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Agenda item 3 is an oral evidence-taking session on the Legal Writings (Counterparts and Delivery) (Scotland) Bill. I welcome from the Faculty of Advocates Robert Howie, Queen’s counsel, who has agreed to give us an opening statement. I think that of those who provided us with written evidence on the bill, the Faculty of Advocates had the most concerns about it, so I look forward to hearing what you have to say, Mr Howie.
Indeed, sir.
Thank you very much, ladies and gentlemen. I should indicate at the outset that the faculty perhaps deals with far fewer large international transactions than some of the larger commercial firms, particularly those cross-border English firms that have taken over Scottish ones. Our involvement in the making of contracts tends to be with contracts to settle litigations. As they are formed on the floor of Parliament House, and everyone is present, the problems at which the bill is directed of necessity do not exist.
However, we see litigation with regard to a number of contracts that are made in Scotland. They are perhaps among the larger contracts that are made in Scotland, such as large building contracts, private finance initiative contracts—if I dare mention them—commercial shipping contracts and sales of company contracts. In a number of such contracts, one sometimes sees unhappy consequences.
We rather fear that a danger is lurking in the bill. That is not necessarily a reason for rejecting it, but the committee perhaps ought to contemplate matters that are in danger of being overlooked, in view of the desire that has been expressed, particularly by a number of the larger commercial firms, that what is proposed should go through pretty much as proposed.
The faculty’s main concern is the risk that the proposed form of execution in counterpart, as opposed to a situation in which everyone executes the same document, can lead to opportunities for fraud and, more probably, given how much more common they are, downright error and mistakes. If enough people sign enough different copies, the copies might not be identical and someone might think that some of the contract either is in or has been deleted. A computer glitch might lead someone to think that something is there, while the other side thinks that it is not there. Only later, when the matter comes before the courts—which is where we tend to see these things—will it be discovered that people did not sign up to the same things or others maintain that they did not sign up to the same things.
That is why we have reservations. If one permits execution by the exchange of the back pages of a contract, each signed by a particular party, plus the front page, it is all too easy for the rogue or fraudster to amend the critical stuff in the middle of the sandwich. Once upon a time, one was required to execute or at least initial every page. Our forefathers were not stupid; there was a reason why one had to do that, and we suggest that human nature has not changed so much in the intervening years that that risk has gone away entirely.
There might, of course, be countervailing advantages. We freely concede that we can see some advantages in the bill. It might save a degree of cost, although we confess that we are inclined to be sceptical as to just how much it will save. Most of the contracts that are made under Scots law are smaller-scale contracts, which are made not in Glasgow, Edinburgh or Aberdeen but in small towns around Scotland. In such cases, we suspect that the saving of cost and the convenience that are envisaged as a result of the electronic execution and exchange of counterparts, instead of simply having people come into the office to do all that, will be limited.
We also invite the committee to question the number of contracts governed by Scots law—those to which the bill will apply—that, as has been mentioned in discussions, involve eight or half a dozen parties in as many parts of the world. I venture to suggest that not too many contracts governed by Scots law involve American banks in New York, Japanese banks in Tokyo, underwriters in London and a seller and purchaser in Edinburgh and, say, Berlin.
We suspect that it is unlikely that the bill will bring to Scotland any increase in legal business. It will not make a great difference to people’s decisions about whether to make their contracts subject to the law of Scotland rather than the law of England—or anywhere else, for that matter. As a general rule, people decide on the contract-governing law on the basis of its effects on the substantive matters in the contract instead of the ease or convenience of execution.
11:15We venture to suggest that if the case is big enough, if it involves a very big transaction of many millions of pounds and if all the people involved are in different places, the savings in cost and convenience that would be achieved by the bill might be so infinitesimal in comparison with the size of the contractual sums at issue that the parties would likely have their great big settlement meeting—or their two settlement meetings—in any event because the relative increase in cost would no longer be worth the consideration. For those reasons—but primarily because of our big concern about error and fraud—we suggest that the bill might usefully be subject to your consideration.
If execution in counterpart and delivery are to proceed as proposed, one possibility is that the bill could provide for only the entire document to be exchanged, which would avoid or at least reduce the risk of people slipping things into the middle of it or the risk of finding that, through error—which, as we have suggested, will much more commonly be the case—parties have not agreed to the same thing or do not realise that they have not agreed to the same thing. One would not wish an increase in the number of cases in which parties come to court asking for their documents to be rectified. In such instances, the first problem is finding out what they have agreed to, never mind what they were supposed to have agreed to.
We suggest that those issues have to be weighed against the undoubted increase in convenience in a number of cases and some degree of cost saving, although there is a question mark over how much cost saving there might be, how many cases the bill will make any material difference to and whether there will be any great advantage through the business that it will bring in. At best, it might partly slow the flow of business away from Scots law cases.
I hope, sir, that that has put in a nutshell what we have said elsewhere at rather greater length.
I think that it has, and I am grateful for that. Stewart Stevenson has a question on a point of detail.
I just want to test the Faculty of Advocates’ views on the financial size of the issue. I heard a substantial attempt to downplay the amounts of money that might be involved. As a rule of thumb, the United Kingdom’s clearing banks turn over their net asset value in transactions every three days. When I was involved in these issues 15 or 20 years ago—as, I should say, a technologist rather than a banker—the daily turnover of the Scottish banks could be as much as £100 billion. Does the Faculty of Advocates have a sense of what proportion of that traffic is under contracts that would be signed mutually by parties? That turnover is clearly commercial rather than the turnover from individuals’ wallets, as the value of notes that the Scottish banks issued 20 years ago—I know that I am substantially out of date—was only about £2 billion. I wonder what quantum of transactions might be covered by the contracts that we are thinking about in relation to the bill.
It is extremely difficult to provide an answer to that question, sir, particularly from a bar such as ours, which, as I have indicated, deals largely in litigation. I suggest that, as we do not have the degree of chamber practice that obtains in, for example, London, it is wrong to believe that the faculty would have an immediate grasp of exactly how much money is being turned over in given contracts. Nevertheless, I venture to suggest that our very inability to say that large quantities of such cases come across our desks arises because large quantities of the work that you are discussing is written under foreign law—English law, in particular—and will continue to be so whether or not the legislation is passed.
The reasons why people choose to have their contracts governed by a given law are generally substantive and relate to the transaction that they are trying to carry out and where those involved in funding and underwriting it are based. As that work is undertaken largely in London, people tend to have a familiarity with and a concentration on English law and use English firms, and they have merchant banks that are much more comfortable using people whom they know, recognise and have dealt with for the last 30 years. With respect, I rather fear that nothing the committee does or does not do in connection with the situation will make any material alteration to that.
