Wherein I Get Sick of Korea Law Blog

by Brendon Carr

As you can tell, Korea Law Blog is pretty moribund. I’ve simply decided that my opinion on legal matters is not a matter of urgency for all people. That said, I think I might be interested in keeping a generalized blog under a different URL, one which would accommodate my opinions on cats, bacon-flavored mayonnaise, and such matters—including politics and Korean legal matters. Watch this space.

June 1, 2009 | Filed Under Uncategorized | Comments are closed

SsangYong Motor Situation Getting Tricky

by Brendon Carr

SsangYong Motor Company (SYMC), Korea’s fifth carmaker and a holdover “zombie” company from the 1998 financial crisis, appears to be on the brink of bankruptcy, with its major shareholder Shanghai Automotive Industry Corporation, apparently having had enough of the company and its union, threatening to walk away from the company and to allow the company to go bankrupt.

Will this contribute to a reordering of the Korean labor market?

Probably not. There is an important difference between the US Bankruptcy Code and the Korean “Bankruptcy Act” (the “Debtor Rehabilitation and Bankruptcy Act”—uggh), and that is the express prohibition on the Korean bankruptcy trustee touching the Collective Bargaining Agreement or company Work Rules (see Bankruptcy Act, Art. 119, para (4)).

In the US, politicians’ lack of appetite for facing the United Auto Workers union is what’s kept GM, Ford, and Chrysler away from the court. Under the Bankruptcy Code, the toxic labor agreements which most generally agree to be the problem for the Detroit Three (I’m old enough to remember them as the “Big Three” but those days seem to be gone) automakers can be torn up and thrown out by the court.

Every other contract but those collective labor agreements is fair game in Korea. The labor union cannot be forced to yield anything in a Korean bankruptcy. The Korean politicians, you see, are really afraid of the unions—and for good reason, as when the bill was drafted (I was a small part of that work) the spectre of whose offices would get invaded by lead pipe-wielding trade unionists was what drove the inclusion of the prohibition on touching the collective agreements.

There is also a requirement under Korean law (see Bankruptcy Act Art. 227) that the reorganization plan be given to the union for its input (not approval, expressly, but “consultation” with the union), and the court to hear the opinion of the union.

So bankruptcy will not be able to reorder SsangYong Motor Company, Korea’s “zombie” carmaker, if the union contracts are a significant contributing factor to the problems there. Personally, I think the problem is SYMC exclusively makes horrid-looking crapmobiles (I’ve worked with European SYMC dealers, and oh, the quality problems they’ve had!) whose gas consumption was hard to justify during the oil-price spike. (Gosh, that sounds familiar.) But that’s me—I’ve been a small-car guy all along.

December 26, 2008 | Filed Under Bankruptcy and Insolvency, Economic News | Leave a comment

Seoul High Court: HIV Not Justifiable Reason for Deportation

by Brendon Carr

Some good news for a change: The Seoul High Court has ruled that foreign residents of Korea cannot be deported simply because of testing HIV positive, according to a report in the Law Times I noticed today. The High Court, an intermediate appellate court, affirmed a district court ruling in favor of a Chinese migrant laborer, a Mr. (Ms.?) Heo, who challenged a deportation order by the Seoul Bureau of the Immigration Service prompted by an HIV-positive blood test result.

Presiding Judge Yu Seung-Jeong (phonetic spelling) held that the objective of protecting public health must be balanced against the infected person’s human rights—which means privacy, as well as the right to receive medical treatment. Judge Yu noted that detection and treatment of HIV were more effective methods to arrest the spread of AIDS than simply tossing out foreigners found to carry the virus.

In the community of foreign residents of Korea, the current practice of automatic deportation for HIV-positive foreigners has tended to suppress the number of people getting voluntarily tested—because as bad as a positive result would be, for many it would be worse to be summarily kicked out of the country and returned home jobless and without health insurance coverage.

Although the story doesn’t note whether or not the case has been appealed, a matter as important as this one undoubtedly will be decided by a final judgment of the Supreme Court.

November 14, 2008 | Filed Under Hub of Hubs | 8 comments

Temporary Employees, Contract Employees: Two Years Only

by Brendon Carr

Anyone doing business in Korea quickly becomes familiar—sometimes through painful experience—with the extreme legal protection of employees’ “right” to continued employment. Requiring “just cause” to terminate an employee under the Labor Standards Act (LSA), Korea has created a system of employment for life.

Differing (informal) standards of official enforcement against small-and-medium enterprises (SMEs) and large corporations means that there are two classes of employees in Korea: Those who have nearly no protections or recourse to law, and those who have a grip on an iron rice bowl. Multinational and foreign-invested companies are generally imagined to be flush with cash—which means you, Mr. Foreigner, are only permitted to offer the iron rice bowl.

Under the 1998 Dispatched Workers Protection Act (DWPA)—and its companion statute adopted in 2006, the Fixed-Term and Part-Time Workers Protection Act (FT-PTWPA)— there are some alternative working arrangements possible.

Today my associate Sun-Hee Kim brought me a case report from the Supreme Court of Korea establishing a useful precedent in respect of these workers: Namely, that in all cases, a non-regular employee’s status shall be converted by operation of law to regular (i.e., permanent) employment whenever an employer shall have used that employee for a continuous period of two years or more.

Most of us in the private practice of law already knew this, but a lot of HR directors and company managers have thought they could get fancy and evade the laws. However, this precedent, as a unanimous decision of the Supreme Court, makes things rather unambiguous.

In the case at hand, a company sourced dispatched workers from a worker-dispatch agency, and used those workers for a period longer than two years (over five years, to be precise). But the activities for which the workers were used were not included in the 26 types of occupations enumerated on the “positive list” established under the DWPA.

When those workers tried to claim regular-employee status, the company claimed that since the worker-dispatch was unlawful, the DWPA—and its rule limiting the non-regular status of dispatched workers to two years—should not be applicable.

Needless to say, they lost.

With this precedent in hand, we can state unambiguously: Non-regular employment in Korea is always limited to two (2) years. After two years, if the employer continues to use the services of the non-regular employee, the relationship converts to regular employment by operation of law. And this means that all the consequences of that status—in particular, employment for life—shall come into play.

November 10, 2008 | Filed Under Employment Law | 4 comments

Samsung No. 1 in US Mobile Phone Market; Korean Market Remains Basically Closed

by Brendon Carr

And I think this could quite quickly become a trade irritant if anybody in Washington notices.

The local papers are crowing that in the third quarter tally, Samsung Electronics achieved for the first time the number one sales position in the United States, bumping American phone maker Motorola to number two. Samsung’s share topped 22.4% of the market, the company having shipped 10,600,000 units to American customers. Congratulations to Samsung, which makes good products at generally fair prices, if you buy those products in a market where Samsung faces competition like it does in America.

Motorola sold only ten million, falling to 21.1% of the market. Korean electronics giant LG Electronics snaffled up third place with 9,700,000 phones, for a 20.5% share.

Combined, then, the Korean phone makers have almost 43% of the American market for mobile phones.

How’s it looking on the flip side? How many mobile phones do American companies export to our valued trading partner Korea?

Here’s where it gets hard to take: Zero. That’s right, none. Motorola makes its phones for the Korean market here, having bought a Korean phone maker in 1999. Apple’s iPhone, despite being a smash hit available in Japan and 61 other countries (with 18 more coming soon, including IT powerhouses Ivory Coast, Senegal and Botswana), is not on sale here in Korea. Other big foreign brands are also absent: Nokia is not present here. Sony Ericsson is not present here.

Why? Because Korea maintains a mandatory non-tariff trade barrier against foreign mobile phones, in the form of a local software requirement called Wireless Internet Protocol for Interoperability (WIPI). The WIPI standard is Korea’s 2003 rejoinder to the Japanese i-Mode (vintage 1998), allowing access to a cut-down “walled garden” Internet controlled by the carrier (entry fee to get into the garden, naturally).

WIPI’s largely been a failure from the perspective of encouraging value-added services. Its user experience is terrible—press “1” for Music, “2” to see some actress’ topless photos, “3” to see the Seoul subway map, etc.

But it’s done a great job of protecting Samsung and LG from foreign competition. The reason is that the cost of engineering WIPI into a phone is largely the same, regardless of whether you have a 1% market share or a 50% market share—like Samsung was reported to have in 2006. WIPI is not used in any market other than Korea, which means that anyone wanting to get into the market has to bear the same engineering cost, but can only amortize those costs across a small number of units. That means lower profits, or a loss, for the foreign maker. It tends to reduce foreigners’ interest in the Korean market.

