In civil and common law countries alike, the
enforceability of many types of contracts is subject to certain formalities. The most common formality is the requirement of
writing and signature. Several reasons for formal requirements
have been advanced, including preserving evidence, putting parties on notice,
signaling the transition from negotiation to contract, and providing
information. Conversely, several disadvantages to contract
formalities also have been identified.
These disadvantages include: inhibiting freedom of contract,
slowing the “free flow of commerce,” and allowing a party to defeat justified
expectations. Of these three, the impediment to the “free flow
of commerce” presents the greatest potential obstacle to e–commerce.
Unless electronic documents are treated as “writings” which can be “signed,”
paper records will have to supplement many electronic transactions, resulting
in e–commerce that is “more expensive, less competitive, and less efficient.”
On June 18, 1999, the European Council reached a common position
on the Signature Directive. The primary aim of the Signature
Directive is to create a “harmonized and appropriate legal framework for the
use of electronic signatures within the Community and to establish a set of
criteria which form the basis for legal recognition of electronic signatures”. The Signature Directive defines an “electronic
signature” as “data in electronic form which are attached to or logically
associated with other electronic data and which serve as a method of
authentication.” The principal effect of
the E-Signatures Directive is to make electronic signatures legally valid in
relation to data in electronic form in the same manner as a handwritten
signature is valid in relation to paper-based data. Member states are obliged to
ensure that an electronic signature is not denied legal effectiveness and
admissibility as evidence in legal proceedings solely on the grounds that it is
in electronic form.
The E–Signature Directive recognizes the validity of two
types of signatures: an electronic signature and an advanced electronic
signature. The former should not be denied legal effectiveness and
admissibility as evidence in legal proceedings solely on the grounds that it is
in electronic form.
The Electronic Communications Act 2000, s 7 is an attempt
to put the position beyond doubt. It states that electronic signatures are
admissible in legal proceedings as evidence of the authenticity or integrity of
a communication. Section 7 does not prescribe any particular method of
signature so various ways of using electronic signatures are possible and each
signature will be admissible in legal proceedings. Interestingly, although the
Act deals with the admissibility of an electronic signature in court, it does
not actually address the legal status of electronic signatures [2,150p.]. The advanced electronic signature
satisfies the legal requirements of a signature in relation to data in
electronic form in the same manner as a hand–written signature satisfies those
requirements in relation to paper–based data and is admissible as evidence in
legal proceedings. The advanced signature qualifies only when it is based on a
qualified certificate, which is defined in Annex I and Annex II of the
Directive. The qualified certificate must also be based on a secure signature
creation device, which should meet the requirements of Annex III. In order for
an advanced electronic signature to meet the legal requirements, it has to
satisfy the criteria of Annexes I, II and III.
Article 4(2) of
the Directive[1] urges the Member States to ensure that electronic signature
products complying with the Directive are permitted to circulate freely in the
internal market. Recital 5 specifies, ‘the interoperability of electronic
signature products must be met in order to ensure free movement within the
internal market and to build trust in electronic signatures, without prejudice
to the regulation regarding dual – use goods.
Article 3(5) provides that the Commission may, in
accordance with the procedure laid down in Article 9, establish and publish
reference numbers of generally recognized standards for electronic signature
products in the Official Journal of the European Communities. Member States
shall presume that there is compliance with the requirements laid down in Annex
ii, point (f), and Annex iii when an electronic signature product meets those
standards.
According to the Signature Directive,
an “advanced electronic signature” is an electronic signature if [4, 320]:
·
it is uniquely linked to the signatory;
·
it is capable of identifying the signatory;
·
it is created using means that the signatory can
maintain under his sole control; and
·
it is linked to the data to which it relates in
such a manner that any subsequent alteration of the data is detectable.
The Signature
Directive takes a two–tiered approach in defining the legal effects of an
electronic signature. The first tier requires Member States to
“ensure that an electronic signature is not denied legal effectiveness and
admissibility as evidence in legal proceedings” solely because it is a) not in
electronic form, b) not based on a qualified certificate or not based on a
qualified certificate issued by an accredited certification–service–provider,
or c) not created by a secure signature–creation device. A
“certificate” is an “electronic attestation which links signature–verification
data to a person and confirms the identity of that person.” A
“qualified certificate” is a certificate that meets specific security standards
and is issued by a qualified “certification–service–provider,” more commonly
known as a CA. The Signature Directive lays down requirements
for qualified certificates and CAS in Annexes I and II, respectively. Similarly, requirements for a “secure–signature–creation device”
are laid down in Annex III. The first level of legislation
accepts most electronic signatures on a technologically–neutral basis.
The second tier of
legal validation entitles qualified technologies to legal equivalency with
handwritten signatures. The Signature Directive requires
Member States to ensure that advanced electronic signatures
which are based on a qualified certificate and which are created by a
secure–signature–creation device
·
it satisfies the legal requirements of a
signature in relation to data in electronic form in the same manner as a
handwritten signature satisfies those requirements in relation to paper–based
data, and
·
admissible as evidence in legal proceedings.
