Brussels, 14 December 2023
EU Council on the Agreement on EU Liability Rules
Negotiators from the Spanish presidency and the European Parliament have reached a political agreement on a new EU law on liability for defective products. The law will update the current, decades-old, civil liability rulebook in order to better take into account that nowadays many products have digital features and that the economy is becoming increasingly circular.
Digital economy
Under the new liability directive, the definition of ‘product’ will be extended to digital manufacturing files and software. Free and open-source software that is developed or supplied outside the course of a commercial activity is excluded from the scope of the directive.
The digital economy has led to a lot of online sales. It has therefore been decided that online platforms can also be held liable for a defective product if they present the product or otherwise enable the transaction for the sale of the product in a way that would lead an average consumer to believe that the product is provided either by the online platform itself or by a trader acting under its authority or control.
Circular economy
In a circular economy, products are designed to be more durable, reusable, reparable and upgradable. When a product is modified substantially, outside the original manufacturer’s control, and is made available on the market or put into service again, the new directive stipulates that the company or person that made the substantial modification should be held liable as the manufacturer of the modified product.
Right to compensation
The Council and Parliament also agreed that any natural person who suffers damage by a defective product is entitled to compensation. Such damages include death or personal injury, including medically recognised damage to psychological health, damage to or destruction of property, as well as destruction or irreversible corruption of data.
The right to compensation will cover material losses resulting from the damage as well as non-material losses resulting from the damage, in so far as they are compensable under national law.
Due to the increasing technical complexity of many products, member states must ensure that an injured person who claims compensation before a national court can request access to relevant evidence at the disposal of the manufacturer in order to be able to prove their claim.
Products bought from non-EU manufacturers
Consumers are increasingly buying products from manufacturers based outside the EU. However, the level of protection they receive should remain the same when those products prove to be defective.
The agreement provides that when a manufacturer of a product or a component is established outside the EU, the importer of the defective product or component, the authorised representative of the manufacturer or, as a last resort, the fulfilment service provider (a company that typically takes care of the warehousing, packaging and dispatching of a product) can be held liable for damages.
Burden of proof
One of the directive’s objectives is to ensure that consumers will have a fair chance of getting compensation in complex cases. When a claimant (e.g. the injured consumer) is faced with excessive difficulties, in particular due to the technical or scientific complexity of the case, to prove the defectiveness of the product or the causal link between its effectiveness and the damage, a court may decide that the claimant is only required to prove the likelihood that the product was defective or that its defectiveness is a likely cause of the damage.
Next steps
Today’s agreement will need to be endorsed by member states’ representatives within the Council (Coreper). If approved, the text will have to go through the formal adoption process in both the Council and the European Parliament.
Background
The EU product liability regime was established to compensate injured persons for physical injury or damages of property that they have suffered due to a defective product (for instance an overheating hair dryer or a leaking washing machine), simply by proving that a product was defective and that the defect caused the injury or damage.
Source – EU Council
EU Parliament: Deal to better protect consumers from damages caused by defective products
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The new bill ensures there is always an EU-based business liable for damage
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Provisions to make compensation for damage more accessible
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Not applicable to free-of-charge open-source software
On Thursday, Parliament and Council negotiators informally agreed on easier access to compensation for individuals suffering damage because of a defective product.
The provisional agreement on the liability of economic operators for damage caused by defective products aims to respond to the increase in online shopping (including from outside the EU) and the emergence of new technologies (such as AI) as well as to ensure the transition to a circular economic model. In order not to stifle innovation, the rules will not apply to open-source software developed or supplied outside of a commercial activity.
New rules ensure that there is always an EU-based business, such as a manufacturer, importer or their authorised representative that can be held liable for a product that caused damage, even if the product was not bought in the EU. MEPs insisted that in cases when such a liable business cannot be identified, member states may provide compensation using national compensation schemes.
Easier access to compensation
The negotiators agreed to simplify the burden of proof for the person requiring compensation, who would normally have to prove that the product was defective and that this caused the damage suffered. For example, the defectiveness may be presumed by a court in case the claimant faces excessive difficulties in particular due to technical or scientific complexity and the product is likely to be defective.
To further help victims of damage with their compensation claim, they will be able to request that the court order the business to disclose the “necessary and proportionate” evidence. MEPs also insisted that competent consumer protection authorities or bodies should be encouraged to provide additional help with compensation claims to consumers.
Extended liability
MEPs ensured, during the talks, that it will be possible to get compensation not only for material damage, such as destruction of property, but also for non-material losses, including medically recognised damage to psychological health. It will also be possible to claim compensation following the destruction or corruption of data that are not used for professional purposes (e.g. deletion of files from a hard drive). Negotiators also agreed on an extended liability period of 25 years in exceptional cases when symptoms are slow to emerge. The injured person will still be able to get compensation after this period if the proceeding was initiated within the given period.
Quotes
Following the negotiations, the Legal Affairs Committee (JURI) co-rapporteur Pascal Arimont (EPP, BE) said: “The revised Product Liability Directive aims to strike the right balance between the need to remain an effective instrument for victims injured by defective products, and the legal certainty economic operators deserve in a fast-changing market characterised today by digitalisation, the circular economy and global value chains”.
The Internal Market and Consumer Protection Committee (IMCO) co-rapporteur Vlad-Marius Botoş (Renew, RO) noted: “The revision of the product liability directive was long awaited. We needed this revision to adapt the liability regime to the new legislation, and to new and innovative products. We must be clear and decide how to cover these new products so that all European citizens have the same rights to be compensated when damage occurs, but it has to be done carefully, to ensure a balance and encourage innovation and the development of new products.”
Next steps
The legislation will enter into force once formally approved by the plenary and the member states. The new rules will apply to products placed on the market 24 months after entry into force of this directive.
Background
These agreed rules update the existing Directive on the liability of defective products, which is now almost 40 years old. It provides an additional layer of consumer protection in the EU on top of national liability regimes. When it comes to AI technology, consumers will also be protected by fault-based rules in the upcoming AI Liability Directive, which is currently being examined by Parliament and Council.