[Congressional Record Volume 146, Number 76 (Friday, June 16, 2000)]
[Senate]
[Pages S5281-S5290]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT--CONFERENCE
REPORT--Resumed
The PRESIDING OFFICER. Under the previous order, the Senate will now
proceed to vote on the conference report accompanying S. 761, which the
clerk will report.
The legislative clerk read as follows:
The conference report on S. 761, an act to regulate
interstate commerce by electronic means by permitting and
encouraging the continued expansion of electronic commerce
through the operation of free market forces, and for other
purposes.
Mr. BURNS. Mr. President, I commend Senator Abraham, Senator McCain,
and Chairman Bliley for their hard work in the conference on the
digital signatures bill, which grants online contracts and other
transactions the same legal force as those conducted with pen-and-ink.
I should add that Senator Leahy and Senator Wyden made significant
positive contributions to the bill. I am an original cosponsor of this
legislation and I am very pleased with the conference report before the
Senate today.
Yesterday, the House of Representatives voted overwhelmingly in favor
of the conference report by a vote of 426-4. I urge my colleagues to
support the conference report, which is a bipartisan product that will
allow businesses to
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take advantage of the speed and efficiency of the Internet while also
protecting consumers. I have no doubt that the passage of this
legislation will help to make sure that electronic commerce can meet
its full potential.
The issue of online authentication is one of the most important
issues to the development of electronic commerce. Electronic commerce
holds great promise, in particular, for states like my home state of
Montana, where businesses and consumers have to deal with vast
distances. E-commerce is expected to continue its upward surge to about
$1.6 trillion by 2003, up from $500 billion last year. The explosion of
information technology has created opportunities undreamed of by
previous generations. In Montana, companies such as Healthdirectory.com
and Vanns.com are taking advantage of the global markets made possible
by the stunning reach of the Internet.
This bill allows for consumers to enter into binding contracts over
the Internet and eliminates the need to engage in needless, burdensome
exchanges of paper documents. This bill will create a uniform system
where contracts have the same validity across all 50 states.
The bill is also technology-neutral and does not impose government
mandates on what formats or software businesses or consumers choose to
use to conduct online commerce.
Numerous consumer safeguards are included in the conference report,
including the requirement that consumers confirm that they are able to
read the format that companies use for online contracts. Also,
safeguards are contained in the bill that will still require that
critical notices such as insurance cancellation and mortgage
foreclosure notices be sent on paper. Furthermore, consumers still have
the right to receive any documents on paper if they so choose.
The passage of the digital signatures bill is a critical step in
ensuring the continued growth of the Internet-driven economy. This
legislation grants additional choice and convenience to consumers and
will also translate into more efficient products and services.
Mr. President, I remind my colleagues of the work of Senator Abraham
and Senator McCain, Chairman Bliley in the other body, Senator Leahy,
and Senator Wyden who had quite a lot to do with this. Of course, it
came out of the Subcommittee on Communications. This is just one more
of the digital dozen we set our goals to pass during this Congress.
So far, we are up around the eighth or ninth bill out of that digital
dozen that will probably lend greater credence to the Internet and the
way we use it as a tool in business and in our personal lives. I thank
those Senators who were instrumental in passing this legislation. I
congratulate them and I yield the floor.
consumer consent provisions
Mr. McCAIN. Mr. President, I want to engage in a colloquy with the
Senator from Michigan, who is the original sponsor of the electronic
signatures legislation, to discuss the consumer consent provisions in
the conference report.
Mr. ABRAHAM. Mr. President, I welcome the chance to participate in a
colloquy about the consent provisions in the conference report.
Mr. McCAIN. Is it the Senator's understanding that pursuant to
subsection 101(c)(1)(C)(ii) of the conference report a consumer's
affirmative consent to the receipt of electronic records needs to
``reasonably demonstrate'' that the consumer will be able to access the
various forms of electronic records to which the consent applies?
Mr. ABRAHAM. Yes. The conference report requires a ``reasonable
demonstration'' that the consumer will be able to access the electronic
records to which the consent applies. By means of this provision, the
conferees sought to provide consumers with a simple and efficient
mechanism to substantiate their ability to access the electronic
information that will be provided to them.
Mr. McCAIN. I agree. The conferees did not intend that the
``reasonable demonstration'' requirement would burden either consumers
or the person providing the electronic record. In fact, the conferees
expect that a ``reasonable demonstration'' could be satisfied in many
ways. Does the Senator agree with me that the conferees intend that the
reasonable demonstration requirement is satisfied if the consumer
confirmed in an e-mail response to the provider of the electronic
records that he or she can access information in the specified formats?
Mr. ABRAHAM. Yes. An e-mail response from a consumer that confirmed
that the consumer can access electronic records in the specified
formats would satisfy the ``reasonable demonstration'' requirement.
Mr. McCAIN. Does the Senator also agree with me that the ``reasonable
demonstration'' requirement would be satisfied, for instance, if the
consumer responds affirmatively to an electronic query asking if he or
she can access the electronic information or if the affirmative consent
language includes the consumer's acknowledgement that he or she can
access the electronic information in the designated format?
Mr. ABRAHAM. Yes. A consumer's acknowledgment or affirmative response
to such a query would satisfy the ``reasonable demonstration''
requirement.
Mr. McCAIN. Would the ``reasonable demonstration requirement'' be
satisfied if it is shown that the consumer actually accesses records in
the relevant electronic format?
Mr. ABRAHAM. Yes. The requirement is satisfied if it is shown that
the consumer actually accesses electronic records in the relevant
format.
Mr. McCAIN. Mr. President, I appreciate my colleague's willingness to
participate in this colloquy to clarify the clear intent of the
conference with respect to this provision.
legislative scope
Mr. GRAMM. Mr. President, I would like to engage in a colloquy with
the gentleman from Michigan, Senator Abraham, who is the original
sponsor of the legislation on electronic signatures, to discuss the
scope of the legislation.
Mr. ABRAHAM. Mr. President, I would welcome the chance to participate
in a colloquy about the scope of the electronic signature legislation.
Mr. GRAMM. Is it the understanding of the Senator from Michigan that
the act is not intended to restrict the scope or availability of any
other federal statute, regulation and other rule of law (whether
currently in effect or becoming effective in the future) that requires,
authorizes or otherwise allows for the use of electronic signatures or
electronic records, to the extent such federal statute, regulation, or
other rule of law is consistent with the provisions of the act? Any
such other statute, regulation or other rule of law will continue to be
fully and independently effective. Rather, this act is intended to
operate as a uniform national baseline permitting electronic signatures
and electronic records to be used with respect to certain activities
notwithstanding other inconsistent statutes, regulations or other rules
of law. Am I correct in my statement regarding the intent of this
legislation?
Mr. ABRAHAM. Yes, the Senator, the chairman of the Banking Committee,
is correct. This act is intended to facilitate e-commerce and to
provide legal certainty for electronic signatures, contracts and
records where such certainty does not exist today. It is not in any way
intended to limit the effectiveness of any other statute, regulation or
other rule of law which permits the use of electronic records,
electronic delivery, and electronic signatures, and which is otherwise
consistent with the provisions of the act.
Mr. GRAMM. As to its coverage, does the Senator agree that this act
is intended to operate very broadly to permit the use of electronic
signatures and electronic records in all business, consumer and
commercial contexts? This breadth is accomplished through the use of
the term ``transaction,'' which is defined broadly to include any
action or set of actions relating to the conduct of business, consumer
or commercial affairs between two or more persons. For example, a
unilateral action or set of actions by one of the parties to the
underlying transaction, or by any other person with any interest in the
underlying transaction, or a response by one party to the other's
action, all are covered by the act. In this regard, it is the nature of
the activity, rather than the number of persons or the identity or
status of the person or entity involved in the activity, that
determines the applicability of the act. Have I stated the matter
correctly?
Mr. ABRAHAM. Yes, this act applies to all actions or sets of actions
related
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to the underlying business, consumer, or commercial relationship which
is based on the nature of the activity and not the number of persons
involved in the activity. The act is also intended to cover the related
activities of those persons or entities who are counterparties to, or
otherwise involved in or related to, the covered activity.
Mr. GRAMM. It is my understanding that this act, for example, covers
any activity that would qualify as a financial activity, an activity
incidental to a financial activity, or a complementary activity, under
section 4(k) of the Bank Holding Company Act of 1956, as amended,
whether or not such activity is conducted by, or subject to any
limitations or requirements applicable to, a financial holding company.
