South Korea Update: What Does the KORUS Hold For US and UK Law Firms

Posted on July 3, 2012 at 7:07 PM


South Korea’s economy has prospered, seeing a $2.2 million trade surplus in April and $2.4 million in May since the KORUS free trade agreement was signed.

US firms such as Cleary Gottlieb and Paul Hastings were among the first to announce thDLat they would be opening Seoul offices following the FTA.

The trade deal has already radically changed the legal marketplace in South Korea. After a five-year, three-step opening process, U.S. and South Korean firms will be able to launch joint ventures. U.S. firms can now employ South Korean attorneys and appoint South Korean lawyers as partners in the American firms.

The growth that has made South Korea Asia’s fourth-largest economy also entails legal complexities that will require expertise by a new generation of lawyers—particularly from the United States.

While South Korean conglomerates have traditionally created in-house legal offices to tackle these complexities, smaller and medium-sized companies are now better positioned to compete by hiring U.S. attorneys through law firms at more reasonable rates. By bringing new skills and services to the South Korean market, US lawyers will compete with the traditionally local legal market.

After receiving preliminary approval from Korea’s Ministry of Justice, Clifford Chance (CC), Ropes & Gray and Sheppard Mullin are set to become the first international firms with offices in South Korea.

CC projects counsel Brian Cassidy, who specializes in energy and mining, will head up the Korean office, with Korea Practice Head Hyun Kim to also move to the country upon receipt of his FLC approval.

Corporate partner William Yongkyun Kim will lead Ropes & Gray’s Korea practice with support from intellectual property litigation partner David Chun.

Many more firms have been applying for permission to practice in South Korea, including DLA Piper and Squire Sanders. Daniel Lee, a corporate partner currently based in Tokyo, will lead the DLA Piper office. Squire Sanders has named corporate partner Joon Yong Kim as its Korea chief, relocating from Tokyo and Los Angeles.

As part of the agreements between the U.S. and South Korea, firms will act as consultants for the first two years. Subsequently, they will be able to take cases in cooperation with local firms. Foreign firms will have the right to hire local lawyers after five years.

Such developments reveal South Korea’s increasingly thriving market, expecting to increase the growth rate of the South Korean GDP by 0.6% per year for the next ten years, along with increased foreign direct investment and heightened competition. With the opening of markets thanks to KORUS, legal expertise will be needed in many dimensions of the South Korean economy: taxes on American auto imports have been abolished, and South Korean public companies can now receive opportunities for privatization, while Korean tariff’s on US beef will be gradually lowered due to Seoul’s insistence on excluding rice from the agreement.

Since the US-China Relations Act of 2000 paved the way for China to join the World Trade Organization in 2001, Asian nations like South Korea and India have sought US partnership to spur economic growth. After being valued at $1.33 trillion for the second quarter of 2010, China’s booming markets led it to become the world's second-largest economy. According to Goldman Sachs chief economist Jim O'Neill, China is on track to overtake the United States as the world's number one economy by 2027. Such developments have brought the attention of US business and legal firms, and should India follow South Korea’s footsteps, a new and increasingly dynamic market will be open to all parties.

It will be interesting to see how the opening of this new Asian market will compare to the growth and maturity of China’s emergence and possibly even incentivize India to do the same.

The United States is one of India's largest trading partners and direct investors. The Trade Policy Forum was formed between the two nations in 2005 to increase bilateral trade, which has increased almost five-fold in the last decade, from $18 billion in 2001 to nearly $90 billion in 2011, and will cross $100 billion this year. In 2010, FDI into India from the United States reached $27 billion, and Indian investment into the United States totaled $3.3 billion.

Should India follow South Korea’s footsteps, a new market for American business and legal firms will be imminent. According to the US Assistant Secretary of State for South and Central Asia Robert Blake, a bilateral investment treaty is high on the agenda of the two countries, with the US actively working to advance negotiations. US firms are well-positioned to support India's economic expansion as India plans to spend more than $1 trillion on infrastructure in the next five years.

It appears that former US ambassador to India Robert Blackwill’s famous 2002 remark that “India-US trade-relations are as flat as a chapati” will hold true no more, as US trade relations with both South Korea and India are growing to be as vibrant as bowls of bibimbap and biryani.

 


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