With the Regulation on Electronic Identification and Trust Services for Electronic Transactions in the Internal Market of the European Union – in short: eIDAS Regulation, the exchange of digital signatures has been uniformly regulated throughout the EU since 2016. The eIDAS Regulation entered into force on 8 August 2014 through publication in the Official Journal of the EU. Businesses can benefit from the advantages of digital signatures within the EU.
The eIDAS Regulation specifies which requirements must be fulfilled technically in order for an electronic signature to be legally secure. Only the term electronic signature is legally defined in the eIDAS Regulation. eIDAS recommends that companies that need a high level of security in their digital transactions and information exchange use advanced or qualified electronic signatures. This is because it is the only type of signature that has the same legal value as a handwritten signature.
What types of electronic signature are there?
There are 3 types of electronic signatures: the simple, the advanced and the qualified electronic signature. According to European law, the simple and the advanced signature allow the text form. A simple electronic signature can be used to sign around 80 percent of all contracts. The difference between the simple and the advanced digital signature is that with the simple signature you do not have to prove your identity. With the advanced signature, the signatory must identify and register himself and two-factor authentication is required.
A qualified signature is required for fixed-term contracts such as employment contracts and tenancy agreements, which must be made in writing according to the law. It has the same legal effect as a handwritten signature. This can be achieved with a video-ident procedure, for example.
Simple electronic signatures (EES)
- Text form within the meaning of §126b BGB
- Admissible in court
- Very easy to use
- One-factor authentication
Advanced electronic signatures (FES)
- It is uniquely assigned to the signatory.
- It enables the identification of the signatory.
- It is created using electronic signature creation data that only the signer can use.
- It is linked to the data in such a way that a subsequent change is visible.
- It complies with text form as defined by §126b BGB and is admissible in court.
- It offers increased security through two-factor authentication.
Integrity and authenticity are guaranteed if the requirements for FES are met. FES may not be legally rejected just because they are in electronic form. Properly implemented FES are equivalent to a traditional handwritten signature. If the validity of FES is questioned, the burden of proof lies with the signatory.
Qualified electronic signatures (QES)
A QES is an advanced electronic signature created by a “qualified signature creation device” and based on a qualified certificate for electronic signatures. The technical requirements for QES are much higher. You have to be certified as a provider. A qualified certificate can only be obtained from a certification authority that is accredited as a Qualified Trust Service Provider (QTSP).
According to the eIDAS requirements, the system must ensure, among other things, that:
- Signature creation data is unique and may only occur once.
- Signature creation data cannot be derived with sufficient certainty and are securely protected against forgery.
- Signature creation data can be securely protected by the legitimate signatory against use by others.
- The generation or management of electronic signature-creation-data on behalf of a signatory may only be performed by a qualified trust service provider.
- only qualified trust service providers may manage electronic signature creation data.
The QES corresponds to the written form as defined in § 126 BGB (German Civil Code) and has the same legal effect as a handwritten signature. Thus, the QES has an increased probative value in court and performs an ID verification by TSP (electronic trust services).
EU Member States are obliged to recognise the validity of a QES created with a qualified certificate from another Member State. Furthermore, a QES is a legal equivalent to a handwritten signature.
The Qualified Electronic Signature is only required for:
- Fixed-term employment contracts
- Tenancy agreements for a fixed term or with graduated rent
- Notices of termination and termination agreements
- Agreements on post-contractual non-competition clauses
- To date, there are contracts that cannot be signed digitally by law.
Contracts that cannot be digitally signed include those that can only be signed before a notary.
Examples of these contracts are:
- Handwritten will
- Acquisition of real estate
- Termination of an employment contract
Which digital signature should be used for which type of contract?
Simply put, everything that is limited in time (employment contracts, tenancy agreements) or notices of termination and termination agreements cannot be signed with the simple or advanced electronic signature. All other contracts can be signed with the advanced signature.
With the INHUBBER signature, GDPR-compliant and legally secure, you can sign around 85% of all contracts.
Any contracts can be signed with the blockchain based INHUBBER signature. Contracts like:
- Rental contracts
- Purchase contracts
- Employment contracts for an unlimited period etc.
Two-factor authentication is provided by means of a password and a security key. Unlike the competition, the INHUBBER signature can sign any file format. For example, Excel spreadsheets, videos, photos, but also complete folders such as zip folders can be signed. INHUBBER also offers the highest security level for signing contracts. The contracts themselves do not leave INHUBBER’s encrypted storage. Instead, the invited signatories receive a “key” to the repository where the contracts are located. Thus, our users always have a DSGVO-compliant secure solution when working with their contracts.
Secure, fast and simple digital contract signing with the help of blockchain technology makes everyday work easier. Regardless of the file format, blockchain technology ensures maximum auditability and transparency during the entire signature process. Sign as many contracts as you like and always keep an overview, as every contract change is documented fully automatically and stored in a tamper-proof manner.
What about the international legal validity of the digital signature?
Digital signatures are now legally recognised in many countries around the world. However, there is no internationally uniform standard as there is for the EU countries. Companies doing business internationally must therefore deal with the legislation in the individual target countries.
A distinction is usually made between generous, two-tier and restrictive legislation. This means that in some countries with very generous legislation, such as Australia and Canada, simple digital signatures enjoy the same status as handwritten signatures. In some cases, however, the parties must have agreed to the use of digital signatures in advance, in the traditional way.
In restrictive national legislations, the digital signature is subject to strict country-specific laws that often do not legally recognise simple digital signatures. In the USA, the ESIGN Act was passed to ensure the validity of electronic signatures for the whole of America. It states that a contract cannot be declared invalid because of its electronic signature.
The eIDAS regulation was designed on the basis of existing global standards for electronic signatures and regulates much more than is required internationally. Therefore, a qualified digital signature according to eIDAS is usually also recognised internationally. But in individual cases, one has to look at each country individually.
A better chance of legal certainty can also be achieved by moving the place of jurisdiction for international contracts to the state in which the requirements for concluding a contract by electronic signature are less stringent.
What do companies have to consider in order for the signature to be legally valid?
All parties involved must agree in a binding manner that they agree to use this form of signature. This is done with a form clause. This could look like this, for example: “If you proceed, you agree that both parties will execute the agreement with an electronic signature.”
It is important that all steps leading to the signature are documented and recorded. Then, if necessary, the process can be proven in a later court case. This can be ensured with blockchain technology for transparent tracking.
How do I prove the contract in court?
Two points are particularly important for this. Firstly, the agreed form clause must be presented, showing that the conclusion of the contract was requested electronically. Secondly, the contracting party must be able to show that the parties signed the contracts electronically and that the form was observed. An advanced electronic signature, as provided by INHUBBER, is always better in any case if disputes arise later.
