Luxembourg does not have a required pay scale for lawyers. Fees are determined on the basis of certain criteria, which may vary depending on the situation.
Fees are set forth in a bill of costs that lawyers send to their client when a matter is concluded.
The bill of costs also includes a category for expenses incurred by the law firm.
Criteria for establishing fees
Although there is no pay scale, lawyers do not have complete freedom in setting their fees.
They must take several criteria specific to the matter into account, including:
- the lawyer's level of responsibility, depending on the magnitude of the matter: the lawyer's level of responsibility is not the same in a dispute over EUR 500 as in one over EUR 500,000. This criterion naturally has an effect on the level of fees;
- the degree of difficulty: the complexity of the dispute has a direct bearing on the amount of time spent on legal research and drafting pleas;
- the result obtained: lawyers fees are always due, regardless of the outcome of the trial. Lawyers do not have an absolute obligation to achieve a particular result. They can never guarantee that a court case will have a favourable outcome;
- the client's financial capacity: fees must be proportionate to the client's financial capacity.
The internal regulations of the Luxembourg Bar Association add the following further criteria:
- the work invested by the lawyer (or by other lawyers in the same firm): this is probably the most important criterion, since the level of fees is determined, above all, by the time that the lawyer and the lawyer's team spend on the matter;
- the lawyer's reputation: a client who selects a well-known lawyer must be aware that such a lawyer will be more expensive than a lawyer who is less well known;
- the lawyer's professional experience: lawyers with a great deal of experience in a particular practice area cost more than young lawyers just starting to gain experience.
On the basis of these criteria, attorneys usually set an hourly rate to be charged in a particular matter, of which they must inform their client from the outset.
Where a lawyer fails to voluntarily inform the client as to the method for determining the fees, clients are advised to discuss this topic with their lawyer:
- at the initial consultation;
- or even during the first telephone call to set up a meeting.
It should be noted that the initial consultation with a lawyer is not free of charge. If the client then decides not to pursue the matter or to pursue it with another lawyer, the lawyer must still be paid for the consultation.
It is even more important to discuss fees with a lawyer when the cost of the fees might be disproportionate to any settlement in a dispute over a modest amount.
Determination of fees by contract
Although it is not the general rule, attorneys may determine their fees by agreement with their clients. To that end, an attorney and client may draft a fee agreement that explains how the lawyer's remuneration will be calculated. The agreement is always based on the criteria listed above.
Such an agreement may also provide that a certain amount will be paid to the attorney based on the matter's outcome (for example, 5 % of the amount recovered by the client).
However, lawyers may not enter into agreements with their clients in which the fees are based exclusively on the results of the lawyer's work.
In addition to compensation for the work performed, the bill of costs usually includes a category for expenses incurred by the law firm.
This category is intended to cover the various business expenses incurred by the lawyer (secretarial costs, stamps, archiving files, etc.). It is generally billed to the client in the form of a lump-sum amount equal to approximately 5-10 % of the lawyer's fees.
VAT at 17 %
Because lawyers are service providers. they are required by law to include value-added tax at the rate of 17 % on all their fees.
It is customary for lawyers to ask their clients to pay a certain sum as a retainer at the beginning of a matter or during the course of the matter.
The retainer serves as an instalment which will be deducted from the final bill of costs.
A final bill of costs is prepared only when the matter is closed, generally after complete execution of a final court decision.
Given that proceedings may extend over several years, instalments help ensure that clients will not be obliged to pay amounts that exceed their financial capacity.
Disputes about fees
If a client believes that the bill of costs exceeds reasonable norms, the client may ask the Bar Association to assess the lawyer's fees and costs. This process is called a taxation of lawyer fees and costs.
If warranted, the bill of costs will be reduced to a fairer amount.
It should be noted that the Bar Association's taxation decision does not constitute a judgement. Therefore, in the event of a disagreement concerning the taxation decision, both the lawyer and the client may still commence court proceedings.