On 22 June 2023, the National Assembly approved a new E-Transaction Law (LOET 2023) that will replace the LOET 2005 from 1 July 2024. The LOET 2023 aims to address the issues and limitations of the previous legislation and bring more clarity and guidance regarding the implementation of transactions by electronic means.
The new E-Transaction Law regulates the implementation of transactions by electronic means without controlling the content, conditions, and form of electronic transactions (E-Transactions). Specifically, E-Transactions are transactions carried out by electronic means, simply understood as transactions carried out through the internet, without requiring the parties in the transaction to be physically present. In this article we delve into the key provisions of the new E-transaction Law and its practical implications for organiations doing business in Vietnam.
The regulated scope is extended
The Vietnamese National Assembly passed the previous Law on E-Transaction (LOET 2005) 18 years ago when the country’s information technology infrastructure was still in its early stages. However, with the rapid growth of internet usage and the emergence of digital platforms and services, the LOET 2005 has shown several shortcomings that required further revisions in order to keep up with Vietnam’s fast-growing digital economy.
Under the Law on E-Transactions 2005, electronic transactions are not applicable to the issuance of certificates pertaining to land use rights, ownership of houses and other immovable properties, inheritance documents, marriage certificates, divorce decisions, birth certificates, death certificates, bills of exchange and other valuable papers. However, the Law on E-Transactions 2023 has made adjustments in a direction that allows parties to conduct electronic transactions if the provisions of specialized law do not prohibit their use. This adjustment provides parties with the flexibility to select the most suitable and convenient form of transaction.
However, this also introduces certain practical challenges. In instances where the specialized law does not prohibit the use of electronic transactions but lacks clear regulations or instructions from state agencies, disputes may arise over the validation of transactions conducted electronically. This necessitates amendments to specialized laws for transactions that are not conducted electronically.
E-transactions performed by state agencies
Electronic transactions involving state agencies encompass: intra-agency electronic transactions, inter-agency electronic transactions, and electronic transactions between state agencies and other agencies, organizations, and individuals. Open data is extensively disseminated by state agencies, allowing agencies, organizations, and individuals to freely use, reuse, and redistribute the information.
The law provides that state agencies may engage experts from the annual state budget for consultation on database construction. This provision effectively addresses challenges related to the utilization of non-business funds for the maintenance and operation of information systems, including the engagement of consultants for database construction.
Electronic signature (E-signature) and digital signature. Types and new classifications
While the Law on E-Transactions 2005 does not provide stipulations for digital signatures, the Law on E-Transactions 2023 has clarified the concept of digital signatures in addition to electronic signatures due to ambiguities between these two concepts in practice.
An electronic signature is defined as a signature created in the form of electronic data that is attached to or logically associated with a data message. It serves to identify the signer and confirm their acceptance of the information within the data message. A digital signature, on the other hand, is an electronic signature that utilizes an asymmetric key algorithm, comprising a private key used for digital signing and a public key used for verifying the digital signature. Digital signatures ensure authenticity, integrity, and non-repudiation but do not guarantee the confidentiality of data messages.
The Law on E-Transactions 2023 introduces a new concept compared to its 2005 counterpart by classifying electronic signatures, which were previously collectively referred to as electronic signatures without any classification. According to the new regulations, electronic signatures are categorized into:
- Specialized Electronic Signature: This is an electronic signature created and used exclusively by an agency or organization for its operations in accordance with its functions and tasks.
- Public Electronic Signature: This is a digital signature used in public activities and secured by a public electronic signature certificate.
- Special-duty Electronic Signature: This is an electronic signature used in official-duty activities and secured by an electronic signature certificate specifically-for-service.
Each type of electronic signature must meet its own conditions as stipulated by the law.
Foreign E-signatures and Foreign Certificates
Foreign E-signatures and Foreign Certificates are permitted for usage in cross-border transactions provided that such Foreign E-signatures or Foreign Certificates:
- Have been created by or issued to foreign-domiciled individuals or entities without any local presence in Vietnam; and
- Have a validity (i.e. having been recognized according to Section 4 above) in the data message that has been delivered to the Vietnam contracting party.
E-signature as a corporate seal
According to the LOET 2005, in the event that a law requires a document to be affixed with the corporate seal of an entity or organisation, a data message will be deemed to have satisfied such “seal” requirement if the e-signature is secured and authenticated.
The LOET 2023 has replaced the “seal” by “certification” requirement. In other words, under the LOET 2023, in the event that a law requires a document to be “certified” by an organisation or entity, a data message will be deemed to have satisfied such “certification” requirement if it is signed by a secured specialised e-signature or digital signature of such organisation or entity. It may be inferred that “certification” refers to the seal requirement and that no seal is required if a document is signed by a secured specialised e-signature.
In Vietnam, trusted service organisations offer services related to the authentication, verification of accuracy, sufficiency, and integrity of electronic data and electronic signatures. The trusted services provided by these organisations include:
- Timestamp Issuance Service
- Data Message Authentication Service
- Public Electronic Signature Authentication Service
The provision of trusted services is a conditional business and investment industry. A trusted service provider must possess a service business license issued by the Ministry of Information and Communications, with the exception of electronic contract authentication services in commerce. An organisation is entitled to register for one or more of the aforementioned services. The validity period for a trusted service business license is 10 years.
The aforementioned points highlight the key aspects of the Law on E-Transactions 2023. Generally, the Law on E-Transactions 2023 has made adjustments to the Law on E-Transactions 2005, providing a clearer and more comprehensive direction after 18 years of its issuance. However, electronic transactions are not yet widely adopted in Vietnam, presenting a significant challenge for organizations and individuals to effectively conduct transactions in the digital environment. The issuance of additional guiding regulations from relevant state agencies and Ministries is necessary to facilitate this transition.
If you need any assistance with these or any other matters in respect to E-transactions and E-signatures in Vietnam, to ensure you are compliant and protected in the market, our experts are ready to support.
Vu Tran Xuan Hoang – Associate, Market Entry and Licensing – firstname.lastname@example.org
Tran Thi Thuy Duong – Senior Associate, Market Entry and Licensing – email@example.com
Matthew Lourey – Managing Partner – firstname.lastname@example.org