Report from the Commission on the Application of Directive 85/374 on Liability for Defective Products
Date: 2001-01-31
Institutions: European Commission
Subjects: application of EU law, approximation of laws, consumer protection, defective product, product safety

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 31.1.2001
COM(2000) 893 final

REPORT FROM THE COMMISSION

on the Application of Directive 85/374 on Liability for Defective Products

REPORT FROM THE COMMISSION

on the Application of Directive 85/374 on Liability for Defective Products

2

TABLE OF CONTENTS

1

1.1

1.2

1.3

2

2.1

BACKGROUND .................................................................................................... 5

INTRODUCTION.................................................................................................... 5

THE GREEN PAPER .............................................................................................. 6

REACTIONS TO THE GREEN PAPER.................................................................. 7

PRACTICAL EFFECTS OF DIRECTIVE 85/374............................................... 8

THE IMPACT ON THE INTERNAL MARKET ..................................................... 8

2.1.1

THE FUNCTIONING OF THE DIRECTIVE IN PRACTICE.................................. 8

2.1.2

THE POSITION OF EUROPEAN BUSINESSES VIS-A-VIS THEIR
FOREIGN COMPETITORS .................................................................................... 9

2.2

2.3

3

3.1

3.2

PROTECTION OF PUBLIC HEALTH AND SAFETY ........................................... 9

THE EFFECTS ON INDUSTRY AND THE INSURANCE SECTOR................... 11

ASSESSMENT OF ISSUES DISCUSSED WITH A VIEW OF
POSSIBLY AMENDING DIRECTIVE 85/374 .................................................. 12

MAINTAINING THE BALANCE......................................................................... 12

ISSUES FOR A POSSIBLE FUTURE REFORM .................................................. 13

3.2.1

BURDEN OF PROOF............................................................................................ 13

3.2.2

DEVELOPMENT RISKS ...................................................................................... 16

3.2.3

FINANCIAL LIMITS ............................................................................................ 19

3.2.4

PRESCRIPTION AND LIABILITY PERIODS ..................................................... 20

3.2.5

INSURANCE REQUIREMENT ............................................................................ 21

3.2.6

TRANSPARENCY ................................................................................................ 21

3.2.7

SUPPLIER’S LIABILITY...................................................................................... 22

3.2.8

PRODUCTS COVERED ....................................................................................... 24

3.2.9

DAMAGE COVERED........................................................................................... 24

3.2.10 ACCESS TO JUSTICE .......................................................................................... 25

3.2.11 OTHER.................................................................................................................. 27

4

4.1

CONCLUSIONS .................................................................................................. 27

FOLLOW-UP MEASURES WHICH ARE DIRECTLY LINKED TO
PRODUCT LIABILITY......................................................................................... 28

3

4.1.1

SHORT-TERM ACTIONS .................................................................................... 28

4.1.2 MEDIUM-TERM ACTIONS ................................................................................. 29

4.2

4.2.1

FOLLOW-UP MEASURES IN OTHER AREAS WHICH ARE
COMPLEMENTARY TO PRODUCT LIABILITY ............................................... 30

AMENDMENTS TO DIRECTIVE 92/59 AND ENFORCEMENT OF
OTHER DIRECTIVES RELATED TO PRODUCT SAFETY ............................... 31

4.2.2

INITIATIVES WITH REGARD TO ACCESS TO JUSTICE................................. 33

4.2.3

INITIATIVES WITH REGARD TO ENVIRONMENTAL LIABILITY ................ 35

4

1.

BACKGROUND

Since 1985, the Directive on liability for defective products1 introduced in the
Community the principle of objective liability or liability without fault. According to
it, any producer of a defective movable must compensate any damage caused to the
physical well-being or property of individuals, independently whether or not there is
negligence on the part of the producer.

1.1

Introduction

The liability laid down by this Community legislation is a coherent framework which
takes account of the various interests involved:

- on the one hand, those of individuals in coping with the risks to their health and
physical and material well-being from a modern society marked by a high degree of
technical complexity,

- on the other, those of producers in avoiding distortions of competition resulting from
diverging rules on liability, and in reducing the impact of those differences on
innovation, competitiveness and job creation.

This framework of liability is capable of contributing to the well-being of consumers
(by ensuring that victims are compensated and by discouraging the marketing of
defective products) and of minimising the costs to industry so as to avoid excessive
interference in their capacity for innovation,
job creation and exporting, due to
diverging national rules.

The Directive on product liability contains the following main elements:

- liability without fault of the producer;

- burden of proof on the victim as regards the damage, the defect and the causal
relationship between the two;

- joint and several liability of all the operators in the production chain, so as to
provide a financial guarantee for compensation of the damage;

- exoneration of the producer when he proves the existence of certain facts
explicitly set out in the Directive;

- liability limited in time, by virtue of uniform deadlines;

- illegality of clauses limiting or excluding liability towards the victim.

In view of the different legal traditions, the Directive accepts that Member States
derogate from the common rules (“options”) with regard to three points by:

- including unprocessed agricultural products in its scope of application;

1

Council Directive of 25 July 1985 (85/374/EEC), OJ No L 210 of 7.8.1985, p. 29

5

- not exonerating the producer even if he proves that the state of scientific and
technical knowledge at the time when he put the product into circulation was
not such as to enable the existence of a defect to be discovered;

- by fixing a financial ceiling of not less than 70 million Euro for damage
resulting from death or personal injury and caused by identical items with the
same defect.

The Directive recognised that the harmonisation could not be total at that stage. It,
therefore, foresees that the Commission presents every five years a report to the
Community institutions on the general application and, if necessary, shall submit
appropriate proposals to it (Article 21). According to Article 15(3) and 16(2), the
Commission reports on development risks and the financial limit ten years after
notification of the Directive. Every five years, it examines the question of revising the
amounts laid down in the Directive (Article 18(2)).

The first report2 was presented in 1995. It is considered that the Directive is generally
perceived to have been an important piece of legislation. It has contributed towards an
increased awareness of and emphasis on product safety. The Commission had
concluded that experience is still limited and would only develop slowly. In 1995, the
Member States had only a very limited case law in the field. On the basis of the
information available at that stage, the Commission had considered it not appropriate
to submit any proposals for amendments. However, certain aspects of the Directive
relating to consumer protection and the functioning of the internal market called for
ongoing attention. This was the case, for instance, with the exclusion of unprocessed
agricultural products by the majority of Member States.

In the aftermath of the “mad cow” crisis, the Commission presented a proposal to
extend the principle of liability without fault for defective products, as foreseen under
Directive 85/374, to primary agricultural products and game. Directive 99/343 now
obliges the Member States to extend the scope of strict product
liability to
unprocessed primary agricultural products.

1.2

The Green Paper

During the first reading of Directive 99/34, the European Parliament called for a
substantial revision of the existing product liability system. Although the Commission
did not share this view, it promised to open a wide discussion with all interested
parties in the form of a Green Paper, which would prepare the second report on the
application of Directive 85/374.

The Green Paper on Liability for defective products was adopted in July 1999.4 It
aimed at collecting information from all interested parties, in particular economic
operators, consumers, insurance companies and public administrations on two points:

2

3

4

The Commission presented its first report on the application of the Directive on 13.12.1995
(COM(95)617), based on an impact study carried out in 1994. This study is published on the
Internet: www.europa.eu.int/comm/internal_market/en/goods/liability/index.htm.
OJ No L 141 of 4.6.1999, p. 20
COM(1999) 396 final of 28.7.1999

6

- as to how the 1985 Product Liability Directive has worked in practice and

- as to what extent it should be modified.

This document was intended to promote reflection and debate. An important part of
the Green Paper called on all those involved to take a reasoned stance concerning the
justification for any revision. This section addresses a wide range of issues: they
include those points the European Parliament had raised in the discussion on Directive
99/34, such as burden of proof, development risks, mental damages, the threshold,
prescription limit and the financial limit; they also consider other questions like the
question of more transparency, supplier's liability or access to justice. The "options
for revision" mentioned in chapter 3 of the Green Paper should guide the open
discussion, without prejudice to any future Commission initiative.

The Commission invited the parties to provide replies which are based on facts, and
not on mere positions of principle.

1.3

Reactions to the Green Paper

The Commission received some 100 comments to the Green Paper. They emanate
from four different groups:

– national and European consumer organisations,

– national industry associations as well as national and European unions representing
insurance,

sectors of industry concerned (in particular pharmaceuticals, cars,
chemicals, agricultural products, electrical equipment),

– public administrations of Member States (Austria, Denmark, Germany, Finland,
France, Netherlands, Greece, Portugal, Spain, United Kingdom) and other
European countries (Iceland, Norway, Slovenia, Switzerland),

– bodies specialising in product liability (e.g. Pan-European Organisation of Personal
Injury Lawyers, US Defense Research Institute, Special Committee on European
Product Liability Law).

As indicated in the Green Paper, the observations received were made public as far as
confidentiality was not explicitly requested, and are available at the following internet
address: http://europa.eu.int/comm/internal_market/en/goods/liability/replies.htm. A
consultant made a summary of two-thirds of the replies which can be found at the
same address.

The Economic and Social Committee adopted on 1 March 2000 an opinion on the
Green Paper.5 The European Parliament voted a resolution on the Green Paper at its
session of 30 March 2000.

