(C) The European Court’s decisions of 2002: ‘complete harmonisation’ and its exceptions

The important question of the relationship between the 1985 Directive and existing and future national law in the area of liability for products was squarely raised before the European Court of Justice in three cases in 2002: did the Directive merely set a minimum for the liabilities of producers and others to those injured by their defective products, or did it also set a maximum, thereby creating a completely harmonised or even uniform law?⁷³ Two of the cases were brought by the European Commission against Member States (Commission v France⁷⁴ and Commission v France⁷⁵) alleging that they had failed to implement the Directive properly on the ground that their implementing legislation went somewhat further in protecting the victims of defective products than envisaged by the Directive. The third case, Gonzàlez Sanchez v Medicina Asturiana SA,⁷⁶ involved a preliminary question raised by a Spanish court in litigation by a person who had contracted HIV from blood supplied by the defendant hospital. The claimant wished to rely on Spanish legislation of 1984 which could be more protective than the 1985 Directive,⁷⁷ but the defendant wished instead to rely on Spain’s legislation of 1994 which implemented the Directive and precluded reliance on this earlier legislation within its scope.⁷⁸ The Spanish court asked whether article 13 of the Directive precluded Member States from restricting rights granted to consumers by legislation which pre-dated the enactment of the 1985 Directive.⁷⁹

Following the advice of Advocate-General Geelhoed,⁸⁰ the European Court of Justice in its three decisions unequivocally ruled that the 1985 Directive did not merely permit the restriction of rights for consumers, but required such restriction within the domain with which it was concerned. ‘[T]he Directive seeks to achieve, in the matters regulated (p.441) by it, complete harmonisation of the laws, regulations and administrative provisions of the Member States.’⁸¹ While the European Court dealt with particular arguments of the parties in the two cases brought by the Commission as regards those particular aspects of the implementing legislation which it criticised,⁸² it set out an identical series of reasons for this general decision as to the impact of the Directive.

The Court’s starting point was the first recital of the Directive, tying the Directive’s purpose of approximation to the necessity to avoid the distortion of competition and the effect on the internal market which differing degrees of protection of the consumer entail, a purpose which was itself necessary to justify EC competence in enacting the Directive.⁸³ In this respect, the Court rejected the argument that it should take into account article 153 EC’s injunction ‘to ensure a high level of consumer protection’ as this provision was inserted into the Treaty after the enactment of the Directive and, in any event, did not concern measures taken under the successor provisions to article 100 under which the Directive had been enacted.⁸⁴ ‘Accordingly, the margin of discretion available to the Member States in order to make provision for product liability is entirely determined by the Directive itself and must be inferred from its wording, purpose and structure.’⁸⁵

Three arguments in particular convinced the Court that this Directive should be so interpreted. First, the economic purposes of the Directive as set out in its first recital in harmonising the system of civil liability; secondly, the absence of any provision within the Directive authorising Member States to adopt or maintain more stringent provisions in the interests of consumer protection, as found, for example, in the Directive on unfair terms in consumer contracts;⁸⁶ and, thirdly, the express provision in articles 15 and 16 of the Directive allowing Member States to make ‘certain derogations’, which implies that they may do so ‘only in regard to the matters exhaustively specified’;⁸⁷ neither these derogations nor the references ‘in certain cases to national law’ mean that ‘in regard to the matters which it regulates harmonisation is not complete’.⁸⁸

This conclusion then coloured the view which the Court took of the significance of article 13 of the 1985 Directive.⁸⁹ The Court interpreted this article as having two distinct limbs: its second part (which refers to the Directive’s not affecting ‘a special liability system existing at the moment when the Directive is notified’ means that the Directive does not affect the rights of injured persons under already existing laws governing liability for ‘a given sector of production’ as illustrated by recital 13’s reference to the (German) law of liability for pharmaceuticals. However, the first part of article 13 (which refers to the Directive’s not affecting ‘any rights which an injured party may have according to the rules of the law of contractual or non-contractual liability’) means that:

the system of rules put in place by the Directive, which in Article 4 enables the victim to seek compensation where he proves damage, the defect in the product and the causal link between (p.442) that defect and the damage, does not preclude the application of other systems of contractual or non-contractual liability based on other grounds, such as fault or a warranty in respect of latent defects.⁹⁰

