France is entitled to bring criminal proceedings against local managers of ride-hailing app Uber for running an illegal taxi service, the EU top court ruled on Tuesday, dealing the Silicon Valley start-up another legal setback.

"Member states may prohibit and punish, as a matter of criminal law, the illegal exercise of transport activities in the context of the UberPOP service, without notifying the Commission in advance of the draft legislation," the Court of Justice of the European Union (ECJ) said in a statement.

The case concerned Uber's use of unlicensed drivers as part of its UberPOP service in France, which has since been suspended.

Uber had argued that France should have sought the European Commission's approval of its proposed taxi law - something it did not do - and that therefore the criminal charges brought against two of the company's French managers were not valid.

Under EU law, national legislation affecting digital services needs to be pre-notified to Brussels to ensure it is not distorting the single market.

The ECJ said that since Uber was offering a transport service under EU law the obligation to notify the Commission in advance did not apply.

Uber has faced regulatory and legal setbacks around the world amid opposition from traditional taxi services. It has been forced to quit countries such as Denmark and Hungary.

Last year, London deemed Uber unfit to run a taxi service and stripped it of its license to operate. Uber is appealing against the decision.