Product Safety and Product Liability - Essay Example

Task Introduction The creation and development of a legal regulatory environment conducive to business and e-business is central to the improvement of trade among the E.U members. Currently, the Lisbon Agenda (2000) of “making the E.U the world’s most competitive and dynamic knowledge based economy by 2010” was already under threat because trade barriers to the development of general business and e-business had not been effectively removed.1 Because of this, many of the European Union’s businesses operate within an e-business environment that is full of legal uncertainties and legal impediments to the take up of e-business. Central to these legal uncertainties is the product liability directives enshrined in the Rome II regulations. The Rome II regulations, though credited for opening up trans-border trade, have also been a source of criticism for the uncertainties they have caused in respect to the choice of law applicable in trans-border product liability cases. The dominant view in this argument is that the Rome II regulations on product liabilities invade the “country of origin” principle that was more customized to allow the growth of business. Instead, the Rome II Regulation adopt the “country of reception” principle which is damaging to the security of business in the E.U.2 this paper will therefore look at the problems producers and businesses may face in respect of the Rome II regulations and their impacts on the businesses across the E.U members. The paper will also seek to examine whether these problems are unique to e-businesses or to the entire businesses in the European Union. The concept of product liability in the European Union Product liability refers to the accountability for personal damage to property caused by the use or consumption of a product.3 An injured person may assert his rights to a remedy in a European Union court through the reliance of the law of contract, negligence and strict tortious liability. However, these remedies differ from country to country among the members of the E.U in seeking to give effect to Roman II regulations. Product liability in the E.U is enshrined in Article 5 of the Rome II regulations that seek to give the range of claims to which it applies. Article 5 of the Rome II Regulations is entitled “product liability” and refers to “non-contractual obligations arising out of the damage caused by a product.” The scope of Article 5 gives no further clarity as to its scope of applicability and this makes the scope of its applicability rather imprecise. This is because the regulation does not clarify the character of the defendants whose liability it applies.4 Because of this, the principle of vicarious liability does not apply under the regulations. The concept of product liability across the E.U member states has been harmonized by directive 85/374, which seeks to prescribe the choice of law in issues that touch on product liability. This is because the directive is centered on making the adoption of a single regulatory framework on product liability Article 5 (1) (a) of the Rome II Regulation on product liability prescribes the rules for the choice of law applicable in product liability cases. The general rule under the regulations is that the applicable law on matters of product liabilities lies in the country where the harm occurred.5 This is usually referred to as the country of application principle. The Roman II Regulations do not govern claims involving disputes between private persons and public authorities in the exercise of their mandates, or a claim that involves the exercise of state powers to actions concerning private persons.6 This is because the application of the Regulations is generally limited to non-contractual liability arising from disputes among private individuals. This means that the application of the Regulations does not regulate liability claims concerning the state or state parties. Roman II Regulations and the issue of product liability The Rome II Regulation is meant to harmonize product liability across the members of the European Union and restrict the liability for the defective products on the producer only. Article 2 of the Roman II Regulation defines the producer as the manufacturer of a finished product, the maker of a component or part, or the producer of any raw material. The choice of law is thus placed on the country of reception where the actual injury was suffered. This means that tortious suits have to be filed in the country where the tort occurs. Under this provision there is thus no leeway for the parties to determine the choice of law and the jurisdiction that is applicable to them in case of emergent disputes. This is opposed to Roman I Regulations where the parties to a contract had the leeway for choosing the choice of law applicable to their transactions. Article 4 (1), of the Roman II regulations, lays down the general rule of the applicable law as the law on which the damage or harm occurs. It reads: “Unless otherwise provided for in this regulation, the applicable law to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event leading to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.” This rule thus refers to the place of damage occurrence, rather than the place the product causing the tort arose. The direct translation of this is that the damage or tort arises in one country, and litigation takes place in another country. Some scholars have argued that the provisions of Article 4 (1) are overly uncertain, and thus a source of problems and confusion with regard to jurisdiction.7 The European court was called upon to give an interpretation as to the concept of liabilities in the case of Bier vs. Mines de potasse d’Alsace8 where the court held that the choice of law rules were applicable as framed on the law. That is that the choice of law and the jurisdiction applicable in the case is that where the tortious claim arose, hence the defendant could be sued on the jurisdiction from the harm or liability arose. Similarly, this rule was upheld by the court in the case of Dumes vs. Hessiche Landes Bank9 where the court upheld the same interpretational rule. The effect of these rules has been persistent uncertainties as to the definition of the producer and the interpretation of the law regarding the liability of such producers within the meaning of the