GEORGIA JOURNAL OF INTERNATIONAL AND COMPARATIVE LAW VOLUME 32 2004 NUMBER 2 FLIGHTS OF FANCY AND FIGHTS OF FURY: ARBITRATION AND ADJUDICATION OF COMMERCIAL AND POLITICAL DIsPuTEs IN INTERNATIONAL AVIATION Paul Stephen Dempsey* TABLE OF CONTENTS I. INTRODUCTION ......................................... 233 II. ARBITRATION OF INTERNATIONAL AVIATION DISPUTES ......... 236 A. BilateralAir TransportAgreements ...................... 236 B. United States v. France (1963) .......................... 243 C. United States v. Italy (1965) ............................ 246 D. United States v. France (1978) .......................... 248 E. Belgium v. Ireland (1981) .............................. 255 F. United States v. United Kingdom (1992) .................. 258 G. Australia v. United States (1993) ........................ 263 * Tomlinson Professor of Global Governance in Air & Space Law, and Director of the Institute of Air & Space Law, McGill University; D.C.L. (1986) McGill University; LL.M. (1978) George Washington University; A.B.J. (1972), J.D. (1975) University of Georgia. Member of the Colorado, Georgia, and the District of Columbia bars. Copyright © 2003 by Paul Stephen Dempsey. Portions of this Article are based on earlier work published by the author in Paul Stephen Dempsey, Law & Foreign Policy in International Aviation (Transnational 1987). The author would like to thank Steve Rynerson, then a J.D. candidate at the University of Denver, for his assistance on the portion of this article addressing the dispute over aircraft noise regulations in United States v. Fifteen European States (2003). The author would also like to thank Dr. Assad Kotaite, President of the ICAO Council, Dr. Ludwig Weber, General Counsel of ICAO, and Ed Stimpson, U.S. Ambassador to the ICAO, for reviewing an earlier draft of this manuscript and providing invaluable insights as to the events described herein. GA. J. INT'L & COMP. L. [Vol. 32:231 IT[. ADJUDICATIONS BEFORE TmE ICAO COUNCIL ..... A. The Chicago Convention ................... B. India v. Pakistan(1952) .................... C. United Kingdom v. Spain (1969) ............. D. Pakistan v. India (1971) .................... E. Cuba v. United States (1998) ................ F. United States v. Fifteen European Nations (2000) IV. THE INTERNATIONAL COURT OF JUSTICE OIgQmII6g .......,..... A. The Cold War Cases ............. D IBOge4Q ............ B. Libya v. United States (1992) ...... IOIOeOIO0 ............ C. Iran v. United States (1996) ....... OJOOOJQgl °........... D. Pakistan v. India (2000) .......... OQIJIIOQQ .... o....... V . CONCLUSIONS .......................................... A. PoliticalMeans of Dispute Resolution .................... B. Legal Means of Dispute Resolution ...................... 20041 DISPUTES ININTERNATIONAL AVIATION I INTRODUCTION By its very nature, aviation is inherently international in character, shrinking the planet and drawing together disparate peoples, cultures, and economies. As aircraft cross borders into foreign airspace and land at foreign airports, conflicts inevitably arise at both commercial and political levels. It is the resolution of these disputes that is the focus of this Article. International dispute settlement mechanisms exist along a spectrum. Coercive means exist at one end, while legal means exist at the other.' This Article focuses on the latter, and in particular, the ad hoc arbitrations that have resolved commercial aviation disputes, as well as the adjudication of aviation disputes before the International Civil Aviation Organization (ICAO),2 and the International Court of Justice (ICJ).3 1 Dimtri Maniatis, Conflict In the Skies: The Settlement ofInternationalAviationDisputes, 20 ANNALS AIR & SPAcE L. 167, 170, 172,185-206 (1995). More formally, negotiation, which offers the parties "the greatest degree of flexibility and control over their dispute," stands at one end of the spectrum. Adjudication stands at the other, inasmuch as it requires the parties to relinquish the highest degree of control over their dispute to a third party. Between negotiation and adjudication are a variety of options, including inquiry, good offices, mediation, conciliation, and arbitration. Though these categories are quite distinct, many dispute settlement mechanisms do not fall precisely within a single category. A. Neil Craik, Recalcitrant Reality and Chosen Ideals: The Public Function of Dispute Settlement in InternationalEnvironmental Law, 10 GEO. INT'L ENvT'LL REV. 551, 553 (1998). 