The space of technology is fast paced and its developments in the past decade alone have over exceeded anybody’s imagination. Regulation has no option but to attempt to keep up as much as possible with the ways and means in which the technology evolution, or rather revolution is occurring.
In the world of business, technology plays an important role and with exceedingly more transactions occurring online, where the validity of these transactions needs to, not only be secure but also legally compliant with applicable laws.
In order to understand if e-signatures are valid, it is important to first understand what creates a binding contract in UAE that will lead us to the evolution of electronic transactions and its validity. The UAE Civil Code carves out the essence of what forms a contract, “A contract is the meeting of an offer issued by one of the contracting parties with the acceptance made by the other party and their concordance in such a manner as to produce their effect on the object of the contract and results in a binding obligation on each party in consideration of the obligation of the other party. A meeting of more than two minds may agree to produce a legal effect.” The Emirate of Dubai was a pioneer in confirming validity of contracting through electronic messaging when it issued an Electronic Transactions and Commerce Law in 2002.
In 2006, a federal law was issued concerning electronic transactions and commerce and this law cemented the acceptance of contracts through electronic message through the Emirates. This law permitted conclusion of contracts between confidential electronic mediums that include two or several electronic information systems. This law defined the electronic signature as Any letters, numbers, symbols, voice or processing system in electronic form applied to, incorporated in, or logically associated with a Data Message with the intention of authenticating or approving the same. The criteria of electronic signature security are defined in Article (18) and include the provisions that shall apply where, on or before sending a Data Message, or by means of that Data Message, the Originator has requested or has agreed with the Addressee that receipt of the Data Message be acknowledged.
This law also set out what constituted protected electronic signatures and states that ‘protected electronic signatures are legal in the UAE unless proven otherwise. E-signatures become protected if:
- it is attributed only to the person who used it.
- it is possible to prove the identity of that person.
- it is fully controlled by him whether concerning its creation or usage at time of signing.
- it is connected to the concerned electronic message by a link that provides reliable proof as regards the signature validity, accordingly if the electronic record is changed, the electronic signature will no longer be protected.’
Interestingly under this federal law, the party relying on the electronic signature or electronic authentication certificate shall be responsible for all the risks that result from the non-validity of that signature or certificate unless otherwise established. This being stated, the entity/person using the electronic signature is governed by certain rules of conduct enlisted in this law such as:
- not use his signature tool unlawfully.
- exert reasonable effort to preclude using his signature tools by unlicensed usage.
- notify the concerned person without any unjustifiable delay, in the instance of:
- The signer’s knowledge that his signature tool is exposed to what indicates doubts in its safety.
- If established due to the circumstance acknowledged by him that his signature tool is exposed to what evoke doubts.
- exert reasonable efforts to ensure precise and perfection of whatever he submit of statements and essential declarations related to the electronic authentication certificate at its effectiveness period, these are the instances in which the signature tool requires the use of this certificate.
The signer is responsible for his failure to comply with requirements of the rules of conduct stated in this federal law.
In a strong move to align laws, the Law of Evidence of 1992 was amended in 2006 to permit admission of evidence submitted electronically.
Accordingly, Cabinet Decision No. 18/2020 Granting a Temporary License to a Project of Technologies of Digital Transactions in the Works of Notaries Public authorized in its article (4) on Validity of Electronic Signature that electronic signature and electronic documents issued in accordance with the provisions hereof shall have the same validity prescribed for the signature or the official paper documents stipulated in Federal Law No. 10/1992 referred to above.
Appropriately, UAE legislator recently operated a significant amendment of the general regime of evidence law by extend the acceptance of electronic signature to notarized and private contracts. Federal Law No. 10/1992 On Evidence in Civil and Commercial Transaction amended by Federal Decree-Law No. 27/2020, dated 27/09/2020 states for the notarized contracts in Article (7) that Official documents are electronic or paper documents in which a public officer or a person in charge of a public service records, in the manner prescribed by law and within the limits of his powers and competence, actions that have been performed in his presence or statements that have been made thereto by the concerned parties. For private contract the article (12) was amended innovatively to state that A customary document – whether electronic or paper – shall not be enforceable towards third parties as to its date, until it has acquired an established date. The date of a document shall be deemed established in the following instances: as of the date on which it is considered established according to the relevant electronic laws in this regard.
