Critics of the proposed revisions to the European Product Liability Directive (PLD) believe it will undermine European competitiveness and open the door to a litigation culture in Europe.

As a result, 12 major industry associations have issued a statement which makes clear they believe the revised PLD could detrimentally affect investment in innovation with a negative impact for consumers.

The European Commission published a proposal for a new directive on liability of defective products in September 2022 to revise the existing Product Liability Directive, adopted in 1985. The next European Parliament Product Liability Directive Trilogue will be held on December 14 with the aim to “reach good compromises on effective and clear rules, for both victims and economic operators alike.”

The associations, who represent a wide range of European businesses, are extremely concerned about the proposed revision, which they insist changes the existing civil law system’s balance which aims to protect those who suffer harm from defective products and ensuring innovation.

The statement reveals the extent of their concerns and says: “As it stands, the revision would sweep away existing checks and balances and create a one-sided, litigation-friendly regime.

“The impact of the changes will significantly raise litigation risk, legal complexity and uncertainty for European businesses. Companies will have to decide whether to expend significant resources to defend against potentially unmeritorious claims or settle to limit litigation costs and reputational risk.

“Modernising the product liability framework to account for new technological advances should not come at the expense of innovation or the European civil justice system’s effective, fair and legally certain functioning. We therefore call for a reassessment of the far-reaching measures proposed in the revised PLD and the consequences European businesses and consumers could face from it.”

The associations claim the expanded reach of the PLD would include digital products, combined with the de facto reversal of the burden of proof, disproportionate disclosure of evidence provisions and removal of compensation thresholds and, therefore, present a genuine concern for all companies.

The key areas of concern:

1)The Revised PLD is proposing to limit the alleviation of the burden of proof with critics insisting a cornerstone of the current PLD is that the claimant must prove the damage, the defect and the causal link between the two. There are also concerns over broad exceptions to this concept linked to undefined terms which could lead to a reversal of the burden of proof.

The associations say : “The scope of the alleviation should be significantly narrowed, and clarification must be provided as to what claimants must do and prove  before any liability can be presumed. Failure would inevitably lead to excessive  litigation and potentially non-legitimate claims.”

2) There is a belief the new disclosure rules lack sufficient safeguards to protect businesses against abusive discovery exercises or disclosure of commercially sensitive data or trade secrets. They represent a huge and costly legal risk for companies even before they get to trial.

The associations say :” There is a real risk that businesses will be pressured into settling weak claims to avoid these costs. Disclosure of evidence must, therefore, be limited to only what is strictly necessary and proportionate. There should also be a reciprocal right for defendants to request relevant information from the claimant.”

3) By including software in a strict liability regime raises the question of  how to apply the concept of defectiveness. In response, there are calls for more investigation into the effects of this extension as it increases the legal exposure for software developers.

The associations say : "Expanding the definition of damage to include data loss or corruption is a significant shift in the concept of safety, creates potentially openended liability for economic operators, will drive up prices and potentially restrict availability. As the Parliament proposed, a threshold should be introduced to prevent  frivolous claims, and it should be clarified what should be compensated."

W Denis arrange specialist liability insurance for businesses of all sizes. To discuss further please contact W Denis:

Eastern Europe

Vida.Jarasiunaite@wdenis.eu

Southern Europe

Christos.Hadjisotiris@wdenis.com

Western Europe &/or elsewhere worldwide

Mark.Dutton@wdenis.com