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Mar 5, 2009

Opening Door to Legal Change

By Sean Hayes (Korea Times 03/05/2009)

On Monday, the National Assembly passed a bill that permits law firms from countries with free trade agreements with Korea to operate ``foreign law consultancy businesses'' and individuals from these countries to be registered as ``foreign legal consultants.''

At present, the best estimate is that over 400 foreign attorneys work and reside in Korea. The vast majority are Koreans. These attorneys work for law firms, accounting firms, and corporations. Many of these attorneys play lead and/or vital roles in representing Korean and non-Korean clients in a vast array of matters concerning Korean and international legal matters.

These attorneys are not technically ``attorneys,'' can't be paid directly by clients, normally don't sign work product, and can't appear in court.But they do play vital functions for clients and Korean firms by bridging the gap between the high expectations of clients and the often low client service skills of Korean attorneys, adding needed specialization to firms, and improving, overall, the quality of work products.

Korea, prior to this bill, had no formal regulation governing these attorneys with the exception of the Attorney-at-Law Act that prohibits the unauthorized practice of law. To my knowledge, no foreign attorney has been prosecuted for the unauthorized practice of law.This bill, passed on Monday, is part of the three-stage process for the opening of the Korean legal services market. The three-stages were formulated and incorporated into the Korea-U.S. Free Trade Agreement (KORUS FTA).

In the first-stage foreign firms are permitted to operate foreign legal consultancy businesses, but are not permitted to hire or partner with Korean attorneys, CPAs, patent attorneys or other like professionals. These ``consultancy businesses'' may only advise clients on issues concerning international law and the laws of the nation the business is from. The bill also permits and potentially mandates foreign attorneys to be registered as ``foreign legal consultants.''

These attorneys must have worked in a foreign jurisdiction for three years. If the attorney has already been employed in Korea for over two years the attorney is only required to have worked in a foreign jurisdiction for one year. A large percentage of foreign attorneys, presently working in Korea, don't meet this requirement.

The first-stage will lead to no noticeable change in the legal market in Korea. The stage is only intended to give Korean firms and attorneys the needed push toward improved competitiveness and few foreign attorneys and firms will choose to register, since there is no noticeable benefit to registration.In the second-stage, which is scheduled for 2011, foreign law firms are permitted to enter into agreements with Korean law firms and in the third-stage, which is scheduled for 2016, foreign law firms could establish joint-ventures with Korean law firms and hire Korean attorneys.

Korea is a dynamic nation with a future that is hard to predict. The third-stage of this plan will likely meet fierce resistance from the Korean bar. If Korea wishes to truly become a part of the global community it must shed the blanket of protectionism and open its service sectors and all other sectors to competition from abroad.

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SeanHayes@ipglegal.com