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Language of document : ECLI:EU:C:2011:864

Case C-366/10

Air Transport Association of America and Others

Secretary of State for Energy and Climate Change

(Reference for a preliminary ruling from the High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court))

(Reference for a preliminary ruling – Directive 2003/87/EC – Scheme for greenhouse gas emission allowance trading – Directive 2008/101/EC – Inclusion of aviation activities in that scheme – Validity – Chicago Convention – Kyoto Protocol – EU-United States Air Transport Agreement – Principles of customary international law – Legal effects thereof – Whether they may be relied upon – Extraterritoriality of European Union law – Meaning of ‘charges’, ‘fees’ and ‘taxes’)

Summary of the Judgment

1. International agreements – Agreements of the European Union – Effect of an agreement in the European Union where no express provision of the agreement prescribes its effect

(Arts 216(2) TFEU and 267 TFEU)

2. Preliminary rulings – Jurisdiction of the Court – Examination of the validity of a directive in the light of an international treaty – Chicago Convention on International Civil Aviation – Convention not binding upon the European Union – Examination precluded

(Arts 267 TFEU and 351 TFEU; European Parliament and Council Directive 2008/101)

3. Preliminary rulings – Jurisdiction of the Court – Examination of the validity of a directive in the light of an international treaty – Kyoto Protocol to the United Nations Framework Convention on Climate Change – Protocol binding upon the European Union – Provisions not unconditional and sufficiently precise – Examination precluded

(Art. 267 TFEU; European Parliament and Council Directive 2008/101; Council Decisions 94/69 and 2002/358)

4. Preliminary rulings – Jurisdiction of the Court – Examination of the validity of a directive in the light of an international treaty – Air Transport Agreement concluded between the European Community and its Member States and the United States of America – Rules designed to apply directly and immediately to airlines – Examination permissible

(Art. 267 TFEU; European Parliament and Council Directive 2008/101; Decisions 2007/339 and 2010/465 of the Council and the representatives of the Governments of the Member States)

5. Preliminary rulings – Jurisdiction of the Court – Examination of the validity of a directive in the light of customary international law – Principle that a State has sovereignty over its airspace, principle that the high seas cannot be made subject to State sovereignty and principle of freedom to fly over the high seas – Examination permissible – Conditions and limits

(Art. 3(5) TEU; Art. 267 TFEU; European Parliament and Council Directive 2008/101)

6. Public international law – Principles – Principles of customary international law – Vessel on the high seas governed only by the law of its flag – Application by analogy to aircraft overflying the high seas – Precluded

7. Environment – Atmospheric pollution – Scheme for greenhouse gas emission allowance trading – Inclusion of aviation activities in that scheme – Competence of the European Union to include those activities in the light of the principles of customary international law that a State has sovereignty over its airspace, that the high seas cannot be made subject to State sovereignty, and of freedom to fly over the high seas

(Art. 191(2) TFEU; European Parliament and Council Directive 2008/101)

8. Environment – Atmospheric pollution – Scheme for greenhouse gas emission allowance trading – Inclusion of aviation activities in that scheme – Competence of the European Union to include those activities in the light of the rule of the Open Skies Agreement requiring the laws and regulations of each contracting party to be complied with

(European Parliament and Council Directive 2008/101)

9. Environment – Atmospheric pollution – Scheme for greenhouse gas emission allowance trading – Inclusion of aviation activities in that scheme – Competence of the European Union to include those activities in the light of the provisions of the Open Skies Agreement concerning customs duties, taxes and fees

(European Parliament and Council Directive 2008/101)

10. Environment – Atmospheric pollution – Scheme for greenhouse gas emission allowance trading – Inclusion of aviation activities in that scheme – Competence of the European Union to include those activities in the light of the provisions of the Open Skies Agreement concerning the environment

(European Parliament and Council Directive 2008/101)

1. In conformity with the principles of international law, European Union institutions which have power to negotiate and conclude an international agreement are free to agree with the third States concerned what effect the provisions of the agreement are to have in the internal legal order of the contracting parties. Only if that question has not been settled by the agreement does it fall to be decided by the courts having jurisdiction in the matter, and in particular by the Court of Justice, in the same manner as any question of interpretation relating to the application of the agreement in the European Union.

