Archives for February 2008
Favorite Story of the Week
by Brendon Carr
Oops: Labor Minister Nominee Fabricated Career (Korea Times).
What? They’re checking references now?!
900 Sq. Ft. Korean Apartment Construction Cost $150K
by Brendon Carr
More real estate and housing policy-related news caught my eye today. From the Maeil Kyungjae (sorry no link because this paper has joined the execrable Korea Herald in the movement against deep-linking):
85m² Apartment Basic Construction Cost to Rise 3.13 Million Won
The basic construction cost of an apartment house with a floor space of 85 square meters is to rise by 3.13 million won.
The Ministry of Construction and Transportation revealed Tuesday that it has decided to raise the basic construction cost which is used to calculate the price of an apartment house under a price cap, by 2.16 percent.
Basic construction costs are adjusted factoring in inflation rates every half year and the recent hike will be applied to apartment houses which plan to advertise for tenants on and after March 1.
Consequently, the basic construction cost of an apartment house with a floor space of 85m² and an area of 112m² is set to rise 3.13 million won (28,000 won per m²) to 148.36 million won. The selling price of an apartment house is determined by the basic construction cost, extra construction cost and land cost.
MOCT revealed the reason of its raising the basic construction cost that labor expenses which take up the largest part of overall construction expenses had climbed 2.65 percent for the past six months and prices of ferroconcrete—one of chief building materials—jumped 10.3 percent.
No, this is not a free-marketer’s rant about how wrong it is for the government to fix the official cost of construction. Maybe another day.
This information gives us an interesting “inside look” at the composition of costs for the housing that Koreans inhabit. This is information useful to employers, economists, and people considering whether Korea is a good place to do business. Costs of living get passed on to the employer in the form of wage demands. Government policies concerning the housing market—which former Pres. Roh Moo Hyun couldn’t resist trying to control—directly affect these costs.
According to MOCT, “basic construction cost” is essentially that work necessary to erect a reinforced concrete apartment tower, four walls and a roof—what’s known in the construction trade as “core and shell” completion. “Extra construction cost” is the work done to make the space habitable—construction of non-structural interior walls, interior decoration, installation of doors, flooring and appliances, plumbing and heating. Basically the customer gets a toilet and bathtub, plus a cheaply-equipped kitchen.
I’ve priced interior renovation for my (slightly larger) apartment. Costs range from W30,000,000 to W70,000,000—which at the higher end would involve tearing out an existing interior with which I’m not that happy, and installation of better toilets and washing facilities, plus bumping out the “veranda” to gain extra floor space. The veranda work would also include new windows to replace the drafty, ill-fitting shit that is basic with a new Korean apartment. For W100,000,000 my place could look like the Playboy Mansion.
So just to be conservative, let’s say that W50 million accounts for the “extra construction cost” necessary to complete that 34-pyong apartment. Construction, then, takes us to just around W200 million. That’s in no way a bargain, by the way—we’re talking about a 900 sq. ft. box (and the basic fit-out is real crap, too).
According to the math, the greatest contributor to the balance of the average apartment price is the cost of land. In an earlier Korea Law Blog entry (August 2007), I noted how Seoul apartments of the size we’re talking about here were selling for an average price of W570 million—this Maeil Kyungjae report says that price is comprised of W200 million for the apartment, W370 million for the minuscule slice of the land underlying the apartment tower.
While I’m not going to rant about an “official” construction cost, or even a price cap for apartments (dumb, dumb, dumb!), I would note that finding ways to control the costs of land will directly accrue to the pocketbooks of Korean consumers once there is some equilibrium achieved between supply and demand. Right now, there is still a housing shortage driving prices (despite the fact that Roh froze the market, the problem is still not enough homes).
Korean families want to live in bigger, more modern homes if they can at all afford it.
That means Lee Myung-bak’s government ought to be looking hard at regulations which constrain the developability of land—especially in the capital region—and the intensiveness of its use. And make re-development easier by streamlining the condemnation process for developers.
Stacking more apartments on each tower (i.e., build taller!), and making the towers closer together (and their neighborhoods therefore more walkable) will reduce the sliver of land that is attributed to each apartment—thus giving us denizens of Korea a chance at more affordable housing. Ending the ridiculous “greenbelt” regulations will enable more units to be constructed closer to where people live and work in Seoul.
See also my earlier, related posts on this topic:
Housing Policy and the Korean Dream
Is There Really a “Glut” of Housing in Korea?
Watch the Construction Companies: Korea’s Canary in the Mine
More Property Fallout: Kwangju Regional Construction Group Foundering
Builders Having Trouble Moving Apartments in Seoul
Housing Bubble: Home Supply Down 30% in 2008
More on Land-Use Regulation and Housing Prices, Plus News From Seattle
Whew! That’s quite a reading list. There will be a quiz, and Korea’s future prosperity and standard of living depends on it.
