EU Court of Justice rules that Uber provides a transport service and is not a mere electronic intermediary: regulatory implications and  “digital” judicial insulation

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Court of Justice of the European Union, 20 December 2017, Case C-434/15,  Asociación Profesional Élite Taxi v Uber Systems Spain SL

Article 56 TFEU, read together with Article 58(1) TFEU, as well as Article 2(2)(d) of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, and Article 1(2) of Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations and of rules on Information Society services, as amended by Directive 98/48/EC of the European Parliament and of Council of 20 July 1998, to which Article 2(a) of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’) refers, must be interpreted as meaning that an intermediation service such as that at issue in the main proceedings, the purpose of which is to connect, by means of a smartphone application and for remuneration, non-professional drivers using their own vehicle with persons who wish to make urban journeys, must be regarded as being inherently linked to a transport service and, accordingly, must be classified as ‘a service in the field of transport’ within the meaning of Article 58(1) TFEU. Consequently, such a service must be excluded from the scope of Article 56 TFEU, Directive 2006/123 and Directive 2000/31.

 

“The technological evolution and the consequent  economic and social changes  need to be addressed not only by the Courts, but also  by independent authorities and parliaments, in the  light of the several interest involved and the novelty of the cases at stake”.

With these words, the Italian Constitutional Court, one year ago (judgment 256/2016, related to Uber services), in one of the few decisions in which it has, until now, directly faced the relationship between  technology and fundamental rights, aimed to  break the (not only Italian) legislative inertia in the field, and to ask for a cooperation between the (constitutional) judicial power and the legislative one.

Words, the above mentioned ones, which seems to not have reached the hoped result, if the Uber regulation conundrum  seems to  have been (only partially as we will see) solved by another Judge, the Court of Justice the European Union (CJEU), which,  on December, 20th  issued a long-awaited judgement (C-434/15) in a preliminary reference brought by the Commercial Court of Barcelona in a dispute between Uber and a Spanish Taxi association on the legal nature of Uber services under EU law.

The matter is strictly connected to issues at the core of a recent strain of national judgements of civil and constitutional courts across the EU, which deals with the application of outdated laws or regulations to new technological means that did not exist when such laws were introduced. A number of such rulings had to deal at national level with the compatibility of Uber-like services with domestic law or regulation subjecting the underlying physical service, and/or the traditional providers thereof, to licenses or other restrictive requirements for public safety purposes.

The common conundrum of this strain of rulings rests in the tension between, on one side, Member States’ competence and discretion in determining and implementing rules which pertain to public safety and, on the other side, their duty of loyal cooperation with the EU (enshrined in Article 4.3 of the Treaty on the Functioning of the European Union, or “TFEU”). This duty requires Member States to refrain from implementing measures that adversely and disproportionally affect the fundamental freedoms and objectives of the EU (such as competition, freedom of establishment and circulation of services within the Single market, technological neutrality and others).

The judgment

In the case at stake, the CJEU had to rule on the crucial question whether the services provided by Uber – consisting in connecting owners of a vehicle and persons who wish to make a urban journey by managing for profit an online technological platform and smartphone application – must be considered ”information society services” (i.e. mere electronic intermediation) or rather transportation service under EU law.

The question is crucial to determine the regulatory framework and legal principles applicable to the service in question. Indeed, transportation services fall under Article 58(1) of the TFEU and are disciplined by the special provisions of Title VI (Articles 90-100) of the TFEU, which are expressly excluded from the scope of Article 56 TFEU. Similarly, the Service and e-commerce directives (Directives 2006/123 and 2000/31) expressly exclude transportation services from their coverage, including in particular from the provisions which preclude Member States to subject the covered services to authorisations, licences or other measures restricting the freedom of establishment and the cross-border circulation of physical or electronic services within the EU.

In its ruling, the CJEU first recognizes that Uber services comprise different types of services, each of which may be analysed separately and linked to different provisions and directives of the TFEU on the freedom to provide services. However, it has come to the conclusion that the intermediation service under scrutiny is more than a mere intermediation service because, simultaneously, the provider “renders accessible” and “organizes” urban transport services that, in practice, would not exist without the provider’s activities.

In that regard, the CJEU observes 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. In addition, 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. […] 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’ within the meaning of [EU law]” (para. 39-40).

Notably, the CJEU does not say that ‘a service in the field of transport’ is completely immune from the principle governing freedom to provide services within the EU. More specifically, the Court says that in the field of transport such principle “must be achieved, according to the FEU Treaty, by implementing the common transport policy” (para. 44).