For a phone like the Research in Motion Blackberry (they’re Canadian, not American, but bear with me), or the Apple iPhone, neither of which needs—or wants—WIPI in order to offer their services to customers, any investment in engineering WIPI compliance would be money completely wasted. The last thing that Steve Jobs wants is a service on the iPhone where users have to navigate some kludgey press “1” for this, press “2” for that menu system. Who needs that, when a full Internet browser is available? Yet under current Korean law, these foreign companies who don’t need WIPI have to bear that wasted cost. That’s a classic non-tariff trade barrier.

In case you’re wondering, in Korea the Samsung Anycall Haptic rev. 2 phone goes for US$690 for the 8GB model, US$775 for the 16GB. Rumor has it that the same phone is coming soon at US$199 in America, where Samsung faces a more competitive market. Does anyone think Samsung relishes the idea of Apple bringing iPhone here at US$199 or a similar price point?

Yet “protecting Samsung’s right to gouge Korean customers” is not an idea likely to gain much traction with the United States Trade Representative, especially not now that Samsung is number one in America. Also, it bears mentioning that other American industries are under Korean pressure—General Motors, Ford, and Chrysler are at death’s door, while Korea exports hundreds of thousands of cars to the United States. So I think things are approaching an inflection point on Korea’s trade policy of “We want free access to American markets, while keeping ours closed with non-tariff trade barriers”. Enjoy it while it lasts, guys!

November 9, 2008 | Filed Under Economic News, Non-Tariff Trade Barriers | 7 comments

A Sad Story of Internet Fraud: Beware Steve Kim of Daekwang Corp.

by Brendon Carr

A couple of days ago some Korea Law Blog reader found me with this common tale of woe:

This is a long shot but I found you through Google (korealawblog.com) and thought I’d take a shot.

To make a very long story short, I wired $3800usd to an individual who goes by the name Steve Kim. He identifies himself as Director of a company in Seoul, Korea called Daekwang Corp. Co. LTD. and gives an address of:

330, MOKDONG APT.
1415-1205, SHINJUNG-DONG,
YANGCHUN-GU, SEOUL, KOREA

I had been purchasing some products from him for several years (all around $1000usd) and he kept pushing for larger orders. In April of this year I made the larger order and never heard from him again. He does not respond to mail and I have not received any products. His wire information is:

BANK NAME : KOREA EXCHANGE BANK , MOKDONGNAMBRANCH
BANK ADDRESS : 158-071, 323-4, SHINJUNG-DONG, YANGCHUN-GU, SEOUL, KOREA
ACCOUNT NO. : 168-JSD-100737-7
SWIFT CODE : KOEXKRSE
BENEFICIARY : DAEKWANG CORP. CO., LTD.

If you Google “Steve Kim Daekwang Corp” you will find more victims of this man.

I have written to the Korean Police and the Supreme Prosecutor’s Office in Seoul and received no response.

Can you please enlighten me (even if only briefly) if Korean Police or the government assists in such matters? I am woefully ignorant of Korean culture and if this is a matter of any interest to the government or local authorities there.

Sadly, I had to tell her that the Korean police and prosecutors are profoundly uninterested in fraud cases as a general rule, and in the woes of nonresidents as well. The victim needs to present him or her self to the investigators in person, plus the police generally have to be able to find the fraudster to interview him as well. So if you’re a nonresident foreigner who’s gotten cheated by a Korean, the odds are stacked against you.

One can hire an attorney to appear at the police station and prosecutors’ office to advance a fraud complaint without coming to Korea, but that requires hiring and paying the attorney, and a significant investment at that (because the police and prosecutors are generally vile in their treatment of fraud complainants, and inefficient to boot, which means a lot of unpleasant yet billable time for the attorney). But for most of the folks who got screwed out of amounts of several thousands of dollars, that would simply be throwing good money after bad.

It’s best, therefore, to avoid getting cheated in the first place.

Out of curiosity, I did Google “Steve Kim Daekwang Corp”. There’s enough there to warn anyone away from doing any sort of business with Steve Kim of Daekwang Corp. Co., Ltd. (actually, any company calling itself Daekwang Corp. Co., Ltd. probably would set off my Spidey sense, as Corp. Co., Ltd. is three ways of saying the same thing).

I also checked the commercial register to locate “Daekwang Corp. Co., Ltd.” at the address reported for Mr. Kim. According to the companies database of the Seoul District Court, which has jurisdiction over that address, there is no corporation registered there. Another, relatively well-known corporation goes by the name “Daekwang Co, Ltd.” (alternatively, “Daekwang Corporation”)—it trades in hiking gear, but is registered at another address. There is likely no connection at all between them. If anyone locally should be upset by Steve Kim, it’s these guys.

It probably bears repeating that scumbags like Steve Kim are not all that creative. In 2005 I wrote “How to Get Cheated Every Time: Ignore These Warnings” on the Marmot’s Hole. It’s recommended reading for anyone thinking of doing business with Steve Kim of Daekwang Corp. Co., Ltd. Forewarned is forearmed.

Actually, in the 2005 piece, I make a throwaway reference to “Kimsco World Incorporation CO., LTD.”, an imaginary not-a-real-corporation, which also has the same dippy three-ways-incorporated branding that Steve Kim is using. Guys like him are really not creative!

UPDATE 12/08—Commenter Robert Donaci of Donaci Hair Extensions, another Daekwang Corp Co., Ltd. victim, reports today that Steve Kim now says his business is “bankrupt” due to the bad reports about Steve’s fraudulent business practices, and that’s why Steve can’t fulfill Donaci’s order. It’s always someone else’s fault with these guys.

UPDATE 2/12/2009—According to the club of Steve Kim’s victims that has coalesced at the Anti-Fraud International forums, the ease with which his scam can be discovered through a Google search has prompted him to change his identity. Now Steve Kim is masquerading as “David Kim” of “Taesan Corp. Co., Ltd.” Here’s his pitch:

T O : TO WHOM MAY IT CONCERN

DATE : FEB. 06, 2009

FROM : TAESAN CORP. CO., LTD.

MR. DAVID KIM / GENERAL MANAGER

TEL) 82-2-2647-3660

E-MAIL : taesancorp@hanmail.net

RE. : HUMAN HAIR WIGS AND EXTENSION HAIR , TOUPEE ,

BUSINESS

 

DEAR SIR,

 

WE ARE ONE OF LEADING MANUFACTURING COMPANY OF HUMAN HAIR WIGS

AND EXTENSION HAIR, TOUPEE OF CUSTOM-MADE USING 100% HUMAN HAIR &

SYNTHETIC HAIR IN KOREA AND IN CHINA. (HIGH QUALITY)

WE ARE EXPORTING THE ABOVE ITEMS TO FOREIGN COUNTRY SUCH AS U.S.A, EUROPE,

CANADA, AUSTRALIA, .....ETC.

WE EXPORT TO OUR FRENCH-TOP WIGS, MONO-TOP WIGS , FULL LACE WIGS,

FRONT LACE WIGS USING 100% EUROPEAN HUMAN HAIR TO OUR BUYERS UNTIL NOW.

WE PRODUCE HIGH QUALITY WOMAN WIGS USING 100% EUROPEAN HAIR OR INDIAN REMY HAIR

& CHINESE HUMAN HAIR OF FRENCH-TOP WIGS, MONO-TOP WIGS , FULL LACE WIGS ,

FRONT LACE WIGS , CLOSURES (TOP-PIECES) AND EXTENSION HAIR OF WITH KERATIN GLUE

( U-TYPE(NAIL), I-TYPE(STICK), V-TYPE) & SKIN WEFT OF HAND KNOTTING ON PU , TOUPEE (MAN’S WIG)

USING 100% EUROPEAN HUMAN HAIR OR REMY INDIAN HUMAN HAIR OR CHINESE HUMAN HAIR

WE HAVE EXPERANCE OF 10 YEARS OF ABOVE ITEMS UNTIL NOW ANDSO WE CAN SUPPLY

THE ABOVE ITEMS AT BEST PRICES TO YOU EXACTLY.

IF YOU HAVE AN INQUIRY OF THE ABOVE-MENTIONED ITEMS,

PLEASE INFORM US YOUR INQUIRY IN DETAILED ( QUANTITY, ITEMS, STYLE, COLOR, LENGTH )

BY E-MAIL SOONEST.

