Korean Law Firms...

Korea

REPUBLIC OF KOREA

South Korea’s economy is still performing more slowly than the government would like, but is showing signs of picking up. Seoul’s government is bringing in measures to boost infrastructure projects in a bid to inject life into the economy, but a strong won currency and high oil prices are raising costs for companies and acting as a deterrent to the investment needed to sustain growth.

In August 2005, Finance Minister Han Duck-soo said South Korea’s economy was recovering more slowly than anticipated because of lagging growth in corporate investment, despite construction companies taking a lead in this area.

“The overall economy is not improving fast enough to meet our expectations, but it is showing clear signs of recovery,” Han told Bloomberg. “Leading indicators show corporate investment is unlikely to show a full recovery for some time.”

Tax cuts and record-low rates have increased consumer spending over the past few months. South Korea also signed a free trade agreement with Singapore in August 2005. The comprehensive pact with Seoul’s 10th largest trading partner also includes the ‘Kaesong provision’, to help North Korea export goods produced in the Kaesong Industrial Complex. 

Foreign investors still express concern at the rigidity of South Korea’s labour regulations and the need for more constructive relations between management and workers. South Korea still has a less than impressive track record for labour strikes, although the mood appears to be changing with a less sympathetic public perceiving the strikes as less about suffering workers’ lack of rights and more about personal interest. South Korea’s labour law is protective of labour and makes it hard for employers to release workers.

South Korea’s underdeveloped financial markets and a general lack of regulatory transparency are also key concerns for investors. 

All government agencies are now required to allow employees to work five days instead of six, which was the former practice. This is part of recent legislation by the government to reduce the working week to 40 hours, with the aim of having a five-day week for all companies, private companies included, by 2008. The government plan is the result of pressure from labour organizations as well as family groups and environmentalists, who see the benefit of energy saving. As a result of the new working week, many recreational companies are springing up to cater for the extra free day, but corporations are generally unhappy with the new working arrangement.

There are also concerns that Korea’s real estate market is overheating and that if the bubble bursts, a recession could follow. The government has been intervening in the real estate market. This included a bid by President Roh Moo-hyun to move the administrative capital from Seoul to the Chung-cheong provincial area to ease urban congestion in Seoul and achieve balanced development around the capital. However, this proposal was faced with opposition from the public and a rejection by the Constitutional Court. The ruling was remarkable also because it showed that courts are now standing up to the president. South Korea’s presidents have often wielded a lot of power, despite its recent democratization. 

On the North-South front, the atmosphere at Panmunjom is still decidedly frosty. Recent six-party talks came to an abrupt end despite a promising opening. But away from politics, the quiet wheels of business have ensured that relations between the North and South are more relaxed than they have been for several years.

The nuclear threat still looms, particularly with North Korea announcing its status as a nuclear power in May 2005, but moves by the South to send food aid and the prospect of an exchange whereby Seoul provides a power grid by 2008 (sufficient for the North’s electricity needs in return for the North giving up its nuclear ambitions), mean that while there is an enormous gulf to be filled, the chances of a nuclear standoff are not as high as they have been. 

South Korea appears to be taking concrete steps to promote itself as a north Asia hub, with the development of foreign economic zones using tax incentives. But the government is going beyond the financial side to draw foreigners in, by concentrating on upgrading education facilities and trying to encourage the establishment of more foreign schools, as well as improving healthcare.

Legal & Legislative Developments

There have been numerous legal developments in Korea over the past year. The amended Lawyers Act, which became effective on July 27 2005, allows the establishment of a law firm in the form of a limited liability company or a limited liability partnership. Many law firms are expected to change their legal firm to the newly available one. 

An amended version of the Securities Exchange Act was introduced in March 2005 to help the management in companies to guard against hostile takeovers. The amended law now requires an investor to disclose the purpose of its investment if acquiring a 5% share or more in a company.  It also requires an unlisted company belonging to a large group of companies to disclose important matters relating to management. 

The legislation is a response to Korean industry complaints that Korean companies must be given adequate protection against foreign companies’ acquisition efforts. The amended act has been lambasted as taking a protective stance over domestic companies, when Korea should be ensuring that its markets are more open if it want to encourage FDI.

The Foreign Investment Promotion Act (FIPA) has also been amended, effective January 1 2005, under which the government can award cash subsidies to foreign investors. The Korean government expects the cash-grant subsidy programme to actively attract research centres and manufacturers of high-tech parts and materials.

The Korea Fair Trade Commission has also introduced the automatic cartel leniency programme, whereby the offender who first confesses to cartel activity is exempted from sanctions. This antitrust law is being actively enforced by the commission and major player in competition law Lee & Ko is expecting a steep rise in antitrust cases over the next few years.

Early in 2005, Korea’s National Assembly passed the Act Concerning the Rehabilitation and Bankruptcy of Debtors or the Unified Insolvency Act, effective from April 2006. This act consolidates Korea’s previously diverse insolvency laws, namely the Bankruptcy Act, the Composition Act and the Corporate Reorganization Act. 

Local Law Firms

Under its agreement with the World Trade Organization, Korea is obligated to open up its legal market. The proposal submitted by Korea to the WTO in March 2004 allows foreign law firms to open representative offices in Korea to consult on “international and foreign law problems”. Under the proposal, foreign law firms will be allowed to represent Korean corporations on international legal issues, but they will be banned from forming joint ventures or even alliances with Korean firms, from advising clients on any area of Korean law or appearing in Korean courts. Foreign firms will also not be allowed to hire Korean lawyers.

While some law firms like to give the impression of being relaxed and in a position of power ahead of the liberalization, there are many who are concerned that it will have an impact on their earnings. Some feel it will shake up the market with increased competition but not enough work to go around. But many feel that the increased competition will also increase the quality of the services provided by local law firms.

Even though by law no local firm can have an association with an international firm, the larger international firms are already present in handling cross-jurisdictional deals. International firms like Clifford Chance, working from its offices abroad, already have a good chunk of the Korean market. Some suggest that the larger firms like Kim & Chang will be the losers when the market opens, although that could be just wishful thinking.

Law firms are reacting in various ways to the impending liberalization of Korea’s legal market, which includes looking abroad to add international talent to their legal line-up. Shin & Kim, which welcomed Coudert Brothers veteran Timothy O’Brien to its corporate group in March 2005. Yoon & Yoo has also expanded its international practice by recruiting two foreign lawyers. Specialist IP law firm Cho & Partners, which has two partners and 11 fee-earners, has added a foreign associate attorney over the past year to accommodate the firm’s expanding work and client base.

Woo Yun Kang Jeong & Han has recruited foreign counsel Robert Wachter from O’Melveny & Myers in California. Woo Yun Kang Jeong & Han is competing to become an equal to the four big firms and is a specialist in areas such as taxation. Established 10 years ago, it is a breakaway firm from Kim & Chang. 

Sewha Park & Goo has formed a Vietnamese group to meet the increasing demand among Korean financial institutions and corporations for investment in Vietnam. 

A rapidly expanding full-service firm is Horizon Law Group, which was established five years ago and now has 15 partners and 43 fee earners. The firm has created a China practice team and plans to open its first overseas office in Shanghai by the summer of 2006.

Law firms that have traditionally specialized in corporate and commercial law are now also bringing on board intellectual property (IP) specialists in a bid to strengthen their capabilities and be more competitive as the market is opened. 

Other firms are moving in the opposite direction, streamlining their business and concentrating on their best areas. Kim & Co, which is well-known for its ship financing, is one example of this trend.

The ‘big four’ law firms still dominate the South Korean market, namely Kim & Chang, Bae, Kim & Lee, Lee & Ko and Shin & Kim. The largest is Kim & Chang, which has over 400 fee-earners and is the dominant force in all areas, although a handful of others are vying to take the crown in some of these.

Established in 1980, Bae, Kim & Lee is a full-service law firm with 50 partners and 157 fee-earners. It is regarded as the country’s pre-eminent litigation firm and is also a specialist in labour law. Bae, Kim & Lee reports that in October 2004 it was the first law firm in Korea to open an office in Beijing with the Chinese government’s formal authorization.

Lee & Ko recently merged with First Law Offices to expand its IP department, as the original head of the IP team left to set up his own firm, the Patent Office of Duk Yeul Baek, in 2005.  The lawyers from First Law Offices were transferred to Lee & Ko’s main practice. While the patent attorneys from First Law Offices and Lee & Ko’s former IP department are now part of First Law Lee & Ko Patent and Law Offices, the name will be changed later to Lee & Ko Patent & Law Offices.  

