On 1 January this year, American law firms were given the green light to set up shop in South Korea.
By virtue of a long awaited free trade agreement (FTA), US firms are now able to advise Korean clients from Korean offices on matters pertaining to US law.
In five years’ time, they will be able to hire Korean lawyers and practise Korean law.
The advent of the US-South Korea FTA came hot on the heels of the EU-South Korea FTA, which came into effect on 1 July 2011. An Australia-South Korea FTA – if you believe the chatter – is just around the corner.
With numerous international law firms already having significant Korean practices – mostly run from their Hong Kong offices on a fly-in, fly-out basis – 2012 is shaping up to be the year in which yet another Asian country becomes the centre of the legal world’s attention.
Law firms the world over aren’t wasting any time in developing strategies by which to get their feet into Seoul.
Laying the foundations
One law firm with its sights firmly set on a piece of South Korea is Clifford Chance. Peter Charlton, the firm’s head of Asia region, says it is only a matter of time before the magic circle giant, along with plenty of other firms, has a presence on the ground.
“We, alongside a lot of other firms, are looking at it quite seriously,” he says. “We like South Korea, and we’ve got a lot of South Korean clients.
We think it would benefit us to have something on the ground there, in order for us to be able to have closer relationships with the major Korean corporations.”
The majority of firms with Korean practices focus on outbound investment for major South Korean corporations, and with a clutch of significant brands which now rival those of Japan – such as Kia, Hyundai and Samsung – South Korea’s economic might is growing at a remarkable pace.
However, until the professional services market opens further and foreign law firms are able to practise South Korean law, they will have to be content with providing advice to Korean clients looking to invest in external markets.
Like Clifford Chance, DLA Piper is not backward in coming forward with its plans to open an
office in Seoul, and says South Korea is an important part of plans to have an office in every G20
“It’s no secret that our global vision is to have a DLA Piper presence in all G20 countries in the
future,” says Alastair da Costa, managing director, Asia Pacific. “As a G20 economy, Korea is of great interest to us and as such, we are very interested in setting up an office in Seoul – not only to service our existing clients there, but also to develop opportunities with new clients.”
Another major player looking to open an office in South Korea is Allen & Overy, though the firm
says it has no concrete plans yet.
“South Korea is a key market for us and we continue to look at the options which enable us to support our Korean clients to the best effect,” says Simon Black, the head of Allen & Overy’s Korea Group.
“This is under consideration.”
While the US and European firms have been given the go ahead to enter South Korea, another firm likely to enter the market – by virtue of its recent merger with Chinese firm King & Wood – is Mallesons Stephen Jaques, and chief executive partner Stuart Fuller has alluded to South Korean designs.
“The combination with King & Wood will give us a greater footprint across Asia and is the first step in creating a global legal brand based in Asia,” he says.
“Any regional presence needs to have marketleading and deep capability in key countries, not simply a token presence.”
Rules and regulations
Despite the recent loosening of the market, there has not yet been a flood of firms into South Korea. According to Charlton, the reason for this is that the details of exactly how foreign law firms can be established are yet to be determined, and this is resulting in a process which is “not entirely straight forward”.
“The treaties are relatively recent and it is a completely new thing for Korea to enable foreign law firms to have offices, so they are writing the regulations as we speak,” he says.
“We are helping them with what is going to be required, and hopefully we’ll then be able to open something.”
While the development of regulations is well and truly underway, Charlton says it is not a process likely to be speedily resolved.
“During this year, we will know what we are doing. It is not an immediate thing,” he says. “We know that a number of other firms have announced plans, but I think everybody is going to have to chat to the regulators to find out what they have to do in order to comply with the local regulations, so I don’t think anything is necessarily going to happen quickly.”
Eyeing the competition
In recent times, South Korea’s economic growth – which the local people refer to as “The miracle on the Han River” – has been significant. Largely driven by exports in the information technology and automotive industries, the country’s gross national income has grown from a mere $US8.2 billion in 1970 to around $US1.1 trillion in 2010.
