A new historic agreement on liability in the digital age!

Just a few days after the historic agreement on the AI Act – i.e. the legislation on artificial intelligence – another political agreement has been reached between the Council and the European Parliament on a directive on liability for defective products, in order to take into account the digital functions of many products, the circular economy, and thus update a system that is almost 40 years old.

The concept of product

The new text extends the concept of "product", defining it as any item of furniture, even if it is incorporated into another item of furniture or into a building, and specifies that it includes electricity, digital manufacturing files - defined as a digital version or digital model of a piece of furniture - and software - supplied "on premise" or "as SaaS".

However, the directive does not apply to free and open-source software developed or supplied outside the framework of a commercial activity.

Defectiveness

Determining whether a product is defective does not depend on the product's unsuitability for use, but on the lack of safety that the general public can legitimately expect, taking into account, among other things, the intended purpose, objective characteristics and properties of the product, as well as the specific requirements of the user group for which the product is intended.

In the latter respect, in particular, medical devices intended to maintain vital functions present a particularly high risk of harm to people and therefore give rise to very high expectations in terms of safety.

A product is considered defective when it does not offer the safety that the general public can legitimately expect taking into account all the circumstances, including : the presentation of the product, including installation, use and maintenance instructions; the reasonably foreseeable use or misuse of the product; its ability to continue learning after deployment; the effect on the product of other products which can reasonably be expected to be used at the same time ; the time at which the product was placed on the market or put into service or, where the manufacturer retains control of the product after that time, the time at which the product left the control of the manufacturer; product safety requirements, including cyber security requirements...

Liable party

All manufacturers involved in the production process may be held liable if their product or a component supplied by them is defective. Where a manufacturer incorporates a defective component from another manufacturer into a product, the injured party may claim compensation for the same damage from both the product manufacturer and the component manufacturer, in which case the parties are considered to be jointly and severally liable.

Evidence and presumptions of liability

Since economic operators are liable regardless of fault, it is up to the injured party seeking compensation for damage caused by a defective product to prove the damage, the defectiveness of a product and the causal link between the two.

However, it is presumed that the product is defective if one of the following conditions is met: the defendant has failed to comply with the obligation to disclose relevant evidence in his possession, or the claimant establishes that the product does not comply with mandatory safety requirements under Union or national law which are intended to protect against the risk of the damage occurring; or the claimant establishes that the damage was caused by a manifest malfunction of the product during normal use or in normal circumstances; or in cases where it would be excessively difficult for the claimant, in view of the technical or scientific complexity of the case (in particular AI), to prove the defectiveness of the product or the causal link, or both.

Exemptions from liability

Economic operators are exempt from liability if they can prove the existence of specific exonerating circumstances (e.g. the defectiveness of the product results precisely from its compliance with mandatory regulations), or if they can prove that the state of scientific and technical knowledge at the time the product was under their control was such that no defectiveness could be detected.

Lastly, the liability of the economic operator may be reduced or eliminated where the injured parties have themselves contributed, through negligence, to causing the damage.

On the other hand, it is not possible to limit or exclude the liability of an economic operator by means of contractual provisions. Similarly, provisions of national law must not be able to limit or exclude liability, for example by setting financial ceilings on the liability of an economic operator.

Prescription

Liability must be incurred within ten years of the product being placed on the market, extended to 15 years in cases where medical evidence shows that the symptoms of a bodily injury are slow to appear.

As substantially modified products are essentially new products, the limitation period then starts running again after the product has been substantially modified, for example following a remanufacture, which consists of modifying a product in such a way that its compliance with the applicable safety requirements may be affected.

Transposition

Member States will have 12 months to comply with the directive, which will enter into force on the twentieth day following its publication.

Article also published on DSIH.