For several years, Lee & Ko has been putting emphasis on the importance of having Chinese specialists within the firm. It opened a representative office in Beijing on July 1 2005. 

First Law Offices has a well-respected and prominent IP practice which includes IP-related services in patents, trademarks and copyright across diverse fields ranging from chemistry and bio-engineering to pharmaceuticals and computer software.

Prominent IP firm Hanyang International has hired a former director general of the Electrical Examination Bureau of the Korean Intellectual Property Office.

SL Partners was set up in July 2004 and counts JP Morgan and Himart among its clients.

Aurora Law Offices is still carving a niche for itself as a second-tier law firm that targets companies that would prefer to have legal services from a firm other than the ‘big four’ firms. 

Aram International Law Offices is a full-service law firm engaged in all areas of legal counselling.

Consolidation of Korea’s legal market seems inevitable. However, one potential route is in-house. In preparation for defending against securities-related class actions, large companies are also increasingly recruiting experienced lawyers as in-house counsel.

International Law Firms

As there is a ban on foreign law firms in South Korea, most of the international firms serving clients located in Korea or having interests there are based in Tokyo or Hong Kong. Overseas law firms involved in South Korea include Allen & Overy, which has eight Korean speakers among its 19 lawyers in its Korea practice group, Baker & McKenzie, Cleary Gottlieb Steen & Hamilton, which is well recognised for its work in Korean capital markets and corporate matters and Freshfields Bruckhaus Deringer. 

Linklaters has been active in Korea for over 25 years and has developed strong relationships with Korean corporations, financial institutions and law firms. Simpson Thacher & Bartlett is also active in Korea, as is White & Case, which advises on a wide range of corporate and finance matters and has added three associates in Hong Kong with Korean language skills and experience over the past year. 

Other international law firms working on Korean deals include DLA Piper Rudnick Gray Cary, Skadden, Arps, Slate, Meagher & Flom, Sidley Austin Brown & Wood, Jones Day and Paul, Hastings, Janofsky & Walker.

AREAS OF EXPERTISE 

Banking 

Korea’s financial regulators have decided to introduce the Basel II Accord, which is scheduled to be implemented into South Korea’s banking system in 2007. All banking institutions are setting up internal credit risk management systems in preparation for adoption of the accord. 

A current government priority is to make the nation the regional financial hub. But in order to achieve that goal, financial deregulation is an essential factor, so the government is concentrating on deregulating current controls to improve the competitiveness of financial institutions.

Under current regulations every new financial product needs to be reviewed and sometimes approved by the financial regulators. This is seen as a big barrier for financial institutions to develop new products. 

Banking
Local Firms	Notable Expertise	Notable Deals (since August 2004)
Sewha, Park & Goo	Partner Jong Baek Park and Dong Won Ko are specialists in banking and finance.
Shin & Kim
Woo Yun Kang Jeong & Han	Hee-Chul Kang, Bong Hee Han and Hee-Woong Yoon are specialists in banking and finance.	Represented Crown Confectionery in its financing for the acquisition of Haitai Confectionery from Hana Bank and other financial institutions.
Yoon & Yoo		Advising Hyundai Capital on a W50 million revolving credit facility loan. Providing Korean counsel to Royal Bank of Scotland and Deutsche Bank on a Euro revolving credit facility to a German company and its subsidiaries, including Korean subsidiary companies.

Over the past year, some major Korean banks have been acquired by foreign firms. Korea First Bank was sold to Standard Chartered Bank in January. Allen & Overy was international counsel for Standard Chartered Bank, while Woo Yun Kang Jeong & Han provided local counsel. Cleary Gottlieb Steen & Hamilton represented KFB Newbridge Holdings in the sale of its entire share capital of Korea First Bank; Kim & Chang provided Newbridge with local counsel. Valued at US$3.3 billion, the transaction is reportedly the largest foreign investment in Korea to date.

Now there are rumours that the shares Korea Exchange Bank, which are currently owned by Lone Star, are going to be sold to foreign-based banks, including HSBC. “We expect the deal to soon begin on the sale of shares in Korea Exchange Bank,” says one lawyer.

Citigroup’s acquisition of KorAm Bank in 2004 was not only the largest M&A transaction in Korea to date, but also the first time that a foreign bank acquired a Korean bank and the first time that the Korean branches of a foreign bank were integrated with the Korean bank that became a subsidiary of a foreign bank. The acquisition of KorAm Bank was also the largest acquisition of a bank subsidiary by Citigroup outside North America. The acquisition was completed through a tender offer on April 30 2004 and a business transfer on November 1 2004.

Kim & Chang advised on Citibank Overseas Investment Corporation’s tender offer and the Korean regulatory approval process for the acquisition of shares. International law firm Linklaters acted as counsel to Citigroup. 

Kim & Chang provides legal services covering all activities in which banks engage, including the establishment of a bank in Korea, its day-to-day operation and management, acquisitions, mergers, and closure. Korean recommended firms for banking include Kim & Chang, Lee & Ko, Shin & Kim and Bae, Kim & Lee as well as Horizon Law Group, whose clients include Woori Financial Group, Korea First Bank and HSBC. Hwang Mok Park is also recommended and counts among its clients Chohung Bank, Shinhan Bank and Woori Bank. 

Woo Chang-rok and Yoon Yong-sup of Woo Yun Kang Jeong & Han serve as outside counsels for various financial institutions and have extensive litigation experience involving them. 

Capital Markets & Corporate Finance 

While Korea’s stock market is currently stable, a key concern is if property prices can sustain their current highs. Korea’s central bank is considering a hike in interest rates, which would also have an impact on the stock market.

Public offerings have been relatively few compared to the frenzied activity of the past two to three years. The government is keen to expand the business scope of securities companies and one recent measure allows them to engage in over-the-counter financial derivatives. A further area of expansion for securities companies is in trust business, which previously was exclusively the remit of banking institutions. 

Kim & Chang and Shin & Kim are the leading legal players in capital markets. Lee & Ko is also active and has reportedly been involved in launching three out of the first six private equity funds in Korea, as well as the first issuance of mandatory convertible bonds by a Korean company. 

Capital Markets & Corporate Finance
International Firms	Notable Expertise	Notable Deals (since August 2004)
Allen & Overy		Advised the underwriters on the US law aspects of the recent 144A Regulation S offering by LG Electronics of its US$600 million 5% notes due in 2010, listed on the Singapore Stock Exchange.
Allen & Overy Shook Lin & Bok Joint Law Venture		Acted for LG Electronics in its recent 14A Regulation S offering of US$600 million 5% notes due in 2010, listed on the Singapore Stock Exchange.
Cleary Gottlieb Steen & Hamilton		Acted for LG Electronics in its recent 14A Regulation S offering of US$600 million 5% notes due in 2010, listed on the Singapore Stock Exchange. Advised Newbridge Asia in the US$3.3 billion sale of Korea First Bank to Standard Chartered Bank. Advised Hynix Semiconductor on a US$500 million Rule 144A/Regulation S offering of senior notes, with registration rights, in July 2005. Acted for Koram Bank in Citigroup’s acquisition of a 36.6% stake in KorAm Bank from US private equity group Carlyle Group. Represented the underwriters in the sale of US$1.03 billion of American depositary shares in SK Telecom, Korea’s leading wireless telecoms services provider.
Debevoise & Plimpton		Acted as US counsel for SK Telecom Co and the selling stockholders in the sale of US$1.03 billion American depositary shares in SK Telecom Co.
Sidley Austin Brown & Wood		Acted for Hannuri Investment & Securities, the arranger and joint lead manager, and HSBC, the trustee and agent, in a US$166 million cross-border primary collaterlized bond obligation issued via the Piraruku Fund in 83 separate tranches of notes to finance 78 Korean companies.
Simpson Thacher & Bartlett		Represented Kumho Tire in its IPO, which was the first ever concurrent dual-listing IPO in Korea and London. Represented Gravity in its US$108 million IPO and offering of American depositary shares (ADS), traded on the NASDAQ National Market. Represented Citigroup Global Markets and HSBC, the initial purchasers in a Rule 144A/Regulation S offering of US$300 million 5% subordinated notes due in 2015, issued by Korea Exchange Bank. Represented LG TeleCom in its inaugural debt offering under Rule 144A/Regulation S of US$200 million 8.25% senior notes due in 2009 listed on the Singapore Trading and Exchange; Credit Suisse First Boston was the initial purchaser.

Medium-sized firm Hwang Mok Park has advised on a range of debt, equity, and derivatives transactions in Korea. Sojong & Partners is a mid-tier commercial practice which focuses on banking and commercial work. 