By virtue of Article 216(2) TFEU, where international agreements are concluded by the European Union they are binding upon its institutions and, consequently, they prevail over acts of the European Union. It follows that the validity of an act of the European Union may be affected by the fact that it is incompatible with such rules of international law. Where such invalidity is pleaded before a national court, the Court of Justice ascertains whether certain conditions are satisfied in the case before it, in order to determine whether, pursuant to Article 267 TFEU, the validity of the act of European Union law concerned may be assessed in the light of the rules of international law relied upon. First, the European Union must be bound by those rules. Second, the Court can examine the validity of an act of European Union law in the light of an international treaty only where the nature and the broad logic of the latter do not preclude this. Finally, where the nature and the broad logic of the treaty in question permit the validity of the act of European Union law to be reviewed in the light of the provisions of that treaty, it is also necessary that the provisions of that treaty which are relied upon for the purpose of examining the validity of the act of European Union law appear, as regards their content, to be unconditional and sufficiently precise.

(see paras 49-54)

2. Although the first paragraph of Article 351 TFEU implies a duty on the part of the institutions of the European Union not to impede the performance of the obligations of Member States which stem from an agreement prior to 1 January 1958, such as the Chicago Convention on International Civil Aviation, that duty of the institutions is designed to permit the Member States concerned to perform their obligations under a prior agreement and does not bind the European Union as regards the third States party to that agreement. Consequently, it is only if and in so far as, pursuant to the EU and FEU Treaties, the European Union has assumed the powers previously exercised by its Member States in the field to which that international convention applies that the convention’s provisions would have the effect of binding the European Union.

Whilst it is true that the European Union has acquired certain exclusive powers to agree with third States commitments falling within the field of application of the European Union legislation on international air transport and, consequently, of the Chicago Convention, that does not mean that it has exclusive competence in the entire field of international civil aviation as covered by that convention.

Consequently, since the powers previously exercised by the Member States in the field of application of the Chicago Convention have not to date been assumed in their entirety by the European Union, the latter is not bound by that convention. It follows that the validity of Directive 2008/101 amending Directive 2003/87 so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community cannot be examined by the Court in the light of the Chicago Convention as such in the context of a reference for a preliminary ruling.

(see paras 61-62, 69, 71-72)

3. It is apparent from Decision 94/69 concerning the conclusion of the United Nations Framework Convention on Climate Change and Decision 2002/358 concerning the approval, on behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfilment of commitments thereunder that the European Union has approved the Kyoto Protocol. Consequently, its provisions form an integral part of the legal order of the European Union as from its entry into force.

However, even though the Kyoto Protocol imposes quantified greenhouse gas reduction commitments with regard to the commitment period from 2008 to 2012, the parties to the protocol may comply with their obligations in the manner and at the speed upon which they agree. A provision such as Article 2(2) of the Kyoto Protocol, which states that the parties thereto are to pursue limitation or reduction of emissions of certain greenhouse gases from aviation bunker fuels, working through the International Civil Aviation Organisation, cannot, as regards its content, be considered to be unconditional and sufficiently precise so as to confer on individuals the right to rely on it in legal proceedings in order to contest the validity of Directive 2008/101 amending Directive 2003/87 so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community. Consequently, the Kyoto Protocol cannot be relied upon in the context of a reference for a preliminary ruling for the purpose of assessing the validity of Directive 2008/101.

(see paras 73, 76-78)

4. The Air Transport Agreement concluded between the European Community and its Member States, of the one part, and the United States of America, of the other part (‘the Open Skies Agreement’), has been approved on behalf of the European Union by Decisions 2007/339 and 2010/465 on the signature and provisional application of, respectively, that agreement and the protocol to amend it. Consequently, its provisions form an integral part of the legal order of the European Union as from its entry into force.

Airlines established in the territory of the parties to the Open Skies Agreement are specifically addressed by the agreement. Certain provisions of the agreement are designed to confer rights on those airlines directly, whilst others are designed to impose obligations upon them.

