Contracting and Digital Signature

As China is still facing uncertainties in the regulation of e-contracting, Hong Kong has already put forward the Electronic Transaction Ordinance to lay grounds for e-contracting, digital signature and certification authority.

China

In March 1999, the National People's Congress published a new contract law, Contract Act of the People's Republic of China (the Contract Act). Article 11 of the Contract Act clearly recognizes the electronic message as a writing form. Article 16 and 34 of the Contract Act also provide the time and lace of contract formation separately. Those provisions provide the basic legal rule for application of the e-contract. But the Contract Act says only the electronic message itself equal to writing. This is simple equivalent, not the "functional equivalent approach" adopted by UNCITRAL in Model Law on Electronic Commerce (1996). This approach is based on an analysis of the purposes and functions of the traditional paper-based requirement with a view to determining how those purposes or functions could be fulfilled through e-Commerce techniques. However there are no other provisions in the Contract Act to govern how the e-contract performs the function of paper-based document. So it is difficult for parties to persuade the judge to enforce a contract entered into by e-mail or other e-message. Legal uncertainty regarding the enforceability of contracts has not been solved. The Contract Act is unable to clear the obstacle to e-Commerce for not providing detail functional equivalent rules (Gao, 2003).

The business practices always go before the law. Certification authorities (CA) have already been set up to provide trust service (or CA service) to individual or entities in Shanghai, Beijing, Guangzhou, Shenzhen, Hainan and other cities since the end of 1999. For instance, the municipal government of Shanghai took the lead in setting up the Shanghai Electronic Certificate Authority Center Co., Ltd. as the body responsible for issuing digital certificates (Nelson & Leigh, n.d.). At the same time, banks and other financial industries have set up it CA system to provide the trust service to its clients.

Some local governments try to enact the regulation to govern the CA service. The Shanghai Municipal Government issued the Provisional Methods on the Price Management of E-commerce in Apr 2000, outlining the procedures for issuing digital certificates, which authenticate digital signatures. The Methods also set up the Shanghai Electronic Certificate Authority Center Co. Ltd. as the sole body responsible for issuing digital certificates. Hainan Province also announced Digital Certificate Rules released on August 9, 2001.

Facing the social needs and the disorder of CA service, and for clearing the legal uncertainty of e-record or e-document, the SLGI decided to draft the Statute on Electronic Signature of People's Republic of China (the Statute) on May of 2002. In the process of draft, there are some debates on the scope of the Statute. One of the key issues is whether the e-signature should include the seal. In China, individuals and enterprises as well as government agencies are used to use seal or seal in addition to personal signature, so if the Statute do not cover the seal its application extension will be largely limited.