Domestic Law Firms Face Tough Competition

The opening of the legal market has become unavoidable due to the free trade agreement with the U.S. Experts say that domestic law firms will have to undergo serious structural reforms after the market opening unless their competitiveness is immediately strengthened. The Dong-A Ilbo asked five renowned lawyers, including four East Asian regional partners of top 20 U.S. law firms and an international arbitration lawyer of a domestic law firm, about their opinions on the prospects of the legal market after its opening.

The paper either personally met or interviewed them through email and phone on Monday and Tuesday; the five legal experts were Kim Gap-yoo of Bae, Kim & Lee, Alan Kim of Sidley Austin, Eric Yoon of White & Case, Park Jin-hyuk of Simpson Thacher & Bartlett, and Han Jin-deok of Cleary Gottlieb Steen and Hamilton.

The five lawyers warned that unless domestic law firms build a more solid foundation through aggressive mergers and acquisitions, they will either lose their elite employees to foreign law firms or be forced to carry out a restructuring once the legal market is completely opened as seen in Germany in the past.

They agreed that in order for domestic law firms to improve their competitiveness, they have to improve their ability, adopt a customer-oriented mindset, and expand their capacity.

Meanwhile, they said that Korean lawyers handling corporate cases are very highly qualified and have certainly gained considerable experience, especially through corporate merger and acquisition cases during the 1998 financial crisis.

However, they pointed out that Korean lawyers have a tendency of assuming that their role is limited to offering legal knowledge. “Lawyers must provide not only legal advice but also solutions that help clients attain their objectives,” one of the lawyers said.

The Korean FTA negotiation team once sought comprehensive legal advice from a top-five domestic law firm in the early stage of the FTA negotiation. The scope of legal advice ranged from international trade to legal knowledge and interpretations of relevant regulations.

However, the contract was cancelled because the content and the quality of the reports submitted by the law firm were far below expectations, not only in assisting working-level talks with the U.S. but also in providing legal knowledge and theories. Following the withdrawal of the contract, the Korean negotiation team sought comprehensive consultation on the FTA talks from two U.S. law firms: Steptoe & Johnson and Sandler and Travis & Rosenberg.

Although some of the Korean negotiators were concerned about the possibility that the U.S. law firms might put U.S. interests before those of Korea without their knowledge, the U.S. law firms left a very good impression on them. “Their knowledge and experience were excellent, and it was very impressive to see that they put customers’ interests first regardless of nationality,” one of the negotiators said.

Although the first law firm that the negotiation team contacted is one of the most renowned major law firms in Korea, its experience and understanding of international trade was much inferior to those of the top U.S. law firms.

Meanwhile, the Korea Bar Association on Thursday decided to demand the government to revise taxation and various regulations in an effort to help major domestic law firms strengthen their competitiveness ahead of the market opening.

With the help of the Ministry of Justice, the KBA plans to request relevant ministries to revise the tax system on law firms and allow domestic law firms to postpone taxes when attempting a restructuring to increase their size or to become more specialized.

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