Tuesday, November 17, 2009

Canada Refrains from the Agenda for Freedom

Despite the summit being hosted within its territory, Canada opted to refrain from signing the Statement of Policy Principles set forth by the International Air Transport Association as part of its Agenda for Freedom.  See Robert Gibbens, Canada Holds Off on Air Carrier Liberalization, Montreal Gazette, Nov. 16, 2009 (available here); see also IATA, Statement of Policy Principles Regarding the Implementation of Bilateral Air Services Agreements (Nov. 16, 2009) (available here).  According to the story:

Canada was odd-man-out at Monday's  International Air Transport Association "Agenda for Freedom" Summit in Montebello, Que.. Seven countries including the United States, Chile, Malaysia, Panama, Singapore, Switzerland, the Emirates and also the European Commission signed IATA's airline liberalization policy document.

But Canada stood aside, saying it needs more time to evaluate the policy process, IATA sources said. Canada has strict limits on domestic airline ownership.

This is a strange justification from the Canadian Government, particularly since its airline ownership law mirrors U.S. restrictions.  Yet the U.S. chose to the sign the Statement.  By doing so, however, the U.S. in no way legally bound itself to altering its tight 25% cap on foreign ownership of airline voting equity.  The Statement clearly sets forth that it "creates no legal obligations on the signatories or the countries they represent.  See Statement, supra, para. 5.  The International Law Commission's Guiding Principles Application to Unilateral Declarations of States Capable of Creating Legal Obligations (2006) (available here), notes that determining whether or not a legal obligation has been created requires "tak[ing] account of [a declaration’s] content, [including] all the factual circumstances in which [it was] made" and, more importantly, such declarations must "manifest[] the will to be bound."  But even if the Statement could be construed--in defiance of law and logic--has a binding declaration, it makes no mention of States' internal rules on foreign ownership.  Rather, it promotes States waiving the nationality clauses in their air services agreements on a reciprocal basis.  Here is the relevant text:

1. Freedom to access capital markets

a. We should generally respect the policies of other countries that to encourage foreign investment in their airlines.  Accordingly, on the basis of reciprocity, and in the absence of valid social or public policy concerns, we should waive, where our legal systems permit us to do so, or otherwise refrain from exercising rights under existing bilateral air services agreements to disallow service by an airline of the other party to that agreement on the grounds that it is not owned and controlled by nationals or the Government of that other party.

b. Furthermore, also on the basis of reciprocity, we should eliminate, replace or otherwise reduce the negative effects of  traditional nationality clauses when negotiating new or amended air services agreements, including through expedited methods such as joint memoranda of understanding or a public exchange of letters.

c. We should give sympathetic consideration to the possibility of a multilateral agreement to accomplish this goal.

So, following the Statement, State A and B would reciprocally waive the nationality clause in their bilateral, thus allowing State C to purchase State B's airline without jeopardizing the carrier's right to fly to and from A.  Of course, State A and B could still waive and retain any internal ownership restriction they deem appropriate. 

Is there more to Canada's hesitancy?  Unfortunately, it's not clear from the story. 


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