As an everyday computer user, whether for private or business purposes, you are probably familiar with the efficiency that electronic document signing can provide. However, are you sure that the agreement you signed with an electronic signature is binding and valid, and what is its legal force? How are electronic signatures and eGovernment related?
Given that the rules governing electronic signatures at first glance are not so simple, the electronic signature is sometimes considered “the thing” that we secretly hope won’t be necessary.
However, the benefits it brings are numerous, and we will deal with key aspects of electronic signature that you should keep in mind when concluding an agreement, as well as taking other legal actions.
A Brief History of Electronic Signatures
At the very beginning of the era of the commercial Internet, in 1999, a Directive was adopted at the EU level, which stated that for the efficient functioning of the online economy and online communication, it is necessary to use electronic signatures that will guarantee that some data, i.e., a document, is authentic. A few months later, in 2000, the Electronic Signatures in Global and National Commerce Act (E-Sign Act) was adopted in the United States, and in 2004, Serbia passed the Law on Electronic Signature. However, given the surprising development of the complex digital ecosystem, the need to regulate electronic signatures and e-business in a more detailed way than these regulations soon arose around the world.
In 2016, the new eIDAS (electronic ID and Services) Directive entered into force in the European Union, following the example of which Serbia adopted its Law on Electronic Documents, Electronic Identification, and Trust Services in Electronic Business (hereinafter: the Law) in 2017. In this way, the rules and principles of electronic signature and electronic documents have been established in Serbia following EU standards.
Electronic Signature – Terms and Types
An electronic signature, or e-signature, is a set of data in electronic form, which together guarantee the content of a document and the identity of the person who signed it.
An electronic signature, as well as a handwritten signature, must be the signature of a natural person. But, on the same principle, a legal entity i.e., the company acquires rights and obligations by the signature of the natural person authorized to represent it (such as the managing director). In other words, a company is considered to have signed a document if it was signed by its director with its electronic signature, but the company itself cannot have its electronic signature.
If we say that an electronic signature is a “dataset in electronic form”, it means that the signature of your email (name, surname, function, company, and/or logo) is an electronic signature. You can even draw an electronic signature in Paint and “paste” it into the document. In addition, an electronic signature is considered to be a biometric signature, which you left on the screen of the electronic device of the courier service when picking up the delivery or at the bank after conducting the transaction at the counter. However, such electronic signatures make up only one of the three types of electronic signatures that our Law knows, and the simplest one.
While it can be handy when speed is required, an electronic signature won’t always be able to replace your handwritten signature on paper. The main reason for this is the fact that the “ordinary” electronic signature, which we described above, does not provide great reliability in the business. Since it is not susceptible to graphological expertise, i.e., it cannot be determined that this signature belongs to a certain person, an authentic signature, carries a greater risk of abuse. Does this mean that it is always safer to sign each document in handwriting? Not necessarily. There are two other types of electronic signatures in addition to this “ordinary”, which ensure a higher level of reliability. Moreover, in many situations, they can prove superior to your handwritten signature on paper because they cannot fade, and guarantee that your interlocutor has signed the agreement in exactly the form you sent it, on a specific date.
Therefore, our Law recognized three types of electronic signatures, which differ in the degree of security they provide in legal transactions, and how they are created.
Each of these three types of electronic signatures has a sufficient legal force to represent evidence that an action has been taken, i.e., that a document has been signed, but their effects and the degree of security they provide differ from each other. That’s exactly what we’ll deal with in the following text.
What Is Advanced and What Is a Qualified Electronic Signature?
We mentioned that an “ordinary” electronic signature consists of data that (in any way) confirms the identity of the signatory and the content of the document. However, this type of electronic signature lacks a unique identification of the signatory, since, for example, in Paint, you can write only your nickname, and it will not be easy for everyone to establish your identity. In addition, in situations where you need an electronic signature that guarantees that nothing has been altered in the document, it is necessary to use an advanced electronic signature – or even its special kind, a qualified electronic signature.
What is an advanced electronic signature? It is an electronic signature that satisfies all of the following requirements at the same time:
- It identifies the signatory and connects it to their signature in a unique way,
- It is created using data that the signatory uses under their exclusive control,
- It is linked to the content of the document (to be signed) in such a way that any subsequent modification of the document can be recognized.
Therefore, an advanced electronic signature is a technology that allows authentication of the identity of signatories in electronic business and guarantees that the document has reached from sender to recipient in unchanged form.
Where and how to create such an advanced electronic signature? If you use DocuSign with ID verification, Adobe Sign with authentication, or similar software, you should know that they are considered advanced electronic signatures, as they guarantee exactly the above-mentioned electronic signature characteristics. So, an advanced electronic signature can be created through software that is available online.
What Are the Advantages of Using an Advanced Electronic Signature in Practice?
When you sign a document with an advanced electronic signature, that signature cannot be copied and thus reused. An advanced electronic signature also guarantees that the document has not been altered from the moment you sent it to the other party and received it back. This implies that such a document cannot replace the page of the contract, and you do not have to put initials on each page. Compared to a handwritten signature on paper, an advanced electronic signature cannot fade, and in addition, the document itself shows (and is unalterable) the date of its signature.
