29 January 2024
As part of our review of upcoming legal developments in product liability and product safety, we take a closer look at some of the regulatory changes in the automotive sector which are set to come into force in 2024. These developments will impact on product liability risks for OEMs and other parties in the supply chain and should be monitored closely.
2024 is set to be an important year for the regulatory framework for self-driving vehicles in the UK, in particular, following the Government's announcement of the Automated Vehicles Bill on 8 November 2023. The Automated Vehicles Bill is intended to set the legal framework for the use of self-driving vehicles in the UK and, importantly, seeks to:
The Automated Vehicles Bill is also intended to complement existing self-driving vehicles legislation in the UK, such as the Automated and Electric Vehicles Act 2018. The Automated Vehicles Bill will impose information collection requirements on "authorised self-driving entities", which are intended to enable insurers to assess claims where an accident has been caused by an automated vehicle under section 2 of the Automated and Electric Vehicles Act 2018.
Businesses in the automotive sector will welcome increased clarity over what the UK's regulatory framework for self-driving vehicles will look like moving forwards. Mark Harper, the Transport Secretary, hopes that the Automated Vehicles Bill will ensure that the UK is "at the forefront of a fast-growing, multi-billion-pound industry by providing the clarity and certainty for business to develop and invest in this exciting technology".
In order to respond to the innovative, technical and fast-changing nature of self-driving vehicles, the Government envisages that the Automated Vehicles Bill will be supported by secondary legislation and guidance (eg in relation to authorisation requirements, conditions and procedures). The Government intends to develop and consult on this secondary legislation and guidance from 2024 through to 2026. Businesses in the automotive sector will therefore need to be ready to adapt to the proposed changes in the regulatory framework for self-driving vehicles, but this year will also present further opportunities for businesses to seek to shape that regulatory framework.
At the EU level, the European Union has also recognized that harmonized and coordinated legislation is crucial in order to promote the integration of self-driving vehicles safely and efficiently. With the Regulation on the General Safety of Vehicles (EU) 2019/2144 and the Implementing Regulation (EU) 2022/1426, the European Union has created the legal framework for the approval of automated and fully driverless vehicles in the EU. In July 2022, the European Parliament finalized a legal framework for fully automated vehicles with autonomous driving functions by adapting the existing General Safety Regulation of Vehicles (EU) 2019/2144, which was extended to include fully automated vehicles. This General Safety Regulation has been in force since July 6, 2022 and sets out specific requirements for autonomous vehicles such as driver assistance systems for all new vehicles from July 2024, with the aim “of making sure that our rules enable us to safely introduce autonomous and driverless vehicles in the EU in a framework that puts the safety of people at the centre”, as Executive Vice-President for a Europe fit for the Digital Age, Margrethe Vestager pointed out.
Moreover, regarding highly automated cars, ie the preliminary stage to fully automated driving, since 2023 the UN Regulation No. 157 has allowed highly automated cars, to reach speeds of up to 130 km/h. Manufacturers must obtain type approval for this before activating this function after careful technical and product liability testing.
Additionally, the Commission's "Europe on the Move" initiative of 2023 outlines a comprehensive strategy to harness the benefits of autonomous vehicles while addressing the legal and ethical challenges they pose. One of the crucial developments is the proposal for a new legal framework for the certification of autonomous vehicles. This framework aims to establish a standardized process for approving self-driving systems, ensuring a high level of safety and reliability. Additionally, the EU is actively working on defining liability rules for accidents involving autonomous vehicles, addressing questions of responsibility and accountability in the event of a malfunction or failure. The changes and progress in the regulatory framework for self-driving vehicles at the EU level reflect a commitment to shaping the future of mobility which is expected to progress in 2024.
Germany, as a leading market in the automotive industry, is also taking proactive steps to shape the regulatory landscape for self-driving vehicles within its borders. In May 2021, the Federal Parliament and the Federal Council approved the Law on Autonomous Driving until harmonized regulations are available at international level allowing autonomous vehicles in Germany to take part in public road traffic without a driver physically present - but for the time being only in defined and pre-approved operating areas. However, the law provides for permanent monitoring of operation by a technical supervisor. This must be a natural person who can stop the motor vehicle with autonomous driving functions in individual cases or release driving manoeuvres of the motor vehicle with autonomous driving functions from outside.
Liability issues in Germany are already largely clarified by national legislation. Even in the case of vehicles with fully automated vehicles with autonomous driving functions that are used without a driver, responsibility lies primarily with the owner of the vehicle. However, this could change if the liability will be regulated differently on EU level.
As the regulatory landscape evolves, challenges persist, ranging from standardization issues to public acceptance of self-driving technologies which will have to be faced in 2024.
