What is it called?
Directive 85/374/EEC on the liability for defective products (the Product Liability Directive or “PLD”).
The PLD is currently under review. The European Commission has indicated it is planning to amend the existing PLD and/or create guidance to help interpret the PLD in the first quarter of 2021.
What is it about?
The PLD creates a European Union-wide strict liability regime for defective products. Under the regime, persons can claim compensation for damage caused by defective products.
A claimant is required to establish:
- Damage: Damage includes death or personal injury. Damage to property can also be recovered if the property is ordinarily intended for private use and was used as such by the injured person. The lower threshold for property damage in most countries is EUR500. Damage to the defective product itself is expressly excluded from the scope of the PLD.
- Product defect: A product is defective when it “does not provide the safety which a person is reasonably entitled to expect” as based on “all circumstances”, which expressly includes but is not limited to the product’s presentation, its use, and the time it was put into circulation. The fact that a better product is put into circulation subsequently does not automatically render the earlier product defective. The factual context of any claim is therefore centrally important to determining whether or not a product has a defect.
- The causal relationship between the damage and the defect: Legal tests for causation are dictated by national laws.
There are a number of statutory defences available to defendants under the PLD. The most important are:
- The product was not defective at the date it was put into circulation;
- The defect is due to compliance with mandatory regulations;
- The state of scientific and technical knowledge at the time the product was put into circulation means it was not possible to discover the defect (aka the development risk defence); or
- For manufacturers of components, the defect is due to the manufacturer’s design or instructions.
Who and what does it apply to?
The PLD has the following scope:
- Applies to all moveable products marketed in the European Economic Area: The definition of product expressly excludes primary agricultural products but includes electricity.
- Imposes liability on ‘producers’, ‘importers’ and ‘suppliers’: The terms are defined more broadly than they are typically used in business. Producers can be: manufacturers (where established in the EU) and anyone presenting themselves as the manufacturer who affixes their brand to the product. Where a producer cannot be identified importers and suppliers may be liable. Parties are jointly and severally liable for defective products.
- Imposes limitation periods to exclude some claims: The limitation period is 3 years from the date the injured person became aware, or should reasonably have become aware, of the damage, the defect and the identity of the producer. A 10-year long stop from the date on which the producer put into circulation the actual product which caused the damage, unless the injured person has in the meantime issued proceedings, also applies.
Why does it matter?
The PLD was introduced in 1985 after rigorous and prolonged debate. It has as one of its guiding principles ‘a fair apportionment of risk’ as between the producer and the consumer. Whilst it is intended to harmonise the European Union laws on this topic, it does leave some areas to Member State legal systems expressly and exists alongside national liability systems.
The PLD is often the regime of choice for individuals harmed by defective products as the evidential bar is lower than other causes of action (e.g. negligence, breach of contract) where fault must be proved.
What reforms are being proposed?
In February 2020, the European Commission published its Report on the Safety and Liability Implications of Artificial Intelligence, the Internet of Things and Robotics, which fed into its White Paper on AI. The Commission identified a number of areas for further consideration, including:
- Clarifying the definition of “product” to cover software;
- Changes to the burden of proof for causation to address perceived challenges with new technologies;
- Amending the definition of “putting into circulation” to address concerns regarding software and firmware updates; and
- A specific regime for ‘high risk’ applications (e.g. healthcare, transport, energy, and parts of the public sector) coupled with the introduction of a mandatory insurance scheme.
The European Commission’s consultation on the White Paper on AI, including changes to the PLD, closed on 14 June 2020.
In her State of the Union Address on 16 September 2020, European President von der Leyen indicated that the Commission would propose new laws in 2021 that “puts people at the centre” and to provide “clear rules if something goes wrong” with AI.
Where can I find it?
The PLD can be found here.
The European Commission Report on the Safety and Liability Implications of Artificial Intelligence, the Internet of Things and Robotics be found here.
Information on the European Commission’s consultation on the White Paper on AI can be found here.
Is there any guidance?
No specific guidance on the revision has been published, but the Commission’s work programme which includes this initiative can be found here.
Cooley is part of the European Commission’s Expert Group on Liability and New Technologies, which has been considering these issues.
We will keep you updated via Productwise as the review continues.