C-466/98

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OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472V98, C-475/98 AND C-476/98

B. Infringement of an exclusive Community competence in the sense contemplated in the AETR judgment 1-9456 Arguments of the parties I - 9456 Assessment I - 9458 (a) General considerations I - 9458 (b) Specific assessments of the question whether the disputed agreements affect the Community legislation I - 9464 (i) Whether Regulations Nos 2407/92 and 2408/92 are affected 1-9465 (ii) Whether the normal functioning of the common market is affected I - 9466 (iii) Whether Regulation No 2409/92 is affected I - 9467 (iv) Whether Regulation No 2299/89 is affected I - 9470 (v) Whether Regulation No 95/93 is affected 1-9472 (c) The applicability of Article 234 of the Treaty and the question of the nature of the disputed agreements I - 9473 (d) Conclusions I - 9476 2. The infringement relating to the right of establishment I - 9477 A. The compatibility of the 'nationality clause' with Article 52 of the Treaty 1-9478 Arguments of the parties I - 9478 Assessment I - 9478 B. Application of the derogation under Article 56 of the Treaty 1-9480 C. Application of the first paragraph of Article 234 of the Treaty I - 9482 3. Breach of the obligations laid down in the second paragraph of Article 234 of the Treaty 1-9484 4. Concluding observations I - 9486 IV. Costs I - 9487 V. Conclusion 1-9487

Introduction Court of Justice against the United King- dom, Denmark, Sweden, Finland, Belgium, Luxembourg, Austria and Germany. These actions, brought under Article 169 of the 1. By eight separate applications, lodged EC Treaty (now Article 226 EC), concern simultaneously on 18 December 1998, the various breaches of Community law arising Commission brought actions before the from the conclusion by those Member

2. I do not need to dwell on the importance and sensitivity of these cases. The issues (b) with having infringed Article 52 of the which the Court has to decide are of EC Treaty (now Article 43 EC) by obvious economic and political signifi- inserting or maintaining in bilateral cance, not only because of the unusual agreements with the United States a number of Member States involved and the clause known as a 'nationality clause' repercussions on relations with the United which in practice allows each party to States but especially because of their impli- refuse the rights provided for under the cations for the major restructuring taking agreements to air carriers designated by place in the international aviation sector the other contracting State but not and hence also for the strategies of Com- owned or controlled by nationals of munity airlines operating in an economic that State; context of market globalisation and grow- ing international competition. But the aspect I wish most to underline for present purposes is that the actions under consider- ation are of particular interest in numerous respects and of singular complexity, notably on the legal level. This will become (c) in the alternative, with having evident in the pages that follow; for now, I infringed the second paragraph of will merely note that this is the first time, to Article 234 of the EC Treaty (now the my knowledge, that the Commission has

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OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 AND C-476/98

brought actions of this kind against 1987, 1990 and 1992 respectively, Member States for infringement of the designed to extend to the aviation sector Community's external competence. both the freedom to provide services and the Community's competition rules.

(i) Council Regulation (EEC) No 2407/92 of 23 July 1992 on licensing of air 3. Air transport, it may be recalled, is carriers, 3 laying down requirements accorded special treatment in the scheme for the granting and maintenance of of the Treaty. According to Article 84(1) of operating licences by Member States in the EC Treaty (now Article 80(1) EC) the relation to air carriers established in transport provisions, contained in Title IV the Community. It may be noted at this (now Title V), apply to transport by rail, stage that Article 3(3) of the regulation road and inland waterway only; provides that undertakings established Article 84(2) provides, on the other hand, in the Community are not permitted to that the Council may, acting by qualified carry passengers, mail and/or cargo by majority, decide 'whether, to what extent air, for remuneration, within the terri- and by what procedure appropriate provi- sions may be laid down for sea and air transport'. 2 — Disregarding for these purposes the measures adopted in relation to competition, the first package consisted of Council Directive 87/601/EEC of 14 December 1987 on fares for scheduled air services between Member States (OJ 1987 L 374, p. 12) and Council Decision 87/602/EEC of 14 December 1987 on the sharing of passenger capacity between air carriers on scheduled air services between Member States and on access for air carriers to scheduled air-service routes between Member States (OJ 1987 L 374, p. 19). The second package comprised Council Regulation (EEC) No 2342/90 of 24 July 1990 on fares for scheduled air services (OJ 1990 L 217, p. 1) and Council Regulation 4. Pursuant to that provision and with a (EEC) No 2343/90 of 24 July 1990 on access for air carriers to scheduled intra-Community air service routes and on the view to the gradual establishment of the sharing of passenger capacity between air carriers on scheduled air services between Member States (OJ 1990 internal market in air transport, the Coun- L 217, p. 8). cil adopted three 'packages' of measures, in 3 — OJ 1992 L 240, p. 1.

ii) Council Regulation (EEC) No 2408/92 of 23 July 1992 on access for Commu- nity air carriers to intra-Community air routes. 5As far as concerns us here, it may be noted that Article 3(1) of that (iii) Council Regulation (EEC) No 2409/92 regulation provides that the Member of 23 July 1992 on fares and rates for States concerned are to permit Com- air services,6 which lays down the munity air carriers (meaning air car- criteria and procedures to be applied riers licensed in accordance with Regu- for the establishment of fares and rates lation No 2407/92) to exercise traffic on air services for carriage wholly rights on routes within the Commu- within the Community. It should be nity; Article 3(2) sets forth a number of pointed out that, while this regulation exceptions of limited duration (until does not apply to fares and rates 1 April 1997) in relation to cabotage charged by air carriers other than services only. The regulation also lays Community air carriers (Article 1(2)(a)), down particular rules governing the Article 1(3) nevertheless provides that right of Member States to impose '[o]nly Community air carriers shall be public service obligations on particular entitled to introduce new products or routes (Articles 4 to 7), to regulate the lower fares than the ones existing for distribution of traffic between the air- identical products': with the obvious ports within an airport system without corollary that third country carriers are prohibited from so doing. 4 — Article 4(3) sets forth a number of exceptions, which arc not relevant to the present cases. 5 — OJ 1992 L 240, p. 8. 6 — OJ 1992 L 240, p. 15

'1. The obligations of a system vendor (ii) Council Regulation (EEC) No 95/93 of under Articles 3 and 4 to 6 shall not 18 January 1993 on common rules for apply in respect of a parent carrier of a the allocation of slots at Community third country to the extent that its CRS airports. 8 This regulation, which is outside the territory of the Community based on the principle that slots at does not offer Community air carriers Community airports must be allocated in a neutral, transparent and non-dis- criminatory way, applies also to third 7 — OJ 1989 L 220, p. 1. This regulation was amended first by Council Regulation No 3089/93 of 29 October 1993 (OJ 1993 L 278, p. 1) and then, after the institution of the present proceedings, by Council Regulation No 323/1999 of 8 February 1999 (OJ 1999 L 40, p. 1). 8 — OJ L 14, p. 1.

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country carriers; however Article 12 appropriate action may be taken to provides that: remedy the situation in respect of the airport or airports concerned, includ- ing the suspension wholly or partially of the obligations of this Regulation in respect of an air carrier of that third country, in accordance with Commu- '1. Whenever it appears that a third nity law. country, with respect to the allocation of slots at airports,

2. Member States shall inform the (a) does not grant Community air Commission of any serious difficulties carriers treatment comparable to encountered, in law or in fact, by that granted by Member States to Community air carriers in obtaining air carriers from that country, slots at airports in third countries.'

8. Relations between the Member States of the European Community and the United States of America in the field of air trans- port have traditionally been governed by 11. In both instances, however, the Council bilateral agreements under which carriers declined to give effect to the Commission's designated by the contracting parties are initiative. Its position was clearly set out in granted the permissions or authorisations the Conclusions approved on 15 March referred to in Article 6 of the Chicago 1993, according to which: Convention, subject to the terms of the each agreement.

— in the view of the Council, Article 84(2) 9. Starting in the early 1990s and with a of the Treaty constitutes the proper view to replacing this set of bilateral legal basis for an operational develop- agreements by a single agreement to be ment in the external aviation sector; concluded between the Community and the United States of America, the European Commission repeatedly requested a man- date from the Council to negotiate an air transport agreement of this kind with the United States authorities.

