Strict product liability: information doesn’t count — official (sort of).

If you hoped that since Brexit you could forget about keeping one eye on the decisions of the CJEU, think again. Yesterday in Krone Verlag GmbH (Case 65/20) [2021] EUECJ C-65-20, that court decided an important issue of product liability under the Product Liability Directive, an EU measure that remains essentially in effect here having been enacted as Part I of the Consumer Protection Act 1987.

An Austrian redtop newspaper reader followed the advice contained in an article it ran on home doctoring, and applied a poultice of grated horseradish for several hours to a swollen ankle. She suffered a serious toxic skin reaction because such remedies ought to be applied for only a few minutes. In an unfortunate typo the paper had substituted hours for minutes.

She sued the proprietors, alleging that the newspaper was a defective product under the Directive and that they were therefore strictly liable to her for the consequences of the material contained in it. The owners argued that defective products meant only physically defective products, and did not cover informational defects. Case law in Austria being divided on the point, the Oberster Gerichtshof (ie the Austrian Supreme Court) referred the matter to Luxembourg.

The Euro-court briskly sided with the newspaper proprietors. A bright Euro-line had to be drawn between liability for defective things (strict) and for bad services (fault-based): and a thing did not become defective merely because it happened to be the medium for misleading advice or intellectual content apt to cause harm or injury.

Good news, certainly, for publishers: not only of newspapers, but (more importantly in the commercial context) of instruction books and manuals for maintenance or assembly. These people are it seems now insulated — at least as a matter of our law — from strict liability claims by workers complaining of injury due to incomplete or misleading materials contained in them; they are also safe from strict liability contribution claims by the insurers of employers and others who have been successfully sued by workers and now seek to pass on part of the liability. Equally, in the rare case where mariners rely on a misleading paper chart with untoward results, there can be no question now of liability in the cartographers for injuries resulting.

This judgment was about paper media: but presumably it applies to material on machine-readable media too. It can hardly make a difference whether information is supplied printed on paper or written on to a DVD or USB stick. So there can now be no strict liability suit for instructions supplied on a DVD, or if a DVD fitted into, say, an ECDIS display has a bug in it that causes the display to be wrong. (If material is supplied over the Net no question arises anyway, since then there is no physical medium at all).

A little more difficult is the position of software for operating machines, where there is no element of intellectual content readable by humans: the DVD, for example, that you insert into a device (such as the control unit of a drone submersible) to cause it to run or to transfer necessary operating information to it. If this is misconfigured and causes the device to malfunction and cause injury, is this a defective good? The matter is not absolutely clear. But the stress laid by the Court on the difference between goods and services suggests that here too liability under the Product Liability Directive should be denied. Bad instructions directed at a machine seem more a matter of a defective service than a defect in anything physical: physicality here is confined to the medium on which the instructions happen to be written.

In terms of strict law this decision is not in any way binding on a court in the UK applying the Consumer Protection Act. In practice, however, Brexit or no Brexit, it’s difficult to see the courts here coming to a different conclusion. Particularly since, at least to us at the IISTL, the result reached in Luxembourg seems so overwhelmingly sensible.

Lugano blues?

Unfinished business permeates Brexit. A case in point is jurisdiction and enforcement of judgments. As of the end of last year the regimes which had thitherto featured so large in lawyers’ lives, Brussels I, Lugano and the Brussels Convention, fell away. What remained was the common law rules on jurisdiction and enforcement, tempered only by the much more skeletal 2005 Hague Convention on Choice of Court Agreements, possibly a few hoary pre-EU bilateral treaties on enforcement of judgments, and a vague prospect of the UK joining Lugano as a non-EU state with the agreement of the EU.

The latter possibility has now been scotched; although the other Lugano states (Switzerland, Iceland and Norway) were cool about the idea, the EU Commission on 4 May came out with a de Gaullean Non. For the moment therefore we are stuck with the status quo.

Is this a disaster for UK lawyers, in particular as regards the enforceability of our judgments elsewhere in Europe? Not as much as you might think, even though though it is a reverse, and admittedly proceedings to give effect to judgments may become somewhat untidier and more costly.

First, note that in the EEA outside the EU, Switzerland has a fairly summary native procedure for enforcing foreign (non-Lugano) judgments; and as regards Norway we have dusted off a 1961 agreement and reactivated it.

