NEWS Alert

ECJ Rejects Challenge by U.S. Air Carriers to the Extension of the EU-ETS to Aviation Emissions

On December 21, 2011 the European Union Court of Justice (“ECJ”) handed down its ruling on the validity of the EU emissions trading scheme’s (“EU-ETS”) extension to aviation emissions, which will become effective on January 1, 2012. The judicial review proceedings, initiated by the Air Transport Association of America (“ATAA”) and certain U.S. airlines (the “Airlines”), challenged the validity of the EU legislation implementing the extension of the EU-ETS as a violation of the Chicago Convention, the Kyoto Protocol, the EU-US Open Skies Agreement, and customary international law.

In pronouncing that Directive 2008/101/EU (the implementing legislation for the aviation extension) was valid, the ECJ first noted that the Chicago Convention did not govern the EU-ETS legislation. In particular, the ECJ ruled that the EU was not a member to the Chicago Convention, even though some of its member states were. As such, the ECJ refused to consider certain provisions of the Chicago Convention as contravening the EU-ETS.

The ECJ also found that Kyoto Protocol (the “Protocol”), although approved by the EU, could not be relied on in judging the validity of Directive 2008/101/EU. Although the Protocol called for member parties to work through the International Civil Aviation Organization in the reduction of aviation emissions, the ECJ found that the requirements were neither unconditional nor sufficiently precise to support a challenge to an act of EU law.

Finally, the ECJ rejected two arguments regarding the EU - U.S. Open Skies Agreement (the “Agreement”), to which the ECJ noted the EU was bound. First, the ATAA and Airlines argued that the EU-ETS’s application to aviation emissions infringed upon the sovereignty by imposing extraterritorial rules on civil aviation in violation of Article 7 of the Agreement. More particularly, the ATAA and Airlines argued that the EU-ETS would apply to aircraft operations not only leaving and departing from the EU, but also during such operations over any EU state or the high seas. The ECJ rejected this argument and held that since the EU-ETS only applied to EU registered aircraft and those aircraft that chose to land in or depart from EU member states, no sovereignty of any third state was offended.

Second, the ECJ rejected the ATAA and Airline’s argument that the EU-ETS amounted to a duty or charge on fuel loads, as prohibited by the Agreement. Instead, the ECJ characterized the EU-ETS as a market-based measure that did not establish a rate in advance for fuel usage. The ECJ also pointed out that the Agreement granted leeway to both the U.S. and the EU to derogate from the Agreement’s terms for environmental reasons, as long as any action taken is non-discriminatory in nature. Since the EU-ETS was applied uniformly to all aircraft landing in or departing from EU member states, the ECJ accepted the EU-ETS Directive as non-discriminatory.

The EU-ETS will become effective regarding aircraft emissions on January 1, 2012. For further information or questions regarding the ECJ’s ruling or the impact of the EU-ETS, contact Glenn Wicks or Ronce Almond at (202) 457-7790.

The Wicks Group • 733 10th St, NW, Suite 3002, Washington, DC 20001 • T: +1.202.457.7790 • F: +1.202.457.7799 • /