In September 1999, nearly six months after the Korean government announced the relaxation of barriers to the legal services market, Stephen Brown, the British ambassador to South Korea, aimed pointed criticism at the market's slow pace of change. "Foreign law firms are effectively unable to open offices in Korea, even to provide advice on non-Korean law, meaning that Korea has one of the most restrictive sectors in Asia, more so than China or Vietnam," Brown said.(2) Though he may have overstated the situation, Ambassador Brown's impatience is understandable. In the three years following the currency crash of 1997, the Korean economy has made a comeback worthy of Lazarus, but its fledging strength needs to be supplanted by continued structural reforms.
As one of Asia's largest economies, South Korea plays an important role in the global market. The events of 1997, during which a fall in the Thai baht precipitated steep market declines in South Korea, Malaysia, Indonesia, Singapore, and Japan, underscored how quickly a shift in one segment of the international market can affect other markets in the region and the world economy. Unprecedented political events focused global attention on Korea again in 2000, for more positive reasons--a historic summit between North and South Korea orchestrated by South Korean President Kim Dae-jung, who was awarded the Nobel Peace Prize for his efforts(3)--but international views on the South Korean economy remain more cautious than confident. To maintain global financial stability and reduce the chances of a "repeat crash," South Korea needs the support of the international business and legal communities as it works to improve transparency in its legal, financial, and business systems.
This Note reviews the background of the current economic situation in South Korea and explains how the 1997 International Monetary Fund ("IMF") relief program affected the Korean legal market. It then focuses on the challenges that international legal practitioners are likely to face regarding transactions in South Korea, points out the importance of recognizing the different points of view regarding the role of law in Korean business transactions, and outlines some of the substantive growth areas for practitioners interested in the Korean market. Finally, this Note argues that allowing international legal firms to offer a full range of services in the Korean market will help forge the kinds of long-term relationships--and draw the long-term capital investment--the country needs.
A. From Tiger to Octopus: South Korea's Economic Backslide
Between 1961 and 1991, state control of industrial development and a fierce determination to modernize South Korea brought about unprecedented economic growth, but at a very high price: nearly every aspect of the South Korean market was under the tight control of distinctly authoritarian regimes.(4) After its first truly democratic election in 1992, South Korea continued to be counted among the strongest of the "Asian tigers," ahead of Singapore, Malaysia, Hong Kong, and Thailand. The winner of the 1992 election, former political dissident Kim Young-sam, built a winning platform on a policy of globalization, or segyewha. President Kim's push to internationalize Korea was a welcome change from the growth-at-all-costs policies of the past thirty years under the administrations of Park Chung-hee, Chun Doo-hwan, Syungmun Rhee, and Noh Tae-woo.
Under the Kim administration, family-owned corporations, or chaebol, continued to dominate the Korean economy as they had throughout the decades immediately following the Korean War. As the country's economic backbone, the chaebol had been carefully monitored by the Park and Chun governments. Companies were told where, when, and how to operate, and disobedience was not tolerated. In turn, the government protected the chaebols' markets through high tariffs and cheap loans until Korean industry became competitive internationally. …