the principles and practice of international

aviation law

The Principles and Practice of International Aviation Law provides an introduction

to, and demystification of, the private and public dimensions of international
aviation law. Unlike other global sectors, the air transport industry is not governed
by a discrete area of the law but rather by a series of disparate transnational
regulatory instruments. Everything from the routes that an international air carrier
can serve to the acquisition of its fleet and its liability to passengers and shippers
for incidents arising from its operations can be the object of bilateral and multi-
lateral treaties that represent diverse and often contradictory interests. Beneath
this multilayered treaty infrastructure are hundreds of domestic regulatory regimes
that also apply national and international rules in disparate ways. The result is
an agglomeration of legal cultures that can leave even experienced lawyers and
academics perplexed. By combining classical doctrinal analysis with insights from
newer disciplines such as international relations and economics, this book maps
international aviation law’s complex terrain for new and veteran observers alike.

Brian F. Havel is Distinguished Research Professor of Law, Associate Dean for

International Affairs, and Director of the International Aviation Law Institute at
DePaul University College of Law. From 2011 through 2013, Professor Havel served
as the Keeley Visiting Fellow at the University of Oxford, Wadham College. He
also holds appointments as visiting professor of law at Leiden University and
University College Dublin. His publications have an interdisciplinary focus
and include Beyond Open Skies: A New Regime for International Aviation (2009)
and In Search of Open Skies: Law and Policy for a New Era in International
Aviation (1997).
Gabriel S. Sanchez is Senior Research Fellow at the International Aviation Law
Institute and previously served as the Institute’s FedEx/United Airlines Resident
Research Fellow from 2007 to 2011. His most recent work on international aviation
law and policy has featured in the Catholic University Law Review, the Virginia
Journal of International Law, and the Harvard Environmental Law Review.
The Principles and Practice of
International Aviation Law

BRIAN F. HAVEL
DePaul University College of Law

GABRIEL S. SANCHEZ
DePaul University College of Law
32 Avenue of the Americas, New York, ny 10013-2473, usa

Cambridge University Press is part of the University of Cambridge.

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www.cambridge.org
Information on this title: www.cambridge.org/9781107697737
© Brian F. Havel and Gabriel S. Sanchez 2014
This publication is in copyright. Subject to statutory exception
and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.
First published 2014
Printed in the United States of America
A catalog record for this publication is available from the British Library.
Library of Congress Cataloging in Publication Data
Havel, Brian F., author
The principles and practice of international aviation law / Brian F. Havel, DePaul
University School of Law, Gabriel S. Sanchez, DePaul University School of Law.
pages cm
1. Aeronautics – Law and legislation. I. Sanchez, Gabriel S., author. II. Title.
k4095.h385 2014
343.090 7–dc23 2013030435
isbn 978-1-107-02052-8 Hardback
isbn 978-1-107-69773-7 Paperback
Cambridge University Press has no responsibility for the persistence or accuracy of
urls for external or third-party Internet Web sites referred to in this publication
and does not guarantee that any content on such Web sites is, or will remain,
accurate or appropriate.
 Contents

Preface page ix
Acknowledgments xiii
List of Abbreviations and Acronyms xv

1 What Is International Aviation Law? 1

1.1. Introduction: A Book About International Aviation Law 1
1.2. The Distinctiveness and Content of International
Aviation Law 4
1.3. A Quick Look at Legal Theory 7
1.4. Public and Private International Aviation Law 11
1.5. The Sources of International Aviation Law 16
1.6. The Role of International (and a Few National)
Organizations 23

2 The Foundations of Public International Aviation Law 28

2.1. Introduction to the Chicago Convention 28
2.2. The “Prehistory” of the Chicago Convention 30
2.3. The Cosmopolitanism of the Chicago Convention 33
2.4. The Historical Impact of the Chicago Convention 36
2.5. The Core Elements of the Chicago Convention 40
2.6. The International Civil Aviation Organization 55

3 The International Law Regime for Trade in Air Services 69

3.1. Introduction to the Bilateral System 69
3.2. Aviation Trade After the Chicago Convention 72
3.3. The Freedoms of the Air 76

v
vi Contents

3.4. The Nationality Rule 86

3.5. The Core Elements of Air Services Agreements: The Open
Skies Model 95
3.6. Looking Beyond Bilateralism 109
3.7. Remaining Challenges to Trade in Air Services 115
3.8. Some Concluding Comments on Trade in Air Services 122

4 The International Law Regime for Airline Investment

and Global Alliances 123
4.1. Introduction 123
4.2. The (Airline) Nationality Rule in Action 125
4.3. A Quick Look at How International Law (Normally)
Regulates Foreign Investment 131
4.4. An Emerging International Investment Regime
for Airlines 137
4.5. Circumventing the Nationality Rule: Global Alliances 148
4.6. The Legal (and Policy) Framework for Global Alliances 151
4.7. Ongoing Issues of Law and Policy for Alliances: “Metal
Neutrality” and “Spillover” 159
4.8. A Survey of U.S. and EU Antitrust Oversight of the Three
Global Alliances 163
4.9. Beyond the Alliance System 171
4.10. Conclusion: A New EU Initiative 172

5 The International Law Regime for Aviation Safety

and Security 173
5.1. Introduction 173
5.2. The Basic Principles of International Air Safety
Regulation 175
5.3. Ensuring International Aviation Safety Through ICAO
Harmonization and State Obligations 176
5.4. The Basic Principles of International Aviation Security
Regulation 182
5.5. The Role of ICAO in International Aviation Security 185
5.6. Exercising State Criminal Jurisdiction in
International Law 189
5.7. The Tokyo Convention (1963) 194
5.8. The Hague Convention (1970) 201
5.9. The Montreal Convention (1971) 205
5.10. Beyond the ICAO Treaty Regime 208
 Contents vii

