B&M Newsletter. Foreign Law Brief. New Product Liability Law of Thailand - Comparison with Japanese Product Liability Act. Background.

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1 B&M Newsletter Foreign Law Brief Tokyo September 26, 2008 Extra Edition Authors: Peerapan Tungsuwan Principal Benedict Yong Consultant bakernet.com New Product Liability Law of Thailand - Comparison with Japanese Product Liability Act Background For a long period of time there has been a proposal to introduce product liability legislation in Thailand. There have been various draft Bills proposed, however these draft Bills have been abandoned after the end of the terms of various governments, due to various political reasons. In December 2007, the National Legislative Assembly approved a draft Bill regarding product liability, known formally as the Bill on Liability for Damage from Unsafe Products. The Bill was published in the government gazette on February 20, 2008 and will become law on February 21, For the purpose of this newsletter, we will refer to the Bill on Liability for Damage from Unsafe Products as the Act. Basic Concepts Yasutaka Orihara Associate The Act has introduced the concept of strict liability regarding product liability. Under this concept, the Business Operator will be liable regardless of whether it has acted deliberately or negligently. A Business Operator may be liable even though he has not intended to cause damage, has in fact exercised all due care, and is not negligent. The plaintiff needs only to prove that he/she has suffered damage and that this damage was caused by an unsafe product. The traditional negligence liability rule is abandoned to focus upon the product and the damage that it causes. There is no requirement for any sort of contract or contractual relationship between an aggrieved party and the Business Operator in order for liability to arise on the part of the Business Operator. Parties who have not bought the product can use the Act and pursue damages if the product has caused them harm. The basic concepts are the same as for product liability in Japan. However, the Act differs from product liability in Japan in relation Baker & McKenzie GJBJ Tokyo Aoyama Aoki Koma Law Office (Gaikokuho Joint Enterprise) The Prudential Tower , Nagatacho Chiyoda-ku, Tokyo Japan Tel Fax Baker & McKenzie All right reserved.

2 to a number of points, as discussed below. Framework of the Act The basic framework of product liability under the Act is that it imposes liability on the Business Operator to an aggrieved party for damage from an unsafe product. Each of these concepts is discussed below. Business Operator The term Business Operator is defined to cover: (1) a manufacturer and manufacturing outsourcer; (2) an importer; (3) a seller of a product in the situation where the product itself does not indicate the manufacturer, manufacturing outsourcer, or the importer; or (4) a person who uses a name, trade name, trademark, mark, or wording, or who displays any of these by any means, in a manner that would give rise to an understanding that such person is the manufacturer, manufacturing outsourcer, importer, or seller. The seller may be liable under (3), and a person who makes an unclear display may be liable under (4). Definition of Unsafe Product Unsafe Product means a product that causes or may cause injury, whether by reason of: (1) defective manufacture or design process; or (2) failure to provide instructions for use or storage, or warnings or information concerning the product, or such is provided but is inaccurate or not as clear as it should be, taking into consideration the condition of the product and the normal manner of using and storing such product as might be expected. Scope of Damage Damage includes physical or emotional damage and damage to property, other than to the unsafe product itself. Punitive Compensation The court may grant punitive damages, which is limited to two times the actual damages proven in court, taking into account the following possible factors: (1) whether the Business Operator sold the product with the knowledge that such product was an Unsafe Product; (2) whether the Business Operator sold the product but due to its gross negligence did not know that the product was an Unsafe Product; and (3) whether the Business Operator did not take appropriate measures to prevent the damage from occurring. 2

