In this guest introductory article, Obelisk consultant Lisa McClory, Knowledge Lawyer and expert in Legal Technology, provides an overview of topical questions for electronic signature technology, as well as recent developments. This is particularly helpful for law firms or companies considering the introduction of an electronic signature platform for the first time and planning where to begin, which areas are easiest to tackle, and how to create the conditions for a comfortable, supported release of new technology and process.
For practitioners and businesses already using the technology, this article also discusses some areas of developing market practice, as well as forthcoming policy initiatives which aim to clarify some of the trickier practicalities surrounding commercial and cross-border transactions. Keeping up to speed with changes may present opportunities for useful innovation, which can help businesses to accelerate, cut costs and reduce risks – all of particular importance when considering how to rebuild resilience in a digital-first environment.
What is electronic signature? An explanation
Going into a business or law firm’s offices to sign with pen on paper in the traditional way is increasingly impractical. Even for digital transactions, whilst many people are working outside of an office environment, access to printers and scanners can be unreliable, and the speed and convenience of electronic signature technology is particularly beneficial.
The ability to sign documents digitally is not particularly new in tech terms: the European Regulation (eIDAS (EU) No 910/2014), which creates a common, cross-border legal framework for electronic signatures, has been in force since 2016, and the Law Society was writing guidance on virtual transactions even before that, in 2010. However, a flurry of recent changes to law, technology and practice during the COVID-19 pandemic suggest that this area benefits from a closer look.
The aim of an electronic signature is to provide evidence that an identifiable person has authenticated information which is held in electronic form. More precisely, the eIDAS Regulation defines electronic signature as “data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign.”
Electronic signatures can take a variety of forms, including a scanned manuscript signature, a check-box, entering a PIN number, or typing on-screen. There is a helpful summary, with more detail about types of technology, in Chapter 2 of the Law Commission’s Consultation Paper No 237. Whilst it is generally possible to use any of these less formal ways to signify agreement to simple contracts, law firms and large organisations have in the main turned to specialised electronic signature software to allow the business to manage and organise the application of signatures. Software might just be put in place for a single type of contract frequently used by the business, or to help coordinate complex transactions which can involve many different parties and types of document. E-signature software typically works by allowing the user to drag signing boxes onto PDF documents, providing signatories with an interactive screen, which guides them to apply a mark of authentication (using a mouse click, or a swipe on a touch screen) in the correct order. Users can keep track of documents which are pending signature and download a certificate at the end of signing to show when, and possibly also where, the parties signed.
Frequently used systems in the UK include DocuSign and Adobe Sign, both of which offer free online technical training and materials to support both introductory and advanced usage, but there are also a range of other systems. There are also ways in which e-signature platforms can integrate with other technical systems, including Teams and collaboration or data room software. Watching one of the free webinars available on a product provider’s website, or getting a personal free subscription to one of these types of software could be helpful for any individual lawyers who would like to get a practical introduction before using the technology in a professional context.
Implementing an electronic signature system
Often, use of electronic signatures is driven by demand from end users for faster and more efficient ways to sign off on contracts. Lack of appropriate signing software might prove an obstacle to concluding a transaction. To access the benefits of electronic signing, it is important for organisations to maintain a reliable digital infrastructure and to ensure that agreements can be concluded reliably and securely.
For companies approaching the question of electronic signatures for the first time, there will be a number of considerations including process ownership, interaction with core terms and conditions (for instance, data protection) and ensuring that the e-signature processes fit neatly into existing tech infrastructure.
Areas where a business generally has some volume of similar, simple contracts can be more straightforward for electronic signatures. For businesses, examples could be:
- standard trading contracts;
- employment agreements;
- non-disclosure agreements; and
- terms of engagement.
In addition to finding out details about the number of agreements and types of user, businesses might also think about integrating electronic signature software with other systems to make signing and document management simpler both for the business and for end users. A branded internal front-end platform might help to ensure that additional compliance requirements and checklists are adhered to at point of sending, and reduce the risk, for example, of users creating charges for tester documents. Chatbot technologies and collaboration platforms can be used alongside an e-signature platform to help with management of any ongoing queries.