5.11. Preventing Aviation Crimes and Other Hostile Incidents

Within the Limits of Law 212

6 The International Law Regime for Aviation

and the Environment 217
6.1. Introduction 217
6.2. An Overview of International Environmental Law 222
6.3. The Role of ICAO in Environmental Issues Affecting
International Aviation 228
6.4. The Chicago Convention and Aviation Emissions
Regulation 235
6.5. The Role of Air Services Agreements in Environmental
Regulation 241
6.6. The Legal and Political Prospects for a Multilateral
Aviation Emissions Treaty 242
6.7. The International Regulation of Noise Abatement 246
6.8. Conclusion 249

7 The International Law Regime for Air Carrier Liability

and Surface Damage 251
7.1. Introduction 251
7.2. The Choice Between Private and Public Oversight of Air
Carrier Liability 255
7.3. The Warsaw System 257
7.4. Reforming the Warsaw Convention (1): The Treaty
Instruments 262
7.5. Reforming the Warsaw Convention (2): Government
and Non-Government Initiatives 268
7.6. The Warsaw Convention: Conclusion 274
7.7. The Montreal Convention (1): Introduction 275
7.8. The Montreal Convention (2): The Basic Principles 277
7.9. The Montreal Convention (3): Activating the Liability
Regime (Accidents, Death, Injury) 283
7.10. The Montreal Convention (4): The New Liability Regime 293
7.11. The Montreal Convention (5): Expanding the Bases for
Jurisdiction 303
7.12. The Montreal Convention (6): A Final Miscellany
of Provisions 306
7.13. Conclusion 313
7.14. The International Law Regime for Surface Damage
Liability 315
viii Contents

8 The International Law Regime for Aircraft Financing

and Aircraft Nationality 325
8.1. Introduction 325
8.2. A Quick Look at International Aircraft Financing 328
8.3. The Third-Party Effects of Secured Financing of Aircraft 332
8.4. An Overview of International Aircraft Leasing 337
8.5. The International Law Regime for Aircraft Nationality 340
8.6. An Overview of International Aviation Law and Aircraft
Financing 345
8.7. The Geneva Convention (1948) 347
8.8. The Cape Town Convention (2001) (1): Background
and Overview 351
8.9. The Cape Town Convention (2): Application and Scope 358
8.10. The Cape Town Convention (3): The Registration and
Priority System 363
8.11. The Cape Town Convention (4): Remedies in Default 366
8.12. The Cape Town Convention (5): Insolvency 371
8.13. The Cape Town Convention (6): Jurisdiction
and Choice of Law 375
8.14. The Cape Town Convention (7): The Convention’s
Impact on Aviation Financing and on International Law 377
8.15. An Overview of the Governmental Role in Aircraft
Financing 380

Afterword by Ulrich Schulte-Strathaus 393

Select Bibliography 399
Table of Authorities 417
Index 435
 Preface

In the age of online search engines, virtually all of international aviation law’s
primary (and many secondary) materials are now only a few keyboard clicks
away. Nevertheless, given the fact that international aviation law, particularly
in its private dimension, is also bound up with more than 190 domestic legal
systems, the sheer amount of documentation to be sifted through can quickly
prove overwhelming to even the most curious and enterprising individual.
Of course, there is nothing wrong with getting into the details, and for
practitioners, it is a necessity; but without first having a sure guide to the
whole terrain, it is all but impossible to find one’s way to the proper sources.
With that in mind, The Principles and Practice of International Aviation Law
is set primarily at a cruising altitude of 30,000 feet. By taking the reader from
one end of international aviation law’s “cosmos” to the other (and all necessary
points in between), we hope to satisfy the need for an overview before the
detailed work of specialization begins.
In addition to breadth of coverage, however, we seek to give the reader a
broader conceptual context for every area of international aviation law that
we consider. Thus, on the public side, we present the regulatory structure of
the international air transport industry against the backdrop of economic and
political history as well as insights from general doctrines of public interna-
tional law and from rational choice theory (Chapters 1, 2, and 3). We look at
the highly charged issues of foreign investment in airlines and the emergence
of global airline alliances by exposing the reader to the governing principles of
modern international investment law (Chapter 4). We frame international
safety and security issues in the wider context of the effectiveness of certain
kinds of multilateral collaboration, and we analyze security issues in particular
within current understandings of the nature of global piracy and evolving
concepts of State criminal jurisdiction (Chapter 5). We examine the impact of
climate change issues on the global aviation industry as part of the wider

ix
x Preface

evolution of international environmental law (Chapter 6). On the private side,

we scrutinize airline passenger and cargo liability law through lenses of correc-
tive justice and the rise of consumerism (Chapter 7). And finally, still on the
private side, we offer a solid foundation in transnational aircraft financing law
and practice that reveals how and why international treaty making in this area is
focused primarily on the protection of creditors (Chapter 8). As we progress
through these discussions, the reader will notice that we also engage critically
with the present state of international aviation law in the hope of igniting further
debate about its future development.
There are two further dimensions to our study. A glance at such important
collections as the United Nations Treaty Series or International Legal
Materials reveals only that international law (including international aviation
law) exists; what is not revealed in their pages is the question of how interna-
tional law functions, particularly in a State-centric world that lacks strong,
centralized mechanisms of oversight and enforcement. We will keep that
question in mind and study it from a number of perspectives including
theories of international relations, rational and public choice, and economics.
But we will not neglect more traditional doctrinal approaches as typified by
comparative, historical, and teleological analysis. Indeed, our approach to the
subject does not mean that we have dispensed with detailed exegesis of
particular treaties – on the contrary, too abstract a view of the Cape Town
Convention on aircraft security interests, for example, would leave the reader
more puzzled than enlightened as to why its drafters pursued its completion
with such ardor. Nor does it mean that we have not on occasion landed in a
particular national (or regional) legal system in order to provide a closer look at
how it has influenced the development of the international order. That is
true, for example, of the open skies policy of the United States as well as of the
grant of antitrust immunity to global alliances involving a U.S. airline, and
also of the wholesale replacement of Member State control over national
market access attempted by the European Union. We also take careful note
of innovations and developments in other regions, including some dramatic
shifts in thinking about the issue of foreign investment in national airlines
that are taking place in Latin America, the Middle East, and Australasia. Once
the reader has completed the journey with us through any of the eight themed
chapters that make up the book, further voyages lie ahead using the guideposts
placed in the notes, the tables of abbreviations and authorities, and the detailed
bibliography.
Like all works on law, this book has been written “in the middle of things.”
The philosopher Eric Voegelin once likened law to Zeno’s paradox: every
time you think you have reached where you think the law has been, you still
 Preface xi

