Scope

Evaluation of Council Directive 85/374/EEC concerning Liability for Defective Products (PLD) as modified by Directive 1999/34/EC

Evaluation findings

There is a wide awareness among stakeholders that producers are liable for defects in their products. Overall, the Directive can be considered to contribute to a reasonable balance between protecting those who suffer injury and ensuring fair competition on the single market. Some of the Directive’s concepts however require guidance and/or clarification as they hamper the effectiveness of the Directive. In particular, a better common understanding of what is meant by ‘product’, ‘damage’ and ’defect’ as well as clarifications on the burden of proof would render the Directive’s application more effective.

Some of these characteristics of emerging technologies may challenge the existing product liability framework. Other aspects may, by contrast, be adequately addressed by the current Directive.

The evaluation has also found the Directive to be consistent with the overall relevant EU rules. This covered existing and proposed EU rules on consumer protection in the area of contractual liability as well as those on dispute resolution. More importantly, the Directive is consistent with EU product safety rules as laid down in the harmonised EU product safety rules and the General Product Safety Directive.

The original objectives of the Directive remain relevant. However, when it comes to new technological developments, stakeholders have expressed concerns about the continued relevance of the Directive’s concepts. There are open questions about what separates a product from a service (e.g. for the Internet of Things, where products and services interact), the scope of damage covered (currently limited to material damage) and the notion of what constitutes a defect.

The evaluation looked at whether the Directive in its current form still serves its purpose, especially also with regard to emerging digital technologies, such as artificial intelligence, the Internet of Things, robots. The evaluation has shown that even though products are much more complex today than in 1985, the Product Liability Directive continues to be an adequate tool. However, the legal understanding of certain concepts (such as product, producer, defect, damage and the burden of proof) needs to be clarified. Furthermore, certain products such as pharmaceuticals may pose a challenge to the performance of the Directive. According to the White Paper on AI² and its accompanying Report on Safety and Liability for AI, IoT and robotics³, the Directive fails to address certain liability questions posed by technological developments.

The Directive is an integral part of the EU’s single market rules. Its benefits are uncontested. The Directive provides uniform consumer protection by serving as the safety net that complements EU product safety legislation. The Directive also strikes a sensitive balance between innovation and protection that can only be achieved at EU level to prevent single market fragmentation and distortion of competition.

Repealing the Directive would lead to fragmentation and differing levels of consumer protection, as national courts would only apply national rules, contract or tort law. It should be noted, however, that the Directive exists alongside national instruments and that there is therefore still room for differing national approaches.

Estimated savings and benefits

The Directive is about striking a balance between injured persons’ and producers’ interests. Its costs are a direct trade-off: what is to the benefit of the injured persons is the producers’ cost and vice versa. The Directive has the benefit of facilitating consumers claims by providing a single person where they can lodge their claims. Overall, the Directive is considered efficient at delivering a stable legal framework for the single market and for harmonising consumer protection. The balance between costs and benefits relating to the Directive is however not uniform across Member States and sectors or product types for injured persons. Judicial costs are no burdens that the Directive itself imposes; no specific simplification potential was identified in this respect.

² COM(2020) 65

³ COM(2020) 64

Which objective(s) does the Commission pursue?

The revision of the Product Liability Directive seeks to ensure the functioning of the internal market, free movement of goods, undistorted competition between market operators, and a high level of protection of consumers’ health and property. In particular, this proposal aims to:

• ensure liability rules reflect the nature and risks of products in the digital age and circular economy;

• ensure there is always a business based in the EU that can be held liable for defective products bought directly from manufacturers outside the EU, in light of the increasing trend for consumers to purchase products directly from non-EU countries without there being a manufacturer or importer based in the EU;

• ease the burden of proof in complex cases and ease restrictions on making claims, while ensuring a fair balance between the legitimate interests of manufacturers, injured persons and consumers in general; and

• ensure legal certainty by better aligning the Product Liability Directive with the new legislative framework created by Decision 768/2008/EC 7 and with product safety rules, and by codifying Product Liability Directive -related case law.

Estimated savings and benefits

The initiative to revise the Directive aims to provide clearer liability rules in the context of the digital and circular economy. This should prevent regulatory costs due to legal uncertainty and fragmentation of national rules. Liability rules would be made easier to apply by national courts, increasing the overall efficiency of justice (lower costs and faster dispute resolution).

Adapting liability rules to the digital age and circular economy will not result in new information requirements nor create administrative costs for businesses or consumers. The initiative is generally not expected to result in new direct adjustment costs for businesses.

Economic operators would have more legal certainty and coherent interpretation of liability rules in the internal market. Without a uniform set of rules for compensating people harmed by defective products, manufacturers would be faced with 27 different sets of rules.