Bad News for Flashers and Sex Pests and Foreign Investors
by Brendon Carr
Ripoff Korea makes it much more expensive to be a “Burberry Man” (the Koreanism for a flasher, based on the best-known brand of trenchcoat here) in Seoul—up to 52% more expensive than the appalling cost in Tokyo. The Maeil Business reports on the shocking cost of living in Korea:
Maeil Business Newspaper and KOTRA (Korea Trade-Investment Promotion Agency) jointly investigated commodity prices in Seoul, New York, Tokyo, London, Paris, Beijing and Hong Kong in January to discover a women’s trench coat from a major luxury brand, Burberry, to be most expensive in Seoul at 1.7499 million won. Even considering the difference in material and design, the retail price of the trench coat in Korea was overwhelmingly higher than those in London (1.14 million won), Paris (1.2 million won) and Tokyo (1.1476 million won).
McDonald’s Big Mac, the commonly used international price index, is sold at 2,900 won in Seoul, 525 won higher than 2,375 won in Japan and twice more than Beijing’s 1,520 won.
Starbucks Americano (237㎖) was sold at 2,800 won in Seoul, also more expensive than the same drink in New York (2,166 won) and Tokyo (2,090 won).
Compared against a year prior, Korea’s high commodity prices have not budged down. Last year, the trench coat was priced 1.75 million won in Seoul and 1.01 million won in Tokyo. Although the year-on-year price change in each country has slightly narrowed to 1.7499 million won and 1.1476 million won, the price in Seoul has stayed put.
McDonald’s cheeseburger was also more expensive in Seoul than in Japan—1,300 won vs. 774 won. The price gap between Korea and Japan once again failed to slim this year with the Big Mac priced higher in Seoul at 2,900 won against Japan’s 2,375 won.
The price difference in cars was more significant. Synonym for a luxury car, Mercedes-Benz S500 was sold for 206.6 million won in Korea, more than twice the price in New York (83.1 million won) and almost twice that in Tokyo (105.7 million won).
Cost of living contributes mightily to multinationals’ choices of where to place their “hub”. While few expatriate managers are clamoring to buy US$1800 Burberry trenchcoats, the Big Mac and cuppa joe are essential to keeping foreigners happy. (Here’s a tip: At lunchtime, McDonald’s has W3000 “value meals” which make the drink and fries next to free.)
If you feel us attorneys’ hourly rates are too high, please understand: We’re getting ripped off too.
Joint Venturing Tips: “Veto” Rights for One-Third Shareholders
by Brendon Carr
Today a question came in from a client apparently intending to form a joint venture in Korea—the question concerned what kind of “veto” rights a shareholder would have under Korean law if he held 1/3 of the voting rights in a Korean corporation.
For the purpose of clarity, note that this applies to a non-listed joint stock company, which is the type that comprises most foreign-Korean joint ventures.
The short answer is: None. To have a “veto” over certain major events of the company, which under the Commercial Code require an Art. 434 supermajority vote, the shareholder must have one-third plus one share. Art. 434 provides that a supermajority shall be a resolution approved by 2/3 of the shareholders in attendance at the shareholders’ meeting, provided that the approving votes comprise at least 1/3 of the total issued and outstanding voting rights.
So with only 1/3 of the shares, a shareholder couldn’t even block approval of the Art. 434 supermajority events. (What are these supermajority events? Well, as a general rule they are so-called “life changing” events like a merger, consolidation, spin-off of a major part of the business, capital reduction, etc.—but importantly, removal of the Representative Director. Election of a director takes only a simple majority, but removal of a sitting director takes an Art. 434 2/3 supermajority.
Where the Articles of Incorporation so specify, a company can be required to seek a greater-than-2/3 supermajority for Art. 434-type corporate actions. The simple majority required for approval of resolutions can also be increased. If you’re going to hold 1/3 of shares or fewer in a Korean corporation, and think you ought to have a veto of some sort, better have a Shareholders’ Agreement and insist on amendment of the Articles of Incorporation of the joint venture company to raise approval thresholds to match the ratio you hold.
Super Staph Infection Free with One-Third of Fish at Large Korean Supermarkets!
by Brendon Carr
Korea Beat today translates a Yonhap News report that a random check of fish on sale at selected large supermarkets in Seoul found almost one-third (16 of 50 samples) infected with Staphlococcus Aureus, or “Golden Staph”:
The Korean Food and Drug Administration (식품의약품안전청) announced on the 14th that it took 50 samples of fish and squid seasonings from four major supermarkets in January, finding 16 cases of Staphylococcus aureus (황색포도상구균), also known as “Golden Staph”.
