October 28, 2011
Court Vacates FAA Ruling on Cape Wind Project
Earlier today the D.C. Court of Appeals vacated an FAA ruling on a proposed offshore wind farm and remanded the matter back to the FAA for further consideration. See Jay Lindsay, Court Says Cape Wind's Offshore Project Won't Fly, USA Today, Oct. 28, 2011 (available here). The FAA had determined that the Cape Wind turbines presented no hazard to the aviation industry, but the Court held that the FAA failed to analyze how the turbines would affect planes flying by visual flight rules.
October 27, 2011
Taiwan and Japan Still On Track for Open Skies Agreement
Taiwan and Japan remain committed to signing an open skies agreement in the near future. See Nancy Liu, Timetable for Taiwan-Japan Aviation Pact to be Set Soon, Central News Agency, Oct. 27, 2011 (available here). The originally scheduled signing was canceled last month, and Taiwanese officials have since denied speculation that China is pressuring Japan to pull out of the agreement. Taiwan currently has open skies agreements with the U.S. and Singapore.
October 26, 2011
U.S. House Prohibits Airlines From Participating in EU Emissions Plan
On Monday, the U.S. House of Representatives passed legislation forbidding U.S. carriers from taking part in the EU's cap-and-trade program. See John Crawley, US House Votes to Ban Airline Compliance with EU Law, Reuters, Oct. 25, 2011 (available here). The Senate has yet to act on the measure, and it is unlikely that the bill will actually become law. Still, this latest signal of resistance to the EU plan is yet another indication that some form of resolution to the issue is needed before January, as non-EU countries appear unwilling to allow their carriers to be subject to the EU regulation.
October 25, 2011
Aerotropolis Event Recap
The International Aviation Law Institute and the Chaddick Institute for Metropolitan Development hosted Professor John D. Kasarda at DePaul Law School for a luncheon and lecture yesterday. Kasarda is the Kenan Distinguished Professor of Strategy and Entrepreneurship and Director of the Kenan Institute of Private Enterprise at the University of North Carolina's Kenan-Flagler Business School. He is also co-author of Aerotropolis: The Way We'll Live Next, and has written extensively on the importance of intelligently developing airports and their surrounding areas to achieve greater economic growth, regional competitiveness, and business supply chain efficiency. The event was well-attended, with guests including Chicago Department of Aviation Commissioner Rosemarie Andolino. Readers interested in learning more about Professor Kasarda's work can do so here.
October 24, 2011
Does ETS Constitute a Tax?
Today we address the Advocate General's dismissal of the third and final argument levied by the international carriers against the legality of the EU's proposed emissions scheme - that the ETS constitutes a tax or fee in violation of Articles 15 and 24 of the Chicago Convention. The relevant portion of Article 15 is as follows, "No fees, dues or other charges shall be imposed by any contracting state in respect solely of the right of transit over or entry into or exit from its territory of any aircraft of a contracting State or persons or property theron." Additionally, Article 24 states, "Aircraft on a flight to, from or across the territory of another contracting State shall be admitted temporarily free of duty, subject to the customs regulations of the State." Article 24 makes it clear that this includes duties on fuel. As discussed in a prior post, the Advocate General maintains that the EU is not bound by the Chicago Convention but considers these two Articles applicable by reference through Articles 3(4) and 15(3) of the EU/US Open Skies Agreement.
The opinion contends that the cap-and-trade scheme, requiring carriers to surrender emissions allowances that they have either been granted free-of-charge or have purchased on the free market, does not equate to a fee, due, charge or duty under the meaning of Articles 15 and 24. In support of this contention the opinion asserts that taxes and charges are, by definition, fixed in advance, and that because the price of the emissions allowances is market-dependent, requiring payment of emissions allowances cannot be considered a tax or charge. It is difficult to read this argument as anything other than a semantic dodge. If carriers were required to hand over actual euro each time one of their aircraft landed at an EU airport it would surely be considered a tax or charge, regardless of whether the amount to be surrendered was undetermined prior to landing and ultimately chosen through some market-based mechanism or even arbitrarily. The fact that the emissions allowances aren't euro shouldn't alter that analysis, as the emissions allowances unquestionably have value, especially because they can be bought and sold on a market which prices them in actual euro. Requiring carriers to surrender something of value upon landing or taking off from an EU airport is clearly a charge by any sensible definition of the word. For support, the AG claims ICAO has in the past distinguished between environmental charges and emissions trading schemes. However, for a contrary reading of ICAO pronouncements blog readers are invited to look at pages 12-14 of Toward A Global Aviation Emissions Agreement, where authors Brian F. Havel and Gabriel S. Sanchez conclude that ICAO has found market-based-mechanisms to be a charge in violation of the Chicago Convention (available here). The AG also notes that the need to harmonize competing emissions schemes is contemplated in Article 15(7) of the 2010 amendment to the US/EU Open Skies agreement. The article says nothing, however, about one State applying emissions schemes to foreign carriers on the basis of landing or departing from domestic airports. For Article 15(7) to be read to contradict explicit prohibitions in the Chicago Convention, one should reasonably expect more specific language than can be found in that article.
Additionally, the AG is forced to grapple with the prohibition against excise duties on fuel in Article 24 of the Convention because the amount of emissions allowances charged under the ETS is calculated by measuring the amount of fuel consumed on a given flight. For this reason, the American carriers argued that the charged emissions allowances should be considered a duty on fuel, citing in support Braathens, a 1999 case in which the European Court held that an emissions tax calculated by measuring fuel consumption equated to an excise duty on fuel, for support. See Case C‑346/97 Braathens  ECR I‑3419 (available here). The AG attempts to distinguish the Braathens opinion by claiming that under the ETS there isn't a direct link between emissions and fuel consumption because carriers could use biofuels, which are considered emissions-free under the plan. However, there is no legally significant distinction between the case at hand and Braathens, other than the factual issue that biofuels were not in the contemplation of the earlier court. Additionally, the AG's opinion does not explain how the ETS ceases to be a fuel excise tax simply by virtue of not being applied to all fuels.
Ultimately, the Advocate General's answer to this third and final argument appears to rest largely on the notion that because the ETS is intended to be an environmental regulation, it should not be viewed as a tax, charge or duty of the type the Chicago Convention intended to prohibit. To its discredit, this line of reasoning ignores the reality that a tax or charge is part of the mechanism by which the ETS aims to discourage environmentally destructive behavior. However noble the EU's intentions may be, the unilateral imposition of its rules on foreign carriers appears to put it at odds with international law.