On 2 July 2015 the Luxembourg Parliament has adopted a comprehensive legal framework which allows to dematerialise documents (principally contracts and any pieces that support the entries in the accounting systems) and to store them electronically without loss of their probative value. Luxembourg is one of the first countries in the European Union having adopted such a legislation.
1. Why introduce new rules?
Provided a number of technical and other requirements are met, intended to guarantee authenticity and integrity, an electronic (or microform) copy of a document will be presumed to have the same probative value as the original, pursuant to the current rules of evidence set out in the Luxembourg Civil code. These requirements are laid down in a grand ducal regulation of 1986 (the "1986 Regulation").
The Commercial code requires undertakings to store all business-related information and documents (contracts, invoices, incoming and outgoing correspondence, etc.) for a certain period of time. Such documents, with the exception of the balance sheet and profit-and-loss statement, can be kept in electronic form (or microform) without losing its probative value provided the requirements of the 1986 Regulation are met.
The current legislation is not very well known and has certain shortcomings:
- an electronic (or microform) copy, within the meaning of the Civil code, will only be deemed equivalent to the original paper version if the latter no longer exists;
- some of the requirements are not in line with current archiving practices, e.g. the requirement that information be stored on a device where, once written, it cannot be modified (e.g., a "write once, read many" or WORM device);
- the company bears the burden of proving that the requirements of the 1986 Regulation are met.
In view of the foregoing, Luxembourg businesses have proved hesitant to dematerialise their documents, and the Luxembourg financial regulator, the CSSF, in its 2008 annual report, discouraged entities in the financial sector from doing so.
2. How do the new rules address these shortcomings?
After a burdensome elaboration and legislative process of more than 7 years, the Luxembourg Parliament has finally adopted the long-awaited E-Archiving Act (click here for all related legislative documents) and accompanying proposed grand ducal regulations. The E-Archiving Act will bring about the following changes:
- an electronic (or microform) copy of written agreements within the meaning of the Civil code and commercial documents that must be stored according to the Commercial code, will be deemed equivalent to the original even if the paper version still exists;
- the conditions of equivalence, laid down in a new grand ducal regulation, will be neutral from a technological perspective and in line with current archiving practices;
- the burden of proof of the compliance with these conditions will be shifted for undertakings that wish to dematerialise and store their business documents (including contracts) by electronic means provided they use a certified dematerialisation and conservation service provider;
- two new categories of "support" financial services professionals will be introduced.
3. What is a dematerialisation and conservation service provider?
Pursuant to the E-Archiving Act, any undertaking can perform document dematerialisation and conservation services in Luxembourg once it has obtained a general business licence.
However, only qualified dematerialisation and conservation service providers can certify that all conditions are met for an electronic (or microform) copy to have the same probative value as the original.
Undertakings can only obtain such a qualified status after certification by duly accredited organisms and after validation of notification by the Luxembourg Institute for Normalisation, Accreditation and Security (ILNAS). They will be certified on the basis of technical rules for certification that have been issued by ILNAS and that will be formalised by grand ducal regulation. These rules are based on international standards, such as ISO/IEC 15489:2001 on record management, ISO/IEC 27001:2005 and ISO/IEC 27002:2005 on information security management, and ISO 30301:2011 on operational management.
The E-Archiving Act also requires certified dematerialisation and conservation service providers to provide information to their customers about, amongst other things, the dematerialisation, conservation, copy, transfer and/or destruction procedures to be used as well as the contractual terms and conditions, prior to conclusion of the agreement. Customers have specific rights, as well, including the right to claim back dematerialised and/or conserved data if a certified provider is subject to insolvency proceedings or ceases or must cease its activities (due to loss of certification).
A certified provider must further guarantee that at least one copy of all the documents that it conserves, is conserved on fully owned (hardware) equipment. This naturally entails that the provider must be the owner of the server and other hardware material used for the conservation of the documents. The wording “at least one copy” seems, however, to grant some respite for providers by permitting recourse to third party (hardware) infrastructure for backup purposes. Such equipment and carriers cannot be the object of a seizure; a rule that for jurisdictional reasons can only apply for equipment and hardware on Luxembourg territory.
4. What about e-archiving in the financial sector?
When a Luxembourg-based financial sector professional (FSP) wishes to outsource document dematerialisation and/or conservation with preservation of probative value, it must in principle call upon a new category of "support FSP" which is authorised by the finance minister to conduct dematerialisation and/or conservation activities on behalf of FSPs. One of the conditions to obtain such an authorisation is first to obtain the general certification of a dematerialisation and conservation service provider under the E-Archiving Act.
Both the FSP and the support FSP must of course also abide by the CSSF's more general outsourcing rules.
5. What is the probative value of electronic copies in a cross-border context?
The new rules on the dematerialisation and conservation of documents are based on international standards and good practices. They will certainly contribute to the acceptance of dematerialised documents abroad, e.g., before a foreign court.
The cross-border acceptance of dematerialised documents, archived in accordance with the conditions laid down in the E-Archiving Act and its implementing regulations, will most likely be ensured by Regulation (EU) No 910/2014 on electronic identification and trust services for electronic transactions in the internal market (most provisions of which will apply as from 1 July 2016). Indeed, Article 46 of Regulation (EU) No 910/2014 foresees that “An electronic document shall not be denied legal effect and admissibility as evidence in legal proceedings solely on the grounds that it is in electronic form.” In other words electronic documents can only be rejected for reasons, e.g. lack of authenticity or integrity, that do not pertain to the mere fact that are in electronic form.
It goes without saying that in its new dematerialisation and conservation rules, Luxembourg is taking the lead in determining how the conditions of authenticity and integrity can be applied in practice and how the risk can be reduced that a foreign judge would reject an electronic document as evidence.