Select Committee on European Communities Minutes of Evidence

Examination of Witnesses (Questions 310 - 319)




  310.  Thank you very much, Mr van Houtte, for sitting in on the last session and being prepared to answer questions now. Can you maybe, first of all, explain something which we started off discussing with Mr van Miert which was this question of slot allocation? It is obviously a DGVII matter rather than a DGIV one, but there is a new draft Regulation, is there not?
  (Mr van Houtte)  Not quite actually.

  311.  Planned?
  (Mr van Houtte)  There is one planned. There is a Regulation in force at present for which a revision was scheduled for 1 July 1997. As things turned out, it was not quite clear in what way we should deal with what they call "secondary trading", the sale of slots or an auctioning procedure and things like that, and, therefore, the revision has been held up for a time. We still plan some time later this year to make a proposal for a new Regulation, but there is nothing quite ready yet, so there are still a number of options open.

Chairman]  So you cannot help us with any thinking?

Lord Methuen

  312.  Is this an existing Regulation, Regulation 95?
  (Mr van Houtte)  It is Regulation 95/93, and the main principle of the existing Regulation is that the co-ordinator at the airport is responsible for the allocation of the slots. It also says, as Commissioner van Miert repeated, that airlines should not engage in the monetary trading of slots, but that Regulation will have to be revised some time later with the proposal that we will have to make later this year.


  313.  So you have not got any views at the moment as to any changes that you might wish to make?
  (Mr van Houtte)  No, I think it is still fairly complex. What we would like to achieve is more flexibility to make sure that the airlines can engage in the most efficient slot-allocation mechanism possible, but how exactly that is to be achieved, what role you give to an auctioning process and things like that, is a very technical matter and frankly we do not fully see clearly on that at the present point, so we need to wait a little.

  314.  And how do you incorporate statements like Mr van Miert has put out today about changes in the number of slots a particular airline might have because that is all part of the mechanism, is it not?
  (Mr van Houtte)  Changes in the number of slots?

  315.  Well, the proposal is that American Airlines and BA have to give up up to 267 slots, do they not?
  (Mr van Houtte)  Yes, but it is actually quite a separate matter. We take the view that the competition rules make it possible for the authority to impose certain constraints on slots, and those constraints operate, notwithstanding the slots Regulation, so in legal terms this is primary Community law and it has precedence over Regulations like the slots Regulation.

Lord Thomas of Macclesfield

  316.  Is there anything that you heard earlier on that you would like to elaborate on or help us on? You know the purpose of our enquiry.
  (Mr van Houtte)  There is just maybe one point, and I was discussing this with Humbert Drabbe from DGIV where there might be a little bit of confusion, I think, subsequent to the question you asked Mr van Miert about the proper way in which to authorise air services agreements. What I would like to say, and I hope Mr Drabbe will intervene if I say anything wrong, is that the proposal which we are making, the 3975/87 provision, is actually intended to duplicate the procedure which we now have for air transport within the Community and that mechanism provides, first of all, for block exemptions which set out the main principles of competition which airlines have to apply and, on top of that, it provides for a procedure under which airlines can ask the Commission to approve certain agreements, but that does not have to happen before they implement the agreements. So, in other words, they can look at the block exemptions, make sure they comply with them and then they are safe and they do not have a problem. If they deviate from the block exemptions, the airlines can take the risk and implement the agreement, but the Commission can intervene if there is a problem under the competition rules. If the airlines want more legal certainty, they can notify the agreement to the Commission and ask for formal approval, so I think that was the point of your question.

  317.  Thank you for that because that is most clear now, but, in answering that question, you have thrown up another new issue in my mind because you used the English term "block exemptions" and clearly that means something entirely different to you, because block exemptions would mean to us a list of existing contracts which were exempt from the law. You are not saying that. You are saying that block exemptions are the parameters within which they must operate in a competitive way.
  (Mr van Houtte)  Block exemptions are sometimes called "blanket exemptions", so the idea is that it is a set of conditions———

  318.  We are separated by the use of the same language!
  (Mr Drabbe)  Block exemptions are there to provide more legal security, in this case to airlines, to the industry in general. So you have a block exemption in which you enumerate a number of contract clauses, for instance, or specific activities where you say, "If you do this, this and this, then you know you can be sure that you are exempt from the competition rules". It means that they would not have to notify, but they would know in advance, "Okay, this is what I can do", so it provides legal clarity and security.

  319.  That is what I was asking for and I was asking for it because I was using the term "block exemptions" to mean that those people had a dispensation and they did not have to worry about the rules, like the anti-trust exemptions in the United States.
  (Mr Drabbe)  I think that would be difficult under the competition rules because if you have an agreement, a corporation agreement, for instance, which would infringe Article 85(1) of the Treaty, then, according to Article 85(2), it is not a valid agreement and you would then have to ask the Commission, by notifying the agreement to the Commission, to exempt it under Article 85(3) where you make up the balance between the advantages and disadvantages.

Lord Thomas of Macclesfield]  Now you are using the term in a different sense of course. It is the same term, but now you are using it in the sense of disregarding it or agreeing to disregard it which is different, but now I understand that, and thank you for that. We are separated by the different use of those words.

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