Legal framework for electronic transactions introduced

July 9, 1999

The Electronic Transactions Bill, which seeks to provide a clear legal framework to promote the wide adoption of electronic transactions in Hong Kong, will be introduced into the Legislative Council on July 14.

Under the Bill, the Government proposes to give electronic records and digital signatures used in electronic transactions the same legal status as that of their paper-based counterparts. The Government further proposes to establish a framework to promote and facilitate the operation of certification authorities (CAs) so as to ensure trust and security in electronic transactions.

Electronic commerce is widely recognised as the engine of future economic growth, a spokesman for the Information Technology and Broadcasting Bureau said today (Friday).

"The Electronic Transactions Bill is an important measure to provide certainty and security for the conduct of electronic commerce, thereby propelling the further development of Hong Kong into an Information Society," he said, noting that the drafting of the Bill is one of the key initiatives under the Digital 21 Information Technology Strategy announced by the Bureau last November.

In drawing up the Bill to give legal recognition to electronic records and digital signatures, the Government has followed the United Nations Commission on International Trade Law - Model Law on Electronic Commerce.

"While it is our policy objective to promote the wider adoption of electronic transactions in Hong Kong, we recognise that for the time being certain types of transactions would preferably be conducted through conventional means because of their solemnity, significance, complexity or other factors," the spokesman said.

Taking account of these considerations, he added, the Government has included in the proposed Bill whereby :

• certain generic items such as wills, trust, statutory declarations, affidavits, power of attorney, court orders, warrant, bills of exchange, documents or instruments concerning land or property transactions, etc. are exempt from the operation of the relevant provisions in the proposed legislation;
  
  
• a mechanism is provided to exempt by means of subsidiary legislation specific rules of law from the operation of the relevant provisions in the proposed legislation;
  
  
• judicial proceedings are exempt from the operation of the relevant provisions in the proposed legislation and the authorities for making court rules are empowered to apply the relevant provisions to such proceedings when the relevant courts/tribunals are ready; and
  
  
• a mechanism is provided to specify format and procedural requirements if necessary in respect of cases whereby electronic information is accepted under a rule of law.

To address public concerns about the security and certainty of electronic transactions, the Government has spearheaded the establishment of a public key infrastructure (PKI) in Hong Kong supported by certification authorities. Taking a lead in this direction, the Hongkong Post will start to provide public certification services on a non-exclusive basis by the end of this year.

The spokesman said, "With the issue of digital certificates by certification authorities and through the use of digital signatures and public/private key encryption, individuals and businesses will be able to establish the identity of the opposite party in electronic transactions, authenticate electronic messages received, ensure that the confidentiality and integrity of electronic messages have not been breached and safeguard against the repudiation of electronic transactions."

Apart from the Hongkong Post, the private sector is also free to set up CAs in Hong Kong to serve the needs of the community. To protect consumer interest, the Government will introduce a voluntary system of recognition whereby trustworthy CAs may apply for recognition from the Director of Information Technology Services. With this recognition regime, consumers should be able to make an informed choice in obtaining CA services in the market.

"To encourage CAs to seek Government recognition under the proposed voluntary regime, we have stipulated in the proposed legislation that the provision therein regarding legal recognition of digital signatures applies only to those digital signatures supported by recognised certificates issued by CAs which are recognised by the Government," the spokesman said.

"In addition, we have, in line with common practice adopted elsewhere, introduced a provision to allow recognised CAs to limit their liability in the issue of recognised certificates under prescribed situation, whereby the CAs have complied with all the requirements under the proposed legislation and have not acted negligently.

"We consider these measures crucial in encouraging the development of a PKI and the establishment of CAs in Hong Kong," he added.

The Electronic Transactions Bill has been published in the Gazette today (Friday).

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