An analysis of the regulatory principles of functional equivalence and technology neutrality in the context of electronic signatures in the formation of electronic transactions in Lesotho and the SADC region
Doctoral Thesis
2018
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University of Cape Town
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Despite the steady growth of electronic commerce (e-commerce), Lesotho and SADC users are uncertain of how to securely sign e-communications practicably. This results in users' lack of confidence in the use of e-commerce. SADC and Lesotho regulatory bodies have developed legal instruments including model laws and bills in an attempt to regulate electronic signatures (e-signatures) in e-commerce to address this problem amongst others. However, it is unclear whether the approach adopted will ensure that the regulatory instruments effectively regulate e-signatures and consequently promote the growth of e-commerce and enhance the socio-economic development of the state. This study examines what the information and communications technology regulatory principles of functional equivalence and technology neutrality entail, their interpretation by the United Nations Commission on International Trade Law (UNCITRAL), and their appropriateness for effective regulation of e-signatures through conceptual analysis. In particular it examines the UNCITRAL Model Laws on e-commerce, UNCITRAL Model on e-signature and the United Nations Convention on the Use of Electronic Communications in International Contracts. The study describes the technical operation of different offline and online signatures in order to appreciate how e-signatures should be regulated. Through textual analysis, it examines whether regulatory instruments of Lesotho and SADC correctly apply the theories in a way that will render use of e-signatures practicable and their regulation effective. It also examines initiatives on regulation of e-signatures in South Africa, the United States of America and the European Union. The study reveals that the purpose of the signature formality is to promote certainty, prevent fraud and provide evidence of a contract despite the form of signature. Although not perfect, functional equivalence and technology neutrality principles render regulation of electronic signatures effective since rules that align with them promote equivalence of legal treatment between offline and online signatures. Consequently, the UNCITRAL's Convention reflects that ordinary e-signatures can meet purposes of the signature formality where appropriate if they observe its functional equivalence criteria. However, the reliability of such electronic signatures is a question of evidence as is the case in offline contracts. Thus, soft laws on electronic evidence must complement the e-signature rules to ensure equivalent legal treatment of signatures. The study reveals that the Lesotho instruments do not fully align with the regulatory principles whereas the SADC instrument closely aligns with them. To different extents, these instruments do not adequately address the problems of users and may inhibit the growth of e-commerce. It further found that the instruments erroneously exclude certain matters such as wills from e-signature application while they correctly exclude others such as negotiable instruments from e-signature application. Lastly it found that the UNCITRAL convention and the US instruments provide better models for effective regulation of e-signatures. By implementing amendments suggested by this study, Lesotho and SADC will address the challenges faced by e-commerce users and make the use of e-signatures feasible for all. Consequently, the instruments will effectively increase the growth of e-commerce and in turn enhance the development of socio economic growth of the SADC region.
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Kulehile, M. 2018. An analysis of the regulatory principles of functional equivalence and technology neutrality in the context of electronic signatures in the formation of electronic transactions in Lesotho and the SADC region. University of Cape Town.