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Ban on lawyer ‘success fees’ rattles legal circles

When South Korea’s highest court last week banned the long-held practice of paying contingency fees to advocates in criminal cases, a large section of the lawyers’ community fiercely protested the decision, while civic groups hailed it as a catalyst in eradicating corruption in the legal field.

The Supreme Court upheld a lower court’s ruling last Thursday that results-based financial incentives for lawyers in criminal cases are illegal, invalidating contingency fee arrangements in the nation and going into effect immediately.

“It goes against morality and social order to connect contingency fees for criminal cases with the results of an investigation or trial for a financial compensation,” the bench said.

Judges deliver a ruling outlawing contingency fees for lawyers in criminal cases at the Supreme Court in southern Seoul on July 23. (Yonhap)
Judges deliver a ruling outlawing contingency fees for lawyers in criminal cases at the Supreme Court in southern Seoul on July 23. (Yonhap)

The decision came amid efforts to stamp out shady practices in which former judges and prosecutor-turned-lawyers are said to make underhand deals with sitting judicial officers to draw favorable results for their clients.

Since South Korea established its judiciary system in 1948, it has been the norm for clients to pay lawyers “success fees” based on the results, a practice lawyers’ organizations viewed as motivating the lawyers to do their best until the close of a case.

The contingency fees for former judges and prosecutors have been especially high, propped by those facing a criminal investigation or trial in a desperate move to sway the ruling in their favor.

But such a practice has been subject to criticism for what some see as encouraging former judges and prosecutors to meddle in the legal process, increasing the possibility of corruption.

The nation’s highest court also said in its ruling that such practices undermined the rule of law and deepened Koreans’ distrust in the nation’s judiciary system.

“We cannot deny that contingency fee contracts have created misunderstanding and distrust for Korea’s criminal justice system in a climate where many people still believe that money can solve everything,” the court said.

The Supreme Court still allowed contingency fee contracts for civil cases, saying it does not violate the legal principles of private autonomy and liberty of contract.

The court also stressed the public role of lawyers, saying their mission is to advocate social justice and human rights to uphold the rule of law in society.

The ruling, however, enraged lawyers who argue that the court is falsely accusing even “innocent” lawyers of receiving “excessive” contingency fees.

“The public distrust in the legal system is created by only a handful of ex-judges and prosecutors who are overpaid for their services,” the Korean Bar Association said in a statement.

“The ruling will not only deal a blow to most of the lawyers having difficulties in finding work without the success fee system, but also to clients who will end up paying more overall, such as before a trial or when an investigation begins,” it added.

On Monday, the organization asked the Constitutional Court to review the ruling, though the Korean law stipulates that it cannot reconsider rulings made by lower courts.

“For the public good, the Constitutional Court should be able to revisit the controversial rulings,” Kim Hyo-eun, a spokesperson for Korean Bar Association, told The Korea Herald. “The ban on contingency fees has unconstitutional aspects that infringe on people’s rights.”

The Constitutional Court and the Supreme Court have been at loggerheads over the scope of their judiciary discretion recently. The Supreme Court supports current regulations, saying the Constitutional Court cannot make decisions on the lower court’s legal interpretations. The Constitutional Court, however, has submitted a request for law revision to the National Assembly.

Kim said that given such a situation, the association’s request for a review may not be taken up for the time being.

Kim Bum-hoon, a lawyer who specializes in criminal cases, lamented that the Supreme Court made the ruling without knowing “the reality” in the legal industry at all.

“Our clients demand the success fee system as they can pay us depending on the result they achieve from trials,” Kim told The Korea Herald. “It is reasonable for them, too.”

“To be honest, I am not sure whether I can put as much effort now without financial incentives,” he said. “I am also a human being, you know?”

With the ban on contingency fees in effect, change seems inevitable in the remuneration of lawyers as monetary incentives have been a major source of their income.

“Lawyers will likely charge clients more for initial fees before a trial begins and receive money based on the amount of time they put in for the case,” Kim said, adding that he has already started charging his clients higher initial fees since the ruling was made.

But The Good Law, a civic organization campaigning for Koreans’ legal rights, welcomed the ruling.

“The decision came too late, but we believe that it will help promote the judicial order in the long term,” Hong Kum-ae, an official from the civic group, told The Korea Herald.

“Some ex-judges and prosecutors make a few phone calls in the office without doing much and charge clients a huge amount of money as contingency fees,” Hong said.

“It is obviously against the rule of law if one’s release from the prison can be determined by a lawyer’s influence,” Hong said. “To protect clients’ rights and uphold the rule of law, sentencing guidelines should be clear and predictable.”

Still, the ruling is unlikely to root out the prevalent practice of former judges and prosecutors using personal connections to influence the probes and trials, lawyer Kim pointed out.

“Behind Koreans seeking judges- and prosecutor-turned-lawyers is the expectation that ex-judicial officers can wield influence on serving judges and prosecutors for their interest,” Kim said. “Under the current legal system, people will continue to have such expectations and find other ways to get a favorable result.”

Lee Heon-uk, a Seoul-based lawyer and member of the People’s Solidarity for Participatory Democracy organization, agreed that the ban on contingency fees can hardly restore the public trust in the nation’s judicial system, let alone change the practice of preferring former judges and prosecutors.

“The public distrust in the judiciary arises from the nation’s legal structure that gives excessive power to judges and prosecutors,” Lee told The Korea Herald.

Under the current legal structure, judges and prosecutors who previously held high positions in the court and prosecution’s office often open a law practice after retirement. They are then often assigned to criminal cases in which they can exert influence.

“Unless Korea puts in place rules that outlaw ex-judges and prosecutors from practicing law, it will never be able to overcome the public distrust in the judiciary system,” Lee said, calling for changes to the current judiciary structure.

But Lee hailed the court ruling as a “stepping-stone” for broader reforms in the legal industry.

“Despite drawbacks, it is meaningful that the Supreme Court attempted to put an end to the lawyers’ excessive profit-making practice and underlined their public role in society,” he said.

By Ock Hyun-ju (