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Flying into the Unknown: The UK’s Air Transport Relations with the European Union and Third Countries Following “Brexit” ( Part 3 )

 

4. POSSIBLE SOLUTIONS

A key part of EU external aviation policy has been the extension of EU aviation liberalization to neighbouring countries, and this has been achieved with many of them, such as Switzerland, Norway, Morocco, Israel and the Western Balkan countries. It is also on ongoing process, with an agreement on the point of being signed with Ukraine, and plans to negotiate with other Mediterranean countries.

This has been achieved in a variety of legal ways; in the case of Norway – through membership of the European Economic Area (EEA); in the case of Switzerland – by way of a package of cooperation agreements in seven specific sectors, one of which concerns air transport; in the case of Mediterranean countries – through the conclusion a Euro-Mediterranean Aviation Agreement (EMAA) modelled after the first such agreement with Morocco; and in the case of the Western Balkan countries – by means of a multilateral agreement establishing the ECAA.

Given this policy towards neighbours, and the UK’s current major role in the EU internal air transport market, it might seem that an obvious and simple way forward would be for the UK to continue to be part of this market, by means of one of the mechanisms mentioned above, or something similar. Obviously some of these mechanisms would be more feasible than others.

The ECAA Agreement was designed to bring the South-East European countries (Bosnia and Herzegovina, Bulgaria, Croatia, the former Yugoslav Republic of Macedonia, Romania, Serbia, Montenegro and the UN Mission in Kosovo) into the existing internal aviation market (comprising the EU Member States, and Norway and Iceland by virtue of their participation in the European Economic Area). The ECAA envisages progression towards an internal aviation market with freedom of establishment, no ownership and control restrictions and unlimited market access.

The ECAA Agreement allows for enlargement of the ECAA by inclusion of States (1) which are ready to adopt the EU aviation acquis and (2) with which the EU has close economic cooperation, such as an association agreement. While it would be desirable for the UK to remain in the internal aviation market, this comes at the price of adoption of the EU aviation acquis as a complete package. Given the nature and structure of the ECAA Agreement, it is very unlikely that the UK would be able to negotiate the exclusion of certain EU Regulations, such as Regulation 261/2004 or avoid the application of CJEU case law passed predating the Agreement. With regard to the requirement of close economic cooperation, the example of an association agreement given in Article 32 suggests that a high degree of integration with the EU may be required for the ECAA to be extended to a third country. Whilst the TFEU only covers association agreements in general terms in Art. 217, these often include measures covering the entire subject matter of the TFEU. Unlike cooperation and partnership agreements, they provide for more intensive forms of integration and are therefore usually concluded with countries that are candidates for EU membership. The CJEU has consistently ruled that such agreements form part of the EU legal order and that the CJEU enjoys broad jurisdiction over their provisions. This is one of the reasons why the ECAA would be an inappropriate mechanism for the UK’s participation in the internal European Aviation market. Another drawback of this model is that the non-EU party has no say in the adoption of new legislation even following the completion of the final stage of the accession process, although it may avoid applying such new legislation by requesting a meeting of the Joint Committee to agree on the implications thereof.

The EMAA Agreement is a comprehensive air transport agreement focused on approximation of non-EU party laws to the EU aviation acquis, progressive liberalization of market access to a certain extent, as well as gradual relaxation of investment restrictions. Importantly, while the EMAA Agreement contains an Annex listing the EU aviation acquis in similar details as the one forming part o the ECAA Agreement, it only requires the non-EU State do adopt equivalent standards, and only in respect of certain provisions of each EU act. This might make it easier for the UK to negotiate exclusions of specific provisions than to do so under the ECAA Agreement. However, the downside of this model is that in its most liberal stage it still only provides for the exchange of third, fourth and fifth freedom services, and does not allow for complete removal of ownership and control restrictions or the freedom of establishment so cannot be characterized as allowing for participation in the internal EU aviation market on par with EU Member States.

The EEA Agreement had the objective of strengthening trade and economic relations between the parties so as to establish a homogeneous European Economic Area characterized by the free movement of goods, persons, services and capital, a level playing field and closer cooperation in certain key areas. To achieve this, the Agreement extended most EU legislation existing as at 2 May 1992 to Norway, including the air transport acquis, with the incorporation of subsequent legislation being decided upon by a joint Committee. This model is most probably unsuitable given its wide scope, in view of the apparent wish of the majority in the referendum to ensure greater national control over immigration and recovery of sovereignty in other respects.