The fact that the parties to the Open Skies Agreement have established a special institutional framework for consultations and negotiations between them in relation to the implementation of that agreement is not sufficient to exclude all judicial application of the agreement. Therefore, since the Open Skies Agreement establishes certain rules designed to apply directly and immediately to airlines and thereby to confer upon them rights and freedoms which are capable of being relied upon against the parties to that agreement, and the nature and the broad logic of the agreement do not so preclude, the Court may assess the validity of an act of European Union law, such as Directive 2008/101 amending Directive 2003/87 so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community, in the light of the provisions of the agreement.

(see paras 79, 82-84)

5. Under Article 3(5) TEU, the European Union is to contribute to the strict observance and the development of international law. Consequently, when it adopts an act, it is bound to observe international law in its entirety, including customary international law, which is binding upon the institutions of the European Union.

Principles of customary international law, such as the principle that each State has complete and exclusive sovereignty over its airspace, the principle that no State may validly purport to subject any part of the high seas to its sovereignty and the principle of freedom to fly over the high seas, may be relied upon by an individual for the purpose of the Court’s examination of the validity of an act of the European Union in so far as, first, those principles are capable of calling into question the competence of the European Union to adopt that act and, second, the act in question is liable to affect rights which the individual derives from European Union law or to create obligations under European Union law in his regard.

When those principles are relied upon in order for the Court to determine, in the context of a reference for a preliminary ruling, whether the European Union had competence to adopt Directive 2008/101 in that it extends the application of Directive 2003/87 to aircraft operators of third States whose flights which arrive at and depart from an aerodrome situated in the territory of a Member State of the European Union are carried out in part over the high seas and over the third States’ territory, even though the principles appear only to have the effect of creating obligations between States it is nevertheless possible, in circumstances where Directive 2008/101 is liable to create obligations under European Union law as regards airlines, which are claimants in the main proceedings, that the latter may rely on those principles and that the Court may thus examine the validity of Directive 2008/101 in the light of such principles. However, since a principle of customary international law does not have the same degree of precision as a provision of an international agreement, judicial review must necessarily be limited to the question whether, in adopting the act in question, the institutions of the European Union made manifest errors of assessment concerning the conditions for applying those principles.

(see paras 101, 103, 107-110)

6. Insufficient evidence exists to establish that the principle of customary international law, recognised as such, that a vessel on the high seas is in principle governed only by the law of its flag would apply by analogy to aircraft overflying the high seas.

(see para. 106)

7. European Union law and, in particular, Directive 2008/101 amending Directive 2003/87 so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community cannot render Directive 2003/87 applicable as such to aircraft registered in third States that are flying over third States or the high seas. The European Union must respect international law in the exercise of its powers, and therefore Directive 2008/101 must be interpreted, and its scope delimited, in the light of the relevant rules of the international law of the sea and international law of the air.

In laying down a criterion for its applicability to operators of aircraft that is founded on the fact that those aircraft perform a flight which departs from or arrives at an aerodrome situated in the territory of one of the Member States, Directive 2008/101 does not infringe the principle of territoriality or the sovereignty which the third States from or to which such flights are performed have over the airspace above their territory, since those aircraft are physically in the territory of one of the Member States of the European Union and are thus subject on that basis to the unlimited jurisdiction of the European Union. Nor can such application of European Union law affect the principle of freedom to fly over the high seas since an aircraft flying over the high seas is not subject, in so far as it does so, to the allowance trading scheme. It is only if the operator of such an aircraft has chosen to operate a commercial air route arriving at or departing from an aerodrome situated in the territory of a Member State that the operator, because its aircraft is in the territory of that Member State, will be subject to the allowance trading scheme.

The fact that the operator of an aircraft is required to surrender emission allowances calculated in the light of the whole of the international flight performed or to be performed is not such as to call into question, in the light of principles of customary international law such as the principle that each State has complete and exclusive sovereignty over its airspace, the principle that no State may validly purport to subject any part of the high seas to its sovereignty and the principle of freedom to fly over the high seas, the full applicability of European Union law in the territory of the Member States. As European Union policy on the environment seeks to ensure a high level of protection in accordance with Article 191(2) TFEU, the European Union legislature may in principle choose to permit a commercial activity, in this instance air transport, to be carried out in the territory of the European Union only on condition that operators comply with the criteria that have been established by the European Union and are designed to fulfil the environmental protection objectives which it has set for itself, in particular where those objectives follow on from an international agreement to which the European Union is a signatory, such as the Framework Convention and the Kyoto Protocol.