Other firms in the capital markets and corporate finance field include Woo Yun Kang Jeong & Han and Kim & Company, which is also known for handling a lot of shipping work.

In the past year, LG-Philips LCD was the first Korean company to have its equity securities listed simultaneously on the Korea Stock Exchange and the New York Stock Exchange. LG-Philips issued 24.9 million shares of common stock in the form of American depositary shares in the US and 8.6 million shares of common stock in Korea for about US$1 billion on July 22 2004. Kim & Chang and Cleary, Gottlieb, Hamilton & Steen represented LG-Philips. Simpson, Thacher & Bartlett and Shin & Kim represented the underwriters.

Capital Markets & Corporate Finance
Local Firms	Notable Expertise	Notable Deals (since August 2004)
Bae Kim & Lee		Local counsel to Hynix Semiconductor in a US$500 million Rule 144A/Regulation S offering of senior notes, with registration rights, in July 2005.
Kim & Chang		Acted as local counsel to LG Electronics in its recent Rule 144A/Regulation S offering of US$600 million 5% notes due in 2010 and listed on the Singapore Stock Exchange.
Lee & Ko		Exclusive counsel to the Korean government and the four entities that operated the Korean securities markets in the consolidation of those markets to form the Korea Exchange, which now operates the KSE, Kosdaq and KFE markets.
Sewha Park & Goo		Advised on the establishment of entertainment funds raised by several institutional investors and managed by CJ Asset Management Corporation, pursuant to the Indirect Investment Asset Management Business Act. Also advised on the sale by Woori Bank of US$100 million precautionary loans to the consortium of Merrill Lynch and Woori F&I, then transferred these to a JV special purpose company, in which Merrill Lynch, Woori F&I and Woori Bank jointly injected capital contribution and issued asset-backed securities.
Shin & Kim		Represented Kumho Tire in a concurrent dual listing on the Korea Exchange and the London Stock Exchange, completed in February 2005. Represented the underwriters to Gravity’s offering of ADRs, which are listed on the Nasdaq. Advised the underwriters on Korean law in the sale of US$1.03 billion in American depositary shares in SK Telecom.
Sojong Partners		Provided local counsel in Hannuri Investment & Securities Co’s US$166 million cross-border primary CBO transaction.
Woo Yun Kang Jeong & Han		Represented Morgan Stanley in its equity investment of US$15 million to Gale International Korea for the development of New Songdo City.  Represented Shinhan Bank in its issuance of US$300 million hybrid Tier 1 securities. Advised SK Telecom on Korean law in its sale of US$1.03 billion in American depositary shares. Also represented SK Telecom in its issuance of US$329.5 million zero coupon convertible notes.
Yoon & Yang		Advised on a US$700 million eurobond offering by a leading Korean cable broadcasting company. Provided local counsel in Hannuri Investment & Securities’ US$166 million cross-border primary CBO. Assisted Morgan Stanley Investment Management Company in Singapore in obtaining a cross-border investment advisory and discretionary investment management business licence in Korea.

Construction & Real Estate

The overheating property market is of great concern to the government. Finance Minister Han Duck-soo said in August 2005 that the government would be introducing measures to allow the central bank to keep interest rates low, to cool real estate speculation and limit price increases in the property market. Bids by the government to create new zones in towns near Seoul, to boost the economy outside the capital and to make real estate prices more reasonable, have had an effect that the government did not desire: increasing speculation on land and property in nearby areas. However, some lawyers feel that the government is putting a chokehold on redevelopment because of its fear of high real estate prices. They argue that the answer to the problem is for supply to meet demand, not market intervention.

Construction & Real Estate
Local Firms	Notable Expertise	Notable Deals (since August 2004)
Horizon Law Group	Han-Seok Myung is the firm’s best-known real estate lawyer.	Represented clients in transactions involving a combination of project financing and asset-based securities for a number of real estate development projects, including Anyang Beesan Tower Development Project, Kimpo Shinkogri Apartment Development Project and the Hawangshibri Samhwan Apartment Development Project.
Lee & Ko		Representing Samsung Electronics in an action brought by residents against the designation of Tangjung-myun, Choong Chung province as an industrial zone, in which Samsung plans to build a W20 trillion production facility.

In other developments, South Korea has amended its Real Estate Investment Trusts Act, effective April 2005. The recent amendments to the REITs Act are intended to diversify the forms of REITs and to promote the use of REITs by relaxing the relevant regulations. The amended act introduces a new type of general REIT which is exempt from corporate tax. The amendments also introduce ‘entrusted management’ REITs, which are not restricted in the types of real estate they can invest in and are exempt from corporate tax. The act also relaxes requirements for the establishment of REITs, reducing the minimum capital from W50 billion (approximately US$48.7 million) to W25 billion. In addition, in-kind contributions of real estate to REITs will be allowed up to the limit of 50% of capital.

Sewha Park & Goo is advising on the Veritas CJ Yedang Entertainment Fund, the first special asset fund under the Indirect Investment Asset Management Business Act to invest in many types of entertainment businesses and real estate. Investors include Kumho Life Insurance and the Military Mutual Aid Association. Yuil Partners provided legal counsel to Yedang. 

Woo Yun Kang Jeong & Han represented Lone Star Fund in its sale of Star Tower building, the largest office building in Korea, to GIC (Singapore’s global investment management company). Kim & Chang represented GIC in the US$ 1 billion transaction.  Woo Yun Kang Jeong & Han also represented Lone Star in its initial purchase of the building.

Bae, Kim & Lee has an active real estate group on large-scale projects. Other law firms active in real estate work include Kim, Shin & Yu and Shin & Kim. 

Lee & Ko is representing major local retail distributors, including Lotte Department Store, E-Mart and Costco, in their acquisition and development of property. Lee & Ko also represents major construction companies, including Samsung Corp, SK Engineering & Construction, Hanjin Heavy Industries, POSCO and GS Construction (formerly LG Construction), in large-scale residential construction and reconstruction projects, construction-related litigations, plant exports and other construction and engineering matters.

Dispute Resolution

Dispute Resolution
International Firms	Notable Expertise	Notable Deals (since August 2004)
Heller Ehrman		Representing Shanda Internet Development in an arbitration with Korean companies relating to licensing agreements, in which the governing law of the agreements is Singaporean law.
White & Case		Representing SKEC in a dispute over the modernisation of a large oil refinery in a Latin American country, with claims and counterclaims aggegating around US$1.6 billion.

Many law firms expect more litigation over the next few years on issues relating to corporate governance and protection of minority shareholders. With increased awareness of their legal rights, Korean firms are generally becoming increasingly litigious. 

More litigation is expected as a result of the March 2005 enactment of the Securities-Related Class Action Act (SCAA). This Act allows certain accounting frauds, including price manipulation and use of inside information, conducted before the Act’s effective date, to be exempted from class actions for two years. The act became effective from January 1 2005 for companies with assets of W2 trillion or more and will become effective from January 1 2007 for companies with less than this amount in assets.

Dispute Resolution
Local Firms	Notable Expertise	Notable Deals (since August 2004)
Lee & Ko		Representing Chairman Gun Hee Lee and the directors of Samsung Electronics in a shareholders’ derivative suit alleging damages of about W360 billion arising out of failed investments and certain share sale transactions.
Shin & Kim		Currently representing Korean game designer Wemade Entertainment, a co-respondent in a three-way ICC arbitration involving Shanghai Shanda and Actoz Software, over contractual disputes regarding China’s best-known online game - Legend of Mir - and in a related copyright infringement against Shanda in Beijing.
Sky Patent & Law Firm		Involved in dispute resolution for a large semiconductor equipment manufacturer operating out of Korea, Taiwan, Singapore and China.
Woo Yun Kang Jeong & Han		Representing Daewoo Securities in its defence against various financial institutions that are claiming damages in excess of W31 billion for its alleged failure to provide accurate or adequate information on the credit rating of commercial papers it sold. Also representing Hyundai Marine & Fire Insurance in its W6.2 billion claim for an insurance payment against Hyundai Life Insurance, a bankrupt company.
Yoon & Yang	Partners Jae-Seung Byun and Hoil Yoon specialize in dispute resolution.	Represented Hanbo Iron & Steel and its creditor’s representative in an ICC arbitration and lawsuit in a New York Federal Court in a dispute with AK Capital, with a claim amount of over US$400 million. Also representing Daewoo Telecom and its creditors’ representative  in an action pending in a New York bankruptcy court.
Yoon & Yoo		Represented Kookmin Bank in a lawsuit filed by an individual for payment of a lottery winning claim.

