Proposal for a European Parliament and Council Regulation on the negotiation and implementation of air service agreements between Member States and third countries
Date: 2003-02-26
Institutions: European Commission
Subjects: EU Member State, EU competence, EU law, air transport, competition law, restriction on competition, right of establishment, third country, transport company

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 26.2.2003
COM(2003) 94 final

2003/0044 (COD)

COMMUNICATION FROM THE COMMISSION

on relations between the Community and third countries in the field of air transport

Proposal for a

EUROPEAN PARLIAMENT AND COUNCIL REGULATION

on the negotiation and implementation of air service agreements between Member
States and third countries

(presented by the Commission)

COMMUNICATION FROM THE COMMISSION

on relations between the Community and third countries in the field of air transport

INTRODUCTION

1. 

2. 

3. 

In  its  Communication  of  19  November  2002,1  the  Commission  took  stock  of  the
Community's external relations in the field of air transport, set out the conclusions it
drew from the judgements of the Court of Justice of the European Communities of 5
November  2002  in  the  "open  skies"  cases2  and  presented  the  broad  lines  and  basic
principles of the Community's external policy in that field.

Implementation of this policy will take place in stages in view of the large number of
bilateral  air  services  agreements  concluded  by  the  Member  States  with  third
countries outside of the European Union.

The  Commission  nevertheless  highlights  the  fact  that  the  Court's  judgements  have
immediate  legal effects  which  will need  to be taken into account in the short  term.
For information, these are, as stated in the above Communication, of two kinds:

–  Several matters that are often covered by the provisions of these agreements now
fall  within  the  exclusive  external  competence  of  the  Community.  In  addition  to
the  specific  areas  of  Community  competence  identified  by  the  Court,  the
application  of  AETR  case-law  to  international  civil  aviation  means  mutatis
mutandis that the Community has competence in respect of several other matters
covered  by  the  agreements  in  question  and  by  Community  law.3  It  is  also
important to stress that, according to the Court, changes which have been made to
the agreements  are  evidence  that  the  agreements  have  been  renegotiated  in  their
entirety. It emerges from this that, while some of the provisions of the agreements
have  not  been  formally  amended  by  having  changes  made  to  them  or  undergo
only  minor  editorial  changes,  the  obligations  arising  from  those  provisions  will
nonetheless  have  been  confirmed  during  renegotiation.  The  Member  States  are
therefore  prevented  not  only  from  contracting  new  international  obligations,  but
also  from  keeping  such  obligations  in  force  if  they  fail  to  take  account  of
Community law (see, for example, Case C-472/98, paragraph 45; see in this sense
also  the  judgements  of  4  July  2000,  Commission  v  Portugal,  C-62/98,  [ECR]  I-
1571, and Commission v Portugal, C-94/98, [ECR] I-5215).

1

2

3

COM(2002)649  final:  Communication  from  the  Commission  on  the  consequences  of  the  Court
judgments of 5 November 2002 for European air transport policy.
Cases  C-466/98,  C-467/98,  C-468/98,  C-469/98,  C-471/98,  C-472/98,  C-475/98  and  C-476/98,
Commission  v  the  United  Kingdom,  Denmark,  Sweden,  Finland,  Belgium,  Luxembourg,  Austria  and
Germany.
COM(2002) 649 final, paragraphs 31 and 32.

2

                                                
–  The  nationality  clauses  contained  in  nearly  all  the  above  agreements  constitute
discrimination on grounds of nationality contrary to the provisions of Article 43 of
the EC Treaty.4

In  view  of  its  scope,  the  latter  point  is  more  particularly  the  subject  of  the
Commission's attention since nationality clauses deprive airlines of one of the main
rights  conferred  on  them  by  the  EC  Treaty,  namely  freedom  of  establishment.  In
practice,  these  clauses  prevent  carriers  from  fully  benefiting  from  the  Community
market and consumers from gaining the benefits of increased competition.5

Since 2001, the air industry has been going through one of the most serious crises in
its  history.  Several  European  airlines  have  implemented  restructuring  plans  to  deal
with  the  serious  difficulties  and  economic  uncertainties  of  the  present  time.  It  will
not  be  possible  to  carry  out  the  necessary  reorganisation  of  the  sector  if  the
competent authorities at national and Community level  do not  display  the  response
and dynamism needed with regard to international relations in civil aviation.

It is therefore essential for the Community to take the measures necessary to ensure
in  the  short  term  that  a  new  regulatory  framework  is  put  in  place  which  is  in
conformity with Community law and meets the needs of economic operators.

CONSEQUENCES  OF  THE  INFRINGEMENT  ESTABLISHED  BY  THE COURT  OF JUSTICE
AS REGARDS NATIONALITY CLAUSES

4. 

5. 

6. 

1. 

1.1. 

General principles

7. 

As  indicated  in  the  Commission's  Communication  of  19 November  on  the
consequences of the Court's judgements of  5 November 2002,6 if  other  bilateral  air
services  agreements  cover  the  same  issues  as  the  "open  skies"  agreements  in
question,  they  must  also  be  regarded  as  incompatible  with  Community  law.  This
applies in particular to the infringement established with regard to nationality clauses
since these appear in nearly all the agreements.

8. 

In this respect, reference should be made to the wording of Article 43(1) of the EC
Treaty, which states:

"Within the framework of the provisions set out below, restrictions on the freedom
of establishment of nationals in a Member State in the territory of another Member
State shall be prohibited. Such prohibition shall also apply to restrictions on the
setting up of agencies, branches or subsidiaries by nationals of any Member State
established in the country of any Member State"7.

According to the case-law of the Court concerning Article 43 of the EC Treaty, the
Member  States  may  not  restrict  the  freedom  of  establishment  of  Community
nationals unless such restriction is justified by the general interest and, among other
things,  there  is  compliance  with  the  principle  of  non-discrimination.  Paragraphs  37

Ibidem, paragraphs 34 to 37.
Ibidem paragraphs 9 and 10.
Ibidem, paragraph 38.
our emphasis

3

9. 

