Black Cabs vs. Mobile Apps: FREENOW Court Case in London

London. The legal framework governing transportation services in the UK has long maintained a clear distinction between licensed taxis and private hire vehicles (PHVs). However, the rise of ride-hailing applications has blurred these traditional boundaries, prompting legal challenges over whether PHVs operating directly through digital platforms are unlawfully plying for hire – a privilege reserved for licensed taxis. This distinction is critical, as it determines whether a service falls under the stricter taxi licensing regime or operates with the more flexible PHV license.

The recent judgment by the Divisional Court in the case involving the FREENOW app provides important legal clarification on this issue (case No. CA-2021-003449). At stake was whether PHVs using the app effectively functioned as taxis and whether operators bear direct contractual responsibility for passenger journeys.

The legal issue: taxi or PHV?

In London, taxis and PHVs operate under different licensing regimes:

1. Licensed taxis (black cabs) can ply for hire, meaning they may pick up passengers from the street without a prior booking. They meet stringent regulatory requirements, including passing the “Knowledge” test, which ensures drivers have detailed familiarity with London’s streets.
2. PHVs, in contrast, cannot accept street hails. They can only operate via pre-booked journeys, arranged through an operator. The licensing requirements for PHVs are comparatively less strict, offering greater flexibility but also imposing restrictions on how they solicit passengers.

The legal challenge centered on whether PHVs via operators using the FREENOW app were, in practice, plying for hire – effectively acting as taxis without the corresponding regulatory obligations. If so, their operators would be in violation of licensing laws, which could result in stricter enforcement measures or changes to how ride-hailing services operate.

Factual background

The case arose from a challenge brought by the United Trade Action Group Ltd (UTAG), which represents London’s black cab drivers. UTAG disputed Transport for London’s (TfL) decision to grant a PHV license to Tranopco (UK) Ltd, the operator of the FREENOW app. Their argument was that the app-enabled service functioned in a way that closely resembled taxi operations, thereby circumventing the legal distinction between taxis and PHVs.

At the same time, Uber sought a declaration regarding the contractual obligations of PHV operators. Specifically, Uber requested clarification on whether, upon accepting a booking, the responsibility for fulfilling the journey lay with the operator or the driver under the Private Hire Vehicles (London) Act 1998.

Court’s findings

The Divisional Court addressed two primary issues:

1. Plying for hire: The Court ruled that PHVs booked through the FREENOW app were not unlawfully plying for hire (they were working via operators). This decision aligns with a previous ruling in Reading v Ali, which similarly concluded that the Uber app did not facilitate illegal street hails. The judgment reaffirmed that app-based ride bookings, even if nearly instantaneous, remain legally distinct from street hailing.
2. Contractual obligations: The Court declared that when a PHV operator accepts a booking under the Private Hire Vehicles (London) Act 1998, PHV operator must enter into a contractual obligation to provide the journey and bear contractual responsibility for the trip. This aligns with the UK Supreme Court’s reasoning in Uber BV v Aslam, which emphasized the legal responsibilities of ride-hailing companies.

What does the court decision change?

The ruling provides clarity for PHV operators, but it also underscores ongoing regulatory tensions:

1. For taxi drivers: Black cab drivers failed to argue that the ability of PHVs to accept bookings within seconds effectively undermines the purpose of the licensing distinction.
2. For PHV operators: The judgment secures their right to continue operating under the PHV framework via operators. By confirming that app-based bookings do not equate to plying for hire, the ruling supports the business model of ride-hailing platforms while also imposing contractual responsibilities on operators.