have further to go. International law, no less than domestic law, is constantly
expanding. Fresh accords, amendments to shopworn treaties, new interpreta-
tions of existing policy, political brinkmanship – the practice of “aeropolitics”
keeps international aviation law dynamic. Recognizing these challenges, we
cannot do better than to invoke Professor Andreas Lowenfeld’s modest claim,
opening the 1981 second edition of his treatise, Aviation Law, that although
“[y]ou will not find instant answers – and certainly not definitive answers –
between these covers[,] . . . you will find a good deal of information, a good
many explanations, and [we] hope a few useful insights.”1
Finally, we have not included an appendix of documents. As the opening
sentence of this Preface implies, and we now confirm, there is no document
mentioned in this text that cannot be downloaded by a simple online search.
We have attempted to provide an account of international aviation law as
it “rested” on December 31, 2013.2 Any remaining errors or inaccuracies are
entirely the responsibility of the authors.

Brian F. Havel
Gabriel S. Sanchez

1 Andreas F. Lowenfeld, Aviation Law xiv (2d ed. 1981).

2 The book’s cover design, by Wendy Bedenbaugh, juxtaposes a Leonardo da Vinci drawing of a
mechanical wing device (circa 1485) with an image of the jet age version.
 Acknowledgments

We would like to express our sincere gratitude to a number of persons and

institutions for their help in bringing this book to fruition. First on the list is our
editor, John Berger, whose enthusiasm for the project was boundless and who
has kept us to a fairly tight schedule from contract to proofs. Finola O’Sullivan,
well known to many Cambridge legal authors, was also solicitous of the
book’s progress. We offer our appreciation to two deans of DePaul University
College of Law, Warren D. Wolfson and Gregory Mark, for their continuing
support. Brian F. Havel would also like to acknowledge his colleagues at Wadham
College, University of Oxford, where he spent two happy years working on this
book as the Keeley Visiting Fellow.
Portions of the book were inspired by lectures we have given at DePaul, at
Leiden University’s International Institute of Air and Space Law (IIASL), at
the International Air Transport Association (IATA) and McGill University’s
Institute of Air and Space Law (IASL) in Montreal, and under the auspices of
the Centre for Aviation (CAPA) in Mumbai. We are especially grateful to
Professor Pablo Mendes de Leon, the Director of IIASL, for creating an
enduring link between his institute and DePaul’s International Aviation Law
Institute and for all of the academic opportunities that he has made available
to us over the years.
Several leading figures in international aviation law contributed their
time and skill to reviewing and critiquing selected parts of the book. For the
liability chapter, we had the expert input of Harold Caplan, former Legal
Advisor of the International Union of Aviation Insurers, and Richard
Gardiner, University College London. On aviation finance, we were able to
call on the expertise of Dean N. Gerber (Vedder Price, Chicago), Dr. Donal
Hanley (Vice President, Legal Aviation Capital Group Corp., Newport Beach,
California), and B. Patrick Honnebier (Of Counsel, Gomez and Bikker,
Aruba and Amsterdam).

xiii
xiv Acknowledgments

We also wish to recognize the contributions of our colleagues in the

International Aviation Law Institute at DePaul. John Q. Mulligan, FedEx/
United Airlines Resident Research Fellow, showed his characteristic attention
to detail and accuracy in the research and refinement he provided for every
chapter of the book, and we owe him prodigious thanks for his dedication.
Stephen B. Rudolph, Executive Director of the Institute, served as project
manager for the book and was indispensable to its completion. Our peerless
proofreader, Alice Rudolph (Steve’s wife), cast her usual meticulous eye over
the whole text. Our thanks also to our student research assistants, Eli Judge and
Jessica Katlin, who gave us many hours of their time and considerable talents.
We are indebted to John R. Byerly, former U.S. Deputy Assistant Secretary of
State for Transportation Affairs, a loyal friend of our Institute, who has always
been available with counsel and support during the writing process. Rush
O’Keefe, Senior Vice President and general counsel of FedEx, and Hershel
Kamen, Senior Vice President, Alliances, Regulatory and Policy at United
Airlines, have also been strong allies of the Institute and of its work, and this
book could not have happened without their material and moral encourage-
ment. And our thanks finally to Ulrich Schulte-Strathaus, former secretary
general of the Association of European Airlines and now Managing Director,
Aviation Strategy and Concepts, for his Afterword to the book – an unflinching
view of the economic issues that will influence the future of the international
aviation industry and of its governing rules.
Brian Havel dedicates this book to his parents, Miroslav and Betty, to his
partner Graeme, and to his family. Gabriel S. Sanchez dedicates this book to
his sons Jonah, Manuel, Iohan, and Eliyah, and most of all to his dear wife,
Laura, without whose love, patience, and support his contribution to this work
would not have been possible.
 List of Abbreviations and Acronyms

