The European Council adopted the Directive on Liability for Defective Products (“DLDP”), replacing the previous directive[1] to bolster effectiveness of the principle that a consumer who suffers material damage from a defective product can seek compensation from economic operators in the supply chain.[2]
The DLDP updates the EU’s liability regime to better suit the digital and circular economy, ensuring the effective protection of consumers in light of technological developments. Together with the AI Act[3] and the Proposal for an AI Liability Directive[4] submitted by the European Commission on September 28, 2022, the DLDP will help address concerns related to artificial intelligence.
The DLDP has been published in the Official Journal and will enter into force on December 8, 2024. Member States have two years to transpose the DLDP into national law.
While the actual effect of the DLDP will be felt over several years, we expect adoption of the DLDP to have significant implications for businesses operating within the EU. First, companies will need to enhance their product safety protocols and quality assurance processes to mitigate liability risks, particularly as the directive emphasizes accountability throughout the supply chain.
Second, the alignment with the AI Act and the Proposal for an AI Liability Directive signals a shift toward stricter regulations for technology-driven products, which in turn will prompt businesses to invest in compliance and risk management strategies.
Finally, the DLDP’s focus on the digital and circular economy may open up new opportunities for innovation, as businesses that proactively adapt to these changes should find new chances to differentiate themselves in a competitive market while fostering consumer trust.
DEFINITIONS AND SCOPE OF APPLICATION
The DLDP broadens the scope of application of the liability regime set forth under Directive 85/374/EEC in objective and subjective terms.
First, the DLDP expands the definition of a “product”[5] so that consumers may request compensation for damage resulting from defective software and digital manufacturing files.
The general rule is that risks are passed on to manufacturers in the form of liability for defective products (and defective components integrated into or inter-connected with products). When it is impossible to identify the manufacturers—for instance, due to technical complexity—all the economic operators in the supply chain may be sued by consumers. This ensures that consumers are offered protection and compensation in the early stages. At a later stage, stakeholders may ask the courts to identify the actual factors that triggered the harm and determine accordingly how the liability should be allocated among economic operators.
In addition, the updated legal framework expressly includes the following as potentially liable economic operators:
- providers of online platforms, to the extent that a manufacturer cannot be identified, when the defective product is sold through remote contracts concluded on their platforms;
- a person or company who substantially modifies the product (e.g., if the product is repaired or upgraded) outside the manufacturer’s control and then makes it available on the market;
- for products manufactured outside the EU, the importer, the authorized representative, or, in their absence, the fulfillment service provider.
In any case, the DLDP does not affect national rules on contractual and non-contractual liability for reasons other than product defect.
DISCLOSURE OF EVIDENCE AND BURDEN OF PROOF
To strengthen consumer protection, the DLDP revised the rules on disclosure of evidence and on the burden of proof.
Although disclosure methods will be determined according to national law, and it is too soon to predict the effect, the early feeling is that the new regime established under the DLDP will have impact on systems like Italy’s where obtaining disclosure of evidence can be burdensome. Indeed, the most significant change is that, upon request of the claimant, an economic operator must disclose relevant evidence (i.e., evidence that supports the plausibility of the claim) at its disposal in certain circumstances (i.e., limited to necessary and proportionate information based on the legitimate interests of all parties concerned). The change is expected to have significant impact because it allows disclosure of evidence that isn’t predetermined. Compare this to the Italian Code of Civil Procedure, under which the judicial authority can only require economic operators to disclose documents or other specifically identified elements.
Notably, under the DLDP the disclosure rules discussed above also apply to the claimant. This can be beneficial in cases where defendants argue that the damages claimed by the claimant may have been caused by a different factor, evidence of which is solely in the claimant’s possession.
Regarding the burden of proof, the DLDP, in line with the previous regime, provides certain exceptions to the general rules in an effort to strengthen consumer protection. Indeed, the claimant shall prove (i) the defectiveness of the product, (ii) the damage suffered, and (iii) the causal link between the two. Nevertheless, different presumptions apply. First, the defectiveness of the product shall be presumed if the economic operator does not disclose the required elements or the product does not meet security requirements or the damage is caused by obvious malfunction (during reasonable use). Also, the causal link shall be presumed to the extent that the product is defective and the kind of damage is typically caused by the type of defect in question.
Notably, the DLDP goes a step further toward a stricter system. Under the DLDP, if due to technical or scientific complexity it is excessively difficult to prove a product’s defectiveness or the causal link between the defect and the damage (or both), a court may decide that the claimant is required to prove only the likelihood that the product was defective or that its defectiveness was a likely cause of the damage.
LIMITATION AND STATUTE OF LIMITATION
Under article 16 of the DLDP, which basically confirms the previous regime, a statute of limitation period of three years applies to filing to claim compensation for damage. That period begins on the day when the injured person becomes aware (or should reasonably be expected to become aware) of the damage, the defectiveness, and the identity of the economic operator that can be held liable.
Also, the injured person is no longer entitled to compensation after ten years, unless they started a proceeding against the economic operator in the meantime. If a person does not start a proceeding within ten years because personal injuries are latent (i.e., the injuries or their effects manifest with a delay), they will no longer have the right to compensation under this directive after 25 years unless they have started a proceeding against an economic operator in the meantime.
The period starts from the date the defective product is placed on the market or put into service or, in the case of a substantially modified product, the date when the product is placed on the market or put into service following its substantial modification.
[1] Directive 85/374/EEC.
[2] Manufacturers, distributors, sellers, and so on.
[3] Regulation (EU) 1689/2024.
[4] Proposal for a Directive on adapting non-contractual civil liability rules to artificial intelligence, COM(2022) 496 final 2022/0303 (COD).
[5] According to article 4 of the DLDP, a product is “all movables, even if integrated into, or inter-connected with, another movable or an immovable; it includes electricity, digital manufacturing files, raw materials and software.”
