ECJ to decide on full recovery of litigation fees in IP cases

lawyer feesIs the Belgian system of capped recovery of lawyer fees compatible with article 14 of the IP Enforcement Directive, that provides for the recovery of reasonable and proportionate legal costs by the party prevailing in an IP case? That is the question that the ECJ has to answer following a referral of preliminary question to the ECJ by the Antwerp Court of Appeal on January 26 in United Video Properties v. Telenet.

Partial recovery of lawyer fees in Belgium

It is only since 2007 that legal fees can be partially recovered from the unsuccessful party in a court case. The Belgian Law on the Recovery of Lawyer Fees provides for a “fixed reimbursement” for lawyer costs and fees, based on fixed tariffs that depend in the amount of damages claimed in the proceeding. The fixed tariffs vary between 165 euro (for claims up to 250 euro) and 16.500 euro (for claims over 1.000.000 euro) with a mark-down and mark-up mechanism for exceptional circumstances that can double the amount due by the loosing party). In most cases their amount only covers part of the winning party’s legal fees.

Compatibility with EU law in IP cases

A point that has caused discussion amongst legal professional in the past few years is the fact that the Law on Recovery of Lawyer Fees applies to all types of litigation cases, including IP cases and this despite the fact that article 14 of EU Directive 2004/48/EG of 29 April 2004 demands that member states “ensure that reasonable and proportionate legal costs and other expenses incurred by the successful party shall, as a general rule, be borne by the unsuccessful party, unless equity does not allow this.”

Because of the relatively low fixed tariffs in the Law on the Recovery of Lawyer Fees, its application rarely results in “reasonable and proportionate” reimbursement of legal costs, especially in IP litigation, that by its nature is often complicated and technical.

The question of the compatibility of the Law on the Recovery of Lawyer Fees with EU Directive 2004/48/EG has been raised several times, but up until now courts have always confirmed the Law on the Recovery of Lawyer Fees, based on rather questionable arguments such as the fact that the tariffs in the Law on the Recovery of Lawyer Fees provides in a mark-up for exceptionally complicated cases (but practice shows that this mark-up is rarely accepted and even when it does, it doesn’t cover all legal costs) or the argument that a preferential treatment of IP-litigation would constitute a discrimination with respect to other types of litigation.

Obviously the foregoing did not satisfy parties that anticipated winning their IP-proceedings in Belgium and it was just a matter of time until one of these parties would request a referral to the ECJ. The Court of Appeal of Antwerp is the first court to actually refer the question to the ECJ by its decision of January 26.

In the meantime…

All eyes will be turned to Luxemburg for the next two years, as the ECJ is not likely to take a decision before the end of 2016. If it rules that the Belgian system does not comply with EU law, this will completely change the IP litigation landscape in Belgium and most likely in several other EU member states.

While awaiting the ruling of the CJEU, litigating parties can best claim the maximum indemnity under the 2007 lawand file an additional claim for the excess amount of their lawyer fees.  The court can then rule on all aspects of the case, but suspend its decision regarding the recovery of the excess lawyer fees claim until after the ERCJ shall have decided.

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