Ranking in major legal directories sets a precedent in assessing legal costs

 

On August 30, the Moscow Arbitrazh Court set a precedent awarding over $1 million in legal costs to Cyprus company Arooj Holdings Limited to be paid by retailer Billa. The amount in dispute was around $12 million. The Cyprus party was represented by Russian law firm ‘Muranov, Chernyakov & Partners’.

In March 2010, the Dutch company C.R.R.B.V. applied to the Moscow Commercial Court with a claim against Billa Ltd. (chain of supermarkets) for recovery of rents (as assignee under the assignment agreement transferring the landlord’s demands in its favour) and the losses caused by breach of the deed regulated by the English law between the claimant and the defendant (the interests of Billa Ltd in the case were represented by Salans and Dechert Russia).

During one year and a half 17 court hearings took place (including numerous appeals by Billa Ltd). Besides, Billa Ltd initiated 18 court proceedings against the claimant. Eventually, the claimant’s demands were satisfied. The procedural substitution of the claimant by its legal successor — the Cyprus limited liability company Arooj Holdings Limited — was effected in the court of appellate instance.

In total, the Claimant asked to recover over $200,000 (which included fixed fees for participation of the claimant’s representatives in the court of each instance, the fee calculated on the basis of hourly rates for participation in consideration of complaints of the individual filed in accordance with the procedure stipulated in Article 42 of the Arbitrazh Procedure Code of the Russian Federation as well as the overhead costs for payment for the postal deliveries, translator’s services, etc.) and about $1 million (the fee was determined as a percentage of the amounts recovered by the claimant).

The court satisfied the claimant’s demands in part awarding about $120,000 and $920,000 respectively.

So far, the Russian case law has not favoured the recovery of legal costs by the winning party. In determining the ‘reasonable extent’ of fees, courts practically have never awarded to the winning party more than several thousand dollars (most often around $2,000 – $3,500). The positive trend appeared only after the Decree of the Presidium of the Supreme Arbitrazh Court of the Russian Federation of 15 March 2012 in the case No. 16067/11 whereby the party was awarded around $100,000. At the same time the Presidium of the Supreme Arbitrazh Court noted that the claimant’s expenses for payment of services were proportionate to the cost of the same services rendered by other legal firms with the same rating in terms of reputation, transparency and quality of services.

In this case the court compared the hourly rates of the claimant’s representatives with those of other law firms with similar rating. Also, it compared fees received by the claimant’s representatives with the fees of the defendant’s representatives and found out that the latter received $13,000 more than the claimant’s representatives.

Muranov, Chernyakov & Partners law firm which represented the interests of Arooj Holdings Limited in the case is among the top firms in such widely-known rating systems as Legal 500, Chambers Global and Chambers Europe. In light of the Decree in the case No. 16067/11, this fact enabled the representatives of Arooj Holdings Limited to prove that their fees should be estimated not on the basis of the court’s subjective idea of ‘reasonable extent’ but by comparing fees of law firms with similar rating.

It follows that the Moscow Arbitrazh Court ruling of September 20, 2012 on the claim of Arooj Holdings Limited regarding the legal costs contains at least three new approaches to determination of the “reasonable” amount of costs for the legal representative’s services in Russia:

Firstly, it is the comparison between the fee received by the claimant’s representatives under the mixed fee payment system (fixed fee rates for each instance plus the final fee in the form of percent of the amount of recovered funds) and the fee that the representatives would receive for the actual volume of the provided legal services applying their standard hourly rates;

Secondly, the comparison between the said standard hourly rates and the rates of the legal firms not just from the same region but also having practically the same rating (the first case of practical application of the legal position of the Presidium of the RF Supreme Arbitrazh Court set forth in the Decree in the case No. 16067/11 that we are aware of);

Thirdly, the comparison between the claimant’s representatives fee and that of the defendant’s representatives (both Salans and Dechert Russia are present in the same ratings).

For the additional information and with requests for comments please contact:

Muranov, Chernyakov and Partners
Daniya Zaynullina
+7.905.516-04-11
+7.495.783-74-50;
press@rospravo.ru

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