Alliances, Immunity, and the Future of Aviation

AMERICAN BAR ASSOCIATION VOLUME 22, NUMBER 4, 2010

By Warren L. Dean, Jr. and Jeffrey N. Shane

eventeen years after the U.S. alliance/ATI development appears to be predicated on Department of Transportation a misunderstanding of both the role of alliances as an S(DOT) granted antitrust essential element in the liberalization of international immunity (ATI) to an innovative air services and the importance of ATI as a factor in KLM-Northwest joint venture, ATI that success. The article suggests that the criticism of has become one of the most contro- DOT’s handling of alliances and ATI fails to under- versial issues in current aviation stand the evolution of the international air transporta- law and policy. This article reviews tion networks and puts at risk a major aviation policy the history of ATI and its statu- success story. DOT’s approach to international airline tory foundation and attempts to place airline alliances alliances and ATI, the article concludes, has been pre- in a more contemporary perspective. Criticism of the scient and insightful, has benefited both the industry and its customers, and should not be disturbed.1

Lessor, Financier, and In 1992, the United States and the Netherlands entered Manufacturer Perspectives into the world’s first Open on the New Third-Party Skies agreement,2 predicated on a new DOT policy initia- Liability Conventions tive.3 The agreement eliminated most of the regulatory By Jeffrey Wool constraints on entry, capacity, and pricing that had charac- n the previous edition of this publication, my learned colleagues Sean terized bilateral air transport Gates and George Leloudas reviewed, from the perspective of the agreements since the first air transport and insurance industries, the proposed new third-party U.S.-U.K. Bermuda accord in I 4 liability conventions adopted at the International Conference on Air Law 1946. The Carter administra- in Montreal in April and May 2009.1 This article provides a lessor, finan- tion had launched the quest cier, and manufacturer perspective on the new conventions, primarily the for more liberal bilateral Convention on Compensation for Damage to Third Parties, Resulting from aviation arrangements in Acts of Unlawful Interference Involving Aircraft (the UIC). This anodyne 1977. Fifteen years later, by abbreviation veils the actual subject matter of this convention: terrorism, eliminating all regulatory con- and the unique legal challenges that pertain to terrorism. The article also straints on carriers’ access to assesses the Convention on Compensation for Damage Caused by Aircraft all gateway cities, the Open to Third Parties (covering general risks, thus referred to as “the GRC”)— Skies model took liberaliza- that is, damages from ordinary course operational incidents. tion to an entirely new level. continued on page 23 continued on page 17

Forum on Air andTheThe Air AirSpace and & SpaceSpace LawyerLawyer Law Volume 22, Number 4, 2010

The Air & Space Lawyer (ISSN: 0747-7499) is published quarterly by the ABA Forum on Air and Space Law, 321 N. Clark Street, Chicago, IL 60654-7598, to inform members of developments in air and space law and to keep the membership apprised of the activities of the Forum. The opinions expressed in the articles presented in The Air & Space Lawyer are those of the authors and shall not be construed to represent the policies of the ABA or the Forum on Air and Space Law. Chair’s Message Address corrections should be sent to the ABA, Membership Services, 321 N. Clark Street, Chicago, IL 60654-7598, [email protected], 800/285-2221. Copyright © 2010 American Bar Association. Greetings! Produced by ABA Publishing. Requests for permission to reproduce or repub- lish material from The Air & Space Lawyer should he Air & Space Lawyer is bringing you yet another outstanding issue, be addressed to ABA Copyrights and Contracts at www.abanet.org/policy/reprints.html. which Ken Quinn will describe in more detail in his Editor’s Column. Editor-in-Chief Ken and his team have consistently delivered a product that is compa- Kenneth P. Quinn T Pillsbury Winthrop Shaw Pittman LLP rable to the very best publications in its quality and the timeliness of its topics. Washington, DC [email protected] We’re sure you will agree that our journal is one of the finest benefits of your Managing Editor Forum membership. David Heffernan WilmerHale, Washington, DC Speaking of benefits, those of you who joined us in Chicago were treated [email protected] Assistant Editors to a spectacular conference, with a top-notch group of speakers giving us John Easton, Houston Lisa A. Harig, Washington, DC their perspectives on everything from airline alliances to orbital space debris Joseph D. Heyd, Cincinnati Dr. John Saba, Montreal, Canada to current labor issues to appellate advocacy. Keynoters John Luth from Jacqueline E. Serrao, University of Miss. Kathleen A. Yodice, Washington, DC Seabury Group and Glenn Tilton from United Airlines provided great insights ABA Staff Editor into the state of the industry from financial and operational perspectives. John J. Palmer Once again, we proved that that Forum is indeed the one-stop shop for Art Director Cameron Anhalt cutting-edge issues in aviation and space law. The social event at the new Forum Manager Dawn Holiday Modern Wing of the Art Institute of Chicago presented an unparalleled net- 312/988-5660 working opportunity before a breathtaking skyline, amidst gorgeous paint- Forum Chair Renee Martin-Nagle Airbus North America Holdings Inc., Herndon, VA ings, sculpture, and other objets d’art. The success of the conference was due Chair-Elect Steven H. Taylor FedEx Express, Memphis, TN in large part to the tireless efforts of the effervescent program chair Julie Ellis Immediate Past Chair Nancy D. LoBue and our wonderful ABA staff liaison Dawn Holiday. Many thanks to them, the Federal Aviation Administration, Washington, DC Budget Officer David A. Schwarte program committee, the moderators, panelists, and all attendees for your time Sabre Inc., Southlake, TX and energies. GOVERNING COMMITTEE MEMBERS: Andrea J. Brantner We hope that you will join us for one or both of the next two conferences. GE Capital Aviation Services, Stamford, CT The annual Update Conference will be held at the Ritz-Carlton in Washington Randal Robert Craft, Jr. Holland & Knight LLP, New York, NY on January 27, 2010, and will have panels on new developments in legislation, Mark C. Fava Nelson Mullins Riley & Scarborogh LLP, Charleston, SC aviation regulation, airline alliances, satellite navigation, and aircraft accident Richard A. Hauser litigation. We are grateful to Nancy Sparks and Andy Steinberg for serving as The Boeing Company, Arlington, VA James Hnat co-chairs of this conference. For the annual fall conference we’ll go to the JetBlue Airways Corporation, Forest Hills, NY West Coast and gather at the Fairmont Hotel in Seattle on September 30 and Monica Hargrove Kemp Airports Council International-North America, October 1, 2010. Bob Span has agreed to chair this conference, and we’ve Washington, DC Francine J. Kerner already begun the planning process. Watch your e-mails and check our website Department of Homeland Security, Arlington, VA at www.abanet.org/forums/airspace for more information as we get closer. Paul R. Lovejoy United Air Lines, Chicago We’ve been asked by a number of people to provide ways to get more Franceska O. Schroeder Fish & Richardson P.C., Washington, DC involved in the Forum, and we’re open to ideas. At the Chicago conference, Patricia G. Smith Roy Goldberg volunteered to dispatch news about current legal issues Consultant, Washington, DC and opinions. Contribute to these updates by e-mailing Roy at rgoldberg@ Robert S. Span Steinbrecher & Span LLP, Los Angeles sheppardmullin.com. In addition, we have formed four committees that Peter Steenland Jr. Sidley Austin LLP, Washington, DC members are invited to join, depending on your interests. Julie Ellis chairs Nancy N. Young the Outreach Committee, which serves as the Forum’s connection with law Air Transport Association of America, Inc., Washington, DC students, law schools, and young lawyers, including overseeing the scholar- LIAISONS: Law Student Liaison Nicholas D. Welly ship program and establishing a mentoring program. Nancy LoBue chairs University of Mississippi School of Law the Education Committee, which is charged with keeping our membership Sponsorship Liaison Jennifer Trock Pillsbury Winthrop Shaw Pittman LLP updated on pressing issues through webinars, brown bag lunches, e-mail Young Lawyer Liaison India J. Pinkney Federal Aviation Administration blasts, etc. Franceska Schroeder chairs the Marketing Committee, which will Canadian Liaison William F. Clark seek liaisons with other like-minded organizations, both domestically and Clark & Company, Toronto continued on page 27

Volume 22, No. 4, 2010 2 The Air & Space Lawyer Editor’s Column

s we approach the end of the decade and close In the face of withering criticism from the out the “00s” it appears Congress is no closer Department of Justice and others regarding DOT Ato passing comprehensive FAA Reauthorization grants of antitrust immunity to airline alliances, their since the agency’s authorization expired two years article is a tour de force defense of DOT analyses and ago. We were told Congress wanted to wait until the decision making in this area. Some argue that alliance presidential election to put forward its comprehensive benefits unquestionably work in favor of the alliance plan. It’s now been over a year since the election. carriers, but question the effect on smaller competitors Good grief. or consumers facing the combined market power of Congress is often the first to criticize the FAA. the alliance carriers. Jeff and Warren forcefully point Members rush to issue press releases taking officials to the market-opening and consumer-efficiency ben- to task for “misguided and flawed” environmental efits of immunity grants, and argue that DOT should reviews, “inability to handle” NextGen, or having “too continue to possess the authority to grant immunity cozy” of a relationship with industry. Enough already. to alliances based on its unique understanding of How about we call a moratorium on congressional the dynamic aviation industry. With DOT approval criticism of the FAA until Congress does its job? Rather of the SkyTeam and Star alliance immunity requests, than heaping scorn on distinguished public servants but EC investigations ongoing, and the oneworld on a near-daily basis, pass a long-overdue FAA reau- immunity application facing union, industry, and thorization bill now. Put aside partisanship or personal regulatory opposition, their article is most timely and pride, strip pet projects and highly controversial mat- informative. ters, and give the agency what it sorely needs: a reli- Next up is Jeffrey Wool’s “Lessor, Financier, and able, long-term platform for agency programs. Manufacturer Perspectives on the New Third-Party In this political climate, with ongoing and divisive Liability Conventions.” Our last issue featured an debates on more universal and media-friendly top- article on this topic from the insurers’ perspective. As ics such as health care, climate change, and stimulus general counsel of the Aviation Working Group and packages, FAA reauthorization ought to be an easy at Freshfields in London, Jeffrey has labored tirelessly one to knock out. With a forecast of 1 billion pas- for the Cape Town Convention to establish an inter- sengers to be flown on U.S. commercial air carriers in national aircraft registry, and now presents the manu- 2015, we cannot continue to wait to fund and update facturer and lessor perspectives on aviation terrorism a system that benefits and transports so many. This protection. He adeptly assesses the terms of the new industry creates over 9 million jobs and contributes draft Conventions relating to compensation for dam- $640 billion to the U.S. economy. If we’re truly seri- age to third parties. While ratification of the texts is ous about safety and jobs, then let’s have fewer press still unclear, the introduction of a legal framework releases, investigations, and hearings, and a lot more and discussion on aviation terror compensation repre- focus on passing basic enabling legislation. sents an enormously valuable and informed contribu- Speaking of continuing to improve our industry, tion to the debate. we are delighted to begin this issue with an article Across the pond, we’ve also seen new develop- entitled “Alliances, Immunity, and the Future of ments in airline consolidation and regulations. We’re Aviation,” by past Forum chair (he has a few other pleased to share an article entitled “New Trends “former” titles) Jeff Shane at Hogan and Warren Dean in the European Commission’s Review of Airline at Thompson Coburn. Both Jeff and Warren have Mergers,” by Sven B. Völcker, partner at WilmerHale spent a lifetime, in and out of government, working in Brussels. Sven thoroughly analyzes how the toward the advancement of international aviation European Commission review of airline mergers has policy. They are dear and longtime friends who pos- evolved since its decision to prohibit the Ryanair/Aer sess keen minds, wicked pens, suave diplomatic skills, Lingus merger. He argues that the issues and tools and twisted humor—all good. that the Commission has been using to investigate and in some cases substantially delay airline mergers Editor-in-Chief Kenneth P. Quinn is a partner in the Washington, D.C., office of Pillsbury Winthrop Shaw Pittman LLP. continued on page 27

Volume 22, No. 4, 2010 The Air & Space Lawyer 3 New Trends in the European Commission’s Review of Airline Mergers

By Sven B. Völcker

or many years, the European Commission clearance.4 An analysis of these cases reveals a number has explicitly welcomed consolidation of the of trends that now allow a more informed prediction of FEuropean airline industry, which remains frag- how the commission will likely appraise future consoli- mented notwithstanding the commission’s consider- dation than would have been possible 18 months ago. able efforts toward removing regulatory obstacles. This article describes some of the key changes in the Consistent with that approach, in 2005 the com- commission’s analysis of substantive issues in airline mission approved the acquisitions by Air France of merger cases, the commission’s use of investigatory KLM and by Lufthansa of Swiss without an in-depth, tools, and its remedies policy. It concludes by asking Phase II merger review, albeit subject to remedies (in whether the commission’s “new approach” is sustain- particular the release of takeoff and landing slots at able, especially in light of the current industry crisis. congested airports) on certain overlap routes.1 In July 2006, the Court of First Instance confirmed the com- Analysis of substantive issues mission’s approach, rejecting easyJet’s complaint that The commission’s basic approach toward analyzing the commission should not have authorized the trans- airline mergers has not changed fundamentally. It con- action without further-reaching remedies.2 tinues to define the relevant markets on a city-pair basis However, the commission’s decision to prohibit rather than through the lens of network competition. Ryanair’s bid for Aer Lingus in 2007 cast some doubt Under the commission’s approach, every connection over its willingness to weigh the loss of competition between a point of origin and a point of destination on individual overlap routes against the general policy (O&D) is generally viewed as a separate market.5 Where objective of consolidation.3 Admittedly, the Ryanair/ the catchment areas of the relevant origin/destination Aer Lingus situation was characterized by a number airports overlap to a significant extent, flights departing of unusual circumstances. The transaction would have from different airports located close to each other may combined two carriers focused on point-to-point traf- be found to belong to one and the same market.6 In a fic and maintaining their principal base at the same second step, the commission determines which airlines airport (Dublin), rather than the largely complemen- and other modes of transport compete on a given O&D tary networks of two network carriers. The unwill- pair. On short-haul routes, the commission generally ing target (Aer Lingus) and the Irish government (its considers that direct and indirect flights belong to sepa- major shareholder) actively opposed the transaction, rate markets, except where direct flights are offered whereas most airline transactions proceed with tacit or only infrequently. In contrast, on long-haul routes, the explicit political support from the Member State gov- commission considers direct and indirect flights to be ernments concerned. Nevertheless, it is well known in substitutable as long as the connecting time of the indi- the industry that shortly after the Ryanair/Aer Lingus rect flights is not unreasonably long.7 The commission decision, the commission conducted an internal tends to consider alternative modes of transport, specifi- review of the effectiveness of remedies in past airline cally high-speed trains, only when the total travel time cases, which provided a further indication that future by train is similar to the travel time by plane on a city- reviews of airline mergers would likely be of a differ- center-to-city-center basis.8 ent quality than in those in earlier days. However, within this general framework, the com- Indeed, while all of the six airline transactions noti- mission’s practice has evolved in a number of areas, fied subsequently avoided the fate of Ryanair/Aer especially in the aftermath of Ryanair/Aer Lingus. Lingus, the commission opened Phase II investigations Time-sensitive v. non-time-sensitive passengers in three of them—KLM/Martinair, Lufthansa/Brussels The distinction between “time sensitive” (typically Airlines, and Lufthansa/Austrian Airlines—in each case business) and “non-time-sensitive” (typically leisure) investigating for many months before finally granting passengers has long been an element of airline cases. Also, in the most recent cases, such as Lufthansa/ Sven B. Völcker is a partner at the Brussels office of WilmerHale. He Brussels Airlines and Lufthansa/Austrian Airlines, the practices in the firm’s Regulatory and Government Affairs department, and is a member of the Antitrust and Competition and Avia- commission relied on the distinction to dismiss competition Practice groups. tive constraints invoked by the merging parties, such as

