COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT pursuant to the second subparagraph of Article 251(2) of the EC Treaty concerning the common position of the Council on the adoption of a Regulation of the European Parliament and of the Council on insurance requirements for air carriers and aircraft operators

2002/0234 (COD)

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT pursuant to the second subparagraph of Article 251(2) of the EC Treaty concerning the common position of the Council on the adoption of a Regulation of the European Parliament and of the Council on insurance requirements for air carriers and aircraft operators

1- BACKGROUND

Date of transmission of the proposal to the EP and the Council (document COM(2002)521 final - C5-0455/2002] - 2002/0234(COD)): // 25 September 2002

Date of the opinion of the European Economic and Social Committee: // 26-27 February 2003

Date of the opinion of the European Parliament, first reading: // 13 May 2003

Date of transmission of the amended proposal: // 28 July 2003

Date of adoption of the common position: // 5 December 2003

2- OBJECTIVE OF THE COMMISSION PROPOSAL

Following the events of 11 September 2001, the Commission adopted a Communication on 10 October 2001 concerning the repercussions of the terrorist attacks in the United States on the air transport industry. [1] With regard to the specific problem of insurance, it undertook to examine the revision of the amounts and conditions of insurance required for the granting of operating licences in order to ensure a harmonised approach. It also took the view that Member States should verify whether third-country air carriers produce proof of minimum risk cover in accordance with internationally agreed recommendations (ECAC Resolution 25/1 of 12/2000) in the absence of Community rules.

[1] COM(2001)574 final of 10.10.2001

The Commission also considered that, as they currently stand, Community rules in the field of air carrier licensing [2] merely require air carriers to "be insured to cover liability in case of accidents, in particular in respect of passengers, luggage, cargo, mail and third parties" without, however, setting any criteria, conditions or amounts to be observed by the licensing authorities of the Member States.

[2] Council Regulation (EEC) No 2407/92 of 23 July 1992, OJ L 240, 24.8.1992, p. 1

To fill these gaps, the Commission adopted a proposal on 24 September 2002 designed to establish a legal framework setting out the conditions of insurance and minimum amounts that both Community and third country air carriers and aircraft operators have to observe at all times when they fly into, within, out of or over the Community. These insurance requirements should cover their liability vis-à-vis passengers, baggage, cargo, mail and third parties.

This proposal should provide for legal certainty vis-à-vis Community and non-Community air carriers and aircraft operators and create a level playing field by ensuring transparent, non-discriminatory and harmonised application of the minimum insurance requirements throughout the Community.

3- COMMENTS ON THE COMMON POSITION

The Council made a number of changes to the Commission's initial and amended proposals that are acceptable because they would ensure its aims were met. These changes concern the following issues:

(1) The nature of the proposal. Although the Commission's initial and amended proposals did not confuse liability regimes and insurance requirements, the Council has sought to state that in even clearer terms (Article 4(2) of the common position). Also, the recitals of the Regulation specify that, where further rules are required to establish adequate insurance for matters not covered by the Regulation, such rules can be introduced by means of subsidiarity (Article 4(2)).

(2) The general obligation of all (EU and non-EU) air carriers and aircraft operators irrespective of any leasing arrangements or cooperation (code-shares, joint operations) to be insured at all times when they fly into, within, out of or over the Community has been confirmed even though redrafted (Article 4(1)).

(3) The general obligations of all air carriers to produce evidence of valid insurance, and the obligation of Member States to ensure that no aircraft (whether operated by an air carrier or an aircraft operator) takes off from an airport on their territory which is not sufficiently insured according to the requirements set out in the Regulation (Article 8) have been confirmed even though redrafted.

(4) The insurance to cover liability in respect of passengers and baggage. The Commission's original and amended proposals stipulate that irrespective of the type of flight, commercial or private, persons on board should benefit from the same insurance cover in case of injury or death (including the destruction or loss of baggage). The Commission proposed 250 000 SDRs (approx. EUR325 000) per passenger following a resolution of the European Civil Aviation Conference (ECAC) of 2000. The Council has found it difficult to endorse that approach for economic reasons relating particularly to aircraft operators using small aircraft of low tonnage.

The text of the common position (Article 6(1)) follows the Commission approach introducing the same insurance obligation for air carriers (commercial flights) and aircraft operators (non-commercial flights) vis-à-vis passengers for all aircraft above 2.7 tonnes. Aircraft operators using aircraft of a lighter weight can benefit from national measures although these may not be below 100 000 SDRs. This differentiation has been made because of the particular economic aspects of small aircraft. The category of aircraft has been chosen to fit the needs of sports and leisure aviation using rather small aircraft. As far as the carriage of cargo is concerned, the common position adopts the approach of the 1999 Montreal Convention on that matter.

