Isra-Mart srl: ECJ Opinion Delivers a Blow to Aviation Emissions Plan Opponents

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The EU’s plan to extend its emission trading scheme (ETS) to aviation is fully compatible with international law, an official opinion of the trading bloc’s highest court found last week. The opinion was issued in response to a high profile challenge by American airlines (see Bridges Trade BioRes, 11 July 2011).

In the opinion released on 6 October, the European Court of Justice’s (ECJ) Advocate General Juliane Kokott suggested that the EU’s plan to extend the ETS to aviation does not interfere with the sovereignty of third countries and complies will all relevant aviation agreements.

The measure is “fully compatible with the provisions and principles of public international law,” including the International Convention on Civil Aviation (Chicago Convention), the Bilateral EU-US Open Skies Agreement, the Kyoto Protocol, and customary international law, Kokott concluded. The opinion does not discuss WTO law, where the WTO’s dispute settlement system has exclusive authority.

The Advocate General’s opinion has sparked strong reactions from international airlines. While an Advocate General’s opinion is non-binding, the ECJ has followed them in approximately 90 percent of all cases.

The Air Transport Association of America (ATA) - a claimant in the dispute - quickly spoke out against Kokott’s decision. “Our view that the extension of this unilateral, regional scheme to aviation violates international law is supported by more than 20 countries,” ATA stressed in a press release.

The International Air Transport Association (IATA) also expressed their dissatisfaction with the opinion. “While the Advocate General believes that Europe is within its rights to move forward with this extra-territorial measure, that opinion is not shared in the international community,” Tony Tyler, Director General of IATA said. It remains “an infringement of sovereignty and the Chicago Convention,” he added.

Though the opinion was in its favour, even the EU reacted only cautiously to the announcement. European Climate Action Commissioner Connie Hedegaard welcomed the Advocate General’s opinion and reaffirmed the EU’s “wish to engage constructively with third countries during the implementation.”

However, after Hedegaard met the EU’s Environment Ministers on Monday to discuss the objections of some EU member states and airlines, one source told BioRes that the ministers had also discussed the option of postponing the EU ETS’ extension to aviation. A number of countries continue to oppose the plan, as they see their competitiveness as airfreight hubs threatened.

“The aviation industry should be tackling climate change with engineers, not lawyers,” said Bill Hemmings, programme manager of environmental lobby group Transport & Environment.

After the Monday meeting, Dutch State Secretary of Infrastructure and the Environment Joop Atsma suggested in an interview with Dow Jones Newswire that the EU ETS “could still be altered after implementation to ensure that the new system doesn’t impact international competition.”

No breach of sovereignty

In 2008, the EU decided to bring aviation into the EU ETS, effective January 2012. The EU directive mandates the inclusion of all flights to and from the EU, including those flight parts that take place outside EU airspace. Foreign airlines fear that this could hamper their competitiveness by making their flights prohibitively more costly.

In 2009, the US Air Transport Association (ATA), together with US airlines Continental and United, filed a complaint against these plans with the UK Supreme Court, which subsequently referred the issue to the ECJ.

ATA and others insist that the inclusion of air routes outside the EU’s territory creates an effect beyond the EU’s territory that they claim is in breach of the international law principles of sovereignty and the freedom of the high seas.

Kokott could find no such “extraterritorial effect,” but instead acknowledged that the approach pursued by the EU “reflects the nature as well as the spirit and purpose of environmental protection and climate change measures.”

“It is well known that air pollution knows no boundaries and that greenhouse gases contribute towards climate change worldwide irrespective of where they are emitted; they can have effects on the environment and climate in every State and association of States, including the European Union,” the opinion reads.

Discrimination argument also falls short, opinion finds

The claimants had further argued that the measure discriminated on the basis of nationality, which was again dismissed by Kokott.

Interestingly, Kokott reviewed a related argument that has been made continuously by numerous countries. In these countries’ opinion, even if no distinction is made on the basis of nationality per se, the mechanism is nonetheless discriminatory, to the extent that it treats developed and developing countries alike despite the principle of common but differential responsibility recognised in the Kyoto Protocol.

Kokott turned this argument against the airlines, finding that the objectives pursued by the Kyoto Protocol and the United Nations Framework Convention on Climate Change (UNFCCC) - namely global climate protection - could only be achieved when all countries were treated equally.

She also found that the alternatives - the exclusion of foreign airlines or flights from a third-country - would actually result in considerable advantages for foreign airlines and long-haul flights, giving rise to unjustified discrimination.

Finally, ATA and the US airlines contend that the EU was under the obligation to refrain from undertaking unilateral acts, as per the terms of the Chicago Convention and the Kyoto Protocol.

The Kyoto Protocol calls upon states to engage in respective discussions under the International Civil Aviation Organisation (ICAO). Discussions at the ICAO have been ongoing for many years, with the EU pushing actively for a multilateral solution. Frustrated over the slow movement in ICAO, the EU eventually decided to move ahead on its own.

Kokott approved of that decision, citing the protocol’s currently vague wording on the subject.

“If the parties to the Kyoto Protocol had wished the ICAO to have exclusive competence they could have been expected to express this with the requisite degree of clarity,” she said.

Which laws apply?

Above all, Kokott dismissed all of the North American airlines’ claims on the basis that many of the agreements cited were no acceptable basis for examining the EU law’s validity.

Although the EU is bound by the international agreements it has signed onto, not all agreements can be invoked by individuals. The only ones that can be invoked by individuals are those that are both binding upon the EU as an entity and also sufficiently precise and unconditional.

While the Chicago Convention is not binding upon the EU, despite all EU member states individually having signed onto the agreement, the Kyoto Protocol and most of the Open Skies Agreement - which the EU is bound by as an entity - failed to meet the latter requirement, Kokott found.

Finally, she stressed that even if these agreements were applicable, they still would not prevent the EU from including aviation in its ETS.

WTO implications?

Though WTO law is never addressed before the ECJ, the ruling might nonetheless have great implications for events at the WTO. The same goes for other sectors that the EU could consider for inclusion in the scheme; first and foremost is the maritime shipping sector, for which some EU members have already suggested a global ETS without success at the International Maritime Organisation (IMO).

Inclusion of this sector in the EU ETS could raise similar questions to those from the current aviation case, particularly in terms of extraterritoriality and discriminatory unilateral action.

Thus far, opposing countries have refrained from bringing a dispute against the EU under the WTO’s dispute settlement mechanism. In particular, the US has been mindful of not creating any precedent ruling that could impede its own possible future emissions control scheme, which might itself include unilateral measures.

However, since ATA has seemingly lost its bid at the European court, they could choose to intensify their lobbying efforts in Washington to achieve a formal WTO complaint. The US would then need to decide whether to support American airlines that suffer substantially from both high fuel costs and recession impacts or stand by US climate objectives.