Uber suffers blow as ruling paves way for overhaul of London business model

Uber suffered a blow to its business model on Monday, when the ride-hailing company lost a High Court case over whether its operations were compatible with transport operating laws in London.

The High Court ruled that it was unlawful for a private hire vehicle (PHV) operator to act as an “agent” between the driver and passenger. This means that Uber and other ride-hailing companies, not individual drivers, will enter into contracts directly with passengers and will be held liable for anything that goes wrong with the service.

Uber claimed it acted as an agent in passenger bookings and that any contract for transportation services was made between drivers and passengers.

The ruling is set to make waves in the private hire industry in London as almost all 1,832 Transport for London (TfL) licensed operators — not just Uber — have used the existing model of operation since regulatory supervision began in 2002.

The decision means that passengers can now only contract with operators and so drivers are in effect working for the operator. It is also likely to put Uber on the hook for paying VAT.

Uber brought the legal action after the Supreme Court in February ruled that Uber drivers were workers and therefore entitled to the minimum wage and holiday pay.

It sought clarity on a point of law after a Supreme Court justice, Lord Justice George Leggatt, suggested that Uber was not only in violation of employment law, but might also be in violation of transport law administered by TfL.

Leggatt had said there was “no factual basis” for Uber’s contention that it acted as an agent for drivers. He suggested the only contractual arrangement compatible with the Private Hire Vehicles (London) Act 1998, was one where Uber “contracts as principal with the passenger to carry out the booking”.

TfL remained neutral during the legal challenge.

Mr Justice Peter Fraser and Lord Justice Stephen Males concluded in Monday’s ruling that “to operate lawfully, an operator must undertake a contractual obligation to passengers”.

Uber said: “This court ruling means that all the details of the Supreme Court decision are now clear. Every private hire operator in London will be impacted by this decision, and should comply with the Supreme Court verdict in full.”

James Farrar, general secretary of the App Drivers and Couriers Union, claimed that the legal action was a “failed collateral attack” on the Supreme Court ruling by Uber. “Rather than fix its broken business model, Uber was determined to double down,” he said.


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