4

5

6
7 

                                                
and 38 of the judgement delivered on 30 November 1995 in Case C55/94 Gebhard8
particularly illustrate the principles which apply:

"It follows, however, from the Court's case-law that national measures liable to
hinder or make less attractive the exercise of fundamental freedoms guaranteed
by  the  Treaty  must  fulfil  four  conditions:  they  must  be  applied  in  a
non-discriminatory manner; they must be justified by imperative requirements
in the general interest; they must be suitable for securing the attainment of the
objective which they pursue; and they must not go beyond what is necessary in
order to attain it (see Case C-19/92, Kraus, [1993] ECR I-1663, paragraph 32).

Likewise, in applying their national provisions, Member States may not ignore
the knowledge and qualifications already acquired by the person concerned in
another Member State (see Case C-340/89, Vlassopoulou, [1991] ECR I-2357,
paragraph 15).  Consequently  they  must  take  account  of  the  equivalence  of
diplomas  (see  the  judgement  in  Thieffry,  paragraphs  19  and  27)  and,  if
necessary,  proceed  to  a  comparison  of  the  knowledge  and  qualifications
required  by  their  national  rules  and  those  of  the  person  concerned  (see  the
judgement in Vlassopoulou, paragraph 16)."

10. 

1.2. 

11. 

Council  Regulation  2407/92  harmonises  the  requirements  for  the  licensing  of  air
carriers  within  the  Community.  An  operating  licence  issued  on  the  basis  of  and  in
accordance  with  the  requirements  laid  down  by  Regulation  2407/92  is  valid
throughout  the  Community.  Member  States  may  not  make  the  granting  of  traffic
rights to third countries subject to the holding of an air operator's certificate (AOC)
issued  by  the  national  administration,  since  that  would  constitute  a  restriction  on
right of establishment contrary to Community law. According to this Regulation, the
holding of an  AOC is a requirement for  obtaining  an  air  operator's  licence  and  not
vice versa.

Practical consequences as regards the designation of Community carriers in the
framework of existing bilateral agreements

Since  the  conditions  for  the  granting  of  air  carrier's  licences  are  harmonised  at
Community level in the third package, it has to be considered  that any Community
carrier within the meaning of Council Regulation 2407/929 who can show that he has
a place of business (subsidiary, branch or agency) in the territory of a Member State
must be able to exercise traffic rights from that State to a third country in the same
manner and on the same terms as carriers which are nationals of the Member State in
question.

12. 

Since the air transport sector is competitive and the interests of airlines are frequently
contradictory,  it  will  be  necessary,  where  there  is  a  ceiling  on  capacity  and/or
frequencies or the number of companies is limited, to distribute traffic rights between
the Community carriers concerned in a non-discriminatory manner .

8

9

[1995] ECR I-4165.
Council  Regulation  (EEC)  No  2408/92  of  23  July  1992  on  access  for  Community  air  carriers  to
intra-Community air routes, OJ No L 240, 24.8.1992.

4

                                                
1.3. 

Consequences as regards the designation of airports

13. 

14. 

1.4. 

15. 

16. 

Where a bilateral agreement contains provisions on the designation of airports for the
exercise  of  traffic  rights,  designation  should,  in  conformity  with  the  principle  of
subsidiarity,  be  a  matter  for  the  competent  authorities  of  the  Member  State
concerned.

However, airports may not be designated in a manner which discriminates between
Community  carriers  on  grounds  of  nationality  or  identity.  In  addition,  where  it  has
been  decided,  in  accordance  with  Article 8  of  Council  Regulation 2408/92,  to
distribute  intra-Community  traffic  between  airports  within  an  airport  system,  the
method  and  criteria  used  to  designate  the  airports  must  not  contradict  the  above
traffic  distribution  decision,  failing  which  some  Community  carriers  may  find  it
impossible to operate a hub for connections at a single airport.

Practical  consequences  as  regards  the  negotiation  of  amendments  to  existing
agreements

Unlike  in  other  sectors  of  economic  activity  when  States  prepare  and  conduct
commercial  negotiations,  the  common  practice  is  for  the  competent  authorities  to
involve air carriers very closely in (nearly) all stages of the procedure.

The principle of equality of treatment which naturally flows from the  provisions of
Article 43 of the Treaty also entitles all Community carriers who can show that they
have an establishment (subsidiary, branch or agency) in the territory of the Member
State concerned to be involved in the preparation and conducting of negotiations on
air services agreements, either directly or through their professional organisations, in
a non-discriminatory manner.

1.5. 

Consequences as regards monitoring of the safety of Community carriers

17. 

18. 

19. 

Within the Community, monitoring of the safety of Community carriers is always the
responsibility of the Member State which licensed the air carrier in accordance with
Council  Regulation  2407/92,  even  where  carriers  operate  routes  between  two
Member States other than the Member State which issued the licence.

The Commission stresses that the same rule must apply where a Community carrier
operates  an  air  route  from  the  territory  of  a  Member  State  other  than  that  which
issued the air carrier's licence to the territory of a third country.

If  a  third  country  refused  to  accept  this  principle,  it  would  be  for  the  designating
Member State, in collaboration with the Member State which issued the air carrier's
licence,

(cid:1)  to explain how safety monitoring of carriers is carried out within the Community

and to state which authority has responsibility for it,

(cid:1)  to make it clear to the third country concerned that it is required to recognise the
certificates issued by the Member State which issued the Community air carrier's
licence  where  the  latter  is  a  State  which  is  a  Contracting  Party  to  the  Chicago

5

Convention, and that the certificates in question are issued in accordance with the
relevant Annexes to the Convention.10

1.6. 

A clear legal framework

20. 

The  above  legal  analysis  provides  a  firm  legal  basis  for  the  development  of
Community  policy.  Community  law  place  a  series  of  firm  legal  obligations  upon
Member  States  and  the  Community  as  a  whole.  There  is  no  scope  to  apply  these
principles  selectively  or  to  introduce  them  progressively.  Community  carriers  are
entitled to exercise their rights  under  the  Treaty  immediately.  However,  in  order  to
give  effect  to  these  principles,  the  Commission  believes  that  it  is  necessary  to
introduce  measures  that  will  enable  the  Community  and  its  Member  States  to
establish a coherent approach towards their application.

10

The  preamble  to  bilateral  air  services  agreements  nearly  always  states  that  these  agreements  apply
without prejudice to the rights and obligations of signatories arising from the Chicago Convention.

