May 15 (Bloomberg) -- Germany's top court upheld a limit on lawyers' fees unless payment is negotiated in advance, arguing that the statutory cap protects clients.

A limit on fees introduced by lawmakers in 2004 is legal because attorneys are free to negotiate higher rates with their clients, the Federal Constitutional Court in Karlsruhe ruled on two cases published today. The law protects clients from excessive fees, it said.

``If lawyers don't succeed in negotiating a higher fee, then they face the general risk associated with offering services to the market,'' the court said in an e-mailed statement.

Today's ruling affects claims worth more than 30 million euros ($41 million), where fees are currently capped at an average of 228,740 euros for the first instance, the court said. Prior to 2004, the only limit on rates was the value of the case. A suit worth 200 million euros would have allowed lawyers to charge about 1.2 million euros.

The judgment will hit lawyers who represent government agencies the hardest, said Klaus Kapellmann, an attorney at the law firm Kapellmann & Partner, which brought one of the cases.

`Crucial Point'

``The court did not address the crucial point of the matter,'' Kapellmann said in an interview. Government agencies normally do not accept individual fees, so lawyers are not free to negotiate them, he said.

``The cap was introduced after two state governments had to pay very high fees in multi-billion cases,'' Kapellmann said. ``We are talking about a very small sector of the market where the cap is relevant at all.''

Lawyers earned about 48 million deutsche marks ($33 million) representing the state of Rhineland-Palatinate in a liability suit brought by RWE Power AG in the 1990s, according to a statement issued by the state government in 2003. The case stretched over several appeals and ended with RWE agreeing to pay the government's lawyer fees.

Bernhard Dombek, president of the German Federal Bar Association, said in an e-mailed statement today that his organization opposes caps because they shift the risk on legal fees to the lawyer. ``In the end, lawyers are subsidizing access to justice for well-off clients here,'' Dombek said.

The cases are 1 BvR 910/05, 1 BvR 1389/05.

To contact the reporter on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net

Last Updated: May 15, 2007 11:37 EDT