The Extension of the EU Emissions Trading Scheme to the Aviation Sector does not contravene international law

Kate Cook

On the 6 October 2011 AG Kokott rendered her opinion in Case C-366/10 The Air Transport Association of America and Others.  The case concerns a challenge brought by airlines based outside the EU to the EU’s attempt to address the issue of CO2 emissions caused by airlines flying into and out of the EU by extending its well known emissions trading scheme to the aviation sector.  As such the case is important for the future of EU climate change policy, both in this area and more widely, as negotiations remain fraught with difficulty in achieving multilateral solutions to the range of challenges posed by climate change. The case also raises once again the thorny issue of the relationship between EU law and public international law. 

According to a 2010 Report published by the International Centre for Trade and Sustainable Development, aviation has the greatest climate impact of any mode of transport. The report points out that there are two ways to measure this impact: (1) measuring Co2 emissions alone and (2) taking non-CO2 effects into account (‘the multiplier effect’). Adopting the second of these approaches, and recognising the scientific uncertainty in assessing such additional effects, the report notes that current consensus is that the climatic impact of aviation emissions is double (according to the IPCC up to four times) the impact from CO2 alone. This implies that aviation is responsible for 4.9% of the climate change impact attributable to human activities.

The Parties to the 1997 Kyoto Protocol agreed to pursue the issue of reducing/limiting emissions produced by aviation through the International Civil Aviation Organisation (ICAO). However in the absence of any broader multilateral agreement on a legal framework for reducing emissions from the aviation sector thus far, the EU has adopted a regional framework by extending its emissions trading system to the aviation sector.

As pointed out by the AG in her Opinion, the scheme for greenhouse gas emission allowance trading adopted by the European Union (EU) in 2003 is a cornerstone of European policy on climate change. Directive 2008/101/EC provides that, as from 1 January 2012, aviation is to be included in this EU emissions trading scheme, with the result that from 2012 all airlines, including those from third countries, will have to acquire and surrender emission allowances for their flights from and to European airports.

Several US and Canadian-based airlines and the Air Transport Association of America (ATAA) challenged the measures taken by the UK to implement the Directive in the High Court, arguing that by including international aviation – and transatlantic aviation in particular – in its emissions trading scheme, the EU was in breach of a number of principles of customary international law and of various international agreements, including the 1944 Chicago Convention on International Civil Aviation, the 1997 Kyoto Protocol and the 2007 ‘Open Skies Agreement’ between the EU and the United States of America (amended in 2010).  The AG summarised the claimants’ challenge as raising three issues: (1) whether the EU is exceeding its powers under international law by not confining its emissions trading scheme to wholly intra-European flights and by including within it those sections of international flights that take place over the high seas or over the territory of third countries; (2) whether an emissions trading scheme for international aviation activities should be negotiated and adopted under the auspices of the ICAO; and  should not be introduced unilaterally and (3) whether the emissions trading scheme amounts to a tax or charge prohibited by international agreements.

After a detailed examination of the various treaty provisions and principles of customary international law relied on by the claimants, the AG has concluded that only two of the treaty provisions could be relied on directly by the claimants and that, in relation to these, neither impacted on the validity of the Directive. Nor did she find that the international provisions and principles relied upon had been breached.

Reliance on international law to challenge an EU measure

Before turning to the substantive issues, the Advocate General addressed the prior question of whether the claimants could rely on general international law in order to challenge the validity of the Directive.

She noted that there was no dispute that the EU is bound by, and has rights and obligations under, international law or that the EU must respect international law in the exercise of its powers.  This much was clear from the famous Kadi case (para 291). However, this did not mean that individuals could automatically rely on provisions or principles of international law in court proceedings in order to challenge acts of the EU institutions. Citing existing case law, the AG stated that it was always necessary “to determine specifically, with regard to each particular provision and principle of international law at issue, whether and to what extent it could be relied upon, in proceedings initiated by a natural or legal person, as a benchmark against which the lawfulness of EU acts can be reviewed” (para 8). Joined Cases 21/72 to 24/72 International Fruit Company and Others (‘International Fruit Company’), (para 8).

The criteria to be met had already been clearly established by the Court: international agreements could be relied upon as a basis for challenging the validity of EU measures provided that (1) the EU was bound by the agreement concerned; and (2) the nature and the broad logic of the agreement concerned must not preclude such a judicial review and, in addition, its provisions must appear, as regards their content, to be unconditional and sufficiently precise.  This language used by the Court and the AG is similar to the criteria of direct effect.

In this case, so far as the Chicago Convention was concerned, the first condition was not met since the EU was not a party (although the fact that all the Member States were Parties could have an effect on the interpretation of provisions of EU law).

In relation to the Kyoto Protocol and the Open Skies Agreement, the EU was a party, so the issue in each case was whether the second criterion was met. So far as Kyoto was concerned, the nature/broad logic neither of the Kyoto Protocol in general nor of Article 2(2) in particular indicated that it had a direct application. The AG noted that the emission limitation and reduction commitments agreed in the Kyoto Protocol, although quantified, afforded the Parties “a wide discretion as to the specific policies to be implemented and measures to be taken in accordance with their national circumstances” para 84. Article 2(2) itself was limited to regulating and describing the organisational framework within which the Contracting Parties wished to cooperate on the limitation or reduction of emissions of certain greenhouse gases from aviation bunker fuels. The legal status of individuals was not affected by this.

