Uber has lost a High Court case over whether its operations were compliant with private hire operating laws in London in a decision set to trigger an overhaul of the capital's ride hailing sector.
The High Court ruled that it was unlawful for any private hire vehicle operator to act as 'an agent' between a driver and a passenger. Instead they 'must enter as principal into a contractual obligation with the passenger'.
This means Uber and other ride hailing companies - including Free Now, an intervener in the case - could be held liable for any issues with the service as well as be liable to pay value added tax (VAT). Uber is reported to be facing a potential £1bn VAT bill.
It also means drivers are in effect working for the operator, which could trigger further worker's claims across London's ride-hailing sector.
In summing up, Lord Justice Males and Mr Justice Fraser wrote: 'As we have concluded that, in order to operate lawfully, an operator must undertake a contractual obligation to passengers, and as both Uber and Free Now acknowledge that they do not at present do so, they will need to amend the basis on which they provide their services. Both companies have indicated that they will do so if that is what the court concludes.'
The judgement was also labelled 'damning' for Transport for London, which had stayed neutral in the legal challenge.
At the conclusion of the proceedings, TfL was told it would 'need to reconsider its current practice which is that it does not review the contractual terms of an operator when considering a licence application'.
'Since an operator which does not undertake the required contractual obligation is not operating lawfully, TfL will need to consider how best to ensure that the basis on which Uber, Free Now and perhaps other similar operators conduct their operations is in accordance with the requirements of the 1998 Act.'
Green Party Assembly Member Sian Berry said: 'This judgement is damning on Transport for London and embarrassing for Uber. Ever since Uber emerged, Transport for London has been on the backest of back feet, failing properly to use the powers it has to regulate and protect London’s private hire operators and drivers.
'The long delay in getting to today’s clear ruling has had a detrimental impact on Uber drivers’ rights, incomes and conditions of work, and caused disruption and harm to the jobs of all workers in the taxi trade in London, as well as potentially putting passengers at risk.
'Regulators are meant to be there to look after the functioning of our city, and make sure services operate for the public good, but Transport for London and the Mayor have both failed to do this.'
In March 2017, the London Assembly passed a motion calling for workers’ rights to be made a condition of all future private-hire operator licences, proposed by Caroline Russell AM.
Uber brought the case after an earlier loss in February in the Supreme Court, which ruled that Uber drivers were workers and therefore entitled to the minimum wage and holiday pay.
Uber had previously claimed that it merely acted as an agent in passenger bookings and any contract was made between drivers and passengers.
Following that judgment, Uber sought clarity on a point of law raised by Supreme Court justice, Lord Justice George Leggatt, who suggested that Uber was not only in violation of employment law, but also could be in violation of transport law.
In a separate point of law under the same case, the judges found that ride hailing apps like Free Now 'do not facilitate or encourage its drivers to ply for hire'.
The judges also ruled that it was not 'necessary or appropriate to quash the decision to grant a licence to Free Now' as it had already made clear that it would amend its terms to comply with the outcome of the case.
The ruling also noted: 'We have not been directly concerned in these proceedings with whether it is open to an operator who accepts a contractual obligation to a passenger to carry out a booking to exclude in effect all liability to the passenger in the way which Free Now's Users' Terms current at the date of the licence appear to do.
'That too, however, is a matter which TfL will need to consider. At first sight it appears hard to reconcile with the purpose of the legislation as we have described it.'
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