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13
jan

Newsletter January 2012: Newsletter FLO – Aviation

 

Arthur Flieger, Attorney of Law Flieger Law Office bvba

With the cooperation of Stijn Brusseleers, Attorney of Law Flieger Law Office bvba

 

EU ETS – judgment of the Court Grand Chamber December 21, 2011 – EU ETS endorsed by the European Court of Justice – and what about African States

 

A.Retroacts

The EU ETS scheme was launched in 2005 as one of the pillars of the bloc’s efforts to combat climate change. From January 1, 2012 all airlines using EU airports are included in it.

In 2011 some airlines stared a legal battle, which gave the European Judges the opportunity to investigate the issues brought up in the frame from a preliminary query.

Unfortunately the Court can’t go beyond the query, but in our view the were other points which could have been brought up, but this is not the forum to discuss possibilities the more that in our view the carbon issue should be solved on a merely international level at ICAO.

The December 2011 decision of the Court represents an European legal interpretation of EU ETS, and one will have to wait now the position of non-European states and their view on it, as well its legal and political acceptability. One will have noticed going global opposition, but at this stage it seems that many non European airlines , f.i. , the US carriers note they will comply with EU ETS but ‘under protest’

I.

The Court gives a very interesting legal description of the several points brought up in the reference for a preliminary ruling, and describes fast the circumstances in which principles of customary international law and provisions of international treaties may be relied upon in the context of a reference for a preliminary ruling on the validity of a measure and, secondly, the validity in the light of international treaty law and customary international law of the EU ETS Directive ( Directive 2008/101/EC amending directive 2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community.

II

The Court describes the legal context as follows to:

 

International law:

– The Chicago Convention

– The Kyoto Protocol

– The Air Transport Agreement between the European Community and the United States – Open Skies Agreement

 

European Union Law

– Directive 2003/87 EC

– Directive 2008/101/EC

National Law

– UK law which did transpose the EU ETS Directive

III.

The United Nations Framework convention on Climate Change, adopted on May 9th, 1992 has the ultimate objective of achieving stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. On December 11th, 1997 the parties to the Framework Convention adopted the Kyoto Protocol to the United Nations Framework Convention on Climate Change which entered into force on February 16th, 2005. The European Union is a party to both those instruments.

The purpose of the Kyoto Protocol is to reduce, during the period 2008 to 2012, overall emissions of six greenhouses gases, including carbon dioxide CO2 to at least 5% below 1990 levels. The parties to the Framework convention commit themselves to ensuring that their greenhouse gas emissions do not exceed to percentages assigned to them by the Kyoto Protocol. The overall commitment entered into by the European Union and its Member States under the Kyoto Protocol relates to a total reduction of greenhouse gas emissions during the period mentioned above to 8% below their 1990 levels.

 

The Kyoto Protocol provides that the parties included in annex 1 shall pursue a limitation or a reduction of emissions of greenhouse gases not controlled by the Montreal Protocol from aviation and marine bunker fuels, working through the ICAO and the International Maritime Organisation.

IV.

Then in respect to the case itself the reference is made to national law more especially to UK Law. One will keep in mind that this matter has been brought before the Court of Justice by a preliminary ruling from the High Court of the Justice of England and Wales, Queens Bench division.

Actually the questions which were brought to the Court for a preliminary ruling are:

(1) Are any or all of the following rules of international law capable of being relied upon in this case to challenge the validity of directive 2003/87/EC as amended by Directive 2008/101/EC so as to include aviation activities within the EU Emissions Trading Scheme:

(a) the principle of customary international law that each State has complete and exclusive sovereignty over its airspace;

(b) the principle of customary international law that no State may validly purport to subject any part of the high seas to its sovereignty;

(c) the principle of customary international law of freedom to fly over the high seas;

(d) the principle of customary international law (the existence of which is not accepted by the Defendant) that aircraft overflying the high seas are subject to the exclusive jurisdiction of the country in which they are registered, save as expressly provided for by international treaty;

(e) the Chicago Convention ( in particular Articles 1,11,12,15 and 24);

(f) the Open Skies Agreement ( in particular Articles 7,11(2)(c) and 15(3);

(g) the Kyoto Protocol ( in particular, Article 2(2);

 

B. The consideration of the questions referred

I.

The Court of justice confirms it has alone jurisdiction to determine that an act of the European Union, such as Directive 2008/101, is invalid or not (1)

 

The international treaties relied upon

The European Union institutions which have power to negotiate and conclude an international agreement are free to agree with the third States concerned what effect the provisions of the agreement are to have in the internal legal order of the contracting parties. Only if that question has not been settled by the agreement does it fall to be decided by the courts having jurisdiction in the matter, and in particular by the Court of Justice, in the same manner as any question of interpretation relating to the application of the agreement in het European Union.

