l
Liberalisation of Air Transport in the EEC and its Implication
for Non-EEC European Countries
by
George T. Hacket
A thesis s .... ,bmitted to the Faculty of Sraduate
Studies and Research in partial fulfillment of the
requirements for the degrce of MASTERS OF LAWS.
Institllte of Air and Space Law
McGill University
Montreal, Canada
Sept.ember 1991
(c) George T. Hacket, 1991
i
Abstraet
European Economie Area stands for the change of the structure
of Europe after the developments it has undergone in recent years.
Europe is changing, a new architecture is being put in place, and new responsibili ties are being assumed. l
The European Economie community? is progressing towards an
integraled internal market. The Member States of the European Free
Trade Associa tian 1 are seeking eloser ties wi th the EEC. With
Austria, a fully neutral country applied for Membership in the EEC
for the first time. Finally, with the surrender of the communist
regimes in Eastern Europe a .Large nurnber of new countries are
seeking after eloser ties with the western market areas.
These changes did not leave air transport matters untouched.
The development towards an internaI market has led to substantial
changes in the EEC legislation on these external relations. As a
concrete outcorne of these changes a draft agreement between two
EFTA countries and the BEC has been negotiated, whieh may indicate
the form of further cooperation between EEC and non-EEC eountries
in air transport matters.
lEES - A Historie Step towards a New Europe (3/90) EFTA Bulletin 1 at 1.
?Hereinafter referred ta as EEC.
lHereinafter referred ta as EFTA.
~'
ii
This thesis was submitted in the summer / autumn of 1991, a
few months before the successful negotiation of a European Economie
Area (EEA) which embodies such further cooperation.
iii
CON T E N U
La sphère économique de l'Europe exemplifie le changement de
la structure de l'Europe après le développement elle a expérimenté
les dernières années.
L'Europe est en train de changer, architecture éLanL mise en place et responsabilités étant être assum0 es. 4
une nouvelle des nouvelles
IJa communauté européene économique 5 est en train de progresser
vers un marché interne intégré. Les états membres de l'association
européene de libre échange6 cherchent des relations plus étroites
avec la CEE. Par l'Autriche, un pays pleinement neutre à solicite
l'adhésion comme membre dans la CEE pour la première fois.
Finalement, avec la capitulation des régimes communistes en Europe
de l'Est un grand nombre des pays nouveaus sont à la recherche des
liens plus proches avec la sphère des marchés de l'Ouest.
Ces changements n'ont pas manqué de toucher les affaires du
transport aérien. Le développement vers un marché interne a amené
des changements substantiels dans la législation de la CEE en vue
de ces relations extérieures. Comme résultat concret de ces
changements un brouillon d'accord entre les pays membre de la zone
européenne de libre échange et de la CEE a été négotié qui pourrait
indiquer la forme de la coopération future entre pays membre de la
4EES - A HisLoric SteR towards a New Europe (3/90) EFTA Bulletin 1 at 1.
SCi-dessous cité comme CEE.
fiCi-dessous cité comme EFTA.
iv
1 CEE 4t pays non-membre de la CEE en matière du transport aér iell.
Cette thèse e été soumise en été/au tomne 1991 quelques Illois
avant. la néç, otiation fructueuse d'une sphère européenf" économique
(EEA) qui englobe cette future coopération.
Q
v
Acknowledgements
At this point l want to thank my supervisor Prof. Peter
P.c.Haanappel for his spontaneous support and the interest he
showed j n my thesis pro ject. Special thanks are extended to
Dr.Ludwig Weber (or his encouragement and advice in the early stage
of Lhe prepera Uon of this study.
F'urLhermore, l should like ta express my sincere gratitude to
Dr .Gerd Dücke lmann-Dublany of the Austrian Trade Commission in
Montreal (or providing me with indispensable material and his
friendship throughout my stay in Montreal. Moreover, 1 ",;ant to
exLend my gra ti Lude ta the section III. 2 of the Austrian Foreign
Ministry, especially to Dr. Ziegler and Dr.Thomas Nayr-Harting for
furnishing me with current documents on the EEA consultations.
Special thanks shall be extended to the "Zentrum für
Europaisches Recht" in Innsbruck, especially to Prof.DDDr.Waldemar
Hummer for allowing me ta make use of a11 the facilities.
l wouid aiso like to thank the Austrian Ministry of Science
and Chamber of Commerce, espf'cially Trade Conunissioner Dkfm. Richard
Voh , and the State of Tyrol for granting me scholarships for my
stay in Mon treal. This stay was one of the most enri ching and
valuable per lods in my life.
i 1.
1 l
vi
Table of Content~
Chapter 1: Relationship between the Different "Trading Blocks" in
Europe ...................................................... 1
I:The European Economie Community as a Supranational Organisation
• • • • • • • • • • • • • • • .. .. • • .. • • ............................ If .. .. .. .. • .. .. .. .. .. .................. .. 1
1.1. : Introduction .......................................... . 1
I.2.:The Single European Act 8
1.3. : 'fhe Trea ty Making Power of the EEC ..................... 10
I.3.1.:Generalities ......................................... 10
1.3.2. :Air Transport as Sub ject of Cornrolercia l Pol icy ........ 1 2
I.3.2.1.:Articles 113 and 114 ............................... 12
I.3.2.2.:Article 238 of the EEC Treaty
I.3.2.3.:Article 235 of the EEC Treaty
17
17
I.3.2.4.:Conclusion ......................................... 19
II:The European Pree Trade Association ......•............... 21
II.1.:Generalities .......................................... 2J
II.2.:Free Trade Agreements of 1972 ......................... 24
III:European Economie Area .................................. 26
III.l.:Generalities 26
III.2.:Delors' CalI for a More Structured Cooperation 27
III.3.:Issues Arising through the Creation of the EEA 30
J
vii
III.4.:Reasons for the Delay in the 8igning of the EEA
Agreemen t ............................................... 35
IV:Foreign Trade P01icy of the Former COMECON Member States. 37
Chapter II:Fulure Air Transport Regulation
jn the European Economie Area .................... 41
I:Draft Agreement on Civil Aviation between the EEC,
Norway and Sweden " .. , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 41
1.1. : Introduction ....................................................... 41
I.2.:Description of the Agreement ............. . 44
l .. 3 .. : rrwo Protocol s ....................................................................... 47
II:Air Transport in the European Economie Community ......... 49
II.l.:Development of Civil Aviation Regulation in the EEC ... 49
II.l.1.:Introduction 49
II.l.2.:Competition Rules of the EEC Treaty ................. 52
Il.l.2.1.:Tntroduction ...................................... 52
II.l.2.2.:Air Transport and the EEC Competition Rules ....... 59
II.l.3.:The Jurlsprudence of the E~ropean Court of Justice .. 60
II.l.3.1.:French 8eamen's Case
II.l.3.2.:8e1gian Rajlway Case
61
63
II.l.3.3.:European Parliament Case ..................•.....•. 64
II.l.3.4.:Nouvelles Frontières Case .................•....... 65
II.1.3.5. : Flemish Travel Agencies Case .......••.....••...... 66
viii
II . l . 3 .6. : Saeed Case ........................................ 67
II.1.3.7.:Wood Pulp Case .................................... 69
II.1.4. :Influence of U.S.Deregulaticn on European Aviation .. 73
II.2.:Liberalisation of Air Transport in Europe ............. 79
II.3.:The Packages of the European Community ................ 84
II.3.1.2.1.:Council Regulation 3975/87 ...................... 85
II.3.1.2.2.:Counci1 Regulation 2344/90 Amending Regulation
3976/87...... ............... ........ ............. 91
II.3.1.2.3.:Commission Regulation 83/91 on Computerised
Reservation Systems (CRS) ........................ 94
II.3.1.2.4.:Commission Regulation 84/91 on Joint Planning
and Coordination of Capacity, Consultation on
Passenger and Cargo Tariffs on Scheduled Air
Services and Slot Allocation at Airports ......... 101
II.3.1.2.5.:Commission Regulation 82/91 Concerning Ground
Handling ......................................... 107
II.3.1.2.6.:Council Regulation 2343/90 on Market Access ..... 109
II.3.1.2.7.:Council Regulation 2343/90 on Fares ............. 114
II.3.1.2.8.:Council Directive 1266/80 on Future
Cooperation and Mutuai Assistance between
Member States in the Field of Air Accident
Investigation
II.3.1.2.9.:Council Decision Setting up a Consultation
Procedure on Relations between Member States
and third Countries in the Field of Air Transport
and on Action Relating to Such Matters within
118
a
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ix
International Organisations ...................... 118
Chapter III:Outlook on Future Air Transport Agreements
between EEC and Non-EEC Countries in Europe ...... 120
I:European Economic Area .................................... 120
II:Future of the European Civil Aviation Conference (ECAC) ... 124
II.1. : Introduction .......................................... 124
II.2. :ECAC's Work and Its Results ........................... 126
II.2.1.:Results in the Economie Field ....................... 126
II. 2.2. : Resul ts in the Technical Field ...................... 128
II.3. : ECAC' s Present Work ................................... 129
1 T .3.1. : ECAC' s Work in the Economical Field ................. 129
II.3.2.:ECAC's Work in the Technical Field .....•............ 131
II.3.3.:ECAC's Associated Body, the Joint Aviation
Authorities (JAA) ..................................... 132
II.4. :The Future of ECAC .................................... 133
III:Future Agreements with Eastern European Countries ....... 136
III.l.:General Economic Cooperation Agreements .............. 136
III.l.1.:General Economie Cooperation Agreements
with the EEC ....................................... 137
III.l.~.:General Economie Cooperation Agreements
wi th the EFTA ...................................... 139
III.1.3.:General Economie Cooperation Agreements
wi III Others ................. " ...................... 140
~ 1
x
III.2.:General Transport Agreements 141
III.2.1.:Seneral Transport Agreements with the EEC .......... 141
III.2.2.:General Transport AgreemenLs with the EFTA ......... 141
III.3.:Specific Air Transport Agreements .................... 142
III.4.:Future Associate EEC Membdrship ...................... 143
111.5. :Future Full EEC Membership ........................... 144
Annex:Bibliography
a
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1
Chapter 1
RELATIONSIIIP BETWEEN THE DIFFERENT "TRADING BLOCKS" IN EUROPE
1.:The European Economie community7 as a Supranational Organisation
1.1.: Introduction
FJllowing the concentric model8 envisaged by the President of
the EEC Commission, Jaques Delors, it appears appropria te to start
an essay on the European Economie Area and the former COMECON
countries with a brief discussion of the EEC and its recent
devclnpments.
7The European Economie Community (hereinafter EEC) is one of the three European Communities. The other two are the European Coal and Steel Communi ty (ECSC) and the European Atornic Energy Agency (Euratom). The three institut,ions were merged together in 1965 and hdve common institutions. As air transp0rt is within the competence of the EEC this papcr will foeus on thaL organisatjon. The countries of Lhe EEC are Belgium, Denmark, the Federal Republic of Germany, Ft'ance, Greeee, Ireland, Ttaly, Luxembourg, the Netherlands, Portugal, Spain and the United Kingdom.
Il A.Deen and D.A.Westbrook,Return to Europe: Inteurating EasLern European Economies into the European Market Through Alliances with the European Community (1990) 31 Harvard Int'l LJ 660 at 661.
Delors promotes a concentric model of Europe with a highly integrated EC at the center, surrounded bv a less integrated trade ring including the EFTA states, with the EaRt European states on the periphery.
r
T
2
The EEC was established in 1957 by the signing of the Treaty
of Rome9, wi th which six independent na tions 10 in Wes tern Europe
seeked ta promote economic expansion, higher standards of living,
and closer relations among Member Countries. The EEC Treaty is
essentially a "framework" treaty, "that is, it sets out as broad
general principles the aims to be achieved, Jeaving its
institutions, in the form of the Commission and the Council, orten
in consultation with Parliament., to fill the gap by means of
secondary legislation."ll Membership is open to any European
nationl2, and the EEC has expanded three times Rince its
inception .13 Paul S. Dempsey cited P. Sutherland, EEC Commissioner
for Competition, to describe the twin goals of the community:
the completion of a genuine, barrier-free in ternal mark0.t and the restoration and enhancement of the eompetitiveness of European industry. Free competition, within the limits set by law, provides the best way of
9Treaty Establishing the European Economie Communi ty, 298 UNTS 3, (opened for signature Mareti 27, 1957, entered into force January 1, 1958), hereinafter Treaty of Rome.
IOOriginal signatories: Belgium, France, Federal Republic of Germany, Italy, Luxembourg and the Netherlands.
11 J . Steiner, Text.book on EEC Law (London: Blacks tone Press Limited, 1989) 5.
12Art.237, Treaty of Rome.
13D.A.C.Freestone and II .S.Davidson, 'l'he Institutional Framework of the European Cornmunities (London & New York: Croom Helm, 1988) 5: Denmark, Ireland, and the United Kingdom became members in 1973; Greeee in 1981; and Portugal and Spain in 1986.
a
3
achieving these goal s .14
The Treaty of Rome intended to bind together the nations of
Western Europe for the purpose of creating an economical1y
efficient market in Europe. 15 Article 2 of the Treaty explains the
aims of the Community. These goals include harmonious development
and expansi on of economic acti vi ties, increased economic st.abili ty 1
an improved standard of living and clo3er relations between the
Member States. IG And what is of particular importance, the Treaty
of Rome seeks to abolish obstacles to freedom of movement of
persons, services dnd capital;17 adopt a common policy for
transportation;18 institute a system to ensure that competition in
the common market including air transport is not distorted;19 and
establish procedures ta coordinate and remedy disequilibria in
balance of payments. 20
In contrast ta ordinary interna.tional treaties 1 the EEC Treaty
has created its own legal system. As the Treaty came into force
14P.S.Dempsey, Aerial Dogfights Over Europe: The Liberalization of EEC Air Transport (1988) 53 J Air L & Comm 615 at 638.
15Art . 3, Trea ty of Rome.
lfiFor a brief see A.Bleckmann, Gemeinschaft, 5th Verlag, 1990) 9
description of the economical concept of the EEC Europarecht Das Recht der Europaischen
ed. (Koln, Berlin, Bonn, MÜnchen: Carl Heymanns 11.
l1Art . 3 (c), Treaty of Rome.
18Art . 3 ( e ), Ibid.
19Art . 3 ( f), Ibid.
20Art . 3 (g), Ibid.
4
this system became an Integral part of the le9al structure of the
Member States. Their courts are bound ta apply it. 21 The Community
constitutes a new legal order in international law?2, "which became
an Integral part of the national legal arder of the Member States
on which i t is superimposed. ,,71 At the same time, Commun! ty law
crea tes rights and obligations directly for individuals who are
able to invoke them before their national courts.?4
The Treaty of Rome has established various independent BEC
institutions invested with autonomous legislative powers, acting
in special circumstances with only a majority vote, ~nd Community
legislation can take effect directly in national legal systems
without the need for prior approval by national parliaments.?~ They
shall be described, due to their importance for the understanding
of the supranational character of the EEC, in big letters.
The Couneil of Ministers. This is the body where the interests
of the Member States find direct expression. 26 It takes the final
21case 6/64 Costa v. ENEL 1964, ECR 585 at 593.
22case 26/62 Van Gend en Loos 1963 ECR l, see also M.Schweitzer and W.Hununer, Europarecht - Das Recht der EuropiHschen Gemeinschaften (EGKS,EWG,EAG)-mit Schwerpunkt EWG, 3rd ad. (Frankfurt: Alfred Metzner Verlag, 1990) 223-229.
23C.Economides, Air Transport Law and Policy in the Europe of the EEC and ECAC: Now and Beyond 1992, (LL.M.thesis, McGi11 University, Montreal, 1989) 18.
24rd., referring to case 106/77 Sirnmenthal 1978 ECR 629, Ground 17.
25Freestone and Davidson, supra, note 13 at 4.
26T.C.Hart1ey, The Foundations of European Community Law, 2nd ed., (Oxford: University Press, Clarendon Law Series, 1988) 13.
1
5
decision on most EEC legislation, concludes agreements with foreign
countries and, together with the Parliament, decides on the
Communi ty budget. 27 It consists of the delegates of the Member
States, each State being repre3ented by a government minister.~ In
the case of air transport the EC Transport Ministers are present.
Therefore it is sometimes a1so called Transport Council. Article
145 requires it to "ensure that the objectives set out in this
Treaty are attained" and "in accordance with the provisions of this
Treaty" the Council is to "ensure co-ordination of the economic
policies of the Member Stdtesi have power to take decisions and
confer on the Commission, in the acts which the Council adopts,
powers for the Implementation of the rules which the Council lays
down ... ". Therefore the Council has not unfettered legislative
powersi they may only be exercised within the constraints imposed
by the Treaty itself. To carry out these tasks, the Couneil can
issue binding directives, regulations and decisions, as weIl as
non-binding recommendations and opinions. 29
?7 Id .
28Art . 2 of the Merger Treat;y. Treaty Establishing a Single Council and a Single Commission of the European Communities, signed in Brussels on 8 April 1965, entered into force on July l, 1961.
?9Art . 189, Treaty of Rome: Regulations: Regulations have general application. They are binding in their entirety and directly applicable in aIl Member States. Directives: Directives are bindjng on Member States as to the resul ts to be achieved, but leave the Implementation to Member States through their own legislation. Decisions: Decisions are those to whom they are addressed, and no national legislation is needed. Recommendations: Recommendations are not laws and have no binding effects.
6
The Commission: The Commission is composed of 17
commissioners30 who must act independently of their Hù tiona l
origin. 31 The powers and functions of the Commission are set out
in general terms in Article 155, which reads as follows: Il , •• ensure
that the provision of this Treaty and the measures taken by the
institutions pursuant thereto are applied. Il Ta achieve these ends,
the Commission, like the Council of Minislers, may issue
regulations, directives, decisions, reco~Rendations and opinions.
Probably the most important aspect of the Commission's roJe as the
main driving force of Integration is the right of participation in
the shaping of legislative measures. The normal melhod o(
legislation envisaged by the majority of Treaty articles is for the
Council to act on a proposaI of the . . 17 CornnusSlon. As for air
transport, the European Commission plays an imporl~nt role in lhe
field of competition matters. The European Commission consists o(
several Directorates General, comparable to national minis tries or
departments. For air transport the two most relevant Djrectorates
General are Transport (DG VII) and Competition(DG IV).
The Court of Justice:The supranational element in the
Community constitution would be ineffective without a court.
T.C.Hartley describes the importance of the ECJ as follows:
The most important functions of the Court of Justice of the European Communities - ... - ùre la ensure that the law is enforced, irrespective of political considerations
30Art.lO(1) Merger Treaty.
31 Art .10 ( 2 ), Ibid.
~Freestone and Davidson, supra, note 13 at 65.
1
7
(especiaIIy against Member States); ta act as referee belween the Member States and the Cornmunity as weIl as between the Communi ly i nsti tutions inter sei and ta protect the rights of the individual from infringement by thn Brussels bureaucracies. These functions are especially important jn view of the fact that the democratic element i8 stlll weak in the Cornmunity.31
The European Court of Justice's (hereinafter referred ta as ECJ)
decisions have been of great importance in implementing EEC law
and systematically eliminating many longstanding barriers ta free
movement within the EEC.~ Also for air transport, the ECJ has built
up a considerable body of case law, notably on the application of
EEC competition law on the airline industry. The importance of the
relationship between Community Jaw and national law can be seen in
the preliminary rulings of the ECJ. This is the case when an action
is iniatated in a national court from which a reference for a
preliminary ruling is made to the European Court of Justice. It is
through i ts power to gi ve preliminary ruli ngs tha t the ECJ has
established the doctrine of direct effect and the doctrine of the
suprernacy of Community law over national law. 35
33Hartley, supra, note 26 at 49.
34oempsey, supra, note 14 at 650.
3'iHartley, supra, note 26 at 58.
8
1.2.:The Single European Act~
The fresh impetus ta the establishment of an "InternaI MarkeL"
was given in 1986 by the adoption of the "Single European Act.". \7
In signing the Act, the Member States have commitLed themsnlves la
establish an internaI market by December 31, 1992. 'l'hi s has been
'd b lIt f l' t' l 'l 111 h' V1.ewe as ta e sa e y a statemen a po L lca ln ent . '1' .1 s,
however, is not aitogether true. Article 8 a 19 referres ta essenLial
issues of an internaI market which are the mutual acceptance of
diplomas 40 , the graduaI coordination of the currency policy and lhe
free movement of capita1 41, ta the common regulation for railway,
~For a history of the development of the Single European Acl see Bleckmann, supra, note 16 at 2 - 6.
37The Single European AcL:.- done al IJuxembou rg, 17 Februa ry 1986, and the Hague, 28 Ft':=!bruary 1986, (1987) 2 CMLR 741. Hereinafter referred la as §E~~ In its preamble in para.1 it reads as follows: By thls Act, they declared the~selves ta be
moved by the will ta continue the work undertaken on lhe basis of the Treaties establishing the European Commun! ty and ta transform their relalions as a whole among their States into a European Union.
mDempsey, supra, note 14 at 676.
39Art . 8a (1), Trealy of Rome. This Article was addnd by Arl.l3 of the SEA and reads as follows:
The Community shal] adopt measures with the> aim of progressively establishing lhe internaI market over a period expiring on 31 December 1992, in accordance wllh the provisions of this Article and of Arlicles 8b, 8c, 28,57 (2), 59, 70(1),84, 99, 100a and lOOb and withoul prejudice ta the other provisions of this Treaty.
40Artlcle 57(2), Ibid.
41 Ar t . 7 0 (1), 1 b id.
9
sea and air transport"?, lhe harmonisa tion of value added taxes43
and finalJy lhe adaptation of the national laws and administrative
provisions in respect to the campletion af the internaI market. 44
Articles 4 to 29 af the SEA are enforceable befare the ECJ. These
articles amend the Treaty af Rame accarding ta Article 236 in a
number of aspects. Alone Art.s. 1 ta 3 and 30 are of a programmatic
na ture. ArLicle 30 deais wi th the ide a of a European Poli tical
Union.
Article 8 a deais with the "InternaI Market". Its second
paragraph reads as follaws:
The internaI market shall comprise an area without internaI frantiers in which the free movement of gaods, persons, services and capital is ensured in accordance with the provisions af the Treaty.
One of lhe main ideas of the SEA is to speed up the process
of decision making in che EEC. The voting requirement of unanimity
is in many cases replaced by a majority rule. In discussing air
transport it is important to note that Article 8 a refers to
Article 84 and thereby imp]ements the "qualified majority" rule.
The voling requirement of unrnimity in the Council was in many
cases replaced by a majority rule,including the development of a
commen transport policy.
The latest report ef the EEC Commission45 on the completion of
47Art.84, Ibid.
43Art . 99, Ibid.
44Art.100 a and b, Ibid.
45COM (91) 321 final, July 31,1991.
10
1 the common market wri tes tha t BO% of the Commissions propùsa 1
implementing the 279 measures 46 outlined in the Whi te paper41
'f
concerning the establishment of the Il interna 1 market" wero aceepted
by the Couneil. 61,3% of aIl Council Regulations have already been
adopted by the national governments of the Member Sta tes and
consequently are part of national law. Therefore there are good
chances that the internaI market will be eompleted by 1993.
I.3.:The Treaty Making Power of the EEC
I.3.1.:Generalities
The EEC's external relations are a subject on whieh the Treaty
of Rome is not very clear. The Treaty does not provide a special
chapter on this matter. However, of relevance are sorne articles in
the Chapter on commercial policy (Articles J 10-116) and sorne of t.he
general and final provisions of the Treaty (Article 210-240). For
this very reason, the Court's contribution has been particularly
important in this matter. 48
In the "early years Il of the Communi ty sorne Member Sta tes
argued that only such powers existed as were expressly stated in
46Bleckmann, supra, note 13 a t 7.
47COM (85) 310 final, August 14, 1985.
48D. Vaughan (ed.), Law of the EUl:opean Communi ties, (London: Butterworths, 1986, Vol.1), par 4.02.
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11
the constitutive treaties49 , but this view was disproved with the
first significant judgement of the Court of Justice on that very
question in the "E.R.T.A." case10• The Court sees the "capacity of
the Community to enter ioto binding agreements with other subjects
of international law over the whole field of objectives set out in
Part one of the Trp.aty". 51
51nce that decision, the issue has been not whether there can
be i~plied powers of treaty making, but in what circumstances such
powers exist. In particular, is the mere possession of a Community
power in the corresponding area of internaI affairs sufficient, or
i6 it also necessary that this power should actually be exercised?
In the E.R.T.A. case the court said that Member States would be
deprived of the right to undertake obligations towards third
countries whenever the Community, with a view ta implementing a
cu .• :1'l1on policy envisaged by the EEC Treaty, adopts provisions laying
49 Hartley, supra, note 26, at 156. Hartley explains it the following way:
This standpoint may be supported by comparing the EEC Treaty with the Euratom Treaty: Article 228 EEC, the general provjsion covering aIl treaty-making by the EEC, begins wi th the words: "Where this 'l'reaty provides for the conclusion of agreements ... ", thus suggesting that it is only ln the case of an express provision that the Communily may conclude lnternational agreements.
Hartley furLher writes that Article 101 of the Euratom Treaty impli es "tha t whorcver the Communi ty ha s ln ternai competence wi th regard to il given questjon it will a]50 have power to enter into international agreements".
'JO Case 22/70 EC Commission v EC Council [1971] ECR 263, [1971] CMLR 334, ECJ.
51 p . J .G.Kapteyn (ed.), Introduction to the Law of the European Communities After Coming loto Force of the Single European Act, (Deventer: Kluwer Law and Taxation Publishers, 1989) 773.
1
12
down common rules, whatever form these may take.~(
Concerning transport matters Haanappe1 51 sees the importance
of this case in the fact that
in the whole field of the general objectives of the Treaty of Rome, including Article 3(e) on & comman transport policy, the Community enjoys the capacity la establish contractual links with non-Mnmber States .... (it) does not C'llly cover intra-EEC international transport, but also transport coming from or going ta non-Member States.
