KORUS FTA

Posted on March 16, 2012 at 2:03 PM


Ironic that U.S. Free Trade Agreements—emphasis on “agree”—invariably rile bilateral dispute.  Will a foreign presence dominate domestic markets?  Will steep tariffs and strict regulations frustrate fruitful commerce?   These predictable rumblings peaked after October’s ratification of the South Korea-United States FTA (KORUS FTA), yet as July approaches, and with it the reality of U.S. firms establishing offices in Seoul, it’s imperative that we tune out alarmism and assess the potential impact of Korea’s liberalization on a more nuanced register.

To calibrate that register, let’s first consider China and India’s respective relationships with globalization over the past twenty years. Following 1992’s “Provisional Regulation of Establishment of Offices in China by Foreign Law Firms”, China has creakingly, creakingly inched open the door of its legal services market, rendering itself increasingly inviting to American lawyers.  In 1995, conversely, India’s Mumbai High Court ceded a monopoly on legal practice to local attorneys.  This almost immediately after the U.S. firms Chadbourne & Parke and White & Case, and the British firm Ashurst, had received license to found plants in the country.  What factors determined these radically different trajectories?  More pressingly, how will they influence the texture of South Korea’s legal terrain?  For more information on the firms planning to enter the market please visit our previous blog post New Firms in South Korea.

Though it chafes our Democratic sensibility, the stance of a nation’s ruling class provides a sound bellwether when speculating about the development of policy.  In India, according to Jayanth K. Krishnan Professor of Law at Indiana University’s Maurer School of Law, it is the standard view that, “a politically powerful set of Indian lawyers and elite Indian law firms have sought to preserve their existing financial dominance and thus have successfully lobbied to block market liberalization of (the legal) sector.”

Korea inverts this paradigm.  The ruling bloc so vehemently asserted itself to effectuate KORUS FTA that it now faces railroading accusations. Han Myeong-sook, chairwoman of the liberal Democratic United Party, recently stated: “We regard the pact―rammed through parliament―as null and void, and call on (the government) to suspend its effectuation.”

Not likely, according to vie pundits such as Kim Tae-hyun, Professor at the Graduate School of International Studies at Chung-Ang University.  “If a country scraps a pact negotiated with another country for any domestic, political reason,” says Professor Tae-hyun, “it would hurt its credibility. Who will be willing to sign any deal with the country that nullifies a bilateral deal…?”

Although South Korea is loath to revoke its FTA à la India, the fertile legal landscape seems marginally accessible to up-and-coming U.S. firms.  As evidenced by the initial scrum to stake claims in China, scrappiness and caliber are hardly the sole criteria for success.

China welcomed foreign attorneys not with open arms, but with Tentative Provisions, prohibitions that forbade incomers from interpreting and issuing opinions concerning Chinese laws, disallowed American practices from hiring Chinese lawyers, and limited the number of firms permitted in the country. Securing one of the fifty prized charters spurred competition that strained ethics.  In her 2001 article “Doors Widen to the West”, Susan E. Vitale notes “successful law firms hint that developing relationships (guanxi) with Chinese government officials helped them obtain a license.”  As Korea has not capped the foreign presence allowed in-country, it seems probable that firms will grapple over legal Seoul-lebrities, rather than authorization.  Jay Eizenstat, for instance recently joined McDermott Will & Emery as a partner in its Regulatory Practice Group. A leading trade negotiator of KORUS FTA, Mr. Eizenstat brings a valence of prestige sure to attract McDermott hearty business.  Firms that lacked budgets to woo Chinese administrators may find themselves eclipsed in Korea due to an inability to acquire legal icons; American and Korean, as U.S. firms may hire native lawyers licensed in the U.S.

Perhaps, then, U.S. firms will simply staff their Korean offices with local talent; bilingual domestic attorneys with strong legal skills and the facility to assimilate in both cultures. An abundance of Korean lawyers, after all, have earned their J.D. from U.S. universities.     Such a strategy seems discerning, an implementation of wisdom gleaned through a challenging induction into Chinese jurisdiction.

Before revising their geographical ban, China specified roughly 15 cities—including Beijing and Shanghai—in which foreign firms could operate. Even with numerous viable options, the abrupt influx of attorneys launched China’s commercial and domestic rent towards the stratosphere but the cost of living and expat packages more than compensated for this increase as well as brought a significant amount of spending money to enhance their economy.  Before these regulatory change Seoul was quite close to Shanghai and Beijing in terms of cost of living so we’ll see what sort of impact this has on the increase in housing as well as education opportunities for children of expats.  Yet with compromise as a primary tenet of Law, KORUS FTA pioneers could not be better equipped to adjust.  Imminent opportunities in South Korea will provoke major reverberations throughout the international legal community; we’ll be sure to keep you abreast as they develop.


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