Cleary, Gottlieb, Steen & Hamilton LLP, Samsung Life Insurance Co.’s adviser on South Korea’s biggest initial public offering, plans an office in Seoul now that a free trade deal is allowing foreign law firms in.
Yong Guk Lee, who will move from Hong Kong to open the new office in the first half of 2012 said it will help the New York- based firm serve Korean clients who are investing and facing more litigation overseas.
South Korean lawmakers last week ratified the free trade agreement first negotiated with the U.S. government more than four years ago. The accord, which is likely to take effect Jan. 1, allows American lawyers to enter a market where more than $119 billion has been raised from debt and equity sales this year, from $92 billion in 2005.
Cleary Gottlieb and Los Angeles-based Paul Hastings LLP, which has also declared its intention to open a Korean office, may beat their European rivals into Seoul. While the EU’s free trade accord with South Korea came into force on July 1, no foreign law firms have set up offices in South Korea, according to Lee Ki-young, of the Justice Ministry’s international legal affairs division.
European and U.K. firms are lacking in qualified lawyers to send to Asia’s fourth-largest economy because most Korean- speaking lawyers working for international firms are U.S.- trained, said Evan Jowers of Kinney Recruiting.
“You just don’t see that many Korean lawyers that are U.K.-trained,” said Jowers, the managing director of the company’s Hong Kong and New York offices.
Getting closer to South Korean clients and law firms is one of the reasons DLA Piper, the world’s largest legal firm with more than 4,000 lawyers, is studying opening an office, according to Alastair Da Costa, its Asia Pacific managing director.
DLA, which is based in London, runs its U.S. and international units separately and can use either the U.S. or EU trade agreements to enter South Korea. It’s looking at the tax implications and which makes more sense to use, Da Costa said.
“Korea is definitely a market a firm like ours wants a presence in,” he said.
DLA, which has worked on deals including raising $600 million for liquid-crystal display maker LG Display Co., expects investments from Europe and the U.S. into South Korea because of the free trade deals and continued outbound investments, he said.
Foreign law firms from countries with free trade agreements with South Korea are allowed to set up offices in Asia’s fourth- largest economy and begin offering advice on the law of their home countries.
After two years operating in South Korea, they can form alliances with local law firms and offer advice on South Korean law. After five years foreign firms can hire Korean-qualified lawyers themselves and independently offer advice on Korean law.
Hong Kong has served as a regional base for many foreign law firms with South Korean clients because of low tax rates and the relatively short four-hour flight to Seoul.
As they move to set up offices in South Korea, they face a higher tax rate on their fees and a new cultural and regulatory environment, said Jeffrey Jones, a former chairman of the American Chamber of Commerce in Korea, who now works for a South Korean law firm.
“There’s a learning curve, and in the meantime the domestic firms will get better from the competition,” he said.
While British firms like Clifford Chance LLP have said they were looking to open a representative office in Korea, London- based Freshfields LLP isn’t.
“At present, we have no plans to open an office in Seoul,” said Asia managing partner Robert Ashworth. Freshfields hired Neil Chang from New York-based Debevoise & Plimpton LLP this year to head its Korea practice.
Chang is based in Hong Kong, where Freshfields “has long served the needs of Korean clients from,” Ashworth said.
While foreign firms already advise many South Korean companies on their deals abroad, it’s uncertain whether they will ultimately attract the local lawyers needed to provide advice on domestic transactions, said Sean Lim, a partner at Seoul-based Lee & Ko, the top-ranked legal adviser on Korean mergers and acquisitions this year, according to Bloomberg data.
The free-trade accord may help South Korea’s export-driven economy expand by 5.7 percent within a decade and create 350,000 jobs, according to the nation’s finance ministry. The biggest trade deal for the U.S. since the North American Free Trade Agreement took effect in 1994 will boost exports by as much as $10.9 billion in its first year of full effect, according to an estimate from the U.S. International Trade Commission.
Lee of Cleary Gottlieb, which has about 30 Korean-speaking lawyers including 17 based in Hong Kong, said Korean companies are looking overseas for opportunities to buy technology, brands and natural resources. Lee and Jay Hoon Choi will be the first two lawyers to relocate to Seoul.
Like Cleary, Paul Hastings has served clients including Samsung Electronics Co. in its $1.4 billion sale of its hard- drive unit to Seagate Technology Plc from its Hong Kong office until now. It has 25 Korean lawyers, with 10 of them in Asia.
“It doesn’t make strategic sense for us as a service provider that we’re so far from our client,” said Daniel Kim, a partner in the firm’s Hong Kong office. “That’s why we’re so eager to go in.”
“We plan to have our application as soon as the process begins,” said Greg Nitzkowski, the firm’s managing partner. “Being present there helps you be a market leader.”