The UAE Courts now validate and accept electronic signatures at par with physical signatures, and electronic signature, writings, correspondence, registers, and documents are deemed to have the same binding force in comparison to signature, writings, correspondence, registers and official and customary documents that may be in original paper and pen version as long as it fulfills the other criteria set out by applicable laws.
With regards to submitting electronic evidence in UAE Courts, an electronic document cannot be rejected on the sole ground that it is electronic, and all provisions under the UAE Evidence Law admits electronic versions of documents. To prove inadmissibility of electronic evidence, one will need to prove in-authenticity of the information source, lack of credibility of the method used to secure such information, lack of trustworthiness of the source, or lack of legitimate identity of the author of the information. We can only conclude therefore, that the biggest hurdle to overcome when dealing with electronic documents or submissions is confirming the authenticity and origin of the electronic documents especially in cases where one or more parties dispute the admissibility.
Dubai International Financial Center (DIFC) was the first UAE Financial Free Zone to recognize the electronic signature in 2017. Law No. 2/2017 on Electronic Transactions Law admits the same. Article (21) states that where any provision set out in any other DIFC law requires the signature of any person, or provides for certain consequences if a document or a record is not signed, that provision set out in the other DIFC law is satisfied if an Electronic Signature is used.
The provisions of the DIFC Law do not apply to:
- The creation, performance or enforcement of a power of attorney.
- The creation, performance or enforcement of a declaration of trust (with the exception of implied, constructive and resulting trusts) and any provision in the Trust Law 2005 (DIFC Law No. 11 of 2005, as amended) requiring information to be written or in writing.
- The creation and execution of wills, codicils or testamentary trusts.
- The creation, execution and use of affidavits or affirmations as evidence in court proceedings pursuant to rule 29 of the Rules of the Dubai International Financial Centre Courts 2014.
- Transactions involving the sale, purchase, lease (for a term of more than ten years) and other disposition of immovable property and the registration of other rights relating to immovable property.
In 2021 the Abu Dhabi Global Markets (ADGM), UAE capital’s growing Financial Free Zone issued its own Electronic Transactions Law admitting the legal recognition of Electronic Signatures (Article 12), its validity (Article 13), identification of the signatory (Article 14) and the Admissibility of Electronic Signatures in evidence. Article (15) states expressly that in any proceedings before the Court, evidence of a signature includes an Electronic Signature.
In 2020 since most government departments moved online, several departments started accepting applications for various processes through online portal where these may not always have been the case. The Dubai Government launched a Smart Dubai 2021 initiative where in the year 2021 it has been initiated for all government processes to be moved online and to go paperless thus paving the way for most digital contracts and e-signatures to be accepted online.
There are exceptions to the rule even though electronic signatures are recognized, for example with respect to the following documents that cannot be legalized by electronic signature (bearing in mind that this list is not conclusive):
- documents with formal notarization requirements
- family law contracts (marriage, divorce, wills, etc.)
- deeds of title to real property
- negotiable instruments like cheques
- transactions involving the sale, purchase, lease (for a term of more than 10 years) and other disposition of real property and the registration of other rights relating to real property
- securitization documents
- corporate articles
- any other documents or transactions exempted by special provision of law or by regulator
There may be exceptions to the rule followed or amended by practice, policy or regulation and it is always advisable to check the validity with a lawyer or legal advisor prior to proceeding further, depending of course on a case-by-case basis.
Finally, the publication by The UAE’s Securities and Commodities Authority (SCA) of “The Authority’s Chairman of the Board of Directors Decision No. (21/R.M) of 2020 Concerning the Regulation of Crypto Assets opens door to the newest generation of digital signature: Blockchain based secured E-signing Solution.