Tuesday, January 26, 2010

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10 Noteworthy Cyberlaw Developments of 2009

10 Noteworthy Cyberlaw Developments of 2009
by Eric Goldman

European Union - European Commission - Information Society - Latvia : Laws relating to Electronic Documents

European Union - EU - European Commission - Information Society: "Legal and Administrative Practices Regarding the Validity and Mutual Recognition of e-Documents - 17 December 2006

The study clarifies the present situation concerning the national legal and administrative practices in 32 countries (the 25 Member States, 3 EFTA countries parties to the EEA Agreement (Iceland, Liechtenstein and Norway), 2 Acceding Countries (Bulgaria and Romania) and 2 Candidate Countries (Croatia and Turkey); it assesses them comparatively and identifies the remaining legal barriers concerning the validity and mutual recognition of e-documents.

The ELDOC Study Team, consisting of K.U.Leuven-ICRI and the Belgian Law Firm Lawfort [since disbanded], have been contracted by the European Commission – DG Enterprise and Industry to perform the Legal Study N° ENTR/04/67, with a view to identifying the existing legal barriers for enterprises (“the ELDOC Study”). The first part, 32 National Reports, is an overview of the existing legal and administrative practices in the Member States, EEA countries and Candidate Countries, with regard to the treatment of electronic documents in e-Commerce transactions. The second part, a Summary final report, examines and assess these practices, identifying any remaining legal barriers to the use of such electronic documents in e-Commerce transactions, and potential solutions to any such barriers, particularly on a cross-border level."

Electronic Documents Law in Latvia

(The material below is taken directly from pp. 274- 288 of ELDOC | LEGAL STUDY ON LEGAL AND ADMINISTRATIVE PRACTICES REGARDING THE VALIDITY AND MUTUAL RECOGNITION OF ELECTRONIC DOCUMENTS | D3.4 – First Interim report (country reports) July 2006 | Interim Report October 2006 Version 1.0 | Prepared for the DG [Directorate General] - Enterprise & Industry Technology for innovation / ICT industries and E-business | European Commission | Prepared by: The ELDOC Study Team, B-3000 Leuven, Belgium | Lead contractor: K.U.Leuven Research & Development, Belgium | Project manager: prof. Jos Dumortier http://www.icri.be/ | Subcontractor: Lawfort
[since disbanded] – ICT Law Department, Belgium, Head: prof. Jos Dumortier http://www.lawfort.be | For further information about DG Enterprise: European Commission - Enterprise and Industry DG, Information and Documentation Centre, BREY 5/150, B - 1049 Brussels, Fax: +32 (0)2 296 99 30, Website http://www.eu.int/comm/dgs/enterprise/index_en.htm).

Note by LawPundit: In this posting we convert part of the EU document referenced above to an online text format in order to make it more easily searchable than the original .pdf and this includes putting the relevant footnotes at the end.

***** the document excerpt (pp. 274-288) starts here *****

Latvia National Profile

A. General legal profile

Latvia (the Republic of Latvia) is a unitary parliamentary republic. According to the constitution881 Latvia is composed of four regions – Kurzeme, Zemgale, Vidzeme and Latgale. There are two territorial levels of local administration – local government - in Latvia. There were a total of 563 local governments on January, 2005:
(1) 530 municipalities (7 republican cities and 53 towns, 444 parishes, 26 amalgamated local municipalities) perform in local or first territorial level;
(2) 33 municipalities (26 counties and 7 republican cities) perform in regional or second territorial level.
Commerce and contract law is a central matter, which is generally incorporated into the Civil Code882 and the Code of Commerce883, both of which largely follow Roman Civil Code and German legal traditions.

eCommerce is also regulated at the central level, through a number of specific laws adopted by the Parliament884 and regulations of the Cabinet of Ministers885. On lower administrative level, the municipalities may adopt binding regulations886, but only within the competence specified by Municipality Law.887 Regulations on commercial transactions do not fall within this competence.

Disputes regarding commercial relations are typically dealt by the regular courts. For matters with a financial value of LVL 30 000 or less – by the district (city) courts888; or by regional courts889 for matters of higher value. Appeals against the decisions of the district (city) courts can be lodged with the regional court, and against the decisions of the regional courts with the Chamber of Civil Cases of the Supreme Court890. The Senate of the Supreme Court891 is a revision instance, which only hears points of law. The Latvian system of jurisprudence does not have any binding power of precedent, although the decisions of the Senate of the Supreme Court are authoritative and should be taken into account by the courts of lower instances.

B. eCommerce regulations

Many questions regarding the validity and recognition of electronic documents must be answered based on doctrine, and the interpretation of legislation does not always provide a clear answer. Moreover, to the best of our knowledge, the court practice with respect to these issues is not well developed. In this section, the Latvian laws and doctrine regarding the legal value of electronic documents are briefly commented.