6

                                                
2. 

APPLYING THE LEGAL PRINCIPLES IN PRACTICE

2.1. 

Assessment of the situation

21. 

22. 

23. 

24. 

25. 

26. 

The  Commission  recognises  the  complexity  of  relations  between  the  fifteen  EU
Member  States  and  their  bilateral  partners,  the  uncertainty  that  now  clouds  those
relations  and  the  problems  that  can  arise  in  practice  by  the  application  of  the  legal
principles  cited  above.  There  is  concern  in  many  quarters  about  the  legality  of  the
existing  agreements,  the  changes  that  might  be  necessary  and  the  reaction  of  third
countries to proposals from the Community and its Member States.

The Commission also understands the economic importance to the aviation industry
of providing a regulatory environment that is flexible enough to react to changes in
economic circumstances and operational requirements, yet which is strong enough to
preserve important market access rights that have been negotiated by Member States
over  the  past  fifty  years.  The  uncertainty  on  how  to  remedy  the  infringements  of
Community  law  identified  by  the  Court  is  hindering  the  management  and
improvement of existing agreements, yet there is a fear that taking action to remove
that uncertainty may jeopardise bilateral relationships that have been built-up.

Accordingly,  the  Commission  believes  that  it  will  be  important  to  limit,  as  far  as
possible, the changes needed to the balance of rights that has been achieved under the
existing framework of bilateral agreements.

Nonetheless, it is clear that changes must be made to the current regime in order to
bring  existing  relations  with  third  countries  into  line  with  the  Court's  rulings  of  5
November 2003. Maintaining the status quo is not an option and, as is recognised by
all concerned, action by the Community and its Member States is required.

However, it must also be stressed that the ambition of Community policy in this area
is not merely to correct the illegalities identified by the Court, essential as this is. The
changes required will also add value to the existing situation by creating  additional
opportunities  for  the  European  aviation  industry  and  giving  European  consumers  a
broader choice of service.

The overriding objective must be to develop a balanced and effective way of working
at Community level that makes full use  of the  weight of  the  Community  to  further
the  interests  of  our  industry  and  consumers.  Clear  priorities  and  the  appropriate
mechanisms for Community action must be established, while ensuring that Member
States can continue to deploy their existing resources and expertise to address aspects
of their international relationships that are specific to their situation.

2.2. 

Responding to the Court Judgements

27. 

The  European  Court  of  Justice  judgements  of  5  November  2002  in  the  so-called
"open skies" cases have implications not only for the eight specific agreements with
the  United  States  which  were  found  to  infringe  Community  law,  but  for  all  other
bilateral air services agreements to which Member States of the European Union are
party.

7

28. 

29. 

30. 

31. 

32. 

In its Communication of 19 November 2002 in response to the Court judgements, the
Commission set out a number of policy priorities. It laid down guiding principles for
future Community policy in this area and identified a number of key trading partners,
notably Russia and Japan, with which it believes Community negotiations should be
opened  in  the  near  future.  However,  first  among  its  concerns  was  to  bring  the
relationship between the Member States and the United States into conformity with
Community law.

In  order  to  do  this,  the  Commission  requested  Member  States  to  activate  the
procedures  for  terminating  their  agreements  with  the  United  States  and  asked  the
Council to authorise it to open Community negotiations (hereinafter ‘mandate’) with
the  United  States  on  the  creation  of  a  new  EC-US  agreement  in  accordance  with
Article 300 of the Treaty.  The Commission  continues to believe that such action is
the  only  way  to  move  the  EU-US  relationship  in  air  transport  onto  firm  legal
foundations.

The Commission welcomes the attention that the Council has devoted to discussion
of  the  EU-US  relationship  and  is  optimistic  that  Community-level  negotiations  can
begin in the near term.

The Commission recognises, however, that there is also an urgent need to provide a
sound legal framework for the ongoing negotiation and implementation of all other
air  services  agreements  and  for  an  appropriate  division  of  responsibilities  between
the  Community  and  its  Member  States  in  the  area  of  international  air  transport
relations.

Accordingly, with the adoption of this Communication  the Commission  makes  two
further  proposals  that,  together  with  the  US  mandate,  form  a  coherent  package  of
three measures that will create this framework.

2.3. 

 The Community Approach on "Ownership and Control"

33. 

34. 

35. 

In  order  to  address  the  infringements  of  Community  law  in  other  bilateral
agreements, the Commission envisages the opening of Community negotiations with
third countries on the issue "Ownership and Control" and on matters of Community
exclusive competence.

The  negotiations  will  have  the  specific  objective  of  securing  non-discriminatory
market access in international agreements for all Community carriers as required by
the  Treaty.  The  Commission  considers  that  a  systematic  Community  approach  is
needed to address the ownership and  control  issue,  aiming over  a  period  of  several
years, to approach all international partners.

Accordingly,  the  Commission  is  submitting  a  recommendation  to  the  Council  to
authorise  it  to  open  Community  negotiations  with  all  bilateral  partners  on  the
ownership  and  control  issue.  The  mandate  will  follow  the  procedures  set  out  in
Article  300  of  the  Treaty,  creating  a  special  committee  of  Member  States'
representatives  to  assist  and  support  the  Commission.  The  mandate  will  exclude
negotiations with any trading partners for which a country-specific mandate has been
agreed.

8

36. 

37. 

38. 

39. 

40. 

41. 

Why a Community approach?

It  must  be  remembered  that  where  it  is  apparent  that  the  subject-matter  of  an
agreement or convention  falls  partly  within  the  competence  of  the  Community  and
partly  within  that  of  its  Member  States,  it  is  essential  to  ensure  close  cooperation
between the Member States and the Community institutions, both  in the process of
negotiation  and  conclusion  and  in  the  fulfilment  of  the  commitments  entered  into.
That obligation to cooperate flows from the requirement of unity in the international
representation of  the  Community (Ruling  1/78 [1978]  ECR  2151,  paragraphs  34  to
36, Opinion 2/91 [1993] ECR I-1061, paragraph 36, and Opinion 1/94 [1994] ECR I-
5267, paragraph 108). The Community institutions and the Member States must take
all  necessary  steps  to  ensure  the  best  possible  cooperation  in  that  regard  (Opinion
2/91, paragraph 38).

