Proposal for a Regulation of the European Parliament and of the Council concerning protection against subsidisation and unfair pricing practices in the supply of airline services from countries not members of the European Community
Date: 2002-03-12
Institutions: European Commission
Subjects: State aid, air transport, restriction on competition, sanction (EU), third country

25.6.2002

EN

Official Journal of the European Communities

C 151 E/285

Proposal for a Regulation of the European Parliament and of the Council concerning protection
against subsidisation and unfair pricing practices in the supply of airline services from countries
not members of the European Community

(2002/C 151 E/20)

COM(2002) 110 final — 2002/0067(COD)

(Submitted by the Commission on 13 March 2002)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 80(2) thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the Economic and Social
Committee,

(6) It should be explained when a subsidy shall be deemed to
exist and according to which principles
shall be
countervailable (in particular whether the subsidy has
been targeted at certain enterprises or sectors or
is
contingent upon service supply to third countries).

it

that

(7) In determining the existence of a subsidy, it is necessary
to demonstrate
financial
that government
contribution by a government or
revenue that is otherwise due is foregone or not collected,
and that a benefit has thereby been conferred on the
recipient enterprise.

there has

been a

Having regard to the opinion of the Committee of the Regions,

(8) It should be explained when an unfair pricing practice is

deemed to exist.

Acting in accordance with the procedure laid down in Article
251 of the Treaty,

Whereas:

(1) There is reason to believe that the competitive partici-
pation of Community air carriers
in providing air
services to or from the Community is adversely affected
by certain unfair practices of non-Community air carriers
providing like air services.

(2) Such unfair practices may result from a subsidy granted
by a government of a country which is not a member of
the Community or from certain pricing practices by a
non-Community air carrier which is State-controlled.

government

(3) Within the Community there are strict rules regarding the
granting of
and for
Community airlines not to be placed at a competitive
disadvantage there is a need for an instrument to offer
protection against subsidised non-Community air carriers
or those receiving other benefits from governments.

aid to airlines,

(4) The Community should be able to take action to redress
such unfair practices resulting from subsidies granted by
the government of a country which is not a member of
the Community.

(5) The Community should also be able to address unfair
pricing practices when the air carrier is controlled by a
government of a country which is not a member of the
Community.

(9) It is desirable to lay down clear and detailed guidance as
to the factors which may be relevant
for the deter-
mination of whether the subsidised or unfairly priced
air
services provided by non-Community air carriers
injury or are threatening to cause
have caused material
injury; in demonstrating that the price levels of the supply
of such air services are responsible for injury sustained by
the Community industry, attention should be given to the
effect of other factors and in particular prevailing market
conditions in the Community.

(10) It is advisable to define the terms ‘Community air carrier’,
and ‘State-

service’

‘like

air

‘Community industry’,
controlled’.

(11) It is necessary to lay down who may lodge a complaint,
and the information on countervailable subsidies or unfair
pricing practice,
and causation which such
injury
complaint should contain.

(12) It is necessary to lay down the manner in which interested
parties should be given notice of the information which
the authorities require; and interested parties should have
ample opportunity to present all relevant evidence and to
defend their interests; it is also desirable to set out the
rules and procedures to be followed during the investi-
gation, in particular the rules whereby interested parties
are to make themselves known, present their views and
if such
submit information within specified time limits,
views and information are to be taken into account; it is
necessary to provide that, where parties do not cooperate
satisfactorily, other information may be used to establish
findings and that such information may be less favourable
to the parties than if they had cooperated.

C 151 E/286

EN

Official Journal of the European Communities

25.6.2002

(13) It is necessary to lay down the conditions under which
provisional measures may be imposed; such measures
may in all cases be imposed by the Commission only
for a six-month period.

2. offsetting the unfair pricing practices by State-controlled

non-Community air carriers

there

is no need to take measures,

(14) An investigation or proceeding should be terminated
whenever
for
example if the amount of subsidisation, the degree of
unfair pricing or the injury is negligible; a proceeding
shall not be terminated unless such a decision is duly
motivated;
than the
amount of countervailable subsidies or the degree of
unfair pricing if such lesser amount would remove the
injury.

that measures

should be

less

concerning the supply of air services on certain routes to and
from the Community which cause injury to the Community
industry.

Article 2

Subsidisation

1.

A subsidy shall be deemed to exist if:

(15) It is necessary to provide that measures should not exceed
the value of subsidies or the non-commercial advantages
granted as the case may be.

