The utility of electronic signatures has become increasingly evident during the last years, and many companies began to use them for convenience reasons.
Electronically signing documents means wasting less paper, avoiding traveling or meeting face to face when it’s not absolutely necessary, and not needing huge spaces to deposit all the paperwork. Basically, it means conducting your business faster and more efficiently.
The COVID-19 pandemic has underlined the utility of electronically signing documents even more. Wet signatures were no longer a reliable option. With the majority of people working from home, and most offices being closed, the electronic signature became an essential tool.
The Legality of Electronic Signature in the World
The utility of electronic signatures is beyond any doubt. The only issue that remains is connected to their legality. This is particularly important when it comes to international business relations, as not all countries have the same legal provisions and open view on electronically signing documents.
While some states have given electronic signatures the same status as wet signatures, others have imposed certain restrictions. Some states haven’t assigned any legal value to them at all.
Legal Models for Digital Signatures
There is an essential aspect when it comes to the legality of electronic signatures in different countries, and it’s connected to the technological standards that the electronic signature must meet in order to be approved and considered legal.
There are two models, dividing the states that allow the use of digital signatures in two major categories:
The Countries With an Open Legal Model
These are the countries where the use of electronic signatures is unrestricted, and authorities don’t impose any particular requirements. In these states, electronically signed documents can be used in court without any problem. Users don’t have to provide any additional proof regarding the legality of the document.
The Countries With a Tiered Legal Model
These are the majority, in fact, countries that recognize the Qualified Electronic Signature (QES). The QES, or its local equivalent, is the type of electronic signature that follows EU regulations and is considered authentic and admissible in court.
This is the electronic signature that offers the highest level of safety, and it’s considered to be completely reliable. The European Union is one of the main economic decisive factors, and when it comes to electronic signatures, they have their standards.
It’s the EU Regulation No 910/2014 (eIDAS regulation) that imposes that standard, and the Qualified Electronic Signature completely fulfills it. The advantage is that you can check and verify the authenticity of an electronically signed document long after the moment it has been created.
The legality of electronic signatures is an issue that most states consider, and things are slowly changing all over the world.
Considering the problematic situation all economies are going through with the COVID-19 pandemic, many states are bound to reconsider the restrictions to ensure the necessary flow of the economy.
But at this point, these are the categories of countries, based on their acceptance of electronic signatures:
- Full Legal Status: These are the countries where electronic signatures have the same legal status as written signatures. It’s the ideal situation, where persons and businesses can electronically sign any document, and it becomes legally binding.
- Unclear Legal Status: Digital signatures use digital certificates and public key infrastructure, which means the owner of the signature can be identified without any doubt. While they offer a really high level of security, they are also a bit more challenging to use.
- Different Status: That means that depending on the country, there may be exceptions, specific fields where the electronic signature isn’t sufficient. Before electronically signing a document in these countries, you need to check if you aren’t dealing with a restriction.
- Not Available: The number of countries where the electronic signature is not at all available is smaller but still larger than it would be beneficial for a vibrant and developing world economy.
The Legality of Electronic Signature on the World’s Map
To better illustrate the way the electronic signature is used all over the world, let’s look at some clear examples of countries from each section mentioned above, as well as the local restrictions they impose.
Countries where electronic signatures have the same legal status as written signatures:
- Australia has been using electronic signatures since 1999, except for documents related to migration and citizenship, and in some regions, wills, powers of attorney, and some real estate transactions are also exceptions to the rule.
- Canada has also allowed electronic signatures since 1999, except for some real estate agreements, wills, estate agreements, and powers of attorney.
- Chile recognized electronic signatures in 2002, except for situations where the law requires that one or more of the parties have to be present, and cases related to family law.
- Colombia allowed electronic signatures in 1999, but there are exceptions there as well, like conveying real estate rights, mortgage agreements, and a few others.
- Ireland issued the Electronic Commerce Act in 2000, mentioning the following exceptions: wills, trusts, powers of attorney, or real property transactions.
- New Zealand passed the Electronic Transactions Act in 2002, with special requirements when it comes to real estate transfers and wills.
- Peru has been using e-signatures since 2000, without any severe exceptions to the law.
- The Philippines recognized e-signatures in 2000, with The Electronic Commerce Act, with no severe exceptions to the law.
- Portugal passed a law for electronic signatures in 2009, which has no exceptions.
