Europe’s digital future — Proposals for change
Is the current Product Liability Directive no longer fit for purpose?
The European Commission (“the Commission”) is inviting comment from manufacturers, insurers, consumer associations, and academics, as well as members of the public, non-governmental organisations and member state authorities, on proposals to address how the rules on establishing liability in claims for compensation relating to defective products can be adapted to fit an evolving digital age. Is the current Product Liability Directive (“the Directive”) no longer fit for purpose?
Why do we need to consider change?
The prevalence of Artificial Intelligence (“AI”) and smart technology within every day products cannot be ignored. Digital products and services are increasingly affordable and claims which rely upon interpretation of the current liability rules are becoming increasingly complex. Software updates, data flows and algorithms do not fit easily with traditional safety assessments, which focus on questions concerning design and production.
In circumstances where harm has occurred, which economic operator should be stepping up to accept liability? When a product or its component part is upgraded or refurbished, and a defect is then found, where will blame lie? Trying to shoehorn into the current Directive to answer these questions is becoming increasingly problematic for consumers and legal advisors, and the Commission has questioned whether the current liability rules are enough to provide legal certainty and consumer protection. In addition, new AI systems need to be safe in development and consumers need to feel safe. If a problem does arise, an individual or entity needs to be capable of identification against a clear framework.
How does this link to a circular economy?
Our transition to a circular economy must be encouraged if we are to focus on environmental change. But that transition also requires us to consider how changes to models of production and consumption which utilise the sharing, leasing, reusing, repairing, refurbishing, and recycling of existing materials and products as long as possible impacts upon the way we interpret liability. If a product has reached the end of its useful life, but some of its component parts can be used again to create further value, then the life cycle of the product can be extended, and waste can be kept to a minimum. But if that ‘new’ product is found to be defective, who should the consumer look to for their remedy, and how should suppliers, manufacturers and producers tackle the departure from the traditional, linear economic model?
The mass production of affordable products relies upon planned obsolescence when a product has been designed to have a limited lifespan to encourage consumers to buy it again. The European Parliament has called for measures to tackle this practice, but if the answer is reusing and refurbishing, how does this fit in with the current rules?
The current rules and the consultation
The current liability rules are based on two pillars: the Directive and non-harmonised national liability rules. The Directive protects consumers who suffer injury or property damage from defective products. It covers anything from kitchen tables to pharmaceuticals, vehicles and AI-driven products. The non-harmonised national liability rules include various differing liability rules, which cover different types of damage and claims against any liable person.
Section I of the consultation concerns the Directive. The Commission notes that since 1985, the Directive has provided a harmonised system for compensating consumers who suffer damage from defective products. The Directive applies to all movable products regardless of the technology they use, and therefore also applies to AI-driven products. Section II of the Consultation specifically concerns AI. The Commission’s objective is to encourage the development and roll-out of safe AI systems and build trust amongst potential users.
Will any changes be applicable to UK business?
The UK will be keeping a watching brief on the Consultation and its outcome. An overhaul of the product liability system within the UK is proposed, and the UK will want to consider potentially replicating any changes made to the Directive into domestic law. Decisions made will not be binding, but they are likely to be influential. For those businesses selling products in the UK and EU, the potential requirement to follow two different regimes will need to be borne in mind.
The Consultation is open for 12 weeks and will run until 10 January. Interested parties are encouraged to complete the questionnaire.
For further guidance and support, please contact our product liability solicitors.