 

It follows that the validity of an act of the European Union may be affected by the fact that it is incompatible with such rules of international law. Where such invalidity is pleaded before a national court, the Court of Justice ascertains whether certain conditions are satisfied in order to determine whether the validity of the European Union law concerned may be assessed in the light of the rules of international law relied upon

 

Three points:

1) The European Union must be bound by those rules;

2) The Court of Justice can examine the validity of an act of European Union law in the light of an international treaty only where the nature of the broad logic of the international treaty do not preclude this;

3) Where the nature and the broad logic of the treaty in question permit the validity of the act of the European Union law to be reviewed in the light of the provisions of the treaty, it is also necessary that the provisions of that treaty which are relied upon for the purpose of examining the validity of the act of the European Union law appear, as regards their content to be unconditional and sufficiently precise.

Such a condition if fulfilled where the provision relied upon contains a clear and precise obligation which is not subject, in its implementation or effects, to the adaption of any subsequent measure.

a) The Chicago Convention

It is undisputed that the European Union is not a party to the Chicago Convention, while all of its Member States are contracting parties.

The TFEU implies a duty on the part of the European institutions of the European Union not to impede the performance of the obligations of Member States, which stem from an agreement prior to 1 January 1958. The institutions have a duty however to permit the Member States concerned to perform their obligations under a prior agreement and does not bind the European Union as regards the third States party to that agreement. Indeed, in order for the European Union to be capable of being bound to the Chicago Convention, it must have assumed, and thus had transferred to it, all the powers previously exercised by the Member States that fall within the convention in question. Therefore, the fact that one or more acts of European Union law may have the object or effect of incorporating into European Union law certain provisions, that are set out in an international agreement which the European Union has not itself approved is not sufficient for it to be incumbent upon the Court to review the legality of acts of European Union law in the light of that agreement.

Nevertheless, whilst it is true that the European Union has in addition acquired certain exclusive powers to agree with third States falling within the field of application of the European Union legislation on international air transport and consequently, of the Chicago Convention, that does not mean that it has exclusive competence in the entire field of international civil aviation as covered by that convention.

 

The court concludes that since the powers previously exercised by the Member states in the field of application of the Chicago Convention have not to date been assumed in their entirety by the European Union, and that the latter is not bound by that convention.

The Court concludes that in the context of the actual reference for a preliminary ruling it cannot examine the validity of Directive 2008/101 in the light of the Chicago Convention.

b) The Kyoto Protocol

By the Decisions 94/69 and 2002/358 the European Union has approved the Kyoto Protocol. Its provision form an integral part of the legal order of the European Union as from its entry into force (2).

The Court determines whether the nature and the broad logic of the Kyoto Protocol do not preclude an examination of validity of Directive 2008/101 and whether additionally, its provisions in particular Article 2(2), appear, as regards their content, to be unconditional and sufficiently precise so as to confer on persons subject to European Union law the right to rely thereon in legal proceedings in order to contest the legality of an act of European Union law such as that directive .

Article 2(2) of the Kyoto protocol provides that the parties thereto are to pursue limitation or reduction of emissions of certain greenhouse gases from aviation bunker fuels, working through the ICAO. Thus, that provision, as regards its content, cannot in any event be considered to be unconditional and sufficiently precise so as to confer on individuals the right to rely on it in legal proceedings in order to contest the validity of Directive 2008/101. Therefore in the view of the Court the Kyoto Protocol cannot be relied upon in the context for a preliminary ruling for the purpose of assessing the validity of Directive 2008/101

c) The Open Skies Agreement

The Open Skies Agreement has been approved on behalf of the European Union by the Decisions 2007/339 and 2010/465. Its provisions form an integral part of the legal order of the European Union as from its entry into force.

The Court examines whether provisions of the Open Skies Agreement that are mentioned by the referring court ( article 7; article 11; article 15(3) in conjunction with article 2 and 3(4) as regards to their content, to be unconditional and sufficiently precise, so as to enable the Court to examine the validity of directive 2008/101 in the light of those particular provisions.

The Court comes to the conclusion that article 7; article 11 and article 15(3) in conjunction with article 1 and 3(4) contains an unconditional and sufficiently precise obligation that may be relied upon for the purpose of assessing the validity of the Directive 2008/101.

d) Customary law

The Court describes the status quaestionis in a very clear way, and concludes that only principles and provisions of international law – mentioned by the referring court – that can be relied upon , for the assessing the validity of Directive 2008/101 are :

A.

within the limits of review as to a manifest error of assessment attributable to the European Union regarding its competence, in the light of those principles, to adopt that directive:

 

– the principle that each State has complete and exclusive sovereignty over its airspace,

– the principal that no State may validly purport to subject any part of the high seas to its sovereignty,

– the principal which guarantees freedom to fly over the high seas,

 

B.