Volume 22, No. 4, 2010 4 The Air & Space Lawyer travel alternatives that involve longer travel time (trains, the only certainty that parties have in future merger indirect flights, flights from secondary airports) or infe- reviews is that they should not rely too heavily on the rior schedules (such as carriers that do not offer a same- success of any argument based on the presence (or, as day return), or fail other “soft” criteria such as on-board the case may be, the absence) of competitive interac- frills, lounges, or frequent flyer programs. However, one tion between two airports within the same broader can detect increasing uncertainty as to how valid the catchment area. distinction still is and where the line between time-sen- Potential competition and appropriate sitive and non-time-sensitive passengers should properly counterfactual in cases of preexisting cooperation be drawn. This is due in part to the commission having In past reviews of airline mergers (at least as far as had to argue against its own distinction in cases such as the combination of network carriers was concerned), Ryanair/Aer Lingus and Lufthansa/Eurowings, in which the commission did not focus much attention on the notifying party alleged that there was only marginal the elimination of potential competition on a given competition between the parties as they pursued dif- route, and never required remedies on this basis. This ferent business models aiming at different passenger changed in the three recent Lufthansa transactions. 9 groups. More fundamentally, however, the uncertainty In Lufthansa/Brussels Airlines and Lufthansa/British is rooted in dramatic changes in passenger behavior Midland, the commission grappled with the question and airline business models that over time have led to of whether preexisting, standard unilateral free-flow a large-scale migration of business travelers to economy code share agreements between the parties provided class and restricted tickets (at least on short- and an indication of potential competition by the market- medium-haul routes), and have thus made it very diffi- ing carrier, competition that would be eliminated by cult to categorize any given traveler as time sensitive or combining it with the operating carrier. The commis- non-time sensitive based on his or her choice of a given sion determined that while such code share agreements type of ticket. While the commission has recognized allow the marketing carrier some degree of freedom that the time span between booking and departure may in setting fares, the operating carrier’s control over its provide some indication for the degree of relative time inventory means that such residual competition for and price sensitivity, it is readily apparent that draw- seats on the same flight is not structurally safeguarded, ing a clear line for market definition purposes is very so that the transaction does not materially reduce difficult. Nevertheless, one should expect that in future premerger competition on routes covered by the code cases the commission will continue to seek empirical sharing agreement.13 However, this insight prompted support for the intuition that there must be a certain the commission to question whether the continued group of passengers who would typically only choose existence of this code share agreement should be the between the merging parties. appropriate “counterfactual” against which to measure Similarly, the commission’s recent case law shows the transaction’s impact. In Lufthansa/Brussels Airlines, a certain tension when it comes to accepting whether the commission concluded that but for the transaction, flights from secondary airports should be considered Brussels Airlines would have joined the oneworld alli- as part of the same market. In Ryanair/Aer Lingus, the ance, which would in turn have led to a termination commission viewed Ryanair-operated flights from many of the preexisting code share agreement that Brussels secondary airports as substitutable with Aer Lingus– Airlines had with Lufthansa’s subsidiary Swiss, which operated flights to principal airports. The commission in turn would have caused Brussels Airlines to start stipulated a benchmark to the effect that airports within operating its own services on the Brussels-Zurich route. 100 kilometers or one hour’s driving distance of the On this basis, the commission required slot remedies relevant city center should normally be considered as on the Brussels-Zurich route. within the same catchment area and thus the same In Lufthansa/Austrian Airlines, the commission relevant market.10 However, in Lufthansa/Brussels dealt with a variation of the aforementioned potential Airlines, the commission did not accept the benchmark competition issue, in that preexisting cooperation as relevant for flights from Antwerp airport, located between Lufthansa and Austrian Airlines went much only 50 kilometers away from the Brussels city center, further than standard code sharing.14 Indeed, for and in Lufthansa/Austrian Airlines, it did not did not almost 10 years before the merger, the parties had accept that Frankfurt-Hahn was a substitute for flights operated a profit-sharing joint venture on the routes to Austria (not even for non-time-sensitive passengers), between Austria and Germany. The commission did while it had viewed Frankfurt-Hahn as an alternative not dispute that the joint venture in its present form for flights to Dublin in Ryanair/Aer Lingus.11 Similarly, precluded price competition between the parties, in Lufthansa/British Midland, the commission did not including on hub-to-hub routes where both airlines view flights from East Midlands and Nottingham to were operating aircraft under the joint venture. Brussels as substitutable, even though it had reached However, again the commission questioned whether the opposite conclusion in Ryanair/Aer Lingus with the continued existence of the joint venture was the respect to flights to Dublin.12 It would appear that appropriate counterfactual against which to measure

Volume 22, No. 4, 2010 The Air & Space Lawyer 5 the transaction’s impact. Its decision stipulates that, Lufthansa’s no-frills subsidiary Germanwings were but for the sale of Austrian Airlines to Lufthansa, in fact competing fiercely, even though the commis- Lufthansa’s rival Air France—which had not even sub- sion had predicted the opposite four years earlier mitted a nonbinding offer in the privatization process– when it examined the acquisition by Lufthansa of –would eventually have acquired Austrian Airlines, Germanwings’ parent company Eurowings.17 terminated the joint venture with Lufthansa, and prompted Austrian Airlines to compete with Lufthansa Investigatory tools on a number of Austrian-German routes. In its airline merger investigations prior to Ryanair/ It can thus be expected that in future merger cases Aer Lingus, the commission relied primarily on market involving preexisting cooperation between airlines, shares calculated on the basis of booking data avail- the commission will conduct a necessarily speculative able from Global Distribution Systems (so-called MIDT analysis of possible counterfactuals. Where alternative data), as well as the views of competitors, corporate transaction or alliance membership scenarios seem customers, and travel agencies. However, in line with tenuous, it should not be excluded that the commis- the evolution of the commission’s substantive analysis, sion will resort to the argument—which only appears it has employed new investigatory tools in its recent as a dictum in the Lufthansa decisions—that preexist- investigations. ing cooperation in its current form could be viewed as Econometric analysis infringing Article 81 EC (the EC’s equivalent of § 1 of In Ryanair/Aer Lingus, Ryanair’s arguments hinged the Sherman Act15) and could thus not be guaranteed to a large extent on showing that Ryanair and Aer to continue indefinitely, notwithstanding the substan- Lingus were not close competitors even where they tial procedural and substantive issues that such an served the same city pairs. To support its arguments, analysis in the framework of a merger case raises. Ryanair’s economists submitted extensive econometric Spillover effects between the target airline and the evidence to the commission, which in turn prompted acquirer’s existing alliance partners unwilling target Aer Lingus to counter with economet- While most of the aforementioned developments ric evidence of its own.18 The resulting “battle of the point to increasing scrutiny of airline mergers, there is economists,” with the commission’s Chief Economist one area in which the commission’s approach in recent Team (CET) conducting its own analysis, produced a cases is more restrained than in the past, namely the 115-page economic annex to the commission’s deci- treatment of the merging airlines’ alliance partners. sion, and set the standard for future reviews.19 Thus, In Air France/KLM and Lufthansa/Swiss, the commis- in all three Lufthansa cases, the CET requested exten- sion assumed that airlines with which the acquirer sive daily pricing data over a several-year period to had a particularly close alliance (e.g., Alitalia in the examine issues such as the closeness of competition case of Air France and SAS in the case of Lufthansa) between the merging parties, the impact of third- would also cease competing with the target company party entry, and the degree of competition between post-merger.16 This led to a considerable increase in flights departing from proximate airports. While the the number of city pairs on which the commission final decisions in all three cases do not suggest that considered the transaction to create overlaps. However, these analyses were dispositive, companies need to be beginning with Lufthansa/Brussels Airlines, the com- aware that the data the commission may request may mission refined its approach. It recognized that a entail considerable delay and expense, and will typi- blanket presumption that the target and the acquirer’s cally require the retention of outside economists. It is existing alliance parties would no longer compete noteworthy that in Lufthansa/Austrian Airlines, the post-merger could be justified only where existing alli- commission even required the submission of extensive ance agreements automatically extend to subsequently pricing data as part of the prenotification process.20 acquired affiliates, which should only rarely be the case. Beyond that, merger-specific spillover effects Internal documents could arise only on city pairs where the merging par- Consistent with a general trend in its merger review ties’ services overlap in any event. In such a situation, practice, the commission has recently shown consider- the commission will investigate on a case-by-case basis able interest in the parties’ internal documents as a whether the alliance partner’s (typically indirect) ser- means of verifying competitive dynamics. In particular, vices constitute an effective competitive constraint on the commission’s new focus on potential competi- the merging parties. This limitation makes sense, as the tion means that in future reviews, it is likely to issue commission can easily intervene on the basis of Article requests for documents discussing possible entry on 81 EC post-merger if the existing alliance relationship routes served by the other party to the merger. Such is in fact later expanded to cover the target’s network. requests need not necessarily be limited to the merging In future cases, the commission will thus not encounter parties—in Lufthansa/Brussels Airlines, the commission the kind of situation that it faced in Lufthansa/Austrian issued a formal, wide-ranging request for documents Airlines, when it had to recognize that Austrian and to a third-party airline to verify its intentions to enter a

Volume 22, No. 4, 2010 6 The Air & Space Lawyer number of overlap routes. Nor do the documents need attempt to secure their own slots through the regular to be limited to the overlap routes themselves—in the process for every IATA season but can continue to use three Lufthansa cases, the commission took great inter- the transferred slots as long as they operate on the est in, and requested large amounts of documents and route. These and other small changes make it easier data with regard to, the parties’ entry and exit decisions for low-cost carriers to take up slots, as these carri- on comparable benchmark routes. Parties contemplat- ers typically have particularly demanding operational ing mergers are well advised to identify in advance the requirements due to short turnaround times. possible custodians for such documents. Of particular interest is the use of grandfathering of Passenger survey slots in order to provide additional inducement for a Another legacy of the Ryanair/Aer Lingus case is new entrant. Grandfathering in this context means that that, at least in future Phase II airline reviews, the after a certain period of operating on the overlap route commission is likely to retain an independent third in competition with the merged entity (the so-called party to conduct a passenger survey in order to gather utilization period), the new entrant is free to use the empirical evidence of actual and hypothetical pas- slots for operating services to other, more lucrative senger behavior, such as passengers’ willingness to destinations if it wishes. From a regulatory perspective, switch to alternative carriers, airports, or modes of grandfathering is a double-edged sword: while it may transport in response to a hypothetical post-merger induce entry on the problem route in the short term, price increase. The commission did so in KLM/ it incentivizes exit from that route after the utilization Martinair and Lufthansa/Brussels Airlines, and the period. The shorter the utilization period, the greater survey results are an integral part of the final deci- the incentive for purely opportunistic entry that does sions in those cases. While even the best-designed not really address the route-specific competition prob- survey will have methodological limitations, and lem. The issue also has a legal dimension, given the the results almost inevitably give rise to divergent importance the Community courts attach to the princi- interpretations, they are clearly preferable to relying ple of proportionality when it comes to designing rem- on often strategic and/or superficial responses from edies in merger cases generally and in airline cases spe- competitors, travel agents, and corporate customers. It cifically.23 Grandfathering is not a new concept, but the is thus somewhat disappointing that the commission most recent cases clearly show the commission’s will- seems reluctant to accept the application of its own ingness to apply it in new ways. Thus, in Lufthansa/ survey results in a critical loss analysis.21 Given the Brussels Airlines and Lufthansa/Austrian Airlines, the airlines’ high fixed costs and corresponding high mar- commission used different utilization periods depend- gins per passenger, such an analysis typically shows ing on the relative value of the slots—shorter utilization that even a small percentage of passengers switching periods for routes that are relatively unattractive for in response to a hypothetical fare increase would new entrants and involved airports with comparatively make such a fare increase unprofitable. low levels of congestion, longer utilization periods for routes involving congested hub airports. The commit- Remedies ments in Iberia/Vueling/Clickair provide for a reduced As mentioned above, shortly after Ryanair/Aer utilization period of only two IATA seasons in the Lingus, the commission conducted an internal review event that one and the same entrant is willing to oper- of its remedies policy in past cases, and Commissioner ate in competition with the merged entity on a “signifi- for Competition Neelie Kroes has repeatedly stated in public that, notwithstanding the commission’s sup- cant number” of overlap routes from a given airport, port for airline in Europe consolidation, she will insist effectively incentivizing a new entrant to set up a base 24 on effective remedies that protect competition on the or station additional aircraft at that airport. overlap routes.22 While fine-tuning of the slot and other remedies may At first glance, the remedies agreed in the most obviously facilitate entry into routes that are in any recent cases—Iberia/Clickair/Vueling, Lufthansa/ event attractive for new entrants, a fundamental prob- Brussels Airlines, and Lufthansa/Austrian Airlines lem remains. Unlike in traditional merger cases, there —do not differ radically from those used in earlier is no productive asset dedicated to the overlap market airline cases. They principally involve the parties’ that the parties could divest. The entry decision is ulti- commitment to transfer takeoff and landing slots at mately driven by the new entrant’s business decisions congested airports to new entrants that are unable to and thus outside of the scope of any remedy that the obtain suitable slots through the regular allocation merged entity can offer. The commission recognized in process. Over time, the commission has tightened its Lufthansa/Brussels Airlines and Lufthansa/Austrian the requirements for such slot releases. For short- Airlines decisions that the profound crisis affecting haul flights, the merging parties now need to release the entire air transport sector will lead to more muted slots within a 20-minute window of the new entrant’s expressions of interest in entering new routes. But the requested times. New entrants no longer need to more fundamental tension runs deeper than the current

Volume 22, No. 4, 2010 The Air & Space Lawyer 7 crisis: the more the commission insists that a remedy 13. Case COMP/M.5335, Lufthansa/SN Brussels Airlines; Case COMP/M.5403, Lufthansa/BMI. be designed to virtually assure new entry, the more 14. Case COMP/M.5440, Lufthansa/Austrian Airlines. the merging parties (and ultimately the commission’s 15. 15 U.S.C. §§ 1–7. own pro-consolidation agenda) may become hostage to 16. Case COMP/M.3280, Air France/KLM (Feb. 11, 2004), http://ec.europa.eu/competition/mergers/cases/decisions/ strategic behavior of their fiercest rivals. The dilemma m3280_en.pdf; and Case COMP/M.3770, Lufthansa/Swiss (July 4, is compounded by the extent to which the commission 2005), http://ec.europa.eu/competition/mergers/cases/decisions/ insists on identifying additional problem routes based m3770_20050704_20212_en.pdf. 17. Case COMP/M.5440, Lufthansa/Austrian Airlines. on debatable notions such as the distinction between 18. Case COMP/M.4439, Ryanair/Aer Lingus. time-sensitive and non-time-sensitive passengers or 19. Id. potential competition. 20. Case COMP/M.5440, Lufthansa/Austrian Airlines. 21. See Case COMP/M.5141, KLM/Martinair. The commission took a similar position in Case COMP/M.5335, Lufthansa/SN Brussels Outlook Airlines. The commission has clearly stepped up its scrutiny 22. Case COMP/M.4439, Ryanair/Aer Lingus. 23. See Case T-177/04, easyJet v. Commission. of airline mergers in the last few years––identifying 24. Case COMP/M.5364, Iberia/Vueling/Clickair (Jan. 9, substantive issues such as potential competition it has 2009), http://ec.europa.eu/competition/mergers/cases/decisions/ not previously focused on, using investigatory tools m5364_20090109_20212_en.pdf. that involve considerable delay and expense for the merging parties, and increasing its expectations in terms of remedies. Ultimately, these hurdles did not stop any of the airline mergers notified post Ryanair/ Aer Lingus, even if in some of these cases agreement on the remedies was reported to be hard fought and achieved only at the eleventh hour. Nevertheless, as The ABA Forum on Air & Space Law would like to the air transport industry continues to face its gravest extend a special thank you to our Conference Sponsors: crisis in history, the pressure to consolidate increases, and the number of carriers that will commit to enter overlap routes based on remedies declines, the com- GOLD mission will have to carefully consider whether its new approach to airline mergers is sustainable and compatible with its pro-consolidation stance.

