**MEMORIAL OF THE UNITED STATES OF AMERICA**

The United States of America hereby submits for settlement by the
Council a disagreement relating to the interpretation and application of
the Convention and its Annexes, pursuant to Article 84 of the Convention
on International Civil Aviation (the "Chicago Convention") and the Rules
of Parts I and III of the Rules for the Settlement of Differences
approved by the Council on 9 April 1957 and amended on 10 November 1975
(the "Rules").

As grounds for its disagreement, the United States of America submits
that the below named respondents, member States of the European Union,
in adopting and undertaking to apply in their territories European
Council Regulation (EC) No. 925/1999 (the "regulation"), have acted in a
manner inconsistent with Chicago Convention Articles 11, 15, 38, and 82
and Standard 1.5 in Annex 16, Volume I (aircraft noise) (3d ed. July
1993) (\"Annex 16\"), thereby raising questions of interpretation and
application of the Convention and its Annexes.

\(a\) [Identification of the Parties]{.underline}

The United States of America ("Applicant") pursues the present
disagreement against Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal,
Spain, Sweden, and the United Kingdom (\"Respondents\").

\(b\) [Authorized Agent]{.underline}

David S. Newman, U.S. Department of State, is authorized to represent
and act for the Applicant in these proceedings. All communications
relating to this case, including notice of the dates of any meetings,
should be sent to the attention of Mr. Newman to the U.S. Mission to
ICAO, 999 University Street, Montreal, PQ, Canada H3C 5H7. The telephone
number of the U.S. Mission is (514) 954-8304.

## 

##  Introduction

The International Civil Aviation Organization (\"ICAO\") has
promulgated, in Annex 16 to the Chicago Convention, uniform aircraft
noise certification standards for the entire international aviation
community. The European Council, acting unilaterally and with
discriminatory intent, adopted European Council Regulation (EC) No.
925/1999 on April 29, 1999. That regulation is inconsistent with ICAO's
noise standards in Annex 16 to the Chicago Convention, Volume I
(Aircraft Noise) and with Articles 11, 15, and 38 of the Chicago
Convention. The United States and other nations injured by the European
Union's actions have attempted unsuccessfully to resolve this dispute
with the European Union without resort to formal intervention of the
ICAO Council under Article 84 of the Chicago Convention. The EC
regulation, if it is not abrogated, will have a profoundly disruptive
and discriminatory effect on the orderly development and operation of
international civil aviation. It is therefore incumbent upon the ICAO
Council to act swiftly and decisively to find the Respondents in
violation of the Chicago Convention; order Respondents to comply with
all provisions of the Convention; and order Respondents to take
immediate steps to procure their release from their obligations under
the EC regulation.

[The international aviation community requires]{.underline}

[uniform international noise certification standards.]{.underline}

International noise certification standards developed at ICAO "are
important for the undistorted and balanced development of both the
aviation and aeronautical industries."[^1] ICAO has been the recognized
and exclusive source of international aircraft noise certification
standards since its initial adoption on April 2, 1971, of Annex 16,
pursuant to Article 37 of the Chicago Convention. Currently, the issue
of aircraft noise is a principal focus of the Committee on Aviation
Environmental Protection (CAEP). Consistently with the Chicago
Convention, including its annexes, and international practice, the CAEP
is working toward stricter aircraft noise certification standards that
are non-discriminatory, considerate of the needs of all contracting
States, and phased in to permit reasonable opportunity for the airlines
of the world to plan accordingly.

Pursuant to Article 37, States are bound \"to collaborate in securing
the highest practicable degree of uniformity\" in regulations and
standards relating to aircraft, where \"uniformity will facilitate and
improve air navigation.\" Article 37. The Respondents\' actions,
resulting in adoption of the EC regulation, represent a failure of
collaboration and are inconsistent with the on-going efforts to develop
and implement new international noise certification standards. As noted
by the President of the Council, \"\[i\]f States believe that changes to
the content or level of implementation of the Standards in Annex 16 are
necessary or desirable, they should use the multilateral mechanism of
ICAO.\" Letter dated 22 March 1999 from the President of the ICAO
Council to the President of the Council of the European Union (E/4/150)
(*See* Attachment 2).

[The EC regulation is inconsistent with the]{.underline}

[spirit and letter of the Chicago Convention.]{.underline}

The Respondents, through European Council Regulation (EC) No. 925/1999,
adopted by the European Council on April 29, 1999, violate their
international obligations under the Chicago Convention and its Annexes
which require that noise certification standards be non-discriminatory
and performance-based. The regulation limits registration and operation
in Respondents\' territories of aircraft that are in full compliance
with the most stringent international noise standards. The targeted
aircraft include aircraft modified to meet Chapter 3 noise standards by
adding "hushkits" (equipment that acts like a muffler on aircraft
engines) to quiet their engines and aircraft on which old noisy engines
have been replaced with newer, quieter engines designed with a by-pass
ratio of less than three to meet Chapter 3 standards (the "targeted
aircraft"). European Council Regulation (EC) No. 925/1999 at Article 2,
section 2 (*See* Attachment 3). The implementing provisions of the
regulation condition imposition of these restrictions on the nationality
of the aircraft.

