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.”
The already-small pool of available clients could grow even smaller if firms need to worry about conflicts, both actual and business related. Business conflicts are a major reason Morrison & Foerster, which has a large IP litigation practice advising Japanese electronics giants, gets little work from their Korean rivals like Samsung, says Max Olson, the firm’s Tokyo litigation chief. The firm, which has no plans to open in Korea, is also currently representing Apple Inc. in its smartphone patent dispute with Samsung.
But Quinn Emanuel Urquhart & Sullivan, the firm advising Samsung in the smartphone dispute, also has no current plans for a Seoul office to go with the one it has in Tokyo. “While the major Korean tech companies are important global players,” says managing partner John Quinn, “there aren’t as many of them as in Japan, and we have not had difficulty servicing them without an office in Korea.”
Another competitive complication is the relatively large number of U.S.-qualified Korean lawyers working at Korean law firms as foreign counsel. Large Korean firms like Kim & Chang, Shin & Kim, and Bae, Kim & Lee literally have dozens of U.S.-trained lawyers on staff, many at the partner level and many who have previously worked in the Korea practices of international firms. Though such lawyers could not represent Korean clients overseas, Jong Han Kim says, they could handle a number of tasks that might otherwise be handled by international firms. They are also likely to play a major role in referring matters from all but the very biggest companies.
The large population of U.S.-trained Korean and Korean-American lawyers is undoubtedly a factor in the high level of interest in Korea among American firms, who can rely on a big talent pool to service their practices.
The lack of a similar population may also be hampering firms based in the United Kingdom, which has historically drawn far fewer Korean students or immigrants. Firms opening offices in Korea are required under the regulations to be represented by a lawyer who has practiced law for seven years, three of which must be in the firm’s home country jurisdiction. Many Korean-American lawyers fit that bill, but British firms, most of whose Korea practice heads are U.S.-qualified, have had to dig a little deeper.
As a result, although the earlier ratification of the FTA between Korea and European Union meant British firms might have gotten to Korea sooner than their American counterparts, they have actually lagged. Clifford Chance is so far the only British firm to have applied to open in Korea, relocating Beijing energy counsel Brian Cassidy to serve as its chief representative in Seoul, though U.S.-trained Hyun Kim will continue to serve as Korea practice head. Herbert Smith has announced plans to open in Korea later this year though it has yet to say who will staff it. Allen & Overy, which has a well-regarded Korea practice, says it is still weighing its options.
Whoever else comes in, one group has already won, says Jong Han Kim.
“Korean corporations will receive excellent service all around,” he says. “Service will get much, much better because there will be so many more firms trying to get work.”
The 16 firms that have so far either applied to open in Korea or said they will are Cleary, Simpson Thacher, Paul Hastings, Clifford Chance, Ropes & Gray, Covington & Burling, Sheppard Mullin, Squire Sanders, McDermott Will & Emery, O’Melveny & Myers, Herbert Smith, DLA Piper, K&L Gates, McKenna Long, Cohen & Gresser, and H. C. Park & Associates.