The prevalence and shift towards the use of digital documents in day-to-day transactions is both timely and relevant, particularly given current global circumstances which may render the physical signing and execution of key contracts and documents impossible or difficult to achieve.
Legality and Enforceability of Electronic Signatures in Bahrain
Pursuant to Legislative Decree No.(54) of 2018 on Electronic Transactions and Communications (the "Law"), Bahrain's digital technology framework is now in line with international market standards. The Law repeals Legislate Decree No.(28) of 2002 on Electronic Transactions and sets forth provisions governing transactions and dispositions of all types, including the legality and enforceability of electronic signatures in the formation of contracts. It must be noted though that the Law's implementing regulations have yet to be issued, currently leaving a number of issues as a matter of interpretation.
Under the Law, electronic records (the "Record") in the context of civil and commercial transactions, are afforded the same level of evidential weight as paper documents and are therefore valid and enforceable. Where a document requires information to be in writing, such requirement will be met by codifying the information in electronic form provided that the information is accessible in the same way that a paper document is accessible.
In assessing the weight of a Record, consideration will be given to the reliability of the following:
- the manner in which the Record was generated, stored or communicated;
- the manner in which the Record was signed (please see below);
- the reliability of the manner in which the integrity of the information was maintained; and
- any other relevant factors pertaining to the integrity of the Record.
Article 6 of the Law permits the use of electronic signatures provided that a method is used to identify that party and to indicate that party's intention to bind itself to the Record in question. Consent must therefore be obtained from a counterparty either expressly or through positive conduct. The signatory must also ensure that strong data protection regulations (including the security of hardware and software systems) are put in place. A declaration by a supervisory or accreditation body may also be required as a means of confirming the reliability of the method used to identify the signatory and the intention for the signed Record to be binding.
To create a digital signature, a signing certificate is required which proves identity. This certificate is usually issued by a public body or trust service provider, who itself should be authorised by the MOICT. There is a presumption under Article 7 of the Law that the signature on the Record is the signature of the person to whom it correlates by virtue of the certificate; that the date and time of the Record is accurate; and that the Record has been sent using a secure electronic delivery service provider and therefore the subsequent safe delivery and receipt of the Record by the recipient at the date and time of delivery. An accredited trust service provider shall not be liable where the person who relied on the certificate knew or ought reasonably to have known in the normal course of events that the certificate has expired or has been revoked or that the accreditation of the relevant trust service provider has been withdraw.
Given the current restrictions regarding physical proximity to one another there are various other provisions and techniques that can be implemented to avoid issues with the execution of documentation, namely:
- Counterparts – counterpart provisions are fairly common boilerplate provisions in most agreements, but remain more essential than ever given that the effect of such a clause is that separate copies of an agreement may be executed by different parties and each copy with be considered an original;
- Powers of attorney – existing powers of attorney provide an alternative solution to executing documents. However, executing new powers of attorney will present the same issues faced with executing other agreements; and
- Witness provisions – guidance states that for documents that require execution in the presence of a witness, such witness needs to be physically present; the witness cannot observe execution by electronic means. A workaround would be to execute the document in a venue with internal glass partitions, so that the individual can witness the execution and also maintain social distancing.
When it comes to executing documents electronically, it is essential that the method of execution will be regarded as valid, should such method ever be questioned. This should be discussed and agreed between the parties and professional advice sought as to the correct method of execution in the relevant jurisdictions.