Electronic Signature Requirements: How to Stay Compliant in the US and EU

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When you’re creating a document with an electronic signature, it’s important to verify that each signature will be legally binding. Electronic signatures are considered equivalent to wet ink signatures in most jurisdictions – particularly in contracts that include an electronic signature clause, in which all parties explicitly agree that e-signatures are legally binding.

At the same time, however, electronic signature requirements do vary somewhat between regions. Let’s take a closer look at e-signature legal requirements in many key economic areas, and then dive deeper into what makes an electronic signature binding in the US and the EU.

Which legislation governs e-signature requirements in the US and EU?

The legislation governing e-signature requirements varies by jurisdiction. You may want to check the requirements of one of more of the following pieces of legislation:

United States: Electronic Signatures in Global and National Commerce Act

Background: Enacted in 2000, the E-Sign Act was introduced to facilitate the use of electronic records and signatures in commerce.

Key Provisions:

• Legalizes the use of electronic signatures in interstate and international commerce.
• Does not mandate the use of e-signatures; rather, it allows for their voluntary use.
• Requires that consumers give explicit consent to use electronic documents.
• Ensures that e-signatures have the same legal standing as traditional wet-ink signatures in commerce.

Comparison with Traditional Signatures: It validates the use of electronic signatures, ensuring they have the same legal weight as traditional signatures in the realms of business and commerce.

United States: Uniform Electronic Transactions Act

Background: Introduced before the E-Sign Act, UETA was designed to provide a legal framework for the use of electronic signatures and records in business transactions.

Key Provisions:

• Aims to harmonize state laws concerning electronic transactions.
• Recognizes the validity of electronic signatures and records in business transactions.
• Upholds the principle that electronic transactions have the same legal weight as those carried out with paper and ink.
• Supports the legal enforceability of electronic checks and other electronic financial instruments.

Note: Not all states have adopted UETA, though many have implemented laws that mirror its provisions.

European Union: European Directive 199/93/EC

Background: The electronic IDentification, Authentication, and Trust Services (eIDAS) Directive was established to provide a consistent regulatory environment for electronic transactions across EU member states.

Key Provisions:

• Sets out the rules and standards for electronic identifications and trust services, including e-signatures.
• Classifies e-signatures into three types: Simple, Advanced, and Qualified, each having a different level of security and legal standing.
• Ensures cross-border recognition of electronic IDs and trust services, promoting digital single market integration

Comparison with the U.S. E-Sign Act: While eIDAS encompasses a broader range of topics than the E-Sign Act, its provisions related to e-signatures aim to validate and encourage their use in online business transactions, paralleling the goals of the U.S. E-Sign Act.

E-signature requirements in the US

For an e-signature to be legally valid in the US, it must comply with all four main requirements outlined in the United States Electronic Signatures in Global and National Commerce (ESIGN) Act, as well as the Uniform Electronic Transactions Act (UETA). The four requirements are as follows:

Intent to sign

You must be able to demonstrate that all parties intended to sign the document. This requirement is the same as for wet ink signatures. In order to show intent to sign, you’ll need to document all of the following:

• Evidence of signing process: Showing steps taken by the signer leading up to and including the actual signing can establish intent.
• Acknowledgement: Signers often acknowledge their intent to sign by ticking a checkbox or clicking on a “Sign” button.
• Timestamp: Certain e-signature platforms automatically timestamp the exact moment of signing, further proving intent.

Consent to do business electronically

You need to have documentation showing that all parties agreed to do business electronically. In some cases, a court will accept the context of the interaction as evidence. But to be on the safe side, especially when dealing with customers, you’ll want to cover your bases. Here are some key terms to be aware of:

• Electronic signature clause: Many contracts or agreements include clauses specifically stating that both parties have consented to e-sign and transact electronically.
• Active consent: Platforms may require users to actively click an agreement or check a box confirming their consent.
• Implicit consent: Some situations, like continued electronic correspondence or actions, might imply consent.

Association between signature and record

You’re required to keep a record of the transaction that includes details about when and by whom it was created. This is sometimes known as an “audit trail,” and may be automatically generated by your e-signing software. The audit trail should include all the following:

• Details of signature: This includes information about who signed, when, and where.
• Document history: Any changes, annotations, or notes associated with the document can also be part of the audit trail.
• Signer authentication: Methods used to authenticate the signer, such as email verification, IP address, or multi-factor authentication, can also be recorded.