The key legal issues relating to the content and negotiation of ownership and control
clauses  is  set  out  in  the  first  section  of  this  communication:  Community  law  has
harmonised the definition of Community air  carriers.  In  addition to these,  there  are
also  considerable  practical  and  political  advantages  in  common,  Community
negotiations.

In  the  first  instance,  if  Member  States  were  to  be  authorised  to  negotiate  a
Community  clause  there  is  scope  for  divergent  views  between  different  Member
States  on  how  to  address  the  question,  resulting  in  third  countries  receiving  mixed
messages  from  the  Community.  Member  States  and  the  Community  will  not  make
progress  in  this  area  if  the  timing  and  substance  of  an  approach  towards  a  third
country  is  not  properly  coordinated  and  if  the  case  for  change  is  put  forward  in
differing forms with differing amounts of political pressure.

In  addition,  individual  Member  States  will  find  that  a  unilateral  request  to  a  third
country  for  the  introduction  of  "Community  clause"  often  meets  with  a  negative
response.  Such  a  request  is  unusual  in  nature  and  often  carries  little  weight  if  it  is
transmitted in isolation by one Member State on its own. In addition, the pressure to
protect  the  existing  traffic  rights  of  the  national  airline  can  make  it  difficult  for  an
individual  Member  State  to  stand  alone  and  insist  upon  the  issue,  even  though  the
Court ruling imposes a legal obligation to secure such a clause.

If  Member  States  were  to  be  authorised  to  negotiate  a  Community  clause,  there
would be a serious risk of distortion of competition between Community carriers. If
each  Member  State  requests  Community  clauses  from  third  countries  in  a  different
order of priority and with differing degrees of success, Community carriers will face
an incoherent patchwork of international market access opportunities. Moreover, the
more successful a Member State is in securing Community clauses, the more its own
industry  will  be  exposed  to  competition  from  carriers  from  other  Member  States,
without necessarily enjoying reciprocal rights across the Community. This would not
be a sustainable situation.

To  resolve  these  difficulties  it  is  essential  for  the  Community  to  approach  third
countries  by  exercising  its  competencies  in  accordance  with  Article  300  of  the
Treaty.  This  will  allow  the  Community  to  argue  its  case  with  a  consistent  level  of
conviction and to avoid a situation where Member States might inadvertently  agree
differing terms.

9

42. 

43. 

44. 

45. 

46. 

47. 

The conduct of negotiations and the results

The  Commission  envisages  that  the  negotiations  would  be  pursued  on  an  intensive
basis. The aim would be for the Commission to agree upon and conduct a concerted
programme of negotiations with trading partners, raising with them the issue of the
ownership  and  control  clauses.  Criteria  will  be  established  in  the  mandate  for  the
prioritisation of contacts with third countries. A draft agreement appropriate to each
third country will be drafted by the Commission as it pursues these priorities.

The  Commission  would  also  be  mandated  to  address  other  issues  of  Community
exclusive  competence  with  a  view  to  incorporating  these  into  the  Community
agreement. In practice, it is likely to be possible simply to incorporate standard texts
currently used in bilateral agreements into the Community agreement, although given
the  opportunity  the  Community  should  seek  to  make  improvements  to  the  current
provisions on these issues.

In  this  way  Member  States  would  remain  free  to  negotiate  with  third  countries  on
matters  of  national  competence  as  they  saw  fit  using  their  traditional  negotiating
structures. However they would be encouraged to use the occasion of the Community
intervention  on  ownership  and  control  with  a  trading  partner  to  address  matters  of
bilateral  concern.  This would  allow all  aspects of  the  aviation  relationship  between
the  third  country  and  the  Community  and  its  Member  States  to  be  overhauled  as  a
package.

The Commission envisages that  the  outcome  of  the  negotiations  could  take  several
forms.  The  simplest  would  be  a  short  stand  alone  agreement  in  which  the  parties
agreed  to  a  revised  definition  of  the  beneficiaries  that  would  override  the  relevant
clauses in the existing bilateral agreements. Such an agreement should also contain
new  provisions  covering  other  matters  of  Community  competence  as  identified  by
the  Commission  in  its  previous  communication  of  19  November  2002.  This
agreement  would  be  the  subject  of  Community  signature  and  conclusion.  Member
States would maintain their own agreement with the country concerned dealing with
matters of national competence. This situation would be maintained until such time
as a mandate is granted for a full negotiation on a Community agreement. For most
countries this is likely to remain some time in the future.

The strength of Community action over bilateral approaches

Failure  to  reach  agreement  is  always  a  risk  in  any  negotiation  and,  while  many
countries  will  be  open  to  change,  some  might  find  the  amendments  requested
difficult  to  accommodate.  With  a  Community  position,  the  Commission  considers
that this is much less likely than in the case of a unilateral request by a lone Member
State.

Nonetheless, should this occur, the Commission would need to report to the Council
and consideration would be given to alternative approaches. The principle at stake is
of  great  importance  and  the  Community  must  take  a  firm  line  in  seeking  these
changes. Eventual options to make progress might include the adoption of a mandate
for  the  negotiation  of  a  completely  new  Community  agreement  to  replace  the
existing bilaterals or the concerted restriction by all Member States of air services to
and from the country concerned. Denunciation would be a serious matter, but it must
be held in reserve and cannot be ruled out.

10

48. 

49. 

50. 

51. 

52. 

Given  the  importance  to  many  countries  of  air  transport  connections  to  and  from
Europe,  it  is  likely  that  bilateral  partners  will  do  everything  to  avoid  a  complete
blockage in negotiations and the risk of denunciation. Most bilateral partners will not
be willing to countenance a complete breakdown in air links with Europe. However,
it  is  to  be  stressed  that  the  Community  will  only  be  able  to  make  progress  in  such
circumstances  if  all  Member  States  take  the  same  approach.  Adoption  of  this
mandate will guarantee such an approach.