The present application report considered the information and observations received
to the Green Paper as well as any other relevant information available. Generally it
follows the structure of the Green Paper: chapter 2 gathers the (mainly) factual

5

OJ No C 117 of 26.4.2000, p. 1

7

information on the practical application of Directive 85/374; chapter 3 assesses the
information and arguments stakeholders put forward in view of the issues for
discussion (the report’s assessment is highlighted with grey colour); chapter 4 finally
draws conclusions from the two previous chapters.

2.

PRACTICAL EFFECTS OF DIRECTIVE 85/374/

The Green Paper proposed in chapter 2 to assess, under different angles, how the
Directive meets the objectives it set out to achieve: the internal market, the protection
of public health and safety and the effects on industry and the insurance sector.

2.1

The impact on the internal market

The Directive on producer liability constitutes a significant element of the legal
in which intra- and extra-Community trade is conducted. The
environment
Commission asked those concerned to comment on its impact in the light of their
experience since 1985, both with regard to its functioning in relation to Community
trade and to the position of Community companies in relation to competitors from
third countries.

2.1.1. The functioning of the Directive in practice

Many observations indicate that the Directive functions properly in practice. This is
considered to be due to the fact that it has created a well-balanced and stable legal
framework which takes into account the concerns of both the consumers and the
producers. However, it is important to note that only little information about the
application exist and statistics, if available, are not complete.

In most Member States, the national rules implementing the Directive are applied
alongside other liability regulations in the majority of the cases. In Austria nearly all
product liability cases are solved on the sole basis of the system provided by the
Directive. Plaintiffs use other liability systems (contractual or tort
law) mainly
because they provide for compensation which is more protective (it covers namely
damages under 500 Euro, non-material damages, damages to the defective product
itself and to property intended for professional use; prescription periods are longer).
In Germany case law constantly interprets applicable provisions of tort law in such a
way that they come close to a no-fault based liability. Another reason for parallel
application is that the “traditional” legislation is better known given that settled case
law exists.

This co-existence of different product liability rules, which is permitted under Article
13 of the Directive,
the variety of rules has not
discouraged the marketing of products in the Community, nor has it had any effect on
insurance companies; it permitted a higher level of consumer protection which, on the
other hand, might restrict the application of the rules under the Directive.

is perceived in various ways:

8

For these reasons, most of the observations are opposed to the Directive becoming the
common and sole system of liability for defective products, but
in favour of
maintaining the present situation under Article 13.6

It was also asked whether each Member State should be able to adopt stricter liability
rules with regard to the provisions of the Directive by introducing a “minimum
clause”. For some, such a minimum clause should be introduced given that all other
Directives in the field of consumer protection follow this model. Another group of
replies disagree with this proposal: such a provision would decrease the level of
harmonisation which results from the Directive in its present form and create potential
obstacles to the free movement of products.

2.1.2 The position of European businesses vis-à-vis their foreign competitors

It seems that the Directive does not weaken the position of European businesses in the
global context. Foreign companies selling their products on the European market must
also respect Community provisions. In their assessment of third countries, European
industry notes that they don’t encounter difficulties in those countries the product
liability legislation of which follows the principles introduced by the Directive (such
as Australia, Japan, Switzerland, Norway and others).

The situation in the United States is considered to constitute a particular case and to
have an important impact on European businesses. The answers confirm the way in
which the Green Paper assessed the legal framework of which US product liability
law forms part: the trial by juries, the “no win, no fee” principle, the awarding of high
punitive damages, the possibility of class actions are elements that encourage victims
to go to court. This is claimed to create a climate of unpredictability of the outcome
for producers. Due to this different situation, European companies, namely small and
medium-sized ones, claim that they refrain to some extent from exporting their
products to the United States. Another consequence is that they have to pay higher
insurance premiums and to face a considerably higher level of litigation. According to
figures presented by the Belgian industry, the US legislation renders exports from
Europe to the United States two times (for textiles and steel), five times (for food
stuffs) and ten times (for pharmaceuticals) more expensive than exports to other
countries. These figures have not been assessed and verified by the Commission.

2.2.

Protection of public health and safety

The Directive helps to increase the level of protection against defective products for
two reasons: first, it encourages producers to do their best to produce safe products by
complementing the regulatory measures of a given product group or those following
the Directive on General Product Safety 92/59 and second, once these preventive
measures have failed and accidents have happened, it allows the victims to obtain
redress from the producers.

The first question addressed by the Green Paper in this respect concerned the
compensation of victims. It is said that product liability cases have been mostly dealt

6

A preliminary ruling procedure, currently pending with the Court of Justice, concerns the
interpretation of Article 13 (case C-183/00, González Sánchez).

9

with under traditional systems and much less under the legislation transposing the
Directive. In Finland, the Consumer Complaint Board registered between 1.1.1993
and 22.11.1999 71 cases; 46 cases were decided on the basis of the Product Liability
Act and 25 cases on the basis of the Finnish Consumer Protection Act. In Portugal,
200 claims were made since the date of the Directive’s implementation; their legal
basis is not indicated. In the UK, the number of cases is low.

There are only few reported Court cases based on the Directive: a recent case in
Ireland, 2 cases in Italy, 3 cases in the UK, 3 or 4 cases in Belgium, Sweden and
Finland, 20 to 25 decisions in Austria, some 30 decisions in Germany, 19 judgements
in Portugal, no decision yet in France, Greece and Luxembourg.

The number of product liability cases seems to be relatively low. In the vast majority
(90%, according to the German and Dutch insurers) these claims are settled out of
court, in particular when the facts (i.e. the defect, the damage and the causal link) are
clear. Business recognises the benefits of settling genuine, validated claims by
avoiding the length and costs of litigation. In these cases, liability is not an issue and
all that remains to discuss is compensation. While some consider the out-of-court
settlement a mechanism which functions well, consumer organisations criticise it
since the details of the settlement often remain confidential and because producer and
insurers have an inequitably advantageous position.

is said that victims are
Given the high number of out-of-court settlements,
compensated in general quickly and efficiently. With regard to cases brought before
the national courts, the question of a swift solution is more a question of the speed and
efficiency of the national systems of civil procedure than of the adequacy of the
law is said to be very formal and strict
substantive law. Spanish procedural
concerning the submission of evidence.

it

Another question of the Green Paper concerned the impact of the Directive on the
victim’s interests. The number of claims based on defective products seems not to
have increased. It is stated that the level of product safety increased considerably
since the Directive was adopted in 1985. This situation results from the existence of a
high safety level ensured by a strict regulatory framework, namely in certain product
sectors, such as pharmaceuticals, chemicals, machinery, electrical equipment, while
the other sectors are covered by the Directive 92/59 on General Product Safety.
Industry is said to take into account these safety features in design, production,
labelling and post-marketing systems and uses extensively good practice standards.
The replies confirm that the Directive on Product Liability has a deterrent effect on
manufacturers and suppliers and gives them a strong incentive, alongside the
obligations under the afore-mentioned safety regulations, to improve the safety level.

The view of industry is that the Directive found the right balance between the
protection of victims and the interests of producers. Consumer organisations disagree
on this point and call for several changes. Several Member States (Germany, the
Netherlands, Austria and the UK) state in their comments that at the moment there is
no concrete information which could justify any changes of the Directive in favour of
the consumers. Another group of Member States (France, Finland, Denmark, Greece

10

and Portugal) indicate areas where some changes could be made; however, in certain
cases, no arguments are given.7

The observations reveal some differences among the Member States as far as the
relationship between the national social security systems and the compensation
awarded according to the Directive is concerned. As a general rule, a person injured
by a defective product receives a payment under the social security schemes,
to his
independent of the existence of a liable person and as a counterpart
contributions to the insurance scheme. Compensation of the victim under
the
Directive is additional to this payment. The level and scope of social security
provisions in Europe is generally high, but differs between Member States. It is
unclear whether in those cases where a large proportion of the damages are covered
by these schemes victims initiate compensation proceedings.

In some Member States, such as the Netherlands8 and Scandinavian countries9, social
security schemes do not have the possibility to take proceedings against the producer
of a defective product. In other countries (as for example in Austria, the United
Kingdom10 or Italy), social security schemes have such a possibility, but have not yet
used it in practice on the basis of the rights conferred upon the victim under the
Directive. No figures exist with regard to the number of cases in those Member States
where the social security actually took redress against the producer.11

It was also asked whether cases existed where the producer liability scheme set up
under Directive 85/374 was insufficient to fulfil its compensatory role so that it was
necessary to fall back on the solidarity of society as a whole to compensate victims.
Those few replies addressing this point confirm the information contained in the
Green Paper (blood transfusions in France, rape-seed oil case in Spain, blood products
in Denmark). In Germany haemophiliacs were infected with the HIV virus by
contaminated blood products during the period of 1980 to 1993 and a compensation
fund was established.12 Several Member States (Germany, France, Denmark, United
Kingdom, Sweden, Italy, Finland and Austria) enacted legislation under which
schemes administered by governments provide compensation payments to persons
with vaccine-associated injuries. They are financed by the general public except for
Denmark, Sweden and Finland where manufacturers contribute to a insurance fund.

2.3.

The effects on industry and the insurance sector

The Green Paper asked industry whether it were aware of any cases of defective
products in which the Directive was actually applied and how this affected its
activities. There were very few claims of this nature which were normally covered by
the company’s insurance policy. Activities may have been affected in so far as
companies had to insure higher risks.

