Local practices forced to sharpen edge, but experts say legal fees won’t necessarily fall
Armed with money and reputation, major European law firms are eyeing the South Korean market gradually opening up with the EU-FTA that came into effect on July 1.
Globally renowned firms such as DLA Piper ― the world’s third-largest law firm ― along with Clifford Chance and Allen & Overy are among those looking to woo domestic customers, industry watchers said.
DLA Piper has already told local press that it wishes to expand its offices to South Korea.
Local lawyers could see the expansion as a chance to branch out, as foreign companies would need domestic brains supporting their new offices.
However, both lawyers and industry watchers warn that the opening of the market must be dealt with wisely to protect the interests of local customers while enhancing local law firms’ competitiveness.
Under Korea’s trade deal with the EU, the 2 trillion won ($1.8 billion) domestic legal services market will be opened up in three phases.
The first phase started on July 1 when the FTA allowed EU law firms to open offices in Korea.
During the current phase, however, foreign law firms are not permitted to employ domestic lawyers or to form joint ventures with local practices.
In the second phase, which will begin on July 1, 2013, EU and Korean law firms will be allowed to jointly handle cases and share profits.
In the third and final step, starting on July 1, 2016, EU law firms will be allowed to form joint ventures with Korean partners and hire Korean lawyers, making the markets completely open.
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A view of the Supreme Court of Korea |
Cutthroat competition
Even though it will be nearly two years before EU and Korean law firms are permitted to jointly handle cases, let alone form joint ventures, the inflow of competition is bound to affect domestic law firms, which have so far enjoyed a monopoly.
“In the area of corporate mergers and acquisitions, local practices will definitely be affected because these companies will be armed with global networks,” said Kim Jae-young, a lawyer at Yoon & Yang. “Local practices will no longer dominate.”
Initially, however, the impact may not be as large as expected as foreign law firms would not be actively involved.
Also, most foreign practices are already in the market some way here, industry watchers said, as many come to Korea for prolonged business trips, working from hotels here.
Domestic clients may not have much advantage with the FTA, lawyers warn, as fees may not go down as much as people may expect.
Kwon Oh-chang, a lawyer with Kim & Chang, the nation’s largest practice, pointed out that in France, fees climbed as more British and American law firms entered the market.
This was because, on average, foreign law firms charge more than their local counterparts.
The upside of having more competitors would be the increased opportunity to receive high-quality legal services.
“Legal consumers will have a wider range of services to choose from,” said Song Chang-hyun of Shin & Kim.
But he also warned that fees may jump by as much as 30 percent.
Defending home turf
The Korean Bar Association recently announced measures to help keep the domestic legal services market competitive.
On June 30, the organization said it would do its best to bolster the competitiveness of domestic law firms and their personnel so that the FTA would serve as a chance to improve the quality of legal services and the legal sector in general.
“We plan to step up efforts to foster the capacity of domestic lawyers and advance the international competitiveness of local law practices,” the association said in a statement.
Its chairman Shin Young-moo added that the organization would ensure fair competition between foreign and local lawyers so that “ultimately, our lawyers can branch out into the global legal market.”
The association’s specific goal for globalization would be to station at least two Korean lawyers in each Asian nation by July 2016, Shin said.
Song of Shin & Kim stressed that local law firms would not stand by and accept being absorbed by foreign competitors.
“We are as professional as any of the foreign firms,” he said.
Law firms also have plans to undergo M&As to pump up their size to compete with the bigger players.
Kim & Chang and Yoon & Yang are considering such a tie-up, possibly with domestic partners.
Smaller law firms are reportedly seeking partners from overseas, saying they are ready to be absorbed if it leads to a brighter future.
Sustainable quality of services, meanwhile, will continue to be the best policy for all law are bracing for change on the local legal scene.
By Kim Ji-hyun (
jemmie@heraldcorp.com)
