in 29 worldwide 2014 Contributing editors: Harvey L Kaplan, Gregory L Fowler and Simon Castley

Published by Getting the Deal Through in association with:

Ajumogobia & Okeke Anderson Moˉri & Tomotsune Araquereyna Boyanov & Co Bühlmann Attorneys at Ltd Bulló – Tassi – Estebenet – Lipera – Torassa – Abogados Carroll Burdick McDonough LLP Cassels Brock & Blackwell LLP Clayton Utz Cliffe Dekker Hofmeyr DWF Fishburns EBA Endrös-Baum Associés Formosa Transnational Attorneys at Law Gianni, Origoni, Grippo, Cappelli & Partners Gorrissen Federspiel Headrick Rizik Alvarez & Fernández I.L.A. Pasrich & Company Jones Day Jun He Law Offices Londoño & Arango Abogados Mayora & Mayora, SC Nobles, LLC Rojs, Peljhan, Prelesnik & Partners Shin & Kim Shook, Hardy & Bacon LLP Souto, Correa, Cesa, Lummertz & Amaral Advogados Van Diepen Van der Kroef Advocaten Yigal Arnon & Co CONTENTS

Product Liability 2014 Global Overview 3 Dominican Republic 52 Harvey L Kaplan Roberto Rizik and Jaime M Senior Contributing editors: Shook, Hardy & Bacon LLP Headrick Rizik Alvarez & Fernández Harvey L Kaplan, Gregory L Fowler and Simon Castley Argentina 5 England & Wales 58 Shook, Hardy & Bacon LLP Mariano E de Estrada and Daniel B Guffanti Simon Castley and Jon Hudson Bulló – Tassi – Estebenet – Lipera – Shook, Hardy & Bacon International LLP Torassa – Abogados France 64 Getting the Deal Through is delighted to Australia 10 Florian Endrös publish the seventh edition of Product Colin Loveday and Greg Williams EBA Endrös-Baum Associés Liability, a volume in our series of annual Clayton Utz reports, which provide international analysis Germany 72 in key areas of law and policy for corporate Brazil 17 , cross-border legal practitioners and Simon Wagner business people. Jorge Cesa, Roberta Feiten and Carroll Burdick McDonough LLP Fernanda Girardi Souto, Correa, Cesa, Lummertz & Amaral Following the format adopted throughout Guatemala 79 Advogados the series, the same key questions are Conchita Villeda and Laura Sánchez answered by leading practitioners in each Mayora & Mayora, SC Bulgaria 23 of the 29 jurisdictions featured. New Kina Chuturkova and Stela Sabeva jurisdictions this year include Argentina, the India 85 Boyanov & Co Dominican Republic and the Netherlands. Amir Singh Pasrich, Vinita Chhatwal and Vaijayant Paliwal Every effort has been made to ensure Canada 29 I.L.A. Pasrich & Company that matters of concern to readers are Glenn Zakaib, Emily Larose and Peter Henein covered. However, specific legal advice Ireland 95 should always be sought from experienced Cassels Brock & Blackwell LLP Aoife Gaughan local advisers. Getting the Deal Through DWF Fishburns publications are updated annually in print. China 36 Please ensure you are referring to the latest Weining Zou Israel 103 print edition or to the online version at www. Jun He Law Offices gettingthedealthrough.com. Barak Tal and Ruth Loven Yigal Arnon & Co Colombia 41 Getting the Deal Through gratefully Maximiliano Londoño, Daniel Arango, acknowledges the efforts of all the Italy 109 Natalia Tobón and Mauricio Moreno contributors to this volume, who were Londoño & Arango Abogados Michela Turra and Alessandra Chimienti chosen for their recognised expertise. We Gianni, Origoni, Grippo, Cappelli & Partners would also like to extend special thanks Denmark 46 to contributing editors, Harvey L Kaplan, Japan 116 Gregory L Fowler and Simon Castley Søren Stæhr and Christian Holm Madsen Gorrissen Federspiel Tetsuro Motoyoshi and Ryohei Ikeda of Shook, Hardy & Bacon LLP for their Anderson Moˉri & Tomotsune continued assistance with this volume.

Getting the Deal Through London June 2014

Publisher The information provided in this publication is Gideon Roberton general and may not apply in a specific situation. [email protected] Legal advice should always be sought before taking any legal action based on the information Subscriptions provided. This information is not intended to Rachel Nurse create, nor does receipt of it constitute, a – [email protected] client relationship. The publishers and authors Published by accept no responsibility for any acts or omissions Business development managers Law Business Research Ltd contained herein. Although the information George Ingledew 87 Lancaster Road provided is accurate as of June 2014, be advised [email protected] London, W11 1QQ, UK that this is a developing area. Tel: +44 20 7908 1188 Alan Lee Fax: +44 20 7229 6910 Printed and distributed by [email protected] © Law Business Research Ltd 2014 Encompass Print Solutions No photocopying: copyright licences do not apply. Tel: 0844 2480 112 Dan White First published 2008 [email protected] Seventh edition ISSN 1757-0786

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Korea 123 Slovenia 149 Ukraine 171 Ghyo-Sun Park, Gea Sung Yang and David Premelcˇ and Jakob Ivancˇicˇ Volodymyr Yakubovskyy and Bo Kyung Lim Rojs, Peljhan, Prelesnik & Partners Alexander Weigelt Shin & Kim Nobles, LLC South Africa 155 Netherlands 130 Pieter Conradie United States 177 Michael Gerrits and Anne van Hilten Cliffe Dekker Hofmeyr Gregory L Fowler and Marc E Shelley Van Diepen Van der Kroef Advocaten Shook, Hardy & Bacon LLP Switzerland 159 Nigeria 138 Lukas Bühlmann and Adrian Süess Venezuela 185 Babatunde A Sodipo Bühlmann Attorneys at Law Ltd Pedro Ignacio Sosa Mendoza and Ajumogobia & Okeke Rodrigo Moncho Stefani Araquereyna Taiwan 165 Russia 145 Jackson Shuai-Sheng Huang Sergei Volfson Formosa Transnational Attorneys at Law Jones Day

2 Getting the Deal Through – Product Liability 2014 Shook, Hardy & Bacon LLP GLOBAL OVERVIEW Global Overview

Harvey L Kaplan Shook, Hardy & Bacon LLP

The increasing connection among people and companies in countries final report recommending that Western Australia adopt a similar around the world underscores the importance of keeping abreast of class action regime. new developments in our respective product liability . We hope The class action regime in South Africa received much-needed the 2014 edition of Product Liability is helpful in that regard. clarification from the country’s Supreme in November 2012. Starting with the United States, the extraterritorial reach of its In two price-fixing cases against various bread companies, the Court continues to be a cause for concern for non-US product man- ruled that the classes should not be admitted and in doing so, pro- ufacturers, whether it may relate to a discovery application abroad, vided helpful guidance on things like the application of certification the Foreign Corrupt Practices Act, the Alien (ATS) or criteria, the need for a clear class definition, and the assessment of questions of personal . Last year, the US Supreme Court whether there is a triable issue. Nevertheless, the Court failed to reined in the reach of the ATS in the case of Kiobel v Royal Dutch adopt a strong predominance requirement and left the door open for Petroleum Co, finding that the plaintiffs failed to overcome a pre- ‘mass personal injury’ claims. This could be tested by another loom- sumption against the extraterritorial application of US ing case on behalf of former miners seeking redress for lung diseases. to foreign entities for alleged violation of on for- Class action efforts continue in Europe and the European eign soil. During this past term, in the case of DaimlerChrysler AG Commission released its long-awaited initiative on collective redress v Bauman, the Court ruled that a federal district court in California in June 2013. The Commission has recommended, but not required, may not exercise personal jurisdiction over a German car manu- member states to adopt class actions within two years in the areas of facturer simply because the company in question has a subsidiary competition claims, , environmental protection, in Michigan that generates considerable sales in the United States. and data privacy. The Commission has also identified features that Of course, the risks faced by foreign entities extend well beyond the such class action models should have. United States. Among the member states, the governments of Belgium, France The demand for greater ‘access to ’ in Latin America and Lithuania adopted class action laws in early 2014. The French continues to drive that has resulted in several nota- law requires a determination of general liability before a class is cer- ble developments for product liability claims. For example, Brazil tified and class members opt in. Personal injury claims are excluded, is examining extensive changes to its Civil Code and Consumer but the government is considering possible expansion of the law to Defence Code that could substantially alter class actions, shift the include health and environmental claims. Belgium and Lithuania burden of proof onto manufacturers, and even introduce punitive also adopted class action laws in March 2014. In contrast to France, damages. Similar changes are being explored in Argentina, Chile, their models include a preliminary certification stage, but with wider Costa Rica and Ecuador. scopes that permit personal injury claims. Other member states, such In Asia, new amendments to China’s Law took as the Netherlands and Hungary, are considering similar legislation. effect from January 2013, introducing a number of changes to the In addition to these procedural changes that affect product man- way cases will be litigated against manufacturers. For example, gov- ufacturers, the European Commission released a new package of ernment agencies or authorised social institutions may bring public measures seeking to improve the consistency of product safety rules. interest litigation for environmental pollution, infringements of con- The proposal would only apply to non-food products and would sumer rights or other public interest matters. There are also provi- provide better coordination of the way in which national authorities sions for fast-track and small-claim litigation, and evidentiary tools monitor and enforce consumer product safety rules. that address electronic and the appointment of forensic While many countries are seeking to strengthen consumer investigators on factual issues. protection and access to justice, the Organisation for Economic At the end of 2013, Japan adopted a proposal to expand its Co-operation and Development (OECD) has increased access to existing consumer group litigation mechanism to permit collective information by launching a global online consumer product recall actions for damages based on consumer claims. Korea, however, portal in October 2012. The portal provides easy access to the latest continues to debate the expansion of its Consumer Basic Act to per- information on products recalled in Australia, Canada, Europe and mit broader class actions for consumer damages. In addition, there the United States. Thus, consumers can check whether a product are continuing efforts to amend the Korean Product Liability Act to they plan to buy has been recalled in another country and inform create a presumption that a product is defective if either the defect their purchasing choices accordingly, even though there may not occurs within an area under the exclusive control of the manufac- have been any reported incidents in their own country or any recall turer or the damages caused are of a kind that would typically be the due to differences in the governing consumer product safety stand- result of a product defect. ards. A global product safety standard is evidently the OECD’s goal. Elsewhere in the Pacific, Australia continues to expand its class In sum, we believe that product liability litigation on a global action regimes. Class actions are presently only allowed in federal scale will continue to present new challenges for product manufac- courts and in the state courts of Victoria and New South Wales. In turers. The following chapters provide a multinational overview of 2013, the Western Australia Law Reform Commission issued its potential product liability risks by examining: www.gettingthedealthrough.com 3 GLOBAL OVERVIEW Shook, Hardy & Bacon LLP

• their respective court systems, including the roles of , • important means for assessing potential risks, such as the status and , if any, as well as the nature of or hearings; of class actions, damage awards, fee arrangements, and efforts to • theories of recovery available for product liability claims (strict, introduce or expand these types of access-to-justice provisions. tort, , fraud, etc) and potential defences; • discovery procedures available – disclosure and document pro- The 2014 edition of this product liability survey is intended to assist duction requirements – and the role of experts and company counsel in developing global product liability and risk minimisation witnesses; and strategies. The reader is encouraged to seek advice from any of these well-qualified authors.

4 Getting the Deal Through – Product Liability 2014 Bulló – Tassi – Estebenet – Lipera – Torassa – Abogados ARGENTINA Argentina

Mariano E de Estrada and Daniel B Guffanti Bulló – Tassi – Estebenet – Lipera – Torassa – Abogados

Civil litigation system 6 What is the basic structure? The proceedings, which in principle are public, are written and have 1 What is the structure of the civil court system? the following structure: firstly the plaintiff submits its written plead- Argentina is a federal country and, therefore, the civil court system ing and the defendant its defences; then a hearing is set in order to has federal and local courts. In the city of Buenos Aires there are allow the parties to reach an agreement and if they fail to do so, the federal courts, national courts (which are local but are also federal evidentiary stage starts (witnesses usually testify orally in a hearing courts) and local courts. Typically, product liability cases in the city and expert witnesses submit written reports). After the evidentiary of Buenos Aires are brought before the national or the federal courts. stage has finished, the lower court issues the , which can be appealed to a higher court. 2 What is the role of the in civil proceedings and what is the role of the ? 7 Are there class, group or other collective action mechanisms The civil court system is adversarial and is based on judges who available to product liability claimants? Can such actions be manage and rule the case. However, it should be noted that in certain brought by representative bodies? cases where consumer rights are involved, the Public Attorney can The Consumer Protection Act (CPA) provides for a rudimentary have a relevant role. class action proceeding. A variety of judicial , including court decisions are shaping this kind of proceeding. Certain prov- 3 What are the basic pleadings filed with the court to institute, inces have local procedure rules that regulate class actions. prosecute and defend the product liability action and what is the Class actions are usually brought by representative bodies such sequence and timing for filing them? as consumers’ non-governmental organisations (NGOs), by the Public Attorney and, only in a few cases, by affected (in Typically, a product liability action in the city of Buenos Aires this case there are not enough precedents as to definitely state that requires a previous mandatory mediation process, after which the affected persons can file a class action on behalf of a class). plaintiffs are entitled to file the suit within a year by submitting a Notwithstanding the above-mentioned, product liability class written pleading. Depending on the amount claimed, the claimant actions are not as common as others (eg, against banks for abu- shall present its written defences within five or 15 working days. sive fees), since the need to prove individual damages clashes with If the claim involves consumer rights the defences usually shall be the requirement that the class members be in a similar situation. submitted within a period of five working days. However, there are a few product liability class actions already filed.

4 Are there any pre-filing requirements that must be satisfied before 8 How long does it typically take a product liability action to get to a formal law suit may be commenced by the product liability the trial stage and what is the duration of a trial? claimant? The answer depends on the complexity of the evidence necessary to See question 3. prove the defect and the extent of the damages. Complex cases can take more than five years to get to the trial stage and two to three 5 Are mechanisms available to the parties to seek resolution of a more years to get the final judgment from the Court of Appeals. An case before a full hearing on the merits? extraordinary appeal to a State Supreme Court or to the National Certain defences can be judged prior to entering to the evidentiary Supreme court can take a further one or two years. stage. The most usual defences are: • statute of limitation; Evidentiary issues and damages • lack of jurisdiction of the courts; 9 What is the nature and extent of pretrial preservation and • lack of standing to sue; disclosure of documents and other evidence? Are there any • lis pendens; and avenues for pretrial discovery? • res iudicata. There are no pretrial discovery stages as in the United States. In cases However, courts are usually reluctant to judge a case in this way where evidence might disappear, certain preservation measures can and defer the judgment of these defences to the final stage of the be obtained (eg, a testimony from an elderly or information proceeding. that can be destroyed after a period of time).

www.gettingthedealthrough.com 5 ARGENTINA Bulló – Tassi – Estebenet – Lipera – Torassa – Abogados

10 How is evidence presented in the courtroom and how is the 17 Can the successful party recover its legal fees and expenses from evidence cross-examined by the opposing party? the unsuccessful party? Documents shall be submitted by the parties along with the suit Yes. The ‘loser pays’ rule applies, except when the losing party or the defences. If the counterparty denies the validity of the docu- has been granted with the right to litigate without bearing costs. ments, the submitting party should offer other complementary evi- However, it should be noted that the fees and expenses paid by the dence (eg, a writing expert). winning party that can be recovered from the loser are only the ones Other evidence shall be offered at the same time for examination awarded by the court. during the evidentiary stage. Third-person testimony is given orally in a hearing, and both parties can interrogate the witness. Expert witnesses are randomly appointed by the courts and sub- 18 Is there a statute that governs product liability litigation? mit written reports that can be challenged by the parties who can be Our National grants the right of safety for all consum- advised in the matter by their own experts. ers as a basic principle in this matter. The Constitution reads: ‘[c] onsumers and users […] have the right to the protection of their health, safety and economic interests’ (article 42). 11 May the court appoint experts? May the parties influence the Product liability in our country is based on two different systems appointment and may they present the evidence of experts they that, in certain cases, can partially or totally overlap. These systems selected? are the basic one set forth in the Civil Code and the special one See question 10. established in the Consumer Protection Act (CPA).

12 What types of compensatory damages are available to product The Civil Code system liability claimants and what limitations (if any) apply? The system ruled by the Civil Code provides two different sources of liability: All kind of damages are available. Typically bodily injuries, • contractual liability: it considers that there is an implicit duty damages (loss of profits) and moral damages are awarded by the of safety by which the provider of a product is liable for the courts, provided that these consequences have been proven after the damages caused by the product to the purchaser. It is strict liabil- evidence stage. ity based on the accessory duty of safety for all the products launched into the market; and 13 Are punitive, exemplary, moral or other non-compensatory • non contractual liability or tort: it states that there is a general damages available to product liability claimants? duty not to harm any person and, therefore, a manufacturer or Since 2008, punitive damages have been available in consumer seller can be considered liable for damages caused by products claims due to an express provision of the CPA. There is a limit of 5 to persons with whom there is no contractual relationship. This million Argentine pesos. liability is strict and based on the created risk. The only requirement set forth by the CPA is failing to comply with a contractual or legal duty. Other parameters such as the rele- In both cases, the liability can only be released by proving that there vance of the damage, the gross negligence by the defendant, etc, shall is no causal link between the damage and the product. only be considered to calculate the amount of the award. However, Although strict liability can be applied under both systems, they courts are usually careful when it comes to awarding punitive dam- have different consequences, for example, the scope of the compen- ages and require gross misconduct by the defendant. sation and the statute of limitation. The grounds of strict liability are different too, ie, duty of safety under the contractual liability and the Litigation funding, fees and costs created risk under the non-contractual liability. Besides, the Civil Code also provides for a fault-based liability 14 Is public funding such as legal aid available? If so, may potential that can be applied also to manufacturers or sellers of a product if it defendants make submissions or otherwise contest the grant of is defective, but in this case the alleged victim shall have the burden such aid? of proving the existence of fault. Procedure rules provide for the right to litigate without bearing At present, there is a bill to reform the Civil Code that devotes a costs when the plaintiff has no resources to afford them or when special chapter to consumer rights. This new Code would eliminate the case involves consumers’ rights. The defendants can challenge the principal differences between contractual and non-contractual that request. liability. The bill has passed the Senate and is now under the consid- Certain consumers’ NGOs receive governmental funds. eration of the House of Representatives.

The Consumer Protection Act system 15 Is third-party litigation funding permissible? This system only applies when the victim is a consumer. There is no on this issue. In cases where a lawyer and his Under the CPA, consumers are individuals or corporations that or her client agree that the lawyer is entitled to receive more than 20 acquire products or services as final consumers for their own benefit per cent of the outcome of the case, the lawyer shall bear the litiga- or for the benefit of their family or social group. tion costs (except when its expressly agreed otherwise). People who are not party to a consumer relationship, but that However, even though third-party litigation funding is not usual as a consequence, or on the occasion, of a consumer relationship, in Argentina, some ways to provide economic assistance to the acquire or use products or services as final consumer, as well as any- plaintiff can be available. one exposed to a consumer relationship, are also considered con- sumers under the CPA. According to the CPA, products and services shall be supplied in 16 Are contingency or conditional fee arrangements permissible? a way that does not harm consumers’ health. Therefore, the liability Yes, lawyers and their clients can agree to entitle lawyers to receive is strict and is based on the duty of safety. up to 40 per cent of the outcome of the case, notwithstanding the The manufacturer, the importer, the dealer, the provider, the fees that the courts can award in favour of the lawyer to be paid by retailer and anyone who applies his or her brand or to the losing counterparty (also see question 15). a product or service are jointly, strictly and severally liable for any

6 Getting the Deal Through – Product Liability 2014 Bulló – Tassi – Estebenet – Lipera – Torassa – Abogados ARGENTINA damages caused to a consumer by the risk or defect of the prod- It should be noted that in (iii) and (iv) the defences shall have force uct or service. The carrier shall be liable for damages arising from majeure characteristics. transportation. It should also be noted that some courts apply a theory by which Anyone mentioned above can be released from liability if he or the burden of proof lies with the party who is in a better condition she proves that the cause of the harm is alien to them. to prove it.

19 What other theories of liability are available to product liability 25 Who may be found liable for injuries and damages caused by claimants? defective products? See question 18. Under the CPA, all the members of the supply chain are considered strictly, jointly, and severally liable. The manufacturer, the importer, the dealer, the provider, the 20 Is there a consumer protection statute that provides remedies, retailer and anyone who puts its brand or trademark in a product imposes duties or otherwise affects product liability litigants? or service are jointly, strictly and severally liable for any damages Yes, as mentioned in the answer to question 18, the CPA provides caused to a consumer by the risk or defect of the product or service. specific regulation to protect consumers. Some of its main provisions The carrier shall be liable for damages arising from transportation. are the following: Any of the above-mentioned can be released from liability by • punitive damages with a cap; proving that the cause of the harm is alien to them. • administrative penalties with a cap; and The one who had strict liability and ended up paying the total • shifting of the burden of proof. compensation can seek proportional reimbursement from the other strictly based liable respondents. Besides, the strictly liable respond- 21 Can criminal sanctions be imposed for the sale or distribution of ent can seek total reimbursement from the ones held fault based defective products? liable. Yes; the supply of defective products can lead to criminal sanctions. Similarly, the ones who were considered liable because of his or her fault and ended up paying the total compensation can seek proportional payment from those who were also considered guilty 22 Are any novel theories available or emerging for product liability by fault. claimants? There are no novel theories, but in certain cases the courts’ rulings 26 What is the standard by which causation between defect and can modify traditional theories, usually in favour of consumers; for injury or damages must be established? Who bears the burden example, medical monitoring is considered a future damage and this and may it be shifted to the opposing party? shall only be compensated if its occurrence is certain or if it is an inevitable consequence of present damages. See question 24.

23 What breaches of duties or other theories can be used to 27 What post-sale duties may be imposed on potentially responsible establish product defect? parties and how might liability be imposed upon their breach? The manufacturer or seller liability can stem from the design defect, Although there are not general rules regarding mandatory recalls, manufacturing defect, lack of warning or any event that can produce the authority can order a recall of products when the public safety harm. in involved. Certain activities are also subject to specific A failure to warn can give rise to liability. According to the CPA, that may lead to mandatory recalls ordered by the respective author- the provider of a product shall inform the consumer about all the ities (eg, drugs, food and medical devices). characteristics of the product or service, and, regarding risky prod- Besides, should the producer, supplier, seller, etc, of any kind of ucts or services, the provider shall follow the applicable regulations product become aware of a defect in a product, section 4 of and provide the reasonable information in order to allow the con- 1978/94 provides that authorities and consumers be promptly sumer to use them in a safe way. For example, a user manual in informed (in the latter case, through advertising). Spanish shall be provided by the producer or the provider, in certain cases. Limitations and defences Even though it is not clear to what extent information provided to intermediaries may totally or partially release if at all, the pro- 28 What are the applicable limitation periods? ducer from liability, it should be noted that the CPA sets forth that Time limits arise from the applicable statute of limitations. the information shall be given to the consumer. The statute of limitation period starts when the claimant suffers There is no ‘learned intermediary’ principle. All the members of the damages or when he or she knows about it. the supply chain may be held liable under the CPA. There are different time limits. The statute of limitation for is two years and for contractual claims ten years. The CPA also provides a three-year statute of limitations for 24 By what standards may a product be deemed defective and who consumer cases, but longer time limits under other regulations shall bears the burden of proof? May that burden be shifted to the prevail. opposing party? What is the standard of proof? It should be noted that some circumstances might affect the cal- The general principle is that the claimant has the burden of proof culation of time limits (eg, pre-judicial claims, continuing damages). of the causal link between the damage and the product. The defend- Additionally, the courts are allowed to disregard time limits when ant has the burden of proof that the causal link was interrupted by the suit was not filed in time due to the existence of factual obstacles, another event. Therefore, the defendant has to prove: provided that the claim is filed within three months after the said (i) lack of causal link between the damage and the product; obstacles disappeared. A similar solution is applicable if the plaintiff (ii) force majeure or similar situations; failed to file the suit due to fraud of the defendant. Criminal actions (iii) victim’s negligence; or might also suspend or interrupt the calculation of time limits. (iv) damage caused by third persons for whom the defendant has no The mediation suspends the statute of limitations. liability. www.gettingthedealthrough.com 7 ARGENTINA Bulló – Tassi – Estebenet – Lipera – Torassa – Abogados

29 Is it a defence to a product liability action that the product 34 Have there been any recent noteworthy events or cases that defect was not discoverable within the limitations of science and have particularly shaped product liability law? Has there been technology at the time of distribution? If so, who bears the burden any change in the frequency or nature of product liability cases and what is the standard of proof? launched in the past 12 months? The concept of ‘risk activity’ is advancing as a reason to attribute First, it should be noted that since 2009 the National Supreme Court liability and this is proposed in the bill to reform the Civil Code. has been ruling in favour of collective actions filed by NGOs or Therefore, if the producer causes damages due to the limitation of affected persons in a variety of matters that include consumer rights. sciences and technology, he or she can be considered liable for car- Second, punitive damages have been increasingly awarded by rying out a risk activity. As a result of this, a state of the art and the courts in individual cases and also are starting to be accepted in development risk in this context has little chance of success. the context of a class action. However, the amounts usually awarded are low and the courts require that a serious fault of the defendant be proved. 30 Is it a defence that the product complied with mandatory (or In this regard, a relevant case is the one where a customer who voluntary) standards or requirements with respect to the alleged had bought a bottle of a well known beverage found a gel envelope defect? floating inside and, therefore, filed a suit claiming, inter alia, puni- When the rule of the duty of safety is applied, compliance with man- tive damages of 2 million Argentine pesos. The lower court of the datory (or voluntary) standards or requirements is not usually a suc- Córdoba province awarded that amount in favour of the plaintiff, cessful defence. but the Court of Appeals reversed the decision. Finally, in May 2014, a third instance local court affirmed the Court of Appeals judgment 31 What other defences may be available to a product liability but ordered that a moral damage compensation be awarded (the defendant? amount is yet to be defined). Another relevant case that might shape product liability law in As mentioned in the answer to question 24, the general principle is the future is a class action filed in mid-2013 by 274 women on behalf that the claimant has the burden of proof of the causal link between of a group of approximately 15,000 women allegedly affected by the damage and the product. The defendant has the burden of proof defective silicone breast implants manufactured in France. The plain- that the causal link was interrupted by another event. Because of tiffs seek compensation of 1.13 million Argentine pesos per person, that, the defendant has to prove: totalling 309.62 million Argentine pesos for the 274 plaintiffs. (i) lack of causal link between the damage and the product; The defendants are the French manufacturer, a German insurer (ii) force majeure or similar situations; and a German certifying body. The suit was filed but the defend- (iii) victim’s negligence and claimant’s fault; ants have not been duly served yet, due to a discussion among the (iv) damage caused by third persons for whom the defendant has no courts as to which court has jurisdiction in this case (federal courts liability. or national courts). There are also rumours that a class action is being prepared by It should be noted that in (iii) and (iv) the defences shall have force an NGO against a local laboratory that in January 2014 recalled majeure characteristics. several lots of a sun-screen that supposedly has caused cases of In general, the assumption of risk is not a defence. It can only allergy. have influence when the claimant carries out or is subject to a risky Apart from those cases, we can mention the following: activity. • an e-commerce site was found liable for stolen tickets that were sold by a third person through the site (Claps v Mercado 32 What appeals are available to the unsuccessful party in the trial Libre SA, CNCom 05-10-2012, CSJN, 19 November 2013, court? IJ-LXX-21); Parties can appeal rulings before the Court of Appeals. Exceptionally, • a car manufacturer was held liable because a brand new car the party can appeal to the State Supreme Court or to the National had to be repaired eight times in a year (Sapas v Forest Car SA, Supreme Court, when constitutional rights are involved. CNCom, 31 May 2013, La Ley, AR/JUR/26074/2013); and • an aggregated filed by hundreds of consumers against a Jurisdiction analysis supermarket in connection with allegedly tainted food (fungus in peanuts) was rejected by the Court of Appeals because the 33 Can you characterise the maturity of product liability law in terms damage was not proved. The Supreme Court upheld the ruling of its legal development and utilisation to redress perceived (28 November 2013). We acted on behalf of the insurance com- wrongs? pany (Benitez v Supermercados Norte SA). Product liability is not as mature a field as it is in the United States, yet it is under constant evolution. Further, at present, the Supreme Court is deciding on a lawsuit There are several individual cases and a few collective ones against two search engines accused of not having properly blocked against product manufacturers (typically car manufacturers, food adult sites showing fake photos of a model. This case is considered producers, laboratories, etc), but usually the plaintiffs have to face to be a leading case in this matter and several public hearings are difficulties to prove a defect or a damage due to the lack of technical being held before the court. preparation of the lawyers or even of the experts available in our Finally, there is no statistical information as to the frequency country. or nature of product liability cases launched in the past 12 months. However, this asymmetry is decreasing because of the effect of the CPA and recent judicial precedents related to class action and the 35 Describe the level of ‘consumerism’ in your country and awarding of punitive damages. consumers’ knowledge of, and propensity to use, product liability Recent developments indicate a growing trend of attempts to litigation to redress perceived wrongs. prevent incurring liability and punishing bad practices. In the product liability field the level is intermediate, but it is con- stantly growing, being driven by the increasing interest of lawyers and NGOs in this area.

8 Getting the Deal Through – Product Liability 2014 Bulló – Tassi – Estebenet – Lipera – Torassa – Abogados ARGENTINA

Additionally, local governments have created a myriad of con- sumer protection offices throughout the country enabling consumers Update and trends to easily file small claims. We perceive an interest from lawyers related to NGOs, as well as other lawyers, to apply the tools that the CPA provides for class 36 Describe any developments regarding ‘access to justice’ that actions, punitive damages and the shifting in the burden of proof in would make product liability more claimant-friendly. product liability cases. There is also an increase of forums, blogs and other web-based tools to exchange information about these A more profound class action regulation, combined with a wider matters. use of punitive damages and a shifting in the burden of proof would Consequently, an increase of product liability litigation is to be make the legal environment more claimant-friendly. expected.

Mariano E de Estrada [email protected] Daniel B Guffanti [email protected]

Juana Manso 205, 2nd floor Tel: +54 11 4320 9600 C1107CBE Buenos Aires Fax: +54 11 4320 9600 Argentina www.ebullo.com.ar

www.gettingthedealthrough.com 9 AUSTRALIA Clayton Utz Australia

Colin Loveday and Greg Williams Clayton Utz

Civil litigation system In the Federal Court, orders for many of these key steps are usu- ally made at a court appointed directions hearing held not long after 1 What is the structure of the civil court system? service of the proceedings. The court has the power to give ‘such Australia has a federal court system and a hierarchy of courts in directions with respect to the conduct of the proceeding as it thinks each of the states and territories. The High Court of Australia (High proper’. This discretionary power is exercised by the court on a case- Court) is empowered to determine constitutional disputes and is the by-case basis. ultimate court of appeal. Product liability litigation usually com- mences in the Federal Court of Australia (Federal Court) or the supreme, county or district courts of one of the states or territories. 4 Are there any pre-filing requirements that must be satisfied before The consideration of choice of law questions, the causes of action a formal law suit may be commenced by the product liability alleged and the quantum of damages sought will usually determine claimant? the forum for a product liability matter. In complex product liability Recently, there has been significant legislative activity in the area matters this will often be the Federal Court. of ‘pre-litigation protocols’, which are mandatory steps a potential litigant must undertake before commencing civil proceedings. These protocols oblige litigants to pursue a range of alternative dispute 2 What is the role of the judge in civil proceedings and what is the resolution steps before commencing proceedings. Federal legislation role of the jury? obliges parties to take ‘genuine steps’ to resolve a dispute. Under Product liability litigation may be brought in either the Federal the federal legislation, genuine steps include the requirement to file Court of Australia or the state supreme courts. Such proceedings are a statement specifying the steps that have been taken to resolve the generally heard by a judge sitting without a jury. However, there are issues in dispute, or the reasons why such steps were taken. Some provisions in the various court rules for some matters to be heard state and territory jurisdictions have much more elaborate pre-action by a jury. protocols, which require the exchange of details information about Civil litigation in Australia is conducted on an adversarial basis. claims, as well as some limited discovery, followed by an attempt to The parties present their case to the court. The judge makes findings settle the claim before proceedings can be commenced. of fact and law after consideration of the evidence that has been presented, and submissions by the parties on the law. 5 Are mechanisms available to the parties to seek resolution of a case before a full hearing on the merits? 3 What are the basic pleadings filed with the court to institute, Interlocutory procedures exist for parties to move to strike out the prosecute and defend the product liability action and what is the whole or any part of a pleading (including causes of action, claims sequence and timing for filing them? and defences), where the court determines that the pleading discloses Each court has procedural rules that set out the relevant steps no reasonable cause of action or defence, has a tendency to cause involved. Those rules of procedure are not too disparate in the supe- prejudice, embarrassment or delay, or is otherwise an abuse of court rior courts in Australia. The Federal Court operates a docket system. process. This means that upon commencement, proceedings are allocated to a specific judge who case manages the proceedings via a series of directions hearings and then becomes the trial judge. 6 What is the basic trial structure? Product liability actions in the Federal Court are commenced Australian courts proceed on an adversarial basis. Practice, proce- by an application, accompanied by a statement of claim. The dure and rules of evidence are similar to those used in English courts. Application specifies the relief claimed by the applicant and the Jury trials are extremely rare, and most trials will be before a single statement of claim contains a statement in summary form of the judge. material facts on which the party relies. After service of the originat- A product liability action in Australia is usually heard by a court ing process, the respondent must either file an appearance or take sitting in the capital city of the relevant state. In every case, the capi- some other step towards having service of the originating process tal is both the political and commercial centre of the state. set aside. In the Federal Court, the only time requirement is that Most of the trial and any subsequent appeal are conducted a respondent must enter an appearance before the date appointed orally. There is no provision for depositions as they are understood for a directions hearing and before filing any document. Thereafter, in the US context. Where written statements or affidavits have been the key steps include the filing of a defence and any reply as well as exchanged before the trial and a witness is called, their statement will refinement of the matters in dispute, including requests for particu- often be adopted and tendered in court as evidence in chief, with any lars, in some cases interrogatories, documentary discovery, subpoe- minor additions or modifications addressed orally at the commence- nas and the service of evidence. ment of the witness’ testimony. The witness is then cross-examined.

10 Getting the Deal Through – Product Liability 2014 Clayton Utz AUSTRALIA

A witness may be cross-examined at large and often without there is no deposition process, so discovery is almost entirely restriction as to time, subject always to the court’s direction. This documentary. comparative freedom to cross-examine and the fact that trials are In many jurisdictions documentary discovery is available with usually conducted by a judge sitting alone means cross-examination the court’s leave in personal injury proceedings. Orders will only be in product liability cases is often searching and extensive. Expert made if the court is satisfied that discovery is necessary. However, witnesses, particularly in matters involving complex issues of medi- the threshold to satisfy a court that discovery is required is not very cine or science, are generally subjected to detailed cross-examination high. Until relatively recently, many Australian courts, notably the relating to both their specific opinion evidence and the underlying the Federal Court, would typically restrict discovery to categories science relating to those opinions. of documents in an attempt to limit the burden imposed on parties. At the conclusion of the evidence, the court hears closing argu- This approach is less favoured than it once was. However, Australian ments that address questions of both fact and law. In more complex courts are generally moving to greater court supervision of discovery matters heard by a judge alone, this oral argument will be supple- in an attempt to limit the cost and delay associated with it. One mented by detailed written submissions. Where the matter is being recent innovation is to defer discovery until after there has been an heard by a judge and jury, the presiding judge addresses the jury at initial exchange of evidence in the hope that the evidence can be used the conclusion of the parties’ submissions. The judge will summarise to focus the discovery. the evidence and direct the jury as to the law. It is then for the jury There is a limited right to administer written interrogatories, but to make findings of fact and, if necessary, assess the quantum of this right is exercised only rarely. damages. A further procedure for obtaining documents for the purposes of litigation is to ask the court to issue a subpoena. Subpoenas are usually issued to non-parties: 7 Are there class, group or other collective action mechanisms • to require a party to attend to give evidence (a ‘subpoena to available to product liability claimants? Can such actions be attend to give evidence’); or brought by representative bodies? • to produce documents to the court (a ‘subpoena to produce’). There are detailed class action procedures in the Federal Court of Australia, the Supreme Court of Victoria, and the Supreme Court Finally, there is also a right to apply for preliminary documentary of New South Wales. The legislation in each of these jurisdictions is discovery before the commencement of proceedings, if it is necessary very similar. There are also older-style representative action proce- to identify a potential defendant or to detetemine whether or not a dures available in other state jurisdictions, but these are rarely used. potential plaintiff may have a claim, or to gain information from An action can only be commenced in the Federal Court where it third parties. attracts federal jurisdiction, for example, if it involves a claim under federal legislation. Class actions have involved products including weight loss 10 How is evidence presented in the courtroom and how is the drugs, heart pacemakers, aircraft fuel, gas, water, tobacco, pharma- evidence cross-examined by the opposing party? ceuticals, financial products and a variety of foodstuffs. Product liability trials are typically conducted orally. Where written Federal, Victorian and New South Wales legislation provides for statements or affidavits have been exchanged before the trial and a the commencement of a class action where seven or more persons witness is called, their statement is commonly adopted and tendered have a claim against the same person and the claims are in respect in court as evidence in chief, with any minor additions or modi- of, or arise from, the same, similar or related circumstances and give fications addressed orally at the commencement of the witness’s rise to a substantial common issue of law or fact. testimony. The witness may be cross-examined at large and often The Competition and Consumer Act 2010 (Cth) (the CCA) without restriction as to time, subject always to the court’s discre- expressly provides for the institution of proceedings by the gov- tion. This comparative freedom to cross-examine means that cross ernment regulator, the Australian Competition and Consumer examination in product liability cases is often searching and exten- Commission (the ACCC) on behalf of those who have suffered sive. Expert witnesses, are required to prepare a written report out- or are likely to suffer loss as a result of contraventions of federal lining their opinion in advance of giving evidence. They are generally legislation. subjected to detailed cross-examination on both their specific opin- ion evidence and the underlying science relating to those opinions.

8 How long does it typically take a product liability action to get to the trial stage and what is the duration of a trial? 11 May the court appoint experts? May the parties influence the Time to trial depends on the particular jurisdiction and the nature of appointment and may they present the evidence of experts they the claim. It may take anywhere from six months to several years for selected? a matter to be heard and determined. Courts in several Australian jurisdictions may appoint a ‘court Proceedings in the Federal Court are usually heard faster than expert’ to inquire into and report on a question of fact arising in a those in the state and territory supreme courts, due in part to the matter before the court, or an ‘expert assistant’ to assist the court on Federal Court’s case management system whereby each proceeding any issue of fact or opinion (other than an issue involving a question is allocated to a particular judge who manages the case and usually of law) identified by the court in the proceeding, should the need hears and determines it, and the supreme courts’ heavier caseload. arise. In some jurisdictions, the court expert’s report will only be There are provisions in all jurisdictions for expedited hearings binding on a party to the extent that that party agrees to be bound in appropriate circumstances, including the ill health of a litigant. by it. In other jurisdictions, the report is deemed to have been admit- ted into evidence unless the court orders otherwise. Evidentiary issues and damages Where the court has appointed an expert in relation to a ques- tion of fact that has arisen in the proceedings, the rules in each juris- 9 What is the nature and extent of pretrial preservation and diction provide that the court may limit the number of other experts disclosure of documents and other evidence? Are there any whose evidence may be adduced on that question, or that a party avenues for pretrial discovery? must obtain leave to adduce such evidence. One key aspect of pretrial preparation involves gathering informa- As a matter of practice, however, court experts are rarely tion and evidence in support of a claim and the defence. In Australia, appointed in product liability matters. As a matter of course, parties www.gettingthedealthrough.com 11 AUSTRALIA Clayton Utz will retain their own experts and adduce evidence from them during enter into an agreement that provides for the normal fee, or a fee the course of the proceedings. calculated by reference to some predetermined criteria such as the amount of time expended by a lawyer, to be increased by a pre- agreed percentage. The relevant rules generally impose a cap on the 12 What types of compensatory damages are available to product percentage by which such fees can be increased. Some jurisdictions liability claimants and what limitations (if any) apply? allow lawyers to enter into an agreement to be paid an ‘uplift fee’ At common law, the type of compensatory damages available for where an additional fee may be levied, calculable by reference to the claims alleging bodily injury include general damages for pain and initial fees. Not all jurisdictions allow such arrangements in personal suffering, loss of amenities and loss of expectation of life; and special injury cases. All jurisdictions continue to prohibit contingency fee damages, for loss of wages (both past and future), economic loss and arrangements where the lawyer’s fee is calculated by reference to a medical treatment expenses and the like. percentage of the client’s . In 2002, reforms to the law of negligence (the Tort Reform Process) led to caps, thresholds and other limitations being placed on the amount of such damages that can be recovered for causes 17 Can the successful party recover its legal fees and expenses from of action in negligence. Damages are also recoverable for mental the unsuccessful party? damage provided it can be established that the claimant is suffer- The unsuccessful party usually pays the costs of the successful party. ing from a diagnosed psychiatric condition. In addition, common These costs include not only court filing fees, copying charges and law damages are available for damage to the product itself, or other other out-of-pocket expenses, but also the lawyer’s professional fees. consequential damage to property. One can recover damages for In this context, a reference to costs is not a reference to the total ‘pure economic loss’ but the nature and extent of such damages is or actual costs incurred by the successful party. In some jurisdic- extremely complex. tions, recoverable costs are calculated by reference to a court scale, which invariably limits the amounts a successful party can claim for disbursements and services performed by their lawyers. In other 13 Are punitive, exemplary, moral or other non-compensatory jurisdictions, the scale approach has been replaced by a system that damages available to product liability claimants? considers the reasonableness of the costs incurred. However, such Exemplary, punitive or aggravated damages can be awarded by the systems have retained the distinction between costs incurred and courts, although not in relation to claims brought under the federal costs actually recoverable. legislation and, in some jurisdictions (as a result of the Tort Reform In some jurisdictions the Tort Reform Process has resulted in Process) not in negligence actions seeking damages for personal further limitations being imposed on the legal costs recoverable in injury. In practice, awards of exemplary damages are extremely rare small personal injury claims (although there are exceptions includ- (and were so even before the tort reform process). ing where the lawyer and client have entered into a costs agreement that provides otherwise). Litigation funding, fees and costs The common law rule has been significantly modified in the case of representative or class actions. Statutory provisions restrict a costs 14 Is public funding such as legal aid available? If so, may potential order being made against class members other than those who actu- defendants make submissions or otherwise contest the grant of ally commenced the proceedings. Where the representative action is such aid? successful, a costs order may be made in favour of the class members Yes, public funding is technically available but rarely so applied in who commenced the representative proceedings in an amount deter- product liability claims. mined by the court.

15 Is third-party litigation funding permissible? Sources of law Third-party funding of claims is permitted in Australia. While law- 18 Is there a statute that governs product liability litigation? yers are restrained from entering into contingency agreements, non- A plaintiff who claims to have been injured by a product or who has lawyers are not. Consequently, litigation funders have emerged to otherwise suffered loss or damage as a result of a defective prod- promote and fund class action litigation. The mechanism is rela- uct can bring an action for compensation on a number of grounds. tively straightforward. A non-lawyer or corporation (the litigation The causes of action most commonly pleaded are the common law funder), identifies a potential claim, contacts potential claimants tort of negligence, a breach of a statutory duty or a breach of the and then enters into express contractual arrangements with poten- Australian Consumer Law (the ACL), which forms part of a federal tial claimants. These agreements provide for the litigation funder to statute called the Competition & Consumer Act 2010 (Cth). The receive an agreed percentage of any monies that come to the claim- liability of manufacturers for safety defects is now covered by Part ant by way of settlement or judgment. In addition, the claimants 3-5 of the ACL. It is a ‘no fault’ regime of strict liability. Specifically, will often assign the benefit of any costs order they receive to the goods are said to have a ‘safety defect’ if their safety is ‘not such as litigation funder who is, under the contractual arrangement, also persons generally are entitled to expect’. given a broad discretion to conduct the litigation as they see fit. The The ACL now provides a single, unified statute that applies litigation funder then retains a lawyer who agrees to conduct the liti- to each state and territory. Part 3 of the ACL provides a range of gation on behalf of the litigation funder on the basis of the ‘normal’ specific protections aimed at regulating unfair practices, consumer rules governing the legal profession. transactions, safety of consumer goods and product-related services, Litigation funders are required by Australia’s corporate and information standards and (as noted above) the liability of manufac- financial regulator to have adequate procedures to deal with con- turers for goods with safety defects. The liability of manufacturers flicts of interest, but are not otherwise required to be licensed or to for safety defects is now covered by Part 3-5 of the ACL. It is a ‘no have their funding arrangements approved. fault’ regime of strict liability. Specifically, goods are said to have a ‘safety defect’ if their safety is ‘not such as persons generally are 16 Are contingency or conditional fee arrangements permissible? entitled to expect’. Rules prohibiting lawyers from entering into contingency fee Sections 18 and 29 of the ACL relate to misleading or deceptive arrangements have been relaxed and a variety of arrangements are conduct and false or misleading representations respectively, and now sanctioned. These arrangements allow lawyers and clients to Part 3-2 Division 1 of the ACL sets down the ‘consumer guarantees’

12 Getting the Deal Through – Product Liability 2014 Clayton Utz AUSTRALIA

(which equate to the former actions for fitness for purpose and mer- 22 Are any novel theories available or emerging for product liability chantable quality (now ‘acceptable quality’)). A person who has suf- claimants? fered loss or damage by reason of conduct contravening chapter 2 The ACL has introduced a significant change by introducing a new or 3 of the ACL may make a claim for damages. Some restrictions legal standard of ‘acceptable quality’. Where a person supplies goods apply to claims for personal injury. to a consumer, there is a guarantee that the goods are of acceptable In addition, Part 5-4 of the ACL provides a range of remedies quality. Goods will be considered to be of acceptable quality if they against suppliers and manufacturers of goods in relation to the con- are: sumer guarantees. If an action is brought against a manufacturer, a • fit for all purposes for which goods of that kind are commonly consumer’s remedy is limited to damages. For actions against sup- supplied; pliers, an affected person may seek a broader range of remedies, • acceptable in appearance and finish; including rejecting goods or terminating . The nature of the • free from defects; breach will also affect the remedy available. A failure to comply with • safe; a guarantee is considered to be a ‘major failure’ if: • durable; and • the goods would not have been acquired by a reasonable con- • as a reasonable consumer fully acquainted with the state and sumer fully acquainted with the nature and extent of the failure; condition of the goods (including any ‘hidden defects’ of the • the goods depart in one or more significant respects from any goods), would regard as acceptable having regard to the nature description, sample or demonstration model; of the goods, the price of the goods, any statements made on • the goods are substantially unfit for a purpose for which goods any packaging or label, any representation made by the supplier of the same kind are commonly supplied and they cannot (easily or manufacturer or any other relevant circumstance relating to and within a reasonable time) be remedied to make them fit for supply. such a purpose; • the goods are unfit for a disclosed purpose made known to There is no breach of this guarantee when: the supplier of goods or a person involved in negotiations or • the reason the goods are not of acceptable quality is specifically arrangements about the acquisition of goods, and they cannot drawn to the consumer’s attention before supply in writing and (easily and within a reasonable time) be remedied to make them in a manner that is ‘transparent’; fit for such a purpose; or • the consumer to whom they are supplied causes them to become • the goods are not of acceptable quality because they are unsafe. of unacceptable quality or fails to take reasonable steps to pre- vent them from becoming of unacceptable quality and they are Part 3-5 of the ACL provides specific actions against manufacturers damaged by abnormal use; or for goods with safety defects. An individual may recover, by action • the consumer examines the goods before acquisition and that against a manufacturer, the amount of the loss or damage (which examination ought reasonably to have revealed that the goods includes injury) suffered by the individual. If the individual dies were not of acceptable quality. because of the injuries, a law of a state or territory about liability in respect of the death of individuals applies as if the action were an The Trade Practices Act equivalent of this provision required goods action under the law of the state or territory for damages in respect to be of ‘merchantable quality’. While the extrinsic material sur- of the injuries, and the safety defect were the manufacturer’s wrong- rounding introduction of the new term suggests there should not ful act, neglect or default. Liability for loss or damage may also be any substantive change to the interpretation of this term, this extend to a person other than the injured individual. remains to be seen in practice.

19 What other theories of liability are available to product liability 23 What breaches of duties or other theories can be used to claimants? establish product defect? In Australia, theories of liability are a mixture of the common law Under the ACL, manufacturers will be held strictly liable directly and statute. A person who claims to have been injured or who has to consumers for injury to persons or property damage suffered as otherwise suffered loss or damage, may commence an action for a result of a defective product. The ACL provides that goods are compensation on the following bases: defective if their safety is not such as persons generally are entitled • the common law tort of negligence, which is tort-based; to expect. The ACL also makes it clear for the purposes of applying • contract; and this test that a defect may exist by reason of product-related design, • breaches of the various statutory provisions. testing, manufacturing, warnings and directions for use. In addition, the ACL also makes manufacturers liable to con- sumers if goods are not of acceptable quality (analogous to mer- 20 Is there a consumer protection statute that provides remedies, chantable quality). imposes duties or otherwise affects product liability litigants? Liability for product defects established in this way attaches The CCA establishes a single, national regime that applies to each to a ‘manufacturer’. However, ‘manufacturer’ is broadly defined in state and territory by incorporating the Australian Consumer Law the ACL and will, for example, include an importer of goods if the (ACL) into Schedule 2 of the CCA. The ACL is a federal statute that actual manufacturer is not present in Australia and a person who will be relied upon in product liability claims as it contains consumer allows their brand or mark to be affixed to or used in relation to the protection, product safety and quality provisions. goods in question. See also question 18.

24 By what standards may a product be deemed defective and who 21 Can criminal sanctions be imposed for the sale or distribution of bears the burden of proof? May that burden be shifted to the defective products? opposing party? What is the standard of proof? Yes. Certain conduct by corporations and their officers may be sub- In negligence, contract and under most provisions of the ACL, the ject to criminal sanctions under federal or state legislation. claimant has the burden of proving that the product was defective. The statutory warranty/guarantee and the defective or unsafe product causes of action under the ACL are often referred to as www.gettingthedealthrough.com 13 AUSTRALIA Clayton Utz

‘strict liability’ provisions. A claimant need not prove fault but, Limitations and defences nonetheless, must establish, on balance, that the subject goods are defective or not of acceptable quality. 28 What are the applicable limitation periods? At common law, in contract and in other actions based on the There are considerable variations between the limitation periods provisions of the ACL, the claimant must establish: applicable to common law and statutory proceedings in the vari- • that loss or damage has been suffered; ous Australian jurisdictions, resulting from a profusion of specialist • that the relevant conduct is either in breach of a common law legislation and court decisions, although the Tort Reform Process duty, in breach of the contract or contravenes one of the provi- has resulted in more uniformity in relation to the limitation period sions of the ACL; and applicable to personal injury actions. • that the loss or damage was caused by the defendant’s conduct. In most jurisdictions the limitation period applicable to claims for personal injury is either: • the earlier of three years from the date the cause of action is 25 Who may be found liable for injuries and damages caused by discoverable by the plaintiff (‘the date of discoverability’) or 12 defective products? years from the date of the alleged act or omission (‘the long-stop Under the ACL, manufacturers will be held strictly liable directly to period’); or consumers for injury to persons or property damage suffered as a • three years from the date the cause of action accrued. result of a defective product. Goods are considered to be defective if their safety is not such as persons generally are entitled to expect. Limitation periods including those applicable to personal injury The definition of ‘manufacturer’ under these provisions of the claims are usually suspended while a claimant is suffering from a ACL is extremely broad and will, for example, include an importer legal incapacity, which encompasses the period prior to a claimant of goods if the actual manufacturer is not present in Australia and turning 18 years, or during which a claimant suffers from a mental a person who allows their brand or mark to be affixed to or used in or physical disability that impedes them from properly managing relation to the goods in question. their affairs.

26 What is the standard by which causation between defect and 29 Is it a defence to a product liability action that the product injury or damages must be established? Who bears the burden defect was not discoverable within the limitations of science and and may it be shifted to the opposing party? technology at the time of distribution? If so, who bears the burden A claimant must prove that they have suffered damage ‘because of’ and what is the standard of proof? the defect in question. The test has been held to correspond to the If a product is found to be defective under the federal legislation, the test of causation, which applies in common law negligence claims. manufacturer or supplier can rely on what is commonly referred to The claimant’s onus is discharged by proving causation on the bal- as the ‘state of the art defence’ or ‘development risk defence’. The ance of probabilties. manufacturer or supplier must establish that the state of scientific In recent years the High Court of Australia has made it clear or technical knowledge at the time when the product was supplied in numerous cases that it is not possible for a claimant to shift this by its actual manufacturer was not such as to enable the defect to onus. It is either discharged on the basis of the totality of the evi- be discovered. The defence must be established on the balance of dence or it is not. probabilities. This defence is only available in respect of claims based on the ‘defective product’ provisions in the ACL. It is not available 27 What post-sale duties may be imposed on potentially responsible in respect of claims that a product was not of ‘acceptable quality’ parties and how might liability be imposed upon their breach? (although, arguably, similar considerations may be imported into the Under the common law, manufacturers and suppliers of products concept of ‘acceptable quality’). owe a continuing duty to purchasers and foreseeable users to take In negligence, the claimant must establish that the manufacturer reasonable care to prevent a product from causing harm, including failed to exercise reasonable care. The state of scientific and technical after the product is sold. Failure to recall a product that may cause knowledge is often pertinent to this issue. harm may amount to negligence and give rise to the obligation to pay compensation to persons suffering injury, loss and damage as a result. 30 Is it a defence that the product complied with mandatory (or The issues that will be considered in deciding whether recall voluntary) standards or requirements with respect to the alleged action is necessary include: defect? • the magnitude of the potential harm involved; Under the defective goods provisions of the federal legislation, it is a • the probability of such harm occurring; defence that the goods had the defect only because there was compli- • the availability and effectiveness of alternative remedial action; ance with a mandatory standard. A mandatory standard is a stand- and ard for the goods or anything relating to the goods which, under law, • the degree of knowledge in potential users of the potential harm. must be complied with when goods are supplied, and which carries a penalty for non-compliance. A standard that simply requires that In addition, the product safety provisions of Part 3-3 of the ACL the goods achieve a minimum standard is not a mandatory standard. contain a stringent regime for the compulsory recall of goods that: In an action for negligence and under the statutory warranty/ • do not comply with a prescribed safety standard; guarantee provisions of the federal legislation, compliance with • have been declared to be unsafe goods or permanently banned; regulations or standards is a relevant factor in determining whether or goods are as fit for the purpose(s) that goods of that kind are com- • will or may cause injury to any person. monly expected to be when bought.

14 Getting the Deal Through – Product Liability 2014 Clayton Utz AUSTRALIA

31 What other defences may be available to a product liability defendant? Update and trends Defendants are permitted to rely on a statutory right to contribu- tion from other concurrent tortfeasors (whether joint or several). One development of note has been a series of appellate court decisions on the often vexed question of causation in personal Alternatively, defendants may seek to rely on a contractual right of injury cases. The test for causation requires consideration of both indemnity. These remedies may be pursued either in the same or sub- the common law principles and a series of statutory provisions. sequent proceedings. If subsequent proceedings are required, time It has been, and continues to be, a complex area of the law, limits do apply. These differ between jurisdictions and depend on particularly in multi-factorial causation cases. However, there is the cause of action. now a growing weight of authority to cement the place of ‘but for’ in the negligence causation analysis. Following the Tort Reform Process, all Australian state and In April 2014, the Productivity Commission published its territory jurisdictions enacted a statutory regime of proportionate draft report on Access to Justice Arrangements. This report is liability for non-personal injury claims for damages. The liability of one of the steps in an inquiry by the Commission into Australia’s a defendant who is a concurrent wrongdoer is now limited to an system of civil , with a view to constraining amount reflecting the proportion of the damage the court considers costs and promoting access to justice. Public hearings have yet to commence and the Commission’s final report is not expected just having regard to the extent of that defendant’s responsibility. before September 2014. It is, therefore, difficult to predict what, if Certain state jurisdictions allow parties to expressly contract out any, impact that this inquiry may have on product liability litigation. of the proportionate liability scheme. However, one of the Commission’s draft recommendations is the removal of restrictions on damages-based billing. If this recommendation leads to the introduction of contingency fees it 32 What appeals are available to the unsuccessful party in the trial is likely to have a decided impact on the level of product liability court? litigation in circumstances where Australia already has a highly active class action system. In virtually all jurisdictions there is a right of appeal from the judg- ment of a trial judge. The procedure varies depending on the juris- diction in which the original trial was conducted. Leave to appeal 34 Have there been any recent noteworthy events or cases that is usually necessary when the appeal is from an interlocutory judg- have particularly shaped product liability law? Has there been ment. Even though appeals generally turn on questions of law, it is any change in the frequency or nature of product liability cases not uncommon for parts of the evidence used at trial to be reviewed launched in the past 12 months? during the course of an appeal. The effects of the new ACL are now beginning to be felt. A party dissatisfied with the decision of a state or territory court Manufacturers and suppliers are coming to terms with the following of appeal or the full federal court may seek leave to appeal to the changes: High Court of Australia, the country’s ultimate appellate court. The • the introduction of mandatory reporting where suppliers must High Court will only grant leave to appeal if it is convinced that report to the appropriate regulator products, which have been there is a significant question to be determined. associated with serious injury or death. This is potentially the most significant change for suppliers, including manufacturers, Jurisdiction analysis in terms of post market surveillance requirements and product 33 Can you characterise the maturity of product liability law in terms reporting; of its legal development and utilisation to redress perceived • a broader test for bans and recalls. Previously, the Minister could wrongs? ban or recall goods that were unsafe because of a defect in the product itself, but it was unclear whether he or she could do so if Prior to 2011, Australia had a relatively well-settled product liabil- the threat to consumer safety arises only as a result of consumer ity regime. From 1 January 2011, the ACL introduced significant misuse. Under the ACL, the threshold test for bans and recalls changes. The ACL was designed to establish a single, national law would cover all goods of a kind that, under normal or reason- concerning consumer protection and fair trading and by streamlin- ably foreseeable conditions of use, will or may cause injury to ing pre-existing state and federal legislative regimes, the ACL intro- any person. In a country where self-regulation through report- duces obvious benefits. However, the ACL also significantly amends able voluntary recalls has been the norm, this change will force previous federal legislation and introduces important changes to the manufacturers and suppliers to give careful consideration to law. These include the mandatory reporting requirements but it will both anticipated consumer use and misuse, including ‘off-label’ take some time to assess the effect of the ACL in a litigation environ- use (namely, use other than for indicated or approved purposes); ment, which is already heavily influenced by litigation funding and and class actions.

Colin Loveday [email protected] Greg Williams [email protected]

Level 15, 1 Bligh Street Tel: +61 2 9353 4000 Sydney NSW 2000 Fax: +61 2 8220 6700 Australia www.claytonutz.com

www.gettingthedealthrough.com 15 AUSTRALIA Clayton Utz

• the practical impact of provisions relating to so-called ‘major federal regulator with new powers, it demonstrates the importance failures’ on suppliers, particularly in relation to a claim that politically of consumerism and consumer protection. goods would not have been acquired by a consumer had the consumer been ‘fully acquainted with the nature and extent of 36 Describe any developments regarding ‘access to justice’ that the failure’. would make product liability more claimant-friendly. The metes and bounds of the mandatory reporting requirements 35 Describe the level of ‘consumerism’ in your country and under the ACL continue to remain unclear, raising concerns for consumers’ knowledge of, and propensity to use, product liability manufacturers and suppliers of consumer products. If a supplier litigation to redress perceived wrongs. becomes aware of the death or serious injury or illness of any person Australia has a long history of product liability litigation. More and considers that it was caused, or may have been caused, by the than 70 years ago, Australia’s highest appellate court considered use or foreseeable misuse of consumer goods, they must report to the the application of sale of goods implied warranties to the consumer appropriate regulator within two days. This obligation also arises if model. More recently, product liability litigation has been influenced they become aware of another person who considers there is a notifi- by a focus on consumer protection and product safety. In the 1990s, able event. In those instances where the facts are unclear or where Australia introduced its version of the EC product liability directive there are contradictory accounts, it can be difficult to decide whether and a class action procedure. Both had been significant forces in the reporting requirements have been triggered much less within the shaping product liability litigation and consumer activism. Indeed, prescribed time limits. much of Australia’s product liability litigation in the two decades Recently, the Australian government requested that the commencing from 1990 mirrored the mass tort cases that were Productivity Commission undertake an inquiry into Australia’s sys- being conducted in the United States. While the recent introduc- tem of civil dispute resolution, with a focus on promoting access to tion of the ACL was primarily designed to establish uniform laws justice (see ‘Update and trends’). concerning consumer protection and fair trading, by providing the

16 Getting the Deal Through – Product Liability 2014 Souto, Correa, Cesa, Lummertz & Amaral Advogados BRAZIL Brazil

Jorge Cesa, Roberta Feiten and Fernanda Girardi Souto, Correa, Cesa, Lummertz & Amaral Advogados

Civil litigation system 4 Are there any pre-filing requirements that must be satisfied before a formal law suit may be commenced by the product liability 1 What is the structure of the civil court system? claimant? The Brazilian civil court system consists of state and federal lower No. court judges; state and regional federal courts of appeal, mainly responsible for second instance judgments; the Superior Court of Justice (STJ), responsible for controlling the proper application of 5 Are mechanisms available to the parties to seek resolution of a federal laws; and the Federal Supreme Court, responsible for ensur- case before a full hearing on the merits? ing the accurate application of the Federal Constitution in According to the CCP, any preliminary issues (see question 3) must that have major federal repercussions. be alleged in the answer to the complaint prior to facing the merits The civil court system in Brazil is ruled mainly by the Federal of the case. The judge may decide on such matters at the beginning Constitution and the Code of Civil Procedure (CCP), Law No. of the proceeding or at the end of the discovery period. If the judge 5,869/73. When a lawsuit concerns state matters involving values accepts one of the pleaded issues, the lawsuit will be extinguished under 40 times the national minimum wage, Law 9,099/95, which before the analysis of the merits. provides for small claims, is applicable (with the subsidiary applica- tion of the CCP). When a lawsuit involves federal matters under 60 6 What is the basic trial structure? times the national minimum wage, it is Law 10,259/01 that applies to the case. Trials are public. Ordinary civil proceedings, which are usually applicable in product liability lawsuits, may have a conciliatory trial if the parties are willing to settle the case, and usually 2 What is the role of the judge in civil proceedings and what is the have a trial hearing where parties speak before the judge and their role of the jury? attorneys to clarify or confess to the alleged facts. The civil court system in Brazil is inquisitorial and there is no jury. Live testimony is one of the most common forms of evidence in The role of a first instance judge is to receive and analyse the facts, Brazil. The parties may indicate three witnesses to corroborate each arguments and evidence, while giving equal treatment to the par- alleged fact. Witnesses are heard in the same hearing, yet separately ties. Judges must rule on each case, observing the requests made in from the parties and other witnesses. Unless the witness is a close the initial complaint and, without going beyond the extent of such friend, enemy, relative of the parties or is interested in the case, he or requests, declare the arguments that support their judgment. As she takes an oath before the judge to tell the truth or be subject to judges have a duty to investigate facts, they may also call for any facing criminal charges. further (or repeated) diligence and evidence they deem necessary for The plaintiff must present all documents with the initial com- the discovery of the truth. plaint and the defendant must produce them with the answer. Parties may impugn the truth of the documents in a separate proceeding. The judge may order that the parties to the lawsuit and even third 3 What are the basic pleadings filed with the court to institute, parties present further documents before the court. prosecute and defend the product liability action and what is the Parties may also produce expert examinations to prove or dis- sequence and timing for filing them? prove the alleged facts. In this case, parties can present questions to A product liability action begins with an initial complaint that must be answered by a court-appointed expert and indicate an assistant observe some formal requirements, such as a clear description of expert to follow the examination and present motions regarding the facts, the legal grounds for the action and the amounts concerned. judicial expert report. Parties may also request the judge’s permis- If the complaint observes said requirements, the judge will summon sion to hear the judicial expert at the trial hearing. the defendant. If not, the judge orders the plaintiff to amend the The judgment (decision on the merits) may occur orally at the complaint before ordering the summons. In ordinary civil proceed- end of the trial. However, the judge usually gives parties the oppor- ings, the defendant may present a formal answer within 15 days tunity to present final written arguments and renders the decision of the date of the proven service of summons. The answer should in camera. include, beside arguments regarding the merits, any allegations Parties may file an appeal against the first instance decision, concerning preliminary issues, such as of limitations, nul- which is then reviewed by the state or regional federal court of lity of the summons, res judicata, etc. When a lawsuit is filed as a appeals in a public session led by three judges, where the attor- small claim (under Laws 9,099/95 or 10,259/01), the defendant’s neys can present their arguments orally. The lower court decision answer should be presented at a hearing arranged by the judge. If is usually suspended by the appeal. According to each case and also the defendant does not serve its answer timely to the complaint, the observing many formal requirements, after the Court of Appeal’s facts alleged by the plaintiff are presumed true, possibly leading to the acceptance of the complaint. www.gettingthedealthrough.com 17 BRAZIL Souto, Correa, Cesa, Lummertz & Amaral Advogados award the parties can still appeal to the Superior Court of Justice, attached to the dockets, thereby allowing each litigating party to pre- the Federal Supreme Court or both. sent a formal challenge or motion concerning its content. Brazilian has been permitting further documents to be presented dur- ing the course of a lawsuit provided that there is a justification for 7 Are there class, group or other collective action mechanisms such late presentation and that the opposing party has the opportu- available to product liability claimants? Can such actions be nity to be heard concerning them. brought by representative bodies? Witnesses are to be questioned in person at a hearing, which Yes. Law 7,347/85 regulates civil collective actions regarding liabil- usually takes place in the state jurisdiction where the lawsuit is ity for damage caused to consumers, to the environment and to running. It is admissible that witnesses who do not live in the city other specified assets. Judges may sentence defendants to pay com- where the lawsuit is running be deposed by the district court of his pensatory damages and to perform (or not perform) certain actions. or her place of residence through an incidental proceeding initiated A civil class action may be instituted by the Public Attorney’s Office for such purpose. (A similar proceeding is applicable for witnesses (PAO), the Public Defence Office, by federal, state and municipal living abroad.) Parties may present, immediately before the hearing, governments, by entities and bodies of the public administration, any impediment that may disqualify a witness. as well as by associations that include consumer defence in their Finally, the conclusions of technical examinations are docketed institutional scope as long as they have been incorporated for at by means of written reports issued by the court-appointed expert least one year (the judge may waive this requirement in some spe- or experts and by technical assistants appointed by the parties (if cific instances). any). Parties are entitled to request that the judge notify the court- The Consumer Protection Code (Laws 8,078/90 – CDC) also appointed expert and technical assistants to attend the hearing and governs collective actions for product liability, which may be filed to render additional clarifications regarding the examination. to protect: • diffuse interests or rights, meaning group, indivisible rights whose holders are indeterminate persons linked by factual 11 May the court appoint experts? May the parties influence the circumstances; appointment and may they present the evidence of experts they • collective interests or rights, meaning group, indivisible rights selected? whose holders are a group, category or class of people linked by Yes, the court may appoint experts whenever there are technical a common legal relationship; or issues to be discussed in the case. The court may even appoint more • homogeneous individual interests or rights, meaning those aris- than one expert when the matter involves more than one field of ing from a common origin. knowledge. Parties cannot influence the appointment themselves, yet the When a collective action refers to homogeneous individual interests CCP provides for instances where the parties may contest the court- or rights, each individual consumer may request liquidation if the appointed expert whenever there is a cause for impediment or action is favourable to the plaintiff. denial, or if the court-appointed expert does not meet the necessary technical qualifications required for the examination. The parties may also appoint their own technical assistants to accompany the 8 How long does it typically take a product liability action to get to examination. the trial stage and what is the duration of a trial? Court-appointed experts present a written technical report, The time for a lawsuit to get to the trial stage varies according to the which may be challenged in writing by the technical assistants and district court and the number of judges, court staff, pending lawsuits by either party. and other local factors as well as the duration of the expert examina- tion, when so required. An ordinary civil liability lawsuit may take years to get to the trial stage and may take up to four years to be 12 What types of compensatory damages are available to product judged in the first instance. liability claimants and what limitations (if any) apply? Product liability claimants are entitled to be fully compensated for Evidentiary issues and damages damage suffered. Claimants must demonstrate the extent of the damage and that it arose from the defective product. 9 What is the nature and extent of pretrial preservation and The general rules for compensatory damages are provided by the disclosure of documents and other evidence? Are there any Brazilian Civil Code (CC), which states that only direct loss or injury avenues for pretrial discovery? is to be compensated by the breaching agent. The injured party is In Brazil there is no pretrial discovery or disclosure of evidence simi- entitled to compensation for any damage suffered as a direct and lar to that found in common law. It is worth noting that the only immediate result of the accident with the defective product, includ- official proceeding that could be deemed similar is the investigation ing actual damages (the actual pecuniary loss for the victim), loss of led by the PAO to gather evidence for a potential collective action. profits, moral damages, bodily injury and aesthetic damage. The loss Such pretrial discovery is not an adversarial proceeding and conse- of an opportunity may also entail damages. quently the parties involved are sometimes not even aware that it is The product liability claimant may be either the consumer of occurring unless the PAO decides that the party is to be notified to the product itself or any parties affected by the consumer accident produce further elements or clarifications. Besides that, according to (bystanders). The CDC also entitles consumers to receive redress for the CCP, anyone may file a lawsuit requesting the urgent production damage related to non-conformity, namely, whenever a product has of evidence in order to avoid the loss of proof and enable the filing a flaw in quality or quantity that makes the product improper or of an ordinary indemnity lawsuit. inadequate for its purpose, diminishes its value or whenever there is a discrepancy regarding the purported characteristics of the product.

10 How is evidence presented in the courtroom and how is the evidence cross-examined by the opposing party? 13 Are punitive, exemplary, moral or other non-compensatory Evidence may consist of documents, testimonies and technical exam- damages available to product liability claimants? inations. The documents supporting each party’s allegations are filed The Brazilian legal system does not provide for punitive damages. with the initial pleadings (complaint and answer, respectively) and The principle of full reparation for damage caused is effective and

18 Getting the Deal Through – Product Liability 2014 Souto, Correa, Cesa, Lummertz & Amaral Advogados BRAZIL provides that compensation must be equivalent to the actual extent successful party, which in turn tends to influence future decisions of of the damage inflicted, meaning that the compensation cannot be lower and state courts regarding the matter. greater or lesser than the extent of the said damage. An accepted exception to such principle is the limitation of liability clause, Sources of law though its application is subject to some restrictions, especially in consumer relationships. 18 Is there a statute that governs product liability litigation? Moral damages are fully acceptable in Brazil and theoretically, Product liability litigation is mainly governed by the CDC and sub- every product liability case can generate a claim seeking moral dam- sidiarily by the CC and CCP. The CDC is grounded on the principle ages. The values of the judicial awards depend on the characteristics of the strict liability of suppliers. of the case, such as the kind of injury suffered, the social and eco- The CC, on the other hand, provides the general rules for civil nomic conditions of the parties, etc. These values are usually not relationships and tort liability. Civil liability is a fault-based system very high yet it should be noted that case law has been taking into and strict liability is the exception. The general hypotheses for strict account the punitive and exemplary functions of compensation in liability relate to the company that puts the product on the market order to establish the indemnification for moral damages. and of agents who perform risky activities.

Litigation funding, fees and costs 19 What other theories of liability are available to product liability 14 Is public funding such as legal aid available? If so, may potential claimants? defendants make submissions or otherwise contest the grant of Before the enactment of the CDC, product liability claims used to such aid? be grounded on breach of contract or on the breach of a general Legal aid is very common in Brazil and may be requested at any duty of care (tort) by demonstrating that the supplier had committed stage of the proceedings simply by presenting an affidavit regard- some form of negligence. Such scenario was radically altered in 1990 ing the claimant’s inability to afford the costs of the lawsuit with- when the CDC came into force and established strict liability as the out harm to their or their family’s subsistence. The defendant may general rule for product liability. It is worth remembering that this oppose legal aid, but has the burden of proving that the claimant has consumer legislation applies even to non-consumers whenever they sufficient financial resources to afford the expenses. are victims of a consumer accident.

15 Is third-party litigation funding permissible? 20 Is there a consumer protection statute that provides remedies, imposes duties or otherwise affects product liability litigants? Third-party litigation funding is not ruled by any law nor is it com- mon practice in Brazil. However, given that it is allowed in other The CDC is the main legislation concerning product liability in countries, Brazilian scholars are beginning to discuss the matter. Brazil. Consumer protection has a constitutional status and the rules provided by the consumer legislation are mandatory. Among the basic rights ensured to consumers, one can highlight the protection 16 Are contingency or conditional fee arrangements permissible? of life, health and safety against risks arising from dangerous prod- Parties and their attorneys may settle fee agreements that observe the ucts; adequate information about products; correctness in advertis- Attorney’s Professional Conduct Code. Fees should be established ing; prevention and redress of damages; and effective and facilitated with moderation by considering complexity, the value in dispute and defence of rights. It also provides the criteria for the definition of the time to be spent on the matter, among other criteria. Success fees defective products and non-compliance defects, the remedies avail- are also admissible. The Brazilian Association of each state pro- able to consumers, strict and joint liability of agents involved in vides a suggested fee chart to be followed by attorneys, who should the supply chain, the instances in which the supplier might not be not charge fees below the minimum on the chart, but may establish deemed liable towards the consumer and the applicable statute of fees above it. limitations. It imposes several duties on the suppliers, related not The fees set by the judge to be paid by the losing party to the only to the adequacy and safety requirements of products, but also winning party’s attorney do not infringe the attorney’s right to to the offer and advertising of such products. It also establishes sev- receive the fees previously agreed on with the party, unless stated in eral commercial practices deemed abusive against consumers and writing within the fee agreement. consequently forbidden to suppliers, and establishes applicable pro- cedural rules in product liability litigation, whether individually filed or brought by the legitimate parties by means of a collective action. 17 Can the successful party recover its legal fees and expenses from the unsuccessful party? The successful party can recover all court costs from the unsuccess- 21 Can criminal sanctions be imposed for the sale or distribution of ful party by requesting that the unsuccessful party be notified to defective products? pay back the court expenses. If the party does not comply with the The CDC, Law No. 8,137/1190 (crimes against consumer relations) notification, the creditor may extend the lawsuit to collect the debt. and the Penal Code establish some types of conduct that are deemed The judge will also order the unsuccessful party to pay a fee to the crimes against the consumer relationship, including the following: successful party’s attorney. These fees may be up to 20 per cent of the • the omission of clearly visible information regarding the dan- amount involved in the case. It is important to point out that these gerousness of a product on its packaging, receptacle or related fees are not to be paid to the successful party but rather to the suc- advertising; cessful party’s attorney. Therefore, these fees do not aim to recover • the failure to notify the competent authority and consumers the party’s expenses. about the dangerousness of products when such features are At present, there is a discussion in Brazil as to whether the suc- known after the product was put onto the market, or the failure cessful party may recover the fees agreed upon between the success- to remove such defective products from the market immediately ful party and their attorney. Although major case law does not allow after being instructed to do so by the competent authority; it, some courts have accepted the request made by the successful • the of false or misleading affirmations or omission party to also recover these agreed fees. Moreover, the Superior Court of relevant information regarding products; of Justice has this year rendered a decision granting this request to a www.gettingthedealthrough.com 19 BRAZIL Souto, Correa, Cesa, Lummertz & Amaral Advogados

• producing or promoting misleading or abusive advertising; and 26 What is the standard by which causation between defect and • producing or promoting advertising when the party is aware (or injury or damages must be established? Who bears the burden ought to be aware) that it may induce dangerous behaviour. and may it be shifted to the opposing party? The main rule regarding causation in Brazil is provided by the CC, which states that redressable damage and injuries are those directly 22 Are any novel theories available or emerging for product liability and immediately resulting from the defect. There are several theories claimants? formulated by scholars aiming at defining the causal link for liability No. purposes. The main one is the ‘theory of adequate causality’, which restricts the cause of damage to that which would be adequate and 23 What breaches of duties or other theories can be used to indispensable to cause a given result. It is also possible to interpret establish product defect? such theory in a negative sense, aiming at discovering the inadequate cause, which would lead to the exclusion of a potential event as a In Brazil, the notion of what makes a product defective is directly cause. related to safety and the supplier’s general duty to only market prod- As to the burden of proof, the consumer must demonstrate that ucts that do not entail any risks to the physical integrity of consum- the defective product is one of the potential causes of the damage. ers or to their assets. The potential breaches that may establish that Therefore, the supplier is to bring evidence that the defect does not a product is defective arise from the product’s design, manufacture, exist or, if it does, that there is no causal link. construction, assembly, formulation, manipulation, presentation and packaging. Further, the breach of the duty to render sufficient and adequate information on the usage and risks of a product will in 27 What post-sale duties may be imposed on potentially responsible itself suffice to characterise a product as defective. parties and how might liability be imposed upon their breach? The main post-sale duty relates to the obligation to report whenever 24 By what standards may a product be deemed defective and who it is found that a product may be deemed dangerous to the health bears the burden of proof? May that burden be shifted to the or safety of consumers. The supplier must notify the competent opposing party? What is the standard of proof? authorities – federal, state and municipal – and also provide clear and sufficiently well-advertised information to consumers (recall). The general rule provided by the CCP establishes that the plaintiff Another post-sale duty consists of the obligation imposed on has the burden of proving all facts which ground the claim. In addi- manufacturers and importers to guarantee that components and tion, the CDC establishes that the burden of proof may be shifted to spare parts are available on the market throughout the manufactur- the defendant whenever the claim is plausible and the consumer is ing or importation period of their products and for a reasonable deemed to be especially disadvantaged compared with the supplier time after manufacturing or importation is ceased. or producer. The CDC also provides for some circumstances which The breach of such post-sale duties may lead to administra- must be taken into account to determine whether a product can be tive and penal repercussions, without prejudice of the obligation to deemed defective, which are: its presentation, the usage and risks redress any damage suffered by consumers. which are reasonably expected from the product and the time when the product was put on the market. As to the standard of proof, it is important to mention that the Limitations and defences Brazilian legislation does not rule on this matter and there is no con- 28 What are the applicable limitation periods? sistent interpretation in case law. Scholars have indicated that the preponderance of evidence may be used to guide the judicial appre- A defective product can generate damages not only to the consumer, ciation of evidence whenever the claim involves private civil matters, but also to suppliers in relations between two companies. If it is a which is usually the case in product liability. If there is a penal reper- consumer who is somehow harmed by a defective product, his or cussion, however, clear and convincing evidence must apply. her right to compensation is time-barred after five years. This period begins to run on the day on which the consumer becomes aware of the damage and of the identity of its producer. 25 Who may be found liable for injuries and damages caused by However, if a company suffers damage as a result of one of its defective products? suppliers’ products – in which case the CC applies – its right to be The CDC provides that the manufacturer, producer, constructor and compensated is time-barred three years from the date when the dam- importer, whether domestic or non-Brazilian, may be found jointly age occurred. The CC provides few situations in which these limita- liable for injuries and damage caused by defective products. Sellers tion periods can be interrupted. If any of the listed events happen, are also deemed liable whenever: the limitation period starts anew. A limitation period can only be • the aforementioned agents cannot be identified; interrupted once. • the product is supplied without clear identification of the manu- facturer, producer, constructor or importer; and 29 Is it a defence to a product liability action that the product • they have not stored perishable products adequately. defect was not discoverable within the limitations of science and technology at the time of distribution? If so, who bears the burden The shareholder’s assets may also be used to satisfy corporate obliga- and what is the standard of proof? tions towards consumers whenever there is abuse, excess of power, infraction of the law or violation of company by-laws, bankruptcy, There is a discussion among legal scholars as to whether producers insolvency, termination or non-operation due to mismanagement should be held liable in such cases and Brazilian courts have not yet and even when the legal entity is deemed an obstacle to the redress had enough cases regarding these possible exclusions to set up a of consumer damages. clear line of interpretation. The argument for the acceptance of these defences is that one cannot be liable for uncontrollable risks. Also authorising this inter- pretation is article 12, section 2, CDC, which states that a product is not deemed defective for the sole reason that another better product has subsequently been introduced into the market.

20 Getting the Deal Through – Product Liability 2014 Souto, Correa, Cesa, Lummertz & Amaral Advogados BRAZIL

The counterargument is that the wording of said article does not clearly exclude producer liability in cases of development risks Update and trends or state-of the-art developments and article 12, section 3, which lists producer defences in product liability cases, mentioning neither Some provisions of the CDC are expected to change or be term. Although CDC legislators attempted to use wording similar to amended over the next few months. A relevant emerging trend relates to Bill 281, which aims to alter the CDC. Among other that found in Directive 85/374/ECC, they did not make it as clear as issues, the bill stipulates that legislation and contracts must be article 7e of the said directive. interpreted and, when applicable, judicially integrated (in the event Having said that, should these defences be deemed applicable, of an omission) in the most favourable manner for the consumer. the product will not be considered defective and since it is the pro- In other words, the bill entitles consumers to have their product liability claims ruled on by means of the most favourable statute ducer that carries the burden of proving the product is non-defec- for their case, regardless of its subjective scope of application. tive, it must also prove that the state-of-the-art and the scientific or This means that even though it is the CDC that governs consumer technical knowledge available when the product was put into circu- relationships, a claimant could choose, for instance, to make use lation did not enable the discovery of the defect. of the statute of limitations established by the CC, given that it provides for a longer term than does the CDC. Moreover, the new law may extend the suppliers’ obligation to disclose information 30 Is it a defence that the product complied with mandatory (or regarding health and safety to include the potentiality of the product to cause environmental impact. In this case, the obligation voluntary) standards or requirements with respect to the alleged to initiate a recall would arise not only from risks to the health and defect? safety of consumers, but also from the risk of an environmental The standard applied by Brazilian law to define a product as defec- impact. tive relates to the safety that consumers are legitimately entitled to expect from it. Analysing the case from a consumer perspective, compliance with mandatory or voluntary requirements is viewed as the case has a general repercussion. Both appeals rarely suspend a fundamental prerequisite for any given product to be put on the the lawsuit and, therefore, are not able to stave off the provisional market. Therefore, compliance with such requirements is not a suf- enforcement of the decision. ficiently strong criterion to fully meet safety standards. Notwithstanding this, it is highly recommended that the defend- Jurisdiction analysis ant prove said compliance in the lawsuit in order to stave off the basic assumption that the product was indeed defectively manufac- 33 Can you characterise the maturity of product liability law in terms tured or designed, or both. of its legal development and utilisation to redress perceived wrongs? The CDC, the basic law regulating this matter, was enacted in 1990 31 What other defences may be available to a product liability and Brazilian courts have decided on a broad range of product lia- defendant? bility cases over these 24 years. Given that such cases usually deal Article 12, section 3, CDC, lists three basic defences. The defendant with technical issues, whose profiles change according to the alleged must prove that: defect, there is always a degree of uncertainty in every case, espe- • they did not introduce the product into the market; cially in novel ones. However, it can be said that Brazilian law in • the alleged defect does not exist; or general has achieved a reasonable level of maturity regarding prod- • the damage was caused by exclusive fault of the consumer or a uct liability matters. third party.

The nature of this list has been object of legal discussions, namely 34 Have there been any recent noteworthy events or cases that as to whether it is exhaustive or not. For instance, another accepted have particularly shaped product liability law? Has there been defence is external force majeure – any event beyond the producer’s any change in the frequency or nature of product liability cases control happening after the product is placed on the market. launched in the past 12 months? There have been no recent laws, cases or groups of cases that have particularly changed the profile of product liability in Brazil. 32 What appeals are available to the unsuccessful party in the trial However, at least two recent STJ decisions have consolidated the court? interpretation of CDC rules and are worth mentioning: Every trial court sentence can be subject to an appeal and though the • the fourth panel of the STJ has denied smokers’ claims seek- right to appeal cannot be contractually excluded, it can be waived ing compensation for damage caused by the consumption of after the trial court award. cigarettes. One of the bases for such decisions is the now-clearer In the second instance appeal, which usually suspends the trial difference between a defective product and the inherent danger- court decision, the case will be judged by a group of three judges ousness of a product; and who comprise one of the chambers of the Court of Appeals. If two • the third panel of the STJ has recently decided on a case stating of said judges take a decision contrary to the trial court sentence, the that even a reseller can be classified as a consumer, and thus be unsuccessful party can appeal to a group formed by judges from two protected by CDC rules, if he or she has suffered damage caused of the court chambers (an embargos infringentes appeal). by a defective product. When the second instance appeals are exhausted, the unsuccess- ful party can file a special appeal, an extraordinary appeal, or both before the Superior Court of Justice and the Federal Supreme Court, 35 Describe the level of ‘consumerism’ in your country and respectively. Both special and extraordinary appeals deal only with consumers’ knowledge of, and propensity to use, product liability issues of law, not of fact. Special appeals can be filed if a federal law litigation to redress perceived wrongs. has not been observed by the Court of Appeals and whenever the In Brazil, the CDC is a very well-regarded legislation and consumer Court of Appeal’s decision differs from that rendered by another protection is a highly legislated area. Moreover, as stated earlier, con- Court of Appeals. Though quite rare in product liability cases, an sumer protection is referred to in the Constitution as a fundamental extraordinary appeal can be filed when a constitutional provision right and in this scenario, judges tend to protect consumers and thus has been neglected by the court or if the appellant demonstrates that litigation is used as a tool to redress perceived wrongs. www.gettingthedealthrough.com 21 BRAZIL Souto, Correa, Cesa, Lummertz & Amaral Advogados

36 Describe any developments regarding ‘access to justice’ that • punitive damages are prima facie not applicable in Brazil, yet would make product liability more claimant-friendly. moral damages are not only allowed by the Constitution, but The CDC and related statutes are oriented by ‘access-to-justice’ also theoretically applicable in almost every civil liability case. guidelines and were enacted to protect consumers both contractu- Hence, moral damages are sometimes used by judges as punitive ally and procedurally. damages, though the awards are usually lower than in nations Consumer rights are not disposable by contract even if consum- that apply punitive damages; and ers have received an advantage for this disposition (for instance, a • collective actions are quite common, especially given the large lower price). Procedurally, consumer cases can be judged by small number of entities that have standing to sue, the most important claims courts, which are faster, free of charge in the first instance and of which is the PAO, which in Brazil is also competent for civil have highly flexible applicable procedures. Moreover, access to legal matters. The PAO may investigate the case before the lawsuit, aid is quite easy and statute-of-limitations periods are larger than in requesting information and documents from the investigated other similar situations. parties and third parties. The PAO may also negotiate agree- Three points should be highlighted in this context: the burden ments with the investigated parties to define measures to be of proof, punitive damages and the importance of collective actions: taken to solve the problem and to compensate the victims. • the burden of proof is shifted by law (eg, in the instance of the defective quality of a product) or may be shifted at the discretion of the judge if a consumer’s allegations are plausible or when the consumer has a significant (economic, technical or legal) weak- ness compared to the other party. (see question 23);

Jorge Cesa [email protected] Roberta Feiten [email protected] Fernanda Girardi [email protected]

Av Carlos Gomes, 700, 13th Floor Tel: +55 51 3018 0500 90480-000 Porto Alegre-RS Fax: +55 51 3018 0501 Brazil www.soutocorrea.com.br

22 Getting the Deal Through – Product Liability 2014 Boyanov & Co BULGARIA Bulgaria

Kina Chuturkova and Stela Sabeva Boyanov & Co

Civil litigation system 3 What are the basic pleadings filed with the court to institute, prosecute and defend the product liability action and what is the 1 What is the structure of the civil court system? sequence and timing for filing them? In Bulgaria there are three levels of courts responsible for adjudi- Litigation commences when the plaintiff files its written statement cating civil cases: first instance courts (regional courts and district of claim with the court. The statement of claim must satisfy certain courts) with proceedings heard and decided by one judge, second formal requirements, and generally the plaintiff must indicate to the instance courts (courts of appeal for judgments rendered by first court and the parties the facts of the case, the amount claimed and instance courts) with proceedings heard and decided by a three- the relief sought, as well as the evidence (documents, witnesses to be judge panel and the Supreme Court of Cassation. heard, experts to be appointed, etc). Documentary evidence has to District courts and regional courts act as first instance courts, be attached to the claim. depending on the amount in dispute and the subject of the litigation. After the action has been filed, the court will first consider Generally speaking, if this amount does not exceed 25,000 levs a whether it meets the formal admissibility requirements and, if so, it regional court will have jurisdiction, otherwise the matter must be will serve the action on the defendant along with a request to submit brought before a district court. Class action litigation must always a written response within 30 days. In its response, the defendant be brought before a district court. must indicate all its objections against the admissibility of the claim If a regional court acts as a first instance court, the competent and all its objections in law and in fact on the merits of the case. district court will decide on appeals against its decisions. Appeals If the defendant does not file a written response within 30 days, it against decisions of district courts acting as first instance courts are loses the right to submit evidence and objections in court. Also, the decided by an appellate court. In the third instance, the Supreme defendant may not raise objections in court or request evidence that Court of Cassation has jurisdiction to decide appeals brought it has failed to raise and request with the written response unless against second instance decisions if grounds for cassation appeal can the omission is due to special unforeseen circumstances. The 30-day be found. The Supreme Court of Cassation has discretion to decide time limit for filing a written response is also the deadline for the whether to accept the appeal and will decide only on questions of defendant to lodge a counterclaim. law. The court decisions adopted in class litigation proceedings are Having received the written response of the defendant, the court always subject to cassation review, irrespective of whether the spe- issues a ruling on the admissibility of the case and the evidences to cial requirements for admissibility of cassation appeal are met. be collected, and schedules the first open hearing.

2 What is the role of the judge in civil proceedings and what is the 4 Are there any pre-filing requirements that must be satisfied before role of the jury? a formal law suit may be commenced by the product liability In Bulgarian civil litigation, no jury is involved in the proceedings. claimant? For around the last 20 years, the Bulgarian civil litigation pro- There are no pre-filing requirements that must be satisfied before cedures have been gradually changing from purely inquisitorial to a formal lawsuit may be initiated by the product liability claimant. largely adversarial. Under the present Civil Procedure Code, which Alternative dispute resolution methods are available but are not entered into force on 1 March 2008, it is the obligation of the par- mandatory. ties to submit relevant facts and evidence to the court, and thus each party carries the burden of proof in respect of its own claim or defence. However, the judge is not a passive recipient of information 5 Are mechanisms available to the parties to seek resolution of a and is obliged to inquire if the statements of a party are unclear or case before a full hearing on the merits? incomplete. Also, the judge must inform the parties in advance of Under Bulgarian legislation, if a civil litigation is pending the court the facts that need to be proven, the burden of proof and the conse- is obliged to advise and invite parties to settle the dispute before quences of an unsuccessful evidence procedure. The court may take commencing the hearing on the merits. The alternatives to litigation part in the collecting of evidence by questioning witnesses and the that the parties are invited to undertake are mediation and voluntary appointment of experts. The court may, however, only consider the settlement of the dispute. Only on very rare occasions, however, do claims brought before it and may not adjudicate on more or any- parties avail themselves of these opportunities. thing other than as claimed by the parties. In March 2008, with the adoption of the new Civil Procedure Code, new legal institutes were introduced by reference to United Kingdom and United States judicial procedures, including two types of judgment similar to summary judgments, which courts can issue depending on the procedural motions of the parties and the consid- erations and determinations of the facts made by the court. www.gettingthedealthrough.com 23 BULGARIA Boyanov & Co

The first type of judgment shall be issued when the defendant 7 Are there class, group or other collective action mechanisms admits the claim entirely and expressly. In such cases the court may, available to product liability claimants? Can such actions be upon request of the plaintiff, hold a judgment based on the admis- brought by representative bodies? sion of the claim without further considerations and determination The new Civil Procedure Code (effective from 1 March 2008) intro- of the relevant facts. duced the first provisions regulating class action pro- The Civil Procedure Code also introduced the default judgment cedure in Bulgaria. in cases: A class action lawsuit may be initiated on behalf of persons who (i) where the defendant has not submitted a statement of defence are harmed by the same infringement where the circle of affected and has neither appeared at the first open-court hearing, nor persons cannot be defined precisely but is identifiable. Any person submitted a request for the case to be heard in his or her absence; who claims that he or she has been harmed by the infringement, or and any organisations responsible for the protection of injured persons, (ii) where the claimant has not submitted a counter-statement on may file a complaint on behalf of all injured persons against the the statement of defence of the defendant, and the claimant has alleged wrongdoer, petitioning the court to proclaim the harmful act not appeared at the first open-court hearing and has not submit- and to issue a decision for cessation of the infringement, for rectifi- ted a request for the case to be heard in his or her absence. cation of the consequences of the infringement or for compensation for the damages inflicted on the plaintiffs or both. In order to issue a default judgment in case (i) above, the court has The statement of claim shall contain the circumstances upon to establish based on the evidence presented that the claim is most which the class action is founded specify the circumstances that likely well founded when the judgment will be issued in favour of identify the circle of injured persons and state the form in which the claimant. In case (ii) the court has to establish based on the evi- the publication of the opening of the procedure should be publicly dence presented that the claim is most likely unfounded when the announced. The court shall accept the participation in the case of judgment will be issued in favour of the defendant. any other injured persons or organisations responsible for the pro- The default judgment is not subject to appeal and is final and tection of the injured persons that have filed, within a time limit binding upon the parties, though there are specific remedies pro- set by the court, a motion for participation in the procedure. The vided: the default judgment may be set aside if a party was unable to court shall exclude the injured persons who have declared, within participate in the trial because of undue service or reasons that have the time limit set, that they will pursue a remedy in separate proceed- been out of his or her control; the party may claim or challenge the ings. Hence, the Bulgarian class action procedure is a typical ‘opt-in’ right resolved by the default judgment in the case of new or newly procedure. discovered circumstances or new evidence. The judgment of the court shall have effect in respect of the defendant, the person or persons who have brought the action, as well as in respect of those persons who claim that they are harmed 6 What is the basic trial structure? by the established infringement and who have not declared that they Litigation before the first instance court is basically divided into wish to pursue a remedy independently in a separate procedure. The two phases. The first phase includes the exchange of written briefs excluded persons may avail themselves of the judgment whereby the (namely, the statement of claim of the plaintiff and the written class action has been granted. response of the defendant) and the ruling of the court issued at a Class actions may also be brought by registered consumer asso- closed session for admitting evidence and for scheduling the open- ciations that are entitled to bring claims for termination of the viola- court hearing. tion of the Consumer Protection Act (CPA) or other applicable laws The second phase includes the open-court hearing, the purpose directly or indirectly protecting consumer rights, and for compensa- of which is for the factual statements of the parties to be finally tion of the damages caused to the collective consumer interest as a clarified and the evidence to be collected with the active assistance result of such violation. of the court. For that purpose, during the open-court hearing the At the time of writing we are aware of only a few class actions judge prepares and reads a report containing instructions about the filed, and as a general rule such claims are still not very popular and facts that need to be proven and the burden of proof that each party are not commonly brought. carries. What follows then is the collecting of evidence admitted by the court, including hearings of witnesses and experts. Witnesses are always heard before the court; a written testimony or affidavit 8 How long does it typically take a product liability action to get to instead of the live testimony of the witness is not permissible. After the trial stage and what is the duration of a trial? the court rules that the taking of evidence is finalised, the parties are There is no pretrial procedure in Bulgaria. A case is considered invited to present their oral pleadings. Once the oral pleadings are opened at the moment when the claim is lodged with the competent concluded the court announces that it will issue its judgment within first instance court conditional on its acceptance as admissible by the the legal term of 30 days. court. Depending on the workload of the competent court, a first- The above-mentioned second phase usually takes more than one court hearing is normally scheduled within three to four months court session, and court sessions are usually scheduled periodically from the filing of the claim. (there are usually between three weeks and several months between The duration of a trial depends on the complexity of the specific the sessions, depending on the specifics and complexity of the case, case, and normally a civil procedure takes one to two years in the the availability of parties, witnesses and experts and the volume of first instance court. the evidence to be collected). It has to be noted that claims based on alleged violation of the Evidentiary issues and damages Consumer Protection Act (with the exception of class action claims) are reviewed by the court under the special expedited proceedings 9 What is the nature and extent of pretrial preservation and that represent an expedited version of the general civil procedure disclosure of documents and other evidence? Are there any specified above. avenues for pretrial discovery? In general, the proceedings are public. There is no pretrial discovery and no pretrial disclosure in Bulgarian civil procedure law. Only in specific instances where there is danger of destruc- tion or loss of evidence, or that its collection would be hindered or

24 Getting the Deal Through – Product Liability 2014 Boyanov & Co BULGARIA prevented, may a party request the court to order certain preventive Litigation funding, fees and costs measures in order to collect such evidence prior to the filing of the statement of claim. 14 Is public funding such as legal aid available? If so, may potential defendants make submissions or otherwise contest the grant of such aid? 10 How is evidence presented in the courtroom and how is the Legal aid, financed by the state budget, is available to individuals evidence cross-examined by the opposing party? in a difficult material situation and is granted on request. Legal aid A general principle in Bulgarian civil procedure law is that the judge refers to free-of-charge legal assistance for the bringing and handling is expected to gain a personal impression of all evidence on which he of a court action. In addition, at the request of a party, the court or she bases his or her decision. Admissible means of evidence under may waive that party’s obligation to pay court fees and costs for the Bulgarian Civil Procedure Code are witnesses, experts, parties’ proceedings. testimony, documentary evidence and inspections by the court. The court ruling by which legal aid is granted cannot be appealed Parties and witnesses give evidence by live testimony. Witnesses by the other party. Defendants may request the court to deprive the are usually cross-examined by the parties. Experts are obliged to file party of legal aid in whole or in part if it is established that the condi- reports in writing and then to appear at the open hearing in order tions for the grant of said aid did not exist or to terminate the legal to present their findings to the court and to answer the questions of aid in the case of a change of the circumstances on the grounds of the judge and the parties. Documentary evidence may be submitted which the aid has been granted. by the parties as an attachment to their briefs or during the open- court hearing. An inspection of objects by the court can either be conducted in a hearing or outside the courtroom. 15 Is third-party litigation funding permissible? Bulgarian law does not provide for third-party funding of claims. However, there is no prohibition for such funding. 11 May the court appoint experts? May the parties influence the appointment and may they present the evidence of experts they selected? 16 Are contingency or conditional fee arrangements permissible? Experts are to be appointed by the court if the judge possesses no Contingency or conditional fee arrangements between plaintiffs and specific scientific or technical knowledge needed for the resolving of their lawyers are allowed by Bulgarian law. the dispute. Experts are appointed either ex officio or at the request of a party. Courts usually appoint experts included in prepared 17 Can the successful party recover its legal fees and expenses from lists of experts in different fields of a science, profession or prac- the unsuccessful party? tice. Such lists, however, are not exclusive and parties may propose other experts. Experts’ opinions are prepared for and submitted to In principle, the losing party must bear the legal costs of the suc- the court at least seven days before the court hearing. Experts are cessful party, including court fees, fees paid for legal assistance and then obliged to appear at the oral hearing in order to present their representation in front of the court, commensurate to the portion of findings to the court and to answer the questions of the judge and the action granted. the parties. Experts are required by law to be non-biased and their opin- Sources of law ions are to be true and impartial. Parties may present written expert 18 Is there a statute that governs product liability litigation? opinions prepared by experts of their own, but such opinions are not considered evidence gathered under the requirements of the law. In Bulgaria, product liability issues are governed by the CPA, in force from 10 June 2006, which implements several EU directives includ- ing the Product Liability Directive, No. 85/374/EEC of 25 July 1985. 12 What types of compensatory damages are available to product The CPA covers compensation for personal injury and property liability claimants and what limitations (if any) apply? damage with regard to items other than defective products, and only Under the strict product liability system provided by the CPA, only if the damage exceeds €500. The CPA provides for strict liability material damages with monetary value are recoverable, both direct in the case of product defects (namely, the plaintiff is only required damages and loss of profit, resulting in personal injury, death or to prove the defect and the causal link between the defect and the damage to objects (other than the defective product itself) in the damage and need not establish that the manufacturer was at fault). property of the injured person. The consumer would have a legal This liability of the manufacturer may not be limited or excluded interest to claim compensation under the special strict liability by contractual provision and any agreement to the contrary is void. regime provided that the defective product has damaged other goods The CPA does not provide an exclusive legal ground for product with a value not lower than 1,000 levs. In cases of personal injury liability claims. Due to the numerous restrictions provided by this no such limitation is set. Act, other causes of action based on tort law and the law of con- Moral damages (pain and suffering) (resulting from caused tracts remain very important for the damaged party. death, disability, health deterioration, etc) may be compensated on the grounds of the general tort liability principles as set out in article 19 What other theories of liability are available to product liability 52-45 of the Obligations and Contracts Act. claimants? The damage to the product itself is recoverable based on the contractual relationship between the seller (in most cases the retailer) General tort, defined by article 45 et seq of the Obligations and and the consumer. Contracts Act, is applicable, inter alia, to matters regarding product liability. Tort under the Obligations and Contracts Act is fault-based either on intent or negligence on the part of the wrongdoer who, in 13 Are punitive, exemplary, moral or other non-compensatory cases of product liability, could potentially be the manufacturer, the damages available to product liability claimants? importer or the retailer. Negligence, in the form of non-compliance Civil liability in Bulgaria, including strict product liability, has only with the objective test of due care, is presumed, thus shifting the bur- a compensatory function and not a punitive function. Contractual den of proof from the injured party and resulting in the procedural liability may include punitive damages if so agreed by the parties, burden for the wrongdoer to prove that he or she indeed applied but it is not common in consumer contracts. the due care and that his or her behaviour was not in breach of law. www.gettingthedealthrough.com 25 BULGARIA Boyanov & Co

The consumer must prove that the wrongdoer acted or omitted to 24 By what standards may a product be deemed defective and who act; that the act or omission was in breach of law; and the dam- bears the burden of proof? May that burden be shifted to the age suffered by the consumer, and a direct causal link between the opposing party? What is the standard of proof? unlawful behaviour of the wrongdoer and the damage. Should a A product is defective when it does not provide the safety that is party injured by a defective product seek indemnification of non- generally expected. Therefore, the standard by which the defect of material damages, the only existing legal solution would be to fol- a product is determined is the legitimate expectation of the aver- low the general procedure by claiming damages in tort. age consumer in the safety of the product. It requires an overall Contractual ground is another legal option for seeking relief for assessment to decide whether or not a product is defective, and this damages suffered from a defective product. Unlike the strict and tort assessment is independent and therefore irrespective of any stand- liabilities, contractual liability may include obligation for compensa- ardisation requirements. The manufacturer is responsible for the tion for damages arising only from the defective product itself and defect even if the product has been manufactured in compliance not from the death, personal injury or damage to other property of with the existing standards and good practices or even if the product the consumer caused by the defective product. Contractual liability has been put into circulation following the issuance of a licence by can be brought only against a party to the contract, and can be based a state authority. only on breach of contract. The injured party bears the burden of proof, meaning that the The aforementioned legal grounds work on a concurrent basis, injured party has to prove the defect, the damage and the causation that is, the different forms of liability (strict, tort and contractual) between defect and damage. If these are proven, the liability of the do not exclude but supplement each other so as to provide the con- manufacturer shall be established. sumer with sufficient and efficient integral indemnification.

