Product Liability & Safety 2020

Last Updated June 24, 2020

EU

Law and Practice

Authors



Cooley LLP has over a thousand lawyers, with 16 offices across Europe, the US and Asia. Its international product liability and safety team has market-leading experience in managing regulatory investigations, litigation, product recalls, risk assessments and international compliance in complex, fast-moving and highly regulated industries including life sciences, cosmetics and consumer products.

The EU product safety regulatory regime is robust and multi-faceted. Underpinned by the EU's core principles of free movement and maximum harmonisation, and with the public’s safety as its goal, the regime has three complementary limbs, consisting of:

  • mandatory obligations for all economic operators within the supply chain;
  • minimum competence requirements for any third parties assessing product or quality management systems; and
  • market surveillance mechanisms.

Legislation

The regime includes numerous pieces of legislation which overlap with or complement each other. Sector-specific legislation regulates specific product categories including, for example, cosmetics, biocides, medical devices, food, motor vehicles, toys, low-voltage electrical equipment, personal protective equipment, machinery and radio equipment. For consumer products outside these specific regimes, or where these regimes are silent, the EU’s general laws on consumer product safety (Directive 2001/95/EC on general product safety; the General Product Safety Directive or GPSD) apply. The GPSD requires all products to be safe in their normal or reasonably foreseeable usage. Member-state authorities are empowered to take appropriate action when this obligation is not met.

Other relevant regimes may also apply, including:

  • Regulation (EC) 1907/2006 on the registration, evaluation, authorisation and restriction of chemicals (REACH), which regulates the production and use of chemical substances;
  • Regulation (EC) 1272/2008 on the classification, labelling and packaging of substances and mixtures (CLP Regulation), which requires manufacturers to appropriately classify, label and pack products containing dangerous substances and mixtures;
  • Directive 2012/19/EU on waste electrical and electronic equipment (recast WEEE Directive), which regulates waste electrical and electronic equipment (WEEE) and provides for collection schemes for consumer products;
  • Directive 2011/65/EU on the restriction of the use of certain hazardous substances in electrical and electronic equipment (recast RoHS Directive), which regulates the restriction on the use of certain hazardous substances in electrical and electronic equipment;
  • Regulation (EU) 1007/2011 on textile fibre names and related labelling and marking of the fibre composition of textile products (Textiles Regulation), which outlines fibre names and related labelling requirements for textile products;
  • Directive 2014/53/EU Radio Equipment, which establishes a regulatory framework for placing radio equipment on the market (RED); and
  • Directive 2014/30/EU on Electromagnetic Compatibility (EMC), which sets requirements for the design and testing of electrical and electronic products to ensure they do not give rise to electromagnetic interference

Regulatory Scope

This EU product safety regime generally applies: 

  • where a product is "placed on the market" in the EU, and to any subsequent action which could be considered placing the product on the EU market until it reaches the end user (including, in some cases, any subsequent instances of the product being "made available on the market")
  • in respect of all forms of selling, including e-commerce or bricks-and-mortar stores; 
  • in respect of newly manufactured and, in some cases, used and second-hand products;
  • to products that enter the EU for the first time after being imported from a third country; and
  • to products that have be subjected to important changes or overhauls aiming to modify their original performance, purpose or type.

National Level or EU-Wide?

The concept of mutual recognition, which has always underpinned the EU system, and which has been reaffirmed by recent legislative initiatives, can sometimes apply to allow a product that is compliant with product safety laws in one member state to freely, without further action, be sold in another EU member state (see 3.1 Trends in Product Liability and Product Safety Policy and 3.2 Future Policy in Product Liability and Product Safety).

Certain discrete product safety and consumer protection laws, including for example those around enforcement (as described in 1.2 Regulatory Authorities for Product Safety) and mandatory language requirements for labels and consumer-facing materials are prescribed at national level rather than EU-wide. Companies should be cognisant of this when launching EU-wide products or undertaking any form of pan-European corrective action or report to authorities.

There is no EU-wide regulator for consumer product safety generally, although there are EU-level agencies with regulatory functions for medicines and chemicals.

Enforcement of product safety regulations is carried out at a national level. Each member state has its own national regulator (competent authority), which is responsible for enforcing that country’s national implementation of EU product safety laws, including through market surveillance activities. These competent authorities have specific powers allowing them to carry out these functions. In some member states there may be a hierarchy within the network of surveillance authorities whereby local authorities are overseen by a national authority with supervisory responsibilities

Whilst enforcement of product safety laws does remain solely within the jurisdiction of national authorities, recently the EU has introduced several new legislative initiatives that, when fully implemented, will considerably impact on the scope and exercise of the enforcement powers of national authorities (see 3.1 Trends in Product Liability and Product Safety Policy and 3.2       Future Policy in Product Liability and Product Safety).

The European Commission (EC) does, however, play a key role in ensuring compliance with EU-level product safety regulations, by:

  • requiring member states to take specific actions in certain circumstances where warranted (for example, requiring a temporary ban, recall or withdrawal from market of unsafe products on the EU market); and
  • providing guidance and interpretation, which is not legally binding, relating to key EU product safety laws, including in its "Guide to the implementation of directives based on the New Approach and the Global Approach" (more commonly known as the Blue Guide), most recently published in July 2016, although currently under review.

This mechanism of regulation introduces complexities for companies trying to adhere to EU-wide product safety obligations enforced by individual regulators, with potentially differing approaches, across Europe. It generally means that alongside synchronisation of an EU-wide approach, country-specific consideration of each issue is often warranted or even necessary.

The more joined-up approach introduced by the new EU legislative initiatives will, once fully implemented, likely significantly impact the enforcement of product safety laws across Europe. The increased visibility of enforcement actions taken by different regulators across Europe, as a part of the above-mentioned legislative initiatives, when implemented, may well also result in greater use of enforcement powers by different regulators for the same product safety issue across Europe. (see 3.1 Trends in Product Liability and Product Safety Policy and 3.2 Future Policy in Product Liability and Product Safety). More than ever companies will therefore have to be vigilant in considering the flow-on effect across Europe that will result from taking action or reporting to the competent authorities in one member state.

