E-signature practical solutions for signing in the event of social distancing measures
In response to the current worldwide turmoil, attitudes are changing and innovative means of communication are being explored. Professionals have to think business differently.
In this context, global measures in place to prevent the spread of Covid-19 have forced Luxembourg companies to find solutions to overcome travel restrictions and containment measures.
As it has become difficult and even impossible, to execute documents in traditional face-to-face meetings, professionals are looking for alternative options available. While practical problems can be experienced when using common signing processes requiring some specific equipment at home, electronic signature appears to be the most convenient option. However, can electronic signature be used to execute any type of documents? What are the limits of the use of electronic signing process?
The below is a practical FAQ document as a guide for e-signing legal documents.
Is a signature always required for a contract to be valid under Luxembourg law?
Article 1108 of the Luxembourg civil code is the only legal provision dealing with the formation of contracts. It provides that the necessary conditions for the validity of a contract are consent of the parties who assume mutual obligations, capacity to contract, a certain object which forms the matter of the agreement and a lawful cause.
The Luxembourg law does not require any specific form and the signature is not a condition of validity of a contract. Indeed, under Luxembourg law contracts are generally valid if the parties (in person or by duly authorized representative) reach an agreement, either orally, in a hard copy or electronically.
Article 1322-1 of the Luxembourg civil code provides that “The signature necessary for the perfection of a private deed identifies the person who affixes it and expresses his adhesion to the content of the deed. It can be handwritten or electronic.”.
The written form and the signature are only required in terms of proof to support the existence, content, authenticity, and valid acceptance of the contract.
Some limits exist to the requirement of written proof. Indeed, only contracts having a value of more than EUR 2,500 are subject to this requirement (article 1341 of the Luxembourg civil code). Then, even if a contract does not meet the formal obligations of articles 1322 and following of the Luxembourg civil code, it still constitutes a prima facie evidence in writing which may be supplemented by testimony and presumptions. Finally, such a written requirement only exists in civil matters, while proof of commercial contracts can be done by any means.
What is an electronic signature?
According to article 1322-1 of the Luxembourg civil code, the electronic signature consists of a set of data, inseparably linked to the deed which guarantees its integrity. The law hence does not prescribe a type of electronic signature.
The Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market entered into force on 1 July 2016 (the “eIDAS Regulation”) and directly applicable in the Member States has brought some clarifications. The eIDAS Regulation repealed and replaced the e-Signatures Directive (1999/93/EC). It ensures that trusted services used in a Member State and means of electronic identification issued in a Member State will necessarily be recognized in the other countries of the European Union.
This eIDAS Regulation defines three categories of electronic signatures on the basis of their probative value.
The “qualified” electronic signature (QES) is a specific digital signature created by a qualified electronic creation device and based on a qualified certificate issued by an accredited trust service provider (so-called “prestataire de service de confiance”). A signature that satisfies the specific and technical requirements of a QES has the same legal effect and probative value as a handwritten signature in each Member State.
The “advanced” electronic signature (AES) is a type of electronic signature that meets the following requirements : (i) it is uniquely linked to the signatory, (ii) it is capable of identifying the signatory, (iii) it is created using electronic signature creation data that the signatory can use under his sole control and (iv) it is linked to the data signed therewith in such a way that any subsequent change in the data is detectable.
The “simple” electronic signature (SES) consists in an electronic copy of a handwritten signature.
Article 25(1) of the eIDAS Regulation provides that “an electronic signature shall not be denied legal effect and admissibility as evidence in legal proceedings solely on the grounds that it is in an electronic form or that it does not meet the requirements for qualified electronic signatures”.
In case of litigation, all final determinations of admissibility will be made by the judge on a case by case basis.
Can electronic signature be used for any document?
Although Luxembourg law recognizes electronic signature, its use can be limited or forbidden for some specific deeds and the form of electronic signatures that can be used (SES, AES or QES) mainly depends on the type of contracts.
There are some cases where a SES is appropriate and sufficient, mainly simple contracts which do not have formality requirements, such as intercompany agreements, commercial agreements between corporate entities, like purchase orders, invoices, sales agreements, distribution agreements or services agreements.
Some operations require more security and the use of QES is generally mandatory such for instance, filing tax declarations, or processing banking transactions.
Some other operations are specifically barred from electronic processes specifically those which required a handwritten signature (employment contracts) or formal notarization or presence before a public officer (like civil status documents governed by family law, incorporation of companies, modification of articles of incorporation, purchase or transfer of real estate, mortgage, etc.).
In the case of documents which require some form of witnessing before a lawyer, notary or other authorities, real difficulties will arise where it is not possible to physically meet with the relevant professional in person. Some alternative solutions already exist in neighboring countries, like in France for notarial deeds, where the notarial profession has implemented for several years a system allowing the production of authentic deeds on electronic support, that has been improved recently with a decree 2020-395 of 3 April 2020 authorizing the execution of notarial deeds remotely during the health emergency period, on an electronic support, while the parties to the deeds are neither present nor represented. The exchange of the necessary information is carried out by means of a communication and information transmission system ensuring a proper identification of the parties, the integrity and confidentiality of the content of the notarial deed. According to some professionals, this could be done using video conferencing.
Consideration must also be given where relevant to the formal requirements of other legal systems, notably when a party is registered in another jurisdiction, the document is not governed by Luxembourg law or is likely to need enforcement overseas. The acceptance of electronic signatures varies across the globe and this must be considered in each case.
While many documents may be signed electronically, there can still be some logistical difficulties with electronic signing and IT security concerns.
What are the pros and cons of using electronic signing platforms?
The act of signing can be made much easier by using electronic signing platform (like AdobeSign, HelloSign or DocuSign), so parties do not have to deliver a wet ink signature or print, sign and scan. You can send your documents via an e-signing platform, and the signatories can sign it using their computer, tablet or phone screen.
This mean of signing is faster, implies easier logistics (mobile signing, no postal charges), less handling (no printing, scanning, etc.), more legal certainty (it is clear who signs, no missed annexes, no execution at the wrong page or missed signatures, the risk of faked signature is reduced). Last but not least these days, it is ecofriendly.
There are also limits to the use of such an electronic signing platform like the costs, internal processes of authorization and procurement, the fact that people may be less attentive to the content of the document they sign, and to the obligation of conservation. The main limit remains that not all documents or transactions are eligible to electronic signature.
Are there any other signing methods available?
A number of methods are available for signings to continue during the Covid-19 pandemic. Electronic signatures are one of those methods. It is also possible, more basically, to work with powers of attorney, to agree via an exchange of emails when no specific form requirement applies, to exchange scanned (PDF) and photographed signatures of a printed and ‘wet ink’ signed execution page, physical copies can also be circulated to signatories by courier or postal services when absolutely necessary. Most important thing is to verify that the person who signs the document, either electronically or by other means, is the relevant signatory and has full legal authority to do so.
This turbulent period should bring people to adapt the way they agree on contractual matters, to find pragmatic methods and always implement more innovative processes to make the continuity of the business possible and to keep thinking on a long-term basis.
Yours Faithfully,
Valerie Kopera & Lucile Lebeaux