Regardless of whether you act as a product manufacturer, importer or distributor of products, specific legal requirements apply under German and European law for the lawful placing of a product on the market and guaranteeing the necessary product safety. In this context, the Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz), which clearly defines corporate due diligence obligations within supply chains, should be emphasised. Overall, product liability law is a highly complex and constantly evolving area of law that requires a sound understanding of all relevant laws and a solid knowledge of current case law in this area.
Schlun & Elseven Rechtsanwälte offers expert and committed legal assistance to provide our clients with the support they need. Our lawyers are ready to show you how your company can effectively minimise liability risk through tried and tested solutions in the drafting of contractual clauses as well as through compliance with high-security standards.
Whether it’s risk assessment, monitoring product standards or dealing with the relevant authorities, we support you throughout the entire life cycle of your products and ensure full compliance with all applicable requirements. Our product liability lawyers represent German and international companies in recourse disputes and the defence against unjustified claims and official interventions. We stand up for you so that your rights and interests as a product manufacturer, importer or distributor of products are always protected.
Product Liability: The Law in Germany
Companies based in Germany are affected by product liability law not only in their domestic business dealings but also in their dealings with other European Union countries and non-EU countries such as China and the United States of America. In Germany, a distinction is made between product liability and producer liability. Producer liability is covered by the tort claim for damages under § 823 German Civil Code (BGB) but is not regulated in detail by law. § 823 BGB stipulates:
- A person who, intentionally or negligently, unlawfully injures the life, body, health, freedom, property or another right of another person is liable to make compensation to the other party for the damage arising from this.
- The same duty is held by a person who commits a breach of a statute that is intended to protect another person. If, according to the contents of the statute, it may also be breached without fault, then liability to compensation only exists in the case of fault.
More concrete detail is provided within the Act on Liability for Defective Products: Product Liability Act which outlines further information on the responsibility of the different parties within the supply chain as well as limitation periods and cases where reduced liability is involved. Among the details within the Product Liability Act is the definition of a defect, which is as follows under § 3 Product Liability Act:
- A product has a defect when it does not provide the safety which one is entitled to expect, taking all circumstances into account, in particular
- its presentation,
- the use to which it could reasonably be expected that it would be put,
- the time when it was put into circulation.
If such a defect can be established and if someone is killed, their body or health is injured or property is damaged as a result of the defect in a product, the manufacturer of the product is obliged to compensate the injured party for the resulting damage in accordance with § 1 (1) sentence 1 ProdHaftG. The latter standard also regulates and standardises the first limitation of liability. According to § 1 (1) sentence 2 ProdHaftG, in the event of damage to property, there is only an obligation to pay compensation if an item other than the defective product is damaged and this other item, by its nature, is usually intended for private use or consumption and was primarily used for this purpose by the injured party. In addition, § 1 (2) ProdHaftG stipulates further limitations of liability.
The damages to be paid by the parties in the context of product or producer liability can be very high, especially if a person suffers a serious injury or dies as a result of the defect. The amount of damages depends on many factors and circumstances of the individual case. The liability of a manufacturer or company can often be mitigated by any contributory negligence on the part of the injured party. However, it is essential to have an experienced legal advisor at your side to ensure that an argument to this effect is successful.
Duty of Care & Responsibilities of Manufacturers in Germany
A distinction must also be made between product liability and manufacturer liability with regard to the breach of duties of care and responsibilities of product manufacturers that can trigger liability for damages. In product liability under the Product Liability Act, the manufacturer is liable for the risks posed by its own product without having to prove fault. This type of liability is also known as strict liability. Producer liability in accordance with § 823 German Civil Code (BGB) is more narrowly defined. In the case of producer liability, the manufacturer must be at fault with regard to a specific type of defect. He must have acted wilfully or at least negligently. Manufacturer liability can arise for the following types of defect.
- Design or development liability: The manufacturer must observe the legally permissible specifications when designing and constructing the product. The user’s safety when using the end product must be the primary consideration in the design. A design defect, therefore, affects an entire series of products.