Simpler contacts with stakeholders

The negotiation of "Community clauses" will permit Community airlines to expand
their international operations from airports in other Member States,  as well as pave
the  way  for  greater  commercial  integration  between  airlines  in  different  Member
States. As mentioned above in Section 1, such companies have a right to be treated
equally and accordingly should have an equal opportunity to be associated with and
informed about negotiations. Pursuing the issue of ownership and control through a
single Community effort will bring much transparency to the process and make the
association  of  the  industry  as  a  whole  with  negotiations  both  simpler  and  more
effective.

Adoption of the mandate and its implications

The  Commission  and  the  Council  will  need  to  address  the  precise  objectives,  the
prioritisation  of  contacts  with  third  countries  and  the  working  methods  for  the
negotiations,  in  the  course  of  agreeing  the  formal  mandate  within  the  Council.  A
recommendation  to  the  Council  in  accordance  with  Article  300(1)  of  the  Treaty  is
made in parallel to this communication.

Adoption  of  the  mandate  would  require  a  major  undertaking  on  the  part  of  the
Commission  and  the  Member  States  in  terms  of  staff  resources  and  political
commitment.  The  objective  would  be  the  creation  of  a  cohesive,  European  team
under the Commission's chairmanship that would work closely and intensively over
the coming years. The Commission would need to establish and pursue a substantial
programme of negotiations in the coming years in order to raise the issue with all the
Community's  trading  partners  in  this  sector.  The  Commission  considers,  however,
that  such  an  approach  provides  the  best  chance  of  success  in  furthering  the
Community's interests.

The Commission recognises that  even with the deployment  of  the full political and
technical  means  of  the  Commission  and  Member  States,  it  will  take  a  substantial
amount  of  time  to  complete  this  task.  In  the  meantime,  the  existing  agreements
should  remain  in  force  as  they  stand,  subject  to  the  proposals  attached  to  this
document.

2.4. 

Information Exchange and non-discrimination

53. 

The third element of the  package, alongside  the opening of US negotiations and of
negotiations  on  the  recognition  of  "Community  carriers"  and  on  matters  of
Community  exclusive  competence, 
this
Communication. This will provide a framework for ensuring that information about
negotiations and agreements in this complex area flows freely within the Community

is  a  draft  Regulation,  annexed 

to 

11

54. 

55. 

56. 

57. 

58. 

59. 

and  establishes  clear  rules  for  the  implementation  of  agreements  in  order  to
guarantee Community carriers fair and equal opportunities.

Moving to a cooperative and collaborative approach

At  present,  it  is  hard  to  obtain  a  precise  picture  of  the  state  of  aviation  relations
between  the  Community  and  its  trading  partners  around  the  World.  Each  Member
State  holds  its  own  set  of  bilateral  agreements  and  has  traditionally  entered  into
negotiations  to  develop  and  manage  those  agreements  entirely  independent  of  the
others. In addition, certain operational aspects of many agreements are contained in
confidential annexes that are not made available beyond the parties and their airlines.

The situation after the Court rulings changes this situation.

In the first instance, there is now a clear role for the Community in international air
transport  relations.  In  a  number  of  areas,  Community  competence  has  been
recognised and, on the matter of air carrier ownership and control, it is essential that
the  Community  exercises  its  competence  too.  Member  States'  ability  to  make
international  commitments  in  these  matters  is  curtailed  and  the  Commission  has  a
need to be supplied with information about the activities of Member States. This will
allow it to monitor developments in areas of interest to the Community and to fulfil
its legal role as guardian of the Treaty.

In addition, the implication of the Court's rulings of 5 November is that, in so far as
they  continue  to  take  charge  of  negotiating  market  access  arrangements,  Member
States  are  no  longer  negotiating  air  transport  agreements  in  the  interests  of  their
national  airlines  alone.  National  carriers'  interests  will  continue  to  be  an  important
factor for negotiators, but traffic rights must now be considered to be negotiated on
behalf  of  Community  carriers  in  a  more  general  sense.  Under  the  Treaty,  all
Community airlines with a valid operating licence and with an establishment in the
Member  State  concerned  have  the  right  to  pursue  their  activities  without  further
restrictions.  Hence,  it  will  be  important  to  ensure  that  information  about  pending
negotiations is made available in order  to allow  Community carriers  to declare any
interest they might have in the outcome and be given equal access to the negotiation
process.

Finally, in order to maximise the impact of the Community and its Member States in
relations with third countries, it would be desirable to ensure that information about
ongoing  and  future  contacts  with  third  countries  is  exchanged.  This  will  allow  the
Commission  and  the  Member  States  to  identify  common  problems  with  specific
trading  partners  and  to  coordinate  their  approaches  in  both  substance  and  timing,
either  by  developing  a  Community  demarche,  or  conceivably  by  coordinating  their
bilateral negotiations in accordance with Article 10 of the Treaty.

Providing for information exchange

To  this  end,  and  to  ensure  compliance  with  Article  10  of  the  Treaty,  a  draft
Regulation of the European Parliament and the Council is attached requiring Member
States to inform the Commission of all planned negotiations. The Commission will
examine all such notifications with a view to both verifying the compatibility of the
proposed  approach  with  Community  law  and  identifying  issues  of  broader

12

60. 

61. 

62. 

63. 

64. 

65. 

66. 

Community  interest  that  might  be  usefully  discussed  with  other  Member  States  or
coordinated more closely at Community level.

The proposal also requires Member States to notify the Commission of the outcome
of the negotiation in order to permit it to verify the compliance of the outcome with
Community law and to allow it to monitor the non-discriminatory implementation of
the agreements provisions, in particular in the area of traffic rights.

Finally,  the  proposal  obliges  Member  States  to  inform  and  accommodate  all
Community carriers with an establishment  in  their territory  in a  non-discriminatory
manner.  This  will  involve  requesting  expressions  of  interest  from  all  Community
carriers  in  advance  of  opening  negotiations  with  third  countries,  in  order  to  ensure
that their interests can be taken into account in the negotiations and so that they can
be present at relevant discussions.

Ensuring non-discrimination

However,  while  it  should  be  straightforward  to  associate  air  carriers  with  air
transport  negotiations,  securing  a  non-discriminatory  outcome  and  providing  for  a
non-discriminatory  distribution  of  the  traffic  rights  that  might  result  from  a
negotiation may prove to be one of the most difficult aspects of the transition from a
bilateral agreements to a Community international air transport policy.