Turning to the position within the EU, it is worth remembering that one sizeable subset of Commercial Court judgments will remain fairly readily enforceable: namely, those emanating from exclusive English jurisdiction clauses – a very common phenomenon in international trade contracts, and a not unusual one in other cases where English law is chosen by the parties to govern their transaction. This is because the 2005 Hague Convention, already applicable in the UK and throughout the EU (and also in Singapore and Montenegro) mandates enforcement, not only of such clauses, but also of any judgments resulting. The only gaping exceptions here are interim judgments and carriage contracts.

In the mid-term things may moreover get better. The EU is, it seems, well on the way to ratifying the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, a convention to which the UK can also adhere. If and when EU and UK both ratify this Convention, it will require expeditious enforcement of each other’s commercial judgments – and incidentally judicially-approve settlements – rendered against, among others, anyone who has agreed to the jurisdiction of the court rendering the judgment. Its only slightly annoying exception, as in the case of the 2005 Hague Convention, concerns carriage contracts, something apt to exclude bill of lading and voyage charter disputes (though possibly not time charter litigation).

Furthermore, it is worth remembering that the UK’s exclusion from Lugano carries one positive benefit: namely, an escape from its strict and arguably over-dirigiste provisions on jurisdiction. UK courts will thus retain the ability regained in January to decline jurisdiction where there is a good reason to do so without being concerned with the straitjacket imposed by Owusu v Jackson (C-281/02) [2005] E.C.R. I-1383. Conversely, English courts will keep their newly-restored ability to extend to European-domiciled defendants the wide English rules of exorbitant jurisdiction tempered only by forum non conveniens and the court’s discretion to refuse permission to serve out. Further, one suspects much to everyone’s relief, lis alibi pendens in Europe will not, as in Art.27 of Lugano, prevent the English court hearing the case, but merely give it a discretion to do so. The unlamented Italian torpedo fashioned by cases such as Erich Gasser GmbH v MISAT SRL (Case C-116/02) [2003] E.C.R. I-14693, partly but only partly disposed of in Brussels I Recast, will thus be for ever disarmed and its casing given a decent burial on the seabed. And, of course, the anti-suit injunction, a remedy of very considerable use in the practical defence of exclusive jurisdiction and arbitration agreements, is now available against all defendants.

In short, life may be messier for English lawyers without Lugano. But one suspects that it may not be that much unhealthier for the legal business of the English courts. For the moment at least UK Law Plc remains in pretty rude health, and with very decent prospects for the foreseeable future. You’d be foolish if you thought of writing it off any time soon.

EU Proposes a Uniform Approach to the Regulation of Artificial Intelligence

Artificial intelligence (AI) is used in many domains ranging from public sector to health, finance, insurance, home affairs and agriculture. There is no doubt that AI can potentially bring a wide array of economic and societal benefits for nations and humanity as a whole. However, it has been subject of intense deliberation as to how AI can be best regulated given that its applications could potentially have adverse consequences on privacy, dignity and other fundamental human rights of individuals. There is no easy answer to this question and various options have been deliberated over the years. Academics have come up with theories as to which manner of regulation would suit the interest of the society best, whilst various stakeholders (developers and/or users of the technology) have supported different types of regulation alternatives suiting their interests.

On 21 April, the European Commission unveiled its proposal for the regulation of AI in EU (2021/0106 (COD)). This is an important development which will, no doubt, generate significant interest (and debate) and play a role in shaping the regulatory framework not only in the EU but perhaps globally. In a nutshell, the proposed new regulatory regime for AI will be as follows:

