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139 IN ECOM 1 we examined the concept of an electronic signature and the legal definition of what constitutes a signature. We also considered the various uses of manual signatures and examined legislation passed in several jurisdictions to implement an electronic signature infrastructure.243 We raised four questions for submissions:
140 One of the options which we raised was the possibility of defining the term “signature” in the Interpretation Act 1999 in a manner consistent with the thrust of article 7 of the Model Law. Under article 7, the elements of the functional equivalent to a signature are the need:
141 Article 7 only applies where a signature is a requirement of law. Where a signature is not required by law then the normal rules in relation to proving an agreement apply.
142 Submissions commenting on electronic signatures were received from Kensington Swan, New Zealand Post, the Information Technology Association of New Zealand (ITANZ), the Ministries of Commerce and Consumer Affairs, the New Zealand Law Society, Telecom, the New Zealand Bankers Association and the Government Communications Security Bureau (GCSB). Not all submitters made comments on each of the four questions.
143 In relation to question 14, it was agreed that electronic signatures should have the same effect as manual signatures, that statutory reform is necessary and that minimalist, technology-neutral legislation should be adopted. The great majority of submissions favoured legislating along the lines of article 7 of the Model Law.
144 In relation to question 15, submitters were of the general view that legislation should not specify acceptable standards for electronic signatures. The majority of submitters felt that standards of security and reliability should be left for the market to develop. Many submitters were of the view that one form of electronic signature technology would be unfairly advantaged if legislation specified technical standards; it was noted that adverse economic consequences for New Zealand businesses could result if prescribed standards were quickly superseded. It was also submitted that prescribing standards would be contrary to the principle of technological neutrality. Several submissions argued that any specification of standards would restrict rather than extend the range and application of the law. However, a number of submitters argued that some standards are necessary. For instance, the GCSB was of the view that there is a need to establish a standard for electronic signatures so as to facilitate their widespread use. To do otherwise was thought to result in a proliferation of systems, which might lead to incompatibility between those systems and a consequent impediment to their use.245
145 In relation to question 16, submitters agreed unanimously that there is a need for an electronic signature infrastructure. All of the submitters were of the view that State intervention and regulation is not required and that the private sector can develop an adequate infrastructure. Many submitters argued that establishing an electronic signature infrastructure is not a matter which requires law reform.
146 In relation to question 17, all of the submissions received were against the State assuming responsibility for the implementation of an electronic signature infrastructure. Submitters considered that the State should only play a minimal role in facilitating the use of electronic signature technology. It was generally agreed that the State’s role in encouraging the use of electronic signature technology should be limited to enacting legislation making electronic signatures equivalent to manual signatures.246
147 We set out, in appendix E, a summary of developments which have taken place overseas since publication of ECom 1. Those developments are limited to national laws and the European Commission Directive. The purpose of the summary in appendix E is to identify the way in which other States are approaching electronic signature legislation.
148 In February 1999, the UNCITRAL Working Group on Electronic Commerce held its 34th working group session. The Working Group considered the work which had been undertaken by UNCITRAL in relation to electronic signatures.247 The report of the Working Group on the work of its 34th session248 instructs the Secretariat to prepare revised draft rules for consideration by the Working Group at a future session. A further session of the Working Group took place in Vienna from 6–17 September 1999.249 It is conceivable that the Working Group will conclude its work in February 2000.
149 The work of UNCITRAL on electronic signatures is, we believe, of primary significance to New Zealand. For reasons which we will outline shortly, we recommend that article 7 of the Model Law be adopted into our proposed Electronic Transactions Act. Adoption of an equivalent to article 7 will enable a court to consider the reliability of the electronic authentication device in determining whether a document should be regarded as “signed” for the purposes of specific legislation. As noted previously, this will involve questions of fact and degree. An email message from A to B purporting to guarantee the debt of C in the sum of $20 may well be regarded as acceptable by the court for that purpose, but a similar message guaranteeing a debt of $1,000,000 is not likely to be regarded as sufficiently reliable. Likewise, a simple email message is most unlikely to be regarded as sufficient to constitute a “signature” for the purposes of an agreement for sale and purchase of land to which section 2 of the Contracts Enforcement Act 1956 applies.
150 When the court assesses the “reliability” of an electronic equivalent to a manual signature, the risk of fraud being perpetrated will be one of the major factors considered. If a contract for the sale and purchase of land is entered into between two parties using accepted public key infrastructure (PKI) systems,250 for which there is a certificate of verification available from a reputable company, that is likely to give weight to the view that the electronic signature is sufficient.
151 Any electronic signature regime must take account of the different levels at which business is done. For those involved in high value transactions or specific projects, particular contractual documents are likely to record fully the way in which parties will be bound when, for example, varying the terms of a contract. For small to medium sized enterprises engaging in electronic commerce over the internet, different considerations apply as one-off contracts will rarely be cost effective. Consumers entering into contracts over the internet are likely to be faced by standard form contracts imposed by persons with whom they deal who may be offshore.
152 The UNCITRAL Working Group on Electronic Commerce is currently reviewing questions of attribution of electronic signatures, the relationship between the proposed uniform rules and the Model Law, the definition and minimum qualities of certification authorities, cross-border recognition of certificates, and revocation and suspension of certificates.251 In our view, the question whether New Zealand should adopt more sophisticated electronic signature legislation should await the outcome of UNCITRAL’s further work. If norms can be agreed among the States which contribute to UNCITRAL’s work, then there may be merit in New Zealand going further and adopting legislation which deals with a higher level of electronic signature. New Zealand was represented at both the February 1999 and September 1999 UNCITRAL meetings by Paul Heath QC. Matters raised in submissions for ECom1 in relation to electronic signatures were put before the UNCITRAL Working Group meeting by the New Zealand delegate.
153 We have come to the view that article 7 of the Model Law should be enacted into New Zealand law so that immediate barriers caused by statutory references to “signing” can be removed. This position was supported generally by the submissions made to us in response to ECom 1. The way article 7 is framed will allow the courts to exercise judgment in determining what type of electronic signatures can be used in lieu of a manual signature.252
154 We also recommend that no further action be taken in the meantime to deal with what we term “enhanced electronic signatures”. By the term “enhanced electronic signatures” we refer to the electronic equivalent of manual signatures which are required to be enacted in a particular form and with more than just a physical signature from the person concerned.253 In our view the question whether any further legislative action is required should await development of the work of the UNCITRAL Working Group on Electronic Commerce.
155 Submitters favoured a minimalist approach from Government and, to the extent that a detailed infrastructure for electronic or digital signatures was considered appropriate, leadership of such development by the private sector. Although some States have adopted prescriptive legislation designed to provide a framework within which the PKI for digital signatures can operate, it is our view that legislation of that type would both:
Accordingly, we do not support the introduction of legislation of that type in New Zealand.
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