Electronic seals: definition, application and validity

Especially now that many of us are working from home, we’re seeing that digitalization brings with it many challenges in managing internal and external workflows that weren’t visible before. It’s also becoming clear, however, that digitization offers a number of options that can make work easier, especially in times such as these. In addition to video conferencing, these options include the electronic signature and electronic seals.

Unfortunately, uncertainty about the legal use of electronic signatures and seals has prevented these technical solutions from enjoying widespread acceptance and use. And it doesn’t help that their similar-sounding names make them difficult to distinguish. Two of the most important questions about electronic signatures are: What is an “electronic seal” and when is it used in addition to or instead of an “electronic signature”? And what added value does it offer the company?

When is an electronic signature used?

First a bit of clarification: Electronic signatures are suitable for submitting digitally documented declarations of intent by individual persons. If, for example, a contract without a required legal form is concluded, a “simple” electronic signature is sufficient, e.g. an e-mail signature. If, on the other hand, written form is required by law or contract, the contracting parties must send their declarations to the other party using a “qualified electronic signature”.

What is an electronic seal?

Electronic seals are used when legal persons such as companies or authorities want to digitally sign documents themselves without involving their authorized representatives. This follows from Art. 3 No. 24 of the eIDAS Directive, according to which the creator of a seal is “a legal person who creates an electronic seal.”
In contrast to an electronic signature, the issuer is the company and not the authorized signatory or managing director. This eliminates the need for a certain individual person to be available. Of course, the actual creation of the electronic seal still has to be done by an employee of the company.

Legal validity of an electronic seal

Caution: If written form is required by law or contract, an electronic seal is not sufficient. In legal terms, electronic seals only imply the following: The recipient recognizes that the document in question was issued by a specific organization and is genuine (authenticity). It is documented that the content of the information has not been changed (integrity). Furthermore, according to Art. 35 Para. 1 of the eIDAS Directive, electronic seals can be introduced as evidence in legal proceedings. In a manner of speaking, the electronic seal therefore constitutes a digital “corporate stamp”.

Optimizing and accelerating processes

Accordingly, the electronic seal eliminates the need for analog stamping. The resulting acceleration in company processes is especially beneficial in the areas of incoming and outgoing mail. In addition, it is also suitable for secure long-term archiving (keyword: integrity assurance measures in accordance with Technical Guideline 03138 on replacement scanning from the Federal Office for Information Security (BSI)). The use of electronic seals can also help prevent fraud. For example, anyone who receives an invoice that bears such a seal can verify for themselves whether the invoice actually originates from the specified issuer and whether the data was falsified after the fact.

What are the advantages of an electronic seal?

New legal regulations are continually creating new areas of application for electronic seals. For example, in connection with the second Payment Services Directive (“PSD2”), regulatory technical standards were defined for strong customer authentication and for secure open standards of communication. In this area, Delegated Regulation (EU) 2018/389 stipulates that the exchange between third parties (Fintech companies) and banking institutions must be made more secure, including by using qualified electronic seals, to minimize the risk of fraud.

Furthermore, Section 53 Para. 3 of the Public Procurement Ordinance (VgV) stipulates that, during contract award procedures, contracting entities may require that expressions of interest, confirmations of interest, requests to participate and tenders must bear an advanced electronic seal or a qualified electronic seal.

Digitizing processes

The cases presented here are only a small selection of the possible applications for electronic seals, but they demonstrate how organizations are obliged to use qualified electronic seals in a multitude of cases or at least how they could benefit from such use.

Electronic seals provide companies and public authorities with an additional tool to further digitize their internal and external processes and thus reduce processing times in their organization. Companies in particular should take note of the additional benefits of these tools and incorporate them into their own workflows.

Do you want to know more about electronic seals and the digital signature?