Our first ever overseas guest post comes all the way from Thailand, where Douglas Mancill of the Deacons law firm reports on new Thai laws on product liability and their possible impact on/creation of product liability claims involving drugs and medical devices.

Needless to say neither Bexis nor Herrmann had anything to do with the substance of this post, as neither of them knows much about Thailand beyond liking the food.

Take it away Doug.

Damage awards in Thailand for defective goods claims have traditionally been very low compared to the U.S., but two new laws aim to change or, at the very least, tighten this gap. On 21 February 2009, the Unsafe Product Liability Act, B.E. 2551 (the Product Liability Act) came into force. Six months earlier, in August of 2008, a procedural law which supports many of the new concepts introduced by the Product Liability Act, the Consumer Case Procedures Act, B.E. 2551 (the CCPA), came into force. These two laws, together, stand poised to materially change the tort law terrain of Thailand.

One issue of great significance to drug and device maker is that plaintiffs in Thailand will not carry the burden of proving a product is defective. Product liability laws in the U.S. and the EU dispense with the negligence requirement and impose strict liability once a product is established to be “defective”, but the plaintiff still carries the burden of proving that a product is, in fact, defective. Not so in Thailand.

Section 6 of the Thai Product Liability Act provides that the plaintiff only carries the burden of proving that damage was caused by a product in “ordinary use or storage”. Once a plaintiff makes this bare minimum showing, the burden shifts to “business operators” (a defined term, but for purposes of this discussion, suffice to say that it clearly covers drug and device manufacturer) to prove the product was “not unsafe”. Stated more directly without the diplomatic double negative, business operators carry the burden of proving a product was safe if an injury occurs from that product.

This is an intentional feature of the new legal terrain created by the Product Liability Act and the CCPA. The CCPA and the Product Liability were passed at the same time by the same appointed legislative body (although the Product Liability Act did not come into force until six months later), and the CCPA contains an evidentiary burden provision which dovetails with and reinforces Section 6 of the Product Liability Act. Section 29 of the CCPA provides that if the Court believes that facts relating to “production, assembly, design or mixtures of the goods, the provision of services or other undertakings” are exclusively known by a business operator, that business operator carries the burden of proof relating to such matters. The Product Liability Act expressly recognizes design defects, meaning that a drug or device manufacturer carries the burden of proving that the design of a medical device or the formulae of a drug is safe when a product liability case is filed in a Thai Court.

The Product Liability Act is a thin law – consisting of 16 clauses and about four pages of text – and in some ways the issues it does not address may be more significant than those that are addressed. There is, for example, no test or stated principle for determining what constitutes a defective product (e.g., the reasonable consumer test, the risk utility test) and in a civil law system where the burden is on the manufacturer to prove a product is a safe, this could be problematic, particularly for drug and medical device makers. Nor does the Act mention the learned intermediary rule.

Although drugs and medical devices have indisputably improved the quality of our lives immensely, they can also cause very real injuries. In Thailand, this means that every time a consumer suffers an injury – perhaps, say, from a drug that otherwise saves millions of lives – she or he will have a potential product liability claim against the manufacturer of that drug or device. And more important, drug and device makers will carry the burden proving that a formula or design was safe. Complicating matters further, the law sets no standards or even provides any guidance on what constitutes a safe design. And because the principle of ratio decidendi does not exist under Thai law, even Thai Supreme Court decisions may not be able to fill this gap.

If a business operator fails to convince a Thai court that the formula of a drug or the design of a device was safe, that determination can be used against the manufacturer in future cases by other plaintiffs pursuant to CCPA Section 30. Section 30 permits factual findings against a defendant in one case to be used against that same defendant in another case. Once the design of a drug or device is found to be defective in one case, it could be used against that same manufacturer by other plaintiffs in other cases. For Thai law, which also doesn’t have a concept of stare decisis (or class actions), this is a major change. And these findings only cut one way – new plaintiffs are not bound by prior findings that the product was safe. This means that every time a design defect claim is filed, manufacturers must aggressively defend that design lest one court decides the design was defective. A finding by one court that the formulae of a drug or the design of a medical device is defective opens up the maker of that drug or device to claims by every person who claims to have been injured by the drug or device.

The CCPA also permits Thai Courts to issue orders requiring business operators to make announcements about and recall unsafe products. These are essentially mandatory injunctions, and because it is generally difficult to procure injunctions of any kind in Thailand (including prohibitory ones enforcing intellectual property rights), it is unclear how the courts will exercise this specific grant of power in practice.

These problems have not gone unnoticed. A proposal to exempt drugs, medical devices and medical professionals from these laws has been put forward. You may be wondering why it includes the medical profession. While the Product Liability Act only applies to products (drugs and devices), the CCPA extends to “services”, including the services rendered by physicians, and it contains many provisions very similar to the Product Liability Act.

Moreover, although the CCPA is not yet six months old, it has been employed very effectively in a number of cases and garnered popular support in a country not well known for US or EU safety standards. For example, an airline passenger used the CCPA to recover emotional distress damages when an airline failed to use a metal detector to screen airline passengers. The metal detector was apparently “on loan” to a local university. (Don’t ask – it doesn’t make sense to us either.) A lawyer plaintiff is now using the CCPA in a high profile case where a fire on New Year’s Eve at a popular Bangkok nightclub fire claimed 66 lives. The lawsuit essentially claims the pub was a fire trap and seeks recovery directly against 33 directors and owners of the pub. This latter aspect of this case is significant because of the alleged identity of some of those owners (say, a high official in an organization responsible for policing the pub) and because the CCPA contains a provision allowing claimants to pierce the corporate veil, something that is otherwise virtually impossible to do in Thailand. All of this, of course, has little to do with medical drugs or devices, but it does help explain the popularity of these new laws, and why proposals, at least at this time, to reduce their scope or exempt certain products might not receive a warm reception in the Land of Smiles.