The EU’s product liability directive and the digital era: Is a regulation revolution required?

Sylvie Gallage-Alwis, Partner, at Signature Litigation, comments on the EU’s product liability directive and the digital era and asks if a regulation revolution is required

The European Union’s product liability directive was enacted in 1985 when self-driving cars and artificial intelligence (AI) were science fiction. Nowadays, virtual assistants are commonplace, and self-driving cars are a reality.

To discuss how the European Union (EU) product liability law can keep pace with technology, the European Parliament Committee on Internal Market and Consumer Protection held a public hearing on 22 January 2020 entitled, “Product Liability Directive: protecting consumers in the Digital Single Market”.

Stakeholders involved included industry representatives, consumer representatives and experts. The Commission’s representatives emphasised the need for the EU to be “technologically sovereign” and to facilitate innovation, to compete with China and the United States.

The consensus was that the key amendments should include:

  • The definition of “product” being updated, reflecting overlap between physical products and digital services.
  • The definition of “producer” being clarified to determine who is the producer in the case of an update or modification.

The consensus was also that the following questions should be considered:

  • Should the damage to be compensated include damage to data or digital assets?
  • Whether strict liability should apply.
  • Should the burden of proof be reversed to lie with the producers?
  • Whether changes should be made to the “development risk defence”
  • Should products be graded? Should there be a sectorial approach, or should regulation remain product-neutral?

Resolution

A resolution dated 12 February 2020, entitled “Automated decision-making processes: Ensuring consumer protection, and free movement of goods and services”, is another development of interest. Whilst welcoming the potential of AI, it said consumers interacting with automated decision making should “be properly informed about how it functions, about how to reach a human with decision-making powers, and about how the system’s decisions can be checked and corrected”.

The resolution also stressed “the need for a risk-based approach to regulation, in light of the varied nature and complexity of the challenges created by…AI and automated decision-making systems” and called on the Commission to develop an “assessment scheme for AI and automated decision-emphasising,” suggesting the Member States should “develop harmonised risk-management strategies”.

In the banking sector, the resolution calls for the supervision of automated decision-making systems by professionals where the public interest is at stake. It also states AI systems should use high-quality, unbiased data sets and “explainable and unbiased algorithms placed on the market.” The report says that all harm caused by AI and automated systems “should be attributable to existing persons or bodies.”

The detail of the EU’s updated product liability regime has yet to emerge. However, the new regime will clearly require transparency, the human supervision of AI systems and human accountability for AI. Other changes, such as those to the definitions of “product”

The Commission’s approach has been informed by the report it commissioned, which found that a person operating AI technology, “for example AI-driven robots in public spaces, should be subject to strict liability for damage resulting from its operation.” The operator would also be “required to abide by duties to properly select, operate, monitor and maintain the technology in use and – failing that – should be liable for breach of such duties if at fault.”

However, the report goes on to state that: “Manufacturers of products or digital content incorporating emerging digital technology should be liable for damage caused by defects in their products, even if the defect was caused by changes made to the product under the producer’s control after it had been and “producer”, may also have a wider impact on EU product liability law.

Sylvie Gallage-Alwis is a Partner at Signature Litigation and heads its product liability practice. She is one of the founding Partners of the Firm’s Paris office.

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