Recent Developments in European Product Liability
The Product Liability Directive, 85/374/EEC ("the Directive") lays down common rules governing liability for defective products in the European Union ("EU"). It imposes strict liability on the producer of a defective product for damage caused by the defect. A product is defective if it does not provide the safety that consumers generally are entitled to expect taking account of all of the circumstances, including the product's get up and presentation and its expected use.
In the last few years, the European Court of Justice ("CJEU") has considered several important issues regarding the scope of the Directive, including the meaning of "defect", the approach to causation, the application of special rules on liability and the rules governing jurisdiction in product liability claims. In this article we discuss those cases and also address the European Commission's consultation on the Directive, which will consider whether any changes should be made to its scope.
What's in a Product Defective?
More than 20 years after the Directive was enacted, the CJEU has provided its first guidance on the circumstances in which a product may be treated as defective. In Joined Cases C-503/13 and C-504/13, Boston Scientific Medizintechnik GmbH v AOK Sachsen-Anhalt and Others, the CJEU was asked to determine if a product is defective if it forms part of a product group which has a significantly increased risk of failure, but where a defect has not been detected in each specific product.
The Court considered two related cases concerning implanted medical devices, a pacemaker and a cardioverter defibrillator, which were both manufactured by Boston Scientific. In relation to the pacemaker, Boston Scientific's quality control system established that a component used hermetically to seal the pacemaker could degrade over time causing premature and sudden loss of battery power. The risk of failure was between 0.3% and 0.9%. Boston Scientific wrote to physicians recommending that they consider replacing the pacemakers in affected patients, and agreed to provide the new devices free of charge and to pay for the explanation operation.
With regard to the cardioverter defibrillator, the manufacturer identified that, in certain circumstances, a magnetic switch in the defibrillator could remain stuck in the closed position, inhibiting the treatment of ventricular and atrial arythmias. Boston Scientific advised that the magnetic switch should be deactivated. In four cases out of 46,000 the devices were found to have a fault and in those cases the patients became aware of the problem by audible beeping warning tones and the device was replaced.
The proceedings related to a claim by the patients' health insurers who sought reimbursement of the costs of original implantation (in case of the pacemakers) or the costs of replacing the devices (in the case of the defibrillators). In both cases, the affected devices were destroyed after removal, so there was no evidence that the relevant device had actually malfunctioned.
In deciding this question, the CJEU has provided guidance on the meaning of "defect" for the purposes of the Directive. Defect is defined in Article 6 of the Directive, which provides that a product is defective when it does not provide the safety which a person is entitled to expect, taking into account all the circumstances, including the product's presentation, the use to which it could reasonably be expected to be put and the time when the product was put into circulation (this is termed the "consumer expectations test"). In construing this provision, the Court made reference to the sixth recital to the Directive, and stated that the effect of that recital was that the "assessment must be carried out having regard to the reasonable expectations of the public at large". Taking these factors into account, the Court concluded that the consumer expectations test must be assessed by taking into account various factors, including the intended purpose of the product, its objective characteristics and properties and the specific requirements of the group of users for whom the product is intended. Although the test is, therefore, said to take into account the expectations of the public at large, in practice, the test encompasses the specific requirements and expectations of the group of users for whom the product is intended.
The CJEU concluded that, where products belonging to the same production series have a potential defect, it was fair to classify all products in that production series as defective without the need to establish that any specific product was, in fact, defective. In reaching its conclusion, the CJEU noted that, on the facts of the cases before it, the affected patients were entitled to expect a particularly high safety level given that the devices were implanted and there was a risk of very serious damage if the product malfunctioned, i.e. a risk of death or cardiac failure. Taking account of these factors, the Court concluded that its interpretation was consistent with the objectives of the Directive as indicated by, in particular, the second and seventh recitals to the Directive, which make it apparent that the legislation was intended to ensure a fair apportionment of risks between the injured person and the producer of the product.
Although the Court appeared to take account of the specific risks arising from implantable medical devices in reaching its decision, its conclusion is broadly framed. It refers to the position where a group or series of products "such as pacemakers or cardioverter defibrillators" have a potential defect, and treats it as relevant that the products had an "abnormal potential for damage". However, the Court does not expressly limit the decision to the facts of those cases. The question of whether the design could, in practice, be safer, or the relevance of warnings was not discussed. It remains to be seen how national courts will interpret the CJEU's decision. It is clear that the Court is saying that, in certain circumstances, it may be possible to prove the legal concept of defect for the purposes of establishing liability under the Directive without showing an actual material defect in the individual product. As the Court has not formulated any very clear principles, it is not apparent in what circumstances, apart from a case of implanted medical devices, defect may be established in this way.
