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Joint Committee on the Secondary Legislation of the European Communities debate -
Wednesday, 13 May 1981

Product Liability.

Perhaps I should invite Senator Molony to read for us the important report on product liability.

This is not an original proposal. It is rather an amended Council directive relating to the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products. It is regarded by the members of the Legal Affairs Sub-Committee as one of the most important reports that we have had to consider.

The original proposal was examined by the former Joint Committee in its 53rd report and concerned itself with the original products liability proposal or draft Directive.

The former Joint Committee considered that the justification for the proposed directive lay in "the need for making the economic consequences of liability uniform throughout the Community". The Committee thought that these consequences depend not merely on the basis of liability but also on the rules for quantifying damages. It suggested that the Directive would fail in its objective unless it incorporated uniform rules for the measure of damages and contributory negligence. Moreover, it suggested that Member States where fault and no fault liability existed side by side could be put at a disadvantage. As you know, Chairman, the basic thrust of the proposal in this directive is to attach stricter accident liability to manufacturers and producers and certain other categories in relation to defective products.

The present amendments were made following the opinions of the European Parliament and the Economic and Social Committee.

In recent years in the United Kingdom there have been reports on the subject by the Law Commission, the Scottish Law Commission and the Royal Commission on Civil Liability and Compensation for Personal Injury. There is also a Council of Europe Convention on Products Liability in regard to personal injury and death which we also examined—("Strasbourg Convention"). We refer to it later in the report. The fundamental purpose of the proposed Directive is to introduce the principle of strict or no-fault liability for defective products into the domestic law of all Member States. There are certain defences available to manufacturers or producers and the onus of proving these defences would lie on the manufacturer or producer. The main changes from the last draft Directive are as follows:

(i) Liability under the Directive will be expressly defined as extending to articles incorporated in immovable property.

That is not really a change. It is a clarification of the original Directive.

(ii) Primary agricultural products, including fish, and craft or artistic products, will not now be covered by the Directive where it is clear that such products are not industrially produced.

That is of particular importance to Ireland.

(iii) Where two or more persons are liable they will continue to be liable jointly and severally but it is now made clear that each person retains the right to compensation from the others.

Is the retailer in Ireland completely exonerated?

He may be liable. Basically, the proposal attaches liability to a manufacturer/producer but in the case of somebody who produces his own brand products or, in relation to a retailer who imports goods from outside the European Community territory, he will be liable. Producers/manufacturers within the territory of the European Community or retailers inside who produce their own brand products or who import from outside the Community will be liable.

(iv) A product will now be considered defective when, being used for the purpose for which it is apparently intended, it does not provide for persons or property the safety which a person is entitled to expect, taking into account all the circumstances, including its presentation and the time at which it was put into circulation.

(v) The Commission propose to cater for the borderline cases arising in the business use/private use context by providing that the directive shall not apply to products used exclusively for the purpose of a trade, business or profession.

(vi) A defence of contributory negligence will be allowed to the producer where the product in question has not been used for the purpose for which it is apparently intended.

That is a change from the original.

(vii) The definition of "damage" has been extended to expressly include the element of pain and suffering endured by the claimant.

(viii) The Commission have recognised the very real problems involved in setting a financial limit on liability for personal injuries arising under the Directive and propose that this question be examined and determined by the Council acting on a Commission proposal. As an interim measure, it is proposed to retain the original figure of 25 million European Units of Account (above £17 million) the figure set will be reviewed every three years as also will the property damage figures which have been retained.

The important thing to bear in mind there is, even though we do not have a system of strict or absolute liability, that in relation to the fault system we have, there is no limit in Ireland on the amount of damages a manufacturer/producer may be liable to pay.

(ix) A minor modification of the time limit on the producer's liability has been introduced so that the ten year period originally proposed will apply from the date on which the producer put the defective article into circulation.

An important element of the Commission's proposal is the decision to maintain the inclusion of development risks and to refuse to allow the state-of-the-art defence to the producer. The European Parliament did not agree with that. They proposed that the producer should not be liable if he could produce evidence that the article could not be considered defective in the light of scientific and technological development at the time the article was put into circulation. The Commission were unwilling to accept this proposal which they considered to be an unjustified negation of the responsibilities of the producer. This was something, as we will see later in the report, that many Irish producers and trade associations found very difficult to accept. It was believed by those associations and interested groups that it could be very harmful to Irish industry, particularly the pharmaceutical industry and other innovative industries.

