Law Applicable to Products Liability

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Law Applicable to Products Liability

In the Convention on Law Applicable to Products Liability

Article 4

This is the first of the key articles in the Convention that are concerned with the choice of the applicable law.

Under this article, the applicable law is the internal law of the State of the place of injury, provided this State is also:

  • the habitual residence of the person directly suffering damage or
  • the principal place of business of the person claimed to be liable or
  • the place where the product was acquired by the person directly
    suffering damage.

The theory of this article, and also that of article 5, is that no single contact should have a decisive role in the choice of the applicable law. Accordingly, under the article, the State of the place of injury will not be the State of the applicable law unless one of the other three enumerated contacts is located there. The place of injury is undoubtedly an important contact. But cases will arise where this place is located in a State which has no other connection with either the parties, the manufacture, assembly, sale or other transfer of the product and where accordingly application of its internal law might be deemed arbitrary or unreasonable.

Such a criticism could hardly be made of the rule of article 4 which requires that the place of injury be grouped with one of three other important contacts in a State before that State can become the State of the applicable law.

A number of the terms used in this article deserve discussion. The first is ‘the place of injury’. In the great majority of situations, this will be the place where the defendant’s wrongful act had its first impact upon the person directly suffering damage. By way of contrast, the place of the defendant’s wrongful act will not for this reason be the place of injury. Take, for example, the situation where the defendant negligently manufactures an automobile in State X and, as a result of the negligent manufacture, the plaintiff is injured in an automobile accident in State Y. Here Y, rather than X, is the State of the place of injury. Occasional situations may arise where damage does not manifest itself immediately upon impact. An example is where, during the course of a trip, a person swallows a pill in State X, first begins to feel ill while in State Y and finally becomes definitely ill while in State Z. The Conference spent some time discussing this hypothetical situation.

It decided that the term ‘place of injury’ should be understood in a sense flexible enough to give the judge discretion in the particular situation to select as the place of injury either the place of first impact (State X) or the place where the existence of damage first became manifest (State Y). The Conference was agreed, on the other hand, that the term ‘place of injury’ should not be read to include the place (State Z) where, after the existence of damage had become manifest, the extent of the damage became clear.

There may also be extremely rare situations where the ‘place of injury’ will not be easily identifiable. Suppose, for example, that a person swallows pills of a certain sort over a period of years and eventually becomes ill. Suppose further that swallowing the first pill would not have been enough to make him ill and that it is unclear how many pills were required to cause the illness. In such a situation, the place of injury might be difficult to identify if the person had been travelling actively from state to state during the period that he was taking the pills. The Commission spent considerable time discussing this hypothetical situation and finally decided that it should not be dealt with explicitly in the Convention but rather should be left to be decided by the particular judge.

Subsection (a) refers to ‘the habitual residence of the person directly suffering damage’. ‘Habitual residence’ is a familiar contact which has figured prominently in other Hague Conventions. No attempt to define the term was made in these Conventions, and it was decided not to make any attempt at definition here. It should be added that in this context the term ‘habitual residence’ applies both to natural and to legal persons, such as corporations, business associations and partnerships.

The Conference gave considerable attention to the question whether in the case of a legal person the appropriate connecting factor should be the principal place of business of the organization as a whole or the place of business (which might be that of a branch or of a subsidiary in another country) which was most closely connected with the damage. It was finally concluded that this question should not be determined in the large, although the principal place of business of the organization as a whole would undoubtedly be the appropriate connecting factor in the great majority of situations. Accordingly, it was decided to have the term ‘habitual residence’ apply without further attempt at explanation both to natural and to legal persons. In each case, it would be for the judge to determine which was the appropriate connecting factor in the light of the particular facts.

The ‘person directly suffering damage’, as stated in the discussion of article 1, is the person who was the first to suffer damage, either to his person or to his property or by way of economic loss. So, for example, where a son sues to recover for the wrongful death of his father, the father, and not the son, is the ‘person directly suffering damage’ within the meaning of the Convention.

Subsection (b) refers to ‘the principal place of business of the person claimed to be liable’. It is not believed that this term requires further explanation except to point out that both natural and legal persons are covered.
Subsection (c) refers to ‘the place where the product was acquired by the person directly suffering damage’. This is the place of physical acquisition or, stated in other words, the place where the person directly suffering damage obtained physical possession of the product.

