Electronic Signatures – are you ready to go digital?
The Law Commission, which keeps the law under review and recommends reforms where needed, recently opened a consultation on whether new law is required to reinforce the validity of e-signatures so as to ensure there is sufficient certainty governing the electronic execution of documents. In short, is English law fit for purpose in a global, digital environment.
The benefits of using electronic execution processes are lower transaction costs, speed and convenience. In addition, in facilitating the demand for digital products and services, e-processes may enable businesses to grow particularly where trade is being done internationally. The consultation covers a wide range of documents but specifically excludes the digital reforms being introduced by the Land Registry, or Wills which are the subject of a separate consultation.
The Law Commission has provisionally concluded that where there is an intention to authenticate the document English law recognises the validity of e-signatures (unless specific regulatory or procedural requirements require otherwise – for example, where the Land Registry or Companies House require “wet” signatures). This means that, as well as for the signing of documents where there is no statutory requirement for a signature, e-signatures can be used for documents where there is a statutory requirement that it be signed (such as guarantees, transfers of registered securities, regulated credit agreements and contracts involving land). The Commission has helpfully listed the following as recognised forms of e-signature:
The Law Commission has recognised that valid execution of deeds is more problematic. This is because in most instances there is a statutory requirement for the deed to be signed in the presence of a witness who attests the signature. Attesting is the act of confirming that the document was executed in the presence of the witness.
Deeds are required in certain circumstances either by statute or at common law and parties may choose to execute a document as a deed simply to secure longer limitation periods in the event of litigation. Deeds are required by statute where the subject matter relates to property (ie the sale of land or interests in land, and mortgages). They are also required by statute for such things as powers of attorney, bills of sale, agreement made without consideration (for example, where a parent company guarantees a loan to a subsidiary).
Where a requirement to witness and attest a signature exists then the view of the Law Commission is that the witness must be physically present when the document is signed. It is not sufficient that the witness views the execution process on screen. This means that, as the law currently stands, witnessing by video link is insufficient to satisfy the statutory requirement of witnessing and attesting the signature.
The Law Commission recognises that the law relating to the execution of deeds is unsuited to the digital age but at the same time considers that the requirements of witnessing and attesting fulfil an important protective and evidential function. The Commission considers that these requirements should remain in place but has proposed a number of potential options for reform to make it easier to sign deeds electronically. One suggestion is to change the law to allow witnesses to use a video link in order to witness and attest a signature. This is seen as a sensible approach given that many signing platforms incorporate video links.
In spite of the fact the Commission has proposed that no further primary legislation is necessary, the consultation provides a very helpful overview as to where the Commission believes the law currently stands on e-signatures. It represents a welcome step forward in an era where businesses are increasingly looking to digital technologies as a means of interacting with customers and suppliers, yet the law appears to be lagging behind.
The consultation ends on 23rd November following which the Law Commission will publish a report setting out its final recommendations. No timescale has been given for the publication of this report.
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