— the Member States retained their full powers in relations with third countries in the aviation sector, subject to meas- ures already adopted or to be adopted by the Council in that domain. In this 10. The first such request was made on 23 February 1990 with the submission by the Commission of a 'Proposal for a 9 — Document COM(90) 17 final. Council Decision on a consultation and 10 — OJ 1993 C 216, p. 15.

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regard, it was emphasised, however, riers, slot allocation at airports, economic that in the course of bilateral negoti- and technical fitness of air carriers, security ations the Member States concerned and safety clauses, safeguard clauses and should take due account of their obli- any other matter relating to the regulation gations imposed by Community law of the sector. But it was explicitly stated and should keep themselves informed that the mandate did not cover negotiations of the interests of the other Member concerning market access (including code- States; sharing and leasing in so far as they related to traffic rights), capacity, carrier desig- nation and pricing.

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OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 AND C-476/98

15. It should also be noted that no agree- ment (known as an 'open skies' agreement). ment has yet been reached with the United According to the United States Govern- States following the conferment of the ment's guidelines, quoted in the Commis- negotiating mandate on the Commission sion's applications, an 'open skies' agree- in 1996. In contrast, as pointed out in the ment should meet the following criteria in Commission's pleadings, the Community particular: concluded a civil aviation agreement with the Kingdom of Norway and the Kingdom of Sweden in 1992, 11 reached an agree- ment in principle with Switzerland, 12 and is negotiating an agreement on the creation of a 'common European airspace' 13 with 12 European countries (Bulgaria, Czech '1. Free access to all routes; Republic, Estonia, Hungary, Iceland, Lat- via, Lithuania, Norway, Poland, Romania, Slovakia and Slovenia)

2. Unlimited capacity and frequencies on all routes;

The United States of America/Member States agreements and the pre-litigation 3. Unlimited route and traffic rights, in procedure other words, the right to operate flights between any point in the United States and any point in the European country, without restrictions as to stopovers and destinations beyond, change of aircraft, flexibility in choice of itineraries, terminal sharing, or the right to carry fifth freedom traffic;

7. Agreement for the conversion and remit- tance of earnings (carriers can convert 17. As also may be seen from these guide- earnings and remit them in hard currency lines, a fundamental and defining feature of promptly and without restrictions); an 'open skies' agreement is a complete exchange of traffic rights. In addition to the exchange of so-called third and fourth freedoms, which are the right for an airline to carry passengers from its home country to another country and vice versa, agree- ments of this kind also provide for the 8. Possibility of code-sharing arrangements; exchange of fifth freedom rights, in other words the right to carry passengers between two countries in an aircraft of a third country on a route with origin/destination in that country. For example, an exchange of fifth freedom rights between Belgium and the United States of America would 9. Provisions relating to stopover services give a United States carrier the right to (right of the carrier to carry out/supervise operate a Boston/Brussels/Berlin flight or a the ground-handling services); Berlin/Brussels/Boston flight (picking up and discharging passengers at the stopover airport), provided, of course, that the German authorities give their permission for the section of the flight under their jurisdiction, a permission that, in its turn, might result from individual decisions or 10. Provisions to boost competition with could result, generally, from a similar reference to commercial opportunities, user exchange of fifth freedom rights between charges, fair competition and intermodal Germany and the United States. As far as rights; directly concerns us here, it should then be

18. In 1993/94, the United States stepped up their diplomatic efforts vis-à-vis various European countries. In 1995, they reached agreement with Denmark, Sweden, Fin- land, Belgium, Luxembourg and Austria to amend the existing agreements with those countries in line with the 'open skies' model; in 1996, they entered into a similar agreement with Germany, replacing a special transitional arrangement negotiated in 1994 (I will refer to these agreements 20. In June and July 1995, the Commis- hereafter as 'disputed agreements'); in sion, finding that its request had not been 1995, finally, they also reached agreement complied with, addressed letters of formal with the United Kingdom to amend the notice, in accordance with Article 169 of bilateral agreement previously in force, the EC Treaty, to the Member States although the new agreement was not concerned, claiming that they were infring- aligned on the open skies model (this ing the Community's external competence agreement, as we will see, is not the subject (by entering into agreements on matters of any complaints by the Commission and within the exclusive competence of the is thus not a 'disputed agreement'). Community), the provisions governing the right of establishment (by including or maintaining in those agreements a 'nationality clause'14) and, in general, the duty of cooperation laid down in Article 5 of the EC Treaty (now Article 10 EC). A similar letter of formal notice was sent to Germany in May 1996.

19. Even before the above agreements were entered into, however, the Commission, by 14 ·— As indicated in the opening paragraphs and as will be discussed more fully below (paragraph 118), such a clause letter of 17 November 1994, asked the permits each party to refuse the rights provided for under Member States not to enter into negoti- the agreements to airlines designated by the other con- tracting State but which are not in the ownership or under ations with the United States without the control of nationals of that State.

22. Not satisfied with the replies received, on 16 March 1998 the Commission sent to the Member States concerned a reasoned 23. Not satisfied with the replies to the opinion in which it essentially confirmed reasoned opinions, on 18 December 1998 the complaints set out in the letters of the Commission brought the present formal notice. In addition, in response to actions for a declaration by the Court of the argument put forward by several of the infringement of Community law as alleged Member States that the agreements in force in the reasoned opinions. In particular, in with the United States were covered by the the proceedings against the United King- first paragraph of Article 234 of the Treaty, dom, the Commission has requested the the Commission replied that even if that Court to declare that, by concluding and were so the defendant Member States applying the Bermuda II Agreement, which would still have been in breach of the provides for the revocation, suspension or second paragraph of that article, since they limitation of traffic rights in cases where air had not taken all steps necessary to bring carriers designated by the United Kingdom into line with Community law agreements are not owned by the United Kingdom or concluded before the entry into force of the Treaty. Only in the procedure relating to the United Kingdom did the Commission 15 — In this regard, the reasoned opinion notes that ''[a]ccessto certain air routes between the United Kingdom and the significantly modify the line adopted in the United States of America is still highly restricted, access of US carriers to intra-Community air routes is not permitted, letter of formal notice, acknowledging that etc.'.

25. The defendant Member States contest the Commission's complaints, arguing — to declare that by negotiating, initial- (with various differences which will be ling and concluding (and, in the actions indicated in due course): against Belgium and Luxembourg only, by applying) the disputed agreements, the defendant States have failed to fulfil their obligations under the Treaty, in particular under Articles 5 and 52, and under provisions of secondary legis- lation (in particular Regulations Nos 2407/92, 2408/92, 2409/92, 2299/89 and 95/93); — that the actions are inadmissible on grounds of misuse of procedure, excessive duration of the pre-litigation phase, vagueness and generality of the letters of formal notice, the failure in those letters to mention complaints raised in the reasoned opinions, and — in the alternative, should the Court failure to specify clearly the subject- regard the disputed agreements as not matter of the action; radically amending and replacing those previously in force, to declare that, by not eliminating the provisions of those agreements which are not compatible with the Treaty (and in particular with Article 52) and the secondary legis- lation, or by failing to take all steps necessary to that end, the defendant States have failed to fulfil their obli- gations under the second paragraph of — that the Community does not have Article 234 or under Article 5 of the exclusive competence to conclude Treaty, depending on whether the 'open skies' agreements with the agreements were concluded before or United States of America;

Misuse of procedure

27. In turning now to examine the many issues raised in these cases, the first thing to be said is that there are many and obvious overlaps between them, as is confirmed, 29. The Belgian, Luxembourg and German besides, by the fact that the various appli- Governments submit that the actions cations lodged by the Commission are in should be declared inadmissible on the large part similar and in certain passages ground of misuse of procedure given that actually identical. It seems to me, therefore, their true purpose is not to obtain judgment

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OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 AND C-476/98

