Product Liability: EC Directive

HL Deb 30 July 1985 vol 467 cc161-7

3.12 p.m.

Lord Lucas of Chilworth

My Lords, with leave, it may be for the convenience of your Lordships if I now make a Statement on the European Community Directive on Product Liability. The Statement is as follows:

The Directive on the approximation of the laws, regulations and administrative provisions of all member states concerning liability for defective products was adopted on the evening of 25th July by the Council of Ministers. The Directive will make producers throughout the European Community strictly liable for damage caused by defective products they put into circulation.

I am pleased that this long-awaited measure of harmonisation and consumer protection has now been agreed. The Directive was held up for several years over disagreements between member states about the "development risks" or "state of the art" defence, and about financial limits on liability. But a package has now been agreed which allows us to introduce the regime we have been seeking to secure for so long. There will be a development risks defence but not total limit on liability, and although member states will be able to adopt different positions on these two points, the Directive as a whole represents a very significant step towards harmonisation of European law in this field.

We must now implement the Directive within three years, which we shall do after full consultations with all concerned. In 10 years' time the operation of the Directive will be reviewed to see if there is a need for even closer harmonisation.

Lord Bruce of Donington

My Lords, we on this side of the House thank the noble Lord for his Statement and we commend him for having made in this House a Statement which in another place—as is very often the custom towards the end of the Session—appears by way of an Answer to a Written Question. May we also place on record from this side of the House our tribute to the noble Baroness, Lady Burton of Coventry, without whose persistent and indefatigable efforts it would probably have been impossible to get a Statement at all?

The Statement says that a package has now been agreed. We should be grateful for some particulars as to what that package in fact contains. The Statement refers also to development risks defence and a total limit on liability; but it also says that the member states will be able to adopt different positions in regard to these two factors. Can the noble Lord enlighten the House, since member states have been referred to, as to what position Her Majesty's Government intend to take on these matters?

We gather that three years is going to be allowed for consultations with all concerned. Will the noble Lord give the House an absolute assurance that aside from the manufacturing and other interests involved, which of course must be consulted, there will be full consultations with all those organisations which represent the consumer interests and in particular those which have been named on a number of occasions by the noble Baroness, Lady Burton?

Baroness Burton of Coventry

My Lords, we on these Benches thank the Minister for making this Statement and also the Government for finding time to do so. I personally should like to thank the noble Lord, Lord Bruce, for his kind remarks, and I should also like to thank the House for its patience over a very long period. Without that patience we would not have got anywhere.

To us on these Benches it seems important that when deliberations have been going on for 10 years, the House should know of any decisions reached before adjourning for the Summer Recess. The Statement tells us, as your Lordships will have heard, that the directive was held up for several years over disagreements between member states, and it lists some of those disagreements. Perhaps the noble Lord the Minister would confirm whether he agrees that I would be correct in saying that while we in this country would much have preferred a completely harmonised regime throughout the European Community, the years of disagreement referred to make it quite clear that a common regime on the lines we suggested would never be agreed. It seems that the package accepted last Thursday by the Council of Ministers should at last allow real progress to be made.

May I just say to the Minister that personally I think the only alternative to accepting the compromise was to continue for another decade or even more without reaching agreement? I should like to support the action taken by the Government and to express appreciation of the efforts made towards harmonisation of European law in this field, from which I believe both the consumer and industry will benefit.

Lord Lucas of Chilworth

My Lords, I am most grateful to the noble Lord, Lord Bruce of Donington, and to the noble Baroness for their reception of the Statement I have just made. May I also endorse the remarks of the noble Lord, Lord Bruce of Donington, with regard to the noble Baroness? I hope that this afternoon she will feel that the efforts she has made over a number of years in poking and prodding a number of Ministers on this side of the House have borne fruit, and that her hopes have been largely realised by the adoption of the directive.

I can give the noble Lord an absolute assurance that the consultation process will include the widest range of interested parties and certainly those which have been mentioned from time to time. He asked me specifically about where we stood with regard to the development risks and the financial limit of liability. While some countries in the Community take rather a different view from us, we shall remain over these next few years in the same position as we always have—that is, without the imposition of a limit on liability and we will retain a development risks defence.

I endorse the point of the noble Baroness because I believe that had we not agreed to this package there would undoubtedly have been a very, very long delay in getting very much further forward. While there is not complete harmonisation, there is now sufficient basis for a common regime so that we can probably move forward. That is for the betterment of the consumer position. We believe that it is also for the betterment of industry because the common elements of the package should remove some of the adverse competitive elements from which some industries have suffered.

