Reform of the Product Liability Directive

Chris Hodges gives an update on recent developments

Amendment to the Directive

In our first edition of Product Liability Focus, we reported on the proposals from the European Commission to amend Directive 85/374/EEC by removing the optional provisions under which member states could decide to exclude liability for unprocessed primary agricultural products and game. This initiative arose out of concern over the safety of beef products following the BSE crisis earlier this decade. This proposal was adopted by the European Community on 10 May 1999 in Directive 1993/34/EC (OJ No L141/20, 4.6.1999). The amendment is obviously of relevance to food producers but may also have implications for those who use products of animal or human origin, such as in biotechnology, cosmetic, pharmaceutical or diagnostics products.

Whilst these proposals were relatively uncontroversial, there was very considerable concern about other proposals which were put forward by the European Parliament and particularly its Committee on the Environment, Public Health and Consumer Protection. These proposals included:

• reversal of the burden of proof
• removal of the “development risks” defence
• removal of the ECU 500 threshold in cases of property damage
• removal or extension of the 10 year period of repose
• removal or doubling of the ECU 70 million cap on liability
• extension of the 3 year limitation period
• inclusion of mental damage

Some of these proposals did not gain sufficient votes in the European Parliament on first reading and the rest of them, which were passed on First Reading were not supported by the Council of Ministers or the Commission and failed to get sufficient votes in the Parliament on Second Reading on 23 March 1999. There was extensive lobbying of Ministers, the Commission and MEPs by industry and trade associations, in which we were closely involved at European and national level.

The Forthcoming Green Paper

The Commission is obligated to report on the Directive to the Council and Parliament by December 2000. In preparation for this process, the Commission has announced that it will issue a Green Paper seeking views on the Directive, which will probably be issued in early Autumn 1999. It is likely that the Green Paper will request information on product liability litigation, including numbers of cases, costs and implications for industry, insurers and consumers. The Green Paper will almost certainly invite views on what impact there might be if amendments were made to the Directive - in particular any of the amendments which were put forward by the European Parliament or its Environment Committee, even though those amendments were defeated. We will provide further information on the Green Paper in the Autumn.

As a preliminary, we have written an article which first gives a complete analysis of the arguments which have been put forward in the debate the Parliament’s proposals for amendment during the past 18 months and, second, points out that the only real test which would justify an amendment to the Directive would be if it could be shown that certain provisions of the Directive were themselves defective. Whilst we await with interest the precise terms of the Green Paper and responses to it, our provisional view is that there is simply no evidence that would establish that the provisions of the Directive are unsatisfactory or defective. We argue that it is simply not correct, as some consumers might argue, to say that the fact that there might be little evidence of product liability claims in Europe would justify a conclusion that there would be no effect on industrial competitiveness and innovation if any of these proposals were to be adopted. Indeed, industry is likely to argue that the adoption of any of the Parliament’s proposals would have a serious adverse effect.

It will be important for interested parties to look out for the Green Paper when it is issued and respond to it within a short timescale, possibly until the end of the year.