Product Liability 2009 - Arnold & Porter LLP

Lovells LLP The EU General Product Safety Regime
Pan-European notification
If the potentially unsafe product has been marketed in more than
one Member State, the producer or distributor is faced with the
prospect of having to give a notification “immediately” to the
national authorities in up to 25 Member States (see the sections on
“Co-ordinate notification action” and “Guidance for Pan-
European notification” below).
Although not envisaged in the Directive or fully reflected in the
implementing legislation in any Member State, the guidelines
suggest a procedure whereby a producer or distributor may notify
only the authority in the Member State in which they are
established, provided either the risk is notified as being a “serious
risk” or is otherwise considered a serious risk by the receiving
authority, or that authority has agreed with the producer or
distributor to notify the authorities in the other Member States.
As this procedure has not been given full effect in the implementing
laws in the Member States, if a producer or distributor chose to use
this single notification procedure, rather than directly contacting the
authorities in each Member State, it could give rise to a breach of
the Member State’s local laws on notification. Some national
enforcement authorities have indicated that they would accept this
single notification procedure as satisfying the notification
obligation. However, whilst businesses may be able to discharge
their obligations in most Member States by following the single
notification procedure, rather than informing each Member State
authority directly, they should nevertheless be advised of the
practical risks in following this “short-cut”.
The main risk, from a practical perspective, of following the single
notification procedure arises from the fact that, whilst it offers the
possibility of a centralised process for notification, there is no
current procedure for centralised enforcement. If the producer does
not make the effort to establish direct contact at a local level with
the authorities who will be making decisions about enforcement,
the enforcement authority may initiate its own investigation in the
local market. Often this will involve the authorities directly
contacting customers and local distributors, and they will make
decisions about enforcement based on whatever information such
investigations may reveal. This makes it impossible for a producer
dealing with a pan-European safety issue to have any confidence in
its ability to control the issue in the various countries, which could
have damaging implications for the reputation of the producer, and
could undermine the key objectives of any corrective action being
undertaken.
The Commission has been considering options for introducing a
technical solution to enable pan-European communications to take
place more effectively, quickly and reliably. In this regard the
Commission has been in the process of setting up a new internet
application - Business Application - to enable producers and
distributors to send the notification form to the competent authorities
of all EU Member States via the Internet. The Business Application
system is to become operable on 4 May 2009 and guidance was
published by the Commission in April on preparation and submission
of the form: http://ec.europa.eu/consumers/safety/rapex/docs/
manual_form_business_app.pdf. The form is available in five
languages, namely English, French, German, Italian and Spanish. If
the notification is to be sent to any Member States that do not work
in one of those languages, the producer or distributor will need to
prepare and attach relevant translations. It should also be noted that
this system still will not include any provision for enforcement
decisions, and will therefore not release prudent producers and
distributors of the need to establish a direct local point of contact with
the enforcement authority in each country.
Risk Management
ICLG TO: PRODUCT LIABILITY 2009
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Effective risk management is crucial to ensuring that as far as
possible products are safe, and that a company responds effectively
under the Directive to any safety problems that arise after the
product has been put into circulation. A risk management system
should cover all stages of the production process including design,
manufacture, production, testing (including equipment testing),
packaging, storage, distribution and post-marketing surveillance.
There are a number of important steps that manufacturers or
suppliers should take as part of a basic risk management system to
help meet the new Directive’s requirements.
Product safety review team
A product safety review team should be set up to co-ordinate a
comprehensive risk management programme. The members of
such a team should be drawn from all relevant sections of the
organisation. The team should meet regularly and have authority to
take any necessary action.
The review team’s main function would be to ensure that the basic
product safety procedures are maintained and that problems are
dealt with effectively.
The review team would need to review safety and quality control
procedures, devise a product recall plan, and, in the event of a safety
problem, be in a position to assess the scale and seriousness of the
risk and respond accordingly. This will involve ensuring that
internal and external advisers with appropriate experience can be
quickly called in to deal urgently with potential risks that might
arise. The review team will also need to nominate individuals as
contact points for the regulators, and keep comprehensive
information on distributors, retailers and customers of each product
should a recall be required.
Terms and conditions
The law permits a degree of flexibility as to the terms on which
manufacturers, distributors and retailers may apportion risk among
themselves in relation to product liability issues. Appropriately
drafted warranties and indemnities can go a considerable way
towards achieving this and at the same time assist in mounting an
appropriate defence in proceedings. Systems should therefore be in
place to ensure that a company’s terms of business are properly
incorporated into contracts and are assessed and reviewed
periodically.
Post-market surveillance
Producers must ensure they take adequate steps to monitor the
safety of their products, even after they have been marketed (Article
5(1)). This may include systems for sample testing of marketed
products, maintaining a register of consumer complaints, and
establishing systems to ensure good communication of information
about potential risks between the producer and distributors.
Instructions and warnings
Companies must ensure that instructions and warnings are
communicated effectively to consumers whether by labelling,
package inserts or other means. This may involve warning product
users of newly identified risks after the product has been sold. The
style of packaging as well as its physical characteristics can affect
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