Enforceability of contracts executed by using electronic means in Russia

1) Is a contract legally enforceable if the parties exchange scanned copies of signed documents by email?

The general rule is that a contract is made and gains enforceability as regards its form if and when the parties have reached an agreement on all material terms of the contract in the form meeting the applicable requirements as may be the case.  Unless a specific form of the expression of such agreement is prescribed by law, the agreement can be made in any form generally acceptable for transactions, in which case the parties are free to determine the form in which to conclude their agreement.

The Civil Code of the Russian Federation (the Civil Code) explicitly provides that a contract in written form may be entered into by the parties executing a single document bearing all parties’ signatures, as well as by exchange of messages or documents, including electronic documents, via communication channels that allow true identification of the sender as a party to the contract (Article 434(2) and (3) of the Civil Code).

2) What requirements must be met for an electronic signature to be considered valid and legally binding?

An electronic signature is recognized as valid, and an electronic document signed with such signature as legally effective, provided that the requirements of Federal Law No. 63-FZ dated 6 April 2011 “On Electronic Signatures”, applicable to the relevant type of electronic signature, as well as the requirements of other applicable laws and regulations, have been satisfied. An electronic document signed with a simple or non-qualified electronic signature is deemed equivalent to a paper document bearing a handwritten signature where this is provided for by a federal law, another regulatory legal act, a regulatory act of the Bank of Russia, or an agreement between the participants in the electronic interaction. Such regulation must establish the rules for identifying the signatory and, in the case of a non-qualified electronic signature, the procedure for verifying the signature; in the case of a simple electronic signature, the requirements of Article 9 of Law No. 63-FZ must also be complied with. A qualified electronic signature is recognized as valid provided that the qualified certificate was issued by an accredited certification authority whose accreditation was valid on the date of issuance; the certificate was valid at the time of signing or, where the signing time cannot be reliably established, on the date of verification; and the verification confirms that the signature belongs to the certificate holder and that the document has not been altered after signing. The verification must be performed using electronic-signature tools for which conformity with the applicable requirements has been confirmed. Where a document is signed by a representative of a legal entity or an individual entrepreneur using the representative’s qualified electronic signature as an individual, a valid machine-readable power of attorney must generally be provided, unless the law or applicable rules establish otherwise.

3) Can a contract be executed entirely electronically without a paper original?

As a general rule, a contract may be entered into, executed, and signed entirely in electronic form, without the need to prepare a paper original. The written form requirement shall be deemed satisfied where the parties exchange electronic documents or messages by means enabling the sender to be reliably identified and the terms of the transaction to be reproduced, unaltered, on a durable medium; an electronic document signed with an electronic signature in accordance with Federal Law No. 63-FZ, dated 6 April 2011, "On Electronic Signature," is equivalent to a document bearing a handwritten signature.

That said, special rules apply to transactions requiring mandatory notarization (Article 163 of the Civil Code of the Russian Federation) or state registration, for instance, certain real estate transactions under Federal Law No. 218-FZ, dated 13 July 2015, "On State Registration of Real Estate", which may require the personal appearance of the parties, the involvement of a notary, or the use of a specific type of electronic signature.

4) Are contracts and agreements concluded through online platforms or mobile applications legally enforceable?

Please refer to Q.1 above.  A written form requirement for a contract formation can be satisfied by means of:

• execution of a single document bearing all parties’ signatures;
• exchange of communications, including electronic documents via communication channels; or
• acceptance of a written offer (including that placed in the information systems) by implicative actions, such as a payment, shipment or other performance under the contract.

Civil Code further explicitly provides that a written form requirement for a transaction is satisfied, among other things, in case of the transaction formation with the use of electronic or other technical means that allow the reproduction of the transaction terms in an unaltered form, on a material carrier (Article 160 of the Civil Code).

Thus, the formation of valid and enforceable contracts and agreements is allowed through online platforms or mobile applications.

Different requirements may apply depending on the type of the transaction.  For example, online retail sales (B2C) would often be concluded by an individual making a payment for the offered goods (option 3 above); however, more complex deals and deals of B2B nature would typically be concluded via option 1 or 2 above.  In that case, a contract can be formed through online platforms or mobile applications with the use of digital signatures.

5) How can a party prove in court that an electronic document was actually signed by a particular person and that its content has not been altered?

With respect to an enhanced (qualified) electronic signature, the law establishes a rebuttable presumption: where the signature verification key certificate was valid at the time of signing and the signature has passed technical verification, the document shall be deemed to have been signed by the person named in the certificate, absent proof to the contrary (Article 11 of Federal Law No. 63-FZ, dated 6 April 2011, "On Electronic Signature"). To establish this, a party will typically adduce the signature verification key certificate, the record (result) of its technical verification, and confirmation from the certification authority or the electronic document flow ("EDF") operator as to the status of the certificate at the time of signing.

For a simple or an unqualified electronic signature, as well as for other means of electronic communication (e-mail correspondence, EDF platforms, instant messengers), authorship and the integrity of the content are ordinarily established by means of the logs of the communications provider or EDF operator (indicating the IP address, timestamp, and sender identifier), a notarial protocol recording the inspection of evidence (Articles 102 and 103 of the Fundamentals of the Legislation of the Russian Federation on Notaries dated 11 February 1993 No. 4462-1), and, further, a forensic technical expert examination. Such electronic materials are admitted by the courts as written evidence provided that it can be reliably established that the document originates from the relevant party to the case.

