Statement by Sen. Spencer Abraham in Congressional
Record.
Re: The Millennium Digital Commerce Act (digital signatures).
Date: March 25, 1999.
Source: Office of Sen. Spencer Abraham.
Mr. Abraham: Mr. President, I rise to introduce the Millennium Digital Commerce Act, a bill to promote the use of electronic authentication technologies and enhance the Internet's capacity to serve as a business tool. I am joined in introducing this bill by Senator John McCain, the Chairman of the Senate Commerce Committee, Senator Ron Wyden, and Senator Conrad Burns. This legislation builds on the Government Paperwork Elimination Act, a bill I sponsored to promote the use of electronic signatures by the Federal government, which was signed into law by the President as part of the Omnibus Appropriations Act.
The Internet has experienced almost exponential growth since its inception. Where once the Internet was a medium limited to the sharing of ideas between scientists and educators, it is now a tool which allows every person with a computer to access more information than is contained in any single library, communicate with friends for a fraction of the cost of phone service, or purchase goods from retailers located all over the world. Electronic commerce is clearly booming. But in order to realize its full potential, we must enact Federal and State legislation to enable, enhance, and protect the next generation of Internet usage.
The Internet is poised to serve as an efficient new tool for companies to transact business as never before. The development of electronic signature technologies now allow organizations to enter into contractual arrangements without ever having to drive across town or fly thousands of miles to personally meet with a client or potential business partner. The Internet is prepared to go far beyond the ability to buy a book or order apparel on-line. It is ready to lead a revolution in the execution of business transactions which may involve thousands or millions of dollars in products or services; transactions so important they require that both parties enter into a legally binding contract.
This capability is provided by the development of secure electronic authentication methods and technologies. These technologies permit an individual to positively identify the person with whom they are transacting business and to ensure that information being shared by the parties has not been tampered with or modified without the knowledge of both parties. While such technologies are seeing limited use today, the growth of this application has out-paced government's ability to appropriately modify the legal framework governing the use of electronic signatures and other authentication methods.
Mr. President, the Millennium Digital Commerce Act is designed to promote the use of electronic signatures in business transactions and contracts. At present, the greatest barrier to such transactions is the lack of a consistent and predictable national framework of rules governing the use of electronic signatures. Over forty States have enacted electronic authentication laws, and no two laws are the same. This inconsistency deters businesses from fully utilizing electronic signature technologies for contracts and other business transactions. The differences in our State laws create uncertainty about the effectiveness or legality of an electronic contract signed with an electronic signature. Of course, certainty is the basis for commerce, and contracts provide that certainty. Parties enter into contracts understanding that they will be bound by the terms of the agreement. However, the fear is that a business located in a State with different electronic authentication rules may be able to escape contractual obligations agreed to through electronic signatures. This legal uncertainty limits the potential of electronic commerce, and, thus, our nationšs economic growth.
The need for uniformity in electronic authentication rules is not only recognized by the business community, but by the States as well. For the past two years, the National Conference of Commissioners on Uniform State Law, an organization comprised of e-commerce experts from the States, has been working to develop a uniform system for the use of electronic signatures for all fifty States. Their product, the Uniform Electronic Transactions Act, or UETA, is in the final stages of review and the drafters expect to have the Act completed by October. Assuming the UETA is finished as scheduled, and I believe it will be, it will then fall on each State legislature to enact the legislation and establish the uniformity necessary for the interstate use of electronic signatures.
But agreement on the final language of the UETA proposal is not the same as enactment. Uniformity will not occur until all fifty States actually enact the UETA. Because some State legislatures are not in session next year and other States have more pressing legislative items, it could take three to four years for forty-five or fifty States to enact the UETA. With the rapid State of development in the high-technology sector, four years is an eternity.
The Digital Millennium Commerce Act is an interim measure to provide relief until the States adopt the provisions of the UETA. It will provide companies the baseline they need until a national baseline governing the use of electronic authentication exists at the State level.
First, the legislation provides that the electronic records produced in the execution of a digital contract shall not be denied legal effect solely because they are electronic in nature. This provision assures that a company will be able to rely on an electronic contract and that another party will not be able to escape their contractual obligations simply because the contract was entered into over the Internet or any other computer network. By granting such certainty, this bill will reduce the likelihood of dissatisfied parties attempting to escape electronic contractual agreements and transactions.
Mr. President, let me stress that this Federal preemption of State law is designed to be an interim measure. It provides relief until the States enact uniform standards which are consistent with those contained in the Uniform Electronic Transactions Act and this legislation. Simply put, once States enact the UETA or other legislation governing the use of electronic signatures which is consistent to the UETA, the Federal preemption is lifted.
I consider myself a Federalist. I believe strongly in States rights and view with great caution proposals which call for the preemption of State law. After considerable study, it is my opinion that the need for a national baseline for the use of electronic signatures justifies a temporary, Federal action until such time as the States can enact a uniform standard.
Second, the bill grants parties to a transaction the freedom to determine the technologies and business methods to be used in the execution of an electronic contract. In essence, this assures that the Federal baseline will extend to the various aspects of State law governing authentication including such matters as registration and certification requirements, liability allocations, maintenance of revocation lists, payment of fees and other legal and regulatory concerns.
Third, this legislation sets forth the principles for the international use of electronic signatures. In the last year, U.S. negotiators have been meeting with the European Commissioners to discuss electronic signatures in international commerce. In these negotiations, the U.S. Department of Commerce and the State Department have worked in support of an open system governing the use of authentication technologies. Some European nations oppose this concept. For example, Germany insists that electronic transactions involving a German company must utilize a German electronic signature application. I applaud the Administration for their steadfast opposition to that approach. In an effort to bolster and strengthen the U.S. position in these international negotiations, this legislation lays out a series of principles to govern the use of electronic signatures in international transactions. These principles include the following:
One, paper-based obstacles to electronic transactions must be eliminated. Two, parties to an electronic transaction should choose the electronic authentication technology. Third, parties to a transaction should have the opportunity to prove in court that their authentication approach and transactions are valid. Fourth, the international approach to electronic signatures should take a non-discriminatory approach to electronic signature. This will allow the free market -- not a government -- to determine the type of authentication technologies used in international commerce.
Mr. President, these principles will bolster the U.S. convention that the Departments of State and Commerce are advocating abroad, and, hopefully, increase the likelihood of an open, market-based international framework to electronic commerce.
Finally, the bill directs the Department of Commerce and Office of Management and Budget to report on Federal laws and regulations that might pose barriers to e-commerce and report back to Congress on the impact of such provisions and provide suggestions for reform.
Mr. President, as with any legislation seeking to affect both Federal and State law, drafting this bill has been a challenging balancing act. During the drafting process, my office has received invaluable support from the Technology Division of the State of Massachusetts. Governor Paul Cellucci's staff have provided indispensable counsel on existing State law governing the use of electronic signatures and the manner in which Federal law can bolster or hamstring State contract law. Of course, the business and technology sectors have also been crucial in helping to craft this bill. Representatives from the Information Technology Association of America, the U.S. Chamber of Commerce, Microsoft, Hewlett-Packard and the National Association of Manufacturers have each lent their time and expertise to this effort. I appreciate their contributions and look forward to continuing this effort to ensure that we develop the best approach possible to promote use of electronic signatures in business transactions.
I urge my colleagues to support the Millennium Digital Commerce Act. Mr. President, I ask that the text of this legislation be placed in the Record following my remarks.