7

8

9

10

11

12

Where replies identify specific shortcomings of the present system, they are discussed in the
relevant part of chapter 3 of this report.
Article 197 of Book 6 of the Civil Code
The introduction of a redress mechanism is at present under discussion in Sweden.
Social Security (Recovery of Benefits) Act 1997
In France one case is known, in Portugal none; in Germany few cases are known.
BGBl. I 1995, 972

11

the introduction of a comprehensive
The pharmaceutical sector
regulatory system since 1965 lead to an increase in costs. However, no figures are
given with regard to the Directive’s impact.

indicates that

No research or studies have been undertaken on the Directive’s potential impact on
companies’ activities.

Another set of questions was specifically addressed to the insurance sector. It asked
for data on the number of claims it had dealt with after accidents caused since 1990,
whether the guarantee given by the insurer is related specifically to the producer’s
liability under the Directive and whether demands for this type of guarantee increased
Insurance policies seem to have risen in
since the Directive applied and its impacts.
Austria up to 100% since the law transposing the Directive was passed. In Germany,
however, the number of demands introduced for product liability policies did not
increase considerably. The reason was that the majority of companies already had
taken appropriate cover, prior to the Directive and following the case law of German
courts which developed stricter liability standards for producers. The same situation
prevailed in most of the other Member States.

The Directive’s impact on costs is difficult to assess because many other factors and
developments influenced the level of compensation paid, the amounts of cover sought
and the premiums collected. At European level no statistics exist which break down
the type of liability (negligence or no fault-based liability) or the type of defect. This
is due to the fact that product liability statistics are neither systematically collected at
this level nor collected in such detail by all individual insurers. They are collected at
national level by a few of the smaller markets. On the basis of this data approximately
60 to 70% of settled claims are based on manufacturing defects and 1 to 11% concern
design defects.

3.

ASSESSMENT OF ISSUES DISCUSSED WITH A VIEW OF
POSSIBLY AMENDING DIRECTIVE 85/374

3.1 Maintaining the balance

Political discussions on earlier occasions and again the contributions to the Green
Paper show that the policy of product liability provokes conflicting views on the part
of producers and consumers. Victims want the highest level of protection at the
lowest cost, while producers ask in particular for ceilings and for the shortest possible
liability period.

Directive 85/374 represents a compromise reconciling the interests at stake. The
Member States' political determination, set out in the provisions of the directive, to
have a balanced framework of liability governing relations between firms and
consumers must not be underestimated. The Commission expressed its wish in the
Green Paper to see this conciliatory approach retained. Accordingly, any proposal to
revise the directive should take into account the balance which at present is rooted in
the following principles:

12

(cid:1)

the producer's civil liability is

(1) objective (no need to prove the fault),

(2) relative (the producer is exempt from liability when he proves the existence of
certain facts, these facts being subject to re-examination (see below, for example,
"development risks"),

(3) limited in time (the producer is not liable for an indefinite period, even though the
practical arrangements for this principle deserve to be re-examined, especially the
period of cessation of liability) and

(4) liability that cannot be waived at the wish of the parties;
(cid:1)

the victim’s rights and obligations are:

(5) he has to prove that damage has occurred, that the product was defective and that
there is a causal relationship between the defect and the damage suffered (the
conditions of proof are subject to re-examination (see below "burden of proof")
and

(6) joint and several liability (allowing the victim to approach any of those liable

without prejudicing his right of complaint).

The Green Paper asked whether the said six principles constitute the basis that needs
to be maintained in order not to upset the internal balance of the Directive. Some of
the comments agree that the six principles constitute a fair balance of the interests
involved and should be maintained, whereas others would wish to see some
modifications introduced.

3.2

Issues for a possible future reform

Earlier political discussions, stakeholders and experts have highlighted several aspects
of the directive as deserving special analysis with a view to possible reform. The
Green Paper explained the issues at stake for each point and, when possible, indicated
“options” which should be considered as guidelines for open discussion, without
prejudice to any future Commission initiative.

3.2.1 Burden of proof

According to the Directive, the injured party is required to prove the damage, the
defectiveness of the product and the causal link between the defect and the damage
suffered. In practice it may be difficult to prove that a product was defective and/or
that a causal link exists. This can be due to the technical complexity of the product
concerned, the high costs for the necessary expert opinions or the disappearance of the
product concerned (e.g. foodstuffs, pharmaceutical products).

Without prejudice to the general principle whereby the burden of proof lies with the
victim,
the Green Paper asked whether its application should be facilitated. It
indicated four “options”:
- to infer a causal relationship when the victim proves the damage or defect, or the
defect when the victim proves the existence of damage resulting from a product;

13

- to establish the degree or standard of necessary proof of the three elements required;
- to impose on the producer the obligation to provide all useful documentation and
information so that the victim can avail himself of concrete facts to prove his case;
-
the costs of
circumstances.

the expert opinion under certain

to make the producer bear

Replies are divided on this issue. One group believes that the current system is
adequate, since problems had not been cited. If the producer had to provide proof that
the product was safe, there was a risk that a large number of actions would be brought
by consumers without due reason. This group rejects the idea of introducing a liability
based on presumption. Since each product liability case needs to be decided on its
merits, presumption would not be a suitable instrument.

Another group considers that the use of presumptions is a useful means in law to put
the onus on the more informed person with the relevant insight in order to prove to the
Court why the product should not be considered to be defective. A similar argument
could be made for causation. It would be unfair to oblige the victim to cover
evidential costs when it is clear that the defective product was the only possible cause
of the victim’s injury.

The situation in Member States in this area differs to some respect. It indicates,
however, that national Courts have already developed ways to facilitate the burden of
proof.

- In Sweden it is for the judge to assess the causal relation, particularly in technically
complex cases. The burden of proof had been reduced by the courts in certain
situations ("probability").

- In Finland, under the principle of the free assessment of evidence, the judge can
take into account the difficulty of establishing the defect in a product or a causal
relation.

- In Germany, according to the law on civil procedure, the Court is free to assess and
judge evidence in the individual case. Causality was established in several cases on
the basis of prima facie proof, when damage arose in the normal course of events.

- When the product disappeared (e.g. an exploding bottle) and when it was difficult to
find the origin of the defect, in Spain judges based their decisions on assumptions.

- Judges in the Netherlands used the power to overthrow the burden of proof in
exceptional cases, e.g. in the case of the defect in the product.

- In Denmark, the requirements of proof depend on each case and are decided by the
judge. There are several judgements where consumers had been unable to furnish
proof and where the court had asked the producer to provide rebuttal evidence.

- According to legal practice in France and Belgium, the defect of a product can be
proven in any way, by evidence and by probability. The judge can infer the causal
link ("the equivalence of conditions").

14

- In the United Kingdom the simple balance of probabilities test (this means at least
51%) is applied to issues of damage, defect and causation.

There is limited experience with regard to relieving the victim’s financial burden of
advancing the costs for expert opinions. Under UK Civil Procedure Rules 1999 the
Court is obliged to ensure that parties are as far as practicable put on an equal footing;
it also has the power to give directions about the payment of a jointly instructed
the producer is
expert’s fees and expenses. According to existing German law,
obliged to pay the expenses insofar as the damage is regulated out of court or if the
producer is ordered to pay damages. In case of financial difficulties, the victim can
apply for legal aid. The Italian transposing decree allows the judge to order the
producer to advance the costs of expert opinion if it is likely that the damage has been
caused by a defect in the product.

Finally, the national rules on discovery vary widely between Member States. Where
such rules provide for excessively limited disclosure of documentation or information
prior to or in the course of litigation, a denial of access to justice could be the possible
result. The English Civil Procedure Rules 1999 are cited as a balanced approach with
regard to the disclosure of information by both claimants and defendants at an early
stage of a dispute. Other liability rules under German law oblige the producer to
provide documentation and information if specific conditions are met. This obligation
applies when sufficient indications for the causation of damage exist and factual
circumstances falling within the ambit of the producer are necessary for the victim to
establish the proof. In cases where the producer does not provide this information, the
burden of proof can be reversed.13

In general, national administrations know of no practical problems due to the rules on
burden of proof. This conclusion concerns also the situation of foodstuffs or
pharmaceuticals which is recognised as being specific.14 In Germany, it is presently
being discussed how to overcome some difficulties with regard to pharmaceutical
products. In this case, consideration might be given to introducing the right of the user
to have certain facts mentioned on the product or on the packaging leaflet concerning
the side-effects of pharmaceutical products, since this was necessary for bringing
legal action.

The Green Paper then addressed the special problem of determining the identity of the
producer when the same product is made by several producers and asked whether
“market share liability” were feasible in Europe for this type of cases.

The concept of “market share liability” is rejected by nearly all the contributions.
Product liability is based on the individual responsibility of the person who causes

13

14

§ 35 of the Law on biotechnology (Gesetz zur Regelung von Fragen der Gentechnik), BGBl I
1999, 1080: Liegen Tatsachen vor, die die Annnahme begründen, daß ein Personen- oder
Sachschaden auf gentechnische Arbeiten eines Betreibers beruht, so ist dieser verpflichtet, auf
Verlangen des Geschädigten über Art und den Ablauf der in der gentechnischen Anlage
durchgeführten oder einer Freisetzung zugrundeliegenden gentechnischen Arbeit Auskunft zu
erteilen, soweit dies zur Feststellung, ob ein Anspruch nach § 32 besteht, erforderlich ist. Die
§§ 259 bis 261 BGB sind entsprechend anzuwenden.
In Germany nearly all cases concerning pharmaceuticals could be solved on the basis of the
prima facie rule.

