A year ago, I wrote about the Eschig decision of the European Court of Justice, which held that insured individuals in a mass tort case retain the right to choose their own lawyers. Now there is another case on its way to the European Court of Justice on the same topic of the right to choose a lawyer in a legal expenses insurance case, once more being referred by an Austrian court for a preliminary ruling.This one is Stark, and is sent from the Innsbruck court of first instance. The question is whether ‘local lawyer clauses’ in legal expenses insurance policies are permitted, even though such clauses allow insurers to restrict the insured person’s freedom of choice to lawyers that are based in the district of the court or administrative body that is competent for the proceedings in first instance. ‘Local lawyer clauses’ come from article 158k of the Austrian Code of Insurance Contracts which, freely translated, states: ‘2) The insurance contract may provide for a clause according to which the insured shall solely choose persons authorised to represent clients on a professional basis that are based in the city of the court or administrative body that is competent for the proceeding in first instance.’

Why this matters is because, according to Austrian civil procedure, the court fixes the amount of the costs of legal representation on the basis of the federal law on lawyers’ tariffs. This law provides for higher tariffs if lawyers represent their clients outside the place where they are based. The purpose of paragraph 2 of article 158k is obviously to reduce insurance payouts. The point arises for decision because article 4 of the directive on legal expenses insurance (87/344) states that ‘Any contract of legal expenses insurance shall expressly recognise that: (a) where recourse is had to a lawyer or other person appropriately qualified according to national law in order to defend, represent or serve the interests of the insured person in any inquiry or proceedings, that insured person shall be free to choose such lawyer or other person’. The European Court of Justice is being asked whether the Austrian law is in compliance with article 4 of the directive.

You may think that this has nothing to do with you, because ‘local lawyer clauses’ as found in Austria would not be found in the UK. But the battle between the right to choose your own lawyer and insurance contracts or practices is taking place in many parts of the EU. When we met with European Commission officials last week about legal expenses in general (and not about any case in particular), they were bemused because the short directive on legal expenses has not given rise to major problems over the last 20-plus years – other than about the right to choose a lawyer, first in Eschig and now in Stark. They see strong benefits arising from legal expenses insurance in terms of access to justice. But they recognise that it is on the boundary between insurance company costs and the right to choose a lawyer that there is a continuing dispute.

We presented to them our own position paper on legal expenses insurance, which gives examples of insurance practices which restrict the choice of lawyer – for instance, in Germany claimants are referred to a call centre where lawyers who have entered into an agreement with the insurance company are recommended. Just the day before the meeting I had been contacted by a lawyer bringing to our attention a case where an insurance company was denying his client the right to choose him as a lawyer unless the lawyer signed a document containing clauses to which the lawyer could not agree (and that was in the UK).

There is also the question of from when the right to choose becomes exercisable: from the moment of first contacting the lawyer for advice about the case, or only from when proceedings begin. It will not surprise you to find that we believe on good grounds that the right is exercisable from the moment that the client seeks advice on the case.

As we know, the legal aid budget is being cut because of the economic crisis. That means that more people may turn to legal expenses insurance, which in turn makes it incumbent on us to ensure that the legal expenses insurance directive, and in particular Article 4 on the right to choose a lawyer, is being properly implemented.

Jonathan Goldsmith is the secretary general of the Council of Bars and Law Societies of Europe (CCBE), which represents over 700,000 European lawyers through its member bars and law societies

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