B.1 eCommerce contract law

B.1.1. General principles

Generally, the Latvian legal system envisages that in case of commercial contracts the formation and proof should be more flexible than for other civil contracts. However, both civil and commercial contracts are regulated by the Civil Code, as the Code of Commerce does not contain separate rules for the conclusion of commercial transactions. The assessment that the formation of the commercial contracts is more flexible can nevertheless be derived from certain rules of the Code of Commerce, which reflect the purpose of ensuring smooth functioning of commercial market.

For example, one of the basic issues for every contract is that it shall be concluded between parties or their duly authorized representatives. According to the Civil Code, if the representative of the party did not have the necessary authority, the contract is binding only to the representative, not to the party itself.892 On the other hand, the Code of Commerce provides that all contracts concluded by a legal representative of the merchant who is registered as legal representative with the Commercial Register, shall be presumed binding to the merchant itself, as the limitations of the representation rights of the legal representatives are not valid with respect to the third parties.893 Also, even if the representative is not legally registered with the Commercial Register, but is otherwise authorized to pursue commercial activities on behalf of the merchant (e.g., sales representatives, commercial agents, shop assistants, etc.), it is presumed that the contracts concluded by them within the normal course of commercial activities are binding to the merchant.894

This flexibility is rooted in the basic principles of the contract law of Latvia, which is more based on the principle of autonomy of will, and not on formal requirements. The Civil Code provides that the form of a legal transaction depends on the discretion of parties, except the cases directly indicated in the law. The parties may conclude an agreement orally or in a written form, invite witnesses, as well as involve a notary.895 The main principle is the will of the parties to become bound by the contract. The will of the parties is crucial also in cases where the law requires a certain form. The Senate of the Supreme Court has recognized that even if there are formal defects, the court should always assess their significance and the real intention of the parties. If the intention of the party may be proved by other means, the defect of form cannot constitute the base for a total invalidity of the contract. Thus a non-observance of formal requirements doesn’t always result in the nullity of the transaction.896

A legal definition of an electronic document is provided in the Electronic Documents Law897. Article 1 of the Electronic Documents Law states: “an electronic document - any electronically created, stored, sent or received data, which ensures the possibility to use it for the performance of any action, for the use and protection of any rights.”

Generally, the validity of electronic documents in contract law is recognised by the law: the Electronic Documents Law envisages that an electronic document is legal evidence and there should be no restrictions for submitting an electronic document as evidence to the competent authority based on the fact that the document is electronic or that it lacks a secure electronic signature.898

The Electronic Documents Law distinguishes between an “electronic signature” and a “secure electronic signature”. An electronic signature is characterized as electronic data, attached to the electronic document or logically associated with this document, which ensure the authenticity of the document and confirm the identity of the signatory.899 A secure electronic signature is such electronic signature, which confirms to all of the following requirements:

(a) it is uniquely linked to the signatory;
(b) it is capable of identifying the signatory;
(c) it is created using means of creating a secure electronic signature that the signatory can maintain under his sole control;
(d) it is linked to the signed electronic document in such a manner that any subsequent change of the document is detectable;
(e) it is confirmed with a qualified certificate.900

It should be stressed that at the moment of drafting this report, the secure electronic signature has not been introduced in practice, as there are no providers of certification services, nor a system for issuing qualified certificates.

The Electronic Documents Law also says that if there is a requirement in law for a written form, then the electronic document fulfils this requirement only if it has the electronic signature and if the electronic document confirms to other requirements stipulated by law. The Electronic Documents Law does not specify what these “other requirements” might entail.

It may be assumed that these “other requirements” should be assessed on case-to-case basis, taking into account the specific legal relationship and the laws regulating it. For example, the Civil Procedure Law901 stipulates that the arbitration clause shall be concluded in writing, and it specifies that it is deemed that the agreement is made in writing, if it is made by exchange of letters, fax messages, telegrams, or by using other telecommunication means, which ensure that the will of the parties to refer the dispute to arbitration is fixed.902 An electronic document should fall within the ambit of other telecommunication means, thus this requirement for a written form is rather flexible.

Nevertheless, taking into account that the Electronic Documents Law uses the notion of the “document”, a reference may be made to the requirements stipulated by Regulations on Drafting and Processing Documents903, which apply to any documents issued, received or stored by any person. These regulations state that the document has a legal force if inter alia it has been signed.904 As the Electronic Documents Law does not regulate the requirements for the general legal force of the electronic documents, the necessity of the existence of signature is applicable also to electronic documents: an electronic document is deemed to be signed by the individual only if it has a secure electronic signature.905 An alternative: the parties have agreed that the document may be signed by an electronic signature (in such a case this agreement must be written on paper and signed or, if in electronic form, confirmed by a secure electronic signature).906 Consequently, a full legal validity may be achieved only by a secure electronic signature or by a relevant agreement of the parties to use and mutually recognize other mode of electronic authentication.