A4A Airlines for America (formerly Air Transport

Association of America (ATA))
AAPA Association of Asia Pacific Airlines
ACSA Central American Agency for Aeronautical Safety
AEA Association of European Airlines
AFRAA African Airlines Association
ALTA Latin American and Caribbean Air Transport
Association
APG Aircraft Protocol Group
ASA Air Services Agreement
ASAM ASEAN Single Aviation Market
ASEAN Association of Southeast Asian Nations
ATAG Air Transport Action Group
AWG Aviation Working Group
BAGASOO Banju Accord Group Safety Oversight Organization
BIT Bilateral Investment Treaty
BRIC Brazil, Russia, India, and China
CAA Civil Aviation Authority
CAEP Committee on Aviation Environmental Protection
CASSOS Caribbean Aviation Safety and Security Oversight
System
CJEU Court of Justice of the European Union
COMAC Commercial Aircraft Corporation of China
DGComp Directorate General for Competition
DOJ United States Department of Justice
DOT United States Department of Transportation
DSB World Trade Organization Dispute Settlement Body

xv
xvi List of Abbreviations and Acronyms

DVT Deep Vein Thrombosis

ECAA European Common Aviation Area
ETS Emissions Trading Scheme
EU European Union
ExIm Export-Import Bank
FAA Federal Aviation Administration
GATS General Agreement on Trade in Services
GATT General Agreement on Tariffs and Trade
GIACC Group on International Aviation and Climate Change
GRC General Risks Convention
IACA International Air Cargo Association
IACA International Air Carrier Association
IASA International Aviation Safety Assessments (FAA)
IATA International Air Transport Association
ICAN International Commission for Air Navigation
ICAO International Civil Aviation Organization
ICJ International Court of Justice
IDERA Irrevocable Deregistration and Export Request
Authorization
IGO International Governmental Organizations
IPCC Intergovernmental Panel on Climate Change
KLM Koninklijke Luchtvaart Maatschappij
LAN Lı́nea Aérea Nacional
MAAS Multilateral Agreement on Air Services
MALIAT Multilateral Agreement on the Liberalization of
International Air Transportation
MBM Market-Based Measures
MFN Most Favored Nation
MOU Memorandum of Understanding
NASA National Aeronautics and Space Administration
NGO International Nongovernmental Organizations
OAA Open Aviation Area
PANS Procedures for Air Navigation Services
PNR Passenger Name Records
RSOO Regional Safety Oversight Organizations
SAFA Safety Assessment of Foreign Aircraft
SARI South Asian Regional Initiative
SARPs Standards and Recommended Practices
SAS Scandinavian Airlines
SCM Agreement Agreement on Subsidies and Countervailing Measures
 List of Abbreviations and Acronyms xvii

SDR Special Drawing Right

TACA Transportes Aéreos del Continente Americano
TFEU Treaty on the Functioning of the European Union
TSA United States Transportation Security Administration
UIC Unlawful Interference Convention
U.K. United Kingdom
U.N. United Nations
UNFCC U.N. Framework Convention on Climate Change
U.S. United States of America
USOAP Universal Safety and Oversight Audit Program
WTO World Trade Organization
 1

What Is International Aviation Law?

1.1. introduction: a book about international

aviation law

1.1.1. Introducing Aviation Law in Its International Dimension

In his landmark casebook-treatise Aviation Law, Professor Andreas Lowenfeld
set out to answer the challenge of his friend, Judge Henry Friendly, that there
would only be value in giving the rules and regulations governing air transport
separate treatment if “the heads of [the] given subject can be examined in a
more illuminating fashion with reference to each other than with reference to
other branches of law.”1 Despite Judge Friendly’s negative appraisal of the
possibility, Lowenfeld prevailed. Aviation Law – expanded considerably with
the publication of its second edition in 1981 – provided an integrated overview
and analysis of the broad, and occasionally disparate, “heads” (e.g., economic,
safety, and tort) of U.S. aviation law to a generation of students, practitioners,
and academics before tumbling into obsolescence as its author abandoned
further updates in favor of new research agendas.2 As the size and format of the
book you currently hold in your hands (or have downloaded to your eReader)
make apparent, The Principles and Practice of International Aviation Law3

1
Andreas F. Lowenfeld, Aviation Law: Cases and Materials xiii (1972) (internal
quotation marks omitted).
2
See, e.g., Andreas F. Lowenfeld, International Economic Law (2d ed. 2008);
Andreas F. Lowenfeld, International Litigation and Arbitration (3d ed. 2005);
The Hague Convention on Jurisdiction and Judgments (Andreas F. Lowenfeld &
Linda J. Silberman eds., 2001).
3
We prefer the term “international aviation law” to “international air law.” Other authors have a
different view, see, e.g., I. H. Ph. Diederiks-Verschoor, An Introduction to Air Law
(Pablo M. J. Mendes de Leon ed., 9th rev. ed. 2012). Our preference, which follows that of
Professor Andreas Lowenfeld’s treatise (discussed in the main text), is motivated only by our view
that the word “aviation” can be used independently of the word “law” to describe the industry we

1
2 What Is International Aviation Law?

is not a direct descendant of Lowenfeld’s work. It is not a thousand-page

hybridization of scholarly treatise and casebook. Neither is it a recitation of
the “black letter” of any single jurisdiction’s aviation law. Rather, what follows
is a fully up-to-date critical introduction to aviation law in its international
dimension that addresses those elements of national and inter-State legal and
political cultures that continue to have the greatest impact on the develop-
ment of international aviation law.

