Last year, when the European Union beat the United States in ratifying a free trade agreement with South Korea, the betting was that British firms, ever eager to plant their flags, would be first into Seoul.
It hasn’t worked out that way.
Out of the several firms that have now officially opened in Seoul,
is the only British one. The rest are American. The same goes for the dozen or so firms in the application pipeline. Most are from the U.S., with
Herbert Smith Freehills
the U.K. exceptions.
It’s both broad demographics and a specific regulation that are hampering the Brits. The U.K. lacks the large Korean immigrant population of the U.S., and Korean nationals who choose to study law abroad invariably head to America. As a result, the requirement that international law firms opening in Korea post chief representatives who are qualified in their home jurisdictions and have practiced there for at least three years has proven no problem for American firms but a major obstacle for British ones.
“It is intended that we have native Koreans for our new office but there aren’t that many English-qualified Koreans to pick from,” says Lewis McDonald, an energy partner with Herbert Smith in Singapore.
McDonald and London-based international arbitration partner Tony Dymond are the two decidedly non-Korean partners slated to launch the firm’s Seoul office early next year, pending regulatory approval by Korea’s Ministry of Justice. Dymond says the office will have four associates, some of whom will speak Korean.
Herbert Smith’s decision to open an office led by non-Korean, non-Korean-speaking lawyers is one other British firms are wrestling with. Clifford Chance relocated counsel Brian Cassidy from its Beijing office to serve as its chief representative in Seoul, though its Korea practice will continue to be headed by partner Hyun Suk Kim, who will also relocate from Hong Kong.
Kim, like most of the heads of the Korea practices at U.K. firms, is a U.S.-qualified lawyer and therefore cannot serve as a British firm’s chief representative. Similarly, Linklaters’ Hong Kong-based Korea practice head is Hyung Jung Ahn, a partner admitted in New York and California but not England. Though Linklaters confirmed it has applied to open a Seoul office, it declined to comment on its staffing plans.
Freshfields recruited the Hong Kong-based head of its Korea practice, U.S.-qualified counsel Neil Chang, last year from
Debevoise & Plimpton
. Chang says Freshfields has generally focused more on its China practice and has not traditionally been a major player in Korea.
“Freshfields is still new to Korea,” he says. “But we do recognize that it is an important market and don’t want it to be a blind spot.”
However, Chang says an effective Seoul office would need to be a certain size to handle deals, and Freshfields still does not have sufficient Korean lawyers–he says the core group is just him and one associate. He is skeptical whether it is wise for British firms to try to fill the gap with partners who have no Korean heritage. He thinks lawyers who do not speak the language and do not know Korean culture may have a hard time forging strong relationships in the market.
“Ultimately, your role is to be a facilitator and to bridge the gap,” says Chang.
Sending such lawyers also potentially takes them away from locations where they may have an easier time building business. Jinduk Han, the Hong Kong-based Korea practice head for
Cleary Gottlieb Steen & Hamilton
, suspects many British firms are hesitant to take such a step.
“Some U.K. firms may think that not opening is worse than opening in an inefficient manner,” he says.
“It’s just a historical thing,” says Han, “U.S. firms have an advantage in recruiting Korean law graduates because we have access to a larger talent pool.”
Edward Kim, a Seoul-based partner for Squire Sanders, notes the much stronger cultural and political ties between the U.S. and Korea, which also have a military alliance.
“Koreans just tend to want to study in the U.S. rather than in the U.K.,” he says. “It might be because the ‘American dream’ thing strikes a chord with young Koreans.”
But Kim notes that, even with relatively fewer Korean lawyers, some British firms have done well advising on Korean deals. “There is no doubt that British firms also have high-caliber people,” he says. “Both American and U.K. firms have strong exposures to the Korean market.”
In 2010, Linklaters advised on Korea National Oil Corp.’s $2.6 billion hostile takeover of Dana Petroleum, an Aberdeen-based oil exploration company. Last year, Clifford Chance acted for $500 million and $300 million bond issues for Korea Hydro and Nuclear Power and Korea South-East Power Co., respectively. The former Freehills, which merged with Herbert Smith at the beginning of October, earlier this year advised a consortium led by Korean steel giant POSCO on a $3.2 billion investment in an iron ore project in Australia.
The British lawyers argue that their practice expertise is what will be most important in Korea. Dymond and McDonald respectively represent two of Herbert Smith’s strongest practice groups: international arbitration and energy. McDonald says his experience building the firm’s energy practice in Singapore makes him a good choice to get the firm up and running Seoul. Dymond, who previously worked for Herbert Smith in Hong Kong for seven years, says he’s advised Korean companies before and has broad experience in other Asian markets where Korean companies have been active.
Likewise, Clifford Chance says Cassidy has the right stuff for Korea too. “His energy sector focus has taken him to South Korea on numerous occasions,” a spokeswoman said in an email. “South Korea has been a key player in the oil and gas sector for many years and his involvement with Korean companies operating in this sector has significantly increased in recent years.”
Dymond says there is a strong competitive imperative for British firms to enter Korea now, despite their staffing problems. He thinks it will soon become very hard for lawyers who fly into the country from Hong Kong or elsewhere to get work when so many of their competitors have offices there.
“I will not be surprised if [more] British firms realize that if they want to have a proper Korea practice, they will need to be on the ground,” says Dymond.