– Articles 7 and 11(1) and (2)(c) of the Open Skies Agreement,

– Article 15(3) of that agreement read in conjunction with articles 2, 3(4).

 

Since the parties in this case are airlines registered in a third State it should, according to the Court, be first determined whether and to what extent Directive 2008/101 applies to those parts of international flights that are performed outside the airspace of the Member States by such airlines, and then the directive’s validity should be examined.

Scope ratione loci of Directive 2008/101

It is clear that Directive 2008/101 applies without distinction to flights arriving in or departing from the territory of the European Union, including those from on or to aerodromes situated outside the territory(3) The Directive is not intended to apply as such to international flights flying over the territory of the Member States of the European Union or of third States when such flights do not arrive at or depart from an aerodrome situated in the territory of a Member State.

It has also to be stressed that where a flight that departs from an aerodrome situated in the territory of a third State does arrive at an aerodrome situated in a territory of one of the Member States of the European Union, or where the destination of a flight departing from such an aerodrome is an aerodrome situated in a third State, it is clear that the aircraft operators performing such flights must report their emissions.

In laying down a criterion for Directive 2008/101 to be applicable to operators of aircrafts registered in a Member State or in a third State that is founded on the fact that those aircraft perform a flight which departs from or arrives at an aerodrome situated in the territory of one of the Member States, t Directive 2008/101, inasmuch as it extends application of the scheme laid down by Directive 2003/87 to aviation, does not infringe the principle of territoriality or the sovereignty which the third States from or to which such flights are performed have over the airspace above their territory, since those aircraft are physically in the territory of one of the Member States of the European Union and are thus subject on that basis to the unlimited jurisdiction of the European Union.

Such application of European law does not affect the principle of freedom to fly over the high seas since an aircraft flying over the high seas is not subject to the allowance trading scheme. Such an aircraft can, in certain circumstances, cross the airspace of one of the Member States without its operator thereby being subject to that scheme. It is only if the operator of such an aircraft has chosen to operate a commercial air route arriving at or departing from an aerodrome situated in the territory of a Member State that the operator, because its aircraft is in the territory of that Member State, will be subject to the allowance trading scheme.

As for the fact the operator of an aircraft in such a situation is required to surrender allowances calculated in the light of the whole of the international flight that its aircraft has performed or is going to perform form or to such an aerodrome, it must be pointed out that, as European Union policy on the environment seeks to ensure a high level of protection in accordance with Article 191(2) TFEU, the European Union legislature may in principle choose to permit a commercial activity, in this instance air transport, to be carried out in the territory of the European Union only on condition that operators comply with the criteria that have been established by the European Union and are designed to fulfil the environmental protection objectives which it has set for itself, in particular where those objectives follow on from an international agreement to which the European Union is a signatory, such as the Framework Convention and the Kyoto Protocol.

The Court decides that the European Union had competence in the light of the principles of customary international law to adopt Directive 2008/101, in so far as the Directive extends the allowance trading scheme to all flights which arrive at or depart from an aerodrome situated in the territory of a Member State.

The court also decides that there is no infringement by the Directive 2008/101 of article 7 of the Open Skies Agreement, and didn’t follow the plaintiff’s argumentation:

the plaintiffs in this case contend that Directive 2008/101 infringes Article 7 of the Open Skies Agreement since , so far as it concerns them , Article 7 requires aircraft engaged in international navigation to comply with the laws and regulations of the European Union only when the aircraft enter or depart from the territory of the Member States or, in the case of its laws and regulations relating to the operation and navigation of such aircraft, when their aircraft are within that territory. The claimants maintain that Directive 2008/101 seeks to apply the allowance trading scheme laid down by Directive 2003/87 not only upon entry of aircraft into the territory of the Member States or on their departure from that territory, but also to those parts of flights that are carried out above the high seas and the territory of third States.

Here the Court pinpoints and recalls that Directive 2008/101does not render Directive 2003/87 applicable as such to aircraft registered in third States that are flying over third States or the high seas. It is only if the operators of such aircraft choose to operate commercial air routes arriving at or departing from aerodromes situated in the territory of the Member States that, because their aircraft use such aerodromes, those operators are subject to the allowance trading scheme.

Directive 200/101 provides that Directive 2003/87 is to apply to flights which arrive at or depart from an aerodrome situated in the territory of a Member State. Thus, since that legislation relates to the admission to or departure from the territory of the Member States of aircraft engaged in international air navigation, both European and transatlantic, it is clear from the very wording of article 7(1) of the Open Skies Agreement that such legislation applies to any aircraft utilised by the airlines of the other party to that agreement and that such aircrafts are required to comply with that legislation.

