Introductory Chapter – Product Liability

Introduction

The past 12 months have been largely dominated by the challenges posed by COVID-19. The global pandemic has arguably accelerated even further our reliance on technology. It is unsurprising in this context that adapting product liability laws to be fit for the 21st century remains a key and pressing issue across the globe. To illustrate this, we highlight below the discussions and proposed developments in:

  1. the EU, where the European Commission is intent on developing a modernised, harmonised, consistent legal framework across the EU and giving consumers greater access to enforcing their rights; and, by contrast
  2. the United States, where case law in individual states can inconsistently impact product liability developments.

An Updated Legal Framework – the EU and UK perspective

The EU Product Liability Directive (PLD) was introduced over 35 years ago and provides for strict (no fault) product liability claims if a product is defective and the defect causes injury or damage to property. The European Commission’s review of the product liability regime is on-going.

The challenges posed by AI, IoT and new technologies are not limited to the product liability regime. It is therefore encouraging to see that the European Commission is not just looking at reform of the product liability regime in isolation, but is also considering other issues, such as product regulation, product safety, ethics and fundamental rights.

A key part of the European Commission’s efforts on this front in 2020 involved a public consultation on the proposals set out in its White Paper and report on the safety and liability implications of AI, IoT and robotics. The White Paper attracted approximately 1,215 contributions from a variety of global stakeholders. A majority of respondents supported a revision of the current regime in the PLD, for example, to cover particular risks created by certain AI applications. The European Parliament also issued a resolution in October 2020 setting out recommendations to the Commission on civil liability for AI more broadly.

A European Commission proposal for a regulation on ethical and legal requirements for AI is currently planned for the first quarter of 2021. We do not yet know exactly what this proposal will cover. Proposals for reform may include the following:

  1. Amendments to the definition of “product” (e.g. to clarify the extent to which the strict product liability regime applies to software).
  2. Amendments to reflect that products may change after they are put on the market and to clarify who is liable for such changes.
  3. Shifting the burden of proof in some cases to make it easier for claimants to successfully bring product liability claims (e.g. taking into account the difficulties of establishing whether complex products are defective and caused injuries).
  4. Taking a risk based approach to reform (e.g. limiting some changes to “high-risk” AI applications).
  5. Introducing record keeping requirements to address the so called “black box” effect and make it easier to trace back actions or decisions of AI systems.

The European Commission is also expected to publish proposals in relation to its review of the General Product Safety Directive (GPSD) in the second quarter of 2021 (following a public consultation which ended in October 2020). One of the key themes of the European Commission’s review of the GPSD is to “respond to issues related to new technologies and online sales“.

Interestingly, the UK, having just entered its post-Brexit era, is already contemplating its own developments, which could move away from the EU regime, proposing to develop an innovative products regime that is fit for purpose in today’s world. In March 2021, the UK Government set out its plans to explore changes to the UK’s product safety and product liability laws. The review has been commenced by the Office for Product Safety and Standards, the UK Government’s lead product safety body which was established in 2018, and includes a public call for evidence. The call for evidence lists an Annex of regulations it applies to, including the Consumer Protection Act 1987, which implements the PLD. The call for evidence closes on 3 June 2021.

Addressing New Tech from the US Perspective

Product liability in the United States is largely governed by state law and driven by court decisions. This can lead to situations where the court in one state addresses a particular liability question one way, while a court in another state addresses it differently. Eventually, product liability law in the United States may evolve towards the application of common principles. But when new issues emerge, those common principles may take some time to develop.

There is currently a tension between rapid product-related technological developments and the current product liability legal construct. Courts, regulators and even legislatures are recognizing that this construct is not particularly well-suited to address such rapid advancements.

Despite this tension, federal and state regulators responsible for products like motor vehicles, medical devices and general consumer products have taken a proactive and encouraging view towards such technology advancements, recognizing both the inevitability of technological change and the profound benefits such change offers to the consuming public. Regulatory frameworks are therefore being added, amended or reworked to specifically address and monitor such technology advancements. However, consensus around how to handle liability issues and safety requirements has been hard to achieve in certain circumstances.

Although regulators continue to assess these issues, courts are left to grapple with applying product liability principles to situations involving products utilizing advanced or emerging technologies. For example, courts are answering fundamental questions like who or what is responsible for the consequences of “decisions” a machine makes between two or more simultaneous risks that are present, or what role a product user has when interacting with automated products.

The rapid development of products utilizing emerging technologies ensures that courts, regulators and potentially even legislatures in the U.S. will continue to grapple with such issues for quite some time, although we can expect that gradually, fundamental principles will begin to emerge both from court decisions and regulatory advancements.

Collective Redress developments in the EU

Another key development in the EU concerns providing an additional mechanism for consumers to enforce the rights granted to them by EU law, including in relation to product liability. After lengthy negotiations on 24 November 2020 the European Parliament formally approved the much-anticipated new directive on representative actions for the protection of the collective interests of consumers (Directive 2020/1828) (the “Directive“). This move commences a countdown for Member States to implement the Directive into their national law, which may well prompt collective claims for infringements of various areas of EU law, including the PLD.

The clear aim of the Directive is to provide a more claimant friendly landscape, specifically providing for designated consumer organizations (the so-called ‘qualified entities’) to be able to launch actions on behalf of consumers. How it will be implemented by each Member State remains to be seen, and we will only see its full effect from mid-2023 onwards.

Concluding comments

Overall, one point is clear, technological change has outpaced developments in the law, including product liability laws. However, there does appear to be global recognition that the legal regime needs to adapt, and steps are starting to be taken.

In the EU, 2021 may be the year in which the European Commission finally puts forward concrete proposals for change. Achieving a consistent, harmonised approach to addressing the challenges posed by AI, IoT and other emerging technologies would facilitate greater certainty for companies, improving their ability to assess and manage potential risk associated with product liability claims. By comparison, developments in the United States need to be monitored, as such changes will continue to emerge over time through case law, regulatory changes and, potentially, legislation.