Wed 21 Dec 2011 – As expected, the European Court of Justice has ruled the EU has complied with both international customary law and the EU-US air agreement in including non-EU airlines serving European airports into its Emissions Trading Scheme (EU ETS). The case has been brought by the Air Transport Association, now Airlines for America, and three leading US airlines who argued that their inclusion infringed principles of sovereignty, the Chicago Convention and the Kyoto Protocol, and was also not in compliance with the Open Skies Agreement. The judges have agreed with the Opinion delivered by Advocate General Kokott in October, which will come as no surprise to many following the case. With little over a week before the EU ETS formally includes airlines into the scheme, the US Secretary of State, Hillary Clinton, has joined in the row by urging the EU to halt or review its plans.
The case was originally brought by the US airlines and their trade body in 2009 and was first heard in the High Court of England and Wales, as the airlines concerned are administered under the EU ETS by the UK. The High Court referred it to the ECJ in order to test the legal validity of whether the EU Directive including aviation into the EU ETS complied with international law.
The ruling by the judges appears to back the EU on all the arguments, including that the EU itself is not bound by the Chicago Convention as it is not a signatory – those obligations rest with its member states, it concludes. On the sovereignty issue – whether the EU has a right to apply its laws outside its airspace – the judges said the EU is not attempting to govern what airlines do outside its territory and the Directive only applies to airlines that choose to operate to EU airports and are thus subject to EU jurisdiction.
“Nor can such application of EU law affect the principle of freedom to fly over the high seas since an aircraft flying over the high seas is not subject, in so far as it does so, to the emissions trading scheme,” says the judgement.
As EU environment policy aims at a high level of protection, the EU has the right, says the ruling, to permit a commercial activity, in this instance air transport, to be carried out in its territory only on condition that aircraft operators comply with EU criteria.
“Furthermore,” it adds, “the fact that certain matters contributing to the pollution of the air, sea or land territory of the member states originate in an event which occurs partly outside that territory is not such as to call into question, in the light of the principles of customary international law capable of being relied upon, the full applicability of EU law in that territory.”
Taxes or duties on international aviation fuel are not permitted either under the Chicago Convention or the Open Skies Agreement but the ruling finds that there is no direct link between consumption of fuel and a market-based measure such as the EU ETS.
“The uniform application of the scheme to all flights which depart from or arrive at a European airport is consistent with the provisions of the Open Skies Agreement designed to prohibit discriminatory treatment between American and European operators,” concludes the ruling.
The case will now be referred back to the High Court in London for a final ruling and although many will consider this a formality, Airlines for America (A4A) said the ECJ decision would not mark the end of the case and was reviewing possible options to pursue in the English court.
“At the same time, the US government and dozens of others around the world are increasing pressure on the EU to come back to the table to consider a global sectoral approach,” said A4A in a statement issued after the ECJ ruling. “In the meantime, A4A members will comply under protest and will continue to operate safely and efficiently to Europe when the scheme takes effect January 1.”
Compliance with the EU ETS could become an impossibility for US carriers, however, if a proposed US bill before the Senate to prohibit them from doing so passes through the US legislative process.
A4A reiterated its argument that aviation greenhouse gas emissions should be regulated on a global sectoral basis and that the EU ETS was an “exorbitant” tax that took away funds that airlines needed to invest in fuel-efficient aircraft technology, sustainable aviation fuels and infrastructure advances.
“Today’s court decision further isolates the EU from the rest of the world and will keep in place a unilateral scheme that is counterproductive to concerted global action on aviation and climate change,” it said. “The court did not fully address legal issues raised and has established a damaging and questionable precedent by ruling that the European Union can ignore the Chicago Convention and other longstanding international provisions that have enabled governments around the world to work cooperatively to make flying safer, more secure and to reduce aviation’s environmental footprint.”
On the other hand, the ECJ ruling will be welcome relief for the embattled European Commission, and the Aviation EU ETS can now go ahead as planned on January 1. However, fierce political opposition from outside Europe remains undiminished.
According to a Financial Times report, US Secretary of State Hillary Clinton wrote last week to her EU counterpart, Catherine Ashton, and other EC commissioners to “strongly urge” the EU to halt its plans to include US airlines into the EU ETS “or face appropriate action”.
EU Climate Commissioner said there would be no backing down on the issue. “We know their views. They know our views,” she told the newspaper.
The US Department of Transportation has just made the first move in retaliatory measures by ordering nine EU airlines serving the United States to submit traffic and emissions allowance data related to the EU ETS, a move that could see the airlines facing financial penalties in due course (see article).
In anticipation of the ruling and the growing political pressure, three European airline trade associations yesterday issued a joint statement that expressed strong concerns over the international political tension and the impact it could have on them.
“Europe’s major trading partners are sending a very strong message to the European Commission that this problem will not simply go away,” said Sylviane Lust, Director General of the International Air Carriers Association (IACA). “Sadly, the debate has moved from the environmental agenda to politics – we want to see that change reversed.”
