Product Liability: The Austrian System according to the EU Directive and Recent Court Decisions - TÜRKİYE HUKUK

Product Liability: The Austrian System according to the EU Directive and Recent Court Decisions

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Hon.-Prof. Dr. Irene Welser / Viyana Üniversitesi

Dear Ladies and Gentlemen!

After the interesting presentation that my dear friend Prof. Öszunay just made, you might be interested to hear some words on Austrian product liability law, which closely follows the product liability system of the EU Directive.

Before I start, I would, however, like to shortly introduce myself. As you can take from the programme, I am honorary professor at the University of Vienna, where I teach private law. But, I must say that I am also managing partner of one of the biggest Viennese law firms, where I have been heading the dispute resolution department for nearly twenty years. This is why I will try to illustrate my speech not only with some recent court decisions, but also with some cases that I have litigated myself. I hope you will find this interesting and inspiring, because it will clearly show some of the practical issues and problems when pursuing or defending product liability claims.

As you all know, in Turkey product liability issues are part of the consumer protection law. Even though the EU Directive No 85/374/EEC, as amended by Directive No 1999/34/EEC clearly aims at ensuring a high level of consumer protection against damage caused to health or property, it was not encompassed in the Austrian Consumer Protection Law itself. Like in many other states, in Austria we have a specific Product Liability Law that first entered into force in 1988 and consists of 17 paragraphs. Despite its shortness, there have been quite a few Supreme Court decisions clarifying various aspects that had been disputed or deliberately left open by the law itself.

What is the definition of product liability? Product Liability means strict, objective liability of the producer of a defective product. It is, therefore, a principle of liability without fault. Therefore, it is not necessary to prove any negligence (or even intent) on the side of the producer. On the other hand, it would be unlawful and ineffective for the producer to contractually exclude product liability towards the injured person.

Who is liable? Basically, as the name suggests, the producer of a product is liable. Producer means the manufacturer of a finished product, of any raw material or component or any person or any entity who “presents himself as producer” by putting his name or trade mark on the product. Furthermore, in order to make court proceedings easier, also the person who, in the course of his business, imports a product into the European Economic Area and puts it in circulation there can be sued directly. He has, however, a right of recourse against the “real” producer. If the producer of the product cannot be detected, the supplier or merchant of this product will be held liable as long as he is unable to name the producer or the firm where he got it from. If two or more persons or legal entities are liable, they are jointly and severally liable. The law obliges the producers or potentially liable enterprises to have sufficient insurance coverage or to provide for the fulfillment of justified claims in another suitable manner.

What is a product? Product means all movables, even if part of another movable or immovable object, including energy. The EU Directive originally excluded primary agricultural products and game (deer), but this exception was deleted in the course of the “mad cow disease crisis” in 1999. This was done specifically to increase the level of consumer protection and to restore consumer confidence in the safety of food products.

Prerequisite of any product liability is a “defective” product. When is a product deemed to be defective? A defect in the sense of product liability has nothing to do with a fault or deficiency in the sense of warranty law. A product is defective if it inflicts danger to other goods. It is therefore only defective if it does not provide the safety that may reasonably be expected, in particular with respect to the presentation of the product, the use of the product that may reasonably be expected, and the time when the product was put into circulation. It is important to stress that a product cannot be considered defective for the sole reason that an improved product is put on the market at a later stage. Defects may in general be categorized in defects in construction, defects in production and defects in instruction.

Let me give you a few examples for construction defects: You will all have heard about exploding high-pressure cooking pots or children’s toys that are toxic when the babies put them into their mouth. Plastic eyeglasses that crack when hit by a snowball with the effect that the glass splinters hurt the eye have, in a recent court decision, been considered defective because there was no warning that they can be destroyed so easily (6 Ob 73/04k).

A cutting-machine for gardening, so-called wood-chopper that would permit you to put your hand into the rear end where the cut garbage is thrown out is another good example for construction defects, as the Supreme Court pointed out (8 Ob 192/99i).

On the other hand, defects may arise from specific, even unforeseen mistakes in the production process, for example, if a machine in a car factory gets out of order and does not properly produce according to general standards, so that the brakes of a certain series of cars are not safe. In this context, there would also be a duty of the producer to call back the series of possibly defective products, as foreseen by the “product safety law”, a public law that lays down detailed provisions on when and how to organize such call-back-actions of defective products.

