Last fall international law firms responded to the long-awaited opening of the Korean legal market by stampeding through the door. At this writing, some 20 U.S. or U.K. firms have opened or have announced plans to open Seoul offices, and still more are expected. Most of those offices are quite small, with one or two partners and a handful of associates.
Yet one firm in Seoul already has more than 100 U.S.–qualified lawyers on the ground, and a few more have at least 30. These particular firms haven’t taken some kind of powerful steroids. Their growth, while impressive, has been relatively steady. In fact, the Korean market has been open to them for quite some time.
What’s their secret? They’re Korean firms: Among them, Kim & Chang, where almost 20 percent of the firm’s 670 lawyers are foreign-qualified; Lee & Ko, where 12 percent of its 430 lawyers are foreign-qualified; and Shin & Kim, where 15 percent of its 300 lawyers are foreign-qualified.
There are firms in China, Japan, and elsewhere in Asia that also employ foreign lawyers, but not on the scale of the Korean firms. Kim & Chang and the other leading Seoul firms actively recruit foreign lawyers at all levels and across a broad array of practices, from capital markets to litigation. It is now possible for a foreign-qualified lawyer to have a complete career path in Korea, from first-year to partner-equivalent. For some young lawyers just starting out, Korean firms are a refuge from tough job markets back home. Other lawyers have previously been partners at international firms.
The phenomenon is partly about demographics. The vast majority of foreign lawyers at Korean firms are Korean Americans or Korean nationals who studied law in the United States. But it’s also about Korean firms recognizing early on their limited ability to address the needs of foreign clients and moving deliberately to address the issue. These firms are now increasingly focusing on helping Korean clients head overseas. It’s no accident that many Korean firms have expanded their foreign lawyer ranks in the past few years as the arrival of foreign firms became imminent.
Which means that the market those 20 or so newcomer firms have entered is likely to be even more competitive than it already appears.
For the most part, American lawyers working at Korean firms do not practice U.S. law; many admit that they would be a bit rusty if they were asked to do so. Instead, they chiefly advise on Korean law matters. That may seem odd, as they are barred from being admitted to the Korean bar and only rarely have any formal training in Korean law. But foreign lawyers are mainly there to bring other skills to the table.
“It’s not really the U.S. license but the U.S. training,” asserts Luke Shin, who joined Kim & Chang as a foreign attorney in 1997 after five years at the former Dewey Ballantine. He points out that the Korean education system, up to and including the bar exam, has historically stressed rote memorization. By comparison, the best U.S. lawyers learn to focus on solving clients’ problems. Justine An, a nonlawyer business development team leader for Korean telecommunications carrier KT Corp., agrees.
“Foreign lawyers treat clients more like customers,” says An, who has worked frequently with foreign lawyers at Kim & Chang, Lee & Ko, and Yulchon. On overseas deals in particular, An says, foreign lawyers bring to bear a familiarity with “international standards” of negotiations and familiarity with a wide variety of business structures. “It has been a big benefit to the client,” he says of the Korean firms’ hiring of foreign lawyers.
“It’s a real symbiotic relationship,” says Jeffrey Jones of Kim & Chang. “The Korean lawyer provides the substantive law knowledge and the American lawyer provides the analysis of the client’s situation in a way that gets the client the best result.”
English language skills are also a major factor. Jae Hoon Kim, managing partner of Lee & Ko, says that although more senior foreign lawyers bring valuable practice experience, even fresh U.S. law grads can play a role facilitating communications. Kim notes that English is the second language that unites businesspeople throughout Asia. “But many Korean lawyers do not speak or write English at a very fluent level, so we need the foreign associates,” he says.
Kim & Chang founder Young Moo Kim pioneered the hiring of foreign lawyers in Korea, making sure they were part of his firm almost from its founding in 1973. Kim had earned a Master of Comparative Law from the University of Chicago in 1967 and a J.D. from Harvard in 1970, on top of his law degree from Seoul National University. “Our founder [Kim] went to the U.S. and saw how sophisticated that legal market was in terms of client service and wanted to bring that back to Korea,” says Shin. Jones, who first learned to speak Korean as a Mormon missionary in Korea, got to know Young Moo Kim while working at Baker & McKenzie in Chicago and Tokyo. When he joined Kim’s fledgling firm in 1980, he became one of three American lawyers working at Kim & Chang—which had only six Korean lawyers at the time.