In addition, it would cover all activities relating to employee
benefit plans or any other type of tax-favored plan, annuity or account
such as an IRA, a 403(b) annuity, or an education savings program,
including all related tax and other required filings and reports. Is
this correct?
Mr. ABRAHAM. Yes, and as a result, the act would apply to such
activities as the execution of a prototype plan adoption agreement by
an employer, the execution of an IRA application by an individual, and
the waiver of a qualified joint and survivor annuity by a plan
participant's spouse and the designation of any beneficiary in
connection with any retirement, pension, or deferred compensation plan,
IRA, qualified State tuition program, insurance or annuity contract, or
agreement to transfer ownership upon the death of a party to a
transaction.
Mr. GRAMM. Mr. President, I appreciate my colleague's willingness to
participate in this colloquy to clarify the clear intent of the
conference with respect to the scope of this act.
Mr. ABRAHAM. Mr. President, because the differences between the House
and Senate passed bills required much careful contemplation on the part
of the Conferees that may not be apparent in the final text of the
Conference Report, and because the Conference did not produce an
official interpretive statement regarding the Conference Report, as the
primary author of S. 761, I have prepared an explanatory document that
should serve as a guide to the intent behind the following provisions
of S. 761.
Mr. President, I ask unanimous consent that a section-by-section
explanation of S. 761 be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
EXPLANATORY STATEMENT OF S. 761, THE ``ELECTRONIC SIGNATURE IN GLOBAL
AND NATIONAL COMMERCE ACT''
Short Title
Senate bill
Section 1 establishes the short title of the bill as the
``Millennium Digital Commerce Act.''
House amendment
Section 1 establishes the short title of the bill as the
``Electronic Signature in Global and National Commerce Act.''
Conference substitute
The conference report adopts the House provision.
Electronic Records and Signatures in Commerce
GENERAL RULE OF VALIDITY
Senate bill
Section 5(a) of the Senate bill sets forth the general
rules that apply to electronic commercial transactions
affecting interstate commerce. This section provides that in
any commercial transaction affecting interstate commerce a
contract may not be denied legal effect or enforceability
solely because an electronic signature or record was used in
its formation.
Section 5(b) authorizes parties to a contract to adopt or
otherwise agree on the terms and conditions on which they
will use and accept electronic signatures and electronic
records in commercial transactions affecting interstate
commerce.
House amendment
Section 101(a) of the House amendment establishes a general
rule that, with respect to any contract or agreement
affecting interstate commerce, notwithstanding any statute,
regulation or other rule of law, the legal effect, validity,
and enforceability of such contract or agreement shall not be
denied on the ground that: (1) the contract or agreement is
not in writing if the contract or agreement is an electronic
record; and (2) the contract or agreement is not signed or
affirmed by written signature if the contract or agreement is
signed or affirmed by an electronic signature.
Section 101(b) provides that with respect to contracts or
agreements affecting interstate commerce, the parties to such
contracts or agreements may establish procedures or
requirements regarding the use and acceptance of electronic
records and electronic signatures acceptable to such parties.
Further, the legal effect, validity, or enforceability for
such contracts or agreements shall not be denied because of
the type or method of electronic record or electronic
signature selected by the parties.
Nothing in section 101(b) requires a party to enter into
any contract or agreement utilizing electronic signatures or
electronic records. Rather, it gives the parties the option
to enter freely into online contracts and agreements.
Conference Substitute
The House recedes to the Senate with an amendment.
The general rule provides that notwithstanding any statute,
regulation, or other rule of law (other than titles one and
two) with respect to any transaction in or affecting
interstate or foreign commerce: (1) a signature, contract, or
other record relating to such transaction may not be denied
legal effect, validity, or enforceability solely because it
is in electronic form, and (2) a contract relating to such
transaction may not be denied legal effect, validity, or
enforceability solely because an electronic signature or
electronic record was used in its formation.
Section 101(a) establishes a basic federal rule of non-
discrimination with respect to the use of electronic
signatures and electronic records, including electronic
contracts. Subject to the Act's consumer consent requirement
(Sec. 101(c)) and specific exceptions (Sec. 103), this
federal rule of non-discrimination means that a State
generally cannot refuse to allow parties to use electronic
signatures and electronic records in lieu of paper records
and handwritten signatures. This federal rule also means that
if two parties agree with one another, electronically or
otherwise, on the terms and conditions on which they will
accept and use electronic signatures and electronic records
in their dealings with one another and the parties could have
entered into a comparable agreement regarding the use of
signatures and records in the paper world, the State cannot
refuse to give effect to the parties' agreement.
The term ``solely'' in section 101(a)(1) and 101(a)(2) is
intended to prevent challenges to the legal effect, validity,
or enforceability of an electronic signature, contract, or
other record that are based on objections to the
``electronic'' quality of such signature, contract, or other
record. In addition, Section 101 should not be interpreted to
permit a challenge based on the combination of a signature,
contract, or other record being in electronic form (Section
101(a)(1)) and having an electronic signature or electronic
record used in its formation (Section 101(a)(2); in this
sense, solely truly means ``solely or in part''.
The conferees agreed to strike title III of the House bill
(HR 1714) with respect to electronic records, signatures or
agreements covered under the federal securities laws because
the title I provisions of the conference agreement are
intended to encompass the House title III provisions. The
reference in section 101(a) of the conference agreement to
``any transaction in or affecting interstate or foreign
commerce'' is intended to include electronic records,
signatures and agreements governed by the Securities Exchange
Act of 1934 and all electronic records, signatures and
agreements used in financial planning, income tax
preparation, and investments. Therefore, the conference
agreement did not need to single out or treat differently
electronic records, signatures and agreements regulated by
federal securities laws in a separate title.
In section 101(b), the conference report makes clear that
title I of the conference substitute does not (1) limit,
alter, or otherwise affect any requirements imposed by a
statute, regulation, or rule of law relating to the rights
and obligations of persons under such statute, regulation, or
rule of law other than requirements that contracts or other
records be written, signed, or in non-electronic form; or (2)
require any person, with respect to a record other than a
contract, to agree to use or accept electronic records or
electronic signatures.
Section 101(c) specifies consumer protections in e-
commerce. If a statute, regulation, or other rule of law
requires that a record relating to a transaction in or
affecting interstate or foreign commerce be provided or made
available to a consumer in writing, an electronic record
may be substituted if (1) the consumer affirmatively
consents to receive an electronic record and has not
withdrawn such consent, (2) the consumer, prior to
consenting, is provided with a clear and conspicuous
statement informing the consumer of rights or options to
have the record provided or made available on paper, and
the right of the consumer to withdraw the consent to
electronic records and of any conditions, consequences
(which may include termination of the parties'
relationships), or fees in the event of withdrawal of
consent. Further, the consumer is informed of whether the
consent applies only to the initial transaction or to
identified categories of records that follow the initial
transaction. Disclosure must also be made describing the
procedures the consumer must use to withdraw consent and
to update information needed to contact the consumer
electronically. The consumer must also be informed
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of how after the consent, the consumer may, upon request,
obtain a paper copy of electronic records, and whether any
fee will be charged for such copy.
Section 101(c) honors the provisions of underlying law
(except as to the specifics of writing and consent
requirements); the Act does not create new requirements for
electronic commerce but simply allows disclosures or other
items to be delivered electronically instead of on paper.
This means that if a consumer protection statute requires
delivery of a paper copy of a disclosure or item to a
consumer, then the consent and disclosure requirements of
subsection (c)(1)(A-D) must be satisfied. Otherwise,
subsection (c) does not disturb existing law.
Section 101(c)(1) refers to writings that are required to
be delivered to consumers by some other law, such as the
Truth-in-Lending Act. The reference to consumers is
intentional: subsection (c) only applies to laws that are
specifically intended for the protection of consumers. When a
statute applies to consumers as well as to non-consumers,
subsection (c)(1) should not apply. In this way, the
subsection preserves those special consumer protection
statutes enacted throughout this Nation without creating
artificial constructs that do not exist under current law. At
no time in the future should these ``consent'' provisions of
101(c), which are intended to protect consumers (as defined
in this legislation), be permitted to migrate through
interpretation so as to apply to business-to-business
transactions.
Pursuant to subsection (c)(1)(C)(i), the consumer must be
provided, prior to consenting, with a clear and conspicuous
statement describing the hardware and software requirements
to access and retain electronic records.
