It's also a very good way of preventing a small entity from suing a large one for anything but a sure thing; since, if they lose, they could wind up on the hook for legal fees that are way out of their price range.
That's why german has standard rates for lawyers. You don't pay the other side's actual legal costs, you pay a standard rate of their legal costs. And since lawyers not on payroll are required to bill standard rate, your legal costs rarely exceed first court estimates (though you can ask for more if you had additional costs).