With a view to that, we suggest that the financial saving that is being contemplated in this case and which has been suggested in the Finance Committee’s questionnaire is open to considerable doubt because, as one will find, only a small number of such contracts are written under Scots law. Given the number of contracts that will be thus created and the unlikelihood of their being at a level that would make any material difference, we suggest that it is unlikely that there will be any great saving at all over what would be achieved today if, for example, parties wanted to execute a document by round robin through the post. Again, to be realistic, we suspect that many of the contracts that will be formed under Scots law and within Scotland will still be taken round to the other chap’s office for him to sign and vice versa, particularly if the people involved live in one of the big cities. That will give them the advantage of being more certain about what exactly everyone is signing up to.
I want to run a possible option past Robert Howie with regard to the issue of fraud. Could the original document be sent to the clients, but be protected by ensuring that no one could add to or amend the information in it? It would be the same as, for example, reading something online and then agreeing to the terms and conditions. Once the document had been read, the individual would tick it to agree that it was correct and would sign a sheet that detailed the document—in other words, the business that they were doing, which would be included in an attachment—and recorded the fact that they had read the document and agreed that it was correct. Could that be considered as a means of doing away with the opportunity for people to add to or amend the original document?
I am sure, madam, that anything can be considered that is thought likely to reduce the risks of fraud—or, indeed, downright error, such as people getting things wrong or using different copies or drafts from different times, which I ask members to think about as being far more likely.
I am sure that people can bend their minds to finding methods of trying to reduce the risks, and they should by all means do so. However, the Faculty of Advocates is concerned that if the bill were to be passed on terms that would allow other things to be done—we had in mind the front and back pages—the process would be all too unpleasantly open to roguery. I am sure that one could try to find methods that electronically or otherwise would reduce that risk. Of course, the rogues will try to find ways around them; we just have to accept that that is the way of the world. The question that we suggest the committee will want to satisfy itself about is whether the proposed legislation reduces that risk, in so far as it could, relative to whatever advantage the committee thinks it could get out of the bill in terms of time, convenience or anything else.
With respect, I do not think that it is for the Faculty of Advocates to say that things should be done this way or that. There are people with greater technical knowledge who know better than we do whether things are secure or not, and there are others more immediately involved in the direct drafting of things who might be better able than we are to say whether matters are more readily capable of being fixed.
It has to be admitted that we have a somewhat skewed view of the world, given that an issue crosses the desk of someone like me only if it has gone wrong. We all tend to be storm petrels, immediately saying, “But what about this risk, that risk or the next risk? What happens if these people do this or that?” I freely accept that, because we see not the 100 things that go perfectly well but the one that goes wrong, we might have a skewed view of the world, but the trouble is that the damage caused by one that goes wrong can be very considerable. We want to see what we can do to try to reduce the risk of that one thing going wrong.
Okay. Thank you.
Good morning, sir. Notwithstanding your skewed view of the world and given that error and fraud are the principal concerns of the Faculty of Advocates and that, notwithstanding your reservations, we are likely to proceed with the bill, what improvements to the proposed legislation can you suggest from either your perspective or the faculty’s?
The improvement that we have suggested, sir, if one is to proceed in the manner proposed is that one should require deliveries to relate to the entire document. Furthermore, if there is to be immediate effect for contracts—that is, if they are to come into effect at a precise moment that can be more readily identified, which is one of the proposed advantages of the legislation, as it means that one can say that they came into effect on such and such a date—that should be followed up by a full postal version of the document. The full original should go through the post to ensure that somebody at least has the opportunity to identify an error. I apologise for repeating myself but, as we have suggested, error is far more common than fraud. Errors happen much more commonly, and they get picked up and corrected. That is a great deal cheaper than their being picked up and corrected when everyone has fallen out for other reasons and the whole thing ends up in the Court of Session, which takes a lot longer and costs a great deal more to sort.
That is the suggestion that we have offered. Others who are more immediately involved in current practice and doing these things for the big commercial firms might be able to assist you further, because they might have experienced problems on a number of occasions and might have been able to sort them out to ensure that they did not come across the desks of persons like me. Again, because of our skewed view of the world, we see the ones that have gone wrong—perhaps badly wrong—and we tend to suggest stronger remedies because we see the more ill patients, if I may borrow that metaphor.
Thank you very much. Of course, we will hear from other organisations’ representatives later on, which will be helpful. I think that Mike MacKenzie will ask the next question.
I was interested in Mr Howie’s use of the sandwich analogy. The analogy is probably pretty good—if I order a steak sandwich and ask for it to be rare but it comes to me well done, that would fall under the description of an error, whereas if I order and pay for a steak sandwich but end up with a Spam sandwich, that would be fraud.
Given that the impetus for the bill arises from the benefits that we accrue as a society through our technology, can you cast your imagination in the direction that would look to that same technology to provide safeguards against both error—which we know happens already, otherwise you would not have any work to deal with—and fraud? Again, if there was no fraudulent practice, I respectfully suggest that you might find yourself out of work. Are there ways in which the same technology can be used to prevent the kind of problems that we experience in any case?
There are those who would smile, having heard you ask me of all people that question, and suggest that you had asked the very last man in the world whom you should have asked about it.
11:30
Or perhaps the first.
I am reluctant to get involved in saying, “Yes, we suggest this, that and the next thing,” because frankly the necessary technological know-how as to how fraudulent practice could be prevented, if that could be done, is not our business. Other people are better qualified in those matters and could give you better and more useful answers about the technology that one could or could not use to protect oneself from alterations and changes, and whether such technology could be got round readily. With respect, your question seems to be about computer technology rather than fraud and would be better directed elsewhere.
Ultimately, the trouble with fraud is that it is a crime of deliberate intention. If people are going to commit fraud, they will set out to get round whatever protection you have put in. The question is how difficult you can make it for them. As I indicated to Mr Scott, we have presented one suggestion in that regard. One can perhaps add the tweak that, if one is to have the ability to execute in counterpart, the originals have to follow, so that one can find the errors and spot them more quickly and more cheaply than one would otherwise do.
I would have thought that the aim is to draft legislation that reflects the evidence that the committee gets about the extent to which technology will protect parties and about how cases that are not done technologically can be protected. One has to allow for the fact that if the legislation simply allows people to execute in counterpart, there will be people who execute in hard copy in counterpart, who will present the front and back pages, as I said.
On such occasions, I tend to use the example of Banff. If a contract is made in Banff, what will happen, given that that is not where we will get large contracts that have a big technological background or which involve large-scale organisations? Perhaps that is unfair on Banff; I should indicate that I make no particular accusation against Banff but simply take it as an example of a small Scottish town that nonetheless will have some degree of contractual work in it.
