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Electronic Signatures – what’s the big deal?

  • United Kingdom
  • Intellectual property
  • Technology
  • Technology, Media and Telecoms


(Note that this is an updated version an article originally published in 2016)

In the era of the “digital economy” (with more than half of our shopping done on-line and 44% of UK on-line1 payments made using a mobile device2), companies are increasingly questioning why their contracts and customer/supplier interactions cannot be moved to an entirely paperless model. In recent years we have seen significant momentum both from clients and in the consumer world to more towards a more efficient and ever digitalised way of carrying out business.

Banks, insurance companies, retailers, telcos, utility providers, software/app vendors and airlines have all been successful in shifting some (if not all) of their consumer contracting to an on-line model; ticking a box sufficient to confirm a transaction and accept associated Ts&Cs.

To tackle the B2B market, providers of e-signatures have proliferated, encouraged by favourable regulatory regimes in Europe, the US and further afield. DocuSign claim that ‘hundreds of millions’ of users in over 180 countries use their service3; Adobe assert that an e-signature solution can “cut the cost and hassle of paper-based tasks” and “speed business transactions4.”

However the absence of globally harmonised legislation, coupled with cumbersome local laws, have, at least historically, led to uncertainty around the scope of application and validity of e-signatures. Likewise “Cloud” delivery models (employed by the majority of service providers) present challenges, particularly from the point of view of data security and data residency.

We seek to address some of those issues in this briefing.

What is an e-signature?

The “eIDAS” Regulation5 cryptically defines an 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”. Under eIDAS, e-signatures can be “simple6” , “advanced” or “qualified”. This complex designation hides a much simpler reality - most users may not realise that they are “signing” contracts electronically by:

  • chip & pin or contactless transactions
  • ticking “I accept7” or “submit” in online purchases
  • signing their name at the end of an email8
  • using biometric signatures (fingerprint and facial recognition).

In the business environment, e-signatures can be used as a vehicle to expedite, simplify and manage the contract execution process. Electronic contracts can be circulated, signed, authenticated and loaded in a matter of minutes.

Parties to an agreement can select the e-signature method which best suits their authentication requirements. Good practice9 dictates that advanced10 or qualified signatures should be used for high value or strategic agreements as they:

  • identify the signatory with a high degree of certainty
  • limit the risk of 3rd party interference or fraud
  • limit the risk of subsequent amendment or revocation

and thus enable the parties to validate the integrity of the signature and, in turn, the enforceability of the contract.

“Qualified11” electronic signatures supplement “advanced” e-signatures by mandating the use of software or hardware tools to create codes or cryptographic keys (certificates) issued by trust service providers and used to validate the authenticity of the signature. The devices and trust service providers must be “qualified” – that is to say they must meet the requirements of eIDAS, be registered with the supervisory body in the relevant Member State12 and notified to the European Commission.

e-signatures and the legal landscape

In 1999 the European Union13, Australia and the United States14 were amongst the first to codify the treatment of electronic signatures. All recognised the validity of e-signatures for the conclusion of contracts and their admissibility as evidence in legal proceedings; all stipulate that a contract cannot be denied legal effect solely on the grounds that they are in electronic form.

So far so good. However:

  • the EU and the US model required states or member states to adopt the legislation; in Europe in particular this created a fractured legislative landscape15;
  • the legislation (in the interests of being technology neutral) did not stipulate what it regarded as an “electronic signature” but defined them by a set of qualifying criteria;
  • the European Directive established a two-tier process for “simple” and “advanced” e-signatures which introduced uncertainty as to the legal effect of the poorer sibling;
  • the legislation was subordinate to existing legislation applicable to specific legal instruments (for example property transfers).

The position in the European Union changed in July 2016 when eIDAS came into force. eIDAS is directly enforceable across member states and replaces the existing Directive. eIDAS is designed firstly to ensure a more harmonised approach with respect to the recognition and enforceability of e-signatures. eIDAS is also designed to build a consistent framework for secure electronic authentication by defining mutually recognised, pan-EU rules for:

  • electronic signatures (simple, advanced and qualified)
  • electronic identification schemes (classified low, substantial, high)
  • electronic seals (simple, advanced and qualified)
  • trust services (simple, advanced and qualified)
  • electronic time stamps (simple and qualified)
  • electronic registered delivery services (simple and qualified)
  • electronic documents (simple)
  • website authentication (qualified).

On Brexit day, the eIDAS regulation will be transposed as is into English law and will be amended only as is necessary to make it effective within our legal system.  

