3 Billions for the Wrong Signature. Lessons from the Railways in the Alps

Last year an important court case involving the usage of an electronic signature for a billionaire contract got notorious visibility due to the big amount of the mount at stake and the nature of the issue, relating directly to the topic of the forms of signing electronically in Europe, QES and the EU-eIDAS Regulation. Despite we already wrote about it, it is a very interesting case, since allows to point out many relevant considerations when signing electronically. Let´s get a little deeper look at it.

 

Brief: Last year, Swiss train manufacturer Stadler Rail AG won a tender published by ÖBB for a 10 years and € 3 billion train production contract for the Austrian railways. The contract was signed electronically, but it seems the part didn´t take the necessary precautions at the moment of signing. One of Stadler´s competitors, Alstom, intervened in front of the justice alleging that the contract between ÖBB and Stadler was invalid.  (or read our first post about this case)

 

Lesson 1. In RegTech, technology is half of the picture.

Choosing the right RegTech solution (in this case, an electronic signature) is not a matter of technology only. Actually, in this case, the signature used by Stadler to sign the contract with ÖBB operated with virtually the same technology than a Qualified Electronic Signature. What was the problem, then? In very simple terms, the problem was that Stadler, a Swiss (non-EU) company, signed a contract with an Austrian (EU member) company. And they choose the wrong product for that legal framework.

As an eIDAS Qualified Electronic Signature is defined by the EU Regulation 910/2014 “eIDAS” (stands for “electronic IDentification, Authentication and trust Services”), Switzerland counts also with a regulation that defines a Qualified Electronic Signature. The Swiss “ZertES” is the regulation in Switzerland for electronic signatures. Just like eIDAS, recognizes different types of signature and considers the Qualified Electronic Signature as the most reliable one, equal to handwritten signatures. Just like with eIDAS, the Swiss QES require also secure identity checks, and a trusted service provider (TSP), that is to say, an officially recognized entity that creates and validates digital certificates.

Lesson 2. Regulation and Jurisdiction.

Stadler offered the best price in the public tender published by ÖBB. They won, and signed the contract using a Qualified Electronic Signature. The problem was that they used an electronic signature qualified by a TSP recognized in Switzerland under the ZertES Regulation… not under the eIDAS Regulation.

This meant that the signature was perfectly valid in Switzerland. But not in the European Union, and with that, not in Austria.

Lesson 3. Enforceability and Legal Certainty.

One of the things that makes this case fascinating, is that both parties involved in the contract, ÖBB buying and Stadler selling, agreed and continue agreeing on everything despite any issues with the way in which this contract was signed. The contract was objected by a competitor of Stadler in the same tender, the train manufacturer Alstom. Alstom raised an objection to ÖBB decision in front of the Austrian justice. This is a particularly tragic example on how the enforceability and legal certainty of a contract can be affected not only by the parties directly involved in the agreement, but by others as well. There are contracts just too important to just trust the counterpart, especially if the possibility of a enforceable signature with all the legal certainty possible is easily available.

After what we can at all lights qualify as an incredibly expensive legal battle held by the three involved parts -ÖBB, Stadler and Alstom, the case was resolved on February this year by the Federal Administrative Court in Vienna, Austria, who cleared the way for the order. Despite this positive result for the ÖBB-Stadler agreement, it is easy for any bystander of this process to highlight the magnitude of the problem that signing with the wrong signature meant (and means) in this case.

  • The expenses of such a court case

  • The long (several months) wait before having again some certainty about the deal

  • The remaining uncertainty if other deliveries under the same contract could be object of similar objections

The right signature would have prevented this small business catastrophe for a couple of Euros.

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