'What is the Abolished (Former) 'Japanese Attorney Fee Standard'? An Introduction to the Specific Calculation Method'

When engaging a lawyer, it is naturally of great concern how much the cost will be.

In fact, previously, each bar association to which a lawyer belonged had established a set of rules called the “Japanese Lawyer’s Fee Regulations,” which included a standard for lawyer’s fees. Individual lawyers were not able to freely set their own fees.

The Lawyer’s Fee Standard was abolished in April 2004 (Heisei 16), and lawyers are now free to set their own fees. However, the Lawyer’s Fee Standard has been used as a “standard” for many years, and it is often a standard that results in “appropriate” fees. Even after liberalization, many law firms still use the (old) Lawyer’s Fee Standard as a basis for setting their fee standards.

• How are lawyer’s fees calculated under the (old) Lawyer’s Fee Standard?
• What problems exist with this calculation?

We will explain these points below.

The (Former) Japanese Attorney’s Fee Standard and “Economic Benefit”

The (Former) Japanese Attorney’s Fee Standard sets calculation standards for dispute cases outside of court and litigation cases. For example, it sets the following standards:

• Retainer fee: If the economic benefit is 3 million yen or less, 8% of the economic benefit
• Contingency fee: If the economic benefit is 3 million yen or less, 16% of the economic benefit

The key term here is “economic benefit”.

What is Economic Benefit?

Economic benefit refers to the amount of money a client seeks to acquire, recover, or maintain through the services of a lawyer. For instance, let’s consider a scenario where a client has lent money to someone who has not repaid it, and the client has requested a lawyer to collect the debt. If the lent amount was 3 million yen, and the debtor claims that they have already repaid it through goods or other means, and ultimately, 2 million yen was recovered, then:

• Initial fee: 8% of the claimed amount of 3 million yen, which is 240,000 yen
• Success fee: 16% of the recovered amount of 2 million yen, which is 320,000 yen

The calculation of the ‘economic benefit’ is as above with the initial fee and the success fee, and the percentages are 8% and 16% respectively.

These percentages decrease as the ‘economic benefit’ increases. More precisely:

(Source: Japanese Lawyer’s Fee Standard by the (former) Japan Federation of Bar Associations)

Also, the minimum initial fee is 100,000 yen.

High Claims Lead to Increased Retainer Fees

As a result, for instance, if you claim 1 billion yen and are able to recover 500 million yen, the calculation would be as follows:

• Retainer fee: 3 million x 8% + 27 million x 5% + 270 million x 3% + 1 billion x 2% = 23.69 million yen
• Contingency fee: 3 million x 16% + 27 million x 10% + 270 million x 6% + 200 million x 4% = 27.38 million yen

This is how the calculation works.

As you can see, as the claim amount increases, the retainer fee, which is part of the attorney’s fees, naturally becomes higher.

Cases in which a lawyer may refuse to accept a case

While clients may prefer a completely success-based fee structure to avoid inflated initial fees, from a lawyer’s perspective, this could potentially result in receiving no compensation at all. Therefore, generally speaking, lawyers tend to hesitate to accept such arrangements. However, our firm:

• Often accepts cases on a completely success-based fee structure when it comes to areas where we have expertise, such as reputational damage control, particularly in out-of-court negotiations.
• Frequently accepts cases on a completely success-based fee structure when the request comes from a client company we advise.

This policy is based on the following reasons:

• If we have expertise in the field and the case involves out-of-court negotiations, we may be able to make a forecast with minimal information and accept the case on a completely success-based fee structure.
• If the request comes from a client company we advise, we already have basic information at the time of consultation, so we may be able to make a forecast with minimal information and accept the case on a completely success-based fee structure.

Therefore, it is generally considered that there are few cases where a lawyer can be hired on a completely success-based fee structure.

On the flip side, accepting a case means receiving an initial fee. Therefore, as a lawyer, it is advisable to avoid cases where there is no prospect of winning and where the only outcome is the receipt of the initial fee. In such cases, the lawyer may refuse to accept the case.

