Financial institutions in the UAE financial free zones are having to rely increasingly on electronic signatures and records as they adapt to the new reality of doing business during the Covid-19 pandemic. In this article, we consider the validity and enforceability of electronic signatures and records under applicable law.
Since the Covid-19 outbreak, working remotely has become the new normal. This adds an additional set of challenges for FIs, which are subject to a regulatory requirement to maintain records and ensure business continuity. In that context, it is crucial for FIs to be able to continue to enter into valid and enforceable transactions, and keep electronic records which would have full evidentiary value, and satisfy their regulatory record-keeping requirements, using electronic means.
We set out below an overview of the legal frameworks in the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) regarding the use of such electronic signatures, with a quick reference to the UAE regime outside the financial free zones (Onshore UAE)).
What is an electronic signature?
An electronic signature can come in many forms, for example:
- a signature which is simply typed in to a document, including an email;
- a scanned image of a person's actual signature which is pasted into a document;
- a signature which is drawn on a web or app based system using a stylus or finger on a mobile phone, touch screen computer or a tablet;
- a tick-box or a clickable button on a webpage or in an email;
- a secure signature applied to a document using software which encrypts the signed document which is then authenticated by a third party certifier acting as a "witness"; or
- a secure (commonly referred to as "digital") signature which is authenticated using a private (unique to the each signatory) encrypted signature key embedded in the document itself.
Under DIFC Law
Electronic signatures are recognised and enforceable under DIFC law, with a few exceptions. The DIFC Electronic Transactions Law (ETL) ensures the validity, legal effect and enforceability of "Electronic Signatures", "Electronic Records", and contracts created by "Electronic Communications".
What is a valid Electronic Signature under DIFC law?
There is no prescribed form for an Electronic Signature under the ETL. An "Electronic Signature" is very broadly defined under the ETL to include an electronic sound, symbol or process, which is attached to or logically associated with a record, and executed by a person with the intent to sign the record. This means that a scanned copy of a signature affixed to document could be deemed to be an Electronic Signature.
An Electronic Signature can be attributed to the person signing the document if the signature "was the act of a person". The act of signature can be established in any manner, such as comparing a scanned signature to a counterparty's signature specimen or previously signed agreements. Finally, not all documents can be recorded or signed electronically. Powers or attorney, declarations of trust, wills, affidavits for evidential use in the DIFC court and real property transactions are excluded from the application of the ETL.
Can a FI rely on an Electronic Record?
An "Electronic Record" is defined under the ETL as any record which is created, stored or transmitted using electronic means. Under the ETL, a record is an Electronic Record if such record:
- preserves the information it contains and is able to be printed
- is retained in its original format or in a format which can accurately replicate the information it contains (such as a scanned copy)
- retains information on its origin and destination (such as the details of the sender and recipient) and its date and time.
This is a relatively low threshold for scanned documents or electronically generated documents (such as a .pdf file) to meet, provided these have not been tampered with (such as having their contents or metadata altered). Such records would also satisfy a record keeping requirement under DFSA rules.
Furthermore, the exchange of Electronic Records, such as an exchange of emails, or scanned copies of signed counterparts, is sufficient to form a valid contract under the ETL.
Under ADGM law
ADGM has not yet implemented any legislation dealing with the validity of electronic signatures. Therefore, in the absence of a specific ADGM law, the English law position would apply to the validity of electronic signatures.
Under English law, in order for a binding contract to be created, the key elements of offer, acceptance, consideration, intention to create legal relations and certainty of terms must be present. The application of these principles does not depend on the particular technology that is used to create the contract. Therefore, when seeking to contract by electronic means, the parties will need to consider whether the key elements for contract formation are present in the electronic communication or contracting process that is being used.
If parties wish to enter into a contract that is subject to certain statutory requirements, important questions arise as to whether the prescribed formalities can be satisfied by the particular electronic means adopted, and the extent to which a contract created electronically is capable of having the same effect as a traditional paper contract. In such a situation, the matter would need to be considered on a case by case basis.
Can ADGM FIs rely on electronic signatures?
The short answer is yes, in the absence of any (usually statutory) requirement for a wet-ink signature. Under English law (which applies in the ADGM), there is no need for contracts to be in any particular form; in fact, they can be entered into orally, provided there is offer and acceptance, consideration, certainty of terms and an intention to be legally bound.
We understand that unless a document is expressly required under ADGM legislation or regulations to be provided with a wet-ink signature, in hardcopy and/or notarised, it can be signed electronically. Therefore, a simple contract may be concluded using an electronic signature in the ADGM.
Under Onshore UAE law
To the extent that FIs are dealing with clients and counterparties in Onshore UAE, with a few exceptions, electronic signatures are recognised and enforceable under Federal Law No. 1 of 2006 on Electronic Commerce and Transactions (ECL). The ECL includes the same exclusions as those found under the ETL, with the addition of "negotiable instruments", which is not defined under the ECL, but we understand to include cheques, drafts, bearer bonds, some certificates of deposit, promissory notes, and bank notes.