TfL v Uber – Transport, Regulation and Disruptive Technology

Technology develops rapidly. The law does not. In consequence, and with increasing frequency, new technology is being introduced into a legal environment that was not designed to accommodate it.

To what extent is the law self-adapting, addressing itself to technological solutions that could not even have been contemplated when it was originally written?

This was the question considered by the High Court in Transport for London v Uber London Ltd, a case which is interesting not only on its own facts, but also because it draws attention to how regulatory systems need to become more responsive in an era of rapid technological change.

The Background

In the UK there are two types of taxi – hackney carriages (black cabs) and private hire vehicles (mini-cabs). Both require to be licensed. Black cabs and their drivers are more tightly regulated, but in return have certain advantages unavailable to mini-cabs – they can ply for hire, wait in taxi ranks, and use bus lanes.

In consequence, there are rules designed to ensure that the two types of taxi can be readily distinguished. In London, under section 11 of the Private Hire Vehicles (London) Act 1998, these include a prohibition on mini-cabs being fitted with taximeters. A taximeter is defined as –

a device for calculating the fare to be charged in respect of any journey by reference to the distance travelled or time elapsed since the start of the journey (or a combination of both).

Breach of the prohibition is a criminal offence. This is, however, a specifically metropolitan issue. In no other part of the country has the same restriction been considered necessary.

The Challenge of Uber

Uber is a company which has become an international byword for disruptive technology. It operates a smartphone app which connects customers with taxi drivers. Through the app, customers can both hail a ride and, at the end of the journey, pay their fare. The app has a number of user-friendly features, such as enabling customers to choose the kind of car they want, see a photo of the driver who is being dispatched, and track his journey to them.

This replaces the role previously carried out by the operators of taxi fleets. Because of its high degree of convenience, it also erodes some of the traditional advantages of black cabs. As a result, it has disrupted established markets and upset vested interests.

This problem has assumed an acute form in other EU member states. Uber’s service is currently limited or banned in all, or parts, of France, Italy, Spain, Germany, Belgium and the Netherlands.

In the UK, there has been no attempt to prohibit the service. However, nor has the legislation been updated to accommodate it. Uber has to work within an existing regulatory framework which was designed before its service existed. Taxi drivers using the app must be licensed, and in charge of a licensed vehicle. Mini-cabs in London are still subject to the prohibition on taximeters.

A large number of existing mini-cab drivers, and a small proportion of black cab drivers, have signed up to the service. A driver entering the taxi market and relying on Uber alone for business would by default be driving a private hire vehicle and regulated accordingly.

The question that arose in TfL v Uber was whether the Uber app, when used by a mini-cab driver, amounted to a prohibited taximeter.

The Judgment

The short title of the case is misleading because it implies that TfL (Transport for London, the regulator of taxis in London) was at odds with Uber. In fact this was a co-operative action for a declaration, in which both contended that the Uber app was not a taximeter. That position was opposed by two other parties, the Licensed Taxi Drivers’ Association (which represents black cab drivers) and the Licensed Private Hire Car Association (which represents taxi operators).

So in fact Uber and its regulator were on the same side, but opposed by those representing the traditional driver and operator interests.

The Statute as Written

In the High Court, Ouseley J took a robust approach to the statutory definition of a taximeter. A smartphone using Uber’s app is not ‘a device for calculating the fare to be charged’ because, as a matter of fact, it carries out no calculations. The app records the distance travelled and time taken for a journey, but does not itself perform any calculations. Instead, the phone sends the data to Uber’s servers in the USA, where the fare calculation takes place. The charge, as calculated, is then relayed back to the phones of both driver and customer simultaneously. If no wi-fi or network coverage is available, the app alone is incapable of calculating a fare.

Moreover, the statutory offence is expressed as a prohibition on a mini-cab being ‘equipped’ with a taximeter. Whatever else a smartphone loaded with the Uber app may be, it is not part of the ‘equipment’ of a taxi.

The Statute as ‘Always Speaking’

So far, so clear. However, the objectors to Uber’s technology then tried a more subtle attack.

