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Canada J j • IMPACT OF THE EC SINGLE MARKET ON THE RELATIONS BETWEEN THE EC AND KOREA MAENG, SUNG KYU A thesis submitted to the Faculty of Graduate Studies and Research in partial fulidlment of the requirements for the LL.M. degree Institute of Air and Space Law Faculty of Law McGill University Montreal, Quebec, Canada Copy # December 1993 • ID MAENG, SUNG KYU Nationallibrary Bibliothèque nationale I~I of Canada du Canada Acquisitions and Direction des acquisitions et Bibliographie Services Branch des services bibliographiques 395 Wellington Stree! 395. rue Welhl"lQfon Ottawa.Onl3no Ottawa (OnI3no) K1A ON' K1A ON' The author has granted an L'auteur a accordé une licence irrevocable non-exclusive licence irrévocable et non exclusive allowing the National Library of permettant à la Bibliothèque Canada to reproducf.l, loan, nationale du Canada de distribute or sell copies of reproduire, prêter, distribuer ou hisjher thesis by any means and vendre des copies de sa thèse in any form or format, making de quelque manière et sous this thesis available to interested quelque forme que ce soit pour persons. mettre des exemplaires de cette thèse à la disposition des personnes intéressées. The author retains ownership of L'auteur conserve la propriété du the copyright in hisjher thesis. droit d'auteur qui protège sa Neither the thesis nor substantial thèse. Ni la thèse ni des extraits extracts from it may be printed or substantiels de celle-ci ne otherwise reproduced without doivent être imprimés ou hisjher permission. autrement reproduits sans son autorisation. ISBN 0-315-94558-3 Canada - 1 - • TABLE OF CONTENTS Page ,.BSTRACT v . .,. RESUME VI ACKNOWLEDGEMENTS ..vii APPENDICES viii INTRODUCTION ...................................... .. 1 CHAPTER l - LIBERAL1ZATION OF AIR TRANSPORT IN THE EUROPEAN COMMUNITY .... ................. .. 7 1-1 Memoranda of the Commission ....................... .. 8 1-2 Inter-Regional Air Services Directive 10 1-3 The Single European Act Il 1-4 The Packages of European Communities 13 1-4-1 First Package 13 1-4-2 Second Package 18 1-4-3 Third Package 23 CHAPTER II - INCOMPATIBILITIES CAUSED BY EC LIBERALIZATION WITH PRESENT REGULATORY SYSTEM OF INTERNATIONAL AIR TRANSPORT ...•......... 29 • Il-l Nationality of Aircraft .. ......................... ... 31 - Il - • II-2 CabOlê.ge ,5 II-2-1 Article 7 of the Chi::ago Convention 36 II-2-2 "Community Cabotage Area" 39 II-3 Bilateral Air Transport Agreement 41 1I-3-1 Representative 42 1I-3-2 Substantial Ownership and Effective Control 43 1I-4 International Air Transport Association 45 CHAPTER III - EXTERNAL RELATIONS OF THE EC WITH NON-EC COUNTRIES 50 III-i External Competence of the EC for Air Transport 51 III-l-i Exclusive Community Competence for Aviation Bilaterals ........................ 51 Ill-I-2 Community Involvement in Bilateral Air Transport Negotiations ... ................ .. 57 III-2 External Effects of Existing Community Legislation 60 III-2-1 Council Decision 69/494 60 III-2-2 Council Decision 80/50 61 III-2-3 Communication on Community Relations with Third Countries in Aviation Matters 61 III-2-4 Council Regulation 2409/92 on Fares and Rates for Air Services 62 III-2-5 Communication from the Commission to the Council ..... 63 • III-3 Jurisprudence of the European Court of Justice 6S - III - • 1II-3-1 Wood Pulp Case 66 1II-3-2 Ahmed Saeed Case 67 111-4 EC Air Transport Relations with Non-EC Countries 68 1II-4-1 Relations between the EC and non-EC countries in Europe 68 III-4-2 Relations between the EC and no~.-EC countries outside Europe 71 CHAPTER IV - IMPACT OF EC LIBERALIZATION ON AIR TRANSPORT IN KOREA 74 IV-I Brief History of Air Transport in Korea 74 IV-2 Impact of the EC Liberalization on the Relationship between the EC and Korea .......... 77 IV-2-} Bilateral Agreements 83 IV-2-2 Extra-territorial Application of Competition Law 85 IV-2-3 Fifth Freedom Rights 87 IV-3 Strategies of Korea 89 IV-3-} Possible Bargaining Tools for Korea 92 A. Acceptance of Community Ownership Requirement .. .. 92 B. A New Airport as a Hub of the Northeast Asia Region .. 93 IV-3-2 Strategies of Korea ....•...•.................95 A. Regional Cooperation 95 B. Access to the EC's Air Transport Market ..