In an important step forward, last week the European Union reached provisional (political) agreement on the text for the proposed revision of the EU’s Product Liability Directive 85/374/EEC (PLD).
The PLD establishes a strict liability (i.e., no fault) regime to enable claimants to seek compensation for defective products across the EU, meaning claimants do not need to establish fault to claim successfully. As a result, it is the preferred way of making product liability claims in the EU. The revision is a significant development, as the PLD dates back to 1985 and has been virtually unchanged for nearly 40 years – with only very minor amendments in 1999.
The reforms will expand the scope of claims that can be brought and the range of damages that can be recovered under the PLD, as well as making it easier for consumers to prove their claims. There also are implications for product safety and cybersecurity issues, such as considerations around how long software updates should be provided to avoid potential liability.
Whilst negotiators from the European Commission, European Council and European Parliament have now reached agreement on the text of the provisional agreement, the final text has not yet been published. It is expected to become publicly available in the next few weeks, and once it is, we will follow up with some more detailed analysis of the implications for stakeholders.
In the meantime, we have listed below some highlights of the agreement on the text, based on what we know at this stage:
- Expanded definition of a product to cover software and digital manufacturing files. The agreed text takes a broad approach, with both embedded and stand-alone software in scope – with only limited exceptions for certain free and open-source software developed or supplied outside of a commercial activity.
- Expanded concept of defect to introduce strict liability for defects from software updates, artificial intelligence (AI) and machine learning, among others.
- Expanded range of damages to include medically recognised damage to psychological health and destruction or irreversible corruption of data (not used exclusively for professional purposes) – e.g., deletion of files from a hard drive.
- Expanded range of defendants, with new liability for online marketplaces and fulfilment service providers in certain cases, as well as for those who ‘substantially modify’ a product outside of the original manufacturer’s control.
- New requirements for discovery by harmonising rules on when a court can order discovery of documents at an early stage (currently not available in all EU Member States under existing rules).
- Easing the burden of proof in certain circumstances, such as in scientific or technically complex cases where it would be difficult for the victim to prove liability. The European Commission has previously suggested this could include vaccines, medical devices and products that make use of AI technologies.
- Significantly extending the long-stop period where symptoms are slow to emerge, from 10 years under the existing rules to 25 years.
The indications are that proposed changes which will increase the importance of regulatory compliance as a means of mitigating product liability risks also have been agreed. These include adding compliance with EU product safety rules and the existence of any product recalls as relevant factors for assessing defect, along with creating a presumption of defect where there is a noncompliance with relevant product safety laws. We are waiting to see the final text to understand the impact of any final tweaks made to these provisions and will follow up with more detail in the new year.
The text of the provisional agreement now needs to be formally approved by the full European Parliament at plenary, and then by the European Council. It will then be signed and published in the Official Journal of the European Union and enter into force 20 days later. A 24-month transition period has been agreed – meaning the laws look set to enter into force in the first half of 2024 and will start applying from 2026.
These reforms sit alongside parallel policy initiatives – such as the EU’s new class actions mechanism that has applied to cases across the EU since June 2023, proposals on AI, circular economy activities and cybersecurity. Together, these reforms are set to significantly change the liability risks for product manufacturers and suppliers.
See more from these press releases following the provisional agreement – European Commission, European Parliament and European Council.
We will be posting more information about these reforms on our Productwise blog in the coming weeks, so continue following to learn more.