30. It seems to me, however, that the 31. The Austrian Government, for its part, Commission has a strong case in its complains that the pre-litigation procedure response to this plea of inadmissibility, in took two years and nine months and that which it cites the case-law of the Court its long duration has created a situation of according to which '[g]iven its role as serious legal uncertainty for the defendant guardian of the Treaty, the Commission State. In effect, though it does not say so alone is... competent to decide whether it is explicitly, I understand the Austrian Gov- appropriate to bring proceedings against a ernment to be seeking to challenge the Member State for failure to fulfil its admissibility of the Commission's action on obligations and to determine the conduct the ground of the excessive duration of the or omission attributable to the Member pre-litigation procedure. State concerned on the basis of which those proceedings should be brought'. 16 The Commission has a wide discretion as to whether or not to initiate an infringement procedure against a Member State, the relevant assessments not being amenable 32. I must point out, however, as the to review by the Court. Therefore, if in Commission has also done in its pleadings, making such assessments the Commission that 'as has been held in the case-law of the also takes into account the potential politi- Court, the rules of Article 169 of the Treaty cal and legal repercussions of a finding of must be applied with no attendant obli- infringement (which, in any event, is not gation on the Commission to act within a specific period, save where the excessive duration of the pre-litigation procedure laid down by Article 169 is capable of making it 16 —Case C-431/92 Commission v Germany [1995] ECRI-2189, paragraph 22. more difficult for the Member State con-

33. The German Government also objects that the Commission's letter of formal notice did not detail with sufficient preci- sion the infringements complained of, and, in particular, that it did not specify which 35. It follows from that case-law that the provisions of the disputed agreement Commission was entitled to limit itself, in should be modified and in what manner. the letter of formal notice, to a statement in The Commission, for its part, argues that summary form of the complaints raised the letter of formal notice can be confined against Germany, while reserving the right to a general outline of the factual and legal to provide further details in the reasoned situation giving rise to the infringement opinion, in the light inter alia of the procedure without rendering the action information and explanations received inadmissible on that account. from that Member State. For present pur- poses, therefore, I need merely note that the letter of formal notice enabled the Member State to ascertain with sufficient precision the subject-matter of the dispute and to prepare its own line of defence in relation 34. On this point I would observe that, to the complaints indicated by the Com- according to settled case-law, 'in view of mission. Accordingly, the Commission did the purpose assigned to the preliminary not curtail the rights of defence of that

17 —See Case C-207/97 Commission v Belgium [1999] 18 —Case C-135/94 Commission v Italy [1995] ECR I-1805, ECR I-275, paragraph 25, and the case-law cited therein. paragraphs 5 and 7.

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Member State, which subsequently had the sion may set out in more detail and define opportunity of replying in full to the more more precisely in the reasoned opinion the detailed material set out in the reasoned complaints formulated in general terms in opinion, the completeness of which has not the letter of formal notice; I would now add been called into question in this action. It that this is clearly so, a fortiori, where the follows that this plea of inadmissibility clarifications are rendered necessary by must also be rejected. arguments put forward by the Member State in its reply to that letter. As the Court has held, '[a]lthough it is true that under the procedure provided for in Article 169 the action brought by the Commission must relate to the same subject-matter as the reasoned opinion, which must in turn Failure to include in the letter of formal be preceded by a letter inviting the Member notice complaints raised in the reasoned State concerned to submit its observations, opinion there is nothing to prevent the Commission from setting out in detail in the reasoned opinion the complaints which it has already made more generally in its initial letter. 36. The Austrian Government also argues Indeed, the reply to that letter may give rise that the complaint relating to the second to a fresh consideration of those com- paragraph of Article 234 of the Treaty was plaints'. 19 raised for the first time in the reasoned opinion without having been mentioned in the letter of formal notice: this, it claims, constituted an improper widening of the procedure and now renders the action inadmissible with respect to the complaint 38. As the Commission has pointed out, in question. The Commission states, in the obligation imposed on Member States response to that argument, that the need by the second paragraph of Article 234 of to allege infringement of the second para- the Treaty to take all appropriate steps to graph of Article 234 arose only after the eliminate incompatibilities with Commu- defendant government sought to rely, in its nity law of agreements concluded before reply to the letter of formal notice, on the the entry into force of the Treaty itself is, in first paragraph of the same article; in any a way, an application, in this specific area, event, the Commission argues, the second of the general duty of cooperation laid paragraph of Article 234 is no more than a down in Article 5. Consequently, the Com- specific enunciation of the duty to cooper- mission was entitled to point out in the ate in good faith laid down in Article 5 of reasoned opinion that if the first paragraph the Treaty, infringement of which had of Article 234 applied, as argued by the already been alleged in the letter of formal Austrian Government in its reply to the notice. letter of formal notice, the failure of that government to comply with the duty to cooperate in good faith would have amounted to an infringement of the second

paragraph of Article 234 of the Treaty. in order to be admissible, concern infringe- Given that it was the defendant govern- ments which are still taking place at the end ment which invoked Article 234 of the of the period laid down in the reasoned Treaty and that the first two paragraphs of opinion and not ones which have been that article are closely interlinked, it cannot remedied during the preliminary stage of now argue that the alternative complaint the procedure.20 Accordingly, if the letter formulated in the reasoned opinion regard- of formal notice concerned a transitional ing infringement of the second paragraph legal regime which was superseded by a of Article 234 prevented it from fully permanent regime before the reasoned exercising its rights of defence in the opinion was sent, it is in relation to the preliminary stage of the procedure. I there- latter that the Commission must bring its fore take the view that this plea must also action. If that were not the case, the Court fail. would be called upon to give judgment, contrary to what is stated in its own case-law, on a regime whose effects were exhausted before the end of the period laid down in the reasoned opinion. I therefore take the view that in the proceedings Subject-matter of the action against Germany the Commission's action is not admissible in so far as it concerns the transitional regime which operated from 39. Finally, the German Government 1994 and that, consequently, the Court points out that in the Commission's appli- must consider only the agreement of 1996. cation it is claimed that the Community's external competence was infringed in relation to both to the 1996 agreement and to the earlier transitional regime which governed relations with the United States from 1994 until the conclusion of the agreement in 1996. That transitional regime was still in force when the letter of B— Substance formal notice was sent but its effects had been exhausted before the reasoned opinion was delivered and consequently, the defendant government argues, could not form the subject-matter of the action. The Commission, on the other hand, con- tends that it is bound to allege all the 1. Infringement of the Community's exter- successive infringements that took place in nal competence this matter, regardless of whether their effects had ceased by the time when the action was brought.

the defendant States (with the exception of 43. According to the Commission, in that the United Kingdom) infringed the external opinion the Court made it clear that the competence of the Community. In support Community's external competence may of that complaint it puts forward two prove to be exclusive not only in the cases separate lines of argument: one based on expressly provided for but also in all other the assertion that it is 'necessary', in the cases in which the conditions indicated by sense contemplated in Opinion 1/76, 21 for the Court are met. In particular, such such agreements to be concluded at Com- exclusive competence arises where com- munity level; the other based on the mon rules have been adopted internally, as assertion that the agreements in question was held in the well-known judgment in 'affect', in the sense contemplated in the AETR; but it also exists — and this is the AETR judgment, 22 the common rules point that is important here — where the adopted by the Community in that field. I internal competence has not been exercised will consider these arguments separately but the conclusion of an agreement at and in turn. Community level is 'necessary' in order to attain an objective of the Treaty. The Commission points out that in the light of Opinion 1/76, regardless of whether spe- cific provisions have been adopted inter- nally at Community level, '[t]he power to bind the Community vis-a-vis third coun- tries nevertheless flows by implication from A — Infringement of an exclusive Com- the provisions of the Treaty creating the munity competence in the sense contem- internal power and in so far as the par- plated in Opinion 1/76 ticipation of the Community in the inter- national agreement is... necessary for the attainment of one of the objectives of the Community'. 23 In those circumstances, therefore, the 'necessity' for the exercise of the Community's external competence Arguments of the parties has the effect of establishing such compet- ence and excluding that of the Member States.

to serious discrimination and distortions of — in any event the Community's external competition to the detriment of Commu- competence in the sense contemplated nity carriers and, more generally, destabi- in Opinion 1/76 could become exclus- lise the internal market. This, according to ive only upon the conclusion of the the Commission, creates the 'necessity', in agreement deemed 'necessary'; the sense contemplated in Opinion 1/76, of joint action vis-à-vis the United States and, hence, exclusive Community competence to negotiate and conclude the relevant agreement; this is so, it maintains, not only irrespective of whether the internal com- — at all events the Commission has not petence has previously been exercised but shown that it was 'necessary' to con- even irrespective of the fact that the Coun- clude a Community-level agreement cil did not authorise the Commission to with the United States. negotiate the agreement in question. It follows, according to the Commission, that the conclusion of the disputed agreements constituted an infringement of the Com- munity's external competence.