Subsection (c)(1)(C)(ii) requires that the consumer's
consent be electronic or that it be confirmed electronically,
in a manner that reasonably demonstrates that the consumer
will be able to access the various forms of electronic
records to which the consent applies. The requirement of a
reasonable demonstration is not intended to be burdensome on
consumers or the person providing the electronic record, and
could be accomplished in many ways. For example, the
`reasonable demonstration' requirement is satisfied if the
provider of the electronic records sent the consumer an e-
mail with attachments in the formats to be used in providing
the records, asked the consumer to open the attachments in
order to confirm that he could access the documents, and
requested the consumer to indicate in an e-mailed response to
the provider of the electronic records that he or she can
access information in the attachments. Similarly, the
`reasonable demonstration' requirement is satisfied if it is
shown that in response to such an e-mail the consumer
actually accesses records in the relevant electronic
format. The purpose of the reasonable demonstration
provision is to provide consumers with a simple and
efficient mechanism to substantiate their ability to
access the electronic information that will be provided to
them.
Subsection (c)(1)(D) requires that after the consent of a
consumer, if a change in the hardware or software
requirements needed to access or retain electronic records
creates a material risk that the consumer will not be able to
access or retain a subsequent electronic record that was the
subject of the consent, the person providing the electronic
record must provide the consumer with a statement of the
revised hardware and software requirements for access to and
retention of the electronic records, and the right to
withdraw consent without the imposition of any fees for such
withdrawal, and the right to withdraw without the imposition
of any condition or consequence that was not disclosed.
Subsection (c)(2) includes a savings clause making clear
that nothing in this title affects the content or timing of
any disclosure or other record required to be provided or
made available to any consumer under any statute, regulation,
or other rule of law. Further, subsection (c)(2) provides
that if a law that was enacted prior to this Act expressly
requires a record to be provided or made available by a
specified method that requires verification or acknowledgment
of receipt, the record may be provided or made available
electronically only if the method used provides verification
or acknowledgment of receipt (whichever is required).
Section 101(c)(3) makes clear that an electronic contract
or electronic signature cannot be deemed ineffective,
invalid, or unenforceable merely because the party
contracting with a consumer failed to meet the requirements
of the consent to electronic records provision.
Compliance with the consent provisions of section 101(c) is
intended to address the effectiveness of the provision of
information in electronic form, not the validity or
enforceability of the underlying contractual relationship or
agreement between the parties. In other words, a technical
violation of the consent provisions cannot in and of itself
invalidate an electronic contract or prevent it from being
legally enforced. Rather, the validity and enforceability of
the electronic contract is evaluated under existing
substantive contract law, that is, by determining whether the
violation of the consent provisions resulted in a consumer
failing to receive information necessary to the enforcement
of the contract or some provision thereof. For example, if it
turns out that the manner in which a consumer consented did
not `reasonably demonstrate' that she could access the
electronic form of the information at a later date, but at
the time of executing the contract she was able to view its
terms and conditions before signing, the contract could still
be valid and enforceable despite the technical violation of
the electronic consent provision.
Subsection (c)(4) provides that withdrawal of consent by a
consumer shall not affect the legal effectiveness, validity,
or enforceability of electronic records provided or made
available to that consumer in accordance with paragraph (1)
prior to implementation of the consumer's withdrawal of
consent. A consumer's withdrawal of consent shall be
effective within a reasonable period of time after receipt of
the withdrawal by the provider of the record. Failure to
comply with paragraph (1)(D) may, at the election of the
consumer, be treated as a withdrawal of consent for purposes
of this paragraph.
Subsection (c)(5) makes clear that this subsection does not
apply to any records that are provided or made available to a
consumer who has consented prior to the effective date of
this title to receive such records in electronic form as
permitted by any statute, regulation, or other rule of law.
Subsection (c)(6) provides that an oral communication or a
recording of an oral communication shall not qualify as an
electronic record for purposes of this subsection except as
otherwise provided under applicable law.
It should be noted that Section 101(c)(6) does not preclude
the consumer from using her voice to sign or approve that
record. Proper voice signatures can be very effective in
confirming a person's informed intent to be legally
obligated. Therefore, the consumer could conceivably use an
oral or voice signature to sign a text record that was
required to be given to her ``in writing''. Moreover, the
person who originated the text record could authenticate it
with a voice signature as well. The spoken words of the
signature might be something like ``I Jane Consumer hereby
sign and agree to this loan document and notice of interest
charges.''
By way of clarification, the intent of this clause is to
disqualify only oral communications that are not authorized
under applicable law and are not created or stored in a
digital format. This paragraph is not intended to create an
impediment to voice-based technologies, which are certain to
be an important component of the emerging mobile-commerce
market. Today, a system that creates a digital file by means
of the use of voice, as opposed to a keyboard, mouse or
similar device, is capable of creating an electronic record,
despite the fact that it began its existence as an oral
communication.
Section 101(d) addresses statutory and regulatory record
retention requirements. It states that when a statute,
regulation, or other rule of law requires that a record,
including a contract, be retained that requirement is
satisfied by the retention of an electronic record, if two
criteria are met. First, the electronic record must
accurately reflect the information set forth in the contract
or record required to be retained. Second, that electronic
record must remain accessible to all parties who by law are
entitled to access the record for the period set out in that
law. Moreover, the electronic record must be in a form
capable of accurate reproduction for later reference. The
reproduction may be by way of transmission, printing or any
other method of reproducing records.
With respect to Section 101(d)(1)(B), this subsection only
requires retained records to remain accessible to persons
entitled to access them by statute. The subsection does not
require the business to provide direct access to its
facilities nor does it require the business to update
electronic formats as technology changes--the records must,
however, be capable of being accurately reproduced at the
time that reference to them is required by law.
Section 101(e) addresses statutory and regulatory
requirements that certain records, including contracts, be in
writing. The statute of frauds writing requirement
exemplifies one such legal requirement. The section states
that an electronic record or contract may be denied legal
effect and enforceability under section 101(a) of this Act,
if such an electronic record is not in a form that is capable
of being retained and accurately reproduced for later
reference by all parties entitled to retain that contract or
record. This provision is intended to reach two qualities of
``a writing'' in the non-electronic world. The first such
quality of ``a writing'' is that it can be retained, e.g., a
contract can be filed. The second such quality of ``a
writing'' is that it can be reproduced, e.g., a contract
can be copied.
With respect to Section 101(e), the actual inability of a
party to reproduce a record at a particular point in time
does not invoke this subsection. The subsection merely
requires that if a statute requires a contract to be in
writing, then the contract should be capable of being
retained and accurately reproduced for later reference by
those entitled to retain it. Thus if a customer enters into
an electronic contract which was capable of being retained or
reproduced, but the customer chooses to use a device such as
a Palm Pilot or cellular phone that does not have a printer
or a disk drive allowing the customer to make a copy of the
contract at that particular time, this section is not
invoked. The record was in a form that was capable of being
retained and reproduced by the customer had it chosen to use
a device allowing retention and reproduction.
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Subsection (f) clarifies that nothing in title I affects
the proximity requirement of any statute, regulation, or
other rule of law with respect to any warning, notice,
disclosure, or other record required to be posted, displayed,
or publicly affixed.
Subsection (g) provides that if a statute, regulation, or
other rule of law requires a signature or record to be
notarized, acknowledged, verified, or made under oath, that
requirement is satisfied if the electronic signature of the
person authorized to perform those acts, together with all
other information required to be included by other applicable
statute, regulation, or rule of law, is attached to or
logically associated with the signature or record. This
subsection permits notaries public and other authorized
officers to perform their functions electronically, provided
that all other requirements of applicable law are satisfied.
This subsection removes any requirement of a stamp, seal, or
similar embossing device as it may apply to the performance
of these functions by electronic means.
It is my intent that no requirement for the use of a stamp,
seal, or similar device shall preclude the use of an
electronic signature for these purposes.
Subsection (h) provides legal effect, validity and
enforceability to contracts and record relating to a
transaction in or affecting interstate or foreign commerce
that were formed, created or delivered by one or more
electronic agents.
Subsection (i) makes clear that the provisions of title I
and II cover the business of insurance.
Subsection (j) provides protection from liability for an
insurance agent or broker acting under the direction of a
party that enters into a contract by means of an electronic
record or electronic signature if: (1) the agent or broker
has not engaged in negligent, reckless, or intentional
tortious conduct; (2) the agent or broker was not involved in
the development or establishment of such electronic
procedures; and (3) the agent or broker did not deviate from
such procedures.
authority to alter or supersede general rule
Senate bill
Section 5(g) of the Senate bill provides that section 5
does not apply to any State in which the Uniform Electronic
Transaction Act is in effect.
