Signing a document is the most common way to indicate that a party accepts the terms and conditions of an agreement, acknowledges consent, or attests to the accuracy of information provided. The ongoing pandemic has accelerated a pre-existing trend towards exchange of electronic documents and signatures. This article examines the use and validity of electronic signatures in Taiwan in the context of cross-border transactions.
At the core of any cross-border transaction is one or more transaction agreements (the “Transaction Agreement”). A Transaction Agreement is typically a contract between or among private parties and usually may be governed by the law of the parties’ choosing.
Many transactions in which Winkler Partners participates involve a foreign purchaser of a local Taiwan company or business. In these situations, the Transaction Agreements may be governed by laws other than those of Taiwan law. Generally, Taiwan courts and arbitral tribunals will recognize and apply foreign law to contracts involving Taiwan counterparties, except in certain limited circumstances. Thus, if the governing law selected by the parties allows for the delivery of electronic documents and signatures to create a validly binding contract, a Taiwan court or arbitral body would most likely find such an agreement so executed to have legal and binding effect in Taiwan.
In some instances, the Taiwan party has market power sufficient to require that the Transaction Documents be governed by Taiwan law. In such cases, it is obviously necessary to understand Taiwan law on the subject of electronic documents and signatures if the parties expect to close the transaction virtually. We would also strongly encourage even those participating in transactions governed by foreign law but whose electronic Transaction Agreements may need to be enforced in Taiwan, to familiarize themselves with Taiwan laws related to electronic documents and signatures. It is our experience that Taiwan courts and arbitral bodies will understandably often interpret foreign law through the lens of Taiwan law.
With respect to private Transaction Agreements, under Taiwan law, a written “wet” signature or chop is not necessarily required to form a valid contract. Pursuant to Article 153 of the Civil Code, a contract would be validly constituted if the relevant parties have expressed their intention to form a contract and agreed to all the essential terms. There is no requirement that contracts bear “wet” signatures or chop, or even be in written form. By law, some contracts must be in written form; however, the use of written contracts and the form of their execution is largely a matter of evidence, i.e., how does a party prove that the other party(ies) to the contract agreed to the terms thereof.
Against the generally permissible backdrop created by the Civil Code, Taiwan adopted its Electronic Signatures Act (the “ESA”) in 2001. The ESA specifically addresses the use of electronic documents and electronic and digital signatures. The ESA basically establishes a default rule that electronic documents and electronic and digital signatures are legally valid, provided that (i) the relevant parties have agreed to the use of such electronic documents and signatures and (ii) no laws, regulations, or other requirements of government or regulatory agencies require otherwise.
This leaves most transactions in the situation where the Transaction Documents would be legally and validly executed and enforceable under Taiwan law if delivered and executed by electronic means provided that the parties agreed to such electronic delivery and execution. Referencing our earlier point regarding evidencing an agreement, we recommend using proven technologies such as Docusign or others that meet certain requirements and are authorized “certification service providers” in respect of digital signatures. Otherwise, issues may arise related to establishing the validity of signatures and, therefore, the agreement.
The general rule is that electronic documents and electronic and digital signatures are legally valid in Taiwan. However, certain legal and practical concerns preclude the broad adoption of such document delivery and execution methods. These concerns could all be generally categorized as problems of inertia.
In the private sector, Taiwan banks and large corporations, in particular, tend to be very conservative and may insist on wet chops and signatures. Although you may be correct as a legal matter that electronically executed agreements are valid and enforceable in Taiwan, sometimes it is not worth the time, energy, or cost to argue the point.
On the government side, many regulations and regulatory agencies continue to require wet ink chops or signatures on documents submitted, in particular notarized documents and powers of attorney. So, while private Transaction Agreements may be validly delivered and executed by electronic means, many other transaction documents may still require wet ink chops or signatures. There are a number of such documents which our team encounters on a regular basis, the most common being corporate registration documents which must be filed with the Ministry of Economic Affairs (the “MOEA”). However, it is encouraging and worth noting that the MOEA has recently begun accepting shareholder consent letters, appointment letters, and certain other documents which have been executed solely by means of electronic signatures.
In sum, we strongly recommend that if you are expecting to engage in a transaction involving Taiwan counterparties or Taiwan governmental agencies and wish to close the transaction via electronic means, you should carefully examine all the necessary transaction documents and determine which ones, if any, can realistically be delivered and executed in electronic form.
If you have any questions or require additional information on electronically executing your transaction in Taiwan, please contact Greg Buxton at email@example.com.Written July 23, 2021 By Gregory A. Buxton, Ming Teng, Megan Chiu.