[South Bulletin 60 Article]

By Chee Yoke Ling &Xu Chengcheng

The EU airline tax controversy has been building up for a while at the global level. A multi-country official momentum against the EU action on its aviation tax increased last year at an international meeting on 29-30 September of ICAO and other non-EU Member States.

This was held in New Delhi to discuss the inclusion of aviation in the EU-ETS. Discussions covered the legal objections to such inclusion, policy objections, the role of ICAO in the way forward and the next steps for countries to consider.

The countries present were: Argentina, Brazil, Canada, China, Chile, Colombia, Cuba, Egypt, Japan, Republic of Korea, Malaysia, Mexico, Nigeria, Paraguay, Peru, Philippines, Qatar, Russian Federation, Saudi Arabia, Singapore, South Africa, Thailand, Turkey, the United Arab Emirates and the United States.

According to the report of the meeting posted on the Indian Government's Press Information Bureau website (http://pib.nic.in/newsite/erelease.aspx?relid=76388), there was wide concern expressed by all countries present, without exception, that the unilaterally imposed EU-ETS measures were inconsistent with the international legal regimes.

There were also references of EU-ETS measures violating the Chicago Convention governing international aviation as also provisions of the World Trade Organization. It was stated by the various delegates that they were also discriminatory in carriers.

A Joint Delhi Declaration was negotiated and adopted at New Delhi that inter alia highlighted the essential role of aviation in economic progress and also recognized the complementary national, regional and global endeavours developed on the basis of collaboration and mutual agreement to address aviation emissions.

It called upon ICAO to continue to undertake efforts to reduce aviation emissions contribution to climate change.

It affirmed the importance of the role of ICAO in addressing aviation emissions, including pursuant to the request from the Parties to the UNFCCC and recognized that international aviation's growth makes it necessary to address the long-term growth of greenhouse gas emissions that contribute to global climate change.

The declaration opposed the EU's plan to include all flights by non-EU carriers to/from an airport in the territory of an EU Member State in its emissions trading system, and also urged the EU and its Member States to work collaboratively with the rest of the international community to address aviation emissions.

The members present most importantly decided to continue to work together to oppose the imposition of the EU ETS on their operators and invited any other State to associate itself with the declaration. It was also decided that the group would meet again in the near future.

On 21-22 February 2012, a second meeting took place in Moscow with participation from Armenia, Argentina, Republic of Belarus, Brazil, Cameroon, Chile, China, Cuba, Guatemala, India, Japan, Republic of Korea, Mexico, Nigeria, Paraguay, Russian Federation, Saudi Arabia, Seychelles, Singapore, South Africa, Thailand, Uganda and the US.

The outcome was the "Joint declaration of the Moscow meeting on inclusion of international civil aviation in the EU-ETS" endorsed by 29 countries (including some who were not at the Moscow meeting).

The declaration stated that the inclusion of international civil aviation in the EU-ETS leads to serious market distortions and unfair competition.

They stressed that, "the unilateral inclusion of international civil aviation in the EU-ETS has constituted an obstacle to the progress of ICAO's work underway to address international civil aviation emissions."

They underlined "the lack of an adequate response from EU Member States to the ICAO Council's Decision C-DEC 194/2, including the lack of a constructive dialogue to address the concerns of the non-EU States expressed in that decision and elsewhere".

(The ICAO Decision C-DEC 194/2 adopts the Joint Delhi Declaration of 30 September 2011.)

The representatives at the Moscow meeting decided inter alia to adopt the Joint Declaration as a clear manifestation of their unanimous position that the EU and its Member States must cease application of the Directive 2008/101/EC to airlines/aircraft operators registered in third States; and strongly urged the EU Member States to work constructively forthwith in ICAO on a multilateral approach to address international civil aviation emissions.

The meeting also agreed on the following "basket" of actions and measures:

·  Filing an application under Article 84 of the Chicago Convention for resolution of the dispute according to the ICAO Rules for the Settlement of Differences (Doc 7782/2);

·  Using existing or new State legislation, regulations, or other legal mechanism to prohibit airlines/aircraft operators of that State from participating in the EU ETS;

·  Holding meetings with the EU carriers and/or aviation-related enterprises in their respective States and apprise them about the concerns arising out of the EU-ETS and the possibility of reciprocal measures that could be adopted by the State, which may adversely affect those airlines and/or entities;

·  Mandating EU carriers to submit flight details and other data;

·  Assessing whether the EU ETS is consistent with the WTO Agreements and taking appropriate action;

·  Reviewing Bilateral Air Services Agreements, including Open Skies with individual EU Member States, and reconsidering the implementation;

·  Or negotiation of the "Horizontal Agreement" with the EU;

·  Suspending current and future discussions and/or negotiations to enhance operating rights for EU airlines/aircraft operators;

·  Imposing additional levies/charges on EU carriers/aircraft operators as a form of countermeasure.