Legal Gangnam Style

Being known around the world after a hit by Korean pop star Psy the central district of Gangnam in Seoul became the meeting point of the prestigious annual conference held by the International Bar Association (IBA) on September 22-27. This is the first annual gathering of the IBA in South Korean capital in the 72-year history of the association.

In addition to the focus on the Asian region, the host country had a unique chance to present its jurisdiction, express the expectations of business, demonstrate strong institutions and unique culture.

The week-long venue gained a reputation as a networking hub and attracted over 5,000 delegates and numerous lawyers coming for satellite venues, receptions, cocktails and face-to-face meetings.

Ukrainian lawyers traditionally join the global forum, while this time we met partners of Arzinger, Asters, AVER LEX, Integrites, Kinstellar, Sayenko Kharenko, Ukrainian Legal Group.

Headlines

The conference program is traditionally diverse (around 200 sessions) to satisfy different queries and expectations. While the conferences in Rome and Sydney of past years had a distinctive focus on technology and artificial intelligence, the issues of diversity and inclusivity took the lead in conversations in Seoul.

Organizational diversity is not new for the legal business, and was discussed from the perspective of better performance. It concerns not only gender parity, but other distinctions relevant for foreign markets, including color, age, values, culture etc. Large corporations continue to develop internal policies addressing diversity requirements for external counsels.

Dismantling stereotypes of categorizing people and the impact on decision-making resonates with the findings of the latest reports saying that “sluggish” progress in representation of women in partnership and leadership roles is observed.

Economically-strong South Korea presented a view on existing crime against humanity in its aggressive neighbor, North Korea. A conversation with the North Korean defector Hyeonseo Lee, renowned for her TED talk and a bestseller “The girl with seven names”, expectedly raised public concerns over life in a society with no freedom. Another defector, Yong-ho Thae, a former North Korean diplomat, predicts that the next generation will go onto the streets to oppose the totalitarian system.

In-house agenda

The holistic view on the world of general counsels (GCs), which is another facet of the legal industry, revealed a number of important trends on emerging trends in the sector.

Often knowing more ins and outs than their external advisors, GCs are driven by accountability to their employer. They want to be involved in the entire value chain and to shape their contribution from the very beginning. In other words, if you don’t understand the businessyou are not a part of the table.

Turning back to the mindset of general counsels, their role in strategic guidance is closed to thinking on long-term value return and continuing to navigate long-term risk management.

The permanent rotation between private practice and in-house legal departments is a natural trend for developed and mature markets. Brilliant lawyers from magic and silver circle law firms regularly apply to global corporates. The big law is not so much concerned about it to date, as this is an obvious trend.

Addressing the broader role of GCs in corporates, Simon Davis, President of the Law Society of England and Wales and partner at Clifford Chance, stated that their role is evolving from risk management to guardians of culture. In the USA it is very common for a GC to sit on the board and the executive committee. It happens because corporates require advice on litigation risks and how to avoid them, and GCs are risk managers. In the European continent GCs were not people to be given strategic advice, which in Mr. Davis’s perception, has changed dramatically. “Now we see counsels across Europe are expected to be guardians of culture and expected to ask themselves a question:  not just is this legal, but how will this look?”

Another curious insight from GCs comes from the perspective to influence policy-makers and facilitate changes in the regulatory environment throughout external legal counsels. Contrary to GCs law firms have recognized strength in this capacity across jurisdictions.

Recent concerns inside legal departments that GCs named included maintaining integrity and following a multi-way approach, which means providing feedback to management on what is happening in the world and how it might impact their business.

To open up or not to open up markets?

The picture of liberalized access to the legal services market is becoming more and more diverse from year to year. Some 69 countries have made legally binding WTO commitments to offer some form of access for foreign lawyers. The volume of the global legal market in 2017 was USD 849 billion, and it is forecast to grow to USD 1.01 trillion in 2021. Asian economic leaders and emerging markets reveal a distinctive understanding as to how the presence of foreign law firms can shape their local legal landscapes.