Oh boy.
Golden Staph is known as a “superbug” because of its ability to become drug-resistant to all known antibiotics. Because of Golden Staph’s immunities, vancomycin—our last line of defense against it—is on rationing in the States, to be used only in very limited instances. Korean doctors, on the other hand, looooove antibiotics, handing them out to an eager public even when the infection is viral. I’m not sure if vancomycin is under any special controls here in Korea, but given the prevalence of Golden Staph contamination in supermarket fish, I sure hope so.
(Thank goodness I Fear the Seafood™, like any good Midwesterner.)
I am also suspicious that the supermarkets may have lower sanitation standards than we might like. They let guys waltz in with buckets full of turds.
I like the last blurb:
On the 5th the KFDA announced that it was considering administrative measures including a possible recall.
For those of you keeping score: Known deadly, drug-resistant bacterium found on one-third of fish for sale to the public? We’re considering measures. The slightest possibility of US beef’s contamination with thumbnail-size chips of bone matter (and the occasional big ol’ spine!), suspected of maybe, possibly causing—or not, nobody knows for sure!—a disease which nobody in America is known to have caught? Instant embargo.
Attention, Democrats in Congress: Korea’s “food-safety concerns” about US beef are, to put it mildly, bullshit disingenuous.
China Law Blog on How to Learn Korean Legal Vocabulary
by Brendon Carr
Dan Harris’ China Law Blog has another wise bit of advice to students of foreign laws—although Dan relates his partner Steve Dickinson’s view on how to learn Chinese law, the advice is (once again!) completely applicable to anyone studying Korean laws. Check it out.
China Law Blog is a little heartbreaking because Dan seems to have so much more energy, and because substituting the word “Korea” in so many of the entries answers all the questions one would have about this place. Takes a lot of the wind out of one’s sails.
More on Land-Use Regulation and Housing Prices, Plus News From Seattle
by Brendon Carr
On the Marmot’s Hole today guest blogger R. Elgin noted a recent press report about another theme park to be constructed near Seoul. A commenter “frederick” opined rather predictably:
This is sickening. Land is sparse in Korea. Korea doesn’t need any more theme parks that will only use up valuable land space.
But actually, despite the population density in Korea, land is actually not so sparse as people imagine. The problem Korea has is too many restrictions on what purposes to which the existing owners can put land. There are rather unrealistic building-height, setback, and density rules applicable in the city center (why, again, are Korean apartment blocks usually 12-19 storeys when Hong Kong apartment blocks are so often 30-50 storeys?), especially in the Central Business District—while fringe areas are often designated “greenbelt” or “agricultural” use, prohibiting development for productive uses.
We have a combination of actual shortage and artificial shortage imposed by the government. Not enough developable land is the problem. Want to improve the lives of the people and control housing price increases? Deregulate, baby.
The good news is, the Bulldozer has already publicly stated the correct view on these issues. Assuming he can bulldoze a real deregulatory scheme through the National Assembly (somehow, I expect this new “business-friendly” crew still has the usual unhealthy proportion of rent-seekers, and so the deregulation may be less dramatic than hoped-for), we will see a wave of better buildings in Seoul and possibly the increase in housing prices will be moderated.
As a homeowner, however, I surely do not want them to come down.
This problem is not unique to Korea. It’s found all over the world, really. I get a semi-regular e-mail blast from Demographia’s Hugh Pavletich in New Zealand, and he describes the house-price bubble unaffordability crisis in Australia and New Zealand being driven by their land-use policies as well. Demographia publishes an annual survey of house-price affordability in the English-speaking world (where the data is, I guess, more accessible and based on comparable standards)—the 2008 Survey is available now (thanks to Hugh for the news and for his sponsorship of the survey).
Los Angeles stands out as the most unaffordable market Demographia surveyed. Seattle, where I went to law school, appears headed the same way. The Seattle Post-Intelligencer reported recently on how nearly all of the Seattle house-price increase of the last 20 years has been driven by land-use policy. I’m posting a heavily-edited version of the piece here, because it’s long (the original is worth a read if you’re interested):
An intriguing new analysis by a University of Washington economics professor argues that home prices have, perhaps inadvertently, been driven up $200,000 by good intentions.
Between 1989 and 2006, the median inflation-adjusted price of a Seattle house rose from $221,000 to $447,800. Fully $200,000 of that increase was the result of land-use regulations, says Theo Eicher — twice the financial impact that regulation has had on other major U.S. cities.
Long building-permit approval times and municipal land-use restrictions upheld by courts also have played significant roles in increasing Seattle’s housing costs, he adds.
Eicher’s $200,000 conclusion doesn’t surprise Kriss Sjoblom, staff economist for the Washington Research Council, a nonpartisan organization that examines public-policy issues.