3 The court can consider other circumstances, including the severity of injury, the period of concealment, any benefits the Business Operator received, the Business Operator s financial standing, and the degree of the injured party s involvement in causing the injury. Joint & Several Liability of Business Operators The liability of Business Operators for damages is joint and several. The injured party must prove that the injury was due to the product of the Business Operator and the use or storage of the product was both normal and usual. However, the injured party need not prove that the damage occurred due to a specific act of the Business Operators. Class actions Strictly speaking, Thai law still does not allow class actions, although a Bill to allow class actions is currently being drafted. However, under the Act, the Consumer Protection Board, any associations, and any foundations accredited by the Consumer Protection Board, shall have the right to institute a lawsuit to claim damages on behalf of an injured party. Limitations period The Act provides that the limitations period for the right of an injured party to claim for damages shall expire after the following periods: (1) three years from the date the injured party is aware of the injury and the identity of the Business Operator who is liable; or (2) 10 years from the date the product was sold. In the event of injury to life, body, health, or wellbeing as a result of the accumulation of a substance in the body of the injured party, or where it would take time for the symptoms to appear, the injured party must exercise the right to claim within three years from the date of becoming aware of the injury and the identity of the Business Operator who is liable, but not exceeding 10 years from the date of becoming aware of the injury. Defenses The defendant can be exempt from liability under the Act upon proving one or more of the following defenses: (1) the product is not an Unsafe Product; (2) the injured party was fully aware that such product was an Unsafe Product; or (3) the injury arose from incorrect use or storage, which differed from that advised in the instructions for use or storage, or the warnings or information concerning the product that the Business Operator reasonably, correctly, and clearly provided. These defenses available to Business Operators are very limited in scope and content compared with the broader range of defenses typically available under comparable legislation in other countries. 3

4 Comparison with Japanese Product Liability Act The basic concepts of the Act are similar to those of the Japanese Product Liability Act. However, please note that the Acts differ in relation to the defense of development risk, punitive compensation, liability of seller, joint & several liability of Business Operators, and class actions. Development Risk Defense The Act does not provide for the development risk defense, which is available under the Japanese Product Liability Act. The Business Operator is not allowed to claim that the defect could not have been discovered and foreseen given the state of technical knowledge at the time of production. In this sense, the Act is disadvantageous to the Business Operator compared with that of Japan, as the Business Operator needs to prove that the product is not an Unsafe Product. Punitive Compensation Punitive compensation is not permitted in Japan, whereas an injured party may be awarded punitive compensation under the Act if there is any concealment on the part of the Business Operator. Punitive compensation under the Act may not exceed two times the actual compensation. We should monitor the extent to which the courts in Thailand actually award punitive compensation. Liability of Seller In general, the seller of the product is not liable in Japan. In contrast, the Act broadens the scope of the liable parties to include the seller of the product, if the manufacturer, manufacturing outsourcer, or the importer of the product cannot be identified. If a person is the seller of the product, he/she should specify the manufacturer, manufacturing outsourcer, or the importer of the product to avoid being liable. Joint & Several Liability of the Business Operators In Japan, the manufacturer, processor, or importer of the product are respectively liable and have no joint or several liability. The Act provides that the liability of the manufacturer, manufacturing outsourcer, importer and seller is joint and several. Class actions The Act provides for class actions by the Consumer Protection Board. In Japan, the Product Liability Act does contain provisions regarding class actions, but the Consumer Contract Act provides that qualified consumer organizations may demand an injunction against a Business Operator to prevent damages to consumers. However, this covers only a demand for an injunction, and not compensation for damages. The class action rights in Thailand under the Act are more advantageous to the victims. 4

