Since their inception over a decade ago e-signatures have become a part of every day life. They come in a variety of forms, including bank card PIN numbers, clicking the "I accept" button when buying goods and services online or signing on an electronic mobile device. However, the advent of the digital age and the recent explosive growth in mobile technologies has greatly increased the potential for e-signatures to be used widely in business.

Traditional businesses have realised that e-signature technology can be adapted and used to streamline day-to-day transactions. The potential benefits are well documented; accelerated transaction cycle times, increased flexibility, reduced transaction costs and more reliable identity authentication, to name but a few.

So what is the legal status of an e-signature in the Middle East? Should we all be preparing to put down our pens and pick up our ipads?

This legal update addresses the risks and highlights some of the issues to bear in mind when considering adopting e-signatures, in contracts with consumers or other businesses, in the Middle East.

The rise of the e-signature

The worldwide retail and leisure sector has unsurprisingly led the way in the use of e-signatures; keen to meet consumers’ expectations of carrying out instantaneous transactions. However, the benefits have not been lost on businesses operating in sectors which are traditionally more conservative.

Communication Intelligence Corporation, a US provider of e-signature solutions, acknowledged in November 2012 that a major US financial services company has now integrated e-signature capabilities with its annuity sales technology platform. In the financial services sector, where security and legal compliance is paramount, this development demonstrates that the e-signature technology available in the market is capable of meeting the highest bar; vital in a world where cyber security threats are on the increase.

Players in the wider technology market have also recognised the potential value in e-signature solutions, demonstrated most notably by Adobe’s acquisition of e-signature solution provider EchoSign in 2011 and Google’s venture capital investment in DocuSign in August 2012.

What is an e-signature?

E-signatures are incorporated in an electronic communication or electronic data and purport to establish the authenticity and/or integrity of that communication or data. Digital signatures are a particular class of e-signature that rely on a form of encryption (known as asymmetric cryptography) to authenticate messages. Encryption involves encoding the data being sent to ensure that only the intended recipient will be able to decode it.

An e-signature can be used in transactions with consumers or with other businesses and can be attached to any digital content, including contracts, correspondence, images and emails. All that is required is some purpose built software. There are a vast number of commercial providers of e-signature solutions, mainly based in the US. DocuSign acknowledged earlier this year that around 15 million people worldwide have executed documents in 188 countries using its solutions.

E-signatures in the Middle East

While e-signatures are being widely used in the US and Europe, the adoption of e-signature technology in the Middle East has been less prevalent.

The development of laws governing electronic transactions is at different stages across the different jurisdictions in the Middle East. Before adopting e-signatures, it is imperative to understand the legal framework in your own jurisdiction.

The key issues in relation to the use of e-signatures are: a) does the law recognise them as valid?; b) are there any key criteria that an e-signature must meet in order to be effective?; and c) will they be admissible as evidence in court in the event of a dispute between the parties to the agreement?

Generally speaking, e-signatures are recognised under the laws of most of the GCC countries provided they satisfy certain requirements. Although this is positive, the formal recognition of e-signatures as evidence of a binding contract has yet to be tested in the courts in the region.

It is important to ensure when using e-signatures in any jurisdiction that once an e-signature has been affixed to a document, the document is incapable of being amended and the e-signature cannot be removed. Only an e-signature solution which satisfies this requirement will provide a reliable audit trail in the event that the validity of the e-signature is challenged.

Will e-signatures benefit my business?

In order to capitalise on the advantages of e-signatures, businesses will need to consider a number of issues:

  • E-signatures are less advisable for complex transactions or heavily negotiated agreements, as the speed of an electronic transaction means that it may not be reviewed with the same level of scrutiny as a hardcopy agreement. Agreements that are high volume, routine, low risk and low value and/or containing standard terms are likely to be more suitable for e-contracting.
  • Identify what the cost to the business is likely to be and what savings can be made. Consider the cost of software, staff training and ongoing maintenance of the software. Weigh this against the potential savings in staff time, speedier transaction timescales and increased market reach.

  • The verification of the signing parties’ identity is key. E-signatures have the potential to be safer than signatures executed on paper, as the e-signature can be verified and the document’s history can be tracked. An online solution is likely to be the most reliable, secure and cost-effective form of verification for businesses using e-signatures.

Conclusion

There are clear commercial advantages to using e-signatures. However, there are key requirements which must be satisfied to ensure that they are valid and there can be risks in certain jurisdictions in terms of enforceability. Before using e-signatures, businesses should ensure that they clearly understand the legal requirements and assess the risk to determine whether e-signatures are an appropriate means of concluding transactions and signing documents.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.