Says Jin Hwan Chung of Hwang Mok Park: “The SCAA was intended by the government to improve minority shareholder rights and therefore corporate governance in Korea by holding not just corporations liable for their actions, but also potentially corporate officers, directors, auditors, underwriters and large shareholders, depending on the circumstances.”

Kim & Chang, Bae, Kim & Lee, Lee & Ko, Shin & Kim, Kim Shin & Yu and Yoon & Yang are all seen as leading players in the dispute resolution field. Horizon Law Group and Aurora Law Offices are also active in litigation and dispute resolution. 

In a recent case, Woo Yun Kang Jeong & Han successfully defended Daewoo Securities against various financial institutions for damages of over W31 billion for alleged failure to provide accurate or adequate information on the credit rating of the commercial papers it sold.

Insurance

There has recently been considerable controversy over the rights of banking institutions to sell insurance products using their branch networks. This is in addition to the previously traditional method of selling insurance projects via a network of individual financial planners. 

In August 2003, the government took measures to allow banking institutions to sell insurance products made by insurance companies. However, the size and scope of insurance products sold by banks has greatly increased and now dominates the market. This has led to insurance companies complaining that banks are taking advantage of their networks and that this is leading to unfair trading. The insurance industry has been putting pressure on the government to regulate insurance practices. However, the government appears unwilling to move on this and has allowed the scope of insurance products dealt with by banking institutions to be expanded until 2008. 

Another issue in Korea is whether an insurance company is allowed to own or hold a banking institution as its subsidiary, a possibility which is opposed by both the government and public opinion. In Korea, large insurance companies are owned by conglomerates, or chaebols, and under government policy chaebols are not allowed to control financial institutions. If insurance companies were allowed to hold banking institutions as subsidiaries, then the chaebols would control the banks. 

Under the Insurance Business Law, there is no specific prohibition against foreign financial institutions entering the Korean domestic market. There are several foreign insurance companies operating in Korea, including ING.

The major firms involved in insurance work in South Korea are Kim & Chang, Lee & Ko, Bae Kim & Lee, Shin & Kim and YP Lee & Mok. Sewha Park & Goo is also involved in insurance and cites Samsung Life Insurance, Shinhan Life Insurance and Samsung Marine and Casualty Insurance Corporation among its clients.

Intellectual Property 

While law firms generally feel that there is good IP protection under the current laws, they feel more could be done about prosecutions under those laws. Increasingly, Korean firms have become concerned about counterfeit goods, particularly those manufactured in China. Parallel imports are also a concern, and Korean companies feel that more policing at borders and commercial centres should be carried out. 

Growing concern over Chinese counterfeit goods flooding the Korean market has led to more Korean companies asking IP firms to register trademarks and patents in China and more law firms becoming specialized in representing Korean companies operating in China.

Although Korea’s large industrial companies are leaders in mobile phones and plasma screens, they are still in part dependent on foreign licensing. But there has been a gradual move towards quality rather than quantity IP work. “Large industrial firms such as Samsung are moving towards time-based billings rather than a fixed-price structure in a move towards securing better quality protections,” says Marc Miller of leading IP law firm Park, Kim & Partner. “This is something patent attorneys have been urging in South Korea for some time and this has gained momentum over the past year. Companies still wish to contain costs but are prepared to pay more which should enable their patent firms to spend the necessary time to come up with better quality patents.”

The implementation of the Madrid Protocol in April 2004, allowing companies to apply for trademarks in several countries at one go, has led to fewer local applications, law firms say. But this could be short lived. The majority of Madrid Protocol applications within South Korea are being rejected due to exact stipulations on product descriptions not being fulfilled. This has led to many local firms reverting back to local applications. In addition, the Madrid Protocol application costs a good deal more than local applications. 

Over the past year, there have been 30,000 trademark and patent applications in South Korea and biotechnology is seen as a big growth area. Some law firms, such as specialist IP firm Muhann Patent & Law Firm, are specifically taking on patent attorneys with academic backgrounds in the sciences and biotechnology to ensure that they can handle this new growth area. 

Intellectual Property
Local Firms	Notable Expertise	Notable Deals (since August 2004)
Cho & Partners		Set a precedent through a civil action against an internet shopping mall operator based on the dilution provision of the Unfair Competition Prevention Act; the court found that use of part of a trademark owner°¶s name to promote and sell imitation goods constituted unfair competition. Also obtained a favourable decision against a Korean trademark squatter based on a claim of trademark abuse.
Lee & Ko		Representing LG Chem and Procter & Gamble in defending the W80 trillion damages award, the largest award of damages by a Korean court to date in a patent infringement claim. Represented Microsoft against a claim brought by Professor KH Lee, alleging that a Korean to English conversion software infringed her patent.
Nam & Nam World Patent & Law Firm		Invovled in an invalidation trial over the ‘bad faith’ registration of the ‘Evisu’ brand by a third party.
Sky Patent & Law Firm		Advising on a foreign trademark dispute between Bellsouth and Bellwave and involved in a litigation case regarding compensation for employee’s inventions.
Woo Yun Kang Jeong & Han		Representing Daum Communication in its litigation against Microsoft Corp and Microsoft Korea for damages over tying Instant Messenger to Windows XP. Advising SK Communications on various IP transactions. Represented Peach Telecommunication & Computer against Enhanced Chip Technology in a preliminary injunction to prevent infringement of patents involving NVIDIA Corp°¶s video chipset. Represented Kookmin Card against Korea First Bank in the first Korean case to provide standards to apply in trademark dilution cases.
Yoon & Yang		Assisted Abbott Laboratories in a matter before the KFDA involving Hanmi Pharmaceutical. Also representing Proctor & Gamble in a patent lawsuit against Kimberly-Clark. Advising Kookin Bank, Shinhan Bank and Hana Bank in a trade name dispute against Woori Bank.

In other developments, a new design provision has been added to the Korean Unfair Competition Prevention Act to automatically protect product designs that are less than three years old, without registration. Specialist IP law firm Cho & Partners reportedly carried out the first successful litigation based on this new design provision, in which the court’s damages award was based on harm to reputation rather than actual damages. The decision is expected to act as a deterrent to would-be infringers.

Other legislative developments over the past year include an amendment to the Korean Trademark Act, which now permits registration of collective marks with geographical indications, such as ‘Bordeaux’ or ‘Fifth Avenue’.

From February 2005, binding mediation for domain name disputes has also been reinstated under the new Internet Address Dispute Resolution Committee, with changes to the ‘bad faith’ grounds for mediation. These changes are expected to make disputes with cyber-squatters less costly and more effective.

Leading law firms in IP include Lee International IP and Law Group, which was set up in 1961 and has expanded into a full-service law firm with more than 70 lawyers. 

Kim & Chang has a specialist IP group that covers the full scope of IP rights. The firm won the 2004 Asialaw IP Award for South Korea. 

You Me Patent & Law Firm was ranked the number one IP law firm in South Korea in the 2004 Asialaw Leading Local Law Firms Poll of international law firms. The firm, which was set up in 1981, comprises more than 50 trademark and patent attorneys with four foreign legal consultants from the United States, Australia and China. 

Lee & Ko  has merged with respected IP firm First Law Patent Office. The merged firm’s name is currently First Law Lee & Ko Patent & Law Offices, although this will later become Lee & Ko Patent & Law Offices. Lee & Ko’s IP work is strong in the area of unfair competition (especially misappropriation of trade secrets by former employees). It represents a diverse range of clientele, including LG Chem and Prada in infringement claims. 

IP firm Hanyang International Patent and Law Firm has five partners and 20 fee-earners.

Kim & Cho’s IP clients include the Bayer Corporation, Bosch and Siemens. 

Muhann Patent & Law Firm was set up three years ago and has 11 patent attorney and has advised companies like  SK Teletec and Caltex.

Park, Kim & Partner has 21 patent attorneys and says that 60-70% of its work is for local clients, which includes LG Electronics and government research and defence agencies. 

Established in 1962, Central International Law Firm has an IP department and a general legal department. 

Kims and Lees, YP Lee Mock & Partners and Nam & Nam are also respected IP firms.

IT, Telecommunications and Media

IT, Telecommunications & Media
Local Firms	Notable Expertise	Notable Deals (since August 2004)
Lee & Ko		In early 2004, the US Justice Department issued subpoenas to major Korean telecom service providers to investigate possible price-fixing activities. Conducted negotiations on behalf of the telecom service providers with the US Justice Department, as a result of which the subpoenas were withdrawn.  Also represented a domestic telecom company on the implementation of a mobile number portability service.
Woo Yun Kang Jeong & Han		Advising Hanaro Telecom on general corporate matters.

