Amended proposal for a Regulation of the European Parliament and of the Council concerning protection against subsidisation and unfair pricing practices causing injury to Community air carriers in the supply of airline services from countries not members of the European Community (presented by the Commission pursuant to Article 250(2) of the EC Treaty)
Date: 2003-05-07
Institutions: European Commission
Subjects: State aid, air transport, international competition, restriction on competition, third country, transport company

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 7.5.2003
COM(2003) 228 final

2002/0067(COD)

Amended proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

concerning protection against subsidisation and unfair pricing practices causing injury
to Community air carriers in the supply of airline services from countries not members
of the European Community

(presented by the Commission pursuant to Article 250(2) of the EC Treaty)

EXPLANATORY MEMORANDUM

1. HISTORY OF THE PROPOSAL

On  12  March  2002,  the  Commission  submitted  a  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  (COM  (2002)  110  final  –  2002/0067  (COD))  for  adoption  by  the  co-decision
procedure laid down in Article 251 of the Treaty establishing the European Community.

On 18 September 2002, the European Economic and Social Committee delivered its opinion1.

On  14  January  2003,  the  European  Parliament  approved  at  first  reading  a  series  of
amendments.  On  this  occasion  the  Commission  gave  its  position  on  each  amendment,
indicating  which  amendments  it  could  accept  entirely  or  partially  and  which  amendments
could  not  be  included.  Of  the  60  amendments  adopted  by  the  European  Parliament,  the
Commission accepted 38 (some with redrafting or in principle) and 8 partially.

2. OBJECTIVE OF THE PROPOSAL

The  airline  industry  in  the  Community  is  faced  with  a  critical  challenge:  the  need  for  it  to
compete  with  third-country  airlines  which  benefit  from  generous  subsidies,  while  the
Community industry is subject to strict rules on government aid.

The recent crisis in some parts of the industry has led third-country governments to subsidise
their  airlines  in  a  manner  which  is  likely  to  distort  competition.  Community  airlines  have
provided  information  about  the  pressure  which  these  airlines  exert  on  ticket  prices  and  to
which they are unable to respond.

Additionally,  subsidisation  is  not  the  only  type  of  state-involvement  which  can  result  in
distortion of international supply of  airline services. Pricing  practices  by foreign air  carriers
may  be  at  unfair  levels  by  virtue  of  them  being  state-controlled  rather  than  being  openly
subsidised. In fact, any subsidies granted by foreign governments to carriers they themselves
control would be extremely difficult to detect.

Some  third  countries  have  introduced  instruments  to  deal  with  such  situations.  Also  the
Community  has,  for  the  maritime  sector,  provided  for  redress  in  case  of  unfair  pricing
practices. However, for the airline sector, no such possibility exists at the Community level.
The only currently available means are bilateral agreements which often lack, both in terms of
coverage and  remedies,  the  potential  to  provide  swift  and  comprehensive  protection  against
subsidisation and unfair pricing practices. Indeed, even if one of the Member States had been
able to take any action under its bilateral agreements, this would have just widened the gulf
even further between the ways in which different Community airlines are treated.

The proposed instrument is designed to address this problem. It will allow Community action
against  unfair  competition  from  non-Community  carriers  on  routes  to  and  from  the
Community due to trade-distorting third country subsidies. Additionally, it will provide for a
remedy against unfair pricing practices by state-controlled air carriers.

1

OJ C 61, 14.3.2003, p.29

2

                                                
3. AMENDMENTS ACCEPTED/ACCEPTED IN PART

3.1. Amendments accepted as such, with redrafting or in principle

The  Commission  has  accepted,  subject  to  redrafting  where  appropriate,  half  of  the
amendments  adopted  by  the  European  Parliament  as  they  strengthen  or  clarify  the
Commission  text.  The  amendments  accepted  in  the  form  proposed  by  the  European
Parliament or after a minor redrating are n° 1, 2, 3, 4, 5, 6, 7, 13, 14, 15, 16, 17, 18, 20, 24,
28, 29, 30, 31, 34, 37, 41, 44, 45, 46, 47, 48, 50, 53, 56, 57 and 59.