The legislation must be able to cope not merely with the large-scale deals that involve the big commercial firms that were in the Scottish Law Commission’s original consultation list and which will no doubt give evidence to you, but with much more low-level contracting work. The committee must allow for the fact that the legislation will be used by people who are operating at such a level. You must ensure that, in protecting and thinking about the top slice of the work in Glasgow and Edinburgh and the stuff that is being done with London and elsewhere, you do not overlook the ability to use the approach in smaller-scale transactions elsewhere, without necessarily using technology. You must ask, “If that is being done, are we satisfied that we have not opened the door to a raft of potential errors and troubles that we will come to regret, because contracts that were executed in what people deemed to be the simplest and cheapest available method have got into difficulty?”
We have made one suggestion on how we might put that right. I do not venture to suggest that there are not other approaches, which might commend themselves to the committee as being better. However, I recommend that you consider whether the problem is sufficiently grave to justify making alterations to the bill in an attempt to reduce the risk and, if it is, what alterations might be made.
The member for Banff might want to comment.
It is perhaps particularly unfortunate that Banff was chosen, given that it is the location of the specialist court for cases to do with fishing, which is an industry that has a turnover of some £460 million a year. Recent fines that have been levied in the pelagic sector have been in seven figures, so Banff’s work is not quite as small in scale as the town’s position in relation to Dornoch and Glasgow might suggest.
As someone who does shipping cases, I know what you mean.
I listened carefully to what you said regarding the economic aspects of the bill and what it may or may not offer. If the bill were to pass through the parliamentary process and become an act of Parliament, either in its current form or as amended, surely that would take Scotland on to a different platform. On whether the large transactions come to Scotland, it would be up to those who operate within Scotland to promote their skills and their services. I suggest that if we do not have this piece of legislation, the opportunity for further work to come to Scotland would be taken away. Would that be a correct assumption?
It is a possibility, but I suspect that it is rather an unlikely one. As I have said already—I apologise for repeating myself—I venture the suggestion that people decide the law that they want to govern their contract by reference to matters to do with the substantive matter that they are dealing with. How one executes a contract falls—or certainly should fall—a very, very long way down the list of priorities. It is an also-ran—or it should be—because one ought to be thinking about matters such as whether the legal background in relation to the area of work in which one is dealing will be helpful. People will be concerned with issues around the standard of the court system where they are and the standard of dispute resolution. They will be interested in matters such as whether that will cause them needless difficulties with conflicts of law problems relating to other bits of their transaction if it is a big international transaction with bits that are governed by New York law, English law or whatever. A reason that is frequently given for not using Scottish law is that it is easier to put everything into the same law if at all possible, because that makes it administratively easier and cheaper.
Lots of people will want to pick a governing law with which they are familiar. The merchant banks, the underwriters and all those people have dealt with English law for many a long year and they are familiar with it and do not want to move from it. In some ways, it is just inertia, I grant you, and lawyers in Scotland might make all sorts of comments of an unkind variety about it all, because we have all suffered at the hands of it. I venture the suggestion that whether one passes this bill or not, it will not really have much attractive effect. Neither do I suspect that people will not have as much reason to go elsewhere as they do at present. Of course it is possible that there might be some case in which the bill makes a marginal difference, but I venture the suggestion that that case will be very rare and that the amount of commercial advantage, if you will, of bringing work into Scotland that will be achieved by it is limited. One might ask, “Well, why not do it because if there is any advantage we cannot have it now?” That is one of the decisions that you have to take. It is one of the things that you are charged with doing.
The faculty suggests that it is distinctly sceptical about the idea that there is a considerable financial benefit to altering the law relating to the execution or delivery of deeds. That is highly unlikely to bring work in or to dissuade work from being done here. However, I read what has been said by others who deal in big-value transactions, because they will have more up-to-date knowledge of them and more direct involvement with them. Our overall view is that we are inclined to be sceptical that there is much of a financial benefit to this at all.
Do you have a view on the likely benefits of setting up an electronic document repository maintained by the Registers of Scotland?
The short answer is not particularly. However, we would be of the view that if one were to create a repository, it would be of help if that repository were of some official variety, such as the Registers of Scotland. Some of the responses that the committee has received have clearly grasped that. One would want to be able to ensure its security and confidentiality so that it could not be a place where those of ill intent could get in and make use of things or alter things electronically.
One has read in the newspapers recently all too unhappy tales about unfortunate things happening with electronic communications and clouds and what have you. It is likely, I should have hoped, that if one were to do this the Registers of Scotland or some such official governmental organisation would be the kind of large place that would be able to provide the security and confidence in its confidentiality that I should have thought would be critical to making that work.
I take you briefly to the original submission from the Faculty of Advocates, which I have in front of me. I hope that you have it, too. At the end of your response to question 1, the faculty has two technical observations. It talks about documents that
“have been subscribed by the parties.”
The last sentence says:
“This would mean that the contract could not be executed in contract.”
I wanted to confirm that that should read “in counterpart” rather than “in contract”. That seems an obvious read.
Will you expand on why the legislation fails if documents are produced by the parties? I am genuinely confused about what that point means.
You have the advantage of me in that you have a version that is different from mine. Would you excuse me for a moment, while I read it?
Indeed.
Do I understand, Mr Don, that you are asking in connection with the second part of technical observation (a), which is about, among other things, construction contracts?
Yes.
Section 1(2) says:
“A document is executed in counterpart if ... no part is subscribed by both or all parties.”
The concern that has arisen here is based largely in relation to construction contracts—although it may apply to other types of contract—in which one ends up with a document that, if one stood it on its end, would stand pretty high off the table because it includes lots of subsidiary documents. Sometimes those documents are very important in themselves and they may already have been executed by the time that one gets to the big construction contract. Imagine a PFI or a development contract that incorporates within it the actual building contract or the specification and base plan for the building contract—the specification and base plan may have been negotiated and agreed in advance, and it is all signed up and initialled and all the rest of it before one gets to the stage of this big document.
11:45Therefore, because the bill provides that no part shall be subscribed by both or all parties, and the specification in my hypothetical example is already so subscribed, that PFI or development contract, whatever it is, cannot be executed in counterpart. That cannot happen, because the bill has provided that
“A document may be executed in counterpart”—
and the evidential advantages to that have been given later on—and that a document is executed in counterpart if
“no part is subscribed by both or all parties.”
In my hypothetical case, the specification has been executed by both parties, but without noticing that, everyone has done the great, new electronic execution in counterpart. The net result is that the contract is not properly executed and is defective.
Indeed, it is totally invalid, because the legislation specifically provides, in section 1(2)(b), that a document cannot be executed in counterpart if part of it has been executed by both or all parties.
