IFLR 1000
The Guide to the World's Leading Financial Law Firms

These are changing times for Korea as market liberalisation comes at a time when the country is investing heavily on a global scale, especially in the Middle East, South America and Africa for energy and natural resources. This, according to one partner at a UK law firm, means that there is "a greater need for international law firms with the global reach and resources they have....

These are changing times for Korea as market liberalisation comes at a time when the country is investing heavily on a global scale, especially in the Middle East, South America and Africa for energy and natural resources. This, according to one partner at a UK law firm, means that there is "a greater need for international law firms with the global reach and resources they have. So these international firms entering Korea during this period of time marks an important aspect of the changing market."

Approximately 80% of the country's economy is export-oriented, and despite the global financial downturn Korea "has been at the forefront of the recovery process" according to one partner and is engaging in many cross-border M&A's and project financings.

Although the Free Trade Agreement (FTA) with the EU has been in effect since July 2011, the entrance of UK firms into Korea has been quite slow, which has been attributed to the relatively low numbers of UK-qualified Korean lawyers. The Korea-US FTA came into force on March 15 2012 and the surge of US firms into the country has also triggered several UK firms to make a move.

The American Chamber of Commerce in Korea estimates that at least 12-14 international law firms will look to open offices in Korea in 2012-2013. International firms confirmed to have applied for licenses thus far include: Clifford Chance, Cleary Gottlieb Steen & Hamilton, Cohen & Gresser, Covington & Burling, McDermott Will & Emery, Paul Hastings, Ropes & Gray, Sheppard Mullin, Squire Sanders and Simpson Thacher & Bartlett.

The Korea-US FTA has three phases with each creating a greater level of freedom for international firms. Initially the licenses only allow the provision of foreign law advice, but in two years they will switch and allow firms to form profit-sharing/alliances or joint ventures with local Korean firms. Finally after five years international entities will able to merge with or take over local firms.

"This FTA further bonds the important political and geo-strategic ties between US and Korea, who have been close partners politically and economically for decades, and further cements the very close ties between the two countries. That's also a very important achievement," says a partner of one of the US firms moving in.

"There is potential on the US side to generate $10 billion or more gross in exports, and importantly making accessible Korea's $580 billion services market to service providers, creating potentially 70,000 new jobs tied to the FTA from express delivery to engineering, education, healthcare, law, and so on," the same partner continues.

On the Korean side the ramifications are no less substantial. "Manufacturers will gain preferential access to the US market. Something like 80% of US goods will be duty free immediately, and 95% will be in five years. There are significant advances for heavy machinery and goods. Koreans are strong performers in the service industry: financial, insurance, brokerage etc. Those markets are liberalized by the FTA, just as trading goods are."

Contrary to what some might expect, Korean firms don't feel too threatened by these developments. Until the second phase of the agreement is implemented, the services provided by international and local firms are more complementary than competing. The legal market's liberalisation will reshape the legal landscape but will also reinforce the activity in the Korean market, both domestic and abroad. "This will eventually bring about more competition, since there are less slices of the pie to go around, but really it will be an issue of making the pie larger," says a partner at a top local firm.

In short, as one partner says: "It's going to be a real game changer in bilateral trade, promoting dynamism and liberalisation in bilateral relationship."

CONTEXT AND TRENDS
The banking industry is undergoing substantial changes in regards to regulatory requirements. In line with the internationalisation of the market, the Korean financial sector has followed the global trend in adopting the Basel III framework and the IFRS accounting standards....

CONTEXT AND TRENDS

The banking industry is undergoing substantial changes in regards to regulatory requirements. In line with the internationalisation of the market, the Korean financial sector has followed the global trend in adopting the Basel III framework and the IFRS accounting standards. Basel III places stricter restrictions on banks, which some practitioners say have contributed to less availability for funding sources. However, others say Korean banks have been well prepared for the Basel III implementation for a long time now. The shift from the GAAP to IFRS also has ramifications for the treatment of equity and debt. Intangible assets are now construed as liabilities, leaving certain companies balance sheets looking bleak.

On the other hand, the financing market has still been active in large overseas projects which has contributed to the health of the domestic economy. There have also been large financings for several significant M&A deals that have taken place this year, especially in the technology sector.