2 The International Civil Aviation Organization was created under the terms of the Chicago Convention on International Civil Aviation, 61 Stat. 1180 (1944) [hereinafter Chicago Convention]. This agreement was ratified by the United States in August 1946 and has been ratified or adhered to by 188 nations-virtually the entire world community. It is permanently headquartered in Montreal. I To date, the World Trade Organization (WTO) has yet to exert jurisdiction over commercial aviation. See Ruwantissa I.R. Abeyratne, Would Competition in Commercial Aviation Ever Fit Into the World Trade Organization?,61 J. AIRL. &COM. 793 (1996). At this writing, only three sectors of aviation activity have been brought under the General Agreement on Trade in Services (GATS) Annex on Air Transport Services: (1) aircraft repair and maintenance; (2) the sale and marketing of air transport services; and (3) computer reservations systems. For an argument that more should be swept under the GATS umbrella, see Randall Lehner, Protectionism,Prestige and National Security: TheAlliance Against MultilateralTrade in InternationalAir Transport, 45 DuKE L.J. 436 (1995), though others argue that an agency with aviation expertise would be better suited to resolve such disputes. See PAUL DEMPSEY, LAW & FOREIGN POuCY ININTERNATIONAL AVIATION 302 (1987). Although the WTO has not addressed commercial airlines, it has rendered several decisions regarding aircraft finance subsidies by manufacturers. See, e.g., Brazil-Export Financing Programme For Aircraft: Second Recourse By Canada To Article 21.5 of the DSU, Wt/Ds46/Rw/2; (01-3570), 2001 WTO Ds Lexis 37 (26 July 2001); Brazil-Export Financing GA. J. INT'L & COMP. L. [Vol. 32:231 Bilateral air transport agreements (bilaterals) define legal rights between nations in the realm of commercial aviation. Rights and responsibilities defined therein concerning airline traffic rights, rates, capacity, safety, security, and competition often lead to conflict between signatory states. Most bilaterals require consultation by governments over disputes before any retaliatory action is taken. Early bilaterals called for an advisory report or adjudication by the ICAO. The Chicago Convention also provides for dispute resolution before the ICAO Council. Modem bilaterals have replaced the ICAO as a dispute resolution forum with ad hoc arbitration, usually with three arbitrators.4 Bilaterals typically call for termination only on twelve months' prior notice. In the history of international aviation, relatively few disputes have resulted in ad hoc arbitration or ICAO or ICJ adjudication.5 At this writing, only six aviation disputes have been submitted to arbitration, only five have been submitted to the ICAO for adjudication, and only twelve have been filed with the ICJ. Most aviation disputes are resolved through negotiation, and, depending on the relative strength of the aviation trading partners, unilateral coercion.6 This Article will review the six ad hoc arbitrations that have been sought to resolve issues of commercial aviation: * United States v. France (1963)-involving fifth freedom7 rights beyond Paris; * United States v. Italy (1965)-involving all-cargo service to Rome; Programme for Aircraft, Recourse By Canada To Article 21.5 Of The DSU, Wt/Ds46/Rw; (00- 1749), 2000 WTO Ds Lexis 14 (9 May 2000); Canada-Measures Affecting the Export of Civilian Aircraft, Wt/Ds70tR; (99-1398), 1999 WTO Ds Lexis 6 (14 April 1999). In this bitter and protracted dispute over subsidies to Embraer and Bombardier by Brazil and Canada, respectively, the WTO first found that Canada could impose $1.4 billion in retaliatory sanctions against Brazil, then subsequently found that Brazil could impose $250 million in retaliatory sanctions against Canada. Tom Cohen, WTO Approves Brazil Sanctions On Canada Over Airline Subsidies, MEMPwS CoMM. APPEAL, Dec. 24, 2002, at B 11. ' Typically, each nation designates one arbitrator, after which the first two arbitrators jointly select the third. ' For a review of each of these disputes, see DEMPSEY, supra note 3, at 259-67, 293-302. 6 See DEMPSEY, supra note 3, at 167-229, 306-07. ' Under "fifth freedom" rights, an airline has the right to carry traffic between two countries outside its own country of registry so long as the flight originates or terminates in its own country of registry. 20041 DISPUTES IN INTERNATIONAL AVIATION * United States v. France (1978)-involving "change of gauge"8 operations between London and Paris; " Belgium v. Ireland (1981)-involving airline capacity between Dublin and Brussels; " United States v. United Kingdom (1992)-involving airline user charges at London Heathrow Airport; and " Australia v. United States (1993)-involving fifth freedom operations between Osaka and Sydney. This Article will also review the five aviation disputes that have been brought before the ICAO Council for quasi-judicial resolution: " India v. Pakistan (1952)-involving Pakistan's refusal to allow Indian commercial aircraft to fly over Pakistan; " United Kingdom