EU's top court to decide whether Uber is a digital app or a taxi service

BRUSSELS (Reuters) - A debate in Europe over whether ride-hailing app Uber [UBER.UL] is merely a digital company or one providing transport services will be decided when the top European Union court hands down its verdict on Wednesday in a highly anticipated case.

While a ruling that Uber is a transport company is unlikely immediately to change the way it operates, it will give local authorities in the EU a green light to regulate the U.S. start-up more like a traditional taxi company, with obligations ranging from licensing to insurance.

Uber - which has clashed with local and national regulators in Europe since its launch there six years ago - says it is simply a digital app which acts as an intermediary between drivers and customers looking for a ride.

Judges at the Luxembourg-based court will decide on Wednesday whether Uber - the world’s second most valuable private venture-backed company - provides transport services, online services or a combination of both.

EU law protects online services from undue restrictions and national governments must notify the European Commission of any measures regulating them so it can ensure they are not discriminatory or disproportionate.

Transport services, on the other hand, are regulated at national and local level and there is no prior EU oversight of new rules.

“Any ruling will not change things in most EU countries where we already operate under transportation law,” a spokeswoman for Uber said.

”As our new CEO (Dara Khosrowshahi) has said, it is appropriate to regulate services such as Uber. We want to partner with cities to ensure everyone can get a reliable ride at the tap of a button.”

In May, an adviser to the Court of Justice of the European Union (ECJ) said Uber should be considered a transport provider on the grounds it does much more than link supply and demand. Although his opinion is non-binding, the judges usually follow such advice.

The case stems from a complaint of unfair competition brought by a Barcelona taxi association against Uber’s unlicensed ride-hailing service, UberPOP, which used amateur drivers to pick up riders and has since been suspended in most European cities.

CHANGE OF FOCUS

Following protests from taxi drivers and multiple court fights, Uber has drastically cut back its use of unlicensed drivers in the EU and focused instead on its licensed services, such as UberX and UberBLACK.

Uber has suffered a torrid last few months. In September, London stripped it of its operating license - a decision Uber is appealing against.

It lost a bid last month to overturn a British tribunal’s finding that its drivers deserved workers’ rights such as the minimum wage. Soon afterwards, it disclosed it paid hackers $100,000 to keep secret a massive breach last year that exposed personal data from around 57 million accounts.

Khosrowshahi, who took the helm at Uber in August after the departure of founder Travis Kalanick following a slew of scandals, has taken a much more conciliatory approach with local authorities.

The company has for example paused its services in Finland and Norway so that it can re-launch under new transport regulations.

It now only operates unlicensed services in Poland, the Czech Republic, Slovakia and Romania, although in the first two Uber is switching its drivers to operate under local transportation law.

The Computer & Communications Industry Association (CCIA), of which Uber is a member, said the ruling will ”decide over the ability of the EU to ensure online services are not unduly restricted by member states.

“The judgment will either promote the digital single market or lead to more market fragmentation for online innovators,” said Jakob Kucharczyk, vice president for competition and EU regulatory policy at the lobby group.