As the historic economic partnership between the UAE and South Korea takes effect, lawyers in both countries are building capabilities across multiple practice areas to help clients navigate unfamiliar regulatory environments through specialised practice groups and strategic alliances.
Four Korean Air Force F-15 fighter jets escorted United Arab Emirates President Sheikh Mohammed bin Zayed Al Nahyan’s presidential jet as it entered South Korea’s air defence identification zone on May 28, to honour the first state visit by a UAE state leader to the country.
Sheikh Mohammed’s trip followed President Yoon Suk Yeo’s visit to the UAE in January last year, the first such visit by a South Korean leader since the two countries established diplomatic ties in 1980.
The two-day summit in Seoul - which included an air show by the air force's Black Eagles aerobatic team, and meetings with chiefs of South Korea's large business groups, including Samsung Electronics chairman Lee Jae-yong, Hyundai Motor Group chair Euisun Chung and SK Group chairman Chey Tae-won - culminated with the signing of the UAE-SK Comprehensive Economic Partnership Agreement (CEPA), a first for South Korea with a Gulf nation.
The CEPA is set to significantly boost the $21 billion bilateral trade market between the two countries, reducing trade barriers and tariffs, particularly in the energy, defence and automobile sectors. The deal will eventually scrap tariffs on more than 90 percent of the imports of both nations.
Lawyers from leading law firms in both countries say the deal is expected to create a substantial demand for legal services, particularly in corporate transactions, project finance, tax, intellectual property and compliance.
“The agreement is likely to create a more dynamic and competitive legal market in both the UAE and South Korea, favouring firms that can quickly adapt, offer genuine cross-border expertise, and provide innovative solutions tailored to the new trade regime.”
- Jiwon Ha, Al Tamimi & Company
INCREASED LEGAL COLLABORATION
Jiwon Ha, senior counsel and lead of UAE law firm Al Tamimi & Company's Korea group, says the agreement will change the legal landscape for cross-border work across both countries. Local firms will be under pressure to develop knowledge of the other country's legal systems and business practices to compete with international firms that have established presences and may initially have an advantage.
“The agreement is likely to create a more dynamic and competitive legal market in both the UAE and South Korea, favouring firms that can quickly adapt, offer genuine cross-border expertise, and provide innovative solutions tailored to the new trade regime. Clients are expected to seek one-stop-shop services for their cross-border needs, benefiting firms with comprehensive offerings and strong networks,” Ha says.
“We can expect an increase in strategic alliances between Emirati and South Korean law firms, with smaller local firms likely seeking partnerships to compete effectively against larger international players,” he adds.
Cross-border legal work between the two nations, which has been limited so far, is poised to rise sharply as UAE sovereign wealth funds look to invest over $3 billion in South Korean markets, and the reduction in tariffs brings Korean industry to the Gulf nation.
Bae, Kim & Lee is believed to be first Korean law firm to launch operations in the Middle East after setting up an office in the Dubai International Financial Centre in 2015.
Sangchul Kim, a partner in the South Korean Big Six firm’s disputes practice, agrees that navigating local regulatory and legal concerns may lead to an increased focus on building specialisation and cross-collaboration among law firms on both sides of the spectrum.
“To effectively serve their clients, law firms may seek to form strategic alliances or partnerships. Emirati and South Korean firms might collaborate to offer comprehensive legal services that leverage their respective strengths. International law firms, with their extensive global networks and resources, will also play a significant role by facilitating cross-border transactions and advising on complex regulatory matters. These collaborations can enhance service offerings and provide a competitive edge in attracting multinational clients,” Kim says.
He adds that as competition for high-value clients, such as multinational corporations and large investment funds, grows, law firms will need to demonstrate their ability to navigate the regulatory landscapes of both countries, provide strategic legal advice, and offer innovative solutions to complex legal issues. “Firms that can effectively market their expertise and track record in handling cross-border transactions will be better positioned to attract and retain these clients,” Kim says.
SECTORS IN FOCUS
This increased cross-collaboration will take place across a variety of sectors that are primed to grow following the implementation of the CEPA.
