by Luca Farkas
The new EU Directive on Liability for Defective Products (“PLD”)[1] was published on 18 November 2024, replacing the existing EU Product Liability Directive 85/374/EEC. The new PLD aims to modernize the EU’s consumer protection laws in response to technological advancements, including Artificial Intelligence (AI), the Internet of Things (IoT), and other digital innovations.[2] The update introduces significant claimant-friendly changes, bringing the EU's product liability framework, which has been in place since 1985, into the 21st century.[3]
A revision of the old PLD was needed, as although it effectively provided compensation to injured consumers, it struggled to address the complexities of modern technologies like AI, interconnected devices, and new business models such as the circular economy.[4] The new Directive is better aligned with today's technological realities, ensuring that claimants receive the same level of protection regardless of the technology involved, while providing businesses with greater legal certainty.[5]
This article explores the key provisions of the new PLD relevant to the digital sector and AI, as well as its potential to transform product liability law within the EU.
Expanding the Definition of "Products": Implications for Digital and AI Innovations
Compared to the “product” definition of the old Directive, the new PLD broadens the term “product” to include digital manufacturing files, raw materials, and all software – whether embedded in hardware or distributed independently.[6] This also encompasses software updates, upgrades, and AI, as well as interconnected devices, such as those within the IoT.[7] However, the content of digital files, for example e-books or source codes are not included.[8]
As a result, software developers, including AI system providers are considered manufacturers under the revised PLD and can be held liable under the EU’s no-fault liability regime if their products cause harm to consumers.[9]
Addressing Information Imbalance: Disclosure Obligations in AI Liability Cases
Another significant development under the new PLD is the introduction of disclosure obligations. When a person seeking compensation for damage caused by a defective product has provided sufficient evidence to make the claim plausible, Member States shall ensure that the defendant is required to disclose relevant evidence in their possession.[10] The disclosure of evidence must be limited to what is “necessary and proportionate”, considering the legitimate interests of the concerned parties.[11]
This change is intended to address the information imbalance between consumers and manufacturers, especially in cases involving complex products like AI systems, where manufacturers may hold critical information that is inaccessible to claimants.
Redefining the Burden of Proof: Presumptions of Defect in Complex AI Cases
Although in general, the claimant is required to prove the defectiveness of the product, under the new PLD, the defectiveness of the product shall be presumed when the defendant fails to comply with a disclosure request.[12] With this rebuttable presumption of defect, the burden of proof shifts to the manufacturer. The introduction of this provision is likely to lead to increased litigation, especially in jurisdictions where disclosure practices have been limited.
Similarly, the court shall presume the defectiveness of the product and the causal link between its defect and the damage, when the claimant faces excessive difficulties—particularly due to technical or scientific complexities, such as in the case of AI systems—in proving either the defect or the causal connection, as long as the claimant shows it is likely that the product was defective or that the defect caused the damage.[13]
New Liabilities and Narrowed Defences for AI and Software Products
The revised PLD establishes liability for situations where software updates, necessary to maintain product safety, are not provided, creating an ongoing obligation for developers to ensure product security through regular updates, removing the previous exemption from liability upon release.[14] The new Directive also addresses the implications of circular economy business models by holding individuals or companies that repair or upgrade products outside the original manufacturer’s control liable for any defects caused by these modifications.[15] This new regime also expands the scope of liability to include new types of recognized compensable harm, such as data loss, medically recognized psychological harm, and other intangible damages caused by digital products and AI systems.[16]
The new PLD retains certain defences available under the previous regime, such as the development risks defence,[17] which allows a manufacturer to avoid liability if the defect could not have been discovered given the state of scientific and technical knowledge at the time the product was placed on the market. However, for digital products like software and AI, certain defences are more limited. For instance, if a defect arises due to a software update or the lack of a necessary update, the manufacturer may still be held liable even if the defect did not exist when the product was initially released.[18] This effectively places a new responsibility on software developers to ensure their products remain safe throughout their lifecycle, regardless of when the product was first placed on the market.
Integrating the New PLD into the EU’s Broader Regulatory Framework
The new Product Liability Directive (PLD) is part of a broader, EU-wide regulatory framework designed to enhance consumer protection and ensure the safety of products within the internal market. This is also shown by the fact that new PLD introduces updated criteria for determining whether a product is defective. Besides considering for example compliance with relevant product safety requirements, and the capacity to learn or acquire new features after deployment, the court shall now also consider adherence to safety requirements of EU or national law. The relevant EU law includes the NIS2 (Directive 2022/2555), the General Product Safety Regulation (Regulation 2023/988/EU) or the AI Act.[19]
Another important regulatory initiative is the draft of the AI Liability Directive,[20] the final version of which is still being debated, and its adoption remains uncertain.[21] While the European Parliament and the Council reached an informal agreement on the proposal's text in December 2023, recent developments, including a complementary impact assessment published by the European Parliamentary Research Service, suggest significant revisions.[22] The Directive is still subject to further discussion, and it is not yet clear whether it will proceed as initially planned or be transformed into a regulation. If adopted, it is intended to apply to non-contractual, fault-based civil law claims within the EU, ensuring individuals harmed by AI systems receive the same level of protection as those harmed by other technologies.[23] The AI Liability Directive is considered important, as current fault-based liability frameworks may not fully address the unique challenges presented by AI-enabled products and services.
