Time based Remuneration Agreement
Remuneration is regularly calculated on an hourly basis. Billing shall be transparent, with notification of the minute-by-minute time recording.
A lump-sum fee for the entire matter or the agreement of lump-sums for individual stages of the proceedings (based on the statutory fees according to the German Lawyers' Fees Act (Rechtsanwaltsvergütungsgesetz)) would indeed meet the understandable interest in the predictability of the costs of defense against tax offences or representation in tax disputes. However, such a remuneration does not, as a rule, do justice to the peculiarities of the defense in criminal tax cases, the handling of self-disclosure mandates and the representation in tax disputes. Thus, the extent of the services to be rendered by the lawyer at the beginning of the mandate cannot be reliably estimated in the majority of cases in criminal tax law or contentious tax law. Especially in tax estimation cases, very extensive research into previously unnoticed aspects of the facts and persistent persuasion of the tax authorities may be necessary.
In many cases, the goal of defense in criminal tax cases is to avoid the procedural stages that follow the preliminary proceedings, such as a main hearing. Likewise, in taxation proceedings, an early agreement with the tax office can be useful in order to avoid proceedings before the tax court. Remuneration according to procedural stages, as provided for in the Lawyers' Remuneration Act, would create nonsensical economic incentives here. This is because the attorney acquires a more extensive claim to remuneration, for example, through the opening of the main proceedings. Financially, therefore, extensive efforts to avoid the opening of proceedings would not appear worthwhile.
Legal expenses insurance
Tax criminal defense and general legal protection conditions (ARB)
Most legal expenses insurance policies do not provide coverage for defense in customs or criminal tax proceedings. Tax evasion is a premeditated offense and the accusation of such offenses regularly precludes coverage of costs by legal expenses insurance. Also, the costs of representation in taxation proceedings are usually only covered from the fiscal court proceedings onwards and there also only in the amount of the so-called statutory fees.
"In principle, a legal protection insurance contract does not provide legal protection for all claims occurring during the term of the contract. Legal expenses insurance does not provide all-risk coverage; instead, as in most insurance lines, the principle of the speciality of the insured risk applies. Insurance coverage is provided only for the risks designated in the insurance contract."
Guntermann, The Business Criminal Law Mandate under Criminal Law Protection Insurance for Companies and Managers, p. 28.
Special criminal legal protection
However, many legal protection insurers offer a special criminal legal protection tariff (often also called extended criminal legal protection). Providers include Ergo, Roland, ARAG, ÖRAG, Württembergische, R+V and many others. The insurance terms and conditions of the individual providers differ considerably in some cases, as there is no standardization here through the model terms and conditions of the GDV (German Insurance Association).
A last change of the model conditions took place in the year 2000 with the non-binding recommendation of the "Special Legal Protection Conditions for Company Managers" (USRB) by the GDV (circular no. 1451/2000 from 18.7.2000 - R 34/2000 M). This modular system includes, among other things, special criminal legal protection coverage.
Within the scope of special criminal legal protection coverage, the legal protection insurers bear the attorney's fees (including fee agreements) for the defense of the insured person in criminal tax proceedings. In some cases, however, there are limits on the amount that can be paid for individual parts of the proceedings.
Also included in some cases are the attorney's fees for activities in tax law proceedings to support the defense in criminal or misdemeanor proceedings or to avoid them. Thus, in these cases, the legal protection insurance covers, for example, the attorney's fees for representation in the taxation proceedings in connection with the tax audit, during the course of which criminal tax proceedings were initiated. The same applies to representation in taxation proceedings due to the amendment of tax assessment notices as a result of the accusation of tax evasion, including the objection proceedings and financial court proceedings. It is also possible to receive a fee for representation in tax liability proceedings, for example, if the former managing director of a corporation is accused of having evaded taxes for the benefit of the company.
It is always important to take a look at the insurance conditions agreed in each individual case.
For example, the conditions of Auxilia (AUXILIA ARB/2021) appear risky for the policyholder. According to C. Special Conditions for Special Criminal Legal Protection (SSR/2021) § 6 lit. b, the maximum limit for reimbursement is 5,300 euros in preliminary proceedings (in which, ideally, most of the work and thus the proceedings are to be completed immediately in criminal tax law). In so-called circumstantial proceedings, the defense attorney has not even worked his way through half the file for this amount. Also the limitation of the reimbursement of costs for "necessary travels of the lawyer acting for the insured person to the place of the competent court or the seat of the investigating authority" to 3,000 euros can become highly problematic. Furthermore, the limitation of the reimbursement of costs in preliminary proceedings for insured persons who are not themselves policyholders to 1,300 euros seems rather unfavorable (for the insured persons).
Interesting for those interested in legal protection insurance (and also for lawyers) are the statistics of the Federal Financial Supervisory Authority (BaFin) on complaints in the insurance class of legal protection insurance. The most complaints per insurance contract among the major insurers were - unsurprisingly for insiders - at ARAG: Here there were 55 complaints per 1,688,439.00 insurance contracts, i.e. one complaint per 30,698.89 contracts. At first glance, the figure appears to be quite low, but considering the frequency with which a legal insurance case occurs and the rarity of BaFin being called upon, it is nevertheless not a glorious one.
According to this, for example, the customers of Allianz (28 complaints on 2,567,191 contracts), Ergo (20 complaints on 1,863,238 contracts) and Örag (21 complaints on 2,046,227 contracts) seem to be better served - here, after all, there were 91,685.39 (Allianz), 93,161.90 (Ergo) and 97,439.38 (Örag) insurance contracts for every complaint.
The target group for special criminal legal protection now includes all companies, from retailers to stock corporations. However, freelancers also come into consideration. Some insurers offer special variants for the target group of doctors and other persons/institutions in the healthcare sector (pharmacists, hospitals, homes, etc.).
D&O insurance and criminal legal protection
For companies and managers, almost all major domestic and foreign insurers represented on the German market offer criminal legal protection insurance, often under the name Industrial Criminal Legal Protection Insurance (ISRS) or Special Criminal Legal Protection Insurance (SSR). It is often part of an insurance concept consisting of directors and officers (D&O) insurance and fidelity insurance (Fidelity Insurance).
The legal protection provided by D&O insurance policies generally covers the costs of defense in criminal tax proceedings. The insured persons are regularly the legal representatives/bodies of the policyholder and all permanently or temporarily employed company employees including interns and temporary workers as well as freelancers within the scope of their activities for the policyholder or all natural persons in the exercise of their professional or other activities for or at the instigation of the policyholder.
Coverage request and further correspondence with the legal expenses insurance company
The request for coverage from the legal expenses insurance company and the settlement of accounts with the same are regularly handled by the lawyer as a gesture of goodwill.
The presentations on our website can of course not replace legal advice in individual cases. Please contact us for help with your specific concern. We will be happy to assist you in word and deed!
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