What is a defect in instruction? A case I handled myself was the claim of a lady who had decided to undergo a specific anti-wrinkle treatment. She had frown-lines between the eyebrows that she wished to have removed by a doctor. The doctor used a medical product that was injected and that would pad out or bolster these wrinkles. One of the very rare side effects of this product was that it might cause serious skin irritations. In fact, this medication did a terrible job with the poor lady. Her skin got redder and redder, and due to various inflammations on her forehead, she soon had a terrible scar where the – relatively harmless – frown-lines had been. She would have been very happy just to have back the wrinkles she had had before, as the skin remained seriously damaged and, in order not to show, she had to have her hair cut in a fringe to cover her scar ever since. She sued both the doctor for medical malpractice and the producer of the medication for product liability. I represented the producer, and we won the case, because there had been clear instructions on the package of the medication that, in very few cases, such side effects may be possible. Hence, the product was not considered defective due to this clear instruction.

Another case that was recently decided by the Austrian Supreme Court (8 Ob 14/11h) was one of a detergent spray for baking ovens, which led to serious skin burns of the person using it. She had by mistake sprayed the product onto her skin and only gone to wash this off “some minutes later”. The Supreme Court ruled that if the use of a product may lead to dangers for the health of the user, there has to be a clear warning stating the precise possible danger as well as the functional context so as to show precisely why the product may be dangerous. As the instruction on how to react in case of skin contact was so unclear that the consumer had been under the impression to have done everything necessary, product liability was affirmed. However, a fault on the side of the injured person was also taken into account, which, also according to product liability provisions, seriously reduced the liability of the producer in this specific case.

A case that I am in charge of, and litigating before the Court of Commerce in Vienna right now, is a world-wide series of infections caused by blood-plasma-derivates in the 1970s and 1980, when the Hepatitis C virus had not yet been detected. So, patients receiving blood plasma that had been donated by infected persons got infected themselves, and many of them even died. Damages amount to millions. Actually, this is not a case under the product liability act, as it dates back before 1988. Still, in this context, it is necessary to point out that, both according to the Directive and to Austrian law, even though liability shall not be excluded by lack of guilt, it may be excluded if the producer proves that the state of scientific and technical knowledge at the time when the product was put on the market was not such as to enable the existence of the defect to be discovered. Therefore, even though such blood derivates are clearly defective, as they are really unsafe, and the poor patients who used them got even sicker, product liability under the existing provisions would probably be denied, as at the time when the blood derivates were put into circulation, there was no possibility to prevent or even detect this defect.

There has been a long discussion as to whether an ineffective product is to be considered defective in the sense of product liability law. The Supreme Court has in the meantime clarified that this is the case: It is irrelevant whether the defect results from “too much” effect of the product, “too little” effect or “no effect at all”, especially if the product was purchased specifically to avoid such unwanted effects. The first decision refers to ineffective sealing material (2 Ob 162/97f), the second one to ineffective water-protective paint that was used for a wooden house (6 Ob 162/05z), which, due to the ineffectiveness, was seriously damaged by rain and mould.

Recent court decisions also show that producers of goods have to take into account a certain degree of improper use of the product, even though, luckily enough, we are far away from American standards, where a producer of a microwave would have to put warning signs on this microwave not to heat up your cat or dog in it. However, it was decided that putting a half-empty bottle of sparkling mineral water into the freezer, and then putting it back into the normal fridge in order to defrost it again was not at all a use of the bottle that would have been unforeseeable or even absurd. Actually, when opening the refrigerator, the bottle exploded and a piece of ice hurt the eye of the person so badly that it had to be completely removed in the end. The product was considered unsafe, product liability was affirmed (9 Ob 50/09b).

