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Opportunity for Trans-Atlantic Civil Aviation: from Open Skies to Open Markets Benoit M.J

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Opportunity for Trans-Atlantic Civil Aviation: from Open Skies to Open Markets Benoit M.J Journal of Air Law and Commerce Volume 63 | Issue 1 Article 9 1997 Opportunity for Trans-Atlantic Civil Aviation: From Open Skies to Open Markets Benoit M.J. Swinnen Follow this and additional works at: https://scholar.smu.edu/jalc Recommended Citation Benoit M.J. Swinnen, Opportunity for Trans-Atlantic Civil Aviation: From Open Skies to Open Markets, 63 J. Air L. & Com. 249 (1997) https://scholar.smu.edu/jalc/vol63/iss1/9 This Comment is brought to you for free and open access by the Law Journals at SMU Scholar. It has been accepted for inclusion in Journal of Air Law and Commerce by an authorized administrator of SMU Scholar. For more information, please visit http://digitalrepository.smu.edu. AN OPPORTUNITY FOR TRANS-ATLANTIC CIVIL AVIATION: FROM OPEN SKIES TO OPEN MARKETS? BENOIT MJ. SWINNEN* TABLE OF CONTENTS I. INTRODUCTION .................................. 250 II. HISTORICAL AND LEGAL BACKGROUND IN THE EUROPEAN UNION ......................... 253 A. CHICAGO CONVENTION ......................... 253 B. EC TREATY ..................................... 257 C. THE THREE LIBERALIZATION PACKAGES .......... 259 1. First Package ................................ 259 2. Second Package .............................. 260 3. Third Package ............................... 261 D. COMPETITION RULES ............................ 265 E. BILATERAL AGREEMENTS ........................ 268 F. OPEN SKIES AREEMENTS ......................... 269 G. THE GENERAL AGREEMENT ON TRADE IN SERVICES (GATS) ............................... 270 III. ISSUES RAISED BY THE MULTIPLICATION OF BILATERAL OPEN SKIES AGREEMENTS ON THE ATLANTIC ROUTES ......................... 271 A. CRITICISM By THE EUROPEAN UNION INSTITUTIONS OF BILATERAL OPEN SKIES AGREEMENTS .................................... 272 B. ANALYSIS OF THE MANDATE OF THE COMMISSION TO NEGOTIATE A MULTILATERAL OPEN SKIES AGREEMENT ..................................... 276 C. BARGAINING CHIPS OF THE EUROPEAN COMMISSION .................................... 277 D. THE VESTED INTERESTS OF THE U.S ............. 280 1. Existing Open Skies Agreements ............... 280 * Lic. Dr., Universit6 Libre de Bruxelles, Brussels, Belgium, 1985; Lic. Ges., Universit6 Libre de Bruxelles, Brussels, Belgium, 1988; J.D. candidate, Southern Methodist University, 1998. 249 250 JOURNAL OF AIR LAW AND COMMERCE 2. Negotiations In Progress for Open Skies Agreements .................................. 280 3. Foreign Ownership Restrictions ................ 281 4. Cabotage Restrictions ......................... 283 IV. EVALUATION AND CONCLUSION: FROM OPEN SKIES TO OPEN MARKETS ............... 284 I. INTRODUCTION ( NJUNE 18, 1996, the Commission of the European Union J(E.U.) secured a mandate' to negotiate, on behalf of the Member States,2 a global "Open Skies"' agreement with the United States. The mandate is split into two successive phases covering, on the one side, soft rights,4 foreign ownership,5 and cabotage,6 and on the other side, hard rights.7 The relevance and scope of this newly-acquired authority granted to the E.U. Commission by this mandate necessitates an understanding of the background in which it arises. First, according to Neil Kin- On June 18, 1996, the European Community transport ministers rewarded the two-year efforts of Neil Kinnock, the E.U. Transport Commissioner since 1994, by granting the European Commission a mandate to initiate multilateral talks with the U.S. on behalf of the 15 Member States. This mandate, resulting from last minute compromises, is a reflection of the ambivalent attitudes of the individual Member States toward losing more sovereign control over a matter that international and national traditions customarily consider an appanage of national pride. The ministers reached an agreement on principles, but they did not complete a negotiation brief. Commission's Multilateralism Mandate Comes in Phases, Maybe Too Late, AVIATION EUROPE, June 20, 1996, available in 1996 WL 10773248. 2 Only 14 out of the 15 Member States voted in favor of the mandate. REUTER EUROPEAN COMMUNITY REPORT, June 18, 1996, at 3. 3 See infra note 9. 4 Soft rights, in civil aviation, are rights granted to the airlines of the signatory states of a bilateral or multilateral agreement in the territory of another signatory that do not, by themselves, have direct economic value. Soft rights typically in- clude ground handling at airports, services, maintenance, and more recently, computer reservation systems or code sharing. They are accessory to the exercise of hard rights. See infra note 7. 5 See infra notes 68-70. 6 See infra note 18. 