Had we not a previous paragraph where it must be shown that the article produced must have been used for the purpose for which it was intended? Was there a deviation from that?

I have referred to the position with regard to contributory negligence. There can be liability for contributory negligence where the product has not been used for the purpose for which it was apparently intended. It is in the nature of a defence.

With regard to the ten year period does that mean that if a product was over ten years old it would not be liable to any prosecution?

The ten year period will run, by and large, from the first time it is put into circulation. I referred to that already. It is one of the changes made to the original proposal. The justification for the proposal is based on Article 100 of the EEC Treaty. The Commission state in the preamble to the proposal that divergences in national legal provisions may distort competition and influence the free movement of goods within the Common Market.

In Ireland, at present, there is liability in tort where a defect in a product, due to negligence, causes damage to a person or to his property, and there are certain terms implied by statute, including one that articles bought must be good, fit and suitable for the purposes for which bought and that an action for damages lies if, because goods are not suitable, damage or loss ensues.

As of now, a person who suffers injury because of a defect in a product arising from its faulty manufacture can sue the manufacturer in tort but to succeed he must prove negligence. He has also a right of action against the person who sold him the goods and, in that event, he will normally have the benefit of the terms implied by the Sale of Goods Act 1893 and now the Sale of Goods and Supply of Services Act, 1980 which came into effect at the beginning of this year. Another important aspect to remember is that this proposal does not propose to replace our existing system. The fault system we have will continue to exist but this no fault or absolute liability system will exist alongside it. It is believed that this might cause certain disadvantages for us in comparison with other countries who do not have a similar fault system to the one we have. The proposed Directive, if adopted, will require the introduction by statute of strict liability on a no-fault basis.

The Confederation of Irish Industry feel that rather than being a harmonising influence, as intended, the Directive, if adopted, will disturb competition within the Community and impede Ireland's economic development and industrial progress. The Confederation make the point that the Commission have produced no evidence that existing laws in the Member States distort competition but merely assert that this is the case. The Confederation consider that it is wrong in principle and damaging in practice in the interests of both consumers and producers, particularly small producers, that a producer should be liable if he can prove a product was not defective in the light of scientific and technological development at the time it was put into circulation.

The Confederation also feel that the justification put forward by the Commission for the introduction of a system of strict liability, that the consumer is in most cases not protected against damage caused by defective products in the Member States, is highly contentious. The Confederation obviously represent one interest group and the Irish Insurance Association represent another interest group in this area. The Irish Insurance Association suggested that if in law we do not have a system of no fault liability or absolute liability, in fact that is the way it will work out. Once claims are made insurance companies tend to settle them.

The Confederation urge strongly that the proposal be opposed but the principle of harmonisation be applied in its stead to liability on a fault basis. That is having a similar system of quantifying damages or assessing damages on a fault system in each of the Member States. The Confederation suggest that should this be unsuccessful, the inclusion in the proposed directive of development risks should be strongly resisted by the admission of a "state-of-the-art" defence. In the event of neither of these changes being implemented in the final Directive, and implementation by means of the introduction of national legislation is necessary, the Confederation strongly recommend reference to the considerable volume of interpretative data produced by the Commission in the course of the long debate on the provisions of the Directive. In this way deviations of interpretation of the very vague provisions in the Directive by Irish courts would be minimised. Such an approach should minimise the incidence of unnecessarily high costs to Irish industry and unnecessarily high prices to Irish consumers. We are all agreed that is a fair point. Later in the report we refer to the fact that it will be some years yet before a final Directive acceptable to the Member States will emerge.

The Federation of Irish Chemical Industries find the proposal fundamentally unacceptable. They were extremely concerned about the proposal in all its ramifications. Their most serious criticism was the refusal of the Commission to acknowledge the reasonableness of providing a defence for development risks. The Federation say that this is an area which, in the context of pharmaceuticals and chemicals, is of vital importance. Ireland has few industries involved in original research but, on the other hand, greatly benefits, and at reasonable cost, from the vast expenditure in other countries on original research not least in the field of pharmaceutical products.

