E-Signature Regulations

European law background

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 and repealing Directive 1999/93/EC (“eIDAS”) sets out the basic rules for electronic signatures in order to create signature procedures that are as secure, trustworthy and easy to use as possible. It differentiates between three types of electronic signatures: simple, advanced and qualified. Each of these electronic signatures has a different security standard.
A simple electronic signature (“SES”) is data in electronic form that is attached to or logically associated with other electronic data and used by the signer to sign. For example, a scanned handwritten signature or a standard e-mail signature are to be considered SES. It is the least secure type of electronic signature.

An advanced electronic signature (“AES”) must, among others, provide a clear allocation to the person signing and enable the identification of the person signing. AES is created by using electronic signature creation data that the signer has under his/her sole control only. AES is linked to the signed data in such a way that any subsequent changes to such data is recognizable. The level of (technical) security of AES is beyond SES which makes it the medium secure type of electronic signature.

There is a number of service providers that provide AES. An AES may be generated by a software installed on a machine. This software provides a certificate/key with which data can be encrypted. One of the commonly known service providers is DocuSign Inc.
A qualified electronic signature (“QES”) is an advanced electronic signatures created by a qualified electronic signature creation device and based on a qualified electronic signature certificate. It is the most secure type of electronic signatures and has the same legal effect as a handwritten signature.

A QES usually requires a hardware device, e.g. a smartcard, which generates a certificate and a corresponding card reader. Due to its high (technical) requirements, QES is used in specific cases only. In Germany, all lawyers dispose of a specific lawyers’ mail account which meets the requirements of QES (the so-called besonderes elektronisches Anwaltspostfach – “beA”). Every lawyer in Germany is obliged to establish and maintain such beA. Such beA can, among others, be used to communicate with courts and/or authorities electronically or to serve letters to other lawyers. For other users, DocuSign Inc. also offers QES services.

Specifics in Germany

As eIDAS was established by the European Union (“EU”) it has direct effect in Germany. Accompanying procedural and detailing rules were introduced by means of the eIDAS Enforcement Act into German law. The prior existing rules on electronic signatures set out by the so-called Signature Act which was established prior to the release of eIDAS were abolished.

With a view to German dogmatic and German law, there is no form requirement for making a legal declaration and/or the conclusion of a contract, in principle. The parties to a contract may thus agree on the conclusion and contents of a contract even verbally. This is a fundamental principle of German contract law and its inherent principle of the freedom of contract.

As a matter of course, the parties may agree on a stricter form at their own discretion, for example on the so-called text form according to which a contract may, e.g. be concluded by e-mail, or written form according to which a contract needs to signed by hand. The strict written form requirement is particularly useful if claims will be enforced in court proceedings and one of the parties will have to present evidence for the existence and content of the contract. According to German procedural law, there is a presumption of completeness and correctness of contract documents which contain a handwritten signature.

Moreover, in the aforementioned cases, the parties to a contract may also agree on SES, AES or QES. The same applies to one-sided legal declarations.

However and in deviation of the aforementioned principle of freedom of contract, in some cases German law requires a contract/legal declaration to be made in written form. In this case, the parties may replace the handwritten form by QES only, unless the law provides otherwise.

The following legal declarations/contracts may be made by QES replacing the mandatory written form:

• court briefs, pleadings and other procedural documents;
• consumer loan agreements;
• temporary rental agreements and termination of rental agreements;
• objection by lessee to termination;
• leases based on stepped or index rent;
• temporary agency work agreement;
• Fixed term employment contract;
• Audit report on the annual financial statement;
• SEPA direct debit mandates.

However, there are legal declarations/contracts where the written form cannot be replaced by the electronic form (i.e. neither QES nor SES and AES). For example:

• termination of an employment relationship;
• contracts of surety;
• reference letter for employees;
• standalone promise to fulfill an obligation;
• acknowledgement of debt.

Also, the following legal declarations/contracts may not be made by QES – moreover, a formal notarial process is required:

• contracts to purchase or transfer real property;
• domestic/family related acts, including marriage contracts;
• contracts of inheritance, contracts waiving inheritance, inheritance sales;
• articles of incorporation of a company with limited liability;
• assignment of shares of a company with limited liability ;
• making the last will.