With a last-ditch attempt by the UK to agree an open skies mini-deal with the USA now abandoned, all eyes are firmly focused on the European Court and its long-awaited ruling over the extent to which Brussels will have influence over future air bilaterals.
The ruling, now expected in late October, will determine the balance of power between Brussels and the 15 European Union (EU) member states when it comes to negotiating international aviation deals with non-EU countries, including the USA.
The case dates back to 1998 when the European Commission (EC) brought actions against the UK, Denmark, Sweden, Finland, Belgium, Luxembourg, Austria and Germany, alleging their individually negotiated US open skies deals were contrary to European law.
The court's advocate general ruled in January this year that member states had competence to sign bilateral treaties, but that agreements over fifth freedom rights and computer reservation systems (CRS) were under the exclusive competence of Brussels. Crucially, however, the advocate general ruled that nationality clauses, infringe the basic "right of establishment", which protects the right of EU companies to set up and operate subsidiaries in any member state. Air bilaterals clearly give rights to a nation's home carriers which are not available to other EU airlines. If the view is upheld, it would mean, in principle, that a carrier should be able to own a subsidiary in any member state even if it flies outside the EU. That would be true even where the parent carrier does not itself have seventh freedom rights.
John Balfour, partner at London law firm Beaumont & Son, says "there is a certain lack of logic in that" and that it should not be taken for granted the court will agree with everything the advocate general says.
However, presuming that the judges agree with the EC on the issue of nationality clauses, the consequences for international aviation are far- reaching. These clauses are at the heart of the bilateral system, and without them, the agreements are, to say the least, undermined. Some lawyers point out that bilaterals negotiated by member states could become ineffective.
The EC hopes that, against this background, member states will decide the only option is to hand over the mandate to Brussels. This would require a Council of Ministers resolution, although the move towards majority voting may help here. Bmi british midland chairman Michael Bishop believes this process will take years, ruling out the chances of his airline flying to the USA from London Heathrow for the foreseeable future.
Much depends on the attitude of the USA, which is very happy with the status quo - with the important exception of London Heathrow. The USA has made clear it is lukewarm about the whole idea of a transatlantic common aviation area covering the USA and Europe.
However, even if member states go to Washington and try to adapt the treaties to conform to the court judgement there could still be problems. The USA may be unhappy with this scenario, bearing in mind that losing the nationality clause could see carriers from member states without open skies agreements sneak into the USA through the back door.
Clearly a break down in the bilateral process would risk provoking a political crisis in transatlantic aviation relations. Because of that, Balfour believes that it is possible that the court may decide to make a special exemption for air bilaterals on grounds of public policy.
With all these different possible permutations, it will doubtless come as some relief to airlines when the court finally makes its decision and sets a clearer framework in which they can plan their future strategies.
Source: Airline Business
