"If You Are Found Not Guilty, I'll Pay 30 Million Won"... As More Clients Refuse to Pay, Lawyers Insist on Large Upfront Fees [Backlash of the Success Fee Ban] ①

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"If you are acquitted, I will pay you 33 million won."

Client A made this promise to a law firm ahead of his appeal trial. He had hired a private investigation agency to secretly film his daughter-in-law in order to obtain evidence of her affair and sent the footage to her workplace. As a result, he was prosecuted on charges of violating the Protection of Communications Secrets Act and defamation. Ultimately, A was acquitted in both the appellate court and the Supreme Court. However, his contract with the law firm became a new point of contention.

He refused to pay the agreed-upon fee to his attorney, citing Supreme Court precedent that "success fees in criminal cases are invalid." The law firm responded by filing a "fee claim lawsuit" against A. In January, the Seoul Central District Court Civil Appellate Division 1-3 (Presiding Judge Choi Sungsoo) ruled in favor of the law firm, stating, "While the success fee agreement itself is invalid, it goes against the principle of good faith for a client to pay nothing at all after achieving an acquittal."

According to the legal community on March 24, there has been widespread discussion following a lower court decision in January that contradicts the 2015 Supreme Court en banc ruling, which deemed success fees in criminal cases invalid. In 2015, the Supreme Court ruled that success fee agreements in criminal cases were completely null and void, reasoning that such agreements undermine the public nature of legal representation and could erode trust in the judicial system.

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However, within the legal profession, there are cases like A's where tacit contracts are made on the premise, "If you are acquitted, we will pay you an additional success fee." This is based on the expectation that attorneys will be more motivated in their defense if they receive a success fee. The issue arises when, as in A's case, the client refuses to pay after the fact, leading to litigation over the fee. This illustrates the significant gap between the 2015 Supreme Court en banc precedent and actual legal practice. According to the Seoul Bar Association, there have been 15 such fee claim lawsuits from 2023 to last year.

As these cases become more common, a new practice is spreading among lawyers: increasing the upfront retainer fee, given the inability to collect success fees. There are growing concerns that clients with limited financial resources now find it difficult to mount a legal defense in criminal cases due to higher initial costs. The case of a daily wage worker, Mr. Jeong, is a prime example. He paid 15 million won upfront for legal representation, which was almost all his assets. While Mr. Jeong was in the detention center, his family was left struggling to afford daily necessities.

The attorney representing Mr. Jeong explained, "In the past, I could take a case for a 5 million won retainer, and the client could use the remaining 10 million won to support his family, then pay the success fee after being released and resuming work. But now, clients must pay a large sum upfront regardless of the outcome, which is devastating for the poor."

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There are also concerns that attorneys' motivation and defensive capabilities have weakened. According to Dongguk University economics professor Ji Inyeob, who analyzed about 150,000 verdicts with the legal tech service 'LBox,' after the invalidation of success fees in criminal cases, the win rate for the same attorneys in criminal cases was 6.2 percentage points lower than in civil cases. The win rate dropped an additional 1.9 percentage points for cases involving low-income clients.

Han Sanghee, professor at Konkuk University Law School, stated, "In Korea, where a systematic litigation insurance system like Germany's has not taken root, the social insurance function provided by success fees cannot be ignored. Instead of an outright ban, we should work together to minimize negative side effects by setting caps on success fees or regulating improper receipt."

Jo Soonyul, president of the Seoul Bar Association, argued, "The Supreme Court's decision effectively encourages clients to act in bad faith. The recent appellate ruling offers a reasonable judgment that aligns with judicial fairness and market common sense."

There are also opposing views regarding the introduction of success fees. Some worry that allowing success fees in criminal cases could tempt attorneys or clients to manipulate evidence or offer bribes to judges, thus undermining the integrity of the judicial process.

However, bar associations argue that the rapid increase in the number of lawyers is encouraging market self-regulation, offsetting the negative effects previously feared by the Supreme Court. While there were 20,000 lawyers at the time of the Supreme Court's ruling, there are now more than 40,000. With reduced information asymmetry and the onset of fierce competition, they claim clients can now compare prices and make informed choices, allowing the market to self-correct.

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