What's the issue?
The Law Commission has been consulting on the use of electronic signatures. The purpose of the consultation was to determine the extent to which there might be problems with the law around electronic execution of documents and deeds which are preventing the use of electronic signatures when they might otherwise be beneficial. The consultation covered deeds including powers of attorney but not wills or registered dispositions under the Land Registration Act 2000.
What's the development?
The Law Commission has published a report following its consultation. The report summarises current law on the use of electronic signatures and makes a number of recommendations, chief of which is that an industry working group be set up to consider the issues raised in the consultation and to provide best practice guidelines. The Commission also suggested the government consider a wider review on the use of deeds.
What does this mean for you?
The report concluded that the law is relatively clear on the use of electronic signatures, that they are capable of being used in law (subject to any specific contractual or statutory requirements) and are admissible in evidence. As such, the Law Commission did not recommend changing current law but did suggest that the government consider codifying it in order to gather it all into one place.
The Law Commission's conclusion on executing deeds is probably of greatest interest as the evidentiary element of witnessing an electronic signature has been something of a grey area. The Commission's view is that deeds can be signed and witnessed electronically but that the witness must be physically present when the deed is signed. Where a deed is executed by two Directors or by a Director and Company Secretary, all signatures may be electronic and need not take place at the same time.
The Law Commission identified a number of key issues raised in the response to its consultation:
- There is some uncertainty about current law on electronic signatures due, in part, to the fact that it is not contained in a single piece of legislation.
- Practical issues can influence the uptake of electronic execution, for example, evidential value, security and issues with cross-border transactions.
- There are concerns that electronic signatures may be more susceptible to fraud than handwritten ones.
- Remote witnessing of execution of deeds – the Law Commission concludes that this is not permitted under current law.
- The law on deeds is potentially outdated and may no longer be fit for purpose, aside from the issue of electronic signatures.
The Law Commission goes on to set out its conclusions as to current law on electronic signatures, both where there is and is not a statutory requirement.
- Electronic signatures are capable in law of being used to execute a document (including a deed) provided that the person signing intends to authenticate the document and that any required formalities are observed.
- Electronic signatures are admissible in evidence in legal proceedings (for example to prove or disprove the identity of the signatory).
- Common law does not specify the form or type of electronic signature although legislation or contractual arrangements may do so.
- The courts will adopt an objective approach when determining whether or not a method of signature demonstrates the intention to authenticate.
- Where the courts have recognised various non-electronic forms to be valid signatures (eg marking with an 'X' or using initials), there is no reason to think that an electronic version of that form would not be recognised.
- The Law Commission's view is that where a deed must be signed in the presence of a witness, the witness must be physically present at the moment of signing, even if both the signatory and the witness are signing electronically.
The Law Commission makes a number of recommendations:
- An industry working group should be set up by the government to consider practical issues relating to electronic execution of documents and provide best practice guidance.
- The working group should also consider solutions to the practical and technical obstacles to video witnessing of electronic signatures on deeds and attestation. Following that, the government should consider legislative reform to allow for video witnessing.
- A holistic review of the law on deeds should be conducted in future. It should consider broad issues as to efficacy as well as the specific issues around witnessing, delivery, and the decision in Mercury (which said, obiter, that a document must be a "discrete physical entity at the moment of signing").
- While current law does not need to be amended, the government may want to consider codifying the law on electronic signatures to improve accessibility of the law.