Telecom Subcommittee Marks Up Electronic Signatures Bill

(July 30, 1999) The House Telecom Subcommittee amended and approved HR 1714, the E-SIGN Act, on Thursday morning, July 29 by a unanimous voice vote. A dispute between Rep. Bliley and Rep. Eshoo over how much leeway to allow state legislatures was settled by a compromise amendment offered by Rep. Tauzin which allows states four years to act.

The Tauzin amendment to HR 1714, the Electronic Signatures in Global and National Commerce (E-SIGN) Act, provides for the acceptance of electronic signatures in interstate commerce. The key language the Tauzin amendment provides that: "With respect to any contract or agreement entered into in or affecting interstate or foreign commerce ... the legal effect, validity, or enforceability of such contract or agreement shall not be denied (1) on the ground that the contract or agreement is not in writing if the contract or agreement is an electronic record; or (2) on the ground that the contract or agreement is not signed or is not affirmed by a signature if the contract or agreement is signed or affirmed by an electronic signature."

Title I of the bill contains most of the essential provisions. Title II requires annual studies to be conducted by the Department of Commerce, and requires the Department to promote the acceptance and use of electronic signatures. Title III of the bill covers securities markets. The House Commerce Committee's Subcommittee on Finance adopted an amended version of Title III on July 21.

There has not been any dispute in the Commerce Committee over whether a bill providing for the acceptance of electronic signatures should be passed. However, the matter of state preemption has divided the Committee. Rep. Anna Eshoo (D-CA) introduced another electronic signatures bill, HR 1320 IH, the Millennium Digital Commerce Act, on March 25. HR 1714 IH provided for strict preemption of state law; HR 1320 IH did not. Several members of the Committee, and staff negotiated a compromise which was contained in the Tauzin amendment.

Rep. Billy Tauzin

"I am pleased to announce that the negotiations with Mr. Dingell, Mr. Markey, and Ms. Eshoo -- we have resolved the outstanding concerns that had been raised both in the hearing and in discussions after the hearing," said Rep. Billy Tauzin (R-LA), the Chairman of the Telecommunications Subcommittee at the beginning of the hearing.

"I will shortly be offering an that will make a number of changes to both Title I and II that will reflect this agreement."

Rep. Tauzin explained the amendment. "Title I of the amendment makes a specific reference to the Uniform Electronic Transactions Act, as reported by the National Conference of Commissioners on the Uniform State Laws, as an action the State may take to be exempted from the provisions of Title I."

"It amends Section 101(a) to more closely follow the rule of construction indeed of the Uniform Electronic Transactions Act."

"It further clarifies that state insurance laws are covered under the scope of the bill."

"It increases the length of time that the state has to enact their own electronic commerce laws from two years to four years, again, recognizing the role of the states in this business."

"It further amends the definition of electronic signature to parallel the definition of electronic signature in the Uniform Act."

Rep. Tauzin then summarized the changes in Title II. "The amendment clarifies that nothing at all requires the Secretary of Commerce to take any action that would affect consumer privacy."

Rep. Ed Markey (D-MA), the Ranking Minority Member of the Subcommittee, spoke in favor of the bill. "Many current laws, however, do not recognize the validity of electronic signatures. Many laws, regulations, and procedures require written real world signatures on documents, both for private transactions, and for correspondence with local, state, or federal government. In 1998 the Government Paperwork Reduction Act directed the Office of Management and Budget and the NTIA in the Commerce Department to develop the appropriate mechanisms to allow citizens to use electronic signatures in communications with the federal government, and required agencies to accept electronic signatures within five years. The legislation before us this morning has been introduced to take these issues to the next step, and to ensure the that private sector relationships have the same legal status in cyberspace."

He added that the amended version "also makes clear that any efforts that this committee makes to spur the development of a market for electronic signatures products and services worldwide shall not be construed to undermine or thwart efforts to protect consumer privacy. I want to thank Chairman Bliley for his willingness to include language to this effect."

Rep. Markey referred to a new clause, of uncertain meaning, which reads: "Nothing in this section shall be construed to require the Secretary or the Assistant Secretary to take any action that would adversely affect the privacy of consumers."

