52. There are many requirements in law for "documents", "records" or "instruments" to be in "writing" and often "signed". The definitions of such words in statute and case law may not encompass digital forms of information as well as more traditional forms of "documents", "writing", "signatures" and so on. This may have the effect of preventing some commercial transactions or dealings with Government being conducted electronically, or place such transactions beyond the scope of some laws.[138]

53. The Government has stated that "at present, there are circumstances where there is doubt about whether a requirement in law for a signature can be met legally using an electronic signature"; and that "the position on requirements for information to be 'written' or 'in writing' is clearer — such a requirement cannot, at present, be met using electronic means".[139] It regards these "uncertainties and limitations" as "important barriers to the development of electronic commerce and electronic Government" which need to be dealt with. [140] One legislative approach has already been rejected. The Government has decided that it would "not be sensible to impose equivalence between traditional and electronic means of communication in one fell swoop. Such a move could have unforseen consequences. Equally, there will be cases (e.g. the registration of births, deaths and marriages) where it is not appropriate, at this stage, to allow electronic means to be used alongside traditional means, or where further consideration and public debate may be necessary, or where it may be necessary to impose specific conditions or restrictions".[141] Instead, two approaches to updating the law are being considered: updating statutory requirements for "writing", "signature" etc on a case by case basis using primary law; and taking powers in primary legislation to make amendments to the law by statutory instrument, as required.[142]

54. Many respondents to DTI preferred that the law be updated by means of statutory instruments, as long as provision was made for consultation on each regulation.[143] The alternative view, that the law should be updated by primary legislation, either in one fell swoop, or on a case by case basis, was also supported by some respondents.[144] EURIM argued that primary legislation could be used to deal with "the majority of common situations".[145] The CBI and the Law Society argued that the definition of "writing" in section 178 of the Copyright, Designs and Patents Act 1988 could be substituted for paper-based definitions of "writing", particularly in relation to priority areas.[146] British Steel stated that "a firm foundation of primary legislation" was required to establish which documents may be accepted electronically and that secondary legislation was "not appropriate for such fundamental issues".[147] PriceWaterhouseCoopers questioned whether "any types of document should necessarily be prevented from being electronic", as the Government has indicated should be the case.[148]

55. Another option suggested was that DTI should follow the practice of the recent draft Australian Electronic Transactions Bill in relation to the timing of changes to the meaning of words such as "writing" etc.[149] That draft Bill changes only those definitions explicitly specified in regulations, before 1 July 2001. After that date, all definitions are changed, except for those which are explicitly exempted. The advantage of this approach is that urgent priorities for updating the law can be dealt with immediately while a review of the whole statute book is undertaken; and that a deadline for the conclusion of that review is specified in law. The Australian approach also allows for changes to be made in the means by which Government services can be delivered to citizens and firms before the law is entirely updated.[150]

56. Mr. Reed, Head of the Information Technology Law Unit at the Centre for Commercial Law Studies, Queen Mary and Westfield College, University of London, told us that there were actually very few English legal requirements for commercial transactions to be undertaken in writing or to be signed by hand. He could cite only three — dealings in land, marine insurance and contracts of guarantee. Of more significance were the nearly 5,000 requirements for writing or written signatures on documents concerned with the proceedings of or dealings with public bodies.[151] Mr. Reed argued that "there are some things that Government could do without major legislative action". In relation to corporate tax returns or VAT declarations, for instance, it is possible for these to be submitted electronically at present but only if individual agreements are negotiated by firms with the departments concerned. Mr. Reed stated that it would be "far easier for business if there were published standards, which if [businesses] complied with [them, then firms] would be able to keep records electronically, send them to the relevant authority" and so on.[152]

57. The Government has already begun to take action in this area, prompted by the Prime Minister's 1997 target for 25% of Government services to be capable of electronic delivery by 2002 and subsequent targets for 50% of Government services to be capable of electronic delivery by 2005 and 100% by 2008.[153] The Finance Bill includes provision for regulations to be made which will permit electronic interaction between firms and individuals and the Inland Revenue and HM Customs and Excise, including the on-line submission of VAT, Insurance Premium Tax, Landfill Tax, self-assessment Income Tax and annual or quarterly PAYE returns.[154] The current review of company law includes a consideration of legislative change to take account of recent technological developments, including the possibility of electronic communication between boards of management and shareholders.[155] The Export Control Organisation launched a computerised form for export licence applications on 1 March.[156]

