ByteSize: The new EU Product Liability Directive and its application to AI, software and connected products

What is the purpose of this legislation?

The EU Product Liability Directive 2022/0302 (COD) (“PLD”) creates a framework for the compensation of individuals that suffer damage caused by unsafe products.

The new PLD updates the 1985 Product Liability Directive (85/374/EEC) to reflect the pace of technological development in products (e.g. the proliferation of connectable products and products that use AI).

When does the new PLD come into force?

The European Parliament formally endorsed the new PLD during its March 2024 Plenary. The PLD will now have to be approved by the European Council. The new rules will apply to products placed on the market 24 months after the PLD is published and comes into force.  

What is the position under UK law?

To date, the UK Government has not made any movement towards adopting similar updates to Part 1 of the Consumer Protection Act 1987. Following the general election on 4 July 2024, this position may change. In any event, consumer products which are supplied by UK businesses into EU member states (whether directly or otherwise) will have to comply with the EU member states’ legislations implementing the PLD. 

Who does the PLD apply to?

Manufacturers are the primary target of claims under the PLD.

• Manufacturers are any persons who:
  • develop, manufacture or produce a product; or
  • have a product designed or manufactured, or who, by putting their name, trademark or distinguishing features on that product, present themselves as its manufacturer; or
  • develop, manufacture or produce a product for their own use.

Manufacturers of products or components which are defective (i.e. do not provide the level of safety that the public are entitled to expect) are strictly liable for resulting injuries (physical or psychological) or damage to property other than the product itself and property used exclusively for professional purposes. The developer or producer of software, including AI system providers are to be treated as a manufacturer.

Where the manufacturer is based outside the EU, the importer of the product or the authorised representative of the manufacturer can be held liable for damage caused by a defective product.

• Importers are any persons who places a product from a third country on the Union market.
• Authorised representatives are persons based in the EU and appointed by a manufacturer in writing to act on its behalf in relation to specified tasks.

In limited circumstances distributors, fulfilment service providers or providers of online platforms can also be held liable.

What are the key changes in the PLD?

• The definition of ‘product’ now includes software, as well as AI systems and AI-enabled goods. The PLD captures software that is standalone or embedded, stored on a device, accessed through a communication network or cloud technologies or supplied through a software-as-a-service model. Free and open-source software supplied or developed outside a commercial activity is not captured by the PLD.

• The criteria relevant to a ‘defect’ (i.e. a failure to provide the safety which the public is entitled to expect) are expanded to include, amongst other factors:
  • The effect on the product of its ability to continue to learn or acquire new features after being placed on the market (e.g. machine learning systems);
  • The reasonably foreseeable effect of the product on other products which can be expected to be used with it, including by interconnection;
  • Safety-relevant cybersecurity requirements; and
  • The specific needs of groups of intended users of the product.

• The critical time for assessment of defectiveness now includes: (i) the moment at which a product was put into service; and (ii) where the manufacturer retains control of the product, the moment at which the product left the manufacturer’s control (which is highly relevant to products capable of receiving security updates and products that utilise machine learning).

• Potential liability for online platform providers, providers of fulfilment services and re-furbishers where the manufacturer, authorised representative or another supplier of the product cannot be identified.

• A new obligation on Defendants to disclose relevant evidence in proceedings where a Claimant has presented evidence and facts sufficient for a plausible claim. This obligation exceeds existing disclosure obligations under (for example) German law.

• A reduced evidential burden on Claimants alleging that a defective product has caused them harm. In specific circumstances (for instance, where a Defendant has not complied with its obligation to disclose relevant evidence), the PLD creates a rebuttable presumption that the product is defective, shifting the burden of proof to the Defendant.

• The maximum limitation period is extended to 25 years from when the product is placed on the market where there is a delay in symptoms of an injury emerging.

• The liability of economic operators for claims under the new PLD cannot be limited by contractual provisions or by national law.

Key takeaways

Businesses supplying software, AI systems and AI-enabled goods in or into the EU will now have to analyse the risk of claims against them or in respect of their products under the new PLD.

All businesses that supply products in or to the EU should revisit and refresh their strategy for mitigating the risk of litigation arising from the new PLD, including:

• ensuring their products are accompanied by clear instructions for their intended use and the level of risk to be expected in the reasonable use of that product;

• analysis of the reasonably foreseeable effect of their products on other products commonly used in conjunction with them (e.g. connected by a local area network);

• maintenance of a file of evidence likely to be required to support the safety of their products, as disclosure of this may be required in the course of litigation;

• reviewing whether insurance cover should be extended; and

• considering whether and how existing contractual arrangements apportion liability within their supply chain.