“It’s actually pleasing,” Sjoblom says, “that we finally have data that allows us to show things we thought were there all the time.”
Compared with 250 major U.S. cities, he says, Seattle:
• Is first in terms of the impact of state political involvement in land issues.
• Is in the top 3 percent for approval delays for new construction.
• Is in the top 10 percent in local political pressure influencing land use.
“The state is intervening to restrict supply. It’s not that there’s no land at all,” Eicher says.
Economists hold that housing costs are driven by supply and demand, and say those factors have certainly influenced the cost of Seattle’s housing.
But Eicher argues that “demand does not need to drive up housing prices.”
Cities such as Houston and Atlanta, which have few growth restrictions, have shown that. They’ve been able to add enough housing to meet demand, so their home prices have risen more moderately than heavily regulated San Francisco and Boston, which have a harder time increasing housing.
Last summer, King County’s potential first-time buyers earning the median family income ($75,143) had just 37 percent of the financial wherewithal to buy the median-priced single-family house ($477,000) at the prevailing interest rate (6.47 percent).
Five years earlier, when King County’s median-priced house cost $282,500, median-income, first-time buyers possessed 72 percent of the income needed.
But various government regulations make it challenging to add more affordable housing, notes Sam Anderson. He’s executive officer of the Master Builders Association of King & Snohomish Counties, which has pushed government to rethink some of the regulations.
Anderson estimates that regulatory costs comprise up to 30 percent of the total cost of building a new house (land costs included). The laundry list of fees and requirements can run to 30 or more, depending on where the house is built.
Among them, Anderson says, are transportation, school and park impact fees, stormwater management fees, critical-areas mitigation and monitoring, pavement requirements and rockery permits.
And then there’s the dollar cost of the process itself.
Building in Seattle can be very time-consuming compared with nearby cities, because of Seattle’s neighborhood-based design-review process, says Linda Stalzer, project development director for the Dwelling Company, an Eastside homebuilder.
In the final analysis, Eicher believes Seattle’s regulatory climate exists because its residents want it. “My sense is land-use restrictions are imposed to generate socially desirable outcomes,” he says. “We all love parks and green spaces. But we must also be informed about the costs. It’s very easy to vote for a park if you think the cost is free.”
The Korean equivalent of the “parks and green spaces” is concrete poured all over the city (i.e., no parks) but make-believe farmland preserved in seemingly-rustic “greenbelt” land within the city limits of Seoul and all around in Kyeonggi Province. This farmland is not very productive, and its green space remains off limits both to developers and to people who might want to tramp through verdant green fields. So what is accomplished by the land-use restrictions?
The theme park, at least, gives people some respite from their homes.
UPDATE 2/17: Prof. Eicher has kindly given permission for me to link to his original paper (PDF) which was the basis of the Seattle P-I story. Like the Demographia Survey, the paper is well worth your time.
Citizens Reject Charity for Namdaemun Restoration, Demand Government Money
by Brendon Carr
Sometimes I really have to wonder about the Korean public’s understanding of how exactly government works. Check out this flap reported in the JoongAng Daily concerning who’s going to pay for the loss of National Treasure No. 1, the Sungnyemun (Namdaemun) gate—which was torched over the weekend by a disgruntled citizen:
After an alleged arsonist destroyed Namdaemun, the 610-year-old southern gate of Seoul on Sunday night, President-elect Lee Myung-bak suggested the next day that the gate’s restoration be funded by citizens’ donations.
Okay, so far, so good. Let the people participate in the restoration of the nation’s lost patrimony. Let the corporations and fat cats fall over themselves to show how much they love the nation.
But after the public ire that followed the president-elect’s announcement, his transition team said yesterday there must have been a serious misunderstanding.
“His [Lee Myung-bak’s] intentions were not delivered well. What he meant was he’d let people freely participate in devoted action to restore Sungnyemun,” said Lee Kyung-sook, the transition team chairwoman, using the formal name of the gate. “He had no intention of starting any mandatory fund-raising of any sort.” Lee made her comments during the team’s daily morning meeting yesterday.
Okay, so the fundraising won’t be mandatory. I don’t know how charity could be mandatory anyway… Except if it were a tax. Anyway, charitable donations would probably come from corporations. Last I heard, Samsung may have some loose money laying around.
President-elect Lee said earlier that he wanted to start a fund-raising campaign to collect the 20 billion won ($21.1 million) needed to restore Namdaemun when he takes office later this month. Critics immediately asked why they should open up their pockets to pay for the government’s failure to prevent the ruin of the gate....
The transition team’s initial idea to start a national fund-raising campaign will most likely be scrapped. Chairwoman Lee retracted the transition team’s initial announcement and said the restoration plan will be dealt with by the government’s budget.
