Attorneys' fees, which judges award to winning parties, are a fixture of Brazilian litigation. However, court-awarded attorneys' fees should not be confused with the legal fees agreed between clients and attorneys (so-called 'contractual' legal fees).
Therefore, in addition to contractual fees (whether fixed, by the hour or success based), winning attorneys are also entitled to a court-awarded amount, which is determined using objective criteria.
The Civil Procedure Code 2015 provides judges with a more objective framework than its predecessor with regard to these mandatory attorneys' fees. Generally, court-awarded attorneys' fees must be 10% to 20% of the award itself (total amount of indemnification) or the economic benefit obtained by the winning side. However, despite being relatively straightforward to calculate, some courts struggle to award attorneys' fees, particularly in disputes involving significant amounts.
In a recent case, a first-instance (trial) court and an appellate panel both departed from the general rule by awarding a winning party considerably lower court-awarded attorneys' fees.
The case was recently brought before the Superior Court of Justice – a last resort in Civil Procedure Code-related issues.
A company (the plaintiff) sought to enforce a Rs2.8 million judgment against a bank (the defendant). The bank had pointed out the excesses in the plaintiff's calculations and successfully reduced the enforcement to approximately Rs300,000.
Therefore, the economic benefit obtained by the defendant was Rs2.5 million, which would have resulted in court-awarded attorneys' fees ranging from Rs250,000 to Rs500,000 (ie, 10% to 20%, depending on the court's discretion).
However, the lower court awarded Rs100,000 in attorneys' fees, which was further reduced to Rs5,000 by an appellate panel. Both courts alluded to Section 85(8) of the Civil Procedure Code, which authorises judges to depart from the 10% to 20% general rule and use an "equitable assessment" to award attorneys' fees whenever "the economic benefit is inestimable".
The Superior Court of Justice increased the amount of court-awarded attorneys' fees to Rs250,000 (ie, 10% more than the economic benefit obtained by the defendant).
The court held that Section 85(3) of the Civil Procedure Code contains an objective rule that must be applied to most cases (ie, court-awarded attorneys' fees must be 10% to 20% of the award itself (total amount of indemnification) or the economic benefit obtained by the winning side.).
The court also decided that the 'equitable assessment' exception in Section 85(8) applies only in cases:
- where it is difficult or impossible to ascertain the actual amount obtained by the winning side; or
- when such amount is very low or negligible (eg, family law matters or cases involving a person's status (personhood rights)).
Although not binding on all lower courts, the Superior Court of Justice's decision is likely to set the tone for future disputes regarding court-awarded attorneys' fees, which should be taken into consideration at the outset of any litigation commenced or defended in Brazil.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.