- Singapore recognized electronic signatures in 2010, with the following exceptions: wills, negotiable instruments, powers of attorney, and some real estate transactions.
- South Korea issued The Digital Signature Act in 2013, with no severe restrictions.
- Spain recognized electronic signatures in 2003, mentioning no crucial exceptions.
- The United Kingdom recognized e-signatures in 2002, and the law mentions some exceptions and advises caution when it comes to transactions relating to marriage, divorce, wills, real estate, and negotiable instruments.
- In the United States, the first states adopted the Uniform Electronic Transactions Act in 1999. In the present, New York is the only state that doesn’t allow electronic signatures. Most states have restrictions when it comes to real property transfers, wills, and some legally required notices to consumers.
Countries where the status of the electronic signature is unclear or where digital signatures are strongly preferred:
- Argentina issued a Digital Signature Law in 2001, except for documents regarding death, family law, or other highly personal matters.
- Austria has been using electronic signatures since 1999, but not for legal transactions related to family and inheritance, for documents that need to be notarized, or for real estate transactions that include registering a deed, and a few other exceptions.
- Brazil passed a law to recognize electronic signatures in 2001, and the law mentioned no critical exceptions.
- Denmark has also used e-signatures since 1999 when the EU passed the Electronic Signature Directive (1999/93/EC), and they have no critical exceptions.
- Hungary passed The Act on Electronic Signature in 2001, with the exception of legal transactions under marriage, family, and legal custody.
- Indonesia recognized the electronic signature in 2008, except notary deeds and letters of court summons.
- Israel recognized e-signatures in 2001, with no restrictions.
- Italy legally recognized e-signatures in 2005, and it doesn’t exclude any type of agreement.
- Malaysia recognized e-signatures in 1997, with no restrictions.
- Mexico doesn’t have one clear law regarding electronic signatures. Their legality is a bit complicated, as there are multiple laws and regulations connected to it.
- Poland passed the Electronic Signature Act in 2001, with a few key restrictions, like the transfer of real estate property, testaments, and checks and bills of exchange.
- Romania recognized electronic signatures in 2001, passing The Electronic Signature Law, mentioning that a digital signature is necessary for real estate and labor agreements.
- Sweden issued the Qualified Electronic Signatures Act in 2000, mentioning that agreements with government entities may be an exception.
- Switzerland has recognized this type of signature since 2003, but with a few exceptions: real property transfer contracts, inheritance contracts, and last will.
- Thailand has been using electronic signatures since 2001, with no critical exceptions to the law.
- Turkey passed a law for electronic signatures in 2004, mentioning no serious exceptions.
- Uruguay passed The Electronic Document and Signature Act in 2009, mentioning that caution is necessary for real estate transactions or other types of transactions that need to be notarized.
- Vietnam recognized electronic signatures in 2005, with the exception of handwritten contracts related to real and intangible property transfers.
Countries where electronic signatures are enforceable but don't have the same status as a written signature:
- Belgium has recognized electronic signatures since 2000, without any critical exceptions.
- China passed the PRC Electronic Signature Law in 2004, and the only exceptions are agreements related to marriage, adoption, inheritance, and some real estate or public utility agreements.
- The Czech Republic issued the Electronic Signature Act in 2000, except for real estate purchases and leases.
- Egypt issued the E-Signature Law in 2004, with the exception of real and intangible property transfers.
- Finland recognized electronic signatures a bit later, in 2009 when they passed The Act on Strong Electronic Identification and Electronic Signatures, and the exceptions are real estate transactions and family law, including inheritance issues.
- France started using e-signatures in 2000, with a few exceptions, like marriage-related documents, real estate and labor agreements, and forms that must be notarized.
- Germany passed the German Signature Law in 2001, except for real estate agreements, documents that need to be notarized, and documents connected to marriage.
- Greece recognized electronic signatures in 2001, but they cannot be used for documents connected to the transfer of real estate property or donations.
- Iceland law permitted electronic signatures in 2001, except for real property transfer contracts and deeds and handwritten employment contracts.
- India passed the Information Technology Act in 2000, with a few exceptions: matters related to the power of attorney, wills, real estate transactions. Apart from that, most transactions require a stamp, which renders the electronic signature pointless.
- Japan has passed The Electronic Signatures and Certification Business Act in 2000 to recognize the legality of electronic signature.
- The Netherlands passed the Electronic Signatures Act in 2003, with no critical exceptions.
