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. Last Updated: 07/27/2016

Online Signatures a Step Away

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Company A wants to sell Company B a million boxes of scrumptious chocolate.

But they live a few thousand kilometers apart and don’t have time to meet to shake hands and sign a contract. With electronic and digital signatures, they don’t have to.

While the technology is not a new concept, government bodies around the globe have only recently created legislation that would make such signatures — essentially paperless contracts with personal codes replacing scribbled names — legally binding.

In mid-2000, then-U.S. President Bill Clinton signed legislation to make the electronic agreements binding, and the law went into effect Oct. 1. In July of this year, all European Union countries are required to have legislation that recognizes the signatures, the International Herald Tribune reported.

The State Duma, however, has not yet reached this stage.

"Technically, it’s there but legally it’s not recognized," said Julia Maximovskaya, senior manager with the tax division of Arthur Andersen.

At least three drafts have been written over the past year, with input from more than one Duma committee.

Last week, the Duma introduced a number of bills for regulating the Internet, including one on electronic digital signatures. Ideally, they will incorporate parts of the various drafts that have been submitted thus far and adopt legislation in the spring session.

However, Maximovskaya and others expected legislation to be adopted not earlier than the fall Duma session.

Of the three main drafts presented, one is more of a framework — an international document that has been adopted and amended by other countries. A second draft was written by a group of deputies. And a third was put forth by the Communications Ministry, with support from the Federal Communication and Information Regulatory Agency, or FAPSI.

The last two are more similar in content, with one exception being that in the ministry’s draft, there is a provision on disclosure of information, whereas in the deputies’ draft, disclosure could come only by a court decision, said Maximovskaya.

Opinions vary over why the Duma has been slow to act and why everyone seems to want to put their own stamp on legislation.

"It’s quite a popular topic right now," Maximovskaya said.

"For laws like this, you really don’t need much money," said Mikhail Usubyan, associate at Baker & McKenzie law firm. "And it’s posh."

He said some government entities are involved because encryption has to be licensed, and the main technique of electronic signatures is encryption.

The necessity of legislation is not in doubt, though it’s not clear how helpful electronic signatures will be to the nascent e-commerce market.

The technology is far from being the stumbling block to development of e-commerce, many say. Rather, it’s the country’s lack of credit cards, poor delivery and banking systems that put a dent on the growth of online transactions.

The most alluring advantage of electronic signatures, besides allowing companies to skip the paperwork in closing agreements, is the security that it provides.

"Digital electronic signatures offer the most sophisticated level of authentication for e-commerce transactions," said Lou Naumovski, general manager for Visa International in Russia.

"The introduction of the electronic signature is to be welcomed. It will encourage banks and other financial organizations to implement fully secure solutions for e-commerce."

And, Arthur Andersen’s tax specialist added, paper would still be necessary to present to accountants and tax authorities.