The burden of proof generally lies with the claimant. Therefore, he has to prove not only the defect of the product, but also the actual damage, and the causal relationship between the defect and the damage. There is another case I litigated myself to illustrate the problems this might entail. A big fire expanded in an apartment, and the whole apartment burnt down. The fire brigade that tried to extinguish the fire and save the flat, located the television set as source of the fire. They spotted the remains of the television set that were completely melted into a small piece. The TV set had been on standby mode. Of course, you may expect that, according to normal safety standards, a television set that is on standby would not start to burn. Therefore, the owner of the apartment sued the producer for product liability. I represented the producer, and we won the case, because the remains of the television set had been thrown away by the fire brigade. So, according to burden of proof regulations, the owner of the apartment had not been able to prove that it really was a defect of the television set that had caused the fire. The court expert would have needed the melted remains in order to judge whether the fire had really started inside the TV set, and to exclude an external source for the flames, for example a forgotten candle that had been put up somewhere nearby. This argumentation was somehow facilitated by the fact that the fire took place around Christmas time, when Austrians tend to put up candle-lit trees and real candles, but still shows that there is no presumption that a product is defective.

Which damages are covered by product liability? Both according to the Directive and to the Austrian Product Liability Act, only two kinds of damages are covered: First, personal damages, that means death or personal injuries. This is irrespective of the fact whether the injured person is a consumer, or if he suffers the personal injury in the course of his business. Second, damages to items of property other than the defective product itself are covered. There is, however, an important restriction. Such damages are not covered by product liability if the damaged objects have been predominantly used by a businessman or business entity in the course of its business.

So, for example, if a defective computer sets my law firm on fire, my associates and partners would be entitled to damage claims for personal injuries. We would not get any damages for the burnt down business equipment, as this has been used for business reasons only. If I had bought an ipod as Christmas present for my daughter, which I had in the meantime stored in my office cupboard, this would basically be reimbursable, but, due to a specific “de minimis”-provision, only in the amount that exceeds € 500,-. Immaterial damages or purely monetary damages, for example lost profits, are not to be reimbursed at all. So, this would be a very sad case for my law firm.

Another case in which I was involved recently where product liability does not help: A construction firm builds a motorway tunnel. Due to unexpected defects of the sealing strips that had been used for connecting the concrete blocks of which the tunnel was made, there were heavy water intrusions in the tunnel that made it unsafe, because the cars that drove through the tunnel had to cope with water pits and, in winter, even icicles dropped from the ceiling. The motorway provider claimed for warranty and damages. Warranty claims against the construction firm are no question. As this example illustrates, of course, national warranty and damage claims are not in any way affected or excluded by potential product liability. This is explicitly laid down both in the Directive and in the Austrian law.

But to come back to our case: No product liability. Why? Even though the tunnel itself may be unsafe, the tunnel itself is not a defective product because it is not moveable. So there is no product liability from the side of the construction company towards the motorway provider. On the other hand, the sealing strip may well be considered a defective (and even potentially dangerous) product. Is the producer of the sealing strip therefore liable towards the motorway provider under product liability law? No, because the tunnel is, of course, only used in the business of the motorway provider, so there is no product liability claim, neither for the motorway provider not for the construction company which has to repair the tunnel under warranty law. Even if, in this case, damages went up to millions and therefore clearly exceeded the € 500,- threshold.

In this example, the only product liability case could be based upon personal injuries or damages to the cars of the users of the tunnel against the producer of the sealing strips, if, due to the defective sealing strips, icicles that fall down and hit them lead to damages. But again, if they damaged cars are used mainly for business purposes, like motor trucks, such damages would not be covered.

Now, before the time limit for my presentation is reached, let me take up this catchword and revert to one last issue: What about time limits for product liability claims? What about prescription? When is a product liability claim time-barred? The Directive sets the standard of a minimum limitation period of three years, beginning from the day on which the claimant became aware or should reasonably have become aware of the damage, the defect and the identity of the producer. The Austrian law sets an absolute limit of 10 years after the defective product has been put into circulation.

I think I have now also reached my personal time limit, and therefore I would like to thank you for your attention!

*Bu metin, 24-25 Kasım 2011 tarihinde gerçekleştirilen Uluslararası Tüketici Hukuku Sempozyumu‘nun 2 . Gün 1. Oturumunda Viyana Üniversitesi’nden Hon.-Prof. Dr. Irene Welser tarafından sunulmuştur. 

Bir önceki yazımız olan Tüketicinin 4077 Sayılı TKHK ile Genel Hükümlere göre Talep ve Dava Haklarının Yarışması başlıklı makalemizde harun kara, tüketici hukuku ve Uluslararası Tüketici Hukuku Sempozyumu hakkında bilgiler verilmektedir.

Paylas.

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