On 9 October 2023, the European Parliament’s Internal Market and Consumer Protection Committee (IMCO) and Committee on Legal Affairs (JURI) agreed revised wording to amend the European Commission’s (the “EC”) proposed new Product Liability Directive (the “Directive”). The vote was passed with 33 votes in favour to 2 against. If adopted, the Directive will replace the existing (almost 40-year old) Directive 85/374/EEC on Liability for Defective Products, which imposes a form of strict liability on product manufacturers for harm caused by their defective products.

The New Directive

The aim of the proposed Directive is to bring EU product liability law into the 21^st century and to keep pace with technological advancements. To that end:

• Article 4 of the proposed Directive brings software into the scope of EU product liability laws. Operating systems, firmware, computer programs and applications and AI systems are all expressly included (by Recital 12).

• Article 7 extends liability to manufacturers of defective components, distributors, fulfilment service providers and online platforms.

• Articles 8 and 9 provide a disclosure regime and set of rebuttable presumptions designed to assist claimants.

EU Parliamentary Committees’ Proposals

The IMCO and JURI Committees propose to revise the EC’s wording in a number of ways. Some of the key amendments are as follows:

• Software – The Committees’ revised wording moves the exclusion of open-source / free software (other than in exchange for a price or for personal data not exclusively used for improving the security, compatibility or interoperability of the software) from the Recitals into the Directive’s operative provisions at new Article 2(1a);
• Component – Regarding components, the Committees have made two significant changes:
  • widened the definition of “component” to expressly include “embedded software”; and
  • excluded liability of a manufacturer of a defective component where the defect is attributable to the product design, not the component design, and/or where the defect is attributable to instructions given to the component manufacturer by the product manufacturer;

• Defectiveness – The Committees have proposed modifying the assessment of “defectiveness”:
  • Average Person/Legal Requirements – Under the EC’s draft, a product would be defective if it does not “provide the safety which the public at large is entitled to expect”; the Committees have suggested that a product should be defective if it does not “provide the safety an average person is entitled to expect or that is required under Union or national law”;
  • Expected Life-Time of Product – In addition, now “defectiveness” will be determined taking into account all circumstances, including the reasonably foreseeable use (misuse has been deleted) of the product taking into account the product’s expected life-time;
  • New Features or Knowledge – “Defectiveness” would also require a consideration of “the effect on the product of any ability to acquire new features or knowledge after it is placed on the market or put into service”. The prior wording here referred to “any ability to continue to learn after deployment”;
  • End-Users’ Specific Expectations – The EC had included, within the factors to be considered when assessing defectiveness, “the specific expectations of the end-users for whom the product is intended”. The Committees have removed this wording;

• Disclosure – In a rebalancing effort, the Committees also suggest that defendants (in addition to claimants) may request disclosure of relevant evidence;

• Rebuttable presumptions – In the EC’s draft, defectiveness or a causal link between defectiveness and damage (or both) would be presumed where claimants could establish (amongst other things) that it is likely that the product is defective or that its defectiveness is a likely cause of the damage (or both).  The Committees have suggested lowering that threshold; in their version, claimants need only show that it is possible that the product is defective or that its defectiveness is a possible cause of the damage (or both) in order to benefit from the rebuttable presumption(s);

• Exemption for small businesses – The Committees have introduced a liability exemption for software manufacturers that are microenterprises or small enterprises at the time of placing the relevant product on the market; and

• Joint and Several Liability – The EC’s wording provided (at Article 11) for joint and several liability where two or more economic operators are liable for the same damage. The Committees have added to this and included a new article expressly providing that there shall be a right of recourse where more than one economic operator is liable for the same damage (in new Article 12a).

Next steps

The proposed Directive will now enter the trilogue stage of the legislative process, meaning there will be interinstitutional negotiations between representatives of the European Parliament, the Council of the European Union and the European Commission. The final wording of the Directive therefore remains to be decided. Covington will be monitoring these developments closely.