Experts urge UK government to allow e-signatures for all its contracts

“It is difficult for the government to seek to widen adoption of e-reforms such as e-signatures unless official documents dealing with all areas of life can be accomplished by using them,” said the final report of the Industry Working Group on Electronic Execution of Documents (117-page / 600KB PDF), which was set up by the UK government. "Exceptions are difficult to justify and although piecemeal reform is one option in areas where specific formalities are required, it would be more beneficial if all government departments adopted an entirely streamlined approach.”

The report said that the successful use of e-signatures in international trade depended on the degree to which they could be trusted and relied on without fear of challenges to their validity.

The group proposed that the UK sign up to a model law developed by a UN agency to co-ordinate its approach with other major trading nations. Without some kind of internationally agreed approach there is a risk that cross-border contracts signed electronically will be invalid or subject to challenge, and therefore will be less likely to be adopted, it said.

“One of the cleanest ways of dealing with these issues, which are otherwise somewhat inevitable, would be for significant trading states to adhere to some form of international norm or code,” the report said. “To this end, the Group recommends that the UK consider adopting the UNCITRAL Model Law on Electronic Signatures, at least in some form. Article 12 of the Model Law is particularly instructive on the point of cross-jurisdictional recognition, and UK movement on this point, given its significance as an international commercial hub, would send a strong signal, and perhaps act as an incentive, to other jurisdictions.”

Some of the recommendations may face industry opposition, however. The report said that ‘best practice’ in e-signatures in commercial contracts would be to allow signatories to the contract or document to be able to amend the document at the point of signing. This could undermine the integrity of the underlying agreement, one expert said.

Banking expert Pippa Whitmore of Pinsent Masons said: “This wouldn’t be palatable. If we set up a contract so that parties could sign in any order and make changes, how would it work if one party made a change after another has signed?”

The report expressed views on the use of digital images of actual, or ‘wet ink’, signatures in the form of JPEG files. “The report advises caution in accepting JPEGs of wet-ink signatures due to their low evidential weight. This is a common method of execution in many sectors of the legal and business community, and could push up use of platform based signatures,” said Whitmore.

The report said that parties to a contract should agree in advance what would count as ‘original’ versions of the signed contracts, which Whitmore also questioned.

“I believe the question of what is the ‘original’ of a contract is a legal point and not something which can be ‘agreed’ between the signing parties. Electronically signed documents are electronic originals and suggesting that parties can agree otherwise is unhelpful,” she said.

Tim Dale of Pinsent Masons agreed. “It shouldn’t be a matter of agreement, it should be a matter of law what constitutes an original.”

The report also stressed the need for clarity in relation to e-signatures in Northern Ireland. A previous report from the Group had said that because of a court ruling from 1584 e-signatures could not be used to execute deeds in Northern Ireland.

But the final report accepts that it is in fact uncertain whether e-signatures can execute deeds in Northern Ireland. The change came after Pinsent Masons’ Tim Dale spoke to the Group.

Dale had argued that the 1584 case dealt with how deeds were delivered; comments about being written on paper or parchment were incidental to the actual issue being ruled on. So they do not bind us now, he said. He also said that the Companies Act, which applies in Northern Ireland, might be relied on to permit Companies to execute deeds with electronic signatures.

“[Dale’s] view, with which the Group agrees, is that it is better to say that the point is uncertain rather than definitive,” the report said. “The clarification about the situation in Northern Ireland is welcome,” said Dale. “But expressly permitting it through legislation is likely going to be needed to allow Northern Ireland to adopt modern methods of execution with confidence. This might be possible through a statutory instrument under section 8 of the Electronic Communications Act of 2000”