A Special Type of Advanced Electronic Signature – Qualified Electronic Signature
As we previously mentioned, a special type of advanced electronic signature is a qualified electronic signature (hereinafter referred to as a qualified electronic signature). It is based on a specially qualified certificate issued by one of the authorized certification bodies in Serbia. To obtain a qualified electronic signature, it is not enough to download just any of the software available online, it is necessary to submit a request to one of the official certification bodies authorized to issue such signatures.
If the advanced electronic signature is so good and reliable, then why would you apply to a certification body, and use a qualified electrical certificate at all? At the core of the matter, the law grants a qualified signature a special legal force, so much so that it equates it with a handwritten signature on paper.
What does this mean in practice, whether you can sign any agreement with a qualified electronic signature? Most of the time – yes, but there are certain exceptions, and we analyze them below.
Key Rules Regarding the Conclusion of an Agreement
Although it is widely understood that each agreement must be printed on paper and hand signed by representatives of the contracting parties to have legal force, such a situation is an exception to the rule. To assume certain rights and obligations, it is enough to agree with the counterparty on the essential issues of the agreement, and not to sign something. That’s why you have to be careful.
Most commercial agreements require only that the parties concluding the agreement agree on what constitutes an essential element of the agreement. As for the form of such consent, it does not have to be given in writing, so for the validity of many agreements, it is enough to reach an oral agreement. We can see this in the following example:
You’ve set up a graphic design agency and you’re e-mailing a U.S. client to create a logo for their company. After the client provided you with instructions on how the logo should look, you sent them the price and delivery time of your services, and you received a confirmation email from the client to start work. This means that the agreement between you and the client has been concluded, although no signing of the document has occurred. An identical situation could have happened over the phone, and the contract would still be considered valid.
Why do you make agreements in writing? To prove the content and to regulate in more detail the specifics that are sometimes crucial. Without a written record, it is much more difficult to prove exactly what was agreed between you and your client. In addition, if some unforeseen situations occur, for example, a terrible natural disaster that destroyed your equipment, you will not be able to meet the deadline you originally agreed on. In this situation, it would be convenient if you provided for the so-called “force majeure” clause in your agreement.
And what about the signature, why should it be included in that agreement? The signature is extremely important to be able to easily prove that the contract was concluded by the person authorized to do so. For example, when you do business with companies, in most cases you will sign contracts with their directors (and exceptionally with a procurator or other authorized person). Consequently, if the price for your design has been confirmed by someone via a Gmail address or phone, and not from an email address related to the client’s domain, your client may later claim that they know nothing about it and that the contract does not exist. Whether the court considers these arguments valid, and to what extent, depends on the specific case, but such a risk should certainly be avoided.
Therefore, although there is no legal obstacle to concluding certain agreements orally, there are numerous benefits to drafting agreements in written or electronic form.
Signing the Agreement by Electronic Signature
As can be concluded orally, the agreement can be concluded in electronic form and signed by electronic signature, and as such will be equally binding on the parties as its traditional written form. Whether you will use a “regular”, an advanced, or qualified electronic signature is a matter of agreement between you and the counterparty. The law stipulates that the validity or evidentiary power of an electronic document may not be challenged solely because it is in electronic form. If it were not so, imagine how much time would have been wasted before starting any cooperation, starting with sending and signing letters of intent, non-disclosure agreements, etc.
But can you conclude every contract in such an informal way, as we described? Unfortunately, no. There are “prohibited” agreements, which cannot be concluded informally because there are laws that expressly prescribe their form.
Among these “prohibited”, formal agreements, there are two types:
- Agreements to be concluded in writing
- Agreements that must be concluded in the legally prescribed form (signature verification, solemnized document, notarial record, etc.) – in this case, the fact that a qualified electronic signature has the force of a handwritten signature will not be sufficient to fulfill the legal form of the agreement.
Qualified Electronic Signature in Practice
Since we will deal in more detail with the question of what legal transactions can/must be undertaken electronically, we will divide legal transactions into three categories:
- actions for which you cannot use a qualified electrical signature,
- actions for which you can — use is a convenience, but not necessary,
- actions you must take in electronic form, using a qualified electrical signature.
In all three cases, these are just examples. In other words, this division does not include all legal affairs, but only those that we encounter most often in practice.
1) Situations in Which the Use of a Qualified Electronic Signature Is Not Allowed
All legal transactions that carry out the transfer of ownership rights on immovable property (or other real rights on immovable property are established) require a handwritten signature. So, when you go to a notary public to certify the contract of buying and selling an apartment, expect an old-fashioned procedure. Even if instead of purchase and sale, the real estate is a gift, you should know that for the conclusion of the deed of gift of a real estate, both contracting parties need to sign the agreement in handwriting, and both parties must be present at the notarization, whether in person or through a proxy, and even a qualified electrical signature is still not an equal replacement.