They feel that if there is no acknowledgment of the need to differentiate between manufacturing and design defects and if those companies involved in innovative research become less involved because of the high risks involved, it will be disadvantageous to the Community as a whole both in industrial and consumer terms. They make the point that it is not possible to say that the rules for contributory negligence in the various Member States would become harmonised on adoption of the Directive, that is, what might be a defence in Belgium might not be accepted by the Irish courts as a valid defence. Consequently, distortion of competition and differing costs for industry will not be eliminated contrary to the stated intention of the Directive. They consider the drafting of the Directive loose and imprecise. The Federation fear that the cost of insurance cover would be prohibitive and that this factor would prove a significant element in final costs. This is something we have not been able to resolve satisfactorily.

The Federation of Trade Associations say that while the proposed Directive relates essentially to the liability of manufacturers—and to that extent could ease the lot of wholesalers and retailers—it has implications for distributors to the extent that, in certain circumstances, they may be embraced within the scope of the definition of producer, for example, in the case of "own brand" products and in the case of goods imported from outside the European community. They make the point in referring to Article 6 that it would be important for the members of a number of the Federation's affiliated associations that farmers purchasing goods for use in their farming business should be deemed to have acquired the goods exclusively for the purpose of a trade, business or profession.

The Sub-Committee are of the view that that would be the case in any event. They feel that the total liability provision in Article 7 may lie heavily on small producers who may well experience great difficulty in obtaining or affording adequate insurance cover. They say that the limit for the commencement of proceedings for the recovery of damages should be one year and that the period of three years suggested is unjustifiably long, having regard to the rapid turnover of goods and the frequent changes in methods of production and distribution, and that the liability of a producer should expire after three years in view of the difficulties which could arise in time of identifying an original defect because of considerable usage of the product, wear and tear and the frequency of repairs by other firms and companies; that is, to distinguish between the length of time an article can be on the market and the producer still liable. They are suggesting that once a person suffers from the use of a defective article, he should have only one year from that time within which to commence his legal proceedings for recovery of damages. In our ordinary system of fault liability for negligence, the period under the statute of limitations is three years.

The National Consumer Advisory Council say that Council members are anxious to see that responsibility for losses and injuries arising out of defective products is placed directly on producers. The Council hope that the changes now planned in the area of product liability will remove the legal obstacles which had made it extremely difficult in certain cases for people to obtain redress for injuries or loss caused by defective products. At present in the absence of proof of fault on the part of the manufacturer only a person who has a contract with the supplier of goods has a right of remedy and that remedy is usually against the retailer. They say that very often the fault is on the part of the manufacturer or producer. They feel that the producer is best able to bear the cost of insurance and he could build this cost into the finished product but it would have to be seen that the increased cost would reflect a better standard of safety.

The Irish Insurance Association are satisfied that the Irish insurance market will be in a position to provide Irish "producers" with the requisite insurance cover to meet the new and increased liability régime proposed by the draft Directive. They feel—and were definite about this—that we have strict liability at present in fact, if not in law. They feel however that Article 5 should contain a provision to exempt the producer from any liability where the defect in the article was caused by an "unavoidable accident", for example, an act of God. They welcome the proposed amendments but think that the present text of Article 7 is ambiguous both as regards the monetary level on liability for personal injury and the use of the word "identical" for determining the application of the overall limit, and recommend that the paragraph be reworded to put the issues beyond doubt.

Regarding the cost of insurance, the Association are of the view that it would not add a significant sum to the cost to the consumer. They point out that even a doubling of existing premiums would have only a marginal effect on ultimate consumer prices.

There was substantial disagreement on this. The trade associations, the Irish pharmaceutical interests and the CII were extremely concerned about the availability of insurance at reasonable cost to the consumer, if it had to be built in at cost. The insurance associations felt they could provide insurance at reasonable cost and that even if they had to double the cost of existing premiums, the effect on the ultimate cost to the producer would be minimal.

