As the coronavirus (COVID-19) pandemic continues to cause disruption at unprecedented levels, the need for convenience and flexibility with respect to deal-making logistics has never been higher.
This briefing contains a high-level summary of key points of the law regarding the legal validity of electronic signatures ('e-signatures') in complex international financing transactions for Bermuda, BVI and Cayman Island companies, giving a comparison of the different jurisdictions and offering some practical points to assist during these challenging times.
While it is common that certain types of contracts are made purely by electronic means (e.g. 'one-click' e-commerce transactions), the use of e-signatures in complex international financing transactions has remained relatively low to date. However, in the face of mounting liquidity concerns and the possibility of signatories having to undergo self-isolation, quarantining or simply work from home for extended periods of time, we anticipate that there will be increased demand for e-signatures as businesses seek to execute financing transactions, whilst struggling to maintain operations.
What is an electronic signature?
E-signatures can take different forms. Examples include:
- typing a name at the bottom of an email;
- importing a JPEG copy of a wet-ink signature into a signature block;
- clicking an "I accept" tick box on a website;
- a cryptographic signature;
- a thumbprint on a tablet; and
- an electronic sound or symbol attached to a document.
The laws of Bermuda, BVI and the Cayman Islands are based on common law principles and English case law provides useful, non-binding guidance.
The European Union adopted Regulation (EU) No 910/2014 (the "eIDAS Regulation") with effect from 1 July 2016, which established an EU-wide legal framework for e-signatures. However, the eIDAS Regulation provides that it is for national law to define the legal effect of e-signatures.
English law provides a statutory framework for the admissibility of electronic signatures in legal proceedings under the Electronic Communications Act 2000. English common law has always been flexible in recognising that a range of different types of signature may be valid in respect of English companies. For example, the courts have accepted electronic forms of signatures including a name typed at the bottom of an email or clicking an "I accept" tick box on a website.
A report published by the Law Commission of England and Wales in 2019 (the "Law Commission Report") confirmed that it is possible to use an electronic signature under English law. However, the Law Commission Report acknowledged that there are a number of practical and other obstacles in certain situations (eg in connection with the mechanics for executing / witnessing English law deeds).
As leading international offshore jurisdictions, Bermuda, BVI and the Cayman Islands adopt modern and flexible attitudes aimed at facilitating cross-border transactions. Bermuda, BVI and Cayman legislation draws extensively on the eIDAS Regulation and the UNCITRAL Model Law of 1996 that preceded it.
Each of these jurisdictions has implemented legislation that recognises the use of electronic signatures and we have produced a comparison table showing the legal validity of electronic signatures for Bermuda, BVI and Cayman companies, which summarises some key legal points.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.