While Asia has generally seen high growth in telecommunications, South Korea continues to stand out. According to an October 2004 survey, Korea’s mobile and broadband Internet access penetration rates reached 75% and 24% respectively, which are among the highest among Organization for Economic Co-operation and Development (OECD) member nations.

There continues to be a substantial liberalisation and deregulation in telecommunications in Korea but with the rapid changes and developments in the industry, new types of regulations are being required in addition to the liberalisation of existing regulations. Thus some restructuring could be ahead.

In October 2004, the Ministry of Communication and Information (MIC), announced its plan to grant three wireless broadband Internet licences. The MIC also announced the introduction of mobile virtual network operator in three years, if certain requirements are met, enabling the service providers to provide certain wireless telecommunications services without obtaining licences to use certain radio frequency bands. 

The Location Information Use and Protection Law came into effect in July 2005 to protect location privacy and promote the use of location information by introducing a new licensing system for location information business and location based services and establishing procedures for the collection, provision and use of location information.

In what was reportedly the first licence granted for Internet telephones on Korean aeroplanes, Hwang Mok Park recently obtained a licence for a Boeing subsidiary to install internet telephones on Korean Air and Asiana aeroplanes. The Boeing subsidiary entered into a joint arrangement with Hanaro Telecom, which was signed on August 31 2005.  Hanaro Telecom was advised by solo practitioner YH Kim. 

Lee & Ko is representing hardware operators (notably Samsung Electronics and LG Electronics) and software operators (notably KT Corp, SK Telecom, LG Telecom and British Telecom), as well as Internet portals like Yahoo and Google.

Shin & Kim and Kim & Chang are also very active in the telecommunications and broadcasting fields. Yoon & Yang has represented C&M and LG Telecom in their telecom transactions.

Labour & Employment

Labour & Employment
Local Firms	Notable Expertise	Notable Deals (since August 2004)
Lee & Ko	Renowned for its work in labour and employment.	Represented the Korea Racing Association in a mass layoff of its employees. Also represented Korean Air in response measures to an illegal strike staged by its pilots and other employees. Represented and advised Korea Deposit Insurance in its negotiations with the labour unions of six major banks and advised the Financial Industry Labour Union on the injection of public funds.
Woo Yun Kang Jeong & Han		Advised and served as defence counsel to Kookmin Bank on various labour and employment related issues, including restructuring. Advised various financial institutions and foreign-invested companies on labour and employment law issues, including termination and restructuring.
Yoon & Yang	Lee Soong-hee and Kim Jae-young are key partners in employment and labour.	Has worked with Paul Hastings Janofsky & Walker, Colley Godward and other law firms on labour issues in Korea as well as updating the Korea chapter of Commerce Clearing House Employment Asia.

The freedom that unions in South Korea enjoy today is still relatively new. In terms of union representation, there has been a shift towards industry-level bargaining. Management are now forced to negotiate with more sophisticated union negotiators. It is still very difficult to terminate an employee in Korea for non-business reasons, such as poor conduct. In the case of poor performance, unions usually prefer companies to take a progressive disciplinary process. 

While the number of strikes have decreased in South Korea, over the past year there was a strike by Asiana Airlines pilots, which is now in government mandatory arbitration as the airline sector is seen as part of the government structure. 

The proposed bill for the protection of non-regular workers was passed by the Cabinet Council and submitted to the National Assembly on November 8 2004, for resolution. The legislation has been halted by severe opposition from the unions, which believe that if this is put into law it will encourage the government to use more temporary workers. Under the new legislation, the 26 categories for dispatch workers would also be removed. The two-year limit for dispatch workers at one site would also be increased to three years. 

Kim & Chang’s human resources and industrial relations practice is the largest of its sort at a law firm in Korea with at least 30 attorneys, including former Ministry of Labour officials. The law firm acts as counsel to multinational corporations, as well as to Korea’s Ministry of Labour. The firm recently represented Korea Exchange Bank in implementing unilateral layoffs following the acquisition of its credit card business. Kim & Chang also worked with Lone Star and KEB on the unilateral layoff of KEB’s credit card business employees in 2004.

Other firms that have a strong labour focus include Bae Kim & Lee, Lee & Ko and Shin & Kim. Lee & Ko has represented the Korea Racing Association in a mass layoff of its employees and represented Korean Air in response to an illegal strike staged by its pilots and other employees. 

Seoul Law Group was set up in March 2005 and covers all general corporate and commercial areas, but is looking to market itself as a specialist labour and employment law firm. 

Hwang Mok Park advises on employee insurance and Woo Yun Kang Jeong & Han regularly advises on labour and employment law aspects of M&A, spin-offs, final dissolutions and restructuring. 

Yoon & Yang works with Paul Hastings Janofsky & Walker, Cooley Godward and other law firms on labour issues in Korea. 

M&A

M&A work alone kept entire law firms busy for years after 1998, and to the surprise of many this is still a strong area, along with joint ventures.

Newly amended legislation to guard against hostile takeovers was introduced in March 2005. To enable the management in Korean listed companies to better defend themselves against hostile takeovers, the government has amended the Securities Exchange Act. The amended law now requires an investor to disclose its purpose when acquiring a share of 5% or more in a Korean company and also requires an unlisted company belonging to a large group of companies to disclose important matters relating to its management. 

This is an attempt by the Korean government to tighten up a loophole in Korea’s reporting system. Prior to the Financial Supervisory Commission requesting that new investors specify the purpose of their share acquisitions, investors could swap from insisting that it was a portfolio investment to stating that it had bought shares to acquire management power and vice versa, to the detriment of the target company. If an investor now states under the revised act that the investment is to influence company management, a cooling-off period will be imposed.

In what was reportedly one of the most significant hostile takeover attempts in Korean history, Woo Yun Kang Jeong & Han successfully defended Hyundai Elevator, a holding company for Hyundai Group companies, against a hostile takeover attempt by Kumgang Korea Chemical. Since this case, the Korean securities regulations have been amended to impose broader disclosure requirements on shareholders with a 5% stake or more in a Korean company. Lee & Ko provided legal counsel to Kumgang Korea Chemical. 

M&A
International Firms	Notable Expertise	Notable Deals (since August 2004)
Allen & Overy		Provided foreign counsel to Standard Chartered Bank in its US$3.4 billion acquisition of Korea First Bank.
Cleary Gottlieb Steen & Hamilton		Advised Hyosung Corporation and Hyosung (America) in their acquisition of a steel cord manufacturing facility from Michelin North America. Advised Newbridge Asia and Affinity Equity Partners on their bid for Jinro.
White & Case		Advised Korea Deposit Insurance Corporation on the US$1.6 billion sale of a 51% stake in Korea First Bank to Standard Chartered Bank, in tandem with Newbridge’s sale of its stake in Korea First Bank. Representing SK Networks, SKC and SK Capital in their proposed sale of a controlling interest in SK Life Insurance. Acting for bidder SK Telecom in the auction for a controlling interest in Turk Telekom, the Turkish government-owned telephone fixed line company.

M&A
Local Firms	Notable Expertise	Notable Deals (since August 2004)
Bae, Kim & Lee		Provided local counsel to Korea Confectionery Holdings in the W545 billionn sale of Haitai Confectionery and Foods to a consortium led by Crown Confectionery. Also provided local counsel to Himart Holdings in its W500 billion acquisition of Himart Co and provided local advice to KorAm Bank in Citigroup’s acquisition of a 36.6% stake in KorAm Bank from US private equity group Carlyle Group.
Hanol Law Offices		Established a joint venture involving a large Korean firm and an American partner - both of which are major players in the shopping industry. Also established a joint venture between a Korean equipment manufacturer and a major distributor in Europe.
Horizon Law Group	Byoung-Ki Lee, Han-Seok Myung and Sun-Hee Park specialize in M&A work.	Represented Hite in its acquisition of a 99.8% equity share of Jinro for W3.4 trillion, the largest M&A deal in Korean history to date in terms of its monetary value.
Kim & Chang		Advised the INI Steel and Hyundai Steel consortium on the acquisition of Hanbo Iron & Steel. Advised Citibank on its acquisition of KorAm Bank in the largest M&A transaction in Korean history to date. Acted as local counsel for US private equity group Carlyle Group in an earlier transaction, in which Citigroup acquired a 36.6% stake in KorAm Bank from Carlyle Group. Provided local counsel to Newbridge Asia in Standard Chartered’s acquisition of Korea First Bank.
Lee & Ko		Represented Shanda Interactive Entertainment in acquiring the controlling share of Actoz Soft.Also represented the Macquarie consortium in acquiring a 50% share of El Paso in Korea Independent Energy Corp and represented LG Chemicals in its joint acquisition of Hyundai Petrochemical with Honam Petrochemical, followed by a spin-off of Hyundai Petrochemical and share swap between LG Chemicals and Honam Petrochemical. Acted for Citigroup in its acquisition of a 36.6% stake in KorAm Bank from US private equity group Carlyle Group.
Shin & Kim		Represented Dubai Ports International in its acquisition of shares in CSX World International, which indirectly owns shares of Pusan New Port. Also represented General Electric Capital in its purchase of 38% of the shares of Hyundai Capital Services from various Korean shareholders of Hyundai Capital Services. Acted for the Carlyle Group in Citigroup’s acquisition of a 36.6% in KorAm Bank from Carlyle Group.
Woo Yun Kang Jeong & Han		Represented Standard Chartered Bank in its US$3.4 billion acquisition of Korea First Bank.
Yoon & Yang		Advised on the US$500 million acquisition of Newcore Department Store by E-Land and advised Hanbo Iron & Steel in its acquisition by INI Steel and Hyundai Steel. Assisting with the establishment of a US$12 million joint venture by a large programme channel provider.