The Council of Europe Convention dated 27 January 1977 imposes strict liability on producers for death and personal injuries caused by defective products. The EEC draft Directive is closely modelled on the Convention, particularly as a result of the revisions which have now been introduced into the Directive, but there are still some significant differences. Unlike the Convention it excludes from its provisions primary agricultural products and it imposes strict liability for damage to personal property in addition to compensation for death and personal injuries. Also, Article 10 of the Convention suggests an absolute measure, while the question of whether the Directive is a minimum or absolute measure is still open.

Of the 21 Member States of the Council of Europe four states have signed, including three EEC States—Belgium, France and Luxembourg. There have been no ratifications of the Convention so far. The Joint Committee understand that no decision has yet been taken as to whether Ireland will sign the Convention. The implementation of EEC directives is mandatory on Member States. The Joint Committee understand that if the provisions of the Directive, when adopted, conflicted with those of the Convention then the Directive would take legal precedence. In the event of such a situation arising, the Committee are informed that it is unlikely that Ireland would ratify the Convention.

The Joint Committee are not convinced that adoption of the proposal as now drafted under Article 100 is justified and feel that the Commission have not furnished evidence that competition is being distorted or that any differences existing between the national laws directly affect the free movement of goods. Moreover, they do not see how the economic consequences of liability can be made uniform throughout the Community unless the varying rules of Member States governing the assessment or quantification of damages are the same.

The Joint Committee understand that in view of the many uncertainties surrounding the eventual "shape" of the Directive, as well as the absence of comparable estimates, it is still not possible to quantify in cost terms the implications of the proposal for manufacturers, consumers and so on and that the only figures available in this area are those produced by the European insurers which show, for different sectors of industry, the estimated insurance costs by reference to turnover.

There is some conflict of opinion in the representations made to the Joint Committee regarding the likelihood of insurance cover being available at reasonable cost. In Ireland we have a higher proportion of small manufacturing companies than in other EEC countries and the Joint Committee are concerned that the increased cost of insurance may bear more heavily on Irish manufacturers than on some of their foreign competitors and consequently have an adverse effect on our competitiveness. This could be particularly the case for certain industries, such as the pharmaceutical and other innovative industries, who may have difficulty in obtaining insurance at reasonable cost. If the Directive is adopted, then presumably the overall cost of insurance will have to be spread over all products and, in the case of smaller Irish manufacturing companies, the unit cost would bear more heavily than on its larger European counterparts.

As a developing country the introduction and development of new technologies is necessary for our economic survival and it has been alleged that some manufacturers will not now want to take the risks involved in developing new products and will go out of the manufacturing business.

In contrast with the views contained in the foregoing paragraphs it is only fair to point out that the Irish Insurance Association state that they can provide the necessary insurance at reasonable cost.

Article 1 (2) provides that the producer is to be liable even if the article could not have been regarded as defective in the light of the scientific and technological development at the time when he put the article into circulation. The European Parliament suggested that an amendment should be made here so as to exclude "development risks". The Commission did not accept the amendment stating, inter alia,“that the effect would be to require the consumer to bear the risk of the unknown”. As already stated in paragraphs 23 and 24 of the draft Report the Joint Committee feel that the insurance costs for bearing development risks may adversely affect Irish industry.

The Joint Committee welcome the amended provision of Article 1 under which primary agricultural products, crafts or artistic products are excluded from liability, where it is clear that they are not industrially produced. This amendment, suggested by the European Parliament, is justified by the Commission in their explanatory memorandum on the grounds that strict liability for primary agricultural products whose defects have been caused by factors extraneous to the activities of the producers would be too onerous: for craft and artistic products, the same considerations apply, in conjunction with the fact that production is by individual item and not by serial production, thus justifying the continuation of the traditional liability for fault. The Committee feel that the definition in practice of "industrially produced" may cause difficulties.

The Joint Committee welcome the amended Article 5, which now provides for a defence of contributory negligence on the part of the plaintiff and those for whom he is liable, a principle which already exists in the law of Member States.

The extension of the definition of damage to include "damages for pain and suffering and other non-material damage" is welcomed by the Joint Committee as there is a corresponding head of damage in the present tort of negligence in Ireland. These non-pecuniary heads of damage have been expressly included at the suggestion of the European Parliament.

