China Law Advisory
China's Electronic Signatures Law Goes Into Effect
By
Rick
L. Leitner
[April 2005]
Today’s fast-paced, global economic environment requires
the enablement of electronic commerce transactions and confidence
in such transactions. Parties need the ability to conduct transactions
electronically and also be assured that transactions effected through
electronic commerce have the same legal effect as do transactions
done over more traditional means such as paper and ink. Recently,
China took a notable step towards achieving these twin aims by enacting
the Electronic Signature Law of the People's Republic of China
(the "E-Signature Law") on August 28, 2004, which law
became effective throughout China on April 1, 2005.
The stated purposes of the E-Signature Law include standardizing
the conduct of electronic signatures, confirming the legal validity
of electronic signatures and safeguarding the legal interests of
parties involved in such matters. See Article 1. The E-Signature
Law also provides standards regarding a subset of electronic signatures
generally known as digital signatures, which type of signatures
involve the use of encryption technologies and third party certification
authorities. Previously enacted legislation such as the Contract
Law of the People's Republic of China ("Contract Law")
did provide general principles around the enablement and validity
of electronic signatures and transactions conducted electronically,
but the E-Signature Law goes further in addressing many specific
electronic contracting issues.
In significant part, the E-Signature Law provides legal definitions
for what constitutes an "electronic document” and what
constitutes an "electronic signature." The E-Signature
Law further identifies the requirements applicable to the communication
and the enforceability of electronic documents, the legal effect
of electronic signatures and certification of digital signatures,
and the consequences for violating the E-Signature Law. The E-Signature
Law is not a mandatory law but an optional one. While parties involved
in commercial contracts or with other documents and instruments
may choose whether or not to conduct transactions electronically,
the E-Signature Law does provide that an electronic signature or
electronic document may not be used in certain matters such as those
involving (i) marriage, adoption and inheritance, (ii) conveyance
of rights and interests affecting real estate, (iii) stoppage of
public utility services, as well as (iv) other circumstances provided
by law and administrative regulations where electronic signatures
or electronic documents may not apply. Article 3, E-Signature Law.
The E-Signature Law defines an “electronic document”
as information generated, sent, received or stored by electronic,
optical, magnetic or similar means, and defines an “electronic
signature” as data in an electronic form that can be used
to identify the signatory to an electronic document and to indicate
the signatory's approval of the information contained therein. Article
2. An “electronic document” that is capable of tangibly
expressing its content and being accessible for use and investigation
is deemed as satisfying the “written” or "original"
requirements provided by Chinese law. Article 4. Specific examples
of what constitute an “electronic document” are not
specified in this E-Signature Law provision, but Article 11 of the
Contract Law gives examples of electronic documents. These include
telegrams, telexes, faxes, electronic data interchange and email.
Taken together, the “electronic document” definition
in the E-Signature Law then likely includes those examples of electronic
documents specified in the Contract Law. In addition, it is noteworthy
that the definition of an "electronic signature" is a
generic, neutral term not one that mandates any current or future
technologies available to electronically sign an electronic document.
In other words, parties to a contract or other legal document may
determine the method or technology used in creating or effecting
an electronic signature.
The E-Signature Law identifies several requirements for an electronic
document to be valid. These include that an electronic document
(i) must be capable of representing the reliability and accuracy
of the document’s contents, (ii) be retained in a format that
accurately represents the content of the document, (iii) not have
been altered, (iv) capable of being verified at any time, (v) enable
the identification of both the sender and recipient of the electronic
document, as well as (vi) identify the date and time the electronic
document was sent and received. Articles 5 and 6. Unless otherwise
agreed, an electronic document is deemed to have been originated
from the sender if the electronic document was sent by a person
authorized to act on behalf of the sender or by an information system
programmed to operate automatically by or on behalf of the sender,
if the recipient confirms that the electronic document was sent
by the sender after properly applying a procedure previously agreed
to by the sender for that purpose. Article 9. Unless the parties
agree otherwise, an electronic document is deemed to have been sent
at the time it passes outside the control of the sender, and is
deemed to have been received at the time it enters the information
system of the recipient. Article 11. If the parties designate a
specific information system for the receipt of the electronic document,
however, the document is deemed to have been received at the time
it enters the designated information system. Article 11. Where the
parties have agreed that receipt must be acknowledged or where otherwise
stipulated by law, the recipient must transmit an acknowledgement
of receipt of an electronic document. Article 10.
