CMS Guide to changes to EU Product Liability Directive in the Netherlands

• The Product Liability Directive 85/374 has been implemented in the Netherlands in the Dutch Civil Code (''DCC''), Book 6, Title 3, Section 3. 
• The DCC imposes strict liability on the producer for damage caused by defective products. This means that the producer is liable without having to be at fault or culpable; the liability is based on the defectiveness of the product itself. 
• A product is defective if it does not provide the safety which a person is entitled to expect, taking all circumstances into account.
• The liability of the producer shall be reduced or extinguished, if the loss has been caused both by a defect in the product and by the fault of the injured party. 
• Without prejudice to the liability of the producer, any person who imports a product into the EEA for any manner of distribution in the conduct of his commercial activities, shall be deemed to be a producer, and shall be liable as a producer.   
• The liability extends to loss caused by the product to another thing, which is usually intended for private use or consumption, and which has been used or consumed by the injured party, with a lower threshold of EUR 500.  

• The Product Liability Directive 2024/2853 (the ''NewDirective'') expands the term ''product'' to include software and digital components, including AI. Due to this expansion, the categories of liable persons and damages eligible for compensation will also change. 
• The New Directive introduces new rules for the disclosure of evidence and a number of presumptions of evidence regarding the defectiveness of products and the causal link between the defectiveness and the damages suffered. 
• An important change for the Netherlands is that persons who are subrogated in the rights of the injured party (e.g. insurers) are also entitled to bring a claim under the liability regime of the directive. This means the end of the 'Temporary Rules regarding Rights of Recourse' of article 6:197 DCC.

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• Potential challenges in the Netherlands may arise from: 1) the practical implementation of the obligation to provide evidence, 2) the protection of trade secrets in relation to the obligation to disclose evidence, and 3) the legal treatment of autonomous AI decisions and the establishment of causality between defects and damage.  

The changes are intended to adapt product liability rules to the modern challenges of the digital age and the circular economy, and to guarantee a high level of consumer protection. With the New Directive, software, including AI, is explicitly recognized as a product. This provides a uniform legal framework and a certain level of legal certainty. 

• As stated before, the New Directive extends the term 'product' to consider software and digital components as products. This means that software, both as an independent product and as part of another product, now falls under the liability regulations. The New Directive thus takes into account the increasing integration of digital components in products. This ensures that manufacturers can be held liable for defects in the digital components of their products. 
• The New Directive states that any natural or legal person that substantially modifies a product outside the manufacturers' control and thereafter makes it available on the market or puts in into service shall be considered to be a manufacturer of that product. This plays an important role in the liability of digital products that are modified or updated after sale. 

• By expanding the term 'product' to include software, the New Directive changes the categories of liable persons and damage eligible for compensation. This strengthens the legal position of the consumer and thus improves consumer protection. 
• Consumer protection is also enhanced by the disclosure requirements and the causality assumptions. 

• The changes introduced by the New Directive will mainly impact companies that are primarily focused on and operate in the software sectors. 
• Companies offering digital products may be imposed with additional compliance costs, particularly in terms of risk assessment and documentation.
• Potential hesitation in innovating with new technologies due to increased liability risks. This fear of liability claims may discourage smaller businesses and startups from investing in new technologies. 
• Companies will need to reassess liability clauses in contracts with suppliers, distributors and service providers. 
• Companies may need to review their liability insurance policies to cover new risks associated with digital products and AI.

Stricter requirements for evidence and reporting may lead to changes in product development and quality control. 

Challenges

• Uncertainty about how courts will assess digital evidence.
• Possible conflicts between the obligation to disclose evidence and the protection of trade secrets. 
• Companies need to implement new internal procedures and contractual arrangements within the supply chain to comply with the new liability standards.

The New Directive does not address aspects of circular value chains that can lead to damage (apart form those mentioned in Article 8, paragraph 2). In such chains, a product may not end up with an end user, but the products or its components remain in use through refurbishment, reuse, remanufacturing and recycling. The safety risks and the possibilities of holding someone liable that are involved in circularity have received little attention. 

Opportunities 

• A clearer legal framework reduces legal uncertainty for businesses and consumers. 

An overall increase of consumer protection, especially regarding software (including AI).

The Netherlands will transpose the New Directive into national law, likely by amending the DCC. 

Businesses are advised to:

• Implement robust quality control and testing procedures to identify and address potential defects before product release. 
• Invest in advanced cybersecurity measures to protect digital products form vulnerabilities that could lead to liability claims. 
• Implement internal policies and legal safeguards to protect trade secrets. 
• Conduct comprehensive compliance audits to assess current product liability risks and ensure alignment with the New Directive. 
• Develop clear policies for product updates and software patches to ensure continued compliance. 

Enhance transparency by maintaining comprehensive records of product design, development, and testing to facilitate evidence disclosure if needed.