The European Union has decided that after nearly 40 years, the moment has arrived to repeal the Product Liability Directive and replace it with a revised version. The EU Council adopted one on 10 October 2024. The new directive was published in the Official Gazette of the European Union on 18 November (“New PLD“).
In this newsletter, we summarize the key provisions of the new Directive and compare them with the analogous segments in the current consumer protection laws in Serbia, Montenegro, and Bosnia and Herzegovina (“BiH“). This exercise helps identify the points of current divergence and the likely future harmonization of the national laws in the region with the Union product liability framework.
What is new
The Product Liability Directive, which dates back to 1985, could not adequately address issues arising from the widespread use of digital technologies. The Directive defined product to mean “all movables, with the exception of primary agricultural products and game, even though incorporated into another movable or into an immovable”. That definition has now been supplemented by the explicit inclusion of electricity, raw materials, digital manufacturing files, and software within the orbit of a “product”. That said, the New PLD does not apply to free and open-source software that is developed or supplied outside the course of a commercial activity.
The principal novelties brought by the New PLD are the following:
- Greater precision in determining the scope
The New PLD introduces provisions that specify the concept of damage falling within the scope of the Directive and the range of economic operators that are liable for damage.
It will be possible for consumers to get compensation for medically recognized harm to psychological health, as well as for destruction or corruption of data. Other forms of non-physical and non-property damages, such as discrimination, privacy infringements, and pure economic loss, remain outside the reach of the Directive.
The New PLD also tackles the problem of liability for products manufactured outside the EU. In such cases, consumers will be able to seek compensation from the manufacturer’s representative, the importer or the fulfilment service provider (service provider that performs at least two of the following services: warehousing, packaging, addressing and dispatching of a product).
- No liability floors and caps
The threshold of EUR 500 for actionable damage to, or destruction of, an item of property has been removed so consumers will be able to receive compensation for the damage caused to numerous affordable goods. There is a concern that such a solution will lead to an unwanted increase in frivolous claims.
With the removal of what was Article 16 in the Product Liability Directive, there will be no limit on the amount of manufacturer’s direct liability resulting from the death or personal injury and caused by identical items that all have the same defect. (Article 16 set the limit at EUR 70 million.)
What remains the same is the basic rule concerning the 10-year statute of limitations after which a person is not entitled to compensation. That period runs from the date on which the defective product which caused the damage was placed on the market or put into service; or, in the case of a substantially modified product, the date on which that product was made available on the market or put into service following its substantial modification. However, there is now an exception from the basic rule, applicable where the symptoms of a personal injury are slow to emerge, and the injured person has not been able to initiate proceedings within 10 years. In that situation, the expiry period is extended to 25 years.
- Partial shift in the burden of proof
The injured party previously had to prove the defect in the product, the damage suffered, and the causal link between the two. In practice, consumers face many difficulties in trying to prove the causal link between the defect and the damage. Under the New PLD, the burden of proof remains with the injured person, but the Directive reduces the effort required from the injured party to prove their case by presuming, in certain situations, that the product is defective and that the defect caused the harm. The presumption of the product’s defectiveness applies in case of the defendant’s failure to disclose relevant evidence at its disposal, the product’s non-compliance with mandatory product safety requirements, and obvious malfunctioning of the product. The presumption of a causal relationship exists if the damage is of a kind typically consistent with the defect in question. The burden then shifts to the defendant to rebut the presumptions.
If the injured consumer faces excessive difficulties in proving the defect of the product or the causal link between the defect and the damage, mainly due to technical or scientific complexity, the defectiveness may be presumed by the court. It is then sufficient to prove that the product is likely to be defective or that the defect is a likely cause of the damage. This is especially helpful in cases where it might be challenging for the claimant to gather evidence to show exactly how the defect led to the harm.
- Disclosure of evidence
The New PLD expressly authorizes the claimant in product liability cases to request that the courts order manufacturers to disclose evidence, limited to what is necessary and proportionate. The reverse also applies: at the request of the defendant, the claimant must disclose relevant evidence that is at his or her disposal.
Awaiting the impact in the EU
Member States have two years to transpose the New PLD into national law. The New PLD will not apply to products already in circulation before the transposition. It might prove challenging in some cases to determine whether the New PLD applies or not, such as when software is already on the market (and no product liability law applies to it) but can be updated afterward, once the New PLD which applies to software is transposed.
Stakeholders’ opinions differ in the assessment of the anticipated impact of the new directive. On the consumers’ side, organisations such as BEUC (The European Consumer Organisation) and Irish Council for Civil Liberties (an independent human rights monitoring organisation) welcomed the revision of the Product Liability Directive. The organisations had advocated for the inclusion of software in the scope of the New PLD and for the simplification of the burden of proof for persons requiring compensation. Their demand for the removal of the lower threshold has been fulfilled. Their expectations have also been met when it comes to the possibility of court-ordered disclosure of evidence in damage claims.
These same modifications cause concern for the business associations. In the consultation process, AmCham EU (American Chamber of Commerce, speaking for American business in Europe) cited the “unnecessarily broad scope and definitions”, “unintended consequences of the ‘alleviation’ of the burden of proof” and the “removal of the thresholds” as the main flaws of the New PLD. BusinessEurope (The Confederation of European Business) has supported the idea of a new product liability legislation only covering physical injury and property damage.
Where the laws in Serbia, Montenegro, and BiH lag behind
The current laws in Serbia, Montenegro, and BiH understandably lack provisions that are new in the EU product liability regulatory framework. The major differences include the following:
- The definitions of “product” in the current consumer protection laws in the three countries vary, but none includes software generally or for the purpose of applying no-fault liability.
- The current laws in the three countries do not provide for any exception from the rule that the claimant (consumer) has the burden of proving the damage, defectiveness, and causal link. That is different from the New PLD, which presumes in certain situations that the product is defective and that the defect caused harm (Art. 10, paras. 2 and 3).
- In the current consumer protection laws, the injured party has the right to compensation for non-economic damage according to the general rules on liability for damage. Those general rules give courts a broad authority to award monetary compensation for, among other, non-economic damage. This is arguably broader than what the New PLD stipulates, considering that Art. 6.1.a of the Directive appears to limit compensation for non-economic damages to medically recognised damage to psychological health.
- The current Montenegrin consumer protection law contains the threshold of EUR 500 for actionable damage to, or destruction of, an item of property, that gives rise to compensation. The New PLD has removed that threshold.
