Legal Services Trade Deficit Hits Record High for Second Consecutive Quarter

Second Quarter Expenditures Reach $599 Million
Deficit Widens to $363.2 Million

The legal services trade deficit for the second quarter of 2025 was recorded at $363.2 million. This figure surpasses the previous all-time high set in the first quarter. While domestic revenue from legal services remained stagnant at around $200 million, overseas expenditures approached $600 million, widening the deficit.

According to the Bank of Korea's Economic Statistics System (ECOS), legal services revenue for the second quarter of 2025 stood at $235.8 million, while expenditures reached $599 million. Revenue increased by 4.66% ($10.5 million) compared to the same period last year ($225.3 million). It also grew compared to the first quarter of this year ($214.4 million).

However, expenditures continue to outpace revenue. Legal services expenditures for the second quarter of this year increased by 17.18% ($87.8 million) compared to the same period last year ($511.2 million), marking the largest amount since related statistics began in 2006. Legal services expenditures surpassed $500 million for the first time in the fourth quarter of 2023, dropped to $461.7 million in the first quarter of 2024, but have remained above $500 million since the second quarter of 2024 ($511.2 million). The figure reached $579 million in the third quarter of 2024, $598 million in the fourth quarter, fell to $575.7 million in the first quarter of 2025, and then approached $600 million again in the second quarter.

As a result, the legal services trade deficit has widened. The deficit for the second quarter of 2025 increased by 27.03% ($77.3 million) compared to the same period last year ($285.9 million). Although the growth rate of the deficit slowed compared to the first quarter of 2025 (which saw a 63.81% increase year-on-year), the deficit itself reached a record high. The legal services trade deficit has remained above $300 million since the third quarter of 2024: $326.8 million in the third quarter of 2024, $318.9 million in the fourth quarter, $361.3 million in the first quarter of 2025, and $363.2 million in the second quarter of 2025.

"Due to Overseas Expansion of IT Companies and Increase in International Disputes"

The expansion of the legal services trade deficit is attributed to increased demand for overseas legal services as Korean companies, particularly in certain industries, expand their overseas operations. Additionally, the overall strengthening of in-house legal teams at domestic companies, which now engage more actively and directly with foreign law firms, has also contributed to this trend.

While compiling the legal services trade balance, the Bank of Korea confirmed that some large IT companies have increased their payments for overseas legal services. A Bank of Korea official stated, "Although it is difficult to verify the specifics of these legal services, it is presumed that there has been an increase in demand for overseas legal advice related to patents and technology."

Experts believe that increased regulatory consulting by industry and a rise in international disputes have further exacerbated the legal services trade deficit. An American attorney working at the Seoul office of a global law firm commented, "Overseas investments by domestic companies are generally on the rise. As Korean companies expand abroad, local disputes are increasing, and intellectual property (IP) patent lawsuits filed by global companies against Korean firms are also likely having an impact." He added, "The United States has seen significant changes in its tariff policies, and new fields such as artificial intelligence (AI) now require legal services. In Europe, demand for advisory services has grown due to changes in the defense industry, while in the United States, ESG policy changes have led to increased demand for legal counsel."

The managing partner of another global law firm's Seoul office also noted, "As Korean companies increase their overseas investments, international dispute work is also on the rise. Litigation related to COVID-19 is still ongoing, and appeals against overseas arbitration awards are becoming more frequent." He further predicted, "Demand for legal advice on industry regulation is likely to grow in fields such as AI, renewable energy, and space law."

There is also analysis that the trend of 'direct transactions' is becoming more pronounced as in-house legal teams at domestic companies grow in size and capability. Both the scale and frequency of direct dealings with overseas law firms are increasing. Ryu Yoonkyo (43, 2nd Bar Exam), Secretary-General of the Korea In-House Counsel Association, explained, "Recently, many in-house lawyers have studied abroad or possess excellent foreign language skills. While it is more efficient to collaborate with domestic law firms for complex or large-scale cases, in other situations, corporate legal teams are increasingly handling matters directly with overseas law firms." A lawyer at a major law firm specializing in international trade also noted, "In the past, many companies had no in-house lawyers at all, but recently, both the number and capability of legal teams and lawyers have increased significantly, leading to more direct transactions with overseas firms without going through domestic law firms."

Revenue earned by Korea from legal services increased in the second quarter of 2025 compared to the same period last year, continuing the upward trend from the first quarter. This suggests that domestic law firms are consistently providing more legal services to overseas companies and clients. However, there is a need to find new revenue models to break through the current situation. The head of a foreign legal consulting office commented, "Even in the UK, it is difficult to vitalize the legal market with domestic demand alone, so internationalization is being actively pursued. If Korea internationalizes its legal market like Singapore and Hong Kong, it will be possible to expand demand for legal advice regardless of the size of the law firm."

Choi Byungil, advisor at Bae, Kim & Lee LLC and an expert in international trade, stated, "With Korean companies' overseas direct investments at an all-time high, Korean law firms also need to expand their overseas business. As the large-scale investment funds discussed in tariff agreements are implemented, it will be important to watch how the legal services market evolves."

Seo Hayeon, Law Times Reporter

※This article is based on content supplied by Law Times.

This content was produced with the assistance of AI translation services.