In the Case of a Claim Received from the Other Party

If you are in a situation where you have received a claim from the other party,

• Economic benefit in the retainer fee: The amount claimed by the other party
• Economic benefit in the success fee: The amount successfully reduced

will be the case. For example, if you were claimed 10 million yen and eventually settled with a payment of 3 million yen,

• Retainer fee: The economic benefit is the claimed 10 million yen. Applying this to the table above, 3 million x 8% + 7 million x 5% = 590,000 yen
• Success fee: The economic benefit is the reduced amount of 10 million – 3 million = 7 million yen. Applying this to the table above, 3 million x 16% + 4 million x 10% = 880,000 yen

will be the calculation.

This is why we used the words “acquisition, recovery, and maintenance” for “economic benefit”. In the case of the party receiving the claim, there is no money to aim for “acquisition” in the first place, but there is money to aim for “maintenance”.

In the case of a dispute where both parties are making claims against each other

For instance, in a system development project,

Your company has completed a system development project contracted by another company. However, the other company claims that the system is not complete and refuses to pay the agreed fee of 10 million yen. Furthermore, they claim that they have incurred damages of 5 million yen due to the delay in completion and are demanding compensation. Your company has no intention of complying with this claim for damages.

In this case,

• Calculation of the retainer fee: Your company is claiming 10 million yen from the other company, and the other company is claiming 5 million yen from your company. Therefore, the economic benefit in the calculation of the retainer fee is 10 million + 5 million = 15 million yen. Applying this to the table above, the calculation is 3 million x 8% + 12 million x 5% = 840,000 yen.

This is how the calculation is done. And if this dispute ultimately

is resolved with the recognition that the system is indeed complete and the other company has an obligation to pay, and the damages claimed by the other company did not occur, but there were some bugs in the completed system, and the fee of 10 million yen was reduced to 8 million yen in the settlement.

In this case,

• Calculation of the success fee: Of the 10 million yen claimed, 8 million yen was approved, and the 5 million yen claimed by the other party was reduced to zero. Therefore, the economic benefit in the calculation of the success fee is 8 million + 5 million = 13 million yen. Applying this to the table above, the calculation is 3 million x 16% + 10 million x 10% = 1.48 million yen.

This is how the calculation is done.

All Disputes Involving ‘Money’ Follow the Same Calculation Method

While there are more detailed aspects to the calculation method of economic benefits under the (old) ‘Japanese Attorney’s Fee Standards’, the general outline for disputes involving ‘money’ is as described above. This applies universally to all types of disputes as long as they involve ‘money’. The example given above was a dispute related to system development, but even in a dispute where, for example, in a reputational risk management scenario, the perpetrator of defamation is identified and damages are claimed from the said perpetrator, the calculation would be as follows:

• Retainer fee: The amount claimed from the other party, such as damages, is calculated as an economic benefit.
• Contingency fee: The amount that can be recovered from the other party is calculated as an economic benefit.

This is how the calculation is made.

Calculating Attorney Fees in Disputes Over Non-Monetary Matters

However, all the discussions so far have been about calculating attorney fees based on the (old) Japanese Attorney Fee Standards in disputes over money. But disputes are not always about money.

Disputes Over Rights That Can Be Valued in Money

For example, in a dispute over the ownership of a patent for an invention, if the value of the right can be monetized, it can be calculated in the same way as a dispute over money. If there is a dispute over the ownership of a patent worth 3 million yen between the plaintiff and the defendant, and it is ultimately recognized as belonging to the plaintiff, the calculation would be:

• Retainer: 8% of the economic benefit of 3 million yen
• Contingency fee: 16% of the economic benefit of 3 million yen

This calculation is the same as in a dispute over money.

Type-Specific Attorney Fees in the (Old) Japanese Attorney Fee Standards

Also, the (old) Japanese Attorney Fee Standards set type-specific standards for typical cases that were common at the time of enactment, other than disputes over money. A typical example is a divorce case, where the retainer and contingency fees in a divorce case were:

Each within the range of 200,000 to 500,000 yen
※The retainer when accepting a divorce negotiation to divorce mediation is half of the above amount
※Claims for property division, consolation money, etc., are calculated separately according to the calculation method for monetary cases.
※The above amounts can be increased or decreased considering the client’s financial ability, the complexity of the case, and the amount of work required to handle the case.