EU-level laws contain broad obligations requiring action to be taken to deal with product safety risks that arise.

Under Article 5(1) of the GPSD, producers must “adopt measures commensurate with the characteristics of the products which they supply.” This ordinarily includes, in the first instance, warning consumers, withdrawing products from the market where warranted and, as a last resort, recalling products. Similar provisions exist in sector-specific legislation.

Classification of product safety risks (as serious, high, medium or low), to identify appropriate "commensurate measures", is, according to the GPSD, determined by undertaking a "risk assessment". This risk assessment determines risk by assessing the possible severity of harm and likely probability of the risk identified.

Although the GPSD is silent on how a risk assessment is performed, the EC has published guidance which sets out a methodology that is routinely adopted for this purpose (see Commission Decision 2019/417/EU), as well as the EU general risk assessment methodology (COM(2013)76). The EC has also now developed an online tool too.

PROSAFE, the professional organisation for market surveillance authorities in Europe, also published guidance on what action may be needed to deal with the various categories of risk:

  • low risk, normally not requiring action for products on the market;
  • medium risk, normally requiring some action;
  • high risk, normally requiring rapid action; and
  • serious risk, normally requiring rapid action.

Specific products may have more prescriptive rules or guidance for recall (for example motor vehicles, medicinal products and medical devices).

Companies generally take these actions to address product safety risks voluntarily, but competent authorities can compel companies to take certain steps if they do not consider the actions taken by the company to have appropriately addressed the risk.

Increasingly, national regulators also require additional, specific actions to be taken by companies regardless of whether or not they are satisfied with the voluntary actions already taken. Certain competent authorities regularly require mandatory advertising of the recall, including the format, frequency and source of publication of the same.

Companies must therefore carefully consider what steps they take upon identifying a potential product safety issue. A multi-functional team, including legal and technical experts, is often required to achieve the best result, one which balances legal compliance and commerciality.

Under Article 5(3), the GPSD requires producers and distributors to “immediately inform the competent authorities of the member state in which the products in question are, or have been, marketed or otherwise supplied to consumers” where they “know or ought to have known” that a product they have marketed is unsafe.

The EC has an online system which facilitates the notification of several relevant member states simultaneously. Formerly known as "RAPEX", the system has recently been renamed as "Safety Gate". 

Safety Gate should be used with caution and with appropriate legal advice; and, in light of the national enforcement mechanisms for product safety, a more country-specific approach should also be considered in consultation with experienced local advisers. In particular, local requirements for the preferred form of reports to authorities and the need for powers of attorney and translations for liaison between points of contact and the authorities are often required, and need to be considered in determining the overall strategy and timing of notification. The expectations of regulators across the EU in respect of their unique preferred method of notification have become increasingly divergent, and therefore complex to navigate, in recent years.

The nomination of a "main member state" within the Safety Gate form mandates that a specific competent authority will lead the process across Europe, in terms of assessing the suitability of proposed corrective actions and escalating the issue to other competent authorities or further publicising the issue to consumers, including through publishing on its own website. Where there is any disagreement between national competent authorities that are affected by the issue, including in respect of the assessed risk (particularly where the authorities believe the risk has been under-assessed, or where they assess the risk is serious), the main member state will have responsibility to resolve these issues amongst the affected countries.

Given the requirement for EU-level product safety laws to be implemented by national legislation, member states are empowered to impose penalties and sanctions for breaching product safety obligations. Sanctions can include monetary fines of significant value as well as, in certain circumstances, imprisonment of individuals.

Increasingly, across Europe there seems to be a tendency for authorities to resort to sanctions, including criminal sanctions, (see 3.1 Trends in Product Liability and Product Safety Policy and 3.2 Future Policy in Product Liability and Product Safety).

There are several causes of action in respect of unsafe products in the EU market. The major ones are set out below.

Statutory Liability under Product Liability Laws

EU Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the member states concerning liability for defective products (the PLD) established the product liability regime in the EU. The PLD creates strict liability offences for defective products; Sections 1 and 3 of the PLD make manufacturers, those who present themselves as manufacturers, importers and suppliers jointly and severally liable “for damage caused by a defect” in a product ("product" is defined broadly in Section 2 as “all movables” but expressly excludes “primary agricultural products and game”). The claimant is required to prove the damage, the defect and the causal relationship between the two, as based on application of the national causation tests that are applicable. A product is defective when “it does not provide the safety which a person is reasonably entitled to expect” as based on “all circumstances”, including but not limited to the product’s presentation, its use, and the time it was put into circulation. The factual context of any claim is therefore centrally important to determining whether or not a product has a defect.

Liability in Tort (Negligence)

By virtue of this, a negligence claim with respect to a defective product will give rise to the same issues as those that present themselves under the PLD. However, unlike the PLD, which is a strict liability cause of action, in negligence actions the claimant is also required to demonstrate fault on the manufacturer’s part.

Liability in Contract

This can be supplemented by reference to Consumer Sales and Guarantees Directive (1999/44/EEC) (which is currently being revised). Liability in contract provides that a seller that is "any natural or legal person who, under a contract, sells consumer goods in the course of his trade, business or profession" will be liable if the product in question does not conform to the contract of sale. Note recent legislative reform to extend the rights of consumers in certain circumstances, when implemented, will likely impact on the frequency that this type of action is deployed. 

Breach of Product Safety Regulation

Please refer to 1 Product Safety for further discussion of this.

These mechanisms of liability all work together in the EU. The strict liability regime is generally preferred by claimants as, unlike the negligence action, it requires no proof of fault. In practice, parallel actions are often used by claimants to seek to obtain the benefits of all regimes, namely taking advantage of the strict lability aspect of the PLD as well as the joinder of parties and broader scope available under negligence causes of action.