The history of the regulation establishes that it was designed to target
U.S. aircraft. Notably, the regulation was adopted without a full
evaluation of its impact, in terms of both environmental benefits and
costs to air carriers and their users. So long as the EC regulation
remains law, its provisions have an immediate and adverse impact on
non-EU registered targeted aircraft, the airlines that operate them, the
airlines of other countries that wish to buy them, and the manufacturers
of the targeted technology. Airlines have no choice but to take account
of the regulation in making long-term decisions concerning the
acquisition, modification, positioning, operation, maintenance, and
disposition of aircraft.

[The regulation is focused more on targeting]{.underline}

[U.S. interests than on reducing airport noise.]{.underline}

Although the preamble to the regulation asserts a purpose to reduce
noise emissions at European airports, the regulation is not reasonably
tailored to meet that objective:

\- The substantive provisions of the regulation are not based upon, and
make no reference to, aircraft noise levels. Even if a hushkit could be
developed that would make old aircraft the quietest aircraft in the sky,
those hushkitted aircraft would be restricted.

\- Instead of targeting noise levels, consistently with ICAO objectives
and guidelines set forth in Annex 16, Volume I (Aircraft Noise) and
related ICAO resolutions, the regulation relies on a design standard,
intentionally targeting U.S. aircraft. The very purpose of the
regulation was described by its advocates as follows:

> It is to be feared that after 31 December 1999 hushkitted Chapter 2
> aeroplanes will be transferred from the USA to the European
> community\'s aeroplane registers. It is the danger of this that should
> be precluded with the directive/regulation here under discussion.

\"Report on the Proposal for a Council Directive on the registration and
use within the Community of certain types of civil subsonic jet
aeroplanes which have been modified and recertificated as meeting the
standards of Volume I, Part II, Chapter 3 of Annex 16 to the Convention
on International Civil Aviation,\" (3d ed. July 1993), Committee on the
Environment, Public Health and Consumer Protection European Parliament
session documents A4-0279/98 (21 July 1998), (hereinafter referred to as
the \"Report on the Proposal\"), Explanatory Statement at p.8. (*See*
Attachment 4).

By targeting U.S. aircraft, and their transfer to airlines of other
countries, the regulation minimizes or avoids adverse impact on owners
and operators of aircraft of Respondents' registries. However, the
regulation does harm manufacturers of the targeted technology, the
current owners of aircraft relying on that technology, and the airlines
of other countries that are potential purchasers of the targeted
aircraft. As a result, the regulation impairs the ability of non-EU
airlines, particularly smaller airlines, to economically achieve a fully
Chapter 3-compliant fleet.

[The regulation distorts the resale market for targeted
aircraft.]{.underline}

The regulation causes further distortion of the international aviation
system by enhancing the value of older aircraft on Respondents\'
registries, at the expense of comparable aircraft on other registries,
and by coercing purchasers of these aircraft to register them on one of
Respondents\' registries. This occurs because a purchaser of aircraft
employing the targeted technology generally may not operate the aircraft
into Europe after April 1, 2002, unless he purchases an aircraft that
was on one of Respondents\' registries and causes the aircraft to remain
on one of those registries.

As a result, any purchaser that might desire to operate into
Respondents\' territories aircraft that it purchases employing the
targeted technology into Europe:

\(1\) is improperly encouraged to purchase aircraft already on one of
Respondents\' registries, rather than aircraft of any other nationality,
and would be forced to pay a premium price for such an aircraft; and

\(2\) if purchasing aircraft on one of Respondents\' registries, is
encouraged to keep the aircraft on that registry, regardless of the
nationality of the purchaser.

This market distortion highlights the discriminatory and protectionist
nature of the regulation.

\(c\) [Statement of Facts]{.underline}

1\. The Applicant and the Respondents are parties to the Chicago
Convention.

2\. On April 29, 1999, the Council adopted Council Regulation (EC) No.
925/1999. The regulation limits access to European airports by aircraft
that \"have been modified to meet Chapter 3 standards either directly
through technical measures or indirectly through operational
restrictions,\" excluding aircraft \"completely re-engined with engines
having a by-pass ratio of three or more.\" Regulation, Article 2 section
2, at Attachment 3.