As everyone knows (or ought to) certain constitutional laws exist as ‘living instruments’, i.e. they set out principles which can be adapted, through judicial interpretation, to meet circumstances that could not have been envisaged by their original drafters. This process can be controversial – witness the political debate over the European Convention on Human Rights – but its legal underpinning is well-established. What may be less well-known is that, some limited exceptions aside, all Acts of Parliament benefit from a diluted version of this approach to interpretation. They are to be regarded as self-updating or ‘always speaking‘.

What this means is that it is not sufficient to ask what Parliament meant on the day on which it passed an Act, but is necessary to ask also what the words of that Act mean today, having regard to the original policy purpose at which Parliament aimed. In the leading case of R (Quintavalle) v Secretary of State for Health [2003] UKHL 13, Lord Bingham, with his customary lucidity, put it like this –

If Parliament, however long ago, passed an Act applicable to dogs, it could not properly be interpreted to apply to cats; but it could properly be held to apply to animals which were not regarded as dogs when the Act was passed but are so regarded now.‘ [10]

So it is not fatal that Parliament could not have had a future piece of technology in mind when it passed an Act, so long as that technology when it is developed falls within what Lord Wilberforce in an earlier case called ‘the same genus of facts as those to which the expressed policy has been formulated‘ (Royal College of Nursing v Department of Health [1981] AC 800 at 822). This is, however, an easier principle to state than it is to apply in practice.

When Parliament passed the Private Hire Vehicles (London) Act in 1998, it clearly did not envisage internet-enabled mobile phones equipped with accurate GPS and sophisticated software. The taximeters it had in mind were of a more strictly analogue variety. But is Uber’s app nonetheless one of Lord Bingham’s ‘dogs’, falling within the language and policy of the Act if it is read on an always speaking basis?

Ouseley J thought not. He had no difficulty in principle with applying an ‘updating interpretation’ to the Act in line with the principles in Quintavalle, but did not think that it made any difference in practice –

The language of section 11 does not depend for its prohibition on the understanding of the technology of 1998: it is quite general and capable of application to any form of modern technology. If the Smartphone was part of the vehicle’s equipment and carried out the calculation with inputs received over the internet, the Act would apply to it. The question of where the calculation is carried out and by what is at the heart of the issue in view of the language chosen by Parliament…The changing technical capabilities have not altered the way in which the Act works.‘ [38]

In the judge’s opinion, it has always been possible at the end of a journey for a London mini-cab driver to radio his/her operator, report the time and distance travelled, and ask the operator to calculate a fare by reference to a table of charges kept back in the office. Uber’s app fulfils essentially the same function, albeit in a more sophisticated way. If the app was classified as a taximeter, there would be no reason not to treat the old school combination of radio, wristwatch and odometer in the same manner. And, clearly, Parliament intended no such thing.

To go further and interpret the statute in a way which incorporated provision for Uber’s service would be to trespass beyond the limits of the always speaking doctrine and into territory which Lord Wilberforce in Royal College of Nursing (as approved by the whole House of Lords in Quintavalle) considered forbidden –

In any event there is one course which the courts cannot take, under the law of this country; the cannot fill gaps; they cannot be asking the question ‘What would Parliament have done in this current case – not being one in contemplation – if the facts had been before it?’ and attempt themselves to supply the answer, if the answer is not to be found in the terms of the Act itself.‘ [at 822E]

The judge therefore concluded that Uber was not providing a taximeter, and that whatever Parliament might have done differently had it been legislating for a world of smartphones and apps was not for him to guess.

Why No Regulation is not Good Regulation

There is nothing unprecedented about new technology coming into collision with old law. As long ago as 1880 it was being asked whether the provisions of the Telegraph Act 1869, which was drafted to deal with telegrams communicated by morse code, could be applied to the newly-invented telephone – see Attorney General v Edison Telephone Co of London (1880) 6 QBD 244.

Nonetheless, the pace of technological change has increased exponentially since then, and the pace of law-making has barely altered. So these issues are going to arise with increasing frequency. And while the case of TfL v Uber ultimately had a clear (and surely correct) outcome, the fact that the parties needed to apply to the court for a declaration shows that the position was not beyond argument.  In many other cases, the outcome will be considerably more marginal. This poses a serious challenge to regulators and law-makers.

