The new EU Product Liability Directive (Directive (EU) 2024/2853) represents a comprehensive overhaul of existing product liability laws, expanding the scope of what the law considers to be a "product" and the compensable harm a claimant can pursue. In this article we highlight the key features of the new Directive and look at what it means for businesses operating in or exporting products to the EU.

Introduction

As the European Union continues to adapt to the ever-evolving landscape of consumer goods and technological advancements, it has become imperative to update and refine the legal frameworks that protect consumers and ensure fair trade practices.

A new Product Liability Directive (“the Directive”), which came into force on 9 December 2024 – and which Member States must implement into their national laws by December 2026 – represents a comprehensive overhaul of the existing regulations, aimed at addressing the challenges posed by modern products, such as digital goods, artificial intelligence and complex supply chains. The Directive will apply to products placed on the market or put into service after 9 December 2026 and complement the requirements of the new EU General Product Safety Regulation.

The need for a new directive

The previous product liability framework, established in 1985, was ground breaking at its inception, but has been outdated by the pace of technological advancement and globalisation. The nature of products has changed dramatically, with digital and AI-driven goods becoming commonplace. Moreover, the complexity of supply chains has increased, making it more difficult to pinpoint liability in cases of product defects.

The Directive seeks to address these issues by expanding the scope of product liability to include digital and AI products, clarifying the responsibilities of different actors in the supply chain, and easing the way for claimants to pursue a legal action for defective products, particularly in complex cases.

Key features of the new EU Product Liability Directive

1. Expanded scope – liability for AI and digital products

One of the most critical aspects of the Directive is its broadening of the scope of product liability law to explicitly include not only software and software updates – including both standalone software and software integrated into a product – but more broadly any core digital ‘related services’ integrated into a product. The recitals to the Directive show how broad this scope is, including for example cloud services for smart devices, real-time data services for navigation systems and digital manufacturing files.

Notably, the recitals to the Directive explicitly envisage that this expanded scope will include liability for developers of AI products.

2. Supply chain responsibility

In a globalised economy, it is common for products to pass through multiple hands before reaching the consumer. The Directive clarifies the responsibilities of various actors in and adjacent to the supply chain, including manufacturers, importers, distributors, and online platforms. The object is to ensure there is always at least one EU-based entity which may be held liable. Joint and several liability remains where two or more parties are liable for a defect (for example, the manufacturer of a defective component and the manufacturer of the product into which the component was incorporated).

The Directive follows a similar hierarchy of liability as the previous framework. An EU-based manufacturer is likely to face primary liability, whereas the importer into the EU or the manufacturer’s EU-based authorised representative may be held liable where the manufacturer is based outside of the EU. In certain circumstances, other entities may be held liable. Significantly, this includes online platforms where an average consumer would believe that the product was provided by the platform itself or by a user under its authority or control, and where the platform fails upon request to promptly identify a relevant economic operator within the EU.

Each actor will be required to ensure that the products they handle comply with safety standards, relevant records are retained, and that any defects are promptly addressed.

3. Enhanced consumer rights

The Directive introduces several measures to bolster consumer rights. These include extended periods for reporting defects and increased transparency regarding the safety and performance of products, including explicit obligations in relation to the disclosure of relevant evidence of a product’s safety.

Whereas the basic test for defectiveness remains almost identical as under the previous regime (for example, where the product “does not provide the safety that a person is entitled to expect”, taking “all circumstances” into account), a new set of rebuttable presumptions will be introduced to make it easier for claimants to prove that a product was defective and that the defect caused the harm suffered.

A product will be presumed to be defective where the defendant fails to disclose relevant evidence at its disposal, where the claimant demonstrates that the product does not comply with exiting EU mandatory safety requirements intended to protect against the risk of damage, or where the damage was caused by an obvious malfunction under reasonably foreseeable use; the example given for the latter in the recitals of the Directive is a glass bottle exploding in the course of reasonably foreseeable use. Causation will be presumed where it is established that the product was defective and that the damage is of a kind that is “typically consistent” with the relevant defect.