25 Who may be found liable for injuries and damages caused by 20 Is there a consumer protection statute that provides remedies, defective products? imposes duties or otherwise affects product liability litigants? Under the strict liability regime the liability for the defect, respec- As specified in question 18, the CPA provides for strict liability in tively for the damages incurred, is borne by the manufacturer. the case of product defects. The same law also regulates the offer- ‘Manufacturer’, according to the CPA, is any person who manufac- ing, selling and other marketing of consumer goods and services by tures finished products, raw materials or component parts included businesses to consumers, the general requirements on the safety of in the manufacturing of other products and any person who, by put- products and measures to protect the life and health of consumers ting his or her name, trademark or other distinguishing sign on the against dangerous products, including recall of defective products. product, presents him or herself as its manufacturer. Without preju- dice to the liability of the manufacturer, any person who imports into the European Union products for sale, hire, leasing or any form 21 Can criminal sanctions be imposed for the sale or distribution of of distribution in the course of his or her business shall be deemed defective products? to be a manufacturer within the meaning of the CPA and shall be Articles 228 and 231 of the Penal Code provide criminal liability responsible as a manufacturer. for physical persons who, as managers of enterprises or as control- If neither the manufacturer nor the person who has imported lers (members of control bodies), order or allow the production of the products into the European Community can be identified then low-quality, substandard or incomplete sets of industrial goods or the supplier should be held liable. According to the CPA, ‘supplier’ articles that do not meet the requirements established for them with (distributor or trader) is ‘any person other than the manufacturer respect to quality, type or features. Criminal liability is provided for who puts the product into circulation’. The supplier shall not be persons who release for sale such industrial goods in considerable held liable if he or she informs the injured person, within a term of quantities or of considerable value without express declaration of 14 days, of the identity of the manufacturer, importer or the person their defects. who supplied him or her with the product. The supplier, however, It should be noted that for engaging the criminal liability of the may not direct the injured person to any person outside the territory perpetrators, it must be proven that they have acted with intent to of the Republic of Bulgaria. commit the respective crime. Provided that several persons qualify as liable manufacturers, importers or suppliers, they bear joint liability and may eventu- 22 Are any novel theories available or emerging for product liability ally seek within their internal relations distribution of the liability claimants? engaged. Where damage has been caused by a defective product that is a component part of another product, the manufacturer of the There are no such novel theories available. said component part and the person who installed it shall be liable jointly. 23 What breaches of duties or other theories can be used to In the case of tort, only the person at fault (manufacturer, establish product defect? importer or supplier) could be held liable. If an injury was caused Pursuant to the definition of article 132 of the CPA, a product is by the act, or the omission to act, of several wrongdoers they would defective when it does not provide the safety that is generally bear joint liability. expected, taking all circumstances into account, including the pres- In cases of contractual breach, the liability is borne by the entation of the product in terms of quality, quantity, name, type, defaulting contractor. contents, origin, specific features, customary and possible usage of the product, the advertising of the product and the provision of 26 What is the standard by which causation between defect and information about the product; and the time when the product was injury or damages must be established? Who bears the burden put into circulation. and may it be shifted to the opposing party? A product may not be considered defective for the sole reason In order to identify the relevant damages, two tests are usually that a better product is subsequently put into circulation. applied, corresponding to two different causation theories. The first test is related to the condition sine qua non theory of causation, proving that there is factual causation between the defect, existing at the time of the passing of risk to the consumer, and the damages

26 Getting the Deal Through – Product Liability 2014 Boyanov & Co BULGARIA suffered. (The defect is viewed as one of several preconditions that contract is set at three years from the date on which the receivable led to the damage of the consumer.) Would the damage still occur if sum has become due and payable. the defect of the product were hypothetically removed? A negative answer leads to establishing a factual causal relationship. 29 Is it a defence to a product liability action that the product However, it has to be pointed out that not all factual damages defect was not discoverable within the limitations of science and are recoverable under Bulgarian law; the legally relevant, direct technology at the time of distribution? If so, who bears the burden damages are the limit of the civil liability. That is why, in order to and what is the standard of proof? identify the direct damages, we put the factual damages to a second test using the adequate causation theory. This test would isolate only The state-of-the-art and development risk defence is provided in those damages that are a typical, normally occurring and necessary article 137 (paragraph 1) of the CPA, pursuant to which the manu- result, a consequence of the contractor’s default or unlawful behav- facturer may be exempted from liability if it is able to prove that the iour, and that are characteristic and will occur again under the same state of scientific and technical knowledge at the time when it put conditions. the product into circulation was not such as to enable the existence In view of the aforesaid, it is not sufficient to prove exposure to of the defect to be discovered. increased risk that might have led to or is usually associated with the The manufacturer bears the burden of proof with respect to this damages of the bodily constitution or property of the injured per- defence. This is an objective test. son provided that the consumer cannot prove that the specific injury would not have arisen without such particular exposure. 30 Is it a defence that the product complied with mandatory (or The plaintiff seeking relief has to prove the causation link voluntary) standards or requirements with respect to the alleged between product defect and damage. The burden of proof cannot be defect? shifted to the defendant. Under article 137 (paragraph 1) of the CPA the manufacturer must prove that ‘the defect is due to compliance of the product with 27 What post-sale duties may be imposed on potentially responsible compulsory requirements issued by state authorities’. However, the parties and how might liability be imposed upon their breach? observance of the applicable minimum statutory standards and qual- If manufacturers or distributors know, or ought to know, on the ity and safety requirements will not be sufficient per se to exclude basis of the information in their possession, that their products the liability of the manufacturer, unless it can prove that compulsory placed on the market pose a risk to the health and safety of consum- instructions of a state authority had been issued and complied with. ers, they must immediately inform the control authorities of this and must provide them with details of the action taken to prevent and 31 What other defences may be available to a product liability terminate risks to the health and safety of consumers. In such case, defendant? the control authorities may impose mandatory measures, including: In the case of the strict product liability there are six grounds under • ordering that the manufacturers or distributors inform the con- the CPA for exclusion of the manufacturer’s liability: sumers of the risk in good time and in an appropriate form; • the manufacturer did not put the product into circulation; • temporarily banning the marketing of the product; • having regard to the circumstances, it is probable that the defect • ordering or organising its actual and immediate withdrawal; that caused the damage did not exist at the time when the prod- and uct was put into circulation by the manufacturer or that this • as a last resort, coordinating or organising, together with the defect came into being afterwards; manufacturers and the distributors, the recall from consumers • the product was neither manufactured by the manufacturer for of dangerous products already supplied to them, and ordering sale or any form of distribution for economic purpose, nor man- the dangerous products’ destruction. ufactured or distributed by it in the course of its business; • the defect is due to compliance of the product with mandatory For failure to fulfil the mandatory measures imposed by the control regulations issued by the public authorities; authorities, the manufacturers or distributors may be sanctioned • the state of scientific and technical knowledge at the time when with monetary penalties on the grounds of the CPA. the manufacturer put the product into circulation was not such as to enable the existence of the defect to be discovered; or Limitations and defences • in the case of a manufacturer of a component, that the defect is 28 What are the applicable limitation periods? attributable to the design of the product in which the compo- nent has been fitted or to the instructions for the product given As a general remark, the lapse of the time limit specified in the law by its manufacturer. only precludes the right to file a claim and does not extinguish the substantive right to compensation for the damages suffered – any In the case of contract there are four grounds for exclusion of manu- payment made by the manufacturer to the injured person after the facturer’s liability: lapse of the time limit is considered duly made, and shall not be • there is no breach of contractual obligation; subject to reimbursement. • the breach of contract or non-conformity is not attributable to In the case of strict liability, the claim for compensation has to the manufacturer and could not have been foreseen (namely, it is be filed with the court within three years from the date on which the due to force majeure); injured person became or should have become aware of the damage, • there is no causal link between the particular damage and the the defect and the identity of the manufacturer, but in all cases not breach of contract; or later than 10 years from the date on which the defective product was • the defect or damage is not covered by the terms and condi- put on the market. tions of the applicable contractual warranty (for example, it is In the case of tort, the claim for compensation has to be filed time-barred). with the court within five years starting from the date when the wrongdoer is discovered (for example, the manufacturer of the In the case of tort it has to be proved that there is no fault (neg- defective product has become known to the injured person). ligence) on the part of the manufacturer or supplier (namely, the In the case of contract, the time limit for the filing of a claim for compensation for damages caused by a non-performance of a www.gettingthedealthrough.com 27 BULGARIA Boyanov & Co burden of proof rests on the manufacturer to demonstrate that it did 34 Have there been any recent noteworthy events or cases that not breach its general duty of care). have particularly shaped product liability law? Has there been In all cases, the liability of the manufacturer may be fully any change in the frequency or nature of product liability cases excluded or reduced proportionally where the consumer has solely launched in the past 12 months? caused, or has contributed by his or her own act or omission, the After the introduction of the class (collective) action procedure in occurrence of the damages. 2008, the number of class actions alleging infringement of consumer protection rules has increased. Class actions have been brought against electricity companies, a water and waste water company, 32 What appeals are available to the unsuccessful party in the trial banks, a mobile operator and even state bodies. The development court? of the proceedings indicates that there are still a lot of uncertainties The decision on the merits issued by the court of first instance may in the application of this relatively new legal feature, especially in be appealed before the appellate court. The appeal may be grounded the case of a class action brought against a state body, where other both on issues of law and fact. The decision of the appellate court options for the realisation of the liability of the state are also avail- may be challenged before the Supreme Court of Cassation if grounds able within special administrative proceedings. for cassation appeal can be found. The Supreme Court of Cassation is competent to decide whether the cassation appeal is admissible, and, in finding so, to rule on it dealing only with questions of law. 35 Describe the level of ‘consumerism’ in your country and consumers’ knowledge of, and propensity to use, product liability Jurisdiction analysis litigation to redress perceived wrongs. At present, the level of consumerism in Bulgaria is very low. Over 33 Can you characterise the maturity of product liability law in terms the past few years we have observed that the level of awareness of of its legal development and utilisation to redress perceived Bulgarian consumers is increasing, and there are growing numbers wrongs? of organisations for consumer protection. However, probably due to Bulgarian product liability law is harmonised with the relevant EU the slow decision-making process of Bulgarian courts, the number legislation, and in particular the following EC directives have been of product liability claims brought by consumers is not large, and if implemented: they bring an action based on a defective product, it is usually as a • the Product Liability Directive, No. 85/374/EEC of 25 July warranty or guarantee claim. 1985; At present, consumer protection is actively carried out by • Directive No. 97/7/EC of 20 May 1997 on the protection of the competent state authority, namely the Consumer Protection consumers in respect of distance contracts; Commission. The Commission conducts regular inspections and • Directive No. 93/13/EEC of 5 April 1993 regarding abusive often imposes administrative sanctions to manufacturers or distribu- clauses in consumer contracts; and tors of defective products. The product liability case law in Bulgaria • Directive No. 1999/44/EC of 25 May 1999 regarding the sale of is predominantly related to court review of appeals against adminis- consumer goods and associated guarantees. trative sanctions imposed by the state authorities.

Product liability law in Bulgaria focuses mostly on administrative surveillance conducted by the Consumer Protection Commission 36 Describe any developments regarding ‘access to justice’ that with respect to products’ safety and compliance with consumer pro- would make product liability more claimant-friendly. tection legislation. Court practice in this field is also in a process of There are no significant developments in the area of product liability development. as far as ‘access to justice’ is concerned. As a general rule Bulgarian Since the adoption of the procedural rules on collective actions consumers are still not much aware of their rights and they avoid (in March 2008) there has been a tendency of growth in the number bringing lawsuits against manufacturers or distributors mainly due of such civil actions initiated by consumers and organisations for to the slow decision-making process of Bulgarian courts. protection of consumers’ rights.

Kina Chuturkova [email protected] Stela Sabeva [email protected]

82 Patriarch Evtimii Blvd Tel: +359 2 805 50 55 Sofia 1463 Fax: +359 2 805 50 00 Bulgaria www.boyanov.com

28 Getting the Deal Through – Product Liability 2014 Cassels Brock & Blackwell LLP CANADA Canada

Glenn Zakaib, Emily Larose and Peter Henein Cassels Brock & Blackwell LLP

Civil litigation system • claim – the plaintiff serves and files the originating pleading, often called a statement of claim. This document is first filed 1 What is the structure of the civil court system? and then served on every named defendant. The claim document Each Canadian province and territory has its own court system. Each must generally contain a recitation of the causes of action, the province’s and territory’s superior courts have inherent jurisdiction damages sought, the material facts and identification of the stat- to hear cases on any subject except those that are specifically limited utes to be relied upon. Claims must be filed with the court within to another level of court by statute (eg, small claims courts, which the applicable limitation period; hear civil matters involving claims below a set monetary amount). • defence – once properly served, defendants respond to statements As a result, virtually all civil claims are heard by these provincial or of claim (or their equivalents) by way of a responsive pleading territorial superior courts. called, at least in a number of provinces, a statement of defence. In addition, Canada has a parallel federal court system. The In their defensive pleadings, defendants specifically admit, deny Federal Court of Canada has civil jurisdiction, limited to matters or state an absence of knowledge with respect to each allegation identified in specific federal statutes. Except to the extent that the made in the plaintiff’s pleading. Where a defendant intends to federal government or a federal ministry or Crown agency (such as prove a version of the facts different from that pleaded by the Health Canada) is a party to the claim, product liability cases will be plaintiff, the defendant must generally articulate its own version heard by provincial or territorial courts. of the facts in the defence. The defendant must also plead any affirmative defences upon which it intends to rely. The timing for the service of defences varies from jurisdiction to jurisdiction. 2 What is the role of the judge in civil proceedings and what is the In Ontario, for example, a statement of defence must be served role of the jury? within 20 days of receipt of a statement of claim served within Canada has an adversarial justice system. Judges are impartial deci- the province (or 30 days if a notice of intent to defend is served sion makers who interpret the law, assess the evidence presented and within the initial 20 days). Statements of claim served elsewhere control procedural matters in motions, hearing and trials. in Canada or in the United States must be defended within 40 Judges of provincial and territorial superior courts, the Federal days. Statements of claim served in the rest of the world must be Court and the Supreme Court of Canada are appointed by the fed- defended within 60 days. These timelines are routinely extended eral government. Once appointed, a judge is eligible to serve on the by agreement of the parties; bench until the age of retirement and can be removed only if an • reply – plaintiffs may file a reply. In Ontario, these must be independent investigation shows good reason. served within 10 days; and There is no constitutional right in Canada to trial by jury in • other pleadings – defendants may also file counterclaims, cross- civil matters. Except in the province of , parties may request claims against co-defendants and third party claims against new juries, but the courts have broad discretion to deny jury trials and parties. may do so, particularly if cases involve complex legal or factual issues. In Quebec, lawsuits are instituted through the filing of an applica- One of the implications of the rarity of civil jury trials is that tion called a motion to institute proceedings. Defendants must then trial decisions are communicated in, often lengthy, written reasons file an appearance and the parties must reach an agreement as to the for decisions from trial judges. These can be helpful in developing conduct of the proceedings (which establishes the schedule). , but they can also pose potential risk to companies defending multiple actions in multiple jurisdictions. For example, reasons for decisions generally include the trial judge’s summary and 4 Are there any pre-filing requirements that must be satisfied before assessment of the evidence and issues (including expert reports, cor- a formal law suit may be commenced by the product liability porate witness credibility and scientific or causation findings), which claimant? could have significant implications on related proceedings in other There are no pre-filing requirements to be satisfied before filing a jurisdictions. claim against a private entity or individual on behalf of a product liability claimant. Proceedings against the Crown (ie, a provincial or territorial government, or the federal government or a ministry of 3 What are the basic pleadings filed with the court to institute, such a government) generally must be preceded by a notice in the prosecute and defend the product liability action and what is the required form. sequence and timing for filing them? Pleading requirements in each Canadian province and territory, and in the Federal Court are governed by the applicable Rules of Civil Procedure in that jurisdiction. Generally speaking, these Rules require the following in respect of an action: www.gettingthedealthrough.com 29 CANADA Cassels Brock & Blackwell LLP

5 Are mechanisms available to the parties to seek resolution of a Provincial and federal regimes are largely uniform, with only case before a full hearing on the merits? a few significant differences, primarily concerning class definition Most jurisdictions in Canada employ a number of different methods (‘opt-in’ or ‘opt-out’?), costs awards (can representative plaintiffs by which to seek early resolution of a case before a full hearing on have costs awarded against them?) and remuneration for class coun- the merits, as follows: sel (contingency fees or fee multipliers?). Fundamentally, a statutory • mediation – in many jurisdictions, parties are mandated to class action is an individual action to which members of a plain- attend mediation after the close of pleadings, but before pretrial; tiff class are added at the moment the action is certified as a class • motions for summary judgment – motions for summary judg- proceeding. ment may be brought by defendants who wish to have all or Generally speaking, class action statutes in the common law parts of the claim against them dismissed on the basis that there provinces and the federal courts have five requirements in order for is no genuine issue requiring trial. The procedure and test for an individual action to be certified as a class action: summary judgment differs from jurisdiction to jurisdiction. • the pleadings must disclose a reasonable cause of action; Typically, such motions are brought on the basis of affidavit evi- • there must be a class capable of clear definition; dence, including, in some cases, affidavits from experts. Pursuant • there must be issues of law or fact common to all class members; to recent amendments to the Rules of Practice in Ontario, • a class action must be the preferable procedure to advance the the court may require that viva voce evidence be presented. litigation of the class members; and Plaintifs may bring equivalent motions on the basis that no trial • the representative plaintiff must adequately represent the inter- is required because their case (in whole or in part) is proven. ests of the class. Quebec courts do not hear motions for summary judgment; and • motions to strike – motions to strike may be brought by defend- A plaintiff class in Canada need only be capable of clear definition ants who wish to have all or parts of a claim against them struck and have two or more members. There is no ‘numerosity’ threshold on the basis that the pleading does not contain an actionable to meet in order to justify a class proceeding. Similarly, there is no cause of action against it (even if all of the facts, as plead, were ‘predominance’ threshold. Canadian courts are satisfied to certify a true). Plaintiffs may bring equivalent motions to strike defences. class action simply to resolve a few issues relevant to advancing the litigation of individual members of the class (known as a ‘common issues’ trial). 6 What is the basic trial structure? Quebec is an outlier in terms of class proceedings procedure. Canadian trials are adversarial in nature. Parties are typically repre- In Quebec, class actions are not individual actions, which become sented by counsel, who act as their in the trial. Trials gen- class actions if certified, but are rather class actions from the very erally commence with the making of opening statements by counsel inception of the action. They may be struck entirely if certification for each of the parties (starting with counsel for the plaintiff) out- is unsuccessful. The test for authorisation of class proceedings in lining the evidence they expect to present and the legal issues to be Quebec is similar to that in the common law jurisdictions, with some raised. Evidence is then put before the judge, as described in question significant differences. For example, the court need not consider 10, and finally, closing statements are made. whether or not a class proceeding is preferable to another form of Trials generally run on consecutive days, but it is not unusual proceeding. It is merely necessary for the moving party to show that in the case of very lengthy trials for there to be breaks lasting days, joinder and representative proceedings with the mandate of class weeks or even months during the trial. members are both impracticable. Unless a specific sealing order is issued, trial proceedings are Quebec permits the bringing of a class proceeding by a repre- open to the public. sentative body rather than a class representative who must have a In the case of trials by judge alone, the role of the judge is to valid cause of action against the defendant or defendants. In other determine issues of admissibility of evidence, to weigh the facts and provinces, not including Ontario, the court may appoint a person evidence and make a ruling on the questions in issue. In the case of who is not a member of the class (such as a representative body) if trials by jury, the judge will provide direction to the jury with respect it is necessary to do so to avoid a substantial injustice to the class. to the questions they will be required to answer, instruct the jury on For class proceedings the main stages of the litigation (aside the law to be applied and deliver a charge to the jury to provide them from any appeals) will generally consist of the following procedures with directions on their deliberations. in the common law provinces: • commencement of the litigation through the issuance of a state- ment of claim; 7 Are there class, group or other collective action mechanisms • pre-certification motions with leave of the court, which may available to product liability claimants? Can such actions be include motions to strike pleadings or challenging of jurisdiction; brought by representative bodies? • exchange of certification motion materials and argument of the Class actions are actively promoted in Canada by both the certification motion; and the various levels of government. • giving of notice of certification and running of the opt-out Provincial courts have jurisdiction to hear class proceedings con- period; cerning most civil actions. The constitutional of provincial • documentary and oral discovery; courts to assert jurisdiction over extra-provincial class members and • trial of the common issues; and defendants, however, remains an open question. • trial of any individual issues on individual causation and All Canadian jurisdictions can support class actions as a result damages. of the Supreme Court of Canada’s decision in Western Canadian Shopping Centres v Dutton, [2001] 2 SCR 534 (Dutton). This case In Quebec, the litigation follows a slightly different path: effectively authorised class proceedings in all Canadian jurisdictions • filing of a motion for authorisation; and provided them with a procedural blueprint. Most provinces have • initial case management hearing and request for leave to bring provincial class proceedings statutes (or, in the case of Quebec, col- motions such as leave to examine the representative plaintiff and lective recourse provisions in its Civil Code). Prince Edward Island, for leave to adduce evidence; and the three Canadian territories, however, still rely on Dutton for • argument of the motion to authorise the bringing of a class the structure of their class actions regime. The federal court system action; has class action procedures enshrined in its Rules of Court.

30 Getting the Deal Through – Product Liability 2014 Cassels Brock & Blackwell LLP CANADA

• giving of notice of authorisation and running of the opt-out to compel the other party to respond. Parties can suffer sanctions if period; they refuse to answer proper questions. For example, in Ontario a • delivery of a formal authorised class claim and service of a party’s pleading can be struck entirely. response; In most provinces, parties are permitted to seek an order from • documentary and oral discovery; the court to allow the examination of a non-party to the action who • trial of the common issues; and would have relevant and necessary evidence. • trial of any individual issues on individual causation and damages. 10 How is evidence presented in the courtroom and how is the evidence cross-examined by the opposing party? 8 How long does it typically take a product liability action to get to Evidence can be presented in the courtroom in two ways in Canada, the trial stage and what is the duration of a trial? either orally or by way of affidavit evidence. The manner by which The amount of time it takes for a product liability action to get to evidence is adduced will depend on the type of proceedings. For tri- trial varies widely from jurisdiction to jurisdiction and depends on als, evidence is presented by way of oral testimony. Some types of several factors including the nature of the case, whether the case proceedings, such as motions brought in the course of litigation, are proceeds with a jury or with a judge alone, the number of parties, argued on affidavit evidence (known as a ‘paper record’). the kind of allegations made, the nature of the product, the extent At trial, all witnesses provide oral testimony before a judge (and, of expert evidence and the urgency with which the plaintiff pursues if it is a jury trial, to the jury as well). Witnesses are examined in the case. chief and then cross-examined by the opposing party. Where appro- Typically, cases take two to three years to get to trial, although priate, the party calling the witness can re-examine the witness to they can take much longer. Trials usually last two weeks, although address new issues raised in the cross-examination. In rare cases, the duration may increase depending on any or all of the factors and subject to leave of the court, evidence of a dying witness may listed above. Further, if a product liability action is brought as a class be taken before trial and evidence of foreign witnesses may be taken proceeding, then timing will likely be much longer to reach a com- by letters of request. The circumstances under which such leave will mon issues trial as discussed in question 7. Once an action proceeds be granted are limited and may include issues relating to conveni- through a common issues trial, individual trials may be required. ence of the parties, unavailability of the witness for the trial or the expense of or inability to bring a particular witness to trial. Evidence Evidentiary issues and damages may also be delivered at trial by reading in testimony from the oral examinations taken before trial during the discovery phase. 9 What is the nature and extent of pretrial preservation and For proceedings heard on ‘paper records’, cross-examina- disclosure of documents and other evidence? Are there any tions take place outside of court. The transcripts of such cross- avenues for pre-rial discovery? examinations are usually filed as part of the record before the Discovery in Canada consists of both documentary discovery and decision-maker. oral depositions. There is an obligation to preserve and produce records relevant to the issues in the litigation and e-discovery is also 11 May the court appoint experts? May the parties influence the applicable. There is equally an obligation to preserve the product in appointment and may they present the evidence of experts they issue in its unaltered post-incident state. selected? Generally, litigants must produce records following the exchange of pleadings in the action. Discovery obligations in Canada are broad Regardless of the type of proceeding, expert witnesses generally pre- and parties are therefore required to produce all relevant documents, pare written reports setting out their opinion. In the case of trials, subject to the limitations set out below. In most Canadian provinces, this report is served prior to the commencement of the trial. In the parties are obliged to deliver an affidavit of documents, namely, a case of ‘paper record’ proceedings, this report is usually appended to sworn affidavit listing all relevant documents in the party’s posses- an affidavit from the expert and filed as part of the proceeding (and sion, control or power. The documents are listed in three categories the expert is cross-examined out of court in the same manner as a – those which are producible, those which are protected by any form lay witness). of privilege (and therefore not producible) and those which would At trial, experts will usually be called to give oral testimony on be producible but which are no longer within the party’s possession, the evidence and issues addressed in the expert report. The expert control or power. Parties can try to agree on the scope of produc- must be qualified to give the opinions expressed in the expert report tion in order to narrow the issues in the litigation and ensure that and, unless the parties agree to the qualifications of the expert, must production obligations are proportional to the claim. first be examined and cross-examined on his or her qualifications. The obligation to produce relevant documents is continuous A ruling will then be made by the court with respect to the expert’s and, therefore, includes any relevant documents that are obtained qualifications in a particular subject area. The expert will be sub- after parties have already produced their respective affidavits of ject to cross-examination by opposing counsel. In limited cases, and documents. with leave of the trial judge, expert evidence may be presented by Following the exchange of documentary productions, parties affidavit. must make themselves available for oral examinations by the oppos- When expert evidence is filed as part of a ‘paper record’, the ing party. The examinations are conducted under oath. In general, issue of qualification of the expert is not formally dealt with by way only one representative of each named party is examined. That rep- of a preliminary ruling by the court. Rather, the evidence is filed resentative must inform himself or herself of the issues in the litiga- as part of the record, and any determinations with respect to the tion. If the representative is unable to respond to specific questions qualifications of the expert are dealt with by the court in its decision. being posed, he or she may provide an undertaking to make inquir- Although courts may appoint their own experts to provide ies and provide answers, usually in writing, subsequent to the oral advice to the judge as , this rarely happens. The parties examination. Questions can also be refused or taken under advise- may also agree to appoint a mutually selected expert to assist the ment, which is treated as a refusal unless it is subsequently answered. court in understanding the issues in the litigation by investigating If a party refuses to answer a proper question, or fails to fulfil an and reporting on any question of fact or opinion relevant to an issue undertaking given at discovery, the other party can make a motion in the action.

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12 What types of compensatory damages are available to product in the event of success and these regulations will vary between juris- liability claimants and what limitations (if any) apply? dictions. Some jurisdictions require the approval of a contingency The intention of the tort damages regime in Canada is to place fee by the court. In class action claims, all fee arrangements must be claimants in the position they would have been in but for the injury approved by the court at the time of approval of a settlement. sustained as a result of the product. Product liability claimants who have suffered an injury may 17 Can the successful party recover its legal fees and expenses from seek to assert claims for damages for pain and suffering (ie, general the unsuccessful party? damages). Claimants may also seek damages for specific pecuniary losses sustained (ie, special damages) as well as losses expected to Canada’s court system is a ‘loser pays’ system except with respect to be sustained in the future. Claimants also typically assert claims for class proceedings. While there is entitlement to recovery of legal fees financial losses including loss of income, both past and future, loss of and expenses, commonly referred to as ‘costs’, the level of recovery opportunity, loss of profits, cost of medications, medical treatment, will vary and will not equate to a full recovery. care expenses and property damage. In most cases, the award of costs is on a partial indemnity basis, The claims for non-pecuniary damages in cases of personal which equates to about a 50 per cent recovery of legal costs. In some injury will include an amount to compensate for the pain and cases, courts may be inclined to grant a higher scale of recovery, suffering sustained by the plaintiff, loss of amenities of life and which in Ontario is referred to as substantial indemnity costs. This loss of expectation of life. General damages claims are capped at may equate to up to 75 per cent to 80 per cent of legal costs. Costs C$100,000 (adjusted for inflation). With inflation, the present value remain discretionary on the part of the court. Settlement offers made of a catastrophic claim is in the order of C$350,000. before trial by either party may have an impact upon the scale of Most jurisdictions provide a statutory cause of action for family costs awarded. members of injured or deceased plaintiffs. In Quebec, the scale of costs awarded relates to court costs, which include expert fees, but not legal fees. Quebec’s general recov- ery of costs is significantly lower than in the common law provinces. 13 Are punitive, exemplary, moral or other non-compensatory In class actions, dependent upon the applicable provincial leg- damages available to product liability claimants? islation, costs may or may not be recoverable on a certification Punitive damages are available where the court finds the defendant’s motion. Ontario, Alberta, Quebec, New Brunswick, Nova Scotia conduct to be sufficiently reprehensible. Such awards in Canada tend and the provinces without class action legislation permit the court, to be modest: in the tens of thousands, rather than in the millions. at its discretion, to award the costs of a certification motion. The remaining provinces are considered no-costs regimes in that it is only Litigation funding, fees and costs in rare circumstances that any costs may be awarded by the court.

14 Is public funding such as legal aid available? If so, may potential Sources of law defendants make submissions or otherwise contest the grant of such aid? 18 Is there a statute that governs product liability litigation? While legal aid is available in most provinces and territories in There is not a specific Canadian statute that governs product liabil- Canada, it is not readily available for the purposes of pursuing ity litigation. At the provincial and territorial level, there are statues a product liability claim. Legal aid is predominantly reserved for that do address liability from the perspective of sale of goods and the defence of criminal charges. The only publicly available fund- consumer protection. Generally, these require privity of contract. ing for civil litigation is in Ontario and Quebec in respect of class Additionally, because it is a jurisdiction, product liability proceedings. claims in Quebec are governed by its Civil Code. At the federal level, there is legislation that governs a number of product categories including consumer products, hazardous prod- 15 Is third-party litigation funding permissible? ucts, motor vehicles and health products (including drugs, medical Litigation funding by third parties is generally permitted subject to devices and natural health products). While none of these statutes considerations of champerty and maintenance. There are third-party explicitly create an independent cause of action, they do, among companies that fund litigation disbursements for law firms generally other things, set product standards to address issues of safety, which and there are also well-recognised third-party funding arrangements can be a foundation for a product liability claim in negligence. in class proceedings. At present, approval of funding arrangements has been rec- ognised in a number of class action cases. There have been some 19 What other theories of liability are available to product liability written judgments in which the courts have specifically held that a claimants? litigation funding agreement does not violate the rule against cham- Product liability claims are traditionally founded in the tort of negli- perty and maintenance and, in fact, provides access to justice for gence or in contract or both. plaintiffs who may not otherwise have the resources to pursue liti- Typical theories of product liability include negligent design, gation. In general, the principles applied by courts in assessing the negligent manufacture and failure to warn (see question 23). Product propriety of a litigation funding agreement include: liability claims may also include allegations relating to misleading • non-interference by the litigation funder in the litigation so as to advertising, as regulated by Canada’s federal Competition Act. interfere with the plaintiff’s right to control the litigation or the duty of the lawyer to the client; 20 Is there a consumer protection statute that provides remedies, • undertaking and duty of confidentiality by the litigation funder; imposes duties or otherwise affects product liability litigants? • a determination that funding of the litigation is necessary to pro- vide access to justice; and At the provincial and territorial level there are sale of goods and con- • fair and reasonable financial terms. sumer protection statutes. These statutes typically impose implied warranties that: • the goods will be reasonably fit for the general purposes such 16 Are contingency or conditional fee arrangements permissible? goods serve; and Contingency fee arrangements are permissible in Canada. There are • the goods are of merchantable quality. regulations relating to contingency fees with respect to payment only

32 Getting the Deal Through – Product Liability 2014 Cassels Brock & Blackwell LLP CANADA

These implied warranties are subject to certain exceptions, depend- aware of the defect. There is also provision for a warranty of safety ing on the nature of the seller, the nature of the buyer and the extent in respect of products that do not afford a reasonably expected to which the buyer examined the goods and ought to have identified standard of safety. a defect, etc. There are also a number of federal product safety regimes appli- 24 By what standards may a product be deemed defective and who cable to different product categories including consumer products bears the burden of proof? May that burden be shifted to the (Canada Consumer Product Safety Act), food, health products and opposing party? What is the standard of proof? cosmetics (Food and Drugs Act), motor vehicles (Motor Vehicle Safety Act), hazardous products (Hazardous Products Act) and pest In a product liability claim alleging a product defect, the plaintiff control products (Pest Control Product Act). Under each of these must prove that on a balance of probabilities the risk outweighs the regimes there are standards for product safety and duties imposed on benefits of the product and the product poses an unreasonable risk sellers, importers, etc (including, in some cases, pre-market authori- of harm to foreseeable users. sation requirements or mandatory incident reporting requirements, If the plaintiff cannot establish that the product in question is or both). These regimes also grant significant enforcement powers to defective (usually through expert evidence), his or her claim should federal government agencies. fail. To the extent a manufacturer fails to comply with a product There is no strict liability in Canada’s product liability law; if safety standard in the applicable product safety regulatory regime a plaintiff does establish that a product is defective, he or she must or is the subject of enforcement activity of the applicable regulator, still establish that the defendant was negligent and that this negli- there are potential product liability (and class action) implications. gence caused that defect. This is not typically a significant hurdle for a plaintiff. Accordingly, once a defect has been established, the evidentiary burden of proving that the defect is not the result of 21 Can criminal sanctions be imposed for the sale or distribution of manufacturer negligence is essentially passed to the manufacturer. defective products? Canada’s Criminal Code does not contain a crime specific to prod- 25 Who may be found liable for injuries and damages caused by uct safety. However, companies as well as their officers, directors defective products? and even certain employees can be convicted of criminal negligence where they are proven to have done something (or have failed to do All parties in the supply chain are exposed to liability for a defective something it was their legally imposed duty to do) in a manner that product including the manufacturers (of the product and its compo- shows wanton or reckless disregard for the lives or safety of others. nent parts), importers, distributors and retailers. Liability along the A number of other statutory regimes provide for the prosecu- chain of distribution may be passed back to the original manufac- tion of corporations and their officers, directors, etc, in the event turer, unless there is a break in the chain of causation. that they fail to meet applicable statutory requirements, including the Canada Consumer Products Safety Act, the Food and Drugs Act, 26 What is the standard by which causation between defect and the Motor Vehicle Safety Act and the Competition Act. injury or damages must be established? Who bears the burden and may it be shifted to the opposing party? 22 Are any novel theories available or emerging for product liability In Canada, the general, but not conclusive, test for causation is the claimants? ‘but for’ test. This test asks whether ‘but for’ the defendant’s negli- Since 2004, claims of ‘waiver of tort’ have been standard in Canadian gence, would the plaintiff would have been harmed? product liability class actions. Waiver of tort is a remedy that permits The Supreme Court of Canada has acknowledged that an to plaintiffs on the basis of the defendant’s wrongful con- alternative test (the ‘material contribution’ test) may be applied in duct. Harm need not be established for it to succeed. appropriate circumstances (eg, in the event there are multiple poten- The uncertainty around waiver of tort has led judges to certify tial tortfeasors). The ‘material contributions’ test asks whether the cases as class actions on the basis that there may be an action in defendant’s negligence materially contributed to the occurrence of waiver of tort, even if the remainder of the plaintiff’s pleadings are the injury. The ‘material contribution’ test will only be applied in insufficient to warrant certification. Waiver of tort is a common law those cases where: doctrine, and has not been applied in Quebec. • it is impossible (due to factors beyond the plaintiff’s control) for the plaintiff to prove that a specific defendant’s negligence caused the plaintiffs injury using the ‘but for’ test; and 23 What breaches of duties or other theories can be used to • the defendant breached a duty of care owed to the plaintiff, establish product defect? thereby exposing the plaintiff to an unreasonable risk of injury, In Canada’s common law jurisdictions, product liability negli- which the plaintiff suffered. gence claims typically fall into one or more of the following three categories: 27 What post-sale duties may be imposed on potentially responsible • design defect – the product, as designed, poses an unreasonable parties and how might liability be imposed upon their breach? risk of harm to foreseeable users that could have been averted or mitigated through the use of a reasonable alternative design; A manufacturer has an continuous duty to warn consumers of dan- • manufacturing defect – the product was not manufactured in gers inherent in the use of its products of which it is, or ought to be, accordance with the applicable design or specifications; and aware. • warning defect – the manufacturer failed to warn product users Once a duty to warn is recognised, it is manifest that the warn- (sufficiently or at all) of dangers it knew or ought to have known ing must be adequate. In the case of Buchan v Ortho Pharmaceutical were associated with the foreseeable use of the product. (Canada) Ltd (1986) 25 DLR (4th) 658, the court stated:

In Quebec, the Civil Code specifically provides for a warranty at the It should be communicated clearly and understandably in a manner time of sale against latent defects that render the product unfit for calculated to inform the user of the nature of the risk and the extent the use intended or so diminishes its usefulness that the purchasers of the danger; it should be in terms commensurate with the gravity would not have bought or paid as high a price if they had been made of the potential hazard, and it should not be neutralized or negated by collateral efforts on the part of the manufacturer. The nature and www.gettingthedealthrough.com 33 CANADA Cassels Brock & Blackwell LLP

extent of any given warning will depend on what is reasonable hav- 31 What other defences may be available to a product liability ing regard to all the facts and circumstances relevant to the product defendant? in question. There are numerous defences available to a product liability defend- ant in Canada. These include: Courts in Canada have held that the duty to warn is a continuous • no causation – the defendant can argue that there was no cau- one, which requires that the manufacturer warn, not only of dan- sation connecting the product to the plaintiff’s injuries. This is gers known at the time of sale, but also of dangers discovered after commonly known as the ‘but for’ test; the product has been sold and delivered. The duty is discharged by • contributory negligence – the defendant can argue that the plain- the appropriate warning and cannot lead to the imposition of strict tiff’s own acts or omissions contributed to his or her injuries. liability. The effect of arguing this defence is that the defendant’s liabil- In the case of manufacturers of what are considered to be more ity is reduced by the percentage of the plaintiff’s contributory dangerous products such as prescription drugs, the manufacturer is negligence; deemed to be an expert in the field and subject to a continuing duty • misuse or alteration of a product – where a plaintiff misuses to keep abreast of scientific developments pertaining to its product or alters a product, the defendant can argue that it is not liable through research, monitoring of adverse reaction reports, scientific for any corresponding failure in the product. This is in effect a literature and other available methods. subset of contributory negligence; In addition to the common law duties, there are, pursuant to the • voluntary assumption of risk – a defendant can argue that, in regulatory regimes identified in question 20, obligations arising from using the product, the plaintiff agreed to assume the risk of such legislation, which may require that manufacturers and others in the use; supply chain take steps with respect to products in the marketplace. • contractual limitations on the defendant’s liability – a defendant These can include providing warnings or supplemental information can limit its liability by requiring that a party using its prod- to consumers, recalling products and stopping sales. uct sign a waiver or limitation of liability. Courts will enforce the language where it explicitly sets out the risks the plaintiff is assuming, including injury and, in some cases, even the risk of Limitations and defences death; 28 What are the applicable limitation periods? • the expiry of a limitation period – the defendant can argue that the applicable limitation period has expired; Limitation periods for contract and negligence claims are set out • the intervention of a learned intermediary, such as a physician in the statutes of each province and territory. In general, limitation – according to the Supreme Court of Canada in Hollis v Dow periods range from between two and six years. In some provinces, Corning Corp, [1995] 4 SCR 634 ‘the “learned intermediary” the triggering point for the commencement of the running of the rule applies where an intermediate inspection of the product is limitation period is when the claim was, or ought to have been, dis- anticipated because the product is highly technical in nature or covered. In others, it is from the date the cause of action arose. Some where a consumer is placing primary reliance on the judgment provinces also provide for an ultimate limitation period. For exam- of a “learned intermediary” and not the manufacturer’. In such ple, in Ontario, the ultimate limitation period is 15 years. cases, manufacturers may satisfy their duty to warn by provid- Quebec’s limitation period is three years from the date of becom- ing full and up-to-date information to the learned intermediary. ing aware of the alleged defect in the product. This can apply in the case of highly technical products intended to be used only under the supervision of experts, or where the nature of the product is such that the consumer will not realisti- 29 Is it a defence to a product liability action that the product cally receive a direct warning from the manufacturer before use; defect was not discoverable within the limitations of science and and technology at the time of distribution? If so, who bears the burden • the defendant met all applicable standards, regulatory or other- and what is the standard of proof? wise – this defence is usually raised in the course of arguing that At present, no such defence is recognised in Canada. However, a the defendant met its applicable standard of care, as discussed in manufacturer could raise this argument in the course of defending question 29. a negligence claim. The test for negligence in Canada requires the following: • the plaintiff must show that the manufacturer owed a duty of 32 What appeals are available to the unsuccessful party in the trial care to the plaintiff and that the manufacturer breached that court? duty of care; and Each Canadian province and territory has its own court of appeal • to show that the duty of care was breached, the plaintiff must in which the appeals of most trial decisions will be heard. Decisions show that the manufacturer did not meet the standard of care of of those provincial and territorial courts of appeal may be appealed, the manufacturer of such a product. with leave, to the Supreme Court of Canada, the country’s highest appellate court. In defending a claim of negligence, a manufacturer could argue that In at least some provinces there are multiple lower levels of it would not be within the reasonable standard of care for it to have appeal. The specific levels of appeal will differ based on the type of discovered the defect in issue given the limitations of science and proceeding and the level of the decision-maker whose decision is technology at the time of the distribution. being appealed.

Jurisdiction analysis 30 Is it a defence that the product complied with mandatory (or voluntary) standards or requirements with respect to the alleged 33 Can you characterise the maturity of product liability law in terms defect? of its legal development and utilisation to redress perceived wrongs? Yes, insofar as the defendant can argue that it met the applicable standard of care (see questions 24 and 29 for a discussion of the test Canada’s product liability law is continuing to mature, particularly for negligence). as new products issues are addressed through class proceedings. Although there is not a particularly high volume of product liability trials, because almost all are heard by a judge who produces written reasons, there is instructive jurisprudence in this area.

34 Getting the Deal Through – Product Liability 2014 Cassels Brock & Blackwell LLP CANADA

Update and trends

Spoliation Spoliation does not occur merely because evidence has been Canadian courts do not generally impose sanctions against a party destroyed. Rather, it occurs where a party has intentionally for the destruction or loss of evidence. However, the law of spoliation destroyed evidence relevant to ongoing or contemplated litigation of evidence, which refers to the intentional destruction or alteration of in circumstances where a reasonable inference can be drawn that relevant evidence when litigation is existing or pending, is a developing the evidence was destroyed to affect the litigation. Once this is area. Courts have used this doctrine to draw an adverse inference demonstrated, a presumption arises that the evidence would have against the spoliating party, order the production of an expert’s file and been unfavourable to the party destroying it. preclude or strike evidence from being used or relied upon where the expert has carried out destructive testing or analysis in the absence Economic loss of interested parties (see Cheung v Toyota Canada Inc [2003] OJ 411 Recently, claimants in product liability cases have attempted to seek (Ont Sup Ct)). More recently, in the case of Stilwell v World Kitchen claims for pure economic loss in non-injury cases. Canada’s present 2013 ONSC 3354, the court held that where the preconditions of stance on economic loss claims is that such claims are only permitted spoliation are established, the principal remedy is the imposition of a in cases where dangerous goods are involved, or where there is rebuttable presumption of fact that the missing evidence would have physical harm or damage to property. In October 2013, the Ontario been unfavourable to the party that destroyed it. Quoting from the Court of Appeal in Arora v Whirlpool Canada LP (2013) ONCA 657, Alberta Court of Appeal in McDougall v Black & Decker Inc 2008 ABCA affirmed the dismissal of claims for pure economic loss in negligence 353 [2009] 1 WWR 257 (Alta CA) the court noted that: for allegedly defective, non-dangerous consumer goods.

34 Have there been any recent noteworthy events or cases that Canada’s loser-pays system are both deterrents to individual litiga- have particularly shaped product liability law? Has there been tion. As such, there is a greater propensity for consumer litigation to any change in the frequency or nature of product liability cases be brought as a class proceeding. This is also due to the relative ease launched in the past 12 months? of certification. The trend of copycat product liability litigation in Canada, follow- ing United States litigation continues. In the last few years, claims 36 Describe any developments regarding ‘access to justice’ that have followed allegations of widespread defect and late or insuf- would make product liability more claimant-friendly. ficient product recalls, particularly in the automotive sector. In 2013, the Supreme Court of Canada released its decision in a tril- ogy of price-fixing class action cases. Those decisions affirmed that 35 Describe the level of ‘consumerism’ in your country and at the certification stage, courts do not need to conduct an assess- consumers’ knowledge of, and propensity to use, product liability ment of the merits of the claim, provided there is some basis in fact litigation to redress perceived wrongs. for the claim. Many commentators consider this to have lowered the Canadians use product liability litigation to address perceived threshold for certification. This, coupled with the approval of third wrongs, however, the degree and intensity of such claims is mod- party funding agreements discussed in question 15, has increased est relative to the United States. The scale of damage awards and access to the courts for product liability claimants.

Glenn Zakaib [email protected] Emily Larose [email protected] Peter Henein [email protected]

Suite 2100, Scotia Plaza Tel: +1 416 869 5300 40 King Street West Fax: +1 416 360 8877 Toronto www.casselsbrock.com Ontario M5H 3C2 Canada

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Weining Zou Jun He Law Offices

Civil litigation system (30 days for foreign parties). It is acceptable for the defendant to delay in filing the motion of defence, whereas the motion of chal- 1 What is the structure of the civil court system? lenge of the jurisdiction of the court involved shall be filed within There are four tiers in the civil court system in China, which, from the time period set by court. bottom to top, are the district people’s courts at the district or county The time for producing evidence can be decided by both parties level, intermediate people’s courts at the municipal level, high peo- on their own. In principle, both parties shall produce evidence in ple’s courts at the provincial level and the Supreme People’s Court line with the agreed time period; however, in practice, the evidence at the national level (the ‘people’s court’ (the court)). Some of the produced after the time period may also be admitted by the court. district courts establish dispatched as their branches. Judges have wide discretionary power over such matter. Generally, the four tiers of courts have jurisdiction over civil dis- putes of first instance that, in any degree, fall into their jurisdiction based on links to the transaction or events giving rise to the dispute 4 Are there any pre-filing requirements that must be satisfied before (for instance, where the contract was performed or where the tort a formal law suit may be commenced by the product liability was committed) and pursuant to the relevant PRC laws regarding claimant? level jurisdiction of the courts. There are none. Special courts such as the railway court, maritime court, and court are also part of the court system and have exclusive 5 Are mechanisms available to the parties to seek resolution of a jurisdiction over specific matters. case before a full hearing on the merits? There is no such mechanism in China but some courts have estab- 2 What is the role of the judge in civil proceedings and what is the lished the pretrial mediation system. Judges may review the plead- role of the jury? ing materials and determine if pretrial mediation is applicable. If so, China’s present trial system follows an inquisitorial model and, judges would suggest the parties resolve the case with pretrial media- unlike common law countries, the judge in China plays an active tion proceedings. and decisive role in ascertaining the matter of facts and leading the progress of proceedings during a trial. 6 What is the basic trial structure? There are two models of proceedings in the civil court. One is summary proceedings in which a sole judge leads the trial; the The basic trial structure includes the following: other is general proceedings in which a collegiate panel would be • court investigation: introduced and this panel is comprised of one judge and two other • the plaintiff to read the complaint; members who can either be judges or citizens. China does not have • the defendant to defend; a jury system. • both parties to present evidence and to cross-examine the committees are established in all levels of courts other party’s evidence; and that play a decisive role in the final judgment of a significant case. • the court and parties to question the facts of case; • court debate; • mediation; and 3 What are the basic pleadings filed with the court to institute, • rendering judgment. prosecute and defend the product liability action and what is the sequence and timing for filing them? Judges basically direct the trial and control the process of the trial, The pleading submitted to the court by the plaintiff in a product while advocates mainly help parties to go through various proceed- liability action should include a complaint and some basic evidence ings and present evidence in favour of their respective principal as that can preliminarily support the facts of product purchase, prod- well as make corresponding interpretations of laws. uct defects and the damages arising from such defects. The com- Live testimony is required. Only under the condition that good plaint shall set out the identity of the defendant, the claims, and facts causes are provided to court, and only with the court’s approval, can and reasons in support of the claims, etc. witnesses provide written statements instead of testifying in court The court needs to decide within seven days upon receipt of the in person. pleading whether to admit the case. The court will deliver a notice Hearings are generally open to the public, except those involving of admitting the case or issue an order stating that it does not admit state secrets or private affairs of individuals. For parts of the hearing the case. If admitting the case, the court will serve a copy of the com- involving trade secrets, on the application of the relevant party, the plaint on the defendant within five days from its decision to admit. court may decide to hold the session in private. The defendant is required to file a motion of defence or a motion Generally, the court will set a date for exchange of evidence of challenge of the jurisdiction of the court involved within 15 days before the trial.

36 Getting the Deal Through – Product Liability 2014 Jun He Law Offices CHINA

The trial usually takes one day, or two days consecutively for com- A witness is required to testify in the court and be subject to plex cases. If the court decides to have more than one session of trial, cross-examination by the parties. However, due to ‘special circum- it is usual that the time between the two trials will be a number of stances’, written testimony or videotaped testimony may be sub- months. mitted in lieu of the witness’s personal presence upon the court’s approval. Different from western countries, the court in China values documentary or physical evidence more than witnesses and 7 Are there class, group or other collective action mechanisms testimonies. available to product liability claimants? Can such actions be The hearing for evidence exchange is part of the court’s investi- brought by representative bodies? gation activity at trial, during which time the plaintiff is required to The notion of group and class actions is exclusive to common law, present its own evidence to support its claims while the defendant is however, there is a notion of collective actions in PRC law when the entitled to challenge the plaintiff on the authenticity, relevancy, and object of the action is identical or is of the same category and one of legitimacy of such evidence. The plaintiff will then cross-examine the the parties is large but uncertain in number. In these circumstances, evidence presented by defendants. Both parties may submit a written the court may issue a public notice informing those entitled to par- cross-examination opinion to the court after the hearing. ticipate in the action to register their rights with court. Representatives can be elected by those registered with the courts or can be designated by the court. Members of the collective 11 May the court appoint experts? May the parties influence the actions are bound by the procedural acts of the representative. The appointment and may they present the evidence of experts they court judgment shall also be applied to those who have not regis- selected? tered their rights but have instituted legal proceedings during the The court will invite experts to verify some specialised technical or statute of limitation. scientific issues based on the needs of the case or the application Such kind of collective actions in China, however, is still rare. of the parties. Generally speaking, the experts to be appointed are Generally speaking, in cases where the number of plaintiffs is large, randomly selected from the expert list prepared by each of the pro- the object of the actions is identical or is of the same category, the vincial high courts. court will try the cases all together as a collective action. The appointed experts shall appear in court for testimony and The newly-amended Civil Procedure Law provides that rep- be subject to questions from the judge and the parties. resentative bodies specified by law are entitled to bring the action Upon the approval of court, parties may engage expert auxilia- to the court regarding acts polluting the environment, infringing ries who shall also testify in court and be ready for questions from the rights of numerous consumers, etc. The Law on Protection of the judge and the parties. Consumers’ Rights and Interests also grants consumer associations the right to bring a representative action on behalf of the consumers 12 What types of compensatory damages are available to product whose rights have been impaired. liability claimants and what limitations (if any) apply? Claimants are entitled to claim damages for bodily injury, mental 8 How long does it typically take a product liability action to get to distress or emotional injury, and damage to property, including the the trial stage and what is the duration of a trial? product itself. Normally, the court will grant both parties an evidence produce To be specific, in the case of personal injury, the liable party period of around one month after the service of pleadings on the should pay the victim’s medical expenses and loss of income, as well defendant. as disability compensation if the victim is disabled; in fatal cases, it For product liability cases involving only domestic parties, as shall pay the funeral expenses, compensation for death and the liv- the court is required to close the trial within three months (in sum- ing expenses of the deceased’s dependents. mary proceedings), or six months (in general proceedings), usually it Emotional compensation awarded by the court is usually rela- will take three to four months to get to the trial stage. But it might tively low and is determined by the judge at his or her discretion in be longer if judicial inspection or appraisal, or court mediation is accordance with the faults of the defendant. applied. Usually a trial would last one day or two consecutive days. 13 Are punitive, exemplary, moral or other non-compensatory damages available to product liability claimants? Evidentiary issues and damages Punitive damages are not dominant in product liability cases and 9 What is the nature and extent of pretrial preservation and are mainly applied to circumstances where the producer or seller disclosure of documents and other evidence? Are there any knowingly produces or sells defective products pursuant to the Tort avenues for pretrial discovery? Liability Law. There is no pretrial evidentiary discovery and disclosure system in For instance, the Law on the Protection of Consumer Rights and China, but the plaintiff is entitled to apply to the court for pretrial Interests grants the victims the right to punitive damages three times preservation of property, evidence as well as injunctive relief. the price of the product or the service under the circumstances that the business operators involved have knowingly sold defective com- modities or services and caused the death or serious damage to the 10 How is evidence presented in the courtroom and how is the health of the consumers or other victims. evidence cross-examined by the opposing party? And the Food Safety Law also awards punitive damages in the For documentary or physical evidence, the evidence shall be the orig- amount of 10 times the food price to the consumers, in cases when inal document or object. Only if the party needs to keep the original the food producer or seller involved produces food inconsistent with or it has difficulty producing the original can the party be allowed to the food safety standards or sells food that they clearly know to be submit a copy or duplicate of the original instead. inconsistent with the food safety standards. If the evidence is produced outside the territory of China, both notarisation and authentication are required. And the foreign docu- ments to be submitted to the court shall be translated to Chinese by a certified translation agency. www.gettingthedealthrough.com 37 CHINA Jun He Law Offices

Litigation funding, fees and costs Consumers may also file the product liability action against the immediate seller with whom they have a contractual relation under 14 Is public funding such as legal aid available? If so, may potential the cause of action as breach of sales contract. defendants make submissions or otherwise contest the grant of such aid? If the plaintiff can establish that it is under financial hardship and 20 Is there a consumer protection statute that provides remedies, thus cannot afford the litigation fee or other expenses, it can apply imposes duties or otherwise affects product liability litigants? to the legal aid office of the local judicial administrative authority for The Law on the Protection of Consumers’ Rights and Interests, review and grant of legal aid and to the court for decrease or exemp- amended in 2013, is the main legislation regarding the protection tion of the litigation fee. Generally, defendants have no mechanism of consumers’ rights. to challenge the grant of such aid, nor to apply for such legal aid other than criminal cases where defendants that are financially in 21 Can criminal sanctions be imposed for the sale or distribution of need are entitled to legal aid. defective products? The sets a separate chapter for ‘Crime for Production 15 Is third-party litigation funding permissible? and Sale of Counterfeit or Inferior Goods’, which contains 11 arti- There are no prohibitive provisions in terms of third-party litigation cles setting out nine crimes imposed on manufacturers or sellers funding in China. of such goods. It provides that ‘any producer or seller who mixes impurities into or adulterates the products, or passes a fake product off as a genuine one, a defective product as a high-quality one, or a 16 Are contingency or conditional fee arrangements permissible? substandard product as a standard one, if the amount of earnings Contingency fee arrangements are permissible in China and the from sales is more than 50,000 renminbi, they might be subject to guidelines are set out for lawyers’ charging activities in terms of the criminal liabilities’. proportion and standard of attorney’s fee, etc, which will not exceed 30 per cent of the amount awarded by the court to the principal. 22 Are any novel theories available or emerging for product liability claimants? 17 Can the successful party recover its legal fees and expenses from There are none. the unsuccessful party? Generally the losing party needs to bear the court fee and inspection fee. 23 What breaches of duties or other theories can be used to If both parties have agreement in advance on the assumption establish product defect? of legal fees, the judge may determine it by taking all circumstances Defects are generally classified as a design defect, manufacturing into consideration. However, it is rare for a judge to determine that defect and warning defect. the losing party shall bear the successful party’s attorney’s fees. 24 By what standards may a product be deemed defective and who Sources of law bears the burden of proof? May that burden be shifted to the opposing party? What is the standard of proof? 18 Is there a statute that governs product liability litigation? In China there has not been a unified single statute governing prod- The Product Quality Law defines defects as ‘posing an unreason- uct liability. There are several pieces of legislation containing the able danger to personal safety or property, or failure to comply with parts relevant to product liability: national or industry standards for the protection of health, personal • the general principles of Civil Law; safety and the safety of property’. If the product does not possess the • the Product Quality Law; operational performance it should have possessed, or if the product • the Law on the Protection of Consumer Rights and Interests; fails to meet the quality standard as stated in the packaging speci- • the Contract Law; fications, or if the quality situation of the product does not com- • the Tort Liability Law; ply with that described on the product appearance, it may also be • the interpretation of the Supreme People’s Court on several deemed defective. issues concerning the application of law in hearing cases of com- There are some controversies in China about which party shall pensation for personal injury; and bear the burden of proof for establishing defect and its causation • the interpretations of the Supreme People’s Court on several with damages. The Law on the Protection of Consumers’ Rights and issues concerning the ascertainment of compensation liability Interests provides that for disputes that arise in the durable com- for emotional damages in civil torts. modities or decoration services within six months from the date when the customer receives the commodity or service, the business Articles 41 and 42 of the Product Quality Law are generally inter- operator shall bear the burden of proof with respect to the defect in preted to impose strict liability on manufacturers, and to impose question. negligence liability on sellers. This strict liability principle against In judicial practice, judges have discretionary power over the manufacturers is adopted in article 41 of the new Tort Liability Law. standard of proof of both parties. Mostly judges tend to lower the The Supreme People’s Court classifies the cause of action for threshold of the burden of proof on the consumer to a very low level. product liability cases as ‘dispute over liability in respect of damage resulting from substandard product quality’. 25 Who may be found liable for injuries and damages caused by defective products? 19 What other theories of liability are available to product liability The Product Quality Law states that a victim may seek compensa- claimants? tion from either the seller or the producer; the seller includes the Dispute over product liability is a secondary cause of action under importer, distributor and the direct seller. tort disputes, and the consumers are entitled to sue against the man- ufacturers and the sellers under such cause of action.

38 Getting the Deal Through – Product Liability 2014 Jun He Law Offices CHINA

26 What is the standard by which causation between defect and injury or damages must be established? Who bears the burden Update and trends and may it be shifted to the opposing party? The standard of proof in civil actions in China is preponderance of At present, product quality actions causing the most concern are focused on food safety. For example, the appearance of news the evidence. regarding clenbuterol, tainted milk, poisoned bean sprouts, waste The plaintiff should bear the burden of proving the causation oil, problematic capsules, diseased pigs and other series of cases and damages; however, it will be regarded as having met its burden have attracted great public attention to food safety issues. During of proof if it can prove that there is a reasonable connection between the past three years, the number of food safety cases brought to the defect and damaging consequence. trial has witnessed a big increase, but most of these are criminal cases. As a consequence, the Supreme People’s Court issued last year Interpretations on Certain Issues Concerning the Application of Law in Criminal Cases of Endangering Food Safety. 27 What post-sale duties may be imposed on potentially responsible parties and how might liability be imposed upon their breach? Articles 45 and 46 of the Tort Liability Law set out that, where a product endangers life or property due to a defect, the wronged 30 Is it a defence that the product complied with mandatory (or party has the right to ask the seller and the manufacturer to ‘elimi- voluntary) standards or requirements with respect to the alleged nate the danger’. Failure to take immediate remedial action estab- defect? lishes liability; where a product is found to be defective after it is put The Product Quality Law defines the defect as posing an unreason- into circulation, the producer and the seller shall give timely warn- able danger to personal safety or property, or failure to comply with ings, recall the defective product, or take other remedial measures. national or industry standards for protection of health, personal If any damage is caused due to the untimeliness or ineffectiveness of safety and the safety of property. Thus, compliance with mandatory remedial measures, the producer and the seller shall bear tortious standards or requirements with respect to the alleged defect is a valid liability. defence. However, the Product Quality Law fails to clarify whether the Limitations and defences producer shall bear the liability if some products were still unsafe and caused injuries even when they have met the safety standards. 28 What are the applicable limitation periods? Claims for damages arising from an injury caused by a defective product must be brought within two years of the date on which the 31 What other defences may be available to a product liability claimant became aware, or should have become aware, of the defect defendant? or injury caused by the defect. Force majeure and fault of the victim or a third party could be The Product Quality Law also stipulates that the right to claim defences the manufacturer and seller seek in product liability cases. damages expires 10 years from the date the product was fist distrib- The Product Quality Law provides that: uted to the consumer, except when the safe-use period specified for the product is longer. producers shall not be held liable if they can prove one of the fol- lowing cases: 1. The products have not been put into circulation; 29 Is it a defence to a product liability action that the product 2. The defects were non-existent when the products were put into defect was not discoverable within the limitations of science and circulation; technology at the time of distribution? If so, who bears the burden 3. The defects cannot be found at the time of circulation due to and what is the standard of proof? the scientific and technological level at the moment. The Product Quality Law states that manufacturers are not liable for defects if the level of science and technology when the prod- uct was put into circulation was unable to detect the defect. The 32 What appeals are available to the unsuccessful party in the trial manufacturer should bear the burden of proving the ‘level of science court? and technology’: it must prove the science and technology applied in The challenge of facts of the case, the application of the law and the production as well as reflected in dissertations or publications exist- trial procedures in first instance may be grounds for appeals. ing at the time of distribution were unable to discover the defect. However, to our best knowledge, such a defence has not yet been successfully admitted in a product liability action.

Jun He Law Offices

Weining Zou [email protected]

China Resources Building, 20th Floor Tel: +86 10 8519 1372 8 Jianguomenbei Avenue Fax: +86 10 8519 1350 Beijing 100005 www.junhe.com China

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Jurisdiction analysis lack of sophistication and experience in formulating their claims and proving product defect, the numbers of successful product liability 33 Can you characterise the maturity of product liability law in terms claims brought by consumers are not high. However, it is notewor- of its legal development and utilisation to redress perceived thy that in many product quality-related actions, the local customer wrongs? would add multinational corporations as co-defendants even if this Chinese product liability laws have been evolving recently. The is groundless. Law on the Protection of Consumers’ Rights and Interests has been amended to ensure it is up to date, while the latest amendment to the Product Quality Law was in 2000. Therefore, there is still much 36 Describe any developments regarding ‘access to justice’ that scope for further updates on relevant laws and regulations. would make product liability more claimant-friendly. PRC laws attach an increasing importance to the protection of the legal rights of consumers. According to the newly revised Law on the 34 Have there been any recent noteworthy events or cases that Protection of Consumers’ Rights and Interests, new mechanisms in have particularly shaped product liability law? Has there been favor of the plaintiff have been introduced, including: any change in the frequency or nature of product liability cases • the Consumer Association is entitled to bring a collective action; launched in the past 12 months? • the operators shall bear the burden of proof in cases regarding There have been none. durable goods and decoration services; and • online trading platform providers may be pursued by consumers involved in online shopping. 35 Describe the level of ‘consumerism’ in your country and consumers’ knowledge of, and propensity to use, product liability According to the Tort Liability Law, where the manufacturer or the litigation to redress perceived wrongs. seller knowingly manufactures or sells defective products that result The level of consumer awareness in China is ever-increasing, and in death or cause serious harm to the health of the victim, the victim the ‘Wang Hai phenomenon’ also appeared recently, which is dedi- is entitled to request the appropriate punitive damages. cated to fighting counterfeit products. However, probably due to the

40 Getting the Deal Through – Product Liability 2014 Londoño & Arango Abogados COLOMBIA Colombia

Maximiliano Londoño, Daniel Arango, Natalia Tobón and Mauricio Moreno Londoño & Arango Abogados

Civil litigation system extraordinary appeal before the Supreme Court may take up to two years. 1 What is the structure of the civil court system? In 2012, Congress enacted a new General Code of Civil The civil court system in Colombia is composed of: Procedure, which has been gradually coming into force since January • municipal civil courts, which try small claims (up to 40 times 2014. Under the new General Code of Civil Procedure, proceedings the monthly national minimum wage. The monthly minimum are to be conducted orally by the courts. In an initial hearing, courts wage in effect for 2014 is 616,000 Colombian pesos, therefore, seek to promote mediation between the parties and, if the parties the municipal civil courts can hear cases that claim damages of fail to reach an agreement, the judge will order the taking of evi- 24.64 million Colombian pesos or less); dence and appoint a date for the instruction hearing and trial. In • civil circuit courts, which hear cases when the claims exceed this hearing, the parties will present their evidence and their closing 24.64 million Colombian pesos. Civil circuit courts may also arguments and finally the court will issue its decision. Taking into decide appeals from certain municipal civil court rulings; account that the General Code of Civil Procedure is coming gradu- • district courts – civil division, which act as appellate courts; and ally into force, it is not possible to determine the time an action will • the Supreme Court – civil division, which decides extraordinary take at trial stage and appellate review. However, the implementa- appeals from district court – civil division’s judgments. The deci- tion of this code is intended to allow an efficient resolution of claims. sions of the Supreme Court will be considered binding on all civil judges. 4 Are there any pre-filing requirements that must be satisfied before a formal law suit may be commenced by the product liability 2 What is the role of the judge in civil proceedings and what is the claimant? role of the jury? There is mandatory mediation requirement. The parties shall appear Civil proceedings are mainly adversarial. The proceedings begin before a neutral third-party mediator. This pre-filing requirement with the lawsuit filed by the plaintiff and the court is bound by the does not apply for class actions and when the plaintiff also requests facts and claims presented by the parties. During the trial, the judge temporary injunctive relief. must remain impartial at all times. However, during the evidentiary stage of the proceedings, the judge may order the taking of evidence on his or her own initiative. 5 Are mechanisms available to the parties to seek resolution of a In class actions, the court has additional inquisitorial powers case before a full hearing on the merits? that allow the court to bring new defendants into the proceedings The defendant may seek a resolution before a full hearing on the if there is evidence that the additional defendant might be liable for merits, in limited circumstances. Summary judgment is available the damages or injuries allegedly caused to the group. In any case, when the defendant raises the following defences: statute of limita- these newly involved defendants will have the right to a due process. tions, res judicata, lack of standing and settlement. Summary judg- On the other hand, Colombia does not have juries in its civil ments are subject to appeals. court system. The courts decide both questions of fact and law. 6 What is the basic trial structure? 3 What are the basic pleadings filed with the court to institute, Colombian Civil procedure is mainly written at the time; however prosecute and defend the product liability action and what is the under the General Code of Civil Procedure, enacted on 12 July 2012 sequence and timing for filing them? and that is gradually coming into force, trials are mainly oral and Proceedings begin with a written complaint. After this document structured by consecutive sessions. is filed and notice is served, the defendant may submit his or her The court decides both the facts and the law, since there are response within 20 days. In class actions, the defendants must file an no jury trials in Colombia. The courts must remain impartial at all answer within 10 days from the serving of the notice. times and grant all rights to the parties. During the hearings, wit- Under the Civil Proceeding Code (CPC), the parties hold a man- nesses are first questioned by the judge and then by the parties. The datory mediation hearing before the court; if mediation fails, the parties may also be questioned by the court and the opposing party. court orders the taking of evidence. The judge will appoint dates Written affidavits by the parties or witnesses are not allowed. Judges for the hearings of the witnesses, order expert reports, consider usually prepare questionnaires for the parties and witnesses. the documents submitted by the parties and ordain any other evi- Hearings are public. dence he or she deems necessary. Once the evidentiary stage ends, The role of the , besides from presenting the client’s the parties have eight days to file their closing arguments. Finally, case, is to file any pertinent written submissions, request and par- the court issues its decision. Actions may take up to three years at ticipate in the taking of evidence and to appear before the court. the trial stage. An appeal usually takes more than 10 months. An Advocates are not officers of the court. www.gettingthedealthrough.com 41 COLOMBIA Londoño & Arango Abogados

7 Are there class, group or other collective action mechanisms 11 May the court appoint experts? May the parties influence the available to product liability claimants? Can such actions be appointment and may they present the evidence of experts they brought by representative bodies? selected? In 1998, Congress enacted through Law 472 two types of actions. Courts may appoint experts either at the parties’ behest or on their The first one is the class action, which is available when there are at own initiative. Courts must appoint experts from an official roster. It least 20 alleged victims. The plaintiff may bring suit on behalf of the is also possible for parties to present experts’ reports. In such a case, group if he or she alleges that there are at least 20 victims harmed the expert must appear at the court for cross-examination at the under uniform circumstances. Group actions may be brought in request of the opposing party. pursuit of compensation for the injuries or damages caused by a defective product. 12 What types of compensatory damages are available to product The second type of action is the public interest action, which liability claimants and what limitations (if any) apply? may be filed by any citizen when a public interest has been harmed or is in danger. These actions may be also brought by associations Different categories of compensatory damages are recoverable in a (such as consumer organisations) in order to protect consumers’ product liability case. Economic losses include both out-of-pocket rights. Even though individual damages are not recoverable under expenses and lost profits. The victim is compensated only to the these actions, they may be relevant in the product liability context, extent of the harm suffered. Economic damages recoverable in a given that the court may order specific measures to hinder dam- product liability case include lost profits for bodily injury and loss of ages and injuries that may be caused by the defect. These measures support in the case of death and damage to property. There are no could include, inter alia, product recall, modifications, warnings and reported cases where the damage to the product itself has been an changes in the design. issue in a product liability action. Public officials may also bring these actions in order to protect Non-economic damages, which include moral damages (eg, consumers from allegedly defective products. compensation for pain and suffering, emotional distress, psycho- logical injuries, loss of a loved one or grievances) and compensa- tion for loss of enjoyment of life, physical impairment or altered 8 How long does it typically take a product liability action to get to social, family or everyday activities are also recoverable in product the trial stage and what is the duration of a trial? liability cases. The Supreme Court periodically lays out guidelines From the moment the plaintiff files a lawsuit, it can take from 18 to for the compensation of non-economic damages. Under the present 20 months for the trial court to reach a decision. An ordinary appeal guidelines, a plaintiff may recover up to approximately 55 million takes around one more year. Depending on the monetary value at Colombian pesos for moral damages and up to approximately 140 stake, the case may reach the Supreme Court, where proceedings million Colombian pesos as compensation for loss of enjoyment of could take up to two years. life, physical impairment or altered social, family or everyday activi- ties. These guidelines are not, however, static and the Supreme Court Evidentiary issues and damages allows the trial courts a relatively wide discretion in awarding non- economic damages. Non-economic damages are not, however, puni- 9 What is the nature and extent of pretrial preservation and tive or exemplary. disclosure of documents and other evidence? Are there any avenues for pretrial discovery? 13 Are punitive, exemplary, moral or other non-compensatory Colombia does not have a broad American-style pretrial discovery. damages available to product liability claimants? Instead, a limited pretrial discovery and disclosure of the documents are permitted. A party may request, before filing a complaint, a court The Colombian legal system prohibits punitive or exemplary order for the production of documents. The requesting party shall damages. Victims are compensated only to the extent of the harm reasonably identify the subject-matter documents and state that the suffered. documents are in the possession of the requested party and how the documents are relevant for the forthcoming case. A party may also Litigation funding, fees and costs request the subpoena of potential witnesses or of the opposing party 14 Is public funding such as legal aid available? If so, may potential before the complaint is filed. defendants make submissions or otherwise contest the grant of such aid? 10 How is evidence presented in the courtroom and how is the Both the CPC and the General Code of Civil Procedure allow legal evidence cross-examined by the opposing party? aid for those who cannot afford the costs and expenses of the trial The taking of evidence is regulated in the CPC and the General Code without affecting their own subsistence. If granted, the party will not of Civil Procedure. Both plaintiffs and defendants are allowed to have to pay the costs of the experts appointed by the court nor will prove facts by admission, witness testimony, expert examination and have to bear the attorney’s fees and costs generally allocated to the opinion, judicial inspection, documentary evidence and circumstan- loosing party. Defendants can request the judge to withdraw such tial evidence. The constitutional clause regarding due process allows aid at any stage of the process by proving that plaintiff’s situation the opposing party to contest evidence at different stages of the pro- has changed or that there are no motives to maintain the legal aid. cess. Witnesses are questioned by the court and are also subject to Certain public officials may, if requested, file class actions on cross-examination. Written statements or affidavits by witnesses are behalf of a group. Law 472 of 1998 provides for the creation and not allowed. Expert testimony is also available. operation of a public-run fund, which provides legal aid and funding The parties may file expert reports. These must be made avail- in class actions and public interest actions. able to the opposing party, which may in turn question the expert, file an additional expert report, or both. Additionally, experts may 15 Is third-party litigation funding permissible? be appointed by the court on its own initiative or if requested by any party. The Colombian legal system neither regulates nor discourages such funding.

42 Getting the Deal Through – Product Liability 2014 Londoño & Arango Abogados COLOMBIA

16 Are contingency or conditional fee arrangements permissible? possibility to impose fines on all those who participate in the chain Contingency fees are allowed and usually make up part of the of distribution of defective products. In any case, if the defective attorney–client agreement in tort and contract cases. product damages someone’s property or causes personal injuries or even death, the person responsible for these crimes may be pros- ecuted according to the Criminal Code. 17 Can the successful party recover its legal fees and expenses from the unsuccessful party? Unsuccessful parties must pay expenses (such as expert fees when 22 Are any novel theories available or emerging for product liability appointed by the judge, , document-copying fees, among oth- claimants? ers) and legal fees (attorney’s fees), which the judge determines The Consumer Protection Statute embodied most of the theory on according to the rates defined in a specific regulation. In cases involv- this matter that had been advanced by the Supreme Court during ing the state, legal fees and expenses are only recoverable by the the last few decades. This theory had been built on successful party if the judge finds that there was no basis to litigate. studies and the principles established in the Civil and Commercial Codes. Therefore, there are no novel theories on the subject in Sources of law Colombia.

18 Is there a statute that governs product liability litigation? 23 What breaches of duties or other theories can be used to In 2011, the Colombian Congress enacted through Law 1480 the establish product defect? Consumer Protection Statute. This statute establishes a strict liabil- ity rule, under which the manufacturer and retailer are jointly and Product defect may be established if the product’s design, manufac- severally liable for injuries caused by defective products. Under this turing, construction, packaging or warnings do not provide the rea- cause of action, the plaintiff bears the burden of proving the defect sonable safety standard that any person is entitled to. of the product, the injury or damages caused by the defective prod- uct and the causation between them. Defendants are excused from 24 By what standards may a product be deemed defective and who liability if they prove that the injury was caused by force majeure or bears the burden of proof? May that burden be shifted to the it arises out of the plaintiff’s fault or negligence, if the injury arises opposing party? What is the standard of proof? exclusively out of the actions of a third party, if the product had not A product is deemed defective if it threatens someone’s life, health been yet introduced to the market, if the defect arises directly out or belongings. The plaintiff bears the burden of proving the defects; of the compliance of a mandatory rule or if the scientific or techni- however, the Consumer Protection Statute does not provide a partic- cal state of knowledge was not sufficiently advanced to enable the ular standard of proof. Under general evidentiary rules, the plaintiff defect to be detected. shall present evidence that in the light of the sound judgment and reasoned analysis of the court shows that the product is defective. If 19 What other theories of liability are available to product liability a sanitary or technical regulation is violated, the defect of the prod- claimants? uct shall be presumed. In other cases, courts may under special cir- Until 2011, product liability rules were construed and applied by cumstances shift the burden of proof onto the opposing party, if the the courts, based on general statutes governing torts and contract opposing party is deemed to be in a better position to submit proof causes of action. The Supreme Court applied a strict liability rule for of a given fact. However, once the plaintiff proves that the product is product liability. Today, in addition to the strict liability rule avail- defective, the manufacturer or seller may only be discharged if he or able under the Consumer Protection Statute, the plaintiff may seek she proves one of the defences brought by the Consumer Protection recovery based on fault-based liability rules. The latter is not how- Statute (force majeure, claimant’s fault, etc). ever a separate cause of action but an additional theory available to the plaintiff. 25 Who may be found liable for injuries and damages caused by defective products? 20 Is there a consumer protection statute that provides remedies, Under the Consumer Protection Statute, the manufacturer and seller imposes duties or otherwise affects product liability litigants? may be found liable for defective products. Additionally, any other The Consumer Protection Statute imposes several duties on manu- person or company involved in the chain of distribution may be facturers, importers, distributors and retailers, which affect prod- jointly and severally liable for injuries caused by defective products uct liability litigants. Under this statute, consumers are afforded if they fail to disclose known circumstances to public agencies or protection against breach of warranties, breach of the duty to be for failure to take corrective measures once the product’s defect has fully informed and against deceptive advertisement. The Consumer come to their knowledge. Protection Statute also imposes the duty on any company involved in the chain of distribution to promptly disclose to public agencies 26 What is the standard by which causation between defect and any known circumstance that a defective product has caused or injury or damages must be established? Who bears the burden may cause injury; additionally, these companies shall take correc- and may it be shifted to the opposing party? tive measures. Failure to observe these duties shall result in joint Neither the Consumer Protection Statute nor the Supreme Court and several liability with the manufacturer. Supervisory and control rulings define a certain standard by which causation between defect authorities may also impose fines on those who disregard their legal and injury or damages must be established. However, judges have duties and can even close their public establishments. maintained that the plaintiff has the burden of proving not only that the product is defective but also that the damages or injuries suffered 21 Can criminal sanctions be imposed for the sale or distribution of were caused by the unsafe conditions of the product. Under special defective products? circumstances, courts may shift the burden of proof onto the oppos- Even though there is no rule in the Penal Code that establishes a ing party, if he or she is deemed to be in a better position to submit criminal sanction for those involved in the sale or distribution of proof of a given fact. However, there is no reported case where the defective products, the Consumer Protection Statute establishes the Supreme Court has shifted the burden of proof in this matter. www.gettingthedealthrough.com 43 COLOMBIA Londoño & Arango Abogados

27 What post-sale duties may be imposed on potentially responsible mandatory rule or standard. Compliance with voluntary standards parties and how might liability be imposed upon their breach? or requirements is not a valid defence. The Consumer Protection Statute obliges manufacturers and prod- uct suppliers to warn the competent authorities about any known 31 What other defences may be available to a product liability adverse effect of their products. Additionally, they have to maintain defendant? records of warranties in case they have sold a defective product. Manufacturers and retailers may have the duty to recall a product Under the Consumer Protection Statute the defendant shall be and to supplement warnings imposed on them. The Superintendence excused from liability if: of Industry and the commercial and civil courts have the express • the injury is caused by force majeure; power to sanction those who do not follow the provisions of the • the injury is caused by the claimant’s fault; Statute. • the injury arises exclusively out of the actions of a third party; • the product has not yet been introduced to the market; Limitations and defences • the defect arises directly out of the compliance with a mandatory rule or standard and may not have otherwise been avoided; or 28 What are the applicable limitation periods? • under the state-of-the-art or development risk defence. The limitation period for product liability is 10 years and gener- ally runs from the date on which the damage or injury occurred. 32 What appeals are available to the unsuccessful party in the trial However, under special circumstances, if there is evidence that the court? plaintiff was not aware of the injury at the time it was caused, courts The unsuccessful party may appeal the trial court’s decision. will rule that the limitation period starts from the date on which the Depending on the monetary value at stake, the unsuccessful party plaintiff should have discovered the injury. may further appeal before the Supreme Court. These appeals are There is a two-year limitation period for group actions. If the also available in class action litigation. applicable statute of limitations for class actions runs out, plaintiffs may sue individually. Jurisdiction analysis

29 Is it a defence to a product liability action that the product 33 Can you characterise the maturity of product liability law in terms defect was not discoverable within the limitations of science and of its legal development and utilisation to redress perceived technology at the time of distribution? If so, who bears the burden wrongs? and what is the standard of proof? Product liability is a developing field in Colombia. There have been The defendant may be excused from liability if as of the date that several Supreme Court cases dealing with basic issues of product the product was introduced to the market, the defect was not dis- liability. However, product liability is still a novel area of the law coverable within contemporary scientific and technological limita- and the volume of claims is as yet relatively low and there is not a tions. The defendant bears the burden of proving the defence under fully developed body of case law. Additionally, the recently enacted the general evidentiary rules previously explained. Liability may Consumer Protection Statute has not yet been properly developed by later arise if any person involved in the chain of distribution fails case law. There is growing interest in the field and one can expect a to promptly disclose any known circumstance that the defect has significant increase in the caseload in the following years. caused or may cause injury or fails to take corrective measures after such knowledge was acquired. 34 Have there been any recent noteworthy events or cases that have particularly shaped product liability law? Has there been 30 Is it a defence that the product complied with mandatory (or any change in the frequency or nature of product liability cases voluntary) standards or requirements with respect to the alleged launched in the past 12 months? defect? As mentioned above, the recently enacted Consumer Protection The defendant is excused from liability if the defect is a direct Statute will shape the new developments on product liability. At result of compliance with a mandatory rule or standard for the the time of writing, since the Consumer Protection Statute was only manufacturing, warning or packaging of the product, as long as the recently enacted, there has not been an increase in the number of defect cannot otherwise have been avoided without breaching this claims filed for product liability.

Maximiliano Londoño [email protected] Daniel Arango [email protected] Natalia Tobón [email protected] Mauricio Moreno [email protected]

Calle 3 Sur No. 43 A – 52 Tel: + 57 4 352 5000 Torre Ultrabursátiles, Of. 1304 Fax: + 57 4 354 0712 Medellín www.londonoyarango.com Colombia

44 Getting the Deal Through – Product Liability 2014 Londoño & Arango Abogados COLOMBIA

35 Describe the level of ‘consumerism’ in your country and 36 Describe any developments regarding ‘access to justice’ that consumers’ knowledge of, and propensity to use, product liability would make product liability more claimant-friendly. litigation to redress perceived wrongs. Class action litigation is a major development in the field. Under There is a growing trend of consumerism. The Consumer Protection Colombia’s class action statute, counsel for the plaintiff is entitled Statute, which has been widely publicised and discussed, is the to recover 10 per cent from the damages afforded to members of result of a growing public concern to remedy perceived wrongs. the class who did not personally intervene. Additionally, contingency Additionally, any person has standing to file a public interest action fees are permissible and widely used in liability cases. Therefore, for the protection of public interests, which include consumer rights, class action litigation poses a significant financial incentive to plain- public safety and health. Finally, the local media shows great inter- tiff’s counsel and additionally promotes litigation even in low-value est in product defect allegations and, generally, in consumer protec- injury claims covering a wide group. tion claims. After recent developments, for example, the collapse of a residential building due to alleged design and construction defects, there is a marked interest in real consumer protection and construction-related litigation.

www.gettingthedealthrough.com 45 DENMARK Gorrissen Federspiel Denmark

Søren Stæhr and Christian Holm Madsen Gorrissen Federspiel

Civil litigation system The writ of summons must, among other things, state the over- all claim or claims, a summary and a description of the facts upon 1 What is the structure of the civil court system? which the allegations are based and suggestions on how to proceed The Danish civil courts are organised in a three-tier system consist- with the case (the number of judges, the need for expert opinions, ing of the district courts, the High Courts and the Supreme Court. In referral of the case to a higher court instance, etc). A fee must be paid addition to these general jurisdiction courts, there are a number of to the court by the claimant for processing the case. specialised jurisdiction courts whose competences are limited to cer- The writ of summons will then be served upon the defendant tain specific types of cases, including the Maritime and Commercial following which the defendant will be allowed a given time limit to Court and the labour courts. submit its reply to the writ of summons. The parties will then con- The district courts are the first level of the civil court system, tinue exchanging pleadings on the legal and factual issues until the and the majority of the civil law suits will be commenced in the case is ready for trial. local district courts. If a case has fundamental importance, the High During the exchange of pleadings, especially in product liabil- Court can be deemed the proper court of first instance. A decision ity cases, it will often be necessary to call upon expert witnesses to passed by a district court can, as a general rule, be appealed to the examine the defective products or give statements as to industrial High Court. standards, expected use of the products, etc. In situations where The High Courts are the second level of the civil court system time is of importance, for example, if the goods are subject to rapid and generally serve as the appellate courts to the district courts. deterioration, steps towards a pretrial expert opinion will often be However, in some cases the High Court will serve as the court of first initiated. instance. The High Court’s decision can be appealed to the Supreme As a general rule, the allegations to support the overall claim Court. If the high court has served as the court of first instance, made by the claimant is that a product introduced on the market is the decision can be appealed without review. If the High Court has defective and has caused bodily or property damage. served as the court of second instance, an appeal must be granted by In cases where liability is denied, the defendant will usually argue a review board. that the product is not defective and contest the amount claimed by The Supreme Court is the third and highest level of the civil the claimant. court system and is solely an appellate court. The Maritime and Commercial Court has jurisdiction either by default or by request in certain types of cases, including international 4 Are there any pre-filing requirements that must be satisfied before business cases, intellectual cases, etc. a formal law suit may be commenced by the product liability claimant? No such requirements exist. 2 What is the role of the judge in civil proceedings and what is the role of the jury? The Danish court system is adversarial, and the parties therefore 5 Are mechanisms available to the parties to seek resolution of a present all the relevant facts and arguments of the case. case before a full hearing on the merits? In smaller cases, namely, where the claim represents a value of The defendant always has the possibility to request the court to less than 50,000 Danish kroner, the judge takes on a certain inquisi- make a preliminary decision to dismiss the case on formal grounds, torial role since the parties in such cases are not intended to be rep- for example, lack of jurisdiction. Either party may request (but can- resented by a lawyer. not demand) a preliminary ruling on certain questions of impor- In civil cases there is no jury. tance to the rest of the case. In product liability cases, such a request may be to decide on the question of liability before deciding on the monetary claim. 3 What are the basic pleadings filed with the court to institute, The Danish courts now also offer free (included in the above- prosecute and defend the product liability action and what is the mentioned case fee) mediation, where a judge or trained mediator sequence and timing for filing them? seeks to resolve the case before initiating the full proceedings. When raising product liability claims, the most common course of action is for the injured party to raise a claim against the manufac- turer, the seller or distributor of the defective goods and through 6 What is the basic trial structure? negotiations seek to settle the dispute between the parties. Failing to After the exchange of pleadings, carrying out of pre-trial hearings, reach an amicable settlement, the injured party will prepare a writ etc, the parties will go to court on a fixed date, where both par- of summons claiming damages or claiming that the defendant must ties will, usually, be represented by a lawyer. The trial commences accept liability of the defective product. with the claimant, objectively, going through the evidence of the case

46 Getting the Deal Through – Product Liability 2014 Gorrissen Federspiel DENMARK and quoting the essential passages from the written evidence. The 11 May the court appoint experts? May the parties influence the defendant will be given the opportunity to comment either during appointment and may they present the evidence of experts they the presentation or after. selected? The parties and any witnesses will then be questioned by the It is usual that the parties agree on an independent expert from whom representing the parties. The parties’ counsels will then a written report is obtained and that the court will typically approve argue the case before the judge. The role of the judge during these of such an expert jointly suggested by the parties. The expert will oral proceedings is to ensure that the procedural rules are followed most commonly base his or her report upon a site visit, inspection and to decide on any questions that may arise during the proceedings. of the items in question, market investigations and will be asked to Traditionally, judges have not been very active with regard to answer a series of questions agreed upon between the parties. The questions to witnesses or the parties during the proceedings. It is, party requesting the expert opinion will usually be obliged to pay the however, becoming increasingly common to see judges taking an fee of the expert but will, at the same time, normally be reimbursed if active role during the proceedings. winning the case through the court’s ruling regarding costs. It is not uncommon that the proceedings stretch over several Expert opinions obtained by one party alone before the com- days, especially in complex cases with many witnesses and a large mencement of the case will generally be allowed as evidence during amount of evidence. Proceedings are, as a general rule, public, but the case (however, it will most likely not be given the same weight the court may decide on private proceedings, for instance in family as reports prepared by an expert appointed jointly by the parties). law matters, etc. Proceedings may not be filmed, photographed or Expert opinions obtained by one party alone after the commence- recorded. ment of the case will generally not be allowed as evidence.

7 Are there class, group or other collective action mechanisms 12 What types of compensatory damages are available to product available to product liability claimants? Can such actions be liability claimants and what limitations (if any) apply? brought by representative bodies? According to the Danish Product Liability Act, compensation for Class actions are possible in Denmark. There are several conditions bodily injury, loss of income of a financial provider and damage to that must be met before a lawsuit can be brought as a class action, ‘consumer goods’ (or goods used in accordance herewith) is avail- including the existence of homogeneous claims. It is also a condition able to a claimant. Damage to the product itself is not covered by that a class action is considered to be the best way to process the the product liability, but compensation may be available through a claims. Generally speaking, product liability claims must be consid- direct contractual claim against the seller. ered suitable for class actions. There are no upper limits to the amount that may be recov- ered by the claimant, but an amount of 4,000 Danish kroner will be deducted in respect of property damage in manufacturer prod- 8 How long does it typically take a product liability action to get to uct liability cases based on the Danish Product Liability Act. Such the trial stage and what is the duration of a trial? an amount may possibly be recovered through the product liability It depends upon the complexity of the case and the workload of principles developed through case law that generally have a wider the courts, which may vary from jurisdiction to jurisdiction. Usually field of application than the Danish Product Liability Act. It is, 12 to 15 months will pass from the time where the complaint is however, still disputed whether the deductible sum of 4,000 Danish filed with the court until judgment is passed in the first instance. kroner may be recovered through the product liability developed If the case is appealed, an additional nine to 12 months should be through case law. expected before a final judgment is made. The length of the oral The product liability developed through case law is wider and hearings depends very much upon the circumstances of the case – in covers damage to goods (including non-consumer goods) and dam- non-complex cases a one-day hearing should be expected. In com- age caused by goods, services, etc. plex cases, the hearings will typically last several days.

Evidentiary issues and damages 13 Are punitive, exemplary, moral or other non-compensatory damages available to product liability claimants? 9 What is the nature and extent of pretrial preservation and Punitive, exemplary and moral damages are not available according disclosure of documents and other evidence? Are there any to Danish law. avenues for pretrial discovery? A party will generally submit the material in its possession and may Litigation funding, fees and costs request the other party to submit specific documents or material as evidence. If the other party refuses to submit such material, the court 14 Is public funding such as legal aid available? If so, may potential may decide against that party in relation to those specific pieces of defendants make submissions or otherwise contest the grant of evidence. such aid? There are, however, no pretrial discovery proceedings available Public funding is available to persons with low income. The income in Danish law according to which a party is obliged to hand over all limit depends upon, among other things, marital status, the number material with certain credentials. of dependent children, etc.

10 How is evidence presented in the courtroom and how is the 15 Is third-party litigation funding permissible? evidence cross-examined by the opposing party? Yes. The most common type of third-party funding is through the The evidence can be a mixture of live testimonies, written reports, use of legal insurance provided by an insurance company. Such documents, videos, pictures and audio recordings, etc. Cross- insurance will usually be subject to a cap or deductibles or both. examination of anyone who testifies is always allowed, including the parties to the case. 16 Are contingency or conditional fee arrangements permissible? An agreement between a party and his or her lawyer according to which the fee is based upon the amount collected or won is not

www.gettingthedealthrough.com 47 DENMARK Gorrissen Federspiel permissible. However, when determining the fee, a lawyer shall take Further, the seller or distributor may, as mentioned above, be into consideration such factors as the significance and value of the considered as a manufacturer and will then be subject to the same case for the client, the outcome of the case, the nature and extent of obligations as the de facto manufacturer. the work performed by the lawyer and the responsibility involved in the case. 19 What other theories of liability are available to product liability claimants? 17 Can the successful party recover its legal fees and expenses from As mentioned above, product liability in Denmark is to some extent the unsuccessful party? governed both by the Danish Product Liability Act and the product The successful party can recover its legal fees and expenses. liability principles developed through years of case law. According to However, the courts will base the costs of the trial on fairly stand- the latter principles, the manufacturer of a product is liable, based on ardised amounts depending primarily on the monetary size of the a fault principle, which, at least for professionals, is assessed rather case. The successful party will, therefore, in most cases only recover strictly, and it is for the manufacturer to prove that the defect was its legal fees partially, as the costs awarded tend to be fairly low. In not caused by a fault or negligence for which he or she is responsible. some situations, the courts may decide that no party shall pay any The seller or distributor is also defined widely according to the prod- costs to the other party, and both the successful and unsuccessful uct liability developed through case law and includes, among others, party are left to bear its own expenses. anyone who has sold, imported or distributed or in some cases even lent out the product. The seller or distributor will be responsible as a Sources of law sort of guarantor (a form of vicarious liability) for a manufacturer’s or previous seller or distributor’s fault or negligence on a strict no- 18 Is there a statute that governs product liability litigation? fault basis. In Denmark there are two legal bases for product liability: If an injury or damage is not covered by the Danish Product • the Danish Product Liability Act (based upon the EU Product Liability Act, a manufacturer or distributor may be held liable Liability Directive 1985/374 EC); and according to the product liability developed through case law, which • the principles of product liability developed through case law. then supplements the Danish Product Liability Act.

It is still disputed to what extent and in what way the product liabil- 20 Is there a consumer protection statute that provides remedies, ity developed through case law supplements the Product Liability imposes duties or otherwise affects product liability litigants? Act and when the two set of rules can be used together. The Danish Product Liability Act and the product liability principles developed The main rules regarding product safety are found in the Danish through case law are, however, based on the same considerations, Product Safety Act, which implements EU General Product Safety namely, to protect from injuries and damages caused by defective Directive 2001/95 EC. The object of the Danish Product Safety Act or dangerous products. In general, the product liability principles is to ensure that only safe products are introduced on the market, developed in case law have a wider field of application. and various governmental agencies monitor both the markets in The Danish Product Liability Act covers bodily injury, loss of general but also more specific markets, namely, within the areas income of a financial provider and damage to ‘consumer goods’ (or of food and pharmaceuticals, etc. The authorities can issue injunc- goods used in accordance herewith) while damage to the defective tions against a manufacturer, or someone who has been involved in product is not covered. marketing or selling the product, to warn the consumer, rectify the circumstances that have resulted in the danger, to destroy, withdraw, The liability of the manufacturer recall the product, etc. In situations where it is not possible to trace According to the Danish Product Liability Act, the manufacturer is the person who introduced the product on the market, the authori- liable based on strict liability if its defective products cause bodily ties may also act on behalf of this person and post warnings, initiate injury or damage to consumer products, and the injury or damage, a recall or a withdrawal, etc. the defect of the product and the causal connection between the defect and the damage or injury can be proven. 21 Can criminal sanctions be imposed for the sale or distribution of The definition of a manufacturer is wide, and a quasi- defective products? manufacturer is also treated as a manufacturer according to the If a product poses a threat to humans, and the manufacturer or dis- Danish Product Liability Act. A ‘quasi-manufacturer’ is, for instance, tributor still sells (or tries to sell) the product, he or she may be a party that attaches its name, signs or symbols to the product of a convicted of endangering other people’s lives and can, in serious third party. Further, certain importers of goods into the EU market cases, for instance if attempts are made to conceal contamination of from third countries outside the EU market are also liable as manu- a product, receive a prison sentence. Further to this, sector-specific facturers. If, for a product manufactured in the EU, the claimant can- rules exist with the possibility of imposing penalties, for example, not identify the manufacturer hereof, or for a product manufactured within the areas of food, drinks, pharmaceuticals, toys, etc. outside the EU, the claimant cannot identify the importer of such a product into the EU, any distributor or seller of such product will also be considered the manufacturer. 22 Are any novel theories available or emerging for product liability claimants? The liability of the seller or distributor No, the Danish Product Liability Act in general is mature and based The seller or distributor of the products is liable based on a fault upon theories with some age to them. principle. It is for the seller or distributor to prove that the damage was not caused through its fault. The seller or distributor are also liable as a sort of guarantor (a 23 What breaches of duties or other theories can be used to form of vicarious liability) towards the injured party and any later establish product defect? sellers and distributors in the chain of distribution for any product Several types of deficiencies and breaches of duties may influence liability to the extent that the damage is caused by the manufac- the assessment of whether or not a product is defective. According turer’s fault or negligence or the fault or negligence of any previous to the Danish Product Liability Act, a product is generally deemed sellers or distributors in the chain of distribution.

48 Getting the Deal Through – Product Liability 2014 Gorrissen Federspiel DENMARK defective where the product is not as safe as could reasonably be • a distributor or seller if the claimant cannot determine who expected. within the EU has manufactured the product or, when the prod- Any deficiencies in design, manufacturing, wrongful marketing, uct is manufactured outside the EU, who has imported the prod- lack of compliance with applicable safety standards, etc, will, as the uct into the EU. main rule, result in the product being characterised as defective. It is not possible to create an exhaustive list of all the breaches of duties Liable as distributor or seller that will lead to the conclusion that a product is defective; a con- A party who through the course of business has put a product into crete assessment must be made in each case. Examples from case law circulation without being characterised as a manufacturer. include a wood-treatment product marketed as suitable for indoor use but that made the house in which it was used uninhabitable Product liability developed through case law for a period of time. Another example is an ice scraper that caused Any link in the supply chain can be held liable. This includes primar- scratches when used on windscreens (both products were considered ily manufacturers, distributors and sellers. defective).

26 What is the standard by which causation between defect and 24 By what standards may a product be deemed defective and who injury or damages must be established? Who bears the burden bears the burden of proof? May that burden be shifted to the and may it be shifted to the opposing party? opposing party? What is the standard of proof? It is for the claimant to prove that damage or injury was caused The Danish Product Liability Act by the defective product. The evidence must be of such nature as A product will be deemed defective if it is not as safe as could rea- to convince the court that the defective product caused the specific sonably be expected. According to the Danish Product Liability damage or injury. Act, three factors in particular are important when making this assessment; 27 What post-sale duties may be imposed on potentially responsible • the marketing of the product; parties and how might liability be imposed upon their breach? • the use one could reasonably expect the product to be put to; and In accordance with the Product Safety Act, post-sale duties may • the time the product was put into circulation. be imposed on responsible parties. If a product is deemed unsafe, the manufacturer must take steps to avoid that the product poses It is important to note that the court will assess all factors, not only a risk to consumers. There are a number of ways a manufacturer the three mentioned above. A product is, however, not considered can do this, from warning consumers in an efficient way to a com- defective just because a new and better product is released and the plete recall. It is difficult to lay down specific requirements for each assessment is in all cases overall and independent. and every situation but guidance can be found in Product Safety in The burden of proof regarding the existence of a defect, the damage Europe – A guide to corrective action including recalls. It is, how- and the causal connection between the defect and the damage lies ever, accepted that a complete recall is the final resort. with the claimant. Limitations and defences Product liability developed through case law 28 What are the applicable limitation periods? Overall, the standards applied to product liability developed though case law are somewhat similar to those found in the Danish Product The Danish Product Liability Act Liability Act. Assessments will focus on the intended consumer, The default limitation period is three years. A claim for compen- where the product will be used and under what circumstances. It is sation against the manufacturer according to the Danish Product also recognised that a certain degree of atypical use must be antici- Liability Act cannot be brought later than 10 years after the product pated by the manufacturer. has been placed on the market. See also question 19. Product liability developed through case law The default limitation period is three years. However, according to 25 Who may be found liable for injuries and damages caused by the Danish Act of Limitation, certain claims relating to personal defective products? injury, pollution, etc, can be brought as late as 30 years after the Both the Product Liability Act and product liability developed commencement of the limitation period under certain circumstances. through case law have rather wide definitions of manufacturers and It is important to note that the legal consequences hereof and the sellers or distributors as the responsible parties. relationship between the Danish Act of Limitation and the product According to the Danish Product Liability Act, the following liability developed through case law has yet to be settled definitively may, therefore, be considered as a manufacturer or distributor or and has not been broadly discussed within the legal community. seller and can thus be found liable (see also question 18).

29 Is it a defence to a product liability action that the product The Danish Product Liability Act defect was not discoverable within the limitations of science and Liable as manufacturer technology at the time of distribution? If so, who bears the burden Those liable as manufacturer are: and what is the standard of proof? • the manufacturer of the product itself and the manufacturer of part of a product or raw materials, etc; Yes, it may be used as a defence that the product defect was not • a party who by putting its name, signs or other characteristics on discoverable within the limitations of science and technology at the a product sets itself up to be the manufacturer of that product; time of distribution. The standard of proof is strict, namely that even • a party who through the course of business has imported the the best expert would not have been able to detect the defect. The product into the EU with the intention of selling, loaning, leasing burden of proof lies with the defendant. or by other means putting the product into circulation; and

www.gettingthedealthrough.com 49 DENMARK Gorrissen Federspiel

• the manufacturer only manufactured a part of the product, and Update and trends he or she proves that the defect is due to the specifications of the final product or instructions given by the final manufacturer of In recent years, there has been increased focus on product liability which its product forms part of; and and pharmaceutical products both in case law and in theory. • the amount of damages may be reduced or the entitlement to The Danish Supreme Court and the Eastern High Court have passed judgments in cases regarding development damages and damages may be forfeited if the claimant has negligently or weight-loss pills. There is a risk that certain types of weight-loss knowingly contributed to the injury or damage. pills could cause heart valve failure. The cases brought before the courts are some of the first to be heard after the entry into force of the Danish Product Liability Act and to grant exemption 32 What appeals are available to the unsuccessful party in the trial from liability with reference to development damages. As regards court? development damages, the Supreme Court points in the direction of the manufacturer being expected to respond to both the latest The losing party will, as a rule, always have access to appeal the knowledge in medical theory and to current governmental reactions court of first instance’s ruling. In some cases, the losing party will to both theory and reports of potential side effects. Reactions also have access to appeal the court of second instance’s ruling, how- must be immediate. The case further underlines the importance ever, only after being granted permission by a review board. of both national and international knowledge and theory in relation to the danger of both the final product and of the individual ingredients. Jurisdiction analysis

33 Can you characterise the maturity of product liability law in terms of its legal development and utilisation to redress perceived 30 Is it a defence that the product complied with mandatory (or wrongs? voluntary) standards or requirements with respect to the alleged defect? Product liability in Denmark is rather mature, as the product liabil- ity developed through case law goes back many years. Recent case Within the scheme of the Danish Product Liability Act, compliance law does, however, indicate a tendency to use the rules and principles with mandatory or voluntary standards is not sufficient to avoid on product liability to a greater extent compared to the more tradi- liability. It is, however, accepted as a defence that the defect was tional rules on damages in contracts. caused by the product having to comply with mandatory require- ments issued by the public authorities. 34 Have there been any recent noteworthy events or cases that have particularly shaped product liability law? Has there been 31 What other defences may be available to a product liability any change in the frequency or nature of product liability cases defendant? launched in the past 12 months? The most common defences by the manufacturer regarding liability Case C402/03 (Skov Æg v Bilka) is considered a milestone within according to the Danish Product Liability Act are: product liability law in Denmark relating to the Danish Product • the manufacturer did not put the product in question into Liability Act. Before this ruling, the legal position in Denmark was circulation; that a distributor or seller could be held responsible as a sort of • the manufacturer did not manufacture, produce, put into circu- guarantor (a form of vicarious liability) for the manufacturer or lation, etc, the product by way of business; a previous seller or distributor’s no-fault liability according to the • the defect is caused by the product having to comply with man- Danish Product Liability Act. This was overturned by the ECJ, and a datory requirements issued by the public authorities; distributor or seller is now only liable as a sort of guarantor (a form • as a result of the scientific and technical knowledge available at of vicarious liability) for liability resulting from a manufacturer or the time when the product was put into circulation, it was not previous seller or distributor’s fault or negligence. possible to discover the defect; • the defect was not present when the product was put into circulation;

Søren Stæhr [email protected] Christian Holm Madsen [email protected]

Silkeborgvej 2 Tel: +45 86 20 75 00 8000 Aarhus C Fax: +45 86 20 75 99 Denmark www.gorrissenfederspiel.com

50 Getting the Deal Through – Product Liability 2014 Gorrissen Federspiel DENMARK

35 Describe the level of ‘consumerism’ in your country and 36 Describe any developments regarding ‘access to justice’ that consumers’ knowledge of, and propensity to use, product liability would make product liability more claimant-friendly. litigation to redress perceived wrongs. In 2008, the rules on class actions entered into force. These rules Denmark is, like many other EU countries, experiencing an increas- are seemingly very well suited for product liability cases, where the ing level of consumer protection within many areas, and consumers claimants are consumers with minor claims, and where legal action are very much aware of their rights. At the same time, insurance would otherwise seem insurmountable or just unprofitable. is used within many areas in Denmark, and consumers will often seek any loss covered through their insurance company that may in turn, depending on the circumstances, direct a claim against the liable person or entity.

www.gettingthedealthrough.com 51 DOMINICAN REPUBLIC Headrick Rizik Alvarez & Fernández Dominican Republic

Roberto Rizik and Jaime M Senior Headrick Rizik Alvarez & Fernández

Civil litigation system 16 judges, all of whom are designated by the National Council on Magistrature, and is divided into three chambers. The First Chamber 1 What is the structure of the civil court system? of the court hears and decides on cassation appeals that are filed The Dominican legal system is organised under a hierarchical system for the first time in civil and commercial matters. Also, within the that is arranged in the following order: the Constitution, the laws, court itself, there are two equally important jurisdictional compo- administrative rulings issued by the power and munici- nents: the full Supreme Court, which comprises of all of the jus- pal rulings. French civil law serves as the basis of Dominican law, tices of the Supreme Court of Justice, and that hears and decides, with the basic structure based on the Napoleonic codes of the 19th among other matters, cases against sitting government officials who century. Except for limited modifications, the Civil Code and the enjoy privileged jurisdiction under the Dominican Constitution; Civil Procedure Code that are presently in effect are based on such and the Combined Chambers, which comprises the three chambers Napoleonic codes. of the Supreme Court of Justice, and that hears and decides cassa- In terms of ordinary civil proceedings, the lowest rung on the tion appeals that are filed for a second time against decisions of the jurisdictional ladder are the courts of first instance. These courts are appeals court that were the result of a prior cassation appeal that the common courts in the Dominican judicial system, that is, they resulted in the appeals court re-hearing the case on an appellate level. have plenary jurisdiction to act as a trial court with respect to all The Constitution of the Dominican Republic, which entered into matters that are not attributed by law to another court, as well as effect in 2010, also established a new high court: the Constitutional any other matter for which the law attributes jurisdiction to them Court (the same also established a second new high court, for elec- (including hearing appeals from of the peace; see below). toral matters, but that is outside the scope of this chapter). The Article 43 of the Judicial Organisation Law provides that ‘in each Constitutional Court comprises 13 judges who, like those of the Judicial District, there will be at least one Court of First Instance Supreme Court of Justice, are designated by the National Council on with plenary jurisdiction, and such court may be divided into cham- Magistrature. In accordance with article 184 of the Constitution, the bers as required in the best interests of the administration of justice’. Constitutional Court is charged with guaranteeing and overseeing There are 35 judicial districts in the Dominican Republic, distrib- the supremacy of the Constitution, the defence of the constitutional uted among the 11 judicial departments. Ordinary courts of first order and the protection of fundamental rights. The decisions of this instance, which may be divided into chambers, have jurisdiction to court are final and irrevocable and serve as binding for all hear civil, commercial and criminal matters in accordance with law. public powers and state bodies. It should be noted, however, that below the courts of first The Constitutional Court hears and decides, without the pos- instance are the justices of the peace. These are the lowest ranking sibility of appeal or other review, the following matters: courts in the country, and they typically hear simple cases and cases • actions seeking to have laws, executive orders, regulations, reso- of low monetary value. Ordinary justices of the peace are those that lutions and municipal rules declared unconstitutional; hear civil cases for small sums, petitions for alimony, suits for pay- • the review of all international to ensure compliance ment of back rent and act as courts of instruction in certain crimi- with Constitutional norms and prior to their approval by the nal cases against adolescents. Most civil cases exceed the sums that Congress; and would attribute jurisdiction to justices of the peace, and thus are • conflicts of jurisdiction that may arise between the public heard by the courts of first instance. powers. Appeals courts (and courts of equal ranking) are generally charged with hearing and deciding on appeals filed against decisions issued by the courts of first instance or other trial courts, as well 2 What is the role of the judge in civil proceedings and what is the as acting as trial courts for criminal cases brought against judges role of the jury? of courts of first instance, district attorneys and certain government Trials are directed and managed by one or more judges, depending officials. Appeals courts comprise five judges, except in certain lim- on whether the trial is held before a court with one judge (typically ited cases. Ordinary appeals courts hear and decide on appeals in justices of the peace and courts of first instance) or courts with multi- civil, commercial and criminal cases. Each of the judicial depart- ple judges (appeals courts and High Courts). The judge or judges are ments has one ordinary appeals court, and of these 11, eight are tasked with guaranteeing that the trial is held respecting the rights divided into chambers by matter (criminal chamber, civil and com- of defence of both parties and that the trial is held in an impartial mercial chamber, and family chamber). manner. The judge has a relatively passive role in the trial, and is The highest court in civil matters (and the highest jurisdictional only tasked with responding to motions presented by the parties (in court of the entire judicial system under the Dominican Constitution), addition to keeping order at court). There are no juries or jury trials is the Supreme Court of Justice. The court is composed of at least under Dominican law.

