Product liability reforms on the horizon. One year after the publication of the European Commission's proposal for a directive on liability for defective products.
One year ago, on 28 September 2022, the European Commission published the Proposal for a Directive of the European Parliament and of the Council on liability for defective products (the "Directive Proposal"), which is now pending approval by the European Parliament. Once approved, each Member State will have to adopt the corresponding legislative measures to implement the new regime in its legal system.
The Directive Proposal aims to revoke the classic Directive 85/374/EEC, which was which was transposed into the local consumer legislation of each Member State.
The origin of the Directive Proposal lies in the need to revise Directive 85/374/EEC due to developments related to new technologies, including artificial intelligence, new business models in the circular economy and new global supply chains.
In general terms, this proposal maintains the essence of the previous Directive and the economic operator's liability continues to be strict, derived from the causal link between the economic operator's actions and the damage caused, regardless of intentional or negligent behaviour. However, some essential concepts relating to defective products are developed in a broader and more specific manner and some new benefits in favour of the consumer are also introduced.
1. The scope of application of the rule (the injured person)
As of this date, product liability is enforceable by all those who suffer damage, whether or not they are consumers, a term in which consumer law includes natural or legal persons acting outside a business or professional activity. However, the Directive Proposal only covers damage suffered by natural persons. In order to protect consumers, goods used exclusively for business purposes are excluded from the scope of the Directive Proposal.
If the new Directive is adopted in these terms, damages suffered by companies and other legal entities as a result of product defects will have to be compensated under another liability regime that may be applicable.
2. The product concept
In addition to movable items, even if incorporated into other movable or immovable products, and electricity, digital manufacturing files, which contain the functional information necessary to produce a tangible item by allowing the automated control of machines or tools, and software, as intangible products that have emerged in the digital age, are added within the scope of the Directive Proposal.
3. Compensable damage
"Loss or corruption of data that is not used exclusively for business purposes" is added to the concept of compensable damage. However, although it is not clear from its reading, the compensable damage is not the loss of the data itself (for which there are protection mechanisms under Regulation 2016/679, of 27 April 2016, on the protection of individuals with regard to the processing of personal data), but rather the material damage that the loss of data causes to the injured parties.
In respect of damage to or destruction of any property, the requirement for prior deduction of the ECU 500 excess provided for in Directive 85/374/EEC, which was intended to prevent mass litigation, is removed. With Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions, it makes no sense to try to dissuade consumers from claiming for damage caused by a defective product.
4. The defective character of the product
In order to delimit the concept of defective product, the Directive Proposal has developed and added new circumstances to be taken into account in order to assess the product safety, such as:
the effect on the product of the possibility to continue learning after deployment (referring to machine learning);
the effect on the product of other products which may reasonably be expected to be used together with the product;
the product safety requirements, including safety-relevant cybersecurity requirements;
the intervention by a regulatory authority in relation to product safety; and
the specific expectations of the end-users for whom the product is intended.
5. The producer
In addition to the manufacturer, importer, supplier (insofar as the producer has not been identified) and intentional supplier, the Directive Proposal adds other parties who may be liable for damage caused by defective products, such as:
the authorised representative of the importer;
the fulfilment service provider, in such a way as to extend liability in the distribution chain beyond traditional mechanisms; and
economic operators involved in the remanufacturing, reconditioning and repair of products, in so far as their intervention leads to a substantial modification therein.
The exception to the extension of liability to the distributor, if he proves within one month the identity of the supplier, is also applicable to the new fulfilment service provider.
6. Finally, the new developments in favour of the consumer
The most relevant new features of the Directive Proposal have been introduced in order to favour the protection of the injured consumer.
Firstly, a new system of disclosure of information at the defendant's expense is introduced, whereby the judge can order the defendant to provide relevant evidence to enable the injured person to properly substantiate his claim for damages, considering that the injured person has presented facts and evidence sufficient to support the plausibility of the claim for compensation. It is a procedural instrument, which may have its origins in the Common Law mechanism of discovery or disclosure, which is very novel in continental-inspired civil proceedings.
On the other hand, it is maintained that the burden of proving the defect, the damage and the causal link lies with the claimant, however, a series of rebuttable presumptions (iuris tantum) have been introduced in favour of the injured person, which means that the burden of proof on the claimant is alleviated.
The Directive Proposal establishes a number of general presumptions, according to which:
a product shall be presumed to be defective when:
- the defendant has failed to comply with an obligation to disclose relevant evidence;
- the claimant demonstrates that the product does not comply with mandatory safety requirements laid down in Union law or national legislation on protection against the risk of damage; or
- the claimant proves that the damage was caused by an obvious malfunction of the product during normal use or under normal circumstances; and
the causal link between the defective character of the product and the damage shall be presumed where the product has been found to be defective and the damage caused is of a kind typically consistent with the defect in question.
In addition, specific presumptions are established for cases where excessive difficulties (due to the technical and/or scientific complexity of the case) are faced by the claimant in proving the defect or the causal link, whereby the defective character of the product and/or the causal link between the defective character and the damage will be presumed when the claimant can prove that:
the product contributed to the damage; and
the product is likely to be defective or its defective character is a probable cause of the damage.
In essence, therefore, there is a reversal of the burden of proof, as the defect is presumed unless the defendant has provided sufficient evidence to prove its non-existence.
In conclusion, we are faced with a draft directive which, if it is finally approved, will entail major changes in the area of civil liability for defective products and immense efforts by economic operators to refute the new presumptions or to challenge the existence of excessive difficulties in proving the defect of the product.
