Opinion of the Economic and Social Committee on the "Green paper - Liability for defective products"

(2000/C 117/01)

On 30 July 1999, the Commission decided to consult the Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the "Green paper - Liability for defective products".

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 15 February 2000. The rapporteur was Mr Vever.

At its 370th plenary session on 1 and 2 March 2000 (meeting of 1 March), the Economic and Social Committee adopted the following opinion by 97 votes to 1, with 2 abstentions.

1. Introduction

1.1. The Green Paper on liability for defective products, issued by the Commission in July 1999, provides the first real opportunity to assess the implementation of Directive 85/374/EEC(1) in the European Union. This was not possible at the time of the last Commission report, published in May 1995, owing to delays in transposition of the directive in the Member States.

1.2. The Economic and Social Committee hosted a hearing on the Green Paper in Brussels on 22 November 1999, in order to listen to the experiences and viewpoints of socio-occupational organisations, companies and consumers' associations. This Committee opinion is broadly based on the discussions that took place at that hearing.

1.3. Currently, the three main issues are:

- evaluation of the implementation of the 1985 directive,

- possibilities for its revision,

- how to improve monitoring and prevention.

2. Comments on the implementation of the 1985 directive

2.1. The 1985 directive was designed to establish a European model that would be applicable in all the Member States. The model relies on a balance between consumers and producers, which, as the Commission stresses, needs to be preserved. This European scheme is based on six principles:

- objective liability, no need to prove fault;

- liability linked to a cause, requiring proof of the defect and the damage;

- legal liability, that cannot be waived at the wish of the parties;

- relative liability, giving the producer exemption from liability in a certain number of explicitly listed cases;

- liability affecting first and foremost the producer or otherwise the supplier or importer by default;

- liability limited in time, with a time limit fixed at 10 years from the date on which the product was put into circulation.

2.2. The 1985 directive has gradually been implemented not only in the 15 Member States, but also in other non-EU European countries (the applicant countries, Switzerland and Norway). In view of the balance it offers the various parties concerned, the directive's provisions have also inspired liability schemes in third countries such as Japan, where this approach has been given preference over the US system.

2.3. However, there were delays in implementing the 1985 directive within the EU, owing to slow transposition in certain Member States. As a result, there has been very little time to monitor the current situation. Furthermore, it would appear that judges, lawyers and other interested parties are not always very familiar with the directive; steps must be taken to remedy this situation.

2.4. Although the directive has contributed to the upward harmonisation of national liability systems, court cases and judgements are founded first and foremost on national provisions, which are sometimes considerably more stringent than those in the directive. The directive does not preclude more stringent national provisions, and the victim of damage may invoke a national contractual or non-contractual liability law or a special liability system. In most of the Member States, victims can even obtain compensation for corporal damage via the social security system.

2.5. The overall cost/benefit balance established by the directive was designed to reconcile the interests of consumer protection, business competitiveness, motivation to innovate and liability. Improved product quality and the desire to prevent damage meant that it was possible to define damage and liability within fairly narrow parameters. It is becoming more and more common for companies to withdraw allegedly defective products or series, or, if a specific component of a complex product is at fault, in the case of motor vehicles for instance, to call products back for checks and corrective action. Awareness and prevention campaigns have also been launched to good effect by the European Union; the Ehlass programme, for instance, addresses accidents in the home. Furthermore, most cases are apparently settled out of court, inter alia by mutually agreed compensation.

2.6. Although it is difficult to assess the exact impact of the directive on the European internal market, it seems to have been positive overall, inasmuch as it offers greater security by drawing together a common core of principles and evaluation methods for liability. Furthermore, the divergent situations that exist owing to specific national provisions being based on other liability systems, covered by either contract or tort law, do not appear as yet to have had a negative effect on trade.

3. Comments on a possible revision of the directive

3.1. The potential revision of the 1985 directive raises a number of prior concerns which demand attention.

3.1.1. As mentioned above, given the short time since the directive was transposed in all the Member States, there is not yet enough information to provide a clear overall picture of how it has been implemented, the problems raised by genuinely important cases and any shortcomings in the common system; the simultaneous existence of divergent national provisions that go further than the common rules is another factor here.

3.1.2. This lack of visibility hampers a reasoned analysis of any areas potentially requiring revision with a view to assessing and reconciling the viewpoints of the parties concerned.

3.1.3. Any revision must therefore be approached with the utmost care in order to avoid upsetting the balances that the directive has sought to achieve and to provide sufficient perspective, while accommodating changes in the field.

