23 October 2003

Grace Suen

Last year the Hong Kong Government reviewed the Electronic Transactions Ordinance (ETO) to ensure that the legal framework for conducting e-business in Hong Kong was completely up-to-date. A public consultation was conducted during March and April 2002 on the Government’s proposals to improve and update the ETO. The scope of the review included the issue of whether legal recognition should be given to other forms of electronic signatures apart from Public Key Infrastructure (PKI)-based digital signatures.

The ETO was originally enacted on 5 January 2000 to facilitate the use of electronic transactions by giving electronic records and digital signatures the same legal recognition as that of their paper-based counterparts. The ETO also established a framework to promote and facilitate the operation of the Certification Authorities’ scheme to enhance public confidence and ensure trust and security in PKI-based electronic transactions.

The Electronic Transactions (Amendment) Bill was introduced in June this year. It proposes to (a) give wider legal recognition to all forms of electronic signatures for transactions that do not involve the Government, and (b) permit service of documents in electronic form where service is required to be by post or in person under certain statutory provisions.

PKI or Non PKI?

The existing ETO does not recognise all forms of electronic signature. It only gives legal recognition to digital signatures generated by the PKI technology. It stipulates that digital signatures, as a form of electronic signature, satisfy any legal ‘signature’ requirement under any rule of law. The ETO was therefore, in this respect, technology-specific. However, all the other provisions of the ETO that recognise electronic records generally are technology neutral.

The Government decided that a wider range of options for satisfying legal ‘signature’ requirements electronically was necessary in order for Hong Kong’s e-business laws to keep pace with technological advances.

The Bill gives legal recognition to all forms of electronic signatures for transactions that do not involve the Government, subject to the consent of the parties involved and to meeting certain standards of reliability and appropriateness in specific circumstances.

This certainly widens the legal framework for electronic transactions in Hong Kong generally. However, for transactions with the Government, the technology-specific approach still applies, i.e. only PKI-based digital signatures are accepted. The Government considered that this approach is necessary for transactions with the Government because it provides certainty and clarity for members of the public as to the form of electronic signature to be used for transactions with the Government. It will also be more cost-effective for Government departments to be equipped to deal with a single specified form of electronic signature.

Service of Documents

Various pieces of legislation presently require documents to be served by post or in person. These legal provisions were enacted at a time when electronic transactions were not prevalent and they have now become an impediment to e-business and e-Government. It is now thought necessary to accept the service of documents by electronic means.

The new Bill therefore proposes that service of a document in ‘electronic record’ form will have the same effect as service by post or in person. However, the Bill’s service provisions are limited to service under three pieces of existing Hong Kong legislation as stated in the Bill’s Schedule: the Landlord and Tenant (Consolidation) Ordinance, which deals with rights of tenure; the Rating Ordinance, which deals with land tax; and the Government Rent (Assessment and Collection) Ordinance.

Apart from the Landlord and Tenant (Consolidation) Ordinance, the other two statutes deal with transactions with the Government only, so the adoption of electronic service under the Bill will be fairly limited. However, it is anticipated that the statutory provisions in the Bill’s Schedule will be extended later.

While the application of the ETO will remain limited in scope for the foreseeable future, the new Bill does reflect the Hong Kong SAR Government’s determination and commitment to e-commerce and to the implementation of e-Government. The Bill will probably have a positive economic impact in the long-term as it will encourage wider adoption of e-business generally and paperless transactions in particular.

Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.