United States: Product Liability Comes To Romania

Government Ordinance 87 adopted on August 29, 2000 by the Government of Romania (published in Monitorul Oficial No. 421of September 1, 2000 and hereinafter the AOrdinance@) concerns the liability of manufacturers, distributors and sellers for losses created by deficient products. In order to conform Romania's legislation with relevant European legislation, the Government also adopted GO 99/2000 regarding the marketing of products, published in Monitorul Oficial No. 424 of September 1, 2000).

Both of these legislative acts are meant to round off the existing laws related to product liability, especially GO 21/1992 (as published in Monitorul Oficial No. 75/1994) regarding consumer protection, Government Resolution 792/1997 regarding the modification of punitive damages related to consumer protection, GO 178/1998 adopted to amend Art. 47 of the Consumer Protection Law, and the amendment of the more recent GO 58 of January 30, 2000, adopted to amend and complete the same GO 21/1992, regarding consumer protection. They are designed to provide redress in the courts to consumers injured in Romania by products defectively produced anywhere.

The Ordinance is designed not only to establish civil liability for damages incurred due to defective products, but to govern the relationships between manufacturers, producers, distributors and sellers on the one hand, and consumers on the other. To understand the Ordinance, one must first understand the definitions of certain keys terms, and it is here that problems in determining the breadth of the Ordinance are first encountered.

Producer-is defined under Art. 2(a) as:

1. the manufacturer of a finished product, the producer of raw materials or the manufacturer of component parts for the same product;
2. any person who places any designation, label or trademark on an article or product, indicating it is a producer;
3. any person importing products with a view to further sale, rental, lease or distribution in any manner, specific to its business; (meaning that if, e.g., an oil company resells a truck it had used for deliveries, it is not a producer under the Ordinance); or
4. the distributor of imported goods, in the event that the importer is not known, regardless of whether the producer is specified.

Product - is defined as any movable asset, regardless of whether incorporated in another movable asset or an immovable one, primary agricultural products, electrical power and thermal energy, water and gas supplied for household and industrial use. (This definition of a product is far broader than any common law or statutory definition existing in the United States. It includes real estate fixtures, regardless of size, electricity even before it reaches a consumer such as in an overhead power line, and agricultural produce, which are usually not considered products and may be the subject of distinct statutes in the US dealing with liability resulting from defects.)

Primary agricultural products - fruits, vegetables and animal products, including fish and game which were not subject to industrial processing. (Under this definition, which is far broader than any used in the United States, a farmer is liable for tainted produce and a fisherman for his pollution contaminated catch. Does this mean that the farmer must place warning labels on tomatoes, and the fisherman on shellfish to be insulated from liability?)

Loss - is defined by the Ordinance as (i) the prejudice caused by the death or bodily injury of a person; or (ii) the damage or destruction of another product, other than the defective product, provided that such product is designed for private use or consumption, has been used by the person who incurred the loss, and its value is no less than ROL 2 million (approximately US $75).

Defective product - is a product which is not as safe as the person is entitled to expect, considering all circumstances, including: i) the design of the product and any warning labels; ii) all foreseeable uses of such product; and iii) date of manufacture, production, distribution or sale. (The ordinance seems to have adopted a "consumer expectations test," which, despite continued use by some American courts with respect to design and warnings, has been eliminated in such regard in the US by the new Restatement (Third) Products Liability.)

A product cannot be considered defective for the sole reason that another, improved product has been commissioned on the market. (The Ordinance does not deal, however, with the American concept of continuing post-sale duty to warn.) Also, the state-owned producers and the state-monopoly producers may be held liable for the production or distribution of defective products, thereby waiving sovereign immunity.

Producers' liability in connection with the products, when the loss is in excess of ROL 2 million, is established either for a current loss or for a future loss. The Ordinance does not specify what a future loss is, and neither does it specify the manner in which such a loss is to be assessed. (Conceptually, a future loss may possibly refer to future medical bills, lost earnings and out of pocket expenses.) The Ordinance also establishes a producers' liability for losses due to the cumulative effect of the product's defect and the act, or omission of a third party. In the event that two or more persons are responsible for the loss, they will be held jointly liable. Curiously, the Ordinance does not specify severable liability - just joint liability - leaving open the issue of a malfeasant being held fully liable for a defect where more than one malfeasant was involved..

There may well be difficulties in the Romanian courts in substantiating the causal relationship between the product defect and the loss incurred, primarily because of the lack of judicial experience in previously handling product liability actions. It therefore behooves the Ministry of Justice to swiftly organize training programs for judges on the law of products liability and its application in the Romanian judicial system.