15

damage. The said concept would make persons liable although they are not involved
in the damage and thus deviate from a fundamental principle of liability. In this
situation it would be extremely difficult to ensure risk as underwriters would not be
able to assess or quantify their exposure until after the case has been concluded. The
Directive introduces the liability of the supplier under Article 3(3) in case the
producer cannot be identified. This guarantees that the victim has a defendant against
whom he can introduce a claim.

Furthermore, Article 3 of the Directive gives a wide definition of a producer. This can
lead to joint and several liability of producers (Article 5). The Dutch Supreme Court
developed the following rule for the DES case:15 if it is established that the victims’
damage is the result of a particular product, each of the producers who had placed that
product on the market during the period in which the damage occurred can be liable
for the full amount of the damage.

It seems that no other similar cases exist and that there is no need for introducing this
concept. Also in the United States, where this concept originated, the application is
limited and the courts have refused its application due to practical difficulties of
definitions.

3.2.2 Development risks

Under Directive 85/374 a producer is exempt from liability when he proves the
existence of certain facts. One of the exemptions concerns the so-called “development
risks”. The European Court of Justice interpreted the relevant provision in the
following way: the producer of a defective product is absolved of liability if he can
establish that the objective state of technical and scientific knowledge, at its most
advanced level, at the time when he put the product into circulation was not such as to
enable the existence of the defect to be discovered. If it is to be a valid argument
against the producer, the relevant knowledge must have been available when the
product was put into circulation16.

Given the controversial debate, the Community legislator in 1985 did not settle this
issue definitely, but provisionally: exemption was possible for a period of ten years,
and the Member States had the option of abolishing it unilaterally. Under Article
15(3) of the Directive, it had been agreed that the Commission would assess the effect
that rulings by the courts as to the application of Article 7(e) and of Article 15(1)(b)
have on consumer protection and the functioning of the internal market. In the light of
this assessment
it was to be decided whether producers should be liable for
"development risks" after the transition period.

After implementation, in some Member States the producer is liable also in case of
development risks. In Luxembourg and Finland the scope of liability concerns all
types of products. Other countries limited this liability to specific product sectors:
Spain in the case of food and pharmaceutical products and France for products
derived from the human body and for those marketed before May 1998. In Germany

15

16

See Green Paper, p. 23, footnote 41.
Commission v the United Kingdom, C-300/95, judgement of 30.5.1997, ECR [1997], p. I-
2649, point 29.

16

the producer’s liability in cases of development risks existed since 1978 in the area of
pharmaceutical products.17

In this context, the Green Paper asked whether and how liability for development
risks involves insurmountable consequences for producers at the European level, by
discouraging them from innovation, especially in the sector of pharmaceuticals, and
whether it would be feasible to insure this kind of risk in the insurance market.

Industry’s replies put forward a number of arguments in favour of maintaining the
exemption based on development risks. In their view this kind of liability would
prevent scientific progress, the development and innovation of new products. Linked
to the specific features of the pharmaceutical sector, the product launch of innovative
bio-tech products could be delayed or prohibited. The degree of unforeseeable risk in
so-called “orphan drugs”,
those designed to treat rare diseases, would be
comparatively higher than with other medicines because the clinical testing is limited
to a small number of patients. Introducing such a liability could lower the standard of
care to which the pharmaceutical industry works since producers could be made liable
notwithstanding the fact that they have applied the highest existing level of scientific
knowledge.

i.e.

Insurers stress the difficulties which will result in pricing a product liability insurance
that covers development risks. Given the unforeseeable and unknown risk, it would be
very difficult to cover it and insurers might exclude it in their policies.

Other replies, namely those from consumer organisations, stress the fact that strict
liability is based on the recognised principle under which the person taking benefits
from a dangerous activity should compensate the disadvantage of other persons.
Consequently, the producer should be held liable also in case of damages due to any
undetectable risk.

Some information is available with regard to the five Member States where, partially
or in general, the producer is liable for development risks.

Finland: The Government regarded cases of development risks as very rare and
introduced producer liability in this case since there was no justification for
consumers having to bear these risks. In practice, the level of insurance premiums
increased, the additional costs being negligible. At a public hearing organised by the
Ministry of Justice in November 1999, it had been noted that there had been no cases
of development risks.

Luxembourg: Case law existing before the Directive was adopted made producers
also responsible for development risks. The option had been used to maintain this
situation. Specific problems due to this system are not known.

Spain: Introducing liability for development risk for foodstuffs and pharmaceuticals
is explained by the fact that these sectors are of greatest public sensitivity and the
occurrence of these risks is likely in this area. The financial impact on industry
(insurance premiums) is not known.

17

The Directive recognised the existence of this specific liability system and authorised the co-
existence with the Directive, see Article 13 and the 13th recital.

17

France: Under the traditional liability system, an undetectable defect was not grounds
for exonerating the producer. Owing to ethical considerations, the transposing law
made the producer liable for development risks with regard to the elements and
products of the human body. Although it is known that insurance companies had
difficulties with this provision, no specific data is available.

impact on the human body medicines have,

Germany: Strict liability including development and production risks with regard to
pharmaceutical products had already existed before the adoption of the Directive.
Given the direct
the Law on
Pharmaceuticals provided for this solution. The inclusion of liability for development
risks is combined with financial ceilings (liability is limited to 500 000 DM in any
individual case and 200 million DM for each pharmaceutical or 12 million DM for
each product per year in the case of annuities). No data on the practical impact is
available and very little case law exists.

Very little data is available on what practical impact the introduction of producer
liability in case of development risks would have for industry and insurers. No
detailed research on the rulings of national courts with regard to the application of the
exemption clause related to development risks exists. The few cases known seem to
indicate that in practice it is not so easy for the producer to prove that the defect could
not be detected on the basis of the knowledge that was available when the product
was marketed and, thus, waive his liability. The occurrence of damages due to a
development risk seems to be most likely in the following sectors: pharmaceutical
products, chemical substances, genetically modified organism and foodstuffs.

The Green Paper asked whether damage caused by development risks should be borne
by society as a whole, by means of a compensation fund using government revenue,
and/or by the manufacturing sector in question, by means of a fund to which those in
the sector contribute.

Replies are divided on this point. Some contributions are in favour of introducing a
compensation fund in the most sensible sectors. Past experience has shown that, with
damage on a large scale, public intervention was inevitable and public funds were set
up to assist those suffering damage (see the cases mentioned above under point 2.2 -
is questionable whether this intervention should not constitute the
HIV etc). It
exception. Therefore,
the
manufacturing sector concerned should be first envisaged. Other comments suggest
that the question of compensation funds should be left to the individual Member
States.

the idea of establishing a fund by companies of

Compensation funds set up by industry exist in few countries. In Germany, due to the
liability limit of 200 million DM per product, manufacturers of pharmaceuticals and
insurers agreed to establish the “Pharmapool”. Manufacturers pay a percentage of
turnover based on three risk categories into a pool comprising all of the German
insurers of pharmaceutical companies. In return, the insurers collectively guarantee
the cover. Since its existence, this pool made one payment of 55 million DM in the
case compensating haemophiliacs with HIV alleged to be caused by blood products.
Premiums were reduced in 1981 since no claims were introduced against the pool.

A voluntary scheme for injuries caused by pharmaceuticals was established in
Sweden in 1978. The scheme is financed by a percentage of the manufacturers’ sales

18

and administered by insurance companies. This scheme was established on the basis
that manufacturers would not be expected to reimburse the National Social Security
Scheme of any payments it had made to injured persons.

A voluntary Pharmaceutical Insurance Scheme exists also in Finland since 1990. An
aggregate upper limit of 100 million Mk per year is set for epidemic injuries.

Danish legislation provides for compensation of personal injury caused to individuals
by pharmaceuticals, regardless of any proof of fault or liability, if the products were
obtained after 31 December 1995. A compensation fund is managed by the patient
insurance association and financed by reducing State reimbursement of medicinal
products individuals have bought. Two claims were introduced during the period of
1998 and 2000.

On the basis of information available it seems that the said compensation funds
intervened very rarely and, if so, for minor damages.

3.2.3 Financial limits

The Green Paper addressed two issues under this heading: First, according to Article 9
of the Directive, the producer does not have to compensate the victim for damage to
property which is lower than ECU 500. This threshold or deductible was introduced in
1985 in order to avoid litigation in an excessive number of cases.18 Stakeholders were
asked to provide any information on the percentage of cases involving material
damage of less than

500.

€

500 limit. Consumers would often
One group of replies proposes to abolish the
suffer damages to property which are below this threshold and therefore lack
compensation in these cases. Contributions contain limited data: in Finland 71 cases
were brought before the Consumer Complaint Board between 1.1.1993 and
22.11.1999; 13 out of these cases involved damage to property of less than

500.

€

€

Another group argues that the current regime should be maintained. The limit would
be reasonably modest and would not unduly disadvantage consumers. Judicial costs
related to this category of claims would be disproportionately high. In most cases, the
damage would be covered by the consumer’s home insurance policy.

The limited data available seems to indicate that a removal of the deductible might
result in a higher number of cases against producers, also small and medium size
enterprises. This could be prevented by encouraging out-of-court solutions for small
claims.

The second issue concerns the possibility left to Member States under Article 16 (1)
of the Directive to fix a maximum ceiling for product liability in the case of damage
to persons caused by identical items with the same defect. This ceiling is set at
70
million. In 1985 lawmakers considered this limit as transitional and agreed that the
Commission should assess the effect of using this option on consumer protection and
the functioning of the internal market after a period of ten years (Article 16(2)). In the

€

18

See 9 th recital of the Directive.