Assessment

46. Let me say at once that I am unable to agree with the conclusions the Commission 45. The defendant Member States' draws from Opinion 1/76 and, more gen- response to those arguments is essentially, erally, from the Court's case-law on the albeit with some differences, as follows: external competence of the Community.

out that an implied external power of the for the attainment of an objective of the Community can arise not only 'in all cases Community, so may the Community, if an in which internal power has already been agreement is 'necessary' to attain one of its used in order to adopt measures which objectives, affirm its own competence come within the attainment of common (again in accordance with the proper pro- policies' but also where 'the internal Com- cedures, as I will shortly endeavour to munity measures are only adopted when show) to conclude that agreement, deriving the international agreement is concluded it by implication from the corresponding and made enforceable'. This was so, internal competence, even if the latter has according to the Court, as mentioned not yet been exercised. And if the cor- earlier, because '[t]he power to bind the responding internal competence is also Community vis-a-vis third countries never- lacking, the same result can be achieved, theless flows by implication from the as has occasionally been done in practice, 25 provisions of the Treaty creating the inter- by resorting directly to Article 235 at the nal power and in so far as the participation time of concluding the agreement. of the Community in the international agreement is, as here, necessary for the attainment of one of the objectives of the Community'. 24

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would remain a genuine mystery. It could that is not the case, in accordance with the not have been the Member States, which do procedure laid down in Article 235 of the not have such a power; nor could it have Treaty. been the Commission or the Council, each acting on its own account, because while they do indeed participate, on their own, in the exercise of that competence, they do not have a monopoly on its establishment; nor, I would say, could it be the Court, because while in such cases it may well be called upon to rule on the lawfulness of the acts or omissions of the competent institu- tions, it cannot substitute its own discre- 53. To return to the parallelism I have tionary assessment for that which those mentioned above with specific respect to institutions did or did not carry out. Article 235, I would point out that that article does not confine itself to requiring a measure to be 'necessary' if Community competence is to be justified, but lays down precise conditions and procedures for the determination of that necessity and, hence, whether it is capable of founding such

It may to serve as authority for deriving such a be debated, possibly even before the Court, conclusion. It seems to me, on the contrary, whether in a specific case the assessment of that it must be inferred both from that the 'necessity' for an agreement was case-law and, in particular, from the logic properly carried out (or omitted), but there of the system that there can be no recog- can certainly be no escaping the fact that nition of the 'necessity' for an agreement the institutions empowered to carry out the unless there has been a specific assessment assessment and the procedures to be fol- by the competent institutions and the pro- lowed are those specified in the Treaty. cedures prescribed, according to the case, Otherwise, I would repeat, there is a risk of have been followed only after that formal introducing (or, what is worse, of imputing

to the Court the intention of introducing) date, although the Community did not in elements of uncertainty, even arbitrariness, any event reach the point of concluding an into the division of powers between Com- agreement with the United States. Given munity and Member States, and of distort- therefore the absence of a positive outcome ing the procedures and the inter-institu- of the procedures prescribed for the assess- tional balances established by the Treaty. ment of the 'necessity' of concluding the disputed agreements, it cannot be main- tained, in the light of what I have said earlier, that an exclusive Community com- petence in the sense contemplated in Opinion 1/76 has been established in this matter. 54. It must therefore be concluded from the foregoing that unless and until the 'necess- ity' for an agreement has been duly and specifically recognised by the competent institutions and in accordance with the prescribed procedures, there can be no 56. Nor is it of any avail to argue, as the exclusive Community competence; con- Commission has done, that in other cases sequently, the Member States remain free the Council deemed it 'necessary' to con- to assume international obligations in the clude particular air transport agreements relevant field, albeit, as we shall also see with third countries. 27 Leaving aside the later, subject to their duty to cooperate in possible differences between the various good faith with the Community institutions specific situations and the different con- in accordance with Article 5 of the Treaty. siderations which may have guided the Council in those cases, the argument could easily be turned around and the very fact that the Council has behaved differently in this instance could be seen as a negative assessment of the 'necessity' of the agree- ment with the United States. 55. To return now to the present proceed- ings, it appears to me to be beyond doubt, in the light of what I have said up to now, that in the cases under consideration here the Community has not exercised an exter- 57. Of course, as I have already mentioned, nal competence justified by the 'necessity', one could take the view that the Council's in the sense contemplated in Opinion 1/76, assessment was unlawful. But in that case, of concluding an air transport agreement as several Member States have pointed out with the United States. As we have seen, in these proceedings, the relevant Council despite the many proposals to that effect decision should be challenged or, if the put forward by the Commission, the Coun- conditions for doing so are satisfied, an cil gave no indication of sharing its view as action for failure to act should be brought to the 'necessity' for such an agreement. against that institution. In the absence of Initially, in fact, it actually refused the any steps of that nature, the Council's Commission the negotiating mandate it sought, and only in June 1996, that is to say, after the conclusion of the disputed 27 — The Commission refers specifically to the agreements agreements, did it grant a restricted man- mentioned in paragraph 15 above.

decisions (or, as the case may be, its that the Community's exclusive external inaction) must be presumed lawful; in any competence has been infringed in the cases event, their validity cannot be challenged in point here is based on the AETR judg- indirectly and by means of inappropriate ment, mentioned above, and relies in par- procedures. It is therefore against the ticular on the existence of Community Council that the Commission ought to legislation governing matters covered by have brought proceedings, on the ground the disputed agreements. that the Council did not deem 'necessary' the conclusion of an agreement with the United States and thus did not bring about exclusive Community competence in that matter. But for this very reason, the Com- mission has no basis now for taking action against the Member States for infringement of a Community competence which in fact has never been established. 60. After recalling the Court's statement in AETR that 'each time the Community... adopts provisions laying down common rules, whatever form these may take, the Member States no longer have the right, 58. In the light of those considerations, it acting individually or even collectively, to cannot in my view be held that, in the undertake obligations with third countries matter in point here, the Community had which affect those rules', 28 the Commis- exclusive competence, in the sense contem- sion submits that this is precisely the plated in Opinion 1/76, to conclude air situation that arises here. It argues that transport agreements with the United States the Community has adopted a complete set of America and that therefore the defend- of common rules designed to realise the ant Member States infringed that compet- internal market in the air transport sector, ence. regulating, in particular, access to intra- Community routes and establishing the mechanisms necessary for preventing impairment of competition. These rules, according to the Commission, do not con- cern Community air carriers only but also apply — at least in part — to third- B — Infringement of an exclusive Com- country carriers. The conclusion by munity competence in the sense contem- Member States of bilateral agreements on plated in the AETR judgment the 'open skies' model is therefore liable to have an adverse effect on the functioning of the internal market in respect of the part of it covered by those common rules and, consequently, constitutes an infringement of Community competence in the sense Arguments of the parties contemplated in the AETR judgment. In response to the Member States' objection

— that in any event the disputed agree- ments do not substantially change the earlier bilateral agreements which were entered into before the adoption of the — that Article 84(2) of the Treaty confers provisions of secondary law relied a wide discretion on the Council to upon by the Commission and in many decide 'whether, to what extent and by cases even before the entry into force of what procedure appropriate provisions the Treaty or the accession of the may be laid down for sea and air Member States concerned, with the transport'; and that in the exercise of result that the provisions of those that discretion the Council deliberately agreements, even if they were in con- refrained from adopting any specific flict with Community legislation, measures on access to Community would in any case be covered by the markets by third-country carriers and exception in the first paragraph of access to non-Community markets by Article 234 of the Treaty.

