There's No Such Thing as a Free Ride

Richard Khoo and Rachel Chiah discuss the legal issues arising from ride-hailing services.
Need a ride? Take an Uber!
Ride-hailing services such as Uber and Grab began as a novel and attractive alternative, but are a norm today. Although lauded as a solution to public transport woes, do they also present a new problem?
Ride-hailing services are online platforms through which a registered user can check the availability of cars and the estimated fare of a ride before requesting for the transportation service (“Services”). This request would then be accepted by a registered driver (“Drivers”). The platform allows both parties to monitor the progress of the vehicle. Payment, either by way of cash or credit card, is made upon completion of the ride.
The Services are appealing for being quick, reasonably priced and accessible. All one needs is the respective ride-hailing service application on his smartphone and access to the Internet.
The Services differ structurally and operationally from traditional forms of public transportation services. Nonetheless, the Services are similar in that they provide transportation services to members of the public. As such, many have argued that they should be regulated.
Lawmakers and policy-makers did not, and could not have, envisaged a concept like the Services when making and passing the current applicable laws. The authorities are thus presented with a conundrum: how do you regulate something when you do not have anything to regulate it with?
This article examines several key issues arising from the lack of regulation of the Services in Malaysia and the measures proposed by the Malaysian Government to deal with them.
Licence to operate
The Malaysian Land Public Transport Commission (“SPAD”) has stated that although the Services are legal businesses, the manner in which they operate is not. 
Pursuant to section 16 of the Malaysian Land Public Transport Act 2010 (“LPTA”), operators or providers of public service vehicle services are required to hold an operator’s licence. It is important to note that operators or providers include a person who (i) uses or drives a public service vehicle himself; or (ii) employs one or more persons to use or drive a public service vehicle.
“Public service vehicle services” refers to the carriage of passengers by means of public service vehicles, whether for hire, reward, or any other valuable consideration. Read in conjunction with the First Schedule of the LPTA (which specifies the types of public service vehicles), this requirement would apply to operators or providers of taxi, bus and car-hire services.
Transport under the Services is typically in the form of private cars, which are not a type of public service vehicle. Accordingly, operators or providers of the Services are not required to have an operator’s licence.
Many, in particular taxi drivers, have argued that the Services should not be allowed to bypass licence requirements imposed on other forms of public transport. That, of course, would be unfair to the latter. However, as the Services are not subject to any conditions of a licence, the greater concern is that the monitoring and supervision of the authorities is far less effective, if not absent altogether. Operators and providers of the Services seemingly need not comply with the requirements applicable to regulated public transportation services.
Licence to drive
Another point to consider would be the Drivers’ licence for driving. Drivers, who use their personal vehicles, would presumably hold a driving licence for the use of motor vehicles as required under section 26 of the Malaysian Road Transport Act 1987 (“RTA”). 
For driving or conducting a public service vehicle, a vocational licence is required under Section 56 of the RTA. The Drivers’ use of their vehicles for providing transportation services to members of the public suggests that it may be necessary for them to obtain a vocational licence. It is pertinent to note that the Malaysian Ministry of Transport has voiced its intention to require the Drivers to obtain vocational licences. 
As stated earlier, public service vehicles do not include private vehicles. Hence, Section 56 of the RTA, as presently worded, does not apply to the Drivers who use their own vehicles for providing public transportation services. The question as to whether it should be applicable is a difficult one to answer. It is clear that the intention behind having different types of licences is due to the different uses of vehicles. Personal use is a separate matter from providing public transport. Drivers, therefore, should be licensed appropriately.
On the other hand, would requiring a vocational license be a redundant exercise? This appears to be the stance taken by the Drivers, who are of the view that their licence for the use of their motor vehicles is sufficient.
Inspection of vehicle
The Motor Vehicles (Periodic Inspection, Equipment and Inspection Standard) Rules 1995 require public service vehicles to be inspected periodically at PUSPAKOM inspection centres. Save for newly manufactured public service vehicles which are to be inspected annually, inspections are to be carried out once in every six months. If a vehicle fails to meet the stipulated inspection standards, it must undergo a re-inspection.