The E-Signature Law provides that a "reliable" electronic
signature has the same legal effect as a handwritten signature or
seal. Article 14. Unless otherwise agreed by the parties, an electronic
signature is considered reliable (i) if the data used to create
the electronic signature are in the exclusive control of the signatory
for the purpose of creating the electronic signature, and (ii) if
one can identify any change to the electronic signature or to the
content or format of the underlying electronic document that takes
place after the issuance of the signature. Article 13. In addition,
the E-Signature Law provides that parties may agree upon other methods
to determine whether an electronic signature is “reliable.”
Id. For example, parties to an agreement could agree that clicking
to accept a click-wrap agreement is a reliable electronic signature.
The E-Signature Law also provides that parties may use a form and
type of an electronic signature generally known as a digital signature.
Different from an electronic signature, a digital signature involves
the use of a third party certification authority and use of encryption
technologies. For any third party certifying a digital signature,
the signatory must obtain a certificate from a legally established
supplier of electronic certification services. A provider of electronic
certification services may certify an electronic signature and issue
a certificate upon examination of an application submitted by the
signatory that confirms the identity of the signatory and provides
other related information. The certificate must contain the name
and identifier for the signatory, the duration the certificate is
valid, and the name of the service provider. Upon approval from
the information industry department of the State Council, and in
accordance with a related bilateral or multilateral agreement or
under treaty reciprocity principles, the E-Signature Law also recognizes
certifications issued by foreign suppliers of certification services.
Article 26.
A supplier of electronic certification services must apply for
approval from the information industry department of the State Council
in order to obtain the authority to issue certificates. In connection
with such an application, the applicant needs to show that the applicant
holds sufficient qualified personnel, capital, technology and equipment
to provide such certificates. The E-Signature Law provides that
the information industry department of the State Council is to issue
a decision whether or not to issue and application within 45 days
from receipt of the submission. Article 18. Successful applicants
may issue digital signature certificates.
The E-Signature Law provides that an electronic signatory shall
be held liable for damages to a party that relies upon an electronic
signature or to a supplier of electronic certification services
(i) if the signatory does not provide timely notice that the data
used for the creation of an electronic signature has been or may
have been compromised and does not stop using the data to create
electronic signatures, or (ii) if the signatory fails to provide
true, complete and accurate information to the supplier of electronic
certification services. A supplier of electronic certification services
may be held liable for losses suffered by a party that acts in reliance
on an electronic signature, unless the supplier proves that it was
not at fault. The E-Signature Law also makes criminal the acts by
any person who forges or otherwise engages in unauthorized use of
an electronic signature, in such cases, the E-Signature Law provides
that civil liability shall apply as well.
While China’s E-Signature Law is perhaps not as well developed
as other legal systems covering transactions involving electronic
documents and electronic signatures, the law is a welcome addition
towards standardizing these issues on a national basis under China’s
e-commerce laws. The E-Signature Law provides a general structure
for parties to conduct transactions electronically, providing both
flexibility for new procedures and provisions to be added while
giving validity to such transactions.
For more information, please contact:
R.Z.
Margaret Lu, Seattle, (206) 628-7753, MargaretLu@dwt.com
James
Fang, Los Angeles, (213) 633-6847, JimFang@dwt.com
Ron
Cai, Shanghai, (011) 8621-6279-8541, RonCai@dwt.com
James
Mei, Portland, (503) 778-5315, JimMei@dwt.com
This China Practice Advisory is a publication of the China Practice/Shanghai
Office of Davis Wright Tremaine LLP. Our purpose in publishing this
Advisory is to inform our clients and friends of recent legal developments
in China. It is not intended, nor should it be used, as a substitute
for specific legal advice as legal counsel may only be given in
response to inquiries regarding particular situations.
Copyright © 2005, Davis Wright Tremaine
LLP.
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