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OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 AND C-476/98

30 — Paragraphs 17 and 18. 29 — Paragraph 19. 31 — Opinion 1/75 [1975] ECR 1355.

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further clarified in a number of opinions of potentially, with the common rules. The the Court. Of these, I would recall in Commission, on the other hand, argues particular Opinion 1/94, in which it was that the prohibition applies irrespective of stated that 'even in the field of transport, any conflict between the common rules and the Community's exclusive external com- the international obligations, it being suffi- petence does not automatically flow from cient for the latter to concern the same its power to lay down rules at internal level. sphere as that covered by the former. As the Court pointed out in the AETR judgment (paragraphs 17 and 18), the Member States, whether acting individually or collectively, only lose their right to assume obligations with non-member countries as and when common rules which could be affected by those obligations come into being. Only in so far as common rules have been established at internal level does the external competence of the Community become exclusive'. 32

33 — Convention N° 170 of the International Labour Organi- 32 — Paragraph 77. sation concerning safety in the use of chemicals at work.

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I - 9460

COMMISSION v UNITED KINGDOM

I - 9461

OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 AND C-476/98

In requirement to ensure the full and correct the event of persistent difficulties, they application of Community law could justify should continue to look to the Community unilateral action by Member States, since in order to achieve the solution most apt to such action might well also 'affect' the ensure the greatest possible adherence to common rules, compromising the unity of the abovementioned principles, again the common market and the uniform working in close collaboration with the application of Community law. Community institutions and adopting, if necessary, concerted action vis-à-vis the other parties to the negotiations.

I - 9462

COMMISSION v UNITED KINGDOM

I - 9463

OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 AND C-476/98

cluded by virtue of the mere fact that 'the the Commission claims the disputed agree- Member States' continuing freedom to ments 'affect', with a view to ascertain- conduct an external policy based on bilat- ing — on the basis of the principles set out eral agreements with non-member coun- above — whether that is in fact the case tries will inevitably lead to distortions in and whether the agreements were therefore the flow of services and will progressively entered into in violation of an exclusive undermine the internal market'. 42 But that competence. reasoning was not deemed a sufficient ground for precluding Member States from concluding agreements in the relevant area. According to the Court, the general risk of distortions which was complained of by the Commission did not suffice for that pur- pose since such distortions could easily be avoided by other means. In particular, the Court noted, 'there is nothing in the Treaty which prevents the institutions from 79. But I still need to make two brief arranging, in the common rules laid down preliminary points. First, it is, I think, very by them, concerted action in relation to important to point out that I will deal non-member countries or from prescribing exclusively with the problems raised by the the approach to be taken by the Member amendments made by the disputed agree- States in their external dealings'. 43 ments. One could, in theory, for reasons I will discuss in due course (paragraph 110 et seq.), also consider the possibility of the legislation being 'affected' by the provi- sions of the earlier agreements which Avere not amended by the subsequent agree- ments, but we will see that no problem actually arises in relation to those provi- sions, notwithstanding the differences of opinion. (b) Specific assessments of the question whether the disputed agreements affect the Community legislation

82. It seems to me, however, that this argument is based on a misreading of the two regulations. As pointed out by the defendant governments, by adopting those regulations the Council was simply decid- (i) Whether Regulations Nos 2407/92 and ing — pursuant to Article 84(2) of the 2408/92 are affected Treaty — to secure access to intra-Com- munity routes for Community air carriers, without concerning itself with third- country carriers. Regulation No 2408/92 provides that 'Community air carriers shall be permitted by the Member State(s) con- 81. In the first place, the Commission cerned to exercise traffic rights on routes submits that the disputed agreements are within the Community' (Article 3(1)), hav- 'incompatible' with Regulation No 2407/92 ing defined 'Community air carrier' as on licensing of air carriers and Regulation meaning 'an air carrier with a valid oper- No 2408/92 on access for Community air ating licence granted by a Member State in carriers to intra-Community air routes. accordance with Council Regulation (EEC) According to the Commission, those regu- No 2407/92' (Article 2(b)). Thus there is lations lay clown exhaustively the con- nothing in Regulation No 2408/92 from ditions for access to intra-Community which it may be inferred that it also aims to routes, thus with regard to all air carriers, regulate (still less to prohibit) the granting whether Community carriers or not. If I of traffic rights within the Community to understand rightly, the 'incompatibility' non-Community carriers, in other words, arises from the fact that the disputed carriers not in possession of an operating agreements provide for an exchange of licence within the meaning of Regulation fifth freedom rights which, especially by No 2407/92. The right of Member States to virtue of the cumulative effect of the seven grant access to routes within the Commu- agreements, would enable United States nity to non-Community air carriers is carriers not satisfying the requirements of therefore not in any way curtailed by Regulation No 2407/92 also to operate on Regulation No 2408/92, nor indeed by intra-Community routes. On this ground, Regulation No 2407/92, which merely lays down the requirements for the granting and maintenance of operating licences by Member States in relation to air carriers 44 — Case C-158/94 Commission v Italy [1997] ECR I-5789, paragraph 55. established in the Community.

83. It is evident from the foregoing that the from this different angle can it be said that alleged conflict between the disputed agree- the agreements affect the provisions of ments and Regulations Nos 2407/92 and Regulation No 2407/92. 2408/92 cannot even be identified, given that the former apply to different situ- ations. Nevertheless, it still has to be asked, in the light of what is said above, whether the obligations assumed by the Member States under the disputed agreements might not equally 'affect' the two regulations, in the sense of impinging on their correct application or altering their scope. How- (ii) Whether the normal functioning of the ever, apart from the arguments which I will common market is affected shortly consider relating to distortions of competition and discrimination allegedly arising from the agreements, it has to be said that the Commission has failed to adduce any evidence, as it ought to have done, to show that this is the case here. It is 85. Secondly, as mentioned above, the therefore not proved, so far as this first Commission submits that under the dis- aspect is concerned, that the agreements puted agreements particular advantages may affect, in the sense contemplated in the have been conferred on the contracting AETR judgment, the provisions of Regu- Member States (especially in relation to lations Nos 2407/92 and 2408/92. traffic rights), which will inevitably lead to distortions of competition and to discrimi- nation and thereby undermine the very notion of an internal market. According to the Commission, furthermore, the competi- tive balance of the internal market will be upset by the fact that the disputed agree- ments give access to routes within the Community to United States carriers who are not subject to all the rules imposed on Community carriers. 84. I also note, given that the Commission broached the point fleetingly, that the outcome might have been different if the agreements in question contained provi- sions concerning the requirements for the granting and maintenance of the operating licences in relation to air carriers estab- 86. I would observe at once, however, that lished in the Community, on the ground the Commission bases these complaints on that those requirements are laid down at very general arguments, without explaining Community level by Article 4 of Regulation in a precise and detailed manner what the No 2407/92, '[w]ithout prejudice to agree- alleged discrimination and distortions of ments and conventions to which the Com- competition might be and which Commu- munity is a contracting party'. But since the nity obligations the United States carriers disputed agreements contain no provision would escape by virtue of the disputed of that nature, it seems to me that neither agreements. Therefore the applications

87. But apart from this, it seems to me that ultimately the Commission is merely 88. It seems to me, therefore, that this repeating here arguments already put argument of the Commission must also be before the Court, and rejected, in Opinion rejected. 1/94. There too, as I have recalled, in order to demonstrate the Community's exclusive competence to conclude the GATS, the Commission maintained, on the basis of an example, that 'the Member States' continu- ing freedom to conduct an external policy based on bilateral agreements with non- member countries will inevitably lead to distortions in the flow of services and will progressively undermine the internal mar- (iii) Whether Regulation No 2409/92 is ket'. Thus, it argued, 'travellers will choose affected to fly from airports in Member States which have concluded an "open skies" type of bilateral agreement with a non- member country and its airline, enabling them to offer the best quality/price ratio for transport'. But, as I have observed above, 89. The Commission further submits that this argument was rejected by the Court, in the changes effected by the disputed agree- the following terms: 'suffice it to say that ments also concern the fares and rates that there is nothing in the Treaty which may be charged on intra-Community prevents the institutions from arranging, routes, and thus a matter which had in in the common rules laid down by them, the meantime come within the exclusive concerted action in relation to non-member competence of the Community by virtue of countries or from prescribing the approach the fact that even before the agreements to be taken by the Member States in their were concluded that matter had been the external dealings'. 45 The fact is that, in the subject of specific provisions of internal absence of Community legislation govern- legislation which also concerned third- ing relations in a given area with third country carriers. More specifically, the countries, the disparities which could hypo- applicant points out that Regulation thetically result from the conclusion of No 2409/92 lays down the criteria and different international agreements by procedures to be applied for the establish- Member States in that area and the econ- ment of fares and rates on air services for omic consequences that might ensue for the carriage wholly within the Community; and that, while it does not cover the fares and rates of non-Community carriers 45 — Paragraph 79. (Article l(2)(a)), it nevertheless provides,

