Regulating the On-Demand Economy: An Agenda (Working Paper)

Regulating the On-Demand Economy: An Agenda (Working Paper)

A shorter version of this working paper appeared in the Law & Our Rights section of Bangladesh’s Daily Star. The link is here: <http://www.thedailystar.net/law-our-rights/law-watch/regulating-demand-transport-technology-1322203 >  In the coming weeks and months, I hope to expand the thoughts behind this article into a more substantial piece that includes other online platform enterprises.

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Within a few days of Uber formally launching its operations in Dhaka, the BRTA banned its operations on the ground that it was illegally providing a taxi/private-hire service. This impasse between a regulatory authority and a market-leading start-up ‘unicorn‘, provides an opportune moment to discuss the emergence of the ‘on-demand’ economy in Bangladesh. This article will briefly discuss what is meant by the on-demand economy before elaborating on the legal problems that certain on-demand economic actors, namely ‘ride-hailing apps’ like Uber can pose to regulatory authorities. It thereby hopes to recommend certain actions that can be taken to preserve the market value of these enterprises without harming the individuals and communities that use its services.

The On-Demand Economy

The ‘on-demand’ economy refers to the “economic activity created by digital marketplaces that fulfil consumer demand via immediate access to and convenient provisioning of goods and services.” There has been a growing interest in Bangladesh in using online platform enterprises in particular, some of which are among the largest global players in the on-demand economy. Online platform enterprises seek to distinguish themselves from many other businesses involved in e-commerce as they do not sell their own goods or services but purportedly, as tech companies, help connect persons offering goods and services to those looking for them. In exchange, the platform extracts a benefit, usually in the form of a share of the earned income or a subscription. Going from TV shows (e.g. Netflix) and music (e.g. Spotify), it is now possible to get a ride in someone’s car (e.g. Uber) or a short-stay in someone’s house (e.g. Air B & B) with a few clicks of a button and a reasonable commission. In short, in a global economy low on disposable income and high on instant gratification, they monetize the growing interest in transient, immediate streaming of goods and services over actual ownership or permanent employment.

Ride-hailing, ride-sharing and carpooling platforms (e.g. Chalo, ShareSAM etc.) have now been around for a few years in Bangladesh, with Uber being the most celebrated entrant to the market. In the tech and start-up coverage of these platforms, they have generally been touted for their potential to solve specific problems: reducing traffic congestion, lowering costs of transport, freeing logistical bottlenecks and so on. Enthusiasts laud their redemptive capacity to ‘disrupt’ the conventional means of providing services, by being more agile and responsive to customer needs, offering more flexible modes of employment and nurturing a sharing culture within communities. Others have expressed concern about how these platforms will weaken the business of conventional taxicab/private-hire companies, erode the protection of workers and impact the safety of passengers. Both perspectives have merits and both camps have equal reason to be aggrieved about existing regulations, one for it being inadequate to harness the potential of emerging internet-based enterprises and the other about the lacunae in rights and protections the operations of these enterprises expose. Using the specific example of Uber will demonstrate why this is especially true in licensing and labour legislation.

Licensing

The BRTA has banned Uber for providing taxi/private hire services without the requisite documentation or permission under the Taxicab Guidelines 2010, read with the Motor Vehicles Ordinance (MVO), 1983.However, that prohibition rests on the assumption that Uber is a taxicab company. In legal actions throughout the world, Uber has presented itself as an online labour brokerage dispatching ‘independent’ drivers to passengers. Unlike orthodox taxicab companies, Uber has no fleet, no central garage/depot and, in their view, employ no drivers. In some countries, it is possible to use the app to connect non-professional drivers to passengers but in many others, it is limited to those that have private hire vehicle (PHV) licenses.

In countries like Bangladesh, strict conditions are placed on the use of motor vehicles to transport private passengers for hire/reward. One option that Uber has reportedly explored is contracting with taxicab companies. However, a taxicab company would struggle to comply with both Uber’s business model and the industry’s Guidelines. While the latter requires certain distinguishing marks (Articles খ (5)-(6), চ(1)) to be used, fixed transparent fares (Articles ঙ (1)-(2)) to be charged and mobile phones not to be used while driving (Article ঝ(9)), Uber’s business model generally uses well-conditioned but anonymous cars, imposes ‘surge’ pricing to automatically raise fares during periods of high demand and penalizes drivers who do not follow predesignated routes on their smartphones.