AFTER WE RECEIVE YOUR INQUIRY, WE WILL CHECK YOUR INQUIRY AND WE WILL INFORM

OUR REPLY TO YOU.

YOUR PROMPT REPLY WILL BE HIGHLY APPRECIATED.

 

THANKS AND BEST REGARDS

 

DAVID KIM

November 7, 2008 | Filed Under Criminal Law, Hub of Hubs | 12 comments

Korean Bankruptcy Wave Starts to Mount Again

by Brendon Carr

(But for reasons peculiar to this country’s legal system, fewer bankruptcies than you might think…)

As the credit crunch starts to bite in the real economy, and Korea’s position becomes more precarious, corporate bankruptcies start to mount. Today I saw the following short report in the English Chosun Ilbo:

More Companies File for Protection

An increasing number of recession-hit businesses are going belly-up.

The Seoul Central District Court on Thursday said a total of 73 companies filed for court receivership from January until October, a threefold increase from the corresponding period last year, which was 22. Ten firms filed for receivership in September and 12 in October alone, setting all-time monthly records. Small- and medium-sized manufacturers including electronics makers made up the largest portion (32 companies or 43 percent), followed by construction firms (24 companies or 33 percent).

During the IMF crisis in 1997 and 1998, 200 to 300 companies asked the Seoul Central District Court for debt write-offs each year. The number leveled off to 20 to 30 per year after 2000.

Judicial circles say the increase is a warning sign for a serious surge in bankruptcies. Companies who hit a cul-de-sac face bankruptcy proceedings unless their application for court receivership is accepted. A total of 45 businesses filed for bankruptcy with the Seoul Central District Court from January until October this year, the same number as the whole of last year.

This signals the return of bankruptcy as a practice area. Luckily [?], this will be my second go-round with a Korean recession/economic crisis.

But despite having had some experience with this, we’ll be discovering the practice area all over again. That’s because Korea’s bankruptcy laws underwent a profound change as a result of the 1997-98 Asian Economic Crisis, or as it’s known here in Korea, the “IMF Crisis”.

As part of the IMF’s US$57 billion bailout offered to Korea, the government was directed to undertake a study of the bankruptcy laws and adopt legal reforms. At our former firm Shin & Kim my partner Doil Son and I were associates on the team led by our supervising partner Yong Seok Park (he’s now left Shin & Kim too) that collaborated with Orrick partner (now at Sidley Austin LLP) Duncan Darrow, Hebb & Gitlin (now Bingham Dana) partners Richard Gitlin and Tim DeSieno, and Inha University Professor Soo-Geun Oh on the study.

At the start of the crisis, Korea had three separate (and aged) corporate insolvency statutes—the Composition Act, the Company Reorganization Act, and the Bankruptcy Act—and a statute on personal bankruptcy, all of which were hardly ever used.

Those corporate insolvency statutes were relatively ineffective for a variety of reasons, but mainly because nobody—not the insolvent companies’ management, not the creditors, and certainly not the government—wanted to allow recourse to the courts under those statutes.

Management didn’t want to proceed to a reorganization under the Company Reorganization Act (similar to US Chapter 11 reorganization) because the law provided not only for a mandatory replacement of the company’s management, but criminal prosecution of the company’s Representative Director and/or its “shadow directors” exercising control through indirect means. Existing shareholders faced the cancellation of their equity positions, which meant loss of the company.

For smaller enterprises, whose Representative Directors had also been compelled to provide personal guarantees for company debt, it was easier and simpler to walk away from the company—leaving the keys on the desk, so to speak. For big companies, it was similarly important to keep the firm away from the court.

Creditors didn’t want to see a company go into reorg because the court judgment would mean a write-down of the value of their credits, something nobody (creditors were mostly banks, because getting loans was significantly easier/cheaper for chaebol than raising capital through share or bond issues) wanted to see. Write-downs could have resulted in a wider collapse of the banking system than we saw at the time—which is why the government, too, was glad to keep companies out of formal insolvency proceedings.

As a result, major corporate reorganizations were undertaken not by recourse to the courts under the then-effective insolvency statutes, but rather mainly by means of informal “workouts” led by the creditor banks whose loans were at risk.

The informal workout regime was institutionalized in 2001 by the adoption of the Corporate Restructuring Promotion Act (CRPA), which took effect in mid-September of that same year. CRPA provided a formal structure for the lead creditor bank, or committee of creditor banks, to declare a company to be “showing signs of insolvency” and take it into a mandatory workout process managed by the lead creditor bank.

As a measure of how seat-of-the-pants was the process under CRPA, the statute had fewer than 40 articles.

Replacing the three corporate insolvency statutes, the Debtor Rehabilitation and Bankruptcy Act, a modern statute modelled on American bankruptcy law and the product of the IMF project, was approved by the National Assembly March 31, 2005 to become effective a year after its approval. The statute brought Korea a number of modern provisions, but importantly removed the punitive aspects of the old insolvency laws that made them so ineffective.

Thus, as we face a wave of corporate bankruptcies, Korea’s formal insolvency statute is new. And the court system’s experience with applying it, is just a little more than two years old. The body of precedents under the Debtor Rehabilitation and Bankruptcy Act is correspondingly brief—only 20 to 30 cases per year.

That number is pretty surprising, considering that the Seoul Central District Court has jurisdiction over the headquarters of about 90% of large businesses in Korea, and serves a population of at least 10 million.

Why so few cases? Personally, I would finger (i) a good economy, (ii) social factors discouraging resort to formal insolvency proceedings, and (iii) the lingering effects of CRPA, which was renewed summer 2007 in a surprising move by the National Assembly. We had previously expected that CRPA would be abolished, making way for the Debtor Rehabilitation and Bankruptcy Act that came out of the IMF project.

In the coming weeks and months and the spike in bankruptcies we’ll surely experience, creditors concerned about bankruptcy risks need not only to familiarize themselves with the new bankruptcy law, but also with the CRPA which will apply to the great majority of insolvency and reorganization cases.

November 7, 2008 | Filed Under Economic News | 4 comments

Korean Prosecution Studying Introduction of Plea-Bargaining System

by Brendon Carr

Because criminal law has so much greater reach in Korea, touching on a wide variety of business conduct (such as wrongful termination, non-payment of wages, default on payment obligations, or not having the proper markings on your website, or using improperly-sized tires on the car) which might more readily be addressed by civil process in common-law countries such as the United States, we end up doing a fair bit of criminal-law counselling of business clients.

Most of them are shocked by the absence of two concepts they take for granted in the United States: The plea bargain, and offers of immunity from prosecution in exchange for testimony. Well, over the weekend I stumbled across this summary of a speech by Prosecutor-General Lim Chae-jin, promising to introduce a plea-bargain system to Korea:

[H]is agency will study all plea-bargaining systems adopted in advanced countries to introduce one that respects human rights before making a final decision.

A future planning taskforce at the Supreme Prosecutors’ Office has reviewed a draft measure on a limited plea-bargaining system that reduces punishment when the defendant pleads guilty to charges with court approval.

What’s interesting to me is that there is already plenty of incentive in the Korean system for an accused to confess and plead guilty, notably an end to interrogation without charge or counsel which can last up to 21 days, but also including leniency in sentencing upon the inevitable conviction (criminal accused in Korea face a conviction rate greater than 99%, which means once charged, odds are overwhelming that the accused will be convicted and punished).

Case loads at the court are high, however. A few years ago, I read that Korea’s harried judges handle something like 40-50 active cases at a time. Plea bargains will move cases through the court system a lot faster, because they will resolve many cases in one 10-minute hearing instead of several, which will free up judicial resources for more complex cases.

November 1, 2008 | Filed Under Criminal Law | Leave a comment

Korea All Over This Week’s Forbes (in Asia, at least)

by Brendon Carr

My copy of Forbes Asia, dated October 27, 2008 turned up on Friday (no doubt having taken a detour somewhere around the office), but I only got around to looking at it over lunch. There are two good Korea-related pieces in this issue.

First up, Don Kirk took a trip to North Korea to visit the site of renewed construction at Pyongyang’s Ryugyong Hotel, the ghostly unfinished shell of a 102-storey hotel the construction of which was abandoned in 1992 after the collapse of worldwide communism left North Korea in a pinch—the markets for its odd industrial products, itchy blankets and ill-fitting suits having been lost when the Soviet Union finally gave up the ghost.

