Legal Teams & Risk Management – The Benefits of Standardised E-Signatures, Risk Assessment, and Cross-Jurisdictional Document Governance
Cross-jurisdictional deals rarely break down over the complexity of drafting documents. They usually break down due to poor execution. A deal team executed the wrong version, a signer did not have proper authority, a timestamp was ambiguous or the signedcopy could not be produced in time to prove validity.
Where does friction exist and where is it still rational?
While most commercial documents are capable of being executed electronically, legal teams will still need a practical decision-making framework to determine when to deviate from this general practice. The key issue is not whether a jurisdiction "permits" theuse of electronic signatures in theory. Rather, the key question is whether the type of document, the parties involved and the enforcement mechanism contemplated in the agreement create a higher level of risk.
Wet ink remains advisable for those types of documents that are subject to potential challenges regarding identification, capacity or formality such as documents requiring notarisation, certain real estate documentation or where a regulatory body orcounterparties insist upon wet ink execution. As a practical matter, it is recommended that firms identify exceptions to electronic execution and establish an operational plan for each exception identified. Where an exception requires partner approval, this shouldbe explicitly stated. If the firm's default position is "electronic by default," then the firm should clearly articulate how and when it will deviate from this default position and revert to wet ink execution while maintaining continuity in its audit trail.
In many cross-border transactions, the greater concern is inconsistency. In some cases, one party will execute electronically, while another will print and scan. At the end of the transaction, there will be several versions of the same PDF labelled as final. Establishing a standard for executing documents can help to eliminate this confusion.
For many legal teams, the benefit of using secure electronic signatures for legal documents lies in combining identity verification, auditing capabilities, and creating a demonstrably accountable audit trail for what occurred and when.
What constitutes a defensible signature record
The debate surrounding electronic signatures is rarely about the actual click that results in a digital signature. Instead, the dispute is usually related to the production of evidence to support the claim made in conjunction with the digital signature. Was the signer'sintent to sign? Was it the correct person? Was the correct version of the document provided to the signer? Was the signed version altered? Is it possible to reconstruct the timeline of events leading up to the creation of the digital signature? All of these arequestions that relate to establishing proof and establishing process controls.
It is also beneficial for legal teams to document context as well. For example, who invited the signer, for what matter, and on whose behalf was the invitation extended? If signing links are forwarded within a client's organisation, the process should providesufficient information regarding who executed the signature and why the firm considers it to be valid.
Cross border transactions add additional pressure to create a defensible record. A contract may be governed by the laws of one jurisdiction, signed by parties in multiple jurisdictions and enforced in yet another jurisdiction. The most effective way to mitigate thisrisk is to implement a consistent and well-documented process that clearly articulates the execution story.
Standardize the workflow and not only the tool
Many firms will choose a platform for their electronic signatures, but will not take the next step to standardize the workflow associated with that platform. It is the workflow that provides consistency among teams, locations and jurisdictions.
A basic template for a workable workflow includes the following elements:
- Lock the "signature version" into place as the singular source of truth for all subsequent actions
- Document the authority of the signer as well as store that documentation in the matter file
- Define the routing rules
- Establish identity and access control parameters
- Define storage
This is not "busywork." Most disputes arise out of minor failures. An executed PDF with no version identifier. Missing exhibits. A countersigned PDF of a different version. Standardization eliminates preventable errors.
Three layers of cross-border policy that keep your teams in sync
Implementing a practical cross-border electronic signature policy is much easier to manage and maintain if you build it in layers.
- Global Baseline: This layer establishes the minimum controls for electronic signature implementation, the standard audit artifacts that must be retained, the default storage procedures, and designates the entity responsible for maintaining templates and theprocess .
- Jurisdictional Exceptions: This layer identifies the categories/types of documents that require additional or enhanced steps that must be implemented prior to electronic execution. The goal here is not to write a lengthy treatise, but rather to provide associatesand legal operations with an operational checklist.
- Client-Specific Requirements: Each of your corporate clients may have its own set of internal policies and procedures related to execution, retention, and authentication that must be followed.
These client-specific requirements should be documented in the matter opening notes so that they are not rediscovered during the signing process.