As a result of the above, the title, recitals 1, 2, 3, 4, 10, 11, 12, 13 and 15 were modified, new
recitals 2a, 3a, 11a, 11b and 19a were inserted in the proposal and article 2(1)a, article 3(1),
article 3(1a), article 3(2), article 3(3), article 4(2), article 4(4), article 5(1), article 5(1a), article
5(2), article 5(3), article 5(5), article 7(1), article 9(2), article 9(3), article 9(4), article 10(1),
and article 11(1) were modified or inserted in the amended proposal.

The Commission has accepted in principle amendments n° 12, 21, 27, 49, 54 and 65. In this
regard, the following changes should be underlined :

–  Amendment 12 (Recital 9) : it is not subsidies as such which cause injury, but rather the

low price levels;

–  Amendment 21 (New recital 16a) : Further to a minor redrafting of the proposed text, the
Commission proposes  the insertion  of  a  new recital 16b to ensure legal consistency  with
Council  Regulation  95/93  on  common  rules  for  the  allocation  of  slots  at  Community
airports;

–  Amendments 27 (New article 1(1a)) and 54 (New article 9a) : The Commission proposes
to  merge  the  substance  of  these  two  amendments  into  a  new  article  6a  outlining  what
redressive measures, whether provisional or definitive, may entail; appropriate reference to
Council Regulation 95/93 is made to ensure the overall consistency of Community law;

–  Amendment 49 (Article 6(1)) : it would have been difficult to understand why the deadline
for  concluding  the  investigation  should  be  shorter  than  the  time  frame  available  for  the
imposition  of  transitional  measures;  accordingly,  the  Commission  proposes  a  period  of
nine months for the conclusion of investigations under normal circumstances.

–  Amendment 65 (Article 15) : the Commission fully subscribes to the political message of
urgency conveyed by this amendment. However, the Commission regrets that the proposed
time frame is not realistic since the date of 1st April 2003 is passed.

3.2. Amendments accepted in part

These are amendments 10, 11, 25, 26, 33, 40, 43 and 64.

Amendment 10:

The Commission cannot accept the last condition ("and an injury … ") since this recital refers
to  determining  the  existence  or  not  of  a  subsidy,  which  per  se,  has  nothing  to  do  with  the
injuries inflicted on Community carriers.

3

Amendment 11

The Commission can accept the first part, related to the difference to be made between normal
competitive  pricing  and  unfair  practices,  but  the  second  part  that  refers  to  promotions  and
special  offers  cannot  be  accepted  since  any  third  country  carrier  competing  unfairly  would
advocate that its practices relate to normal promotions of commercial nature. Moreover, such
a distinction is a concept rejected in the trade in goods area.

Amendments 25, 26, 33 and 43

For the Commission, the introduction of the words “significant” and material before “injury”
affects the legal security and may fail to fulfil the objectives pursued by the Parliament. The
notion of injury  is already  defined  in Article  4(1)a  of  the  proposal.  In  addition  the  wording
“material injury” is widely used in other Community trade defence instruments in which it has
a precise meaning.

Amendment 40

By adding “or of the aid received”, the amendment mixes the notion of injury with that of the
aid received, which is not appropriate. It may run against the idea that reddressive measures
should exceed neither the amount of the aid nor that of the injury.

Amendment 64

The Commission could accept the principle of submitting within two  years  an evaluation of
the implementation and the impact of this regulation, however it is not appropriate to make a
reference  in  the  body  of  a  regulation  to  the  ECJ  case  law.  Moreover  the  proposed  sentence
gives  the  impression  of  a  very  unclear  situation  with  regard  to  external  Community
competence in international civil aviation.