3.2. In the Committee's view, the necessary conditions for this process include:

- drawing from a more in-depth study of the current situation and the changes afoot;

- maintaining an overall balance between the concerns of the interested parties, which is critical for the general good;

- ensuring that the single market operates properly and that enlargement-related requirements are met;

- defining the respective roles of law-makers and the economic players, especially regarding prevention (voluntary and contractual approaches).

The specific comments below must be viewed in the context of these preconditions.

3.3. As regards the exclusiveness of the directive, it would seem preferable during the current monitoring phase to maintain the common European scheme, set up under the directive in tandem with national provisions, which may where necessary be more stringent. A European framework for these national provisions is an option as a means of preventing further disparities, but a more detailed study of the impact of disparities would be required. It must not, under any circumstances, upset the balance achieved by the directive.

3.4. Regarding the burden of proof, the directive relieves victims of damage from the need to prove the manufacturer's fault, but it obliges them to demonstrate a causal link between the damage and the product defect. In the Committee's view this arrangement is balanced on the whole.

3.4.1. The causal link is a vital element in liability without fault arrangements. It is a key part of the balance achieved by the European directive and, as such, must be preserved in the interests of all the parties concerned.

3.4.2. This balance and the legal concept that underlies it are not compatible with the alternative "market share liability"-type scheme introduced by the US courts for certain cases. There are no grounds for introducing such arrangements in the European context insofar as the 1985 directive gives the plaintiff legal assurance that liability will always be apportioned. On the contrary, this type of scheme would fracture the very concept of liability, by distorting competition between companies in accordance with market share. It would make insurance schemes difficult to apply under strict conditions, and would be a major disincentive to individual responsibility and preventative action in companies, which is more critical than ever and should be promoted accordingly.

3.4.3. Companies should be encouraged to apply, on a voluntary basis, the criteria of transparency, availability and attentiveness to the views of the plaintiffs. Efforts should also be made to make it easier for victims of damage to prove their case.

3.5. The development risk exemption clause has been adopted by 10 of the 15 Member States. A case of this nature has yet to arise in the five Member States where the clause does not apply. The Committee believes the clause is justified mainly by the need to preserve capacity for business innovation; the victim, meanwhile, can always invoke another basis for liability. Furthermore, development risks are either impossible to insure or insurable only at enormous cost, which would be crippling or out of the question for companies, and for SMEs in particular.

3.6. There do not appear to be grounds for changing the optional ceiling, which three Member States have chosen to apply. Raising it could complicate the use of insurance, while abolishing it would make it more difficult still.

3.7. The Committee notes that the 10-year period of limitation is part of the overall balance in the directive's common provisions and should be retained, given that it does not preclude longer periods based on other provisions. Lengthening the period would mean shifting the cost of the risk to society, with all the collective constraints and financial burden that entails, while possibly leading insurers to terminate certain policies.

3.8. The Committee is in favour of developing insurance schemes to facilitate the settlement of damages, but would stress nonetheless that the introduction of compulsory insurance provisions would pose problems regarding cost. Extensive measures in this field must not be allowed to curtail companies' capacity for innovation by exerting an excessive cost pressure, especially on SMEs.

3.9. The scope of the 1985 directive stretches beyond products; in 1999 it was extended to cover primary agricultural materials. Liability for defective services is not covered by the 1985 directive owing to the specific nature of the issues involved. The Commission is consequently planning a new measure to accommodate those particularities. Buildings are not covered by the directive either as they too have very specific characteristics (highly standardised sector, wide range of integrated products, immobility, etc.); they are regulated mainly by national provisions. It would be useful to take the opportunity afforded by increased monitoring of the EU liability system to update evaluation of the legal situation, specific issues and developments in the industry in the various Member States.

3.10. All in all, there are a number of reasons for caution regarding any revision of the 1985 directive:

- as already mentioned, the balance struck by the directive appears to be satisfactory in the main and care must be taken to ensure that it is not disrupted by piecemeal changes;

- there has not yet been enough time to monitor the application of the directive thoroughly, and that process must be completed;

- very few cases have given clear cause for the directive to be revised;

- the introduction of new European provisions would require another long and hazardous process in the national parliaments;

- the implementation of the corpus of Community legislation is already placing a considerable burden on the applicant countries, and that is a further argument for not changing the European arrangements at present.

3.11. Nevertheless, the Committee is fully in favour of actively developing more soundly-based and thorough arrangements to monitor the implementation of the directive and the development of liability systems in the various Member States by setting up an effective mechanism for collating data, while also launching new measures to strengthen European safety and prevention policy.

