Legislature(2003 - 2004)
03/25/2004 01:43 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 285-ELECTRONIC TRANSACTIONS & SIGNATURES
CHAIR CON BUNDE announced CSHB 285(JUD) to be up for
consideration.
MS. VANESSA TONDINI, staff to Representative Lisel McGuire, said
the uniform laws were promulgated by the Uniform Law
Commissioners in 1999 in an effort to prepare state law for the
electronic commerce era.
The objective of UETA (Uniform Electronic
Transmissions Act) is to establish the legal
equivalence of electronic records and signatures with
paper writings and manually signed signatures removing
barriers to electronic commerce. This is a very
limited, but important objective - that an electronic
record of a transaction is the equivalent of a paper
record and that an electronic signature be given the
same legal affect, whatever that may be, as a manual
signature. UETA does not attempt to create a whole new
system of legal rules for the electronic marketplace.
It doesn't make any changes substantively to rules of
law that currently apply, such as contractor agency
law, and it's really a framework that allows for
regulations and acceptance if - and this is important
- both parties voluntarily choose to use electronic
communication.
If we don't set this framework up on a state level,
the federal E-sign Law will apply and UETA is much
more comprehensive than that. Forty-five states have
already adopted UETA to date, so we're a little bit
behind the curve. I believe that Alaska should now
join the rest of the nation in adopting this bill. The
version that you have before you is the version that
unanimously passed the House.... The only change from
the original version of the bill is the addition of AS
45.02 in section 1...the UCC chapter on sales. Its
omission was just a drafting oversight.
MR. ART PETERSON, Uniform Law Commissioner, State of Alaska,
said he is one of the five commissioners. He said this bill is a
product of the Uniform Law Conference along with the Uniform
Commercial Code, the Uniform Probate Code, Child Custody
Jurisdiction. The conference covers a broad variety of subjects
in the legal world that are thoroughly analyzed, studied, well-
written, etc. He supported Ms. Tondini's testimony in favor of
this bill and speculated that not enacting it would hinder
commerce within the state and interstate commerce significantly.
It's the first comprehensive state law for the electronic
commerce era.
It doesn't change contract law; it simply says that
when you engage in contracts, when you engage in
transactions by means of electronics, it will have the
same effect as the old-fashioned paper method.
MR. PETERSON said the federal E-Sign Law has a provision that
says if states enact UETA essentially verbatim, state law would
govern and not the federal one.
It's a very unusual situation. I believe it's the
first time federal law has actually included a
provision that specific to a product of the national
conference.
He said that section 7 of AS 09.80.040 is the heart of the act
and sets out some basic rules on page 3, line 19. Page 10 deals
with governmental entities.
CHAIR BUNDE politely asked Mr. Peterson to stay on hand to
answer questions.
MS. PAULA KELSEY, Recorder Manager, State Recorders Office,
deferred testimony to Vicky Backus, but said she was available
to answer questions.
MS. VICKY BACKUS, State Recorder, supported UETA saying:
A high percentage of mortgage transactions in Alaska
today involve out-of-state lenders and standardizing
the electronic recording process within the framework
of a uniform law like UETA will benefit commerce in
those states with a uniform approach. The handful of
states that don't have uniform laws may find
themselves at a disadvantage when we get into the
world of electronic commerce and recordation. E-Sign
and UETA permit state and federal agencies to allow
and control electronic filings, but E-Sign doesn't
provide any authority for establishing filing
standards and this must be derived only from UETA or
from other state law. So, UETA will encourage
government filing offices to promote consistency and
inner operability and that's what we're looking for.
MR. DAVID JONES, Assistant Attorney General, wanted to answer
any question and to clarify that 43 states, the District of
Columbia and the U.S. Virgin Islands have adopted UETA in the
five years since the Uniform Law Commissioners drafted it. "It's
clear that it's not particularly controversial." It primarily
gives folks who choose to conduct their transactions
electronically the ability to enforce them in court. It will
allow efficiencies not only to private sector transactions, but
to governmental operations, as well.
CHAIR BUNDE observed that there was no opposition to the bill.
SENATOR HOLLIS FRENCH said the signature section of the bill on
page 12, lines 3 - 5, is a crucial aspect and asked how it
works.
MR. JONES said he had some background in electronic signatures.
Currently under Alaska statutes, which would be
repealed by this bill, we have very technologically
specific definitions of electronic signatures that are
sort of the Cadillac version of electronic signatures.
