I. The “Open Skies” agreements
In cases C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 and C-476/9,8 delivered on November 5, 2002, also referred to as the “Open Skies” cases, the Commission took Austria, Belgium, Denmark, Finland, Germany, Luxembourg and Sweden to the European Court of Justice due to their concluded “Open Skies” agreements with the US, as well as the UK due to its Bermuda II agreement with the US.1
Regarding International Air Transport policy, the Commission argued that in 1992 a Single Market for air transport had been created by the Member States, which meant that all EU airlines were granted equal rights to operate air services from a home base. The Commission moreover believed that removing internal trade borders would go hand in hand with a common external policy towards non-EU countries and thus Member States would no longer need to enter into bilateral agreements, as this would disturb the Single Market and discriminate in favor of airlines in each Member State and against other Member States in allocating air traffic rights to third country destinations based on nationality. For these reasons, the Commission considered that no bilateral agreements should be signed between Member States and third countries after the establishment of the Single Market.2
There exist nine Air Freedom rights, whose framework was established in 1944 at the International Convention in Chicago. All Freedom rights beyond the first two need bilateral agreements to be exercised. The fifth freedom traffic rights, so-called beyond rights, allow for carrying passengers between two third countries on flights that either originate or are destined for the carrier’s home country.3
In 1994, the US released a statement presenting a strong commitment for an open aviation world and offered these so-called “Open Skies” agreements. Their objective was to liberalize the air transport for any signed party, including fifth freedom traffic rights. EU Member States had been asked by the Commission not to enter into “Open Skies” agreements with the US, but seven of them nonetheless did, while the UK signed a more restrictive but regardless similar agreement.4
The Commission argued that by entering into these agreements in the context on a Single European liberalized Market, the US obtains considerable operational opportunities in the EU, which are however not reciprocal for the EU in the American Market. US carriers can fly from any point A to any point B in the EU, while EU carriers are granted no such fly rights in the US. This leads to restrictions for EU businesses but none for their counterpart, as well as to a reduced scope of intraEU rationalization and investment. Moreover, the danger of dependence on national airlines to provide international links emerges. According to the Commission, a joint approach is used for all major international trade negotiations, so applying such approach in this case as well is what would be the most appropriate in order to ensure a more balanced outcome to the negotiating leverage of all EU Member States. 5
To summarize, the main arguments that the Commission brings to Court are that firstly, “Open Skies” agreements distort the Single Market in allowing non-European airlines to enter it; secondly, they discriminate between European airlines; and thirdly, they undermine the core idea of the European Community airlines, as written in EU law, by denying them the access to international routes from EU Member States other than their own, thus undermining the right of establishment.6
II. Legal issues at stake
Among the Community’s specific powers listed in the TEU, there are special transport provisions with three “packages” of regulations. They exist in order to ensure the freedom of Community air transport services and fair competition. The latest package from 1992 grants operating licenses by Member States for air carriers established in the Community; gives access for Community carriers to intra-Community routes; and establishes fares and rates for these routes. Two other regulations are supplemented to the package, concerning computerized reservation systems and the allocation of airport slots.7
Since the 1990s, the Commission had been aiming to obtain from the Council a mandate to conduct air transport negotiations with the US, with the goal of replacing the previous bilateral agreements between the US and certain Member States. Eventually, it did obtain a limited mandate. The US started entering into the “Open Skies” agreements with EU Member States from 1995 onwards, which made the Commission go to Court against the seven Member States including the UK. The Commission stated that they had, by entering into “Open Skies” agreements, firstly infringed the Community’s external competence since it is only the Community that can conclude such agreements, and secondly infringed the Treaty’s provisions on the right of establishment by allowing the US to refuse certain air traffic rights by the clause of ownership and airlines’ control.8
The major legal issues that the Court had to take into consideration in the “Open Skies” cases are the exclusive competences of the Community, international agreements in this context, and the doctrine of implied powers. The latter will be discussed in the section on the assessment of the Court’s decision.