1.1.2. Complexity of International Aviation Law

The choice of a global perspective on aviation law in place of a jurisdiction-
specific analysis is not accidental. For more than sixty years the air transport
industry has functioned as probably the world’s most visible services sector and
(despite, as we will see, the irony of its own legal inability to “globalize” across
borders) as one of the principal catalysts for globalization. Revenues from
international air passenger and air cargo carriage hugely overshadow those
from domestic air transport – a differential that is expected to widen even
further in the coming decades.4 And, although domestic aviation regulation

are discussing: the term “air” does not appear to have the same autonomy (the “air industry”
seems a nebulous idea; a Google search of that term quickly defaults to “airline” or “air transport”
industry). For an early consideration of the question of nomenclature, see Daniel Goedhuis,
Air Law in the Making (1938) (arguing that “air law” is favored also in France (Droit Aérien)
and Germany (Luftrecht) but noting Italian jurist Antonio Ambrosini’s use of the even wider term
“aeronautical law”). Another approach to naming the subject is taken in the International Civil
Aviation Organization’s Manual on the Regulation of International Air Transport
(Doc. 9626, 2d ed. 2004), at (iv) [hereinafter ICAO Manual], which draws a distinction between
“air transport” as a more specific term, referring to those aspects related to carriage by air (usually
commercial air transport), and “aviation” as a more generic term that includes topics such as
military, state, and private flying, aircraft manufacturing, and air navigation. Although in this
book we focus primarily on international commercial air transport, we also consider legal and
regulatory issues that affect other participants in the modern “aviation” value chain (including
airports, air navigation service providers, manufacturers, computer reservation systems, and
ground-handlers). Accordingly, we still prefer to adopt the wider term.
4
Despite the current weak economic conditions, especially in the West, global air transport
over the long term is expected to grow by 5% annually until 2030, a compound increase of
more than 150%. Differential growth rates, however, will see a relative shift to areas outside
the United States and the European Union with Asia and the Middle East in particular
expected to become the focus of international air traffic flows. Fully half of the world’s
new traffic added during the next 20 years will be to, from, or within the Asia-Pacific
region, which may therefore overtake the United States as leader in world traffic by 2030
(reaching a market share of 38%). See European Commission, Communication from
the Commission to the European Parliament, The Council, The European Economic
and Social Committee and the Committee of the Regions, The EU’s External Aviation
Policy: Addressing Future Challenges, COM(2012) 556 final, at 5 [hereinafter European
Commission Communication, External Aviation Policy].
3 1.1. Introduction: A Book About International Aviation Law

(especially in the United States) certainly exhibits the complexity that no

doubt captivated Lowenfeld, the regulatory governance of international air
transportation – which of course includes national governance of inbound and
outbound international air services – is by an order of magnitude even more
complex. Indeed, while the tempo of regulatory change has fluctuated
between intrusive and light-handed, complexity is always implicated when
one considers the task of regulating air transport within, across, and beyond the
borders of more than 190 sovereign States. Comprehending this legal labyrinth
without a modern foundational text is a formidable challenge for a dedicated
academic and almost impossible for students and practitioners who must, by
necessity, compartmentalize their time. We hope that this book will serve all
of these potential readers.

1.1.3. Enduring Role of Domestic Law

Nevertheless, it must be obvious from the foregoing statements that domestic
aviation law retains an important place in this study even though our principal
focus is international. As this chapter introduces, and as the remainder of the
book elucidates, there is a dynamic relationship between aviation law’s “clas-
sically” international components (e.g., the corpus of bilateral and multilat-
eral agreements) and the State (or, in the case of the European Union (EU),
supra-State) legal systems that regulate air transport. For example, although
almost every country has laws addressing the civil liability of air carriers for any
damage they may cause to their passengers, cargo, or to third parties on the
ground, to the extent that a flight responsible for the damage can be identified
as international, one or more multilateral treaties will set the baseline rules for
the responsible carrier’s liability, the choice of jurisdiction for any lawsuits,
and the carrier’s available defenses.5 In those situations, domestic courts will
have direct jurisdiction over claims arising from damages caused by an air
carrier’s performance of international services, yet much of the procedural and
substantive disposition of those claims will be, depending on your perspective,
aided or constrained by the international legal obligations contracted by the
carrier’s home State.

1.1.4. Definitions, Sources, and Organizations

In the next part, we will define more precisely what we mean in this book by
the term “international aviation law.” We will then discuss the book’s

5
For further discussion, see infra Chapter 7.
4 What Is International Aviation Law?

interpretive approach – one that relies not only on traditional doctrinal

scholarship, but also at times on economic analysis and on other so-called
rational choice methodologies. Next, we will review the sources of interna-
tional law and briefly explain how they intersect with international aviation
law in both its public and private dimensions. Finally, we will consider how
international aviation law is applied through a number of governmental and
nongovernmental bodies and explore how those organizations (both public
and private) continue to help shape legal developments in the field. More
detailed exposition of all of these topics will be found throughout the remain-
ing chapters.

1.2. the distinctiveness and content

of international aviation law

1.2.1. A Discrete Object of Study?

It is not necessarily obvious what is meant by “aviation law” or, more specif-
ically, “international aviation law.” Is there really a distinct body of the law of
aviation that stands comparison with “organic” subjects like the law of con-
tracts, the law of property, and the law of torts? To restate the question in
stronger terms, is international aviation law simply an academic illusion open
to Judge Frank Easterbrook’s charge of being patently absurd like his mythical
“law of the horse” and thus “doomed to be shallow and to miss unifying
principles”?6 Lowenfeld’s case for aviation law as a discrete object of study
was made easier by the fact that he grounded his materials in the legal culture
of the United States. A designated segment of Title 49 of the United States
Code, for instance, specifically covers aviation. At the same time, however,
laws as sectorally panoramic as the Sherman and Clayton Antitrust Acts and
the Railway Labor Act7 have undeniably powerful effects on the functioning of
the U.S. aviation industry. To cut a line that demarcates “pure” aviation
statutes from “aviation-related” legislation would not only render an account
of this area of law woefully incomplete, but would also be needlessly artificial.
Still, to legal conservatives who may be suspicious of sui generis bodies of law
that depart from the ideal of a set of foundational principles covering all of