In addition, although generally the Latvian legal system provides contractual freedom by allowing the parties to conclude agreements on which form they wish, there are cases envisaged by the law where a specific form is required and its non-observance makes the transaction invalid. As stated in the legal doctrine, a certain form may be necessary either due to the contents of the act (corpus) or due to ensuring the evidence (onus probandi).907 For example, if the law requests that the agreement must be concluded at the public notary, then an agreement ignoring this requirement is void. 908

Notwithstanding the mandatory requirements, otherwise the Latvian laws allow the parties to agree upon the form of their contracts to be legally binding.909 This applies to all types of contracts. The parties are free to choose the form, unless it is already stipulated by mandatory requirements of the law. For electronic documents, the consensus of both parties is not a precondition if the document has a secure electronic signature: in such cases one party may not refuse to accept it. However, if the document does not have a secure electronic signature, its validity is subject to the agreement of the parties.910 The special exceptions with respect to the transactions which may not be concluded in electronic form are included in the Electronic Documents Law (for a detailed description see section B.1.2. below). Latvian laws do not directly regulate the sending of electronic notifications instead of paper documents. However, it should be noted that the Civil Code does not require a paper form for the notifications. The form of the notification depends on the substantial transaction to which this notification is related. If the notification is related to an already concluded contract (e.g., a notification on termination of the contract), then it normally shall be made in the same form as the contract itself: according to the Senate of the Supreme Court, the rule “from the larger to the smaller” shall be applied, i.e., if the contract itself was concluded in a written form, also all notifications in relation to it shall have the same form.911 So, electronic notifications are allowed if the contract itself was concluded either in an electronic form or orally. Also, in case of written contract, an electronic notification having an electronic signature should be deemed as valid, unless the law or the contract requires the signing of such notification.

Electronic notifications without a secure electronic signatures are allowed if the parties agree to it or if the law or the transaction itself did not require a signed document (e.g., when agreeing on using arbitration, the Civil Procedure Law allows a notification by “other telecommunication means”, which should include an electronic notification912). In case the parties are not in contractual relations yet, e.g., when accepting an offer, the form of such notification would depend on the form of the offer: if the offer does not require any specific form for its acceptance, it may also be given electronically. Additionally, special requirements for sending electronic notifications within the realm of information society services are stipulated by the Law on Information Society Services.913

The Latvian legal system has not implemented a framework for sending electronic registered mail. The sending of electronic mail is regulated only with respect to the communication within state and municipal institutions and between such institutions and private parties.914 The regulations provide that the electronic documents shall be circulated by use of electronic mail, special online forms, or 3,5” floppy disks. If the document has been sent by electronic mail or by special online forms, it is deemed that the addressee has received it within two business days after its sending. In case of dispute, the institution has the burden to prove that the document has been sent.

With respect to electronic archiving, the Electronic Documents Law provides that generally electronic documents shall be archived in the same cases and order as paper documents. These rules do not apply to the electronic archiving of paper documents, for which there is no special regulation. For the archiving of electronic documents, the following special requirements are applicable: the possibility to use the data shall be ensured; storage is done in the original form; and the stored data allows to determine the origin or destination of the document, the time of its sending or reception.915 Also, there are special rules for transferring the electronic documents for archiving to the State archive.916 The regulations apply to state and municipal institutions and to those private legal entities who have the duty to transfer their documents for storage to the State archive. The state and municipal institutions are also required to draft internal instructions on circulation of electronic documents, including their storage.917

B.1.2. Transposition of the eCommerce directive

The eCommerce directive has been transposed in Latvian legislation through the Electronic Documents Law and by the Law on Information Society Services.

The transposition applies only to information society services. The law does not apply to areas governed by laws on personal data protection and on gambling services where a monetary award may be gained.918

Article 9 of the Directive (formal requirements in an electronic context) is not transposed by the Law on Information Society Services. Instead, it is transposed by the Electronic Documents Law: Article 3, parts 4 and 6 reflect the provisions of the Directive, Article 9, parts 1 and 2 respectively. Thus the Electronic Documents Law provides that generally contracts may be concluded by electronic means and that such contracts may not be deprived of legal effectiveness and validity on account of their having been made by electronic means.

Also, Latvian legislators have used the discretion provided by Part 2 of Article 9 of the Directive to exclude the application of the general validity of electronic documents to specific categories of contracts. The following categories of contracts shall be concluded on a written (paper) form and may not be carried out by electronic documents: (1) agreements by which the rights to real estate are created or transferred (except lease rights); (2) agreements, which according to law are invalid if not approved as requested by law (usually by the public notary); (3) guarantee agreements and security of pledge, if such guarantees or securities are given by persons acting in the realm not connected with their profession, business, or trade; (4) transactions within the area of family and inheritance law – for example, marriage contracts, testaments, inheritance agreements, etc.).919