(see paras 122-123, 125-129)

8. Directive 2008/101 amending Directive 2003/87 so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community provides that Directive 2003/87 is to apply to flights which arrive at or depart from an aerodrome situated in the territory of a Member State. Thus, since that legislation relates to the admission to or departure from the territory of the Member States of aircraft engaged in international air navigation, both European and transatlantic, it is clear from the very wording of Article 7(1) of the Air Transport Agreement concluded between the European Community and its Member States, of the one part, and the United States of America, of the other part (‘the Open Skies Agreement’) that such legislation applies to any aircraft utilised by the airlines of the other party to that agreement and that such aircraft are required to comply with that legislation. It follows that Article 7(1) of the Open Skies Agreement does not preclude the application of the allowance trading scheme set up by Directive 2003/87 to operators of aircraft, such as airlines established in the United States, when their aircraft engage in flights which arrive at or depart from an aerodrome situated in the territory of a Member State.

(see paras 134-135)

9. Unlike a duty, tax, fee or charge on fuel consumption, the scheme introduced by Directive 2003/87 establishing a scheme for greenhouse gas emission allowance trading within the Community, as amended by Directive 2008/101, apart from the fact that it is not intended to generate revenue for the public authorities, does not in any way enable the establishment, applying a basis of assessment and a rate defined in advance, of an amount that must be payable per tonne of fuel consumed for all the flights carried out in a calendar year.

Thus, it cannot be asserted that Directive 2008/101 involves a form of obligatory levy in favour of the public authorities that might be regarded as constituting a customs duty, tax, fee or charge on fuel held or consumed by aircraft operators. The fact that aircraft operators may acquire additional allowances to cover their actual emissions not only from other operators but also from the public authorities when they auction 15% of the total quantity of allowances is not in any way capable of casting doubt on that finding.

Consequently, in extending the application of Directive 2003/87 to aviation, Directive 2008/101 does not in any way infringe the obligation, applicable to the fuel load, to grant exemption, as laid down in Article 11(1) and (2)(c) of the Air Transport Agreement concluded between the European Community and its Member States, of the one part, and the United States of America, of the other part, given that the allowance trading scheme, by reason of its particular features, constitutes a market-based measure and not a duty, tax, fee or charge on the fuel load.

(see paras 143, 145-147)

10. The objective formulated in Article 25a of Directive 2003/87 establishing a scheme for greenhouse gas emission allowance trading within the Community as amended by Directive 2008/101, which seeks to ensure optimal interaction between the European Union allowance trading scheme and market-based measures that may be adopted by third States, so that those schemes are not applied twice to aircraft operating on international routes, be they registered in a Member State or in a third State, corresponds to the objective underlying Article 15(7) of the Air Transport Agreement concluded between the European Community and its Member States, of the one part, and the United States of America, of the other part (‘the Open Skies Agreement’).

Furthermore, the second sentence of Article 15(3) of the Open Skies Agreement, read in conjunction with Article 3(4) of the agreement, does not prevent the parties thereto from adopting measures that would limit the volume of traffic, frequency or regularity of service, or the aircraft type operated by the airlines established in the territory of those parties, when such measures are linked to protection of the environment. Article 3(4) of the agreement expressly provides that neither of the parties to the agreement may impose such limitations ‘except as may be required for … environmental … reasons’. Article 15(3) of the agreement, read in conjunction with Articles 2 and 3(4) thereof, provides however that, when the parties to the agreement adopt such environmental measures, they must be applied in a non-discriminatory manner to the airlines concerned.

As is apparent from the express terms of recital 21 in the preamble to Directive 2008/101, the European Union has provided for uniform and non-discriminatory application of the allowance trading scheme to all aircraft operators on routes which depart from or arrive at an aerodrome situated in the territory of a Member State. Consequently, Directive 2008/101 is not invalid in the light of Article 15(3) of the Open Skies Agreement, read in conjunction with Articles 2 and 3(4) thereof.

(see paras 151-156)