Now well into its second stage of infrastructure reform, the speed with which South Korea has bounced back from its 1997 economic crisis has been largely due to the influx of inbound foreign investment. This was achieved by the swift reforms implemented by the Korean government to make the country more accessible to foreign investors. For instance, in 1998, under pressure from the International Monetary Fund (IMF), the government raised the ceiling on the acquisition of shares in domestic companies by an individual foreign investor from 7 per cent to 55 per cent. Thus in general, although the restrictions depend on the specific industrial sector, the limitations on foreign ownership have been eased, and in some cases removed, such as for securities investment trust companies and the commercial banking sector.
This movement opened up a floodgate of work related to foreign direct investment. Inevitably, the very real need and the market demand for foreign lawyers and international legal expertise increased.
Despite this, the Korean legal services sector remains closed to international influences and is highly regulated and monopolised. The requirements of becoming admitted as a lawyer and setting up law practices in Korea are governed by the Attorneys At Law Act.
In short, the act implicitly prohibits foreign lawyers from practising law and foreign law practices from establishing themselves in Korea. (So if a foreign lawyer wishes to practise law in Korea, they are required to pass the Korean Bar Examination in the same manner as the Korean nationals and thus become an attorney at law in Korea; furthermore, only such Korean law-qualified attorneys at law are permitted to set up practices). To date, however, there has been no foreign lawyer who has passed the Korean Bar Examination. Despite such a technical legislative barrier, however, it is estimated that more than 200 foreign lawyers are in practice employed in Korean law firms. Notwithstanding this, there is no administrative or regulatory body overseeing the role of foreign lawyers in Korea, let alone a registration system.
Korean lawyers and law firms need to acknowledge and understand the benefits they would gain through the liberalisation of their legal services market. There will be an overall improvement in the standard of legal services as international law firms bring in much-needed legal knowledge and technical know-how in such areas of law as banking, finance and securities. It will allow foreign law firms to work more closely with the Korean firms on the ground, allowing clients to avoid delays and the additional costs incurred otherwise. By opening up its legal market, Korea will undoubtedly create a better highway for inbound foreign investment.
In recognition of these factors, the EU and the UK Government have been actively lobbying for the liberalisation of the Korean legal services market. In July 2000, Christopher Patten, the European Commissioner for External Affairs, officially requested of the Korean government that it open up the legal market. At the third Asia-Europe Meeting, held in October 2000, Tony Blair directly urged President Kim Dae-jung to open up, among other markets, the Korean legal market. And at the Trade Practices Review meeting of the World Trade Organisation's (WTO) members, the EU and the UK delegates demanded that the legal market be opened up. In response to pressure from the WTO, the Ministry of Justice of Korea recently published a comprehensive review on the liberalisation of the legal services market in its country.
The agenda for the next round of General Agreement on Trade and Services negotiations will be decided by March this year. The battle for the last frontier continues, as international pressure to urge the Korean government to liberalise its legal market will be maintained on all fronts.
John Kwon is a senior associate and founding member of the Korea practice. Charles Sohnk an associate and member of the Korea practice, Clifford Chance Hong Kong.