A revised Product Liability Directive

The revised Product Liability Directive (“PLD Proposal”) builds on known rules such as the strict liability of manufactures for unsafe products, whilst modernising its scope to encompass digital products, circular economy business models and global supply chains:

• Products in the digital age: the PLD Proposal expressly outlines that AI systems, digital manufacturing files, (standalone or embedded) software and AI-enabled goods are all considered “products” within the scope of the EU’s product liability rules. In turn, this means that, provided specific requirements are met, an injured person is able to claim compensation for death, personal injury, property damage or even data loss caused by a defective AI system or AI product.
• Circular economy: as the number of products which can (and sometimes even have to) be modified or upgraded after being placed on the market are increasing, the PLD Proposal aims to ensure that consumers have the same rights to compensation for harm caused by defective modified products as they would for entirely new products. Therefore, the rules of the PLD Proposal are designed to also apply to remanufacturers and other businesses that substantially modify products in the event such products result in damage.
• Global supply chains: the PLD Proposal takes into account the vast number of products manufactured outside of the EU but in circulation on the EU market (for example, when consumers purchase products from outside the EU directly) and aims to ensure that  consumers can claim compensation from an EU-based economic operator in the supply chain.
• Proposed procedural changes: with the declared aim of putting consumers on an “equal footing” with manufacturers, the PLD Proposal includes provisions that require manufactures to disclose evidence in order to ease the burden of proof on consumers.

A brand new AI Liability Directive

Given their specific, nuanced characteristics (complexity, autonomy, opacity, the “black box” effect and more), the AI Liability Directive (“AILD Proposal”) aims to harmonise non-contractual, fault-based liability rules for AI-enabled products and services.

In a bid to provide more protection for all types of potential victims (individuals or businesses) who suffer damage as a result of an AI product or service, the AILD Proposal introduces three main features:

• Presumption of causality: where a relevant fault is established and a causal link to the AI performance is deemed as ‘reasonably likely’, a targeted rebuttable presumption of causality would apply under certain cumulative conditions. These conditions differ depending on whether the AI system in question is considered a high risk AI system (i.e. one which poses a high risk to health, safety or fundamental rights). In turn, claimants face less difficulty in trying to explain in detail the causal link between a defective AI product or system and the damage caused.
• Right of access to evidence: subject to certain safeguards, in cases where high-risk AI is involved, a court may order the disclosure of relevant evidence related to the specific AI system that is suspected of having caused damage.
• Amendment to Directive (EU) 2020/1828: last but not least, it is intended for the AILD Proposal to be added to Annex I of the EU's Representative Actions Directive, allowing for consumer representative actions (otherwise known as class actions or collective actions) to be initiated for claims falling within the AILD’s scope at a local Member State level.

The AILD Proposal also envisages a monitoring programme run by the European Commission who will review information on incidents involving AI systems. The European Commission will then use this information to consider whether more stringent measures (i.e. the introduction of strict liability for AI cases with a particular risk profile; mandatory insurance coverage etc.) should be introduced for AI systems.

Will the UK follow?

Similar to its approach to the EU’s AI Act (which regulates the use of AI on the EU market and was passed by the European Parliament on 13 March 2024, now awaiting publication in the European Official Journal), it is currently unclear (particularly as a result of the recent UK election) whether the UK government will follow in the steps of the EU and adopt similar measures to update its product liability rules to expressly address the use of AI systems. That said, the UK government has flagged AI technology as a key agenda item for its national growth in its AI Regulation Policy Paper and National AI Strategy Guidance – meaning AI regulation and governance is clearly in focus in the UK. 

Next steps

• The PLD Proposal was formally adopted by the European Parliament at first reading on 12 March 2024. It is expected that the Council of the European Union will follow suit and formally adopt the Directive at first reading shortly, after which it can be published in the Official Journal. It will then enter into force on the 20th day following its publication, with Member States having 24 months to transpose the Directive from the date of its entry into force.
• AILD Proposal: the AILD Proposal is trailing slightly behind the PLD Proposal with the European Parliament JURI Committee (Legal Affairs) yet to adopt its report on the proposal so that the European Parliament can vote on its first-reading position in plenary. The Council of the European Union is also carrying out its preparatory work in parallel to agree its position.

Businesses involved in the supply of AI products and services must take note of the expanding liability rules in the EU – implementing not only protective measures in the event of product liability claims (which will be more wide ranging than ever before), but also measures to avoid damage being caused by their AI products and services in the first place.

Hogan Lovells Global Products team is internationally renowned for its work across all industry sectors and jurisdictions on product regulatory compliance, safety and product liability litigation. We advise global technology giants on all aspects of a product’s lifecycle and have extensive experience in managing multi-jurisdictional and multi-party product liability litigation and class actions. We encourage businesses to keep an eye out for our future updates, and to get in touch with any questions they may have.

Authored by Valerie Kenyon, Vicki Kooner, and Lorena Baltazar.