58. Despite this welcome progress, we think a more urgent approach to this issue is required. In 1997, DTI welcomed the detailed analysis undertaken by Mr. Reed of the definitions in English statute and case law of the words "document", "instrument", "record", "signature" and "writing" and his recommendations for reform.[157] Mr. Reed recommended amending the Interpretation Act 1978 to ensure that such words could be used in future legislation to cover electronic transactions and systematically amending existing legislation on a case-by-case basis, where appropriate. He concluded that "it should be comparatively easy to identify the majority of those statutory requirements of form which are already perceived as unnecessary barriers, and to apply new definitions as appropriate".[158] DTI indicated that it would consider taking these recommendations forward. Two years on, little appears to have been done. Mr. Reed told us that the Government "lost an opportunity a couple of years ago to take fairly quick action on the writing and signatures question, which could have been very easily clarified for English law, and would have set a model for other people".[159] We agree. DTI has recently requested views on the "appropriate means of ensuring legal recognition of electronic signatures and writing" without giving any assessment of the instances of the use of the words "signature" and "writing" in law it believes might need to be changed or which transactions it thinks should not be allowed to be conducted electronically. The outdated definitions of words such as "writing" and "signature" in law are potentially significant barriers to the development of electronic commerce in this country. DTI seems not to appreciate the need for swift legislative action in this area and would appear to have made limited progress since 1997. We favour the Government taking powers in the forthcoming Electronic Commerce Bill for secondary legislation to update definitions of words in law to take account of new information and communication technologies and drawing on the approach of the Australian draft Electronic Transactions Bill 1999. We recommend that the Government quickly publish an analysis of legal changes required, both in relation to English and Scots law and identify those transactions and official proceedings which it believes should not be allowed to be conducted electronically.

139   Consultation 99, paragraph 16; Masons questioned the rationale for this assertion in their response to Government, paragraph 7 Back

140   Consultation 99, paragraph 17 Back

141   Consultation 99, paragraph 17; also Q576; some respondents to Government questioned the reasoning behind this assertion - for instance Masons paragraph 9 Back

142   Consultation 99, paragraph 18 Back

143   Including responses to Government from APACS p4, Lloyds p1, Brokat AG section III.A, PriceWaterhouseCoopers section II p4, Barclays p3, Institute of Directors p1, IEE p1, Nationwide paragraph 2.1, IMIS p4, Association of Unit Trusts and Investment Funds p1, Motorola p11, BBA p1, LIBA p2, British Computer Society p4, Vodafone paragraph 11, Inatitute of Credit Management p2, RICS p3, Royal & Sun Alliance p7, SAP(UK)Ltd paragraph 3.1.4, Demon Internet/Scottish Power section 2, British Music Rights, CommerceNet UK p7, Energis section 3, IUA p1, Berwin Leighton p1; responses from Computer Weekly p3, Consumers' Association p3 and Anderson Consulting p2 all stressed the need for consultation on instruments Back

144   Responses to Government from the Post Office paragraph 1.12, British Telecommunications paragraph 1, the UK Notarial Forum p1, Cooperative Insurance Society paragraph 28, Justin Watts p2, Charles Schwab p4, MacRoberts pp5-9, Tucker Turner Kinglsey Wood & co paragraph 10, Society of Justices' Clerks p1 Back

145   Responses to Government from EURIM, p3, Masons paragraph 9 Back

146   Response to Government from Confederation of British Industry, Annex A; and from the Law Society section II.1, Alliance and Leicester p1, Masons paragraph 8 Back

147   Response to Government from British Steel, p2 Back

148   Response to Government from PriceWaterhouseCoopers p4; and from John Sacher, Interforum p2, Alliance for Electronic Business paragraph 2.2.3, AOL/Compuserve p2, American Express p2 Back

149   Responses to Government from R.I. Howland p6, Alliance for Electronic Business paragraph 2.2.3, Law Society section II.1 Back

150   Australian draft Electronic Transactions Bill 1999, part I clause 5.2 and Explanatory Notes p5; see footnote 51 for reference Back

151   Qq 266, 270; Ev, p99 paragraph 2.1.1; see also response to Government from Cooperative Insurance Society paragraphs 5-18 Back

152   Q270; Ev, p99 paragraph 2.1.2 Back

153   Our Information Age, April 1998; Modernising Government, paragraphs 15-16 Back

154   Q576; HM Customs and Excise and Inland Revenue press release CW1, 9 Mar 99 and HM Customs and Excise Budget Note 12/99 Back

155   Q576; DTI Press Notice, 99/166, 25 Feb 99; Modern Company Law, Company Law Review Steering Group, Feb 99, URN99/654, section 5.7 and paragraph 6.32 Back

156   DTI Press Notice, 99/174, 1 Mar 99; also Trade and Industry Committee, Second Report, 1998/99, Strategic Export Controls, HC65, paragraphs 70-1 . The form will be sent to firms, and returned, by diskette, rather than over the internet, but it is understood that supporting documentation may be transferred over the internet Back

157   Consultation 97, Annex A Back

158   Digital Information Law: electronic documents and requirements of form, C. Reed, Centre for Commercial Law Studies, Queen Mary and Westfield College, University of London, 1996, p307 Back

159   Q257 Back