EU Council's position on the proposed revision of EU product liability law

Background

In previous articles concerning the revision of the EU product liability regime, we took a look at the European Commission's ("Commission") initial PLD Proposal dated 28 September 2022, in particular

• European Commission proposes new ground-breaking rules on product liability and AI civil liability.
• Rebuttable presumptions of fact under the EU Commission's recent product liability directive proposal
• Proposed new disclosure obligations on alleged product defects for defendants in product litigation

In this piece, we will consider the changes that the Council proposed on 14 June 2023 ("Council's Amendments").

Negotiating Mandate of the Council

On 14 June 2023, the Council adopted its negotiating mandate for a revised EU directive on liability for defective products. In its position, the Council proposed several amendments to the PLD Proposal to "increase consumer protection and guarantee a stable legal framework for companies".

Council's Amendments

Scope of application

The Council's Amendments replaces the notion of 'consumers' with that of 'natural persons' to ensure a full and effective level of protection (hence possibly a wider scope by not applying any limitation inferred by the qualification of consumer).

With regard to the debate on inclusion of software in scope, the Council's position is that software shall be considered a product irrespective of whether the software is stored on a device, accessed through cloud technologies, or supplied via a software-as-a-service model. In addition, the Council clarifies that mere information-like content of digital files (e.g. media files or e-books as well as source code of software) shall not be considered a product. On the other hand, in line with the Commission's PLD Proposal, digital files containing the functional information to produce a tangible product shall be considered a product. The Council's Amendments include 3-D printed goods as an example.

For open-source software, the Council agrees with the PLD Proposal to exclude it from the scope because such software would "by definition not be placed" on the EU market. The Council however adds that where a manufacturer integrates open-source software as a component into its product, it may be held liable for damages caused by the defectiveness of the software as such.

On software-updates and other related services and components, the Council's Amendments foresee that liability of the manufacturer shall depend on whether or not these related services and components are within the manufacturer's control. There shall be control where they are integrated, inter-connected or supplied by the manufacturer or a third party who has been authorised by the manufacturer to do so, or at least who acts with the consent of the manufacturer. Further to the condition of placing these components on the market, the main criteria shall be that the manufacturer has the technical ability to supply software updates or upgrades either itself or through a third party.

Furthermore, the Council states that, to avoid legal uncertainty, raw materials such as gas and water should be comprised within the definition of ‘product’.

Additionally, the Council explicitly excludes electronic communications services from the scope of related services, as defined in the PLD Proposal. Electronic communications are thus not considered as digital services interconnected with a product in such a way that they would determine the functioning and safety of the product.

Presumption of defectiveness / Burden of Proof

The PLD Proposal aims at easing the burden of proof by allowing national courts to assume the defectiveness of a product in certain circumstances; for instance, if providing evidence is difficult due to technical or scientific complexities.

The Commission's PLD Proposal thus provided for a presumption of defectiveness when a claimant "demonstrated, on the basis of sufficiently relevant evidence, that the product contributed to the damage and it is likely that the product was defective or its defectiveness is a likely cause of the damage".

The Council's Amendments further ease the proof of the defectiveness of a product. According to the Council's position, claimants are only required to prove the likelihood that the product was defective or that the defectiveness of a product is a likely cause of the damage. Thereby the Council aims to "maintain a fair apportionment of risk while avoiding a reversal of the burden of proof."

The defectiveness of a product is to be determined according the expectations of "the public at large" and in light of the product's presentation. The Council further clarifies that product information, including warnings or lists of side effects, does not exclude defectiveness of a product. Defectiveness can also be presumed in cases of "misuse that is not unreasonable under the circumstances such as the foreseeable behaviour of a user of machinery resulting from lack of concentration or the foreseeable behaviour of certain user groups such as children."

Last but not least, the Council's Amendments foresee that when the product defect has been established and similar cases have shown that the defectiveness typically causes such damage, a causal link between the defectiveness and the damage shall be presumed.

Development risk defense

The Commission's PLD Proposal provides that manufacturers can exempt themselves from liability if the defectiveness of the product could not have been foreseen in light of the state of scientific and technical knowledge at the time the product was placed on the market, put into service or during the period the product was within the manufacturer's control. 

The Council's Amendments, however, allow Member States to derogate from this provision. Member States can therefore introduce regulations that hold manufacturers liable even though a defect could not have been foreseen due to scientific and technical complexity. Such national rules have to be necessary, proportionate and justified by public interest objectives, public security and health. Moreover, the national legislation has to be notified to the European Commission and put on hold for six months for review by the EU executive, which can issue a non-binding opinion.

