SHE Matters: Proposal for a revised Product Liability Directive

On 28 September 2022 the EU Commission published two new proposals for Directives.

The first, which is the subject of this article, is a proposal to replace the current EU Product Liability Directive (Directive 85/374/EEC), that directive introduced into the law of the EU Member States a new system of strict liability for damage, in particular personal injury, caused by defective products. That new system of strict liability was loosely based on a type of tort liability developed in the United States to provide a remedy for consumers against damage, in addition to any contractual claims that they might have against the sellers of products.

The second, and linked, proposal put forward by the Commission is a separate proposal for a new Directive (the proposed AI Liability Directive). This would adapt the rules in Member States governing non-contractual civil liability rules, i.e. tort rules, to developments in the field of artificial intelligence so as to make it easier for claims to be brought for compensation in respect of damage caused by the operation of AI. That second proposal is not the subject of this article. but we will aim to cover it in a later issue of SHE Matters.

The proposal for a new Product Liability Directive will repeal and replace the existing Product Liability Directive as it currently applies in the continuing EU Member States.

It would retain the essential framework of the current Directive but introduce significant amendments to take account of the importance of software and AI in the functioning of many products now placed on the market. The new proposal is also intended to reflect developments in the area of collective redress (see for example for example, the proposal discussed in the previous article), and also the importance of the Circular Economy, the EU policy encouraging the repair and reuse of products rather than their disposal as waste.

Central to the existing law is the concept of liability of producers to pay compensation, without need for proof of fault on their part, for damage caused by products which are “defective”. The new proposal would extend the concept of “defect” to ensure that defects in software count as defects for the purpose of strict liability. In particular, in assessing whether or not a product is defective, the proposal would provide for account to be taken of the effect of the product of any ability on the part of the product to continue to learn after deployment, an AI aspect, and also the effect on the product of other products that can reasonably be expected to be used together with it.

Under the proposal the Directive would now use somewhat new terminology, in that the word “manufacturer” is now generally substituted for the word “producer” used in the current Directive. However, that has not changed the essential meaning of the concept, because the term “manufacturer” is defined in a broadly similar way to “producer” under the current Directive, so as to include “own branders” of the product, for example.

The new proposal would also extend the scope of the existing rules for ensuring that claimants can obtain redress where a manufacturer is based outside the EU. Accordingly, there are provisions to ensure that where no authorised representative or importer is available and based in the EU to step into the manufacturers shoes to carry liability, claims can be brought against a wider group of actors in the supply chain for the product, and notably against “fulfilment service providers”.

The expression “fulfilment service provider” does not include the providers of postal services or freight transport services. However, subject to that, it includes economic operators who provide two or more specified categories of service relating to the particular product, namely warehousing, packaging, and addressing and dispatching it.

There are also provisions for the operators of online platforms on which a product might be sold, as well as distributors, to incur liability in certain cases where they have failed to identify their suppliers. That expands and updates a provision existing under the current Directive.

Under the new proposal, the concept of “damage” is extended beyond the traditional concepts of damage to property and personal injury, to include medically recognised harm to psychological health. The concept will now also include the loss or corruption of data which is not exclusively used for professional purposes.

Claimants are to be assisted by new provisions for courts to order disclosure of evidence, but subject to rules for the protection of trade secrets. While these new provisions are similar to those which would apply in comparable circumstances in common law jurisdictions, they are likely to be an innovation in a number of jurisdictions with a civil law system.

In cases where a defendant fails to comply with its disclosure obligations there is provision for the burden of proof to shift from the claimant to the defendant.

Furthermore, new provisions would similarly shift the burden of proof where the product does not comply with relevant mandatory safety requirements under Union or national law. The burden would also shift where the claimant has established that damage was caused by an obvious malfunction of the product during normal use, or under ordinary circumstances.

The proposal would also create a presumption of a causal link between defect and product, where the product is shown to be defective, and the damage is of a kind typically consistent with that defect.

In certain cases, defect and causation may also be presumed where a court judges that a claimant “faces excessive difficulties due to technical or scientific complexity”.

While the general position is maintained that manufacturers will only be liable for defects which existed when the product was first sold, they will be liable under the strict liability regime for related services which they may provide thereafter, and in respect of software updates or upgrades they provide and also for any failure to provide such updates and upgrades, where they are necessary to maintain safety.

On limitation periods, the proposal would continue to provide a 10-year longstop period for claims under the Directive running from the date the product was first placed on the market or put into service. However, there is provision for time to run again from any subsequent substantial modifications made to a product. That is intended to reflect the operation of the Circular Economy. There is also a new 15-year longstop period where an injured person has not been able to initiate proceedings within ten years due to latency of the personal injury.

If adopted, the proposal will have significant implications for manufacturers whose products are sold in EU Member States. That will include a large number of UK manufacturers, as well as their counterparts based in the EU, notwithstanding that the UK itself is under no obligation to make corresponding amendments to the liability rules under the Product Liability Directive as it applies in the UK.