Turkey: Memorandum On Electronic Signature Law

LIST OF INDEX

I. SUBJECT

II. LAW PROVISIONS

1. Purpose and Scope of the Law

2."Electronic Signature" Concept

3. Activities of Electronic Certificate Service Providers

4. Legal Results of Secure Electronic Signature

5. Foreign Electronic Certificates

6. Audit

7. Sanctions

8. Regulations

9. Effective Date of the Law

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As a result of the recent technological developments, the parties resident at different places and jurisdictions may enter into contracts through communication via computer, and the requirement of execution and exchange of such contracts by valid and binding signatures has emerged as an important legal problem of our day, and with a view to harmonizing our national law with the legal practices in various countries and satisfying the needs, an Electronic Signature Law was passed and published in the Official Gazette on 23 January 2004. This Law, no. 5070, will enter into force as of 23 July 2004.

This Memorandum is prepared in order to brief the reader about this new Law.

The Law sets down legal and technical aspects of electronic signature and principles on use of electronic signature and deals with:

• legal definition of electronic signature;

• activities of electronic certificate service providers and

• rules on use of electronic signature in all aspects.

Electronic signature is an electronic data which is added to or has a logic link with another electronic data and is used for identity verification purposes.

"Electronic data" is defined as all records and data that are generated, carried or stored by electronic, optic or similar other ways.

According to the Law, "secure electronic signature" is an electronic signature which:

• belongs solely and only to the signor; and

• is created by using "secure electronic signature tool" that is only at the disposal and under control of the signor; and

• is used for verification of identity of the signor in reliance upon a "qualified electronic certificate" and

• can be used for detection of any subsequent change or modification in a signed "electronic data".

"Electronic certificate service provider" is a new concept used in the Law and refers to providers of the services relating to:

• electronic certificate,

• time stamp and

• electronic signature.

The providers may be:

• public entities and organizations,

• private law legal entities or

• natural persons.

Electronic Certificate Service Providers may start their business activities TWO MONTHS AFTER sending a notice to the Telecommunication Authority certifying that they satisfy the required conditions and qualifications.

These Service Providers start their activities 2 months after the date of NOTICE delivered to the Telecommunication Authority, and if, during performance of their activities, it is at any time determined that the Service Provider fails to "use secure products and systems" or "perform and render the services securely" or "take all kinds of measures for prevention of imitation and alteration of certificates", first, a certain period of time is granted to the Service Provider for correction and remedy of its default, and its activities are immediately stopped and suspended, and if the default is not corrected or remedied by the end of this period of time, its activities are terminated.

• Electronic Certificate Service Provider will clearly write on a "qualified electronic certificate" issued and provided to its client that the certificate is a "qualified electronic certificate".

• The certificate contains identity data of the service provider and name of its home country.

• Identity data for "identification" of the signor is also given in this certificate.

• The certificate contains signature verification data corresponding to signature formation date. Signature verification data refers to cryptographic keys and codes used for verification of an electronic signature.

• ‘Validity term’ and ‘serial number’ of the certificate, and if the certificate holder is an agent, information about the principal, and if requested by the certificate holder, professional or personal data and information of the certificate holder must also be given in the certificate.

• Conditions of use of the certificate, and restrictions on transactions where the certificate may be used, if any, will also be inserted in the certificate.

• The certificate must also contain the secure electronic signature of the service provider, verifying the accuracy of the information in the certificate.

Service provider will perform the following obligations:

• Service provider will securely determine and verify the identity of certificate clients, and identity of both the certificate holder authorized to act for and on behalf of another person and the person in whose name the certificate holder acts, in reliance upon and according to official identity documents.

• If certificates are generated by the service provider, it will take care of confidentiality and security.

• Service provider informs its clients in writing before delivery of certificate about:

• Service provider will keep all relevant records for a period of time to be specified in the Regulation.

• Service provider will duly inform the relevant bodies and authorities no later than THREE MONTHS before ceasing its activities.

Electronic certificate service providers are not allowed to take and keep a COPY of the generated "signature formation" data or to STORE SUCH DATA.

Service provider:

• may not request or receive information, other than the information requisite for issuance of a certificate, from its clients; and

• may not keep the certificates within reach of third parties; and

• may not disclose to third parties or use the collected information without a prior consent of the certificate holder.

Liabilities of electronic certificate service provider to electronic certificate holders are subject to the general law provisions.