Accordingly, there is no shortage of law firms looking to elbow their way in to protect existing
client relationships, and pump up their client portfolios even more.
By all indications, this is a corner of Asia about to get a whole lot more competitive.
“South Korea is mainly important to us because of the considerable success of South Korean companies on the world stage,” says Black.
“Like any Asian market, to secure work you have to put your best team forward, show depth
and breadth of the practice, and be competitive on fees.”
But with so many firms having existing Korean practice groups, which have been functioning successfully over several years, the utility of going to the lengths of actually establishing in office on-theground, when you are unable to practise local law, could be questioned.
For Charlton, however, the drivers are clear-cut, especially for firms wanting a competitive edge.
“Like a lot of places in Asia, culturally, organisations like to know who they’re dealing with,”
he says. “It will help us create stronger and closer relationships with our major Korean clients, and potentially new Korean clients, if we have something on the ground. It is like how you do business everywhere, if you think about it. That’s the reason we’re in Australia. We had plenty of Australian clients, but with nothing on the ground it was a bit difficult to get very close to them.”
Despite this, though, Black thinks it unlikely that the European and American FTAs, and the impending Australian FTA, will result in a flood of foreign firms into the market.
“There will be a handful of firms who establish offices to target Korean clients, and others who continue to service the clients regionally,” he says.
“Over time, there may be opportunities to tie-up with Korean firms and practise local law, but it is too early to say how quickly this develops or how attractive a proposition [this will be] for international or Korean firms.” According to Charlton, the FTAs are unlikely to have a significant impact on what he sees as an already competitive market for lucrative work.
“The competition for Korean corporations’ work outside Korea is not going to change as a result of these FTAs,” he says. “We are still going to be competing with the American firms, the big European firms and the Asian firms for work around the region and around the globe.”
Da Costa, too, sees the FTAs as having little relevance in terms of South Korea’s future as an economic hub.
“Regardless of the FTA, the South Korean legal market for overseas work will continue to grow rapidly as their market shares grow, attracting many international firms,” he says.
However, Charlton believes that having a physical presence in Korea will be crucial in the future.
“Now that the legal market is opening up or liberalising a little bit, it will be important, in order to compete in the future, to have something on the ground in Korea,” he says.
“It will help us compete for work going forward. There is not going to be a great new flow of work or work opportunities as a result of the liberalisation. Korean companies will be doing the same amount of work around the world as they are doing now, with or without the treaties.
But, at the same time, the fact that we are allowed to be present in the country will be a big help.”
The new Singapore
Many of South Korea’s regional counterparts, especially Hong Kong and Singapore, are already thriving financial hubs in which most major law firms have a presence.
So is it feasible that South Korea will follow suit and become a critical Asian business centre?
Black believes that while it will continue to increase in significance, its role will be different.
“Hong Kong and Singapore are currently the main truly international financial centres
in Asia as a place to raise capital and locate regional headquarters,” he says. “Korea will be an important business hub with its successful companies, and its capital markets will
continue to develop.” According to Charlton, South Korea is more akin to Singapore than
“Singapore has gradually liberalised its legal practice system over the years, to the point where we now have qualified foreign legal practices. This allows us to do some local Singapore work, but not everything we’d like to do,” he says.
“The plan is, over time, that Korea will liberalise further. The starting point is to allow offices of foreign law firms, with lawyers working in those offices, but not advising on Korean law.
The next stage – but it’s a little bit further down the line – would be to permit some sort of association or joint venture between foreign law firms and local Korean firms. Then, the final phase – which may take a decade – would be to completely open up the market.”Da Costa, though, sees incredible potential in South Korea, and believes it may even outgrow its thrivingneighbours.
“South Korea has always been an important economic and financial hub in Asia,” he says. “Given the importance of the Korean economy in the world, the sufficient capital pool the country has, and, in particular, the strong work ethics of the Korean people, I am sure that Korea will continue to be an important hub as much as, or even more than, Hong Kong or Singapore.