Early on in the project, I thought that the answer to everything was indeed the electronic. I put that proposition to the law firms with which we were engaging and the universal answer, interestingly, was that there was no client demand for it. I am not 100 per cent convinced that there is no client demand. It was also reasonably clear that the solicitors were reluctant to engage with electronic signatures too far too quickly.
Part of the concern relates to the security of even the advanced electronic signature and the certification process, which was mentioned in your previous discussion. The problem has been brought about largely by commercial providers that are exposed to the hazards of the marketplace. In the discussion paper, we give one or two examples of certification service providers in the Netherlands that have gone bust, causing a lot of problems.
An interesting development that we mentioned briefly in our written evidence is that the Law Society of Scotland is now issuing all its members with a smart card, which will provide an electronic signature for every solicitor who is registered with the Law Society. Clearly that opens up certain possibilities. So far as we were able to establish with the Law Society and with Registers of Scotland, which is also significantly involved in this because of the land registration rules that were referred to—I have lost my thread, I will try to regain it. The point is that solicitors could use those electronic signatures on behalf of their clients, provided that they had the appropriate mandate to do so.
Another point that was put to us in discussion as, at that time, an abstract possibility—it is now a slightly greater possibility—was that a solicitor requires a mandate every time they apply the advanced electronic signature that Mr Stevenson was referring to. Of course, it may well be that you apply your advanced electronic signature to what you believe is a final version of a document in its electronic form and then the next person who comes along to apply their advanced electronic signature will say that their name is spelled wrongly on page 13 or the wrong company number was given or—as I found recently in a conveyancing transaction in which I am involved—their national insurance number was not given correctly, and so on.
Those are the sorts of things that happen and they hold up transactions. It is important information—it is important that it is correct—so the solicitor then has to go back to the beginning. They have to get a fresh mandate to apply that advanced electronic signature to the document again as it is now a new document. It was said in discussion that that would be much too cumbersome. Doing it to the paper document, which is provided for in the Requirements of Writing (Scotland) Act 1995, is slightly easier. It is not exactly easy but it is a lot easier. It is basically the famous process of putting your initials in the margin at the place where the document has been manually corrected.
There are obvious advantages to the electronic option, but there are drawbacks from a purely practical and pragmatic point of view. My sense overall as we went through the consultation process was that we are still in a transitional phase, which may go on for many years yet. The mixed economy was mentioned previously—paper is still important and paper still has certain advantages.
The transactions in which we see the new process operating primarily—to begin with, at least—are the ones where the parties will often have been negotiating with each other for years before they get to that particular stage, so they are in a pretty close and basically trusting relationship. They know each other and they are expecting a signature page to come from, say, Stewart Stevenson Ltd to Hector MacQueen Ltd at the other end of the line. They have their lines of communication well established through their solicitors so there is a close relationship of trust. That is why I am not unduly concerned, in that particular context, about some of the issues that have been mentioned in relation to signature pages and so on.
We will have to rely on the law as it is for other transactions between parties who are less familiar with each other, as may well be the case. However, I think that the same issue of security exists as the law is at present and it is not an issue that one can clearly see a solution to without creating all sorts of burdens on business and on people who know each other perfectly well and are carrying out perfectly reasonable transactions. We have to be very cautious in this area, but we need to keep an eye on developments. That is where the ancillary powers in section 5 of the bill may be useful.