International Product Liability Review

Transcription

1 International Product Liability Review Issue 50 Contents Overview 1 Feature Reform of EU product 2 safety laws: important changes on the horizon for those involved in the product supply chain Europe EU 7 Europe Germany 11 Europe Netherlands 17 Europe Spain 19 Europe UK 23 North America US 30 march 2013

2 In this issue 1 Overview Feature 2 Reform of EU product safety laws: important changes on the horizon for those involved in the product supply chain Two significant developments are currently under way for EU product safety laws: the revision and alignment of the New Approach Directives and the revision of the General Product Safety Directive. Rod Freeman, Claire Taylor and Valerie Kenyon (London) look at how the changes will impact on those in the product supply chain. Europe EU 7 EU waste law and product recalls: what you need to know The EU law that governs the shipment of waste between member states raises a number of regulatory and administrative challenges which can add significant cost and complexity to a product recall. Christopher Norton (London) considers how EU waste transportation measures may affect product recalls. Europe Germany 11 Court rejects application to medical devices of the right to disclosure under German Medicinal Products Act The Higher Regional Court of Frankfurt has rejected an argument by a claimant that the right to disclosure of documents that is provided by the German Medicinal Products Act should apply by analogy to medical devices. As Sebastian Lach and Victoria Parr (Munich) comment, the decision is to be welcomed. 13 Reform of the Capital Markets Model Case Act: product liability claims left alone, but for how much longer? Stefan Rekitt and Victoria Parr (Munich) look at the recent reform of the German securities class action procedure, and question how long it will be before its scope is extended to other types of claim, including product liability claims. Europe netherlands 17 Dutch Court of Appeal rules that leaking heart valve is not a defective product Karen Jelsma (Amsterdam) reports on the recent case considered by the Court of Appeal of The Hague in relation to whether a leaking heart valve should be considered a defective product within the meaning of the Dutch legislation implementing the EU Product Liability Directive. Europe spain 19 An introduction to the criminal law aspect of product liability in Spain Ignacio Sánchez (Madrid) canvasses the Spanish Criminal Code provisions applicable to defective products specifically food and pharmaceuticals and comments on the interplay between the civil and criminal aspects of the product liability laws in Spain. Europe UK 23 Legal privilege in England and Wales confined to lawyers David Graves (London) discusses the recent, and much anticipated, decision of the Supreme Court of England and Wales on the question whether legal advice privilege extends to legal advice given by professionals other than lawyers. As the majority has ruled, it does not. 25 English Commercial Court finds actual, rather than alleged, liability is necessary for insurance indemnity in product liability case Nina Tulloch (London) describes the recent decision of the Commercial Court in relation to two preliminary issues between Astrazeneca Insurance Company Limited and two of its reinsurers. The issues that the Court was asked to consider would establish whether, under the particular insurance liability policy in issue, the coverage was only for actual and not merely alleged liabilities.

3 In this issue 27 A delicate balance: High Court finds in favour of claimant on retrial of catastrophic injury case Siobhan Thomson and Dennis Waller (London) report on the successful appeal by the claimant in Uren v Corporate Leisure (UK) Ltd and Ministry of Defence, and the judgment following retrial in the High Court, which highlights the importance of performing proper risk assessments and of taking proportionate and sensible steps where any real risk is identified. North America US 30 Jurisdiction of US courts over foreign product manufacturers after J. McIntyre Machinery, Ltd. v Nicastro Alvin Lindsay (Miami) considers the continued application in most US courts of the stream of commerce test (which sets the bar low for taking jurisdiction over foreign suppliers) despite a recent Supreme Court decision suggesting that something more is required than merely placing a product into channels of trade in circumstances where it might find its way into the forum.

