Lawyers girding against a flood of foreign briefs

Feeling the pressure of free trade agreement talks between Korea and the United States and the effect a pact would have on Korean law practices, domestic legal firms are expanding through mergers.
The mergers are in a sense, to “put on weight” so that they can hold their place as floodgates are gradually opened and foreign legal firms are allowed into Korea.
Lawyers explain that it is inevitable for their firms to merge; they say it would be impossible to compete with foreign firms in terms of size and range of services should they not grow. Many Korean law firms are boutique operations, specializing in a niche where they were extremely competitive.
But when, as they fear, they have to take on foreign law firms with hundreds of employees in Korea alone (a fear that may be somewhat dubiously grounded), those new entrants will be able to set up units that compete in the existing firms’ specialties. “We won’t be able to compete because of the sheer difference in scale,” one Seoul lawyer said.
Korean lawyers are the latest in a series of groups that fear a foreign influx; they say they expect many foreign law firms to set up shop here and eventually expand to include dozens or perhaps hundreds of lawyers and staff.
Most Korean law practices of any size are legal entities; in order to set up the equivalent of a law corporation here, they must have a minimum of five attorneys. Most have fewer than 10. The Korean Bar Association says only eight of its 340 member law practices here have 50 or more lawyers; only four of the eight have 100 or more. The largest law practice in Korea, Kim & Chang, is the exception to the rule. It is organized as a limited legal partnership rather than as a corporate body, and has 250 lawyers in its practice. The legal entities in the law profession are usually owned by one or two of the founders.
By comparison, there are hundreds of law firms in the United States that employ hundreds or even thousands of attorneys, such as Baker & McKenzie of Chicago, which has more than 3,000 attorneys.
Bulking up
Mergers or acquisitions have been fairly common among larger legal firms, especially in the past five years, but the reasons for such deals have shifted during the past year or so.
A lawyer at one of the five largest firms in Korea said, “Before, big firms wanted to diversify the legal fields that they covered, but starting last year, there has been a kind of industry consensus that we have to achieve quantitative growth as well as qualitative.”
Lee and Ko, the second-largest law firm, merged with Jeil International Patent Office in June 2005 to more than triple the number of patent attorneys it employs from 15 to 55. Woo Yun Kang Jeong & Han also absorbed a 10-person patent law practice in October to add patent law to its practice. Sojong Partners formed a strategic partnership in December with another patent law firm.
Patent attorneys are distinct from other lawyers in Korea, and require a different set of credentials to practice. That distinction is rare among the world’s nations, and so the urge to add patent attorneys is an attempt to add a patent practice to compete when the expected foreign deluge arrives.
More recently, even small law firms have begun to expand, but the trend has gone mainly unnoticed except in the legal community.
“In most cases, law firms just closed their old offices,” said Shim Eun-young at the Korean Bar Association, “and then got together in new offices with their combined staff. That’s not an official merger on paper, but is an “understood” merger.”
In January, Woohyun and Jisan law firms did just that, opening new offices and merging their names. Kim Sung-yong, joint head of Woohyun-Jisan, said publicly that the reason for the merger was fear of a market opening here.
“Woohyun specialized in construction and real estate and Jisan concentrated on finance, so we thought it would be good to prepare for an open law market and build competitiveness,” he said.
In March, Janghan C&K and Changwon merged and opened up a new office under the name of Lex. Janghan C&K had seven attorneys; Lex now has 15. This was the firm’s second expansion; the first was in June 2005 when Janghan and C&K merged. Also in March, Yoon & Yang acquired Kim Shin & Yu, becoming Yoon Yang Kim Shin & Yu.
More may be coming, another lawyer said; rumors of at least one more merger before the end of the year are circulating.
”Although we can’t talk about the consequences of what hasn’t happened,” said Kim Hyoung-jun, a prosecutor at the Justice Ministry, “examples of other countries’ law market openings show that small and medium law firms are the ones first hit.”

The Korean legal market
The legal market in Korea is almost exclusively reserved for domestic enterprises founded by Koreans who had passed the government bar examination. There was a limited opening of the market in 1996, when foreign citizens who passed the bar examination were allowed to practice.
A ban on foreign investment in legal services was lifted in 1997, and beginning in 2000, selected foreign lawyers who were deemed to have given meritorious service to Korea were allowed to practice here.
But those measures were limited in scope and created few if any concerns about a larger opening, according to Koh Joon-sung of the Korea Institute of Industry and Technology Information.
“The effects that opening the legal services market will have here will differ according to how quickly the market is opened,” he said. “If it is a full-scale opening, as in Germany, mega-law firms will come shopping or start scouting the best lawyers because they have the management expertise and the money. This will cause a major shift in domestic firms.”
Mr. Koh added that talks on opening the legal services market have been taking place on several levels with many countries, but the free trade talks with the United States pose a more imminent threat.
”Worries about the outcome of opening up the services market can be voiced in any field, but the legal sector may feel more threatened because American law firms dominate the top 20 in the world in terms of billings and the number of attorneys,” he said.

by Wohn Dong-hee