So, the retainer for a divorce case is “within the range of 200,000 to 500,000 yen”, and if you also claim for property division or consolation money, that part is calculated based on the economic benefit, just like in a monetary case.

Other “types” of cases include, in addition to the above-mentioned divorce cases:

• Contract negotiation
• Collection procedure cases
• Bill and check litigation cases
• Boundary disputes
• Non-litigation leasehold cases

These were defined. For example, a “boundary dispute” refers to a dispute between neighbors over the boundary of a piece of land. This is a type of dispute that has continued from the birth of the Civil Code to the present, and therefore, it is stipulated in the (old) Japanese Attorney Fee Standards.

Cases Where Disputes Cannot Be Valued in Money

However, there are also disputes that are not listed in the (old) Japanese Attorney Fee Standards, and that cannot be valued in money, or where it is extremely difficult to do so.

For example, in the case of reputation damage control, a dispute where a request is made to delete a bulletin board post that constitutes reputation damage, and a deletion request is made to the operator of the bulletin board, is difficult to convert into money, and perhaps because it is a type of dispute that was not anticipated at the time of the enactment of the (old) Japanese Attorney Fee Standards, there is no description of the calculation method in the (old) Japanese Attorney Fee Standards.

In such cases, if the monetary evaluation is impossible or extremely difficult, the claim is considered to be 1.6 million yen. Therefore, if this claim were to follow the (old) Japanese Attorney Fee Standards, the calculation would be:

• Retainer: 8% of the economic benefit of 1.6 million yen
• (Upon successful deletion) Contingency fee: 16% of the economic benefit of 1.6 million yen

It would be calculated as such.

Furthermore, in a dispute where parts that revolve around money and parts that are difficult to convert into money coexist, for example, in reputation damage control, if you make a claim against a person who is defaming you with a real-name Twitter account,

• Claim for compensation of 1 million yen for consolation money (part revolving around money)
• Request for deletion of the post (part difficult to convert into money)

In such a case, the economic benefit in calculating the retainer is 1 million + 1.6 million = 2.6 million yen. And if this dispute ends with a settlement that “abandons the claim for consolation money but allows the deletion of the tweet”, the economic benefit in calculating the contingency fee is 1.6 million yen.

Issues with the (Former) Japanese Attorney Fee Standard

However, for example, the above calculation in the case of reputational damage measures is a fixed amount, as long as a person requests a company (bulletin board operator) to delete a post. This is because it is always a claim where “monetary evaluation is impossible or extremely difficult”. To put it extremely, whether you are deleting a single post of just one line or deleting 1000 posts, the attorney’s fees remain the same.

Furthermore, this calculation is done for each opposing party. Therefore, in the case where the same reputational damage post is copied and pasted 5 times on the Internet,

• If those 5 posts happen to be on the same site (same operator): The economic benefit is 1.6 million yen
• If those 5 posts happen to be on different sites (different operators): The economic benefit is 1.6 million yen × 5 = 8 million yen

This is the calculation. Whether in out-of-court negotiations or in court, it is true that the amount of work and difficulty vary somewhat depending on whether “all are on the same site” or “all are on different sites”. However, it is clearly strange that the economic benefit (and therefore the attorney’s fees) becomes five times as much.

The rule of the (Former) Japanese Attorney Fee Standard, which is a flat 1.6 million yen for claims that cannot be calculated in “money” (non-monetary claims), is inevitably rigid, and if the subject is actually numerous or there are many opposing parties, it inevitably results in an unreasonable calculation.

For this reason, many law firms are believed to:

• Calculate based on the (Former) Japanese Attorney Fee Standard for monetary cases
• Calculate differently from the (Former) Japanese Attorney Fee Standard, considering the amount of work and difficulty for non-monetary cases

The latter is typically referred to as “attorney’s fees according to the actual working hours of the attorney”, also known as time-charged. It is believed that many firms adopt this approach for tasks such as contract creation and checking.

Also, for example, our firm accepts page deletion in out-of-court negotiations for reputational damage measures at a completely success-based fee of 100,000 yen per page. This can also be said to be one form of setting attorney’s fees in the latter form.