52 Getting the Deal Through – Product Liability 2014 Headrick Rizik Alvarez & Fernández DOMINICAN REPUBLIC

3 What are the basic pleadings filed with the court to institute, these procedures or otherwise granting special evidentiary status due prosecute and defend the product liability action and what is the to the commonality of interest of the parties. The court simply hears sequence and timing for filing them? the case file by multiple plaintiffs arising out of the same cause of In civil and commercial matters, suits are initiated by a notice by action. means of a bailiff’s act from the plaintiff to the defendant. This bail- iff’s act must contain sufficient information regarding the suit and 8 How long does it typically take a product liability action to get to a demand that the defendant respond before the competent court. the trial stage and what is the duration of a trial? Article 61 of the Civil Procedure Code provides that all bailiffs’ acts whereby a suit is commenced must set forth a number of factual Depending on whether certain preliminary motions are filed or not matters, including the basis of the lawsuit, the names of the defend- (eg, a motion to have the case dismissed and remitted to an arbitral ants and the court before which the suit is being filed. While they ), then the duration for a tort case to reach a stage where the plaintiff may make certain changes to the allegations in the lawsuit, court of first instance can issue a ruling may take anywhere from these must not be material as otherwise the Constitutional principle one to three years. It should be noted that there is no single ‘trial’ of the immutability of the process would be affected. under Dominican law (see question 6), but rather a series of hear- ings. Appeals can last anywhere from one to five years. The timing of cases shows wide variance in the country, depending on the com- 4 Are there any pre-filing requirements that must be satisfied before plexity of the case, the diligence with which the parties pursue the a formal law suit may be commenced by the product liability same, whether preliminary motions are presented and other issues. claimant? There are generally no requirements to filing a lawsuit in the Evidentiary issues and damages Dominican legal system, with a few exceptions to that rule. 9 What is the nature and extent of pretrial preservation and disclosure of documents and other evidence? Are there any 5 Are mechanisms available to the parties to seek resolution of a avenues for pretrial discovery? case before a full hearing on the merits? In Dominican civil proceedings, the manner in which documents There are a number of summary disposition motions that are avail- that are relevant to the proceedings are entered into the record and able to defendants in civil cases. Although the concept of a motion exchanged between the parties is through a process of voluntary dis- for summary judgment is not available under Dominican law, there closure. In such cases, the party making use of a document must are other types of motion that can produce similar effects (ie, to publicly file it in the court docket. Thus, the disclosure of documents dismiss the case prior to the hearing on the merits). tends to be driven by the parties and is done on a courtesy or volun- However, it is very important to note that judges in the tary basis, and there is generally no obligation to file any documents. Dominican Republic can ‘accumulate’ summary disposition motions The mutual disclosure of documents is typically requested by both to be decided upon jointly with the merits. Thus, while a summary parties at the first hearing, and judges almost always grant consecu- disposition motion may be presented early in the case, the judge may tive 15-day terms for each of the parties to file the documents that decide to have the case move forward (ie, presentation of evidence, such a party wishes to disclose. This 15-day term is often extended conclusion on the merits) and only when the case is going to be on repeated occasions during the first few hearings of any action. It decided upon the merits, proceed to rule on the summary disposi- should be noted that the parties may file documents at later points tion motion. in the process as long as they are filed before the conclusions on the merits are presented at trial. Dominican civil procedure does provide for the obligatory dis- 6 What is the basic trial structure? closure of documents in certain limited circumstances. The obliga- By constitutional mandate, hearings must be conducted in public, tory disclosure of documents by a party usually occurs when one oral and adversarial fashion. In order for a hearing to take place, party would like to make use of certain documents necessary for its all of the parties must have been duly cited, taking into account all case and to which it does not have access to or is in the hands of a of the formalities required by law to cite persons, as well as having third party, in which case, such a party can request that the court exhausted the time periods required following such a citation. order the production of the document. In civil cases in the Dominican Republic, there is no single ‘trial’ or hearing where the parties present all of their evidence and plead the merits of the case. In fact, in most (if not all) civil cases, a 10 How is evidence presented in the courtroom and how is the number of hearings are held before the pleadings on the merits are evidence cross-examined by the opposing party? presented (in certain exceptional cases (such as certain emergency Parties in litigation in the Dominican Republic are generally free to proceedings), the merits may be reached in the first hearing). Thus, provide any sort of proof as they see fit, be it testimonial, expert motions, evidence and other matters are presented over the course witness or documentary evidence, among others. The party against of a number of hearings, and when the parties have presented all of which evidence of any kind is presented will have the opportunity the evidence that will be used in the case and plead their motions, the to respond to such evidence (either by filing other documents, by judge invites the parties to plead on the merits. cross-examining the witness, by presenting expert testimony that contradicts that presented by the other party, etc). The general principle applicable in Dominican civil litigation is 7 Are there class, group or other collective action mechanisms that all sources of proof must be provided by the parties to the liti- available to product liability claimants? Can such actions be gation and provided to the other parties, to the end that such other brought by representative bodies? parties have the opportunity to examine and respond to such proof. Group and class actions are not provided for under Dominican law. Thus, except in certain limited instances, the parties to a trial drive However, one court may hear and decide on suits with respect to the process of requesting and providing proof, with the role of the the same event or against the same defendant, which have been filed judge being fairly passive (as a general rule, a judge in a trial may by multiple defendants. These types of proceedings are not subject not order production of documents or the testimony of a witness). to special or particular rules, and there is no concept of expediting

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11 May the court appoint experts? May the parties influence the 16 Are contingency or conditional fee arrangements permissible? appointment and may they present the evidence of experts they Article 3 of Law No. 302 of 1964 provides that lawyers may agree selected? to represent clients in litigation on the basis of a contingency fee. Expert testimony may be presented in a case. However, unlike in These contracts are called contratos de cuota litis, and their value other jurisdictions, court-appointed experts typically provide writ- may not be less than the minimum amounts specified in Law No. ten reports and do not frequently provide testimony. As noted in 302 (the amounts of which are de minimis), but may not exceed 30 previous questions, the parties in litigation drive the process of pro- per cent of the value of the award in the litigation in question. viding evidence. Accordingly, courts do not have general powers to seek expert testimony or guidance to aid in their decisions; however, 17 Can the successful party recover its legal fees and expenses from the parties must move to have the court approve any request to hear the unsuccessful party? expert evidence or testimony. Generally, the losing party is liable to pay the legal fees and costs associated with such a process. In most litigation matters, article 12 What types of compensatory damages are available to product 130 et seq of the Civil Procedure Code permits the attorneys for the liability claimants and what limitations (if any) apply? prevailing party to recoup their fees from the losing party. However, Compensatory or material damages under Dominican law, refers article 1 of the Law on Attorney’s Fees, Law No. 302 of 1964, speci- to losses that can be quantified in money, and that can take the fies that the losing party that is charged with paying the attorney’s form of damages to property or bodily harm that may be quanti- fees and costs of the successful party must do so, not on the basis of fied. Dominican law generally requires that ‘sufficient’ damages be the fees actually charged, but rather on the basis of the rates speci- awarded in order to repair the damage that has been caused. Thus, fied in the law. These rates are substantially below the market price damages may not be awarded simply to repair or replace tangible (the costs were below the market price in 1964, and have not been objects, but may also be awarded with respect to foregone income adjusted since then), so this provision is of little use in litigation. and other monetary losses that may be more difficult to quantify. In terms of evaluating the amount of damages, this determina- Sources of law tion is left to the discretion of the judges. While there are no limita- tions specifically established by law (ie, damages caps), judges must 18 Is there a statute that governs product liability litigation? determine the amount of the damages that will be compensatory Product liability cases are generally governed by common civil law, based on the proof that is presented to them as well as the gen- specifically those provisions regarding torts and damages. There are eral notion that all amounts of damages must be reasonable and in no generally applicable product liability statutes in the Dominican proportion to the actual damage suffered. In contract matters, dam- Republic. However, there are some statutes that provide some regu- age limitation and mitigation clauses, as well as liquidated damages latory supervision and relief to consumers that could apply to prod- clauses, are generally permissible. Other than the foregoing mention uct liability matters. For example, Law No. 385-05 on Consumer of damages limited by contract, there is no general principle of limi- Protection created the General Directorate on Consumer Protection, tation of damages under Dominican law except for the requirement which has some limited powers to investigate, publicise and poten- that damage awards be reasonable and in proportion to the damage tially regulate or fine cases where consumers are harmed. suffered.

19 What other theories of liability are available to product liability 13 Are punitive, exemplary, moral or other non-compensatory claimants? damages available to product liability claimants? Under Dominican law, in order for civil liability in tort to arise, three Under Dominican law, non-compensatory damages are referred to requirements must be met: fault, damages and a relation of cause as moral harm or damages. These types of damages cannot be quan- and effect between the fault and the damages (the first and third tified in money, such as pain and suffering, violations to privacy, loss requirements are discussed in greater detail in the questions below). of companionship, effects on the reputation or honour of a person, Accordingly, with respect to the second point of the analysis, we can among other types (see question 12 regarding the determination of conclude that there can be no liability if there are no damages. It the amount of such damages and limitation). should be noted that article 1315 of the Civil Code requires that the plaintiff prove the existence (and amount) of the damages, so there Litigation funding, fees and costs is no general presumption that an act that may be considered to be wrongful necessarily causes damages. 14 Is public funding such as legal aid available? If so, may potential With respect to contract law, this is available as an avenue for defendants make submissions or otherwise contest the grant of redressing product liability claims. However, any limitations on such aid? damages and other considerations (eg, arbitration clauses, non- Legal aid and public funding is not available for civil and commer- subrogation clauses, etc) must be taken into account in terms of cial cases (there is a public defender’s office, but only for criminal evaluating contract law torts matters. cases). However, a consumer may file a claim before the Office of See question 22 for a discussion of recent developments and Consumer Defence, which has no cost, and that office may initiate question 28 for an important distinction between common law torts investigations and actions against a company. and contract torts in terms of statute of limitations issues.

15 Is third-party litigation funding permissible? 20 Is there a consumer protection statute that provides remedies, Litigation funding is not permitted. The general rule applicable in imposes duties or otherwise affects product liability litigants? such cases is derived from the French maxim (as recognised and Law No. 385-05 on Consumer Protection establishes certain given effect in the Dominican Republic by decisions of the Supreme consumer rights and provides for the creation of the General Court of the Dominican Republic) that ‘no one may litigate on Directorate on Consumer Protection. While this law could serve as account of another person’, meaning that a party must pay its own the basis for investigations and public requests to address poten- expenses for litigation. tial issues in product liability matters, it does not provide a clear basis for imposing tort liability on defendants. Nevertheless, on

54 Getting the Deal Through – Product Liability 2014 Headrick Rizik Alvarez & Fernández DOMINICAN REPUBLIC

26 March 2014, the Third Chamber of the Supreme Court of the 24 By what standards may a product be deemed defective and who Dominican Republic issued a decision whereby it recognised that the bears the burden of proof? May that burden be shifted to the General Directorate of Consumer Protection has an inherent capac- opposing party? What is the standard of proof? ity to sanction violators of norms that it published. This direct right The burden of proof is always borne by the plaintiff, and is not to impose sanctions on violators had not been previously recognised shifted in any circumstance to the defendant. The plaintiff must by courts and, indeed, most commentators did not believe that it did prove all three elements of traditional tort liability – fault, causation in fact exist under the law and applicable constitutional provisions. and damages. The Dominican Republic legal system does not have a Notwithstanding the foregoing, in the products liability context, this typical ‘standard of proof’ formulation, but, generally, the standard law serves a regulatory role, and non-compliance with the terms and requires proof between that of preponderance of the evidence and conditions of the law and those imposed by the regulators in accord- clear and convincing evidence; the judge hearing the case will be ance with the law, could potentially serve to argue the ‘fault’ aspect looking to substantiate the findings on the record with sufficient evi- of a product liability case under common law, but, to our knowl- dence to ensure that a reviewing court will not challenge the ruling edge, this argument has yet to be presented in court. based on a lack of evidence that is sufficient to sustain the decision.

21 Can criminal sanctions be imposed for the sale or distribution of 25 Who may be found liable for injuries and damages caused by defective products? defective products? Apart from the knowledge and intent of the distributing party, crimi- In theory, any party that participated in the manufacturing, distribu- nal liability should, generally, not be triggered by the sale or distribu- tion or sale of a product could be held liable for damage caused by tion of defective products. One possible exception in this sense are a defective product. However, as previously noted, a plaintiff will cases of manslaughter, which do not require intent on the part of the have to establish through the presentation of clear and convincing party subject to criminal liability. However, even in those potential evidence that the actions or omissions of any defendant party had a cases, and we are not aware that any such case has been presented in direct causal link with the harm caused, which could be a difficult Dominican courts, the prosecution would have to prove a direct link standard to meet. between the action or omission of one person (which cannot be a juridical person, as such entities are not subject to criminal law, and thus, must be a physical person) and the harm that has been caused. 26 What is the standard by which causation between defect and Notwithstanding, in product liability matters, it may be difficult to injury or damages must be established? Who bears the burden identify a specific person to whom responsibility for the defect or and may it be shifted to the opposing party? wrongful act could be attributed. Dominican law generally requires establishing a direct causal link between the wrongful act (action or omission) and the harm suf- fered. While theories of proximate causation could be successful in 22 Are any novel theories available or emerging for product liability certain limited instances, courts will generally not find that the cau- claimants? sation element required for general tort claims has been met unless Dominican case law, following French jurisprudence, has recently there is a direct relationship that can be conclusively established. The recognised a ‘right to security’ in respect of products sold by man- Supreme Court of Justice, in numerous cases, has reiterated that the ufacturers. This type of right acts as a type of legal warranty in burden is on the plaintiff to establish this link, and the defendant has respect of the product, whereby the consumer is assured that the no responsibility to prove that no such causal link exists. product should be safe to use. Recent cases, also following French jurisprudence, have also recognised the principle of ‘chain of con- tract’, whereby a consumer is recognised to have standing to sue a 27 What post-sale duties may be imposed on potentially responsible manufacturer even if that consumer did not enter into contractual parties and how might liability be imposed upon their breach? relations directly with that manufacturer. Some potentially novel There are no general post-sale duties under Dominican law. A novel theories (fault under the Consumer Protection Law and criminal argument could be made if a party has knowledge of a defect after law responsibility in certain limited cases) have been previously dis- the sale and chooses not to warn customers who have already pur- cussed in this chapter. There have also been novel factual situations chased the product that this constitutes ‘fault’ under tort doctrine; and fact patterns that continually present themselves in product however, we are not aware of any case where this theory has been liability litigation in the country. However, at this time, the practice presented to the courts. of product liability litigation is concentrated on traditional theories and defences, and few novel theories have been presented in court. Limitations and defences

28 What are the applicable limitation periods? 23 What breaches of duties or other theories can be used to establish product defect? Article 2262 of the Civil Code provides the general rules regarding the limitation periods (ie, statute of limitations) for civil litigation. Dominican law does not specifically distinguish among different Relevant limitation periods are as follows (in all cases, unless a law theories of product defect. Thus, if the three elements of tort can be specifically provides otherwise): satisfied (fault, causation and damages), then any theory of product defect could serve as a theoretical basis for a cause of action. As a • six months from the date of occurrence for most tort actions not general matter, judges are likely to look to identifying direct causal arising out of negligence; links between the harm suffered and the alleged wrongful act, which • one year from the date of occurrence for most tort actions aris- could potentially pose a challenge to certain types of product defect ing out of negligent actions; theories (eg, a theory of warning: a plaintiff would need to establish • two years from the date of breach for most contract torts; and a direct link between the absence of warning and the harm suffered). • 20 years for other matters not mentioned above.

If there is a situation that it makes it legally or factually impossible to comply with this statute of limitations, the law provides that the statute of limitations will be tolled for the amount of time where such impossibility existed. www.gettingthedealthrough.com 55 DOMINICAN REPUBLIC Headrick Rizik Alvarez & Fernández

32 What appeals are available to the unsuccessful party in the trial Update and trends court? As a matter of , all court decisions may be appealed The increasing preponderance of the regulatory state continues to a higher court. Thus, as a general principle of Dominican law, all to be an important development in the product liability market in the Dominican Republic. On the one hand, greater regulatory decisions may be reviewed by at least two courts. In civil or com- obligations mean that companies have to take additional mercial matters, the appeal must be filed by a bailiff’s act whereby considerations into account when designing, distributing and the party filing the appeal notifies the other party that the appealing selling products – all potential avenues for liability. This also party is thereby filing an appeal with respect to the decision. Such entails that the general public will become more cognisant of an appeal must be filed within one month after the date on which potential avenues for redress by seeking to file suits in court for alleged wrongdoing. On the other hand, to the extent that such the appealing party received notice of the decision that is subject to considerations are accurately addressed in products, these could appeal. serve as potential defences in cases of allegations of fault. Jurisdiction analysis

29 Is it a defence to a product liability action that the product 33 Can you characterise the maturity of product liability law in terms defect was not discoverable within the limitations of science and of its legal development and utilisation to redress perceived technology at the time of distribution? If so, who bears the burden wrongs? and what is the standard of proof? Product liability law is not particularly developed in the Dominican Statute of limitations questions generally reference whether the Republic. There is a moderate caseload in terms of claims filed that defect was known or discoverable during the specified time periods. relate to product defects and harms suffered. As the theories under- In this sense, while to our knowledge this argument has not been lying product liability issues are generally based on traditional liabil- presented in Dominican courts, it could possibly be entertained as ities of tort, the judiciary is familiar with the area of law. However, valid if there was no feasible way to discover the defect due to limita- as the law continues to develop, more advanced theories, both as to tions of science and technology. the identity of the defendant and the elements of establishing fault and causation, are likely to be presented in court.

30 Is it a defence that the product complied with mandatory (or voluntary) standards or requirements with respect to the alleged 34 Have there been any recent noteworthy events or cases that defect? have particularly shaped product liability law? Has there been any change in the frequency or nature of product liability cases Yes, this could present a compelling defence in any case. Particularly launched in the past 12 months? with respect to the question of whether the defendant was at ‘fault’, the argument that the product complied with mandatory or volun- There are no noteworthy developments in the jurisdiction in the past tary standards or requirements could serve to rebut the argument year. that the defendant’s actions or omissions were at fault in causing the harm. 35 Describe the level of ‘consumerism’ in your country and consumers’ knowledge of, and propensity to use, product liability 31 What other defences may be available to a product liability litigation to redress perceived wrongs. defendant? The use of product liability remains a fairly limited recourse for per- The defence related to actions of a third party or the misuse of the ceived wrongs in product liability matters. However, as the General product are valid defences that could be asserted in any case. Other Directorate on Consumer Protection (discussed in previous ques- theories, such as fault of the claimant (either as a complete defence tions) continues to publicise cases of alleged wrongdoing, it is possi- against liability or as an argument for comparative negligence) ble that there will be an increase in the use of lawsuits to seek redress and assumption of risk are not specifically addressed in case law. for perceived wrongs. However, these defences could serve as rebuttals to arguments of causation, namely, the direct causal link between the defect and the harm suffered would have been severed due to the fault of the plain- tiff or other actions or omissions thereof.

Roberto Rizik [email protected] Jaime M Senior [email protected]

Gustavo Mejía Ricart Avenue No. 106 Tel: +1 809 473 4500 Piantini Tower, Sixth Floor Fax: +1 809 683 2936 Santo Domingo 10148 www.hrafdom.com Dominican Republic

56 Getting the Deal Through – Product Liability 2014 Headrick Rizik Alvarez & Fernández DOMINICAN REPUBLIC

36 Describe any developments regarding ‘access to justice’ that future. The new Civil Procedure Code could substantially change would make product liability more claimant-friendly. civil procedure in the country, basically by moving away from the A reformed Civil Procedure Code has been discussed for many years previous French-based inquisitorial system towards a more US-style in the Dominican Republic. At this time, there has been no legisla- adversarial system, similar to what occurred with the reform of the tive action to approve the new Code, but this could change in the Code.

www.gettingthedealthrough.com 57 ENGLAND & WALES Shook, Hardy & Bacon International LLP England & Wales

Simon Castley and Jon Hudson Shook, Hardy & Bacon International LLP

Civil litigation system 4 Are there any pre-filing requirements that must be satisfied before a formal law suit may be commenced by the product liability 1 What is the structure of the civil court system? claimant? Civil claims in England and Wales are brought in the county courts The CPR is supplemented by a number of pre-action protocols that up to a value of £25,000 (or £50,000 for personal injury claims) or provide relatively detailed guidelines as to the actions required of the the High Court (for all other claims). In April 2013, the small claims parties before proceedings are commenced. limit for non-personal injury claims was increased to £10,000. The pre-action protocol for personal injury claims obliges The small claims limit for personal injury remained unchanged at claimants to send a sufficiently detailed letter of claim detailing the £1,000. In 2013, the government carried out a consultation pro- allegations made against the defendant before any proceedings are posing reforms aimed at reducing the number and costs of whip- commenced. The defendant then has a period of three months to lash (neck injury) claims, including raising the small claims limit to investigate before admitting or denying liability. If no response is £5,000 for some personal injury claims. The government has since received from the defendant, or liability is denied, the claimant is indicated that, while it remained in favour of raising the limit, it free to issue proceedings by filing and serving a claim form on the would not do so until the effect of other reforms has been observed. defendant. Appeals from the county courts and High Court are heard by the Product liability claims other than those arising out of personal Court of Appeal Civil Division. The court of final appeal in England injuries (mostly property damage claims) are not governed by a spe- and Wales is the Supreme Court, which assumed the judicial author- cific pre-action protocol, but all claims must comply with the prac- ity previously held by the House of Lords in October 2009. tice direction on pre-action conduct, which sets out a number of general principles along similar lines. 2 What is the role of the judge in civil proceedings and what is the role of the jury? 5 Are mechanisms available to the parties to seek resolution of a The court system is an adversarial one, each party usually being case before a full hearing on the merits? represented by an advocate and most civil cases being heard by Part 24 of the CPR sets out a procedure by which the court may one judge at first instance. There are no juries in civil cases except decide a claim or a particular issue without the need for a full trial. for claims in defamation, fraud, malicious prosecution or false The court may give a summary judgment against the claimant or imprisonment. defendant on the whole of the claim or on a particular issue if it considers that the claimant has no real prospect of succeeding on the 3 What are the basic pleadings filed with the court to institute, claim or issue; the defendant has no real prospect of defending the prosecute and defend the product liability action and what is the claim or issue; and there is no other compelling reason why the case sequence and timing for filing them? or issue should go to trial. The application for summary judgment may be based on a point of law, the evidence available (or lack of it) Civil litigation procedure is governed by the Civil Procedure Rules or a combination of both. The court may give a summary judgment 1998 (CPR). Subject to pre-action requirements discussed below, against a claimant in any type of proceedings, and against a defend- proceedings are commenced by issuing a claim form in the relevant ant, except in some real estate and admiralty claims. Either party court. The claim form must then be served on each defendant within may make an application for summary judgment under Part 24 CPR four months of issue, together with detailed particulars of claim. and the application will be dealt with by the court at a summary Each defendant must then file and serve its defence within 14 days. judgment hearing. The court can also list the case for a summary Alternatively an acknowledgement of service may be filed, in which hearing on its own initiative. case the defendant has a period of 28 days in which to file and serve Summary judgment procedure is not supposed to be a mini trial. its defence. After the defence is filed, the court will decide, provi- It is intended to dispose of cases where there is no real prospect of sionally, the track that appears most suitable for the case, serve on success from either perspective. the parties a notice of proposed allocation, and order the parties to file the appropriate directions questionnaire. The claimant has the option of serving a reply, which must be served at the same time 6 What is the basic trial structure? as the claimant’s directions questionnaire. After service of a reply, The trial timetable will normally be agreed between the parties or pleadings are deemed to be closed, and no party may file or serve set by the judge at a case management conference. Claims are allo- any further statement of case without the permission of the court. cated to ‘tracks’. Small claims and fast-track claims will normally be listed for less than one day. Multi-track claims (claims of higher value or greater complexity of issues) will normally last longer, and a

58 Getting the Deal Through – Product Liability 2014 Shook, Hardy & Bacon International LLP ENGLAND & WALES multi-party product liability trial could extend to a number of weeks 8 How long does it typically take a product liability action to get to or months. the trial stage and what is the duration of a trial? Oral evidence is given by lay and expert witnesses for both par- This will vary widely depending on the complexity of the issues at ties, although each witness’s evidence-in-chief will take the form of stake and the attitude of the parties. The CPR, which govern all civil a written witness statement (or, in the case of expert witnesses, an litigation in England and Wales, place great emphasis on settlement expert report), which will have been filed in advance of the trial. of claims before trial, but a complex product liability action that Each party will have the opportunity to cross-examine the opposi- does proceed could take several years to reach trial. tion’s witnesses at trial. The length of the trial is again determined by the complexity of Legal advisers in England and Wales are split into and the issues and the amount of evidence to be heard. Whereas a rela- . The division of responsibilities between these professions tively straightforward individual product liability claim with mini- can be confusing, but in general solicitors are instructed directly by mal expert evidence might be disposed of in one day or less, a trial the claimant or defendant from the start, and are responsible for of a group claim with complex legal, technical and procedural issues managing the case and for communicating with the opposition’s may run to a number of weeks or months. representatives. Barristers (usually referred to as ‘counsel’) are instructed by solicitors to undertake courtroom advocacy and to Evidentiary issues and damages provide advice on specialist points of law. 9 What is the nature and extent of pretrial preservation and disclosure of documents and other evidence? Are there any 7 Are there class, group or other collective action mechanisms avenues for pretrial discovery? available to product liability claimants? Can such actions be brought by representative bodies? Disclosure is governed by the CPR, which dictates that each party must disclose a list of those documents in its control upon which A group litigation order (GLO) may be made by the court where it relies, as well as those which adversely affect its own case, and a number of claims give rise to common or related issues of fact or which support or adversely affect the other party’s case. Disclosure law. The court then has a wide discretion to manage the claims as it takes place at a relatively early stage of proceedings after service sees fit. There is no opt-out class action mechanism in England and of pleadings. Both parties are under a duty to conduct a reason- Wales, and a GLO serves only to bring together individual claims able search for disclosable documents (which includes electronic litigated in their own right. Any further claimants wishing to join the documents), and this duty is a continuing one that both parties GLO will still need to issue their own proceedings. must have regard to at all stages of proceedings, up to and includ- At present, there is a limited right for designated consumer bod- ing trial. The reforms introduced by the Legal Aid Sentencing and ies to bring representative actions on behalf of consumers in com- Punishment of Offenders Act 2012 (LASPO), which came into force petition (antitrust) claims only. Only one such claim has so far been on 1 April 2013, are aimed at encouraging parties to conduct litiga- brought, by Which? (the Consumers’ Association), in respect of tion in a more cost effective manner. Once litigation is commenced, alleged price-fixing of football shirts. The claim was settled and so parties are now required to file a disclosure report before the first the mechanism has not been fully tested in court. case management conference, describing which documents exist and In 2012, the government carried out a consultation on pri- their availability. The presumption in favour of standard disclosure vate actions in . In its response to this consulta- in multi-track cases has been replaced by a ‘menu’ of options from tion, published in January 2013, the government indicated that it which the court will choose to make an order on disclosure. would proceed with the introduction of a limited ‘opt-out’ collective Some pre-action protocols (for example, that for personal actions regime for competition claims. The proposed legislation (the injury) provide for early disclosure of documents before proceedings Consumer Rights Bill) was introduced to the UK Parliament at the have been issued, and mechanisms also exist for a party to apply to end of January 2014. The bill proposes the creation of a new limited the court for an order for pre-action disclosure in other cases where opt-out collective action for competition law claims on behalf of such an order might help to settle or dispose of the claim fairly and both consumers and businesses in the Competition Appeal Tribunal efficiently. (CAT). This form of collective action will enable consumers and In accordance with Part 31 CPR, as soon as litigation is con- businesses to seek redress for anti-competitive behaviour via a rep- templated, the parties’ legal representatives must notify their clients resentative body in respect of an entire class of affected consum- of the need to preserve disclosable documents (including electronic ers (other than those who actively opt out of the case). The bill is documents). currently being reviewed at the committee stage of the legislative process in the House of Commons. In 2013 the European Commission published a package of 10 How is evidence presented in the courtroom and how is the proposals, which covers collective redress in the areas of competi- evidence cross-examined by the opposing party? tion claims, consumer protection, environmental protection and Witness evidence is presented in the first instance in the form of a data privacy. This included a recommendation, which is a non- written witness statement, which will have been disclosed to the binding instrument, that invites member states to harmonise their other party prior to the trial. This will stand as evidence-in-chief of collective redress systems using common principles outlined by the each witness. Commission. The recommendation is to be implemented by July In the courtroom, witnesses will be asked to confirm the con- 2015, at which point the Commission will review progress and tents of their witness statements, before being cross-examined by the decide whether further action is needed, including future legislation. advocate of the opposing party. The common principles outlined in the recommendation include an opt-in model with group members having to be identified before a claim is brought. In addition, only ‘ad hoc certified entities’ would 11 May the court appoint experts? May the parties influence the have standing to bring representative actions. The recommendation appointment and may they present the evidence of experts they includes various safeguards aimed at avoiding the perceived excesses selected? of US-style ‘class actions’ in Europe, specifically, by banning punitive The court does have powers to appoint experts although in practice damages, pre-trial discovery and juries. these are seldom if ever used in product liability cases. It is, however, normal for the court to make use of its discretion to allow or restrict the use of expert evidence by the parties. The court may allow each www.gettingthedealthrough.com 59 ENGLAND & WALES Shook, Hardy & Bacon International LLP party to instruct its own expert in a given field, or it may order that has now changed and is now only available where a failure to pro- a single joint expert is appointed. In either case, the expert’s overrid- vide it would be a breach of legislation. Funding will ing duty is to assist the court, not the instructing party, and all expert no longer be provided for other types of claims, even if it can be evidence is in theory therefore considered to be independent. Where argued that there is a significant wider public interest in funding each party has instructed its own expert, the normal practice will these claims. be to exchange expert reports at an early stage. Each party then has the opportunity to put written questions to the other party’s expert, 15 Is third-party litigation funding permissible? and the experts will normally then meet and produce a statement for the court identifying those issues that are agreed between the Third-party funding of litigation has historically been disallowed in experts and those that are in dispute. If the expert evidence is to be England and Wales by the common law doctrines of maintenance relied upon by the parties, each expert will be cross-examined at and champerty. Developments have, however, seen the courts relax trial by the opposing party’s advocate. Since 1 April 2013, the court their approach to third-party funding in certain circumstances and may direct that the evidence of the parties’ experts in a particular such funding is now widely available. Indeed, a number of com- discipline be heard concurrently. mercial funders are now in operation with the express purpose of In an April 2011 judgment the Supreme Court decided that an funding litigation with a view to sharing in any awards made by the expert witness was not entitled to immunity from suit in connection court to successful claimants. with negligence in the performance of their role. The third-party funding model is mostly used in certain com- mercial and insolvency disputes, but depending on its success and popularity, and on the introduction of any reformed collective 12 What types of compensatory damages are available to product redress mechanism at UK or EU level, there is likely to be an appetite liability claimants and what limitations (if any) apply? among the claimant lawyer community to seek to widen its appli- Strict liability claims under the Consumer Protection Act 1987 cation to multiparty actions, which have the potential to present a (see question 18) may be made for damages in respect of personal highly profitable proposition to third-party funders. injury (both bodily and psychological where a medically recognised The Jackson Review (see question 13) recommended that third- psychological illness has been caused), and in respect of damage to party funders should subscribe to a voluntary code of practice, with property (subject to a de minimis claim of £275). No claim may be consideration given to statutory regulation in due course depend- made under the Act for damage to the product itself. ing on the development of the third-party funding market. The Claims in negligence and contract may similarly be made for Association of Litigation Funders of England and Wales published damages in respect of personal injury and property damage, although its code of conduct in November 2011, which sets out standards of they will be subject to considerations of remoteness and contractual practice and behaviour. exclusion or limitation. Damages in contract may include the recov- ery of the cost of damage to the product itself. 16 Are contingency or conditional fee arrangements permissible? Conditional fee arrangements (CFAs) are permissible in England 13 Are punitive, exemplary, moral or other non-compensatory and Wales. Lawyers are permitted to act on a ‘no win, no fee’ basis. damages available to product liability claimants? However, under the provisions of LASPO 2012, where a CFA was In practice, damages awarded are virtually always calculated on entered on or after 1 April 2013, claimants’ lawyers are no longer a compensatory basis. Exemplary and aggravated (punitive) dam- able to recover any success fees under a CFA from a defendant, so ages are available only in very limited circumstances in England and claimants must pay their lawyer’s success fees (if any) out of any Wales and will only be awarded at the discretion of the court. In the damages recovered. If the CFA was entered into prior to 1 April January 2010 review of the costs regime in England and Wales by 2013, the success fee may still be recovered. Lord Jackson (the Jackson Review), there were recommendations Contingency fees more along the lines of the US model (where for an additional 10 per cent uplift in general damages. These recom- lawyers charge a fee as a percentage of damages recovered) have mendations were not included in LAPSO 2012, which implemented been available since 1 April 2013 under LASPO 2012. These con- other recommendations made in Lord Jackson’s review. However, in tingency fee arrangements are termed ‘damages based agreements’ July 2012, in Simmons v Castle [2012] EWCA Civ 1039, the Court (DBAs). The maximum amount that a lawyer can recover from the of Appeal ruled that a 10 per cent uplift in general damages should claimant’s damages is capped at 25 per cent of damages (excluding apply to all applicable cases decided after 1 April 2013. The Court of damages for future care and loss) in personal injury cases; at 35 per Appeal revisited its decision in October 2012, in Simmons v Castle cent in employment tribunal cases and at 50 per cent in all other (Number 2) [2012] EWCA Civ 1288, deciding that the 10 per cent cases. increase would not apply where the claimant had brought the pro- LASPO 2012 also prevents claimants from recovering the costs ceedings under a conditional fee agreement entered into before 1 of ‘after the event’ (ATE) insurance from a defendant. Again, these April 2013. will have to be met out of the claimant’s damages. These changes do not affect mesothelioma cases or insolvency cases. Litigation funding, fees and costs

14 Is public funding such as legal aid available? If so, may potential 17 Can the successful party recover its legal fees and expenses from defendants make submissions or otherwise contest the grant of the unsuccessful party? such aid? The basic rule in England and Wales is that the losing party will be Legal aid is available in England and Wales via the Legal Services ordered to pay the reasonable costs of the successful party. The court Commission, although the accessibility of public funding has been has wide discretion to vary this rule in awarding costs to either side, much restricted in recent years and is not available to fund general and will take into account the compliance of each party with the personal injury claims arising out of negligence or breach of a duty. CPR, as well as their general conduct in the litigation. As a general Before 1 April 2013, when LAPSO 2012 came into force, legal rule any step taken by a party that unnecessarily incurs or increases aid was often available in multiparty actions for personal injury costs is likely to result in an adverse costs award against that party claims on the basis that these actions may have a significant wider to the extent that the costs have been unnecessarily incurred or public interest. However, the test for providing exceptional funding increased.

60 Getting the Deal Through – Product Liability 2014 Shook, Hardy & Bacon International LLP ENGLAND & WALES

However, the reforms that came into force on 1 April 2013 22 Are any novel theories available or emerging for product liability to implement the recommendations in Lord Jackson’s report have claimants? significantly changed the costs regime in respect of personal injury There are a number of developments emerging for personal injury cases. ‘Qualified one-way costs shifting’ (QOCS) has been intro- and negligence claims in general, which may have relevance to future duced for personal injury claims, which means that claimants, sub- product liability cases. In particular, in October 2007 the House of ject to certain exceptions, will not be liable for the defendant’s costs Lords ruled in the case of Johnston v NEI International Combustion if their claim is unsuccessful. The claimant may lose the protection Ltd on the issue of whether pleural plaques constituted compensa- of QOCS if the court finds that the claim was ‘fundamentally dis- ble damage in claims made by employees who had been negligently honest’, the claim is struck out as having no reasonable grounds exposed to asbestos by their employers. Although the plaques (small for bringing proceedings or as an abuse of process, or where the areas of pleural thickening on the lungs) were themselves asymp- claimant has failed to beat the defendant’s offer to settle under Part tomatic, they were argued to evidence a higher risk of developing 36 of the CPR. other compensable diseases caused by exposure to asbestos (for The normal costs principle that the loser pays still applies in all example, mesothelioma and asbestosis). The claimants sought the other claims. costs of medical monitoring and distress caused by awareness of the increased risk. The House of Lords ruled that the plaques did Sources of law not constitute damage for the purposes of negligence and were not therefore compensable, but made it clear that this decision would 18 Is there a statute that governs product liability litigation? not necessarily apply to claims made in contract, for which proof of Strict liability for product liability claims in England and Wales is damage is not an essential element of a cause of action. Whether this imposed by the Consumer Protection Act 1987 (CPA), which imple- may give rise to a new wave of medical monitoring or ‘worried well’ mented the European Product Liability Directive (85/374/EEC). product liability claims in England and Wales remains to be seen. Under the CPA 1987, a producer is liable for damage caused by Following the decision in Johnston, the Scottish Parliament defective products (namely, those products that are not as safe as moved swiftly to pass legislation that effectively reversed the deci- ‘persons generally are entitled to expect’). The claimant does not sion, making damages in respect of pleural plaques recoverable need to show any fault on the part of the producer, only the presence by statute. Similar legislation came into force in Northern Ireland of the defect and a causal link between the defect and the damage. in December 2011. The Scottish legislation was subject to a legal challenge by insurers, but this challenge was denied by the Supreme Court in October 2011. In England and Wales, the Ministry of Justice 19 What other theories of liability are available to product liability consulted on whether similar action should be taken in England and claimants? Wales. In February 2010, the government announced, in response Claimants may also bring a claim in tort (negligence) or contract. to the consultation, that no such measures would be taken, and the In order to establish a negligence claim, claimants must show that House of Lords decision therefore stands. the defendant (usually the manufacturer) owed a duty of care to the claimant (there is an established duty between manufacturers and consumers at common law in England and Wales), that the duty 23 What breaches of duties or other theories can be used to was breached and that the breach caused damage to the claimant’s establish product defect? person or property. In order to establish a product defect the claimant must show that A claim in contract can only be brought against the party who the product is not as safe as persons generally are entitled to expect. supplied the defective product to the claimant (as the only party When deciding whether a product meets such a standard of safety with whom the claimant has a direct contractual link). The claimant the court will take into account all the relevant circumstances, would usually rely on a term implied by statute into the contract for including: sale that the goods would be of satisfactory quality and reasonably • the manner in which the product was marketed; fit for the purpose for which they were supplied. • any instructions or warnings given with it; Product liability claims in England and Wales are commonly • what might reasonably be expected to be done with it; and pleaded concurrently under the CPA 1987, in negligence and in • the time the producer supplied the product. contract. A product will not be judged to be defective merely because a prod- uct supplied at a later date by the same manufacturer has a higher 20 Is there a consumer protection statute that provides remedies, standard of safety. imposes duties or otherwise affects product liability litigants? In England and Wales claimants can bring a claim for breach of statutory duty where it is clear that a statute is intended to create 24 By what standards may a product be deemed defective and who private rights for individuals, however there are no consumer pro- bears the burden of proof? May that burden be shifted to the tection statutes other than the CPA 1987, which give rise to such opposing party? What is the standard of proof? private rights in respect of product liability claims. The claimant bears the burden of proving that the product is defec- tive on a balance of probabilities (namely, it is more probable that the product is defective than not). 21 Can criminal sanctions be imposed for the sale or distribution of The burden of proof may be shifted to the defendant where cer- defective products? tain statutory defences are raised (see question 30). The General Product Safety Regulations 2005 (GPSR), implement- ing the European Product Safety Directive (2001/95/EC), impose a duty on producers to place only safe products on the market, and 25 Who may be found liable for injuries and damages caused by additionally to notify the authorities where an unsafe product has defective products? been marketed. Under the CPA 1987, a claimant may bring a claim against the pro- Criminal sanctions are imposed on producers who breach their ducer of the product, any person who has held himself or herself out duties under the GPSR 2005, which can include a fine of up to to be the producer by applying his or her own name to the product £20,000 and imprisonment of up to 12 months. www.gettingthedealthrough.com 61 ENGLAND & WALES Shook, Hardy & Bacon International LLP

(‘own branders’), and any person who imported the product into the The defence is not available to a producer once the risk becomes EU in order to supply it to others in the course of his or her business. known (or ought to be known) to the producer. A claim in negligence may be brought against any defendant from whom the claimant can show he or she was owed a duty of 30 Is it a defence that the product complied with mandatory (or care. This will normally include the manufacturer of the product. voluntary) standards or requirements with respect to the alleged A contract claim may only be brought against a defendant with defect? whom the claimant has a direct contractual relationship. This will normally be the party that supplied the product to the claimant Compliance with standards (whether mandatory or voluntary) does (who may or may not also be the manufacturer). not provide a defence to a claim brought under the CPA 1987, or in negligence or contract. Evidence of such compliance is likely how- ever to be influential in determining whether a product is defective 26 What is the standard by which causation between defect and or (in the case of a negligence claim) whether reasonable care was injury or damages must be established? Who bears the burden taken by the manufacturer. and may it be shifted to the opposing party? It is a defence to a claim under the CPA 1987 if the producer can The claimant bears the burden of proof to show, on the balance of show that the defect arose as a result of compliance with a manda- probabilities, that the defendant’s defective product caused the dam- tory legal requirement under English or European law. age in respect of which it is claiming. The simple ‘but for’ causation test has recently developed into 31 What other defences may be available to a product liability a more complex legal issue in a line of cases dealing with multi- defendant? ple potential causes of damage (eg, Fairchild v Glenhaven, Barker v Corus, Sienkiewicz v Greif (UK) Ltd), but it remains to be seen Other defences to claims made under the CPA 1987 include: whether these principles will be carried over to product liability • that the product was not supplied by the defendant; cases. • that the product was not supplied in the course of a business; and • that the defect did not exist at the time the product was supplied. 27 What post-sale duties may be imposed on potentially responsible parties and how might liability be imposed upon their breach? In negligence it is a defence if the defendant can show that the claim- Various post-sale obligations are imposed on producers by the ant freely and voluntarily assumed the risk of injury, in the full GPSR 2005. While parties will remain liable for damage caused knowledge of the nature and extent of the risk. by their defective products under the CPA 1987 and common law Allegations of contributory negligence may be raised to claims regimes described above, they may incur criminal sanctions (a fine of made both under the CPA 1987 and in negligence. up to £20,000 and 12 months’ imprisonment) for failure to comply with their obligations under the GPSR 2005, which include provid- 32 What appeals are available to the unsuccessful party in the trial ing warnings and information regarding risks posed by a product court? that are not obvious, taking appropriate measures (including recall if necessary) to ensure the continuing safety of consumers and notify- An unsuccessful party in a county court trial may appeal either to a ing the authorities where an unsafe product has been placed on the more senior judge in the county court or directly to the High Court, market. depending on the judge that heard the original trial. An appeal from a High Court trial must be made to the Court of Appeal. Decisions Limitations and defences in the Court of Appeal can ultimately be appealed to the Supreme Court (formerly the House of Lords), the court of last appeal in the 28 What are the applicable limitation periods? English judicial system. Claims in negligence or contract must be brought within six Appeals may be made on points of fact or law, although no new years of the accrual of the cause of action (or the date of knowledge evidence will normally be heard in an appeal hearing. Permission to of the claimant, if later), or within three years for personal injury appeal must be sought, either from the original trial court or from claims. Likewise, claims for defective products under the CPA 1987 the Appeal Court directly. The test for permission to appeal will be must be brought within three years of the accrual of the cause of whether the appeal has a real prospect of success. action (or the date of knowledge of the claimant, if later). The costs of the appeal will be awarded following the ‘loser The court has discretion to extend these periods and, in particu- pays’ costs rule, with the further possibility that any prior costs lar, has shown willingness to do so in personal injury actions where order made by the trial judge may be overturned in the event that the defendant has been unable to show that it would suffer any real the appeal is successful. prejudice from an extension of the three-year period. In addition, a claim that a product is defective must be brought Jurisdiction analysis within a long-stop date of 10 years from the date the product 33 Can you characterise the maturity of product liability law in terms was first put into circulation. In contrast to the limitation periods of its legal development and utilisation to redress perceived described above, the court has no discretion to extend the 10-year wrongs? long-stop period. Product liability law in England and Wales is a developed body of law, with strict liability imposed by the CPA 1987 and a comprehen- 29 Is it a defence to a product liability action that the product sive product safety regime provided by the GPSR 2005. Any limita- defect was not discoverable within the limitations of science and tions in access to redress for consumers lie primarily with funding technology at the time of distribution? If so, who bears the burden issues that affect the litigation culture in England and Wales gener- and what is the standard of proof? ally, not just those claims arising in product liability. The effect of The CPA 1987 provides a state-of-the-art defence to claims made the funding reforms introduced by LASPO 2012 on the volume of under the Act. The burden lies on the defendant to show that the claims will be seen over the coming years. defect was not discoverable in the light of the scientific and technical knowledge at the time the product was supplied.

62 Getting the Deal Through – Product Liability 2014 Shook, Hardy & Bacon International LLP ENGLAND & WALES

34 Have there been any recent noteworthy events or cases that have particularly shaped product liability law? Has there been Update and trends any change in the frequency or nature of product liability cases launched in the past 12 months? The most important recent development relating to product liability litigation in England and Wales has been the implementation of Restrictions on funding have meant that there have been few high- the reforms on civil justice costs, aimed at encouraging parties to profile product liability cases in England and Wales in recent years. conduct litigation in a more cost-effective manner, which came into However, as the funding environment continues to develop in the force on 1 April 2013 as discussed in this chapter. The true effect light of European and UK proposals on group actions, and with the of these reforms will be seen over the next few years. relaxation of the rules relating to third-party funding, it may be that claimants attempt to import recent developments in general personal injury and negligence law, such as medical monitoring claims, (see At present, the culture both in the UK and EU-wide is shifting the Johnston, Fairchild and Barker and Sienkiewicz cases referred to a greater emphasis on consumer protection via access to justice, to in questions 22 and 26) into the product liability arena. None and it may be that this is reflected in measures that will encourage of these issues has yet had any effect on the frequency or nature of greater use of product liability litigation to redress perceived wrongs product liability cases in England and Wales. in future years.

35 Describe the level of ‘consumerism’ in your country and 36 Describe any developments regarding ‘access to justice’ that consumers’ knowledge of, and propensity to use, product liability would make product liability more claimant-friendly. litigation to redress perceived wrongs. The Consumer Rights Bill, which proposes the creation of a new England and Wales has a relatively high level of ‘consumerism’ in limited opt-out collective action for competition law, was introduced comparison with other EU states, the Middle East, Africa and Asia, to the UK Parliament at the end of January 2014. The bill is cur- although a relatively low level of claims for personal injury damage rently being reviewed at the committee stage of the legislative pro- in comparison with the US. cess in the House of Commons. However, consumers in the UK are more likely to seek redress LASPO 2012 came into force on 1 April 2013 and has made via insurance, warranties, consumer organisations or ombudsman- significant changes to the litigation funding regime in England and type services than via litigation, owing both to the disincentives Wales. The introduction of QOCS will reduce the financial risk to provided by the funding and costs regime and a general cultural dis- the claimant. However, the removal of the possibility of recovering inclination towards litigation. success fees under CFAs and ATE insurance fees may prove to be a disincentive as claimants will have to pay these costs out of any damages awarded to them.

Simon Castley scastley @shb.com Jon Hudson

25 Cannon Street Tel: +44 20 7332 4500 London EC4M 5SE Fax: +44 20 7332 4600 United Kingdom www.shb.com

www.gettingthedealthrough.com 63 FRANCE EBA Endrös-Baum Associés France

Florian Endrös EBA Endrös-Baum Associés

Civil litigation system President of the Court (the President) and without any preliminary proceeding. 1 What is the structure of the civil court system? The parties involved have a strong influence on the proceedings The first instance civil courts consist of local ’ courts for and play a decisive role: minor litigation for claims up to the value of €10,000 and the dis- • they initiate the proceedings (section 1 CPC); trict courts for claims of more than €10,000. In addition to these • they may suspend or terminate the case (section 1 CPC); general jurisdictions, there are specialised jurisdictions whose com- • they determine the subject matter of the proceedings (section 4 petences are limited by the , including the commercial CPC, the rule of the ‘irreversibility of the subject matter’ of the courts and the labour courts. The persons in charge of deciding proceedings); and cases in these two jurisdictions are not professional judges; rather, • it rests with them to submit evidence (sections 6 and 9 CPC). they are judges elected by their peers. Merchants registered with the French Commercial Register are elected for the commercial courts, Juries are not used in civil proceedings. while employers and employees are elected for the Labour Relations Board. 3 What are the basic pleadings filed with the court to institute, The majority of cases tried in the first instance may be decided prosecute and defend the product liability action and what is the again by a new jurisdiction (court of appeal) (except cases judged ‘in sequence and timing for filing them? the first and last instance’, which are only subject to review proceed- ings on matters of law at the Court of Cassation (Supreme Court)). There are some differences between the procedure before the regular The court of appeal is responsible for retrying the entire case on superior courts and the commercial courts. matters of fact and law, thus offering each party the possibility that its case may be tried a second time. Prior expert opinion A final extraordinary appeal lies to the Court of Cassation for In the context of civil liability for defective products, requesting an district court decisions of first and last instance or decisions of the expert opinion to establish the accuracy of the facts prior to the pro- court of appeal. The Court of Cassation solely evaluates the law, ceedings in the main action is recommended and common practice. and verifies whether lower courts observed law and procedure. The The expert opinion will play an important role in the proceedings Court of Cassation may annul the judgment if the procedural rules in the main action. In cases of extreme time pressure, it is possible were breached or if the law was improperly applied. to request the President’s authorisation to obtain the determination of an expert at a fixed date. The procedure ends with the filing of a report that will be used in the main action. The value of proof 2 What is the role of the judge in civil proceedings and what is the of such an expert opinion is very high; in practice, it is very dif- role of the jury? ficult to challenge the expert opinion after the end of the expertise In general, civil proceedings are adversarial, although the power proceeding. granted to judges has increased over time. Judges in civil court play the role of impartial arbitrators who listen and judge the case. In Summons the 1960s, judges responsible for the preliminary proceedings were The summons to appear in court is served (through a bailiff) by the introduced. These judges watch over and ensure the progress of pro- plaintiff on the defendant. The summons must include a chronologi- ceedings, may summon the parties and rule on a case after a thor- cal summary and description of the facts on which the allegations ough evaluation of the claims asserted by each party. are based and the objective of the claim. A summons to appear in the Judges also: commercial court specifies a fixed date, while a summons to appear • may grant extensions (section 3 of the French Civil Process in the superior court does not; parties appearing before the superior Order (CPC)); court must be represented by a lawyer, so the defendant is granted • judge the case solely on the facts provided by the parties; a period to engage a lawyer, which may not be less than a fortnight. • precisely assess the subject matter (section 12-2 CPC); and • make decisions in compliance with the legal provisions and not Proceedings in the main action according to his or her discretion (section 12-2 CPC). The main objective of the first-instance hearing is to ensure that both sides are heard. The judge also has to ensure that both parties are The judge’s role during preliminary proceedings has been codified represented by a lawyer (should this be obligatory) and that the par- in 760-781 CPC. However, the intervention of judges responsible ties exchange statements and documents. Parties are not obliged to for preliminary proceedings is limited to the most complex cases; attend hearings if they are represented by their lawyers. This pro- summary proceedings are opened following a brief review by the cedure, from the request of an expert opinion until the date the President fixes for the pleadings in the main action, may take from three to seven years.

64 Getting the Deal Through – Product Liability 2014 EBA Endrös-Baum Associés FRANCE

4 Are there any pre-filing requirements that must be satisfied before 7 Are there class, group or other collective action mechanisms a formal law suit may be commenced by the product liability available to product liability claimants? Can such actions be claimant? brought by representative bodies? French law does not specify such pre-filing requirements. In March 2014, a new law called the Hamon Law introduced a type of class action in French law. This collective action aims at obtaining the compensation of individual and patrimonial damages resulting 5 Are mechanisms available to the parties to seek resolution of a from material damage suffered by several consumers placed in an case before a full hearing on the merits? identical or similar situation and having incurred damage as a result Mechanisms such as a motion to dismiss or a motion for summary of a contractual or legal breach by one or more same professionals. judgment do not exist in French law. The only possible way for the This action only concerns the damages resulting from the sales of parties to seek a resolution of the case before a full hearing on the goods, service supply or anti-competitive practice. This new type of merits is codified in the CPC section 384 et seq, and provides either action is reserved for consumers who are defined in the new law as a withdrawing of the plaintiff’s claim (that must be accepted by the ‘any who is acting for purposes which are outside his defendant) or the defendant’s acquiescence in the claim. Further, or her trade, business, craft or profession’. such a mechanism does not entail a resolution of the case, but a The consumers, however, cannot bring the action themselves: resolution of the proceeding. only the representative consumers association can file this type of In any event, the resolution may not be sought on grounds such action. The associations have to be representative at national level as the lack of jurisdiction over the person, or the failure of the plain- and approved under article L441.1 of the French consumer code. tiff to allege requisite elements of the cause of the action. Only 16 associations are approved under this article as having the authority to file a collective action. 6 What is the basic trial structure? Two types of proceedings for this collective action are foreseen by legislation. Parties must submit evidence to support their claims so that the The ordinary procedure is close to the opt-in procedure. It judge is able, after ensuring that each piece of evidence has been requires an active approach on the part of the consumer, who has to assessed, to decide the case. In this context the brief containing the take the initiative to join a consumer group identified by the judge as pleadings is a decisive factor. The judge relies on this brief to evalu- the group against which the professional is liable. The judge estab- ate the allegations of the parties, and to base his or her decision. The lishes the prerequisites to join the group and the time limit to do so. brief contains all the documents specified in the summons; a set of all This deadline has to be between two and six months from the infor- procedural actions (eg, summons, submissions, previous decisions mation measures. The judge decides which measures should be taken made in the same case); and, as the case may be, copies of the juris- to inform the consumers of the decision. The information measures prudence and the doctrine, which were cited in the briefs. can only be taken once the judgment is no longer subject to a further The brief containing the pleadings is transmitted to the other appeal. During this time, the professionals presumed to be liable will party, who shall be informed about the documents the brief contains not know how many people they will have to indemnify. as well as the legal arguments made. The judge is not informed in The other proceeding is called the simplified procedure and is advance about the documents in the brief, which is handed over to close to the opt-out system. The judge will make a statement on the the judge at the end of the pleadings. However, it should be noted professional’s liability and order it to indemnify, directly and individ- that the commercial court and the superior court in Paris request ually, the consumers whose identity and number are known without the parties to provide them with the brief containing the pleadings any active approach of those consumers. In this procedure, there several days before the hearing, so that they are able to examine is no time limit for the consumer to accept the compensation. This them in advance. procedure is relevant for cases where the company liable has a client Forms of litigation are differentiated between the summary trials file, such as matters concerning insurance or mobile phone contracts. and complex cases). In the summary procedure, the President (fol- Taking into account the fact that many companies have client files, lowing his or her conference) will fix a date for the first hearing if the simplified procedure is likely to be widely implemented. the case can be judged immediately or in the near future. In complex As this law is still very recent, it means we will have to wait cases, the President will postpone the matter to his or her next con- for case-law examples to measure its impact. Further, some ference and grant the lawyers time to inform each other about their should take place in the coming month to specify the law application. documents and exchange their submissions. The President oversees the timetable for the claim and has no judicial powers. In complex proceedings, the case is sent back to the judge 8 How long does it typically take a product liability action to get to responsible for the preliminary proceedings. Several hearings then the trial stage and what is the duration of a trial? take place during which the judge examines possibilities for concili- The preliminary procedure to gather evidence for the product lia- ation and oversees the preliminary proceedings. bility claim can take from two to six years. The first judgment of One peculiarity of French law is the very weak evidentiary value proceedings in the main action, from the summons until the pro- that is ascribed to the evidence provided by witnesses. The judge nouncing of the judgment, can take two to three years. primarily bases his or her decision on written and not on verbal If an appeal against the decision in the first instance is filed, the statements. Even if the testimony is included in a brief, the judge still average time is approximately two years until the court of appeal ascribes a weak evidentiary value to it. renders its judgment. Decisions of the Court of Cassation take Parties are not obliged to provide the court with all relevant approximately two years. documents on the matter, and lawyers are even liable professionally if they provide documents to the court or the other party that would Evidentiary issues and damages disadvantage their client. 9 What is the nature and extent of pretrial preservation and disclosure of documents and other evidence? Are there any avenues for pretrial discovery? Parties may resort to a preliminary injunction to clarify the facts and also to preserve evidence. In urgent cases the President may (ruling in terms of a preliminary injunction) decree any measures www.gettingthedealthrough.com 65 FRANCE EBA Endrös-Baum Associés as long as they are not seriously contested by the parties or are person whose opinions can enlighten them. The judge will designate unlikely to become the subject of a dispute. The President can order experts based on their: an expert opinion ex officio or at the parties’ request. This expert • professional qualifications; opinion allows any of the parties to take an additional legal action. • competence in resolving technical questions; According to the law it is sufficient that, prior to any proceedings, • moral qualities (objectivity, impartiality); and there is a legitimate reason to preserve or to establish any proof of • intellectual qualities (clarity, diligence). facts on which the outcome of the lawsuit depends, if a party wishes a preliminary injunction. Since 1975, an expert need no longer be a French national. However, This expert opinion can be ordered if the President decides that certain restrictions remain with respect to the person (who must be he or she is not sufficiently informed and needs the opinion of a free of convictions) and with respect to the expert’s profession (for technician ex ante, or the plaintiff may request it in the main action example, bailiffs, judges or are ineligible). prior to any litigation. A list of domestic experts created by the office of the court of The expert is designated by a court order made in the course of appeal and the office of each superior court is at the disposal of the preliminary injunction; the content of the court order will define judges. However, the judge is free to choose experts that are not the expert’s role. In general, the experts will comment on the urgency named on these lists. of the situation; the risk of deterioration of evidence; or the need Parties cannot influence the choice of the expert, but can object to collect more information that the plaintiff might need to file an to appointments under section 234 of the CPC before the judge who action in the future. The urgency does not change the general con- appointed the expert. Should the judge accept the objection, he or tradictory character of this expert opinion, which must be based on she will choose a replacement. The reasons for objection to a judge the opinion of the parties (this is different from the expert opinion (which are likewise applicable in the case of an expert) are listed in on request, which by definition is non-contradictory). section 341 CPC. Experts may collect oral or written information from any per- It should be noted that besides judicial expert opinions (requested son pursuant to section 242 CPC. They may also request the judge’s by a judge) and amicable expert opinions (accepted by the parties support should he or she intend to question a third party refusing to out of court), there remains expert opinion provided by a party- provide requested information; the judge may order the third party, appointed experts. The party is entirely free to resort to such expert under threat of a penalty, to provide the expert with the requested opinion, but it must bear that expert’s fees. This expert opinion may information. be introduced into the procedure, just like any other document, but Parties are not obliged to provide the expert with documents must have been discussed with the other party. that would be of disadvantage for them, and lawyers should be The opinion of the court-appointed expert is, in practice, extremely careful when providing the expert with evidence on which predominant. the latter will base his or her report as lawyers can be held responsi- ble if they hand over any documents that would disadvantage their 12 What types of compensatory damages are available to product client. liability claimants and what limitations (if any) apply? There are some differences between the general law and the special 10 How is evidence presented in the courtroom and how is the provisions stipulated in sections 1386-2 of the French Civil Code evidence cross-examined by the opposing party? (the Civil Code). As outlined in question 6, testimony provided by witnesses has virtually no evidentiary value before the French courts. In cases of General law civil liability for defective products, the expert is very influential. Liability pursuant to the liability law (sections 1384 et seq of the Although the judge should not be bound by it, the content of the French Civil Code): the damage (proprietary or non-proprietary) expert opinion will largely govern the discussions. may be of any kind without any exceptions. This includes loss of Besides this expert opinion, each party must provide the evi- profit, loss of image and loss of opportunity. dence for its allegations. Evidence must comply with certain formali- Contractual liability (sections 1641 et seq of the Civil Code): ties, for the court to be able to consider it. Parties may use bailiffs to both the seller and manufacturer are bound to deliver a compliant prove that a certain situation existed, preserve the proof regarding a good that is free from defects and have an obligation to inform. consequential damage or even inspect the damage location and take Both material and moral damages can be claimed. This includes all pictures of the damages. pure economic loss such as loss of profit, loss of image and loss of Bailiffs may visit a third party’s premises to take a statement chances. if the third party has agreed to it explicitly. The bailiff may only In order to recover damages, the purchaser must prove that the intervene at the opposing party’s premises with the prior consent defect existed prior to the sale. of a judge, in the form of an official order made upon request by the interested party. This official order fixes the exact mission of the Special provisions of section 1386-2 of the Civil Code bailiff in accordance with the request. This procedure permits the ‘The provisions of this Title shall apply to damage resulting from bailiff to prepare a report even without the permission of the owner an injury to the person or to a property other than the defective of the premises. Thus, this is a non-contradictory procedure that can product.’ be very efficient in the case of an upcoming litigation, especially to motivate the parties to start negotiations immediately to avoid the Under the provisions of section 1386-2 of the Civil Code, all dam- procedural costs. ages (proprietary or non-proprietary) deriving from personal injury must be recompensed. The recovery of damages to property is simi- larly possible, irrespective of the use of the property (namely, pri- 11 May the court appoint experts? May the parties influence the vate or professional). As such, economic damages, such as a business appointment and may they present the evidence of experts they interruption, may be recompensed a priori. selected? There is one restriction: section 1386-2(2) of the Civil Code stip- In civil proceedings, the President may freely choose which experts ulates that damage to the product itself does not trigger any compen- to nominate; section 232 CPC stipulates that judges may choose any sation, while European law obliges domestic legislation to stipulate a threshold. Therefore, section 1386-2 specifies that the damages

66 Getting the Deal Through – Product Liability 2014 EBA Endrös-Baum Associés FRANCE have to exceed the amount provided by a separate regulation. This These expenses are solely those incurred in connection with the regulation, dated 11 February 2005, fixes this amount at €500. services of the judicial institutions and do not include all the costs incurred during the proceedings (for example, lawyer’s fees, travel- ling expenses). The legislator relies on the equitable discretion of the 13 Are punitive, exemplary, moral or other non-compensatory judge (section 700 CPC) to determine the party that has to cover damages available to product liability claimants? these costs. Since such discretion is variable, the judge may decide The French system does not provide for punitive damages since the that the winning party must partly bear the extrajudicial costs of the legislator refuses to acknowledge the possibility for legal entities to losing party (or the other way round), or that each party has to bear be subject to a ‘penalty’ under civil law. In practice, however, the the expenses it incurred in connection with the proceedings. judge can, when evaluating the damage, consider the indemnifica- tion with respect to the victim’s loss of image or reputation. Thus, Sources of law the judge evaluating the dimension of the damages may increase the amount to be paid in damages and, as a side effect, is free to penalise 18 Is there a statute that governs product liability litigation? unacceptable business behaviour. The statutory provisions governing product liability are found in section 1386-1 et seq of the Civil Code, adopted by the statute on Litigation funding, fees and costs 19 May 1998 (which implemented Directive No. 85/374 of 25 July 1985). This law introduced the strict liability of the producer, which 14 Is public funding such as legal aid available? If so, may potential is likewise applicable in the case of a claim ex contractu or ex delicto. defendants make submissions or otherwise contest the grant of Pursuant to this, the victim must prove the existence of a defect and such aid? a causal connection between the default and the incurred damages. The state provides legal aid to persons with insufficient funds to pro- Section 1386-18 of the Civil Code leaves the decision regarding tect their rights at court. This financial aid is variable and depends the basis for claim to the victim who may choose to rely on several on the income of the requesting party. Aid is directly transferred to bases for claim, under the condition that the victim respects the gen- the legal professional (for example, lawyer, bailiff) who will assist eral principle of non-accumulation between contractual and tortious the party during the trial. A request may be made before either the liability. However, the provision of sections 1386-1 et seq of the Civil judiciary or the administrative jurisdiction and the aid will (entirely Code do not apply to those products brought into circulation prior or partly) cover the lawyer’s fees, the bailiff’s fees and even the costs to 1998, to which only the provisions of the general law are applica- for an expert opinion. ble (contractual or tortious liability). Both French nationals and foreign nationals (under certain The victim also has the right to base its claim against the seller conditions) may request financial aid, and aid may be granted to or producer on regular contractual liability (section 1147 and sec- individuals and to non-profit legal entities. However, aid is refused tion 1641 et seq of the Civil Code). French jurisprudence considers should the requesting party have legal protection insurance covering that the contractual action is transmitted as an attachment to the the costs of the proceedings or the transaction. product to the different buyers. The end user is entitled, according Should the beneficiary lose the proceedings or have to bear the to French internal law, to act against each distributor in the distribu- costs, he or she also has to pay his or her adversary’s costs, except tion chain as well as against the producer directly (Cass ass plén 7 for the adversary’s lawyer’s fee (unless the court decides otherwise). February 1986). Should the beneficiary win the case and his or her financial resources A limit has, however, been established concerning the non- increase, the state may request him or her to reimburse the financial homogeneous chains of contracts, especially for outsourcing. aid. Without contractual links between the owner and the outsourcer, Legal aid may only be cancelled in two cases: if the beneficiary the action is necessarily a tort action, according to the general princi- has obtained it through a false declaration or has acquired sufficient ple of contract relativity (Cass ass plén 12 July 1991). Nevertheless, money during the proceedings. Section 71 of the French Regulation it has been judged that even if the claim is based on a tort action, a dated 19 December 1991 stipulates that this clawback may be contractual breach can be claimed since a damage was caused (Cass requested ex officio or by any interested party, in particular by the ass plén 6 October 2006). adversarial party or by the lawyer.

19 What other theories of liability are available to product liability 15 Is third-party litigation funding permissible? claimants? The use of third-party capital to fund litigation is not permitted in It is necessary to draw a distinction between the theories stipulated by France. Section 11.3 of the National Domestic Regulation stipulates the legislator and those that have been elaborated by jurisprudence. inter alia that lawyers may solely receive their fees from their client or a representative of the latter. Therefore, the French bar is very Contractual liability pursuant to section 1641 et seq of the Civil reluctant regarding a payment by a third party, and recourse to pri- Code vate funds to support proceedings is not explicitly permitted, either This right may solely be applied in a contractual context, therefore by law or by constant practice. the victim must be a contracting party with respect to the person it makes charges against (manufacturer, producer or seller). The victim 16 Are contingency or conditional fee arrangements permissible? must produce proof of the latent defect, proof that the defect existed before the purchase and proof of the causal connection between the Professional ethics bar lawyers from entering into ‘no win, no fee’ default and the incurred damages. Nevertheless, the claimant is enti- arrangements with clients. tled to base its claim on a different section (for example, section 1384 or section 1386-1 et seq of the Civil Code); however, it has to 17 Can the successful party recover its legal fees and expenses from respect the general principle of non-accumulation between contrac- the unsuccessful party? tual and tortious liability. Each party generally must bear the incurred expenses (eg, bailiff’s fees and fees for an expert opinion) as defined in section 695 CPC. Liability in tort pursuant to section 1384 of the Civil Code However, the judge may decide to oblige the other party to bear These provisions derive from the general law (general liability these costs. regarding property). Should this provision be applied, the liable www.gettingthedealthrough.com 67 FRANCE EBA Endrös-Baum Associés person is the one who had ‘the possibilities to use, to direct and to defective product. The provisions oblige everybody (manufac- control’ (Cass Ch Réunies, 2 December 1941, Franck) the property turers as well as distributors) to immediately stop the sale of the at the moment the damage occurred. Even if the victim claims the product that appears to be defective and to carry out the neces- manufacturer’s liability since the product was in its custody, the vic- sary measures to recall the defective product; tim still has to prove the structural defect of the product. Thus, if the • criminal assaults: section 221-6 of the Penal Code establishes reason for the damage cannot be determined, a priori the manufac- several unintentional elements of a crime in cases of injury to turer’s liability does not come into consideration. However, should the life, body or health of a person (for example, bringing toxic a doubt remain with respect to the origin of the damage, the juris- comestible goods into circulation); prudence tends to presume that the damage can be attributed to the • fraud: section L213-1 of the French consumer protection statute structure of the product. generally imposes liability on sellers who try to mislead their contracting partner with respect to the qualities and risks of the Jurisprudence product; and Victims basing their claim on the guarantee of latent defects may • misleading advertising: any seller who does not provide its cli- refer to the manufacturer’s failure to observe its duty of care in ents with products complying with the offer for sale it advertised accordance with section 1147 of the Civil Code. This duty obliges exposes itself to the penalties set forth in sections L121-1 of the manufacturers and sellers to provide ‘products that are compliant French consumer protection statute. with the security one may legitimately expect’ (Cass 1st civ, 3 March 1998). The criminal assault can concern the company itself and not only In a contractual context, the jurisprudence has provided the the physical person. purchaser who suffered damage in connection with the purchased product with the possibility to refer to the supplier’s failure to com- 22 Are any novel theories available or emerging for product liability ply with its duty to inform. Thus, it has become obligatory for the claimants? supplier to provide such information (for example, by providing a note). This duty to inform also applies to products that are harmless Such a framework exists with respect to buildings under construc- (Cass 2nd civ, 27 April 1977), but will be applied more strictly as the tion. Section 1792-4 of the Civil Code imposes a warranty on the possibility of danger arising from a product increases (Cass Com, 3 manufacturer if it has provided a work, a part of a work or an ele- January 1977). ment of equipment designed and produced for meeting precise and predetermined requirements when in working order. To hold the manufacturer liable, it is necessary that the hiring 20 Is there a consumer protection statute that provides remedies, party made use of the work without modification and in compliance imposes duties or otherwise affects product liability litigants? with the directions of the manufacturer. The manufacturer must have Section L221-1 of the French consumer protection statute obliges clearly enunciated the operation instructions and the characteristics businesses to observe a general duty of care regarding products and of the product. (The term ‘manufacturer’ also applies to persons services: ‘products and services must, under normal conditions of importing a work, a part of a work or an accessory part produced use or under other conditions of use generally foreseeable by a pro- abroad, and those who offer the product as their own work by sell- fessional, comply with the safety requirements one may legitimately ing it under their name, their brand or any other distinctive feature.) expect and must not be hazardous to anyone’s health’. Further, manufacturers may be held responsible on the grounds of Section L221-1-2 obliges the responsible business that brings a the general law concerning the sale (eg, guarantee regarding latent product into circulation to provide the consumer with the neces- defects, application for an exemption and additional duty to provide sary information to assess the inherent risk of the product if these a caution notice). risks are not perceptible at the moment of purchase. Further, it must The subcontractor’s liability is different from the manufacturer’s; adopt the necessary measures to keep the consumer informed of the its liability can only be based on sections 1386-1 of the Civil Code. inherent risks of the product and to take the necessary actions to control the risks (for example, recall the product, warn consumers). 23 What breaches of duties or other theories can be used to Section L221-1-3 specifies that if a business is aware that its establish product defect? product is not in compliance with the requirements set forth in section L221-1 of the French consumer protection statute, it must The defendant may be confronted with various breaches of duty: inform the competent administrative institutions and specify the • breach of the manufacturer’s or seller’s duty to inform; measures it intends to take to avoid risks for consumers. This is a • where the product does not comply with the stipulations of the duty to inform which is applicable if a risk appears after the product agreement; was brought into circulation. • in cases of latent defect, if it can be proved that the defect existed before the purchase of the product; and • if the product does not comply with the safety standards one 21 Can criminal sanctions be imposed for the sale or distribution of can lawfully expect (however, if the product was delivered with defective products? a notice expressing a warning with respect to the handling of the The victim may claim ascertainment of the liability under criminal product and providing precautions to be taken, this argument law for the manufacturer, the producer or the seller of the defec- does not apply). tive product. This parallel criminal claim can be based on several reasons: 24 By what standards may a product be deemed defective and who • the criminal offence of endangering a third party: section 121-3 bears the burden of proof? May that burden be shifted to the of the French Penal Code establishes a criminal liability should opposing party? What is the standard of proof? a person deliberately endanger any third party. It applies in the case of any producer bringing a product into circulation that Lack of safety: defined in Regulation No. 85/374 dated 25 July 1985 it knows to be defective or that it does not retrieve from the and implemented in section 1386-4 of the Civil Code, ‘[a] product is market after the defect has emerged. It likewise applies in the defective within the meaning of this Title where it does not provide case of a failure to act or imprudence or negligence on the part the safety which a person is entitled to expect’. The victim bears the of a party that might have contributed to the distribution of the burden of proof pursuant to section 1386-9 of the Civil Code; it

68 Getting the Deal Through – Product Liability 2014 EBA Endrös-Baum Associés FRANCE must prove that the product emerged as atypically dangerous. The putting their name, trademark or other distinguishing feature on the manufacturer may discharge itself by proving that the defect did not product, and those who import a product into the European Union exist when the product was put into circulation. In addition, the for sale, hire (with or without a promise of sale) or any other form of danger emerging from the product itself does not allow the conclu- distribution. The following are considered to be producers: sion that the product is defective (eg, tobacco). However, the judge • manufacturers of industrial products; will not hesitate to base his or her decision on a presumption of facts • companies providing power supplies; (section 1353 of the Civil Code) to assume an existing defect; this • farmers; and procedure facilitates the victim’s burden of proof. • subcontractors.

Lack of conformity This provision can be construed extensively and thus includes the This applies when the delivered product does not comply with the suppliers as provided under section 1386-7 of the Civil Code. In the characteristics of the product that were stipulated in the agreement. (hypothetical) case that the manufacturer cannot be identified, it is The purchaser bears the burden of proof. stipulated that the seller or the hirer are liable for the lack of safety of a product, unless they identify the supplier or the producer within Latent defect three months beginning with the reception of the request regarding This applies when the product is unfit for the use for which it was the victim’s claim. intended (section 1641 of the Civil Code). This is often an inner defect of the product (for example, a manufacturing defect in a 26 What is the standard by which causation between defect and machine). Since the defect is not visible, the victim bearing the bur- injury or damages must be established? Who bears the burden den of proof has to prove it by means of inspection. In the case of and may it be shifted to the opposing party? damage due to an unknown reason, it is assumed that the product that is the origin of the damage is necessarily flawed (Cass 2nd civ, The purchaser bears the burden of proof regarding the causal rela- 2 December 1992). tionship between defect and damage. This onus of proof cannot be reversed. Duty to inform This is a collateral obligation of the seller. The jurisprudence of the 27 What post-sale duties may be imposed on potentially responsible Court of Cassation obliges the manufacturer or seller to provide the parties and how might liability be imposed upon their breach? proof that they have discharged their duty to inform. Therefore, the As described in question 20, sections L221-1-2 and L221-1-3 of manufacturer has to produce an instruction label as well as a warn- the French consumer protection statute stipulate such an obligation ing regarding the dangers of the product. once the sale has been effected (for example, recall from the market, information provided to customers and the competent administra- Safety obligation tive institutions). The manufacturer must deliver a product free from defects and ful- fil its safety obligation. Thus, in the case of a defect, its liability is Limitations and defences assumed. However, the safety obligation is not unlimited; it is lim- ited to the delivery of the products that, used in compliance with 28 What are the applicable limitation periods? the recommendations provided by the distributor, do not normally present any danger when used. General law Section 1384 of the Civil Code sets out liability for damage or Contractual context Latent defects: pursuant to section 1648 of the Civil Code, the victim injury caused by objects in one’s care. Should damage be caused by must file an action within two years of the detection of the defect. objects, the person who has these in his or her custody is responsible Failure to observe the duty of care: the victim must file an action for the damage. The victim bears the burden of proof. within five years. This period extends to 10 years (beginning on the date the damage healed at the best) in the case of an assumed bodily 25 Who may be found liable for injuries and damages caused by harm (section 2226 of the Civil Code). defective products? Failure to observe duty of care: the victim must file an action Distinctions have to be drawn between general and specific legisla- within five years (limitation period set forth by general law), unless tion in this regard. a bodily harm can be assumed, in which case within a period of 10 years (section 2226 of the Civil Code). General law (sections 1641 et seq and 1384 Civil Code) French jurisprudence construes these notions extensively and holds Tortious context all businesses that intervened at any time (namely, from the design With respect to claims based on section 1384 of the Civil Code, the and development of the product, through to the bringing of the period is five years (general law); the period begins at the moment product into circulation, until the retail sale) liable for defective the victim becomes aware of the defect (section 2224 of the Civil products. Thus, it concerns the following parties: Code). • manufacturers; • producers; Special provision pursuant to section 1386-17 of the Civil Code • suppliers; An action for the recovery of damages based on the provisions of • importers; the title is time-barred after a period of three years from the date on • distributors; and which the claimant knew or ought to have known the damage, the • retailers. defect and the identity of the producer. Should the defective product have been brought into circulation prior to the entry into force of Special law (sections 1386-1 et seq of the Civil Code) the Act dated 19 May 1998, the period during which the victim may While the producer is the principal, section 1386-6 of the Civil file an action against the seller begins with the purchase (Com, 24 Code also catches those who present themselves as the producer by January 2006).

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29 Is it a defence to a product liability action that the product 32 What appeals are available to the unsuccessful party in the trial defect was not discoverable within the limitations of science and court? technology at the time of distribution? If so, who bears the burden Before civil jurisdictions: the party wishing to lodge an appeal against and what is the standard of proof? a judgment rendered in the first instance may do so within a period In order to release itself from liability, the producer may refer to the of one month beginning with the announcement of the judgment. argument that the product defect was not discoverable within the Before criminal jurisdictions: the appeal has to be lodged within limitations of science and technology at the time it put the product 10 days beginning with the announcement of the judgment (section into circulation (article 1386-11 No. 4 of the Civil Code). The pro- 498 CCP). ducer bears the burden of proof. In this case of appeal, the civil claim and the criminal matter will Nevertheless, a special provision stipulated in section 1386-12 be re-examined by the court of appeal. of the Civil Code applies in the case of exoneration; where dam- age was caused by an element of the human body or by products Jurisdiction analysis thereof, a producer may not invoke the exonerating circumstance provided for. 33 Can you characterise the maturity of product liability law in terms In the context of a guarantee of latent defects (general law), the of its legal development and utilisation to redress perceived risk that the defect develops in the course of time does not allow the wrongs? seller or the manufacturer to escape liability (Cass 3rd civ, 17 July The French product liability law was introduced into the Civil Code 1972). by the Law of 19 May 1998, which transposes the European direc- tive into national law. French product liability creates a high risk for the seller, manu- 30 Is it a defence that the product complied with mandatory (or facturer of goods or the construction company, especially because voluntary) standards or requirements with respect to the alleged this liability is not conditional on the proof of a fault. More and defect? more, judges consider that a company can easily manage the risk The producer may refer to the argument that the defect is caused with appropriate insurance coverage. This coverage is very impor- by the product being in compliance with mandatory provisions of tant, especially for financial damages. statutes or regulations; this is a proper defence in the context of The scope of the law of 19 May 1998 allows the compensa- product liability based on defective products (section 1386-1 et seq tion for personal injury and material damages as mentioned above. of the Civil Code). This is stipulated in section 1386-11 No. 5 of the Consequently, regarding liability, this law is commonly used each Civil Code. time a product is involved in the damage. However, this reason for exoneration must be counterbal- Apart from these considerations, the special product liability law anced by section 1386-10 of the Civil Code, which stipulates that does not entitle to punitive damages or contingency fees, which still ‘a producer may be liable for a defect although the product was do not exist in French law. manufactured in accordance with the rules of the trade or of exist- ing standards or although it was the subject of an administrative authorisation’. Therefore, the judge decides the question. 34 Have there been any recent noteworthy events or cases that have particularly shaped product liability law? Has there been any change in the frequency or nature of product liability cases 31 What other defences may be available to a product liability launched in the past 12 months? defendant? French product liability law continues to become more and more The producer may refer to the argument that the defect is caused strict for the seller or the producer or both, even if some recent deci- by the product being in compliance with mandatory provisions of sions underline some very important basics. statutes or regulations; this is a proper defence in the context of In an interesting decision from 2010, the Supreme Court pointed product liability based on defective products (section 1386-1 et seq out that the claimant has to prove the concrete defect of the product; of the Civil Code). This is stipulated in section 1386-11 No. 5 of the it is not sufficient that the product was implicated in the accident. To Civil Code. qualify the product as defective, the judge must be able, based on the However, this reason for exoneration must be counterbal- evidence as an expert report, to exclude alternative technical causes anced by section 1386-10 of the Civil Code, which stipulates that (Cass 2 civ 4 February 2010, No. 08-70373). ‘a producer may be liable for a defect although the product was manufactured in accordance with the rules of the trade or of exist- ing standards or although it was the subject of an administrative authorisation’. Therefore, the judge decides the question.

Florian Endrös [email protected]

63, rue de Varenne Tel: +33 1 53 85 81 81 75007 Paris Fax: +33 1 53 85 81 80 France www.eba-avocats.com

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35 Describe the level of ‘consumerism’ in your country and 36 Describe any developments regarding ‘access to justice’ that consumers’ knowledge of, and propensity to use, product liability would make product liability more claimant-friendly. litigation to redress perceived wrongs. As explained in question 7, a new law on collective actions has been The level of consumerism in France is quite high and consumers are passed. In the simplified procedure, no active approach is required well-informed about their rights. Very often, claims are filed from on the part of the consumers in order to be indemnified. In theory, the insurance company of the consumer to seek redress against the this type of procedure is claimant-friendly insofar as the consumers manufacturer or seller of the presumed defective product. In the case do not have to join a group, being listed in a client file is sufficient of an accident, the victim and its insurance company quite auto- to be indemnified if the professional is recognised liable. However, matically sue all producers and suppliers of components when the to date, there is no case law to confirm the consequences of this new amount of the claim justifies the action. law and the proceedings introduced by it. This ‘reflex’ to start a proceeding is not restricted to consumers; it is the ‘normal’ French reaction to any event, even between busi- ness partners or in the industrial field. The incidence of this kind of proceeding is increasing, especially in this period of economic crisis, when it seems easier to the claimant to earn money by legal actions than by its normal business.

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Simon Wagner Carroll Burdick McDonough LLP

Civil litigation system the courtroom, particularly with regard to proposing amicable solu- tions of the dispute. 1 What is the structure of the civil court system? The courts of regular civil jurisdiction are the local courts, regional courts, higher regional courts and the Federal Supreme Court 3 What are the basic pleadings filed with the court to institute, (BGH). The local courts and regional courts have jurisdiction as the prosecute and defend the product liability action and what is the courts of first instance. The regional courts generally have jurisdic- sequence and timing for filing them? tion to hear cases in which the value of the dispute exceeds €5,000; Civil proceedings are initiated by filing a formal complaint with the below that threshold, local courts have jurisdiction. court. The court has two options: it can initiate a preliminary hear- In the second instance, regional courts and the higher regional ing in order to discuss the case with the parties and to conduct set- courts have jurisdiction. Judgments rendered by the local courts in tlement negotiations. If the dispute is not settled during this initial the first instance can be appealed at the regional courts. The higher hearing, an exchange of briefs and, finally, another hearing takes regional courts hear appeals against judgments of first instance rul- place in which evidence will be taken. Alternatively, the court can ings of the regional courts located in its respective circuits. order an exchange of briefs without an initial hearing in order to The Federal Supreme Court is the highest appellate court and, as enable the parties to thoroughly prepare the factual and legal issues such, reviews and decides on appellate rulings issued by the regional of the case. After that exchange, a single comprehensive hearing on courts or the higher regional courts, or both. the merits takes place in which the court will take evidence. After having decided how to proceed, the court serves its deci- sion together with the complaint on the defendant. If an early initial 2 What is the role of the judge in civil proceedings and what is the hearing takes place, the summons is served together with the com- role of the jury? plaint and the defendant must respond usually within two weeks. In Germany, civil matters are not tried by a jury. If an exchange of briefs is ordered, the complaint is served upon Most civil cases are heard and decided by professional judges. the defendant and the defendant is requested to notify the court They either sit alone (almost always in local courts with very rare whether he or she intends to defend the action. At the same time, the statutory exceptions and in regional courts and higher regional defendant is given a minimum time limit of two additional weeks to courts when the case is neither factually nor legally difficult) or, respond to the complaint in writing. The latter may be extended at before the regional and higher regional courts, sit in chambers con- the defendant’s request (usually two to six weeks). Upon receiving sisting of three professional judges. In some cases, however, a dispute the defendant’s response, it will be forwarded to the plaintiff, who before a regional court can be transferred to a special chamber for may comment on this brief in a statement of reply (usually within commercial matters of this court on motion of one of the parties. two to six weeks). Upon receiving the reply, in most cases, the court The special chamber consists of a professional judge presiding and will set a hearing date for the taking of evidence. However, it may of two ‘lay judges’ who are usually businessmen. also be possible that, prior to setting a hearing date, the court will A judge is not allowed to investigate a case or to establish the provide further instructions or obtain an expert opinion. facts and circumstances of a case acting ex officio. Rather, the parties are responsible for bringing a case before the court and for present- ing the facts of this case to the court. The judges must only consider 4 Are there any pre-filing requirements that must be satisfied before the facts presented by the parties to the court. The judge is essentially a formal law suit may be commenced by the product liability prevented from determining the ‘actual’ facts and circumstances of claimant? the case. No. With regard to small claims, in some states of Germany, media- A judge has a statutory obligation to direct the proceedings. This tion is mandatory if the value of the matter does not exceed €600 obligation includes making sure that the parties explain all relevant to €750. facts in full in a timely manner. The court must also point out if a party has overlooked or considered irrelevant or incorrect an aspect 5 Are mechanisms available to the parties to seek resolution of a of the case that is relevant for the court’s decision. Further, the court case before a full hearing on the merits? has a statutory obligation to conduct the proceedings in a manner that encourages the parties to settle the dispute amicably. This obli- There is no such mechanism available in Germany that is compa- gation includes conducting a mandatory pre-trial conciliation hear- rable to a US-style motion to dismiss, or a motion for summary ing and proposing amicable settlement solutions to the parties at any judgment. However, a claimant may file a motion for a collection stage of the proceedings. procedure. The court would then briefly check whether the formal Due to these far-reaching statutory obligations, German judges requirements for the application are met. Should the respondent tend to take a very active role in civil proceedings inside and outside accept his or her responsibility and file no objection with the court, a claimant can obtain an enforceable judgment against a respondent.

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However, should a respondent file an objection, the proceeding hearings before a court will issue its decision. It can take several would be changed into a regular court proceeding. In theory, this months from the time a lawsuit was filed until the first hearing or the mechanism would be an easy and uncomplicated way to enforce a final hearing on the merits. In the event that a certified court expert claim against a manufacturer. In practice, however, this proceeding is appointed, the proceedings may last for several years. However, is almost never used in product liability matters. before the regional courts in first instance the duration of the pro- ceedings usually is on average between eight and 12 months.

6 What is the basic trial structure? Evidentiary issues and damages The hearings are public and, apart from proceedings before local courts, representation by counsel is mandatory. In principle, the Civil 9 What is the nature and extent of pretrial preservation and Procedure Rules provide for one single hearing in which the case is disclosure of documents and other evidence? Are there any to be dealt with comprehensively (including settlement discussions avenues for pretrial discovery? and taking of evidence). However, in practice and in particular in Pretrial discovery does not exist in German civil law. Each party large and complex cases, the court sets up several oral hearings in bears the burden of proof for the facts on which its case is based and order to deal successively with the aspects of the case. Although, and each party must establish the facts it relies on. In principle, a party generally speaking, it is mandatory to conduct an oral hearing, the is not obliged to provide the other party with potentially harmful parties and the court together may waive the requirement for an oral material. hearing. Further, if the value of the matter does not exceed €600, a However, a party can try to meet its burden of proof by moving hearing must only take place upon the request of one of the parties. that the court requests the other party to produce certain documents Although the oral hearing plays an important role in the proceed- (section 421 Civil Procedure Rules). An obligation to submit the ings, the main focus in civil proceedings lies on the parties’ written proof, however, only exists if the opposing party itself has referred briefs that prepare the hearing. It is of paramount importance that to those documents during the proceedings (section 423 Civil a party states the facts on which it intends to rely in these briefs Procedure Rules), or if the moving is entitled to a claim of surrender comprehensively with sufficient and correct substantiation. It is very or submission under substantive law. difficult to rectify later, at the hearing, any mistakes that occurred In addition to the section 421 motion, a court is entitled to offi- during the preparatory phase of the proceedings. cially request a party to produce documents under section 142 Civil At the start of a hearing, the court announces the facts of the Procedure Rules if a party has made reference to a specific docu- dispute and its preliminary assessment of the legal situation. Then ment. The party in question has no legal recourse available against the parties will be given the opportunity to be heard personally. the order. The order is not directly enforceable because the court After that, the court suggests settlement terms and discusses ami- has no means of coercive measures or punishment. However, non- cable solutions with the parties. In the event that these conciliatory compliance with such a court order can, and, in most cases will, discussions are unsuccessful, the court will formally initiate the trial be taken into consideration when the court assesses the outcome of hearing and the parties will submit their motions. This is followed by the taking of evidence. Usually, such free consideration will lead to the taking of evidence. In this phase of the proceedings, and depend- unfavourable results for the party that did not comply. The duty to ing on the complexity of the case, the hearing can be adjourned, disclose can be mitigated by the interests of the parties in confidenti- often for several times. ality, for example, in the case of important trade secrets. Upon completion of the taking of evidence, the court will dis- In practice, however, the courts are usually reluctant to oblige a cuss the outcome of the taking of evidence and it must announce its party to produce documents because such an official request contra- preliminary view on the merits of the case. In this phase, usually, the dicts the traditional and generally accepted approach of the German court again submits settlement proposals, which take into account civil procedural system that a party bears the burden of establishing the court’s view on the evidentiary situation. If a settlement agree- and proving facts that support its own position. ment is not reached, the court will adjourn or end the oral hearing and, depending on the situation, set a date to either resume the hear- ing or to announce the ruling. 10 How is evidence presented in the courtroom and how is the evidence cross-examined by the opposing party? Evidence can be provided by witnesses, by experts, upon oral exami- 7 Are there class, group or other collective action mechanisms nation of the parties, by means of inspection of objects and by means available to product liability claimants? Can such actions be of presenting documents. A witness who is called must appear at brought by representative bodies? the hearing and provide the court with the requested evidence. This In principle, class actions and group actions do not exist under may be enforced (via a fine or confinement for contempt of court German law. However, the Act of Model Proceedings for Investment and mandatory presentation, or both) except the witness is entitled Suits (KapMuG) provides for a procedural mechanism for stream- to refuse to give evidence by (eg, claiming family or lining related claims in the field of capital market law and related professional privilege). Witnesses do not submit written statements cases. This procedure, however, is not a class action but testify at an oral hearing in the presence of the parties and their and is only valid for claims by capital investors. Although time and attorneys. time again there are discussions, particularly on a European level, to Expert opinion plays a major role in civil proceedings and in introduce class action elements in German law in order to enhance particular in product liability actions. The expert is appointed by the the level of consumer protection, at present, there are no specific and court and not by the parties. He or she, therefore, is regarded as an concrete efforts to establish class actions or other collective actions independent and impartial adviser of the court and hence the courts in German civil procedural law. usually rely on his or her expert statement. Statements provided by experts designated by the parties to the lawsuit are merely consid- 8 How long does it typically take a product liability action to get to ered to be factual statements and not expert testimony. However, the trial stage and what is the duration of a trial? since these statements are usually more or less well-founded, the court-appointed expert usually must deal with the statement of that The duration of the trial depends on the complexity of the individual expert in his or her own expert opinion in order to render a sound case and the workload of the respective court. Usually, hearings do statement upon which the court may rely. The court-appointed not last more than a few hours or a day, but there may be several experts usually submit their expert opinions in writing, which allows www.gettingthedealthrough.com 73 GERMANY Carroll Burdick McDonough LLP the parties to comment on that opinion and to ask supplementary Litigation funding, fees and costs questions. The expert can also be summoned to a hearing where he or she can be asked to explain his or her findings. The questioning 14 Is public funding such as legal aid available? If so, may potential of an expert is conducted in the same way as the examination of a defendants make submissions or otherwise contest the grant of witness. such aid? Inspection means that the evidence is provided to the court for Anyone unable to pay for the costs of litigation may petition the its immediate inspection. court for legal aid. The court will then examine whether or not the Evidentiary documentation has to be submitted to the court in the action or defence is reasonable, whether it has a chance of success, original. In practice, however, the parties frequently submit photo- and whether the petitioning party is in need of financial assistance copies of documents, which is considered sufficient as long as the (pursuant to the official tables provided by statutory law). If these authenticity of a document is not questioned by a party. requirements are met, the court must grant legal aid without any The oral examination of the parties is a form of supplemental discretion. The granting of legal aid does not present any prejudice proof. Usually it is conducted in cases in which a party cannot pre- with respect to the main action. The opponent cannot appeal against sent other means of evidence or if the court is not fully convinced by the granting of legal aid. the evidence presented in the case and expects the examination of the party to or to overcome its doubts. Cross-examination does not exist in German civil proceedings. 15 Is third-party litigation funding permissible? Individuals are examined primarily by the court and only subsidi- Third party funding of litigation costs is permissible and available. arily by a party. The court will comprehensively monitor the admis- In the last few years, third-party funding has become more and more sibility and expediency of the parties’ questions with regard to the common and funding firms offer funding in exchange for a share factual issue for which the witness has been called to testify. The of the damages awarded. Also, legal protection insurance exists in courts usually do not allow extensive questioning conducted by a Germany. Consumers often opt for this coverage to pay for their party. Therefore, an effective cross-examination can neither develop litigation costs. during the proceedings nor can it be used effectively. 16 Are contingency or conditional fee arrangements permissible? 11 May the court appoint experts? May the parties influence the In specific and exceptional situations, success fees may be negoti- appointment and may they present the evidence of experts they ated with an attorney. A contingency fee can be agreed on only if selected? the client’s objective economic situation is such that he or she could See question 10. The expert evidence must officially be taken at otherwise not finance the lawsuit. the court’s request or discretion. The court is obliged to select an expert, and publicly-appointed experts are given preference. If the 17 Can the successful party recover its legal fees and expenses from parties jointly suggest to appoint a certain expert, the court generally the unsuccessful party? follows this suggestion. Depending on the court’s instructions, the expert may submit his or her opinion orally or in writing. As a general rule, the losing party must bear the costs of litigation. The submission of an opinion of a party-appointed expert is This includes reimbursement of all costs incurred by the opposing permissible. Opinions of this type, however, are not considered to party to the extent that these were necessary for an appropriate legal be expert opinions. The party expert opinion is merely treated as a prosecution or defence (section 91 Civil Procedure Rules). The reim- submission by the party and the private expert is treated as a party bursement is restricted to the court costs and the statutory attorney expert witness. However, in an individual case, a previously drawn- fees including general expenditure. Attorney fees calculated on the up private opinion may be used as documentary evidence. Cross- basis of hourly rates, which usually exceed statutory fees, are gener- examination does not take place. ally not covered.

Sources of law 12 What types of compensatory damages are available to product liability claimants and what limitations (if any) apply? 18 Is there a statute that governs product liability litigation? Under German law, damages are, in principle, calculated as follows: Like many countries, Germany has a long tradition of holding the a party harmed by a defective product has to be placed in the posi- manufacturer of a product responsible for damages caused by prod- tion it was in before the damaging event. If the other party is not able uct defects. There are two legal regimes governing product liability: to do that personally, it must bear the costs necessary for restoring first, there is the Product Liability Act, which imposes strict liability the previous position as damages. on the manufacturer of a defective product. This act transforms the Damages in product liability cases can primarily be claimed EU Product Liability Directive (85/374/EEC) into national law and under the tort law regime (section 823 German Civil Code) or must therefore be construed taking into account European law and according to the German Product Liability Act, which is a strict its interpretation by the European Court of Justice. Second, there is liability regime. Both regimes are applicable in parallel. Under both still the traditional tort liability regime (section 823 German Civil regimes compensatory damages for bodily injury, including pain Code). Both regimes are applicable in parallel. Product liability and suffering, or damage to property can be awarded to the party claims are mostly, but not necessarily, based on the Product Liability harmed. However, damages for emotional distress or pure economic Act because the claimants can meet the requirements for a successful losses cannot be claimed. claim easier than in tort law due to the strict liability regime and a Although there is no cap to damages that can be awarded under more advantageous distribution of the burden of proof. the tort law regime, compensation according to the Product Liability According to section 1(1) of the Product Liability Act, the manu- Act is limited to €85 million per case. facturer of a defective product is liable for the resulting damage if a person is killed, or suffers bodily injury or harm to his or her health, 13 Are punitive, exemplary, moral or other non-compensatory or if goods are damaged. In the case of damage to goods, the manu- damages available to product liability claimants? facturer is liable only if an item of goods that is materially different from the defective product has been damaged, but is not liable for Non-compensatory damages cannot be awarded in Germany. All forms of punitive damages are alien to the German legal system.

74 Getting the Deal Through – Product Liability 2014 Carroll Burdick McDonough LLP GERMANY damage to the product itself. There is a de minimis amount of €500 into circulation. This effectively shifts the burden of proof to the (section 11 Product Liability Act). manufacturer. According to section 4(1) of the Act, a ‘quasi-manufacturer’ is A manufacturer can produce exculpatory evidence to establish treated as a manufacturer. A ‘quasi-manufacturer’ is any party that that it was not at fault in manufacturing and negligently putting on attaches its , signs, symbols or name to the product of a the market a defective product by showing, for example, that it: third party, thus creating the appearance that it was the actual manu- • ensured that its products complied with the governing technical facturer. According to section 4(2) of the act, importers of goods into standards, laws and regulations; the EU market from third countries are also liable as manufacturers. • selected, trained and supervised its employees carefully and According to section 1(2) of the Act, a manufacturer is not lia- diligently; ble for damages suffered by a consumer if it can prove one of the • used state-of-the-art machinery and tools to produce products following: free of defects; • it did not put the product into circulation; • established adequate quality control measures, regularly checked • the product was not defective when it was put into circulation; the production process and eliminated defects during this pro- • it did not manufacture the product for sale or another form of cess; and distribution with an economic intent; • carefully selected suppliers and controlled the products regularly • it did not manufacture or distribute the product in the context of using a state-of-the-art process. its professional activities; • the defect was caused by the fact that the product complied with If a manufacturer can prove that it carried out due diligence and mandatory legal requirements at the time it was put into circula- show that a state-of-the-art production process was used, it will not tion; or be held liable for damages caused by a defective product under the • the defect could not be detected by state-of-the-art means at the theory that the individual defect was an ‘outlier’. However, this bur- time the manufacturer put the product into circulation. den of proof is not an easy one to meet.