19

light of this assessment it should be decided whether this financial ceiling should be
removed.

Three Member States (Germany, Spain and Portugal) have adopted financial ceilings.

In Germany, the setting-up of a financial ceiling of DM 160 million was explained
by the fact that liability without fault needed to be limited. Under the specific regime
for pharmaceutical products the financial ceiling is DM 200 million. There are no
known cases in which the financial ceiling would not have been enough.

In Spain, the ceiling is PTS 10 500 million. So far, no cases are known were this
limitation left injured persons without compensation.

In Portugal, legislation set a financial limit at ESC 10 000 million. No data on the
application is available.

The little information seems to indicate that the financial ceilings which exist in three
Member States are high enough in order to cover any claims for compensation. No
data exists which would show that the use of the option under Article 16 (1) of the
Directive by these Member States has any major impact on the functioning of the
internal market.

3.2.4 Prescription and liability periods

The liability of a producer extincts ten years from the date on which the product was
put into circulation, unless there are any claims or proceedings pending (liability
period). A person who wants to bring a claim against a producer for damages due to a
defective product must bring his claim within three years after the date on which he
became aware, or should reasonably have become aware, of the damage, the defect
and the identity of the producer (prescription period). This limitation of liability is
mainly justified by the fact that strict liability puts a higher burden on producers than
liability under the traditional systems of contractual or extra-contractual liability.
Therefore, the liability period is limited in order not to discourage technological
innovation and to allow insurance cover.

The Green Paper asked whether the time limit of ten years needed to be changed,
either generally of specifically for certain products or sectors and whether the costs
resulting from such a change should and could be borne by industry and the insurance
market.

One group of replies thinks that the ten-year limit should be maintained. Their
arguments relate to the need for legal security, problems to get insurance cover in case
of longer periods or at least an increase in insurance premiums. Another point is that,
since it is easier for the victim to get compensation under strict liability, the time limit
is justified and the victim has the possibility to take redress against the producer for
longer periods (up to 30 years) under other liability systems.

Another group of comments suggest to extend the limit, at least with regard to
particular product sectors (such as foodstuffs, pharmaceuticals, agricultural products
or products intended for especially long-use). These sectors are identified to bear
latent injury where the damage might result a long time after the product was put on

20

the market.19 Other proposals consist in beginning the ten-year period by the date on
which the product was first supplied to the consumer or extending the limit to the
foreseeable period of the product’s use.

The Directive 92/59 on general product safety20 requires that only safe products are
put on the market. In this context, the notion of a safe product refers to the foreseeable
period of a product’s use. It is to be noted, however, that Directive 92/59 and
Directive 85/374 have a complementary function: the first instrument ensures that
only safe products are put on the market (prevention);
the second instrument
establishes the rules under which personal injury and damage to property caused by a
defective product are compensated (compensation). Therefore, it is justified to deal
with the issue of time-limit in relation to the producer’s liability in a different way
than in relation to the general safety of products.

There is no information on practical cases in relation to the effect of the ten-years
time-limit, nor concrete data on the financial impact on industry and the insurance
sector if the time-limit was extended.

3.2.5 Insurance requirement

Producers are currently not required to have any kind of financial cover; they are not
required to take out liability insurance for an amount that is adequate to cover any
damage caused by a defective product.

The Green Paper asked about the experience in this regard, in particular whether any
cases are known where lack of insurance cover left victims without compensation and
whether there is a need for further action in this relation.

A group of contributions considers that the producers themselves should decide on the
question of insurance. The arguments are twofold: there are no known cases where
compensation could not be provided due to the lack of insurance cover and obligatory
insurance for all product sectors would make the manufacturers of products with low
risk pay a part of the financial burden of more dangerous products. Some comments
favour the introduction of a mandatory insurance in those sectors which insurance
companies have recognised as risk sectors.

On the basis of the information available, it seems that the absence of a specific
provision on insurance cover did not lead to any practical problem. It should be
further assessed whether in practice manufacturers of those sectors where the liability
risk is high already seek on their own insurance cover or whether there is a need for
further action.

3.2.6 Transparency

The Directive currently does not foresee any means of making its implementation
more transparent by instituting a mechanism covering information with regard to

19

20

A case occurred in France where a pharmaceutical was taken by pregnant women and which
caused physical damage to their children which appeared, however, at the age of sexual
maturity.
OJ No L 228 of 11.8.1992, p. 24.

21

product liability cases. Producers are not obliged to keep records of claims against
them, nor are the national authorities obliged to collect the cases reported.

The Green Paper asked whether the Directive should provide for means of increasing
in particular by
transparency of the way in which operators apply the rules,
identifying the cases involving defective products that are still on the market.

With regard to the question of ways to identify defective products that are still on the
market, some replies propose to set up a system requiring producers of defective
products to provide a central body with all the relevant information. Another group of
comments refer to Directive 92/59 on general product safety. This Directive and the
national implementing measures are considered to be the means of guaranteeing that
only safe products are placed on the market and that, should unsafe products be found
on the market, they are withdrawn or recalled.

A number of contributions disagree with the idea of publishing the details of product
liability cases. Two main arguments are raised: detailed information on specific cases
could in some instances weaken the consumer’s position when negotiating the amount
of compensation; increased information about product liability cases could lead to a
number of ungenuine claims.

It needs to be further analysed whether the obligation of the producer under the
Directive 92/59 with regard to post-marketing, in particular recall and withdrawal of
unsafe products, is correctly implemented.

3.2.7 Supplier’s liability21

The Green Paper addressed under this title two points: the notification procedure in
relation to the supplier and the supplier’s liability.

Formal notification of supplier: Article 3(3) of the Directive states that where the
producer of a defective product cannot be identified, the supplier of the product shall
be treated as its producer unless he informs the injured person, within a reasonable
time, of the identity of the producer or of the person who supplied him with the
product. The same applies in the case of a product imported into the Community, if
this product does not indicate the identity of the importer, even if the name of the
producer is indicated. The victim is therefore obliged to notify the supplier formally,
so that he can within a reasonable time provide details of the producer or previous
supplier.

The Green Paper asked whether the supplier should inform the victim of the
producer’s identity within a maximum time limit.

Many contributions consider that a fixed time limit could be justified because the
indication of “reasonable time”, as currently stated, could be interpreted in different
ways in the Member States. While some propose a limit of one month, it is three
months for others.

21

The Directive uses in Article 3 (3) the term “supplier” within the meaning of a person
distributing a product put on the market to the consumer. The present report follows this
definition.

22

It seems that Member States apply the indication of “reasonable time” with small
variations. No data is available on the practical effects of these differences. At this
stage, there is no clear evidence for a need for harmonisation.

Extent of supplier's liability: The Directive is based on the principle that it is the
producer who is liable for the damage caused by a defect in his product. Article 3(1)
of the Directive defines a producer as "the manufacturer of a finished product, the
producer of any raw material or the manufacturer of a component part and any person
who, by putting his name, trade mark or other distinguishing feature on the product
presents himself as its producer".

By way of exception, a professional acting as simple supplier is liable in only three
cases: when he is the importer of the product into the Community - within the
meaning of Article 3(2) of the Directive - and, in certain circumstances, when the
producer of the product cannot be identified by the victim of the damage caused by
the product or when the identity of the aforementioned importer is not indicated on
the product (Article 3(3)).

The Green Paper asked whether the Directive should be applicable to any professional
in the product supply chain when his activities have affected the safety properties in
question of a product placed on the market.

A group of replies refer to Directive 92/59 whereby the definition of producers
includes other professionals in the supply chain, insofar as their activities may affect
the safety properties of a product placed on the market. This means that professionals
in the supply chain are also obliged to ensure that only safe products are marketed and
to participate in post-marketing measures. The liability rules under Directive 85/374
should be extended in this sense. The contributions do not always clearly indicate
whether the supplier’s liability should be unlimited (i.e. the supplier would be liable
also if it concerns a manufacturing defect) or only limited to specific activities of the
supplier involving e.g. repackaging, transport or storage.

Another series of comments rejects the idea of introducing supplier’s liability. The
main argument is that it is difficult to see how the principle of no-fault based liability
can be applied to the supplier. If the supplier was liable for any defect due to storage
or transport, such a liability would come close to the concept of fault-based liability.
Other problems would consist in identifying the liable person (the producer or the
supplier) and proving the defect if it is a defect falling within the supplier’s sphere.
The approach adopted in the Directive 85/374, based on the production and marketing
of defective products, does not justify full liability of the supplier, i.e. also in the case
of a defect existing at the moment of commercialisation.

As already mentioned above, Directive 92/59 has the objective of prevention and
Directive 85/374 has the role of compensation. Although these functions are
complementary, it does not mean that in all respects the rules applicable need to be
the same. This is true for the question whether the obligations suppliers bear under the
Directive on general product safety can be transposed ipso facto to the area of product
liability. The objective underlying Directive 85/374 is that the producers shall be
liable for defective products independently of any fault. Suppliers are liable only in
case that
the Directive recognises the
exceptional situation of the supplier’s liability.

the producer cannot be identified. Thus,

23

The number of cases where a product defect results from the activity of a supplier
seem to be relatively limited (mainly in the area of foodstuffs and agricultural
products); no concrete data is available in this regard. No information is available
whether consumers were left without compensation in this specific situation or
whether they could turn themselves against the producer. A fundamental change in
shifting the liability to the supplier in other situations than the ones foreseen by
Article 3(3) of the Directive does not seem justified at this stage.