Instead, ride-hailing platforms could look to the burgeoning number of private hire vehicles that are driven by the individuals who own them. For them ride-hailing apps present a lucrative opportunity to bolster their business. They can feasibly do so if they have, inter alia, a professional driving license (sections 2(41), (44), Form D), a contract carriage permit that may specify a designated route, a tax token (sections 51, 63(2)(i), (xii)), third party liability insurance (sections 109-110) and their vehicle is appropriately registered, meets fitness standards and has distinguishing marks. Still, these provisions, coupled with the contractual requirements of ride-hailing apps, are quite onerous and could have a dissuasive effect on using these platforms. It is also evident that the permits and licenses granted under these laws do not contemplate the use of web/mobile applications for navigation and customer complaints or GPS tracking of vehicles. In India, retrofitting earlier regulation to extend older licensing rules for ‘radio taxi’ operators to online platforms was found to be wanting. As such, this requires fresh regulation.

Part-II

Labour

For this nascent industry to grow, it must come to address the problem of who is responsible for maintaining working conditions. Courts in other jurisdictions have grappled with the question: is the driver an independent contractor, using an online platform to secure client-passengers, is he a worker of an intermediary contracted with the platform or is he employed by the platform itself?

Determining ‘worker’ status is important given that the Labour Act (LA), 2006 (as amended) guarantees a raft of protections for workers that do not automatically extend to independent contractors. These include, but are not limited to, maximum working hours (sections 100-106), leave (sections 115-118), minimum wages (section 140, 145, 148-149), unionising (section 176) etc. As such, employment status determines which party bears safety net costs.

Usually, with regard to taxicab companies, under the Taxicab Guidelines, the company is obliged to only use duly-trained and qualified drivers that they have appointed (Articles ক(14)-(15)).  This provision, coupled with the definition of worker stated in MVO, 1983 (“worker means driver” in s. 2(60)) and the Fourth Schedule of the Labour Act which states that workers includes individuals employed as drivers (clauses 27, 30), indicates a presumption that a taxi driver has an worker relationship with their taxicab company.

What complicates this picture, with the insertion of a platform and its influence over the activity of drivers, is whether taxicab/private-hire-vehicle companies or even individual driver-owners are fully in control over the transport service. The question of who the employing entity is in such situations turns on the facts, rather than on contract, and will be determined by who ‘employs’ the worker and who exercises management and control over such decisions (sections 2(49)). Judgments such as Aslam, Farrar & Others v Uber B.V. et al, Case Nos. 2202550/2015 (Aslam) delivered by an English employment tribunal on 28 October 2016 indicate that only looking at the literal word of a platform’s terms and conditions is unhelpful in determining employment status. The tribunal noted the manner in which Uber twisted contractual language and created fictions to carve out any responsibilities it might have to the driver or the passenger. However, since the law seeks to identify and protect those workers in a position of subordination and dependence (Byrne Brothers (Formwork) Ltd-v-Baird & Others [2002] ICR 667, paragraph 17) the court disregarded such legal gymnastics and looked towards the real relationship between the parties. In London, it was found that Uber interviewed and recruited drivers, instructed how they may carry out their duties, asserted its discretion to accept/decline bookings for the driver as its agent, exclusively controlled key information about the passenger, penalized the cancellation of trips and the use of routes other than the one specified by them, managed performance through a rating system and reserved the power to unilaterally vary contract terms (Aslam, paragraph 92).This was sufficient to find that a contractual relationship between the driver and the passenger could not exist and that instead there was a dependant work relationship between drivers and Uber, with the former being a ‘worker’ and the latter being an employer (Aslam, paragraph 98).

Whether this will translate into a platform being considered an employing entity by Bangladeshi authorities is uncertain. While drivers seeking ‘worker’ status may similarly claim that ride-hailing apps exert a high degree of control and management, it is possible that the platform will seek to shift responsibility onto taxicab/private-hire-vehicle companies by claiming they are de facto “contracting agencies” under section 3A, LA 2006. Drivers supplied by contracting agencies are treated as workers of the latter, except during compensation claims (section 161, LA 2006).

It is worth pointing out that, in the UK, Canada, Spain and Italy, ‘dependant’/’independent’ workers represent a third employment status, between employee and self-employed, and are not extended the same protections as employees.  A roughly equivalent status in Bangladesh would be that of ‘casual’ workers, individuals who work on an “ad-hoc basis in an establishment for work of a casual nature” (section 4(4)) and are entitled to fewer rights, e.g. no pay for extended stoppage of work.  A platform could argue that their drivers fall under this classification given that they are free to log on/log off the platform but that is doubtful.