Endnotes 1. Case COMP/M.3280, Air France/KLM (Feb. 11, 2004), http://ec.europa.eu/competition/mergers/cases/decisions/ SILVER m3280_en.pdf; and Case COMP/M.3770, Lufthansa/Swiss (July 4, 2005), http://ec.europa.eu/competition/mergers/cases/decisions/ m3770_20050704_20212_en.pdf. 2. Case T-177/04, easyJet v. Commission, [2006] ECR II-01931. 3. Case COMP/M.4439, Ryanair/Aer Lingus (June 27, 2007), http://ec.europa.eu/competition/mergers/cases/decisions/ m4439_20070627_20610_en.pdf. 4. Case COMP/M.5141, KLM/Martinair (Dec. 17, 2008), http://ec.europa.eu/competition/mergers/cases/decisions/ m5141_20081217_20682_en.pdf; Case COMP/M.5335, Lufthansa/SN Brussels Airlines (June 22, 2009) (text of decision not yet publicly available); Case COMP/M.5440, Lufthansa/Austrian Airlines (Aug. 28, 2009) BRONZE (text of decision not yet publicly available). 5. See, e.g., Case COMP/M.5335, Lufthansa/SN Airholding (June 22, 2009) (not yet published), ¶¶ 12–14. 6. See, e.g., id. ¶¶ 51–104. 7. See, e.g., id. ¶¶ 36–50. 8. See, e.g., id. ¶¶ 117–40. 9. Case COMP/M.4439, Ryanair/Aer Lingus (June 27, 2007), http://ec.europa.eu/competition/mergers/cases/decisions/ m4439_20070627_20610_en.pdf; Case COMP/M.3940, Lufthansa/ Eurowings (Dec. 22, 2005), http://ec.europa.eu/competition/mergers/ cases/decisions/m3940_20051222_20212_de.pdf. 10. Case COMP/M.4439, Ryanair/Aer Lingus. 11. Case COMP/M.5335, Lufthansa/SN Brussels Airlines (June 22, 2009) (text of decision not yet publicly available); Case COMP/M.5440, Lufthansa/Austrian Airlines (Aug. 28, 2009) (text of decision not yet SCHOLARSHIP SUPPORTER publicly available); Case COMP/M.4439, Ryanair/Aer Lingus. 12. Case COMP/M.5403, Lufthansa/BMI (May 14, 2009), http://ec.europa.eu/competition/mergers/cases/decisions/ m5403_20090514_20310_en.pdf; Case COMP/M.4439, Ryanair/Aer Lingus.

Volume 22, No. 4, 2010 8 The Air & Space Lawyer An Intersection of Air and Space Law: Licensing and Regulating Suborbital Commercial Human Space Flight Operations By Michael C. Mineiro

magine the excitement of traveling to the upper What legal advice will the commercial human space limits of the atmosphere, experiencing weight- flight industry need? I lessness and the beauty of mother Earth, and A full range of legal services specially tailored to returning home to share your stories. Several compa- the industry will be required. A market will develop nies in the United States are developing and actively for lawyers practicing in “traditional” areas, such as marketing this experience and it is anticipated that contracting, financing, and regulatory, that are able in a few years and for a few hundred thousand dol- to transpose their traditional knowledge base for this lars you will be able to purchase such a ride. But unique industry. Niches will include federal and state where man goes, so does law, and as lawyers our vehicle licensing and liability risk management. natural inclination is to ask how these activities are to be regulated. How is suborbital commercial human flight This article examines the regulation of subor- regulated in the United States? bital commercial human space flight in the United The Commercial Space Launch Act (CSLA), as States, highlighting aspects of the U.S. regulatory amended, is the principal law governing the licens- regime, particularly the role of the Federal Aviation ing and regulation of commercial space transportation Administration (FAA). The European Union is now in the United States.3 As originally enacted in 1984, starting to look at developing its own regulations as the CSLA was limited to the regulation of expendable well and this article illustrates how the EU approach launch vehicle (ELV) operators and launch sites. This may differ from that of the United States. The practi- regulatory authority was granted to the Department cal questions of future demand for legal services and of Transportation (DOT). To implement this author- upcoming legal challenges also are addressed. ity, DOT established the Office of Commercial Space Transportation, and later the Associate Administrator for What is the emerging industry of suborbital the Office of Commercial Space Transportation (FAA- commercial human space flight? AST) under the administration of the FAA. In 1988, the Suborbital commercial space flight is a service offered CSLA was amended to provide a three-tier liability risk- by private companies to private individuals, government sharing regime, including conditional indemnification agencies, nonprofit organizations, and educational insti- for catastrophic accidents.4 In 1998, CSLA was amended tutions. Numerous applications have been identified for to make clear DOT authority to license reusable launch suborbital flights, including flights for purposes of tour- vehicle (RLV) operators. In 2004, Congress amended ism and high-altitude scientific research. the CSLA “to promote the development of the emerging Suborbital commercial human space flight is one commercial human space flight industry” and clarified subset of commercial space flight. It can be under- DOT authority to implement regulatory standards to stood as the carriage of persons for compensation govern commercial human space flight.5 on a suborbital trajectory1 that passes through outer The CSLA is primarily driven by two public policy space.2 The suborbital commercial human space flight objectives: (1) “to ensure compliance with the inter- industry will be comprised of primary and secondary national obligations of the United States” and (2) “to service providers and manufactures. Vehicle operators, protect the public health and safety, safety of property, vehicle manufacturers, insurers, pilots, participant and national security and foreign policy interests of the training, and medical service providers are just a few United States.”6 Congressional legislation pertaining examples of potential industry participants. And let’s to the regulation of human space flight has attempted not forget the lawyers! to strike a balance between these objectives and the needs of the nascent human space flight industry to Michael C. Mineiro is a doctoral candidate and Boeing Fellow at the Institute of Air & Space Law, McGill University. The author evolve in a regulatory environment that “neither stifles expresses sincere appreciation to Michael Gerdhard and Laura technology development nor exposes crew or space Montgomery for sharing their thoughts on the subject of this article. flight participants to avoidable risks as the public All views and opinions in this article are those of the author alone and do not necessarily reflect those of any other individual, govern- comes to expect greater safety for crew and space flight ment, institution, or corporation. participants from the industry.”7

Volume 22, No. 4, 2010 The Air & Space Lawyer 9 The FAA’s Office of Commercial Space How might the EU regulatory approach differ from Transportation (FAA-AST) issues experimental per- that of the United States? mits and licenses to vehicle and site operators. The EU has not yet adopted a regulatory posi- Permits and licenses require interagency review and tion with regard to regulating suborbital commercial approval, including the Department of State, Federal human space flight. There is an academic discussion Communications Commission (FCC), and Environmental about whether or not and to what extent the European Protection Agency.8 To obtain a suborbital human Aviation Safety Agency (EASA) system is adequate to space flight launch operator license, an applicant must accommodate such regulations. However, neither the (1) undertake a pre-application consultation with the European Commission nor member states have yet FAA, (2) provide information and satisfy a public safety given an opinion on the regulatory authority of EASA review, (3) demonstrate compliance with human space in this field. flight regulations, (4) provide information for an envi- A primary question raised in European discourse ronmental impact review and satisfy environmental is whether such vehicles fall under the International impact requirements, (5) provide information for maxi- Civil Aviation Organization (ICAO) definition of air- mum probable loss (MPL) analysis and satisfy financial craft and, therefore, whether the rules for aircraft responsibility requirements, and (6) receive approval should apply. It has been proposed that the ICAO from an interagency policy review. Only one license or annex definition of aircraft includes suborbital vehi- permit is required from the DOT to conduct activities cles. This means that suborbital vehicles that “derive involving crew or space flight participants, including support in the atmosphere from the reactions of the launch and reentry.9 air other than the reactions of the air against the Two important features within the FAA-AST regu- earth’s surface” would be categorized as suborbital latory regime are suborbital rockets and spaceflight aircraft and suborbital rockets.17 Categorization of participants. Suborbital vehicles are regulated as these vehicles as aircraft would subject them to air- suborbital rockets if the vehicle is rocket-powered craft certification standards. As compared to current and generates thrust that is greater than its lift for U.S. suborbital rocket standards, this is a considerably the majority of the rocket-powered portion of its more detailed and substantial standard for vehicle ascent.10 By focusing on the degree of lift gener- manufacturers to achieve. ated by the non-aerodynamic lift of a vehicle, this Another important departure that has been proposed definition achieves the legislative goal of including a is for participants on suborbital flights to be regulated broad array of possible suborbital vehicles into the as “passengers” and not “space flight participants.”18 regulatory structure of the CSLA. However, operators This approach would allow for more significant regula- of suborbital rockets that “use traditional aviation tion of suborbital vehicles in order to protect the health technology and components, including wings, for and safety of passengers. It also would shift assump- lift and glide capability, as well as rocket propulsion tions of liability risks and loss to the operators. for thrust to maintain their trajectories” may require other FAA authorization, specifically “an experimen- Will there be international standards similar to ICAO tal airworthiness certificate (EAC), as a condition of SARPS (Standards and Recommended Practices)? a launch license, to operate in the National Airspace In 2005, the ICAO Council considered the concept (NAS).”11 of suborbital space flights in relation to the Chicago In the United States, suborbital human space flights Convention.19 The main question explored by the carry paying “space flight participants,” not “pas- Council was whether suborbital flights would fall sengers.”12 Unlike aircraft passengers, space flight within the scope of the Chicago Convention and participants assume a significant degree of physical therefore ICAO’s mandate.20 and legal risk.13 The FAA-AST has limited regulatory The Council’s working paper appropriately rea- authority to protect the health and safety of space soned that “should suborbital vehicles be considered flight participants. Furthermore, given the nature of (primarily) as aircraft, when engaged in international suborbital flight, space flight participants have poten- air navigation, consequences would follow under tially significant third-party liability exposure.14 the Chicago Convention, mainly in terms of registra- Recently states have begun to pass legislative initia- tion, airworthiness certification, pilot licensing and tives in support of the commercial space flight industry. operation requirements (unless otherwise classified These include the establishment of spaceport authori- as State aircraft under Article 3 of the Convention).”21 ties, tax incentives, state and local taxing and bonding However, the Council failed to conclude whether or authorization, military spaceport infrastructure conver- not suborbital vehicles should be considered primar- sion, trust funds, liability immunity, and spaceport ily as aircraft. The U.S. regulatory approach does infrastructure development.15 Federal law does not pro- not consider suborbital vehicles primarily as aircraft. hibit state legislation, so long as it is not inconsistent If the EU adopts the ICAO annex definition of air- with the CSLA.16 craft within its suborbital vehicle regulatory regime,

Volume 22, No. 4, 2010 10 The Air & Space Lawyer then an important precedent will be established that issued and the industry has time to apply the licensing strengthens the argument that ICAO should consider regulatory regime in practice, it will be difficult to con- suborbital vehicles primarily as aircraft. clude whether the current regime is sufficient to serve Practically, the international harmonization of the needs of the United States and its domestic com- regulations governing all vehicles operating in shared mercial suborbital human space flight industry. airspace is necessary. If ICAO does not take the lead It is important for the licensing regime to be in this area, other mechanisms will need to be imple- assessed as one part of a larger federal regulatory mented, either via ad hoc or formal arrangements, to regime. As the commercial suborbital human space ensure aircraft and suborbital vehicles can operate flight industry develops and experience with the safely in shared airspace. U.S. regulatory regime is gained, it is likely regulatory issues outside licensing, such as export control What are the future legal challenges for the and FCC licenses, will have an impact on licensed regulation of U.S. suborbital commercial human operations. space flight? Neither the European Commission nor member Tort Liability: Serious deficiencies exist in the tort states have yet to adopt a regulatory regime for subor- liability. Tort liability is primarily governed by state bital vehicles. For the time being, Europe is observing law, with litigants subject to a multiplicity of jurisdic- the United States and engaging in relevant discourse. tions without unified standards. As a result, parties If the EU chooses to regulate suborbital vehicles as involved in human space flight must do their best to aircraft and not as suborbital rockets, the respective formulate potential risk by drawing parallels to other cross-Atlantic regimes will not be harmonized. This established industries such as aviation and adven- raises two important questions. How will the EU’s ture sports/tourism.22 Legal precedent exists in these regulatory approach affect both the U.S. and EU com- respective fields that establish legal duties, standards mercial human space flight industry? What, if any, of care, immunities, and defenses for involved parties. regulatory body should be responsible for harmoniz- The difficulty is predicting how courts will interpret ing international suborbital flight? current federal and state statutory law and common law and how the law will be applied in litigation aris- Endnotes 1. Commercial Space Launch Act of 1984, Pub. L. No. 98-575, ing from an accident. Interested parties should under- 49 U.S.C. § 70102(20) (2009), defines “suborbital trajectory” as “the take legal risk mitigation measures that minimize intentional flight path of a launch vehicle, re-entry vehicle, or any exposure and protect against tort liability. portion thereof, whose vacuum instantaneous impact point does not leave the surface of the Earth.” On-Orbit Jurisdiction: The DOT has not been 2. No rule of conventional international law has been estab- granted explicit jurisdiction to regulate orbital opera- lished that defines where airspace ends and outer space begins. tions. Commercial space flight will evolve from sub- Likewise, no U.S. law or regulation defines or demarcates air and outer space. It is interesting to note that the U.S. Department of orbital to orbital operations. Congress will need to Transportation awards commercial astronaut wings to pilots and address this omission. flight crew on board a licensed launch vehicle on a flight that Catastrophic Indemnification: The federal govern- exceeds 80.45 km as recognition for having reached outer space. As suborbital transport systems and high-altitude platform vehicles ment provides conditional catastrophic loss indemni- enter into service, this legal ambiguity in demarcation of air and fication for licensed operations.23 On December 24, outer space will need to be addressed in order to resolve questions 2009, Congress extended this legislation until the end of concurrent conflicting air and outer space legal norms. 3. See Timothy Hughes & Esta Rosenberg, Space Travel Law of 2012. (and Politics): The Evolution of the Commercial Space Launch Safety Regulations: The DOT is prohibited from Amendments Act of 2004, 31:2 J. Sp a c e L. 12 (2005). 4. See id. at 17. restricting or prohibiting launch vehicle design fea- 5. H.R. 5382, 107th Cong., preamble (2004). Enacted as tures and operating practices until the year 2012 Commercial Space Launch Amendments Act of 2004, Pub. L. No. 108- unless a serious or fatal injury occurred to crew or 492, 118 Stat. 3974–83 (2004). The CSLA and related amendments are codified in Title 49, Subtitle IX, Chapter 701, of the U.S. Code. a space flight participant, or an event during flight 6. 49 U.S.C. § 70101(a)(7) (2009). posed a high risk of causing a serious or fatal injury 7. Id. § 70101(a)(15). to crew or a space flight participant.24 In 2012 this 8. Id. §§ 70101 et seq.; Commercial Space Transportation Regulations, 14 C.F.R. §§ 401 et seq. (2009). prohibition is lifted, but the DOT is not required to 9. Commercial Space Launch Act of 1984, Pub. L. No. 98-575, 49 implement such regulations. Should such regulations U.S.C. § 70104(d) (2009). be implemented? And if so, to what extent? 10. Id. § 70102(16). 11. Id. 12. Id. § 70102(17). Conclusions 13. See Tracey Knutson, What Is “Informed Consent”? 33 J. Sp a c e To date, several experimental permits have been La w 105 (2007). 14. See id. issued, but no licenses have yet been issued for sub- 15. Michael Mineiro, Law and Regulation Governing U.S. Commercial 25 orbital human space flight operators. It is anticipated Spaceports: Licensing, Liability, and Legal Challenges, 73 J. Ai r L. & suborbital human space flight operator licenses will be issued in the near future. Until operator licenses are continued on page 22