By way of contrast, it is not the place where title to the product was acquired. The term covers all cases where physical possession of the product is obtained; it makes no difference whether this acquisition of physical possession is, or is not, accompanied by the acquisition of legal title.

A limitation upon the application of this article is stated in article 7.

Article 5

This article is the second of the key articles concerned with the choice of the applicable law. It provides that the applicable law will be ‘the internal law of the State of residence of the person directly suffering damage’ provided that this State is either:

  • ‘the principal place of business of the person claimed to be liable’ or
  • the place where the product was acquired by the person directly suffering damage’.

The theory of this article is the same as that of article 4. This theory is that no single contact should have a decisive role in the choice of the applicable law. Accordingly, the State of habitual residence will not be the State of the applicable law unless at least one of the other two enumerated contacts is located within its territory.

Rare situations may arise that are covered by both article 4 and article 5. The beginning words of article 5 make clear that in such situations the provisions of article 5 will control. An example of such a situation would be one where the State of the place of inquiry is also the State where the product was acquired by the person directly suffering damage but where the State of the habitual residence of this person is likewise the principal place of business of the person claimed to be liable. In such a situation, the internal law of the latter State would be applied to determine the rights and liabilities of the parties pursuant to the provisions of article 5.

The meaning of the terms ‘habitual residence’, ‘person directly suffering damage’, ‘principal place of business of the person claimed to be liable’, and ‘place where the product was acquired’ have been discussed in connection with article 4. A limitation upon the application of this article is stated in article 7.

Article 6

This article applies to situations that do not fall within the scope of either article 4 or article 5. Stated in other words, this article applies where neither the State of the place of injury nor the State of the habitual residence of the person directly suffering damage contains one of the other contacts enumerated in either article 4 or article 5. In these unusual situations, the claimant is given a limited option in that, subject to the limitation stated in article 7, he may choose to base his claim upon the internal law of either the State of the principal place of business of the person claimed to be liable or the State of the place of injury.

As stated previously in the General discussion of the Convention, this article is thought, to treat with an even hand both the claimant and the person claimed to be liable. Under limited circumstances, the claimant is given the power to choose between two laws. But, by reason of article 7, the person claimed to be liable will in no event be held subject to an unforeseeable law.

As a result, there will be situations where the claimant must base his claim on the internal law of the State of the principal place of business of the person claimed to be liable even though he, the claimant, has no connection whatsoever with that State.

The meaning of the terms ‘principal place of business of the person claimed to be liable’ and ‘place of injury’ have been discussed in connection with article 4. The Conference was aware that cases will arise where the person in question has changed the place of his habitual residence or of his principal place of business.

In such circumstances, there will be the problem of determining the time when for the purposes of articles 4-6, a person’s habitual residence or principal place of business in a State is important. The Conference was of the opinion that it would be unwise to state a precise rule on this subject. The problem was, accordingly, left to the decision of the judge.

Articles 4-6 also make clear that, where two or more persons are claimed to be liable for damage done by a product, the applicable law may vary with respect to each. So, for example, in a case where both a manufacturer and a retailer are claimed to be liable for damage done by a product, it is possible that the liability of each will be governed by a different law.

Finally, articles 4-6 make clear that the reference is to the internal law of the selected State. In other words, the forum is directed to look to the rules of products liability of that State and not to its rules of choice of law. As in the case of all Hague Conventions, application of the “renvoi” doctrine is forbidden by this Convention.

Article 7

This article imposes a limitation of foreseeability upon the scope of application of articles 4-6. It provides that the internal law of neither the State of the place of injury nor the State of the habitual residence of the person directly suffering damage may be applied ‘if the person claimed to be liable establishes that he could not reasonably have foreseen that the product or his own products of the same type would be made available in that State through commercial channels’.

By reason of this article, the law made applicable by either article 4 or article 5 may not be applied if this requirement of foreseeability is not met. And, unless this requirement is met, the claimant will not have the option under article 6 of having his rights determined under the internal law of the State of the place of injury. In other words, the rights of the claimant must perforce be determined by the internal law of the State of the principal place of business of the person claimed to be liable if the requirement of foreseeability is satisfied by neither the State of the place of injury nor the State of the habitual residence of the person directly suffering damage.