Regardless of status, certain inconsistencies with the labour legislation would remain. For instance, section 110 restricts workers being employed in more than one establishment in one day without permission which is contrary to the aim of ride-sharing, where a person may wish to offer their driving services to more than one platform/operator (‘multi-homing’) or work in another profession altogether.

Conclusions & Recommendations

The highlighted regulatory gray areas and lacunae are merely the tip of the iceberg. The operation of ride-hailing apps may raise concerns about passenger discrimination and safety, secure handling of private data (section 63, Information and Communication Technology Act, 2006) and anti-consumer allegations for variable, arbitrary pricing. Conversely, as the platforms offer similar features and products, issues regarding copyright and patent infringement might also arise. Given the uncertainty clouding the legality of ride-hailing platforms and the fact that the Competition Commission is still findings its feet, clashes between platforms or with various drivers’ associations regarding abuse of market dominance (section 16, Competition Act 2016) are still beyond the horizon.

As daunting as it may be to regulate such a fast-changing industry, going forward, a compromise should be struck between preserving laudable protections and enabling a culture of shared commuting. One option could be introducing a new transport provider category such as “on-demand transportation technology aggregator” to Bangladesh’s road transport laws as has been done in various parts of India, through advisories and guidelines.

Following a multi-stakeholder consultation, the BRTA’s transport committees could consider issuing a new form of permit for aggregators that are granted on the conditions that permit holders maintain detailed, up-to-date records on their drivers and vehicles, ensure passengers are not discriminated against or threatened and cooperate with government authorities when required. At the same time, licensed vehicles could be exempt from having distinguishing marks, colour or a separate registration category. This permit could be complemented with guidelines setting out best practices on data protection, pricing and on maintaining a ‘level playing field’ in the road transport market. With regard to the employment status of drivers, some scholars have argued in favour of introducing third, intermediate categories in jurisdictions where they are absent. For the sake of simplicity, it may be preferable to retain the existing presumption towards ‘worker’ status – if a certain amount of time is spent using the platform or an amount of income earned. The precise terms of this can be specified under further guidelines.

Morshed 
Leiden

Digitization of the Legal Industry

Digitization of the Legal Industry

The digitization of certain aspects of the legal industry is a hot topic these days. From the relatively prosaic introduction of e-filing of legal documents at the turn of the century to the creation of ‘self-executing’ smart contracts within blockchains to the potential use of ‘3D imaging, panoramic videography, robotics and virtual reality‘ to transport juries to crime scenes, it is becoming imperative that the legal industry stay on top of the latest developments in technology to retain a competitive edge. I say legal industry because this is not only relevant to lawyers and law firms operating in an increasingly competitive business environment but also to national legal systems, hoping that parties will select their courts as their forum of choice in commercial contracts.

While this inevitably presents certain challenges, it provides a number of fresh opportunities, especially for emerging markets. Some that immediately come to mind in the Bangladeshi context:

  1. Reducing procedural deficiencies using existing technology: This has already started to take place to a limited extent. Along with an assortment of e-filing and e-registration options provided by government websites, social media is being actively used by certain departments. Facebook and android apps are used by the tax authorities to crowd source reports (via screen shots) of businesses that do not charge VAT or misrepresent their charge of the tax by printing a false VAT number on receipts. The Dhaka police have developed an app that facilities contact with them. Messenger and an active Facebook page is used by the executive magistrates of Bangladesh’s main airport to expedite the processing of passenger complaints and reports of criminal activity. Social media is also increasingly being used by the legal community to disseminate information on key legal topics (Think Legal Bangladesh) and answer questions from the public. There is potential for this to grow. The Supreme Court already offers an SMS service to receive information about the details of a case and its website provides information on bail confirmations and soft copies of cause lists but perhaps in the not-too-distant future we will see substituted summons via WhatsApp – as is already taking place in Singapore and Australia.
  2. Outsourcing Legal Support Services: This effectively means offshoring the review of documents, legal research and even the drafting of certain pleadings to countries which charge low fees as an attempt to defray costs. The ability of transferring large quantities of data and documents using fast and secure online connections allows this to take place. It is a phenomenon that is already taking place in a big way in India but hasn’t percolated to Bangladesh. While concerns about client confidentiality and security remain, if these issues are accounted for and a high quality service is provided, this could provide an opportunity for Bangladeshi start-ups and the growing legal community.
  3. Designing of Artificial Intelligence (AI) software for the Legal Industry: This is perhaps the most exciting development currently taking. Along with the virtual reality robots mentioned above, could artificial intelligence be used to help judges to quickly identify violations of the law? One recent study of European Court of Human Rights cases has shown that AI can already predict the outcome of a factually complex human rights case with 79% accuracy. It can also be used to search for concepts rather than just keywords. ROSS (not the character from Friends) is an ‘AI lawyer’ that can conduct fairly sophisticated legal research in a fraction of the time that it would take a human lawyer. Even more impressively, it can provide an opinion  on how relevant it is to a given case and has an ability to ‘learn’ as more information is processed by it.