As the rationale of this particular approach is in line with the approach followed by both the European Parliament and the Council on the insurance requirements for aircraft operators using small aircraft (categories of aircraft below 25 tonnes), the Commission has been able to accept this approach.

(5) The possibility of amending the minimum insurance requirements to cover liability in respect of passengers, baggage, cargo and third parties by means of a regulatory comitology procedure as proposed by the Commission (Articles 6(5) and 7(2)).

(6) The comitology procedure is also used in exceptional cases of insurance market failure, where, in addition to its powers in application of the rules of the Treaty relating to State aid, the Commission can also decide by means of the regulatory comitology procedure on the appropriate measures regarding compliance by air carriers and aircraft operators with the requirements of the Regulation.

(7) The Council has deleted certain definitions (Article 3): "insurer", "insurance", "insurer's principal place of business", "incident", "air service", "scheduling period". The Commission has been able to accept the deletion of these definitions as the text does not deviate from established Community law in the field of the provision of financial services, i.e. Council Directives 73/239/EEC and 79/267/EEC, and because the redrafting of Articles 5 and 6 has made them superfluous. The Council has also revised the definitions of "aircraft operator", "flight" and "passenger" and has added a new definition regarding "third parties". The Commission has been able to accept these changes as the new text further clarifies the proposed definitions.

In total the European Parliament proposed 24 amendments in the opinion it adopted on 13 May 2003. The Commission was able to accept 18 of them as such, in part or in principle. The Council was able to incorporate in principle or with redrafting 16 of the European Parliament's amendments. In particular, the Council was able to endorse the objective of most of the amendments proposed by the European Parliament without necessarily using the same wording.

4- COMMISSION DETAILED COMMENTS

4.1 Amendments accepted by the Commission and incorporated in full or in part in the common position

The references below are to recitals and articles of the common position.

Amendments 1 (recital 17) and 10 (Article 8(4)). The amendments concerning the validity throughout the Community of the deposit by Community air carriers and aircraft operators of evidence of insurance have been incorporated into the text of the common position. The scope of the measure however, has been restricted to Community air carriers and aircraft operators only, so as not to interfere with the obligations of Member States stemming from the Montreal Convention (Article 50).

Amendments 2 (Article 2(1) and 21 (Article 3-(g)). The amendments concerning which persons would be covered by the Regulation have been taken on board in the common position by widening the definition of "passenger" (Article 3(g)).

Amendments 3 and 4 (Article 2(1)). The amendments concerning the scope of the Regulation have been fully incorporated into the text of the common position. Part of amendment 4 has been addressed in the definition of "aircraft operator" (Article 3 (c)).

Amendment 5 (Article 2(2)(a). The amendment concerning the exclusion of state aircraft from the scope of the Regulation has been fully incorporated in the common position (explicit exclusion under Article 2 and introduction of a (new) corresponding recital 12).

Amendment 6 (Article 2(1)). The amendment concerning the inclusion of local flights in the scope of the Regulation has been fully incorporated in the text of the common position.

Amendment 7 (Article 3(f)). The amendment concerning the definition of maximum take-off weight (MTOW) has been redrafted to fit the description (acronym) of maximum take-off mass (MTOM), which is practically the same (and is the acronym used by the European Civil Aviation Conference - ECAC).

Amendment 8 (Article 4(1)). The amendment concerning the reference to air carriers and aircraft operators falling within the scope of the Regulation has been fully incorporated in the common position with a consistent reference through the Regulation to "air carriers and aircraft operators referred to in Article 2".

Amendment 14 (Article 7(2)). The amendment concerning the categories of aircraft and the minimum insurance requirements for damages to third parties has been followed in principle in the common position. All aircraft that fall within the scope of the Regulation operated by air carriers and/or aircraft operators have to be insured for damages caused to third parties, including risks of war and terrorism. The common position contains more categories of aircraft (below 25 tonnes) than those proposed by the Commission and the European Parliament and different insurance requirements from those proposed by the Commission and the European Parliament. The table below summarises the situation:

>TABLE POSITION>

COM* = Commission's initial proposal - COM(2002)521 final of 24.9.2002

Amendment 16 (Article 7(2)). The amendment concerning the commercial practice of aggregates currently applicable to insurance cover for risks of war and terrorism, has been fully followed in the common position.

Amendment 19 (Article 8(6)). The amendment concerning sanctions against third-country air carriers and aircraft operators has been partially taken up in the common position. The part concerning overflights has not been followed.

Amendment 20 (Article 8(7)). The amendment concerning the sanctions against aircraft which have landed without adequate insurance has been followed in full despite the provision's being redrafted.