The Ryugyong is a favorite of journalists and tourists worldwide, due to the building neatly encapsulating everything freaky about North Korea’s autarky.

This is a story I missed over the summer, but North Korea Economy Watch’s been following it since February.

Kirk follows Egyptian engineer Mahmoud Fawzi of Orascom Telecom, which is working to finish off construction on the hotel. Orascom, as long-term Korea Law Blog readers might recall, is one of North Korea’s biggest recent investors. Why Orascom Telecom, instead of its sister company Orascom Construction Industries? Well, it seems that Orascom Telecom provides a 3G mobile-phone network for the use of the elite, and a 105-storey communications tower would provide great line-of-sight to nearly everywhere in the capital.

Methinks the project of “finishing” the hotel involves the installation of cladding over the bare top floors, and fake windows—maybe to include interior lighting, maybe not—over the rooms.

Orascom, by the way, can also provide those North Korean cadres with roaming service in Zimbabwe. They seem to have a long-term vision over there at Orascom.

Next up, South Korean portal champion NHN, operator of the nigh-unstoppable Naver. Its Chinese strategy is discussed, along with a story that reminds me, no matter how difficult it seems to do business in Korea, we’ve come a long way baby:

NHN sent Lee to China in 2003 to start a joint venture that planned to bid for the right to sell the tickets for the Beijing Olympics. But the Chinese partner stole hundreds of thousands of dollars from the venture and hired thugs to break into the office and steal more assets. He got into a fight with the thugs, fled by car and was chased through the city before escaping and going into hiding for ten days. Says Lee, sourly: “Those were fun days.”

October 27, 2008 | Filed Under Hub of Hubs | 1 comments

Dominance of SKY Universities Nearly Complete in Legal Profession

by Brendon Carr

Anyone who’s had contact with Korean society for any period of time will be familiar with the importance of school networks, and, thus, the university entrance examination. An unholy triumvirate of three universities in the capital—Seoul National University (“S”), Korea University (“K”), and Yonsei University (“Y”)—has such a hammerlock on influence and power that teenagers will sit out a year and try again on the test rather than go to a “lesser” university, or commit suicide out of hopelessness over their lot in life without a SKY diploma.

As it happens, SKY schools also have a firm grip on the legal profession—especially the judiciary and prosecution.

Earlier in the week, a reader (thanks, reader!) forwarded a link to the execrable Korea Times (yeah, thanks a lot, reader…) piece describing findings announced by National Assemblyman Lee Chun-seok. However, I got a little busy and didn’t get around to posting it. Plus, even though the execrable Korea Times is in English and therefore more accessible to the Korea Law Blog’s primarily English-speaking readership, I don’t like the paper and dislike linking to it so much.

So I was delighted to see that the guys at the estimable Korea Beat weblog (recommended by your Uncle B!) had gone to the bother of translating a slightly better Yonhap News piece on the same topic. Korea Beat editorializes “the situation in South Korea appears to be almost ludicrous”.

According to the Yonhap story, of the 5919 new lawyers admitted in the six years from 2002 to 2007, SKY graduates comprised 3662—almost 62%. Three other Seoul universities—Hanyang University, Ewha Womans University, and Sungkyunkwan University—added nearly 1000 more new lawyers to the mix in that period, making the “top 6” Korean universities the source of 78% of new lawyers minted in that six-year period.

Note the diminishing returns, and see how your chances of grabbing the brass ring fall even within the “top three” schools, according to Yonhap:

The so-called SKY schools, SNU, KU, and YU, accounted for 2,010, 990, and 662 successful applicants respectively, 61.9% of the total.

Hanyang, Ewha, and SKKU accounted for 332, 263, and 361 successful applicants respectively.

In particular, the selection of new judges (in Korea, judge is a first legal job for fresh admittees to the bar) and prosecutors seems to be at least partly driven by school ties. The winners at the Judicial Research and Training Institute go into government service, while the “losers” (mind you, still fantastically talented people having survived the Korean bar examination) have to work for clients. Quoth the Korea Times:

Of 1,205 new judges appointed between 2003 and 2008, nearly 80 percent or 964 graduated from the “SKY” universities…said Rep. Lee…citing data from the Ministry of Justice.

Of 780 prosecutors designated during the same period, 546 were from these schools, accounting for 70 percent in total. The lawmaker added that roughly 60 percent of the 1,000 people who pass the Korean bar exam each year are also SKY certificate holders.

Clearly, if you’re a Korean kid aspiring to the legal profession, which itself is protected by a massive barrier to entry in the bar examination (which only about 2% of applicants pass), admission to a top Korean university is much more critical than it is for aspirants in other legal markets. But it ain’t just for future lawyers, says the Korea Times:

Such a “SKY-take-most” phenomenon is not confined to the legal circle. It has also played out in the field of business, the administration and journalism.

For instance, of 285 top government officials including ministers, vice ministers, and presidential secretaries, 61 percent or 175 are SKY graduates. Seven out of ten chief executive officers of top 100 Korean companies by market value in 2007 graduated from one of the three colleges.

So as you can see, getting into a SKY school is like being tapped for the Mob. You’d think that once in, and having passed the bar examination, and been selected to join the court, a young lawyer could breathe easy. You’d be wrong:

Such SKY-dominant atmosphere invites invisible discrimination against those with what they call “inferior academic background.”

A former judge from a non-SKY university said, “School of origin appears to be playing a minor role in choosing those to be promoted in judicature. However, it’s very, very important indeed.”

Of 14 Supreme Court judges here, Kim Ji-hyung is the only one with a non-SKY academic background. His alma mater is Wonkwang University in Iksan, North Jeolla Province.

Another former judge added, “Competition among SKY graduates is also very intense. Some form an unofficial alliance with colleagues with identical backgrounds to take an upper hand in promotion.”

This means the Seoul National University guys gang up on the Korea and Yonsei guys, who in turn would gladly knife the others to get ahead.

Despite the selectivity, or perhaps because of the selectivity, it doesn’t appear that the judicial system comports itself in accordance with the high standards supposedly advanced by keeping the hoi polloi away.

October 26, 2008 | Filed Under Legal Market | 12 comments

Korean Youth Losing Grip on Traditional Morality

by Brendon Carr

The Korean branch of Transparency International announced the stunning results of a survey of 1100 middle and high-school students where the students were posed questions of morality and ethics, according to the JoongAng Ilbo English edition.

Shockingly, more than half of the students disapproved of excusing criminal activity by leaders who have contributed to the people’s well-being. Further, one out of five said they would use bribery to get things done (although another one out of five wasn’t sure). These results clearly show that Korea’s traditional public order faces complete breakdown. What are the schools doing? Where will the next generation of crook-coddling judges and crooked corporate chieftains come from? Even worse:

Some teenagers were willing to spend time in jail for money. Asked whether they would spend 10 years in jail in return for 1 billion won ($732,600), 18 percent said “yes” while 65 percent said they would not.

That one of out five figure is great comfort to employers trusting staff with money, I’m sure. The remaining 17 percent correctly identified this one as a trick question: Everybody knows that stealing or embezzling a billion won usually gets the criminal a suspended sentence.

October 23, 2008 | Filed Under Criminal Law, Economic News | 2 comments

Blind Candidate Passes Bar Exam for First Time

by Brendon Carr

The Korea Times, taking a break from its riveting 467-part series on “national branding”, caught up to other media outlets including the Law Times and the Chosun Ilbo in reporting the achievement of 27 year-old Choi Young in passing the bar examination’s two-stage written portion. If he passes the oral interview part of the qualification process, Choi will enroll in the Judicial Research and Training Institute (JRTI) to receive two years of official practical tutoring in how to operate the nation’s judicial apparatuses.

Choi is the first blind person in the history of the bar examination to pass the written test. After petitioning the Ministry of Justice for accommodations for his disability—and offering the precedent of Japan having allowed non-sighted candidates to receive extra time and audio assistance (since they can’t read)—Choi was allowed to take the examination. Previously, non-sighted candidates operated under the disadvantage of not being able to see the examination papers.

Here the Korea Times gets a little ahead of itself, saying that Choi will be a lawyer if he passes the interview. That’s not correct—the two-year JRTI course, which is admittedly pretty hard to fail, given that the students are all extremely talented—is a prerequisite to admission to the bar. So if he passes the oral interview (results will be known on Tuesday the 28th, and are sure to be reported) Choi will be looking for work as a lawyer around December 2010.

