Electronic signatures in the European Union
This work is a collaboration between Lorna Brazell of Osborne Clarke LLP and VASCO’s eSignLive. In the first part, Osborne Clarke provides an opinion on the legal validity of electronic signatures in the European Union. The second part has been prepared by eSignLive and outlines best practice recommendations for legal compliance when implementing electronic signatures.
On July 1, 2016, the 2014 Regulation on electronic identification and trust services for electronic transactions in the internal market (“eIDAS”), which replaces the 1999 Directive on electronic signatures (“the Directive” ), will enter into force throughout the European Union (“EU”). Although the Directive had not been the subject of any controversy in its 16-year history, neither had it been a success. Its objective, which allowed the widespread use of electronic signatures to carry out cross-border activities within the EU, was not achieved.
There are three main reasons for this:
- Most EU member states’ legislation does not specify any form of signature for commercial contracts other than guarantees or contracts for the award of real estate.
- Many people mistakenly believe that the Directive mandates the use of advanced electronic signatures supported by a qualified certificate, i.e. qualified electronic signatures, for an electronic signature to be legally effective. In fact, the Directive says the opposite: courts can accept any form of electronic signature that has legal effect. The distinction is that in the case of a qualified electronic signature, the court has no choice but to accept it. However, the cost and administrative burden of implementing the technology required for qualified electronic signatures has outweighed the potential benefits because of its difficulty of use.
- The divergence between Member States as to the regulatory regime with which signature or certification providers must comply. As a result, signatures produced with certification services approved in one member state run the risk of not being recognized as compliant in another.
Given that the mechanisms of the Directive have been so little used, it is not surprising that there is no European case law to provide guidance on how it should be interpreted.
The shortcomings of the Directive have not slowed down the development of cross-border trade in the EU. In 2015, the Court of Justice of the European Union (“CJEU”) ruled that the terms of a ” click-wrap ” B2B agreement can be legally binding even if the user has not read the terms of the agreement. In that case El Madjoub, a car dealer, attempted to enforce an online contract for the purchase of a used car, through a complaint in a local German court, but lost because he had clicked to indicate his acceptance of terms he had not read. Those terms included submission to the jurisdiction of the Belgian courts. The CJEU held that he was bound by the terms even though he had not read them, because he had had the opportunity to read them and click on his agreement. Consequently, the simplest form of electronic signature imaginable – using a cursor to click a button – can have legal effect and most B2B or B2C transactions can be completed without signatures equivalent to a handwritten signature, provided there is satisfactory evidence, one way or the other, to prove that each party had accepted its commitment.
However, the European Commission concluded that the lack of harmonization between Member States continues to represent a potential obstacle to the internal market. Therefore, by introducing the eIDAS Regulation and leaving the Member States no choice in its implementation or interpretation, they hope to ensure that electronically signed documents will now be accepted in each of the 28 EU Member States, regardless of national legal or regulatory approaches.