Last month, the UK Law Commission (the “Commission“) launched a consultation paper as part of its latest project to address any uncertainty as to the formalities around the electronic execution of documents. Specifically, the consultation seeks views on the electronic execution of documents where legislation prescribes that a document must be signed or executed as a deed.
In England and Wales there is a fair amount of flexibility when it comes to executing documents and in most cases physical signing is not actually required, although, certain documents, in particular deeds, have certain formalities prescribed by legislation. A growing question is how to match technology and the commercial reality of for example multi-party contracts with old-fashioned formalities for signing documents.
In particular, there is currently increased focus on the electronic execution of transactions because of interest in the use of blockchain and automated “smart” contracts. It is important that businesses are clear about what they can and cannot lawfully do electronically, and that the law of England and Wales is seen to be capable of accommodating technological developments, as well as legal ones.
The Commission seeks consultees’ views by 23 November 2018.
The Commission uses the term ‘electronic signatures’ broadly “to cover everything from a scanned manuscript signature that is added to documents to digital signatures and Public Key Infrastructure“. Electronic signatures have also received European treatment in the form of the eIDAS Regulation (EU) No 910/2014 (“eIDAS“) which prevents the denial of the validity of electronic signatures. eIDAS is mirrored in the UK Electronic Communications Act 2000, though the Commission notes this does not expressly provide for the validity of electronic signatures. However, decisions in the Court of Appeal and High Court have decided that electronic methods of signing such as clicking on an ‘I Accept’ button do satisfy a statutory requirement for a signature, provided there is an intention to authenticate the document.
The Commission’s provisional view is that a combination of eIDAS, domestic legislation and case law, means that an electronic signature is “is capable of meeting a statutory requirement for a signature if an authenticating intention can be demonstrated.” However, it seeks consultees’ views on whether they agree with this conclusion, or if something more is needed in the form of legislative validation.
The Commission has also proposed the creation of an industry working group, potentially convened by Government. The working group will release guidance and aim to improve stakeholder confidence in the use of electronic signatures where there are concerns around “trust and identity, the interoperability of electronic signature systems, and the archiving of information“.
In England and Wales for a deed to be validly executed by an individual it must be signed in the presence of a witness who attests the signature (for example a will). Whilst there is some legislation dealing with electronic signatures, there is nothing currently on the electronic execution of deeds. The Commission notes that whilst some stakeholders do not think witnessing and attestation should be required for the electronic execution of the deed, this process “fulfils an important evidential function whether a deed is signed electronically or not“. Therefore, the witnessing and attestation requirement should be kept; however, the Commission seeks consultees’ views on whether this can be satisfied via electronic means. For example, a witness could “observe an electronic signature by video link and then attest the document by affixing their own electronic signature to it“.
Another question is whether a new concept of ‘electronic acknowledgment’ should be introduced. The Commission envisages a signatory would sign the document electronically and then acknowledge to the witness that they had signed it by showing or sending the document to them. The witness in turn signs the document with their electronic signature and includes a statement that the signatory ‘acknowledged’ the signature. Whilst this would improve transaction efficiency, it would require significant legislative amendment and therefore is not something the Commission would “recommend lightly“. As such consultees’ views are sought on this option.
The Mercury decision shone new light on the practice of electronic signings, in particular the comments of Mr Justice Underhill who referred to a document as having to be “a discrete physical entity (whether in a single version or in a series of counterparts) at the moment of signing“. This caused concern in practice, in particular whether signing and transmitting a single page of pdf signatures over email would amount to valid execution of a document. The Law Society has however issued a guidance note to practitioners on such signings and the Commission believes this is sufficiently clear so as not to warrant legislative reform and asks whether consultees agree.
What action should you take?
The consultation is open until 23 November 2018 and is comprised of 18 questions that are summarised at the end of the Commission’s summary paper. If you wish to respond to the consultation submit your comments using the Commission’s online form; or alternatively, by emailing the Commission direct at email@example.com.