May 20. 2024. 11:15

The Daily

Read the World Today

EU Council refines scope, responsibilities in product liability rulebook


A new Council text on the revised Product Liability Directive, seen by EURACTIV, puts software more firmly under the scope, clarifies the concept of manufacturers’ control and seeks to limit national fragmentation.

The Swedish presidency of the EU Council of ministers shared on Thursday (9 March) a compromise text on the Product Liability Directive, a legislative proposal to update the EU’s liability framework from the 1980s to bring it up to speed with digital technologies.

The liability regime defines under which conditions someone who suffered from damage due to a defective product can bring the product manufacturer to court for damages.

The text will be discussed next Friday (17 March) at the Working Party on Civil Law Matters, a technical body of the Council that deals with civil liability matters.

EU Commission proposes extending product liability rules to software and related services

The European Commission’s proposal for a revised Product Liability Directive is intended to bring the EU’s liability regime up to speed with the digital age. An additional directive has been put forth targeting specific damages caused by Artificial Intelligence.

Scope

Throughout the text, references to the effective protection of consumers have been replaced with that of natural persons. That is broader, as the person who suffered the damage might not necessarily be the same one who purchased the product.

Moreover, the right to compensation for an injured person applies regardless of the damage suffered directly because of the defectiveness of a product or resulting from another person’s injury.

The text has been aligned with a recent non-paper from the European Commission that clarified that software, included when provided an ‘as-a-service’ model like Netflix or Microsoft 365, is considered a product and, therefore, in scope.

Similarly, also the related digital services integrated or inter-connected with the product have been better defined as, for instance, traffic data for a navigation system or a temperature control service that monitors the functioning of a smart fridge.

The compromise clarifies that the directive does not apply to open-source software, as, by definition, it is not a product launched on the market but developed and supplied for free.

EU Commission clarifies digital implications of new product liability framework

Last week, the European Commission circulated a non-paper with EU governments to clarify the digital elements of the new Product Liability Directive (PLD). which aims to make it fit for the digital age.

Manufacturers’ control

Manufacturers can only be deemed liable for a related service or other components if they are within their control, like rolling out a software update to integrated or inter-connected elements with the product.

The text clarifies that the manufacturers are deemed in control not only if they supply a related service or component of the product directly but also if the supplier is an agreed third party.

The example provided is that manufacturers of smart televisions would still be liable if their product includes a video application that has to be downloaded from a third party’s website, resulting in damage caused by any defectiveness.

In other words, both the third party manufacturing a defective component and the manufacturer of the overall product would be deemed liable if the latter explicitly or implicitly consented to the supply from the third party.

The presidency excluded from the concept of related services electronic communications services as defined under the European Electronic Communications Code like internet access, messaging apps and broadcasting.

Harmonised interpretation

In the previous compromise, the Swedish presidency added an article on damage, somewhat implying that national law could introduce the right to compensate for non-material damages resulting from the damage covered by the Directive.

This wording caused some anxiety about a scope creep at the national level, as the Product Liability Directive was only meant to cover material damage. That would be particularly relevant for Artificial Intelligence, as, for instance, people could sue the AI developers if their system discriminated against them.

The relevant paragraph was slightly cut down, but the reference to non-material damage remains. However, the text’s preamble specifies that “beyond the matters regulated by this Directive, national procedural rules should apply in so far as they do not undermine the effectiveness and objectives of the system of liability for which this Directive provides.”

In addition, to guarantee the harmonised interpretation of the new product liability directive across the EU, a provision was added requiring appeal courts and top courts will be required to publish the relevant judgments.

Regarding the provisions on applying or reducing the liability to one or more economic operators, the document specifies that these do not affect the national legislation related to the right of contribution or recourse.

Timeframes

The legislative proposal sets a time limitation for the manufacturers to sue for damages in court for their product to 10 years following the placement on the market, extended to 15 years for symptoms that are slow to emerge.

The compromise clarifies that that timeframe resets when substantial modifications to a product since that is to be effectively considered a new product launched on the market.

The entry into application of the new liability rules was postponed until two years after it entered into force. Similarly, member states have given themselves two rather than one year to transpose the directive into their national legal framework.