Watchdog stops lawyers’ bid to increase legal fees

A markets regulator has blocked lawyers’ quest to increase legal fees arguing that the move amounts to price fixing, which needs special exemption to apply in a free market.

The Competition Authority of Kenya now says the Law Society of Kenya’s (LSK) latest attempt to increase legal fees is illegal as it is in breach of the competitions law.

Lawyers have been pushing for an increase in the fees charged for a wide range of legal services, including conveyance, filing of suits, registration of trademarks and debt collection arguing that failure to review the charges is hurting lawyers’ finances and keeping them out of tune with the cost of living. But the competition regulator has put up a strong opposition to the move insisting that the fixing of fees by professional organisations is only allowed under special circumstances.

“All professional bodies, including Quantity Surveyors of Kenya and Architectural Association of Kenya among others must adhere to the Competition Act, 2010,” said Wang’ombe Kariuki, the director-general of the Competition Authority.

The law demands that “a professional association whose rules contain a restriction that has the effect of preventing, distorting or lessening competition in a market may apply in writing...for an exemption”.

Mr Kariuki said that the authority is only allowed to grant exemption in cases where the professional body seeking it has proven that failure to fix prices could negatively affect the quality of services. 

Such an application is, however, benchmarked against international best practices before any exemption is granted, he said.

The competitions regulator maintains that the law requires any professional body involved in fixing of rates, minimum or otherwise, to seek its approval.

“In fact, setting a minimum fee aims at protecting the service provider and not the consumer. This gives us more grounds to be consulted in the review exercise,” Mr Kariuki said.

More than double

The LSK’s proposal shows that legal fees will more than double for some services if approved without amendments.

Lawyers’ fees are reviewed through amendments to the Advocates Remuneration Order for which the LSK is required to seek exemption from the competitions watchdog.

To amend the remuneration order, the LSK is required to submit its proposals to the competition authority for review and offer of immunity if the proposal meets certain conditions.

The LSK last week declared that it had decided to go ahead with review of the fees arguing that the competition authority lacks jurisdiction over the matter.

Eric Mutua, the LSK chairman, said the society was merely “setting a revised minimum fee and not a fixed rate” and that the authority could only intervene in the latter case.

“The competition authority has no role in this process because their mandate is to prevent unfair price fixing in a free market,” Mr Mutua said, adding that the minimum fee would prevent undercutting among lawyers.

“If we did not do it, the profession would turn chaotic with the only cause of action for disgruntled clients being hiring another lawyer to sue the first one.”

The legal fees battle has roped in several high-ranking institutions, including the Judiciary and the Commission on the Implementation of the Constitution (CIC), which have offered different opinions on the matter.

A fierce exchange of mails involving the protagonists since July 23 has not yielded a solution.

Chief Justice Willy Mutunga sparked the debate with an invitation to the CIC and the Competition Authority to offer their “perspective” on the matter.

Documents seen by the Business Daily show that the Chief Justice had initially not supported the consumer or the lawyers, arguing that the rights and interests of both parties should be protected.

“In my earlier discussions with the LSK, I pointed out that gazettement of the new fees must be consistent with the provision of the Constitution of Kenya, 2010 which require, inter alia, public participation in law making,” said Dr Mutunga.

“...it must not run afoul the provisions of other statutes, including the Competition Act, 2010.” But in a letter dated August 30, CIC chairman Charles Nyachae took issue with the LSK’s approach to the review, terming it irregular.

Mr Nyachae has since directed the LSK council to “readily comply with Section 25 of the Competition Act, 2010” and invite public participation in the review.

“CIC is of the opinion that regulation of the remuneration of advocates is necessary to protect consumer rights and to prevent unfair competition among advocates,” Mr Nyachae said even as he reprimanded the LSK for approaching the matter in a manner that is aimed at wrestling the power to approve the fee reviews from the Chief Justice.

“It is against the principle of good governance for employees to set their own remuneration. The Chief Justice, as an impartial State officer, is in a better position to regulate advocate’s remuneration,” Mr Nyachae said.

If the parties reach an agreement, Kenyans may soon have to dig deeper into their pockets for legal services.

For instance, filing a new civil suit valued at Sh500,000 or below will cost a client Sh50,000 up from the current Sh28,000 — an increase of 78.5 per cent.

Consumers of legal services will pay Sh75,000 for suits with express value of up to Sh1 million, a 114 per cent increase from the current rate of Sh35,000.

Costs for ongoing cases have also been reviewed upwards.

Advocates will charge their clients Sh5,000, up from the current Sh630 , to prepare an affidavit needed for purposes of an appeal while conducting a search for a registered trade mark at the registry and getting legal advice for it will cost at least Sh10,000 up from the current Sh1,260.

The Advocates Remuneration Order allows a lawyer to bill clients based on the complexity of the case and time spent in cases where the express value of a case cannot be determined.

The theoretical foundation for lawyer’s billing schedule is that the more complex a suit is the more money a client should spend on it — which has not been the case, causing discontent in the legal circles.

Express permission

In other instances, to cure these disparities, lawyers are allowed to bill by the hour but they have to have express permission of the client.

The LSK says this review is overdue and justified if its members are to get proper compensation following a steep rise in the cost of living.
The charges were last reviewed in 1997, it says.

“Kenyan lawyers charge the lowest fees in the region which is not right given the runaway inflation rates and tougher economic times,” said Mr Mutua, adding that a 2006 revision only raised the fees for conveyance services.

A lawyer in Kenya is paid Sh28,000 to act for a client in a case worth half a million shillings while his Ugandan counterpart gets the equivalent of Sh87,000, according to Mr Mutua.

In Tanzania a lawyer will pocket Sh115,000 for a similar job.

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