6) Can a contract be considered validly executed if one or both parties sign it using a facsimile signature?

Yes, a contract may be considered validly executed where signed by facsimile, but only if the parties have previously agreed in writing to permit the use of a facsimile reproduction of a signature and to the manner of its use (whether by a separate agreement or by a term in a contract bearing a handwritten signature), and provided that no specific statutory prohibition applies to the type of transaction in question. This follows from Article 160(2) of the Civil Code of the Russian Federation, which permits the use of a facsimile signature "in the cases and in the manner provided by law, other legal acts, or an agreement of the parties."

7) In what circumstances does the law require a specific form of signature or a paper original despite the possibility of executing the contract electronically?

1. Exceptions where an electronic contract in the standard form is insufficient:

• Mandatory form. Federal legislation sets forth requirements for a document to be in paper form only in specific cases — such as a bill of exchange, a promissory note or a mortgage deed (in the case of a mortgage, if a documentary mortgage deed is drawn up).
• A handwritten signature is required in specific cases.

Employment law. An employment contract may be concluded electronically, but only within the framework of the Labour Code’s rules on electronic HR document management. Outside these mechanisms, not every electronic signature is permissible.

Property. The contract itself may be electronic, but state registration of the transfer of title is carried out in accordance with the rules of the law on property registration and requires the use of the Unified Electronic Property Register (UKEP) or notarial electronic document management.

Family law. A will cannot be drawn up as an ordinary electronic document — it must be in notarial form.

• Notarization. A notarial document must be drawn up in accordance with specific rules. When a document is notarised, the signature is usually affixed in the presence of a notary; however, the law also permits certain electronic or remote notarial procedures.
• Special requirements regarding the form of documents may apply for state registration, for example, in the property sector.

2. Specific requirements set for e-signature.

State or municipal procurement contracts concluded following electronic bids require a specific type of e-signature (enhanced qualified e-signature).

8) What risks should businesses consider when using electronic methods to execute and sign contracts?

Key business risks in the Russian Federation:

Disputes over signatures — a counterparty may claim that they did not sign the contract.

Inappropriate type of electronic signature — different types of e-signature have different legal consequences.

Lack of an agreement on electronic document exchange — this is particularly critical when using a simple e-signature, email or SMS codes.

Lack of authority — an electronic signature does not, in itself, confirm an employee’s right to enter into a contract.

Alteration of the document — it is necessary to ensure that the signed version remains unchanged.

Evidence issues — it is important to retain the original document, signature details, date, time and proof of dispatch/receipt.

Compromise of the electronic signature or account — a malicious actor may act on behalf of the company.

Failure to comply with the specific form of the transaction — for certain contracts, the law sets out specific requirements regarding the form of the document.

9) Which types of contracts cannot safely be executed entirely electronically?

The general rule is that contracts cannot be formed electronically where the law requires a specific form for such contract (e.g., a state registration or execution before a notary).  However, as the digitalization of the market progresses, there is an increasing number of attempts to make a list of such exempt transactions more narrow and allow their formation electronically.

There are restricted categories of goods and services which cannot be sold by way of distance sales (e.g., certain medications, alcohol, weapons), which means that retail sales of such goods cannot be made online.

As far as the safety of the transaction is concerned, since the parties are free to determine the form of their contract, in some cases, the choice in favor of a traditional (non-electronic) form of contract is made by the parties based on the considerations of the storage or access to information risks.

10) Who bears the risk if an account or electronic signature is compromised and a third party signs the contract?

The law does not set a universal rule regarding risk allocation in case the account or an e-signature is compromised.

The Electronic Signature Law No. 63-FZ, dated 6 April 2011 (the E-Signature Law) imposes certain obligations on the e-signature user, including, among others and with slight variation depending on the specific type of a digital signature in use, the obligation to preserve the confidentiality of the digital signature keys and to avoid the risks of the e-signature use without the proper authorization; and to cease the use of the e-signature if compromised).  However, this general rule does not immediately shift the risks to the e-signature user, and all circumstances of the unauthorized use of such are to be assessed on a case-by-case basis.

If a contract is challenged on the basis of a faulty e-signature (lack of will to enter into a contract or lack of authority), the court would look into all facts and circumstances to determine whether due care was exercised by the parties in the identification of the signatory and the establishment of the parties’ will to be bound by the contract.  Such analysis may extend to other communications between the parties, internal rules and procedures implemented on each side, the initiation of a criminal case if the intentional wrongful acts of third parties are asserted. 

That said, professional participants of the market (e.g. banks) may generally be expected to exert higher degree of diligence and scrutiny when dealing with individuals, and there are cases that were resolved in favor of wronged bank clients where the banks were not found to have taken due efforts aimed at the identification and authentication of the client.

Authors:

Alla Naglis, Partner

Vladislava Novokreshchenova, Associate

Marina Khasanova, Associate

Yulia Vyrypaeva, Legal Assistant