E-signatures in finance and NPL transactions in Czech Republic

Under Czech law, written legal acts (statements) generally require the signature of the acting person to be valid. The signature can be replaced by mechanical means where standard. Legal acts in electronic (or other technical) form are also deemed to be written legal acts if it is possible to capture the content of the act and identify the acting person.

Given this, as a general rule many legal acts (including contracts) can now be concluded electronically without a need for paper format and wet-ink signatures. For some legal acts Czech law does not even require the written form, whether paper format or electronic written form; however, for practical reasons (especially for evidentiary purposes) legal acts without a written form are uncommon in banking and finance transactions even if allowed for a particular legal act.

Nevertheless, there are various exceptions to the above and many documents in banking and finance transactions still require the written form with wet-ink signatures. This applies in particular to the following documents:

• documents on which the parties’ signatures require notarisation (verification), because no electronic signature is currently considered equivalent to an officially verified wet-ink signature (mostly security documents such as pledge agreements and mortgage agreements);
• documents affecting rights in rem to immovables (e.g. a mortgage agreement);
• other documents for which the applicable statutory provisions do not foresee an option for such document to be issued electronically (e.g. certain public-law documents issued by public authorities); and 
• further, in practice, documents to be filed with various registers registering security are typically executed on paper with wet-ink signatures; however, most already fall under the above mentioned categories such as documents with the requirement for the notarisation of signatures.

Finally, we note that in the course of 2022 a new law is expected to come into effect to replace the requirement on officially verified signatures with the use of certain electronic means, including electronic signatures based on a qualified certificate.

Except for cases where paper with wet-ink signatures is mandatory, many banking and finance transaction documents can be concluded and signed electronically, with certain types of electronic signatures, including the following:

• facility/loan agreements;
• guarantees (bank, corporate, cost overrun);
• various security documents, except for security documents that require the notarisation of signatures;
• subordination agreements;
• corporate resolutions relating to finance transactions; and
• various notices and other ancillary documents.

In general, Czech law does not explicitly stipulate which type of electronic signature needs to be used in order for a document to comply with the requirement of the written form. However, it states that the technical form used must enable the identification of the acting person.

Given this, both the QES (Qualified Electronic Signature) and the AES (Advanced Electronic Signature) should meet these criteria. Regarding private law documents, it is generally argued that a simple electronic signature should also be sufficient to fulfil the requirement of the written form, provided that the acting person can be duly identified on the basis of such signature.

Czech law further defines a Recognised Electronic Signature as meaning either: (i) an Advanced Electronic Signature based on a qualified certificate for an electronic signature; or (ii) a Qualified Electronic Signature, which is typically used by/with public law entities. This signature would also meet the criteria for the written form.

In general, no. If the written form is required, the document should be signed with an electronic signature, provided that the electronic form is preferred by the parties; for details regarding the particular types of electronic signatures, please refer to our answer to question No. 3 above.

In legal acts regarding which the written form is not mandatory or preferred, they can be made in any other way allowed by the applicable law (e.g. orally). Naturally, any of the abovementioned types of electronic signatures would also be acceptable.

Ultimately, the questions involved come down to the level of evidence the parties wish to meet. Apart from electronic signatures and wet-ink signing (organising a standard signing meeting at which the signatories are present), the exchange of signed signature pages in PDF form only is also often used. For this purpose, one party sends out PDF execution copies to all parties and asks to receive scans of each signature page; this party then compiles a PDF copy containing scans of all signature pages. In such case, the parties would however typically exchange wet-ink counterparts afterwards.

The concept of “attorney countersigning” is not known under Czech law. Anyhow, verification of signature by an attorney can not be done electronically.

Based on recent changes of the applicable Czech law, drawing up a notarial deed can be done also electronically. In such a case , the relevant parties to the document sign the deed with electronic signatures (QES).

Czech law also allows a counterpart of a notarial deed to be issued by the notary in electronic form. In such a case, the notary issues the notarial deed in PDF form and signs it with qualified electronic signature. Such electronic counterpart of the notarial deed then has the validity of the paper original.

We understand that the e-Apostille Program (e-APP) is an initiative connected to the Hague Convention of 5 October 1961 Abolishing the Requirement of the Legalisation for Foreign Public Documents (Apostille Convention) to which the Czech Republic is a party and which facilitates, among others, the issuing and use of electronic Apostilles (e-Apostilles) and the creation and operation of electronic Registers of Apostilles (e-Registers). A particular e-Register is able to verify the origin of an apostille online using the number and date of the apostille, and this works for both e-apostilles and paper apostilles. The e-Apostille is an electronically created and issued apostille, signed with qualified electronic signatures.

There is currently no such e-Register of apostilles in the Czech Republic and the Czech Republic has not yet implemented the Electronic Apostille Program (e-APP).

Although the public authorities have issued some statements supporting acceptance of e-Apostilles and we have seen e-Apostilles accepted in practice, e.g. by notaries, there still does not seem to be a fully unified approach by all public authorities on this topic. Paper apostilles are strongly preferred in practice, and most commonly used and accepted by public authorities.

Yes. Financial institutions are generally entitled to identify and verify their customers in an electronic way according to the relevant Czech AML laws.

In general, according to the Czech AML laws the entity which is obliged to perform the customer authentication (verification)/identification may do so by means of electronic identification that fulfils the following:

• technical specifications and procedures for a high level of assurance in accordance with Commission Implementing Regulation (EU) 2015/1502 of 8 September 2015 on setting out minimum technical specifications and procedures for assurance levels for electronic identification means pursuant to Article 8(3) of Regulation (EU) No. 910/2014 of the European Parliament and of the Council on electronic identification and trust services for electronic transactions in the internal market, whereas such means of electronic identification shall be introduced and used within the framework of a qualified system in accordance with the applicable Czech laws on electronic identification; or
• the technical specifications and procedures under which the means of electronic identification may be used for the purposes of proving identity, which is required by law or exercise of powers, outside the scope of a qualified system under the relevant Czech laws governing the activities of banks, i.e. authentication/identification by using banking identity (BankId).

As outlined above, the relevant steps in the AML customer authentication (verification)/identification process can also be done electronically. This applies to the beneficial owner and PEP checks undertaken within the authentication/identification process, including, where required, the relevant beneficiary owner declaration and PEP declaration. 

The technical formalities and options are more broadly described in our answer to question No. 2 above but signing such declarations via Recognised Electronic Signature should generally be acceptable.