The EC Treaty contains special transport provisions conferring on the Community specific powers which allowed it to adopt three "packages" of regulations (in 1987, 1990 and 1992) designed to ensure freedom to provide Community air transport services and free competition within the Community. The package adopted in 1992 comprises three regulations concerning:
-    the granting of operating licences by Member States in relation to air carriers established in the Community;
-    access for Community air carriers to intra-Community air routes; and
-    the establishment of fares and rates on intra-Community routes.

That package is supplemented, in particular, by two other regulations of 1989 and 1993 concerning:
-    computerised reservation systems (CRSs)
-    the allocation of airport slots.

Since the beginning of the 1990s, the Commission has sought to obtain from the Council a mandate to negotiate an air transport agreement with the United States of America in order to replace the bilateral agreements previously concluded with certain European countries which, at the time, were not members of the Community. It has obtained a limited mandate to negotiate with the United States of America, which has not yet led to an agreement between the Community and that country.

However, from 1995, the United States entered into "open skies" type bilateral agreements with a number of Member States in order to facilitate, in particular, free access to all routes, the granting of unlimited route and traffic rights, the fixing of prices in accordance with a system of "mutual disapproval" and the possibility of sharing codes.

The Commission brought actions against seven Member States (Denmark, Sweden, Finland, Belgium, Luxembourg, Austria and Germany) which are signatories to "open skies" agreements as well as an action against the United Kingdom. ¹ The Commission alleges, in particular, that, by concluding those agreements, they have:

(i)    infringed the external competence of the Community since only the Community has competence to conclude such an agreement (N.B. this complaint has not been raised against the United Kingdom) and
(ii)    infringed the provisions of the Treaty concerning the right of establishment by permitting the United States to refuse traffic rights in its airspace to air carriers designated by the Member State which is party to the agreement, if a substantial part of the ownership and effective control of that carrier are not vested in that Member State or in its nationals (clause on the ownership and control of airlines).

The infringement of the external competence of the Community

In relation to air transport, the Treaty provides for a power for the Community to take action which is dependent on there being a prior decision of the Council. That provision does not, in itself, establish an external Community competence in the field of air transport which allows the Community institutions to conclude international agreements binding the Community. There is therefore no express external Community competence in that regard.

However, the Court notes that the Community's competence to conclude international agreements may result by implication from the Treaty. That is the case where the conferment on the Community of external competence is necessary for the effective exercise of its (not yet exercised) internal competence.

The Court finds that these cases do not disclose a situation in which internal competence could be exercised only at the same time as external competence since the Council was able to adopt the "third package" without its being necessary to conclude an air transport agreement with the United States of America.

The Court then points out, in accordance with its case-law, that, where the Community lays down common rules, the Member States are no longer competent to enter into obligations towards non- member countries if those obligations affect the common rules and that the Community alone is entitled to assume such obligations. That is the case where the international commitments fall within the scope of the common rules or, in any event, within an area which is already largely covered by such rules or where the Community has included in its internal legislative acts provisions relating to nationals, in this case air carriers, of non-member countries.

The Court then goes on to examine the scope of the regulations cited on a case-by-case basis.

First of all, the Court examines the scope of the regulations relating to the granting by the Member States of operating licences in relation to air carriers established in the Community and the access of Community air carriers to intra-Community routes and finds that the bilateral agreements do not fall within an area already covered by those regulations sincethey contain rules directed to American air carriers. Consequently, those regulations cannot establish an external competence of the Community.

On the other hand, the Court finds that some of the provisions relating to the establishment of fares and rates on intra-Community routes and those relating to computerised reservation systems and the allocation of airport slots contained in the other regulations referred to apply to air carriers of non-member countries. The Community therefore has exclusive external competence in that case. However, the Court holds that the Commission has not established that the bilateral agreements in question include commitments relating to airport slots.

Accordingly, the Court declares that Denmark, Sweden, Finland, Belgium, Luxembourg, Austria and Germany have infringed the Community's external competence as regards the Community rules on the establishment of air fares and rates on intra-community routes and on computerised reservations systems (CRSs).

The infringement of the right of establishment

The Court finds that, according to the clause on the ownership and control of airlines, the United States is, in principle, under an obligation to grant the rights provided for in the agreements to carriers controlled by the Member State with which it has concluded the agreement and is entitled to refuse those rights to carriers controlled by other Member States which are established in that Member State. That is a case of discrimination excluding air carriers of other Member States from the benefit of national treatment in the host Member State, which is forbidden by the Community rules on the right of establishment.

Furthermore, that clause cannot be justified on the grounds of public order and public safety since there is no direct link between any threat and the generalised discrimination against Community airlines.

Accordingly, the clause on the ownership and control of airlines incorporated in the bilateral agreements concluded between the United States and the United Kingdom, Denmark, Sweden, Finland, Belgium, Luxembourg, Austria and Germany is contrary to the rules on the right of establishment.

Unofficial document for media use only; not binding on the Court of Justice. Available in all languages. For the full text of the judgments, please consult our Internet page www.curia.eu.int  at approximately 12 noon today. For further information please contact Isabelle Guibal: Tel: (00 352) 4303 3355; Fax: (00 352) 4303 2731 Pictures of the hearing are available on "Europe by Satellite" European Commission, Press and Information Service, L-2920 Luxembourg Tel: (00 352) 4301 35177; Fax: (00 352) 4301 35249, or B-1049 Brussels, Tel: (00 32) 2 2964106, Fax: (00 32) 2 2965956, or (00 32) 2 301280

¹    With respect to the United Kingdom, the situation is slightly different. The Commission contests the bilateral agreement concluded in 1977 (Bermuda II) between the United Kingdom and the United States of America, in which, it claims, there are provisions contrary to Community law as regards the right of establishment.