  • The regulation lists AI systems whose use is considered unacceptable and accordingly prohibited (Article 5). Such AI practices are: i) those that deploy subliminal techniques beyond a person’s consciousness in order to materially distort a person’s behaviour in a manner that causes or is likely to cause that person or another person physical or psychological harm; ii) those that exploit any of the vulnerabilities of a specific group of persons due to their age, physical or mental disability, in order to materially distort the behaviour of a person pertaining to that group in a manner that causes or is likely to cause that person or another person physical or psychological harm; iii) those that are used by public authorities or on their behalf for the evaluation or classification of the trustworthiness of natural persons over a certain period of time based on their social behaviour or known or predicted personal or personality characteristics, with the social score leading to either or both of the following: a) detrimental or unfavourable treatment of certain natural persons or whole groups thereof in social contexts which are unrelated to the contexts in which the data was originally generated or collected; b) detrimental or unfavourable treatment of certain natural persons or whole groups thereof that is unjustified or disproportionate to their social behaviour or its gravity; and iv) those that use “real-time” remote biometric identification systems in publicly accessible spaces for the purpose of law enforcement (certain exclusions also listed for this).
  • The new regime contains specific rules for AI systems that create a high risk to the health and safety of fundamental rights of natural persons (Title III, Arts 6 and 7). Annex III, lists a limited number of AI systems whose risks have already materialised or likely to materialise in the near future (e.g. biometric identification and categorisation of natural persons; AI systems intended to be used for recruitment or selection of natural persons for employment; AI systems intended to be used by public authorities to evaluate the eligibility of natural persons for public assistance benefits and services and AI systems intended to be used by law enforcement authorities as polygraphs and similar tools to detect the emotional state of a natural person) Article 7 authorises the Commission to expand the list of high-risk AI systems in the future by applying a set of criteria and risk assessment methodology.
  • The proposed regulation sets out the legal requirements for high-risk AI systems in relation to data and data governance, documentation and record keeping, transparency and provision of information to users, human oversight, robustness, accuracy and security (Chapter 2).              
  • Chapter 4 sets the framework for notified bodies to be involved as independent third parties in conformity assessment procedures and Chapter 5 explains in detail the conformity assessment procedures to be followed for each type of high-risk AI system.
  • Certain transparency obligations have been set for certain AI systems (e.g. those that i) interact with humans; ii) are used to detect emotions or determine association with (social) categories based on biometric data and iii) generate or manipulate content (deep fakes)) by virtue of Title IV.
  • Title V encourages national competent authorities to set up regulatory sandboxes and sets a basic framework in terms of governance, supervison and liability.   
  • The draft regulation proposes to establish a European Artificial Intelligence Board which will facilitate a smooth, effective and harmonised implementation of the requirements under this regulation by contributing to the effective corporation of the national supervisory authorities and the Commission and providing advice and expertise to the Commission. At national level, Member States will have to designate one or more national competent authorities and, among them, the national supervisory authority, for the purpose of supervising the application and implementation of the regulation (Title VI).           

There is no doubt in the coming weeks the suitability of the proposed regulation will be rigorously deliberated. For example, civil rights campaigners might possibly argue that the proposed regulation does not go far enough as the it allows several exceptions to the use of “real time” biometric identification systems. Fundamentally, Article 5 of the proposed regulation states that the use of real-time biometric identification systems can be allowed for the “prevention of a specific, substantial and imminent threat to the life or physical safety of natural persons or of a terrorist attack”, the interpretation of which leaves wide discretionary power to the authorities. On the other hand, developers of AI applications might find it troubling that the Commission would have a discretion going forward to treat new applications developed as high-risk making them subject to a demanding compliance regime set out in the proposed regulation.

Obviously, the proposed regulation will not apply in the UK. However, it is important for the relevant regulators in the UK to see what is brewing on the other side of the Channel. We should follow the debates emerging, reactions to it from various interest groups and academics with interest. There might be considerable benefit for the UK to make its move once the path the EU is taken on this issue is settled. This might bring economic advantages and even perhaps a competitive edge (assuming that more efficient regulatory measures are preferred in the UK)!   

No-go Lugano?

The UK’s application, submitted on 8 April 2020, to join the Lugano Convention in its own right appears to be foundering on opposition from the EU. Although the three non-EU Members (Iceland, Norway and Switzerland) have expressed support for admitting the UK, the European Commission is less favourably disposed, and its consent is essential if the UK is to become a party to the convention. On 12 April the Commission stated.

“The Commission has conducted a thorough assessment of the request and has discussed it with Member States. It will come forward with a Communication in the coming weeks.

It is worth noting, however, that the Lugano Convention is a tool used within the EU-EFTA/EEA context. The UK has chosen to leave the EU, the Single Market and the Customs Union. It has chosen to have a more distant relationship with the EU than EEA-EFTA countries. These choices have to be taken into account when determining the EU’s position.”

The final decision, however, lies with the European Council, which comprises EU Member State heads of state or government and is expected soon. We wait with bated breath.

