In these weeks and months marked by the corona virus and the entailing restrictions on physical meetings, Boards and companies are faced with practical issues in the implementation and recording of their decision taking.
Whilst a recent grand ducal regulation of 20 March 2020 enables companies in this crisis, to hold its shareholder meetings and meetings of management bodies exclusively in digital form, the issue of signing documents, agreements, resolutions or minutes of those digitally-held meetings remains.
In these weeks and months marked by the corona virus and the entailing restrictions on physical meetings, Boards and companies are faced with practical issues in the implementation and recording of their decision taking.
Whilst a recent grand ducal regulation of 20 March 2020 enables companies in this crisis, to hold its shareholder meetings and meetings of management bodies exclusively in digital form, the issue of signing documents, agreements, resolutions or minutes of those digitally-held meetings remains.
An alternative solution to tedious processes, involving human intervention and sending out documents by mail or courier in order to gather numerous signatures, would be the use of electronic signatures.
Boards and daily management of companies should discuss how the implementation of electronic signing could not only enhance the digitalization of their processes but also increase efficiency.
What is an electronic signature
An electronic signature is data associated to identity in electronic form which is strongly attached to or logically associated with other data in electronic form and which is used by the signatory to sign. An electronic signature is any type of identity-linked image, sign or mark that you apply on a document in order to give your personal, legally binding acceptance or approval.
Legal framework
The European framework for electronic signatures is given by 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 (the “eIDAS Regulation”). At local Luxembourg law level, the law of 14 August 2000 on electronic commerce (as amended) (the “eCommerce Law”) sets out the applicable provisions. The eCommerce Law is currently in the process of being amended in order to be fully aligned with the eIDAS Regulation.
Electronic signatures are valid under Luxembourg law by application of both the eIDAS Regulation and the eCommerce Law. The eCommerce Law amended the Luxembourg Civil Code and more specifically, Article 1322-1, which now provides that the signature necessary for the perfection of an act under private seal may be handwritten or electronic.
Categories of electronic signatures
The eIDAS Regulation establishes three categories of electronic signatures, hereinafter classified in increasing order of probative value:
Simple electronic signatures: these minimalistic electronic signatures correspond to data in electronic form which is attached to, or logically associated with, other data in electronic form and which is used by the signatory to demonstrate his/her willingness to sign (e.g., signature drawn on touch screen, scanned handwritten signatures or putting your signature block at the end of an email). This is the most basic and the less secure, type of electronic signature. The signed document is not protected (i.e. could be amended after signing) and there is no certainty on the signatory’s identity.
Advanced electronic signatures: these electronic signatures shall (i) be uniquely linked to the signatory, (ii) be capable of identifying the signatory, (iii) be created using electronic signature creation data that the signatory can, with a high level of confidence, use under his/her sole control and (iv) be linked to the data signed therewith in such a way that any subsequent change in the data is detectable. For the Advanced electronic signature, the signatory’s identity is fairly known and the signed document is protected. The Advanced electronic signature benefits from the principle of non-discrimination in Court and it can be fairly well defended provided that is it accompanied by an additional set of evidence.
Qualified electronic signatures: these electronic signatures shall meet all requirements applicable to Advanced electronic signatures, and shall in addition be supported by (i) a qualified certificate (the supporting data that verifies that the signature is valid and links it to the named signatory, who has been identified through a face-to-face or certified-equivalent face-to-face process) issued by a qualified/accredited trust services provider (“QTSP”) and (ii) a qualified electronic signature creation device (the hardware or software used to create the signature) and certified process. This signature provides the highest level of protection and security of the document (which may not be amended after signing) and uniquely confirms the identity of the signatory. The Qualified electronic signature is considered equivalent to a handwritten signature and self-sustainable in Court as it does not require any additional evidence.
Who issues qualified certificates needed to create qualified signatures
QTSPs are responsible for assuring the electronic identification of signatories and services by using strong mechanisms for authentication, digital certificates and electronic signatures. QTSPs issue certificates pursuant to very stringent certified and audited processes, which for qualified certificates involve a face-to-face (or equivalent) identification of the signatory.
In accordance with the Commission Decision (EU) 2015/1505 of 8 September 2015, each Member State must draw up a “trusted list” of QTSPs. The Luxembourg Institute for Standardisation, Accreditation, Safety and Quality of Products and Services (ILNAS) is in charge of managing this “trusted list” in Luxembourg and of supervising the two TSPs currently established in Luxembourg (LuxTrust S.A. and BE INVEST International S.A).
The list of all QTSPs accredited by the EU Member States is available under the following link: https://webgate.ec.europa.eu/tl-browser/#/
Legal value and admissibility in courts of different categories of electronic signatures
Whilst the three categories of electronic signatures are all legally binding, their respective legal forces differ.
Pursuant to the eIDAS Regulation, an electronic signature shall not be denied in terms of legal effect and admissibility as evidence in legal proceedings solely on the grounds that it is in an electronic form.
In addition, under Luxembourg law, a distinction is made between agreements of a commercial nature and agreements of a civil nature. Whereas commercial agreements can be proven by all means, agreements in civil matters are subject to stricter formal requirements. Thus, in commercial matters, even when using a Simple or an Advanced electronic signature, the proof of the existence of the agreement itself can be brought by all means.
Advanced and Simple electronic signatures will be prima facie admissible in evidence before a Luxembourg Court, but will have a lower evidential weight than a Qualified electronic signature. Their validity will need to be established by the claimant and additional evidence will need to be provided.
For Advanced electronic signatures, the electronic signature system (logs…) can provide elements to demonstrate trustworthiness of the signature.
Only Qualified electronic signatures are considered equivalent to a handwritten, wet ink signature and benefit automatically from an EU wide recognition and have the benefit of a reverse burden of proof in case of litigation.
What type of electronic signature to use
For Luxembourg, neither the eIDAS Regulation nor the eCommerce Law define which type of electronic signature is required in each case to execute a specific document. It is only provided that, as an exception, any contractual arrangement requiring the intervention of a notary public cannot be executed remotely by way of electronic signature.
A general recommendation could be for Boards to conduct an assessment based on risk and to use a Qualified electronic signature for high-risk or high-stake agreements, and Advanced or Simple electronic signatures for medium/low-risk or internal documents and agreements.
Prepare the signing process
Whether to use an electronic signature, and which type, should be agreed upon ahead of the signing between all parties in order to enable a smooth signing process. If a Qualified electronic signature is chosen, it should be ensured that all signatories are in the possession of a qualified certificate issued by a QTSP.
The Board should get comfort that especially cross-border issues are properly assessed. It will be necessary to establish ahead of the signing, whether any additional formalities are triggered under applicable laws and regulations (e.g. law of formal validity of the agreement…). Local law requirements may exclude electronic signing for specific documents. Legal advice should also be sought on the validity and acceptance of electronic signatures in the jurisdiction in which any litigation may be required to be taken in the future.
Storage and archiving
After having fully signed the electronic document, Board members should be aware that the electronic version of the electronically signed document represents the “original” of the document. Printing of the electronically signed document may be useful for their personal records, but the printed document does not benefit from the electronic mechanisms that permit to protect the integrity of the document, nor from the means to check the validity of the various electronic signatures contained therein.
Depending on the nature of the electronically signed document, the proper storage or archiving should be well assessed as well. Simple storage in corporate folders might be appropriate for some low importance documents, whilst high-stake documents might need to be protected by long term electronic archiving which ensures the probative value of the signatures and the document.
Written by ILA Legal & Regulatory committee.
