Electronic signatures: are they valid and enforceable?
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Parties involved in international trade are eager to use technology to conclude and execute contracts more efficiently, hoping to save resources and accelerate trade flows. Electronic signatures are a key means of doing this (blockchain being the other major opportunity).
The term ‘electronic signature’ encompasses all of the following:-
- Typing a name: Typing one’s name, initials or another identifier at the bottom of an electronic document.
- Scanned manuscript signature: Pasting a scanned copy of a manuscript signature into an electronic document.
- Digital signatures: Using public key cryptography (also known as asymmetric cryptography) to produce a signature. The signature maker encrypts a document with a private key which can be decrypted by a counterparty using a public key. Each key consists of a very large, computer-generated number.
- Stylus: Physically signing using a stylus or fingernail on a touchscreen.
- PINs and contactless: Using a PIN or contactless technology to authenticate a transaction.
- Clicking on ‘I accept’: Clicking on an ‘I accept’ or ‘Submit’ button on a website.
- Biometrics: Attaching information about a physical characteristic (e.g. fingerprint, iris, face) to an electronic document to verify the signatory’s identity.
The position on legal validity of electronic signatures is not straightforward as it depends on a combination of regulations, statute and case law, and it varies from country to country. The comparison table below summarises the position under the laws of Brazil, England and Wales, Hong Kong, People’s Republic of China, the Russian Federation, Turkey and the United States of America – all popular choices of governing law in international trade contracts. The guidance is based on input received from colleagues practising in those jurisdictions.
As can be seen from the comparison table, in jurisdictions with relaxed validity requirements (e.g. England and Wales, and the USA) the courts will take into account the alleged signatory’s intention (or not) to authenticate the subject contract. This being so, we recommend investing in electronic signing technologies which provide a high level of assurance as to identification of the signatory and his/her intention to authenticate the document. Such technologies generally involve encryption and third party certification.
Are electronic signatures legally valid? | Where a contract is governed by a foreign law and electronic signatures are valid under that foreign law, will local courts enforce an arbitration award determining a dispute arising under the contract? | Are there any limitations on the use of electronic signatures? | |
Brazil By: Godofredo Mendes Vianna, Livia Sancio, Tarik Bergallo, Jessica Antunes, Kincaid, Mendes, Vianna | Under Provisional Measure 2.200/2001, digital signatures which have an ‘ICP-Brasil’ Certificate only are treated as legally equivalent to a handwritten signature in Brazil. The validity of such electronic signatures was confirmed by the Superior Court of Justice of Brazil in Special Appeal case 1.495.920/DF. | Yes. The claimant would have to satisfy the Brazilian court that the electronic signature meets the validity requirements of the governing foreign law. Also, the arbitration would have to be ratified by the Brazil Superior Court of Justice in order to be enforced. | Generally, no. However specific laws regulating certain types of contract may limit the use of electronic signatures and/or require that a signature be witnessed. |
England and Wales By: Jeff Isaacs, Miranda Hearn and Georgina Benson, Hill Dickinson LLP (London) | Yes. The common law takes a pragmatic approach to the execution of contracts. Save where required by statute or agreement, contracts can be made without signature or other formality. They can even be made orally. In a number of cases the courts have found that where execution formalities are required by statute, electronic signatures will in certain circumstances satisfy the requirements:- In WS Tankship II BV -v- Kwangju Bank Ltd [2011] EWHC 3103 (Comm) the Commercial Court held that the appearance of the defendant bank’s name in the header of a SWIFT message constituted a signature within the meaning of Section 4 of the Statute of Frauds 1677. Critically, the bank had accepted that the guarantee set out in the SWIFT had been issued properly and therefore there was an intention to authenticate the guarantee by sending the SWIFT. In Golden Ocean Group -v- Salgaocar Mining Industries Pvt Ltd [2012] EWCA Civ 265 the Court of Appeal held that an exchange of e-mails satisfied the requirement under Section 4 of the Statute of Frauds 1677 for a contract of guarantee to be in writing. In Bassano -v- Toft [2014] EWHC 377 (QB) it was held that clicking on an ‘I Accept’ button was a signature for the purposes of the Consumer Credit Act 1974. The common law position is supplemented by legislation as follows:- Section 7 of the Electronic Communications Act 2000 provides for the admissibility of electronic signatures as evidence in legal proceedings in relation to any question regarding the authenticity or integrity of a document. The Electronic Identification, Authentication and Trust Services Regulation (EU) No. 910/2014 (‘eIDAS’) distinguishes electronic signatures generally from (i) ‘advanced electronic signatures’ and (ii) ‘qualified electronic signatures’, and provides that qualified electronic signatures shall have the equivalent legal effect of a handwritten signature (Article 25). Definitions: ‘Advanced electronic signatures’ are electronic signatures which meet the following requirements (Article 26): (a) Uniquely linked to the signatory. (b) Capable of identifying the signatory. (c) Created using electronic signature creation data which the signatory can use under his sole control. (d) Linked to the data signed in such a way that any subsequent change is ‘Qualified electronic signatures’ are advanced electronic signatures (see above) which meet the following additional requirements (Article 