On December 21, 2011, the Court of Justice of the European Union ("CJEU") returned a ruling in the matter Air Transport Association of America, et al. vs. Secretary of State for Energy and Climate Change (C-366/10). At stake was the validity of Directive 2008/101/EC, amending Directive 2003/87/EC (establishing a scheme for greenhouse gas emission allowance trading within the European Community and amending Council Directive 96/61/EC) to extend the EU Emissions Trading Scheme to aviation activities including non-EU air carriers.

  Under the extended scheme, all flights departing from or arriving at an EU airport are subject to Directive 2008/101/EC regardless of the carrier's country of registration or the flight's point of origin or destination. Since January 1, 2012, transatlantic flights operated by U.S. companies have been accountable for all carbon dioxide emissions generated thereby, not just emissions from the legs of such flights occurring over EU territory.

This led several U.S. airline companies and trade associations to seek judicial review of the Directive's United Kingdom implementation measures in the High Court of Justice of England and Wales. The High Court decided to stay the proceedings and to refer the matter to the CJEU for a preliminary ruling.

Among the arguments raised by the claimants were that the Directive violated the Chicago Convention on International Civil Aviation, the 1997 Kyoto Protocol, and the 2007 Open Skies Agreement between the EU and the U.S. The claimants also raised a series of challenges based on international law principles, including the principle that each Member State has complete and exclusive sovereignty over its airspace, the principle that no Member State may validly purport to subject any part of the high seas to its sovereignty, and the principle that guarantees the freedom to fly over the high seas.

The CJEU found it could not examine the validity of the Directive in light of the Chicago Convention, because the powers previously exercised by the Member States under that Convention have not been assumed in their entirety by the European Union, and therefore the EU is not bound by that Convention. Similarly, the court found that the provisions of the Kyoto Protocol invoked by the claimants were not "unconditional and sufficiently precise so as to confer on individuals the right to rely on it in legal proceedings" challenging the validity of the Directive.

In contrast, the CJEU found that the Directive was subject to review under principles of international law and the Open Skies Agreement. However, the court ultimately found that the Directive did not contravene the requirements of either body of law, concluding that its examination of the Directive "disclosed no factor of such a kind as to affect its validity."

As far as the ability of the EU's legislature to regulate those parts of flights not conducted over EU airspace, the court concluded that the fact that certain activities contributing to the pollution of the air, sea, or land territory of the Member States occur partly outside that territory is not sufficient to call into question the full applicability of European Union law in that territory.