4. AMENDMENTS REJECTED

These are amendments 8, 9, 19, 22, 23, 32, 35, 38, 39, 55, 58, 60, 61, 62 and 63. They have
been rejected for the following reasons:

Amendment 8:

The link should not be made between this proposal and the development of a broader external
Community competence in the area of international civil aviation. Even if the Member States
were  to  refuse  to  pass  on  to  the  Community  broad  competencies  in  that  area,  Community
airlines ought to be protected against unfair practises from third country carriers.

Amendments 9 and 38 :

The  introduction  of  the  words  “significant”  and  material  before  “injury”  affects  the  legal
security and may fail to fulfil the objectives pursued by the Parliament. The notion of injury is
already defined in Article 4(1)a of the proposal. In addition the wording “material injury” is
widely used in other Community trade defence instruments in which it has a precise meaning.

4

Amendment 19:

The proposed  amendment,  i.e. the replacement of  "or" by  "and" just before  "…the injury is
negligible" in recital 14, would result in a contradiction with Article 9(2) and not be consistent
with proposed amendments number 20, 51 and 52. Indeed, the proposed Regulation provides
for  a  double  safety  mechanism:  reddressive  measures  can  exceed  neither  the  amount  of
subsidies, nor the amount of the injury. Amendments 20, 51 and 52 refer to and/or reinforce
that mechanism but replacing here « or » by « and » goes against the objective.

Amendments 22 and 55:

As a matter of general principle, it is acknowledged that it would be appropriate for excessive
duties  imposed  on  non-Community  carriers  to  be  reimbursed.  However,  this  regulation  and
proposed  amendments  to  it  pave  the  way  for  other  forms  of  reddressive  measures  than  the
"usual"  purely  financial  reddressive  duties  that  are  commonly  imposed  in  trade  defence
instruments.  And  it  is  unclear  how  the  reimbursement  procedures  proposed  in  these
amendments should be applied for these other reddressive measures.

In  any  event,  reimbursement  procedures  would  have  to  provide  for  the  reimbursement  of
duties in excess of the level of the measure or subsidy granted to the non Community carrier,
but  not  for  the  reimbursement  of  duties  in  excess  of  the  level  of  the  injury  suffered  by
Community carriers (see trade in goods provisions).

Amendments 23, 60, 61 and 62:

The  safeguard  procedure  is  used  in  questions,  which  have  to  be  dealt  with  as  a  matter  of
urgency. It is thus usually referred to alongside other procedures for those decisions and acts
which are not so urgent. This is not the case with the proposed amendments 23, 60, 61 and 62.

Moreover, it  is  not  unlikely  that  the  Member  States  would  be  divided  on  such  dossiers  and
that  the  Council  would  subsequently,  as  the  case  may  be,  fail  to  reach  decisions  on
Commission decisions referred to it by a single Member State.

In that regard, the proposed amendments are likely to undermine the credibility and efficiency
of  the  proposed  regulation  and  to  de  facto  deprive  the  Commission  of  one  of  its  key
institutional prerogatives, i.e. acting as the watchdog of Community interests.

Amendment 32

This amendment exceeds the scope of the subsidy definition in the trade in goods where there
is no requirement that subsidies must be "discriminatory" or "trade distorting". It is uncertain
how  this  should  be  established.  Moreover,  the  introduction  of  the  word  "significant"  before
"material  injury"  affects  the  legal  security  and,  for  that  reason,  it  may  fail  to  fulfil  the
objectives  pursued  by  the  Parliament.  In  addition,  the  wording  "material  injury"  is  widely
used in other Community trade defence instruments in which it has a precise meaning.

Amendment 35

Introducing  the  word  "operated"  as  suggested  will  imply  that  rates  charged  by  marketing
carriers in the framework of code share agreements may not be taken into account.

This may prove counter productive in some instances.