The language of article 7 makes clear that the person claimed to be liable has the burden of establishing that the requirement of foreseeability has not been met. In other words, the existence of foreseeability is not part of the claimant’s case. Furthermore, even if in a particular case the judge happens to be convinced that the requisite foreseeability did not exist, he should not raise this issue on his own initiative The issue should be raised only by the person claimed to be liable, and he is the party who bears the burden of proof.

It will be noted that the article speaks of the ‘law’ of the State of the place of injury and of the ‘law’ of the State of the habitual residence of the person directly suffering damage. Clearly, the ‘internal law’ of these two States is intended.

It will also be noted that the article says nothing about the time at which the product, or products of the same type, must have been available, through commercial channels, in the State concerned, in order to make the applicable law meet the test of foreseeability. Clearly, the requirement would be met in a situation where it was reasonably foreseeable that the product or products would be in the State in the required sense at the time of the injury. Equally clearly, the requirement would not be met if it was only foreseeable that the product or products would be in the State at some time after the injury.

On the other hand, no clear-cut answer can be given in a situation where it was foreseeable that the product or products would be in the State at some time prior to the injury but not foreseeable that they would be there at the time of the injury. Much would inevitably depend in such a situation upon the facts of the particular case. Clearly, the requirement should be considered satisfied in a situation where products of the same type of the person claimed to be liable had previously been sold in the State and where a considerable number of these products were still being used in the State at the time of the injury.

Probably, on the other hand, the requirement should not be considered met where similar products had not been available in the required sense in the State for so long a time prior to the injury that none of these products were still located in the State at the time of injury. For all of these reasons, it was thought the course of wisdom to say nothing on this question in the Convention and to leave it to the decision of the judge.
Article 8
This article, which is largely the same as article 8 of the Convention on the Law Applicable to Traffic Accidents, mentions certain of the most important matters that are to be determined by the law made applicable by the Convention. As its wording makes clear, the article is intended to be illustrative rather than all-inclusive. There are undoubtedly other matters, in addition to those mentioned, that should be determined by the law made applicable by the Convention. It was certainly the intention of the Conference that the scope of the law declared applicable by the Convention should be as broad as possible, with the exclusion of the situation described in the second paragraph of article 1 and of certain other matters (…).

8(1) The first sub-paragraph is concerned with ‘the basis and extent of liability’. The term ‘basis of liability’ includes such questions as whether liability must be based on fault or whether liability may be absolute, that is to say whether there can be recovery in a situation where the actor was not at fault. Also included are the meaning of fault, including the question whether fault can consist of a failure to act as well as of affirmative conduct, and problems of causation, whether legal or in fact.

The term ‘extent of liability’ includes such questions as whether any limitations should be imposed on the amount of recovery, the extent to which interest may be recovered and questions of contribution and indemnity between joint tort-feasors.

8(2) The second sub-paragraph is concerned with ‘the grounds for exemption from liability, any limitation of liability and any division of liability’.

Examples of possible grounds for exemption from liability are acts of God, fault on the part of the person directly suffering damage and the supervening act of a third person. Other examples are the ‘guest statutes’ found in certain common law States, which limit the liability of the driver of an automobile toward a guest passenger, and the immunity from liability in tort which is sometimes accorded one member of a family against another member of the family, particularly by common law States. Also included within this category is the question whether a manufacturer or other supplier may effectively limit his liability by some statement made either in an advertisement or in a document which accompanies the product.

The best example of a division of liability is the doctrine of comparative negligence which provides that damages are to be divided in a situation where both the person claimed to be liable and the person directly suffering damage were at fault. Whether this doctrine is applicable and, if so, the manner of its application are questions to be determined by the law made applicable by the Convention.

8(3) The third sub-paragraph is concerned with ‘the kinds of damage’ for which compensation may be had. Examples of questions falling within this sub-paragraph are whether there can be recovery for emotional distress or for pain and suffering. Also included is the question whether there can be recovery for lost profits as opposed to recovery for losses incurred.

8(4) The fourth sub-paragraph is concerned with ‘the form of compensation and its extent’. This is explicitly mentioned in order to make clear that the measure or extent of recovery is to be determined by the law made applicable by the Convention and not by some other law, such as the “lex fori.”

Other questions included within this sub-paragraph are whether recovery should take the form of money damages and whether these should be paid in a lump sum or in installments. Similarly, the forum should apply any standards for determining the amount of recovery for pain and suffering or for emotional distress that may have been developed in the State whose internal law is made applicable by the Convention.

