Defective products – liability

KEY POINTS

The new directive adapts the existing liability rules to the following areas.

• The digital economy. The definition of product has been clarified to cover software, including artificial intelligence (AI) systems:
  • all types of software, including applications and AI systems, are covered by the new directive;
  • the manufacturer is liable for defects that might appear following an update or upgrade of the software performed under its control;
  • the manufacturer is liable for defects that might appear through the continuous learning of the AI system where the AI system remains under the control of the manufacturer;
  • digital services that are necessary for the product to function and that have been incorporated into the product under the manufacturer’s control are covered by the directive.
• Global value chains. The directive ensures that there is always a liable person in the EU against whom the victim can claim compensation when a manufacturer is established outside of the EU:
  • importers and authorised representatives can be held liable for damages caused by the defective product;
  • in the absence of an importer or an authorised representative, fulfilment service providers can be held liable for the defective product;
  • online platforms that act as a manufacturer, importer, authorised representative, fulfilment service provider or distributor can be held liable for a defective product sold on their platform just like any other economic operator;
  • online platforms acting as a mere intermediary for the defective product can still be held liable under certain conditions.
• The circular economy. A company or person who substantially modifies a product outside the original manufacturer’s control becomes a manufacturer of the product and can be held liable for any defect.

The directive also covers the following main elements.

• Defectiveness. A product is considered defective if it does not provide the safety that a person is entitled to expect or that is required under EU or national law. An assessment of the defectiveness would include, among other circumstances:
  • the presentation and the characteristics of the product, including its labelling;
  • the effect on the product of any ability to continue to learn or acquire new features;
  • the reasonably foreseeable effect on the product of other products that can be expected to be used together with the product.
• Damage. The right to compensation exists when one of the following types of damage has been caused by the defective product:
  • death or personal injury (including medically recognised damage to psychological health);
  • damage to property;
  • destruction or corruption of data not used for professional purposes.
• Access to evidence. The directive establishes a right for both parties to request access to evidence necessary to support their claims.
• Liability and compensation.
  • Any person who has suffered damage caused by a defective product can bring a claim before a national court.
  • Businesses remain liable for their defective products for a period of 10 years after the product was placed on the market.
  • The 10-year limitation is extended to 25 years where the personal injuries are slow to emerge (latent health injuries).
  • Victims have three years to bring the claim for compensation before a national court.