Korea has heretofore not been a particularly disability-friendly society. Last year, a proposed anti-discrimination law stumbled over its inclusion of homosexuality as a protected class, and so there’s still no express anti-discrimination statute here, and no analogue to the Americans with Disabilities Act (ADA) requiring reasonable accommodations for disabled persons like Choi.

What’s interesting to me is that the Korean legal profession, because it pays well while not being particularly physically-demanding, has traditionally always had an overrepresentation of people with physical deformities (club foot, strawberry mark on the face, etc.). The amount of time, and intense focus, required to adequately prepare for the bar examination has tended to select for nerd and/or klutz qualities (ask me about my two years playing tee-ball!)—getting bullied or excluded, and wanting to “get even” (success is the best revenge) or to “be somebody”, has prompted a lot of young Koreans to really study hard for that exam. It’s surprising to me that until now, there hasn’t been any blind guy.

One detail of the story that’s not in the Korea Times, but which I found in the Chosun version (good human-interest reporting!), is that Choi gets by with the help of friends (you know there’s a good woman among those “friends”—or at least there will be in the movie version) and hard-working, self-sacrificing parents working as day laborers in a countryside town. It’s a poor-kid-overcoming-every-obstacle story, the kind everyone likes. As for me, I’m rooting for Choi and would look forward to working with him. I hope on the 28th to be noting his success at passing the oral interview.

October 23, 2008 | Filed Under Legal Market | 2 comments

What the Won’s Collapse Means for the Korean Legal Market

by Brendon Carr

Last week, the Korean won cratered against the US dollar, plumbing depths of weakness not seen since 1998. The won flirted with closing below 1400 to the dollar. The government, of course, after telling us everything’s okay, is now trying to talk the won back up to W1000 to the dollar.

Firms which had been dependent on finance and banking-related practice areas such as asset-backed securitizations (ABSes) and derivative products seem to be experiencing a profound lull in activity (duh!). Litigation over such products, however, appears to be a growth area.

Inbound mergers and acquisitions interest from foreign companies may pick up slightly; I think the cheap currency might spark some interest but the “Lone Star effect” will keep foreign investors wary of large acquisitions. Meanwhile, Korea’s small and medium enterprises’ outbound M&A interest will likely be greatly reduced. Offshore acquisitions will be so much more expensive, in won terms, for smaller Korean enterprises to finance. (On the other hand, whatever earnings they might make from the operations of the acquired foreign business would be correspondingly greater when denominated in won.)

It’s never been a better time to establish that greenfield Korean subsidiary, as your cost of dumping foreign capital into the market will be markedly lower than just a week ago. If the won recovers, the profits you’ll earn will have been bought with cheap won investment.

The big winner, however, of all this economic trouble will be the real estate practice area. Korean commercial real estate, although “expensive” (not so much, given the exchange rate now) also earns well due to high rents and minuscule vacancy rates. Additionally, real estate assets’ value can be properly assessed by transparent financial models—accounting fraud and manipulation of earnings is much harder with a commercial building. Rent reduced by the vacancy rate = cash flow. And current cash flow, plus prospects for capital appreciation, enables an investor to arrive at a price which can be similar to the value of the property. Try that with an industrial concern—good luck!

So here’s what I think we’ll see: Korea’s regulations concerning real estate investment trusts will be amended to lift the arbitrary five-year lifespan on so-called “corporate restructuring” REITs (CR-REITs), so as not to force a bunch of transactions on to the market at the same time. (Because a lot of those CR-REITs are now five years old.) Funds which had bought into properties during the W1100 days thus won’t face exchange-related losses from forced dispositions.

Pension funds who’ve taken a beating will be looking for investments with steady cash flow and capital-appreciation opportunities—like Korean real estate. So they’ll be back. Developers of commercial properties—not residential, mind you—will find that they alone will have access to finance.

October 12, 2008 | Filed Under Economic News, Legal Market | 2 comments

Dongwon Tuna Closes on Purchase of StarKist

by Brendon Carr

This one’s a little braggy, but my partner Doil Son and our fine team of associates worked so hard on this deal it merits mention on Korea Law Blog.

Recently, among other events, we’ve been lucky enough to work on one of the major outbound investment deals: Hwang Mok Park PC advised Korean fishery company Dongwon Enterprise Co., Ltd. on the cross-border acquisition and financing of Dongwon’s US$360 million acquisition of US tuna brand StarKist from Del Monte Foods. Transaction finance was supplied by a syndicate of Korean and international banks arranged by Korea’s Hana Bank; the closing took place at the beginning of October, in the teeth of the global credit crunch. HMP’s team was led by corporate and securities partner Doil Son. The Hong Kong office of Simpson Thacher & Bartlett LLP acted as international counsel to Dongwon.

Where we say that the closing took place in the teeth of the global credit crunch, we’re not fooling: This deal was due to close at the end of September, and from around the 20th things started to go pear-shaped with the syndicate arranged by Hana Bank. The scramble for replacement finance in the StarKist deal, due to nobody’s fault, meant very long days and nights for our team. But especially, my friend Doil worked like a dog and it bears mentioning: he did great work for Dongwon and I’m proud to work with a lawyer like him.

October 10, 2008 | Filed Under Deal Sheet | Leave a comment

Shutdown Allowances Under Korean Law

by Brendon Carr

This morning a client got in touch with what I fear may be an all-too-common issue: Headquarters wants all offices worldwide—including the client’s Korea branch office—to close up for a month, with staff on unpaid leave, as a cost-containment measure in response to the credit crunch. Previously, the company had done a week’s closure, during which employees were required to burn off their unused annual-leave balances.

The client asks: What does Korean law have to say about this? As the question seems to be of general interest, and this client may not be a good credit risk right now anyway (got to get those bills out!), I decided not to charge for the answer and to publish it here on Korea Law Blog. J., this one’s for you, buddy!

The first issue raised is whether Korea requires employers to pay some minimum “shutdown allowance.” The answer is yes: Art. 46 of the Labor Standards Act prescribes a shutdown allowance of 70% of the worker’s “average wage” during a period of business suspension due to “reasons attributable to the employer”. In general, this includes all cost-saving measures undertaken to save money. A smaller shutdown allowance is possible, but only by approval of the Ministry of Labor, after making a formal request explaining the business problems faced by the employer. We are advised that historically, MOLAB has been very hostile to employers making this request, but that currently the ministry is aware of global economic conditions and is prepared to be understanding about requests for a lower shutdown allowance.

In cases where the workforce needs to be restructured due to “urgent managerial necessity”, under Art. 24 of the Labor Standards Act an employer may terminate the employment of some workers without additional compensation, provided that certain procedures are followed in respect of worker consultation, number of and selection standards for workers to be made redundant, notice to Ministry of Labor, etc. But simply closing the business for a specific period of unpaid leave is not lawful except by permission of the Ministry of Labor.

As for mandatory use of accrued but unused annual leave entitlement, in principle the employee shall have complete freedom to choose the date and time of use of leave. But it is also possible to make agreements with the employees, individually or collectively through amendment of the Work Rules, in respect of when to use leave. Ministry of Labor is supposed to receive notices of amended Work Rules, but does not have the right to approve changes (well, to be frank, there is an informal “review” phenomenon where MOLAB may recommend or direct changes after receiving reports of changed Work Rules, but you get the idea…).

October 9, 2008 | Filed Under Economic News, Employment Law | Leave a comment

Major Overhaul of Korea’s Civil Code Forthcoming From 2009

by Brendon Carr

For the first time since the Korean Civil Code was last overhauled in 1958, the basic statute of Korean laws will be overhauled completely from 2009-2012, reported the Law Times yesterday. The scholarly effort will be similar to the epochal Restatements of the Law undertaken by the American Law Institute, in that the forthcoming changes to the Korean Civil Code will aim to reduce to clear, concise language principles of law already developed through case precedents since 1958 but not codified into law. However, unlike the Restatements, the new Korean Civil Code will be primary legal authority binding on all courts.

This is an important undertaking, as the Korea of 1958 would hardly be recognizable to the young Koreans of 2008. They will need a modern body of laws to take them forward.

A select body of Korean legal scholars intend to work their way through the Civil Code in four stages, addressing each year one of Part I to Part IV of the 1118-article statute.

