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Airlines face uphill battle in E.U. emissions case, legal experts say

Against the backdrop of a brewing political backlash in Washington, 13 judges have the job of deciding whether the European Union's plan to impose carbon emissions caps on international airlines is in conflict with international law.

They face some tough legal questions. And they may not have all the answers, legal experts say.

In order to reach a conclusion, the judges sitting on the European Court of Justice, based in Luxembourg, have to tackle some key issues of state sovereignty. They also have to scour the small print of various international aviation agreements.

Meanwhile, the clock is ticking. Airlines landing or taking off in Europe are due to be included in the European Union's emissions trading system (ETS) beginning Jan, 1, 2012, although carriers would not have to start paying anything until April 2013.

Once the program goes into effect, airlines will have to buy 15 percent of their emissions certificates at auction. Carbon emissions from planes will initially be capped at 97 percent of the 2004-2006 levels.

The court could set "interesting precedents" in international law, particularly in the context of climate change as individual countries attempt to take action to tackle greenhouse gas emissions outside of global talks, said Robert Percival, an environmental law professor at the University of Maryland School of Law.

"It's really a fascinating case," he added.

Aviation and E.U. law experts believe the airlines are unlikely to prevail, citing a legal system very different from the United States in which the European court is somewhat restricted in what it can do. They also see some weaknesses in some of the airlines' arguments.

"It would be very surprising that the European Court of Justice would overthrow a major plank of E.U. legislation," said Mark Bisset, a London-based aviation lawyer at the Clyde & Co. law firm.

Another European lawyer, Jurgen Werner, who is based in Brussels with the Norton Rose firm and specializes in E.U. regulatory issues, said there was a 99.9 percent chance the court would find the directive to be valid.

"That's normally what happens," Werner added.

The European court

The 13-judge panel of the European high court -- which has a total of 27 members, one from each E.U. member state -- heard the equivalent of oral arguments in the case July 5 (ClimateWire, July 5).

The U.S. government -- and other nations, including China -- oppose the plan, and U.S. lawmakers have added to the criticism by introducing legislation that would prevent U.S. carriers from participating in the program (Greenwire, July 20).

The airlines' claim was originally filed in 2009 by U.S. carriers, led by the Air Transport Association of America (ATA), in the High Court in London. They had to file in the court of an E.U. member state because outside parties cannot directly challenge E.U. law in the European Court of Justice.

The English court then asked the Luxembourg court to answer several questions on whether the E.U. directive breaches international law.

Therefore, in this case, the court does not have the same role as the U.S. Supreme Court, which fairly regularly strikes down statutes deemed to be unconstitutional.

The court's duty is to provide guidance on E.U. law to the English court, which will eventually issue a ruling.

The next stage of the process takes place on Oct. 6 when the advocate general, an independent member of the high court, issues an advisory opinion. The court is not obligated to endorse that finding, but it often does, a court spokesman said.

A judgment is expected early next year. Then the case will be referred back to the High Court in London.

Airline arguments

The legal question lurking in the background is whether the E.U. directive is invalid.

The principal focus is on the fact that the requirements apply to emissions from the entire flight, not just the portion that occurs within E.U. airspace.

"In applying its environmental legislation to aviation activities in third countries' airspace and over the high seas, the E.U. has violated fundamental and well-established principles of customary international law," the lawyers for the airlines wrote in a court filing.

The European Union's actions infringe on the notion that each nation has sovereignty over its territory, "a universally recognized principle" of international law, as the airlines' lawyers put it.

There would be no problem with the European Union imposing ETS on flights between member countries, said Nancy Young, vice president of environmental affairs at ATA.

"The problem is that they then grabbed in a bunch of other countries," Young said.

By acting unilaterally, the European Union also "breached international obligations" that require such matters to be resolved by consensus under the auspices of the International Civil Aviation Organization (ICAO), a U.N. agency that handles global aviation matters, the airlines' lawyers say.

The airlines allege that the European Union has breached provisions of the Chicago Convention, the 1944 agreement that established the ICAO, and the 2007 bilateral accord between the European Union and the United States -- known as the Open Skies Agreement -- that loosened restrictions on where airlines could fly.

Both agreements grant states authority over aircraft that enter their airspace, but specifically prohibit them from imposing charges for entry into or exit from a country.

In response, the European Union and its supporters maintain that the ETS is not a charge or a tax but a cap-and-trade system.

"The purpose of our legislation is to reduce emissions, not make money," said Isaac Valero-Ladron, a spokesman for the European Commission, the executive body of the European Union.

Including aviation in the ETS is "fully consistent with international law" because the European Union is not seeking to extend its authority outside of its airspace, he added.

Legal experts in Europe note that a lengthy legal analysis takes place before the European Union adopts a new directive, not just within the European Commission but also in individual member states and other bodies, including the European Parliament.

One example is a 2008 report written by German law professor Eckhard Pache on the exact question of whether the proposal would contravene international law. It was commissioned by the German government.

Pache concluded that including airline emissions in the scheme would not constitute a fee in part because, under the Chicago Convention, it would not be "applied solely for the right to enter, exit or transit." Payments could not be constituted as a prohibited customs duty either as defined in the convention, he added.

As for the role of ICAO in tackling emissions, there would be no conflict because ICAO reached any agreement on a possible emissions trading scheme "or any other measure to combat greenhouse gas emissions from international aviation," Pache wrote.

Not surprisingly, environmental groups have been keen to offer their support to the European Union. Several, including U.S.-based Earthjustice and the Environmental Defense Fund, have intervened in the case.

Possible outcomes

Experts on both E.U. and aviation law based in the United States and Europe say the airlines are unlikely to win. Some think the entire case was launched more as a way to increase political pressure in Washington than as a genuine attempt to seek a legal resolution.

"My guess is that they will come down on the side of the E.U.," said aviation law expert Marshall Turner, a New York-based partner at the Condon & Forsyth law firm, of the European court.

Brian Havel, director of the International Aviation Law Institute at DePaul University College of Law in Chicago, said the court could easily dispose of the case by finding that the European Union is not bound by the Chicago Convention based on the fact that the individual member states are signatories, not the European Union as a single entity.

Then, the only recourse for the airlines would be to ask the U.S. government to intervene via ICAO or even the International Court of Justice, which handles disputes between states.

As Bisset, the London-based aviation lawyer, noted, it is "reasonably rare" for the European court to even take up the question of whether an E.U. directive is lawful.

Even if ATA were to win, under one possible scenario raised by Bisset in a legal journal, the landscape could get even messier.

He wrote that it is possible the court could rule narrowly in ATA's favor based only on the Open Skies Agreement between the United States and the European Union.

Under that scenario, non-U.S. airlines would still be included in the program, but other countries would then look to their own bilateral agreements with the European Union and possibly assert separate legal claims, he said.

Werner, the Brussels-based lawyer, raised the prospect of another possible outcome: The court could suggest that the scope of the program be narrowed in terms of how emissions are calculated so that, for example, emissions from outside the European Union might not be part of the equation.

"I imagine that could happen," Werner said, although he does not believe it will.

As DePaul's Havel noted, the European court "has a history of providing the European Commission what it wants with respect to air transport regulation."

That leads most experts to assume that the conflict is most likely to end up being resolved via international negotiations, not by a court.

"I wouldn't be surprised to see a great deal of diplomatic activity behind the scenes," said aviation lawyer Turner. "There's going to be quite a bit of pressure."

Click here to read ATA's court filing.

Click here to read the environmental groups' court filing.

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