There have been significant changes to South Korea’s political landscape in the wake of the Park Geun-hye presidential scandal. The new administration under former labour and human rights attorney Moon Jae-In brought with it high expectations from the left and thorough scrutiny from the right. The government has an aggressive agenda with initiatives to make sure people have jobs, increase the minimum base salary, and put a strong cap on maximum working hours. Furthermore, Moon – nicknamed the ‘chaebol fighter’ – has promoted reform of Korea’s powerful but notoriously opaque business conglomerates, while appointing Kim Sang-jo as the Korea Fair Trade Commission’s (KFTC) chairman – nicknamed the ‘chaebol sniper’ – to take aim at the family-run conglomerates including household names such as Samsung and Hyundai.

Yet despite the political shake-up the market has remained stable and the trends remain similar to recent years – at least for now. South Korea's central bank kept interest rates low so there has been a lot of refinancing. Korean lenders remained more active than their international counterparts looking to finance acquisitions facilitated by private equity funds, but there has been a widening pool of lenders in the market. Traditional banks have been a bit more conservative while securities firms have become more active in offering a range of products at favourable interest rates. Another trend sees Chinese banks becoming prominent in the market replacing Western banks, especially in aviation finance – a growth area in Korea as more low-cost carriers enter the market and quite a few airlines need to replace their fleet. Also export credit agencies (ECAs) continue to actively expand overseas alongside Korean developers, particularly in Southeast Asia.

There has been a lot of liquidity in the capital markets with a number of block trades being carried out despite the decreasing numbers of IPOs and flutters owing to the slight interest rate hike and the US-China trade war. There is a longer term trend of foreign companies from countries such as the US, China and Vietnam listing on the Korea Exchange, and the listing of companies with a Korean parent on foreign exchanges, such as Lotte Chemical Titan’s IPO in Malaysia.

In restructuring and insolvency, much coverage has been given to the stress faced by the shipping, tourism and construction industries in the past few years. The government is quite keen to revive the shipping and associated shipbuilding industry which is still in distress, but the work has died down a bit after the headline grabbing bankruptcy of Hanjin Shipping last year.

Moreover, as an alternative to court proceedings, private workout arrangements are more of a trend; however, there has been some hesitation in applying. The Corporate Restructuring Promotion Act to facilitate out-of-court workouts expired in June 2018, and the Korean National Assembly will be working to reenact this law as it will be needed by the many distressed small to mid-sized companies.

Finally, outbound M&A has continued healthily with deals in the healthcare, automotive and power industries in Southeast Asia, Australia and Europe.

Over recent years the Korean legal market underwent a protracted period of liberalisation following bilateral agreements with the EU and US (a revised version of the United States-Korea Free Trade Agreement (KORUS) was signed in late September 2018) that established a regulatory framework divided into three phases. Phase one allowed international firms to establish branch offices in Seoul practising foreign law; phase two allowed Seoul offices of foreign firms to enter fee-sharing relationships with Korean firms to facilitate cross-border work; and phase three promised to allow foreign and Korean lawyers to work together in some sort of partnership arrangement.

As international firms entered and positioned themselves in the market, phase three remained elusive as imminent liberalisation also meant intense competition for local legal service providers. The ensuing Ministry of Justice amended Foreign Legal Consultant Act (FLCA), designed to regulate the opening of the legal market, showed strong protectionist tendencies. Foreign law firms were prohibited from owning a stake greater than 49% in a joint venture, and Korean firms had to be in existence for three years before they could form joint ventures with foreign firms.

In light of these developments, it comes as no surprise that not even a single foreign law firm has sought to establish a joint venture with a domestic firm. The lack of control of minority partners in any joint venture would force foreign law firms to take on more risks than they are willing to bear, and the time restriction protects major Korean law firms by making it harder for teams of talented Korean lawyers to defect and create joint-ventures with international firms.

There are now 28 international firms with offices in Korea, but the branches mainly advise Korean companies on foreign laws in relation to outbound investments. There is a general feeling in the market that the waves of market entrants were not driven by a real sense of opportunity, but were rather a defensive manoeuvre geared to protect market share. Furthermore, Korean law firms are of such a scale that makes them difficult to digest and so there is little incentive for Korean firms to form a joint venture, while smaller firms are not so international in their outlook, meaning they are not necessarily a good fit for international firms.