Regulation. This has affected negatively businesses, which are the most affected by these legal uncertainties, as they are the biggest consumers of these laws. The resultant effect of the choice of law provisions under Roman II Regulations is that the claimant is denied to choose the applicable law and thus the courts where the damage or loss occurred will apply its own law in respect of the damage suffered within its jurisdictions. The courts from whose jurisdiction the product originated from will apply the foreign law of the country where the damage or loss occurred.10 Moreover, the regulation is not limited to actions of obtaining damages but rather extends liability to among others claims for injunctive reliefs for the prevention of future breaches of non-contractual responsibilities. The effect of these broad reliefs offered to the claimant exposes businesses to excessive costs in the event of successful tortious actions against the business entities. Another problem associated with the choice of law provisions under the Roman II Regulations is the harsh litigation costs in the event the product causes injury to consumers in numerous countries at the same time. It is noteworthy that Article 4(1) of the Roman II regulations discards two rules that would have a consolidating effect, the principle of country of origin. It rather accepts a single fold principle that bases liability on only one country, the country where the tort arose. It is thus likely that the places where the tort arises will mostly be far more increased in number than the place in which the action giving rise to the harm occurred. This increases the likelihood of the existence of multiplicity of lawsuits emanating from the harm caused by a single product that has caused damage across many countries in the union. This can therefore have a disastrous impact on a business that finds itself the subject of such lawsuits. In this respect therefore the Roman II regulations may be argued as being inconsiderate to the rights and welfare of business entities. This position is emphasized in the case of Dumes vs. Hessiche Landes11 Bank where the European court of Justice held the position that, “the place of damage can only be understood as the place where the event causing the damage or giving rise to the tortious claim directly produced its harmful effects upon the person who is the victim of that event.” The issue of jurisdiction and the challenges it presents to the producer within the operation of the Roman II Regulations The Roman II Regulations have always presented a significant challenge on the adequacy of the protection measures afforded to the producer. This is essentially because the provisions are directed towards consumer protection due to the notion that product liability laws are only geared towards consumer protection as opposed to both sets of parties. The result of this approach has been not only exposure to litigation risks, but also exposure to complexities resulting from the issue of jurisdiction. Matters of international jurisdiction are fundamentally governed by the operations of the Brussels I Regulations of 2000, which applies to persons domiciled in a member state of the E.U. The basic principle regarding Brussels I Regulations is that a defendant to any civil proceedings will be sued in the country where he/she is domiciled irrespective of his/her citizenship. This principle was upheld in the Netherlands where the Dutch Supreme Court in Focus Veilig v. Lincoln Electric12 ruled that in a matter of private international law, there was no reason as to why an order by a Dutch court should be limited to acts that occurred within the Netherlands. This position was upheld in 2004 in the case of Philips v. Postech13 where the Dutch Supreme Court unanimously stated that an injunction could have a cross border force of law. The resulting effect of this principle to the producer, as defined under the Roman II Regulation, is the increased risk of litigation on product liability arising from different jurisdictions. This means that a producer, based on the Brussels I regulations, may be liable in proceedings instituted on his own domicile, but arising out of the same products from different jurisdictions across the E.U. This is because the general rule being that a producer will be liable in an action arising from his domicile regardless of his citizenship, serves to expose such a producer to the risk of multiple suits being filed on his jurisdiction from harm suffered across the member countries. For example, if A manufactures body lotion in Sweden and exports it to the Netherlands, Germany or France, and the lotion proves to be causing skin disease to consumers across these countries, then A may be sued under tort in his domicile in a suit originating from France, and another one from Germany, and another one from the Netherlands thereby causing a multiplicity of suits. This problem is common also to producers involved in e-businesses where tortious claims may be launched on member states where the tort arose, and also from the state where the producer is domiciled thereby resulting in multiplicity of suits arising from the liability of the same product. The problem of Roman II Regulations on e-business As earlier discussed, the liability for the harm, damage or injury resulting from the use or consumption of a product is placed on the producer based on the tortious laws of the country where the harm or damage occurred. This concept of liability adopted by the Roman II Regulations becomes problematic when determining the producer of the product when they are applied in cases of injury or harm caused by the products obtained from e-commerce. This is because for liability to ensue, the claimant must first be able to identify the producer of the product so that a tort claim can be initiated against him. Article 2 of the Rome II Regulations defines a producer as the manufacturer of a finished product, the maker of a component or part, or the producer of any raw material. This definition become problematic in the realm of e-business it is difficult to identify the producer of such products. The difficulty arises in determining the producer of the product since the goods move about various distributors online. It is therefore not easy to identify the producer of the products within the meaning of Article 2. The question then arises as to whom a