As the Korea-US free trade agreement effectuation nears, foreign law firms are seeking ways to penetrate the Korean market.
Whether they will aggravate the trade balance in the field is questionable, but domestic firms are also gearing up to take measures against the “invasion.”
According to the Ministry of Justice, seven US-based law firms applied to gain licenses as advisers on foreign law Tuesday, the first day of applications. They are Paul Hastings, Ropes & Gray, Sheppard Mullin, Cleary Gottlieb, Cohen & Gresser, Squire Sanders and the Law Offices of Park & Associates. UK-based Clifford Chance’s also applied last year.
Many of them boast high reputations, capital and extensive networks. Clifford Chance is one the world’s biggest 3 law firms. Cleary Gottlieb, Paul Hastings, and Ropes & Gray are also market leaders, according to the ministry. They also have international networks with branches in major cities around the world.
The preliminary screening will take a couple of months and the final approval will also take another month or two. The firms, if approved, will be able to conduct business activities no sooner than the latter half of the year here, observers said.
The US law firms will concentrate on advising Korean firms about international affairs at first, since the FTA opens up the legal market to in three steps. In the first phase to last until February 2014, firms will be able to provide advice on legal procedures of their respective countries and Korea only. In the second stage that will last until March 2017, foreign companies will be able to jointly handle cases and share profits. From then, foreign firms will be allowed to establish joint ventures and hire Korean lawyers.
Many industry insiders worry that the “invasion” of foreign firms will ravage the domestic market, which performs poorly regarding international legal matters. According to a Bank of Korea report, Korean law firms earned $680 million last year by handling foreign business affairs, compared to the $1.1 billion Korean corporations paid to foreign law firms.
Korea has been an attractive market due to its size, estimated to be worth 2 trillion won ($1.8 billion) and the fact that international trade has been a staple source of many corporations.
Europeans firms’ business in Korea was made available in July last year when the Korea-EU FTA came into effect. However, not one firm has yet established an office here, possibly due to a lack of personnel who understand both European and Korean laws, as well as the culture and other background information. American firms, on the other hand, may have a softer landing since many Korean-American or Korean natives are working with a US license.
“It is not even a question that foreign firms have more experience in handling international affairs. In the advisory field, domestic firms’ profits will shrink,” Lee Ki-young, an MOJ official said in a seminar last month. “The government will wage the appropriate regulations on foreign firms and maintain the market order,” he added.
“Korean firms do have strength in the domestic market: They have a wider communication tool with domestic clients and can cut costs through direct and faster delivery of messages,” said Sohn Do ?il, a spokesman for the Korean Bar Association. “We need to build trust with our domestic and international clients,” he added.
Experts note that it is time Korean law firms advance into foreign markets.
Daeryook & Aju, a noted law firm, has recently announced its plans to enter into the Commonwealth of Independent States. Another firm, Yulchon, is seeking ways to embark into the Chinese and Vietnamese markets.
“We will turn the opening of the domestic market into a business opportunity. We will join hands with foreign firms that do not have their offices here so that we can share cases and experiences,” a spokesman of the firm told a local daily.