Thursday, March 19, 2009

Time to Amend the Chicago Convention?

According to a story from Air Transport World, the U.K. House of Commons Environmental Audit Committee is urging the Government to seek amending the Chicago Convention on International Civil Aviation in order to allow governments to tax international aviation fuel.  The Committee cited the declining price in fuel as justification for the policy.

Under Article 24(a)of the Chicago Convention, 61 Stat. 1180, 15 U.N.T.S. 295, "[f]uel . . . on board the aircraft of a contracting State, on arrival in the territory of another contracting State and retained on board on leaving the territory of that State shall be exempt from customs duty, inspection fees or similar national or local duties and charges."  This provision was reiterated by the International Civil Aviation Organization Council in a 1993 resolution.  See ICAO, ICAO's Policies on Taxation in the Field of International Air Transport, ICAO Doc. 8632-C/968 (2d ed. 1994).  Paragraph 2 of that resolution goes on to state that "fuel . . . taken on board for consumption" by an aircraft from a contracting State in the territory of another contracting State departing for the territory of any other State "shall be furnished exempt from all customs and other duties."  Finally, Paragraph 4 makes clear that "[t]he expression 'customs and other duties' shall include import, export, excise, sales, consumption and internal duties and taxes of all kinds levied upon . . . fuel."  

Both Article 24 and the subsequent resolution accords with the Chicago Convention's telos that international civil aviation "be developed in a safe and orderly manner and that international air transport services may be established on the basis of equality of opportunity and operated soundly and economically."  See Chicago Convention, pmbl.  Remove the protections of Article 24 and what you are left with is the opportunity for States to meddle in the orderly development and provision of air services by stuffing their coffers with monies drawn from fuel taxation.  For airlines to operate "soundly and economically," they must be placed out of the reach of the opportunistic hands of governments. 

Clearly, the worldwide economic downturn has placed great strains on governments trying to balance fiscal responsibility with providing the aid they believe is necessary to combat the crisis.  But the aviation industry, no less than governments, has been adversely impacted as well.  While the airlines have been given some relief through the fall in oil prices, they are now feeling the brunt of a global decline in demand for their services.  Any amendment to the Chicago Convention will be accompanied by deliberation and that takes time.  By that point, there is no telling where fuel prices will be.  An amendment so radical as to allow States to do what they have been rightly barred from doing for over 60 years will not be easily implemented or revoked.  When the global economy finally "bottoms out" and matters are back to "normal," will the U.K. and other likeminded States be ready to lead the charge to reinstall Article 24?  That's doubtful.  The temptation will be too great for governments the world over to reserve for themselves the right to tax civil aviation when it appears politically expedient.  The result will be to place another economic encumbrance upon the international airline industry and inevitably retard the development  and operation of civil aviation the Chicago Convention was meant to secure.   

http://lawprofessors.typepad.com/aviation/2009/03/time-to-amend-the-chicago-convention.html

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