5

Amendment 39

Airline alliances are in a great variety of forms, shape and scope. Some are very loose, others
entail very close co-operation. Whether or not related carriers deserve protection depends on
the  level  of  integration/control  within  the  alliance,  this  can  only  be  done  on  a  case-by-case
basis.

It is therefore essential that the need for the exclusion of "related" Community carriers may be
appreciated  on  a  case-by-case  basis.  Without  that  discretion,  the  instrument  might  not  be
operational  in  many  cases,  considering  the  vast  number  of  relationships  in  the  form  of
alliances in this sector.

Amendment 58

The exact background and scope of the proposed amendment are unclear to the Commission
since the procedure laid down in Article 12 (2) provides per se for the Commission to make a
proposal and for an appropriate information of the Council.

Amendment 63

This  would  be  a  clear  derogation  to  the  important  principle  in  the  trade  in  goods  area  that
there  is  a  built-in  presumption  that  measures  against  unfair  trade  are  in  the  Community
interest,  if  the  substantive  conditions  are  fulfilled.  Only  when  there  are  compelling  reasons
against this presumption, measures are not imposed.

6

2002/0067(COD)

Amended proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

concerning protection against subsidisation and unfair pricing practices causing injury
to Community air carriers in the supply of airline services from countries not members
of the European Community

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 Commission2,

Having regard to the opinion of the European Economic and Social Committee3

Having regard to the Opinion of the Committee of the Regions4

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

Whereas:

(1) 

(2) 

There is reason to believe that The competitive position participation of Community
air  carriers  when  in  providing  air  services  to,  via  or  from  the  Community  could  be
adversely affected by certain unfair and discriminatory practices of non-Community
air carriers providing like air services;

Such unfair practices may  result from a  subsidy  or  subsidies  or other forms of aid
granted by a government or regional body or other public organisation of a country
which is not being a member of the Community or from certain pricing practices by a
non-Community air carrier or carriers which are is state-controlled;

(2a)

It is necessary to define the redressive measures to be taken against such unfair
practices;

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

2

3

4

OJ C […], […], p. […].
OJ C
OJ C

7

                                                
(3a)

(4) 

(5) 

(6) 

(7) 

It would be preferable for airline services to be included within the scope of the
GATS  process  of  the  WTO,  so  that  competition  and  subsidisation  in  the  sector
could be regulated fairly on a global basis;

The  Community  should,  in  the  mean  time,  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;

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;

It should be explained when a subsidy shall be deemed to exist and according to which
principles  it  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);

In determining the existence of a subsidy, it is necessary to demonstrate that there has
been a financial contribution by a government via a transfer of funds or that debts of
any kind representing government revenue that are is otherwise due are is foregone
or  not  collected,  and  that  a  benefit  has  thereby  been  conferred  on  the  recipient
enterprise;

(8) 

It should be explained when an unfair pricing practice is deemed to exist;

(8a)

(9) 

(10) 

(11) 

(11a)

It  should  be  made  clear  that  an  unfair  pricing  practice  can  only  be  deemed  to
exist  in  cases  where  that  practice  is  clearly  distinguishable  from  normal
competitive pricing practices;

It is desirable to lay down clear and detailed guidance as to the factors which may be
relevant for the determination of whether the subsidised or unfairly priced air services
provided by non-Community air carriers have caused material injury or are threatening
to  cause  injury;  in  demonstrating  order  to  demonstrate  that  the  price  levels  of
pricing practices related to the supply of such air services are responsible for cause
injury sustained by to the Community industry, attention should be given to the effect
of other factors, since consideration will be given to all relevant and known factors
and economic indicators which have a bearing on the state of the industry, and in
particular prevailing market conditions in the Community;

It  is  advisable  essential  to  define  the  terms  'Community  air  carrier',  'Community
industry', 'like air service' and 'state-controlled';

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

It  is  necessary  to  determine  that  a  complaint  should  be  rejected  where  there  is
insufficient evidence of injury to proceed and that proceedings should be limited
to  third  country  air  carriers  whose  services  have  a  significant  impact  on  the
Community market;