Unfortunately some industries haven't fared so well including shipping and construction. The general downturn in the ship financing market has left companies with nothing on their plate, leading some more substantial entities, with the available resources for research, to shift their focus towards offshore plants, while smaller ones have simply gone bust. Many mid-sized shipping companies and construction companies are undergoing rehabilitation proceedings. One partner highlights this trend: "Corporate activity has increased in the sense that the legal and regulatory environment is becoming more complex, so we're getting more work in that regard. But construction companies have gone belly-up so we're doing a lot of restructuring work too. Not all work is purely positive in this regard but we hope for more positive work in the future."

MAJOR LATERAL HIRES

Sam Kim
From: Bae Kim & Lee
To: SK Telecom

MAJOR LEGISLATION CHANGES

Financial Investment Services and Capital Markets Act
Permits setup of hedge funds – in effect as of September 30 2011

Monopoly Regulation and Fair Trade Act
Introduces consent order system – in effect as of December 2 2011
Amends enforcement decree – in effect as of January 2 2012

Korea Exchange amends listing rules
In effect as of March 1 2012

Korean Commercial Code amendments
Eases financing and M&A regulations – in effect as of April 15 2012

RISING STARS

Kim & Chang
Chul Man Kim

Shin & Kim
Bok Gi Choi
Sang Hyun Lee

Bae Kim & Lee
Bo Youl Hur

CONTEXT AND TRENDS
With the liberalisation of the country's economy through the Korea-US Free Trade Agreement, a rapidly evolving industrial base and heavy legislative discussions in parliament in the context of national elections, Korea has experienced a year of dramatic change. The heavy outbound activity in all corporate areas is a firm indication of the market's current strength....

CONTEXT AND TRENDS

With the liberalisation of the country's economy through the Korea-US Free Trade Agreement, a rapidly evolving industrial base and heavy legislative discussions in parliament in the context of national elections, Korea has experienced a year of dramatic change.

The heavy outbound activity in all corporate areas is a firm indication of the market's current strength. Although the global financial crisis has had an impact on the export-driven market, which hindered financing activity, Korean companies' have turned to the rest of the world to diversify their sources of funding. Sky-high numbers in both the value and volume of cross-border M&A, especially in the energy/resources and hi-tech sectors, have resulted in increasingly complex and diversified transactions that in turn require innovative approaches.

The various amendments to the Korean Commercial Code, effective from April 2012, aim to further facilitate the creativity and variety in deals. One of the most significant changes is the introduction of hedge funds due to the increased importance of private equity funds. Although the Lone Star-KEB deal, as an exception, springs to mind as according to one lawyer it "poured some cold water on foreign private equity funds," there have been hundreds of successful purchases made by funds in Korea. This has the potential to reshape the M&A landscape. "There is liquidity in the market meaning there's money to be spent, but it hasn't been easy to find the right investment target. Private equity companies continue to look for various opportunities," says one partner.

Several Korean companies have addressed the need to diversify their finances by issuing bonds overseas, particularly in the US, China, Japan and Australia. On the equity side, as Korean involvement in the international arena becomes more significant, their means of tapping the global markets has also evolved. Moving away from depository receipts for funding, there is a shift in certain areas towards concurrent dual listings, as one Korean partner explains, "The international feature of these transactions can allow Korean issuers and companies to have access to global capital markets, and comparatively to depository receipt or concurrent listings, the advantage is that investors partially have access to Korean capital markets as well."

The dynamic economic activity has also been addressed in politics. As conglomerates and large corporations lead the way in the biggest deals, small and medium enterprises (SMEs) feel their market share is threatened with this growing competition. Recent price increases have also distressed the consumer base. The Korean Fair Trade Commission (KFTC) has thus taken a consumer-oriented approach to foster the growth of SME's and has put forth policies to increase monitoring and restrictions in activity of conglomerates and large companies, especially in the technology, manufacturing and construction sectors. Increased investigations, sanctions and merger control are only a few of the commission's approaches this year, and it is rapidly becoming one of the most active antitrust agencies in the Asian region, if not the world.

MAJOR LATERAL HIRES

Young Jae Cho
From: Shin & Kim
To: Lee & Ko

Hee Kyung Byun
From: Jipyong & Jisung
To: Bae Kim & Lee

Hyo Young Kang
From: Yulchon
To: Linklaters

Sung Bom Park
From: Yoon & Yang
To: Yulchon

RISING STARS

Kim & Chang
Myoung Jae Chung