Taking counsel

  • 2004-10-27
  • By Juhani Siira, senior associate at Sorainen Law Offices in Vilnius and member of the Finnish Bar
Is there a unified product liability law in the EU?
Although each European Union member state has its own product liability law, they resemble each other very much due to the fact that the laws have been harmonized by EC directive 85/374 on product liability. According to the directive, the producer will be liable for the damage caused by a defect in his product.

The concept of producer. "Producer" means manufacturer of a finished product, the producer of any raw material or the manufacturer of a component part and any person who, by putting his name, trade mark or other distinguishing feature on the product, presents himself as its producer. This extended meaning of producer means that, in addition to a manufacturer of a defective finished product, a producer's subcontractors and suppliers may also be held liable in the event that the supplied component/raw material causes damage. Licensors who have granted a license to another company to manufacture their products and affix their trade mark to licensed products may face product liability even if the defective product was manufactured by the licensee and not by the licensor.

Liability within supply chain. For importers, distributors and other middlemen, the provision of the directive on the liability of the importer is of special importance: Without prejudice to the liability of the producer, any person who imports into the community a product for sale, hire, leasing or any form of distribution in the course of his business shall be deemed to be a producer and shall be responsible as a producer.

In practice, this means that the sale of products within the European Union does not create any product liability to the importer, but in the event the products are imported from outside the European Union (or the European economic area) the importer, together with the actual producer, will be liable for the damage caused.

Joint and several liability. Where two or more persons or companies are liable for the same damage, they are liable jointly and severally. According to the directive, the liability, in relation to the injured person, may not be limited or excluded.

Contractual risk management. One of the most cost-efficient (and also least-known) ways to reduce product liability risks is agreement. Although, according to the directive, the liability in relation to the injured persons may not be limited or excluded, the parties to commercial agreements who bear joint and several liability (manufacturers/importers, component manufacturers/end product manufacturers, licensors/licensees), may agree about the internal division of liability and the costs to be shared between them. The validity of such agreements is not regulated by the directive but depends on the law applicable to the agreement in question.

Litigation. Jurisdictional rules within the European Union are very favourable to the injured person, who may bring an action for damages against one or all of the persons responsible for the damage - either at the place where the harmful event occurred or at the place where any of the responsible persons is domiciled. A judgment given by a court in one EU country is also enforceable in all other EU countries against persons responsible for the damage. Since the method of calculating the amount of damages is not harmonized by the directive, this kind of favorable treatment of injured persons may lead to "forum shopping" - a practice where the injured person chooses the forum where the amount of compensations is the highest. In Europe the compensation level is, however, far behind from the enormous amounts of damages applicable in the United States.