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Lawyers to face price-fixing challenge

Cyprus lawyers face price-fixing challengeA NEW organisation calling itself ‘Fairness in Fees’ is preparing to challenge what it says is a price-fixing practice followed by lawyers in Cyprus.

The London-based group has commissioned competition law expert Robert O’Donoghue, of Brick Court Chambers who argues that the Cyprus Bar Association’s (CBA) so-called minimum fee regulations – a set of rules mandating the minimum lawyers can charge for out-of-court cases – are in clear breach of the price-fixing and cartel provisions of Article 101 of the European Treaty and therefore of European law.

“The minimum fee regulations set out formulae for calculating lawyers’ fees irrespective of the time spent or the complexity of the matter,” said Fairness in Fees founder George Lambis.

“This is believed to be unique within the EU.”

Under the CBA’s regulations, a straight-forward out-of-court execution of a will in which property of €1 million is to be distributed among the beneficiaries would incur €56,000 in legal fees.

Similar work in the UK, for example, would likely incur no more than €5,000 in fees.

Article 101 of the Treaty on the Functioning of the European Union (the ‘Treaty of Rome’) prohibits all “decisions by associations […] which may affect trade between Member States” and which aim the “prevention, restriction or distortion of competition within the internal market”.

“In particular, those which directly or indirectly fix purchase or selling prices or any other trading conditions,” the article states.

Fairness in Fees plan to submit a formal complaint to the European Competition Commission (ECC), whose decision will take a few months.

A favourable ruling by the ECC would render all fees calculated under the Cyprus Bar Association’s regulations null and void and refundable to clients, whether Cypriots or expats. In the absence of a statute of limitations, claims can be made without a time limit restricting them.

Further, members of the public could bring actions for recovery and overpaid fees against lawyers who have overcharged them.

But just as importantly, the Cyprus Bar Association “risks being fined 10 per cent of its annual income by the European Commission for price fixing”.

“Individual lawyers and legal practices could be similarly fined,” Fairness in Fees claimed.

The CBA had no comment on this issue.

“This is a complex issue, for which there is no straight-forward answer,” a Cypriot lawyer told the Sunday Mail.

“I am inclined to say there is no price-fixing in this context. In actual fact, competition in Cyprus is not hindered because there is no price ceiling, so one lawyer can charge, say, €100, while another may charge €1,000.”

Furthermore, he added, minimum legal fees are hardly unique to Cyprus, though he was unable to definitively state other EU countries in which they are in effect.

The lawyers’ obligation to maintain the CBA-mandated minimums isn’t cast in stone, either, he said.

“There are fee minimums set by the CBA, and charging less than that is technically a breach of the regulations,” he said.

“But such breaches are overlooked. I can’t imagine anyone facing disciplinary indictment for charging less than the minimums.”

Cyprus law bestows the CBA with the right to “set lawyers’ fees for out-of-court cases”, which means, of course, that lawyers found non-compliant with its regulations regarding minimum fees could face disciplinary measures.

Meanwhile, the regulations by definition exclude practices which are commonplace elsewhere in Europe.

“All of the figures in the minimum fee regulations applied by the CBA are higher than nil whilst lawyers in the EU – including the UK – will (and routinely do) charge nothing for their time,” said Lambis.

“Examples are free initial consultations, time which is written off, and pro bono work.”

In fact, the CBA regulations only set a minimum of fees that must be charged (while fees charged can actually be higher than the minimum), but as far as regulated markets go, a price floor on legal fees is bound to cause distortions.

That’s fine, the unnamed lawyer told the Cyprus Mail.

“Hiring counsel from another EU country is not forbidden,” he said.

According to a 2007 country report published in the European e-Justice portal regarding transparency of legal costs in Cyprus, “the trend is that more and more young lawyers choose to deal with out-of-court work, because it is considered to bring a lawyer much more income than court disputes, within a much shorter period of time and with much less effort”.

The trend could, perhaps, be indicative an imbalance in the level of minimum fees charged for each of the two types of legal work.

Fairness in Fees welcomes all parties interested in participating in challenging out-of-court legal fees in Cyprus to email [email protected] as soon as possible.