Um, so let me get this straight: The people don’t want to be strongarmed into donating money, because they think it’s the government’s responsibility to pay for the restoration. So the government shouldn’t seek our money, it should use its own money. Is that right? Where do we suppose the government gets that money?
In respect of the donation plan, I think it’s a good one. Yesterday, our partners decided to contribute W100 million—about W5 million per partner of our firm—to the fund-raising campaign. Word of our management’s decision spread through the office like wildfire, and the associates were positively chipper about the news. They knew that we were able to earn that money through their efforts for the firm’s clients—in other words, their work was directly contributing to the restoration. Why deny other folks (schoolchildren contributing their piggy banks, for example) the same good feeling?
Plus, if you ask me that restoration isn’t going to cost W20 billion. It will be several times that, and the money will be necessary. Plus if there’s any left over, I don’t think anyone who contributed would begrudge the allocation to paying for security systems and firefighting for other national cultural artifacts.
But public outcry rejecting charity in favor of taxes, that’s a new one.
Flash! Non-Compete Covenant May Require Compensation
by Brendon Carr
In late January the Seoul District Court issued a judgment holding for the first time that “reasonable compensation” must be made to employees subject to a non-compete covenant if the employees have not had access to “trade secrets” of the employer.
This is a new and dramatic holding—previously Korean courts had as a general rule not required any compensation for non-compete covenants of 12 months, and sometimes enforced longer covenants under certain circumstances. For example, there is one Supreme Court precedent in which a three-year non-compete had been upheld without compensation to the employee.
The recent case concerned teachers at a private “cram school” in Seoul who left employment and took jobs at a nearby school. They had signed a non-compete agreement forbidding them from taking a position with another cram school within five kilometers (because they could then recruit former students who live in the area) for a period of 12 months from termination.
The court held that where employees do not perform any specialized duties involving trade secrets of the employer, non-compete covenants without compensation for the limitation on the Constitutionally-guaranteed freedom of occupation cannot be enforced as a matter of public policy. But there was no guidance offered by the court concerning the level of compensation deemed “reasonable”, which the court stated shall be required to make an enforceable covenant in cases where no trade secrets were involved.
The District Court ruling is not binding on parties other than those in the case concerned, although the precedent, if not reversed or revised on appeal, may be persuasive to other courts. A Court of Appeals or Supreme Court ruling would be binding, and we would expect to see such a ruling within a year or so if appealed. Right now, then, the state of the law may be described as uncertain because of this ruling.
What this probably means is that for rank-and-file employees without any special responsibilities, a non-compete would need to be compensated. But for senior managers or technical staff, to whom the employer may grant access to formulas, pricing, and customer lists—all of which may be trade secrets under Korean law, if the company takes efforts to protect such information and control access within the company—it is our opinion based on the recent court precedent that their non-compete covenants need not be compensated.
But because of the uncertainty over whether this precedent will be affirmed on appeals, or perhaps extended in the course of appeals, employers should pay closer attention to their use of non-compete agreements and whether such agreements protect genuine trade secrets or merely serve to vex former employees.
First Korean “Jury Trial” Concludes
by Brendon Carr
Law.com reported today that Korea’s first-ever criminal trial held with the participation of a panel of citizens concluded Tuesday in Taegu with a guilty verdict for a 27 year-old man who broke into the apartment of a 70 year-old lady to rob her, injuring the old woman in the process.
Anyone who knows the Korean justice system could predict the outcome: A suspended sentence of four years’ two and a half years’ imprisonment, based on mitigating factors like the fact the assailant didn’t mean to hurt her, and that he took her to the hospital and turned himself into police. Okay, you got me on that one—sounds like a robber/assailant with a conscience. Still, beating up an old lady should get you some actual punishment…
The citizens’ advisory panel (it’s not correct to call them a “jury” just yet, as the panel merely offers the judge a non-binding recommendation after the trial) deliberated for several hours (good) before returning with a finding of guilt and a collection of sentencing recommendations which tended to favor suspension of the jail term.
The JoongAng Daily’s report on the same trial noted the high level of public interest in participating:
The regional court sent notice letters last month to 230 candidates, selected at random among residents of the district. Prosecutors and defense lawyers picked the nine official jurors, with three substitutes, from among 86 potential jurors.
“I am surprised that more citizens than expected appeared in court to participate in the first trial by jury,” said Um Jong-gyu, a judge of the Daegu District Court. “Many people have expressed an interest in the new system and more and more people want to take part in a trial.”
