November 19, 1999
Tokyo, Japan

Background Memorandum

In Japan, both government and industry are studying the policy of electronic signatures and authentication. According to the Nikkei newspaper of August 4, 1999 (headline article), the Obuchi Administration is planning to introduce legislation to be adopted around April, 2000. Currently the Ministry of International Trade and Industry (MITI), the Ministry of Post and Telecommunications (MPT), and the Ministry of Justice (MOJ) are working on the draft legislation.

The issue of electronic signatures is creating a global policy debate. Since the Utah Digital Signature Act in 1995, almost every state in the U.S. has enacted some sort of legislation to deal with the use and recognition of electronic signatures. In Europe, individual countries, such as Italy and Germany, have enacted digital signature laws and the European Union is currently drafting a directive on this issue. In Asia, countries such as Malaysia, Singapore and South Korea have enacted similar legislation.

As new and divergent laws and regulations develop on this issue, the need for international harmonization (or at least avoidance of inconsistency) increases. Because the Internet and e-commerce are inherently global, legal and structural impediments to the global nature of the new medium should be removed. At the same time, cultural sensitivities and differences of legal structures should not be ignored. If e-commerce is to become an opportunity for everyone in the world, legal and regulatory systems of some should not be imposed to the detriment of others.

ILPF CONTRIBUTION

As a private sector participant in the global development of e-commerce, the Internet Law & Policy Forum (ILPF) and its members have been involved in this debate from the beginning. The ILPF has conducted two surveys-the "U.S. State Electronic and Digital Legislative Initiatives" (www.ilpf.org/digsig/update.htm) and the "International Electronic and Digital Signature Initiatives" (www.ilpf.org/digsig/survey.htm). The ILPF has also published its "International Consensus Principles for Electronic Authentication" (www.ilpf.org/digsig/intlprin.htm) which was presented to the OECD and other relevant forums.

International discussions on electronic signatures and authentication in Japan are not only timely because of pending national legislation, but also important for all global participants of e-commerce. Pending Japanese legislation may influence policy in other parts of Asia, where the information technology industry and the use of new technologies are rapidly expanding. More importantly, knowing different cultural and legal systems will create better understanding and offer new insights and approaches for us all.

UNIQUE JAPANESE ISSUES

As an early participant in the Internet and e-commerce, Japan is reviewing legal issues and challenges that are very similar to those discussed in the U.S. and Europe. Nevertheless, there are some unique cultural and legal issues, which include:

1. The legislative reference to "signature and seals (stamps)." In many official documents, such as the registration of real estate transactions and marriages, the relevant laws require a physical signature or stamp (which is commonly called "Hanko") affixed to documents. Some argue that in order to accept electronic (or digital) signatures, Japan would need to amend many statutory clauses so that the definition of "seals" would include electronic signatures.

2. There are cases in Japan where the court assumed that the signature and seals affixed to documents are of those of the principal or an agent. Section 228(4) of the Japanese Civil Procedure Law gives a legal presumption that "if the signature and seals are of the principal or an agent, the document was made by or on behalf of the principal."

   In many cases, the court also assumes that there was no forgery of such a document, depending upon the appearance of the document. The Japanese Code of Civil Procedure does not have detail evidence rules such as those in the common law countries. The written documents, even without the signature and seal, can be admitted by the court as evidence. However, written documents are most likely to be given a higher evidentiary weight by the court as reliable evidence because of the existence of a physical signature and seal appearing on them. Thus it is worth addressing, for the pending Japanese legislation, whether and how to give similar presumptive effect to electronic documents with electronic signatures.

3. One proposal from the Japanese Administration is to create a qualification system for authentication activities. Under this system, certification authorities that wish to voluntarily apply for this qualification must meet certain criteria set by the government. Certificates issued by those qualified certification authorities can automatically obtain the presumptive privilege under section 228 (4) of the Civil Procedure law. (This does not deny the validity of certificates issued by non-qualified certification authorities.) The critics of this system argue that, "although the qualification system is voluntary and not a requirement for the authentication business in Japan, this creates a de facto mandatory qualification system because nobody would want to use a second-class certification company."

4. There are other more practical issues, too. Seals (Hankos) are used in many transactions. For instance, at banks, clients are identified by their registered seals. However, in many cases, these seals are not legally required and similar seals are purchased very cheaply. Because of this practice, electronic authentication may be more easily accepted in Japan. Another example where electronic signatures may be applied is the notary system in Japan, which is more highly regulated than in other countries.

PROPOSAL FOR CONFERENCE

Keidanren, one of the largest industry federations in Japan, is interested in this issue and has offered to hold jointly a workshop in Japan with the ILPF. The workshop will be held at the Akasaka Prince Hotel (downtown Tokyo) on Friday, November 19, 1999.

Masanobu Katoh
Chairman of the Board
ILPF