3(12)): Created by a qualified electronic signature creation device. Based on a qualified certificate for electronic signatures. eIDAS applies directly in all EU member states without the need for national implementation. eIDAS will remain part of English law after Brexit as it will be incorporated. | The UK is a contracting state to the New York Convention and will therefore recognise and enforce awards made in other contracting states unless one of the exceptions in Section 103(2) of the Arbitration Act 1996 applies. The exception in Section 103(2)(b) provides that an award shall not be recognised or enforced if the arbitration agreement was not valid. | The following documents are subject to statutory execution formalities and this means it may not be possible to execute them validly using an electronic signature:- Guarantees Power of attorney Deed Contract for sale of land Transfer of registered securities under the Stock Transfer Act 1963 Credit agreements regulated by the Consumer Credit Act 1974 |
Hong Kong By: Damien Laracy, PY Leung, Felix Cheung, Hailey Lam and Timmy Lam, Hill Dickinson Hong Kong | Yes, as long as the contract is governed by the laws of Hong Kong and the information contained in the electronic record is accessible so as to be usable for subsequent reference. ‘Electronic signature’ is defined under Section 2 of the Electronic Transactions Ordinance (Cap 553) (‘ETO’) as ‘any letters, characters, numbers or other symbols in digital form attached to or logically associated with an electronic record, and executed or adopted for the purpose of authenticating or approving the electronic record”. For an electronic signature to be valid, three requirements must be satisfied (Section 6(1) of the ETO): The person who gives the signature must use a method to attach the electronic signature or associate it with an electronic record to identify himself and indicate his authentication of the information in the electronic record. The method indicated in (1) must be reliable and appropriate for the purpose for which the information in the electronic record is communicated. The person to whom the signature is given must consent to the method used by the signature maker. Note that Section 6(1) does not apply to transactions involving government entities, for which additional requirements must be satisfied. | Hong Kong adopts a pro-arbitration approach, whereby a final arbitration award rendered in a foreign jurisdiction is enforceable without regard to the substantive dispute or rulings. Further, the validity of the underlying arbitration agreement is governed by the law of the seat of the arbitration. Hence, for example, if the seat of the arbitration is England, and the electronic signature relating to the underlying substantive agreement is valid under English law, then the arbitration award will be enforceable in Hong Kong (subject always to the usual New York Convention caveats). For the avoidance of doubt we should emphasise that in Hong Kong, an arbitration clause need not be accompanied by a signature in order to be binding. | Under Schedule 1 of the ETO certain types of document require handwritten signatures. These include: Wills and codicils Trusts Powers of attorney Documents for land transactions and floating charges Negotiable instruments Court orders/judgments Court warrants Oaths and affidavits Statutory declarations Additionally, Schedule 2 to the ETO sets out types of legal proceedings (including proceedings before the Court of Final Appeal, the Court of Appeal, Court of First Instance, the District Court and the Magistrates Court) where electronic signatures cannot apply. Further, Section 14 of the ETO states that if any other applicable piece of legislation specifies further requirements for a signature to be valid, then those requirements will supersede Section 6(1). |
United States of America By: Lauren B. Wilgus, Noe Hamra and Bill Bennett, Blank Rome | Yes. Under United States law, a contract for the sale of goods in excess of US$ 500 must be in writing and signed in order to be to enforceable under the Uniform Commercial Code’s (‘UCC’) statute of frauds. The United States Electronic Signatures in Global and National Commerce Act (‘ESIGN’), 15 U.S.C.A. § 7001, et seq., is a federal law that gives electronic signatures the same legal effect as traditional handwritten signatures under the statute of frauds in every state and US territory where federal law applies. An electronic signature under Section 7006(5) of ESIGN requires that ‘an electronic sound, symbol, or process, attached to or logically associated with a contract or other record’ be ‘executed or adopted by a person with the intent to sign the record.’ 15 U.S.C. § 7006(5). ESIGN, as a federal law, generally pre-empts state laws on electronic signatures that are inconsistent with it. However states are entitled to adopt the Uniform Electronic Transactions Act (‘UETA’) in place of the federal law. States can modify the federal requirements by specifying an alternative procedure if it is consistent with the federal law and does not require or favour a particular technology. UETA has been adopted by 47 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The three states which have not adopted the UETA (New York, Illinois and Washington) have all adopted similar laws making electronic signatures legally enforceable. Each state’s laws vary with respect to electronic signature laws. Some state laws validate any type of electronic signature, others require some form of security, and others only validate digital signatures (i.e. a type of electronic signature that uses encryption). These laws also vary with respect to the types of transactions that are covered. An individual must consult with each state’s specific UETA or equivalent electronic recording statute to determine exactly which transactions can be conducted electronically. The key consideration when determining the enforceability of an electronic signature is the parties’ intent to be bound. Courts in some jurisdictions have found that merely placing a name at the bottom of an email in a signature block may constitute a binding signature, while other courts have held an electronic signature in an e-mail message does not necessarily evidence intent to electronically sign a document attached to the e-mail. | US courts ‘shall confirm’ a New York Convention award unless a ground to refuse enforcement or recognition specified in the Convention applies. The Convention specifies that an arbitration agreement must be ‘signed by the parties or contained in an exchange of letters or telegrams.’ Courts have expanded the meaning of ‘telegrams’ to include more modern means of electronic communication. The FAA is even more permissive and only requires the agreement to be in writing. Thus, a U.S. court would have no difficulty enforcing an arbitration award made pursuant to an agreement that met these criteria, even without any signature at all. | ESIGN does not apply to contracts or records governed by laws on the creation and execution of wills, codicils, or testamentary trusts; laws on adoption, divorce, and family matters. The UCC (with a few exceptions including Article 2 which governs the sale of goods) does not apply to court papers; notices cancelling or terminating utility services; certain notices in credit agreements or residential rental agreements; cancellation or termination of health or life insurance or benefits; certain product recall notices; and certain documents for hazardous, toxic, or dangerous materials. The UETA similarly only applies in certain types of transactions and only when the parties have agreed to conduct the transaction electronically. The UETA excludes wills, codicils and testamentary trusts. |
People’s Republic of China By: | Yes. Under Article 14 of the Electronic Signature Law, a reliable electronic signature shall have equal legal force as a handwritten signature or seal if it meets the requirements set out in Article 13, which are as follows:- (1) The creation data associated with the electronic signature must belong exclusively to the signatory. (2) The creation data must be controlled only by the signatory. (3) Any alteration made to the electronic signature after it has been created must be detectable. (4) Any alteration made to the contents and form of a document after the signature has been created must be detectable. | Under Chinese conflict of laws, the parties are free to choose the governing law of the contract. Note, however, that the competency of the business entity and/or its authorised personnel in concluding the sales contract may arguably be determined by the law of the country where the business entity is registered rather than the agreed law of the contract. | Article 3 of the Electronic Signature Law prohibits the use of electronic signatures in the following contexts: Documents relating to personal relations such as marriage, adoption and succession. Documents relating to the transfer of real estate rights and interests. Documents relating to the termination of public utility services such as water supply, heat supply, gas supply and power supply. Situations where electronic signature is specifically prohibited by law. |
Russian Federation By: Elena Popova, | The following categories of electronic signature are recognised: Simple Enhanced encrypted and non-certified Enhanced encrypted and certified Electronic signatures falling into category (3) (‘enhanced encrypted and certified’) are deemed to have value equal to a handwritten signature unless a specific law applicable to the particular document requires execution in paper form. However, parties to a contract are free to agree that electronic signatures falling into categories (1) and (2) above shall be treated as valid and have equal status as a handwritten signature. Such agreement should stipulate the method by which the electronic signature and identity of the signatory may be verified, and should set out details of any confidentiality obligations regarding encryption keys. The following laws are relevant: Federal Law ‘On electronic signature’ 6 April 2011 No 63-FZ. Federal Law ‘On information, information technologies and on protection of information’ 27 July 2006 No 149-FZ. The Civil Code of the Russian Federation. Numerous by-laws. | Yes. The procedure for recognition and enforcement of arbitration awards is regulated by the New York Convention and the Arbitrazh Procedural Code of the Russian Federation. In accordance with these provisions, the Russian court is not entitled to reconsider the award on the merits. If the electronic signature is valid under the governing foreign law, the use of an electronic signature shall not constitute a basis on which to refuse enforcement. | Russian law may limit the use of electronic signatures in certain contexts. |
Turkey By: Feyzi Erçin and Aslihan Asman, Ercin Bilgin Bektasoglu (EBB Law Firm) | Under Article 5 of the Electronic Signature Law and Article 15 of the Turkish Code of Obligations (‘TCO’), generally a secure electronic signature will bear the same legal consequences of a handwritten signature. A secure electronic signature is defined by Article 4 of the E-Signature Law as an electronic signature which meets the following requirements:- Is specifically designated to the signatory. Is created with a secure electronic signature tool (defined in Article 6), which is at the disposal of only the signatory. Has a qualified electronic certificate (defined in Article 9) which verifies the identity of the signatory. Is capable of indicating whether any alterations have been made to the document after the creation of the electronic signature | Yes. Note, however, that under Article 504 of the TCO a company representative must have special authorisation in order to conclude an arbitration agreement validly. This often creates an obstacle to enforcement in Turkey. | Under Art. 5/2 of the E-Signature Law the following contracts may not be signed electronically: Guarantee letters (save for bank guarantees) and sureties. Contracts for the sale of real estate. Contracts for the sale of motor vehicles. Any contracts required by law to be on an official form or concluded pursuant to a formal procedure. |
