Two decades after the British Government gave legal validity to electronic signatures, its expert law reform body has concluded that most documents executed digitally have the same legal force as those on paper.
However, in a Government commissioned report published today, the Law Commission warns against moving the process of applying for lasting powers of attorney entirely online.
Titled Electronic execution of documents, it also reveals continuing doubts within HM Land Registry over whether it is possible to witness an electronic signature.
Although many thousands of contracts are signed electronically every day, in settings ranging from doorsteps to City dealing rooms, many lawyers remain concerned that electronic signatures could be open to challenge. The Government asked the Law Commission to investigate whether new legislation, on top of the 20-year-old Electronic Communications Act and the EU eIDAS regulation, was required.
The commission concludes that it is not, warning that any attempt to clarify the law could have a chilling effect on electronic commerce as well as putting a legal question mark over contracts signed under the existing mishmash of legislation and case law.
Satisfying formalities
In a two-page statement of the current law, the commission states that an electronic signature is capable in law of executing a document (including a deed) provided that the person signing intends to do so and that any further required formalities, such as a witness, are satisfied.
While on the surface this is good news for digital-by-default public services, the 124-page report contains several caveats.
One concerns lasting powers of attorney. As part of a campaign to encourage more people to make provision in the event of losing mental capacity, the Ministry of Justice is promoting an online application service. But professional bodies such as the Law Society warn that online processes could put vulnerable people at risk.
The report agrees, stating that the MoJ should “consider what is sufficiently secure and reliable for donors before introducing any system using electronic signatures”. It says it has notified the MoJ and the Office of the Public Guardian of these concerns.
Another tricky area is where signatures are required to be witnessed, for example in property title transfers.
Video link caution
In a consultation document published as part of its investigation the Law Commission proposed that signatures might be witnessed by video link. It now appears to be rowing back from the idea, stating: “Our view is that the requirement under the current law is that a deed which must be signed ‘in the presence of a witness’ requires the physical presence of that witness.”
It also quotes a response from HM Land Registry questioning whether even physically witnessing an electronic signature is legally acceptable.
“‘It is the view of HM Land Registry that it is not possible for an electronic signature to be physically witnessed in the way that a pen and ink signature can,” the Land Registry said. “The e-signature is applied to the data within a software system or in a hardware security module, or some other computing device. A person cannot witness that process.”
The commission makes several recommendations to address some of the practicalities of electronic execution and the rules for executing deeds. These include:
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An industry working group to consider practical and technical issues around electronic signatures and provide best practice guidance for their use in different types of transactions.
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Video witnessing for deeds. The industry working group should look at solutions to the practical and technical obstacles that exist to video witnessing. Following this work, the Government should consider legislative reform to allow for this.
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A future review of the law of deeds, to consider broad issues about the effectiveness of deeds and whether the concept remains fit for purpose, and specific issues which have been raised by stakeholders. The review should include deeds executed on paper and electronically.
The commission also says the Government may wish to consider codifying the law on electronic signatures in order to improve the accessibility of the law.
Image from Larry Johnson, CC BY 2.0
