Tuesday, July 26, 2011
For more background on tomorrow's Congressional hearings on the EU ETS, blog readers may want to peruse the recently proposed EU ETS Prohibition Act, H.R. __ (112th Cong., July 20, 2011) (available here). The proposal directs the Department of Transportation to "to prohibit an operator of civil aircraft of the United States from participating in any emissions trading scheme unilaterally established by the European Union." The proposal does not provide specific penalties for U.S. carriers which defect from the prohibition, however.
The U.S. House Infrastructure and Transportation Committee is scheduled to hold hearings on the legality of the European Union's Emissions Trading Scheme tomorrow morning at 9:00am EST. The hearing will focus on whether the ETS violates international law. A full list of witnesses, along with a briefing memo, is available from the Committee's website here.
Wednesday, July 20, 2011
Blog readers may be interested in Auguste J. Hocking's new article, Ownership and Control in Australia's Air Services Agreements: Further Reform Needed for Genuine Commercial Freedom?, 36 Annals Air & Space L. __ (available from SSRN here). From the abstract:
Australian bilateral air services agreements, like those all around the world, invariably contain an airline nationality clause. Most such clauses restrict designation to airlines, “substantially owned and effectively controlled,” by the state of designation and/or its nationals. A key feature of the bilateral regulatory framework, ownership and control clauses work to restrict the benefit of an air services agreement to the signatory states and lock out third parties. Uncontroversial and rarely problematic in the days of the government-owned flag carrier, the requirement is now a serious obstacle to meaningful liberalisation in the commercial aviation sector.
The free flow of capital is axiomatic of globalisation. Commercial decisions can be taken with relative freedom from artificial nationality distinctions. Rationalisation along efficiency lines, accordingly, is the norm in global markets. The airline business, however, is treated differently. Ownership and control restrictions isolate the airlines and curtail the ability to access capital, consolidate across borders and establish in new markets. Prospective efficiency gains are forgone. Many suggest, on reasonable grounds, that the future health and prosperity of the industry and the broader marketplace is dependent on relaxation of these restrictions. Commercial aviation, they posit, should be treated, “just like any other business”.
Australia considers itself at the forefront of liberalisation initiatives. It is party to 3, "open skies," agreements, one of which comprises the Single Aviation Market with New Zealand, and is presently, it is reported, negotiating a further substantive agreement with the EU. Foreign ownership restrictions for Australian airlines have been progressively reduced and, most notably, 100% foreign ownership is permitted for domestic airlines. However, like many other nations, Australia is still bound by traditional ownership and control restrictions in many of its approximately 70 bilateral agreements. Reform on a point has been slow and, as this paper will argue, further action is needed.
Tuesday, July 19, 2011
The U.S. Open Skies policy continues forward. After celebrating its 100th Open Skies partner earlier this year, the Department of State announced last week that it had initialed a new agreement with Macedonia. See Air Transport Agreement, U.S.-Mac., July 11, 2011 (available here).
Monday, July 18, 2011
Though not directly related to aviation, blog readers may still want to read noted antitrust scholar Louis Kaplow's latest article, On the Meaning of Horizontal Agreements in Competition Law, 99 California L. Rev. 683 (2011) (available here). From the abstract:
Competition law’s prohibition on price fixing and related horizontal agreements is one of its few uncontroversial provisions and is understood to be well grounded in economic principles that are taken to provide the foundation for competition policy. Upon examination, however, commonly offered views of the law’s conception of agreement prove to be difficult to articulate in an operational manner, at odds with key aspects of legal doctrine and practice, and unrelated to core elements of modern oligopoly theory. This Article explores these and other features of the agreement requirement and suggests the need for a wholesale rethinking of how competition law should approach the oligopoly problem.
Wednesday, July 13, 2011
Blog readers may be interested in Brian F. Havel and Gabriel S. Sanchez's latest article, The Emerging Lex Aviatica, 42 Georgetown J. Int'l L. 639 (2011). The article is available to download from SSRN here. From the abstract:
Since the advent of international commercial air travel, every airline has been straitjacketed by treaty-based restrictions which mandate that, in order to be eligible to provide international air services on behalf of its home state, it must be owned and controlled by citizens of the home states (or by the home state itself). This citizenship “purity” requirement, commonly referred to as the “nationality rule,” is reinforced by national laws requiring substantial (share) ownership and effective control of national air carriers by the home state or its citizens. The combined effect of these treaty and national law restrictions has been to prevent airlines from merging across borders or from establishing subsidiaries in other states. Consequently, airlines are locked out of transnational capital markets at a time when the global operating environment (including oil price spikes and lingering demand weakness in the wake of the Great Recession) has never been more challenging. In this Article, we identify an emerging normative transition, which we dub the “lex aviatica,” that is attempting to displace the treaty-based nationality rule. This transition is rooted in an evolving consensus among airlines and sympathetic government officials. Thus, in contrast to its concep- tual antecedent, the “lex mercatoria,” through which the merchant class consciously broke with the common law, the emergent lex aviatica suggests a lawmaking process where not only is the state no longer the sole actor or regulator, but there is an appreciably more open-textured collaboration between merchant and state. The Article analyzes how this normative transition could transform the global regulatory order for international aviation, liberating commercial and investment opportunities that will allow the industry that globalized the world to become global itself.
Sunday, July 10, 2011
This week's edition of the Economist has an excellent piece on airlines and globalization, entitled Climbing Through the Clouds, Economist, July 8, 2011 (available here). However, one strange element of the piece is the fact it identifies the International Air Transport Association as being one time akin to a "global regulator" for the aviation industry. While it is true that IATA did serve as a cartel facilitator during the days of tightly managed trade in air services, the Association operated under the regulatory supervision of national authorities (e.g., Civil Aeruonautics Board). Unfortunately, the story implies that IATA was vested with direct authority over international air transport, a rather ridiculous claim given the fact that not even the International Civil Aviation Organization--the intergovernmental institution created by the 1944 Chicago Convention--possesses that level of power.