Private Equity & Venture Capital 

An October 2004 revision of the Presidential Enforcement Decree to the Indirect Investment Asset Management Business Act introduced a new type of investment vehicle, the private investment specialized company (PISC). The revisions became effective as of December 2004.

With government limits on investment in real estate, private equity funds (PEFs) provide a way for money to be invested in companies and enhance their value for making profit through management control or corporate governance improvement. PEFs are seen by many law firms involved in banking and finance as one of the key growth areas over the next few years.

Private Equity & Venture Capital
International Firms	Notable Expertise	Notable Deals (since August 2004)
Simpson Thacher & Bartlett		Represented the private investment arm of Goldman Sachs in its US$120 million equity investment in C&M in the form of convertible preferred stock and common stock of C&M.
Local Firms
Sewha Park & Goo		Researched and produced a report on promoting a revitalization of venture capital companies, together with Deloitte Hana/Anjin. Much of the contents of the report were adopted by the Ministry of Finance and Economics as national policy.
Yoon & Yang		Assisted the National Pension Corporation in the establishment of the largest private equity fund in Korea, the Shinhan-NPC Private Equity Fund I.

While the level of investment expected since the amendment has not materialised, more PEF investment is expected in the latter half of 2005. Some investors are taking a cautious approach, also because there have been legal uncertainties over the past few months since the amendment. It is expected that PEFs operated by major financial institutions will lead the market and set examples for future funds.

May 2005 data from the Financial Supervisory Commission (FSC) indicated that PEFs in South Korea had total assets of approximately W1.12 trillion. PEFs registered with the FSC included Wooribank, LG Investment Securities and Korea Development Bank. 

In the past three to four years, the venture capital market has suffered a downturn because of unsound management within the venture capital business. There have been problems regarding the use of government financial assistance in venture capital, including the misuse or misappropriation of that assistance. Some of the venture capital companies have gone bankrupt. 

The government consequently began the Venture Capital Restart Programme in 2005 to support some of those venture capital companies that have either become insolvent or are having financial problems. Park Jong-baek, senior partner at Sewha Park & Goo, is a member of a committee that has been involved in the review process for the programme. Much of the firm’s proposals in its Venture Company Restart Project report, which was produced together with Deloitte Hana/Anjin, were adopted by the Ministry of Finance and Economics as national policy.

Ahnse Law Offices advises on the establishment, registration and operation of a venture business.

Project Finance, Infrastructure & Energy

Privatization plans for large state-owned enterprises have gone at a slower pace than initially envisioned. This is partly due to strong opposition from labour unions to some of the privatizations and also delays in passing implementing legislation. But it is also due to a president who came in on a labour platform and is himself against privatization of such state assets.

Plans to privatize Korean Electric Power and the natural gas monopoly Korea Gas have been put on hold. The South Korean government decided in June 2004 to limit the privatization of the electric power sector to generation facilities retaining ownership over the transmission and distribution assets of Korean Electric Power.

Project Finance, Infrastructure & Energy
International Firms	Notable Expertise	Notable Deals (since August 2004)
Baker & McKenzie		Advised K-Power, a joint venture company between SK Corp of Korea and BP, on its US$2 billion 20-year LNG sale and purchase agreement from the Tangguh LNG project in Indonesia developed by BP and its partners.
Local Firms
Bae, Kim & Lee		Advised Incheon International Airport Railroad in the whole process of the W3.3 trillion project financing from around 20 financial institutions, including KDB, to fund its construction of a railway.
Horizon Law Group	Helen Pak is the firm’s practitioner in project finance.	Successfully represented New Songdo City Development on a dual currency US$1.5 billion project financing for the development and construction of residential, commercial, hospitality and other facilities in New Songdo City, near Inchoen City, in one of the largest syndicated bank financings in Korea to date. The project is sponsored by The Gale and POSCO Engineering & Construction.
Lee & Ko		Representing the lenders in a W600 billion loan to finance the new Incheon bridge project and advising on related shareholders’ agreements. Also advised the lenders in a limited recourse financing for the development of light rapid transit system in Yong In city, in the first rail private investment project in Korea; the sponsors are Daelim Industrial and Bombardier.
Sewha Park & Goo		Advising on the projects in which the Incheon Free Economic Zone Authority is involved, including the construction of Incheon Great Bridge, construction of the Convention Centre, construction of a new port and the establishment of foreign schools and hospitals.
Yoon & Yoo		Advising CJ Asset Management on a US$90 million project financing for the construction of apartments in Masan.

Kim & Chang and Shin & Kim are seen as the leading law firms in project finance, infrastructure and energy. 

Sewha Park & Goo is reportedly the sole advisor on the project financing for a solar powered plant which was funded by Kookmin Bank and is likely to act as a model for other financing deals for alternative energy. 

Sewha, Park & Goo is among the local law firms advising on the huge infrastructure project involving the 10.3km Incheon Bridge linking the international airport situated on Yongjong Island with Sondo New Town economic development zone located southwest of Seoul in Incheon Metropolitan City. The bridge is due to be completed in 2009. This is seen by some law firms as the last big infrastructure project before the government starts concentrating on smaller-scale infrastructure projects such as hospitals and prisons. 

Lee & Ko advised the lenders, led by Kookmin Bank, Kyobo Life Insurance and Korea Life Insurance, in limited recourse financing for the development of light rapid transit in the City of Yong In, which is the first rail private investment project in Korea. Kim & Chang acted for the sponsors, Daelim Industrial and Bombardier.

Other law firms actively involved in project finance, infrastructure and energy include Sechang Law Offices, Kim, Choi & Lim and Yoon & Yang.

Restructuring, Insolvency & Bankruptcy 

Developments over the past year have included consolidation of the three insolvency laws into the Act Concerning the Rehabilitation and Bankruptcy of Debtors or the Unified Insolvency Act, effective from April 2006. 

There are many debt transfer agreements underway in South Korea as bankrupt firms unload their assets. This phenomenon has been going on since the economic crisis of 1997 when the International Monetary Fund stepped in. 

Over the past year, the shares held by the Korea Asset Management Corporation (Kamco), the agency set up for the purpose of restructuring and buying non performing loans from companies, have significantly decreased. The restructuring of many Korean companies that were in financial distress is now at a later stage.

Restructuring Insolvency & Bankruptcy
International Firms	Notable Expertise	Notable Deals (since August 2004)
Dechert		Advised MagnaChip Semiconductor in Hynix Semiconductor’s business transfer of its system IC business to MagnaChip.
Local Firms
Bae, Kim & Lee		Advised Hynix  Semiconductor in all aspects of business restructuring in its business transfer of its System IC business to MagnaChip Semiconductor. Represented Korea Deposit Insurance Corp in its sale of all issued and outstanding shares of common stock of Korea Investment & Securities to Dongwon Financial Holding for W546.2 billion.
Kim & Chang	Kim & Chang’s Young Jay Ro, Han Woo Park and Frank Shyn worked on this deal.	Advised MagnaChip Semiconducto in Hynix Semiconductor’s business transfer of its system IC business to MagnaChip.  Coordinated with MagnaChip’s international counsel (Dechert) in all aspects of the transaction from due diligence to the closing.
Lee & Ko		Represented LG Cable in its successfully acquisition of Jinro Cable through its reorganization procedure, despite strong competition from Daehan Cable, which had purchased a large share of the reorganization claims.
Shin & Kim		Represented Fila Korea and its executives in a management-buyout transaction; the sellers were affiliates of Sports Brands International.
Woo Yun Kang Jeong & Han		Advised Jinro Corporation in the corporate reorganization proceedings and sales to the Hite consortium. Represented UTC Venture Investment in its W120 billion acquisition of Dongseo Industrial, which was in reorganization. Advised Telson Information Communication in obtaining a court decision to commence its corporate reorganization.

