Since their inception over a decade ago e-signatures have become a part of everyday life. They come in a variety of forms, including bank card PIN numbers, clicking the ‘I accept’ button when buying goods and services online or signing on an electronic mobile device. However, the advent of the digital age and the recent explosive growth in mobile technologies has greatly increased the potential for e-signatures to be used widely in business.
Traditional businesses have realised that e-signature technology can be adapted and used to streamline day-to-day transactions. The potential benefits are well documented; accelerated transaction cycle times, increased flexibility, reduced transaction costs and more reliable identity authentication, to name but a few.
So what is the legal status of an e-signature in the Middle East? Should we all be preparing to put down our pens and pick up our ipads?
The rise of the e-signature
The worldwide retail and leisure sector has unsurprisingly led the way in the use of e-signatures; keen to meet consumers’ expectations of carrying out instantaneous transactions. However, the benefits have not been lost on businesses operating in sectors which are traditionally more conservative.
Communication Intelligence Corporation, a US provider of e-signature solutions, acknowledged in November 2012 that a major US financial services company has now integrated e-signature capabilities with its annuity sales technology platform. In the financial services sector, where security and legal compliance is paramount, this development demonstrates that the e-signature technology available in the market is capable of meeting the highest bar; vital in a world where cybersecurity threats are on the increase.
Players in the wider technology market have also recognised the potential value in e-signature solutions, demonstrated most notably by Adobe’s acquisition of e-signature solution provider EchoSign in 2011 and Google’s venture capital investment in DocuSign in August 2012.
What is an e-signature?
E-signatures are incorporated in an electronic communication or electronic data and purport to establish the authenticity and/or integrity of that communication or data. Digital signatures are a particular class of e-signature that rely on a form of encryption (known as asymmetric cryptography) to authenticate messages. Encryption involves encoding the data being sent to ensure that only the intended recipient will be able to decode it.
An e-signature can be used in transactions with consumers or with other businesses and can be attached to any digital content, including contracts, correspondence, images and e-mails. All that is required is some purpose built software. There are a vast number of commercial providers of e-signature solutions, mainly based in the US. DocuSign claimed earlier this year that around 15 million people worldwide have executed documents in 188 countries using its solutions.
Law on e-signatures in the Middle East
While e-signatures are being widely used in the US and Europe, the adoption of e-signature technology in the Middle East has been less prevalent.
The development of laws governing electronic transactions is at different stages across the different jurisdictions in the Middle East. Before adopting e-signatures, it is imperative to understand the legal framework in your own jurisdiction.
The key issues in relation to the use of e-signatures are:
· does the law recognise them as valid?
· are there any key criteria that an e-signature must meet in order to be effective?
· will they be admissible as evidence in court in the event of a dispute between the parties to the agreement?
A summary of some of the legal requirements in certain jurisdictions in the Middle East is set out below:
· In the UAE, e-signatures are effective, provided reliance on the e-signature is not deemed unreasonable. In practice this means taking steps to ensure that the e-signature is not invalid, and where it is invalid, not relying on it. Advisable steps may include incorporating an acknowledgement in the document to be signed that the parties will conclude it electronically and that the signatures will be considered to be the same as a handwritten signature.
· In Kuwait, there is no law relating to e-signatures. In the event of a dispute a Kuwaiti Court is likely to treat the e-signed version of the agreement as a copy and require the submission of a hard copy of the agreement signed by hand. If no version of the agreement with a hand-written signature can be produced, the Kuwaiti court may hold that the agreement is not legally binding.
· In Oman, provided the signature is authentic, can only be used by one specific person and is incapable of being changed after it is made to a document, the document signed should be valid. However, the Omani law has not yet been tested in the Omani Courts.
· In Bahrain, electronic documents will have the same evidentiary standing as their hard copy counterparts in Bahraini Courts. However, to be valid an e-signature must have an accredited certificate associated with it; meaning the e-signature must be provided by an accredited certification service provider.
· In Egypt, anything other than a hand-written signature on a paper copy of the agreement will be difficult to rely upon as evidence before an Egyptian court. Therefore, any party looking to rely on a document in court will need to be able to produce a hard copy complete with hand-written signatures.
· In Jordan, electronic contracts and agreements are valid, effective and legally enforceable, regardless of the type of ‘electronic device’ used to conclude them. To be valid an e-signature must be unique, capable of verifying the identity of the user and attached to the document in such a way that the document cannot be amended once signed.
It is important to ensure when using e-signatures in any jurisdiction that once an e-signature has been affixed to a document, the document is incapable of being amended and the e-signature cannot be removed. Only an e-signature solution which satisfies this requirement will provide a reliable audit trail in the event that the validity of the e-signature is challenged.
Business advantages, and dangers, of e-signatures
In order to capitalise on the advantages of e-signatures, businesses will need to consider a number of issues:
· E-signatures are less advisable for complex transactions or heavily negotiated agreements, as the speed of an electronic transaction means that it may not be reviewed with the same level of scrutiny as a hard-copy agreement. Agreements that are high volume, routine, low risk and low value and/or containing standard terms are likely to be more suitable for e-contracting.
· Identify what the cost to the business is likely to be and what savings can be made. Consider the cost of software, staff training and ongoing maintenance of the software. Weigh this against the potential savings in staff time, speedier transaction timescales and increased market reach.
· The verification of the signing parties’ identity is key. E-signatures have the potential to be safer than signatures executed on paper, as the e-signature can be verified and the document’s history can be tracked. An online solution is likely to be the most reliable, secure and cost-effective form of verification for businesses using e-signatures.
Conclusion
There are clear commercial advantages to using e-signatures. However, there are key requirements which must be satisfied to ensure that they are valid and there can be risks in certain jurisdictions in terms of enforceability. Before using e-signatures, businesses should ensure that they clearly understand the legal requirements and assess the risk to determine whether e-signatures are an appropriate means of concluding transactions and signing documents.
Joycia Young is a Partner in Clyde & Co’s technology, media and commercial group in the Middle East.
Kellie Blyth is an Associate there: www.clydeco.ae