The Joint Committee feel that Article 7 regarding limit of liability is not clear in its intention and needs clarification. Should it be adopted as it stands the Joint Committee feel that it may be very difficult to operate. Questions which could, inter alia, give rise to difficulty and which should be resolved are:

(i) It is provided that the total liability for personal injuries may be determined and so forth. From this it is not clear whether the total limit is optional or mandatory. It appears as if it was intended by the Commission to have it made mandatory and, if so, the meaning should be made clearer.

(ii) Presumably the total amount of liability applies to the whole Community, though this again is not absolutely clear in the Directive. If so, how would the total be divided in practice between different countries in the case of identical defective articles sold on a Community basis, and between different individuals?

(iii) How would it be known whether the limits had been exceeded until all the claims had been received and determined? In the meantime could claims be met by interim payments in such circumstances? Or would the consumer have to wait an inordinate length of time, e.g. the maximum limit of ten years provided under the Directive? Where no limit is provided for an individual's claim, as in the proposal, these difficulties are increased.

(iv) The limit on the producer's liability is expressed to be for all personal injuries caused by "identical articles having the same defect". What is the meaning of the expression "identical articles"?

The Commission in their explanatory memorandum state that the amendment introduces flexibility into the difficult problem as to whether the strict liability should have a ceiling and that the new formula tends towards a compromise acceptable to proponents and opponents of limited liability. The Joint Committee reiterate their view that Article 7 should be tightened up, as otherwise it could give rise to serious difficulties which could be resolved only by litigation with a lot of frustration for consumers.

The Economic Questions Group of the Council which is examining the proposal has completed its second reading and it has entered on a third reading. The Joint Committee are informed that to-date discussion has been largely confined to the general questions raised by the proposal. It is expected that the third reading, which has now commenced, will entail a more detailed examination. The Joint Committee understand that future progress is expected to be slow, and that negotiations could even take several years. Member States are required to bring into force the provisions required to comply with the Directive within 18 months and there is a suggestion that this period should be extended.

All Member States, except Ireland, have now agreed to the principle of strict liability for defective products although several Member States, notably the UK, have already indicated that the present text as proposed by the Commission is largely unacceptable and will require major amendments before worthwhile progress can be envisaged.

The Joint Committee have indicated certain misgivings which they have regarding the application of the proposal in Ireland and to certain sectors of Irish industry. The Committee have drawn attention to certain provisions which need clarification and redrafting. National provisions are to remain in force alongside the proposed Community system of product liability. As a result of this and of differing national legal and administrative systems, the costs arising from liability for defective products will vary from one Member State to another. This would hardly lead to the Commission's objective of creating equal competitive opportunities in the Community.

Finally, the Committee feel that, notwithstanding the position outlined in paragraph 32, it would be extremely difficult for the Committee to form a judgment in depth in regard to the principle of strict liability as it might be applied in the field of tort in Ireland generally and that such a study should be undertaken by somebody here, ideally by the Law Reform Commission, in the context of the Directive, before a change of such magnitude is introduced into the Irish legal system.

The Joint Committee wish to acknowledge their indebtedness to the Confederation of Irish Industry, the Irish Insurance Association, the Federation of Irish Chemical Industries, the Federation of Trade Associations and the National Consumer Advisory Council for the considerable help they received from them and they wish to express their sincere thanks to all these bodies.

We regard this as an extremely important report. Even though progress on the Commission proposal has been very slow so far and it may be some time before this Directive is brought within sight of becoming law here, we feel this report deserves the consideration of the Seanad—the Dáil is not in a position to discuss this matter. I should like to reiterate the point about the Law Reform Commission examining the report. Not only commercially but for our whole legal system, it could have very wide ramifications. The Sub-Committee felt a little inadequate in their examination of it because of the very serious implications involved in the commercial and legal areas.

I thank Senator Molony for his exposition of what he properly described as a very important subject. It took the Sub-Committee a long time to reach their conclusions. I reiterate what is well expressed in paragraph 33 of the report and I formally propose its acceptance by the Joint Committee.

