Free tool · Remedies
Who Pays Legal Costs? The American Rule and the Loser-Pays Rule
Under the American rule each side normally bears its own legal fees, win or lose, unless a statute, a contract or the court’s power to punish bad faith shifts them. Under the loser-pays rule, used in England and Wales, most of the Commonwealth and much of Europe, the loser normally pays a proportion of the winner’s reasonable costs, so a winner usually recovers only part of what was spent. Fee-shifting statutes, such as those in civil rights and consumer law, let a prevailing claimant recover fees. Settlement offers can shift costs: a claimant who rejects an offer and does not do better at trial may lose its costs recovery or pay the defendant’s costs from the date of the offer.
Tool · Costs Shifter
After costs the claimant ends with 91,000 and the defendant with −146,000.
Claimant ends with
91,000
Defendant ends with
−146,000
Rule: Under the loser-pays (English) rule the loser normally pays a proportion of the winner’s reasonable costs, as assessed. A winner usually recovers only part of what they spent.
Costs order: The claimant wins and recovers about 70% of its costs from the defendant.
- These are simplified rules. Actual practice differs: the American rule has many statutory exceptions, the loser-pays rule is discretionary and costs are assessed on a scale or for reasonableness, and a court can depart for conduct. Settlement offers and offers-of-judgment have different consequences in each system (some shift only taxable costs, others add interest or indemnity costs). Check the rules of the court.
Shows what each side ends up with after legal costs under the American rule (each side bears its own) and the loser-pays rule (the loser pays a proportion of the winner’s costs), with a fee-shifting statute and a rejected settlement offer. Figures are invented and the rules simplified: costs are assessed and discretionary, and offer rules differ by court. A teaching aid, not legal advice. Runs in your browser; nothing is stored or sent.
How to use it
- Choose the costs rule and the result for the claimant.
- Enter the amount claimed and awarded and each side’s costs.
- Add a fee-shifting statute or a settlement offer if there is one.
- Read what each side ends up with.
Common questions
Why does a winner not recover all of its costs?
Because costs are assessed for reasonableness and proportion, and the court may reduce them for partial success or conduct. A winner often recovers well under its real bill.
Do fee-shifting statutes work both ways?
Many are one-way: a prevailing claimant recovers fees, but a losing claimant usually does not pay the defendant’s unless the claim was frivolous.
Are the figures real?
No. The figures are invented and the rules simplified. Costs are discretionary and offer rules differ by court, so check the rules where you work.
Learn the law behind the tool
This tool is part of our Remedies course, with lectures, concept maps, flashcards, interactive exercises and a capstone case. Remedies: Declarations, Punitive Damages and Costs.
More free law tools
General information, simplified, mainly on American law, not legal advice. States and countries differ, and real cases turn on facts that a tool cannot capture.