3\. These restrictions will preclude certain targeted aircraft from
being registered on Respondents\' registries or from operating at
Respondents\' airports, based on their State of registration and place
of operation prior to application of the regulation. Also, the
regulation discriminates in favor of targeted aircraft of European
ownership that transfer between Respondents\' registries, or between
Respondents\' registries and other registries, in conjunction with a
lease. Specifically, pursuant to the regulation:

> a\. As from May 4, 2000, Respondents must refuse registration in their
> States of targeted aircraft, unless the aircraft continuously has been
> registered in any Respondent State since May 4, 2000. Regulation,
> Article 3 sections (1) and (2);
>
> b\. As from April 1, 2002, Respondents must deny access to their
> airports to targeted aircraft not on a Respondent\'s registry, unless
> the aircraft continuously has been on the same State registry since
> May 4, 2000, and was operated into the EU between April 1, 1995 and
> May 4, 2000. Regulation, Article 3, section (3).
>
> c\. Targeted aircraft registered in any Respondent State may continue
> to operate into any of Respondents\' airports, regardless of a
> transfer of state of registration, provided the transfer is between
> Respondent States. Regulation, Article 3, section (2); and
>
> d\. Respondents may grant exemptions from the regulation's
> restrictions for leased aircraft removed from one of Respondents\'
> registries on which it was registered during the six months prior to
> the date of application of the regulation, provided ownership of the
> aircraft remains in a Respondent State. Regulation, Article 4, section
> (3).

4\. The regulation was designed specifically to restrict U.S. aircraft
using hushkits, an apparatus that acts like a muffler on aircraft
engines, to quiet their engines[^2] and aircraft whose old noisy engines
have been replaced with new quieter engines designed with a by-pass
ratio of less than three. Regulation at Article 2, section 2.

5\. The regulation imposes these restrictions in spite of the fact that
the targeted aircraft have been certificated by Respondents and accepted
by other governments as being in full compliance with the most stringent
international noise standards. Targeted aircraft, including re-engined
aircraft and aircraft fitted with hushkits, have been certificated by
the United States Federal Aviation Administration ("FAA") as compliant
with Chapter 3 noise standards.[^3]

6\. The regulation discriminates among targeted aircraft on the basis of
the aircraft\'s nationality, past and present. For example, a targeted
aircraft transferred to or from a non-Respondent registry after May 4,
2000 loses its ability to operate into Respondents\' territories;
whereas, the same aircraft transferred between any of Respondents\'
registries would not be restricted.

7\. The FAA has granted Chapter 3 noise certifications to U.S.
registered aircraft that have been re-engined with Pratt & Whitney
JT8D-200 series engines that have a by-pass ratio of less than three, as
well as to European manufactured Rolls Royce TAY 651-54 engines and
engines manufactured by CFM International (a U.S./French joint venture),
which have by-pass ratios greater than three. *See* Attachment 5. The EC
regulation\'s standard for by-pass ratio would cause the regulations
restrictions to hit only the U.S. manufactured Pratt & Whitney engines.
*See* Regulation, Article 2.

8\. The Regulation targets recertificated aircraft re-engined with
engines having a by-pass ratio of less than three, but does not affect
other aircraft built with engines having a by-pass ratio of less than
three, such as the MD-80. *See* Regulation, Article 2.

9\. Engine by-pass ratio is not a test criterion for noise certification
under Annex 16.

10\. Respondents have recognized FAA aircraft noise certifications on
U.S. registered aircraft, thereby acknowledging that the FAA
certifications standards, including its noise certification of
hushkitted and re-engined aircraft, are at least equal to the applicable
Standards in Annex 16, Volume I, Chapter 3. *See* Attachments 6, 7. In
fact, the EU has acknowledged expressly that hushkitted aircraft meet
the standards for Chapter 3. *See* Report on the Proposal, Attachment 4,
Explanatory Statement at p.7 (\"hushkitted aeroplanes only just satisfy
the standards for Chapter 3....\").

\(d\) [Supporting Data]{.underline}

1\. A copy of European Council Regulation (EC) No. 925/1999 is
Attachment 3.

2\. An affidavit of Thomas L. Connor, Manager of the Noise Division of
Environment and Energy at the FAA, is Attachment 5. The affidavit
discusses the noise certification process, identifies the equipment and
manufacturers of equipment targeted by the Regulation, and, through
copies of portions of supplemental type certificates (STC), establishes
that FAA has granted noise certifications to targeted aircraft.

3\. Attachment 6 hereto includes portions of STCs for FAA approved
hushkits and an FAA Approved Airplane Flight Manual Supplement to Boeing
727-200 Airplane Flight Manual relating to installation of Pratt &
Whitney Internal Exhaust Gas Mixer Noise Reduction Kit. The attached
official documentation reflects that aeronautical authorities in the
United Kingdom and France have accepted aircraft so modified for
operation in the territories of the U.K. and France.

4\. An affidavit of Kenneth R. McGuire, President of Burbank
Aeronautical Corporation II (\"BAC II\"), is Attachment 7. BAC II is a
holder of STCs issued by the FAA for certain Stage 3 hushkit
modifications. The affidavit discusses the FAA noise certification
process and establishes that hushkitted aircraft that are targeted by
the Regulation already have been permitted by Respondents to operate in
their territories.

