Electronic execution of documents: Ministerial statement on Law Commission report on electronic execution
On 3 March 2020, Robert Buckland, the Lord Chancellor and Secretary of State for Justice, issued a written ministerial statement (the Ministerial Statement) regarding the UK Government’s response to the Law Commission’s report on the electronic execution of documents (the Report) published on 4 September 2019.
The high level conclusions of the Law Commission in the Report as to the law regarding the validity of electronic signatures are set out below.
• An electronic signature is capable in law of being used to execute a document (including a deed) provided that the person signing the document intends to authenticate the document and any formalities relating to execution of that document are satisfied. Such formalities may be required under a statute or statutory instrument, or may be laid down in a contract or other private law instrument under which a document is to be executed. Examples of formalities include the signature must be witnessed or the signature be in a specified form (such as being handwritten).
• An electronic signature is admissible in evidence in legal proceedings. It is admissible, for example, to prove or disprove the identity of a signatory and/or the signatory’s intention to authenticate the document.
• Save where the contrary is provided for in relevant legislation or contractual arrangements, or where case law specific to the document in question leads to a contrary conclusion, the common law adopts a pragmatic approach and does not prescribe any particular form or type of signature. In determining whether the method of signature adopted demonstrates an authenticating intention the courts adopt an objective approach considering all of the surrounding circumstances. The courts have, for example, held that the following electronic forms amount to valid signatures: (i) signing with an “X”; (ii) signing with initials only, (iii) using a stamp of a handwritten signature, (iv) printing of a name, (v) signing with a mark (even where the party executing the mark can write), and (vi) a description of the signatory if sufficiently unambiguous, such “Your loving mother” or “Servant to Mr. Sperling”.
• Electronic equivalents of these non-electronic forms of signature are likely to be recognised by a court as legally valid and there is no reason in principle to think otherwise. For example, the courts have held that the following electronic forms amount to valid signatures in the case of statutory obligations to provide signature where the statute is silent as to whether an electronic signature is acceptable: (i) a name typed at the bottom of an email; (ii) clicking an “I accept” tick box on a website, and (iii) the header of a SWIFT message.
• The Law Commission’s view is that the requirement under the current law that a deed must be “signed in the presence of a witness” requires the physical presence of that witness. This is the case even where both the person executing the deed and the witness are executing or attesting the document using an electronic signature.
The Report also sets out the Law Commission’s recommendations and options for reform in relation to electronic signatures and deeds. The key highlights of the Report, as well as the concurrence of the Lord Chancellor pursuant to the Ministerial Statement, are set out below.
The Law Commission considered a number of possible approaches to legislative reform relating to electronic signatures. Firstly, amendments to the Interpretation Act 1978 to include a definition of “signed” which encompasses electronic signatures. However, it was concluded that such an amendment would not clarify the position for documents which are not required by statute to be signed but where the parties have agreed signatures are required. Secondly, codification of existing law to fill the perceived gaps in the existing provisions in Regulation (EU) 910/2014 on electronic identification and trust services for electronic transactions in the internal market (eIDAS) and the Electronic Communications Act 2000 (ECA 2000). The view of the Law Commission is that case law fills the perceived gaps in eIDAS and the ECA 2000 and the purpose of any new legislative statement would be to provide clarity and would effectively codify the existing law so that it appeared in a single statutory statement.
Ultimately, the Law Commission concluded that it is not for legislation to attempt to deal with the more practical aspects of electronic execution and proposed that an inter-disciplinary working group would be better placed to consider these issues and develop guidelines. The Ministerial Statement agrees with the Report’s conclusion that formal primary legislation is not necessary to reinforce the legal validity of electronic signatures and endorses the Law Commission’s draft legislative provision as set out in the Report, as reflecting the Government’s view of the legal position on electronic signatures. The Ministerial Statement also accepted the Law Commission’s recommendation that an industry working group be established to consider practical issues relating to the electronic execution of documents.
Deeds – witnessing and attestation
The Law Commission concluded that parties could not be confident that the current law would allow for “remote” witnessing where the witness is not physically present when the signatory signs the deed. The Law Commission considered two potential options for the executions of deeds electronically: (i) witnessing by video link and witnessing through a signature platform, and (ii) the use of digital signatures, or another type of technology, to replace witnessing and attestation and a new concept of acknowledgment for electronic signatures.
Witnessing using a video link would involve the witness observing the signing ceremony via the video link and attesting to execution by affixing their own electronic signature to the same document. The witness could attest to the fact of having seen the document being signed, though not in the physical presence of the signatory. Consultees raised a number of issues on this point including (i) can an electronic signature be witnessed? (ii) is the proposal for video witnessing a viable and practical option? (iii) would it give rise to an unacceptable risk of fraud? (iv) the need for careful legislation.
The Law Commission recommended that the terms of reference for the industry working group should include considering potential solutions to the practical and technical obstacles to video witnessing of electronic signatures on deeds and attestation as well as considering how these potential solutions can protect signatories to deeds from potential fraud. Further, the Law Commission recommended that following the work of the industry group, the Government should consider using section 8 of the ECA 2000 to allow for video witnessing which provides a power to modify primary or secondary legislation to authorise or facilitate the use of electronic communications for certain purposes. In line with the Law Commission’s recommendation, the Ministerial Statement stated that the industry working group will be asked to consider potential solutions for the obstacles to video witnessing of electronic signatures.
Review of the law of deeds
In pre-consultation discussions, some stakeholders queried whether the formality requirements for deeds, and even the concept of deeds in general, are fit for purposes in the 21st century. As such, consultees were asked whether a review of the law of deeds should be a future Law Commission project. While the majority of consultees did not agree that there should be a review of the law of deeds, some responses made a strong argument in favour for a review, including that the current law of deeds is arguably outdated and there should be a broad review taking into account technological developments.
The Law Commission ultimately decided to recommend that there should be a review of the law of deeds, dealing with both deeds executed on paper and electronically. Such a review could consider broad issues about the efficacy of deeds and whether the concept is fit for purpose, as well as the specific requirements of deeds. The Ministerial Statement accepted the Law Commission’s recommendation that there should be a wider review of the law of deeds and that the Law Commission will undertake this review, although the timing will be subject to overall Government and Law Commission priorities given the current volume of law reform work.
It is welcome news that active steps are being taken to clarify and develop the law and practice in relation to the electronic execution of contracts and deeds, in particular in the context of English law which is commonly used by parties across the globe on cross-border transactions. Clearly this is an area that will continue to evolve, and as ever legal advice should be sought on a case-by-case basis to ensure that you and your counterparties have correctly executed the relevant document.