Navigating the Evolving Product Liability Landscape. Part 1 - Key Changes under the New Directive

Definition of “product”

Any tangible movable item, even if it is incorporated into another movable or immovable item.

The definition of a “product” is greatly expanded under the New Directive to cover all products, tangible and intangible, that have been placed on the EU market. This includes, but is not limited to:

• traditional products

• software, including applications operating systems and AI systems

• digital services that are integrated into a product in such a way that their absence would prevent the product from performing one of its functions

• raw materials, such as electricity and water

Additionally, a product that has been substantially modified (e.g. remanufactured, refurbished or repaired) is considered a new product.

When is a product considered “defective”?

Under the existing regime, a product is considered defective if it does not provide the safety that a person is entitled to expect having regard to factors such as the presentation of the product, its use, and the time at which it was put into circulation.

The New Directive retains the core consumer safety expectation found under the existing regime but refines it by expressly incorporating compliance with applicable regulatory requirements into the defectiveness assessment. Regulatory non-compliance can be an indicator of defectiveness and, in certain circumstances, may give rise to a rebuttable presumption of defectiveness. Accordingly, the New Directive does not alter the fundamental standard but strengthens it by aligning it more closely with the applicable regulatory framework.

What type of damage may be compensated?

The following damage is compensable:

• Death/ personal injury

• Damage to private property

The categories of compensable damages are expanded to include:

• Death/personal injury

o    The New Directive clarifies that personal injury includes “medically recognised and medically certified damage to psychological health”

• Damage to private property

• Destruction or corruption of data not used for professional purposes

Who is entitled to compensation?

The purchaser and any other reasonably foreseeable end user of the product.

The right to compensation extends to any person who has suffered damage as a result of a defective product, including third parties.

Who can be held liable?

Under the existing regime, the “producer” of the product is held liable for damage suffered by the claimant.

The “producer” is defined as the manufacturer and, in circumstances where the manufacturer cannot be identified, the supplier.

The New Directive introduces the concept of the “economic operator” who is liable for the damage suffered by the claimant.

As under the existing regime, the manufacturer of a product remains the primary entity from whom an injured person can claim compensation. In the event that the manufacturer is based outside the EU, the non-EU manufacturer remains liable under the New Directive, but the injured person may pursue other EU-based entities in the following descending order:

• The importer to the EU

• The authorised representative of the manufacturer

• The fulfilment service provider

• The distributor

The claimant may request the details of the EU-based liable party from the distributor. In the absence of an EU-based liable party or a response from the distributor within one month, the injured party may claim compensation directly from the distributor.

Test

Under the existing regime, the test for product liability is one of strict liability which requires the consumer to prove:

• a product was defective;

•  the person suffered damage; and

• there was a causal link between the defect in the product and the damage suffered.

The test remains one of strict liability which requires the consumer to prove:

• a product was defective;

• the person suffered damage; and

• there was a causal link between the defect in the product and the damage suffered.

However, the New Directive eases the burden of proof for the claimant by establishing several rebuttable presumptions in relation to defectiveness and causation.

Under the New Directive, the defectiveness of the product shall be presumed where any of the following conditions are met:

• the defendant refuses to provide certain relevant evidentiary documents relating to the product;

• the claimant demonstrates that the product breaches safety requirements which are specified in European or national law and are aimed at preventing the damage that occurred; or

• there is an obvious malfunction of the product during its normal use.

Causation is presumed where the product is shown to be defective and the damage is of a type typically associated with that defect.

The New Directive also introduces a rebuttable presumption of defectiveness, causation or both, where the claimant faces 'excessive difficulties' in proving defectiveness and/or causation, due to the technical or scientific complexity of the product and it is ‘likely’ that the product is defective and/or that the defect caused the damage.

Disclosure Requirements

There are no specific disclosure requirements under the existing regime, with disclosure and discovery being governed by the general discovery rules in Ireland.

Under the New Directive, courts are empowered to order the disclosure of relevant evidence, including technical documentation and, where necessary, trade secrets. While confidentiality safeguards are included to protect commercially sensitive information, these provisions mark a significant shift towards facilitating claimant access to evidence and easing the evidential burden on claimants, thereby increasing disclosure exposure for manufacturers and economic operators.

Defences

Under the existing legislation, a producer would not be liable if they proved one of the following:

• They did not put the product into circulation

• It is probable that the defect arose after the product was put into circulation

• The product was not manufactured for sale or any economic purpose, nor as part of the defendant’s business

• The defect results from compliance with EU law or other mandatory legal requirements

• The objective state of scientific or technical knowledge at the time was not sufficient to detect the defect (Development Risk Defence)

• If the product is a component, and the defect is due to the design of the final product into which it was incorporated

The defences remain similar under the New Directive.

As under the existing regime, the Development Risk Defence is a defence that Member States can choose to incorporate. Ireland and many other Member States elected to transpose this defence into national law under the existing regime and therefore, it is likely that Ireland will opt to do so once more.

Time Limits

The claimant is entitled to make a claim within 3 years from the date of the incident or the date at which they became aware, or should reasonably have become aware, of the damage, the defect of the product and the identity of the producer.

The existing regime also includes a long-stop period of 10 years from the date that the product was put into circulation. After this date, no claim can be brought, even if the defect only became apparent after that date.

The New Directive retains the limits of the existing regime in most circumstances.

However, the New Directive does introduce a new concept of latency in certain health-related and environmental cases, where damage takes longer to accrue. In such instances, the long-stop period of 10 years is extended to 25 years.