26 October 2023 Anke Krause  -  Léonard Maistriaux  -  Alex Ferreres ProductLiabilityLinks

Revised Product Liability Directive Gets Near the Finish Line

Almost four decades after its adoption, on 28 September 2022, the European Commission adopted a proposal to revise the directive on liability for defective products (the Product Liability Directive or “PLD”) (see our previous blog post). The key drivers behind the Commission’s proposal were that, in the current PLD, (i) certain products, economic actors and damage in the digital and circular economy escape strict liability; and (ii) consumers face obstacles to getting compensation for damages caused by defective products, in part due to challenges in gathering evidence to establish liability, especially in light of increasing technical and scientific complexity. 

Following the EU’s ordinary legislative procedure, the European Council and the European Parliament each adopted their positions on the Commission’s proposal. The Council issued a final compromise text on 23 May 2023, whilst the Parliament adopted its report on 18 October 2023. Trilogue (i.e. interinstitutional) negotiations are now underway, with the aim of reaching a political agreement on the legislative text in the coming months.

Some key changes envisaged in the draft revised PLD

The draft revised PLD introduces several important changes to the EU product liability regime. Key changes proposed by the Commission that seem to already have been accepted by the Council and the Parliament focus on the following aspects:

  • Confirmation of revised scope: The draft revised PLD makes clear that it would cover both tangible and intangible products. Software (including AI systems) are explicitly mentioned as in-scope products. In the same vein, software developers (including AI system providers) are treated as manufacturers which can be held liable for damages caused by their products. The draft revised PLD also provides for other economic operators throughout the supply chain which can be held liable under certain circumstances for damages caused by a product: importers, manufacturers’ authorised representatives, fulfilment service providers, distributors, and operators which substantially modify the relevant product.
  • Easier proof of defectiveness and causation: The draft revised PLD provides new examples of circumstances to take into account in the analysis of objective safety expectations, such as the effect on the product of any ability to continue to learn (or to acquire new features or knowledge) – specifically targeting AI systems. The draft revised PLD also introduces a series of (rebuttable) presumptions of defectiveness and/or of causation (e.g. in the event that the claimant faces “excessive difficulties”, due to technical or scientific complexity, to be able to establish that the product is defective or the causal link between the defectiveness and the damage), thereby greatly alleviating the burden of proof resting on the claimant.
  • Damage: The definition of damage under the draft revised PLD includes medically recognised damage to psychological health, as well as the destruction or corruption of data. 
Remaining differences between the positions of the Parliament and Council

Despite the apparent consensus on some of the key changes, there remain several differences between the positions of the Parliament and the Council, specifically with respect to the inclusion of software, which will undoubtedly be addressed during the ongoing trilogue negotiations. For example, unlike the Council, the Parliament suggested to (i) essentially exempt free and open-source software from the scope of the revised PLD; (ii) exempt from liability manufacturers of software which are micro or small enterprises if another economic operator is already liable under the revised PLD; and (iii) only allow irreversible destruction or corruption of data to be compensated if the material loss resulting therefrom exceeds EUR 1,000.

Way forward 

Trilogue negotiations have commenced this week, with the aim of reaching a political agreement on the legislative text within the coming months. Once such political agreement will be reached, the legislative text will need to be formally endorsed by the Council and the Parliament. The revised PLD will then enter into force on the 20th day following its publication in the Official Journal of the European Union and will afterwards have to be transposed into national legislation. The deadline for such transposition will depend on the outcome of the trilogue negotiations – the Commission and Parliament having proposed a 12-month period after the entry into force of the revised PLD, whilst the Council suggested a 24-month period. 

With several key changes already agreed on, it is clear that irrespective of the outcome of the trilogue discussions, the EU product liability regime as we know it is about to change. The introduction of lesser standards for the burden of proof, while simultaneously broadening the scope of covered economic actors and products will increase overall risks of liability. With the introduction of new collective redress mechanism across the EU as a result of the implementation of the Collective Redress Directive (read more in our tracker), the new, claimant-friendly regime will open up another area which could become the target of collective or mass consumer litigation.