New EU framework for electronic signatures
Electronic or e-signatures are a way to sign ‘virtual’ documents, much like a pen is used to sign a hard-copy document. The traditional practice of signing a hard-copy document in ink, scanning it and sending it by email is being overtaken by the use of e-signatures as these become increasingly common in a range of commercial transactions.
Regulations establishing a new EU-wide framework for e-signatures came into force on 22nd July 2016 - the Electronic Identification and Trust Services for Electronic Transactions in the Internal Market Regulations 2016 (“Regulations”). Previously all countries in the EU had their own individual e-signature laws but now standards across the EU will be the same. The Regulations have updated the Electronic Signatures Regulations 2002 and parts of the Electronic Communications Act 2000. However, so far as English law is concerned, there has been relatively little change to the legal regime.
What are e-signatures and what legal effect do they have?
E-signatures can be divided into three groups:
- Simple electronic signatures – these include scanned signatures and tickbox plus declarations. The Regulations provide that an electronic signature should not be denied legal effect and admissibility as evidence in legal proceedings just because it is electronic although its admissibility can be challenged.
- Advanced electronic signatures – these are uniquely linked to the signatory, are capable of identifying the signatory, are created using electronic signature creation data that the signatory can, with a high level of confidence, use under his sole control and are linked to data within the signature that can detect any changes made. They are typically known as ‘digital’ signatures. Again, these should not be denied legal effect and admissibility as evidence in legal proceedings just because they are electronic or do not meet the requirements for qualified electronic signatures. Their admissibility can also be challenged but they would have more evidential weight in legal proceedings than a simple electronic signature.
- Qualified electronic signatures – these are advanced electronic signatures that are based on and accompanied by a qualified certificate for electronic signatures issued and managed by a qualified trust service provider. The term ‘qualified’ here means that it meets the requirements of the Regulations and meets one of three specific digital signature technical standards that have been developed by the European Telecommunications Standards Institute. Qualified electronic signatures are automatically granted the equivalent legal effect of a handwritten signature ie they will be legally admissible as evidence. They will have more evidential weight in legal proceedings than a simple or advanced electronic signature and are very difficult to challenge and they therefore represent the highest level of protection.
Use of e-signatures
E-signatures can be used for virtually all business contracts including those that need to be in writing and/or signed and also for documents which are required to be signed as a deed, provided certain requirements regarding the witnessing of the original signature are met.
It is also possible for one of the parties to a document to sign using an e-signature, while the other uses the traditional wet-ink signature.
Overseas companies/foreign law
The Law Society’s practice note on using e-signatures expresses the view that:
- if an overseas company executes a contract governed by English law using an e-signature, provided that the relevant signatory is (as a matter of the laws of the territory in which the company is incorporated) acting under the authority (express or implied) of the company, that contract will have been validly executed as a matter of English law; and
- where a document is not governed by English law, whether it can be validly executed using an e-signature would need to be determined in accordance with the governing law stated in the contract.
Further information
Further information can be found in the Government's Guide to Electronic Signatures and Trust Services.
The reality is that e-signature services are increasingly being used as a matter of routine by businesses and this momentum is only likely to increase. This is an example of the law continuing the process of trying to catch up with the technology and modern business practices, effectively confirming that electronic and traditional physical signatures are treated very much on the same basis and is therefore to be welcomed.28th September 2016