Criminal Liability

Generally, the above offences create civil liability. However, criminal offence provisions also exist under the GPSD for breach of product safety regulations.

Individual claimants injured by a defective device may commence proceedings under the PLD (Article 4 stipulates it is the “injured person” who is entitled to bring actions under the PLD). Multiple claimants often bring joint actions in relation to a single product or sub-type of product. The current draft legislation for a new collective redress mechanism in the EU presently allows group actions to be brought under the PLD.

There are strict time limits imposed for claims under the PLD.

Article 10 prescribes a limitation period of three years, which “shall begin to run from the day on which the plaintiff became aware, or should reasonably have become aware of the damage, the defect and the identity of the producer.” This provision applies without affecting member states' laws that may allow for a suspension of the running of the time period in certain circumstances.

Article 11 specifies that the plaintiff’s rights are completely extinguished, notwithstanding the above, “10 years from the date on which the producer put into circulation the actual product which caused the damage, unless the injured person has in the meantime instituted proceedings against the producer.”

The rules for invoking the jurisdiction of the EU courts and the choice of national jurisdiction in respect of the PLD and/or negligence claims are complex. 

Regulation (EC) 864/2007 on the Law Applicable to non-contractual Obligations (Rome II Regulation) provides that claims can be validly brought under the law of the country in which: 

  • the person sustaining the damage had his or her “habitual residence” when the damage occurred, if the product was marketed in that country;
  • the product was acquired, if the product was marketed in that country;
  • the damage occurred, if the product was marketed in that country; and/or
  • the person claimed to be liable is habitually resident, if he or she could not reasonably foresee the marketing of the product, or a product of the same type, in the countries to which the above points relate.

Contracts may, and frequently do, contain choice of law/governing law provisions, that may act to limit arguments that may be made regarding jurisdiction. In the absence of such provisions, different rules apply in respect of contract-based claims. Regulation (EC) No 593/2008 on the law applicable to contractual obligations (Rome I Regulation) states, most relevantly to product liability matters, that “a contract for sale for goods shall be governed by the law of the country where the seller has “habitual residence”. These rules are overlaid with rules regarding the specific jurisdiction of the member state in which the plaintiff actually brings their claim.

Given their complexity, careful legal analysis needs to be applied at the outset to determine whether the plaintiff is entitled to bring their claim in the jurisdiction and whether there are arguments against the chosen forum.

The member state in which a product liability claim is made often has relevant mandatory pre-litigation steps before a plaintiff is allowed to bring formal proceedings. Failure to comply with these steps can result in the invalidity of any subsequent litigated claim and/or cost consequences at any subsequent trial.

Member states in which product liability claims are brought often have rules against the destruction, or requirements for the preservation, of evidence in respect of product liability claims. These rules are often less robust than the American concept of "spoliation of evidence", which is the basis for a complete dismissal of a claim. In the EU, claims can and do proceed in the absence of the device itself, if the circumstances warrant it. Adverse inferences may, however, be drawn from the destruction in some instances.

Careful consideration needs to be given to destructive examination practices undertaken in preparation for litigation, ideally with the participation and consent of all potentially affected parties to any litigation. 

Disclosure requirements in product liability cases are heavily dependent on the rules of the member state jurisdiction in which the claims are brought. Civil law system countries often have much narrower concepts of disclosure than in common law system countries. Equally, the rules for which documents may be withheld on the basis of legal privilege vary significantly across the different member states.

The rules governing use of expert evidence in product liability cases vary greatly across member states in the EU. EU-wide rules governing expert evidence are, however, generally strict.

Civil law systems often have greater formalities attached to, and place greater weight on, expert evidence than their common law counterparts. Approaches regarding oral as opposed to written testimony, as well as collaboration between opposing sides and experts, also vary greatly.

The strict liability mechanism established by the PLD means that plaintiffs need not prove the negligence or fault of the defendant. Under Article 4 of the PLD all that is required is for the injured person to prove the damage, the defect and the causal relationship between defect and damage.

The producer bears the burden of proving any defence relied upon.

In respect of negligence claims, the plaintiff bears the onus of proof to establish the existence of a duty of care, its breach, damage suffered and a causal relationship between the two.

In respect of contractual claims under certain consumer protection laws, the onus of proof can shift depending on how long after the product was purchased any claim is made.

The standard and mechanism of proof is determined by the laws of the member state in which the claim is brought.

The laws of the member state in which a product liability claim is brought will determine all applicable civil procedure rules.

Under Article 267 of the Treaty on the Functioning of the European Union, the Court of Justice of the European Union (CJEU), as the highest European court, is able to hear matters referred to it from national courts in respect of claims arising from the PLD, as the final determiner of interpretation of all EU law. In these instances, local proceedings are stayed until the judgment of the CJEU.

Appeal avenues available to claimants in product liability claims depend on the laws of the jurisdiction in which the claim is made. As noted in 2.10 Courts in which Product Liability Claims Are Brought, the ultimate arbiter on questions of EU law is the CJEU, which can hear cases referred to it by national courts in the member states.

Article 7 of the PLD contains several statutory defences to a product liability claim, these are set out below.

The defendant did not manufacture or distribute the product.

The defect which caused the damage did not exist at the time when the product was put into circulation.

The defect is due to compliance with a mandatory regulatory requirement. For this defence to be used, the defect must be caused by compliance with a specific regulatory requirement; mere compliance with all regulatory compliance obligations in relation to the device is not, in and of itself, a statutory defence. This differs from a claim in negligence, where these matters would be relevant in establishing a breach of duty of care. Nevertheless, the recent CJEU decision of DePuy did confirm (at paragraph 101) that regulatory compliance remains a useful factor for the defence to refer to in making out its case.

The state of scientific and technical knowledge at the time when the product was put into circulation was not such as to enable existence of the defect to be discovered (the so-called development risks or state of the art defence). Historically, this defence has proved the most controversial. Its scope and scope of application have been subject to much debate in litigation. In recent CJEU case law, it appears that its scope may be broadening, but it remains unclear whether it applies outside the narrow context in which it first arose (pharmaceuticals).