As regards these ‘other grounds of liability’, there would appear to be no limitation in terms of the timing of their enactment since article 13’s phrase existing at the moment when this Directive is notified’ does not qualify its protection of these rights.⁹¹ In the Court’s view, the Directive sets both a minimum and a maximum for the Member States in setting the liabilities which form its subject matter, but it does not prevent the application of existing or future laws affecting the rights of injured parties harmed by products on other legal bases. As a result, on the cases before them, the Court held both France and Greece in breach of the 1985 Directive’s requirements to the extent to which their implementing measures were more protective of consumers than it allowed.

The significance of the European Court’s decision in Gonzàlez Sanchez is more difficult to discern. The Court understood the question put to it by the Spanish court as asking whether article 13 must be interpreted as meaning that the rights conferred under legislation of a Member State on victims of damage caused by a defective product may be limited or restricted as a result of the Directive’s implementation.⁹² The claimant in the Spanish court had argued that Spanish implementation was not entitled to restrict her rights under previous Spanish legislation (of 1984) which, inter alia, imposed liability for damage caused by the correct use or consumption of goods or services, thereby imposing a liability not restricted to ‘products’ as such and, more importantly, where products were in fact in issue, not requiring proof of their defectiveness.⁹³ The European Court’s reply to the Spanish court was that article 13 must be interpreted as meaning that:

the rights conferred under the legislation of a Member State on the victims of damage caused by a defective product under a general system of liability having the same basis as that put in place by the Directive may be limited or restricted as a result of the Directive’s transposition into the domestic law of that State.⁹⁴

In order for this decision to be sufficient for the Spanish court to decide its case, the European Court must be taken to have assumed that the earlier Spanish legislation did rest on the same basis as that put in place by the Directive, so that Spain’s implementing legislation was entitled to restrict recourse by claimants to its provisions. With respect, however, the European Court did not appear to consider the question whether or not the earlier Spanish legislation did rest on the ‘same ground’ as the Directive for this purpose—while the relevant provision was tied to liabilities for production, it was not based on their ‘defectiveness’. It could be thought that if liability for ‘latent defects’ in the laws of the Member States could remain unaffected by the Directive because it did not rest on the ‘same ground’ as the Directive and therefore fell within article 13, so could this special Spanish liability. Certainly, the European (p.443) Court’s decision did not explicitly say that the 1985 Directive required Spain to restrict reliance on the earlier legislation as part of its proper implementation.⁹⁵

Whatever the precise significance of the Gonzàlez Sanchez decision, in all three cases the European Court stated clearly that the Directive’s purpose was the complete har-monisation of laws within its own ambit and terms (‘in the matters regulated by it’).⁹⁶ This interpretation is understandable in terms of the Court’s own general approaches to legislative interpretation, for it interpreted a particular provision (article 13) of the Directive in the light of its purposes stated in its preamble which were themselves related to EC competence and wider EC principle (fair competition and free movement of goods); it looked at the preamble’s gloss (notably, recital 13) to the particular provision as an aid to its interpretation; and yet it still gave a meaning to the words used by article 13. Having said this, the Court’s interpretation has a number of perverse effects on the way in which its implementing legislation relates to the rest of the law of a Member State. For what it envisages is that the Directive requires that each Member State must maintain or create a special system of liability which reflects the provisions of the Directive, setting liability for producers for harm caused by defective products (as it defines all these concepts) and subject to the defences and time limits which it provides. Each Member State must possess a ‘completely harmonised’ set of rules for the Directive’s subject matter, frozen until such time as the EC legislator itself changes the Directive’s own provisions.⁹⁷ In this respect, while there has been considerable talk of reform of the Directive, very little has so far been done.⁹⁸