In addition, according to section 1(1) of the Act, the manufacturer is 20 Is there a consumer protection statute that provides remedies, only liable in cases of damage to goods if the product was intended imposes duties or otherwise affects product liability litigants? for ordinary private use and primarily used as such by the claimant. Further, according to section 1(3) of the Act, liability does not exist The German Product Safety Act applies to the technical safety of for the manufacturer of a component part if the defect was caused products. The Act and the regulations adopted under the Act trans- by the design of the product into which the part was integrated. pose the EU safety legislation set out in several EU directives and Similarly, a component part manufacturer will not be held liable if a resolutions into German law. Its goal is to ensure that only ‘safe’ defect was caused by instructions issued by the manufacturer of the products are placed on the market and to protect consumers from product. Conversely, this means that the manufacturer of a compo- the dangers of potentially dangerous goods. It provides official nent part is liable together with the assembler or manufacturer of the authorities and government agencies with an array of enforcement product respectively if the component part was defective. powers. Among those powers are the power to monitor all members Under the strict liability regime of the Act, the claimant must of the manufacturing and distribution chain, to inform consumers prove the damage, the defect and the causal connection between and the market of product defects and to issue public warnings, to damage and the defect, as per section 1(4). forbid the placing on the market of products that do not meet the applicable standards, or to order the recall and destruction of dan- gerous products. A violation of the provisions of the Act does not 19 What other theories of liability are available to product liability only trigger civil liability because the Act constitutes a ‘protective claimants? law’ according to section 823(2) German Civil Code, but also trig- The more traditional approach to German product liability is liabil- gers criminal liability. ity in tort according to section 823 of the German Civil Code. Here a claimant must also prove that: 21 Can criminal sanctions be imposed for the sale or distribution of • the defective product was put into circulation by the defective products? manufacturer; • damages have been incurred; and There is no special criminal law regime governing product liabil- • a causal connection between the defect and the damage exists. ity. However, within the scope of criminal product liability, general criminal acts, such as premeditated murder or involuntary man- As is the case under the terms of the Product Liability Act, in cases of slaughter, bodily injury, property damage, arson and environmental damage to goods, the manufacturer is liable only if an item of goods crimes must be taken into consideration. Elements of an offence also that is materially different from the defective product has been dam- exist in supplementary penal provisions (eg, food law and pharma- aged: ‘liability for creeping defects’. This principle usually plays a ceutical law). There are implications both in active participation major role in cases of defective component parts. and omission. An active participation, for example, may consist of Unlike with the strict liability regime, a claimant can demand incorrect instructions or assembly errors. As far as omissions, these, compensation for damages under the tort regime even if the product in particular, include the failure to conduct a necessary or timely was used primarily for business purposes. product recall. There is a high criminal risk if a company recognises In contrast to other liabilities in tort, in the case of product a product defect but does not immediately initiate field measures liability, a claimant does not have to prove that the manufacturer such as publishing warning notices or conducting a product recall. negligently put a defective product into circulation. At present, if a Under the German Penal Code, a company cannot be penalised. claimant can prove the existence of the three elements listed above, However, the members of a company’s executive board or the board it is presumed, according to well-founded and established case law, and management, as well as decisive acting employees, may be held that the defect of the product originated from the sphere of the man- liable under the Penal Code. ufacturer and that the manufacturer, at least, acted negligently. It is then up to the manufacturer to prove either that the defect did not originate from its sphere or that it did not put the defective product

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22 Are any novel theories available or emerging for product liability of sale of a correspondingly altered product, and the related risk- claimants? utility test for the product. No. At present, it is unclear and highly controversial if a mere sus- picion of a product defect has to be considered as a product defect. This controversy becomes relevant if an examination of the product 23 What breaches of duties or other theories can be used to is not possible or reasonable and if there are indications that the establish product defect? product could be defective (eg, implanted medical devices such as The strict product liability regime and the corresponding liability in pacemakers). The higher regional courts have rendered diverging tort define the term ‘product defect’ identically. Unlike the older tort decisions on this issue: on 30 July 2013, the Federal Supreme Court regime, section 3 of the Product Liability Act provides a statutory requested the European Court of Justice to give a ruling on this legal definition of the term ‘product defect’, which is based on the estab- question as per article 267 of the on the Functioning of the lished definition used in tort law. The provision states that a product European Union. The ECJ proceeding (docket number C-503/13) is is defective if it does not ensure safety, which must be expected, tak- still pending. ing into account all factors, especially the product’s presentation, its use that can be reasonably expected and the date on which it was put into circulation. 24 By what standards may a product be deemed defective and who This justified consumer safety expectation is a key element that bears the burden of proof? May that burden be shifted to the a product must meet when a court is deciding whether a product opposing party? What is the standard of proof? is defective. Four categories of defect are recognised: design defect, A product is deemed to be defective if it does not meet the justified manufacturing defect, instruction defect (or failure to warn) and fail- safety expectations of the consumer (for more information about ure to monitor the market. a product defect see question 23). Under both theories of product The subjective safety expectation of the ‘harmed consumer’ is liability, strict liability and tort, a claimant must prove that: not solely decisive under the definition of a defect. Rather, liability • the defective product was put into circulation by the is based objectively on the question of whether the product meets manufacturer; the safety expectations that the customary usage in the respective • damages have incurred; and industry deems necessary. A product has a design defect if, at its con- • a causal connection between the defect and the damage exists. ception, it does not meet the ‘necessary’ safety level. Thus, as early as the designing and planning stages of a product, the manufacturer In contrast to other liabilities in tort, in the case of product liability must take into consideration all measures that are objectively neces- a claimant does not have to prove that the manufacturer negligently sary and objectively reasonable to avoid possible danger originating put a defective product into circulation. At present, if a claimant can from the product. prove the existence of the three elements listed above, it is presumed, ‘Necessary’ safety measures are those that are possible regarding according to well established case law, that the defect of the product the design and construction according to the state-of-the-art science originated from the sphere of the manufacturer. It is then up to the and technology available at the time that the product is placed on manufacturer to prove either that the defect did not originate from the market, which are sufficient and able to prevent damage. The its sphere or that it did not put the defective product negligently applicable ‘state-of-the-art science and technology’ standards must into circulation. This effectively shifts the burden of proof to the not be considered to be those that are ‘customary’ in the respec- manufacturer. Due to this shift and due to the identical definition of tive industrial sector, as the safety measures applied in the industry ‘product defect’, there is now not much difference between the tort can remain behind technical developments and thus fall below the regime and the strict liability regime with regard to product liability legally required measures. although, in theory, unlike the strict liability regime, the tort regime The possibility to avoid a hazard exists if, according to the estab- requires culpable behaviour of the damaging party (ie, negligence or lished specialist knowledge of the respective expert groups, practi- even wilful intent). cal operational solutions are available. However, this can only be The standard of proof is that the parties have to bring the full assumed when a superior alternative safety-related construction is proof, in other words, clear and convincing evidence, of the neces- operational for serial production. A manufacturer is not obliged to sary elements in order to fully convince the court. implement safety concepts that are still on the drawing board or still in the experimental stage. 25 Who may be found liable for injuries and damages caused by If certain risks associated with the use of the product cannot be defective products? avoided, notwithstanding the implementation of the respective state- of-the-art science and technology, the manufacturer must evaluate Under both product liability regimes the manufacturer of the defec- whether the potentially dangerous product can be put on the market tive product can be held liable for damages. The manufacturer of a at all, taking into consideration the nature and the quality of the defective component part can be held liable separately and together risks, the probability of their occurrence, as well as the advantages with the manufacturer of the end-product. According to section 4(1) and benefits associated with the product and its sale and use. of the Product Liability Act, a party affixing its name, trademark or There is no general rule for assessing if a specific safety meas- other distinguishable sign to a product is also liable since it is consid- ure is reasonable. This question can be assessed only by taking ered to be a manufacturer (quasi-manufacturer). Finally, any party into account all elements of each individual case. The extent of importing a product into the European market with the intent to the danger emanating from the product plays a decisive role. The sell, lease or otherwise distribute the product with an economic pur- more severe the danger, the higher the standards that must be met pose is also liable as a manufacturer (section 4(2) Product Liability to avoid liability. In the case of significant dangers to life and limb, Act). In practice, however, claimants usually either address the man- more stringent measures must be implemented by the manufacturer ufacturer of the end-product or, in the case that the manufacturer (compared with cases in which there is only a danger to property or is insolvent, address the party in the manufacturing chain with the an insignificant risk of impairment to one’s personal physical integ- deepest pockets. Product liability insurance companies are not liable rity). Whether a measure is reasonable also depends on the economic for a defect of the insured manufacturer towards persons sustain- implications of the safety measure. In this context the following ing the damage. The insurance merely plays a role in the internal aspects are the most important aspects to be taken into considera- two-party relationship between the manufacturer and the insurance tion: the customs of the consumer, the production costs, the chances company.

76 Getting the Deal Through – Product Liability 2014 Carroll Burdick McDonough LLP GERMANY

26 What is the standard by which causation between defect and means of the state-of-the-art science and technology at the time the injury or damages must be established? Who bears the burden product was put on the market (development defect). and may it be shifted to the opposing party? The element of causation has to be established by the party harmed 30 Is it a defence that the product complied with mandatory (or by the defective product under both product liability doctrines by voluntary) standards or requirements with respect to the alleged means of full proof. The evidence must be strong enough to fully defect? convince the court that the defective product caused the specific damage to other goods or the specific bodily injury to claimant. Merely meeting all applicable standards, laws and regulations alone is usually not an appropriate defence per se to a product liability claim. On the other hand, a failure to comply with applicable stand- 27 What post-sale duties may be imposed on potentially responsible ards can be prima facie evidence that the product is defective. As parties and how might liability be imposed upon their breach? indicated earlier, especially in response to question 23, meeting all Under the tort regime (but not under the strict liability regime), a applicable standards is a minimum threshold in deciding whether a manufacturer has a duty to monitor the market. After putting its product is defective. Consumers justly can expect that a manufac- product on the market, the manufacturer must implement adequate turer will meet all the applicable legal and other technical standards procedures to enable him or her to verify that the use of his or her applicable to the product. A manufacturer, however, must do more products by ordinary consumers does not pose any unforeseen risks to escape liability for defective products. It must verify that there are or dangers. Should the manufacturer discover such risks, the manu- no additional or alternative technical solutions objectively possible facturer must initiate appropriate measures to eliminate these risks. and reasonable to further improve the safety of the product. Only However, these measures are usually limited to issuing warnings or if the manufacturer can show that it implemented these measures providing instructions how to avoid the risks and how to safely use can he or she be relieved of his or her duty to compensate a harmed the product. The manufacturer also has to establish adequate proce- consumer. dures in his or her organisation to enable him or her to investigate customer complaints about possible product risks and to discover 31 What other defences may be available to a product liability potentially negative interactions between his or her product and defendant? third-party or after-market products typically and reasonably used by consumers. Only if a manufacturer finds out that issuing warn- All defences available in tort claims in general are also available in ings, providing adequate instructions or other measures do not elim- product liability matters; this is especially true for contributory neg- inate serious dangers to consumers, the manufacturer must consider ligence on the part of the harmed consumer (section 6(1) Product a recall of his or her product. Liability Act, which references section 254 German Civil Code). According to section 6(2) of the Product Liability Act, the manu- Limitations and defences facturer’s liability is not reduced if the damage was caused by the product defect and another independent act of a third party at the 28 What are the applicable limitation periods? same time. If the manufacturer can show that the person harmed Under both the tort regime and the strict liability regime, the statute knew or should have known about the risks or dangers associated of limitations expires after three years. As per section 12(1) Product with the product, it can also be relieved of liability to some degree. Liability Act, the limitation period for strict liability claims starts to run from the day when claimant has the positive knowledge, or 32 What appeals are available to the unsuccessful party in the trial should have the knowledge, of the following three facts: the dam- court? age, the defect and the liability of the person or entity. The period is The unsuccessful party generally can appeal against the judgment suspended when and for as long as the parties are negotiating a pos- rendered by the court of first instance before the court of second sible settlement or other compensation. In addition, a claim for com- instance (which is usually the higher regional court in product liabil- pensation cannot be brought later than 10 years after the product ity lawsuits). The Court of Appeal examines the judgment of the has been placed on the market (section 12(2) Product Liability Act). first instance in fact and in law. The appellate decision is subject to Under the product liability regime in tort, according to sections 195 a second appeal before the Federal Supreme Court as the court of and 199 of the German Civil Code, the statute of limitations expires third instance if the court of second instance either has committed three years after a claimant has the positive knowledge, or must have procedural mistakes or applied the law incorrectly, or if the court acquired this knowledge in the absence of gross negligence, of the of appeal has allowed a second appeal in its ruling or if the Federal same facts as under the Product Liability Act. However, the period Supreme Court has allowed a second appeal after a special com- does not commence before the end of the year in which the claimant plaint procedure. The second appeal can only be conducted in terms has knowledge of these facts. Irrespective of a possible knowledge of law but not in terms of fact and it must be permitted if the legal of the mentioned facts, a claim for compensation in personal injury matter basically is significant or the development of the law or the cases cannot be brought later than 30 years after the injury (section securing of a uniform legislation requires a ruling by the Federal 199(2) German Civil Code). Claims for compensation in material Supreme Court. damage cases are statute-barred either 10 years after the damaging event, or 30 years after the product was put into circulation, which- Jurisdiction analysis ever is earlier (section 199(3) German Civil Code). 33 Can you characterise the maturity of product liability law in terms 29 Is it a defence to a product liability action that the product of its legal development and utilisation to redress perceived defect was not discoverable within the limitations of science and wrongs? technology at the time of distribution? If so, who bears the burden Like many countries, Germany has a long tradition of holding the and what is the standard of proof? manufacturer of a product responsible for damages caused by prod- Under both the tort regime and the strict liability regime a manufac- uct defects. Germany, as an EU member state, transposed the EU turer is not liable for the damages its defective product has caused, if Product Liability Directive (85/374/EEC) into national law in the he or she can prove that the defect was not discoverable by using the form of the Product Liability Act. The act took effect on 1 January 1990 and imposes strict liability on the manufacturer of a defective www.gettingthedealthrough.com 77 GERMANY Carroll Burdick McDonough LLP product. The more traditional approach to German product liability 2015. This regulation, which primarily will deal with the safety of is liability in tort according to section 823 BGB, codified for the first consumer products, might also have some influence on the manufac- time in 1900 and developed substantially in a landmark decision in turer’s product liability. 1968. Since then, product liability has been constantly evolving, even before the introduction of the Product Liability Act. Many principles 35 Describe the level of ‘consumerism’ in your country and codified in the Product Liability Act are also applicable in the liabil- consumers’ knowledge of, and propensity to use, product liability ity in tort according to section 823 BGB. Legal scholars thoroughly litigation to redress perceived wrongs. watch and digest the court decisions and there are many textbooks, commentaries and law journals publishing articles dealing with this Consumer protection is, as in the rest of the EU, constantly evolving. field of law. With its long history in product liability, German juris- In cases of negative events or precisely, in the case of damage, the diction can be regarded as mature and highly developed. common mentality in society is that ‘someone is to blame’. On the other hand, Germany is a country with a high level of insurance cov- erage. The insurance companies indemnifying their clients in a first 34 Have there been any recent noteworthy events or cases that stage are becoming more and more professional when it comes to have particularly shaped product liability law? Has there been filing subrogation claims against manufacturers. In product liability any change in the frequency or nature of product liability cases matters, in order to build up pressure on the manufacturers, insurers launched in the past 12 months? seek to ‘pool’ information about factual claims and technical issues. At present, an increasing number of cases concerning medical By and large, there is, however, still no professional ‘lawsuit devices (pacemakers, hip implants, breast implants) is being brought industry’ in Germany with both claimants and lawyers using prod- before the German courts. These legal actions are not only brought uct liability as an instrument of pressing manufacturers to settle forward by the patients but also by the health insurance companies. product liability cases more or less favourably. The still pending pacemaker case, which has been referred to the European Court of Justice by the Federal Supreme Court (see 36 Describe any developments regarding ‘access to justice’ that question 20), could become a new landmark decision concerning the would make product liability more claimant-friendly. definition of ‘product defect’. With regard to EU legislation, the new consumer products regu- Please see www.gettingthedealthrough.com. lation is looming on the horizon and will most likely be enacted in

Simon Wagner [email protected]

Herrenberger Str 12 Tel: +49 7031 439 9600 71032 Böblingen Fax: +49 7031 439 9602 Germany www.cbmlaw.com

78 Getting the Deal Through – Product Liability 2014 Mayora & Mayora, SC GUATEMALA Guatemala

Conchita Villeda and Laura Sánchez Mayora & Mayora, SC

Civil litigation system It could be said, however, that in civil and commercial matters there are basically three kinds of actions: ordinary trials, summary 1 What is the structure of the civil court system? trials and enforcement proceedings. Most actions concerning con- The judiciary is composed of three tiers. At the top, the Supreme tractual and extra-contractual liability for damages are filed in the Court of Justice (SCJ) (article 74 of the Judiciary Act) exercises a kind form of an ordinary trial. of appellate jurisdiction, mostly in civil, criminal, administrative and As regards product liability, although there are certain adminis- matters, and direct jurisdiction regarding amparo proceedings. trative proceedings that may arise as a consequence of the provisions In the Guatemalan system, amparo proceedings are mostly used to of the Consumer Protection Act (CPA), and although some of those seek injunctive relief or to review the constitutionality or of proceedings may lead to the initiation of commercial arbitration administrative or judicial decisions or actions that may damage or (should both parties be willing to submit to it), the liability derived legally affect the petitioner (article 265 of the Constitution). from the sale, distribution, commercialisation or supply of defective Where the SCJ exercises direct jurisdiction in amparo proceed- or intrinsically dangerous products will almost invariably have to ings, a further appeal before the Constitutional Tribunal is available be discussed within the rules and proceedings of the ordinary trial. to either party. The Constitutional Tribunal thus exercises appellate As regards criminal proceedings, although there are a few dif- jurisdiction over every other court in amparo proceedings (article ferent types of proceedings, it is appropriate to state that investiga- 60 of the Amparo Act), and direct jurisdiction in matters of con- tions that may result in a criminal trial may be a consequence of: stitutionality of ordinary legislation and regulations issued by the the ex officio decision of the Office of the General; the executive or any administrative agency, as well as by municipal gov- report (duly ratified) of any person (including the victim) on the pos- ernments. It is perfectly possible and often the case that amparo peti- sible commission of a crime; and a formal accusation filed with the tions are made within civil judicial proceedings. Office of the Prosecutor General (article 24 of the Code of Criminal Directly below the SCJ there are a number of different tribu- Procedure (CCP)). It is possible to seek redress for damages within nals, generally composed of three-judge panels; the most important the criminal proceedings themselves, including those derived from are the ones that integrate the Court of Appeals, the Administrative product liability, although claimants generally prefer to go to the Tribunal, the Tax Tribunal, the Labour Tribunal and the Court of civil court with these matters. the Comptroller. These tribunals generally exercise appellate juris- diction over the judges of first-instance or trial courts, which are divided by specific substantive subject matters such as criminal, civil 4 Are there any pre-filing requirements that must be satisfied before and commercial, labour and . Except for a few cases that a formal law suit may be commenced by the product liability go to a small claims court or justices of the peace, the vast majority claimant? of civil litigation takes place before the courts of first instance, pre- The CPA does establish some preliminary measures – a settlement sided over by a single judge, for civil and commercial matters. agreement between the parties or an administrative proceeding (arti- cle 74 of the CPA). However, these preliminary measures are not pre- filing requirements that must be satisfied before submitting a formal 2 What is the role of the judge in civil proceedings and what is the lawsuit, meaning that the claimant can submit a lawsuit without role of the jury? going through the preliminary measures. Civil judges and criminal courts, as well as appellate tribunals, decide cases by themselves, except for the rare libel and slander cases that require the formation of a press jury. However, the adversarial 5 Are mechanisms available to the parties to seek resolution of a system mostly prevails both in civil and criminal law proceedings. case before a full hearing on the merits? In civil trials the judge may set a ‘settlement hearing’ so that the par- ties can attempt to end their dispute. If a settlement is reached the 3 What are the basic pleadings filed with the court to institute, judge records the parties’ agreement; and then he or she issues a res- prosecute and defend the product liability action and what is the olution terminating the process. The ‘settlement agreement’ reached sequence and timing for filing them? by the parties is an enforceable title. There are numerous basic pleadings depending on both the nature In criminal proceedings, Guatemalan legislation establishes of the matters involved and on the kind of remedy or declaration some desjudialacion measures, such as opportunity criteria (article that is sought (eg, the breach of a civil contract requires an ordinary 25 of the CCP) and conditional suspension of the criminal prosecu- trial, while the breach of a commercial contract requires a summary tion. Both measures require acceptance of the fact and assurance of trial, if the applicable provisions would be those of the Commercial damage repair; further, the ‘opportunity criteria’ requires the agree- Code). ment of the victim through a conciliation hearing.

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6 What is the basic trial structure? allow for the use and abuse of both technical and procedural objec- Type of hearing tions that often entail considerable delays in the substantiation of In most civil cases, including those concerning liability for damages proceedings. Additionally, because of the written nature of the civil in general, the proceedings take the form of filing and exchange of procedure, there is no ‘trial period’ as such. Technically, the litis on written memoranda (article 61 of the CCP). There is no open cross- the subject matter of the case begins once every technical and pro- examination available to examine witnesses, expert witnesses or the cedural objection has been either dismissed or remedied. This may parties or their representatives, but rather preformulated written take anywhere from six months to two years (or more). interrogatories, in which questions are previously examined, then In criminal matters, the general rule is that any investigation approved or rejected, and addressed by the judge. Evidence, in the proceedings may not remain open for more than three months form of documents, is submitted by means of attachments to written where no specific individual has been subjected to the investigation memoranda filed with the court, and the possibilities for the judge or for more than six months where any specific person has been to examine objects and places in situ are quite limited. It is possible subjected to the investigation. At the end of the relevant time period, to request the court to hear oral arguments (in the form of closing the Office of the Prosecutor General must decide whether to go to statements), but this is rare. trial or close the case. Criminal proceedings are predominantly written during the investigation phase, but the trial is a series of oral hearings where Filing to judgment witnesses, expert witnesses, the accused and the victim may be cross- As regards civil matters, for the same reasons mentioned above, it is examined fairly openly. extremely difficult to provide an estimate of the time frame involved In both civil and criminal cases, proceedings are public. In prac- from the point that evidence has been produced and closing state- tice, for civil proceedings this generally means that any person can ments have been filed with the court or delivered orally, and the have access to the court dossier, and that the few hearings where expected date when the judge makes his or her ruling (which actu- oral pleadings and interrogatories are directed are open for anyone ally takes the form of a written opinion). A judgment may take from to be present. two to five years to be issued, and a further one to three years may well lapse before every appeal and remedy are exhausted. During Role of judges and lawyers the course of the proceedings, any of the parties may well decide to The Judiciary Act provides for the formal obligations of judges challenge the constitutionality or the legality of the rulings of the and magistrates and refers also to those for lawyers (article 68). In trial court by means of an amparo, and this may easily take up to general, these rules refer to the basic duties of mutual respect and one year in and of itself. loyalty that are obviously necessary for any justice system to operate In criminal cases, although there are also several specific prob- smoothly. In practice, however, judges allow for more or less formal lems that may largely affect the length of time before a judgment is interviews with the lawyer of one of the parties without previous issued, cases rarely take longer than three years. notice to the other party’s lawyer. Lawyers themselves tend to be somewhat careless when observing rules of professional courtesy, Evidentiary issues and damages ethical canons or legal obligations concerning the appropriate use of legal and procedural means in any particular matter. Prosecutors 9 What is the nature and extent of pretrial preservation and and their assistant prosecutors tend to behave more as judges han- disclosure of documents and other evidence? Are there any dling the investigation, rather than conducting the investigation avenues for pretrial discovery? independently. Perhaps the main issue related to the production of evidence and Therefore, while there are legal rules, ethical canons and con- damages allegedly suffered because of defective products (not ventional rules concerning the appropriate behaviour of judges and derived from a breach of contract) is that the claimant only needs to lawyers, all these are loosely observed and inconsistently applied by prove that the damage was sustained by the victim. Negligence (the the judiciary’s disciplinary board, the Bar Association and possibly main source of liability) is legally presumed, but the defendant may the courts themselves. produce evidence either to prove the contrary or to prove that the damages occurred due to the inexcusable negligence of the victim. Thus, the victim’s behaviour and conduct, and the occurrence of the 7 Are there class, group or other collective action mechanisms damages, will ultimately determine whether product liability exists available to product liability claimants? Can such actions be or not. As regards intrinsically hazardous products, this is even more brought by representative bodies? complex (as explained below). Strictly speaking, there are no class, group or other collective action As a general rule, there is no discovery in the Guatemalan rules mechanisms available to product liability claimants. The CPA allows of civil procedure. Any of the parties may request the other to pro- for the creation of ‘associations’ (a kind of not-for-profit civil corpo- duce documents within the proceedings, but it must provide the ration) for the protection of consumers’ rights, but although these court with a fairly accurate description of the documents that are associations may file reports and complaints on behalf of groups of requested. This, of course, is a considerable limitation, mitigated consumers, they do not have legal standing to sue on their behalf. somewhat by the ability to request the court to order the other party Indeed, in accordance with article 13 of the CPA, the role of to produce its accounting books and records. There is limited access consumer and user associations, when submitting the claims of con- to pretrial proceedings to try to produce evidence that will be used sumers to the Consumers Directorate due to a breach of this Act, is or invoked to support allegations within a future legal action. This strictly extrajudicial, as its function should be limited to facilitate kind of proceeding generally requires a fairly accurate knowledge of rapprochement between the parties. the documents, records, book entries and files that are desired to be brought or produced before the judge. 8 How long does it typically take a product liability action to get to the trial stage and what is the duration of a trial? 10 How is evidence presented in the courtroom and how is the Filing to trial evidence cross-examined by the opposing party? In civil matters concerning liability, there are numerous possible sce- Witnesses narios upon filing a complaint. The structure of the rules of civil pro- The use of witnesses (article 142 of the Code of Civil Procedure) cedures and the formalism naturally attached to written procedures is certainly advisable but, due to the techniques of examination or

80 Getting the Deal Through – Product Liability 2014 Mayora & Mayora, SC GUATEMALA questioning of witnesses, it is not easy to get to the core of the mat- 13 Are punitive, exemplary, moral or other non-compensatory ter with them. Additionally, it is common for lawyers to question damages available to product liability claimants? the impartiality of witnesses and, given the rules applicable in this There are no legal provisions or jurisprudence establishing puni- regard, these objections are often accepted by the courts. tive, exemplary or other non-compensatory damages available to product liability claimants. Moral damages are applicable, under the Reports and written statements Civil Code, to cases of libel or slander (article 1,656). The fact that the civil procedure is basically a written procedure favours the use of almost any kind of written evidence, and practice Litigation funding, fees and costs in this forum has developed some techniques to record facts or cir- cumstances that exist independently of the documents. 14 Is public funding such as legal aid available? If so, may potential It should be mentioned here that a party may call the other party defendants make submissions or otherwise contest the grant of to answer an interrogatory under oath (article 130 of the Code of such aid? Civil Procedure), and that the nature and effects of such means of As a general rule, there is no public funding or legal aid available for evidence are generally quite important, since the technique of ques- product liability cases. The CCP provides, on a case-by-case basis, tioning the other party may expose inconsistencies, contradictions for the appointment of legal counsel at no cost for claimants who or flaws in its core thesis or basic claims. show they lack the means to provide for their representation.

11 May the court appoint experts? May the parties influence the 15 Is third-party litigation funding permissible? appointment and may they present the evidence of experts they Although not common practice, there are no specific legal provisions selected? limiting third-party litigation funding. In accordance with the rules of civil procedure, expert witnesses generally produce their reports in writing (article 169 of the CCP) rather than by means of open cross-examination. Each party 16 Are contingency or conditional fee arrangements permissible? appoints an expert witness and submits the specific points that have Contingency or conditional fee arrangements are legally permissible, to be addressed in their report. The other party may agree, ques- although the ethical canons issued by the bar deem quota litis agree- tion or add other points to be covered (article 164 of the CCP). ments as unethical. Although there are no public statistics, contin- Unless the parties agree to the appointment of one single expert, the gent or conditional fee arrangements seem to be a common practice. court should appoint a third one in case the reports of the other two conflict (article 165 of the CCP). At any rate, in this kind of case it 17 Can the successful party recover its legal fees and expenses from is normally necessary, or at least convenient, to consider using this the unsuccessful party? means of producing evidence. Any of the parties may request that the judge examine persons, The general rule is that the successful party is entitled to recover its objects or places personally (article 172 of the CCP), together with legal fees and expenses from the unsuccessful party. However, the the supporting evidence of experts, as required in order to illuminate judge may exempt the unsuccessful party from this obligation where the court as to the nature or characteristics of any particular facts or it is determined that it litigated in good faith. The application of circumstances that may be relevant to show either the nature of the this rule is rather discretionary and there are no settled standards or activities involved or the conduct or behaviour of the other party. criteria to point to.

Sources of law 12 What types of compensatory damages are available to product liability claimants and what limitations (if any) apply? 18 Is there a statute that governs product liability litigation? Under civil law in general, and in the Guatemalan Civil Code in In Guatemala there are no product liability statutes in force. There particular, the distinction between compensatory and other kinds of are certain laws and regulations regarding the production, sale or damages is not generally applicable. One exception would be that distribution of products, such as pharmaceutical and oil products, of moral damages (not applicable to matters of product liability) as well as food and drugs that establish certain obligations as to the as opposed to physical damages. Thus, using by analogy the defini- standards of care, safety and manufacturing, but no product liability tion of damages (which comprises actual losses and forgone legiti- rules as such. Moreover, the Constitutional Tribunal has ruled that mate profits) provided for cases arising out of a breach of contract, the state may not decline its responsibility for the control of these claimants are generally entitled to seek recovery of any loss and any products (ruling of 12 May 1993). forgone profits derived from the negligent behaviour or conduct of Thus, the Constitution establishes that the government shall a third person. control the quality of food, pharmaceutical and chemical products This abstract rule would be applicable to product liability in and everything potentially affecting the health and wellbeing of the general, either on the basis that there is a legally presumed obligation people (article 96). The Health Code establishes that the health min- on behalf of the seller to disclose unapparent defects known to it istry shall maintain control over pharmaceutical products in order (articles 1,559 and 1,562 of the Civil Code), or on the basis that the to address and prevent health risks to the people, and that the manu- manufacturer has been negligent in the manufacturing of the defec- facturers and importers are fully liable for the quality or quantity of tive products sold, thereby causing the victim to suffer damages. The the products (article 170). The Norms for the Sanitary Control of negligent behaviour of the manufacturer may also derive from its Medicines and Related Products (Government Decree 712-99) indi- failure to inform consumers of the hazards intrinsic to the product cate that there is an obligation for all pharmaceutical establishments sold appropriately (article 39 of the CPA). Additionally, where the to have a technical director or supervisor responsible for the quality, hazardous or dangerous character of any product has been deter- security and efficacy of the products that are manufactured, and for mined by a court, or any other competent authority, there is joint their adequate storage and distribution (article 86). liability among the manufacturer, the importer and the distributor It is also reasonable to state that there are no product liability (article 45 of the CPA). rules as such in Guatemalan civil law. The closest provision is con- tained in article 1,650 of the Civil Code, and even in this case the

www.gettingthedealthrough.com 81 GUATEMALA Mayora & Mayora, SC nucleus of the rule refers to the liabilities arising from use rather than 23 What breaches of duties or other theories can be used to to the sale or distribution of intrinsically hazardous products. establish product defect? The main legal theory arises from two basic legal rules: one, men- tioned in question 12, which imposes on the seller the obligation 19 What other theories of liability are available to product liability to disclose unapparent defects in the products sold; two, that the claimants? seller is under a basic obligation to give the buyer a guarantee that Contractual civil liability covers actual losses and forgone profits. the product sold will be useful (article 1,809 of the Civil Code). Article 1,434 of the Civil Code, which refers to contractual dam- Drawing on these general principles, the seller may be liable for the ages, indicates that these have to be the immediate and direct con- diminution of value of the product resulting from the said defects sequence of the alleged breach of contract. We are of the opinion if it did not know of the defects of the product, or for both actual that the nature of this causal relationship for contractual damages losses and for any foregone legitimate profits if it did know of the should be deemed equally applicable for extra-contractual damages defects of the product. by analogy. However, as mentioned above, the generality of article 1,645 of As regards extra-contractual damages or torts, the general rule the Civil Code allows for an additional legal theory, namely that the is that the tortfeasor must be at fault – that is, it must be negligent. careless manufacture of a product may be the direct cause of dam- Negligence is presumed, but the tortfeasor may prove to the con- ages suffered by any person. Here, the contractual relationship is not trary (article 1,648 of the Civil Code). Therefore, referring back to necessary, since liability arises from the manufacturer’s negligence the section on the burden of proof, it must be said that the defendant resulting in a defective product that, when used in any non-negligent has two different defences available. manner by the victim, results in losses or forgone legitimate profits. The defendant may first show that it was not at fault; article 1,648 of the Civil Code allows it to prove this and thus escape lia- bility if the nature of its activities or the products involved in the 24 By what standards may a product be deemed defective and who litigation are not intrinsically hazardous or dangerous. Additionally, bears the burden of proof? May that burden be shifted to the according to article 1,645 of the Civil Code, the defendant may also opposing party? What is the standard of proof? escape liability if it shows that the victim of the damages was inex- There are no generally settled criteria as to when a product may be cusably negligent. Again, this defence is available where the activities deemed defective. From the wording in the applicable general rules or products involved are not intrinsically hazardous or dangerous. of the Civil Code, the main question is whether the product was Contrarily, in the case of per se dangerous or hazardous products, as useful for its intended or natural purpose. Where an action for dam- indicated in article 1,650, the defendant may still show in its defence ages is sought for negligence of the manufacturer, it is not necessary that the victim intentionally caused the damage to occur. for the victim to prove negligence, as explained below, but rather to The Civil Code introduces one more rule, which we think is logi- show in what manner the product was defective and how there is a cally operative only where the three defences referred to above are causation relation between the defect and the damages suffered by not applicable. This is the proportional liability rule contained in the victim. article 1,654. According to this rule, the party who contributes to the causation of the damages can only recover in the proportion that it did not contribute to their occurrence. 25 Who may be found liable for injuries and damages caused by defective products? Where there is a contractual relation and the action is based on 20 Is there a consumer protection statute that provides remedies, the legal obligation to deliver ‘useful’ products with no unapparent imposes duties or otherwise affects product liability litigants? defects, the respondent will typically be the seller of the product. The CPA does not really add any substantial rules as to product However, where the legal action is based on tort rules, the respond- liability in general. Its focus is rather the rights and obligations of ents will most likely be the seller and the manufacturer or its dis- suppliers and consumers from the perspective of the use of reliable tributor or representative. As mentioned above, the CPA establishes publicity and information, and also regarding standard agreements joint liability for the manufacturer, the importer and the distributor and abusive clauses. The nature of liability from defective products where a court ruling, or any other competent authority’s determina- is not for the most part the object of this statute. tion, has defined the product as intrinsically hazardous or dangerous.

21 Can criminal sanctions be imposed for the sale or distribution of 26 What is the standard by which causation between defect and defective products? injury or damages must be established? Who bears the burden There are no criminal sanctions imposed for the sale or distribu- and may it be shifted to the opposing party? tion of defective products but, as mentioned above, civil liability The general principle for civil actions is that the plaintiff has the for damages can certainly arise as a consequence of, or in relation burden of proof (article 126 of the CCP). As regards civil liability, to, criminal offences, including where products shown to be defec- the general rule contained in article 1,648 of the Civil Code is that tive are involved one way or another. Thus, where a car accident the plaintiff needs to show only the existence of the damage and that entails criminal liability and, in addition, the vehicle is defective as it was caused by the defendant (in the specific sense that the victim a product, it is conceivable that the victim may seek damages from does not need to prove that the defendant was negligent, negligence the manufacturer. There have been cases where the manufacturers is legally presumed, but only that the defendant caused the dam- of certain pesticides have been sued for bodily injury and also for ages), unless the latter shows that the damage was the result of the damages arising from the intrinsically hazardous nature of their victim’s inexcusable fault or negligence. products. A certain form of product liability appears in article 1,650 of the Civil Code. According to this, any person or firm undertaking any activity, habitually or occasionally, in which per se hazardous 22 Are any novel theories available or emerging for product liability mechanisms, instruments, appliances or substances are used (be it claimants? for the speed they develop, their explosive or flammable nature, for There are no novel theories available or emerging for product liabil- the energy or current that they conduct or for other like characteris- ity claimants of enough magnitude or importance to have prompted tics), will be held liable for damages caused to third parties provided legislative enactments or settled jurisprudential criteria.

82 Getting the Deal Through – Product Liability 2014 Mayora & Mayora, SC GUATEMALA that the plaintiff shows the existence of the damage and that it was state or its agencies for the protection of human health and well- caused by the defendant, unless the latter proves that the damage being (see the reference to the Constitution and the Health Code was caused by the victim’s own deliberate intention. Therefore, in mentioned above). Voluntary standards are subject to discussion and this case, the burden of proof on the defendant, to show deliberate examination as to their specific merits. intention on behalf of the victim, is certainly a tougher standard to meet. 31 What other defences may be available to a product liability Since product liability is not a fully developed theory in general defendant? in Guatemalan law, in most cases (except for those arising in relation to intrinsically hazardous products, as explained above) the manu- According to the CCP, the unsuccessful party can appeal (within facturer or distributor will not be interested in shifting the burden of three working days) the following: the resolution that solves the pre- proof (generally lying on the potential victim). liminary objections that finish the process; the resolution that ends the incidents processed in a separate string; and the definitive resolu- tion of the first-instance judge. 27 What post-sale duties may be imposed on potentially responsible parties and how might liability be imposed upon their breach? 32 What appeals are available to the unsuccessful party in the trial The CPA does establish a duty to supplement warnings regarding court? products that are hazardous or dangerous to human health (article 40), and also the duty to recall products that, although used ade- As mentioned above, the defendant may show that it was not at quately by the consumer, may be dangerous or hazardous due to a fault, since article 1,648 of the Civil Code allows it to prove this defect of the product (articles 40 and 44). These are obligations for and thus escape liability, if the nature of its activities or the products the seller and include the obligation to reimburse consumers for the involved in the litigation are not intrinsically hazardous or danger- price they paid. ous. Additionally, according to article 1,645 of the Civil Code, the defendant may also escape liability if it shows that the victim of the Limitations and defences damages was inexcusably negligent. Here again, this defence is avail- able where the activities or products involved are not intrinsically 28 What are the applicable limitation periods? hazardous or dangerous. Contrarily, in the case of per se dangerous The two basic limitation periods are six months, where the judicial or hazardous products, as indicated in article 1,650, the defendant action is filed on the basis of defects that make the products partially may still show in its defence that the victim intentionally caused the or totally defective; and one year, where the action is filed on the damages. basis of contractual or extra-contractual damages (tort liability). Jurisdiction analysis

29 Is it a defence to a product liability action that the product 33 Can you characterise the maturity of product liability law in terms defect was not discoverable within the limitations of science and of its legal development and utilisation to redress perceived technology at the time of distribution? If so, who bears the burden wrongs? and what is the standard of proof? Product liability law in Guatemala is still in its formative stage, in There are no specific legal rules providing for a ‘state-of-the-art and the sense that there are only a few scattered legal statutes that view development risk defence’. However, as mentioned above, where this area of the law as independent from other sources of liability. At the seller can prove that it did not know of the unapparent defects, this point, product liability cases remain subject to traditional legal liability may extend only to the loss of value of the products, but not theories derived from the Civil Code and other general rules, rather to damages suffered by the claimant. than from specialised statutes. There have not been any developments regarding ‘access to jus- tice’ mechanisms. 30 Is it a defence that the product complied with mandatory (or voluntary) standards or requirements with respect to the alleged defect? Compliance with mandatory standards should be considered proof that the manufacturer did not engage in careless or negligent con- duct, although there are no specific provisions to this effect, but only the general notion that mandatory standards are established by the

Conchita Villeda [email protected] Laura Sánchez [email protected]

15 Calle, 1-04 Zona 10, Of 301 Tel: +502 2223 6868 01010 Guatemala City Fax: +502 2366 2541 Guatemala www.mayora-mayora.com

www.gettingthedealthrough.com 83 GUATEMALA Mayora & Mayora, SC

34 Have there been any recent noteworthy events or cases that relative inefficacy of the court system, consumers (or consumers’ have particularly shaped product liability law? Has there been activists) have tended to bring their complaints before the gov- any change in the frequency or nature of product liability cases ernmental agency in charge of the enforcement of the CPA. This launched in the past 12 months? agency, Diaco, lacks the kind of powers that similar agencies have Owing to globalisation, the fact that in recent years cases resulted in jurisdictions where product liability law and jurisprudence are in the recall of products in our jurisdiction (eg, the Ford/Firestone more developed or extended. Thus, the Minister of the Economy has and Mattel cases) has spurred commentary and a growing sense that recently announced that the government will soon present a bill in local legislation should follow global trends in this matter. There order to convert Diaco into a special prosecutor in matters related to have been no truly local cases that have stirred public debate con- consumer protection, presumably including certain areas of product cerning product liability. Perhaps the most significant recent cases liability, and to secure the necessary budget appropriations for its where product litigation and activism have taken place are the cases operation. filed by the state against international tobacco manufacturers, and the DBCP cases, where litigation was initiated (both abroad and in 36 Describe any developments regarding ‘access to justice’ that Guatemala) claiming damages for personal injuries derived from the would make product liability more claimant-friendly. use of the pesticide DBCP by workers of fruit plantations in the country. As indicated in question 35, although the level of consumerism in Guatemala has risen substantially in the past decade; due to the inefficacy of the court system, consumers have tended to bring their 35 Describe the level of ‘consumerism’ in your country and complaints before Diaco instead of before the competent courts. consumers’ knowledge of, and propensity to use, product liability Hence, it might be said that instead of searching for relief before litigation to redress perceived wrongs, the courts, consumers have found an indirect way to improve their The level of consumerism in Guatemala has risen substantially in ‘access to justice’ through Diaco’s intervention. the past decade. However, up to this point, and mainly due to the

84 Getting the Deal Through – Product Liability 2014 I.L.A. Pasrich & Company INDIA India

Amir Singh Pasrich, Vinita Chhatwal and Vaijayant Paliwal I.L.A. Pasrich & Company

Civil litigation system 1959 in the case of K M Nanavati v State of Maharashtra, AIR 1962 SC 605, pursuant to which the government abolished jury trials 1 What is the structure of the civil court system? in 1960 since they were susceptible to media and public influence. India has a unified three-tier judicial structure with 29 states, six Minor issues in rural areas are handled through the Panchayati Raj union territories and one national territory, further subdivided into system involving village assemblies and elders. over 672 administrative districts. Each district has a district court Although the role of the judges and presiding officers in the con- complex with several courts exercising original civil and criminal sumer forums follows the format of a civil proceeding under the jurisdiction with limited appellate jurisdiction. There are 24 High Civil Procedure Code, 1908 (the Code), it is not strictly governed by Courts at the state and union territory levels (some states have more the provisions of the Code (see Indian Airlines Ltd v CERS, 1991, than one bench and each High Court has multiple courtrooms) NCDRC). exercising appellate jurisdiction over the district courts. Most High Consumer forums occasionally insist upon cross-examination Courts have original civil jurisdiction (allowing claims to be filed but evidence is generally recorded by way of affidavits and a sum- or to originate there) for matters over a specified threshold value. mary procedure is followed. In a recent case, the NCDRC ruled The Supreme Court of India exercises appellate jurisdiction over the that if a party seeks to cross-examine a deposing witness to test his High Courts and original jurisdiction only in certain cases such as or her veracity, the consumer forum or commission ‘should’ allow disputes involving state governments or fundamental rights. Most cross-examination. The consumer courts are somewhat inclined to civil claims are accepted subject to payment of ad valorem court fees, be lenient with procedure (particularly in relation to individual com- but no court fees are paid for consumer cases that form the bulk of plainants), and once the deficiency or defect has been demonstrated, product liability cases. the awards are also fairly reasonable rather than curative or penal. The Consumer Protection Act, 1986 (CPA) was enacted to create Some Supreme Court judgments have discouraged penalties or penal a special system of consumer courts (called district forums and state damages, but some awards include mental agony and inconvenience commissions). India now has 629 district forums, 35 state commis- damages, others lately have included minor penalties (the CPA was sions and the National Consumer Disputes Redressal Commission amended in 2002 to allow for ‘punitive damages’). (NCDRC). Large cities have more than one district forum and each state (and some union territories) have a state commission for appeals and original jurisdiction above a pecuniary limit. The 3 What are the basic pleadings filed with the court to institute, NCDRC has its seat at New Delhi and is vested with supervisory prosecute and defend the product liability action and what is the powers over the state commissions and district forums. The NCDRC sequence and timing for filing them? also has original jurisdiction above a threshold value of 10 million Most product liability actions begin with a consumer complaint. rupees. The consumer courts have a fairly wide jurisdiction in rela- India still does not have an excessively developed product liability tion to defective goods, product liability and deficiency in service. system involving statutory standards that can be enforced through Each district forum is headed by a person who is or has been, or is either civil proceedings or consumer court actions initiated by eligible to be, appointed as a district judge, and each state commis- the state. There are, however, specialist bodies that oversee prod- sion is similarly headed by a person who is, or has been, a judge of uct safety and compliance for particular industries like cosmetics, a high court. Apart from the above-mentioned district court struc- pharmaceuticals and drugs, foods, motor vehicles and many other ture, there are a number of judicial tribunals that have been set up industries. These may be regulated through general standards of the under different special laws. These include the Income Tax Appellate Bureau of Indian Standards (BIS), and in the case of a defective prod- Tribunal, Company Law Board, Competition Commission of India, uct certified to be BIS complaint, the complaint may be addressed Customs, Excise and Service Tax appellate tribunals, debt recovery to the consumer affairs and public grievances department of the tribunals, Telecom Regulatory Authority of India, etc. These tribu- BIS. It is also possible to file a complaint with the relevant specialist nals function subject to the supervisory jurisdiction of their respec- regulator such as the Food Standards and Safety Authority of India tive appellate tribunals (such as the Competition Appellate Tribunal) (FSSAI) created in September 2008. and in some cases the relevant High Court or the Supreme Court. An ordinary complainant or plaintiff has the option to proceed by initiating a consumer complaint or a civil suit for recovery. In both instances, it is possible to claim money along with other reliefs 2 What is the role of the judge in civil proceedings and what is the like mandatory injunctions for products to be fixed or replaced role of the jury? and even for defective goods to be withdrawn from the market. The role of judges in a civil proceeding is purely to adjudicate between Injunctions may be granted to restrain the sale of a defective product adversaries. The system does not admit inquisitorial proceedings. All or hazardous goods. matters, even those involving the state, are adversarial. India has no A civil suit is initiated by filing a plaint in a court of origi- functioning jury system for trials and the last jury trial took place in nal jurisdiction such as the district court or a High Court having www.gettingthedealthrough.com 85 INDIA I.L.A. Pasrich & Company territorial jurisdiction over the defendants. A similar procedure is that the court is then required to formulate the proposed terms of prescribed for consumer complaints, but in consumer cases the pro- a settlement before referring the parties to arbitration, conciliation cedure is simpler and quicker without the ad valorem court fees. or mediation (some mediation or ‘judicial settlement’ is handled by A consumer complaint can be initiated without much attention to the people’s courts). Order XXIII, rule 3 of the Code also lays down prescribed formats even in the form of an ordinary letter addressed that in the event the parties arrive at a settlement, a court ‘shall’ to the consumer court. pronounce judgment in terms of the settlement, leaving no scope for Once a plaint is filed in a civil court, a response (written state- adjudication. It is now a common practice in most civil proceedings ment) has to be filed within 30 days from the date of service, with for the courts to compel the parties to appear before a mediator admissions and denials in response to each of the allegations con- (especially where there is a mediation centre available) and some of tained in the plaint. The plaintiff is usually allowed to file a rejoin- the learned judges also try to reduce long-pending disputes by meet- der or replication in response to the written statement; especially ing the parties in chambers to resolve the matter. if the defendant counterclaims. Such formal requirements do not The people’s court or Lok Adalat set up under the Legal Services exist under the CPA but it is common for parties to approximate the Authorities Act, 1987 is a conciliatory body and many courts refer consumer court procedure in a similar but simpler manner without disputes to the people’s courts. It is permissible for a people’s court pre-set formats. There is no provision for a counterclaim or claims to return a report to the court or forum to the effect that the parties in a consumer case. Once pleadings are complete, it is common for were unable to settle their differences. The people’s courts aim to evidentiary affidavits to be filed on behalf of the plaintiff. At this urge settlements that result in the closure of a case without the pos- stage, the civil proceedings differ significantly from those before a sibility of an appeal. Some of these new practices have resulted in consumer forum since civil proceedings require the plaintiff’s and quicker closure of disputes, which used to take years, especially due the defendant’s evidence to be recorded followed by cross-exami- to the subsequent appellate proceedings. nation of their witnesses, that is, trial procedures, whereas in a con- sumer case, the complainant and the opposite parties are given an 6 What is the basic trial structure? opportunity to file their evidentiary affidavits and the matter is usu- ally decided without cross-examination, allowing the parties to file The basic trial structure for a civil case involves hearings on a peri- written submissions and to address brief arguments. odic basis whereby trial dates have one or more witnesses examined and the remaining witnesses presented for another trial date. Several hearings with witness examination, sometimes spread over a long 4 Are there any pre-filing requirements that must be satisfied before period, culminate in conclusion of the trial before a case is treated a formal law suit may be commenced by the product liability as ripe for final arguments. The length of an adjournment depends claimant? upon court availability determined by a court diary. Witnesses are The CPA does not contain pre-filing requirements, but it is common supposed to be examined and cross-examined on the same day, but for parties to issue a legal notice that may or may not result in a it is not uncommon for a key witness to be examined over several dispute being settled before the complainant approaches a consumer trial hearing dates. Live testimony is commonly recorded when the forum. Legal notices are often relied upon by the claimant but they witness is being cross-examined, but an examination-in-chief is do not have special evidentiary value. now furnished by affidavit. Court proceedings are open under sec- In the civil court system, there is presently no requirement for tion 153B of the Code; however, a proviso appended to the same mandatory mediation or conciliation, but most civil courts do sug- section empowers the presiding officer of the court to restrict the gest mediation or conciliation at the initial stages of a fresh lawsuit. access of the general public to the court premises in cases where he The conciliation process has recently been streamlined by newly or she deems fit. Since the establishment of the District Consumer established mediation centres; these are established in some of the Dispute Redressal Forums, nearly 3.4 million consumer complaints High Courts and some are being set up outside the court system by have been filed, out of which 3,123,773 consumer complaints have chambers of commerce. The relevant mediation centre is often the been disposed of. Consumer cases do not involve regular trials and subject of a reference in the interim orders of the court, and, increas- ordinarily the consumer courts only allow exchange of affidavits to ingly, consumer cases are being referred to the people’s courts (see prove facts contained in the complaint or in the reply of the opposite question 5). party or parties. Some consumer courts still insist upon a trial pro- cedure involving cross-examination or impose it for a special case. The process of affidavit exchange (and thus recording of evidence) 5 Are mechanisms available to the parties to seek resolution of a can take up to six months. case before a full hearing on the merits? Under the provisions of order XII, rule 6 of the Code, courts may, at any stage of the suit, pass a judgment in terms of such facts as are 7 Are there class, group or other collective action mechanisms admitted in the ‘pleading or otherwise’ and similarly, under order available to product liability claimants? Can such actions be VII, rule 11 a court may reject a plaint that does not disclose a cause brought by representative bodies? of action or is barred by any law in force. A partial or full decree Class or group actions are recognised under the CPA under section in favour of a plaintiff may result if the defendant admits the case 2(b)(ii), which recognises ‘any voluntary consumer association reg- of the plaintiff resulting in a summary judgment to that extent. In istered under the Companies Act, 1956 or under any other law for certain matters such as money claims under order XXXVII, rule 3 the time being in force’ as a complainant to initiate a complaint on of the Code (providing for summary trials), the plaintiff may claim behalf of affected consumers. Section 2(b)(iv) provides for a com- a liquidated sum that appears to be due from the defendant and if plainant to include ‘one or more consumers, where there are numer- there is no apparent excuse for non-payment, the court may direct ous consumers having the same interest’. However, these are different immediate deposit or payment of the undisputed amount. However, from the class action law suits common in jurisdictions such as the a defendant may apply for liberty to defend a summary suit through United States. The Civil Procedure Code also allows any number an affidavit explaining his or her defence and then the same suit of plaintiffs (under order 1, rule 1) to file a suit against the same would be converted to an ordinary suit, if leave to defend is granted. defendant (or defendants) if the relief claimed arises out of the same Apart from the summary procedures built into the Code, section 89 act or series of acts. In such cases, the award may be apportioned provides for a situation ‘where it appears to the court that there exist among the plaintiffs in such manner as the court deems fit. There elements of a settlement which may be acceptable to the parties’ so remains an express prohibition to prevent Indian lawyers charging

86 Getting the Deal Through – Product Liability 2014 I.L.A. Pasrich & Company INDIA contingent fees or for that matter any success-related remuneration. Evidentiary issues and damages Lawyers and law firms cannot advertise product liability claims and seek out victims. While it is possible for an individual consumer to 9 What is the nature and extent of pretrial preservation and advertise for similarly affected parties to join him or her, this has also disclosure of documents and other evidence? Are there any not been commonly pursued. As a result, it is still uncommon for a avenues for pretrial discovery? group action to be initiated through an ordinary tort claim. Apart The documentation required for a consumer case is significantly less from the few occasions in which such actions have been initiated than that which may be required to discharge the onus of proof in a by non-government organisations, societies and consumer protec- civil suit. In both cases, there are sufficient provisions for pretrial dis- tion associations set up for this express purpose, very few concerted covery, but in practice these are not pursued actively and most par- actions are taken in cases where consumers are similarly affected ties simply rely upon their own documentation. For consumer cases, against a particular tortfeasor. the district forum is empowered to summon and enforce the attend- ance of any defendant or witness, to order discovery and production of any document or other material object able to be produced as 8 How long does it typically take a product liability action to get to evidence and to requisition reports for analysis or testing from an the trial stage and what is the duration of a trial? appropriate laboratory or other relevant sources. These powers are There are three different possible proceedings that could be initiated exercised occasionally and on an application of the concerned par- for product liability actions and these proceedings can be initiated ties seeking discovery. Discovery is also sometimes sought in rela- in any of several hundred possible courts around the country. The tion to government bodies through the Right to Information Act, time taken for the case to run through a trial process and up to the 2005 that can also be used to obtain product standards and norms final judgment depends upon whether it is a consumer complaint specified by the authorities, as well as the conditions prescribed by a or a civil suit, and in some rare cases, it could also involve either government regulator or other information that is available with a an action against the regulator (by a writ proceeding) or an action government instrumentality. Although there are also powers of dis- by a regulator. There is also a complaints procedure with statutory covery set out in the Code for an ordinary civil suit, lawyers and ombudsmen for certain industries. In the case of food, the regulator parties do not use these extensively. The relevant provisions in the is the Food Safety and Standards Authority of India (FSSAI) whose Code are set out under order XI, which allows for discovery and powers include the power of entry and inspection, search and sei- inspection by means of interrogatories and otherwise. zure and power to take samples and destroy defective food items. Similarly, the prescribed authorities for drugs and cosmetics include the drugs inspector, drugs controller, etc, whose powers include the 10 How is evidence presented in the courtroom and how is the power of entry and inspection, power to collect samples, search and evidence cross-examined by the opposing party? seizure, power to order production of a book, record, evidence, etc. There is no existing system for recording evidence through technical Where public complaint and grievance redressal procedures are apparatus in Indian courts even though there are a few e-courts with prescribed by statute, the authority may also be required to decide a documentation uploaded on a computer to enable the court to avoid complaint within a set time frame and then the outcome can be chal- paper files. Evidence is recorded by the presiding officer, supported lenged by way of appeals provided for within these laws. Taking an by the court’s staff, on a computer that usually has two screens so ordinary civil suit as the most common form of litigation, for prod- that the deponent is able to see the deposition as it is taken down. uct liability claims (such claims could easily cover anything from In consumer courts, it is common to submit evidentiary affidavits tents to tunnel-boring machines), the jurisdiction depends upon and most consumer courts avoid a trial involving cross-examina- the cause-of-action and whether the defendant has a branch office tion. However, where cross-examination is demanded by a party, an within the territorial limits of the court where the case is being filed. opportunity to cross-examine the relevant witness or all witnesses A typical trial takes upwards of two to three years depending on should not be denied by the consumer courts. This was stated by the court where the case is initiated. Some fast-track courts decide the National Commission in the case of Salgaocar Medical Research a civil dispute pending in that forum or commission within six to Centre v PB Raikar [(1996) 2 CPJ 209]. Cross-examination is car- 12 months while others can take several years due to the backlog ried out in a civil trial by the counsel for the opposing party. An that remains high as a national average. The CPA provides that each affidavit is filed, exhibited along with oral testimony and then docu- district forum shall ordinarily endeavour to decide a consumer dis- ments are marked with a short examination-in-chief that is often pute finally within three months from the date of receipt of notice followed by a (usually exhaustive and exhausting) cross-examina- by the opposite party and within five months where the complaint tion process. The latter can take up multiple court dates. The oppos- requires testing or analysis of commodities, but in practice these dis- ing party’s counsel is permitted to ask questions on the documents putes can take much longer in certain parts of the country. With that have been exhibited by the witness as well as other documents over 629 district forums and 35 state commissions, the handling of placed on record. these disputes across India is varied, and much depends upon court resources, support staff and the number of disputes pending in that 11 May the court appoint experts? May the parties influence the forum or commission. appointment and may they present the evidence of experts they Since class actions are uncommon, there is little material avail- selected? able with regard to the extent of time taken for product liability issues involving a large number of plaintiffs or complainants, but Civil courts are empowered to appoint experts but the procedure such cases generally take much longer especially with successive is treated as an independent process involving a commissioner that rounds of appellate litigation. will report to the court. Order XXVI provides for the appointment The process of dealing with the original complaint, subsequent of commissions to inquire into questions involving scientific investi- appeals to the state commission and then an appeal to the national gation, adjustment of accounts, taking evidence, etc. Ordinarily, the commission depends on the district and state where the case is filed report of the commission is treated as evidence except in circum- and the outcome of each appeal, so that it can take more than two stances where the court deems fit to order further inquiry. Experts to four years. may be appointed by consumer forums or courts, depending upon the facts and circumstances of each case. However, the case should be complicated enough to require the opinion of an expert. As per section 45 of the Indian Evidence Act, expert testimony is possible www.gettingthedealthrough.com 87 INDIA I.L.A. Pasrich & Company but generally cross-examination does follow the expert testimony The law with regard to product liability follows general princi- and opinions are limited to highly technical points. Section 13(4) of ples set out for consumer cases in judgments of the NCDRC or the the CPA grants them the power to requisition a report or test result Supreme Court. The NCDRC has held that the award of compen- from an ‘appropriate laboratory’ or ‘other relevant source’ similar to sation has to be made on well-recognised principles governing the provisions in the Code of Civil Procedure, so that expert evidence is quantification of loss or injury suffered to assess compensation and usually sought through a court-requisitioned report rather than oral not arbitrarily; compensation is granted only for the monetary loss testimony and cross-examination. Parties are always free to adduce actually suffered and not for any imaginary or indirect loss (see the expert evidence. Un-rebutted expert evidence may be accepted case of Punjab Tourism Development Corporation Ltd, Chandigarh especially if the respondent company fails to examine the defec- v Kirit P Doshi, 1997 (5) CTJ 186 NCDRC). tive product or the resulting damage. In the case of National Seed The law of tort in India still follows English precedent and, as Corporation Ltd v M Madhusudhan Reddy and Another (AIR 2012 such, the reasonable foresight principle continues to limit damages SC 1160), involving a consumer complaint about defective seeds, (see Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co the Supreme Court did not display much sympathy for the appeal- Ltd [1961] AC 388; and the Indian cases following this case such as ing company when it failed to examine the resulting crop, let alone Leena Mathew and Others v The Kerala Shipping Corporation Ltd produce expert evidence to refute the evidence of the complainants’ 1988 (1) KLT 212, Rajkot Municipal Corporation v Manjulaben experts and the company’s appeal was dismissed. In contrast, in Jayantilal Nakum and Others 1992 ACJ 792, etc). Some recent cases Royal Enfield Motor Ltd v Kulwant Singh Chauhan (II, 2011, CPJ, speak of exemplary or penal damages and this interesting trend (and 489) the NCDRC accepted the evidence on affidavit of the com- its impact on insurance) is worthy of careful observation. In the case pany’s two witnesses and dismissed the complaint refusing to find of Mrs Rashmi Handa & Ors v OTIS Elevator Company (India) Ltd a ‘manufacturing defect’, stating that the complainant had failed & Ors [I(2014)CPJ344(NC)], the National Commission (NCDRC), to prove the defect. The NCDRC relied on the Supreme Court of recently awarded damages of more than 30 million rupees along India’s oft-cited judgment in Maruti Udyog Ltd v Susheel Kumar with interest at the rate of 9 per cent due to a faulty lift (elevator) Gabgotra & Another (2006) CPJ 3 (SC). In the case of Ganesh Ram leading to the death of a senior government officer. The NCDRC v Prop. Kisan Agro Sales [(2004) (III) CPJ 17 (NC)], the National followed precedents relating to death caused in motor accident cases Commission, while determining whether or not there was a defect (using a multiplier based on the age of deceased times income and in the seeds, heavily relied on the seller’s expert report and decided dependency with provision for income growth plus interest) and the case against the complainant solely on the basis of the expert’s apportioned the greater part of the award on the manufacturer and report, which did not find any defect in the seeds. In a case where a service provider, namely, Otis (70 per cent), the employer (Chairman vehicle had to be taken to a workshop 36 times during its warranty of the Research and Analysis Wing) was only held liable for 5 per period, the National Commission relied upon the doctrine of res ipsa cent of the award and the Military Engineering Services who han- loquitur and upheld the State Commission’s award against the man- dled day-to-day maintenance were held liable to the extent of 25 ufacturer, see Tata Engineering & Locomotive Co Ltd (TELCO) v per cent. Subhash Ahuja and Another (FAO531/08, decided 13 April 2013). In Maruti Udyog (see question 11), the Supreme Court held that a warranty condition referred only to replacement of the defective part and not the car, or its price through a refund). In an old case of 12 What types of compensatory damages are available to product 1993, the NCDRC held that replacement of the whole machine is liability claimants and what limitations (if any) apply? not necessary and ‘would be prejudicial to the interest of the man- The consumer protection law provides for punitive damages (see ufacturer’ without sufficient cause. Claims for refund of the price the proviso to section 14(d) of the CPA), but punitive damages of the car are usually unsuccessful where the defective part can be are rarely awarded; instead there is commonly an award made for replaced, but some compensation for mental agony and inconven- ‘mental agony and suffering’ (see Jose Philip Mampillil v Premier ience is awarded (see Honda Siel Cars India Ltd v Indra Pati Singh Automobiles Ltd, AIR 2004 SC 1529), which may cover non- and Others (I (2011) CPJ 382). Guidelines for granting compensa- compensatory damages that derive from inconvenience caused to tion by have been set by the National Commission (see Ghaziabad the complainant. Such damages may be said to cover psychological Development Authority v Yogesh Chandragupta [I (2005) CPJ 23 injury, but are usually quite conservative (from the point of view of NC). the tortfeasor) and can even be seen as ‘reasonable’ in most cases. Most of the consumer courts thus award quick relief without exces- sive trial procedures while maintaining a relatively low scale of dam- 13 Are punitive, exemplary, moral or other non-compensatory ages, which covers actual loss or damage and a reasonable amount damages available to product liability claimants? towards mental agony and suffering. Although the Act does not Punitive, mental agony and other non-compensatory damages have allow for punitive damages, the question of whether punitive dam- been discussed in response to question 12, but it may also be men- ages can be awarded by a civil court through a lawsuit (that claims a tioned that the concept of moral damages is not generally applied large amount to discourage similar conduct in the future) has not yet in India. been decided. This probably derives from the fact that most courts require payment of court fees based on the amount of the claim, Litigation funding, fees and costs but, in addition, it is also uncommon for courts to tax negligence or impose penalties that would also be regarded as a windfall to the 14 Is public funding such as legal aid available? If so, may potential claimant. Some courts have imposed fines, especially in cases involv- defendants make submissions or otherwise contest the grant of ing death, serious injury or ‘total failure to take reasonable care’. The such aid? compensation is usually not restricted to simple reimbursement of Legal aid is available in India and the criteria for receiving it is speci- expenses and the cost incurred consequent to the tortfeasor’s negli- fied in section 12 of the Legal Services Authorities Act, 1987. This gence, but extends to a reasonable figure for the harassment caused makes it possible for poor and indigent litigants to initiate and con- (see C Venuprasad General Manager (Operations) Premier Vinyl tinue legal proceedings at different levels of the legal system. Each Flooring Ltd. and others v M/s Narangs International Hotel Pvt Ltd of the High Courts has a legal aid cell and it is common for courts and OTIS Elevator Co (India) Ltd where the hotel operator was to award costs that are payable to the relevant High Court legal aid held liable and Otis was exonerated, having warned the hotel about cell. We should, however, point out that a manufacturer of a product preventative maintenance on numerous occasions. as a potential defendant would usually be beyond the criteria for

88 Getting the Deal Through – Product Liability 2014 I.L.A. Pasrich & Company INDIA legal aid and they are thus left to defend a product liability claim defective. The Act also defines ‘defect’ to mean ‘any fault, imperfec- without legal aid. tion or shortcoming in the quality, quantity, potency, purity or stand- ard which is required to be maintained by or under any law for the time being in force or under any contract, express or implied, or as 15 Is third-party litigation funding permissible? is claimed by the trader in any manner whatsoever in relation to Although there is no express bar to third-party funding of litigation, any goods’. There are other specific statutes that contain provisions this is relatively uncommon in India. To the extent that a third party relating to product safety, standards and regulations such as: may participate in a property-related dispute, there are occasions • the Food Safety and Standards Act, 2006; where third party funding may be resorted to so that the owner of a • the Drugs and Cosmetics Act, 1940; disputed property can pursue his or her title with outside assistance, • the Agricultural Produce (Grading and Marketing) Act, 1937; but this is practically unknown for tort or product liability claims. • the Bureau of Indian Standards Act, 1986; The difficulty in relation to third-party funding probably derives • the Insecticides Act, 1968; from the rule prohibiting lawyers from accepting contingency fees • the Standards of Weights and Measures Act, 1976; and so that a third party would not necessarily invest funds after arriv- • the Energy Conservation Act, 2001 ing at an agreement with the complainant or plaintiff with a similar arrangement arrived at with the concerned lawyers. India also does A general duty is also imposed under the Sale of Goods Act, 1930 not presently have a mass tort litigious society and as such insurance whereby the sale is subject to implied conditions as to quality or fit- costs, payments, awards and even court-assisted settlements result in ness, merchantable quality and conformity with the sellers’ descrip- low-level payments making it uneconomic for a third party to fund tion. In some cases of goods being sold without warranty or other litigation. standard conditions in favour of the purchaser, the courts may occa- sionally resort to custom or trade practice to determine the normal 16 Are contingency or conditional fee arrangements permissible? antecedents of a sale in the relevant product. The Competition Act, 2002 came into force after some amendments in May 2009. The Act The Bar Council of India rules, which apply to the entire union of amended the Consumer Protection Act, 1986 (CPA) to insert refer- India provide that: ‘An advocate shall not stipulate for a fee con- ences to unfair trade practices (UTPs) (deriving from the repealed tingent on the results of litigation or agree to share the proceeds Monopolies and Restrictive Trade Practices Act, 1969). UTPs are thereof’ (rule 20) and thus prohibit an advocate from accepting a defined in section 2(r) of the CPA, covering any form of false or contingency or conditional fee arrangement. misleading representation, statement or advertisement. These are actionable through the usual consumer complaint process. 17 Can the successful party recover its legal fees and expenses from the unsuccessful party? 19 What other theories of liability are available to product liability In a case decided by a civil court, the court can order payment of claimants? costs incident to the suit (costs follows the event). The Code expressly Tort law is the foundation for non-contractual claims, but the law provides: ‘Where the Court directs that any costs shall not follow the of tort in India has been overlaid with a rich variety of case law event, the Court shall state its reasons in writing’. However, despite arising from consumer complaints, appellate decisions in the field this provision, it is rare for the courts to actually impose even the of consumer law and recently some involvement of the Competition actual costs incurred by a successful defendant, let alone compensa- Commission of India in relation to conditions affecting the sale of tory costs in respect of false or vexatious claims or defences. Express certain products. Product liability claimants thus have recourse to provision is made in the Code for compensatory costs on account of their contractual rights where there is a written contract or a printed a false or vexatious claim and similarly the Code also provides for warranty supplied with the product, in addition to consumer and costs to be imposed for causing delay. It would thus be apparent that tort remedies. It is also possible in some instances for an affected although provisions exist for the loser to pay and for costs to follow party to file criminal complaints against the supplier of a defective the event, most judgments of the superior courts in India end with product if it has caused death or serious bodily harm, such com- the words ‘no costs’ or similar expressions that impose the cost of lit- plaints accelerate settlements. igation on the respective parties. An example of costs quantified on a rough and ready basis by the Supreme Court of India can be found in the case of Jose Philip Mampillil v Premier Automobiles Ltd (AIR 20 Is there a consumer protection statute that provides remedies, 2004 SC 1529) where the court rejected the winning appellant’s imposes duties or otherwise affects product liability litigants? claim for costs (for lack of proof) but awarded a percentage of the There is the Consumer Protection Act, 1986 that has been described claim. The conservative award of costs is explained as a policy meas- above. The Act does not contain provisions that impose new statu- ure that avoids discouraging the poor litigant from approaching the tory duties, but is formulated to allow for complaints against defec- courts. In one recent (and unusual) National Commission case costs tive goods or goods that will be hazardous to life and safety when were awarded against the consumer when he lost the appeal even used or offered for sale to the public. The general provisions of this though his original claim had succeeded in two courts below (see law, as explained above, cover faults, imperfections, shortcomings in H&R Johnson (India) Ltd & Ors v Lourdes Society Snehanjali Girls the quality, quantity, potency, purity or standards that ought to be Hostel & Ors [IV (2013) CPJ 475 (NC)]). maintained under any law for the time being in force or under any contract, express or implied. Depending on the claimed amount, the Sources of law district forums, state commissions and the national commission are adequately empowered under the Act to provide any of the follow- 18 Is there a statute that governs product liability litigation? ing reliefs in the case of defective goods or products: Unlike the EU’s Product Liability Directive 85/374/EEC, India does • to remove the defect; not have a general product liability statute, but there are several • to replace the goods with new goods of a similar description, general laws that protect consumers from defective products. The which shall be free from any defect; Consumer Protection Act, 1986 has provisions for a complaint to • to return the price or consideration to the complainant; be filed in relation to goods that are hazardous to life and safety (in contravention of any standards imposed by law) or otherwise www.gettingthedealthrough.com 89 INDIA I.L.A. Pasrich & Company

• to pay such amount as may be awarded as compensation to the (see TC Balakrishnan Menon and Ors v TR Subramanian and Anr consumer for the loss or injury suffered by the consumer due to [AIR 1968 Ker 151]). The Union Carbide cases involving the Bhopal the negligence of the other party and in a fit case to award puni- gas leak disaster, arising out of a product that was not on the market tive damages; and was in fact part of a manufacturing process also gave rise to • to discontinue the unfair trade practice or the restrictive trade significant pronouncements (and some novel theories) in the field practice or not to repeat them; of tort and general dangerous products liability. We have avoided • to cease and desist manufacture of hazardous goods; detailed reference to this case on account of the uncommon circum- • not to offer hazardous goods for sale; and stances. The Regulations on Food Recall Procedures enforced from • to withdraw hazardous goods from being offered for sale. 2013 require ‘reasonable efforts’ to be made by the FSSAI (Food Safety and Standards Authority of India) to communicate with the end user or customer with specific reference to electronic media 21 Can criminal sanctions be imposed for the sale or distribution of (e-mails, telephone calls and press announcements) and it is yet to be defective products? seen how these affect the relevant product sales. Some of the relevant laws impose criminal sanctions in the form Where a regulator fails to impose fines or effect its statutory of punishments for a violation of standards, adulteration or for the mandate, Indian constitutional law furnishes a commonly used writ sale of unsafe or hazardous or spurious products. Criminal product remedy that can involve private parties as respondents with the pos- liability may arise for non-compliance with statutory requirements, sibility of courts ordering payment of compensation. This was done some examples of regulatory laws affecting product sales, manufac- in a motor accident case and a case involving 54 deaths arising from turing or distribution are: a fire in a cinema hall caused by an electrical transformer. • the Agriculture Produce (Grading and Marking) Act, 1937; The law relating to product recall in India is evolving and we • the Indian Standards Institutions (Certification Marks) Act, have noticed recent provisions that require recall for perilous or 1952; defective products. Industries have been slowly following or enforc- • the Food Safety and Standards Act, 2006; ing global standards ever since the advent of the internet, which • the Drug and Cosmetics Act, 1940; allows activist litigants to obtain information about standards • the Standards of Weights and Measures Act, 1976; and imposed outside India, complied with by global manufacturers (out- • the Indian Penal Code, 1860. side India) and flouted in India. The courts have also become quick to appreciate international norms and apply these to test defective In most cases, it is the state or central government that initiates pros- products. Examples of such innovative judicial pronouncements can ecution for breach of statutory provisions. The Bureau of Indian be found in relation to consumer products like mobile phones and Standards Act, 1986 imposes monetary penalties without necessar- cars. ily treating the relevant violation as an offence, but the same act also imposes criminal sanctions (imprisonment for a term, which may extend to one year or a fine of up to 50,000 rupees, or both) for 23 What breaches of duties or other theories can be used to improper use of the ISI standard mark or any colourable imitation establish product defect? thereof without a valid licence (granted by the bureau). The Act defines ‘defect’ in a manner that is sufficiently broad (see There have been instances of the ordinary criminal law being references above to this) to cover fitness for purpose and express or applied for product safety cases; if a product was made negligently implied standards, but there is no express reference to ‘design’ so it in such a manner as to cause death or endanger the personal safety of would have to be treated as incorporated by reference in the expres- others, or if a product caused death due to a negligent act of another sion ‘fitness for purpose’. The usual civil law remedies such as a suit (operator, manufacturer or repairman), criminal proceedings could in a court of original jurisdiction seeking damages on account of a be commenced by the state. In some instances, provisions relating to defective product, damages for breach of warranty (within the war- cheating have been used with regard to the sale of spurious or defec- ranty period) and even prayers for mandatory injunctions to com- tive products. The criminal law (Indian Penal Code) contains provi- pel the defendant to repair, replace, recall or otherwise mitigate the sions for fraudulent use of weights and measures and also in relation damage caused by a defective product have been effectively pursued to adulteration of food and drink, drugs, etc, so that punishment in Indian courts, though sometimes the remedy can take far longer (imprisonment or a fine, or both) can be imposed in such cases. The than a normal commercial process could easily tolerate. Certain Food Safety and Standards Act, 2006 provides for imprisonment for products carry warnings about the type of use they are intended life and a heavy fine to discourage manufacture, storage, sale, dis- for so as to bypass the implied fitness for purpose provisions of the tribution or import of any article of food for human consumption Sale of Goods Act, 1930, and most warranties contain similar lan- that is unsafe and for similar wrongful conduct. Some other interest- guage so as to limit the manufacturer’s liability for damages, etc, ing statutes can occasionally cause unexpected consequences such as replacement or even simply repair. Interestingly, consumer courts in the Drugs & Magic Remedies (Objectionable Advertisements) Act, India, being generally inclined to favour the evidence of a consumer, 1954, which provides for imprisonment consequent to an advertise- treat technical defences adopted by manufacturers with some dis- ment for a product claiming to cure any of the ailments specified in dain and rarely allow reliance upon long-winded warranty clauses the Act (such as appendicitis, arteriosclerosis, cancer, blindness etc). especially if they are incorporated by reference into a manufacturer’s standard warranty (see General Motors v Major Gen B S Suhag [2008 decision of the NCDRC]). Occasionally the consumer courts 22 Are any novel theories available or emerging for product liability treat a complainant’s case with suspicion when it is apparent that claimants? the product has already been well-used and without complaint (see In the absence of a special product liability statute or other law impos- the Royal Enfield case cited above in answer to question 11 and ing liability for defective products, it is difficult to find any novel General Motors India Pvt Ltd v GS Fertilizers [2013 decision of approaches employed by product liability claimants. Indian law is, the NCDRC]). Expiry of the warranty period may not prevent a however, dynamic and often driven by equitable considerations with court from awarding damages when the cause of action is stated to all the civil courts having an equitable jurisdiction recognised by have occurred during the warranty, and in some cases the consumer the Supreme Court. Where there is a lack of special statutory provi- forum may even extend the warranty for the period of distress (see sion, the lacuna may be filled by a common-sense judicial approach Balaji Motors v Devendra and Another [II (2013) CPJ 534 (NC)]). as was necessary in an old case involving (unregulated) fireworks

90 Getting the Deal Through – Product Liability 2014 I.L.A. Pasrich & Company INDIA

24 By what standards may a product be deemed defective and who & Ors v OTIS Elevator Company (India) Ltd & Ors [I(2014) bears the burden of proof? May that burden be shifted to the CPJ344(NC)]). opposing party? What is the standard of proof? The law of contract admits claims depending on privity and There is no clear objective standard for a product to be deemed generally allows for damages based on the ‘loss or damage caused defective except where specific rules have been set out by a statutory [...] which naturally arose in the usual course of things from such authority such as the Bureau of Indian Standards, Food Safety and breach’. Although tort law is intended to be more restrictive (dam- Standards Authority, Bureau of Energy Efficiency, Export Inspection ages based primarily on reasonable foresight), it allows for more Council, etc. A court may grant damages to the affected party if it potential defendants. considers a product as defective on account of proven facts. The burden of proof lies on the claimant (subject to evidentiary rules 26 What is the standard by which causation between defect and derived from English law that sometimes cast the burden upon the injury or damages must be established? Who bears the burden other side) and the standard of proof is the normal civil standard, and may it be shifted to the opposing party? namely, preponderance of evidence or balance of probabilities to be decided by the adjudicating officer or court. The NCDRC has held Causation requires a direct link between the product defect and the that although the strict rules of evidence do not apply for consumer injury caused. A possible novus actus interveniens (outside act or cases, ‘the dispute is to be decided on the yardstick of reasonable intervention of a third party) can be asserted as a defence to the probability on the basis of the facts brought on record’. As discussed principle of causation (in K Madhusudan Rao v Air France, Revision above in response to question 11, reliable and un-rebutted evidence Petition No. 3792 of 2008 decided by the NCDRC on 1 April 2010, may be accepted depending on the facts and circumstances, espe- a case was successfully defended relying on this principle). In other cially if the court considers the witnesses to be unbiased. Witness words, the product defect must be treated as a sine qua non or causa evidence can equally be rejected if the witnesses seem inclined to be causans for the injury and not a contributing factor. biased or in the event of contrary testimonies or affidavits. The con- The law in this regard derives from a few unfortunate cases such troversy is usually decided simply on the basis that the evidence of a as one involving a defective unserviced escalator, which caused the particular witness seems more credible or reliable. Product liability death of a minor (Geeta Jethani and Others v Airports Authority of of the manufacturer or seller can sometimes be avoided by labels India [III, 2004 CPJ 106 NC]). Although the manufacturer (Otis) that the product carries ‘no guarantee’, ‘no exchange’, ‘no return’ was made a party to the litigation, it was not held liable, due to or that the company shall not be responsible after the product is the lapsed warranty and maintenance contract so that the owner- installed. The manufacturer or seller was held liable for deficien- operator of the escalator was held to be negligent. The doctrine of cies in the product in the case of Sandeep Marbles v Jagdev Singh [I res ipsa loquitur may be invoked to transfer the burden of proof (2014) CPJ 116 (Punj.)], but in a recent National Commission case, onto the manufacturer. In such cases it could be argued that main- the NCDRC took the view that use of the product during the dispute tenance should only be required to ensure that the machinery func- and an exemption clause on the box (‘ the company shall bear no tions at its optimum capacity, but the manufacturing process should liability after the tiles are fixed’) were sufficient to fully displace the be such that there are built-in safety mechanisms (such as an auto- manufacturer’s liability. (See H&R Johnson (India) Ltd and Ors v cut mechanism in the case of an escalator) to prevent the machine Lourdes Society Snehanjali Girls Hostel and Ors [IV (2013) CPJ from becoming hazardous, and the absence of such safety mecha- 475 (NC)]). nisms should be considered a defect in the manufacturing process. If, following an accident that caused death or injury such as in Geeta Jethani, it was assumed that the product was defective, then the 25 Who may be found liable for injuries and damages caused by manufacturer must establish that the defect (or other failure due to defective products? bad maintenance) was not noticeable as one that derived from the The law provides that any person who trades in goods or provides manufacturing process. Ordinarily the burden of proof to demon- services in any manner, such as the manufacturer, seller, importer, strate that a product caused a specific injury would be on the claim- distributor, wholesaler, packer, retailer, etc, may be held liable for ant, but there have been several instances of defects leading to an injuries or damages, or both, caused by defective or spurious prod- unreasonable number of visits to the workshop (see TELCO case, ucts. However, the courts tend to fix liability for defective prod- question 11) or where engine replacement was necessary during the ucts predominantly on the manufacturer. In Ram Shankar Yada warranty period (see Honda Siel Cars case, question 12). The burden v JP Associate Ltd [I (2012) CPJ 110 NCDRC] paragraph 5, the of proof to show any defect in goods is on the person who alleges the National Commission observed: ‘In any case, it is settled law that deficiency and the cost of getting the product tested must ordinarily for any manufacturing defect in a product, it is the manufacturer be borne by the party alleging the defect (see Jai Prakash Verma v JK and not the dealer who could be held liable.’ In reviewing the defi- Lakshmi Cement Ltd II (2013) CPJ 54 (NC)). nitions of ‘complaint’, ‘defect’, ‘deficiency’ and ‘trader’ (read with ‘manufacturer’ since ‘trader’ includes a manufacturer) contained 27 What post-sale duties may be imposed on potentially responsible in the Consumer Protection Act, one may find the foregoing state- parties and how might liability be imposed upon their breach? ment of law to be contradicted by the statute. Nevertheless, in our view this should be read in the context of a normal dispute where Post-sale duties are ordinarily imposed by contract in the form of a both the manufacturer and the seller or dealer are made parties and, warranty, and manufacturers generally limit the terms of the war- where the manufacturer is unavailable or out of India, the complaint ranty so as to avoid consequential loss or damages on account of would lie only against the seller and the action would not fail for a defective product, leaving themselves liable only to repair a prod- want of the seller’s fault in importing defective products. Similarly uct that has a ‘manufacturing defect’. The provisions of the Sale of if fault cannot be pinned on the manufacturer on account of bad Goods Act and the CPA (see questions 18 and 19) impose an auto- pre-sale storage conditions (in, for example, the sale of cement), then matic ‘fitness for purpose’ warranty and although this can be limited the manufacturer, dealer and even the retailer may be jointly liable by contract, consumer courts are not always open to technical limi- (see Bhopal Steels v Govind Lal Sahu & Others [III (2008) CPJ 89 tations imposed by a small-print warranty. There is now a new set NCDRC]). Thus, more than one party may be held liable in respect of recall procedures emerging from the Food Safety and Standards of the same damage, but again the apportionment of liability will Act, which require any food business operator to notify the FSSAI depend on a finding of fault (see the case of Mrs Rashmi Handa or initiate recall procedures if he or she discovers that the food pro- cessed, manufactured or distributed is not in compliance with the www.gettingthedealthrough.com 91 INDIA I.L.A. Pasrich & Company provisions of the legislation or is unsafe for consumption. Medical found to be defective, particularly if such defect is discovered during practitioners are now obliged to report all occurrences of food poi- the warranty or annual maintenance contract period, the manufac- soning brought to their attention to a ‘food safety officer’, so desig- turer or maintaining agency would be required to bear the burden nated under the Act. These and certain other statutory provisions of proof and prove that the product defect could not be discov- such as in the Drugs and Cosmetics Act require reporting, product ered within the limitations of science and technology at the time of recall, steps to contain distribution of a defective product and impose distribution. other positive post-sale duties. In National Seed Corporation Ltd v M Madhusudhan Reddy and Another (AIR 2012 SC 1160), the 30 Is it a defence that the product complied with mandatory (or Supreme Court rendered its judgment for the complainant (seed pur- voluntary) standards or requirements with respect to the alleged chaser) partially on the ground that the company had not responded defect? to complaints and its representatives had not even visited the field where the crop was said to be inadequate due to the defective seeds. It would certainly be arguable that a product that complies with In cases where an express warranty is provided by the manufacturer statutory standards or requirements is not defective and as such the as a part of its post-sales service commitment, the Consumer Forums compliance would be taken as a defence. are not inclined to extend this period of warranty or hold the man- ufacturer responsible for repairs beyond the contractual period of 31 What other defences may be available to a product liability warranty (Godrej GE Appliance Ltd v Satinder Singh Sobti (2000 defendant? (1) CPC 602 NC)). Most of the possible defences are mentioned above and these would include: contributory negligence; voluntary assumption of risk (for Limitations and defences example, in a stress test where the patient signs a disclaimer before 28 What are the applicable limitation periods? using the treadmill in a hospital); limitation (see Suresh Baban Gaekar v ICICI Bank and Others [II(2013) CPJ 474 (NC)]); juris- The applicable civil limitation periods are set out in the Limitation diction (see Executive Engineer, Irrigation Division, Gonda v Neeraj Act, 1963, which generally imposes a three-year limitation period Kumar [II(2013) CPJ 127]); locus standi (Amita Sharma v BHEL for all civil claims. The CPA actually reduces the limitation period [II(2013) CPJ 505(NC)]); the state-of-the-art defence; normal wear from three years to two years but allows for an extension of limita- and tear without an obligation to maintain a defective product (see tion if the ‘complainant satisfies the district forum, the state commis- General Motors India Pvt Ltd v GS Fertilizers (2013 decision of the sion or the National Commission, as the case may be, that he had NCDRC)); misuse of the product; third-party interference; contrac- sufficient cause for not filing the complaint’ within the period of two tual terms limiting liability; etc. For certain products purchased with years (see Pawan Kumar Kamra v JC Hospital (II (2013) CPJ 58). a clear contract setting out that the goods are sold on an as-is-where- However, the new trend is to seek specific reasons for the delay and is basis without any post-sale responsibilities of the seller, it would an unjustified delay is only condoned in exceptional cases and in also be a defence for the seller to state that the responsibility had the interest of justice (see DDA v Rajesh Tiwari (II (2013) CPJ 23B been assumed by the buyer. (NCDRC))for a case where the delay was reluctantly condoned and Satyam Computer Services Ltd v A Prakash and Another (II (2013) CPJ 18B (NCDRC)) where a delay of 56 days was not condoned. 32 What appeals are available to the unsuccessful party in the trial Some criminal offences are also subject to limitation. The court? Criminal Procedure Code, 1973 provides that the period of limita- An unsuccessful litigant can file a regular first appeal in an appel- tion for offences punishable with a fine only would be six months; late court if he or she is dissatisfied with the trial court judgment. where the offence is punishable with imprisonment for a term not Similarly, provisions for appeals from the district forum to the exceeding one year, the period of limitation is one year; and where state commission, and from the state commission to the National the offence is punishable with imprisonment for a term exceeding Commission are provided for in the CPA. It is also possible for one year but not exceeding three years, the period of limitation is an unsuccessful appellant or respondent to approach the Supreme three years. The period of limitation commences on the date of the Court of India if he or she is dissatisfied with a final judgment of offence or if the offence or offender is not known, the first day on the National Commission. An order attains finality if no appeal is which the offence comes to the knowledge of the person aggrieved filed within a prescribed period of limitation. The ordinary period by the offence, to the knowledge of any officer or the first day of limitation for an appeal is normally 30 days (plus the time taken when the identity of the offender is known. There is no limitation to obtain a certified copy of the judgment), except for appeals to for an offence punishable with imprisonment for a term of more the Supreme Court, for which the period is prescribed by the than three years. Constitution of India to be 90 days.

29 Is it a defence to a product liability action that the product Jurisdiction analysis defect was not discoverable within the limitations of science and 33 Can you characterise the maturity of product liability law in terms technology at the time of distribution? If so, who bears the burden of its legal development and utilisation to redress perceived and what is the standard of proof? wrongs? The state-of-the-art defence was relevant in the Geeta Jethani escala- Product liability law in India is developing rapidly along with tor case referred to in question 26 (it was a 14-year-old machine) increased consumerism and the advent of technology-driven prod- and this may have influenced the court’s decision not to impose ucts. There may be a need for a special product liability law, but this liability on the manufacturer since the escalator was old and hav- has not necessarily dented the availability of remedies since defective ing no responsibility for its maintenance, the question of defective products are covered both by special acts and also by the CPA. It design after so many years was not considered relevant. Given the may be possible in the future for heavier penalties and liabilities to reasonable foresight principle applied in tort cases that are approxi- be imposed so as to deter manufacturers, traders and distributors mated for the purposes of product liability, it would be reasonable from manufacturing or dealing with substandard products, but at to assume that if a product defect could not be discovered within present, India can ill afford to have the further burden of mass litiga- the limitations of science and technology at the time of distribution, tion or even substantial class actions and attendant higher awards. the manufacturer could exonerate itself. Once the product has been

92 Getting the Deal Through – Product Liability 2014 I.L.A. Pasrich & Company INDIA

Update and trends

Decisions of the consumer courts culminate in decisions of the and has demonstrated the usual inertial tendency to favour mass National Consumer Disputes Redressal Commission (NCDRC), and consumer benefit in preference to a careful consideration of each the NCDRC’s recent decisions and a decision of the Supreme Court food provider’s circumstances. Although this is an inherent problem suggest a noticeable shift towards acceptance of contract provisions with new legislation, we are hopeful that the new trend towards avoiding India’s previous equitable (and somewhat ambiguous) upholding business interests will also find its voice in decisions of leaning towards anyone who knocked on the consumer court’s doors. the appropriate authorities and judicial officers outside the consumer This trend reflects an appreciation of the business community’s courts in places such as the FSSAI. reliance on age-old doctrines such as caveat emptor and more The Competition Commission of India and its appellate body significantly demonstrates a balancing of the complainant’s and (the COMPAT) continue to give voice to consumer interests against consumer’s rights against those of the relevant trader, businessman cartels, abuse of dominance and a host of restrictive practices. This or manufacturer. The view that a relatively impoverished complainant is reflected in a recent COMPAT judgment that went against a major is one who must get something, even if he or she can’t prove his builder whose contracts imposed unfair standard terms. Although or her case (and because so many consumers don’t approach the our last ‘Update and trends’ section in the India chapter for 2013 courts), is slowly fading. The Food Safety and Standards Authority mentioned punitive damages, this provision has not seen many of India (FSSAI) has been an important new regulator from 2011 awards intended to discourage defaulting manufacturers, distributors onwards, but much like other new bodies, it is slowly finding its feet or other producers.

This would suggest that although product law in India is not as well was found to have caused the death of a government officer, the developed as it might be, it is reasonably adequate both for the pur- award itself, apportionment and process of determining causation pose of deterrence and for reasonable compensation. are significant.

34 Have there been any recent noteworthy events or cases that 35 Describe the level of ‘consumerism’ in your country and have particularly shaped product liability law? Has there been consumers’ knowledge of, and propensity to use, product liability any change in the frequency or nature of product liability cases litigation to redress perceived wrongs. launched in the past 12 months? Consumerism is growing and the Ministry of Consumer Affairs, In one of the few consumer cases to be decided in 2012 by the Food and Public Distribution’s department of consumer affairs regu- Supreme Court of India (see the National Seed Corporation case larly publishes advertisements encouraging consumers to appreciate cited in question 11), the court interpreted the definition of a ‘con- their rights and to approach the relevant consumer courts. There sumer’ broadly to include farmers who had purchased defective are a fair number of NGOs and consumer associations that assist seeds despite the existence of a separate law (the Seeds Act) that reg- consumers in different districts with some cases being fought on ulated seed sales as the Seeds Act did not provide for compensation. behalf of aggrieved and indigent consumers by the relevant associa- The court held that the Consumer Protection Act was a beneficial tions that also spread awareness. The climate for consumer litigation legislation and assuming an apparent inadequacy in the provisions may not have fully permeated to the village level, but it has certainly of the Seeds Act, there was no reason to exclude farmers from the reached a high level of sophistication in the urban areas of India. definition of ‘consumer’. While remaining traditionally conservative India has a fairly litigious society with no social restraint to prevent in the quantum of damages for deficient products and services, the initiation of legal proceedings including actions against a govern- consumer courts and the Supreme Court freely admit claims and ment body. This results in a healthy consumer environment that is avoid technical disqualifications to dismiss or completely deny relief. only hamstrung by the volume of cases in our courts and the time The recent (2014) case titled Mrs Rashmi Handa & Others v OTIS taken to decide those cases. Efforts are under way to improve this Elevator Company (India) Ltd & Others. [I(2014)CPJ344(NC)] slow but steady justice system and these measures should take effect delivered by the National Commission, where a fault in the lift eventually.

Amir Singh Pasrich [email protected] Vinita Chhatwal [email protected] Vaijayant Paliwal [email protected]

901-905 Naurang House Tel: +91 11 4101 2000 21 Kasturba Gandhi Marg Fax: +91 11 4101 2004 Connaught Place www.ilaindia.com New Delhi – 1 India

www.gettingthedealthrough.com 93 INDIA I.L.A. Pasrich & Company

36 Describe any developments regarding ‘access to justice’ that Access to justice for claimants has improved pursuant to the gener- would make product liability more claimant-friendly. ally open-door policy of the consumer courts, the NCDRC and the Legal aid is available under the Legal Services Authority Act (see Supreme Court (as discussed in question 34). There are occasional question 14), class actions are uncommon and contingency fees are aberrations in the process of deciding consumer cases, as in some not permitted in India. Third-party litigation funding is also not consumer forums where there are an excessive number of cases and common as contingency fees are not permitted (see questions 15 and a lack of resources, staff or even members, this results in a lack of 16). The courts generally take a conservative outlook towards dam- uniformity in the administration of such cases, but the general trend ages and compensation and this is not restricted to consumer cases is positive. In Delhi alone there has been a significant improvement but also extends to compensation granted for accidents and torts. in the time taken to decide original complaints.

94 Getting the Deal Through – Product Liability 2014 DWF Fishburns IRELAND Ireland

Aoife Gaughan DWF Fishburns

Civil litigation system A new 10-judge Court of Appeal is being set up to ease the burden on the Supreme Court, which is to become more of a 1 What is the structure of the civil court system? Constitutional court. Ireland operates a common law system, similar to England and Matters involving personal injuries must first be pursued by Wales, Canada, New Zealand and Australia. This system places an making an application to the Injuries Board, which assesses the emphasis on previous decisions of the courts, operating under the claim. If any party does not agree with the assessment, the Injuries principle of stare decisis. The Irish courts at all levels now have the Board then provides an authorisation for the matter to go to the power to adjourn civil proceedings to facilitate mediation and other relevant court. forms of alternative dispute resolution between parties to encourage pretrial settlement. The civil court system in Ireland is organised into four primary 2 What is the role of the judge in civil proceedings and what is the divisions: the District Court, the Circuit Court, the High Court and role of the jury? the Supreme Court. The courts system in Ireland is adversarial and to a certain degree The District Court sits in twenty four districts throughout the can still be regarded as ‘trial by ambush’ depending on the degree country. Civil claims can be brought in the District Court where the of case management or cooperation between the parties in advance claim or award does not exceed €15,000. The jurisdiction of both of a hearing. Each party will usually be represented by an advocate. the District Court and the Circuit Court were substantially increased Most civil cases are heard by one judge at first instance. The judge in on 3 February 2014. Section 2(1) and Part 3 of the Courts and Civil Irish civil proceedings has three fundamental functions: to do justice Law (Miscellaneous Provisions) Act 2013 took effect on 3 February between parties in deciding the issues; to ensure that justice is served 2014. The District Court has a limited appellate jurisdiction in in a reasonable and unbiased manner; and to have regard to the respect of decisions made by some statutory bodies and has wide intermediate and long-term impact of their decisions. powers in relation to liquor and lottery licensing. Although juries are commonly used in criminal cases, they are It is also noteworthy that if you purchase a product that is faulty not used in civil cases, except for defamation and assault claims. or has been inappropriately marketed and the retailer refuses to give The function of the jury is to give a verdict on the basis of evidence you a refund or replacement, a claim can be filed for the value of the submitted at the hearing. goods up to €2,000 through the Small Claims procedure. The Circuit Court is divided into eight circuits and may hear civil 3 What are the basic pleadings filed with the court to institute, cases with a value of up to €75,000, with a maximum of €60,000 prosecute and defend the product liability action and what is the for personal injuries claims. The Circuit Court is the court of appeal sequence and timing for filing them? for District Court matters with some exceptions. The Circuit Court also acts as an appeal court from decisions of the Labour Court, and Civil litigation procedure in Ireland is governed by the Court the Employment Appeals Tribunal. Rules, provided for by statute. These rules are divided as follows: The High Court is the court of first instance for all civil claims the District Court rules, the Circuit Court rules and the rules of the with a value of over €75,000 and for over €60,000 for personal Superior Courts, which govern procedure in the High Court and injuries claims. There is no upper limit to its jurisdiction. It sits as Supreme Court. By way of example, the initiating procedure for a a court of appeal for the District and Circuit Courts. It also has High Court claim (at present over €75,000 (and over €60,000 for power to review the decisions of certain tribunals. For commercial personal injuries)) is set out below. disputes with a value of over €1 million, or disputes relating to intel- Before any litigation is issued, a letter before action will be sent lectual property issues, a party can apply to have their case heard to the respondent, detailing the claim and requesting a full indem- in the Commercial Court, which is a division of the High Court. nity. If this is not forthcoming, the plaintiff will issue proceedings. The Commercial Court was established in 2004 to provide efficient Subject to the pre-filing obligations for a personal injuries action and effective dispute resolution in commercial cases. It uses a case (discussed below), a product liability claim is initiated in a similar management system designed to streamline the preparation for trial, manner to any civil litigation in Ireland, which is by way of a ple- to remove unnecessary costs and stalling tactics, and to ensure full nary summons. This initiating document is prepared by the plain- pre-trial disclosure. tiff’s or , stamped with the relevant tax and filed The Supreme Court is the court of final appeal in Ireland, which in the relevant court’s office (which will depend on the value of the hears appeals from decisions of the High Court on points of law and claim). The Statute of Limitations stops running on the claim at this questions of law referred to it by the lower courts. Decisions of the point and they have one year to serve it on the defendant. To serve Supreme Court are by majority, although any judge may deliver a the issued proceedings, a stamped and filed copy of the plenary sum- separate judgment, whether assenting or dissenting. mons is delivered to the defendant, either personally or by registered post (if the defendant is a company or has legal representation to accept service). www.gettingthedealthrough.com 95 IRELAND DWF Fishburns

The defendant is then required within eight days of service of courts. If the respondent agrees to assessment by the Injuries Board, the plenary summons to file an ‘appearance document’ in the rel- the Injuries Board assesses the claim value and communicates this evant court’s office, to indicate that it will be responding to the claim decision to both parties. If either party rejects the decision of the made and noting whom their legal representative (if any) will be in Injuries Board, then an authorisation will issue for proceedings to this regard. When the defendant has entered an appearance docu- begin. ment, the plaintiff has 21 days to deliver a ‘statement of claim’ to the defendant, setting out the particulars of the claim made and the 5 Are mechanisms available to the parties to seek resolution of a redress being sought from the courts. Generally a statement of claim case before a full hearing on the merits? is not filed, but is delivered directly to the defendant’s solicitor. When the case goes to hearing, only allegations specifically pleaded in the Order 37 of the Rules of the Superior Courts provides a procedure statement of claim may be heard in court. where a court can grant summary judgment, without a full hearing. The defendant at this point may seek further details of the claims The plaintiff can initiate a claim for summary judgment, either with made in the statement of claim by way of a ‘notice for particulars’, the consent of the defendant (where the defendant cannot raise any however, according to the Court Rules, the defendant only has 28 defence), or by application. This procedure is most often employed days from delivery of a statement of claim to furnish its defence where the plaintiff seeks to recover a debt or liquidated demand in document to the plaintiff, in response to the claims made. A notice money from the defendant. To successfully contest an application for particulars does not stop time running, but in practice replies for summary judgment the defendant would simply have to satisfy are often provided before the defence is delivered. Again, normally, the court that there is a fair and reasonable probability that it has a the defence is not filed. The defence should seek to address each real and bona fide defence. In light of this relatively low hurdle for and every allegation in the statement of claim. If any of the above a defendant to overcome, the courts are slow and sparing in the cir- time limits are not adhered to, either party can apply to the court cumstances in which they allow summary judgment, but they would seeking an order compelling the other side to furnish its appearance still be used fairly regularly, at present by banks in particular. document, statement of claim, or defence. However, unless the delay Irish courts encourage parties to utilise mediation and other is excessive, the usefulness of these applications can be limited. In forms of alternative dispute resolution where possible to resolve dis- fact, even with what could be considered significant delay, the courts putes before a full hearing and the rules of court have been amended regularly simply set a new date for delivery of the relevant pleading, to support this. rather than striking out the claim or defence, as this is viewed as a draconian power. Respective legal teams often therefore consent to 6 What is the basic trial structure? the above time limits being extended, although not flouted. The court can try preliminary issues that determine whether the After the defence has been delivered, parties may request dis- remainder of the trial should proceed if it deems this to be expedient covery of documents (including electronic documents) relevant to for saving costs or time, or both (Order 25 and Order 34 Rule 2, the issues in dispute in the case. The requesting party must set out Rules of the Superior Courts). reasons why each category of documents is required and allow a A trial will normally be run on consecutive days and the length reasonable time for this to occur. When this information exchange of trial will be a function of its complexity and the number of wit- has been completed, the plaintiff’s legal team will file a notice of trial nesses involved. The basic trial structure is opening statements by followed by a certificate of readiness for trial, which will notify the both parties, direct examination or cross-examination of each par- relevant court office that the pleadings are closed and the matter is ties’ witnesses and closing statements. ready to be listed for a hearing. Generally, these opening statements and cross-examinations are carried out by barristers, acting on behalf of each party, unless a 4 Are there any pre-filing requirements that must be satisfied before party has decided to represent themselves. There is a divide in dis- a formal law suit may be commenced by the product liability ciplines in the legal profession, between solicitors and barristers. In claimant? reality, the divide amounts to a delegation of specific duties, all of There are no specific pre-filing requirements for product liability which might, for example, normally be undertaken, by an attorney, claims. There is also no mandatory mediation. However, if a claim in the US. Generally, a client instructs a solicitor to represent them involves a personal injury (excluding a personal injury arising from and to initiate or defend a claim as the case may be. The solicitor the provision of medical services), there are several steps that must will take instructions from the client and prepare and exchange the be taken before proceedings can issue. Firstly, the plaintiff must send pleadings referred to above. If and when a matter reaches trial, a a letter before action to the alleged wrongdoer, stating the nature solicitor may instruct a barrister, who is a specialist in court practice, of the wrong alleged to have been committed and asking for a full to act as advocate in court, on behalf of the client. The barrister may indemnity. If an indemnity is not forthcoming, the plaintiff, before also provide legal opinions on particular aspects of a case, or points issuing any court proceedings, must notify the claim to the Injuries of law. If a case is particularly complex, a barrister may be instructed Board. The Injuries Board (formerly known as the Personal Injuries at an earlier juncture, to collaborate with the solicitor in drafting Assessment Board), is an independent statutory body set up to pleadings and to advise on case strategy with a view to preparing provide an independent assessment of personal injury claims. The for a court hearing. Injuries Board publishes the Book of Quantum to aid assessment of Oral evidence will normally be given in person by witnesses in compensation and facilitate settlement. This is now arguably out of civil trials. While witnesses of fact and expert witnesses may pre- date in several respects and higher awards are regularly made. pare written witness statements of their evidence in advance of the The plaintiff’s application to the Injuries Board must be accom- trial hearing, there is generally no requirement to exchange them panied by a medical report and vouching documentation for the loss unless agreed between the parties (or, more unusually, by the court). claimed (to the extent that this is available). The Injuries Board then However, in the commercial list of the High Court, witness state- forward a copy of the plaintiff’s documentation to the respondent ments are exchanged in advance and form the evidence-in-chief on and asks if they will consent to assessment of the loss by the Injuries which they are cross-examined and can expand on. Board. If the respondent refuses this, the plaintiff will be given an Civil trials are generally heard in public and product liability authorisation by the Injuries Board to proceed with their claim in the cases will be in public.

