Introduction

As the global financial landscape continues to evolve at a rapid pace, the significance of electronic transactions is becoming increasingly prominent. Businesses and consumers are progressively embracing digital solutions for their financial transactions, highlighting the crucial need for the law to enable such activities. In Hong Kong, the Electronic Transactions Ordinance (Cap. 553) (“ETO”) is fundamental to facilitating electronic transactions, ensuring the legal recognition of electronic signatures and contract creation.

Recent amendments to the ETO, specifically the Electronic Transactions (Exclusion) (Amendment) (No. 2) Order 2024 (L.N. 142 of 2024) and the Electronic Transactions Ordinance (Amendment of Schedule 3) (No. 2) Order 2024 (L.N. 143 of 2024), underscore the Government’s commitment to enhancing the law to accommodate technological development. We expect further amendments to the ETO to cater for DLT and other technological advancements, as Hong Kong continues to shape up as an international innovation and technology hub.[1]

This article provides an overview of the ETO. We consider the current status of electronic signatures under Hong Kong law, identify existing legal uncertainties and examine the implications of such uncertainties on electronic transactions.

Understanding the ETO: How are documents virtually signed?

Enacted in 2000, the ETO enables the use of electronic transactions in Hong Kong.  The provisions governing electronic signatures were largely based on the United Nations Commission on International Trade Law – Model Law on Electronic Commerce.[2] The ETO provides legal recognition of electronic signatures applied to create certain types of contracts thereby removing the need for “wet-ink” signatures. The accompanying schedules outline specific exclusions regarding certain documents[3] and court proceedings[4], as well as provisions for the electronic service of documents[5]. There is now confidence among businesses and consumers when engaging in digital transactions. Key provisions of the ETO include: 

1.        Recognition of electronic contracts: the legal validity or enforceability of a contract will not be denied solely because an electronic record has been used for its formation, whether in whole or in part;[6] and

2.        Recognition of electronic signatures: an electronic signature attached to, or logically associated with, an electronic record used for the contract formation, will not be denied legal effect solely on the ground that it is an electronic signature.[7]  

An “electronic signature” is defined in the ETO as:

“any letters, characters, numbers or other symbols in digital form attached to or logically associated with an electronic record, and executed or adopted for the purpose of authenticating or approving the electronic record”.

Under the ETO, a signature required by law can be satisfied by an electronic signature provided that: 

(a) the person uses a method to attach the electronic signature to, or logically associate the electronic signature with, a document for the purpose of:

(i) identifying the signer; and

(ii) confirming the signer’s approval of the information contained within the electronic contract or document[8]  ;

(b) reliable and appropriate method[1] is used to attach the signature, and such use of the signature must have consent from the counterparty[10]; and

(c) for transactions involving government entities, a digital signature is required to be supported by a recognised certificate.[11]

Essentially, contracts (other than those explicitly excluded from electronic signing) can generally be concluded electronically, once these conditions are met.

Whether contracts are formed electronically through the exchange of records or executed in person, all elements of contract formation — including offer, acceptance, consideration, and intention to create legal relations — must be present for a contract to be enforceable. By adhering to these conditions, parties can ensure the legal enforceability of electronic contracts within Hong Kong's regulatory framework.

Recent amendments to the ETO: Small practical steps forward

The recent amendments to the ETO mark progress to meet contemporary needs:

1.        Electronic Transactions (Exclusion) (Amendment) (No. 2) Order 2024: This amendment effectively enables digital submissions for identity card applications and renewals, streamlining processes that were traditionally paper based. Registration, issuance and renewal of identity cards, which process were previously excluded from the application of the ETO, now no longer mandate records in paper form or require wet-ink signatures.

2.        Electronic Transactions Ordinance (Amendment of Schedule 3) (No. 2) Order 2024: This amendment expands the scope of application of electronic service provisions. Service of documents in the form of electronic records is available for the issuance of certificates of registration for limited partnerships[12] and the applications for gas supply construction approvals[13].

These changes enhance public services, streamline filing procedures, and accommodate modern digital practices.

Current uncertainty in Hong Kong

Legal uncertainties under common law relating to the use of electronic execution of deeds remain unresolved in Hong Kong.

Although the ETO establishes a legal framework for electronic signatures, it explicitly excludes in Schedule 1 various critical documents from execution electronically. The key provisions of the ETO that recognise electronic execution do not apply to powers of attorney and deeds related to real property transactions. 

While not all deeds are excluded from the application of the ETO’s provisions for electronic execution, the common law imposes formal requirements for deeds, stipulating that they must be written on parchment or paper (the “Paper Requirement”). The ETO does not explicitly address these requirements, leading to residual uncertainty about whether it sufficiently accommodates the common law requirement.

This ambiguity creates challenges for businesses and individuals seeking to apply electronic signatures for important legal documents, potentially resulting in inefficiencies and disputes. The question remains whether the ETO adequately addresses the formality requirements for deeds, particularly the Paper Requirement. Ultimately, the lack of clarity regarding the execution of deeds under the ETO contributes to uncertainty in Hong Kong.

Comparative overview of electronic signature laws

Other jurisdictions have adopted more flexible frameworks for electronic signatures and their application to deeds.

United Kingdom

In the UK, the Electronic Communications Act 2000 established the legal validity of electronic signatures,[14] and the Law of Property (Miscellaneous Provisions) Act 1989 abolished the Paper Requirement.[15] The English Law Commission published a report on the electronic execution of documents in 2019 confirming that an electronic signature is capable in law of executing a document, including a deed, provided that the person signing intends to authenticate it and any relevant formalities are satisfied.[16] However, current English law still requires a witness to be physically present even if both parties use electronic signatures, which may create practical complications for electronic execution.

Australia

In Australia, the landscape for electronic signatures is similarly progressive. For Australian companies registered under the Corporations Act, deeds may be in electronic form and signed electronically.[17] Where a deed is to be executed by an entity other than a company registered under the Corporations Act, the question of whether the deed can be electronically executed depends on the relevant State or Territory law governing the deed. In several States, including New South Wales[18], Victoria[19] and Queensland[20], the Paper Requirement for deeds has been abolished by legislation, allowing deeds to be executed electronically under specific circumstances. This shift reflects a broader trend towards embracing digital solutions in legal processes and enhancing efficiency.

Summary Table of Electronic Execution of Deeds