3.2.8 Products covered

The Directive applies only to products22 and covers all material movables, whether for
private use or not, including electricity.

The Green Paper asked whether real estate property should be included in the scope of
the Directive.

Comments are in general negative on this point. Specific legislation on liability for
buildings exists in several Member States. In other Member States rules of contractual
law ensure that a person can seek compensation in case that there is a problem with a
building. The Directive envisages the producer’s liability for defects in products
which are industrially mass-produced. Accordingly, the Directive covers construction
products which are incorporated into an immovable. However, real estate property
constitutes an individual service and requires different rules.

On the basis of data available it does not seem appropriate to make the Directive
apply to real estate property.

3.2.9 Damage covered

The Directive currently refers in Article 9 to damage caused by death or personal
injury, as well as damage to property, provided that it is intended for non-professional
use. The defective product itself23 is not covered.

The Green Paper addressed three issues in this respect:

Non-material damage (any damage not affecting property, moral damage, mental
suffering, etc) is not at present covered by the Directive, even though most national
legislation takes it
into account. Stakeholders were asked whether the Directive
should cover also non-material damage.

Contributions are divided on this point. It is confirmed that national laws on strict
liability in most Member States already cover non-material damage. However,
differences exist with regard to the definitions and the practical application (e.g.

22

23

For defective services the Commission is considering a possible specific initiative, see
Communication from the Commission - "Consumer policy action plan 1999-2001" (COM(98)
696 of 1.12.1998).
Product compensation is covered by the legislation on sales guarantees (see Directive
99/44/EC on after-sales guarantees, OJ No L 171 of 7.7.1999, p. 12).

24

amount of compensation awarded in this respect). In Germany, discussions have
started in order to extend damage which is compensated according to the national law
on strict liability to non-material damage resulting from suffering.

The replies do not give sufficient detail in order to be able to assess what practical
impact national rules providing for compensation of non-material damage and the fact
that they have a different scope and are applied in different ways have on the
functioning of the internal market as well as on the protection of the consumer. This
issue needs to be further examined before any conclusions can be made.

The Green Paper also asked whether damage caused to products intended normally
for professional or commercial use should be covered by the Directive and, thus,
professionals should be protected in case of damage.

The position of comments in this regard is in general negative. The main argument is
that one of the Directive’s objective is the protection of the consumer and products
other than consumer goods should not be covered. In practice professional users had
either a means of redress under contractual law or any damage would be covered by a
business insurance policy.

On the basis of data available it does not seem appropriate to amend the Directive on
this point.

Only few contributions address the issue whether damage to the defective product
itself should be covered. Damage to the defective product itself was said to be
covered by contractual arrangements.

On the basis of data available it does not at this stage seem appropriate to include this
type of damage.

3.2.10 Access to justice

The Directive contains no special provisions on the victims’ access to justice in its
current version. The injured person has to use national remedies.

The Green Paper put the question whether special measures to improve victims'
access to justice should be introduced by providing for
injunctions, special
mechanisms for out-of-court proceedings and/or class actions.

A number of contributions consider the power given to the national authorities under
Directive 92/59 to withdraw any dangerous product sufficient for the protection of
consumers. They think that there is no need for an individual’s right on injunction.

While some replies are in favour of giving further thought to alternative dispute
mechanisms, others consider that the out-of-court proceedings currently in existence
are functioning well since the majority of claims are solved in this way. There are
objections on formal grounds (lack of Community competence under Article 95 EC
with regard to the harmonisation of rules on civil procedure) against group actions.
Another negative argument in this respect relates to the fact that rules on legal
proceedings should not be created for a specific sector, as this same problem arises in
all consumer-related areas.

25

There is some information on the situation in most of the Member States with regard
to group actions. It can be summed up as follows:

In Portugal, popular legal action exists whereby the Public Prosecutor's Office and
consumers' organisations can intervene in cases of injury to private individuals.

In Austria, civil procedural rules allow the victim to pass on his/her liability claim to
a consumers’ association.

In Belgium, plaintiffs with similar but separate claims can institute proceedings
before the same court and then ask the court to handle their claims at the same
hearing, without joining them.

In Greece, legal action by consumer groups is possible.

In Denmark, the rules on legal proceedings allow popular legal actions to be brought
in all consumer-related areas.

In France, legislation exists which enables consumer associations to defend the civil
interests of consumers. This does, however, not include actions for compensation for
a group of injured persons. Consequently, there are no actions similar to the "class
actions" in the United States.

In Germany, in the event of a series of accidents, there is a "trial action" which will
subsequently form the basis of compensation between industry and the injured
persons.

In Ireland, the rules of court provide a procedure whereby one or more of persons
having the same interest in a single claim may bring or defend the claim on the behalf
of all those interested.

In Italy, consumers' associations can defend consumers' interests, but cannot act on
behalf of injured persons.

In Finland, a few years previously, the question of popular legal action had been
examined. The consumer ombudsman can assist individuals before the court; the trial
costs can be entirely covered by a special budgetary fund.

In the Netherlands, multi-party action is possible under the Group Actions Act from
May 1994.

In Spain, consumers' associations can bring a legal action on behalf of one of its
members. An amendment of the rules on court proceedings will make it possible to
bring joint actions, as from January 2001.

In Sweden, rules concerning popular legal action are being considered, and a proposal
might be put forward in the future.

26

In the United Kingdom, multi-party action can be brought in the courts in England
and Wales24 under a rule of civil procedure on group litigation. Under this procedure
one or more individuals can act in a representative capacity and bring proceedings on
behalf of others where they have the same interest.

At this stage, there is no indication that action concerning access to justice specifically
with regard to product liability cases would be appropriate.

3.2.11 Other

Some contributions advance additional points which should be reflected further. The
issues concern some points where the Directive leaves Member States to define
certain legal concepts (such as “putting into circulation”25) or where, due to an
apparent lack of clarity in the Directive, Member States seem to have taken diverging
national transposition laws. Another point relates to the use of a defective product in
the supply of a service. Finally, the question is raised whether the Directive should
contain provisions concerning conflicts of law (defining the jurisdiction and the
applicable law).

These issues need further consideration. They would not require in principle a
modification and might be dealt with either in relation to the transposition control of
the Directive or in the context of an exchange of information between Member States
on the practical application of certain provisions.

4.

CONCLUSIONS

The Commission concluded in its First Application Report in 1995 that experience
was still limited and was only likely to develop slowly. The impact study26 on which
the report based its conclusions and to which it referred, explained the different
reasons why experience would be little.

In view of this situation, the Commission thought it appropriate to issue a Green
this document would address the
Paper on product liability for the following reasons:
various points on which factual information is needed and would trigger a large and
substantial debate in this respect. The Commission received a large number of
contributions which shows the great interest in the subject matter.

The Green Paper had invited the stakeholders to provide the Commission with factual
information on the practical application, rather than mere positions of principle, in
order to enable it to justify its conclusions, in particular if they were to lead to a
substantial amendment of the Directive.

24

25

26

The Scottish Law Commission rejected the idea of introducing such a rule.
A preliminary ruling request, currently pending with the Court of Justice, addresses inter alia
this point (case C-203/99, Veedfald).
See footnote 2.

27

On the basis of the information available at present which results from the
contributions to the Green Paper as well as other documents received, one can
summarise the situation prevailing in the Member States as follows:

-

-

-

there is still limited experience with regard to the application of the Directive.
This is mainly due to two factors: the Directive was lately transposed in some
Member States and, according to the possibility given to Member States under
Article 13 of the Directive, national contractual or extra-contractual law or a
specific liability regime is applied in parallel;

the scarce information available has not permitted to identify any major problems
with the application of the Directive;

a cost-effective framework should be maintained preserving the balance between
the interests of both consumers and producers.

Globally, the factual situation is not different compared to the situation prevailing in
1995 when the Commission presented the first report. The Commission is of the
opinion that any modifications to the Directive should be grounded on objective
factual bases. The information available at the present stage is not sufficient to draw
firm conclusions. Therefore, the Commission considers that it would be premature to
envisage any changes to the current liability system under Directive 85/374.

The Commission intends, however, to take a number of follow-up actions which are
twofold: on the one hand, it envisages measures which are directly linked to the issue
of product liability, with short and medium-term objectives; on the other hand,
measures in other fields which are complementary to product liability are either
already under way or will be taken up in the near future.

4.1

Follow-up measures which are directly linked to product liability

The Green Paper purported to collect as much factual information on the functioning
of the Directive as possible. Despite the active participation of a large number of the
interested parties in this exercise, difficulties in gaining a full picture of the situation
in the Member States still remain. In view of the continuous process of assessing the
application of the Directive in the Community, means need to be explored by which
the present information gaps can be filled in the short-term. A reflection on ways for
greater harmonisation of product liability at Community level in the medium-term
should also be initiated.

4.1.1 Short-term actions

The Commission is of the opinion that a pragmatic and efficient
tool of data-
collection could be the setting-up of a expert group on product liability, similar to the
idea of an “observatory” the Social and Economic Committee had put forward in its
opinion on the Green Paper. This expert group would involve all the interested parties
such as experts from national administrations, specialised lawyers and academics,
representatives from different industry sectors and the insurance area as well as
consumers’ associations.

28

The expert group would gather information in relation to all the Member States in
particular on the legal application of the Directive, on recent case law and changes in
national legislation having an impact on product liability (such as issues concerning
the access to justice). In addition, the data exchanged could be published on the
Internet in order to increase transparency.

