New Product liability regime in the European Union
The Swiss Federal Product Liability Act (“PLA”) closely mirrors the EU Product Liability Directive established in 1985. On 10 October 2024, the European Council adopted an extensively revised new Product Liability Directive (“PLD”), which was published on 18 November 2024 and entered into force on 9 December 2024. According to the EU Commission, the new PLD aims to promote robust consumer protection, a level plying level field for competition, and legal certainty for all enterprises, while simultaneously mitigating substantial costs and risks for small and medium-sized enterprises (SMEs) and start-ups. The new PLD is part of the legislative framework that establishes a unified regulatory structure at the EU level concerning artificial intelligence, commencing with the AI regulation adopted earlier in 2024.
The revised PLD is based on a proposal from the EU Commission dated 2 September 2022. Already at that time, it was evident that the PLD dated from the 1980’s required complete revision due to the EU Commission’s identification of substantial deficiencies. For instance, the applicability of longstanding definitions and concepts to contemporary digital economy products, including software, smart devices, and autonomous vehicles, was problematic. Moreover, the burden of proof concerning the existence of a defect and its causal relationship to the incurred damage presents a challenge for injured parties, particularly in relation to pharmaceutical, smart, or AI-based products. The EU Commission also criticised the old PLD for significantly limiting the ability to seek damages since it does not allow the compensation for property damage valued at less than EUR 500. The weaknesses of the old PLD with regard to new digital technologies were set out in the European Commission White Paper on Artificial Intelligence – A European approach to excellence and trust, COM(2020)65 final of 19 February 2020, in the Report of the European Commission on the safety and liability implications of artificial intelligence, the internet of things and robotics (COM(2020) 64 final, 2020) as well as in the Report of the Expert Group on liability for artificial intelligence and other emerging digital technologies published in 2019.
Companies marketing products to individuals for non-professional use must consider that, according to the new PLD, a defective product now encompasses both tangible and intangible goods. Thus, the definition of “product” is expanded to encompass software (operating systems and applications, including those with integrated AI systems), whether embedded in a device or accessible via the cloud and thereby enlarging the PLD’s scope. However, the definition of a “defective product” was preserved, signifying a product that is unsafe when it does not offer the safety that a person is entitled to expect. In evaluating defectiveness, the following factors will be considered: presentation, labelling, design, technical specifications, composition, packaging, assembly instructions, installation, usage, maintenance, reasonably foreseeable product use, and the effect on the product of any ability to continue learning.
Furthermore, the parties that might be liable for defective products has been broadened. According to the new PLD, the entities encompass the manufacturer (developer or producer of a product), distributor, importer, authorised representative, and the provider of remote order processing services (online platforms that sell defective products, provided they act as distributors and economic operators rather than intermediaries). If these are not situated within the EU, the importer established in the EU or the authorised representative shall be considered liable. In the absence of any, the logistics service provider shall be considered liable.
The burden of proof was also revised: Under the new PLD regime, the injured party may compel the manufacturer to furnish proof of the product’s defective characteristics, adhering to the principles of necessity and proportionality. During the proceedings, the courts must ensure the protection of confidential information and trade secrets. If the manufacturer declines to provide the required documentation, it will result in an assumption of defect when the product fails to meet the mandatory safety standards set by national or European regulations, or when damage arises from an obvious malfunction of the product during normal or anticipated use. Similarly, due to the potential complexity in establishing a causal link, the presumption of such a link is also introduced. The presumption will occur when, owing to the technical or scientific complexity of the product, the injured party encounters substantial challenges in establishing its defectiveness and shows that the product is likely defective (e.g., elucidation of an AI system’s internal mechanisms) or that a causal relationship exists (e.g., the connection between a pharmaceutical or food product and the emergence of a disease).
Legal action for damages is limited to three years, with an additional 25-year extension beyond the standard 10 years for claimants whose bodily injury symptoms manifest gradually. Substantially modified products are regarded as new products, thus initiating a new limitation period upon modification. The EU Member States shall bring the new PLD into force by 9 December 2026. The old PLD shall be repealed at the same date.
As mentioned above, Switzerland has previously adopted the old PLD alongside the PLA nearly verbatim, thus it appears evident that Switzerland might similarly adopt the new PLD. However, the actual occurrence of this remains uncertain and currently, there is no indication of an inticipated revision of the PLA. Regardless of this, Swiss companies should ascertain whether they or their EU subsidiaries are subject to the new PLD and whether their business partners, online platforms, or distributors might pursue to recourse claims.