- Norway has The Act on Electronic Signatures since 2001, but they also have exceptions, like debt certificates, premarital agreements, or a board's signing of annual accounts.
- Russia has passed the Federal Law of the Russian Federation No. 63-FZ "On Electronic Signature"] in 2011, mentioning no significant restrictions.
- Saudi Arabia has recognized e-signatures in the Electronic Transactions Law of 2007. However, that law applies only to certified electronic transactions that aren’t available to private parties at this point.
- South Africa passed The Electronic Communications and Transactions Act in 2002, with specific exclusions, like long-term leases, property transactions, wills, or bills of exchange.
- Ukraine passed a law for e-signatures in 2003, except for handwritten certificates of inheritance.
Countries where electronic signature is not available:
This category is a bit unusual. Most of these countries have issued acts to recognize electronic signatures, but either don’t have a specific data and law to state they are legally valid or simply don’t use them in practice yet. Some examples are:
- North Korea
Note: Each category only lists some representative countries. Hence, it is not a completed list for all of the countries in the world.
The Legality of Electronic Signature in the EU
Electronic signatures have caused mixed reactions in general, so it has been up to authorities to issue clear laws and regulations that could increase the public’s trust and interest in this relatively new tool.
The European Union has played an incredibly important part, as it influenced the reaction in many countries. An essential step was the European Union Regulation No 910/2014, also known as the Electronic Identification and Trust Services for Electronic Transactions (eIDAS).
The goal of this regulation was to open up the European market to electronic transactions by setting the standards.
The Legality of Electronic Signature in the US
The electronic signature has been widely embraced in the US, with one exception, the state of New York. As for the rest of the states, electronic signatures are slowly gaining the trust of the public.
It’s true that in many cases, people still have their concerns with the legality and efficiency of e-signatures, but those will be overcome shortly. The COVID-19 pandemic has turned this tool into an essential one, so many businesses are now reconsidering their reluctance.
Two acts govern the usage of electronic signatures in the US: ESIGN, or the United States Electronic Signatures in Global and National Commerce Act, and UETA, or the Uniform Electronic Transactions Act. Both have established the same requirements that electronic signatures must meet:
- The intent to sign – just like wet signatures, electronic ones are only valid if the intent to sign is clearly demonstrated.
- The consent to do business electronically – e-signature software will ask users to confirm their consent before moving forward.
- Association of signature with the record – there must be a clear connection between the electronic signature and the document.
- Record retention – an accurate reproduction must be recorded for future reference for all interested parties.
The Advantages of Electronic Signatures
One of the main advantages of signing documents online is that it saves a lot of time. Instead of printing a document, signing it, and then mailing or handing it to your partner, you can do everything in a few minutes, without leaving your device.
Spending less time signing and sending a document, and avoiding unnecessary meetings or departures, means you can use your time more efficiently and focus on other tasks that are waiting. The productivity of the staff will be increased.
Companies can reduce their expenses if people are working remotely. There is no need for renting office space, for example. In some fields, that is possible for the majority of the staff, which means the profit of the company will be much higher.
Electronic signatures are safe, fast, legally binding, and you can easily prove their authenticity, maybe even easier than with physical signatures. Employees can benefit from using e-signatures, as it makes their job easier.
It can also be a bonus in the eyes of the customer. Speed and efficiency, as well as a professional-looking document that is delivered in an updated way, can make a real difference.
The Use Cases of Electronic Signatures in Business
Electronically signing documents can help your business in more ways than you probably imagine. It’s an extremely versatile tool that can be applied to many types of important documents you use frequently. These are the most common uses of electronic signatures in business:
- For sales contracts
- For agreements with your suppliers – once you have negotiated a price, it’s crucial to close the deal as quickly as possible
- Forms for new customers
- For issuing change orders
- To get quick approval from a customer
- Documents related to hiring new staff
- Documents on intellectual property
- Signing non-disclosure agreements, even from your mobile phone
- Tax forms
- Insurance-related documents
- Loan applications
Electronic signatures are connecting the business world on a new level. It’s an essential tool that makes business relations much more accessible and many processes that used to take a long time can be done in minutes. If you use an electronic signature, your business will be more profitable, as you will be saving time, money, and your employees will be more relaxed because their job will be significantly easier.
You can organize all aspects of your business and communicate in real-time about the changes you want to implement. Electronic signatures help speed up and improve your workflow and spend less time worrying about paperwork and more on expanding your client base.
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