No automatic exemption: Legal aid for court costs and the Federal Employment Agency
With its decision of July 19, 2024 (Ref.: 4 W 13/24), the Higher Regional Court of Frankfurt am Main clarified that the Federal Employment Agency is not automatically exempted from statutory personal contribution when it comes to bearing court costs. This decision addresses the fundamental question of the applicability of the regulations on legal aid for civil proceedings (PKH) to public bodies and highlights the legal limits of relieving public entities from cost obligations in civil proceedings.
Legal aid for court costs in German civil procedure law
Legal aid for court costs was created by the legislator as an instrument to enable parties with low income to access the courts. The relevant provisions are set out in Sections 114 et seq. of the Code of Civil Procedure (ZPO), which require applicants to disclose their financial need. If granted, following judicial review, the costs of litigation may be covered wholly or in part by the state treasury, always subject to judicial discretion. Neediness criteria apply not only to natural persons but also to legal entities, provided a legitimate interest in pursuing or defending legal rights can be demonstrated (§ 116 ZPO).
The special position of public law institutions
The question regularly remains open as to the extent to which public law institutions – such as the Federal Employment Agency – are obliged to use their own budgetary resources to finance court costs before applying for legal aid. According to Section 116 sentence 1 no. 2 ZPO, legal aid is only granted to legal entities and associations capable of being parties to proceedings if the anticipated litigation costs cannot be covered from their assets, as well as taking into account the financial circumstances of their members or shareholders.
Case law of the Higher Regional Court of Frankfurt am Main
In the underlying proceedings, the Federal Employment Agency was litigating for an objective within its own area of responsibility. It sought the granting of legal aid and referred to its function as a public body and to the absence of corresponding funds in its current fiscal year.
The Higher Regional Court of Frankfurt am Main made it clear that the Federal Employment Agency, as a federal public body with its own budgetary and financial sovereignty, is not per se exempted from the obligation to bear costs in the context of legal aid proceedings. Rather, it is required to first use any available free budgetary resources to cover litigation costs. There is no general priority for legal aid merely due to a public law status.
Key aspects of judicial evaluation
The court emphasized that, according to the principle of budgetary autonomy—and within the framework of its statutory duties—the Federal Employment Agency is also obligated to use resources economically. The application for legal aid should not result in public institutions gaining an advantage over private individuals or companies. Relief can only be considered in exceptional cases, such as where there are legally established restrictions or earmarked funds. In the present case, the court found that such circumstances were not apparent.
Consequences for practice and parties to proceedings
This decision underscores that the preferential treatment under Sections 114 et seq. ZPO should generally be interpreted restrictively, even if the applicants are public law entities. The parties to proceedings should therefore be aware that self-financing has priority and legal aid can only be granted on a subsidiary basis. This imposes an increased obligation on public institutions to review and prove the use of the relevant budget items claimed.
Notes on the procedural status
The statements provided are a summary of a final and binding decision (OLG Frankfurt a.M., Decision of 19.07.2024, Ref.: 4 W 13/24). For further details, especially regarding possible legal remedies, please refer to the decision and public sources (cf. https://urteile.news/OLG-Frankfurt-am-Main_4-W-1324).
Conclusion
This decision emphasizes the necessity of a differentiated examination of legal aid for court costs in the case of public law entities. The privilege under Section 116 ZPO is subject to strict conditions and does not automatically exempt such entities from the obligation to finance litigation costs from their own resources.
If you have any questions about the application of legal aid for court costs or about litigation financing options for institutions and companies, the lawyers at MTR Legal Rechtsanwalt are available to provide an individual review of your case.
