Obligation to return hire cars is incompatible with EU law

I. What is the ‘obligation to return’ for hire cars?

Hire cars, as defined by the German Passenger Transport Act (PBefG), are licensed passenger cars which, whilst not taxis, are likewise hired for transport with a driver, the purpose, destination and itinerary of which are determined solely by the hirer (Section 49(4), first sentence PBefG). Colloquially, they are referred to, for example, as ‘mini-cars’ or ‘passenger hire cars’. 

Although, from the customers’ perspective, hire cars and taxis provide a largely interchangeable transport service, different legal requirements apply to them. Only taxis are subject to an obligation to provide transport and strict fare regulations. Hire cars, on the other hand, may only operate upon prior booking. The booking must, in turn, be made via the hire car operator’s business premises or residence. 

In 1983, the legislature also introduced the so-called ‘obligation to return’ in Section 49(4), sentence 3 PBefG. According to this provision, a hire car must return to its place of business immediately after completing a transport assignment, unless it has received a new transport assignment from its place of business or the operator’s residence before the journey, or whilst en route.

Almost immediately, the Federal Constitutional Court (BVerfG) had to rule on the provision. Interpreting it in accordance with the constitution, it ultimately still affirmed its compatibility with the freedom to pursue a profession (Article 12(1) of the Basic Law (GG)). The legislative purpose lay not in the return itself, but solely in better ensuring that hire cars do not make themselves available on public roads and in public places in a manner similar to taxis and accept fares. The underlying interest in distinguishing between taxi services and hire car services served to protect the viability and functionality of the taxi industry. If hire car operators were permitted to operate in exactly the same way as taxi operators, but without being bound by fixed fares or obliged to accept all contracts, they could undermine the competitiveness of the taxi industry by undercutting taxi fares, without the latter being able to defend itself by adjusting its fares flexibly. Consequently, this ultimately could put the provision to the general public of a means of transport for individual needs at a fixed fare at risk (BVerfG, decision of 14 November 1989, Ref. 1 BvL 14/85, 1 BvR 1276/84). 

II. Why do civil courts deal with the obligation to return?

The obligation to return under Section 49(4), third sentence PBefG is, first and foremost, a provision of economic administrative law. Breaches may be sanctioned by the authorities with fines (Section 61(1) No. 3 PBefG). 

Besides, established case law considers the obligation to be a rule within the meaning of current Section 3a of the Unfair Competition Act (UWG) that is intended to regulate market conduct , in the interests of market participants, and where a breach is likely to significantly prejudice the interests of consumers, other market participants or competitors (established in: BGH, judgment of 5 May 1988, Case No. I ZR 124/86 – Obligation to return).

Consequently, competitors can also challenge breaches by issuing a warning letter and bringing claims for injunctive relief before the civil courts. As a result, the First Civil Senate of the BGH, which is responsible for unfair competition law, has regularly had to deal with this obligation. The first five rulings on the “obligation to return” primarily concerned the interpretation and application of the provision.

The most recent ruling, ‘Obligation to Return VI’, however, centred on its compatibility with constitutional law and, above all, EU law. Doubts have arisen primarily due to developments in road traffic and environmental concerns, particularly in the context of climate change. These raise questions as to whether the obligation to return – which applies only to hire cars – can still be justified on the basis of the considerations that prevailed at the time. The trigger for the review under EU law was, in turn, the judgment of the European Court of Justice (ECJ) of 8 June 2023 in the case C-50/21 – Prestige and Limousine. 

III. The recent facts of the case

At first glance, the underlying case appears straightforward: the claimant, a Cologne-based taxi cooperative, is bringing a claim for an injunction under unfair competition law against a car-hire company for an alleged breach of the obligation to return. The alleged breach is said to have occurred on Breslauer Platz in Cologne following a car-hire journey booked via the Uber X service. 

