27 April 2005

The Web

No open skies for Malta, too early to comment for Censu Galea

Matthew Vella

In a series of infringement procedures launched on the 16 March 2005, Malta is facing proceedings for its bilateral “open sky” agreement with the United States, due to “nationality clauses” which only allow national companies in signatory countries to benefit from the agreement.
Malta and 19 other Member States face infringement proceedings for failure to renounce or modify their existing bilateral air service agreements, commonly referred to as Open Sky agreements, with the United States.
It received a letter of formal notice from the European Commission informing them of the flagrant breach of European law. Four other Member States – France, Greece, Italy and Portugal – were sent reasoned opinions.
But Competitiveness and Communications Minister Censu Galea has told The Malta Financial and Business Times that it would be premature to give any further comments on the matter given that consultations on the subject have been ongoing for some time as Member States consider their position.
The Open Sky agreements are bilateral agreements signed with the USA setting liberal ground rules for international aviation markets and minimal government intervention. There are no restrictions on international route rights, number of designated airlines, or pricing, which has to be determined by market forces unless both signatories concur.
According to the Commission however, these agreements are in breach of European law because they contain nationality clauses which are contrary to the provisions of the Treaty on the freedom of establishment.
At issue is the question of preferential landing rights for national airlines, in violation of Article 43 of the Treaty Establishing the European Union, by which “restrictions on the freedom of establishment of nationals of a member state in another Member State shall be prohibited.”
The Commission said the reservation of traffic rights for national carriers prevent free competition in the provision of international air transport between the European Union and the United States, to the detriment of the airline industry and consumers.
In addition to violating Article 43, the Open Sky agreements were found to be in breach of Council Regulations 2409/92 (fares and rates) and 3089/93 (computerised reservation systems, whilst violating the EU's exclusive competence to regulate specific aspects of air service agreements with non-EU countries.
On 5 November 2002, the Court of Justice ruled against eight Member States which had concluded air service agreements with the United States in breach of European law. It had stressed the illegality of the nationality clauses and said that these Member States had violated the exclusive power of the Union to deal with certain areas of aviation policy with third countries, such as slots and computerised booking systems.
In these judgements, the Court found that the Member States had infringed Community law by reserving traffic rights for their own national airlines in their air transport agreements with the United States. As of today, Member States have taken no action to remedy the problems identified by the Court.
The Commission also argued that the agreements denied consumers and airlines the benefits of the European Single Market and were forcing Member States which do not have “open skies” to negotiate on their own such agreements with the US.
Whilst the European Commission has initiated infringement proceedings against the twenty offending member states, it is also continuing negotiations on a common air agreement with the United States, although little has been achieved in two years.
The Commission also plans to open similar negotiations with China and Russia in an effort to harmonise the current regulations governing these markets. The Commission hopes to convince Russia to abandon the current ‘fly-over’ fee assessed against airlines that pass through Siberian airspace.


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