According to Alison Hook of consultancy Hook Tangaza, 60% of jurisdictions allow some form of foreign-local lawyer fee sharing or partnership. 70% of jurisdictions allow some recognition. However, there are many countries where a recognition arrangement applies only to a group of neighboring countries or countries which have reciprocal recognition arrangements.

What are the drivers behind making a jurisdiction expand access of foreign lawyers to their markets?

The market’s opening up in South Korea was led by its government and concerned not only the legal sphere. The country followed the model of Japan to have a transition period until the market is fully opened. At the first stage foreign law firms can open their representative offices. At the second – they can cooperate with Korean lawyers by signing special cooperation agreements and can share legal fees. At the third stage, foreign law firms can set up a joint venture office and can hire local lawyers and provide Korean law advice.

China’s opening was driven by the huge amount of foreign investments and WTO accession. It is noteworthy that here the regulation touches law firms and not individuals. For example, Chinese lawyers who are currently working in foreign firms and who have dual licenses (qualified in the US, UK and China) are not allowed to practice Chinese law and have to suspend their license for the time being.

In Brazil foreign law firms are allowed to establish associations with local companies. There is currently a special regulation for foreign legal consultancy adopted by the national bar association. Brazilian lawyers who go to work in foreign law firms have to give up their Brazilian bar, and many practitioners simply do not want to take that risk as they have to pass the bar exam again.

India is considered to be one of the most closed legal markets. However, in coming years its regulator will allow foreign lawyers to come and practice law in the country. Interestingly, the country imposes substantial fees to register a firm. As local legal practitioners admit, their government understands that the ambitious objective of creating an arbitration hub in India is not going to happen until foreign law firms come in.

On the other side of the spectrum, Australia is an open market with very high standards regarding being admitted to practice local law. From the perspective of market insiders, there is no threat to the local profession when someone practices foreign law in Australia. However, in South Australia law firms are prevented from employing foreign lawyers.

The drivers for international law firms seeking presence around the globe are simple – clients require advice on English law around the world. At the same time, internationals are required to look at the law of several countries while supporting global transactions. “By creating borders we are ignoring our clients”, stated Geoffrey Nicholas, partner Freshfields Bruckhaus Deringer.

The lessons learnt from the perspective of international law firms suggest that they don’t necessarily enter liberalized markets immediately but thoroughly look how a market will suit them – is there enough business, legal talent, etc.

Another important issue for further consideration is the regulatory objective – protecting a consumer or a profession?

Overall Uberisation?

As even traditional industries now experience the effect of Uber, often called “Uberisation”, legal markets also tend to move towards the gig economy. The question is how disruptive could it be in general, and for certain segments in particular?

The idea of marketplaces changes the delivery of legal services and pushes the development of alternative business models. The core social impact is divided into benefits for consumers, particularly for the general public and smaller companies, simplification of access to justice (presumed by reasonable pricing), managing budget restrictions by means of cost certainty, availability of providers. According to Neville Eisenberg, senior partner and CEO of BCLP Cubed (London), big law firms in the UK do not consider marketplaces and platforms as their competitors, because their clients usually prefer to keep this type of work in-house. The problem is that law firms have been very slow to move towards providing solutions for “business as usual” at the right price. “The ‘Big 4’ companies have noticed this gap in the market, which is exactly why many of them are investing heavily in building up their legal capability,” he said.

In spite of positive implications, the comparatively deregulated area may definitely raise ethical issues and require rules and standards. However, sooner or later regulators may spread their authority onto gig platforms.

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The IBA launched new reports at the venue: Legal Expenses Insurance and Access to Justice; The Future of Work (with special considerations towards law and disruptive technologies); New Anti-Corruption Paradigm: Sextortion; A Tool for Justice: Cost-Benefit Analysis of Legal Aid (joint IBA and World Bank report).

The next Annual Conference 2020 will take place in Miami, USA, on November 1-6, 2020.