According to the Court there is also no infringement of article 11(1) and (2) (c) of the Open Skies Agreement. The ultimate objective of the allowance trading scheme is the protection of the environment by means of reduction of greenhouse gas emissions. In its perusal and analysis of the Directive and its implication the Court concludes that in contrast to the defining feature of obligatory levies on the possession and consumption of fuel, there is no direct and inseverable link between the quantity of fuel held or consumed by an aircraft and the pecuniary burden on the aircraft’s operator in the context of the allowance trading scheme’s operation. The actual cost of the operator, resulting from the number of allowances to be surrendered, a quantity which is calculated inter alia on the basis of fuel consumption, depends, inasmuch as a market-based measure is involved, not directly on the number of allowances that must be surrendered, but on the number of allowances initially allocated to the operator and their market price when the purchase of additional allowances proves necessary in order to cover the operator’s emissions. Nor can it be ruled out that an aircraft operator, despite having held or consumed fuel, will bear no pecuniary burden resulting from its participation in the allowance trading scheme, or will even make a profit assigning its surplus allowances for consideration.

 

The Courts concludes that the EU ETS Directive is not intended to generate revenue for the public authorities, does not in any way enable the establishment, of an amount that must be payable per tonne of fuel consumed for all the flights carried out in one calendar year. The Court cannot assert that the EU ETS Directive involves a form of obligatory levy in favour of the public authorities that might be regarded as constituting a customs duty, tax, fee or charge on fuel held or consumed by aircraft operations.

 

 

In respect to Article15(3) of the Open Skies Agreement, the Courts states that Directive 2008/101 is not invalid in the light of said article ( read in conjunction with Article 2 and 3(4) .

This decision will be the basis for the outcome of the case brought in before the High Court of Justice of England and Wales

 

Conclusion and remarks , and what about the African States

 

I.

The decision may reflect European confidence in European plans, however it is our opinion that there are still some other possibilities to challenge the EU ETS, if any party will do so. However- in our view – a formal solution should be sought on ICAO level. One will also have to stress that India and China is reported to have instructed its airlines not to comply, and similar legislation is moving to the US Congress H. Probably the EU ETS in the USA will take some measures in the course of 2012 if there is no change, which will apply that there might be an air war between the several continents.

However it should also be noted that some countries do not like the European approach but are not going to do anything to reduce emissions….and aircarriers in non EU countries , despite the fact they are against the scheme are adding a surcharge on fares between their country and the EU , as a move that would help to offset the cost of the scheme.

Reading the decision of the Court one may try with other legal arguments to challenge the scheme.

 

II.

African States view as well with great concern the unilateral imposition of the EU ETS on non EU carriers. Their position is that the Directive 2008/101 is an action contrary to the provisions of the Kyoto Protocol. In their view, as well of others, there is a need to comply with the United Nations Framework on Climate Change principle of common but differentiated responsibilities and capabilities. It will lead us to far to go into details about the interesting African States point of view, but we do refer to the ICAO Assembly 36th session, Agenda Item 17: Environmental protection, Working Paper: Environment and Emission Trading Charges ( Presented Nigeria on behalf of African States)(4).

The future will show how the non European aviation community will react on the EU ETS Directive, and on the decision of the Court. Maybe ICAO has to decide on the matter. Third countries affected by this Directive that are contracting States to the Chicago Convention may take recourse to the ICAO Council as an arbitration body to appeal the inclusion of GHG emissions from international aviation in the EU emission allowance trading scheme.

Hopefully the commitment to develop a framework based on the 15 principals agreed the 37th assemble in 2010 at ICAO might lead to a possible solution at the 38th ICAO assemble in 2013.

 

For further information and comment, please contact Arthur Flieger at Flieger@fliegerlaw.com, Website: www.fliegerlaw.com, telephone: +32 3 238 77 66

 

 

 

 

Notes:

1. Case 314/85 Foto-Frost (1987) ECR 4199, paragraph 17; Joined Cases C-143/88 and C-92/89 Zuckerfabrik Süderdithmarschen and Suckerfabrik Soest (1991) ECR I-415, paragraph 17; Case C-6/99 Greenpeace France and Others (2000) ECR I-1651, paragraph 54; IATA and ELFAA, paragraph 27; and Joined Cases C-188/10 and C-189/10 Melki and Abdeli (2010) ECR I-5667, paragraph 54

2. Case 181/73 Haegeman (1974) ECR 449, paragraph 5

3. Recital 16 preamble Directive 2008/101.

4. ICAO A36-WP/251

 

 

 

 

Copyright: A. Flieger