Correct. It will be incompetent. That is what that is about. I apologise if that was not—
No, it is okay. For the record, will you clarify that the final words of paragraph (a) in the part of your submission that gives technical observations in response to question 1 should be “executed in counterpart”, rather than “executed in contract”?
It is quite obvious that it should say “counterpart”. I do apologise.
Thank you. We can probably amend the submission.
Certainly.
In the next part of your submission—paragraph (b)—you make the interesting point that although a duty is imposed in section 2(3) the bill says nothing about who might be liable if they do not carry out that duty. On reflection, does the section need to be amended, or does the general law of the land—the law of trust, or whatever—mean that it is okay?
A difficulty was identified, in that subsection (5) of section 2 provides that, for the purposes of the document having effect, it does not matter whether subsection (3) applies. However, subsection (3) says:
“A person so nominated must, after taking delivery of a counterpart by virtue of subsection (1), hold and preserve it for the benefit of the parties.”
If the document’s having effect does not depend on that, why are we saying that the person must hold and preserve the counterpart? What does that do? Let us suppose that the person does not hold and preserve the counterpart, not because there is a fire in the office but because he simply forgets about it—it is thrown out in an office move, or something of that order. That clearly does not affect the document’s effect, because of subsection (5), so what does subsection (3) achieve? Why is it there? What advantage does it bring?
It might be that the intention behind subsection (3) is that a person who has been nominated and who is an agent of one of the parties must hold the counterpart to the benefit of both parties, so he cannot be put in a conflict-of-interest position and told, “You are my agent and I want that destroyed. Destroy it.” If the object of the exercise is to prevent that from happening, that is all well and good. However, section 2(3) does not seem to sit with section 2(5).
It might be better if subsection (3) said “both parties”. That would not change the sense, but it might change the implication—the purpose.
Yes, if the object of the exercise is to ensure that if the solicitor of one of the parties is nominated, as will frequently be the case, he is protected from being put in an impossible position as a result of a subsequent dispute between the parties. The bill might provide that he must hold the counterpart for the benefit of both parties, which would give him a statutory duty that would protect him against his own client if there was a fall-out and he was instructed to destroy the counterpart.
Thank you for those observations. I suspect that we will return to that point.
You might want to do so, in the context of considering the remedy for a breach and whether the law relating to the duty on solicitors is affected. In that connection, you might want to check a very recent case—it was last week—in the inner house of the Court of Session, which was about the difficulties in relation to unhappy frauds and documents being taken and not taken and so forth. The case indicates that there can be quite an issue when a solicitor finds himself considering his duties to the other side after that party and his client have fallen out. No doubt you will want to talk to people who are perhaps more directly affected by such matters than—fortunately—I am.
Thank you.
If members do not want to explore the bill further, I thank Mr Howie for the extensive advice that he has given us.
11:50 Meeting suspended.
It is my pleasure to introduce Professor Robert Rennie and Alasdair Wood. Professor Rennie is the chair of conveyancing at the University of Glasgow, and Alasdair Wood is a member of the Law Society of Scotland’s obligations law committee. Thank you very much for your presence here, gentlemen. Thank you also for ensuring that you were here to hear the previous evidence, which saves us from having to play it back to you. We will have many questions on the same subjects, led by Margaret McCulloch.
Good morning. You heard Mr Howie question the number of contracts under Scots law that would come into effect with the new electronic system. Do you agree with his comment? He did not feel that there would be an increase in business. Do you have any evidence to contradict that?
We disagree.
Can you tell me how you disagree?
We have experience of commercial contracts that start off on the basis that they will be governed by Scots law because one of the parties—perhaps the main party—is based in Scotland and the subject matter of the contract is Scottish. We get to three weeks, say, before the final completion of the contract, when it is suggested that it will be necessary for everybody to convene in one particular place so as to execute the document at one time. We both have experience of being met with resistance at that point and, in a number of cases, the clause that says, “This contract shall be governed by Scots law” is changed to, “This contract shall be governed by English law.” That is simply to allow the execution of the document by counterpart.
I was surprised in some ways to hear Mr Howie say that that did not matter a great deal. Not only does it alter the law governing the interpretation of the contract; it also alters the forum in which any disputes can be litigated. It takes bread and butter out of the mouths of the Faculty of Advocates. I am clear—I think that my colleague is also clear—that there is a significant commercial issue.
I echo that view. In a number of transactions that we work on, the sole reason to change the law to English law or to that of another jurisdiction is the inconvenience of creating a valid document when people are based in different countries, different towns or even different offices in the same city or town, late at night, for instance.
Mr Howie also mentioned his concern about the procedure being less secure among smaller law firms, rather than multinationals, perhaps. Would that be the case? I would think that, when it comes to documentation, if there is a certain standard for a large law firm with multiple branches, the checks in place for a smaller business would be the same. Do you understand where Mr Howie is coming from when he says that he is concerned that small businesses would possibly be more open to fraud or error when using the electronic system rather than the paper system?
I disagree with that view. I worked in what would be regarded as a small firm for 30 years before moving to what would now be regarded as a large city outfit. The same checks and balances applied in both. I am quite confident that a small to medium-sized legal firm would be as secure as a large firm.
On the point about fraud generally, in 1970, when an act of Parliament was passed to allow ordinary conveyancing documents to be signed on the last page only, there was a terrible kerfuffle among the legal profession about what was going to happen. “My goodness!”, it was said. “People will take out the pages in front of the signature, put in other pages to change the whole sense of the document, and it will be the end of western civilisation as we have known it.” I defy anybody to produce any evidence to the effect that anything like that has happened since 1970.
I also point out that execution in counterpart is a feature of the English jurisdiction and of European and American jurisdictions. They seem to have managed to operate it without any substantial increase in fraud. I make a third point—and it is the obvious one—that people will commit fraud no matter what you do or what the process is. No bill, and no safeguard in a bill, is ever going to prevent fraud absolutely. I do not consider that the measure substantially increases the risk of fraud in commercial transactions.
12:00
Finally, what kind of impact would the change have on Scottish property transactions? My understanding is that the law does not permit parties to change the law of contract to English law.
The bill is intended to apply to what I call bilateral or multilateral deeds. Property transactions, in the sense of conveyances, are not bilateral or multilateral. A disposition transferring property from A to B, be it a house or an enormous factory or retail centre, is signed by one person, so counterpart does not come into it. The same is true of a document for a mortgage over a house or a bank lending document for commercial lending over a factory; such a document is signed only by the borrower. The bill will have no effect on ordinary property conveyancing. It will have effect if there is a bilateral agreement or a multilateral agreement involving two or more parties.
Do you have any comment, Mr Wood?
