EU Law Blog

Product liability, put into circulation, pharmaceuticals and Case C-127/04

In Case C-127/04 Master Declan O'Byrne the Court seems to have helped solve one problem but may have helped to create another.

The problem that had to be solved was to define at what point a product was "put into circulation" according to Article 11 of Council Directive 85/374/EEC of July 25th, 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products. That provision provides:

"Member States shall provide in their legislation that the rights conferred upon the injured person pursuant to this Directive 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 which caused the damage, unless the injured person has in the meantime instituted proceedings against the producer."

In other words, the ten year period during which the producer of a defect product is strictly liable for any loss and damage caused by the defect starts when the product is "put into circulation". But when is that ? No definition of "put into circulation" is given in the Directive. It is defined by Article 2 d) of the 1977 Strasbourg Convention on Products Liability in regard to Personal Injury and Death. Granted that is not a great deal of help either but paragraph 43 of the Explanatory Report states :

"Paragraph d defines the term "put into circulation". This definition indicates the moment when the producer becomes liable under the convention, and so separates this type of liability from that which is provided by the ordinary rules of law. For example, in certain States the producer will be liable as the "keeper" of the product until it is put into circulation and liable under the -products liability" system after it has been put into circulation."

In Case C-127/04 the Court of Justice was faced with an antihaemophilus vaccine manufactured in France, distributed in England by the wholly owned subsidiary of the producer and administered in England. So when was the vaccine put into circulation ? When it left the French company, when it reached the English subsidiary, when it left the English subsidiary or when it was received by the English health care organization, ready for administration ?

The point was important in the actual case because it seemed that the plaintiff may have sued too late to benefit from the ten year strict liability regime according to which starting point was taken for it.

The Court of Justice held that a product must be considered as having been put into circulation, according to Article 11 of the Directive, when it leaves the production process operated by the producer and enters a marketing process in the form in which it is offered to the public in order to be used or consumed. But when is that ? The Court gives some guidance, but whether it is enough remains to be seen. The Court stated that :

"when one of the links in the distribution chain is closely connected to the producer, for example, in the case of a wholly-owned subsidiary of the latter, it is necessary to establish whether it is a consequence of that link that that entity is in reality involved in the manufacturing process of the product concerned."

And the Court went on that it was relevant whether those are companies carrying out different production activities or are, on the contrary, companies one of which, i.e. the subsidiary company, acts simply as a distributor or depository for the product manufactured by the parent company. So, if we understand that correctly, a wholly owned subsidiary that does nothing more than distribute the product is not involved in the manufacturing process. Thus, the product is put into circulation when it leaves the producer in a state ready to be used or consumed. In any event, the matter is for the national courts to determine on the facts of each case.

Bad eggs, product liability and Case C-402/03

Two Danes bought some eggs from a retailer. The retailer in turn got them from the producer. Alas, the eggs were bad and and gave the two consumers salmonella poisoning. The consumers brought an action in tort against the retailer who then joined the producer in the proceedings.

The point that came up was whether the retailer could be strictly liable according to Council Directive 85/374/EEC of July 25th 1985 on the approximation of the laws, regulations and administrative provisions of the member States concerning liability for defective products.
Directive 85/374/EEC provides for strict liability of the producer for any loss and damage caused by a defect in goods he puts into circulation. However, Danish law, implementing the Directive, provided also that any intermediary, such as a retailer, could also be liable in lieu of a producer.

The Court held in its judgment in Case C-402/03 Skov Æg v. Bilka that an intermediary such as a retailer could not be strictly liable in lieu of a producer under Directive 85/374/EEC. The Court repeated that Directive 85/374/EEC brought about complete harmonization of liability for defective products and consequently, member States could not have a system of no fault or strict liability for defective products of persons other than those defined by the Directive itself. Nor could member States transfer the liability of the producer to other persons such as retailers.

But the Court did state that member States were free, under the Directive, to have a liability system in which a supplier or retailer was liable in negligence or for fault.

Two more general points came up.
The first concerned the legal value of a statement on the meaning of a provision in the minutes of the Council meeting held during the adoption process of the legislation. In this case, the Danish government sought to rely on a statement in the minutes of a Council meeting to support their submissions that the Directive should be interpreted in a particular manner. The Court recalled that where a statement recorded in the Council minutes is not referred to (or reflected) in the wording of the provision in issue, it cannot be used for the purpose of interpreting the provision (see inter alia Case C-375/98 Epson Europe).
The second was the temporal effect of a preliminary ruling of the Court of Justice. The Danish government and the injured persons asked the Court of Justice to limit the temporal effects of its judgment so that it would apply only from the time of its delivery. The Court denied the request. It stated that as a matter of principle, a judgment rendered in an Article 234 EC procedure clarifies and defines the meaning and scope of EC law as it should have been understood from the moment that the law entered into force. As a consequence, the law as interpreted by the Court of Justice must be applied by national courts to legal relationships that arose before the judgment was handed down in the Article 234 EC procedure. The Court also stated that it is only exceptionally that it will restrict for any person concerned the opportunity to rely on a provision of EC law that it has interpreted. Two conditions must be fulfilled before such a limitation can be imposed :

- Those concerned should have acted in good faith

- There should be a risk of serious difficulties

(see Case C-372/98 Cooke). In this case the Court of Justice found that no serious difficulties would arise if the temporal effects of the judgment were not limited.