The specific requirements for the use of electronic signatures are also provided by the Electronic Documents Law. The law distinguishes between regular electronic signatures and secure electronic signatures. An electronic signature is defined as electronic data attached to the electronic document or logically connected with this document and which ensures the authenticity of the electronic document and confirms the identity of the signing person. A secure electronic signature is such electronic signature, (i) which is linked only to the signing person, which ensures the identification of the signing person; (ii) which is created by a secure means of creating the electronic signature, (iii) which are under the sole control of the signing person, (iv) which is connected with the signed electronic document in such a way that later amendments to this document would be noticeable, and (v) which is approved by a qualified certificate. Full recognition is given only to electronic documents signed by a secure electronic signature: a document is deemed to be individually signed if it has a secure electronic signature. Alternatively, the parties may agree in writing (within the traditional (hand written) sense, or this writing is confirmed by the secure electronic signature) that they deem the electronic document to be individually signed even if it has a nonsecure electronic signature.

B.2 Administrative documents

The Electronic Documents Law applies also to the use of electronic documents in administrative procedures. This process is regulated in more detail by Regulations of the Cabinet of Ministers No.473 of 28 June 2005 entitled “Order of drafting, forming, storing and circulation of electronic documents in state and municipal institutions and order how the circulation of electronic documents within state and municipal institutions or between these institutions and natural or legal persons takes place”.920

These rules aim towards providing a general legal framework for electronic communication with public administrations, as well as mandates the acceptance of electronic documents by public institutions as of 1 January 2004.921

The scope of regulation is broad: it applies to all state and municipal institutions. It should be noted, however, that in practice the regulations are not functioning, since at the moment of drafting this report a secure electronic signature has not yet been introduced. The institutions interpret their obligation to accept electronic documents in such a way that they would have to accept only documents with a secure electronic signature. This is based on the presumed lack of legal force of documents without a secure electronic signature, as according to Regulations on Drafting and Processing of Documents the signature is a necessary component for the legal force of the document.

Another possibility is to agree on the acceptance of electronic documents. So far, the State Revenue Service has taken up an initiative to conclude such agreements with taxpayers, enabling them to file the tax reports as electronic documents.922

Certain other institutions have introduced electronic filing of documents, however, mostly subject to further confirmation in paper form.923

C. Specific business processes

In this section of the study, we will take a closer look at certain sections of the applicable Latvian legislation and legal and administrative practice. Specific examples of common document types will be examined to assess the validity and recognition of their electronic counterparts.

The section below is organised according to four stages in the electronic provision of goods on the European market. They comprise the credit arrangements, transportation and storage, cross border trade formalities and financial/fiscal management. As a preliminary note it should be pointed out that there is practically no local court practice with respect to the use of electronic documents in the areas described above. In addition, the use of electronic documents in these business processes is not very common, as it is hindered by the incapability to apply a secure electronic signature.

C.1 Credit arrangements: Bills of exchange and documentary credit
C.1.1. Bills of exchange
Bills of exchange are governed by two rather old laws, both adopted in 1938.924 The laws do not contain a definition of a cheque or a bill of exchange, however, they list the necessary components. One of the necessary components is the signature of the issuer. If there is no signature, the bill of exchange is not valid.

Taking into account that the respective laws were adopted in the first part of the last century, as well as the fact that their renewal in 1992 took place without any substantial amendments to the text, a literal and historical interpretation of their wording excludes the use of electronic documents. However, the laws should be interpreted in accordance with the system of laws currently in place, also taking into account the purposes of the regulation. Thus, if the necessary requirement of the bill of exchange is the signature of the issuer, the Electronic Documents Law may be applied, which states that the document is deemed to be individually signed, if it has a secure electronic signature. Consequently, the cheques and bills of exchange should be deemed valid if they have a secure electronic signature.

On the other hand, certain wordings of the law make its application difficult for electronic document, as they presume the use of the paper. E.g., it is stated that the endorsement shall be written on the bill of exchange or on the page attached to it.925 Also, some sections envisage the striking out of certain sections or writing across an already written text. Problems might occur also with respect to the originality of the bill. Normally, a paper bill of exchange is a single unique document (or several identical documents), signed by the issuer. Any copies must be clearly designed as such and duly numbered.926 In case of electronic documents, it remains to be solved how the authenticity of the original bill is ensured. Nevertheless, the use of paper is nowhere explicitly requested, thus a teleological interpretation of the law should allow the use of electronic documents, with a condition that a secure electronic signature is included.

It should be noted that there is no explicit regulation how electronic bills of exchange should be formed and used, nor are the criteria for their validity clear.
C.1.2. Documentary credit
There is no specific legal regulation for documentary credits in Latvia. Thus the documentary credit is largely subject to the general rules of the contract law. Consequently, there is also no specific legal framework for electronic documentary credit agreements.

