International law firms are facing a South Korean market clouded by uncertainty. Seven years into the country's legal market liberalisation, global firms still lack clarity on what to do with their Seoul offices.

Caught up in Britain's agonising withdrawal from the European Union, the fate of U.K. firms' Seoul offices was suddenly thrown into question. So far, their ability to operate in Seoul hinges on a free-trade agreement between Korea and the EU, in which Britain has been a member since 1973. But all bets are off once Britain leaves.

Herbert Smith Freehills recently got itself out of the predicament by re-registering as an Australian firm. That option isn't for everyone. The Korean government said decisions on license registration are case-by-case, and has remained opaque on what it deems a "principal office." In theory, the law only allows foreign firms to register under a jurisdiction where the firm makes its "highest decisions."

Herbert Smith Freehills, the result of a 2012 merger between the U.K.'s Herbert Smith and Australian firm Freehills, can argue that significant decisions are made out of Sydney, but the rest of the group—Allen & Overy, Linklaters, Clifford Chance and Stephenson Harwood—are easily identified as U.K.-based law firms.

These firms will likely have to close their Seoul offices when Brexit takes effect. But as of this writing, even the date of Brexit is unclear; it could extend as far as 2021 depending on how members of the British Parliament vote and whether the EU 27 is on board with the U.K.'s decision.

Even without the Brexit chaos, Korea's experience with foreign law firms has been unpredictable. The government's 2016 decision to pull back from a full-market liberalization raised many eyebrows, especially among the global firms intending to practice Korean law. Foreign firms can still form joint ventures with Korean law firms, but by making the prerequisites so restrictive, the government practically rendered the so-called third phase of the liberalization an unworkable option.

The government's ambiguous attitude does not send a positive message to the market. Even for those without local law aspirations, the signal is that the liberalization is conditional and limited. The sense of disappointment and uncertainty has translated into market instability over the past six months or so.

Clifford Chance's Seoul managing partner and Korea practice head Kim Hyun-suk left the firm, as did White & Case office head and Korea practice leader James Lee. Milbank also recruited a new Korea practice leader after a predecessor retired. Simpson Thacher & Bartlett, the New York firm considered one of the strongest players in Korea, alongside Cleary Gottlieb Steen & Hamilton and Paul Hastings, has decided to close its Seoul office altogether.

Simpson Thacher will move most of its Seoul operations to Hong Kong, where many firms had based their Korea practice before foreign firms were allowed to set up shop in Seoul in 2012. Hong Kong held onto its position as a key spot for many firms' Korea practices even after Seoul opened up, while Seoul has remained on the fringes of Big Law's Asia presence. Most firms' Seoul offices, with the exception of Cleary, have fewer than a half-dozen lawyers who often spend time in other offices.

Seven years isn't a long time for firms to test the waters in Seoul, and interest hasn't yet waned. Lee, White & Case's former Korea partner, is helping Arnold & Porter Kaye Scholer open a new Seoul office. Shearman & Sterling also recently added a Seoul office. The U.K.'s Clyde & Co was preparing to open one before shelving the plan.

As long as the likes of Samsung and Hyundai continue their growth as multinationals, international firms are compelled to at least entertain the idea of having on-the-ground support to their clients in Seoul. If they don't, their competitors will.

Additional reporting by John Kang in Hong Kong.