(a) there is a financial contribution by a government of a
country not member of the European Community, that is
to say,

(16) It is necessary to provide that measures are to remain in
force only for as long as it is necessary to counteract the
subsidies or unfair pricing practices causing injury.

(i) where a government practice involves a direct transfer
of funds, potential direct transfer of funds or liabilities;

(17) It is necessary to specify procedures for the acceptance of
undertakings eliminating or offsetting the countervailable
subsidies or unfair pricing practices and injury in lieu of
the imposition of provisional or definitive measures; it is
also appropriate to lay down the consequences of breach
or withdrawal of undertakings.

(ii) government revenue that is otherwise due is foregone

or not collected;

(iii) a government provides goods or services other than
general infrastructure, or purchases goods or services;

(18) It

is necessary to provide,

submitted of changed circumstances,

in cases where sufficient
for

evidence is
review of existing measures.

(iv) a

to

payments

government makes

funding
mechanism or entrusts or directs a private body to
carry out one or more of the type of functions illus-
trated above which would normally be vested in the
government and, in practice, in no real sense, differs
from practices normally followed by governments; and

a

(19) In accordance with Article 2 of Council Decision
1999/468/EC of 28 June 1999 laying down the
procedures
implementing powers
the
conferred on the Commission, measures
implementation of this Regulation should be adopted by
use of the advisory procedure provided for in Article 3 of
that Decision,

the exercise of

for

for

HAVE ADOPTED THIS REGULATION:

Article 1

Principles

A redressive measure may be imposed for the purpose of:

1. offsetting any subsidy granted, directly or indirectly to a

non-Community air carrier, or

(b) a benefit is thereby conferred.

2.
Subsidies shall be subject to redressive measures only if
the subsidies are limited, in law or in fact, to an enterprise or
industry or group of enterprises or industries within the juris-
diction of the granting authority, including subsidies contingent
upon export performance.

Article 3

Unfair pricing practices

1.
Unfair pricing practices shall be deemed to exist where
State-controlled non-Community air carriers benefiting from a
non-commercial advantage continuously charge on a particular
air service to or from a Community, air fares which are lower
than the normal fare rate.

25.6.2002

EN

Official Journal of the European Communities

C 151 E/287

2.

The term ‘normal fare rate’ means

(a) the level of fares of the air services under consideration,
and the effect of such air services on fares offered by
Community air carriers; and

(a) the comparable rate actually charged during a period of at
least 6 months in the ordinary course of air transport for
the like air service on the same or comparable route by an
established and representative air carrier which is not a
government-controlled air carrier; or where such rate
cannot be determined;

(b) the constructed rate which is determined by the costs of a
comparable air carrier plus a reasonable margin of profit.
This cost shall be computed on the basis of all costs
incurred in the ordinary course of trade, both fixed and
variable, plus a reasonable amount for overhead expenses.

(b) the consequent

those air

impact of

services on the
Community industry as indicated by trends in a number
of economic indicators such as number of flights, utili-
share,
sation of capacity, passenger bookings, market
profits, return on capital, investment, employment.

No one or more of these factors can necessarily give decisive
guidance.

A non-Community air carrier shall be deemed to be
3.
‘State-controlled’ if the Government or any other public body
within the territory of a third country owns more than 50 per
cent of the equity interest in it, or have the power to name a
majority of its directors or otherwise legally direct its actions.

It must be demonstrated, from all the relevant evidence
3.
presented in relation to paragraph 2, that the air services under
consideration are causing injury within the meaning of this
Regulation.

Article 4

Determination of injury

1.

For the purposes of this Regulation:

(a) the term ‘injury’ shall be taken to mean material injury to
the Community industry, or threat of material injury to the
Community industry;

(b) the term ‘Community industry’ shall be interpreted as
referring to the Community air carriers supplying like air
services as a whole or those of them whose collective share
constitutes a major proportion of the total Community
supply of those services;

(c) the term ‘Community air carrier’ shall be taken to mean an
air carrier with a valid operating licence granted by a
Member State in accordance with Council Regulation
(EEC) No 2407/92 of 23 July 1992 on licensing of air
carriers (1);

(d) the term ‘like air service’ shall be interpreted to mean air
services which are supplied on the same route or routes as
the air services under consideration or such air services that
are supplied on a route or routes closely resembling the
route or
service under
consideration is supplied.

routes on which the

air

A determination of

2.
injury shall be based on positive
evidence and shall involve an objective examination of both:

(1) OJ L 240, 24.8.1992, p. 1.

than the

Known factors other

4.
services under
consideration which are injuring the Community industry at
the same time shall also be examined to ensure the injury
caused by these other factors is not attributed to the air
services under consideration.

air

threat of material

A determination of

5.
injury shall be
based on facts and not merely on allegation, conjecture or
remote possibility. The change in circumstance which would
create a situation in which the subsidy would cause injury must
be clearly foreseen and imminent.

