21/12/2011 - Grand Chamber rejects US and Canadian airlines' international law challenge to EU emissions trading scheme

The Grand Chamber of the CJEU ruled on 21/12/2011 in Case C-366/10 Air Transport Association of America, rejecting a challenge by US and Canadian airlines to the validity of Directive 2008/101/EC. The Directive brought transatlantic aviation within the scope of the EU's greenhouse gas emissions trading scheme.  The Advocate General's Opinion had been delivered on 6/10/2011.

The challenge to the validity of the Directive commenced in the Administrative Court by way of challenge to the Secretary of State for Energy and Climate Change's measures to implement the Directive. The Administrative Court referred the question of validity to the CJEU for a preliminary ruling.  Before the CJEU, three EU institutions and twelve national governments intervened.

The CJEU's judgment explained the conditions under which an act of EU law may be assessed in the light of rules found in international agreements. It found that the Chicago Convention and the Kyoto Protocol failed to meet those conditions, but that certain provisions of the Open Skies Agreement could be relied on in order to challenge the validity of the Directive.

The CJEU also held that sufficiently established principles of customary international law could be relied upon to the extent that they called into question the competence of the EU, as the UK government had been alone in arguing. The CJEU said that since principles of customary international law do not have the same degree of precision as a provision of an international agreement, the scope of judicial review in such cases is limited to asking whether in adopting the act in question EU institutions made "manifest errors of assessment" concerning the conditions for applying those principles.

The CJEU went on to reject the airlines' arguments that the Directive was incompatible with the Open Skies agreement. It also found that the EU enjoyed the competence, in the light of principles of customary international law, to adopt a Directive which applied to all flights which arrive at or depart from and aerodrome situated in the territory of a Member State, that the scheme was not a "duty, tax, fee or charge" on fuel held or consumed by aircraft operators, and that it was non-discriminatory.

The inclusion of aviation within the EU's ETS scheme has given rise to controversy. In its article following the CJEU's judgment the Financial Times noted the vehement objections of many non-EU countries to that aspect of the scheme, and the continuing possibilities of retaliation and further legal challenges. It also quoted the US State Department saying, after the ECJ's ruling: "We continue to have strong legal and policy objections to the inclusion of flights by non-EU carriers in the EU emissions trading scheme. We do not view the [ECJ's] decision as resolving these objections." The debate seems likely to continue, notwithstanding the CJEU's ruling.