They require that the electronic signature be attached
to the electronic record in such a way that if any
change is made to the electronic record, that will be
evident and the signature will be registered as
invalid by what is known as a certifying authority.
It's a fairly complicated process to explain, but the
UETA has the advantage in the beauty of not making the
technological choices in defining electronic
signatures. One, because there may be different levels
of security that are appropriate for different
transactions. Just as when we go to the store, some
may require that we show an i.d., some may be
satisfied with just a signature or for some
transactions it may be necessary that we provide a
notarized signature, a birth certificate, a passport.
Depending on the significance of the transaction,
there may be different types of the electronic
signatures that would suffice. In one case, a personal
identification number, a PIN, might do the trick. In
another case, you might want the Cadillac version,
which involves the public in private key
infrastructure and a certifying authority that I
referred to earlier.
Another reason it's a good idea not to be
technologically specific in the definition is that
technology is changing so rapidly that the definition
we adopt today, if it's technologically specific, may
be obsolete in another five years or sooner. So, this
definition of electronic signature is not very
definite; it's fairly broad and that is very useful
for purposes of a uniform law.
CHAIR BUNDE asked if signing a credit card at a store is one
level of electronic signature where others might be a
typewritten name with a PIN.
MR. JONES replied that is correct.
SENATOR FRENCH said that answers his question and asked another
- if buying something from Amazon.com and clicking "I Accept" is
another version of electronic signature.
MR. JONES replied that is correct.
SENATOR FRENCH said it looks like they are leaning toward
raising or lowering the level of formality a person chooses to
use. He was wondering what kinds of formality and
trustworthiness were going to follow the new transactions. "It
sounds to me like you're saying it's just going to be up to the
players?"
MR. JONES replied that is correct.
They are going to be in the best position to decide
between themselves what level of security and
formality they need for those electronic signatures.
SENATOR FRENCH asked if the act has fraud provisions.
MR. JONES replied:
There are not specific fraud provisions in the act.
The same fraud rules that would apply to a paper
contract or transaction will apply to electronic
records and transactions.
SENATOR FRENCH said he would have to reread the forgery statutes
in light of this bill.
CHAIR BUNDE said it appears that the bill is running the gamut
from buying a book on Amazon.com to signing a 30-year mortgage.
At one level, my electronic signature could simply be
"I Accept." The other would have to be an actual
physical replication of my signature something along
the Cadillac that you've mentioned.
MR. JONES replied that is correct.
MR. PETERSON commented that the House Judiciary Committee
discussed fraud also and he wrote a letter to Professor Pat Fry
who chaired the committee that drafted this act and her response
regarding the fraud question was:
Use of electronic technology is consensual. No one is
required by statute to use them. Accordingly, parties
are free to condition their assent to the use of
electronic technologies on the use of agreed security
procedures. Consequently, any security technologies to
be used are to be taken into account when courts
consider issues of identity and agreement. The
strength of the technology should go directly to the
evidentiary weight of the electronic record or
signature.
As to opening up people to fraud, all UETA does is say
that people may deal electronically. As I noted, it
does not require one to do so. There are fraudsters on
line. UETA is not designed to, nor does it in any way
supersede, the common law or statutes dealing with
various forms of fraud and larceny. [Indisc.] statute
has been on the books for years or is newly enacted
specifically for the on-line environment. UETA is not
a regulatory or criminal statute; it's a piece of
infrastructure validating electronic transactions and
records. [Indisc.] tells courts to accept electronic
evidence; it should assist in the prosecution of
frauds. At the same time, it validates millions of
legitimate transactions entered into by individuals
every day.
Everyone I have contacted as someone who has been
thoroughly immersed in these technologies and the law
surrounding them feel that this is not opening up any
fraud potential that's really any different from
current potential on paper.
CHAIR BUNDE said, "Senator French, I note that you will have
another bite at this apple if you want to bone up on your
fraud."
SENATOR FRENCH responded, "Fair enough, Mr. Chairman."
CHAIR BUNDE noted there were no more witnesses and closed public
testimony.
SENATOR GARY STEVENS moved to pass CSHB 285(JUD) out of
committee with individual recommendations and the attached
fiscal note.
CHAIR BUNDE asked for the roll call vote. Senators Bettye Davis,
Gary Stevens, Hollis French and Chair Con Bunde voted yea; and
CSHB 285(JUD) moved from committee.
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