Archive for the ‘Chiomenti’ Category

Working as a Lawyer in Pyongyang

Sunday, July 27th, 2008

Brendan Carr over at Korea Law Blog dug up some information on law firms operating in the DPRK.  All the information he posts is worth reading, but here are some highlights:

[T]he prospect of working as a foreign lawyer in Pyongyang has been on my list since I’ve been a lawyer.

Michael Hay, a foreign legal consultant in Seoul since 1990, actually did this—striking out from “Big Four” firm Bae, Kim, & Lee in 2001 [domain lapsed] to focus on being a full-time North Korea consultant. He established KoreaStrategic Inc. as a consultancy (its domain lapsed in June 2006, though), then with a splash announced the formation of Hay, Kalb & Associates as the first foreign/North Korean joint venture law firm in Pyongyang. The Hay, Kalb website, too, disappeared sometime in 2005, and I lost touch with Mike Hay around the same time. I remain curious to know about his adventure up North; I’m sure it’s been fascinating. However, he was always extremely tight-lipped about what he was doing there. Other than that he was focusing on North Korea “full-time, all the time” it was hard to get any specifics out of him.

There are two other law firms advertising their services and office presence in North Korea: Italy’s Birindelli e Associati (now Chiomenti after being acquired) and Singapore’s Kelvin Chia Partnership

But today I found that the International Financial Law Review’s IFLR Legalwire, to which I hadn’t previously subscribed, recently (May 2008) reported on Birindelli partner Sara Marchetta’s experiences in Pyongyang. It’s fascinating stuff, published in two parts—go read Part 1 and Part 2. The article gave the impression that Hay, Kalb was still trading, which is promising, but Marchetta says that Birindelli kept no expatriate lawyer there year-round, because there were only four or five clients a year needing legal services, mostly in resource-extraction and processing ventures.

From Marchetta’s interview, I thought the following observations were worth noting:

Obtaining copies of laws: 

The first issue is looking for legal resources  – the law- as it is extremely complicated to get them.  Even if you are a law firm and have people who are well-connected, its still a very long process to get a copy of a law.  Even if the law has already been enacted and should be public, you still need special permission.  If the law has not yet officially been translated into English, then you need to obtain special permission to get it and translate it.

The second thing is that the intended implementation of the law in a western sense does not exist.  Especially when you go out of Pyongyang and Kaesong [North Korea's special economic zone], everything is pretty much left up to political decision: whether you can stay here or there, what you do and cannot do…

Just to give you an example: in terms of a corporate tax, you go to a place, make an investment and you pay a corporate tax even if you don’t profit.  It’s sort of a tax for being there.  Corporate tax ends up being interpreted as a presence tax , which is paid independently of whether you make profits or not.  In a few cases, we did find this type of interpretation, which is obviously extremely bizarre.    So it is really a matter of general legal culture – which is totally lacking – and education of the administrative middle to low levels.

Does [this environment] hinder getting things done?  Yes and no. Yes in the sense that getting a deal done takes more time because you do not have all of the information available at the beginning.  No in the sense that once there is the intention of getting the deal done, there is a lot of facilitation from the bureaucratic and governmental point of view.  If they say yes, its basically yes and it will happen.

How big is your office in Pyongyang:

It is currently staffed with two people.  We have no expatriates.  It is a joint venture as we are there in cooperation with a DPRK government entity called the Korean Justice Committee [KJC].  It is equivalent to the Chinese Ministry of Justice.

Are your lawyers at the office North Koreans?

Yes, they are North Korean lawyers. One of them is a pure lawyer, the other one is more someone who is well-connected in the government and has also PR and English capabilities.  One side has the legal knowledge, and on the other side, fluent in English that they use to work with foreigners.

Does your JV status with the KJC give you an advantage over foreign firms?

As a matter of fact, from an operational point of view: yes.  From the client’s point of view, I don’t know.  I have no idea.  I don’t think this is something that is hindering the expansion of our client base in Pyongyang, but I am not sure if it enhancing it.

What types of clients do you serve?

We serve companies looking at setting up a presence in the DPRK.  These are large companies that deal with natural resources, like mining or consumer goods, and most of them have already a presence in China.

What are teh key sectors of Work?

Well we deal with mining projects.  This means that yo go there, you test the product and if it’s okay then you give the technology to be extracted in a proper way.  You do part of the processing of the mineral and export it.  This is one deal.  On the other side, before advising on an investment we advise our clients on precessing contracts.  Obviously this can be done not just for mining, but for shoes, clothes, and any other product that can be exported.  The deal structure is basically these two.

Looking forward, is there enough going on to fairly classify the DPRK as an “emerging market”?

Not in terms of a domestic market.  I don’t think that the domestic market is going to develop very much, but the DPRK is a good place for processing contracts.  I mean, you send raw materials and they send back the finished product.  There is also a strong market for natural resources and low-to-medium technology projects.  There, you can produce basic chemicals, basic pharmaceutical products and some consumer goods.  The Chinese are doing clothing here, doing shoes, and a lot of other things.

Do you predict enough work growth to expand?

Not for the time being for a number of reasons.  One, we do not see an increase in DPRK-related work.  We have two, three, four, maximum five clients a year and that’s basically it.  So this is the main reason.  Then you have always the political issue.  It’s always there.  The political wind is really swinging a lot and it changes by the season and is very much affected by the situation of the six-party talks.  So for the time being, we are looking at what is happening and we are doing what we can do, but we do not have plans to enlarge our presence in the DPRK for the time being.

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