The Commission considers that the establishment of such a expert group would not
only be a practical way of filling information gaps, but also a forum to continuously
discuss issues related to product liability. The specific details of the expert group and
its functioning will be defined in the beginning of the year 2001.

Another question concerns the collection of information related to the availability of
safe products on the market. A Community injury data-collection and information
system has already existed since 1993 under the former EHLASS (European Home
and Leisure Accident Surveillance System) system. In the past, this system did not
identify the number of injuries caused by a defective product because all types of
accidents involving a product were collected. Under the programme of Community
action on injury prevention,27 a new Community system for compiling information on
injuries has been set up. Product and services safety indicators will be developed. The
feasibility of integrating additional information in particular dealing with accidents
caused by defective products will also be approached.

the information received from the interested parties during the
Furthermore,
discussion on the Green Paper needs to be completed by other expert opinions. The
Commission intends to launch a study on the assessment of the economic impact of
strengthening the current liability system under Directive 85/374.

The Directive in its current version attributes a specific role to the Commission when
assessing the impact of the Directive with regard to the options left to the Member
States regarding the exemption to liability for development risks and the financial
limit
(see Article 15(3) and 16(2) of the Directive). Given that the impact of these
two options on the functioning of the internal market and the protection of consumers
at present cannot be measured sufficiently, the envisaged study should focus on these
issues.

The objective of the study would be to assess the economic impact for industry,
insurance companies, consumers and society as a whole (in particular via social
security schemes) of introducing producer liability also in case of development risk
and of eliminating maximum financial limit for serial incidents. This analysis should
be as fact-based as possible.

The results of the study should enable the Commission to have a realistic evaluation
of the costs and benefits of strengthening the current liability system.

4.1.2 Medium-term actions

The lawmakers in 1985 thought that the Directive was only an initial step towards
establishing a genuine producer liability policy at Community level. They introduced

27

OJ No L 46 of 20.2.1999, p. 1

29

a review of it at regular intervals (five years) in order to proceed towards greater
harmonisation with a view to establishing a regulatory framework which is as
comprehensive, coherent, balanced and effective as possible for protecting victims
and guaranteeing legal certainty for producers.

At this moment, reflection could start with whether greater harmonisation between the
different liability systems currently existing would be advisable and, if this was the
case, what means would be feasible.

Indeed, for the time being, the Directive does not affect any rights the injured person
may have according to contractual or non-contractual (negligence/tort) liability or a
the
special liability system existing in July 1985 (Article 13). This means that
Directive sets common rules on strict
liability which Member States have to
implement and from which they cannot deviate by adopting stricter provisions. The
injured person can, however, base an action against the manufacturer of a defective
product under other product liability systems which may exist in the different Member
States, provided the specific conditions necessary for their application are met.

This possibility of allowing the co-existence of different liability systems might be
one factor which could explain the limited number of practical cases brought before
national courts on the basis of national rules implementing the Product Liability
Directive.

In principle it would seem that the injured party could more easily bring actions based
on strict liability provisions rather than under other provisions; in particular, he/she
does not have to show the fault or negligence of the producer as is the case under
contract or tort law. An absence of fault would seem to exclude the liability of the
producer under another system. Contributions to the Green Paper, however, indicate
that in practice, at least in some Member States, actions are based in parallel on
different systems, and not only on the strict liability provisions.

Moreover, case-law in several Member States tends to interpret
the producer’s
liability under fault-based liability systems in an extensive way with the result that in
liability systems is getting
practice the difference between fault-based and strict
blurred. In this situation and given that fault-based liability systems generally provide
for a larger scope of consumer protection parallel applications are a practical
consequence.

In some Member States, strict liability rules used to be only exceptionally applied and
the principle introduced by the Directive therefore constituted a novelty for these legal
systems. In this situation one would assume that the position of the injured person
suing the producer of a defective product has improved.

At present no assessment is possible as to the real impact of the co-existence of
national laws transposing the Directive with other liability systems. Therefore, the
Commission will launch a study which should analyse and compare the practical
effects of the different systems applicable in all the Member States on the bringing of
claims for defective products (i.e.
laws implementing the Product
Liability Directive, the national laws on contractual obligations, the national laws on
extra-contractual obligations and specific liability laws). One important aspect of the
study would be to analyse on what points the different systems diverge from each

the national

30

other (in particular with regard to conditions and scope of application, rules on burden
of proof, products and damages covered, exemptions of the producer, prescription and
liability periods, financial limits, levels of damages awarded, access to justice).

A second part of the study would look into the future of product liability legislation. It
would address the question of whether a uniform product liability system could be
introduced in the Community on the basis of the present situation in the Member
States. In this context, the study should look at the different initiatives existing with
regard to the law of obligations, such as the Lando Commission, the European Group
on Tort Law and the European Centre on Tort and Insurance Law (Europäisches
Zentrum für Schadenersatz- und Versicherungsrecht) in Vienna.

This study would enable the Commission to have a complete overview of all the
applicable product liability laws and their practical application in all the Member
States. On the basis of the results of this study, the Commission could assess the
practical effect of the strict product liability provisions under Directive 85/374 and the
need and feasibility of introducing - at medium-term - a common and sole liability
system for defective products.

4.2

Follow-up measures in other areas which are complementary to
product liability

The Commission is committed to achieving a high level of consumer protection
against product-related risks. In this context, the provisions of Directive 85/374 on
product liability are one major element. Two other areas play a complementary role:
Directive 92/59 on General Product Safety and specific Community legislation
governing the safety of products are of paramount importance since their correct
application ensures that only safe products are put on the market and, therefore,
minimises the risk that any liability claims due to a defective product occur. Access to
justice issues are another important element in providing compensation to consumers
in general and, more particularly, to the victim of an injury caused by a defective
product. Any actions taken in the past addressed these questions in general and did
not envisage specific actions for product
liability matters. The present situation
confirms the soundness of this approach.

Another area important in relation to product liability is environmental liability which
concerns the allocation of responsibility for damage caused to the environment.

The Commission already took and intends to take further actions in these areas, as
described below, and considers that these measures will help to foster product safety,
guarantee consumers fair access to justice as well as a well-conserved environment.

4.2.1 Amendment

to Directive 92/59 and enforcement of other Directives

related to product safety

The General Product Safety Directive 92/59 and other Directives related to product
safety have established an elevated level of consumer protection in the Community.

The past experience has shown some weaknesses in the provisions of the Directive
92/59 and the review of its application identified additional needs of consumer

31

protection. Therefore, the Commission adopted on 29 February 2000 a Proposal for
revision of Directive 92/59.28

Several of the proposed amendments to Directive 92/59 enhance the preventive aspect
of product safety by reinforcing the effectiveness of market surveillance. In this
respect, the obligations for producers and distributors needed to be completed:

- producers and distributors, the latter within the limits of their respective activities,
have to pass on information on product risk, safeguard and provide documentation
necessary for tracing the origin of products, inform national authorities immediately if
a product put on the market is dangerous and they have to inform these authorities of
the action taken to prevent risks to consumers. This information will help market
surveillance authorities to trace the products concerned, verify whether other products
present the same risk, take any necessary measures and inform the authorities of the
other member States as appropriate.

- producers and distributors have to collaborate with the national authorities on action
taken to avoid the risks posed by products they supply or have supplied. This will
tracing of dangerous products during emergency situations and
enable swift
organising their withdrawal.

- in addition to the withdrawal of dangerous products from the market when this is
necessary to prevent risks to consumers, producers have to recall products already
supplied to the consumers when other means would not suffice to prevent the risks
involved.

- producers have to adequately and effectively warn consumers of the risks posed by
the products that have already been sold to them.

Another set of amendments are proposed with a view of strengthening market
surveillance and enforcement powers of the Member States. These measures aim to:

- ensure that effective, proportional and dissuasive sanctions are applied as necessary;

- ensure that systematic and co-ordinated market surveillance approaches are put into
place by all Member States;

- ensure that the market surveillance systems work in a transparent manner and are
open to consumers and other stakeholders;

- provide for a periodic assessment by the Commission of the results achieved by the
market surveillance systems of the Member States;

- set-up a framework for systematic collaboration between the enforcement authorities
of the Member States;

- reinforce the enforcement powers of competent authorities, namely in relation to:

28

COM(2000) 139 final/2 of 15.6.2000

32

- recall of dangerous products already supplied to consumers, and adequate

consumer information on the risks posed to them;

- temporary prohibition of the placing on the market of certain products,

pending verification and assessment of their risks;

-

rapid action,

rapid
intervention, and removal of limitations on the circulation of information on such
risks.

in case of serious risks requiring immediate or

Market surveillance is an essential tool for the enforcement of Community legislation
on product safety (with regard to, inter alia, pharmaceuticals, chemicals, cosmetic
products, medical devices, machinery and electrical equipment). It is worth recalling
the fact that market surveillance must allow to verify that the provisions of applicable
Directives have been complied with in each Member State on the same basis. This
guarantees both a high level of protection for consumers and users, and supports the
free movement of goods in the internal market by eliminating unfair competition and
non-compliant products. Member States’ authorities have an obligation to organise
and carry out market surveillance in an effective way (i.e. adequate infrastructures and
resources). In order to ensure that market surveillance is as effective as possible, the
Commission encourages administrative co-operation between national authorities.

