European Union: Is The EU Product Liability Directive Still Fit For Purpose?

Many things have changed since 1985, in particular in the world of technology.  The Commission's 10 page report and evaluation of 7 May 2018 questions whether the Product Liability Directive of 1985 ("the Directive") is still fit for purpose.  The Directive was implemented to protect consumer safety and imposes strict liability (i.e. no requirement for the injured party to prove fault) on a producer of defective products for personal injury or damage to property caused by the defect.

The Commission's Report

Although, historically, the Commission has reported on the implementation of the Directive to the Council and Parliament every 5 years, this is the first time that the report has been accompanied by an evaluation of the relevance of the Directive in the EU today, owing to widespread concerns regarding the invention and everyday use of "products" that were not even imagined back in 1985.  The report recognises the urgent need to consider whether the Directive, in its current form, adequately deals with the challenges posed by "digitisation, the Internet of Things, artificial intelligence and cybersecurity" now and in the future, and, if it does not, what changes would be required to address the shortcomings.

In addition, as with previous reports, there is a section reporting on the number of complaints and infringements (none) that were commenced during 2011-2017 ("the reporting period"), pursuant to the Directive, together with an analysis of the Commission's own research into the number and types of claims brought throughout the EU. The Commission found that very few product liability claims have reached the Courts during the reporting period.  The majority were settled by negotiation between the parties and without recourse to the Court.  Cases involving pharmaceuticals accounted for 16.1% of all cases identified by the study.

The report also includes a brief commentary on the 4 product liability cases which have been brought before the Court of Justice of the European Union ("CJEU") during the reporting period.  All 4 cases concern medical devices and pharmaceuticals, namely: Case C-495/10 Centre hospitalier universitaire de Besançon v Thomas Dutrueux and Caisse primaire d'assurance maladie du Jura, Case C-310/13 Novo Nordisk Pharma GmbH v S, Case C-621/15 N. W and Others v Sanofi Pasteur MSD SNC and Others,  and joined cases C-503/13 and C-504/13 Boston Scientific Medizintechnik GmbH v AOK Sachsen-Anhalt – Die Gesundheitskasse and Betriebskrankenkasse RWE. The Commission observes, on the basis of these cases, that there may be a need to examine whether medical devices and pharmaceutical products should remain within the ambit of the Directive, since the biggest challenge facing claimants in such cases appears to be establishing causation between the product alleged to be defective and the damage sustained.  The CJEU has confirmed that national rules implemented to assist the claimant in establishing such proof are acceptable, provided that the burden of proof remains squarely on the shoulders of the Claimant, as required by the Directive.

Scope of the Evaluation

The Commission Staff Working Document, analysed the results of external research into various aspects of the Directive, including whether the Directive was still meeting its original objectives of ensuring producer liability and the protection and compensation of injured people; and whether it was effective, efficient, coherent, relevant and added EU value.

In terms of effectiveness, the evaluation found, reassuringly, that there was widespread awareness among stakeholders that producers are liable to those injured for their defective products.  While "Industry" was largely content with the scope of the Directive, consumers felt that proving the association between defect and damage (given that they were often not in possession of the relevant documents, and had to bear costs upfront) was too onerous.  As digital technology advances, there is also a need for a better understanding of the meaning of key terms, such as "product", "damage" and "defect", and the ambit of the "burden of proof", all of which, the Commission has recognised, may need to be revised to take into account the complexities of new technologies.

As for the perceived efficiency of the Directive, while the evaluation considered that the Directive does provide a harmonised "stable legal framework" to ensure consumer protection, it was, nevertheless, critical of the cost and length of court cases pursued in some Member States, which, the Commission believed, had a greater adverse effect on consumers than on producers.  This was particularly so in cases involving pharmaceuticals.  However, since the efficiency or otherwise of national judicial proceedings was outside the ambit of the Directive, the Commission did not feel that this impinged upon the efficiency of the Directive itself.

The Directive forms part of a wider EU product safety framework, designed to encourage innovation and ensure consumer safety.  In its current form, the Commission's evaluation found that the Directive is coherent and the safety standards and obligations imposed on producers in the Directive are in line with those contained in wider EU product safety rules and the General Product Safety Directive.  However, the evaluation does warn that the Directive will need to keep pace with technological changes that are reflected in other EU legislation.

While the evaluation considers that the Directive has withstood 30 years of technical advances, it recognises concerns among stakeholders that the Directive's 'concepts' should remain relevant to new technological developments.  For example, the evaluation asks whether the Directive adequately addresses the increasing blurring of the lines between products and services; whether the concept of damage (currently limited to material damage above EURO 500) is sufficiently wide, and whether the definition of "defect" is sufficiently broad to encompass technological advances now and in the future.

The Commission's evaluation regards the Directive as a cornerstone of the broader EU single market rules, which succeeds in protecting consumers while encouraging innovation – and as such rejects any notion of repeal.  Such a step would lead to undesirable consequences, such as inconsistency in the levels of consumer protection at national level and potentially adversely affect competition among producers.

Fit for purpose?

Despite all of the changes and developments that have occurred to products since the mid-1980s, the Commission has, nevertheless, concluded that the Directive is still currently fit for purpose, and strikes the right balance between encouraging innovation and consumer protection in the EU.  However, the evaluation highlights the urgent need to look more closely at the key concepts in the Directive, and at certain types of products, including pharmaceuticals, which, the Commission says, "may pose a challenge to the performance of the Directive" because, for certain products, the balance may not be fairly distributed between producers and consumers in terms of costs.

Given the challenges posed by emerging digital technologies, and the concern that the Directive should continue to offer a meaningful product liability framework for innovators and consumers, the Commission will undertake further research into the concerns raised by stakeholders regarding the relevance of the Directive to some products (including new technologies and products that may have been "refurbished, patched and reused"). The Commission aims to publish comprehensive interpretative guidance in mid-2019 to clarify the extent to which the Directive applies to emerging technologies, and potentially suggest updated definitions of key terms, while safeguarding the principle of strict liability, so as to ensure legal certainty for consumers and producers as the digital future unfolds.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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