Use of e-signatures in the German market in banking transactions

Due to the Covid-19 crisis and in particular during the lockdown phase parties are or were not always able to provide original signature pages to the documents signed in connection with a banking transaction. Therefore, a number of questions came up whether banking documentations can be signed via e-signatures.

As a first step, it needs to be determined what law applies to the use of e-signatures. In general, the governing law set out in the relevant contract will be what is used to determine whether the agreement has been validly executed. This is normally set out in the choice of law and jurisdiction clause in the contract. Under the governing law of each jurisdiction there are some types of documents that cannot be signed using an e-signature. It is important to confirm in relation to the relevant document that is to be signed that the use of an e-signature is not prohibited under the relevant governing law. It is also important to consider the location of the entities signing the document (and sometimes the location of any relevant asset) as, if either party is located/incorporated in a jurisdiction that is not the jurisdiction specified in the choice of law and jurisdiction clause, this may affect (amongst other things) whether the relevant signatory has due authorisation to sign on behalf of a company. This is because delegation of authority to sign by a company will be subject to the law and corporate rules applicable to the jurisdiction of the relevant company.

With respect to German law governed finance documents (such as the facility agreement and related security documents) e-signatures can be used to the extent that no specific form requirements exist according to German law. However, it is still market practice to sign the facility agreement and related security documents in hand writing and to circulate originals. We have seen only a few transactions where the parties decided to use electronic signatures with respect to the finance documents to which no formal requirements apply. In those cases the parties agreed on using a qualified electronic signature. A qualified electronic signature is a signature (i) offered by a qualified trust service provider; (ii) that meets the specific requirements for an advanced electronic signature (AES), (iii) is created using a qualified creation device; and (iv) is supported by a qualified certificate. The requirements for AESs are that they must (i) be uniquely linked to an identifiable signatory who has sole control of the data used to create the signature; and (ii) ensure that any changes made to the signed data can be detected.

There are certain documents where the law imposes specific from requirements, e.g. the notarization of a share pledge over the shares in a GmbH or the notarization of a land charge deed. In these cases e-signatures cannot be used. With respect to guarantees, certain form requirements may apply. If the guarantee is a suretyship (Bürgschaft), such guarantee is subject to the written form requirement of sec. 766 BGB for suretyship agreements (Bürgschaften) The electronic form is specifically excluded and an electronic signature not possible. However, if the agreement qualifies as a commercial transaction for the guarantor sec. 766 BGB does not apply according to sec. 350 HGB.