House amendment
Section 102(a) of the House amendment provides that a State
statute, regulation or other rule of law enacted or adopted
after the date of enactment of H.R. 1714 may modify, limit,
or supersede the provisions of section 101 (except as
provided in section 102(b)) if that State action: (1) is an
adoption or enactment of the UETA as reported by the NCCUSL
or specifies alternative procedures or requirements
recognizing the legal effect, validity and enforceability of
electronic signatures; and (2) for statutes enacted or
adopted after the date of enactment of this Act, makes
specific reference to the provisions of section 101.
Section 102(b) provides that no State statute, regulation,
or rule of law (including those pertaining to insurance),
regardless of date of enactment, that modifies, limits, or
supersedes section 101 shall be effective to the extent that
such statute, regulation, or rule of law: (1) discriminates
in favor of or against a specific technology, method, or
technique; (2) discriminates in favor of or against a
specific type or size of entity engaged in the business of
facilitating the use of electronic signatures and electronic
records; (3) is based on procedures or requirements that are
not specific and that are not publicly available; and (4) is
otherwise inconsistent with the provisions of section 101.
Section 103(c) provides that a State may, by statute,
regulation or rule of law enacted or adopted after the date
of enactment of this Act, require specific notices to be
provided or made available in writing if such notices are
necessary for the protection of the public health or safety
of consumers. A consumer may not, pursuant to section
101(b)(2) consent to the provision or availability of such
notice solely as an electronic record.
Conference substitute
The conference report adopts a substitute provision.
Section 102 of the conference report provides a conditioned
process for States to enact their own statutes, regulations
or other rules of law dealing with the use and acceptance of
electronic signatures and records and thus opt-out of the
federal regime. The preemptive effects of this Act apply to
both existing and future statutes, regulations, or other
rules of law enacted or adopted by a State. Thus, a State
could not argue that section 101 does not preempt its
statutes, regulations, or other rules of law because they
were enacted or adopted prior to the enactment of this Act.
Section 102(a) provides that a State statute, regulation or
other rule of law may modify, limit, or supersede the
provisions of section 101 only if that State action: (1)
constitutes an adoption or enactment of the Uniform
Electronic Transactions Act (UETA) as reported and
recommended for enactment by the National Conference of
Commissioners on Uniform State Laws (NCCUSL) in 1999; or (2)
specifies alternative procedures or requirements (or both)
for the use or acceptance of electronic signatures or
electronic records for establishing the legal effect,
validity and enforceability of contracts or records.
It is intended that any State that enacts or adopts UETA in
its State to remove itself from Federal preemption pursuant
to subsection (a)(1) shall be required to enact or adopt UETA
as that document was reported and recommended for enactment
by NCCUSL.
Subsection (a)(1) places a limitation on a State that
attempts to avoid Federal preemption by enacting or adopting
a clean UETA. Section 3(b)(4) of UETA, as reported and
recommended for enactment by NCCUSL, allows a State to
exclude the application of that State's enactment or adoption
of UETA for any `other laws, if any, identified by State.'
This provision provides a potential loophole for a State to
prevent the use or acceptance of electronic signatures or
electronic records in that State. To remedy this, subsection
(a)(1) requires that any exception utilized by a State under
section 3(b)(4) of UETA shall be preempted if it is
inconsistent with title I or II, or would not be permitted
under subsection (a)(2)(ii) (technology neutrality).
Requirements for certified mail or return receipt would not
be inconsistent with title I or II, however, note that an
electronic equivalent would be permitted.
As stated above, subsection (a)(2) is designed to cover any
attempt by a State to escape Federal preemption by enacting
or adopting specific alternative procedures or requirements
for the use or acceptance of electronic signatures or records
except a strict enactment or adoption of UETA (which would be
covered by subsection (a)(1)). States that enact UETA in the
manner specified in (a)(1) may supercede the provisions of
section 101 with respect to State law. Thus, regulatory
agencies within a state which complies with (a)(1) would
interpret UETA, not section 101 of the federal act.
Further, some States are enacting or adopting a strict,
unamended version of UETA as well as enacting or adopting a
companion or separate law that contains further provisions
relating to the use or acceptance of electronic signatures or
electronic records. Under this Act, such action by the State
would prompt both subsection (a)(1) (for the strict enactment
or adoption of UETA) and subsection (a)(2) (for the other
companion or separate legislation).
Subsection (a)(2) contains two important conditions that
limit the extent to which a state could utilize it to opt-out
of the federal regime. Specifically, when interpreting
section 101, alternative procedures or requirements: (1) must
be consistent with this title and title II; and (2) shall not
require, or accord greater legal status or effect to, the
implementation or application of a specific technology or
technological specification for performing the functions of
creating, storing, generating, receiving, communicating, or
authenticating electronic signatures or records. It is not
intended that the singular use of technology or technological
specification in subsection (a)(2)(A)(ii) allows a State to
set more than one technology at the expense of other
technologies in order to meet this standard, unless only one
form of the technology exists, in which case this act is not
intended to preclude a technological solution. Further,
inclusion of the `or accord greater legal status or effect
to' is intended to prevent a state from giving a leg-up or
impose an additional burden on one technology or technical
specification that is not applicable to all others, and is
not intended to prevent a state or its subdivisions from
developing, establishing, using or certifying a certificate
authority system.
In addition, subsection (a)(2)(B) requires that a State
that utilizes subsection (a)(2) to escape federal preemption
must make a specific reference to this Act in any statute,
regulation, or other rule of law enacted or adopted after the
date of enactment of this Act. This provision is intended, in
part, to make it easier to track action by the various States
under this subsection for purposes of research.
Section 102(b) provides a specific exclusion to the
technology neutrality provisions contained in subsection
(a)(2)(A)(ii) for procurement by a state, or any agency or
instrumentality thereof.
Section 102(c) makes clear that subsection (a) cannot be
used by a State to circumvent this title or title II through
the imposition of nonelectronic delivery methods under
section 8(b)(2) of UETA. Any attempt by a State to use
8(b)(2) to violate the spirit of this Act should be treated
as effort to circumvent and thus be void.
SPECIFIC EXCLUSIONS
Senate bill
Section 5(d) of the Senate bill excludes from the
application of this section any statute, regulation or other
rule of law governing: (1) the Uniform Commercial Code as in
effect in any state, other than sections 1-107 and 1-206 and
Articles 2 and 2A; (2) premarital agreements, marriage,
adoption, divorce, or other matters of family law; (3)
documents of title which are filed of record with a
governmental unit until such time that a State or subdivision
thereof chooses to accept filings electronically; (4)
residential landlord-tenant relationships; and (5) the
Uniform Health-Care Decisions Act as in effect in a State.
House amendment
Section 103(a) of the House amendment excludes from the
application of section 101 any contract, agreement or record
to the extent that it is covered by: (1) a statute,
regulation or rule of law governing the creation
[[Page S5286]]
and execution of wills, codicils, or testamentary trusts; (2)
a statute, regulation or other rule of law governing
adoption, divorce, or other matters of family law; (3) the
Uniform Commercial Code as in effect in any state, other than
sections 1-107 and -206 and Articles 2 and 2A; (4) any
requirement by a Federal regulatory agency or self-regulatory
agency that records be filed or maintained in a specified
standard or standards (except that nothing relieves any
Federal regulatory agency of its obligation under the
Government Paperwork Elimination Act, title XVII of Public
Law 105-277); (5) the Uniform Anatomical Gift Act; or (6) the
Uniform Health-Care Decisions Act.
Section 103(b) excludes from the application of section
101: (1) any contract, agreement or record between a party
and a State agency if the State agency is not acting as a
market participant in or affecting interstate commerce; (2)
court orders or notices or official court documents
(including briefs, pleading and other writings) required to
be executed in connection with court proceedings; or (3) any
notice concerning: (A) the cancellation or termination of
utility services, (B) default, acceleration, repossession,
foreclosure or eviction, or the right to cure under a credit
agreement secured by, or a rental agreement for, a primary
residence of an individual or the cancellation or termination
of health insurance or benefits or life insurance benefits
(excluding annuities).
Conference substitute
The conference report adopts a substitute provision.
Section 103(a) excludes from the application of section 101
any contract, agreement or record to the extent that it is
covered by: (1) a statute, regulation or rule of law
governing the creation and execution of wills, codicils, or
testamentary trusts; (2) a statute, regulation or other rule
of law governing adoption, divorce, or other matters of
family law; (3) the Uniform Commercial Code as in effect in
any state, other than sections 1-107 and 1-206 and Articles 2
and 2A.