To date, most agreements have been negotiated with the aim of securing traffic rights
for a single national flag carrier. In some Member States there are one or two smaller
international  carriers,  but  few  Member  States  have  had  to  face  the  problem  of
allocating the traffic rights they have negotiated between different airlines.

The rulings of the European Court of Justice of 5 November 2002 change all this. As
noted  above,  they  confirm  that  there  is  an  obligation  on  Member  States  not  to
discriminate between companies on the basis of  ownership  as long  as they  have an
establishment  of  some  form  on  their  territory.  This  is  a  legal  obligation  upon
Member States today. Air carriers have the right to challenge Member States where
they consider that their rights under the Treaty to have been removed or undermined
either  by  the  text  of  a  bilateral  agreement  or  by  the  means  in  which  it  has  been
applied.

Under the negotiating mandate proposed above and in its future negotiations with the
United  States  and  other  third  countries,  the  Community  will  need  to  address  the
deficiencies in the wording of the existing bilateral agreements and give Community
carriers the treatment they are due.

Designation

The aim in any negotiation concerning the Community and its Member States should
now  certainly  be  multiple  and  unlimited  designation.  Single  Designation  is  simply
insufficient to permit the meaningful implementation of Community law. Even if an
agreement  grants  rights  to  Community  carriers,  if  it  also  limits  designation  to  one
Community carrier on routes between a Member State and a third country or between
individual  cities  in  the  two  parties,  it  will  completely  undermine  the  rights  of
Community  carriers  under  the  Treaty.  Community  carriers  will  effectively  be
deprived of their market access rights.

13

67. 

68. 

69. 

70. 

71. 

72. 

73. 

Accordingly,  in  instances  where  third  countries  seek  to  maintain  existing  single
designation  clauses  or  request  the  imposition  of  new  ones,  Member  States  and
Community  negotiators  must  refuse  them  and  refer  the  matter  back  to  the
Commission. The Commission considers that this matter would be best dealt with as
part of the concerted Community renegotiation of the ownership and control clauses.

Severe  limitations  on  frequencies  could  also  be  problematic  for  similar  reasons.  It
will  be  important  to  ensure  that  all  interested  Community  carriers  can  be  properly
accommodated. The number of frequencies necessary  to  ensure  this  will  vary  from
country to country.

Distributing limited rights

In the near future it is likely that a substantial number of agreements will remain in
pace that either fail to provide enough frequencies, capacity or designation rights to
satisfy all interested Community carriers. There will therefore be a need for Member
States to establish procedures for the non-discriminatory allocation of limited traffic
rights or limited designation rights.

To  this  end,  the  draft  Regulation  attached  to  this  Communication  clarifies  the
obligations on Member States in this regard. It requires Member States to establish a
non-discriminatory  system  that  provides  information  to  carriers  about  the  traffic
rights available, requests expressions of interest in those traffic rights and adjudicates
between applications in a fair and transparent manner.

The  Commission  recognises  that  it  will  be  important  in  assessing  applications  for
designation  and  traffic  rights  for  Member  States  to  have  the  ability  to  dismiss
unrealistic applications and to ensure that  the rights are  used  to best effect.  To this
end clear criteria must be established for the adjudication process. Criteria that might
be applied by Member States include:

–  Consumer interest and the benefit to the public;

–  Competition in the markets in question;

–  The ability of the applicant to guarantee continuity of service;

–  The ability of the applicant to meet safety requirements

–  The need to apply Community law.

The draft Regulation imposes various requirements on Member States to ensure that
the  criteria  used  are  properly  communicated  to  carriers  and  that  the  decisions
resulting from their application is made public.

A set of general principles and procedures for the allocation of traffic rights are set
out  in  an  annex  to  this  document.  These  provide  a  reference  point  for  the  interim
period  before  the  proposed  Regulation  comes  into  force  and  will  be  of  use  in
implementing the Regulation once adopted.

14

3. 

74. 

CONCLUSION

The Commission believes that the opening of Community negotiations with the US,
taken  together  with  the  measures  explained  above,  represent  a  strong  package  of
measures that will enable the Community and its Member States to give effect to the
rulings of the Court of 5 November 2002 in the so-called "open skies" cases.

75. 

As a first step, it is essential to move forward to open negotiations with the United
States.

76. 

77. 

78. 

– 

The  Commission  urges  the  Council  to  take  the  decision  to  authorise
Community  negotiations  on  the  creation  of  an  Open  Aviation  Area  with
the United States.

Furthermore,  it  is  of  the  utmost  legal  and  economic  importance  to  allow  all
Community carriers to benefit from market access rights under the existing bilateral
agreements,  by  agreeing  with  third  countries  on  the  designation  of  Community
carriers. However, it will be impossible to make rapid progress in this field unless a
dynamic  Community  approach  is  taken,  under  Commission  leadership  and  a  clear
mandate.

– 

The  Commission  therefore  recommends  the  Council  to  authorise
Community  negotiations  on  the  designation  of  Community  carriers  on
international  routes  to  and  from  third  countries  and  on  matters  within
Community exclusive competence.

Within  the  Community,  it  is  essential  to  ensure  that  Community  airlines,  Member
State governments and the Community institutions are properly informed of ongoing
and  all  planned  negotiations.  This  will  permit  the  Commission  and  other  Member
States  to  identify  matters  of  common  interest  and  propose  coordination  where
necessary. For airlines, greater transparency will allow them to take real advantage of
their rights under the Treaty, which exist for the moment largely on paper.

Finally,  recognising that it  will  not  be  possible  to  move  immediately  towards  open
air  transport  agreements  with  all  bilateral  partners  and  that  traffic  rights  from  third
countries to and from Member States are likely to  remain  limited  in  some  cases,  it
will be important to agree upon common principles for the allocation of traffic rights
that will ensure that all interested Community carriers have a fair and equal chance
of obtaining market access.

–  With  these  aims  in  mind,  the  Commission  requests  that  the  European
Parliament and the Council give urgent consideration to its proposal for a
Regulation  on  the  negotiation  and 
implementation  of  air  service
agreements between Member States and third countries.

79. 

