Economic Evaluation of Japanese Attorney Fees

Abstract

The Japanese judicial system does not differ greatly from those of most other civil law countries (Ota, Am J Comp Law 49:561–583, 2001). Especially in terms of allocating litigation costs between plaintiffs and defendants, Japanese rules of cost allocation in litigation resemble the American rules. The American rules hold that each party is responsible for paying their own attorney fees. In contrast, there is an allocation rule of costs between a client and one’s own attorney can be used. That is mainly a contingent fee contractual arrangement, which is very common in the United States, especially for tort litigation. Under a contingent fee, a client is charged for an attorney’s services only if the lawsuit is successful. That is, a client pays a percentage (usually one-third) of the recovery to the attorney (See Miceli (The economic approach to law. Stanford University Press, Stanford, 2004) and Kakalik and Pace (Costs and compensation paid in tort litigation. Rand Institute for Civil Justice, Santa Monica, 1986) reported a US survey showing that 96% of individual plaintiff attorneys in tort litigation paid their attorneys on a contingency basis, but almost all the defendants’ attorneys were paid according to an hourly rate.). However, as for allocating costs between a defendant and an attorney, the Japanese legal system differs from the American system. It is a reverse contingent fee. The reverse contingent fee is one by which a defense attorney’s compensation depends in part on how much money his attorney saves the defendant: the lower the judgment given, the higher the attorney’s fee (Garner, Black’s law dictionary, 9th edn. West Group, St. Paul, 2009). Actually, reverse contingent fees are prohibited or substantially restricted in many other common law and civil law legal systems (Rubinfeld and Scotchmer, Contingent fees. In: Newman P (ed) The new Palgrave dictionary of economics and the law, vol 1. Stockton Press, New York, 1998, pp 415–420). In Japan, however, deregulation of attorney’s fees began in 2004 by the Judicial Reform of Japan. Therefore, reverse contingent fees are not banned under the Japanese legal system (Japan Federation of Bar Association, Rules concerning Attorney’s fees. JFBA Official Web Page, 2008, in English).