Foreign firm’s success stirs liberalization fears
According to a 2016 report from the Korean Ministry of Justice, released Monday, the British law firm Clifford Chance was listed among the institutions or companies at which retired public officials are prohibited from being hired.
The list was compiled using law firms’ revenue reports to the National Tax Service in 2015, which showed that Clifford Chance had surpassed the 10 billion won in billings in 2014.
The results come amid concern among domestic lawyers that they could lose their competitive edge over foreign law firms operating offices in the country once Korea’s legal market is fully liberalized.
Under the free trade agreement between Korea and the European Union, the domestic legal market will be fully liberalized in July. Similarly, the Korea-U.S. free trade agreement calls for the market to be fully liberalized to American firms in March 2017.
Between January and November 2015, Korean legal service offices had an average deficit of $490 million, according to statistics from the Bank of Korea.
And earlier this month, the ambassadors of the United States, the European Union, the United Kingdom and Australia presented to Legislation and Judiciary Committee Chairman Lee Sang-min their concerns over draft legislation regulating the opening of the Korean legal market to law firms based in Europe and the United States.
The revised Foreign Legal Consultant Act pending in the National Assembly, they argued, effectively violates the free trade agreements between the concerned parties.
According to the diplomats, the bill - which will implement the third and final stages of legal market liberalization under the free trade agreements with the countries in question - unfairly imposes certain limitations and restrictions, such as banning foreign law firms from owning a stake greater than 49 percent in a joint venture.
The bill was put on hold on Jan. 7, ahead of the final vote by the parliamentary Legislation and Judiciary Committee, due to strong opposition from the four envoys.
The Ministry of Justice maintains that the bill does not go against the free trade agreements.
Clifford Chance is the first of the 26 foreign law firms that have opened offices in Korea since the legal market here opened in July 2011 whose annual revenue has surpassed 10 billion won.
The firm, which opened its Seoul office in July 2012, said that it could not reveal its gross revenue in Korea due to regulations; however, Clifford Chance recorded global revenue of $2.22 billion last year, making it the fifth-highest grossing law firm in the world.
Headquartered in London, it has offices in 24 countries, with 2,495 lawyers.
Since opening here, Clifford Chance has advised clients on international finances and mergers and acquisitions projects, among other matters. In 2014, the firm advised the Carlyle Group on its acquisition of Tyco Fire & Security Services Korea and its subsidiaries, including ADT Caps, for some $1.93 billion.
Clifford Chance’s office in Seoul has five attorneys, who are expected to have higher salaries than their counterparts in domestic law firms, which are considered in Korea to pay well.
“This sort of situation occurs because, even though the level of legal advice is similar, foreign law firms charge three to four times more,” said an attorney from a large Korean law firm.
“So with the Korean offices of foreign law firms offering those kinds of services, there is a greater likelihood that large Korean corporations will depend on American or British firms when it comes to legal incidents that occur overseas. And it’s worrisome that a situation like that could become standard.”
Large domestic law firms, which will most likely be affected by the full liberalization of the Korean legal market, are especially wary of the competition from foreign firms.
“Until Korean law firms are competitive enough against the global market, there is a need for the government to regulate the speed at which the domestic legal market is opened,” a partner at another large law firm said.
BY IM JANG-HYUK, SARAH KIM [email@example.com]