Uber and the Sharing Economy: The policy, the law and the perception

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp

The Truth on Uber: Is the government trying to kill Uber? Are you insured when taking an Uber car? Are the people of Hong Kong behind or against Uber? HT answer your questions.


It’s not (just) about Uber

Simon Lee (李兆富) believes Hong Kong’s regulatory regime, far from helping, innovators in Hong Kong, is positively designed to stifle innovation. The Director of AdvB, and local media pundit, pulled no punches in his harsh analysis of the situation – but also delivered some surprising nuance.

“The arrest of Uber drivers and staff in August was not an explicit conspiracy against its operations in Hong Kong,” said Mr Lee. “Police only take action when they receive complaints. These complaints could be against Uber or GoGoVan – which is less problematic as there are only some 70,000 van licences in town – or taxis. Therefore, the arrest was just a ‘happy coincidence’ for taxi drivers that had been somewhat overly politicised by the public.”

“That being said, the HKSAR Government holds a rail-first [i.e. MTR] policy preference with an aim to control the number of cars on the road, hence the reluctance to increase the number of taxi licences, which has stagnated for 16 years at about 18,000. Meanwhile, it is very easy in general for established players to put pressure on the Government proactively,” he said.

Mr Lee cited a minor protest held by taxi drivers against Uber in July as an example showing fundamental challenges for incoming companies. While arguing that this is not necessarily a case of taxis versus Uber, Mr Lee  believes the policy and the bureaucracy was to be blamed for the unnecessary drama.


Top of the polls

Mr Fergus Clarke, founder of social media monitoring company Lamplight Analytics, shared his team’s findings on online reactions to the arrest with Harbour Times. “There were about 25,000 social media posts in total on Uber the day after the arrest, of which 95% were in traditional Chinese. At peak there was a post every 10 to 15 seconds,” Mr Clarke said. “It was THE topic on Hong Kong’s social media for the following two weeks.”

Mr Clarke also noted that during the height of the controversy, the Uber app went to number one in the App Store, proving all news is good news when it comes to downloads. Many of the online comments focused on how bad taxi services were and slammed the Government for discouraging attitude toward Uber as the beacon of innovative entrepreneurship. Expats comments sometimes reflected concerns in global media: Are Uber drivers actually staff, deserving of benefits and protections?. But the vast majority of comments in the local media centred on the quality of  the service and the unfairness of being denied choice.


The big question on insurance

Mr Tow Lu Lim is a partner in the Hong Kong office of Mayer Brown JSM’s Insurance and Reinsurance Practice and has extensive experience in complex litigation and insurance matters. He explained while Uber itself is not illegal – at least for now -, the very legal basis of the hire car permit system under the Road Traffic (Public Service Vehicles) Regulations is not designed for its business model.

The big question of insurance was put to rest.  Government had insinuated for weeks that, without a commercial driver permit, insurance of Uber drivers could be invalid. The confusion was cleared up – to the satisfaction of this audience.

“All car owners are by law required to be insured against third party risks under the Motor Vehicles Insurance (Third Party Risks) Ordinance.” The Road Traffic Ordinance provides that no person shall use a motor vehicle for the carriage of passengers for hire or reward unless a hire car permit is in force. The limitation on use of motor vehicles for carriage for hire or reward is also present in motor vehicle insurance policies which restrict the use to social, domestic and pleasure purposes. The effect of this is that insurers are entitled to deny cover under the policy to the driver for an accident where the vehicle is used for hire.  “Accordingly, insurers do not cover use of Uber drivers’ vehicles for carriage for hire or reward since the insurance industry does not want to be seen as providing insurance cover to drivers who are potentially in breach of the law [the Road Traffic Ordinance],” Mr Lim said. However, victims of a motor vehicle accident “will be protected as the law requires the insurer concerned to compensate the victims first and the insurer will then seek recovery against the driver who knowingly (or unknowingly) violated the terms of their insurance”. Victims will get paid and the courts sort it out later.

Mr Lim was referring to section 10 of the Motor Vehicles Insurance (Third Party Risks) Ordinance and the First Fund Agreement of the Motor Insurers’ Bureau of Hong Kong (MIB) which administers a ‘fund of last resort’. All insurance companies authorised by the Hong Kong Government to issue motor vehicle insurance are required to become members of the Bureau.


Things can go worse

For Mr Lee, this is essentially a problem brought about by the rise of the sharing economy. “It [the sharing economy] blurs the line separating social and private life since maximisation of resources would now mean you can rent out the use of them [private goods] whenever there is a market. New technologies enable such business models to exploit the transformation, and now the regulatory regimes are struggling to accommodate them,” He said. “If I bought a DVD and would later want to maximise its value by renting it out directly to someone else through an e-platform, I am not allowed to do so because of the Copyright Ordinance.”

The speakers turned to Airbnb, an online platform that allows people to rent out their flats to tourists and already has thousands of listings in Hong Kong, which they identified as a case much more complicated than the Uber one both from a regulatory and insurance viewpoint.

“In Hong Kong, there are about 600,000 cars on road [ie. the maximum possible number of Uber drivers] while you have millions of housing units.” Mr Lee said.

Mr Lim echoed Mr Lee by adding that there are too many different cases of accidents in which there is no such legal structure to protect guests and third-party players.

Raising the topic to the realm of philosophy, Mr Lee suggested that the sharing economy challenged the very meaning of ‘property rights’ when in fact a person is not entitled the right to achieve full utilisation of the resources he or she possesses. The economy is transforming to a new level that connects individual buyers directly to sellers to minimise transaction costs. Mr Lee’s position was clear: The HKSAR Government should adapt to the ‘new normal’ and scrap its outdated regulations.