Volume 22, No. 4, 2010 The Air & Space Lawyer 11 The International Charter on Space and Major Disasters and International Disaster Law: The Need for Collaboration and Coordination By Josie Beets

hen countries look for help in the aftermath disaster law can be elusive due to their varying geo- of a disaster, they do not intuitively look to graphic scopes and levels of specificity.7 space technologies and industry for assis- W Human rights and international humanitarian law tance. Space systems, however, provide an opportunity for both preparation for and reaction to disasters, as Human rights law is one field that bears on interna- 8 earth observation satellites and satellite telecommunica- tional disasters. Many treaties identify rights germane tions are invaluable resources to recovering communi- to disaster relief (the right to life, food and water, ties. Developing countries typically do not have direct housing, clothing, health, livelihood, and freedom access to these technologies; resources are generally from discrimination), though few are binding instru- 9 scarce and focused on citizens’ most basic needs, not ments. A right to receive humanitarian assistance dur- on the disaster risks they disproportionately face.1 ing national disasters could be inferred from human The International Charter on Major Disasters,2 rights instruments as a matter of customary law; Tampere Convention,3 and other cooperative agree- “[u]nder the classical doctrine of international custom- ments constitute a coordinated international effort ary law, for a right to be binding upon a State, there to provide resources of space systems to those fall- must exist extensive and uniform State practice car- ing victim to major disasters. This article examines ried out so as to show a general recognition that a 10 the underpinning of legal obligations relating to the rule of law or legal obligation is involved.” Human use of satellites to assist in natural disaster manage- rights arguments posit that when a government can- ment. It reviews the international disaster law regime, not meet needs, victims have a right to access aid and as well as law in the various states regarding outer nations have an obligation to seek aid. Even during space treaties to foster community assistance. It then times of crisis, states are reluctant to receive aid based 11 suggests international law should move further to on such grounds due to sovereignty concerns. create a cooperative system of satellite imagery and While human rights law is expressed as a series communications. Specifically, it suggests better legal of rights, international humanitarian law consists of safeguards and coordination to maximize the ability a series of duties that create more substantial obli- of communities to quickly turn to satellites in their gations upon states than human rights law when recovery efforts. paired with humanitarian law’s deep history and broad acceptance.12 Humanitarian law is generally International law on disasters considered as the law of armed conflict and shares challenges with disaster scenarios, including a sense International instruments on disasters of urgency, a reduced administrative capacity domesti- International law regarding disasters is scattered cally, and the pressures of high-visibility situations.13 and inconsistent.4 The field consists of multilateral trea- Over these areas of similarity, international humani- ties, international declarations, regional agreements, tarian law is instructive by analogy. The Geneva and intergovernmental operations. No central treaty Conventions and the Additional Protocols have many regime exists, but many separate tracks of international requirements that benefit humanitarian organizations law have addressed disaster issues; treaties relating to providing relief, typically to be applied during times disasters tend to do so tangentially or by analogy, with of war. The world’s largest humanitarian network, the their primary focus elsewhere.5 International resolu- International Red Cross and Red Crescent Movement, tions and declarations in particular are plentiful.6 These has two branches, one dealing with humanitarian instruments bear the limitations of soft law and are relief during times of armed conflict and the other not formally binding but identify important unifying focused on humanitarian relief during disasters.14 principles. Conclusions about the body of international Privileges and immunities law Josie Beets graduated from law school in 2008 and is currently prac- Privileges and immunities law is relevant because ticing in Louisiana. She was the winner of the 2008 ABA Forum on Air & Space Law’s Student Writing Competition, sponsored by of the roles of the United Nations (UN) and the Rolls-Royce. This article is adapted from that paper. International Committee of the Red Cross (ICRC) in

Volume 22, No. 4, 2010 12 The Air & Space Lawyer disaster response.15 The concept of privileges and enhancing early warning systems.25 immunities stems from the special treatment accorded International law on disasters draws on many to diplomats, but intergovernmental organizations also different sources. As a result of their variety, inter- have some of these rights. Two widely ratified instru- national instruments often lack consistency between ments grant privileges and immunities to the UN, and states, including states of a particular region and even the ICRC has agreements with most of the countries within a state’s own active treaties.26 Firm, broadly where they operate. Common privileges and immuni- applicable principles are difficult to discern; the ties include exemptions from customs regulations, international community has expressed dedication to immigration restrictions, and domestic taxation.16 These addressing the problems of disasters, but the utility of benefits can be very useful for entities involved in the existent instruments is questionable.27 disaster response, as they allow the holder “to easily enter, exit and operate in a foreign country.” However, Effectiveness of the international disaster regime most nongovernmental organizations have to pursue Though the number of instruments bearing on bilateral agreements to achieve special status and privi- disaster law is high, in the field they are rarely used. leges within a country. Major challenges include a general lack of aware- ness of the instruments and the diverse nature of the Regional agreements instruments. International instruments on disasters are Regional agreements are more plentiful and often “largely unknown to government and field personnel directly related to disasters, unlike multilateral trea- and are rarely referred to or effectively utilized.”28 17 ties. In Europe, an extensive system of bilateral and Yet, even if field workers could be well educated on regional treaties and agreements regulates many of the body of international disaster response law, its the important aspects of disaster management. These diverse and sometimes contradictory nature would treaties have created “a comprehensive network still limit effectiveness. Regional agreements may be of mutual cooperation including most countries in more focused and thus more valuable,29 especially in 18 the region.” This preparation by Europe, and lack regions such as Latin America and Southeastern Asia thereof elsewhere, is incongruous with Africa’s and where a single disastrous event can impact a geo- 19 Asia’s particular vulnerabilities. In 2006, of 27 disas- graphic area spanning many countries.30 ters each affecting over a million people, 20 occurred in Asia and seven in Africa. Space law regimes addressing disasters The Association of Southeast Asian Nations (ASEAN) Numerous international organizations have drafted has had joint commitments regarding disasters for recommendations, resolutions, and international con- decades, but in 2005 they adopted a more comprehen- ventions reflecting the international community’s dedi- sive treaty on disasters, calling for exemptions from cation to addressing the problems of disasters.31 The taxes for relief goods, standards for the quality of relief International Charter on Major Disasters (the Charter) is goods, and facilitation of the entry of relief personnel. the first to focus on space resources as a point of com- However, the treaty requires ratification by all member prehensive coordination between space organizations states before officially entering force. While still pal- and states for the benefit of the wider community.32 ing before Europe’s elaborate legal structure, ASEAN’s efforts are very promising for the region. Also, many Overview and history of the Charter bilateral agreements exist that often set out procedures The Charter arose from discussions at the third for assistance, provide for the exchange of information, United Nations conference on the exploration and and minimize bureaucratic formalities between the peaceful uses of outer space (UNISPACE III conference) party nations with regard to relief efforts.20 in Vienna in 1999.33 The UNISPACE III conference was Nonbinding resolutions have the broadest scope specifically tasked with finding ways to utilize space regarding disasters.21 An ICRC report found at least technology to solve regional and world problems 50 resolutions and declarations on disaster response as well as assisting developing countries while also made by intergovernmental forums.22 UN Resolution increasing international cooperation. Initiated by the 46/182 acknowledges the importance of humanitarian European Space Agency (ESA) and the French Centre assistance in disaster, urges states to give and receive National d’Etudes Spatiales (CNES), the Charter was international assistance, and sets up mechanisms for signed on October 20, 2000, and began operations in UN facilitation.23 Also, the UN’s Millennium Declaration November of that same year. The Charter was the first included commitments to reduce the impact of disas- internationally coordinated and comprehensive system ters.24 In 2005, an international conference convened to that integrated different space resources, making them address disasters and adopted the Hyogo Framework available to a wider community through interagency for Action, a framework for a decade of attention to cooperation.34 The Charter’s purpose is to share data disaster reduction. In the Hyogo Framework, the par- and information that results from the use of space ties identified priorities for the next 10 years, among facilities before, during, and after a natural disaster.35 them ensuring disaster risk reduction as a priority and Currently, the Charter includes nine international

Volume 22, No. 4, 2010 The Air & Space Lawyer 13 agencies.36 Charter members participate on a volun- Principles,44 two texts that outline the legal framework tary basis, making data collected from their respective of space activities. Generally, these principles are remote sensing or earth observation satellites available maintaining the freedom of outer space, using space to states affected by disasters as soon as possible at for the common good of humanity, and encouraging little or no cost to the affected states.37 international cooperation. The Outer Space Treaty establishes that space should be free for exploration Governance and procedures to activate the Charter and use by all countries, should be used for the ben- Governance of the Charter is the responsibility of a efit of all mankind, and should promote international Charter Board composed of all members.38 The Charter cooperation. In kind, the Remote Sensing Principles functions without a formal office, but each Charter state that remote sensing activities should be con- member serves as a rotating host agency, becoming ducted for the benefit of all countries and should pro- the lead Charter agency for administering the Charter’s mote international cooperation. obligations and liaising with external parties; the cur- In accordance with these principles, the Charter rent host agency is the British National Space Center provides remote sensing data to all countries suffering through its affiliation with ESA. Utilizing the Charter from disaster that request help through authorized bod- involves a clearly defined process as outlined by the ies at no cost to those seeking assistance, keeping the text of the Charter and the Charter website. Those domain of space open. The Charter is the ultimate rep- authorized to use the Charter are defined as a civil resentation of international cooperation, as agencies in protection, rescue, and defense or security body from a multitude of jurisdictions stand ready to assist coun- the country of a Charter member (referred to as an tries suffering from disaster in an efficient and nondis- “Authorized User”). Agencies from countries not listed criminatory manner. In fact, the Charter goes beyond as Charter members can activate the Charter by request- the framework and requirements in the Remote Sensing ing assistance from similar agencies in their countries Principles, as it provides the sensed countries with data or by requesting international aid from Charter member completely free of charge, whereas the Remote Sensing countries. Also, since 2004, the United Nations Office Principles call for “reasonable cost terms.”45 for Outer Space Affairs has been authorized to request Charter data on behalf of UN agencies responding to Liability Under the Charter disasters, widely expanding the reach of the Charter. One drawback of the Charter is liability, as it pro- Exclusions from Charter activations include activation vides a waiver of liability in its text for Charter mem- occurring more than 10 days after the beginning of the bers. Article V, § 5.4 states: actual crisis, as the call would be beyond the emer- The parties shall ensure that . . . no legal action will be gency period; ice or oil-spill monitoring, as they are taken against the parties in the event of bodily injury, also nonemergency situations; droughts, as the benefits damage or financial loss arising from the execution or from space assets is doubtful; and war or armed con- non-execution of activities, services, or supplies arising flicts, as they are outside the scope of the Charter.39 out of the Charter. Purposes and costs of activating the Charter Agencies that provide erroneous data, data that Article II of the Charter states that no funds will be could further worsen a disaster, are under no legal exchanged between members in return for services duty to mitigate the consequences of their actions.46 provided through the Charter. Operational costs of This waiver is partly due to a lack of a remote sens- activities under the Charter are covered by the member ing liability regime. The Liability Convention estab- space agencies; this includes costs in acquiring the lishes the international liability of a launching state for satellite image, processing the data, and producing physical damage directly caused by a space object on products for delivery.40 Providing data under the Charter Earth, a definition of damage too narrow to include is voluntary, and member agencies know they will not damage from remote sensing activities.47 The Remote be compensated for their services when they ratify the Sensing Principles provide broader wording that states Charter. The cost for responding to Charter requests is will bear international responsibility for their activi- expensive, and is higher for some agencies than for oth- ties but limits responsibility to the state operating the ers.41 The cost generally impacts agencies at the agency remote sensing satellite.48 level but does not affect national budgets.42 The willing- A lack of a liability regime is a serious issue for ness to provide these services for no cost underlies the implementation and growth of the Charter’s opera- Charter’s ideals of goodwill and best endeavors. Even tions. The unintentional or intentional misuse or mis- though the Charter is not a binding instrument filling its representation of data provided by Charter members parties with legal duties and obligations, parties adhere could create serious consequences. Especially egre- to the common goodwill of participating agencies. gious mistakes could turn opinion against the Charter. Legal basis for the Charter Successes and drawbacks of the Charter The Charter espouses principles set forth in both Since its inception in 2000, the Disasters Charter the Outer Space Treaty43 and the UN Remote Sensing has been activated over 150 times.49 That number is

Volume 22, No. 4, 2010 14 The Air & Space Lawyer increasing yearly; the number of activations has risen need for international collaboration to grow the from just 12 in 2002 to 43 in 2007. While the instances potential of Earth observation systems, GEOSS will of natural disasters are increasing,50 the extraordinary connect a global network of content providers with increase of activations is also a testimony to the suc- comprehensive, real-time data, information, and cess of the Charter. The Charter has covered disasters analysis for a diverse group of users. It includes 72 on all the continents without restriction; Charter governments and the European Commission (GEO members activate for disasters in their countries while Members), as well as 52 intergovernmental, interna- countries that are not Charter members can request tional, and regional organizations (GEO Participating assistance through the UN Office for Outer Space Organizations).59 The aim of the system is to enhance Affairs.51 The numerous activations of the Charter relevance of Earth observations to global issues; disas- attest to its usefulness and the immense value of ter management and response are an important factor remote sensing data to responders during disasters.52 in its development. The development of this compre- By all accounts, the Charter is a success. hensive system, if done in conjunction or with the There still exists, however, room for improvement. same purpose as the Charter, provides an opportunity Having a more formal legal status (for example, mak- for expansion of the Charter’s goals through further ing membership more than voluntary) would serve to cooperation and coordination. But the rights and lend more credibility to the Charter and its members. obligations of sensed and sensing states, data provid- The Charter may find itself to be binding over time, ers, and recipients should be clearly defined.60 GEOSS as it is confirmed by opinion juris and state practice.53 reinforces the need for an unambiguous legal regime, The more agencies that become members, the better including a liability convention for remote sensing, the Charter’s operations will be; but there are notable that covers earth observation programs. absences from its membership roster, including NASA. In addition to the Tampere Convention, many of the Some also have argued that, in addition to raw data instruments of international law discussed earlier could required by the Charter, agencies should provide addi- be called upon to create a comprehensive, collaborative tional analysis, as some analysis is necessary for non– legal framework for disaster response. The principles of satellite expert users (those typically handling disaster international cooperation and activities for the benefit crises).54 However, member agencies often exceed of all mankind enshrined in the International Charter their obligations, providing the end user with value- on Space and Major Disasters, the Outer Space Treaty, added work at private sector facilities; this was seen and the Remote Sensing Principles are nowhere more most extensively with the Indian Ocean tsunami disas- apparent than when discussing aiding countries suf- ter of 2004.55 This is further evidence of the Charter’s fering the effects of disaster. Addressing international viability as a forward-thinking hub encouraging col- relief regimes is an essential part of disaster prepared- laboration between government and civilian satellite ness; as such, space agencies, remote sensing satellites, operators and space agencies in the realm of disasters. and satellite telecommunications should pay particular attention to what services they can offer to states recov- The future of the Charter and disaster management ering from disaster. The Charter is at the forefront of interoperability and coordination among international space and civil Endnotes agencies, but many more areas exist where coopera- 1. An d r e w Co b u r n & Ro b i n Sp e n c e , Ea r t h q u a k e Pr o t e c t i o n 33 tion is essential. Communication and coordination of (John Wiley & Sons, 2d ed. 2002). 2. International Charter Space & Major Disasters, Charter on efforts—be they in remote sensing data or telecommu- Cooperation to Achieve the Coordinated Use of Space Facilities in nications—are paramount in a disaster. One important the Event of Natural or Technological Disasters, available at http:// multilateral agreement that could be utilized with the www.disasterscharter.org/web/charter/charter [hereinafter Charter]. 3. Tampere Convention on the Provision of Telecommunication Charter, the Tampere Convention on the Provision of Resources for Disaster Mitigation and Relief Operations of 1998, Telecommunication Resources for Disaster Mitigation available at http://www.ifrc.org/what/disasters/idrl/research/ and Relief Operations of 1998, relates directly to tampere.asp [hereinafter Tampere Convention]. 4. Int’l Fed’n of the Red Cross and Red Crescent Soc’ys, disasters and provides a framework to facilitate coop- International Disaster Response Laws (IDRL): Project Report 2002– eration regarding telecommunications resources in 2003, at 2, 28th International Conference of the Red Cross and Red disasters.56 This convention refers to the telecommuni- Crescent (Dec. 2–6, 2003), available at http://www.icrc.org/Web/ cations field but has a broad view that addresses many eng/siteeng0.nsf/htmlall/5XRDP7/$File/IDRL_Report_FINAL_ANG. pdf [hereinafter IDRL Project Report]. 57 disaster response activities. The convention, which 5. In t ’l Fe d ’n o f t h e Re d Cr o ss a n d Re d Cr e s c e n t So c ’y s , La w unlike the Charter is enforceable law, is centered on a n d Le g a l Iss u e s i n Internationa l Di s a s t e r Re s p o n s e : A De s k St u d y 33 removing regulatory barriers restricting telecommuni- (2007), available at http://wwwuat.ifrc.org/Docs/pubs/idrl/desk- 58 study/113600-idrl-deskstudy-en.pdf [hereinafter IFRC Desk Study on cations that could hinder disaster response. Disaster Response]. One example of a comprehensive system is 6. David Fisher, Domestic Regulation of International the Global Earth Observation System of Systems Humanitarian Relief in Disasters and Armed Conflict: A Comparative Analysis, 89 In t ’l Re v . o f t h e Re d Cr o ss 345, 354 (2006). (GEOSS). Led by the Group on Earth Observations 7. Id. at 346. (GEO), itself a group born out of the recognized 8. IFRC Desk Study on Disaster Response, supra note 5, at 34.

