The CJEU considers the ratio of 1 PHV / 30 taxis in Barcelona to be unjustified

The CJEU considers the ratio of 1 PHV / 30 taxis in Barcelona to be unjustified
August 23, 2023

On June 8, 2023, the Court of Justice of the European Union (“CJEU”) answered the questions referred for a preliminary ruling by the High Court of Justice of Catalonia (“TSJC”) in the dispute between Prestige and Limousine, S. L. (“P&L”), an operator of private-hire vehicles (“PHVs”), and the Barcelona Metropolitan Area (“AMB”). The questions concerned the interpretation of articles 49 and 107(1) TFEU in relation to the requirement of the AMB regulation on PHVs (i) regarding the need to obtain a specific license to provide PHV services in that conurbation; and (ii) the ratio of 1 PHV license to 30 taxi licenses.

Regulatory background

After the abolition of the ratio of 1 PHV / 30 taxis in 2009, there was a significant increase in the number of PHV licenses. To curb this phenomenon, on June 26, 2018, the AMB adopted the “Regulation for the organization of the activity of occasional urban transport of passengers with driver by means of vehicles with a maximum of nine seats circulating exclusively in the territory of the Metropolitan Area of Barcelona, adopted by the Metropolitan Council of the Metropolitan Area of Barcelona" (“RVTC”). The RVTC thus established that PHV services were subject to a prior authorization—and to the limitation of the number of PHV licenses to one thirtieth of taxi licenses, making use of the power provided for in article 48(3) of the Law 16/1987 on the Organisation of Land Transport (“LOTT”).

Position of the parties (AMB and TSJC)

In the preliminary ruling proceedings before the CJEU, the AMB justified the RVTC measures on the grounds of overriding reasons in the general interest. According to the AMB, the RVTC was intended to ensure: (i) the quality, safety and accessibility of taxi services in Barcelona as a service of general interest; and (ii) the proper management of transport, traffic and public space.  According to the AMB, the measures introduced were appropriate and proportionate to preserve a balance between taxi and PHV services, thus guaranteeing the provision of this service of general interest and the protection of environmental sustainability.

On the other hand, the TSJC considered that the RVTC was based on the assumption that PHVs jeopardized the economic viability of taxi services, since they compete in the urban passenger transport market. Also, the AMB had allegedly failed to consider PHVs’ guarantees for ensuring a low-emission or non-polluting service when justifying the overriding reasons of general interest in environmental sustainability.

The TSJC had doubts as to the compatibility with EU law of the “dual licensing” system to which PHVs were subjected in the AMB. Under article 91 LOTT, PHV licenses allow for the provision of “urban and interurban services throughout the national territory,” and hence the additional license requirement in the AMB could be seen as a strategy to minimize competition between PHVs and taxis. According to the TSJC, this additional requirement made it practically impossible for EU PHV companies to establish themselves in the AMB—which could amount to a state aid advantage.

CJEU’s ruling

The CJEU considers that restrictions such as those established by the RVTC would be compatible with EU law, provided that they do not involve a commitment of State resources incompatible with the internal market, within the meaning of article 107(1) TFEU (State aid). Furthermore, EU law does not preclude the requirement of an additional specific license for PHVs, but it must be based on objective and non-discriminatory criteria.  

However, the CJEU concludes that article 49 TFEU does preclude legislation providing for a limitation of the number of PHV licenses by the number of taxis where it is not established that such measure is suitable to attain the objectives of sound transport management and environmental protection.  

Therefore, the CJEU rejects the argument relating to the AMB’s overriding reasons of general interest. Purely economic objectives such as ensuring the economic viability of taxi services cannot constitute an overriding reason in the general interest justifying a restriction of a fundamental freedom guaranteed by the Treaty. Such an objective cannot be invoked to justify the ratio of 1 PHV / 30 taxis. In the words of Advocate General Szpunar: “At no point has it been proven by the AMB that restricting the issuing of licenses to a ratio of 1 for every 30 taxi licenses is suitable to attain the management of local transport, of local traffic, of the use of public space and the protection of the environment” (paragraph 81 of the Opinion).

The CJEU did consider that requiring an additional authorization to that at the national level “may well be appropriate to achieve the objectives of sound management of transport, traffic and public space and of environmental protection" (paragraph 89 of the Judgment).

Implications of the CJEU’s judgment

In its judgment, the CJEU points out that legislation such as the RVTC may not only lead to internal market fragmentation but may also reduce the benefits of digitalization and flexibility in services provided by digital platforms in the field of transport.

It only remains to wait for the TSJC’s decision on the merits of the case, based on the CJEU’s judgment. If the TSJC concludes that the RTVC provisions potentially contrary to article 49 TFEU should be annulled, this may reduce the entry barriers to the PHV market for third parties.   

August 23, 2023