In respect of a component manufacturer’s liability, the defect of the product is attributable to the design or instructions of the product in which the component has been fitted.

Defences in other actions under national laws are developed nationally, but can include, for example, voluntary assumption of risk/consent, illegality and contributory negligence. 

Whether or not a product that is subject to strict requirements under EU safety regulations can be considered defective if it complies with those regulations remains a controversial point in the EU. As noted in 2.12 Defences to Product Liability Claims, it seems relatively clear that regulatory compliance will rarely be a complete defence and there is no concept of pre-emption in the EU in this context. However, it must still be the case that the requirements of product safety regulations are an important consideration when trying to assess what a person's legitimate expectations as to safety are for the purposes of liability under the PLD. This is an area ripe for further consideration in Europe.

Additionally, breach of regulatory obligations can give rise to its own liability, which can sometimes result in criminal sanctions (including fines and imprisonment) against individuals of defendant companies.

National laws of the jurisdiction in which product liability claims are brought will determine the relevant rules for payment of costs.

Applicable rules for litigation funding are those of the member state in which the product liability claim is brought.

Historically, collective redress mechanisms in the EU were governed at member state level. Since 2013, the European Commission had been calling for the use of such mechanisms by all member states, but not all countries had adopted this recommendation.

Currently, however, as part of the so-called New Deal for Consumers, an EU-wide mechanism is being considered for collective redress, which, if implemented, is likely to change the way in which product liability claims are brought across Europe, particularly for those countries that had not previously used a collective redress mechanism locally. (See 3.1 Trends in Product Liability and Product Safety Policy and 3.2 Future Policy in Product Liability and Product Safety).

Product liability law cases which interpret the PLD have historically been relatively infrequent in the EU.

However, recent case law from the CJEU in respect of the PLD has arisen in the context of medical device litigation in the EU. Two seminal recent cases include Boston Scientific Medizintechnik GmbH v AOK Sachsen-Anhalt Die Gesundheitskasse (C-503/13), in which the court considered the meaning of "defect" under the PLD, and N W v Sanofi Pasteur MSD SNC (C-621/15), in which the court considered the requirement for the claimant to prove a causal link under the PLD.

The Boston Scientific Case

The Boston Scientific case introduced the concept of "batch liability" by finding that a determination that a particular device was defective could, in certain circumstances, be extended to conclude that all suitably similar devices were similarly defective. In the case, the health insurer of a surgical group brought a claim against the manufacturer of implantable cardioverter defibrillators and pacemaker devices for the cost of replacement of devices with significantly elevated failure rates. The CJEU relied on the high failure rate to establish that any product in the group was defective, and that all costs associated with their replacement were therefore recoverable. The court stated that persons are entitled to expect "particularly high" safety requirements for the specific types of products in question because of the "particularly vulnerable situation” the implant creates. The court did not provide guidance as to the application of this principle outside these narrow factual circumstances, and in particular to other types of products.

The Sanofi Case

In the Sanofi case, the CJEU confirmed the broad tools that the claimant may employ in establishing causation under the PLD. The family of a deceased man alleged that a vaccine for hepatitis caused the multiple sclerosis which ultimately resulted in his death. French courts had previously allowed the claimant to establish causation under French law by "evidentiary presumptions" – ie, there was no pre-existing family history of the disease and the disease arose shortly after the vaccine was administered. In upholding the French court’s acceptance of the claimant’s causation evidence, notwithstanding a lack of scientific proof to establish a link between the vaccine and the disease, the CJEU stated that national courts have a wide discretion to determine what evidence a claimant can rely on to prove causation, as long as the evidential burden of proof is not reversed.

Although there is variance between member states, product liability risk is generally on the rise and the volume and complexity of litigation is increasing.

The EU product safety regime, itself, has recently undergone significant and comprehensive reform.

The Goods Package

First, there have been several initiatives introduced across the EU that are aimed at (i) further harmonising national approaches to enforcement of product safety laws, in light of widely divergent enforcement practices by national authorities, and (ii) re-emphasising the spirit of EU product safety legislation and its focus on free circulation within the single market, as based on the Treaty on the Functioning of the European Union that underpins EU law generally.

The "Goods Package", which involves two distinct Regulations, addresses the above-mentioned two core EU product safety law principles whilst seeking to achieve fairer market conditions for product suppliers operating in the EU, albeit with the increased risk of costs associated with compliance and of falling foul of enforcement powers.

Regulation 2019/515

The new Regulation 2019/515 on the mutual recognition of goods lawfully marketed in another member state seeks to improve upon the predecessor EU regime on mutual recognition. Mutual recognition allows a product, compliant with member-state specific product safety regimes, to be lawfully sold, without further action, in another member even where the full requirements of the second member state are not met. The new revised legislation has at its core the principle of mutual recognition, and introduces some new concepts to enhance the use of this principle. New initiatives include:

  • the existence of a voluntary “mutual recognition declaration”;
  • an assessment procedure for compliance of products;
  • a minimum level of reasoning that member state authorities must give when they restrict or deny market access;
  • an appeal mechanism for contesting decisions made by member state authorities; and
  • the establishment of “product contact points” in each member state, which provide free advice to business to assist in interpreting mutual recognition regulations. 

Regulation (EU) 2019/1020

The new Regulation (EU) 2019/1020 on market surveillance and compliance of products seeks to improve product compliance controls across the EU, and at its borders, by establishing rules for economic operators, enhancing market surveillance powers and better harmonising them, and providing a framework for the controls at the EU border. The new concepts introduced by the legislation include:

  • the requirement for a person responsible for compliance (analogous to the existing “responsible person” concept in cosmetics legislation) to be established in the EU before any product is placed on the market;
  • strengthened powers of national authorities to check compliance of products in their regions and a base level of harmonisation of enforcement powers available to authorities across Europe; and
  • the introduction of additional mechanisms for communication flow between market surveillance and custom authorities in respect of non-compliant products.