92. Thus according to the approach I have 90. The defendant governments reply, outlined above, the introduction of such essentially, that the provisions of the dis- legislation gives rise to exclusive Commu- puted agreements are not in conflict with nity competence in the matters covered by Article 1(3) of Regulation No 2409/92; in it. As recalled above, it was held in Opinion any case, some of them argue, precisely in 1/94 that '[w]henever the Community has order to remove any doubt in that regard, included in its internal legislative acts clauses were inserted into the agreements provisions relating to the treatment of with the United States requiring the con- nationals of non-member countries..., it tracting parties to comply with that provi- acquires exclusive external competence in sion in relation to fares on intra-Commu- the spheres covered by those acts'. 46 So nity sections. while a complete set of rules has not been adopted at Community level in respect of the fares which third-country carriers may charge, the restriction imposed on the freedom of those carriers as regards pricing should in my view — to draw the strict inferences demanded, as we have seen, by the AETR judgment — have the effect of bringing these questions within the external competence of the Community. As a result, 91. For my part, I would first observe that following the adoption of Regulation by explicitly restricting to Community No 2409/92 the Member States could no carriers the right to introduce 'lower fares longer assume international obligations in than the ones existing for identical prod- relation to the airfares which could be ucts' within the Community, Article 1(3) of charged within the Community by non- Regulation No 2409/92 indirectly but Community carriers without thereby unequivocally excludes that right for non- 'affecting' the scope of that regulation. Community carriers, who are thus pro- hibited from introducing such fares. The Commission is therefore right in maintain- 46 — Paragraph 95. In the same vein, as noted previously, it was ing that this constitutes a significant restric- held in Opinion 2/92 that the Community has exclusive external competence in matters which are 'already the tion on the freedom of third-country car- subject of internal legislation containing provisions on the treatment to be accorded to foreign-controlled undertak- riers to set fares within the Community, a ings' (paragraph 33).

94. Nor does it seem to me that this conclusion can be undermined by the fact that, as observed by Finland and Belgium in particular, some of the disputed agreements effected only minor amendments to the 96. But even leaving aside these consider- pricing rules previously in force. Without ations, I must reiterate that the infringe- its being necessary here to 'quantify' those ment in question is constituted by the mere amendments, I believe that, in terms of fact that the previous bilateral agreements principle, what matters is not whether they were amended in respect of matters which are major or minor: this may go to the have now been brought within the Com- seriousness of the infringement of Commu- munity's external competence following nity competence but has no bearing on the the adoption of common rules internally. question whether or not such an infringe- Not even the need to ensure the full and ment has occurred. correct application of the common rules (Regulation No 2409/92 in this instance) could justify, as I have said earlier (see paragraph 73 above), autonomous action by the Member States outside the frame- work of the Community institutions, since any such action will in any event poten- 95. Nor does it seem to me of decisive tially 'affect' those rules, thereby prejudic- importance that, as pointed out by various ing the unity of the common market and defendant governments, some of the the uniform application of Community

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OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 AND C-476/98

97. It follows from the foregoing that after 100. Once more, however, I must point out Regulation No 2409/92 had been adopted, that the adoption at Community level of the Member States no longer had power to provisions such as those under consider- amend, outside the framework of the ation — which apply also to non-Commu-

I - 9470

COMMISSION v UNITED KINGDOM

I - 9471

OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 AND C-476/98

obligation of the Member States not to embourg), the Commission complains that contravene the Community rules on CRSs the disputed agreements are capable of in force at the time clearly does not enable 'affecting' the application of Regulation possible conflicts in the event of those rules No 95/93, which establishes common rules being amended to be eliminated. 48 But for the allocation of slots at Community above all, I would point out, in accordance airports and which applies to non-Commu- with what is stated in the AETR judgment nity carriers also, subject to some excep- (paragraph 71 above), that following the tions based on the principle of reciprocity. adoption of the Community provisions on According to the Commission, while the CRSs Member States no longer had power disputed agreements contain no clauses to assume international obligations in that relating specifically to the allocation of area, even international obligations con- slots, they do include a kind of general sistent with those provisions. clause on fair competition, which requires the contracting parties to maintain fair and equal conditions of competition. 49 Such a provision, the Commission argues, also implies an obligation to guarantee to the other party's designated carriers access to 104. If follows from the foregoing, in my the necessary airport facilities, such as, opinion, that the provisions of the disputed specifically, slots, on non-discriminatory agreements concerning CRSs are capable of terms. The Commission does not, however, affecting, within the meaning of the AETR produce anything in support of that inter- judgment, the application of Regulation pretation, other than a report of the United No 2299/89, as amended by Regulation States administration 50 according to which No 3089/93, and were therefore negotiated clauses of this kind normally also cover the in violation of the Community's external allocation of slots. competence.

107. It seems to me too that the clause in (c) The applicability of Article 234 of the question was not introduced by the dis- Treaty and the question of the nature of the puted agreements but had already appeared disputed agreements in the earlier agreements; only the agree- ments concluded in 1995 by Denmark, Finland and Sweden made slight changes, essentially of a drafting nature, to the clause in question. On this ground alone, it could therefore be concluded that the disputed agreements did not infringe Com- 109. Before concluding on this point, I still munity competence, at least in the cases have to examine the defence based on the where they did not modify the clause. But first paragraph of Article 234 of the Treaty apart from this, it seems to me important to which a number of Member States have point out that the Commission has by no raised in response to the Commission's means shown that the clause also applies to complaints. As mentioned earlier, various the allocation of slots. The clause is, defendant governments have argued that admittedly, worded in very general terms the disputed agreements merely amended and lends itself to various interpretations, bilateral agreements they had concluded which may in principle include the one with the United States of America before suggested by the Commission. However, in the entry into force of the Treaty. 51The the light of the position taken by the agreements currently in effect are, there- contracting Member States, which flatly fore, according to those governments, at reject that interpretation, and in the least in respect of the parts not amended by absence of any official statement by the successive agreements, covered by the first United States Government on the matter, it paragraph of Article 234 of the Treaty, seems to me that, to discharge completely which provides that '[t]he rights and obli- the burden of proof incumbent on it, the gations arising from agreements concluded Commission would have had to adduce before the entry into force of this Treaty specific evidence in support of its argu- between one or more Member States on the ment, rather than simply citing a general one hand, and one or more third countries document, the report of the US General on the other, shall not be affected by the Accounting Office, which, what is more, provisions of this Treaty'. does not even specifically refer to the agreements concluded with the European countries.

debate between the parties and which also grounds of the conflict between the two features in other complaints raised by the opposing positions because, as we have Commission, although, as we will see, it seen (and as we will see also in respect of does not arise in the same terms in each the next complaint), it follows from those instance. I am referring specifically to the conclusions that the area of potential question whether, as the defendant incompatibility with Community law is Member States maintain, the bilateral confined to the amendments introduced agreements previously in force ('the old by the disputed agreements.

