E-Signatures and the EU — Boiling the Ocean Takes Time (Part 2)

- January 7, 2014 10:35 AM
Categories: Commentary, Industry News | Tags: ,

This is the second in a two-part article. Read Part 1 here, covering the EU’s ongoing efforts in codifying e-signatures.

The civil law countries love codification, so the appeal of this approach is understandable. However, remember that wet signatures (which this effort aims to replace, along with a lot of paper) really have no authority at all beyond the ink on the paper itself. There will still be transactions of a notary public nature (e.g. real estate, articles of association) where wet ink is needed – but a secure mode of signing is really all that’s needed to keep the business wheels turning. No need to overcomplicate things, especially not when evolving technology is involved.

Here in the US we have the Uniform Electronic Transactions Act (UETA), which aligns the various states’ and possessions’ rules regarding e-signatures, among other things. Note that Illinois, New York, and Washington have yet to adopt UETA, but they have other laws that address e-transactions. On the federal level we have the ESIGN Act, which was passed in 2000 to serve as a 50-state baseline for recognition of the enforceability and validity of electronic signatures. Essentially it’s the federal version of UETA.

Public Key Infrastructure, or PKI, is another need-to-know term. It refers to when the signer has one half (the private part) of the digital key used, and the other key is made available publicly (via the Certificate Authority) to access and validate that the content comes from the stated person.

The success we already see with firms like DocuSign and EchoSign using the PKI approach in the commercial sector proves the viability and need for a light, easy-to-use, yet secure signature approach. I covered DocuSign on Spend Matters Plus last week, links to which you can find below.

Note the final bullet in my DocuSign article regarding the insurance premium savings that should take place for firms that switch to e-signatures. To give you a specific example, CISCO has used e-signatures since 2002 (CISCO’s procurement group developed their own simple click-to-agree software for internal use, and they have been using it ever since). Since the switch, they have experienced only one lawsuit (where e-signatures was the critical factor)—a lawsuit they won. CISCO’s errors and omissions insurance premium has dropped considerably thanks to the use of this technology. Don’t leave these savings on the table!

To conclude, in the EU, short of a government mandate to use this approach, Spend Matters doesn’t see much use for this level of qualified complexity in the private sector. We’ll have to see if Europe (or elsewhere) rolls this out in conjunction with an invoice “clearing” mechanism along the lines of what is used in parts of Latin America – that would really be a way for the governments to gain full visibility into who bought what and on what terms. Transfer pricing is still a hot topic for many revenue services.

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