A guaranteed electronic signature instead of an officially verified signature?

29. 10. 2020
4 minutes

Introduction

The last time I have dealt with electronic signatures and contracting, it was on 10 April 2020 in the article Advanced electronic signature simplifies concluding contracts. However, in that article, I did not cover juridical acts that by statute require a certified signature (or a higher form of signature). Only a few of these juridical acts exist in the daily life of an entrepreneur, however, when entrepreneurs come across them, electronic signing has been practically unavailable (so far).

Generally, it can be summarised that the Czech law does not provide an electronic equivalent of a certified signature. This basic rule has not changed with the decision in question of the Czech Supreme Court.

However, the decision of the Supreme Court of 10 June 2020, file no. 31 ICdo 36/2020 (hereinafter referred to as the decision in question), which I have learned about from the October edition of magazine Právní rozhledy, brings certain new legal views. The decision in question acknowledges that a guaranteed electronic signature may be in certain cases sufficient to seal a juridical act for which the law otherwise requires a certified signature, and that the absence of legal form in such case does not invalidate the juridical act.

General overview of certified signature in electronic contracting

I have chosen an older decision of the Supreme Court which summarizes the current state of electronization. In the decision of 30 July 2019, file no. No. 29 NSCR 133/2017, the Supreme Court held (unofficial translation from Czech): “Thus, an advanced electronic signature (or any other electronic signature) was not and is not the equivalent of a certified signature, nor does it have the same effects. A certified signature did not and does not have a corresponding electronic form.”

Similarly, the opinion of the eGovernment Department of the Ministry of the Interior of the Czech Republic (which otherwise relates to Act No. 26/2000 Coll.) states that no electronic equivalent of an certified signature currently exists (the opinion was available from the Ministry of Regional Development website on 26 October 2020 here: Existence of alternatives to the officially certified signature in electronic form). In this context, the Ministry of the Interior has set up a working group which, de lege ferenda, seeks for a legislative solution to this problem.

A reference may also be made to the Point I of the Interpretative Opinion of the Presidium of the Notary Chamber of the Czech Republic of 19 October 2017 No. 2/2017, according to which (unofficial translation from Czech) “If a generally binding legal regulation stipulates the obligation to officially certify the signature of the acting person, a certified signature cannot be replaced by an electronic signature on documents drawn up in electronic form”(the opinion was available on the day of citation on 29 October 2020 from the website of the Notary Chamber of the Czech Republic here: Interpretative Opinion VS 2/2017).

Well, that is that. Now is there any change as a result of the decision in question?

How has the approach of courts changed as a result of the decision in question?

The provision of Section 13 of Act No. 90/2012 Coll., on Business Corporations, as amended (hereinafter referred to as “BCA“) provides that “[a] contract between a single-member company represented by the sole member and such member must be in written form with certified signatures…”

The provision of Section 580, Paragraph 1 of Act No. 89/2012 Coll, The Civil Code, as amended (hereinafter referred to as “Civil Code“) provides that “[a] juridical act is also invalid if it is contrary to good morals or contrary to a statute, if so required by the sense and purpose of a statute.

The provision of Section 588 of the Civil Code stipulates that “[a] court shall, even of its own motion, take into account the invalidity of a juridical act which is manifestly against good morals or which is contrary to a statute and manifestly disrupting public order…”

Note that the provisions of Section 588 of the Civil Code do not require for the invalidity of a juridical act that does not comply with the required form to be in conflict with the sense and purpose of a statute. Such juridical act is (absolutely) invalid if it concurrently manifestly disrupts public order.

In the present case, the Court of Appeal ruled that a juridical act which does not meet the conditions of Section 13 BCA due to the absence of a certified signature is absolutely invalid pursuant to Section 588 of the Civil Code. According to the Court of Appeal, such juridical act does not have the form required by statute (it is contrary to the statute) and, at the same time, manifestly disrupts public order. However, the Supreme Court annulled the judgment of the Court of Appeal by the decision in question.

In paragraphs 32, 33 and 34 of the reasoning of the decision in question, the Supreme Court explained that non-compliance with statutory form renders a juridical act invalid only if required by the sense and purpose of the statute governing its form.

According to the Supreme Court, this applies to both relative and absolute invalidity. In the present case, the Supreme Court assessed the sense and purpose of Section 13 of BCA and concluded that this sense and purpose will usually be fulfilled even in case of an electronic juridical act with a guaranteed electronic signature (cf. paragraphs 54 and 55 to the decision in question).

If I should extremely simplify the reasoning of the Supreme Court, then, according to the Supreme Court, the sense and purpose of Section 13 BCA is that a company with a single member does not additionally “modify” its own contracts or directly perform the back dating of contracts and, therefore, negatively affect the rights of third parties (especially creditors).

Given that it is not technically possible to make an anti-dated juridical act or modify a juridical act sealed by a guaranteed electronic signature, such juridical act will usually meet the requirements of Section 13 BCA (because it is not in conflict with its sense and purpose).

Conclusion

Before drawing any legal conclusions from this article, it is important to emphasize that:

  1. in the first place, the Supreme Court considered completely different issues in the context of the decision in question (interpretation of the concept of public order, manifest disruption of public order etc.), and
  2. the Supreme Court assessed the fulfilment of the sense and purpose of Section 13 BCA with regard to the circumstances of the specific case (yeah, this is a magic spell), whereas that case has been an incidental dispute within the Insolvency Act.

It is therefore not possible to state in general terms that a guaranteed electronic signature will always be in accordance with the sense and purpose of a provision of law that requires a certified signature for a valid juridical act. However, I believe that a number of statutory provisions requiring a certified signature do so precisely to exclude the possibility of the acting person to date back or subsequently modify the juridical act. It would, therefore, be appropriate to state in accordance with the reasoning of the Supreme Court in the decision in question that sealing such juridical acts with a guaranteed electronic signature will meet the sense and purpose of such statutory provisions and be valid.

Corporate law is known for its rigidity and formality. I dare to say that if the Supreme Court was able to draw the foregoing legal conclusion in relation to non-compliance with the legal form required by Section 13 BCA, its argument can be used even in cases of violation of the legal form required by legislation of less rigid areas of law.

Me and my law firm promote and support digitization. Therefore, I welcome the fact that the perception of electronic juridical acts is shifting throughout society and is gaining more trust. I believe that the decision in question can be used for arguments in disputes concerning digital contracting.

(Photo by Lewis Keegan on Unsplash)

Author:

Mgr. Jiří Císek

Mgr. Jiří Císek is the law firm's founder. Since 2016, he focuses his practice on intellectual property law and IT law, and is active on many lectures, workshops and conferences in these areas. In 2018, he was awarded the Innovative Lawyer award by publishing house Economia.

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