Hearing fee without even “picking up the phone”?

The claimant in question obtained a preliminary injunction against the defendant in proceedings for a preliminary injunction before the Regional Court; as explicitly requested in the application, no hearing for oral arguments was actually held in the proceedings. However, the parties subsequently entered into an out-of-court settlement in writing, without any oral communication (including by telephone) taking place between the persons representing the parties in the proceedings. The claimant then withdrew its application and the defendant was ordered to bear the costs of the proceedings. The Regional Court’s decision as to the costs did not take into account any hearing fee to be refunded to the claimant by the defendant. The claimant immediately filed an appeal against this decision with the Higher Regional Court, which, however, dismissed the appeal. The Higher Regional Court held that no hearing fee had to be refunded as no such fee had been incurred, given that no hearing for oral arguments was required in proceedings for a preliminary injunction and that it had already been included in the written application that the decision should be made without holding a hearing for oral arguments. The claimant proceeded against this ruling by filing an appeal on points of law with the German Federal Court of Justice.

In the proceedings in question, the German Federal Court of Justice had to deal mainly with two questions:

1. Do proceedings for a preliminary injunction constitute proceedings for which a hearing for oral arguments is required?
2. Does the agreement on a written settlement out of court, rather than in court, suffice for a hearing fee to be incurred?

The Federal Court of Justice has answered both questions clearly in the affirmative. Pursuant to the third variant of No. 3104(1)1 of the Schedule of Fees of the German Lawyers’ Fees Act, in order for a hearing fee to be incurred, a hearing for oral arguments must be required for the relevant proceedings. For civil proceedings, the general principle of oral arguments is stipulated in Section 128(1) of the German Code of Civil Procedure (Zivilprozessordnung). Whether this principle also applies to proceedings for a preliminary injunction has been a matter of dispute in the past. The application of said principle has often been denied with reference to Sections 936, 922 of the German Code of Civil Procedure, according to which a court can decide at its discretion to settle a case by court order without holding a hearing for oral arguments.

The Federal Court of Justice has now confirmed that if a discretionary decision is made regarding the holding of a hearing for oral arguments, such hearing cannot be deemed “required” within the meaning of the third variant of No. 3104(1)1 of the Schedule of Fees of the German Lawyers’ Fees Act. However, the provisions of Section 922 of the German Code of Civil Procedure do not apply. This is because Section 937(2) of the German Code of Civil Procedure defines exceptions, thereby confirming the principle of oral arguments also for proceedings for a preliminary injunction: according to said provision, decisions without a hearing for oral arguments can only be made under certain circumstances – for example, in urgent cases. Conversely, this means that a hearing for oral arguments must normally be held. Furthermore, unlike in Section 922(1) of the German Code of Civil Procedure, Section 937(2) of the German Code of Civil Procedure does not grant the court any discretion; instead, it merely defines exceptions, thus confirming the general principle and “requiring” the holding of a hearing for oral arguments also in proceedings for a preliminary injunction.

In the opinion of the Federal Court of Justice, this principle also remains unaffected if, like in the case in question, a decision without a hearing for oral arguments has been explicitly applied for due to urgency. According to the Federal Court of Justice, this is the very purpose of the hearing fee: the person representing the relevant party in the proceedings should not choose a particular form of proceedings in order to receive a certain fee, or in order to avoid receiving a smaller fee, but should instead create an additional incentive to settle the matter as early as possible out of court, irrespective of any motives of the aforesaid kind, also with a view to reducing the workload of the courts.

In addition, the Federal Court of Justice has established that the facts giving rise to a fee pursuant to the third variant of No. 3104(1)1 of the Schedule of Fees of the German Lawyers’ Fees Act do not require the conclusion of a written settlement in court, i.e. a settlement that is recorded in a hearing for oral arguments or whose validity is established by a court order in accordance with Section 278(6) of the German Code of Civil Procedure. Neither the wording nor the purpose of said provision permits such a restrictive interpretation. On the contrary, applying the provision in this manner would conflict with the legislator’s intention: the granting of a hearing fee also for a settlement in writing has been intended as an incentive to attempt to terminate the dispute at an early stage, which would be incompatible with an additional formal requirement in the form of a court settlement.

Incidentally, the Federal Court of Justice has also clarified in its ruling that even an out-of-court discussion held to reach an amicable agreement is not a requirement, as it is not evident why a lawyer who negotiates an out-of-court settlement by corresponding in writing should be in a less favourable position than a lawyer who does so in a discussion. This clarification might be of great relevance to legal practitioners. Communicating orally (including by phone) is, therefore, no longer a prerequisite for a hearing fee to be incurred.

With its ruling, the Federal Court of Justice has provided clarity about when a hearing fee can be incurred in proceedings for a preliminary injunction. The rather incidental clarification that it does not make any difference whether the persons representing the parties in proceedings negotiate a settlement by compromise orally or in writing is of particular relevance in practice and also takes into consideration the use of modern communication technologies in actual legal practice. The Federal Court of Justice has thus emphasised the purpose of the hearing fee and confirmed and enhanced the incentive for reaching an amicable out-of-court settlement of disputes whilst easing at the same time the workload of the courts.