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[To Eurosmart members only]
European Commission wants to make liability rules fit for the digital age
The European Commission recently published a document (Inception Impact Assessment) that considers several options to revise the current EU liability rules. The European Commission believes that the current rules are not fit for the digital age (e.g. AI) and circular economy.
The European Commission is currently receiving feedback on its document. Interested parties can submit comments until 28 July.
Background: shortcomings of the Product Liability Directive
The existing liability framework consists of the EU Product Liability Directive and national liability rules. The Product Liability Directive sets harmonised rules regarding claims against the producer for damage caused to a consumer due to the defectiveness of a product. Producers are liable even without fault (they are “strictly liable”). Implementation of the Directive depends on national rules (e.g. rules on evidence).
The Product Liability Directive dates back to 1985. The European Commission wants to address the shortcomings of the Directive resulting from emerging technologies (e.g. AI) and the circular economy. Among the identified shortcomings, the European Commission explains that the Directive does not consider digital products, such as software. It is unclear whether injured parties can be compensated for damage caused by software, including software update, and who will be liable for this. In addition, the Directive provides for compensation only for physical or material damage. For instance, data loss is not covered.
The European Commission also underlines that it is very challenging for injured parties to identify the responsible producer in case of digital technologies, especially for technologies bought on marketplaces. In the current framework, the injured person carries the burden of proof, meaning that he/she must prove the actual damage, the defect in the product and the causal link between the damage and the defect. Proving these elements can be very complicated in the case of AI systems.
The European Commission also notes that circular business models considerably developed since the adoption of the Directive. Products are repaired, recycled, refurbished, or upgraded. At the moment, the Directive puts the emphasis on the defectiveness of a product when it is put into circulation. It is unclear who should be liable for defects resulting from changes to products after they are put into circulation. The Directive also misses a provision on environmental damage.
Member States might try to resolve these problems by themselves (e.g. alleviate the burden of proof in national law), leading to fragmentation of rules across the EU.
Proposed modifications
The European Commission presents several options in its Inception Impact Assessment.
First, the European Commission would like to modernise the existing liability rules. The European Commission proposes an option to extend strict liability rules to cover intangible products (e.g. software) that cause physical/material damage and address defects resulting from product after placement on the market (e.g. software update or product refurbishment). This would imply revising the Product Liability Directive. Such a revision could also address defects resulting from interactions with other products (e.g. IoT) and cybersecurity risks. Strict liability would be extended to online marketplaces, where it is currently difficult to identify the producer. Additionally, the Commission could include non-material damages (e.g. data loss, privacy infringement) in the range of damages for which users can fill a claim.
The European Commission could also harmonise the existing strict liability schemes of operators/users that apply to AI-equipped products and providers of AI-based services. In this respect, the European Commission could put in place a risk-based approach for AI, whereby owners/operators of high-risk AI systems would also be covered by strict liability, not only producers. Mandatory insurance is also on the table. The system would be similar to the one in place for motor vehicles.
Secondly, the European Commission wants to make it easier for injured parties to make claims and get compensation. The European Commission envisages alleviating the burden of proof by obliging the producer to disclose technical information to the injured party and allowing courts to infer that a product is defective or caused the damage under certain circumstances (e.g. products from the same series have proven to be defective). The European Commission could also reverse the burden of proof, meaning that the producer would have to prove the product was not defective.
In the case of AI, the European Commission considers ensuring that producer of products that continuously learn remain strictly liable for damage. The European Commission envisages measures to alleviate the burden of proof for this specific case of AI systems.
The European Commission is currently receiving feedback on its document. Interested parties can submit comments until 28 July.
Eurosmart’s previous activities on the topic
Eurosmart had previously published a position paper on the Product Liability Directive. Eurosmart called on the Commission to consider software to be a product, enlarge the definition of damage, and address the specific case of evolving technologies.
Eurosmart is also a member of the Product Liability Directive Expert Group.
Please find below the lnception Impact Assessment and the link to the feedback platform.
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