\(e\) [Statement of Law]{.underline}

A principal objective of the Chicago Convention is to allow
international air transport services to be \"established on the basis of
equality of opportunity and operated soundly and economically.\" Chicago
Convention, preamble paragraph 3. This objective may be achieved only if
States do not discriminate on the basis of nationality and they do not
deviate from international standards. The prohibition against
discriminating on the basis of the nationality of aircraft is most
clearly set out in Articles 11 and 15 of the Convention. Those Articles
prohibit States from relying upon the State of registration of aircraft
as a basis for discriminating, either in the context of promulgating
laws affecting international civil aviation or in permitting access to
their public airports. *See* Chicago Convention Articles 11 and 15.[^4]

Under the Convention, States also undertake \"to collaborate in securing
the highest practicable degree of uniformity in regulations ... in all
matters in which such uniformity will facilitate and improve air
navigation.\" Chicago Convention Article 37. Unquestionably, noise
regulations fall within the category of matters requiring such
collaboration. Nevertheless, the Convention anticipates that there will
be times when it is necessary for a contracting State to adopt
regulations or practices differing from the international standards.
Accordingly, Article 38 of the Convention sets out guidelines for States
deviating from the international standard, including the obligation to
notify ICAO immediately.

In adopting a discriminatory, design-based standard, Respondents have
disregarded this framework and have violated the Convention. The
Convention provides no defense to the Respondents\' violation of the
prohibition on discriminating on the basis of aircraft nationality.
However, if a contracting State meets the standards of Article 38 and
must adopt noise certification requirements stricter than, or in
addition to, the international standard, there is a procedure for it to
do so. It must, however, give notice to ICAO of that difference, in
accordance with Article 38 of the Chicago Convention. Respondents have
failed to give such notice.[^5]

A. [The Regulation Violates Articles 11 and 15 of the
Convention]{.underline}

[by Discriminating on the Basis of Aircraft Nationality.]{.underline}

Articles 11 and 15 of the Chicago Convention prohibit States from
discriminating among aircraft on the basis of nationality in allowing
access to their airports and airspace or in applying their laws relating
to operation and navigation of aircraft. Article 11 provides:

> Subject to the provisions of this Convention, the laws and regulations
> of a contracting State relating to the admission to or departure from
> its territory of aircraft engaged in international air navigation, or
> to the operation and navigation of such aircraft while within its
> territory, shall be applied to the aircraft of all contracting States
> without distinction as to nationality, and shall be complied with by
> such aircraft upon entering or departing from or while within the
> territory of that State.

Article 15 provides, in pertinent part:

> Every airport in a contracting State which is open to public use by
> its national aircraft shall likewise, subject to the provisions of
> Article 68, be open under uniform conditions to the aircraft of all
> the other contracting States.

The regulation is inconsistent with Article 11 of the Convention,
because it distinguishes among aircraft, granting or denying the ability
to operate within Respondents\' territory, based upon the nationality of
the aircraft. *See* Regulation, Article 3. For example, under the
regulation, a targeted aircraft that transfers registries after May 4,
2000, will be excluded from Respondents\' airports, but not if both the
old and new registries were in Respondents\' states. Thus, the
Respondents will inquire into the past and present nationalities of
aircraft and will discriminate against aircraft with similar noise
levels, depending upon their nationalities at specified times.

Under the regulation, a targeted aircraft\'s transfer of registries
between the United States and Canada would result in an aircraft losing
its right to operate into Respondents\' airports, whereas, a similar
aircraft transferred between two Respondent States could continue to
operate into any of Respondents\' airports. *See* Regulation, Article 3.
Consequently, a U.S. registered targeted aircraft sold to, and
re-registered in, a third country after May 4, 2000, would not be
permitted to operate into Respondents\' airports after April 1, 2002.

Moreover, pursuant to Article 15, contracting States may not invoke a
condition to deny access to its airports by aircraft of foreign
registry, unless those conditions are applicable on a uniform basis to
national aircraft. The regulation violates that provision, because it
constitutes a condition on access to Respondents\' airports that is not
applied on a uniform basis to aircraft of all nationalities. The
regulation targets certain design standards and denies access to its
airports by targeted aircraft not on a Respondent\'s registry, in
situations where access would be permitted for aircraft that were on any
of Respondents\' registries. For example, targeted aircraft of
Respondents\' registries may be transferred freely among those
registries and continue to operate into any of Respondents\' airports.
However, if a U.S. airline purchased a targeted aircraft from an airline
of any Respondent after May 4, 2000, the aircraft could not operate into
any of Respondents\' airports after April 1, 2002.

