Constructing a Blue-print for Electronic Execution – New Guidance from the Industry Working Group on the Electronic Execution of Documents
Over the past two years, e-execution has been instrumental in overcoming the logistical challenges posed to document execution by the Covid-19 pandemic. However, the trend towards e-execution was well established even before this. Within the construction sector, factors such as the voluminous nature of construction contracts and ancillary documentation, the often time-sensitive nature of transactions and the geographic distance between signatories have precipitated the need for an alternative to traditional ‘wet ink’ signature.
In September 2019, the Law Commission’s Report confirmed that electronic signatures provided legally valid means of executing documents (including deeds).
However, the Report considered legislation governing the practical considerations of electronic execution to be unnecessary, instead recommending that guidance be developed by an inter-disciplinary industry working group. This was affirmed in March 2020 by the Lord Chancellor and Secretary of State for Justice’s response to the Report.
Fast-forward to February 2022 and these recommendations are beginning to materialise with the recent publication of an Interim Report by the Industry Working Group on Electronic Execution of Documents.
The Interim Report outlines the three established levels of signature under the retained law version of Regulation (EU) No 910/2014 on electronic identification and trust services for electronic transactions in the market; and details the ways in which these signature techniques should apply to various categories of legal documentation.
This goes further than any previous guidance by providing a clear and concise set of best-practice guidelines. To summarize these, parties now seeking to execute documents electronically must take steps to:
- agree in advance that documentation will be executed electronically;
- circulate signing instructions as clearly as possible;
- circulate completed documents to each party once signing is complete; and
- appropriately handle information or data collected during the signing process.
Additionally, the Interim Report sets out recommendations for implementing electronic execution in circumstances where vulnerable individuals are privy to the signing process.
At Charles Russell Speechlys, e-execution has proved to be a useful tool in allowing us to progress transactions in an expedient, dynamic and secure manner. The Interim Report sheds light on a variety of issues which we have encountered in that process, and has enabled us to address these both in practice and in our own internal protocols.
For instance, where one party requires its own signature to be in hard copy, perhaps because it will execute by the affixing of a seal, it may still be possible to agree a hybrid signing protocol whereby the parties execute in counterparts. The report affirms that this is to be communicated and agreed by all parties in advance of signing. The report also confirms that the position in relation to witnessing deeds remains that any witnesses to the execution of a deed must be physically present on signature of the document, even though their attestation will be recorded electronically. Finally, the report also reiterates the need for all signatory parties to be advised that their data will be retained as part of the signing process, and to be informed of their right to have such data erased once signing has been completed.
The interim report provides some much-welcomed guidance which will serve to further integrate electronic execution into construction transactions as well as wider transactions and dealings in the legal sector. We look forward to seeing further guidance by way of the Working Group’s final report, later this year.
