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US Congress' electronic signatures bill clears hurdle

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A virtual triathlon of civil contract lawmaking continues in Washington as legislators struggle to accomplish a deceptively simple thing: drafting consistent, national regulations for electronic transactions without affecting the status of paper contracts, and without trampling the rights of the states which, constitutionally, are empowered to decide such matters for themselves. Yesterday the House Judiciary subcommittee on courts and intellectual property adopted a more balanced approach to contract law governing e-commerce and digital signatures than one put forward earlier by the House Commerce Committee. The Judiciary version would grant the states power to exempt certain classes of contracts from being made electronically, as they see fit. The earlier version had been criticised for overstepping the rights of states to make exceptions. It would seem a small matter to require the states to recognise digital signatures where adult parties consenting to e-transactions want them recognised, but nothing is ever so simple in Washington. As usual, numerous interested parties are working at cross purposes. On the Right, the Republican Party, which is sponsoring both versions, is in fact sub-divided among those who jump at any opportunity to accommodate Big Business, and those who take a fundamentalist tack towards civil liberties and states' rights, so there is not yet a consensus on the Republican side of the aisle. This gets further complicated by the natural reluctance of all Republicans to enact legislation of which the Clinton Administration might approve, or from which it might extract PR brownie points. In the middle lies the Administration, and here again, far from unified. The President personally wants to do all he can to lubricate e-commerce, but the several bureaucracies over which he presides have their own pet objects which they want to see lubricated. Chief among these is a Justice Department concern that widespread electronic contract-making will lead to poor records keeping, and so expose the federal government to numerous legal liabilities. "These issues are important, because they affect the government's ability to enforce its agreements and programs and to defend itself from potential lawsuits," Deputy Associate Attorney General Ivan Fong told the committee in testimony on 30 September. "The issues are likely to take on heightened significance [because] the government is all too often a target of fraud... Agencies must be able to manage risks arising from the potential for fraud undertaken through the use of electronic records," Fong warned. Added to that are concerns by the Department of Commerce that the inevitable development of technical specifications for signature authentication will lead the US to a frighteningly "European" state of hopeless over-regulation. Commerce Department Counsel Andrew Pincus, who apparently never met a regulation he didn't hate, warned that giving preference to "particular types of electronic authentication by establishing specific technical requirements for electronic signatures" will lead the American business community towards something like the EU's Electronic Signatures Directive, which no doubt will pave the way for some sort of Socialist revolution. Europe can expect a fight with Uncle Sam over technical specifications for international e-contracts. Pincus made it clear that, "in the international arena [the US Commerce Department's] focus is on promoting our principles of minimalism and facilitation as opposed to governmental mandates and regulation as the basis for enabling electronic commerce worldwide." So, if inter-departmental squabbling doesn't derail the legislation, upcoming international disputes will be more than capable of doing so. Finally, on the Left (assuming there actually is a "Left" anywhere in the US government), a number of House Democrats suspect that enabling electronic signatures at the federal level will endanger consumers. The theory here is that online commerce encourages online contractual disclosure, and this in turn could cause full disclosure to be withheld from consumers who lack Internet access. It is a bit difficult to imagine this problem cropping up in the real world, however. Disclosure is always the vendor's responsibility. It's hard to imagine a judge penalizing some bilked consumer for not reading the "fine print" on line, when he has made a purchase through some other medium. No doubt there are vendors who will attempt such a sketchy defence, but surely there's little danger that any would prevail. The objection most likely conceals nothing more than stubborn foot-dragging and partisan nay-saying over a piece of Republican legislation. The bill moves to the House Rules Committee this week or next for compromise and reconciliation between the new Judiciary version and the older Commerce version. The Register's money is on the Judiciary version, as it more closely resembles a corresponding Senate bill, and therefore has some hope of one day escaping Capitol Hill as law. Assuming, of course, that the sponsors and signatories really want it to become law, an assumption which, judging by the behaviour of all concerned so far, is somewhat less than safe. ®

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