96 Getting the Deal Through – Product Liability 2014 DWF Fishburns IRELAND

7 Are there class, group or other collective action mechanisms not be reached, an order of the court will determine the scope of available to product liability claimants? Can such actions be discovery. Discovery allows one or more parties to obtain relevant brought by representative bodies? documents in relation to the proceedings. However, it is not a fishing In Ireland there is no facility to bring US-style class actions. The clos- expedition and clear reasons must be provided for each category of est equivalent in Ireland is a representative-type action under Order documents sought. It is important to note that parties have an obli- 15, rule 9 of the Rules of the Superior Courts, which provides that gation to disclose not only documents that assist their case, but also ‘where there are numerous persons having the same interest in one any relevant documents that may not necessarily do so. Discovery cause or matter, one or more of such persons may sue or be sued, or of electronic documents can also be sought and parties should give may be authorised by the Court to defend, in such cause or matter, particular thought to the process involved if there are high volumes on behalf, or for the benefit, of all persons so interested’. However, of electronic documents involved. this is of limited benefit as separate findings of fact are required in More specifically, Order 31 rule 13 of the Rules of the Superior each case. Consolidation of proceeding is also possible in certain Courts sets out that ‘“documents” for the purposes of this rule, circumstances where it appears to the court that the actions can be includes all electronically stored information’. However, there is no conveniently tried together. statutory definition of electronically stored information. It would The Law Reform Commission considered the area of multiparty include contents of inboxes, computers, servers, hard-drives, per- litigation and published a report recommending it in September sonal electronic devices, mobile phones, tablets, voicemail and voice 2005. However, at the moment it would appear that legislation to recordings, storage media, third-party online systems (eg, Gmail, implement this is not imminent, despite the fact that there is consid- Hotmail), back-up tapes, SMS, calendar entries, pdf files, spread- erable support for class actions from certain parts of the legal com- sheets, etc. munity. The EU is considering harmonisation in this regard to aid collective redress, which if implemented could lead to an increase in 10 How is evidence presented in the courtroom and how is the product liability litigation across the EU. evidence cross-examined by the opposing party? Witness evidence for trial is generally through live testimony. 8 How long does it typically take a product liability action to get to However, in the commercial list of the High Court, witness state- the trial stage and what is the duration of a trial? ments are exchanged and furnished to the court in advance of the The time required for a product liability action to get to trial can hearing. In court, the witnesses can be examined and cross-exam- vary significantly depending on the complexity of the dispute, the ined on this evidence and expand on it. It is possible that parties attitude and responsiveness of the parties in exchanging pleadings could agree the witness statements as evidence-in-chief and then it and discovery and also, the court in which the claim is brought. A only remains to conduct cross-examination before the court to save case brought in the Commercial Court list, where there is stringent court time. This mainly happens in the Commercial Court. case management for large-value, complex litigation, can be com- In all cases of product liability, evidence is crucial. It is therefore pleted within six months of entry into the list. However, this would vital that documentary evidence is preserved. If acting for a defend- only be for cases qualified to be admitted to the Commercial list, ant or potential defendant, the relevant stop notices should be issued usually therefore involving a claim for over €1 million. The speed as soon as soon as there is a claim issued or threatened to suspend of operation of the Commercial list can put significant pressure on normal document retention policies as appropriate. Consideration parties, particularly if there are high volumes of documents involved. should also be given to third-party sources of key documents that On the other hand, product liability litigation in the High Court’s should be preserved if possible, for example, medical records. main list can take over 24 months to reach trial due to the volume of claims. The length of the trial will be determined by its complex- 11 May the court appoint experts? May the parties influence the ity, as well as the number of witnesses for each party. Hearings can appointment and may they present the evidence of experts they therefore take from as little as one day to as much as several weeks, selected? or even months. In the event that there is an appeal to the Supreme Court, it can now take between three and four years to get a hearing Generally, in Ireland, each side will appoint its own expert(s), and date unless there are convincing reasons for an urgent hearing. One furnish their expert evidence to the court to assist their case. It is of the aims of the amendments to the financial jurisdictions of the possible, but it would not be common, for the court to appoint its courts in the Courts and Civil Law (Miscellaneous Provisions) Act own expert (it is more common in arbitrations). Experts are cross- 2013 is to reduce the number of matters being heard by the High examined in the same way as any witness. The normal practice is Court and also the number of appeals to the Supreme Court and it that the expert prepares a report and, if parties agree, this may be remains to be seen if it has the affect of cutting these waiting times. exchanged in advance. The individual role of the expert witness is to Also, the proposed new Court of Appeal is expected to ease the assist the court on specialist or technical matters using their exper- significant backlog of cases at the Supreme Court, as the Supreme tise. The expert’s duty to the court overrides any obligation to the Court will have the power to select which appeals it hears. person who is instructing or paying them. An expert should only deal with matters, and express opinions, that fall within the limits Evidentiary issues and damages of their professional competence. If a particular question arises that falls outside the expert’s area of specialism, they have a duty to make 9 What is the nature and extent of pretrial preservation and this clear. An expert should give a balanced opinion and be able to disclosure of documents and other evidence? Are there any state the facts and assumptions on which it is based. If there is a avenues for pretrial discovery? range of opinion on a particular issue, the expert should summarise Discovery is provided for in the Court Rules. It is a process where the range of opinion and explain how they arrived at their view. documents that are in the ‘possession, power or procurement’ of a party involved in legal proceedings and are relevant to the issues 12 What types of compensatory damages are available to product in the case (and which are not legally privileged), are disclosed by liability claimants and what limitations (if any) apply? way of a sworn affidavit to the other parties, prior to the trial of Effectively, the aim of compensatory damages is to compensate the the matter. This is usually after pleadings have closed and can be plaintiff for the loss suffered and to put the plaintiff in the same following a request for voluntary discovery or, if agreement can position as if the tort or breach of contract had not been committed. www.gettingthedealthrough.com 97 IRELAND DWF Fishburns

Compensatory damages can include: loss of income up to the date matters), a solicitor may not calculate charges as a specified percent- of trial, loss of future income, pension rights, damages for pain age or proportion of any damages or other monies that may become and suffering (in certain circumstances this may include psycho- payable to the client and any such charges are unenforceable in any logical injury), damage to property and damage to the product action to recover them. itself. For personal injuries matters, the Injuries Board publishes However, solicitors can and do operate on a ‘no win, no fee’ the Book of Quantum, which establishes guidelines for damages basis, where the client will not be charged a professional fee unless awards for different injuries; however, it has not yet been updated the claim is successful. This is deemed to be acceptable practice and and therefore awards can be higher in certain cases. Section 22 of indeed, in the personal injury sphere, is particularly widespread. the Civil Liability and Courts Acts 2004 requires the court to have regard to the Book of Quantum when assessing damages. Pursuant 17 Can the successful party recover its legal fees and expenses from to the Courts Act, the court also has discretion to apply interest of the unsuccessful party? 8 per cent. The general rule in Ireland is that ‘costs follow the event’, meaning that the losing party will be obliged to pay the reasonable party and 13 Are punitive, exemplary, moral or other non-compensatory party costs of the successful party (rather than their solicitor and cli- damages available to product liability claimants? ent costs). However, the court has a wide discretion and can decide, Damages are generally calculated on a compensatory basis. for example, to make an order in relation to costs that takes account Exemplary damages, or punitive damages, are only awarded in lim- of the conduct of the parties, both before and during the litigation ited circumstances, at the court’s discretion. They are designed to and the effect of such an order. For instance, if a damages award is make an example of the defendant, based upon the wrong commit- made in favour of a successful litigant who has incurred unnecessary ted or the manner in which it was committed. In addition, they are costs, or, conducted the litigation in a manner that the court believes designed to deter other individuals or companies from committing is inappropriate, the court may decide to reduce any costs award in similar acts. The Supreme Court has indicated that when awarding their favour, or make no costs award in their favour. Another exam- exemplary damages, the court must consider the defendant’s back- ple would be if an award was made that was lower than the financial ground, the nature of the offence, the actual loss suffered by the jurisdiction of the court, the court could decide to limit costs to the plaintiff and the conduct of the defendant. lower court level. The issue of costs can be referred to the Taxing Masters to decide. Litigation funding, fees and costs Sources of law 14 Is public funding such as legal aid available? If so, may potential defendants make submissions or otherwise contest the grant of 18 Is there a statute that governs product liability litigation? such aid? The Liability for Defective Products Act 1991 (1991 Act) imple- There is limited provision for civil legal aid in Ireland. It is primar- ments the European Product Liability Directive (85/374 EEC). The ily available in relation to the defence of criminal proceedings. An 1991 Act deals with product safety and imposes strict liability on the applicant for free legal aid must satisfy a means test, have reason- producer of a defective product for any damage caused wholly or able grounds for proceeding with the litigation and must be reason- partly by a defect in its product. A product will be deemed defective ably likely to succeed in the litigation. In practice, nearly all product if it fails to provide the safety expected of it. Products that are faulty, liability actions are run without the benefit of legal aid, however, but otherwise safe, do no fall within its remit. The Law Reform several would be taken on a ‘no win, no fee’ basis by plaintiff’s solici- Commission produced a useful administrative consolidation of the tors, where they would only take a fee if they win (other than court 1991 Act in 2010. The 1991 Act is a key piece of legislation as is it and experts’ fees). imposes strict liability and therefore there is no need for a plaintiff to establish a duty of care, negligence or fault on the part of the producer. The plaintiff must simply show a casual link between the 15 Is third-party litigation funding permissible? defect and the injury to avail themselves of redress under the 1991 Maintenance and champerty are prohibited under Irish law. Act. Maintenance is the provision of financial support to one of the par- The Sale of Goods and Supply of Services Act 1980 imposes the ties to an action by a person who has neither an interest in the action obligation that goods must be of merchantable quality and therefore nor any other motive recognised by law as justifying his or her inter- fit for purpose. However, this act offers limited benefit to the con- ference. Champerty is a type of maintenance, where the third-party sumer due to the requirement of privity of contract. There is also the funder receives a portion of an award made in exchange for their Consumer Protection Act 2007. initial funding of the litigation. A person guilty of maintenance acts unlawfully and contrary to public policy and, therefore, is not enti- tled to enforce any agreement for any form of benefit made with the 19 What other theories of liability are available to product liability relevant litigant. However, if the third-party funding the litigation claimants? has a sufficient connection to the plaintiff, they may well be able to The common law in Ireland requires that in order for a plaintiff overcome an allegation of maintenance or champerty. to sue for negligence they must show a duty of care, breach of this The Irish courts have indicated that they may, in an appropriate duty and a causal link between the breach of duty and the damage case, award costs that might ordinarily fall to be paid by an impe- caused. Contract claims are limited in that they are only applicable cunious party against a third-party finder who maintained an action to cases where privity of contract exists between the plaintiff and the but was not party to it. Therefore, a defendant who successfully defendant. Under the Contract for the Sale of Goods Act 1980, the defends a matter may seek to have the identity of the third-party seller has a contractual responsibility to the buyer in respect of faults funder disclosed and seek to recoup its legal costs from that party or defects. Normally, plaintiffs in product liability actions regularly allege negligence, breach of contract (if there is a contractual rela- tionship), breach of statutory duty generally and breach of the 1991 16 Are contingency or conditional fee arrangements permissible? Act, and may even claim there has been some breach of constitu- According to the Law Society’s Guide to Professional Conduct, tional rights. third edition (2013), in contentious matters (except debt collection

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20 Is there a consumer protection statute that provides remedies, and assisting state authorities in minimising their claim exposures. imposes duties or otherwise affects product liability litigants? The NTMA is known as State Claims Agency when performing Consumer laws in Ireland were reinforced by the introduction of these functions. For example, the NTMA issued a report in 2010 the Consumer Protection Act 2007, which aims to protect consum- regarding compensation for Irish thalidamide survivors. ers against ‘unfair, misleading or aggressive commercial practices’. Offences under this Act include making false claims, pressuring con- 23 What breaches of duties or other theories can be used to sumers to enter into transactions by using intimidating sales tactics establish product defect? and baiting customers through false advertisement. Proceedings may be brought under this Act for up to two years after the commis- Under section 5 of the 1991 Act, a product is defective if it fails to sion of the offence. However, this legislation may be more suitable provide the safety that a person is entitled to expect, taking all cir- for claims against service providers as opposed to manufacturers of cumstances into account, including: the presentation of the product, products. the use to which it could reasonably be expected that the product The National Consumer Agency can make directions regarding would be put, and the time when the product was put into circula- product recall under the European Communities (General Product tion. A product shall not be considered defective for the sole reason Safety) Regulations 2004, These directions may be appealed to the that a better product is subsequently put into circulation. Circuit Court within 21 days of receipt of the direction. An appeal To succeed in a product liability claim in tort, a plaintiff must to the High Court on foot of a decision of the Circuit Court on the show one of the following: direction may be made on a . • there was a precaution the defendant should have taken but did The government has indicated that a new Consumer watchdog not; – the Competition and Consumer Protection Commission (CCPC) • a safer design of the product was possible; (merging the National Consumer Agency and the Competition • the particular item was not properly manufactured; Authority) – is being created. According to the government this will • better warning of associated risk could have been given; or carry out criminal investigations, prosecute price-fixing ‘cartels’, • the manufacturer could have taken steps to protect customers issue on-the-spot fines to retailers who fail to display the correct after the product was distributed. prices, and ‘name and shame’ those who fail to comply with con- sumer law. 24 By what standards may a product be deemed defective and who On 13 June 2014, the Directive on Consumer Rights (2011/83/ bears the burden of proof? May that burden be shifted to the EC) replaced Directive 97/7/EC on the protection of consumers opposing party? What is the standard of proof? in respect of distance contracts and Directive 85/577/EEC to pro- The onus is on the injured person concerned to prove the damage, tect consumer in respect of contracts negotiated away from busi- the defect and the causal relationship between the defect and dam- ness premises. The European Union (Consumer Information, age, on the balance of probabilities. Under the 1991 Act, there is Cancellation and Other Rights) Regulations 2013 give effect to strict liability and therefore the plaintiff simply has to prove a causal Directive 2011/83/EC in Ireland. link between the damage and the injury and it is not a defence, for example, if the defendant took reasonable care. 21 Can criminal sanctions be imposed for the sale or distribution of defective products? 25 Who may be found liable for injuries and damages caused by The European Communities (General Product Safety) Regulations defective products? 2004 established a product safety regime, which prohibits the plac- All parties in the distribution chain of a product may essentially be ing of dangerous products on the market and gives rise to crimi- held liable for any product defect causing injury. Plaintiffs usually nal liability in certain circumstances. A person guilty of an offence join a number of parties to proceedings including the manufacturer under these Regulations is liable on summary conviction to a fine (there may be several manufacturers of different components that not exceeding €3,000 or to imprisonment for a term not exceeding make up the product), the retailer and often the supplier and distrib- three months, or to both. utors. Generally proceedings are issued against all of the parties that potentially owe a duty of care and this can lead to certain defendants 22 Are any novel theories available or emerging for product liability indemnifying others or being joined as third parties as necessary. claimants? The EU has been conscious of developing trends in international 26 What is the standard by which causation between defect and mass consumer markets with consumers engaging in more inter- injury or damages must be established? Who bears the burden net and cross-border shopping, thereby increasing the potential for and may it be shifted to the opposing party? them to be harmed by the same or similar illegal practices and has The onus is on the injured person concerned to prove the damage, sought to address the disparity in approach across the EU in terms the defect and the causal relationship between the defect and dam- of collective redress. In this regard, the Commission has conducted a age, on the balance of probabilities. consultation process and published a working paper in 2011. Also, the European Parliament’s report (July 2012) recommended that a regulation should be introduced so that there was uniformity. 27 What post-sale duties may be imposed on potentially responsible In Ireland, it is still not possible to bring a ‘class action’, despite parties and how might liability be imposed upon their breach? a Law Reform Commission Report recommending this. While there The European Communities (General Product Safety) Regulations is no draft legislation here, it is possible that the EU’s moves could 2004 established a product safety regime that prohibits the plac- lead to the introduction of a collective redress system throughout the ing of dangerous products on the market and gives rise to criminal EU, including Ireland. This would be likely to increase the number of liability in certain circumstances. If a product is found to be dan- product liability actions, as they would become more accessible and gerous it must be recalled and consumers are entitled to a refund potentially more attractive to bring in relation to defective products. or replacement. The National Consumer Agency maintains a list In Ireland, the National Treasury Management Agency (NTMA) of product recalls and EU recalls are listed on the RAPEX web- manages personal injury, property damage and clinical negligence site. Depending on the circumstances the company may contact the claims against the state. It also has a risk management role, advising www.gettingthedealthrough.com 99 IRELAND DWF Fishburns consumer directly, via advertisements or media and should liaise 31 What other defences may be available to a product liability with the relevant regulator. defendant? A crucial theme underlying the modern law of negligence is For claims brought under the 1991 Act, strict liability applies, but a the recognition that the manufacturer is responsible for a product producer shall not be liable if he or she proves: and its composition. The duty to warn is a continuing duty that • that he or she did not put the product into circulation; requires parties within the chain of distribution to warn consum- • that, having regard to the circumstances, it is probable that the ers of any dangers that have been discovered after sale. In O’Byrne defect that caused the damage did not exist at the time when the v Gloucester the Supreme Court (unreported, 3 November 1988) product was put into circulation by the producer or that that upheld the finding of negligence against the makers of a brushed defect came into being afterwards; cotton skirt for failing to attach a warning that the skirt was highly • that the product was neither manufactured by him or her for flammable. A warning enables the consumer to consider and avoid sale or any form of distribution for an economic purpose nor the risk in what would otherwise be an unacceptably dangerous manufactured or distributed by the producer in the course of his product. A producer will discharge his or her responsibilities where or her business; the appropriate steps have been taken to highlight the defects to an • that the defect concerned is due to compliance by the product ordinary consumer. Failure to heed warnings shall break the link with any requirement imposed by or under any enactment or between the manufacturers’ decision to put the product on the mar- any requirement of the law of the European Communities; ket and an injury caused to the user. • that the state of scientific and technical knowledge at the time when he or she put the product into circulation was not such as Limitations and defences to enable the existence of the defect to be discovered; or • in the case of the manufacturer of a component or the producer 28 What are the applicable limitation periods? of a raw material, that the defect is attributable entirely to the The time limits for commencing such proceedings are governed by design of the product in which the component has been fitted the statute of limitations. Due to the hybrid nature of product liabil- or the raw material has been incorporated or to the instructions ity claims, the statute of limitations for a product liability case varies given by the manufacturer of the product. depending on the nature of the claim or claims. It is essential that proceedings are issued within the correct time frame or that head of For claims in negligence or contract, the defendant can seek to argue, claim could be lost. It is noted that the statute of limitations provides for example, that: a defence and does not prevent actions being brought. • it did not owe the plaintiff a duty of care; If there is a personal injury element to the claim, then it must be • the appropriate precautions were taken; issued within two years from the date of accrual or knowledge, or • the injury was not a foreseeable consequence of the defendant’s that element of the claim may be statute-barred (although the noti- conduct; fication should be made to the Injuries Board as soon as possible, so • the plaintiff substantially altered the product after it left the that medical reports are obtained at an early stage and to maximise manufacturer’s control, and this alteration caused the plaintiff’s the chances of a successful claim). Under the 1991 Act, the time limit injury; or is three years from the date on which the plaintiff should have rea- • it was probable that the plaintiff would examine the product sonably become aware of the damage. There is a long-stop date in before using or consuming it and if this examination would have the 1991 Act of 10 years from the date the producer put the actual avoided the loss (this may not be a full defence, but may assist in product into circulation. For a claim in tort, with no personal injury, reducing the producer’s liability). the statute is extended to six years from the accrual of the cause of action. The statutory limit for a breach of contract claim is six years from the date on which the breach of contract occurred. 32 What appeals are available to the unsuccessful party in the trial court? An unsuccessful party in a product liability trial generally has the 29 Is it a defence to a product liability action that the product right to appeal to a superior court, with the Supreme Court being defect was not discoverable within the limitations of science and the final court of appeal. Appeal can be made only on a point of technology at the time of distribution? If so, who bears the burden law. Leave to appeal can be sought from and granted by the original and what is the standard of proof? trial court. It is a defence under the 1991 Act if a producer can prove that the state of scientific and technical knowledge at the time when it put Jurisdiction analysis the product into circulation was not such as to enable the defect to be discovered. The onus of proving this lies with the defendant pro- 33 Can you characterise the maturity of product liability law in terms ducer, on the balance of probabilities. of its legal development and utilisation to redress perceived wrongs? Product liability is well established in Irish law by way of the leg- 30 Is it a defence that the product complied with mandatory (or islative provisions discussed above and also case law. Ireland has voluntary) standards or requirements with respect to the alleged seen some high-volume product liability litigation (eg, in relation to defect? tobacco products) and regulators exist in relation to specific prod- Under the 1991 Act, compliance with mandatory standards or uct areas. There are a number of public bodies that assist potential requirements can be a defence if the defect concerned is due to claimants in relation to defective products, including the National compliance by the product with any requirement imposed by or Consumer Agency and the Injuries Board. The potential exposure under any enactment or any requirement of the law of the European to the costs of unsuccessful litigation generally discourages spurious Communities. litigation, but it can also be a potential barrier to valid claims. In addition, the lengthy time it can take to obtain redress by way of court proceedings may act as a disincentive for some to bringing proceedings.

100 Getting the Deal Through – Product Liability 2014 DWF Fishburns IRELAND

Update and trends

Product liability cases involve international issues, given the global cosmetic surgery (which petitioned to be wound up) said its insurance nature of economies and product distribution networks. There are, of cover does not extend to liability claims for products, including breast course, cases where there will be litigation in a number of jurisdictions implants sourced from a third party. simultaneously, or internationally coordinated product recalls, as well The Superior Court rules (Order 56A) and the rules of the as cases where the question of which jurisdiction (to sue or be sued) District (Order 49B) and Circuit (Order 19A) courts have now all been is a hot topic. Typically the US would be seen as the key jurisdiction amended in Ireland so that civil matters can be adjourned to allow in this regard. An example of where the Irish High Court was asked to mediation or information on mediation and other forms of alternative consider this was Patrick Burke v UVEX Sports GmbH & Motorrad TAF dispute resolution. This has assisted in a general growth in the use of GmbH (8 March 2005), which involved an Irish plaintiff who purchased mediation in Ireland. Either party can suggest mediation as a means a motorbike helmet in Germany. The parties accepted that the plaintiff of attempting to resolve the dispute, as can the court itself. A draft was not a ‘consumer’. Mr Justice Herbert dismissed proceedings Mediation Bill was published on 1 March 2012 and has gone through against the German retailer on the grounds that the plaintiff could a consultation process. Section 15 Civil Liability and Courts Act 2004 not overlook the contract, however basic, between the plaintiff and relates to mediation in personal injuries actions. Motorrad’s shop, by seeking a remedy solely in tort. Mediation can be an advantageous means of resolving a product He held that the Brussels I Regulation must be strictly interpreted liability dispute as it is a voluntary, confidential, without prejudice, to ensure uniformity of application across EU member states and he flexible process in which parties retain control without any third- followed decisions of the European Court of Justice. He found that party-imposed decision. There can be significant cost savings and an there was nothing in terms of the Brussels I Regulation that permits increased speed of resolution to obtain a settlement that is binding. consideration of a detriment and, therefore, the fact that the plaintiff Amendments to the Medical Devices Directive have been debated feared he may be out of time to bring court proceedings in Germany and reforms, once finally implemented, are likely to be wide-ranging could not be a factor in his decision. The Irish court indicated that and will overhaul certification by notified bodies as well as traceability, the claim should have been brought in Germany, as Germany was monitoring and inspection. The next stage in the process will be the place of delivery of the product and the place where the retailer negotiation with the European Council and member states, in an resided. attempt to finalise the legislation. In the meantime, the European Document management and preservation, including e-discovery Commission has published Regulation (920/2013/EU) on the (of electronic documents) and potential spoliation issues are an designation and supervision of notified bodies and a Recommendation important element of many product liability claims as they are often (2013/473/EU) on audits and assessments performed by notified document-heavy cases. Also, the issue of whether other companies bodies in the field of medical devices, as part of the overall aim to within a group (especially outside the jurisdiction) must provide improve patient safety in this area. The Irish Medicines Board is the documents continues to be an important issue and still seems to competent authority in Ireland for the regulation of medical devices depend to a large extent on the circumstances. and it serves to ensure that all such devices that are placed on the It is noteworthy that insurance issues have potentially put Irish market in Ireland meet the essential requirements of the various cosmetic surgery lawsuits in jeopardy where a company providing aspects of medical devices legislation.

34 Have there been any recent noteworthy events or cases that 35 Describe the level of ‘consumerism’ in your country and have particularly shaped product liability law? Has there been consumers’ knowledge of, and propensity to use, product liability any change in the frequency or nature of product liability cases litigation to redress perceived wrongs. launched in the past 12 months? Ireland is similar to western Europe and the USA in that there is The much-publicised ‘horsemeat’ labelling scandal across Europe has a high level of consumerism. While the economic downturn of the been the most noteworthy event in recent times. Interestingly, there past number of years has certainly affected this, one would find was never any suggestion that any of the meat products involved, that the same or similar products are generally available in Ireland, which were found to contain certain amounts of horse-meat, were from many of the same retailers as would be found and purchased defective in any way. However, it certainly reminded manufacturers in other European countries and in the USA. Generally speaking, and producers of the importance of proper labelling on products Irish consumers can be reasonably litigious, and there is a relatively and the significant effect product recalls can have on companies. strong provision for consumer protection, by way of the Sale of Goods and Supply of Services Act, the Distance Selling Regulations and also the Consumer Protection Act discussed above. However, as stated in question 33, the potential exposure to costs of litigation and the long time periods involved can act as a disincentive for some to issue proceedings.

Aoife Gaughan [email protected]

5 George’s Dock Tel: +353 1 790 9400 IFSC Fax: +353 1 790 9401 Dublin 1 www.dwf.co.uk Ireland

www.gettingthedealthrough.com 101 IRELAND DWF Fishburns

36 Describe any developments regarding ‘access to justice’ that The LRC also produced a report that identified the need for legis- would make product liability more claimant-friendly. lative reform that would hold corporate entities criminally liable for In recent years there have been a number of reports commissioned manslaughter. There have been a number of attempts to introduce that may affect producers of products and the potential implica- legislation in this regard, including the Bill tions for them of placing defective products on the market. The Law 2013. This Bill would create an offence of corporate manslaughter Reform Commission (LRC) considered the area of multiparty litiga- where an undertaking causes the death of a person by gross negli- tion and published a report recommending it in September 2005, gence. Undertakings convicted of corporate manslaughter are liable although there do not currently appear to be any moves to enact to an unlimited fine. High managerial agents who are convicted Irish legislation in this regard. The EU has recently been consider- would face an unlimited fine or up to 12 years in prison, or both. ing a regulation on collective redress, which, if enacted, would most likely increase product liability claims across the EU.

102 Getting the Deal Through – Product Liability 2014 Yigal Arnon & Co ISRAEL Israel

Barak Tal and Ruth Loven Yigal Arnon & Co

Civil litigation system 5 Are mechanisms available to the parties to seek resolution of a case before a full hearing on the merits? 1 What is the structure of the civil court system? Under Israeli procedure there is one type of a dispositive motion: a Israel has a general court system and a number of specialised motion to dismiss in limine (there is no tool similar to a US motion courts. The general court system is comprised of three instances: for summary judgment). In general, a motion to dismiss may be magistrates’ courts, the district courts and the Supreme Court. The granted if the plaintiff is not entitled to the relief sought as a mat- Supreme Court is the highest court of appeal (and sits as well as a ter of law, assuming that all facts asserted in the claim are true and high court of justice having the original jurisdiction to adjudicate correct. administrative matters as well as challenges to government action that are not under the jurisdiction of any other court or tribunal). Special courts, such as the labour courts and family courts have spe- 6 What is the basic trial structure? cial jurisdiction in relevant limited areas. The trial is not necessarily confined to one concentrated period of In civil matters the district courts have residual jurisdiction over time or consecutive days and may consist of a series of sessions tak- matters that do not fall within the jurisdiction of the magistrates’ ing place over a period of several weeks or even months (the absence courts (the jurisdiction of magistrates’ courts in civil matters gener- of a jury makes this possible). Testimony of experts is filed in written ally depends upon the monetary value of the claim, which to date is form and in most cases the court will order the parties to submit up to a maximum of 2.5 million shekels), and general residual juris- the testimony of their witnesses in affidavit form as well. The affi- diction to hear any matter that is not under the exclusive jurisdiction ants and experts are then subject to live cross-examination before of any other court or tribunal. District courts also serve as courts of the court at the scheduled evidentiary hearings, as well as redirect appeal over the magistrates’ courts. examination. The cross-examination and redirect examination are performed by the parties’ respective attorneys, and the judge’s role is adversarial, namely the judge observes the cross-examination and 2 What is the role of the judge in civil proceedings and what is the redirect examination and rules on objections of the parties’ attor- role of the jury? neys (although the judge may pose his or her own questions to the Juries are not used in the Israeli legal system. All questions of fact witnesses and experts). and law are determined by professional judges. The court system is adversarial, not inquisitorial. The judge’s role is to determine the The basic law facts and apply the relevant law, not to investigate. The judiciary provides for inter alia the public nature of the trial, unless otherwise provided by law or unless the court directs other- 3 What are the basic pleadings filed with the court to institute, wise under law. There are certain limited cases in which the court prosecute and defend the product liability action and what is the may rule that the trial or a part thereof is held behind closed doors sequence and timing for filing them? but those are generally inapplicable for product liability actions. A civil action is instituted by filing a statement of claim by the plain- tiff. The defendant is required to file a statement of defence within 7 Are there class, group or other collective action mechanisms 30 days of the date of service of the statement of claim (or a longer available to product liability claimants? Can such actions be period if approved upon application to the court). The plaintiff is brought by representative bodies? allowed (but not necessarily required) to file a statement of reply The Class Actions Law 2006 (Class Actions Law) allows for the within 15 days thereafter (or a longer period if approved by the filing and adjudication of class actions, and defines a class action court). as ‘an action managed in the name of a class of people, who have There are additional procedures for instituting a civil action but not empowered the class plaintiff for this purpose, and which raises in most cases those are inapplicable for product labiality actions. material questions of fact or law that are shared by all members of In addition, the procedure for instituting a class action (including the class’. The filing of a class action is subject to the court’s approval with respect to product liability cases) is different than that outlined and discretion, and is subject to meeting several conditions: above (see question 7). • the action must raise material questions of fact or law that are shared by all members of the class; 4 Are there any pre-filing requirements that must be satisfied before • there must be a reasonable possibility that those legal or factual a formal law suit may be commenced by the product liability questions will be decided in favour of the class; claimant? • a class action must be the efficient and fair way of resolving the dispute under the circumstances of the case; and There are no pre-filing requirements. In some cases mandatory medi- ation is applicable after the filing of the action. www.gettingthedealthrough.com 103 ISRAEL Yigal Arnon & Co

• there must be a reasonable basis to assume that the interest of all disclosure and inspection of documents. Unlike the US system, how- members of the class will be represented and managed properly ever, there is no provision for conducting pretrial depositions. and in good faith.

10 How is evidence presented in the courtroom and how is the These requirements are examined by the court in the scope of a pre- evidence cross-examined by the opposing party? liminary motion to approve the action as a class action (motion for class certification). Testimony of experts is filed in written form. In most cases the court The Class Actions Law sets forth a closed list of issues and sub- will order the parties to submit the testimony of their witnesses in jects with respect to which a class action may be filed, some of which affidavit form as well. The affiants and experts are then subject to may be applicable to product liability actions, for example a claim live cross-examination before the court at the scheduled evidentiary against a ‘dealer’ (as defined in the Consumer Protection Law, 1982: hearings, as well as redirect examination. a person selling products or providing services by way of occupa- tion, including a manufacturer) in regard to a matter between it and 11 May the court appoint experts? May the parties influence the a client. appointment and may they present the evidence of experts they The following may bring a class action in the name of the class: selected? (i) a person possessing a personal cause of action that raises mate- The parties are allowed to file expert testimony on their behalf. The rial questions of fact or law that are shared by all members of court may also appoint experts, after providing the parties an oppor- the class; tunity to present their position. Expert testimony is filed in written (ii) a public authority with respect to a claim in the scope of one of form. its public goals, that raises material questions of fact or law that The Israeli Rules of Civil Procedure provide that in the event the are shared by all members of the class; and court appoints an expert and the parties have also filed expert tes- (iii) an organisation (typically a non-governmental organisation) timony on their behalf with respect to the same matter, the parties’ with respect to a claim in the scope of one of its public goals, experts shall not be cross-examined, unless requested by a party and that raises material questions of fact or law that are shared by in such a case they shall be cross examined in a manner and scope all members of the class, and in the event of an organisation determined by the court in accordance with the circumstances of the other than the Israeli Consumer Council, provided that under case, and in view of the opinion of the court-appointed expert and the circumstances there would be a difficulty in filing the action his or her testimony. by a person possessing a cause of action as per point (i). In the event that a court-appointed expert was appointed with the consent of the parties, such consent constitutes a procedural stip- As part of adjudicating the motion for class certification, the court ulation providing as follows (unless otherwise directed by the court): examines whether the action raises material questions of fact or law • the parties shall not file expert testimony on their behalf; and that are shared by all members of the class, and whether there is • expert testimony filed by the parties prior to the appointment a reasonable possibility that they will be decided in favour of the of the court-appointed expert shall be deemed as if not filed as class. Consequently, at this preliminary stage, the court examines the evidence. alleged cause of action on its merits with respect to both legal and factual aspects. The parties may stipulate not to cross-examine the court-appointed In its decision certifying the class, the court is required to define expert, whether or not the expert was appointed with their consent, the class in whose name the class action will be managed, includ- and in the event they do so, the court-appointed expert shall not be ing sub-classes. The Class Actions Law provides for an ‘opt-out’ cross-examined unless the court finds that it is required for adjudi- mechanism, namely, any person or entity that falls under that defi- cating the dispute. nition becomes a member of the class, unless they provide a with- drawal notice within the time frame provided for by the court. The court is allowed, under special circumstances, to apply an ‘opt-in’ 12 What types of compensatory damages are available to product mechanism. liability claimants and what limitations (if any) apply? Under Israeli law product liability may arise under several areas of 8 How long does it typically take a product liability action to get to law, including liability under tort, contractual liability, the Consumer the trial stage and what is the duration of a trial? Protection Law, 1981 (Consumer Protection Law) and the Defective Products Liability Law, 1980 (Defective Products Law). The duration for adjudicating a product liability action depends on The Defective Products Law applies only to bodily injuries its complexity, for example whether jurisdictional issues arise (eg, and does not extend to indirect, consequential, or pure economic where foreign entities have been sued); whether there are complex damages. discovery proceedings; the complexity of expert testimonies; and The Torts Ordinance [New Version] (Torts Ordinance) provides other factors. An individual action (as opposed to a class action) that the injured party is entitled to compensation for damages that usually takes over a year to get to trial and in some case several may be caused in the natural and regular course of events and that years. As stated above, the trial is not necessarily confined to one were directly caused by the tort. The term ‘damage’ is defined in the concentrated period of time or consecutive days and may consist of Torts Ordinance in a wide manner and includes loss of life, assets, a series of sessions taking place over a period of several weeks, and comfort, physical welfare or reputation. This definition includes in some cases several months. both direct and indirect damages as well as pure economic damages. The remedies provided for under the Torts Ordinance are applicable Evidentiary issues and damages to the Consumer Protection Law as well. 9 What is the nature and extent of pretrial preservation and The remedies for breach of contract cover damages that were disclosure of documents and other evidence? Are there any caused as a result of the breach and that the defaulting party fore- avenues for pretrial discovery? saw or should have foreseen as a probable outcome of the breach. The term ‘damage’ is defined in the Contracts (Remedies for Breach The Israeli Rules of Civil Procedure provide a number of pretrial of Contract) Law, 1970 (Remedies Law) to include loss of profits. discovery devices that enable disclosure of information among the adverse parties to a lawsuit. These include interrogatories, and

104 Getting the Deal Through – Product Liability 2014 Yigal Arnon & Co ISRAEL

This definition includes both direct and indirect damages as well as In order to base a claim on this law, the injured party only needs pure economic damages. to prove that the product was defective and that he or she sustained The Defective Products Law provides that for purposes of calcu- bodily injury as a result of the defect. The law provides the manufac- lating loss of earnings and loss of earning ability, the court may not turer with a few limited defences: take into account a level of earnings higher than three times the aver- • the defect was created when the product was no longer under age earnings in Israel. The damages for pain and suffering pursuant the manufacturer’s control (in which case it is presumed that the to this law are limited. The remaining bases of claim generally do not injury was caused by a defect that was created after the product provide for a maximum amount of liability. was no longer under the manufacturer’s control, if the manufac- turer proves that the specific product was tested by reasonable safety tests before it left its control); 13 Are punitive, exemplary, moral or other non-compensatory • a ‘state-of-the-art’ defence, where pursuant to the available sci- damages available to product liability claimants? entific and technological knowledge available when the product In general, the Israeli courts do not award punitive, exemplary, left the manufacturer’s control, it could not have known that moral or other non-compensatory damages (although some case law the design of the product did not comply with reasonable safety provides that they are authorised to do so). standards; • the product was released beyond the control of the manufac- Litigation funding, fees and costs turer contrary to its desire and the manufacturer took reason- able measures to prevent such release and to warn the public; 14 Is public funding such as legal aid available? If so, may potential and defendants make submissions or otherwise contest the grant of • assumption of risk – the injured party was aware of the defect such aid? and the risk involved and voluntarily assumed such risk (the last State legal aid is available pursuant to the Legal Aid Law, 1972. defence is not applicable to an injured party younger than 12 The eligibility for legal aid depends on the applicant’s economic years). resources, including income and property, pursuant to criteria set forth in regulations enacted pursuant to the Law. In addition, in 2002 the Israeli Bar Association established a pro 19 What other theories of liability are available to product liability bono programme to complement the Legal Aid Law. In 2009, the claimants? Israeli Bar Association Law, 1961 was amended to include a section Under Israeli law, product liability may arise under theories of both that provides that one of the functions of the Israeli Bar Association tort and contract. is to provide legal aid to those of limited means who are not eligible The two most relevant torts for product liability cases are neg- for state legal aid pursuant to law. ligence and breach of statutory duty. The tort of negligence pursu- With respect to class actions, the Class Actions Law established ant to the Torts Ordinance imposes liability on any person or entity a statutory fund for financing class actions aimed at assisting plain- that performed a negligent act or omission that caused damage to tiffs in bringing class actions of public or social interest. In addition, any person or entity towards which the former owes a duty of care. consumer organisations assist in some cases in bringing class actions This tort is general in nature and it may be applied in various cir- relating to consumer rights. cumstances and relationships. Thus, this tort is shaped by the courts based on proper legal policy considerations, determining inter alia in which circumstances a duty of care between the opposing parties 15 Is third-party litigation funding permissible? exist, and the acts or omissions that constitute negligence. Third-party litigation funding is permissible and there are generally The tort of breach of statutory duty may also be applicable in no limitations or restrictions with respect thereto. In general, third- product liability cases. It imposes liability on any person or entity party funding of class actions is required to be disclosed to the court. that breached a statutory duty imposed on it (excluding the duties imposed by the Torts Ordinance itself), which is intended for the 16 Are contingency or conditional fee arrangements permissible? benefit or protection of another person, and the breach caused that person damage of the nature intended to be prevented by that stat- Contingency or conditional fee arrangements are permissible in ute, unless that statute intended to exclude the remedy provided civil cases and there are generally no limitations or restrictions with for by the Torts Ordinance. This tort is also general in nature and respect thereto. In class actions, remuneration to the class plaintiff may be applied in various circumstances and relationships and with and attorney fees to the class attorney are subject to court approval. respect to various statutory duties. Like the tort of negligence, this tort is shaped by the courts based on proper legal policy considera- 17 Can the successful party recover its legal fees and expenses from tions, determining inter alia which statutory duties are intended for the unsuccessful party? the benefit or protection of the injured party As a general rule, a losing party will be required to pay costs and In contract, the breaching party is obliged inter alia to compen- attorneys’ fees to the prevailing party, in amounts subject to the sate the injured party for damages he or she sustained as a result of court’s discretion. the breach, as detailed above. The Sale Law, 1968 (Sale Law), and the Sale Law (International Sources of law Sale of Goods), 1999 (International Sale Law) may also be appli- cable. The Sale Law governs the sale of goods (as well as the sale 18 Is there a statute that governs product liability litigation? of lands and rights), and applies in the absence of legislation that The Defective Products Law provides a non-exclusive cause of applies to the specific issue at hand and in the absence of contrary action, and imposes strict liability on manufacturers (as defined intent apparent from the contract between the parties. This law therein) to compensate consumers who suffered bodily injury as a sets out the obligations of the parties to a sale contract and specific result of using the manufacturers’ defective products. The main pur- remedies for breach of such obligations (in addition to the remedies pose of this law is to protect consumers and facilitate their claims for provided for in the Remedies Law). This law provides, for example, bodily injury by exempting them from proving any fault or negligent that the seller breached its obligations if he or she delivered goods act on the manufacturers’ part. that are not of the quality or type required for their regular or com- mercial use or specific purpose apparent from the contract. www.gettingthedealthrough.com 105 ISRAEL Yigal Arnon & Co

The International Sale Law implements the provisions of the to the consumer’s ‘autonomy of will’ that should be compensated, United Nations Convention on Contracts for the International Sale since it deprived them of their right of free choice. of Goods, 1980 (Convention). This law governs contracts for the In a decision rendered by the Israeli Supreme Court in December sale of goods between parties whose principle places of business 2011, it was ruled that injury to the consumer’s ‘autonomy of will’ are not in the same country, including contracts with a party whose is not caused by the mere non-disclosure of certain information to principle place of business is in a country that is not a party to the the consumer, other than when actual subjective injury is caused by Convention. This law does not apply to goods that were purchased emotions of anger, frustration, disgust or other negative emotions for personal, family or domestic use and does not apply to the liabil- resulting from the conduct of the defendant. As a result the Supreme ity of the seller for death or bodily injury to any person that was Court affirmed in part and reversed in part, ruling that compensa- caused by the goods. This law is therefore applicable with respect to tion for such a injury should be granted only with respect to those the internal relationship between the entities in the chain of distri- consumers who actually suffered such a injury (as was deduced from bution and supply of the product, and is also applicable in certain statistical evidence filed by the parties). In later decisions, the Israeli circumstances to product liability cases. This law is dispositive in Supreme Court reiterated that rule. nature and the parties may agree that it or any of its provisions will not apply to the contract between them. 23 What breaches of duties or other theories can be used to establish product defect? 20 Is there a consumer protection statute that provides remedies, The Defective Products Law provides that a product is defective if: imposes duties or otherwise affects product liability litigants? • it may cause bodily injury due to a deficiency; or The Consumer Protection Law imposes various obligations on deal- • warnings or safety instructions were not provided or were inap- ers of products and services (including manufacturers) toward con- propriate given the risk involved with the product. sumers that purchase their products for personal, family or domestic use such as a prohibition on misrepresentation, duties of disclosure, There are no strict limitations or restrictions on the circumstances duties concerning product labelling and other various duties and that may establish a product defect. In general all circumstances prohibitions. The Consumer Protection Law provides that violation that result in the product causing an undesired injury by normal use of certain of the prohibitions and duties imposed by it, including thereof may establish product defect including deficiencies in design, the prohibition on misrepresentation and duties of disclosure, con- manufacturing, warning and safety instructions. stitute a tort pursuant to the Torts Ordinance (as well as a criminal offence). The Consumer Protection Law is also applicable in certain 24 By what standards may a product be deemed defective and who circumstances to product liability cases, particularly with respect to bears the burden of proof? May that burden be shifted to the cases involving alleged misrepresentation or violation of duties of opposing party? What is the standard of proof? disclosure. In general, a product causing an undesired injury by normal use may be deemed defective.The plaintiff bears the burden of proving that 21 Can criminal sanctions be imposed for the sale or distribution of the product was defective, with the applicable standard of proof defective products? being the balance of probabilities (namely, by a higher than 50 per There are several avenues for imposing criminal sanctions for cent probability). the sale or distribution of defective products. The violation of the The Defective Products Law provides that a product is presumed Consumer Protection Law may constitute a criminal offence. In to be defective if the circumstances of the case fall more in line with addition, the sale or distribution of defective products that resulted the conclusion that the product was defective than with the conclu- in bodily injury may be subject to several potential offences, includ- sion that it was not, thus assisting plaintiffs in meeting this burden ing wrongful death. in the appropriate cases. The Torts Ordinance establishes several presumptions with respect to claims based on negligence that shift the burden of proof 22 Are any novel theories available or emerging for product liability to the defendant. For example, the defendant bears the burden to claimants? prove that there was no negligence on his or her part if: In one of the most interesting product liability cases in Israel, it • the plaintiff has no knowledge and cannot have any knowledge was discovered in 1995 that an Israeli manufacturer of various as to the actual circumstances that led to the event that caused food products added silicone (dimethylpolysiloxane) to its low-fat the damage; long-life milk product in order to prevent its foaming, in violation • the damage was caused by an asset that was under the full con- of official standards and in contradiction of certain statements it trol of the defendant; and made. There was no question that the addition of this substance did • the court is of the opinion that the event that caused the damage not pose a threat to the well-being of the consumers. The manufac- falls more in line with the conclusion that the defendant did not turer and certain of its officers were convicted of violation of an act with reasonable precaution than with the conclusion that the official standard and misrepresentation pursuant to the Consumer’s he or she did act with reasonable precaution. Protection Law. A motion for certification of a class action was filed and the class action was certified and approved in a decision of the In addition, Israeli law recognises the doctrine of ‘evidentiary dam- Israeli Supreme Court in 2003 for compensation of the class mem- age’. In the appropriate cases the court may decide to shift the bers for injury to their ‘autonomy of will’. This was a precedent- burden to the defendant if the defendant by its conduct caused evi- making decision that ruled that this type of damage is also covered dentiary harm or damage to the plaintiff. by the definition of ‘damage’ in the Torts Ordinance, and is recover- able in a class action. This decision led to widespread allegations of the above- 25 Who may be found liable for injuries and damages caused by mentioned type of damage (injury to the consumer’s ‘autonomy defective products? of will’) in various cases, such as allegations that the mere non- In general, all persons and entities in the chain of manufacture, disclosure of certain information to the consumer constituted injury distribution and sale may be found liable for injuries and damages

106 Getting the Deal Through – Product Liability 2014 Yigal Arnon & Co ISRAEL caused by defective products, provided that the elements of a recog- 10 years from the end of the year during which the product was no nised cause of action are met in their case. longer under the manufacturer’s control. The Defective Products Law defines the term ‘manufacturer’ as follows: 29 Is it a defence to a product liability action that the product • the manufacturer of the product (or any component thereof), defect was not discoverable within the limitations of science and including any person or entity that presents itself as the manu- technology at the time of distribution? If so, who bears the burden facturer of the product (by permitting use of its name or trade- and what is the standard of proof? mark with respect to the product or in any other manner); • an importer that imported into Israel for commercial purposes a A state-of-the-art defence is explicitly provided for under the product that was manufactured outside of Israel (or any compo- Defective Products Law (and may be applicable in other bases for nent thereof); or liability, such as the tort of negligence). The defendant bears the bur- • a supplier of a product whose local manufacturer or importer is den of proving this defence, and in general the applicable standard not labelled on the product. of proof is the balance of probabilities.

26 What is the standard by which causation between defect and 30 Is it a defence that the product complied with mandatory (or injury or damages must be established? Who bears the burden voluntary) standards or requirements with respect to the alleged and may it be shifted to the opposing party? defect? The plaintiff bears the burden to prove causation between the defect Compliance with mandatory (or voluntary) standards or require- and injury. Certain doctrines that require a decreased degree of ments does not constitute in and of itself a full defence (and such a proof have been advanced in some cases, but in general the applica- defence is not provided for in the Defective Products Law). Israeli ble standard of proof is the balance of probabilities. case law provides that compliance with mandatory (or voluntary) The presumption and rules outlined in question 24 may be standards or requirements does not preclude the possibility of applicable in certain circumstances to causation as well. See also imposing liability for negligence in appropriate cases. question 36. 31 What other defences may be available to a product liability 27 What post-sale duties may be imposed on potentially responsible defendant? parties and how might liability be imposed upon their breach? See question 18 with respect to the defences provided for by the The Consumer Protection Law and regulations enacted pursuant Defective Products Law. In addition, the following defences may be thereto contain various post-sale duties, mainly with respect to war- applicable: ranty, including warranty information, periods and terms; repair of • assumption of risk; defects; technical service; and more. • contributory negligence; In addition, in appropriate cases, failing to meet certain reason- • the fault of a third party was the decisive reason for the injury or able post-sale duties may create liability under the tort of negligence, damage; for example, the duty to recall or to supplement warnings. In March • de minimis; and 2014 the Israeli Standard Institution adopted a new Consumer • where the act or omission constituting the tort was pursuant Product Recall Standard, Israeli Standard 10393, based on ISO to the provisions of law and in accordance therewith, or in the 10393 (which is currently unofficial unless and until adopted by the scope of lawful authorisation, or in a reasonable and good faith Ministry of Economy). belief in the existence of a lawful authorisation (this last defence is generally inapplicable for negligence). Limitations and defences 32 What appeals are available to the unsuccessful party in the trial 28 What are the applicable limitation periods? court? The general statute of limitation period for civil claims is seven years. A judgment in a civil action of the first instance is appealable, as of This period is applicable to claims based on the Torts Ordinance and right, to the appellate court. A judgment rendered by the appellate in contract. court may be appealed to a higher instance only if leave of court is The Torts Ordinance provides that in cases where the cause of granted. action is based on damage caused by an action or omission (such as the tort of negligence), the limitation period starts to run on the Jurisdiction analysis date on which the damage was caused. In cases where the damage was not discovered on the date on which it was caused (a case of 33 Can you characterise the maturity of product liability law in terms concealed damage), the limitation period starts to run on the date on of its legal development and utilisation to redress perceived which the damage was discovered, provided, however, that in such wrongs? a case a claim may not be filed after the expiry of 10 years from the The various bases under Israeli law for product liability have been date on which the damage was caused. The practical meaning of this in force and effect for many years, including The Defective Products provision is that the statute of limitation expires upon the earlier of Law, which was enacted over 30 years ago. As a result the Israeli seven years from the discovery of the damage or 10 years from the legal system and judiciary are familiar with this area of law, and causation of the damage. are well equipped to adjudicate product liability cases. Although the The statute of limitation period for claims based on the Defective population of the state of Israel is relatively small, Israel is a litigious Products Law is three years. A claim under the Defective Products society and Israeli product liability case law is robust. Law may not be filed after the expiry of 10 years from the end of the year during which the product was no longer under the manu- facturer’s control. The practical meaning of this provision is that the statute of limitation pursuant to the Defective Products Law expires upon the earlier of three years from the discovery of the damage or

www.gettingthedealthrough.com 107 ISRAEL Yigal Arnon & Co

34 Have there been any recent noteworthy events or cases that have particularly shaped product liability law? Has there been Update and trends any change in the frequency or nature of product liability cases launched in the past 12 months? Issues of collection, retention and use of consumer information have recently been the subject of consumer-related cases in Israel, The enactment of the Class Actions Law in 2006 has led to a sub- including certain class actions. These issues raise precedential stantial increase in product liability cases. The Class Actions Law questions relating to consumer privacy in the modern environment. now allows the filing of class actions under various circumstances, relationships and causes of action (while prior to the enactment of the Class Actions Law, one could only use several specific laws for These discussions stem from the plaintiff’s burden to prove causation the filing of a class action, and such laws permitted the filing of a pursuant to a balance of probabilities standard, which is satisfied if class action only under specific causes of actions). In general, a class the plaintiff proves that there is greater than 50 per cent chance that action is typically not applicable to bodily injury claims, however, the injury was caused by the defect (otherwise known as the ‘more a court may also grant compensation for other damages resulting probable than not’ standard). Modern cases of vague causation and from the defective products. The Class Actions Law has also lead mass torts have raised a question as to whether it would be more to a substantial development of substantive case law on consumer appropriate to apply a more flexible standard for proof of causation, rights, duties of disclosure, duty to warn, product labelling, causa- such as a ‘relative liability’ standard (pursuant to which the courts tion and other matters related to class actions. will grant, by way of example, compensation for 30 per cent of the damage if causation is proven at a 30 per cent probability). 35 Describe the level of ‘consumerism’ in your country and In 2005 the Israeli Supreme Court ruled (in CA 7375/02 Malul v consumers’ knowledge of, and propensity to use, product liability Carmel Medical Center) that the court may apply the relative liabil- litigation to redress perceived wrongs. ity standard in cases of vague causation, where several potential fac- tors may have led to the injury and damage, but causation cannot be Israeli law and its legal and judiciary systems, are well aware of the proven with respect to any of the factors beyond 50 per cent. In such need to protect consumer rights. There are various causes of action cases, compensation will be structured in a way that is appropriate for imposing product liability; a wide variety of types of damages to the level of probability of the causation that has been proven. This that can be recovered; the injured party may sue various entities rule will be applied if certain conditions are met, mainly if applying in the chain of manufacture, distribution and sale of the product; the balance of probabilities rule would result in substantial injustice. particular legislation of consumer rights pursuant to the Consumer However, this decision was later overturned in 2010 by an Protection Law is broad and extensive; and the statute of limita- expanded panel of the Supreme Court (CAD 4693/05 Carmel tion is substantially long (in comparison to other western states). Medical Center v Malul). It was then ruled that the relative liabil- In addition, the fact that consumers have easy access to filing class ity rule may not be adopted as an exception to the rule of balance actions has led to increased awareness of consumer rights, increased of probabilities in cases of vague causation. However, a majority enforcement thereof and, simultaneously, a dramatic increase in con- of the expanded panel of the Supreme Court in said case seem to sumer-related litigation. In addition, the ex post threat of a poten- have been in agreement that the court may deviate from the bal- tial class action substantially affects the considerations and conduct ance of probabilities rule and apply the relative liability rule in cases of commercial entities ex ante, thus leading in practice to increased of ‘systematic repeating diversion’, where the tortfeasor created a enforcement of consumer rights. joint and repeated risk to a group of injured parties, in circumstances where it is impossible to prove causation pursuant to the balance of 36 Describe any developments regarding ‘access to justice’ that probabilities standard due to a repeating systematic diversion in the would make product liability more claimant-friendly. application of that rule. Over the past few years, lengthy discussions have been held in the As a result, there have been voices (including among the judici- case law and within the legal community with respect to the rules of ary) calling for the legislator to enact more flexible rules of causation causation under Israeli law, and whether they are currently appro- for the appropriate cases. priate to address modern cases of ‘vague causation’ and mass torts.

Barak Tal [email protected] Ruth Loven [email protected]

1 Azrieli Center Tel: +972 3 6087 835 Tel Aviv 67021 Fax: +972 3 6087 716 Israel www.arnon.co.il

108 Getting the Deal Through – Product Liability 2014 Gianni, Origoni, Grippo, Cappelli & Partners ITALY Italy

Michela Turra and Alessandra Chimienti Gianni, Origoni, Grippo, Cappelli & Partners

Civil litigation system raise any ‘strict’ exception (any exception, procedural or on the mer- its, that cannot be raised by the judge) or all of these. Otherwise, the 1 What is the structure of the civil court system? same pleading can be filed also at the first hearing. In Italy there are three levels of courts: first-instance courts (justices At the first hearing, any of the litigants may request terms within of the peace and tribunals); second-instance courts (courts of appeal which to file defensive briefs; namely, a first term of 30 days to for judgments rendered by tribunals; tribunals for judgments ren- amend claims and defence arguments already submitted; a second dered by justices of the peace); and the Court of Cassation (Supreme term of additional 30 days to file means or requests for evidence or Court). both; and for a third term of an additional 20 days to oppose the The courts have jurisdiction over legal counterparty’s means or request of evidence or both. actions up to the value of €5,000, damages caused by floating or The judge, who is not bound to apply the law indicated by the vehicular traffic up to the value of €20,000 and some specific subject parties (iura novit curia principle), will then set a date for a hearing, matters. Cases filed with the justice of peace in which the amount during which the items of evidence requested by the parties and con- claimed is less than €1,100 may be decided ‘according to principles sidered relevant and admissible will be gathered. of ’, which means on a ‘common-sense’ basis. In these cases When the judge, after the conclusion of the evidence-gathering the justice of the peace may depart from the rules of law, provided phase or even before, deems the case ready to be decided, he or that the principles of the legal system are respected. she schedules a hearing to let the parties specify their conclusions. Tribunals have first-instance jurisdiction over all cases not Following this, the parties are granted a term not longer than 60 expressly allocated to other courts and second-instance jurisdiction days to file their final pleadings and a further term of 20 days to file over decisions issued by the justices of the peace. their pleadings of reply. Alternatively, the judge can let the parties Courts of appeals have first-instance jurisdiction over some spe- discuss the case orally at the above hearing or at a further hearing cific matters and second-instance jurisdiction over decisions issued to be scheduled to this end. That, however, is not a very common by the tribunals. option. The Court of Cassation is at the top of the hierarchy. It is the court of last resort and its task is to ensure the consistent interpreta- tion and application of the law. The court review is limited to issues 4 Are there any pre-filing requirements that must be satisfied before regarding the interpretation and correct application of the law, as a formal law suit may be commenced by the product liability the court does not review any assessment of facts made by the judge claimant? in the trial. There are no pre-filing requirements to begin a formal, ordinary law- suit for product liability.

2 What is the role of the judge in civil proceedings and what is the role of the jury? 5 Are mechanisms available to the parties to seek resolution of a Italy relies upon an adversarial judicial system. There are no juries case before a full hearing on the merits? in civil proceedings. There are no mechanisms of summary dispositions available once proceedings are initiated. Nonetheless, in appeal proceedings, at the first hearing court of 3 What are the basic pleadings filed with the court to institute, second instance (for tribunals or courts of appeal, see question 1) an prosecute and defend the product liability action and what is the evaluation on the admissibility of the relevant writ of appeal has to sequence and timing for filing them? be made, that considers the actual possibility that the relevant appeal A product liability action is governed by the same rules set forth by is admissible (the filtering evaluation). the Italian Code of Civil Procedure for ordinary proceedings. A case begins with the plaintiff’s writ of summons, which includes all the claims against the defendants. In the writ of sum- 6 What is the basic trial structure? mons the plaintiff must clearly state the type of relief sought (namely, Italian civil proceedings can be broadly divided into three phases: claim for compensation for damage) and the facts and points of law • introductory phase – this is to assess the formal and procedural supporting the claim. regularity of the proceedings, with regard to the parties (relevant The defendant’s first pleading, whereby appearance is entered in legal standing and powers), jurisdiction of the court and all the the proceedings, must include any defence arguments and challenge other procedural issues that may prevent the case from reach- to any fact and point of law indicated by the plaintiff at support of ing the subsequent phase. The court examines the requests for its claims. The said pleading has to be filed within the mandatory evidence and admits the requests it deems appropriate; term of 20 days before the first hearing in case the defendant intends to raise a counterclaim, to join third parties in the proceedings or www.gettingthedealthrough.com 109 ITALY Gianni, Origoni, Grippo, Cappelli & Partners

• evidentiary phase – the evidence admitted by the court is gath- prior to the beginning of proceedings should there be a matter of ered, witnesses are examined and experts appointed by the judge urgency or the risk not to be able to procure the same evidence any render their opinions; and more later on. • decision phase – this includes the evaluation of the collected evi- dence and of the arguments submitted by the parties. This leads 10 How is evidence presented in the courtroom and how is the to the final decision. evidence cross-examined by the opposing party? There is no the distinction between pretrial and trial phases found In the Italian civil law system considerable weight is given to writ- in the common law system. The same judge presides over all three ten evidence. The basic principle is that oral testimony is allowed in phases, which are not formally divided; the judge sets the dates for cases where documents are either unavailable or unreliable. In prac- the hearings, checks that there are no procedural flaws, rules on the tice, apart from unusual cases all evidence must be given verbally at requests of the parties, appoints experts and conducts and oversees the hearings and written statements are not allowed. the evidence-taking activities up to the final decision. Only the judge When the parties submit their requests for evidence, they must can question witnesses, putting to them questions previously submit- also include a list of people to be called to testify, along with the list ted by the parties and accepted by the judge. of questions to the witnesses. The judge rules on the admissibility of Normally, proceedings are not public. Access to court files is both witnesses and questions. Only witnesses of fact can be admit- not permitted to third entities, not being party to the proceedings. ted and no personal evaluation can be expressed by the witness; it Nonetheless, the hearing held for discussion of the case is open to the follows that experts cannot be used as witnesses. public. Further, the decision is publicly available. The parties are not entitled to question the witnesses directly and no formal cross-examination exists: it is only the judge who questions the witnesses, while the parties can suggest questions to 7 Are there class, group or other collective action mechanisms the judge. available to product liability claimants? Can such actions be The parties cannot be witnessed. Upon request of the counter- brought by representative bodies? party, however, each party or its legal representative can be sum- Class action seeking for damage compensation is a mechanism moned for a ‘formal examination’. Formal examination is a kind recently introduced in the Italian legal system, effective from 1 of evidence aimed at achieving a confession. The party can be January 2010 in relation to wrongful events that have occurred since questioned only by the judge and only on the questions previously 15 August 2009. Since then, moreover, the relevant provisions have approved by the judge. The party cannot be forced to appear, but if already been subject to partial modifications. he or she fails to appear or refuses to answer, the judge can consider Class action consists of two phases: a first admissibility stage the facts as admitted. and a second liability and damage stage. An essential condition for Moreover, the court can order the parties to appear in order to admissibility is homogeneity of the rights claimed by the members question them informally (free examination). During a free exami- of the group. Once the court, ruling in panel, declares the action nation the party is not bound to answer, and the statements rendered admissible, publicity takes place, being the action based on an opt-in are not considered as technical evidence. system. Formal and free examinations are not used often, because the The decision of the court is not a direct condemnation but rather examination is not under oath and a possible lie would not be pun- sets the criteria to be used to calculate the amount to be paid to the ished as perjury as the party is not – technically – a witness (principle consumers or, if possible, establishes the minimum amount to be of ‘privilege against self incrimination’). paid to each consumer. The assessment of individual damages is then A party’s ‘oath’ is a sworn statement affirming that one or more referred to a subsequent settlement or litigation. of the alleged facts is true. It is taken only upon the request of the Class action can be started by ‘duly representative’ consum- opposite party, and the party requested to take the oath may also ers’ associations appointed by one or more consumers, in order to ask the other party to do the same. The oath, when taken, provides request compensation for damages or reimbursement in favour of ‘legal’ evidence and conclusive proof of the facts. On the contrary, consumers in the event of unlawful behaviour damaging a plurality when the party requested to take the oath refuses to do so or fails of persons, including product liability. to appear, the relevant facts are regarded as established. In practice, oaths are rarely used. Writing witnesses in the form of depositions became recently 8 How long does it typically take a product liability action to get to admissible, albeit within strict limits depending on the nature of the the trial stage and what is the duration of a trial? matter, the agreement of the parties and the discretional evaluation The average length of first instance proceedings, whose rules also of the judge. govern product liability action, ranges from one to five years, The court can rely only upon evidence provided by the parties, depending mainly on the evidentiary means offered by the parties and must refrain from personally investigating facts deemed relevant and admitted by the court and on the workflow of each individual to the case. Nonetheless, the judge is entitled to appoint one or more court. experts, in order to ground his or her decision in facts or circum- stances of general knowledge and to call witnesses referred to by Evidentiary issues and damages other witnesses during their testimony. The judge may ground his or her findings on certain particular items of evidence and disregard 9 What is the nature and extent of pretrial preservation and other items, provided that a logical and detailed explanation for this disclosure of documents and other evidence? Are there any is given in the decision. avenues for pretrial discovery? The law sets forth the preservation of documents for companies and professionals. Timing may vary depending on the nature of the 11 May the court appoint experts? May the parties influence the documents. appointment and may they present the evidence of experts they No formal US-style discovery exists. Any party can ask the judge selected? to order the filing of specific documents with the court. When the case requires specific technical knowledge, the judge may Very limited pretrial activities are admitted to procure evidence appoint, also upon a party’s request, one or more experts (CTUs) (witness, ascertainment over the status of goods, technical experts) to act as the judge’s assistants and provide their technical opinions.

110 Getting the Deal Through – Product Liability 2014 Gianni, Origoni, Grippo, Cappelli & Partners ITALY

The CTU is selected among experts included in lists filed in 13 Are punitive, exemplary, moral or other non-compensatory court. Otherwise, the authorisation of the court president is neces- damages available to product liability claimants? sary. The parties can oppose the appointment of the CTU on proper Italian traditional legal theories state that any damage not aimed at grounds, such as risk of impartiality and bias. fully compensating the injured party for distress actually suffered The CTU cannot make legal assessments, establish the existence (punitive, exemplary, etc) is not permitted. It should be noted that of legal provisions or assess documentary evidence. Each party can some scholars and some legal provisions, in specific areas, are to appoint its own retained expert to work together with the CTU. some extent in support of not strictly compensatory damages. The CTU’s expertise is carried out in writing and develops through a first filing by the expert of a draft report, to which parties’ Litigation funding, fees and costs experts can reply in a given term, and ends by the filing of a final report, including comments on or remarks to the parties’ experts 14 Is public funding such as legal aid available? If so, may potential notes. The expert can be summoned to the hearing to explain the defendants make submissions or otherwise contest the grant of outcome of his or her activity or to reply to the questions raised by such aid? the lawyers and by the parties’ experts. An indigent party can access legal aid, provided that the claim is It is the judge’s duty to evaluate the findings of all experts. The not clearly groundless. In order to obtain legal aid, the party must judge may disagree with the conclusions reached by the CTU, as file an application to the local bar association. Thereafter, the court long as he or she provides adequate grounds for this disagreement. before which the proceedings are pending may cancel the legal aid The parties may appoint experts even if the court does not if the income of the party is found to be above the threshold set by appoint a CTU, and these experts can draft reports. the law, or that the requirements provided by the law do not exist or if it deems that the party has acted or defended itself with malice or 12 What types of compensatory damages are available to product gross negligence. Legal aid includes lawyers’ fees and any other costs liability claimants and what limitations (if any) apply? linked to the case. When legal aid is granted, some of the costs are anticipated by the state and others are waived. Legal aid is, however, All damages, including both pecuniary and non-pecuniary damages, not widespread, due to its limitation in admissibility and because – suffered by the injured party are recoverable. in general – litigation in Italy is not particularly expensive. For years, courts and scholars have made reference to four cat- egories of damages: • economic damages – these can consist of monetary damages 15 Is third-party litigation funding permissible? (pecuniary loss incurred or loss of profits); Generally speaking, third-party litigation funding is permissible but • biological damages – damages to the psychological and physical not common. integrity of a person, directly related to his or her health; • non-economic or moral damages – non-pecuniary damages (pain and suffering), which can be awarded only in the cases provided 16 Are contingency or conditional fee arrangements permissible? for by law (mainly in cases involving criminal offences); and Contingency or conditional fees have become admissible in the last • existential damages – these are non-pecuniary damages ‘created’ few years. Accordingly, legal fees can be agreed as a percentage of by case law to compensate damages not covered by the moral the sum awarded to the represented party. Agreements have to be in damages rule. The category is relatively undefined, but accord- writing. In any case, any form of transfer of credits in favour of the ing to the same case law can cover any event that negatively lawyers is still prohibited. affects ‘quality of life’. 17 Can the successful party recover its legal fees and expenses from However, by a stand-out ruling in 2008 (No. 26972) the Joint the unsuccessful party? Sections of the Court of Cassation maintained that non-pecuni- ary damages are compensable only in the cases provided for by The court’s final decision also awards costs. As a general rule, the law, namely in two sets of cases: cases in which compensability is losing party has to pay both the expenses and the fees of the winning expressly acknowledged (for example, in cases in which the tort party; however, this does not mean that the winner will certainly is characterised by elements that make it amount to a criminal recover all costs, as the court does not liquidate the effective costs offence); and cases in which, although compensability of such kind incurred but determines the fees to be reimbursed on the basis of cer- of damages is not expressly provided for by any legal provision, the tain criteria as established by the law. In accordance with these crite- tort seriously prejudiced a personal right that is directly protected by ria, which have been recently modified and reviewed, fees have to be the constitution. calculated having regard, basically, to the value of the claims and the As a consequence of such a decision, damage defined as ‘existen- activities carried out by the lawyers in each and every phase of the tial’ is practically no longer compensable as an autonomous category proceedings (ie, study of the case; introductory, evidence-gathering of damages, while non-pecuniary damages must be compensated in and ruling phases; and the enforcement procedure). full, but without duplications. The court may also deny the recovery and settle the expenses, In Italy, decisions, even from the Supreme Court, do not con- when serious circumstances explained in the judgment require this. sist of binding precedents and only have persuasive effect. In recent In that case, each party has to bear its own costs. As a matter of years, however, the trend of both high and lower courts is to follow fact, the court frequently deems it not appropriate for a company to the above interpretation. recover costs against losing individuals. The damage may also be proved on the basis of mere presump- tions, but the damaged person remains burdened with the task to Sources of law allege the factual elements from which the existence and the extent 18 Is there a statute that governs product liability litigation? of prejudice may be gathered. EU Directive No. 85/374 on product liability was implemented in Italy in 1988 by the Product Liability Act, as amended by Legislative Decree No. 25/2001 (the PLA). Further, Legislative Decree No. 115/95, implementing European Directive No. 1992/59, as amended by Legislative Decree No. 172/04, in turn implementing European www.gettingthedealthrough.com 111 ITALY Gianni, Origoni, Grippo, Cappelli & Partners

Directive 2001/95, which introduced general obligations on product • part IV concerns the quality and the safety of products, provid- safety, to a certain extent supplements the PLA, imposing an obliga- ing for, in particular, provisions on liability for defective prod- tion on manufacturers and producers to withdraw unsafe products ucts, legal guarantee of conformity and commercial guarantee from the market. All the above Acts were subsequently incorporated for goods; into the Consumer Code, enacted in 2005. • part V deals with consumers’ associations and their right to take In general terms, the provisions of these Acts are a response to legal action, including class actions, without preventing the con- the difficulties that consumers had been facing in seeking damages sumer from suing. Consumers’ associations are entitled to act in caused by a defective product, relying on the ‘traditional theories of defence of consumers’ health, safety and quality of goods and liability’, namely in contract or in tort, as the former implied that the services, adequate information and fair advertising; and action had to be laid against the party with which the consumer had • part VI contains final provisions, including provision establish- signed a contract (usually the seller) and the latter implied the fault ing that consumers’ rights cannot be waived and the consequent of the manufacturer, that had to be proven by the consumer. nullity of any agreement in this regard. On the contrary, the EU Directive and now the Consumer Code have provided a new kind of liability, which is strict, not fault-based, 21 Can criminal sanctions be imposed for the sale or distribution of and can be claimed directly against the manufacturer, regardless of defective products? the existence or not of a contract between the latter and the con- sumer or user. Pursuant to the Consumer Code it is the manufacturers’ duty to ensure that products placed on the market are safe and grants the power to the relevant authorities to check the safety of products and 19 What other theories of liability are available to product liability to order or impose certain means aimed at preventing any possible claimants? damage. As discussed above, pursuant to most widespread case law, further Manufacturers can be sanctioned for the infringement of the to the Consumer Code, claimants may claim compensation on the provisions of the Consumers Code and may also be sentenced to basis of tort or contract liability, or both. imprisonment of up to one year. Tort is based on the ‘duty of care’ concept. The main rule estab- lishes that: ‘Any person who wilfully or negligently commits an act 22 Are any novel theories available or emerging for product liability causing another party to suffer unjust damages shall be required to claimants? pay compensation for such damages.’ Additionally, the Italian system provides for a strict liabil- There are no significant novel theories available to claimants. In gen- ity, based on a presumption of liability on subjects who perform eral terms, theories on product liability litigation are still developing, a ‘dangerous activity’, so that ‘whoever has caused injuries to oth- also in connection with the quite recently introduced class action ers while performing dangerous activities (defined as dangerous by provisions. their nature or because of the type of instruments used to perform them), is required to pay compensation, if he or she is unable to 23 What breaches of duties or other theories can be used to prove that all measures that would have been suitable to avoid any establish product defect? injury have been adopted’. The presumption of liability exempts the In accordance with the Consumer Code a product is defective ‘when injured party from the burden of proving the fault of the allegedly it does not provide the safety a person can reasonably expect, tak- liable party. ing into account all circumstances’ or in the case of manufacturing Contractual liability, based upon the breach of an obligation defects, when it does not provide the safety normally provided by undertaken by one of the parties, relies on the general rule, accord- other category specimens. In assessing this standard, various factors ing to which in the event of non-performance or imperfect perfor- are considered, including the manner in which the product was dis- mance of the contract (which includes the supply of a defective tributed and marketed, its clear features, the instructions and warn- product), the seller and the lessor are liable to the buyer, leaseholder ings provided; the reasonably foreseeable use of the product; and the or user, unless they can prove that non-performance was due to facts time the product was put on the market. beyond their control. For contractual liability, compensation is lim- Consumers’ safety expectations are evaluated on the basis of a ited to reasonably foreseeable damages at the time of entering into series of objective parameters, including price, technical rules (man- the contract. datory standards that the manufacturer or producer must comply with), any trial, test and present state of technical and scientific 20 Is there a consumer protection statute that provides remedies, knowledge available at the date of distribution of the product. imposes duties or otherwise affects product liability litigants? Finally, the reasonable use of the product is evaluated not in abstract The Consumer Code was put in place in 2005, to gather together terms but rather in relation to the users at whom the product is and consolidate all the different provisions concerning consumers aimed (such as the foreseeable use of a toy for children). already in force in Italy. It consists of 146 articles divided into six Three types of defects are set forth under the Consumer Code: parts: manufacturing defects (when the defect is the result of an error in • part I contains the ‘general provisions’ governing consumers’ production of an otherwise well-conceived product); design defects and users’ rights. In particular, section 2 contains a list of con- (when the defect is inherent to the project itself); defects based on sumers’ rights (for example, the rights to protect health; to safety inadequate information (when the product is well conceived and and quality of products and services; to adequate information produced, but it is dangerous as placed on the market without ade- and fair advertising; and to fairness, transparency and equity in quate information to users or consumers). contractual relationships); • part II deals with consumers’ education and information to 24 By what standards may a product be deemed defective and who the same in terms, for instance, of quality, price and risks, and bears the burden of proof? May that burden be shifted to the advertising; opposing party? What is the standard of proof? • part III contains the provisions regulating contracts signed by The injured party bears the burden of proof with regard to the defect consumers; of the product, damage and causality.

112 Getting the Deal Through – Product Liability 2014 Gianni, Origoni, Grippo, Cappelli & Partners ITALY

A first trend of merit courts was to assume the existence of the Limitations and defences defect by the damage caused. But said trend seems to be changed fur- ther to a decision of the Supreme Court, which can be now regarded 28 What are the applicable limitation periods? as a benchmark in the matter (Court of Cassation judgment of 15 The statute of limitation period is three years from the day on which March 2007, No. 6007). Indeed, assuming a more severe approach, the injured party becomes or should have become aware of the dam- the Supreme Court ruled that the general rules on burden of proof age, the defect and the identity of the liable party and 10 years from set out in the Code have to be applied. As noticed above, Italian the day on which the product was placed on the market. decisions, even from the Supreme Court, do not consist of binding If the action is based on the general tort provision, the statute precedents and only have a persuasive effect. Nonetheless, at the pre- of limitation period is five years from the consumer’s awareness. In sent time, the trend of both high and lower courts is to follow the contract liability action the relevant period is 10 years, again from interpretation at issue. the consumer’s awareness.

25 Who may be found liable for injuries and damages caused by 29 Is it a defence to a product liability action that the product defective products? defect was not discoverable within the limitations of science and The principle is that manufacturers shall be liable for damage caused technology at the time of distribution? If so, who bears the burden by their products. Manufacturers, as described by the Consumer and what is the standard of proof? Code, include: Liability is excluded in the event that ‘the scientific and technical • the manufacturer of the product in the EU; knowledge available at the time the product was put on the market • anyone presenting itself as manufacturer by placing a name, was not yet of such a kind as to allow the product to be considered trademark or other distinctive sign on the product, or anyone faulty.’ The Consumer Code confirmed this exemption, but some who reconditions the product; authors consider it tacitly revoked by the regulations governing • the manufacturer’s representative when the manufacturer is not product safety that impose post-selling obligations. The burden of established in the EU, and importers when there is no manufac- the proof is borne by the defendant. turer’s representative established in the EU; and • other parties included in the supply chain, insofar as their activi- 30 Is it a defence that the product complied with mandatory (or ties may affect the standards of safety of a product. voluntary) standards or requirements with respect to the alleged defect? Suppliers may also be held liable, but only in the event that manu- facturers have not been identified. Suppliers can be released from The fact that the product is in compliance with mandatory stand- liability by allowing the identification of manufacturers. ards or requirements is a valid defence, as pursuant to the Consumer Code liability is excluded if the defect is due to the compliance of the product with a mandatory law or a binding order. 26 What is the standard by which causation between defect and According to commentators, this defence may be applied in the injury or damages must be established? Who bears the burden event the mandatory law or a binding order imposes specific condi- and may it be shifted to the opposing party? tions or formalities on the manufacturer, but not if the mandatory With reference to the standard of causation, the trend of the Supreme law or a binding order sets forth for minimum safety standards. In Court is to consider the threshold of probability in civil cases lower this case, compliance with such minimum safety standards does not than that required in criminal cases and that consequently in the amount to a valid defence. former cases causal chain can be determined on the logic of ‘more probable than not’. Thus, according to the above, the relevant causal 31 What other defences may be available to a product liability chain, for which wrongdoers shall be liable, is that related to con- defendant? sequences that are ‘usually’ produced by their actions, unless a new fact occurs in relation to which they have no duty or possibility to Another exclusion of liability that has, in our experience, proved act (in compliance with the ‘theory of causal regularity’). The law to be fairly effective is the contribution by the injured party. The does not set forth the reversal of the burden of the proof, which is Consumer Code allows for exclusion from compensation if the on the plaintiff. party, although aware of the defect and the related risks, voluntarily exposes himself or herself to risk of damage.

27 What post-sale duties may be imposed on potentially responsible parties and how might liability be imposed upon their breach? 32 What appeals are available to the unsuccessful party in the trial court? As already stated, the Consumer Code requires the manufacturer and the distributor to place on the market a safe product and to Decisions issued in first instance proceedings for product liability ensure this foresees a general duty to carry out ‘post-market con- can be appealed by ordinary means before courts of second instance trols’ (testing the product, monitoring consumers’ claims, etc) and (for tribunals or courts of appeal see question 1). a number of post-sales duties aimed at preventing damages that a Second instance courts can rule again on the merits of the case. defective product might cause. These may include the withdrawal of As a general remark, new claims and new challenges are not admis- the product from the market, the recall from the consumers or users sible. New evidentiary means or requests cannot be admitted unless and provision of supplementary information aimed at making con- the court considers them essential to decide the case or the party sumers aware of risks and instructing them on how to avoid dam- proves that they could have not been submitted during first instance ages. Manufacturers are also required to inform the authorities with proceedings for reasons not attributable to the same. jurisdiction of any of their products’ defects or risks and cooperate Relevant decisions can in turn be challenged before the Supreme with them in all activities aimed at preventing damage. Court for reasons of law, but are not subject to further review on In turn, the authorities have the power to instruct manufactur- the merits. ers to withdraw or recall any product they deem to be faulty and to supplement information in order to prevent damage.

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Update and trends

In the last few years, special attention has been dedicated, by both review of the case, the relevant decision becomes final and binding. professionals and scholars, to class action. Such a mechanism of This, however, does not prevent the relevant consumers from trying to legal protection became available to consumers in Italy only recently, initiate a new class action, also on the basis of the same claim. from 1 January 2010. Trends and developments in the relevant case Among the procedures admitted as above, only one regarded a law may have an impact in determining the recourse to this kind claim based on product liability. Such a claim, however, was rejected of procedure and modifying present scenarios in product liability on the merits, on the assumption that the damage allegedly suffered litigation. was not proved. As a general observation, since class action was introduced as A significant decision, even if not strictly related to product liability above, almost 45 procedures have been initiated. Out of them, only a matters, is the one recently issued by the Court of Milan (April 2014), very few were admitted, positively passing the preliminary evaluation dealing with a class action for compensation for damage caused of the court in terms of certification. by a strike in public transport in Milan, which occurred in October Some of the rulings establishing the inadmissibility of the 2012. The Court of Milan, in dismissing the case, condemned the relevant procedures were appealed. After having been confirmed at Consumers Association to refund the counterparty (ie, the company the conclusion of the second instance procedure, one of these rulings in charge of public transport) all the costs of proceedings, thus was further challenged before the Court of Cassation, the Italian abandoning the common practice of compensating the same costs Supreme Court. In deciding the case, the Court of Cassation rejected between the parties when the consumers are the losing party. the relevant claim, finding the challenge at issue as inadmissible. This decision was grounded on the negligence of the Consumers Particularly, according to the Court of Cassation, the assessment Association in carrying out the proceedings (lack of accuracy and of over the admissibility of class action is subject to a double review professionalism in filing the claims), which could also be detrimental by the merit courts only; should admissibility be denied after a first to the rights of the consumers represented by the same association.

Jurisdiction analysis personal injuries due to the sudden breakage of the column sup- porting the front gear-shift of a mountain bike and the consequent 33 Can you characterise the maturity of product liability law in terms detachment of the bicycle wheel. of its legal development and utilisation to redress perceived Another well-known decision was issued by the Court of wrongs? Cassation, which excluded the liability of the manufacturer in rela- Although theories and case law on product liability are still develop- tion to a swing. The court held that: ‘The manufacturer of a product ing, there does appear to be a good balance between the provisions that has caused damage shall be exempt from liability […] when it governing product liability in terms of compensation of damages is shown that the safety defect of the product was only manifested suffered by consumers and those aimed at preventing these damages, in relation to a method of use thereof that did not fall within the use and in particular those enforcing post-sales duties and post-market that can be reasonably foreseen by the manufacturer.’ controls. Two other significant decisions were issued in 2008 by the Joint Having said that, however, statistically the plaintiffs’ lawyers Divisions of the Supreme Court, ruling on causation and on statute still tend to rely on different law to tort liability. Consequently, the of limitation. The Joint Divisions have held that in civil litigation number of cases concerning product liability decided every year, the existence of causation does not require a certainty beyond any albeit seemingly increasing, remains limited. The familiarity of the reasonable doubt; rather, the criterion of ‘more probable than not’ judiciary with this area of the law still has room for improvement. applies. The Supreme Court also maintained that, when evaluating Differences, moreover, can be seen between lower and higher courts, causality, judges must take into account whether the event could and also in different territorial areas around the country. have been foreseen, in the sense that the harm resulting from an act or omission must be reasonably predictable on the basis of statistical or scientific criteria. 34 Have there been any recent noteworthy events or cases that In this regard, it is also worth mentioning that the awareness of have particularly shaped product liability law? Has there been the risks or the relevant warnings turned out to be a winning defence any change in the frequency or nature of product liability cases argument in product liability litigation. With respect to warnings, launched in the past 12 months? some merit courts ruled on the relevant standard and clarified that Until the end of the 1960s, judges based manufacturers’ liability on the warning must be sufficiently explicit to enable the consumer to general tort rules. This solution was extremely detrimental to injured appreciate the particular hazard involved, especially where the haz- parties in that the burden of proving the manufacturer’s fault lays ard is likely to arise from normal use of the product. with the injured party. Case law underwent a crucial transformation This interpretation, moreover, was more recently confirmed in the Saiwa case, decided in 1964. Here the judges made their deci- by the Court of Cassation. In a case for compensation of damage sion on the basis of the criteria of objective liability and the fault of caused by the use of sun tanning lotion with no sunscreen protec- the manufacturer was assumed as culpa in re ipsa, namely, implicitly tion, the Supreme Court stated that the production could not be due to the damaging nature of the product itself. considered as ‘defective’ only because of its potential riskiness, as Further to the Saiwa case, judges began – although case law was the liability of the manufacturer of a defective product could only far from uniform – to decide cases of product liability by presum- be ascertained if the damage had been caused by said product when ing liability on the part of the manufacturer. In particular, from the used ‘in accordance with its normal use’, namely, in accordance with 1980s onwards, case law began to refer to other rules to simplify the the instructions and warnings provided for by the manufacturer injured party’s position, including article 2050 of the Italian Civil (decision No. 25116 of 13 December 2010). This principle was sub- Code on dangerous activities, affirming that the expression ‘danger- sequently followed by both higher and lower courts. ous activities’ could also include the product as final result of the rel- Notwithstanding the above, however, the courts continue to evant activity. In this regard, case law on blood infection and drugs decide many cases of product liability on the basis of general rules should be mentioned. provided by the Italian Civil Code, also after the PLA became The PLA had limited application in Italy, as shown by the few effective. rulings made, based specifically on this rule. In fact the first action This trend arguably relies on the outcome of decision C-52/00 of was brought in 1991, known as the Mountain Bike case, concerning 25 April 2002 of the European Court of Justice, stating that:

114 Getting the Deal Through – Product Liability 2014 Gianni, Origoni, Grippo, Cappelli & Partners ITALY

The reference in Article 13 of the Directive to the rights that an development. The increasing attention of consumers’ associations to injured person may rely on under the rules of the law of contractual the matter may, however, determine new trends in the near feature. or non-contractual liability must be interpreted as meaning that the Moreover, after a first start up period, seemingly needed to sharpen system of rules put in place by the Directive, which in Article 4 ena- ‘techniques’, recourse to class action may become more common. bles the victim to seek compensation where he/she proves damages, the defect in the product and the causal link between such defect 36 Describe any developments regarding ‘access to justice’ that and the damages, does not preclude the application of other systems would make product liability more claimant-friendly. of contractual or non-contractual liability based on other grounds, such as fault or a warranty in respect of latent defects […] Article 13 As already mentioned, litigation based on product liability claims of the Directive cannot be interpreted as giving the Member States is still developing in Italy. Law reforms introduced in the past few the possibility of maintaining a general system of product liability years may have a role in speeding up such a development. These different from that provided for in the Directive.Indeed, on the basis reforms include the introduction of a class action procedure and the of the above decision, the injured party can rely on different legal possibility for clients to enter into contingency fee agreements with grounds rather than the PLA and Consumer Code. their lawyers, which had been previously inadmissible. Third-party funding (which is not prohibited but which at the same time is not No significant change, moreover, has been registered in this trend in regulated) may contribute. the past 12 months. Nonetheless, up to the present time, statistics show that the above mechanisms are still timidly approached by plaintiffs and that general awareness on their availability and potential effects is 35 Describe the level of ‘consumerism’ in your country and not mature yet. The activities of consumers associations, which are consumers’ knowledge of, and propensity to use, product liability themselves entitled to represent classes of consumers in the relevant litigation to redress perceived wrongs. class action procedures, may become more and more decisive in Despite the legislative instruments available to injured parties, dis- alerting the attention on the topic at issue and in promoting a wider putes concerning product liability do not have a wide, significant notice to the same.

Michela Turra [email protected] Alessandra Chimienti [email protected]

Piazza Belgioioso 2 Tel: +39 02 763 741 20121 Milan Fax: +39 02 7600 9628 Italy www.gop.it

www.gettingthedealthrough.com 115 JAPAN Anderson Moˉ ri & Tomotsune Japan

Tetsuro Motoyoshi and Ryohei Ikeda Anderson Moˉri & Tomotsune

Civil litigation system The court will then send a summons together with the complaint to the defendant by post. Before the hearing, the defendant has to 1 What is the structure of the civil court system? file a written answer. A written answer shall contain the following: All judicial power is vested in the Supreme Court and lower courts • statements of the answer to the object of claim; such as the high, district, family and summary courts. Summary • concrete statements of admission or denial of the facts stated in courts have jurisdiction over proceedings where the contested the complaint and facts in support of defence; and amount does not exceed ¥1.4 million. District courts hear appeals • statements of material facts related to the facts stated in the com- from summary courts and are also courts of first instance for all plaint or the facts in support of defence and evidence for the matters with a contested amount in excess of ¥1.4 million and respective grounds that require proof where necessary. litigation involving property. Family courts have jurisdiction over non-monetary family law claims. Appeals from the district and fam- In cases where it is not possible to include the aforementioned state- ily courts are heard by the high courts. The Supreme Court hears ments in the written answer due to unavoidable circumstances, a appeals on certain matters from the high courts. brief containing these statements shall be submitted promptly after submitting the written answer. Copies of important documentary evidence are to be attached to a written answer where evidence is 2 What is the role of the judge in civil proceedings and what is the required. Where it is not possible to attach such copies of important role of the jury? documentary evidence due to unavoidable circumstances, the cop- Japanese civil litigation is adversarial in nature and it does not ies shall be submitted promptly after submitting the written answer. involve a jury. Judges make findings of fact, apply the law and deliver judgments on whether the claim of the plaintiff should be allowed or not. Judges rely on the factual information provided to the court 4 Are there any pre-filing requirements that must be satisfied before by the parties and will not generally collect information themselves. a formal law suit may be commenced by the product liability Judges also control procedural issues such as deciding the timeline claimant? and schedule for the case, the admissibility of evidence, etc. There are no pre-filing requirements for civil litigation generally. In practice, however, a claimant often sends a content-certified letter, stating the material issue and asking for some action to be taken, to 3 What are the basic pleadings filed with the court to institute, the defendant. prosecute and defend the product liability action and what is the sequence and timing for filing them? An action shall be filed by submitting a complaint to the court. A 5 Are mechanisms available to the parties to seek resolution of a complaint shall contain the following facts to provide the court with case before a full hearing on the merits? sufficient information to decide the course of the case: There are no statutory mechanisms that allow parties to seek resolu- • the parties; tion of a case before a hearing on the merits. However, a claim that • the object of the claim (namely, the nature of the relief claimed, lacks certain prerequisites shall be deemed unlawful, and the court, such as demand for payment of a certain amount of money); by a judgment, may dismiss such a claim without holding a full hear- • the statement of claim (namely, the facts to specify the claim); ing on the merits (see article 140 of the Code of Civil Procedure • the fundamental facts from which the claim arises in law; (CCP) (Act No. 109 of 1996, as amended)). The following are • the substantial evidentiary facts; and examples of such prerequisites: the valid service of a complaint, the • the necessary evidence in the plaintiff’s possession, including non-filing of overlapping claims, the parties have the ability to bring documentary evidence. proceedings in their own names, the court has jurisdiction, and the claim contains the benefit of bringing such a suit or person eligible It is the plaintiff’s responsibility to specify the content of the claim to be pursued in the litigation. and the claim amount. After the filing of the complaint, the court clerk will verify the correctness of the complaint form and the stamp duty paid in rela- 6 What is the basic trial structure? tion to the complaint (the amount of stamp duty corresponds to Court hearings are held periodically to determine the substantial the contested amount). The clerk will then contact the plaintiff or issues and prepare the trial. In many cases preparatory hearings are the plaintiff’s attorney and will determine the date of the first oral held in chambers, where judges might ask the counsel questions to hearing according to the availability of the plaintiff or the plaintiff’s clarify the parties’ positions. After determining the substantial con- attorney. tested issues, the court will run a trial and permit the conduct of witness examination if it deems it necessary.

116 Getting the Deal Through – Product Liability 2014 Anderson Moˉ ri & Tomotsune JAPAN

When a party requests for witness examination to be conducted, • disposition for the collection of evidence prior to the filing of the requesting party’s witness statement shall be submitted as evi- an action (CCP article 132-4): if an advance notifier or a recipi- dence prior to the witness examination to facilitate the counterpar- ent of an advance notice has difficulty collecting any evidence ty’s preparation for the cross-examination, unless it is difficult for necessary for proving its case, the court may make dispositions the requesting party to submit such statement (for example, where such as commissioning to send a document or commissioning the witness is hostile). After the witness examination, each party will of examination upon petition before the filing of the action. submit its closing brief to facilitate the court’s final deliberation and Please note that such dispositions are not typically practised in judgment. Japanese lawsuits; • request for information (Attorney Act (Act No. 205 of 1949) article 23-2): a qualified attorney may request the bar associa- 7 Are there class, group or other collective action mechanisms tion to which he or she belongs to make inquiries with public available to product liability claimants? Can such actions be offices or private organisations regarding information necessary brought by representative bodies? for a case for which he or she has been retained. The bar associa- At present, class actions are not allowed under Japanese law; tion will make such inquiries unless it finds such request to be accordingly, each person needs to be a plaintiff (although there is in-appropriate. Notwithstanding this, information may be with- no restriction on the number of the plaintiffs named in one com- held by the its holder, especially if the information requested is plaint). However, a bill introducing a class action procedure, which private and confidential; will enable a qualified consumer organisation, which been admitted • inquiry to an opponent (CCP article 163): a party may, when by the Prime Minister, to file a lawsuit in which common questions a suit is pending, request for its opponent to make inquiries of liability will be assessed, was passed by the Diet on 4 December regarding matters necessary for preparing its allegations or 2013 (see ‘Update and trends’). evidence; Under the CCP, each person can individually appoint any other • commission to send a document (CCP article 226): a party may person who shares the common interest as a plaintiff in such litiga- request the court to commission the holder of a document to tion (CCP article 30). send such document to it; • commission of examination (CCP article 186): government agen- 8 How long does it typically take a product liability action to get to cies, public offices, foreign government agencies, foreign public the trial stage and what is the duration of a trial? offices, schools, chambers of commerce, securities exchanges or any other organisations (such as hospitals or employers of vic- The first court hearing will typically be held within 40 to 60 days tims in a suit) may be commissioned by a court to conduct a after the filing date by the decision of the court. After that, court necessary examination and report the result to the court; and hearings or preparatory proceedings will be held once a month, or • document production order (CCP articles 220 to 225): a party once every few months. The examination of the witnesses, if neces- can request the court to order the holder of a document to sub- sary, the closing brief, final oral proceedings and the judgment then mit the same to the court if such holder has an obligation (under follow. CCP article 220) to produce the document in court and it is nec- On average, judgment in the first instance is rendered one-and- essary to a suit for that document to be examined. If the holder a-half or two years following the filing of the complaint in ordi- of the document, who is a party to the case, does not comply nary cases which involve witness examinations. For product liability with such a court order, or has discarded the document with the cases, it takes on average 32 months before final judgment will be intention of disrupting the proceedings, the court may rule that received. the petitioner’s allegations regarding the contents of the docu- ment are true. Evidentiary issues and damages

9 What is the nature and extent of pretrial preservation and 10 How is evidence presented in the courtroom and how is the disclosure of documents and other evidence? Are there any evidence cross-examined by the opposing party? avenues for pretrial discovery? Witnesses give oral evidence regarding the facts they have person- There is no general discovery or disclosure. However, pretrial pres- ally experienced that are related to the subjects to be proved. The ervation of evidence and some avenues for pretrial ‘request for infor- examination of a witness proceeds with direct examination by the mation’ do exist (there are various specific exceptions, such as when requesting party, cross-examination by the opposing party and trade secrets or private secrets are involved) as follows: supplemental examination by the judge. The opposing party cross- • preservation of evidence (CCP article 234): where a court con- examines the witness about matters raised previously in the direct cludes that it would be difficult to examine evidence unless a examination and any matters related thereto, and also matters con- prior examination of evidence is conducted (for example, where cerning the credibility of the testimony (Rules of Civil Procedure there is a risk that such evidence will be altered or discarded), it (Rules of the Supreme Court No. 5 of 1996, as amended) article may permit the conducting of an examination of evidence upon 114). If the opposing party wants to bring up matters that the petition. This procedure is typically used for clinical records requesting party will not raise, the opposing party can do so by fil- where a medical accident happened; ing a request for examination as well. • inquiry prior to filing an action (CCP articles 132-2 and 132-3): Although it is not necessary in all cases, the court will often where a person who intends to commence legal action has given instruct the parties to submit written statements, prior to trial, con- advance notice of the same to a prospective defendant, the giver taining the principal facts to be attested to from each person who is of the advance notice may make an inquiry with the prospec- to give evidence as a witness. Written statements help the court to tive defendant regarding matters necessary for the preparation understand what a witness is going to prove, facilitate the opposing of the advance notifier’s allegations or evidence. The recipient of party’s preparation for cross-examination and contribute to improv- the advance notice may also make an inquiry with the advance ing the quality of examination. notifier for purposes of preparing its allegations or evidence. The court decides a plan for witnesses’ examination in light of This procedure of making inquiries is not typically practised in the parties’ motions, the allegations, and the written statements. The Japanese lawsuits; plan includes the persons to be examined, the order of witnesses, and the allotted examination time for each witness. www.gettingthedealthrough.com 117 JAPAN Anderson Moˉ ri & Tomotsune

11 May the court appoint experts? May the parties influence the 15 Is third-party litigation funding permissible? appointment and may they present the evidence of experts they There are no specific regulations regarding third-party litigation selected? funding where a third party funds a claimant’s action against the Generally, presentation of expert testimony is arranged only at the defendant in return for a share of the damages. Article 73 of the request of the parties to a suit. However, the court sometimes takes Attorney Act stipulates that no person shall engage in the business the view that expert testimony is necessary and may request the of obtaining the rights of others by way of assignment and enforcing parties to arrange for expert testimony to be presented. An expert such rights through lawsuits, mediation, conciliation or through any witness shall be designated by the court at its discretion (CCP arti- other means. The scope of such prohibition is unclear. However, it cle 213). The court usually determines who is to be an expert after would be deemed a violation of the Attorney Act if a party repeat- consulting with parties. Expert witnesses state their opinions either edly obtains the rights of others and enforces such rights in Japan. in writing or orally as determined at the discretion of the court (CCP article 215). 16 Are contingency or conditional fee arrangements permissible? Where the court has an expert witness state their opinions orally, the opinion will be stated first, followed by questioning from the There are no specific limitations or restrictions under the rules or judge, the requesting party and the opposing party (in that order) laws, including the rules of the Japan Federation of Bar Associations. (CCP article 215-2). However, in practice, no win, no fee arrangements are rare in Japan. If the parties choose to present their own expert evidence, the parties may present an expert’s written opinion as documentary 17 Can the successful party recover its legal fees and expenses from evidence. At the opposing party’s request, the expert may be exam- the unsuccessful party? ined as a witness so that the opposing party can conduct a cross- In principle, the unsuccessful party bears the court costs, including examination in order to challenge the written opinion. Sometimes, filing fees for an action or fees for the presentation of expert testi- the court may arrange for further expert testimony to be presented mony (CCP article 61). Where the court has not ruled entirely for after both parties present their respective experts’ written opinions the claimant or defendant, the court may allocate the court costs to as documentary evidence. the parties at its discretion (CCP article 64). Attorneys’ fees are not In addition, after hearing the opinions of the parties, the court part of court costs. However, in tort cases (which include PLA cases), may have a technical adviser participate in the court proceedings in the court can include a certain portion of the claimant’s attorneys’ order to provide explanations on various technical aspects thereto fees (typically amounting to 10 per cent of damages) as part of the (CCP article 92-2). However, practically speaking, technical advisers damage that the claimant has suffered. are not frequently used in product liability lawsuits.

Sources of law 12 What types of compensatory damages are available to product liability claimants and what limitations (if any) apply? 18 Is there a statute that governs product liability litigation? There is no specific limitation regarding the types of compensatory The PLA, which came into force from July 1995, governs product damages under the Civil Code (Act No. 89, of 1896, as amended) liability litigation along with the Civil Code. The liability under the or the Product Liability Act (PLA) (No. 85, of 1994, as amended) PLA can be regarded as ‘strict’ liability as, by replacing ‘negligence’ (see question 18). Therefore, any compensable damage incurred by with the existence of ‘defect’, victims are not required to prove the the victim, whether direct or indirect, physical, psychological or eco- negligence of the manufacturer as defined in question 25. However, nomic, can be covered, if there is legally sufficient causation. victims still have to prove the defect and the other conditions for tort liability (namely, the existence of damage and the causation between defects in the product and the damage) to claim the damage under 13 Are punitive, exemplary, moral or other non-compensatory the PLA. The PLA is notable for its protection of not only individu- damages available to product liability claimants? als but also corporations. No punitive, exemplary, moral or other non-compensatory damages are available under either express provisions or court cases. 19 What other theories of liability are available to product liability claimants? Litigation funding, fees and costs Along with liability under the PLA, victims may make claims in tort 14 Is public funding such as legal aid available? If so, may potential or for contract liability under the Civil Code. Liability in tort under defendants make submissions or otherwise contest the grant of the Civil Code is regarded as fault-based liability. such aid?

The Japan Legal Support Centre (JLSC), which is a public corpo- 20 Is there a consumer protection statute that provides remedies, ration established according to the framework of an incorporated imposes duties or otherwise affects product liability litigants? administrative agency under the Comprehensive Legal Support Act The Consumer Products Safety Act (CPSA) (No. 31, of 1973, as (Act No. 74 of 2004), may provide financial support to a claimant to amended) stipulates that where an accident has occurred in relation cover the claimant’s legal fees (including but not limited to attorneys’ to a consumer product, any person engaging in the manufacture or fees. The claimant is required to repay such funding to the JLSC, import of that consumer product shall investigate the cause of the although the amount to be repaid may be reduced or the repay- accident, and where necessary to address any danger in relation to ment date may be postponed, depending on the financial circum- such products, endeavour to recall the product or take other meas- stances of the claimant. Pursuant to a party’s petition, the court may ures to address any danger in relation to the product (CPSA article also exempt the party from the payment of court costs or from the 38(1)). Under the CPSA, where an accident has occurred as a result requirement to provide security for court costs (CCP article 83(1)). of defects in a consumer product, or serious danger has arisen or is However, this discretion of the court does not extend to other costs, imminent to general consumers, the Minister of Economy, Trade and such as attorneys’ fees. Industry may, if he or she finds it particularly necessary to prevent Potential defendants can make submissions or contest the grant the occurrence and increase of such danger, order a person engag- of aid under CCP. ing in the manufacture or import of the consumer product to recall

118 Getting the Deal Through – Product Liability 2014 Anderson Moˉ ri & Tomotsune JAPAN the consumer product or to take such other measures necessary to (ii) any person who provides their name, etc, on the product as address the danger (CPSA article 39(1)). Violation of such a minis- the actual manufacturer of such a product, or any person who terial order is punishable by imprisonment for a term not exceed- provides the representation of their name, etc, on the product ing one year with prison labour, a fine not exceeding ¥1 million, or thereby misleading others into believing that they are the actual both (CPSA article 58 (iv)). If the representative or agent, employee manufacturer; and or other worker of such manufacturer or importer violates such a (iii) apart from any person mentioned in item (ii), any person who ministerial order with respect to the business of the manufacturer or provides any representation of their name, etc, on the prod- importer, the offender, together with the manufacturer or importer uct that, in light of the manner concerning the manufacturing, is punishable by a fine not exceeding ¥100 million (CPSA article 60 processing, importation or sales of the product, and other cir- (i)). cumstances, holds themselves out as its substantial actual manu- In addition, certain specific products are regulated exclusively facturer (collectively defined as the ‘manufacturer’ in PLA article by the following laws instead of the CPSA: automobiles by the Road 2). (‘Person’ encompasses both natural persons and corporate Tracking Vehicle Act (No. 185, of 1951, as amended); medicines, entities.) cosmetics and medical appliances by the Pharmaceutical Affairs Act (No. 145, of 1960, as amended); and food, additives and the like by Therefore, the manufacturer and importer can bear liability under the Food Sanitation Act (No. 233, of 1947, as amended). the PLA, but a distributor or seller is not included unless it falls into (ii) or (iii) above.

21 Can criminal sanctions be imposed for the sale or distribution of defective products? 26 What is the standard by which causation between defect and There are no clauses in the PLA or the Civil Code that impose crimi- injury or damages must be established? Who bears the burden nal sanctions on the sale or distribution of defective products. and may it be shifted to the opposing party? However, laws concerning specific types of products (the Food The standard for causation is whether the causation between the Sanitation Act, for example) (see question 20) have penalty provi- defect and injury or damages is legally sufficient. The standard of sions applicable to non-compliance with the respective laws, some of proof of causation under the PLA is the same as that under the Civil which are related to the sale and distribution of defective products. Code. Essentially, the complainant bears the burden to establish causation.

22 Are any novel theories available or emerging for product liability claimants? 27 What post-sale duties may be imposed on potentially responsible There are no apparent or obvious novel theories regarding product parties and how might liability be imposed upon their breach? liability cases in Japan at present. The following are examples of post-sale duties imposed by specific laws and regulations: • duty to report: manufacturers or importers are required to report 23 What breaches of duties or other theories can be used to to the Consumer Affairs Agency (CAA) (CPSA article 35(1)) any establish product defect? known serious accidents caused by their products. Where manu- Defect is defined as ‘a lack of safety that the product ordinarily facturers or importers fail to comply, the CAA may require them should provide, taking into account the nature of the product, the to develop a system necessary for collecting, managing and pro- ordinarily foreseeable manner of use of the product, the time when viding information concerning serious product accidents (CPSA the manufacturer delivered the product, and other circumstances article 37). Violation of such orders is punishable by imprison- concerning the product’ (PLA article 2(2)). See question 25 for the ment with prison labour or a fine, or both (CPSA article 58(v)). definition of ‘manufacturer’. The CAA should make public the information regarding seri- ous product accidents after receiving such report, or where they 24 By what standards may a product be deemed defective and who otherwise come to know of the occurrence of the accidents, if it bears the burden of proof? May that burden be shifted to the finds it necessary (CPSA article 36); opposing party? What is the standard of proof? • duty to investigate and recall a product: the CPSA stipulates that manufacturers or importers must investigate the cause of A product may be deemed defective where there is a lack of safety product accidents and, if necessary, take preventive measures that the product ordinarily should provide (see question 23). Any (CPSA article 38). In serious cases, the authority may order the factor related to the product is considered in this standard, including manufacturers or importers to recall products or to otherwise the nature of the product, the ordinarily foreseeable manner of use take hazard prevention measures (Hazard Prevention Order; of the product, and the time of delivery. The defect must exist at the CPSA article 39(1)). Violation of such orders is punishable by time the product is delivered. imprisonment with prison labour or a fine, or both (CPSA article The claimant bears the burden of this proof under the PLA. 58(iv)); However, a court may lower the burden of proof regarding the exist- • duty to record and to give supplementary warnings: under the ence of a defect, depending on the parties involved (for example, Long-term Use Consumer Product Safety Inspection System (the in the instance of a consumer acting against a large corporation), System) (CPSA article 32-2, etc), manufacturers or importers of the nature of the product (such as the complex operational func- certain products with a high likelihood of causing serious acci- tions of a product) and the ordinarily foreseeable manner of use of dents over time, should: a product. • prepare a list of the product holders; • establish, label and explain the design standard-use period 25 Who may be found liable for injuries and damages caused by and inspection period; defective products? • notify holders of the need for an inspection of the product The liable actors under the PLA are: six months before commencement of the inspection period; (i) any person who manufactured, processed, or imported the prod- and uct in the course of trade (actual manufacturer);

www.gettingthedealthrough.com 119 JAPAN Anderson Moˉ ri & Tomotsune

• conduct an inspection of the product upon request. Failure 29 Is it a defence to a product liability action that the product to give notification under article 32-2(1) is punishable by a defect was not discoverable within the limitations of science and fine; and technology at the time of distribution? If so, who bears the burden • duty to attach warning labels: the labelling system applies to cer- and what is the standard of proof? tain products (including air conditioners and cathode ray tube It is stipulated as a defence in the PLA that the manufacturer will televisions) with high rates of accident report due to deteriora- be exempted from product liability if it proves that the defect in the tion over time (the Electrical Appliances and Materials Safety product could not have been discovered given the state of scientific Act (No. 234, of 1961, as amended) and its ordinance). or technical knowledge at the time when the manufacturer delivered the product (PLA article 4). Practically, however, this defence is very In addition, there are some (criminal and civil) judgments where the difficult to prove. court held the manufacturer liable due to its failure to conduct a recall. Generally speaking, the manufacturer has a duty to conduct a recall or other appropriate measures when it can foresee that the 30 Is it a defence that the product complied with mandatory (or accidents will occur widely. voluntary) standards or requirements with respect to the alleged defect? Limitations and defences No. This is because product liability law (regulation after the acci- dent) and product regulation (preregulation to prevent the accident) 28 What are the applicable limitation periods? are independent from one other. Accordingly, compliance with The right to demand compensation for damage based on the PLA is standards or requirements is not a defence for a manufacturer under extinguished if: the PLA. However, compliance with standards or requirements (i) the victim does not exercise such right within three years from would be an important factor when determining whether there is a the time the victim becomes aware of the damage and the iden- defect in a product. tity of the party liable for the damage; or (ii) 10 years have elapsed from the time the manufacturer delivered 31 What other defences may be available to a product liability the product (PLA article 5(1)). defendant? Notwithstanding this, it should be noted that the 10 years in (ii) is Examples of some defences that a product liability defendant can calculated from the time of the occurrence of the damage, where use are as follows: such damage is caused by substances that become harmful to human (i) the court may decrease the amount of compensation in consid- health as a result of accumulation in the body, or where the symp- eration of the negligence of a victim (contributory negligence) toms indicative of such damage appear only after a certain latent (Civil Code article 722(2)); period (PLA article 5(2)). (ii) the defendant may claim that the amount of profit that the The right to demand compensation for damage based on tort plaintiff gained or the amount of expenses that the plaintiff has under the Civil Code is extinguished if: ceased to incur in relation to the tortious action (such as the ces- • the victim does not exercise such right within three years from sation of incurrence of living expenses where a victim has died) the time the victim becomes aware of the damage and the iden- should be deducted from the amount of compensation; tity of the defendant; or (iii) the court can allow a decrease in the amount of compensation • 20 years have elapsed from the time the tortious act was com- payable due to a victims’ pre-existing conditions prior to them mitted (Civil Code article 724). suffering damage (such as a specific chronic disease) by a wide interpretation of contributory negligence; and The right to demand compensation for damage due to breach of (iv) the defendant is not liable under the PLA if it proves that where contract under the Civil Code is extinguished if the victim does not the product is used as a component or as a raw material of exercise that right within 10 years from the time the victim was another product, the defect occurred primarily because of com- eligible to exercise that right. Where the contract falls within the pliance with the instructions concerning the design of that other definition of ‘commercial transactions’ under the Commercial Code product given by the manufacturer of that other product and of Japan (Act No. 48 of 1899), which is typical of product liability the defendant was not negligent with respect to the occurrence cases, the period of 10 years will be reduced to five years. of such defect (PLA article 4). The right to demand compensation for breach of a seller’s war- ranty against defects (Civil Code article 570) is extinguished if the It should be noted that in certain legal precedents, the amount of victims do not exercise such right: compensation was cut by 70 per cent or 80 per cent due to con- (i) within one year from the time when the victims become aware tributory negligence (item (i)). It should also be noted that a defence of the defect; or under item (iv) is very difficult to prove in practice. (ii) within 10 years of the delivery of the product. Please note that in cases of a sale between ‘traders’ under the Commercial Code, the 32 What appeals are available to the unsuccessful party in the trial buyer must generally examine the products and dispatch notice court? of any defect to the seller immediately after discovering it. Judgments of the district court can be appealed to the high court and then to the Supreme Court. The grounds for appeal from the district With regard to item (ii), the period of 10 years may be reduced to court to the High Court are both error-in-law and error-in-fact. The five years if the contract falls within the definition of ‘commercial Supreme Court will hear appeals from the high court on grounds of transactions’ under the Commercial Code. error in interpretation of (and other violations of) the Constitution. In addition, violations of civil procedure rules, such as error in juris- diction, lack of reasoning, etc, will also give rise to a right of appeal to the Supreme Court. Petitions to the Supreme Court are also avail- able, which gives the Supreme Court discretion to accept cases if the judgment being appealed is contrary to precedent or contains signifi- cant matters concerning the interpretation of laws and ordinances.