The CJEU was also asked to provide guidance on the damages recoverable in such circumstances and, in particular, whether the costs of an operation to remove and replace the defective medical device constituted losses caused by personal injury which are recoverable under the Directive. Again, the CJEU adopted a broad approach to the meaning of "damage". It held that since, under the Directive, it is necessary to prove that there is a causal relationship between the defect and the damage suffered, compensation for damage relates to any damage or losses that are necessary "to eliminate harmful consequences and to restore the level of safety which a person is entitled to expect". As a result, in the case of the defective pacemaker, compensation for damage covered the replacement of the defective product, and included the costs of the surgical operations. In the case of the cardioverter defibrillators, the national referring Court was asked to determine whether deactivation of the magnetic switch was sufficient to remedy the defect in that product, bearing in mind the particularly vulnerable situation of patients using that implanted device and the high risk of damage if a defect arose.
The CJEU's broad approach to the meaning of "damage" appears to conflict with Article 9 of the Directive, which expressly provides that "damage" does not include the costs of replacement of the defective product. It also potentially cuts across national case law on this issue, which can limit the damages recoverable in specific circumstances of this type. Claimant lawyers are likely to rely on the decision to argue that all losses and expenses potentially related to the use of a defective product are recoverable, however remote the loss.
One potential application is in relation to claims for the recovery of the cost of medical monitoring. Many US Courts have permitted the recovery of damages in respect of the cost of so called "medical monitoring" where a product has not yet caused injury, but may do so in the future, including the costs of regular investigations and appointments with a medical practitioner to determine if a condition or complication potentially caused by the product has in fact arisen. Claims have been brought in situations like the Boston Scientific case, where an implanted device has not in fact malfunctioned and the medical advice to the patient is to carry out regular checks to determine the continued safe operation of the device, rather than running the risk of operating to remove the device. There have also been cases involving medicinal products where medicinal monitoring may be approved to look for, for example, a rare adverse effect which may only become manifest some years after the product was taken. The approach to recovery of these types of damages differs throughout the EU. However, large scale medical monitoring claims of the type pursued in the US have not been a feature of European litigation. The precise scope of the Boston Scientific decision remains to be explored, Claimants may argue that, in the light of the wider definition of "damage" adopted by the CJEU and the broad definition of defect applied (which includes the situation where the product forms part of a production series and there is an increased risk of failure) such costs should be recoverable.
In conclusion, depending on how the Boston Scientific decision is construed, it has the potential to expand the scope of liability under the Directive beyond what was previously understood, and more generally with respect to the range of damage recoverable where a product is found to be defective. Most legal commentators had previously assumed that, because under the Directive the claimant has the burden of proving that the product is defective, liability would only arise if a product was shown actually to be defective, as opposed merely to be at increased risk of becoming defective.
In a pending reference, the French Cour de Cassation has asked the CJEU to provide guidance on the evidential requirements to prove causation for the purposes of the Directive. Case C-621/15, W X Y v Sanofi Pasteur MSD SNC and Others, concerns a claim for damages brought against Sanofi Pasteur in respect of Mr W's condition of multiple sclerosis which, it is alleged, was caused by his vaccination against Hepatitis C with a vaccine manufactured by Sanofi Pasteur. The Paris Cour d'appel reviewed the scientific evidence supporting the claim for causation and concluded that there was no scientific consensus to support the existence of a causal relationship in these circumstances. However, under French law a causal association may be presumed where a disease manifests itself shortly after administration of an allegedly defective product in circumstances where there are no personal or family antecedents related to the disease, even if existing medical research does not generally confirm the existence of such an association. Against this background, the Cour de Cassation has asked the CJEU to provide guidance on the Claimant's obligation under Article 4 of the Directive to prove the "causal relationship between damage and defect" and whether the presumption of causation permitted under French law is consistent with that burden of proof.
Advocate General (AG) Bobek delivered his Opinion on the reference on 7 March 2017. He concluded that the standard of proof and what evidence is required to meet that standard are not harmonised by the Directive and are, therefore, matters of national law, subject to the overarching requirement that those national laws must respect the principles of equivalence and effectiveness. A factual presumption could, in principle, be relied on to establish causation provided that the national Court was convinced it was based on relevant evidence and was sufficiently rigorous such that it did not, in practice, amount to a reversal of the burden of proof.
