Case Note: Extraterritoriality or an Illegal tax? A Challenge to the inclusion of aviation in the eu Emissions trading scheme


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The ATA (Air Transport Association of America)' issued judicial review proceedings in England's Administrative Court2 to quash the UK's implementation3 of the EU legislation4 which included aviation in the EU ETS (Emissions Trading Scheme)5 on the basis that such inclusion breached international treaties and customary international law. In R (on the application of Air Transport Association of America Inc) v Secretary of State for Energy and Climate Change,6 the High Court referred certain questions in the case to the European Court of Justice (ECJ)7 for a ruling on the validity of the EU law in this instance.

The significance of this case was that an interpretation by the ECJ in favour of the claimants could have led to a ruling that the inclusion of aviation in the EU ETS was invalid. This interpretation would consequently mean that aircraft taking off or landing in the EU could not be forced by EU law to pay towards the Emissions Trading Scheme, thus undermining efforts to create a European-wide environmental aviation 'polluter-pays' scheme. Airlines registered outside the EU believed they should not have to pay what they deemed to be an illegal tax charged by a foreign government.


In an effort to reach climate change commitments made under both the Kyoto Protocol8 and UNFCCC,9 an EU-wide allowances trading scheme in greenhouse gas emissions was developed.10 At the time of signing, the USA-EC Air Transport Agreement, which opened up competition for routes in the USA and EU, was not included in the EU ETS. However, aviation was later included in the EU ETS' and the EU12 subsequently adopted its own amendments13 to the USA-EC Air Transport Agreement on a provisional basis while that treaty was renegotiated.14 Unwilling to pay for an aviation emissions allowance, the claimants sought to challenge the decision to include aviation in the EU ETS.

The claimants' main argument was that the inclusion of aviation breached sovereign regulatory rights pursuant to international customary law, the Chicago Convention,1'1 the Kyoto Protocol16 and the USA-EC Air Transport Agreement.17 The Chicago Convention grants each Member State sovereignty over the airspace above its territory,18 prohibits discrimination in airport charges based on the nationality of the aircraft19 and exempts aircraft from fuel charges.20 The USA-EC Air Transport Agreement created similar obligations, specifically prohibiting aviation taxation, while the Kyoto Protocol created a common obligation to reduce emissions.

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