While the Court of Administrative Justice (CAJ) delivered a verdict on March 20 ordering the government to halt the operations of transportation network companies (TNCs), drivers working for Uber and Careem continue to roam the streets uninterrupted.
A court of urgent matters verdict issued in early April challenges the CAJ’s ruling, which is also essentially nullified by a new law submitted by the government just one day after the court’s decision and passed by Parliament on May 7, regulating TNCs’ activities.
The administrative court ruling was based on the grounds that the operations of TNCs, frequently referred to as ride-hailing companies, are in violation of the Traffic Law (66/1973) because they use private cars, not taxis, in the provision of transportation services, a practice prohibited by Article 32 of said law.
A reportedly challenging piece of legislation tackling issues with no legal precedent, the new Law Regulating Passengers’ Urban Transportation Using Information Technology addresses this issue by imposing licensing regulations.
It is expected that President Abdel Fattah al-Sisi will ratify the law soon, according to Member of Parliament Saeed Taema, a member of the legislature’s Transportation Committee. If this occurs, the CAJ will have to drop appeals on its decision to halt TNCs activities, which will then have a governing law.
However, does the new law respond to all issues, concerns and contentions surrounding TNCs, both in Egypt and worldwide?
The legal contest around TNC activity is not exceptional to Egypt. With the absence of laws regulating TNC activities, many taxi operators and drivers in various countries turned to the judiciary to address the unregulated proliferation of TNCs in the transportation market.
In response, legislators around the world began to forage for solutions to regulate ridesharing companies. Within proposed solutions, questions on competitiveness, labor relations and privacy remain ongoing challenges, in Egypt and beyond.
On the financial front, the vast expansion of new TNCs attracted enormous investments. With sufficient funds, major companies managed to provide car owners with facilities and incentives, thus encouraging them to join their platforms, all while continuing to provide services to riders at low prices without making profits.
Uber, which officially launched its services as a peer-to-peer, ride-hailing application in San Francisco in 2011, started off as UberCab, but shortly after, had to drop the word cab from its name, after complaints from cab operators. And after initially offering luxury cars only, with fares 1.5 times that of a taxi, in July 2012, the company introduced UberX, a service offering rides at fares comparable to those of regular taxis. As the company’s investments multiplied, it was eventually able to offer its services at an even lower fare, calculated based on a number of factors, including the distance traveled, the time consumed on the trip and traffic encountered en route
Uber is now active in over 700 cities and towns around the world and last year alone, the company garnered US$37 billion in investments, while posting a $4.5 billion loss for the same year in the outcome of its operations.
Taxi operators, meanwhile, are forced to abide by regulatory laws governing their activities in the different markets they operate in, which include licensing fees and taxes, as well as preset tariffs in most places. As a result, they are unable to offer competitive pricing.
Some countries have attempted to address the issue of competition. In Denmark, in view of complaints from taxi drivers and taxi driver unions against unfair competition that favors Uber, the Danish parliament passed a law in February 2017, forcing actors in the transportation industry to comply with taxi tariffs. Following the decision, Uber shut down its operations in Denmark in April 2017.
In Egypt, and under the new law, TNCs must now acquire licenses valued at a maximum of LE30 million during the first five years of their operations. This follows a heated debate in Parliament, where prominent MPs pushed for lowering the license fee from the originally proposed LE10 million per year for a five-year period, which they considered an excessively large amount.
The main mechanism through which competition concerns are addressed in Egypt’s new law is through a stipulation that the prime minister issue fare regulations for TNCs, while vehicles working with these companies have the responsibility to pay their due taxes as per the Traffic Law, as well as an additional 25 percent, from which regular taxis are exempted. This raises questions regarding how the drivers for TNCs will strike deals with their companies to manage the payment of the extra 25 percent.
In a report produced by the International Transport Forum, which held a workshop in 2016 to address TNCs’ regulatory frameworks, the question of market entry control, which is ultimately tied to competition, is raised in two ways: Market flooding and linking licensing to congestion and pollution, among other similar considerations.
