Product Liability Directive in the European Union: An Essential Guide

The Product Liability Directive applies to virtually all products – including physical products and digital products such as software – that are sold in the EU regardless of where they originate from. Under the directive, providers of unsafe products that are sold and that cause harm to EU consumers can be taken to court and be required to compensate the consumer for their losses.

This guide addresses some common questions relating to the application of this directive and explain how it impacts manufacturers and other businesses.

What is the Product Liability Directive?

This directive provides persons injured by a defective product the right to compensation. Under the directive, this right covers physical and non-physical losses.

For example, when a user gets physically injured because of a defective product, the Directive requires EU member states to allow such users to exercise this right in court.

The right to compensation also arises when the defective product causes property damage. For instance, if a defective electronic product explodes and causes the consumer’s house to erupt in flames, the consumer, as the injured person, can exercise the right in court.

What are the potential consequences of selling unsafe products?

An unsafe product is considered a defective product. If a defective product causes harm to a person, the person is entitled to compensation under the Directive.

Suppose that your defective product causes a damage to a consumer or their property. In that case, the injured person can take legal action against you in an EU court to get compensation for their losses.

From when does the Directive apply?

The Directive replaces the old product liability legislation (Directive 85/374/EEC) and applies to products sold or put into service after 9 December 2026.

What products are covered?

This Directive applies to products. A “product” refers to all moveables, including those that are a part of other moveables or immovables. Furthermore, it includes the following items:

• Electricity
• Digital manufacturing files
• Raw materials
• Software

The directive provides the following scope and definition of “product”:

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Article 2(1): This Directive shall apply to products placed on the market or put into service after 9 December 2026.

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Article 4(1): ‘product’ means all movables, even if integrated into, or inter-connected with, another movable or an immovable; it includes electricity, digital manufacturing files, raw materials and software;

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We could not find a definition for “movable” and could not find any examples of products covered in the directive. However, we found a guidance page which mentions that the directive covers all products, including the following types of products:

• Traditional products
• Raw materials
• Digital products

We found another publication entitled “New Product Liability Directive: Europe fit for the Digital Age” that confirms that it applies to virtually all products and provides more examples of covered products:

a. Digital products (software, AI systems)

b. Products in the circular economy (e.g. remanufactured and refurbished machinery or equipment)

The publication also lists examples of products for which claims were made in 2000-2016 under the old product liability legislation, including the following:

• Cosmetics
• Clothing accessories
• Chemicals
• Electrical machinery and equipment
• Raw materials
• Miscellaneous manufactured articles

Exempted products

Although the directive applies to software, it does not apply to software that is both:

a. Free and open-source

b. Developed or supplied for non-commercial purposes

This is the only product exemption that we found in the Directive.

Who is liable for defective products under the directive?

Under the directive, the following types of businesses can be liable and taken to court when someone gets injured due to a defective product:

a. The manufacturer of a defective product, which according to the definition of manufacturer, includes businesses that sell products under their own brand

b. In the event that the manufacturer is not from the EU:

• The EU importer
• The EU authorised representative
• Where there is no EU importer or authorised representative, the fulfilment service provider

c. The distributor of a defective product that fails to identify its suppliers within one month of receiving a request to do so by an injured person

If two or more of the businesses mentioned above are liable for the same damage, they can be held liable jointly and severally. This means that they are liable equally but either one can pay the full amount owed.

Thus, if both a non-EU manufacturer and an EU importer are taken to an EU court and are both held liable for the same damage, the court can have the EU importer settle all the costs owed despite the non-EU manufacturer’s absence.

There are cases where the economic operator is not liable under the directive. Here are some examples:

a. The economic operator is a manufacturer or importer that did not place the product on the market or put it into service

b. The economic operator is a distributor that did not make the product available on the market

c. Where compliance with legal requirements is what caused the defectiveness of the product

The full list of exemptions from liability is contained in Article 11 of the Directive.

When is a product considered defective under the directive?

A product is defective when it does not meet:

• Consumer expectations concerning the product’s safety
• EU product safety requirements
• Product safety requirements under national law

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Article 7(1): A product shall be considered defective where it does not provide the safety that a person is entitled to expect or that is required under Union or national law.

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When assessing whether your product should be considered a defective product, the directive requires taking into account the information mentioned in Article 7(2):

• Design
• Labelling
• Accompanying documents (instructions)
• Applicable product safety requirements, including cybersecurity requirements
• Expected use by the consumer
• The effect on the product of any new features acquired after being placed in the market or put into service
• The effect on the product of other items that can be used together with the product
• The moments in time when the manufacturer retains and loses control of the product
• Any product recalls or other interventions by competent authorities
• The specific needs of the intended users
• Any failure of the product to prevent damage as intended

Note that some of the above considerations are similar to the safety aspects that must be observed when assessing the safety of the product under the General Product Safety Regulation.

However, there is one exception, a product cannot be considered defective if the only reason that is given is that there is a better product in the market.

Who must prove that the product is defective?

The injured person must prove that the product is defective, among other things, to claim compensation for their losses in an EU court. Specifically, the injured person is required to prove the following:

• The defectiveness of the product
• The damage suffered
• The damage was caused by the product’s defectiveness

The directive provides certain instances where a product can be presumed to be defective. For example, if a toy product does not comply with the Toy Safety Directive and the claimant shows this, it may be sufficient to prove that the toy is defective. Thus, it is important to identify and follow applicable product safety regulations.

When can a person claim the right to compensation?

A person can claim the right to compensation when the defective product causes certain types of damages. Here are the different types of damages that can entitle the person to the right to compensation:

a. Death or personal injury (including medically recognised damage to psychological health)

b. Damage to or destruction of property (excluding the defective product itself and property used exclusively for professional purposes)

c. Destruction or corruption of data (not used for professional purposes)

Generally speaking, the right to compensation expires after 10 years since the defective product was sold or used.

Once the injured person is aware of the product’s defectiveness, the damage caused, and the liable persons or businesses, he has three years to start legal proceedings.

Does the Directive affect non-EU manufacturers?

When a business that is considered to be the manufacturer is located outside of the EU, the following businesses can be held liable for the defective product:

a. The importer of the defective product or component

b. The manufacturer’s authorised representative

c. The fulfilment service provider (Where there is no EU importer or authorised representative)

However, this does not mean that the non-EU manufacturer is off the hook. The businesses mentioned above can in turn take legal action against the non-EU manufacturer. However, in practice, it can be difficult, expensive, or even impossible to get compensated from businesses in other countries.

Does the Directive require product liability insurance?

We could not find any requirement related to product liability insurance. All we could find was that the directive does not cover compensation schemes like insurance schemes.

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(11) Compensation schemes outside the context of liability regimes, such as national health systems, social security schemes or insurance schemes, fall outside the scope of this Directive and should therefore not be precluded.

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Although the directive does not contain a requirement concerning product liability insurance, it is important to have it to protect your business.