*by Johannes Fiala, Lawyer (Munich), Mediator (Univ.), MBA Financial Services (Univ.Wales), MM (Univ.), Certified Financial and Investment Advisor (A.F.A.), EC Expert (C.I.F.E.), Lecturer (Univ. of Cooperative Education), Banker (www.fiala.de)
The client goes over the settlement with his lawyer. “Nothing wrong with the expense of lunch,” he says, “though I actually thought you invited me. But what is this: Advice on working lunches – 50 marks?” – “Don’t you remember?” the lawyer wants to know, “I advised you to have the steamed shrimps in Madeira.”
As of 01.07.2007 there is the possibility for traders to offer legal services as well, provided that legal advisors handle this part.
Today, legal services that are not merely a subordinate ?auxiliary business? lead to the nullity of the consultancy contract. In future, it will be permissible for the trader himself to offer legal services both in his own name ? and for the offer to be made jointly with a lawyer or legal adviser.
Incompatibility with sales activities: Today and in the future, however, it will not be possible for lawyers to assist in the distribution of financial services, as this would be incompatible with their position as an ‘independent self-governing’ body. organ of the administration of justice. This concerns, for example, the brokerage of investments, real estate and insurance on a commission basis and the like.
However, fee-based advice, such as that provided by a management consultant, will be compatible.
Incompatibility with certain client advice: Where the advice will also have a direct effect on the trader’s own performance obligations, the trader will still not be able to entrust a salaried lawyer or tax adviser with the provision of advice to clients. A typical example is legal expenses insurance, which is not allowed to offer its customers the services of employed lawyers: this is because the services directly influence the cost side in the insurer’s legal expenses claim.
A similar constellation can also exist in the financial services sector. For example, an employed in-house lawyer or in-house counsel cannot ‘switch sides’ and advise both his employer and his client on a matter.
No client referral in one’s own interest: The Federal Supreme Court (BGH) has clarified by its decision of 20.06.2006 (file no. VI ZB 75/05) that solicitor’s instructions are ineffective if the person concerned, as the owner of claims, has his case taken ‘out of his hands’, as it were. In the concrete case, a car rental company had the claims (concealed) assigned to it ? the car renter signed a power of attorney so that the claims (against e.g. insurer or other party involved in the accident) could be collected in court.
The BGH clarified that it is not permitted for a lawyer to cooperate with a trader (here as ?accident assistance?) in order to in reality also represent the economic interests of the trader (here motor vehicle lessor). It would be correct if the legal representation was carried out at the instigation and in the interest of the actual client or claim holder (in this case the motor vehicle lessee) and not only formally by means of a power of attorney.
It is permissible for a trader to have an assignment of claims given to him as security and then, after unsuccessful recourse, to realise the security, so to speak, i.e. to pursue a matter which is then his own.
Incompatibility of certain business models: Business models in which the actual claimant does not even know his lawyer (conceivable, for example, in the case of social security clearing), i.e. is not involved in the settlement at all, are therefore inadmissible. In this case, the lawyer is only acting as an “extended arm” of the trader.
The same applies if the initiative for the authorization does not come from the client (conceivable, for example, in the case of the assertion of a new settlement of terminated life insurance policies).
Ineffectiveness in case of mediation of attorney contracts: A lawyer’s contract can also be ineffective if there was no free choice of lawyer and the assignment did not take place on the initiative and in accordance with the wishes of the claim holder: This can be the case, for example, if an intermediary “leads” the client or claim holder to a certain lawyer with a “stack power of attorney” and a model lawyer’s contract from the law firm. (conceivable, for example, in the case of checking a pension commitment for errors in employment and tax law).
According to the prevailing opinion, a lawyer’s contract that has come into existence in this way cannot be remedied at a later date, so that no remuneration is owed. However, the power of attorney alone then nevertheless remains effective, as the BGH states, because the law is only intended to protect the client/power of attorney and not to punish him.
Already permissible arrangements today: In contrast, the simple recommendation of a certain tax advisor or lawyer is always permissible: The holder of the claim or future client must then only take the initiative to approach the lawyer and have sufficient time to decide whether and which lawyer to instruct and authorise.
Anyone who wants to collect third-party receivables, for example as a rental car company, usually needs a collection permit or a special assignment with a special security agreement in order to take action themselves. This will remain the case after 01.07.2007.
It is already permissible today to become active without further ado as a litigation financier against profit sharing (also out of court !). Probably the greatest danger is that the procedures will take longer than planned. Then the cost of your own financing can multiply.
It is still permissible today to buy up receivables. Here, too, the profit sharing ? hardly ever complained about by courts ? 50% and more.
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About the author
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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