I.3.2:Air Transport as Subject of Commercial Policy
A dispute exists whet1-)er the regulation of air transporl
should be considered as a commercial activity, thereby subject to
Articles 113 and 114, or whether it should rather be subjRcl tü
Articles 235 or 238 of the EEC Treaty.
I.3.2.1.:Articles 113 and 114
The Commission has recently adopted a new policy objective in
its Communication entitled "Community Relations with Third
57vaughan, supra, note 48, para 4.02. This is the doctrine of "parallelism": It would be 1.11ogical for the Community to have internaI law-making power with regard to a certain topic and yet be unable ta conclude intnrnational agreements in that field: in Schweitzer and Hummer, supra, note 19 at 178.
53p.p.c.Haanappel,_ThLExternal Aviation Relations of European Economie Communi ty and of EEC Member Sta tes in to Twenty-first Century - Part l (1989) 14 Air L 69 at 83f.
the the
13
Countries in Aviation Matters"S4. The Commission asserts that
Communjty competence for commercial aviation rnatters exists, based
on Artlcle 113. The consequences of such an assertion are
~'i "dramaUc" . Currently, there is an average of 60 bilateral air
transport agreements which each Member State has with third
countries. ',fi Close warns that if the Commission is correctS7, no
Member State wlll be allowed to enter into bilateral air transport
agreements, as such agreements will fall within the cornrnon
commercia l policy'iB for: wh l.ch the Cornrnuni ty is exclusively
competen t. SC) Furthermore, it seems extremely difficult to
disentangle the pu.cely commercial aspects of the common transport
policy from its other aspects. 60
The Communication was the first occasion on which the
Commission asserted that the Common Commercial Policy comprehends
~COM(90) 17 final, Brussels, February 23, 1990.
S', G.Close, External Relations in the Air Transport Sector: Air Transport Policy or the ConlTIlon Commercial Policy?, (1990) 27 Comm Market LR 107 at 107.
5fiE • Ka lshoven-vé'ln Ti jen, The EEC Commission as the Europea;_ Version of CAB? - Fit, Willinq and Able?, (1990) 15 Air L 257 at 261.
S'Close ana lyses a t length the Commission's assertion. Close, supra, note 55 at 116 - 122.
'J8 Hcreinafter referred ta as CCP.
S9Close, supra, note 55 at 116.
6o Ibid ., at p.121.
"illegalness" of the
] 4
the external commerciaJ aspect.s of transport. iiI The logic which
stands behind the Commission's opinion is the following:
The Comission' s syllogism L'uns: the exchange of gonds and services with third countries is subject of the c')mmol1 commercial poLicy, international air transporl 18
a service, thcrefore the ex change of international air services between the Communily and lhird countries is a matter for the common commercial P011CY. 67
Th L f th E C . t . 63 . t t.h· l' ( e aw 0 european .on 'l1Unl ·les wrl es on e lnc USlon 0
air transport matters as a common commercial polLcy:
.,. there are topics, such as transport, which might in other C'ontexts be regarded as "commercial" but which are not governed by these articles because of the existence of other ~rovisions in the Treaty which deal with them directly.
In this context it should also be kept in mind that Arlicle 61(1)
of the Treaty states that "freedom to provide services" in the
field of transport shaii be governed by the artlcles of the Treaty
dealing specifically with transport matters.
Haanappel, in his article on the external relations of the
EEC concerning air transport, is of the opinion that
[A]s long as air transport and other services are exeluded from the scope of the General l\gn~em0nt on Tariffs and Trad~(GATT), Article 113 and 114 do not soom part Lcula rly re lr;vant to t.he Communi ty treal y mak i ng power in the field of air transport, , lf ever lhe fu ture ai)~ transport were ta be ine 1 ucied in GA'j"l', Ar l i.e 1 e 113 and 114 of the Treaty of Rome would beeome most
61 Ibid ., at p.I09.
67G.CIose, External Com~tence for Air Policy in Third Phase Trade PolLey on Transport Poliey?, (1990) 15 Air L 295 at 295.
63vaughan, supra, Ilote 48 at par 4.03.
MArtic]e 84(2) concerns air transport. Article 61 makes special referrence to the title of transport.
a
15
relevant. 65
Probably the most liberal writer on EEC aviation matters,
Henri A. Wassenbergh, warns in his article "Opening the skies -
the EEC and third countries" 66 tha t~ "the main problern for European
external civil aviation relations is to forrnulate the common
transport~EEC-policy, taking account of each possible situation
which may present itself for each of the Mernber States and for the
EEC as such. The interests of the Member States will not be the
same in each case. ,,67 The policy pursued by the more liberal
European ajrlines such as British Airways, Aer Lingus and KLM is
very ditferent to the one of conservative airlines.~
Furthermore, a common external air transport policy was deal t a
serious blow on March Il, 1991 when the United States and the
United Kingdom reached a bilateral agreement on Heathrow Flights.~
The United Kingdom allowed the U.S. Department of Transportation
ta transfer the licence of Pan Amer i can Wor Id Airways'
transatlantic London routes to United Airlines and Trans World
Airl ines routes ta American Airlines. In exchange, the United
6'iHaanappel, supra, note 53 at 84.
fi6H • A. Wassenbergh, Openinq the Skies Countries (1990) 15 Air L 305 at 307.
6l Ibid ., at 309.
the EEC and Third
MA.Kark, Die Liberalisierung der europâischen Zivilluftfahrt und das Wettbewerbsrecht der Europâischen Gemeinschaft, (Frankfurt am Main: Verlag Peter Lang, 1989) 92.
69u.S.Department of Transportation, News, DOT 21-91.
16
! Kingdom was granted a very liberal bilateral air transport
agreement. 70
Article 84 (2) of the Rome Treaty left open "what kind of
special regime would eventually be decided upon by the Council for
air transport." 71 Wi thin the Communi ty, the Court of Justice has
declared in its Opinion 1/78 that "the notion of 'commercial
policy' as laid down in Article 113, i6 of an evolutive nature and
embraces aIl in an international framework, that i5 considered to
form part of such a policy."
To the present day the time may not have come to include air
transport in Articles 113 & 114 of the Treaty of Rome as it Is not
considered ta be part of the commercial policy, aIl the more since
the transport poliey is mostly dealt with under a separate title
70Ibid ., a t 2. "In return the U,S. agreed, among other things, to: #Allow a second British carrier (in addi tion ta Bd tj sh Airways) to operate from Heathrow on U.S.-U.K. routes. #Grant Br i ti sh carriers broader r ights to milke codE-~ sharing arrangements with American carriers. 'rhis wlll enable U. K. airlines to schedule f li ghts to the U. S. , with one or more segments of the flight operaled by U.S. airlines. #Increase the number of cities j n LaUn Americil, Canada, and Asia to which Bd tish fI ights ran conlinue aiter stopping at points in the United States. One Bri tish carrier will be allowed to operate one flight daily between between Seattle and Australia. #Give the U.K. four opportunities to permit an addillonal British carrier to tly to U.S. cities already served by one or two U.K. carriers. #Grant British carriers rights to a limited number of flights from five countries in Europe to the U.S. in conjunction with services between the U.S. and U.K. The five countries are Belgium, Germany, Ireland, Luxembourg, and the Netherlands."
71wassenbergh, supra, note 66 at 307.
17
in the EEC Treaty. The truth, however, may come out in October of
this year, when the Agreement on Civil Aviation Between the EEC,
Norway dnd Sweden will be sig~ed. There may be a compromise in the
sense that bath Articles 84 and 113 will be mentioned. Therefore,
bilateral air transport agreements between EEC Member States with
non-Member States will be discussed on aState by State basis in
the future as it has been do ne to the present day.
I.3.2.2.:Article 238 of the EEC ~reaty
This provision envisages that the Communi ty may conclude
agreements establishing an association involving reciprocal rights
and obljgations, common action and special procedures with a third
State, a union of States or an international organisation. Article
238 does not specify the subject matter. Its application, though,
still remains limi ted to agreements conferring trade preferences. 72
I.3.2.3.:Article 235 of the EEC Treaty
Article 235 functions as a general clause for treaty making
power of the Cornmunity. This provision empowers the EC Council to
take appropriate measures if action by the Community should prove
necessary ta attain one of its objectives and the EEC Treaty has
not provided the necessary powers. Article 75 is worded in a way
72vaughan, supra, note 48 at Par 4.04.
18
which strongly suggests that actions of an international nature
can be based upon i t. 73 Close74 , analysing the decisions of the EC .. .J
on the transport sector75, cornes to the conclusion that the EEC
foreign common transport policy was always seen to be based on
Article 75. Concerning air transport, no difference is admissible.
Article 84, being placed at the very end of the transport Chapter,
thereby disapplying the previous provisions from sea and air
transport, rnanifests the extrernc "nervousness" 76 of the MQrnber
States about the subordination of these sectors to Communi ty
decision making and any possible loss of national competence. 77
73Art . 75 (1), Treaty of Rome: The Council is to lay down: 11 (a)common rules applicable to international tranf:port to or from the terri tory of a Member Sta te or pass i ng across the territory of one or more Member States; (b)the conditions under which non-resident carriers may opera te services within a Member State; (c)any other appropriate provislons."
74Close, supra, note 55 at 109 - 113.
75Case 22/70 [1971], ECR 263; Opinion 1/76 [1977], ECR 741; Council Decision (82/S05/EEC) of July 12, 1982 Concluding the Agreement on the InternationaJ Carriage of Passengers by Raad by Means of Occassional Coach and Bus Services(ASOR), O.J.(1982) No. L.230, at 38ff. Council Regulation(EEC)No.4055/86 of December 22,1986 Applying the Principle of Freedom ta provide Services ta Maritime 'l'ransport between Member States and between Member States and '!'hird Countries,O.J.(1986), NO.L 378, at 1ff. Article 10 of Council Directive (87/601/EEC) of December 14, 1987 on Shares for Scheduled Air Services between Member StaLes O.J.(1987), NO.L 374, at 12ff.
76Close, supra, note 55 at 121.
77see also Economides, supra, note 23 at 12.
q
19
I.3.2.4.:Conclusion
As transport rnatters are still not included in GATT and the
principles of free trade can therefore not be applied te air
Lransport, the EEC's treaty rnaking power in transport rnatters can
generally be based upen a combination of Article 75 and Article
235 or upon Article 75 aione. In air transport matters, the treaty-
making rower should be considered based upon Article 84 (2) and
Article 235 or upon Article 84 alone. 78 Attention must be paid te
the aspect thal in case Articles 75 and 84(2) are seen as the basis
for the external competence there will only be a qualified rnajority
in the Council essential, whereas in case of Article 235 unanirnity
will be required.
Te further the understanding of the comph!xity of the subject
matter the opinion of the Director of the EUIDpean Aeropolilical
Affairs division of the International Air Transport Association
shail be cited79• This association has big influence on the Council
of the European Community.
78Haanappel, supra, note 53, at 84. Close, supra, note 55 at 126. Wassenbergh, supra, note 66 at 315. E.L.M.I<alshoven-van Tijen, Recent Developments in EEC Aviation Law: "The Second Phase", (1990) 15 Air L 122 at 137.
79p . P. C. Haanappel, Description of European Aeropoli tical Developments, Geneva, July 1991, inedited material.
l
'.
------------------------------------------------........................... a
20
For both 1egal and policy reasons, it seems unrealistic that European Communi ty insti tutions would take over traffie negotiations from EEC Member States, a11 of a sudden, and at a rather arbitrary date, as proposed hy the Commission in February 1990. The process will probably be graduaI and on an ad hoc basis, until eventually a fully integrated European air transport market will make Community traffic right negoliations a day-to-day and logical thing, both for EEC and non-BEC countrles and carriers. ln law, if indeed Article 84(2) of the Treaty of Rome (the air transport provision) i8 the legal basis for the BEC's external aviation policy rather than Article 113 (on commercial relatlons in general), exclusive Community jurisdiet.lon in traffic right negotiations is not a pOlnt. The jurisdiclion may be negotiated at Community level, if and to the Axtent that the EC Council would give the Commission a mandate to da 50. Otherwise, indivldual EEC Member States would continue to do 50, payi ng duc regard, however, und0r Article 5 af the Treaty ol Rome, to what the Communily as such has already achieved Ln its common external aviation policy. For instance, Lf the Communit:y has already adapted a comman exlernal aviation competlLion policy, as outlined above, buL still leaves lra(Uc right. negotiatians to Member States, the latter could freely negotiate bilateral air 1_ransparl agreements with "Ud rd eountries", but in doing 50, they would have to respect the already existing Community aviation competition policy, e.g. with respect to pricing or commercial
l · 80 revenue poo lng.
As for the negotiations of the EEC with the EFTA Members with
the aL.. ta extend the aviation regime of the EEC to these
countries, these negotiations will be based upon a Couneil
deeisionR1 and be undertaken by the Commission.
80Ibid ., at 9., emph. in original.
81COM (90) 18 final, February 14, 1990.
1
21
II. : 'l'he European Free Trade Association
II.1.:Generalities
The EFTA was created on May 3, 1960, on the basis of the
Stockholm Convention, in direct respanse to the creation of the
EEC .!l? Currently i t comprises the following seven countries :Austria,
Finland, lce]and, Liechtenstein, Norway, Sweden and Switzerland. 83
The EFTA, like the EEC, has been crea ted ta improve trading
candi tions between i ts Members. 84 Unlike the Treaty of Rome, the
~Text of Convention and Other Documents Approved at Stockholm on 20th November 1959. Presented to the parliament by the Exchequer and the Pres iden t of t.he Board of trade by command of Her Ma jesty, November 1959. Her Majesty's Stationary Office, London, 1959;
81The original EF'l'A memters were: Austria, Denmark, Finland(as associate member), Norway, Portugal, Swedcn, Switzerland and the United Kingdom. In 1973, the United Kingdom and Denmark acceded ta the Communily. ln 1986, Portugal became member of the Community. Therefore, whi] e t~he EEC was enlarging i ts terri tory, the EFTA was losing members and influence.
841)ie Europaische Freihandelsa~;soziation, (Geneva: EFTA-Sekretariat, 1987) 12:
An ers ter Ste lIe stand die Furcht vor einer wirtschaftlichen Diskriminierung seitens der neu gebildeten EWG. Zweitens war es die Idee, das sich eine Freihande ls zone für d i.e Wirtschaftsintegration gut eigne. Dri t tens waren die Gründungsmi tglieder der EFTA, insbesandere die neutralen, nicht gewillt, dem Grossunterfangen elner wirtschaftlichen und letztlich wirtschdf t lichen Union mi t suprana tionalen Insti tutionen und Be5ch l uss fassungsorganen zu zustimmen. Viertens wollten sie sich im Bereich der europ~ischen Integration Erfahrungen sammeJ n und gieichzei tig ihre weI twei ten Wirtschaftsbez iehungen aufrechterha 1 ten. Fünftens woll ten sie zwischen sich und den Mi tg liedern der EWG ei ne Brücke [ür eine engele vlirtscha ftliche Zusammenarbei t schlagen. Sechtens wollten sie srhliesslich, dass ihre Assoziation "zur harmonischen Entwicklung und Auswei tung des Welthandels sowie zur fortschreitenden Beseitigung seiner
22
St.ockholm Convention did not try ta legislate in detail and in
advance for every contingency that may arise. Instead, it
established a framework within which the necessary minimum of rules
has been set out. For the rest, the Convention contents i tsel f wi th
the statement 'f certain guiding principles and the indication of
procedures by which i t cou Id be appl ied in actual si tua tions. fi', The
only areas the Convention has deait with in detail were the
provisions for tariff reductions and for the elimination of
quantit~ve restrictions. The rules of origin have also been spelt
out in detail. 86 At the time of the establishment of the EFTA i t was
felt that a 100se association of countries to eliminate tariffs on
industrial goods only, and one wi th fewer poli tical obliga Lions
than the EEC could equally weIl serve as an instrument of European
integration .87
The Association avoided endowing the organisation with
supranational structures, opting instead for a small secretariat
with 70 employees88 to service the EFTA-Council - EFTA's governing
body.89 Twice each mon th, the permanent representa ti ves of each
Beschrankungen bei tragt, wie es in der Stockholmer Konvention in den Zielsetzungen(Art.2 d) gefordert wird.
85The European Free 'l'rade Associa tion - Structure, Rules anc!. Operation, (Geneva: EFTA Secretariat, 1976) 13.
86 Id .
87 30 Years of European l:istory, (2/90) EFTA Bulletin 5 at 6.
88EFTA , supra, note 84 at 49.
89Ibid ., at36.
23
Member country meet; twice every year, meetings are held at the
ministerial level. 90 The principal tasks of the Association are: ta
ensure the efficient working of the Stockholm Convention
instituting free t.rade between its Members, to provide a framework
for consul ta tiOJ,S and coordina tion on matters connected with each
of lhe EF'rA countries' bilateral free trade agreements with the
EEC, which are identical ta a large extent; and to serve as a forum
for consultations on a wide range of economic questions.
The Member countries preferred to construct a free trade area
with in which the participat ing countries were to abolish trade
barriers, but each was to retain its own external tariff as weIl
as control over its policies regarding trade with countries outside
the area. 91 Th is is one of the most striking differences between the
EEC and the EFTA. EFTA lacks the abi li ty ta conclude treaties on
behalf of its Member Stales. Each individual EFTA country must
negotiate its own treaty with an outside entity.92
90 Id .
91 EFTA , supra, note 85 at 18.
92S . Wilson, Counterpoint: Austria' s Application For Membership in the European Ecopomic Community and Delor' s CalI For a New EC -EFTA Relationship, (1990) 20 Georgia J Int' 1 & Camp L 241 at 242, ft.4.
24
1 II.2.:Free Trade Agreements of 1972
At the time of the accession of the United Kingdom and Ireland
to the EEC each of the remaining EFTA countriesQ3 concluded a free
trade agreement (FTA) with the Community.q~ One common goal of aIl
EFTA Member countries was to make sure that the enlargement of the
EEC would not result in the reintroduction of tariif bûrriers in
9r: Western Europe.:J Although these agreements have undergone sorne
adaptations they remain essentially unchanged. Various agreements
have been concluded with individual EFTA countries in the context
of the General Agreement on Tariffs and Trade.%
AlI the agreements follow very much the same pattern. 91 They
cover virtually aIl non-agricultural goods and certain processed
agricul tural products. 98 On these products, import duties were
reduced. Nevertheless, a variable component corresponding to the
common agricultural policy levy on the raw materia ls may be
. d 99 l.mpose . EFTA exports are not enti tled to a more favourable
treatment in the Community than that applied by Member States ûmong
93Austria, Finland, Iceland, Norway, Sweden and Swi tzerland.
~vaughan, supra, note 48 at par 4.109.
95Wilson, supra, note 92 at 242.
96vaughan, supra, note 48 ût par 4.13.
97 EFTA , supra, note 85 at 75.
9~aughan, supra, note 48 at par 4.109.
99Id .
25
themselves. Consequently, when protective measures are introduced
within the Community such as those used to protect the balance of
payments of a Member State they override the obligations of these
100 agreements.
AlI tariffs on industrial goods were abolished by 1977, except
for tariffs on paper goods, which were withdrawn by 1980, and
tariffs on steel, which were abolished by 1984. 101 The Free Trade
Agreements are important for the EFTA countries as 50% of their
export goes to the EEC. 102
From the technical point of view, the FTAs are cumbersome.
Twice a year, the EEC has to meet its EFTA partners separately to
review malters arising under the bilateral FTAs .103 Since most of
the issues discussed in these "joint committees" are the same for
aIl seven EFTA countries, the activities in the commi ttees are
coordina ted in advance. 104 In fact, 80% of EFTA' s work concerns the
rela tions wi th the EEC. ID')
In the years after the signing of the FTAs, cooperation
between EFTA countries and the EEC intensified gradually. This
loord.
101 30 Years of European History, (2/90) EFTA Bulletin, 6 at 6.
IOtv . C. Priee, EFTA and the European Communi ties: What Future For "Greater Europe"?, (22/1989) Biblio-Flash, Document Interne, 5 at 5.
101Art.29 of each FTA.
104 EFTA, supra, note 84 at 109.
1051bid ., at p .103.
26
development culminated at the ministerial meeting of several
foreign ministers of the EEC and EFTA States at Luxembourg on April
9, 1984 when the EEC accepted the EFTA as a partner. 106 This
development was the first step ta crea te a European ~conomic Area,
which shall be discussed below.
III.:European Economie Area
III.l.:Generalities
The creation and interconnection of the EEC and EFTA as two
big free trading areas, comprising a total population of 350
million people, has 1ed ta an increased mutuai dependency. Apart
from a pure trade connection within Europe this dependency has led
ta the need for further interaction .107 Both trading blacks feared
that this successful cooperation may be impeded by different trade
palicies . 108
The idea of a global approach between the twa "blacks" arose
at the first meeting of the ministers of foreign affairs of bath
sides after a quarter of a century of their existence. 109 This
I06EFTA , supra, note 84 at 103.
1070ut of Austria exports 68.3% went ta the EEC.,in Einbruch bel Osterrelchs Exporten, EG-Anteil gestiegen, Osten übertraf EFTA, (June 11, 1991) Die Presse 13 at 13.
lOOEFTA, supra, note 84 at 113.
IM 30 Years, supra, note 101 at 6f. It was ta mark the dismant1ing of the 1ast tariff barri ers between EFTA and EEC states.
Q
..... ----------------------------------------------...
27
landmark meeting was held in April 1984, in Luxembourg, at which
guidelines were laid down for further EFTA-EEC cooperation. The
result of this meeting became known as the Luxembourg process. It
was also at that meeting that the term European Economie Space was
first used. llo Generally, the t'AlO trading blocks agreed to work
towards d closer cooperation in economic matters. ll1
EFTA continued to move towards 3. s] owly developing cooperation
with the EEC. Due ~o unanimity in decision-making required by the
EEC Council, the general consensus within the EFTA was the EEC
would not meet the projected deadline of 1992. 112 The Members of
EFTA hoped that the l,uxembourg Declaration would allow them to
participate in the EEC' s goal of the elimination of non-tariff
barriers wi thin Europe. 113
III.2.:Delors' CalI for a More Structured Cooperation
The Single European Act 114 introduced qualified majori ty voting
in the EEC. With that change, the EEC can move more quickly tùwards
110 Id .
"Space " from the French "espace". Later, the word "area" became current in the English version.
lllEprrA's Consultative Committee Meeting: Cooperation with the EC the Main Theme/ (4/86) EFTA Bulletin 14 at 15.
Il?Id. Hùwever, in tl,e later SEA the unanimity requirement was abandoned in many instances.
114see , supra, note 36.
28
integration and will possibly be able to establish a common market
by 1992. This shattered EFTA's self-content. The EFTA countries
knew that as outsiders they would face economic discr ind na t ion. l\'l
On January 19, 1989 Jaques Delors, President of the EEC
Commission, invited the EFTA States to
look for a new more structured partnership with cornmon decision-making and administralive institutions to rnake our acti vi ties more ef fecti ve and to high 1 igh t l he political dimension of our cooperation in the economic, social, financial and cultural spheres.
Delors' calI for the new "third track" between the EEC and
EFTA carne about for two distinct reasons. Firstly, EFTA countries,
as has already been mentioned, feared an economic loss after 1992.
Secondly,. the EEC wanted to discourage any new Membership
applications before the integration process had not been
completed. 116 However, Delors' idea cou Id not prevent l\ustria from
applying for full Membership on June 17, 1989. 117 Sweden did the
same on .Tuly l, 1991. 118
115Wilson, supra, note 92 at 243.
1l6rbid ., at 246: Numerous authorities have stated that shou]d Austria be granted Ee membership, other EFTA states would apply for membership in the EC as neutral states. But, by submitting to more cooperation in cGrtain areas, Delors hoped to discourage a rash of memhership applicall.ons from EFTA members submjtted because EFTA was entirely outside the decision-making process.
1l7"Aide Mémoire" of the Austrian Foreign Ministry, Vlenna, Februnry 1990, 1.
118Brüsseier "Avis" 5011 am 31. Juli verabschiedet Schwedens Premierminister Carlsson Uherrreicht Mitgliedschaft, (July 2, 1991) Die Presse 2 at 2.
werden. Auch Antrag auf
Q
29
The negotiations on formaI Membership will take sorne years.
In the meanwhile, these countries do not want to be excluded from
the integration process. )19 Furthermore, the negotiations on the
European Economie Area comprise approximately 60% of what amounts
C b h · .. 170 Th f to EE Mem ers ~p negot~at~ons. ere ore these countries
participate açtively in the negotiations on the creation of the
European Economie Area, 171 al though i t may seem contradictory dt
first sjght. The two aims have ta be seen in different time
perspectives .127
IJCISchÜssel Vorsi tzender des EF'rA-Ministerrates, (January 2, 1991) Der Standard l at 1.
170Lecture given by Dr.G.Reisch, General Secretary of EFTA, held at the Diplomatische Akademie, Vienna, June 15, 1991.
I?IEditorial:EFTA - the Unique 1993 KeL ta the EC's InternaJ_ Market, (4/90) EFTA Bulletin 1 at 1.:
The internal market will be a reality by January 1, 1993. At th3t same date the EC will open door to new membership negotjations. These will take sorne two, maybe more, years ta complete. Sa, the point is to have access ta the EC internaI mar~et by 1 January 1993. The membership key cannot open the door by then. There is only one key around that could do the trick, the EEA key.
Interesting aiso the Swedish position on this point: An EEA agreement would give Sweden full access ta the EC internaI market when it is implemented on 1 January 1993. With this timing in mind, an EEA agreement is the only alternative.
ln L.Maurer, 6sterreich und die Europ~ische Integration, (6/1990) Ost-West Journal 5 at 7.
