Select Committee on European Union Seventeenth Report


8 April 2003

By the Select Committee appointed to consider European Union documents and other matters relating to the European Union.




14663/02  Communication from the Commission on the consequences of the Court Judgments of 5 November 2002 for European air transport policy.


1.  The European Court of Justice (ECJ) handed down a series of judgments on 5 November 2002 against eight EU Member States. These judgments affect the web of bilateral air service agreements (ASAs) between EU Member States and non-EU states. The ECJ judgments deal with two issues:

·  the "nationality" clause (see box 1); and

·  articles relating to computer reservation systems and intra-EU tariffs in "open skies" ASAs signed by some EU Member States with the United States of America.

2.  The "nationality" clause was deemed to have infringed Article 43 of the Treaty establishing the European Community, and the "open skies" infringements offended the principle of exclusive Community competence (see Appendix 6).

3.  There is, therefore, a need to bring ASAs into conformity with Community law. The question is, how should this be done? Individually by Member States? Or collectively by the European Commission on behalf of the Community holding a mandate from Member States? Or by Member States in coordination with the Commission?

4.  The European Commission, in its Communication dated 19 November 2002, called on Member States to denounce existing bilateral ASAs with the United States, and to agree a mandate for the Commission to negotiate all aspects of ASAs.

5.  This position was modified in a second Communication published on 26 February 2003, when the Commission sought to distinguish between the need to address the "infringements" that flowed from the ECJ judgments, and the pursuit of a wider mandate aimed at renegotiating full ASAs with the United States on a bloc to bloc basis.

6.  This wider mandate's objective would be the creation of what is known as the Trans-Atlantic Common Aviation Area (TCAA) or the Open Aviation Area (OAA). The aim is to bring about a fully liberalised aviation area comprising the United States and the European Union going further than the existing "open skies" agreements in removing restraints on air services.

7.  Supporters of liberalisation claim that considerable benefits will flow from more open markets, but it is often not clear where the benefits will fall. To the airlines or to the consumers? There are also differences between the passenger market, and the air freight and wet leasing markets. (See Appendix 4 which contains a glossary of terms.)

8.  This report examines these issues and the US responses, and makes the following recommendations:

(a)  that Member States should give the European Commission a limited mandate to negotiate with the USA to bring EU Member States' bilateral ASAs with the United States into conformity with Community law as specified in the ECJ judgments of 5 November 2002;

(b)  that Member States should give the Commission a wider mandate to renegotiate ASAs with the United States of America initially, and subsequently with major aviation powers such as Russia and Japan in order to achieve full liberalisation in aviation;

(c)  that it would not be in the European Union's interest, or the United Kingdom's national interest, to negotiate for any thing short of a fully liberalised aviation market between the EU and the US. The Committee believes that in current circumstances it may be necessary to deal first with issues under (a) above before moving on to issues under (b) above as a second phase of negotiations;

(d)  that HMG resist the Commission's call to denounce existing bilateral ASAs with the USA.

9.  The Committee also concluded that greater liberalisation would bring economic benefit—it had already done so in the case of internal US liberalisation, and intra-EU liberalisation. Although the extent of the long-term benefits for liberalisation for both airlines and passengers has, perhaps, been overstated, such benefits were real and therefore the effect on the wider economy would be advantageous. An agreement to extend full liberalisation to the US, Russia and Japan would effectively open up some 80 per cent of the world aviation market.

10.  The Committee held informal talks with the US authorities, and concluded that the US would be prepared to enter negotiations with the European Commission to deal with the changes required by the ECJ decisions, and would, in principle, also be prepared to enter into negotiations with the European Commission in order to achieve greater trans-Atlantic liberalisation.

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