New Product Liability Directive and Artificial Intelligence Liability Directive: Proposals published by European Commission

Speedread

On 28 September 2022, the European Commission published two draft pieces of legislation, which if ultimately adopted, will significantly reshape the consumer products landscape.

• A proposal for a new Product Liability Directive (NPLD)
• A proposal for a new Artificial Intelligence Liability Directive (AILD)

To put this into context, the existing EU legislation on liability for defective products – the Product Liability Directive – was adopted in 1985 and transposed into Irish law by way of the Liability for Defective Products Act 1991. This "no fault liability" regime has been subject to a number of reviews in the intervening period. However, the publication of this new draft text heralds a potentially significant transformation of the liability regime for consumers and economic operators.

The NPLD will sit alongside the AILD but the focus of the NPLD is on claims against manufacturers for damage caused by defective products and is intended to cover claims made by private individuals. The AILD covers claims made by any natural or legal person and has in its focus wider types of damage. 

This briefing sets out at a high level some of the key points in the draft text of the NPLD. 

Key points

• An entirely new regime: The recitals to the NPLD make it clear that the existing regime is being revised "in light of developments related to new technologies, including artificial intelligence (AI), new circular economy business models and new global supply chains, which have led to inconsistencies and legal uncertainty." The NPLD will repeal and replace the Product Liability Directive. However, the previous regime will continue to apply to products placed on the market or put into service before the effective date of the NPLD.
   
• Definition of "product": The liability regime will apply to all moveables, including those integrated into other moveables or installed in immoveables. Software is specifically caught by the definition of "product."
   
• Concept of "damage": This will be extended to cover loss or corruption of data that is not used for professional purposes. From a personal injury perspective, it will be extended to include "medically recognised harm to physical health".
   
• Interaction with Collective Redress Directive: The NPLD references the Collective Redress Directive (see our last briefing on this here), making it clear that the NPLD won't affect alternative means of seeking redress, whether through that directive, ADR, court proceedings etc. There is also specific reference to Member States ensuring that claims for compensation may be brought by "a person acting on behalf of one or more injured persons" in accordance with Union or national law.
   
• Fulfilment service providers and online platforms and intermediaries: The text envisages that these can be held liable for damage caused by a defective product, in certain circumstances.
   
• Liability for product modifications: There are also specific provisions around the liability of economic operators who make substantial modifications to a product. This is of particular importance in the context of increased circular economy businesses. In summary, it is envisaged that economic operators who make modifications can be made liable but they may be exempted from liability if they can prove the damage is related to a part of the product not affected by the modification.
   
• New disclosure rules: There is also a focus on the difficulties faced by injured persons in obtaining compensation, with a particular emphasis on access to information and evidence. One stand out feature of the NPLD intended to assist with this, is the new regime envisaged for disclosure of evidence. Member States will be required to ensure that national courts are empowered to order disclosure of relevant available evidence on the request of a claimant who has presented facts and evidence sufficient to support the plausibility of the claim for compensation. There have been safeguards built into this proposed disclosure regime including considerations to be given to necessity and proportionality, legitimate interests (including those of third parties) and the protection of confidential information and trade secrets. However, it is also envisaged that if the defendant fails to comply with the new disclosure obligations, the defectiveness of the product will be presumed.
   
• Limitation period in case of 'latent' personal injury: An enhanced limitation period of fifteen years will be introduced for cases in which the injured person has not been able to initiate proceedings within the previous ten year longstop period, due to the "latency" of a personal injury. The ten year longstop period itself has been tweaked to allow this period to run from when a product was "substantially modified" which could arguably be perceived as a possible potential extension of the longstop in some cases.
   
• Evidential presumptions to assist in proving claims: Finally, the key concept that a claimant must prove the defectiveness of a product, the damage and the causal link between the two will remain. There are however new provisions which provide that where a national court judges a claimant to face "excessive difficulties" due to technical or scientific complexity, to prove the defectiveness of a product or the causal link between its defectiveness and the damage, or both, then these can be presumed if the claimant can demonstrate certain points based on "sufficiently relevant evidence". The defendant can contest this, but it would certainly be a key new departure from the current regime if ultimately enacted.

What next? 

As an initial step, the European Commission has, on 3 October, launched a feedback period on the measures, open until the end of November 2022.

The proposal will then make its way through the legislative process and seems likely to generate plenty of debate. The measures will next need go to the European Parliament and Council meaning they are some way off being finalised. Ultimately, how the NPLD and the AILD will sit alongside one another and other redress mechanisms such as the Collective Redress Directive, in practical terms, will be something which will be closely monitored by all interested parties.

For more information, please contact Katie O'Connor, partner, Cliona Christle, partner, Róise Nic Ghráinne,  senior associate, Orla Clayton, Knowledge lawyer or your usual A&L Goodbody Disputes and Investigations team contact.

Date published: 7 October 2022