30
III.3.:Issues Arising through the Creation of the EEA
The EFTA Heads of State met in Oslo ta discuss the creation
of the EEA in March 1989. They expressed their will otto explore
together with the EEC ways and means ta achieve a more structured
partnership with common decision-making and administrative
institutions. ,,123 They further expressed their wish to include the
four freedoms 124 , the free movement of goods, services, capi tal and
persons on the basis of the relevant "aquis communitaire,,1?'i as well
as coopera tion in research, technology, education, env ironment,
transportation, and social poliey matters as flanking and
horizontal policies .126 Furthermore, mutually satisfactory legal and
123EFTA Oslo Surnmi t: Meeting of EF'l'l\-Head of States, Oslo, March 14th and 15th, (March 15, 1989) Press Release.
124Kapteyn, supra, note 51 at 355 - 467.
125S . Norberg, The European Economie Space Legal and Institutional Issues, (90/3) EFTA Bulletin 5 at 6.:
"Acquis communautaire" cansists in this context of the EES relevant part of the Community's total legislation, including case law, which i8 to be integrated into the agreement as a comman legal basis for the Ee and EFTl\ relationship. This concerns, in other words, the r~sllit of Ee Integration work of more thar, thirty years and mounts to sorne 1400 acts (apart from basic parts of the Treaty of Rome, essentially EEC directives and EEC regulations) or sorne la 000 pages of legal texts in the Official Journal. By integrating this "acquis" into the future EES Treaty the conditions for the equal treatment and non-discrimination of citizens from aIl nineteen countries will be created throughout the whole of the EES.
126Summit, supra, note 123.
...
- ------------------------------------
31
insti tutional arrangements were to be included. 127 The framework
treaty should be in force by January 1, 1993. 1(18 EFTA is negotiating
wiLh the EEC multilaterally. The EEC wants EFTA to speak with one
voice in the future EEA, as otherwise the danger of serious
distortions in the future work will be likely.129
The two trading blocks negotiate in five "negotiating
groups" ,110 In the EEA, there will be a free movement of goods .131 It
will not be an equivalent free movement of goods, like in the EEC,
as the EEA will not be a eus toms union. As there shall be no
foreign common commercial policy and no conunon foreign customs
rates, the rules of origin137 and border contraIs will remain. As
for the freedom of services and capital, it may be stated that
127 H,A.Koch,Aktueller Stand der Integrationspolitik, Austrian Chamber of Europaisc~e Integration, Vienna, January 1991.
Osterreichischen Commerce, Referat
l~EES - a historie step towards a new Europe, Declaration of EFTA Heads of Government and Ministers Meeting in Gothenburg, Sweden, June 13 and 14, 1990, (3/90) EFTA Bulletin, Il at 12.
17QEurope, (June 2, 1990), No.5267.
130lnformation für die Mitglieder der osterreichischen Kontaktgruppe zum Europa ischen Parlement, Schaffung des Europaischen Wirtschaftsraumes, Auswirkungen auf Osterreich, insbesondere im Ilinblick auf eine a11fa11ige Übernahme von Rechtsnormen der Gemeinschaft-L as of May 14, 1991, 1788j/1-6,III.2. Hereinafter referred ta as "Report" l.group one on the free movement of goods, II.group two on the free movement of capital and services, III.group three on the free movement of persans, IV.group four on the four f1anking horizontal policies (four forms of f reedom) , V.group five on lega1 and instjtutional questions.
131 Ibid ., at 2.
132EFTA , supra, note 85 at 54 - 59.
32
services offered by a forejgner shall be rendered under the same
conditions as a citizen of that country may perform them. 1B These
goals shall be achieved by harmonizing the rules of procedure,
standards and the control and supervision of origin .\34 The EFTA
countries asked for a transitional period, concerning the freedom
of establishment, which deals with the mutual acceptance of
diplomas, professional training and certificates of
qualification .135 The major obstacle to an agreement lies in the
meaning of the term "public administration". The mas t important
issue in this consultation group is the question of the "cohesion
fund", i.e. a fund for reducing economic and social disparities
wi thin the EEC. 136
As for the main topie of this study, i.e. the lega1 analysis
of air transport in the EEA and its development with Eastern
European eountries, the future legal and institutional arrangements
will be a pivotaI issue. The institutional arrangements poscd f-hc
most serious poli tical problems in the negotiations, as .Jaques
Delors insisted on the ide a of a two-pillar theory, which stands
for a separate development of both, the EFTA and the EEC I31, as the
133Report, supra, note 130 at 3.
134Id .
135Id .
136Greece, Ireland, Portugal and Spain.
137Koch , supra, note 127 at 12: bei einer Verwirklichung dieser "Zwei-Süulen
Theorie"(EG und EFTA-Süule stehen autonom nebeneinander) bliebe das den EFTA-Staaten eingerüumte Entscheidungsrecht in der Praxis auf das von EG-Organen
33
latter would not be included in the decision making process. In
such a case, EFTA countries cou Id only follow the measures taken
by the EEC. The EFTA therefore wanted to participate fully in the
EEC deci sion making process. The following compromise cou Id be
reached. This compromise shall be discussed in big letters only as
the final outcome of the discussions is still open at the present
moment .138
Opting-out clause: The EEA treaty will provide for an opting-
out clause in case a future regulation of the EEA might cause major
economic, social and environmental difficulties. 1E
Further developroent of EEA law: In due course, EFTA countries
participate at the level of experts, however not at a ministerial
level, through information and consultation in the law making
process. The Commission will refer to EFTA countries in the same
manner as i twill to EEC Members. 140 EFTA States will not be
encompassed, though, in the decision making process, except for
areas of the cohesion fund in which the EFTA States participate
fully through their financial contributions.
EEA-Council: There will be a Council which will be constituted
by the Ministers of the 19 Members of the EEA. It will hold a
meeting twice a year to decide on the future policy of the EEA. For
bereits beschlossene Gemeinschaftsrecht beschrankt.
1380 l ' f . . D G W h . ra l..n ormatl..on gl..ven r .. ose nagg, Austrian EFTA delegation, given on July 25, 1991.
IEReport, supra, note 130 at 5.
11\0Id.
Member of the
34
current lega1 and administrative assignments, there will be a
common organ in whieh the EFTA will have ta speak with one voiee.
This organ will adopt its decisions with consensus .141
Court of Justic~:Seven judges of the EFTA countries will be
appointed. There will be an independent Court of Justice for the
EEA. It will cansist of five judges from the ECJ and three of the
seven judges of the EFTA countries. The court will be functionally
integrated in ta the ECJ and will have the following competences:
It will decide, firstly, upon request of the joint committee of
the treaty parties; secondly, it will decide in case of a conflict
between the EFTA Council and an EFTA Member; and thirdly, issues
of competi tion ~ which are usually regulated wi thin the EFTA
14?b b h db b . , 11\\ 'llb process ut want to e c ange y us~ness enterpr~ses , w~ e
decided by the Court of Justice.
Surveillance Authori ty among the EF'l'A States l"": The
surveillance authority shall be installed with its own budget and
independent secretariat. To the present day, cooperation between
the EFTA surveillance authority and the other EFTA/EEA organs
concerning general administrative activities is unclear. Subjects
of con cern for the Authority are the issues of competition, State
141 Id .
142See Art.13-17 of the Stockholm Convention, supra, note 82.
~3Report, supra, note 130 at 6.
144Draft Agreement Establishing a Surveillance Authority Among the EFTA Stat..e~, July 10, 1991 (rev.2), with the courtesy of Austrian Ministry of Foreign Affairs.
c
35
aid and public procurement. For this task, the EFTA Surveillance
Authority may, like the European Commission, "request aIl the
necessary information from the Governments and competent
authorities of the EFTA States and from undertakings and
associations of undertakings.,,145
111.4. :Reasons for the Delay in the Signing of the EEA Agreement
Negotia tors had wanted to sign the EEA agreement at the
Ministerial Meeting in Salzburg on June 26, 1991. 146 Problems and
unwillingness on both sides to make compromises on sorne issues did
not allow the conclusion of the agreement. The disagreements are
as follows l 'l7:
a) The regulation of transit transport through Austria and
Switzerland seems to become a major obstacle. The positions are
diametrically opposed: The EEC wishes an increased quota for
transport and thereby promises the introduction of trucks which
wouJd produce half of the current amount of exhaust fumes in a
timespan of twelve years. Austria and Switzerland, in their turn,
want to reduce the quota .148 The EEC, however, insists that in case
they t:'educe the amount of emmissions, Austria and Swi tzerland
145Art . 3 , Ibid.
l4{jEurope, (February 1,1991) No.5422, at 9.
147Heisse EWR-Endphase, (June 19, 1991) Die Presse 1 at 1.
l'll1Der FisC'h stinkt beim Transit - Der Weg zum EWR ist noch nicht [rei, (June 20, 1991) Die Presse 3 at 3.
36
1 should increase the quota. Austria' s Minister of Transport, R.
Streicher, however, believes this ta be inadmissible. 149
Furthermore, Austria wants Swi tzerland to wi thdraw i ts tonnage
limitation of 28 tons .150 The point is that in case the issue of
transit is not solved, the whole issue of transport, including air
transport, might consequently be excluded from the EEAI'JI;
Commissioner F.Andriessen fears that in such an event there wou1d
be no EEA at a11. 152 Consequently, the liberalisation m(~ùsures for
air transport would not app1y to the EEA, except for Norway and
Sweden, as the latter two countries have already been included in
the EEC air transport regulations. 151
b) Furthermore, the amount of money ta be put into the cohesion
fund is still not agreed upon. This fund shall be used for the
infrastructural development of the poorer EEC Member Countries, as
listed above in footnote 131.
c) The fishing quotas of the EEC in Iceland dnd Norway and the free
access of fishery products to the EEC market on a non-reciprocal
149H. Pollak, Das Ûi.he Ringen um einen Transi tvertrag - Harte Herbstrunde Osterreich - EG?, (August 19, 1991) Die Presse 3 at 3.
150Id .
151Chancen für Transi tabkommen sinken - Bonn und Rom wollen EWR nicht scheitern lassen, (June 18, 1991) Die Presse 2 at 2.
152F .Andrlssen in an interveiw for the Austrian 'l'elevision, June 26, 1991.(Zeit im Bild l, FS l, 7,30 p.m.)
l~see infra chapter II.
Q
37
1 basis has led ta the fierce opposition of Spain1M, which seems ta
try to make up for mistakes in its accession agreements to the EEC.
1
IV.:Foreign Trade Policy of the Former COMECON Member States
After the decline of the communist regimes in the countries
of the former Eastern Block, the economies of these countries are
in a stage of transformation from their planned economies into
market structured economies. For this very reason, these countries
are aiming a t new and closer ties wi th the weIl established
"Western~ European countries. The Eastern European countries were
tied together in the Council for Mutual Economie
Assistance(COMECON), which was founded in January 1949. It was
supposed to be a reaction to the Marshall Plan of the United States
with which it helped to reconstruct Europe. With the changes in
Eastern Europe the time had come for the former COMECON Members to
decide ta di ss01 ve this insti tu tion. This happened on June 28,
1991. 155 Currently, these countries are seeking new forros of
cooperation among one another and with the West.
154Europa, Neue Hürden für Wirtschaftsrauro: Spanien hart, Pannen der EFTA, (June 12, 1991) Die Presse 2 at 2.
15'iCOMECON-Auflosung:Das Ende des Ostblocks, (June 27, 1991) Die Presse 4 at 4.
1 38
On February 15, 1991, Czechoslovakia, Hungary and Poland
signed a declaration for further cooperation in Visegrad. 156 The
declaration is considered as the firsL mutuai step away trom the
post revolutionary chaos. The declaration, however, does not
conta in any intentions for the future establishment of a free trade
area. The three former communist countries still look out to the
West .157 As these countries have many problems in common, the words
of poland's President Lech Walesa are pointive:"We are cnndemned
to work together." 158 However, more recent newspaper reports show
that there are talks under way ta conc1ude a free trade agreement
between Czechos1ovakia, Hungary and Poland. 159 In fact, everyLhing
that one of these three countries undertakes may be subsumed under
the formula:
radika le Reform, unterstützt durch regiona1e Koord inat ion und intensivere Kooperation .160
156Gemeinsame Annaherung an Europa, Gipfel CSFR, Polen und Ungarn suchen einen Weg aus der Krise, (February 16 & 17, 1991) 1 at 1.
157 Ibid., a t 2.: CSFR, Polen und Ungarn wollen in der speziellen Situtation des tlberganges unter sich bleiben, schliessen aber bewusst "keinen Pakt" (Havel), sondern sie wollen nur die "getrennt geführten Verhandlungen mit der EG koordinieren" (Antall) .
l~Drei Lander zur Zusammenarbeit verurleiJt-Oie Tschechoslovakei, Polen und Ungarn vereinbarten an de~ Donau eine Kooperation, die sich gegen niemenden richtet._, (February 16 & 17, 1991) Die Presse 3 at 3.
159Vom Visegrâd-Dreierbund bis zu den Donau- und SchwarzmeerAnrainern, (June 27, 1991) Die Presse 4 at 4.
160Id . i "radical reform, supported by regional coordination and more intensive cooperation."
1
1
39
The remaining Eastern European countries follow these
developments with apprehension 161 and try to undermine the efforts
of these three countries. But it may be stated as a fact that there
is a major difference in the development of these three countries
of Central Europe t67 and the Southeast European countries l63•
At the meeting of the EFTA Ministers in Gothenburg, Sweden,
on June 14, 1990, declarations of a more intense economic
cooperation between Czechoslovakia, Hungary and poland were
signed. Hi" The representatives of these countries expressed their
wish for the conclusion of a free trade agreement. 165 The EFTA
countries responded positively to this wish. However, the EFTA
countries wi 11 follow their principle of "parallelisrn" with the
respective activitles of the EEC in order to achieve identical
treaties.]66 'l'herefore it may be stated that these three countries
may enter the EEA - in case it cornes into being - in the future and
be subject to that liberalised regime for air transport. 167
As the economles of the former COMECON countries are not
161 Id .
162Czechoslovak la, Hungary and poland.
163A1b . BI' l' d . anla, u garla, Yugos aVla an Romanla.
IM Koch , supra, note 127 at 15.
165 Id .
166 l b 1 d ., a t 1 7 •
167see also: D.Kennedy and D.E.Webb, Inteqration: European Economie Communi ties, (1990) 28 at 663.
Eastern Europe and the Columbia J TransI.' 1 L, 633
i
1
40
strong enough to compete with EEC Members in an integrated EEC
market, they have concluded association agreements with the EEC.
These associations do not provide for future accession to the EEC,
unlike enjoyed by Greece, Portugdl and Spain in the past. IliA At
least until April 1990, poland, Czechoslovakia, Hungary, Yugoslavia
and Bulgaria had negotiated bila teral trade accords wi th the
. 169 European Economie Commun1ty. EEC External Affairs Commissioner
Frans Andri8ssen promulgated the idea of an associate Membership
in the EEC llO, whatever that may mean. This idea, however, found
little response with his fellow Commissioners. Therefore it may be
concluded that none of the former COMECON countries may be seen as
Members of the EEC in the near future. 171
lWDeen and Westbrook, supra, note 8 at 667.
169 l b id., a t 6 6 0 .
170Brüssel :Andriessen warnt vor zu raschem EG-Ausbau, (June 11, 1991) Die Presse 2 at 2.
171For speculations concerning possibilities of integration, see: Kennedy and Webb, supra, note 167 at 633 - 675. Deen and Westbrook, supra, note 8 at 660 - 670.
•
41
Chapter II:
Future Air Transport Regulation in the European Economie Area
The aim of this chapter is to describe the future regulation
of air transport within the European Economie Area. In order to
understand the rules i t is essentiai to foeuse on the existing
Iegal stipulations governing air transport in the EEC. This is the
case as the EEA agreement will incorpora te the Community lawon air
transport. In order to fully understand the provisions one aiso has
to be aquainted with their development.
I.:Draft Agreement on Civil Aviation between the EEC, Norwayand
Sweden
I.l.:Introduction
One of the first eoncrete results of the EFTA-EEC approach is
the above mentioned agreement. It may be questioned why only Norway
and Sweden were ineluded in the mandate of the Commission to
negotiate the externai implications of Iiberalisation in air
transport matters.
42
The reason is the special situation of the Scandinavian
airline SAS, where Denmark as an ECC-Member is a partiei Fant. 177
Denmark therefore insisted that it would only accept lhe second
phase of EEC air transport liberallsation on condition lhat an
agreement like the one under discussion would be signed. Il.l As early
as June 14, 1988, Sweden and Norway had been asking for
negotiations to be opened and had even prepared a draft
agreement. 174 Six months later the other EFTA countries did the
172J.w.F.Sundbergr Inter-CLO"\[ermnental Relations ln ALr Transport betweeIl EEC and Non-EEC Countries - Gencr.al Aspecls, aL 174, in P.P.C.Haanappel,et aL, EEC Air 'rransport Policy and Regulation, and their Implications for North-Am~rica: PrGCeeolngs of a Conference lIeld é1t McGill University, Montreal, Canada, September 1989 (Deventer, Boston: Kluwor Law and Taxation Publishers, 1990)
The airllne SAS was created by the Consortium A~~pmon..!::. of February 8, 1951 between lhree molher C'ompé1nies, Swedish ABA, Oanish DOL and Norwegiùn DNL. 'l'h(~ mother companies owned airerait in the air] i ne f leot in the proportions ABA 3/7 , DOL 2/7 , and DNL /. / 7 . 'J'he Scandinavian countries have mostly f'ucceeded in i_nscrling a so-called "SAS-clause" in most of thf.ür hllateral agrpc~ents whereby, although the Scandjnavian stato concern80, party to the bilat,eral, will designale ils own airline to operate the agreed services, this alrllnn is expressly permitted to do so with aircraft é:lnd cn~w
belongillg to ei ther of lhe two members of the Consort i um. Norway "lnd Sweden are not members of thp EEC. As mentione~. J owever, due to the Danish participation, SAS i5 listed as an EEC air carrler inter alla, Annex J Lo Decision 87/602/87 (whether it is an EEC ,ir carrler in other respects remains obscure in view of the facl tllal headquaters are in Stockholm). Only Copenhagen is an EEC airport, Stockholm, Gothenburg aTid Os 10 are non-EEC airports. This means that under the package, StockholmMilan i8 a non-EEC route while Copenhagen-Milan is an EEC route.
173Europe, (January 9, 1991), No.5405, at 9.
174 Id .
1
43
sa~e. In June 1990, the EEC Council declined ta give a negotiating
manda te wi th EFTA as a whole, due to the problems concerning
Swilzerland's and Austria's opposition to Alpine transit. I7S
Although the agreement was not directly discussed in
connection with the European Economie Area, the final EEC - Norway
/ Sweden draft agreement i8 interesting to analyze in detail as the
regime for air transport in the EEA will be of a very similar
nature. This is the case as it is the EFTA countries which seek
entrance to the EEC comnlon air transport market. Two aspects shall
be kept in mind:
-to what extent the Community provisions are being implemented in
such agreements. Therefore a description of til~ agreement including
its annexes shall be given.
-In addition to the Agreement itself, three non-binding Protocols
are planned, of which two are of relevance .176
The agreement provides for full application of existing
Co~munity law in Norway and Sweden, notablyof the rules introduced
in the first and second phase of liberalisation of air transport,
and for subsequent incorporation of future Community legislation.
175 rd .
176protocol 1 and 2 of the Draft Agreement on Civil Aviation between the EEC« Norway and Sweden [Hereinafter referred to as Draft Agreement]:
1. A ~asic commitment ta incorpora te in the Agreement future CUi"'u!luni ty legislation concerning civil aviation; 2. Speeif ie measures to ensure uniform implementation of certain provisions of the two Council Regulations on market access 1 capacity sharing and tariffs respectively.
44
Therefore these rules will be discussed in a separate chapter.
I.2.:Description of the Draft Agreement
The Agreement consists of six Chapters and one Annex. Article
1 specifies the general intent of the agreement: that the "acquis
communautaire" will be applicable between the parties in the field
of civil aviation. It further refers ta the EEC rules concerned,
i.e. the Regulations and Directives set out in the Annex.
Chapter Two, which comprises Artic les 3 ta 7, incorpora tes
the provisions of the Treaty of Rome on competition and State aid.
Article 3 ensures that the provisions of the Agreement and the
Annex apply only ta the extent that they concern air transport or
an associated service mentioned in the Annex.
Chapter Three includes the Articles 8 ta 10 which deal wi lh
the implementation of the competition provisions. Article 8 asks
for the submission of specifie information to the Commission
concerning the obligations under Articles 4, 5 and the Annexes.
Article 9 provides a procedure for the implementation of lhe
Commission' s decisions addressed to the Kingdoms of Norway and
Sweden. Article 10 lays down the procedure concerning the
implementation of Commission de~isions addressed ta undertakings.
Chapter Four comprises Articles 12 ta 14 and c ircumscr ibes
the relationship between the parti es. Article 12 recognises the
right of a party unilaterally to amend its domestic legislation on
matters regulated hy the Agreement and specifies the action to be
45
taken by the Joint Committee and the Contracting Party. Article 13
establishes the Joint Committee l77 and lays down the composition,
duties and procedures to be followed. It will safeguard the
implementation of the agreement, particularly the Commission' S
recommendations regarding compliance wi th State aid and competi tion
rules. Article 14 governs the decisions of the Joint Commit tee. Any
decisions will be legally binding for the parties. There is no
possible recourse against the decisions of the Joint Committee. If
the decisjons are not acted upon within six months the agreement
will lapse. At the same time, if the Joint Committee cannot reach
agreement within six months on a Commission proposaI concerning
compliance with the agreement, the agreement will become null and
void.
Chapter Pive includes consultation provisions and
miscellaneous provisions. Article 15 establishes a dut Y ta consult
each other a t the request of ei ther party "( a) on air transport
questions dealt. with in international organizations: and (b) on the
various aspects of developments which have taken place in relations
between Contracting Parties and third countries in air transport,
and on the functioning of the significant elements of bilateral or
multilateral agreements concluded in this field." Articles 16 and
17 specify the purpose of the consultations ta be held under
Article 15. The Consul ta tions have to take place in the Joint
177 Art.13(4), Draft Agreement, supra, note 176. The Joint Committee shall consist of three representatives: one representative each of Norway and Sweden on the one hand and the EEC on the other.
. ,
46
Commi t tee. 178
Article 19 makes it clear that the current provisions of the
agreement are without prejudice to those adopted in the same field
in the context of the European Economie Area. The Norway - Sweden
agreement will lapse once the agreement between the Community and
EFTA cornes into force. This provision was included upon the
insistence of the negotiators of Norway and Sweden due to Lhe short
lapse of time granted to them for the negotiations. 119 Under Article
21, Norway and Sweden are obliged to adapt their national laws in
arder to enforce the provisions on competition and State aid. The
relevant provisions of this Agreement shaii supersede the relevant
provisions of bilateral arrangements in force between Norway and
Sweden on the one hand and Communi ty Member States on the other
hand. Besides the of f icial languages in the EEC (Danish, Dutch,
English, French, German, Greek, Italian, Portuguese and Spanish)
alsa Norwegian and Swedish will be considered as authentic
languages. 180
178Art.18, Ibid.
179Europe, (January 9,1991), No.540S, at 9. Negotiations began in July 1990 and were completed in June 1991.
180Art.24, Draft Agreement, supra, note 176 .
- --------------------------------------.
47
1.3. : Two Protocols
Protocol 1 fore sees a procedure for the incorporation of
certain actions 181• It establishes a basic commitment to incorpora te
in the Agreement. future Community legislation concerning civil
aviation. Article 12 of the Draft agreement deals with the
incorporation of future legislation and the role of the Joint
Committee.
Protocol 2 provides measures to ensure uniform implementation
of certain provisions of the two Council Regulations on market
access, capaci ty sharing and tariffs respecti vely. Point 1 of
Protocol 2 refers ta Article 3( 5) of the Council Regulation on
fares for scheduled air services l82• Article 3 puts down the
criteria for the approval of air fares. Article 3(5) inter alia
alludes to the matching of fares of non- scheduled air services
wi th the scheduled ones. The Protocol wants to ensure that the
products on the market are equivalent. Elements of importance for
the assessment are the possible inclusion of additional services
ISl The Protocol 1 ists the following: - Consultation between airports and users - Mutual acceptance of Licences and harmonisation - Slot allocation - Licensi ng of air carrier and allocation of route rights - Common specif ications for ATC equipment - Cabotage - Value added tax - Abolition of tax free sales between the Contracting Parties - Relations with third countries.
1fl7Council Regulation (EEC) No 2342/90 of July 24, 1990 on fares for schedulded air services, a.J. L 217, 1990, at 1-8.
-
~
48
such as accomodation and "aiso whether the non-schedu led prodl'-:t
is legally on the market in a regular way according to the
definition in Article 2(b)(iii)(2) while the Commission may need
ta assess matching of fares with respect ta the rules concerning
predatory behaviour." 183
Point 2 of Protocol 2 refers to Article 10 (3) of Council
Regulation on access for air carriers to scheduled intra-Community
air service routes and on the sharing of pa ssenger capaci ty between
air carriers on scheduled air services between Member States .If\ll The
Protocol wants ta make sure that Member States which "bene[it tram
the specL_~ 1 candi tians under paragraph 3 of Article 10 '" will
not, on pain of losing such special candi tions which they have,
grant new rights regarding the airports concerned, on terms which
would put their Communi ty partners at a disadvantage by comparison
with carriers from third countries outsjde the Community."I!I,)
Point 3 of Protocol 2 speaks of capacity sharing. The annua]
increase of capacity share of 7.5% as envisaged in Article Il of
Council Regulation 2343/90 will be reduced to a growth rate of 5%
in case market share lies between 30 and 25%, and shall further be
183The provision referred to reads as follows: "with flights 50 regular or frequent that they constitute a recognizably systematic sed es ...
181\Council Regulation (EEC) No 2343/90 of July 24, 1990 on access for air carriers to schedulded intra-Commllnity air service routes and on the sharing of passenger capaci ty between air carriers on schedulded air services between Member States, a.J. No. L.217, at 8-15.
185protocol 2 point 2.
a
49
reduced to 4% in case of a market share of less than 25%.