4.2.2 Initiatives with regard to access to justice

Since the eighties, with the continuing development of the internal market, the
Commission has faced a new challenge: to promote more effective and efficient
access to justice in view of the cross border dimension of the problem. In its Green
Paper on “Access of consumers to justice and the settlement of consumer disputes in
the Single Market”, the Commission set out a number of proposals aimed at resolving
individual and collective cross border disputes. This led to the adoption of Directive
98/27 on injunctions for the protection of consumers’ interests29 to allow qualified
entities (e.g. consumer associations) to seek injunctions where there has been an
infringement of one of the Directives related to consumer protection enumerated in
the annex and which harms the collective interests of consumers. In addition, the
Commission published a “Consumer Guide in the Single Market” and a “Guide to
Legal Aid in the European Union”.

The Commission has also been supporting for several years, a network of Consumer
“Euroguichets” which aim to support and give advice to consumers on access to
justice in cross border cases. Finally, the Commission adopted, in 1996, an “Action
Plan on consumer access to justice and the settlement of consumer disputes in the
internal market” which highlighted the need for Community action in regard to the
settlement of consumer disputes.

In the light of the consultations surrounding these initiatives the Commission adopted
in 1998 a “Communication on the out-of-court settlement of consumer disputes”. This
Communication contains two features designed to improve access to justice for

29

OJ No L 166 of 11.6.1998, p. 51

33

individual consumers: a consumer complaint form and Recommendation 98/257/EC30
laying down the principles applicable to out-of-court procedures for the settlement of
consumer disputes.

These two initiatives were aimed at addressing this issue through promoting access to
simple, swift, effective and inexpensive legal channels for
resolving disputes.
Member States were requested to notify the Commission of all out-of-court bodies
which applied the principles of the Recommendation and these where placed on the
Commission website. As the follow up the Commission adopted on 17 March 2000 a
“Working Paper on the creation of the EEF-Net” to provide a background and
framework to create a network of European out-of-court consumer dispute resolution
schemes: the European Extra-Judicial Network (EEJ-Net).

The EEJ-Net will utilise all existing alternative dispute resolution (ADR) schemes
notified to the Commission by Member States as complying with the principles within
Recommendation 98/257/EC. Member States have undertaken to establish national
contact points (or ‘Clearing Houses’).31 If a consumer has a dispute with an enterprise
he can then contact his Clearing House for advice and support to assist him in filing a
complaint with an out-of-court body where that enterprise is located. In cross-border
disputes the Clearing House will address existing barriers to seeking extra-judicial
redress such as language differences and lack of information and then pass the
complaint through the network to the appropriate out-of-court body.

The Commission further announced in its consumer policy action plan 1999-2001 a
number of initiatives concerning consumers' access to justice.32 In line with this action
plan, it published in February 2000 a Green Paper on Legal Aid in Civil Matters33 in
cross-border litigation. The Commission will adopt at the beginning of the year 2001
a Communication on widening access to justice for consumers, which will build on
existing Community initiatives and provide criteria to promote greater choice and
flexibility for using out-of-court resolution schemes.

Since Article 65 EC came into force in May 2000 the competence of the Community
has been extended to cover judicial co-operation generally. Therefore, these initiatives
should be seen in the wider framework of co-operation in ensuring citizens better
access to justice.

By the year 2001, the Commission will issue a Green Paper on alternative dispute
resolution (ADR) and a Working Paper on recovery of legal expenses and lawyers
fees. Other areas where the Commission intends to launch initiatives concern
measures to make it easier for consumers to take legal action collectively and the
definition of the applicable law to non-contractual obligations.

30

31

32

33

OJ No L 115 of 17.4.1998, p. 31
See Council Resolution of 25 May 2000 on a Community-wide network of national bodies for
the extra-judicial settlement of consumer disputes, OJ No C 155 of 6.6.2000, p. 1.
COM(98) 696 of 1.12.1998, p. 21
COM(2000) 51 of 9.2.2000

34

4.2.3 Initiatives with regard to environmental liability

The Commission adopted in February 2000 a White Paper on environmental
liability34 with a view to introducing a framework directive on environmental liability.
This future liability regime will provide for liability for damage to the environment as
such, next to covering traditional damage (damage to persons and goods) which is
caused by dangerous or potentially dangerous activities. It will have to ensure
coherence and consistency with Directive 85/374. In this regard, it is necessary to
determine the applicable regime in cases where there could be an overlap between
Directive 85/374 and the future environmental liability regime. This question needs
particular reflection as far as genetically modified organisms (GMOs) are concerned.
Directive 85/374, as amended by Directive 99/34, establishes already liability for
damage caused by GMOs to persons and property. The future environmental liability
regime should in any event supplement this by covering damage to the environment
caused by GMOs.

*

*

*

The Commission will continue to monitor the implementation and effects of the
Directive 85/374 in view of its requirement in Article 21 to submit periodic reports to
the Council and Parliament. Based on the findings of this report, it intends to set up a
forum for a continuous dialogue and exchange of information between the interested
parties with regard to product liability issues. The results of two studies will complete
the information available at present and allow the Commission to assess the need and
the feasibility of developing a strengthened Community liability system for defective
products. In parallel, the Commission will propose supporting actions in the area of
general product safety, access to justice for consumers and environmental liability.

34

COM(2000) 66 of 9 February 2000

35

FINANCIAL STATEMENT

1.

TITLE OF OPERATION

Report on the application of Directive 85/374 on Liability for Defective Products

2.

BUDGET HEADINGS INVOLVED

B5-3001

3.

LEGAL BASIS

Article 21 of Directive 85/374 on Liability for Defective Products foresees that the
Commission reports every five years to the Council on the application of the
Directive.

4.

4.1

DESCRIPTION OF OPERATION

General objective

At the present stage only limited information is available on the actual impact the
Community legislation on product
liability has on the internal market and the
consumer protection. The present report identifies information gaps with regard to the
application of product liability legislation in all the Member States which need to be
filled.

4.2

Period covered and arrangements for renewal

The duration of the action is limited to five years.

According to Article 21 of Directive 85/374, the Commission will present in 2005 a
report to the Council on the application of the Directive and, if necessary, submit
appropriate proposals to it.

5.

5.1

5.2

CLASSIFICATION OF EXPENDITURE OR REVENUE

Non-compulsory expenditure

Differentiated appropriations

6.

TYPE OF EXPENDITURE OR REVENUE

Purchases of studies.

36

7.

7.1

FINANCIAL IMPACT

Method of calculating total cost of operation (relation between
individual and total costs)

Operational expenditure (cost of studies) will amount to EUR 0,5 million.

All expenditure on incidental activities mentioned in the report in other areas than
those being directly linked with product liability have been or will be the subject of
separate financial statements.

7.3

Operational expenditure for studies, experts etc. included in Part B of
the budget

Commitment appropriations EUR 0,5 million (at current prices)

2001

2002

2003

2004

2005

2006

Total

Studies

0,5

0

0

Total

0,5

0

0

0

0

0

0

0

0

0,5

0,5

7.4

Schedule of commitment and payment appropriations

2001

2002

2003

2004

2005

2006

Total

EUR million

Commitment appropriations

0,5

0

Payment appropriations

Studies

Total

0,21

0,29

0,21

0,29

0

0

0

0

0

0

0

0

0

0

0

0

0,5

0,5

0,5

8.

FRAUD PREVENTION MEASURES

The rules and procedure governing procurement of goods and services for the
in accordance with the financial
Communities will be strictly complied with,
regulation applicable to the general budget of the European Communities,
the
regulation on modalities for the implementation of the financial regulation and
internal rules.

37

9.

9.1

ELEMENTS OF COST-EFFECTIVENESS ANALYSIS

Specific objectives; target population

Product liability legislation has a major impact on manufacturers and suppliers of
products as well as important consequences for consumers, therefore even small
modifications to the existing product liability framework, although limited, can have
an important effect. Studies appear to be the most efficient way of achieving a
consistent analysis of the situation across all the 15 Member States.

9.2

Grounds for the operation

The Commission is assessing the functioning of the internal market throughout the
Community. Only limited information is at the present stage available on the actual
impact the Community legislation on product liability has on the internal market and
the consumer protection. The aim of the present actions is to gather lacking
information by having recourse to the help of external expert knowledge. These
actions form part of the on-going assessment of the functioning of the internal market
legislation. They will highlight whether the legislation is achieving its objectives and
functions correctly and whether any changes are needed.

9.3

Monitoring and evaluation of the operation

This forms part of the ongoing monitoring of the Internal Market and more
particularly of the functioning of Directive 85/374 on which the Commission is
obliged to report every five years.

10.

ADMINISTRATIVE EXPENDITURE (SECTION III, PART A OF THE BUDGET)

The mobilisation of required administrative and human resources is covered by the
existing resources of the managing service.

38

10.1

Effect on the number of posts

Type of post

Staff to be assigned to managing
the operation

Source

Duration

Permanent
posts

Temporary
posts

Additional
resources

Existing
resources in
the DG or
department
concerned

Officials or
temporary staff

Other resources

0.54
0.16

A
B
C

Total

0.7

0.54
0.16

0.7

10.2

Overall financial impact of additional human resources

Amounts

Method of calculation

Officials

378.000

0,7 (two-third official per year) x EUR 108.000 x 5 years

EUR

Temporary staff

Other resources (indicate
budget heading)

Total

378.000

10.3

Increase in other administrative expenditure as a result of the operation

EUR

Budget heading

Amounts

Method of calculation

A 7030 General meetings

111.500

(10 private experts x EUR 790 + 5 experts
administrations x EUR 650 = 11.150 ) x 2 meetings x 5 years

from national

Total

111.500

39