European Commission launches infringement procedures against two Member States over agreements with Russia on equal treatment of EU airlines and Siberian overflights

On 6 April 2011 the European Commission has launched infringement procedures against Bulgaria and the Czech Republic over their bilateral air service agreements with Russia, sending each of these Member States a formal request for information known as a ‘letter of formal notice’. The Commission is concerned that the agreements may hinder equal treatment of EU airlines and competition between European airlines and provide the basis for Siberian overflight charges that may be illegal under EU anti-trust rules. Similar letters of formal notice have already been sent to 23 other Member States in recent months, and the Commission is now assessing the compliance with EU law of the remaining two Member States’ bilateral aviation agreements with Russia. The fact that European Union airlines have to pay to fly over Siberia on their way to Asian destinations can not only make the flights more expensive, but can also lead to unfair competition between EU and non-EU airlines.

The view of the European Commission is that air transport agreements must treat all EU airlines equally, and respect antitrust rules. Otherwise some EU airlines may be treated less favourably than their direct competitors or face paying unreasonable additional charges which can get passed on to consumers in higher air fares.

The infringement procedure addresses two main issues:

1. Freedom of establishment

Bilateral air service agreements between an individual Member State and a non-EU country have to include an “EU designation clause” recognising that the terms apply equally to all EU airlines, and not just the airlines of that Member State. This is an essential part of the Single European Aviation Market which was created in the early 1990s, guaranteeing that airlines are entitled to operate under the same conditions anywhere in the EU. The requirement to have an “EU designation clause” was confirmed in the “Open Skies rulings” of the Court of Justice in 2002 (see IP/02/1609). The Court stated that provisions limiting the benefits of air service agreements to nationals of the Member State concerned are in breach of EU rules on freedom of establishment (now laid down in Article 49 of the Treaty on the Functioning of the EU).

Most agreements with non-EU countries have since been adapted to the Court ruling. Russia is one of the few countries in the world that fails to recognise that all EU carriers must be treated equally, and that the terms of any bilateral agreement must include an “EU designation” clause and apply to all. This creates serious practical problems, putting at risk traffic rights, for example, for airlines taken over by a carrier from another EU Member State.

2. Siberian overflight charges

Designated EU airlines are obliged to pay Siberian overflight charges for routes to many Asian destinations. It is estimated that in 2008 alone, the EU carriers concerned paid around USD 420 million in charges – most of it directly to the Russian airline Aeroflot. The Commission is concerned that this is in breach of EU antitrust law whereby airlines should not be forced into concluding a commercial agreement with a direct competitor. The Commission is also concerned that this is in breach of international law (Chicago Convention). These bilateral agreements also impose different conditions on EU airlines depending on the country they are based in, which creates an additional distortion of competition. In the end, passengers risk having to pay more for their flights than they would otherwise need to.

Next steps

Member States have two months to respond to the letters of formal notice. If they fail to react satisfactorily the Commission will send a reasoned opinion requesting the Member States in question to amend their bilateral air service agreements with Russia.

Letters of formal notice were already sent in October 2010 to Austria, Finland, France and Germany (see IP/10/1425), in January 2011 to Belgium, Denmark, Italy, Luxembourg, The Netherlands, Sweden and the UK (see IP/11/74), in February 2011 to Cyprus, Ireland, Poland, Portugal, Slovakia and Spain and in March 2011 to Estonia, Greece, Hungary, Lithuania, Malta and Slovenia (see IP/11/298).

The Commission is actively assessing the compliance with EU law of the bilateral air service agreements that the remaining two Member States have with Russia.

For more information on EU infringement procedures, see MEMO/11/220

Source: DG Mobility and Transport