What else might the future hold for the e-legal industry?

Morshed 
Leiden

How to get an Inns of Court BPTC Scholarship

How to get an Inns of Court BPTC Scholarship

Those law graduates looking to pursue the Bar, please see this for some useful tips

Warwick Law Careers Blog

Fees for the BPTC are a terrifying £16,500. It makes sense to try to land an Inns of Court Scholarship. I asked Alicia Jones currently studying with the benefit of two major scholarships for her advice on how to secure that prized scholarship. Here’s what she said.

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Supreme Court of India Judgment on Conversion of ‘Sick’ Company into a Workers’ Cooperative

Supreme Court of India Judgment on Conversion of ‘Sick’ Company into a Workers’ Cooperative

Last night, I was reading some of the research articles presented at the recently concluded International Summit of Cooperatives (Quebec, Canada) and in a paper presented by Prof. Dr. Vrajlal Sapovadia, I came across a reference to an Indian Supreme Court decision from 1988 approving a workers’ scheme to take over a distressed factory (Kamani Tubes Ltd.) and its assets, with the hope of reviving its fortunes. After a little research I found the judgment in question: Navnit R. Kamani & Ors vs R.R. Kamani 1989 AIR, 9 1988 SCR Supl. (3) 123. The judgment makes for interesting reading in terms of how the Court sanctioned the dilution and transfer of shares from the owners (i.e. the Kamani family) to the workers, as well as the provision of the law (Sick Industrial Companies (Special Provisions) Act, 1985 a.k.a SICA) that enabled such transfers. In particular, note the wide-ranging schemes that the Board for Industrial and Financial Reconstruction can authorize to revive a ‘sick’ or ailing company in section 18. Section 18(2)(i)-(l) refers to the schemes that can be submitted by workers to revive a company, including through a sale or lease of assets or transfer of shares in the company.

However, aside from this interesting legal provision, the language of the judgment of Thakkar J is interesting in itself, recalling a bygone time when Supreme Court judges spoke unblushingly about workers’ struggles and trade union movements. Thakkar J concluded his judgment with this moving passage:

While the Act enacted in 1985 does envisage the revival of sick units by the workers who had been rendered unemployed, it is (as far as is known) for the first time that the legislative intent reflected in the relevant provisions of the Act to encourage workers’ schemes is being given a concrete shape in this manner. It is perhaps for the first time that such a Scheme sponsored by the suffering employees themselves has come to be sanctioned. Under the circumstances a very heavy burden rests on the shoulders of KEU and the concerned employees. Tens of thousands of similarly situated workers would be watching with anxious eves the outcome of this bold experiment undertaken by the workers of KTL. On their success or failure will depend the future hope and destiny of tens of thousands of similarly situated workers. Success of this venture will instil [sic] new confidence and enable the workers to try to build their own future with their own hands albeit at Some initial sacrifice. Failure will be visited with disastrous consequences. We, therefore, not only hope and trust that KEU and the concerned workers will make themselves fully aware of this crucial factor, but also beseech them to rise to the occasion and individually and collectively do their best to make it a success. They will have an opportunity to show to the world that the workers in New lndia are capable of managing their own affairs, shaping their own destiny, and building their own future. They will also have an opportunity to establish that when the workers are inspired by an ideal they can produce optimum quantity PG NO 140 as also the best quality. Because, they would be working for a great cause, and working for themselves instead of working for others who often deny to them their legitimate dues and even deprive them of such legitimate dues by appropriating to themselves the fruits of the worker’s labour. Be it also realized that the Trade Union Movement, in the event of the success of this exercise, will be stepping into a new creative phase in the struggle of the working class to assert its identity. One can almost hear the footsteps of the new era in the corridors of [the] future. The workers must therefore ensure the roaring success of this Scheme in this noble cause at any cost.