In particular, he clarified that the method of proof may only involve presumptions that are rebuttable by appropriate evidence and rely on evidence which is both relevant and sufficiently rigorous to sustain the inferences drawn. In this context, he clarified that if there was no evidential basis for the presumption of causation, or if it was based on wholly irrelevant evidence, that would amount to an impermissible reversal of the burden of proof. However, the AG declined to rule on whether relevant but "weak" evidence, such as the temporal link between the Claimant's vaccination and the manifestation of multiple sclerosis were sufficient. He stated that such matters should be determined by the national court, but indicated that as a matter of principle other EU laws (such as in the competition field) recognise presumptions based on limited factual evidence.
He also concluded that the rules of evidence implementing Article 4 of the Directive should allow judges the freedom to assess all of the evidence presented to them, including scientific research, but noted that there was nothing wrong with national laws attributing particular weight to specific pieces of evidence. Accordingly, there was no obligation under Article 4 to prove causation based on medical research. In reaching this decision, the AG noted that Article 4 only imposes on the Claimant the burden of proving that the particular defective product caused the alleged harm (known as "individual causation"); there was no requirement to establish that scientific research had proved the harmfulness of the product more generally ("general causation"). Furthermore, such a rule would make it impossible to establish causation in cases where medical research evidence was lacking, irrespective of the quality of the other evidence available and could impermissibly extend the "defences" to liability under the Directive laid down in Article 7. However, he indicated that such evidence should be taken into account; laws which explicitly prohibited judges from taking potentially relevant evidence into account would, likely, be contrary to the principle of effectiveness.
The AG made a number of other interesting observations in reaching his Opinion. In particular, he disagreed with submissions made by Sanofi Pasteur that the Claimant was impermissibly inferring that the vaccine was defective from the existence of a causal link. While noting that was not how the French referring court had framed the reference, he concluded that even if Sanofi Pasteur were correct, such an inference was not problematic as the evidence being used to establish causation was serving indirectly to establish defect. In the same way that a presumption could be used to establish causation, it could also establish defect. Proof of defect was a matter for the national court. However, the AG also commented that the definition of defect in Article 6 of the Directive, while ambiguously worded, in his opinion referred to the baseline expectation of the product under normal conditions of use. He disagreed with Sanofi Pasteur's submissions that establishing a causal link alone was insufficient to prove defect, and that more was required, including an assessment of the cost/benefits of the product.
The AG's opinion that the determination of causation is essentially a matter of national law is unsurprising, as it respects the EU principle that procedural laws are a matter for Member States. Similarly, his suggestion that evidential rules that effectively result in a reversal of the burden of proof are not permitted, is consistent with the clear wording of Article 4, which imposes the burden of proof on the Claimant. However, his comments about the interaction between causation and defect are more controversial, and contradict the case law in some Member States (such as the UK). The Directive provides that "all circumstances" may be taken into account in assessing defect, so it is unclear why, in appropriate cases, considerations of costs and benefits may not be taken into account. The AG's implicit suggestion that individual causation (i.e. that the product caused the individual Claimant's injuries) can be established without proving generic causation (i.e. that the product is capable of causing the type of injury alleged) is also novel to common law practitioners. It remains to be seen whether the CJEU will follow the AG's Opinion; even if it does its Judgments are usually more narrowly focused, simply addressing the questions referred.
Special Liability Systems
Article 13 of the Directive provides that special liability systems which existed at the time the Directive was first notified are not affected by its enactment. Germany has such a special liability system, the Arzneimittelgesetz of 24 August 1976 (the "AMG"), which provides for special compensation arrangements where a person is injured as a result of taking a medicinal product. In 2002, the AMG was amended to give the injured party the right to information about the medicine's adverse effects from the pharmaceutical manufacturer.
In Case C-310/13, Novo Nordisk Pharma GmbH v S, the Claimant, who suffers from diabetes, was prescribed a medicine which she claimed caused her to suffer lipoatrophy (loss of subcutaneous fat tissue). She brought proceedings in Germany against the manufacturer, Novo Nordisk, seeking disclosure of information regarding the medicine's adverse effects, relying on the amended AMG. Novo Nordisk objected to disclosure on the ground that the amendment to the AMG, which was made after the Directive entered into force, was contrary to the Directive. The CJEU was asked to determine whether, where a special liability system exists, it is possible for the national court to develop that liability system, and if so, whether the amendment to the AMG infringed the Directive. Consistent with existing case law, the Court found that while the Directive is a maximal harmonisation measure, it does not seek to harmonise liability for defective products beyond matters regulated by it. The CJEU held that as the amended AMG did not reverse the burden of proof laid down in the Directive, but was concerned only with the disclosure of information, the amendment which gave injured persons the right to request information fell outside the scope of the Directive and was, therefore, permissible. The case confirms existing CJEU case law regarding the scope of the Directive.
