The European Court of Justice (ECJ) has ruled that Uber provides a transport service and can be regulated like traditional taxis.
Photo: RNZ / Diego Opatowski
The ride-hailing firm argued it helped people contact each other electronically, and is not a cab firm.
The case arose after Uber was told to obey local taxi rules in Barcelona.
Uber said the verdict would make little difference to the way it operated in Europe, but experts say the case could have implications for the gig economy.
"This ruling will not change things in most EU countries where we already operate under transportation law," an Uber spokesperson said.
"However, millions of Europeans are still prevented from using apps like ours. As our new CEO has said, it is appropriate to regulate services such as Uber and so we will continue the dialogue with cities across Europe."
In its ruling, the ECJ said that a service whose purpose was "to connect, by means of a smartphone application and for remuneration, non-professional drivers using their own vehicle with persons who wish to make urban journeys" must be classified as "a service in the field of transport" in EU law.
"As EU law currently stands, it is for the member states to regulate the conditions under which such services are to be provided in conformity with the general rules of the treaty on the functioning of the EU."
British Trade Union general secretary Frances O'Grady said the verdict meant Uber must "play by the same rules as everybody else".
"Their drivers are not commodities. They deserve at the very least the minimum wage and holiday pay.
"Advances in technology should be used to make work better, not to return to the type of working practices we thought we'd seen the back of decades ago."
The verdict comes after Uber was told last month that the appeal to renew its licence in London could take years, according to Mayor Sadiq Khan.
Uber's presence around the world has often been controversial, with protests staged against it in various cities.
However, Rohan Silva, a tech entrepreneur and former adviser to David Cameron, said the firm has made competitors up their game.
"Millions of people use these ride-hailing apps every day - not just Uber, but dozens of others too. They have brought real benefits, making it cheaper, easier and more convenient to get around the city," he said.
"There has also been a benefit in incumbent London taxi cabs, which are now taking credit cards, which they resisted for years. That is a response to competition."
He added that similar services could soon face regulation as a result of the ECJ ruling.
"There could be big implications for a sharing economy service like Airbnb, which will probably be regulated by the EU," he said.
"What is fascinating about this right now is that different countries are taking very different views. Portugal has legalised Uber and Airbnb, whereas France is clamping down."
Andre Spicer, from the Cass Business School, welcomed the ruling.
"Many people see the EU is actually leading the way in pushing back the almost unlimited power of tech firms and beginning to provide some limits around that, Prof Spicer said.
"We also claim this fosters competition, but what Uber's model is based on is pricing, so much that they basically drove everyone else out of the market.
"This judgement will allow normal competition, so what we will see is lots of other smaller apps appearing around Europe."
- BBC