Article 5

Initiation of proceedings

1.
An investigation under this Regulation shall be initiated
upon a written complaint by any person or association acting
on behalf of the Community industry, or on the Commissions
own initiative, if there is sufficient evidence of the existence of
countervailable
their
amount) or unfair pricing practices within the meaning of
link between the
injury and a
this Regulation,
allegedly subsidised air services and the alleged injury.

if possible, of

(including,

subsidies

causal

2. When it is apparent that there is sufficient evidence to
justify initiating a proceeding, the Commission shall, acting in
accordance with the procedure laid down in Article 12(2),
initiate the proceeding within 45 days of the lodging of the
complaint and shall publish a notice in the Official Journal of the
European Communities. Where insufficient evidence has been
presented, the Commission shall, acting in accordance with
the procedure
inform the
complainant within 45 days of
the date on which the
complaint has been lodged with the Commission.

laid down in Article 12(2),

C 151 E/288

EN

Official Journal of the European Communities

25.6.2002

The notice of initiation of the proceedings shall announce
3.
the initiation of an investigation,
indicate the scope of the
investigation, the airline services on the routes concerned, the
countries whose governments allegedly granted the subsidies or
the air carriers allegedly engaged in unfair pricing
control
practices and the period within which interested parties may
make themselves known, present their views in writing and
submit
such views are to be taken into
account during the investigation; it shall also state the period
within which interested parties may apply to be heard by the
Commission.

information,

if

4.
The Commission shall inform the air carriers supplying
the air services under consideration, the government concerned
and the complainants of the initiation of the proceedings.

The Commission may, at any time before initiation of the
5.
proceedings and thereafter,
invite the foreign government
concerned for consultations with the aim of clarifying the
situation as to the matters referred to in paragraph 2 and
arriving at a mutually agreed solution.

Article 6

The investigation

the

initiation

Following

1.
the
Commission shall commence an investigation which shall
cover both subsidisation or unfair pricing practices of airline
services supplied by non-Community carriers on certain routes,
and injury.

proceeding,

the

of

The interested parties which have made themselves
2.
known in accordance with time limits set forth in the notice
of initiation, shall be heard if they have made a timely request
for a hearing showing that they are an interested party likely to
be affected by the result of the proceeding and that there are
particular reasons why they should be heard.

3.
In cases in which an interested party refuses access to, or
otherwise does not provide, necessary information within the
appropriate time limits, or significantly impedes the investi-
gation, provisional or final findings, affirmative or negative,
may be made on the basis of
is
found that any interested party has supplied false or misleading
information, the information shall be disregarded and use may
be made of the facts available.

facts available. Where it

Article 7

Provisional measures

Provisional measures may be imposed if a provisional
1.
affirmative determination has been made that the air carriers
under consideration benefit from subsidies or are engaged in
unfair pricing practices
to the
Community industry and that the Community interest calls
for intervention to prevent such injury.

and consequent

injury

Provisional action may be taken in accordance with the

2.
procedure laid down in Article 12(2).

Provisional measures shall be imposed for a maximum of

3.
six months.

Article 8

Termination without measures

1. Where the complaint is withdrawn, the proceeding may
be terminated by the Commission unless such termination
would not be in the Community interest.

protective measures

the
2. Where
proceeding shall be
terminated in accordance with the
procedure laid down in Article 12(2). Any decision to
terminate a proceeding must be duly motivated.

unnecessary

are

Article 9

Imposition of definitive measures

1. Where the facts as finally established show the existence
of subsidies or unfair pricing practices and injury caused
thereby, and the Community interest calls for intervention in
accordance with Article 13, a definitive measure shall be
imposed in accordance with the procedure laid down in
Article 12(2).

conferred

2.
The level of measures imposed to offset subsidies shall
not exceed the amount of subsidies, calculated in terms of
the
benefit
non-Community carriers have been found to benefit, and
should be less than the total amount of subsidies,
if such
lesser level were to be adequate to remove the injury to the
Community industry.

from which

recipient,

the

on

3.
The level of measures imposed to offset unfair pricing
practices benefiting from a non-commercial advantage, shall
not exceed the difference between the fares charged by the
fare
non-Community air carrier concerned and the normal
rate established in accordance with Article 3 but should be
less if a such lesser level would be adequate to remove injury
to Community industry. In any event, the level of measures
should not exceed the value of the non-commercial advantage
granted to the non-Community air carrier.