Then, with the qualified electronic signature, you will not be able to use the signature for inheritance and family law agreements. This means that typical inheritance law agreements, such as a contract for the assignment and distribution of property for life, a lifetime maintenance agreement, inheritance agreements, or statements by the parties to the legacy dispute process – also cannot be signed by qualified e-mails. Signature. The same applies to contracts governing property relations between spouses, as well as contracts on the disposal of property of persons who have been deprived of legal capacity.
Unfortunately, there are also cases in which it is not possible to use a qualified electronic signature for other reasons – which is non-compliance with legal regulations, which can be especially noticed in the field of labor law. About the grey area between labor regulations and the Law, we wrote in an earlier blog – Guide for employers: electronic signing of employment law documents.
2) Situations in Which You Can Use a Qualified Electronic Signature
Among the categories in terms of application of qualified electronic signatures also include eGovernment jobs. These are legal transactions that you can still undertake by submitting paper documentation, but in parallel with them are used electronic services, the application of which is encouraged.
eGovernment is the most noticeable and at the same time the most crucial convenience of using a qualified el. Signature. Imagine that a website, which you accessed via your computer or mobile phone, is the counter of a state authority or institution. It is increasingly going towards the fact that when we need some service under the administration’s authority, we will not have to go to the counter and waste time waiting in line.
First of all, you can submit tax returns to the Tax Administration electronically. Of course, if you do it as a natural person, there is no hindrance to doing it physically, with paper documentation. However, this does not apply to business entities that are obliged to submit certain tax returns electronically. Qualified electronic signing will also apply when applying for an e-permit in the field of construction, access to the Internet counter of the Republic Agency for Electronic Communications, and the Central System for electronic processing and storage of copies of registers in electronic form. The qualified electronic signature also applies in business with the Customs Administration, by submitting a report on the operation of securities issuers.
In addition, you might find it useful to use the qualified electronic signature with company formation in Serbia. Namely, when the founding act is in electronic form, members of the company do not have to go to a notary and certify their handwritten signatures but can use their qualified electronic signatures for this purpose. The condition for the use of this convenience is that the founding act does not transfer the rights on real estate because a special regime is always applied to real estate, as we have already explained earlier.
3) Situations in Which You Are Required to Use a Qualified Electronic Signature
Finally, there is a third category of affairs, the one for which the use of qualified electronic signatures is required.
This group of legal transactions includes, for example, financial statements, which have been mandatory to the Business Registers Agency since 2015 in electronic form, signed with qualified e-mails. signed by the legal representative of the company. In addition, qualified el. You will also need a signature to register the beneficial owner of a company or other organization. Finally, as we mentioned, the Tax Administration requires that certain applications for business entities be submitted through the e-Taxes portal, which requires the use of a qualified electronic certificate.
What Is Required for a Qualified Electronic Signature?
To be able to sign documents electronically from your computer, you first need to obtain a certificate for a qualified electrical certificate. signed, i.e. qualified electronic certificate (hereinafter referred to as Certificate). The certificate is issued by an authorized certification body. It has the status of an intermediary, or “trusted third party”, in electronic business and communication that takes place between you and the other party.
Therefore, the Certificate is an electronic identification “controller” containing data about the issuer of the Certificate and the user of the Certificate. The certified certification bodies that you can contact for the issuance of the Certificate are:
- Certificate Body of the Post Office
- Certification Body of the Serbian Chamber of Commerce (PKS)
- The certification body of the Ministry of Internal Affairs
- HALCOM BG CA
- ESS CA
- The certification body of the Ministry of Defense
The cost of a qualified el. The signature, i.e. the Certificate on which it is based, varies from one certification body to another since there are important differences in their use. Which specific body you choose is a matter of your needs and preferences. But, in any case, do not forget to inform yourself about the conditions of issuing the Certificate and its use at least through the above-linked sites.
For example, one of the specifics of the Certificate, which was created by the certification body of the Ministry of Interior, is that it can be obtained free of charge by any citizen of the REPUBLIC of Srpska who has a valid identity card with a chip, issued after August 18, 2014. The entire procedure takes only a few minutes, and the necessary documents are signed by the user on the spot.
On the other hand, the advantage of certification bodies of the Post office and the Chamber of Commerce of Serbia consists in the fact that these certification bodies issue Certificates to non-residents, i.e. persons who do not have a Serbian ID card, nor a Personal ID card, and the Certificate is necessary for them, for example, to take certain actions before the Business Registers Agency (as we have written in section 3) Situations in which you are obliged to use a qualified electronic signature ). In addition, with these certification bodies, there is a possibility of acquiring carriers’ (media) electronic certificates – smart card readers and USB tokens.
Can you use a qualified e-mail? Without a smart card reader. Yes, you can! As of March 2022, the Business Registers Agency has enabled the use of electronic signatures in the cloud, which means that the signatory is not tied to any additional device when signing documents electronically. The only thing you need to use this service is to download the ConsentID mobile application. A qualified electronic certificate in the cloud is issued by the OFFICE FOR IT and e-Government, free of charge, and additional information about it can be found on their Electronic Identification Portal.