Part I will be wholly amended and replaced in 2009. Currently, Part I of the Korean Civil Code contains general principles of law applicable to business organizations and relationships and juridical acts. Notably, Part I of the Civil Code also contains the articles concerning extinctive prescriptions, or Korea’s statutes of limitations on claims.

Part II is the keystone of the Civil Code, in my experience. This is where the articles defining real rights in property (and thus, as a consequence, security interests in property as well) are found. A key reform that would improve Korea’s economic foundation would be a formal legal recognition of security interests in non-real properties, so called “personalty”, and non-titled movables. Currently, small Korean businesses are starved for credit (I know, now is not the best time to be talking about a credit-based economy) by the fact that only land and buildings can be offered as security; if small businesses could, for example, pledge their inventory as security for credit, more small businesses could operate and grow. Security interests in intangible properties probably also merit consideration. From 2010, if the scholars working on the Civil Code are paying attention, this could breathe new life into the small and medium enterprise segment of the Korean economy.

Part III addresses claims in contract and tort. It contains Korea’s basic rules on formation and rescission of contracts of all types (including contracts for sale of goods, and contracts of employment), bailments of property, and a very thin chapter on torts. One of Korea’s legal failings, in my opinion, is poorly defined set of expectations and standards for a duty of care—i.e., negligence is really hard to prove, as the Civil Code doesn’t say all that much. After 2011, Korea’s doctors, dentists, accountants, and—yes—lawyers may have to take greater care with their services lest they be found negligent.

Part IV, scheduled for 2012, may be most momentous as this part of the Civil Code addresses family relationships, marriages and divorce, and inheritance law. It currently comprises almost 1/3 of the bulk of the Civil Code, spanning Arts. 767-1118. Might we even see—gasp!—gay marriage addressed in Korean laws?

October 9, 2008 | Filed Under Economic News | Leave a comment

Computer Security As Fraud Preventative

by Brendon Carr

Korea’s government has finally woken up to e-mail’s role in official communications, and banned government employees from the use of free web-based e-mail services for official duties, reports the Korea Times.

Additionally, the government is instituting more stringent data-security practices—controlling access to files on government servers, limiting the use of USB flash-memory sticks, and blocking connections to web-based file-exchange services like WebHard (http://www.webhard.co.kr).

After the spate of data-privacy violations this year, somebody must have tumbled to the vast quantity of private information stored on government computers, and how easy it is to scarf up that data. A two-gigabyte USB key (now sell for about $10) can pull off quite a caper.

Finally, they may be establishing a blacklist of sites inappropriate for government workers to access from work. The days of government-sponsored porn surfing may be at an end. (Thank Goodness for the private sector!)

It’s a bit surprising that it took the government so long to tumble to these measures—in particular, the e-mail address thing.

Imagine you got an e-mail from the Securities and Exchange Commission asking for your help with an official government investigation, but the guy who was writing asked you to reply to “bobsmith847@hotmail.com”. Who would go for that? Yet in Korea, it’s been a very normal practice.

The article quotes a government employee complaining that the free web-based services are easier to use than the government’s official systems. Surely ease of use is an issue. But for a country continuously engaged in a struggle against government corruption, the lax computer-security measures created a rather permissive environment for government crooks.

Last year we had a case where a government official used his @naver.com e-mail address in the course of his scheme to extort money from one of our clients. The official held an office with significant discretionary power over government approvals of a certain product, and was making life difficult for the client by what seemed to be an unreasonable interpretation of the sketchy rules applicable.

And then he sent them an e-mail from his private address suggesting that the problems the client was having were due to “not understanding the Korean market and business practice”, and further suggesting that the best way to solve the issues was to convert their local business to a joint venture with the official’s friend—“and then I can take care of you”. Whoopsie daisy.

He must have felt pretty secure writing that, since his office servers would have no record of the communication. Under the new rules, if implemented competently, he would have a somewhat harder time.

For Korea Law Blog readers managing a company in Korea, or legal counsellors supporting such businesses, here are some questions to ask yourselves:

There’s definitely a lot to think about here, and in our experience most companies don’t consider any of these issues until after getting hit by an employee fraud or data-theft disaster.

September 27, 2008 | Filed Under Employment Law | Leave a comment

Why Ambulance Chasing Doesn’t Pay in Korea

by Brendon Carr

This short bit in the Korea Times piqued my interest, as it illustrates why English-speaking lawyers aren’t standing by to right every wrong against Korea’s long-suffering foreign teachers of English:

Doctor Blames for Suicide Stemming from Wrong Diagnosis

A hospital is partially responsible for a patient’s suicide if the suicide was committed after a doctor’s wrong diagnosis, according to a court ruling Tuesday.

The Seoul Eastern District Court ordered the National Police Hospital to pay 15 million won ($13,000) in damages to the wife of a late patient, acknowledging a mistaken diagnosis by a doctor at the hospital affected the patient’s suicide decision.

In May last year, the doctor diagnosed the unidentified patient as having terminal stomach cancer. After a few days, the patient killed himself. A detailed examination, however, showed later that he had gastritis.

The wife filed a suit against the hospital, claiming her husband committed suicide from the shock of the diagnosis.

The court ordered the hospital to pay 15 million won.

“We recognize the wrong diagnosis influenced the patient’s decision to kill himself,” judge Park Kyung-gil said in the ruling.

“The patient himself is the most responsible for the suicide. But it seems that he had no other reasons to kill himself beside the erroneous diagnosis, as he had no mental illness related to suicide and was in no financial difficulty,” Park said.

The damages available in the case of shocking medical malpractice resulting in wrongful death were only W15 million (about US$13,000 at today’s exchange rate). Plaintiffs are responsible for nearly all of their legal costs (yes, the court awards money for “legal costs” to a successful plaintiff, but the costs award is based on a fanciful idea of what a lawyer should cost, rather than what a lawyer does cost), which means unless you’re able to represent yourself as a pro se litigant, careful cost-benefit analysis should be undertaken.

And, no, we don’t want to work on a contingency fee. Even 100% of W15 million doesn’t cover the cost of the trial.

September 24, 2008 | Filed Under Civil Litigation and Arbitration | 1 comments

Americans Overseas: Register and Vote

by Brendon Carr

[This entry will stay top of the page through Nov. 4.]

We all know this election is important. Every election for the Presidency is an important one, but perhaps this November is especially crucial.

As an American citizen overseas, you still have the right—and moral obligation—to vote for the candidates of your choice. If not your state elections, make sure to cast that federal ballot. Go to the Overseas Vote Foundation or the Federal Voting Assistance Program to register and request an absentee ballot to return by mail.

I have heard that FedEx will return the ballots free for Americans voting from Korea. But they have forbidden me from stating such, from providing you a link to their press release or any other confirmation of my understanding (stupidly, I forgot what big corporations are like and asked their corporate-communications department for permission). I recommend you contact FedEx directly to ask about their ballot-return service. It seems like a very patriotic thing for an American company to do for its country, and FedEx ought to be praised for this, no matter how weak and weaselly their corporate-communications department.

As for me, I’m voting for John McCain and recommend you consider the issues and the candidates carefully, before you vote for McCain your own self.

September 19, 2008 | Filed Under Uncategorized | Comments are closed

Some Lawyers Struggling to Make a Living

by Brendon Carr

The execrable Korea Times reports a polarizing legal community, where solo and small-firm lawyers struggle to survive and others—those in larger law firms—prosper. In other words, a real marketplace, with winners and losers. The current Korean legal market is a far cry from the not-too-distant past, when simply passing the bar exam was an achievement which more or less guaranteed a lifetime of prosperity and prestige.

Those days are over:

Last March, the Seoul Bar Association initiated a fundraising campaign after hearing the heart-wrenching stories of the wives of two late attorneys who had to peddle on the street to make a living.

“It was the first time funds were collected to help family members of deceased lawyers. It would have been unimaginable in the past. But it’s true now,” an association official said.

(Sounds like the Seoul Bar Association ought to commission a group life insurance policy for its members, similar to the American Bar Endowment project of the American Bar Association, and those run by state and local bar associations.)

In the tougher marketplace, the number of bankrupt lawyers is noted by the Korea Times as a new development, with “one or two” insolvent lawyers filing for bankruptcy in the Seoul District Court each year since 2006.