Volume 22, No. 4, 2010 The Air & Space Lawyer 15 9. Id. (mentioning in particular Article 23 of the African Charter Geological Survey (USGS); the British National Space Centre on the Rights and Welfare of the Child, which includes protec- (BNSC) on behalf of the Disaster Monitoring Constellation (DMC) tion for displaced children and specifically includes among them Consortium; and the China National Space Administration (CNSA). children displaced by natural disasters; and the International See International Charter Space & Major Disasters, About Us, http:// Convention on the Rights of Persons with Disabilities of 2006, www.disasterscharter.org/about_e.html. which requires state parties to take “all necessary measures to 37. ESA provides data from Environmental Satellite (ENVISAT); ensure protection and safety of persons with disabilities in situa- CNES provides data from Satellite Pour l’Observation de la Terre tions of risk, including situations of armed conflict, humanitarian (SPOT); CSA provides data from RADARSAT-1 and RADARSAT-2; emergencies and the occurrence of natural disasters”). CONAE provides data from SAC-C; ISRO provides data from Indian 10. Ronan J. Hardcastle & Adrian T. L. Chua, Humanitarian Remote Sensing satellite (IRS); JAXA provides data from Advanced Assistance: Toward a Right of Access to Victims of Natural Disasters, Land Observing Satellite (ALOS). See also Disasters Charter website, 325 In t ’l Re v . o f t h e Re d Cr o ss 89; see also IFRC Desk Study on http://www.disasterscharter.org/participants_e.html (last accessed Disaster Response, supra note 5, at 34. Apr. 23, 2006). 11. Fisher, supra note 6, at 352. 38. Charter, supra note 2, art. III, § 3.3. 12. Id. at 346. 39. International Charter Space & Major Disasters, 2002 13. Id. Annual Report of, available at http://www.disasterscharter.org/ 14. Int’l Fed’n of Red Cross and Red Crescent Soc’ys, Who We downloadable/2ndAnnualReport.pdf (last accessed May 16, 2009). Are, http://www.ifrc.org/who/movement.asp. 40. Legal Aspects of the International Charter, supra note 32, at 15. IFRC Desk Study on Disaster Response, supra note 5, at 39. 234. 16. Id. 41. Atsuyo Ito, Report: IISL/ECSL Space Law Symposium 2006: 17. Id. at 16. Legal Aspects of Disaster Management and the Contribution of 18. IDRL Project Report, supra note 4, at 16. the Law of Outer Space, in 45t h Se ss i o n o f t h e UNCOPUS Le g a l 19. In t ’l Fe d ’n o f t h e Re d Cr o ss a n d Re d Cr e s c e n t So c ’y s , Wo r l d Subcommittee (Apr. 2006) [hereinafter Ito Report]. Di s a s t e r Re p o r t 2006: Fo c u s o n Ne g l e c t e d Cr i s e s 171 (2006). 42. Ospina, supra note 31, at 82. 20. Id. 43. Treaty on Principles Governing the Activities of States in the 21. Fisher, supra note 6, at 354. Exploration and Use of Outer Space, including the Moon and Other 22. IDRL Project Report, supra note 4, at 17. Celestial Bodies, opened for signature Jan. 27, 1967, 18 U.S.T. 2410, 23. G.A. Res. 46/182, U.N. Doc. A/RES/46/182 (Dec. 19, 1991). 610 U.N.T.S. 24. IFRC Desk Study on Disaster Response, supra note 5, at 55. 44. Principles Relating to Remote Sensing of the Earth from Outer 25. Hyogo Framework for Action 2005–2015: Building the Space, G.A. Res. 41/65, U.N. Doc. A/Res/41/65 (Dec. 3, 1986). Resilience of Nations and Communities to Disasters, at 16, World 45. Legal Aspects of the International Charter, supra note 32, at Conference on Disaster Reduction (Jan. 18–22, 2005), U.N. Doc. A/ 236. CONF.206/6, at 6–7. 46. Ospina, supra note 31, at 82. 26. IDRL Project Report, supra note 4, at 16. 47. Convention on International Liability for Damage Caused by 27. Id. at 2. Space Objects, opened for signature Mar. 29 1972, 24 U.S.T. 2389, 28. Id. 961 U.N.T.S. 187. 29. Id. at 16 (noting some benefits of Europe’s comprehensive 48. Legal Aspects of the International Charter, supra note 32, at network of treaties). 237. 30. See In t ’l Fe d ’n o f t h e Re d Cr o ss a n d Re d Cr e s c e n t So c ’y s , Le g a l 49. International Charter Space & Major Disasters, International Iss u e s f r o m t h e Internationa l Re s p o n s e t o t h e Ts u n a m i i n In d o n e s i a 5 Charter Activations, http://www.disasterscharter.org/web/charter/ (2006), available at http://www.ifrc.org/Docs/pubs/idrl/indonesia-cs. activations. pdf (noting the tsunami affected 12 countries in Southeast Asia); see 50. Kofi A. Annan, An Increasing Vulnerability to Natural also In t ’l Fe d ’n o f t h e Re d Cr o ss a n d Re d Cr e s c e n t So c ’y s , Le g a l Iss u e s Disasters, In t ’l He r a l d Tr i b u n e , Sept. 10, 1999, http://www.un.org/ f r o m t h e Internationa l Re s p o n s e t o Tr o p i c a l St o r m St a n i n Gu a t e m a l a News/ossg/sg/stories/articleFull.asp?TID=34&Type=Article. 5 (Apr. 2007), available at http://www.ifrc.org/Docs/pubs/idrl/ 51. International Charter Space & Major Disasters, http://www. guatemala-cs.pdf (mentioning Mexico, Costa Rica, El Salvador, disasterscharter.org. Honduras, and Nicaragua as affected by Tropical Storm Stan). 52. Ospina, supra note 31, at 82. 31. Sylvia Ospina, SOS—Is Anyone Getting This Message? in 53. Ito Report, supra note 41. Pr o c e e d i n g s o f t h e 49t h Co ll o q u i u m o n t h e La w o f Ou t e r Sp a c e 86 54. Stefan Voigt, Satellite Image Analysis for Disaster and (2006). Crisis-Management Support, IEEE Tr a n s a c t i o n s o n Re m o t e 32. Atsuyo Ito, Legal Aspects of the International Charter on Se n s i n g (June 2007), available at http://ieeexplore.ieee.org/ Space and Major Disasters, in Pr o c e e d i n g s o f t h e 47t h Co ll o q u i u m iel5/36/4215027/04215094.pdf?tp=&arnumber=4215094&isnumber o n t h e La w o f Ou t e r Sp a c e (2004) [hereinafter Legal Aspects of the =4215027. International Charter]. 55. Ahmed Mahmood, International Charter “Space and Major 33. International Charter Space & Major Disasters, available at Disasters” Status Report, Internationa l Ge o s c i e n c e a n d Re m o t e Se n s i n g http://www.disasterscharter.org. Sy m p o s i u m 2005 ( July 2005), available at http://ieeexplore.ieee.org/ 34. Mahulena Hoffman, The International Legal Framework of iel5/10226/32600/01525885.pdf?arnumber=1525885. Remote Sensing in the Year 2005: Changed Conditions and Changed 56. Tampere Convention, supra note 3. See also Ospina, supra Needs, in IISL/ECSL Sp a c e La w Sy m p o s i u m 2005 (Apr. 4, 2005). note 31, at 84. 35. Charter, supra note 2, art. II. 57. IDRL Project Report, supra note 4, at 15. 36. ESA; CNES; the Canadian Space Agency (CSA); Argentine 58. Ospina, supra note 31, at 85. Space Agency (CONAE); the Indian Space Research Organization 59. Group on Earth Observations, About GEO, http:// (ISRO); Japan’s Aerospace Exploration Agency (JAXA); the U.S. earthobservations.org/about_geo.shtml. National Oceanic and Atmospheric Administration; the U.S. 60. Legal Aspects of the International Charter, supra note 32, at 241.

Volume 22, No. 4, 2010 16 The Air & Space Lawyer Alliances, Immunity, and the Future of Aviation continued from page 1

Shortly after the agreement was competition threatens to endanger toward the airline industry and its concluded, Northwest and KLM, the progress that the United States efforts to find a coherent and con- already partners in a marketing and its many Open Skies partners temporary operating model. and operational joint venture, have made in fostering a more filed a petition with DOT seeking efficient and competitive global Importance of strategic alliances immunity from the antitrust laws aviation system. The outcome will Strategic alliances are not for all joint activities undertaken have profound implications for the unique to the airline industry. within the framework of their alli- future of commercial aviation. They are but one form of partner- ance.5 They sought to integrate Evidence of the challenge ing among business enterprises on their services more completely abounds: a continuum of transaction types, and to operate as though they • Legislative proposals passed ranging from passive investment were a single carrier. In January in 2009 by the U.S. House of by one company in another to a 1993, DOT approved the agree- Representatives would sunset complete merger of two business ment and granted the requested existing ATI grants to airline entities.14 Increasingly popular in antitrust exemption.6 alliances and require the today’s rapidly evolving market- The U.S.-Netherlands Open Skies establishment of new criteria place, alliances allow enterprises agreement, and the order granting for the review of future appli- to respond more efficiently to ATI that followed shortly thereafter, cations, while tightening fur- changes in the commercial envi- established the template for a major ther the requirements for U.S. ronment without incurring the transformation of international citizen control of U.S. airline costs, delays, complications, or aviation. DOT had hoped it would operations.10 permanent commitments associ- do just that. As it made clear in its • In a 55-page objection to ated with a full merger. The size order approving and immunizing DOT’s tentative decision in and character of today’s global the KLM-Northwest alliance: “The the recent “Star II” proceed- marketplace pose challenges United States signed the Open ing,11 in which DOT approved, that require companies of all Skies Accord with the Netherlands inter alia, the addition of sizes to enhance their reach and not only to liberalize aviation ser- Continental Airlines to a pre- competitiveness through care- vices with the Netherlands, but also viously immunized alliance, fully structured partnerships.15 As to encourage other EC members the Department of Justice a general proposition, alliances to enter into an open skies regime suggested that the benefits of generate important competitive with the United States.”7 inter-alliance competition had benefits. Put simply, if a combina- In the years since, DOT’s not been established.12 tion of resources from different expectation has been vindicated. • In October 2009, Senators enterprises is necessary to com- Liberalized regimes and Open Herb Kohl and Orrin G. pete effectively in a market, then Skies agreements have become Hatch, chairman and rank- allowing the combination to take increasingly ubiquitous—not just ing member, respectively, the most efficient form effectively for air services to and from the of the Senate Subcommittee lowers the barriers to entry into United States, but worldwide. To on Antitrust, Competition that market. date, the United States has entered Policy and Consumer Rights, In international aviation, alli- 8 into 94 Open Skies agreements, informed Secretary of ances generate an additional and many of which have been fol- Transportation Ray LaHood unique benefit not found in other lowed by grants of ATI to alliances that the Subcommittee would sectors: airline alliances have been operating in the newly liberalized examine “whether the DOT a vital contributor to the liberaliza- 9 bilateral markets. The confluence is the appropriate agency to tion of worldwide air transport. of Open Skies agreements, alli- have final authority over the They are helping to break down ances, and ATI has spawned a fun- grant of antitrust immunity barriers to competitive entry that damental reinvention of the global for international airline alli- even Open Skies agreements leave air transport industry. ances, or whether legislation unaddressed. For example, an Today, however, a newly should be drafted to give Open Skies agreement between intensified debate about the effect greater authority to the Justice two countries does not allow of airline alliances and ATI on Department.”13 airlines from either country to These developments appear to establish a system of domestic Warren L. Dean, Jr. is a partner at Thomp- reflect an attitude approaching feeder flights in the other country. son Coburn LLP in Washington, D.C. Jeffrey N. Shane is a partner at Hogan & Hartson outright hostility, at least in some A well-crafted alliance agreement, LLP in Washington, D.C. quarters of the U.S. government, however, can permit an airline to

Volume 22, No. 4, 2010 The Air & Space Lawyer 17 enjoy the benefits of such a system air services agreements, the emer- need or to achieve important without violating the domestic law gence of alliances—and particularly public benefits” and if there is no of the other country. Similarly, no immunized alliances—arguably has less anticompetitive alternative.22 Open Skies agreement guarantees represented the most important DOT is required to exempt from that an airline of one country will development in the industry since the antitrust laws any agreement be able to find enough traffic to the introduction of jet aircraft. approved on those grounds to make flights to the other country the extent necessary to allow the economically viable, particularly if Origins of DOT’s jurisdiction over transaction to proceed.23 flights beyond that other country international alliances Where DOT finds that an agree- are restricted by the policies of Congress, when it deregulated ment is not adverse to the public third countries.16 Alliance partici- the U.S. airline industry and abol- interest and does not violate pation allows an airline to create ished the Civil Aeronautics Board the statute––i.e., that it does not a network that enables it to fill up (CAB), preserved and transferred to substantially reduce or eliminate seats throughout its system with DOT the CAB’s discretionary author- competition––DOT is required to traffic to a variety of destinations, ity to exempt certain forms of airline approve it. A grant of ATI is per- even where the “last segment” conduct from the operation of the mitted in such a case only if it is operations to some of those desti- antitrust laws.18 Although DOT’s “required by the public interest,” nations must be on other airlines. authority relating to domestic airline however, and then only “to the Alliances also have helped mergers, acquisitions, and agree- extent necessary to allow the per- airlines address the most conspicu- ments was terminated on January 1, son to proceed with the transaction ous of the residual nationality- 1989, DOT’s authority to approve specifically approved by the order based impediments to rational and immunize agreements relat- and with any transaction necessar- industry structure and perfor- ing to international aviation was ily contemplated by the order.”24 mance—the laws in most countries left wholly intact.19 This outcome While references to the public that make ownership and control was consistent with a DOT recom- interest appear in both the test by citizens a prerequisite to eligi- mendation to Congress and wholly for approval (“not adverse to bility for an airline license.17 Those supported by the Department of the public interest”) and the test laws effectively prohibit cross-bor- Justice.20 The congressional deci- for granting ATI (“required by der mergers and acquisitions and sion to maintain the CAB’s antitrust the public interest”), the latter even some forms of cooperation— exemption authority for agreements test is substantially more daunt- transactions that have enabled the relating to international aviation, ing. As DOT wrote in its seminal globalization of so many other and to keep it at DOT, was predi- KLM/Northwest decision: “The industries. By facilitating the shar- cated on a recognition that com- Department has always recognized ing of resources, including capital petition in international aviation is that the public interest standard in and possibly equity, without a closely related to, and often a prod- [49 U.S.C. § 41308] is a much more change of control, airline alliances uct of, the bilateral negotiating pro- stringent standard than [49 U.S.C. have engendered many of the cess.21 If the U.S. government was to § 41309’s] public interest stan- competitive benefits of rationaliza- attempt through diplomacy to move dard.”25 DOT also has recognized tion that would be available in a its aviation trading partners coher- consistently that, “[b]ecause the more conventional legal and diplo- ently toward a more market-based antitrust laws represent a funda- matic environment. and pro-competitive regime, it was mental national economic policy, Thus, by allowing airline part- essential that the antitrust exemp- one that serves consumers and ners to sell their services freely tion authority be vested in the travelers well, . . . immunity from on each other’s equipment and agency primarily responsible for the the antitrust laws should be the coordinate their service offerings, development of U.S. international exception, not the rule.”26 alliances have allowed much of the aviation policy. Some 94 Open Skies Nevertheless, because the industry to replicate the advantages agreements later, the wisdom of that prospect of enjoying the benefits enjoyed by the efficient global assessment is undeniable. of that exception became so networks in many other sectors attractive to carriers following (e.g., telecommunications, ship- Alliances and public benefits: The the KLM/Northwest decision, and ping, financial services). They also emerging jurisprudence because DOT had made it clear have facilitated a new and robust If DOT finds that a proposed that an Open Skies agreement form of global competition. In sum, agreement between airlines would was an essential prerequisite to given the restrictions that continue substantially reduce or eliminate consideration of a request for to impede efficiency and competi- competition, DOT can approve the ATI, foreign government inter- tion in international air transport agreement only if it “is necessary est in Open Skies relationships even after the spread of liberal to meet a serious transportation with the United States began to