New Deal for Consumers

Second, there has been a focus on enhancing visibility, take-up and again on enforcement, this time in respect of rights of EU consumers, by introduction of the “New Deal for Consumers” legislative package. The package aims to strengthen consumer rights and authorities’ enforcement powers across the EU. Some of the existing legislation is set out below

Directive (EU) 2019/2161

The new Directive (EU) 2019/2161 on the better enforcement and modernisation of EU consumer protection rules. The Directive amends four key pieces of EU consumer protection legislation:

  • the Consumer Rights Directive (2011/83/EU);
  • the Unfair Contract Terms Directive (93/13/EEC);
  • the Unfair Commercial Practices Directive (2005/29/EC); and
  • the Price Indication Directive (98/6/EC).

The legislation, amongst other things:

  • requires national authorities to impose strong penalties in some instances of violations of EU consumer law;
  • seeks to harmonise the availability of relief for unfair commercial practices across the EU;
  • seeks to increase online transparency by mandating certain disclosures;
  • focuses on practices regarding dual quality products (that is products that have differing claims across the EU even though they are in substance identical); and
  • monitors price reduction claims.

Collective redress

A Directive on collective redress is currently proposed (see 3.2 Future Policy in Product Liability and Product Safety for further discussion).

Legislation Modernisation

Implicit to the above initiatives is the modernising of the legislation taking into account technological advances, which has been a well-worn theme in EU product safety legislative developments for several years now. Specific reform aimed at making older legislation "fit for purpose" in a modern world, the facilitation of interconnectedness and digital transformation across the Union and the targeting of online platforms and sales have also been the focus of EU policy-makers.

Directive (EU) 2019/771

Directive (EU) 2019/771 on certain aspects concerning contracts for the sale of goods, which repeals the existing Consumer Sales and Guarantees Directive 1999/44/EC (CSGD), is designed to enhance and harmonise European consumers’ contractual rights, which have historically been divergent across the EU, in respect of non-functional products and with a new focus on products with digital elements. Specifically, under the new regime for goods with digital elements, liability and the burden of proof remain with the seller for two years. The legislation is aimed at “levelling the playing field” to allow smaller business to operate alongside “e-commerce giants”.

Directive (EU) 2019/770

Directive (EU) 2019/770 on certain aspects concerning contracts for the supply of digital content and digital services establishes the first EU-wide regulatory regime for consumer rights in respect of the supply of digital content and services. The Directive covers a wide variety of digital media – including, for example, computer programs, apps, movies, streamed and downloaded music and movies and cloud services. The key aspects of the regime are:

  • a requirement for digital content/services to be fit for purpose;
  • the establishment of remedies for a lack of conformity of these products;
  • minimum legal guarantee period for goods; and
  • the requirement that businesses provide updates to consumers throughout the period of supply.

Regulation (EU) 2019/1020

The above-mentioned Regulation (EU) 2019/1020 on market surveillance and compliance of products, part of the new Goods Package will also necessarily have an impact on online sales.

Corporate Social Responsibility

Legislators have also looked at the impact of the product industry more broadly, focusing on and developing a set of laws that increase the consumer products industry’s social responsibility and social impact. Some of the major legislative initiatives in this area are set out below.

European Accessibility Act

The new Directive on Accessibility Requirements for Products and Services (also known as the European Accessibility Act (EAA)) is aimed at improving access to products and services for those with disabilities or other functional impairments, as part of the European Disability Strategy 2010-2020. The EEA establishes common accessibility requirements for the user interfaces of specific products and services (phones, computers, tablets, e-books, payment terminals, consumer banking, audio-visual media services and e-commerce).

Ecodesign Directive

A new regime, under the Ecodesign Directive (2009/125/EC), establishes EU-wide rules for certain energy-related products (refrigerators, dishwashers, washing machines and washer-dryers) and their repair, availability of spare parts and access to repair and maintenance information. Under these new laws:

  • manufacturers, importers and authorised representatives must make spare parts available for a minimum period of time after the product is placed on the EU market;
  • spare parts must be delivered in a certain time period;
  • manufactures must ensure spare parts can be replaced using commonly available tools; and
  • certain information must be made available to professional repairers and a list of the spare parts and the procedure for ordering them must be displayed on a free access website by the manufacturer, distributor or authorised representative.

Legislation to Be Implemented

Much of the new legislation discussed in 3.1 Trends in Product Liability and Product Safety Policy is yet to be implemented, such that its impact is still to be felt in full. The timeline for implementation of these many and varied legislative initiatives is set out below.

The legislation for the reform of the sale of goods legislation, namely Directive (EU) 2019/771 on certain aspects concerning contracts for the sale of goods, and also Directive (EU) 2019/770 on certain aspects concerning contracts for the supply of digital content and digital services, came into effect on 11 June 2019. Member states now have until 1 July 2021 to transpose these laws into national law. Member states have until 1 January 2022 to apply their local implementation of these legal requirements.

Directive (EU) 2019/2161 on the better enforcement and modernisation of Union consumer protection rules, one part of the Goods Package, came into force on 7 January 2020. The Directive must be implemented into national law by member states by 28 November 2021. That national legislation must have effect from 28 May 2022.

The initiatives under the Ecodesign Directive (2009/125/EC) were adopted on 1 October 2019 and will apply from 1 March 2021 (for most affected product groups).

Legislation Being Debated

There are also several further legislative initiatives still being finalised, and which are at varying stages in the legislative process, that are relevant to the initiatives discussed in 3.1 Trends in Product Liability and Product Safety Policy.

