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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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