Service provider is liable to indemnify and hold third parties harmless from all kinds of damages and losses attributable to a breach of laws by service provider, and is further held liable for all acts of its employees.

All kinds of limitations or disclaimers of liability of the service provider are invalid.

Service provider is under obligation to take out and buy a "certificate financial liability insurance".

Pursuant to provisions of article 5 of the Law, secure electronic signature is EQUIVALENT to manual signature WITH RESPECT TO ITS LEGAL RESULTS.

The Law provides that "(i) legal transactions and deals that are subject to an ‘official form’ pursuant to laws, or (ii) legal transactions and deals that are subject to a ‘special procedure’ pursuant to laws, and (iii) ‘warranty and guarantee contracts’ cannot be signed by a secure electronic signature".

Requirements on form of contracts are as described below.

Our law generally deals with the form of a contract in two separate categories, namely:

Legal form stands for the form of contract stipulated by the relevant laws. If the form of a contract is envisaged in a mandatory law provision, that form constitutes a basic condition of ‘validity’ of the contract. Surety/bail bond referred to in article 484 of the Code of Obligations is an example thereof. Assignment of receivables (article 163/1 of the Code of Obligations), contract of maintenance for life (article 512 of the Code of Obligations) and marriage contract (article 134 of the Turkish Civil Code) are other examples of contracts which are subject to a certain form pursuant to the Laws.

Voluntary form refers to the form agreed upon between the parties of a contract which is in fact not subject to any form requirements for validity thereof pursuant to the Laws.

On the other hand, in ‘written form’, the declarations of will of the parties to a contract are written and then signed by the party or parties who assume obligations. For instance, donation promise (article 238/1 of the Code of Obligations) and real estate brokerage contract (article 404/IV of the Code of Obligations).

‘Official form’ refers to signature of the contract by or before an official authority. We may show the transactions carried out in a notary public for an official testament (will) and in a land registry for purchase and sale of a real estate. Transactions conducted in official form are considered and treated as valid and true unless and until proven otherwise, i.e. official form is a prima facie evidence of the underlying transaction.

This is to say that the Turkish law has substantially restricted the freedom of form in contracts both in terms of validity of contract and for the sake of facilitating the proof of contract. Thus, by not accepting the secure electronic signature in the WARRANTY AND GUARANTEE contracts and in the transactions subject to a special procedure or an official form pursuant to the applicable laws, the Turkish Law no. 5070 restricts the freedom of form.

This issue can be discussed under two headings according to the laws:

The Law stipulates that an electronic certificate service provider established in Turkey may be ‘accepted’ by an electronic certificate service provider resident in a foreign country. In this case, as per the Law, the foreign electronic certificates are considered and treated as "qualified electronic certificates". If and when the use of this type of electronic certificates causes damages and losses, the service provider in Turkey will be held liable for such damages and losses.

A foreign ‘electronic certificate service provider’ founded and active in a foreign country may issue and provide electronic certificates; provided, however, that the legal results of these certificates are subject to and governed by the INTERNATIONAL AGREEMENTS. Provisions of the relevant international agreements, if any, will be applicable for indemnification of the damages and losses that may arise out of use of this type of certificates.

Pursuant to the Electronic Signature Law, the activities and transactions of electronic certificate service providers will be audited by the Telecommunication Authority, if and when deemed necessary.

One who:

• collects or obtains signature formation data; or

• acquires or obtains signature formation tools; or

• gives these tools; or

• copies these tools; or

• recreates these tools; or

• creates an ‘unauthorized electronic signature’ by using signature formation tools acquired or obtained without authority

without and beyond the consent of the relevant person will be sentenced to IMPRISONMENT FROM ONE YEAR TO THREE YEARS and various fines.

In addition, one who:

• issues and creates fully or partially FALSE electronic certificates; or

• IMITATES or ALTERS a valid electronic certificate; or

• issues and creates electronic certificates ‘without authority’; or

• KNOWINGLY uses electronic certificates that are false, imitation, altered or unauthorized

will be sentenced to IMPRISONMENT FROM TWO YEARS TO FIVE YEARS and various fines.

Furthermore, various ‘administrative fines’ are imposed on the service providers which violate the laws.

The details of implementation will be regulated by various regulations required to be adapted and enacted until 23 July 2004. This is to say that the provisions of the Regulations to be enacted are also required to be complied with.

The Law will become effective as of 23 July 2004.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.