In July of 2016, the EU will enact the first phase of its new regulation on electronic identification. The Electronic Identification and Trust Services (eIDAS) law will be implemented with the aim of improving online convenience, confidence and trust. In addition to providing the framework for new EU electronic identification cards, the legislation will affect eSignatures, electronic seals and electronic registered delivery services.
This new regulation repeals the 1999 EU directive on eSignatures and will affect national laws that were enacted under it, such as the UK Electronic Communication Act of 2000. In part, this serves as an acknowledgement that the current laws around electronic signatures no longer serve the purpose for which they were intended – to increase trust in electronic transactions, promote cross border use of electronic signatures and take Europe a step closer to a single digital market. So why has the existing legislation failed to deliver?
Counteracting the confusion
Firstly, it is important to point out that the Directive was initially aimed at the European government, as opposed to the private sector. The idea was that eSignature and electronic identity would be amalgamated into one secure form of digital identity – the equivalent of an electronic passport. It was hoped that through providing this framework for governments, the private sector would follow by example and reap the benefits of a more connected digital market.
However, in hindsight, it seems that the original legislation tried to do too much at once. The fact that the directive consisted of guidance, as opposed to specific laws, meant that EU member states all followed different procedures. This caused a great deal of confusion, and resulted in some countries refusing to accept electronic documents from others, as there was a lack of consensus around what an authentic and valid transaction entailed.
The upcoming eIDAS regime serves to counteract any confusion around what constitutes a valid eSignature, because it requires member states to recognise each other’s electronic identification systems. This is perhaps the most significant step thus far towards the growth of a digital single market.
How should lawyers prepare for the eIDAS regulations?
One of the most common concerns around the eIDAS legislation seems to arise from the perception within the private sector that businesses must take some course of action to comply with the regulations. This is not the case. As previously stated, the directive is aimed at governments first and foremost, and the central regulation of trust service providers.
Until now, the confusion that has arisen as a result of different authentication standards in different countries, coupled with a fear of inadequate compliance, has served as a barrier to the digital single market. One of the core aims of the updated eIDAS regulations is to eliminate any fears that businesses may have around deploying a new approach to transaction management. The harmonization of trust services throughout the EU will simultaneously unify the private sector’s understanding of the available levels of identity assurance, and make it clear that the Regulation fosters flexibility and choice for private parties – there is no longer a “one size fits all” dilemma.
In terms of the advice lawyers should be providing to companies ahead of the legislation, it is important to approach the issue with a mind to solving problems, as opposed to creating them. Any guidance that lawyers provide to business about the regulations should ensure that they are better able to transact online with confidence as a result. Essentially, lawyers should focus on the impact of the legislation (or lack thereof) for businesses, and reassurance that there are really no new compliance requirements for the private sector.
What are the business benefits of a single digital market?
Whilst the EU eSignature directive will affect governments first and foremost, increased trust in electronic transactions across borders should lead to a culture of interoperability, co-operation and innovation throughout industry. eSignatures present a real opportunity for companies to take vital steps towards becoming a 100% digital business, and take advantage of all that this provides. Further legislation from the EU reinforces the original message from the 1999 and 2000 acts; electronic signatures are safe, secure and legally binding. In turn, wider recognition of these facts should help to speed up transactions across Europe.
In addition to improving the speed of transactions, the benefits of electronic identification are wide-ranging. Global enterprises are able to save millions by switching their paper-based legacy processes to digital. The ability to send documents across borders electronically will reduce printing and faxing costs, whilst increasing visibility of the status of a transaction – all of which can drastically reduce turn-around time.
From a legal perspective, the benefits are much the same. The ability to request signatures and process documents online can vastly reduce the time spent on administrative tasks such as printing, faxing, scanning, and overnighting documents. In addition, the eIDAS regulations will make it even easier to complete document-intensive processes such as asset purchase agreements, merger and acquisition agreements and board consents.
The consequences of clearer EU legislation on eSignatures and services will be initially felt by governments. However, the standardisation of trust services should in turn lead to far greater recognition of cloud-based services as a viable means of high-assurance online identity. For legal professionals, it is a case of ensuring that businesses are as well informed as possible about how the regulations will impact them.