Record retention

All e-signatures need to be capable of retention and accurate reproduction. This means a one-off scribble isn’t legally valid on a contract, because there’s no way to verify who created that scribble, or how it was made. Electronic signature records must meet all the following requirements:

• Legibility: The record and signature should be clear and easy to read.
• Accessibility: Stakeholders should be able to access the document when necessary.
• Security: Measures should be in place to prevent unauthorized access, tampering, or loss.

Remember, while these are the primary requirements in the US, it’s crucial to consult with legal counsel and stay updated with the latest regulations to ensure compliance.

E-signature requirements in the EU

Within all 27 member states of the EU (as well as in Britain following Brexit), the electronic IDentification, Authentication and Trust Services (eIDAS) Directive distinguishes between three classes of electronic signatures:

Simple e-signature (SES)

An SES could be anything from a hand-drawn signature to a person’s name typed in an ordinary font. While an SES is technically an e-signature under eIDAS, it’s not secure, and isn’t considered legally binding without supporting proof of the signer’s identity and intent to sign.

Advanced e-signature (AdES)

This type of electronic signature can also take a variety of forms – but eIDAS specifies that it must comply with certain conditions in order to qualify. An AdES must be:

1. Uniquely linked to the signer
2. Capable of identifying the signer
3. Created using a private key controlled by the signer, and
4. Linked to the signer in such a way that changes to the data can be detected.

By complying with these requirements, an AdES can provide legal verification that a signer is who they say they are, and that they intended to sign. For these reasons, an AdES is considered legally binding on many types of documents in the EU.

Qualified e-signature (QES)

The tightest regulatory requirements apply to this type of e-signature, which is the most legally binding of all three types. That’s because a QES must be:

1. Created by a qualified electronic signature creation device (QESCD), and
2. Based on a qualified certificate for electronic signatures issued by a qualified trust service provider (QTSP).

In other words, a QES can only be created using specialized software, and must be validated by a human being who checks the signer’s identity at each signing event – typically by having them show a passport or other form of identification.

What’s more, each link between a QES and its TSP must be confirmed via public key infrastructure (PKI). This consists of a set of public and private keys that are uniquely associated with each other, providing a further layer of assurance that a signature is authentic.

Is there a difference between US and EU requirements for e-signatures?

Electronic signature legal requirements are very similar between the US and the EU. However, the EU does make sharper distinctions between the legal validity of simple e-signature (SES), advanced e-signatures (AdES), and qualified e-signatures (QES).

To some degree, the best type of e-signature you use depends on the nature of the document you’re signing. But in any case, you’ll want to have proof that all parties intended to sign, as well as an e-signature clause in which the parties agree to do business electronically. These requirements will ensure that each e-signature you collect is legally valid.

What legislation governs e-signatures in other jurisdictions?

The following pieces of legislation govern e-signatures in jurisdictions other than the US and EU:

United Kingdom: Electronic Communications Act 2000

This UK Act, based on the EU Directive, affirms the legal status of e-signatures related to encryption, communications, and data storage.

United Kingdom: Electronic Signatures Regulation 2002

Supplementing the 2000 Act, this regulation defines an e-signature in the UK as electronic data attached to or associated with other electronic data.

Canada: Personal Information Protection and Electronic Documents Act

PIPEDA governs consumer data privacy and aims to boost trust in e-commerce within Canada’s private sector.

Australia: Electronic Transactions Act 1999

This Act facilitates electronic transactions in Australia, ensuring they aren’t invalidated solely for being electronic.

India: Information Technology Act 2000

The IT Act grants legal status to electronic documents and digital signatures in India, with significant amendments made in 2008.

Japan: Law Concerning Electronic Signatures and Certification Services

Japan’s main e-signature legislation emphasizes the significance of electronic records and e-signatures to its economy and citizens’ quality of life.

China: Electronic Signature Law of the People’s Republic of China

Introduced in 2004, this law standardizes e-signature creation in China, ensuring they remain legally binding.

New Zealand: Electronic Transactions Act

Effective from 2003, this Act recognizes the importance of e-commerce and e-signatures, offering protections and enabling electronic communication with the government.

United Nations: UNCITRAL Model Law on Electronic Signatures

Adopted in 2001, the MLES provides a global benchmark for e-signature legislation, focusing on the certificates used in e-signature creation.

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