As an American lawyer, I am a firm believer in the wisdom of the jury system, grotesque outcomes like the OJ Simpson murder trial notwithstanding. (And as an aside, as a Red Stater I believe in the “castle doctrine” whereby anyone coming into another’s home uninvited does so on notice that he may be shot dead or otherwise summarily killed by the occupant.)
Korean criminal justice has been tainted by its origin and abuse as an oppressive tool wielded by the Chosun state, Japanese colonial government, and successive cruel Korean military dictatorships. Turning over the apparatus to the people is an important step toward gaining public trust in the fairness of the courts.
Still, the leniency of the sentence raises the issue that because the Korean criminal justice apparatus has mainly been viewed as fundamentally unjust, judges and now juries are generally reluctant to punish convicted criminals. American sentencing is much stiffer.
And I also have some worry about the intersection of Korean emotionalism and xenophobia in cases where the accused is a foreign Public Enemy No. 1, like Lone Star, or—God forbid—some foreign terrorist like the Korean monster who burned down Namdaemun on Sunday. In those cases, an untrained jury seems to be a menace to the fair disposition of justice.
This first jury trial is attracting worldwide interest. My old new nemesis Sean Hayes (he priggishly criticizes my love of colorful phraseology—like “priggish”!) turns up in a report on France 24’s English-language website (possibly also in French, but I do not read French) yesterday, offering well-informed comment and a quote that puts a more friendly spin on the same concern I express above:
The types of cases that would be put before juries are typically very public cases, [Hayes] says. “If the jury gives a guilty verdict, the judge is going to have overwhelming pressure to agree.”
Personally, overwhelming social pressure sounds a lot like an opening to mob rule.
UPDATE—This evening, Sean Hayes writes to correct my earlier statement concerning “four years’ imprisonment”. Such a sentence could not have been suspended. The AP and other press reports are conflicting on the sentence—given that some reports say two and a half years, which would fit the rules for suspension, it could be that the period of suspension is four years. For sentencing-guideline mavens, there is an explanation on Sean’s blog.
Tragedy of Bob Costas’ Youthful Looks
by Brendon Carr
I am going to start posting comments on things that interest me—Korean legal topics and perspectives will probably remain the dominant theme here, but the legal world doesn’t produce Earth-shaking news every day.
Over the weekend I caught the latest episode of HBO’s political talk show Real Time with Bill Maher. It’s an entertaining show, despite the pronounced liberal bent of the host, the audience, and two-thirds of the invited guests (if you’re conservative you must be bold to venture into that studio). This weekend’s show was aberrant—they somehow got four conservatives—Jonah Goldberg, Matthew Dowd, Amy Holmes and P. J. O’Rourke—invited to appear on the show, together with the pride of St. Louis (my hometown), NBC sportscaster Bob Costas.
Bob Costas is a handsome and fresh-faced 55 year-old man, pixieish in stature at 5’ 7” (if you’re feeling generous—I suspect he’s shorter than that) and graced with wild intelligence, encyclopedic sports knowledge, and a great voice for broadcasting. He’s widely known and respected as a decent fellow, despite his liberal politics. Everybody likes Bob Costas (in St. Louis, anyway).
He has done something terrible. Throughout the program, I was unnerved by the fact that Costas’ forehead, eyebrows, and upper lip were immobile. Having just seen an episode of Penn & Teller: Bullshit! featuring graphic footage of plastic surgery, in particular Botox injections into the (you guessed it) forehead, eyebrows, and upper lip of women who refused to age gracefully, I am certain that’s what’s behind Costas’ frozen mien—in addition to the probable surgery he’s had. He also has bleached his teeth and perhaps gotten veneers, although because his upper lip never moved I couldn’t see the top teeth to be sure.
Bob Costas! You’re 55 years old. It’s okay if you no longer look 20. In fact, it would give many of us comfort.
Intense Competition for Lawyers Seeking Employment at KFTC
by Brendon Carr
Since I know at least one of the lawyers who’ve applied for these posts, this report in the Korea Times seems relevant. Korean-licensed lawyers are taking greater interest in working for the Korea Fair Trade Commission, which has for some time been recruiting small numbers of attorneys to join its staff:
As many as 109 lawyers have applied for five posts at the Fair Trade Commission, a government regulator on fair trade of businesses, making the competition ratio 22:1, the commission said [February 9].
A commission official said that the ratio has been revealed after compiling applications for the posts of Grade 5 of public servants which were accepted from Jan. 15-22.
He said that successful applicants will be selected via tougher interviews.
A total of 40 lawyers applied for two posts offered by the commission one year earlier and 30 lawyers for four posts last autumn, he said.
A considerable number of applicants are reported to be trainees who have passed state bar examination and they are [thought to be interested in experiencing] fair trade affairs at the commission in preparation for the possible growth of lawsuits involving fair trade.
