Philipp Reusch – “As long as a product is not defective, no litigation is looming.”
By the day we see growth and increasing complexity in the compensation culture that surrounds us, and although the moral standing is arguable, the law exists to protect people, businesses and their productivity. But is this the truth for all nations? In the case of German product liability law, justice really grits its teeth and in most scenarios, consumers or businesses are able to achieve a just resolution, but on the other hand, manufacturers are strongly in need of experienced and knowledgeable insight from a specialized lawyer.
Here Philipp Reusch, Founder and Managing Partner of Reuschlaw, talks to Lawyer Monthly about the changes the German and EU landscape has experienced in recent years, the dominant themes surrounding product liability throughout Germany, and about the impact of alternative dispute resolution methods in this legal segment. Philipp also talks about trends in the sector, his experiences that led to this practice, and the laws he would change if he had the power.
What systems of product liability are available in Germany?
Let me first draw your attention to the fact that product liability law has undergone profound changes in recent years. As the European Union focuses on a high level of consumer protection, product liability related legislation has evolved into a complex system of interacting requirements that manufacturers face today. Issues may already arise in determining which directive is applicable, whether technical standards are legally binding.
German law adopted and extended the European legislative input. Civil law infringements may consist in manufacturers’ fault or even “simple” negligence during the placement on the market.
Public authorities determine whether manufacturers met the safety and labelling requirements, which differ regarding the products’ types. Manufacturers can be personally held responsible according to criminal law. Hence, it may seem that product liability law is a minefield for any manufacturer. This is why we want to assist our clients on their way to a fully compliant yet profitable production. My team and I will not be satisfying ourselves in pointing out the risks in boring legal opinions. Presenting a selection of feasible and reasonable options not only for the present situation but also anticipating future business challenges is what our clients can expect. Mutual trust, our knowledge and our experience create the synergy that makes us business partners instead of spoilsports.
What have been the key areas of litigation in the German product liability sector in recent years?
Product liability litigation can occur between customers and manufacturers as well as between manufacturers themselves. Customer-related cases often involve safety aspects and get more publicity. For instance, when you buy a mountain bike, you expect it to be suitable for driving in rough terrain without falling apart. Another case led to the conclusion that even extremely cheap products, though they may not reach a high quality level, should nonetheless match the safety levels required by law. As such, litigation involving customers often recurs to interpretation of rules and by that produce the opportunity to deduce manufacturers’ particular requirements.
As product liability is also strongly related to labelling and safety requirements, disputes on the B2B level often arise with regard to manufacturers’ tort, damage or recall responsibilities. At this stage, rules of law rather serve to determine the scope of duties and responsibilities as such, whereas contracts and contract law clarify internal settlements.
What do businesses need to be particularly mindful of, in terms of product liability, in order to avoid litigation?
From a manufacturers’ point of view, prevention is the key. As long as a product is not defective, no litigation is looming. On this account, the responsibilities begin with a quality management system covering every stage of production – encompassing the production’s organization, development, production and observation. Nevertheless, a quality management system reaches its limits when it comes to relations with other businesses. A simple advice, though often hardly to achieve: a good contract avoids disputes. Most of the time, the parties’ horizon is limited to the future business opportunity. In that situation, no one wants to discuss potential conflicts – a lawyer’s alert is often considered to be embarrassing or even exaggerated. However, clear and legally valid liability clauses contribute to a fair and effective management in the event of critical situations.
Furthermore, both parties should not lose sight of the big picture: although conflicts may arise out of business relations, the relation is still something that both sides want to keep alive. Bearing this in mind, agreeing upon solving issues by the means of discussion, mediation or ADR may be the key to a mutual understanding.
What role do alternative dispute resolution methods such as arbitration and mediation play in resolving product liability disputes, as opposed to litigation? What would you say are the advantages of ADR?
Even though the German Civil Procedure Code stipulates a conciliation hearing, it still takes places within a court litigation. De facto, ADR or mediation are not very popular in Germany, probably due to the parties’ lack of understanding. I think that German mentality is aiming for something reliable – a need only a court’s judgement can satisfy.
The main advantage consists in maintaining a cooperative spirit between the parties. In particular when it comes to the automotive sector, the market is relatively narrow. Both OEM and supplier cannot afford to totally break up their business relations. However, it would be splendid if the parties would work together ahead of possible conflicts and therefore recognize that a synergy of efforts to prevent product liability cases is the route to take – rather than litigate afterwards.
In product liability-related court proceedings, does the court have power to appoint technical specialists to sit with the judge and assess the evidence presented by the parties (i.e. expert assessors)?
German Civil Procedural Law provides that a claim’s decisive facts may only be substantiated by certain means of evidence. Among these evidences, rules of law not only provide the court with the power of their appointment but also with the authority to issue directives regarding the experts’ scope of analysis. This means that there are no direct ways for an attorney to impact on the experts’ work. Although the court cannot yield a decision to an expert, it practically often does. It is therefore crucial to lead the proceeding in a manner that the court will set clear guidelines to the expert in a way that the analysis – and favorably also the result – support your own argumentation and the client’s point of view. However, regardless of the expertise, a specialist is considered as a “normal” witness and an opinion’s value does not increase by labelling it “specialist”. A clear, carefully arranged and consistent procedural strategy will.