By contrast, the AG agreed with the Commission and France that natural and legal persons could invoke the Open Skies Agreement before the courts.  Although some of the wording of the Open Skies Agreement could undoubtedly be construed as simply governing relations between the Parties, much of the remaining wording of the Agreement specifically referred to the rights and obligations of individuals. In particular, the agreement directly addressed airlines and other service providers. The Advocate General contrasted the provisions of the Open Skies Agreement with those of UNCLOS, the latter having been the subject of consideration in Intertanko and concluded that the Open Skies Agreement could by its nature and broad logic, affect the legal status of individuals.

In the light of these considerations two of the three provisions of the Agreement relied upon by the claimants – Article 7 and the second sentence of Article 15(3) – were sufficiently precise and unconditional to be relied upon by the claimants.

The Claimants had also sought to rely on various principles of customary international law. In relation to this, the AG noted that the Court had not previously addressed the issue of the conditions under which reliance might be placed on customary international law in order to challenge the validity of an EU measure. She proposed that the Court should adopt the same approach as with international agreements: (1) the principle of customary international law had to be binding on the EU and (2) the nature and broad logic of that particular principle must not be such as to preclude such a review; the principle in question must also appear, as regards its content, to be unconditional and sufficiently precise.

She added that the codification of the relevant principles in international agreements was not a bar to the claimants’ reliance on those principles because a principle of customary international law retains a separate existence alongside the international agreement in which it is codified. Interestingly, she then held that the claimants had established that three of the principles relied upon were binding on the EU and thus met the first condition set for reliance: the principle of the sovereignty of States over their air space; the principle of the invalidity of claims of sovereignty over the high seas and on the freedom to fly over the high seas. However the AG then concluded that the claimants could not rely on those three principles because they were not capable of having an effect on the legal status of individuals. She noted that the common feature of the three principles was that they determined the scope of sovereignty of States and limited their jurisdiction. Principles such as these were, by their ‘very nature and broad logic’, by no means capable of having an effect on the legal status of individuals.

Substantive Issues

The AG held that the Directive was not incompatible with Article 7 of the Open Skies Agreement. Article 7 of the Open Skies Agreement, in so far as it is of relevance here, was substantively the same as Article 11 of the Chicago Convention. The AG found that the only substantive requirement laid down by Article 11 in relation to the laws and regulations of Contracting States concerning the admission, departure and operation of aircraft was the prohibition of discrimination against aircraft on grounds of their nationality: the laws and regulations concerned are to ‘be applied to the aircraft of all contracting States without distinction as to nationality’. None of the parties involved in the present case had cast any doubt on the fact that the EU emissions trading scheme satisfied that requirement. Nor could it be inferred from Article 11 that it would be prohibited for a Contracting State to take account, within the framework of its emissions trading scheme, of parts of flights taking place outside that State’s territory. The relevant clause merely stated that the laws and regulations of a Contracting State ‘are to be complied with upon entering or departing from or while within the territory of that State’. It is this and only this that the EU demanded of airlines in the context of its emissions trading scheme. The EU emissions trading scheme did not contain rules that would have to be observed during parts of flights that take place outside the territory of the European Union.

As far as the second sentence of Article 15(3) of the Open Skies Agreement was concerned, the application of environmental measures for aviation activities was made contingent upon adherence to the principle of fair and equal opportunity for airlines to compete (Article 2 of the Open Skies Agreement) and the right of airlines to determine the frequency and capacity of their international air transportation (Article 3(4) of the Open Skies Agreement). What all these requirements had in common was that environmental measures must be applied to airlines in a non-discriminatory manner and must not prejudice the airlines’ prospects in competition with each other. Overall, no breach of the principle of non-discrimination laid down in Articles 2 and 3(4) of the Open Skies Agreement could be established.

For the sake of completeness and notwithstanding her view that the other provisions and principles could not be relied upon, the AG also considered the substantive issues raised and made some very interesting findings, noting the highly divergent legal opinions expressed on the issues raised.

There were currently no ICAO environmental standards for aviation activities that would prevent the inclusion of aviation activities in an emissions trading scheme such as the EU scheme, nor did the scheme breach the rules on non-discrimination. Consequently there was no breach of Article 15(3).  It was apparent from Article 15(7) of the Open Skies Agreement, as amended by the 2010 Amending Protocol, that the Parties to the Open Skies Agreement were also assuming that market-based measures were permissible in principle

The Contracting Parties’ preference for a multilateral solution within the framework of the ICAO was only translated by Article 2(2) of the Kyoto Protocol into a very general obligation of conduct. If no agreement was reached within the framework of the ICAO within a reasonable period the Parties to the Kyoto Protocol must be at liberty to take the measures necessary to achieve the Kyoto objectives at national or regional level, otherwise there would be a serious risk that those objectives might not be achieved. Whether and when the EU, working outside the framework of the ICAO, should unilaterally take measures to limit or reduce greenhouse gases from aviation was “ultimately a question of expediency, which it is for the EU’s political authorities to determine”.