It is obvious why public service vehicles are subject to periodic inspections. Safety is naturally a priority when it comes to vehicles used for public transport. This is due to the frequency in which such vehicles are used as well as the number of passengers being carried. As the risk of accidents or collisions would be correspondingly higher, steps must be taken to minimise the risk of injury to innocent passengers who have no control over the condition of the vehicles.
By definition, vehicles used by Drivers are not public service vehicles. Fundamentally, it is irrefutable that they are or should be deemed as such. Thus, for the purpose of ensuring the safety of passengers, it would be prudent to require Drivers to have their vehicles inspected regularly.
Insurance for passengers
A worry that has cropped up amongst consumers of the Services is the insurance coverage for the vehicles being used. This is because the insurance taken up by Drivers for their vehicles would be for private vehicles rather than commercial vehicles. Coverage of third party liability would thus be less extensive if not lacking altogether. There is therefore the possibility that passengers may not be insured against personal injuries sustained in the course of using the Services.
This boils down once more to the Drivers using their vehicles not only for personal use, but also for providing the Services. Consumers of public transportation services should be adequately protected from the possible risks arising from the use of such Services.
The Deputy Minister of Transport has stated that the Government of Malaysia intends to make it compulsory for Drivers to purchase commercial vehicle insurance. Additionally, operators of the Services seem well aware of the need to assuage consumers’ fears. For instance, Grab recently announced that it had purchased extensive personal accident insurance coverage for both its Drivers and the passengers.
Compliance costs
The additional requirements imposed on operators of public service vehicle services have led to an outcry by the operators of these services that the operators of the Services and the Drivers have an unfair advantage as they are not subjected to the cost of complying with the legal requirements imposed on operators of public service vehicle services.
As a matter of public policy, regulation is essential for both the economy and society. The Services, which presently sit outside the scope of applicable laws, cannot be an exception to the rule. It is to be noted that in August 2016, SPAD announced that the Cabinet had approved its proposed Taxi Industry Transformation Programme. One of the proposed reforms in the Taxi Industry Transformation Programme is the regulation of the Services by way of amending the LPTA.
On 4 April 2017, the Commercial Vehicles Licensing Board Act (Amendment) Bill 2017 and the Land Public Transport (Amendment) Bill 2017 (collectively, the “Bills”) were presented to the House of Representatives of the Malaysian Parliament for the first reading.* The significant amendments set out in the Bills are considered below.
(1)     A definition “e-hailing vehicle” is introduced and refers to “a motor vehicle … used for the carriage of persons on any journey in consideration of a single or separate fares … facilitated through an electronic mobile application …” The Drivers’ vehicles would fall within such a definition.
(2)     In connection therewith, e-hailing vehicles will be classified as public service vehicles. The Drivers’ vehicles would therefore be subject to the standards and requirements imposed on public service vehicles. This would require the Drivers to submit their vehicles for periodic inspections and take appropriate insurance cover for their passengers.
(3)     An operator or provider of an “intermediation business” will be required to obtain a licence for such business. “Intermediation business” is defined as “the business of facilitating arrangements, bookings or transactions for the provision of land public transport services … for any valuable consideration ...” The introduction of this amendment will result in operators and providers of the Services having to obtain, and be subject to the conditions of, a licence. In the event the operators or providers fail to comply with this licence requirement, they will be liable to a fine or imprisonment or both.
The amendments set out in the Bills are clearly aimed at regulating the Services and as a consequence thereof, levelling the playing field between operators of public service vehicles and the operators and providers of the Services. At the time of writing however, the Bills have yet to be presented for their second reading. As the Bills are tabled by the Government, it is likely to be a matter of time before the proposed amendments become law.
In Singapore, regulation of the Services has already been introduced by way of amendments to the Singapore Road Traffic Act. The Singapore Transport Minister has stated that while the regulations are intended to protect consumers’ interests and safety, they also allow for the growth of the point-to-point transport industry. Evidently, a balance has to be struck so that the introduction of regulation does not hamper socio-economic development.
If the Bills are passed and the proposed regulation of the Services is implemented in Malaysia, what will the effect of such regulation be? Will it bring this product of “disruptive technology” to a juddering halt or will the exponential growth of the Services continue unabated? Only time will tell.