As South Korea gradually opens its market to the European Union, Australian law firms will soon be able to make a move into a relatively untapped legal market. But do they want to? Briana Everett reports
|LIGHTING THE WAY: Several international firms are looking to set up shop in South Korea|
And with negotiations surrounding the Australia-South Korea FTA set to wrap-up by the end of this year (if all goes to plan), a number of Australian law firms will also be re-evaluating their Asian growth strategies as they await the final outcome and learn exactly where they stand.
In its 2009 submission to the Department of Foreign Affairs and Trade regarding the proposed FTA between Australia and South Korea, the International Legal Services Advisory Council - whose members include Corrs Chambers Westgarth CEO John Denton and Mallesons Stephen Jaques CEO Robert Milliner - called for the introduction of a right for Australian lawyers to enter South Korea and provide legal services as 'foreign lawyers' on a fly-in, fly-out basis through representative offices (thus not being required to meet a minimum residency requirement).
The Council also sought the right for Australian lawyers and firms to establish offices in South Korea and enter into cooperative agreements with local firms through partnerships or joint ventures.
While there's no certainty as to whether Australia's FTA negotiations with South Korea will be finalised by the end of this year, the FTA is expected to mirror that of the European Union, which received approval on 16 September 2010. This was only achieved after eight rounds of talks which kicked-off in May 2007.
The EU-South Korea FTA established a timescale for the gradual opening of South Korea's market to EU firms and, as of this month (1 July 2011), European-based law firms can now set up representative offices in South Korea and advise on foreign law.
After 1 July 2013, foreign representative offices will be able to enter into cooperative arrangements with local firms, advising on both domestic and foreign law and, after 1 July 2016, European firms will be able to invest in Korean firms and recruit Korean lawyers to provide multi-jurisdictional services.
Not all smooth sailing
Despite this progressive collaboration between South Korea and the EU (as well as the United States), the liberalisation of the South Korean market has been met with opposition from the conservative Korean Bar Association, says the associate director (Asian commercial law) at Melbourne Law School's Asian Law Centre, Andrew Godwin.
"There is concern [amongst the local legal market]. South Korea has been quite conservative and has held off opening up the market for quite some time," says Godwin. "They made no commitment to opening up the market to foreign law firms in their commitment to GATS (the General Agreement on Trade in Services, which came into force in 1995) and, as a result, they are dealing with it by way of bilateral free trade agreements."
Regardless of these concerns - and the speed at which the Australia-Korea FTA negotiations come to an end - Godwin says Australian firms are unlikely to set up shop in South Korea immediately.
"I think Australian law firms will be considering the benefits of opening an office in Korea along similar lines to other jurisdictions in Asia. Namely, do they think they'll be servicing clients who might be investing in that jurisdiction? Would there be a benefit in terms of inward investments from Korea into Australia?" he says, adding that while he doesn't expect masses of Australian firms to establish a presence in the newly-opened market, there may be a handful of firms seriously considering their options.
"I don't think you'll have the same critical masses as you have with the European-based international law firms or the American law firms, many of which service the Korean practice out of Hong Kong. Firms that have the relevant people may consider opening up and it may be driven largely by client need. I think a lot depends on the resources firms currently have, and their focus."
"We think that having a physical presence is symbolically important. It shows that you're really committed to the market"
Ian Williams, partner, Blake Dawson
Godwin adds that Australian law firms have not yet developed a significant South Korean focus to the same extent that the European-based international firms have, meaning plans to launch a representative office in South Korea is not as much a priority for Australian firms as it is for the European international firms at this stage.
"Unless you've got the critical mass and existing practice, it makes sense to hold back and see how things develop," he says. "I don't expect South Korea to have quite the same attraction as mainland China, for a number of reasons, but I think there may be one or two Australian firms with a Korean focus that will be following developments with interest.
"But ultimately, as was the case perhaps in the early days of the opening of the legal market in China, it will be opportunistic in nature."
Sights on Seoul
Although most Australian firms aren't expected to immediately establish offices in South Korea, there are a number of firms contemplating their South Korean strategy and the establishment of a representative office once the market is open to Australia.
