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November 4, 2009 11:50 AM

LETTER FROM ASIA: South Korea Moves to Loosen Regulations on Legal Trade

Posted by Anthony Lin

The Korean government is planning a major deregulation of the nation's legal and other professional services markets, the Korea Herald reports today.

At a government meeting Tuesday, Finance Minister Yoon Jeung-hyun explained the move as a way to boost employment in the high-value services sector.

"The government will lower entry barriers to the professional service market to spur competition and to boost the size of the market," Yoon said.

A number of measures aimed at reducing regulation have been recommended to the government by the Korean Development Institute, a think tank. Perhaps most controversially, the KDI has proposed that nonlawyers and conglomerates be permitted to own stakes in law firms. The institute has also recommended an end to restrictions on lawyers, patent agents, and certified public accountants practicing together.

Local bar groups are not happy about the move toward less regulation of the trade.

"We are opposed to the KDI's suggestion of allowing nonlawyers to have a stake in a law firm because a legal service cannot, and should not, be regarded as a general business," Korean Bar Association spokesperson Chang Jin-young told The Korea Herald.

The Seoul Bar Association released a statement, saying "a nonlawyer's ownership of a law firm will make law firms subordinate to market capital which undermines the fundamental legitimacy of the current lawyer licensing system."

In the United States, lawyers are prohibited from splitting legal fees with nonlawyers and therefore banned from sharing ownership of a law firm. In the U.K, on the other hand, the 2007 Legal Services Act expressly permits so-called Alternative Business Structures for law firms, including possible ownership by nonlawyers. The British government has yet to develop the regulatory structure for licensing such practices though and much controversy still swirls around their introduction.

Korea has historically had a very small legal sector, with only 1,000 new lawyers qualified each year. However, as we reported in September, even that small elite is now having difficulty in the job market, a development that has raised concerns about plans to double the number of bar-passers by 2012.

Many lawyers say one major problem facing the industry that Korean corporations and government agencies still hire and use far fewer lawyers than their counterparts in the United States or Europe. The Korean government may well see deregulation as the best means of getting the business community to create more lawyer jobs.

The Korean government is planning to hold public hearings on professional-services deregulation this month and finalize the proposed measures in December.

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