Summary

At the beginning of September the Law Commission published its long awaited report on e-signatures, the follow up to its 2018 consultation. The report was commissioned to consider whether there are problems with the law around electronic execution of documents and deeds which are inhibiting the use of electronic documents by commercial parties (and if appropriate consumers) and if so whether legislative reform or other measures are needed. Importantly it excludes two categories, which are the subject of separate projects, being registered dispositions that go to HM Land Registry (HMLR) and wills.

At the beginning of September the Law Commission published its long awaited report on e-signatures, the follow up to its 2018 consultation. The report was commissioned to consider whether there are problems with the law around electronic execution of documents and deeds which are inhibiting the use of electronic documents by commercial parties (and if appropriate consumers) and if so whether legislative reform or other measures are needed. Importantly it excludes two categories, which are the subject of separate projects, being registered dispositions that go to HM Land Registry (HMLR) and wills.

The theme running through the report, and one that we also endorse, is that whilst there is a legal foundation for the use of e-signatures (as there was when the Commission last published guidance on the topic in 2001), the law is not very accessible, particularly to non-lawyers and small businesses. A wider, targeted, legislative statement would be welcomed in order to bolster confidence and uptake across the sector at a faster rate than has been seen in the last 18 years. A draft broad (and technology neutral) statement is included within the report which is a helpful resource in itself.

1 Legal effect of electornic signature(1) An electronic signature (whether or not it is a qualified electronic signature) -(a) has the same legal effect as a handwritten signature, and(b) is capable of being witnessed and attested.(2) Subsection (1) -(a) has effect in relation to an agreement subject to any contrary agreement between the parties,(b) does not require a person to accept an electronic signature - (i) for a purpose for which the person has indicated that a signature that is not an electronic signature is required, or (ii) for a purpose for which the person has indicated that am electronic signature of a particular description is required, if the electronic signature is not of that description, and(c) does not apply where the manner in which a document is to be signed, or the form of a signature, is expressly provided for by or under an enactment.(3)The Secretary of State may by regulations made by statutory instrument make provision setting out other cases or circumstances in relation to which subsection (1) does not apply.(4) The power to make regulations under subsection (3) includes power to make consequential, supplementary, incidental, transitional or saving provision.(5) A statutory instrument containing the regulations is subject to annulment in pursuance of a resolution of either House of Parliament.(6) In this section - "the eIDAS Regulation" means Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC;"electornic signature"and "qualified electronic signature" have the same meanings as in the eIDAS Regulation (see Article 3(10) and (12) of that Regulation).

In the meantime, the report reiterates the following:

+ The eIDAS Regulation (now directly incorporated into UK domestic law), the Electronic Communications Act 2000 and case law relating to electronic signatures and signatures more generally confirm that an electronic signature is capable in law of being used to validly execute a document, including a deed.

+ English courts have treated electronic signatures as capable of binding parties in the same way as a handwritten signature, provided that there is an intention to authenticate. That legal validity has not been made conditional upon the fulfilment of particular security standards.

+ An electronic signature can be witnessed in the same way as a handwritten signature and the witness can sign electronically but they must be there in person with the person’s whose e-signature they are witnessing.

The key recommendations to the Government focus on the creation and ambit of a new interdisciplinary industry working group. The focus for the working group should be to: consider how different technologies can help provide evidence of identity and intention to authenticate and how secure and reliable they are; then produce best practice guidance for the use of electronic signatures in different commercial transactions with separate guidance for individuals’use. There is also a suggestion that the working group should look at potential solutions for video witnessing paving the way for the Government to, probably using section 8 of the Electronic Communications Act 2000, allow video witnessing in practice. A review of the law of deeds may also be on the horizon.

We welcome this ambition, look forward to playing a part in the working group and helping to shape the future of e-signatures in our industry and beyond, including through HMLR’s Digital Street initiatives. In the meantime, we will continue to encourage our clients to consider using e-signatures wherever possible, given their potential to deliver significant cost and time efficiencies.