eSignature Legality in Sri Lanka

eSignature Legality Summary

Under Sri Lankan law a written signature is not necessarily required for a valid contract. Contracts are generally valid if legally competent parties reach an agreement, whether they agree verbally, electronically or in a physical paper document in terms of the applicable law of contracts and the Electronic Transactions Act No. 19 of 2006 as amended by Electronic Transactions (Amendment) Act, No. 25 of 2017 (collectively, the “ETA”), unless such contracts are required to be executed in accordance with certain statutory stipulations. The ETA specifically confirms that contracts cannot be denied enforceability merely because they are concluded electronically. To prove a valid contract, parties sometimes have to present evidence in court. Leading digital transaction management solutions can provide electronic records that are admissible in evidence under Section 21 of the ETA, to support the existence, authenticity and valid acceptance of a contract.

Use Cases for Standard Electronic Signature (SES)

Use cases where an SES is typically appropriate include:

• commercial agreements between corporate entities including NDAs, procurement documents, sales agreements

• consumer agreements including new retail account opening documents

NOTE: Although the law permits contracts to be electronically signed, some local parties may prefer to contract using conventional execution formalities.

Use Cases That Are Not Typically Appropriate for Electronic Signatures or Digital Transaction Management

Use cases that are specifically barred from digital or electronic processes or that include explicit requirements, such as handwritten (e.g. wet ink) signatures or formal notarial process that are not usually compatible with electronic signatures or digital transaction management.

• Handwritten - A license issued to a telecommunications system operator is required to be in writing (as under Section 17 (6) of the Telecommunications Act No 25 of 1991 (as amended) read with Section 23 (b) of the ETA)

• Handwritten - A bill of exchange is required to be reduced to writing and duly signed by the maker of the instrument (electronic record and electronic signature insufficient) (as under Section 3 (1) of the Bills of Exchange Ordinance No 25 of 1927 (as amended) read with Section 23 (c) of the ETA)

• Handwritten - A trust for movable property (excluding a constructive, implied or resulting trust) – such a trust cannot be validly created unless it is declared in a document of testamentary disposition or in a document of non-testamentary disposition and it is reduced to writing, and signed by the author

• Handwritten - HR contracts, benefits paperwork.  In relation to employment contracts there is a preference for handwritten signatures on account of evidentiary ease. However, to meet certain filing requirements of the labour department, a hardcopy with a handwritten or ink signature (and affixing thumb impression in some instances) is necessary.

• Handwritten - IP licenses and transfers require an ink signature as the concerned regulator i.e., National Intellectual Property Office, requires filings bearing ink signature

• Handwritten - Corporate documents- electronic signatures are yet to be accepted by the Registrar General of Companies4

• Handwritten - In practice, certain Government departments require handwritten documents (Section 8 of the ETA, specifically allows for acceptance of electronic records and signatures in government institutions, although several government agencies accept electronic records, it is yet to be implemented in its entirety)

• Handwritten – Financial transactions on a regulated exchange, foreign exchange transactions, inter-bank payment systems, inter-bank payment agreements or clearance and settlement systems relating to securities or other financial assets or instruments and the transfer of security rights in sale, loan or holding of or agreement to repurchase securities or other financial assets or instruments held with an intermediary (Section 23 (ca) of the ETA).

• Formal notary - A will, testament or codicil or any other testamentary disposition is required to be in writing and duly signed and executed by the testator in the presence of a notary public and two witnesses. The requirement of notarial attestation is dispensed with if the will is executed by the testator in the presence of five witnesses (as under Section 4 of the Prevention of Frauds Ordinance No 7 of 1840 (as amended) (“PFO”) read with Section 23 (a) of the ETA)

• Formal notary - A power of attorney is required to be reduced to writing and executed in the presence of two witnesses or executed before or attested by a notary public or by a Justice of the Peace, Registrar, Deputy Registrar, or by any Judge or Magistrate, or Ambassador, High Commissioner or other diplomatic representative of the Republic of Sri Lanka (as under Section 2 of the Powers of Attorney Ordinance No 4 of 1902 (as amended) read with Section 23 (d) of the ETA)

• Formal notary - A trust for immovable property (excluding a constructive, implied or resulting trust) – such a trust cannot be validly created unless it is declared in a document of testamentary disposition or in a document of non-testamentary disposition and it is reduced to writing, signed by the author of the trust or trustee and notarially executed (as under Section 5 (1) of the Trusts Ordinance No 09 of 1917 (as amended) read with Section 23 (e) of the ETA)

• Formal notary - A contract for sale or conveyance of immovable property or any interest in such property – a contract for sale, purchase, transfer, assignment, mortgage of land of immovable property shall be reduced to writing and executed by the maker of the instrument or such other person authorized in the presence of a notary public and to witnesses and duly attested by the said notary and witnesses, excluding a lease at will or a lease for any period not exceeding one month (as under Section 2 of the PFO read with Section 23 (f) of the ETA).

Local Technology Standards

As part of its open, technology-neutral approach to electronic signature, there are no laws requiring the use of specific technology for a legally enforceable electronic signature, either for digital certificates or otherwise. Some specific requirements may be in place when transacting with government institutions.