EEA membership was also offered to Switzerland, but this was rejected in a referendum. Switzerland eventually entered into seven sectoral agreements with the EU, one of which concerns air transport. The advantages of the Swiss model are that it is focused on air transport like the ECAA Agreement without requiring undesirable levels of EU integration and it goes beyond the EMAA Agreement in terms of liberalization, allowing the parties to agree on cabotage services and providing for the freedom of establishment. A key disadvantage is that the agreement was negotiated as part of a package of seven sectoral agreements, protected by a clause contained in each agreement which provides for the termination of all of them if the provisions of any one are breached. Any air transport deal between the UK and the EU may also be likely to be part of a broader cooperation arrangement, lessening the opportunities to negotiate air transport matters separately and allowing a situation where the achievement of beneficial positions in certain areas may be conditional on compromises made with respect to aviation and vice versa. Moreover, the ‘cross-default’ provision may lead to the termination of a successfully negotiated air transport agreement due to an unrelated, but politically unforgivable breach of another agreement of the package. For example, the decision by the Swiss people in a referendum in 2014 to restrict freedom of movement is inconsistent with the EU-Switzerland Agreement on free movement, and hence, if implemented, will require the termination of all seven agreements, the matter has been under consideration and discussion between the two sides and the Brexit vote has added impetus.

Finally, the UK could obtain access to the EU market by entering into a comprehensive agreement modelled after the EU-US Agreement. It would then be treated not as a fully-fledged participant of the internal aviation market, but rather as a third country representing a strategic partner of the EU. This would have the benefit that the UK would not be required to accept the EU aviation acquis and focus during negotiations could be more easily directed at the exchange of traffic rights. Unlike the United States, however, the UK is likely to be interested in securing full seventh and ninth freedom rights for the benefit of its low cost carriers and no present EU agreement with a third country provides for the exchange of these rights.

Whichever model is chosen, it is by no means certain that it would be easy to achieve, as the agreement of all the other twenty-seven EU Member States would be required, and it is possible that one or more of them could see competitive advantage for its airlines in denying continued access to the UK’s airlines. Thus, if the UK wished current liberal arrangements to continue, it would have to seek to achieve this by way of bilateral negotiations with individual Member States (or possibly a group or groups of them) interested in such continuance. The issue of competence, and the correct party for negotiations, may well arise in connection with this.

5. CONCLUSION

The UK’s withdrawal from the EU will require the reconfiguration of the legal basis of the country’s relations with the EU and its Member States, as well as with other countries in a number of areas. This immediately raises the questions whether a comprehensive arrangement will be implemented, covering aviation among other sectors, or whether aviation could be addressed separately. The former option may have certain drawbacks, as the aviation industry is indeed unique and may be worthy of a bespoke approach: being an enabler of communications and trade, it is of strategic importance; it is international in character and merits separate treatment form industries less reliant on international cooperation; it is highly regulated, necessitating more regulatory fine-tuning to ensure smooth functioning than some other industries.

That said, a number of possible solutions specific to air transport are available, some being easier to implement than others, but all of which come with advantages and disadvantages. Different neighbouring States have implemented models of cooperation with the EU that vary in het level of their integration in the EU internal market. Norway has full access to the EU internal aviation market, but has accepted the bulk of EU legislation in return. When finally established, the ECAA envisages a similar level of integration that the UK may not be comfortable with. The Euro-Mediterranean Aviation Area provides for a lower level of regulatory convergence, but does not grant full market access. Switzerland was able to negotiate a solution for air transport separately, but the effect of that agreement depends on the effect of its agreements with the EU in the other six areas.

It is clear that all of these models of cooperation with the EU provide useful guidance, but a tailored solution combining, for instance, full participation in the internal aviation market and an approximation of laws rather than adoption of EU legislation, is probably more desirable. Whether this is achievable in practice will depend on the format of negotiations and the extent to which an air transport agreement will form part of a wider arrangement, and the attitude of other EU Member States. At the same time, the UK’s key role in the creation of a liberalized internal aviation market, its participation in joint manufacturing projects and involvement in EASA, as well as its contribution to the SES initiative, highlight the desirability of the UK’s continued close cooperation with the EU for the benefit of both parties.

 

For further information and comment, please contact Arthur Flieger (flieger@fliegerlaw.com, +32 3 238 77 66)

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