Lord Allen of Abbeydale

My Lords, perhaps I may also thank the Minister for making his Statement, and say that it is very good to have what is a reasonably satisfactory agreement after all these years, even while it does not achieve perfection. But may I ask the noble Lord one or two questions?

Am I right in thinking that this directive will have no effect at all on the rights of consumers in this country until legislation has been passed and comes into force, which I gather can be as long as three years away? Perhaps a three-year interval will be of help to the CBI who, in the five years that the Pearson Commission were sitting, were unable to come to any conclusion as to the evidence they should give to that body. When we come to legislation, is the idea that it should set out the directive itself and give it the force of law in this country, or shall we aim at resolving some of the ambiguities in the text—and I am afraid there are some—by enacting our own version, with the usual risk that in due course it might be found that we had not been acting in compliance with the directive?

Thirdly, will it be possible under the directive to deal differently with various types of product? For example, could drugs be dealt with in a way unlike that applying to other products? I am well aware that it is the Government's current policy not to make any differentiation, but I am merely asking whether it would be practical to do that under their directive if policy were changed? Finally, does this directive mean that the 1977 Council of Europe Convention on Product Liability, which among other things ruled out the defence of development risks, is now, in effect, dead?

Lord Lucas of Chilworth

My Lords, I am grateful to the noble Lord, Lord Allen of Abbeydale, for his acceptance. I would say to him that we have three years in which to enact legislation to conform to the directive. Of course, until such legislation has been passed the solutions that the directive contains would not be applicable. I would not expect us, however, to wait three years before we enact legislation. I should hope that we would get our consultations under way shortly. But I am sure that the noble Lord will appreciate, as the House will appreciate, that I cannot determine here and now when legislation will be brought forward. I hope that it will not take three years.

The force of law will, of course, apply to the directive and it is for member states to interpret in their domestic law the provisions of the directive. As soon as we receive the final copy of that directive it will certainly be made available. It is not anticipated, however, that different products will be treated differently. Perhaps that may emerge during the course of consultations, but it is certainly my understanding that all products will be treated in the same way. Finally, as to the convention to which the noble Lord referred, we cannot ratify this convention if we retain the development risks defence.

Lord Mottistone

My Lords, does my noble friend not think it is illogical that the directive retains a special position for primary agricultural products which in fact are being given special treatment? Would it not have been more sensible to have a similar treatment for all food products at whatever stage they came? Will it not be to the disadvantage of consumers that when they consume primary agricultural products they will have less protection than when they consume processed products? Is that not illogical and would it not have been better to have had that eliminated from the directive?

Lord Lucas of Chilworth

My Lords, I do not think that it is illogical. As I said, it was necessary to agree with our partners so that we could move this matter forward. My noble friend Lord Belstead has written to the noble Lord—I think he has received this letter—explaining that the producer of processed food products will be liable under the terms of the directive for any defect in his products; so, even in the absence of express terms in the contract to supply, the supplier remains strictly liable for the consequences of supplying a product which is not fit for its purpose. I do not believe, therefore, that the consumer will be under any disadvantage at all.

Lord Northfield

My Lords, may I ask a question about the pharmaceutical industry? The noble Lord will be aware, as he mentioned in his original Statement, that one of the primary defences of the pharmaceutical industry has been taken away; namely, the "state of the art" defence. Can he tell us what the directive puts in its place as some means of compensating the pharmaceutical industry? Secondly, can the noble Lord tell us whether measures may emerge from these consultations which he is about to have which may bring it within the discretion of the United Kingdom Government to provide compensation for the pharmaceutical industry in this respect?

Lord Lucas of Chilworth

My Lords, at the risk of wearying your Lordships, on this particular point I answered the noble Lord, Lord Allen, last week. An argument has been put forward that the development risk defence emasculates the directive's provision for strict liability in respect of drugs. In particular, it is held that it would let a modern-day Thalidomide off the hook. But we do not believe that is so, because it must be remembered that the test of the state of scientific and technological knowledge at the time is a very tough and dynamic factor. We would therefore not agree with what the noble Lord is in part suggesting. I am sorry that I did not quite understand the drift of his second question.

Lord Northfield

My Lords, I shall put it in writing.

