ECJ Decision: Now What?

Posted on December 29, 2011 by Susan Cooke

According to news reports of the December 21 opinion rendered by the European Court of Justice, the ECJ’s decision upheld imposition of the European Union’s Emission Trading Scheme (“ETS”) upon non-EU airlines that take off or land at airports in an EU member state.  However, those news reports fail to note what the ECJ did not decide.

In December 2009 the Air Transport Association of American and three US member carriers brought suit in the UK against the UK Secretary of State for Energy and Climate Change to reverse inclusion of non-EU airlines in the EU ETS.  They argued that such inclusion violated the US/EU Open Skies Agreement precluding the signatories from imposing import restrictions, taxes, duties, and similar fees and charges on fuel used by air carriers in international air transport.  They also argued that such inclusion violated the Chicago Convention and the Kyoto Protocol.

The Chicago Convention provides for adoption of international standards and recommended practices on air navigation “safety, regularity, and efficiency” by the International  Civil Aviation Organization (ICAO), a United Nations specialized agency that oversees civil aviation.  The ICAO has adopted aircraft noise and engine emission standards in Annex 16 to the Convention.  The Chicago Convention also provides for resolution of signatory country disagreements over interpretation or application of the Convention and its Annexes by decision of the ICAO Council which can then be appealed to an arbitral tribunal or to the Permanent Court of International Justice (now the International Court of Justice).  The Kyoto Protocol in turn provides for signatory states to address limitations on or reductions to greenhouse gas emissions from aircraft fuels through the ICAO.

For several years member signatories to the Chicago Convention have been considering mechanisms to address greenhouse gas emissions from commercial carriers.  Spurred on by EU plans to impose its ETS on non-EU airlines, the ICAO hopes to have a mechanism in place by the end of 2012 for ICAO decisionmaking at its 2013 meeting.  At the present time a number of market based mechanisms are being considered, including some form of emission trading, carbon taxes on fuel use, levies on departing passengers and cargo, and carbon offsets.  The EU has said that it would exempt non-EU carriers from the EU ETS if they adopt “equivalent” measures.

In its decision the ECJ concluded, in the context of the UK court’s preliminary ruling, that it cannot examine the validity of the ETS under the Chicago Convention because the EU (as opposed to the EU member states who would perform their obligations under that Convention) was not a signatory to, and thus not bound by, the Chicago Convention.  It also concluded that the Kyoto Protocol provisions for addressing greenhouse gas emissions from aviation fuel through the ICAO “cannot . . . be considered to be unconditional and sufficiently precise” to be relied upon by the plaintiffs in contesting application of the EU ETS.  Thus, its rulings were limited to consideration of the Open Skies Agreement and customary international law.  With respect to the former, the ECJ concluded that the tax and fee exemption for aircraft fuel used by carriers engaged in international travel between the EU and the US does not prohibit implementation of the EU ETS.  The court likewise concluded that the EU Directive imposing the ETS was valid under customary law principles.

It remains to be seen what path the plaintiffs, or other interested countries or carriers, may choose to take regarding the court’s interpretation of the Open Skies Agreement and customary international law as they apply to the EU ETS.  Even more interesting is the question of how the ECJ interpretation relates to the decisionmaking power vested in the ICAO.  It is of course possible that the ICAO will implement “equivalent” measures for addressing greenhouse gas emissions before any further judicial decision is rendered.  Nevertheless, additional legal action is highly likely, given the number of interested parties.



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