Section 103(b) excludes from the application of section
101: (1) court orders or notices or official court documents
(including briefs, pleading and other writings) required to
be executed in connection with court proceedings; or (2) any
notice of: (A) the cancellation or termination of utility
services, (B) default, acceleration, repossession,
foreclosure or eviction, or the right to cure under a credit
agreement secured by, or a rental agreement for, a primary
residence of an individual or the cancellation or termination
of health insurance or benefits or life insurance benefits
(excluding annuities).
The exclusion pertaining to utility services applies to
essential consumer services including water, heat and power.
This provision does not apply to notices for other broadly
used important consumer services, such as telephone, cable
television, and Internet access services, etc. Electronic
cancellation or termination notices may be used in
association with those other services, assuming all of the
other elements of Section 101 are met. To clarify further,
with respect to Section 103(b), the statement that ``the
provisions of section 101 shall not apply to'' the listed
items means only that Section 101 may not be relied upon to
allow an electronic record or electronic signature to
suffice. Section 103(b) does not prohibit use of electronic
records or signatures, however. Whether such can be used is
left to other law.
Section 103(c)(1) directs the Secretary of Commerce, acting
through the Assistant Secretary for Communication and
Information, to review the operation of the exclusions in
subsections (a) and (b) over a period of three years to
determine if such exclusions are necessary for the protection
of consumers. The Assistant Secretary shall submit the
findings of this review to Congress within three years of the
date of enactment of this Act.
Section 103(c)(2) provides that a Federal regulatory
agency, with respect to matter within its jurisdiction, may
extend, after proper notice and comment and publishing a
finding that one or more of exceptions in subsections (a) or
(b) are no longer necessary for the protection of consumers
and eliminating such exceptions will not materially increase
the risk of harm to consumers, the application of section 101
to such exceptions.
APPLICABILITY TO FEDERAL AND STATE GOVERNMENTS
Senate bill
The Senate bill contained no provision affecting the
authority of Federal regulatory agencies.
House amendment
The House amendment provided in Section 103 that the
authority of Federal regulatory agencies would be preserved
over records filed or maintained in a specific standard or
standards.
Conference substitute
The conference report adopts a substitute provision.
Section 104(a) provides that subject to section 104(a)(2),
a Federal regulatory agency, a self-regulatory organization,
or State regulatory agency may specify standards or formats
for the filing of records with that agency or organization,
including requiring paper filings or records. While the
conference report preserves such authority to such agencies
or organizations, it is intended that use of such authority
is rarely exercised. Section 104(b)(1) provides that subject
to section 104(b)(2) and section 104(c), a Federal regulatory
agency or State regulatory agency that is responsible for
rulemaking under any other statute may interpret section 101
with respect to such statute through (1) the issuance of
regulations pursuant to a statute; or (2) to the extent such
agency is authorized by statute to issue orders or guidance,
the issuance of orders or guidance of general applicability
that are publicly available and published (in the Federal
Register in the case of an order or guidance issued by a
Federal regulatory agency).
The conference report provides for more limited Federal and
State interpretative authority over other functions related
to records. This Act grants no additional or new rulemaking
authority to any Federal or State agency. The conference
report provides that if Federal or State regulators possessed
specific rulemaking authority under their organic statutes,
they could use that rulemaking authority to interpret section
101 subject to strict conditions. Those conditions include
determinations that such regulation, order or guidance: (1)
is consistent with section 101; and (2) does not add to the
requirements of the section. Additionally, the conference
report requires that any Federal agency show conclusively
that: (a) there is a substantial justification for the
regulation and the regulation is necessary to protect an
important public interest; (b) the methods used to carry out
that purpose are the least restrictive alternative consistent
with that purpose; (c) the methods are substantially
equivalent to the requirements imposed or records that are
not electronic records; and (d) such methods will not impose
new costs on the acceptance and use of electronic records.
The conference report requires strict technological
neutrality of any Federal or State regulation, order or
guidance. Absent such technological neutrality, any such
regulation, order or guidance is void.
The conference report is designed to prevent Federal and
State Regulators from undermining the broad purpose of this
Act, to facilitate electronic commerce and electronic record
keeping. To ensure that the purposes of this Act are upheld,
Federal and State regulatory authority is strictly
circumscribed. It is expected that Courts reviewing
administrative actions will be rigorous in seeing that the
purpose of this Act, to ensure the widest use and
dissemination of electronic commerce and records are not
undermined.
Subsection (b)(3)(A) provides authority to a Federal or
State regulatory agency to interpret section 101(d) in a
manner to specify specific performance standards to assure
accuracy, record integrity, and accessibility of records that
are required to be retained. Subsection (b)(3) extends this
authority to override the technology neutrality provision
contained in subsection (b)(2)C)(iii) but only if doing so
(1) serves an important governmental objective; and (2) is
substantially related to the achievement of that objective.
Further, subsection (b)(3)(A) does not allow a Federal or
State regulatory agency to require the use of a particular
type of software or hardware in order to comply with
101(d).
Subsection (b)(3)(B) provides authority to a Federal or
State regulatory agency to interpret section 101(d) to
require retention of paper records but only if (1) there is a
compelling government interest relating to law enforcement or
national security for imposing such requirement, and (2)
imposing such requirement is essential to attaining such
interest. It is important to note that the test in subsection
(b)(3)(B) is higher and more stringent than in subsection
(b)(3)(A). This is intentional as it is an effort to impose
an extremely high barrier before a Federal or State
regulatory agency will revert back to requiring paper
records. However, this does not diminish the test contained
subsection (b)(3)(A). It, too, is intended to be an extremely
high barrier for a Federal or State regulatory agency to meet
before the technology neutrality provision is violated. It is
intended that use of either of these tests will be necessary
in only a very, very few instances. It is expected that
Federal and State agencies take all action and exhaust all
other avenues before exercising authority granted in
paragraph (3).
Subsection (b)(4) exempts procurement by a Federal or State
government, or any agency or instrumentality thereof from the
technology neutral requirements of subsection (b)(2)(C)(iii).
Subsection (c)(1) makes clear that nothing in subsection
(b), except subsection (b)(3)(B), allows a Federal or State
regulatory agency to impose or reimpose any requirement that
a record be in paper form.
Subsection (c)(2) makes clear that nothing in subsection
(a) or (b) relieves any Federal regulatory agency of its
obligations under the Government Paperwork Elimination Act.
Subsection (d)(1) provides authority to a Federal or State
regulatory agency to exempt without condition a specified
category or type of record from the consent provisions in
section 101(c) if such exemption is necessary to eliminate a
substantial burden on electronic commerce and will not
increase the material risk of harm to consumers. It is
intended that the test under subsection (d)(1) not be read
too limiting. There are vast numbers of instances when
section 101(c) may not be appropriate or necessary and should
be exempted by the appropriate regulator.
Subsection (d)(2) requires the Securities and Exchange
Commission, within 30 days after date of enactment, to issue
a regulation or order pursuant to subsection (d)(1)
[[Page S5287]]
exempting from the consent provision any records that are
required to be provided in order to allow advertising, sales
literature, or other information concerning a security issued
by an investment company that is registered under the
Investment Company Act of 1940, or concerning the issuer
thereof, to be excluded from the definition of a prospectus
under section 2(a)(10)(A) of the Securities Act of 1933.
Section 104(e) provides that the Federal Communications
Commission shall not hold any contract for telecommunications
service or letter of agency for a preferred carrier change,
that otherwise complies with the Commission's rules, to be
legally ineffective, invalid or unenforceable solely because
an electronic records or electronic signature was used in its
formation or authorization.
The Federal Communications Commission (FCC) has been very
slow, even reticent, to clearly authorize the use of an
Internet letter of agency for a consumer to conduct a
preferred carrier change. As a result of the Commission's
repeated failure to act on this matter, the conference
report provides specific direction to the Commission to
recognize Internet letters of agency for a preferred
carrier change.
STUDIES
Senate bill
Section 7 of the Senate bill directs each Federal agency
shall, not later than 6 months after the date of enactment of
this Act, to provide a report to the Director of the Office
of Management and Budget and the Secretary of Commerce
identifying any provision of law administered by such agency,
or any regulations issued by such agency and in effect on the
date of enactment of this Act, that may impose a barrier to
electronic transactions, or otherwise to the conduct of
commerce online or by electronic means, including barriers
imposed by a law or regulation directly or indirectly
requiring that signatures, or records of transactions, be
accomplished or retained in other than electronic form. In
its report, each agency shall identify the barriers among
those identified whose removal would require legislative
action, and shall indicate agency plans to undertake
regulatory action to remove such barriers among those
identified as are caused by regulations issued by the agency.