Law Society Guidance

In response to eIDAS, the Law Society of England and Wales (with input from leading counsel) published a practice note16 which recognises the validity of electronic signatures for commercial contracts and provides some guidance on the extent to which e-signatures satisfy the requirement for documents to be “in writing” and “signed”. The practice note also provides some guidance on documents which still require a wet-ink signature, as well deeds, originals, counterparts and conflict of laws issues. Importantly, given the complexity of the subject matter, the Law Society recommend that advice is taken on the individual circumstances and nature of the documents to be executed.

Law Commission Programme

In December 2017, the Law Commission published their Thirteenth Programme of Law Reform17 which highlights Electronic Signatures as an area that requires significant reform. The Law Commission stated that e-signatures could “boost Global Britain and help enhance the UK’s competitiveness as we leave the EU18 but recognised that further work was necessary to eliminate uncertainty over the validity of e-signatures for the execution of certain types of agreements and instruments.

Further to this, the recent Law Commission Report19 (which Eversheds Sutherland and its clients contributed to) the Commission sought to further clarify the position on electronic signatures. The report set out that an electronic signature is capable of being used to execute a document, provided that: (i) the person signing intends to authenticate the document; (ii) other formalities relating to execution are satisfied (e.g. witnessing); and (iii) relevant legislation, case law or contractual arrangements do not specify otherwise. The common law does not prescribe a particular type of signature and there is no statutory definition of "signed" or "signature" which applies generally.

The report also provided much needed clarification on the electronic execution of deeds in England and Wales. The current position is that witnessing of an electronic signature will be permissible so long as the witness is physically present, and this can be evidenced where the IP address of the witnesses’ signature is be the same the IP address of the authorised signatory 20. However, witnessing by a video link remains an outstanding point for the Commission and sparked much debate amongst the respondents to the report.  Given the requirements for “social distancing” introduced to control the spread of the coronavirus , the Law Commission may choose to issue updated guidance on video-witnessing to allow businesses to conduct signings of deeds even if signing parties and witnesses are in isolation. 

The Government responded to the Commission’s report in March 2020, confirming its agreement with the legal conclusions and undertaking to establish an Industry Working Group to consider issues of security and technology.

Benefits of e-signatures

e-signature service providers underline numerous benefits when executing contracts electronically21:

Speed of execution - e-signatures enable contracts to be executed and returned in a matter of minutes, on any device by geographically- dispersed signatories;

Security – contracts executed by e-signature, particularly when overlaid with authentication tools, are inherently more secure and harder to forge than paper-contracts;

Traceability – signatures are traceable and auditable; workflow tools enable companies to track the status of contracts in real-time;

Integration – e-signature solutions can be integrated with existing CRM, procurement, accounting, HR and document management systems to provide end-to-end workflow management;

Ease of use – execution processes are technology neutral, intuitive and culturally accepted by the digital generation;

Cost – whilst there will be inevitable up-front / ongoing charges for implementing an e-signature solution, vendors argue these will be offset by closing contracts more quickly, introducing certainty, saving management time, facilitating contract management and eliminating courier fees.

Barriers to adoption of e-signatures

Under the new EU legislative framework, and with technology embedded in popular culture, most documents can be executed electronically – from confidentiality agreements, to contracts of employment. Indeed retail banks routinely use electronic signatures for the execution of consumer credit agreements22, loan and mortgage applications.

However there remain some barriers to the use of e-signatures for certain documents in some jurisdictions, for example:

  • deeds requiring specific registration23, wills and trust documents;
  • lasting and more general powers of attorney;
  • certain real estate agreements24;
  • transfers of rights in intellectual property;
  • stock transfer forms;
  • marriage, birth, divorce and death certificates;
  • other official documents required to be submitted in paper form; and
  • agreements which stipulate that they can only be signed or varied by agreement “in writing and signed by hand”.

It is advisable to seek advice and develop a policy which addresses local law requirements in relevant jurisdictions, as even across EU territories which are subject to the eIDAS regime, local laws can throw up interesting challenges for certain use cases.