Having States arguing that the Commission's com- said that, however, I must also admit that I plaints should be assessed at most in respect am highly puzzled by the Commission's only of the amendments made by the argument, both because it is contradicted disputed agreements to the 'old' agree- by significant indications to the contrary ments, excluding those provisions which and because it is not supported by reason- remained unamended, while the Commis- ing capable of justifying such radical impli- sion maintained that the 'new' agreements cations. Not only does it not take any should be considered in their entirety, account of the fact that from a formal point including therefore the provisions of the of view the disputed agreements amended 'old' agreements that were not amended by but did not replace the bilateral agreements the disputed agreements. previously in force, but in particular it seems to me that it disregards the parties' intentions, which in fact should form the main point of reference in a matter such as

I - 9474

COMMISSION v UNITED KINGDOM

should survive in all other respects. More- in question did not completely transform over, as mentioned above, the Commission the 'old' agreements into 'new' ones, it is has put forward nothing to show that the also the case that if they were incompatible parties intended to terminate the 'old' with Community law they could not be agreements, even by implication,52 and to justified by reference to the continuance of replace them altogether by entirely new the 'old' agreements into which they were agreements. And all this does not even take incorporated. account of the negative implications of the Commission's argument in terms of the certainty of international relations and respect for the rights of the contracting parties.

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OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 AND C-476/98

I - 9476

COMMISSION v UNITED KINGDOM

ance with the AETR judgment, the defend- contain what is called a 'nationality clause', ant Member States had no power to assume which in practice enables each party to international obligations concerning the refuse the rights provided for under the prices that third-country carriers are auth- agreements to carriers designated by the orised to charge on intra-Community other contracting State but not in the routes or concerning computerised reserva- ownership or under the control of nationals tion systems (CRSs). On the other hand, I of that State. More specifically, the clause do not consider that it has been proved that empowers each contracting State to desig- they had no power to assume the other nate the airlines which it intends to have obligations contained in the disputed agree- the right to operate the air transport ments. services provided for in the agreements in question. The other contracting State is required to grant those airlines the necess- ary permissions or authorisations when certain conditions are satisfied, and in 117. Accordingly, I take the view that the particular, so far as concerns us here, the Court should declare that, by inserting in condition that the substantial ownership the disputed agreements provisions con- and effective control of the airlines be cerning the prices which may be charged by vested in the contracting State designating air carriers designated by the United States them and/or in natural or legal persons of America on intra-Community routes and having the nationality of that State. It is concerning computerised reservation sys- provided, however, that if, after the requi- tems (CRSs), Denmark, Sweden, Finland, site permissions or authorisations have Belgium, Luxembourg, Austria and Ger- been granted to an airline designated by many have failed to fulfil their obligations the other party, the above condition is no under Article 5 of the Treaty and Regu- longer satisfied, each contracting State may lations Nos 2409/92 and 2299/89. revoke, suspend or limit the permissions or authorisations in question.

Arguments of the parties 122. The defendant governments also argue that in any event, in the circum- stances in point here, Article 52 is not applicable ratione loci (to adopt a term used by the German Government), since 120. In the Commission's view, the right the relevant economic activities are pursued given to each party to withhold, revoke, on transatlantic routes and thus outside the suspend or limit the requisite permissions Community. Indeed some of them maintain or authorisations in respect of airlines that Article 52 does not apply ratione which are not owned or controlled by the materiae either since the nationality clause other contracting State or by nationals of relates only to the freedom to provide that State (the 'nationality clause') is services, which in the sphere of air trans- incompatible with Article 52 of the Treaty. port is protected only within the limits of This is because an airline owned or con- the provisions of secondary law adopted trolled by a non-contracting Member State pursuant to Article 84 of the Treaty. The (or by nationals of a non-contracting German Government, finally, claims that a Member State) and established in one of clause which is inserted in its agreement the defendant Member States would not, as with the United States, and which I will be a result of the nationality clause, receive the discussing shortly, has the effect of elimin- same treatment as that accorded to national ating, with respect to that agreement, the companies and would thereby suffer dis- alleged discriminatory effects of the crimination contrary to Community law. nationality clause.

Member States, contrary to the require- pose to operate air services solely within ments of Article 52 of the Treaty, do not the Member State in question or to other accord to airlines owned or controlled by Member States, or whether they propose to other Member States or by nationals of operate such services also, or exclusively, to other Member States who are established in third countries. To take a few simple their territory the same treatment as that examples, a Member State could not, accorded to their own nationals. Only the without being in breach of Article 52, allow latter, and not the former, have the right, if only its 'national' companies, and not those all the relevant conditions are met, to established in its territory but controlled by obtain in all cases from the United States nationals of other Member States, to pro- authorities the permissions or authori- vide consultancy services to Japanese com- sations required to operate the air transport panies, to market products in Canada, to services provided for under the bilateral organise holidays in the Caribbean coun- agreements. It is therefore undeniable that tries or to provide express courier services this situation involves a case of discrimi- to Australia, and so forth. In the same way, nation based on nationality and, moreover, therefore, Member States cannot discrimi- that it results not from any conduct on the nate against an airline established in their part of the United States, but directly from territory but owned or controlled by the bilateral agreements. nationals of other Member States, in respect of access to transatlantic routes.

126. Before concluding on this point, I States; in other words, it does not eliminate must still deal briefly with the German the discrimination contrary to Article 52 of Government's argument that the incom- the Treaty. The provision invoked by the patibility of the nationality clause with German authorities therefore cannot cure Article 52 of the Treaty is eliminated by a the illegality of the nationality clause incor- special provision inserted in 1996 as porated in the current Germany-US Agree- Article 3(3) of the Germany-US Agreement ment. of 1955. If I understand this clause properly, and indeed it does not at all make for easy reading, 53 it substantially restricts the right of the United States administration to withhold or revoke the permissions needed by airlines which are designated by other Member States under the terms of a bilateral agreement between them and the United States and in which German natural or legal persons hold less than 50% of the share capital. If that is the case, it seems clear to me that this clause B — Application of the derogation under does not remove the right of the United Article 56 of the Treaty States to withhold or revoke the relevant permissions needed by airlines designated by the German authorities which, although established in Germany, are owned or controlled by nationals of other Member

I - 9480

COMMISSION v UNITED KINGDOM

128. I must say, however, that I do not find to protect the interests which it seeks to this argument convincing. First, I would safeguard'. 56 It follows, in particular, that point out that all the agreements under Article 56 cannot serve as a basis for consideration already contain appropriate justification of derogating measures provisions on aviation security which seem adopted by Member States where the pro- to address the same public-policy require- tection of the public interest which those ments as those now relied upon by the measure seek to assure can be secured by parties as justification for the nationality less restrictive means. 57 clause. Furthermore, as the Commission has pointed out, the clause does not limit the parties' 'right of refusal' to cases of actual threat to a public-policy interest, so that it cannot be excluded that the right in question will in fact be exercised for purely economic considerations, which, according to settled case-law, cannot constitute grounds for the application of the deroga- tion in question. 54

I - 9481

OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-47S/98 AND C-476/98

I - 9482

COMMISSION v UNITED KINGDOM

case of the United Kingdom because of the demonstrates the intention of those auth- special features of the so-called Bermuda II orities to maintain unchanged the position Agreement (the disputed agreement in that as it existed prior to the entry into force of case), which I will discuss below. the EC Treaty.

I - 9483

OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 AND C-476/98

138. That scope was in fact extended which is the disputed agreement in the following and as a consequence of the proceedings against the United Kingdom, in complete liberalisation of the fifth freedom its turn entirely replaced the Bermuda I routes effected by the disputed agreements: Agreement of 1944 (the 'old agreement'). the airlines of the contracting Member By concluding Bermuda II, the parties thus States, if designated by them, obtained the manifested a new and explicit intention right to serve such routes in the United with respect to the entire agreement, States, while the United States authorities including the nationality clause which were empowered to refuse access to those already featured, with the same content, same routes to airlines of non-contracting in the 'old agreement'. By virtue of this new Member States. In this way, the parties manifestation of intention, there is no implicitly agreed to extend the scope of the doubt that the clause in question was clause in question, by modifying the rights incorporated into Bermuda II: in other and obligations flowing from it. If they had words, into an agreement which was con- not intended it to be automatically cluded after the Member State's accession extended in this way, they could have to the Community. revised the terms of the clause, for example by limiting the number of airlines to be designated or authorised to fly on particu- lar routes. By doing otherwise, they impli- citly assented to this extension. It follows that the disputed agreements modified, 140. To conclude on this point, I consider albeit indirectly, the content of the that the nationality clause contained in the nationality clause contained in the 'old' current agreements between the defendant agreements. It also follows, given that the Member States and the United States of agreements were concluded in 1995 and America is not covered by the first para- 1996, in other words after the entry into graph of Article 234 of the Treaty. force of the Treaty, that the first paragraph of Article 234 of the Treaty can no longer be applicable to them.

