National Legislation on E-Commerce

Electronic Transactions Ordinance (Cap. 553)

The Electronic Transactions Ordinance (Cap. 553) (the "ETO") which was gazetted earlier this year is an attempt by the HKSAR government to promote and facilitate electronic commerce in Hong Kong. Particular emphasis has been placed on relieving the public's concern about security and uncertainty over electronic transactions. Thus much of the Ordinance has been dedicated to providing the infrastructure for conducting electronic transactions.

Particular attention has been placed on giving legal status to electronic records and digital signatures, the authentication of the parties to electronic transactions, confidentiality and integrity of electronic messages and non-repudiation of electronic transactions and electronic contracts.

Legal Status of Electronic Records and Digital Signatures

Electronic Records

A key feature of this Ordinance is that it gives legal recognition to electronic records and digital signatures. Part III of the Ordinance provides that where a rule of law requires or permits information to be given in writing, electronic records of such information is sufficient to satisfy such requirement. Sections 7 and 8 of the Ordinance further provide that if a rule of law requires information to be retained or presented in the original form, such requirement is considered met if the information is in the form of electronic records. Electronic records are also valid as evidence to be given in court under the ETO.

However, certain types of transactions are exempted from the operation of the ETO for various reasons. Essentially, if a rule of law requires a particular transaction to be in a specific format, then such format should be followed and the ETO is excluded from operation. The first schedule to the ETO further provides matters which are excluded from the operation of ETO - these matters include wills and trust documents, documents relating to land and property transactions and statutory declarations. Also exempted are court and tribunal proceedings or cases where electronic information cannot be accepted for operational, technological and other reasons under the law.

Digital Signatures

In order to facilitate electronic transactions, any requirements for personal signatures would be deemed satisfied if a digital signature is supported by a recognised digital certificate issued by a recognised certification authority ("CA"). The creation of a certification authority is also a new development from the ETO. Essentially, a certification authority is an organisation which issues digital certificates to verify the identity of a party to an electronic transaction or an electronic message.

Certification Authorities

The HKSAR Government has established an infrastructure for the development of public keys and digital certificates through the Hongkong Post. However, the Hongkong Post will not be the only organisation permitted to issue digital certificates. The Government is taking an open and non-intrusive approach to handle the development of electronic commerce in Hong Kong and therefore, the private section is free to set up certification authorities and there is no mandatory licensing requirements for CA in Hong Kong. This is quite different to some places where CA is required by law to be licensed and registered.

However, a voluntary registration system of recognition for CA has been introduced by the new legislation to enhance user confidence and provide a secure platform for electronic transactions. CA in the private sector may apply to the Director of Information Technology Services to become a recognised certification authority. By becoming a recognised certification authority, the CA will be subject to some degree of monitoring and must comply with the general provisions in the ETO. Under the new legislation, a recognised CA must publish a certification practice statement describing the practice and standard it has adopted for issuing certificates to subscribers. Further the recognised CA must use a trustworthy system in performing CA services and comply with a code of practice issued by the Government.

Electronic Contracts

Part V of the Electronic Transactions Ordinance formally recognises the validity of a contract formed by electronic means, such as the communication of offer and acceptance by electronic means (s17(1)). Connected with this issue is the attribution of sending and receiving of electronic records in Part IV of the ETO. S.18 provides that an electronic record is that of the orginator if it was sent by the originator or that the record had been sent with the originator's authority. S.19 provides that an electronic record is regarded as sent when it is accepted by an information system outside the control of the originator or its agent. This clarifies the position as to offer and acceptance in the formation of an electronic contract.

Prepared on 15 November 2000.

The above legal information is provided for general reference only. Advice of qualified Hong Kong lawyers should be sought in respect of any particular circumstances arising under the Ordinances referred to in this update.