4 13 INTRODUCTION For several years now, the potential introduction of class actions into German law has been a recurring theme. At present, there are no general provisions for class actions in the formal sense of the term and a judgment will bind only those who are party to the proceedings. Consequently, it is not uncommon to find a number of affected individuals pursuing similar claims against the same entity in multiple proceedings before multiple regional courts. Whilst each regional court may decide to group similar cases into a single set of proceedings, it is not currently possible to join cases from different regional courts. In light of the mass securities litigation involving about 17,000 independent claims brought by disappointed stockholders of Deutsche Telekom AG, the Capital Markets Model Case Act (KapMuG) was introduced into German law in The KapMuG provides a mechanism for handling mass securities litigation and establishes a lead case procedure for the collective handling of individual capital market related actions. In doing so, the German legislature attempted to achieve the delicate balancing act of keeping fundamental German and European procedural law principles intact, while at the same time avoiding the perceived pitfalls of the US class action system. The German legislature has very recently decided to introduce further amendments to extend the scope of the KapMuG, thus continuing the current trend of moving towards a more claimant-friendly environment. This article will discuss the most important revisions following the new reforms, the potential future extension of the KapMuG to include product liability cases, and Germany s legal position in relation to the long-awaited EU reforms. THE KAPMUG S EARLY DEVELOPMENTS When the first version of the KapMuG came into force in November 2005, it was primarily seen as a trial measure, limited to a five-year period determined by a so-called sunset clause. However, the law received positive feedback, particularly from the German Federal Government, which considered that the KapMuG should be extended, not only in time but also to include other mass civil case proceedings. 1 In May 2010, in response to a report by the Frankfurt School of Finance & Management, 2 the German Minister of Justice confirmed that the government was considering whether 1 See Capital Markets Class Actions: KapMuG and beyond, Hogan Lovells Class Actions Bulletin October The proposal to extend the scope of the KapMuG arose from this report. similar mechanisms could and should be introduced into other areas of law, including mass tort claims for personal injury and/or product liability. 3 Accordingly, the legislature prolonged the sunset clause for a further two years, until October 2012, to allow more time to consider reform. 4 IMPORTANT CHANGES INTRODUCED BY THE NEW REFORMS The new reforms of the KapMuG became effective as of 1 November 2012 and the law s period of application has been extended for a further eight years until Whilst the German legislature decided to retain the basic concept of the KapMuG and to revise only certain aspects of it, 5 these are still likely to have a major impact. The KapMuG s main goal remains to ensure availability of lead case procedures in the ambit of securities law. Claims concerning similar interests will be brought together to relieve the burden on courts. The individual proceedings will be continued only once the legal issue that concerns all claimants has been answered. The first change is that the reform extends the scope of application of the KapMuG to include civil law suits where capital market information has been used in the sale and distribution of financial products and/or the provision of investment services. Claims based on a pre-contractual breach of duty are also included where the breach arose, for example, from the presentation of a defective prospectus in the course of the provision of investment services. Secondly, investors are now given the option of registering their claim and applying for model case treatment before deciding whether eventually to bring a claim. This makes model case proceedings much more accessible for claimants, with the added consequence of suspending the limitation period pending the outcome of the model case proceedings. A third change is that the process itself is accelerated through the implementation of a deadline within which the application for a model case proceeding must be brought. Additionally, competence for the extension of model case proceedings has been transferred from the district court to the Higher Regional Court. 3 See Stefan Rekitt, Lead case procedure for mass securities actions to be permitted for product liability cases? European Product Liability Review 41 (December 2010), p15. 4 See Germany: Developments in the Collective Redress Mechanism, Hogan Lovells Class Actions Bulletin July For further details, see Draft paper, Bundestag printed paper 15/5091, p1.

5 14 International Product Liability Review March 2013 Issue 50 Prospective claimants make application to court of first instance for the establishment of a model case Fourthly, any settlement must be accepted by the Higher Regional Court before it can become effective. Once accepted, it binds all parties, unless they decide to opt out of it within a month of the Higher Regional Court s decision. This is comparable to the settlement procedure adopted in the Netherlands; however, unlike the Netherlands, the settlement would be binding only on those claimants who have already filed an individual claim. Finally, the admissibility of a separation of joinder of claims 6 has been limited in order to encourage collective legal action of the investors as early as the court of first instance. All the first instance proceedings before the lower courts are stayed Court Court makes order to transfer the action to the Higher Regional Court (OLG) and announces request in a public register of claims Within 6 months of announcement more than 9 other parties must also request model case treatment OLG OLG decides the model case, and issues an order which binds the parties in th case before the lower courts Model case proceeding major ImPAct of the reforms It appears that, by extending the scope of applicability of the KapMuG and altering the different stages of the procedure, the reforms have made model case proceedings even more accessible and should lead to greater time and cost savings for claimants. The most important revision however is the ability of claimants to register their claims and apply for model case treatment before eventually bringing the claims. Claimants must apply for model case treatment within six months of the court s having announced the request for such a procedure in the public register of claims, indicating the reason and amount of the claim. Once the claimant has applied for and registered the claim, the limitation period is suspended and only begins to run again three months after the model case proceeding has been concluded. Registering a claim before actually bringing it means that, under the new KapMuG, the claimant clearly benefits from the suspended limitation period and the possibility of seeing the result of the model case proceeding prior to deciding whether to bring a claim. This leads to an inherent risk of abuse of the system, a risk that has certainly been heightened by the recent reforms. As registration is cheap and generally low-risk, claimants can easily put pressure on defendants by encouraging as many registrations as possible. The imbalance between claimants and defendants is further emphasised by placing defendants in a weaker bargaining position. Defendants need to act as if the registered claimants have already brought their claims, by checking all registered claims in order to evaluate any risks. This task is made more difficult by the fact that the registered claims will contain only 6 Ie the ability to have similar claims dealt with separately.

