Given the state of emergency declared by the Panamanian Government as a result of the COVID 19 pandemic, the stay at home orders issued by the health authorities and the social distancing that is essential to control the outbreak, the technological tools available for companies to operate remotely are vital.
Law 51 of July 22, 2008, regulated the use of electronic documents, electronic signatures, storage services for the electronic documents, the certification of electronic signatures and adopted other measures to develop e-commerce. Law 51 of 2008 was subsequently amended by Law 82 of November 9, 2012 and regulated through Executive Decree No. 684 of October 18, 2013.
Law 51 of 2008 defines “electronic signature” as the “technical method to identify a person and indicate that such person approves the information in data messages or electronic documents.”
Pursuant to Law 51 of 2008, electronic signatures are valid mechanisms in Panama to consent to agreements or sign documents or legal transactions, provided that the following two (2) conditions (established in article 8 of the law) are satisfied: (i) the availability of a method to identify the originator of the data message and indicate that the content is approved, and (ii) that such method is appropriate and reliable for the purpose for which the message was generated and communicated.
It is important to stress that electronic signatures are different from digitalized signatures, the latter being frequently used to share, through electronic means, Portable Document Format (PDF) versions of documents bearing handwritten signatures. In this sense, Law 51 of 2008 defines a digitalized or scanned signature as “an image of the drawing of a handwritten signature, meaning, the result of its scan. This type of signature is not, in any case, a qualified electronic signature.”
Not only does Law 51 of 2008 provide legal validity to an electronic signature – as opposed to a digitalized signature – as long as the two aforementioned conditions are satisfied, but, furthermore, it creates the possibility to elevate the standard of efficacy and legal effect given to the electronic signature ipso jure, by using the so called “qualified electronic signature.”
The aforementioned article 8 of Law 51 of 2008 establishes that the two conditions for the electronic signatures to be legally binding, shall be presumed ipso jure in case of a qualified electronic signature which is supported by a certificate issued by a certifying service provider duly authorized by the Electronic Signature National Authority (in Spanish, “Dirección Nacional de Firmas Electrónica”).
But what exactly is a “qualified electronic signature”?
Law 51 of 2008 defines it as an “electronic signature the validity of which is backed by a qualified electronic certificate that:
- Allows the identification of the signer and detect any subsequent change to the signed content.
- Is bound to the signer in a unique manner and to the data to which it refers.
- Has been created using secured devices for creating an electronic signature, which are exclusively in the control and possession of the signer.
- Has been created through the infrastructure of a certifying service provider registered with the Electronic Signature National Authority.
In order for a qualified electronic signature to be generated, an independent third party known as “Certifying Service Provider” must intervene. This third party will bind a device that generates an algorithm validating the identification of the signer and its consent, to the act to which the electronic signature is added. This independent third party must be registered with the regulator of all matters pertaining to electronic signatures in the Republic of Panama: the Electronic Signature National Authority which, pursuant to Law 82 of November 9, 2012, is part of the Public Registry of Panama.
Currently, a person interested in obtaining a qualified electronic signature in Panama can register such signature with the Electronic Signature National Authority which as regulating authority, has enabled this registry.
The qualified electronic signature, as previously defined, grants the highest level of legal certainty to the fact that the signer is the person indicated in the qualified certificate and that their consent was given through a data message. In this manner, Law 51 of 2008 deems such qualified electronic signature equal to a handwritten signature authenticated before a public notary, which for all purposes, certifies its genuineness. Notwithstanding the foregoing, a qualified electronic signature does not grant such certainty with respect to its date, unless it is stated through timestamping, provided by a registered certifying service provider. Timestamping is an online mechanism that evidences that certain data have been in existence and have not been altered, since a specific moment in time. In order to have certainty of the date in which an electronic document was signed, a timestamping mechanism must be incorporated, in addition to the qualified electronic signature, in order to simultaneously certify the date of its execution and delivery.
For companies that wish to obtain qualified electronic signatures allowing their employees to sign on behalf of the company, it is important to bear in mind article 15 of Law 51 of 2008, which establishes that “the electronic certificates of legal entities are requested for electronic devices used in a company, such as computers, servers, among others, and shall be requested by its management or duly authorized legal representative with sufficient capacity.” The company, however, can set restrictions and limitations as it deems convenient for the use of electronic signatures by each signer. It is also important to mention that Law 51 of 2008 expressly establishes that if a signer uses the electronic signature on behalf of the company in violation of the restrictions or limitations imposed by such company, the latter shall only be bound vis-à-vis third parties if it acknowledges or ratifies such act, or if it benefits from it. With respect to the legal responsibility of an individual that resorts to the use of electronic signature on behalf of the company, if such individual carries out any acts in violation of the limitations or restrictions imposed by the company in the use of the electronic signature and against the interests of the company, the effects of such act will be enforceable against the individual with access or in possession of the device for the creation of electronic signatures, who can, in turn, file legal actions against the third party that in fact misused the electronic signature of the company, if it was a person other than said employee.
Even though this law was enacted in 2008, there has been relatively little practical applications of it, as well as little to no judicial precedents from the Panamanian courts. It is likely that, due to such lack of judicial precedents, companies have been reluctant to implement the electronic signature as a method to sign legal documents, uncertain as to how the Panamanian judiciary will ultimately interpret the provisions of Law 51 of 2008. However, considering the current COVID-19-related circumstances, technological tools such as electronic signatures are without a doubt legally available options for increased efficiency and competitive advantage. Precisely for that reason, we believe that Panamanian authorities should, without delay, acknowledge and embrace the provisions and mechanisms created by Law 51 of 2008, in order to bring an environment of legal certainty with respect to the use of electronic signatures. This will allow market agents to implement the use thereof to help mitigate the effects of the health crisis currently confronting Panama and, in fact, the world.
Pablo Epifanio, senior associate, Morgan & Morgan
Author: Pablo Nuñez