I am not an expert on property law, so I defer to the professor.
To tie off that issue, would it be fair to say that many of the property transactions that commercial companies undertake are actually about purchasing the company that controls the property? There is a process that delivers control over a property without affecting what is in the Registers of Scotland and probably avoids such things as stamp duty, so there could be instances of larger transactions where the provisions before us may well matter when it is de facto about transferring control over property, if not necessarily legal ownership.
That is correct. For company transactions where a single purpose vehicle may own a property, the bill will enable those contracts to be entered into by two parties in different locations. The same goes for a company where the transfer of shares would require a stock transfer form, which is also a single, unilateral party deed.
Mr Howie suggested that, in his view, the law of the country was more important than the convenience of the signing. That is a position that you evidently do not agree with but, given the differences between Scots law and English law, I am inclined to his view rather than yours—that it is a reasonable position for those making major deals to consider which legislation they would rather work under, particularly considering the increase in devolved powers, rather than the convenience of signing in counterpart or the inconvenience of not being able to.
I do not disagree with that. There will be cases where one of the parties will want to have a particular jurisdiction. I am talking about the technical aspect—cases in which the parties have already agreed that the contract comes under Scots law.
In such a case, we can be six months down the road with the negotiation and the contract is due to be Scots law from day 1, but three weeks before the end the parties say all of a sudden that it is a terrible inconvenience for them all to come up to get the contract signed here, so they ask just to make it English law because it does not make that much difference.
I am surprised to hear that, which is probably a reflection on my naivety more than anything else.
Alasdair Wood probably has more experience of that than I do, but it is a factor. I canvassed colleagues in my corporate department before I came to the committee, and they confirmed that that has happened to them on a number of occasions.
Forgive me for being impertinent, but you seemed to suggest that that was the norm, rather than something that has happened “on a number of occasions”.
I am not suggesting that it happens on every occasion—if it did, one would not bother putting Scots law in the agreement at the start—but it does happen on some occasions.
Why should we not be as up to date electronically as other jurisdictions? If other jurisdictions think that this approach is commercially good and legally safe, I see no particular reason for saying that we should stay where we are. Are we the only jurisdiction that has a monopoly of legal truth?
I suspect that we could discuss that question for some time.
Good afternoon, gentlemen. I posed a question earlier to Mr Howie regarding an electronic repository. Do you have any views on the likely benefits of setting up an electronic document repository, maintained by the Registers of Scotland?
I suppose that that is really a matter for the Registers of Scotland, representatives of which are giving evidence to the committee next week.
At the moment there are such registers: books of council and session is a preservation register, although it is not used very much now and it is a physical hard copy register, which would not suit this situation. The problem with repositories is that IT systems change and are updated from time to time. I agree with Mr Howie in this regard: we would want to be sure that whatever system was used was never going to be completely outdated, meaning that we could not access what was there.
I gather that there is a system in Spain called Adobe X, which Adobe has guaranteed will always be accessible, no matter what changes there are. I am not IT literate to any great extent, so I cannot evaluate the worth of that statement. In due time, a repository might be a good thing, but the bill stands on its own and does not depend on having a repository at all. We should not get away from the focus of the bill, but in the longer term, yes, a repository might be a good thing.
Before coming to the issues that I was intending to address, and as the subject has come up, I want to ask about the repository.
Although it may not be necessary for the repository to hold all documents in whatever form, are you of the view that the algorithms and methods by which electronic signatures are provided to documents, wherever they are held, could usefully be held in a central repository, thus allowing future generations access to the means to understand and verify documents wherever they are held subsequently? Could a central repository be important, besides the holding of the documents themselves?
In the longer term, yes. I see no reason not to have something of that nature. However, you are asking the wrong person—I kind of lost the place when you said “algorithms”, but I understand that you are talking about how the digital signature is verified.
Do forgive me. I spent 30 years in technology, but of course I am somewhat out of date because those 30 years started in the 1960s.
I am sorry—I cut across Alasdair Wood, who wanted to respond.
I was merely going to say that that is an interesting concept. It seems to be of historical value to be able to maintain the probity of signatures into the future. It seems a logical step from the signature to the electronic signature.
Perhaps it is something that you gentlemen may take away to think about while we do the same.
Moving on to the subject of electronic signatures as a whole, I take it that you would be of the view that it is helpful if we have a permissive environment that allows electronic signatures and electronic verification of the validity of the content of documents to be part of Scots law.
Yes.
I agree.
That is concise and unambiguous.
The Law Society is developing a smart card and digital signature scheme. I am not sure that the committee knows all that much about it. Is either of you in a position to give us a little more insight into where that stands in the process of development and implementation, without necessarily giving us insight into the mathematical algorithms on which it will depend?
The position at the moment is that digital smart cards are being handed out to members of the profession. I understand, although I am not directly involved in this, that criminal practitioners—I use the phrase advisedly—are getting the cards first because they will also be used as security passes to enter Her Majesty’s penal institutions. The cards will be handed out to individual solicitors as the year progresses.
We were hoping to have James Ness, who is the deputy registrar, along this morning, but he was unfortunately not able to come. I suspect that this is an area of expertise that we would like to interrogate somehow or other.
Yes, he would be the person to ask.
We can perhaps get Mr Ness along or get some written advice on that subject, which is perhaps for another day.
Professor Rennie, you said that you do not see any huge additional risk of error or fraud from the provisions. Do you think that there would be any specific risk of error or fraud with the use of pre-signed pages—or do you think that there is sufficient protection in the proposed legislation in this area?
Yes, I do.
That answers my question very succinctly.
Thank you for that succinct answer.
I want to take you gentlemen to the last subject that I raised with Mr Howie. It is about a situation in which, if a bundle of papers already contains a document that has been subscribed by the parties, it appears not to be competent to execute it in counterpart, which is clearly not what anybody would have intended. Does that strike a chord with you, or is there an immediate fix?
That is not my interpretation. My interpretation of section 1(2) is that it relates to the document that is to be executed, which is the main document. What Mr Howie was referring to was the possibility that there might be annexed to the main document another subsidiary agreement, such as a building contract.
Let us consider a big development contract involving developers, funders and whoever, and annexed to it are a series of other subsidiary agreements, which, because the parties are proximate, have simply been signed by both in the normal way. That is an annexation to the main document that is being signed in counterpart. The section refers to the document that is being signed in counterpart; it does not refer to any annexation. I do not therefore accept the interpretation as given.
12:15
That is very helpful—thank you.
In my non-legal ignorance, I seek clarity as to what an annex looks like.
