Electronic signatures have been recognised in under Hong Kong laws as early as January 2000 with the enactment of the Electronic Transactions Ordinance (Cap. 553) (“ETO”).
Given the current social and travel restrictions put in place to combat the COVID-19 pandemic, and where “work from home” is becoming the new normal for many businesses including law firms, the usage of electronic signatures is becoming more and more common.
This article provides a summary of the current legal framework governing electronic signatures in commercial settings and in litigation settings.
Requirements of E-Signatures
ETO draws a distinction between Electronic Signatures and Digital Signatures (collectively, “E-Signatures”). Electronic Signatures are defined to mean “any letters, characters, numbers or other symbols in digital form attached to or logically associated with an electronic record and executed or adopted for the purpose of authenticating or approving the electronic record”. Digital Signatures, on the other hand, are a more complicated form of E-signature.
Provided that an Electronic Signature complies with the requirements set out under ETO, Electronic Signatures are considered to be valid and enforceable, and share the same legal status as traditional “wet-ink” signatures, for transactions not involving any government entity. The requirements for Electronic Signatures are provided under Section 6(1) of the ETO as follows:-
- the Electronic Signature must be attached to, or be logically associated with, the electronic message for the purpose of identification and indicating his/her approval of the information in the electronic message;
- the method used to apply the Electronic Signature must be reliable and appropriate for the purpose for which the signature is required; and
- the recipient of the electronic message must consent to the use of Electronic Signatures.
Currently, there are no express requirements for the format of Electronic Signatures.
Where the transaction involves a government entity, Digital Signatures must be used. They are required to be:-
- supported by a recognised certificate;
- generated within the validity of that certificate; and
- used in accordance with the terms of that certificate.
Limitation of E-Signatures
Schedule 1 of the ETO sets out a list of documents that are not suitable to be electronically signed i.e. must be executed with traditional wet-ink signatures. They include a will, codicil or any other testamentary documents, documents in relation to the creation, execution, variation or revocation of a trust, documents in relation to the creation, execution, variation or revocation of a power of attorney, documents required to be stamped or endorsed under the Stamp Duty Ordinance (Cap. 117), Government conditions of grants and leases, documents referred to under the Land Registration Ordinance (Cap. 128) including documents effecting a floating charge , any assignment, mortgage or legal charge within the meaning of the Conveyancing and Property Ordinance (Cap. 219) or relating to interest in immovable property, oaths and affidavits, statutory declarations and negotiable instruments.
Further, the ETO explicitly excludes the application of E-Signatures to court proceedings in relation to any information given, presented or retained, documents served, or signatures required unless any rule provides otherwise. We anticipate that there will be future developments in this regard, especially with the passing of the Court Proceedings (Electronic Technology) Bill to facilitate electronic filing on 17 July 2020. Currently, there is no information as to when this Bill will come into force.
As a closing note, we set out below some practical considerations when using E-Signatures in Hong Kong:-
- Check whether the document is one permitted under the ETO to be signed electronically.
- Check whether there are other requirements e.g. registration requirements, filing requirements and the counterparty’s requirements in relation to E-Signature.
- Consider whether E-Signatures are equally valid and enforceable in other jurisdictions or whether there are additional requirements to execution of documents by electronic means in cases where the document is a multi-jurisdictional document.
- Parties should verify and satisfy themselves that the E-Signature identifies with the signatory.
- Consider whether to include express terms in relevant contracts binding E-Signatures.
- Consider whether the document will have to be notarised in the future and/or whether the execution must be witnessed.
Contact us today if you need assistance in contractual matters and relevant execution advice.