As the spread of the COVID-19 pandemic continues, business leaders will be developing and implementing contingency plans to protect their employees, to ensure continued supply to their customers and to mitigate any adverse impact on their business. A huge range of businesses are potentially at risk. For those businesses it will be vital to identify and address perceived weak points in their business that might be exposed by the pandemic.
Even before the UK government’s announcement this week, many businesses were already deploying and expanding so-called agile or remote working practices and IT infrastructure to ensure that they continue to function effectively during potential extended periods of self-isolation and illness among their workforce. Of course, as well as promoting the business continuity on which the health of our economy relies, such measures may also be a key factor in slowing the spread of the virus itself.
But isolation measures intended to keep workforces safe, will also create some challenges for businesses aiming to maintain business continuity. One such challenge is how, when signatories are working remotely, a business can continue to form, sign and complete agreements: whether such agreements are required to maintain business as usual; or to deliver specific projects or meet business critical needs.
The technological and legal challenges
Even where agile working is well-established within a business, its infrastructure may not extend to the hardware required to print and scan a document which requires a signature or the facility to create a copy of the signed document to be sent to contracting counterparties. Many regulated businesses (including law firms) must retain documentation in a secure IT environment in order to protect it and meet customer confidentiality, legal and regulatory requirements. Compliance with such obligations may be wholly incompatible with installing software to run personally-owned IT hardware or forwarding documents to a personal email account to allow printing, however pragmatic that might be. This is just one of many invidious situations that businesses are facing in this uncharted territory.
Even if a document can be printed there are potential challenges around signing contracts validly and effectively in circumstances where co-signatories for a party are in separate locations or are self-isolating.
Continuity is key to the health of our economy and if delay is not an option – and it is wholly unclear for how long we will be facing the current crisis – businesses and their advisers will need to find ways to work around these legal and practical problems.
Many business supplies, may be transacted on pro forma or integrated electronic ordering systems. Others are customarily undertaken by email or other more informal means.
However, in many cases, formal, bespoke contractual paperwork is required, which must be signed by the parties. In many cases, for the contract to be valid and effective, signatures must be witnessed (or “attested to”) by a third party. For example, transfers and other dispositions of land (such as a mortgage) must be executed in that way by deed.
Fortunately, the legal and wider business community have already begun to adopt a number of technologies which may solve a number of these challenges and indeed may introduce a swifter, more secure and verifiable means of transacting business than has been the case with the traditional “wet ink” method of executing documents.
A number of specialist IT suppliers have developed software which is designed to allow authorised signatories to execute documents electronically on a computer, laptop or even a smartphone. The systems involved vary in scope but they seek to avoid the need for printing, signing and scanning and are designed to be highly secure. Typically, each signature is verified and traceable to a particular transaction and to an authorised, consenting individual. Supporting evidence can include the time and date of signing and, even the signatories’ location by reference to their IP address. These systems can provide the added benefit of allowing parties to monitor the progress of signing in real time and can dramatically speed up the signing process; something of particular benefit in larger, document-heavy or time-critical transactions.
Such systems have been widely adopted, including by us here at TLT and, given the particular urgent business need, take-up is only likely to surge in the coming weeks and months in circumstances where “wet ink” signing is not an option.
In September 2019 the Law Commission published a report setting out a specific statement of the law relating to the validity of electronic signatures confirming that electronic signatures can be used to sign formal legal contracts under English law. In many cases, electronic signatures can be used as a viable alternative to handwritten ones. An electronic signature is capable in law of being used to execute a document (including a deed) provided that (i) the person signing the document intends to authenticate the document and (ii) any formalities relating to execution of that document are satisfied.
This is encouraging but challenges clearly remain.
The execution of deeds and other “attestation” documents nonetheless remains a challenge and many questions raised by the Law Commission remain unanswered. Take for example the legal requirement that the witness to a signature needs to be physically present with the signatory when applying their details. This means the metadata from the signing process would need to be able to verify that the witness applied their details at the same terminal and login session as the principal signatory.
The need on the part of a signatory to self-isolate may entirely rule out the option of having their signature witnessed in person. These points are technical but they are key; deeds are a vital tool in the legal armoury and a legal requirement in many cases such as English land transfers. It has already been confirmed that remote witnessing by video link is not sufficient. Until tested it isn’t clear how high the bar will be set and how much judicial accommodation or new legislation might be required to overcome it.
In this note we have considered these issues purely from a domestic perspective. In relation to reliance on the electronic signature of a counterparty in overseas jurisdiction, local legal advice will be required. Although in relation to EU counterparties the eIDAS Regulations provide for mutual recognition of electronic signatures between member states, few applications meet the strict technical criteria to be a ‘qualifying electronic signature’ or ‘advanced electronic signature’ for the purpose of the Regulations and further, the status of the Regulations following the Brexit transition period is unclear.
Assuming these issues can be overcome, there is a further important consideration that is outside of the control of individual businesses to directly influence. To be valid and effective or to provide sufficient protection to the parties involved, many contracts must be filed at certain public registries and other bodies, often within statutory time limits. The Land Registry is one such body. Companies House is another. Such bodies often apply strict practical requirements developed over many years within the relevant legal framework determining how a document must be executed in order to be registered. Electronic signatures may be anathema to such custom and practice. Thus far, practitioners have shied away from the risk of rejection of electronically signed documents the registration of which may be vital to their client’s requirements. It remains to be seen whether the practical constraints of the coronavirus pandemic will drive dramatic changes in this regard and whether judicial or political pressure will be brought to bear to ensure that the wheels of legal business keep turning.