### The Discriminatory Nature of the Regulation is 

### Demonstrated by its Disparate Impact on U.S. Interests

As established above, the regulation discriminates explicitly on the
basis of aircraft nationality, in violation of Articles 11 and 15 of the
Convention. However, impermissible discrimination also has been
interpreted, in the context of civil aviation, to include disparate
impact, in addition to direct discrimination. *See* Award on the First
Question, U.S./U.K. Arbitration Concerning Heathrow Airport User Charges
(November 1992), at pages 324-26. Unpublished (on file in the Office of
the Legal Adviser, U.S. Department of State) (hereinafter
\"Award\")(*See* Attachment 8).[^6]

In the U.S./U.K. Arbitration, the arbitral tribunal rejected the
argument that the disputed pricing structure was non-discriminatory,
because, objectively, airlines of each side were subject to the same
rate schedule. Rather, the Tribunal found \"nothing in Article 10(2)
\[user charges provision of the bilateral agreement\] or, indeed, in
Article 15 of the Chicago Convention on which it is based, to support
the proposition that discrimination need be assessed only by reference
to \"overt\" behavior, \"which may, in fact, mask actual discrimination,
when other operational factors are taken into account....\"[^7] Award,
ch. 8, at 324-25, para 7. *See* Attachment 9. The Tribunal further
concluded that \"an examination of potentially discriminatory practices
requires more than a superficial comparison of the schedule of charges
on a flight by flight basis; rather, it mandates a closer inquiry into
the overall effect of charges and related rules....\" *Id.* at 326.

Given the clear evidence in the legislative history of the regulation of
the EU intent to target U.S. hushkitted aircraft, and the effect of the
regulation on U.S. interests, Respondents\' violation of the
non-discrimination provisions of the Chicago Convention is established
by the disparate impact the regulation has on U.S. interests.

B. [Respondents Have Failed to Comply]{.underline}

[with Article 38 of the Chicago Convention.]{.underline}

The Respondents have failed to comply with the requirements of Article
38 of the Convention, because they have adopted a regulation
inconsistent with international standards, without immediately notifying
ICAO of the differences between their own practice and that established
by the international standard. Pursuant to Article 37 of the Convention,
States undertake:

> to collaborate in securing the highest practicable degree of
> uniformity in regulations ... in relation to aircraft ... in all
> matters in which such uniformity will facilitate and improve air
> navigation.

Pursuant to Article 38:

> Any State which finds it impracticable to comply in all respects with
> any such international standard or procedure ... or which deems it
> necessary to adopt regulations or practices differing in any
> particular respect from those established by an international
> standard, shall give immediate notification to the International Civil
> Aviation Organization of the differences between its own practice and
> that established by the international standard.

ICAO\'s global standards for aircraft noise certification appear in
Volume I of Annex 16 to the Chicago Convention. Those standards dictate
that the noise evaluation measure for subsonic jet aeroplanes "shall be
the effective perceived noise level." Annex 16, Volume I, Standard
3.2.1.1. (*See* Attachment 9). This measurement is to be in EPNdB
(Effective Perceived Noise level in decibels) as described in Appendix 2
to Annex 16, Volume I. Thus, ICAO's Chapter 3 standards are based on the
acoustic performance of the aircraft. The standards include procedures
and guidelines for noise measurement, testing, and certification. *See*
Annex 16, Volume I, Chapter 3 (Attachment 9).

The EC regulation sets out noise standards based upon whether the
aircraft has been modified to meet Chapter 3 standards and whether it
has been recertificated. In conjunction with these tests, the regulation
references specific design standards. Annex 16 does not establish noise
standards based on whether aircraft have been modified or based upon any
aircraft design specifications.[^8] Thus, the standards that the
Respondents are bound to implement constitute differences from the
international standards set out in Annex 16.

There can be no question but that the promulgation of noise standards
constitutes a matter in which uniformity would facilitate and improve
air navigation, within the meaning of Article 37. ICAO has, in fact,
long been the recognized forum for setting international noise
certification standards for aircraft. Whereas, the Respondents, through
the EU, have acknowledged their regulation as a new environmental
standard for aircraft;[^9] nevertheless, they have failed to comply with
the requirement of Article 38 to notify their difference to ICAO.

The regulation already has been challenged in Europe as an unjustified
departure from international standards - and the High Court of Justice
in the United Kingdom supported that challenge. In the case of *Regina
v. Secretary of State for the Environment, Transport and Regions, ex
parte Omega Air Limited* (UK High Court of Justice November 25, 1999)
(h*ereinafter referred to as the \"Omega\"* case at Attachment 11), the
High Court of Justice noted serious questions as to the validity of the
regulation. The applicant in that case, an Irish company engaged in
trading in aircraft and engine refurbishment, re-engined a number of
Boeing 707 aircraft with engines having a by-pass ratio (BPR) of less
than three. The applicant sought the court\'s referral to the European
Court of Justice (ECJ) for annulment of Council Regulation EC No.
925/1999, with respect to its restrictions linked to engine by-pass
ratio. The Court noted that the regulation would prevent Omega\'s
re-engined aircraft from being operated in the EU, thus making them
commercially nonviable for potential customers. *Omega* at 4.