tortious act can be instituted against incase of harm suffered from the sale and distribution of the harmful product. This brings about a dilemma because instituting proceedings against such a distributor would be unfair because such a trader does not fall with the meaning of a producer attached to Article 2 of the Rome II regulations. This problem is thus not only restrictive to the growth and development of e-business but also hurts the consumer by making denying the consumer speedy redress. Another problem facing the producers in e-businesses is the Brussels I Regulations where the consumer has the option of suing the producer of the business in her domicile or the domicile of the business. This poses a problem to e-businesses because it means that the producer can be sued in either the country of domicile of the consumer, or the country of the producer’s domicile. The problem posed by this regulation is highlighted by the recent case joined case of Pammer v Reederei Karl Schlüter GmbH & Co KG and Hotel Alpenhof GesmbH v Oliver Heller14 where the court considered the minimum requirements for an internet site where activities advertised on that site can amount as activities capable of being look upon as activities ‘directed’ to the Member State of the consumer’s domicile within the meaning of Article15 (3) of Council Regulation (EC) 44-2001. On the first case, the ECJ held that a contract for the voyage of a freighter was a contract of transport within the meaning of Article15 (3) of Council Regulation (EC) 44-2001, which is on jurisdiction and the recognition of foreign judgments on civil and commercial matters. The court went ahead to establish that an online business with high priority ‘.com’ or ‘eu domain name’ or international dialing numbers on its website can be construed as intending to carry on business overseas, and thus can be sued on its domicile or the domicile of the consumer where the cause of action arose. Similarly, on the second case the ECJ held that the websites utilized by internet traders to market their services and products could be directed to customers in other jurisdictions provided there was an intention to do so hence a contract for the provision of accommodation on an hotel market by a website was a contract of accommodation within the meaning of Article15 (3) of Council Regulation (EC) 44-2001. The effect of the judgment given by the court in the joined cases is to the effect that provided there was an intention by internet providers to conclude a sale of product or services on the websites, such online traders are liable in a suit filed in their own domicile or the domicile of the consumer. This therefore means that online traders should be prepared to face law suits emerging from their own domiciles and suits emerging from foreign countries. The e-commerce directive on product liability The electronic commerce directive was adopted in the year 2000 with the function of setting up an internal market for electronic commerce in the provision of legal certainty for both businesses and consumers. Unlike the Roman II Regulation, the electronic commerce directive seeks to provide clear legal certainties as to the jurisdiction and choice of law to be applied in consumer product liability cases. The general rule under the directive is that the county of origin principle applies in the liability of cases that have cross border effects. The effect of the adoption of this principle is the protection of both the consumer and the producer as there is certainty of the jurisdiction to be used and this does not put the producer under the risk of multiple suits arising from multiple jurisdictions where the harm occurs. However, the directive does not adequately protect online publishers and online service providers whose websites are merely used as conduits to facilitate the access of materials published on their websites. This is evident in the joint cases of Pammer v Reederei Karl Schlüter GmbH & Co KG and Hotel Alpenhof GesmbH v Oliver Heller15 where online publishers of information for service providers were interpreted by the courts as liable in claims of product liability. This means that there is inadequate protection to online publishers and online service providers who are merely conduits for information posted on their websites. The rules on liability under the directive should therefore be maintained to the original manufacturers of the goods, but not extended to the intermediaries who merely offer caching and hosting of the products and services. Conclusion Whereas the Roman II Regulations were meant to issue directives on the harmonization of product liability laws, the harmonization has acted to impose unfavorable business environment. This is because the regulations act one-sidedly to protect the consumer while disregarding the rights of the producers and the business fraternity. To ensure the prosperity of the business community, wholesome amendments need to be carried out on the Roman II Regulations to accommodate the rights of the business fraternity. The Brussels I Regulations should also be amended to charge a producer for the liability of products on only one jurisdiction as the current approach on determining jurisdiction offers no protection to the producer. Bibliography Bier vs. Mines de potasse d’Alsace case 21/76 (1976) ECR 1735 Brussels I Regulations Council Regulation (EC) No 44/2001 Dumes vs. Hessiche Landes Bank Case 364/93, (1995) ECR 1-2719 EuroISPA, ‘DG Enterprise Consultation on Legal Problems in E-Business’ 30 January 2004, viewed on 19 November 2011, p.1 Focus Veilig v. Lincoln Electric IEPT19891124, HR Frahuil v. Assitalia, 2004 E.C.R. I-1543 Hartley, T.C., ‘Choice of law for non-contractual liability: selected problems under the Rome II Regulation’, I.C.L.Q. 2008, 57(4), 899-908 Pammer v Reederei Karl Schlüter GmbH & Co KG and Hotel Alpenhof GesmbH v Oliver Heller C-585/08 and C-144/09 Philips v. Postech IEPT20040319, HR. Rome II Regulations, EC Regulation 864/2007 Schonning J, The Rome II Regulation — A short analysis of Article 4, 5 December 2011, Available at schonning.wordpress.com/2010/12/05/the-rome-ii-regulation-—-a-short-analysis-of-article-4/ 19 November 2011 Stone, P., Product Liability under the Rome II Regulation William Boger ‘The Harmonization of European Products Liability Law’ Fordham International Law Journal Volume 7, Issue 1, 1983, p.1 Read More