Keeping the local legal marketLocal law firms are tense ahead of the liberalization of the local legal market starting in July next year. European law firms can open businesses in Korea jointly with their Korean counterparts from 2016, and ones from the United States can enter in 2017. Under joint-ventures, foreign lawyers are free to handle local cases. About 26 foreign firms are already in Korea to prepare to open businesses.
According to the national statistics office, the local legal market was estimated at 3.6 trillion won ($3 billion) as of 2013. Baker & McKenzie, ranked as the largest in the United States, alone reports annual revenue of 2.8 trillion won. To foreign companies, the local market is neither big nor attractive. But they can also easily dominate the market.
An oversupply of lawyers has led to reduced fees and poor service in the local market. Licensed lawyers total over 20,000, up sharply from 800 in 1994. The surge in the population has led to fee competition. About 3,400 have shut down business, recording the all-time high closure rate of 17.1 percent. Lawyers’ monthly caseloads have been reduced to an average of 1.9 last year, compared with 2.8 cases in 2011. Service charges by a lawyer running his or her own business have been reduced to 1 million won from 5 million won.
Smaller law firms are also managed poorly. About 60 have shut down over the last two years. About 30 closed last year and another 30 as of August this year. The firms employing less than 10 lawyers had to close their businesses because they could not sustain annual expenses of 400 million won to 500 million won. The mergers and acquisitions market has already been taken over by foreign companies. Of the 20 companies that consulted on local merger and acquisition deals as of September this year, 14 were foreign ones. More than half of the 945 deals estimated at $85.8 billion went to foreign companies.
Local law practitioners can no longer rely on nationalistic favor. At the current rate, the entire legal market could fall to foreign firms. Local law firms must seek out ways to improve service. They must set their fees more fairly and transparently to earn trust from local consumers. They must break the old revolving-door tradition and try to compete through better legal practice and service. Law schools also must train aspiring lawyers to be more competitive amid the changes of the time and environment. JoongAng Ilbo, Oct. 7, Page 34