In broad terms, the documentary credit would fall under the guarantee under the Civil Code. According to the Civil Code, a guarantee is a duty undertaken by an agreement to be liable to the creditor for the debt of the third party, however, not liberating the latter from its debt.927 With respect to the formal requirements, the guarantee needs to be in a written form.928 According to the Electronic Documents Law, the requirement to have a written form is fulfilled if the electronic document has an electronic signature (not necessarily a secure electronic signature). In addition, the practice of issuing documentary credits largely follows the Uniform Customs and Practice for Documentary Credits (UCC-500), created by International Chamber of Commerce. Banks usually give a reference to these customs in their rules on issuing documentary credits.929

As there is no detailed regulation, the parties have a significant freedom to agree on the practical organization of the documentary credit. They may agree to present certain document in an electronic form. In practice, however, the filing of applications for documentary credits and presentation of documents takes place on paper form. The banks request that the applications are signed by the authorized representatives of the person applying for documentary credit. As there is no secure electronic signature, the signature on a paper document presents the only possibility. Alternatively, several banks allow a possibility to fill in the applications for several types of credit electronically, if the person is already a bank client and has received the necessary password for the use of internet banking. Nevertheless, a secure electronic signature should present a workable solution.

C.2 Transportation of goods: Bills of Lading and Storage agreements
C.2.1. Bills of lading
A bill of lading is a document issued by the carrier of goods to the sender and confirming that the goods are received for transportation and the carrier’s commitment to transport them. It is issued by the carrier at the sender’s request. The holder of the bill of lading is entitled to receive the goods upon arrival at their final destination.

The use of bills of lading for maritime transport is governed by the Maritime Code.930 The Maritime Code provides the mandatory details to be included in the bill of lading. There are no special requirements as to the form of the bill, however, it is indicated that it shall be signed by the shipmaster or a person authorized by the carrier.

There are no explicit regulations with respect to the use of electronic documents. However, as there is a requirement for signing, it may be derived that electronic documents may be allowed only if signed by a secure electronic signature. When using electronic documents, it would be crucial to designate the original bill of lading, as only the presentation of the original entitles the holder to receive the goods.
C.2.1. Storage contracts
A storage contract is generally governed by the Civil Code. Within the understanding of the Civil Code, by the storage contract the custodian undertakes to store a movable property, which has been entrusted to him.931 A storage contract is a real contract, which means that the contract comes into force only when the relevant property has been transferred to the custodian. The law does not contain any requirements in which the contract on storage terms should be concluded, so the terms may be agreed in any form, including electronically. In any case, the agreement will come into force only after the property to be stored will have been transferred physically to the storage by the custodian.

With respect to storage contracts evidenced by the use of International Federation of Freight Forwarders Associations (FIATA) documents, such as FCR (Forwarders Certificate of Receipt) and FWR (FIATA Warehouse Receipt)932, it should be noted that it is crucial to distinguish between the original document and its copies. Thus, in case of using electronic documents, the authenticity of the original shall be clearly designated (e.g., by a secure electronic signature).

C.3 Cross border trade formalities: customs declarations

According to recently adopted regulations, it is possible to file customs declarations in an electronic form.933 The regulation codifies two earlier instructions of the State Revenue Service of 28 October 2004 On Permissions to Declare Goods Electronically and instruction of 28 April 2004 On certification of declaring persons.934

The regulations state that the State Revenue Service shall ensure the possibility to file custom declarations in electronic form. The person wishing to do the electronic declaration shall receive a relevant permit from the State Revenue Service. Upon issuing the permit, the State Revenue Service also grants a user name and password, which shall further on be used for electronic declaring. The State Revenue Service decides on issuing the permit within 30 days after reception of the application and accompanying documents.

C.4 Financial/fiscal management: electronic invoicing and accounting
C.4.1. Electronic invoicing
The eInvoicing Directive935 has been transposed in Latvian laws by various amendments to VAT laws, as well as related regulations.936 However, none of the amendments address specifically the issuing of electronic invoicing. Consequently, there is no explicit authorization for the use of electronic invoices. There are also no provisions for the storage or archiving of electronic invoices.

The VAT law does not explicitly require that the invoice should be signed, thus formally complying with the provision of the eInvoicing directive that the member states shall not request the signature on the invoice. However, it should be noted that the VAT law states that the VAT invoice is a document.937 Consequently, the requirements of the Regulations on Drafting and Processing of Documents can be applied, inter alia, the stipulation that the legal force of the document is ensured only by its signing. Therefore an electronic invoice might be issued only with a secure electronic signature.
C.4.2. Electronic accounting
The accounting procedures are governed by the Law On Accounting.938 The law generally allows to carry out the accounting in electronic form, but with a rather broad condition that the requirements of this law may not be violated. Specifically, entries in the accounting registers shall be timely, complete, precise and systematically arranged. Entries, the content or quantifiers of which differ from corroborative documents, shall not be allowed. If entries in the accounting registers or documents are amended, their initial content shall be visible, and each correction shall be justified and confirmed with a signature. Corrections may not be made in such a manner that it is not comprehensible when and why such have been made. Furthermore, representation of the data in a form legible to third persons, and provision of their printout, if necessary, shall be ensured.