Importantly, where the claimant would face “excessive difficulties” in proving the defectiveness or the causal link between defectiveness and the harm suffered, for example “due to technical or scientific complexity”, defectiveness and/or the causal link will be presumed where the claimant demonstrates that it is “likely” that the product is defective or that the defect caused the harm suffered.

4. New compensable harm and financial claim thresholds

The Directive will also introduce new types of compensable harm for destruction/corruption of data and medically recognised and certified psychological harm, including where such harm is not the result of physical harm.

As with the previous directive, there is no maximum financial limitation on liability for defective products, but the Directive also removes the de-minimis threshold of the previous framework, meaning claims for trivial financial loss might now be pursued.

Implications for manufacturers and businesses

The Directive will have far-reaching implications for manufacturers and businesses operating within the EU. Companies will need to adapt their practices and processes to comply with the new framework. This may involve investing in new technologies to ensure product safety, enhancing supply chain transparency, and maintaining detailed records of product performance and AI decision-making. In addition, companies should review their contractual arrangements where components from third party manufacturers are incorporated into the finished product, to ensure appropriate warranties and contractual remedies are in place.

Although the UK has left the EU, UK businesses exporting to the EU (and businesses operating in Northern Ireland) will need to ensure compliance with the Directive. This may involve adapting product designs, updating safety protocols, and maintaining detailed records to demonstrate compliance. It is also advisable that businesses establish a sophisticated system to trace products through the supply chain to help identify and address any issues, particularly involving batches of products suspected to be defective. 

In due course, the UK may align its own product liability laws with the Directive to facilitate trade and ensure high standards of consumer protection. This alignment could simplify regulatory compliance for businesses operating across both markets.

Challenges and criticisms

Despite many advantages, the Directive has faced criticism and posed challenges for businesses. One major concern is the potential increase in compliance costs, particularly for small and medium-sized enterprises (SMEs). These businesses may struggle to meet the stringent requirements of the Directive without significant financial investment.

Additionally, some industry stakeholders have expressed concerns about the Directive's impact on innovation. They argue that the increased regulatory burden could stifle creativity and slow down the development of new products. However, proponents of the Directive contend that robust safety standards and consumer protection are essential for sustainable innovation.

Moreover, the expansion of the scope of recognisable harm may open the door to novel and creative claims, whilst the removal of minimum financial thresholds for claims may present opportunities for low-value claims to be brought en-masse (facilitated by the Representative Actions Directive). This appears particularly likely in cases of defective software resulting in a loss of data, where the financial loss might be close to zero but nevertheless (in theory) recoverable under national law implementing the Directive.

Lastly, whilst the burden of proof is said to remain on the claimant to prove that the product was defective and that the defect caused the harm suffered (with the help of the rebuttable presumptions referred to above), the introduction of the presumption of defectiveness and a causal link in complex scenarios where the claimant merely demonstrates a likelihood of defectiveness or causation risks a role reversal, leaving the defendant(s) to prove that the product was not defective or that the defect did not cause the damage.

Conclusion

The Directive represents a significant step forward in consumer protection and product safety within the EU. By addressing the challenges posed by modern products and complex supply chains, the Directive aims to create a safer and more transparent market for consumers. While businesses may face challenges in adapting to the new requirements, the potential benefits in terms of consumer trust and competitive advantage are substantial.

The Directive is not just a regulatory update; it is a necessary evolution that reflects the dynamic nature of today's market and the EU's commitment to protecting consumers and fostering innovation. As we move forward, the Directive will undoubtedly shape the future of product liability and consumer protection in the EU – and, perhaps, beyond.

The Directive can be read in full here: *Directive (EU) 2024/2853 of the European Parliament and of the Council of 23 October 2024 on liability for defective products and repealing Council Directive 85/374/EEC (Text with EEA relevance)

Our commentary on the new EU General Product Safety Regulation can be read here.