Tuesday, July 13, 2010

Will There Be a Third Stage?

As discussed previously on the blog, the "second stage" Protocol amending the 2007 U.S./EU Air Transport Agreement, 2007 O.J. (L 134) 4, was signed at the end of June.  See also Protocol to Amend the Air Transport Agreement . . . (June 24, 2010) (available here).  The Protocol strengthens aeropolitical relations between the two parties through the Joint Committee established under the first agreement.  Specifically, the Protocol contemplates cooperation on issues such as the environment, social protection, competition, and security.  The Protocol also eliminates the first agreement's suspension clause which allowed the parties to suspend some or all of the treaty's concessions if they were dissatisfied with the outcome of second stage negotiations.  (For more on the suspension clause, see earlier discussion here).

Conspicuously absent from the Protocol, however, are concrete concessions on investment rights.  Despite EU urging to the contrary, the U.S. refused to modify its current 25% cap on foreign ownership in U.S. air carriers.  Instead, the two sides reached a limited compromise whereby U.S. airlines would be afforded limited seventh freedom (stand alone) rights for passenger or combination passenger/cargo services from points within the EU provided each party "permit[s] majority ownership and effective control of its airlines by the other Party or its nationals[.]"  See Protocol, supra, art. 6 (replacing Article 21 of the 2007 Agreement). 

It is far from clear that the offer of limited seventh freedom rights will be enough to entice the U.S. to reform its airline ownership laws.  Perhaps with that in mind, the European Parliament motioned for a resolution last month calling on the European Commission "to start the process of third stage negotiations with a view to include . . . additional foreign investment opportunities."  See Euro. Parliament, Motion for a Resolution to Wind Up the Debate . . . on the EU-US Air Transport Agreement, Session Doc. No. B7-0374/2010 (June 14, 2010 (available here).  Whether these negotiations occur or not remains to be seen.  Until there is a change in Washington's protectionist stance on airline ownership, however, it's difficult to imagine any further progress being made.


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