Stephenson’s Rocket

An email circulated within the Department for Business, Innovation and Skills carries a picture of Stephenson’s Rocket and asks ‘Would such innovation be possible in today’s regulatory environment?’. Beneath it sits a quotation from the Secretary of State, Sajid Javid – ‘I am determined to take the brakes off British businesses and set them free from heavy-handed regulators. The Government’s pledge to cut £10bn in red tape over the course of this Parliament will help create more jobs for working people, boost productivity and keep our economy growing.

The question is a fair one, but the implication of the quote is that regulation is a barrier to innovation, and that an absence of regulation boosts growth and productivity.

This misses the point. The products of little or no regulation are collateralised debt obligations and credit default swaps – and we know exactly where that takes us. If Stephenson’s Rocket were introduced today in an unregulated environment, it would do exactly what the original did and kill someone (the unfortunate William Huskisson MP, who lies buried in the shadow of Liverpool’s Anglican Cathedral).

The government focuses on deregulation because it is easier to think of the problems with regulation in quantitative than in qualitative terms. Generally, however, difficulties occur in regulatory law not because there is too much of it – on the contrary, there is often too little – but because it is frequently not good enough.

Most companies introducing new technology into the market do not want to do so in a legal vacuum; they simply want clarity and certainty as to what the regulatory environment looks like. And that requires government and regulators to be on top of the latest developments and to respond to them quickly by updating legislation in intelligent and proportionate ways. This is difficult work. It does not generate easy headings (a ‘pledge to cut £10bn in red tape’). It demands real regulatory expertise and responsiveness.

What TfL v Uber Tells Us

In this context, the concept of ‘always speaking’ legislation is double-edged. While it allows a potentially useful element of self-updating within statutes, it also creates more space for ‘purposive’ arguments as to what the updated interpretation should be. TfL v Uber provides an object lesson in the problem.

Uber has promoted its business forcefully, in spite of the legal obstacles in its way. But many companies which are naturally more risk-averse (which is to say most companies) would have paused at the threshold before launching a product onto the market that might have caused themselves, or others, to commit a criminal offence.

How many products or services have not been brought to market merely because of old law which is of unclear application to new technology? And what is the cost to those companies (and therefore consumers) if they choose to proceed in the face of this uncertainty?

All entrepreneurial businesses in this area will face financial, market and technological risk as a matter of course, but in any sophisticated modern economy they should surely not also have to live with the additional risk caused by unresponsive regulatory systems.

It is not as if Uber could have obtained clarity of the law on taximeters before it had commenced its service. Applications for declarations of this nature are entertained by the courts only in restricted circumstances. In deciding to grant a declaration, Ouseley J made it clear that it was important that the case was ‘not a theoretical one as to future conduct which may or may not be undertaken‘ [48]. In other words, Uber was entitled to its declaration only because it had already taken a risk and changed the facts on the ground.

Nor was the problem one of TfL’s making, since it was stuck with having to interpret legislation written almost two decades ago and capable of change only by Parliament. The problem is more systemic, revealing limitations in how the UK, and more widely the EU, makes and changes regulation in areas susceptible to rapid technological change.

On this score, Uber, and by extension other technology companies, have recently found support at senior level within the EU Commission. Two Commissioners, Elżbieta Bieńkowska and Jyrki Katainen, have claimed that opposition to its service is backward-looking and futile – ‘like fighting with print in medieval times‘ according to Ms Bieńkowska.

Whether or not this is a fair description, Mr Katainen, a Commission Vice-President, correctly identified the legal issues as symptomatic of the wider problem of out-of-date regulation conflicting with the latest technology – ‘The member states who have banned Uber, for instance, have done it because [extant] national legislation has forced them to ban the businesses,’ he said. ‘But then we have to ask: is the current regulation the best possible in terms of job creation [and] economic growth?

And that, at least, is to ask the right question.

Postscript – The Future of Uber

Uber’s problems in the EU partly arise because its service has been treated as falling within the sphere of transport, which is not subject to the liberalising provisions of the EU Services Directive (2006/123/EC).

In Case C-434/15, on a reference from Spain, the Court of Justice has recently been asked to give a preliminary ruling on whether Uber is more properly classified as an information society service, bringing it within the scope of the Directive. If it is, it will severely limit the freedom currently enjoyed by member states to place regulatory restrictions on it.