6 15 short statements; these will not enable defendants to make a full evaluation of the individual claims. Another important change made by the recent reforms concerns the regulation of settlements in the KapMuG. Until now, a settlement was possible only if all parties agreed to it a requirement that was nearly impossible to fulfil. Now, however, the Higher Regional Court must accept a settlement before it becomes effective. Once the settlement has been accepted, it binds all parties to the model case proceedings. Parties can decide to opt out of a settlement, but must do so within a month of the Higher Regional Court s decision. For a settlement to be binding, no more than 30% of the claimants may use their opt-out rights to withdraw from it. The worry for defendants is that, if too many claimants opt out, they cannot treat a settlement as the definitive end to the dispute. These claimants may decide to register again and bring a claim leading to another identical model case proceeding against the defendant. It will therefore be advisable for defendants to settle only if the effectiveness of doing so will be high and will reach a high proportion of registered claimants. APPLICATION OF THE KAPMUG TO PRODUCT LIABILITY CLAIMS? The above mentioned report by the Frankfurt School of Finance & Management in 2009 had stated that the benchmark for extending the scope of the KapMuG should be merely a question whether the cause of action is, at least partly, based on generalisable legal prerequisites. The authors argued in particular that this applies best to product liability cases, where a product defect would easily be considered generalisable. According to the authors of the report, the question whether a product is defective can be answered in a general and supraindividual way. This argument does not hold true when one considers the taking of evidence in product liability cases. 7 If several claimants allege a product defect, the assessment of that defect depends on all the circumstances of each individual case. Section 3 of the German Product Liability Act, which implements the EU Product Liability Directive, provides a non-exhaustive list of circumstances that have to be taken into account in assessing whether a product is defective which will be found to be the case if the product does not provide the safety which a person is entitled to expect including the time a product was put into circulation, and the state of scientific and technical knowledge at the time. These circumstances are bound to be different in each individual case and therefore lead to a divergent assessment of the defect. This is problematic considering that, to commence a lead case procedure, the KapMuG simply requires that the various cases concern the same underlying subject matter. Thus, a product defect is in fact not easily considered generalisable. Furthermore, if the court did try to take into account all circumstances of all claims involved, it is most likely that this would take longer than assessing the circumstances separately, in individual proceedings. If individual claims were handled separately, a decision could be rendered earlier and more easily in certain cases. Moreover, some claims may be dismissible for reasons other than the alleged product defect, eg for lack of causation. During a lead case procedure however, an early and cost efficient dismissal of the claim for lack of causation would be impossible, as dismissal could not be achieved until after the lead case procedure concerning a different matter altogether had been completed. However, it seems very likely that discussion regarding a further extension of the KapMuG to other fields of law like product liability will start again before the end of the newly stipulated eight year sunset clause period. It is also likely that the long-awaited EU reforms in the field of collective redress will have an influence on future German legislation. EU REFORMS The EU has been making slow progress with its initiative on exploring the idea of an EU-wide form of collective redress. In February 2012, the European Parliament passed a resolution entitled Towards a coherent approach to collective redress, 8 which included more detailed guidance on the design of such a mechanism. Although we are still waiting for the European Commission s concrete proposals, the information obtained from the consultations on collective redress and previously published benchmarks already sets the tone. The Commission repeatedly focusses on collective redress as a means of handling small claims, where an individual claimant has no incentive of going to court, because the effort and cost involved are not in proportion to the damage 7 See Stefan Rekitt, Lead case procedure for mass securities actions to be permitted for product liability cases? European Product Liability Review 41 (December 2010), p15. 8 See for example, EU Collective Redress The European Commission launches its long-awaited public consultation, International Product Liability Review 42 (March 2011) p4.

7 16 International Product Liability Review March 2013 Issue 50 suffered. It argues that, due to the expansion of mass consumer markets and increased shopping on the internet, the number of such low-value claims, where consumers are being harmed by the same illegal practice, is rising. The recitals to the 2012 resolution stress that consumers who wish to pursue a court case in order to obtain redress on an individual basis often face significant barriers in terms of accessibility, effectiveness and affordability, that individual lawsuits may not constitute an effective means of stopping unlawful practices or obtaining compensation in cases where a group of citizens are victims of the same infringement, and that victims of unlawful practices must be able to claim compensation for their individual loss or damage suffered, in particular in the case of scattered and dispersed damages, where the cost risk might not be proportionate to the damages. Similarly, the Commission s benchmarks published in 2008 make reference to individual situations where the cost risk to the claimant does not stand in proportion to the damage suffered. For instance, the first benchmark explained that the mechanism should enable consumers to obtain satisfactory redress in cases which they could not otherwise adequately pursue on an individual basis. Stefan Rekitt Munich sebastian.lach@hoganlovells.com Victoria Parr Munich victoria.parr@hoganlovells.com However, these situations are not typical for product liability cases, where the claimants usually demand higher sums and the cost risk is therefore not disproportionate to the alleged damages. This focus of possible future EU legislation on small-value claims might play a role when the German legislator finally decides to introduce the KapMuG into other fields of law, in particular product liability. WHAT DOES THE FUTURE HOLD? The new KapMuG has been limited to the next eight years, and expires on 1 November This time around the trial period serves as a time for assessment and reflection. It can be expected that by 2020 the legislature will have decided whether to introduce model case procedures fully into the German law on civil procedure. It remains to be seen whether the KapMuG will be extended to include product liability cases, and whether the European Commission will submit a proposal that affects the KapMuG. What can however be said with certainty is that the overall trend in Germany is towards a more claimant-friendly environment, and that the recent reforms are a further step in that direction.