Law firms in Germany are a step closer to being able to charge success fees after a ruling earlier this month that the fee arrangements should be allowed under some circumstances.

Firms will now be able to agree a portion of their fees based on the successful outcome of a project – but only if the client is unable to pay by any other means.

The change follows a 2006 constitutional court ruling that found the complete ban clashed with the country's constitution.

In its current form, the 1 July ruling is likely to have the biggest impact on smaller firms acting on litigation cases.

Freshfields Bruckhaus Deringer Hamburg litigation partner Jan Willisch said: "People are taking an interest in the new law because they are fighting for a more general allowance of success fees. [As it stands] it will not affect anyone at Freshfields – we simply do not have clients that cannot afford litigation. The same probably goes for all the other big firms. This will affect small firms with private clients – but it is a bit of a gamble."

Linklaters' ex-managing partner for Germany, litigation partner Markus Hartung, said: "Smaller firms could be interested, or firms interested in insurance law."

However, German partners hope the ruling could be an initial step towards opening up the wider issues of success fees and other billing options to debate.

If the laws are expanded so that firms can use success fees without restrictions on corporate deals and litigation without the stringent restrictions – as is possible in other countries – the impact of the court's ruling would be far wider.

Hartung added: "We are not keen on success fees – as a lawyer I prefer to work on hourly rates, not a premium alone. What we want is more flexibility in negotiating fees. If we are part of a chain involving investment bankers and accountants, who
are all free to negotiate their fees, why should lawyers be treated differently?"

Stefan Ruetzel, head of Gleiss Lutz's litigation practice, said: "I would certainly welcome a further relaxation. It would give a broader variety of billing approaches.

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