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.
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I am highly doubtful that Korean firms will ever act in a capacity greater than local counsel for foreign companies doing business in Korea. Isn’t their concern actually that even more domestic companies will use foreign firms as their lead counsel in international transactions?
If Korean firms are to compete with global law firms as counsel to Korean companies going overseas, they are going to have to transform the way Korean lawyers advise clients.
That transformation either will be self-driven, or prompted by competition in the domestic market.
It’s not impossible to achieve; French, German, and Dutch law firms support their nationals’ operations worldwide. But they only awoke to those possibilities after they came under competitive pressure from UK and US law firms.