The Gazette 1986

GAZETTE

MARCH 1986

The EEC Directive on Products Liability

P A R T I

Wi l l i am Bi nchy, B . A . , B . C . L ., LL .M., Barrister-at-Law

ur law relating to products liability has in recent

years greatly extended the protection given to

those who suffer injury or damage from dangerous or

defective products. In contract, the

Sale of Goods and

Supply of Services Act 1980

has conferred important

new statutory protection; the law of negligence has con-

tinued to expand the range of liability in respect of

products, the most notable example being the High

Court decision in

Ward

-v-

McMaster and Louth Co.

Co.

Moreover, the decision in

Kearney

-v-

Paul and

Vincent Ltd.

though not imposing liability on the facts,

expressed the principles of products liability in fairly

broad terms.

Activity has also been apparent at the international

level. The Council of Europe has established a Conven-

tion on the subject of products liability. More recently

on 25 July 1985 the European Economic Community

has issued a Directive on the subject. The Directive has

important implications for Irish law. This article will

consider some of these implications and seek to place

the Directive in the broader context of international

thinking on products liability over the past decade.

The Preparation of the Directive

The Commission of the European Economic Com-

munities presented its draft Directive on Product Liabil-

ity to the Council in September 1976/ Negotiations

between the EEC countries then followed and, as has

been mentioned, the Directive was finally implemented

on 25 July 1985.

The Directive extends only to Member

States (Article 22).

Article 19 of the Directive requires Member States to

bring into force, not later than three years from the date

of notification of the Directive - 30 July 1985 - the laws,

regulations and administrative provisions necessary to

comply with the Directive. It should be noted that the

Directive supplements, rather than replaces, the existing

remedies in tort and contract under Irish law: Article 13.

The Socio-Economic Background

Increased concern for the rights of injured consumers

is, of course, a feature of European and North American

culture over the past twenty years - Ralph Nader is still

regarded by very many people as a champion of their

interests. It is interesting, therefore, to note that the

Directive springs only in part from the urge to solve the

problem of fair apportionment of risks inherent in

modern technological production. The Directive also

stresses the fact that approximation of the laws of the

Member States is necessary because "the existing

divergences may distort competition and affect the

movement of goods within the common market . . . "

The economic arguments for and against strict liabil-

ity for products are worth mentioning briefly. It has

been noted by one expert that strict liability substantially

reduces litigation costs, inhibits socially unacceptable side

effects and reflects the lack of bargaining equality between

consumers and producers/ But the same expert also

mentions some drawbacks:

"Firstly, strict producer liability will have roughly the

same effects on prices as an indirect tax. Moreover,

producer liability leads to a redistribution of income

away from consumers who incur low accident costs

(presumably poorer consumers) to those with higher

accident costs (the richer consumers). Both effects

are regressive and many would argue that on equity

grounds they should be avoided. A second problem is

that in as much as direct product regulation or the

imposition of producer liability is a restriction on the

freedom of producers to maximise long-run profits,

innovation may be retarded and consumers may

eventually be denied products which could have ben-

efited them greatly. This effect will be most marked

in technically progressive industries such as pharma-

ceuticals, where the product comes in very direct

contact with the consumer (for example, foodstuffs)

and where small firms are involved. Small firms have

historically been highly innovative but might also be

unable to compete in the future given the substantial

economies of scale to insurance which arise from

risk-spreading."

In Britain, the Pearson Commission also adverted to

some of these difficulties but took the view that, " f or

most industries, the cost of products liability insurance

would be small in relation to other costs. . . " /

The economic arguments range far more widely than

this brief summary. A helpful series of articles by leading

authors from the United States is contained in the

Sym-

posium on Products Liability: Economic Analysis and

the Law.

After these very general observations, let us turn to

consider the main features of the Directive.

The Main Features of the Directive

The essence of the Directive is contained in Article 1,

which is drafted with commendable simplicity:

"The producer shall be liable for damage caused by a

defect in his product."

There are, of course, some important qualifications

to this statement of general principle, but the main

notion is clear: liability is based, not on

wrongful con-

duct

by the producer, which (in theory at least) is the

hallmark of negligence, but merely on proof of a

fact,

that a defect in the product caused the plaintiff damage'.

Whether it is all that easy to avoid the elaborate norm-

ative scaffolding of negligence law - the duty of care,

unreasonable conduct, the reasonable man, for example

- is a question we will consider later in this article.