Contingent fees meet the British rule: an exploratory study

Abstract

Compensation schemes in which lawyer’s fees are contingent on winning the suit are becoming increasingly popular throughout Europe. At the same time, the British rule of legal cost allocation is applicable in many European countries. As a result, it is of policy relevance how their coexistence may be harmonized. This paper uses the litigation-contest framework to analyze the consequences of three different cost-allocation regimes if a plaintiff’s attorney is compensated on a contingent fee basis. We compare the equilibrium contest effort, justice, and payoffs for affected parties in the different regimes and find arguments in favor of not reimbursing contingent fees.