5 Comparison of Product Liability Laws Thailand and Japan Concept of liability Elements to prove Defences Definition of unsafe and defect Definition of Business Operator Thailand Strict liability - Liability arises irrespective of whether injury arose through a wilful act, negligence, or otherwise (Section 5). Injured party must prove : Injured party was injured due to the product of the Business Operator; and the use or storage of the product was both normal and usual (Section 6). (1) Product is not an Unsafe Product; (2) Injured party was fully aware that such product was an Unsafe Product; or (3) Injury arose from incorrect use or storage, which differed from that advised in the instructions for use or storage, or the warnings or information concerning the product that the Business Operator reasonably, correctly, and clearly provided (Section 7). Unsafe Product means a product that causes or may cause injury, whether by reason of: defective manufacturing or design process; or failure to provide instructions for use or storage, or warnings or information concerning the product, or such is provided but is inaccurate or not as clear as it should be, taking into consideration the condition of the product and the normal manner of using and storing such product as might be expected (Section 4). Business Operator means: (1) a manufacturer or manufacturing outsourcer; (2) an importer; (3) a seller of a product in the situation where the product itself does not indicate the manufacturer, manufacturing outsourcer, or the importer; or (4) a person who uses a name, trade name, trademark, mark, or wording, or who displays any of these by any means, in a manner that would give rise to an understanding that such person is the manufacturer, Japan Strict liability - Intent or negligence is not relevant to liability. Liability arises for damage caused by a defect in the product (Article 3). Plaintiff must prove: damage arose from the infringement of life, body or property of others; and damage was caused by a defect in the product (Article 3). (1) Defense of development risk: defect could not have been discovered given the state of scientific or technical knowledge at the time of delivery (Article 4 (i)); or (2) Defense of component product: in a case where the product is used as a component of another product, the defect occurred primarily because of the compliance with instructions concerning the design given by the manufacturer of such other product, and the manufacturer of the component product is not negligent with respect to the occurrence of such defect (Article 4 (ii)). Defect shall mean a lack of safety that the product ordinarily should provide, taking into account the nature of the product, the ordinarily foreseeable manner of use of the product, the time when the manufacturer delivered the product, and other circumstances concerning the product (Article 2 (2)). Manufacturer, etc. means: (1) any person who manufactured, processed, or imported the product in the course of trade; (2) any person who provides his/her name, trade name, trademark or other indication on the product as the manufacturer of such product, or any person who provides any representation of name, etc. on the product which misleads others into believing that he/she is the manufacturer; (3) any person who provides any representation of name, etc. on 5

6 Joint & several liability Damages Statute of limitations period Class actions manufacturing outsourcer, importer, or seller (Section 4). All Business Operators are jointly liable, irrespective of whether the injury arose from an act done willfully, or through negligence on the part of the Business Operator, or otherwise (Section 5). In addition to compensation under the Civil and Commercial Code, the court may award compensation as follows: (1) damages for emotional distress; and (2) in the case of concealment, the court is empowered to award punitive compensation, but not exceeding two times the actual compensation. The court can consider the circumstances, including severity of injury, the fact that the Business Operator knew the product was unsafe, the period of concealment, what the Business Operator did with its knowledge that the product was unsafe, the benefits the Business Operator received, the Business Operator s financial standing, the extent that the Business Operator acted to relieve the extent of the injury, and the degree of the injured party s involvement in causing the injury (Section 11). Three years from the date the injured party is aware of the injury and the identity of the Business Operator who is liable; or 10 years from the date the product was sold. In the event of injury to life, body, health, or wellbeing, as a result of the accumulation of a substance in the body of the injured party, or where it would take time for the symptoms to appear, the injured party must exercise the right to claim within three years from the date of becoming aware of the injury and the identity of the Business Operator who is liable, but not exceeding 10 years from the date of becoming aware of the injury (Section 12). Strictly speaking, Thai law still does not allow class actions, although a Bill to allow class actions is currently being drafted. However, the Consumer Protection Board, any associations, and any foundations accredited by the Consumer Protection Board, shall the product which, in light of the manner of manufacturing, processing, importation or sale of the product, and other circumstances, holds himself/herself out as its substantial manufacturer (Article 2 (3)). No joint liability arises among manufacturer, or importer etc. Damages for emotional distress can be awarded. There is no punitive compensation system. Three years from the time when the victim becomes aware of the damage and the party liable for the damage (Article 5 (1)); or 10 years from the time of delivery, but this period shall be calculated from the time of the occurrence of the damage where such damage is caused by substances which become harmful to human health when they accumulate in the body, or where the symptoms which represent such damage appear after a certain latent period (Article 5(1) and (2)). While the Product Liability Act does not contain provisions regarding class actions, the Consumer Contract Act provides that qualified consumer organizations may demand an injunction against a Business Operator to prevent damage to 6

7 have the right to institute a lawsuit to claim damages on behalf of an injured party (Section 10). consumers. However, this law permits only a demand for an injunction and not compensation for damage. Baker & McKenzie GJBJ Tokyo Aoyama Aoki Koma Law Office (Gaikokuho Joint Enterprise) is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a partner means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an office means an office of any such law firm Baker & McKenzie All rights reserved. 7

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