Catching up with the industry sectors it serves: Law Commission (of England and Wales) consults on the validity of electronic signatures

Catching up with the industry sectors it serves: Law Commission (of England and Wales) consults on the validity of electronic signatures

In the fast-paced world of global commerce, with new emerging technologies and with a variety of contracts being conclude online, it may come as somewhat of a surprise that from a legal perspective, much weight is still placed on original or “wet-ink” signature documents. We see this every day, particularly, more so, when dealing with matters that require registration with a public registry (charges, mortgages, deeds, director appointments – the list goes on and on). What may come as more of a surprise is that, despite the existence of electronic signatures (or e-signatures), the law surrounding its validity remains unclear.

The Law Commission of England and Wales (the Commission) has considered and offered provisional conclusions and proposals in its consultation on electronic execution, published on 21st August 2018. Interestingly, the Commission seemed to have also, at least provisionally, confirmed its view that “an electronic signature is capable of satisfying a statutory requirement for signature”.  In what is undoubtedly a most welcome and forward-thinking consultation, the Commission also provided helpful suggestions as to how further reform and industry guidance could result in greater adoption of e-signatures.

The consultation drew on issues revolving around both the statutory requirements for documents which simply need to be signed, as well as those documents (such as deeds) which need to be “executed” and require additional formalities in order to be enforceable.

The consultation was undertaken in the context of England and Wales, but the Commission’s welcome suggestions should also be considered further in the context of Gibraltar; where the validity of e-signatures is even less clear.

The Commission’s conclusion that an e-signature meets the requirements of a contract come from a consideration of:

  1. the “eIDAS regulation”[1], an EU regulation which applies directly in all member states without the need for national implementation, which provides that an electronic signature cannot be denied legal effectiveness solely because of its electronic nature;
  2. the Electronic Commerce Act 2000 (of England and Wales) which largely mirrors the eIDAS regulation; and
  3. a selection of caselaw which has dealt with a variety of matters on this specific issue.

In the context of Gibraltar, the following should be noted:

  1. Gibraltar forms part of the EU by virtue of the UK and thus the directives and regulations of the EU apply to Gibraltar in the same manner as they would apply to any other EU member state (the eIDAS regulation inclusive);
  2. Gibraltar has its own Electronic Commerce Act 2001, which is similar to that of England and Wales save that the Gibraltar act repealed provisions relating to the issue of accreditation certificates in respect of e-signatures;
  3. the common law of England and Wales applies to Gibraltar.

In light of the above, applying the Commission’s approach to the validity of e-signatures to Gibraltar should not really be too much of a stretch. However, its conclusion that England and Wales would not require further legislative developments to emphasise that validity would prove harder to consolidate in our jurisdiction – not least because the repeals within our own Electronic Commerce Act.

Turning back to the consultation, in addition to its assessment on e-signatures in isolation, the Commission also considered the impact of e-signatures in the context of deeds which, in England and Wales, need to be signed, witnessed/attested and delivered. The Commission offered various suggestions to tackle this additional form of verification and authentication. Such suggestions included the possibility of witnessing via a video link, witnessing via an electronic signing platform or even replacing it with a new concept called electronic acknowledgement where a signatory could acknowledge their signature in writing, in person, by video link or by telephone.

Whilst the Commission’s interesting approaches to allow for a more fluid adoption of e-signatures and alternative modes of “witnessing” could potentially be applied in the context of Gibraltar, we would also need to consider our additional hurdle that, in Gibraltar, individuals executing a document as a deed need to ensure that that document is signed, sealed and delivered. Therefore, certain thought would need to be given as to how the formality of sealing should be adapted.

With the opportunity to provide suggestions and input being open until the latter stages of 2018, the consultation is ongoing and far from finished, but it does certainly seem to be a step in the right direction and will hopefully provide much needed clarity on the matter. It would be most useful if the same approach to review the matter were taken Gibraltar.

Indeed, times are changing, new technologies are emerging and commerce is advancing. It appears the law has some catching up to do.

 

[1] Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC

Text by: Chris Davis