The UK Government has referred an action for judicial review by the Air Transport Association of America and three of its members to the European Court of Justice. The action opposes UK regulations extending to US airlines in the implementation of the EU Emissions Trading Scheme.

Introduction

International aviation is governed primarily by treaties and air service agreements between different countries. These agreements set out, inter alia, rules and limitations on the types of regulations that individual countries can enforce on the airlines of other countries, thereby ensuring freedom to travel and international commerce.

In September 2009, the United Kingdom’s Aviation Greenhouse Gas Emissions Trading Scheme Regulations (the “Regulations”) came into effect, implementing a portion of the 2008 EU Directive that extends the EU Emissions Trading Scheme (ETS) to airlines. However, these Regulations did not sit well with the Air Transport Association of America (ATA), who on 16 December 2009, along with three of its member airlines, American, Continental and United, filed an application for judicial review in the United Kingdom.

Judicial Review in the United Kingdom

The application for judicial review was brought in the United Kingdom as a consequence of it being the first EU Member State to apply to airlines the Regulations implementing the EU ETS, and also due to the impending UK deadlines for challenging regulations..

Under the Regulations, aircraft operators in the United Kingdom can apply for free allocation of allowances for participation in the EU ETS, and are required to monitor and report their activities and greenhouse gas emissions from January 2010. If an aircraft operator exceeds its emissions allowance, it will be forced to buy extra carbon allowances. This has the desired effect of encouraging aircraft operators to restrict carbon emissions in order to avoid facing higher costs. Any breach of the core provisions of the Regulations will result in civil penalties.

ATA Arguments

The primary concern for the ATA is that the EU ETS may be in breach of the Article 1 of the Convention of International Civil Aviation, which states that countries have sovereignty over the airlines in their own airspace. The ATA argues, by way of example, that the EU ETS regulates US airlines in US airspace, commenting that “for a flight of a US carrier from Dallas to London the proposed legislation would regulate the emissions from that flight on the ground and as it takes off in Dallas, as it flies over Texas, Oklahoma, Missouri, Illinois, Indiana and Michigan, within US offshore territory, over Canada and the Atlantic Ocean. Thus, the [EU ETS] provisions would regulate the entire flight, even though the flight would be in EU airspace for only a tiny fraction of the journey”. The ATA therefore contends that greenhouse gas emissions by airlines should be addressed under a global approach, as opposed to by unilateral action by the UK Government or EU governments.

On 20 January 2010, the UK Government, who reportedly “firmly refutes” the judicial review, referred the matter to the European Court of Justice (ECJ). Until the matter is resolved by the ECJ, the ATA and its airlines intend to comply with all applicable requirements, albeit “under protest”.

Conclusion

While the aims of the Regulation may be legitimate, it is relatively easy to see how the arguments of the ATA and its members find favour with some. Whether the relevant EU Directive and Regulations have to be revisited lies in the hands of the ECJ, whose ruling will have profound implications for all transatlantic operators.