Goodbye pen and paper … the rise of the electronic signature in Scotland

The recent publication of the English Law Commission’s consultation on English law issues in using electronic signatures has prompted us to review the position in Scotland. Increasingly, public and private sector organisations alike are considering abandoning the traditional hard copy pen and ink signature process in favour of the electronic equivalents, especially for bulk commoditised type contracts. This note addresses some commonly asked questions.

What does the law say?

We now have separate regimes in Scotland in relation to the use, signature and delivery of ‘traditional’ paper documents on the one hand and electronic documents on the other (as respectively defined in The Requirements of Writing (Scotland) Act 1995 (“ROWA”) (as amended)).

What is an electronic document?

Electronic documents are documents, which, rather than being written on paper, or some similar tangible surface, are created in electronic form. All documents governed by Scots law (with limited exceptions for wills and testamentary writings) can now take completely electronic form.

Note however that a 'traditional document’ created, printed off and signed on paper does not become an electronic document under Scots law just because it is delivered by e-mail. Although such electronic delivery in accordance with the statutory rules is equally as valid for paper documents as it is for electronic, what is delivered electronically is not to be treated as being the traditional document itself.

What is an electronic signature and can we found upon it in court if necessary?

An electronic signature is ‘so much of anything in electronic form as (a) is incorporated into, or logically associated with an electronic document, and (b) purports to be so incorporated or associated for the purpose of being used in establishing the authenticity of the electronic document, its integrity or both’. This is a very wide-ranging definition and could potentially cover everything from a scan of a handwritten signature at one end of the scale to a fully certified encrypted secure digital signature at the other.

Electronic signatures of all kinds have been admissible in court throughout the UK to evidence the authenticity or integrity of an electronic communication since The Electronic Communications Act 2000 and the Electronic Signatures Regulations 2002. Scots law has built and expanded upon the UK framework to make specific provision for the kind of electronic signature that is required for different types of document, through amendments to ROWA and the implementation of The Electronic Documents (Scotland) Regulations 2014 (“the Regulations”). More sophisticated forms of electronic signature have higher evidential status in the event of any dispute, as explained below.

Does the law require us to use any particular form of electronic signature?

In Scotland, a particular type of electronic signature, an ‘advanced electronic signature’ must be used to sign the types of document that ROWA says must always be created in writing (namely documents for the constitution of rights in relation to land, gratuitous unilateral obligations and some trusts).Such electronic documents must be ‘authenticated by each granter’ which means that an advanced electronic signature “which is uniquely linked to the signatory, capable of identifying the signatory, created using means that the signatory can maintain under his sole control, and which is linked to the data to which it relates in such a manner that any subsequent change of the data is detectable” must be applied for formal validity.

For other types of electronic document, any form of electronic signature may be used. However, an advanced electronic signature and, beyond that, a certified advanced electronic signature (as described below) will carry greater evidential weight in the event of any dispute.

Our organisation currently signs high value/important/all of our ‘traditional’ hard copy contracts probatively (i.e. formally by the signature of a director/authorised signatory in the presence of a witness). Is there an electronic alternative with equivalent standing in law?

For an electronic document to be ‘probative’ (which means that it benefits from a statutory presumption that the signature is authentic) an additional step is required after application of an ‘advanced electronic signature’ by the signatory as described above. That additional requirement is that the signature must ‘bear to have been certified’ which means that a third party certificate in the form prescribed in law has been added to verify the authenticity of the signature.

An electronic document bearing to have been authenticated by a party to the document by the application of an advanced electronic signature by that party with a qualified third party certificate and where nothing in the document or authentication indicates that it was not so authenticated attracts the same statutory presumptions of authenticity (i.e. ‘probativity’) as a pen and ink signed and witnessed paper document. This means (1) that the authenticity of that signature is assumed and (2) if such authenticity is challenged, the burden of proof in court in challenging the authenticity of the signature rests on the challenger.

Do we need to execute our contracts probatively? Could we opt for an advanced electronic signature alone, or even something more straightforward?

Aside from the statutory requirement under ROWA (as described above) to execute certain categories of contract in writing and where electronic, by applying an advanced electronic signature, there is no legal requirement in Scotland in most cases to put contracts in writing at all. Parties choose to do this for practical evidential reasons.

The decision by any organisation to opt for formal or less formal modes of signing, whether traditional or electronic, should be made following a risk-assessment exercise undertaken with legal counsel. The advantages of the tried and tested and probative execution must be weighed up against the convenience of new alternatives and the likelihood or otherwise of any challenge being mounted by a party to the validity of a signature. Organisations may be able to identify classes of contract that they consider should be signed probatively and others that need not be so signed.

How can we obtain an electronic signature?

Any enrolled Scottish solicitor, including registered in-house counsel, may obtain a Law Society of Scotland Smartcard, which incorporates both an advanced digital signature and the required certification by an independent third party. The Smartcard can be used where appropriate for probative execution by the solicitor as agent on behalf of his/her client.

There are also many commercial providers of e-signature products with different levels of security and ID verification. It should be noted that some basic 'off-the shelf' e-sign products do not satisfy the statutory tests as ‘advanced electronic signatures’ or, beyond that, for electronic probative signature. However, enhanced products with more stringent security are usually available at increased cost. In any case, organisations should ensure that they understand the evidential value of the e-signature product.

Organisations should bear in mind that the other parties to the agreement will also need to sign the document electronically. In many cases, it will prove more straightforward if all parties use the same e-signature product.

Can we sign a document electronically while the other party/parties sign it traditionally?

This is untested in law and we recommend that it be avoided, not least because of the inherent practical difficulties.

If the plan is for all parties to sign the ‘same’ physical document, then this cannot work at a practical level unless the hard copy traditionally signed document is turned into electronic form by, for example, being scanned. Under Scots law, a document is either traditional or it is electronic.

Scots law allows parties to sign a document in counterpart. This means that the parties do not all need to sign the same physical copy but may execute in two or more duplicate interchangeable parts. Therefore, theoretically, one party could sign a hard copy in ink and the others a duplicate electronic copy or copies by electronic signature. However, the law says that the actual document after signature consists either of all of the signed counterparts taken together or alternatively, one of the counterparts collated with the signing page or pages from the other counterparts. If you have a traditional hard copy document on the one hand and an electronic on the other, these cannot be collated into a single document without turning one form into another.

Who should apply an electronic signature on behalf of our organisation?

Regulation 5 of the Regulations sets out details of the signatories permitted to apply an electronic signature on behalf of juristic persons such as companies, local authorities and other corporate bodies. This can be accessed here.

Should we print off and keep a hard copy of our signed electronic agreement?

An electronic document which is electronically signed and delivered between the parties exists in and of itself, and is itself the binding legal agreement. Electronic agreements, like hard copy traditional paper ones, should be stored securely. An electronic agreement should be safely filed and retained in the organisation’s IT system with appropriate back-up and security in place. Many commercial e-signature providers also offer secure e-storage facilities.

If an electronic agreement needs to be made available in a Scottish court, this may be done by delivering it on an USB stick. However, a pilot scheme for a full electronic evidence portal is underway.

Conclusion

The legal framework supporting the use of electronic documents and signatures is now in place in Scotland. There remain a few uncertainties (such as the validity of mixed forms of signature - both traditional and electronic – on the same document) which will only be resolved if the issues are tested in court, or clarified in further legislation.

If you have any questions, please contact your usual contact at CMS or Caroline Wilson (Professional Support Lawyer; [email protected]).