Jursidiction in Product Liability Claims
The CJEU has also recently considered the issues of jurisdiction under Council Regulation 44/2001 (the "Brussels Regulation") in the context of product liability claims. In Case C-45/13, Andreas Kainz v Pantherwerke AG, the Court was asked to consider the question of jurisdiction in a product liability claim brought by an Austrian Claimant against the German manufacturer of a defective bicycle. Mr. Kainz purchased the bicycle from an Austrian supplier and sustained injuries while riding the bike in Germany. He commenced proceedings for damages in the Austrian Courts. The manufacturer of the bicycle, Pantherwerke AG, contested jurisdiction.
The Brussels Regulation provides a special regime for establishing jurisdiction in tort cases under Article 5(3), which provides that in such cases a person may be sued in the courts of the place where the harmful event occurred or may occur. Existing CJEU case law means this is interpreted as either the place of the event giving rise to the damage, or the place where the damage occurred. Where these places are not identical the Defendant may be sued, at the option of the Claimant, in the Courts of either of those places. In the Kainz case, the CJEU was asked to clarify the meaning of the place of the event giving rise to the damage. The Court held that in product liability claims, the place of the event giving rise to the damage is the place where the event which led to the damage to the product itself occurred. In principle, this is the place where the product was manufactured. Applying this test, the Austrian Courts did not have jurisdiction to hear Mr. Kainz's claim, even though he had purchased the defective bicycle in Austria, as the harmful event (both the damage and the event giving rise to that damage) occurred in Germany. The case provides clear guidance on the application of the jurisdiction rules under the Brussels Regulation to product liability claims. If the place where the damage occurred as a result of the defective product is different from the country of manufacture, the Claimant may, of course, choose to bring proceedings in that country, in accordance with existing CJEU case law (see, for example, Case C189/08 Zuid-Chemie BV v Philippo's Mineralenfabriek NV/SA).
European Commission Consultation
Alongside its regular five yearly review of the operation of the Directive, the European Commission has announced a formal evaluation and "fitness check", which will assess the functioning and performance of the Directive, and will look, in particular, at how the Directive is applied to new technologies, such as software, the Cloud, the Internet of Things, advanced robots and automated systems. The Commission wants to assess how Member States are applying the Directive to these type of matters, including how to allocate liability to participants in the Internet of Things and whether the Directive covers liability caused by malfunctioning apps and non-embedded software. The evaluation will also look at whether the Directive continues to meet its objectives of guaranteeing at EU level the strict liability of the producer for damage caused by a defective product, while also ensuring free movement of goods and offering a high level of protection to EU consumers. The evaluation is scheduled to take place during 2017. A public consultation has been launched with separate questionnaires available to producers, members of the public and public authorities/law firms, which will close on 26 April 2017. In addition, the Commission intends to gather information through interviews with stakeholders.
ConclusionMore than 30 years after the Directive was enacted, the CJEU has finally provided guidance on some of the difficult issues of interpretation raised by the Directive. While the clarification provided by the Boston Scientific decision is welcomed, there remain questions regarding how that decision should be interpreted. It remains to be seen whether national courts will apply the decision by inferring the existence of defect only in the case of high-risk products groups, such as implanted medical devices where the consequence of failure in terms of injury is serious, or whether it will be applied more broadly whenever a product is part of a group or series of products that has a potential defect.
In addition, there remain other areas of uncertainty regarding the interpretation of the Directive, for example:
- the scope of the development risks defence; and
- what information may be taken into account in assessing whether a product is defective—for example, whether it is realistic to provide a totally safe and reliable product or the costs of so doing and whether the information and warnings supplied to intermediaries such as health professionals in the medicines and medical devices field, as well as information supplied directly to consumers, may be taken into account.
It is hoped that the European Court will, in future, be invited to provide guidance in these areas. The pending reference in the Sanofi Pasteur case may provide clarity on the scope of the Claimant's obligation to prove causation. It is too early to say whether the Commission's evaluation of the Directive will result in proposals to change its scope. However, it is encouraging that the Commission is reviewing its application to new technologies, to address any inconsistencies in application at an early stage in the development of those technologies.