Woo Yun Kang Jeong & Hon advised Jinro Corporation in the largest M&A deal in Korean history in terms of its monetary value. Horizon Law Group successfully represented Hite, the largest producer of beer in Korea, in acquiring a 99.8% equity share of Jinro, the world’s largest producer of soju, a popular alcoholic beverage in Korea and other parts of Asia. The transaction, which was a part-equity-part-debt deal, involved an W3.4 trillion investment by the Hite consortium in Jinro, of which W2.4 trillion was used to buy the shares of Jinro and W1 trillion was used to purchase corporate bonds issued by Jinro. The massive deal was reviewed and cleared by the Korean Fair Trade Commission for anti-trust violations and the impact on competition in the market. Yoon & Yang assisted Hite on anti-trust clearance.

Yoon & Yang was also involved in  Hanbo Iron & Steel’s seven-year sale of its assets to a foreign investor. After a couple of sales fell through, the firm assisted in the successful sale to INI Steel and Hyundai Steel on October 1 2004. All the employees of Hanbo were transferred to INI. Kim & Chang represented the INI/Hysco consortium.

Securitization & Structured Finance

Under the current asset securitization law, the originator which is qualified to use the securitization system prescribed under the securitization law is limited. Those allowed include financial institutions or private companies that have good credit grading. For the securitization market in South Korea to expand, the scope of the qualified originator has to increase. While there is the possibility of expanding the securitization market, it is unlikely to achieve the market levels of the previous three to five years. 

Securitization & Structured Finance
International Firms	Notable Expertise	Notable Deals (since August 2004)
Baker & McKenzie		Represented Samsung Card in its US$300 million asset back securitization backed by credit card receivables and arranged by ING Bank.
Freshfields Bruckhaus Deringer		Represented BNP Paribas on the restructuring of the securitisation of credit card receivables originated by Shinhan Card and arranged by BNP Paribas. Advised HSBC on the restructuring of the US$400 million securitisation of credit card receivables by Challenger III Asset Securitization Specialty. Also advised ING Bank and Merrill Lynch in arranging the US$300 million securitisation of credit card receivables originated from Samsung Card in Korea.
Rajah & Tann		Advised on the US$150 million securitization of US$600 million underlying assets payable by telecom companies to Dreamline through a bridge bank, Korea Development Capital, and arranged by KDB.
Local Firms
Kim & Chang		Provided Korean counsel to Korean arranger Daishin Securities on the structuring, underwriting and sale of collateralized bond obligations (CBOs) issued by a Korean SPC and backed by a portfolio of bonds issued by small and medium sized domestic enterprises. Also advised on the issuance and international offering by a Singapore SPC of securities backed by the Korean CBOs.
Lee & Ko		Represented Korea’s largest air carrier, Korea Air, which set a new benchmark in the future flow receivables asset class with a W20 billion securitization transaction backed by cargo receivables on its Korea-Japan routes.
Sewha Park & Goo	Yong Gun Bae is the firm’s best securitization lawyer.	Advised on the US$150 million securitization of US$600 million underlying assets payable by telecom companies to Dreamline through a bridge bank, Korea Development Capital, and arranged by KDB.
Shin & Kim		Represented LG Card in its first cross-border securitization since its financial crisis in 2003. Represented the arrangers in Korea’s first Euro-denominated cross-border residential mortgage-backed securitization, by Korea First Bank; also  represented the arrangers in the second such transaction for the same bank. Advised Citigroup in Korean Air’s first yen-denominated cargo receivables securitization.
Yoon & Yoo	Jin Sook Choi is the firm’s top finance and securities lawyer.	Advising Daewoo Securities on its issuance of asset-backed securities valued at US$50 million.

Over the past year, securitization transactions carried out in South Korea have included the issuance by Korea First Mortgage No.3 of US$731.1 million guaranteed secured floating rate notes due in 2036. The notes were originated by Korea First Bank on a pool of residential mortgage loans in Korea. The December 6 2004 issuance involved a 30-year cross-currency interest rate swap with Calyon, in which Ambac Assurance issued an unconditional 30-year swap guarantee in addition to its 30-year unconditional note guarantee. The transaction constitutes both the largest (in deal size) and the longest (in legal maturity) cross-border securitization out of Korea to date. It is also the third cross-border residential mortgage backed securitization deal completed by the same originator, Korea First Bank, in a single year, all of which Jones Day has advised on. 

Ambac, the guarantor, was advised by Jones Day as international counsel and Hwang Mok Park as domestic counsel. Joint arrangers Calyon, BNP Paribas and Royal Bank of Scotland were advised by Clifford Chance, as international counsel, and Shin & Kim, as domestic counsel.  JP Morgan, the trustee, was advised by Clifford Chance.  Korea First Bank received international counsel from Cleary Gottlieb Steen & Hamilton and domestic counsel from Kim & Chang. 

In the past year, Korean Air Lines (KAL) also pioneered a securitization of future Japanese yen cargo receivables. KAL Japan ABS 2 Ireland, a special-purpose vehicle incorporated in Ireland, issued ¥20 billion (approximately US$188.8 million) secured floating rate notes due in 2008. KAL also enjoyed a credit facility supporting payments on the notes from the Korea Development Bank. The notes were listed on the Irish Stock Exchange on March 24 2005.

Joint arrangers Nikko Citigroup and the Korea Development Bank were advised on English and Japanese law by Paul, Hastings, Janofsky & Walker. The law firm also advised the trustee and transaction administrator JP Morgan Chase Bank on English law. The deal is the second cross-border future flow securitization by Korean Air. In September 2003, Paul, Hastings, Janofsky & Walker acted as transaction counsel on the airline’s securitization of future Japanese yen passenger ticket receivables.

Bae, Kim & Lee says that one of the most active areas for its capital markets and corporate finance practice group relates to domestic/overseas asset-backed securitization transactions, notably in relation to various non-performing assets of Korean financial institutions.

Kim & Chang is also very active in securitization work. 

Shipping, Maritime & Aviation

Shipping, Maritime & Aviation
International Firms	Notable Expertise	Notable Deals (since August 2004)
Cleary Gottlieb Steen & Hamilton		Advised selling shareholders STX Pan Ocean, STX Shipbuilding, POS Ship Management and STX Engine in a US$318 million Rule 144A/Regulation S offering of 600 million shares of their common stock through a placement to institutional and other investors and a public offering in Singapore.
DLA Piper Rudnick Gray Cary		Represented Woori Bank in a dispute with Britannia Steam Ship Insurance Association at the London Maritime Arbitration Association.
Local Firms
Choi & Kim	Noted as one of the top specialist shipping law firms in South Korea.	Assisted Greek buyers of new buildings on the re-negotiation of shipbuilding contracts.  Represented carriers or terminal operators in connection with damages caused by typhoon ‘Maemi’,  the severest typhoon on record to date in Korea.
Lee & Ko		Exclusive counsel to Hanjin Shipping, which has at least a 50% market share of Korea’s shipping industry. Represented the owners and P&I insurers of the ‘Pos Bravery’ ship, which collided with the ‘Morning Express’ at the entry of Gwang Yang Port, in criminal proceedings against the crew, proceedings before the Marine Accident Adjudication Tribunal and settlement negotiations with the ‘Morning Express’ owners. Successfully  represented Korean Airlines in proceedings before the Fair Trade Commission over the airline’s frequent flyer programme.
Yoon & Yang	Lee Duk-min is the firm’s top partner for shipping issues.	Represented Woori Bank in a dispute with Britannia Steam Ship Insurance Association at the London Maritime Arbitration Association. Also assisted the bank in arresting vessels in Hong Kong, Korea and Singapore.

A revision of the maritime chapter of the Korean Commercial Code is currently being discussed, as are amendments to the Marine Pollution Prevention Act, which would involve more administrative sanctions for polluters.

An amendment to the Aviation Act is pending and is currently before the National Assembly. The draft, which took a year to draw up, relates to current air alliances. Current pricing discussions between Korean Air and Asiana Airlines and the other international airlines within alliances are facing difficulties because of some concerns by foreign participants over the possibility of anti-trust exceptions for airlines, similar to that available in the US. 

Kim & Co, originally an offshoot of Lee & Ko, represents European banks on ship financing in South Korea.