8

(11b)

It  is  desirable  to  lay  down  the  procedure  to  be  followed  in  the  investigation  of
unfair practices by non-Community carriers; this procedure should be limited in
time;

(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
investigation, in particular the rules whereby interested parties are to make themselves
known, present their views and submit information within specified time limits, if such
views and information are to be taken into account; it is necessary to allow interested
parties access to all information pertaining to the investigation which is relevant
to the presentation of their case; it is necessary to provide that, where parties do not
co-operate satisfactorily, other information may be used to establish findings and that
such information may be less favourable to the parties than if they had co-operated;

(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 normally no
later than six months after the initiation of proceedings and only for a six-month
period;

(14)  An investigation or proceeding should be terminated whenever there is no need to take
measures, 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;  that  measures  should  be  less  than  the  amount  of  countervailable
subsidies  or  the  degree  of  unfair  pricing  if  such  lesser  amount  would  remove  the
injury;

(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 or the sum corresponding to
the injury caused, where this is lower;

(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;

(16a) Preference should be given to duties when it comes to the imposition of redressive
measures;  where  such  duties  prove  not  to  be  appropriate,  other  redressive
measures may be considered;

(16b) The  application  of  this  Regulation  shall  be  without  prejudice  to  Council
Regulation  (EEC)  No  95/93  on  common  rules  for  the  allocation  of  slots  at
Community airports;

(17) 

(18) 

(19) 

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;

It is necessary to provide, in cases where sufficient evidence is submitted of changed
circumstances, for review of existing measures;

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

9

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.

(19a)

It is necessary to ensure that any measures taken by virtue of this regulation are
in  full  accordance  with  the  Community  interest,  with  particular  regard  to  the
interests of the industry and of users and consumers of air transport services;

HAVE ADOPTED THIS REGULATION:

Article -1

Objective

The  Regulation  lays  down  the  procedure  to  be  followed  in  order  to  respond  to  unfair
practices by non-Community air carriers which operate in competition with Community
air  carriers  on  specific  routes  to  or  from  the  Community,  in  so  far  as  these  practices
cause injury to Community air carriers on those routes, and to Community interests.

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

(2) 

Offsetting the unfair pricing practices by state-controlled non-Community air carriers

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

1.

(a)

Article 2
Subsidisation

A subsidy shall be deemed to exist if:

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

(i) where  a  government  or  other  public  body  practice  involves  a  direct
transfer of funds such as grants, loans, equity infusion, potential direct
transfer of funds to the company or the assumption of liabilities of the
company such as loan guarantees;

(ii)

debts  representing  government  or  other  public  body  revenue  that  is
are  otherwise  due  is  are  foregone  or  not  collected  such  as  fiscal
incentives such as tax credits;

10

(b)

2.

1.

1a.

(iii) a  government  or  other  public  body  provides  goods  or  services  other
than  general  infrastructure,  or  purchases  goods  or  services  from  the
company;

(iv)

a  government  or  other  public  body  makes  payments  to  via  a  funding
mechanism or entrusts or directs a private body to carry out one or more
of the type of functions illustrated above which would normally be vested
in  the  government  or  public  body  and,  in  practice,  in  no  real  sense,
differs from practices which may be normally followed by governments
or public bodies; and

a benefit is thereby conferred.

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 jurisdiction of the granting authority, including subsidies contingent upon export
performance.

Article 3

Unfair pricing practices

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  the  Community  air  fares  which  are
lower  than  sufficiently  below  the  normal  fare  rate  to  cause  sustained  injury  to
competing Community carriers.