The *Omega* Court generally found in favor of the Applicant, referring
to the ECJ questions relating to the validity of the regulation. *Omega*
at 33. In reaching that conclusion, the Judge made a preliminary finding
that the international standard for aircraft noise is based on decibel
levels and the regulation fails adequately to explain its reliance on
by-pass ratio. *Id.* at 17. Reviewing both ICAO standards and Article 2
of the WTO Agreement on Technical Barriers to Trade, which establishes
rules against technical barriers to trade, the Judge determined that the
regulation requires explanation for moving from a decibel level related
test to a by-pass ratio method. *Id.* at 13-17. Further, the Judge noted
the need for some rationale in support of the specific by-pass ratio
chosen. *Id*. at 17. The Judge noted \"his own view\" that the
regulation seems wholly defective for these reasons. *Id.* at 17.

In accordance with ICAO procedures, the State of Registry of an aircraft
relies upon Annex 16 noise evaluation standards in granting or
validating noise certification of an aircraft. An aircraft that complies
with requirements that are at least equal to the Annex 16 standards must
be certificated. Annex 16, Volume I, Standard 1.2

C. [Respondents Violated Annex 16, Volume I, Standard 1.5]{.underline}

The EC regulation also violates the Respondents\' obligation, set forth
in Annex 16, to recognize the noise certifications of other States, so
long as the other State's certification standards at least meet the
standards in Annex 16. The obligation of contracting States to recognize
the noise certification of other contracting States is set out in Annex
16:

> Contracting States shall recognize as valid a noise certification
> granted by another Contracting State provided that the requirements
> under which such certification was granted are at least equal to the
> applicable Standards specified in this Annex.

Annex 16, Volume I, Standard 1.5. (See Attachment 9). The EC regulation
compels Respondents to prohibit operation into their territories by some
U.S. registered aircraft that have been granted noise certification in
accordance with ICAO Standards; whereas, Annex 16, Volume I, Standard
1.5 obligates Respondents to open their airports to all aircraft so
certificated. Thus, the EC regulation\'s imposition of additional tests
(including whether the aircraft has been recertificated, modified, or
transferred between registries) in the context of regulating noise, for
purposes granting access into Respondents\' airports, violates Annex 16,
Volume I, Standard 1.5.

The obligation of a State to recognize a noise certification means that
the State into which the certificated aircraft seeks to operate cannot
deny access to its airspace or airports on the basis of some additional
noise based requirement. Except to the extent that a State has, in
accordance with the requirements of the Convention, notified a
difference to ICAO, the obligation States incur under Annex 16, Volume
I, Standard 1.5 may not be qualified or modified through legislation or
administrative regulations enacted by the individual State. *See British
Caledonian Airways Ltd. v. Bond*, 665 F.2d 1153, 1161 (D.C. Cir 1981)
(interpreting Article 33 of the Convention, which employs language
equivalent to that in Standard 1.5 recognizing certification granted by
other States party to the Chicago Convention) (*See* Attachment 12).

In the *British Caledonian* case, the British airline was joined by
Swissair, Balair AG, Lufthansa, and Alitalia in challenging an order
issued by the FAA prohibiting the operation of all Model DC-10 airplanes
within the airspace of the United States, including aircraft registered
in other countries. The order, which addressed an apparent safety
hazard, was issued following a DC-10 crash that killed 271 people and
following findings by the U.S. National Transportation Safety Board
(NTSB) to justify grounding the aircraft.

The matter came before U.S. courts on the argument that FAA violated
U.S. law, the predecessor to 49 U.S.C. § 40105(b)(A), which obligated
the FAA Administrator to comply with U.S. international obligations. The
airlines argued, and the court found, that absent the Administrator
raising the question of whether the foreign governments that had
certificated the DC-10s had failed to observe the minimum safety
standards referred to in Article 33 and set forth in Annex 8, the FAA
could not, consistently with Article 33, question the airworthiness
judgment of the country of registry. 665 F.2d at 1162.[^10]

Notably, the EU rule is not predicated on any finding that the targeted
aircraft, whether modified in the United States or elsewhere, fail to
meet the standards of Chapter 3 of Annex 16, Volume I. Neither has any
Respondent challenged the targeted aircraft's compliance with
international standards. To the contrary, the regulation implicitly
recognizes the targeted aircraft's compliance with Chapter 3 standards,
by permitting some of the targeted aircraft to continue operating in the
Respondents\' territories without restriction. Furthermore, Respondents
have consistently recognized U.S. aircraft noise certification,
including Chapter 3 noise certification of U.S. hushkitted and
re-engined aircraft, in accordance with their obligation to do so under
Standard 1.5 of Annex 16, Volume I. (*See* Attachment 9).