Section 7(b) requires a report to Congress by The Secretary
of Commerce, in consultation with the Director of the Office
of Management and Budget within 18 months after the date of
enactment of this Act, and after the consultation required by
subsection (c) of this section, report to the Congress
concerning--
(1) legislation needed to remove barriers to electronic
transactions or otherwise to the conduct of commerce online
or by electronic means; and
(2) actions being taken by the Executive Branch and
individual Federal agencies to remove such barriers as are
caused by agency regulations or policies.
7(c) provides that the Secretary of Commerce shall consult
with the General Services Administration, the National
Archives and Records Administration, and the Attorney General
concerning matters involving the authenticity of records,
their storage and retention, and their usability for law
enforcement purposes.
7(d) If the report required by this section omits
recommendations for actions needed to fully remove identified
barriers to electronic transactions or to online or
electronic commerce, it shall include a finding or findings,
including substantial reasons therefor, that such removal is
impracticable or would be inconsistent with the
implementation or enforcement of applicable laws.
House amendment
Section 104 of the House amendment directs the Secretary of
Commerce (the Secretary), acting through the Assistant
Secretary for Communications and Information, to conduct an
inquiry regarding any State statute, regulation, or rule of
law enacted or adopted after enactment on the extent to which
such statute, regulation, or rule of law complies with
section 102(b). Section 104(b) requires the Secretary to
submit the report described in paragraph (a) at the
conclusion of the five year period.
Section 104(c) requires the Secretary, within eighteen
months after the date of enactment, to conduct an inquiry
regarding the effectiveness of the delivery of electronic
records to consumers using electronic mail as compared with
the delivery of written records by the United States Postal
Service and private express mail services. The Secretary
shall submit a report to Congress regarding the results of
such inquiry at the conclusion of the eighteen month period.
Conference substitute
The conference adopts a substitute provision. Specifically,
the conference report retains subsection 7(a) of the Senate
amendment and redesignates it as section 104(a) of the
conference report. Further, the conference report includes a
new subsection (b) that requires the Secretary of Commerce
and the Federal Trade Commission, within one year after date
of enactment, to submit a report to the Congress analyzing:
(1) the benefits provided to consumers by the consumer access
test of the consent provision (section 101(c)(1)(C)(ii)); (2)
any burdens imposed on electronic commerce by the provision,
whether the benefits outweigh the burdens; (3) whether the
absence of such procedure would increase consumer fraud; and
(4) any suggestions for revising the provision. In conducting
the evaluation, the Secretary of Commerce and FTC shall
solicit the comments of the public, consumer representatives,
and electronic commerce businesses.
DEFINITIONS
Senate bill
Section 4 sets forth the definitions of terms used in the
bill: `electronic;' `electronic agent;' `electronic record;'
`electronic signature;' `governmental agency;' `record;'
`transaction;' and `Uniform Electronic Transaction Act.'
House amendment
Section 104 of the House amendment defines the following
terms: `electronic record;' `electronic signature;'
`electronic;' `electronic agent;' `record;' `Federal
regulatory agency;' and `self-regulatory agency.'
Conference substitute
The conference report adopts a substitute provision
adopting definitions for the following terms: `consumer;'
`electronic;' `electronic agent;' `electronic record;'
`electronic signature;' `Federal regulatory agency;'
`information;' `person;' `record;' and `transaction.'
To clarify further the definition of ``consumer,'' the
definition is intended to be consistent with traditional
interpretations of such definitions. This means that the
party dealing with the consumer may rely on the consumer's
intended use for the product or service as indicated when the
transaction is entered into. Thus if an individual indicates
at the time of the transaction that the online purchase of a
heater is primarily for personal family or household use,
then that individual is a consumer; the fact that the
individual may later dedicate the actual use of the heater to
the individual's business is not relevant. The opposite is
also true: if an individual indicates that the intended use
is primarily for business purposes, then that individual
is not a consumer even if the individual later uses the
heater primarily for personal or family purposes.
EFFECTIVE DATES
Senate bill
The Senate bill contained no provision.
House amendment
The House amendment contained no provision.
Conference substitute
The conference report creates a general delayed effective
date for the bill, and creates specific delayed effective
dates for certain provisions of the bill. Subsection (a)
establishes that, except as provided in subsections (b), the
provisions of the bill are effective October 1, 2000.
Subsection (b) delays the effective date of the records
retention provision until March 1, 2001 unless an agency has
initiated, announced, proposed but not completed an action
under subsection 104(b)(3), in which case it would be
extended until June 1, 2001. Subsection (b)(2) delays the
effective date of this Act by one year with regards to any
transaction involving a loan guarantee or loan guarantee
commitment made by the United States Government. The one year
delay was granted to permit the federal government time to
institute safeguards necessary to protect taxpayers from risk
of default on loans guaranteed by the federal government.
Subsection (d) delays the effective date of section 101(c)
for any records provided or made available to a consumer
pursuant to title IV of the High Education Act of 1965 until
the Secretary of Education publishes revised promissory notes
under section 432(m) of such Act or one year after the date
of enactment, whichever is earlier.
TRANSFERABLE RECORDS
Senate bill
The Senate bill contained no provision.
House amendment
The House amendment contained no provision.
Conference substitute
The conference report adopts a new provision in recognition
of the need to establish a uniform national standard for the
creation, recognition, and enforcement of electronic
negotiable instruments. The development of a fully-electronic
system of negotiable instruments such as promissory notes is
one that will produce significant reductions in transaction
costs. This provision, which is based in part on Section 16
of the Uniform Electronic Transactions Act, sets forth a
criteria-based approach to the recognition of electronic
negotiable instruments, referred to as `transferable
records' in this section and in UETA. It is intended that
this approach create a legal framework within which
companies can develop new technologies that fulfill all of
the essential requirements of negotiability in an
electronic environment, and in a manner that protects the
interests of consumers.
The conference report notes that the official Comments to
section 16 of UETA, as adopted by the National Conference of
Commissioners on Uniform State Laws, provide a valuable
explanation of the origins and purposes of this section, as
well as the meaning of particular provisions.
The conference report notes that, pursuant to sections 3(c)
and 7(d) of the UETA, an electronic signature satisfies any
signature requirement under Section 16 of the UETA. It is
intended that an electronic signature shall satisfy any
signature requirement under this provision, as well. The
conference report further notes that the reference in
[[Page S5288]]
section 201(a)(1)(C) to loans secured by real property'
includes all forms of real property, including single-family
and multi-family housing.
TREATMENT OF ELECTRONIC SIGNATURES IN INTERSTATE AND FOREIGN COMMERCE
Senate bill
Section 6 of the Senate bill sets out the principles that
the United States Government should follow, to the extent
practicable, in its international negotiations on electronic
commerce as a means to facilitate cross-border electronic
transactions.
Section 6 lists the principles as follows: (1) advocates
the removal of paper-based obstacles to electronic
transactions. This can be accomplished by taking into account
the enabling provisions of the Model Law on Electronic
Commerce adopted by the United Nations Committee on
International Trade Law (UNCITRAL) in 1996. Paragraph (2)
permits that parties to a transaction shall have the
opportunity to choose the technology of their choice when
entering into an electronic transaction. Paragraph (3)
permits parties to a transaction the opportunity to prove in
a court or other proceeding that their authentication
approach and transactions are valid. Paragraph (4) adopts a
nondiscriminatory approach to electronic signatures.
House amendment
Section 201(a) directs the Secretary of Commerce, acting
through the Assistant Secretary for Communications and
Information, to conduct an annual inquiry identifying: (1)
any domestic or foreign impediments to commerce in electronic
signature products and services and the manner and extent to
which such impediments inhibit the development of interstate
and foreign commerce; (2) constraints imposed by foreign
nations or international organizations that constitute
barriers to providers of electronic signature products and
services; and (3) the degree to which other nations and
international organizations are complying with the principles
in section 201(b)(2).
Under subsection (a)(2), the Secretary is required to
report to Congress the findings of each inquiry 90 days after
completion of such inquiry.
