European Court Cases Test "Open Skies" Agreements with U.S.

MAY 8, 2001

[Editor's note: The outcome of these cases will have important consequences for the stand-off between the U.S. and the European Commission on the issue whether jet aircraft retrofitted with ineffective "hush kits" to meet current international aircraft noise standards will be able to land at European airports.]

On Tuesday 8 May, an oral hearing will take place before the European Court of Justice on the legal cases brought by the European Commission against seven countries that have concluded bilateral "Open Skies" agreements with the United States in the field of air transport (Austria, Belgium, Denmark, Finland, Germany, Luxembourg, Sweden), as well as against the United Kingdom, which has also opened its market to the US carriers in the Bermuda II agreement.

The cases were originally submitted to the Court in December 1998 and written submissions in which the parties set out their arguments have been exchanged. In October 1999 the Netherlands decided to join the cases in support of the other member states.

After the oral proceedings the parties will need to await the opinion of the Advocate-General before the final ruling of the Court is announced.

The Commission is examining the scope for further legal action against the Netherlands (in its own right), France, Italy, and Portugal, all of which have also concluded bilateral agreements with the United States in recent years.

The Commission's Position

In 1992 the member states of the European Union agreed to create a single market in air transport. This meant liberalizing aviation and allowing all European airlines to fly passengers and goods throughout the EU. This liberalization created a single European market for air transport and gave all airlines established inside the EU equal rights under the law.

The Commission takes the view that the member states of the European Union should not now enter into a bilateral agreement with countries from outside the EU on an individual basis since such agreements:

a. affect the way the single market operates, for example, by allowing foreign air carriers to enter the internal European market. Airlines have to meet strict criteria to gain their status as European carriers and they should not face unfair competition from external carriers that do not meet those criteria, or which operate in a protected environment at home;

b. give airlines from one member state unfair competitive advantages over airlines from other member states, in particular, by allocating air traffic rights to foreign destinations on the basis of nationality, which negates the very essence of the internal market. The nationality rules hamper competition between European airlines by limiting each airline to its national market only and prevent the European industry from consolidating into more economic international businesses.

Given that there is a single European domestic market and that all European airlines should have equal rights to fly passengers and cargo, the Commission considers that negotiations with foreign countries cannot be negotiated by every member state and that the resulting agreements should provide all European airlines with equal rights and benefits.

The Agreements with the United States

All the agreements being challenged by the Commission are bilateral agreements between individual EU member states and the U.S. Moreover, all bar one of the agreements is a full "Open Skies" agreement which comprehensively liberalises air transport, including the right to fly onwards from the destination to a third country (known as "fifth freedom traffic rights"). The UK agreement is more restrictive than the "Open Skies" arrangements, but only in respect of Heathrow and Gatwick. For all other airports it contains similar elements that affect the single market and prevent European airlines from competing on an equal footing with their British counterparts.

The Commission respects the general liberalization objective of these bilateral agreements, but believes that by negotiating separately, the EU member states concerned have given US airlines considerable access to the domestic European market without gaining rights of equivalent value for European airlines in the United States. For example, while US carriers can fly freely from any point in the US to almost any point in the EU under this patchwork of agreements, European airlines can only fly to US destinations from their home country. Moreover, while US airlines can use their "fifth freedom" rights to fly between two member states of the EU, European airlines cannot fly in between different destinations within the US.

The Commission believes that in the case of negotiations with the United States, the only way for the EU to achieve a more balanced outcome is by pooling the negotiating leverage of all EU member states together. This joint approach, under which the EU speaks with a single unified and powerful voice, is now used in virtually all major international trade negotiations to good effect and the Commission sees no rationale for air transport to be approached in a different manner. The Commission, with the support of all Europe's major airlines, has developed a concept for a full EU-US agreement that would aim to create a fully liberalized market and open-up international investment in airlines. The Commission is awaiting the political go-ahead from the member states to open discussions with the US on this "Transatlantic Common Aviation Area".

Source: Green Skies Network, Tim Johnson