E-signatures: Industry Working Group Final Report
15 May 2023
The Industry Working Group on Electronic Execution of Documents has now published its final report on how to optimise the use of e-signatures in cross border transactions; it addresses the particular challenges, sets out recommendations for reform and also highlights the benefits of e-signatures in guarding against fraud.
Last year, we published an article on using e-signatures in corporate transactions, which highlighted issues posed by cross-border transactions. The Industry Working Group on Electronic Execution of Documents (the “Group”) has now published its final report (the “Final Report”) on how to optimise the use of e-signatures in cross border transactions; it addresses the particular challenges, sets out recommendations for reform and also highlights the benefits of e-signatures in guarding against fraud.
The Group was formed in 2021, following the Law Commission’s 2019 report on the electronic execution of documents, which established the general validity of e-signatures in the UK (see our previous article). The Group’s main purpose is to consider how different technologies can be used to promote e-signing and to consider practical and technical issues associated with electronic execution.
The Group was tasked with considering eight terms of reference covering a broad set of issues relating to e-signatures. An interim report was published in February 2022 (the “Interim Report”), which considered six of these terms of reference. The purpose of the Final Report is to address the remaining two:
1. Challenges arising from the use of electronic signatures in cross-border transactions and how to address them.
2. How these potential solutions can protect signatories to deeds from potential fraud.
The Final Report also makes recommendations around further areas of reform to promote and facilitate the appropriate use of e-signatures.
Summary of the Final Report
Cross-border challenges and recommendations for reform
Legal agreements used in cross-border transactions should be drafted and executed in accordance with the jurisdiction of the parties and the governing law of the agreement, to ensure they are valid and binding. The Group highlights the following challenges posed by e-signatures in the context of cross-border transactions:
1. Lack of certainty. There can be uncertainty as to the validity of electronic execution in a specific jurisdiction and the requirements and formalities that apply. Parties should consider obtaining local law advice to confirm whether local law supports the use of e-signatures.
The Group recommends that governments worldwide encourage the adoption of an international standard of e-signature which would be recognised in all participating jurisdictions. Specifically, the Group recommends that the UK adopt The United Nations Commission on International Trade Law (“UNCITRAL”)’s Model Law on Electronic Signatures, which would hopefully encourage other jurisdictions to follow suit.
2. Enforcement risks. The Final Report reiterates enforcement risks previously flagged in the Law Society’s 2022 Update, when a signatory seeks to enforce an English law governed contract signed electronically in another jurisdiction. Especially where claims are under the exclusive jurisdiction of a foreign court, the method of signing chosen (electronic or wet ink) should align with acceptable practices in that jurisdiction.
3. Lack of international standards. There is currently a universal lack of assurance that e-signing platforms meet different global requirements. The Group proposes that the introduction of an international technical standard would encourage confidence in the use of e-signatures, and have suggested that an existing body, such as the Information Commissioner’s Office should be tasked with providing a public record of which states have adopted technical standards. If implemented successfully, this would reduce the need for parties to a transaction to spend time and money investigating this.
The Group remains divided on whether e-signing services should be regulated and have considered the possibility of a self-certification regime for signing platforms. This could involve a government moderator developing a set of publicly available "basic performance standards", along with a list of self-certified signing platforms.
Further recommendations for modernisation
The Final Report also makes some additional recommendations around the modernisation of signature requirements in the UK, including:
- Wholesale adoption by the government of e-signatures for all government or official purposes.
- Relaxation of formalities surrounding execution of deeds.
- Relaxation of requirements around making a statutory declaration, including allowing these to be made wholly electronically.
- Establishing a permanent body similar to the Group designed to address issues and developments around e-signatures as and when they arise.
Protection from Fraud
The Group’s Final Report reiterates the role e-signatures can play in the deed authentication process. These advantages (which would apply to any document, not just deeds) include:
- Provision of advice: E-signing platforms are capable of recording advice given in relation to the signing of a deed. This can be stored alongside the signed document, providing comfort that proper processes have been followed and evidencing the intention of the parties.
- Signing: E-signing platforms can track the signing process and retain evidence of this, allowing for better record-keeping. DocuSign, for example, issues certificates of completion which provide a helpful audit trail.
- Limits on coercion and duress: Depending on the functionality of the platform, it may be possible to impose time limits on signing and signatories can be given the option to reject a deed. This reduces the risk of physical coercion or duress being placed on the signatory.
- Accessibility: E-signing platforms ensure that deeds are accessible and legible when displayed on a range of devices, so that signatories are able to review documents properly before signing.
- Confidentiality: Using e-signature platforms that are only accessible to the parties intended to review and sign maintains the confidentiality of documents and prevents paper copies from falling into the wrong hands or being lost.
- Identity verification: This issue applies as much to electronic execution as to physical execution. The functionality of e-signing platforms could be harnessed to carry out automated checks on credit agency databases, electoral rolls etc and to validate documents automatically such as passports and driving licences automatically.
So, where does this leave us?
There is clearly a need for international collaboration and a harmonised approach to e-signatures globally. An international standard should be established to remove uncertainty and bolster the integrity of, and public confidence in, e-signatures. In the meantime, particular care should be taken when using e-signatures in cross-border transactions to ensure these are accepted under local laws. However, e-signatures have many advantages, including protection from fraud. They are already used widely in corporate transactions and this continues to be the direction of travel.
In addition, some of the concerns around the use of e-signatures, such as validity and enforceability outside the UK, can be mitigated by following our practical tips for using e-signatures in corporate transactions.