Pending the opening of the negotiations envisaged above and the entry into force of
the proposed Regulation on procedures for the negotiation and implementation of air
service  agreements  between  Member  States  and  third  countries,  legal  uncertainty
must be reduced. The Commission considers that Member States can reduce the risk
of  conflict  with  their  Treaty  obligations  and  with  Community  law  by  following  a

15

number  of  basic  principles,  which  anticipate  the  entry  into  force  of  the  proposed
regulation:

a)  Under  Article  10  of  the  Treaty,  Member  States  are  under  an  obligation  to
ensure fulfilment of obligations that arise therefrom and that they are under an
obligation to facilitate the achievement of the Community's tasks and they shall
abstain  from  any  measure  which  could  jeopardise  the  attainment  of  the
objectives of the Treaty. Member States must therefore conduct their relations
with third countries accordingly.

b)  Member States' actions must support the Community's initiatives, negotiations,

policies and objectives.

c)  Member  States  must  not  enter  into  negotiations  on  matters  of  Community
exclusive  competence  or  which  are  the  subject  of  Community  negotiations
under a specific mandate.

d)  With  regard  to  bilateral  agreements  Member  States  must  inform  the
Commission of all planned international negotiations and the outcome of such
negotiations  in  order  that  it  may  monitor  and  coordinate  approaches  to  third
countries as well as ensure that Community law is respected.

e) 

f) 

– 

the  adoption  of 

Pending 
the  above-mentioned  Regulation  specifying
Community  rules  in  this  matter,  Member  States  must  seek  to  distribute  any
traffic  rights  arising  from  their  bilateral  agreements  in  a  non-discriminatory,
transparent  and 
timely  manner  between  Community  carriers  with  an
establishment on their territory. A list of principles and procedures are set out
in an annex to this document.

In  order  to  give  practical  effect  to  the  right  of  establishment  as  set  out  in
Article 43 of the Treaty, Member States must use the opportunities offered by
their  bilateral  agreements  to  open  routes  to  and  from  third  countries  to  all
Community carriers with an establishment on their territory on a fair and equal
basis.

The  Commission  requests  Member  States  to  follow  these  guidelines  until
the  adoption  of  the  mandates  and  until  the  proposed  Regulation  enters
into force so as to avoid infringements of Community law

16

ANNEX to the Communication

PRINCIPLES  AND  PROCEDURES  FOR  THE  ALLOCATION  OF  TRAFFIC  RIGHTS  AMONG COMMUNITY
CARRIERS UNDER A BILATERAL AGREEMENT BETWEEN A MEMBER STATE AND A THIRD COUNTRY

General principles:

(cid:1)  Traffic rights are negotiated on behalf of Community carriers generally and not on behalf

of a single air carrier.

(cid:1)  All  Community  carriers  with  an  establishment  in  the  Member  State  shall  have  an  equal

right:

– 

– 

– 

to be informed of the traffic rights available;

to apply for the use of said traffic rights;

to have their application duly considered.

Procedures:

(cid:1)  Where either the number of Community carriers that can operate a given route or series of
routes is limited by an agreement, or where traffic rights are limited in terms of frequency,
capacity,  overflight  or  in  some  other  respect,  the  Member  State  shall  inform  all
Community  carriers  with  an  establishment  on  its  territory  of  the  available  traffic  rights
and issue a call for the expression of interest for the distribution such rights. In particular,
it shall indicate:

– 

– 

the number of designations and the traffic rights available;

the criteria according to which it will designate carriers and allocate the
traffic rights;

(cid:1)  Member States shall arrange the dissemination of this information so as to provide carriers

with at least two weeks in which to prepare their written applications.

(cid:1)  Where the applications received do not exceed the rights, the Member State shall allow all

applicant Community carriers to operate.

(cid:1)  Where  on  the  basis  of  the  written  applications,  the  rights  available  are  not  sufficient  to
meet the applications received, the Member State shall organise a public hearing, inviting
all carriers having expressed an interest to substantiate their request.

(cid:1)  The  Member  State  shall  duly  motivate  its  decisions  in  accordance  with  the  criteria

established in the call for interest.

(cid:1)  The  Member  State  shall  provide  for  an  appeals  procedure  before  a  court  of  law  or  an

independent arbitrator in accordance with national law.

(cid:1)  On completion of the exercise, the Member State shall publish the requests received, the
carriers designated and any allocation of capacity and frequencies between those carriers.

17

Member States shall seek to establish standardised procedures, including standard deadlines,
criteria  and  an  appeals  procedure,  although  these  may  vary  according  to  the  nature  of  the
agreement and the routes concerned.

18

2003/0044 (COD)

Proposal for a

EUROPEAN PARLIAMENT AND COUNCIL REGULATION

on the negotiation and implementation of air service agreements between Member
States and third countries

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  Commission11,  having  regard  to  the  opinion  of  the
Economic and Social Committee12,

Having regard to the opinion of the Committee of the Regions13,

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

Whereas:

(1) 

(2) 

(3) 

International aviation relations between Member States and third countries have been
traditionally governed by bilateral air services agreements between Member States and
third countries, their annexes and other bilateral and multilateral arrangements;

Following  the  judgement  of  the  Court  of  Justice  of  the  European  Communities  in
cases C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 and C-
476/98,  the  Community  is  exclusively  competent  to  negotiate,  sign  and  conclude
various aspects of such agreements.

The  Court  has  also  clarified  the  right  of  Community  air  carriers  to  benefit  from  the
right  of  establishment  within  the  Community,  including  their  right  to  non-
discriminatory market access to routes between all Member States and third countries;

(4)  Where it is apparent that the subject-matter of an agreement or convention falls partly
within the competence of the Community and partly within that of its Member States,
it  is  essential  to  ensure  close  cooperation  between  the  Member  States  and  the
Community institutions, both in the process of negotiation and conclusion and in the
fulfilment of the commitments entered  into. That  obligation to  cooperate  flows  from
the  requirement  of  unity  in  the  international  representation  of  the  Community.  The
Community  institutions  and  the  Member  States  should  take  all  necessary  steps  to
ensure the best possible cooperation in that regard.

11

12

13

OJ C […], […], p. […].
OJ C […], […], p. […].
OJ C […], […], p. […].