- Production liability: The company must have quality control mechanisms within the production line to ensure the process meets the required high safety standards. Only through quality control can potential problems and hazards to the end-user/consumer be detected and prevented during production. Only individual products are usually affected by this defect. However, the manufacturer is not liable for one-off “outliers”.
- Instruction liability: Product manufacturers, especially in pharmaceuticals, should have instructions clearly shown to demonstrate the potential risks of product misuse. Our lawyers will oversee your instructions to ensure they have provided the legally required standard of instructions.
- Product Observation Failure: If problems are found with the product after it has been released to the public, the company must investigate how the issues arose and what actions (if any) can be taken to resolve the problems as part of the product observation requirement. The manufacturer may be required to warn customers of the problem and sometimes even issue a product recall.
As can be seen from the amount of responsibility for manufacturers, manufacturers need to access ongoing legal support. Breaching any of the above-listed liabilities can result in significant legal actions being taken against them. Our German business lawyers will oversee your legal responsibilities in this area and provide the needed guidance to ensure you remain compliant.
Supply Chain Due Diligence Law in Germany
Since 1 January 2023, German companies with at least 3,000 employees and, from 1 January 2024, companies with at least 1,000 employees have been subject to the Supply Chain Due Diligence Act (see Section 1 (1) LkSG). This imposes human rights and environmental due diligence obligations on certain companies.
With regard to human rights violations, reference is regularly made to existing international agreements (such as the core labour standards of the International Labour Organization (ILO)). In this context, the Supply Chain Due Diligence Act (Section 2 LkSG) lists the following violations in particular:
- Child labour,
- forced labour,
- slavery,
- Disregard of labour protection obligations,
- Disregard of the freedom of association,
- unequal treatment in employment (age, gender discrimination),
- withholding of an appropriate wage,
- Torture or degrading treatment.
In addition to the violation of a prohibition that serves to prevent human rights risks (see Section 2 (2) LsKG), Paragraph 3 also lists prohibitions that harbour an environmental risk. Environmental risks are understood to mean, in particular, environmental damage that results in human rights violations (cf. Section 2 para. 2 and 3 LkSG). Consequently, it is incumbent on companies to continuously monitor their business activities with regard to potential human rights violations. They should take appropriate preventive measures to avoid any violations of the applicable human rights standards.
They are also obliged to set up an adequate complaints mechanism for those affected. As the name of the law already makes clear, the due diligence obligations extend to the entire supply chain – starting with the raw material and ending with the product ready for sale. This results in an urgent need for adaptation and updating for companies, which particularly affects compliance, purchasing and contract design.
Level of Liability and Burden of Proof
According to § 1 (4) ProdHaftG, it is up to the claimant to prove that the manufacturer (or another party within the supply chain) is responsible for the damage caused to them. If several manufacturers are found to be at fault, they can all be held jointly liable, depending on the circumstances of the individual case. If they are held liable for the damage caused, the amount of compensation also depends on the individual case. They may be obliged to pay compensation for loss of profit, for damage to property or for further costs for restoring the condition prior to the damaging event.
However, it should also be noted that there is a special limitation period under § 12 ProdHaftG and therefore a time limit for when a case can be brought to court. According to this, the claim expires “three years from the date on which the person entitled to compensation became aware or should have become aware of the damage, the defect and the person liable to pay compensation” (§ 12 (1) ProdHaftG).
At Schlun & Elseven Rechtsanwälte, our lawyers will ensure compliance with the limitation periods on your behalf and review your contracts to determine the amount of contractual liability they provide for. When drafting future contracts, liability can be limited to a certain level with legal support. We also take care of setting up and ensuring the necessary structures for quality control/monitoring of your products with regard to the applicable safety standards. These measures can effectively minimise product or producer liability.
Practice Group: German Commercial Law
Practice Group:
German Commercial Law
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