The Cologne Regional Court upheld the claim. The defendant’s appeal was unsuccessful. In its appeal judgment of 9 May 2025 (Case No. 6 U 106/24), the Cologne Higher Regional Court, referring to the aforementioned decision of the Federal Constitutional Court of 14 November 1989, upheld the view that the obligation to return is compatible with the Basic Law. The return requirement served to preserve the viability and functionality of the taxi industry, which the legislature was entitled to regard as a matter of general importance to the public interest. Nor would the provision infringe EU law or the freedom of establishment guaranteed by Article 49 TFEU. It was true that, in the ‘Prestige and Limousine’ case, the Court of Justice of the European Union (CJEU) held that a provision limiting the number of licences for radio-hailed hire car services in the Greater Barcelona area to one-thirtieth of the number of licences for taxi services was contrary to EU law. However, that judgment concerned only restrictions on market access and was therefore not applicable to the obligation to return, which constitutes a restriction solely on the freedom to pursue a profession.

The defendant lodged an appeal against this judgment with the BGH. The appeal was successful. The Federal Court of Justice granted the defendant’s leave to appeal. 

IV. The oral hearing before the BGH

At the oral hearing on 26 February 2026, the presiding judge made it clear in his introductory summary that the Cologne Higher Regional Court’s reasoning under EU law was flawed. 

To begin with, the Court of Appeal had not examined whether the scope of the freedom of establishment applied at all. In a purely domestic matter with no cross-border relation, this was not the case. If, on the other hand, there were cross-border relations, the compatibility of the obligation to return would certainly have to be assessed on the basis of the principles of the ECJ judgment in Case C-50/21. Regulations governing the practice of a profession also restricted the freedom of establishment. It followed from the case law of the ECJ that the obligation to return could not be justified by the economic objective of ensuring the viability of taxi services. Only the objective of sound management of transport, traffic and public space in a conurbation and the objective of protecting the environment in such a conurbation may constitute reasons that could justify the obligation to return. The Court of Appeal had made no findings in this regard. 

V. The judgment of the BGH

The BGH dismissed the appeal. 

The BGH first dealt in detail with a possible referral under Article 100(1) of the Basic Law to the Federal Constitutional Court (BVerfG) to assess the compatibility of the obligation to return with the Basic Law. Ultimately, the Senate saw no grounds for such a referral. Whilst there were doubts as to whether the preservation of the viability and functionality of the taxi industry, in view of new mobility services and people’s changing mobility needs, still constituted a particularly important matter of public interest today. However, doubts as to the constitutionality of a law were not sufficient to trigger an obligation to refer the matter. Rather, the court hearing the case must be convinced of the law’s unconstitutionality. Ultimately, the Senate had not reached such a conviction. It was crucial to bear in mind that the legislature, which is endowed with broad discretion in its assessment and policy-making, continued to regard a functioning taxi industry as necessary for safeguarding public services in the transport sector in the context of the most recent Act on the Modernisation of Passenger Transport Law of 16 April 2021 (see BT-Drucks. 19/26175, p. 52). Furthermore, the provision on state objectives in Article 20a of the Basic Law, which was only incorporated into the Basic Law in 1994, afforded the legislature considerable discretion. In the most recent amendment to the law, the legislature had made use of this discretion whilst fundamentally retaining the obligation to return, taking climate protection concerns into account, and, in the Senate’s view, did not exceed this scope.

In the next stage of its review, the BGH rejected the reasoning on which the Higher Regional Court of Cologne based its finding that the provision in Section 49(4), third sentence PBefG was compatible with EU law. It finds that this reasoning does not stand up to scrutiny. As regards the legal framework, the BGH refers to and confirms the key principles of the ECJ’s judgment in the ‘Prestige and Limousine’ case. Taking these ‘standards’ into account, the judgment then identifies three errors on the part of the Court of Appeal.