We will see changes to the UK's type approval scheme in 2024, as the GB Type Approval Scheme is expected to become compulsory for all new type approvals for passenger and goods vehicles from 1 February 2024. This will be particularly relevant to manufacturers based outside of GB as, importantly, manufacturers based outside of GB must have a GB-based representative to hold a GB type approval.
The Government recognises that the UK's type approval scheme will need to adapt to the increased use of self-driving vehicles on UK roads. The Automated Vehicles Bill provides that the Secretary of State can impose new type approval requirements or change existing type approval requirements in respect of automated vehicles, in order to ensure there is some much-needed flexibility in the type approval scheme.
Consumers tend to bring claims against OEMs for product liability under the strict regime set out in the EU Product Liability Directive 85/374 ECC ("PLD") and as implemented in the UK in the Consumer Protection Act 1987 ("CPA). As explained in our earlier 2023 round up article, the PLD is undergoing significant change with substantial amendments proposed and designed to bring software companies firmly into the liability regime. This will likely include those software developers which are involved in the supply chain for semi-autonomous and autonomous vehicles.
Some of the key changes proposed will have a significant impact on technology companies involved in the automotive supply chain. For example, potential defendants will be subject to new disclosure obligations which might include a requirement to provide commercially sensitive and confidential technical data (including software/firmware updates) and/or trade secrets. It is unclear as to how the courts will grapple with difficult issues such as preserving confidentiality, trade secrets and data protection when ordering such disclosure. This is entirely novel for some European Member States.
We do not yet know to what extent the UK will follow suit and implement similar changes to the CPA. As mentioned in our previous article, the OPSS is carrying out a product safety consultation which will include a review of the CPA and most likely consider questions such as adding new defendants, including software in the definition of a "product" and the impact of software updates on the assessment of defect.
OEMs, software developers, distributors and other parties involved in the automotive supply chain are likely to face increased product liability risks. Claims by consumers are also likely to be easier to pursue and there could be an increase of group actions and/or collective redress. Group action procedures are more limited in the UK given the "opt-in" process and lack of punitive damages (as compared to the US). That said, automotive businesses should be prepared for the potential risk of collective redress particularly where there are a higher number of consumers affected and the potential value of the claims is relatively high. The regime for collective redress in the EU has significantly developed since the implementation of the EU Directive on Representative Actions which is discussed further below.
In 2020, the European Union passed the EU Directive on Representative Actions 2020/1828 to introduce an EU-wide minimal standard for the protection of collective interests of consumers. Under the EU Directive on Representative Actions, qualified consumer organisations can take legal action on behalf of consumers that join the action. Representative actions shall mainly help consumers to enforce their rights by claiming collective payment (which is new to some EU Member States, like Germany) and relieve each Member State’s courts of tens of thousands of individual consumer claims.
Each EU Member State had to implement the EU Directive by 25 June 2023. Many EU Member States were late, including Germany which only passed the implementation act in October 2023. As the EU Directive on Representative Actions only sets a minimum standard, the actual "attractiveness" and future success of representative actions depends on how consumer friendly each EU Member State’s implementation is. Each EU Member States decides, for example, whether registration should be opt-in (active registration required) or opt-out (active deregistration required), on the registration deadline and the required degree of similarity of individual claims brought forward as a “class” in a representative action.
At first sight, Germany has opted for a rather consumer-friendly implementation: a very long opt-in registration period which only ends three weeks after the end of the last hearing. Consumers can therefore register or deregister at a time when it should be clear to them, based on the court's preliminary assessment, whether the action will be successful. In addition, qualified consumer organisations will be able to act quickly after identifying new mass phenomena. Amongst other minor criteria, they can already file a representative action after one year of being registered as an association.
However, in Germany, the possibility of third-party funding has been severely restricted: The consumer organisation is only allowed to receive financial contributions from companies up to five per cent of its own resources. Litigation funder can receive a maximum of ten per cent of the awarded payment, and the potential amount in dispute was capped. Consequently, legal fees for the first-instance would be limited to ca. EUR 10,000 for law firms involved. It is therefore questionable whether the representative action will be a viable alternative to the already proven assignment models or litigation-funded individual actions.
Notwithstanding potential financing problems, three representative actions have already been filed in Germany within the first weeks of the German implementation act’s existence. Apart from uncertainties with regard to the economic viability for consumers, the litigation funders and consumer law firms, each court’s understanding of the requested degree of similarity of individual claims will be crucial. Germany requires "essentially similar legal considerations and factual findings". As EU Member States are free to determine the degree of similarity required, it remains to be seen how consumer friendly the competent national courts will interpret this criterion.
Please contact our international products team if you require any further information on the topics discussed above.
Part one of this insight "Product liability & product safety – a round up of 2023 " can be read here.
Our international team looks at 2023 developments across the EU and the UK.
by multiple authors