Anticipating Legal Challenges: The Impact of the New PLD on AI Liability
The introduction of claimant-friendly features in the new PLD, such as simplified procedures for bringing claims, increased access to evidence, and an expanded scope of liability, is expected to increase product liability litigation across the EU.[24] The revised directive is designed to make it easier for claimants, both individually and collectively, to pursue compensation for harm caused by defective products.[25]
Moreover, the updated PLD is likely to fuel the rise of collective actions, as it enhances the ability of consumer protection organizations and other bodies to bring claims on behalf of multiple consumers. This could lead to a wave of new litigation, particularly in industries where AI and connected devices are widely used.
Key Milestones and What’s Next for AI and Product Liability
The revised PLD will come into force on December 9, 2024, after which member states will have two years to transpose it into their national law.[26] Its provisions significantly impact manufacturers, including those producing software, AI systems, and connected devices.
The new PLD is likely to result in increased product liability litigation across the EU, as it will make it easier for claimants to bring lawsuits, either individually or collectively. Additionally, it will facilitate organizations representing collective claimants in initiating claims related to allegedly defective products.[27]
[1] Draft Proposal for the New Product Liability Directive, PE-CONS 7/24, Procedure File: 2022/0302(COD), European Parliament and Council, Sept. 25, 2024, hereinafter: New PLD.
[2] New PLD, Preamble (3).
[3] Freshfields Bruckhaus Deringer, The new Product Liability Directive – An update on the EU’s modernised, consumer-friendly product liability regime, November 2024. https://www.freshfields.com/4acc84/contentassets/21621d7cbef445249cffcfa6753ccca6/the-new-product-liability-directive---an-update-on-the-eus-modernised-consumer-friendly-product-liability-regime.pdf, hereinafter: Freshfields, The New Product Liability Directive.
[4] New PLD, Preamble (3).
[5] New PLD, Preamble (3).
[6] New PLD, Article 4.1.
[7] Freshfields, The New Product Liability Directive.
[8] Baker McKenzie, Marc Prat, European Union: New directive on product liability (including goods with AI), 02.11.2024. https://www.globalcompliancenews.com/2024/11/02/https-insightplus-bakermckenzie-com-bm-consumer-goods-retail_1-european-union-new-directive-on-product-liability-including-goods-with-ia_10222024/, hereinafter: Baker McKenzie, Marc Prat, New Directive on Product Liability.
[9] New PLD, Preamble (13). See also: Freshfields, The New Product Liability Directive.
[10] New PLD, Article 9.1.
[11] New PLD, Articles 9.3. and 9.4.
[12] New PLD, Articles 10.2 (a) and 10.5.
[13] New PLD, Preamble 48 and Article 10.4.
[14] Baker McKenzie, Marc Prat, New Directive on Product Liability.
[15] European Union, PRESS RELEASE 746/24, EU Brings Product Liability Rules in Line with Digital Age and Circular Economy, 10.10.2024.
[16] Freshfields, The New Product Liability Directive.
[17] New PLD, Article 11.1 (e).
[18] New PLD, Article 11.2.
[19] Covington & Burling, What Can You Expect from the New Product Liability Directive?, 11.10.2024. https://www.cov.com/en/news-and-insights/insights/2024/10/what-can-you-expect-from-the-new-product-liability-directive, hereinafter: Covington & Burling, New Product Liability Directive; Freshfields, The New Product Liability Directive.
[20] Procedure File of 2022/0303(COD), Legislative Observatory, European Parliament, Adapting non-contractual civil liability rules to artificial intelligence (AI Liability Directive), https://oeil.secure.europarl.europa.eu/oeil/en/procedure-file?reference=2022/0303(COD).
[21] InsidePrivacy, The EU Considers Changing the EU AI Liability Directive into a Software Liability Regulation, 10.01.2024. https://www.insideprivacy.com/european-union-2/the-eu-considers-changing-the-eu-ai-liability-directive-into-a-software-liability-regulation/.
[22] Ibid.
[23] White & Case, AI Watch - Global Regulatory Tracker: European Union, 18.10.2024. https://www.whitecase.com/insight-our-thinking/ai-watch-global-regulatory-tracker-european-union, hereinafter: White & Case, AI Watch - EU Tracker.
[24] Freshfields, The New Product Liability Directive.
[25] Ibid.
[26] Baker McKenzie, Marc Prat, New Directive on Product Liability.
[27] Covington & Burling, New Product Liability Directive.