No strikeout for Bangladeshi ship scrapping claim: but don’t hold your breath

As we mentioned on this blog last August, these days you have to be careful who you sell an old ship to. In Begum v Maran [2021] EWCA Civ 326 MUK, the English managers of a Liberian ship fit only for scrap, helped arrange her sale to a buyer who paid fairly handsomely. That buyer proceeded (entirely foreseeably) to have her scrapped by a thoroughly dodgy outfit called Zuma in a dangerous and environmentally irresponsible way on a Bangladeshi beach. A worker engaged in stripping the hulk fell to his death. Prospects of recovery from Zuma being low, if for no other reason because of a local one-year statute of limitations during the running of which nothing had been done, his widow sued MUK as of right in England because of its domicile here, alleging negligence. Jay J decided that it was arguable that MUK had owed the man a duty of care, and that the local limitations law might be circumvented, and refused a strikeout. MUK appealed.

The Court of Appeal yesterday allowed the case to go ahead, though only very grudgingly and on a more limited basis than Jay J. The Court was particularly sceptical on the limitation point. Under Rome II, applicable to the claim as it predated Brexit (and still applicable to post-Brexit claims in its domesticated form), the law governing the claim – including on the subject of limitation – was Bangladeshi. This immediately defeated the claimant unless she could escape it. The judge had regarded as possibly plausible a contention that Art.7 of Rome II allowed her to invoke English law because her husband’s death had resulted from environmental damage caused by an event here – namely, MTM’s arrangements for sale of the ship. But this was dismissed on appeal as unarguable: rightly so, since this simply wasn’t an environmental case in the first place. But the court did see it as arguable – just – that the limitation period was so short that an English court might disapply it on public policy grounds under Art.26 of Rome II, and ordered a preliminary issue on the point.

On the substantive points, the widow argued either that MUK had owed her husband a duty of care on the principle of Donoghue v Stevenson [1932] AC 562, or that MUK’s sale of the vessel when it should have known that it was likely to be dangerously demolished had created an immediate danger to her husband’s life and thus engendered a duty in respect of the bad practices of his employers Zuma.

Giving the lead judgment, Coulson J was very sceptical on the first point. This wasn’t, he said, a case of a disposal of a dangerous thing, but rather the furnishing of an opportunity for a third party to be negligent in respect of a thing not inherently perilous. Whether this could give rise to a duty his Lordship thought very doubtful indeed – but still not quite implausible enough to justify an immediate strikeout. Our view is that the doubts were fully justified. We normally expect employers to look after their employees; to put a duty on third parties to police the behaviour of contractors they engaged in that respect is to say the least drastic. Should I really have to scrutinise or supervise the employment practices of the builder I employ to extend my house in case one of his workers is hurt? It seems doubtful.

On the second point, the difficulty (a considerable one) was the general rule that people were not generally made responsible for the wrongs of others, however foreseeable. But, said Coulson J, there were possible exceptions where the danger in question had been created by a defendant. And while it seemed unlikely that this would apply here, the law was not absolutely clear and the prospect of persuading a sceptical judge to recognise a duty of care wasn’t dismal enough to deny the widow the chance to argue the toss. Her prospects might be slim, but she was entitled to chance her arm.

This case will possibly be hailed in the liberal media as an advance in the campaign to make big business in Britain take responsibility for the activities of its dodgier partners abroad. But commercial lawyers know better than to engage in chicken-counting. Remember, the claimant here only avoided a strikeout by the skin of her teeth. Her chances of recovering much over and above a nuisance value or reputation-saving settlement remain, it seems fair to say, pretty slim.

Oh, and one more thing. The ability to sue a UK-domiciled company here as of right disappeared with Brussels I Recast in a puff of celebratory Brexit firework smoke at 2300 hours on 31 December last. It follows that, barring swift adherence by the UK to the Lugano convention (increasingly unlikely by all the indications), any future claimant basing their complaint on events in a far-off land with no ostensible connection to England will now also face the prospect of a forum non conveniens application. This may well have an appreciable chance of success. There is, after all, no immediately apparent reason why the English courts should act as the policemen of work practices worldwide, hoewever much sympathy we may feel for a claimant personally.

In short, the boardrooms of corporate Britain, and even more those of their liability insurers, may well see some sighs of relief, if not discreet socially-distant celebrations, in the next few days.

Environmental divergence starts now. EU gold plates the Basel Convention 2019 amendments.

The fourteenth meeting of the Conference of the Parties to the Basel Convention (COP-14, 29 April–10 May 2019) adopted amendments to Annexes II, VIII and IX to the Convention with the objectives of enhancing the control of the transboundary movements of plastic waste and clarifying the scope of the Convention as it applies to such waste. New entries relating to plastic waste were included.

