The use of electronic signatures in cross-border transactions can be fraught with difficulties given the lack of uniformity relating to electronic signatures across countries. This position is further exacerbated by the lack of widespread adoption of the Convention on the Use of Electronic Communications in International Contracts 2005, which sought to standardise electronic communications. The most common questions to consider in cross-border deals when seeking to execute documents electronically are the following:
1. Does the governing law of the agreement recognise execution by electronic means?
If not, then it will not be possible to execute electronically. If yes, the governing law of the agreement may prescribe requirements for electronic execution, and different forms of electronic signing may have different standards of authentication, evidential weight and admissibility.
2. Does the jurisdiction of incorporation of the signatory permit execution by electronic means and do the constitutional documents of the signatory permit such execution?
Even if the governing law of the agreement recognises electronic signatures (however described), one may run into a conflict of laws where the jurisdiction of incorporation of the signatory does not recognise electronic signatures as a valid form of execution by a natural or juristic person. For example, under English law an overseas company may execute a document in any manner permitted by the law of the territory in which the company is incorporated for the execution of documents. Should electronic execution not be recognised in the jurisdiction of incorporation of the company, then it would not be possible to execute electronically. In addition, the constitutional documents of the signatory may prohibit electronic execution.
3. What is the evidential weight and admissibility of the different forms of electronic signature in the relevant jurisdiction?
After passing the hurdles of questions 1 and 2 successfully, the form of electronic signature to be used and its evidential weight and admissibility must be determined in the relevant jurisdiction. Whether a certain form of electronic signature should be used will depend on the risk associated with a particular agreement. For example, security documents may need to use a form of electronic signature which provides the best authentication and full admissibility into court. In comparison, for side letters and minor agreements, parties may decide to use a lesser form of electronic signature, which may require further evidence of authenticity to be provided. The relevant jurisdiction may prescribe a certain form of electronic signature for certain documents.
4. Where is my agreement likely to be enforced?
The attitude of the enforcing jurisdiction and rules of admission into evidence before their courts will be a factor in determining whether a particular agreement can be signed electronically. For example, security documents may have handwritten signature requirements.
5. Does the agreement have to be filed or registered, and if so, what are the registry’s requirements?
The relevant registry may not permit the filing or registration of electronically executed documents. The most common agreements which are likely to have unique requirements are those relating to land and security.
6. Does my agreement permit execution and variation by electronic means?
The governing law of the agreement may require a clause in the agreement permitting the entry into the agreement by electronic signature. The execution requirements for the agreement by electronic signature will be determined by the governing law, the jurisdiction of incorporation of the signatory and the agreement itself, along with all the other considerations outlined above, including any conflict of laws which may arise. However, it is advisable to include a clause requiring the amendment or variation of the agreement by certain specified forms of electronic signature which require an authentication process or a third party verification agent. Similarly one should avoid including in the definition of ‘signature’ a general reference to ‘electronic signature’. These drafting considerations may prevent a carefully crafted agreement from being varied by a careless email, which could include a valid form of electronic signature.
Note that this article does not deal with virtual closings using scanned pdfs of the parties’ signatures.