However, the Court reminds that “non-public urban transport services and services that are inherently linked to those services, such as the intermediation service at issue in the main proceedings, has not given rise to the adoption by the European Parliament and the Council of the European Union of common rules or other measures based on Article 91(1) TFEU” and  therefore “as EU law currently stands, it is for the Member States to regulate the conditions under which intermediation services such as that at issue in the main proceedings are to be provided in conformity with the general rules of the FEU Treaty”  (para.46-47).

What actual and potential regulatory implications in practice? What role for Member States’ constitutional courts?

The immediate practical consequence of the characterization of Uber services as comprised “in the field of transport” is that Uber itself can be required by each Member State to obtain a license or authorization to perform the service, in addition or substitution to its affiliated drivers.

Hence, the CJEU’s judgment has put a slate on the chance for Uber (or equivalent platforms) to invoke EU law to preclude Member States from requiring a licence or authorisation to operate its services for profit in connection with non-professional drivers. Nevertheless, Uber also provides similar services in connection to professional, licensed drivers (e.g. UberBlack) and the CJEU’s reasoning and wording of the judgment is sufficiently case-specific to preclude a broader application to such services as well.

It seems indeed arguable that a service such as UberBlack is not integral part of a transport service that otherwise would have not been provided or used, since licensed drivers have always been performing transportation services without Uber and could in theory organize a similar service by themselves.

Moreover, other Uber services such as Uber Pool do not necessarily use professional, licensed drivers but are nonetheless intrinsically different from the organization of a taxi-like transportation service. By car-pooling services, such as BlaBlaCar, cars’ owners simply share their own routes and related costs with other persons who wish to do the same route (it is therefore a proper car-sharing service).

Said services may fall out of the scope of the judgement and, consequently, be characterized as “info society” or mere “electronic intermediation” services, which cannot be subject to prior authorization.

Even when dealing with the Uber services which are the object of the judgement, Member States have a great responsibility in implementing appropriate regulation, which must in any case comply not only with internal fundamental principles of open and sound competition, technological neutrality and non-discrimination, but also with international principles which derive from being part of the EU, such as that of loyal cooperation with the EU and the other Member States.

For instance, the general and fundamental principle of proportionality of the measures adopted at national level does serve as a limit to the discretion of Member States in deciding what restrictions they can apply to the services in question, even though they are tantamount to “transportation services” within the meaning of EU law. Other principles enshrined in Title VI of the TFEU prohibit Member States to implement disproportionate or inadequate restrictive legislation which discriminates in favour of national companies or specific services.

The role of constitutional courts of Member States is therefore still very important to preserve a legislative and regulatory framework of non-public transport services which is genuinely competitive, technologically neutral and open to undertakings established cross-border. In all Member States, acts of enforcement of national law and regulations can be challenged before national courts by affected natural or legal persons for contrariety to domestic constitutional principles.

Last but not least, the European Commission (and the Council) may still play the head role in the field of non-public transport by defining an EU policy or adopting harmonized legislation governing non-public transportation services, with particular care for new technological platforms such as Uber.

In addition, the European Commission can always intervene with individual decisions or infringement proceedings against Member State which blatantly refrain from adopting appropriate legislation in the field of transportation, to the sole end of protecting certain undertakings or specific transportation services from innovation and competition from other Member States.

In conclusion, a  final  comment of a more general  relevance.

It is well known that today, more than ever, courts within their respective legal orders, occupy a privileged position that enables them to identify the risk of potential collisions that may encroach upon the effective protection of fundamental rights between interconnected legal systems. This consequently enables them to forge closer ties between different yet interacting systems.  The crucial position of the Courts is amplified yet further with regard to the protection of fundamental rights in the digital age.

This is due to two peculiarities of the Internet.

The first peculiarity is substantive in nature and concerns the awareness that legal reforms tend to lag behind technological advances. The burden of making up for this necessary legislative inertia falls heavily on the shoulders of the courts. However, from our perspective, the novelty of the factual and legal context created by the Internet is even more interesting. Indeed, this is the main reason, along with the inertia of the legislature on national and supranational levels, why the courts increasingly seek assistance and inspiration in relation to the protection of fundamental rights on the Internet with courts of different yet interconnected legal orders even more than they do in the analogical world.

The drawback is that, exactly for the reasons described above,  Courts, in digital age, seem to be always more alone in facing the challenge to protect fundamental rights and economic freedoms in the new technological scenario. A forced – not welcomed – digital judicial insulation.

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