120 Getting the Deal Through – Product Liability 2014 Anderson Moˉ ri & Tomotsune JAPAN

Update and trends

The Act on Special Civil Procedure for Collective Recovery of have received the recognition from the Prime Minister can file this Consumers’ Damage (the Act), which was enacted on 4 December first procedure. If a Recognised Qualified Consumer Organisation 2013 and promulgated on 11 December 2013, will introduce a new succeeds in the first procedure, the court determines the amount of class action system when or after the Act takes effect. The Act will each claim filed by each consumer, respectively. Following judgment in come into force within three years from promulgation, on a date that the first procedure, there will be a public notice put on the internet or will be fixed by a Cabinet Order. However, it will not be applied to individually by the court,or both. The Recognised Qualified Consumer claims regarding contracts entered into or wrongful acts conducted Organisation or the CAA, or both and consumers may join the second prior to the promulgation. It is expected that relevant rules and procedure even where they did not file claims in the first procedure. regulations will be established before the Act takes effect. It will be Although this new class action system will be applied to a lawsuit necessary to look into these rules in order to fully understand the new based on general tort principles under the Civil Code, it will not be class action system in Japan. applied to claims based on the PLA. Further, it will only be available In applying this system, court judges must first consider whether where the losses claimed are economic losses relating to consumer or not a defendant is liable to a considerable number of consumers, contracts (for example, refund of the purchase price of defective based on common factual or legal causes. Only qualified consumer goods), and will not be available in respect of other types of loss, such organisations (Recognised Qualified Consumer Organisation) that as physical injury (eg, injury or death caused by a defective product).

Jurisdiction analysis in Tokyo and Osaka against the company, AstraZeneca, which imported and distributed the drug, and the government. In the 33 Can you characterise the maturity of product liability law in terms lawsuits, they claimed that they or their family developed inter- of its legal development and utilisation to redress perceived stitial lung disease because of defects in design, defects related wrongs? to the absence or inadequacy of a warning label and adver- Product liability law as embodied in the PLA can be regarded as tisements exaggerating safety without pointing out the fatal mature enough to redress perceived wrongs; it has been almost 19 side effects of the drug. On 12 April 2013, the Supreme Court years since the PLA was enacted, and it is based on the theory devel- rejected the plaintiffs’ appeals and upheld lower court decisions oped and refined by the courts in the course of deciding major prod- that had dismissed the claims; and uct liability cases since the 1970s. • since September 2013, based on the PLA, a number of plain- tiffs sued Kanebo, a famous Japanese cosmetic company, in dis- trict courts in Tokyo, Shizuoka and Hiroshima. They claim that 34 Have there been any recent noteworthy events or cases that they had developed achromodermia on their skin due to using have particularly shaped product liability law? Has there been Kanebo’s whitening cosmetics including Rhododenol. Kanebo any change in the frequency or nature of product liability cases has already carried out a voluntary recall of the cosmetics. The launched in the past 12 months? company, however, asserted that the claim should be dismissed Recent noteworthy events and cases that have particularly shaped in the first oral hearing of the litigation in Shizuoka held on 9 product liability law in Japan include the following: May 2014. • since April 2012, 39 lawsuits based on the PLA have been filed, in district courts all across Japan (according to the National None of these lawsuits has yet been concluded. Consumer Affairs Centre (NCAC) of Japan). The plaintiffs in these lawsuits sued Yuuka, Phoenix and Katayama Chemical, claiming that they had developed wheat-dependent exercise- 35 Describe the level of ‘consumerism’ in your country and induced anaphylaxis due to using certain soap. Yuuka sold the consumers’ knowledge of, and propensity to use, product liability soap and Phoenix manufactured it. Katayama Chemical manu- litigation to redress perceived wrongs. factured and sold Glupearl 19S, which is a component in the The number of filings under the PLA has consistently been around soap and the substance that caused the disease. None of these 10 cases a year since its entry into force. Lack of punitive damages lawsuits has yet been concluded; and discovery-like evidence rules might have some effect on why • certain patients who had taken a lung cancer treatment (Iressa) this number is less than that expected at the time of the PLA’s enact- developed interstitial lung disease and some of these patients ment. However, it is also true that the level of consumerism and died. In 2004, the victims and their families filed two lawsuits consumers’ knowledge in relation to recovering damages has been

Tetsuro Motoyoshi [email protected] Ryohei Ikeda [email protected]

Akasaka K-Tower Tel: +81 3 6888 1140 2-7 Motoakasaka 1-chome, Minato-ku Fax: +81 3 6888 3140 Tokyo 107-0051 www.amt-law.com/en Japan

www.gettingthedealthrough.com 121 JAPAN Anderson Moˉ ri & Tomotsune enhanced and the number of filings under the PLA shows an upward 36 Describe any developments regarding ‘access to justice’ that trend. The government’s pro-consumer policy finally established the would make product liability more claimant-friendly. CAA and a new data bank for consumers (the Data Bank System for A bill for the introduction of a class action procedure, which will Accident Information). There are also multiple public and private enable a qualified consumer organisation that has been admitted by institutions that support consumers by conducting consultations, the Prime Minister to file a lawsuit in which common questions of alternative dispute resolutions, etc, including the NCAC, a national liability will be assessed, was passed by the Diet on 4 December core institution working together with local consumer centres; local 2013. While the date had not been enacted by the 20 May 2014, the consumer life centres, which are accessible first contacts established Act will take effect by 10 December 2016 at the latest (see ‘Update by local governments; and product liability centres, which are and trends’). complaints-resolution entities set up by industrial groups. Further, The purpose of this new system is to protect consumers in in some cases the law firms and groups of lawyers have created a relation to consumer contracts. However, the entities that can file website to announce that they have sued a certain company and that lawsuits and the claims that can be brought, as well as kinds of dam- they will hold an explanatory meeting for consumers who can join ages that may be recovered through the new system, are limited (see the case as plaintiffs. Such consumers may contact the law firms or ‘Update and trends’). defence counsel and give them power of attorney.

122 Getting the Deal Through – Product Liability 2014 Shin & Kim KOREA Korea

Ghyo-Sun Park, Gea Sung Yang and Bo Kyung Lim Shin & Kim

Civil litigation system action. Such a written complaint should contain the remedies sought by the plaintiff (for example, performance such as payment, or prohi- 1 What is the structure of the civil court system? bition order) and factual and legal grounds supporting the requested The Korean civil court system is divided into three levels: district remedies, and names and addresses of plaintiff and defendant. The courts of first instance, High (appellate) Courts and the Supreme defendant should submit a written reply within 30 days from the Court. In addition, there are special courts such as patent courts (at date of receipt of the complaint (article 256 of the Civil Procedure the level of the High Court), family courts and administrative courts Act). If a defendant fails to submit its reply within the 30 days, the (at the level of the district courts). court may render a decision, without holding any pleadings, based The three-trial system is applied to civil cases in Korea and the on the assumption that the defendant has admitted plaintiff’s claims jurisdiction of court is determined for each level. District court cases (article 257 of the Civil Procedure Act). can be heard by a single judge or a panel of three judges depending Once a defendant submits its reply, the court sends a copy to the on the size of the claims. A panel consists of a presiding judge and plaintiff within three to four weeks (usually with an order to submit other judges (namely, associate judges). In some cases, a presiding the preparatory brief and evidence). Until the end of the hearing, judge may delegate to an associate judge certain matters such as the the parties may make their written submissions at any time without handling of preparatory process, settlement recommendations, evi- restriction. dence examination outside court, etc. A presiding judge is in charge of a case under the law, and for each case, one of the panel judges is designated as the chief judge to review the documents and prepare 4 Are there any pre-filing requirements that must be satisfied before the court’s decision. a formal law suit may be commenced by the product liability claimant? There is no pre-filing requirement (for example, mandatory media- 2 What is the role of the judge in civil proceedings and what is the tion) to be satisfied before a formal lawsuit may be commenced by role of the jury? the product liability claimant. A product liability claim can be filed Korean courts generally adopt the principle of pleading where a directly to the court. party to litigation should collect and submit the litigation materi- als (for example, facts and evidences) and the court should consider only such litigation materials collected and submitted by the party. 5 Are mechanisms available to the parties to seek resolution of a However, such a principle of pleading is limited to the method of case before a full hearing on the merits? presenting facts and evidence; and the court (judge) has discretion In Korea, there is no summary disposition such as a motion to dis- to evaluate the evidence and make its decision based on the facts miss or motion for summary judgment. asserted by parties. The principle of pleading is based on the assumption that 6 What is the basic trial structure? both parties have the equal and perfect ability to litigate the case. However, such ability is not equal or perfect in reality. In order to After one or two exchanges of briefs between the parties, the court overcome such flaws in the pleading principle, a court aggressively sets the date for a hearing or preparatory hearing, which usually exercises its right to request an explanation or to conduct discretion- takes three to five months from the filing of the claim. Preparatory ary investigation on certain issues such as confirmation of jurisdic- hearings used to be a mandatory requirement but are now selectively tion and laws. ‘Right to request for explanation’ means the court’s applied by court since the amendment to the Civil Procedure Act of authority to ask, demand or make inquiries in order to clarify rel- 26 December 2008. evant issues, or both, so that a party may present its argument as to Despite this amendment, courts often hold preparatory hear- certain legal issues that the party has not noted before. ings in cases that raise complicated or important issues. Preparatory Since January 2008, Korea has implemented the system for hearings involve presentation of parties’ claims and main issues, citizen participation (jury trial) in criminal cases on a limited basis. requests for evidence, etc, and are conducted by a presiding judge or However, citizen participation in trials is not available for civil litiga- an associate judge. Preparatory hearings are usually held once but tions such as product liability litigation. can be held two or three times if necessary. In Korean civil litigation proceedings, there is no concentrated trial or hearing that lasts for a number of days in a row. Main hear- 3 What are the basic pleadings filed with the court to institute, ings are held usually once a month and involve presentation of argu- prosecute and defend the product liability action and what is the ments by both parties and examination of evidence. Parties should sequence and timing for filing them? submit their claims in writing (article 272 of the Civil Code) but, A plaintiff’s filing of a written complaint to the relevant court and recently, oral argument has tended to play a more significant role the delivery of the complaint to the defendant commences the legal than in the past. www.gettingthedealthrough.com 123 KOREA Shin & Kim

Methods for evidence examination include written submission, 11 May the court appoint experts? May the parties influence the witness examination, inspection and appraisal, among which the appointment and may they present the evidence of experts they written submissions and witness examination are most commonly selected? used. Witness examination starts with the examination by the party When expert knowledge or experience is necessary, the court may that called for the witness, followed by cross-examination by the appoint an expert as an appraiser at its discretion or upon request opposing party and supplement examination by the court. In prac- by a party. Each party may recommend to the court a certain expert tice, witness examination takes about 30 minutes for each witness or institution of expertise. In the appraisal process, each party may but may take longer than one or two hours if the case involves com- send inquiries to the appointed appraiser through the court and plicated facts or issues. Based on the consideration of the witness request for examination of the appraiser regarding the report sub- and the evidence to be presented by the witness, court may substitute mitted by the appraiser. Separately from the appraisal conducted by witness examination for a written statement by witness (for exam- the court-appointed appraiser, a party may submit the written report ple, a notarised affidavit). of its own expert and call him or her as a witness. A party may sub- mit its own witness report or statement without restriction, and the court has the discretion to determine whether a party expert should 7 Are there class, group or other collective action mechanisms be selected as a witness upon the request by a party. available to product liability claimants? Can such actions be brought by representative bodies? Although the Securities-Related Class Action Act, which can be 12 What types of compensatory damages are available to product applied to certain illegal acts (for example, false or insufficient filing liability claimants and what limitations (if any) apply? of securities reports or business reports, etc), has been effective since Under the Product Liability Act (PLA) of Korea, a manufacturer is January 2005, there is no general class action system in civil pro- liable for the damages to life, persons and property caused by prod- ceedings in Korea (including product liability cases). The ‘appointed- uct defect. Damage to the product itself is excluded from the ‘dam- party’ system in Korea has some similarities with the class action age’ under the PLA. The PLA does not define the scope of damages system but is differentiated because, under the ‘appointed-party’ sys- and provides that the Civil Code should apply to the general provi- tem, only those participating in the trial can enjoy the court’s award. sions of compensation for damages. As such, direct damages (for example, property damage and medical expenses), indirect damages (for example, loss of potential benefit) and compensatory damages 8 How long does it typically take a product liability action to get to are recognised. the trial stage and what is the duration of a trial? The Civil Code categorises the damages caused by intentional or After the filing of the complaint, it usually takes three to five months negligent torts into ordinary damages and extraordinary damages. for the court to designate the hearing (or preparatory hearing) date. Ordinary damages are normally expected to incur by an instance of The trial court’s decision usually takes eight to 12 months from the illegal conduct, while extraordinary damages may incur due to the filing of the complaint but may take longer if the case involves com- extraordinary circumstances of the injured and can be compensated plicated facts and issues. For example, in a cigarette case in Korea, only when the offender could have foreseen such extraordinary the complaint was filed in 1999, the trial court’s decision was ren- circumstances. dered in 2007 and the appellate court’s decision in 2011.

Evidentiary issues and damages 13 Are punitive, exemplary, moral or other non-compensatory damages available to product liability claimants? 9 What is the nature and extent of pretrial preservation and There are no punitive damages in Korea, and, therefore, no compen- disclosure of documents and other evidence? Are there any sation is available under the PLA other than those for the damages avenues for pretrial discovery? to life, persons and property caused by a product defect. However, There are no pretrial discovery proceedings in Korea. However, since the PLA does not limit the maximum amount of damages, a during a trial, a party may request the court to make a document court may take the significance of the case and the type of illegal production order. Also, preservation of evidence may be permitted act into consideration in determining the damage amount. However, upon the application of a party if the court recognises the existence a Korean court has never recognised a large amount of punitive of exceptional circumstance where the evidence should be examined damages as has been seen in US cases. On 10 October 2013, cer- beforehand because the evidence cannot be used after the trial starts. tain members of the National Assembly proposed a draft bill that would allow courts to impose exemplary damage not exceeding 12 times the amount of actual damage if the manufacturer knew of the 10 How is evidence presented in the courtroom and how is the alleged product defect before delivery of product, but took no action evidence cross-examined by the opposing party? to correct it. Evidence may be submitted to the court in the form of witness tes- timony, written documents, party statement or an expert report or Litigation funding, fees and costs statement. A party may submit materials rebutting the evidence sub- mitted by the other party. Prior to witness examination at the court, 14 Is public funding such as legal aid available? If so, may potential a party requesting witness examination should submit the contents defendants make submissions or otherwise contest the grant of of its examination to the court and the opposing party. The opposing such aid? party should prepare its cross-examination in writing and submit Unless it is certain that a party has no chance to win the case, upon to the court at the time of cross-examination. This procedure also the request by a party or at its own discretion, the court may grant applies to expert witness examination. Credibility and value of the legal aid to a party unable to pay for the litigation costs. A party evidence can be disputed by the opposing party who can impeach the applying for legal aid must present to the court the evidence of its person who produced the evidence, submit its own evidence rebut- financial status. Legal aid includes deferred payment of court fees ting the disputed evidence and request to examine its own witness. and attorneys’ fees and exemption from the deposit for court fees. The opposing party may not object to the court’s decision of grant- ing legal aid other than the exemption from the deposit for court fees.

124 Getting the Deal Through – Product Liability 2014 Shin & Kim KOREA

In addition, Korea Legal Aid Corporation, a public organisa- defendant’s wilfulness or negligence and defect in product, occur- tion, provides legal assistance (including representation during trial) rence of damage and the causal link between the defect and the to individuals with financial difficulties at minimal fees or without damage. However, if the plaintiff could prove that the accident had charge. happened within the realm of the manufacturer’s exclusive control and that such an accident does not usually happen without being someone’s fault and the defendant could not prove that the accident 15 Is third-party litigation funding permissible? was caused by a reason other than the product defect, the court miti- There is no law or regulation specifically prohibiting third-party liti- gated the plaintiff’s burden of proof by acknowledging the inference gation funding in Korea. of manufacturer’s liability.

16 Are contingency or conditional fee arrangements permissible? 20 Is there a consumer protection statute that provides remedies, Contingency or conditional fee arrangements are permitted in Korea imposes duties or otherwise affects product liability litigants? and there is no legal restriction on the maximum amount of such fee. Article 19 of the Framework Act on Consumers of Korea (FAC) pro- vides for manufacturer’s responsibilities as follows: 17 Can the successful party recover its legal fees and expenses from • duty to take necessary measures to prevent any danger and the unsuccessful party? injury from goods or services to a consumer’s life, person or property; The ‘loser pays’ rule is applicable in Korea. After the case is com- • duty not to use any condition or method of trade that might pletely closed (meaning the final closing of the case with no possibil- interfere with rational choice or interest of consumers, in the ity of further proceeding), the prevailing party must apply for the supply of goods or services; court to assign the final allocation of the litigation costs. The court • duty to sincerely provide consumers with accurate information determines the final amount of each party’s costs for the proceedings, on goods, etc; and pursuant to which, the prevailing party may recover certain costs • duty to settle any consumers’ complaints or damages due to the (for example, stamp tax, service of process fees and appraisal costs) defects of goods or services through providing necessary com- from the losing party. However, only a portion (not the full amount) pensation, etc, and to indemnify them for any damages caused of attorneys’ fees may be recovered under court regulations. by non-fulfilment of obligation.

Sources of law A consumer may request for compensation for damages caused by 18 Is there a statute that governs product liability litigation? using products or service under the FAC. The PLA governs the product liability litigation in Korea. Pursuant to clause 1, article 3 of the PLA, a manufacturer is responsible to 21 Can criminal sanctions be imposed for the sale or distribution of compensate for the damages to life, persons and property caused by defective products? product defect, except for the damages incurred to the product itself. Under the FAC, if an administrative agency considers that a company A manufacturer cannot be relieved from its responsibility for dam- causes or may cause any danger or injury to consumers’ lives, bodies, age compensation unless it can prove any of the following (clause 1, or property due to a defect in goods furnished by the company, the article 3 of the PLA): administrative agency may order the company to remove, destroy, or • the manufacturer did not supply the product; repair such goods, exchange them for other goods, refund the costs, • existence of the defect was not discoverable by the state of sci- or prohibit manufacturing, import, sale or supply of such goods, ence or technical knowledge at the time when the manufacturer and to repair relevant facilities or take other necessary measures, supplied the product; pursuant to the procedures determined by the Presidential Decree • the defect was due to the compliance with any act or subor- (clause 1, article 50, FAC). In addition, in order to prevent any dan- dinate statute at the time when the manufacturer supplied the ger or injury to consumers’ lives, persons, or property arising from product; or goods, etc, the state should determine the standards the companies • in the case of raw materials or components, the defect was attrib- should abide by (clause 1, article 8, FAC). If a company manufac- utable to the design of the product in which any raw materials tures, imports, sells or provides the products or services in violation or components have been fitted or to the instructions concerning of such standards, an administrative agency may order the company manufacturing given by the manufacturer of the product using to suspend such act of violation or take other corrective measures them. (clause 1, article 80 of the FAC). A violator of such an order could be subject to imprisonment for not more than three years or a fine In addition, any special agreement excluding or limiting the manu- not exceeding 50 million South Korean won (item 1, clause 1, article facturer’s liability for damages under the PLA is invalid, unless a 84, FAC). person who received a product in order to use it for his or her own In addition, a person who causes the death or injury of another business makes a special agreement excluding manufacturer’s liabil- by occupational or gross negligence may be punished by imprison- ity for the damages on his or her business property (article 6 of the ment for not more than five years or by a fine not exceeding 20 PLA). However, contractual liability for non-performance of obliga- million South Korean won under the Korean Criminal Code (article tions may also arise between the contracting parties. 268 of the Criminal Code). Such provisions may be applied to a Although there was a revision to the PLA in 2013, most of the seller of a defective product, who is deemed to have such gross neg- revision involved changes to the wording as opposed to any substan- ligence and caused the death or injury of another. tive law changes.

22 Are any novel theories available or emerging for product liability 19 What other theories of liability are available to product liability claimants? claimants? On the duty to warn by a manufacturer and the legal standard gov- Prior to the enactment of the PLA, a product liability action could erning a design defect, the Korean Supreme Court stated the follow- be brought as torts or non-performance of liability claims under the ing in its Agent Orange decision in 2013: Civil Code. In such cases, the plaintiff had the burden of proving a www.gettingthedealthrough.com 125 KOREA Shin & Kim

• a manufacturer who designs and manufactures a chemical prod- • defect in design – lack of safety caused by the failure of the man- uct containing a toxic substance that is harmful to the human ufacturer to adopt a reasonable alternative design in a situation body has a high standard of obligation to prevent risks; that any damage or risk caused by the product would otherwise • the manufacturer should thoroughly verify the safety of the be reduced or prevented; and manufactured product using the highest level of technology • defect in warning – conditions that a manufacturer fails to available at the time, and remove and minimise the risks that give reasonable explanations, instructions, warnings and other may occur through investigation and research; and indications on the product, while occurrence of damage or risk • if a manufacturer designs a chemical product with a risk of caused by the product could otherwise be reduced or prevented. causing harm to human life and body, and manufactures and sells such a product the way it is designed in violation of such a The PLA does not provide for allocation of burden of proof, and, high standard of obligation to prevent risks, it is appropriate to therefore, like in other civil litigation, the plaintiff should prove the recognise that, unless special circumstances exist, such chemical existence of defect, occurrence of damage and causation between the products have a design defect. defect and the damage. However, based on the precedents, the courts may mitigate the plaintiff’s burden of proof in product liability cases. In addition, on whether statistical connection proves the causation Although the PLA does not prescribe the standard of proof for a in a product liability suit, the Korean Supreme Court held as fol- ‘defect’, the general principle has been that the plaintiff should prove lows in the Agent Orange decision and the cigarette decision. With the existence of a defect by a preponderance of the evidence. On 9 respect to non-specific diseases, even if an epidemiological correla- July 2010, certain members of the national assembly proposed a tion is recognised between a risk factor and a non-specific disease, draft bill that would require the manufacturer to prove that the con- the probability of causation between the risk factor and the non- sumer was negligent or the product was free of the alleged defect in specific disease cannot be seen to have been proven by mere proof of a damages claim alleging product defect. This draft bill however was the fact that an individual was exposed to the risk factor and that the automatically discarded after the term of the proposing members of individual was afflicted with the non-specific disease. The probabil- the National Assembly expired on 29 May 2012. ity of causation between the risk factor and the non-specific disease should be proven by showing through a controlled epidemiological study on a group exposed to the risk factor and another general 25 Who may be found liable for injuries and damages caused by group not exposed thereto that the incidence rate of the non-specific defective products? disease in the exposed group is significantly higher than that in the A manufacturer subject to product liability under the PLA is defined unexposed group and by additionally proving the time and extent as follows (clause 2, article 3, PLA): of exposure to the risk factor, the time of occurrence of the non- • a person who is engaged in the business of manufacturing, pro- specific disease, health conditions prior to exposure to the risk factor, cessing or importing any product; or lifestyle, progress of the non-specific disease and family history in • a person who presents himself or herself as any person falling respect of individuals in the exposed group. (Hence, the decisions under the previous item by putting his or her name, firm name, were rendered that there were no proofs of the connection between trademark or any other distinguishable feature (his or her name) the Agent Orange and non-specific diseases such as diabetes or the on the products, or a person who puts his or her name, etc, on connection between smoking and non-specific diseases such as non- the product in a manner mistakable for any person falling under small cell lung cancer. the previous item.

When a manufacturer is unidentifiable, the person who supplied the 23 What breaches of duties or other theories can be used to product for profit, in a form of sale or lease, etc, shall be liable for establish product defect? damages, if the supplier knows or could have known the manufac- In determining the existence of a product defect, the Korean Supreme turer’s identity but fails to inform the injured party (or legal repre- Court considers various factors such as a common understanding of sentative) of the manufacturer’s identity within a reasonable time the society, characteristics and usage of product, ordinary form of (clause 2, article 3 of the PLA). use, expectation of users, expected risk, user’s awareness of risk, pos- sibility of user’s avoidance of risk, possibility and economic costs of alternative design, and relative advantages and disadvantages of the 26 What is the standard by which causation between defect and current design and the alternative design. (Supreme Court Decision injury or damages must be established? Who bears the burden No. 2007DA52287, 28 February 2008). and may it be shifted to the opposing party? There is no specific provision regarding the causation under the 24 By what standards may a product be deemed defective and who PLA. Accordingly, the plaintiff should prove causation between bears the burden of proof? May that burden be shifted to the defect and damages under the general theory and the proof of cau- opposing party? What is the standard of proof? sation should be sufficient for the court to exclude any reasonable doubt. Provided, however, that with respect to the damage caused Since the manufacturer and seller of products are ordinarily required by high-tech products manufactured by mass production, the court to produce safe products within the expected scope in light of pre- mitigates the plaintiff’s burden to prove causation between defect sent technology and economic efficiency in structure, quality and and damage because it is very difficult for consumers to scientifically performance of products, the product is deemed to have a ‘defect’ and technically prove the defect and causation between the defect if the product lacks such safety. In connection therewith, the PLA and damages (see question 19). defines the term ‘defect’ as the defect of any products in manufactur- ing, design or warning falling under any of the following items or lack of safety that the product ordinarily should provide (clause 2, 27 What post-sale duties may be imposed on potentially responsible article 2 of the PLA): parties and how might liability be imposed upon their breach? • defect in manufacturing – lack of safety caused by manufactur- A manufacturer cannot be exempted from liability if the manufac- ing or processing of any product deviating from the originally turer fails to take appropriate measures to prevent damages even intended design, regardless of whether the manufacturer faith- though the manufacturer, after delivery of a product, knew or could fully performs the duty of care and diligence with respect to the have known of the defect in the product (clause 2, article 2, PLA). manufacturing or processing;

126 Getting the Deal Through – Product Liability 2014 Shin & Kim KOREA

Also, the FAC prescribes that, upon discovery of a material However, the reasons for an appeal to the Supreme Court should defect in the goods or services provided to consumer that causes mainly discuss questions of law and should be submitted within 20 or may cause any danger or injury to consumers’ lives, persons, days from the receipt of notice that the Supreme Court has received or property, a company must report to the administrative agency the case records. If the reasons for the appeal are filed after such a (clause 1, article 47, FAC). In the case of a defect, a company should period, the appeal will be dismissed by the Supreme Court. remove, destroy, or repair the relevant goods or services, exchange Filing an appeal provides a practical benefit that it may sus- them for other goods or services, refund the costs, or prohibit manu- pend the enforcement of the court’s decision. If the court renders facturing, import, sale or supply of such goods or services and take a decision recognising a plaintiff’s claim for damages, a provisional other necessary measures (article 48 of the FAC). enforcement order is also issued and enforcement of the order can be made based on the first court’s decision, without closing the case. Limitations and defences However, the appellant may request for the suspension of enforce- ment when filing an appeal, and the suspension of enforcement may 28 What are the applicable limitation periods? be ordered on the condition of providing security. If an order of pro- The PLA provides for the 10-year long-term statute of limitations visional enforcement is attached to the judgment of the appeals court and three-year short-term statute of limitations, and the statute of (namely, the High Court), the request for suspension of enforcement limitation runs with whichever occurs earlier. Specifically, a claim is usually rejected even if an appeal is filed with the Supreme Court. under the PLA should be brought within 10 years from the deliv- ery of the defective product and within three years from the plain- Jurisdiction analysis tiff’s discovery of damages and relevant liabilities. For the damages caused by harmful substances or the damages that become apparent 33 Can you characterise the maturity of product liability law in terms after a certain latent period, the long-term statute of limitation will of its legal development and utilisation to redress perceived be calculated from the occurrence of damages. wrongs? Even before the PLA became effective on 1 July 2002, such legal principles had been recognised in many precedents. However, the 29 Is it a defence to a product liability action that the product PLA provides more clear definition of the conditions and scope defect was not discoverable within the limitations of science and of product liabilities. In Korea, the introduction of the PLA was technology at the time of distribution? If so, who bears the burden designed to strengthen the obligation of enterprises to ensure the and what is the standard of proof? product safety and promotes consumers’ rights and interests. Efforts State-of-the-art or development risk defence is recognised in the to promote consumers’ rights and interests are active in Korea due PLA, which prescribes that a manufacturer may be exempted from to the high level of consumer awareness, educational background liability if the manufacturer proves that it was not possible to dis- and keen interest in their rights developed during the process of cover the product defect by the state of science or technology at rapid economic growth within a short period of time. the time of supply of the product. The manufacturer has the bur- As a result, manufacturers must pay great attention to consumer den of proof for such defences. However, a manufacturer cannot be safety as well as protection of consumer rights and interests, which exempted from liability if the manufacturer fails to take appropriate has been reflected in changes to legislature. For example, the FAC measures to prevent damages even though the manufacturer, after stipulates the obligation on entrepreneurs to take actions necessary delivery of product, knew or could have known of the defect in the to protect consumers from any harm to their safety and that the gov- product. ernment may collect and destroy products that cause harm to con- sumers. Also, collective lawsuits were introduced in 2008 to allow 30 Is it a defence that the product complied with mandatory (or consumer organisations to file a lawsuit for individual consumers if voluntary) standards or requirements with respect to the alleged their rights and interests are harmed by enterprises’ violations of the defect? law. There have not been many cases of collective lawsuits, but such changes have led to the increase in enterprises’ awareness of con- The PLA prescribes that ‘the manufacturer shall be exempted from sumer safety and voluntary efforts to improve their product quality the liability if the product defect was due to manufacturer’s compli- such as product recalls when defects are identified in their products. ance with the standards provided by the laws or regulations at the time of delivery of the defective product’. The manufacturer has the burden of proof in such a case. 34 Have there been any recent noteworthy events or cases that have particularly shaped product liability law? Has there been any change in the frequency or nature of product liability cases 31 What other defences may be available to a product liability launched in the past 12 months? defendant? Hearing the appeal by lung cancer patients that the cigarettes they See question 18 for the statutory defences under the PLA. had smoked caused the cancer, the Korean Supreme Court ruled on 10 April 2014 that all their claims were denied. The cigarette 32 What appeals are available to the unsuccessful party in the trial case, that had lasted 15 years, eventually ended in a total victory for court? KT&G, the cigarettes-maker defendant represented by Shin & Kim. The appeals process in product liability cases is the same as in The Korean Supreme Court affirmed the ruling of the Seoul High other civil cases in Korea. A party may appeal the decision of the Court holding that the cigarettes were not defective, that KT&G did trial court (namely, district court) to the High Court, and the High not commit any intentional tort or violate the Consumer Protection Court’s decision can be appealed to the Supreme Court. The appeals Act. The holding of the Seoul High Court was that the smoker has must be filed within two weeks from the receipt of the lower court’s been continuously exposed to carcinogens due to smoking and it is decision. As the appeals proceedings at High Courts are conducted difficult to expect the reversibility-effect of non-smoking, as in one by trial de novo, the facts or evidence not presented to the trial court of the examples in the present case where the smoker started smok- can be submitted and there is no time limit to submit the reasons for ing when he was in his youth and continued smoking for over 30 the appeal. years with a smoking history of at least 20 packs per year until he was diagnosed with lung cancer, and the type of individual lung can- cer that developed is more associated with smoking than the general www.gettingthedealthrough.com 127 KOREA Shin & Kim

Update and trends

Tobacco (product liability) litigation, which had lasted for about 15 matters. Though the product liability litigation with smokers of 15 years between smokers and tobacco companies, was closed by the years was closed, the tobacco litigation entered another stage, due decision of the Supreme Court dated 10 April 2014. However, in to the filing of the lawsuit by NHIS in connection with the liability of the same month, the National Health Insurance Service (NHIS) filed tobacco companies. Consumers are increasingly understanding their a lawsuit against tobacco companies, including foreign ones. NHIS rights and are familiar with how to exercise such rights by jointly filing argues that it paid 10,127.3 billion South Korean won as medical a lawsuit. Also, recently, there occurred an extensive leakage accident expenses for smoker patients during 10 years from 2003 to 2012, of personal information, which led to a class action suit. It is not clear which is the alleged damage suffered by NHIS. However, NHIS initially yet whether this lawsuit relates to any defect in facilities handling the filed a lawsuit, not for the full amount of such damage, but only for personal information or any matter of product liability. Considering 53.7 billion South Korean won that was paid with respect to the lung such mass suits are occurring with amendment pending, cancer patients, who smoked for 20 years or more and for whom the that will reduce the burden of proof for plaintiffs while allowing causation was presumed in the appeal case of tobacco litigation. punitive damages, it seems more likely than not that the argument NHIS calculated this damage amount by using ‘health insurance for amending the legal system more favourably for plaintiff (and big data’, and there will be a fierce dispute with respect to the legal commensurately less favourably for defendant companies) may carry ground of NHIS to request such damage, causation, illegality and other more weight in the future.

type of lung cancer, as in one of the examples in the present case from such non-specific diseases. That is, the Supreme Court viewed where a senior male had been diagnosed with squamous cell carci- that the individual causal relationship cannot be admitted by the epi- noma or small cell carcinoma. While not expressly deciding on the demiologic causation, but requires additional evidences. This deci- rationales used by the Seoul High Court, the Korean Supreme Court sion of the Supreme Court is noteworthy because it states that the rejected the alleged connection between smoking and lung cancer individual causal relationship cannot be acknowledged only by the (rather than squamous cell carcinoma or small cell carcinoma). epidemiologic causation. The Seoul High Court will have the first On 14 April 2014, the National Health Insurance Service filed a hearing for the reverted case at the early of June 2014. suit against certain cigarette companies (KT&G, PM and BAT) for damages in the amount of 53.7 trillion South Korean won, repre- 35 Describe the level of ‘consumerism’ in your country and senting the amounts the National Health Insurance Service had paid consumers’ knowledge of, and propensity to use, product liability out from 2003 till 2012 to 3,484 patients diagnosed with squamous litigation to redress perceived wrongs. cell carcinoma, among those with a smoking history of at least 20 pack-years. There is a high level of awareness regarding consumer rights in With respect to the case that Vietnam War soldiers requested Korea. Accordingly, collective lawsuits by consumers and the con- the United States herbicide manufacturers to indemnify for damages sumer dispute mediation process were introduced. The class action because of their diseases due to Agent Orange, on 12 July 2013, the lawsuit has not yet been introduced in Korea, but the Agent Orange, Korean Supreme Court remanded the case to the Seoul High Court, automobile gas emissions and cigarette cases could be considered ruling partially in favour of the appeals of the defendants and reject- as class action lawsuits. Recently, the customers, who suffered from ing all other appeals of the defendants (represented by Shin & Kim) the financial companies’ leakage accident of personal information, and the plaintiffs. While the Seoul High Court found a causal rela- jointly filed a lawsuit against the financial companies. These cases tionship between exposure to Agent Orange and 11 diseases, such raised public controversy over the necessity for a legal system that as chlorine cane, lung cancer and throat cancer, the Korean Supreme allows a group of victims having the same cause to efficiently file a Court denied such causal relationship for all diseases except for lawsuit. As such, the class action lawsuit similar to that permitted chlorine cane. The Korean Supreme Court refused to find the causa- under the common law will likely be introduced in Korea in the tion merely based on the facts that there is a statistical correlation near future. Moreover, the passage of the law amendment for the between exposure to Agent Orange and the other 10 non-specific introduction of a punitive compensation system is likely to cause the diseases suffered by the plaintiffs and that the plaintiffs did suffer easier filing of more lawsuits.

Ghyo-Sun Park [email protected] Gea Sung Yang [email protected] Bo Kyung Lim [email protected]

8th Floor, State Tower Namsan Tel: +82 2 316 4114 100 Toegye-ro, Jung-gu Fax: +82 2 756 6226 Seoul 100-052 www.shinkim.com Korea

128 Getting the Deal Through – Product Liability 2014 Shin & Kim KOREA

36 Describe any developments regarding ‘access to justice’ that These provisions are intended to ease the burden of proof on the would make product liability more claimant-friendly. plaintiffs. As well as these presumptions, the amendments seek to At the time of publication, two amendments to the Product impose on manufacturers punitive damages within the range of 12 Liability Act, proposed by members of the National Assembly on times the actual damages suffered, authorising the courts to assess 28 November 2012 and 10 October 2013, are presently pending damages by considering a set of factors comprising whether the approval by the National Assembly. The amendments contain provi- manufacturer committed an intentional wrongdoing or were aware sions that would trigger in a product liability case the presumption of the likely occurrence of the damages, what the actual damages of: were in amount, the duration of the conduct of the manufacturer • a defect in the product in question if damages resulted from a and the size of the damages, and the endeavours by the manufac- normal use of the product; and turer to redress the damages. • a causal connection between the defect and the damages if the In a recent case in which the plaintiff, a Korean citizen, sued damages suffered are the same as the damages that can result a Japanese company for damages in connection with the compul- from the defect in question. sory military draft during the Japanese colonial period in Korea, the Korean Supreme Court rejected the defendant Japanese company’s argument that the statute of limitations had already run on the claim, holding that the plaintiff could still raise a claim for damages.

www.gettingthedealthrough.com 129 NETHERLANDS Van Diepen Van der Kroef Advocaten Netherlands

Michael Gerrits and Anne van Hilten Van Diepen Van der Kroef Advocaten

Civil litigation system case ‘appointed for life’ means until the age of 70 years. Jury trials do not exist in the Netherlands. Cases are dealt with by professional 1 What is the structure of the civil court system? judges. In most civil cases claims and disputes must be brought before a competent district court in the first instance, unless the parties have agreed upon a different form of dispute resolution, such as media- 3 What are the basic pleadings filed with the court to institute, tion, arbitration and binding-ruling proceedings. If the amount prosecute and defend the product liability action and what is the claimed is €25,000 or less, a special division of the district court (the sequence and timing for filing them? subdistrict court division) deals with the case. Appeals against judg- Proceedings ensue as follows. First, the claimant serves a writ of ments passed by a district court can be lodged with the competent summons on the defendant. The claimant then files a writ of sum- court of appeal, unless the claim in the first instance did not exceed mons. Next the defendant issues a statement of defence within a the amount of €1,750, in which case the decision cannot be appealed time frame decided on by the court (usually six weeks). Extensions, at all (section 332 of the Dutch Code of Civil Procedure (CCP)). however, are possible. In most cases, the defendant’s statement of A court of appeal re-examines the facts of the case and reaches its defence is followed by a hearing attended by the parties, although a own conclusions. In most cases it is possible to contest a court of judge may decide against one. The court has a discretionary power appeal’s decision by appealing to the Supreme Court. As the highest to forego a hearing, if it decides that the matter does not lend itself court in the field of civil law, the Supreme Court is responsible for to it (section 131 of the CCP). In all proceedings the court is required hearing appeals to it and for a number of specific tasks with which to decide whether a hearing would be appropriate in the relevant it is charged by law. The aim of an appeal to the Supreme Court is case. Nevertheless, the legislature offers some guidance. In minor to promote legal uniformity and the development of law. The court or simple cases a potential hearing is sometimes outweighed by the examines whether a lower court has properly applied the law in costs involved. Further, a judge may prefer to have several rounds of reaching its decision. At this stage the facts of the case established by written pleadings before ordering a hearing. This could be the pro- the lower court are no longer subject to debate. cedure in cases where specialist knowledge is required and the judge does not have much experience of the subject matter. Acting on their own initiative or in response to an application, a judge may always 2 What is the role of the judge in civil proceedings and what is the schedule a hearing at a later stage during the proceedings (sections role of the jury? 87 and 88 of the CCP). The role of a judge in the Dutch civil law system is passive. In civil After a hearing has been held, the court can elect to pursue any proceedings the litigating parties are considered to be autonomous of the following avenues: and the court is regarded as passive. In short, what this means is • an interlocutory ruling (instructions issued to a party to prove that the parties are at liberty to determine whether legal action is specific aspects); or to be taken or continued, as well as decide on the subject matter of • a final decision, or, if there is no hearing or the court deems it the proceedings, unless the parties are not at liberty to do so. The necessary: process is almost entirely controlled by the parties. However, judges • a reply (the claimant is granted six weeks, although an have assumed a more active role during recent years. A judge comes extension is possible); followed by to a decision based on the information and facts that are presented • a rejoinder (from the defendant); by the parties. As mentioned before, the court is passive. It is not • counsel’s pleadings (only if either party requests this, as allowed to base its judgment on facts that have not been presented pleadings are only usually permitted upon request); and by any of the parties. If a judge needs more information in order to • judgment (interlocutory or final). make a decision, he or she will ask the parties to provide it. A judge will hand down a decision in accordance with the Dutch Civil Code (Civil Code (CC)) and other local laws as well as inter- 4 Are there any pre-filing requirements that must be satisfied before national conventions, and may consult case law to ascertain what a formal law suit may be commenced by the product liability other judges have decided in similar cases, although it is not obliged claimant? to do so. Judges are not bound by the judgments pronounced by No, there are no such requirements in the Netherlands. However, a other judges. A judge may deviate from a former ruling and hand different type of lawsuit may be filed. On 1 July 2010, the Subsidiary down a different decision. The court system is adversarial. Disputes (Injury and Death) Act came into effect. This act improves In the Netherlands, judges are appointed for life by the govern- the position of people who have sustained loss pertaining to per- ment. They are independent and cannot be dismissed by the Minister sonal injury or loss pertaining to death (this means loss due to injury of Security and Justice because of the decisions they make. In this or death). In many cases such people can act quickly and inexpen- sively to bring an issue concerning the manner in which their case is

130 Getting the Deal Through – Product Liability 2014 Van Diepen Van der Kroef Advocaten NETHERLANDS dealt with before a court of law. The act defines a subsidiary dispute 7 Are there class, group or other collective action mechanisms as a disagreement about part of a claim for personal injury or the available to product liability claimants? Can such actions be loss of dependency. Examples include the question as to whether the brought by representative bodies? aggrieved party is to blame for the occurrence of the loss themselves A class action as known in the common law system is not provided and any debate concerning an advance payment. Case law reveals for in the Netherlands. There are, however, various alternatives that the courts have opted for a broad interpretation of the concept available to deal with multiple claims. Claimants whose individual of a ‘subsidiary dispute’. Almost any disagreement may qualify as claim may not be substantial enough to justify expensive legal pro- a subsidiary dispute, provided that it does not concern the dispute ceedings might benefit from a class action. The persons concerned as a whole, and as long as the court is convinced that its resolution will need to consolidate their individual cases in the sense that sev- could contribute to a settlement being reached. The conclusion of a eral claimants will be involved in a single court case. A foundation settlement agreement is not necessary. The point is whether the par- or an association can institute proceedings for the purpose of pro- ties will be able to take the next step in their negotiations with each tecting similar interests of other persons to the extent that its con- other following the resolution of their subsidiary dispute. In several stitution seeks to safeguard such interests (section 3:305a(1) of the cases the court did not hold that there were grounds, or sufficient CC). Among other things, such proceedings may be used to obtain a grounds, for this to occur. Once the court has decided that a sub- declaratory judgment in relation to the party who is liable. No pecu- sidiary dispute exists, it then has to rule whether it is worth taking niary compensation may be claimed. Individual claimants may use the dispute under consideration. The investment of time, money and a judgment to negotiate compensation or to institute proceedings. effort needs to be weighed up against the interests at stake in the Further, Dutch law provides for an opt-out mechanism that relevant claim and the contribution that a ruling could make to an facilitates the implementation of collective settlements in a fashion amicable settlement being reached. somewhat similar to US class action settlements. This mechanism is rooted in the Class Action (Financial Settlement) Act (WCAM). The WCAM came into effect on 27 July 2005. Basically, it allows the 5 Are mechanisms available to the parties to seek resolution of a parties to a settlement agreement to jointly petition the Amsterdam case before a full hearing on the merits? Court of Appeal to declare a settlement agreement to be binding. In the Netherlands summary dispositions are not available as they The agreement must be concluded between one or more potentially are in the United States. However, as set out in question 4, a separate liable parties and one or more groups of persons for whose benefit type of lawsuit is possible based on the Subsidiary Disputes (Injury the settlement agreement was concluded. If the Amsterdam Court and Death) Act (see question 4 for more detailed information). of Appeal declares a settlement agreement to be binding, the agree- ment binds all persons covered by its terms, even those who were 6 What is the basic trial structure? not involved in the conclusion of that agreement. However, a person may opt out of a settlement agreement in writing within a certain For the role of the judge and the structure of legal proceedings in time period decided on by the Amsterdam Court of Appeal after the Netherlands, especially in the first instance, see questions 2 and issuing a declaration to the effect that the agreement is binding. The 3. Most court proceedings in the Netherlands mainly take the form opt-out period is determined by the Amsterdam Court of Appeal but of an exchange of written statements between the parties. The court will amount to at least three months. Before deciding to declare a system in the Netherlands does provide for a trial as is customary in settlement agreement to be binding, the Court of Appeal will assess other jurisdictions. If the amount claimed is €25,000 or more, any how representative any foundation or association representing the written statements, such as a writ of summons or a statement of interested parties is, as well as how reasonable the settlement agree- reply, have to be written by a lawyer. In the case of such claims the ment is. Notification of the interested parties is crucial, both at the parties need to be represented by a lawyer. If the amount claimed is litigation stage, where the aim is to obtain a declaration stating that €25,000 or less, the subdistrict court division deals with the case. the agreement is binding, and after that declaration has been issued. There is no compulsory legal representation, so the parties are free The binding effect of a settlement agreement will only be deemed to to litigate in person. In the subdistrict court division the parties may be acceptable, if the interested persons have been properly notified also be represented by an authorised representative who is not a at both stages and have thus had an opportunity to object to it and lawyer. Of course, one may be represented by a lawyer in proceed- to opt out. After a declaration is issued, it will no longer be possible ings before a subdistrict court. for a claimant who has not availed themselves of the opportunity to In most cases the court will schedule a hearing after the defend- object and to opt out, to receive damages from the party that is liable ant has submitted his or her statement of defence. The court decides except through the settlement agreement. whether a hearing will be held. The purpose of a hearing is to obtain further information (factual or otherwise) to assess the possibility of the parties settling their dispute and in some cases to allow the par- 8 How long does it typically take a product liability action to get to ties (or their lawyers) to plead their cases. the trial stage and what is the duration of a trial? Another written round is then held in the form of a reply and It is not easy to estimate how long it typically takes a product liability rejoinder if no hearing is held or if the judge deems it necessary after action to get to the trial stage and the duration of a trial. The dura- the hearing. The hearing is thus a very important part of the pro- tion depends strongly on the complexity of the case and the question ceedings. A judge may hand down the judgment after the hearing. as to whether a judge wants to examine witnesses or experts. This This judgment may be an interlocutory decision instructing a party could cause considerable delay. A claim in the civil courts typically to prove specific aspects, or a final decision that resolves the dis- takes between one to two years to reach a final judgment in the pute between parties. If an examination of witnesses takes place, the first instance, depending on the complexity of the case. An appeal judge plays an important role. A judge can order an examination of may take about the same amount of time. An appeal to the Supreme a witness on his or her own initiative. In this regard it is worth not- Court will add another year or two to the duration of the proceed- ing that the judge examines the witnesses and can prevent a witness ings, with the result that a case may last three to six years. from answering a question asked by a party.

www.gettingthedealthrough.com 131 NETHERLANDS Van Diepen Van der Kroef Advocaten

Evidentiary issues and damages 151(2) of the CCP). Authentic (section 157 of the CCP) and any judgment handed down by a criminal court (section 161 of the 9 What is the nature and extent of pretrial preservation and CCP) are examples of conclusive evidence. The court enjoys discre- disclosure of documents and other evidence? Are there any tion to determine the evidential value of non-conclusive evidence. avenues for pretrial discovery? The Dutch legal system does not allow for any formal pretrial discovery or disclosure, as is the case in the United States and the 11 May the court appoint experts? May the parties influence the United Kingdom. There are, however, four instruments available to appointment and may they present the evidence of experts they help parties before the commencement of the substantive proceed- selected? ings, namely: A court must rule on every issue, either legal or factual, raised by the • a preliminary examination of witnesses (sections 186 to 193 of litigants in relation to their dispute. In the course of the proceedings the CCP); the court, acting either ex officio or at the request of either party, • preliminary expert advice (sections 202 to 207 of the CCP); may order that expert advice be taken on certain issues. When it • an application to inspect and copy records (section 843a of the comes to product liability, this usually involves technical or medical CCP); and aspects of the relevant matter. Before substantive court proceedings • an application to receive a copy of, extract from or to inspect commence, a party may request that the court allow preliminary lost evidence (section 843b of the CCP). expert advice to be presented on a certain issue (see question 9). Further, each party is at liberty to file opinions prepared by their A preliminary examination of witnesses and preliminary provisional own experts. However, a party’s experts are assumed to be partisan. expert advice may be useful in order to establish whether a claimant Where there is a conflict between the opinions of the parties’ experts, has a claim to file with a court. The parties will then be in a better the court usually appoints its own expert, who is required by law to position to estimate the chances of a lawsuit meeting with success. perform their duties impartially and to the best of their ability. It is In summary proceedings an attorney may petition a court to important to note that, even then, the court will not be bound by order a party to produce evidence pursuant to section 843a of the an expert’s advice. The judge will consult the parties to determine CCP. The party requesting such documents must have a legitimate which individuals qualify as experts. The parties may lodge objec- interest; for example, the party requires the evidence for the pur- tions to the appointment of a certain expert. The court, however, is poses of legal proceedings. The documents must be properly speci- not obliged to accede to any objections raised by the parties (section fied. A judge will not allow a fishing expedition. The application for 194(2) of the CCP). documents to be submitted may be submitted separately or during legal proceedings. 12 What types of compensatory damages are available to product liability claimants and what limitations (if any) apply? 10 How is evidence presented in the courtroom and how is the In order to claim damages, the aggrieved party has to prove that any evidence cross-examined by the opposing party? loss has occurred or that a defect exists, and that there is a causal Under Dutch law a claimant has a duty to substantiate their claim link between the defect and that loss (section 6:188 of the CC). The by presenting evidence. A basic principle of Dutch law of civil pro- following six types of loss are recognised in relation to product cedure is that there is an open evidentiary system, that is to say, that liability: evidence may be offered by all possible means, unless a statute stipu- • loss pertaining to death; lates otherwise (section 153(1) of the CCP). By producing evidence • loss pertaining to personal injury; the parties involved will ensure that a court will deem the relevant • mental injury; facts to have been established and will base its judgment on them. A • damage to property; claimant must present all available evidence in the writ of summons • damage to a defective product; and itself or as an exhibit attached to it. • intangible loss. The defendant may always provide evidence to the contrary, unless the law expressly precludes this. The defendant is required to The relevant product liability provisions of the law are based on present all their evidence in their statement of defence. Both sides of the EU Product Liability Directive (85/374/EEC (the Directive)). the argument should be heard. A witness’s evidence must be allowed The Directive has been implemented in sections 6:185 to 6:193 of and is provided at the request of one of the parties or in response the CC. Liability under these provisions is strict in relation to any to an order by the court. The parties themselves may also give evi- claimant who is a private individual. This applies to any loss due dence as witnesses. Where evidence is to be provided by witnesses, to a defective product that has caused death or personal injury, or the parties will call their own witnesses. In addition, experts may damage caused to any object (damage to property) that is usually present written or oral reports at the request of one of the parties or intended for private use or consumption, and that has indeed been at the court’s behest (section 194 of the CCP). The court in the first used or consumed by the individual suffering the loss, principally instance or on appeal may order a party to submit further evidence for personal purposes, with an excess or deductible amount of €500 regarding specific facts or circumstances. (section 6:190 of the CC). There is no need to prove culpability on Any evidence is assessed by the court, unless the law stipulates the part of the producer, although they do have an exhaustive num- otherwise. The court may exclude evidence on the grounds that it ber of defences at their disposal. The rule is reasonably simple: a has been unlawfully obtained (notwithstanding the fact that the producer is liable for any loss caused by a defect in the product that manner in which evidence has been acquired may constitute a crimi- they have put into circulation. The aggrieved party is required to nal offence). However, the Dutch civil courts are not easily disposed prove that they have suffered a loss, that a defect exists and that to exclude evidence as unlawful. A distinction is drawn between there is a causal link between the two. If the aggrieved party furnish- conclusive and not-conclusive evidence. In the case of conclusive ers such evidence, the relevant producer is liable unless they are able evidence the court is required to accept that the substance of such to rely on any of the relevant defences. Strict liability on the part evidence is true or to acknowledge the compelling nature of that of the producer does not apply in the case of any type of loss other form of evidence as determined by the law (section 151(1) of the than personal injury or damage to private property. In such a case a CCP). Where conclusive proof is produced, evidence to the contrary consumer is required to hold the seller of the relevant product liable may also be presented except where the law precludes this (section in accordance with the general provisions of volume 6 of the CCP

132 Getting the Deal Through – Product Liability 2014 Van Diepen Van der Kroef Advocaten NETHERLANDS

(see section 7:24(1) of the CC). However, the seller has a right of Litigation funding, fees and costs recourse against the producer (section 7:25 of the CC). 14 Is public funding such as legal aid available? If so, may potential Loss pertaining to death (strict liability) defendants make submissions or otherwise contest the grant of Only a person referred to in section 6:108 of the CC may claim such aid? compensation for death, such as that of their registered partner or In the Netherlands, legal aid is available under certain circumstances children, or the deceased’s spouse. They may claim compensation under the Legal Aid Act. Several criteria must be satisfied in order in the case of death if, for example, the deceased was their provider. to qualify for legal aid. In accordance with section 12 of the Legal Aid Act, legal aid will, in principle, be offered to any person whose Loss pertaining to personal injury (strict liability) legal interests concern the Netherlands and whose financial capac- Such loss may include hospital fees, for example. In general, only the ity does not exceed certain specified amounts. Further, the costs of aggrieved party is compensated for any loss due to personal injury the legal aid must be in reasonable proportion to the interests at (section 6:107 of the CC). stake in the case. Such aid takes the form of payment of most of an individual’s own legal fees. An individual is always required to Mental injury pay a small amount themselves. A recipient of legal aid must pay an Mental injury is not physical, such as the emotional loss suffered income-related fee. In addition, the individual has to pay the relevant by a person involved in an accident, who may have suffered injury court fees and, should they lose the case, the other party’s costs, as other than any of a physical nature as a result of that accident. Such ordered by the court. Potential defendants may not challenge the compensation may only be claimed if it is based on tort and not if it granting of such aid. has its basis in the product liability provisions of the law.

15 Is third-party litigation funding permissible? Damage to property (strict liability in some cases) Damage to property may be broken down into that sustained by pri- Yes, third-party funding is permissible. There are no limitations or vate property and that inflicted on any other tangible object. Under restrictions on this type of funding. There is no formal arrangement the product liability provisions of the law compensation may only regarding the funding of collective actions. Most collective actions be claimed for certain types of damage to property. Liability extends are financed with the aid of voluntary contributions from the indi- to damage inflicted by a product on another object that is usually vidual claimants, associations or foundations concerned. Several intended for private use or consumption, and that has been mainly claims purchasers operate in the Netherlands. Such purchasers buy used by the person who has suffered the loss for private purposes a claim for a certain amount. Often such purchasers agree that the subject to an excess or deductible sum of €500 (section 6:190(1) of aggrieved party will be entitled to a certain amount of the potential the CC). The aggrieved party must prove that they have used the claim awarded. The purchasers often have several investors backing damaged object for personal purposes. Only a private individual them. may claim compensation for any damage to property pursuant to section 6:185 of the CC. Any loss that occurs within a business con- 16 Are contingency or conditional fee arrangements permissible? text, such as forgone sales, are excluded. A company would have to base its claim for damage to property on tort or breach of contract. With regard to this matter, article 25 of the Netherlands Bar Association’s Rules of Conduct 1992 applies. According to article 25, conditional fee arrangements are allowed, in principle, as long Damage to a defective product This type of damage is excluded from the product liability provisions as the fees are reasonable. In the past, lawyers in the Netherlands of sections 6:185 to 6:192 of the CC and refers to the usefulness or were not allowed to agree on no-cure-no-pay terms. However, on 1 unsuitability of a product. Damage to a defective product also refers January 2014 an experiment started, which allows lawyers to make to any damage of part of a product. Any loss suffered as a result of no-cure-no-pay agreements with their clients in cases concerning damage to a defective product, such as repair costs or financial loss, losses pertaining to personal injury or death under certain condi- may be claimed pursuant to contractual liability or tort. tions. This experiment will finish in 2019.

Intangible loss 17 Can the successful party recover its legal fees and expenses from In accordance with section 6:106 of the CC, compensation for any the unsuccessful party? intangible loss may be claimed pursuant to tort. Such intangible loss The successful party is entitled to court fees, incidental costs such should pertain largely to the claimant’s honour, reputation or right as those incurred for expert evidence and legal fees (sections 237 to to privacy (section 6:106(1)b of the CC). The amount awarded for 239 of the CCP). However, the legal fees that need to be recovered intangible loss is relatively modest. Any reasonable costs incurred are not the actual costs incurred by the successful party. Based on to avoid or limit any loss may be claimed pursuant to section 6:96 the ‘court-approved scale of costs’, a fixed amount may be awarded, of the CC. which is usually much less than the actual costs involved. The suc- cessful party cannot take legal action to claim the remaining part of There is no maximum limit on the damages recoverable. However, their legal costs. This system has been criticised for a long time, but is compensation may only be claimed in so far as the relevant loss is not expected to change in the near future. The court-approved scale related to the event giving rise to liability on the part of the defend- of costs can be found at www.rechtspraak.nl. ant and for which the latter is culpable having regard to the nature of that liability and loss (section 6:98 of the CC). In addition, the Sources of law court has the power to reduce the amount of compensation, where the award of full damages would clearly lead to unacceptable results 18 Is there a statute that governs product liability litigation? (section 6:109 of the CC). In the Netherlands, a claim regarding product liability may be based on the following three grounds: 13 Are punitive, exemplary, moral or other non-compensatory • product liability legislation (statutory liability – sections 6:185 damages available to product liability claimants? to 6:192 of the CC); No, under Dutch law punitive, exemplary, moral or other non- • contractual liability; and compensatory damages are not recoverable. • tort-based liability. www.gettingthedealthrough.com 133 NETHERLANDS Van Diepen Van der Kroef Advocaten

Under the product liability provisions of the law, in principle, the • the presentation of the product (its advertising, packaging and producer is responsible for a defective product (section 6:185 of the user instructions); CC). This imposes a strict liability on the producer. The standards • the purposes for which that product could reasonably be applicable for the purposes of determining whether a product is expected to be put to use; and defective, are set out in section 6:186 of the CC (see question 23). • the time when the product was put into circulation. When it comes to strict liability, culpability is not important. If a cer- tain risk materialises, liability is a fact. Section 6:185 of the CC only The mere fact that a ‘better’ product has been put into circulation applies in the case of personal injury (any loss pertaining to death or does not mean that the previous product is defective. A ‘better’ prod- personal injury(section 6:190(1a) of the CC)) or damage to private uct is one that is safer, in the sense that it complies with any stricter property (section 6:190(1a) of the CC). Where contractual relations safety standards that have subsequently been developed. A manu- between companies or private individuals acting in a professional facturer needs to bear in mind the fact that a product is not always capacity are involved, in general, liability can be limited or excluded used in accordance with its intended use (foreseeable unreasonable by contract or standard terms and conditions. usage, not being abuse). Further, a producer has to bear in mind Even if the aggrieved party is entitled to take legal action in that consumers will not always take all necessary precautions. This accordance with the product liability provisions of the law, that accords with legal precedents (Supreme Court, 2 February 1973, NJ party may institute proceedings against a supplier or any other party 1973, 315 – Lekkende Kruik I). For example, a producer of medi- that has put the relevant product into circulation on contract or tort, cine should bear in mind that a user may exceed the prescribed dose. or both. Within reasonable limits a producer has to anticipate improper use.

19 What other theories of liability are available to product liability 24 By what standards may a product be deemed defective and who claimants? bears the burden of proof? May that burden be shifted to the As set out in question 18, sections 6:185 to 6:192 of the CC repre- opposing party? What is the standard of proof? sent the most important part of the CC. Those provisions only con- Section 6:186 of the CC sets out standards for the purposes of cern losses suffered by private individuals. Any damage to property determining whether a product is defective (see question 23). This or pecuniary loss suffered by anyone other than a private individual is the most important of sections 6:185 to 192 of the CC. Those needs to be based on breach of contract or tort, or both. provisions deliberately leave a significant margin of discretion to the judge. The relevant literature and case law also describe prod- ucts with manufacturing defects, design defects and accompanying 20 Is there a consumer protection statute that provides remedies, inadequate instructions or warnings (including a failure to warn) as imposes duties or otherwise affects product liability litigants? defective products. See question 18 for a brief outline of consumer protection legisla- In principle, the party that relies on the legal consequences of the tion. A producer has a duty to recall any defective, unsafe product facts or rights that they invoke bears the onus of proving those facts immediately to remove it from circulation. This duty follows from, and rights (section 150 of the CCP). This means that the claimant among other things, the Commodities Act, in accordance with which bears the burden of proof in relation to any defect and correspond- manufacturers and suppliers are not allowed to supply any products ing loss, although the court may decide to shift the onus of proof to that are dangerous due to a defect. The duty to recall a product may the defendant. The court may decide to do so in a tort-based case also be based on product-specific legislation, such as the General if a producer has failed to warn users about an unsafe product. In Food Law Regulation. Further, the producer has a duty to alert users that case, it is not up to the claimant to prove that the producer has about any unsafe product appropriately and immediately. See ques- failed to adequately warn them about the unsafe product, but up to tion 27 for more information concerning this matter. the producer to prove that it had actually provided an appropriate warning to users in respect of the unsafe product that it had put into 21 Can criminal sanctions be imposed for the sale or distribution of circulation. defective products? Criminal sanctions apply to the supply of defective products. They 25 Who may be found liable for injuries and damages caused by are mainly based on the Economic Offences Act. They may also be defective products? based on the Dutch Criminal Code. Under the Criminal Code any Under the product liability provisions of the law, in principle, the person who knowingly puts a defective product into circulation risks producer bears responsibility for a defective product (section 6:185 a fine of up to €81,000 and imprisonment for a maximum of, where of the CC). The notion of ‘producer’ is a broad one. Section 6:187 of the defective product causes death, 30 years (sections 174 and 175 the CC defines a ‘producer’ as: of the Criminal Code). A business risks a ban from doing business • the manufacturer of a finished product; for a certain period of time. The fines imposed under the Criminal • a producer of raw materials; Code are more severe than those under the Economic Offences Act. • the manufacturer of a component part; • a ‘pseudo producer’ (also known as a ‘house brand labeller’ or 22 Are any novel theories available or emerging for product liability ‘private labeller’, or any person who, by putting their name, claimants? trade mark or other distinguishing feature on a product presents themselves as its producer); See question 34. • any person who imports a product into the European Economic Area for sale, hire, leasing or for any form of distribution in the 23 What breaches of duties or other theories can be used to course of their commercial activities; or establish product defect? • the supplier of the product if it cannot be determined who the Under Dutch law the standards applicable for the purposes of deter- producer is, unless the supplier discloses the identity of the pro- mining whether a product is defective or not are set out in section ducer or the party from whom it bought the product to the rel- 6:186 of the CC. According to that section, a product is defective if evant consumer within a reasonable period of time. it does not provide the safety a person is entitled to expect, taking all circumstances into account, including, but not limited to: A consumer may hold any of the parties mentioned above liable for any loss they have suffered in relation to product liability. The

134 Getting the Deal Through – Product Liability 2014 Van Diepen Van der Kroef Advocaten NETHERLANDS broad definition of ‘producer’ and the fact that the product liability General tort-based liability must be based on culpability. The provisions of the law allow the aggrieved party to claim compensa- claimant must provide evidence to the effect that the relevant tion for all of the losses that they have suffered from any of several producer was at fault (and that this fault can be attributed to the producers means that the outcome is generally favourable to that producer). However, as mentioned in question 24, there are circum- party. Under the general liability provisions of the law, such as those stances in which the burden of proof is shifted to the defendant. governing tort (section 6:162 of the CC) and default of performance of an obligation (eg, section 6:74 of the CC), other parties may be 27 What post-sale duties may be imposed on potentially responsible liable as well. parties and how might liability be imposed upon their breach? See question 20. Once a defective product has been introduced into 26 What is the standard by which causation between defect and the market, its producer may have a duty to recall it, withdraw it or injury or damages must be established? Who bears the burden make sure that it is no longer being made available on the market. and may it be shifted to the opposing party? This obligation may be based on articles 20 and 21 of European Causal link is provided for in section 6:98 of the CC. That section Regulation (EC) No. 765/2008 and on the Commodities Act. The of the CC stipulates that damages may only be claimed in so far Commodities Act prohibits a producer or supplier from putting any as the relevant loss is related to the event giving rise to the defend- product into circulation that it knows could be dangerous to humans ant’s liability and for which the latter is culpable as a result of that if used as intended. Further, the producer has a duty to provide users event, taking into account the nature of that liability and of the loss with an appropriate warning of the dangers of a product, if there are concerned. Causal link is necessary for the purposes of establishing any, immediately. If a party knowingly supplies dangerous products, liability. A distinction is drawn between establishing liability (con- it has a duty to inform the relevant national enforcement authorities, ditio sine qua non) and the extent of such liability. Consequences such as the Dutch Food and Consumer Product Safety Authority have to be determined, which may be attributed to the defendant (NVWA). The NVWA provides tools on its website, which can help as a result of the behaviour that caused the loss. Section 6:98 of to determine whether a product is dangerous (see www.vwa.nl/eng- the CC sets out the criteria for determining all legal obligations to lish). The NVWA has a discretionary power to order a producer or remedy any loss, including product liability. The aim of section 6:98 supplier to recall a dangerous product. of the CC is to answer any legal questions based on objective cir- cumstances, such as: Limitations and defences • the type of liability (eg, fault-based liability as opposed to strict liability); 28 What are the applicable limitation periods? • the type of loss (eg, it is easier to attribute any loss pertaining Under Dutch law, a right of action to demand the performance of a to death or personal injury than that occasioned by damage contractual obligation to give or to do something, prescribes upon to property, and the same applies to damage to property and the expiry of five years from the beginning of the day following the a purely financial loss, as well as any loss that is incurred and a one on which the claim falls due. However, the following exceptions loss of earnings); to this rule apply. • the extent to which the relevant loss was foreseeable; and The limitation period depends on the grounds invoked. If the • the type of behaviour (eg, the greater the extent to which an claimant relies on the product liability provisions of the law, their individual is culpable in relation to their behaviour, the easier it claim will be barred three years after the aggrieved party becomes, is to attribute the loss concerned). or ought to have become, aware of the information required to com- mence such proceedings, such as the relevant loss, defect and identity In general, the aggrieved party has to prove the existence of causal of the producer (sections 6:185 and 6:191(1) of the CC). This is link between the event causing the loss and the loss itself. If behav- referred to as the ‘relative limitation period’. iour that qualifies as tort or contractual liability results in any loss, In any event, the claim will be barred 10 years after the prod- causal link between the behaviour and that loss is generally estab- uct has been introduced into the market (section 6:191(2) of the lished. The defendant needs to produce prima facie evidence that CC). This is referred to as the ‘absolute limitation period’. Therefore, the loss would also have occurred in the absence of the defendant’s it is possible that, although the relative limitation period of article defective product. 6:191(1) of the CC may still allow the aggrieved party to take legal For the purposes of legal action concerning product liability, sec- action to secure compensation, entitlement to damages may already tion 6:188 of the CC stipulates that the claimant bears the burden be time-barred, because the loss occurred after a long period of time of demonstrating that the product was defective and that the defect (meaning more than 10 years after the product has been introduced caused the loss suffered by the claimant (conditio sine qua non). into the market). Once the aggrieved party has proven that a product is defective and This limitation period of 10 years also applies in relation to the that the defect has occasioned a loss, the producer bears the burden rights of a third party who is jointly liable for such loss in relation of proving, among other things, that the defect did not exist when to their right of recourse against the producer. It is worth noting that the product was introduced into the market (Supreme Court, 24 the ultimate limitation period under the usual rules governing tort is December 1993, NJ 1994, 214 – Pepsi Cola). This is called the res 20 years, so to this extent the product liability provisions of Dutch ipsa loquitur doctrine. law could be said to offer less protection to consumers. As mentioned in question 24, the party that relies on the legal However, section 6.3.3 of the CC (product liability: sections consequences of the facts or rights that they invoke generally bears 6:185 to 6:192 of the CC) does not have an exclusive effect. The the onus of proving those facts and rights (section 150 of the CCP). aggrieved party will retains their rights pursuant to any contractual This means that the party claiming damages bears the burden of obligation or tort and may still base a claim on such grounds. The proof. However, in some circumstances the courts have relaxed rules of prescription set out in section 3:310(2) and (3) of the CC are the burden on the claimant or shifted the burden of proof to the not affected by the limitation period of 10 years stipulated in section defendant. 6:191(2) of the CC. Section 6.3.3 of the CC (sections 6:185 to 6:192 of the CC) is of a supplementary nature. The aggrieved party may claim damages pursuant to a contractual obligation or tort.

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• the producer did not put the product into circulation; Update and trends • the defect that caused the loss did not exist at the time the prod- uct was put into circulation; One of the most important, emerging threats for producers • the product was neither produced nor distributed for economic nowadays is the risk of product liability when product packaging purposes, nor was it produced or distributed as part of the pro- does not comply with legal standards. The legislation governing product packaging is expanding. ducer’s business operations; and • a defence that is applicable to manufacturers of raw materials and components only: the defect was due to the design of the product of which the relevant part constitutes a component, or 29 Is it a defence to a product liability action that the product the defect is due to the instructions given by the producer of the defect was not discoverable within the limitations of science and end-product. technology at the time of distribution? If so, who bears the burden and what is the standard of proof? It is important to note that this list of defences, including the defences Pursuant to article 6:185(1e) of the CC, a producer is not liable for mentioned in questions 29 and 30, is exhaustive, unlike the list of damages caused by a defect in its product that could not have been circumstances mentioned in question 23. discovered at the time the product was introduced into the market, given the state of the art at the time. It is up to the producer to prove that the defect was not discoverable within the limitations of sci- 32 What appeals are available to the unsuccessful party in the trial ence and technology at the time of distribution. The demands for court? this kind of proof are strict. The court may ask for expert evidence See question 1. An appeal against a judgment handed down by a proving that the producer was unable to discover the defect by read- district court (including the subdistrict court division) may be lodged ing existing trade journal articles. For the producer, the chance of with the competent court of appeal, unless the claim in first instance success is low. Only in one well known case, the Sanquin case, did did not exceed the amount of €1,750, in which case the decision a producer prevail while employing this defence (District Court of cannot be appealed at all (section 332 of the CCP). Amsterdam, 3 February 1999, NJ 1999, 621 – Sanquin). Subjective ignorance, or a lack of time or means will not help a producer in its Jurisdiction analysis defence against an aggrieved party claiming damages. Nevertheless, absence of accessibility to information concerning the state of the art 33 Can you characterise the maturity of product liability law in terms may serve as a defence to a producer. of its legal development and utilisation to redress perceived wrongs?

30 Is it a defence that the product complied with mandatory (or It would seem that the number of liability claims made on the basis voluntary) standards or requirements with respect to the alleged of product liability law has increased. Moreover, there has been an defect? increase in the number of out-of-court settlements for compensation reached between the aggrieved party and the producer. In general, Section 6:185(d) of the CC stipulates that a producer is not liable current product liability law seems to have achieved a proper bal- if the defect is due to the relevant product’s compliance with man- ance between consumer protections and the producer’s interests. datory governmental regulations. The producer will have to prove However, there is a risk that the number of claims for minor losses that the design or composition of the product complies with manda- will increase. tory governmental regulations and that the defect is due to the need to comply with those regulations. The fact that a product complies with a standard applied voluntarily by a producer will not serve a 34 Have there been any recent noteworthy events or cases that successful defence to the latter. If a product complies with such a have particularly shaped product liability law? Has there been standard, this does not mean that it is in line with mandatory provi- any change in the frequency or nature of product liability cases sions of the law (governing health and safety or otherwise). launched in the past 12 months? See question 33. The following is a noteworthy case. Based on a judg- 31 What other defences may be available to a product liability ment handed down on 18 September 2013 by the District Court of defendant? The Hague, a cardiac valve that periodically does not close entirely Defences other than those mentioned in questions 29 and 30 include but does not result in any actual symptoms, is not considered to be the following: a defective product according to the product liability provisions of the law.

Michael Gerrits [email protected] Anne van Hilten [email protected]

Dijsselhofplantsoen 16-18 Tel: +31 20 574 7474 1077 BL Amsterdam Fax: +31 20 574 7475 Netherlands www.vandiepen.com

136 Getting the Deal Through – Product Liability 2014 Van Diepen Van der Kroef Advocaten NETHERLANDS

35 Describe the level of ‘consumerism’ in your country and though, because judges do not award such excessive amounts by consumers’ knowledge of, and propensity to use, product liability way of damages as courts do in the United States. litigation to redress perceived wrongs. The level of consumerism takes the form of a movement to enforce 36 Describe any developments regarding ‘access to justice’ that consumers’ rights in relation to producers and trade. The frequency would make product liability more claimant-friendly. and scope of product liability cases and related class actions is increasing in the Netherlands. However, the Netherlands does Consumers would like more protection at lower cost, which would not have a claims culture that is similar to that prevailing in the mean, for example, removing the €500 threshold (section 6:190(1)b United States. The number of product liability cases is increasing of the CC). The producers, however, are in favour of increasing the as a result of the amount of product recalls. The effect is limited threshold (see question 33).

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Babatunde A Sodipo Ajumogobia & Okeke

Civil litigation system contains the factual basis upon which the claimant’s cause of action is founded and the reliefs sought. 1 What is the structure of the civil court system? Most states, such as Lagos, Ogun, Kano and Abuja, as well as The structure of the civil court system is stipulated in the Nigerian the Federation, have adopted reformed rules of court, which require Constitution, 1999 (as amended). The courts of record, in order a claimant to file documents accompanying the writ of summons of hierarchy, are the Supreme Court (the highest appellate court), and statement of claim. These accompanying documents, known as the Court of Appeal, the Federal High Court, the state high courts ‘front-loaded processes’, include lists of witnesses to be called and and the High Court of the Federal Capital Territory (FCT), Abuja. documents to be relied on at trial, written statements on oath of wit- Nigeria is divided into 36 states. Each state and the FCT, Abuja has nesses, copies of documents that the claimant intends to rely on at a high court where civil cases are instituted. Product liability claims the trial and in Lagos, a pre-action protocol form (see Order 3, Rule are usually instituted in these courts. Courts with summary jurisdic- 2 of the High Court of Lagos State (Civil Procedure) Rules 2012 tion over small civil claims are called courts in southern (the Lagos Rules). Nigeria and district courts in northern Nigeria. These courts are The defendant has a period of 30 or 42 days (depending on the established under the laws of each state. Appeals from judgments of rules of the relevant court) from the date of service of the writ of sum- the magistrate and district courts lie to the state high courts and the mons and statement of claim to enter an appearance to the writ and high court of the FCT. file a statement of defence accompanied with the aforementioned The Federal High Court has jurisdiction over specific subject front-loaded processes. The statement of defence is required to con- matters, such as: , admiralty, mines and min- tain the defendant’s specific denial or admission of alleged facts in erals, matters to which the federal government or its agencies are the statement of claim. The defendant may file a set-off or counter- parties etc. Appeals from judgments of the federal and state high claim, if he or she claims relief against the claimant by incorporat- courts and the High Court of the FCT lie to the Court of Appeal. ing it in the statement of defence. Such a defence will be filed with All appeals from the Court of Appeal lie with the Supreme Court. accompanying documents. Upon receipt of the statement of defence, In addition to its appellate jurisdiction, the Supreme Court exercises the claimant may, if necessary, file a reply within a period of seven original jurisdiction over certain specific matters, such as disputes or 14 days (depending on the rules of the relevant court). Where a between governments, etc. Judgments of the Court of Appeal are counterclaim is served, a claimant is required to file a defence thereto binding on all other courts in Nigeria, except the Supreme Court. with accompanying documents within 14 days from the date of ser- Judgments of the Supreme Court are final and binding on all other vice and the defendant may file a reply to the claimant’s defence to courts in Nigeria. counterclaim within seven or 14 days (depending on the rules of the relevant court). Once the last pleading is filed or the time for filing it expires, pleadings are deemed to have closed. 2 What is the role of the judge in civil proceedings and what is the In states where reformed rules have not been adopted, the rules role of the jury? of court prescribe an eight-day period for entering appearance. In The Nigerian civil court system is adversarial. Parties to civil litiga- such cases, the defendant has a period of 14 days from the date of tion present their cases before judges who preside over disputes, as entering appearance to file a statement of defence and the same pro- independent and impartial arbiters. Judges hear and determine dis- cedure for filing and responding to a counterclaim applies. However, putes on the pleadings and evidence presented by the parties and the there is no requirement to file accompanying documents. application of the law thereto. A judge has no authority to assume Where a party defaults in complying with stipulated deadlines, an inquisitorial approach to adjudication in civil litigation. the time frame may be extended by the court, upon an application There is no jury system in Nigeria. A judge sitting alone presides by the party in default and, in states where reformed rules have been over civil proceedings in the federal and state high courts. adopted, upon the payment of penalty for the days of default.

3 What are the basic pleadings filed with the court to institute, 4 Are there any pre-filing requirements that must be satisfied before prosecute and defend the product liability action and what is the a formal law suit may be commenced by the product liability sequence and timing for filing them? claimant? The applicable procedure in civil cases is governed by the civil proce- Under the Lagos Rules, a product liability claimant is required to dure rules of the court where the action is instituted. comply with the Pre-action Protocol by filing a Pre-action Protocol In Nigeria, product liability claims are commenced by filing a Form O1 along with his or her writ of summons. In Form O1, the writ of summons and statement of claim at the state high courts claimant describes the unsuccessful attempts that he or she had and the High Court of the FCT. The writ of summons is endorsed made to achieve amicable resolution of the dispute through arbi- with the claims and the reliefs sought while the statement of claim tration, mediation, conciliation, or other dispute resolution options.

138 Getting the Deal Through – Product Liability 2014 Ajumogobia & Okeke NIGERIA

The claimant must also state that his or her claim was set out in trial. Under this procedure, the defendant is deemed to have admit- a written memorandum to the defendant and that he or she has ted all the facts pleaded by the claimant in the statement of claim, complied, as far as practicable, with the duty of full and frank dis- but nevertheless contends that the claimant is not legally entitled to closure of all information relevant to the issues in dispute (Order 3, the relief sought. Rule 2(1) of the Lagos Rules). Failure to comply with the Pre-action Where the judge is of the opinion that such point of law would Protocol will result in the court registry refusing to accept the writ substantially dispose of the action or any part of the action, the of summons for filing (Order 3, Rule 2(2) of the Lagos Rules). There judge, upon hearing the application, may strike out the action in are no pre-filing requirements to be fulfilled by a product liabil- whole or in part or make an order that would meet the justice of ity claimant before an action may be commenced in other states. the case. However, where an action is to be commenced in any state or the Federation against certain statutory corporations or public officers, Motion to strike pleadings, etc the claimant may be required by statute to serve the defendant with A claimant or a defendant may apply and a judge may, at any stage a pre-action notice, at least 30 days before commencing the action. of the proceedings, strike out or amend any pleading or indorsement Also, Order 4, Rule 15 of the High Court of the Federal Capital of any writ or any part thereof on the ground that it discloses no rea- Territory (Civil Procedure) Rules, 2004 (the FCT Rules) requires a sonable cause of action or defence, whichever is the case, or that it legal practitioner to certify that he or she has counselled his or her is scandalous, frivolous or vexatious or may prejudice, embarrass or client on the strength and weakness of his or her case before filing delay fair trial of the action or constitutes an abuse of court process. an action. In the case of a defendant-applicant, the judge may order the action to be stayed, dismissed, or judgment entered. In the case of a claim- ant-applicant, the court may strike out the defendant’s pleading. 5 Are mechanisms available to the parties to seek resolution of a Where the defendant contends that no reasonable cause of case before a full hearing on the merits? action is disclosed, he or she would be deemed to have admitted The rules of court provide parties to product liability claims with all the facts pleaded by the claimant in the statement of claim, but various options to obtain judgment or dismiss an action without a nevertheless, contends that the claimant is not legally entitled to the full trial or, in some cases, without trial. These options are as follows. relief sought, and no evidence is admissible at the hearing of the application (see Order 15, Rule 18 of the Lagos Rules). Summary judgment A claimant may apply for judgment without trial. This procedure Preliminary objection or motion challenging jurisdiction is adopted when the claimant is of the belief that the defendant has This is a procedure by which a defendant may, at the earliest oppor- no defence to his or her claim. This is done at the commencement of tunity after service of the originating process, dispute the jurisdic- the action by filing a writ of summons and all accompanying pro- tion of the court to entertain the suit, without filing a statement cesses along with an application for summary judgment, which is of defence. The court may only examine the writ of summons and supported by a written address and an affidavit stating the grounds statement of claim in determining such applications. Such applica- of the claimant’s belief that the defendant has no defence to the tions may be on the grounds that: the action is statute-barred, the claim. Upon being served with the foregoing, the defendant, if he court lacks subject-matter jurisdiction or the claimant lacks locus or she intends to defend the action, files a statement of defence with standi, etc. These applications are heard by the court, as a matter of accompanying documents, a written address and a counter-affidavit priority, before the case proceeds to trial. Generally, if the application to the claimant’s application for summary judgment within the time is successful, the suit will be struck out. However, if the court holds stipulated for filing a defence. that the cause of action is statute-barred, the suit will be dismissed. At the hearing of the application for summary judgment, the judge may enter judgment against the defendants, or refuse the application and grant leave to the defendant to defend the action, 6 What is the basic trial structure? if the judge is of the view that triable issues have been disclosed by The constitution provides that parties may represent themselves in the defendant. In such case, the action would then proceed to trial. court, or they may be represented by a legal practitioner of their Judgment under this procedure is final and on the merit and may choice. However, it is common practice that parties are represented only be overturned on appeal. by legal practitioners. The role of a barrister and solicitor is fused. Therefore, a legal practitioner offers both services. The legal prac- Default of appearance or defence titioner conducts the trial on behalf of his or her client. He or she Under the rules of the various courts, where a defendant fails to is regarded as an officer of the court and he or she is required to appear in response to a writ of summons or defaults in filing a uphold the law and maintain private trust and public duty. defence within the stipulated period of time, and the claim is for Trials are conducted on the basis of pleadings and accompa- unliquidated damages (as is usually the case in product liability mat- nying documents filed and exchanged by the parties and the oral ters) the claimant is at liberty to apply by motion for judgment in testimony of witnesses or experts at the trial. The claimant com- default of appearance or defence, upon establishing the service of mences trial by calling his or her witnesses or experts to proffer evi- the originating process on the defendant. In such circumstances, the dence on his or her behalf. In states where reformed rules have been quantum of damages shall be ascertained by the court before judg- adopted, the witnesses are required to adopt their written statements ment is entered. on oath and to tender documentary evidence. The defendant would The judgment by default of appearance or defence shall be final be permitted to cross-examine the claimant’s witnesses or experts. and may only be set aside upon an application to a judge brought Thereafter, the claimant may re-examine the witnesses or experts within a reasonable time (usually 14 days), explaining the reason for to clarify any ambiguity arising from cross-examination, if neces- the default and proffering a defence to the action. sary. The defendant would then open the defence by calling his or her witnesses or experts who will adopt their written statements on Proceedings in lieu of demurrer oath and tender documentary evidence in support of the defence. Demurrer has been abolished in Nigerian courts and replaced with The claimant will be permitted to cross-examine these witnesses or proceedings in lieu of demurrer. This procedure permits a defend- experts. The defendant may re-examine the witnesses or experts, if ant to raise a point of law in his or her statement of defence, which necessary. may, on application, be decided by the judge before, during or after www.gettingthedealthrough.com 139 NIGERIA Ajumogobia & Okeke

When the trial is concluded, parties file and exchange final writ- Evidentiary issues and damages ten addresses in which they assess the evidence, apply the law to the facts of the case and analyse the strength of their case and the 9 What is the nature and extent of pretrial preservation and weakness of the other party’s case. Parties adopt their final writ- disclosure of documents and other evidence? Are there any ten addresses and the judge is required to deliver judgment within avenues for pretrial discovery? a period of three months from the adoption of written addresses. In states where reformed rules have been adopted, the rules of court Trials may be fixed to run on consecutive days or periodically, as provide for mandatory preliminary hearings called ‘pretrial confer- the business of the court may permit. Trials are adjourned to a later ences’, or ‘case management conferences’ in Lagos state (Order 25 date, when the business of the court makes it expedient to do so. of the Lagos Rules). The pretrial or case management conference Proceedings are conducted in public, except when the judge directs is presided over by a judge and all interlocutory matters including otherwise, for the protection of, for example, infants or national discovery are concluded at this stage. security, in accordance with statute. Relevance is the basis for discovery under Nigerian law. An application may be made, usually within seven days of the close of pleadings, for discovery on oath of any document that is or has been 7 Are there class, group or other collective action mechanisms in the possession, custody or control of the other party relating to available to product liability claimants? Can such actions be any matter in question in the suit. This procedure permits general brought by representative bodies? discovery requests, provided that they are relevant to facts at issue in Representative actions are permitted where a similar cause of action the case. The other party has a period of seven days to file an answer has accrued to more than one person, or the right of more than on oath exhibiting copies of the requested documents. If a party one person has been infringed, arising from the same or related cir- intends to object to the production of the requested documents, such cumstances. One or more of such persons is entitled to commence a party may refuse to provide the requested documents and state the an action on behalf of or for the benefit of the others, against the grounds for refusal in an affidavit, for example that the documents person who infringed their rights, and to seek common relief against are not relevant to the facts in issue, as disclosed in the pleadings that person. This procedure also applies to numerous persons jointly filed in the action, or that they are privileged. defending a claim. The Supreme Court of Nigeria held in Idise v The rules of court also provide for the delivery of interrogatories William International Limited (1995) 1 NWLR (Pt 370) 142 at in writing on either party for his or her examination on oath on 152-153 H-A that the prerequisite for sustaining a representative any issue related to the case, usually within seven days of the close action is that the parties to be represented and those representing of pleadings. The other party is required to file an answer on oath them must share a common interest and common grievance in the within seven days and in that answer may object to answering any of subject matter of litigation and must seek common relief beneficial the interrogatories on the ground that it is scandalous, irrelevant, or to all. Thus, representatives may bring an action on behalf of claim- tantamount to fishing. The objection would be heard at the pre-trial ants only if they share a common interest and common grievance or case management conference. with the claimants they represent. Otherwise, such representation An application for discovery may be refused if it is considered would be disallowed. unnecessary. In cases of default, the court may order the attach- Most of the rules of the state high courts in respect of class ment of a party for disobedience. Counsel may also be the subject of actions do not apply to product liabilitity claims. The FCT Rules attachment for disobedience, if it is shown that he or she neglected, stipulate, however, that class actions only apply to cases in which without reasonable excuse, to give notice of the discovery request to claimants apply for a declaration or order of injunction. Thus, prod- his or her client. uct liability claims fall outside the scope of the rules of Nigerian courts on class actions, except for the FCT Rules, which apply to product liability claims, only where declarations or injunctions are 10 How is evidence presented in the courtroom and how is the sought in such claims. evidence cross-examined by the opposing party? Group actions are not provided for under Nigerian law. During the examination-in-chief of a witness by counsel to the party on whose behalf evidence is to be proffered, evidence is presented in the form of written statements on oath. Introductory questions are 8 How long does it typically take a product liability action to get to directed at the witness during the examination-in-chief and he or she the trial stage and what is the duration of a trial? is required to adopt his or her written statement on oath, whereupon The period within which a product liability action is set down for it is tendered through the witness and admitted in evidence by the trial varies depending on the workload of the judge to whom the court. matter is assigned, the availability and number of witnesses, the com- Counsel to the opposing party has a right to cross-examine the plexity of the matter, the amount of documentary evidence involved, witness for the purpose of testing his or her veracity or impugning the disposition of counsel and the length of the pretrial conference. his or her credibility. Thereafter, if necessary, counsel to the party The pretrial conference is usually required to be completed within that called the witness may re-examine him or her to clarify any three months. However, this period is frequently extended by the ambiguity arising during cross-examination. chief judge of the court (or the judge, in Lagos state) on application by either party, where matters remain uncompleted at the expira- tion of the deadline. This frequently occurs when several contested 11 May the court appoint experts? May the parties influence the interlocutory applications are filed by parties at the pretrial stage. appointment and may they present the evidence of experts they Ordinarily, parties may reasonably expect to secure trial dates selected? within a period of six to eight months from the close of pleadings. The court has the power to appoint an expert where it would be in The trial may be concluded within six months to two years, if the interest of justice to do so, to help reach a just conclusion of the the facts in dispute are relatively straightforward. dispute. This occurs where expertise is required in a particular field of science or foreign law relevant to the case. The expert may present evidence by oral testimony and written report. When appointed, the expert is a witness of the court and not that of either party to the proceedings. Parties to the suit may cross-examine the expert only with leave of the court.

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Parties may appoint experts to present evidence on their behalf. 13 Are punitive, exemplary, moral or other non-compensatory Such evidence is usually presented in the form of oral testimony and damages available to product liability claimants? may be accompanied by a written report. Generally, the role of an Punitive or exemplary damages are awarded sparingly, only in cases expert witness is to assist the court in gaining a proper understand- where the injury caused to a claimant is one arising from an inten- ing of the issues in his or her area of expertise, regardless of the party tional or malicious act of the defendant. who selected him or her to give evidence. The procedure for examin- The Supreme Court of Nigeria in Odogu v AG Federation & ing, cross-examining or re-examining an expert witness is the same Others (1996) 6 NWLR (Pt 456) 508, held that punitive or exem- as for any other witness. The testimony of the expert is not binding plary damages are only awarded where they are specifically pleaded on the court, as it is the duty of the court to determine the issues by the claimant, and the claimant must establish that the defendant in question by, inter alia, evaluating the testimony of the expert in acted with malicious intent, recklessness, cruelty, or with flagrant relation to the pleadings and the totality of evidence presented by disregard of the law (see also Odiba v Azege (1998) 9 NWLR (Pt the parties. 566) 370 at 382 B – F.

Litigation funding, fees and costs 12 What types of compensatory damages are available to product liability claimants and what limitations (if any) apply? 14 Is public funding such as legal aid available? If so, may potential The injured party in a product liability claim is entitled to damages defendants make submissions or otherwise contest the grant of for bodily injury such as pain or illness and for psychological injury such aid? such as agony, discomfort or negative feeling. Damages may also The Legal Aid Council Act, 2011 establishes the Legal Aid Council, either be purely economic, such as loss of income, loss of or dam- which provides public funding for persons who lack the means to age to property, loss of business or expectation of profit; or non- institute or defend an action. However, product liability claims do economic, such as loss of life expectancy. In addition, the injured not qualify for funding under the Legal Aid Council Act, which in party may also recover the cost of medical expenses and purchase of terms of civil proceedings, focuses on accident and fundamental the defective product. On this point, see the decision of the Supreme right claims. Court of Nigeria in Okwejiminor v Gbakeji (2008) 5 NWLR (Pt In Lagos state, legal aid is provided by the Office of the Public 1079) 172. Defender and such aid may be provided in respect of any civil or The guiding principle in the award of damages is the doctrine criminal matter in which the cause of action or part thereof arises of restitutio in integrum. This means that the plaintiff would be in Lagos state. The applicable statute confers power on the public awarded such monetary compensation, as will restore him to his or defender to make regulations for legal aid to be offered in respect of her former position prior to the injury suffered to such extent as is certain types of civil or criminal proceedings, however, we are not possible. aware that such regulations have been made or published. Under Nigerian law, damages are generally categorised as either Nonetheless, a potential product liability claimant who lacks the ‘general’ or ‘special’. General damages represent compensation for means to fund an action may apply in writing to the chief judge of a the direct natural consequence or probable consequence of the state high court for leave to sue in forma pauperis. Actions in forma action complained of by the claimant. Special damages represent pauperis are permitted by most of the rules of the state high courts compensation for the exact or precise loss of the claimant, as proved and the High Court of the FCT. An applicant applies to court for by the claimant on the basis of pleadings and evidence presented leave to sue in forma pauperis, deposing to an affidavit stating that before the court. There are other categories of damages such as nom- he or she is unable to afford the services of a legal practitioner. If the inal, exemplary, prospective or anticipatory damages. application and the proposed action are considered meritorious, the There is no statutory limitation on the quantum of damages to court may admit the applicant to sue in forma pauperis by assigning be awarded. However, there are a few common law limitations that a legal practitioner to represent the applicant and the applicant shall affect the wholesale application of the doctrine of restitutio in inte- be partly or wholly exempted from paying court fees and any cost grum. These limitations are that: awarded. The procedure shall be revoked if it is subsequently dis- • a judge, eschewing sentiments, is expected to be fair and rea- covered that the party suing in forma pauperis misrepresented facts sonable in the award of damages, having regard to the plead- to obtain such benefit. The rules of court do not expressly provide a ings and evidence placed before him or her (see the decision of procedure whereby the opposing party may object to an application the Supreme Court of Nigeria in Lagos State City Council v to sue in forma pauperis, as it would appear that the application Unachukwu (1978) 1 ANLR 92); is required to be made before the action is filed and processes are • a judge is required to give reasons for an award of damages served on the opposing party. based on his or her assessment of the quantum of such damages from evidence adduced before him or her (see the Lagos State City Council case); 15 Is third-party litigation funding permissible? • the award of damages must be on a case-by-case basis having Under Nigerian law, third-party litigation funding is not permissible, regard to the individual facts and circumstances of the case; as it would be treated as champertous and therefore, void for being • although, as a matter of law, there may be a presumption that contrary to public policy. general damages flow from a wrong complained of by the claim- ant, he or she must establish the quantum by evidence; and • in negligence claims, once a claimant has established that the 16 Are contingency or conditional fee arrangements permissible? defendant owes him or her a duty of care and is in breach of Contingency fee arrangements are permissible in Nigeria. Rule 50 that duty, which has caused damage, then he or she must demon- of the Rules of Professional Conduct for Legal Practitioners, 2007 strate that the damage was sufficiently proximate to the breach expressly permits them. Although Rule 51 prohibits a legal practi- to entitle him or her to compensation. The claimant must also tioner from funding his or her client’s litigation, it permits a legal show that the damage was reasonably foreseeable, otherwise practitioner to, in good faith, advance expenses, either as a matter this limits the extent of compensation accruable to the claimant. of convenience or subject to reimbursement. The foregoing arrange- ments constitute exceptions to the rules on maintenance and cham- perty, which exist in Nigeria.

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The Rules of Professional Conduct require the following: • publish lists of products, the consumption and sale of which • a legal practitioner must advise his or her client of the details and have been banned, restricted or have not been approved by effect of the contingency fee arrangement and must afford his or Nigerian or foreign governments; and her client the opportunity of reviewing the arrangement before • cause offenders to protect, compensate and provide relief and retaining his or her; and safeguards for injured consumers suffering adverse effects of • the contract for a contingency fee arrangement must not be harmful, violent or hazardous technologies. drafted in a manner prejudicial to the interest of the client and the legal practitioner’s remuneration must not be unreasonably A consumer or community that has suffered loss, injury or damage excessive. as a result of the use of any good, product or service may make a complaint in writing and seek redress through a state committee. Upon investigation, if it is established that the consumer’s right has 17 Can the successful party recover its legal fees and expenses from been violated or a wrong has been committed by way of trade, pro- the unsuccessful party? vision of services or advertisement, which has caused injury or loss There is a ‘loser pays’ rule in Nigeria. However, real costs inciden- to the consumer, the council may take such action as it deems neces- tal to the conduct of legal proceedings, at both the interlocutory sary in addition to the right of the consumer to pursue legal action. stage and final judgment, are not borne by the loser on an indemnity The Act therefore provides relief that is supplemental to redress by basis. Costs are awarded at the discretion of the court and tend to be way of litigation. nominal and insufficient to cover the successful party’s counsel fees and expenses. There are only a very few instances of real costs being Sale of Goods Law (SGL) awarded by Nigerian courts to successful litigants. The English Sale of Goods Act, 1839 has been domesticated with relevant modification in the various states of Nigeria. Sources of law The SGL of Lagos state stipulates that where a contract pro- vides for sale of goods by specification, an implied condition that the 18 Is there a statute that governs product liability litigation? goods shall correspond with the said specification arises. Also, where There is no specific statute in Nigeria that governs product liability the buyer has expressly or impliedly made known to the seller the litigation. particular purpose for which the goods are required, an implied con- dition arises that the goods shall be reasonably fit for such purpose 19 What other theories of liability are available to product liability and that the goods are of merchantable quality. If the seller breaches claimants? any of the implied warranties, the buyer may maintain an action against the seller for damages for breach of warranty. It provides In Nigeria, the main source of product liability litigation is English a supplemental cause of action to the rights of the consumer under common law, as domesticated by local statutes and further devel- common law. oped in Nigerian case law. Product liability claims are usually based There is also the Standards Organisation of Nigeria Act (SON on tort law. Claimants mostly seek damages for breach of duty of Act), which empowers the relevant government agency to formulate care or negligence that results in damage. and apply standards in the regulation of both imported and domesti- The common law principle enunciated in Donoghue v Stevenson cally manufactured goods. (1932) AC 562 constitutes the guiding principle on negligence in Nigeria. The principle was cited with approval and applied by the Product-specific statutes Supreme Court of Nigeria in Nigerian Bottling Company Limited v Certain statutes that address specific products provide remedies and Ngonadi (1985) 1 NWLR (Pt 4) 739 and Okwejiminor v Gbakeji causes of action. These include: (2008) 5 NWLR (Pt 1079) 172. It postulates that where a party • the National Agency for Food and Drugs Administration and has suffered injury as a result of a breach of duty of care owed by Control Act; a manufacturer, the manufacturer may be liable to compensate the • the Food, Drugs and Related Products (Registration, etc) Act; injured party if the injury is a reasonably foreseeable consequence of • the Tobacco Smoking (Control) Act; the act of the manufacturer. For a claimant to succeed in his or her • the Trade Malpractices (Miscellaneous Offences) Act; and claims, however, the injury must not be too remote from the act of • the Counterfeit and Fake Drugs and Unwholesome Processed the manufacturer. Foods (Miscellaneous Provisions) Act. Product liability claims may also be commenced under contract law where a party has breached the terms of a contract in respect of the specification of the goods supplied or has failed to supply goods 21 Can criminal sanctions be imposed for the sale or distribution of that are fit for purpose. A party need not have suffered any injury to defective products? institute a product liability claim under contract law. Any person who contravenes any of the provisions of the CPCA, including the sale or offering for sale of unsafe or hazardous goods, 20 Is there a consumer protection statute that provides remedies, is liable upon conviction to a fine of 50,000 naira or imprisonment imposes duties or otherwise affects product liability litigants? for a term of five years, or both. Further, all the statutes discussed in question 20, except the SGL, impose criminal sanctions, such as The following consumer protection statutes provide remedies and imprisonment and fine for breach of duties, standards or obligations impose duties and obligations that affect product liability claims. imposed or stipulated in relation to the sale or distribution of defec- tive products. Consumer Protection Council Act (CPCA) The CPCA establishes the Consumer Protection Council (CPC) to: • provide speedy redress for consumer or community complaints 22 Are any novel theories available or emerging for product liability through negotiation, mediation and conciliation; claimants? • seek means of removing hazardous products from the market There are no novel theories available or emerging for product liabil- and ensure offenders replace such products with safer and more ity claimants, as product liability litigation is still evolving in Nigeria. appropriate alternatives;

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23 What breaches of duties or other theories can be used to the product to be withdrawn from the market. If directed by the establish product defect? CPC, manufacturers, dealers and service companies are required to Various statutes provide standards, regulations and warning require- give public notice of such danger. Failure to comply with the forego- ments that a manufacturer must fulfil before its products are placed ing or any other corrective actions renders the defaulter liable, on on the market. Any breach of such standards, regulations or warn- conviction, to a fine of 50,000 naira or imprisonment for five years, ing requirements may be used to establish product defect (see ques- or both. tion 20). An example is the SGL, which creates implied warranties that a product matches its specification and is fit for purpose. A Limitations and defences breach of the implied warranties may be a basis for establishing product defect. Also, a breach of the Tobacco Smoking (Control) 28 What are the applicable limitation periods? Act’s requirement that the packaging of tobacco products must bear The limitation periods applicable in a product liability action would warnings and a description of the content of the product could result depend on whether the cause of action is one arising out of con- in liability under the statute. tract or tort. Each state of Nigeria has enacted a limitation law. The Limitation Act is applicable in the FCT, Abuja. There is a slight dif- ference in the periods of limitation in certain states. In Lagos state, 24 By what standards may a product be deemed defective and who claims founded on contract or tort are subject to a limitation period bears the burden of proof? May that burden be shifted to the of six years from the date the cause of action accrued. Claims for opposing party? What is the standard of proof? damages arising from negligence or breach of duty of care involving Each statute referenced in question 18, sets product standards for personal injury must be instituted within three years of the date the manufacturers and sellers. A product is deemed defective when these cause of action accrued. standards are breached. The burden of proof is borne by the party claiming to have suf- fered injury as a result of a defect in the product. The general prin- 29 Is it a defence to a product liability action that the product ciple is that the onus is on the one who affirms, not on the one who defect was not discoverable within the limitations of science and denies (see section 131 of the Evidence Act, 2011). In civil litigation, technology at the time of distribution? If so, who bears the burden while the legal burden of proof is fixed on the claimant, the eviden- and what is the standard of proof? tial burden shifts from one party to the other. The evidential burden This defence is not recognised under Nigerian law. of proof lies on the party against whom judgment would be given if no further evidence were adduced. The burden oscillates, until all 30 Is it a defence that the product complied with mandatory (or the issues in the parties’ pleadings are exhausted. However, the legal voluntary) standards or requirements with respect to the alleged burden may lie on the defendant if the plaintiff pleads the doctrine defect? of res ipsa loquitur (‘the thing speaks for itself’). The standard of proof in civil cases is proof by a preponderance Compliance with statutory standards does not constitute a defence of evidence on a balance of probabilities. to product liability claims predicated on common law, once it is shown that the duty of care owed by the defendant to the claimant was breached and the breach resulted in damage to the claimant. 25 Who may be found liable for injuries and damages caused by defective products? 31 What other defences may be available to a product liability In a claim for negligence, the liability for injuries and damages caused defendant? by defective products is borne by those persons that the claimant proves owed him or her a duty of care. This usually includes the The traditional defences in tort actions are available to a product seller and distributor of the defective product, the distributor and liability defendant. These defences are negligence of the claimant or any other person in the chain of distribution, up to the manufac- contributory negligence, intervening force, failure to mitigate loss, turer or importer. The Supreme Court in Okwejiminor v Gbakeji remoteness of damage or an act of a third party. In contract, the (see question 19) held that an injured party may commence a prod- defendant may rely on limitation of liability clauses, express waiv- uct liability action against a manufacturer or its agents. ers or disclaimers. Generally, a defendant may raise the defence of In a contractual claim, liability is borne solely by the defaulting limitation of actions. party to the contract. 32 What appeals are available to the unsuccessful party in the trial 26 What is the standard by which causation between defect and court? injury or damages must be established? Who bears the burden Under Nigerian law, any party that is dissatisfied with the decision and may it be shifted to the opposing party? of a court has a constitutional right of appeal to an appellate court. The claimant must establish that the injury or damage suffered was As discussed earlier, the court of appeal has jurisdiction over appeals a direct consequence of the defect in the product. Thus, a claimant is from the state and federal high courts. In turn, the Supreme Court is required to establish a connection between the defective product and the court of final appeal. It has appellate jurisdiction over all appeals the injury suffered to succeed in a product liability action. In doing from the court of appeal. The final decision of a trial court sitting at so, he or she must prove that the damage is not too remote and that first instance and an interlocutory decision on grounds of law may it is a foreseeable consequence of the defendant’s action. be appealed as of right while an interlocutory decision on grounds See question 24 regarding burden of proof. of fact or mixed law and fact may be appealed with leave of court. The final decision of the court of appeal on grounds of fact or of law and fact may be appealed to the Supreme Court with leave of court, 27 What post-sale duties may be imposed on potentially responsible while appeals on grounds of law, are appealed as of right. parties and how might liability be imposed upon their breach? Under the CPCA, manufacturers and distributors, on becoming aware of any unforeseen hazard arising from the use of a product, which they placed on the market, are required to immediately cause

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Jurisdiction analysis Update and trends 33 Can you characterise the maturity of product liability law in terms of its legal development and utilisation to redress perceived A hot topic in Nigeria at the moment is the attempt by the federal wrongs? legislature to introduce tobacco control legislation containing several litigation provisions designed to confer unfair advantages There is no specific legislation on product liability litigation in on government and claimants in reimbursement and product Nigeria. The CPCA does not impose strict liability for default. The liability litigation respectively against tobacco manufacturers. federal legislation on legal aid does not cover product liability claims These proposed provisions: and there are no court rules on class or group actions in product • confer on the government a cause of action for reimbursement liability claims. The foregoing demonstrates a need for further devel- against manufacturers, dispenses with the need to prove causation; opment of product liability law in Nigeria. Nevertheless, product • shift the burden of proof to manufacturers; standards and safety regimes have been strengthened in terms of • prohibit discovery, thereby depriving manufacturers of access monitoring, recall and enforcement by the relevant government to crucial evidence necessary for preparing their defence; agencies and this has provided protection to consumers on a broader • require courts to presume unproven and implausible facts against manufacturers, in some cases, without opportunity to scale. rebut them; and The Supreme Court of Nigeria, by entering judgment for the • reduce the level of proof required by claimants, thereby consumer in Okwejiminor v Gbakeji (a case of consumption of a enabling them to overcome factual defects arising in their contaminated beverage (see questions 19 and 25)), will encourage cases. consumers in similar circumstances to explore the possibility of rec- The proposed legislation has passed the second reading at the ompense through civil litigation and we may soon begin to experi- House of Representatives and is at present being reviewed by the ence a more robust challenge by consumers against manufacturers, house committees on health and justice. Several stakeholders importers, distributors and retailers of defective products. have formed a lobby to ensure that the proposed legislation is not Thus, Nigerian product liability law is evolving and it is expected passed into law with the problematic litigation provisions. There is a risk that the problematic provisions that are at present directed that it will develop substantially when the legislature intervenes with at the tobacco industry may be applied in future legislation against the passage of a product liability litigation statute providing legis- other industries in Nigeria. lation-based remedy for breaches of consumer rights, the introduc- tion of strict liability default and provision for legal aid in respect of product liability claims. campaigns on consumerism and introduced regulations and pro- grammes designed to protect the interests of the consumer, such 34 Have there been any recent noteworthy events or cases that as the 2005 regulation made by the Consumer Protection Council have particularly shaped product liability law? Has there been requiring all products manufactured, imported, advertised or sold in any change in the frequency or nature of product liability cases Nigeria to be registered with the Consumer Protection Council, the launched in the past 12 months? Products and Services Tracking System introduced in 2011 for the At present, there are no events or cases in this regard. We are not monitoring of products and services in Nigeria, and the introduction aware of any change in the frequency or nature of product liability of liability insurance. cases filed in the past 12 months. With the advent of active consumer protection organisations, such as the Consumer Rights Advocacy League, it is hoped that the level of consumerism in Nigeria will increase significantly. 35 Describe the level of ‘consumerism’ in your country and consumers’ knowledge of, and propensity to use, product liability 36 Describe any developments regarding ‘access to justice’ that litigation to redress perceived wrongs. would make product liability more claimant-friendly. The enactment of several pieces of legislation regulating prod- uct standards has increased the level of consumerism in Nigeria. We are not aware of any developments regarding access to justice, Relevant government agencies have also intensified public awareness except for the topic discussed in ‘Update and trends’.

