Various measures have been implemented to help Luxembourg funds and companies tackle the impact of the COVID-19 outbreak. These can be found here. In a context where limited travel and social distancing are the rules, the interest in electronic signatures is now widespread.
On July 17, 2020, a new law on e-commerce and electronic signature (the “E-Commerce Law”) was implemented which does not fundamentally change the legal framework of e-signatures in Luxembourg, however its clarifications and legal certainty are useful.
WHAT CHANGES WITH THE E-COMMERCE LAW OF JULY 17, 2020?
In short, not much.
The E-Commerce Law was enacted in order for Luxembourg to fully comply with European Regulation 910/2014 on electronic identification and trust services (the “eIDAS Regulation”). The E-Commerce Law repealed or amended any provisions of the previous Luxembourg law of August 14, 2000, that were not in line with the eIDAS Regulation. The E-Commerce Law also repealed provisions under which no person may be forced to sign electronically as this was inconsistent with other Luxembourg laws (e.g., some filings with the Luxembourg trade and companies register already required e-signatures). This change is expected to incentivize signatories to execute documents electronically.
The E-Commerce Law clarified the powers and authority of the Institut luxembourgeois de la normalisation, de l'accréditation, de la sécurité et qualité des produits et services (the “ILNAS”) over Luxembourg trust service providers and qualified trust service providers through ex-post and ex-ante supervisory controls. Notably, the ILNAS now has the power to fine the trust service providers up to EUR 15,000 for certain violations (e.g., when refusing to provide documents or to cooperate).
Finally, the E-Commerce Law brought some clarity to the rules applicable to the trust service providers by making direct references to the eIDAS Regulation.
TYPES OF ELECTRONIC SIGNATURES
Under the eIDAS Regulation and the E-Commerce Law, there are three types of electronic signatures: (1) the simple electronic signature, (2) the advance electronic signature, and (3) the qualified electronic signature.
The Standard E-Signatures (the “SES”)
SES are the most simple e-signatures. A SES is a scanned copy of a handwritten signature, inserted electronically in a scanned PDF document (as opposed to signing a document and scanning it). The SES is widely used in practice but the validity can more easily be challenged.
The Advanced Electronic Signature (“AES”)
AES are becoming more and more widespread, especially since the COVID-19 outbreak. Four cumulative criteria must be met of an electronic signature to qualify as an AES. The signature must:
- Be uniquely linked to the signatory’ ID in a unique and non-transferable manner;
- Allow for the identification of the signatory;
- Have been created from data that the signatory can use under his sole control; and
- Be linked to a document in such a way that any subsequent change in the document is detectable.
Many very accessible platforms and software services allow users to sign with AES which makes this type of e-signature widely accessible.
The Qualified Electronic Signature (the “QES”)
A QES is a stricter form of electronic signature but also the only one that is equivalent in all respects to a handwritten signature. In order for an e-signature to qualify as a QES, all of the above four criteria mentioned in respect of the AES must be met and the signature must be certified by a qualified certificate (i.e., a certificate issued by a trusted service provider).
Trusted service providers are listed on the “trusted list” published by the competent European national authorities. The complete list of trusted service providers is available here. In Luxembourg, the trusted list currently includes BE Invest International S.A. and LuxTrust S.A.
LEGAL VALUE AND BURDEN OF PROOF OF E-SIGNATURES
All e-signatures are theoretically valid. There is a principle of non-discrimination under the eIDAS Regulation that states that e-signatures shall not be denied legal effect and admissibility solely on the basis that they are in an electronic form or that they do not meet the requirements of a QES.
However, all e-signatures are not born equal and they do not have the same legal value as shown in the table below.
Types of
E-Signature |
Legal Value |
Burden of Proof |
| SES |
Less than a Prima Facie written evidence
|
The burden of proof bears on the person relying on the validity of the signature.
|
| AES |
Prima Facie written evidence (commencement de preuve par écrit)
|
AES are not presumed to be valid but the claimant can rely on the AES as one element of a wider body of evidence to prove the validity of the signature.
This means that there is in a wider margin of appreciation for the judge to assess whether an AES is acceptable or not.
|
| QES |
Similar by all counts to a wet-inked signature
Benefit from the principle of mutual recognition in the European Union
|
QES are presumed to be valid until proven otherwise. The burden of proof bears on the person challenging the validity of the signature.
|
PRACTICAL EXAMPLES
QES might be imposed or recommended depending on the circumstances. For example, in Luxembourg, QES is necessary for VAT declarations or for any filings with the Luxembourg trade and companies register. It is also recommended for agreements or contracts with a higher risk of being challenged.
In practice, AES is becoming more prevalent in all types of documents at the various stages in the life of a fund (i.e., signature of a limited partnership agreement, a subscription agreement, a service agreement, side letter, drawdown notices, transfer agreement, etc.). When using an AES or an SES, additional evidence (such as emails) should be collected by the signatory.
In terms of corporate governance (minutes of board meetings, shareholder resolutions, written resolutions, etc.), it is becoming practice to use an SES. In such cases it is advisable to collect originals at a later stage.
The Commission de Surveillance du Secteur Financier (the “CSSF”) has confirmed that SES/SEA and SEQ can be used for all CSSF formalities such as marketing notifications to the relevant EU member states.
It should be noted that electronic signatures cannot be used in all circumstances. Notarial deeds, contracts creating or transferring real estate ownerships, contracts requiring by law the involvement of courts, public authorities, etc. still require a hand-written signature.