• The distinction emphasised by the Court of Appeal between restrictions on market access and restrictions on the freedom to practise a profession fails to recognise that the ECJ does not make such a distinction in relation to the freedom of establishment. Rather, any measure that renders the exercise of this freedom less attractive constitutes a restriction on the freedom of establishment under Article 49 TFEU. The Federal Court of Justice thereby implicitly confirms that the obligation to return is such a measure.
• The Court of Appeal erred in law by relying solely, and in a reductive manner, on the fact that Member States are entitled to determine the scope and organisation of their services of general economic interest and, in that regard, enjoy a wide margin of discretion. In doing so, the Higher Regional Court of Cologne overlooked the fact that the paragraph of the ECJ judgment to which it itself referred also pointed out that this power of the Member States could not be unlimited and must, in any event, be exercised in accordance with EU law.
• Furthermore, the Court of Appeal had apparently assumed that taxi services in the Federal Republic of Germany, as a service of general economic interest, fell within the sectoral exemption under Article 106(2) TFEU. Correctly, however, there were no indications that German taxi services constituted a service of general economic interest. 

Nevertheless, the BGH subsequently refrains from conducting its own assessment of the compatibility of the obligation to return with the freedom of establishment guaranteed by Article 49 TFEU. It takes the view that the freedom of establishment is not applicable in the specific case in question. 

The provisions of the TFEU on the free movement of persons, the freedom of establishment and the free movement of capital would not apply to a situation in which none of the characteristics extend beyond the borders of a Member State. In the specific circumstances of the case, there was no connecting factor for the application of EU law.

• The claimant and the defendant were German companies with their registered offices in Germany. The dispute concerned exclusively the transport of passengers within Germany. 
• The place of establishment of the intermediary service Uber X was irrelevant, as this would solely concern the freedom to provide services under Article 56(1) TFEU.  
• The proceedings were a civil law dispute which (legally) lead only to a decision that was effective between the parties. The matter would not concern the annulment of provisions that apply not only to German nationals but also to nationals of other Member States. 
• The mere possibility that nationals resident in other Member States had or have an interest in exercising the freedom of establishment in order to offer car-hire services in Germany was not sufficient. Rather, in order to establish a link between the circumstances of the legal dispute and the freedom of establishment, there would need to be clear evidence, such as complaints or legal actions brought by economic operators resident in other Member States or in which nationals of those States were involved. 

VI.  Assessment and Outlook

The BGH summarised the outcome of the decision in the headline of its press release as follows: ‘The obligation to return hire cars booked via Uber X is not subject to assessment under EU law in cases involving purely national circumstances’. This wording already implies the converse conclusion that the obligation to return must necessarily be assessed against EU law if the case is not a purely domestic one. 

According to the BGH, it would be sufficient for this if market participants established in other Member States have lodged complaints or brought legal proceedings, or if nationals of those states are involved. When a decision needs to be made on such a matter in the future, the courts will therefore have to examine whether the obligation to return is compatible with the requirements of EU law as set out by the BGH.

The focus will then be on the requirement – which was already discussed at length during the oral hearing – that restrictions on the freedom of establishment are only permissible if, firstly, they are justified by an overriding reason in the public interest and, secondly, they are proportionate. From the outset, the only compelling reasons of general interest that may be considered are the objectives of the proper organisation of transport, traffic and public spaces, as well as environmental protection. Purely economic motives, such as the aim of ensuring the economic viability of taxi services, are insufficient.  

Consequently, the interpretation prevailing in the reporting on the “Obligation to return VI” ruling – namely that the BGH had confirmed that the obligation to return was compatible with higher-ranking law – falls significantly short of the mark.

Quite the opposite is true. Ultimately, it follows from the grounds of the judgement that the objective of preserving the viability and functionality of the taxi industry – an objective that has been overused in the legal discourse on the obligation to return for decades – has had its day. Within the scope of EU law, this motive cannot justify the obligation to return. 

Note: The law firm HARTE-BAVENDAMM advised the defendant in the proceedings and represented it before the lower courts in Cologne.