Korea has opened its legal market to foreign law firms under Free Trade Agreements about one and a half years ago. According to the Ministry of Justice, 16 foreign firms have opened shop and are currently operating in South Korea:
• 13 US-based firms: Cleary Gottlieb Steen & Hamilton; Sheppard Mullin Richter & Hampton; Simpson Thatcher & Bartlett; Paul Hastings; Ropes & Gray; Covington & Burling; O’Melveny & Myers; K&L Gates; Cohen & Gresser; Square Sanders; Greenberg Traurig; McKenna Long & Aldridge; McDermott Will & Emer
• 3 UK-based firms: DLA Piper; Clifford Chance; Herbert Smith Freehills
Why Korea? South Korea is ranked 15th in the world by nominal GDP and 12th by purchasing power parity, and is considered one of the fastest growing economies in the world. The combined outbound M&A market for last year was $8.8 billion, an increase of 13% from 2011. The country also ranks 4th in the number of patents issued by the World Intellectual Property Organization in 2011. Korea’s largest companies are technology companies, such as Samsung, LG, and Hyundai. Law firms are drawn to the corporate and IP opportunities and Korean companies are similarly drawn to their service. Korean companies and government have spent close to $1.1 billion in 2011 for foreign legal services in 2011.
Law firms are integrating in 3 stages. For the first two years, firms can open representative offices and provide legal counseling on non-Korean law, which has already attracted a long list of interested corporations. For the following three years, firms can enter into co-operative agreements with Korean firms, which include advising on legal issues involving a mixture of domestic and foreign law, and entering into fee-share agreements with their Korean counterparts. The final stage is to allow firms to invest in the local market, recruit Korean lawyers, and enter into partnerships with Korean firms.
Some say that heightened competition for legal work will impact fees, and predict that a restructuring period will soon begin. Others focus on the fierce competition that will emerge from local players that have nurtured deep relationships with Korean companies. Another consideration is to understand the deeply rooted Confusionistic culture that is pervasive in the business culture, such as the top-down management style whereby decisions are made by committees rising up the hierarchy.
But on a whole, foreign firms will have better access to the dynamic global market of Korea and enhance bilateral investment opportunities, in turn making it easier for Korean companies to navigate investments abroad.