The amendment to Annex VIII, with the insertion of a new entry A3210, clarifies the scope of plastic wastes presumed to be hazardous and therefore subject to the Prior informed consent procedure. The amendments came into force on 1 January 2021.

On 22 December the EU Commission decided to ban the export of plastic waste from the EU to non-OECD countries, except for clean plastic waste sent for recycling. By contrast UK exports of plastic waste will now be made under a new system of PIC, under which the importer has to agree to accept the waste, and has the opportunity to refuse it.

All the UK wants for Christmas is….Lugano

As 2020 draws to its end, two bits of good news in December. The first roll out of COVID-19 vaccines in the UK, and yesterday’s announcement of a free trade deal between the UK and the EU. However, commercial lawyers will be scanning the news for any announcement that the EU will now consent to the UK’s application to join the Lugano Convention 2007. However, even if that were granted today there would still be a three month delay before the UK joined the Lugano Club.

Article 72 of the Convention provides

3.   Without prejudice to paragraph 4, the Depositary shall invite the State concerned to accede only if it has obtained the unanimous agreement of the Contracting Parties. The Contracting Parties shall endeavour to give their consent at the latest within one year after the invitation by the Depositary.

4.   The Convention shall enter into force only in relations between the acceding State and the Contracting Parties which have not made any objections to the accession before the first day of the third month following the deposit of the instrument of accession.

So in the interim, the UK on 1 Jan 2021 would revert to common law on civil jurisdiction and enforcement of judgments as between itself and the Lugano parties, subject to application of the Hague Convention 2005 which comes into force with the UK as an independent signatory, rather than by virtue of the EU’s accession, on 1 January 2021.

However in November the UK and Norway agreed to extend and update their 1961 Convention for the Reciprocal Recognition and Enforcement of Judgments in Civil Matters, so that it will apply to the extent that, and during any period that, the 2007 Lugano Convention does not apply to the UK.

The agreement between the two countries 

EU Parliament suggests civil liability regulation for artificial intelligence. Possible collisions ahead with IMO civil liability collisions?

On 22 October the European Parliament sent a draft regulation to the Commission for a new strict liability regime for operators of AI systems. Its salient features are.

Scope

Art 2

This Regulation applies on the territory of the Union where a physical or virtual activity, device or process driven by an AI-system has caused harm or damage to the life, health, physical integrity of a natural person, to the property of a natural or legal person or has caused significant immaterial harm resulting in a verifiable economic loss.

Definitions

Art 3

(c)  ‘high risk’ means a significant potential in an autonomously operating AI-system to cause harm or damage to one or more persons in a manner that is random and goes beyond what can reasonably be expected; the significance of the potential depends on the interplay between the severity of possible harm or damage, the degree of autonomy of decision-making, the likelihood that the risk materializes and the manner and the context in which the AI-system is being used;

(d)  ‘operator’ means both the frontend and the backend operator as long as the latter’s liability is not already covered by Directive 85/374/EEC;

(e)  ‘frontend operator’ means any natural or legal person who exercises a degree of control over a risk connected with the operation and functioning of the AI-system and benefits from its operation;

(f)  ‘backend operator’ means any natural or legal person who, on a continuous basis, defines the features of the technology and provides data and an essential backend support service and therefore also exercises a degree of control over the risk connected with the operation and functioning of the AI-system;

(g)  ‘control’ means any action of an operator that influences the operation of an AI-system and thus the extent to which the operator exposes third parties to the potential risks associated with the operation and functioning of the AI-system; such actions can impact the operation at any stage by determining the input, output or results, or can change specific functions or processes within the AI-system; the degree to which those aspects of the operation of the AI-system are determined by the action depends on the level of influence the operator has over the risk connected with the operation and functioning of the AI-system;

(h)  ‘affected person’ means any person who suffers harm or damage caused by a physical or virtual activity, device or process driven by an AI-system, and who is not its operator;

(i)  ‘harm or damage’ means an adverse impact affecting the life, health, physical integrity of a natural person, the property of a natural or legal person or causing significant immaterial harm that results in a verifiable economic loss;

(j)  ‘producer’ means the producer as defined in Article 3 of Directive 85/374/EEC. (the Product Liability Directive)

Strict liability for high-risk AI-systems

Article 4

1.  The operator of a high-risk AI-system shall be strictly liable for any harm or damage that was caused by a physical or virtual activity, device or process driven by that AI-system.

