Electronic Execution of Documents: A Further Step Forward?
Electronic signatures and execution of deeds and documents in the UK are not, as yet, universally accepted as a legally binding method – but we’re not far off.
Best practice guidelines for the use of e-signatures have been set out by the Industry Working Group on Electronic Execution of Documents which make for important reading. We look at what the guidance (just published in an interim report) means for businesses.
What’s the background?
In 2019, the Law Commission concluded that esignatures were valid for “the vast majority of business transactions and legal processes”. But it also acknowledged that there were many uncertainties around the use of esignatures and a lack of confidence in professionals in their use of esignatures.
A multi-disciplinary group of business, legal and technical experts group was therefore set up to consider the continuing issues and seek out potential solutions. The group’s interim report is the result of that work.
What’s new?
When the 2019 Law Commission report was published, covid-19 was not yet on the radar. But the pandemic quickly forced businesses and professionals across many sectors to rely heavily on technology to enable them to continue providing their products and services. Even a temporary change to the law was necessary to allow the electronic execution of wills (albeit in limited circumstances).
In that sense, events superseded the Commission’s stated position at the time, and this report provides important clarity which businesses and professionals (particularly lawyers) will welcome as they continue to deal with the pandemic’s impact on business operations.
Crucially, there is an important focus on best practice. Given the broad range of electronic options now available, the report identifies five key principles to consider. These include agreeing as early as possible that e-execution is necessary and the procedure to be adopted; a secure and safe platform should be used; consideration as to whether further evidence is necessary to record the execution/signatures; and considering the needs of any vulnerable signatories.
While the report provides detailed guidance on factors to be taken into account when applying good practice, it emphasises that these are “simple principles” which can be taken on board early on in a transaction.
Perhaps more radically, the Working Group said a priority should be given to providing digital identities to all members of society who wish to have one.
The report also makes a number of major recommendations in relation to, for instance, smart contracts, cross-border transactions, adoption of esignatures in transactions with third parties, and widening the use of esignatures in legal documents, such as Lasting Powers of Attorney.
The Working Group’s “clear view is that electronic signatures can and should be used today on a wide scale, and that members of society should have confidence in doing so”. This is a view most professional businesses would undoubtedly agree with, but how this can be achieved while also protecting vulnerable parties, minimising the security risks and the risks of fraud and duress could well be a continual challenge.
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