Such practices must be clearly distinguishable from normal competitive pricing
practices.  To  determine  whether  this  is  the  case,  account  shall  be  taken  of  the
following elements:

–  the actual price at which tickets are proposed for sale;

–  the  number  of  seats  proposed  at  an  allegedly  unfair  price  out  of  the  total

number of seats available on the aircraft;

–  the  restrictions  and  conditions  attached  to  the  tickets  sold  at  an  allegedly

unfair price; and

–  the level of service proposed  by  all  carriers providing the like  air service in

question.

2.

The term ‘normal fare rate’ means

the comparable rate actually charged during a period of at least 6 months in the
a)
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. These costs shall be computed on the basis

11

of all costs incurred in the ordinary course of trade, both  fixed and variable,  plus a
reasonable amount for overhead expenses.

3.

A  non-Community  air  carrier  shall  be  deemed  to  be  "state-controlled"  if  the
Government  or  any  other  public  body  within  the  territory  of  a  third  country  owns,
directly  or  indirectly,  more  than  50  per  cent  of  the  equity  interest  in  it,  or  of  the
specific rights over a majority of its liabilities, or are able to determine its fares
and  revenue,  or  have  the  power  to  name  a  majority  of  its  directors  or  otherwise
legally control or direct its actions

Article 4

Determination of injury

1.

For the purposes of this Regulation:

(a)

(b)

(c)

(d)

the  term  "injury"  shall  be  taken  to  mean  material  injury  to  the  Community
industry, or threat of material injury to the Community industry;

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;

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 carriers5;

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 routes on which the air service under consideration is supplied.

2.

A determination of injury shall be based on positive evidence and shall involve an ,
following a prior objective examination of both:

(a)

(b)

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

the  consequent  impact  of  those  subsidised  air  services  on  the  Community
industry  as  indicated  by,  amongst  others,  trends  in  a  number  of  objectively
quantifiable  economic  indicators  such  as  number  of  flights,  utilisation  of
capacity  and  occupation  levels,  passenger  bookings,  market  share  obtained,
geographical  sphere  of  activity,  profits  obtained  on  these  routes  and
overall,  return  on  capital,  investment,  level  of  employment.  As  a  reference
period for such a trend at least one scheduling season shall be considered.

No  one  or  more  of  these  factors  can  necessarily  give  These  indicators  should  be
considered together and no single indicator should provide decisive guidance.

5

OJ L 240 , 24.8.1992, p. 1

12

                                                
3.

4.

5.

1.

1a.

2.

3.

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

Known Factors other than the air 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.

A  determination  of  Threat  of  material  injury  shall  only  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.  positively  determined  and  redressive  measures
imposed  if  the  totality  of  the  factors  considered  leads  to  the  conclusion  that,
unless redressive measures are taken, injury will occur imminently.

Article 5

Initiation of proceedings

An investigation under this Regulation shall be initiated upon a written complaint by
any natural or legal person acting on behalf of the Community industry such as an
association  representing  the  Community  industry,  or  on  the  Commission's  own
initiative, if there is sufficient evidence of the existence of countervailable subsidies
(including,  if  possible,  of  their  amount)  or  unfair  pricing  practices  within  the
meaning of this Regulation, injury and a causal link between the allegedly subsidised
air services and the alleged injury.

Complaints submitted to the Commission shall contain sufficient evidence of the
existence of the unfair pricing practice and the injury resulting therefrom. Even
if  no  complaint  has  been  lodged,  any  Member  State  which  has  sufficient
evidence regarding the granting of subsidies and the injury resulting therefrom
to  the  Community  sector  shall  immediately  forward  such  evidence  to  the
Commission.

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 laid down in Article 12(2), inform the complainant within 45 days
of  the  date  on  which  the  complaint  has  been  lodged  with  the  Commission.  A
complaint shall be rejected if injury or threat of injury has not been sufficiently
demonstrated to justify proceeding with the case.

The  notice  of  initiation  of  the  proceedings  shall  announce  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
control  the  air  carriers  allegedly  engaged  in  unfair  pricing  practices  and  the  period
within interested parties may make themselves known, present their views in writing
and  submit  information,  if  such  views  are  to  be  taken  into  account  during  the

13

4.