Amendment 23 (Article 3(g)). The amendment concerning the definition of "flight" has been adopted in principle. The Commission has been able to accept the text of the common position as it spells out what is covered by this term more clearly than the European Parliament's proposal.

Amendment 31 (Article 8(5)). The amendment concerning the withdrawal of the operating licence of Community air carriers as a sanction for infringing the Regulation has been followed in full in the common position.

4.2 Amendments accepted by the Commission and not incorporated in the common position

Amendment 11 (Article 5(3)). The amendment concerning overflights was accepted by the Commission in its amended proposal. The Council however, considered the practical difficulties linked to the enforceability of controls and sanctions against air carriers and aircraft operators overflying the territory of a Member State and has therefore unanimously supported the relevant text proposed in the Commission's initial proposal. For this reason the Commission has been able to support the common position.

Amendment 17 (Article 8(1)). The amendment concerning stricter general enforcement of the insurance requirements provided for in the Regulation through additional unannounced inspections was accepted by the Commission in its amended proposal. The Council, however, took the view that the proposed wording by the European Parliament as accepted by the Commission was over-prescriptive. Therefore, it agreed a text which leaves it to Member States to decide how they enforce the Regulation. Thus, the text allows Member States to proceed with additional and announced inspections if they consider it appropriate. For this reason the Commission has been able to accept the text of the common position.

Amendment 19 (Article 8(6)). The amendment concerning the refusal to allow third-country air carriers and aircraft operators to overfly the territory of a Member State as a sanction for infringement of the Regulation was accepted by the Commission in its amended proposal. When considering the question of overflights, however, the Council came to the conclusion that enforcing this sanction would be very difficult in practice. For this reason the amendment has not been retained as such.

Nevertheless, a new text has been proposed in the common position (Articles 5(3) and 8 (2) and (4)) whereby Member States may request evidence of insurance from air carriers and aircraft operators overflying but not landing in the Community. Where such controls show evidence of an infringement of the Regulation, sanctions have to be effective, proportional and dissuasive. Thus, Member States also have the possibility of imposing appropriate sanctions for infringement of the Regulation in the case of overflight. Given that this was the objective of the measure, i.e. to ensure that the Regulation stipulates that the insurance requirements are adequately enforced, the Commission has been able to accept the text of the common position.

4.3 Amendments rejected by the Commission and not incorporated in the common position

Amendments 9 and 25 (Article 5(2) - text deleted in the common position). The European Parliament had proposed that the measure whereby third-country air carriers and aircraft operators are given alternative insurance possibilities should be made optional. It had also proposed extending the measure to cover State guarantees. The Commission had not accepted the amendment of the European Parliament. The Council was unanimously against any positive discrimination of third-country air carriers and aircraft operators. Thus, the provision has been deleted from the proposal.

Amendment 12 (Article 5(5) - text deleted in the common position). The European Parliament had proposed imposing the obligation on air carriers to ensure that before commencement of the flight their insurance cover would continue to be in force until after safe landing. The Commission had not accepted this amendment because it was unreasonable to impose an obligation on air carriers and aircraft operators that they cannot control, as insurance cover for risks of war and terrorism (particularly after 11.9.2001) may be withdrawn automatically under certain conditions beyond the control of air carriers and aircraft operators. In its common position the Council has unanimously suppressed the text initially proposed by the Commission and replaced it with a general obligation (new Article 4(2)) for air carriers and aircraft operators to ensure that insurance cover exists for each and every flight. In that context, the common position also makes it clear in the definition of the term "flight" that an aircraft is considered to be in "flight" until it has come to a complete stop on the apron. Thus, even though the text of the proposal has been redrafted the result is effectively the same as the Commission's initial (and amended) proposal.

Amendments 13 and 15 (Articles 6(2) and 7(4) - text deleted in the common position). In these two amendments the European Parliament had proposed the concept of short-term leases. The Commission had not accepted these amendments as they are sufficiently clearly defined in Council Regulation (EEC) No 2407/92 on air carrier licensing. In the common position the Council has deleted the two provisions in the initial (and amended) Commission proposal and has replaced them by a new Article 4(2) with effectively the same result as the Commission's initial (and amended) proposal.

Amendment 18 (Article 8(3)). The European Parliament had proposed specifying the cases where Member States may request additional evidence of valid insurance. The Commission had not accepted this amendment because in view of the words used in the Commission proposal ("where appropriate") it considered it to be superfluous. The Council did not follow the proposed amendment of the European Parliament and replaced the word "appropriate" by the word "necessary". In view of this situation the Commission has been able to accept the text of the common position.

5- CONCLUSION

For the reasons explained above, the Commission considers that the common position adopted on 5 december 2003 by qualified majority does not alter the aims and approach of its proposal and thus can support it.