Section 201(b) directs the Secretary of Commerce, acting
through the Assistant Secretary for Communications and
Information, to promote the acceptance and use of electronic
signatures on an international basis in accordance with
section 101 of the bill and with designated principles. In
addition, the Secretary of Commerce is directed to take all
actions to eliminate or reduce impediments to commerce in
electronic signatures, including those resulting from the
inquiries required pursuant to subsection (a).
The designated principles are as follows: free-markets and
self-regulation, rather than government standard-setting or
rules, should govern the development and use of electronic
signatures and electronic records; neutrality and
nondiscrimination should be observed among providers of and
technologies for electronic records and electronic
signatures; parties to a transaction should be allowed to
establish requirements regarding the use of electronic
records and electronic signatures acceptable to the parties;
parties to a transaction should be permitted to determine the
appropriate authentication technologies and implementation
for their transactions with the assurance that the technology
and implementation will be recognized and enforced; the
parties should have the opportunity to prove in court that
their authentication approaches and transactions are valid;
electronic records and signatures in a form acceptable to the
parties should not be denied legal effect, validity, or
enforceability because they are not in writing; de jure or de
facto imposition of electronic signature and electronic
record standards on the private sector through foreign
adoption of regulations or policies should be avoided; paper-
based obstacles to electronic transactions should be removed.
Section 201(c) requires the Secretary of Commerce to
consult with users and providers of electronic signatures and
products and other interested parties in carrying out actions
under this section.
Section 201(d) clarifies that nothing requires the
Secretary or Assistant Secretary to take any action that
would adversely affect the privacy of consumers.
Section 201(e) provides that the definitions in section 104
apply to this title.
Conference substitute
The House recedes to the Senate with an amendment. Section
301(a)(1) directs the Secretary of Commerce to promote the
acceptance and use of electronic signatures on an
international basis in accordance with section 101 of the
bill and with the set principles listed in subsection (a)(2).
In addition, the Secretary of Commerce is directed to take
all actions to eliminate or reduce impediments to commerce in
electronic signatures.
Section 301(a)(2) lists the principles as follows: (1)
Removal of paper-based obstacles to electronic transactions.
This can be accomplished by taking into account the enabling
provisions of the Model Law on Electronic Commerce adopted by
the United Nations Committee on International Trade Law
(UNCITRAL) in 1996; (2) Parties to a transaction shall have
the opportunity to choose the technology of their choice when
entering into an electronic transaction. Parties to a
commercial transaction should be able to chose the
appropriate authentication technologies and implementation
models for their transactions. Unnecessary regulation of
commercial transactions distorts the development and
efficient operation of markets, including electronic
markets. Moreover, the rapid development of the electronic
marketplace is resulting in new business models and
technological innovations. This is an evolving process.
Therefore, government attempts to regulate may impede the
development of newer alternative technologies; (3) Parties
to a transaction the opportunity to prove in a court or
other proceeding that their authentication approach and
transactions are valid. Parties should have the
opportunity to prove in court that the authentication
methods that they select are valid and reliable; and (4)
Adoption of a nondiscriminatory approach to electronic
signatures and authentication methods from other
jurisdictions.
Section 301(c) directs the Secretary to consult with users
and providers of electronic signature products and services
and other interested parties. Section 301(d) applies the
definitions of `electronic signature' and `electronic record'
in section 107 to this title.
Increasingly, online transactions are not just interstate
but international in nature and this creates a clear need for
international recognition of electronic signatures and
records that will not create barriers to international trade.
Title III directs the Secretary of Commerce to take an active
role in bilateral and multilateral talks to promote the use
and acceptance of electronic signatures and electronic
records worldwide. It is intended that the Secretary promote
the principles contained in this Act internationally.
However, it is possible that some foreign nations may choose
to adopt their own approach to the use and acceptance of
electronic signatures and electronic records. In such cases,
the Secretary should encourage those nations to provide legal
recognition to contracts and transactions that may fall
outside of the scope of the national law and encourage those
nations to recognize the rights of parties to establish their
own terms and conditions for the use and acceptance of
electronic signatures and electronic records.
There is particular concern about international
developments that seek to favor specific technologies of
processes for generating electronic signatures and electronic
records. Failure to recognize multiple technologies may
create potential barriers to trade and stunt the development
of new and innovative technologies.
Unfortunately, international developments on recognizing
electronic signatures are troubling. The German Digital
Signature Law of July 1997 runs counter to many of the widely
accepted principles of electronic signature law in the United
States. For example, the German law provides legal
recognition only to signatures generated using digital
signature technology, establishes licensing for certificate
authorities, and sets a substantial role for the government
in establishing technical standards. Further, a position
paper on international recognition of electronic signatures
released by the German government (International Legal
Recognition of Digital Signatures, August 28, 1998) seeks to
apply these principles internationally. This policy statement
reemphasizes the principle that uniform security standards
are necessary for all uses of digital signatures regardless
of their use, supports mutual recognition of digital
signatures only to those nations which have a similar
regulatory structure for certification authority, and fails
to provide legal effect to electronic signatures generated by
other technologies.
The European Community is considering a framework for the
use and acceptance of electronic signatures for its member
countries. `Directive 1999/93/EC of the European Parliament
and of the Council of 13 December 1999 on a Community
Framework for electronic signatures' lays out the European
Community's approach to electronic signature legislation.
Of particular interest is Article 7, International
Aspects, which recognizes the legal validity of digital
certificates issued in a non-European Community country.
While international recognition of electronic signatures
is important, there is concern that this approach will not
recognize non-certificate based electronic signatures,
such as those based on biometric technologies. The
conference report notes that negotiations with the
European Union on electronic signatures is a top priority.
Commission on Child Online Protection
authority to accept gifts
Senate bill
The Senate bill contains no similar provision.
House amendment
The House amendment contains no similar provision.
Conference substitute
The conference report adopts a provision to amend section
1405 of the Child Online Protection Act by adding a new
subsection (h), which allows the Commission on Online Child
Protection to accept, use and dispose of gifts, bequests or
devises of services or property for the purpose of aiding or
facilitating the work of the Commission.
Mr. WARNER. Mr. President, I want to offer my strong support for the
Electronic Signatures in Global and National Commerce Act. This
legislation removes legal barriers to electronic commerce by
establishing important legal standards for electronic contracts and
signatures.
[[Page S5289]]
With the passage of this important legislation, businesses will have
the legal certainty that they require and consumers will have the
assurance of safety and security that they need. The measure represents
a balanced approach. It ensures that protections in the digital world
equal those in the paper world.
Mr. President, E-commerce offers tremendous benefits for businesses
and consumers in terms of efficiency, choice, convenience, and lower
costs. The measure will ensure the continued expansion of electronic
commerce, the roots and future of which lie in Virginia. It will take
electronic business-to-business and business-to-consumer commerce to
the next level.
Mr. BENNETT. Mr. President, I rise to praise the hard work,
commitment and diligence of Senator Spencer Abraham of Michigan. He
navigated truly treacherous legislative and political waters to bring
this legislation to shore. Were it not for his steadfast guidance of
this legislation, there would be no E-Sign bill before us today. From
the outset, Senator Abraham had the vision and initiative to call to
life a law which will allow American consumers and businesses to do
transactions over the Internet with a greater confidence in their legal
rights and responsibilities. And let me say this to my colleague,
Senator Abraham, this bill is much like the Internet in that almost
instantaneously all kinds of people will come out of the woodwork to
claim credit for your great achievement. Savor it, because those of us
who worked by your side know well that the credit lies with you.
Throughout the conference I kept one goal in mind. We must make every
effort to have a digital signature be equal to a paper signature both
in the ease of use and in the eyes of the law. And while we did not
fully succeed in that regard, this legislation is clearly a worthwhile
step in the right direction and I intend to support its passage.
Mr. President, let me take one more moment to express, generally,
some of my concerns about provisions that were added in the name of
providing greater consumer protection and which were outside of the
scope of the bills passed in the House and the Senate. I fear that the
lack of clarity of several terms and phrases which were added in the
conference and which are strewn throughout the bill will create the
opportunity for misunderstandings and lawsuits. Greater consultation
among the conferees could have resolved these issues, because I know
that we all share the same hopes for the success of this legislation. I
sincerely hope that my concerns about the use of these terms is
misplaced and that they will not come back to haunt us.
Finally, Mr. President, pursuant to the Government Paperwork
Elimination Act passed by the previous Congress, the Office of
Management and Budget has adopted regulations to permit individuals to
obtain, submit and sign government forms electronically. These
regulations direct Federal agencies to recognize that different
security approaches offer varying levels of assurance in an electronic
environment and that deciding which to use in an application depends
first upon finding a balance between the risks associated with the
loss, misuse or compromise of the information, and the benefits, costs
and effort associated with deploying and managing the increasingly
secure methods to mitigate those risks.
