EU/UK Cross-border transactions and eIDAS

In this guide, a reference to eIDAS is to Regulation (EU) No. 910/2014 on electronic identification and trust services for electronic transactions in the internal market. eIDAS has established an EU-wide legal framework for electronic signatures and other “trust services”.

Following the UK’s withdrawal from the EU, eIDAS was incorporated (with minor modifications) into UK law by the European Union (Withdrawal) Act 2018 (UK eIDAS).

The starting point to help determine whether an electronic signature is valid and enforceable is the Adobe jurisdictional legality guide (Adobe Legality Guide) (https://www.adobe.com/trust/document-cloud-security/cloud-signatures-legality.html).

This guide is aimed at customers domiciled in the UK and EU who are using Adobe Acrobat Sign to execute transactions with overseas entities or contract under the laws of an overseas jurisdiction (cross-border transactions). In cross-border transactions, it is vital that documents are executed in a manner that ensures their recognition, registration and potential enforcement in every relevant jurisdiction. A relevant jurisdiction is a territory within which the judgments or orders of a court may be enforced or executed.

In a perfect world, where a transaction involves (a) an overseas entity and/or (b) transaction documents subject to overseas governing law(s), a customer will obtain a foreign legal opinion from lawyers in each of the relevant jurisdictions confirming that:

• an electronic signature is a valid method of execution for the specific use case.
• the overseas entity has the corporate capacity and authority to enter into, and execute, the documents.
• the authorised signatories have the authority to execute the documents.
• the documents create valid, binding and enforceable obligations.

However, in the real world, it is often not feasible to obtain a foreign legal opinion for every transaction.

Here is a short guide to the electronic execution of cross-border transactions under UK and EU laws.

The Adobe Legality Guide will provide guidance on whether it is possible to execute the document electronically using Acrobat Sign. The governing law of the document may also prescribe the type of electronic signature, such as an advanced electronic signature (AdES) or a qualified electronic signature (QES) in certain use cases. For more information about the characteristics of AdES and QES, please see https://helpx.adobe.com/sign/using/legality-european-union.html.

2. Does thE jurisdiction Where the parties are incorporated permit electronic execution?

Once you have established that the governing law permits electronic execution of the relevant document, you should check that the jurisdiction in which the overseas entity is incorporated also recognises electronic signatures as a valid method of execution. Again, we recommend you consult the relevant Adobe Legality Guide.

National law seldom precludes electronic execution altogether. If an overseas entity is incorporated in a jurisdiction that does not permit electronic signatures in general or for the specific use case, you should not execute the document electronically.

3. Are there any restrictions on electronic execution in the constitutional documents OF THE OVERSEAS ENTITY?

Where possible, the constitutional documents of the overseas entity should be checked for applicable signature requirements. This includes reviewing any restriction on the use of electronic signatures or an express requirement for an AdES or QES.

It is also prudent to verify that the signatories are authorised to execute the documents. For example, you may request to see the board minutes authorising the signatories to sign on behalf of the overseas entity.

The identity of the directors may be confirmed by undertaking a search of the local companies registry (e.g. Companies House in the UK).

But customers will frequently not have the time or resources to investigate the constitutional documents of the overseas entity and the authority of the signatories to bind the overseas entity. In some jurisdictions, there are statutory protections for customers contracting with companies – overseas or otherwise. Section 40(1) of the Companies Act is one example in English law. It provides that, “In favour of a person dealing with a company in good faith, the power of the directors to bind the company, or authorise others to do so, is deemed to be free of any limitation under the company's constitution.”

4. Where is the document likely to be enforced in the event of a legal dispute?

The law of the jurisdiction where a document is relied on or enforced, and the rules of admission in evidence, may also be relevant.

Article 25(1) of eIDAS (and UK eIDAS) provides that an electronic signature shall not be denied admissibility in evidence solely on the grounds it is in electronic form. Thus, in a cross-border transaction, any document bearing an electronic signature will be admissible in legal proceedings before a UK or EU court to determine the authenticity or integrity of that document. But it is for the court to decide what evidential weight should be given to the signature. A QES will carry more evidential weight than other types of electronic signature.

Whether that document has been validly executed will, however, depend on the governing law. Article 2(3) of eIDAS (and UK eIDAS) allows EU member states and the UK to lay down any formalities for transaction documents they see fit. This means national law may stipulate that a particular type of signature such as an AdES, QES or handwritten signature must be used for a given document.

5. Is there a requirement to notarise the document?

Certain documents – particularly in civil law jurisdictions – may require notarisation. A notary’s chief function is to authenticate the execution of a document or to verify some fact or thing done.

Some notaries now offer electronic notarisation. In the UK and EU, this still requires the physical presence of the notary and the original signatory. This is not to be confused with “e-Notarisation” services available in the US where notarisation can occur remotely over a video link. Moreover, for overseas usage, many notarial documents must also be legalised with an apostille which is added to the notarial certificate to certify the authenticity of the notary’s signature and seal. In the UK, the apostille is issued by the Foreign and Commonwealth Office (FCO). The FCO is currently only able to issue an apostille in paper format which is affixed to a physical document. Until such time as the FCO can attach electronic apostilles to electronically signed and notarised documents, it will not be practicable for notarial documents emanating from the UK for use in the EU to be issued electronically.

6. Does the document have to be filed in a public registry?

You should consider whether any documents - such as land or security documents – are to be filed in a public registry.

In response to the COVID-19 pandemic, many public registries in the UK and EU have temporarily relaxed their requirements for handwritten signatures and will accept electronic signatures for registration purposes. See for example Adobe’s guidance on submitting deeds signed electronically to HM Land Registry (https://helpx.adobe.com/sign/using/adobesign-hmlr-requirements.html).

If a registry only accepts handwritten signatures, you will not be able to execute documents electronically, regardless of the legal position.

7. How does a QES facilitate cross-border transactions?

As the above guide shows, cross-border transactions pose additional challenges compared to purely domestic transactions.

A QES possesses legal advantages over electronic signatures that can help resolve the conflict of laws regarding the validity and recognition of electronic contracts. Article 25 of eIDAS (and UK eIDAS) provides that a QES has the highest level of admissibility in court and has the equivalent legal standing of a handwritten signature. Moreover, a QES based on a qualified certificate issued in one EU member state benefits from mutual recognition across the whole of the EU and in the UK.

If there is no legal requirement to notarise the document or sign with a handwritten signature for registration purposes, you should consider using a QES in cross-border transactions involving UK and EU entities. This is increasingly common in more regulated industry sectors such as financial services and healthcare, and in high value deals.

A QES also offers a higher level of assurance as to the identity of the signatory and the integrity of the document. This is because the signatory’s identity is verified by a “qualified trust service provider” (QTSP) whose activities are stringently regulated under eIDAS (and UK eIDAS). The QTSP issues a qualified certificate to authenticate that the signatory is who they claim to be, and which links the signatory to a key pair of public and private cryptographic keys.

The integrity of every document signed electronically using Acrobat Sign can be certified by a tamper-evident seal. But a QES provides even greater integrity because cryptographic signatures – generated and validated by the key pair - protect the integrity directly. The public cryptographic key cannot validate the QES if anyone has attempted to tamper with or modify the document.

In conclusion, the elevated legal standing of a QES makes it more probable that cross-border transaction documents will be valid and enforceable in relevant jurisdictions.