Through the 1980s and much of the 1990s, the foreign lawyers at Korean firms—Jones estimates that the total went from 30 to 100 during that time—focused their practices on American companies coming to Korea to invest in manufacturing ventures or to undertake large-scale infrastructure projects; Jones recalls advising on the construction of large switching stations by AT&T Inc. By the mid-1990s, large Korean companies had also started looking abroad for acquisitions and foreign capital.
What changed everything was the 1997 Asian financial crisis. Burdened by portfolios of nonperforming loans, Korean banks collapsed in waves, and many companies filed for bankruptcy. The International Monetary Fund eventually stepped in with a $58 billion bailout tied to some tough austerity measures. Though traumatic to the country at large, the crisis brought bargain-seeking foreign investors into Korea on a major scale, making foreign lawyers more vital than ever. The sophistication of the practice improved enormously as well.
“There was an explosion in cross-border transactions,” recalls Shin, who arrived in Korea just a few months before the crisis. “What made it so exciting is that we were really working on groundbreaking cases. We had more foreign investment in a single year in ’98 than we’d had in the last 50 years, and that translated into really interesting deal flow.” He was part of Kim & Chang teams that advised Norwegian and Canadian paper giants Norske Skog and Abitibi-Consolidated Inc. on their $1 billion investment in Hansol Paper in 1998, General Motors Corporation on its $400 million acquisition of Daewoo Motors in 2001, and Total S.A. on a petrochemical joint venture with Samsung Group in 2003.
Other Korean firms, including Bae, Kim & Lee, Lee & Ko, and Shin & Kim, joined Kim & Chang in hiring more and more foreign lawyers, a boom that largely coincided with a demographic spike in Koreans studying in the U.S., as well as the number of second-generation Korean Americans. (From 1976 to 1990, Korea was third in the number of immigrants moving to the U.S. For many years, it has also ranked third as a source of foreign students at U.S. universities.)
This diaspora is a natural recruiting pool for Korean firms—many lawyers with Korean roots are drawn to the idea of working in their homeland. That pull has only increased over the past two decades as Seoul has become a sleek, world-class city. In recent years, working in Seoul has grown even more attractive to young U.S.–trained Korean and Korean American lawyers because of the tough legal job market in the U.S. Korea-born Kelly Lee, who spent five years in Los Angeles as a child, went to Boston University School of Law for her J.D. “When I graduated, it was ’08, and the market was terrible,” she recalls. She considered staying in the U.S., but returned to Korea because of personal ties. Now a foreign attorney at Shin & Kim, Lee thinks she made the right call. “Most of my friends who graduated with me were ultimately laid off and had a lot of trouble finding other jobs,” she says.
For June Yeum, who had been a litigation partner with Baker & McKenzie in New York before she left to join Yulchon last year, Korea offered a chance to move up the ranks faster. A relatively junior partner at the U.S. firm, she was asked to lead an international disputes and arbitration practice at the Seoul firm. “What swayed me was the opportunity to play a leadership role and grow a practice in my home country,” says Yeum, who was born and grew up in Korea before studying law at Georgetown University Law Center. “I thought it would be a meaningful career change from Baker & McKenzie, where I was just one of many. I thought it would be a challenge, and I’d be able to add more value than at an international firm.”
Under laws passed pursuant to the free trade agreements that opened the Korean legal market, foreign firms are barred from practicing Korean law until 2017. Many foreign firms, including Simpson Thacher & Bartlett, Cleary Gottlieb Steen & Hamilton, and Paul Hastings, have already said that they have no plans to practice Korean law, even after 2017. Jong Han Kim, head of Paul Hastings’s Seoul office, says it would be hard to compete with Korean firms on inbound transactions, in large part because of the foreign lawyers at those firms. “The big Korean firms have many senior foreign attorneys who can execute those deals very competently,” he says.
But foreign lawyers at Korean firms say they’re increasingly focused on advising Korean companies on outbound matters like overseas acquisitions and litigation, particularly in the U.S. This puts them in direct competition with international firms.