Volume 22, No. 4, 2010 18 The Air & Space Lawyer increase dramatically. The result reductions and traffic gains. The U.S.C. § 41308 (“required by the was a rapid increase in interna- ‘Alliance Network Effect’ will there- public interest”)—is now predi- tional aviation liberalization, in fore play a key role in the evolving cated on the applicants’ ability to the number of alliance ATI appli- international aviation economic and demonstrate that the alliance will cations submitted to DOT, and in competitive environment.”29 deliver public benefits of sufficient the frequency of ATI awards. The case for international alli- quality and magnitude to justify the It was essential, during a ances was a powerful one, but the exemption. time of such ferment, that DOT “fundamental national economic DOT decisions both granting assess the real-world conse- policy” reflected in the antitrust and denying ATI over the past quences for competition and laws required that any grant of few years reflect a sophisticated consumers. DOT’s first formal ATI be predicated on a transparent understanding of the way alli- assessments of immunized alli- and sensible set of criteria. ances have evolved and how ances and their effect on inter- airline networks function. The Approving agreements under 49 national aviation markets were orders make clear that ATI will U.S.C. § 41309 issued in 1999 and 2000, after be awarded only where the appli- DOT’s analysis of whether to seven years’ experience with cants can demonstrate that the approve an alliance agreement immunized alliances in Open public benefits likely to flow from is typically based on the Clayton Skies markets. Based wholly the alliance will be significant—in Act30 test, long used to predict the on an empirical analysis, DOT’s keeping with the positive effects competitive effects of mergers. conclusions regarding the role DOT described in its 1999 and The issue is whether the alliance and impact of airline alliances 2000 reports—and that those would be likely to substantially were reported in two detailed benefits would not materialize reduce competition such that reports: “Global Deregulation without a grant of ATI.31 Thus, the applicants would be able to Takes Off” (December 1999) and for example, in its most recent exercise market power—i.e., to “Transatlantic Deregulation: The award of ATI as of this writing— profitably charge supracompetitive Alliance Effect” (October 2000).27 to the expanded Star immunized prices or reduce service or quality The 1999 report told a remark- alliance—DOT concluded that the below competitive levels in any able story. It found that, operat- alliance would produce “numer- relevant market. This entails a ing within the framework of ous public benefits,” including determination of whether the alli- new Open Skies agreements, • an expanded network serving ance would significantly increase immunized alliances were stimulat- many new cities; concentration, whether the alliance ing demand, accelerating system • new online service, includ- would raise concern about poten- growth, and producing more ing both new routes and tial anticompetitive effects in light attractive service and price offer- expanded capacity on existing of other factors, and whether entry ings. The report highlighted routes; into the market would be timely, important consequences not just • enhanced service options such likely, and sufficient to either deter for the users of air transportation, as more routings, reduced or counteract a proposed alliance’s but also for local and national travel times, expanded potential for harm. economies through increased air nonstop service in selected DOT’s jurisprudence during the service. It concluded that global markets, new fare products, past decade treats an Open Skies deregulation and alliance develop- and integrated corporate agreement and its guarantee of ment were still at an embryonic contracting and travel agency open market access as sufficient in stage and predicted the continued incentives; most cases to prevent partners in an expansion of alliances in the • enhanced competition due to alliance from reducing or eliminat- future, together with the emer- the addition of a major new ing competition or exercising mar- gence of new ways of competing gateway, the elimination of ket power. Where an Open Skies as alliances continued to expand multiple markups on code- agreement exists, DOT typically and overlap each other. share segments, and more finds that it can approve a proposed The 2000 report, which was vigorous competition between alliance agreement under 49 U.S.C. similarly quantitative in its alliances; § 41309 on the ground that it is not approach, concluded that “the pro- • cost efficiencies; adverse to the public interest. consumer changes identified in our • strengthened financial posi- first report dramatically acceler- Granting ATI tions for the participating car- ated during 1999.”28 Importantly, The second element of a DOT riers; and DOT found that “[a]lliance-based alliance decision—whether to • substantial economic benefits networks are the principal driving award ATI to an approved alliance to communities.32 force behind transatlantic price under the more stringent test of 49 It would not have been

Volume 22, No. 4, 2010 The Air & Space Lawyer 19 sufficient, however, for the appli- market that would emerge under interpretation by a team of anti- cants merely to make “theoretical more conventional legal and dip- trust experts working full time in and attenuated” predictions about lomatic arrangements. the case of a complex, multiple- the likely public benefits of the party, and multiple-market joint enlarged alliance.33 DOT noted that The ATI controversy venture. Even then, the likely “[t]he applicants explain in detail Much of the controversy sur- conclusions would be at best how they will expand the existing rounding DOT’s handling of alli- tentative: immunized alliance to incorporate ance agreements is attributable • What conduct is reasonably the largely complementary ser- to the conviction among critics related to the objectives of the vices of Continental”—the carrier that alliances approved by DOT joint venture? being added to the Star immunized following the negotiation of an • Is it the least anticompetitive alliance—by implementing a Open Skies agreement, if indeed alternative? “metal neutral,” highly integrated, unobjectionable on competition • Is there a market analysis of revenue-sharing joint venture grounds as DOT has found, do its effects? agreement.34 DOT explained further not need an antitrust exemption No safe harbors exist, just safety why it had concluded that ATI was to deliver the public benefits they zones that themselves are severely essential to realizing the alliance’s promise. While acknowledging hedged. No relevant examples are potential benefits: that DOT is required by the statute furnished.37 In addition, critical The carriers are not likely to to approve an agreement that it questions in this area of antitrust achieve the efficiencies and cost finds will not reduce or eliminate law remain unsettled.38 The finan- savings on their own; an inte- competition, the opponents main- cial consequences of failure in grated economic benefit sharing tain that the statute prohibits DOT such cases are likely to be enor- arrangement is needed to pro- from granting an exemption from mous. Alliance members can have vide the incentive for the car- the antitrust laws in most cases no confidence in their ability, as riers to invest the significant because it is not possible to make defendants in a treble-damages resources necessary to create the prerequisite finding that the case, to explain to a court after the additional consumer benefits. public interest requires it. It is a By sharing risk and optimizing fact the dynamics of a commercial the joint network, the alliance seriously mistaken view. ATI, in aviation joint venture and the exi- members will likely accelerate most cases, is an essential prereq- gencies of networked operations. the introduction of new capac- uisite to realizing the competitive While a complicated subject ity, give consumers more travel benefits that international strategic beyond the immediate scope of options and shorter travel times, airline alliances can engender. this article,39 a legitimate and and reduce fares at the margin, First, alliances have become as growing concern exists in some due to the elimination of multiple complicated as the international quarters that U.S. antitrust laws— mark-ups. Antitrust immunity is regulatory environment in which and the inherently conservative well suited to enable carriers to they operate. The risk that private jurisprudence that has developed achieve merger-like efficiencies attorneys general representing under those laws—are not keeping and deliver benefits that would a large class of plaintiffs would pace with the emergence of newly not otherwise be possible.35 seek treble damages for some important joint venture models. In sum, DOT has reached perceived wrong means that, Some experts argue that the anti- its conclusions about ATI and without immunity, the members trust laws create an unhealthy chill public benefits carefully and of an alliance would be deterred on the development of strategic has validated them repeatedly. from exploiting its potential effi- alliances and that this chill, in DOT knows that anachronistic ciencies. Accordingly, it is critical turn, generates anticompetitive regulatory constraints continue to that alliance parties have certainty effects. Congress itself has recog- impede the international opera- regarding the lawfulness of their nized the impact that the threat tions of airlines everywhere, and agreements. of treble-damage liability can that those constraints compromise To make matters worse, anti- have on joint ventures, including the value that aviation delivers to trust jurisprudence itself is murky those involving the production consumers and national econo- in this area. The Department of of services.40 In such an environ- mies. Through a carefully cali- Justice/Federal Trade Commission ment, DOT’s carefully calibrated brated exercise of its long-stand- “Antitrust Guide for Collaborations oversight, informed by its partici- ing authority to grant exemptions Among Competitors” illustrates pation in the crafting and conduct from the antitrust laws, DOT has the challenge confronting alliance of U.S. international aviation helped the industry to begin over- participants.36 The document is policy, provides a more appropri- coming these impediments and nearly 40 pages of single-spaced ate regulatory framework for alli- to begin replicating the kind of “guidance” that would require ances than conventional antitrust

Volume 22, No. 4, 2010 20 The Air & Space Lawyer litigation, with its inherent costs that success should be considered support, that consumers benefit from and uncertainties. with great care, and proponents of competition between alliances, particularly immunized alliances.”). Unsurprisingly, airlines seeking any alternative approach should 13. Letter from Senators H. Kohl & a DOT antitrust exemption for alli- bear the burden of showing how O. Hatch to R. LaHood, Secretary of and why it would serve the public Transportation (Oct. 13, 2009). ance participation routinely state 14. John P. Beavers, Strategic Alliances: in their applications that they will interest better. What They Are and Why They Are Popular, not implement the alliance agree- boardandexecutive .n e t (Aug. 2001), www. ment without ATI. The statement Endnotes boardandexecutive.net/strategic/79.asp. 1. The authors take no position on any 15. Id. represents an appropriate measure pending alliance ATI application. 16. In an Open Skies agreement, Party of caution—and in every case is 2. Air Transport Agreement Between A forfeits the right to object to flights by based on the advice of antitrust the United States and the Netherlands, Oct. airlines of Party B between the territory of 14, 1992, T.I.A.S. No. 11976. Party A and third countries. But nothing in counsel. DOT is correct to accord 3. In re Defining “Open Skies,” DOT any Open Skies agreement requires third it significant weight. Without ATI, Docket 48130, Order Requesting Comments countries to accept such flights. alliance members will not under- (Apr. 29, 1992); Final Order (Aug. 5, 1992). 17. U.S. airline citizenship requirements 4. Agreement Between the Government are set forth at 49 U.S.C. § 40102(a)(2) and take to generate the innovative of the United States of America and the (15). programs, service offerings, and Government of the United Kingdom 18. Airline Deregulation Act of 1978, scheduling efficiencies that typi- Relating to Air Services Between Their Pub. L. No. 95-504, 92 Stat. 1705 (1978). Respective Territories, Feb. 11, 1946, 19. Civil Aeronautics Board Sunset Act cally benefit travelers. reprinted in 3 Av. L. Rep. (CCH) ¶ 26,540a, of 1984, Pub. L. No. 98-443, 98 Stat. 1703 DOT’s decisions to grant ATI at 23,219. (1984), § 3. even to alliances that it finds will 5. The petition was filed pursuant to §§ 20. De p ’t o f Tr a n s p ., Ad m i n i s t r a t i o n o f 412 and 414 of the Federal Aviation Act of Av i a t i o n An t i t r u s t Fu n c t i o n s , Re p o r t t o not substantially reduce or elimi- 1958, now codified at 49 U.S.C. §§ 41308 Co n g r e ss Pu r s u a n t t o Pu b . L. 98-443, at 1, nate competition are consistent and 41309. 22–25 (May 1987). DOT stated that “its with the statutory test: Where it 6. Joint Application of Northwest authority to approve and immunize interna- Airlines and KLM Royal Dutch Airlines, tional agreements is an important element in is clear that the parties will not DOT Order 93-1-11 (Docket 48342) (Jan. its conduct of U.S. international aviation pol- proceed with the transaction in 11, 1993). For a discussion of the statutory icy and regulatory oversight.” Id. at 25. The Introduction noted that the report had been the absence of ATI, the exemption test for granting ATI, see text accompany- ing notes 22–24, infra. prepared by DOT and that “[t]he Department is indeed “required by the public 7. Northwest/KLM, DOT Order 93-1-11, of Justice (DOJ) concurs in the recommenda- interest.”41 The analysis is signifi- at 12. tions contained therein.” Id. at 1. 21. International reactions to a con- cantly reinforced by reference to 8. See list of Open Skies agreements in force on the Department of State’s website, troversial and long-running CAB case the aviation diplomacy required at http://www.state.gov/e/eeb/rls/othr/ launched in 1978 may have encouraged for the further liberalization of ata/114805.htm. this delegation of responsibility. The CAB had proposed to stimulate international aviation markets—a rationale that 9. See list of immunized alliances on the Department of Transportation’s website at airline price competition by withdraw- DOT is uniquely positioned to http://ostpxweb.dot.gov/aviation/X-50%20 ing the ATI extended since 1946 to the acknowledge and evaluate.42 Role_files/immunizedalliances.htm. International Air Transport Association 10. H.R. 915, 111th Congress, 1st Sess. (IATA)’s tariff coordination activities. (passed by House of Representatives on Agreements adopted by the International Conclusion May 21, 2009), §§ 426 (sunsetting all grants Air Transport Association relating to the Airlines and regulators have of ATI three years after effective date of Traffic Conferences, CAB Docket 32851, always understood the value of legislation; developing new criteria for Order to Show Cause (June 9, 1978). The review of future applications) and 801 (pro- CAB proposal triggered a firestorm of criti- efficient networks. For many viding that an airline shall not be deemed cism from U.S. trading partners everywhere decades, antitrust immunity eligible for an air carrier certificate “unless as a highly objectionable exercise in unilat- facilitated a single, monopoly net- citizens of the United States control all mat- eralism. Most other countries’ policies not ters pertaining to the business and struc- only tolerated IATA’s industry price-fixing work operated by IATA. Today, ture of the air carrier, including operational activities but also often relied on them, as we enjoy competition among a matters such as marketing, branding, fleet did the United States itself for many years. number of networks operating as composition, route selection, pricing, and Because the CAB did not receive statutory labor relations”). authority to suspend or investigate a tariff immunized alliances. Immunity 11. Joint Application of Air Canada, The in foreign air transportation until 1972, the allows alliance participants— Austrian Group, British Midland Airways Board’s only tool for addressing an issue Ltd., Continental Airlines, Inc., Deutsche relating to an airline’s fares was its ability which cannot legally merge—to Lufthansa AG, Polskie Linie Lotniecze to disapprove the IATA agreement pursu- realize a level of economic integra- Lot S.A., Scandinavian Airlines System, ant to which those fares were charged. Id. tion that provides significant pub- Swiss International Air Lines, Ltd., TAP at 3. In 1982, after four years of tension in Air Portugal, and United Air Lines, Inc. to U.S. aviation relations, the United States lic benefits. Amend Order 2007-2-16 under 49 U.S.C. concluded a novel memorandum of under- Open Skies, airline alliances, §§ 41308 and 41309 so as to Approve and standing with several European civil avia- and DOT’s savvy administration Confer Antitrust Immunity, DOT Docket tion authorities meeting under the auspices OST-2008-0234 (“Star II”). of the European Civil Aviation Conference. of its power to confer ATI have 12. Star II, supra note 11, Comments The “U.S.-ECAC MOU” established zones been a major public policy success of the Department of Justice on the Show of pricing flexibility within which airlines story for consumers, global airline Cause Order (Public Version), at 33–34 would be allowed to set fares without gov- (“The Applicants inflate the importance ernment interference. Following the sunset competition, and the airline indus- of inter-alliance competition . . . The of the CAB, DOT terminated the Show- try itself. Proposals to tinker with Applicants also suggest, without evidentiary Cause Proceeding without ordering any

