Mr. Chairman and Members of the Subcommittee:

Thank you, Mr. Chairman and Members of the Subcommittee, for this opportunity to provide the Department of Justice’s views on H.R. 1714, the Electronic Signatures in Global and National Commerce Act. My name is Ivan Fong. I am a Deputy Associate Attorney General at the Department of Justice. The Office of the Associate Attorney General is responsible for managing and overseeing, among other areas, the Department’s civil litigating components, which include the Antitrust, Civil, Civil Rights, Environment and Natural Resources, and Tax Divisions. My particular responsibilities include oversight of civil litigation and environmental matters as well as technology issues, which include Internet and electronic commerce issues. I am pleased to have this opportunity today to express the Department’s views.

This Administration has long supported the growth and development of electronic commerce. In its Framework for Global Electronic Commerce in July 1997, the Administration declared its support for electronic commerce generally and, in particular, for the development of a legal framework that recognizes, facilitates, and enforces electronic transactions worldwide. An interagency Working Group on Electronic Commerce, of which the Department of Justice is an active member, meets regularly to discuss and address electronic commerce policy issues. And, since 1997, the Department of Justice has had its own Electronic Commerce Working Group, comprised of over fifty attorneys from more than a dozen of the Department’s components. (For more information on electronic commerce activity at the Department, please see the Department’s website, at www.usdoj.gov/criminal/cybercrime/ecommerce.html.)

Through these working groups, the Department is actively engaged on a variety of electronic commerce policy issues. For example, earlier this year, the Department participated in the Federal Trade Commission’s workshop on Consumer Protection in the Global Electronic Marketplace. Department officials have also testified before Congress on issues relating to Y2K liability, Internet gambling, and the sale of prescription drugs over the Internet. In addition, just last month, the President issued an Executive Order (E.O. 13,133) that directs the Attorney General to chair an interagency Working Group on Unlawful Conduct Involving the Use of the Internet. This Working Group will review certain Internet-related law enforcement issues in the context of the Administration’s policies of support for industry self-regulation where possible,
technology-neutral laws and regulations, and an appreciation of the Internet as an important medium both domestically and internationally for commerce and free speech. As the Nation’s litigator, legal advisor, and primary law enforcement agency, the Department of Justice strongly supports the Administration’s efforts to encourage the healthy growth of electronic commerce.

The current bill under review by this Subcommittee, H.R. 1714, represents a significant effort to address the legal status of electronic signatures in transactions and contracts. The proposal contains broad provisions regarding the validity of electronic contracts and electronic signatures, including contracts and agreements to which the federal government and regulated entities are parties.

 The Department of Justice, of course, strongly supports all efforts to ensure that government services are provided in efficient ways that are accessible to, yet still protect, the public. Accordingly, the Department supports the increased use of electronic transactions and electronic-based processes by government agencies. At the same time, however, we want to be careful to ensure that adequate safeguards exist so that the government can retain its ability to enforce its agreements, programs, and laws.

The Department is concerned that H.R. 1714, as reported by the House Commerce Committee, might limit the government’s ability to put in place sufficient safeguards to ensure the effectiveness and enforceability of federal agreements, programs, and laws. For example, in transactions in which the government or a regulated entity is a party, H.R. 1714 does not address the extent to which the use of electronic processes may affect the availability of records; the usability, persuasiveness, and admissibility in court of information in electronic form; and other legal responsibilities that may arise from the electronic processing of information (such as those imposed by the Privacy Act, the Freedom of Information Act, and the Federal Records Act). These issues are important, because they affect the government’s ability to enforce its agreements and programs and to defend itself from potential lawsuits. These issues are likely to take on heightened significance in view of the fact that the government is all too often a target of fraud, and although we are all familiar with fraud that is committed against government agencies through the use of paper records, agencies must also be able to manage risks arising from the potential for fraud undertaken through the use of electronic records.

In addition, except for Title III of the bill, which authorizes the Securities and Exchange Commission to provide standards for electronic contracting under federal securities laws, the bill does not provide for regulatory needs that relate to agreements made by regulated entities, whose own standards may be insufficient to serve the public interest. For example, disclosure or record keeping requirements that currently apply to regulated entities or transactions should continue to apply when such transactions are conducted electronically. These concerns, too, must be addressed systematically and deliberately.

In addition, except for Title III of the bill, which authorizes the Securities and Exchange Commission to provide standards for electronic contracting under federal securities laws, the bill does not provide for regulatory needs that relate to agreements made by regulated entities, whose own standards may be insufficient to serve the public interest. For example, disclosure or record keeping requirements that currently apply to regulated entities or transactions should continue to apply when such transactions are conducted electronically. These concerns, too, must be addressed systematically and deliberately.

Indeed, Congress last year, with support from the Administration, enacted the Government Paperwork Elimination Act (GPEA), title XVII of Pub. L. 105-277, to provide an orderly process for increasing the ability of citizens to interact with the federal government electronically. Under the GPEA, executive agencies must, by October 2003, provide for the option of electronic submission and processing of information, when practicable as a substitute for paper, and for the use and acceptance of electronic signatures, when practicable (GPEA § 1704). To help agencies decide whether electronic processing of information is practicable, and how best to achieve it, Congress directed the Office of Management and Budget (OMB) to develop procedures for the use and acceptance of electronic signatures by executive agencies (GPEA § 1703). Congress further provided that electronic records "would not be denied legal effect" if they were submitted or maintained in accordance with the OMB procedures (GPEA § 1707). The GPEA thus links the legal effectiveness of electronic government processes to the procedures used to implement these processes. This linkage is essential to effective adoption of electronic processes by the government.

OMB has been working and continues to work diligently to produce its final procedures by April 2000. Earlier this year, OMB published a proposed draft of its procedures (64 Fed. Reg. 10,896 (Mar. 5, 1999)). The Department of Justice submitted written comments to OMB on the proposed draft procedures, describing in substantially greater detail some of the themes mentioned above. (The Department’s comments on OMB’s proposed procedures under the GPEA are available at www.usdoj.gov/criminal/cybercrime/gpea.htm.)

In short, OMB is already working with many federal agencies, including the Department of Justice, to define a set of procedures that address issues, including those identified above, that arise from federal agency use of electronic transactions and processes. We believe that enactment of H.R. 1714 as reported could disrupt those deliberative efforts, undertaken pursuant to Congressional directive under the GPEA, to allow for the use by federal agencies of electronic transactions and processes in efficient ways that also protect the public interest.

Even if H.R. 1714 were amended to apply only to transactions between private parties, we would remain concerned, because it would still cover transactions in which the federal government succeeds to the position of one of private parties who entered into the contract. For example, the federal government may in some instances find it necessary to enforce contracts made by private lenders to whom the government provides loan guarantees. Similarly, in legal actions against businesses related to reporting or business records, the government’s evidence may depend on the terms and conditions established by the private parties to the transaction.

Thank you for the opportunity to present the views of the Department on H.R. 1714 and this important topic. We look forward to working with this Subcommittee or Committee in any way that you would find helpful. I would be pleased to answer any questions you might have.
 

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