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It's long been clear that international law firms were eager to enter the Korean market. But exactly which firms and how many has turned out to be more of a surprise.
"Some of the firms that have applied to open an office are not any that we've seen in the market before," says Yong Lee, the partner who will open the Seoul office for Cleary Gottlieb Steen & Hamilton, which has the largest and perhaps best-known Korea practice among international firms. "It seems quite clear that it's going to be a very competitive market."
Indeed. Some 16 U.S. and U.K. firms have either applied to open an office in Korea or publicly stated their intention to do so since the free trade agreements liberalizing the Korean legal market came into effect at the beginning of the year. The list includes established Korea players like Cleary, Simpson Thacher & Bartlett and Paul Hastings but also somewhat less familiar names in the practice like Ropes & Gray, Sheppard Mullin Richter & Hampton, and McKenna Long & Aldridge.
Jong Han Kim, the head of Paul Hastings' Korea practice, says he thinks there are still several other firms that might soon announce plans, meaning the starting roster could be well over 20.
Can the Korean market support those kinds of numbers? It's far from clear. According to the World Bank, the country of 49 million people had 2010 gross domestic product of roughly $1 trillion, less than one-fifth that of Japan or China. Moreover, unlike Hong Kong or Singapore, Seoul is not a global financial hub.
William Kim, who is relocating from New York to Seoul later this year to lead the Korea office for Ropes & Gray, says Korea practices that have been based in Hong Kong -- like those of Cleary, Simpson Thacher, and Paul Hastings -- and those based in the United States may be looking at the market differently. The former, he says, are preoccupied with the relatively stable volume of major capital markets and mergers and acquisitions transactions, while the latter are more attuned to more high-growth areas of opportunity like litigation.
U.S. litigation, especially intellectual property disputes involving giants like Samsung Group or LG Corp., is indeed the main attraction for many of the firms heading to Korea. William Kim says that Ropes & Gray has crunched numbers that show that Korean companies' legal spending has more than doubled in the last six years. Much of that increase, he says, is from litigation.
Lee and Jong Han Kim agree that U.S. litigation is a growth area and say that their firms are targeting it as well. But both also note a major challenge for international firms: The growth really comes from a very small band of very big companies.
Whereas Japan has a vast second tier of still-large companies, Korean companies tail off dramatically in size after the big names are counted. Jong Han Kim says the number of Korean companies with a significant amount of international legal work may be as few as 15. "The Korean market is definitely not as big as Hong Kong or Japan," he says. "If people are coming in and hoping for dramatic breakthroughs, it might be challenging."
William Kim does not disagree that it will be tough going. "You've got a limited company list and a large pool of lawyers trying to service it," he notes. "The competition is going to be very fierce."