Recently, large law firms are recruiting specialists in fair trade affairs, while forming special teams to prepare for an ever-growing lawsuits involving fair trade.
“As the fair trade sector is increasingly made known important in the bar community, there are a growing number of aspirants hoping to learn related affairs,” an FTC official said.
The KFTC has for a very long time employed Korean graduates of foreign legal studies, most of whom had not yet passed an American state bar examination (hey, it’s hard to pass a professional examination in a second language!), as “legal consultants”, as well as legally-trained graduates of law faculties at Korea’s more prestigious universities. But this trend of bringing attorneys onto the staff, at least some of whom may have had actual experience working for commercial clients in private practice (if not in industry), presages a deeper and more commercially-savvy professionalism at the increasingly-powerful agency.
The positions being recruited are for “Grade 5” civil servants, which at the working level of a Korean government agency are fairly senior and powerful positions. Unless I’m mistaken, the equivalent corporate rank could be something like a “kwa-jang”—a team leader. We are given to understand from scuttlebutt (and the newspaper article seconds this opinion) that the vast majority of the applicants are brand-new Judicial Research and Training Institute graduates who may not yet have secured jobs, and are thus throwing resumes at anything which looks like an employment opportunity. Lawyers coming from one of Seoul’s commercial law firms with three or four years’ experience, who may also speak English, should have a decided advantage.
Imagine a world where some of the persecutors prosecutors, or judges, of Lone Star had had actual experience working on M&A deals.
UPDATE 2/11—Our friend the corporate lawyer who applied to KFTC was rejected. The stated reason was a suspicion (correct, as it turns out) that the lawyer coming from a firm probably wouldn’t stay at KFTC forever—that he or she would eventually go back to the original or some other law firm and make a living with the knowledge and contacts from KFTC. So much for a deeper professionalism: What’s wrong with that kind of objective? Isn’t KFTC’s interest also served by its alumni being placed where they can counsel companies how to remain compliant with competition law?
Paul Hastings on Korean Legal Market Opening
by Brendon Carr
With the Korean legal market opening a Done Deal For Next Year™, as it has been since I started following the issue in 1991, I thought I’d post this Korea Herald article from November 2007 which I clipped and saved (Korea Herald makes it really hard to directly link to their content).
It’s an interview with US Biglaw firm Paul Hastings’ managing partner Greg Nitzkowski. With its notable partner Jong Han Kim in Hong Kong no doubt presiding over a booming Korea business, the firm is one of several global law firms reportedly eyeing the day when they can open a Seoul office.
But the US firms correctly note some fear on the part of the Korean legal profession:
Offshore law firms pose no threat, U.S. attorney assures
Korea Herald, Nov. 23, 2007
What is it about offshore law firms that make the hackles rise on their Korean counterparts?
Nothing, according to Greg Nitzkowski, managing partner of Paul Hastings, Janosfky & Walker LLP, a top U.S.-based law firm.
“We just don’t see ourselves as a threat because they can’t do what we do, and we can’t do what they do. And we don’t want to. We see ourselves as being very, very complementary,” Nitzkowski told The Korea Herald in an interview.
Paul Hastings, an international law firm based in Los Angeles, employs 1,200 lawyers and has 18 offices worldwide. Its Asia offices include Hong Kong and Japan, but not Korea although the firm does represent Korean companies.
This may change as Korea is now poised to open up its 1.4 trillion-won ($1.5 billion) legal market in the wake of a free trade agreement signed with the United States.
Once all three phases of the opening process are completed—scheduled for five years after the trade pact becomes effective—offshore law firms will gain unfettered access to the local industry.
This deregulation, the U.S. lawyer predicted, would pave the way for foreign and Korean law firms to cooperate, complementing each other with their respective areas of expertise to ultimately better satisfy clients, both global and local.
“We can serve global investment banks, private equity firms, people who provide by capital. By being here, we better serve their needs in Korea,” he said.
He emphasized that Paul Hastings does not “seek to be a practitioner of Korean law.” Rather, it seeks to capitalize on the expertise it would gain from operating in Korea to promote its international-transactions business.
Once a global law firm builds a presence in Korea, it becomes significantly easier to take care of the Korean side of legal transactions, Nitzkowski pointed out.
For local law firms, which tend to focus on domestic affairs and less on international transactions, working alongside an offshore counterpart, which is likely to have global exposure and expertise, would help widen their scope.
A number of top law firms are already looking overseas for potential clients, partly to secure Korean companies that are expanding abroad, and partly to prepare for the inbound foreign competition.
“We work in a relatively unregulated market (in the United States); we see that being more unregulated provides a greater level of service and a differentiation of the services. So I think that will happen and will be a great thing for Korean society to have a system that makes lawyers less like priests and more like what we are, which are advisers,” the attorney said.
