On 4 September 2019, only a few months before the start of the pandemic, the Law Commission reported that electronic signatures could be validly used in English law to sign most documents (including deeds). This finding, in parallel with the rise of the electronic signature platforms and other technologies, has enabled businesses and legal professionals to ease signing processes.
However, the Law Commission outlined a number of barriers and practical issues to signing electronically and recommended best practice guidance be created to strengthen the confidence of businesses and individuals in new signing methods. It recommended that a team of diverse industry experts be formed to produce the guidelines and proposals for further reform and development. The Industry Working Group on Electronic Execution of Documents was convened, and published its interim report on 1 February 2022.
Fostering innovation
As the Law Commission had done, the report sets out a summary of the many types of electronic signature, the relative levels of legal and evidential security they can provide, and outlines continuing barriers to use, but has also taken this usage a stage further.
We are reminded that a valid electronic signature can be as simple as a text or digital image ('static signatures') attached to a document; clicking 'yes' on a website to accept terms; or clicking a field on a document uploaded to an e-signing platform. Indeed, the use of these technologies has considerably increased in the business and legal worlds. However, the industry working group also explores other exciting technological advances such as those involving biometrics or which are certification-based, and highlights in its report that "modern technology moves at an increasingly astonishing speed". Indeed, one of the Industry Working Group's objectives is to establish best practice to make sure that the ability to use these fast-growing technologies is eased, so preserving the "the innovation that is inherent in this field".
A framework for assessing available technology
The working group explains that each available electronic signing technique carries a different profile of legal admissibility and evidential weight. It therefore stresses the importance of analysing available technology against key requirements such as: the level of legal validity of the signature; the use case; user experience; the document to be signed (particularly given the additional requirements for signing certain documents); and how the technology is deployed.
In the case of the level of legal validity, we should not forget the key requirements that a document is intended to be 'authenticated' by the signatory and that certain documents must meet additional formalities, such as writing, witnessing or requirements imposed by registries. The working group also explains the different types of electronic signature: 'Simple' electronic signatures, which are the most commonly used in the UK; 'Advanced' electronic signatures and - the 'gold standard' - 'Qualified' electronic signatures. The latter are less widely used, despite the high level of trust that can be afforded to a 'Qualified' electronic signature, which involves independent identity certification of the signatory by a 'Qualified Trust Service Provider' regulated by The Information Commissioners' Office and carries the same weight at law as a hand-written signature.
In relation to best practice, the report lists the following five high level points and sets out more detailed guidance by method/type of electronic signature in Appendices 5 (Commercial transactions) and 6 (Individuals) to the Report:
- Agree as early as possible that a document is to be executed electronically and the procedure for doing so.
- Chose the right signing platform providing at least a set of security/safety/functionality with a strong audit trail that demonstrates an intention to sign by the signatories.
- Consider whether additional evidence to record the identity of the signatory and the fact that the signatory is approving the document and has the intention to be bound is necessary/appropriate.
- To the extent possible, provide multiple signing options to vulnerable signatories.
- Use secure digital identities (albeit this should not be essential).
Businesses should ideally review their current practices against the guidance. For example, in relation to 3, consider the level of authentication being used when inviting a signatory to sign a document on a signing platform – has a separate SMS code been generated to the signatory to enter in the platform when accessing a document via email to sign it?
The Future – Working group recommendations
The Working Group concludes that 'speed is of the essence' if the UK is to remain at the forefront of innovation in digital commerce and that legal reform and technological advances will be more effective if developed in tandem. It makes some important recommendations for the future including that:
- digital identities be made available as a matter of priority to all members of society who wish to have one, supporting the work of the Department for Digital, Culture, Media & Sport on creation of a digital identities trust framework;
- the law requiring documents such as deeds to be witnessed be reformed, stating that Qualified Electronic Signatures, particularly if underpinned by such a digital identity framework, would be capable of fulfilling the same objectives;
- current relaxations to the law allowing electronic witnessing of wills be extended;
- starting with major trading partners, a cross border database of permissible regulatory and execution modes be set up and maintained by Government or a not-for profit industry organisation – this would address current barriers to contracts to be executed overseas or with overseas parties where the law on electronic signatures is fragmented; and
- the Government lead the way in adopting electronic signatures in its transactions and official documents including by progressing current projects for the use of qualified electronic signatures at the Land Registry (although it currently already accepts some types of electronic signatures) and the Office of Public Guardian for lasting powers of attorney.
The Working Group also highlights the importance of promoting simple and effective electronic signing to the growing number of agreements that are now performed in an automated way, such as smart contracts. These have been the subject of a separate recent Law Commissions report, which we explain here.
Comment
Backed by the Ministry of Justice, the report is a clear call to action, but some of its recommendations require input from the legislator whose pace rarely matches that of technological innovation.
In the meantime, it presents a strong case for businesses and law firms to continue using available technology such as electronic signing platforms, and assess new technology using its best practice framework. However, as noted in the report, the absence of a harmonious set of rules worldwide for recognition of e-signatures impedes their use in cross-border transactions.
This topic, and the question of how best to use electronic signatures so as to optimise their benefits when set against the risk of fraud, will be part of the second phase of the working group's work in its final report (expected later this year). This will be of key significance, coming as it does against the backdrop of the UK and Singapore Digital Trade Deal, said to be the first digitally-focussed trade agreement signed by a European nation, and one which commits to work towards mutual recognition of electronic signatures.
Could the Working Group be a catalyst for greater transparency on the law of other countries, and a move towards global e-signing standardisation? We will wait and see.