6
Frank H. Easterbrook, Cyberspace and the Law of the Horse, 1996 U. Chi. Legal F. 207.
7
The Sherman Antitrust Act and Clayton Antitrust Act provide the basis for most U.S. com-
petition regulation including the air cargo and airline industries. The Railway Labor Act was
amended to include aviation in 1936. See generally Duane E. Woerth, Airline Labor Law in the
Era of Globalization: The Need to Correct a Misreading of the Railway Labor Act, Issues
Aviation L. & Pol’y (CCH) ¶ 30,011, at 16,011 (2001).
5 1.2. The Distinctiveness and Content of International Aviation Law

life’s events, international commercial aviation offers a compelling response as

to why it can and should support a separate body of law: it is a massive industry,
heavily regulated, structurally borderless, and treated by governments (e.g.,
through creation of a separate United Nations (U.N.) organ to frame common
global aviation rules) not as an ordinary part of international trade but as
singular and exceptional.8

1.2.2. Content of International Aviation Law

Simply stated, then, international aviation law is comprised of the rules and
regulations (whether domestic, bilateral, or multilateral in their origin) that
affect global air transport. The fount of this body of law includes not only the
widely recognized sources of international law, but also the national and supra-
national legal and political cultures of the world community of States. At the
level of international law, it is possible to identify aviation-specific multilateral
treaties that govern global airline safety, security, and liability, and lately even
aircraft financing, as well as the rights and duties of States with respect to control
of their sovereign airspaces. From there, the mass of bilateral instruments that
directly regulates the international aviation industry’s commercial environment
(routes, fares, capacity, etc.) can be located, aggregated, and analyzed to draw out
general, but reliable, conclusions concerning the privileges and limitations that
apply to air carriers’ abilities to access foreign markets. Only a handful of
“general” treaties (those not specific to any sector) have any bearing on aviation.
And, consistent with aviation’s exceptionalism, even some of those include
whole or partial exemptions for air transport. For example, the North
American Free Trade Agreement, which dismantled many of the trade and
investment barriers between the United States, Canada, and Mexico, does not
embrace their aviation sectors.9 Similarly, the Kyoto Protocol to the U.N.
Framework Convention on Climate Change singles out emissions produced
by international aviation for separate consideration under the auspices of the
U.N.’s aviation body, the International Civil Aviation Organization (ICAO).10

8
As always, there are exceptions to the exceptional. Those who reject an autonomous concept of
aviation law might concede, at most, that aviation is just a special instance of the broadly
similar transport rules that cover maritime and rail. Some evidence exists for this assertion.
Italy, for example, has combined its aviation and maritime rules into a single code, Il Codice
della Navigazione [C. nav.] (It.).
9
See North American Free Trade Agreement, art. 1201(2)(b), U.S.-Can.-Mex., Dec. 17, 1992,
reprinted in 32 I.L.M. 289 (1993).
10
See Kyoto Protocol to the United Nations Framework Convention on Climate Change, art. 2(2),
opened for signature Dec. 11, 1997, 2303 U.N.T.S. 162; see also infra Chapter 6 (discussing more
fully the implications of the Kyoto Protocol for the control of international aviation emissions).
6 What Is International Aviation Law?

1.2.3. Aviation’s Exceptionalism

By examining the provisions of all of these specific and general treaties,
together with their historical and negotiating contexts, a unified (though not
always coherent) picture of aviation’s exceptionalism emerges. With due
respect to Judge Easterbrook, the treatment of aviation law as distinct – in its
international dimension no less than in its Lowenfeldian domestic dimen-
sion – is not just an academic indulgence. To illustrate: the near-universal
prohibition on States granting foreign airlines “cabotage rights,” that is, the
privilege to move passengers or cargo between two points within a single
domestic territory, makes little sense without reference to what the 1944
Convention on International Civil Aviation (the “Chicago Convention”)11
says about the practice. An international dimension also applies when it
comes to domestic laws limiting foreign investment in airlines. Those laws
are designed, in large part, to ensure that States comply with requirements in
their bilateral air services treaties that their airlines remain “substantially
owned and effectively controlled” by their own nationals as a prerequisite
for access to foreign markets.12

1.2.4. Influence of National Regimes on International Aviation Law

Just as States have national laws to regulate domestic aviation, so too do they
have rules governing air services to or from their respective territories. Is that
international aviation law as well? To the extent that States are engaging in
regulation of transnational activity, of course the answer is yes. Trawling
through the particulars of each national regime, however, would require
several volumes and has been usefully done elsewhere.13 Even so, a few

11
Convention on International Civil Aviation, opened for signature Dec. 7, 1944, 61 Stat. 1180, 15
U.N.T.S. 295 (entered into force Apr. 7, 1947) [hereinafter Chicago Convention]. The ninth
and latest edition of the quadrilingual text (English, French, Spanish, and Russian) is available
from the ICAO, Convention on International Civil Aviation, ICAO Doc. 7300/9 (9th ed. Dec.
3, 2010). As of March 1, 2013, ICAO reported 191 contracting States, making it one of the most
“universal” of modern treaties. See Status of Convention on International Civil Aviation
Signed at Chicago on 7 December 1944, http://www.icao.int/secretariat/legal/List%20of%
20Parties/Chicago_EN.pdf. As discussed infra Chapter 2, the Chicago Convention is the
centerpiece treaty of international aviation law and also the constitutive document for ICAO.
12
Cabotage and airline investment restrictions are discussed in detail infra Chapters 2, 3, and 4.
13
See, e.g., Aviation Law Reporter (1947–2013) (semi-monthly update on U.S. aviation law,
especially tort liability rulings); European Air Law (Elmar Giemulla et al. eds., 1992–2013)
(regularly updated loose-leaf compilation of EU legislation and decisions affecting air
transport).
7 1.3. A Quick Look at Legal Theory