Representative actions

As part of the New Deal for Consumers a proposed Directive on representative action will allow certain consumer organisations (qualified entities) to bring a representative action seeking compensation, repair or replacement in respect of a defective product on behalf of a large class of consumers. Member states will decide whether such collective actions are opt-in or opt-out. The legislation currently proposes a "loser pay principle" whereby the losing party will be required to cover the cost of the winner. There is also discussion of further refining the distinction between domestic and EU-wide representative actions in further iterations of the document. Following debate over various aspects of the draft legislation (the Directive), including suggestions made by the European Parliament’s Committee on the International Market and Consumer Protection in 2019, the European Parliament adopted an amended version of the Directive, in late 2019. Currently, the Directive on representative actions remains under negotiation.

European Green Deal

In the spirit of corporate social responsibility, as noted in 3.1 Trends in Product Liability and Product Safety Policy, in respect of existing new legislative regimes, some proposed legislative initiatives focus on the circular economy and responsibility for products throughout their lifecycle. As part of its European Green Deal, which aims to develop a strategy of growth that does not contribute to climate change and environmental degradation, the European Commission adopted a new Circular Economy Action plan in early 2020. The Action Plan has initiatives which apply across the whole product lifecycle, with a view to making sustainable products the norm in the EU, ensuring less waste and leading the circular economy movement globally. The Plan focuses on high-risk sectors, including electronics, information technology products (ICT) and textiles in particular. Some key proposals include:

  • expansion of the range of products covered by the EU’s Ecodesign Directive (2009/124/EC);
  • extending the "right to repair";
  • developing eco-design measures for textiles;
  • legislating for common chargers to improve the durability of charging cables and discourage the purchase of multiple chargers;
  • introducing an EU-wide take back scheme for some products;
  • reviewing the EU Directive on hazardous substances in electrical and electronic equipment (2011/65/EU). following a recent public consultation on the topic; and
  • introducing a new regulatory framework for batteries that requires recycled content and the phasing out of non-rechargeable batteries

More broadly, under the European Green Deal, the EC has committed to becoming carbon neutral by 2050 and implementing the necessary changes to EU legislation to achieve this. In particular, it has foreshadowed revision of the Batteries Directive, or the introduction of a new regulation, which will include end-of-life and sustainability requirements; and evaluation of the Restriction of Hazardous Substances (RoHS) Directive (the consultation for this initiative has already taken place), looking at the effectiveness and efficiency of adopting substance restrictions as well as consistency with other legislation such as the REACH Regulation and Ecodesign Directive.

Digital regulation

As part of its general modernisation of EU legislation, and in particular under the “A Europe fit for the Digital Age” initiative, the EC has indicated it will undertake several actions imminently. These actions include:

  • reporting on internal market and cross-border e-commerce (geo-blocking) regulations, specifically the potential additional administrative and financial burden for traders stemming from different regulatory consumer contract law regimes;
  • evaluating if the Low Voltage Directive (LVD) is fit for purpose and/or needs amendments to improve its performance (following earlier public consultation); and
  • revising the Machinery Directive to, amongst other things:
    1. turn it into a Regulation;
    2. address risks stemming from new technologies while allowing for technical progress; and
    3. allow documents in digital formats, following an earlier public consultation on the Directive.

Potential Future Reform

Other specific reform is also on the horizon, with several ongoing product liability and safety policy initiatives having recently been announced or otherwise foreshadowed.

Blue Guide

The EU’s Blue Guide, a key resource on the application of EU product rules, may be revised following a consultation period held in January 2020 during which the European Commission sought stakeholder’s input on potential amendments. Specific proposals included addition of references to new EU product safety legislation, including, notably one of the pieces of legislation that forms part of the EU’s new Goods Package (EU’s Regulation 2019/1020, relating to compliance/enforcement) and better reflection of the digital age and circular economy concepts.

Software updates

The European Commission has been considering the introduction of new laws that deal with the propensity for software updates or new software to change the behaviour of connected devices in a way that alters their original compliance with product safety laws such as the Radio Equipment Directive (2014/53/EU). In this vein, the Commission recently closed its consultation that sought views from various stakeholders in respect of the introduction of a wide range of potential mechanisms (from no new measures to voluntary measures of self-regulation to ensure new software does not affected the original compliance of the device, mandatory laws, or a combination of voluntary and mandatory measures).

E-labelling

The potential introduction of e-labelling, which is an alternative method of indicating market compliance (including displaying this information online), in some sectors in the EU following a consultation on e-labelling of fragrance allergens in November 2019, is contemplated.

The coronavirus outbreak has had and continues to have an immense impact in the EU on all those who manufacture and supply products across multiple sectors and industries. The extent of the impact on industries is directly tied to their role in the fight against COVID-19 – some industries, specifically those in life sciences areas and personal protective equipment (PPE), are required to ramp up their production, whereas other companies in areas not directly relevant to the fight against COVID-19 are having to try and maintain the normality of their everyday operations in the very unusual circumstances they find themselves in. Other companies, whether driven by economic incentive or because of social impact, or a combination of both, are pivoting their product lines to products that are directly relevant to COVID-19 efforts. 

Regulators have responded according to the impact on their areas of regulation, in considering the ongoing application of ordinary product safety and liability laws in these extraordinary circumstances. All actions that have been taken, both by regulators and companies alike, have been taken under extreme time pressures.

National regulators in the EU have been most active in providing guidance or exemptions in respect of the COVID-19 pandemic, based on their roles as enforcers of EU-derived product safety laws and the fact that, because the circumstances of the crisis are specific to each individual country, the regulatory response should be reflective of the on-the-ground situation. In terms of assisting those pivoting to, or increasing production of, products directly relevant to the fight against COVID-19, such measures have included:

  • granting of special exemptions or derogations from usually applicable product safety laws;
  • shortening usually applicable timeframes for certain regulatory processes, including for authorisations and approvals;
  • setting up dedicated helplines or teams to assist with queries; and
  • producing guidance to assist navigation of complex regulatory pathways, particularly for those not familiar with them.

Regulators have also issued guidance in assisting companies to continue with everyday operations as best as possible in light of travel and workplace restrictions caused by COVID-19.