Unfortunately, the noble cause was ultimately doomed to failure. Sapovadia notes that after a brief period of financial success and optimism, managerial entrenchment and the disenchantment of workers led to the emergence of a rift among the two groups, causing the business  to suffer the business to be acquired by private investors in 2006. I would add that after 1 July 2016, following the passage of the Bankruptcy and Insolvency Code 2016, the Board for Industrial and Financial Reconstruction itself is beginning to winding up its activities as it gets subsumed by the National Company Law Tribunal. It goes without saying that the laws of market-friendly ‘shining India’ has a markedly less pro-labor tenor. In fact, while Section 18(2) of SICA explicitly mentions a revival/rehabilitation scheme involving employees and workers (‘workmen’) through a cooperative, Chapter XIX, Companies Act, 2013 does not. Sections 253 (1)-(4) and 254 places major secured creditors and the company itself (i.e the management and board of directors) in the front seat of the revival process. They are the ones who can submit a draft scheme for revial under section 254(2)(c), which if feasible, will form the basis of the final scheme prepared by the company administrator appointed by the National Company Law Tribunal. Thus, while Section 261(2)(e), which governs the substance of such revival schemes, leaves open the possibility for a sale of assets to any party – including employees I assume – it is only at the behest of creditors and management. In short, mention of employees and workers’ schemes have been expunged from statute leaving the option of consultations and employee buy-outs at the total discretion of creditors and the company.

Regardless of this, conversions to the (worker) cooperative form should not be deemed a lost cause. The law has not closed the door completely on such schemes and there have been salutary examples from India itself of how a distressed company can be successfully resuscitated through employee ownership for the long term – see the example of Kerala Dinesh Beedi mentioned in an earlier blog post. Rather than dwelling on the failures, I feel that it is more worthwhile focusing on the successful cases and considering what they have done differently. What lessons do they hold for aspiring cooperators? Can they be transplanted across borders, to new modes of production and non-industrial sectors of the economy? While I ponder on that, I hope you find the obiter statements of the judge to be as inspiring as I did.

Morshed
Leiden

The Relationship between the Rule of Law and Separation of Powers: A Bangladeshi Perspective

The PDF below contains an essay I wrote for a Legal Theory class at Warwick in 2008-2009 on the aforementioned topic. I spent a good part of my Spring break reading Rousseau and social contract theories before writing this. There is much I would add now, in light of recent case law, but I still maintain the view that both terms are essentially contested and than an appreciation of whether rule of law ‘exists’ in a country cannot be divorced from local realities or the country’s stage of political maturity.

Relationship between Rule of Law and Separation of Powers in BD

Morshed
the Hague

Impression of the Guest Lecture delivered by H.E. CG Weeramantry

Impression of the Guest Lecture delivered by H.E. CG Weeramantry

Today, I attended an inspiring guest lecture delivered by H.E. CG Weeramantry, a former Vice President and Judge of the International Court of Justice (ICJ), most famous for his dissenting and separate opinions on nuclear weapons and sustainable development. In his 50-minute, ex tempore address, the honourable judge spoke eloquently about how the wisdom of global religions should inspire the development of international law. Interweaving quotations from the Holy Quran, the Ramayana and the King James Bible, in his lecture he argued that these great scriptures are a treasure trove  for those seeking to formulate principles of international environmental law, protect the rights of the child and preserve the rule of law. He referred to how Rama avoided the use of highly destructive weapons in the war against Ravana, after consulting great sages (of the law), and how Christ sought to protect the rights of children (and arguably future generations) by saying, “whoso shall offend one of these little ones which believe in me, it were better for him that a millstone were hanged about his neck, and that he were drowned in the depth of the sea” (Matthew 18:6). He spoke of how they all espoused sustainability and concern for future generations and stressed the cross-fertilisation of these universal ideas across civilizations. This was in line with his approach as an international judge, when he broke away from the traditional eurocentricism of the ICJ and arguably brought TWAIL more into the mainstream.

However, while looking at the past, at millennia of knowledge, the 89-year old judge had an eye fixed firmly at the future. Nuclear disarmament is not as high on the policy agenda now as it was in the ’80s and ’90s but sustainable development certainly is. Thus, the title of one of his 30 (!) books continues to be instructive – “Tread Lightly on the Earth” (quoting Ayat al-Furqan, 25:63).

Morshed
Leiden