John Kim, who joined Lee & Ko as a partner-level foreign lawyer in 2011 after stints as an in-house intellectual property litigator at Samsung Electronics Co. Ltd. and as a partner at Quinn Emanuel Urquhart & Sullivan, says that Korean firms have been building up their ranks of experienced foreign lawyers in preparation for that competition. In just the last two years, for instance, Lee & Ko has raised its foreign lawyer head count from 40 to 52.
For Korean firms, the goal isn’t to displace international firms on outbound mergers and acquisitions transactions. Such deals will always require lawyers on the ground in both Korea and the target jurisdiction. But Korean firms are aiming to maximize the amount of work they get on outbound deals and, wherever possible, take the lead role advising the client. “I don’t think lead counsel is necessarily the domain of any particular law firm from any particular jurisdiction,” says Edward Kim, a former partner with Fried, Frank, Harris, Shriver & Jacobson who joined Lee & Ko last year as an M&A–focused foreign lawyer. “It’s a reflection of the confidence the clients have in those firms’ ability to take care of them.”
The question, at the end of the day, is whether Korean firms will be able to generate that kind of trust from Korean clients. KT’s An thinks that Korean firms have an advantage there at the moment. “Korean companies are very big and very conservative, and they are accustomed to using the top five Korean firms,” he says. “They may feel they are taking a risk with some of the international firms.”
That ability may vary by jurisdiction. A major outbound acquisition in the U.S. will likely still be led by a large U.S. firm. But Korean companies are also eyeing overseas deals in many places where the big international firms don’t have as clear an edge. Kim points to the January 2013 deal in which a consortium led by Korean steel giant POSCO acquired a 15 percent stake in ArcelorMittal Mines Canada for $1.1 billion. The consortium was advised by Kim & Chang foreign lawyer Jason Lee, with Lee & Ko and Shin & Kim advising other consortium investors; although Canada’s Osler Hoskin & Harcourt represented the consortium, the Korean firms took the leading roles, says Osler partner Shahir Guindi. “It’s a case in which Korean clients felt comfortable with their local firms in the lead roles,” Kim says. “It’s not necessarily the norm, but it could conceivably be a few years from now, depending on what those local firms do.”
Korean firms also think they will have an edge when it comes to price. Billing rates of Korean firms are 25–40 percent lower than those of their international counterparts, and discounts to long-term clients are common. “You cannot underestimate the difference in fees,” says John M. Kim, a senior foreign lawyer with Shin & Kim. He thinks international firms have been able to charge Korean clients more because they were “overseas” in Hong Kong or the U.S.: “Now that they’re in Korea, I hear clients now say they should be charging rates more similar to ours.”
Youngjin Sohn, the head of the newly opened Seoul office for Simpson Thacher, says the relationships between the leading Korean firms and international firms have long been partly competitive, partly cooperative. He notes that there are still strong referral relationships in many instances, and he thinks that may temper some of the Korean firms’ bigger outbound ambitions. Moreover—though Sohn says that Korean firms have many smart and talented lawyers—he still thinks the top international firms’ deep institutional experience in cross-border deals will give them an edge. He analogizes the situation to that of domestic Asian investment banks. “Just because you manage to hire a few big names from Goldman Sachs, that doesn’t make you Goldman Sachs,” says Sohn.
The biggest foreign names, as well as foreign lawyers in general, are well paid by Korean firms, with compensation for experienced foreign partners and associates in line with that of international law firms. Though only Korean-qualified lawyers can be equity partners at Korean firms, senior foreign lawyers are treated as “virtual partners,” with pay packages set by formulas identical or similar to those for Korean partners.
But for foreign lawyers joining a Korean firm, it is still not always an easy transition. Though lawyers interviewed for this article almost all say that Korean and foreign lawyers working at the same firm mostly regard each other as equals, they also acknowledge occasional friction. Benjamin Hughes, who worked as a foreign lawyer at Kim & Chang and then Shin & Kim before becoming an independent arbitrator in Seoul earlier this year, says that some Korean lawyers regard foreign lawyers as second-class citizens. The traditionally low passage rates of the Korean bar exam—which has meant that only a select few become qualified Korean lawyers—plays a role in such attitudes, Hughes says.
Some Korean partners insist on dominating relationships with Korean clients, so that all the foreign lawyers’ advice goes through them. Hughes says: “It just builds in an opportunity for miscommunication.” Other foreign attorneys have similar stories, though many say their own firm is different in that regard. Shin recalls deal meetings where the senior Korean partners across the table only called their foreign-qualified colleagues into the room to take notes or draft instructions. “It has stuck in my mind it’s not the same for all foreign lawyers,” he says.
