Our Product Regulation & Consumer team looks at how the changing nature of healthcare products in the digital age has challenged some of the core rules and concepts underpinning the current product liability regime provided for under EU law.
The transition to a digital and circular economy continues to transform various aspects of the healthcare sector. This undoubtedly has many positive economic and social impacts. However, the changing nature of healthcare products in the digital age has challenged some of the core rules and concepts underpinning the current product liability regime provided for under EU law. Notable recent changes include the interconnectedness and self-learning functions of products, and the emergence of new actors such as online platforms.
A revised Product Liability Directive
The current EU Product Liability Directive (PLD) has been in force for nearly 40 years. A 2018 evaluation of the PLD by the European Commission identified several shortcomings, largely driven by significant changes since the PLD was adopted in 1985. These include the modernisation of product safety and market surveillance rules. In particular, technological advances and increased awareness around environmental sustainability and the circular economy have led to the creation of a new generation of products that have made it more difficult to:
- Consistently apply the definitions and legal tests contained in the PLD
- Effectively prove that a defect in a product caused the damage suffered
- Allocate responsibility and liability when a business substantially modifies a product that is already on the market, or when a product has been directly imported from outside the EU by a consumer
In light of these concerns, in September 2022, the European Commission published its proposal for a new Product Liability Directive (PLD Proposal). The changes contained in the PLD Proposal are designed to address these challenges and provide the EU with an extra-contractual product liability regime updated to deal with the 21st century product landscape.
Noteworthy features
Some noteworthy features of the PLD Proposal include:
- Alignment of Terminology: the PLD Proposal would bring EU product liability and product safety rules into closer alignment by adopting various terms and definitions that are already used in EU product safety legislation. For example, ‘manufacturer’, ‘placing on the market’ and ‘making available on the market’
- Expanded definition of a ‘product’: the PLD Proposal expands the definition of a ‘product’ to include software and digital manufacturing files. The proposed new definition clarifies when a related service, ie a digital service that is integrated into, or inter-connected with, a product is to be treated as a component of that product
- Defectiveness: the PLD Proposal adds additional factors to be considered when determining whether a product is defective. These factors include interconnectedness, self-learning functionality and a product’s cybersecurity vulnerabilities
- Burden of proof: there is a proposed rebuttable presumption of defectiveness where:
– The claimant establishes that the product does not comply with mandatory safety requirements
– The claimant establishes that the damage was caused by an “obvious malfunction” during normal use or under ordinary circumstances
– A defendant fails to comply with an order to disclose the evidence necessary for the claimant to understand how a product was produced and how it operates
The PLD Proposal also includes a rebuttable presumption that a defective product caused damage where it has been established that the product is defective, and the damage caused is of a kind typically consistent with the defect in question.
- Defendants: the PLD Proposal expands the pool of defendants that can potentially be held liable for damage caused by a defective product. As well as manufacturers, importers and in some cases distributors, the PLD Proposal would also permit no-fault liability claims to be brought against authorised representatives, fulfilment service providers, third parties making substantial modifications to products already placed on the market, and certain online platforms. This proposed change highlights the growing significance of products manufactured outside the EU and is designed to ensure that there is always an economic operator in the Union against whom a claim for compensation can be made. In the case of online platforms, the PLD Proposal makes it clear that it does not affect the conditional liability exemption available under the Digital Services Act. This is because the PLD Proposal is geared towards liability in cases where: an online platform cannot benefit from that exemption; and a person is harmed by a defective product and seeks compensation
- Scope of ‘damage’: the PLD Proposal seeks to extend the concept of ‘compensable damage’ to include corruption of data and recognised forms of psychological injury. It is also proposed to remove the €500 minimum threshold for property damage
- Scope of liability: the PLD Proposal seeks to expand the scope of liability from the previous reference to when a product was put into circulation to possibly include the time after circulation, including once the product has been placed on the market, if a manufacturer retains control of the product, for example through software updates
- Longstop provision: the PLD Proposal suggests two modifications to the 10-year longstop provision. First, an extension to 15 years in certain cases involving latent personal injuries. Second, calculation of time running from the date that a product has been substantially modified, at a point after it has been placed on the market or put into service
When?
Now that the European Council and the European Parliament have approved their negotiation positions on the PLD Proposal prepared by the European Commission, trilogue negotiations will commence to agree the final text of the legislation. This is with a view to having the legislation passed in advance of the European Parliament elections in June 2024.
As the table below illustrates, while there is some consensus between the three institutions, there remain significant differences in their positions. These will have to be addressed before political consensus is achieved. After this, the legislative text will be formally adopted by the Parliament and Council before publication and entering into force on the 20th day following its publication in the Official Journal of the European Union.
Once adopted, the revised Product Liability Directive will also need to be transposed into national law. The PLD Proposal provides that the current Directive would be repealed, and Member States would be required to transpose the new legislation into national law within 12 months of its entry into force.
Snapshot: Respective positions of the EU Institutions on the revised Product Liability Directive
Product | Defectiveness | Damage | Causation | Limitation Periods | |
European | Should include ‘software’ and ‘digital manufacturing files’. | Should be assessed with reference to:
Introduction of a rebuttable presumption of defectiveness in | The notion of compensable damage should include corruption of data and recognised forms of psychological injury. Removal of the €500 minimum threshold for property damage. | Introduction of a rebuttable presumption that a defective product caused the damage where:
| Proposed extension of 10-year longstop to 15 years in certain cases involving latent personal injuries. The limitation period could also reset and restart from the date that a product had been substantially modified. |
European Council | Definition should cover raw materials. | When assessing defectiveness:
| Compensation for pure economic loss, privacy infringements or discrimination should not by themselves trigger liability under the revised Directive. However, this should not affect the right to compensation for any damages, including non-material damages, under other liability regimes. | Presumption of a causal link between a product’s defectiveness and the damage suffered where the claimant has established that a product is defective and similar cases have shown that the damage suffered is typically caused by the defect in question. | Proposed extension of longstop period to 20 years in certain cases involving latent personal injuries. A new limitation period after a product has been substantially modified and has subsequently been made available on the market or put into service. |
European | Agrees with the inclusion of raw materials. | A product’s ‘reasonably foreseeable use’ should consider its expected lifespan. Defectiveness should consider a product’s ability to acquire new features or knowledge after its deployment. | The definition of ‘damage’ should include material losses resulting from:
| The presumption of a causal link where a product belonging to the same production series as a product already proven to be defective. Empowerment of national consumer protection bodies to gather the evidence necessary to prove defectiveness, damage and the causal link between the two, on behalf of groups of consumers. | Proposed extension of longstop period to 30 years in certain cases involving latent personal injuries. |
For more information, contact a member of our Product Regulation & Consumer team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
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