The new European Union laws on liability for defective products to make them fit for the digital age and circular economy continue to be updated to ensure they cover connected products and software.

The Product Liability Directive is making slow progress through the European Parliament with co-rapporteurs Pascal Arimont and Vlad-Marius Botoș now attempting to increase the pace of the first substantial rewrite of the critical parts of the file.

The rewrite is necessary as the current EU rules date back to 1985 when few products had any digital features.

Further political guidance will now be sought with a committee vote expected on the Directive in September. New amendments require the European Commission to review the Directive after five years.

Gunnar Strömmer, Swedish Minister for Justice said : “Effective liability rules are essential if consumers are to trust the market. With our economies becoming digital and circular an update to the EU rulebook is important. The Council position will increase consumer protection and guarantee a stable legal framework for companies.”

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 simply by proving that a product was defective and that the defect caused the injury or damage.

In a previous version, MEPs excluded free and open-source software from the scope of the Directive. However, the revised definition of the product only includes software when it is necessary for a tangible product to operate or when it presents a safety relevance.

Digital services integrated or inter-connected with products are also included but only if, without them, the product could not perform its core.

The European Council has issued a statement highlighting key points of the update:

Digital economy

The proposed new liability directive extends the definition of ‘product’ to digital manufacturing files and software. Because of the increasing technical complexity of many products, member states must also ensure that an injured person who claims compensation before a national court has access to relevant evidence at the disposal of the manufacturer on how a product was produced.

Circular economy

In a circular economy, products are designed to be more durable, reusable, reparable and upgradable. When a product is modified substantially and is made available on the market or put into service again, it is considered to be a new product. Where the modification is not made by the original manufacturer the new directive stipulates that the person that made the substantial modification should be held liable as the manufacturer of the modified product.

Products bought from non-EU manufacturers

Because consumers are increasingly buying from manufacturers based outside of the EU, the new liability directive provides for the same level of protection against defective products coming from non-EU manufacturers as for products from EU manufacturers. It stipulates that the importer of the defective product, 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.

Longer expiry period

Entitlement to compensation expires after 10 years from the placing on the market of the defective product. In cases where the symptoms of a personal injury are slow to emerge, the expiry period is 20 years – up from the original Commission proposal of 15 years.

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. The Council has therefore streamlined the presumptions that apply when claimants are faced with excessive difficulties, in particular due to the technical or scientific complexity of the case. In these cases, 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.

W Denis arrange specialist liability insurance for businesses of all sizes. To discuss further please contact Vida.Jarasiunaite@wdenis.eu or mark.dutton@wdenis.com