Babatunde A Sodipo [email protected]

Sterling Towers, 2nd floor Tel: Tel: +234 1 271 9368 / 9369 20 Marina Fax: +234 1 462 2686 Lagos www.ajumogobiaokeke.com Nigeria

144 Getting the Deal Through – Product Liability 2014 Jones Day RUSSIA Russia

Sergei Volfson Jones Day

Civil litigation system 5 Are mechanisms available to the parties to seek resolution of a case before a full hearing on the merits? 1 What is the structure of the civil court system? There are no such mechanisms available in product liability litiga- Russian courts are divided into the courts of common jurisdiction tion in Russia. and ‘arbitrage’ courts (namely, state commercial courts) with the Supreme Court being on top of these two court systems. Common jurisdiction courts consider civil disputes involving individuals while 6 What is the basic trial structure? disputes between legal entities are considered by the arbitrage courts. When the court sets the case for a trial it is usually aimed to be Product liability disputes may fall under the jurisdiction of either completed in one trial day. However, very frequently the hearings are common jurisdiction courts or arbitrage courts depending on the postponed to a new date (normally within 30 days) if the parties or claimant’s status, for example individual consumer disputes are con- the court subpoena new or additional evidence, summon witnesses sidered exclusively by the courts of common jurisdiction. to testify, appoint expert examination, etc. There are usually only live witness testimonies. The parties must provide their own evidence and witnesses or 2 What is the role of the judge in civil proceedings and what is the demonstrate to the court that such evidence and witness need to be role of the jury? subpoenaed or summoned by a court order. The parties may be (but The judicial process in Russian courts has an adversarial nature, are not obliged to be) represented by attorneys. the parties are mandated to provide and respectively evidence their The court hearings are public unless the court orders to ‘close arguments in front of the professional judge or a panel of three pro- the proceedings’ based on the parties’ motion or the court’s own fessional judges depending on the specific type of dispute or court discretion. This may happen if the matter in dispute is confidential instance. There is no jury in civil litigation in Russian courts. or relates to privacy of the parties involved.

3 What are the basic pleadings filed with the court to institute, 7 Are there class, group or other collective action mechanisms prosecute and defend the product liability action and what is the available to product liability claimants? Can such actions be sequence and timing for filing them? brought by representative bodies? The Russian litigation process is almost entirely based on documen- Russian law does not support class actions. There is a possibility tary submissions and evidence. Product liability action commences for consumer protection organisations to file legal actions ‘in favour with the filing of the claim together with the relevant evidence with of unlimited number of parties’, but this is rather narrow (non- the court of particular jurisdiction. The respondent should then damage) action, which may not be described as a product liability submit a reply with the defence statement with the respondent’s in a strict sense. evidence. The defence statement is normally filed at or after the pre- liminary administrative hearing – in other words, within approxi- mately one month (or later) from submission of the claim. 8 How long does it typically take a product liability action to get to In product liability disputes the court frequently appoints expert the trial stage and what is the duration of a trial? to examine the particular issue that is at the focus of the dispute The trial stage may range from two months (as provided under the (namely, a defect in a product). Although the courts of common law) to several months or even years in practice depending on the jurisdiction are mandated by court procedure to complete consider- complexity of the dispute and procedural issues involved. ation of the merits of a dispute in two months from commencement of the proceedings, in practice such complex disputes like product Evidentiary issues and damages liability action require substantially more time to complete consid- eration of the matter in the trial court. Some of the most complex 9 What is the nature and extent of pretrial preservation and disputes were, or are still, continuing for more than 12 months. disclosure of documents and other evidence? Are there any avenues for pretrial discovery? Russian law and procedure does not provide for any specific actions 4 Are there any pre-filing requirements that must be satisfied before aimed at pretrial discovery, preservation or disclosure. However, the a formal law suit may be commenced by the product liability court may order at a preliminary pretrial stage (and at the parties’ claimant? request) to examine particular evidence, which may not be available There are no mandatory pre-filing requirements for a product liabil- at a trial stage. ity claim.

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10 How is evidence presented in the courtroom and how is the Sources of law evidence cross-examined by the opposing party? 18 Is there a statute that governs product liability litigation? Russian civil litigation is mostly document-based. However, live wit- ness testimony in product litigation is also quite common with the Under present Russian legislation, a product liability claim can be parties entitled to cross-examine any witness during the trial. based on the provisions of the Civil Code and on the provisions of the Federal Law of the Russian Federation ‘On Protection of Consumer Rights’ of 7 February 1992 No. 2300-1 (as amended) 11 May the court appoint experts? May the parties influence the (the Consumer Protection Law). appointment and may they present the evidence of experts they The Civil Code (section 59 ‘Obligations Resulting from Causing selected? the Harm’) establishes the general principles of liability for caus- The court may appoint the expert examination (for example, based ing the harm to individuals and legal entities (articles 1064–1083 on the parties’ motion). The parties are entitled to submit their nomi- of the Civil Code); the legal basis for calculation of compensation nated experts and questions for the experts to the court for approval. of damages caused to life or health of an individual, or both (arti- Once expert evidence is submitted to the court, at the trial the court cles 1084–1094 of the Civil Code); the legal grounds for liability of and the parties are entitled to cross-examine the expert during the a manufacturer for harm resulting from the use of a product; and hearing. However, such cross-examination may be granted only if compensation for ‘moral damages’. approved by the court. General liability for harm under the Civil Code (tort) Under the general principle of the Civil Code (article 1064) a harm 12 What types of compensatory damages are available to product caused to an individual or his or her property shall be compensated liability claimants and what limitations (if any) apply? in full by a person causing such harm. It also states that a person who Under article 1064 of the Russian Federation Civil Code (the Civil caused the harm may be relieved from liability if it is proved that the Code), harm caused to an individual or his or her property shall harm was not caused by its fault. In certain instances Russian legisla- be compensated in full by a party that caused such harm. A party tion may provide for liability and compensation of damages without that caused harm may be relieved from liability if it is proved that a fault of a responsible person (it will be noted below). such harm was caused without the party being at fault. In certain To collect damages under article 1064 of the Civil Code a claim- instances Russian law may provide for liability and compensation ant has to prove the following elements of a tort action: for damages without any fault of a responsible party. • damages to health or property, or both; Bodily injury, damage to property and ‘moral damages’ may • illicitness of the activity of a person who caused the harm; be claimed as part of the overall damages claim. However, it is at • a causal link between the alleged culpable act and damage suf- the court’s full discretion to award such damages in full or in part fered by the claimant; and depending on the particular merits of the case. • fault of a person who caused the harm.

13 Are punitive, exemplary, moral or other non-compensatory ‘Strict liability’ under the Civil Code damages available to product liability claimants? Article 1095 of the Civil Code sets out that ‘harm caused to the life, health or property of an individual as a result of wrongful design, Punitive damages are not supported by Russian law. Moral damages formula or other defects in the products as well as the result of false may be claimed, but their extent is to be determined exclusively at or insufficient information about the product, shall be compensated the court’s discretion. Normally moral damages are awarded in an by the seller or manufacturer regardless of their fault or existence amount that is a smaller fraction of an amount of actual damages of contractual relations with the claimant’. This article sets out the awarded. ‘strict liability’ principle – a seller or manufacturer can be held liable for a defective product (product that caused harm to individual or Litigation funding, fees and costs his or her property) even if the conditions of negligence or breach of 14 Is public funding such as legal aid available? If so, may potential warranty do not apply. defendants make submissions or otherwise contest the grant of The same article also establishes the ‘strict liability’ of the pro- such aid? ducer for providing false information on the product or lack of proper information on the product. There is no specific public funding for legal aid in product liability The manufacturer may be relieved from liability if it proves that matters in Russia. the harm to the consumer was the result of force majeure circum- stances or a consumer’s breach of the suggested guidelines for opera- 15 Is third-party litigation funding permissible? tion (use or consumption, or both) of the product (article 1098 of There is no third-party litigation funding either supported in law or the Civil Code). available in practice. The Consumer Protection Law Under the Consumer Protection Law, a manufacturer owes certain 16 Are contingency or conditional fee arrangements permissible? duties to consumers, among which are the following: Domestic attorneys widely practice contingency and conditional • to ensure that the product is safe for a consumer’s life, health, fee arrangements. However, this issue is still being debated in court and property, as well as for the environment (article 7 of the practice since the Constitution Court held that such fee arrange- Consumer Protection Law); ments cannot be justified as lawful court-related expenses. • to provide consumers with sufficient information about the product and its use (articles 8 and 9 of the Consumer Protection Law); and 17 Can the successful party recover its legal fees and expenses from • to provide consumers with certain information regarding the the unsuccessful party? manufacturer as specified by law (for example, the manufactur- Under the law, court expenses should be imposed on the losing party, er’s name and address) (article 10 of the Consumer Protection however the amount of such expenses (namely, legal fees in particu- Law). lar) is at the court’s discretion.

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Manufacturers may be held liable by a court for failure to fulfil any In practice this means that the court considers the persuasiveness of of the above-mentioned duties, provided that such breach of duty is the evidence provided based on the internal beliefs of the judge or deemed by a court to be a violation of the consumer’s rights and the judges, in other words, the ultimate decision as to whether a party consumer can prove harm to his or her health or property as a result. has met his or her burden of proof fully rests with the judge. In consideration of such claims, the court is required to presume that the consumer has no special knowledge of the product’s character- 25 Who may be found liable for injuries and damages caused by istics or attributes. defective products? The Consumer Protection Law also provides for the imposi- tion of liability on a manufacturer if harm to the consumer arises in A claimant in a product liability action is entitled to make claims connection with the use of, among other things, any material in the against the manufacturer, seller, importer or an ‘authorised agent of manufacture of the product, regardless of whether it was possible the manufacturer or the seller’, or both. to uncover the harmful effects of such material (article 14 of the Consumer Protection Law). 26 What is the standard by which causation between defect and The manufacturer may be released from the liability if it estab- injury or damages must be established? Who bears the burden lishes that the harm to the consumer was the result of force majeure and may it be shifted to the opposing party? circumstances or a consumer’s breach of the suggested guidelines Though a causation between an alleged culpable act and the suf- for operation, use, storage or transportation of the product, or both. fered damage is a prerequisite to establish a liability based on tort or The Consumer Protection Law does not directly provide for the ‘strict liability’, there is no specific legal test for defining causation ‘strict liability’ of a manufacturer, in other words, that the liability of under Russian law. The burden to prove such causation rests with the manufacturer is established regardless of the fault of the manu- the claimant and the court considers the evidence establishing such facturer. Though Part 2 of the Civil Code, enacted in 1996 has over- causation at its own discretion. riding power over the Consumer Protection Law, thus any claims based under the Consumer Protection Law may be based on the ‘strict liability’ of the producer pursuant to the regime established by 27 What post-sale duties may be imposed on potentially responsible article 1095 of the Civil Code. parties and how might liability be imposed upon their breach? The Consumer Protection Law provides for the manufacturer’s duty 19 What other theories of liability are available to product liability to recall the product or withdraw the product from the market, or claimants? both, in cases of massive damage caused by the product or the rev- elation of a product’s non-compliance with the applicable technical The tort claim theory as described in question 18 is also available to regulations. product liability claimants.

Limitations and defences 20 Is there a consumer protection statute that provides remedies, imposes duties or otherwise affects product liability litigants? 28 What are the applicable limitation periods? The Consumer Protection Law as described in question 18. Russian law provides for a general three-year statute of limitations for civil claims. However, the Consumer Protection Law sets a nar- rower limitation for product liability claims. 21 Can criminal sanctions be imposed for the sale or distribution of For example, individual consumers are entitled to claim for defective products? damages caused within the life term or before the expiration date Russian criminal law provides liability exclusively for individuals. of the product. Thus, individual officers of the manufacturer or seller who have There are certain exceptions that enable the claimants to claim enabled manufacture or sale of unsafe products (namely, unsafe for damages even beyond the product’s life term if no such life term of life and health of consumers) may be subjected to criminal liabil- the product was established by the manufacturer or in its informa- ity under Russian criminal legislation, which ranges from fines to tion specifically delivered to the consumers. Also if the product pre- imprisonment. sents a danger to life and health after the expiry of the product life term or expiration date, consumers are entitled to make their claim regardless of the statute of limitation. The latter claims may be made 22 Are any novel theories available or emerging for product liability within 10 years of the manufacture or purchase of the product. claimants? There are no novel theories. 29 Is it a defence to a product liability action that the product defect was not discoverable within the limitations of science and 23 What breaches of duties or other theories can be used to technology at the time of distribution? If so, who bears the burden establish product defect? and what is the standard of proof? See question 18. The Consumer Protection Law provides for the imposition of liabil- ity on a manufacturer if harm to the consumer arises in connection 24 By what standards may a product be deemed defective and who with the use of, among other things, any material in the manufacture bears the burden of proof? May that burden be shifted to the of the product, regardless of whether it was possible to uncover the opposing party? What is the standard of proof? harmful effects of such material during the time of manufacture. Russian legislation does not provide for a standard level of proof required for a civil legal action to convince a court that a given prop- 30 Is it a defence that the product complied with mandatory (or osition is true. The concept of ‘balance of probabilities’ is also not voluntary) standards or requirements with respect to the alleged recognised by the Russian legal system. defect? Russian procedural legislation sets out that the court shall evalu- Such product’s compliance with the relevant technical standards and ate the evidence at its own discretion based on thorough, compre- requirements may indeed be used as a defence, however, with no hensive, impartial and direct evaluation of the evidence provided. guarantee of such defence to be accepted by the court, but would www.gettingthedealthrough.com 147 RUSSIA Jones Day not be considered by the court as the only available and sufficient 34 Have there been any recent noteworthy events or cases that defence. have particularly shaped product liability law? Has there been any change in the frequency or nature of product liability cases launched in the past 12 months? 31 What other defences may be available to a product liability No particular noteworthy events or cases took place in the latest defendant? 12 months apart from the Supreme Court’s updated summary guid- Article 1083 of the Civil Code provides that any damages caused by ance of court practice on product liability for lower courts issued the affected party’s intent cannot be compensated, and such affected in late 2012, where the court of highest instance provides various party’s gross negligence may serve as a basis for a reduction of the recommendations on substantive and procedural legislation to be amount of damages. Russian law does not provide for any adequate followed by the courts of common jurisdiction. That summary guid- recognition of the concepts of voluntary risk assumption and con- ance document of 2012 focuses mostly on disputes between indi- tributory negligence except as specified above. vidual consumers and service providers and generally serves to bring court practice up to date with the modern business and economic 32 What appeals are available to the unsuccessful party in the trial reality since the last time such Supreme Court’s guidance was issued court? was in 1994 (although later amended). The decisions of courts of common jurisdiction may be appealed to the appellate courts, then to courts of cassation and subsequently to 35 Describe the level of ‘consumerism’ in your country and the Supreme Court of Russia. consumers’ knowledge of, and propensity to use, product liability The decisions of arbitrage courts may be appealed to the appel- litigation to redress perceived wrongs. late court, then subsequently to the courts of cassation and finally to Consumerism is obviously on the rise with the growing number of the Collegium (Panel) on Economic Disputes of the Supreme Court consumer protection organisations hungry for work. Taking into of Russia. account that consumer product liability claims are exempted from the payment of state duty, consumers and consumer protection Jurisdiction analysis organisations take no risks in commencing legal actions in court. 33 Can you characterise the maturity of product liability law in terms of its legal development and utilisation to redress perceived 36 Describe any developments regarding ‘access to justice’ that wrongs? would make product liability more claimant-friendly. Russian consumer legislation is one of the most developed modern So far no legislative initiatives or significant proposals are being con- statutes and there is a broad court practice of consideration of con- sidered in Russia that aim to introduce class or collective actions, nor sumer product liability claims. At the same time, although both the to introduce punitive damages, lengthen the statute of limitations, consumer legislation and the court practice are obviously consumer- or amend the burden of proof with respect to defect or causation. friendly, it is not perceived by the manufacturers as over-draconian Similarly, there are no legal bases or practical solutions available since neither class actions nor punitive damages are supported by for claimants enabling third-party litigation funding or otherwise law. facilitating an increase in the mass of incentives for the claimants in To date in Russia there is robust case law on product liability product liability disputes. disputes and there is a relatively high volume of claims such that the judiciary is familiar with this area of the law.

Sergei Volfson [email protected]

Ducat III, 12th floor Tel: +7 495 648 9200 6 Gasheka Street Fax: +7 495 648 9201 125047 Moscow www.jonesday.com Russia

148 Getting the Deal Through – Product Liability 2014 Rojs, Peljhan, Prelesnik & Partners SLOVENIA Slovenia

David Premelcˇ and Jakob Ivancˇicˇ Rojs, Peljhan, Prelesnik & Partners

Civil litigation system evidence are presented. Still, this right to direct proceedings through questions to the parties cannot be equated with an inquisitory com- 1 What is the structure of the civil court system? petence to determine the facts ex officio. The principle of iura novit The structure and composition of the court system in Slovenia are curia applies fully within the Slovenian civil procedure system – the prescribed in the Courts Act. The civil court system is comprised of Law is not subjected to the adversarial system. Civil litigation in courts of general jurisdiction, represented by 44 local courts and 11 Slovenia does not employ juries. district courts on the first instance, four higher courts on the sec- ond instance and finally, the Supreme Court as the highest judicial authority within the state. These courts of general jurisdiction are 3 What are the basic pleadings filed with the court to institute, competent to hear most civil cases. There are also specialised courts, prosecute and defend the product liability action and what is the with ratione materiae limited jurisdiction, competent to hear labour sequence and timing for filing them? and social security cases, which are not covered by the courts of gen- Proceedings are instituted with the filing of a suit. Litigation (and eral competence. The Constitutional Court exists principally as the with it litispendence) commences once the suit is formally served to guardian of the Slovenian Constitution and the fundamental human the defendant party. Upon a preliminary formal review of the suit rights posited therein. Rulings of the courts of general competence and, within 30 days from its filing, the court must forward the suit might therefore be subject to review by the Constitutional Court as to the defendant party, who in turn is given 30 days to file its state- a matter of redressing violations of the Constitution. ment of defence. Failure to lodge a reasoned and timely statement The division of competence between local and district courts is of defence with the court will lead to the issuing of a judgment in based on a ratione materiae consideration of the subject and in some default by the court. If appropriately filed, the statement of defence cases the value of the dispute. Thus for example IP law disputes, dis- will then be served to the plaintiff within 30 days from its filing with putes relating to competition law, commercial disputes, and disputes the court. related to bankruptcy proceedings always fall under the competence A lawsuit and the countering statement of defence are the only of district courts. Appeals against the judgments and decisions of mandatory pleadings prescribed under the Civil Procedure Act. local and district courts are heard by the higher courts and extraor- However, it is within the court’s disposition – given under its man- dinary legal remedies against judgments or decisions of lower courts date of substantive direction – to order either party further filings, if may be lodged with the Supreme Court. deemed necessary to elaborate or supplement factual or evidentiary issues. In any case, either party may lodge such filings at its own discretion, even if no court order is given, until the main hearing is 2 What is the role of the judge in civil proceedings and what is the closed. role of the jury? The rules on civil procedure are governed by the Civil Procedure Act and the Non-litigious Civil Procedure Act. While courts (judges) 4 Are there any pre-filing requirements that must be satisfied before possess certain inquisitorial competences in non-litigious proceed- a formal law suit may be commenced by the product liability ings and litigious proceedings concerning marital and parental claimant? disputes, these are not relevant to product liability disputes, where No, and we further believe that an agreement limiting the right of a general rules on litigious proceedings apply. contracting party to seek judicial redress (ie, a mandatory mediation The principle of disposition is applied in the Civil Procedure Act agreement containing a waiver of the right to judicial redress) might with little exception. It postulates, among other elements, the ne eat be contrary to jus cogens provisions of the Consumer Protection Act. iudex ultra et extra petita partium principle. The object of the dis- pute and the subject of litigation are thus formed by the litigating 5 Are mechanisms available to the parties to seek resolution of a parties – in this sense, the adjudicative power of the court is limited case before a full hearing on the merits? by the will of the parties – they are the domini litis. A further corol- lary of this starting point is that the litigating parties are to present Under the Act on Alternative Dispute Resolution in Judicial Matters, the facts on which they base their claim or defence and provide the the courts will offer to the litigating parties, subject to their prior evidence for these facts – proceedings are adversarial and the court consent, the possibility of an alternative dispute resolution, except has only limited inquisitorial competence, which may be attributed if the judge would deem this to be inappropriate considering the to the court’s duty to prevent immoral or illegal procedural disposi- circumstances of the case. In addition, subject to the litigating par- tions by the litigating parties, rather than to a material truth maxim. ties’ written agreement, the court may decide a dispute on the basis The court, however, does have a duty and power to provide sub- of the parties’ written submissions and evidence, without carrying stantive direction to proceedings. For this purpose it may submit out a main hearing. Further, the Civil Procedure Act provides for a questions to the parties and must see to it that all material facts and mandatory settlement hearing, which is to be carried out after the filing of a statement of defence and prior to the main hearing, unless www.gettingthedealthrough.com 149 SLOVENIA Rojs, Peljhan, Prelesnik & Partners the parties had already unsuccessfully attempted to settle their dis- in the proceedings. The only possible exception, relevant to prod- pute prior to instituting judicial proceedings or if the court deems uct liability, is included in article 75 of the Consumer Protection it unlikely that a settlement will be achieved. The litigating parties Act, which is an implementation of articles 2 and 3 of EC Directive are also free to conclude a judicial settlement agreement at any time 98/27/EC on injunctions for the protection of consumers’ interests. during litispendence. For this purpose, the court is under a duty to Consumer representative bodies are given capacity to institute pro- observe the possibility of settlement at all times during litispend- ceedings under article 75 of the Consumer Protection Act. However, ence and must counsel the litigating parties towards achieving a as is evident from the wording of the Directive – a similar wording is settlement. applied in the Slovenian Consumer Protection Act – this is merely a remedy, given to consumers and their representative bodies, against unfair commercial business practices, not an action for damages. 6 What is the basic trial structure? The trial consists of two interconnected yet functionally distinct phases, namely preliminary proceedings and a main hearing. 8 How long does it typically take a product liability action to get to Preliminary proceedings are intended to ensure that all formal and the trial stage and what is the duration of a trial? procedural prerequisites, required before the merits may be heard, It takes between 12 and 18 months to get to the trial stage and the are met and that the defendant is served with the suit and given typical duration of a first-instance trial is one year, if a product liabil- ample time to submit a statement of defence. The final stage of pre- ity expert is appointed. Without an expert the trial is usually com- liminary proceedings consists of the scheduling and a settlement pleted within four months. hearing. The main hearing is the central point of proceedings, wherein Evidentiary issues and damages the court hears pleadings by the litigating parties and hears evidence for each party’s case. The principal purpose of the main hearing is 9 What is the nature and extent of pretrial preservation and to enable the parties to comprehensively present the factual basis of disclosure of documents and other evidence? Are there any their pleadings, which the court will need to consider when deciding avenues for pretrial discovery? on the merits of the case. The main hearing is carried out through Pretrial discovery and disclosure do not exist in the Slovenian civil one or more hearings, usually timed periodically – therefore not on litigation system. Once litispendence is opened, however, if a party consecutive days. Proceedings are public, unless otherwise required cites a document as evidence to support its statements, asserting that due to reasons of official, business or personal secrecy, public order such document is held by the opposing party, the court shall order or public morality. the latter to submit such document within a specified period of time. It is the court’s task to direct the main hearing, pose questions The opposing party may only withhold such document for reasons to the litigating parties, hear evidence, give the floor to the parties expressly stated within the Civil Procedure Act. The justifiability of or their representatives and maintain order during the hearings. A reasons to withhold documents in a particular case is determined by procedural emphasis is given to the first hearing within the main the court. If a party who has been ordered to submit a document hearing phase of proceedings – the litigating parties must present all asserts that it is not in possession thereof, the court may demand relevant factual arguments and submit all pertinent evidence, as well that it presents evidence to determine the truth of this assertion. as rebuttals and counter-evidence on the opposing party’s submis- Thereupon, the court may assess by considering that party’s argu- sions, during the first hearing at the latest. Factual or evidentiary ments and by taking all circumstances of the case into account, the submissions given after the first hearing will not be taken into con- significance of the fact that a party possessing a document has failed sideration by the court, unless the party presenting them establishes to comply with an order to produce it, or has asserted, contrary to that it was not able to present them at the first hearing for reasons the belief of the court that it is not in possession of such document. not imputable to it. Persons other than parties may be ordered to submit documents The first hearing opens with the plaintiff’s presentation of the only if such an obligation is imposed by statute, or if the contents of suit and is thereupon continued by the defendant’s statement of a document to be submitted relate both to such person and to the defence. Each litigating party may then present arguments, address- party adducing it. ing questions of fact or law. Evidence is heard by the court, which may inter alia consist of the reviewing of documentary evidence, the 10 How is evidence presented in the courtroom and how is the hearing of witnesses or experts and hearing of the parties. Particular evidence cross-examined by the opposing party? emphasis may be given to expert testimony in product liability cases due to their factual particularities. As already stated, due to the adversarial nature of proceedings, Immediately upon the conclusion of the main hearing, a decision each party is to state the facts and cite the evidence on which their on the merits should be proclaimed orally and a written judgment respective claims are based, and contest the facts stated and evidence must then be issued within 30 days. If the matter heard is deemed adduced by the opposing party. It is the court’s duty and power to complex by the court, it may defer proclamation and issue the judg- decide which evidence is ultimately material to the dispute and, ment in writing within 30 days after the main hearing. Although this therefore, which evidence will be produced for the determination of is intended as an exception rather than a general rule, it has become material facts. Evidence is presented through direct inspection by the practice for the courts to conclude the main hearing without procla- court, documentary evidence, witness testimony, experts and exami- mation and issue their judgments only in writing. nation of the parties. Direct inspection is conducted if immediate observation is neces- sary for the court to determine or explain a material fact. If necessary, 7 Are there class, group or other collective action mechanisms it may be carried out with the assistance of experts. Documentary available to product liability claimants? Can such actions be evidence is presented by submission to the court. Special considera- brought by representative bodies? tion is given to documents issued by a governmental body in the No. There is no particular available within the civil prescribed form and within the limits of the respective bodies’ pow- litigation system that would enable one or more plaintiffs to submit ers (ie, public documents) – the information included within them is a lawsuit on behalf of themselves and all other persons having an deemed to be true. identical interest in the alleged wrong and further having a res judi- If summoned as a witness, a person is under a duty to comply cata effect on a class of subjects, regardless of their actual activity with the summons and must testify, unless otherwise stipulated by

150 Getting the Deal Through – Product Liability 2014 Rojs, Peljhan, Prelesnik & Partners SLOVENIA the Civil Procedure Act. Information relating to official or military • damage to, or destruction of, any item or property other than secrets, attorney privilege, religious confessions, or medical treat- the defective product itself, provided that the damage exceeds ment is privileged information and holders of such information may €400 and, further, that the item of property is of the type ordi- refuse to give testimony. A person, however, may not refuse testi- narily intended for private use or consumption, and was used mony on the grounds of protection of a business secret if the disclo- by the injured person mainly for his or her own private use or sure of certain facts is to the benefit of the public or another person, consumption. provided that such benefit outweighs the injury caused by disclosure of the secret. A witness may refuse to answer a particular question The right of the injured person to seek damages extinguishes upon for justified reasons, particularly if, by answering it, he or she might the expiry of a period of 10 years from the date on which the pro- expose him or herself, close relatives or a partner or spouse to seri- ducer puts the actual product into circulation. ous disgrace, considerable financial loss or criminal proceedings. Witnesses are examined separately and in the absence of other 13 Are punitive, exemplary, moral or other non-compensatory witnesses who are to be subsequently examined. The witness is ini- damages available to product liability claimants? tially ordered to tell the court everything known to him or her in respect of the facts on which he or she is testifying. Thereafter, the No. witness may be asked questions, first by the court and then by the litigating parties, intended to check, complete and clarify his or her Litigation funding, fees and costs testimony. There is no temporal restriction to questioning and no 14 Is public funding such as legal aid available? If so, may potential examination and cross-examination as these terms are understood defendants make submissions or otherwise contest the grant of in common law systems. The court has control over the permissibil- such aid? ity of the question – leading questions are not permitted. Several witnesses may be confronted (ie, appearing together in front of the Yes. Public funding of legal aid is regulated by the Free Legal Aid judge so they can listen to each other’s answers) if their testimonies Act. Under it, entitlement to public funding for legal aid is given differ with respect to material facts. to individuals who, due to their financial circumstances, are unable Expert examination, carried out by experts, is conducted in a to bear the costs of litigation without harm to their social secu- similar manner. However, experts are appointed, and if necessary rity. Specific thresholds are prescribed in the Free Legal Aid Act. dismissed, by the court – they are agents of the court, rather than the Additionally, parties may file for exemption from legal fees with parties. In that manner, it is the court’s duty to direct the production the court. Opposing parties cannot contest the grant of such aid or of expert evidence, posit questions to the expert and require addi- exemption. tional explanations regarding the expert’s findings, where necessary. The court may also decide to examine the parties; however, 15 Is third-party litigation funding permissible? due to the particular nature and probable partiality of this type of Third-party litigation funding is generally permissible and there are evidence, it is regarded as somewhat secondary to other forms of no legal restrictions or specific regulations in this regard. evidence.

16 Are contingency or conditional fee arrangements permissible? 11 May the court appoint experts? May the parties influence the appointment and may they present the evidence of experts they The issue falls within the ambit of the Attorneys Act and the selected? Attorney’s Price List. Contingency fee and conditional fee arrange- ments are permissible; however, if such arrangements are agreed The court may appoint experts, if so requested by the parties, who upon, they cannot be combined or accumulated with regular are domini litis. Expert evidence will most likely be given signifi- Attorney Price List payments. cant consideration in product liability cases. As already mentioned, experts are agents of the court, not the parties. They are chosen and appointed by the court of law. However, prior to the appointment of 17 Can the successful party recover its legal fees and expenses from an expert, the court must give the parties the opportunity to be heard the unsuccessful party? on the question of competence of the person appointed as expert. While each party must advance the payment of legal fees and The parties may also petition for disqualification of an expert due to expenses, the losing party shall normally recover the costs incurred the existence or probability of partiality. The court shall decide on by the winning party. In deciding which costs are to be recovered whether the expert is to give the findings and opinion orally at the to a party, the court will take into account only those expenses that hearing, or in writing prior to the hearing. were indispensable for the litigation. Refunds of lawyer fees and The litigating parties can also present opinions and studies of expenses will be limited in accordance with the Attorney’s Price List. experts they have solicited out of court. This evidence will not, how- If the defendant party did not provide a cause for action and ever, be regarded as expert evidence by the court, but rather as part if it had acknowledged the claim in its statement of defence or at of the parties’ own submissions and claims. the main hearing before the merits of the dispute were addressed, the plaintiff must recover its expenses, regardless of the principle of 12 What types of compensatory damages are available to product success. liability claimants and what limitations (if any) apply? Pursuant to articles 4 through 11a of the Consumer Protection Act, Sources of law implementing Council Directive 85/374/EEC on the approximation 18 Is there a statute that governs product liability litigation? of the laws, regulations and administrative provisions of member states concerning liability for defective products, which as inter- The general product liability statutory provision is included in arti- preted in ECJ decisions in C-183/00, C-52/00, C-154/00 is to be cle 155 of the Slovenian Civil Code and provides for what is com- regarded as an instrument for complete harmonisation of product monly regarded as a form of strict (non-fault-based) liability of the liability within member states, recognised damages include: producer. The provision states that a person who markets any object • damage caused by death or personal injury; and manufactured by that person, which object entails a risk of damages to people or property as a result of any type of fault inherent in the object, shall be liable for the damages, which occurs as a result of www.gettingthedealthrough.com 151 SLOVENIA Rojs, Peljhan, Prelesnik & Partners such fault. Further, any manufacturer who has failed to do all that would particularly have to be put into use by a claimant, aiming to is necessary to prevent any foreseeable damages by placing a warn- sue for lost profit. ing on the object, by utilising safe packaging or through any other appropriate measure, shall not only be liable for damages resulting 20 Is there a consumer protection statute that provides remedies, from faults inherent in the object, but also for damages resulting imposes duties or otherwise affects product liability litigants? from any dangerous attributes of the object. In accordance with its obligations under EU law, Slovenia has The Consumer Protection Act of 1998 is the basic legal act regulat- also implemented Council Directive 85/374/EEC on the approxima- ing the framework of rights and remedies of consumers in relation tion of the laws, regulations and administrative provisions of the to producers, manufacturers and service providers. The Act has been member states concerning liability for defective products. It has done amended several times since 1998, most notably in 2002 to imple- so through the Consumer Protection Act, which sets down the strict ment EU law on the subject of consumer protection. Its relevance to (objective) liability of producers for damage caused by a defect in product liability litigation has already been commented on. their product – the injured person is required to prove the dam- age, the defect and the causal relationship between the defect and 21 Can criminal sanctions be imposed for the sale or distribution of damage. A product is defined as any moveable, even if incorporated defective products? into another moveable or immoveable, and includes electricity. It Criminal sanctions may be imposed for the sale or distribution of is regarded as defective when it fails to provide the safety, which a not all but some categories of defective products, subject always to person is entitled to expect taking all circumstances into account, the determination of all necessary preconditions (act and causation, including: realisation of normative prohibition, illegality and guilt). Express • the presentation of the product; statutory prohibitions exist specifically in relation to the production, • the use to which it could reasonably be expected to be put; and sale or any other form of placing on the market of harmful medica- • the time it was put into circulation. tion, foodstuffs, personal care products, children’s toys or similar products for mass consumption. The production, sale and any other A product shall not be considered defective for the sole reason that form of placing such products on the market are punishable by up to a better product is subsequently put into circulation. As previously eight years imprisonment. If the violation of this prohibition results mentioned, recognised damages include: in grievous bodily harm to the affected person or persons the maxi- • damage caused by death or personal injury; and mum penalty is 10 years imprisonment. If the violation results in • damage to, or destruction of any item or property other than the death of one or more persons, the maximum penalty is 15 years the defective product itself, provided that the damage exceeds imprisonment. €400 and further that the item of property is of the type ordi- narily intended for private use or consumption, and was used by the injured person mainly for his or her own private use or 22 Are any novel theories available or emerging for product liability consumption. claimants? We are not aware of any new theories emerging in the field of prod- Whether and to what extent the general product liability provision, uct liability. included in the Slovenian Civil Code, still applies after the imple- mentation of the Directive in 2002 is a question that has not yet been resolved in national judicial practice. The ECJ’s practice has 23 What breaches of duties or other theories can be used to clearly been in favour of exclusivity for the Directive regime with establish product defect? regard to strict product liability. That being said, it has also been the Under the Consumer Protection Act, a product is regarded as defec- ECJ’s position that member states remain free to regulate fault-based tive when it fails to provide a level of safety that a person is entitled product liability. Theorists’ opinions on the nature of the general to expect, taking all circumstances into account, including: product liability provision, posited in the Slovenian Civil Code, vary, • the presentation of the product; however, as it is placed within the Civil Code’s strict liability sec- • the use to which it could reasonably be expected to be put; and tion it is more commonly regarded as a form of strict liability. In • the time it was put into circulation. this view, since both the Civil Code and the Consumer Protection Act cover strict liability, the most appropriate position would seem A product shall not be considered defective for the sole reason that to be that the Consumer Protection Act (Directive) regime is lex a better product is subsequently put into circulation. The producer specialis to the Civil Code regime. A recent decision of the Higher may exculpate themselves if they prove: Court in Maribor corroborates this position. In its judgment in I Cp • that they did not put the product into circulation; 240/2013, issued on 23 April 2013, the Higher Court in Maribor • that, having regard to the circumstances, it is probable that the qualified the relationship between article 155 of the Slovenian Civil defect that caused the damage did not exist at the time the prod- Code and the product liability regime of the Consumer Protection uct was put into circulation or that this defect came into being Act as a relationship between a general legal norm (lex generalis) afterwards; and its detailed implementation (lex specialis). • that the product was neither manufactured for sale nor any form of distribution by the producer, nor manufactured or distributed in the course of their business; 19 What other theories of liability are available to product liability • that the defect is due to compliance of the product with manda- claimants? tory regulations issued by public authorities; Setting aside strict liability, covered by the Consumer Protection • that the state of scientific and technical knowledge at the time Act, a claimant can base its action on general fault-based civil liabil- when the product was put into circulation was not such as to ity, providing of course that it proves culpability on the side of the enable the existence of the defect to be discovered; and producer. Additionally, contractual liability might come into play, • in the case of a manufacturer of a component, that the defect is depending on the particular contractual circumstances of each case. attributable to the design of the product in which the compo- As lucrum cessans is not a recognised form of damage under the nent has been fitted or to the instructions given by the manufac- Consumer Protection Act, these alternative institutes of liability turer of the product.

152 Getting the Deal Through – Product Liability 2014 Rojs, Peljhan, Prelesnik & Partners SLOVENIA

24 By what standards may a product be deemed defective and who • obligation to cooperate – at the request of the competent bears the burden of proof? May that burden be shifted to the inspecting authority, the producers and distributors are obliged opposing party? What is the standard of proof? to cooperate in implementing the actions necessary to avoid the As already explained, a product is regarded as defective when it is risks posed by products that they supply or have supplied. unsafe, taking all circumstances into account. The burden of proof is on the claimant with regard to proving the defect, damages and Distributors are required, within the limits of their respective activi- the causational link between them. Once these elements of the plain- ties, to act with due professional care to help to ensure compliance tiff’s claim are substantiated, the burden of proof shifts to the oppos- with applicable safety requirements. In particular, they are prohib- ing party, which must prove the existence of any of the exculpating ited from supplying products that they know, or should have pre- circumstances described in question 23. While the Slovenian Civil sumed based on available information, do not comply with those Procedure Act does not expressly state the required standard of requirements. proof, it is generally accepted within the legal theory and jurispru- dence that the material facts of a claim must be established beyond Limitations and defences reasonable doubt. On the other hand, procedural questions may be decided on the basis of preponderance. 28 What are the applicable limitation periods? Pursuant to the framework provided by the Directive, Slovenian product liability law provides for a 10-year objective limitation 25 Who may be found liable for injuries and damages caused by period – the right of the injured person to seek damages extinguishes defective products? upon the expiry of a period of 10 years from the date on which the As a basic rule, producers shall be liable for damage caused by a producer put the product that caused the damage into circulation. defect in their products. Where the producer of the product can- The subjective limitation period, also prescribed in the Directive, not be identified, each supplier of the product shall be treated as its was not implemented through the Consumer Protection Act, as it producer unless the injured person is informed, within a reasonable was deemed by the Slovenian legislature that the general provision time, of the identity of the producer or of the person who supplied in the Slovenian Civil Code, which provides a three-year limitation her with the product. period counting from the day when the injured person became aware A producer, for the purposes of the Consumer Protection Act, of the damage and the identity of the agent, suffices for that purpose. means the manufacturer of a finished product, the producer of any raw material or the manufacturer of a component part and, further, any person who, by putting their name, trademark or other distin- 29 Is it a defence to a product liability action that the product guishing feature on the product presents themselves as its producer. defect was not discoverable within the limitations of science and Additionally, this includes any person who imports or distributes, or technology at the time of distribution? If so, who bears the burden the representative of a producer. and what is the standard of proof? An importer, for the purposes of the Consumer Protection Act Yes, and the burden to prove this material fact beyond reasonable means any person who imports a product into the territory of the doubt will fall on the defendant (producer). EU. 30 Is it a defence that the product complied with mandatory (or 26 What is the standard by which causation between defect and voluntary) standards or requirements with respect to the alleged injury or damages must be established? Who bears the burden defect? and may it be shifted to the opposing party? A recognised defence is that the producer shall not be liable due to General rules regarding the standard and burden of proof, as the product’s compliance with mandatory regulations, issued by the described in question 24, apply. public authorities. Again, the burden to prove this beyond reason- able doubt will fall on the defendant.

27 What post-sale duties may be imposed on potentially responsible parties and how might liability be imposed upon their breach? 31 What other defences may be available to a product liability The following post-sale duties are imposed under the General defendant? Product Safety Act: Please see question 23. Additionally, the defendant may dispute any • the duty to provide warnings – producers are obligated to pro- of the material facts required to substantiate the plaintiff’s claim (ie, vide consumers with all relevant information, to enable them to the existence of damages, the existence of a defect or the existence of evaluate the risks inherent in a product during its regular and a causal relationship between them). foreseeable use; • producers must adopt measures commensurate with the char- 32 What appeals are available to the unsuccessful party in the trial acteristics of the products they supply, enabling them to ensure court? that information regarding the risks that these products might pose is communicated effectively, and choose to take appro- The unsuccessful party may challenge the first-instance decision priate action aimed at avoiding these risks, which may include with ordinary and extraordinary legal remedies. An appeal is the adequate and effective warnings to consumers, withdrawal of only available ordinary legal remedy. It may be used to challenge the product from the market or a recall; the first-instance decision alleging a manifest error of appreciation • the obligation to provide information – where producers and of relevant facts, an infringement of procedural rights or an error of distributors as professionals know, on the basis of the informa- assessment of legal concepts. Extraordinary legal remedies include tion in their possession, that a product they have placed on the a petition for revision. Issues of law or procedure may only be pre- market poses risks to the consumer that are incompatible with sented in a petition for revision. Finally, under certain conditions general safety requirements, they must immediately inform the enumerated in the Civil Procedure Act, the unsuccessful party may competent inspection authority to that effect; and petition to reopen the case.

www.gettingthedealthrough.com 153 SLOVENIA Rojs, Peljhan, Prelesnik & Partners

Jurisdiction analysis causation (the plaintiff is released of the burden to prove causa- tion between the effect of the dangerous object and the damages). 33 Can you characterise the maturity of product liability law in terms The Supreme Court rejected the applicant’s assertions by applying of its legal development and utilisation to redress perceived the following reasoning: the court emphasised that the question of wrongs? whether an object can be qualified as a dangerous object is one of While Slovenian product liability law is fully harmonised with EU legal qualification, rather than a factual question. It further found requirements and may be regarded as appropriate and modern in that a product cannot legally be qualified as a dangerous object, if it most respects, case law on product liability is scarce and there is no had (factually speaking) become dangerous as a result of the user’s clearly settled boundary in judicial practice between the Consumer misuse, regardless of whether the misuse was a result of the user’s Protection Act (Directive) regime of strict liability and the general negligence, the user’s intent or even the producer’s failure to provide product liability regime, based on the Civil Code. appropriate instructions to the user. The decision of the Supreme Court is particularly relevant with respect to delimiting the differ- ent liability regimes, governing a producers liability for its products 34 Have there been any recent noteworthy events or cases that under the Consumer Protection Act (non-fault-based liability, causa- have particularly shaped product liability law? Has there been tion is not presumed) and the liability for damages, arising out of any change in the frequency or nature of product liability cases the use of dangerous objects under the Civil Code (non-fault-based launched in the past 12 months? liability, causation is presumed). Judgments from two noteworthy cases dealing with the issue of product liability law have been published in the past year. In the above-mentioned (see question 18) judgment in I Cp 240/2013, 35 Describe the level of ‘consumerism’ in your country and issued on 23 April 2013, the Higher Court in Maribor qualified the consumers’ knowledge of, and propensity to use, product liability relationship between article 155 of the Slovenian Civil Code and the litigation to redress perceived wrongs. product liability regime of the Consumer Protection Act as a rela- We are of the opinion that consumers’ knowledge of their rights tionship between a general legal norm (lex generalis) and its detailed under the Consumer Protection Act is satisfactory. However, the implementation (lex specialis). use of product liability litigation to redress perceived wrongs is Additionally, on 13 February 2014, the Supreme Court of the rather low due to systemic questions related to the judicial branch Republic of Slovenia issued a judgment in II Ips 269/2012. The in Slovenia (ie, the professed inefficiency of the courts and resulting Supreme Court dealt with the question of whether a producer’s lia- scepticism surrounding the purpose of civil litigation). bility should be judged under the rules of strict (non-fault-based) lia- bility for damages arising out of dangerous objects, on the mere fact that the producer has failed to provide appropriate instructions for 36 Describe any developments regarding ‘access to justice’ that the use of the product. The applicant’s reasoning in the case was that would make product liability more claimant-friendly. as a result of the producer’s failure to provide appropriate instruc- At present, Slovenia is not thinking about introducing any of the tions for the use of its product, the product had become a dangerous above enumerated measures with a view to enhance ‘access to jus- object. Consequently, the applicant asserted, the producer’s liabil- tice’; however, the Ministry of Justice in cooperation with the judi- ity should be judged through criteria for liability, which apply with cial sector is preparing proposals for a general improvement of the respect to damages arising out of dangerous objects. These criteria state of justice in Slovenia, with a view to enhancing, inter alia, the apply a strict form of non-fault-based liability (the fault on the part independence, transparency and efficiency of the court system. of the defendant is not a precondition of liability) with presumed

David Premelcˇ [email protected] Jakob Ivancˇicˇ [email protected]

Tivolska cesta 48 Tel: +386 1 230 6750 1000 Ljubljana Fax: +386 1 43 25 123 Slovenia www.rppp.si

154 Getting the Deal Through – Product Liability 2014 Cliffe Dekker Hofmeyr SOUTH AFRICA South Africa

Pieter Conradie Cliffe Dekker Hofmeyr

Civil litigation system business days after the filing of a notice of intention to defend. The plaintiff may file a replication within 15 business days after receipt 1 What is the structure of the civil court system? of the plea, and if a counterclaim is delivered, the plaintiff must file a Judgments are delivered in the South African civil courts based on plea to the counterclaim within 15 days. The plea and counterclaim the common law and precedents of judgments in the high courts. The must be filed together. common law in South Africa is based on English law and Roman Dutch law. South African law is not codified. The lower courts in South Africa have a limited jurisdiction of 300,000 rand for dam- 4 Are there any pre-filing requirements that must be satisfied before ages claims and are called the regional courts, while the High Court a formal law suit may be commenced by the product liability has unlimited jurisdiction. From the regional courts an appeal can claimant? be lodged to the High Court, while from the High Court appeals are Mandatory mediation is not a prerequisite prior to the commence- made to either three judges in the High Court sitting as an appeal ment of the litigation process in South Africa. It is mandatory, in tribunal, or a matter can be referred directly to the South African terms of the High Court Rules, to arrange a pretrial meeting between Court of Appeal situated in Bloemfontein. Usually five judges sit as the legal representatives of the parties to endeavour to curtail the the appeal tribunal in the South African Court of Appeal, but in proceedings and therefore to agree or find some common ground certain special circumstances the amount of judges can be increased with regard to some of the issues pleaded. While the defendant may to a maximum of 11 judges. The highest court in South Africa is the have denied most of the allegations made by the plaintiff in its plea, Constitutional Court with 11 judges dealing mainly with constitu- a defendant may during the pretrial conference admit some of the tional matters. Since the enactment of the Supreme Court Act 10 of allegations it denied in the pleadings. 2013, the Constitutional Court has jurisdiction to hear any matter if it is regarded to be In the interest of justice to do so. 5 Are mechanisms available to the parties to seek resolution of a case before a full hearing on the merits? 2 What is the role of the judge in civil proceedings and what is the In South Africa it is not compulsory to mediate prior to a trial. role of the jury? However, the High Court Rules compel parties to meet during a The South African court system is adversarial. The jury system pretrial meeting and to discuss ways to curtail the proceedings and was abolished in South Africa during the 1950s. The judge must possible settlement. Apart from the aforesaid, nothing compels the apply his or her mind with regard to the quality of the evidence of parties to seek resolution of the case before the hearing. A plain- a witness and must, further, control the proceedings conducted in tiff may apply for summary judgment in the event of a liquid claim the court. The advocates will address the judge at all times and will (therefore a claim not based on damages). The defendant may file an request the judge to make interlocutory rulings while the civil mat- answering affidavit to the application for summary judgment and ter is progressing. Rulings may be made by the judge with regard to set out its defence, if the court is satisfied that the defendant has no failure to make proper discovery or the use of a document, which bona fide defence to the claim, summary judgment may be granted. was not made discovery of, hearsay evidence and which party has the onus or duty to begin with its case. 6 What is the basic trial structure? After the hearing the judge will listen to arguments addressed to him or her by the advocates representing the parties, and after The advocates address the court during the beginning of the trial to being so addressed, the judge may then immediately give a judgment inform the court about the allegations made in the pleadings and or will inform the court that he or she requires time to consider the what the parties intend to prove during the trial. The procedure is judgment and the law and will give judgment at a later stage. In adversarial and therefore the judge must be careful not to enter the more complicated matters the judge will ask the advocates to pre- cross-examination arena. However, the judge is entitled to ask ques- pare heads of argument for him or her, and to address him or her on tions at any time to the witnesses during the trial proceedings to the heads of argument at a later date to assist him or her to prepare clarify the evidence. his or her judgment. Trials are run in the high courts on a consecutive-day basis. If the matter will last longer than five days, then in most jurisdictions of the various provinces in South Africa the judge president of the court 3 What are the basic pleadings filed with the court to institute, must be informed at least six weeks prior to the trial date to enable prosecute and defend the product liability action and what is the him or her to allocate a judge for a longer period. Oral evidence is sequence and timing for filing them? lead and the evidence is recorded. The evidence can be transcribed The service of a summons by the sheriff will be the first step in the on a daily basis to assist the advocates with their cross-examination. exchange of the pleading process. The defendant must file a plea Proceedings are in public. Only in exceptional circumstances (eg, and, if applicable, a counterclaim or claim in reconvention within 20 when a minor testifies) will the court hearing be held in camera. www.gettingthedealthrough.com 155 SOUTH AFRICA Cliffe Dekker Hofmeyr

7 Are there class, group or other collective action mechanisms Evidentiary issues and damages available to product liability claimants? Can such actions be brought by representative bodies? 9 What is the nature and extent of pretrial preservation and disclosure of documents and other evidence? Are there any South Africa has not yet promulgated class action legislation as it is avenues for pretrial discovery? commonly known in the US. Class or group actions in South Africa are basically actions by a group of people where the facts and the Discovery in South Africa is document-based and compulsory in law of the case of each individual within that group are the same. terms of the High Court Rules. Depositions, such as they exist in The High Court Rules of South Africa allow for any number of per- the United States, do not form part of the discovery process in South sons to be joined as plaintiffs, provided that the same question of Africa. Rule 35 of the High Court Rules governs the various sce- law or fact would arise on each action if the plaintiffs brought the narios of discovery and requests for better discovery to be made. action individually. All the plaintiffs must therefore have the same Discovery is made under oath and attached to the affidavit will be interest (eg,, thousands of members of a particular pension fund the list of the documents discovered. The documents must be listed claiming that a directive issued is ultra vires of the rules of the pen- in chronological order and the list of documents must also state sion fund, and should be declared nul and void, can all be joined as whether the party is in possession of a copy or the original. plaintiffs in such action). Further, section 38 of the Constitution of the Republic of South Africa of 1996 introduced a type of group or 10 How is evidence presented in the courtroom and how is the class action that allows for a competent court to protect the rights evidence cross-examined by the opposing party? of groups of persons whose rights in the Bill of Rights, which forms Evidence is presented in court orally by the various witnesses. The part of the Constitution, have been infringed. advocate leading the witness may not ask leading questions. The The latest development is that in certain gold mine damages- opposite party’s advocate may cross-examine the witness and upon related claims, the Supreme Court of Appeal in the matter of completion of cross-examination, the advocate who represents the Children’s Resources Centre Trust v Pioneer Foods (Pty) Ltd (2012) particular witness may ask questions to clarify answers given by the (Children’s Resources Centre Trust) commenced with the process of witness during cross-examination. The advocate is not allowed at laying down procedures for certification of class actions. It has now that stage of re-examination to deal with new matters or evidence been accepted that class or group actions are possible to institute in the witness has not dealt with during its evidence-in-chief. South Africa and such class or group actions must be certified. The requirements stipulated in the Children’s Resources Centre Trust matter for the certification of a class are as follows: 11 May the court appoint experts? May the parties influence the • existence of class identifiable by objective criteria; appointment and may they present the evidence of experts they • existence of a cause of action raising a triable issue; selected? • that there are issues of fact or law, or both, common to members It is not within the power of the courts to appoint experts. Each of the class; party may call experts, and a procedure must be followed prior to • that the relief or damages sought flow from a cause of action such expert being called to entitle a party to call an expert witness. and are ascertainable and capable of determination; The High Court Rules compel parties to file a notice that they intend • that there is an appropriate procedure to allocate damages to to call an expert and such a notice must name the expert witness to class members; be called. The last mentioned notice must be followed up by another • that a representative has been proposed suitable to conduct the notice, which will include a summary of the expert’s evidence. action and to represent the class; and • that the class action has appropriate means to determine class members’ claims in light of the composition of the class and the 12 What types of compensatory damages are available to product nature of the proposed action. liability claimants and what limitations (if any) apply? In terms of section 61 of the Consumer Protection Act, monetary compensation may be awarded, including economic loss or appor- 8 How long does it typically take a product liability action to get to tionment of liability among persons who are found to be jointly the trial stage and what is the duration of a trial? and severally liable. A court will assess whether any harm has been Prior to the promulgation of the Consumer Protection Act 68 of proven and adequately mitigated. The compensatory damages 2008, not many product liability actions were instituted in South award may include damages suffered because of bodily injury or Africa. This was mainly because the plaintiffs had to prove negli- psychological injury, or damage to the product or even other prop- gence on the part of the defendant and punitive damages are not erty if it was foreseeable that other property can be damaged due to awarded in South Africa. Product liability matters will, like any a defect in the goods. other damages claim in South Africa, take approximately one-and-a- half to two years to proceed to trial. After the close of pleadings the waiting time for a trial date is approximately one-and-a-half years, 13 Are punitive, exemplary, moral or other non-compensatory depending on the jurisdiction in which the claim has been instituted. damages available to product liability claimants? The duration of the trial depends on the number of witnesses to be No other form of damages has been specifically dealt with in the called by the plaintiff and defendant. Consumer Protection Act. Damages are divided into general dam- With the introduction of the strict liability or no-fault principle ages and specific damages. General damages will be, for example, when section 61 of the Consumer Protection Act became enforce- damages awarded for pain and suffering resulting from bodily able on 24 April 2010, more product liability cases may be instituted injury. Specific damages will be claims relating to hospital and medi- and more experience will then become known to put us in a better cal expenses and therefore damages, which are easily determinable. position to answer this question.

156 Getting the Deal Through – Product Liability 2014 Cliffe Dekker Hofmeyr SOUTH AFRICA

Litigation funding, fees and costs 21 Can criminal sanctions be imposed for the sale or distribution of defective products? 14 Is public funding such as legal aid available? If so, may potential No. defendants make submissions or otherwise contest the grant of such aid? Yes, public funding is provided by institutions such as the Legal 22 Are any novel theories available or emerging for product liability Aid Board, the Legal Resources Centre and certain legal aid clinics. claimants? Defendants are not entitled to contest the grant of such aid. No.

15 Is third-party litigation funding permissible? 23 What breaches of duties or other theories can be used to A third party may fund litigation. Champerty has been accepted in establish product defect? South Africa since 2004 and is found to be neither contrary to public The producer or importer, distributor or retailer has a duty to sup- policy nor void. ply safe goods and goods without defects or hazards, and to provide proper instructions or warnings to the consumer pertaining to any hazard arising from or associated with the use of any goods. 16 Are contingency or conditional fee arrangements permissible? Contingency fees are allowed in South Africa. However, there are restrictions with regard to the ‘success fee’, which may be charged. 24 By what standards may a product be deemed defective and who Common law contingency fees are not allowed and the Contingency bears the burden of proof? May that burden be shifted to the Fees Act of 1997 regulates contingency fees. opposing party? What is the standard of proof? The standard for defectiveness of a product will depend on the type of product. In certain circumstances the South African Bureau of 17 Can the successful party recover its legal fees and expenses from Standards may set the standard. the unsuccessful party? Because product liability became strict liability from 24 April Legal fees are recoverable on a party and party scale, which provides 2010 in South Africa, the onus is on the producer or importer, dis- that the successful party is entitled to recover the legal fees in terms tributor or retailer to prove that a product is not defective. The of the High Court Rules, as per a taxed bill of costs, subject to the standard of proof in the civil courts is on a balance of probabilities. discretion of the taxing master. Special orders may be made in cer- The onus will not shift but the rebuttal of evidence may shift. tain circumstances and such orders may include attorney and client costs or attorney and own-client costs against the unsuccessful party. In terms of a taxed bill on a party and party scale, approxi- 25 Who may be found liable for injuries and damages caused by mately 50 per cent of the legal costs are recoverable. If a special defective products? order is made, more than 50 per cent is recoverable. Any natural or juristic person may be held liable in terms of section 61 of the Consumer Protection Act. Persons liable will most likely be Sources of law the producer or importer, distributor or retailer of goods.

18 Is there a statute that governs product liability litigation? 26 What is the standard by which causation between defect and Section 61 of the Consumer Protection Act governs liability with injury or damages must be established? Who bears the burden regard to product liability. Product liability litigation will be gov- and may it be shifted to the opposing party? erned in terms of the normal High Court Rules. In terms of section 61, the liability is strict or no-fault based and is an exclusive cause South African delictual law distinguishes between factual and legal of action. causation. According to the South African Court of Appeal, the ‘but for’ test applies with regard to factual causation. Different from fac- tual causation is legal causation, which deals with the remoteness of 19 What other theories of liability are available to product liability damages and therefore no liability. A claimant will therefore have to claimants? prove that the increased risk to which he or she was exposed, with- Product liability was tort-based in South Africa, but with the imple- out any warning about the existence of the risk, caused the harm. mentation of section 61 of the Consumer Protection Act on 24 April The increased risk must be causally connected with the injury suf- 2010, the producer or importer, distributor or retailer of the goods fered. Without proof of such nexus, the claimant will be unsuccess- became statutory obliged to comply with the act. The Consumer ful. The onus will be on the claimant and will not shift. Protection Act governs the liability of the producer or importer, dis- tributor or retailer. 27 What post-sale duties may be imposed on potentially responsible parties and how might liability be imposed upon their breach? 20 Is there a consumer protection statute that provides remedies, Safety monitoring and recall falls within the jurisdiction of the imposes duties or otherwise affects product liability litigants? Commission, which is established in terms of the Consumer In terms of section 61 of the Consumer Protection Act the pro- Protection Act. The Commission may recall a product and will also ducer or importer, distributor or retailer of any goods is liable for be entitled to compel the responsible party to supplement warnings. any harm caused wholly or partly as a consequence of, for example, If failure to adhere to rulings by the Commission results in damages supplying any unsafe goods, a product failure, defect or hazard in caused, such failure may result in criminal liability. any goods or inadequate instructions or warnings provided to the consumer pertaining to any hazard arising from or associated with Limitations and defences the use of any goods, irrespective of whether the harm resulted from any negligence on the part of the producer or importer, distributor 28 What are the applicable limitation periods? or retailer, as the case may be. Liability of a particular person in The limitation period for an action to be instituted is three years. terms of section 61 of the Consumer Protection Act does not arise in The liability of a particular person does not arise if the claim for certain circumstances. damages is brought more than three years after the death or injury www.gettingthedealthrough.com 157 SOUTH AFRICA Cliffe Dekker Hofmeyr of a person who suffered harm caused by a defective product. The Jurisdiction analysis three years will be calculated from the earliest time at which a per- son had knowledge of the material facts about a defect that may 33 Can you characterise the maturity of product liability law in terms have caused damage, or the earliest time at which a person with an of its legal development and utilisation to redress perceived interest in any property had knowledge of the material facts about wrongs? the loss or damage to that property. The Consumer Protection Act, and more specifically section 61 deal- ing with product liability, only became law in South Africa on 24 April 2010. Product liability law in South Africa is therefore in its 29 Is it a defence to a product liability action that the product infancy. Previous case law based on fault-based liability will there- defect was not discoverable within the limitations of science and fore become history and cannot be relied upon in future, unless the technology at the time of distribution? If so, who bears the burden action is based on a product that was manufactured and used prior and what is the standard of proof? to the implementation of section 61 of the Consumer Protection Act. Liability of a particular person does not arise if it is unreasonable to Since the Consumer Protection Act came into effect, only one expect the distributor or retailer to have discovered the unsafe prod- case has been reported dealing with the distribution of contaminated uct characteristic, failure, defect or hazard, having regard to that foodstuff and which is product liability related. It was found in the person’s role in marketing the goods to consumers. The state-of-the- case of Freddy Hirsch Group v Chickenland, 2011 that the distribu- art defence, therefore, does apply. The onus will be on the distributor tor was the innocent victim of the manufacturer’s illegal conduct. or retailer or person who makes such an allegation in the pleadings and wishes to rely on such defence. The standard will be that of the reasonable distributor or retailer. It is therefore a higher test than the 34 Have there been any recent noteworthy events or cases that reasonable man test. have particularly shaped product liability law? Has there been any change in the frequency or nature of product liability cases launched in the past 12 months? 30 Is it a defence that the product complied with mandatory (or No. voluntary) standards or requirements with respect to the alleged defect? The defence may be raised that the product complied with public 35 Describe the level of ‘consumerism’ in your country and regulations. consumers’ knowledge of, and propensity to use, product liability litigation to redress perceived wrongs. Time alone will tell how the South African public will react to the 31 What other defences may be available to a product liability Consumer Protection Act, the requirements that must be complied defendant? with by various entities to comply with the Act and how the public Defences that the alleged unsafe product characteristic, failure, will react if the Act is not complied with. We suspect that, because defect or hazard did not exist in the goods at the time it was supplied the claimant does not have to prove negligent conduct by the manu- to the consumer may be raised. The claimant’s fault or assumption facturer or other responsible person any longer, that many product of risk and the actions of third parties may also be raised. liability matters will see the light in future.

32 What appeals are available to the unsuccessful party in the trial 36 Describe any developments regarding ‘access to justice’ that court? would make product liability more claimant-friendly. An appeal may be made to the South African Court of Appeal. The promulgation of the Consumer Protection Act is already an effort to expand product liability in South Africa. The principal of strict liability was introduced, and with this Act only two years old, we will have to wait a while for the development of product liability law and trends to be established.

Pieter Conradie [email protected]

1 Protea Place Tel: +27 11 562 1000 Sandton Fax: +27 11 562 1111 2196 Johannesburg www.cliffedekkerhofmeyr.com South Africa

158 Getting the Deal Through – Product Liability 2014 Bühlmann Attorneys at Law Ltd SWITZERLAND Switzerland

Lukas Bühlmann and Adrian Süess Bühlmann Attorneys at Law Ltd

Civil litigation system circumstances require so and the court may hold instruction hear- ings at any time during the proceedings (article 225 CPC). 1 What is the structure of the civil court system? A case becomes pending when an application for conciliation Switzerland has a federal system that consists of three different lev- (see question 4), an action or an application is filed (article 62 CPC). els: the confederation, the cantons and the municipal authorities. The cantons are sovereign except to the extent that their sovereignty is limited by the federal constitution. Consequently, the 26 Swiss 4 Are there any pre-filing requirements that must be satisfied before cantons have a considerable degree of lawmaking authority. Civil a formal law suit may be commenced by the product liability proceedings before cantonal courts are governed by a Federal Act: claimant? the Swiss Civil Procedure Code (CPC). The organisation of the civil Litigation is generally preceded by a mandatory attempt at concili- court system remains in the authority of the cantons and is subject ation before a conciliation authority (article 202 CPC). If no agree- to cantonal law. Cantonal legislation usually provides for multiple ment is reached, the conciliation authority grants authorisation to district courts (courts of first instance) and one superior court (court proceed and commence a formal lawsuit (article 209, paragraph 1 of appeal). Some cantons (eg, Zurich, Berne, St Gallen and Aargau) CPC). Under certain circumstances, conciliation proceedings are not provide for a specialised commercial court, which is the sole can- held. For example, there are no conciliation proceedings if jurisdic- tonal instance in commercial matters. The highest court and court tion is with the commercial court or if the value in dispute exceeds of final appeal in Switzerland is the Swiss Federal Supreme Court 100,000 Swiss francs. The parties may also mutually agree to waive in Lausanne. any attempt of conciliation. The plaintiff may unilaterally waive conciliation if the defendant’s registered office or domicile is abroad or if the defendant’s residence is unknown. The conciliation pro- 2 What is the role of the judge in civil proceedings and what is the ceedings may be replaced by mediation upon request of both parties role of the jury? (article 213 CPC). Civil court proceedings in Switzerland are contradictory. Each party is heard by one or more judges at first instance. The judge (or presi- dent of the panel of judges) has formal and material control over 5 Are mechanisms available to the parties to seek resolution of a the proceedings. A judge may set deadlines for party’s submissions. case before a full hearing on the merits? The parties must substantiate their claims and present the facts to In Switzerland there are several mechanisms available to seek reso- the court and submit evidence in support of their case (article 55, lution of a case before a full hearing on the merits. An attempt at paragraph 1 CPC). If a party’s submission is unclear, conflicting, conciliation before a conciliation authority is generally mandatory ambiguous or incomplete, the court gives the party the opportunity and the conciliation authority only grants authorisation to proceed to clarify or complete the submission by asking appropriate ques- if no agreement may be reached (see question 4). A court may issue tions (court’s duty to inquire, article 56 CPC). A judgment is based an interim decision delivering a judgment on single issues, for exam- on the free assessment of the evidence taken. In its decision, the court ple, the jurisdiction of the court. The court may at any time attempt does not award a party anything more than or different from what to achieve a settlement agreement between the parties (article 124, the party has requested, nor less than what the opposing party has paragraph 3 CPC). Further, the parties may agree to seek resolution acknowledged (article 58, paragraph 1 CPC). Swiss law does not of the dispute in mediation (article 214 CPC). A settlement agree- provide for juries in civil or criminal matters. ment approved by the court has the same effect as a legally binding decision.

3 What are the basic pleadings filed with the court to institute, prosecute and defend the product liability action and what is the 6 What is the basic trial structure? sequence and timing for filing them? There are several stages in ordinary civil proceedings. Ordinary pro- The ordinary proceedings are initiated by filing the statement of ceedings are predominantly conducted in writing and are initiated claim at the competent court including the prayers for relief, a by filing the written statement of claim, subsequently followed by detailed description of all relevant facts, notice of the evidence the exchange of written submissions (see question 3). In the main offered for each allegation of fact and the available physical records hearing, the parties present their case and have the opportunity to to be offered in evidence (article 221 CPC). The court serves the reply, followed by a rejoinder. After the hearing, the court continues defendant with the statement of claim and at the same time sets a with the evidentiary proceedings. Before evidence is taken, the court time limit to file a written statement of defence (article 222, para- issues an order, indicating the admissible evidence and which party graph 1 CPC). Time limits set by the court may be extended for good bears the respective burden of proof or counter proof. Orders on reason if the request to do so is made before the period expires. The evidence may be changed or amended at any time (article 154 CPC). court may order a second exchange of written submissions if the Once the evidence is taken, the parties may comment on the result www.gettingthedealthrough.com 159 SWITZERLAND Bühlmann Attorneys at Law Ltd of the evidence and on the merits of the case. The court allows the person or property by an expert. The court may not, however, infer parties the opportunity for closing submissions (article 232 CPC). from a party’s or third party’s legitimate refusal to cooperate that the The final stage of proceeding forms the deliberations of the court alleged fact is proven. and the judgment. The court closes the proceedings by deciding not There is no cross-examination in Switzerland. Witnesses are to consider the merits or by making a decision on the merits. The summoned by the court. Upon request of a party, a court may ask court decides by majority. additional questions (article 173 CPC). The court may also question The court may hold instruction hearings (and take evidence) at one or both parties on the relevant facts of the case or it may ex any time during the proceedings in order to discuss the matter in officio order one or both parties to give evidence subject to criminal dispute in an informal manner, to complete the facts, to attempt to penalties for failure to do so (article 191 CPC). reach an agreement and to prepare for the main hearing (article 226 CPC). 11 May the court appoint experts? May the parties influence the appointment and may they present the evidence of experts they 7 Are there class, group or other collective action mechanisms selected? available to product liability claimants? Can such actions be Expert evidence plays an important role in product liability actions. brought by representative bodies? At the request of a party or ex officio, the court may obtain an opin- Swiss law does not provide for group actions. However, claimants ion from one or more experts (article 183 CPC). The court must whose rights and duties result from similar circumstances or legal hear the parties before appointing an expert. The parties may appeal grounds (eg, product liability) may jointly appear as plain-tiffs (arti- against the nomination of an expert by pursuing a legal remedy. cle 71 CPC). If two or more actions that are factually connected are The court may order that the expert submits his or her opinion in raised against one and the same defendant, each court that has juris- writing or presents it orally. The court may also summon the expert diction over any one of the actions has jurisdiction over all of them to the hearing in order to explain his or her written opinion. The (article 15, paragraph 2 CPC). The joint parties may appoint a joint court gives the parties the opportunity to ask for explanations or representative. Swiss law does not provide a right for representative to ask additional questions. Swiss law does not provide for cross- bodies to bring representative actions in the scope of product liabil- examination of experts. All expert evidence of court-appointed ity litigation in Switzerland. experts is considered to be independent. The parties may also present evidence of self-selected experts. Such expert opinions are considered merely as statements of the par- 8 How long does it typically take a product liability action to get to ties. In practice, however, an expert opinion submitted by a party the trial stage and what is the duration of a trial? may have considerable weight and may convince a court regarding The duration of the overall proceedings may vary and depends technical questions in dispute, depending on the reputation of the on the complexity of the case, the conduct and tactics of the par- expert and the quality of the expert opinion. ties, the evidence to be taken and the workload of the respective court. Between filing the statement of claim, the exchange of written submissions and the main hearing (see questions 3 and 6) several 12 What types of compensatory damages are available to product months may pass. Hearings, however, usually last from a few hours liability claimants and what limitations (if any) apply? to a couple of days, depending on the evidence to be taken. Compensatory damages under the Product Liability Act (PLA) are available for personal injury and death and in respect of damage to Evidentiary issues and damages property in private use (article 1 PLA (see questions 18 and 35)). No claim may be made under the PLA for damage to the defective 9 What is the nature and extent of pretrial preservation and product itself. Damages that are not recoverable under the PLA may disclosure of documents and other evidence? Are there any be based on other legal grounds, for example, tort or contract (see avenues for pretrial discovery? question 19). In addition, where a person has been killed, or has sus- There is no pretrial discovery in Switzerland and parties are not tained bodily injury, the judge may, having due regard to the particu- required to disclose evidence before the evidentiary proceedings. lar circumstances, award to the injured person, or the next-of-kin of Upon request, a court may order precautionary taking of evidence the deceased, an adequate sum of money as reparations (article 47 if the applicant, inter alia, shows probable cause that the evidence is Swiss Code of Obligations (CO)). at risk or if the applicant has a legitimate interest (article 158 CPC). For limitation periods, see question 28. A party may be entitled to information that might be used for evi- dence based on other legal grounds (eg, contract law). Consequently, 13 Are punitive, exemplary, moral or other non-compensatory a party may file an action by stages, requesting information for evi- damages available to product liability claimants? dence in a first step and then file a substantiated action. Non-compensatory damages are not available in Switzerland. Even if claims based on a product defect or a faulty description of a prod- 10 How is evidence presented in the courtroom and how is the uct are governed by foreign law, no damages may be awarded in evidence cross-examined by the opposing party? excess of those that would have been awarded for such damage Evidence is required to prove facts that are legally relevant and under Swiss law (article 135, paragraph 2 of the Federal Act on disputed (article 150 CPC). The following means of evidence are Private International Law (PIL)). admissible in civil procedures in Switzerland: testimony, physical records, inspection, expert opinion, written statements, questioning Litigation funding, fees and costs and statements of the parties (article 168 CPC). In their submissions, parties are required, inter alia, to offer 14 Is public funding such as legal aid available? If so, may potential evidence for each allegation of fact. Parties to the proceedings and defendants make submissions or otherwise contest the grant of third parties have a duty to cooperate in the taking of evidence (arti- such aid? cle 160 CPC). In particular, they have the duty to make a truthful A person is entitled to legal aid if he or she does not have sufficient deposition as a party or a witness (usually by live testimony), to financial resources and his or her case does not seem devoid of any produce the physical records and to allow an examination of their chances of success (article 117 CPC). In general, legal aid comprises

160 Getting the Deal Through – Product Liability 2014 Bühlmann Attorneys at Law Ltd SWITZERLAND an exemption from the obligation to pay advances and provide secu- such as tort or contract. In general, liability under tort or contract rity, an exemption from court costs, the appointment by the court of law is fault-based. a legal agent under the legal aid system if this is necessary to protect Under contract law, product liability claims may be based on the the rights of the party concerned and, in particular, if the opposing general provisions of article 97 Swiss Code of Obligations (CO) or party is represented by a legal agent. The grant of legal aid does not may be based on special provisions such as sales warranties (article relieve the party concerned from paying party costs to the opposing 197 CO) or the liability of the contractor in the event of a defective party (article 118 CPC). piece of work (article 368 CO). Usually, however, there is no con- A party must reimburse the legal aid received as soon as he or tractual relationship between the consumer and the manufacturer. she is in a position to do so. The canton’s claim prescribes 10 years Consequently, product liability claims against a producer may be after the closing of proceedings (article 123 CPC). brought forward under tort. An action in tort may be based on the Generally, the opposing party may object to a decision granting so-called danger-rule (Gefahrensatz, article 41 CO) or the liability of legal aid to the other party, if it has a legitimate interest (eg, regard- the principal (article 55 CO). ing an exemption from the obligation to provide security for party Product liability claims may also be based on federal and can- costs). tonal , such as specific product, industry or activity-related statutes (eg, the Federal Act on Explosive Substances).

15 Is third-party litigation funding permissible? Third-party funding of litigation is permissible in Switzerland. 20 Is there a consumer protection statute that provides remedies, Third-party funders may, in return, reward a share of any awards imposes duties or otherwise affects product liability litigants? made by the court to successful claimants. The PLA itself also protects consumers. In addition, the PSA imposes duties on manufacturers, inter alia, with the goal to ensure the safety of products and therefore indirectly protects consumers. In par- 16 Are contingency or conditional fee arrangements permissible? ticular, post-sale duties according to the PSA only apply regarding Contingency fee arrangements are not permissible in Switzerland. consumer products. Likewise, specific product-related statutes may Attorneys are therefore not allowed to act on a no win no fee basis provide consumer protection provisions and impose certain duties in return for a success fee. Attorneys may, however, agree on a basic on manufacturers (eg, Federal Act on Foodstuffs and Utility Articles). non-conditional fee (covering costs, expenses and adequate profit) Swiss law provides for special rules regarding jurisdiction of and an additional success fee. courts in matters relating to consumer contracts. Accordingly, in dis- putes concerning consumer contracts, a court has jurisdiction at the 17 Can the successful party recover its legal fees and expenses from domicile of either of the parties (article 32 CPC). the unsuccessful party? As a general rule in Switzerland procedural costs are charged to the 21 Can criminal sanctions be imposed for the sale or distribution of unsuccessful party (article 106, paragraph 1 CPC). If no party is defective products? entirely successful, the costs are allocated in accordance with the The sale or distribution of defective products may lead to criminal outcome of the case. The court, however, may diverge from the gen- sanctions under the Swiss Penal Code (SPC). Examples of crimi- eral principles of allocation and allocate the costs at its own discre- nal liability regarding defective products include involuntary man- tion if certain requirements are met (article 107 CPC; for example, slaughter (article 117 SPC), bodily injury by negligence (article 125 if an action has been upheld in principle but not the full amount SPC), conflagration by negligence (article 222 SPC) or misuse of claimed, and if the amount of the award was difficult to quantify). explosives or toxic gases without criminal intent or through negli- The procedural costs (article 95 CPC) include the court costs (eg, gence (article 225 SPC). Also, the PSA provides for criminal liabil- fee for the conciliation proceedings, judgment fee, costs of taking ity (article 16 and article 17). Further, public law regarding specific evidence, costs of translation) and the party costs (eg, reimburse- environmental or industry related laws and regulations provide for ment of necessary outlays, costs for professional representation). criminal liability (eg, Swiss Environmental Protection Act (EPA)). The cantons set the tariffs for the procedural costs. Procedural costs A company may be held liable and face a fine of up to 5 million mainly depend on the specific value in dispute. Swiss francs if a criminal act is committed in the exercise of commer- Therefore, the unsuccessful party will be ordered to pay the cial activities in accordance with the objects of the company and if it procedural costs (including legal fees and expenses of the success- is not possible to attribute this act to any specific natural person due ful party according to the cantonal tariffs). Additionally it bears the to the inadequate organisation of the company (article 102 SPC). costs for its own attorney and expenses.

Sources of law 22 Are any novel theories available or emerging for product liability claimants? 18 Is there a statute that governs product liability litigation? There is some debate regarding the new PSA and how it will influ- The PLA imposes strict liability on manufacturers, importers and ence product liability litigation in the future. It is likely that PSA suppliers for personal injuries and damages to goods in private use widens the field for product liability claims. It is possible that the caused by a defective product (see questions 23 and 25). The PLA infringement of provisions of the PSA that cause personal injury or follows the European Directive on Product Liability to a large extent damages may lead to the compensation under general tort law. The (EC Directive 85/374). The Swiss Product Safety Act (PSA) and its interaction of PSA, specific product, industry or activity related stat- implementing regulation provide rules on product safety. The PSA utes and PLA as well as general tort and contract law is not entirely resembles the Directive 2001/95/EC of the European Parliament and clear at the moment and will have to be interpreted and clarified by of the Council on general product safety. the courts.

19 What other theories of liability are available to product liability claimants? The PLA provides in article 11, paragraph 2 that, alternatively, prod- uct liability claims may be based on traditional theories of liability www.gettingthedealthrough.com 161 SWITZERLAND Bühlmann Attorneys at Law Ltd

23 What breaches of duties or other theories can be used to 26 What is the standard by which causation between defect and establish product defect? injury or damages must be established? Who bears the burden According to article 4, paragraph 1 PLA, a product is defective if it and may it be shifted to the opposing party? does not provide the safety that a person is entitled to expect, taking The injured party bears the burden of proving the defect, damage into account all circumstances, particularly: and causation. There must be an ‘adequate’ causal link between • the presentation of the product to the public; defect and injury or damages in order to establish liability. Natural • the use that one reasonably may expect; and causation is not sufficient. With respect to product liability, the cau- • the date on which the product was put into circulation. sation between the defective product and injury or damages is con- sidered as an adequate causal link if the defect referred to general For example, a product defect may result from a lack of appropri- experience of life and the usual course of event is likely to cause such ate information, or a design or manufacturing defect. The Federal injury or damages. Supreme Court held in a recent decision that with products that serve for the purpose to protect against dangers (eg, fire extinguish- 27 What post-sale duties may be imposed on potentially responsible ers), a dysfunction also qualifies as a defect (BGE 139 II 534) (also parties and how might liability be imposed upon their breach? see question 34 and ‘Update and trends’). The PLA does not specifically provide for post-sale duties of manu- facturers. Post-sale duties of a manufacturer may be subsumed under 24 By what standards may a product be deemed defective and who the general principle that products have to provide the safety that a bears the burden of proof? May that burden be shifted to the person is entitled to expect (article 4, paragraph 1 PLA). Further, opposing party? What is the standard of proof? post-sale duties might arise pursuant to contractual obligations or The test that courts apply under the PLA to determine if a product under general tort law (articles 41 and 55 CO). is defective is whether a product provides the safety that a person In contrast, the PSA explicitly provides post-sale duties for con- is entitled to expect (see question 23). The actual expectation of a sumer products and products that could, under reasonably foresee- specific person is not decisive. As a general principle, the claimant able conditions, be used by consumers. Post-sale duties include the bears the burden of proof. No strict proof but a ‘preponderant prob- duty to monitor the market and to inform the competent authorities ability’ for product defects is necessary with regard to the degree of in the case of danger (article 8 PSA). Accordingly, the manufacturer the required standard of proof (BGE 133 III 81, E 4.2.2). In a recent or the importer is obliged to implement adequate procedures and decision the Swiss Federal Supreme Court has held that this does not measures after having put a product into circulation in order to iden- reverse the onus of proof to the other party (BGE 137 III 226, E 3.2). tify and trace back the product and avert dangers originating from According to article 3 PSA, a product may only be put into mar- the product (eg, warnings, cessation of sales, withdrawal from the ket circulation if it poses no harm to the safety and health of users market or recall). Moreover, the manufacturer or importer is obliged or innocent bystanders. Products have to meet basic requirements to examine complaints regarding product security thoroughly and of safety and health or if no such requirements have been estab- take samples if necessary. The retailer must cooperate in order to lished, products must comply with the state of science and technol- comply with the safety requirements and monitor the market. A ogy. Moreover, to ensure the safety and health of users and innocent breach of post-sale duties according to the PSA or other statutes may bystanders, certain elements have to be considered: the specified or lead to liability under PLA and tort law (articles 41 and 55 CO). estimated service life of a product; possible interactions with other products in normal use; the use by consumers; and the use by groups Limitations and defences of consumers facing greater risks. 28 What are the applicable limitation periods? Claims under the PLA must be brought within three years after 25 Who may be found liable for injuries and damages caused by knowledge (or after the claimant reasonably should have become defective products? aware) of the damage, defect of the product and the identity of the The manufacturer of a product may be found liable for injuries and manufacturer (article 9 PLA). In any event, claims must be filed damages caused by defective products according to article 2 PLA. within 10 years from the date that the defective product was first The term ‘manufacturer’ under article 2 PLA is defined broadly and put into circulation (article 10 PLA). includes: Claims based on general tort law must be brought within one • the manufacturer of an end product, any basic material or single year after knowledge (or reasonably should have become aware) product components; of the damage and the liable person (article 60, paragraph 1 CO). • any person presenting itself as a manufacturer by affixing its Claims under tort law must be brought, in any event, 10 years after name, trademark or other distinguishing feature to a product; the date on which the loss or damage was caused. and Generally, claims based on contract law must be brought within • any person importing a product into Switzerland with the intent 10 years after due date (article 127 CO). Certain claims become to sell, lease or otherwise distribute the product in the course of time-barred after five years (article 128 CO, for example, claims in business. connection with work carried out by tradesmen and craftsmen or purchases of retail goods). Claims based on sales warranties must be In addition, each supplier is subsidiarily liable if the manufacturer brought within one year after the delivery of the purchased product of the product cannot be established and if the supplier does not (article 210 CO). Also, the buyer must have notified the seller imme- disclose the identity of the manufacturer or the person who supplied diately in the event of defects (article 201 CO). it with the product upon request of the injured person and within a reasonable period of time (article 2, paragraph 2 PLA). In practice, however, claimants usually address the manufacturer or importer of the end product.

162 Getting the Deal Through – Product Liability 2014 Bühlmann Attorneys at Law Ltd SWITZERLAND

29 Is it a defence to a product liability action that the product The Swiss Federal Supreme Court does not conduct a full review. defect was not discoverable within the limitations of science and Generally there is no or a very limited review of facts. technology at the time of distribution? If so, who bears the burden and what is the standard of proof? 33 Can you characterise the maturity of product liability law in terms The PLA provides a state-of-the-art defence to claims made under of its legal development and utilisation to redress perceived the PLA. The onus of proof lies on the manufacturer to show that wrongs? the defect was not discoverable in the light of the scientific and tech- nical knowledge at the time the product was put into circulation Switzerland is not a member of the European Union but the Swiss (article 5, paragraph 1 lit e PLA). In such a case the manufacturer Product Liability Act resembles, to a large extent, the EU Product is not liable. Liability Directive (85/374/EC). Further, the Swiss Product Safety Act largely follows the principles of Directive 2001/95/EC of the European Parliament and of the Council on General Product Safety. 30 Is it a defence that the product complied with mandatory (or The standard of product liability law and litigation is therefore on voluntary) standards or requirements with respect to the alleged a similarly high level as in the European Union. In terms to redress defect? perceived wrongs, however, Swiss product liability law remains It is a defence to a claim if the manufacturer proves that the defect underutilised (see question 35). occurred due to mandatory legal requirements issued by the public authorities (article 5 paragraph 1 lit d). However, compliance with Jurisdiction analysis voluntary standards or requirements does not provide an exemp- tion from liability according to the PLA (or tort or contract) since 34 Have there been any recent noteworthy events or cases that a manufacturer is obliged to design a safe product according to the have particularly shaped product liability law? Has there been latest state of scientific or technological knowledge. any change in the frequency or nature of product liability cases launched in the past 12 months? 31 What other defences may be available to a product liability In 2011 the Swiss Federal Supreme Court ruled on the issue of defendant? whether a prematurely worn out hip prosthesis that needed to be Other defences, further to the above-mentioned defences against replaced constituted compensable damage under the PLA (BGE 137 claims brought under the PLA include the producer’s proof that III 226). (article 5, paragraph 1 PLA): The court held that a defective medical implant might be a basis • the product was not put into circulation by the producer; for compensation if the defective implant caused bodily injury (with- • regarding the circumstances, it is likely that the defect did not out the need to examine whether the implant is a product in private exist at the time the product was put into circulation; or use). The court held that although strict proof for product defects • the product was neither manufactured for sale or any other form may not be required, the burden of proof does not shift to the other of distribution for economic purposes, nor manufactured or dis- party. The court also held that product liability is excluded for non- tributed in the producers’ course of business. discoverable defects in the light of the scientific and technical knowl- edge at the time the product was put into circulation. The court Further, the manufacturer of raw material or a component part is held further, that Swiss courts must take into account the intention not liable if he or she proves, that the defect was caused by the design of the Swiss legislator to harmonise Swiss law with European law. of the product into which the raw material or the component part Although Swiss courts are not obliged to follow EU case law, the was integrated or if the defect was caused by instructions issued by Federal Supreme Court held that courts must avoid dissimilar inter- the manufacturer of the product (article 5, paragraph 2 PLA). pretation without legitimate reason. Other possible defences to claims under PLA are outlined in The Federal Supreme Court held in a recent decision of October questions 29 and 30. 2013 that a dysfunction of products that serve for the purpose to In addition, further defences to claims arise based on other stat- protect against dangers (eg, fire extinguishers), also qualifies as a utes and doctrine. As, for example, it is a defence if the defendant defect that may impose liability (BGE 139 II 534). The appellant had can show that the claimant consented to the act causing the damage, claimed that a faulty product (ie, a faulty fire extinguisher) only con- or if circumstances for which the damaged party is responsible have cerned the functioning of the product and not the safety of the prod- caused or aggravated the damage (article 44 CO). In such a case the uct (also see ‘Update and trends’). The Supreme Court held that the judge may reduce or completely deny any liability based on tort law. dysfunctioning of such (safety) products constitutes a defect under both the Product Liability Act and the Product Safety Act. 32 What appeals are available to the unsuccessful party in the trial court? 35 Describe the level of ‘consumerism’ in your country and In a district court trial, a party may appeal the decision to the can- consumers’ knowledge of, and propensity to use, product liability tonal appellate court if the value in litigation exceeds 10,000 Swiss litigation to redress perceived wrongs. francs (article 308, paragraph 2 CPC). The appellate court conducts The propensity to use product liability litigation compared to the a full review on points of fact or law. New facts and new evidence level of consumerism in Switzerland is relatively low. Product lia- are only considered if they are submitted immediately and could bility cases regularly involve high costs and due to the burden of not have been submitted in the first instance despite reasonable dili- proof of the claimant involve a risk of litigation. Cases are regu- gence (article 317 CPC). According to the Federal Act on the Federal Supreme Court (article 72) a party may appeal against a decision of larly settled between the parties. Manufacturers also feel compelled a cantonal superior court to the Swiss Federal Supreme Court if the to settle product liability cases for fear of negative publicity due to value in dispute exceeds 30,000 Swiss francs. An unsuccessful party a public trial. Other potential claimants seek redress via insurance in a commercial court trial may appeal directly to the Swiss Federal (Switzerland has a high level of insurance coverage) or warranties. Supreme Court.

www.gettingthedealthrough.com 163 SWITZERLAND Bühlmann Attorneys at Law Ltd

36 Describe any developments regarding ‘access to justice’ that would make product liability more claimant-friendly. Update and trends Swiss law does not particularly provide for mechanisms that would make product liability litigation more claimant-friendly than any Under Swiss law, a product is defective if it does not provide the safety that a person is entitled to expect, taking into account other claims. In general, product liability litigation follows the rules all circumstances (article 4 PLA). ‘Safety’ in this sense only of civil procedure as described above (see question 1). Punitive dam- concerns the safety of the product itself and does not relate to its ages, class actions or contingency fees are not permissible do not suitability for use. In October 2013, the Swiss Federal Supreme exist in Switzerland. Litigation funding is permitted and available Court decided that products whose value lies in the prevention but is not (yet) an established and common business for product or defence against dangers, namely, products where safety and usability are closely related, such as fire extinguishers (BGE 139 liability claims. As product liability claims usually involve high costs II 534), may qualify as defective products if they do not function and the claimant bears the burden of proof with regard to the prod- properly. In such cases, a lack of function is also a product defect. uct defect, product liability litigation seems to be underutilised.

Lukas Bühlmann [email protected] Adrian Süess [email protected]

Neustadtgasse 7 Tel: +41 43 500 62 90 8001 Zurich Fax: +41 43 500 62 99 Switzerland www.br-legal.ch

164 Getting the Deal Through – Product Liability 2014 Formosa Transnational Attorneys at Law TAIWAN Taiwan

Jackson Shuai-Sheng Huang Formosa Transnational Attorneys at Law

Civil litigation system party – in the case of a denial, the reasons for the denial must be given. 1 What is the structure of the civil court system? Taiwan has a three-tiered court system made up of the Supreme Court, the High Courts, and the district courts. The Supreme Court 4 Are there any pre-filing requirements that must be satisfied before is the top tier of the court system. The second tier is made up of a formal law suit may be commenced by the product liability the High Courts, which are established in the counties or special claimant? regions. Each of the High Courts has several tribunals for civil and Generally, there are no pre-filing requirements for civil litigation criminal trials made up of a presiding judge and two other judges. related to product liability cases. However, if the dispute arises from The third tier is made up of district courts, which are the lowest proprietary rights where the price or value of the object in dispute courts located in counties or cities. These courts are usually presided is less than NT$100,000, the matter will be subject to mediation by over by one judge. However, there can be up to three judges on a the court before the relevant litigation action is initiated. panel for larger cases. Civil claims are generally first brought in a district court. However, claims for less than NT$500,000 may be 5 Are mechanisms available to the parties to seek resolution of a first brought in a simplified procedure court. Appeals from the dis- case before a full hearing on the merits? trict court are made to the High Court, and appeals from the High Courts are made to the Supreme Court, provided that the claims are There is no summary disposition, such as a motion to dismiss or for amounts exceeding NT$900,000. motion for summary judgment. However, if the claim in the com- plaint has certain apparent defects, it shall be deemed unlawful and the court may, by a ruling or judgment, dismiss such a claim without 2 What is the role of the judge in civil proceedings and what is the holding a full hearing on the merits. If, on the other hand, the defect role of the jury? is rectifiable, the court will order the claimant to rectify the defect Taiwan operates a civil law system modelled after the Continental within a designated period of time. legal system. Consequently there are only bench trials and no jury Some examples of apparent defects in a claim are as follows: trials. Judges generally play a much more active role in civil pro- • the civil court does not have subject-matter jurisdiction over the ceedings than their counterparts in common law jurisdictions. They action; may take a relatively passive role, simply hearing the evidence and • the court in which the action is pending does not have territorial ruling on matters of fact and law, and submissions from the par- jurisdiction over the action; ties. Alternatively, judges may also take on a more active, inquisi- • the plaintiff or defendant lacks the capacity to be a party; torial role, questioning the parties and the witnesses, investigating • the plaintiff or defendant lacks the capacity to litigate and is not the facts, or gathering relevant evidence. Decisions are made on the legally represented by his or her statutory agent; basis of both statutes and precedents; however, the extent of reli- • an advocate initiates the action and the advocate lacks the ance on precedents is likely less when compared to common law authority to do so; jurisdictions. • the action is not initiated in accordance with the prescribed for- malities, or lacks other requirements; • the plaintiff reinitiates an action that has been initiated and is 3 What are the basic pleadings filed with the court to institute, pending; and prosecute and defend the product liability action and what is the • given the alleged facts, the plaintiff’s claim manifestly lacks legal sequence and timing for filing them? grounds. A civil product liability action commences when a plaintiff files a formal complaint (usually with copies also served on the defendant) with the court. A complaint must indicate the following items: the 6 What is the basic trial structure? parties and their statutory agents; the claim and the transaction or Court hearings are held periodically to determine the substantial occurrence giving rise to such claim; and the demand for a judgment issues and prepare for the trial. In this phase, preparatory hearings for the relief sought. are held in chamber. After receiving the complaint, the court issues and serves a writ For purposes of preparing for oral arguments, the parties must of summons on the defendant. Before the hearing, the defendant submit to the court a pleading that indicates their claims and defences will generally file a written answer. The defendant’s answer must and their responses to the opposing party’s statements, claims, and indicate the following: the facts and grounds of his or her defence; defences. The parties must also send a written copy or photocopy of the evidence proving the disputed facts – if there are multiple items the same directly to the opposing party. of evidence, all of them must be provided; and a statement either After the preparatory proceeding by exchange of pleadings has admitting or denying the facts and evidence alleged by the opposing been completed, the presiding judge or the commissioned judge will www.gettingthedealthrough.com 165 TAIWAN Formosa Transnational Attorneys at Law designate a date for oral argument or the preparatory session. The Evidentiary issues and damages court may require the parties to formulate and agree on simplifying the issues in the case. The presiding judge may, if necessary, order the 9 What is the nature and extent of pretrial preservation and parties to submit pleadings that summarise the result of the formula- disclosure of documents and other evidence? Are there any tion of the issues within a period of time as designated by the judge. avenues for pretrial discovery? The pleading provided in the preceding paragraph must be made in Although there is no pretrial procedure that is the equivalent of ‘dis- concise writing, in orderly itemised paragraphs, and must not make covery’, and ‘interrogatories’ do not exist in Taiwan, under the Code general reference to the previous statements presented in pleadings of Civil Procedure (passed by the Legislature on 15 January 2000) or oral statements. both parties should exchange relevant documents before trial for the The judges may ask the attorneys questions to clarify the facts purpose of, among others, clarifying the issues to be focused on dur- and the parties’ positions, and to try to simplify the arguments at ing trial (article 268-1 of the Code of Civil Procedure). issue. Parties are able to actively present favourable evidence and to request the court to summon witnesses for examination. If all 10 How is evidence presented in the courtroom and how is the substantive issues are reviewed, the court will determine the date for evidence cross-examined by the opposing party? oral argument and make the final judgment. Evidence can be categorised as ‘personal evidence’ (when presented by a witness or an expert) and ‘real evidence’ (when presented in the 7 Are there class, group or other collective action mechanisms form of documents and objects to be inspected). available to product liability claimants? Can such actions be With respect to personal evidence, the identity of a witness and brought by representative bodies? the matters to be examined must be specified by the party when The class action system in Taiwan has been developing since 1994. such witness is introduced. Then the court will summon the witness It was first introduced in the Consumer Protection Act in 1994 and through a notice. When examining a witness, the court will first ask expanded by the Code of Civil Procedure in 2003. the witness for his or her full name, age, occupation and domicile Article 50 of the Consumer Protection Act provides that: or residence; if necessary, the presiding judge will also question the relationship between the witness and the parties and other matters [W]here numerous consumers are injured as the result of the same in order to evaluate the credibility of the witness. The court should incident, a consumer protection group may take assignment of the also order a witness to answer the questions fully and consecutively. rights of claims from 20 or more consumers and bring litigation in Parties may request the presiding judge to conduct a necessary its own name. Consumers may revoke such assignment of the rights examination of a witness or, conduct such examination himself or of claims before the close of oral arguments, in which case they must herself after informing the presiding judge. Therefore, the examina- notify the court. tion of witnesses may be conducted by the court or by the requesting party and cross-examined by the opposing party. Similarly, article 44-1 of the Code of Civil Procedure also articulates that: 11 May the court appoint experts? May the parties influence the appointment and may they present the evidence of experts they multiple parties with common interests who are members of the selected? same incorporated charitable association may, to the extent per- mitted by said association’s purpose as prescribed in its by-laws, An expert witness is appointed by the court and the number of appoint such association as an appointed party to sue on behalf expert witnesses is also determined by the court. Therefore, the par- of them. ties are only required to specify the matters for which expert testi- mony is sought in the motion for taking expert testimony. Therefore, product liability claimants can invoke these statutory However, before appointing an expert witness, the court may provisions to initiate class actions if they meet the requirements of give the parties an opportunity to be heard. If the parties have ‘numerous consumers’ or ‘multiple parties with common interests agreed to designate a specific expert witness, the court will generally who are members of the same incorporated charitable association’. appoint such expert witness, except when the court considers that In addition, such actions can be brought by a representative party such expert witness is manifestly inappropriate. such as a consumer protection group or a charitable association. 12 What types of compensatory damages are available to product 8 How long does it typically take a product liability action to get to liability claimants and what limitations (if any) apply? the trial stage and what is the duration of a trial? There is no specific limitation regarding the types of compensatory This will vary widely depending on the complexity of the issues and damages that are available under the Civil Code or the Consumer the attitude of the parties. A complex product liability action could Protection Act. Therefore, any compensatory damage suffered by take years to proceed to trial. the victim, whether direct or indirect, psychological or economic, With respect to the approximate length of product liability can be included, if there is legally sufficient causation. cases, the trial of the first instance may take between one and two years, or even longer. Pending cases may be suspended by agreement 13 Are punitive, exemplary, moral or other non-compensatory between parties for up to eight months, during which time they may damages available to product liability claimants? pursue other options such as out-of-court settlement. The court may Punitive damages are available to product liability claimants if their render decisions more quickly if one litigant’s claim is particularly interests are injured by a defective product. In a litigation brought meritorious. under the Consumer Protection Act, the claimants may demand punitive damages of up to three times the amount of actual damages as a result of injuries caused by the wilful misconduct of business operators, however, if such injuries are caused by negligence, puni- tive damages may be claimed only up to the amount of the actual damages suffered.

