Germany: Remote working - signing legal documents using e-signatures

This article will outline that the correct decision on the "whether", "how" and "where" of the use of electronic signatures requires both legally and commercially demanding preliminary considerations. Such considerations must be planned and implemented in a coordinated manner throughout the company.

I. What is an "electronic signature"?

According to its purpose, e-signatures correspond to the handwritten signature on a paper document. The law recognises various forms of e-signatures, each of which varies in terms of security level and evidential value (see Art. 25 et seq. of Regulation (EU) No. 910/2014). In this respect, a distinction is made between "simple", "advanced" and "qualified" e-signatures:

• Simple e-signature is a typewritten reproduction of the signatory's name.
• Advanced e-signature is a mark that uniquely identifies the signatory and ensures that the signatory is the originator of the signed data content; in particular, subsequent changes to the content must remain recognisable.
• Qualified e-signature is an advanced e-signature based on a qualified certificate and generated by means of a particularly secure signature creation device.

II. Which contracts can/must be signed electronically?

Generally, the conclusion of a contract does not require a particular form under German law. In these cases, an e-signature is not mandatory, but can certainly be useful as evidence (see III. below).

In exceptional cases, an e-signature may be mandatory, especially in order to comply with legal form requirements (eg. written form) (see IV. below).

However, there are also cases in which the use of an e-signature is prohibited (see V. below).

Since the recipient of the declaration is not obliged to operate suitable devices to receive (not only electronic!) declarations, you (as the party who is subject to the burden of proof for the receipt of your declaration) by all means should ensure in advance that the recipient can receive and read your declaration. Due to the (still) relatively low level of dissemination of qualified e-signatures, it is advisable to obtain the recipient's consent to the use of (at least) such signatures in advance (especially as this is sometimes considered a legal admissibility requirement!).

Please also note that for electronic communication with German courts, namely “procedural briefs” (bestimmender Schriftsätze) such as lawsuits and appeals, special requirements apply in some cases which are not dealt with further in this document.

III. Voluntary use cases (preservation of evidence)

Even if no statutory form requirement applies, it may be necessary to use an advanced or qualified e-signature, depending on the risk associated with the respective signing or the need to preserve evidence. This is likely to regularly apply, to eg. resolutions of the executive- and the supervisory board (Vorstand und Aufsichtsrat) of a public limited company, where advanced electronic signatures are most likely to correspond to analogue recording.

IV. Mandatory use cases

Contracts which have to be signed by hand due to legal or (unambiguous) contractual provisions require a qualified electronic signature. The legislator has determined in this respect that only such signature can provide the (high) evidential value of the written form of Section 126 of the German Civil Code (Bürgerliches Gesetzbuch - “BGB”) (cf. Sections 126 para. 3; 126a BGB). Accordingly, qualified electronic signatures must be used eg. in the following cases:

1. lease agreements for residential and (above all) commercial premises (cf. Section 550 BGB);

2. transfer of works council tasks and works council minutes (cf. Sections 27 para. 2 and 34 para. 1 of the Works Council Constitution Act – Betriebsverfasungsgesetz – „BetrVG”);

3. audit reports on the annual financial statements (Jahresabschlussbericht) of a public limited company (cf. Section 171 para. 2 sentence 1 of the German Stock Corporation Act – Aktiengesetz „AktG“); and

4. securities transactions, eg. in connection with the safekeeping or pledging of securities (cf. eg. Sections 5 et seq. of the German Act of Deposits of Securities – Depotgesetz – „DepotG“).

In addition to the form requirements listed in Sections 126 et seq. BGB, there are numerous other form requirements (also in Union law) that require an advanced or even qualified electronic signature. A prominent example are data processing agreements. Here "written form" is required, which can also be maintained by "electronic form". The ambiguity of these terms within the logic of Sections 126 et seq. BGB (and also Regulation (EU) No. 910/2014!) illustrates that the choice of the "correct" electronic signature in various applications raises legally untrivial preliminary questions. Again, a case-by-case assessment of compliance aspects will be required.

V. Use cases that are subject to prohibition

The use of an electronic signature may also be prohibited - despite "analogous" formal requirements. On the one hand, this applies to cases in which statutory law expressly excludes electronic form (to particularly safeguard the authenticity of the document and/or against over-hasty declarations), eg:

1. consumer loans (cf. Section 492 BGB);

2. notices of termination and job references (cf. Sections 623, 630 BGB);

3. consumer KYC documentation (does not apply to WebIdent);

4. declarations of surety (cf. Section 766 BGB);

5. promises and acknowledgements of debt (cf. Sections 780 et seq. BGB); and

6. conclusion of works agreements (cf. Section 77 para. 2, sentence 1 of the Works Council Constitution Act – Betriebsverfassungsgesetz – „BetrVG”).

Not every notarial procedure is thus excluded from the electrical form. Simple certificates (EinfacheZeugnisse) within the meaning of Section 39 BeurkG (eg. certain notarial certifications, certificates of public register entries) can also be drawn up electronically by the notary (cf. Section 39a BeurkG).

Whether the use of electronic signatures can also be contractually excluded is subject to dispute. Whether or not such exclusion is permissible depend on relevant circumstances of the individual case.

VI. What about using e-signatures in other jurisdictions?

The use of e-signatures may present challenges for entities incorporated in, and contracts governed by, the laws of some jurisdictions. Those jurisdictions include Canada, China, Kuwait, Russia and Turkey.

We have significant experience of advising on a broad range of issues arising from the use of e-signatures within financial services, and the legal and regulatory impacts of this.

We have carried out a number of different cross-border regulatory surveys on this topic, including one covering all major financial centres (40 countries). This survey was made up of a large number of questions, covering:

• The basics of e-signatures, e-delivery, e-capture, e-upload and other similar solutions, and if they are permitted in each country;
• Enforceability of those solutions against customers in each country;
• Regulatory consents required to use these solutions;
• Consideration of issues relating to cross-border use of these solutions;
• Formalities to be dealt with in order to use e-signatures and other solutions;
• Types of documents/agreements that can and cannot be e-signed;
• Related data privacy issues; and
• Document retention requirements and how to interpret these in an e-signatures context.

VII. Other relevant considerations

1. There are a number of e-signature providers in the global market. In choosing one, commercial factors are likely to play an important role.

2. Relevant considerations will include cost, convenience, data security, compatibility with existing systems, the location of physical servers and the adequacy of recovery planning.

As a firm, which is not only applying but also moreover developing “legal tech” – solutions Simmons & Simmons has the necessary market know-how to support you also in the commercial evaluation of e- signature solutions.

See our coronavirus (COVID-19) feature for more information generally on the possible legal implications of COVID-19.