2.  All high-risk AI-systems and all critical sectors where they are used shall be listed in the Annex to this Regulation…

3.  Operators of high-risk AI-systems shall not be able to exonerate themselves from liability by arguing that they acted with due diligence or that the harm or damage was caused by an autonomous activity, device or process driven by their AI-system. Operators shall not be held liable if the harm or damage was caused by force majeure.

4.  The frontend operator of a high-risk AI-system shall ensure that operations of that AI-system are covered by liability insurance that is adequate in relation to the amounts and extent of compensation provided for in Articles 5 and 6 of this Regulation. The backend operator shall ensure that its services are covered by business liability or product liability insurance that is adequate in relation to the amounts and extent of compensation provided for in Article 5 and 6 of this Regulation. If compulsory insurance regimes of the frontend or backend operator already in force pursuant to other Union or national law or existing voluntary corporate insurance funds are considered to cover the operation of the AI-system or the provided service, the obligation to take out insurance for the AI-system or the provided service pursuant to this Regulation shall be deemed fulfilled, as long as the relevant existing compulsory insurance or the voluntary corporate insurance funds cover the amounts and the extent of compensation provided for in Articles 5 and 6 of this Regulation.

5.  This Regulation shall prevail over national liability regimes in the event of conflicting strict liability classification of AI-systems.

Amount of compensation

Article 5

1.   An operator of a high-risk AI-system that has been held liable for harm or damage under this Regulation shall compensate:

(a)  up to a maximum amount of EUR two million in the event of the death of, or in the event of harm caused to the health or physical integrity of, an affected person, resulting from an operation of a high-risk AI-system;

(b)  up to a maximum amount of EUR one million in the event of significant immaterial harm that results in a verifiable economic loss or of damage caused to property, including when several items of property of an affected person were damaged as a result of a single operation of a single high-risk AI-system; where the affected person also holds a contractual liability claim against the operator, no compensation shall be paid under this Regulation, if the total amount of the damage to property or the significant immaterial harm is of a value that falls below [EUR 500](9).

Limitation period

Article 7

1.  Civil liability claims, brought in accordance with Article 4(1), concerning harm to life, health or physical integrity, shall be subject to a special limitation period of 30 years from the date on which the harm occurred.

2.  Civil liability claims, brought in accordance with Article 4(1), concerning damage to property or significant immaterial harm that results in a verifiable economic loss shall be subject to special limitation period of:

(a)  10 years from the date when the property damage occurred or the verifiable economic loss resulting from the significant immaterial harm, respectively, occurred, or

(b)  30 years from the date on which the operation of the high-risk AI-system that subsequently caused the property damage or the immaterial harm took place.

Of the periods referred to in the first subparagraph, the period that ends first shall be applicable.

Fault-based liability for other AI-systems

Article 8

1.  The operator of an AI-system that does not constitute a high-risk AI-system as laid down in Articles 3(c) and 4(2) and, as a result is not listed in the Annex to this Regulation, shall be subject to fault-based liability for any harm or damage that was caused by a physical or virtual activity, device or process driven by the AI-system.

2.  The operator shall not be liable if he or she can prove that the harm or damage was caused without his or her fault, relying on either of the following grounds:

(a)  the AI-system was activated without his or her knowledge while all reasonable and necessary measures to avoid such activation outside of the operator’s control were taken, or

(b)  due diligence was observed by performing all the following actions: selecting a suitable AI-system for the right task and skills, putting the AI-system duly into operation, monitoring the activities and maintaining the operational reliability by regularly installing all available updates.

The operator shall not be able to escape liability by arguing that the harm or damage was caused by an autonomous activity, device or process driven by his or her AI-system. The operator shall not be liable if the harm or damage was caused by force majeure.

3.  Where the harm or damage was caused by a third party that interfered with the AI-system by modifying its functioning or its effects, the operator shall nonetheless be liable for the payment of compensation if such third party is untraceable or impecunious.

4.  At the request of the operator or the affected person, the producer of an AI-system shall have the duty of cooperating with, and providing information to, them to the extent warranted by the significance of the claim, in order to allow for the identification of the liabilities.

National provisions on compensation and limitation period

Article 9

Civil liability claims brought in accordance with Article 8(1) shall be subject, in relation to limitation periods as well as the amounts and the extent of compensation, to the laws of the Member State in which the harm or damage occurred.