II.: Air Transport in the European Economie Communitv
Air Transport in the EEC needs to be discussed at this point
because EEC air transport law and policy including the first and
second phase by incorporation became part of the Norway-Sweden
Agreement. This is the case as the EEC i5 the strongest participant
in air transport matters in Europe. Furthermore it was the EEC that
started Iiberalisation of air transport. Liberalisation was
described as
a gradua l form of deregulati on, taking place in different phases, and taking into account the fact that, notwi thstanding many poli tica l changes and forms of cooperation in Europe, national boundaries and national sovereignty still exist .186
II.l.:Development of the Civil Aviation Regulation in the EEC
II.l.l.:Introduction
Air transport negotiations among European Communi ty Member
States Iasted severai years before aIl political, social,
historical, diplomatie and economic issues were resolved. In
addition, the negotiations started in content almost 30 years after
the signing of the Treaty of Rome .187 Haanappe1 IB8 sees the following
1~Haanappe1, supra, note 79 at 1.
187Economides, supra, note 23 at 47. see a1so Kark, supra, note 68 at 72 - 90.
50
1 as the reasan for the delay of 30 years befare a cammon transport
1
palicy came into effect:
At
EEC nations and airlines had, for many years, been used to deal with air transport relations on a bilateral country by country basis, rather than through il
multilateral EEC system. They had been used to a syslpm whereby national "f 1ag" carriers en joyed cons idûrc1blE:' protection from outsicte competitors, amongst olhers fr0m i ndependent charter opera tors, and whereby these Crl rd p.rs were allowed ta restrict competitIon betw0cn themsolves through bi la tera 1 inler-carr ier agreements and Lh rOllgh multi1atera1 International Air Transport ASSOclillion (IATA) agreements. Both amongs t EEC nalions and "f lag" carriers there was cons iderable fear for a change, for a move towards a more competit.ive commercial climate, and for a system whereby competition 1aws would apply to airline activities.
the drafting conference of the Treaty of Rome air and
transport were considered ta be tao complex ta be included in
Treaty of Rome, as it was already regu1ated by many bilateral
sea
the
air
transport agreements. 189 Furthermore, for safety and securily
reasans which are both not within the EEC competence the draftcrs
'90 did not regulate air transport. 1 Moreover, i t was considered of
h ' h 'l ' " '1 fI ,JIll l 19 nat10na prest1ge to malntaln a natlona ag carrler , a so
in cases were it was not economically viable. Additionally sorne
dornestic routes were financially more rewarding than others. Due
ta an imminent system for compensation for less revenue creating
IMHaanappel, supra, note 53 at 70.
IMKark , supra, note 68 at 99.
190Grabitz,E., Kommentar zurn EWG-Vertrag, June 1990, at Art.84, para.44
191 Id .
51
routes air transport required special protection from competition.
The same practice was extended ta international air transport
wi thin the framework of bilateral air transport agreements .192 At
least the drafters of the Treaty through Article 84(2)193 left it
open ta Lhe Couneil ta decide on a common legislation for air
transport. There was a dispute in the legal literature whether the
general provisions of the Treaty of Rome also apply to transport
matters, as Article 74 only speaks of a common transport policy,
unlike Article 38( 1) on agriculture which speaks of a common
market. 11)4 The counter argument voiced the opinion that, as the
provisions in the Treaty of Rome are of a general nature, they are
also to be applied te air transport. The general provisions of the
Treaty are only ta be neglected in case they are expressly
excluded. 195
197 Id.
193"The Council may, acting by whether, to what extent and by provisions may be laid down for sea
a qualified majority, decide what procedure appropriate
and air transport."
11)4 For a detailed discussion on this subject matter see L.J.Weber, Die Zivilluftfahrt im Europaischen Gemeinschaftsrecht, (Berlin, Heidelberg, New York: Springer Verlag, 1981) 105 - 125.
!I)'i rbid . , beziehL sich GemeinschafL. Luftfahrt. "
at auf Sie
105: Die Errichtung des gemeinsamen Marktes "das gesamte Wirtschaftsleben innerhalb der
erfasst auch die Seeschiffahrt und die
Weber in his extensive analysis of the Case French Republic 1 1974, 1 ECR 357. The case is Seamen's case or Merchant Seamen's case. The common market refers ta the "whole scale Communi ties. Il
167/73 Commission v. also known as French establishment of the of economy in the
52
Due to the applicability of the general rules of the Treaty
to air transport, Economides 196 analyses that already in 1957
certain tasks and powers were transferred from Mûmber States to the Communlty. This transfer is found in (1) articles 49,54 and 87(2)(c), which provide t.hf"' Community with the power to legislatei (2) articles 2, 3(c), 6(1), and 155, which give administrative conLrol lo the CommunitYi (3) articles 2, 3(c), and 169, which give judicial control over the ECJi and (4) l\rt.icle 84(2), which gives the right lo the Communlty Lo eslablish a con~on air transport policy.
II.l.2.:Competition Rules of the EEC Treaty
Council Regulation No.2344/90 left in force Couneil Regulation
No.3975/87, which applies the competition rules ta intra-EEC air
transport. This Regulation can be seen as a response to the below
mentioned cases. 197 Therefore a survey of the competition ru les
shall be given.
II.l.2.:Introduction
The objectives of the rules of competition concentra te mainly
upon the promotion of fair competition in a basically free market
d h . f . 1 k 198 • • economy an upon t e creatlon 0 an lnterna mar et ,comprlslng
the protection of the freedom to provide services and to avoid
l%Economides, supra, note 23 at 25.
1975ee chapter II.1.3.
I~Kapteyn, supra, note 51 at 501 f.
53
discrimination on the grounds of nationality. 199 The rules of
competition are to be considered in the context of the fundamental
principles?OO of the Treaty. They are desiqned to ensure that the
objectives of the Treaty are effective and cannat be distorted. 201
Article 85 (1) declares incompatible with the Common Market
and forbids aIl acts, agreements, decisions and c..oncerted practices
which have the aim or effect to restrain, hinder or falsify free
compet i tion wi thin the Common Market. 202 Article 85 in i ts paragraph
three gives four possibilities for the allowance of the practices
forbidden under paragraph 1. Under the condition that the above
agreements, decisions and practices contribute ta ( i ) the
improvement of the production or distribution of product or
technical and economic progress; and (ii) that an equitable share
of such benefits is passed on to the consumers. "Distinct
objectives must be involved, which tend to offset the disadvantages
of the restriction of the competition. This would seem to refer in
the first place to reduction of the costs of purchase, production
or processing, sale, transport, advertising, and other forms of
sales promotion, and moreover to improvement of quality", writes
Kapteyn. 701 Furthermore, i t is important to note that where there is
199vaughan, supra, note 48 at par 19.03.
200 Art.2 and 3, Treaty of Rome.
201 Vaughan, supra, note 48 at par.19.02.
202 Kapteyn, supra, note 51 at 510.
703 Ibid ., at 518.
54
a common policy in the field concerned the agreements must bE'
examined against lhe terms of lhat policy.Z01 It must be established
that any restriction of competition agreed upon His a conditio sine
qua non for the attainment of the improvements in question, not
only according to the wi Il of the parties bu t a Iso f rom an
objective point of view. ,,20'i
At this point attention shall be given to the enlargement of
the Air France group through the merger of Air France with UTA and
Air Inter as an example of the creation of the establishment of
European megacarriers. This development has also been observed in
the United States. ZOG The deal gives Air France control over l.ts
only ma jor French competi tor and will at the same time il 1so grant
it complete control of the domestic Air Inter, in which the two
airlines toget.her have over 70 percent of the shùres. 707 This
takeover cornes at a time when the European Communi ty is moving
towards making it mandatory that multiple designation rights are
to be granted to aIl eligible airlines on intra-European routes.?œ
Al though UTA was campaigning for such a pol icy for a ] ong time70CJ,
204 rbid ., at 519.
2os Ibid ., at 520.
2œSee Chapter on Deregulation in the United States.
207S.Wheatcroft and G.Lipman,European l,iberalisation and World Air Transport, -'l'owards a Transna lional Industry, (LOndon: 'rhe Economie Intelligence Unit, Special Report No.2015, 1990) 146.
208rd .
209Id .
Q
1
55
the takeover was approved by the Commission of the EEC. 210 The
Commission has sanctioned the deal as the French Government adopted
special measures for the French market which convinced the
Commission. 711 'l'he proposaI foresees that Air France will withdraw
from TAT grndually by June 30, 1992. Furthermore, special domestic
route rights will be given to a French air carrier outside the Air
France group.712
'l'his merger is of interest with regard to 1992. With this
deadline it is said that the European Community market will not be
sufficient to sustain on an independent basis the 12 existing flag
carriers already in existence.?13 It has also been said that each
merger has ta be assessed on its individual merits. Sorne mergers are good for the industry 1 the economy as a whole and for the consumer. Others are not. The benefits in terms of econom~es of scale and larger route network must be balanced against the disadvanLages in terms of reduced actual and potentinl competition and consumer ~hoice. It may be thél t there are no genu ine improvements ta be obtained from the merger and that one airline is simply seeking ta eliminate the competition sa as to ensure the continualion of its monopoly or dominant position. On the other hand, it may be that the merger is the only means whereby the new airline can conEront the challenges presen ted La i t by i ts larger competi tors. 214
?IOEurope, (October 31, 1990) at 12.
?IIEurope, November 7, 1990, No.5365 at Il.
l'II' Id.
?l1Competition and Current problems in Air Transport, Extracts from the speech by Sir Leon Brittan to the Aviation Club, London, (Brussels, February 8, 1991) Press Release, JP(91)109, .
?1~Competition and the Single European l1arket in Air Transport, Extracts from the speech given by Sir Leon Brittan at the IATA Aviation Symposium Marrakesh, 7 June 1989, at 4.
56
Mergers and takeovers, however, are only one scenario which
will shape the future airline scenario. ?l'i The aim of the Commission
is ta ensure that the developments which took place in the United
States are not going to be repeated in Europe .1'16 AIl agreements
between airlines will be sanctioned by the Commission if they meet
certain established criteria of "general interest ", as defined in
Article 85. Article 85(3) does guarantee in its last condition that
even the most useful form of co-operation should leave a
substantial degree of competition intact. 717 Thus the Commission
will not allow mcrgers and aquisitions which would eliminate
competition on certain routes.
There are four possibi1ities for competition restricting
agreements which do not fall under Article 85(1), firstly,
technical agreements are exempted, secondly, group exemptions,
thirdly, individual exemptions and, fourthly, negative clearance
procedure are allowed.
Article 86 of the Treaty declares any abuse of a dominant
position within the common market or in a substantial part of it
-by one or more undertakings - insofar as trade between Member
215Por a scan of th€:-, consolidation strategies of the European Airlines see: Wheatcroft and Lipman, supra, note 198 at 148 - 153.
216Competi tion and the Single European Market in Air 'l'ransport, supra, note 210 at 3.
217R. P. Whish, Lectures on Competi tion Law, Insti tute of Pub lic International Law and Public Re lations, Thessa loniki (August 26th -September 13th 1991, Seminar on "The International Community and
the EC in view of the challenge of 1992"), at 6.
4
T l
57
States cou Id be affected by it218 - to be incompatible with the
common market. The ECJ refers to a dominant position as "position
of economic strength enjoyed by an undertaking which enables it to
repress effective compet i tion being maintained on the relevant
market by affording it the power to behave to an appreciable extent
independently of its competitors, its customers and ultimately of
the consumers. ,,?tg Existence of a dominant position can be
established only for a relevant market, covering those goods or
services which are considered to be similar by reason of their
characterist ics, price or use. 220 In order to act contrary to
Article 86 of the Treaty as additional requirement this dominant
position has to be abused. On this point the ECJ rules:
to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a resuit of the very presence of the undertaking j n quesLj on, the degree of competi tion is weakened and whi ch, through n::course to methods di f ferent -,-rom those wh ich cond~ tj on normal cœnpeti tion in products or services on the basis of the transactions of normal operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growLh of the.") t competi t ion. 2?1
The abuse of the dominant position must resuit ln an
infringement of the trade bet\Veen Member States. Article 86 (2)
7lRCase 85/76, Hoffman-La Roche v. Commission, [1978] ECR 461-Ground 38.
21CJ1d .
nOCase 6/72, Europemballage Corp. V. Commission, [1973] 1 ECR 215.
271 Case 85/76, supra, note 209, Ground 91.
58
gives a non-exclusive enumeration of them.???
Ta many of the large EEC community air carriers, operations
to and from the EEC and outside the EEC are of pivotaI importance
from a revenue-earning point of view.?n Thus, the quest ion of the
future impact of EEC competition rules on air transport oulside lhe
EEC must be given attention. The aspect of the extraterritorial
application and jurisdiction of the competilion laws will be of
importance. Undertakings situated outside the European Community
may be subject ta C0mmuni ty rules on competition. 774 Unt i l the Wood
Pulp Case2?5, the ECJ has applied the theary of enterprise enlity,
by "imputing the conduct of the subsidiaries inside the EEC tü
their parent company outside the EEC. ,,726 In the Wood-PuJp decisl0n,
the Court of Justice applied the effects theory as i t has bp.en
227Article 86(2):(a)direclly or J.ndirectly imposing unfair purchase or selling priees or other unfair trading conditions; (b) limi tinq production, markets or technical deve lopmen l ta the prejudice of consumers; (c)appIying dissimilar conditjons lo equivalen t
transactions with other trading parties, thereby placing them at a competitive disadvanlage; (d)making the conclusIon of contracts subjecl la acceptance by the other partIes of suppl~menlary obligations whIch, by thei r natu re or accard: ng ta co~nercial usage, have no cannectian with the subjecl af such contract:3.
223L . J . Weber, The EEC InternaI Aj r Transport f1arket and Ils Impact on the Airline Industry, supra, note 172 at 50.
224vaughan, supra, note 42 at pa.r 19.16.
22\Toined Cases 89, 104, 114, 116, 117, 125-129/85; Judgement of 27 September 1988. Grounds 16 to 18.
226weber, s'lpra, note 214 at 50.
...
59
. d b th C . . 777 Th L f tl E C . t . V1ewe y e ommlSSlon. e aw 0 le uropean ommun~ ~es
circumscribes the effect theory as "(T) he candi tians for the
appJ icalion of this doctrine are that acts of the undertaking
should have a direct, Immediate, reasonably forseeable and
substantial effect on compeLition between Member States. ,,228 It has
been asserted that the Court of Justice has not given any precise
criteria which have to be met "in arder to ascertain whether a
sufficient link exists between the anti-competitive act and the EEC
territory and which would therefore warrant the EEC Commission to
exercise jurisdiction. "nG The same author maintains in his analysis
that "the effects of the anti-competitive arrangements on the EEC
market must be the primary and direct, intended and substantial
result of the said agreement. ,,230
II.1.3.:Air Transport and the EEC Competition Rules
Agreements which are capable of fal~ing within the terms of
Articles 85(1) and 86 would be automatically void, if "either the
national authorities had, on the basis of Article 88, considered
as being prohibited under Article 85(1) and as not qualifying for
277R.Wjsh, Competition Law, (London: Butterworths, 1985) 266. The effects for air transport will be discussed in chapter II, 11.3.1.2.1.
77Bvaughan, supra, note 42 at par 19.16.
77QWeber, supra, note 223 at 53.
7301bid ., at 54.
60
an exemption under Article 85 ( 3), or the Commission had, by a
decision under Art iele 89, found to infringe Article 85 ( 1) . "ni This
was the case in the Nouvelles Frontières decision?3? as Council
Regulation No. 17 733 did not apply ta air transporL. 7\4 Therefore no
decision in the subject matter was taken.
II.l.3.:The Jurisprudence of the European Court of Justice
As already mentioned, the Council of the European Economie
Communi ty hardly acted upon a common EEC air transport pol icy unti l
the coming into force of the SEA in 1986. It is superfluous to
consider whether the COJncil would have acted without the decisions
described below. The point is "that more cldrity is needed in Lhe
exact wording of the EEC legislation with respect ta civil
aviation. ,,735 Seven cases may be selected, which signi f icantl y
influenced the liberalisation of air transport. 2m
231 K. Walsh, Air 'l'ransport and the EEC Competi '~ion Rules, (1986) Int'l Business L 223 at 224.
232Joined Cases 209-213/84, Hinistere Public v. Lucas Asjes and Others, l1986] ECR 1425.
233Counci l Regu la t ion No. 1 7, of Februél ry 6, 1962 lmplemHn ting Articles 85 and 86 of the Treaty, OJ (1962) L 13/204.
2~Council Regulation(EEC) No.l41 exempting transporL from the application of Couneil Regulation No.l7, OJ (1962) L 124/2/51.
73<;S .A. Will iams, InternaI Market and Common Market - the Sj ngle European Act Versus the Treaty of Rome: ProLecLionism or Competitiveness in European Civil AVlation? supr~, note 172 at 13.
?36Haanappel, supra, note 53 a t 72.
61
II .1.3.1. : French Seamen' s Case?"!7
The ECJ held that sea and air transport remain, on the same
mode as olher modes of transport, subject ta the general rules of
the Treaty7W, unless these general rules contain a specifie
exceplion for transport, like, for example, Article 61(1). In this
specifie case, the Court applied the Treaty's general rules on the
free movement of workers to sea transport. The Court also rules to
reserve certain merchant marine posts ta French citizens under
French national law to be contrary ta the Treaty.2E
Article 48 lays down the principle of freedom of movement for
workers. 7~O 'fhis freedom implies the abolition of aIl discrimination
based on national! ty between workers who are nationals of the
Member States, in matters of employment, renumeration, and other
working conditions. 241 It also includes the rights to accept offers
of employment actually made; ta move freely within the territory
of Member States for the purpose of employment, to stay in a Member
State for that purpose and to remain in the territory of a Member
237French Merchant Seamen: Case 167/73, E.C.Commission v. France, [1974] 2 CMLR 216.
73Bwilliams, supra, note 235 at 11.
(3!) Haanappel, supra, note 53 at 73.
740Art . 48 (1), Treaty of Rome.
741Art.48 (2), Ibid.
62
State after having been employed in that State. 7.17 The [ree movemenl
of workers is subject to restrictions on the grounds of public
policy, public securi ty or public heal U/43, and does not. appl y to
l 'tl bl' ,{'Il·t emp oyment ln le pu lC serVlce.
Art. 48 and Regulation l612/68?45 lay down the rules which are
applicable to the free movement of workers and which are dircctly
applicable in the Member States of the Community. As these rules
creale rights for individuals and are to be respccled by domeslic
courts, they have rendered conf licting national ldw inapplicable. I~h
As far as the air transport sector is concE-rned the above
stipulations are mandatory. Thus, community air carriers must
render their employment policies in accordance with the provisions
of the EEC Treaty and Regulation 1612/68, 50 that their personnel
can move freely in the 12 EEC Member States. Moreover, aIl
regulations preferring national ewployees, compelling foreign
employers to hire a certain percentage of nationals of the State
of operation, and providing for adminlst.rative procedures which
hamper the eligibility of foreign workers for available employment,
~2Art.48 (3) Ibl'd ... ,. 243 Id .
244Art.48 (4), Ibid.
245verordnung Nr.1612/68 Über die Arbeitnehmer innerhalb der Gemeinschaft, (1968) L 257, at 2.
FreizUgigkeit 15.Cktober 1968
der C.J.
24GCase 167/23 Commission v. French Republic, 1974, 1 ECR 357.
!1
63
must be abolished.?47 Consequently, airlines will be able to train
their personnel in one State and send them to any other place in
the Community where they do business, regardless of the nationality
7"8 of the employees .
II. 1. 3.2. : Belgian Railway Case249
The Court applied certain general competition ru les of the
Treaty, namely Articles 92-94 on State aid, to railway transport,
in this particular case to State aid given ta the Belgian national
railway company: the Court applied the se general competition rules
on State aid ta the transport sector, notwithstanding the fact that
the Transport title of the Treaty contains one specifie provision
on State aid, namely Article 77.
The significance of the two cases can be seen in the fa ct that
they shed light on the meaning of EEC Council Reg.Nos.17 and 141.7~
Regulation NO.17 gives rules whereby, pursuant ta Article 87 of the
Treaty, the competition rules of Article 85 and 86 are implemented.
Regulation No.141, which is the original version and valid for air
transport until January 1, 1988, stated that Reg.No.17 would not
747Economides, supra, note 23 at 191-
240rd.
749Case156/77, E.C.Commssionv. Belgium, [1978] ECR 1881-
7~oEEC Council Regulation 17 of February 6, 1962, as modified and completed by EEC Council Regulation 59 of July 3, 1962; EEC Council Regulation 141 of November 26, 1962.
64
apply to the transport market. Therefore the cases make it clear
that aIl that Reg.No.141 purported to do was to exempt transport
from the application of Regula tian No. 1 7 .7<)1
II.1.3.3. : European Parliament Case?5?
The European Parlialllènt asked the Court of Justice to declare
that the Council of the European Communities was in violation of
Article 175 of the Treaty of Rome by failing to act on a Common
Transport Policy. Although the Court found only a narrow violation
on the part of the Council, namely that the Counr.il had failed ta
ensure freedom to provide services in the sphere of in land
transport, and although the court mentions that the Council ha5
discretion in the adoption of a common transport po l icy, i t a 1so
notes that progress towards such a common policy must continue.
Like in the French Seamen' s case, the Court mentions that the
general provisions of the Trea ty of. Rome also apply to the
transport sector. However, the Court does not make special
references to Article 84(2).
This case is significant as "it is an exhortation to make
progress towards a cornmon transport policy and market. ,,7'11
Furthermore, since the adoption of the SEA there lS a stronger link
25lHaanappel, supra, note 53 at 73.
2~Case 13/93, European parliament vs. E.C.Council, [1986], 1 CMLR 138.
253Haanappel, supra, note 53 a t 74.
(
65 1
~ between Art.84 and Art.75.
II.l.3.4.:Nouvelles Frontières Case2~
The Tribunal de Police de Paris asked for a preliminary ruling
by the Court under Article 177 of the Treaty of Rome. The question
was asked in a number of non-governmentally approved ticket sales
whether the French statutory system of Government approval of air
tariffs was contrary to the Treaty where those tariffs are a result
of an agreement between enterprises - such as a tariff agreement
reached by the International Air Transport Association(IATA) -
which is contrary to Article 8~ of the Treaty.
The Court held that the competition rules of the Treaty are
applicable to air transport. 255 No provisions implementing the
Treaty' s competition rules have been adopted for air transport
under Art.87 of the Treaty, and no relevant action by national
authorities or by the Commission of the European Communities has
been taken under Arts.BB and 89 respectively.2~ Air tariff
agreements restricting competition are not expressly forbidden by
Art.B5(2), but would be forbidden or null after the appropriate
nation' s or Commission' s actions under Arts. 88
7~Joined Cases 209-213/84, supra, note 223.
755Ar t. 85-90, Treaty of Rome.
7~Nouvelles Frontières, at par. 68.
757Haanappel, supra, note 53 at 69.
and 9. 257
,1
..
66
Governmental approval of air tariffs, resulting from agreements
between air carriers, 15 contrary ta the obligation of EEC Mernber
States under Art.55 in conjunction wlth Art.3(f) with Art.8S,
obliging Member States ta refrain from measures incompatible with
the objectives of the Treaty, including the prevention or
distortion of competition in the common market, only if appropriate
action under Arts.8B and 89 has been undertaken.
They did not declare any specifie illegalities. In the absence
of any implementing rules under Art.8? for air transport, Arts.uS
and 86 of the Treaty are applicable ta the air transport sector,
but can only be implemented on the basis of Arts.88 and 89 of the
EEC Treaty. As uniform EEC regulations are preferable to actions
under Articles 88 and 89, it would constitute an important impelus
towards the adoption under Art.8? of regulaljons implemenling the
competition rules of Arts.8S and 86 for air transport. This case
encouraged the Commission to attempt to define the application of
Art.85 for air transport.2~
II.l.3.5.:Flemish Travel Agencies Case?~
The question answered in this case was whether certain
provisions of Belgian administrative law based on an earlier code
258 Ibid ., at 74.
259Case 311/85, Association of Flemish 'l'ravel J\genci.es-y":" Social Services Department of the Local and Regional Public Services, as yet officially unreported.
a
........ _--_._-----------------------
67 ? , of conduct, drafted by a Belgian professional association of travel
1
agencies and forbidding travel agencies to return earned commission
to clients, were contrary to, inter alia, Art.8S of the Treaty of
Rome. The Court answered that such acts were characterised as
unfair competition. This statutory provision is therefore
incompatible with Art.5, in conjunction with Art.3(f) and 85. The
case is stricto sensu not a transport, but a service case. That is
why the Court does not go into the question of implementing
regulations under Art.87, like in the previously discussed case. 260
761 II.l.3.6.:Saeed Case
The case concerned a West-German travel agent who engaged in
cross-border selling of airline tickets, thereby taking advantaqe
of cheaper priees in another country. The travel agent was sued by
the German Association [or the Campaign Against Unfair Competition
for infringing federal German law by undercutting approved fares.
The German Federal Supreme Court on Civil Matters in Karlsruhe
referred sorne specifie questions arising from the case to the
European Court of Justice. The Court had to answer three issues.
Firstly, whether multilateral or bilateral tariff agreements (e.g.
those of IA'1'A) in which at least one EEC domiciled air carrier
participates are null under Art.85(1), even when there has been no
760Haanappel, sllpra, note 53 at 76.
?6l Case 66/86, Ahmed Saeed Fluqreisen et al. vs. Zentrale zur
Bekampfung Unlauteren Wettbewerbs e.V.
68
national antitrust action under Art.B8 or no Comm i ss ion
infringement procedure under Art.8g. Secondly, does the exclusivp
charging of such tariffs constituLe an abuse of a dominant position
in the sense of Art.86 of the 'l'reaty'? Thirdly, is governmental
approval of such tariffs in violation of Arts.5 and 90 of the
Treaty?