One of those firms is Blake Dawson, which, according to partner Ian Williams, has been servicing South Korea since 1997 on a fly-in, fly-out basis.
"It's always difficult when we're relying on government negotiations because they're always fraught with difficulty, but we imagine the Australian FTA will mirror the US FTA in relation to access for legal firms. In the interim, we've greatly increased the frequency of our visits," says Williams, who heads the firm's North Asia practice, splitting his time between Sydney and the firm's Tokyo office.
According to Williams, as Australia joins the international legal services market, it is important to consider the firm's international presence and strategy in Asia.
"With four of the leading UK or magic circle firms establishing a presence in Australia, it's important for us to also consider a need to have a presence on the ground ... Last year, we established the Tokyo office and that has really exceeded our expectations. We'd look to mirror that with Korea," he says.
"We'll probably use what the UK firms are doing, which seems to be a fairly small presence on the ground and then a lot of fly-ins and fly-outs. We think that having a physical presence is symbolically important. It shows that you're really committed to the market."
For DLA Piper, Korea is an important market and one in which the firm must have a presence, according to DLA Piper's managing director (Asia-Pacific, Middle East and emerging markets), Alastair Da Costa.
"Given Korea's prominence in the economic and global community it is clear that we must have a presence in this important market," says Da Costa. "As the market progressively opens in Korea, it will be interesting to see how quickly international and multinational firms can become active in that market ... The Korea-Australia connection is burgeoning."
Global firm Baker & McKenzie also confirmed its desire to set up shop in Korea. "As Korea is an important market, we are closely monitoring regulatory developments," says Baker & McKenzie pacific regional chairman Jeremy Pitts. "At a time that it makes sense to our clients as well as ourselves, we will certainly consider establishing an office in Seoul in compliance with all applicable Korean laws."
"I think there may be one or two Australian firms with a Korean focus that will be following developments with interest. But ultimately, as was the case perhaps in the early days of the opening of the legal market in China, it will be opportunistic in nature"
Andrew Godwin, Melbourne Law School
While a number of Australian firms currently service the Korean market on a fly-in, fly-out basis, Godwin notes the residency requirements of fly-in, fly-out services under the EU FTA and the possibility that a similar constraint may be imposed upon the fly-in, fly-out provision of services under the Australia-South Korea FTA.
"There may not be any express prohibition on the provision of legal services on a fly-in, fly-out basis but I think there will be a question mark over that," he warns. "Because this wasn't covered by Korea's commitment to GATS, I think there is a question mark about where it leaves law firms or lawyers who want to provide services on a fly-in, fly-out basis."
While firms such as Blake Dawson, Baker & McKenzie and DLA Piper will be watching the FTA negotiations closely, a number of other Australian-based firms are not as eager to establish a physical presence in South Korea.
"We act for many Korean clients in Australia and south-east Asia," says Allens Arthur Robinson chief executive partner Michael Rose. "We have had secondment arrangements with Shin & Kim throughout the last decade and we have good relationships with other leading firms in Korea. In the circumstances, we have no desire to establish there."
Similarly, while closely watching the market, Minter Ellison chief executive partner John Weber says there needs to be a very solid business case for the firm to establish a new international office.
"Given our focus on inbound investment into Australia, Korea is an important market for us," he says. "At present, we service our Korean clients' needs by flying our lawyers in and out as required. We also have informal and non-exclusive arrangements with domestic Korean firms. We don't expect these arrangements to change in the near term."
While Norton Rose Group does not currently have plans to move into South Korea, group deputy chief executive and Norton Rose Australia managing partner Don Boyd claims it would be "foolish to ignore this market", while Mallesons Stephen Jaques chief executive partner Robert Milliner said the firm wouldn't rule out setting up a representative office in Korea.
On the global scale, while the EU-South Korea FTA has received approval and came into play this month, many of the European-based international firms are also hesitant, waiting for further details of the liberalisation process before committing to the establishment of a representative office.
"We have ambitious plans for growth in Asia and Korea is an important part of that strategy," says Clifford Chance regional managing partner (Asia-Pacific) Peter Charlton.
"We welcome the recent legal liberalisation and are working towards having a suitable presence in the country at the first available opportunity."