Irreconcilable differences with Korean partners led Yeum to leave Yulchon after only a few months for Lee & Ko, where she is also now coheading an international disputes and arbitration group. Yulchon subsequently sued her in Korean court, while Yeum countersued in New York, alleging that Yulchon partner Sae Youn Kim misled her about how she would be treated at the firm. In her complaint, Yeum says that, contrary to what she had been told when Kim recruited her, she wasn't allowed to serve as a relationship partner with clients, was not allowed to call herself a partner outside the firm, and wasn't allowed to present at international arbitration seminars and conferences.
“It wasn’t what I thought it would be,” says Yeum, though she stresses that her issues at Yulchon had to do with individuals rather than the firm as a whole. She declines to comment further on the cases except to say Yulchon and Lee & Ko have been in talks and are close to resolving the matter.*
She thinks the arrival of international firms may put pressure on Korean firms to make sure that their foreign lawyers are being treated well. Foreign firms are barred from hiring Korean lawyers for another four years, but they can hire Korean firms’ foreign lawyers right now, and some have already done so. “It will create more options for foreign lawyers,” says Yeum. O’Melveny & Myers, for instance, hired two former senior foreign lawyers from Shin & Kim, Sungyong Kang and Jinwon Park, to lead its Seoul office.
John M. Kim agrees that the prospect of foreign firms poaching talent will mean better treatment for foreign lawyers at Korean firms. But he also thinks the huge number of new entrants and resulting level of competition will probably give many foreign lawyers pause about moving in the near future. “With some of these [international] firms, I don’t have confidence they’re going to be around here five years from now,” he says.
Newly arrived international firms may alter the landscape for foreign lawyers at Korean firms in other ways. For instance, lawyers based full-time in the Seoul offices of overseas firms are required to register as foreign legal consultants (FLCs). Many anticipate that foreign lawyers at Korean firms will also need to register at some point, either because foreign firms demand it or because foreign lawyers at Korean firms perceive that the FLC title confers a marketing edge. Shin notes that foreign lawyers in Japan were similarly required to register when that market opened up in the late 1980s. “My understanding is that maybe it had the same purpose of distinguishing locally licensed from foreign-licensed lawyers, but ultimately it became a badge of honor,” he says. “It signified that the foreign attorneys had been in the market and they’d been vetted. I’d expect much the same will happen here.”
That might prove a bigger headache for Korean firms than foreign ones, since the FLC Act requires anyone applying for the status to have three years’ experience outside Korea. Sinseob Kang, the managing partner of Shin & Kim, calls the overseas practice requirement “unrealistic,” and says that Korean firms are currently discussing relaxing the requirement with the Korean Bar Association.
Will the Korean legal profession always need its foreign lawyers? Recent reforms to the Korean legal education system seem designed to produce lawyers who are more worldly and analytical. Instead of an undergraduate course of legal study culminating in a punishing bar exam, the country is now transitioning to U.S.–style postgraduate law schools, with a goal of bringing people with more diverse backgrounds, including previous overseas or work experience, into the Korean legal profession. And more Korean lawyers have themselves lived or studied abroad, often from adolescence. Command of English is far more common.
Could the foreign lawyer role be headed for obsolescence? “I hope so,” says Hughes, who teaches as an adjunct professor at the law school of Seoul’s Hanguk University of Foreign Studies. “This system that Korea is implementing now will better prepare students to think more logically and more strategically, to assess their clients’ needs, and just be better lawyers.” The result, he says, will be a reduced reliance on foreign attorneys: “That’s not a bad thing. There will always be a need for foreign lawyers, but it should be as a supplement to what the Korean profession offers, not because there are deficiencies.”
That day still seems a long way off. In the meantime, says Kim & Chang’s Nelson Ahn, Korean firms are still drawing up wish lists of the types of foreign lawyers they want. “For certain lawyers, young or otherwise, with a good set of skills in so-called hot spaces like projects, infrastructure, energy, antitrust, it’s a great market right now,” he says. “There’s a lot of demand.”
Updated, 7/2/2013: The original version of this story has been updated with information about the lawsuits that followed June Yeum's departure from Yulchon.