7 Hard rights are principally the traffic rights defined by the Chicago Conven- tion. See infra part IIA. They have direct economic value because they give ac- cess to routes, hence to markets. This Comment focuses on scheduled air traffic rather than on charter traffic of goods and passengers which has historically been treated differently. An accessory to routes, slots at airports have progressively gained economic value as airports become increasingly congested. They are key to the efficient, economic exploitation of air rights. They could, for that reason, be included in hard rights although traditionally they are treated as soft rights. 1997] TRANSATLANTIC CIVIL AVIATION 251 nock, Transport Commissioner of the E.U., the European civil aviation sector will be legally and formally liberalized by April of 1997.8 Second, the U.S. policy of "conquer and divide"9 through bilateral Open Skies agreements10 is reaping results." Third, public international air law, involved in economic regulation of air travel, is in a general state of confusion. 12 Fourth, the airline 8 See Neil Kinnock, Address to the European Transport Conference-The Lib- eralization of the European Aviation Industry, London (September 16, 1996), available in LEXIS, Europe Library, Alleur File. See infra notes 137-138 and ac- companying text evaluating the validity of this statement. 9 See Kinnock, supra note 8, referring to a statement made by U.S. Secretary of Transportation Pena in 1994 in response to the European Union's inability or unwillingness to pursue negotiations with the United States toward a multilateral Open Skies agreement. The U.S. efforts at that time came as a result of the re- port of the National Commission to Ensure a Strong and Competitive Airline Industry, which stated: The principal challenge for our country is to fashion a new, growth- oriented international aviation framework that allows U.S. airlines to use their competitive strengths and international air services to realize their full potential. This goal will require a clear and deci- sive shift in policy by the United States away from the present sys- tem of bilateral regulation of air services to one based on multinational arrangements that may be regionalized at first, but eventually cover the globe. Daniel C. Hedlund, Toward Open Skies: Liberalizing Trade in International Airline Services, 3 MINN.J. GLOBAL TRADE 259, 262 (1994). Hedlund makes a strong argu- ment that "[t]he bilateral system is . .. incapable of supporting the continued expansion and globalization of the international air transport industry, and must be replaced by a multilateral regime." Id. at 299. "The key to any meaningful liberalization lies with the United States and the E[uropean] U[nion]," using the bilateral Open Skies between the United States and the Netherlands as a model. Id. at 298. The U.S.-Netherlands agreement, the first liberal Open Skies agree- ment, was entered into in 1992. Agreement to Amend the Air Transport Agree- ment, Apr. 3, 1957, U.S.-Neth., 12 U.S.T. 837, as amended, and the Protocol Relating to the United States-Netherlands Air Transport Agreement of 1957, Mar. 31, 1978, 29 U.S.T. 3088, as amended, Oct. 14, 1992, U.S.-Neth., T.I.A.S. No. 11976. 10 On Open Skies agreements, see generally Adam L. Schless, Open Skies: Loos- ening the ProtectionistGrip on InternationalCivil Aviation, 8 EMORY INT'L L. Rv. 435, 446-52 (1994). 11 See infra part III.A. (evaluating the effects of the U.S. policy to enter into Open Skies agreement with certain European countries, whether or not they are members of the European Union). 12 See Andras Vamos-Goldman, The Stagnation of Economic Regulation Under Pub- lic InternationalAir Law: Examining Its Contribution to the Woeful State of the Airline Industry, 23 TRANSP. L.J. 425, 443-46 (1996) (arguing that the system of bilateral agreements has created an unmanageable and inefficient web of over 4,000 agreements worldwide and that the underlying principle of individual state sover- eignty of the Chicago Convention does not reflect the unequal economic bar- gaining power of the individual states). See also Ruwantissa I.R. Abeyratne, Would 252 JOURNAL OF AIR LAW AND COMMERCE industry is either supporting or opposing changes, depending on its particular economic interests of the moment.'3 The purpose of this Comment is to examine the stakes in the negotiation of a global Open Skies agreement between the U.S. and the E.U. These negotiations arise in a context far more favorable to the United States than to the E.U. for reasons (mostly extraneous to any action taken by the United States) that result from the European Union's internal policy regarding competition in the civil aviation industry and the absence of a common external E.U. policy. The present success of the E.U. Commission in securing its long sought mandate is but a first and limited step toward a common external policy. This Com- ment argues that the E.U. Commission
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