The EC regulation creates two classes of aircraft within Annex 16,
Volume I, Chapter 3. While the aircraft in both classes comply with the
noise requirements in that Chapter, one class could be registered and
operated in Respondents\' territories after April 2002, whereas the
other class could not. These classifications are based upon criteria
that have no relevance to the standards in Annex 16, including: whether
the aircraft has been recertificated, whether the aircraft has been
operated in Respondents\' territories, and where the aircraft has been
registered. These classifications are incompatible with the requirements
of Annex 16.[^11]

For these reasons, the EC regulation differs in particular respects from
international standards and, therefore, Respondents were obligated,
under Article 38 of the Convention, to give immediate notice to ICAO of
the differences between their practice and the international
performance-based standard, once the EC regulation became law on May 4,
1999.

Furthermore, by assuming an obligation to exclude from their airports,
on the basis of noise, aircraft certificated by the United States as
compliant with applicable international noise standards, Respondents
violate their obligation under Annex 16, Volume I, Standard 1.5 to
recognize the noise certifications of other States.

D. [Suspension of the Regulation Neither Excuses]{.underline}

[Respondents' Breach nor Justifies Delay of a Review]{.underline}

The regulation, although not yet applied, has been incorporated into law
and represents a binding undertaking of the Respondents. In that regard,
the Respondents stand in violation of Article 82 of the Convention,
which provides, in pertinent part:

The contracting States accept this convention as abrogating all
obligations and understandings between them which are inconsistent with
its terms, and undertake not to enter into any such obligations and
understandings.

The regulation constitutes a set of obligations and understandings
undertaken by Respondents that are inconsistent with Articles 11, 15,
and 38 and Annex 16 of the Convention. Therefore, the Respondents
presently are in breach of the Convention.

Even before its application, the regulation has caused significant harm
to operators of U.S. aircraft as well as to U.S. manufacturers of
hushkits and targeted engines. This harm is suffered because the
regulation forces U.S. airlines and U.S. aircraft to anticipate, in all
decisions relating to acquisition, modification, positioning, operation,
maintenance, and disposition of aircraft, the discriminatory limitations
on their access to Respondents' airports. U.S. airlines are being
prevented from making the decisions most appropriate for their purposes,
even among options that would comply with all applicable international
standards.

Furthermore, there is no just reason for delaying a legal review of the
regulation. Just as was found in the *Omega* decision, the parties to
this dispute and all States affected by the regulation \"should be able
to act with certainty in regard to the legal efficacy of the
Regulation.\" *Omega* at 6. (Attachment 11). The judge in *Omega*
discussed, in this context, the case of *The Queen v. Secretary of State
for Health, ex parte Imperial Tobacco Limited* \[ECJ 1991\], where the
European Court of Justice held, in light of existing uncertainty as to
whether a particular directive could be made legally effective, that the
Court \"should be prepared to grant declaratory relief in respect of the
intention and obligation of the Government of the United Kingdom to
implement the requirements of the directive...\" *Imperial Tobacco*,
EuLR page 582, *quoted in Omega* at 4-5. Likewise here, Respondents are
obligated to implement the Regulation, which is now law, and thus, this
matter is ripe for review.

\(f\) [Requested Relief]{.underline}

The Applicant respectfully requests that the Council: (1) determine that
Respondents are in violation of Articles 11, 15, 38, and 82 of the
Convention and Annex 16, Volume I, Standard 1.5; (2) order Respondents
to comply with all provisions of the Convention; (3) order Respondents
to take immediate steps to procure their release from their obligations
under the EC regulation; and (3) grant the Applicant such other and
further relief as the Council deems proper and just.

\(g\) [Report of Negotiations]{.underline}

Negotiations to settle the present disagreement have taken place between
the parties but have not been successful. Protracted negotiations have
failed to bring the parties near to agreement, despite engagement at the
highest political levels.

> David S. Newman
>
> Agent for the United States of America

[^1]: Communication from the Commission to the Council, the European
    Parliament, the Economic and Social Committee and the Committee of
    the Regions, Air Transport and the Environment Toward Meeting the
    Challenges of Sustainable Development, Brussels, 30 November 1999,
    COM (1999) at paragraph 11. (*See* Attachment 1). In this
    Communication, the Commission suggested the following guidelines for
    when an individual EU airport might be permitted to adopt more
    stringent rules:

    > With a view to safeguarding internal market requirements and
    > undistorted competition, it is important, however, that
    > entitlement for introduction of more stringent rules must be based
    > on fulfilment of clear and objective criteria constituting an
    > exceptional situation and on use of common benchmarks for the
    > determination of the noise impact on the environment of the
    > airport. Such benchmarking will be greatly faciliated by the
    > introduction of common indicators and assessment methods as
    > discussed above.