In relation to customary international law, she noted that the claimants essentially accused the EU legislature of having exceeded the bounds of State jurisdiction in breach of principles of customary international law. They argued that the inclusion of flight sections that take place in airspace outside the EU has created an extraterritorial rule which contravenes, on the one hand, the sovereign rights of third countries and, on the other, the freedom of the high seas. The AG found that allegation to be ‘untenable’ being based on ‘an erroneous and highly superficial reading of the provisions of Directive 2008/101’.

The AG held that the fact that the calculation of emission allowances to be surrendered was based on the whole flight in each case did not bestow upon Directive 2008/101 any extraterritorial effect. It was undoubtedly true that, to some extent, account is thus taken of events that take place over the high seas or on the territory of third countries and this might indirectly give airlines an incentive to conduct themselves in a particular way, in particular to consume as little fuel as possible and expel as few greenhouse gases as possible. It was not unusual however for a State or an international organisation to take into account in the exercise of its sovereignty circumstances that occur outside its territorial jurisdiction. She referred to principles widely applied in income tax law and competition law. The decisive element from an international-law perspective was that the particular facts displayed ‘a sufficient link’ with the State or international organisation concerned.

The territoriality principle did not prevent account being taken in the application of the EU emissions trading scheme of parts of flights that take place outside the territory of the EU. Such an approach “reflected the nature as well as the spirit and purpose of environmental protection and climate change measures”.

Nor was there any adverse effect on the sovereignty of non-EU states since, contrary to the view taken by the claimants, Directive 2008/101 did not, either in law or in fact, preclude third countries from bringing into effect or applying their own emissions trading schemes for aviation activities. It was true that there was a risk of ‘double regulation’ but such double regulation was not prohibited under the principles of customary international law. It was in fact accepted under customary international law, just as the widespread phenomenon of double taxation was accepted in the field of direct taxation.


In clarifying the basis on which customary international law may be relied upon in order to challenge the validity of an EU measure, the Opinion is of general interest and in adopting the same conditions as apply when a challenge is based on international agreements, the AG has proposed an approach which is coherent and well-established. The thorniest issue in such cases will generally be whether the relevant agreement is of a nature to be relied upon by individuals – “the nature and the broad logic of the agreement concerned must not preclude such a review” – and in this respect there may be increasing room for argument as to the correct approach to take. The current approach taken by the Court and supported by the AG in this case effectively privileges the position of economic operators whose position is explicitly addressed in the text of an international agreement over the wider public interest which the agreement may also reflect and over more general references to the concerns of humankind. The appeal of adopting such an approach is clear from a forensic point of view (and that of judicial economy in limiting such challenges) but it has the effect of placing those whose individual economic concerns are addressed in an agreement at a considerable advantage over consumers, residents and civil society organisations who may also have concerns with compliance by the EU legislator with international standards and rules. This is essentially the same issue as has been raised in relation to the (very limited) scope of the standing of individuals under EU law to challenge EU measures more generally. The debate as to what legal entitlement to challenge a measure should flow from public or environmental concern as opposed to participation in an economic freedom is unlikely to go away and will not be resolved by this case.

Another interesting aspect of the case (related to the general issue highlighted above) is that the AG held that the Kyoto protocol as a whole did not meet this condition, in addition to finding that the particular provision relied on, Article 2(2) could not be replied on. The finding on Article 2(2) appears to be fully justified and it is difficult to envisage the Court not adopting the same approach, but the rather sweeping dismissal of any other provision of the KP potentially giving rise to individual rights at some stage may be more questionable and certainly merits more in-depth consideration, if and when such challenges are presented.

From the point of view of climate change policy, the Opinion contains some welcome findings: the scope for unilateral action on the part of the EU is confirmed by the rulings on lack of extra-territorial effect and lack of infringement of the sovereignty of other states. The EU currently appears to be the strongest supporter, among developed/Annex I countries, of an extension to the Kyoto Protocol beyond the end of the first commitment period in 2012. Council conclusions adopted on 10 October 2011 in preparation for COP17 in Durban in December, confirm the EU’s ‘openness to a second commitment period under the Kyoto Protocol as part of a transition to a wider legally-binding framework’ albeit subject to certain important conditions. By contrast, other Annex I countries including Japan, Canada and Russia have all stated that they will not sign up to any further commitment under the Kyoto Protocol unless all major economies (including those of non-Annex I states) are bound. It is possible therefore that the EU, which appears to be more willing to maintain the system of binding multilateral emissions targets currently applied under the KP, will be left to follow its commitments unilaterally, unless agreement is reached at Durban as to the future of the Kyoto Protocol. A finding by the CJEU that its own legal system effectively prohibits the EU from pursuing an important extension to its own climate change policy would be a big step backwards for EU climate change policy (and indeed its current negotiating position). The EU’s ability to go it alone if necessary (for at least some period of time in the absence of an extension of Kyoto) in a range of areas may be important in maintaining the momentum for a credible multilateral agreement based on common ground between at least some Annex I countries and those in the developing world

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