The Court decided that tariff agreements relating to fljghts
between a Member State and a third country situated ouLside the
EEC are only void if the national "authorities" of the Memher Stale
where the airline has its registered office find such agreements
to be contrary to Article 85. So the Court affirmed that the
competi tion rules may apply to routes to and f rom the Commun i ty and
not merely to routes within the Community.
A tariff agreement and, by implication, any other kind of
inter-airline agreement?û? may be declared to be in violation of
Article 85 of the competition rules either by the Member State in
which one of the airlines is registered, thereby acting under
Article 88, or by the Commission acting under Article 89.
Tariff agreements (and other agreements) may be held to be an
abuse of a dominant position in the market in question when an
airline in a dominant position has succeeded in imposing the
application of excessively high tariffs or excessively reduced
tariffs on a particular route. 763 Sir Leon Brittan sees the
~7Wheatcroft and Lipman, supra, note 207 at 40.
263Haanappel, supra, note 53 at 77.
Q
J
L_
69
importance of the case in the fact
that consultaUons which have not been exempted under Arlicl e 85 (3) on fares betwnen a dominant carrier and its competitors, and which resulted in an uniform fares structure on a particular route, thus effectively elimlnating priee competition betweGn carriers, may be regarded as an abuse of a dominant position. 26il
It has been slated that Ils implications go weIl beyond this and
"a case may be made that its reasoning applies equally to capacity
and revenue sharing agreements. "765
II.1.3.7.:Wood Pulp Case200
A number of Wood Pulp producers from Canada, Fin1and and the
United States appealed to the ECJ under Art.173(2) for relief from
fines imposed upon them by a decision of the Commission for
violation of Art.8S. Fines had been imposed upon them for priee
coordination under Art.85, having an impact upon se11ing priees of
wood pulp withjn the Conunon Market. The Court uphe1d the decision
of the Commission even though the appe1lants were non-Community
companies and the agreements between them were made outside the
Communi ly. The Court ru led tha t the agreement between companies are
in violation of competi tion ru1es because their actions had an
impact on commerce within the EEC. The Court said that competition
264 • t d' h f d' 20 41 Cl e ln W eatero t an Llpman, supra, note 7 at .
26'iW' Il . 235 3 1 lams, supra, note. at 1 .
766Joined Cases 89, 104, 114, 116, 117, 125-129/85; Ahlstrom Osakeyhtio and Others vs. Commission, [1988] 4 CMLR 901.
70
1 restricting agreements consisted of two elements, formation and
implementation. 267 In this case, the decisive factor was the place
of implementation. 268
The main significance of this case lies in the
extraterritorial applicability of competition rules .769 'l'he
implication of this rule for aviation is that "inter-airline
agreements, particular tariff agreements, covering priees and other
conditions offered in the common market to air transport users for
transport between community and third countries" will fall under:
the Communi ties competition rules. 27o Capaci ty and pooling
agreements between airlines on EEC - non EEC routes will be treated
by the competition rules too.
Moreover, the relevance of the last two cases can be seen in
the fact that the competition rules may apply to EEC and non-EEC
airlines on routes wi thin the Communi ty and on routes from the
Community to countries outside thereof. 271 'l'he case may become an
impetu. towards adoption by the Council of EEC regulations
implementing competi tion provisions of the Trea ty of Rome for
267C . O . Lenz, The Decisions of the Applicabili ty of the Rules
the European Court of Justice on of the Trea ty of Rome ta Air
Transport, supra, note 172 at 45.
of the decision. German C.Vedder, F.Emmert, Verlagsgesellschaft,
2W1d ., confer also ground 12 And 13 text reprinted in W. Hummer. B. Sirnma, Europar.\-cht in Fa lIen (Baden-baden: Nomos 1991) 288.
269williams, supra, note 235 at 12.
270Uaanappel, supra, note 53 at 79.
271 Id.
.... _ ... _-----------------------------
71
transport between EEC countries and Countries outside thereof. 272
'l'his is the case as i t seems "illogical that the Conunission should
grant exemption (or certain types of agreements for intra-Communi ty
operations but disapprove exactly the same kind of agreements when
they are made between Communi ty and non-Communi ty airlines." 273
Haanappel in his analysis of the eRse makes the following
observations fOL" the potential implications for bilateral air
transport agreements. Sorne clauses, "like inter-airline prieing
agreements, int.er-airline agreements on capacity provisions and
revenue pooling agreements between designated airlines in bilateral
air transport agreements may be caught by prohibition under Arts.5
and 90, which means not to enact or ta mdintain in force measures
which are incompatible with lhe competition rules of the Treaty. ,,274
However, the prohibi tion would only apply t.O new bilateral air
transport agreements. This is the case as the old bilateral air
transport agreements were according ta Regulation 141 notified and
accepted by the Commission. 275 Art. 85 (3 \ makes it clear that
717 Id. see chapter on Draft Agreement on Civil Aviation between the EEC, Norway and Sweden. Norway and Sweden as long as the EEA agreement i5 not signed may be considered as non EEA countries. Thersfore thosc agrecment may be 50en as representative for an EEC/non EEC case. Even mon? 50 as Swoden and Norway - at the time of conclusion of U1(~ agt-f~(-}ent(;'flt - as non EEA countries have nol adopted any other "aquis communl ta i r(~" . 'rh i sis so f cl r thc only legùJ proposi tion in this respect.
?Il Wheatcroft and Lipman, supra, note 207 at 41.
?/4Haanappel, supra, note 53 dt 79.
713see also, Kapteyn, supra, note 51 at 516 f.
72
possible exemptions from the rule, i.e. anti-competitive agreements
between undertakings including airlines are forbidden. The
exemptions given by lhe Cauncil in 1987 apply only ta intra-EEC
international air transport carried out by community air cdrriers.
Furthermore, the "substantial ownership and effective control"
clause will d · ?7fi l lsappear. TJlere will be a creation of airline
companies which will be owned by more EEC countries simull~neouRly
as the increased competition will not allow each Member Slale La
maintain its national carrier. Air transport will not be exempted
from the EEC rules on state aid in the future. Secondly, through
the realisation of the freedoms of establishment?ll, servic0s7J8 and
f th .. l f d . .. t . ?!C) o e prlnclp e 0 non- lscrlmlnd -lon , airlines of an EEC
country may eventually establish themselves at hubs in othor EEC
countries. Hence, under a bilateral air transport agreement, the
Belgium government for instance would have ta dcsignale a foreign
air1ine to carry services from Brussels if seeked by an EEC
carrier. At this point, nevertheless, it must be emphasized that
sorne 1egal prob1ems may arise as there is a significant difference
between a right existing under the Treaty and the melhod of ils
implementation. 2flO For the start of its operations the newly
276 Id .
277Arts.52 - 58, Treaty of Rome.
778Art . 59 1 Ibid.
279Art . 7 , Ibid.
2MEconomudes, supra, note 23 at 196.
4
73
established airline will be subject to the attribution of a licence
to opera te. Moreover a foreign airline cannot: make use of the right
of establishment, if the Member State where the airline intends to
establish its service has awarded an air service monopoly ta its
national • 781 Th f carrler. ere.ore national requirements for the
attribution of an operating licence shall and will be harmonised
by 1992.?B7 EEC Member States will have to delete its substantive
ownership and effective control clause in their national
requirement and replace it with an EEC based substantial ownership
and effective control clause.
II.l.4.:Influence of U.S.Deregulation on European Aviation
The United States opted for a deregulated air transport system
in order to change the unfavourable environment of a heavily
regulated structure of air transport. 781 It was generally held that
free access lo the air transport market would decrease the priee
and increase the services. Deregulation started in 1975 with sorne
decisions taken by the former Civil Aeronautics BOard(CAB)2~ on,
inter alia, liberalised charter rules, approval of domestic deep-
discount fares and expedited route entry proceedings. Congress
781. d 1. •
?fl7uannappel, supra, nole 79 at 6.
(lH1Economides, supra, note 23 at 30.
?R4 p • P. C. Hélanappel, Pricing and Capaci ty in Internationa 1 Alr 'l'ransport, (l'èventer: Kluwer Law and Taxation Publishers, 1984) 50.
74
adopted in 1977 the Air Cargo Reform Act?8j, which liberalised air
cargo services; in 1978, it adopted the Airline Den'!gulation ACt.?tUi
America's experiment with airline deregulation was in exislence for
nearly a de cade before the EEC started to l~bera lise i ts air
transport. In their study of the U. S. deregulation of th(~ avialion
industry until 1986 the coauthors Wheatcroft and Lipman come to thp
following results.~7
*Deregulation had undoubtedly produced a wider chai ce for consumers: i t had crea ted opportuni ties for entreprf)neUrS to offer ncw kinds of air1ine services, to price these products in di fferent ways and to make innovativE' changes in how alrlines were operaled, managed and marketed. *New enlrant airlines had created powerfuJ pressurps (or improving efficiency and reducing costs lhroughouL the industry. *There had, however, been ser iou s prob lems f or the airli nes, parLicula r J y f inancia J ~ns labi lit Y and inadequate profita.biJity arising from recurrent price wars ln which fares had been eut below costs. *'rhere were cJear trends towards concentration in lhe industry and indications that it was moving towards a structure in wldch a smail number of very larg8 alrJlnes with overwhelming market powers WOllld dominate. *There were serious concerns about fal1ing sa[cly standards and a clear nAed to mùintain oyen closer supervision of air~Lne operationa1 periormance. *The main burden of reduced air1ine costs had fa1ien on th3 pay of employees. 7BB
The main issue for the European aviation industry is the
answer to the question whether it is necessary to maintain somA
degree of government control ta ensure that adequate services are
285p • L . 95 -163, N 9] 977 91 St t av., , a . 1284.
286pub . L. No. 95-504,92 Stat. 1705,
287Wheatcroft and Lipman, supra, note 207.
28fl rbid ., at 12.
Q
75
provided. The O.S. experience has shawn that there was no
disruption of essentia l opera tions .789 The resul t of US deregulation
can be addressed j ri three stages. In the first phase there were
problems arising from economic recession and the consequences of
the strike of lhe Air Traffic Controllers.?OO The second phase was
seen as a period of turmoil by price wars and struggle for market
shares . ?CJI The thi rd per iod was a time of consol ida tion of the US
aviation induslry.?~ The pricewar of lhe second period disappeared
by the end of 1987, and the fares and yields went up. The result
was the emergence of the dominant carriers at major hub airports
with a very high share of traffic at those hubs. 293
Michael Levine, who was general director of International and
DomesUc Avialion at the US Civil Aeronautics Board and closely
associaled wilh chairman Alfred Kahn in the implementation of the
deregulalion pol ieies, admi ts that the theory of total deregulation
?1l9 Id . ,
Western 'l'ran::;pol_ ':.a1.ion Advisory Coune _1 - WESTAC Vancouver, special eollion, Newsletter, vol. 12, no. 4, October 1986, at 19. The V.S. Experience: A Sma Il Conununi t..y Aj r Service program subsidising a irlines to gllarélnlee that communl tü~s which had scheduled service on October 24, 1978 wauld contjnue to receive essantial service. The program was lu lasL Len years and has been extended for another ten years.
?9ll rd .
{9'Ibid., at 13.
7~The sludy shows the creation of eight "mega" carriers, which transport 92,2% of the total passenger number in the US. Since then, the situation has further developed into one wjth only three "stable" mega-cnrriers: Arnerican Airlines, Delta and United.
71H • Ibld., at 20.
76
was wrong as in air transport there is no such th ing like a
contestable market. ?CJ4 This theory "fai led in th~~ dp.regu la tf'd
industry becau:3e the established airJines were able t() exploit ntc1ny
inherent strençlths '(.0 protecl their market posit ions and lo ensure
that they were not effectively chal1enged by actual or potentlal
new entrants. ,,29'i
The real les son of the U.S. deregulation was summarized by EC
Competition ComntJ.ssioner Sir Leon Brittan in 1989 in the following
way:
DereguJation in the United States ~as been on balance il
success. Li bera lisa tian in thE~ Eu ropean EcoTlomi c Communi ty i 5 in its early stages and wi ll, l am eonvinced 1 l.n the end he an even grea ter sucees!'>. 'J'he cha 110nge for the Communi ty wlll be to J ca rn f rom thn liS experiencc ilnd avoid the rH t fa 11 s encoun lorpci lhern. '['h is means thnt we must liberalise fast but smoothly, withouL causing unwarranted turbulence. We must a lso ensure that this liberal i sation is accompanied by a riqoro\ls applica tion a f the competi tion ru les and merqer control. 2%
Besides the lesson to be learned by the EEC, when liberalising
its air transport, the US developments were of paramount importance
for the liberalisation in Europe. Economides 297 puts il the
2~Wheateroft and Lipman, supra, note 207 at 15. "The Theory of market contestability assumed thal the threat of competition from potential new entrant airlines would be sufficient tü make the airline(s) already in a market act as though the conditions of pE~r[ect competi tLm prevai led. "
29'i Id .
296Speech held at an IAT\ AviatioL Symposium in Harrakesh in June 1989, ciLed Ibid., at 23.
297 Eeonornides 1 5 upra, note 23 ut 35.
a
77
fo lJ owing way:
The sudden discrepancy between its free-market domestic poncy and conLrolled Jnternational poliey led the United Slalps La senk a Jllorc open market for internaliona l aviation. The Intcrnalional Air 'Transportation Act of 1979 gav(~ thn CAB and, after January ], 1985, its SUr:;Cf~SS()rS the pOv-ler la en force a system of free compeU t,i on in international air lransport in arder to facilJt,nU~ thn conclusion of Ilberal bilaterals between the Uni Led Sta tes and other na tions.
Due Lo t.he low fares and the strong US dollar at the beginning
of the 1980' s the U.S. successfully exported the deregulated
environment ta North At.lantic f11ghts, which led ta an 80% increase
in lhe passenger numbers whereas the frequences of flights only
rose by 14%. 79B 'l'he U. S. a ir1ines offered low fares thereby puting
European air 11 nes under consi derablE. competi ti ve pressure. Thus the
above mentioned "mega" carriers very strong and efficient
airlines made the> Europeans calI for a common policy. 299
Economides in his study elaborates five points why a different
approach towards deregulation in Europe was taken. F1rstly, the
division into several sovereign States with the same number of
sovereign authorities so that international aviation regulations
such as the Chicago Convention and the bi lateral air transport
agreements 100 had ta be taken into consideration. 301 Furthermore,
unlike in the U.S., many European nations perce ive the provision
7QSlbid., at 36.
799 ITA Magazine No. 36, at 21-
100See aiso chapt:er II, II.2.
~lEconomides, supra, note 23 at 39f.
78
1 of air services to be essentially a public-utilily lype of
enterprise "which must be available ta aIl on a non-discrimina tory
basis. ,,302 Every ma jor airport should be provided wi th air transport
services. Thirdly, fares for intra European flights werp for
various reasons 2.6 times higher lhan those charged on comparable
flights in the United States. 301 Fourlhly, charter traffic is far
more significant in Europe than it is in lhe U.5. 304 Fifthly, EuropC!
has a weIl organised and expanded netwark of railways .10') The same
study therefore cornes ta the conclusion that. the "central purpofiP
of future European air transport policy, had la be th~ cr0at.ion
of a more competi ti ve industry, since lhe levei of campel iL i on
within Europe was Inadequate. The objective was not ta deregulal0
air transport, but to modi fy the regulatory s tructurC' j n ways wh ich
would ailow greater airline competition." 106
To the current author' s opinion i t was lhe decreasc of the
priee level which fostered the public opinion ta reduce regulalion
in order ta ailow competition which Ieads lo more ef f ic iency, lower
costs and lower prices. Furthermore, i t was shown tha t lhe US
302 Ibid ., at 41.
3031bid ., at 42.
304 l b id., a t 4 4 . Economides writes that "Charters represent 57 per cent of lhe total intra-EEC international traffic, as expressed in passenger/km."
3051d .
306 Ibid ., at 46, see also: N.Argyris, EEC Competition Law Rules and their Impact on Air Transport Services Ancillary Thereto, supra, note 172 at 73.
c
-------------------.---
79
seeked liberal bilateral air transport agreements. Thus, due ta the
strong US airline industry European governments were forced to
change there conservati ve atti tude towards air transport - at least
in connection with the United States. In this way elements and the
spirit of deregulation found its way to EEC countries.
II.2. :Liberalisation of Air Transport in Europe
In a Europe comprised of sovereign national terri tories among
which air transport was regulated by the Chicago Convention J01, each
State could regulate air transportation of passengers, goods and
mail at its own discretion. T~e Chicago Convention stipulates
certain obligations which apply to air transport in a territoryof
a contracting state, such as recognition of complete and exclusive
sovereignty the airspace above a contracting States
terri tory. 308 As a consequence of the fa ilure of the Chicago
Convention of 1944 to find a formula for the multilateral exchange
of traffic rights states exchanged bilaterally traffic rights for
307C t . 1 t t . l C' . lA' t' Ch' D onven J.on on n erna lona lVl Vla lon, lcago, ec. 7, 1944, entered into force April 4, 1947, ICAO Doc. 7300, 6th ed. 1980, of spacial relevance are Art.l,5,6, and 7. However, mosl SUl tes have exchanged on a mu ... tilateral basis the first and second freedom lights: first freC'dom: freedom of overflight. second frecdom: privileqe to land in another count.ry for nontraffic purposcs. International Air Services Transit Agreement, Dec. 7, 1944, entered into force Feb. 8, 1945, US Dept. of State Publ. No.2282.
30flArt . l, Chicago Convention.
r 1
80
! scheduled air transport. 30Q Therefore, the air transport indust ry
among EEC Member States themselves as weIl as wi th non-EP:C Mnmoer
States was regu la ted on il bila tera l basis. In the bi lil terùl ai. r
transport agreements the countries exchanged, inter alia lhe thrcp
commercial freedoms and sometimes fi Eth freedom righl. 110 'l'l1f'sf~
agreements led to the development and protection of nalional flag
carriers. Priva te carriers were mainly operating in lhe charler
traffic. 311 A very rigid route structure according to bilaleral air
transport agreements developed over the years. Strong Slale
intervention in market access was another consequence of the
highly regulated environment. The airl i,nes went into capaci ly,
priee, cooperation and pool agreements. JI? EEC Member States did not
see an incentive to change this situation and there[ore were happy
to see that the economic integration in Europe did not immediately
3~N.M.Matte, Treatise on Air-Aeronautical Law, (Toronto: The Carswell Co. Ltd., 1981) 141f.
3JO'rhird freedoJn.: the privilege ta put down in another State passengers, mail and cargo taken on in the territory of the State whose nationality the aireraft possesses; Fourth freedom:t.hc privilege to take on in another State passengers, mail and cargo destined for the territory of the Stale whose nationaLity the aireraft possesses; Fifth freedom:lhe privilege of an air carrier to undertake the air transport of passengers, freight. and mail between two States other than the State in which it i8 licensed.
31lweber, suprd, note 194 at 42 ff.
312J . Erdmenger commenting on Article 84 (2), in van der Groeben, Thiesing, Ehlf~rITIann, Handbuch des Europarechts, Systemat ische Sammlungen mit ErlauLerungen, 1989, Band 7, at 104. Hereinafter referred to as ~ndbuch.
'.
L
81
include air transport. Thus, until the French 8eamen' s Case313 in
1973, nothing happened in respect of a common air transport policy
as envisaged by Article 84(2) of the Treaty of Rome. In due course,
activities were undertaken gradually. In June 1978, the EEC Council
issued a priorit.y programme11tl affecting air transport, which
included aIl concerns arising out of the application of the general
rules of the Treaty to air transport.
As a next step, the Commission of the EEC published its first
Memorandum on air transport. 115 The Conunission tried to put these
new measures, such as noise on the cne hand and competition rules
on the other hand, into one coherent system and tried to develop
new measures towards that aim. 'l'he objective of the Commission was
ta provoke a dia logue among the institutions. l1G As knowledge by the
Comnüss ion of a ir transport issues was not very good 317 and the
Member States were still not willing to give up their dealings with
t.heir airlines 118, the Commission' s proposaI was re jected.
313Case 167/73, E.C.Commission v. France, [1974], 2 CMLR 216.
lltlReprinted in EEC Bulletin 6/78, Ziff.2.1.109.
11'i Memorandum by the Commission on the contributions of the European Conoounities ta the development of air transport services, Doc. 8139/79.
li fiW i Il i il ms, supra, Il 0 t. e Î 3 5 a t 14. The author cites to the Memorandum, at p.3: " ... around a number of radical suggestions to improve the scope for innova lion in Communi ty air services ... and thus opening the way for specifie actions."
Jll EcoJ1 .,mides, supra, note 23 at 49.
318Id .
l
82
On the basis of proposals submi t ted by the Commiss ion, lhe
Council of Ministers approved a number of directives concerning
cooperation and mutua l assistance belween Member Sta tes in inqui n?s
into aircraft accidents,3!CJ limiting the noise o[ subsonic
aircraft3?O and concerning the authorisation of sch0dulcd
Interregional air services. 3?l This directive's aim was ta develop
certain new Interregional air services outside the principal routt!s
already in service. 377 Haanappel, however, cri ticises tha t, due to
the restrictions of that directive on aircraft of more than seventy
seats and serving only ca Legory 2 and/or 3 airporLs, thereby
excluding major category 1 airports, as weIl as other restrictions
and exceptions, it has had the ove ra 11 effect of rendering tlw 1983
directive of little practical importance. l71 'l'he utmost importance
lies in the fact that for the first time a country of destinatlon
had to approve an application if the applicant fulfilled the
requiremen ts .3?4
The next hallmark towards a common air transport policy was
the second Memorandum of the Commission in 1984 entitled "Progress
319vaughan, supra, note 48 at par 18.238.
320 rbid ., at. par. 18.232 et seq.
~lCouncil Directive 83/416/EEC (came into force in Oclober 1, 1984) O.J.L 237 August 8, 1983. cited in Ibid., at par.18.239 - 242.
~2Williams, supra, note 235 at 17.
~lHaanappel, supra, note 53 at 80.
~4Hanbuch, supra, note 312 at 109.
4
83
'l'owards the Development of a Communi ty Air Transport Policy". 375 In
this paper, the Commission tries to give intra-EEC air transport
more freedom of action Lhrough a mulLilateral dimension. In this
way, lhe drawbacks of Lhe bilateral air transport agreements should
be overcome, at Lhe sarne time increasing the efficiency of air
transport. The financial independence of airlines shall be given
special priority rnainLaining at thR sarne tirne tighter control of
Stale ajd lo prevenL escalation of public subsidies. Furlhermore,
the Memorandum discusned U.S. deregulation and came ta the
conclusion that it is "not necessarily suitable for application to
third coun Lr Les. " 17fi Therefore an evolutionary approach was
preferred Lo the revolutionary policy adopted by the United
States. l?l 'l'he Memorandum addressed several specifie areas of
liberalisation. 178
17"COM(84)72 final, March 15, 1984. for a detailed discussion of the Memorandum see Economides, supra, note 23 al 53 - 57. Dempsey, supra, note 14 at 659 - )70.
~fiCOM(84) 72 final, March 15, 1984, at 1.
~/Dempsey, supra, note 14 at 661.
J7Il rbid ., at 659.
84
1 II.3. :The Packages of the European Communities
i
In arder ta arrive at an "internal market" by 1993 which shall
also include the creation of a common market for air transport, in
which free market access, capacity and pricing freedom shall be
guaranteed. 129 Air transport in Europe wi Il be liberal ised in threp
stages as the EEC chose the evolutionary process. 'l'he first
package1m was agreed upor in the Council on Decernber 14, 1987. The
second package was adopted on July 24, 1990311, and the thi rd é\nd
final package shaJl be adopted by June 30, 1992. 117 ln the
329Kalshoven van Tijen, supra, note 78 at 123.
130Council Hegulation (EEC) No. 3975/87 of December 14, 19B7 Laying Dawn the pror.edure for the Application of the Rules on Competition ta Undertakings in lhe Air Transport Snctor~ Council Rr.gulalion(EEC) .No. 3976/87 of December 14, 1987 on tht: Applicdtion of Article 85(3) of the Treaty ta Cerlain CalE.~gorics of Agreemen ts and Concerted Pract iees in the Air Transport Scc tor; Couneil DirecUve of. Decemner 14, 1987 on Fares for Schedll10d Air SerVlces between Mernber States (87/601/EEC); Counejl Decision of December 14, 1987 on the Sharing of Pdsspngcr Capaeily between Air Carriers and Scheduled Air Services betwecn Membcr States élnd on Access for Air Carders to ScheduJed Al.r Service Routes belween Member States(87/602/EEC); all [our in O.J.(1987) No.L 374, at 1 ff.
311Couneil Regulation (EEC) !'Jo.~34212Q of July 24, 1990 on Fares for Schedulded Air Services. Co.meil Regulation (EEC) No.2343/90 of .Ju]y 24, 1990 on Accpss for Air Carriers to Scheduled Intra-Community Air Service Routes Hnd the Sharing of Passenger Capacity between Air Carrier on Scheduled Air Services between Member States. Couneil Regulation (EEC) No.2344/90 of .July Regulation (EEC) No.3976/87 on the Application 'rreaty ta Certain Categories of Agreements and in the Air Transport sector. all three in O.J. (1987) No.L.217, at 1 ff.
24, 1990 AmfHldl ng of Art.OS(3) of lhA Concerted Practices
3375ee preamble of Couneil Regulation (EEC) No2342/90, in O.J.1990, L.217
L
85
following, the regulations wi Il be diseussed ,,,hieh have been
eonsidered to be relevant by the EFTA Negotiating Group on Free
Movement of Services and Capital. 311 This Negotiating Group also
includes the transport seetor in thei r agenda and leads the
negotiations for the European Economie Area.