Having regard to the fact that we have not had any examination—it is not possible for the Joint Committee, with the skills at their disposal, to have such an examination—of the cost of introducing here what neither we nor the UK have got, a strict liability system side by side with liability in negligence, steps should be taken by the appropriate authority to ensure that the Law Reform Commission, with their resources, will regard this as an urgent matter so that the Joint Committee will be aided in future deliberations by having the benefit of the advice of the Law Reform Commission.

An alternative to that is that steps be taken to vary our terms of reference so that we will be able to pay people to do the work which is required before we go along with this proposal. As a member of the Sub-Committee I feel strongly that this Member State is being asked to jump into a sea in which the dangers are unknown to us. We feel it is our duty to strike a note of warning about the usefulness of this in relation to the objective of the Commission to create equal competitive opportunities. We do not know what the cost to this country will be. the UK are kicking to touch on it, and I think we should do likewise.

I should like to make one further point to put this no-fault liability in context. Discussions have taken place here about the introduction of a no-fault system for road users, people driving cars. It seems extraordinary that we should be considering the introduction of no-fault liability for defective products. I am talking as a member of the Irish public. People can be knocked down on our roads and if they cannot prove the negligence of the offending drivers they will fail in their actions. When we look at it in that context, perhaps we are going a lot further than the vast majority of people might like us to go.

I further think there is a defect in our whole structure. This is a Joint Committee established by the Houses of the Oireachtas to examine important measures of this kind and make reports to both Houses but we are not in a position to indicate to the Law Reform Commission, if we have not got the money to pay people to do these research projects, that we want assistance for the purpose of advising the Oireachtas as to what its attitude ought to be. Perhaps the statute establishing that body needs to be amended to give us some rights. I feel quite strongly about that. I do not know whether Senator Molony wishes to propose an amendment to his own draft report but he did mention a debate in the Seanad about this. If you want a debate in the Seanad you will have to propose an amendment.

I would propose that amendment in view of the implication of what we have been discussing. It is a report that warrants discussion in the Seanad.

I would agree. It is a very important matter. I do not think it will be resolved very easily. I think Senator Molony and his Sub-Committee are to be congratulated on giving us a basically educative document which is effective and indicates trends and pitfalls that might lie ahead for any simplistic conclusions. At the same time, I feel that the attitude in Ireland to quality is bad. The ordinary Irishman tends to have the "Ah, sure it will do" complex. This will not do in the modern world of industry. I will mention here, for instance, the approach in Japan where they have fathered the concept of zero defects and that is one of the secrets of their industrial success. Industry in the West is now copying the Japanese in relation to what they call quality circles where groups of workers get together and work out continuously how they can upgrade the quality of the products they are producing by improving the processing methods they use or by improving the design and so on. They are not "high-fallutin" PHDs and engineers and scientists; they are people on the shop floor who are involved in this so it becomes a philosophy, an attitude of mind that one produces products that have zero defects.

One of the groups that I would have liked to have seen you consult are the Quality Control Society in Ireland who are doing a lot of useful work now. Their attitude to this might be taken into account in the future. My feeling is that maybe we are getting too wrapped up in the legislator's problems that arise in covering product liability and forgetting that bad workmanship is bad workmanship.

The thing to remember there is that in the context of bad workmanship, if you can establish fault or negligence or if you can come under one of the implied terms of the Sale of Goods and Supply of Services Act you can attach liability and can succeed under our existing system. But these proposals go way beyond that and when you think of the exclusion of the developmental risks, somebody who is carrying out research and produces a product in a completely new area is certainly going to be very worried about his work in that field if he cannot get insurance, or if insurance is very expensive. There are very different views on that.

We are all worried about things like pharmaceutical products and things like thalidomide and so on. I do not think industry should be let off the hook. There is a certain tendency for them to use the cost element and the removal of advantage in the arena of competition every time. This is nothing new. I am not bringing this up just because of this Committee and because we are debating it in public. I have articles written 16 years ago on the need to adopt quality consciousness in Ireland � la the Japanese approach. We still have not done it. We are coming around to it but, when I see this attitude creeping through I am inclined to highlight it. But the Committee have done what they could do in the circumstances of the report and the progress that has taken place in the Commission.

In a way the Committee are saying they need this matter more thoroughly examined than this Committee are able to examine it.

