Committee Reports > List of Committees > Joint > 1977 > Committee on the Secondary Legislation of the European Communities > Report No. 53 - Product Liability

REPORT

1. Introduction

The Joint Committee has examined the proposal made by the Commission in September, 1976 for a Council Directive on the approximation of the laws and administrative provisions of the Member States concerning liability for defective products [R/2237/76].

This proposal is based on Article 100 of the EEC Treaty and is aimed at the approximation of the laws of Member States relating to product liability. In some States manufacturers are liable for damage caused by defective products only on proof of fault such as negligence. In others, they are held liable even where fault does not exist or cannot be proved. The Commission claims that these divergences may distort competition because of the varying cost burdens imposed on producers and also may affect the free movement of goods within the Community. As between the fault and no fault systems the Commission has chosen the latter because of the better protection it affords to consumers.

The Joint Committee is informed that the proposed Directive is a close reflection of a Council of Europe Convention on Product Liability which was adopted by the Committee of Ministers in September, 1976.

2. Contents of Proposal

The proposal would make the producer of a finished article or component thereof liable for damages caused by a defect in the article by way of death, personal injury or damage to property acquired and used only for private use or consumption, whether or not the producer knew or could have known of the defect. A similar liability would be imposed on an importer of an article from a third country. To escape liability a producer or importer would have to prove that the article was not defective when he put it into circulation. Liability could not be excluded or limited by contract.

The proposed Directive would limit the total liability of a producer to (a) 25 million European units of account (EUA) “for all personal injuries caused by identical products having the same defect”, (b) 15,000 European units of account in the case of moveable property and (c) 50,000 European units of account in the case of immoveable property.

There are also provisions extinguishing liability after ten years, fixing the period of limitation for action at three years and providing for joint and several liability.

The introduction of the strict liability proposed would not prevent claims being made on any other grounds available at present whether in tort or contract.

3. Implications for Ireland

At present a person who suffers injury because of a defect in a product arising from its faulty manufacture can sue the manufacturer in tort but to succeed he must prove negligence. He has also a right of action against the person who sold him the goods and in that event he will normally have the benefit of the terms implied by the Sale of Goods Act, 1893. If he succeeds in recovering damages from the supplier, the latter will be entitled to be indemnified by his supplier and so on along the chain of supply. In the case of death a cause of action will survive for the benefit of deceased’s estate by virtue of Part II of the Civil Liability Act, 1961 and under Part IV of that Act, an action may be brought on behalf of certain dependants who suffer injury or mental distress as a result of the death. In the case of all these actions the rules relating to contributory negligence apply and damages are liable to be reduced in proportion to the extent that the damage suffered was caused by the negligence or want of care of the person killed or injured.

None of these causes of action would be affected by the adoption of the Directive. An additional cause of action would be created in which the plaintiff would merely have to prove the defect and the injury leaving the producer to prove, if he could, that the product was not defective when he put it into circulation. In addition, the Directive would impose a new non-contractual liability on an importer of goods from outside the Community because its definition of “producer” includes him.

The draft Directive states simply that damage to the person means “death or personal injuries” but it does not appear to be the intention that the measure of damages is to be the same as in the existing causes of action. According to the Commission’s explanatory memorandum, for example, it is not intended that there would be any compensation for pain and suffering which is a head of damage in the present tort of negligence. This could result in concurrent actions proceeding in which the onus of proof varied.

The draft Directive contains no reference to contributory negligence because the Commission considers that it “would be superfluous since this principle applies under the laws of all Member States”. Presumably it is the intention that the existing rules will apply to the new cause of action.

4. Views of Interested Bodies

The Confederation of Irish Industry is completely opposed in principle to the proposal. It points out that insurance is arranged on the basis of maximum damages awarded by the Courts and that these have very seldom exceeded £250,000. As the proposed Directive suggests a limit of about £17 million most manufacturers in Ireland will have to acquire very substantial increases in their present insurance limits and the Confederation’s view is that “in many cases, it will probably be found that there is no currently available market to facilitate these limits”. The Confederation believes that the increased cost will affect the price or availability of nearly every product and will seriously impair the ability of many concerns to function. In case the proposal goes ahead the Confederation has made several proposals for amendment.

The Irish Insurance Association would also like to see the draft amended in several respects. In particular it believes that the draft needs to be amplified so that the precise incidence of damages can be accurately assessed. Pending clarification it finds itself unable to give any approximate indications of the likely costs in insurance to Irish industry but it has advised the Joint Committee that “for certain industries the cost is likely to be considerable”.

5. Views of the Joint Committee

The Joint Committee believes that it is a laudable object to make it easier for persons to get compensation for damage caused by defective products. However it believes that the proposed Directive raises many complex issues that need to be examined before a final decision is taken.

The justification for the proposed Directive appears to be the need for making the economic consequences of liability uniform throughout the Community. It seems to the Joint Committee that these depend not merely on whether fault is the basis of liability or not but also on the rules by reference to which damages are quantified. It appears to the Joint Committee, therefore, that the declared object of the Directive cannot be achieved unless it incorporates rules for the measure of damages and for contributory negligence which national laws cannot alter. Moreover, if fault liability attracting larger damages is to exist side by side with no fault liability in some Member States and not in others it is difficult to see how all producers are being put on an equally competitive footing.

The Joint Committee understands that the Law Reform Commission has been asked to advise on the legal aspects of the proposal. A fuller exposition of the legal issues involved should help to clarify the implications of the proposal and the Joint Committee assumes that no decision will be taken on the proposal before the Commission reports.

(Signed) CHARLES J. HAUGHEY,

Chairman of the Joint Committee.

23rd March, 1977.