 There are also provisions regarding contributory negligence, Article 10, joint and several liability, Article 11, recourse for compensation, Article 12.

There are no carve-outs as regards existing civil liability conventions for maritime claims such as the CLC, Bunker Oil Pollution Convention, HNS Convention, which are strict liability based, and the 1910 Brussels Collision Convention which is fault liability based. This is in contrast to the exclusions contained in the 2004 Environmental Liability Directive whose territorial scope was widened with the 2013 Offshore Safety Directive. The current proposal applies to the “territory of the Union” which would encompass the territorial sea of Member States and, in the light of the ECJ’s decision in Commun v Mesquer, loss or damage manifesting on land from an oil spill in the exclusive economic zone of a Member State would come within the scope of the Regulation. As such, it has the capacity to conflict with existing strict liability conventions as enacted in national laws (see the priority of the regulation stipulated in art 4(5)) where autonomous vessels come into operation at MASS Levels 3 and 4, if these are regarded as ‘high risk’. If that were the case, collision liabilities involving such vessels would be dealt with by a strict liability regime, as opposed to the current fault based regime under the Brussels Collision Convention 1910.

Hague Convention 2005. After the transition period.

As expected the UK government has made a fresh declaration agreeing to be bound by the Hague Convention on Choice of Law 2005 in its own right from the end of the transition period at 11pm, UK time, on 31 December  2020. It states “With the intention of ensuring continuity of application of the 2005 Hague Convention, the United Kingdom has submitted the Instrument of Accession in accordance with Article 27(4) of the 2005 Hague Convention. Whilst acknowledging that the Instrument of Accession takes effect at 00:00 CET on 1 January 2021, the United Kingdom considers that the 2005 Hague Convention entered into force for the United Kingdom on 1 October 2015 and that the United Kingdom is a Contracting State without interruption from that date.”

It has also made a reservation under art 21 of the Convention that it will not apply the Convention to insurance contracts except as stated below.

(a) where the contract is a reinsurance contract;

(b) where the choice of court agreement is entered into after the dispute has arisen;

(c) where, without prejudice to Article 1 (2) of the Convention, the choice of court agreement is concluded between a policyholder and an insurer, both of whom are, at the time of the conclusion of the contract of insurance, domiciled or habitually resident in the same Contracting State, and that agreement has the effect of conferring jurisdiction on the courts of that State, even if the harmful event were to occur abroad, provided that such an agreement is not contrary to the law of that State;

(d) where the choice of court agreement relates to a contract of insurance which covers one or more of the following risks considered to be large risks:

(i) any loss or damage arising from perils which relate to their use for commercial purposes, of, or to:

          (a) seagoing ships, installations situated offshore or on the high seas or river, canal and lake vessels;

          (b) aircraft;

          (c) railway rolling stock;

(ii) any loss of or damage to goods in transit or baggage other than passengers’ baggage, irrespective of the form of transport;

(iii) any liability, other than for bodily injury to passengers or loss of or damage to their baggage, arising out of the use or operation of:

         (a) ships, installations or vessels as referred to in point (i)(a);

         (b) aircraft, in so far as the law of the Contracting State in which such aircraft are registered does not prohibit choice of court agreements regarding the insurance of such risks;

         (c) railway rolling stock;

(iv) any liability, other than for bodily injury to passengers or loss of or damage to their baggage, for loss or damage caused by goods in transit or baggage as referred to in point (ii);

(v) any financial loss connected with the use or operation of ships, installations, vessels, aircraft or railway rolling stock as referred to in point (i), in particular loss of freight or charter-hire;

(vi) any risk or interest connected with any of the risks referred to in points (i) to (v);

(vii) any credit risk or suretyship risk where the policy holder is engaged professionally in an industrial or commercial activity or in one of the liberal professions and the risk relates to such activity;

(viii) any other risks where the policy holder carries on a business of a size which exceeds the limits of at least two of the following criteria:

          (a) a balance-sheet total of EUR 6,2 million;

          (b) a net turnover of EUR 12,8 million;

          (c) an average number of 250 employees during the financial year.

2. The United Kingdom of Great Britain and Northern Ireland declares that it may, at a later stage in the light of the experience acquired in the application of the Convention, reassess the need to maintain its declaration under Article 21 of the Convention.”