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.