144. As mentioned above, the defendant Member States maintain that they attempted to renegotiate the clause in 142. In the event, therefore, that the Court question with the United States authorities, should decide that the nationality clause with a view to eliminating its alleged contained in the current agreements incompatibility with Community law, but between the United States and Denmark, were met with a firm refusal by those Sweden, Finland, Austria and Germany is authorities. I must object, however, even covered by the first paragraph of without embarking on a reconstruction of Article 234 of the Treaty, the Commission the negotiations that took place with the asks the Court to declare that those defend- United States, that such an attempt cannot ant Member States have infringed the be regarded as sufficient to constitute second paragraph of that article, by not proper performance of their obligations having done everything in their power to under the second paragraph of Article 234 eliminate the incompatibility found to exist of the Treaty. For that, the Member States between that clause and the right of concerned must show that they made every establishment. effort to remove the incompatibility; and it does not seem to me that they have shown that they did so in this instance. It is, in particular, not in dispute that, notwith- standing the specific provision to that effect in the second paragraph of Article 234, they did not adopt a common attitude vis-à-vis the United States, nor did they 143. I would recall that under the second take steps to assist each other with a view paragraph of Article 234, to the extent that to bringing the other contracting parties to agreements concluded before the entry into agree to an amendment of the nationality force of the Treaty are incompatible with clause so as to bring it into line with the Treaty, 'the Member State or States Community law. Furthermore, it does not concerned shall take all appropriate steps appear that in the course of the negoti- to eliminate the incompatibilities estab- ations the Member States concerned lished. Member States shall, where necess- informed the United States of America that, ary, assist each other to this end and shall, if the nationality clause were not amended where appropriate, adopt a common atti- in the sense just indicated, they might tude'. And I would also recall that the ultimately find themselves in a situation in Court has recently given quite a strict which it would be necessary to denounce interpretation of that provision, holding the agreements. that the requirement to bring agreements predating the entry into force of the Treaty into line with Community law means that 58 — Joined Cases C-62/98 and C-84/98 Commission v Portugal Member States have even to go so far as [2000] ECR I-5171 and I-5215.

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COMMISSION v UNITED KINGDOM

IV — Costs 148. In view of the conclusions I have reached in the preceding pages, in particu- lar with reference to the Commission's and the defendant States' failure on some heads, and in view also of the special circum- stances of the case and the complexity of 147. Under Article 69(2) of the Rules of the issues raised in these proceedings, I Procedure, the unsuccessful party is to be consider that it is appropriate for the ordered to pay the costs if they have been parties to bear their own costs. applied for in the successful party's plead- ings. Under Article 69(3), the Court may order that the costs be shared or that the parties bear their own costs if the parties are successful on some heads and unsuc- 149. As to the Netherlands, an intervener cessful on others, or where the circum- in all the cases, it too should bear its own stances are exceptional. costs, in accordance with Article 69(4).

V — Conclusion

150. For all of the reasons set out above, I propose that the Court should give judgment in the following terms.

(i) In Case C-466/98, I propose that the Court declare:

— that, by inserting in the air transport agreement concluded with the United States of America in 1995 specific provisions concerning the fares that air carriers designated by the United States of America are allowed to charge on intra-Community routes and concerning computerised reservation systems (CRSs), the Kingdom of Denmark has failed to fulfil its obligations under Article 5 of the EC Treaty (now Article 10 EC) and under Regulations Nos 2409/92 and 2299/89;

— that, by maintaining in force the nationality clause contained in the earlier agreement with the United States of America, the Kingdom of Denmark has failed to fulfil its obligations under Article 52 of the EC Treaty (now Article 43 EC);

— in the alternative, if it is decided that the first paragraph of Article 234 of the Treaty is applicable, that the Kingdom of Denmark has failed to fulfil its obligations under the second paragraph of that article by having failed to take all appropriate steps to eliminate the incompatibility between the earlier agreement with the United States of America and Article 52 of the Treaty; I - 9488

COMMISSION v UNITED KINGDOM

— that the application is dismissed in all other respects;

— that the Kingdom of Denmark and the Commission shall bear their own costs;

— that the application is dismissed in all other respects;

— that the Kingdom of Sweden and the Commission shall bear their own costs;

— that the Kingdom of the Netherlands shall bear its own costs.

(iv) In Case C-469/98, I propose that the Court declare:

— that, by inserting in the air transport agreement concluded with the United States of America in 1995 specific provisions concerning the fares that air carriers designated by the United States of America are allowed to charge on intra-Community routes and concerning computerised reservation systems (CRSs), the Republic of Finland has failed to fulfil its obligations under Article 5 of the EC Treaty (now Article 10 EC) and under Regulations Nos 2409/92 and 2299/89;

— that, by maintaining in force the nationality clause included in the earlier agreement with the United States of America, the Republic of Finland has failed to fulfil its obligations under Article 52 of the EC Treaty (now Article 43 EC);

(v) In Case C-471/98, I propose that the Court declare:

— that, by inserting in the air transport agreement concluded with the United States of America in 1995 specific provisions concerning the fares that air carriers designated by the United States of America are allowed to charge on intra-Community routes and concerning computerised reservation systems (CRSs), the Kingdom of Belgium has failed to fulfil its obligations under Article 5 of the EC Treaty (now Article 10 EC) and under Regulations Nos 2409/92 and 2299/89;

— that, by maintaining in force the nationality clause contained in the earlier agreement with the United States of America, the Kingdom of Belgium has failed to fulfil its obligations under Article 52 of the EC Treaty (now Article 43 EC); I - 9491

OPINION OF MR TIZZANO — CASES C-466/98, C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98 AND C-476/98

— that the application is dismissed in all other respects;

— that the Kingdom of Belgium and the Commission shall bear their own costs;

— that the Grand Duchy of Luxembourg and the Commission shall bear their own costs;

— that the Kingdom of the Netherlands shall bear its own costs,

(vii) In Case C-475/98, I propose that the Court declare:

— that, by inserting in the air transport agreement concluded with the United States of America in 1995 specific provisions concerning the fares that air carriers designated by the United States of America are allowed to charge on intra-Community routes and concerning computerised reservation systems (CRSs), the Republic of Austria has failed to fulfil its obligations under Article 5 of the EC Treaty (now Article 10 EC) and under Regulations Nos 2409/92 and 2299/89;

— that, by maintaining in force the nationality clause contained in the earlier agreement with the United States of America, the Republic of Austria has failed to fulfil its obligations under Article 52 of the EC Treaty (now Article 43 EC);

— in the alternative, if it is decided that the first paragraph of Article 234 of the Treaty is applicable, that the Republic of Austria has failed to fulfil its obligations under the second paragraph of that article by having failed to take all appropriate steps to eliminate the incompatibility between the earlier agreement with the United States of America and Article 52 of the Treaty; I - 9493

— that, by inserting in the air transport agreement concluded with the United States of America in 1996 specific provisions concerning the fares that air carriers designated by the United States of America are allowed to charge on intra-Community routes and concerning computerised reservation systems (CRSs), the Federal Republic of Germany has failed to fulfil its obligations under Article 5 of the EC Treaty (now Article 10 EC) and under Regulations Nos 2409/92 and 2299/89; I - 9494

COMMISSION v UNITED KINGDOM

— that, by maintaining in force the nationality clause contained in the earlier agreement with the United States of America, the Federal Republic of Germany has failed to fulfil its obligations under Article 52 of the EC Treaty (now Article 43 EC);

— in the alternative, if it is decided that the first paragraph of Article 234 of the Treaty is applicable, that the Federal Republic of Germany has failed to fulfil its obligations under the second paragraph of that article by having failed to take all appropriate steps to eliminate the incompatibility between the earlier agreement with the United States of America and Article 52 of the Treaty;

— that the application is dismissed in all other respects;

— that the Federal Republic of Germany and the Commission shall bear their own costs;