5.

1.

2.

3.

investigation; it shall also state the period within which interested parties may apply
to be heard by the Commission in accordance with Article 6(2).

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 proceedings and thereafter,
invite the foreign non-Community 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  in  order  to  attempt  to  arrive  at  a  mutually  acceptable
solution.

Article 6

The investigation

Following  the  initiation  of  the  proceeding,  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.
This  investigation  must  be  carried  out  expeditiously  and  shall  normally  be
concluded  within  a  period  of  nine  months,  except 
in  the  following
circumstances, where it may be prolonged:

– 

– 

negotiations with the foreign governments concerned have progressed to a
point that a satisfactory resolution of the complaint appears imminent; or

additional  time is needed in  order  to  achieve a  resolution  which  is  in  the
Community interest.

The interested parties which have made themselves 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.

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
investigation, provisional or final findings, affirmative or negative, may be made on
the basis of facts available. Where it 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.

14

Article 6a

Redressive measures

Without  prejudice  to  any  appropriate  action  to  be  taken  under  regulation
95/93/EEC,  redressive  measures,  whether  provisional  or  definitive,  shall
preferably  take  the  form  of  duties  imposed  upon  the  non-Community  carrier
concerned.

Article 7

Provisional measures

Normally  no  later  than  six  months  after  the  initiation  of  the  proceeding,
provisional measures may be imposed if a provisional affirmative determination has
been  made  that  the  air  carriers  under  consideration  benefit  from  subsidies  or  are
engaged in unfair pricing practices and consequent injury to the Community industry
and that the Community interest calls for intervention to prevent such injury.

Provisional  action  may  be  taken  in  accordance  with  the  procedure  laid  down  in
Article 12(2).

Provisional measures shall be imposed for a maximum of six months.

Article 8

Termination without measures

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

Where  protective  measures  are  unnecessary  the  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.

Article 9

Imposition of definitive measures

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).

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

15

1.

2.

3.

1.

2.

1.

2.

3.

4

5.

1.

2.

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 non-Community air carrier concerned and the normal fare rate established in
accordance with Article 3 but should and shall be less than that difference 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.

A  redressive  measure  shall  be  imposed  in  the  appropriate  reasonable  and
proportional amounts as determined 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.

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.

Article 10

Undertakings

Investigations may be terminated without the imposition of provisional or definitive
measures  upon  receipt  of  if  undertakings  are  received  from  or  agreements
reached with the subsidised enterprises and/or non-Community states entailing
satisfactory voluntary undertakings under which:

(a)

(b)

the  government  granting  the  subsidy  or  non-commercial  advantage  agrees  to
eliminate  or  limit  the  subsidy  or  non-commercial  advantage  or  take  other
measures concerning its injurious effects; or

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

Undertakings  shall  be  accepted  in  accordance  with  the  procedure  laid  down  in
Article 12(2).

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 determination as to subsidisation and
that  the  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.

16

Article 11

Reviews

1.

2.

1.

2.

The need for the continued imposition of measures in their initial form may shall 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 duly substantiated request by
non-Community air carriers subject to measures or by Community air carriers.

Reviews  shall  be  initiated  by  the  Commission  acting  in  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

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

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.

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

1.

Provisional  or  definitive  redressive  measures  shall  be  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.

17

2.

3.

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

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

Article 14a

Evaluation

Within two years of the entry into force of this Regulation, the Commission shall submit
to  the  European  Parliament  and  the  Council  an  evaluation  of  its  application  and  the
associated impact on the Community's air transport sector, including service providers,
users and consumers.

Article 15

Entry into force

This  Regulation  shall  enter  into  force  on  the  day  following  that  of  its  publication  in  the
Official Journal of the European Union.

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

Done at Brussels, […]

For the European Parliament
The President
[…]

For the Council
The President
 […]

18