Draft for a new product liability directive in the EU
On 28.09.2022, the EU Commission presented a draft for a new product liability directive. Various product liability experts are already warning of this draft and its fundamental effects, should it be implemented in this or a comparable form.
However, a sober view shows: The new/additional liability risks now conjured up have always existed. A doomsday scenario in terms of liability law looks different. What is happening instead is an overdue harmonization at the European level of the requirements of public product safety law - what requirements must a product meet in order to be imported into the EU and sold there - with European product liability. And, en passant, Anglo-Saxon procedural law is being used with regard to the evidentiary requirements for proving the defectiveness of a product. A real expansion of product liability is only taking place where, in addition to manufacturers and distributors, other economic actors - e.g. fulfillment service providers - are to be made liable. The main points discussed here are:
1. in the future, European product liability will no longer apply only to movable objects and electricity, but explicitly also to digital production files and to software including AI systems.
Comment PSP: It is already a subject of discussion whether software falls under the product concept of the European product liability. This is because there can be different opinions as to whether software is a "movable object" in the sense of the Product Liability Directive as implemented in the German ProdHaftG. However, it was not really possible to justify constitutionally a better position of manufacturers of software compared to manufacturers of other goods. As a result, this is more of a clarification than an innovation.
2. a product is defective if it does not meet the reasonable expectation of safety of an average consumer. What about cybersecurity?
Comment PSP: This is also already the subject of the previous European product liability. What will be new according to the draft (not yet final European legislation) is that software / AI products will have to be considered under product liability law. However, with the increasing range of digital products, there is probably no alternative to this step.
3. deductibles and maximum liability limits shall be abolished without replacement.
Comment PSP: That is correct. Up to now, European product liability has provided for a deductible of EUR 500 and a maximum liability limit of EUR 85 million. However, the deductible plays virtually no role in practice, and the same applies to the maximum liability limit. And: It must always be borne in mind that product liability as so-called producer liability can also be justified according to national tort laws, which as a rule have always not provided for any limitation of liability.
4. anyone who substantially alters a product is liable without fault in the same way as a manufacturer.
PSP commentary: This is indeed an innovation, but probably also more in the sense of a clarification. The Commission's comments on the proposal for a new product liability directive make it clear that this should only apply to significant interventions in a product that have not been agreed with the manufacturer. It is not clear why the company in question should not be liable in the same way as a manufacturer.
In the future, placing the product on the market will not be the sole determining factor for product liability. The manufacturer's liability may also arise if he can continue to control his product after it has been placed on the market, e.g. via software updates.
Comment PSP: This is indeed also an innovation. Only: According to national tort laws, there has always been the so-called product monitoring obligation, according to which the manufacturer had to react if, in the course of product monitoring after placing the product on the market, he discovers product risks, in particular to life, limb and health of the product users. The Commission is now transposing this tort law approach to European product liability.
In addition to the manufacturer, the quasi-manufacturer and the importer, the manufacturer's authorized representative and the fulfillment service provider may also be liable for product defects in the same way as the manufacturer.
Comment PSP: A distinction must be made here: This extension of liability to authorized representatives of the manufacturer as well as fulfillment service providers does not apply equally alongside the manufacturer, the quasi-manufacturer and the importer, but with regard to the importer and the authorized representative only if the manufacturer is located outside the European Union. With regard to the fulfillment service provider, this only applies if both the manufacturer and the importer and the manufacturer's authorized representative are located outside the European Union.
7. facilitation of proof is extended. The causal link between product defect on the one hand and the damage on the other hand shall be presumed if the damage was caused by an obvious malfunction of the product during normal use.
PSP commentary: The draft of the new product liability directive actually provides for simplification of the burden of proof in favor of the person allegedly harmed by a product. However, it is still up to the manufacturer to prove that the damage claimed is not due to defects in his product.
8. liability exclusions are limited, e.g. if the defect of a product was not recognizable when it was placed on the market, but could have been remedied by a safety software update.
Comment PSP: This is correct, but the result is only that the product observation obligation, which has always applied in tort law, is now also implemented in European product liability via the limitation of the exclusion of liability. The aggravation of liability results from the fact that European product liability does not require any fault on the part of the manufacturer, unlike tort law.
9. companies will be forced to hand over evidence in their possession (e.g. design documents) that the plaintiff needs to substantiate his claims. If they do not do so or do not do so completely, the defectiveness of the product will be presumed by law.
Comment PSP: This is a real innovation, because this approach - disclosure of documents - is unknown outside common law countries. Disclosure is rightly criticized as a common law procedural approach, because it requires a sometimes comprehensive and complicated disclosure of documents of any kind, in particular also digital documents, which are related to the disputed facts. Here, however, this disclosure is to take place only if the plaintiff has presented sufficient facts and evidence that suggest a claim for damages, which, at least according to the current status of the draft product liability directive, means more than just conclusive factual presentation, but also in part the presentation of evidence by the plaintiff. In this way, it should be possible to counteract, at least in a first step, an investigation that is fundamentally inadmissible under German procedural law. In addition: Business secrets and trade secrets in particular are to be adequately protected in the course of implementing the Product Liability Directive. It remains to be seen how this is to be done, e.g. by means of a so-called in camara appraisal of production documents to be submitted by the court and an expert appointed by the court. Under these limited conditions, however, this is something other than dosclosure according to the Anglo-Saxon model, but rather reminiscent of the production of documents provided for in the procedural laws of the common law states, i.e. the submission of individual sufficiently designated documents.
Regardless of this, of course, the following applies: even if a document submission can be defended against afterwards, the principle remains that any submission in court must correspond to the facts. False statements of fact are at least punishable as attempted fraud and are therefore generally not recommended.
Although the draft of the new product liability directive tends to tighten liability, it provides for clarification rather than real innovation in many areas. Overall, if the draft is adopted in this or a similar form, it is possible to "live with" the draft on the corporate side. A legal doomsday scenario looks different.