South Korea is destined to open up its legal services market as mandated by the free trade agreements with the European Union and U.S. -- which took effect in July 2011 and March 2012, respectively -- within five years of their implementation.
Last month, the issue came to the fore again as a group of local lawyers raised the worn-out sovereignty matter. They denounced U.S. ambassador Mark Lippert and some others for calling on Korea to ease some conditional barriers in its scheduled opening procedures.
On Monday, the National Assembly’s Legislation & Judiciary Committee passed the final bill – the third of the three step-based market-opening bills. But the Justice Ministry-led bill appears to leave some protectionism in place, and the committee has left the barriers untouched before handing it over to the plenary session.
The nation has to liberalize the law market to EU firms by July 1, and to U.S. firms by March 15, 2017, and the final clauses need to be confirmed at the Assembly’s upcoming plenary session.
It is a worrisome development, and we do not rule out the possibility that Korea will face trade frictions with its FTA counterparts in the coming weeks or months.
The ambassadors are asking the government and the Assembly to further mitigate the regulatory hurdles at least, hinting that they would then tolerate it even without 100 percent market opening.
A disputed clause concerns whether to ban foreign law firms from holding a stake of more than 49 percent in a joint venture with Korean firms, which is reportedly aimed at not yielding the decision authority to inbound counterparts. Another is requiring them to operate for a minimum of three years after their debut in the local market, which is reportedly targeted at blocking brain drain.
Further they are barred from subrogating clients during court trials here. They also cannot independently deal with domestic cases related to labor, inheritance and state affairs.
These barriers could certainly build discontent among the inbound law firms, which may be linked to commercial issues between the foreign ministries that signed the free trade pacts.
Lawmakers and policymakers have paved the way for farmers and manufacturers from the U.S. and EU to make inroads into the local market by eliminating tariffs and a variety of regulations.
Vice versa, Korean manufacturers including carmakers and smartphone-makers are also enjoying FTA benefits in the counterparts’ markets.
It is unreasonable and goes against the principle of equality if the nation tries to leave the protection barrier in place only for local law firms.
It unpleasant to see some comments of Justice Ministry officials or lawmakers, in which they highlight the side effects of Germany’s full-fledged opening of its legal market to the U.S. and U.K. Some local lawyers argue that Korea needs to benchmark Japan, which is seeking to protect its market.
Considering the fact that Korea lags far behind major developed countries in the number of lawyers per citizen, the pact is an opportunity in terms of introducing high-quality legal counsel skills and improving the local legal services.
Before the bill passes in the plenary session of the Assembly, the Justice Ministry should relax the handicap for foreign players in reconsultation with the Legislation & Judiciary Committee.
Otherwise, any possible trade conflict could undermine the nation’s credibility. An FTA counterpart may even file a claim against the Korean government with the International Court of Arbitration.