    Attachment 1 at para. 62. Under the EU\'s own guidelines, the EC
    regulation would be characterized as one that disrupts the market
    and distorts competition, because, contrary to these guidelines, the
    EC regulation lacks a clear objective, relies on design standards,
    and disregards the need for common benchmarks for determining noise
    impact.

[^2]: While the regulation on its face would appear to cover any
    aircraft modified to meet Chapter 3 standards, it is clear from the
    history of the regulation that its target was hushkitted aircraft.
    *See* Report on the Proposal, Attachment 4 , at p. 8 (\"The proposal
    is thus intended to prevent the re-registration of noisy aeroplanes
    (i.e. hushkitted Chapter 2 aeroplanes.\") and at 9 (\"it is to be
    feared that, by the time the directive/regulation enters into force,
    i.e. 1 April 1999, recertificated subsonic jet aeroplanes
    (=hushkitted aeroplanes) may be registered in the EU or third
    countries in increased numbers.\"); \"The aim of the proposed
    directive/regulation is to prevent an increase in noise pollution
    due to recertificated civil subsonic jet aeroplanes (=hushkitted
    Chapter 2 aeroplanes).\")

[^3]: FAA\'s noise compliance findings are made in accordance with 14
    CFR part 36, pursuant to U.S. law. The FAA\'s test and analysis
    procedures used to measure noise levels and to grant Stage 3 noise
    certification under 14 CFR Part 36 are essentially equivalent to the
    Chapter 3 standards in Annex 16

[^4]: Article 17 of the Convention provides that \"aircraft have the
    nationality of the State in which they are registered.\"
    Accordingly, \"nationality\" and \"state of registration\" are used
    interchangeably in this Memorial.

[^5]: The procedure for notifying differences under Article 38 is
    expressly limited to departures from international standards and
    procedures. *See* Article 38 (Departures from international
    standards and procedures). Clearly, States cannot violate the
    provisions of the Convention, such as the non-discrimination
    provisions of Articles 11 and 15, and invoke an Article 38 notice as
    a defense.

[^6]: Award on the First Question, U.S./U.K. Arbitration Concerning
    Heathrow Airport User Charges. Unpublished (on file in the Office of
    the Legal Adviser, U.S. Department of State) (hereinafter
    \"Award\"). Relevant portions appended at Attachment 8. Discussed in
    S.M. Witten, \"The U.S.-U.K. Arbitration Concerning Heathrow Airport
    User Charges,\" 89(1) *Am. Jrnl. Intl. Law* 174-192 (1995) and J.
    Skilbeck, \"The U.S./U.K. Arbitration Concerning Heathrow Airport
    Charges,\" 44(1) *The International and Comparative Law Quarterly,*
    pp. 171-179 (1995).

[^7]: ^?^ In the Heathrow Arbitration, the arbitral tribunal also
    considered whether the U.K.\'s failure to monitor \"whether the
    operation of the sharply differentiated peak/off-peak charging
    system \[for landing fees\] was in practice working inequitably, to
    the detriment of the U.S. airlines, by reason of British Airways
    having some advantage, that was denied to Pan Am/TWA, in relation to
    re-scheduling flights out of terminal peak hours.\" Award, ch. 6, at
    207, para 11.2.37 (*See* Attachment 8).

[^8]: Annex 16, Chapter 3 relies exclusively on aircraft performance
    levels. Similarly, Chapter 2 of Annex 16, volume I, adopted in 1977,
    also relied on aircraft performance for purposes of determining
    which aircraft might be restricted under that standard. However,
    Chapter 2 also made reference to aircraft engine by-pass ratio, but
    solely in the context of exempting such aircraft from the noise
    standards. (*See* Attachment 9) The provision did not establish a
    precedent for restricting aircraft that meet the international noise
    standard.

[^9]: The European Union published in its web page, at
    www.eurunion.org/news/press/1999, under \"The European Union Press
    Releases, on March 29, 1999, as EU PR 14/99, a press release
    advising that \"This legislation places the EU at the forefront of
    elaborating the most stringent environmental standards for aircraft
    which is the normal responsibility of ICAO.\" *See* Attachment 10
    (\"Press Release\").

[^10]: The *British Caledonian* case involved a violation of Article 33
    of the Convention; whereas, the present disagreement concerns a
    violation of Standard 1.5 of Annex 16 to the Convention. While the
    Convention provides no justification for non-compliance with
    provisions of the Convention itself, the Convention does provide
    justification and procedures for non-compliance with standards and
    the Annexes in Articles 37 and 38. Accordingly, if the Respondents
    had appropriate justification and followed Article 38 procedures for
    notifying differences, their non-compliance with Standard 1.5 of
    Annex 16 would not constitute a breach.

[^11]: *See generally* ICAO Document C-Min 156/16 19/3/99 Council -
    156th Session, Summary Minutes of the Sixteenth Meeting (The Council
    Chamber, Friday 19 March 1999, at 1000 hours) at p.8, para 23
    (comments of D/LEB) (Attachment 13).