Apparently, the number of lawyers is increasing faster than the load of work available for them to do: The article says that the litigation caseload for attorneys has fallen by nearly half since 1997, from 57.2 lawsuits per year for the average solo practitioner in 1997, to 31.5 in 2007. With the number of lawyers projected to double over the next seven (7) years, this is a worrisome decline.

The figure of seven million Korean won is offered as the average per-case fee for these struggling lawyers, although in 1997 I think the number was lower. Anyway, W7,000,000 multiplied by 31.5 yields a gross annual income of W220,500,000. But it doesn’t go as far as you might think…

The article alludes to high overhead costs for these solos—needing to “hire two or three secretaries and a researcher, maintain an office and promote business”, which the Seoul Bar Association says costs about W15 million per month (W180,000,000 per year).

Now, I used to work in a small firm where I was intimately familiar with the costs. Let’s take a look at those numbers: Secretaries cost about W1,000,000-1,500,000 a month, while a good researcher costs about W2,000,000-2,500,000. Offices for these types of law firms down near the courthouse tend to be filthy holes in the wall, costing not more than W2,000,000-3,000,000 per month. So the overhead for salaries and rent could range between W6,000,000 a month on the low end, and W10,000,000 a month on high end.

“Promote business” is what’s killing these lawyers. Unaffiliated solo practitioners who have not worked as a judge or prosecutor, instead coming out onto the market armed only with a law license, frequently have to hire a non-lawyer broker to help them find cases—and these guys cost money. Usually a good broker demands a salary of W7,000,000-10,000,000 a month plus a share of the profits (although here we’re talking about no-profit law firms). Everybody knows it’s illegal, while at the same time the practice is completely ubiquitous. (In this respect it’s a lot like making foreign lawyers partners in the larger Korean law firms. There are a lot of ethnic-Korean, US-admitted lawyers who are partners—even owners—of Korean law firms.)

The need to hire a broker highlights a number of problems in the traditional Korean lawyer’s way of doing business.

First, the lawyer has to have a bunch of staff doing his job for him—in a traditional “high street” law office, the lawyer doesn’t actually prepare any case for trial, including interviewing clients and witnesses and writing briefs to be submitted to the court. His “researcher” does all of that, while the lawyer merely stamps his name on the papers and drops by the court a couple times a week. His license is really kind of a license to print money.

Because the world owes him a living, the Korean lawyer is relatively inert at the marketing-related activities of speaking, writing, and educating clients and potential clients about the law. Even in large law firms, it’s very difficult to get lawyers to focus on education-based marketing efforts.

(Okay, this is a little unfair—most lawyers, everywhere, are inert marketers. The difficulty in getting Korean lawyers to speak, write, and educate may be more pronounced due to the characteristics of their market, but this is not a problem unique to Korea.)

Furthermore, his tax obligation to the government is not rooted in the actual performance of his business. Because “lawyers are rich” and the fact that many individual clients might not request a receipt for cash payment, the National Tax Service assesses a turnover tax on the lawyer’s office, based on number of matters the lawyer handled—the court reports how many Powers of Attorney (necessary for appearance in a case) are filed by an attorney, and the NTS multiplies that number by its supposition of what the fee must have been. That becomes the lawyer’s taxable income as far as the NTS is concerned.

And finally—and most importantly—note that the Korea Times and the Seoul Bar Association keep talking about “cases”. A traditional Korean lawyer is merely a person who shepherds litigation matters through the court. No lawsuit, no work for the lawyer. However, in a more developed legal market, the lawyer is both an attorney and a counsellor at law—the lawyer provides planning and advisory services to help clients build their business and avoid legal entanglements. In the United States, something like 90% of the lawyers in practice work as counsellor-advisors, rather than as litigation attorneys. The underdevelopment of this segment of practice is what’s making these lawyers poor.

With the number of new lawyers projected to be competing in the future marketplace, the new law schools and the bar associations must begin preparing lawyers for the reality that the legal market is indeed a market—and help them understand how to compete in a market-based system. Not all lawyers are going to be good at it—in the United States, too, there are extremely wide variations in lawyers’ income, based on the fact that not everyone is good at business—but more of them will make it if they are properly educated and prepared by their profession.

September 1, 2008 | Filed Under Legal Market | 3 comments

Top 12 Search Terms for August 2008

by Brendon Carr

Reading the referrer logs and web statistics for search terms gives one a keen insight into what concerns web surfers. Knowing what brought visitors to the site allows a blogger to tailor the content to what’s been demonstrated to be in demand.

Here’s the top 12 searches that brought visitors to Korea Law Blog so far this month:

1. bob costas plastic surgery
2. bob costas botox
3. bob costas toupee
4. korea law blog
5. bob costas hair
6. korean nudes
7. bob costas surgery
8. rekha sharma nude
9. list of american allies
10. korean law firms
11. brendon carr
12. bob costas cosmetic surgery

Somehow I think the Olympics has raised Bob Costas’ profile in the public consciousness, and not to his advantage either.

August 26, 2008 | Filed Under Uncategorized | 2 comments

Seoul’s Growing Law Firms Finding “No Room at the Inn”

by Brendon Carr

Trumpeting Large Law Firms “One Family Under Three Roofs”, the Law Times reported Thursday on a phenomenon of relevance to all law firms in Seoul, including the foreign law firms supposedly salivating just outside the gates: Seoul’s office buildings are bursting at the seams, and law firms are finding it impossible to locate places with enough space to accommodate their growing numbers.

According to the Law Times, the vacancy rate of commercial office buildings with more than 10 storeys is at or below 1%, and fully 65.5% of office buildings across the Seoul metropolitan area have no empty space at all. In Kangnam it’s 71.7% of all buildings; Mapo and Yeoido, 64.9%, and the Central Business District (Kwanghwamun area) 62.6%. But remember that this is across all classes of buildings; in the Class “A” space the ratio of zero-vacancy buildings must be much greater.

Jeong Jin-Kyu, managing partner of the combined DeRyook/Aju law firm which announced its merger last month, told Law Times, “Originally we intended to lease one office north of the [Han] river for the whole combined firm, but the office situation is really serious. We’re not in a position to be taking up spaces all over the place.” He continued, “Regardless of whether in Kangbuk or Kangnam, we have to take up space for 100 lawyers as well as reserve space for anticipated growth. Finding such a place is very difficult.”

The Law Times mentioned the Horizon/Jisung firm as having a similar problem as DeRyook/Aju, being scattered across three offices already in Kangbuk and Kangnam. Bae Kim & Lee is said to have its people in the Hankook Tire Building on Teheran-no, plus three other locations—and Bae Kim & Lee reportedly is growing by 50 lawyers per year.

And, of course, Korea’s largest law firm Kim & Chang, with its 600-some fee earners, has metastasized from the Seyang Building where it started into three other buildings (to my knowledge, the Northgate Building, the Heungkook Insurance Building, and the Naray Building next door to Seyang).

Our own firm Hwang Mok Park PC is in this same bind: In 1999, the firm occupied the entire 9th floor of the Daekyung Building across from Namdaemun (before it burned down last year), and over time grew to take up 1/3 of the 10th floor. Then the Shinhan Bank designated this building their headquarters, and started to squeeze out the other tenants. HMP, when it needed yet more space, was forced to lease offices on the 10th floor of the neighboring Booyoung Building. Those offices now hold 15 lawyers. HMP overleased in the neighboring building, so we have growth space for maybe another 10 professionals. But our lease in the now Shinhan Bank Building is up in 18 months, and there isn’t space in the Booyoung Building for all of us to come over all of a sudden.

Where are the law firms going to end up? The traditional location for corporate law firms is the Kwanghwamun area north of the river, and due to building restrictions very little new supply appears to be available or on the horizon. In the late 1990s, several corporate firms got rooted in Kangnam, south of the river—notably Bae Kim & Lee, but also Yulchon, Yoon Yang Kim Shin & Yu, and Barun Law are all down there. And there’s not so much additional space coming on line down there, either.

In Yeoido, there are two major developments—the AIG International Finance Centre and Skylan Development’s next-door neighbor Parc 1—each of which will dump massive amounts of space onto the Yeoido market starting in 2010. IFC will have 88,000m² (26,667 pyong), while Parc 1 will have 268,000 m² (81,212 pyong) of office space—each in addition to retail and residential/hotel uses. Historically, no major law firm has been officed in Yeoido despite the island having been designated “the Manhattan of Korea”. But all that empty first-class space may entice one, as the Canary Wharf development got some out of the City of London, and the Landmark East and related redevelopments are pulling firms to the Kowloon side in Hong Kong. Hopefully the rates on offer for long-term early occupants will be favorable.