Volume 22, No. 4, 2010 The Air & Space Lawyer 21 major change in IATA’s tariff coordination when the Joint Applicants have given us Akira Goto eds., 1997). machinery. so little information about their plans for 40. The National Cooperative Research 22. 49 U.S.C. § 41309(b). implementing a grant of antitrust immunity and Production Act, as amended, 15 U.S.C. 23. Id. § 41308(c). under section 41308”). §§ 4301–4306, was enacted to promote 24. Id. §§ 41309(b), 41308(b) (emphasis 34. Star II, supra note 11. innovation, facilitate trade, and strengthen added). 35. Id. The contrast between DOT’s the competitiveness of the United States in 25. Joint Application of Northwest response to two separate efforts by the world markets by (1) clarifying the appli- Airlines and KLM Royal Dutch Airlines, leading SkyTeam carriers to secure ATI cability of the rule of reason standard to DOT Order 93-1-11 (Docket 48342), at 11 for a major expansion of their immunized the antitrust analysis of joint ventures and (Jan. 11, 1993). alliance, including the combination of the standards development organizations, (2) 26. Joint Application of Alitalia-Linee separately immunized Delta/Air France providing for the possible recovery of attor- Aeree Italiane S.p.A., Czech Airlines, Delta and Northwest/KLM alliances, highlights ney fees by joint ventures and standards Air Lines, Inc., KLM Royal Dutch Airlines, DOT’s approach. In the first application development organizations that are pre- Northwest Airlines, Inc., and Société in 2005, the details of the SkyTeam carri- vailing parties in damage actions brought Air France for Approval of and Antitrust ers’ proposed expanded joint venture had against them under the antitrust laws, and Immunity for Alliance Agreements under not yet been developed in great detail. (3) establishing a procedure under which 49 U.S.C. §§ 41308 and 41309, DOT Docket DOT found that the expanded alliance joint ventures and standards development OST-2004-19214 (“SkyTeam I”), Show could be approved as not adverse to the organizations are liable for actual, rather Cause Order, DOT Order 2005-12-12, at 33. public interest, but it was unable to find, than treble, antitrust damages. 27. U.S. De p ’t o f Tr a n s p ., Internationa l on the basis of the material submitted by 41. 49 U.S.C. § 41308(b). Av i a t i o n De v e l o p m e n t s : Gl o b a l De r e g u l a t i o n the applicants, that a grant of ATI was 42. See Joint Application of Northwest Ta k e s Off (Dec. 1999), available at “required by the public interest.” SkyTeam Airlines and KLM Royal Dutch Airlines, http://ostpxweb.dot.gov/aviation/Data/ I, supra note 26, Order to Show Cause, DOT Order 93-1-11 (Docket 48342), at 12 globalderegtake.pdf; U.S. De p ’t o f Tr a n s p ., DOT Order 2005-12-12, at 34. By contrast, (Jan. 11, 1993). Internationa l Av i a t i o n De v e l o p m e n t s : SkyTeam’s second attempt to expand its Tr a n s a t l a n t i c De r e g u l a t i o n : Th e All i a n c e alliance, addressed in a 2007 joint appli- Ne t w o r k Eff e c t (Oct. 2000), available at cation, was successful because, as DOT http://ostpxweb.dot.gov/aviation/Data/ wrote, “the Joint Applicants now supply transatlantdereg.pdf (“2000 DOT Report”). a detailed joint venture agreement that 28. 2000 DOT Report, supra note 27, at integrates international operations to such 1–2. an extent as to suggest metal neutrality 29. Id. at 5. DOT also found in its 2000 [indifference among participating carriers report that “[t]raffic on both alliance and regarding which carrier’s capacity they are non-alliance carriers have [sic] increased selling in any given transaction] and seam- dramatically, demonstrating that deregula- less travel across one joint network.” DOT tion and airline alliances have not simply found that the alliance would generate re-allocated traffic among carriers but have substantial public benefits, including “the stimulated additional demand. Increased introduction of new capacity and greater supply (capacity) is a critically important availability of discount fares across the component of consumer benefits in dereg- entire joint network[,]” and that ATI was ulated markets.” Id. at 10. Moreover, necessary to enable the carriers to achieve “[i]nternational airline alliances have these “mergerlike efficiencies and . . . ben- improved service in historically under- efits.” Joint Application of Alitalia-Linee served regions of the world and, as a Aeree Italiane S.p.A., Czech Airlines, Delta An Intersection of Air result, have stimulated additional demand Air Lines, Inc., KLM Royal Dutch Airlines, and Space Law for air transportation in those markets.” Id. Northwest Airlines, Inc., and Société 30. 15 U.S.C. §§ 12 et seq. Air France for Approval of and Antitrust continued from page 11 31. Moreover, the ATI enjoyed by Immunity for Alliance Agreements under many airline alliances is not a license 49 U.S.C. §§ 41308 and 41309, DOT Co m m . 759, 792 (2008). to pillage. Airlines cannot obtain the Docket OST-2007-28644 (“SkyTeam II”), 16. 49 U.S.C. § 70117(c) (2000). global, comprehensive ATI enjoyed by Show Cause Order, DOT Order 2008-4-17, 17. See Jean-Bruno Marciacq, Yves labor unions, ocean common carriers, at 15. Morier, Filippo Tomasello, Zsuzsana Erdelyi agriculture, professional sports leagues, 36. The guidelines were published in & Michael Gerhard, Accommodating Sub- newspapers, insurance providers, and April 2000 by the Department of Justice orbital Flights into the EASA Regulatory others. Under current law, the only way and the Federal Trade Commission and are System, Pr o c e e d i n g s o f t h e 3r d IAASS airlines can obtain ATI is to apply to available at http://www.ftc.gov/os2000/04/ Co n f e r e n c e –Ro m e : Bu i l d i n g a Sa f e r Sp a c e DOT for an exemption for specific activi- ftcdojguidelines.pdf. To g e t h e r (Oct. 21–23, 2008). ties pursuant to a specific agreement. All 37. Another Department of Justice/ 18. See id. antitrust exemptions granted by DOT are FTC publication, An t i t r u s t En f o r c e m e n t f o r 19. See Paul S. Dempsey & Michael conditional, and failure to comply with Internationa l Op e r a t i o n s (Apr. 1995), avail- Mineiro, ICAO’s Legal Authority to Regulate DOT’s conditions can result in the loss of able at http://www.justice.gov/atr/public/ Aerospace Vehicles, Pr o c e e d i n g s o f t h e 3r d immunity. Finally, any agreement or activ- guidelines/internat.htm/, is not likely to be IAASS Co n f e r e n c e –Ro m e : Bu i l d i n g a Sa f e r ity that is exempted from the operation of helpful either. Sp a c e To g e t h e r (Oct. 21–23, 2008). the antitrust laws remains subject to DOT’s 38. The Supreme Court has granted cer- 20. Id. authority to prosecute unfair or deceptive tiorari in a case that may provide guidance 21. ICAO Council, 175th Sess., Concept practices and unfair methods of competi- on whether and to what extent the market- of Suborbital Flights, at § 2.3 (Working Paper tion (49 U.S.C. § 41712), which mirrors the ing activities of an authorized joint venture CWP/12436, May 30, 2005). authority of the Federal Trade Commission are entitled to single-entity treatment under 22. See Knutson, supra note 13, at 105. under § 5 of the FTC Act (15 U.S.C. § 45). the antitrust laws. See Am. Needle, Inc. 23. Commercial Space Launch Act of 32. Star II, supra note 11, Order to Show v. Nat’l Football League, 129 S. Ct. 2859 1984, Pub. L. No. 98-575, 49 U.S.C. § 70113 Cause, DOT Order 2009-4-5, at 18–19. (2009). (2008). 33. SkyTeam I, supra note 26, Order to 39. See R. Shyam Khemani & Leonard 24. Id. § 70105(c). Show Cause, DOT Order 2005-12-12, at 34 Waverman, Strategic Alliances: A Threat to 25. FAA-AST, FAA-AST Launch Data (in proposing to deny the SkyTeam I ATI Competition? in Co m p e t i t i o n Po l i c y i n t h e and Vehicles, http://www.faa.gov/about/ application, DOT stated: “we are reluc- Gl o b a l Ec o n o m y : Mo d a l i t i e s f o r Co o p e r a t i o n office_org/headquarters_offices/ast/ tant to immunize the alliance agreements (Leonard Waverman, William S. Comanor & launch_data/.

Volume 22, No. 4, 2010 22 The Air & Space Lawyer Lessor, Financier, and Manufacturer Perspectives continued from page 1

Impact of September 11th on the success or failure of ter- and corporate governance issues Work leading to the UIC began rorists. Rather, the following prin- faced by airlines. Customary as a consequence of, and imme- ciples should remain paramount. indemnities given by airlines were diately following, the events of First, aviation terrorism is an weakened, given the latter’s insur- September 11, 2001. A prompt act against governments. Like oth- ance problems. These develop- and direct result of 9/11 was the ers harmed by terrorism, aviation ments adversely affected the air- withdrawal of aviation insurance industry participants are victims as lines (uninsured direct exposure) cover and the halt of air transport. well. To the extent that airlines are and the indemnitees (uninsured To permit the resumption of air asked to compensate other victims, credit exposure). One need look transport, government-supported this approach stems more from an no further than the range of 9/11 war risk insurance was needed to interest in efficiency than from the defendants to observe the risks address contractual, risk manage- application of accepted legal prin- of protracted litigation and poten- ment, and corporate governance ciples of fault. Policies underlying tial liability faced by the entire issues. Such government support strict liability are stretched beyond industry. A corollary of multiparty was viewed as a stop-gap mea- reasonable recognition in the ter- litigation, common in the aviation sure. It was clear across the air rorism context. Similar arguments industry, is that limiting the liabil- transport sector that a more lasting apply to negligence-based liability, ity of one party directly impacts solution to risk management in the given that terrorist acts by definition the potential exposure of other terrorism context was required, involve intervening criminal conduct parties.4 The aviation industry is and that such solution needed to designed to maximize damage of integrated, with overall air trans- be global in nature. To that end, which it is the proximate cause. port dependent on the working of within weeks of 9/11, the Aviation This principle will be called the the entire system. This principle Working Group (working with “industry-as-victim principle.” will be called the “integrated the International Coordinating Second, following from the industry principle.” Committee of Aerospace Industries industry-as-victim principle, any The above principles underlie Associations) and IATA submitted allocation of legal risk to airlines the U.S. government’s post-9/11 to ICAO a proposed draft conven- for acts of terrorism must be lim- legislation, the FAA war risk insur- tion limiting liability. ICAO’s focus ited by the amount of insurance ance program, and the statutory was multipronged: in the short available on a commercially rea- limits placed on liability. They also term, governments were requested sonable basis. Anything else would formed the conceptual basis for to provide national war risk insur- undercut the efficiency basis for ICAO’s Globaltime compensation ance or guarantees; in the medium liability, and, thus, would be inap- scheme, which contemplated the term, work was intensified on a propriately punitive. This linking provision of funds—to all industry global war risk insurance proof liability and insurance, a neces- participants—to address liabilities, gram;2 and in the longer term, a sity in this context, was taken including in the case of further treaty would be developed. as a given after 9/11. As time restrictions of commercial insurance. Perceptions tend to change has passed, however, some have They should animate the solutions over time. The fortunate absence lapsed back into unhelpful formal adopted by the international com- of major aviation terrorist events distinctions—such as liability is since 9/11 has led some to lose munity in these conventions. one thing, insurance is another. sight of the general principles and No government would have acted Lessors, financiers, and ideas that animated thinking and differently than the United States manufacturers discussion at that time. Should when it retroactively limited 9/11 In the case of lessors and another major terrorist event liability to the amount of insurance financiers, 9/11 raised basic risk occur, these principles and ideas in place at that time.3 This prin- considerations, particularly in undoubtedly would resurface, but ciple will be called the “insurance jurisdictions where such parties law and policy should not depend liability cap principle.” could be exposed to strict liability Jeffrey Wool is secretary and general coun- Third, as this article’s focus (relatively few) or the prospect of sel of the Aviation Working Group. He is reflects, 9/11 materially and complex and protracted litigation. on secondment from Freshfields Bruckhaus Deringer, where he is head of aerospace law adversely impacted the entire The fundamental point, which & policy. The author has written this arti- industry, not only the airlines. must guide policy regarding these cle in his personal capacity and the views Insurance was withdrawn for parties, is that the economics and herein should not necessarily be attributed to the AWG or its members, Freshfields, or other industry participants, which structure of the aviation indus- any other person. raised the same risk management try simply do not support any

Volume 22, No. 4, 2010 The Air & Space Lawyer 23 third-party (or passenger) liabil- equated airlines with the industry others. Based on the last sentence ity against lessors or financiers. as a whole. The liability of oth- in Article 29(1), such actions must These entities merely provide a ers was beyond the scope of such be immediately dismissed (to financial service: the provision of instruments, meaning that they the extent there is jurisdiction in credit. Airlines have operational were left to applicable law.6 One the first place). Channeling was responsibility. Governments have could argue in principle or in inspired by other international regulatory responsibility. This real- context about the merits of such instruments (outside of aviation) ity is reflected in many—though an approach, and the complexity addressing low and unknown regrettably not all—jurisdictions. and thus the procedural implica- probability but high magnitude Law and policy support this real- tions of any other approach. But liability exposure, which present 8 ity, as reflected in U.S. federal law, no reasonable argument can be insuring difficulties. In the pres- 5 as properly interpreted. made that ignoring the integrated ent context, channeling provides In the case of manufacturers, industry principle is sound law a sound and economically effi- three threshold points apply. and policy, while limiting liability cient approach; it assigns liability First, governments, in approving for airlines. Such an approach to those best able to insure and an aircraft’s design, have ultimate contains a zero-sum game ele- collectivize the risk. It limits the responsibility for antiterrorism ment: other industry participants exposure to the assigned party, features. It follows that manufac- potentially face greater exposure, taking into account insurance turers should have no liability for as they become comparatively available on a commercially rea- the consequences of such govern- more attractive as litigation targets. sonable basis. mental decisions. Manufacturers ICAO and the states at the diplo- This channeling concept are bound by these governmental matic conference deserve credit for is based on the UIC’s general determinations, which have been this breakthrough. approach of advancing compen- made in light of a wide range of The means by which the inte- sation objectives, rather than policy considerations—such as grated industry principle was fol- assigning blame through liability policy preferences on preventing lowed was through the exclusive rules, as traditionally formulated 9 The “compensation terrorists, passenger safety, avail- remedy provision. Given its impor- and justified. able technology, cost, and military versus liability” question is the tance, the text is set out in full as and technology transfer issues. prism through which the UIC is follows: One example of such a deter- best understood. Compensation mination is whether antimissile Article 29—Exclusive remedy generally prevailed: the UIC technologies should be included 1. Without prejudice to the ques- seeks to provide victims with on an aircraft, a matter beyond the tion as to who are the persons compensation, and does so in control of manufacturers. Another who have the right to bring a functional manner. The basic suit and what are their respec- example is the nature and extent tive rights, any action for com- elements are strict liability of the of cockpit security. Second, the pensation for damage to a third airline up to a capped amount, insurance liability cap principle party due to an act of unlawful with further claims made against applies to manufacturers. Clearly, interference, however founded, an International Fund,10 financed the same policies applicable to whether under this Convention by passenger and cargo-based con- or in tort or otherwise, can only airlines apply in favor of limiting be brought against the opera- tributions. The airlines, supported manufacturers’ product liability in tor and, if need be, against the by the wider industry, sought the terrorism context to available International Fund and subject to a “hard” or “unbreakable” cap insurance. Third, in accord with the conditions and limits of liabil- through procedures designed to the integrated industry principle, ity set out in this Convention. No provide a certified safe harbor as claim by a third party shall lie limiting airlines’ liability increases against any other person for com- a quid pro quo for liability, which risks to manufacturers, the other pensation for such damage. they do not deserve in the terror- party customarily involved in avia- ism context (per the industry-as- tion accident litigation. 2. Paragraph 1 shall not apply to victim principle).11 That hard cap an action against a person who has was regrettably diluted. The UIC: Key provisions committed, organized or financed Grasping the full picture on an act of unlawful interference. At a conceptual level, the UIC liability for lessors, financiers, and represents a breakthrough in air This provision, while superfi- manufacturers requires a sum- law. For the first time, a major cially similar to parallel clauses in mary of Articles 24, 25, 26, and international air law instrument other air law instruments, is in fact 27 of the UIC. Articles 24 and recognizes and advances the quite new.7 It channels liability to 25 establish rights of recourse in integrated industry principle. the operators. It prevents actions favor of the operator (airline) and Previous air law instruments have by third-party victims against the International Fund against

