Scotland to introduce new form of execution (for documents)

What next for the execution of documents in Scotland? Scott Burns, partner at CMS Cameron McKenna, comments on a Bill before the Scottish Parliament which he says will make it easier to finalise transactions in a practical and timely way.

Original news

A Bill to make provision about execution of documents in counterpart and the delivery by electronic means of traditional documents and for connected purposes.

What is the purpose of the Bill?

The Bill is intended to enable the execution of documents in counterpart (both traditional paper form documents and electronic documents). Execution in counterpart means that different parties to the same document can sign separate copies of it, rather than all having to sign the same piece of paper. The Bill also provides for the delivery of traditional paper documents by electronic means (for instance, by e-mail, memory stick, disc etc) rather than by hand or by post.

Can Scots law documents (either simple or the equivalent of a deed in English law) not already be signed in counterpart?

The Scottish Law Commission has referred to evidence that execution in counterpart is already competent in Scotland according to old case law. However, this has not been the generally accepted view in practice, and lawyers have avoided execution in counterpart for fear of invalidity. There is no concept of deeds in Scotland.

Why has it taken so long for Scotland to catch up with the useful business technique of execution in counterparts?

We can only speculate—perhaps pressure on parliamentary time. Additionally, sometimes parties choose English law to govern their contracts to allow them the convenience of executing them remotely in counterpart and this may have removed some of the urgency for change.

With international business and a fast moving world, are parties using some form of execution by electronic means already?

Yes. Many companies with international business and some financial institutions are using electronic means of execution. Often, however, this form of execution is employed in ‘routine’, lower value contracts rather than those with the greatest commercial significance.

Are there any documents which will not be allowed to be executed by electronic means?

No. Scots law does specify that certain types of contract have to be in writing (for example, the transfer of interests in land). However, recent legislation—the Land Registration etc (Scotland) Act 2012 and more recently, the Electronic Documents (Scotland) Regulations 2014, SSI 2014/83 which came into force on 11 May 2014—makes it clear that electronic documents can have equivalent status and validity to paper documents. This new legislation sets out the requirements for an ‘advanced electronic signature’ that must be used in the case of contracts relating to land, testamentary dispositions, and so on, which must be in writing.

When is this Bill likely to pass into law?

This is the first Bill in a new parliamentary process designed for Bills emanating from the Scottish Law Commission. Stage one consideration of the Bill should be concluded by 28 November 2014. Like any other Bill, stages two and three will have to follow. We have been advised that the process is likely to be completed in early 2015.

Do you think it will improve execution of documents under Scots law?

Yes. The Bill has been drafted to take account of concerns raised by practitioners and will make it easier to finalise transactions in a practical and time saving way.

Interviewed by Nicola Laver.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

First published on LexisPSL Banking & Finance. Click here for a free trial.

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