Air Transport Association of America v. Secretary of State for Energy and Climate Change. Case No. C-366/10. At http://curia.europa.eu.
Court of Justice of the European Union (Grand Chamber), December 21, 2011.
European Union law--relationship with international law--climate change--greenhouse gases--regulation of international aviation--Open Skies Agreement--Chicago Convention--Kyoto Protocol
In a landmark decision, on December 21, 2011, the Court of Justice upheld the extension to international aviation activities of the greenhouse gas emissions trading scheme (ETS) of the European Union (Union or EU) against a challenge that it violates several treaties and principles of customary international law. (1) In addition to its broader significance in the context of global versus unilateral approaches to tackling climate change, and its related role in fueling a major international trade dispute, the ruling pronounces on important aspects of international aviation law and clarifies the principles governing conformity of EU internal legislation with international law.
The ETS, the preeminent element of the Union's climate change policy since 2005, is a "cap and trade" system designed to induce cost-effective reductions in emissions of certain industrial greenhouse gases. Within a specified overall limit on the amount of such gases that can be emitted annually by covered entities, companies are granted--or purchase by auction--tradable emission allowances, each giving a right to emit one metric ton (or 2204.6 pounds) of carbon dioxide (C[O.sub.2]) equivalent per year. They are obliged annually to redeem allowances commensurate with the volume of their recorded emissions or pay a penalty price. Directive 2008/101/EC (Directive) extended the ETS, as of January 1, 2012, to airlines (including those headquartered in non-EU countries) that operate flights departing from or arriving at airports in thirty European countries. (2) It is applied to each of those flights regardless of its point of origin or destination (whether within the Union or outside it) and with respect to C[O.sub.2] emissions calculated on the basis of the entire length of the flight (plus an emission factor). (3)
In 2009, three major U.S. operators of transatlantic air services, together with the then Air Transport Association of America, brought a proceeding before the High Court of Justice of England and Wales seeking to quash regulations that implemented the Directive in the United Kingdom (the member state responsible under the Directive for most United States airlines). (4) The challengers contended that, in adopting the Directive, the Union had violated the provisions of the Chicago Convention, the Kyoto Protocol, the EU-U.S. "Open Skies" Agreement, (5) and several principles of customary international law. It had done so, they claimed, most particularly by purporting to extend jurisdiction and control over flight emissions occurring beyond the Union's borders, including over the high seas and the territory of non-EU states. (6) The defendant argued that the Directive did no such thing, as jurisdiction was exercised only in relation to aircraft on the ground at Union airports.
Because the validity of an EU directive was being challenged, the English court referred the case for a preliminary ruling to the Court of Justice in Luxembourg, which alone has competence to rule on the validity of an EU legislative act. It posed four questions in its referral (Questions (1)-(4)):
(1) Were the claimant corporations entitled to rely on any or all of (a) the four customary norms, or (b) the provisions of the Chicago Convention, the Kyoto Protocol, or the Open Skies Agreement (7) as benchmarks against which to judge the Directive's validity?
(2) Was the Directive invalid for contravening one or more of those customary norms "if and in so far as it applies the [ETS] to those parts of flights ... which take place outside [Union] airspace"?
(3) Was the Directive invalid for contravening one or more of the treaty provisions "if and in so far as it applies the [ETS] to those parts of flights ... which take place outside [Union] airspace"? (8) and
(4) Did the Directive contravene any treaty norms by unilaterally applying the ETS to international aviation activities generally governed by the standards found in global conventions or promulgated by the International Civil Aviation Organization (ICAO)? (9) (Para. 45)
The proceedings attracted considerable international attention. Twelve governments intervened at the written proceedings stage and seven at the oral hearing. (10) The EU Council, Commission, and Parliament also intervened. (11)
The Court of Justice upheld the Directive. It first held, in answer to Question (1), that the claimant corporations were entitled to rely on only some of the treaty and customary norms. On the issue whether or not the Directive satisfied the applicable principles and rules contained in the norms that it found could be relied on (Questions (2)-(4)), it found "no factor of such a kind as to affect its validity" (para. 157).
In answering Question (1), the Court dealt first with treaty law. It reiterated that "by virtue of Article 216(2) [of the Treaty on the Functioning of the European Union (TFEU) (12)], where international agreements are concluded by the European Union they are binding upon its institutions and, consequently, they prevail over acts of the European Union" (para. 50). In principle, therefore, "the validity of an act of the European Union may be affected by the fact that it is incompatible with such rules of international law" (para. 51). A claimant corporation could, however, rely on rules of international law to defeat an EU act only when the Union was bound by those rules; the "nature and the broad logic" of the treaty in question did not preclude it; and the provisions of the treaty "appear, as regards their content, to be unconditional and sufficiently precise" (paras. 52-55).
With respect to the Chicago Convention, the Court noted that, while all twenty-seven member states are party to it, the Union itself is not, and so is not bound by it. This status is not affected by the Union's implied duty, under TFEU Article 351, (13) not to impede member states' performance of duties under prior agreements, as that article's purpose is to permit such performance, and not to bind the Union itself as regards third state parties. Moreover, the Union could be treated as having "functionally succeeded" to the Convention only if it had assumed all the duties of its member states under it (paras. 60-71). The Court therefore concluded that it could not examine the validity of the Directive in light of the Chicago Convention "as such" (para. 72).
Although the Union is party to the Kyoto Protocol, and although that protocol mandates quantified greenhouse gas reductions, flexibilities in its provisions persuaded the Court that it "cannot ... be considered to be unconditional and sufficiently precise so as to confer on individuals the right to rely on it in legal proceedings in order to contest the validity of [the Directive]" (para. 77).
Since, in contrast, the Open Skies Agreement, by which the Union is also bound, "establishes certain rules designed to apply directly ... to airlines and thereby to confer upon them rights.... capable of being...