The EU is currently overhauling its product liability laws. Prompted by the perceived risks of new technologies and a desire to make it easier for claimants to bring claims for medical device and pharmaceutical claims, the changes represent a major shift in the litigation landscape in the EU. They will have a profound effect for life sciences companies, especially when taken together with the EU’s new class actions mechanisms. As a result, businesses need to prepare for an increase in the already growing trend of EU consumer claims against life sciences manufacturers and suppliers.
This blog provides an overview of the proposed revisions to the EU’s Product Liability Directive 85/374/EEC (“PLD“). It also considers how these changes will sit alongside new laws on the liability of AI systems (which we have previously blogged about here) and new class action mechanism (see our blog here).
Revision of the PLD
The PLD establishes a strict liability framework for defective products across the EU. As claimants do not need to establish fault to claim successfully, it is the preferred way of making product liability claims in Europe – particularly in the life sciences sector. For example, in the last two decades the PLD has been used to bring claims in landmark EU litigation for breast implants, vaccines, pacemakers and metal-on-metal hips, amongst others.
The PLD dates back to 1985 and has not been amended substantially for over 20 years. The revisions that have now been put forward are radical and include proposals to:
- extend the scope of claims that can be brought;
- expand the range of damages that can be recovered; and
- make it easier for consumers to prove their case.
Taken together, these changes have the potential to bring about a fundamental shift in the European risk landscape for manufacturers and suppliers of medical devices, pharmaceuticals, health-tracking software and other products.
We believe there is a real risk that these changes will upset the tried and tested balance that the PLD has struck for over 35 years, leading to a lack of certainty and instability which will be detrimental for EU businesses and consumers. For more details, you can review our feedback to the European Commission (here).
Key changes
There are a number of important changes proposed for life sciences companies selling products to consumers in the EU, including as follows.
- Expansion of the definition of product “ the definition of a “product” would be expanded to include software and certain related digital services. Certain types of software are subject to regulation in the EU already under the Medical Devices Regulation and In Vitro Diagnostic Medical Devices Regulation (where they have a specific medical purpose). However, to date, standalone software has been out of scope of the PLD. If the proposed changes are agreed, software would be in scope whether embedded in a device or placed on the market as a digital product in its own right and irrespective of the purpose of the software or the mode of supply and usage (e.g. stored on a device or accessed through cloud technologies). As a result, companies developing, for example, health-tracking apps designed to diagnose or treat specific conditions, should be prepared for claims to be brought under the revised PLD for the first time.
- Expansion of the definition of defect “defect” will also be broadened to include cybersecurity/connectivity risks and software updates (or lack of software updates). There will be strict liability for these defects. In our view, the proposal to include lack of software updates as the basis for establishing a defect is particularly problematic.
The proposal includes explicit reference to compliance with EU product safety rules and product recalls as a factor for determining where there is a defect. Where a product does not comply with mandatory safety requirements under EU or national laws intended to protect against the risk of damage that has occurred, the defectiveness of the product would be presumed. Where field safety corrective action has been taken, defect would not be presumed, but this would be a relevant factor for determining whether there is a defect with a device.
- Availability of damages – the scope of damages will be expanded to include data loss or corruption and “medically-recognised harm to psychological health”.
In our view, expanding the scope of damages to cover data loss and corruption, when combined with other amendments (e.g. expanding defect to include cybersecurity risks and software updates, or lack of updates) will create a significant increase in the risk of trivial data loss or corruption claims following, for example, cybersecurity incidents or bugs in software updates. These create a particular risk of class actions, following the introduction of the new EU class actions mechanism (see below) and could have a profound impact for EU businesses and a chilling effect of the development of software in the EU, as the total compensation sought by a large collection of small claims could be astronomical.
