Select Committee on European Union Thirty-Sixth Report

APPENDIX 3 How the texts agreed at Transport Council on 5 June meet UK negotiating objectives

1. "Aim for a comprehensive and generally liberal agreement with the US on a Transatlantic Open Aviation Area, with safeguards should the talks fail or the Commission return with an inadequate deal."

The Commission's US mandate envisages an ambitious, comprehensive and fully liberalised agreement between the EU and the US. In particular the mandate aims to break down the restrictive ownership and control provisions customary in such agreements, thereby providing for the free flow of capital and management expertise throughout the Area, as well as allowing carriers licensed in the EU or the US to operate freely within the Area.

The safeguard should the talks fail comes in Article 4 of the draft Regulation. So long as the Commission is actively negotiating with the US, Article 4(4) applies if a Member State conducts bilateral talks with the US. The Member State may not apply provisionally, or conclude, a bilateral agreement (with the US) without going through the Community procedure set out in Article 4(3). If on the other hand the talks have failed, so by definition the Commission is not actively negotiating with the US, a Member State which concluded a deal with the US would be subject to either Article 4(1) or Article 4(2). If the new deal included the so-called Community clauses the Member State would be free to conclude the agreement without reference to Brussels, under Article 4(1). If it did not include the so-called Community clauses the Member State would be free under Article 4(2) to apply the agreement provisionally, though it would have to go through the Community procedure under Article 4(3) before formally concluding the agreement.

The safeguard against the Commission returning with an inadequate deal is contained in the US mandate itself.

2. "Allow Member States to negotiate in parallel with the Commission, whether it be with the US or with other countries, using standard clauses where appropriate, subject to a reasonable level of oversight by the Commission"

Article 1 of the draft Regulation states explicitly that Member States may enter into bilateral negotiations with third countries, provided that they include the so-called Community clauses in such negotiations and comply with a notification procedure. Article 4 of the draft Regulation sets out the arrangements for oversight by the Commission, which we regard as a workable and fair balance. The degree of oversight is greatest in cases where the Commission is actively involved in negotiations with the same third country. Where the Commission is not actively involved, Community procedures come into play only if the Member State in question does not succeed in negotiating the so-called Community clauses.

3. "Allow Member States to continue managing and improving existing bilaterals"

This is implicit in (2) above. Where the Community procedure set out in Article 4(2) applies, it is clear that "managing" an existing bilateral, or securing a modest increase in traffic rights to reflect changing commercial circumstances, are less likely to be held "to harm the object and purpose of the Community Common Transport Policy" than striking a radical new agreement.

4. "As far as possible prevent one Member State benefiting from not acting properly, and ensure non-discriminatory treatment for all EU airlines"

This is also dealt with in the draft Regulation. The notification procedure set out in Article 1, the provision for the Commission to participate in bilateral negotiations as an observer (also in Article 1), and the reporting procedures set out in Article 4(1), will all improve the transparency of Member States' negotiating objectives and outcomes. This transparency will be further enhanced by discussions in the Advisory Committee of Member States assisting the Commission under Article 3(3), and in the Special Committee of Member State representatives assisting the Commission under the horizontal mandate.

Non-discriminatory treatment for all EU airlines is provided for in the draft Regulation, by Article 2 which requires Member States to include all interested EU carriers in the preparation and conduct of bilateral negotiations; by Article 3, which prevents a Member State negotiating a reduction in the number of airlines it may designate under a bilateral (eg moving from dual or multiple designation to single designation); by Article 5 which requires Member States to ensure a fair distribution of limited traffic rights among eligible Community carriers; and by Article 6 which makes provision for the publication of each Member State's procedures in respect of Articles 2 and 5.

5. "Recognise that third countries will have legitimate safety concerns about Community designation"

This is dealt with in a draft Declaration agreed by Member States, which is for use with third countries to assuage any safety concerns they might have. This Declaration reads as follows:

"Where a Member State designates under one of its bilateral air services with a third country a Community air carrier licensed by another Member State, it is understood that:

(a) in the event that the third country concerned raises concerns or requests in relation to the maintenance and administration of safety standards and requirements in respect of that Community air carrier, the Member State responsible for licensing the carrier and for its effective regulatory control shall directly, or at the request of the designating Member State, respond fully and expeditiously to such concerns or requests; and

(b) where the Member State responsible for licensing the carrier fails to respond fully and expeditiously, the designating Member State may react immediately by placing conditions on or suspending the designation of that air carrier. That Member State shall forthwith inform the Commission and the other Member States of the measures taken and the reasons therefor."

6. "Provide a suitable institutional framework and balance of powers for Member States and the Commission to co-operate in liberalising air transport services between Europe and the rest of the world"

We believe that the package of measures agreed at the Council, taken as a whole, meets this objective. It is consistent with the ECJ's finding that Member States may continue to negotiate bilaterally with third countries provided they do not maintain or introduce certain clauses which are incompatible with Community law. The package of measures hands responsibility to the Commission to negotiate a liberalised agreement with the US; enables both the Commission and Member States to negotiate with other third countries on a standard Community designation clause, and other clauses in areas of exclusive Community competence; whilst allowing Member States to continue negotiating, particularly on traffic rights, with third countries, subject to a reasonable level of oversight in Brussels.

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