Thereby the Council's position upholds Art. 15 (1) (b) of the existing Product Liability Directive, which the Commission's proposal did not include.

Compensation of non-material damages

The Council specifies the compensation for non-material damages in its position. The Council prescribes that compensation for non-material losses, such as pain and suffering, should be provided in so far as they are compensable under national law.

However, it stresses that certain losses, such as pure economic loss, privacy infringements and discrimination, do not give rise to liability under the directive, but remain regulated at national level.

Extension of the expiry period

The Product Liability Directive allows for complaints to be brought to court within a timeframe of 10 years following the product's placement on the EU market. In cases where damages are slow to manifest, the Commission's PLD Proposal provides for an expiry period of 15 years. The Council's Amendments now intends to extend this period to 20 years.

In addition, the Council clarifies that in case of a substantial modification to  a product, a new expiry period starts to run. Conversely, mere upgrades or updates not amounting to a substantial modification shall not affect the original expiry date for complaints.

New rules regarding the substantial modification of a product

The Council's Amendments introduce new rules regarding the substantial modification of a product.

The Council's position includes a new definition of "substantial modification" which is a modification of a product after it has been placed on the market or put into service: "(a) that is considered substantial under relevant Union or national rules on product safety; or (b) […] that: (i) changes the product’s original performance, purpose or type, without this being foreseen in the manufacturer’s initial risk assessment; and (ii) changes the nature of the hazard, creates a new hazard or increases the level of risk."

Further, the Council explicitly outlines that a substantial modification may not exempt a manufacturer from liability if such modification remains within the manufacturer's control.

Court judgments' database

The Council’s Amendments clarify that the final judgments that Members States have to publish in the context of the PLD Proposal shall include judgments of courts of appeal and of the highest national instance, excluding final judgments in first instance, in contrast to the Commission's PLD Proposal. The proposition that the Commission may set up and hold its own publicly available database outlining these judgments remains unchanged.

Extension of the transition and implementation periods

The Council's Amendments extend the transition and implementation periods envisaged in the Commission's PLD Proposal. Member States shall have 24 months (instead of 12) after its entry into force to implement the Directive’s provisions into national law and have to apply their regulations 30 months after this entry into force. Accordingly, the existing PLD shall be repealed with effect from 30 months (instead of 12) after the entry into force of the revised Directive.

Outlook

The European Parliament is currently debating on its negotiating position. The Rapporteurs of the Parliament's Committee on the Internal Market and Consumer Protection ("IMCO") and the Committee on Legal Affairs ("JURI") are preparing their own amendments to  the Commission's PLD Proposal. The official vote is planned for summer 2023 and publication for September 2023. According to the JURI parliamentary debate, which took place on 26 June 2023, the main challenge lies in finding the right balance between the protection of consumers' rights and upholding the interests of economic actors, while encouraging innovation.
Once the Parliament has adopted its own position, the Council will engage in talks with the European Parliament and Commission during the trilogue phase to settle on the wording of the final text. We will follow these next steps carefully and provide an update once available.

A quick note on the UK

It is currently unclear whether the UK government will follow in the steps of the EU and adopt similar measures to update its product liability rules, with no official statement being released on this point.

Instead, for now, the UK regulator responsible for consumer protection, the Office for Product Safety and Standards (the “OPSS”) seems to have its eyes firmly set on online marketplaces, and ensuring such marketplaces are active in keeping unsafe products out of the hands of consumers. This was demonstrated during a recent Round Table hosted by the OPSS, in which the regulator outlined ‘controls’ online marketplaces could implement to ensure they are not supplying unsafe products. These ‘controls’ include:

• Controlling relationships with third party suppliers;
• Ensuring the safety of products before they are placed on the market;
• Improving the response to new safety information; and
• Giving consumers better information about products and third-party suppliers.

In terms of next steps for the UK, keep an eye out for the UK Government’s upcoming publication of its Product Safety Review. Although the Review may not include policy proposals relating to product liability rules in the UK more generally, it is expected to include such proposals for online marketplaces.

Authored by Ina Brock, Christelle Coslin, Nicole Saurin, Johannes Reinsberg, Valerie Kenyon, Olivier Swain, Vicki Kooner and supported by Lara Bruchhausen.