If corroborative documents are prepared with computers, the signatures of persons responsible for the performance of the economic transactions and correctness of information may be replaced by their electronic confirmation (authorisation). The procedures for electronic confirmation (authorisation) at an enterprise shall be determined by the manager of the enterprise. Electronic confirmation (authorisation) of external documents may be utilised only if the parties to the transaction have mutually agreed upon the procedures by which an electronic exchange of corroborative documents shall be performed and upon the procedures for electronic confirmation (authorisation).939

Thus, generally it is possible use fully electronic accounting, if the all of the above conditions are observed.

It should be noted that the Latvian laws require a deposit of the company’s annual account with the competent authority (the Company Register).940 The law does not contain an explicit provision that the annual account shall be drafted and submitted in a paper form, however, it provides that the annual account shall be duly signed by the legal representatives of the company.941 The law provides that the documents may be submitted to the Company Register electronically, if they are accompanied by a written confirmation that the submitted documents are identical to the originals.942 As soon as a secure electronic signature is introduced, there should be no legal obstacle to submit the annual account fully in an electronic form.

D. General assessment

D.1 Characteristics of Latvian eCommerce Law
  • Latvian eCommerce Law is based largely on the laws transposing the relevant EU directives: the eCommerce Directive and the eSignature Directive. In broad terms, Latvia has adopted the general legal framework for enabling the functioning of eCommerce. The main legal act ensuring this is the Electronic Documents Law, which introduces notions of electronic documents, electronic signature, secure electronic signature, certification services, and which also establishes the validity of electronic documents and their legal equivalence to traditional documents. However, the practical functioning of eCommerce is currently impeded due to the lack of infrastructure for activities of certification services providers and for creating secure electronic signatures.

    The Electronic Documents Law is the lex specialis for eCommerce, while the Civil Code still has to be applied as the general law. The Civil Code is quite flexible with respect to the formal requirements of the documents, and its principal aim is to ensure the autonomy of will of the parties.

  • Following the Electronic Documents Law a range of secondary legal acts have also been adopted, governing specific issues in relation to circulation of electronic documents, the technical requirements, requirements for providers of certification services, etc. The following regulations are adopted on basis of the Electronic Documents Law: regulations on the use of electronic documents in state and municipal institutions943; regulations on storing and archiving944; regulations on information to be indicated in the description of systems of certification services945; regulations for order and terms of examination of systems of certification services946; regulations on minimum insurance of providers of certification services947; regulations on technical and organizational requirements for qualified certificate948.

  • The content issues of eCommerce are governed also by the Law on Information Society Services, which largely copies the provisions of the eCommerce Directive.
D.2 Main legal barriers to eBusiness
  • In fact, there are no substantial legal barriers to eBusiness, as the necessary legal acts have been adopted.

  • However, the most important barrier is that so far these legal acts have not been implemented in practice, as the possibility to create a secure electronic signature has not been ensured. There is no system for issuing qualified certificates and there are no certification service providers.

    Consequently, electronic commerce and business cannot be carried out in practice, as according to Electronic Documents Law the document is deemed to be individually signed only if it has a secure electronic signature. As lots of documents involved in commercial transactions need to be individually signed (e.g., documents to be submitted to public institutions), the lack of secure electronic signature forces the use of the traditional paper form. Moreover, the general regulations for the legal validity of any documents require the signature as a necessary precondition for legal enforceability.

    It is to be hoped that the problem of the lack of the necessary structure for a secure electronic signature will soon be solved. On 15 June 2005 the Republic of Latvia entered into an agreement with SIA Lattelekom (largest fixed telephony operator controlled by state with 51% shares) and VAS Latvijas Pasts (fully state owned postal services provider) by which it is agreed that Latvijas Pasts will become a reliable provider of certification services, and Lattelekom will be a technological partner, ensuring the necessary infrastructure and services.949 o On 7 November 2005 the Cabinet of Ministers approved a Concept on Choice of the Carrier of Secure Electronic Signatures and Introduction of Secure Electronic Signatures. By this concept it is envisaged that the device for carrying the secure electronic signature shall be a smart card.950 According to the Ministry for Special Assignments for Electronic Government Affairs, the secure electronic signature should be introduced by September 2006.951
D.3 Main legal enablers to eBusiness
  • As described above, the flexibility with respect to the formal requirements of documents and the party autonomy principle are the key factors for enabling the functioning of eBusiness. Also, the Electronic Documents Law presents a workable framework for use of the electronic documents by establishing criteria according to which the traditional requirements may be fulfilled in electronic form, such as substitution criteria for individual signatures and for stamping requirements. Thus, as soon as there is be a practical possibility to use a secure electronic signature, there should be no significant legal obstacles to eBusiness.

  • On the other hand, it also cannot be excluded that a practical and more common use of electronic documents (including use of secure electronic signatures) may reveal additional impediments in the form of wording of certain legal acts (e.g., implication of the use of paper, requesting certain procedures presumed to be performed in paper form, etc.).

