[Viewpoint] Bracing for global competitionAs the Korea-EU free trade agreement goes into effect on Friday, the legal services market faces an imminent turning point.
The Korean economy has attained rapid growth through market opening and competition. The only exception has been the fundamental service sector, which includes legal and educational services. As a result, the legal and educational sectors, which employ the most elite brains in the country, will become the most vulnerable fields when they’re exposed to global competition.
As soon as the free trade agreement takes effect, European attorneys will be able to provide consultation services on European and international laws, and European law firms will be permitted to open branch offices in Korea. Soon, Korean attorneys will find themselves in intense competition with world-class European legal professionals.
The clients should welcome the competition. Companies based in Korea will be able to take advantage of necessary consultation services associated with international mergers and acquisitions, international financial transactions and issuance of securities in foreign markets through the prestigious European law firms such as Clifford Chance and DLA Piper.
From July 2013, European law firms will be able to operate jointly with Korean firms, and in July 2015, the European law firms operating as a joint venture in Korea will be free to employ Korean lawyers. The cooperation and joint ventures will enable foreign investors to obtain necessary services at one firm, so the change is expected to boost foreign investment in Korea.
Korean law firms and international lawyers will be exposed to unlimited competition. It is likely that European law firms will dominate the legal counseling market for outbound cases of large conglomerates such as Samsung and Hyundai, by using their merits and global networks. Japan opened its legal services market in 1987. The top five companies among the top 10 law firms are indigenous companies, but they all specialize in domestic legal services.
At present, American and British law firms dominate overseas consulting for global enterprises in Japan, and they handle most services for foreign companies when they establish Japanese branches.
As the Japanese law firms mostly focus on defending the domestic market, they ended up conceding international counseling services to foreign companies, which has great growth potential.
The Korean economy’s dependence on foreign trade is nearly 90 percent, so Korea’s case would be somewhat different from that of Japan, whose dependence on foreign trade is only about 20 percent. It means that Korean law firms cannot afford to concede international corporate legal services entirely to foreign companies.
Moreover, it is true that client loyalty to indigenous law firms is not solid. Therefore, in order to not repeat Japan’s history, Korean law firms need to offer its attorneys more extensive opportunities for overseas training and professional development.
At the same time, Korean law firms certainly need to improve benefits and performance-based bonus payouts.
Also, they should expand foreign branches not only in Asia but also in western countries, and increase affiliations and exchanges with local companies. In the end, the only way to survive is to prepare an advanced platform to offer comprehensive legal services.
Legal education at law schools needs to be drastically globalized. Law schools tend to prefer students with extensive knowledge and experience in Korean law to raise their bar acceptance rate, but such an admission practice should be changed.
In the age of globalization, it is common sense that the most elite students receive the most globalized education, and are offered opportunities to work in the internationally competitive legal services market.
The opening of the legal services market as a result of the free trade agreement with the European Union means a return to that common sense for both the legal advisors who have comfortably settled into the old system, and the global companies, who had no choice but to be provided with long distance services.
We hope this common sense resonates with the last remaining sanctuary of the country’s most sheltered industry - the educational services market.
*The writer is a professor of law at Ewha Law School.
By Choi Won-mog