Rep. Markey also mentioned that Rep. Bart Gordon (D-TN) had been involved in the negotiations.

Rep. Tom Bliley (R-VA), the Chairman of the full committee, and the sponsor of HR 1714, also delivered an opening statement. "There are a number of current and existing technologies that can authenticate the parties to a transaction and electronically sign a contract or agreement online," said Rep. Bliley.

"These technologies also provide consumers and business with greater safety, security and privacy in their transactions. Unfortunately, the legal status of an electronic signature is unclear. To remove this roadblock of uncertainty, H.R. 1714 establishes a uniform, nationwide standard that provides legal validity to electronic signatures and electronic records.

Rep. Tom Sawyer (D-OH) raised the subject of providing waivers in the bill for certain entities. He stated that the Federal Paperwork Reduction Act and the E-SIGN Act "raise the question about the requirement for the availability of e-signature standards, not only in state, federal, and other governmental agencies, but also with regard to entities that may have been charted and created to facilitate transactions with those agencies directly. I think specifically in terms of the kinds of secondary markets that are created for house and education and the other kinds of borrowing that furthers national policy. It seems to me that that might well serve to expand the reach and the use of electronic signatures in ways that commensurate (?) with what has been done prior to this. I am sensitive, Mr. Chairman, to the potential for widening jurisdiction in something of that kind. So, I look forward to working with you to obtain the appropriate waivers."

Rep. Ed Oxley (R-OH) and Rep. Bobby Rush (D-IL) also spoke briefly in support of the bill.

	Rep. Eshoo

Rep. Eshoo also explained her bill, and the compromise, in a statement which she read at the hearing. "Today, we're marking up a bill that Chairman Bliley introduced. It has the same goal of my bill, but it takes a different approach, especially in the preemption of state contract law."

"Now it's the responsibility of Congress to ensure that there are no roadblocks impeding the growth of E-commerce. Fortunately, state governments have been working on updating their laws in the hopes that, similar to the Uniform Commercial Code, businesses and consumers will have a uniform standard to operate under for electronic transactions."

"Even though the National Conference of Commissioners on State Law is likely to report the final version of the Uniform Electronic Transactions Act this week, it will take some time for every state to adopt this model law, or similar legislation."

"That's the reason we're here today. The purpose of my legislation and Mr. Bliley's is to bridge the gap between now and the time when every state has passed a form of the UETA. To do that Congress must pass a law preempting current state law and replacing it with a uniform statute."

"The major difference between the bill I introduced and Chairman Bliley's bill is how that preemption issue is dealt with - which frankly, is the heart of any e-commerce legislation we pass. I'm pleased that the amendment being offered includes the section in my bill that ends this preemption upon passage of the UETA and rewards states that act quickly on this model law reported by the National Conference of Commissioners on State Law."

"Additionally, the change from two years to four years provides an adequate amount of time for states to pass the UETA. These changes are significant because they recognize the diligent work done by the states. I hope the changes will inspire states to act quickly to pass the UETA so that there is one consistent law governing interstate electronic commerce."

Rep. Bart Gordon (D-TN) offered an amendment to the Tauzin amendment which is a revised version of HR 1572 IH, The Digital Signature Act of 1999, of which he is the sponsor. The bill, and the amendment, provide guidelines to federal agencies for implementing the Government Paperwork Elimination Act. After explaining and pleading for his amendment, he withdrew it. He did this for the purpose of informing and persuading other Members of the Subcommittee and the general public about this proposal.

The members of the subcommittee who attended the meeting, and were present for the votes to adopt the Tauzin amendment, and to report the bill, were Tom Bliley (R-VA), Rick Boucher (D-VA), Nathan Deal (R-GA), John Dingell (D-MI), Anna Eshoo (D-CA), Gene Green (D-TX), Bart Gordon (D-TN), Ron Klink (D-PA), William Luther (D-MN), Ed Markey (D-MA), Mike Oxley (R-OH), James Rogan (R-CA), Bobby Rush (D-IL), Tom Sawyer (D-OH), John Shimkus (R-IL), Billy Tauzin (R-LA), Heather Wilson (R-NM).