New Regulatory Framework For Mobile App-Based Ride-Hailing (“E-Hailing”) Services In Peninsular Malaysia.

Legal News & Analysis - Asia Pacific - Malaysia - Regulatory & Compliance

3 November, 2017


IN THIS ARTICLE, FATIMAH ZAHIRAH LOOKS AT THE NEW REGULATORY FRAMEWORK FOR E-HAILING SERVICES.
 
Introduction
 
The legality of e-hailing services like Uber and GrabCar has been the subject of debate including whether or not the operations fall within the existing regulatory framework governing land public transport.
 
The relevant statute regulating land public transport in Peninsular Malaysia is the Land Public Transport Act 2010 (“LPTA 2010”), which is enforced by the Land Public Transport Commission (“SPAD”).
 
SPAD had in its various anti-illegal taxi operations seized private vehicles used to carry passengers under e-hailing platforms for operating without a Public Service Vehicle Licence under the LPTA 2011[1]. However, it appears that the use of the mobile platform services provided by the e-hailing companies like Uber and GrabCar have not been declared illegal and no action has been taken directly against the e-hailing companies for arguably “abetting” such “illegal taxi operations”.
 
The legal vacuum within which the e-hailing companies currently operate will be filled, and the debate on the legality and the need to regulate operators of e-hailing platforms will be put to rest, once the proposed amendments to the LPTA 2010 come into effect.
 
New regulatory framework
 
The Land Public Transport (Amendment) Bill 2017 (“Bill”) has been passed by both Houses of Parliament respectively in July and August 2017[2] and is currently awaiting royal assent. It is expected to come into force in October 2017[3].

It is also noteworthy that, ahead of the proposed amendments to the LPTA 2010, the Self-Employment Social Security Act 2017 (“SESSA 2017”) has come into force on 13 June 2017 to regulate social security contribution by a self-employed person, which includes an e-hailing driver[4].
 
This article highlights the key changes and expected measures in regulating the e-hailing services in Peninsular Malaysia under the new regulatory framework.
Licensing of intermediation business
 
The operators of e-hailing platforms will be required to obtain an Intermediation Business Licence to operate an intermediation business[5].
 
An “intermediation business” refers to the business of facilitating arrangement, bookings or transactions for the provision of public service vehicle service for hire or reward or for any other valuable consideration or money’s worth or otherwise[6].
 
Public service vehicle includes an “e-hailing vehicle”, which is a motor vehicle having a seating capacity of four persons and not more than 11 persons (including the driver) used for the carriage of persons on any journey in which the arrangement, booking or transaction, and the fare for such journey are facilitated through an electronic mobile application provided by an intermediation business[7].
 
Specific standards and measures

 
The Intermediation Business Licence may include, among others, the following conditions[8]:
 

  • the type and extent of intermediation business to be operated or provided by the licensee;
  • the general level of service to be provided to persons using services provided by the intermediation business;
  • the measures to safeguard the safety and security of persons using services provided by the intermediation business; and
  • the standards of performance to be complied with by the licensee in the operation of the intermediation business.

 
No draft subsidiary legislation or guidelines have yet been published by SPAD to provide for specific standards and measures to regulate e-hailing services. However, various media releases and news reports have hinted that the specific standards and measures may include[9]:
 

  • periodic vehicle inspection for e-hailing vehicles;
  • insurance coverage for passengers and third parties in the case of accident;
  • registration of e-hailing drivers with SPAD;
  • submission by e-hailing operators of records and data relating to e-hailing drivers (including records of traffic and other offences) to SPAD;
  • implementation of a “panic button” on e-hailing apps to provide passengers with a feature to notify the police in case of an emergency;
  • e-hailing vehicles to be not more than five years old;
  • health screening for e-hailing drivers; and
  • e-hailing drivers to obtain digital Driver’s Card, own a driver’s licence, attend customer service oriented training and have no criminal record, summons or compounds. 
  • It was also indicated from news reports that e-hailing fares will not be regulated but will remain market-driven[10]. 

 

Penalty

 

A person carrying out an intermediation business without an Intermediation Business Licence will be liable to a fine not exceeding RM500,000 or to imprisonment for a term not exceeding three years or both[11].
 
An intermediation business licensee who fails to comply with any of the conditions attached to the Intermediation Business Licence will be liable to a fine of not less than RM1,000 but not more than RM200,000 or to imprisonment for a term not exceeding two years or both[12].
 
One-year grace period for existing intermediation business operators
 
An intermediation business operator who has been operating before the date of coming into operation of the Bill has a one-year grace period from such date, within which it will have to make an application to obtain an Intermediation Business Licence[13].
 
SESSA 2017
 
Under the SESSA 2017, an e-hailing driver would need to register with and pay a prescribed contribution to Pertubuhan Keselamatan Sosial (“PERKESO”) or Social Security Organisation (“SOCSO”), the failure of which is an offence and will attract a fine not exceeding RM10,000 or imprisonment for a term not exceeding two years or both[14].
 
Conclusion
 
The proposed amendments to the LPTA 2010 to subject e-hailing services to operate within a regulatory framework is timely to ensure that the highest safety standards are practised by e-hailing operators and drivers in the interest of the public. This is especially so in view of recent news reports alluding to criminal offences committed by some e-hailing drivers against passengers[15].

 

[1]See (among others):

[2] The Bill was passed by the House of Representative on 27 July 2017 and by the Senate on 15 August 2017; seewww.parlimen.gov.my.
[3] See www.thesundaily.my/news/2017/08/01/cars-used-e-hailing-services-must-be-less-5-years-old.
[4] Self-employment activity covered by the SESSA 2017 include the service of carriage of passengers by means of public service vehicle or motor vehicle  for hire or reward or for any other valuable consideration or money’s worth or otherwise; First Schedule, the SESSA 2017.
[5] Clause 3 of the Bill — in relation to insertion of new section 12A(1) of the LPTA 2010.
[6] Clause 2(d) of the Bill.
[7] Clauses 30 and 31 of the Bill.
[8] Clause 3 of the Bill — in relation to insertion of new section 12A(5) of the LPTA 2010.
[9] See (among others):

[10] See www.thesundaily.my/news/2017/07/29/spad-welcomes-amendments-land-public-transport-act.
[11] Clause 3 of the Bill — in relation to insertion of new section 12A(8) of LPTA 2010.
[12] Clause 3 of the Bill — in relation to insertion of new section 12A(9) of LPTA 2010.
[13] Clause 32(1) of the Bill.
[14] Section 11 of the SESSA 2017.
[15] See (among others):

 

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For further information, please contact:

 

Fatimah Zahirah Mohd Damanhuri, Shearn Delamore & Co​

fatimah.zahirah@shearndelamore.com