Europeans getting more product-liability protection

The relative calm in Europe's courtrooms may soon end. Europe has been a curious, quiet onlooker as American newspaper headlines have trumpeted million-dollar damage awards, long court cases pitting consumers against multinational corporations, and massive class-action lawsuits.

Now a European Community directive, accepted by the 12 EC members, promises to give the Continent's consumers more protection in product-liability cases.

The deadline for compliance was July 30, but only three countries have brought their legislation into line so far. The nine others, however, are expected to follow in the next few months.

An American-style glut of lawsuits is unlikely, according to consumer groups and insurers.

``The population here is not so litigious,'' a lawyer adds. ``It's partly a question of mentality, but there are also fewer specialized lawyers here who promote class-action suits, for example.''

There are several reasons that liability suits have never occurred on the same scale in Europe as in the United States:

In the US, people who go to court can arrange contingency fees with their lawyers, under which the lawyer is paid if he wins the case. But in Europe, you pay, whether you win or lose a case.

Discovery procedures are different here. A victim's lawyers do not generally have pretrial access to defendants' information. A company's research records, for example, are not available.

Judges, not juries, decide liability cases, lessening the sympathy element.

Punitive damage awards are rare.

European social security systems generally provide better relief for victims than in the US, according to observers here, so 90 percent of liability cases are settled out of court.

Under the new legislation, producers of goods will be held liable for damage caused by product defects, whether or not caused by negligence.

Until now, laws in Europe have varied widely in how liability was assessed and in the burden of proof. In most cases, the victim has had to prove that harm was done, that the product was defective, and that there was a causal relationship between the two. Without access to a defendant's records, this has often proved difficult.

The directive does not apply to commercially used products, and it does not touch services. Therefore, it will not affect malpractice suits, which are rare.

Consumer groups have given the new initiative a cautionary thumbs up.

``We think it's a good first step - it does introduce the idea of no-fault liability,'' says Bob Schmitz, a legal adviser to the European Office of Consumer Unions in Brussels. ``If we can get judges to see that [a defendant] can be liable without being negligent, it is a step forward.''

Reaction has been mixed, he says, with southern European consumer groups viewing it positively, because they have had virtually no such legislation until now.

France and West Germany have long had some consumer-protection laws. Groups there complain that the directive is not tough enough. These groups also complain that the directive was too much of a compromise in one critical area: It leaves each country the option of letting producers off the liability hook, if the state of scientific research at the time of manufacture did not show any harmful effects.

``Allowing this `development risk' defense, rather than strict liability, creates a loophole which can be used quite considerably by lawyers,'' Mr. Schmitz contends.

European insurers see the situation somewhat differently. According to the Geneva Association, a research group for the international insurance industry, asbestos damages in the US alone have so far cost more than $1 billion, though at the time the material was put into use, its potential harm was not known. The massive losses played an important role in the liability insurance crisis that came to a head in the US two years ago.

Insurers argue that some kind of time limit must be provided, for economic reasons.

``Liability will be a big market in Europe in the next 20 years, but it must stabilize,'' says Orio Giarini, secretary-general of the Geneva Association. ``Insurers don't know what the basis is for organizing their coverage. The problem is: How far can you go? How do you set limits so you can do business? How can you collect the funds necessary for paying out, if you don't have enough knowledge?''

The insurance industry is promoting ``risk engineering'' to get companies to study potential problems before they arise. ``In Europe, the situation won't be as open-ended as in the US, but it will change, and a lot of companies may go under if they haven't paid enough attention to what is happening,'' says Leonhard Grass, a spokesman for the Zurich Insurance Company. His company is a leading international insurer of insurance companies against major losses.