However, this still leaves the question of the relationship of the Directive’s implementing legislation and other laws of Member States. For example, in Commission v France, the Court’s decision censured the expansion by the French loi of 1998 of liability of ‘suppliers’ beyond the extent required by the Directive;⁹⁹ but can the domestic law of a Member State impose liability on ‘sellers’ or other ‘suppliers’ under its law of sale or more general contract law to a more burdensome extent than the Directive requires, whether this imposition is accomplished by judicial interpretation of existing laws or by legislative change, as long as the formal implementing legislation of the Directive is left untouched? According to the Court, article 13 leaves unaffected the laws of Member States governing ‘contractual and non-contractual liability’ and it specifically included within these liability for latent defects (notably arising under the law of sale).¹⁰⁰ On the other hand, it makes little practical sense and no sense at all from the point of view of the harmonising effect of the Directive if a Member State can impose a wider liability on ‘suppliers’ or ‘producers’ simply by (a) renaming them; (b) reclassifying their liability and/or (c) making sure that the liability is imposed under some law other than the Directive’s own implementing legislation and is expressed to rest on a legal ground distinct from the Directive’s. As I shall explain, in France the question of the practical impact of the 1985 Directive as interpreted by the (p.444) European Court in 2002 on existing judicial constructions of liability resting loosely on interpretations of the Civil Code (and therefore at first sight on ‘other grounds’) has become particularly prominent, being complicated by French judicial ‘implementation’ of the Directive in the 1990s and by French domestic understandings of the relationship between its own (national) legislation and its jurisprudence.¹⁰¹ Moreover, if a Member State may still give effect to a more protective policy for victims of products under cover of its interpretation of domestic law, but not overtly in its implementing legislation of the Directive itself, this can create real problems of coherence and clarity in the fabric of the national law. As I shall explain, the problems of potential incoherence are accentuated where the implementation of other EU legislation (and notably the Consumer Guarantees Directive of 1999) may require or suggest legislative changes which impact substantively on the liability of ‘producers’, ‘importers’ and ‘suppliers’, though wearing their contractual denominations as various sellers in the chain of distribution.¹⁰²

By comparison, the decisions of the European Court of Justice in 2002 on the nature of the Product Liability Directive have hardly been noticed by English commentators. Of course, at one level this can be explained by the minimalist approach to the implementation of the Directive by the United Kingdom in Part I of the Consumer Protection Act, the government of the time not wishing to impose any greater burden on business than the Directive specifically required.¹⁰³ This being the case, the minimal nature of the Directive was very much in the minds of the English draftsmen, but not the extent to which it set a maximum within its ambit. Moreover, the English law of extra-contractual product liability rested on (and still rests on) a general requirement of proof of negligence which looks more demanding from the point of view of a claimant than proof of the necessary elements of liability under the Consumer Protection Act 1987. And English courts have not extended the general contract law or law governing sale in any way remotely similar to that undertaken by their French counterparts, in particular as regards the extent to which liability may be relied on beyond the parties to the contract.¹⁰⁴

In terms of the more general substantive sense of the European Court’s decisions, it is one of the arguments of this book that the idea that the European legislature can, by requiring even a ‘completely harmonised’ set of rules of liability for a particular class of defendant in relation to a particular type of claim, thereby create a level playing field of costs arising from liability is fundamentally unconvincing. Even restricting one’s inquiry to the impact of liability, the burden on any category of person can only be seen in the context of wider patterns of the distribution of liabilities and the pattern of their channelling within the system.¹⁰⁵ As long as wider patterns of liability differ as between legal systems, the creation of a formally uniform basis of liability for one category of defendant can do little in terms of their relative costs deriving from liability.