Volume 22, No. 4, 2010 24 The Air & Space Lawyer “any other person.” There are no word “commercially” was added Assessment express substantive or procedural to the pre-diplomatic conference Turning to the assessment of standards governing that right, text. That addition indicates that the UIC as applied to lessors, meaning that such is determined the provision is linked to stan- financiers, and manufacturers, under applicable law. This point dard business decision making; one may draw several conclu- was confirmed on the record, it should not require a higher sions. Lessors and financiers are following a statement and direct level of cover than is customary. fully protected from direct claims question by the Aviation Working Efforts were made to provide more by third parties and recourse Group. There could be no other objectivity, including through an claims by the operator/airline or sensible interpretation, particularly amendable schedule set out by the the International Fund. Likewise, given that a “person” is defined in Conference of the Parties. States, such protections apply equally to Article 1(g) to include a state. however, did not agree. Thus, a manufacturers as regards matters Articles 26 and 27 restrict any court would determine the amount relating to approved antiterrorist right of recourse under appli- of insurance available on a com- design, provided they carry the cable law. Article 27 contains mercially reasonable basis. This burden of proof on its mandatory two direct and complete restric- provision reflects the insurance lia- character. In the case of normal tions. First, no right of recourse bility cap principle—with only one product liability claims against shall lie “against an owner, les- modification. Article 26(2) states a manufacturer (e.g., improper sor, or financier retaining title to that, in an otherwise permissible performance of its manufacturing holding security in an aircraft,” recourse claim by the International of the governmentally approved where such is not the operator Fund (but not by the operator), design), recourse, but not direct, (meaning the airline controlling the insurance cap does not apply claims are permitted. Applicable or making use of the aircraft where the person against whom law determines the standards (see Article 1(f)). This is a wide recourse is sought has acted “reck- for any such recourse claim, but restriction, which, in a stroke, lessly and with knowledge that such recourse is capped by the sweeps aside concepts of strict damage would probably occur.” amount of insurance available to liability and assertions of negli- While this standard for break- manufacturers on a commercially gence. It realistically reflects and ing the cap is relatively high, reasonable basis. The only excep- promotes the basic structure and the clause is misguided. It could tion to that cap applies in the case economics of the aircraft leasing potentially be invoked in claims of recourse by the International and financing industry. Second, against a manufacturer for nonde- Fund, where a determination must Article 27 prevents recourse sign issues. As the clause is limited first be made that a manufacturer “against a manufacturer if that to action by the International acted recklessly and with knowl- manufacturer proves that it has Fund, a collective decision would edge that damage would probably complied with the mandatory be required regarding any such occur. requirements in respect of the “reckless” conduct. To some The UIC significantly improves design of the aircraft, its engines degree, this procedural step will the position of lessors, financiers, or components.” This provision minimize the risk of speculative and manufacturers regarding is intended to address, and reject, and strategic assertions. design claims—arguably their potential claims such as whether A final point on Article 29(2). greatest risk in this context. While antimissile technology is included That clause removes the exclu- imperfect, the manufacturers’ posi- on an aircraft and the design of sion for financiers in respect of a tion regarding normal product lia- cockpit security. The concept of person, inter alia, who “financed bility is generally improved, when “design” should be read broadly. an act of unlawful interference” measured against current law in Manufacturers, which will carry (i.e., terrorism) (emphasis added). most jurisdictions. the burden of proof for this exclu- This provision should be inter- Lessors, financiers, and manu- sion, are well advised to ensure preted narrowly. The entity must facturers will naturally take into that any design requirements have financed the actual terrorist account the position of their related to antiterrorism are fully act. Changes were made from a airline customers in determining and clearly documented. prior, interim draft that could have the extent to which they actively Article 26(1) further restricts been read as casting a wider net, support the UIC. There are some any right of recourse under to include the general financing concerns in this regard, most applicable law “to the extent the of terrorism. The final, narrower notably the softening of the air- person against whom recourse is text reflects that the UIC is not the lines’ liability cap. That softening sought could have been covered proper place to address broader raises questions about adherence [by] insurance available on a com- questions relating to the financing to the industry-as-victim principle. mercially reasonable basis.” The of terrorism. The airlines, individually and

Volume 22, No. 4, 2010 The Air & Space Lawyer 25 collectively, must determine their Article 13, following the wording Each of these instruments requires own positions on the UIC. They in the UIC, states that “neither the 35 ratifications to enter into force. will likely weigh its terms against owner, lessor or financier retain- In the case of the UIC, those rati- their position under current law, ing title or holding security in an fications must be from countries while taking into account the aircraft, not being an operator, with sufficiently high levels of payment of passenger and cargo nor their servants or agents, shall traffic to ensure the capitalization contributions to the International be liable for damages under this of the International Fund. In practi- Fund. The airline industry will Convention or the law of any State cal terms, that means that the UIC note other aspects, both positive Party relating to third party dam- needs to be ratified by either the and negative, in assessing the UIC. age.” This is fortified by Article United States or most European On the positive side, Article 18(3) 11, which prevents recourse by an Community member states. While contains a reasonably helpful operator against these entities and little time has passed since adop- “drop-down” provision accessing persons. Taken together, the GRC tion of these texts, there is cur- the International Fund, and reduc- provisions, like the UIC, reflect rently no apparent rush toward ing liability, where insurance is and advance the basic structure ratification. Yet circumstances may wholly or partially unavailable. and economics of the leasing and change, producing different ratifica- On the negative side, a state can financing industry. tion dynamics. declare at time of ratification that From a manufacturer perspec- The UIC addresses a critical the UIC does not apply to domes- tive, the GRC is more complex and topic for the air transport sec- tic flights, which contravened the its merits are more debatable. The tor. Recalling the lessons of 9/11 position of the airline industry starting point is Article 4, in which and the resulting core principles (noting that 9/11 involved domes- the airlines are granted a soft cap outlined above, all interested par- tic flights). limiting the amount for which they ties should consider whether, on are strictly liable (Article 4(1)). balance, the UIC provides a better General Risks Convention (GRC) Article 4(3) provides that cap is and more lasting framework than Throughout the development breakable on simple negligence. current law to address aviation ter- and negotiation of the texts, most The threshold issue for manufactur- ror compensation and liability. A state delegations and industry ers is whether their overall risk has strong argument can be made that representatives felt that a treaty increased or remains roughly the it does. The UIC also represents a on third-party liability for general same, measured against current breakthrough in air law: for the first risks was neither necessary nor law.12 The argument for the for- time, the integrated industry principle was followed. Air law should desirable. Current law is not seen mer is that the airlines have a cap, embrace this broader conception of as problematic. Insurance is avail- making the manufacturers more the range of interested parties. able at reasonable rates to cover attractive litigation targets by com- Both the UIC and the GRC general risks. Legal systems are parison. The argument for the latter provide sensible rules for the treat- sharply divided between fault and is that airlines are strictly liable ment of lessors and financiers. strict liability regimes, thus making up to the cap, which may increase These aspects bode well for future wide acceptance of a harmonized their comparative attractiveness as legal issues addressed by ICAO system unlikely. The outdated a litigation target. Moreover, the and the states that might take Rome Convention of 1952, with cap is easily breakable, thus not ICAO precedent into account in low limits of airline liability, lacks protective in practical terms. A the development of national law. contemporary relevance, and thus final consideration is that, through need not be directly superseded Article 12(2), certain limits on types Endnotes by a modernized instrument (com- of recoverable damages in favor of 1. See Final Act, International pare the Warsaw system and the the airlines (e.g., preventing puni- Conference on Air Law, Montreal, Apr. 20 Montreal Convention of 1999). to May 2, 2009, DCCD Doc No. 44. For the tive damages) also apply in favor of final version of the two texts adopted at Nonetheless, certain groups of manufacturers. the Diplomatic Conference, the Convention states pressed for adoption of the on Compensation for Damage to Third GRC, principally contending that it The future of the UIC and GRC Parties, Resulting from Acts of Unlawful Interference Involving Aircraft and the will help modernize their national The entry into force prospects Convention on Compensation for Damage laws. Although this arguably is not for the UIC are unclear, given the Caused by Aircraft to Third Parties, see the soundest basis for an inter- significant differences of opinion DCCD Doc No. 43 and DCCD Doc No. 42, respectively. No article commenting on the national convention of this type, on the approach followed by, and results of the Diplomatic Conference would overall political considerations details of, that convention. The be complete without commending Mrs. resulted in the proposed GRC. prospects for the GRC are equally Kate Staples, president of the Conference, for her extraordinary skill and fairness in The GRC text is favorable from uncertain, in view of basic ques- leading the Conference and Ms. Tan Siew a lessor and financier perspective. tions about its necessity and utility. Huay, for her diligence and thoroughness

Volume 22, No. 4, 2010 26 The Air & Space Lawyer in chairing the Drafting Committee. of State Parties in respect of the Fund), and well as other international stan- 2. Press Release, ICAO, ICAO Council 17–18 (use of funds and compensation by Approves Global Aviation War Risk the Fund). dards. He offers a great foundation Insurance Scheme (June 14, 2002). While 11. See Joint Industry Paper, International on which we can all start consid- ICAO’s Globaltime compensation scheme Conference on Air Law, Montreal, April 20 to ering legal work in a stimulating did not enter into force, the work on it May 2, 2009, DCCD Doc No. 10. new field of law. helped lay the foundation for the UIC. In 12. See Aviation Working Group Paper, particular, the scheme was farsighted in International Conference on Air Law, Speaking of space, Josie Beets, its treatment of the industry as a whole, its Montreal, Apr. 20 to May 2, 2009, DCCD Doc who won our law student writing global approach to risk sharing in the terror- No. 5. competition, presents us with the ism context, and its method for addressing future withdrawal of insurance coverage article “The International Charter (the so-called drop-down). Each of these on Space and Major Disasters aspects features prominently in the UIC. Chair’s Message and International Disaster Law: 3. See Air Transportation Safety and System Stabilization Act, Pub. L. No. 107-42, continued from page 2 The Need for Collaboration and 115 Stat. 230 (2001). Coordination.” Josie’s article abroad, to enhance the breadth 4. See R. Litan, The Case for Government- focuses on the current interna- Supported Terrorism Insurance for U.S. and depth of our topics and to Aerospace Manufacturers (Nov. 11, 2002) develop a strategic approach to tional legal regime for assisting in (on file with the author). disasters and suggests greater col- our conference topics. Finally, 5. 49 U.S.C. § 44112 (a “lessor, owner, laboration among governments and or secured party is liable for personal injury, Captain David Hayes chairs the death, or property loss or damage on land Public Relations Committee, which industry with the use of satellite or water only when a civil aircraft, aircraft will get the word out about the imagery and analysis to detect and engine, or propeller is in the actual pos- respond to disasters. session or control of the lessor, owner, or Forum and will make sure that secured party . . .”) (emphasis added). The our stellar speakers get the press No issue would be complete intention of § 44112 was to “remove one of coverage they deserve. Should any without our Web faves. We are the obstacles to the financing of purchases pleased to bring you some favorite of aircraft.” See H.R. Re p . No. 802091 (1948). of these committees intrigue you, As a general proposition, federal courts please contact the committee chair, sites from none other than Bob have correctly interpreted this section to Dawn Holiday, or me. Rivkin, DOT General Counsel. preempt liability under state law. See, e.g., Find out where he gets his flight In re Lawrence W. Inlow Litig., 2001 U.S. Finally, I want to wish each of Dist. LEXIS 2747 (S.D. Ind. 2001). There you a new year filled with well- information, music, and politics, have been some misguided state law deci- being, prosperity, and adventure. with a great suggestion on how sions, see, e.g., Retzler v. Pratt & Whitney, to talk cheaply and effectively to 723 N.E.2d (Ill. App. 1999), that need to be Warm regards, addressed at the first opportunity. distracted college kids. 6. Most notably in the Convention We hope to see you in D.C. for for the Unification of Certain Rules for the Update Conference in January. International Carriage by Air, 1999 (“MC 99”), reprinted in S. Treaty Doc. 106-45, Renee Martin-Nagle As always, please feel free to send 1999 WL 333292734, and the Convention any compliments or gripes our for the Unification of Certain Rules relat- way and keep those articles coming to International Transport by Air, 1929, reprinted in note following 49 U.S.C.A. § ing to [email protected] 40105 (1997). Editor’s Column and david.heffernan@wilmerhale. 7. See, e.g., MC 99, art. 29 (basis of continued from page 3 com. Cheers. claims). 8. Examples include the Convention on conflicts with its otherwise pro- Third Party Liability in the Field of Nuclear consolidation stance. Energy (1960), the Vienna Convention on Civil Liability for Nuclear Damage (1963), Following Sven’s piece, and the International Convention on Civil merging U.S. and EU aviation Kenneth P. Quinn Liability for Oil Pollution Damage (1992), policy, is an article entitled “An Editor-in-Chief the International Convention on Liability and Compensation for Damage in connec- Intersection of Air and Space tion with the Carriage of Hazardous and Law: Licensing and Regulating Noxious Substances by Sea (1996), and the Suborbital Commercial Human International Convention on Civil Liability for Bunker Oil Pollution Damage (2001). Space Flight Operations,” by Mike 9. See M. Jennison, Report of the Mineiro, a doctoral candidate at Rapporteur on the Draft Convention McGill. Mike succinctly poses and on Compensation for Damage Caused by Aircraft to Third Parties, in the Case answers questions related to the of Unlawful Interference, ICAO Legal legal ramifications of the emerg- Committee, 33d Sess., L/C33—WP/3-3 at ing and exciting industry of com- ¶ 2.2. 10. See UIC arts. 8 (constitution and mercial human space flight. He objectives of the Fund), 9–10 (conference outlines the current U.S. laws gov- of the parties (authority over the Fund)), 11 erning space transportation and (secretariat and director of the Fund (management of the Fund)), 12–15 (matters relat- juxtaposes that with the possible ing to contributions to the Fund), 16 (duties regulatory approach of the EU as

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IN THIS ISSUE… Web Favorites

For each issue, we ask a member of the air and space community to share favorite websites with our readers. Robert Rivkin, Department of Transportation General Alliances, Immunity, and Counsel, shares his. the Future of Aviation...... 1

Lessor, Financier, and FlightAware ites, it finds songs like the ones you http://flightaware.com already like, introducing you to artists Manufacturer Perspectives on No need to call the airline––or FAA you never heard of. the New Third-Party Liability ATO Operations––to get current Conventions...... 1 flight information. This site provides Skype a live picture of the current position www.skype.com Chair’s Message...... 2 of all flights, by tail number or airline Speaking of teens, Skype is an amaz- flight number, with departure and ing way to touch base when your Editor’s Column...... 3 expected arrival times. loved ones move out of the nest. Computer-to-computer video chat New Trends in the European Routes International and for free with your college-age kids, The Man in Seat Sixty-One watching them as they busily check Commission’s Review of http://routesinternational.com all their incoming messages and pre- Airline Mergers...... 4 and www.seat61.com tend to pay attention to you at the Routes International has links to same time. Just like when they lived An Intersection of Air virtually every transportation source at home. and Space Law: Licensing imaginable: airlines, airports, city transit agencies, rail, bus, ferries, and RealClearPolitics and Regulating Suborbital everything in between. Seat61 gives www.realclearpolitics.com Commercial Human Space great tips on train and ship travel The best collection I have found of Flight Operations...... 9 worldwide. Both are inspiring when political news, analysis, opinion, and you’re feeling stuck in the office. Oh, polling across the spectrum. The International Charter on the places you could go, if only . . . Space and Major Disasters and Pandora Internet Radio International Disaster Law: www.pandora.com The Need for Collaboration If you have any interest in expanding a music collection that was frozen in and Coordination...... 12 time upon college graduation, and your teenage children’s music just doesn’t do it for you, try Pandora. Applying some basic algorithms to analyze your favor-