II.3.1.2.1.:Counejl Regulation No.3975/87
With Regulation No.3975/87, the Couneil adopted rules for th~
applica tion of the EEC competition rules. In the following the ma in
provisions of the procedure shall be discussed. The seope of the
Regulation is expressly limited to internatio'1al air tran5port
between Communi ty airports. 31,4 This limi t.ation in the appl icabi li ty
of the Regulation has been criticised by Economides .111 Re[errlng Lü
the '.\Iouvelles Frontières case, he states that no indication was
made by the ECJ to exelude international or domestic air transport
from the competition rules. He further draws the following two
concluE ions .
First, the Council, by considering those situations, is in breach of i ts Treaty obligations as interpreted by the ECJ. Second, the applicable regime in those two si tuat ions should follow the ECJ' s judgement in Nouvelles
331EFTA , Compila tion of the Relevant Ar::guis, the Aguis and Cornmittees_ indentified as Relevant by Confldential, Hl.NG/II/W 9/91, 5 Annexes, February Disc.ribution B. 2.
10 Pipeline". the EFTA, 13: 1991,
334Art . 1 (2), Couneil Regulation (BEC) No 3975/87, in O.J.(1987) No .L. 217.
135Economides, supra, note 23 a t 113.
86
Frontières.
Economides' legal conclusi'ns seemed ~onfirmed by the subsequent
Saeed decision of the European Court of Justice. For the time
being, it js mainly for polit~cal reasons that international and
domestic transport have remained excluded from tne scope of
Regulation 3975/87.
Argyris maintains tha t the limita tian "suggests an implici t
assumption that practices affecting competition in international
air transport between a Member State and a third country are
unlikely ta have a substantial effect on tracte between Member
States. ,,336 'rhis limitation leads ta the concern of relevant markets
in air transport. 337 Argyris states that at the moment the
Commission will have ta rely on the powers it holds under Article
89 "if it wishes to act in respect of infringements of the
336N .Argyris, The EEC Rules of Competition and the Air Transport Sector, (1989) 26 Common Market LR, 5 at 12.
U7 f t' l' or an ex enSlve ana yS1S see: B.v.Houtte, Relevant Market.s in Air Transport, (1990) 27 Common Market LR at 521 - 546.-
87
competition rules ,,338 in case of a breach by a non-EEC country. This
i8 one of the reasons why the COJTImission asks for a common policy
in air transport towards third countries. The application of the
competition rules towards third countries is essenlial lü air1in0
agreements between two carriers "serving a long-haul route f rom one
Member State ta a third country,,339. Argyris gives the example lhat
an agreem8nt between two carriers serving a long-haule route from
one Member State ta a third country could result in a diversion of
the intra-Con@unity feeder traffic to that Member State and away
from another Member State, "thus affecting trade in ai r transport
services between Member States." 340 If these agreements have effects
on the short and medium feeder services and thus, wi thj n lhe
Communi ty, on trade between Member States, an infripgemen t of the
338Argyris, supra, note 336 at 14. see also Vaughan, supra, note 48 at par 19.17. This commentary writes:
The Commssion may impose fines on the basi s tha t i t has jurisdiction and can serve as decision as outllnec1 above. Where more than one undertaking ls 1nvolved, for example a pa~ent and subsidiary, the Commjssioll may make liability for payment joint and severa 1 f and may thon seek ta enforce against the undertak1ng loca tod i Il the Community. Decisions imposing a pecuniôry 'Jbl i.9f1Lj on are enforceable in Member States under the EEC Trealy. The Commission has never attempted ta enforce a fine in a non-member State, and it is doubtful whether it has any power to do sa.
339ArgYL-is, supra, note 336 at 12.
3I\OId. The author refers to the cooperation agreement between Uni Led and British Airways, which gives the latter a competi ti ve advantage over other EEC carriers, especia11y Ai.r Franse, on the North Atlantic routes.
88
Competi tian rules may be established. 341 The ECC Commissioner Sir
Leon Br1ttan rea3sures that lacunae:
... , under the recent ruling of the Court of Justice in the Ahmed Saeed Case such arrangements may be challenged before the courts under Article 86. Conversely there is no anti-trust immunity or exemption for these "extraCommunity" and "domestic" agreements. 34 ?
Sa much [or the scope of the agreement. In the following, the
Regulation shall be described.
Unlike under Decision no .17, according ta Article 2, the
competi tian ru les will not. apply ta agreements, decisions and
concerted practices listed not exhausti vely in the Annex. r.che
Commission will launch procedures either upon complaint or on its
own j ni tiati ve ta terminate the infringement. 343 In case the
Commission f lnds tha t there was an encl'oachment i t May by decision
require the undertakings or associations of undertakings concerned
ta bring such a viola tion to an end. 34ft A concerned undertaking May
nevertheless apply on the basis of the facts ln its possession that
there are no grounds for an action on its part in respect of an
agreement, decision or concerted practice(sa called negative
Nisee aiso Wood Pulp Case, ground 16. supra, note 266.
347Competition and the Single European Market in Air Transport, Extracts from the speech given by Commission Vice President Sir Leon Brittan at the TATA Aviation Symposium, Marrakesh, June 2, 1989. in (Brussels, June 2, 1989) Press RelcDse, IP(89)412.
~lArt.3, Council Reg.3975/87, supra, note 334 .. see alsa Vaughan, supra, note 48 at pars 19.05 - 19.08.
344Art . 4 (1)., Council Reg.3975/87, supra, note 330.
89
test).345 The negative clearance procedure i5 important to the
ai~lines as, in course of liberalisation, there i5 an increasing
uncert.:linty as to which airline agreements would be exerlpted from
ArtiC' _.e 85 ( 1 ) .
Il' case the Commission infers that the requirements of Article
85(3) a~e met it shal1 take a decision excempting the agreemenl
from an infringement. ThlS Regulation shall indicate t.he period for
which i t is to be valid. Norma 11y i t sha11 Ilot be less than s j x
years. 3t16 The decision may be renewed or revoked i f Lher.c~ "has been
a change in any of the factG which were basic to the making of the
decisions; or where the parties commit a breach of any obligation
attached ta the dccision; or where the decision is based on correct
information or was induced by deceit; or where Lhe parties abuse
the exemption from the provisions of Article 85(1) of the Treatv
granted ta them by the decision." 31\7
An undertaking which wishes to fall under Article 85(3) shall
submi t applica tion ta the agreement. 'J'he Commission in consequence,
sha11 publish in the Official Journal of the European Communities
a summary as soon as possible. The interested parties then may
subrni t their comments wi thin 30 days. In case the Commission does
not notify the applicants within 90 days ta the contrary the
agreement, decision or concerted pract.lce shal1 be deemed ta be
345Art . 3 (2), Ibid.
~6Art.4(3) in connection with Art.6(1), Ibid.
347 Art. 6 para. 3 lit. a-d, Ibid.
-
90
excempt, in sa far as it conforms wiLh the description given in the
appllcation. This exception shall last up ta six years from th~ day
of the publication in the Official Journal of the European
Communi tien. In case t.he Commission fi nds after ex,piry of the 90
day limit but before the end of the six-year pe.ciod, that the
condi tians for applying Article 85 ( 3) of the Trea ty are not
satisfied it may declare that Article 85(1) will apply. Such a
decision may also be retroactive in cases where the Commission was
either provided with inaccurate information or where an undertaking
has abused an exemption from the provisions af Article 85(1) or has
contravened Article 86. l-HI
Article 7 of the Regulation empawers the ECJ ta review the
decisions of the Commission, which shall have the sole power to
issue decisions pursuant ta Article 85(3) of the Treaty.
The Regulation foretells the same provision concerning
requests for information by the Commissic)fl in carrying out the
dut ies assigned to i t by this Regulation as Decision No .17. 349 The
Commission may "obtain aIl necessary information from the
governments and competent authorities of the Member States and from
underLakings and associa tians of undertakings." 350 The Commission
has means of coercion in the form of penalty payments ta obtain the
348Art . 5, Ibid.
N9Kark , supra, note 68 at 137.
350Art . 9 (1), Council Reg.3975/87, supra, note 330.
91
1 required information. 3~1 'rhe Commission may verify the exactnes5 of
.....
the content either by using the aulhorities of the Member States
or by using the powers of the Commission. 1'i?
II.3.1.2.2.:Council Regulation No.2344/90 Amending Regulatioll
No.3976/87
Council Regulation No.2344/90 extends the time lLmitatLon
of Regulation No.3976/87 to December 31, 1992 to give the air
carriers more time "to adapt to the more campet i li ve envi ronmen t
which was introduced by changes in the !"egulatory system applicable
to intra-Community international air transport." l'lI Any such
regulation shall e;.pire at the above mentioned date. 1'i4
The scope of the agreement is t.he same as that of Counci l
Regulation No. 3975/87, as it is narrowed to international air
transport between Communi ty airports. 355 Article 2 allows the
Commission to adopt regulations in respect of agreements, decisions
and concerted practices so that they will be exempt.ed from thE-~
3~1 Art. 9 ( 5 ) in connection wi th Art. 12 ( 1 ) (b) & Art. 13 ( 1) ( c ) , Ibid.
352Art .10 & 11, Ibid.
353Council Regulation (EEC) No.2344/90, O.J.(1990) L 217, at 15.
354Art . 3, Ibid.
355Art . 1 , Ibid .
1
92
t · t' 1 356 compe 1 lon ru es.
Thjs shall be the case in joint planning and coordination of
the capaci ty in scheduled air services "insofar as i t helps to
ensure a spread of services at the less busy times of the day or
during less busy periods or on less busy routes, so 10l"g as any
partner may withdraw without penalty from such agreements,
decisions or concerted practices. He is nat required ta give more
than three months notice of its intention not to participate in
such joint planning and coordination for future Reasons. ,,357
Furthermore, the sharing of revenue from scheduled air
services, in case i t does not exceed 1 % of th8 poolable revenue
earned on a particular route, shall be permitted. 358 As additional
requirement the Regulation asks that 1:.he transfer "15 made in
compensation for the 10ss incurred by the receiving partner in
scheduling fI ights at less busy times of the day during less busy
periods" . 159
Consultations for common preparation of proposaIs on tariffs
shall be legitimate under the following three conditions: Firstly,
the consultations must be voluntary, secondly, the air carriers
will not be bound and, thirdly, the Commission and the Member
356 Art. 2 ( J ) , Ibid.
357 Art. 2 ( 2 ) , Ibid.
358Art . 2 ( 2 ) , Ibid.
359 Id .
93
1 States may partlcipate as observers in any such consultations. 1@
1
As for slot allocation at airports and airport scheduling,
four requisi tes mus t be met. Concerned air carriers mus t b0.
entitled tc rarticipate; national and multilale~al procedures are
transparent; take into account any constraints and dj stri bulion
rules defined by national or international authorities; [inally,
any rights which air carriers may be historically entitled to are
taken into consider2tion.~1
The common purchase, development and operation of computer
reservation systems shall be authorised "on condition(s) that air
carriers of Member States have access to such systems on equal
terms, that participating carriers have their services 1isted on
a non-discriminatory basis and also that any participdnt may
withdraw from the system on giving reasonable notice." lfi?
Group exemptions shal1 also be granted for technical and
operational ground handling at airports such as aircraft push back,
refuelling, cleaning and security, h~ndling of passengers, mail,
freight and baggage at airports, services for the provision of in
flight catering. 363
The Commission in their Euro-Information bulletin writes that
the basic philosophy of the exemptions is twofold:
to allow air transport companies to work together in ways
360 Id .
361 Id.
362 Id .
363Id .
,
94
which will Jmprovc services to the travelling public, while ensuring that there is slill competition in fares and quality of service and making sure that new entrants have aCCCRS la the market. The Commission i5 anxious ta ensure that inLer) inlng is generally applied and that new entrants have adequate oprnrtunity for new take-off and
d · 1 lh1 lan lng sots.
II.3.12.3.:Commission Regulation 83/91 on Computerised Reservation
Systems (CRS) 1fi!j
This Regulation followed Commission Regulation 2672/88 166•
Cornputerised Reservation Systems (CRS) are described as
computerized systems containing information about, inter alia, air carrier schedul es, fares 1 seat availability and related services, dnd through WhlCh reservations can be made or tickets issued or both, to the extent that aIl or sorne of these services are ma ~ available ta
b 'b lfil su serI ers.
In North America and Europe, the majority of scheduled airline
tickets are current1y sold using CRS for the entire transaction. 368
The airlines have created through the development of CRS "a means
lMCommissj on Adopts Block Exemption Rules For Air Transport 1
Information, Brussels, December 5, 1990,
Th~Cornmis5ion Regulation of December 5, 1990 on the Application of Article 85(1) o[ the Treaty to Certain Categories of Agreements between Undert~klngs Relatlng to Computer Reservation Systems for Air Transport Services, 0.J.(1991) L.IO, at 9.
16('Commi ssion Regu la lion of Ju ly 26, ] 988 on the Application of Article 85(3) of lhe Treaty to Certain Categories of Agreements between Undertakings Relating ta Computer Reservation Systems for Air Transport Servlces, 0.J.(1988) L.239, at 13.
lb 1 Art . 2 ., lb id.
3fiAC . Ly 10, Compu ter-Age Vulnerabili ty in the International Airline Industry, (1988) 54 J Air L & Comm 161 at 163.
95
ta control the way travel is packaged, priced, marketed, sold and
delivered ta passengers dnyv.!'2rc 1.n the wor Id. ,,3fiQ l t ha!.> been
stated that in sorne cases the information enterprises "are more
profitable than their airline activity.,,110 This is the case as
booking fees are charged by the CRS vendors to non-hast carriers
using the CRS and subscribers, such as travel agents, to the CRS
for each reservation made. Jl1
CRS system was percej ved hy t:he Commission as "ancillary"
service to air transport as air transport was theoretically
feasible without prior reservation. The Commission maintained that
"Regulation No.141 has ta be strictIy construed. It excludes only
those anti-competitve practices from the scope of Regulation No.17
which consist in themseives in the provision of a transport
service. ,,312 Therefore Regulation No .17 was applicable to Ruch
services. This was held by the Commission in London European v.
Sabena~ and Olympie Airways374. It was maintained that this vi ew
369Wheatcroft and Lipman, supra, note 207 at 88.
370 Id .
371J.R.Mietus, European Community Regulat.ion of Airline Computer Reservation Systems..L,. (1989) 21 L & Pol Int' 1 Bus, 93 at 97. The same source writes the Typical booking fees charged by U.S. Systems in 1988 ranged from $1.00 to $2.10 per flight.
377Weber, supra, nole 223 at 55.
373London European v. Sabena, O.J. (1988) L.317, at 47.
3740Iympic Airways, O.J. (1985) L.46, at 51.
96
was "incongruent ,,17'i wi th system of regulations for air transport.
Now this "incongruent" situation has been abolished by the Couneil
. h h' RI' 176 W1t t lS egu at1on.
The Regulation considers the common purehase, development and
operat ion of eomputed sed reservation systems relating ta
limelablE)s, reservations and tickets. The Commission sees the
necessily of exemptlng CRS from Art. 85(1) in view of the fact that
only a [ew European underlakings could invest and achieve on their
own the sufficient econoI":ies of scale required to eompete with the
more advanced existing sys tems .377 This regula tian, however, is
limited by four contractual obligations. A joint venture carrier
of one CRS may not become a partner in another CRS, and a system
vendor must permit carrier partners to become exclusive
distributors within their countries, appoint distributors as
regional marketing representatives, and, finally, require these
represenlati ves to market only that vendor' s CRS. 378 Consequently,
the regula ti on applies only to the two European CRS systems,
Amadeu~,yq and Gillileo1RO • Il has been contended that the purpose of
the block exemptions concerning CRS "ls not only ta condone the
III) Weber, supra, note 223 at 55.
116Kark , supra, note 68 at 142.
l11Preamble of Conunission Reg.83/91.
3lB1d .
119Air France, Iberia, Lufthansa, SAS, and regional airlines.
~OAlitalia, British Airways, Swiss Air, KLM, Aer Lingus, Air Portugal, Austrian Airlines, Olympie and Sabena.
1
97
operation of these Systems but also to protect them from U.S.
competition. ,,381 SABRE, American l\lrlinl:.s' CRS ls a case in point.
As early as 1985, it established sorne 500 terminaIs in Europe.~?
The European airlinps feared that they would not be able ta stand
t US .. 181 1 b f f . b f h up 0 competltlon. Tle agreements ecame e ectlve e ore t e
issuance of the Regulation was be exempted and met the conditions
for exemption set out in Lhe Regulation. Jll4
A system vendor shall allow any air carrier to participate in
CRS without discrimination "within the avaiJable capacity of the
system concerned, subject to any technical constraints outside the
control of the system vendor. ,,385 The data of the participa ti ng
carriers shall be displayed "in a clear and comprehensive manner
and without discrimination or bias, in particular as regards the
order in which the information ls presented. ,,11l6 This stipulLlt ion
refers to "screen bias" 187, il practice which was described as
381Mietus, supra, note 371 at 107.
382 Id .
383Wheatcroft a!',d Lipman, supra, note 207 at 91.
384 Id .
385Art . 3 ., Commission Reg. 83/91, supra, note 340.
386Art . 4 ( 1 ), Ibid.
387The EEC has adopted a specia l Code of Conduct for this purpose, Council Regulation (EEC) No.2299/89, OJ (1989) L.220, at 1 . In the US: 'fhese regulations are codified at 14 C.F.R. para. 255.1-255.10(1988) and were promulgated under the CAB's power to prohibit "unfair or deceptive pracLices or unfair methods of competiLion in air transportation" under para. 411 of the Federal Aviation Act, Pub.L.No.85-725, TitleIV(1958) (codified aL 49
-
98
"ru_ranging fligl.::' information on a CRS display to favour the CRS
host carrier and make f light information for non-host ca rriers
difficult to find. ,,388 Moreover, the owner of a CRS has the abi lit Y
to "control inventory, vary product offering, differentiate priees
and target discounts. ,,100
An important provision against economic coercion is that a
participating carrier shall have the right to terminate his
contract "without penalty on giving notice which need not exceed
six ITIonths. ,,390 Participating carriers and others providing the
materia1 shall make sure that the data submitted is comprehensive,
accurate, non-misleading and transparent. EI System vendors shall
watch Lhat the submitted information is being loaded accurate1y on
d . " t b' 392 h . b . t . 1 f b f a non- lscrlmlna ory aS1S. - T ere ':'LS a 19 poten la or a use 0
CRS information by mismanaging competitors f1ight data. These
systems can carry the f 1igh t schedules of a large number of
carriers in an often minute by minute updated basis.~l As it is the
vendor who imputs the data, it is possible for him te withhold or
u.S.C.para.1381(a)(1982&Supp. 1988). The validity of the regu1at:ions ""as affirmed in United Airlines,Inc. v. Civil Aeronautics Board, 766 F.2d 1107(7th Ciro 1985), cite in Mietus, supra, note 371 at 100, ft.62.
3SRM . t 3 7 1 t 95 le us, supra, note a .
JR9Wheatcroft and Lipman, supra, note 207 at 98.
390 Id.
391Art.!)(1), Commission Reg.83/91, supra, note 365.
3~Art.5(2), Ibid.
393Mietus, supra, note 371 at 96.
99
distort this information. 394 This is achieved in various ways by
"delaying the input of competitors" flight information; omitting
flight schedules competing with those of the host carrier; by
displaying faise seat availabiljty information; and by carrying a
competitior's discount fare information after the fare has been
discounted. ,,395
The fees charged by the system vendor shall be in acco~dance
wi th the cast of the service provided. 196 Discrimina tian between
parent carriers of non-EEC countries and EEC countries will be
allowed in case the CRS of the third country does not con[orm with
the Regulation under discussion.~7 The subscriber of the system is
allowed to terminate his contract with a system vendor wi lhout
penalty on "giving notice which need not ex..;eed three months to
expire no earl ie\- han the end of the f irst year." 1fJ8 This rule
shall impede the practice of imposing upon subscribers of long-term
contracts penalties for swi tching systems. 399 Furlhermore, a system
vendor shall not require a subscriber to sign an exclusive
contract. 4OO In the relations with the subscriber it is forbidden
394 rd .
39Srd .
396Art . 6 , Commission Reg.83/91, supra, note 365.
397Art . 8, Ibid.
398Art . 9, Ibid.
39gWheatcroft and Lipman, supra, note 207 at 95.
4ooId •
&
100
for a carrier to link the use of CRS by a subscriber wi th the
receipt of any commission or other incentive for the sale of one
of his tickets or any othgr transport product. 401 System vendors
among each other are not allowed to enter into any agreements or
engage in a concerted practice with other system vendors with the
object or effect of partitioning the market.
Article 12 provldes the Commission with the possibility
pursuant to Article 7 of Regulation (EEC) No.3976/87 to withdraw
the exemption in certain cases. This shall be the case v~ere the
agreement hinders the maintenance of effective competition in the
market for computer reservation systems; the agreement has the
effect of restricting competit.ion in air transport or travel
related markets; the system vendor directly or indirect1y imposes
unfair pd ces, fees or charges on subscribers or participating
carriers.
401Art.10,Commission Reg.83/91, supra, note 340. For example SABRE, the most advanced American CRS system is capable of "[booking] reservations on 291 different carriers, more than Il 000 hotel and condominium properties and 21 car rentaI companies." in R.J.Fahy,Jr.,Regulation of çomputerized Reservation Systems in the United States and EuroQg, (1986) Il Air L 232 at 232.
1 101
I.3.1.2.4.:Commission Regulation 84/91 on Joint Planning and
Coordination of Capaci ty, Consul tatiom~ on Passenger and Car9.Q
Tariffs on Schedulded Air Services and ~lot Allocation at
AirportsQ02
This Regulation follows Commission Regulation 2671/88 Q01 on
joint planning, capacity and revenue sharing and the allocation of
slots. The Commission Regulation exempts under certain conditions,
firstly, joint planning and coordination of capacity to be provided
on scheduled international air services between Communi ty airports,
secondly, the holding of consultations on tariffs for the carriage
of passengers, wjth their baggage, and of freight on scheduled
international air services between Communi ty airports, and thirdly,
slot allocation and airport scheduling in so far as they concern
international air services between airports in the Community. ~04
Joint planning and the coordination of capacity shall help ta
ensure the maintenance of services at less busy times of the day,
402Commission Regulation of December 5, 1990 on t.he Application of Article 85(3) of the Treaty to Certain Categories of Agreements, Decisions and Concerted Practices Concerning Joint PJanning and Coordination of Capaci ty, Consul ta tions on Passenger and Cargo Tariffs Rates on Scheduled Air Services and Slot Allocation at Airports, D.J. (1991) L.IO, at 14.
403Commission Regulation of JuIl' 26, 1988 on t,he Application of Article 85(3) of the Treaty to Certain Categories of Agreements between Undertakings, Decisions of Associations of undertakings and Concerted Practjces Concerning Joint Planning and Coordination of Capacity, Sharing of Revenue and Consultations on Tariffs on Scheduled Air Services and Slot Allocation at Airports. D.J. (1988) L.239, at 9.
404Art . 1 , Commission Reg.84/91, supra, note 402.
----
102
during less busy periods or on less busy routes, and the
development of onwards connections and thereby benefi ting air
tran~port users. The airlines sha1l be free ta withdraw from the
planning and coordination of future agreements. 405 Likewise,
airlines shaii be free ta al ter their schedu1e wi th respect ta
capacity and schedules during the period of the agreement "without
incuring penalties and without being required ta obtain the
app:-oval of the other participants. ,,406
Consultations on passenger and cargo tariffs shall advance
the general ized acceptance of interlinable fares and rates. 407 In
this setting, the agreement signed between Air Europe and Lufthansa
on interline facilities shall be referred to. Lufthansa and Air
Europe had granted each other inter1ine facilities, allowing
passengers to use tickets on either airline under certain
d . t . 1\08 Th' t con 1. 1.ons. 1.S agreemen was signed to help Air Europe and
Lufthansa ta compete effectively on the London-Munich and London-
Dusseldorf routes, while mainta ~_ning the advantages offered by
interlining to airline travellers.
The interline system has been described as follows: Interlining is essential1y based on an IATA agreement pursuant ta which most of the world' s airlines have authorised the other signatories ta sell their services. As a resuIt, travel agents can of ter passengers a single ticket providing for transportation by different carriers
405Art . 2 (e), Ibid.
406Art . 2 (d), rbj d .
401preamble (4), Ibid.
408C t" . l' . , l' ompe 1.tl.on Between A1.r 1.nes, Cornm1.SSl.on Secures Inter l.ne Facilities, (Brussels, May 15, 1990) Press Release.
1
",
103
(e.g. leaving on the airline iS5u1ng ticket and r~turning on another airline serving the same route, or conLinuing to destinations not served by the issuing airlino). In addition, airlines recognj se each other' s aulhori ty to change a ticket so that passengers can change reservations, routJngs or airltnes r.lfter Lho ticket has been issued. 'l'hese chr.lnges wou ld norma l J 'i requl n: th0 consent of the airline indicaLed on the licket [or the sector concerned ("endorsement") but lUost airlim~s ",av3 agreed ta wai ve this requ irement in pract iee. ~O'l
I.ufthansa and Air Europe were bath partips of this
multilateral system. When Air Europe started to undercut the prices
of Lufthansa on its London-Munich route, Lufthansa denied boarding
to passengers holding a ticket issued by Ai r Europe . .,\0 As a
consequence Air Europe faced major difficuJties in competing wiLh
Lufthansa and thus filed a claim with the Commission of the EEC.
Air Europe alleged that Lufthansa was abusing its dominant position
in the London-Munich market. The Commssion found that a dominant
carrier may restrict interline arrangements. A verdi ct on this
concern must relate to the nature of a particualr roule. The
Commission said that for a new airline to compete on a main] y
tourist route, for instance, it may want interlining of APEX fares,
"whereas a primarily business route wou1d on1y require interlining
for standard unrestricted fares. The central principle is that
sufficient interlining should exist to allow the newcomer to
411 compete on egual terms."