The report says that regulatory control should limit market “oversupply of unskilled drivers” to avoid “a number of problems in the hail/rank market that [include] too many taxis plying for passengers in certain popular parts [and] violent altercations as a result of efforts to secure rides or to eliminate competitors.”
The report suggests that transportation services might decline “with open entry, numerous, ostensibly less-trained, drivers [who] would flood the market with vehicles of declining quality.”
Also, any legislation regulating for-hire services must, the report concludes, take into account the “increase in congestion, energy use and pollution caused by too many vehicles cruising for passengers, particularly at busy times of the day […]”
None of these issues are addressed by the Egyptian law.
Another recommendation for legislators in the International Transport Forum report is to protect “the welfare of drivers against unreasonably low remuneration and highly cyclical employment cycles,” namely their percentage of fares, working hours and breaks.
The working relationship between TNCs and drivers has posed yet another regulatory challenge. Against all lawsuits raised to demand employment rights and abidance by labor laws around the world, Uber has been adamant to present itself as a tech company that connects riders with drivers, not a transport company.
This argument did not hold in the European Court of Justice (ECJ), however. In December of last year, the ECJ ruled in a case filed by Spanish taxi drivers that Uber is a transportation company like any other.
While ECJ’s ruling may lead to new licensing fees being demanded from TNCs, Uber downplayed the impact of the decision, saying that the ruling “will not change things in most EU countries, where we already operate under transportation law.”
The Egyptian law obliges the companies to provide insurance to its drivers, but still doesn’t clarify their overall status as employees versus independent contractors, which leaves other employment issues, such as working hours and minimum wages, up in the air.
Meanwhile, a 2017 survey-based research paper authored by economics professor Nagla Rizk, where she studies Uber’s impact on the labor economy, finds that Uber provides parallel labor opportunities, with many surveyed drivers doing the job in addition to mainstream or informal employment to increase their income. The report also argues that Uber represents both a parallel and an alternative to formal employment and to the totally unregulated informal labor market, with company’s low barriers to entry, drivers’ ability to control their own working hours and a broader sense of self-management, which was praised by surveyed drivers.
Privacy and users’ data protection have been also at the center of the debate on TNCs regulation.
The question of privacy is particularly consequential in Egypt, where the state has mounted a large-scale surveillance operation to monitor the internet, without regard to governing constitutional and legal principles.
The recently passed law regulating TNCs in Egypt states that licensed companies have a duty to pass on the user data they gather through the service to national security apparatuses, as well as to the government, when requested.
Demands have been issued by the State Council and others to revisit this stipulation on the basis of its potential breaching of Article 57 of the Constitution protecting citizens’ right to privacy. These requests have gone unmet.
Uber and Careem representatives, in one of the consultation meetings held with Parliament’s Transportation Committee in March, recorded their objection. Rana Kortam, an Uber public policy senior associate, demanded that the government draft be amended such that “a substantiated judicial order be required for companies to provide the competent security body with the requested data or information to avoid violating private lives and, thereby, contravening the constitution.”
But Parliament’s Transport Committee head Hesham Abdel Wahed found these reservations strange. “If we trust companies, how can we not trust the government?” he said. Parliament disregarded the remarks and a single amendment was introduced: In exchange for granting the security apparatus the right to access the data in question at any time without obtaining prior judicial permission, the government ceded live database connectivity. Instead, companies are now committed to preserve their data for just 180 days, during which security apparatuses may request access to user information. A future prime ministerial decree should specify exactly what kind of data companies are allowed to retain for these 180 days.
Now, even though TNCs in Egypt are regulated by law, this does not signal the end of the issue. According to Careem’s External Relations Director Dalia Seif al-Nassr, “[Rapid] tech development may require amendments as frequent as six months apart, not two years,” she said in a March meeting held in Parliament to discuss the legislation.