The OMB regulations recognize that among the various technical
approaches, in an ascending level of assurance, are (1) ``shared
secrets'' methods (e.g., personal identification numbers or passwords),
(2) digitized signatures or biometric means of identification, such as
fingerprints, retinal patterns and voice recognition, and (3)
cryptographic digital signatures, which provide the greatest assurance.
Combinations of approaches (e.g., digital signatures with bio-metrics)
are also possible and may provide even higher levels of assurance. The
technical competence and experience of the service provider should be
of paramount concern as we step into this brave new world. A positive
first step in this regard is the General Services Administration's
development of the ACES, or Access Certification for Electronic
Services, Program for all federal agencies.
Mr. President, in developing this legislation, we recognized that
certain technologies are more secure than others and that consumers and
businesses must, just as the government, select and weigh which
technology is most appropriate for their particular needs taking into
account the importance of the transaction and its corresponding need
for assurance.
Mr. ABRAHAM. Mr. President, I ask for the yeas and nays on the
conference report accompanying S. 761.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The question is on agreeing to the conference report. The clerk will
call the roll.
The legislative clerk called the roll.
Mr. NICKLES. I announce that the Senator from Kentucky (Mr. Bunning),
the Senator from Colorado (Mr. Campbell), the Senator from Utah (Mr.
Hatch), the Senator from Oklahoma (Mr. Inhofe), the Senator from
Kentucky (Mr. McConnell), the Senator from Wyoming (Mr. Thomas), and
the Senator from Virginia (Mr. Warner) are necessarily absent.
I further announce that if present and voting, the Senator from
Kentucky (Mr. Bunning), the Senator from Kentucky (Mr. McConnell), the
Senator from Utah (Mr. Hatch), and the Senator from Colorado (Mr.
Campbell) would each vote ``aye.''
Mr. REID. I announce that the Senator from California (Mrs. Boxer),
the Senator from North Dakota (Mr. Conrad), the Senator from North
Dakota (Mr. Dorgan), the Senator from Iowa (Mr. Harkin), the Senator
from Vermont (Mr. Leahy), and the Senator from Virginia (Mr. Robb) are
necessarily absent.
I further announce that, if present and voting, the Senator from
Vermont (Mr. Leahy) and the Senator from Iowa (Mr. Harkin) would each
vote ``aye.''
The PRESIDING OFFICER (Mr. Hagel). Are there any other Senators in
the Chamber who desire to vote?
The result was announced--yeas 87, nays 0, as follows:
[Rollcall Vote No. 133 Leg.]
YEAS--87
Abraham
Akaka
Allard
Ashcroft
Baucus
Bayh
Bennett
Biden
Bingaman
Bond
Breaux
Brownback
Bryan
Burns
Byrd
Chafee, L.
Cleland
Cochran
Collins
Coverdell
Craig
Crapo
Daschle
DeWine
Dodd
Domenici
Durbin
Edwards
Enzi
Feingold
Feinstein
Fitzgerald
Frist
Gorton
Graham
Gramm
Grams
Grassley
Gregg
Hagel
Helms
Hollings
Hutchinson
Hutchison
Inouye
Jeffords
Johnson
Kennedy
Kerrey
Kerry
Kohl
Kyl
Landrieu
Lautenberg
Levin
Lieberman
Lincoln
Lott
Lugar
Mack
McCain
Mikulski
Moynihan
Murkowski
Murray
Nickles
Reed
Reid
Roberts
Rockefeller
Roth
Santorum
Sarbanes
Schumer
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thompson
Thurmond
Torricelli
Voinovich
Wellstone
Wyden
NOT VOTING--13
Boxer
Bunning
Campbell
Conrad
Dorgan
Harkin
Hatch
Inhofe
Leahy
McConnell
Robb
Thomas
Warner
The conference report was agreed to.
Mr. LOTT. Mr. President, today the Senate has taken a momentous step
in promoting and facilitating the growth of electronic commerce with
the passage of the conference report to S. 761--the Electronic
Signatures in Global and National Commerce Act.
It was a long and difficult road to get to this point, following the
bill's introduction in the Senate last March by my colleague and
champion of E-signatures, Senator Abraham. Many roadblocks had to be
overcome along the way. In the end, many compromises were agreed to.
This bill could have been done months ago; however, some wanted to make
this a partisan issue. I am personally very pleased though that the
sustained efforts of Congress resulted in a conference report supported
by a meaningful majority of conferees, and by a majority of the
business world.
S. 761 will establish legal certainty and validity for electronic
signatures and electronic records. When engaging in business online,
consumers and companies should feel secure and confident that their
contracts and agreements will be honored. This bill recognizes and
addresses those real needs now,
[[Page S5290]]
rather than waiting for all 50 States to adopt uniform laws. S. 761
will provide the basic foundation, or the rules of the road, for the
future of electronic commerce in America. It will foster the continued
expansion of electronic commerce. More importantly, it will empower
consumers to take part in a vibrant segment of our economy. It will
afford consumers from all across America the real opportunity, if they
so choose, to take advantage of electronic commerce. This, to me, is
the crux of this legislation. The ability of our citizens in all 50
States to improve the quality of their lives. S. 761 provides that
ability.
Some have expressed concern that this measure places a higher
standard and unnecessary burdens on the on-line world than those in
effect for the off-line world. I hope it does not. I believe a good-
faith effort was made to provide the flexibility necessary for those
with that great entrepreneurial spirit and imaginative ability to
advance the Internet and electronic commerce. If, over time,
bureaucracy does indeed impede the bill's intent, I expect that
Congress will again assume responsibility and take corrective action.
The participation of several Members of Congress was integral to this
bill's enactment. They include the chairmen of both the House and
Senate Commerce Committees, Chairman Bliley and Chairman McCain,
Chairman Gramm of the Senate Banking Committee, and Chairman Hatch of
the Senate Judiciary Committee. I extend my thanks to them and to all
of the members of the conference for their attentiveness and commitment
to this important issue.
I also want to take a few moments to express my special appreciation
to my colleague and good friend, Senator Abraham. Senator Abraham
recognized early on the extreme importance of electronic signatures. It
was his initiative that led to the 105th Congress' enactment of the
Government Paperwork Elimination Act, a significant first step toward
the eventual broad use and acceptance of electronic signatures. Senator
Abraham's continued stewardship, vision, and tireless efforts have led
to the next logical step of now affording secure and accessible
opportunities in electronic commerce for the private sector and
millions of consumers. I believe no other Senator worked as hard on, or
knows as much about, this issue as Senator Abraham. Without his hard
work, keen judgment, and persistence, I do not believe we would be
voting on this conference report today. Senator Abraham is to be
commended for his leadership in this area, and I look forward to
working with him on other important technology issues facing Congress.
It goes without saying that Congress could not operate without the
dedicated efforts of staff. I want to identify those Senate staffers
who worked hard to prepare this legislation for consideration: Renee
Bennett, Moses Boyd, Jeanne Bumpus, Cesar Conda, Robert Cresanti, Makan
Delrahim, Geoff Gray, Martin Gruenberg, Carole Grunberg, Dave Hoppe,
Jack Howard, Jim Hippe, Kevin Kolevar, Chase Hutto, Jim Hyland, Julie
Katzman, Maureen McLaughlin, Paul Margie, Mike Rawson, Dena Ellis
Rochkind, Lisa Rosenberg and Jim Sartucci, as well as my former
Congressional Fellow, Steven Apicella. I thank them all.
Electronic signatures is an innovative technology whose time has
come. S. 761 will remove barriers to their use in a timely and useful
manner. S. 761 will make it easier for millions of Americans to use
electronic commerce. S. 761 will help stimulate our nation's economy.
And S. 761 will preserve America's leadership in the global
marketplace. I am proud that the 106th Congress has taken this action.
The PRESIDING OFFICER. The Senator from Michigan.
Mr. ABRAHAM. Mr. President, I thank my colleagues on both sides of
the aisle for their work on the legislation which has just passed. This
is an extraordinarily important bill which will essentially open up
opportunities in e-commerce that have previously not been existent for
Americans. It will be a tremendous incentive to our economy. I express
to all my colleagues my appreciation for their hard work on the
legislation. It is a significant accomplishment for the Congress.
The PRESIDING OFFICER. The Senator from Nevada.
____________________