Additionally, there is one other area I can think of that has a lot of empty office space: Sangam-dong, near the World Cup Stadium in Seoul’s northwest corner. There are a number of completely empty, 25-storey buildings available in Sangam-dong. However, this area is far from Kwanghwamun, taking 25-40 minutes by car, and very far from Yeoido and Kangnam (over an hour to each). We have a client that moved over there, and have to visit on a regular basis. With the busiest district court in Seoul down on Teheran-no an hour away, the only law firm that might move to Sangam-dong would be one with a substantial transactional practice and a profile as a firm which could offer economical service due to location—sort of an Eversheds for Korea.

August 25, 2008 | Filed Under Hub of Hubs, Legal Market | 3 comments

More Advice for English Teachers on Employment Relations at Korean Hagwon

by Brendon Carr

This weekend I got a nice message from a Korea Law Blog reader thanking me for the Korea employment law FAQ in the sidebar. It’s a popular download, with about 1000 visitors having taken the time to download over the last year. The reader, a foreign teacher of English about to sign a contract and come over to Korea to teach, asked whether it would be worthwhile to have a lawyer look over the contract before executing it.

English-teacher readers of the employment-law FAQ ought to be aware that while in the main the rules stated therein are generally applicable to their situation, some things might be different in their case. English teachers are not my target audience. Put simply, this is because they have no money—or, rather, not enough money—to pay for legal services to settle their usually very small disputes with the hagwon owner. For example, I fielded one call this year where I determined, after a lengthy discourse on what a horrible bastard the owner was, that the caller sought legal assistance in attempting to force the hagwon to pay £25 for a diploma misplaced by the school. So readers need to be aware that the target audience—managers and in-house counsel supporting multinational corporations’ businesses in Korea—may have different needs from theirs.

Setting aside, for the moment, the far more sensible advice DON’T DO IT! (because at this point prospective teachers are usually wedded to the idea, and being the naysayer is like trying to warn your friend his new fiancée is a horrible shrew), my first advice to someone intending to come teach English in Korea is to forget about the contract. So many aren’t honored and the cost and effort required to enforce a contract is greater than the benefit supposedly to be obtained through enforcement. Think of it as a set of guideposts for best efforts rather than a legally-binding document; I assure you, your Korean employer certainly views your contract this way!

Still, it’s often helpful when begging for promises to be honored to have obtained those promises in writing. Here are the key points to hit:

- If your employer has you shuttling around from site to site between in-class teaching engagements, that time is considered to be work time. If you teach split shifts of three hours at a time, and shuttle around between them, you’re a full-time employee. (Full-time, under Korean law, is more than 15 hours a week, just so you know.)

- You’re entitled to 10 or 15 days paid vacation (depending on whether the employer is on a five day, 40-hour workweek or not); if 10 days, you’re also entitled to one additional paid day off for “monthly leave”, which basically means you work two half-Saturdays instead of four.

- You’re entitled to participate in National Medical Insurance, workers’ compensation, and national pension except if you’re coming from certain countries which have a treaty with Korea on the subject. Unemployment insurance is a different story. Foreign workers generally don’t get unemployment—they get deported.

- You’re entitled to 30 days’ severance pay at the conclusion of the contract, provided you’ve worked a “full year” (which doesn’t mean 365 days exactly, but rather more like 11-1/2 months). Severance pay is never forfeited for any reason.

- You should require the hagwon to pay for your plane ticket in advance if they are promising transportation. Don’t be their lender. If you’re going to be paying for the ticket and being reimbursed, get reimbursed in a few installments at the beginning of the contract (1/3 each of the first three months or something like that) rather than letting the employer hold you hostage for a year waiting to get that ticket money.

Be aware that the Korean-national instructors are in a similar boat to you, but not the same boat. They are also frequently mistreated by their employer, having to endure the same kind of crazy oppression and broken promises—but they are also jealous of the “unearned” benefits that you, the foreign English teacher, receive because of your nationality. For example, a Korean instructor doesn’t get any assistance with housing, while foreign teachers usually do; neither do they get a plane ticket to some exotic foreign destination like your home country. Your salary is also higher than theirs, especially at the entry level. Bellyaching to your co-workers about broken promises is not going to earn you friends.

And finally, have enough money available to walk if you need to. Do not come 5000 miles around the world, to a foreign country, without a cash-advanceable credit card that has about $3500 in available credit on it—so you can have a place to stay, meals to eat, and a return ticket home if you’re screwed over by the hagwon. I get a lot of Friday night calls from desperate hagwon instructors looking for a white knight to intervene and restore order to the world by Monday morning, because the instructor doesn’t have enough money for Cup o’Noodles. And the sad fact is, the legal system doesn’t work with instant remedies, if any remedy is available at all. So there’s nothing I can do for these poor, benighted people.

Your Uncle Brendon can’t help you in the case of a dispute. There are a number of reasons, but the primary one is You can’t afford me and so we’re an employer-side practice. Similar divisions of practice area exist among firms in the US and Canada and elsewhere, so we’re not different. But I have already written here in Korea Law Blog and elsewhere on the web where you should go (and where I’ll be going if I ever become an employment-law plaintiff in Korea—I can’t afford me either) for legal help if you’re a hagwon teacher or company employee in dispute over pay, benefits, or unfair dismissal. (This means although I’ll gladly share what I know and think is relevant here on this blog, English teacher, when you call me in the evenings you’re really imposing on my free time. You’re not a client or potential client. Although I’m too much of a softy to say so directly to those who call, it’s tiresome. So save it for real emergencies, please.)

For the purpose of fairness, in the “Don’t Teach English in South Korea” warning page I linked above, there are a number of hyperbolic statements which are simply not true. It’s not true that if you’re not Korean, you have no legal rights; unless you have the misfortune of getting branded “Enemy of People” the courts are fair and evenhanded on nationality. It’s also not true that an English-language contract is “worthless”. (I’ve covered this in an earlier Korea Law Blog entry this summer.) Still, I have to agree with the overall conclusion, which is that Korea is not a good place for foreign teachers of English to come and work.

August 24, 2008 | Filed Under Employment Law | 1 comments

Understanding Agency, Distribution and Franchise Regulation in Korea

by Brendon Carr

This comes up from time to time in our practice, but infrequently enough (maybe once a year for me, as I do inbound FDI/M&A work and employment law mostly) that when a colleague in Europe asked if we had a throwaway overview memorandum to give, I had to confess that no, we did not. So this weekend my associate Sun-Hee Kim and I polished off the sort of stock memorandum that most law firms should have ready to hand on standard topics, but few Korean firms do. Anyone who is interested in the scintillating subject of agency, distribution, and franchise relationships in Korea may download our paper (Adobe Acrobat PDF, 88Kb download).

August 11, 2008 | Filed Under Franchise and Distribution | 1 comments

Oops! They Did It Again

by Brendon Carr

Law firm mergers seem to be coming on a daily basis, or at least as often as the Law Times turns up on my desk (twice weekly).

This time it’s Kim Chang & Lee (“Korea’s oldest law firm”) and Kim & Company who are merging to form a 40-something mid-sized firm, also with ambition to double its mass in the next two years. All of these mergers have the ambition to double their headcount in an impossibly short time, it seems. (Of course, this begs the question—if such hyper-growth is so easy to come by, why weren’t you growing at that rate before? Guess this means the new firm will remain prowling for further merger candidates.)

Kim & Company is a banking and finance-focused practice formed from a team which left Lee & Ko in 2001.

KIm Chang & Lee has been through the merger process before. In 2005 or 2006—I don’t remember—the firm attempted to merge with acquisitive Barun Law, moving most of its lawyers from Kim Chang & Lee’s Insa-dong offices down to Barun’s Samsung-dong (near COEX) offices (at least the biographies disappeared from Kim Chang & Lee’s website and appeared on Barun’s) before reappearing in 2007 in an apparent unwinding of the merger.

The two firms will operate under the Korean name Yang-Heon

(양헌)

. The English name hasn’t been announced yet; both firms’ websites are irregularly updated (you can get news from 1995 on the Kim Chang & Lee website, but nothing past 2002). Of course, our firm’s website is no treat either—Korean firms haven’t caught on to the power of the Internet for marketing purposes.

July 29, 2008 | Filed Under Legal Market | Leave a comment

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