19

                                                
(5) 

(6) 

All  existing  bilateral  agreements  between  Member  States  and  third  countries  that
contain  provisions  contrary  to  Community  law  must  be  replaced  by  agreements  that
are wholly compatible with Community law

The  Community  should  undertake  to  revise  the  elements  in  existing  bilateral
agreements that infringe Community law;

(7)  Without prejudice to the provisions of the Treaty, and in particular Article 300 thereof,
Member  States  may  desire  to  make  amendments  to  existing  agreements  and  make
provision to manage their implementation until such time that an agreement concluded
by the Community enters into force;

(8) 

(9) 

(10) 

It is essential to ensure that a Member State conducting negotiations takes account of
Community law, broader Community interests and ongoing Community negotiations;
To this effect an efficient and transparent verification procedure should be established;

 If Member States wish to associate air carriers in the process of negotiations, all air
carriers with an establishment in the territory of the Member State concerned should
be treated equally;

In order to ensure that the rights of Community carriers are not unduly restricted, no
new  clauses  that  prevent  more  than  one  Community  carrier  from  entering  a  given
market or that place severe limitations on frequency  or  capacity or service should be
introduced in bilateral air service agreements;

(11)  Member States should establish non-discriminatory and transparent procedures for the
distribution  of  traffic  rights  between  Community  carriers.  In  some  circumstances,
traffic  rights  granted  under  an  agreement  may  be  sufficient  to  allow  all  Community
carriers who wish to provide service to enter the market;

(12) 

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

(13)  Since the objectives of the proposed action, namely the co-ordination of negotiations
with third countries with a view to concluding air services agreements, the necessity to
guarantee  a  harmonised  approach  in  the  implementation  and  application  of  the
agreements  and  the  verification  of  compliance  with  Community  law  of  such
agreements, cannot be sufficiently achieved by the Member States and can therefore,
by the reason of the Community-wide scope of this regulation, be better  achieved at
Community  level,  the  Community  may  adopt  measures,  in  accordance  with  the
principle of subsidiarity, as set out in Article 5 of the Treaty. In accordance with the
principle  of  proportionality,  as  set  out  in  that  Article,  this  regulation  does  not  go
beyond what is necessary to achieve those objectives;

20

HAS ADOPTED THIS REGULATION:

1.

2.

3.

1.

2.

Article 1 - Notification to the Commission

In  the  absence  of  Community  negotiations  with  a  third  country,  or  where  a
Community  agreement  exists,  but  addresses  only  a  limited  number  of  issues,  a
Member  State  may,  without  prejudice  to  the  respective  competencies  of  the
Community and its Member States, wish to enter into negotiations with that country
concerning  a  new  agreement  or  the  modification  or  application  of  an  existing  air
service  agreement,  its  annexes  or  any  other  related  bilateral  or  multilateral
arrangement.  If  a  Member  State  so  decides  it  shall  notify  the  Commission  and  the
other Member States of its intentions in writing.

This notification shall include a copy of the agreement concerned and an indication
of the provisions to be addressed in the negotiation, the objectives of the negotiation,
and  any  other  relevant  information.  It  shall  be  transmitted  at  least  one  calendar
month before contact is established with the third country concerned.

The Commission and the Member States may make comments to the Member State
which has notified its intentions in accordance with paragraph 1. That Member State
shall  take  such  comments  into  account  as  far  as  possible  in  the  course  of  the
negotiations with the third country concerned.

Article 2 - Consultation of stakeholders and participation in negotiations

In so far as air carriers are to be associated with the negotiations referred to in Article
1, Member States shall treat equally all Community carriers with an establishment on
their respective territories to which the Treaty applies.

Article 3 Prohibition to introduce more restrictive arrangements

Member States shall not enter into any arrangements that eliminate the possibility for
more  than  one  Community  carrier  to  provide  service  in  between  its  territory  and  a
third  country,  either  in  respect  of  the  entire  air  transport  market  between  the  two
parties or on the basis of specific city pairs.

Article 4 - Conclusion of agreements

Upon  conclusion  of  the  negotiations,  the  Member  State  concerned  shall  notify  the
Commission of the draft agreement and any other relevant documentation.

Following the notification under paragraph 1 the Commission shall examine whether
the  draft  agreement  is  compatible  with  Community  law  and  the  objectives  of  the
Community in this field. If the Commission intends to object to the conclusion of the
agreement,  it  shall  take  a  decision  to  this  effect  in  accordance  with  the  advisory

21

3.

.

procedure  laid  down  in  Article  3  of  Decision  1999/468/EC,  in  compliance  with
Article 7 and Article 8 thereof.

The Commission shall be assisted by the Committee established under Article 11 of
Regulation 2408/92/EC.

Article 5 – Distribution of traffic rights

Where a Member State concludes an agreement or amendments to an agreement or
its annexes that provide for limitations on the number of traffic rights or the number
of  Community  carriers  eligible  to  be  designated  to  take  advantage  of  traffic  rights,
that  Member  State  shall  ensure  a  distribution  of  traffic  rights  among  eligible
Community carriers on the basis of a non-discriminatory and transparent procedure.

Article 6 - Notification of Procedures

The details of the procedures that Member States apply for the purposes of Articles 2
and  5  shall  be  notified  to  the  Commission.  Any  subsequent  changes  to  such
procedures    shall  be  notified  to  the  Commission  at  least  6  weeks  before  they  enter
into  force.  All  such  notifications  shall  be  published  in  the  Official  Journal  of  the
European Communities.

Article 7 - Confidentiality

In  notifying  the  Commission  of  negotiations  and  their  outcome  as  foreseen  in
Articles  1  and  4,  Member  States  shall  clearly  inform  the  Commission  if  any
information  therein  is  to  be  considered  confidential.  The  Commission  shall  ensure
that  any  information  identified  as  confidential  is  treated  appropriately  without
prejudice to regulation 1049/200114.

Article 8 Entry into force

 This regulation shall enter into force on the thirtieth day following its publication in

the Official Journal of the European Communities.

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

14 OJ L 145 , 31/05/2001 P. 0043 - 0048

22

                                                
Done at Brussels, […]

For the European Parliament
The President
[…]

For the Council
The President

23