I will give some context to my question. For my grave misfortune, I had to be involved in many such cases in my previous life. Indeed, I had to travel to other continents to sign things with other people. Often, commercial contracts will include many schedules, which are separately signed and which may be expected to be changed during the course of the contract—what equipment might be delivered, and so on. Are those what you are describing as annexes, or does “annex”, in the legal terms that I am sure you are using, mean something different?
No, it is exactly the same. An annexation is simply something that is outwith the body of the agreement, but which is referred to in it. An annexation could be a plan, a list of parts for a machine, a list of employees or a copy building contract that has already been signed—you name it.
So it is exactly as I am familiar with.
That is so.
In most commercial contracts to which I have been party, the schedules are substantially bigger, in aggregate, than the contract itself.
Absolutely.
That makes perfectly good sense.
I will pick up on the issue of section 2(3), which reads:
“A person so nominated must, after taking delivery of a counterpart ... hold and preserve it for the benefit of the parties.”
There seems to be a suggestion that solicitors would normally be holding the agreement once it has been executed. You will have heard our previous discussion about whether that refers to both parties and about the question of what that provision is for. Does that subsection give you any concerns?
Not really. Section 2(3) is a technical provision, which is designed to cover the situation in which a single person holds a document for the benefit of both or all parties to that document. It is designed to make things clear.
Let us say that the solicitor acting for party A is the nominated person to hold the document. The provision is designed to prevent party A going to the nominated solicitor and saying, “You’ve got that document. You act for me. I’m not happy now. Tear it up.” The solicitor for party A cannot do that, because he or she is not holding the document in the capacity of a solicitor; they are holding it for all the parties. That is why the provision is there.
And it is sufficiently accurate to say that.
Yes.
I think that it is. I am not doubting it, but I wanted your thoughts.
I am familiar with the use of the term “escrow” in certain other contexts. Is it the generality that, in this case, the agreement of the two parties would be required as to the instructions that are given to the person holding the document? Is that the way that it generally works?
Yes. Section 2(1) states:
“Parties to a document executed in counterpart may nominate a person”.
I emphasise “Parties” in the plural. All the parties to the document must agree to nominate a particular person.
And they must agree to any subsequent changes in the nature of the nomination.
Yes.
Thank you, gentlemen. That completes our questions. Are there any other issues that you think we should have covered but have not asked you about?
No. This is a very useful bill.
I agree. It is a very useful bill. It is very useful for Scottish law.
If something else occurs to you in the next few days and you wish to write to us about it, that would be appreciated. Thank you very much for your responses.
12:19 Meeting suspended.
I welcome Paul Hally, who is a partner in finance and restructuring at Shepherd and Wedderburn LLP; Colin MacNeill, who is the corporate partner at Dickson Minto WS; and Dr Hamish Patrick, who is a partner on the banking and finance team at Tods Murray LLP. Thank you for coming along, gentlemen, and thank you for your patience while waiting.
Who wants to fire straight in? Would Margaret McCulloch like to come straight back in on the subject she asked the Law Society about?
I am more than happy to do so. We have already asked the following questions of other witnesses, but it would be useful to hear from you.
Can you give examples of difficulties that your organisations or you have experienced because of an inability to get everyone together to sign contracts? Can you state the advantages to you if your firms could go down the electronic route?
I should come in, as someone with an interest in this subject. My name is plastered all over the Scottish Law Commission report as being someone who suggested that the bill be written in the first place. Colin MacNeill and Hamish Patrick will be able to support me.
There has been a lot of talk about whether the change will bring work into Scotland. The evidence that was given earlier by the Law Society about the way in which contracts are now conducted is pertinent. Colin, Hamish and I have all sat round boardroom tables for the last 20 to 25 years, and the nearer to today that has happened, the more disparate have been the parties to contracts. If a person is selling a Scottish company, the law that logically should govern that contract is Scots law. However, time and again firms change that to English law because there are four or five parties, and the director may be on holiday—he may be sunshining in the Cayman Islands—and the last thing he wants to do is turn up in a wet, dreich Glasgow to sign the contract, despite the fact that it is selling his company for millions of pounds.
The points that were made by the Law Society are valid in that, although the bill may not bring work into Scotland in terms of people choosing Scots law, there have been countless times over the past 20 or 25 years when I, my partners and—I am sure—Colin and Hamish have changed the law of a contract from the law of Scotland to the law of England, precisely for the reasons that were outlined by the Law Society. When I started in law 20 or 25 years ago, when we got to the end of a transaction, all the parties met round the table and we all signed the documents in duplicate. Parties getting together to sign contracts to end a transaction—no matter what type of transaction—now never happens. Under English law it never happens. We need to have a legal system that facilitates the way in which businesses and companies want to do business.
My firm was also involved in a relevant case. It is a useful example because everything in this particular transaction pointed to use of Scots law.
A fairly large Scottish company that had operations north and south of the border was refinancing its bank facilities with Scottish banks. The head offices and registered offices of all the parties concerned were in Scotland and yet, at the last minute and for the reasons that Professor Rennie explained, the choice of law was changed from Scots to English, not because of a minor inconvenience or minor travelling cost for the parties to get to one place—the costs of travel are insignificant—but because we could not contemplate asking many busy people to take a day or half a day out of their lives to get to one solicitor’s office. The effect is multiplied when you deal with parties in places outside Scotland.
That case is an example of a contract on which we should hope that litigation never transpires; if it does, the Faculty of Advocates has lost that business.
I have a few questions on the back of your answers. How confident were those businesses about transferring from Scots law to English law, taking into account the security aspect of the electronic signatures?
They were utterly confident. Such businesses transact under both jurisdictions all the time. The benefit is that English law and Scots law are in almost all respects the same for the average commercial transactor. It was no difficulty for them, and there was certainly no difficulty in doing it electronically because, as Professor Rennie said, that is what happens. As Hamish Patrick and Paul Hally will confirm, contracts under English law are done electronically and have been done that way under a recognised procedure for a number of years.
Mr Howie questioned the number of contracts that would actually convert from Scots law to English law. Can you give a ballpark figure for how many contracts your organisation converted from Scots law to English law over the past year in order to get electronic signatures?
We see issues arising in relation to documents and obligations that cannot be written under another law, so the asset is moved to a different jurisdiction. When things have to be done under Scots law and are a pain to do under Scots law, people just say, “Well, it’s not worth it.” They may move a bank account to England because that makes it easier, or they may exclude certain assets from the Scottish multijurisdictional element of the transaction.
I spend quite a lot of my time apologising for the inadequacies of Scots law. For example, if you have a multijurisdictional financing transaction with assets in England and various European countries or the United States, all the parties involved will sign their documents electronically in counterpart, and they will do them in advance, with a signing date several days before the closing date. I have to tell them, “Sorry, we can’t do that.” I have to explain that we need separate Scottish documents that operate differently, and that we must then work out how to get our footwork right so that they work, and it is not uncommon for us to have to get signatories out again on the day of completion to sign a series of documents, in a specific order, to comply with the requirements of Scots law as to counterpart or delivery. Escrow is also a big issue.