Selecting an e-signature platform

There are a myriad of e-signature service providers. Some suppliers offer an “on-premise” solution (i.e. where the software is hosted by the customer) but most are now cloud-based. Most solutions are are compatible with mobile devices (enabling tablet or smart phone signatures), and offer custom branding so they can be white-labelled or “integrated” with existing CRM or ERP systems. Most offer multiple authentication options (from public/private keys to biometric signature verification). Many warrant that they are compliant with existing legislation (including eIDAS and the US ESIGN Act).26

Given the range of vendors and features, it will be important for businesses to conduct detailed due diligence and vendor selection taking into consideration:

  • functionality and ease of use
  • pricing plans and options
  • performance and availability requirements
  • integration and compatibility with existing CRM/ERP systems
  • scalability and flexibility
  • data privacy, data security and data residency requirements
  • compliance with SYSC27/Solvency II28
  • other applicable terms and conditions

Basic Contractual Principles Apply

It must not be forgotten that traditional legal principles apply to contracts concluded electronically (offer, acceptance, consideration, incorporation of applicable terms and conditions and an intention to be bound). As such it is important to define a solution or a process which enables: the incorporation of applicable terms; validation that signatories have adequate capacity and delegated authority to sign; certification that the agreement has not been varied; and an actionable change-control process. It may also be recommended that parties include clauses that recognise the parties’ intention to be bound by an electronic signature.

Some Practical Considerations

For clients deploying an e-signature solution, it will be important to manage the risk of contracts being inadvertently disclosed or mistakenly (or maliciously) executed. Robust security procedures and HR policies should control the risk of physical IT assets being left unsecured or the sharing of passwords and access keys. Clients should also allow for a review of existing contractual arrangements – supplier, customer and employee Ts&Cs may need to be adapted to allow for electronic signatures. The same applies to internal governance procedures, ensuring that contracts or purchase orders have been authorised and signatories have appropriate delegated authority.

Clients should also consider drafting specific electronic signature policies to ensure that the execution of documents electronically is subject to a clearly defined and well managed process.

Policy Review and Implementation

Introducing electronic signatures requires a mix of technology, legal advice and practical experience. Our Technology team can help clients define business objectives, manage vendor due diligence and procurement, assess regulatory requirements and assist with the implementation of streamlined contracting processes. With the strength of our global network, we help multi-national clients define global policies, taking into account local law, custom and practice.

Please contact Craig Rogers, Rosie Wallace or your usual Eversheds Sutherland contact for further information and guidance.

  1. IMRG Capgemini e-Retail Sales Index 2016.
  2. Adyen Mobile Payments Index 2015.
  5. Regulation (EU) No 910/2014 of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market, repealing Directive 1999/93/EC.
  6. We use the term “simple” to distinguish those identification or trust services to which no special conditions apply; for further detail on “advanced” or “qualified” e-signatures, please see below.
  7. Bassano v Toft [2014] EWHC 377 (QB).
  8. Golden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd and another [2012] EWCA Civ 265.
  9. For guidance refer to Department for Business Innovation and Skills, Guide on Electronic Signatures, September 2014.
  10. eIDAS article 26.
  11. eIDAS article 28 – an “advanced” e-signature based on a “qualified certificate” created by a “qualified electronic signature creation device” and issued by a “qualified trust service provider”.
  12. In the UK, tScheme Limited manages the register on behalf of the Secretary of State; accreditation is provided by UKAS.
  13. Electronic Signature Directive 1999/93/EC.
  14. US Electronic Signatures in Global and National Commerce Act (ESIGN), 30 June 2000; US Uniform Electronic Transactions Act (UETA) July 1999; Australian Electronic Transactions Act 1999.
  15. The applicable UK legislation is the Electronic Communications Act 2000 and the Electronic Signatures Regulations 2002.
  16. Practice note on execution of a document using electronic signature by the Law Society Company Law Committee and The City of London Law Society Company Law and Financial Law Committees, July 2016.
  17. Law Commission Thirteenth Programme of Law Reform 13 December 2017
  18. Project status and objectives of the 13th Programme of Law Reform
  19. See this link for the full Law Comission report
  20. This is a summary of the perceived benefits and do not reflect the view of Eversheds Sutherland – actual benefits will depend upon individual circumstances.
  21. However please note that where one of the parties signs using a device connected to the internet by a mobile network, or uses a VPN, geolocation tracing may produce unreliable results.
  22. Consumer Credit (Agreements) Regulations 2010; see regulation 4(5) for example.
  23. Note that where deeds are to be registered at the UK Land Registry or certain other specialist asset registries, e-signatures will not be acceptable.
  24. Law of Property (Miscellaneous Provisions) Act 1989. Note also Land Registry Practice Guide 8 requires manual signature “in ink or some other indelible medium”.
  25. Forrester Research, Inc. No data was available on comparative market share as at the date of publication.
  26. Though it is not always clear whether their products satisfy the requirements for “qualified” e-signatures.
  27. Senior Management Arrangements, Systems and Controls set out in the FCA Handbook and the PRA Rulebook.
  28. Directive 2009/138/EC which harmonises risk and capital requirements for insurers.