But deregulation, as a rule, accompanies intensified competition, meaning both law firms and lawyers would be hard-pressed to sharpen their legal expertise.
Korea’s solution was to open professional law schools, a move Nitzkowski saw to be beneficial for the industry and especially consumers.
“(It would be) much better for clients having more access—opening up opportunities for more lawyers serves in the best interest of the clients,” the lawyer said.
He noted that in many countries, while high-end legal services are ready on hand for corporate clients, individuals have a difficult time tracking down and more importantly, paying for attorneys. “A broader segment of clients would access the industry once there are more lawyers to go around,” he said.
But for the industry to evolve to such levels, Nitzkowski expects to initially see a flurry of offshore law firms vying for a piece of the market once the deregulation commences.
“We’ll have a period when many firms want to come into the market. Some of them for client reasons, some of them for very idiosyncratic reasons. They will have two, three or four Korean-American attorneys who have some element of Korean expertise. Then many will find that it doesn’t make sense for them and ultimately they’ll be settling out,” Nitzkowski predicted.
In the end, it will be a question of who best accesses the opportunities in the market and who best represents their clients, he said.
Of course the foreign law firms don’t intend to be practitioners of Korean law. Korean companies don’t want to pay for domestic legal services. They will, however, pay handsomely for international legal services which help them gain access to capital markets.
Once here, though, there will be an inevitable push into the local legal market—it will come from non-Korean clients who like working with the firm in global markets, and who would like that level of service here in Korea.
Why would Korean lawyers fear foreign firms’ entry? A great many Korean lawyers think what Western law firms do is nonsense; the typical Korean lawyer, even in a large firm, does not conceive of himself as an advisor—the typical Korean lawyer thinks of himself as a litigator only. And the Korean lawyer particularly thinks that being businesslike is beneath his dignity.
Some years ago I worked in another, small law firm. One of our partners was a “young” (a few years junior to me, but older because of the “40 Year Old Virgin” nature of Korean accession to the legal profession) English-speaking lawyer who applied for and received a Korean-British fellowship to attend a three-month training course sponsored by the Law Society of England and Wales, followed by a three-month placement in a London law firm.
When my partner came back from London sneering to our other Korean partners that “English solicitors don’t do anything. They just make phone calls and talk all day,” I knew that he had missed the point.
Most of these lawyers are really struggling in the market, because they’re trying to keep selling buggy whips in an automotive world. Some of them still prosper, because they’re in large Korean firms providing “Our Own Style” (i.e., not really all that commercially-focused) legal service to a captive audience of multinationals who can’t get Korean-law advice from lawyers trained and supervised by a global law firm.
But General Motors lurks around the corner. The Korean lawyers who adapt their self-concept to the new world will do well, but for others, like my former partner, life is going to get harder.
I’ve written about this at Korea Law Blog a couple of times, so readers might also be interested in the following entries: Korean Legal Market Opening to Begin?; Wall Street Journal on Korea Legal Market Opening: “Free the Lawyers”; and yesterday, in response to the latest announcement of legal market opening, Another Step Toward Legal Market Opening.
Another Step Toward Legal Market Opening
by Brendon Carr
The Foreign Legal Consulants’ Act cleared a cabinet meeting today, reports the Korea Times. Next stop is submission to the National Assembly for an up-or-down vote. According to the proposed timetable, initial market opening will take place “from 2009”—which often means Jan. 1, 2009, but could also mean some later date during that year depending on the date of passage in the National Assembly.
But before the parades of cheering foreign lawyers can start, it’s important to note that the law, as drafted, makes market opening dependent on the existence of a free trade agreement or some other treaty between Korea and the state from which the foreign lawyer or law firms might come:
The legal market opening comes in line with a free trade agreement (FTA) with the United States…
“It’s the first stage of the agreement on legal market opening as agreed with the U.S. We may have different details in pacts with other nations. So, we need to see whether the system under the first stage works well or if we need to modify the law afterward,” a [Ministry of Justice] official said.
Therefore, if the KORUS FTA doesn’t pass the National Assembly or the United States Congress, American lawyers and law firms will not be able to take benefit of the Foreign Legal Consultants Act regardless of whether the Act passes. I’m not sure of the content of the Korea-Singapore and Korea-Chile FTAs currently in effect, or what the provisions of the Korea-European Union and Korea-Canada FTAs now under discussion might be.
So for now, although the newspapers will undoubtedly report otherwise, the status of Korean legal market opening is “Still not open.” But it’s a Done Deal For Next Year™—more “next year” than it’s ever been since started following this issue in 1991.
Still, my money is on “2009” meaning a plan will be formulated by Dec. 31, 2009 for implementation beginning 2011.
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