8(5) The fifth sub-paragraph is concerned with the transferability of a right to damages or, stated more specifically, with whether such a right may be assigned or inherited. Nothing more need be said, it is thought, on the question of assignability. On the other hand, the question whether a right may be inherited deserves brief discussion.

To begin with, this sub-paragraph is not concerned with the right of a person to recover for damage he himself has suffered by reason of injury to another person. Whether there can be recovery for damage of this sort falls within the scope of sub-paragraph 6, which will be discussed below. What is involved here is the question whether the right of the person who directly suffered damage to recover for such damage may be inherited. This question in turn may be divided into two. The first is whether it is the claimant who is entitled to inherit from the person who directly suffered damage. This is a question of succession and should be determined by the law governing succession rather than by the law made applicable by the Convention.

The second question is whether the particular right in question is capable of being transferred at death. This second question should be determined by the law made applicable by the Convention.

8(6) The sixth sub-paragraph is concerned with ‘the persons who may claim damages in their own right’. The principal question covered by this sub-paragraph is whether there can be recovery not only by the person who directly suffered damage but also by other persons who suffer damage on account of the injury done to the first person. So this sub-paragraph covers the problem whether one person, such as a wife or a child, may recover for the financial loss suffered by reason of the wrongful death of another person, such as a husband or a parent, or whether a person who has not suffered physical injury himself, may recover for the emotional distress he suffered by having witnessed physical injury being done to another.

8(7) The seventh sub-paragraph is concerned with vicarious liability, namely with whether a principal may be held liable for the acts of an agent and an employer for the acts of his employee. Covered by this sub-paragraph is, of course, the question of the limits within which a legal person, such as a corporation, may be held liable for the acts of its organs. It is clearly desirable that the same law should be applied to determine the liability of both the person who did the act and the person who is claimed to be vicariously liable for the act.

8(8) The eighth sub-paragraph is concerned with the burden of proof but only ‘insofar as the rules of the applicable law in respect thereof pertain to the law of liability’. This is the one subject dealt with in this article that was not expressly covered by article 8 of the Convention on the Law Applicable to Traffic Accidents.

At the outset, it should be pointed out that this sub-paragraph is not concerned with the burden of proving lack of the foreseeability required by article 7. The burden of proving lack of this foreseeability is placed by article 7 upon the person claimed to be liable.

This sub-paragraph recognizes that rules relating to the burden of proof fall into two categories:

  • those concerned with the conduct of the trial, and
  • those designed to affect the outcome of the case.

Only rules of the latter sort are to be supplied by the State of the applicable law. In each case, therefore, the forum must decide whether a given rule of burden of proof of the State whose law is made applicable by the Convention is concerned with the conduct of the trial or is designed to affect the outcome of the case. The rule will only be applied if it is found to belong in the latter category.

An example of a rule of burden of proof that is almost certainly designed to affect the outcome of the case is the (…) German law which places upon the manufacturer the burden of establishing absence of fault. The forum would presumably apply its own rules on the burden of proof in situations where the State whose law is made applicable by the Convention has no relevant rule of burden of proof that is designed to affect the outcome of the case.

8(9) The ninth sub-paragraph is concerned with ‘rules of prescription and limitation’. As such, it covers, among other things, ‘rules relating to the commencement of a period of prescription or limitation, and the interruption and suspension of this period’. The terms used in this sub-paragraph should be interpreted in a broad sense to cover all situations where an action to recover damages for harm done by a product is barred by the lapse of time. Thus, this subparagraph covers situations where by reason of the lapse of time:

  • the right of action is extinguished or
  • the remedy to enforce the right of action is barred although the right itself is not extinguished.

On the other hand, this sub-paragraph does not cover situations where a right is extinguished or a remedy barred for reasons other than the lapse of time.

This sub-paragraph, which subjects issues of prescription and limitation to the law made applicable by the Convention, is at variance with the rule of common law countries that issues of this sort are usually governed by the law of the forum. For this reason, a Contracting State is empowered by article 16 to reserve the right not to apply the provisions of this sub-paragraph. [1]

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Notes and References

  1. Explanatory Report by W.L.M. Reese, Actes et Documents, Douzième session (1972) Tome I, Institute of International Law

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