What is proposed will make life a lot easier for some of my junior lawyers, who will not have to jump through all those hoops. We will look a little bit less embarrassed in such situations, where we currently, to be frank, appear backward. We have to do it.
Can you give me a rough percentage of your business in a year for which you choose the English rather than that Scottish model, for ease of business and efficiency?
12:30
I am not sure that I have figures for that. In writing a contract for which we know that it is highly unlikely that the parties will come together to sign, we would predominantly choose English law rather than Scots law. It is not a question of how many documents there are or whatever; it is about the fitness for purpose of Scots law against the expectation of the global community.
We all advise on English contracts as well as Scots contracts. A contract might be a properly English contract from the start of the transaction, so it is difficult to give a percentage. In looking back over the past 20-odd years, I would say that it is not an insignificant percentage.
There is another angle to this. In some more systematised situations, people will choose English law for convenience. There are some situations where they cannot do so, for consumer protection reasons or whatever. Vehicle leases, for example, are often written under English law. One reason for doing that is that it is easier to execute them.
There are other reasons for people to use one law for their business if they operate throughout the UK. The convenience of the system when considered as a whole might tip the balance towards where contracts of one sort or another are originated. They could save large amounts of money, and it is preferable if their origination system does not require people to sign things, send them off and get them back again.
I can think of a mundane example. My son has just moved into halls of residence at university, and he has to sign a lease, as do I. He had to download two copies, sign those two copies and send them to the residence. When he got to the residence, he picked up one of them, which had been countersigned. It would have been very much easier for him to download one, sign it, scan it and email it. Then, the other party would countersign it and send it back again. That works in England. His lease had to be made under Scots law, so it had to be done that way. Why would a vehicle lease not be written under English law, given its systematic convenience?
I have another example. During the summer, I was on holiday in South Carolina. My son is at the London School of Economics, and he woke me up one morning and said, “Dad, we’ve got two hours to sign the contract for the lease.” Using an electronic document system called DocuSign, the landlords sent us the lease and the guarantee that I had to sign for it. All three parties—there are three tenants and three guarantors—signed up using that electronic system. That is not an advanced signature system; it is simply an electronic system that people in England are using for commerce—for leases. That is an illustration of the things that are already happening, and Scots law has to keep up with that.
If you had the option of using electronic signatures for your business, would all your contracts then be under Scots law, as you would not have to use English law?
Electronic signatures are perhaps a separate point. If the bill were passed to allow counterparts, that would take out the percentage of contracts that are changed to English law but which would otherwise be under Scots law. It would make a difference in that respect.
How long has the bill been in practice in England?
There is not a bill in England. There was a case that drew attention to the problems of electronic delivery and signing in 2008. In 2009 or thereabouts, the Law Society in England and various other bodies agreed a number of approaches that practitioners could use to ensure certainty. One of those approaches is almost universally used.
The approach is working in England; do you see any reason why it should not work as efficiently in Scotland?
No. We are trying to make the approach work in England at the moment. There has been some discussion in the papers about whether or not emailing signed unilateral documents in portable document format counts as delivery. We do it—whether we will be sued at some point as a result, I do not know. Practice varies, although I am sure that other firms do the same thing. We take multilateral documents and turn them into unilateral documents, so that we can do that sort of thing. It makes things much more complicated in other respects, but we do it so that we can fit in with what people are trying to do. We see emails from the south and ask, “How do we make our system fit in with that?” Just because a system operates in England does not mean that we must have it, of course, but we want our system to interact effectively with other systems.
Richard Baker wants to ask about fraud.
Thank you. The witnesses heard the Faculty of Advocates’s concerns about fraud and error. What do firms currently do to mitigate the potential for fraud and error? To what extent will that change when signing in counterpart is possible?
Let us take the example of a simple bilateral contract that is negotiated between two law firms. Even though the firms might be geographically close to each other, there might be no reason to meet throughout the transaction. All documents are transferred in Word format by email until they are agreed, and the final version is agreed and signed off as the final version, by both sides. That follows best practice in England: one firm will then convert the document to a PDF. At that point, if there is to be a physical completion meeting, the solicitor prints off however many copies are needed and takes them to the meeting to be signed. If completion is to be done electronically, the solicitor sends the PDF, which of course cannot be changed, round all the parties, who agree that that is the document to be signed.
In effect, you foresee no material difference in what firms will do in the future.
I foresee no material difference.
Concern has been expressed about the use of pre-signed signature pages and the potential for fraud—that might relate to the case that was mentioned that led to a change in the rules down south. Professor Rennie was adamant that the bill contains sufficient protection. Are the witnesses also satisfied in that regard?
It is very unusual to use pre-signed signature pages. In practice I would be reluctant to do so, other than very exceptionally. In an advised transaction, where lawyers were involved, I would ensure that I had a clear trail of authorisations indicating approval of the document to which the page was attached. I would want the PDF to be accompanied by an email that said, “You can attach this page to this document” if I was the person who was doing the attaching. I would also want to know why we had to do it that way.
Will a lot of the responsibility for such work fall on firms and practitioners?
I suspect that it will do, at a practical level.
The bill’s purpose is not to permit the pre-signing of contracts. The Scottish Law Commission looked into whether that would be a desirable aspect of law reform. My firm did not think that it would be desirable, because there are more concerns than advantages in relation to pre-signed pages. There are other ways to get round someone’s inability to sign once the document has been agreed.
Here is a wee test. Can companies in Scotland get insurance to cover the risk of fraud and error? Do they do so?
I do not think that I know the answer to that.
I suspect that that is not possible, other than in relation to general fraud by employees.
Fraud on the part of an officer entering into a transaction or—perhaps worse to contemplate—on the part of an adviser may well be difficult to insure against. I do not think that companies consciously do so. I ask Paul Hally whether he thinks think that that is covered by commercial insurance.
I would not know. I do not think that it enters into people’s thinking.
Again, I think that we should be careful about what we are looking at. In many cases, for commercial parties to make a contract, the contract does not need to be reduced to writing. Much of this is about contracts that are facilitated by lawyers and therefore there is a huge degree of probity already in the system because of the fact that there are lawyers on either side.
I have heard concerns about the provision being used by parties themselves, and that could happen under the bill. However, many of the contracts that ordinary parties undertake without legal advice do not need to be reduced to writing. I could agree with you tomorrow to buy your company—we could do that verbally and shake hands, and that would be a binding contract. I just do not understand the fraud concerns around all of this.