Ulrich Schulte-Strathaus, Secretary General of the Association of European Airlines (AEA), said that even if the ECJ ruled the EU ETS conformed with EU law, it would not resolve non-European hostility. “This political face-off will not be solved in European courts, but in Montreal, through ICAO.”
The Director General of the European Regions Airline Association (ERA) expressed concern that European airlines could get caught in the political cross-fire and be at a competitive disadvantage. “If these tensions erupt into full-scale trade conflict, there will be no winners – least of all the environment,” he said. “Political conflict does not cut emissions. However, global political will can.”
The British Air Transport Association (BATA) said UK airlines would be looking to the UK government to ensure they were not subject to retaliatory action by states opposed to the EU scheme.
“UK airlines have consistently supported the introduction of the EU ETS as the first step in the development of a global emissions trading scheme,” commented BATA Chief Executive Simon Buck. “However, the world’s politicians have failed to agree to such a global system. BATA notes the decision of the Court of Justice but remains concerned at the growing signs that including aviation in the EU ETS could lead to a damaging trade war that is in no one’s interests.”
The International Air Transport Association (IATA), which supported the A4A action, said the ECJ decision represented a European legal interpretation and it was now a case of how non-European states viewed its legal and political acceptability.
“Today’s decision is a disappointment but not a surprise. It does not bring us any closer to a much-needed global approach to economic measures to account for aviation’s international emissions. Unilateral, extra-territorial and market distorting initiatives such as the EU ETS are not the way forward. What is needed is a global approach agreed through ICAO,” said Tony Tyler, IATA’s Director General and CEO.
“The ECJ decision may reflect European confidence in European plans. But that confidence is by no means shared by the outside world where opposition is growing.”
The ruling was welcomed, however, by a transatlantic coalition of six environmental groups which had intervened on the side of the EU in the case.
“Today’s decision, from the highest court in the European Union, makes clear Europe’s innovative law to reduce emissions from international flights is fully consistent with international law,” said a coalition statement. “It [also] makes clear that existing law bars precisely the discriminatory treatment of airlines that the United States and others are calling for, and that the US-EU Open Skies Agreement specifically provides for this type of action when pursued for environmental purposes.”
Annie Petsonk, International Counsel at the Washington DC-based Environmental Defense Fund, said: “It is high time airlines actually live up to their green claims and comply with the EU law, which will cut pollution and spark low-carbon innovation. Americans invented the airplane, now it’s time for us to create climate-friendly skies.”
Keith Allott, Head of Climate Change at WWF-UK, commented: “Today’s verdict is a victory for European law and environmental leadership. The Scrooges who have claimed that it is illegal to include international airlines in the ETS have been proved wrong. We hope that aviation industry lobbyists will now divert their energies into securing an ambitious global agreement to tackle the sector’s soaring emissions rather than trying to tear down the ETS, one of the few building blocks we have.
“The EU can now press ahead with implementing the scheme, and European governments must deliver on the aim that ETS revenues should be ring-fenced for action on climate change in developing countries. That would be a real win-win and the best Christmas present of all.”
Update Dec 22:
Commenting on the outcome of the ECJ ruling, Krishna Urs, Assistant Secretary for Transportation Affairs at the US Department of State, said: “The US Government is not a party to the case. Nonetheless, we have been monitoring it closely. We continue to have strong legal and policy objections to the inclusion of flights by non-EU air carriers in the EU ETS. We do not view the Court’s decision as resolving these objections.
“The United States strongly supports the goal of combating climate change and reducing GHG emissions from international aviation. We urge the EU to work with its international partners in the International Civil Aviation Organization to address the valid concerns that have been raised by the international community.”
Update Dec 23:
Nine US environmental organisations have written to Hillary Clinton, Secretary of State, and Ray LaHood, Secretary of Transportation, urging them to respect to the ECJ decision, to refrain from escalating the US-EU dispute and to work with the EU in clearing the ICAO “logjam”. The letter can be downloaded here (pdf).
Expressing its concerns over the dispute, the Association of Asia Pacific Airlines (AAPA) called for renewed political dialogue. AAPA Director General Andrew Herdman said: “The EU has painted itself into a corner, by stubbornly refusing to recognise the legitimacy of the concerns repeatedly voiced by foreign governments on this issue, apparently in the mistaken belief that no one will call their bluff. But the problem cannot be wished away.
“We urge the EU to scrap plans to include foreign airlines within the EU ETS, rethink its position and re-engage with the international community. This dispute needs to be resolved through constructive political dialogue, rather than embarking on a bruising trade war. AAPA strongly urges all governments to work within the auspices of ICAO towards an effective multilateral agreement on a global, sectoral framework on aviation and the environment, and to refrain from introducing duplicative measures, including the imposition of arbitrary taxes that deliver no real environmental benefit.”
European Court of Justice – press statement on ruling (pdf)
European Court of Justice – full judgement
European Commission – Aviation EU ETS
Airlines for America press statement
European airlines press statement
IATA press statement
BATA press statement (pdf)
Environmental group coalition press statement
AAPA press statement
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