Benjamin Woof, solicitor at Shoosmiths, explains the implications of changes to the electronic signatures regime

Thanks, in part, to the growth of e-commerce, it is becoming more and more common for leasing documentation to be concluded electronically by means of electronic signatures (or e-signatures).

In the view of the European Commission, however, the uptake of electronic signatures and public confidence in them has not reached the desired level.

Therefore, the law governing e-signatures is changing from 1 July 2016 with the introduction of the Regulation on electronic identification and trust services for electronic transactions in the internal market (EU/910/2014) (Regulation).
The basic features of the current legislation are retained by the Regulation. However, some of the key changes are outlined below.

Legal recognition

As is the case under the current legislation, there are two classes of electronic signature: a "basic" electronic signature and an advanced electronic signature. Although the regime provides that electronic signatures should not be denied legal effect and admissibility in legal proceedings solely because they are electronic rather than handwritten, it is only advanced electronic signatures that automatically enjoy the same legal status as traditional "wet-ink" signatures.

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The Regulation has modified the definition of advanced electronic signature by inserting the phrase "with a high level of confidence" into the list of requirements below:

  • it is uniquely linked to the signatory;
  • it is capable of identifying the signatory;
  • it is created using electronic signature creation data that the signatory can, with a high level of confidence, use under his sole control; and
  • it is linked to the data signed therewith in such a way that any subsequent change in the data is detectable.

This change allows the signatory to electronically sign documents using the latest technologies, such as mobile phones, which may have fallen foul of the previous requirement for absolute sole control.

Trust services

The Regulation also replaces the concept of "certified service providers" with that of "trust service providers", which reflects the Regulation’s increased scope over the area of trust services. Trust services involve the creation, verification, validation and preservation of electronic time stamps, electronic seals and electronic registered delivery service, in addition to electronic signatures.

The aim of this change is to increase the degree of scrutiny over a wider range of electronic services, so that the public will have greater confidence in electronic signatures and their ancillary services.

Comment

In spite of the above, the Regulation does not bring about significant change to the existing legislation covering electronic signatures.
It is unlikely that the modified definition of advanced electronic signature will lead to a huge surge in uptake given that the signatories to a contract still need to jump through a number of technological hoops to create an advanced electronic signature, but it may increase finance companies’ confidence in electronic signatures.

It remains for finance companies to find a balance between offering greater convenience to consumers and safeguarding the authenticity and integrity of the signatures they receive. Furthermore, finance companies need to ensure that they still meet the required legal formalities for certain documents. For example, guarantees executed as a deed still need to be executed using a handwritten signature.

Benjamin Woof, solicitor at Shoosmiths