Technology is rapidly changing, and governments worldwide are looking to adapt their existing laws to the digital age.
The European Parliament and Council are currently engaged in an intense legislative review of a European Commission proposal to update the 1985 Product Liability Directive (PLD), a law that has successfully provided European consumers with the means to claim compensation for damage caused by defective products, while still giving businesses the room to innovate. The revision was created to help answer developing product liability questions surrounding artificial intelligence (AI) and emerging technology. Unfortunately, the proposed rules go beyond the limited revisions that were originally identified by the Commission when it evaluated the existing Directive and could end up dissuading businesses from putting out new technologies.
For starters, the Commission has expanded the definition of a “product” to include AI, digital services, and software. There does not appear to be sufficient evidence of harms arising that would justify the inclusion of completely new categories of products within the scope of the PLD. This revision would also allow consumers to bring claims for non-material damages, such as data loss and psychological harm – two concepts either already covered by another EU law (the data privacy law) or difficult to define or assess (in the case of psychological harm). The revision also seeks to remove the monetary thresholds of the PLD, encouraging increased litigation for an excessive number of cases that may become uninsurable with the removal of the existing thresholds.
The Commission has also proposed to remove a key safeguard on the “burden of proof.”
Revising the Product Liability Directive would allow claimants who allege harm or defect from a product to sue for compensation, without having to prove the product caused the damage. Instead, defendants would have to prove their product did not cause the harm – sometimes forcing them to “prove a negative.”
Equally troubling, the revised Directive would also considerably increase rights to obtain disclosure or discovery of all relevant evidence related to claims, making this system more like U.S. civil litigation. This would generate discovery forum shopping across EU Member States and lengthen the resolution of cases.
To address these issues and avoid creating a culture of suing, EU legislators should consider the following suggestions:
- Limit liability to those who control the risk;
- Establish protections against malicious mass claims;
- Narrow the definition of “damages” to harms that are provable, foreseeable, and quantifiable;
- Reinstate monetary thresholds; and
- Limit the reversal of the burden of proof.
The revised Product Liability Directive—taken into the context of the fast-changing liability environment in Europe, including the ongoing implementation of the EU Representative Actions Directive (RAD)—will make the EU far more litigious.
More lawsuits will have a lasting effect on the EU’s economy and result in higher consumer costs. A recent study by the European Centre for International Political Economy states that the proposal would have a “dampening effect on investments, production, and innovation in technology-intensive products and services industries.”
The EU should be very careful in adopting this revised Directive because it could shut the door to U.S. businesses looking to expand operations abroad or established companies that want to invest more resources in various Member States. It is perhaps not what the European Commission had in mind, but thankfully there is still an opportunity to make significant improvements to the proposal to keep the EU competitive.