  • Nevertheless, such problems may be solved by systemic and teleological interpretation of such laws and by adopting a flexible approach to formal requirements. Within eCommerce as in the business in general the intention of the parties is the key factor, and this may be derived also from electronic documents, if their authenticity and originality is ensured.

  • eBusiness would be substantially encouraged if there would be a relevant court practice confirming the correctness of the above described understanding and interpretation of applicable laws, however, according to our best knowledge, currently there is little or no such practice.
___________________
881 Satversme
882
The Civil Code (Civillikums), adopted on 28.01.1937, legal force renewed on 01.09.1992 (introduction part, property law, and inheritance law), on 01.03.1993 (contract law), and on 01.09.1993 (family law).
883
The Code of Commerce (Komerclikums), adopted on 13.04.2000, in force from 01.01.2002.
884
Saeima
885
Ministru Kabineta noteikumi
886
Pašvaldību saistošie noteikumi
887
The Municipality Law (Par pašvaldībām), adopted on 19.05.1994, in force from 09.06.1994.
888
Rajona (pilsētas) tiesa
889
Apgabaltiesa
890
Augstākās tiesas Civillietu tiesu palāta
891
Augstākās tiesas Senāts
892
Article 1518 of the Civil Code.
893
Article 223, part 3 (regarding Management Board members in private limited liability companies); Article 303, part 3 (regarding Management Board members in public limited liability companies); Article 92, part 2 (regarding legal representatives of general and limited partnerships); Article 36, part 1 (regarding procuration holders).
894
Articles 40 to 42 of the Code of Commerce.
895
Articles 1473 and 1474 of the Civil Code.
896 Judgment of the Senate of the Supreme Court Department of Civil Cases in case No.SKC-304, 3 November 2004.
897 Electronic Documents Law (Elektronisko dokumentu likums), adopted on 20.11.2002, in force from 01.01.2003. This law implements the Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures (hereinafter: eSignature directive) and partly also the Directive 2000/31/EC of the European Parliament and of the Council of 8 July 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce) (hereinafter: eCommerce directive).
898
Article 3, part 4 of the Electronic Documents Law.
899
Article 1, paragraph 4 of the Electronic Documents Law. The definition is substantially similar to definition included in eSignature Directive, Article 2, paragraph 1.
900
Article 1, paragraph 2 of the Electronic Documents Law. Sections (a) to (d) substantially quote the relevant provisions of the eSignature Directive, Article 2, paragraph 2.
901
The Civil Procedure Law (Civilprocesa likums), adopted 14.10.1998, in force from 1.03.1999.
902
The Civil Procedure Law, Article 492, part 2.
903
Regulations No.154 of the Cabinet of Ministers of 23.04.1996. “Regulations on Drafting and Processing of Documents” (Dokumentu izstrādāšanas un noformēšanas noteikumi).
904
Paragraph 18 of the Regulations on Drafting and Processing of Documents.
905
Article 3, part 2 of the Electronic Documents Law.
906
Ibid.
907
Sinaiskis V. “Latvijas Civiltiesību apskats. Lietu tiesības. Saistību tiesības” (Overview of Latvian Civil laws. Property law. Contract law), Rīga: 1996., p.125.
908
Article 1486 of the Civil Code.
909
Article 1473 of the Civil Code.
910
Article 3, part 2 of the Electronic Documents Law.
911
Judgment of the Senate of the Supreme Court Department of Civil Cases in case No.SKC-223, 25 April 2001; also in case No.SKC-441, 22 September 2002.
912 See above, footnote 14 [.pdf document online].
913
Law on Information Society Services (Informācijas sabiedrības pakalpojumu likums), adopted on 4.11.2004, in force since 01.12.2004.
914
Regulations of the Cabinet of Ministers No.473 of 28 June 2005 “Order of drafting, forming, storing and circulation of electronic documents in state and municipal institutions and the order how the circulation of electronic documents within state and municipal institutions or between these institutions and natural or legal persons takes place” (Elektronisko dokumentu izstrādāšanas, noformēšanas, glabāšanas un aprites kārtība valsts un pašvaldību iestādēs un kārtība, kādā notiek elektronisko dokumentu aprite starp valsts un pašvaldību iestādēm vai starp šīm iestādēm un fiziskajām vai juridiskajām personām).
915
Article 7 of Electronic Documents Law.
916
Regulations of the Cabinet of Ministers No.117 of 02.03.2004 “Regulations on way of assessment, order of storage and transfer for storage to state archive” (Noteikumi par elektronisko dokumentu izvērtēšanas veidu saglabāšanas kārtību un nodošanu valsts arhīvam glabāšanā).
917
Article 6, part 4 of Electronic Documents Law.
918
Article 2, part 2 of Law on Information Society Services.
919
Article 3, part 6 of the Electronic Documents Law.
920
See footnote 26 above [.pdf document online].
921