President Yoon's office said the UAE reaffirmed a 2023 pledge of $30 billion in investment for South Korean businesses in areas from nuclear power and defence to hydrogen and solar energy. The Abu Dhabi National Oil Company signed a letter of intent for Hanwha Ocean and Samsung Heavy Industries to build at least six LNG carriers valued at about $1.5 billion, it said.
The CEPA substantially removes South Korea's tariffs on crude oil imports from the UAE, stimulating increased energy trade between the nations.
New work for law firms will be generated from an increased focus on renewable energy projects, regulatory compliance for new energy ventures, and structuring joint ventures in the energy sector, Ha explains.
Legal professionals will be asked to advise on regulatory compliance, environmental impact assessments, and the structuring of contracts for large-scale energy projects, Kim adds.
Further, new environmental standards and incentives for green technologies will lead to opportunities in advising on compliance with environmental regulations, accessing incentives, and structuring sustainable ventures.
Another sector that is likely to spur cross-border trade will be technology, as the UAE will look at Korea’s market-leading innovations to continue its diversification from oil and gas. Consequently, law firms will bolster their specialised practice groups, focused on tech deals, intellectual property, financial technology, data privacy and cybersecurity.
Other sectors in focus will include infrastructure and construction, automobiles, healthcare and pharmaceuticals, and financial services.
While no defence deal has been unveiled yet, South Korea has signed a series of global defence equipment contracts as part of its plans to become the world's fourth-largest defence exporter by 2027. This is reflected in the CEPA, and defence exports from South Korea to the UAE will likely go up soon.
To attract more Korean capital in the UAE, the nation's foreign ownership restrictions will be eased, and sector-specific regulatory regimes will be created and constantly updated based on feedback. Additionally, antitrust notifications, environmental clearances, and data localisation laws will develop, giving rise to more compliance and corporate work for law firms.
“These changes will allow lawyers to develop new practice areas, offer comprehensive strategies for market entry, provide ongoing compliance advice, assist with regulatory filings and approvals, and conduct client training on new regulatory requirements,” Ha at Al Tamimi explains.
“Additionally, reductions or eliminations of tariffs and streamlined customs procedures will necessitate advice on tariff classification, rules of origin compliance, and optimising supply chains,” adds Ha.
CLIENT CONCERNS
Navigating complex foreign regulatory environments is a key concern for clients from both countries. Kim at BKL explains that for Korean clients, UAE regulations are considered less accessible compared to South Korean regulations.
“In South Korea, an official inquiry system is well-established, making it easier for businesses to seek clarification and access regulatory information. In contrast, dealing with government authorities in the UAE to obtain similar clarifications is considered to be more challenging,” Kim adds.
Ha says that in addition to regulatory compliance work, cultural and business practice differences, which require navigating cultural nuances in negotiations and understanding local business etiquette, will also require deployment of local expertise by law firms.
Increase in demand for local talent is also prompted by due diligence challenges, such as accessing reliable information on potential partners or acquisition targets and verifying asset ownership and financial statements, explains Ha.
Another key area of concern for clients are the tax implications in both countries, as any investment requires careful navigation of the distinct tax regimes in South Korea and the UAE.
Differences in corporate tax and value-added tax rates, niche differences in tax regulations, such as transfer pricing and double taxation agreements, will trigger an increased investment by law firms in tax practices in both countries.
“Changes in tax regulations will bring opportunities in structuring investments to optimise tax benefits, advising on transfer pricing, and ensuring compliance with new tax requirements,” says Ha.
Lastly, substantive and procedural dispute resolution laws in both countries are a top concern for businesses in the UAE and South Korea.
“Korean clients, in particular, are often concerned about the efficiency of the UAE’s court system and the enforcement of arbitration awards. The perception is that litigation in UAE courts can be protracted, predominantly involving local lawyers, and characterised by unfamiliar procedures, and enforcement of arbitration awards are often denied with grounds not common in other jurisdictions,” Kim explains.
“Ensuring that there are reliable mechanisms in place for resolving disputes amicably and efficiently is essential to maintaining business relationships and protecting investments,” he adds.