104
The Regulation allows refusaI to grant an interlining
agreement for "objective and non-discriminatory reasons of a
technical or commercial nature. ,,412 Participation in the
consultations for the adoption of such an agreement is voluntary
and open ta any carrier "who operates or has applied to operate
direct or indirect services on the route ccncerned. ,,413 Moreover,
the consultations are not binding on participants, with the
specification that, following the consultations, the participants
retain the right ta act independently in respect of passenger and
cargo tariffs. 414 The Commission and the Member States concerned
shall be entitled to participate in such consultations as
observers. For that purpose, air carrjers shall give them the same
notice as they give to the participating carriers, but not less
than 10 days in advance. 415
The nature of "arrangements on slot allocation at airports
and airport scheduling can improve the utilization of airport
capacity and airspace, facilitate air traffic control and help
411 Id. A similar interlining dispute was addressed by the EC Commission in 1991, over the refusaI of Aer Lingus to interline with British Midland on the London - Dublin route.
417Ar t.3(b), Com.Reg.84/91, supra, note 402. ThE' Regualtion refers especially but not exclusively to the creditworthiness of the carrier.
4UArt . 3 (d), Ibid.
414Art . 3 (e), Ibid.
415Art . 3 ( 2) (a), Ibid.
T 1
105
spread out the supply of air transport from the airport ... 1116
The exemption on slot allocation cavers agreements at those
airports where the airlines themselves are responsible for
allocating take-off slots. This task i 5 usually undertaken by
airport coordinators, sometimes assisted by air1ine commiltees." 11
The group exemption lays down rules in order to guarantee sorne
possibility of slots for new entrants, even at congested airports.
This is achieved by rules which give new entrants priority for al
least half the new or unused slots which may bEc1me availab1e at
a Communi ty airpart. -118 For this reason, a precise def ini tian of a
"new entrant" was given by the Counei1.
An improv8ment of slot-allocation shall be achieved through
transpareney in the negotiations of sueh slots. Participating
carriers shall therefore have aecess to consultation relating la:
-historieal slots by air carrier and ehronologically for aIl carriers, -requested slots (initial submissions) by air carriers and chronologjcally for aIl air carriers, -alloeated slots, and outstanding slot requests if differpnL, by air carrier and chronologically for aIl air carriers, -remainig slots available, -eomparisons between requested slots and allocated slots by time interval and by carrier, -full details on the constraints being used in allocation.
416preamble 5, Ibid.
417Commission Adopts Black Exempt.ion Rules For Air Transport, Information, P-I02, Brussels, December 5, 1990.
418 / Art.4(e), Com.Reg. 84 91, supra, note 402 ..
106
These rules have become necessary as the implementation of
the new freedoms depends heavily on airport and airspace capacity
being avai lable. 419 "EvEm now, it is extremely difficult for an
airline already established at h~athrow to commence a new servirp
from there", and according to Bal four, "i t is impossible for an
airline not already established. ,,420 This statement, howevpr, was
seen to be exaggerated dS new small regional airlines managed ta
estabUsh themselves at London Heathrow airport. 421 The coauthors
Stephen Wheatcroft and Geoffrey Lipman have identified eight
airports in the EEC which are at the present moment capacity
saturated. 477 The coauthors mention that the Association of European
Airlines has identified 35 which will be saturated by 1995. Balfour
therefore fears that i twill not only be difficul t for many
a irlines ta take full advantage of the liberalisation of air
transport in the EEC, but also that "it will give stronger airlines
several years opportunity ta try in advance to frustrate the
liberal isation objectives by doing aIl they can to ensure that
there i5 little or no capacity available for new services by
then. ,,473 This strong proposition may be questionable as to why IATA
419J.Balfour, Beyond the Second Package, (July 1990) 7 Avmark Aviat Econ 2 at 2.
47In.A.wassenbergh in his lecture given at McGill University, Institute of Air and Space Law, on March 13, 1991.
472Wheatcroft and Lipman, supra, note 207 at 55.
423Balfour, supra, note 419 at 2.
107
1 would lobby for liberalisation of air transport in the EEC if their
1
Members tried to frustrate its advantages. According to Piet J.
SIot, the airport and ainlays congest ion i s caused through the
absence of an integrated system of air traffic control. il?~ Bence,
the Commission has aiready proposed to give Eurocontro14(~ grea ter
power in the air traffic management.
II.3.1.2.5.:Commission Regulation 82/91 426 Concerning Ground
Handling Services
This Regulation follows Commission Regulation 2673/884?1, The
Regulation shall apply to aIl technical and operational services
generally provj.jed for on the ground at airports.I\?8 These services
include the provision of the necessary flight documents and
information to crews, apron services, including loading and
424 p , J . SllJt , Civil Aviation in the \.ommuni ty, in P.D.Dagtaglou, Toward a Community Air 'l'L"anSport Policy -Dimension, (Deventer: Kluwer Law and Taxation Publishers,
P.J.Slot, The Legal 1989) 10.
425Eurocontrol was insti tuted by the Internationa) Convention for the Safety of Air Navigation, signed on December ]3, 1960, at Brussels.
4?6Commission Regulation of Decemb9r 5, 1990 on the Application of Article 85(3) of the Treaty to Certain Categories of Agree~ents, Decisions and Concerted Practices Concerning Ground Handling Services, a.J. (1990) L.IO, at 7.
427Commission Regulation of July 26, 1988 on the Appl ication of Article 85(3) of the Treaty to Certain Categories of Agreements between Undertakings, Decisions of AssoLiations of Undertakings and Concerted Practices Concerning Ground Handling Services, O. J . (1988) L.239, at 17.
428 / Art.2(1), Com.Reg.82 91, s~pra, note 422.
1
.f
~
--~------------_i ;_-__ _
108
unloading, safety, aircraft servicing and refuelling, and
operations before take-off. 4/9 AlI services connected with the
handling of passengers, mail, freight and baggage shall be further
included in the scope of the agreement. 430 Addi tionaly, aIl services
for the provision of in-flight catering, including the preparation,
storage and deli very of meals and supplies to airerait and the
maintenance of catering equipment are contained in the
Regula tion. 431
According ta Article 3 of the Regulation, an exemption is only
granted if the agreement is concluded between two carriers. Also
in this case, the agreement, by its nature, is not allowed to be
of exclusive character and shall not be tied to the conclusion of
contracts for or acceptance of other goods or services which have
no connec tian ta the services described in Article 2. 432 The
Commsission specifies the exemptions as far as no quasi-monopoly
for the above mentioned services is caused by the Regulation. Each
air carrier has the right to choose from the range of ground
handling services of fered by a particualr supplier. The airline
shall further not be restricted ta procure such services from
another supplier or provide them itself. 433 The priees charged must
429Id .
430Art . 2 (2), Ibid.
431Art . 2 (3), Ibid.
43?Art.3(2), Ibid.
433 Art. 3 ( 3 ) , Ibid .
L
109
1 be in reasonable relation to the services. '134 Any air carrier shall
1
retain the right ta withdraw from the agreement without penalty
wi thin three mon ths .435
Also in case of ground handling services at airports the
Commission has the right ta withdraw the exemption if it
contravenes the conditions laid down by Article 85(3) or ;s sirnply
prohibited by Article 86 of the Treaty.4W
II.3.1.2.6.:Council Regulation 2343/90411 on Market Access
The Regulatjon encompasses the whole territory of the European
Communi ties, except the Greek Is lands and the Azores. 41A Oporto
shall be exempted until July 1, 1993.
The Council shall adopt upon the propos~ls by the Commission
rules for the designa tian of carriers. These cri teria sha 11 be
adopted by July 1, 1992. 439 Article 4 allows aIl Cornrnunity air
434Art . 3 (4.), Tbid.
435Art . 3 ( 6 ), Ibid.
436Art . 4, Ibid.
437Council Regulation of July 24, 1990 on Access of Air Carriers to Scheduled Intra-Cornmunity Air Service Routes and on the Sharing of Passenger Capacity between Air Carriers on Schedulded Air Services between Member States, O.J. (1990) L.217, at 78.
438Art . 1, Ibid. However these terri tories have the possibility to ex tend this exemption after July 1, 1993 for ten years in two periods.
439Art . 3, Ibid.
-
110
carriers to provide third- and fourth-freedom air services between
ail airports in the Community if they are open to international air
services. This stjpulation is an important step towards a
liberalised European air transport market and was not agreed upon
in the first package. 'l'lO Article 5 goes as far as to permit sixth
freedoml\'ll traf f le. This is the case as Communi ty carriers are
entitled to use one dnd the same flight number for combined 3rd and
4th freedom services within the EEC. Furthermore, if aState has
designaled one of its carriers on a route, it cannat refuse an
airline of the other St.ate to fly on the same route. 442 For routes
which are considered to be of fundamental importance, the Member
State is entitled to impose a public service ~lause. This
prerequisite includes conditions of continuity, :regularity,
capacity and priees which airlines would normally not comply with
if they only took their commercial interest into consideration. 443
This qualif ication may only be used for routes wi th a yearly
capacity of less than 30 000 seats and is one of two incidences
where the reciproci ty rule does !lot apply. 444 rfhe second exemption
440Kark , supra, note 68 at 147.
'l41 Sj x th Freedom: Somet imes used for the carriage of traf fic between two other States via the home country of an air carrier. Il is the result of the "Hub and Spoke" system. Example: Air France flight: New York - Paris - Amsterdam.
4th fr. 3rd fr.
1j~2Art. 5 (3), Ibid.
443Art . S (3), Ibid.
444 Id .
l
111
1 is that on routes between two regional airports aState j s not
1
obliged to autllOrise another State' s airline to operate in case the
licence was issued for two years, their airline uses aircraft with
l t \, 80 t d th th 'l' b' l 4"'i l ess Ilan sea s an e 0 er a~r Lne uses a ~gger pane. n
case a Member State feels that the public service clause is used
in order to limit the development of air traffic on that route, the
Commission shall arbitrate within two rnonths following
submission. 446
A Member State must accept multiple designation441 on a route
under the foliowing criteria: Firstly, from January l, 1991, on
routes on which more than 140 000 passengers were carried the
preceding year or on which there are more than 800 round trips per
year, secondly, frorn January 1, 1992, on routes on which more than
100000 passengers were carried the preceding year or on which there
are more than 600 round trips per year.
The second package introduced t.hrough Article 8 of this
Regulation new fifth freedom rights which are accessible ta all
Community carriers under certain conditions. Firstly, the fifth
freedom righ~ must be a preliminary of a service or an extension
of 3rd and 4th freedom service on departure or on route ta the
445Art . 5 ( 4), Ibid.
446Art . 5 (5), Ibid.
447 Art. 2 (i ), Ibid.: "Mul tiple designation" on a city-pair basis means the designation by a State or registration of two or more of the air carriers licensed by it ta operate a scheduled air service between its territory and that of another Member State.
112
State of rpgistration, secondly, the airline may not use more than
50% of its available capacity in seats per season on the main route
on which 3rd and 4th freedom service is carried out. A change of
gaugellllB sha1l a1so be a110wed if the aircraft which is different is
not bigger th an the first aireraft.
The Council Regulation a1so controls the condition of traffic
rights. Traffic rights can only be freely exercised if the airport
or airport system has sufficient facilities to accomodate the
service and the navigational aid is sufficient ta accomodate the
service. 1I119 In such cases, the Member State rnay impose conditions
on, limi t or refuse the exercise of such traffie rights. As a
eontrolling measure, the Commission must be notified of the refusaI
and pray ided wi th aIl the necessary supporting documents and
information. /l'iD If a Member State has refused to allow a foreign air
carrier ta launch or increase a service on an existing route, it
shall not be permitted ta allow a carrier under its registration
ta do so. 1151
Côpacity Sharing:
From November l, 1990, the capacity share per season may te
increased by 7.5 percentage points more than i t was in the
preceding season. Whatever the case may be, a Member State may
4WEquivaient with change of aircraft.
449Art.10 (1), Council Reg. 2343/90, supra, note 184.
450 Art. 10 ( 2), Ibid.
451Art.10 ( 3 ), Ibid.
113
1 requeot a 60% share. By January 1, 1992, the Commission must put
forward a proposaI to abolish aIl capaci ty sharing arrangements
starting on January 1, 1993.1\52 In case a country tries ta reduce
the capaci ty through unilaterral cut-backs, the basis for the
calculation shall be the capacity offered in the previous
corresponding seasons by the air carriers.
1
In order to prevent economic hardship caused through
deregulation of capaci ty Article 12 foresees an escape clause. In
such a case, the Commission will examine on the bas is of aIl
relevant factors the financial situation of airlines, their
difficulties and their market position. Furthermore, at the request
of a l'1ember Sta te whose scheduled air services are exposed to
substantial competition by non-scheduled services the Comm! oSsion
may reduce the capaci ty by 7.5 percentage points.
The Commission shall publish a report on the implementa tion
of this regulation every two years. The first such report shall be
published by May 31, 1992. 453 The Regulation shall decide on a
revision of the proposaI by June 30, 1992 the latest. 454
452Art . Il (2), Ibid.
453Art .14 (1), Ibid.
454Art . 15, Ibid.
114
I.3.1.2.7.:Council Regulation 2342/90455 on Fares
Within the scope of this Regulation are all fares for
. . l' C . t . 456 Th .lnternat.lona .l.ntra- ommun.l y sery lces . e objective of the
Council Regulation tariffs has been seen as "to produce more
compeLition, since the combination of governmental limitations on
entry and capaci ty together wi th airline agreements on pricing and
pooling had created an inadequate level of competition within
Europe. ,,457
Article 3 institutes criteria for the approval of air fares.
Paragraph 1 requires mandatory approval for scheduled air fares of
communi ty air carriers "if they are reasonably related to the
applicant air carriers 1 long-term fully-allocated relevant costs,
while taking into account the need for a satisfactory return on
capit~l and for an adequate cost margin to ensure a satisfactory
safety standard." Moreover, Member States shall take into account
factors such as needs of consumers and the competi ti ve market
situation, including the fares of the other air carriers operating
on the route and the need to prevent dumping. 458
Article 3(5) gives the possibility of aligning scheduled air
fares wi th non-scheduled fares applied on the same route. The
45~Council Regulation July 24, 1990 on Fares for Scheduled Air Services, D.J. (1990), L.2J7, at 1.
456Art . 1, Ibid.
451Economides, supra, note 23 at 121.
458Art • 3(2), Council Reg.2342/90, supra, note 192.
115
prerequisite is that the two produets are equivalent in terms of
quality and conditions. Additionally, charter carriers must operate
between two or more points according to published timetables. The
flights must be sufficiGntly regular or frequent so as to form a
recognizably systematic series.
The EEC only permi ts Communi ty a ir carriers to introduce lower
fares than the existing ones when they operate on the basis of
third and fourth freedom traffie rights. '1'19 In case of fifth freedorn
traffic rights, such lower fares can only be introduced when they
eomply wi th Article 4 ( 3 ), which wi 11 be described belaw. 4(iO This
sets a precedent. 461 However, one restriction was placed. Fifth
freedom Community carriers can only excercise this right within the
zone limi ts .462 r.rhe same commenta tar wri tes that "t..his las t
provision signifies that these fare initiatives would only affect
fares rafiging from 105% and 30% of the reference Y fare, with the
relevant fare conditions, if any. ,,463
The "zonal pricing schemes" for the priee approval regime
adopted by the Cauncil cavers the principle of three zones. 464 The
459Art . 3 ( 6), Ibid.
460Id .
%lAir France, Note Concernina the Second Liberalization Pac~age and the Implementation of Deregulation in EuropeL 1990, at 3.
462 Ibid ., at Il.
463Id .
464Art . 4 ( 3), Council Reg. 2342/90, supra, note 182.
a
-
116
zone limi ts for scheduled air services range as follows: (i) a
normal economy fare zone which shall extend from 95 ta 105% of the
reference fare, (ii) a discount zone which shall ex tend from 94 ta
80% of Lhe reference [are and (iii) a deep-discount zone which
shall extend from 79 ta 30% of the reference fare. The three
different types of fares are described in Annex II of the
Regulation. When the fares comply with these conditions, they are
automatically approved. For fares above 105%, the double
disapproval rule for tares applies. This means that the two Member
States concerned by a specifie route must bcth reject a new fare
to prevent it from coming into force. Before the entrance into
force of l-he second package it was usuai that bath Member States
approved a new fare before it came into force.
In case of a dispute over an air fare, a Member State which
claims a legitimate interest in the route concerned may request the
Commission to decide whether an air fare does not meet the terms
of Article 4(3), but nevertheless complies with Article 3(1) or
whethûr a Member State has fulfilled its obligations under Article
3(3). Within 14 days, the Commission will decide if the fare shall
remain in force during its examination. The Commisslon, if it does
not need to obtain additional information, Ghall decide within one
month upon the request and commun icate i t ta the Member States and
tt · .. l d 465 b S h' f f \e a lr carr~er ~nvo ve. Any Mem er tate erel.na ter may re er
the Commission' s decision within one month La the Council, which
4b5Art . 5 ( 4 ), Ibid.
117
l . shall decide by a quali f ied ma jori ty vote wi thin one mon th. 4(ifi
1
A consultation and arbitration procedure within the framework
of the double approval regime was instituted in Article 6. This
procedure applies when one State has not approved the fare. Should
consultations between the two States fail to reach a conclusion in
a 21-day period, the arbi tration procedure will be implemented 1
which is led by a panel of three arbitrators appointed by each of
the States involved and a third Member S'Late unless the States have
agreed upon a single arbitrator. The Commission has the role of an
observer in this procedure. 1167 The aroi tration shall be lerminated
within a period of 21 days of completion of the panel, whereupon
the Commission is notified immediately. Within a period of 10 days,
the Commission shall confirm the award "unless the arbitrators have
not respected the criteria set out in Article 3 or the procedure
laid down by the Regulation or the award does not comply wi th
Community law in other respects. ,,468 Important ta note ls th.!L 1
during the whole period of the consultation and arbitration
d h .. f . l' bl 469 proce ure, t e ex~st~ng ares I8ma1n app lca e.
466Art . 5 ( 5 ) , Ibid.
467 Art. 6 ( 4 ) , Ibid.
468Art • 6 ( 8 ) , Ibid.
469Art . 6 ( 9 ) , Ibid.
118
f II.3.1.2.8.:Council Directive 80/1266/EEC470 on Future Cooperation
1
and Mutual Assistance of Mernber States in the Field of Air Accident
Investigation
The EEC took rneasures in the field of aircraft accident
investigation as not aIl Mernber States had the technical means ta
do so. The Directive basically establishes a dut Y of cooperation
in these rnatters. A Member State which has at its disposaI these
means shal1 not refuse its assistance for which each Mernber State
shall adopt dornestic legislation.
II.3.1.2.9. :Council Decisionm Setting up a Consultation Procedure
on Relations between Member States and Third Countries in the Field
of Ai r 'l'ranfJPort and Action Relating to such Matters within
International Organisations
With this decision, the Council has responded to the
increasing importance of the EEC Member States for the ex change of
their experience on aviation rnatters. Therefore, on request of a
Mernber State or the Commission, such consultations must be held on
470Council Directive of Decernber 16, 1980 on Future Cooperation and Mutuai Assistance between the Mernber States in the Field of Air Accident Investigation, O.J. (1980) L.37S, at 32.
471Council Decision of December 20, 1979 Setting Up a Consultation Procedure on Relations between Member States and Third Countries in the Field of Air Transport and on Action Relating ta Such Matters within International Organisations. O.J. (1980) L.018, at 24.
119
i matters discussed in international organisations as well as on
various aspects of the development which have accrued between EEC
Member States on the one hand and third countries on the other
hand. 472 These consultations, however, do not require a comman
posi tion of the Mernber States. 473 Theil.' purpoee i8 ta determine the
problerns and, only if absolutely necessary, to coordinate the
posi .ons to be taken in the international organisation or towards
the third country.
,"\
472Art . 1 , Ibid.
473Art . 2, Ibid.
-
120
Cha pte r III
Outlook on Future Air Transport Agreements between EEC and non-BEC
Countries in Europe
I.:European Economie Area
Air transport negotiations wi th aIl EFTA countries, including
Norway and Sweden 174, are being held wi.thin the broader scope of
negotiations which may lead up to the creation of the European
Economi.c Area. Th~se negotiations have so far shown that the EEC
packages of 1987 ~ 1990 and 1992 on air transport liberalisdtion
mea5ures will be inserted into the Treaty.
The EEC is liberalising air transport in three phases and i5
currently in the second phase. The EF-C Council has therefore
adopted three Regulations and one Decision. The three Regulations
caver the areas of passenger air fares, market access, capacity
and competition. The scape of these four instruments in the
probably forthcoming European Economie Area will be limited to
intra-EEA international air transport and to EEA air carriers only,
with the exception of intra-EEA fifth freedom sectors of non-EEA
air carriers, where the Regulations may apply as weIl.
474The Norway - Sweden agreement will lapse once the agreement between the Communi ty and EFTA cornes into force. (Article 19 of the Draft Agreement), supra, note 176.
r t
1
121
As for passenger air fares, there may be an intra-EEA zonal
system of automatic air fare approva1 within the conditions set
forth within Council Regulation 2342/90. 475 There will be thn~e
zones, one for no:rmai fares and two for discount fares. The zones
will run from 105% of the reference fare ta 95% for normal fares;
from 94% ta 80% for discount; and from 79% ta 30% for deep discount
fares. There will be special requirements ta be eligible for the
lower fares. Important ta note is that in the EEA for non-EEA.
carriers where the fares Regulation applies ta them in their intra-
EEA fifth freedom sectors, these fifth freedom carriers may not act
as priee leaders.
Market acc:ess and capaci ty access to intra-EEA third and
fourth freedom routes will be free. There can be limitations of a
tec:hnica1, safety or environmental nature. There might be sorne
exemptions from the market access rules for sorne airports, aa is
currently the case wi th Greek Is land alrports, Porto and the
Azores. AdditionalYr there will be a reciprocity in the sense that,
if a carrier of State A receives permission to f1y a route ta State
B, State Amay not refuse carriers of State B on the same route.
Intra-EEA fifth freedom operations will allow for fifth freedom
operations from a category one airport ta another, or from a
category one airport ta a regional airport. The capacity of fifth
freedom capacity may go up to 50% of the total capacity. Multiple
designation will be allowed on a country pair basls and
475See also chapter II, II.4.2.7.
-- --
122
considerably liberalised on a city-pair basis.
After 1992 and the completion of the internaI market within
the EEC and, to a large extent, in the forthcoming EEA, a system
of non-discrimina tory licensing of EEA air carriers will come into
force, provided the licensing rules are going to be harmonised in
the EEA as weIl. This would mean that, in principle, EEA air
carriers may establish themselves according to Articles 52-59
Treaty of Rome in aIl EEA countries and perform air services out
of such countries. This will be the case as the four freedoms476 of
the EEC shall be extended to the EEC.
The capacity sharing ratio may increase 7.5% annually.
However, the equivalent ta the EEC Commission477 in the EEA will be
entitled to examine situations and propose solutions where
competing non-scheduled air services unduly hinder a country' s
ability to increase scheduled air services.
As for the competition rules, block exemptions are still
maintained in the second phase. The exemptions will most likely
continue and possibly be adapted in the third phase. 478 The group
exemptions include provisions in the field of tariff coordination
and slot allocation. For intra-EEA tariff consultations, like in
IATA, there will be an interlining requirement. Consequently, aIl
416See jnfra, Chapter II.1.3.1.
477The EEA agreement will e!3tablü'(1 a surveillance Authority among the EFTA which shall monitor issues of competition, state aid and public procurement. The exact composition of the Authority is not determined as yet.
478Haanappel, supra, note 79 at 6.
123
fares and rates which are the subject of consultations must, in
principle, be ~nterlineable. New-available or unused slots will
have to be given up to 50 percent to new entrant carriers on intra-
EEC air services. Furthermore, there will be a code of conduct for
slot allocation, which is currently being developed.
External aviation relations of the EEA Members, i.e the power
to conelude air transport agreements, will go parallel wilh the
discussion on the legal basis of the treaty making power of the
EEC in air transport matters. The air transport agreements which
are to be negotiated by the EEC will be valid also for aIl EEA
States. The EEC will represent EEA countries. This is an important
issue that "at this very time that one is considering the
possibility of the EEC itself entering into air transporl
agreements with non-EEC countries, an ~mportant debate is going on
as to the precise legal basis for this action. ,,'Î19 'l'herefore i t
shall be referred to the relevant Articles of the Treaty of Rome
which comprise Articles 75, 84(2), 113, 114, 235 and 238. In brief,
if Articles 75 and 84(2) will be considered as the basis for the
negotiations of aix transport agreements with non-EEA countries the
negotiations would be pursued by the Commission and subsquently be
coneluded by the Couneil of Transport Ministers by majority vote.
In case the negotiations of bilateral air transport agreements are
to be ineluded in the common commercial policy, the Commission will
'Î79p.p.C.Haanappel, The Future Relations between EEC Institutions and International Organizations Working in the Field of Civil ~viation - Part 2, (1990) 15 Air L 317 at 319.
124
have the exclusive power to negotiate and enter into such
agreements. Article 228 gives the general procedure for the
conclusion of international agreements by the EEC where the
agreements are to be made with non-EEC States or with international
organisations, they are to be negotiated by the Commission and ta
be concluded by the Council of Ministers. In case the Community
considers the present situation of legislative powers to be
insufficient in arder to achieve the common market, according to
Article 235 of the Trea ty .. the Council shall, acting ~nanimously
on a proposaI from the Commission and after consulting the European
Parliament, take the appropriate measures." The matter of external
aviation relations within the EEC will be much clearer after the
air transport between Norway and Sweden on the one side and the EEC
on the other side on civil aviation has been signed this October.
II:Future of the European Civil Aviation Conference(ECAC)
II.l.:Introduction
Due to Europe's geographical situation with a l~rge number of
small States with relatively small terri tories situated close to
each other already before the creation of the EEC, the idea of
European integration in the field of European aviation had already
developed in another direction. Matte wri tes that the "large number
of States corresponded to a variety of regulations, procedures,
125
t formali ties, air transport markets and Sta te airlines. ,,4HO Therefore
ECAC was founded in 1955. The basic document of ECAC was nat a
multilateral convention among the Member States, but simply
Resolution No. l of the inaugural session of ECAC. <lfll ECAC ls
closely connected with the International Civil Aviation
Organisation (hereinafter referred to as ICAO). ECAC ls neither a
subordinate or regional body of ICAO, nor campletely Inclcpendent,
but has an intermediate status. ECAC can fix i ts own working
i)fP programme, convene its meetings und set the agenda. 1 ECAC uses
ICAO's regional headquaters in Paris.