The EU Electronic Signatures Directive (Directive 1999/93/EC)
marks the EU's approach to the regulation of electronic signatures. The stated
aim of this directive is to "create a harmonised and appropriate legal
framework for the use and legal recognition of electronic signatures within the
EU." The Directive requires that
member states enact legislation that affords legal recognition to
"electronic signatures that are based on a 'qualified certificate'"
so long as they were "created by a 'secure–signature–creation device
...'" While a contract that
fulfills Article 5 is per se valid, other contracts are not necessarily
invalid.
The EU Directive does not require a
specific type of technology, but allows for technological adaptation that
fulfills the secure–signature–creation requirement. Certification Service
Providers (CSPs) will provide the service of fulfilling this requirement. In
turn, "CSPs will be liable to anyone who relies upon an issued
certificate."
The Signature
Directive’s two–tiered structure strives to reach a middle ground between
technology–specific and enabling approaches. On the one hand,
the Signature Directive enables the use of all electronic signatures by
mandating their “legal effectiveness and admissibility as evidence in legal
proceedings.”On the other hand, it promotes digital signature
technology by creating a presumption that “advanced electronic signatures which
are based on a qualified certificate
satisfy the legal requirements of a signature in the same manner as a
handwritten signature” [5]. This presumption is limited
functionally to digital signatures because qualified certificates are unique to
PKI technology.
Under the Signature Directive,
authentication methods that qualify as “advanced electronic signatures,”
created by a “secure–signature–creation device” but not based on a qualified
certificate, appear to fall short of presumptive equality with handwritten
signatures. It follows that signatures created through
signature dynamics would not enjoy the same presumptive validity as digital
signatures because they provide direct proof of signer identity rather than
relying on “a complex system of trusted third parties Thus,
under the current Signature Directive, a business using an otherwise “secure”
signature method that is not a digital signature subject to a qualified
certificate risks creating an unenforceable or voidable contract.
This is not “technological neutrality” but rather technological “favoritism.”
As between the
technology–specific and technology–neutral approaches, it is
the latter that comports with the principles suggested by this maxim. Businesses that engage in sound commercial business practices
will, as they currently do, choose methods for signing their computer documents
that meet their commercial needs. Businesses should use
digital signatures because they solve practical problems created by open
network transactions, not because the law dictates their use.
“The technology implementation itself provides the necessary security and
certainty necessary for electronic commerce without the need for legislative
intervention.” Thus, laws favoring digital signatures are not
needed to create a “security infrastructure.”
In its present form, the Signature
Directive appears to favor digital signatures to the potential detriment of
other current and future technologies[3]. Encouraging the use of digital signatures is
superfluous to achieving the Signature Directive’s goals of Market
harmonization. Simply
validating currently held broad interpretations of what is a “writing” is
sufficient to remove fears that electronic contracts will be held invalid. For example, Ireland is considering this better reasoned
approach and recently unveiled an outline for electronic signature legislation. This outline borrows the Signature Directive’s first tier of
validation, but notably leaves out the second tier.
The future treatment of electronic signatures regulation is
likely to continue on the same track as current trends. That is, technology has
taken the lead over legislation further than legislation has restrained or
guided technology. The EU Electronic Signature Directive is an example of this
relationship. The Directive utilizes the technology available, while remaining
flexible to accept future technologies, to ensure that electronic contracts can
be given the same evidentiary standing as traditional contracts. Technologies
such as secure–signature–creation and the forethought to allow commercial CSPs
to turn electronic contract verification into an industry are signs of future
legislation. The type of adaptation that the EU Directive explicitly allow for
will provide room for future, more secure, and reliable technologies. While the
EU Directive allows for non–EU CSPs to offer their services within the EU,
there are no international agreements for global acceptance of such electronic
contract verification. A multilateral convention or international consortium
outlining standards for the global recognition of CSPs would support e–commerce
growth on a larger international scale.
List of
Literature:
1. Directive
1999/93/EC of the European Parliament and of the Council of 13 December 1999 on
a Community framework for electronic signatures, http://eur–lex.europa.eu
2. Mike Butler E– Convergence: A Guide to the Law of Digital Media,–
‘Bloomsburry Professional LTD’, Great Britain, 2001
3.
Stephen Errol Blythe, E–Commerce Law around the world, – ‘ Xibris
Corporation’ kindle edition, 2011
4.
Quinten Kroes. E– Business Law of the European Union, – ‘Wolters
Kluwer’, Great Britain, 2010
5.
Faye Fangfei Wang. Law of Electronic Commercial Transactions.
Contemporary issues in the EU, US and China, – ‘Taylor & Francis’, kindle
edition, 2010