Trust in Electronic Signatures

Trust emerges in an electronic commerce environment as an essential element to commit parties into their respective obligations. Fukuyama (1995) defines trust as:

"... the expectation that arises within a community of regular, honest, and cooperative behavior, based on commonly shared norms on the part of the other members of that community."

The interpretation of this definition contains no moral notion, since trust is a social phenomenon that does not distinguish between legal activities or otherwise, while trust is the result of factors like previous acquaintance or satisfaction from existing transactions, etc. (Fukuyama, 1995). A basic concern when building a business relationship is to define the level of mutual trust that might exist between the trading partners as a proportion of that relationship.

Electronic commerce transactions entail the exchange of electronic messages and interactive online communications that have a commercial meaning. It has been suggested that a distinguishing feature of electronic commerce is that it enables short-term or ad hoc commercial transactions between organizations and individuals (Lee, 1996; Kalakota & Whinson, 1996). Unlike a closed transaction environment that might require prearranged relationships among the transacting parties, an open environment requires limited or no reliance on a prearranged framework. A closed framework might be set up on the basis of agreements among the participants. These agreements could create bilateral or multilateral contractual relationships between or among the participants. As an alternative, binding policy frameworks could be used to allow parties to adhere to transaction framework conditions. Policy-driven transactions have the advantage that they require no lengthy negotiations ahead of adhering to them while they observe the constant requirement for legal safety and transparency in the transactions. Such policies can be seen as general terms and conditions prevailing in conventional transactions among multiple trading parties. A policy-driven transaction environment could be seen as an intermediary step towards open transaction frameworks.

Open transaction environments require no set arrangements prior to the transaction taking place. An open trading environment can contribute to the lowering of entry barriers for new users and establishing links between trading partners by minimizing the need for bilateral agreements to set a transaction framework.

Since 1996, electronic signatures have been subject to proactive legislation that aims at creating a global environment to facilitate electronic commerce. The subject matter of current electronic signature regulation addresses, e.g., requirements on the legal recognition of electronic signatures used for non-repudiation. Non-repudiation is addressed in both technical standards (such as X.509) and legislation. Standards also address aspects associated with authentication and encryption, two areas that remain, however, beyond the scope of at least the prevailing regulation in the European Union with respect to electronic signatures as it has evolved following the Directive 1999/93/ EC of the European parliament and of the Council of December 13, 1999, on a community framework for electronic signatures. Non-repudiation addresses the requirement for electronic signing in a transaction in such a way that an uncontested linkage to the declaration of will of the signatory is established.

Electronic signatures can serve several purposes such as authentication of identity, origin of data, etc. Non-repudiation can be defined as the attribute of a communication that protects against a successful dispute of its origin, submission, delivery, or content (Ford & Baum, 2001). Non-repudiation can be seen as a service that provides a high level of assurance on information being genuine and non-refutable (Caelli, Longley, & Shain, 1991; McCullagh, 2000). While parties might in practice attempt to repudiate a transaction, non-repudiation facilitates the availability of evidence to support the speedy resolution of a dispute. From a transaction perspective, the essential role of electronic signatures is to ensure the non-repudiation of a transaction. Since electronic signatures are logically linked to the signed data, they have a high-grade effect in evidencing the intention of the signatory to sign that data.

In a paper-based environment, non-repudiation can hardly be achieved, as paper-based signatures can be repudiated if signature is proved to be a forgery and obtained, for example via fraud, misrepresentation, undue influence, etc. In a paper-based environment the burden of proof with regard to the validity of an electronic signature is typically assigned to the relying party that has to prove that a signature has been the result of a fraudulent act.

Electronic signing and non-repudiation in traditional paper-based transactions are based upon the assumption that the signatory is in full control of the singing mechanism. In an electronic signature environment, however, a signatory relies on technology that is not always under its full control. It is therefore necessary to relieve the signatory from such burden and let it prove that an electronic signature is a forged one. Contrary to the typical legislative assertions applied to handwritten signatures in the physical world, Article 13 of the UNCITRAL Model Law on Electronic Commerce (1997) stipulates that the onus of proof should lie upon the alleged signatory to demonstrate that the electronic signature is the result of forgery.