THE PRODUCT LIABILITY DIRECTIVE - FIT FOR THE 21ST CENTURY?
The Product Liability Directive (Directive 85/374 EEC, "PLD") came into force in July 1985. It lays down EU-wide rules for producers' liability resulting from defective products. It provides for "no fault" responsibility in circumstances where a defective product causes injury to persons or damage to their property; there is no need to establish negligence or fault of the producer. A product is deemed defective when it does not provide the safety a person is entitled to expect. An aim of the PLD is to facilitate the free movement of goods whilst maintaining a fair balance between the interest of consumers and producers. All EU member states have transposed the PLD into their national legislation.
While the PLD refers in the recitals to "the problem, peculiar to our age of increasing technicality," legislators could not have contemplated the remarkable pace at which technology has developed, nor the manner in which business models have evolved.
The more-than-thirty-year-old PLD – adopted at a time when mobile phones were the size of a house brick – now has to provide a clear liability regime in connection with a myriad of technically complex products that were not in existence when it was conceived. In assessing this issue, a particular emphasis in recent European Commission-related documents has been on "emerging digital technologies, such as the Internet of Things, artificial intelligence, advanced robotics and autonomous systems."
An example of such products, provided by a European Commission staff working document, is the "smart" home environment, which is described as consisting of "connected and intelligent products (like smart fridges, meters, doors or fire alarms), which collect data through sensors, interact autonomously with each other and with external actors and use cloud services, embedded and non-embedded software for the provision of sophisticated hybrids between products and services."
Technology of this nature is regarded as having the potential to test the applicability of certain definitions and concepts within the PLD, including "product," "producer" and "defect," all of which have the potential to be blurred in the case of advanced interdependent products that have the capacity to effectively change themselves.
Evaluation and Fitness Check
In 2016, the European Commission ("the Commission") announced that it would carry out an "Evaluation and Fitness Check" to assess the functioning and the performance of the PLD.
Between January and April 2017, the Commission held a public consultation directed at consumers, producers, insurers and public authorities amongst others. It aimed to ascertain:
• whether and to what extent the PLD meets its objectives of guaranteeing at EU level the liability without fault for damage caused by a defective product;
• whether it still corresponds to stakeholders' needs; and
• whether the PLD is fit for purpose as regards new technological developments such as the Internet of Things and autonomous systems.
Close to half of those consulted considered that the PLD, over three decades after its drafting, might not sufficiently tackle issues raised by advances in technology. However, in order to deal with these concerns, they tended to favour the provision of guidelines and revisions as opposed to new legislation.
The Fifth Report
In 2018, the Commission issued its fifth report on the application of the PLD in accordance with the mandate set out in Article 21 PLD. This report was the first formal evaluation to assess the legislation’s function and performance. It acknowledges that the PLD must deal with widely different issues to those arising from the "largely analogue world of 1985" and notes that it would benefit from clarification by way of guidance and possibly an update. However, despite the complexity of products with which the PLD is faced, the Commission considered that the PLD "continues to be an adequate tool."
The report detailed the launch of an expert group on liability (subdivided into two configurations) to explore the effect of technological developments on the PLD. The 'Product Liability Formation' was to assist the Commission in its drafting of guidance on the application of the Directive. The 'New Technologies Formation' was briefed to assess the implications of emerging and digital technologies for liability frameworks at the EU and national levels. This group issued its report 'Liability for Artificial Intelligence and Other Emerging Digital Technologies' in November 2019. It contains their findings on how liability regimes should be designed to rise to the challenges of those technologies. Suggestions include strict liability for operators of certain technologies, considerations as to circumstances in which a service provider may be an operator of a product, reversals of the burden of proof in several situations where complexity and recording of information is a feature, and ideas concerning compulsory insurance for certain risk situations.
Awaiting the European Commission's guidance on the PLD
The culmination of the processes started by the Commission’s 2016 Evaluation and Fitness Check (via a series of working documents, expert groups and consultations) is set to be its guidance on the PLD and a "report on the broader implications for, potential gaps in, and orientations for the liability and safety frameworks for artificial intelligence, the Internet of Things and robotics." This was expected by mid-2019.
As perhaps heralded by the innovative suggestions emanating from the New Technologies Forum, there are a number of different voices representing the various interests at stake that are having input into the complex issues. There will be those who consider that minor tweaks to the PLD’s wording will suffice whilst others may be advocating a broader reworking of the legislation. As seen with previous Commission consultation responses, these two viewpoints are likely split along consumer and manufacturer lines.
Regardless of its ultimate approach, the Commission will need to take serious care to ensure an appropriate balance between the interests of those affected by the legislation. Consumer associations will be interested in changes that may address perceived difficulties in meeting the burden of proof in light of the complex nature of new technologies. At the same time, the innovation of producers must not be constrained due to concerns about an extension to liability.
At the time of writing there is no indication of how the Commission will negotiate this delicate balancing act to the satisfaction of stakeholders.