The Revised EU Product Liability Directive and Liability Allocation Clauses in Export Supply Agreements
Rethinking liable parties, software update obligations, and recourse between businesses
The revised EU Product Liability Directive (Directive (EU) 2024/2853) applies to products placed on the market after December 9, 2026. Software is now included within the scope of products, and for products made by manufacturers outside the EU, the range of liable parties within the EU, such as importers and authorized representatives, has been expanded.
Because liability to injured persons cannot be limited or excluded by contract, the role of a supply agreement is to determine the final allocation of costs between businesses. Companies supplying EU customers should review the clauses in their supply agreements on liable parties, software updates, recourse, and insurance.
1. Timing and Scope of the Revised Directive
The new Directive applies to products placed on the EU market or put into service after December 9, 2026. The previous directive continues to apply to products placed on the market before that date (Articles 2 and 21).
Member States must adopt national implementing laws by the same date (Article 22). Because actual claims will proceed under each Member State's implementing legislation, companies should also check the status of legislation in their main sales countries.
The new Directive defines software as a product (Article 4). Components that operate through firmware or apps, as well as related services required for a product's functions, may also be assessed for defects.
Compensable damage includes death and personal injury, damage to private property, and destruction or corruption of data not used for professional purposes (Article 6). Damage to property used exclusively for professional purposes is excluded, so losses between business partners must be reviewed separately under the supply agreement and general civil liability rules.
2. Liable Parties for Products Made Outside the EU
If the manufacturer is established outside the EU, the importer and the manufacturer's authorized representative within the EU may be liable to injured persons in addition to the manufacturer. If neither exists, the fulfilment service provider becomes a liable party (Article 8(1)).
Even if a Korean manufacturer exports directly, its EU customer may be the first to face a damages claim as the importer. In that case, the customer will seek reimbursement from the Korean manufacturer, so the recourse clause in the supply agreement becomes the standard for the actual dispute.
Even when supplying components, the component manufacturer may be a liable party if a component integrated into the finished product caused the defect. If several businesses are liable for the same damage, they are jointly and severally liable to the injured person (Article 12).
A business that substantially modifies a product and places it back on the market is treated as a manufacturer (Article 8(2)). If an EU distributor will modify the product or software to meet local specifications, the scope of modification and allocation of liability should be stated in the agreement.
3. Software Updates and Changes to Exemptions
Previously, a manufacturer could escape liability by proving that the defect did not exist when the product was placed on the market. The new Directive does not allow this exemption for defects caused by software or updates within the manufacturer's control, the lack of updates necessary to maintain safety, or substantial modifications (Article 11(2)).
Where a product can receive updates after it is placed on the market, who provides security updates and for how long directly affects the liability assessment. The supply agreement should also set the update support period, the distribution channel, and the customer's obligation to cooperate with installation.
A component manufacturer may be exempt if it proves that the defect is attributable to the design of the finished product or to instructions given by the manufacturer of the finished product (Article 11(1)). This is why specifications, design instructions, and change request records should be preserved.
4. Indemnity and Recourse Clauses in Supply Agreements
Liability to injured persons cannot be limited or excluded by contractual terms (Article 15). Indemnity clauses in a supply agreement should be understood as provisions that determine the final allocation of costs between businesses, not as a defense against injured persons.
A business that has compensated an injured person may seek recourse against other liable businesses, but the method is governed by national law (Article 14). If the scope and ratio of recourse, incident notice deadlines, control of the defense, and settlement approval procedures are not agreed in advance, dispute costs increase.
Liability caps should be reviewed together with caps based on the supply price, per-incident and aggregate caps, and exceptions for intentional misconduct or gross negligence. The agreement should also separately specify how far each party bears losses outside the Directive, such as recall costs and the customer's lost profits.
For software components made by small enterprises, there is a special rule under which the manufacturer of the finished product may waive its right of recourse by contract (Article 12(2)). When contracting with a software developer, companies should check whether this provision applies.
| Clause | Key Review Points |
|---|---|
| Timing | Products placed on the EU market after December 9, 2026; implementing laws in sales countries |
| Liable parties | Designation of importers, authorized representatives, and fulfilment service providers |
| Software | Update support period and distribution channel; customer cooperation with installation |
| Liability allocation | Scope of recourse and notice deadlines; liability caps and recall costs |
| Insurance and records | Territorial coverage and limits; retention of technical documents and update records |
5. Pre-Signing Materials and Insurance
Companies should first organize information on sales countries and launch schedules, the designation of importers and authorized representatives in the EU, and the list of software and related services included in the product. This information is needed to determine who will be a liable party and to align each party's contractual role.
Companies should check the territorial coverage of their product liability insurance, whether software defects are covered, and whether the customer should be added as an additional insured. If the insurance limit and the contractual liability cap do not match, losses not covered by insurance may arise.
The duration of liability should also be considered. An injured person must bring a claim within three years from becoming aware of the damage, the defect, and the liable party, and the right to claim expires ten years after the product is placed on the market (25 years for latent personal injuries) (Articles 16 and 17). Retention periods for technical documents and update records should be aligned with these periods.
6. Implications for Businesses
Whether the revised Directive applies is determined by when the product is placed on the market, not when the contract is signed. For products scheduled to be placed on the market after December 9, 2026, companies should re-examine the liable parties and allocation of roles even for transactions under existing agreements.
For products that include software, post-market update management affects the liability assessment. Designing update obligations, record keeping, recourse between businesses, and insurance limits together is at the core of reviewing EU supply agreements.
Related Laws and References
EUR-Lex — Directive (EU) 2024/2853 on Liability for Defective Products
