What Should You Know About eIDAS When E-signing Business Contracts in the EU?

In the European Union, electronic signing is regulated by the eIDAS Regulation (electronic IDentification, Authentication and Trust Services), which came into force on July 1, 2016. The purpose of the eIDAS Regulation is to harmonize electronic identification and trust service standards across the EU, ensuring the security and reliability of electronic transactions. It grants electronic signatures and trust services legal status in all member states.

eIDAS establishes different levels of electronic signatures and defines requirements for qualified trust service providers, who are responsible for issuing certificates and ensuring the validity of signatures.

By using e-signing in compliance with the eIDAS Regulation, businesses and individuals can enjoy the benefits of e-signatures, including speed, convenience, and security, while being assured that their transactions comply with European Union regulations.

Types of Electronic Signatures and Their Legal Status in the European Union

The eIDAS Regulation in the European Union distinguishes between three types of electronic signatures, each with a different level of trust and legal status:

Simple Electronic Signature (SES)

This includes all electronic methods of signing that are not advanced or qualified electronic signatures. For example, this could be a scanned handwritten signature or a typed name at the end of an email. While simple electronic signatures are easy to use, they have a lower legal standing as they are easier to forge and more challenging to authenticate. However, there are varying levels of security even among simple electronic signatures, making it incorrect to categorically state they are unsuitable for use. In fact, many business contracts today are signed using simple electronic signatures.

Advanced Electronic Signature (AdES)

An advanced electronic signature must meet the following requirements:

• It is uniquely linked to the signer.
• It allows for the identification of the signer.
• It is created using means that the signer can reliably control.
• It is linked to the signed data in such a way that any subsequent changes to the data are detectable.

Advanced electronic signatures offer higher security and reliability compared to simple electronic signatures and are often used in business contracts and official documents.

Qualified Electronic Signature (QES)

A qualified electronic signature is an advanced electronic signature that is based on a qualified certificate and created using a qualified signature creation device. In the European Union, a qualified electronic signature has the same legal effect as a handwritten signature and is the most secure and reliable type of electronic signature.

Entrepreneurs should choose the type of electronic signature based on the importance of the transaction or document and the legal requirements. Using a qualified electronic signature ensures maximum legal protection and reliability, especially for cross-border transactions within the European Union.

Qualified Electronic Signature and Its Importance

A Qualified Electronic Signature (QES) holds the highest level of reliability and legal status in the European Union, equivalent to a handwritten signature. This is particularly important for cross-border transactions, as it ensures that signed documents are legally recognized and enforceable across all member states, reducing legal barriers and increasing trustworthiness. Using QES guarantees maximum security and legal validity for documents and transactions.

Why Is a Qualified Electronic Signature Important?

• Legal Validity: A QES is legally equivalent to a handwritten signature, ensuring the legal standing of documents and contracts throughout the European Union.
• Security: This type of signature provides a high level of security, protecting documents from unauthorized alterations and confirming the identity of the signer.
• Reliability: Qualified electronic signatures are based on trusted certificates that verify the identity of the signer and guarantee the authenticity of the signature.

How to Use a Qualified Electronic Signature?

To use a Qualified Electronic Signature, a certificate issued by a trusted service provider and a specialized signing device that meets eIDAS requirements are necessary. In Estonia, common solutions include the ID card, Mobile-ID, and Smart-ID, all of which enable the use of a qualified electronic signature.

Is It Necessary to Always Use an eIDAS Qualified Electronic Signature in Business Contracts?

Using electronic signatures in business contracts has become commonplace, but the question of whether a qualified electronic signature is always required depends on several factors, such as legal requirements, the value of the transaction, and the agreement between the parties.

General Principles

• Contractual Form Requirements: Some contracts legally require a specific form, such as written or notarized form. If the law requires a written form, a qualified electronic signature can replace a handwritten signature, as it has equivalent legal effect.
• Agreement Between Parties: If no specific legal form is mandated, the parties can agree on the type of electronic signature to use. It is essential that both parties are comfortable with the chosen signing method and that it meets their needs.

