In the nearly 40 years since its adoption, the Product Liability Directive[1] (PLD) has provided an effective compensation mechanism for those who suffer damage caused by defective products in the EU. More recently however, technological advances have led to the creation of a new generation of products that challenge some of the core rules and concepts underpinning the regime provided for under the PLD. For example:

• It is no longer always clear how to apply the definitions and concepts contained in the PLD to products in the modern digital economy and circular economy, examples include, ‘smart’ or ‘connected’ products incorporating software or digital services
• The ability of a consumer to prove that a defect in a product caused the damage suffered has become increasingly difficult in the case of technically complex products
• The rules limiting access to certain forms of compensation such as property damage worth less than €500 are now viewed as deserving of reconsideration, and
• It is not clear who is liable when a business substantially modifies a product that is already on the market, or when a product has been directly imported from outside the European Union by a consumer

We take a closer look at the changes contained in the draft text of a proposal for a revised PLD (Proposal). These changes are designed to address these challenges and provide the EU with an extra-contractual product liability regime updated to deal with the 21^st century product landscape.

Aims

The Proposal has several stated aims:

• To ensure liability rules reflect the nature and risks of products in the digital age and circular economy
• To ensure there is always a business based in the EU that can be held liable for defective products bought directly from manufacturers outside the EU
• To ease the burden of proof in complex cases and ease restrictions on making claims where appropriate, and
• To ensure legal certainty by codifying PLD-related case law and better aligning the PLD with the EU’s New Legislative Framework (NLF) and existing product safety rules

Changes

In seeking to achieve these aims, some noteworthy features of the Proposal include:

Terminology: the Proposal would bring EU product liability and product safety rules into closer alignment by adopting various terms and definitions, such as ‘manufacturer’ and ‘placing on the market’, that are already in use in EU product safety legislation under the NLF.

Expansion of the concept of ‘product’: the definition of a ‘product’ under the Proposal would now include software and digital manufacturing files. The new definition would clarify when a related service, ie a digital service that is integrated into, or inter-connected with a product is to be treated as a component of that product.

Scope of ‘damage’: the notion of compensatable damage would be extended to include corruption of data and recognised forms of psychological injury. The €500 minimum threshold for property damage would also be removed.

‘Defectiveness’: Article 6 of the Proposal would add the following factors to a list of non-exhaustive criteria that can be considered when determining whether a product “provides the safety which the public at large is entitled to expect”:

• The effect on the product of any ability to continue to learn after deployment
• The effect on the product of other products that can reasonably be expected to be used together with the product
• Product safety requirements, including safety-relevant cybersecurity requirements, and interventions related to product safety
• The specific expectations of the end-users for whom the product is intended

A rebuttable presumption of defectiveness could also arise in circumstances where:

• The claimant establishes that the product does not comply with mandatory safety requirements laid down in EU law or national law that are intended to protect against the risk of the damage that has occurred
• The claimant establishes that the damage was caused by an “obvious malfunction” of the product during normal use or under ordinary circumstances, or
• A national court were to consider that a claimant faced “excessive difficulties” in proving defectiveness and/or causation owing to the technical or scientific complexity of a product

Causation: claimants would also be able to avail of a rebuttable presumption that a defective product caused damage where:

• He or she faced “excessive difficulties” in proving same owing to the technical or scientific complexity of a product, as above in relation to defectiveness, or
• It could be established that the product is defective and the damage caused is of a kind “typically consistent” with the defect in question.

Defendants: the Proposal expands the pool of defendants that can potentially be held liable for damage caused by a defective product. As well as manufacturers, importers and in some cases distributors, the Proposal would also permit no-fault liability claims to be brought against authorised representatives, fulfilment service providers, third parties making substantial modifications to products already placed on the market and certain online platforms.

Defences: regarding the defence currently available under the PLD that allows a defendant to escape liability if it can be proved that it is probable that the defect that caused the damage did not exist when the product was put into circulation, the Proposal would close off this possible defence in cases where the defect is due to a ‘related service’ or software. This includes updates or upgrades or lack thereof that are required to maintain safety that is within the control of the manufacturer.

Limitation periods: the 10-year longstop period would be extended to 15 years in certain cases involving latent personal injuries. Time could also be determined to start running from the date that a product had been substantially modified ie at a point after it had been placed on the market or put into service.

Conclusion

The Proposal will now move through the EU’s co-legislative process. During that process, businesses should:

• Assess how the revisions contained in the current text of the Proposal would impact their product portfolios were they to become law
• Consider the impact of these proposed changes alongside other new EU legislation designed to safeguard the interests of consumers, especially the Collective Redress Directive, and
• Where necessary, identify opportunities to become involved in policy debates relating to proposed changes that could have a significant impact on particular product lines or product categories.

For more information, please contact a member of our Life Sciences and Product Regulatory team.

[1]Directive 85/374/EEC