Shipping firm Choi & Kim is seen as a major player in this field, representing most of the major protection and indemnity (P&I) clubs in Europe and Korean shipping companies.

Kim Shin & Yu says it has been active in maritime cases this year. 

Lee & Ko represents major foreign insurance firms and P&I clubs and exclusively represents Hanjin Shipping, it says. In the past year, the firm has represented P&I clubs in two collision cases.

Pusan International Law Offices, which is based in Pusan, benefits from being outside the capital city. A general law firm, it also represents some of the largest maritime companies. The firm represents Hansung, one of the largest seafood manufacturing firms, as well as a couple of P&I clubs. 

Because there are fewer crashes due partly to more sophisticated navigation systems, much of the aviation work for law firms tends to be recovery insurance and cargo damage. Lee & Ko is representing the Air China insurers over a 2002 Air China crash in Korean territory. The case is now reaching the end of proceedings. The law firm also does continuous work for Korean Airlines.

Bae, Kim & Lee maintain a large shipping and aviation practice group. The practice group’s international clients comprise shipowners, banks, insurance companies, trading companies and P&I clubs.

Kim & Chang advises on both shipping and aviation work and has reportedly represented shipowners/P&I clubs and insurers in all the major maritime environmental incidents and casualties that have occurred in Korean waters.

Taxation

Taxation
Local Firms	Notable Expertise	Notable Deals (since August 2004)
Lee & Ko		Advised LG Chem on the tax ramifications of its acquisition of Hyundai Petrochemical shares jointly with Honam Petrochemical Corp, followed by a horizontal spin-off of Hyundai Petrochemical into the surviving company and two newly incorporated companies; the firm’s advice included transfer tax, corporate income tax and securities exchange tax.
Woo Yun Kang Jeong & Han	Highly regarded  for its tax work. Tax experts include Chang Rok Woo and Sai Ree Yun.	Represented Kyobo Life Insurance before the National Tax Tribunal over a US$250 million tax dispute involving re-evaluation of property held by the company. Advised Standard Chartered Bank on tax issues in its acquisition of Korea First Bank for US$3.4 billion, including Korean withholding tax implications of capital gains earned by the transferor, Newbridge.
Yoon & Yang	Partners Seung Soon Lim and Yoong-Neung Kee specialize in tax work.	Represented Jae Yong Lee, the first son of the chairman of Samsung Group, and five others in a suit over a US$60 million tax assessment for their undertaking of corporate bonds issued by Samsung Everland. Obtained a tax cut for Hyundai Shopping under the Seoul Acquisition Tax Reduction Bill.

A series of raids and tax investigations have been carried out by the National Tax Office against a number of private equity funds, with amounts involved reaching hundreds of millions of dollars. 

Another issue is that of anti-treaty shopping measures. Legislation being contemplated that would stipulate that even if a foreign fund comes from a tax treaty jurisdiction, if it is regarded as a tax avoidance area, the area can be blacklisted. The International Tax Co-ordination Law, which will become a part of the Corporate Tax Law, has just been announced for public consultation.

Tax specialist firm Woo Yu Kang Jeong & Han has been working with the Ministry of Finance and Economy to establish safe harbour guidelines for determining ‘beneficial ownership’ of investments made into Korea by investment funds established in tax favourable jurisdictions. The firm has almost doubled the size of its tax team to 25 tax professionals, with new additions including Jay Shin, an international tax lawyer who used to be a partner at PricewaterhouseCoopers. 

Shin & Kim has worked on the tax investigation of an investment management company and its shareholder, including issues relating to the transfer price on management fees. It has also worked on tax investigations of domestic and foreign-invested banks, including issues relating to yen-swap deposits, and on litigation against the National Tax Service before the Administrative Court on international share exchange transactions of a foreign-invested company.

Kim & Chang has the largest tax consulting division among all of South Korea’s accounting and law firms. It has about 60 tax specialists, including former officials of the National Tax Service and former officials of the Ministry of Finance and Economy in charge of tax matters. 

Lee & Ko’s tax team includes a former member of the Tax Adjudication Tribunal, a former special research assistant to Supreme Court Justices on tax matters, a chairman of the Tax Law Research Association, a legal advisor to the National Tax Service and a lecturer of tax law at Seoul National University law school. Recent tax cases for the firm include advising LG Chem on the tax ramifications of its acquisition of Hyundai Petrochemical shares jointly with Honam Petrochemical, followed by a horizontal spin-off of Hyundai Petrochemical into the surviving company and two newly incorporated companies. The firm’s advice resulted in tax savings of about W50 billion. 

LG Chem sought opinions from both Lee & Ko and Bae, Kim & Lee because it is a very significant tax issue. The two opinions were quite different and LG Chem adopted the Lee & Ko opinion. As the case developed, other tax issues arose, and this time LG Chem sought opinions from Lee & Ko and Kim & Chang. Again Lee & Ko’s opinion was adopted. 

The tax practice group of Kim, Choi & Lim, which was set up in 1991, is headed by Lim Hee-Taek, who specialized in tax law even before passing the Korean bar in 1984. He practised with both Kim & Chang and Shin and Kim before becoming a founding member of Kim, Choi & Lim. 

By Annemarie Evans

DEMOCRATIC PEOPLE’S REPUBLIC OF KOREA (DPRK)

The legal and economic situation in North Korea is tied inextricably to the country’s political environment. Periodic six-party talks and direct communication efforts behind the scenes between North Korea and the United States could offset an international crisis. Law firms in South Korea, while aware and concerned by the situation, largely see the current situation as more positive than it has been in recent years.

Talk of a nuclear threat can easily scare away foreign direct investment. But foreign investment is on the increase, which could perhaps be an indicator that things are more settled – at least for now. Foreign investors consist of two groups: either those which have a vested interest in a united Korea at some distant point in the future (largely investors from South Korea), or those eying a country with large mineral reserves (the north has the second largest magnesium deposits in the world) and cheap labour at half the cost of that in China.

As China’s burgeoning economy produces a richer population, those investing in China have to increasingly look to the west of the country for cheap labour. North Korea provides a cheap labour option, even if an unsophisticated legal system means that there is still a certain element of risk involved. 

Foreign investors remain dependent on North Korea’s willingness to enter into contractually binding agreements. But the North’s increasing interest in signing up for international trade agreements does indicate a positive desire to attract foreign investors and take their business seriously.

Although it is difficult to assess economic statistics for North Korea, its trade has risen by 20% a year and stood at about US$1.2 billion a year as of 2004. Both the economic zone near the Russian border and the Kaesong economic zone near the demilitarized zone have encouraged foreign interest, including South Korean investors other than Hyundai, which initially set up the zone. 

The Kaesong zone was set up in 2003 when 15 South Korean companies began constructing manufacturing facilities. Government plans for the zone envisage participation by 250 South Korean companies by the start of 2006. 

Two-way trade between North and South Korea, which was legalized in 1988, rose to US$697 million by 2004, according to the US State Department. This amount included a substantial quantity of non-tradable goods provided to the north as aid (food and fertilizers among other goods), as part of inter-Korean cooperative projects. About half of the total trade consisted of commercial transactions and was trade based on processing-on-commission arrangements, the US State Department said. The Republic of Korea is North Korea’s second largest trading partner after China.

North Korea is still tied to a planned economy, which means its factories have to serve the government’s interests first. But Chinese firms are also interested in using North Korean factories in the times when they do not have production targets set by the government. European firms are also interested in North Korean labour.

Local Law Firms

British lawyer Michael Hay set up a joint venture with a North Korean business partner in August 2004, Hay, Kalb and Associates. The firm provides legal and accounting services and advice to foreign investors.

In January 2005, Italian law firm Birindelli Law Co established an office in Pyongyang in a joint venture with North Korean institution Korean Lawyers Committee, the authority overseeing the North Korean bar association. 

There is a basic approval process for joint ventures: a limited liability company is set up and a list of projects is given in which it is not allowed to be involved. 

Birindelli’s main work in Pyongyang consists of contract law, the establishment of companies and technology transfers. The office has two North Korean lawyers, and Sara Marchetta, the co-representative of the Pyongyang office, working in both Pyongyang and Beijing.

“The focus of the DPRK government is on light industry such as food processing, clothing, and shoes. A lot of the work is with the Chinese, with processing contracts. We have a lot of continental European companies that have an interest in the DPRK, especially companies that already are in Asia, especially China,” says Marchetta.

Birindelli has a large client base in Italy and has been in China since 1993. The Italian firm’s long association with China has given it plenty of experience in working with Chinese state-owned companies, which has put Birindelli in a good position to understand the type of firms available in North Korea.

By Annemarie Evans

개인회생제도 개관

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