It must make sense to pursue a claim. The costs and the litigation risk of bring legal proceedings should therefore be weighed against the potential proceeds or a desired outcome. It is important that the company - prior to taking bringing legal proceedings - assesses whether it makes sense overall to conduct the case.
If, for example, the case concerns payment of an amount of DKK 10 million, the following should be considered before taking legal action:
- What are the costs of conducting the case?
- What is the probability of the court finding in favour of the company?
- Are there any prospects of obtaining payment from the opponent if the court finds in favour of the company?
The same question should be considered for cases concerning fundamental questions that are not about significant economic claims but about establishing a right. However, in these cases, the desired outcome may in itself outweigh the risks and costs of conducting the case, e.g. if the decision concerns a question of general importance to the company’s operations.
Below, we will go through the relevant costs of conducting litigation.
The other two considerations (2 and 3) will always be specifically reasoned and vary from case to case. We recommend consulting a lawyer who may assess the legal basis of the case before deciding whether to take legal action.
The company must pay its own lawyer
According to the Danish Administration of Justice Act and the professional code of conduct of lawyers, attorney's fees must be fair. In practice, the fees are fixed based on time spent, but other elements are also included. This may be e.g. the complexity of the case, its importance and value to the company, the outcome of the case and the related responsibility and liability. Companies are recommended to make a clear agreement about the attorney’s fees from the start of the case and request an estimate of the expected costs.
Court and listing fees
A court fee is payable at the commencement of proceedings and a listing fee prior to the trial hearing. Today, fees are calculated as a percentage based on the value of the case and are paid by the party taking legal action (the plaintiff/appellant).
However, the Danish Parliament has recently adopted a new Act on court fees, which will come into force on 1 October 2021. The purpose of the Act is to simplify the current rules and increase the motivation to make a settlement.
According to the new Act, a court fee of either DKK 750 or DKK 1,500 is payable at the commencement of proceedings depending on the nature and value of the case, unless the case is exempt from tax. In addition, a listing fee is payable in cases with a value exceeding DKK 100,000, which is fixed based on the value of the case according to the following table:
The listing fee is payable when the court sets the date of the trial hearing (but no earlier than three months before the trial hearing). However, there will be no tax liability if the court is informed no later than two weeks before the commencement of the trial hearing or before the filing of the closing statement (in cases decided in writing) that the case has been withdrawn.
The new Act on court fees may result in an increased number of legal proceedings as it will be less burdensome to bring new legal proceedings.
However, it will at the same time be more expensive when the listing fee is to be paid, and it is therefore expected that the parties will to a greater extent investigate the options of a settlement up to the trial hearing. It may have the advantage that the parties will decide to settle the case on an informed basis as the written preparation for a trial is to be organised with a view to “narrowing the issues”.
Costs for the opponent
If the court finds in favour of the company, the court may order the opponent to pay costs to (partially) compensate the company for its attorney’s fees. The costs are fixed at an appropriate amount based on the High Courts’ recommended rates, and, based on experience, the costs will be fixed at a fairly lower amount than the actual attorney's fees.
If the case is lost, the court will award legal costs to the opponent to cover the opponent’s appropriate expenses for an attorney.
The court’s fixing of costs will also include full compensation for the opponent’s other expenses for conducting the case (e.g. witness fees, expenses for expert opinions, court and listing fees, etc.).
The company must include costs for a potential appeal
A two-tier principle applies in the Danish legal system, which ensures that all decisions may be heard by two instances - often the district court and the high courts.
If a decision is appealed to a higher instance, the parties must expect additional costs for exchange of pleadings and the appeal proceedings. During an appeal, there will also be expenses for lawyers, and a new court and listing fee is payable, unless the case is exempt from tax.
If the case is of fundamental legal importance, the company may also apply to the Appeals Permission Board for the case to be tried before the Supreme Court in the third instance. The term “fundamental legal importance” covers mainly cases concerning statutory interpretation or a fundamental legal question.
We have now described the costs and considerations in connection with legal proceedings before the Danish courts. However, it is also possible to have a dispute settled by an arbitration tribunal if agreed between the parties.
There are certain advantages of arbitration, including that:
- it is often a faster procedure;
- the process is not public;
- no appeal lies against a decision from an arbitration tribunal.
However, traditional arbitration will be more expensive as fees are payable to one or more arbitrators as well as expenses for the chosen arbitration institute.
If the party believing that a claim may be made against another party does not have the economic means or risk tolerance to pursue the claim, litigation finance may be a relevant consideration.
By litigation finance, an agreement is made with a professional investor where the investor undertakes the economic risk of conducting the case against receiving a part of the proceeds if the case is won.
Do you want to know more?
If you want to know more about conducting litigation before the Danish courts, or if you have a case that you would like us to assess, you are very welcome to contact us. You can also read more in the articles below:
Procesfinansiering i Danmark (in Danish)
Justitsministeriet har fremsat forslag til en ny lov om retsafgifter (in Danish)
Notat om sagsomkostninger i civile sager (in Danish)
Folketingets forslag til lov om retsafgifter - lovforslag L 66 (in Danish)