Electronic signatures in the age of COVID-19

By Michael McKee, Partner and Head of Financial Services Regulatory and Neil Millar, Associate, DLA Piper UK LLP.

Electronic signatures in the age of COVID-19

The disruption of recent weeks has brought into focus the importance of firms ensuring operational resilience and continuation of service at a time of social distancing and mass lockdown. In this respect, one issue which comes up repeatedly in our conversations with clients is how legal agreements can be validly executed in an era of remote working.

Here we explore electronic signatures in the age of COVID-19, and the legal framework governing the use of electronic signatures or “e-signatures” under English law.

What are e-signatures?

An electronic signature is widely defined in both European and English law to capture anything in electronic form which is attached to or logically associated with other electronic data and which is used by the signatory to sign. This might include, for example, a scanned manuscript signature, clicking an “I accept” box on a website or the use of an e-signature platform to insert writing into the execution block.

Permissibility of e-signatures under English law

Unlike European law, which follows a tiered approach in designating three levels of e-signatures under the eIDAS Regulation, English law has taken a historically permissive approach to the use of e-signatures and does not traditionally distinguish between various types.

This means that, assuming all other contractual formalities are satisfied, an e-signature will be a valid method for executing documents under English law. In addition, the Law Commission has also confirmed in recent years that e-signatures are both admissible in legal proceedings and can constitute a valid method for executing deeds.

Exceptions where a physical signature is recommended

That said, there are certain documents where it remains prudent to persist with the use of “wet-ink” signatures. In particular, the Land Registry and HMRC have thus far been reticent to accept electronically executed documents. Therefore real property and tax related documents which require filing at these registries (e.g. legal mortgages or documents where stamp duty is payable) should generally be executed by wet-ink signature. In addition, where evidencing the location of signing is important (e.g. due to tax considerations or when witnessing deeds) then parties may feel that a physical signature is more appropriate.

That said, aside from these relatively limited exceptions, electronic signatures are generally seen as a valid means of execution for the vast majority of documents under English law.

Recent developments - electronic signatures during COVID-19

Indeed, in recent weeks, the use of e-signatures in financial markets has received tacit recognition from one of the UK’s primary financial services regulators, the Financial Conduct Authority (“FCA”). On 20th April 2020, the FCA released a statement noting that they do not explicitly require wet ink signatures in agreements and that e-signatures will generally be acceptable for any interactions firms have with the regulator. While the FCA acknowledged that firms would need to consider their own legal advice and apply the FCA’s usual principles of business with regards to the execution of client documents more generally, this is generally seen as a positive endorsement of e-signing practices from the regulator. 

In addition, policymakers have also provided helpful clarification around the use of e-signatures for executing wills. Here there is an acknowledgment of the difficulty of obtaining valid execution whilst complying with government guidance on social distancing and, as a result, the Law Society has confirmed that, while it is not possible to witness a will via video-conferencing under the current law, it is possible to supervise the signing of a will using electronic means where you are not acting as a witness to the will. This clarification is designed to make the execution of such documents more feasible in the current environment. 

Conclusion

Aside from the limited exemptions outlined above, e-signatures represent a practical, cost effective and legally valid method for companies to execute documents, particularly with so many employees working remotely during the COVID-19 pandemic. 

As a firm, we are encouraging all of our clients to consider the use of e-signatures where possible in order to facilitate compliance with the government’s social distancing guidelines and, in this respect, a platform like DocuSign is well placed to support clients in adopting such an approach. 

Authors

Michael McKee is a Partner at DLA Piper’s Financial Regulatory practice in London. He has over 30 years’ experience of banking and investment banking issues having previously been an Executive Director at the British Bankers Association. Michael is also a member of the Executive Board of the International Regulatory Strategy Group of CityUK and the Corporation of London.

Neil Millar is an Associate at DLA Piper’s Financial Regulatory practice in London. He advises on a broad range of UK and EU regulatory matters, including issues relating to the UK Financial Services and Markets Act 2000, EMIR, MiFID II, AIFMD, and PSD 2.