Facts
- The European Union adopted an emissions trading system (ETS) for greenhouse gases and later amended it to include aviation activities.
- The aviation rules required airlines operating flights arriving at or departing from airports in EU Member States to surrender emissions allowances calculated using emissions from the entire flight.
- A trade association and several U.S. airlines challenged U.K. measures implementing the EU aviation ETS rules.
- The challengers argued the aviation ETS was invalid under international law, including the Chicago Convention, the EU–U.S. Air Transport Agreement (Open Skies), the Kyoto Protocol, and customary international law principles on sovereignty, high seas freedoms, and limits on extraterritorial regulation.
- The High Court of Justice (England & Wales) referred questions to the Court of Justice of the European Union (Grand Chamber) on the validity of the EU aviation ETS rules.
Issues
- Whether the validity of the EU aviation ETS rules could be reviewed against the Chicago Convention, given the EU is not a party to that convention.
- Whether the EU aviation ETS rules were invalid under the EU–U.S. Air Transport Agreement, the Kyoto Protocol, or customary international law.
- Whether requiring allowances based on whole-flight emissions for flights to/from EU airports constituted impermissible extraterritorial regulation.
Decision
- The Court upheld the validity of the EU aviation ETS rules.
- The Chicago Convention could not be used as a direct standard for reviewing the validity of EU legislation because the EU was not a contracting party.
- The Kyoto Protocol did not bar the EU measure because it imposed framework obligations and left substantial implementation discretion.
- The EU–U.S. Air Transport Agreement did not invalidate the measure; relevant provisions were either not directly reviewable against EU legislation or were not breached because the ETS was not a prohibited tax/charge and applied without nationality-based discrimination.
- The measure was not unlawfully extraterritorial because the regulatory trigger was a flight’s arrival at or departure from an EU airport, creating a sufficient territorial connection even if compliance was calculated using whole-flight emissions.
Legal Principles
- EU legislation may be reviewed for compatibility with international law only where the invoked international norms bind the EU and are suitable to serve as a legality standard.
- A treaty to which the EU is not a party cannot, as such, be relied on to assess the validity of EU acts.
- Framework climate instruments that set general objectives and leave implementation discretion do not, without more specific constraints, preclude regional market-based measures.
- Conditioning access to EU territory (use of EU airports) on compliance with environmental requirements can be consistent with customary international law where there is a genuine territorial nexus and non-discriminatory application.
- A cap-and-trade obligation to surrender tradable allowances is not necessarily equivalent to a prohibited “tax, fee, charge, or duty” under air transport agreements, particularly when structured as a market mechanism and applied generally to all carriers using EU airports.
Conclusion
The Court sustained the EU’s inclusion of aviation in its ETS, holding that applying allowance-surrender obligations to any carrier operating flights arriving at or departing from EU airports was territorially grounded and not invalidated by the cited treaties or customary international law principles.