Why New York Must Modernize Its Electronic Transactions Law: UETA & ESRA
New York is the only U.S. state without a version of the Uniform Electronic Transactions Act (UETA). Instead, New York relies on the Electronic Signatures and Records Act (ESRA), which is widely considered outdated, technology-specific, and inconsistent with both federal law and international standards. The City Bar’s Commercial Law and Uniform State Laws Committee urges the Legislature to amend ESRA to align with UETA — bringing New York in line with all 49 other states, D.C., Puerto Rico, and the U.S. Virgin Islands. Read the Committee’s full report here.
- 50 U.S. jurisdictions have enacted UETA: all 49 other states, D.C., Puerto Rico, and the U.S. Virgin Islands.
- 87 nations and 63 subsidiary jurisdictions have enacted laws consistent with the UNCITRAL Model Law on Electronic Commerce — the international standard on which UETA is based.
- New York is the only U.S. state where attorneys and commercial parties routinely avoid selecting New York law for electronic transactions — choosing Delaware and other jurisdictions instead.
Download the full UETA/ESRA overview (PDF)
NEW YORK MUST ALIGN ITS ELECTRONIC TRANSACTIONS LAW WITH THE REST OF THE NATION
The Commercial Law and Uniform State Laws Committee urges the Legislature to amend Article 3 of New York’s Technology Law, the Electronic Signatures and Records Act, NY Chapter 57-A, Sections 301-309 (“ESRA”) to more closely align ESRA with the Uniform Law Commission’s (“ULC”) Uniform Electronic Transactions Act (“UETA”). UETA is in effect in the rest of the United States, and laws based on the same principles as UETA have been adopted throughout much of the rest of the world. (The amendment to ESRA proposed herein is referred to as the “Amendment.”)
NEW YORK HAS ALREADY RECOGNIZED THE NEED TO MODERNIZE ITS LAWS FACILITATING THE USE OF ELECTRONIC TECHNOLOGY IN BUSINESS
New York is actively engaged in updating its laws to recognize and facilitate the use of electronic technology in the conduct of business and the creation of legally binding electronic and digital instruments. In recent years, New York recognized remote notarization of electronic records; modernized the Uniform Commercial Code’s treatment of certain kinds of digital assets, including recognizing the validity of controllable electronic records evidencing accounts and treating them effectively as negotiable assets; and recognized “electronic wills,” which are executed electronically using internet-based technology and retained in electronic format.
These technological initiatives are essential to preserve New York’s stature as the leading U.S. commercial jurisdiction and to enable New York consumers and businesses to enjoy all the benefits of electronic records in the conduct of personal and business affairs. Use of electronic technology (rather than reliance on paper) provides greater security in the creation and storage of important records, anti-fraud and forgery protection, and convenience and cost-saving advantages.
ESRA CREATES CONFUSION AND UNCERTAINTY, LEADING PARTIES TO SELECT THE LAW OF OTHER JURISDICTIONS
ESRA’s Key Deficiencies:
- Every other U.S. State, as well as the District of Columbia, Puerto Rico and the Virgin Islands, has enacted UETA.
- ESRA is not considered to be consistent with the UNCITRAL Model Law on Electronic Commerce (“UNCITRAL Model Law”) on which UETA is based. 87 nations and 63 subsidiary jurisdictions have enacted electronic records laws consistent with the UNCITRAL Model Law.
- Two different laws govern electronic transactions in New York. ESRA applies only to purely intra-state transactions within New York. ESRA is pre-empted for interstate and international transactions by the federal Electronic Signatures in Global and National Commerce Act (“E-SIGN”), which is based on UETA. This is a source of potential confusion and unnecessary choice-of-law disputes that makes selection of New York law unattractive for technology transactions.
- ESRA is not technology-neutral; it does not recognize or apply to distributed ledger or blockchain technology, which is a critical electronic technology now regularly used in business transactions to evidence ownership or control of digital assets, and ESRA may not apply to future technologies not yet envisioned.
- ESRA excludes from its scope and does not apply to important legal instruments, including electronic negotiable instruments based on blockchain and non-testamentary electronic powers of attorney and trusts executed by individuals. The failure of ESRA to address these new technologies and to apply to commonly used instruments deprives New York businesses and consumers of both convenience and security.
- ESRA lacks useful provisions setting rules to deal with (i) errors and changes to electronic records, (ii) transmission, receipt and retention of electronic records, (iii) notarization of electronic records, (iv) attribution of electronic signatures, (v) automated transactions and smart contracts, and (vi) control over electronic negotiable notes.
ULC Model acts dealing with commerce and technology presume enactment of UETA. When New York attempts to enact any of these ULC model laws, it routinely must revise the proposed act to deal with the fact that UETA is not the law in this State.
ALIGNING ESRA WITH UETA WOULD SOLVE THESE PROBLEMS
Lawyers whose practices encompass electronic transactions know that the deficiencies with ESRA create confusion and uncertainty, which frequently leads parties to select the law of other jurisdictions, such as Delaware, to govern electronic transactions. This tendency to avoid application of New York law for electronic transactions is inconsistent with the goal of New York to be a leading jurisdiction in digital commerce, including blockchain. Updating ESRA to align with UETA would provide clarity and predictability for commercial actors, ensure that New York law remains a reliable choice for sophisticated transactions, and reduce unnecessary disputes over choice-of-law issues and the validity of electronic records and signatures.
There is no advantage to New York to retain ESRA as is, without incorporating the provisions that are in effect in every other U.S. jurisdiction and in the leading commercial jurisdictions that have enacted laws consistent with the UNCITRAL Model Law.
THE CITY BAR URGES THE LEGISLATURE AND GOVERNOR TO ADOPT THE PROPOSED AMENDMENT TO MODERNIZE NEW YORK’S LAW RELATING TO ELECTRONIC RECORDS AND TRANSACTIONS.
Contact: Elizabeth Kocienda | Director of Advocacy | ekocienda@nycbar.org