4. Recommendations for improving monitoring and prevention

4.1. In view of the above-mentioned difficulties in gaining a true picture of the current situations in the Member States, the Committee would stress that common tools are required to monitor the implementation of the 1985 directive, changes in national liability schemes and measures for the prevention and compensation of damage. The European Commission should promote this monitoring process as it is a sine qua non for any future reform of the directive.

4.2. To that end, the Commission should set up an observatory to monitor the situation in a pragmatic and workable manner. The observatory should involve all the interested parties (such as governments, the legal professions, socio-occupational groups and consumers' associations) and would be supplied with information by a regularly-updated database accessible on the Internet. It would examine:

- the legal application of the directive in the European Union;

- specific problems posed in the various areas and industries not covered by the directive;

- the information supplied by national and Community safety promotion programmes, such as the EHLASS programme which addresses accidents in the home;

- comparative developments in the Member States, especially in areas that are new in relation to the directive or go beyond its remit;

- the development in particular of case law in the various Member States;

- the comparative situation in the applicant countries and in the countries of the European Economic Area;

- the impact of this legal situation and its development on the operation of the European internal market.

4.3. This would provide the Commission with an analytical tool enabling it to prepare a detailed report within a maximum of five years on the implementation of the directive and reasoned proposals for updating or supplementing it.

4.4. The Committee also stresses the vital role of an effective, coordinated prevention policy at European Union level and in the Member States. It must involve a number of elements:

4.4.1. appropriate incentives must be maintained to strengthen prevention; ensuring that liability can be clearly apportioned is a great help;

4.4.2. the imminent European directive on product safety should provide for a greater guarantee of reliability and safety, including the withdrawal of products to prevent damage;

4.4.3. standardisation should be further developed at European level, mirroring the basic requirements of the directives; this will involve bolstering the resources of the European standards bodies, especially the European Committee for Standardisation (ECS), the European Committee for Electrotechnical Standardisation (Cenelec), and the European Telecommunications Standards Institute (ETSI);

4.4.4. certification and mutual recognition of certification also play a critical part in improving product safety and consumer information; this too is an area requiring further attention;

4.4.5. codes of conduct, targeted quality assurance campaigns, and contractual provisions at company or industry level can also make a major contribution to European prevention policy.

4.5. Furthermore, improvements must be made in various areas of training:

- general education and training, from school age up through the various levels of education;

- awareness raising and training for all players in companies (company directors, managers, employees, trade unionists, etc.) in product quality and safety requirements;

- training for the public and consumers, via information campaigns in particular;

- training for judges and legal professionals, not least on the provisions of the 1985 directive.

4.6. Guarantee of compensation for damages could be improved by developing insurance schemes. These would have to apply to identifiable and homogeneous risks, especially in specific sectors. This guarantee of compensation would also have to be linked to the continuation and development of incentives for liability and prevention; the insurance option would therefore be preferred to the use of guarantee funds.

5. Conclusions

5.1. The cost-benefit ratio achieved through the 1985 directive appears to be satisfactory overall despite the difficulties in ascertaining its full impact. These difficulties are the result of delays in implementing the directive and the occasionally patchy development of national systems, exceeding the common provisions, in spite of the harmonisation achieved by the directive. Although the possibility of future changes to the European directive cannot be ruled out, priority must currently be given to maintaining the overall balance already struck, improving the monitoring of the implementation of the directive and changes in the national systems, and enhancing the common prevention policy.

5.2. To that end, the Committee recommends that the Commission set up an observatory to monitor the situation, in conjunction with all the interested parties (governments, the legal professions, socio-occupational groups and consumers' associations), with a view to presenting a detailed report, within a maximum of five years, on:

- the legal application of the directive in the European Union;

- comparative developments and case law in the Member States, especially in areas that are new in relation to the directive or go beyond its remit;

- the comparative situation in the applicant countries and in the countries of the European Economic Area;

- the impact of this legal situation and its development on the operation of the European internal market.

5.3. The Committee also believes that the Commission should launch an ambitious and consistent prevention policy at European level during the same period:

- updating basic safety requirements by means of directives;

- extending and tightening up European standards;

- developing certification and mutual recognition;

- promoting codes of conduct, contractual provisions and campaigns to favour product quality and safety;

- doing more to support training endeavours in all the sectors concerned.

Brussels, 1 March 2000.

The President

of the Economic and Social Committee

Beatrice Rangoni Machiavelli

(1) OJ L 210, 7.8.1985, p. 29.