Baroness Hooper

My Lords, I also should like to thank my noble friend the Minister for his Statement. Furthermore, I should like to congratulate the noble Baroness, Lady Burton of Coventry, on her perseverance in ensuring that we had this discussion this afternoon. I, too, as vice-chairman of the European Parliament's Consumer Protection Committee, was formerly involved in pushing for some action on this proposal, which in my view does not necessarily give added protection to the consumer but is certainly intended to simplify the procedures and means by which he can seek redress if he suffers from defective products. I therefore welcome this proposal and the decision of the Council as a step in the right direction and a definite link in the chain of Lord Cockfield's programme on the internal market.

However, in view of the anxieties and fears that have been expressed, both by the consumers, who believe that these present proposals do not go far enough, and by the producers, who feel that they go too far and add unnecessarily to their costs and overheads, I wonder whether my noble friend the Minister can reassure us on the question of implementation? It has always seemed to me important in relation to proposals from the European Community that the implementation and effect should be monitored both at a European and at a national level. The Minister has referred to a review after five years. Are there any intermediate steps which are planned either at a European or indeed at a United Kingdom level to monitor the progress of this directive? And does this imply that at the five-year review which he mentioned there will in fact be a change if a change is found necessary?

Perhaps as a supplementary question I may ask this. Had there not been a meeting of the Ministers of Consumer Affairs this decision would probably still not yet have taken place. Can we, therefore, have an assurance from the Minister that the Government will continue to agree that Ministers of Consumer Affairs should meet to discuss proposals of this type?

3.30 p.m.

Lord Lucas of Chilworth

My Lords, I am most grateful to my noble friend Lady Hooper for her reception of this Statement. Of course, I appreciate that her knowledge of European matters is much greater than my own. She will know that all the European directives are reported upon at the fifth year, and in my Statement I referred to the review which will take place at 10 years. So far as the United Kingdom is concerned, we are continually in touch with both consumer organisations and producer organisations, and I have little doubt that they will make their feelings abundantly clear as soon as the legislation is enacted. We do not share some of the fears expressed by industry which have recently been reported. We believe that this is a good measure which will aid both consumer and producer.

Lord Graham of Edmonton

My Lords, the Minister has referred to consultations that have taken place. Will he tell the House about consultations that took place with interests in this country which have agreed with the action that the Government took last week? For instance, as the House well knows, I live in Edmonton and the MK Electric firm are very close to my past associations. Through their membership of the British Electrical and Allied Manufacturers Association, BEAMA, they have passed some very disparaging comments about what the Minister is now proposing.

The Minister must also be aware of the reservations of the CBI, which last week circulated to parliamentarians a parliamentary brief. Will the Minister agree to tell us what representations were made to him by the CBI, because they told me that they have asserted that this compromise will not lead to harmonisation of European laws, but will in fact add extra burdens to industry just when the Government are seeking to lighten them.

Lord Lucas of Chilworth

My Lords, there have over the years—nine years, I think it is—been consultations with a wide variety of bodies, trade bodies, and their views have been represented. It has been said that over those nine years their views have changed considerably. Some were in favour at the beginning but were not so much in favour at the end of the day, and vice versa. I attended with my honourable friend the Minister responsible for corporate affairs meetings with the CBI and was somewhat disappointed that they shifted their ground on a number of occasions. We do not accept some of the objections which they put forward and which they included in a "round robin" letter to Members of Parliament, and indeed to Members of your Lordships' House.

Lord Bruce of Donington

My Lords, may I press the noble Lord a little further? He mentioned the question of the ratification of the Council of Europe Convention. Will he explain to the House the reasons for the delay in our ratifying this convention? Will he also give some indication of what differences there are, or what differences may emerge, between the directives adopted by the Community and the Convention of the Council of Europe in this regard?

Lord Lucas of Chilworth

My Lords, I very much regret that I cannot go further this afternoon on that matter, since I have had available only since last week the general text and not the definitive text. So I have not yet had the opportunity of making the comparison that the noble Lord asks of me.

Lord Airedale

My Lords, do the Government expect to introduce compulsory insurance alongside this scheme, like car insurance? This is the age of the small firm and not every small firm will insure, unless it is made to do so. Its products will not be more safe than the products of large firms which do insure, so the injured person is liable to find himself without a remedy unless there is compulsory insurance.

Lord Lucas of Chilworth

No, my Lords. There is no intention to impose compulsory insurance. Indeed the remedy that the noble Lord suggests is available to people today under the law of contract. It is available through the civil courts. If a man is not insured, then that is a disadvantage. We certainly cannot make everybody insure against every specific action, although my understanding is that all businesses carry a product liability insurance. Most retailers carry a civil liability insurance and there is cover there.