I was only asking the question to see whether someone external to the profession had done a risk assessment.
No.
That was my only reason for asking. Equally, I can see that it might be cheaper to self-insure—that is, to carry the risk on your own books.
Again, we need to look at the bill as being facilitative. People will use the bill to do counterpart execution and will follow the steps in it. Sometimes they may sign the last page and use those provisions and sometimes they may decide to ask for the whole document to be sent through.
The other thing that is of comfort in all this is, as you have heard in evidence from the Law Society of England and Wales, that there is no evidence of the practice in England, which comes from the common law, being abused or open to fraud. What we have tried to do here is to build on the policy statements in England and make the system even better.
That is fine. I did not want to make a meal of it. By the way, I hope that you are not relying solely on PDFs, but are using secure PDFs. I have software that enables me to edit PDFs, which I do for my own reasons.
How widespread is the use of electronic signatures currently? Is there enough in the bill to allow electronic signatures to be used as widely as the profession might find useful?
They are not used at all. Pen and paper are used the world over, whatever jurisdiction people are in. That is true for the contracts that I get involved in, and I suspect that that is the case for Paul Hally and Hamish Patrick as well.
Yes.
For my sins, I was one of the project managers for the clearing house automated payment system—CHAPS—which introduced electronic signatures 32 years ago. I make that passing observation.
That is a good example of something that was innovative at the time and has become commonplace. Who knows, in 32 years’ time we may all be looking like the dinosaurs. We are reflecting what our clients do.
I suppose that overlying CHAPS will be something with a signature on it, under which the account has been opened.
No—not even in 1982 when we went live. Believe me.
Would John Scott like to come in?
I have a more general point that I would like to make at the end of the questions.
Having heard evidence from the previous two panels, I have been looking through your submissions again. Regarding the current system in which we work, the word “antiquated” comes up in the submissions from Shepherd and Wedderburn and Tods Murray. Two of the initial bullet points in the submission from Dickson Minto state:
“There are no disadvantages to the approach taken in the Bill”
and
“The Bill is comprehensive and we do not believe that there are any missing provisions”.
That suggests that Dickson Minto’s position is very clear. If possible, I would like to have it on record whether Tods Murray and Shepherd and Wedderburn agree with the comments from Dickson Minto and believe that the bill is accurate and there are no missing provisions.
I am happy to support Mr MacNeill and Dickson Minto in the clarity of their submission.
As am I. The bill was gone into in great detail by the Law Commission before it came here.
12:45
I anticipated that you were going to say that.
My next question, which I also put to the previous two panels, is on a different subject: the electronic repository. Will there be any benefits from the setting up of an electronic document repository maintained by Registers of Scotland?
I am not sure that that is my area of expertise and, as has been said before, it is separate from the provisions of the bill, although the bill facilitates moving towards such an arrangement. Because we often transact cross border, any form of depository would need to gain a degree of universal acceptance. Registers of Scotland, or someone else, may be able to provide that—I do not know. It might be possible for such a register to become universally accepted, which would be very helpful—the situation is similar to that of CHAPS, which has been discussed. I imagine that setting up such a repository is possible, although I do not have the technical knowledge to know how that would work.
I agree with Paul Hally. For cross-border transactions, it is difficult to see how and why Registers of Scotland might have a role—and that is to presuppose that an electronic repository would be accepted anyway. In the areas in which the three of us work, it probably would not be at the moment.
Very often, law firms have their own systems, which operate in parallel. I can certainly see the advantages of having a central repository rather like the books of council and session, but whether it would be an answer to everyone’s problems is another question. It would be useful, but it is not everything.
Further to Stuart McMillan’s question, as laypeople—notwithstanding Stewart Stevenson’s obvious, albeit historical, expertise in this area—we all have to take the advice of experts such as yourselves. Mr Howie raised concerns about the bill that you gentlemen and Professor Rennie discount and disagree with. Do you have any reservations about the bill? As it appears that you have none, are you therefore inviting us to discount and dismiss Mr Howie’s concerns? Are there any of his concerns that you would support and uphold?
Perhaps I can go first. I had the benefit of sitting through all his evidence. His first concern was about fraud and error. I suspect that we have covered that. His second was that he was not sure how many contracts would be affected, and I think that we have covered that, too. It is difficult to put a percentage on this, but, nonetheless, the bill would affect a percentage of the contracts that we all come across. If litigation arose in relation to those contracts, and if they remained under Scots law, the benefit would be that the cases would be litigated in Scotland.
Mr Howie did not think that the bill would influence the choice of law. I think that, in other evidence, we have demonstrated that that is not the case. Although there are often very clear factors determining the choice of law between Scotland and England, for parties that operate throughout the UK, that choice often comes down to mundane matters such as convenience of execution. The bill therefore will influence the choice of law.
Finally, Mr Howie said that, in large multiparty international deals, cost is not an issue. As I said earlier, travelling costs are not an issue, but the time cost for clients is an issue—they are not in a position to travel to Edinburgh, Glasgow or wherever from their own offices. Very often, as we indicated, whole transactions involving billions of pounds can be covered without people leaving their offices. That is a common feature of commercial life just now.
Although I do not feel that any of the concerns that Mr Howie raised are valid, others might have other things to add.
Others will speak for themselves, doubtless.
I do not have much to add to what Colin MacNeill has said.
I am afraid that I was shaking my head in disbelief through all of Mr Howie’s evidence. I understood the concerns, but I do not agree with them in practice. It would be incomprehensible not to introduce such a bill to put us on a level playing field.
Mr Howie suggested that one protection might be for the bill to require the whole of the document to be sent back electronically as a counter to error or fraud. I was party to a discussion with the Law Commission when the proposed provisions were being formulated. I will illustrate our concern about the matter using the example of when Paul Hally was on holiday. I do not know how long his document was, but let us say that it was 100 pages. Consider the situation of someone who is on holiday, or even just sitting by their printer at home. It is a gross inconvenience to ask a company director to print off 100 pages at 2 o’clock in the morning and then rescan them all to send back, whereas printing off a single signature page to get the deal done is not an inconvenience.
If the company director is staying in a hotel somewhere, finding the necessary facilities in the small hours of the morning—even if he happens to be staying in a five-star hotel—is not what he wants to do. He will ask, “Why am I doing this under Scots law, and why am I using your legal firm to do this?” That would be a positive disincentive to using Scots law.
Thank you. That is clear cut.
That completes our questions. Thank you again, gentlemen, for being here. I particularly thank Mr MacNeill for arriving very early. The fact that you heard all the previous evidence is very much appreciated—that was helpful to us. I am grateful for that.
12:52 Meeting suspended.