As AI becomes an integral part of everyday technology, product liability law is evolving to address the new risks it introduces. The new EU Product Liability Directive (2024/2853) marks a fundamental shift in how defective products – including software, AI systems, and digital components – are regulated. Hungary is now preparing to align its national rules with this modernized regime. A legislative proposal to amend the Civil Code is currently before Parliament, and its adoption will significantly broaden liability exposure for businesses involved in developing, modifying, or distributing AI-powered products.
Adapting Liability to the AI Age
Under the current rules, based on the old Product Liability Directive 85/374/EEC, manufacturers can be held strictly liable – regardless of fault – for damage caused by defective products. However, these rules were not designed for complex, data-driven, and continuously evolving systems. AI challenges traditional concepts of product safety in several ways: systems can change after being placed on the market, the underlying logic may be opaque (the so-called “black box” problem), and, given the interconnectivity of AI components (including hardware, software, data, and third-party integrations) involving multiple parties, it is difficult to identify where the harm originates.
The new EU directive directly addresses these challenges. For the first time, software and AI are clearly recognized as “products” within the meaning of product liability law. Liability now extends beyond the moment of initial placement on the market – products can be deemed defective due to risks introduced by subsequent updates, training data, or related digital services. In legal proceedings, courts will be empowered to order the disclosure of internal documentation and logs from manufacturers and may apply rebuttable presumptions of defect or causation in cases where victims cannot reasonably meet the burden of proof due to the technical complexity of AI.
The Hungarian Implementation: Key Elements
The proposed amendment to the Hungarian Civil Code closely mirrors the new EU directive but also tailors certain rules to national legal structures. The definition of a product is broadened to include intangible assets such as digital manufacturing files and software (except free and open-source code software developed or made available in the course of non-commercial activity). A “defect” is now assessed not only by reference to physical safety but also by cybersecurity requirements, the expectations of target user groups, and the product’s ability to fulfill its intended safety functions.
Liability is extended across the supply chain: manufacturers, component producers, importers, authorized representatives, logistics providers, and online platforms may all be jointly responsible.
Full compensation cannot be limited by equity or other considerations. Upon becoming aware of the harm, the victim has three years to file a claim, but in any case, the claim must be filed within 10 years (except in cases of latent personal injuries where the stop period may extend to 25 years).
It is very important to stress that any business that substantially modifies a product outside the manufacturer’s control, and then places it into use or circulation, is deemed the manufacturer. This makes the liability scheme significantly broader; potentially even users fine-tuning LLM models could fall under this category (though how courts define “substantial modification” remains to be seen).
Strategic Considerations for Businesses
AI developers and distributors should begin preparing now. Risk management will need to start at the design phase and continue throughout the product’s lifecycle, including software updates, retraining, and digital integrations. Companies should review their supply chain relationships, ensure a clear allocation of responsibilities in contracts, and verify whether their product liability insurance extends to digital and AI-driven risks. All business users who do more than buy a boxed solution – for example, by fine-tuning LLMs – should examine whether the extended liability scheme applies to them. Technical documentation and traceability – already important under the EU AI Act – will now be essential from a liability standpoint as well.
What Comes Next?
The Hungarian Parliament is expected to vote on the draft Civil Code amendment in late autumn 2025, with the new rules applying to products put into circulation after December 9, 2026. Product liability will no longer be limited to physical goods or static risks – it will follow the full digital lifecycle of intelligent products. Hungarian businesses, therefore, have to start preparing to mitigate liability, navigate new waves of litigation, and maintain customer trust in an increasingly intelligent marketplace.
By Endre Varady, Partner, VJT & Partners
This article was originally published in Issue 12.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
