LIABILITY FOR DEFECTIVE PRODUCTS
(20429)
10609/99
COM(99) 396
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Commission Green Paper on Liability for Defective Products.
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| Legal base: |
— |
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| Department: |
Trade and Industry |
| Basis of consideration:
| SEM of 9 February 2000
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| Previous Committee Report:
| HC 34-xxviii (1998-99), paragraph 7 (20 October 1999)
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| To be discussed in Council:
| Not applicable |
| Committee's assessment:
| Legally and politically important
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| Committee's decision:
| Cleared |
Background
4.1 The purpose of this Green Paper is to
give all interested parties an opportunity to comment on the efficacy
of Directive 85/374/EEC which seeks to protect victims of damage
to health, safety and property caused by a defective product.
4.2 When we last considered the document
(in October 1999), we decided to wait for a copy of the Government's
response before clearing it. We also asked for information about
any particular concerns made known to the Department.
4.3 The Parliamentary Under-Secretary of
State for Consumers and Corporate Affairs (Dr Howells) has now
provided us with a copy of the Government's response to the Green
Paper, together with information about the views of business and
consumer organisations.
Views expressed by business and consumer organisations
4.4 The Minister explains it has taken time
to collect these views, since few business or consumer organisations
copied their comments on the Green Paper to his Department, as
requested. However, it has now received a sufficient number of
replies on which to report. He summarises the views as follows:
"Businesses take the view that the Directive
has generally worked well and do not believe that there are grounds
for significant amendment. They believe that the Directive strikes
a fair balance between the interests of consumers and business.
They observed that some of the suggestions for amendment in the
Green Paper would have a serious effect on the competitiveness
of EU companies, as well as on innovation and employment.
"Businesses were particularly concerned that
any proposal to remove the development risks defence[25]
would stifle innovation. If companies were reluctant to introduce
new technology to the market this would restrict the quality and
choice of goods available to consumers. They were also strongly
opposed to any easing of the burden of proof for the injured party.
They considered that any such alteration would be likely to encourage
speculative claims giving rise to unnecessary costs caused by
defending claims where no defect in the product was found to be
responsible for injury. Businesses also considered that the current
ten-year liability limitation should be retained. They felt that
an increased time limit for bringing claims would bring significant
additional costs, particularly for small businesses, to protect
themselves.
"Consumers generally want the removal of the
development risks defence which they see as an unfair bar to obtaining
compensation. Furthermore, they noted that in a few Member States
which have not included this optional defence in their legislation
(e.g. Finland) the level of protection enjoyed by consumers is
higher.
"Consumers also had particular concerns about
the time limits for bringing claims under the Directive. They
commented that while the current ten-year limit is not a problem
in many cases, they are concerned about harm involving pathological
conditions which are slow to develop (e.g. CJD[26])
and may not become apparent until after the ten year limit has
expired."
The Government response to the Green Paper
4.5 The Government has replied to all the
Commission's questions. Its replies to the key ones which we highlighted
in our last Report are as follows:
Do you think that the experience of implementing
the directive justifies its being amended in order to make it
easier to determine the burden of proof? How? (Q.9)
"The Directive provides that the injured person
must prove the damage, the defect and the causal relation between
them. In implementing the Directive, the UK took the view that
the standard of proof should be the same as in all other civil
proceedings. That is, the injured person must be able to show
that on the balance of probabilities (i.e. it is more probable
than not) a defect in the product caused the damage. The fact
that the injured person does not have to show fault on the part
of the producers is a considerable advantage. And we are not aware
of any case failing because of problems of proving the defect."
Would "market share liability" be feasible
in Europe for cases in which there are several producers of the
same product and it is not possible to identify the producer of
the product in question? (Q.10)
"As the Directive is currently applied Article
3 of the Directive ensures that where the producer of the product
cannot be identified, each supplier of the product shall be treated
as its producer. However, if the supplier informs the injured
person within a reasonable time of the identity of the producer
or the person who supplied him with the product any potential
liability passes to that person. For example, a retailer will
be liable unless he identifies his supplier. We therefore see
no need to adopt a market share concept. Also, we feel this would
have far reaching consequences for producers and might discourage
record keeping for traceability purposes."
Do you think that producers should be liable for
development risks? Should damages caused by development risks
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 contributory fund)? (Q.11)
"The UK included the development risks defence
in its implementing legislation. However, to date, we are not
aware of any case law in the UK in which this defence has been
invoked.
"It is understandable that a consumer who is
injured by a defect in a product which could not have been foreseen
would feel aggrieved that he does not have a right to compensation
under this Directive where the producer proves this defence. However,
we are concerned that if the burden of compensation were to fall
on business in such cases, this would stifle innovation. This
would, in turn, damage business competitiveness and restrict consumer
choice.
"The Government has no current financial provision
for a compensation scheme of this kind. It would also be difficult
to assess the likely demand on such a fund."
Does the time limit of ten years need to be changed,
either generally or specifically for certain products or sectors?
Should and could that change be borne in terms
of cost by industry, especially SMEs and the insurance market?
(Q.13)
"Those who advocate increasing the period of
liability are clearly concerned that some injuries (such as BSE[27])
have long incubation periods and may appear later than 10 years
after the product was supplied. We have some sympathy with this
concern, but we believe that doubling the period, for example,
would add significantly to business costs, and would bear particularly
heavily on smaller enterprises. We are also concerned about the
practicability of deciding to which sectors to apply longer time
limits. Also, such an added layer of complexity would not be in
the interests of business or consumers."
Are you aware of any cases whereby lack of insurance
made it impossible for victims to obtain re-reimbursement for
damages? Do you think that there is a need to require producers
to have insurance cover for risks linked to production, or, alternatively,
to encourage voluntary arrangements between producers and the
insurance market? (Q.14)
"We have not heard of any such instances. We
believe insurance cover for product liability is a matter for
individual businesses to decide in line with other commercial
risks."
Do you think that the directive needs to be extended
to cover real estate property? (Q.17)
"We feel construction activities are largely
a service activity. We believe that liability for defective working
practices (as opposed to the supply of defective products) is
best considered under any separate initiative which the Commission
may propose for defective services."
4.6 The Commission wishes to publish responses
to the Green Paper on its website and has asked to include the
response from the UK Government. The Minister seeks our agreement
before giving permission.
4.7 The Commission will report to the Council
at the end of 2000 on the comments received, before preparing
a proposal for amendment of the Directive, if appropriate.
Conclusion
4.8 We thank the Minister for giving
us a copy of the Government's response to the Green Paper, which
we certainly agree should be published on the Commission's website.
We also thank him for informing us about the views of business
and consumer organisations.
4.9 We note that the general tenor of
the response is against amendments to the Directive, and that,
where the views of business and consumer organisations conflict
(as over the development risks defence and the time limits for
bringing claims), the Government has taken the side of business.
As the organisations have commented directly to the Commission,
we shall be interested to see what balance of view is reflected
in its eventual report. Meanwhile, we clear the document.
25 Under the so-called "developments risk"
defence, a producer is not liable if he can show that the state
of technical and scientific knowledge at the time when he put
the product into circulation was not such as to enable the defect
to be discovered. Back
26 Creutzfeldt-Jakob
Disease. Back
27
Bovine Spongiform Encephalopathy. Back
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