South Korea remains one of the last countries in Asia to liberalize its legal services market. Currently, foreign law firms are prohibited from establishing offices in Korea, and lawyers with foreign licenses are not officially allowed to practice foreign law. Although there are approximately 400 foreign attorneys employed as “foreign legal consultants” in various Korean law firms, they are not permitted to work independently and there is no formal registration system recognizing their status as foreign lawyers. But the landscape may be about to change.

Korea’s Ministry of Justice announced in July 2007 that a draft bill of the Foreign Legal Consultants Act will be put before the National Assembly in the near future. The bill was originally introduced in November 2006, but was withdrawn in view of free trade agreement negotiations with the United States. The act is the first measure the Korean government has taken to comply with the free trade agreement signed between the United States and Korea in June 2007. According to the Ministry of Justice, the government expects to have the act instituted before the free trade agreement becomes effective.

THREE STAGES OF THE LEGAL SERVICES MARKET OPENING

The act, once enacted, will open the legal services market in three stages.

First, it will allow foreign lawyers to establish operations in South Korea as “foreign legal consultants” and advise clients on the law of their home jurisdictions, public international law and international arbitrations. Second, within two years from entry into force, foreign law firms will be allowed to enter into specific cooperative agreements with Korean law firms to handle cases that involve both domestic and foreign legal issues. Finally, within five years, foreign law firms will be permitted to establish joint ventures with Korean law firms and hire Korean-licensed lawyers as partners or associates.

The act applies only to lawyers licensed in, and law firms registered in, countries with which Korea has a trade treaty. Thus, assuming that the Korea-U.S. fair trade agreement becomes effective this year, the legal services market in Korea is expected to fully open itself to U.S. competition in 2013. The same will be true for Chile, Singapore and member countries of the European Free Trade Association — comprising Switzerland, Norway, Iceland and Liechtenstein — whose free trade agreement with Korea is already in effect, since those free trade agreements accord most favored nation status. It is anticipated that more countries will be able to take advantage of the opening of Korea’s legal services market; Korea is in talks with the European Union, Japan, Canada, Mexico and the Association of Southeast Asian Nations — which consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam — regarding additional free trade agreements.

FOREIGN LEGAL CONSULTANTS

The time frame for the opening of the Korean legal services market set forth in the act closely follows Korea’s obligations under the Korea-U.S. free trade agreement. In addition to providing a measure for opening the legal services market, the act adopts certain restrictive measures regarding foreign lawyers, which are permitted as part of Korea’s reservations under the agreement.

First, foreign lawyers will be prohibited from using the title “lawyer”. Instead, they must use the title of “foreign legal consultants.” Similarly, foreign law firms may not represent themselves as law offices. They will have to display, after their name, a sign that says “foreign legal consultant office.” Some critics believe that this unfamiliar title will confuse legal consumers, who will be unable to determine whether a “foreign legal consultant” is licensed to practice law at all. Indeed, insistence on the title “foreign legal consultants” seems an unnecessary restriction, since titles such as “foreign lawyer,” “U.S. lawyer” or “Japanese lawyer” are not likely to be confused with Korean lawyers. Second, the act will require all foreign lawyers to have at least three years of experience in their respective jurisdictions. For lawyers who are also partners or representatives of an office, the requirement will be three years in their jurisdiction of license with seven years of experience overall. Absent a suitable “grandfather” clause, this restriction could pose an obstacle to foreign lawyers who are already working in Korea. On the other hand, this restriction may result in an increase in the overall quality of foreign legal services, ensuring that foreign lawyers obtain valuable practice experience and training where they are licensed rather than starting their legal careers in Korea without any experience, having only the bare minimum of obtaining a foreign law license.

Third, to practice as a foreign legal consultant, a foreign lawyer will have to stay in Korea for a minimum of 180 days per year. (Moon, supra.) Many suspect that this provision was included because the Korean government’s basis for taxation of individuals is a minimum residency of 180 days per year. The Korean government claims that the residency requirement has been widely adopted in the countries with an open legal services market. In the United States, however, only two states require residency and 11 states require foreign legal consultants to establish an in-state office.

ONE-STOP GLOBAL LAW FIRMS

Despite these restrictions, the act appears to be a significant step toward opening the legal services market in Korea. U.S. companies looking to conduct businesses in Korea may benefit enormously from the change. In the past, it was necessary for such companies to hire a Korean law firm because foreign attorneys were prohibited from executing legal documents on behalf of their clients in Korea. Now companies will have available to them fully integrated, one-stop international law firms that can meet the local needs as well as provide them with global know-how and resources. These changes could reduce the cost and inconvenience to both Korean and U.S. businesses in locating and retaining experienced U.S. counsel in Korea. The availability of U.S. law firms in Korea may also provide U.S. companies with a certain comfort factor that could further facilitate Korea’s long-sought foreign investment activity. Perhaps the greatest benefit to U.S. companies will be the caliber of legal services that will be available in Korea. There is currently a disproportionately small number of Korean lawyers who are experienced in sophisticated finance or corporate transactions.

In addition to the act, the Korean government has recently adopted the U.S. law school system under which all bar admission applicants are required to complete a three-year post-graduate law program. The schools are set to open in 2009, but the number of students admitted per year will be limited to 1,500, which will gradually increase to 2,000 students by 2012.

THE CURRENT SYSTEM

Under the current system, to qualify as an attorney, an individual must pass the Korean bar examination and spend two years at the Judicial Research and Training Institute, at the end of which one decides whether to practice as an attorney, a judge or a prosecutor. Approximately 30,000 students sit for the bar exam each year, but only 1,000 are permitted to pass, a limit that was gradually raised from 300 in 1996.

The Korean government’s plans with respect to liberalization of the legal services market follow, but will proceed more rapidly, than those of Japan. Japan introduced the U.S. law school system in 2002, but it does not set a cap on the number of students admitted to the schools.

Source: http://www.law.com