## Facts

- The United States and France were parties to the Air Services Agreement of March 27, 1946 (as amended by a 1960 exchange of notes), granting reciprocal route and traffic rights to designated airlines.
- Pan American World Airways (Pan Am), designated by the United States, planned to operate West Coast–London–Paris service using a change of aircraft in London (a third State): wide-body aircraft on the transatlantic segment and a smaller aircraft between London and Paris.
- France objected that the proposed operation was not permitted under the Agreement, raising questions about “continuous service,” the Agreement’s change-of-gauge provisions, and the related traffic rights.
- On May 3, 1978, French authorities prevented Pan Am’s passengers from leaving the aircraft in Paris and required the flight to return to London.
- The United States protested and, through the Civil Aeronautics Board (CAB), initiated proceedings under Part 213 of its Economic Regulations; the CAB issued an order (May 31, 1978) aiming to restrict certain French carrier services (including Paris–Montreal–U.S. West Coast operations) while France maintained its position toward Pan Am.
- The States concluded a Compromis (July 11, 1978) establishing an ad hoc arbitral tribunal seated in Geneva and submitting two questions: (A) a binding question on whether the Agreement permitted the change-of-gauge operation in London on the West Coast–Paris route; and (B) a non-binding advisory question on whether the CAB measures were lawful under international law in the circumstances.

## Issues

1. Whether the 1946 Air Services Agreement permitted a U.S.-designated carrier to operate West Coast–Paris service via London with a change of aircraft in London, consistent with the Agreement’s requirements for “continuous service” and applicable traffic rights.
2. Whether, given France’s actions toward Pan Am, the United States had a right under international law to take the CAB measures as non-forcible countermeasures, and what limits applied (including negotiation duties and proportionality).

## Decision

- The tribunal answered Question (A) in favor of the United States: the Agreement permitted a change of aircraft in London (a third State) for West Coast–Paris service, so long as the operation satisfied the Agreement’s structure for the authorized route and the requirements associated with “continuous service” and traffic rights.
- In reaching that conclusion, the tribunal read the treaty as an integrated instrument and treated the Agreement’s silence on change of gauge in third-State territory as not establishing a blanket prohibition.
- On Question (B) (advisory), the tribunal recognized that countermeasures may be available in principle in response to a prior internationally wrongful act, but only within strict limits.
- The tribunal indicated that the CAB action, as framed and timed—especially in light of the parties’ movement toward arbitration and the need to avoid worsening the dispute—raised serious difficulties under the requirements of negotiation, restraint pending settlement procedures, and proportionality.

## Legal Principles

- Treaty interpretation requires reading the instrument as a whole; meaning is not determined by isolating phrases detached from context, object, and overall structure.
- Where an air services treaty regulates change of gauge in the Parties’ territories but is silent about third States, the silence does not, by itself, exclude change of gauge at an intermediate point in a third State if the authorized service remains within the treaty’s route and traffic framework.
- The notion of “continuous service” can accommodate operational changes (including switching aircraft) when the service remains an integrated through operation on the authorized route rather than a recharacterized new service.
- Subsequent practice and operational history under a bilateral aviation agreement are significant evidence for interpreting contested operational terms and route rights.
- In an inter-State dispute concerning direct interference with treaty rights, the classic exhaustion-of-local-remedies rule associated with diplomatic protection does not bar the injured State from pursuing international claims in its own right.
- Countermeasures not involving armed force may be available to induce compliance after a perceived breach, but they are limited by requirements including prior efforts to resolve the dispute, proportionality between the measure and the injury, and termination once compliance is secured or settlement procedures take hold.
- Even when countermeasures are contemplated, States must act with restraint in relation to ongoing dispute-settlement processes, including a duty not to worsen the dispute and to continue meaningful negotiations.

## Conclusion

The arbitration held that the U.S.–France air services treaty allowed a U.S.-designated carrier to operate the West Coast–London–Paris route with a change of aircraft in London, treating the service as “continuous” within the Agreement’s route and traffic scheme. In its advisory portion, the tribunal accepted countermeasures in principle but stressed limiting conditions—especially negotiation, restraint in light of agreed settlement procedures, and proportionality—casting doubt on the permissibility of the CAB measures as taken in the circumstances.


Air Servs. Agreement Arbitration (U.S. v. Fr.), Award (Dec. 9, 1978), 18 R.I.A.A. 417.