The current EU rules on product liability, based on the strict liability of manufacturers, are almost 40 years old.  As a result, they do not reflect current trends or requirements. Consequently, the European Commission has come up with two new laws to adapt liability rules to the digital age and the circular economy, among other things.

Firstly, it proposes to update the existing rules on the strict liability of manufacturers for defective products to move with the times. Secondly, the Commission proposes to harmonise national liability rules for AI in a targeted way, with the aim of making it easier for victims of AI-related damage to obtain compensation. 

Revised Product Liability Directive

The revised Directive modernises and reinforces the current well-established rules, based on the strict liability of manufacturers, to compensate for personal injury, damage to property or data loss caused by unsafe products, from garden chairs to advanced machinery. It:

  • Modernises liability rules for circular economy business models, by setting out clear and fair liability rules for companies that substantially modify products.
  • Modernises liability rules for products in the digital age by providing for compensation for damage if products such as robots, drones or smart-home systems are made unsafe by software updates, AI or digital services that are needed to operate the product.  New rules will also apply if manufacturers fail to address cybersecurity vulnerabilities.
  • Creates a more level playing field between EU and non-EU manufacturers: when consumers are injured by unsafe products imported from outside the EU, they will be able to turn to the importer or the manufacturer's EU representative for compensation - UK producers will need to take this into account.
  • Puts consumers on an equal footing with manufacturers: by requiring manufacturers to disclose evidence, by introducing more flexibility to the time restrictions to introduce claims, and by alleviating the burden of proof for victims in complex cases, such as those involving pharmaceuticals or AI.

AI Liability Directive

The purpose of the AI Liability Directive is to set out uniform rules for access to information and alleviation of the burden of proof for damage caused by AI systems, and to establish wider protection for victims (whether individuals or businesses). It will harmonise certain rules for claims outside of the scope of the Product Liability Directive, where damage is caused due to wrongful behaviour. This covers, for example, breaches of privacy, or damages caused by safety issues. As an example, the new rules will make it easier to obtain compensation if someone has been discriminated against in a recruitment process involving AI, something that we have written about a few times at Lewis Silkin.

The Directive simplifies the legal process for victims when it comes to proving that someone's fault led to damage, by introducing two main features: 

  • where a relevant fault has been established and a causal link to the AI performance seems reasonably likely, the so called ‘presumption of causality' will address the difficulties experienced by victims in having to explain in detail how harm was caused by a specific fault or omission, which can be particularly hard when trying to understand and navigate complex AI systems. 
  • victims will have more tools to seek legal redress, by introducing a right of access to evidence from companies and suppliers, where high-risk AI is involved.

Next steps

The Commission's proposal will now need to be adopted by the European Parliament and the Council. The Commission plans to assess the need for no-fault liability rules for AI-related claims five years after the entry into force of the AI Liability Directive.

UK position

This is a subject that has been considered by the Law Commission of England and Wales and the Scottish Law Commission in relation to their work on automated vehicles and was covered to a limited extent in the Automated and Electric Vehicles Act 2018.  As part of that work, the Law Commissions said that they believed that a wider reform of product safety law is required in the UK. 

On 11 March 2021, the Office for Product Safety and Standards published a call for evidence seeking views on possible changes to the UK product safety regime, including to address new methods of manufacture and distribution, new products and technologies such as AI and environmental considerations. On 11 November 2021, the OPSS published its analysis of the responses, focusing on the five main themes of the call for evidence:

  • Product design, manufacture and placing on the market.
  • New models of supply.
  • New products and product lifecycles.
  • Enforcement considerations.
  • A diverse and inclusive product safety framework.

The government intends to use the information supplied, alongside wider evidence and research, to shape policy proposals for the UK's future product safety framework. However, it remains unclear when exactly the OPSS intends to publish its proposals, and with the current turmoil at the top of government, it may take some time.