Paragraph 1 of the Transition Terms of Electronic Documents Law.
922
On 24.03.2006. came force a State Revenue Service instruction No.1 of 13.03.2006. "Agreement on the signing of electronic documents with the electronic signature by using the services of the electronic reporting system of State Revenue Service and the ensuring of these services”. According to this instruction the State Revenue Service is entitled to conclude agreements with tax payers on the signing of electronic documents with the electronic signatures. The tax payers who have concluded this agreement may file their tax reports in an electronic form and do not have to submit them on paper anymore.
923
Bureau of Tender supervision allows to apply for publishing of tender announcements electronically. However, the applications are reviewed only after a printed application form with regular signature is received.
924
The Law on Cheques (Čeku likums), adopted 27.09.1938; The Law on Bills of Exchange (Vekseļu likums), adopted 27.09.1938; the force of both laws renewed on 01.10.1992.
925 Article 13 of the Law on Bills of Exchange; Article 16 of the Law on Cheques.
926
Articles 64 to 67 of the Law on Bills of Exchange; Article 49 of the Law on Cheques.
927 Article 1692 of the Civil Code.
928
Article 1695 of the Civil Code.
929
E.g., General Terms and Conditions for Issuance of Letters of Credit of Nordea Bank Plc. Latvia branch (http://www.nordea.lv/sitemod/default/index.aspx?pid=69282).
930
The Law Shipping Code (Jūras kodekss), adopted on 29.05.2003, in force since 01.08.2003.
931
Article 1968 of the Civil Code.
932
More information available in www.fiata.com. FIATA documents are commonly used in freight forwarding, including the storage of goods.
933
Regulations of the Cabinet of Ministers No.999 of 27.12.2005 “The Order how the permits for submitting custom declarations in electronic form shall be issued” (Kārtība, kādā izsniedzamas atļaujas muitas deklarāciju iesniegšanai elektroniskā veidā).
934
Instructions No.1808 of the State Revenue Service of 28 October 2004 On Permissions to Declare the Goods Electronically (Par atļaujām deklarēt preces elektroniski) and instruction No.664 of 28 April 2004 On certification of declaring persons (Par deklarētāju sertifikāciju).
935
Directive 2001/115/EC amending Directive 77/388/EEC with a view to simplifying, modernising and harmonising the conditions laid down for invoicing in respect of value added tax.
936
Law on Value Added Tax, adopted on 9.03.1995, in force from 01.05.1995; Regulations of the Cabinet of Ministers No.339 of 25.06.2003. “Regulations on the strict recording waybills-invoices” (Noteikumi par stingrās uzskaites preču pavadzīmēm-rēķiniem).
937
Article 8, Section 5.1.
938
Law On Accounting (Par grāmatvedību), adopted 14.10.1992.
939
Article 7 of the Law on Accounting.
940
Law on the Annual Accounts, adopted 14.10.1992.
941
Article 61 of the Law on the Annual Accounts.
942
Article 66 of the Law on the Annual Accounts.
943
See footnote 26 above [.pdf document online].
944
See footnote 28 above [.pdf document online].
945
Regulations No.357 of the Cabinet of Ministers of 01.07.2003 “Regulations on the information to be indicated in the security description of information systems, equipment, and procedures of provision of certification services” (Noteikumi par sertifikācijas pakalpojumu sniegšanas informācijas sistēmu, iekārtu un procedūru drošības aprakstā norādāmo informāciju).
946
Regulations No.358 of the Cabinet of Ministers of 01.07.2003 “Regulations on the order and terms of the security examinations of information systems, equipment, and procedures of provision of certification services” (Sertifikācijas pakalpojumu sniegšanas informācijas sistēmu, iekārtu un procedūru drošības pārbaudes kārtība un termiņi).
947 Regulations No.267 of the Cabinet of Ministers of 19.04.2005 “Regulations on the minimum amount of civil insurance of a reliable provider of certification services” (Noteikumi par uzticama sertifikācijas pakalpojumu sniedzēja civiltiesiskās atbildības minimālo apdrošināšanas summu).
948
Regulations No.514 of the Cabinet of Ministers of 12.07.2005. “Regulations on technical and organisational requirements to which a qualified certificate and a reliable provider of certification services shall confirm, on secure tools for creating a secure electronic signature, as well as on order how a secure electronic signature shall be verified (Noteikumi par tehniskajām un organizatoriskajām prasībām, kādām atbilst kvalificēts sertifikāts, uzticams sertifikācijas pakalpojumu sniedzējs, droši elektroniskā paraksta radīšanas līdzekļi, kā arī kārtību, kādā veicama droša elektroniskā paraksta verificēšana).
949 Approved by the Cabinet of Ministers on 14 June 2005, protocol No.35 30.§.
950
Approved by the Direction of the Cabinet of Ministers No.714.
951
Press release of 27.04.2006, available at www.eparvalde.lv.

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