powerful jurisdictions have had a substantial and quantifiable impact on the

evolution and direction of the general body of international aviation law. The
United States, which convened the negotiating conference for the Chicago
Convention in November 1944, later pioneered the international air transport
liberalization agenda known as “open skies,” provoked the modernization of
the international aircraft accident liability regime, and (through the Boeing
Company and the Federal Aviation Administration (FAA)) has until recently
been the sole decider of global best practices for safe and reliable aircraft
manufacture. The EU, now with twenty-eight Member States, legislated a
single EU aviation market in 1992. The single market combined the Member
States’ commercial airspaces into a unified sovereignty somewhat analogous to
U.S. federal airspace and thereby (albeit without prior intent on the part of the
legislators) caused the rise of the “low-cost” carrier phenomenon represented
by Ryanair, easyJet, and others.14 The EU has since externalized its commit-
ment to liberalization by pursuing an Open Aviation Area policy (OAA) (its
more muscular version of open skies) with several third countries, most
notably the United States.15 Where specific States (and subglobal organiza-
tions of States) have significantly shaped international aviation law, their
influence will be discussed throughout the book.

1.3. a quick look at legal theory

1.3.1. Dominance of Doctrinalism

This book is not wedded to any particular “theory” of law to explain (or
speculate) why international aviation law has developed as it has, but we
have chosen to refer to legal theory wherever it seems helpful to the reader’s
understanding. It must be said that neither international law in general nor
international aviation law in particular has been the object of much intro-
spective theorizing by the academy. Both fields have been dominated by
doctrinal experts skilled in explicating the content of the law.16 Most doctrinal
14
Low-cost carriers now represent 40% of intra-EU capacity, a figure projected to reach between
45% and 53% by 2020. See European Commission Communication, External Aviation Policy,
supra note 4, at 6.
15
See generally Developing the Agenda for the Community’s External Aviation Policy, COM
(2005) 79 final (Mar. 11, 2005). For more on the OAA, see infra Chapter 3.
16
This is not an unworthy pursuit given that the “teachings of the most highly qualified publicists
of the various nations” are deemed by the Statute of the International Court of Justice to be a
“subsidiary means for the determination of the rules of [international] law.” Statute of the
International Court of Justice art. 38(1)(d), Jun. 26, 1945 [hereinafter ICJ Statute], http://www.
icj-cij.org/documents/. See also Michael Peil, Scholarly Writings as a Source of Law: A Survey
of the Use of Doctrine by the International Court of Justice, 1 Cambridge J. Int’l & Comp. L.
8 What Is International Aviation Law?

scholars probably share the idealism of the late Columbia law professor Louis
Henkin, who famously observed that “almost all nations observe almost all
principles of international law and almost all of their obligations almost all of
the time.”17 A domestic tax lawyer would recoil from such a proposition if its
tenets were applied to the taxpaying citizenry of a State,18 but for international
lawyers it actually reflects a comforting assumption about the degree to which,
and the reasons why, States comply with rules of international law.19
Sometimes even doctrinalists, especially those working in general interna-
tional law, are tempted to cross over from observation to promotion and to
proselytize or advocate for the merits of their field and its usefulness to
humanity. After the “realist” school of international relations emerged during
the second half of the twentieth century,20 it was left to pioneering doctrinalists
such as Ian Brownlie to rebuff claims that international law was little more
than impotent rhetoric.21 Brownlie and others distilled a body of international
law doctrine that was assumed, more often than proven, to serve as an
exogenous constraint on State behavior. “Advocates” like Brownlie professed
their faith in international law as law, ambitiously hoping that more interna-
tional law or the “right” kind of international law (no matter how ill-defined)
would yield positive outcomes ranging from universal respect for human rights
to uninterrupted international peace and security.22

1.3.2. Issue of State Compliance

In the field of international aviation law, Henkin’s assessment is probably close
to the truth, although his statement lacks the power to explain a strong culture
of State compliance.23 Do States obey international aviation law because of a
sense of moral obligation, or because the efficient and secure coordination of

136 (2012). For a comment on the authoritativeness of the writings of publicists, see infra
note 74.
17
Louis Henkin, How Nations Behave 47 (2d ed. 1979).
18
A tax law professor who announced with satisfaction to students that “almost all citizens observe
almost all principles of tax law and almost all of their tax obligations almost all of the time”
might be accused of condoning tax evasion.
19
But see John Strawson, Introduction, in Law After Ground Zero xi, xix (John Strawson ed.,
2002) (arguing that, after the World Trade Center attacks, international law became a post-
Westphalian “contested arena”).
20
See generally Jack Donnelly, Realism and International Relations (2000).
21
See generally Ian Brownlie, Principles of Public International Law (7th ed. 2008).
22
See id.
23
See generally Harold Koh, Why Do Nations Obey International Law?, 106 Yale L.J. 2599, 2655
(1997) (explaining several schools of thinking on the methods by which international law binds
State actors).
9 1.3. A Quick Look at Legal Theory

transborder aviation operations simply cannot occur without it? As we will see,
defectors from international air transport law regimes, whether the governing
instruments are bilateral or multilateral, will suffer immediate economic and
other consequences that cannot easily be remedied. That said, there are
certain theoretical domains, beyond legal positivism (i.e., doctrinal law from
identifiable sources), that a contemporary analysis of international aviation
law should consider.