•....... 97 • C. Airline Alliances ................•...... .. 99 - IV - • CONCLUSION 11.' APPENDICES 115 BIBLIOGRAPHY 127 • • - v - ABSTRACT At present European air transport is undergoing radical changes as a result of the liberalization measures taken by the European Community. The traditional system. characterized by nationalism, protectionism, and bilateraiism, which prevented true competition and protected na!ional carriers. has broken up. The creation of a common air transport policy for the c:ommunity has important implications for relationships between Member States and third countries. The world airline industry is very much concerned by the emergence of a series ofnew principles and laws affecting the international air transport ofthird countries, such as the principle of non-discrimination, freedom of establishment, freedom of services, and EC competition law. Korea, which has fewer bargaining tcols to attract the EC alr carriers, must understand correctiy the present changes in the air transport field of the EC and try to seek its own possible strategies. • • ~ VI - ActuelIement. le transport aérien européen connait des changements radicaux suite aux mesures de libéralisation prises par la Communauté Euro~ene. Le système traditionnel. caractérisé par le nationalisme. le protectionis:ne et le libéralisme et qui a freiné la libre concurrence pour protéger les transporteurs nationaux. aopartient désormais au passé. La création d'une politique commune en matière de transport aérien a des conséquences importantes pour les relations entre États membres et les pays tiers. L'industrie du transport aérien mondial est très influencée par l'émergence d'une serie de nouveaux principes et par les lois affectant le transport aérien international des pays tiers. Ces principes sont ceux de la non-discrimination. de la liberté d'établissement, de la liberté de services et du droit de la concurrence de la CE. La Corée, qui a peu d'instruments économiques qui lui permettrait d'attirer les transporteurs de la CE doit s'adapter aux changements présents dans le domaine du transport aérien de la CE et essayer de trouver ses stratégies face à cet adversaire. • - VII - • ACK]'I;QWLEDGMENTS 1 wish to express my particular gratitude to Dr. M. Milde for giving me the chance to study in the Institute of Air and Space Law. His continuous encouragement and valuable advice supported me during my stay at the Institute. A special debt of gratitude is owed to Prof. Richard A. Janda. As my thesis supervisor his precious suggestions and comments guided me throughout the completion of this thesis. 1 will never forget the fruitfuI time 1 shared with him in the Institute. 1 would a1so !ike to thank my classmate, Jill Ferrier, for her kind treatment and patientiy and diligentiy proof-reading this thesis. 1 a1so wish to thank ail the teaching and other staff, of the rnstitute of Air and Space Law. Finally, 1 wish to acknowledge my deepest gratitude to my family: parents, wife Ae Ran, sons Jung Yong and Byung Yong. Especially, my wife's love and patience helped me in the realization of this work. • - VIll - • APPEl\1)ICE..<;; I. Articles of the Union Treaty Relevant to This Thesis II. Comparison between Third and Second Package III. Comparison of NSMA and Other New Airports in Northeast Asia Region IV. Transnational Airline Alliances of Major EC Carriers " • • - 1 - INTRODUCTION The international system of Air Transpon Regulation has been funclioning for more than 40 years based on its lhree piIIars: the International Civil Aviation Organization (ICAO) , provided lechnical and safety regulations; the International Air Transpon Association (lATA)~ provided the framework for tariff and fare coordination; and bilateral agreements. eventually. established a world-wide ne!Work. However. poiitical and economic changes in recenl years have altered the operating environment for international air transpon and created a widely felt need to re- assess the post-war aviation regulatory regime. ~ 1 ICAO was created by the Convention on lnremalional Civil Avialion, ICAO Doc. 7300/6; 15 UNTS 295 (opene:l for signature 7 December 1944, entered into force 4 April 1947) [hereinafter Chicago Convention].