OPINION: Court of Justice of European Union holds Uber is a Transport Service

Uber is a part of larger trend of “sharing economy” that emerged in the last decade. This includes small and large companies that enable individual service providers of homes, bikes, cars, etc, to pool their services as an aggregated offering for customers. E.g., AirBnB offers shared housing as an alternative to hotels. The sharing economy offers convenience and alternative to traditional rental model of sharing services and goods by being peer-to-peer instead of principal-client model. Sharing economy is a growing trend with one Brookings paper estimating its growth from $14 billion in 2014 to $335 billion by 2025 (“The Current and Future State of the Sharing Economy” by Yaraghi et al., 2017).

As the sharing economy expands via internet and mobile apps, a piquant situation arises when it applies to a regulated service or goods. For example, taxis are regulated heavily across different countries. But ride sharing apps like Uber globally or India’s Ola also offer services that can be considered similar to taxis in some aspects. The ride sharing companies resist the tag of taxi or a public transport service as that means being subject to regulations that can crimp their operations and growth. The question is relevant in India too as taxi services are regulated by state’s transport administrations and frequent friction does arise among regulated taxis and app based transport aggregators.

In an interesting decision (20 December 2017), the Court of Justice of European Union (“Court”) recently held that “Uber” service that connects individual customers with non-professional car drivers is covered by services in the field of transport. The case (“Case”) that decided this issue was the subject of the preliminary ruling in Asociación Profesional Elite Taxi (“Elite Taxi”) v Uber Systems Spain, SL. (“Uber Spain”). Elite Taxi brought an action before a Barcelona commercial court seeking declaration that Uber Spain’s services infringe Spanish law along with unfair competition claims through its mobile booking system.

The Barcelona court widened the scope of its enquiry to the whole of EU as the services were provided by Uber Spain and were linked to the international Uber system. Obviously, neither Uber Spain nor drivers linked to its services were licensed in Spain. The Barcelona court referred preliminary EU law issues regarding classification of Uber’s service under EU various directive as issues for the Court of Justice’s determination.

The Case involved interpretation of EU law, in particular, Art.56 (Treaty on The Functioning of the EU) (“…restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States…”). Art. 1 of Directive 98/34/EC dealing with provision of information about technical standard, Art.3 of Directive 2000/31/EC relating to Directive on Electronic commerce in the internal market and other related aspects. Question was whether Uber is an “information society service”? Under Directive 2000/31, member states cannot curtail freedom to provide information society services from other states with deviations allowed for specified grounds.

Under Directive 2006/123, prohibited member states from enacting need for authorization (exceptions apply) for accessing a service or its exercise, but this excluded transport services, taxis and ambulances. As the petitioner association was from Spain, the court considered Spanish law that required a prior licence for an urban taxi from a local body or from transport ministry for inter-urban transport service.

The Court reasoned that, “… it follows from the information before the Court that the intermediation service provided by Uber is based on the selection of non-professional drivers using their own vehicle, to whom the company provides an application without which (i) those drivers would not be led to provide transport services and (ii) persons who wish to make an urban journey would not use the services provided by those drivers.” And further that, “…Uber exercises decisive influence over the conditions under which that service is provided by those drivers. On the latter point, it appears, inter alia, that Uber determines at least the maximum fare by means of the eponymous application, that the company receives that amount from the client before paying part of it to the non-professional driver of the vehicle, and that it exercises a certain control over the quality of the vehicles, the drivers and their conduct, which can, in some circumstances, result in their exclusion.”

Hence, the Court determined that, “…intermediation service must thus be regarded as forming an integral part of an overall service whose main component is a transport service and, accordingly, must be classified not as “an information society service’” under relevant directive but it should be held as “a service in the field of transport”.

While the above decision of the Court of Justice of EU is merely exemplary in Indian law context, it does open up possibility of Indian courts considering sharing economy’s services to be regulated more. Whether that will ultimately, benefit the consumer or not, is a matter of open debate for future.

Hasit Seth practices law in Mumbai with the firm Link Legal India Law Services as a Partner. Views expressed are personal of the author. The Indian Jurist does not take responsibility for the views expressed or facts stated.

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