Learn: Electronic Signatures
Concept
Signing documents is, and always has been, central to the smooth operation of legal services. A signature is a legally enforceable way of indicating knowledge, approval or acceptance. In the past signatures were handwritten. However, electronic signatures (e-signatures), as the name implies, allow documents to be signed electronically. A valid e-signature can therefore be defined as a legally enforceable indication of knowledge, approval or acceptance evidenced digitally.
There are numerous ways to sign electronically and many different types of e-signatures. In their simplest form, e-signatures could be ‘tickbox declarations’ or handwritten signatures that are scanned and inserted into an electronic document. Alternatively, advanced e-signatures use software to produce a unique, digitally generated signature capable of identifying the signatory.[1] This variety has, until recently, rendered e-signatures unclear and underused, particularly in the context of deeds and documents which are required to be signed by statute.
Case study: DocuSign
DocuSign is arguably the most notable provider of the advanced e-signature technology. It operates a software-as-a-service (SaaS) business model by which users pay a subscription fee to sign documents via the DocuSign software. The concept is simple: documents are signed and verified using an electronic device. There are many drivers behind the recent increase in uptake of the technology. DocuSign’s journey helps illustrate the development as well as subsequent spread of e-signatures and the advanced e-signature technology.
Regulatory Development
DocuSign was founded in 2003, which demonstrates that the technology is not new. However, innovations in the regulatory framework in which the technology operates have facilitated their increased use. The EU first recognised e-signatures in 1999[2], before introducing the more expansive eIDAS Regulation[3] in 2016. The EU was followed by the US, which passed the Electronic Signatures in Global and National Commerce Act in 2000. Moreover, the UK Law Commission recently published a report confirming that e-signatures can continue to be used in executing documents post Brexit, including when there is a statutory requirement for a signature.[4]
Although e-signatures were already being used in a variety of transactions prior to the Law Commission’s report, they were less often relied upon in large cross-border transactions due to concerns in their reliability, security and evidential value. These regulatory developments have increased user confidence, thereby resulting in an increased uptake of e-signatures.
COVID-19
It is clear that COVID-19 accelerated the spread of e-signatures. With travel restrictions, social-distancing and lockdowns in place, businesses and individuals had no choice but to adopt e-signatures to allow transactions to continue. This is evidenced in DocuSign’s 2020 customer acquisition figures which state that the company added 260,000 new customers between January 2020 and January 2021, a 46 per cent year-over-year increase.[5] According to DocuSign, this brings them to over 820,000 customers and hundreds of millions of users in over 180 countries.[6] In a year where face-to-face interactions stopped, e-signatures proved to be critical.
Environmental Benefits
Whether environmental considerations are better described as drivers or consequences of the uptake of e-signatures is open to debate. But it is irrefutable that e-signatures have impressive environmental benefits, which range from reduced air travel to decreased paper consumption. From its establishment in 2003 till January 2020, DocuSign claims to have saved 20 billion sheets of paper, 11 billion litres of water and prevented 65,000 tonnes of waste and 900,000 tonnes of CO2 from polluting the environment.[7] As companies become more environmentally conscious, e-signatures will certainly be considered in corporate strategies to combat climate change.
The Future
The journey of e-signatures shows that often technological innovation occurs more quickly than regulatory change. Innovation in the legal sector requires an open-minded regulatory regime that encourages technological development and facilitates its use. This explains why a relatively simple technology has taken so long to become widespread. When technology and regulation work together, the benefits are significant; regulatory pragmatism can and should be used to foster novel ways of tackling today’s most pressing problems.
[1] Department for Business, Energy & Industrial Strategy, Electronic Signatures and Trust Services: Guide (August 2016) 4
[2] Community framework for electronic signatures [2000] OJ 2 13/12
[3] Electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC [2014] OJ 2 257/73
[4] Law Commission, Electronic Execution of Documents (Law Com No 386, 2019)
[5] DocuSign, Inc., ‘DocuSign Announces Third Quarter Fiscal 2020 Financial Results’ (PR Newswire, 5 December 2019) <https://www.prnewswire.com/news-releases/docusign-announces-third-quarter-fiscal-2020-financial-results-300970304.html> accessed 1 March 2021
[6] ibid