National Differences

The eIDAS Regulation harmonizes the use of electronic signatures, but member states have some flexibility in establishing their own requirements:

• Estonia: In Estonia, the qualified electronic signature (digital signature) is widely used and equivalent to a handwritten signature. This means that most business contracts can be digitally signed, provided that the legal form requirements are met.
• Other Countries: Practices may vary in other EU member states. For example, in some countries, the use of simple and advanced electronic signatures is common, though they may not always be considered equivalent to a handwritten signature. Therefore, it is crucial to understand the legislation and practices of the specific country before signing a contract.

Recommendations for Entrepreneurs

• Assess the Importance of the Contract: For significant and high-value contracts, it is advisable to use a qualified electronic signature to ensure maximum legal protection.
• Consult Local Experts: For international contracts, it is wise to consult local legal advisors to understand the requirements and practices regarding electronic signatures in the specific country.
• Use Trusted Service Providers: Choose electronic signing service providers that comply with eIDAS requirements and are recognized both in Estonia and other EU countries.

In summary, entrepreneurs are not always required to use a qualified electronic signature in business contracts, but its use provides higher security and legal protection, especially in cross-border transactions. For example, a qualified electronic signature is particularly beneficial in international contracts where the parties are in different member states, ensuring the legal validity of the document across the European Union. It is important to consider the nature of the contract, the legal requirements, and the agreement between the parties.

Trust eIDAS but Verify the Authenticity of the E-signature Yourself

If your business partner in another European Union member state uses their country's electronic signing method, it is crucial to understand how to verify the validity of such a signature and rely on it confidently.

The eIDAS Regulation (electronic identification and trust services regulation) establishes standards for electronic signatures, ensuring their legal validity across all member states. This means that if your partner's signature complies with eIDAS requirements, it is also legally valid in your country. However, how can you personally verify the authenticity of an electronic signature?

PAdES Format: A Universal Solution for E-signing

PAdES (PDF Advanced Electronic Signatures) is a format specifically designed for electronically signing PDF documents. Its advantage is that all the information necessary to verify the authenticity of the signature is integrated directly into the PDF file. This means that documents signed in PAdES format can be opened and verified using standard PDF readers, which simplifies cross-border collaboration.

Verifying Qualified Electronic Signatures

Qualified electronic signatures have the highest level of trust under the eIDAS Regulation and are equivalent to handwritten signatures. To verify their validity, you can, for example, open the signed PDF in Acrobat Reader and access the signatures panel to check which certificates were used for signing. For qualified signatures, the certificate will clearly show the name of the individual along with identification details, allowing you to confirm the signer's identity.

Non-qualified Electronic Signatures

For non-qualified signatures, much depends on the specific application used to create the signature. Some applications may add the name of the signing tool instead of the actual signer's name, making it difficult to determine who signed the document conclusively. In such cases, other supporting evidence, such as previous communication with the client, may be necessary if a dispute arises.

Agrello has addressed this issue with two additional measures. First, if the user has provided their name on the platform, it is included in the signing certificate. Second, all actions are logged in detail, reducing the likelihood of future disputes.

Summary

Electronic signing is an essential tool in today's business world, allowing documents to be signed quickly, securely, and efficiently. The eIDAS Regulation in the European Union provides a framework that harmonizes the standards for electronic signatures and ensures their legal validity across all member states. The choice of signature type depends on the importance of the business contract and the legal requirements involved.

A qualified electronic signature (QES) offers the highest level of reliability and is legally equivalent to a handwritten signature, but its use is not always mandatory. It is crucial to assess the importance of the contract and consider the specific regulations of each country.

For successful implementation of e-signing in businesses, it is recommended to consult local experts, use trusted service providers, and understand the legal implications of the different types of electronic signatures. Proper education and verification mechanisms help ensure the reliability of e-signatures and reduce legal risks that may arise in international business contracts.

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