I would support the idea of the Law Reform Commission looking at it, of course.

We, as a Committee, do not even have the power to request members of the Law Reform Commission to come in and discuss matters with us, much less ask them to carry out a detailed study of the Directive. I feel strongly about the views expressed by the Chairman. We should consider seeking an amendment of the statute establishing the Law Reform Commission so that a committee like this, an Oireachtas committee, would have power to request an examination of a Directive.

I think it is probably not appropriate for us, as a Committee, to include that in our report. It needs separate discussion.

Paragraphs 1 to 33, inclusive, agreed to.

Does Senator Molony wish to make a request for a debate?

I move: Before paragraph 34 to insert a new paragraph as follows:

In view of the serious implications which the adoption of the proposed Directive could have in this country the Joint Committee requests that a debate take place in Seanad Éireann. In this connection the Joint Committee refers to the Order of Seanad Éireann of 18th February, 1981.

Amendment agreed to.

The very important question of insurance arose when we had the representatives of the insurance companies here. They gave an undertaking that it would be quite average and quite all right. Did we ask them at that time could they put a figure on their premiums? My recollection is that they could not even tell us remotely what it might cost so that the information from them would be almost useless.

We pursued that very diligently with anyone who might give us information as to the cost of insurance. The Irish Insurance Association said insurance would be available at a reasonable cost. They could not identify or quantify the cost. Nobody really knew and we were at a loss to offer any view on that ourselves. They said that the element of insurance cost in the case of a finished article was so tiny that even if it was doubled the insurance would not be significant. But then when one speaks of innovative industries and the pharmaceutical industry, they said that the cost of insurance in certain respects is very high and that if we suggested to them that the cost of their insurance premium might be doubled, they would be extremely concerned about it. We would hope that if this Directive were to become law here the cost of insurance would be spread over all products here. If that did not take place and developmental risks were not excluded from the Directive you can imagine the results where certain industries are concerned.

As you have raised that question I would like to inform you that we had from the chief secretary of the European Committee of Insurances a statement which contained a very pertinent sentence —"Community insurers however have no experience of the type of strict liability as provided for under the draft directive". That increases the number and variety of unknowns.

I recollect some of the groups that came to us making the point that in the United States they had been very attracted by this idea of no fault liability but now the trend is the other way and they are trying to get away from that.

Where the national provisions have to remain in force alongside the proposals of the Community it was mentioned that this will affect our competitiveness. We are one of the few in the EEC that have this.

The problem we saw first of all — and in this we agreed very strongly with the views of the last Joint Committee — is that basically if this Directive is to be justified on the basis of removing all the distortions in particular, we are not satisfied that it does. The first step that should be taken is to introduce the kind of system of quantifying damages under a fault system that exists throughout the Community. That would be the first step to be taken rather than changing the system of liability itself.

The principal point I was making was, while we have our own national provisions going side by side with the Community ones, how does it affect the other question I asked in relation to the retailer, apart from the article produced by a retailer which makes him a manufacturer or a producer?

It would not affect him at all. Take a retailer who is producing products that are produced within the Community territory: he would continue to be liable under our existing fault system. He would not be affected by the new system proposed by the Directive. He would not be affected by this system unless he imported goods from outside the Community.

He would be covered by the Sale of Goods Act.

He is covered by that already and would continue to be liable under that.

It is probably useful to put on our record and draw your attention to an article in the Confederation of Irish Industry's News Letter dated 10 March which follows a point which has been made. It says:

The United States introduced legislation not as absolute and as restrictive as that now proposed by the EEC Commission. The result was a flood of claims of extremely doubtful validity, massive increases in insurance premia and hence in product prices. Recognising that the legislation made producers liable for things over which they had no control, the United States Government introduced last year a Model Uniform Product Liability Act, the purpose of which is to restore the concept of fault to the product injuries filed. This is a highly detailed document which embodies the experience gained over many years in the attempted administration of legislation similar to that now proposed by the EEC. The Commission has not, however, withdrawn the proposed Directive for redrafting in the light of this experience.

Paragraph 34 agreed to.

Draft Report, as amended, agreed to.

Ordered: To report accordingly.

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