The EC has also taken a wide range of measures, but these, based on the EC’s role as overseer of the EU product safety system rather than direct enforcer, have necessarily been more focused on the issuance of guidance on complex regulatory pathways. Several technical standards, which are a well-recognised way in which companies can show the compliance of their products in benefiting from the presumption of conformity, have also been made freely available at no cost, in conjunction with relevant technical standards bodies. The EC has also encouraged national authorities, in some circumstances, to be more flexible in applying any discretion they have to allow products that have not met full compliance requirements to be marketed.

The significant legislative reform currently being undertaken on product laws in the EU has also been impacted by the crisis – with delay of several new initiatives, such as the new medical devices legislation and the collective redress initiative. Other reforms have received greater focus, particularly those relating to the revised sale of good legislation that focuses more on online sales and sellers. These are being heralded as the way forward (or a “tool to exit” the crisis by the EC) for product safety laws in the EU given the new world in which we find ourselves.

In terms of product liability, very few proactive measures have been taken by relevant bodies across Europe. Some governments have taken the unprecedented step of extending indemnities to manufacturers of certain devices where there is an urgent unmet need for products in the critical medical care of COVID-19 patients.

The future impact of the crisis on product safety and liability laws remains to be seen. The COVID-19 context is likely to be highly relevant to any future liability claims, particularly under the PLD, given the central importance of factual circumstances to a determination of liability. Reliance on derogations and exemptions, and the cessation of those derogations while products are still in circulation, will also introduce interesting issues. Some of the new methods of working trialled during the COVID-19 pandemic may also carry into new long-term practices in the EU.

Cooley LLP

Dashwood
69 Old Broad Street
London
EC2M 1QS, UK

+44 (0) 20 7556 4429

rfreeman@cooley.com www.cooley.com
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Trends and Developments


Authors



Cooley LLP has over a thousand lawyers, with 16 offices across Europe, the US and Asia. Its international product liability and safety team has market-leading experience in managing regulatory investigations, litigation, product recalls, risk assessments and international compliance in complex, fast-moving and highly regulated industries including life sciences, cosmetics and consumer products.

EU product safety and product liability laws are undergoing significant change currently. 3 Recent Policy Changes and Outlook of the EU Law & Practice article in this guide provides a detailed overview of a large number of legislative reforms that are currently being undertaken at an EU-level and that are set to change the legal framework currently applicable to products.

Related to, or on top of the themes that underpin this legislative reform, there are also several high-level themes that have emerged in the past year in respect of product safety and product liability in the EU, as set out below.

Product Safety

Convergence of product safety laws

In recent years new product safety laws have increasingly brought together previously separate legal concepts in an unprecedented way. Whilst the notion of EU sector-specific regimes applying in parallel, and the GPSD applying in the absence of more specific provisions, still applies; recent product safety laws have increasingly introduced new concepts borrowed from other sectors within products law, or otherwise from completely separate legal areas. 

For example, there has been an increasing focus on classifying cybersecurity and data privacy as part of the traditional concept of product safety. In particular, this notion has been well documented and considered in the context of medical devices, where the notion of cybersecurity is well-established as being a safety aspect of such devices.

Otherwise, newer legislation is borrowing from legislation from other sectors, including the use of food contact materials principles in respect of cosmetics packaging and the introduction of the “qualified person” concept, analogous to the pre-existing responsible person concept within cosmetics legislation, in new enforcement/compliance initiatives. There has also been the importation of several environmental law concepts into the legislation around the circular economy and waste laws

The application of regimes has also seen an increase in the intersection of laws. The toy safety regime, for example, is considered by authorities to be increasingly applicable to general consumer products because of marketing and the introduction of new features

Divergence of local practices for implementation and enforcement

Whilst the laws underpinning product safety are increasingly converging, as discussed above, the implementation of those laws or local practices with regard to enforcement are, on the contrary, growing increasingly disparate.

The EU system has, at its core, the aim of a high degree of harmonisation. This is intended to allow a European-wide approach for companies, both in respect of marketing and also in respect of obligations for corrective actions and reports to the authorities. Increasingly, however, national member states seem to be developing their own mechanisms and preferences for reporting outside the European Commission’s "Safety Gate" system (formerly known as RAPEX). This can introduce significant problems for international companies that are attempting to rely on the Safety Gate system, in the way intended, to discharge legal obligations across Europe.

The very different approaches to enforcement by national authorities across Europe have been well recognised and are one of the driving forces behind several recent reform initiatives that aim at streamlining enforcement activities of authorities.

Increased focus on enforcement

Overall, authorities across Europe have been quicker and more willing to impose sanctions, both monetary and criminal, in respect of non-compliance with product safety laws.

This trend is thought to reflect recent changes to legislation that have broadened, strengthened and streamlined the powers of market surveillance authorities across Europe. This is the case even where such legislation has yet to have full effect. It is therefore likely there will be an even more pronounced increase in enforcement activity following the application of those pieces of legislation that expressly encourage and, in some instances, require it.

The increased transparency of enforcement practices across Europe, as introduced by the new laws, is also likely to result in increased enforcement activity. This might particularly be the case where national regulators look to emulate, or at times better, the enforcement actions taken against some companies.

Brexit

Whilst Brexit has and will have, no doubt, the most significant impact on the UK, which officially left the EU on 31 January 2020, as it will be required to draft and implement its own versions of EU laws after the EU law ceases to apply to the UK after 31 December 2020, the EU is also impacted significantly.

Europe must now adapt to the new status quo. Products which are marketed in the EU only will continue to have the usual laws apply, including a requirement for an EU CE mark and an EU entity responsible for compliance. If businesses who are in the EU wish to market their products in the UK there will be a requirement to comply with separate UK laws, as the UK is now treated as third country for the purposes of EU product safety laws. Different sectors will be treated differently based on the nature of the transition and any unique issues that might arise. For example, the cosmetics regime has unique concepts that are likely to make it more difficult to transition.

The UK’s presence, in respect of future law making and implementation, as a well-recognised leader in product safety issues, may well impact the future direction of EU legislation and implementation.

