Following the recent reform of the legal profession introduced by Law No. 247 of 2012, there have arisen a number of questions of interpretation concerning some critical points thereof and, in particular, the question of the so-called contingency fee agreements.
As is well known, until a few years ago there existed in Italy a ban on contingency fee agreements, as provided for under paragraph 3 of Article 2233 Civil Code: Lawyers, prosecutors and advocates cannot, even by proxy, enter into with their clients any sort of agreement concerning the assets which are the subject-matter of the disputes in relation to which they have been hired. Any such agreement entered into by the latter shall be null and void under and shall give rise to an award for damages.
Subsequently, the so-called Bersani law had amended the third paragraph of Art. 2233 cc, which now provides that agreements executed between lawyers and their clients for professional fees shall be null and void unless they are made in writing.
The changed regulatory framework also made it necessary to amend article. 45 of the Lawyers’ Code of Professional Conduct, which allows lawyers to agree fees which are measured against the achievement of objectives, without prejudice to the provisions set forth in Articles 1261 and 2233 of the Italian Civil Code 1261 of the Italian Civil Code and provided that the compensation is proportionate to the activity carried out by the lawyer.
Article 13, paragraph 4 of Law 247/12 now expressly provides that agreements whereby the lawyer receives as compensation a whole or a part of the asset which is the subject-matter of the litigation are prohibited.
Are, therefore, contingency fee agreements still valid?
To answer this question it is necessary, as often happens, take a step back and look at the reform as a whole.
In so doing, we discover that the third paragraph of the aforementioned provision provides for the right of lawyers to agree upon professional fees on the basis of various criteria, including a percentage of the value of the deal or of what the latter is expected to earn
It seems, therefore, that contingency agreements may be valid provided that the fees in question are measured not in terms of a part of the asset which is the subject-matter of litigation (in the light of the prohibition set forth in paragraph 4) but rather in terms of a percentage of such asset.
In other words, what is prohibited is an agreement between lawyer and client whereby, directly or indirectly, a receivable or an asset which is the subject-matter of the litigation is assigned, thus contravening the prohibition set forth in Article 1261 of the Italian Civil Code.
With regard, however, to lawyers’ professional fees, article 13 paragraph two, provides that lawyers’ fees are normally agreed in writing at the time lawyers are hired, taking into account the complexity of the case and, in the case of legal proceedings, the foreseeable costs and duration thereof.
However, the parameters set forth in the decree issued by the Italian Minister of Justice every two years shall be used in the following cases:
1. If at the time of the appointment or thereafter the lawyer’s fee has not been agreed upon in writing;
2. Where such professional fee has not been fixed consensually by the parties;
3. Where the fee is fixed by a judge;
4. Where the professional fee is provided for the benefit of a third party or for official services provided for under the law.
Furthermore, according to article 13, paragraph 10, lawyers – in addition to the compensation due for the professional services – must be reimbursed:
1) The expenses actually incurred by them, as well as all the charges and expenses paid in advance on behalf of the client;
2) A lump sum for general expenses, the maximum amount of which is established by the decree referred to in paragraph 6, together with the method of calculation and the documentation that needs to be supplied in justification of such expenses.
Finally, the eighth paragraph of the provision in question expressly provides that when a legal dispute is defined by agreements executed in any form whatsoever, the parties are jointly and severally liable for the payment of the fees and the reimbursement of the expenses of all the lawyers that have carried out professional activities in the last three years and that are still owed amounts, unless the latter expressly waive the right thereto.