There is no definition of “medically-recognised harm to psychological health” included in the proposal and it is currently very unclear what this term means, and what would be in scope. Indeed, as drafted, there is potential for it to capture a very broad range of issues. For example, if a person sees a doctor for anxiety or sleep issues and the doctor makes a note in the patient’s file recording these symptoms, it would be open to a claimant to argue that they are then “medically recognised”.
- Reducing the threshold for claims “ there are various amendments designed to make it easier for consumer to bring claims, including removing the minimum €500 threshold for damage to property and extending the long-stop provision from 10 to 15 years in certain cases of latent harm, where the symptoms of personal injury are slow to emerge (e.g. in claims involving exposure to certain chemicals/toxic substances over a prolonged period of time, such as asbestosis).
- Disclosure of technical documentation “the proposal introduces broad-ranging powers for courts to order that a defendant disclose certain technical documents upon the claimant establishing a plausible case. There is a risk that disclosure could be used by claimants in so-called “fishing expeditions” (i.e. spuriously, in the hope that it might turn up something that could help put together a claim). To seek disclosure of documents, a claimant only needs to show facts and evidence sufficient to support the plausibility of the claim. We consider that this is too low. At the same time, the potential scope of information that can be obtained is too wide and, in our view, should be limited to documents that are relevant to the claimant’s case, not all relevant documents at its disposal, as drafted. Life sciences companies should be aware that failing to disclose the required technical information can lead to a presumption of defectiveness. Moreover, there is no reciprocal right for defendants to obtain, for example, claimants’ medical records.
- Reducing the burden of proof for certain claims – for “scientific or technically complex cases” where it would be difficult for the claimant to prove liability (the Commission’s Q&A specifically highlights cases involving pharmaceuticals or AI), or an obvious malfunction, the burden of proof will be eased. This will allow a court to presume that defect has been established if the claimant can show that the product contributed to the damage and that it was the likely cause of it. For life sciences, this reduction in the burden of proof is likely to have a significant impact as EU product liability claims for medical devices and pharmaceuticals most frequently fail on grounds of causation.
Timing
A 12-month transition period has been proposed with the new rules applying to products placed on the market after that date. In practice, this means that the new provisions could enter into force as soon as late 2023 or early 2024 and could apply to products placed on the EU market from 2024 – 2025. It is important that manufacturers and suppliers of products are aware of these new risks, and take steps to review their existing insurance, contractual and claims handling processes, in light of the expanded scope of potential claims that will be brought.
Interaction with the proposal for the new AI Liability Directive
Alongside the proposed revision to the PLD described above, the Commission has also recently published its proposal for a new AI Liability Directive (“AILD“) (which we have previously blogged about here). This proposal works in tandem with both the PLD and a new regime to regulate AI technologies in the EU (the AI Act). This will be relevant for many life sciences companies whose products incorporate AI technology.
The Commission has announced that it considers consumers currently face challenges in obtaining compensation for damages caused by AI systems, making it necessary to reform the claims landscape in this area. The proposed AILD would amend the laws of EU Member states to make it easier to bring claims for defective products under national fault-based liability laws (e.g. tort).
Relationship with new EU representative action laws
Upcoming EU representative actions laws are set to apply from June 2023, which will allow consumer groups to launch class actions. These new laws need to be kept in mind in the context of the proposed PLD and AILD reforms. They represent a major overhaul of the European class actions landscape – introducing mechanisms for group litigation in every one of the EU’s 27 Member States, alongside a new cross-border mechanism for bringing class actions in multiple EU countries at the same time. The new rules are specifically designed to enable groups of consumers, through representative agencies, to bring claims against companies on a large scale. Consumer groups can seek injunctions, damages and/or redress for breach of a wide range of EU laws – in total, 66 pieces of EU legislation covering product liability, AI, medical devices, in vitro diagnostic medical devices and medicinal products, amongst many others.
Where to find out more
- A copy of the European Commission’s legislative proposal to revise the PLD can be found here
- A copy of the European Commission’s legislative proposal for the AILD can be found here
- More information about the EU’s class actions mechanisms can be found here
Contributors