In the Judgment C-366/10 (Air Transport Association of America and others v. Secretary of State for Energy and Climate Change) the Court of Justice of the European Union has confirmed the compatibility of Directive 2008/101/EC with international law as regards the inclusion of the aviation sector in the European Greenhouse Gas Emissions Trading Scheme.

The European Greenhouse Gas Emissions Trading Scheme (EU ETS) was established by Directive 2003/87/EC in 2003 as a measure to combat climate change within the framework of the Kyoto Protocol. Although initially the EU ETS did not cover greenhouse gas emissions from air transport, Directive 2008/101/EC provides that aviation activities will be included in that scheme from 1 January 2012. Accordingly, from that date all airlines – including those of third countries – will have to acquire and surrender emission allowances for their flights which depart from and arrive at European airports.

In that respect, a group of American and Canadian airline associations contested the measures transposing Directive 2008/101/EC in the United Kingdom before the High Court of Justice of England and Wales. In particular they alleged that, in adopting the respective Directive, the EU infringed, first, the Chicago Convention, the Kyoto Protocol and the Open Skies Agreement by imposing a form of tax on fuel consumption, and second, certain principles of customary international law in that it seeks to apply the allowance trading scheme beyond the European Union’s territorial jurisdiction. In the framework of the judicial procedure the High Court of Justice of England and Wales has submitted a request for a preliminary ruling to the Court of Justice of the European Union which examined the validity of Directive 2008/101/EC in the light of the aforementioned rules and concluded by confirming the compatibility of the Directive with international law.

Specifically, the Court noted that the EU it is not bound by the Chicago Convention because it is not a party to that convention and also has not hitherto assumed all the powers falling within the field of the convention. As regards the Kyoto Protocol, the Court held that the parties to the protocol may comply with their obligations in the manner and at the speed upon which they agree and that, in particular, the obligation to pursue limitation or reduction of emissions of certain greenhouse gases from aviation fuels, working through the International Civil Aviation Organisation (ICAO), is not unconditional and sufficiently precise to be capable of being relied upon.

Furthermore, as regards the allegation that the emissions trading scheme constitutes a tax, fee or charge on fuel in breach of the Open Skies Agreement, the the Court noted that in contrast to the defining feature of obligatory levies on the possession and consumption of fuel, there is no direct and inseverable link between the quantity of fuel held or consumed by an aircraft and the pecuniary burden on the aircraft’s operator in the context of the allowance trading scheme’s operation. The actual cost for the operator, resulting from the number of allowances to be surrendered, a quantity which is calculated inter alia on the basis of fuel consumption, depends, inasmuch as a market-based measure is involved, not directly on the number of allowances that must be surrendered, but on the number of allowances initially allocated to the operator and their market price when the purchase of additional allowances proves necessary in order to cover the operator’s emissions.

Finally, with regards to the compatibility of the Directive with the principles of customary international law, the Court observed that the Directive is not intended to apply to aircrafts flying above the territory of the EU member states, but to aircrafts arriving at or departing from an EU airport. In this context, application of the emissions trading scheme to aircraft operators infringes neither the principle of territoriality nor the sovereignty of third States, since the scheme is applicable to the operators only when their aircrafts are physically in the territory of one of the Member States of the EU and are thus subject to the unlimited jurisdiction of the EU. Nor can such application of EU law affect the principle of freedom to fly over the high seas since an aircraft flying over the high seas is subject, to the emissions trading scheme, only when the operators of such aircraft choose to operate a commercial air route arriving at or departing from an airport situated in the EU.