Under the principal of conferral, there are three main types of competences conferred to the EU, which are the exclusive, the shared, and the supporting competences. The Single Market, mentioned in the argumentation of the Community, falls under shared competences. The legal issue at stake is the Commission’s exclusive competence for air transport agreements negotiations on behalf of the Member States. Indeed, according to Art. 3 Par. 2 of the TFEU, “The Union shall also have exclusive competence for the conclusion of an international agreement when its conclusion is provided for in a legislative act of the Union or is necessary to enable the Union to exercise its internal competence, or in so far as its conclusion may affect common rules or alter their scope.” In this area, the EU alone can legislate and adapt acts, and can also empower Member States to do so themselves. The exercise of competence is subject to two principles, as written in Art. 5 TEU. Firstly, to the principle of proportionality, which states that the scope and content of EU’s action may not exceed what is necessary for the achievement of the objectives in the Treaty, and secondly, to the principle of subsidiarity, which adds that in an area of non-exclusive EU competences the EU shall only acts if the Treaty’s objectives cannot be sufficiently met by the Member States.9
The EU has a legal personality and can therefore, as a subject of international law, negotiate and conclude international agreements. In the context of the Community’s external competences, the TFEU provides rules on these international agreements, which are in the core of the “Open Skies” cases. International agreements are secondary legislation of the EU under public international law, that generate obligations and rights for the contracting parties. Art. 216 TFEU lists the cases in which such agreements can be concluded. They might require ratification by secondary legislative acts after they have been signed, depending on the matter. International agreements are to be applied throughout the EU, and have a legal force stronger than the one of unilateral secondary acts. Moreover, Art. 207 TFEU, on which the Commission relied for its legal argumentation, states that EU’s trade policy is a key external competence of the EU.10
III. Decision of the Court
The European Court of Justice ruled that certain aspects of fares and rates and their establishment on intra-Community routes, that apply to non-Community carriers, as well as reservation systems, fall indeed under the Community’s exclusive external competences. The Court did not prohibit Member States from entering into bilateral agreements with the US, nor confer competence to the Commission to conduct negotiations with the US on behalf of the Member States. The decision did not immediately impact the rights of EU and US airlines to continue services in accordance with the challenged bilateral agreements. Indeed, the Court concluded that only certain types of provisions in these bilateral agreements are contrary to EU law, and ruled for the infringement of the external competence of the Community and the infringement of the right of establishment.11
a. Infringement of the external competence of the Community
In air transport, the Community can take action that is dependent on a prior decision of the Council, but this provision does not allow for the establishment of external Community competence for the conclusion of international agreements that bind the Community. Therefore, there exists no express external competence of the Community in this regard. Nonetheless, the Court stated that international agreements could be concluded by the Community in the case of implication from the Treaty, in which case the authorization of the Community of external competence is needed for the effective use of its not yet exercised internal competence. The “Open Skies” cases, according to the Court, were not subject to a situation in which internal competence could be practiced only simultaneously with external competence. The reasoning for this is that the Council had adopted the “third package” without the necessity of concluding an air transport agreement with the US. Following the case-law in which common rules are laid down by the Community, the Member States are indeed not qualified to enter into bilateral agreements and obligations with third countries outside of the Union, if these agreements are incompatible with these common rules. This means that the Community alone is eligible to such obligations in the case where international commitments are entirely or largely covered by common rules.12
Regarding the scope of the regulations in each of the cases, the Court firstly examined the extent of the regulations that grant the rights to Member States to operate licenses on air carriers, established in the Community, as well as the access to intra-Community routes by Community air carriers. The Court concluded that the bilateral agreements are not part of the area that is covered by these regulations, but in fact contain rules that are directed to American carriers. Thus, they do not make an external competence for the Community. Secondly, the Court discovered that a part of the provisions for the establishment of rates and fares on intra-Community paths and the provisions for the reservation systems and airport slots allocation that exist in the other mentioned regulations apply to carriers of third non-member countries. In this case, the Community can exercise its exclusive external competences. Notwithstanding, according to the Court, the Commission had not made clear that these bilateral agreements contain commitments concerning airport slots.13
Consequently, the Court ruled that Denmark, Sweden, Finland, Belgium, Luxembourg, Austria, and Germany are liable to infringement to the external competence of the Community as regard to the common rules on air fares and rates and their establishment on intra-Community paths and reservation systems.14
1 European Commission. Background Note - The “Open Skies” Court Cases. Press corner, Memo/02/12. January 29, 2002.
3 Rodrigue, Jean-Paul. Air Freedom Right. Chapter 5 -Transportation Modes. The Geography of Transport Systems. 2020.
4 European Commission. Background Note - The “Open Skies” Court Cases. Press corner, Memo/02/12. January
5 29, 2002.
6 Guibal, Isabelle. Judgments in Cases C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 and
7 C-476/98. Press Release No 89/02. Press and Information Division. Curia Europa. November 5, 2002.
9 Council of the EU. Consolidated treaties, Charter of Fundamental Rights 2016. Treaty on the Functioning of the European Union. Art. 3, 4, 5, 6.
10 Ibid. Art. 3, 4, 207, 216.
11 Shane, Jeffrey. Associate Deputy Secretary of Transportation. Remarks on the American Var Association’s Forum on Air and Space Law. US Department of State, Archive. November 8, 2002.
12 Guibal, Isabelle. Judgments in Cases C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 and C-476/98. Press Release No 89/02. Press and Information Division. Curia Europa. November 5, 2002.
- Quote paper
- Sophia Milusheva (Author), 2020, Open Skies Cases of the European Union. An Annotation, Munich, GRIN Verlag, https://www.grin.com/document/1000028