The producer is absolved of liability provided that it can substantiate the existence of one of the following:

1. that the producer has not manufactured, distributed or sold such product;
2. the defect that caused the injury did not exist on the date of such product's manufacture, production, distribution or sale, or appeared subsequent to the manufacture, production, distribution or sale of the product, for reasons not imputable to the producer (meaning that it has been altered, modified or subjected to an unforeseeable use);
3. the respective product has not been manufactured for marketing or for any other form of distribution for business purposes (homemade products, or used products not sold in the course of the seller's business could not be the subject of an action);
4. such defect is due to the producer's compliance with certain mandatory conditions set forth by regulations issued by public authorities (an interesting limitation of liability that allows the producer a defense that the defect occurred as a result of compliance with a statue or a regulation - but is the defense limited only to Romanian laws or regulations, or does the defense have extraterritorial implications? For example, is compliance with a warning required under American law a defense?); or
5. the level of the scientific knowledge as at the time of the product's manufacture, production, distribution or sale did not allow for the assessment of such defect (compliance with the state of the art is a defense).

Another exemption from liability of a producer is set forth under Art. 7 (2) and refers, principally, to the producer of component parts, who shall not be held liable for any losses provided that such producer is able to prove that the defect is imputable to the faulty design of the equipment on which such component part was installed or due to the instructions to the producer of the final product.

Comparative negligence is introduced in the Ordinance by permitting a competent court to limit the producer's liability if the loss is produced by a combination of the product's defect, the injured person's fault, or the fault of a third party, who can be held responsible. (Query: can a third party be held partially responsible if the court cannot get personal jurisdiction over such third party?)

The Ordinance also permits a limitation of liability where the injured person has concluded a contract with the producer providing for a limitation of liability for losses, or where such limitation is provided under other laws. This presents a host of unanswered issues. Does this provision literally mean that a written contract is required, or does it apply to a unilateral product disclaimer? Even if it means a written contract, can an automobile product's manufacturer or seller include such a provision in its standard contract of sale, thus effectively eliminating product liability lawsuits for anyone who purchases an automobile in Romania?

In addition to the legal provisions in connection with liability, Art. 9 (1) of the Ordinance provides for an injured or prejudiced persons' right to claim damages based upon contractual or non-contractual liability (such as insurance) or grounded on any other legal provision in force as of the time the injury was incurred.

Is the injured or prejudiced person's right to remedial action under continental legal systems subject to any limitations? It may well be that only compensatory damages and not damages for pain and suffering can be recovered in Romania. Such limitation would drastically reduce the awards which courts could provide to Romanian consumers who were seriously injured as a result of defects in products.

The issue of which statute of limitations applies and when it begins to run is left somewhat unresolved in the Ordinance. The general rule regarding the moment when the time period to commence an action starts running has a double legislative governance: Art. 7 (1) of the Decree 167/1958 and Art. 1886 of the Romanian Civil Code, enacted in 1864, and still in force.

According to Art. 7 (1) of Decree 167/1958 "The time period set for the limitation of the right of action starts running as of the date when such right arises," (in other words, when the injury occurs), while according to Art. 1886 of the Civil Code "No time period for limitation may run before the action subject to such extinguishment has arisen."

The right to remedial action, under the present Ordinance, is limited to three years, a period of time which starts running as of the date when the claimant took notice - or should have taken notice - of the loss, the defect and the producer's identity, but not later than 10 years as of the date when such product was manufactured, produced, distributed or sold, provided that the loss is incurred within such 10 years term. Rulings in such actions are the competence of the court of jurisdiction at the place where such loss is incurred, or of the court of jurisdiction of the defendant's headquarters or, if applicable, the defendant's domicile.

Recently certain amendments have been adopted to the provisions in the Civil Code. Government Emergency Ordinance 138/2000 sets forth the several levels of competence in accordance with the amount of the loss, i.e. the Court of first instance (Judecatorie) (in their capacity as a court of first instance) is competent to rule in cases involving civil claims of up to ROL 2 billion. The Law courts (Tribunals) are competent to rule in cases involving civil claims of more than ROL 2 billion and in commercial litigations involving claims for amounts of up to ROL 10 billion. The Courts of Appeal have original jurisdiction in commercial litigation involving claims of more than ROL 10 billion.

An unintended consequence of Romania's new Product Liability Ordinance's inclusion of primary agricultural products in its coverage might result in warning labels being affixed to fruits and vegetables. Attorney Cary Stewart Sklaren, of Herzfeld & Rubin, P.C. in New York, prepared, with tongue in cheek, a banana warning, in conjunction with a presentation he made at an American Bar Association National Institute.

The Ordinance will only come into force on August 29, 2001 - a very long term apparently set in order to provide the Government with the time required to issue explanatory norms to clarify the ambiguities in the Ordinance and, hopefully, to train the nations' judges in the field of product liability law.

The enactment of the Ordinance places consumers at an advantage enabling them to sue producers directly in the Romanian courts. This compares favorably with previous consumer protection legislation (Ordinance 21/1992) that provided for a slower procedure where administrative bodies were appointed to ensure consumer protection - principally the Consumer Protection Office.

The development of an effective and fair product liability law in Romania will require a partnership between business and government. Unfortunately, almost no Romanian lawyers and few, if any, of the Western law firms currently in Romania, other than, Herzfeld & Rubin, P.C., know anything about product liability law. The Romanian government and the nation's judiciary know even less. For manufacturers, distributors and sellers of products in Romania, this dearth of experience will make traversing the new area of product liability law in Romania perilous, arduous and costly.