Herbert Smith Freehills recently announced its departure from the South Korean legal market, continuing a steady stream of international law firm exits in the past few years. At the same time, Watson Farley & Williams established a Seoul office, while Ashurst recently became a part of the country’s first-ever joint law venture. Lawyers say that with hurdles like language barriers, growing competition and tight regulations, the key to longevity might involve closely hewing growth strategies to Korea’s market potential.
The South Korean legal market was recently hit by a sudden exit, with Herbert Smith Freehills ending its 10-year presence in the East Asian country. The firm said it will “wind down” its physical presence in Korea this year as it determined to serve their clients’ interests with “a new approach.” Some of the office’s 14 staff members will leave the firm as a result.
HSF was not the first international law firm to take the decision to whittle down its on-the-ground offerings in South Korea. Clifford Chance quit the market less than two years ago, with McDermott Will & Emery and Simpson Thacher & Bartlett shuttering their Seoul offices in 2019 and 2018, respectively.
“With the right people and strategy, international law firms can succeed in the Korean market. South Korea is one of the largest economies in Asia. It is export-driven, and its economy was resilient during the COVID years with active overseas investments. Over the years, we have observed a consistent and high demand for international legal services from our Korean clients.”
— Philip Kim, Watson Farley & Williams
But there have been firms bucking this outflux of foreign outfits. One of the latest is Watson Farley & Williams (WFW), which opened its Seoul office just weeks before HSF shut its own. International arbitration specialist Philip Kim ended a seven-year stint at HSF to join the energy-focused firm, which aims to focus on M&A, energy, and public international disputes. And in November last year, London-headquartered Ashurst launched a first-of-its-kind legal joint venture in the North Asian country with midsized law firm HwaHyun.
Kim notes that although some international law firms have exited the Korean market, there are more new entrants. “With the right people and strategy, international law firms can succeed in the Korean market,” he says. “South Korea is one of the largest economies in Asia. It is export-driven, and its economy was resilient during the COVID years with active overseas investments. Over the years, we have observed a consistent and high demand for international legal services from our Korean clients.”
The Korea legal market also remains attractive to one of its long-time occupants, Cleary Gottlieb Steen & Hamilton, which first set foot in Seoul in 2012. Jinduk Han, a partner at the firm’s Seoul office, says the string of high-profile exits has not swayed Cleary’s Korea strategy.
“We have been doing Korea work since the early 1990s, and our focus and strategy have stayed fairly consistent throughout – serving our clients’ needs by focusing on practice areas where we have expertise – capital markets and M&A – and by doing excellent work in executing those deals on the ground,” says Han.
Adds Sang Jin Han, also a partner at Cleary, “Korean clients are sophisticated, and they are doing interesting and dynamic transactions in Korea and around the world even though the market is relatively small, especially for international firms, and competitive.”
GROWTH TRACK
According to the Bank of Korea, outbound legal spending by Korean companies have grown each year since data was first compiled in 2006, except for the period hit by the Global Financial Crisis of 2008. Kim of WFW expects this trend to continue, which he believes can sustain his firm’s marque offerings in the energy sector.
“Korean companies are actively investing outside of South Korea, in particular areas relating to the energy transition, electric car batteries, semi-conductors, shipbuilding and health-care, which are traditionally strong or high growth areas for South Korea,” says Kim.
Eugene Chang, who left K&L Gates to blaze the trail for WFW in Seoul, says the firm is well-equipped in Korea with tailor-made strategies to capitalise on the increasing demands in energy-related transactions.
“Korean companies are at the forefront of the energy transition - in particular renewables and electric car batteries - and is traditionally strong in the shipbuilding and construction industries, which means that there is strong demand for our specialist sector expertise,” explains Chang, who specialises in cross-border energy and infrastructure projects and corporate work.
“Our strategy in Korea will be sector-focused, in line with our global strategy to be the leading law firm in our specialist sectors of energy and trans-port. We measure success using several metrics, including financials, cross office collaboration, client satisfaction, team building and contribution to the local community,” he adds.
Adds Kim, “we will always focus on assisting Korean clients with their international legal needs. For inbound work, we will work closely with our local law firm colleagues, as we have done over the years with great success for the firm’s institutional clients. We will concentrate our resources on the energy and transport sectors, in particular project and asset finance on the transactional side, and international arbitration on the contentious side.”
To gain a long-standing foothold in Korea like Cleary did, Jinduk Han and Sang Jin Han believe their work’s “consistent excellence” is the key to success.
“All of our senior lawyers - two partners and one counsel - and most of our associates have been with Cleary for their entire career, and our clients know the Cleary brand and the quality of work that we bring to the table. They also appreciate the consistency we provide in staffing their matters,” says Jinduk Han.
Both Cleary and WFW are convinced that by establishing the Korean outpost, the overall competitiveness of the firms will get a boost in other international markets as well.
“As an outbound practice, we do not have all the expertise on the ground and cross-office working is the norm. This cross-office working will enhance the overall competitive of the firm in that it will help offices in key markets grow and be involved in the largest international mandates,” says Chang of WFW.
For example, “Singapore is an important hub for our international arbitration practice, and this is where Korean clients are increasingly arbitrating. By assisting Korean clients with their international arbitration mandates from Korea, this helps us grow our practice in Singapore,” he adds.
However, to break into a market such as Korea, which has traditionally tended to be more inward-looking and self-contained, is not without challenges for a UK firm as WFW. Recruitment, for example, used to stand as one of the major hurdles. Kim explains that is due to the limited number of bilingual UK-qualified Korean lawyers compared to other Western jurisdictions including the United States.
“As our practice matured, we have observed that work for Korean clients is truly international, and it is by no means confined to English law matters. This has naturally led to diversification of hiring from other common law jurisdictions like Australia for UK-based international law firms operating in South Korea,” adds Kim.
For an established player as Cleary, talent attraction is also top of mind. “We are in a talent business, and being able to continue to attract and retain top quality lawyers who are bilingual has always been one of the keys to our success, which we continue to be mindful of,” says Jinduk Han.
Sang Jin Han concurs: “Fortunately, we have had a steady flow of associates relocating from our U.S. offices, and we have had many lateral associate candidates who are interested in joining us given the strength of our firm and reputation in the Korean market.”
“Going forward, we expect technology and innovation will play a greater part in our work and our clients’ expectations, on which we are focused as a firm. This is not particular to Korea but globally,” he adds.
