EU Directive on Liability for Defective Products: implications for medical device producers in Australia

A new EU Directive could have widespread implications for Australian manufacturers of medical and pharmaceutical products supplied within the EU. The Directive significantly lowers the bar for the bringing of legal claims that increases the risk of Australian manufacturers being sued in the EU.

The Directive provides a timely warning to Australian manufacturers to review their medical and pharmaceutical product standards and ensure they are protected against the increased risk.

Background

On 8 December 2024, the new product liability Directive (Directive (EU) 2024/2853) adopted by the Council of the European Union on 10 October 2024 came into force. Member States are required to transpose the Directive into national law within two years.

The Directive seeks to address technological development and increasingly global supply chains by introducing into the EU’s previous product liability regime various presumptions of defectiveness and causation for any type of product, including medical devices, pharmaceuticals and new technologies.

The Directive has potentially significant implications for companies manufacturing medical devices in Australia for export to the EU, as it is likely to increase the prevalence of product liability claims and reduce the obstacles for claimants in EU jurisdictions from making those claims. The same implications arise for companies manufacturing pharmaceutical and other products.

Australian manufacturers should consider the Directive and review their product standards to ensure they are protected from any additional risk of liability.

The Directive

Notable aspects of the Directive include the following:

• Digital products: The meaning of ‘product’ is extended to digital manufacturing files and software. The Directive also contemplates liability for digital services that are integrated or interconnected with a product.
  
  
• Disclosure requirement: Defendants must disclose relevant evidence to claimants bringing proceedings.
  
  
• Non-EU manufacturers: Where manufacturers are based outside the EU, liability can be extended to importers of products, the manufacturer’s authorised representative or, in the absence of an importer or authorised representative, the fulfilment service provider.

The most significant changes to the product liability regime are to the burden of proof requirements needed to establish a claim. Article 10 of the Directive introduces several rebuttable presumptions that reduce the burden of proof placed on claimants, including:

• The presumption that a product is defective where:
  
  
  • a defendant fails to disclose relevant evidence;
    
    
  • the product fails to comply with mandatory product safety requirements in EU or national law; or
    
    
  • the damage caused was due to an obvious malfunction of the product throughout “reasonably foreseeable use or ordinary circumstances”.
    
    
• The presumption that a causal link exists between the damage caused and the relevant defect where the damage is “of a kind typically consistent with the defect”.
  
  
• The presumption that a product is defective or that a causal link exists, or both, where:
  
  
  • there are excessive difficulties for a claimant, particularly due to technical or scientific complexity, in proving a defect or causal link, or both; and
    
    
  • it is likely that the product is defective or that there is a causal link, or both.

Australian Product Liability Scheme

In contrast, Australia’s product liability regime (which is contained within the Competition and Consumer Act 2010 (Cth) contains no presumptions of causation. It is for that reason that the Directive will immediately affect Australian manufacturers exporting their products to the EU.

Also of note, Australia’s current product liability scheme was influenced by the EU’s 1985 Product Liability Directive (85/374/EEC), which established the EU’s product liability regime. It is thus conceivable that the new Directive may influence changes to the Australian Consumer Law in coming years. Manufacturers should be conscious of changing global standards and the increased likelihood of liability claims brought by consumers.

Implications for medical device manufacturers

While the Directive has primarily sought to address the rise of artificial intelligence and digital products, the changes have relevant implications for medical device producers. The Directive applies to products “put into service” and explicitly identifies medical devices as potentially falling into this category.

There are two relevant circumstances that companies need to consider as a result of the Directive:

• Companies who manufacture products for export to the EU may need to be mindful of new obligations and possible claims that arise as a result of the Directive; and
  
  
• Entities within Australia should be cognisant of potential changes that may be made to Australian law, influenced by the Directive.

The following aspects of the Directive are particularly relevant to medical device manufacturers in Australia who export their products to the EU, who may be subject to the Directive:

• Technical or scientific complexity presumption. The Directive identifies medical devices as potentially falling within the scope of this presumption. The presumption envisions circumstances where a product itself is of a complex nature, for example an “innovative medical device”. The application of this complexity presumption would have the effect of reducing the burden of proof on claimants to prove a product is defective or that a causal link exists, or both.
  
  
• Disclosure requirement. As a result of the obligation to disclose relevant evidence to claimants, operators should be mindful about admissions or suggestions of defect made in internal documents. The practical application of this requirement to the disclosure of confidential documents remains to be seen.
  
  
• Substantial modifications and component parts. A primary intention of the Directive is to promote an increasingly sustainable, circular economy, extending potential liability to companies that make substantial modifications to a product or to manufacturers of component parts of a product that are found to be defective. Medical device producers who alter products or contribute component parts should be conscious that they may fall under the scope of liability.
  
  
• Concept of defectiveness. Defectiveness under the Directive is to be regarded as an objective standard based on the “safety that the public at large is entitled to expect”. Devices such as life-sustaining medical devices that involve a high level of risk give rise to high safety expectations. The preamble to the Directive indicates that such expectations should be considered by making it possible to find that a product is defective where it belongs to the same “production series” as a product already proven to be defective. Thus, the potential for liability in respect of such products may increase.