ECAC is an intergovernmental organisation comprising 28
States. 483 ECAC' s main objective was described as ta harmonise" the
air transport policies of its Member States in arder to promote the
coordination, better utilisation and orderly development of
European air transport, through recon~endations and resolutions,
in the economic, technical and security fields.,,4M
480Matte, supra, note 303 at 267.
481 ICAO Doc. 7676 - ECAC/l, Resolution 1.
4~Weber, supra, note 194 at 33.
483 IATA Regulatory Affairs Review, June - July 1991, Vol. 20, Number 4, at 598. Austria, Belgium, BulgarLa, Cyprus, the Czech and Slovak Federal Republic, Denmark, Finland, France, Germany, Greeee, Hungary, Iceland, Ireland. Italy, Luxembourg, Malta, Monaco, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, Turkey, United Kingdom and Yugoslav5a.
4MEconomides, supra, note 23 at 83.
~,----------------------------
-
126
ECAC can enter into consultations. ECAC's resolutions and
recommendations depend on the approach of the Member States'
governments. 48,) 'rherefore, unlike the EEC, ECAC is not entrusted
with supranational power. Thus, aIl measures adopted by ECAC are
not legally binding on its Member States. However, these
resolutions and recommendations, according to Dempsey, are
considered by its Members and often implemented by them as
regula tions . "86
II.2.:ECAC's Work and Its Results
Discussing ECAC's work and its results, one has to distinguish
between its work perforrned in the economic field on the one hand
and the technical f~eld on the other hand.
II.2.1.:Results in the Economie Field
An additional distinction has to be made between scheduled
and non-scheduled air transport. In the field of scheduled air
transport, the first progress achieved by ECAC was the Memorandum
of Understanding on the Procedure for the Establishment of Tariffs
485Art . 1 (3), 0f ECACs' constitution, which was modified in 1968. see the ECAC Constitution of 1968, ECAC Information Paper No.l3, October 1969.
4Moempsey, supra, note 14 at 625.
127
j for lntra-European Scheduled Air Services on June 16, 1987. 4111 On
the same day, an Agreement was concluded on the Sharing of Capacity
on lntra-European Scheduled Air Services. 4M This additional
agreement on capacity was signed as ECAC Member States, as was th0
case in the EEC, percelved that tariff fJexibility could not be
achieved without true capacity flex1bility. The two agreemenLs are
very similar ta the respective EEC Regulations. Therefore one may
refer ta the thereto related discussions. An interesting aspect in
this context is that, since not aIl ECAC Members are Members of the
EEC a standard clause was introduced into the ECAC agreements,
which reads as follows:
[W]hile signing . "f the Member States of the European Communities declare the provisions of this Agreement cannat prevail over Community law as regards relations between them. 489
In the field of non~scheduled air transport, a "Multilateral
Agreement on the commercial rights of Non-Sche~uled Air Services
in Europe" was formulated and signed on April 30, 1956 in paris.4~
This Agreement 1 and the libera l interpretation of it1\91, was seen to
487 EC 9/1.8/1 - 396 ECAC., reprinted in (1988) 13 Annals Air & Space L 376 - 389.
488ECAC/No. 18110., reprinted (1988) 13 Annals Air & Space 1. 398-399.
489Such clauses were for the first time introduced in the aforementioned 1987 ECAC Agreements on tariff and capacity liberalisation.
490 rcAo Doc. 7695., cited in Matte, supra, note 303 at 270.
491Economides, supra, note 23 at 84.
128
have been the reason for chartered air carriers to account for more
than 65 per cent~~ of Europe's passenger air transport.
On July la, 1967, the so-called Paris Agreement was signed. 493
This agreement replaced the tariff clauses in bilateral agreements
between signa tory States. It thus provided for uniformi ty and
suppnrts the conference machinery of rATA wi th respect to the
establishment of tares and rates.4~
II.2.2.:Results jn the Technical Field
AmuI tilateral agreement achieved wi th in the framework of ECAC
was the "Multilateral Agreement Relating to Certificates of
Airworthiness for Imported Aircraft". 495 This agreemnet was meant
to complement Article 33 of the Chicage Convention. Article 33
refers to the mutual recognition of airworthiness certificates.
However, i t does not cover imported aircraft which are to be
registered in the importing State. Thereforn, prior to this
agreement, su ch clauses were introduced in bilateral air transport
~96 . agreements. The 1960 Multllatcral Agreement makes such clauses
~92Wheatcroft and Lipman, supra, note 207 at 139.
491Thp' International Agreement on the Procedure for the Establishment of Tariffs for Scheduled Air Services, ICAO Doc. 8681.
4~Matte, supra, note 303 at 271.
495 rCAO Doc. 8056; signed on April 22, 1960; in force since August 24, 1961, cited in Matte, supra, note 303 at 271.
496Matte, supra, note 303 at 271.
129
1 arnong signatory States unnecessary. 497
1
II.3.:ECAC'S Present Work
ECAC's present work has ~o be reviewed from an economic and
technical perspective. The Triennial Session held in Strasbourg
from June 25-28, 1991, has undertaken this task. Generally, it may
be stated that ECAC and Joint Aviation Authority(JAA) initiatives
are often adopted by the EEC. On the other hand, EEC commercial
initiatives are sometimes employed by ECAC. Q98 It must be emphasized
that the EEC Member States take a common position in ECAC.
ECAC is working in its working groups such as EURPOL-l,
EURPOL-2 and TARPOL on a number of topical items for the triennium
1991-1994. Air carrier licensing, non-scheduled air transport, air
freight, slot allocation, denied boarding compensation and
cornputerised reservation systems are among the items. QOO
II.3.1.:ECAC's Work in the Economie Field
ECAC begun to concentra te on subjects, such as slot allocat~Jn
and licensing criteria for air carriers. Work on those subjects and
the creation of an ECAC-wide denied boarding compensation scheme,
497 Id.
49Bwheatcroft ..lnd Lipman, supra f note 207 at 179.
4~Haanappel, supra, note 79 at 2.
130
1 based on that adopted wi thin the Communi ty, are proceeding. 500
In addition, ECAC's North Atlantic Policy Committee (NAPOL)
examines the renewal of the ECAC - USA Memorandum of Understanding
(MoU) on North Atlantic Passenger Fares. This MoU, for the first
time concluded between ECAC Member States and the United States in
1982, remain~d in place. It had to be renewed on two occasions
during the triennium. "A renewal of the MoU including its
provisions on antitrust immunity for tariff coordination", it was
rnaintained, "is particularly important at this time, now that the
US Oepartment of Transportation (DOT) is engaged in its general
review of the antitrust immunity currently enjoyed by the IATA
Traffic Conferences. ,,501
ECAC continued its efforts towards a common code of conduct
for the CRS. ECAC had recently finalized its comments on the U.S.
NPRM, concerning revision of the existing CRS rules, and it was
their intention to pursue the points made in direct discussions
wi th the Americans. 502
5000raft Report of the Fourteenth Triennial Session, reprinted in IATA, Regulatory Affairs Review, June-July Vol.20, Number 4, at 644.
~lHaanappel, supra, note 79 at 2.
502 IATA , supra, note 500 at 644.
ECAC, 1991,
131
1 II.3.2. : ECAC' s Work in the Technical Field
ECAC is foremost concerned with the harmonisation and
Integration of European air traffic control systems. Pragmat.ic
considerations within ECAC have led the organisation to aim for a
progressive integration, with the expectation of providing sorne
relief in the short and medium term as weIl. 'rhis has become
necessary as in Europe there are currentl y "43 en route control
centres for the 22 national systems in Europe wlth different
operational standards. Then there are separate arrangements for
military flights, organised by defence departments which in turn
are coordinated through NATO plans. ,,'iD3 After achieving this aim
the concept of centralised management will be the next step. !JO~
The Triennial Session of ECAC also considered a draft
recommendation on joint operational take-off and Ianding
performance requirements for small aeroplanes.
Matters relating to aircraft noise po1icy were a1so an agenda
item of the Triennial Session. The Session deall with a draft
recommendation on Chapter 2 operating restrictions, "prepared at
the initiative of Directors General to give practical effect in
Europe to the worldwide consensus achieved by ICAO in Resolution
A28-3. It was noted that consideration wou1d, in any case, have ta
be given ta c1arify proper Chapter 3 noise certification methods
503Wheatcroft and Lipman, supra, note 207 at 56.
504 IATA , supra, note 500 at 646.
l
132
within ICAO, in order that the effect of this consensus shou1d not
be diluted." 505 Therefore, in matters relating to noise, one has to
follow the work pursued by the International Civil Aviation
Organisation.
In the Facilitation and Security Committee, special
contingency security measures were drawn up in connection with the
Gulf crisis. A direct outcome had been a decision to prepare an
ECAC contingency plan that could quickly be put in place in the
f f . . 1 506 event 0 a uture s~m~ ar emergency.
Pertaining to facilitation of baggage of aIl kind - such as
hold baggage and passenger baggage - a prompt enforcement of 100
. . . d 507 per cent screen~ng ~s env~sage .
II.3.3. : ECAC' s Associated Body, the Joint Aviation Authorities (JAAl
Through the finalisation of the Arrangement Document on
December 6, 1989, JAA was simultaneous1y accepted as an associated
body of ECAC. The Arrangement selected Hoofddorp, the Netherlands,
as their headquarters, which became operationa1 on August 1,
1991 .508
505Ibid . , at 647.
506Ibid . , at 648.
507 Ibid . , at 651.
508Id .
r ,
133
Nineteen Member States have signed the Arrangements.
Currently, JAA is a foundation under Dutch law, but Member State'3
seek to replace it as soon as possible by full Treaty status.~q
The Joint Aviation Authority's activities caver aIl aspects
of air safety, including air worthiness, operation
maintenance. 5lO The Draft Report writes,
Looking to the future, ... , [A]n appropriate degree of integration of aviation safety su!:veillance would be essential to ensure continuation and improvem~nt of the safety level of the European aviation system. :JII
II.4.:The Future of ECAC
and
ECAC has at its Fourteenth Triennial Session given itself a
work programme in the economic field. Concerning the Intra-European
matters, it will comprise the establishment of a code of conduct
for computerised reservation systems, including applica tian to non-
scheduled passenger air services, airport slot allocation, denied
boarding compensation and air carrier licensing criteria together
with conditions for wet-Iease512 operations. 513
509Id .
510Id .
51l Id .
5120 . H. Bunker, The Law of Aerospace Finance in Canada, (Montreal, McGill University: Institute and Centre of Air and Space Law, 19 B 8) 56:
Wet Lease: a lease of an aircraft under the term', of which the les sor provides, d1rectly or indirectly, the aircrew to opera te the airera ft.
1
--
134
Moreover, ECAC is going to review the implications for the
wider Europe of developments in the EEC in the fields of market
access, tarif fs, capaci ty and of the EEC' s application of i ts
competition rules. 514 Other subjects will include automated tariff
filings, non-scheduled air services and CRS proposaIs for air
freight.
The Technical Committee foresees in its work programme inter
alia the development of pol icy and regulations of criteria in
following technical .... :eas affecting flight safety.515 Firstly,
flight crew licensing, by taking into account ICAO and EEC
developments, will be elaborated. The aim is to harmonise the
technical criteria for the issue of flight crew licences by a
Member State with a view to possible muLual recognition of such
licences. 516 Secondly, matt.ers of airworthiness and operations of
aireraft shall be dealt with. Thereby, the exchange of jnformation
on progress made by the JAA Committee, the exchange of information
on aetl.vities of the respective bodies concerned with off-shore
he licopter operations, the reduction of bird hazards and the review
of EUROCAE's work in the field of airborne navigation and
communications equipment, will be on the agenda.
513 IATA, supra, note 500 at 670.
514 Id .
515 Id .
516Ibid ., at 671.
135
With respect to the development of policy relating to the
protection of the environment, the issues of aircraft noise and
engine emissions will be disrussed. 517 Concerning aireraft noise,
ECAC will implement ICAO restriction policy on aeroplanes,
complying with Chapter 2 of ICAO Annex 16, but not Chapter 3, with
the objective of achieving harmonised action by Member States. With
respect to engine emissions after collecting and analysing
information on environmental issues created by engine emissions,
ECAC will review available ways and means of limiting the
environmental impact of aircraft engine emissians. Furthermare,
ECAC will evaluate the technical feasibility of implementing such
ways and means, of the environmental benefits ta be derived from
them and of their economic implications for the industry.
Furthermore, matters of accident investigation and reporting
will be of particular concern to ECAC. 518 Items of common interest
shall be coordinated particularly with a view towards increasing
the commonali ty in accident investigation, reporting procedures and
the monitoring follow-up for safety related findings of accident
investigations. ECAC will undertake special studies to enhance
flight safety in general aviation and aerial work in Europe,
priority being given to accidents involving:
a)twin engine aeroplanes of less than 5 700kg MTOM; b}VFR flights in poor weather conditions; or
517Ibid ., at 671f.
518Ibid ., at 672.
--
136
c) helicopters of less than 5 700 kg MTOM. 519
Addi tionally, the status of implementations of ECAC
recommendations on technical questions will be reviewed. 520 The
Secreatariat of ECAC will collect and analyse information from
States on the status of implementation of ECAC recornmendations in
the technical field which have been in effect for at least two
years. This information shall be disseminated in the Manual on the
status of implementation of technical recornmendations. 521
III.:Future Agreements with Eastern European Countries
III.l.:General Economic Cooperation Agreements
In the following the cooperation of the Eastern European
Countries with the rest of Europe shall be reviewed in big lines.
It will be di vided in general economic cooperation agreements,
general transport agreements and finally specifie air transport
agreements. This approach was taken as it 5eems essential to see
air transport as part of the infrastructure which forms part of the
national economy of each country.
519Id •
520Ibid ., at 673.
521 ECAC Doc. No.14, (sec. ed.).
137
111.1.1.: General Economie Cooperation Agreements with the EEC
The normalisation of trade relations between the EEC and
Eastern European countries is vital to the success of the economic
restructuring now being implemented in each Eastern European
country.~2 A starting point for discussion of EEC - Eastern Europe
trade relations is the EEC's common commercial policy. Article 3(b)
of the Treaty of Rome sets forth the establishment of a cornrnon
customs tariff and of a common commercial policy towards third
countries as one of the objectives of the Community.
Due to the common commercial policy objective of the EEC i t
can be said that in principle, Member States are not entitled
independently to impose tariffs, quantitive restrictions or
measures of equivalent effects on products originating jn thlrd
countries nor to enter into voluntary export restraints or other
trade agreements with third countries. 523 'rherefore the cornrnon
commercial policy will be pursued by the EEC.
Bulgaria524 , Czechoslovakia525 , Poland526 and Hungary~21 signed
522G.Bustin and D.Webb, Breaking Down the EAST-West Trade Wall, (April 1990) 9 Int'l Financial LR, 3 at 13.
523 Id . ; See also Arts. 113 & 114 on the common commercial policy of the Cornmunity. For further information: Kapteyn, supra, note 51 at 792 - 794.
524Abkommen zwischen der Europaischen Wirstschaftsgemeinschaft und der Volksrepublik Bulgarien Uber den Handel und die handelspolit.ischen und wirstschaftliche Zusammenarbeit, Sept., 24 1990, a.J. (1990) L 291, at 9 - 27.
-
138
cooperation agreements with the EEC. These agreements foresee a
graduaI elimination of the trade barriers introduced by the EEC for
State trading countries in 1983. 528 The agreements establish a
timetable for the elimination of quantitive re:..,~~ictions.
Furthermore, the agreements create a framework for trade
negotiations on various aspects of mutuai trade. Mo.reover, the
agreem8nts inciude a commitrnent to commercial cooperation between
the signatories. However, as has been mentioned, the rnost important
task of the former COMECON Members will be the leading of tedious
negotiations over the elimination of discrirninatory quantitive
restrictions. Finally, Joint Commissions were established, which
will negotiate on possible mutual concessions in trade matters.
The EEC fears anti-dumping practices on the side of former
COMECON countries as they were SLate trading countries and
therefore not subject to priee competition like the EEC countries.
It can, however, be expected that Western suspicions of Eastern
'i?5Abkommen zwischen dr Europaischen Wirtschaftsgemeinschaft und der Europaischen Atorngemeinschaft einersei ts und der Tschechischen und Slowakischen F6rderativen Republik andererseits Über den Handel und die handeispoli tische und wirtschaftIiche Zusammenarbeit, Sept. 20, 1990, O.J.(1990) L.291, at 28 - 44.
'i?6Beschluss des Rales V0rn 30. Oktober 1989 über den Abschluss des Abkommens zwiscen der Europaischen Wirtschaftsgemeinschaft und der Volksropublik Plen Über den Handel und die handelspolitische und wirtschaftliche zusammenarbeit, O.J. (1989) L. 399, at 1.
'i?7Soschl uss des Ra tes vorn 21. November 1988 Über den Absch luss des Abkommens zwischen des Europaischen Wirtschaftsgemeinschaft und der Ungarischen Volksrepublik Über den Handel und die handelspolitische und wirtschaftliche Zusammenarbeit, O.J. (1988) L.327, at l.
5?8EEC Regulation 3420/83. O.J.(1983) L.346, at 6.
139
1 dumping will arise less frequently if the economic reforms resull
in more market-determined pricing and fewer supports. 5?Q
1
After the mili tary coup in the Soviet Union on August 19,
1991, which collapsed three da ys later, the EEC is considering a
closer relationship with former COMECON countries in order to
prevent similar actions in these countries. 530 At the present
moment, however, it is difficult to predict future developments.
111.1.2. :General Economie Cooperation Agreements with the EFTA
At their meeting in Gothenburg, December 1989, th,'" EF'rA
Ministers agreed on criteria upon which Eastern European countr.ies
will qUdlify for closer insti tutiona l ties wi th EF'l'A. 'ill 'l'hese
conditions are of an entirely economic nature and incl ude the
introduction of market economy and pricing through suppl y and
demand, liberalisation of foreign trade, convertibility of currency
and the allowance of aIl forms of property.532 A future free trade
agreement between an Eastern European country and EFTft will depend
on the fulfillment of the above mentiohed criteria. SO far,
cooperation agreements between EFTA on the one hand and Hungary,
529K . Bolz, Implications of the EC InternaI Market for Reldtions With Eastern Europe, (Jan./Feb 1990) 25 Intereconomics, 36 at 27.
530Trade Commissioner Schmidthuber in an interview wi th the Austrian Television, August 20, 1991.
531 B . Arnason, Der Weg zur Marktwirtschaft und Vorraussetzungen fÜr den Freihandel, (3/90) EFTA Bulletin 19 at 19.
532 Id .
1
140
poland and Czechoslovakia on the other hand have been signed. 5TI
111.1.3.: General Economie Cooperation Agreements with Others
This matter depends highly on the bilateral relationship of
several European countries. Therefore it would by far exceed the
topic of this paper to analyse them aIl. However, reference i5 made
to the special relationship between Germany and the Soviet Union
as trade partners, even if since August 19, 1991 the political
situation in the later country has become very turbulent. The
emphasis on cooperation is based on the production of consumer
goods - an area of the economy which i5 pivotaI importance for the
restructuring of Soviet economy. 534 Such agreements might also
follow for other Eastern European countries in other fields of
their economy.
Moreover, the participation of the Soviet Union in the General
Agreement on Tariffs and Trade may be doubtful as the mechanisms
for priee fixing, dumping and State subsidisation are still
predominant in this country. 535
534W. R. Smyser, Partner im Widerstreit - Die Bundesrepublik und die Vereinigten Staaten vor dem Beginn einer neuen Ara, (1989) 44 Europa Archiv 645 at 652.
515H. B. Ma Imc;;ren, Die Sowjetunion und das GATT - Vorteil und Pflichten der Mitgliedschaft, (1989) 44 Europa Archiv 655 at 656.
141
1 III.2.:General Transport Agreements
III.2.1.:General Transport ~eements with the EEC
Generally, it may be stated that with the improvement of trade
relations between the two areas general transport agreements will
be signed. General transport agreements encompass severa l sorts of
arrangements dealing with infrastructure including road, rail and
shipping networks between countries. Furthermore, the opening up
of Eastern Europe will create new travel markets and consequently
stimulate a traffic growth. Up to the present day, no such
agreements have been signed. However, i t shall be kept in mind thal
up lo the Second World War the main traffic corridors were running
from west to east. 536
III.2.2.:General Transport Agreements witt the EFTA
The same may be said of EFTA Stales. EFTA states might,
however, negotiate cooperation agreements on a bilateral basis.
This was the case wi th the introduction of the train "Wiener
Walzer", running from Budapest to Basel on a daily basis. More such
examples can be found when studying a European-wide timetable of
international train connections.
536p.Horst, Verkehrspolitik in Europa, (1989) 44 Europa Archiv 703 at 709.
'.
·r
142
III.3.:Specific Air Transport Agreements
It was held that air transport is likely to play a very
important rol e in the process of social liberalisation and economic
restructuring in Eastern Europe for a variety of reasons. 537 The
much freer exchange of air rights on the side of former communist
countries may be qualified as a more open policy approach on their
part. Additionally the Eastern European countries including the
Soviet Union allow flight rights more willingly so that the traffic
towards the Pacific can be flown on a more direct route. However,
it will take a long time until a liberal bilateral air transport
agreement will be signed by an Eastern European country, due to the
considerably lower productivity of their airlines. 53B This was
stated by Garrett FitzGerald, former Prime Minister of Ireland, in
a study on Eastern Europe's air transport problems and prospects,
presented at an East West aviation conference in Paris in February
~~heatcroft and Lipman, supra, note 207 at 164.
53Bwheatcroft and Lipman, supra, note 198 at 166: The coauthors show the following table ccmparing Aeroflot, American Airways and Lufthansa's productivity in 198B:
Passengers (mn)
Employees ('000)
Aircraft (no)
-----------------------------------------------------
Aeroflot (international) American Lufthansa
124 4
64 19
400 15 67 39
2 442 100 470 127.
143
1 1990. 539 He concluded that there would be a requirement - excluding
the USSR - for at least 300 - 450 Western aircraft over the next
decade. 51\0
III.4.:Future Associate EEC Membership
The EEC has proposed to replace the current trade agreements
with individual association agreements. The precise nature of the
proposed association relationship remains vague. If the experience
of others, such as Turkey, is a guide, the Eastern European
countries can expect the EC to be forthcoming in reducing tariff
barriers. Yet, it has to be kept in mind that in sensitive areas
like agriculture and textiles association may give no assurance to
market access. 541 Nevertheless, for "reasons of cul tural a f fin i ty
and economic interest, association for sorne Eastern European
countries may only be the first step on the road to full
integration", write the coauthors George Bustin and David Webb.
539East-West Aviation Conference: Opening the Skies, International Chamber of Commerce, Paris, February 19 - 20, 1990.
540G.FitzGerald, East-West Financing Arrangements, Paper prepared for presentation at East-West Aviation Conference: Opening the Skies, International Chamber of Conunerce, Paris, February 19 -
20, 1990, at 6.
541Bustin and Webb, supra, note 522 at 14.
~-
144
III.5.:Future Full EEC Membership
In the EEC' s view, the time for EEC Membership for former
COMECON countries is not ripe. Austria and Sweden which have
already applied for full EEC membership will be next for full
integration as mernbers of the EEC. The time for the EEC membership
of the former COMECON countries is not ripe. Moreover on the top
of the EEC agenda, however, is the completion of the internaI
market. Germany, the driving force behind the Integration of the
EEC i8 occupied by the retooling of the former German Democratie
RHpublic after reunif Ica tion. Thus, the newly established
democracies will have to wai t sorne years before there economie
strength will allow full EEC membership.
145
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III.Materials and Treaties
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the
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Commission Regulation (EEC) No 82/91 of December 5, 1990 on th~
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Commission Regula tian (EEC) No 84/91 of December 5, 1990 on the
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Couneil Decision, Concerning the Conclusion of an Agreement between
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(Brussels, December 11, 1989) SEC(89) 2105 final.
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Council Regulation (EEC) No 2343/90 of July 24, 1990 on Access for
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on the Sharing of passenger Capaci ty between Air Carriers on
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159
Council Regulation (EEC) No 2344/90 of July 24, 1990 Amending
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its Member States and the Countries of the European Free Trade
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ProposaI For A COUNCIL DECISION on a Consultation and Authorization
Procedure for Agreements Concerning Commercial Aviation Relations
between Member States and Third Countries and on the Negotiation
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ProposaI [or a Council Directive on the Harmonization of Technical
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(Brussels, September 27, 1990) COM(90) 442 final.
Recommendation For a Couneil Decision, The Opening of NeQotiations
between the European Economie Commun! ty and EF'rA Countries on
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Recommendation for a Council Decision, presented by the Commission,
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Ahmed Saeed Flugreisen et al. v. Zentrale zur Bekaempfung
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EC Commission v. EC Council, Case 22/70, (1971] ECR 263, CMLR 335,
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European parliament v. E.C.Council, Case 13/83, [1986] 1 CMLR 138.
Ministere Public v. Lucas As jes et al., Cases 209-213/84, [1986 J
3 CMLR 173., sometimes referred to as the "Nouvelles Frontierés"
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Opinion 1/76, 1977 ECR 741, [1977] 2 CLMR 279, ECJ.
Re French Merchant Seamen: E.C.Commission v. France, Case 167/73,
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VZW Vereniging van Vlaamse Reisbureaus (Association of Flemish
Travel Agencies) v. VZW Sociale Dienst van de Plaateli jke en
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165
Wood Puip Case, Joined Cases 89/85, [1988] 4 CMLR 901.
,
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