When looking at use cases for electronic signature, businesses need to consider types of document on their own terms to ensure that agreements and authorities can validly be signed electronically. This will particularly be the case for documents with an overseas element, whether due to the nature of the parties, assets or the possibility of enforcement before an overseas court.
Other considerations include accessibility and the requirements of particular users. Companies may need to take into account formal duties under equality legislation to make reasonable adjustments, as well as generally ensuring that new processes are applied fairly, in accordance with corporate values, and do not exclude employees or customers with particular requirements.
Businesses which are regulated may also need to take into account regulator or sector-specific requirements. This includes firms which are regulated by the Financial Conduct Authority, and which must comply with the Principles of Business, to include a review of the risks and harms of using electronic signatures and ensuring that requiring use of electronic signature is in a client’s best interests and is fair, clear and not misleading.
Key Recent Developments: timeline
For businesses which already use electronic signature technology, there have been a number of recent changes, reflecting increased usage and reliance upon digital technology during the COVID-19 period. Whilst not exhaustive, a summary of key changes is set out here.
September 2019: Law Commission Report on Electronic Execution
On 4 September 2019, the Law Commission released Report No 386 on Electronic Execution of Documents. This Report, along with the related Consultation Paper No 237, provides a detailed and helpful overview of electronic signature law and practice.
March 2020: Ministry of Justice Statement and Proposed Working Group
In a Statement made on 3 March 2020, the Ministry of Justice responded to the Law Commission’s Report. Amongst other things, the Government intends to follow the Law Commission’s recommendations regarding an industry working group, which will consider practical and technical issues associated with electronic execution of documents. Further details of the proposed working group are awaited at the time of writing.
March – April 2020: relaxation of Registrar Requirements
June 2020: Law Society Practical Tips
During June 2020, the Law Society reviewed its 2016 Practice Note on Execution of a Document using an Electronic Signature, adding a cover note with tips on practice. This sets out practical recommendations, including a suggestion that use of video or photographic evidence should be considered in order to help evidence identity, or presence of a witness.
July 2020: Electronic signatures for registered land transactions
For the first time, HM Land Registry began accepting signatures (including witness signatures) applied electronically, provided that witnesses are physically present (i.e. video witnessing is not accepted) and that two-factor authentication is applied to provide assurance that individuals have signed. Detailed practice guidance is also set out by HM Land Registry, which may prove useful to inform best practice in other areas where deeds are to be executed electronically.
3 August 2020
Legal IT Insider reported that the first electronically signed property deed had been submitted to HM Land Registry for filing. For individuals hoping to get property transfers through quickly before the end of the Stamp Duty holiday, this may be a welcome process enhancement.
October 2020: Conclusion of eIDAS framework consultation
On 2 October 2020, the European Commission concluded an Open Public Consultation on the extent to which the eIDAS framework for electronic transactions remains fit for purpose. In respect of electronic signatures, the review aims to improve the regulatory framework in order to better support business continuity and opportunities for recovery.
Further developments: Brexit
Under section 3(1) of the European Union Withdrawal Act, the eIDAS Regulation will be incorporated into English law. Cross-border compatibility as regards the admissibility of electronic signatures as evidence of authenticating intent will also depend upon the terms of any further agreement which may apply after the end of the Transition Period, both in respect of eIDAS as well as other treaties governing law and jurisdiction. This is something to monitor during the months ahead.
Check back on our blog next week to read Part 2 of this article on practical and legal questions related to electronic signatures, automation opportunities and innovation.
About the author
Lisa is a Legal Knowledge Director, who has led on legal innovation and transformative projects within the UK magic circle and big4 accountancy practices. She works as an independent legal technology and knowledge management consultant through Obelisk Support and also runs a lawtech business at https://fractal.legal.