There have been strong demands for a more digitalization-friendly working environment due to the growth in number of persons working from home in response to the COVID-19 pandemic during and after 2020. In September 2021, a new Digital Agency has been established and legislation to support the digitization of companies and the relaxation of regulations which require (i) paper documents, (ii) affixation of seals and/or (iii) face-to-face meeting is rapidly being prepared and implemented, with the laws related to digitization being enacted on May 12, 2021. Digitalization has been widely expanded in respect of (a) external documents of companies (such as e-contracts), (b) internal documents of companies (such as board minutes) and various governmental procedures. E-signatures have been focused as a replacement of “seals” in respect of such digitalized documents and procedures. In addition to measures against the COVID-19 pandemic, digitalization has significant advantages such as reforming working styles through working from home, improving work efficiency and strengthening corporate competitiveness. Our firm has been providing practical advice in respect of e-signatures based on recent developments in both law and practice.
A. Under Article 2 of the Act on Electronic Signatures and Certification Business (the “E-signatures Act”), an “e-signature” is defined as “an e-signature affixed on electronic data (i.e., data or information which is recorded in an electronic form) which satisfies the two requirements as set out below:
(i) an e-signature is affixed on certain electronic data (e.g., an e-contract) in order to express that such electric data is made by the person who has affixed such e-signature; and
(ii) it can be verified that the contents of any given electric data have not been modified after such e-signature is affixed”.
A. Although lacking statutory definition, it is understood that a third party type e-signature (jigyoshagata-denshishomei) means an e-signature which is (a) encrypted by using secret keys assigned to an e-signature service provider, and (b) attached to electric data in accordance with an instruction given by a user of such e-signature. A third party type e-signature is frequently used in respect of e-contracts executed by companies in Japan.
A. Admissibility of evidence under the Code of Civil Procedure is divided into two categories, i.e.: (i) admissibility as to formality (keishikiteki-shokoryoku), and (ii) admissibility as to substance (jisshitsuteki-shokoryoku).
(i) Admissibility as to formality (keishikiteki-shokoryoku) means admissibility of evidence in respect of whether a document has been duly executed by its signatory.
(ii) Admissibility as to substance (jisshitsuteki-shokoryoku) means admissibility of evidence in respect of whether and to what extent such document is admissible as evidence in order to prove certain facts.
It is important for an e-contract to meet the criteria for both admissibility as to formality and admissibility as to substance.
A. An e-contract duly executed by attaching a third party type e-signature is considered to be admissible as evidence to the same degree as a paper contract executed by affixing an unofficial seal (mitome-in) if such third party type e-signature satisfies the requirements set out by the administrative Q&A related to Article 2 of the E-signatures Act (“Article 2 Q&A”) published by the Ministry of Justice and other ministries on July 17, 2020 (an “Article 2 E-signature”). Article 2 Q&A (in Japanese only)
Moreover, an e-contract executed by means of a third party type e-signature is considered to be admissible as evidence to the same degree as a paper contract executed by affixing an officially registered seal (jitsu-in) if such third party type e-signature satisfies the requirements of“uniqueness (koyu-sei)” set out by the administrative Q&A related to Article 3 of the E-signatures Act (“Article 3 Q&A”) published by the Ministry of Justice and other ministries on September 4, 2020 (an “Article 3 E-signature”). Article 3 Q&A (in Japanese only)
Companies can choose to use either an Article 2 E-signature or an Article 3 E-signature depending on the level of legal risks associated with any given e-contract.
A. Practical issues include
(1) whether or not a person attaching an e-signature for the counterparty is duly authorized to execute such e-contract, and
(2) whether or not an appropriate e-signature is chosen depending on the level of legal risks
associated with the e-contract in question.
A. Further issues include
(1) how to deal with cyber security risks, and
(2) how to deal with a situation where the counterparty is not set up to execute an e-contract (e.g., executing contracts by means of both paper contracts and e-contracts).
Such issues can be resolved by implementing practical solutions.
A. The e-Government (e-Gov) system has been updated to expand the range of applications that can be made by simple methods such as creating an account in e-Government (e-Gov), except for exceptional application procedures that require an electronic certificate.
Moreover, discussions on the digitalization of judicial procedure have been held in respect of civil court procedure at the level of the Legislative Council (housei-shingikai) at the Ministry of Justice. For example, on February 19, 2021, the Ministry of Justice published a draft amendment to the Code of Civil Procedure that addresses the digitalization of civil court procedure. Also, according to the Digitalization Reform Strategies (digital-shakaino-jitsugennimuketa-juten-keikaku) (the “2021 Digitalization Reform Strategies”) approved by the Prime Minister of Japan and his cabinet on December 24, 2021, it is aimed that (a) the amendment to the Code of Civil Procedure is will be submitted to the Diet by March 2023, (b) oral proceedings (koutou-benron) via web meeting system will be implemented by March 2024 and (c) digitalized civil proceedings as a whole will be implemented by March 2025. Accordingly, it is expected that the digitalization of civil court procedure will be further accelerated.
A. According to the 2021 Digitalization Reform Strategies, it is scheduled (a) to review any and all regulations which are against “digitalization principles”, i.e., regulations which require (i) paper documents, (ii) affixation of seals and/or (iii) face-to-face meeting by Spring 2022 and (b) to implement relaxation of such regulations from the beginning of 2022 to the extent possible. Accordingly the digitization of all public/private sectors is expected to be greatly progressed in 2022.