166 Getting the Deal Through – Product Liability 2014 Formosa Transnational Attorneys at Law TAIWAN

Litigation funding, fees and costs protect consumers. Consequently, the Consumer Protection Act was enacted to provide more sufficient protections and remedies. 14 Is public funding such as legal aid available? If so, may potential defendants make submissions or otherwise contest the grant of such aid? 19 What other theories of liability are available to product liability Except in cases where there is manifestly no prospect for a party to claimants? prevail in the action, if a party lacks the financial means to pay for Prior to the enactment of the Consumer Protection Act, a product the litigation expenses, the court will grant litigation aid by ruling on liability action could be brought as a torts or non-performance of a motion. In determining whether a party lacks the financial means, contract claim under the Civil Code. Liabilities under such claims are the court takes into consideration the basic living expenses of the regarded as fault-based liabilities. However, under the Civil Code, a party and his or her family members living together. A grant of legal product liability action could also be brought based on warranties aid has the following effects before the action is concluded: made by the seller. Liability in this regard is a no-fault liability • temporary exemption from paying the court costs and other liti- gation expenses that are to be advanced; 20 Is there a consumer protection statute that provides remedies, • exemption from providing a security for the litigation expenses; imposes duties or otherwise affects product liability litigants? and • temporary exemption from paying the attorney’s fees when the As indicated in question 18, the Consumer Protection Act enacted in presiding judge appoints an attorney to advocate the case for the 1994 imposes duties on business operators. They must pay attention party pursuant to the applicable laws. to the health and safety of consumers, and are required to explain to consumers the proper methods of using goods and services, and According to the various precedents, the opposing party may not of ensuring the fairness of transactions, and of providing consum- object to the court’s decision to grant legal aid as such decision does ers adequate and accurate information, and implementing other not cause him or her detriment. measures necessary to protect consumers with regard to goods or services provided by them. Moreover, the Consumer Protection Act also requires business operators to ensure that goods and services 15 Is third-party litigation funding permissible? they provide meet and comply with the contemporary technical and There is no law or regulation specifically prohibiting third-party liti- professional standards of the reasonably expected safety prior to gation funding in Taiwan. these goods or services being launched in the market. Where goods or services may endanger the lives, bodies, health or property of con- sumers, they must have a label in a conspicuous place that includes 16 Are contingency or conditional fee arrangements permissible? proper warnings and indications of the methods for emergency han- According to article 35 of the Regulation on Attorney Ethics, law- dling of such danger. yers are only restricted from having a contingency fee agreement Business operators that violate the above obligations and cause for criminal cases, family matters, and juvenile delinquency cases. injury to consumers or third parties shall be jointly and severally Therefore, for product liability cases, contingency fee arrangements liable. are permissible.

21 Can criminal sanctions be imposed for the sale or distribution of 17 Can the successful party recover its legal fees and expenses from defective products? the unsuccessful party? The Consumer Protection Act does not impose criminal sanctions According to article 78 of the Code of Civil Procedure, the losing on the sale or distribution of defective products. However, if the party bears the litigation expenses. In certain circumstances, how- government believes that the goods or services provided by busi- ever, the court has the discretion to order the successful party to bear ness operators may endanger the lives, bodies, health or property the litigation expenses incurred in full or in part if: the act performed of consumers, they will immediately undertake an investigation. If by the prevailing party was unnecessary for asserting or defending the belief is confirmed, the related agency shall order such business its rights; or the act performed by the defeated party was necessary operators to immediately cease the design, production, manufactur- to assert or defend its rights in accordance with the phase of the ing, processing, importation and distribution of such goods or the proceedings reached at the time. rendering of such services, or take other necessary measures. Attorney fees are not a part of the litigation expenses in the A business operator violating such order may be punished by an court of first and second instance, as the appointment of an attorney administrative fine of not less than NT$60,000 and not more than is not required. However, the attorney’s fees in the court of third NT$1.5 million and these fines may be imposed consecutively if the instance are included as a part of the litigation expenses because violations are not ceased. the appointment of an attorney is mandatory at the Supreme Court. In the case of a material violation, an order for the suspension of operations or discontinuance of business may be issued with the Sources of law approval of the relevant authorities at the central government level or of the Consumer Protection Commission of the Executive Yuan. 18 Is there a statute that governs product liability litigation? In addition, laws concerning specific types of products, such There is no specific statute governing product liability cases. as food, contain penalty provisions for non-compliance under the Nevertheless, relevant regulations concerning product liability are respective laws, which are related to the sale and distribution of included in the Civil Code and the Consumer Protection Act. defective products. Traditionally, if a consumer is injured due to defects in a product or service, there are two different claims that he or she can assert in an attempt to remedy his or her injuries in accordance with the Civil 22 Are any novel theories available or emerging for product liability Code. The first is to demand compensation based on a contractual claimants? relationship between the consumer and the other party. The second At present, there are no novel theories emerging for claimants. is to demand compensation based on a cause in torts. Nevertheless, Nonetheless, the public is putting increasingly heavy emphasis on the traditional contract and torts liabilities are not sufficient to product safety; especially with respect to food and the product www.gettingthedealthrough.com 167 TAIWAN Formosa Transnational Attorneys at Law liability field, due to recent discoveries of poisonous additives in the common use or consumption of his or her merchandise, unless some food in Taiwan. there is no defectiveness in the production, manufacture, process, or design of the merchandise, or where the injury is not caused by the defectiveness, or where the manufacturer has exercised reasonable 23 What breaches of duties or other theories can be used to care to prevent the injury.’ Consequently, if the party invokes this establish product defect? article rather than the Consumer Protection Act as the legal ground See question 24. for the compensation demanded, as long as he or she shows that the injury resulted from the common use or consumption, the causation 24 By what standards may a product be deemed defective and who will be assumed to exist and the burden of proof will shift to the bears the burden of proof? May that burden be shifted to the manufacturer. opposing party? What is the standard of proof? The applicable defect standard varies between contractual liability 27 What post-sale duties may be imposed on potentially responsible and torts liability. With respect to contractual liability, a product is parties and how might liability be imposed upon their breach? deemed defective if the product lacks the reasonably expected usage, Article 10 of the Consumer Protection Act provides that if there are value, and quality, and has caused a mismatch of consideration facts sufficient to prove the existence of suspicion that goods or ser- between contractual parties. Therefore, the seller of a product must vices provided will endanger the safety and health of consumers, warrant that the product sold is free from any defect in quality that business operators are required to immediately recall such goods or may destroy or impair its value, its fitness for ordinary efficacy, or discontinue such services. If necessary treatments taken by the busi- its fitness for the efficacy of the contract of sale. In this regard, the ness operators are sufficient to remove such danger, the foregoing burden of proof lies on the complainant who alleges that the prod- recall will not be required. Furthermore, where goods or services uct is defective. are a danger to the lives, bodies, health or property of consumers in With respect to torts liability, ‘contemporary technical and the absence of conspicuous warning labels with explanations of the professional standards’ are applicable. That is, business operators methods for emergency handling of such dangers, article 10 applies engaging in the design, production or manufacture of the goods or mutatis mutandis. in the provisions of services must ensure that the goods and services If the business operators fail to recall or take necessary measures, they provide meet and comply with the contemporary technical and they may face an administrative fine of not less than NT$60,000 and professional standards of reasonably expected safety prior to the not more than NT$1.5 million and these fines may be imposed con- goods being launched for sale in the market, or at the time of render- secutively if the operators continue to fail to recall or take necessary ing services in accordance to the Consumer Protection Act. Further, measures. In the case of a material violation, an order for suspension business operators are required to present evidence to demonstrate of operations or discontinuance of business may be issued. that when their goods are sold in the market or at the time when the services are rendered, they were in compliance with the contem- Limitations and defences porary technical and professional standards of reasonably expected safety. The burden of proof on consumers is therefore lessened and 28 What are the applicable limitation periods? partially shifted to the manufacturers. The Consumer Protection Act remains silent as to the limitation period. Therefore, the relevant article of the Civil Code can be 25 Who may be found liable for injuries and damages caused by applied. Article 197 of the Civil Code provides that the limitation defective products? period is two years from the date when the injury and the person liable to make compensation became known to the injured person. Generally, business operators such as designers, producers, and Regardless of the above, the limitation will have lapsed 10 years manufacturers may be found liable for injuries caused by product after the date when the wrongful act was committed. defects. The Consumer Protection Act further broadens the scope of possible respondents. Importers are deemed as the designers, pro- ducers or manufacturers and thus also bear the liability of producers 29 Is it a defence to a product liability action that the product Distributors of goods and services are jointly and severally liable defect was not discoverable within the limitations of science and for damages with the business operators with respect to injuries technology at the time of distribution? If so, who bears the burden caused by the provided goods or services; however if the distribu- and what is the standard of proof? tors have exercised due care with respect to the prevention of such Article 7 of the Consumer Protection Act stipulates that business injuries, or if despite the distributor’s exercise of due care, the injury operators are only required to ensure that goods and services pro- would still have occurred, the distributor will not be jointly and sev- vided by them meet and comply with the contemporary technical erally liable. and professional standards of the reasonably expected safety prior Importers of goods or services are deemed the designers, produc- to the goods being sold in the market, or at the time when the ser- ers, or manufacturers of such goods or the providers of such services vices were provided. Therefore, as a defence, business operators can and therefore bear the liability of producers set forth in article 7 of argue that the product defect was not discoverable within the limita- the Consumer Protection Act. tions of science and technology at the time of distribution. However, business operators bear the burden of proving such claims. 26 What is the standard by which causation between defect and injury or damages must be established? Who bears the burden 30 Is it a defence that the product complied with mandatory (or and may it be shifted to the opposing party? voluntary) standards or requirements with respect to the alleged In the Consumer Protection Act, the consumer, who is the injured defect? party, bears the burden of proving the causation between the defect The relevant administrative rules simply set minimum standards and the damage under the general theory. Further, the evidence of for products. Manufacturers can still produce or design safer prod- the causation must be sufficient for the court to exclude any reason- ucts without limitations. Therefore, compliance with standards or able doubt. requirements normally cannot be used as a defence to exempt a man- Nonetheless, article 191-1 of the Civil Code provides that ufacturer from product liability. Nonetheless, if relevant regulations ‘the manufacturer is liable for the injury to another arising from

168 Getting the Deal Through – Product Liability 2014 Formosa Transnational Attorneys at Law TAIWAN

Update and trends

The amendment to the Act Governing Food Safety and Sanitation in sold in the market. In addition, large rewards and whistleblower 2014 once again places greater product liability to the manufacture protections have been set up for employees reporting illegal activities of food. of the violating companies. Even though the amendment to the Act Governing Food Safety The primary focuses of the amendments to the Act Governing and Sanitation of Taiwan of 19 June 2013 increased the penalties for Food Safety and Sanitation are as follows: violation, there are still violators, who for their own interests ignore • specific manufacturers of food products must perform self- the rights of consumers, the economy of the food industry and the inspection or have other laboratories to inspect the material, semi- reputation of theTaiwan. For example, there was a chain bakery that manufactured product or end-product that they use or sell; engaged in false advertising and added artificial flavouring to its • the fines for adding false or prohibited additives have been products and a cooking oil manufacturer illegally mixing oils. As a increased from between NT$60,000 and NT$15 million to result, in 2014, the penalty for violation was increased again, and between NT$60,000 and NT$50 million. The imprisonment term the industry self-governance programme, the three-stage government has been increased from less than three years to less than five inspection programme, and the Food Safety and Protection Fund were years; set up to protect consumers. • the fines for false, exaggerated, misleading product labels, The newly amended Act Governing Food Safety and Sanitation advertisements or marketing have been increased from between expanded the penalty, which may now be increased based on the NT$40,000 NT$200,000 to NT$40,000 and NT$4 million; and benefits gained from the illegal activity. The three-stage government • penalties for companies have been increased to up to 10 times inspection programme will prevent the defective products from being that of individual violators.

have deprived a manufacturer of the discretion with respect to a Jurisdiction analysis product’s design and manufacture, and compliance with the regula- tion will inevitably lead to a product defect, the manufacturer may 33 Can you characterise the maturity of product liability law in terms raise its compliance as a defence. of its legal development and utilisation to redress perceived wrongs? There is no unified single statute governing product liability in 31 What other defences may be available to a product liability Taiwan. There are several articles dealing with product liability in the defendant? Civil Code and the Consumer Protection Act. However, these regu- A product liability defendant may argue that the Consumer lations have similar but slightly different requirements that make Protection Act does not apply to goods that were already circulated the area of product liability law more sophisticated. The Customer in the market or services that were already provided prior to the Protection Act brings in certain innovations that benefit complain- implementation of the Act on 11 January 1994. Moreover, defend- ants and the Civil Code also includes a newly enacted special torts ants will not be liable for defective products if they can prove that cause of action that allows complainants to demand compensation. the products were distributed without the defendants’ prior consent. The interaction and application of these laws is important. In recent years, laws on class actions have been enacted. While these laws seem to be suitable for product liability cases, they are 32 What appeals are available to the unsuccessful party in the trial rarely used. court? Any party that is dissatisfied with a judgment made in the first instance may appeal to the higher court within 20 days from the 34 Have there been any recent noteworthy events or cases that date the judgment is served. An appeal may also be taken from have particularly shaped product liability law? Has there been the final judgment of a court of the second instance to the court of any change in the frequency or nature of product liability cases third instance with jurisdiction. However, it should be noted that launched in the past 12 months? no appeal may be taken from the judgment of a court of the second Recently, this area of law has become an important issue that has instance on an action arising from proprietary rights when the value attracted enormous attention due to several incidents closely con- of the interests in such appeal is not more than NT$1 million. nected to product safety. Several food additive manufacturers are under investigation for selling poisonous products over the past few decades. Both the press and the government are placing great

Jackson Shuai-Sheng Huang [email protected]

13th Floor, Lotus Building Tel: +886 227 557 366 ext. 260 136 Jen Ai Road, Section 3 Fax: +886 227 556 486 Taipei 106 www.taiwanlaw.com Taiwan

www.gettingthedealthrough.com 169 TAIWAN Formosa Transnational Attorneys at Law emphasis on this issue. Several legislators have even proposed • receiving complaints – the foundation also gives suggestions amending the relevant laws to impose harsher punishment on those with respect to product liability disputes. People can make ‘black-hearted’ manufacturers. We can reasonably predict that the reports regarding manufacturers whose products are harmful frequency of product liability cases will increase dramatically during or deceptive. The foundation will request the manufacturer to the coming years. clarify the issues; and • publication – the foundation publishes books and magazines that reveal the results of its investigations as well as product 35 Describe the level of ‘consumerism’ in your country and testing data for the reference of consumers. consumers’ knowledge of, and propensity to use, product liability litigation to redress perceived wrongs. Moreover, the Consumer Protection Committee, a governmen- Lately, legislators and social movements point out that Taiwan is tal authority in charge of consumer protection, is established in experiencing an increasing level of consumer protection in many the Executive Yuan to aid consumers seeking redresses. It provide areas. Furthermore, the level of ‘consumerism’ is gradually being information services, including various brief introductions, publica- elevated and people tend to boycott or shun enterprises that have tions, activities, relevant consumer protection laws, example copies provided defective products in the past and frequently seek redress of standard contracts, and various channels of consumers to make for harms caused by defective products. petitions. Its primary duties include: • drafting and amending basic consumer protection policies and 36 Describe any developments regarding ‘access to justice’ that plans; would make product liability more claimant-friendly. • coordinating and supervising the execution of the functions car- ried out by the agencies of the central and local government; The Consumers’ Foundation, a non-political and non-profit organi- • drafting and amending consumer protection laws; and sation, was established in 1980. The foundation’s ultimate goal is to • mediating and handling significant consumer disputes. protect consumers’ interests, elevate consumers’ standing in business transactions, and popularise consumer awareness. It provides multi- The above governmental and non-governmental mechanisms make ple claimant-friendly functions and services as listed below: product liability more claimant-friendly. • providing consultation – people can call in and ask any ques- tions regarding defective products, misleading product promo- tion, etc. There are also several lawyers involved to provide preliminary legal opinions;

170 Getting the Deal Through – Product Liability 2014 Nobles LLC UKRAINE Ukraine

Volodymyr Yakubovskyy and Alexander Weigelt Nobles LLC

Civil litigation system 3 What are the basic pleadings filed with the court to institute, prosecute and defend the product liability action and what is the 1 What is the structure of the civil court system? sequence and timing for filing them? The civil court system is a part of the general jurisdiction court To institute a product liability action, the claimant files a statement system in Ukraine. First instance courts are local courts of general of claim with the supporting documents. With some exceptions, the jurisdiction that are competent to hear civil law cases, along with plaintiff must also file copies of such a statement according to the criminal and certain administrative matters. Any party to a civil number of defendants and third parties. The court then must con- dispute is entitled to file an appeal with the Court of Appeals if it sider admissibility of the claim in terms of its jurisdiction, merits considers that the court has failed to properly apply some proce- and formalities. If the claim is admissible, the judge orders an initia- dural or material aspects of the case. There are 24 regional courts tion of the proceedings under the claim within three days after its of appeals that represent 24 regions of Ukraine and there are three registration with the court. Along with the other parties of the case, courts of appeals in territorial units with special status, namely, the the court notifies the defendants of its initiating order and invites it court of appeals in the Crimean Autonomous Republic and the cities to submit written objections to the claim within a designated time, of Kiev and Sevastopol. However, given the temporary occupation which is before the preliminary hearing, but not later than the first of the Crimea peninsula, all cases of respective local courts and the hearing on the merits. The defendant may also file a counterclaim courts of appeals in the Crimean Autonomous Republic and the city before the hearing of the case, which is considered together with the of Sevastopol are temporarily transferred to the jurisdiction of the original claim if the court finds both claims somehow related. local courts and courts of appeals in the city of Kiev respectively. Similar to local courts, the courts of appeal have the authority to review the questions of fact and law in the civil cases. The decisions 4 Are there any pre-filing requirements that must be satisfied before of the appellate courts are effective immediately. However, a party to a formal law suit may be commenced by the product liability a dispute that disagrees with the decision of the appellate court may claimant? file a cassation claim with the High Specialised Court of Ukraine for There are no mandatory pre-filing requirements for a product liabil- Civil and Criminal Cases. The Chamber on Civil Cases of the High ity claim that must be satisfied before commencing a formal lawsuit. Court reviews the civil matters from the point of material and proce- The claimant is entitled to file a product liability claim directly with dural law. The High Court can consider a case when the lower court the court. has misapplied material and procedural law. The last instance court is the Supreme Court of Ukraine, which can hear civil law matters 5 Are mechanisms available to the parties to seek resolution of a in some exceptional cases. In particular, a claimant must show an case before a full hearing on the merits? unequal application of the law by the cassation court or breach of international commitments by Ukraine confirmed by the respective The judge may appoint a preliminary hearing within 10 days resolution of an international judicial body. after initiation of the product liability action. The purpose of the preliminary hearing is for the judge to examine if the dispute may be resolved quickly before a full hearing on the merits. The judge 2 What is the role of the judge in civil proceedings and what is the holds conciliatory discussions and inquires whether the claimant role of the jury? refuses the claim, whether the defendant acknowledges the claim The civil legal procedure in Ukraine is of an adversarial nature. The and whether the parties want to conclude an amicable settlement. basic principle is that the burden of proof rests with parties to the However, the preliminary hearing is not mandatory under Ukrainian dispute. Each party must prove the circumstances it refers to in its procedural law and is appointed at the discretion of the judge. In claims or objections with some exceptions. The judge, however, practice, the judge usually does not appoint such a preliminary hear- plays an important role in the process. The judge coordinates the ing and makes short conciliatory inquiries at the first hearing. civil proceedings, reads and clarifies for the parties their rights and There is no other specific mechanism available to the parties to obligations, watches over compliance with substantive and proce- seek resolution of a case before a full hearing on the merits. dural law, warns of consequences of procedural actions or inactions, decides on admissibility of evidence and adjudicates on the merits. 6 What is the basic trial structure? The judge cannot decide on any issues that fall out of the scope of the statement of claim. As mentioned above, the court may appoint a pre-trial conference Usually, one judge hears the civil case at first instance. for conciliatory discussions. If no amicable resolution is reached, the Ukrainian law does not envisage the right to a jury in civil judge examines organisational issues to expedite disposition of the proceedings. case. At the preliminary hearing or the first hearing before delib- erations on the merits, the judge clarifies the pleadings, acknowl- edges the facts and determines the issues that must be proved by www.gettingthedealthrough.com 171 UKRAINE Nobles LLC the parties, verifies the evidence, identifies witnesses and documents, Thus, the actual consumers will not be required to prove this fact in makes schedules for the submission of additional documents and their respective individual proceedings. written explanations, listens to and makes rulings on submitted pre- 8 How long does it typically take a product liability action to get to trial motions and sets dates for further hearings. The parties must the trial stage and what is the duration of a trial? file pre-trial motions before the preliminary hearing, but in any case before the consideration on the merits. In particular, the parties may Ukrainian law sets certain time limits for civil court trials. In particu- submit pre-trial motions on obtaining evidence, on expert opinion, lar, the judge is restricted to consider a case within a reasonable time, on audio-recording of the trial, on interim measures or on engage- but not more than two months from commencement of the action. ment of witnesses, experts, translators. The two-month limitation period may be extended in complex Once all pretrials motions are considered, the proceedings moves cases for another 15 days upon the request of any party to the trial. to the hearing on the merits. It begins with the judge announcing the However, the trial timing may take even longer since there are other claims and the position of the defendant and respective positions lawful grounds why the judge may lawfully suspend and thus delay of any third party claims, if any. The judge then gives the parties a the trial. In particular, the judge must suspend the proceedings when, possibility to support and explain their positions: the plaintiff pre- inter alia, a related case is heard in another court that makes consid- sents its claims and evidence first and then the defendant presents eration of the given case difficult or an inquiry to the foreign court its objections. Third parties present their positions after either the (authority) must be made for the purpose of the case. The court may plaintiff or the defendant, depending on whose side they support. also postpone the trial when it appoints an expert examination for Having heard the explanations of the parties, the judge proceeds the time of such examination. As a matter of practice, it usually takes with clarifying the facts and circumstances of the case and examin- five to seven months to obtain a court decision in a product liability ing relevant evidence (documents, hard evidence, expert opinions, case at the first instance. witnesses statements, etc). After fact-finding and evidence examination, the judge moves Evidentiary issues and damages to the court debates between the parties and their representatives. 9 What is the nature and extent of pretrial preservation and The plaintiff and its representatives take the floor first and then the disclosure of documents and other evidence? Are there any defendant gives its oral arguments. Third parties take the floor after avenues for pretrial discovery? the respective party whose interests they support. The parties may make additional remarks to each other, while the defendant has the The claimant may file a motion for preservation evidence even right to the final remark. The judge may not limit duration of the before the filing a statement of claim, but in any case before the court debates, but may control the debated issues that must be in trial. It may ask for onsite review of evidence, witness testimony, line with the claims and established evidence. expert examination, etc. In his or her motion, the claimant must When the court debates are concluded, the judge retires to the show what evidence needs to be preserved, what facts such evidence deliberation room. If no additional questions arise, the judge then supports and what indicates that it will be impossible or difficult to announces the decision to the parties in the court room. obtain such evidence. The court considers such a motion within five In practice, the trial is usually divided into short-term hearing days. If the motion is satisfied, the claimant must file a statement of sessions, which usually last around half an hour, but sometimes claim within three days. The claimant may also ask for disclosure longer. The judge orders respective adjournments normally due to of documents. The product liability laws grant the injured party a the need to obtain and present additional evidence, appoints court specific right to demand disclosure of all the documents relevant expertise and calls witnesses or experts to tackle the need for opin- to the defective product. However, in practice, the extent for such ion on foreign laws, etc. disclosure is usually rather restricted as the claimant is expected to The parties may also agree to conclude an amicable settlement request specific documents that should normally exist or of which at any stage of the proceedings, whether before, during or after the the claimant is aware. trial. The claimant is also entitled to withdraw its claim before the The evidence is usually submitted to and considered in the court hearing on the merits, which entails dismissal of the case and pre- unless an onsite examination takes place (which is extremely rare cludes the plaintiff from filing a lawsuit against the same party and in Ukraine). As a general note, extensive pretrial discoveries are not on the same grounds. common in civil court practice. Civil law proceedings, not excluding product liability actions, are open to the public. This means, practically, that any person can 10 How is evidence presented in the courtroom and how is the attend a court hearing. Nonetheless, the parties are entitled to sub- evidence cross-examined by the opposing party? mit a motion for a non-public proceeding, if the court hearing will There are no strict procedural rules for presentation and cross- reveal information on the private life of the parties. examination of the evidence. Each party must submit the evidence that relates to their respective arguments and assertions before the 7 Are there class, group or other collective action mechanisms trial. The judge reviews admissibility of the evidence and may ask available to product liability claimants? Can such actions be the opinion of the opposing party. The other party may express an brought by representative bodies? objection or an agreement to the presented evidence. Ukrainian law does not envisage a classic class action mechanism. The judge decides whether the evidence presented relates to the However, the judge can join cases when a number of plaintiffs sues subject matter of the case and whether such evidence is permissible. the same defendant on similar grounds. This, however, does not hap- Under Ukrainian civil procedure, the following evidence is admissi- pen very often. The parties to such actions become co-claimants, but ble before the court: written and oral statements of plaintiffs, defend- they still are independent in their claims to the respondent and each ants, third parties and their representatives, testimonies of witnesses, has to provide its own evidence. Further, the judge may later divide documentary evidence, physical evidence, audio and video records, the cases if it becomes difficult to hear and resolve on the merits. and expert opinions. Ukrainian law has a possibility for non-governmental organisa- The law provides for cases where parties are not required to tions of consumers to file lawsuits against sellers and manufacturers prove certain facts in the court, namely: if both the defendant and to establish a violation against an unidentified number of consumers. the plaintiff acknowledge the fact; if the fact is a common knowl- edge; or if the facts have previously been duly established by a court decision on a civil, commercial or administrative case.

172 Getting the Deal Through – Product Liability 2014 Nobles LLC UKRAINE

In Ukraine, the parties tend to submit documentary evidence 13 Are punitive, exemplary, moral or other non-compensatory more than other evidence, such as a statement from a hospital con- damages available to product liability claimants? firming health damage, rather than rely on live testimony. Experts The concept of punitive or exemplary damages is not available usually give a written opinion and then testify before the court. under Ukrainian civil law. It is possible, though, to claim a compensation for moral dam- ages under Ukrainian civil law. The definition of moral damages 11 May the court appoint experts? May the parties influence the includes, inter alia: appointment and may they present the evidence of experts they • physical pain and suffering that a person has endured as a result selected? of permanent or another health injury; The court may appoint an expert to clarify the circumstances • moral suffering that a person has endured as a result of unlawful that are relevant to the case and that require special knowledge in treatment to the person, his or her family members or his or her such fields as science, engineering, technology, art and other areas close relatives; and with specific professional skills. Any party to the case may request • moral suffering that a person has endured as a result of destruc- an expert opinion before the court. The judge decides whether to tion of or damage to its property. appoint an expert. The judge, however, is mandated to appoint an expert upon the request of both plaintiff and defendant to the case. The court determines the amount of such compensation and it The appointment of expert is also mandatory, upon request of any depends on the nature of wrongdoing, level of the defendant’s fault, party, if it is necessary to determine, inter alia, the nature and extent degree of injury and moral suffering, deterioration of skills and abili- of health damage. ties and other substantial circumstances. Moral damages are always Any party may also suggest an expert and the issues that should hard to quantify. The law does not set any limitations, but it estab- be addressed to such an expert. Again, the judge ultimately decides lishes that the amount of moral damages must be reasonable and what expert is appointed and what questions such expert must fair. As a rule, moral damages rarely exceed 100,000 hryvnias. answer. However, if the parties have agreed on a particular expert or expert institution, the judge must appoint the expert or expert Litigation funding, fees and costs institution according to such an agreement. Also, if the judge refuses the requesting party in addressing some questions to the expert, it 14 Is public funding such as legal aid available? If so, may potential must do so with reasoned justification. In any case, any party may defendants make submissions or otherwise contest the grant of file a motion to disqualify the expert on certain grounds, such as, such aid? inter alia, conflict of interest, lack of competence, etc. Legal aid is available in Ukraine. Potential defendants have no The parties may also present the evidence of experts they have right to contest the grant of such legal aid. The Law of Ukraine on selected themselves. However, the court may, and is likely to, rely Protection of Consumers’ Rights allows establishing of non-profit only on the opinion of an expert that such a court has appointed. organisations that provide legal aid to injured consumers. Such None of the expert opinions is binding for the judge who evaluates organisations, may, in particular, provide legal advice to consumers, all evidence according to his or her own beliefs based on a compre- assist in drafting of claims and motions to be submitted to the court hensive and objective study of all the evidence. and serve as representatives of the consumers in the courts.

12 What types of compensatory damages are available to product 15 Is third-party litigation funding permissible? liability claimants and what limitations (if any) apply? The third party litigation funding should be generally permissible. The type of compensatory damages depends on the kind of injury Ukrainian law does not specifically address the issue of third-party or loss caused by a defective product to an individual and his or her litigation funding. There is no official regulation or prohibition in property. this regard. Moreover, the court does not investigate who funds the Damages to the property may be compensated in two major litigation costs. As a general practice, however, the parties usually ways: in kind or money. The court usually awards monetary com- bear their expenses of litigation. pensation to the plaintiff to be paid for real damages, namely, the value of property replacement, repair costs and, in rare cases, loss of profits if it possible to calculate them. Upon request of the plaintiff, 16 Are contingency or conditional fee arrangements permissible? the court may also oblige the defendant to compensate damages in Ukrainian law does not prohibit contingency or conditional fees. It kind, namely, to replace the property with a similar item of the same does not provide for any regulation on this matter, including with quality to repair the damaged property. regard to any limitations. Therefore, it should be possible to con- If there is a health injury that caused a loss or decrease of work- clude contingency or conditional fee arrangements. However, given ing ability or a complete disability of an individual, the individual lack of regulation, there may be substantial risks and problems with must be paid compensation connected with respective loss or reduc- the enforceability of such arrangements. tion of income. The law provides for certain formulas for calculation of the damage on the basis of the injured party average income. The injured individual is entitled to recover additional medical expenses, 17 Can the successful party recover its legal fees and expenses from including costs on special nutrition, medical treatment, medicines, the unsuccessful party? prosthesis and nursing care. The respective monetary compensation The successful party may claim to recover its legal fees and other may be paid in one lump sum or in monthly instalments. documented expenses (eg, expert opinions, witnesses, etc). However, In the case of the death of an individual, the dependants or there are certain statutory limitations on the amounts of fees and relatives of such an individual are entitled, with certain limitations, other expenses that may be compensated. It should be noted that to a monetary compensation based on the deceased wage earner. consumers are free from any court duties. Therefore, the court fees Additionally, the relatives may claim compensation of funeral and will be only borne by the defendant if he or she is unsuccessful. related costs. Otherwise, the fees are compensated from the state budget.

www.gettingthedealthrough.com 173 UKRAINE Nobles LLC

Sources of law respective quality and safety of the imported products pursuant to the safety requirements of Ukrainian law. 18 Is there a statute that governs product liability litigation? The Decree of the Cabinet of Ministers of Ukraine on In 2011 the Parliament of Ukraine has adopted the Law of Ukraine Standardisation and Certification requires certain products to be on Liability for Damages Resulting from a Defect in a Product. This certified in order to confirm that they are adequately safe for con- law has been developed in accordance with the Council Directive sumers and of an adequate quality. Certified laboratories conduct 85/374/EEC of 25 July 1985 on the approximation of the laws, such testing in Ukraine. All goods subject to certification must have regulations and administrative provisions of the member states a ‘compliance certificate’, which confirms that the goods are safe concerning liability for defective products. The law supplements for use or consumption. Selling or importing goods into Ukraine and specifies the general provisions of the Civil Code of Ukraine on that are subject to certification without such certificates is strictly defective product liability and compensation of damages. prohibited. In terms of procedure, the Civil Procedural Code is a major stat- The Law of Ukraine on Providing for the Sanitary- ute governing private claims in the product liability litigation. If it Epidemiological Welfare of the Nation also sets out basic principles comes to criminal liability, the respective proceedings shall be gov- and standards for the safety of products sold in Ukraine and for erned by the Criminal Procedural Code of Ukraine. Any dispute with the activities of enterprises, plants, factories and others. This law regard to public actions or failure to act in product liability matters requires all producers and importers to receive a special document is governed by the Code of Administrative Judicial Procedure of that confirms the safety of the products they produce. This document Ukraine. is a sanitary and hygienic conclusion. It is required for all manufac- turers and importers of all types of goods that may be dangerous to people’s health, such as, products for personal hygiene (soap, sham- 19 What other theories of liability are available to product liability poos, shower gels, deodorants, etc), all food products, toys, etc. This claimants? conclusion is issued by state sanitary laboratories under the Ministry Financial sanctions (strict liability) of Health Protection of Ukraine, which regularly issues and updates The Law of Ukraine on Protection of Consumers’ Rights sets pen- the detailed list of products that require sanitary and hygienic con- alties on the producers and distributors for non-compliance with clusions. Selling or importing goods to Ukraine subject to sanitary- product safety laws and regulations. This law imposes a financial epidemiological control without a valid sanitary hygienic conclusion penalty for production or sale of products that do not comply with is strictly prohibited. life, health and environment safety requirements. The applicable The Law of Ukraine on General Safety of Non-Food Products penalty is 300 per cent of the value of the defective products manu- sets out a list of requirements applicable to manufacturers. In par- factured or received for sale. ticular, manufacturers must apply identification information on The Law on General Safety of Non-Food Products imposes each product (such as name, producer’s address, the type or model financial sanctions on business entities that violate the law. The number, serial number and component parts). Manufacturers must amount of liability depends on the type of breach. For instance, the also have expert safety reviews (tests) of the products in the case of release of dangerous non-food products results in liability in the consumer notices and take necessary preventive or corrective meas- form of a penalty ranging from 25,500 to 51,000 hryvnias for an ures after consideration of such claims. Manufacturers must provide initial breach and from 42,500 to 85,000 hryvnias for any addi- consumers with information that enables to estimate possible risks tional breach during the next three years. If a manufacturer does not typical for a given product if such risks are not evident and to take provide information to customers as required under the law, such necessary safety precautions. a manufacturer will be subject to liability in the form of a penalty from 12,750 to 25,500 hryvnias for the initial breach and from 25,500 to 51,000 hryvnias for any additional breach during the fol- 21 Can criminal sanctions be imposed for the sale or distribution of lowing three years. defective products? Ukrainian law provides criminal liability for violation of product Administrative liability safety laws. Article 167 of the Code of Administrative Violations of Ukraine Article 227 of the Criminal Code of Ukraine provides for crimi- imposes administrative liability in the form of a fine on responsible nal sanctions for the production or sale of dangerous or low-quality officials for production or sale of goods that do not comply with products in the form of a fine from 8,500 to 17,000 hryvnias with a safety requirements. The applicable fines range from 340 to 1,700 prohibition to conduct certain activities or occupy certain positions hryvnias for each individual violation. The administrative fine is for up to three years. imposed in addition to the financial sanctions. However, criminal liability applies only in the case of a violation of consumers’ rights resulting in ‘significant damage’, which may not be less than 304,500 hryvnias. 20 Is there a consumer protection statute that provides remedies, It should be noted that legal entities may not be subject to crimi- imposes duties or otherwise affects product liability litigants? nal liability under Ukrainian law. Therefore, an investigation will The major statute on consumer protection is the Law of Ukraine on have to establish individuals at the enterprise who are responsible Protection of Consumers’ Rights. It does impose a duty on all manu- for a respective criminal offence. facturers and sellers to ensure that all the products they produce and sell are safe to the lives, health and property of consumers and to the environment. This means that the packaging, ingredients and 22 Are any novel theories available or emerging for product liability materials of any product should not harm the health, life or property claimants? of consumers or the environment while products are used, stored or There seems to be no novel theories available or emerging in Ukraine transported. Ukrainian laws and applicable by-laws set quality and with respect to product liability claims. safety requirements to all products circulated in Ukraine. If the prod- uct must be used, stored or transported under special conditions, the manufacturer must develop special rules and inform the consumer of such rules. The law also sets a duty of importers to confirm the

174 Getting the Deal Through – Product Liability 2014 Nobles LLC UKRAINE

23 What breaches of duties or other theories can be used to • the manufacturer (distributor) has taken all the necessary cor- establish product defect? rective (preventive) actions in relation to all units of the product In Ukraine, the basic theory to establish product defect is strict liabil- and withdraw the products from circulation; ity. Under the product liability law, the manufacturer is generally • the problem is with the quality and not with the safety of the liable for a defective product regardless of its fault. The negligence product; or and various consumer protection claims may also be used to estab- • the manufacturer (distributor) is aware that the competent lish product defect liability against a responsible party. supervising authority has already been notified of the problem by other market participants and has all the relevant information.

24 By what standards may a product be deemed defective and who Pursuant to the Law of Ukraine on Protection of Consumers’ Rights bears the burden of proof? May that burden be shifted to the and the Law of Ukraine on State Market Control and Control Over opposing party? What is the standard of proof? Non-Food Products, the manufacturer (distributor) is also obliged A product is deemed defective when it does not comply with the to recall products from production, distribution and consumers use, safety standards that a consumer has a right to expect, taking into if it is impossible to remove the reasons that may cause the danger. account all conditions for its use, maintenance, utilisation and trans- Under Ukrainian law and within present Ukrainian business prac- portation, and taking into account the caution warnings and other tice, recall from consumers is rather a measure of the last resort. information on the product, including: Additionally, the manufacturer is obliged to reimburse to the con- • the presentation of the product; sumer all damages, caused by the recall. • the reasonable use of the product; and • the time when the product was put into circulation. Limitations and defences

The product may not be deemed defective only for the reason that 28 What are the applicable limitation periods? after putting the product into the stream of commerce another prod- The Law of Ukraine on Liability for Damages Resulting from a Defect uct of higher quality has also been commercialised. in a Product establishes limitation period of three years, which shall The injured person bears the burden of proof and must prove: apply to proceedings for the recovery of damages. Therefore, the • the actual damage; injured person has three years within which to seek compensation. • the defect in the product; and The limitation period shall begin to run from the day on which the • the causal relationship between damage and defect. plaintiff became aware, or should reasonably have become aware, of the damage, the defect and the identity of the producer. The burden is usually rather high. However, he or she does not have The law also stipulates that the rights conferred upon the injured to prove the negligence or fault of the producer or importer. person shall be extinguished upon the expiry of a period of 10 years from the date on which the producer put into circulation the actual product that caused the damage, unless the injured person has in 25 Who may be found liable for injuries and damages caused by the meantime instituted proceedings against the producer. Thus, the defective products? producer will not be liable after 10 years from the date the product The manufacturer is a major respondent for a defective product was put into circulation. that includes the producer of a raw material, the manufacturer of a finished product or of a component part or any person putting its name, trade mark or other distinguishing feature on the product. For 29 Is it a defence to a product liability action that the product imported goods, the importer of such goods is deemed the ‘producer’ defect was not discoverable within the limitations of science and and, therefore, a proper respondent. If the manufacturer may not technology at the time of distribution? If so, who bears the burden be determined for some reason, the seller of products is then liable, and what is the standard of proof? unless it provides the injured person with the contact details of the Ukrainian product liability law does not allow for this line of manufacturer within 30 days. defence. This defence was not included in the list of possible defences under the product liability law as it was not strictly required by the Council Directive 85/374/EEC of 25 July 1985. 26 What is the standard by which causation between defect and injury or damages must be established? Who bears the burden and may it be shifted to the opposing party? 30 Is it a defence that the product complied with mandatory (or An injured party bears the burden of proof and must prove that a voluntary) standards or requirements with respect to the alleged defective product caused injury or damage. The burden of proof for defect? causation is usually rather high. Ukrainian product liability law does release the manufacturer from liability if the manufacturer proves that the defect is due to compli- ance of the product with mandatory requirements of the law or the 27 What post-sale duties may be imposed on potentially responsible state authorities’ instructions. parties and how might liability be imposed upon their breach? Ukrainian law generally requires manufacturers and distributors to inform the state body charged by the Cabinet of Ministers of 31 What other defences may be available to a product liability Ukraine with supervision and control over specific types of products defendant? about known defects or incidences of injury or property damage The manufacturer may be released from liability for damages if it that result from defective (unsafe) products (article 10 of the Law proves that: of Ukraine on General Safety of Non-Food Products). The by-law • it did not put the defective product into circulation; approved by the Cabinet of Ministers of Ukraine further sets out the • the default occurred after the product was put into circulation, requirements, procedure and special form for the notification. apart from cases where defect has been caused by the product’s The manufacturer or distributor is not required to file such design; notice in cases, inter alia: • the defective product was neither manufactured nor distributed in the course of its business; or www.gettingthedealthrough.com 175 UKRAINE Nobles LLC

• the defect has been caused due to compliance with the require- 34 Have there been any recent noteworthy events or cases that ments of law or state authorities’ instructions; or have particularly shaped product liability law? Has there been • the defect of a component was caused during the manufacture of any change in the frequency or nature of product liability cases a final product. launched in the past 12 months? In 2013 the major trend was an increasing volume of the fines that When the injured person is also at fault, the producer’s liability may the supervising authorities impose on distributors for violations of be reduced. consumer protection laws. For instance, in 2013, the State Inspection of Ukraine on Protection of Consumers’ Rights imposed a fine in an amount exceeding 100 million hryvnias on a Ukrainian network for 32 What appeals are available to the unsuccessful party in the trial the sale of uncertified refrigerators (that allegedly caused fires), and court? with another similar network, a fine was as high as over 400 million Any party may appeal a decision of the trial court before the courts hryvnias. of appeals. If the appeal is filed in due course, the decision of the trial court does not take effect until its complete review with the appellate court. The decision of the court of appeals enters into force imme- 35 Describe the level of ‘consumerism’ in your country and diately. If the decision of the appellate court is again not satisfac- consumers’ knowledge of, and propensity to use, product liability tory, the party may submit a cassation appeal to the High Specialised litigation to redress perceived wrongs. Court of Ukraine for Civil and Criminal Cases. The judgment of the Ukrainian consumers lack knowledge of product liability litigation High Specialised Court may also be appealed to the Supreme Court and usually try to avoid bringing lawsuits against manufacturers or of Ukraine, but only in specific exceptional cases. Otherwise, the distributors. This may be explained by the fact that Ukrainians do decision of the High Specialised Court will be final. not have confidence in the Ukrainian court system and try to avoid time-consuming and costly litigations. Jurisdiction analysis

33 Can you characterise the maturity of product liability law in terms 36 Describe any developments regarding ‘access to justice’ that of its legal development and utilisation to redress perceived would make product liability more claimant-friendly. wrongs? Given the political situation, there are no particularly significant The special law on product liability was adopted only in 2011 in recent efforts to expand product liability. Parliament has no regis- Ukraine. Even though this was a significant progress, there is still tered bills that would implement such mechanisms as class action, insufficient understanding of product liability concepts and theories punitive damages or lengthening of the statute of limitations. At among litigation lawyers, experts and judges. The area can there- the same time, the courts are trying to digest the recent significant fore be characterised as not sufficiently mature, and court practice is enactments. not well developed. Product liability litigation is still quite rare and the media and education systems are not giving this area adequate coverage.

Volodymyr Yakubovskyy [email protected] Alexander Weigelt [email protected]

7/11 Khreschatyk Street Tel: +380 44 4953080 01001 Kiev Fax: +380 44 4953090 Ukraine www.nobles-law.com

176 Getting the Deal Through – Product Liability 2014 Shook, Hardy & Bacon LLP UNITED STATES United States

Gregory L Fowler and Marc E Shelley Shook, Hardy & Bacon LLP

Civil litigation system Each state maintains its own ‘supreme’ court, which serves as the final arbiter of claims in that jurisdiction. These courts generally 1 What is the structure of the civil court system? only review cases involving an issue as to which the courts of appeal The federal government and the individual 50 states maintain inde- have come to different conclusions or that present a novel issue of pendent . The federal judiciary is one of limited jurisdic- law. tion, while state courts are of general jurisdiction and may hear any The federal judiciary and the states’ judiciaries all maintain their matter. own rules of procedure, and often each judge within each district Courts in the United States are based upon the English common maintains his or her own particular practices. Due to the diversity law model. The sole exception is the Louisiana judiciary, which is of substantive and procedural law, the importance of the forum and based on the Civil Code. However, because there is no federal ‘com- venue cannot be underestimated. mon law’ except in cases such as , federal courts pri- marily apply either federal statutes, or the common law or statutory law of the state where the federal court sits. 2 What is the role of the judge in civil proceedings and what is the role of the jury? The federal court system Federal judges are appointed by the president and confirmed by The federal courts consist of three levels: the district courts (trial Congress. Some state judges are appointed by the state governments, courts); the circuit courts of appeal (first-level appellate courts); and while others are elected by popular vote. Unlike other court systems the United States Supreme Court (the final federal appellate court). in which the judge may assume an investigational role, American The district and circuit courts are organised geographically and judges oversee the adverse parties who shape the issues at trial. In every state has at least one district court or more, depending on the a jury trial, the judge will conduct the proceedings, maintain order size of the state. There are also a number of speciality federal courts in the court, determine what legal standards to apply, determine the to hear cases under maritime, patent and bankruptcy law. admissibility of evidence and instruct the jury on the law and how The federal district courts may exercise their limited jurisdic- the law should be applied to the evidence at the close of trial. In a tion over only two types of cases. Under ‘federal question’ jurisdic- bench trial the judge also serves as the ultimate finder of fact. tion, the district courts have original jurisdiction of all civil actions The parties generally have a constitutional right to have their arising under the United States Constitution, laws or treaties of the claims decided by a lay jury in civil cases. This right, which is waiv- US. Under ‘diversity’ jurisdiction, the district courts have original able, applies only to legal claims, whereas equitable claims, such as jurisdiction of all civil actions between states, where the parties are those requesting injunctive relief, may be heard by a judge. citizens of different states, one party is a citizen of a foreign state or Jurors are picked to hear a particular case through a process one party is a foreign state. called voir dire intended to eliminate those persons who are unable The circuit courts of appeal will not retry cases, but instead to be unbiased fact-finders and decision-makers. Most jurisdictions apply a ‘standard of review’ based upon the district court record and prescribe a jury of 12 individuals in criminal cases, and between six briefs by the parties. and 12 jurors in civil cases. The jurors are instructed by the judge on The US Supreme Court is the ultimate arbiter of federal law, the law and are free to decide for either party on any of the issues including interpretation of the US Constitution. In practice, the presented. In civil cases, some jurisdictions require a unanimous jury Supreme Court only reviews a small percentage of the writs it verdict for certain issues, while others require only a simple majority, receives. Only in rare exceptions will the Supreme Court maintain and still others fall somewhere in between. If the jury finds for the original jurisdiction (eg, actions involving ambassadors or contro- plaintiff, it may award damages that it finds appropriate, even if less versies between the US and a state). than the amount the plaintiff demanded.

The state court system 3 What are the basic pleadings filed with the court to institute, Most state judiciaries are structured similarly to the federal judiciary, prosecute and defend the product liability action and what is the with three layers to each court system. First, there is a trial court, sequence and timing for filing them? which may be of limited or general jurisdiction. There is usually a subcategory for municipal courts that generally hear smaller matters Each state has its own particular rules of pleading, but there are (eg, fewer than US$10,000 in controversy). two basic types of methods. Notice pleading, followed by the fed- Most states maintain an intermediate appellate court where an eral courts, is based on the premise that the pleadings need only appeal is first heard. Parties almost always have the right to appeal provide basic notice of the issues, and relies on pretrial discovery to the first final determination of their case. Like the federal circuit further delineate the particular facts at issue. However, in two recent courts of appeal, the standard of review of the state appellate courts decisions, Bell Atlantic Corp v Twombly and Ashcroft v Iqbal, the is limited. Supreme Court clarified that the statements in the complaint must contain enough information for the court to conclude that the claim www.gettingthedealthrough.com 177 UNITED STATES Shook, Hardy & Bacon LLP is plausible. Fact pleading requires that the facts be pleaded with Iqbal, one could view the necessity of collecting all the facts needed greater particularity and is generally the practice followed in state to support the cause of action as a form of pre-filing requirement. courts.

5 Are mechanisms available to the parties to seek resolution of a The complaint case before a full hearing on the merits? The plaintiff files an initial pleading, usually called a complaint or a petition, that initiates the action and is intended to frame the issues. Yes. US civil procedure provides for two opportunities to dismiss a The complaint must generally contain a short and plain statement of case before it reaches trial (see motions to dismiss and for summary the court’s jurisdiction, the claim showing that the pleader is entitled judgment described in question 3). to relief and the plaintiff’s demand for judgment for the relief. 6 What is the basic trial structure? The answer A typical civil trial begins with opening statements by the attorneys A defendant may either answer or move to dismiss a complaint. The for each party. The plaintiff’s attorney will then put on plaintiff’s answer may admit, deny or deny for lack of knowledge the allega- case-in-chief, primarily by calling witnesses to the witness stand and tions of the complaint. The answer must also set forth, or forever conducting a ‘direct examination’ or by admitting other forms of waive, any affirmative defences such as statute of limitations, fraud, documentary or tangible evidence. The defence counsel then has the estoppel, res judicata and others. Some states allow a general denial right to cross-examine that witness. Plaintiff’s counsel may re-exam- of the complaint, while others (including federal court) require spe- ine the witness, sometimes followed by a recross. Once the plaintiff cific denials of specific parts of the complaint. Averments in the com- rests its case, the defence presents its case in the same fashion. After plaint that are not denied are deemed admitted. the defence rests, the plaintiff may present a rebuttal case. The par- ties then make a closing argument, the judge instructs the jury on the Motion to dismiss law and the jury deliberates and renders a verdict. The most common form of motion to dismiss in federal practice is Trials are conducted on consecutive days and are usually public, a ‘12(b)(6) motion’, in which a party seeks to dismiss a claim as a subject to the judge’s discretion to set the schedule and to bar the matter of law on the basis that, even if all facts averred in the com- public from certain sensitive proceedings. plaint are true, no legal claim exists for which relief can be granted (eg, lack of subject matter jurisdiction, lack of personal jurisdiction, Role of judge and lawyer improper venue, improper service of process or failure to join an There is no barrister or solicitor distinction in the United States. indispensable party). Attorneys play the predominant role at trial by examining witnesses, presenting evidence and arguing to the jury. Counterclaim and crossclaim As stated in question 2, the proceedings are adversarial (rather A defendant may also assert claims against the plaintiff by filing than inquisitorial) and the role of the judge is to decide only ques- a counterclaim. Plaintiffs and defendants may also assert claims tions of law in a jury trial, while in a bench trial the judge will also against each other by filing cross-claims. Compulsory counterclaims serve as the finder of fact. (those arising out of the same transaction or occurrence that is the subject of the other party’s claim) must be asserted in the same action or are forever waived. Conversely, permissive counterclaims 7 Are there class, group or other collective action mechanisms are not waived if not asserted in the same action. available to product liability claimants? Can such actions be brought by representative bodies? Joinder of additional parties Both federal and state laws provide for the prosecution of collective A party may also move to join an additional party if complete relief or ‘class’ actions in which one or more class representatives assert cannot be afforded without such joinder, the person to be joined legal claims on behalf of a defined ‘class’ of individuals. While the claims an interest in the subject matter of the action and either that requirements for certification vary, most are based on the federal party’s ability to protect those interests may be impaired, or that model. party may be subject to a substantial risk of multiple or inconsistent Rule 23(a) of the Federal Rules of Civil Procedure requires obligations. the party seeking class certification to prove the threshold require- ments that: the class is so numerous that joinder of all members Motion for summary judgment is impracticable; there are questions of law or fact common to the A motion for summary judgment may be made by any party, usually class; the claims or defences of the class representatives are typical some time before trial following discovery and the development of of the other class members; and the class representatives will fairly a factual record. Summary judgment shall be granted if the plead- and adequately protect the interests of the class. The party must also ings, discovery, affidavits and depositions demonstrate that there is prove that the proposed class satisfies one or more bases for the no genuine issue as to any material fact, and that the moving party is different subsets of rule 23(b), such as an ‘injunctive relief’ class, a entitled to judgment as a matter of law on all or some of the claim. ‘limited fund’ class or other grounds. A class action brought pursu- ant to rule 23 typically requires class members to expressly opt out 4 Are there any pre-filing requirements that must be satisfied before of the class in order to avoid being bound by the judgment. Finally, a formal law suit may be commenced by the product liability the court must be satisfied that any proposed class action settlements claimant? are fair, adequate and reasonable. No. While other causes of action (eg, employment claims and claims against the government) occasionally require preliminary adminis- 8 How long does it typically take a product liability action to get to trative steps prior to filing a lawsuit, there is no pre-filing require- the trial stage and what is the duration of a trial? ment that a plaintiff must meet before commencing a product The length of time between filing a case and trial depends on several liability lawsuit against a private company involved in the manufac- factors, including the complexity of the case and the need for dis- ture of an allegedly defective product. covery and pretrial motion practice, the shape of the court’s docket, However, from a practical standpoint, under the fact-pleading the time needed to try the case and the nature of the case itself. standard in federal courts following the decisions in Twombly and

178 Getting the Deal Through – Product Liability 2014 Shook, Hardy & Bacon LLP UNITED STATES

It is not uncommon for two or three years (or more) to pass before 11 May the court appoint experts? May the parties influence the a complex case reaches trial. appointment and may they present the evidence of experts they selected? Filing to judgment Typically, experts are called by one of the parties to testify, not the Once the case reaches trial, the length of trial is likewise a function court. Courts may appoint expert witnesses in cases, although this of the complexity of the case, the pace of the presentation of the is rarely done in practice. Experts may offer opinions when it will evidence and the court’s schedule. Simple cases may take less than a be helpful to the determination of a fact at issue and the witness’s week to try; complex cases may take several months. Jury delibera- testimony is based on scientifically reliable principles. Generally, an tion will last as long as required to reach a verdict, or until it is hope- expert witness must be qualified as an expert in a particular field in lessly deadlocked, in which case a mistrial will be declared. After a order to offer an expert opinion. verdict is reached and the court enters final judgment, the parties typically have 30 days to appeal. 12 What types of compensatory damages are available to product Evidentiary issues and damages liability claimants and what limitations (if any) apply? In most jurisdictions, compensatory damages may include both 9 What is the nature and extent of pretrial preservation and pecuniary (economic loss such as out-of-pocket expenses, medical disclosure of documents and other evidence? Are there any expenses, property damage) and non-pecuniary (intangible loss such avenues for pretrial discovery? as pain and suffering) damages, which are often capped due to the Federal and most state courts provide for liberal pretrial discov- danger of unlimited . ery, not only through interrogatories and depositions, but through requests for the production of documents as well. The federal courts 13 Are punitive, exemplary, moral or other non-compensatory and many state courts require the parties to file or exchange ‘initial damages available to product liability claimants? disclosures’ before trial to identify all individuals, documents and tangible things that may be relevant to the issues in the case. In most states, punitive or exemplary damages are recoverable when The federal and state rules also generally provide for broad doc- the defendant’s injurious act is accompanied by aggravating conduct ument discovery procedures through which a party may discover such as malice or gross negligence. The purpose of punitive damages any non-privileged information reasonably calculated to lead to the is generally to punish and to deter. While the defendant’s finances discovery of relevant evidence. The responding party may either may often be considered to determine the quantum of punitive dam- simply produce the information sought, object and produce the dis- ages, many states have begun scrutinising, limiting and even banning covery, or object and refuse to produce the discovery. It may addi- these awards altogether due to the proliferation of high verdicts. tionally seek a protective order from the court. Discovery disputes are generally resolved initially among the parties themselves, or later Litigation funding, fees and costs by a motion to compel. The court is generally empowered to punish 14 Is public funding such as legal aid available? If so, may potential discovery misconduct through sanctions up to and including entry defendants make submissions or otherwise contest the grant of of judgment against the offending party. such aid? Every jurisdiction makes some provision for providing legal aid to 10 How is evidence presented in the courtroom and how is the indigent individuals. Contingency fees and punitive damages, how- evidence cross-examined by the opposing party? ever, have made legal aid unnecessary in most personal injury and Both federal and state courts allow the admission of a wide variety product liability suits. of evidence, but each court has its own rules of evidence before evi- dence may be admitted. Generally, the proponent of the evidence 15 Is third-party litigation funding permissible? must lay a foundation for the evidence to demonstrate that it is authentic and admissible. While technically prohibited in most jurisdictions by common law, Live witness testimony and depositions are the most common statute or public policy, the prohibition is usually enforced under types of evidence. Witnesses may be either lay or fact witnesses or usury laws governing the loan arrangement. Moreover, some states expert witnesses. Lay witnesses may testify only to personal knowl- permit offensive uses of the prohibition to invalidate such agree- edge. Expert witnesses may offer opinions in a case when helpful ments. A few states have begun permitting third-party funding for to the determination of fact and when the opinions are based on appeals, or only for non-personal injury claims, such as intellectual scientifically reliable principles. property. Expert and lay witnesses are expected to testify in person rather than submit expert reports or depositions. Such out-of-court 16 Are contingency or conditional fee arrangements permissible? declarative statements are generally barred as inadmissible hearsay Contingency fees are allowed and typically governed only by the if offered to prove the truth of the matters asserted in the reports rules of professional conduct. Most contingency fees range between or depositions. A party’s sworn responses to written discovery, 25 per cent and 40 per cent of the judgment. however, may generally be admitted as evidence against that party. Depositions may also be used to impeach a witness, even if not admissible as substantive evidence. 17 Can the successful party recover its legal fees and expenses from The parties may also admit real or tangible evidence, such as the the unsuccessful party? actual malfunctioning product, where it is first established that the Under the American rule, each party pays their own legal fees regard- evidence is authentic, or what the proponent claims it to be. less of who prevails. There are limited exceptions to this rule such as when a statute, most often a consumer protection statute, authorises the payment of attorneys’ fees by the losing party, or when attorney conduct or equity demand it. Notwithstanding, the state of Texas, for example, adopted a tort reform measure in 2011 that grants judges the discretion to award costs and reasonable attorney’s fees to the prevailing party in conjunction with a ruling on a motion to www.gettingthedealthrough.com 179 UNITED STATES Shook, Hardy & Bacon LLP dismiss. The state of Tennessee adopted a similar measure in 2012 20 Is there a consumer protection statute that provides remedies, that awards up to US$10,000 to a party if the court finds that the imposes duties or otherwise affects product liability litigants? claim does not have a basis in fact or law. Most states have some form of deceptive trade practices act or con- sumer protection statute. These statutes proscribe certain types of Sources of law sales and marketing practices as unconscionable or deceptive. Some such statutes provide for enhanced penalties and presumptions in 18 Is there a statute that governs product liability litigation? favour of the consumer. There is no uniform product liability statute or common law in the United States. Each of the 50 states defines product liability law under its own standards, but typically product liability claims are 21 Can criminal sanctions be imposed for the sale or distribution of brought under strict product liability theory, tort (negligence or defective products? fraud) theory or warranty theory. Despite unsuccessful efforts by Congress to adopt criminal penalties with regard to product safety, there is no general criminal liability unique to defective products. To be criminally liable under state law, 19 What other theories of liability are available to product liability a product manufacturer must have the required level of criminal claimants? intent for any other similar crime. Otherwise, only the deliberate Strict liability misrepresentations to federal regulatory bodies with regard to a Most states recognise some form of strict liability, which focuses product that results in death or serious injury may subject officers or solely on the product in issue and the key question of whether that agents to criminal sanctions. product was defective, irrespective of whether the defendant’s con- duct was negligent or whether a contract was breached. Generally, under the strict product liability theory, a manufac- 22 Are any novel theories available or emerging for product liability turer or seller is liable for any product in a defective condition that claimants? is unreasonably dangerous to the user or consumer, that causes per- While many courts recognise the theory of medical monitoring, sonal injury, property damage and damage to the product itself if the there is a split of opinion as to whether this theory is an independ- seller (which includes the manufacturer) is engaged in the business ent cause of action or just a form of damages. Conceptually, medi- of selling the product, and the product reaches the user or consumer cal monitoring is different from increased risk or fear of disease in without substantial change in the condition in which it is sold. There which the compensation is for the incremental risk and the fear itself are essentially three types of defects: manufacturing defects, design respectively. Instead, plaintiffs seek to recover the actual cost for the defects and warning defects. medical test, which has been previously recognised, but what makes medical monitoring controversial is the award in the absence of Negligence physical injury and its use in class actions. Negligence, the most common tort theory, focuses upon the con- duct of the manufacturer rather than the nature of the product itself. 23 What breaches of duties or other theories can be used to Negligence is described as the failure to use ordinary care, which is establish product defect? usually described as the care that a reasonable person would use under the same or similar circumstances. In a product liability claim, Within the United States, the various states determine product defect the duty will generally be expressed in terms of a duty to manufac- under one or a combination of two separate defect tests, known gen- ture and market a reasonably safe product, and the alleged breach erally as the consumer expectations test, and the risk utility test. The will be expressed in terms of a manufacturing, design or warning consumer expectations test provides that a product is unreasonably defect. dangerous if it is dangerous to an extent beyond that which would be contemplated by an ordinary consumer with knowledge of the Fraud product common to the community. The risk utility test attempts to Fraud is an ‘intentional tort’ that requires specific intent to deceive. balance the utility of the product against the risks of its particular The two primary varieties of fraud recognised are fraudulent mis- design. representation and fraudulent concealment. In a product liability context, courts have generally held that a manufacturer has a duty 24 By what standards may a product be deemed defective and who to disclose non-obvious dangers of its products. bears the burden of proof? May that burden be shifted to the opposing party? What is the standard of proof? Conspiracy Manufacturing defect Conspiracy is also an intentional tort requiring specific intent. It is a A manufacturing defect occurs when the product left the defendant’s derivative tort that generally must be based on an agreement among control, it deviated in some material way from the design specifica- two or more persons to commit another independent tort. tions, formula or performance standards of the defendant, or from otherwise identical products manufactured under the same design Contract specifications. Typically, there are three varieties of contract breach in the product liability context that may be asserted simultaneously: Design defect • breach of express warranty, where the product fails to conform A design defect occurs when something is wrong with the product to a promise made by the seller that served as part of the basis of even though it conforms to the design specifications of the product, the bargain; or is in the condition intended by the manufacturer. • breach of implied warranty of fitness for a particular purpose, where a seller at the time of contracting knew of a particular Warning defect purpose for which the goods are required; and A warning defect involves a failure to warn or to adequately warn of • breach of implied warranty of merchantability, where the prod- a reasonably foreseeable danger of the product. Typically a warning uct is not fit for the ordinary purpose for which the product is defect arises where: used. • inadequate warnings or instructions are given;

180 Getting the Deal Through – Product Liability 2014 Shook, Hardy & Bacon LLP UNITED STATES

• the foreseeable risks of harm posed by the product could have Most states also impose either a general or product liability- been reduced or avoided by the provision of reasonable warn- specific statute of repose. Such statutes cut off claims after a certain ings or instruction by the manufacturer (or others); and number of years, generally running at between five and 10 years, • the failure to provide such warnings or instructions rendered the from a specified event (usually the sale or delivery of the product). product not reasonably safe. Certain statutes of repose will apply only to certain types of prod- ucts, such as improvements to machinery. Statutes of repose typically trump statutes of limitation, and cut off a cause of action even if it 25 Who may be found liable for injuries and damages caused by accrues within the limitation period, regardless of when the cause of defective products? action is discovered. In theory, any entity in the stream of commerce (eg, the final manu- facturer, the manufacturer of individual components in the product, sellers, distributors, importers) may be liable under a strict product 29 Is it a defence to a product liability action that the product liability claim for injury caused by a defective product. Under a neg- defect was not discoverable within the limitations of science and ligence theory, only those respondents with a duty to the plaintiff technology at the time of distribution? If so, who bears the burden will be potentially liable. This will usually include the manufacturer, and what is the standard of proof? but may additionally include the manufacturer of individual compo- Evidence of a product’s conformity with the state-of-the-art at the nents. However, many states have sealed container or innocent seller time of manufacture is typically not a bar to recovery under strict statutes that insulate non-culpable retailers or middlemen importers liability, but rather is evidence for the jury to decide whether a prod- from liability. uct was defective when it left the manufacturer. Likewise, under the negligence theory, the state-of-the-art is admissible to assess whether 26 What is the standard by which causation between defect and the manufacturer has met its duty of due care to make a reasonably injury or damages must be established? Who bears the burden safe product. and may it be shifted to the opposing party? The plaintiff bears the burden of proving that the breach of duty in 30 Is it a defence that the product complied with mandatory (or a tort claim, the breach of contract in a warranty claim or the prod- voluntary) standards or requirements with respect to the alleged uct defect in a strict liability claim proximately caused the plain- defect? tiff’s injury. This analysis typically involves two distinct concepts In most jurisdictions, proof that a product complied with an appli- – cause in fact and policy concerns. The former is usually analysed cable safety statute, administrative regulation or industry standard under either the ‘but for’ causation standard or the substantial fac- is at least admissible as some evidence of due care and in some states tor standard. The latter examines whether, even if the defendant’s may create a rebuttable presumption of non-defectiveness. Only a conduct factually caused the injury, it is too remote or indirect to minority of jurisdictions provide that such compliance is conclusive warrant liability as a matter of public policy. proof of the lack of defect or, conversely, preclude such evidence. Some states provide inferences in favour of a plaintiff, such as a Evidence of non-compliance with such standards is admissible in rebuttable presumption of defect where a product malfunctions. In most states to prove defectiveness, although such evidence is not some cases, when there is more than one defendant, and the plaintiff dispositive. Other states address this issue in the context of the state- does not know which one is liable, the burden of proof may shift to of-the-art defence. the defendants to prove they are not the liable party or to show their relative percentage of liability. 31 What other defences may be available to a product liability defendant? 27 What post-sale duties may be imposed on potentially responsible Comparative fault and comparative negligence parties and how might liability be imposed upon their breach? Some form of comparative fault or comparative negligence is a Generally a manufacturer has no per se common law duty to recall defence in most jurisdictions. This doctrine reduces the plaintiff’s products. However, ‘voluntary recalls’ may be required as part of the recovery based on the plaintiff’s adjudged percentage of fault for manufacturer’s post-sale duty to warn once a manufacturer discov- its injury. Strict comparative fault reduces the plaintiff’s amount of ers a serious or life-threatening hazard or a defect in a product. As recovery by the percentage of the plaintiff’s fault, and allows the the awareness of the frequency and gravity of the potential or actual plaintiff to recover some level of damages regardless of whether the harm increases, so too does the post-sale duty to warn, including the plaintiff’s level of fault exceeds that of the defendants. Modified manufacturer’s duty to recall the product. comparative fault allows the plaintiff to recover damages where the plaintiff’s percentage of fault is equal to or less than the defendants’ Limitations and defences percentage of fault (50 per cent or less). An alternative type of modi- 28 What are the applicable limitation periods? fied comparative fault only allows the plaintiff to recover damages if the plaintiff is less at fault than the defendants (less than 50 per cent). Many states’ product liability statutes create specific periods of limitation. Under these statutes, the limit is usually set at two to Contributory negligence three years after the date the cause of action accrues. Otherwise, A minority of states retain the defence of contributory negligence, the limitations period depends upon the cause of action at issue. which bars any recovery by the plaintiff where the plaintiff is at fault For example, the period for personal injury actions is often two or in any percentage for its injury. This defence has been largely aban- three years from the date of accrual, while for contract actions it doned, due to the fact that a plaintiff may be denied any recovery if may be four years. Accrual has been defined generally as the date at even 1 per cent at fault. which a plaintiff has the basic information it needs in order to sue. Under some state laws, the cause of action for personal injuries will Assumption of risk accrue at the time of the injury, but most states apply a discovery rule Where recognised, assumption of the risk is a complete affirma- to latent diseases or continuing torts. Under the discovery rule, the tive defence, which a defendant must plead and bear the burden cause of action will not accrue until the plaintiff discovers or should of proof. Unlike contributory negligence, assumption of the risk have discovered the injury and the connection between the injury involves a subjective standard that requires that the plaintiff actually and the defendant. www.gettingthedealthrough.com 181 UNITED STATES Shook, Hardy & Bacon LLP knew the particular risks of the product and voluntarily assumed Jurisdiction analysis them. Many states have subsumed the concept of assumption of the risk within their comparative fault analysis, and no longer recognise 33 Can you characterise the maturity of product liability law in terms it as a separate defence. of its legal development and utilisation to redress perceived wrongs? Open and obvious or commonly known risks Product liability law in the United States, which is largely a func- In the context of negligence claims, most states impose a duty to tion of state law, is well developed in most states, but is fluid and warn only for dangers that are not open and obvious. Where a dan- continues to adapt and respond to developing trends and theo- ger is open and obvious, it is also difficult to prove that a defendant’s ries. For example, abuses of the product liability laws in particular failure to warn, whether in a strict liability context or a negligence areas such as asbestos claims and pharmaceutical litigation have context, was the cause of a plaintiff’s injury. Where the particular led to reform of procedural rules, like class actions, and other tort danger is specifically known, the defence may rise to the level of reforms in various states, such as caps on damage awards. These assumption of the risk. measures have reduced the number of these types of product claims. However, countervailing measures continue to emerge to make new Product misuse types of product claims available to consumers (see question 36). Unforeseeable misuse or abnormal use of a product by the consumer In California, for example, in addition to the imposition of public generally serves as a complete defence if the misuse was not reason- penalties, Proposition 65 has made it possible for private citizens to ably foreseeable to the manufacturer at the time of sale or manu- enforce a product manufacturer’s failure to provide adequate warn- facture. Most states recognise misuse as an affirmative defence for ings for products containing chemicals ‘known to the state’ to cause which the defendant bears the burden of proof. However, a minority cancer or reproductive harm. These claims are often brought in con- of states treat misuse as an element of comparative fault, rather than junction with California’s consumer protection statute, which also as a complete defence. awards attorney’s fees and injunctive relief, making their filing easier for consumers. Learned intermediary This defence applies to certain defined types of products such as 34 Have there been any recent noteworthy events or cases that prescription drugs or medical devices for which a ‘learned intermedi- have particularly shaped product liability law? Has there been ary’ can be expected to provide warnings to the ultimate consumer. any change in the frequency or nature of product liability cases Therefore, the manufacturer or seller has a duty to warn only the launched in the past 12 months? learned intermediary, such as a physician. The evolution of United States product liability law is marked by Alteration several seminal events, and is the product of thousands of court Most states provide that substantial alteration of a product is a com- decisions, statutes and scholarly articles. Product liability case law plete defence to liability. A minority of states treat product alteration perhaps originates in a 1916 case, MacPherson v Buick Motor Co as a partial defence to be analysed in terms of comparative fault, in which negligence ‘duty’ concepts were first applied in a product and will reduce a plaintiff’s recovery only to the extent to which the manufacturing and design defect context. Then in 1963, California alteration resulted in a plaintiff’s injuries. adopted the first strict liability theory of recovery in Greenman v Yuba Power Prods Inc. In 1965, the American Law Institute codi- Contract and warranty defences fied strict liability in section 402A of its Restatement (Second) of Many states apply tort and strict liability-based defences to breach Torts, which has been adopted by the vast majority of states. The of warranty claims brought for personal injuries, viewing these Restatement (Third) of Torts, released in 1998, reframes strict liabil- claims as essentially strict liability claims. Several contract-based ity law in several respects, but has not been adopted yet by most defences may apply against a breach of warranty claim. Where only states. economic damages are alleged, most states recognise a lack of privity According to the Administrative Office of the US Courts, which as a defence. releases an annual statistical report on the federal judiciary, the num- ber of product liability claims commenced in US district courts in the year 2000 was 15,349. This number doubled by the year 2005, 32 What appeals are available to the unsuccessful party in the trial and doubled again by 2010 when the number of cases commenced court? reportedly reached 64,367. In 2013, the number decreased slightly As stated in question 1, in both the federal and state systems, an to 50,526. unsuccessful party almost always has the right to appeal the first Importantly, this number reflects only the cases in federal courts, final determination of its case. The period for filing a claim after and excludes state courts. judgment is typically 30 days. The appeal is not a retrial, but a brief- It is possible that at least some of this initial increase observed ing of the claims of legal error, followed by oral argument before the in federal courts since 2005 is due to the 2005 Class Action Fairness appellate court. The appellate court assesses the arguments based Act by the US Congress. The Act’s goal was to expand federal juris- on the applicable ‘standard of review’. Depending on the court and diction over many large class action lawsuits and mass actions that issue, a further appeal may be granted by the state supreme court or previously were heard by state courts, which over time were viewed the US Supreme Court. However, this review is often discretionary as less capable of rendering fair decisions, often marked by large and and permitted only if, over time, a split of opinion has developed arguably unjustified awards, particularly in product liability cases. among the appellate courts on the question of law. In recent years, US courts have more closely considered the A party need not always wait until the final judgment to seek concept of federal pre-emption, which is a fundamental part of review. In some instances, a party may seek appellate review through the US Constitution, in the context of state law consumer protec- an interlocutory appeal or writ of mandate if a contested issue tion actions. This case law, which has primarily involved pharma- would conclusively determine the outcome of the case or if it would ceutical and medical device products, may play a key role in the effectively be unreviewable if immediate appeal were not allowed. defence of consumer product claims since, in August 2008, the US The best example in the product liability context is the interlocutory Congress approved the Consumer Product Safety Improvement Act review of a decision certifying a class action. (CPSIA). Although the CPSIA requires the Consumer Product Safety

182 Getting the Deal Through – Product Liability 2014 Shook, Hardy & Bacon LLP UNITED STATES

Update and trends

In November 2013, the US Consumer Product Safety Commission products from the marketplace. Companies then have a safe harbour (CPSC) proposed new guidelines for voluntary recall notices. The in which to investigate the safety concern, which can take additional intention behind the new guidelines is to align the voluntary recall time. process more closely with the process for mandatory recalls under The CPSC’s proposed changes, however, would allow CPSC staff section 15 of the Consumer Product Safety Act (CPSA). The CPSC’s to veto a company’s ability to disclaim liability. Instead, companies proposal includes the creation of a new subsection within the relevant could be required to make an implied admission of liability in order to Code of Federal Regulations, Principles and Guidelines for Voluntary move forward with the recall process before an adequate investigation Recall Notices, that would impose requirements for compliance can even be made. Such an admission could be used in subsequent programmes, introduce standardised language and content in recall litigation against the company as evidence of the company’s liability notices, and, most troubling, strengthen the authority of CPSC staff for the defect and related injuries to consumers. Because of the in the event of a company’s non-compliance. This last change has potential exposure this creates, companies would be well-advised to companies subject to the CPSA – and the counsel who represent them engage counsel before proceeding with any recall or possibly even – concerned because it marks a shift away from the original voluntary forgoing the voluntary recall altogether until it either completes its scheme and introduces substantial future risks to companies in investigation into the safety risk or the CPSC mandates a formal product liability litigation. recall. This chilling effect would eviscerate the benefits of the present The CPSA does not specifically recognise voluntary recalls, but voluntary scheme and delay the recall process substantially, causing over time, the CPSC and companies have developed a less formal greater harm to both consumers and companies. process whereby a ‘fast track’ recall is negotiated. This option is The CPSC received public comments on the proposed rule change now used with greater frequency than mandatory recalls, resulting in during February 2014. As at the time of writing, no final decision on fewer mandatory recall actions by the agency and greater flexibility to the proposal had been made. Notwithstanding this, it illustrates how consider the circumstances of each case. This encourages companies even a slight shift in the regulatory regime can have substantial ripple to report potential defects in their products to the CPSC without effects in product liability litigation. For more information on the recall necessarily inviting legal penalties. For the CPSC and consumers, process in the United States, see Getting The Deal Through: Product this has the benefit of more quickly removing potentially dangerous Recall 2014, ‘United States’ by Harley V Ratliff and Devin K Ross.

Commission to impose stricter requirements on consumer goods, it 36 Describe any developments regarding ‘access to justice’ that explicitly pre-empts certain product claims. would make product liability more claimant-friendly. Finally, an important tool for defending product liability claims, As discussed elsewhere in this chapter, product liability litigation in in the form of a preliminary motion to dismiss, has been sharpened the United States already has many claimant-friendly features such recently by the US Supreme Court decisions of Twombly and Iqbal, as class actions, contingency fees and punitive damages that are which impose a higher pleading requirement than previously existed widely used. Although historically there has been a prohibition on in federal courts. third-party funding, this is slowly changing depending on the state and the type of claim (see question 15). In addition, although not unique to product liability, US courts 35 Describe the level of ‘consumerism’ in your country and have been open to expanding their reach over possible defendant consumers’ knowledge of, and propensity to use, product liability companies outside of the United States. As a recent example, in litigation to redress perceived wrongs. January 2014, the US Circuit Court of Appeals for the Fifth Circuit The diversity of US product liability law, the availability of puni- affirmed a decision by a US district court in Louisiana, which ruled tive damages, the potential for class actions and the prevalence of that a Chinese manufacturer of drywall, without any physical con- contingency fees make the United States fertile ground for product tacts with the forum, was subject to personal jurisdiction. The deci- liability litigation. It is fair to say that the United States has become sion was based on the foreign company’s specific contacts with a the epicentre of product liability litigation in nearly every category of buyer in Virginia and its general engagement with the US market. products. The US plaintiffs’ bar is well financed, well organised and The company’s nationwide contacts were marked by, among other experienced. The dominant plaintiff firms have adopted an entre- things, the maintenance of a website with English-language content preneurial attitude towards litigation, particularly product liability that was accessible to US consumers and efforts to host US compa- litigation. While tort reform has been achieved in many jurisdictions nies for factory and marketing visits at its facilities in China. to discourage what some consider to be predatory, duplicative and Finally, although not an expansion of law, there has been a con- meritless lawsuits, litigation by consumers continues to be a substan- siderable expansion of information regarding product safety made tial risk for product manufacturers.

Gregory L Fowler [email protected] Marc E Shelley [email protected]

2555 Grand Blvd Tel: +1 816 474 6550 Kansas City Fax: +1 816 421 5547 M0 64108-2613 www.shb.com United States

www.gettingthedealthrough.com 183 UNITED STATES Shook, Hardy & Bacon LLP available to consumers due in part to the online portal launched in decision to publish the incident report was ‘arbitrary and capricious’ 2011 as part of the Consumer Product Safety Improvement Act of and therefore violated the Administrative Procedure Act. The court 2008. One of the biggest criticisms of the portal, saferproducts.gov, concluded that the report was both misleading and could have influ- has been the public’s ability to submit incident reports directly to the enced the purchasing decisions of a reasonable consumer given the database and the lack of quality control by the CPSC. Once notified publication on a government-sponsored website. The court’s rul- of an incident report, the manufacturer has 10 days to challenge the ing validated many of the concerns regarding the CPSC’s database report’s accuracy before it is published on the database. The CPSC voiced by industry, particularly that poorly vetted information might conducts its own review and makes the ultimate decision on whether find its way onto the public database and harm the goodwill of a to publish it and how it will be worded. An unidentified company company. (For another example of how steps by regulators such as sued the CPSC under seal in the US District Court of Maryland for the CPSC can have unforeseen consequences in product liability liti- publishing an incident report that the company claimed was ‘materi- gation, see ‘Update and trends’.) ally inaccurate’. In October 2012, the court ruled that the CPSC’s

184 Getting the Deal Through – Product Liability 2014 Araquereyna VENEZUELA Venezuela

Pedro Ignacio Sosa Mendoza and Rodrigo Moncho Stefani Araquereyna

Civil litigation system in the case of the said repair not being possible. Said procedure may also result in administrative fines for the liable party. 1 What is the structure of the civil court system? The civil court system in Venezuela is structured to consider both the territory and the value of the claims being settled. In respect of the 5 Are mechanisms available to the parties to seek resolution of a territory, the country is divided into judicial constituencies, meaning case before a full hearing on the merits? that it is administratively divided to guarantee access to justice in The parties may reach an agreement during a civil procedure for every state of the country. Competence according to the territory product liability, which once ruled admissible by a judge would have may be decided conventionally between the parties. the same effects as res judicata, meaning that the same claim could According to the value of the claim being settled, the civil court not be filed again. system is divided into three different levels of courts, municipal courts, first instance courts and superior courts. Some cases, how- 6 What is the basic trial structure? ever, may be settled by the Civil Cassation Chamber of the Supreme Tribunal of Justice. Product liability actions in Venezuela go through the procedure known as ordinary civil procedure, which must be written. The only possibility for an oral deposition is when witness testimony is being 2 What is the role of the judge in civil proceedings and what is the rendered, which then also has to be transcribed into a minute, which role of the jury? is accompanied by the file of the proceedings. The role of the judge in civil proceedings in Venezuela is as director According to the basic and normal process, after the complaint of the process, meaning that the judge simply guarantees that the is filed with the competent court, the defendant must present his procedural rules are followed, and it is the parties that have the main or her answer in writing, within 20 court days following the day responsibility to carry forward the proceedings. This type of system when the defendant was duly served. There is also the possibility to is also called adversarial. present a motion for previous issues, which are comprised of a series of pre-trial defences based on certain aspects related to the process that are intended to impede the continuance of the trial as it is. The 3 What are the basic pleadings filed with the court to institute, defendant may also file a counterclaim. prosecute and defend the product liability action and what is the Venezuelan laws observe the basic principle related to evidence, sequence and timing for filing them? which provides that a party making allegations must provide suffi- To initiate legal action emanating from product liability, the plain- cient evidence supporting the allegation, called the burden of proof. tiff must file a pleading with the competent court that deals with After the suit has been admitted and the defendant has filed the its claims, supporting facts and legal reasoning; this pleading is answer to the merits, or after the plaintiff has answered an even- known as a complaint. The statute of limitations for these types tual counterclaim, the evidence stages begin. The evidence stages in a of complaints is that of personal actions, which according to the trial will develop as follows: the parties have 15 days to promote or Venezuelan Civil Code is 10 years, starting from the moment when indicate to the court all the evidence that will be produced in order the plaintiff could have brought legal action. to support their arguments. When this period ends, there is a three- If there are guarantees for the products established in the con- day period for both parties to oppose each other’s evidence, and tract or by law, special limitation periods could be applicable. another three additional days for the court to admit or reject them. The production of evidence must be conducted within a lapse of 30 days beginning from the admittance of the evidence. Additional 4 Are there any pre-filing requirements that must be satisfied before timing shall be granted for the production of evidence when it has to a formal law suit may be commenced by the product liability be obtained from another judicial circuit. Also, an extension of this claimant? time frame could be granted by the court if it is considered that such There are no pre-filing requirements for claims resulting from prod- an extension is necessary. uct liability in Venezuela, unless the said claim is going to be brought On the 15th day after the conclusion of the evidence stage, the against a government entity, in which case, an administrative proce- parties shall file a written statement containing its final arguments dure must be initiated before the Attorney General’s Office. (closing arguments). Each party will be entitled to make observa- Although it is not a requirement, a plaintiff may appear before tions to the other party’s closing arguments within the following the consumer protection agency in Venezuela, called the National eight days. The said rulings may be appealed, and only in excep- Superintendence for the Protection of Socioeconomic Rights tional cases may a cassation motion be filed before the Supreme (Sundde), to initiate a procedure for the said institute to compel the Tribunal of Justice. liable party to pay for a free repair of the product or a full refund A ruling must be issued within 60 days after the period of time given for the filing of the closing arguments ends. Such a period of www.gettingthedealthrough.com 185 VENEZUELA Araquereyna time can be extended once, by 30 additional days, only when excep- Only qualified people who by virtue of their profession, art tional circumstances require for such measures. or industry have the practical and theoretical knowledge that are The number of days for the terms and periods previously men- required to review a specific situation, are entitled to act as experts. tioned may be calculated in consecutive or court days, depending on Should an expert’s assessment be required in a trial, both parties the case. Court days are the days on which the courts actually work. shall appoint one expert each, and a third one will be appointed by A lawyer authorised to practice in Venezuela must initiate the the court. However, if the parties agree, the expert assessment could trial proceedings by filing the claim mentioned above and must pre- be prepared by one expert. These three experts will participate as a sent all supporting arguments with adequate and sufficient evidence. team in the evaluation of a determined situation and their response The parties are also obliged to follow the trial at every stage of the or expert’s assessment shall be submitted to the trial’s file in writing. procedure. For the role of the judge, see question 2. The parties may ask for clarifications. Also, expert evidence may be brought to trial by means of wit- nesses. There are two kinds of witnesses regarding expert evidence: 7 Are there class, group or other collective action mechanisms the expert witness who is a qualified person and who does not know available to product liability claimants? Can such actions be the facts of the case, but will offer his or her technical knowledge brought by representative bodies? and expertise; and the witness expert who is a person who knows The Venezuelan constitution has established collective- and diffuse- the facts discussed in the case and will offer not only his or her tech- rights actions, which up until 2010 were extensively regulated nical assessment on the specifics of the case but also general techni- by case law. Said case law was then incorporated in the Supreme cal knowledge and expertise. Tribunal of Justice’s Act. These types of actions could be used for product liability claims. If the claim is related to nationally relevant issues, the competent 12 What types of compensatory damages are available to product authority to decide the matter is the Constitutional Chamber of the liability claimants and what limitations (if any) apply? Supreme Tribunal of Justice, otherwise it would be the First Instance The Venezuelan Civil Code establishes that any person who suffers Courts where the facts occurred. The procedure is both written and injury due to tort or breach of duty may be indemnified for all prop- oral, and is comprised of very short terms. erty damage and pain and suffering caused. Representative bodies may file a collective- and diffuse-rights In addition to the provisions of the Civil Code, consumer protec- action, but depending on how the said complaint is brought, said tion regulations regarding product liability were provided for in the body may need to be somehow related to the claim. Act for the People’s Protection on the Access of Goods and Services (APPAGS) until 23 January 2014, when the Just Prices Master Law was published. 8 How long does it typically take a product liability action to get to Although the Just Prices Master Law abolished all of the pro- the trial stage and what is the duration of a trial? visions contained in the APPAGS, it prohibits any kind of actions It is not possible to estimate a fixed time for the completion of a that may violate consumer’s rights. Considering this, and for the product liability action, due to the complexity of the courts system purposes of this chapter, we have referenced provisions of the now in Venezuela. In theory, the proceedings should take up to 120 court abolished APPAGS, because, up until the time of writing, no further days for the first stage, and then 60 consecutive days for the decision regulations regarding product liability had been enacted, but it is to be issued. However, most cases take from two to three years to safe to assume that any future regulations may be similar to the ones reach a decision in the first instance. that existed before the Just Prices Master Law was enacted. Considering the above-mentioned, the APPAGS provided that Evidentiary issues and damages the party liable for the damages caused by a product is also respon- sible for any repairs that may be needed to be done to the product or 9 What is the nature and extent of pretrial preservation and if necessary the cost to replace it. disclosure of documents and other evidence? Are there any avenues for pretrial discovery? Unlike legislation in the common law system, there is no specific 13 Are punitive, exemplary, moral or other non-compensatory opportunity for the parties to produce their evidence prior to the damages available to product liability claimants? case in Venezuela. As we have mentioned, each party must prove the Venezuelan legislation does not provide for payment of the puni- alleged facts during the proceedings, leaving the judge to consider tive damages frequently granted under the common law system. the evidence. However, our legislation does recognise payment for moral damages (pain and suffering), although the terms of the claim are somewhat uncertain. Although there is some discussion regarding the recog- 10 How is evidence presented in the courtroom and how is the nition of moral damages in contractual liability cases, in torts and evidence cross-examined by the opposing party? other extra-contractual liabilities both moral and material damages The evidence must be presented in writing at the time of the are recognised. It is up to the judge to both establish and quantify evidence-promotion period mentioned previously. If the type of evi- moral damage, the parties are not entitled to estimate a fixed amount dence allows, the parties may cross-examine the opposing party’s of moral damages. evidence, when the said evidence is produced at trial. As mentioned Moral damage is considered to be the damage suffered directly in question 6, live testimony may be produced and cross-examined, by the victim to his or her feelings, beliefs or reputation. An example but has to be, at the same time, transcribed into a minute filed to the of indemnifiable moral damage is compensation to the spouse and action’s docket. certain relatives for the pain suffered by a victim’s death.

11 May the court appoint experts? May the parties influence the appointment and may they present the evidence of experts they selected? As evidence, the parties, or even the court in exceptional cases, may request an expert judgment to be rendered upon technical issues, pursuant to the action.

186 Getting the Deal Through – Product Liability 2014 Araquereyna VENEZUELA

Litigation funding, fees and costs According to the APPAGS, members of the manufacturing or commercialisation chain of a product are jointly liable for a free 14 Is public funding such as legal aid available? If so, may potential repair or a full refund of the said products when: defendants make submissions or otherwise contest the grant of • products subject to compulsory quality regulations do not com- such aid? ply with the applicable conditions; Although very rare in practice, Venezuelan procedural legisla- • materials, elements, substances or ingredients that constitute the tion provides for a gratuity benefit in all civil judicial proceedings, product do not correspond with the characteristics they purport included product liability claims. The said benefit may be requested to bear; by anyone who earns less than three times the national minimum • the product is acquired with a determined warranty for its qual- wage. ity or function and within the time the warranty is still valid, a The gratuity benefit means a waiver of all the fees needed to be deficiency in the guaranteed quality or function becomes evident paid during a trial for the requesting party. The potential defendant as long as the product has been normally used or consumed may oppose the granting of the benefit, following which both parties according to the circumstances and nature of the product; have the right to submit evidence supporting their claims regarding • any product, due to any deficiencies in fabrication, elaboration, the gratuity benefit request and the matter will be finally decided by structure, quality or sanitary conditions, depending on the par- the judge. ticular case, is not suitable for its intended use; • the agreed specifications of a product between the provider and the final consumer are not met by the said products; 15 Is third-party litigation funding permissible? • based on the permitted tolerance limits, the net content of a Agreements between a potential plaintiff and a third party or rep- product is less than it should have or when the quantity of the resentative of the plaintiff to finance the costs of the litigation in said product is less than the quantity indicated on its packaging; exchange for a percentage of the claims proceeds, also known as • the instrument employed for the measurement of the content, quota litis pacts, are inadmissible and therefore any third-party quantity, volume or any similar measurement category has been funding for a product liability claim would not be permissible. used to the detriment of the consumer or out of the limits of tolerance allowed in these types of measurements; and 16 Are contingency or conditional fee arrangements permissible? • a prior repair was not satisfactory. Contingency fee arrangements, the common term for the agreement Product liability is not limited to the above indicated causes, but as between attorneys and their clients whereby the attorneys agree to mentioned, the APPAGS established them as the ones that entitle represent their clients for a compensation consisting of a percentage the final consumer to ask for a free repair or a full refund as men- of the amount recovered in a judicial or non-judicial service, are not tioned in question 4. Consumers may only petition Sundde for the strictly prohibited in Venezuela. free repair of the product or a full refund. A claim for other repara- There are, however, certain prohibitions and limits that forbid tions and damages will necessarily be filed through the ordinary civil attorneys to proceed freely with regard to the estimation and charge procedure. of their fees. On the one hand, there is a limit imposed by article 286 Although there has been some discussion on the matter, as a of the Civil Procedure Code, which indicates that no attorney shall consequence of the protectionist nature of the law in favour of con- charge more than 30 per cent of the value of the litigation. On the sumers, most Venezuelan commentators agree on the fact that the other, as mentioned above, the Civil Code prohibits quota litis pacts product liability established in the APPAGS is a strict liability, mean- (see question 15). ing that the possible claimants would not have to prove any fault According to the Supreme Tribunal of Justice’s case law, contin- on the part of the provider or party liable for the damage, but only gency fee arrangements are not prohibited in Venezuela. Attorneys the damage and the casual relation between the product and the and clients must be fully aware, however, of the limitations and the damage. prohibitions contained in Venezuelan law as regards legal fees. According to the Venezuelan Civil Code, strict liability is based on extra-contractual civil liability for the protection of property. 17 Can the successful party recover its legal fees and expenses from Commentators have interpreted that the members of the manufac- the unsuccessful party? turing or commercialisation chain, having products in their keeping, The successful party of a product liability action may claim from are responsible for the products they manufacture or sell. the losing party all the costs it incurred due to the proceedings. The It is important to note that the APPAGS established the possibil- ‘loser pays’ rule in Venezuela only applies to those proceedings in ity of pointing out the specific member of the manufacturing and which the decision is absolutely contrary to the intentions of the commercialisation chain liable for the damages instead of applying losing party. The proceedings costs include attorneys’ fees. In some joint liability. Therefore, if a member of the said chain is sued, he or cases, without the interested party asking for it, the court may rule she could argue as a defence that another member is solely liable. that the losing party must pay the proceedings costs and attorneys fees incurred during the trial. 19 What other theories of liability are available to product liability However, it should be mentioned that the procedural rules in claimants? Venezuela establish a limit to the costs that the losing party must pay Although, as we have seen, there is a special procedure for product to the winning party, in order to cover its legal expenses. This limit liability contained in consumer protection legislation, claimants can has been fixed at 30 per cent of the amount involved in litigation. also use contractual tort liability to present their demands. The basis of contractual liability is mainly contained in the Sources of law Venezuelan Civil Code. However, its provisions dictate a series of 18 Is there a statute that governs product liability litigation? principles and characteristics for the establishment of this type of liability, since its true foundation is a contract or any other agree- As mentioned, in Venezuela, product liability litigation is conducted ment between the parties. Contractual liability arises from a breach following the ordinary civil procedure that is contained in the Civil of contractual provisions, or any other conventional agreement Procedure Code (CPC), but rules specifically pertaining to product between the parties. liability were contained in the APPAGS (see question 12). www.gettingthedealthrough.com 187 VENEZUELA Araquereyna

In order to prove and effectively present a claim for contrac- The possible criminal sanctions range from six months to five years tual liability, the plaintiff must provide sufficient evidence to at least in prison for the person found to be responsible, and a possible pro- demonstrate the existence of the contract and the breach of any of hibition on exercising commercial activities for up to 10 years. the obligations contained in such. The law provides a method of determining the importance and influence of the fault of the agent. 22 Are any novel theories available or emerging for product liability The measurement methods use ‘precaution’ as a way of evaluating claimants? the influence of the agent’s conduct while causing the contractual breach. When a contractual breach has been alleged, the fault of At present, the field of product liability is neither being developed the agent will only be measured on a limited basis and can only be nor widely pursued by claimants in Venezuela, therefore, there are declared in cases of absolute absence of precaution and normal pre- no novel or emerging theories in product liability upon which we caution. This excludes of course any action of the agent that could can comment at the time of writing. be interpreted as breach of a situation that requires maximum levels of precaution, which exceeds normal expectations. This is the rea- 23 What breaches of duties or other theories can be used to son, according to which in cases of civil liability, the repaired dam- establish product defect? ages will only extend to those foreseeable. See questions 12 and 18. The APPAGS expressly provided for certain Despite the above, the parties can regulate and limit any liability causes that lead to the establishment of a product defect, but as also scenarios in a contract, and they can even exclude any kind of liabil- mentioned, plaintiffs may claim product liability for a host of other ity, unless the breach is caused with intention or gross negligence. reasons, given the fact that the said list of causes is not limited to civil Usually, the contractual liability indemnifications are determined in liability but only to the liability referred to as the free repair or full the specific agreement. refund of the product. Torts are equally regulated in the Venezuelan Civil Code and it is conceived as the situation according to which certain damage has been caused by breach of a legal provision. 24 By what standards may a product be deemed defective and who In order to build up a case by virtue of a tort, the plaintiff must bears the burden of proof? May that burden be shifted to the sufficiently prove all elements of liability; damage, the causal rela- opposing party? What is the standard of proof? tion between the agent’s conduct and the damage itself, and the In Venezuela, the Autonomous National Service of Normalisation, agent’s fault. Quality, Metrology and Technical Regulations (Sencamer), is the With regard to damages, the liability for tort extends to the government agency responsible for issuing technical rules applica- material damages and to the ‘pain and suffering’ caused. The mate- ble, among other things, to the quality and measurements of some rial damages should be proved as much in their nature as in their products to which the APPAGS referred, to use as standards when quantity, as well as the causal relationship, and they are fundamen- considering product defects (see also questions 12 and 18). tally constituted by the ‘emerging damage’, being the effective loss Venezuelan procedural rules observe a basic principle related to suffered by the victim. The ‘pain and suffering’ is the damage suf- evidence, which provides that a party alleging a fact bears the burden fered directly by the victim. The damages in torts are extended to of proof, and the said burden cannot be shifted in a product liabil- those foreseeable and unforeseeable damages. ity procedure. Thus, in a product liability procedure, the consumer In addition, when referring to the fault of the agent, the plaintiff would carry the burden of proving the alleged defect in the product must provide sufficient evidence supporting the actual cause of the that caused damages or injuries or both, as well as the causal rela- damage, the violation by the defendant of an express or tionship between the defect and the said effect. The defendant would of a general legal duty, the wilful misconduct or negligence by the also have to prove any allegation made in his or her defence. defendant and the causal relationship between the illegal action and The general theory of evidence provides that the judge must base the damage. the decision only on sufficiently proven facts alleged by the parties. Unlike contractual liabilities, parties cannot limit or exclude The judge must apply his or her sound judgment when reviewing the liability originated in tort, since contractual agreements on future evidence in order to reach his or her decision. damages are not permitted.

25 Who may be found liable for injuries and damages caused by 20 Is there a consumer protection statute that provides remedies, defective products? imposes duties or otherwise affects product liability litigants? As mentioned in question 18, according to the APPAGS (see ques- As mentioned, product liability regulations were contained in the tion 12), any member of the manufacturing or commercialisation consumer protection legislation, the APPAGS, now replaced by the chain of a product may be liable for a free repair or a full refund of Just Prices Master Law (see question 12). said products. That said, all of the above-mentioned companies or individuals may be found to be jointly liable for damages and inju- 21 Can criminal sanctions be imposed for the sale or distribution of ries due to the fact that the APPAGS establishes a joint liability in all defective products? matters related to consumer protection in Venezuela. In addition, the Civil Code establishes that the party directly According to the APPAGS (see question 12) and now the Just Prices responsible for the damage is going to be liable for any injury or Master Law, aside from administrative fines that may be imposed damage. for product defects that may then lead to product liability claims, there are three specific cases in which the party liable may be found to be also criminally liable, namely: 26 What is the standard by which causation between defect and • when that party imports or sells a product that has been deemed injury or damages must be established? Who bears the burden to be harmful and therefore prohibited; and may it be shifted to the opposing party? • in the case of food, beverages or medicine sold or even exhibited In Venezuela, the causation or causal relation between the defend- that are harmful or past their expiry date; and ant’s actions and the injury or damage must be direct, therefore, the • when a provider has modified or altered in any way the quantity, product defect must have played an active role in the occurrence weight or measurement of the product to the detriment of the of the injury or damage, meaning that not any tangential interven- consumer. tion of the product in the event causing the injury or damage will

188 Getting the Deal Through – Product Liability 2014 Araquereyna VENEZUELA be considered causation to constitute liability and also the product 29 Is it a defence to a product liability action that the product defect must be the generating cause of the injury or damage, mean- defect was not discoverable within the limitations of science and ing the event occurred because of the product defect. technology at the time of distribution? If so, who bears the burden and what is the standard of proof? The fact that a product defect was not discoverable within the limi- 27 What post-sale duties may be imposed on potentially responsible tations of science and technology at the time of distribution of said parties and how might liability be imposed upon their breach? product may not be used as a defence to avoid liability for a product The APPAGS (see question 12) provided for the obligation of man- defect. Given the fact that there is a strict liability system provided ufacturers and importers of durable goods to offer sufficient war- for in the APPAGS (see question 12), it is irrelevant if the defect was ranties in writing to consumers against any malfunctioning, other not discoverable at the time of the distribution and, therefore, the manufacturing defects and any other hidden risks, in accordance provider acted without fault, meaning that no intention, negligence, with the nature of the product. It also expressly provides that sup- imprudence or wrongdoing were involved in the cause of the dam- pliers are jointly and severally liable for the observance of the terms age because said provider or party found to be liable is liable regard- of the warranties. less of fault. The warranties shall be issued as certificates and they must include a detailed description of the product and warranty condi- tions, including: 30 Is it a defence that the product complied with mandatory (or • identification of the product covered by the warranty; voluntary) standards or requirements with respect to the alleged • the information of the warrantor or third parties that may fulfil defect? the obligations arising from the warranty, including an address, As mentioned in the previous question, the fact that no intention, and the information of the beneficiary; negligence, imprudence or wrongdoing on part of the provider is • the date of issuance and extension of the warranty, that in present, is not a defence in product liability claims and, in this case, no case may be less than three months or 120 days for used the defendant cannot argue that he or she complied with all of the products; standards and legal obligations bestowed upon him or her as a • terms and conditions for the warranty; defence because, according to the APPAGS (see question 12), there is • the obligations of the warrantor and the rights of the beneficiary no need for fault from the defendant for liability to exist. according to the APPAGS; and • the express mention of the obligation on the part of the warran- tor to repair or give a full refund for defective products. 31 What other defences may be available to a product liability defendant? All suppliers or importers are obliged to comply with all valid war- As in any liability case, defendants in product liability cases can ranty claims within the established period, which may not be longer argue ordinary, extraneous, non-imputable causes as a defence, such than 30 days. In the absence of a warranty certificate the product’s as: invoice may serve as such. For product warranty fulfilment please • an act of God; refer to question 18. • a force majeure; Also, the APPAGS imposed a post-sale duty to the importer or • an act of a third party; supplier to maintain a supply of at least 10 years after commerciali- • an act of the victim, or claimant’s fault; and sation of a product and of its components, spare parts and technical • an act of the state. services. According to the APPAGS, any member of the manufacturing or 32 What appeals are available to the unsuccessful party in the trial commercialisation chain of a product in the case of a product being court? found to be dangerous, harmful or even at risk of becoming danger- ous or harmful must: As partly covered in question 6, any ruling given in a product liability • inform the Sundde about the said findings; procedure may be appealed before the immediate superior tribunal • inform consumers of the potential risks through adequate means or court. Thus, the decision of said superior court may be extraor- of communication; and dinarily subject to a cassation motion before the Civil Cassation • immediately recall any product deemed to be dangerous or Chamber of the Supreme Tribunal of Justice. potentially harmful. Any of the aforementioned decisions may also be subject, but only in exceptional cases, to a revision recourse before the As mentioned, members of the manufacturing or commercialisation Constitutional Chamber of the Supreme Tribunal of Justice, or an chain are responsible for the costs of the recall and communications amparo (injunction) in the case of the unsuccessful party consider- campaign and they may also be found to be administrative, civil or ing his or her constitutional rights have been somehow violated by criminally liable. the decision. As mentioned in question 7, for collective and diffuse-rights Limitations and defences actions related to nationally relevant issues, the competent authority to decide the matter is the Constitutional Chamber of the Supreme 28 What are the applicable limitation periods? Tribunal of Justice, therefore, exceptionally in those cases, the con- A product liability claim has a limitation period or a statute of limi- stitutional right of double instance is not guaranteed. tation of 10 years, the Venezuelan Civil Code having established the said statute of limitation for personal claims. The 10-year period Jurisdiction analysis is calculated starting when the consumer realises the damage had 33 Can you characterise the maturity of product liability law in terms occurred. of its legal development and utilisation to redress perceived wrongs? As already mentioned, in Venezuela, product liability was regulated in a very broad way in the consumer protection legislation and, by means of doctrine and case law, the extra-contractual civil liability www.gettingthedealthrough.com 189 VENEZUELA Araquereyna for the ‘guard of property’ theory contained in the Civil Code has most renowned case of product liability in Venezuela in the recent been applied to product liability. Therefore, we consider that, past, especially because some have accused the Ruling’s cautionary regarding the global trend, Venezuelan legislation is still immature measures of being unconstitutional because of their condemnatory and underdeveloped regarding product liability, although the leg- effects and the fact that it was case was a collective- and diffuse- islation in place, due to its protective nature for the consumer, is in rights action (see question 7) brought by the People’s Defender on theory effective in redressing any injury or damage that a defective behalf of all the women potentially exposed to damages or injury product may cause. caused by the PIP implants. Although no drafts have been made public, some development in regulations regarding consumer protection and, in turn, product 35 Describe the level of ‘consumerism’ in your country and liability, could come as a result of further regulations of the Just consumers’ knowledge of, and propensity to use, product liability Prices Master Law. As mentioned in question 12, we would expect litigation to redress perceived wrongs. that new regulations may be similar to the ones discussed herein provided for in the APPAGS, but we would advise that any action Especially in recent years and in part due to the political climate, or analysis to be made in Venezuela regarding product liability, first consumerism and consumers’ propensity to attend to Sundde and be discussed with local counsel to check if further regulations have claim rights provided for in consumer protection legislation, includ- been enacted. ing product liability has arisen. There is also a growing trend of consumers wrongly claiming civil liability before Sundde instead of the competent courts. Judicial product liability claims are rare in 34 Have there been any recent noteworthy events or cases that practice. have particularly shaped product liability law? Has there been any change in the frequency or nature of product liability cases launched in the past 12 months? 36 Describe any developments regarding ‘access to justice’ that would make product liability more claimant-friendly. The Constitutional Chamber of the Supreme Tribunal of Justice issued Ruling No. 790 dated 6 June 2012, regarding the world- Venezuelan legislation provides for collective- and diffuse-rights renowned case of the silicone breast implants branded PIP, manu- actions, which could be used for product liability claims, and thus factured by the French company Poly Implant Prothèse (PIP). In the make it easier for consumers to pursue actions against providers (see said ruling, among other cautionary measures, the Chamber ordered question 7). that the breast implants that had started leaking be removed at Also, it should be mentioned that Venezuelan legislation is con- the expense of the company responsible for the import of the said sidered to be very user-friendly, and therefore it could be argued that implants. it would also be claimant-friendly in the event of a product liability Although product liability was not expressly mentioned in the suit. Nevertheless, that fact does not indicate a shift in the burden of decision, it is clear that this was a product liability case. It is the proof, nor the existence of punitive damages or a lengthening of the statute of limitations.

Pedro Ignacio Sosa Mendoza [email protected] Rodrigo Moncho Stefani [email protected]

Centro Lido, ‘C’ Tower, 8th Floor Tel: +58 212 953 9244 Francisco de Miranda Avenue, El Rosal Fax: +58 212 953 7777 Caracas www.araquereyna.com Venezuela

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