4.
A redressive measure shall be imposed in the appropriate
amounts in each case, on a non-discriminatory basis on air
services supplied by all non-Community air carriers found to
benefit from subsidies or engaged in unfair pricing practices on
the respective routes, except as to air services supplied by those
non-Community air carriers for which undertakings under the
terms of this Regulation have been accepted.

5.
A measure shall remain in force only as long as, and to
the extent that, it is necessary to counteract the subsidies or
unfair pricing practices which are causing injury.

25.6.2002

EN

Official Journal of the European Communities

C 151 E/289

Article 10

Undertakings

2. Where reference is made to this paragraph, the advisory
procedure laid down in Article 3 of Decision 1999/468/EC
shall apply, in compliance with Article 7 and Article 8 thereof.

1.
Investigations may be terminated without the imposition
of provisional or definitive measures upon receipt of satis-
factory voluntary undertakings under which:

(a) the government granting the subsidy or non-commercial
the subsidy or
other measures

advantage agrees to eliminate or limit
non-commercial
concerning its effects; or

advantage

take

or

(b) any non-Community air carrier undertakes to revise its
prices or to cease the supply of airline service to the
the
route in question so that
subsidy or non-commercial advantage is eliminated.

the injurious effect of

Undertakings shall be accepted in accordance with the

2.
procedure laid down in Article 12(2).

3.
In case of breach or withdrawal of undertakings by any
party, a definitive measure shall be imposed in accordance with
Article 9, on the basis of
the facts established within the
context of
the investigation which led to the undertaking,
provided that such investigation was concluded with a final
and
determination
the
and
subsidisation
to
that
non-Community air carrier concerned, or
the government
granting the subsidy, has, except in the case of withdrawal of
the undertaking by the non-Community air carrier or such
government, been given an opportunity to comment.

as

Article 11

Reviews

1.
The need for the continued imposition of measures in
their initial form may be reviewed, where warranted, on the
initiative of the Commission or upon the request of a Member
State or, provided that a reasonable time of at least one year
has elapsed since the imposition of the definitive measure,
upon a request by non-Community air carriers subject
to
measures or by Community air carriers.

Reviews shall be initiated by the Commission acting in
2.
accordance with the procedure laid down in Article 12(2). The
relevant provisions of Articles 5 and 6 shall apply to reviews
under paragraph 1. Where warranted by reviews, measures
shall be repealed, amended or maintained, as appropriate in
accordance with the procedure laid down in Article 12(2).

Article 12

Committee

Article 13

Community interest

A determination as to whether the Community interest calls for
intervention should be based on an appraisal of all the various
interests taken as a whole. In such an examination the need to
eliminate the trade-distorting effects of injurious subsidisation
or unfair pricing practices and to restore effective competition
shall be given special consideration. Measures may not be
applied where the authorities can clearly conclude that it is
not in the Community interest to apply such measures.

Article 14

General provisions

Provisional or definitive redressive measures shall be
1.
imposed by Regulation, and enforced by Member States in
the form, at the rate specified and according to the other
criteria laid down in the Regulation imposing such measures.
If measures other than duties are imposed, the Regulation shall
define the precise form of the measures in accordance with the
provisions of this Regulation.

Regulations imposing provisional or definitive redressive
2.
measures, and Regulations or Decisions accepting undertakings
or suspending or terminating investigations or proceedings,
shall be published in the Official
the European
Communities.

Journal of

3.
This Regulation shall not preclude the application of any
special rules laid down in agreements concluded between the
Community and third countries.

Article 15

Entry into force

This Regulation shall enter into force on the day following that
of
the European
Communities.

its publication in the Official

Journal of

The Commission shall be assisted by the Committee

1.
instituted by Article 11 of Regulation (EEC) 2408/92.

This Regulation shall be binding in its entirety and directly
applicable in all Member States.