Corporate social responsibility

Over recent years the EC has particularly focused on the broader impact of the consumer products industry on Europe. In that vein, it has introduced or further refined several pieces of legislation, including in respect of the use of conflict minerals, environmental considerations for product manufacture and new accessibility requirements for devices to allow all consumers to use products freely.

The two pillars of focus, the "Circular Economy" and "Green Europe", are likely to continue to form key drivers for legislative reform and enforcement for several years. 

Online focus

Several key pieces of new legislation that have been introduced either expressly or implicitly impact online platforms and sellers as well as distance-selling mechanisms. Where online sellers might previously have been able to make an argument that any sales to EU consumers were incidental (in respect of consumers using websites intended for other markets), the new revised sale of goods regime, when implemented, will remove this argument such that online sellers and platforms will need to give more thought to how they will comply with EU requirements if EU consumers are purchasing their products.

Product Liability

Collective redress

Legislation attempting to harmonise and increase uptake of a bona fide collective redress regime in the EU is well underway. The implementation of this legislation will likely significantly change the ways product liability matters are litigated in Europe, particularly in countries where collective redress was not a common or existing mechanism that consumers were able to use. Given that the proposed legislation allows both cross-border and domestic collective redress, the size and complexity of litigation in the EU is likely to significantly increase in years to come.

Continued efforts to modernise

Given the age of the legislation that governs product liability law in Europe (the Product Liability Directive 85/374/EEC or PLD), created in the 1980s, there have been frequent and ongoing inquiries into whether the legislation remains fit for purpose in the modern, technological world.

For some time, “soft law” guidance has been foreshadowed, in favour of redrafting of the legislation, to assist companies to understand how to navigate the PLD in the context of newer and more modern products.

Products manufactured and supplied during COVID-19 pandemic

Regulatory exemptions and novel regulatory pathways, or otherwise expedited existing pathways, have all been relied upon to bring many products to market under urgent time pressure because those products were required for the fight against COVID-19. This type of regulatory process may be retained in the future to change the way products law is regulated in the EU.

The impact on the PLD regime and the product liability regime remains to be seen; however, it is likely that there will be significant litigation following the pandemic in respect of products that were produced during this time. Given the relatively small amount of litigated cases in respect of product liability at the EU-court level (CJEU), the complex issues introduced by the pandemic might see more cases reach the EU courts.

Defences

The COVID-19 context is undeniably relevant to any future PLD claims, and is likely to be deployed defending against arguments that products are defective. The definition of defect under the PLD necessarily requires consideration of the factual context, such as COVID-19, as below (Article 6, PLD ):

A product is defective when it does not provide the safety which a person is entitled to expect, taking all circumstances into account, including:

  • the presentation of the product;
  • the use to which it could reasonably be expected that the product would be put; and
  • the time when the product was put into circulation. (Article 6, PLD (emphasis added)).

Some of the circumstances that might be argued to be relevant to the matter are set out below.

Time

In that the product was produced during extraordinary times that were vastly different from usual production times.

Use

In that there is great social utility and public interest surrounding the products.

Presentation

If the product is marked as being relevant for specific and limited circulation (ie, during COVID-19 crisis, although reference to treatment of viruses can trigger the application of the medicines regime so should be carefully considered)

Regulatory guidance

The existence of regulator-issued guidance documents, some of which expressly state that they indicate "minimally acceptable performance" requirements for certain products, makes it arguable that products manufactured in adherence to these guidelines should benefit from a presumption that they meet consumer’s expectations of safety. Adherence to these guidelines could also make allegations of a breach of care in negligence claims more difficult to establish.

The above factors could be deployed in argument one of two ways in respect of consumer’s reasonable expectations as to safety during the COVID-19 crisis. On the one hand, it is arguable consumers would appreciate the unique and difficult circumstances of production such that their expectations for safety are lowered. On the other, and potentially more plausibly, given the life-saving nature of many of the devices in question, consumer expectations might in fact be heightened during the pandemic and in respect of products manufactured and supplied at a time of need. Differences are likely to arise amongst member states based on the way the pandemic was handled in their countries.

The causation aspect of a product liability claim is even more difficult to establish in the context of COVID-19, based on the multi-faceted nature of disease contraction, the likelihood of several intervening events that could likely be pointed to and the high likelihood of contraction of disease without any intervention.

Defences that are likely to be deployed under the PLD include:

  • regulatory compliance, including reliance on any express derogations/flexibilities or exemptions from usual requirements as granted by national authorities;
  • mandatory compliance with regulations, in particular following prescriptive guidelines that have been produced by the European Commission, which provide a comprehensive roadmap for complex regulatory regimes to help manufacturers quickly bring their products to market; and
  • the development risk defence, based on the ever-changing science underlying knowledge of disease prevention.

Notified bodies and third-party retailers, particularly those that have in recent times been removing products from original packaging to sell separately to allow more consumers to benefit from the products, will likely be brought into many actions. It is possible the behaviour of regulatory authorities overseeing the production and supply of products will be further questioned if issues arise from the adherence to their guidelines.

Cooley LLP

Dashwood
69 Old Broad Street
London
EC2M 1QS, UK

+44 (0) 20 7556 4429

rfreeman@cooley.com www.cooley.com
Author Business Card

Law and Practice

Authors



Cooley LLP has over a thousand lawyers, with 16 offices across Europe, the US and Asia. Its international product liability and safety team has market-leading experience in managing regulatory investigations, litigation, product recalls, risk assessments and international compliance in complex, fast-moving and highly regulated industries including life sciences, cosmetics and consumer products.

Trends and Development

Authors



Cooley LLP has over a thousand lawyers, with 16 offices across Europe, the US and Asia. Its international product liability and safety team has market-leading experience in managing regulatory investigations, litigation, product recalls, risk assessments and international compliance in complex, fast-moving and highly regulated industries including life sciences, cosmetics and consumer products.

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