1.3.3. Use of Economic Analysis

Aviation law, at least in its domestic iteration, has long been the subject of
economic analysis.24 Starting with Michael Levine’s pioneering 1965 critique
of the now-defunct U.S. Civil Aeronautics Board’s approach to economic
regulation of the airline industry,25 economics added coherence to aviation
law scholarship during the 1970s and 1980s before eventually petering out.26
This is not to say that economists did not continue to comment on aviation,
only that the formal legal academy took little interest in attempting to make
economics its primary analytical tool once the era of U.S. regulation had
ended and eyes turned toward the international arena and the liberalization of
cross-border air transport services. Some aspects of international aviation law
always received scant attention from economists, particularly the private realm
governing air carrier liability, despite the obvious economic consequences
these rules have for the air transport industry as a whole.27 In this book, we
endeavor to include insights from the field of economics when they seem to
explain the emergence (and shortcomings) of international aviation law, but
we leave the strictly commercial aspects of airline economics to the side.28 In
Chapter 4, for instance, we look at the potential anticompetitive effects of
international airline alliances that have received immunity from national

24
The application of economic analysis to aviation law and policy emerged alongside the “Law &
Economics” (L & E) movement of the 1960s and 1970s. Despite significant resistance within
the legal academy, L & E remains the most successful interdisciplinary partnership between
academic law and another academic field. See generally Richard Posner, Economic
Analysis of Law (8th ed. 2011).
25
See Michael E. Levine, Is Regulation Necessary? California Air Transportation and National
Regulatory Policy, 74 Yale L.J. 1416 (1965).
26
See, e.g., Alfred E. Kahn, The Economics of Regulation: Principles and
Institutions (1981).
27
See infra Chapter 7.
28
For a useful introduction to commercial planning and business economics in the airline industry,
see Rigas Doganis, Flying Off Course: Airline Economics and Marketing (4th
ed. 2010).
10 What Is International Aviation Law?

antitrust rules. We do not, however, look closer at the complex revenue-

sharing and marketing agreements that sustain these alliances.

1.3.4. Rational Choice Theory

More recently, a new generation of international law scholars has taken its cue
from international relations theorists rather than from the orthodox, but
theoretically limited, thinking of the doctrinalists.29 Leveraging economic
analysis and other rational choice methodologies, the new scholarship
attempts to provide instrumental accounts of international law and compli-
ance without recourse to traditional (but vague) concepts such as “legality” or
“morality.”30 Rational choice adherents believe that in order to understand
international law, scholars and students alike must go “behind” it to track,
explain, and predict what they see as the largely self-interested behavior and
motivation of States. Given the unavoidable economic and other State-interest
implications of international aviation, rational choice theory opens up a richer
methodology to understand and critique international aviation law. For exam-
ple, the principle of “international Paretianism” – one of the conceptual
products of this new literature – holds that States will not enter into interna-
tional agreements unless they believe that they are made better off as a result of
the transaction.31 When applied to international aviation, the principle helps
to clarify why, for example, an aviation power like the United States has
eagerly entered open skies treaties that expand market access opportunities
for its airlines, but is hesitant to commit to a global aviation emissions
reduction agreement that would impose heavy financial burdens on those
same carriers.32 Moreover, as we will illustrate throughout the following

29
For an early example, see Kenneth W. Abbott, Modern International Relations Theory: A
Prospectus for International Lawyers, 14 Yale J. Int’l L. 335 (1989).
30
Or, at least, this is the explanation for the field offered by neo-rationalists Jack Goldsmith and
Eric Posner in The New International Law Scholarship, 34 Ga. J. Int’l L. 463 (2006). Other
scholars in the rational choice “mode” have attempted to offer more nuanced views that retain
some of the “old thinking” on international law. See, e.g., Joel P. Trachtman, Economic
Structure of International Law (2008). For further examples of the different applica-
tions of rational choice theory in the field of international law, see Economics of Public
International Law (Eric A. Posner ed., 2010); Symposium, Rational Choice and
International Law, 31 J. Legal Stud. S1 (2002).
31
See Eric A. Posner & David Weisbach, Climate Change Justice 6 (2010).
International Paretianism is derived from “Pareto efficiency” in normative economics, namely,
the proposition that “[a] change is said to be superior if it makes at least one person better off and
no one worse off.” Richard A. Posner, The Economics of Justice 54 (pbk. ed. 1983).
32
For further explanation, see Brian F. Havel & Gabriel S. Sanchez, Toward a Global Aviation
Emissions Agreement, 36 Harv. Envtl. L. Rev. 351, 372–75 (2012).
11 1.4. Public and Private International Aviation Law

chapters, rational choice can contribute also to a fuller understanding of other

international aviation legal phenomena, ranging from the shortcomings of the
Chicago Convention’s dispute settlement machinery33 to the loopholes that
emasculate the “aviation crimes” treaties.34

1.3.5. An Integrated Approach

Despite some of the perceived shortcomings of rational choice theory, notably
its alleged under-appreciation of the effects of government inertia and of the
higher motivations of individual government officials,35 our sense is that the
benefits of its insights into a highly mercantile business like international
aviation far outweigh the potential costs associated with its some of its simpli-
fications. At the same time, we strongly resist the temptation to dispense with
orthodox doctrinal analysis altogether. Only by understanding in the first place
what the law of international aviation actually is, for example, through close
inspection of its treaty provisions, can we or other scholars in this field begin to
test the extent to which rational choice analysis – or any kind of interpretive
theory – assists or hinders a more robust understanding of those rules.

1.4. public and private international aviation law

1.4.1. Public International Aviation Law

Most of the content of international aviation law is generated by public
international law, the legal system that governs the conduct of States and
intergovernmental organizations. Public international law determines, inter
alia, States’ control over the airspace above their territories, their duties and
powers to prevent and punish crimes aboard or against aircraft, and the level of
market access they provide to foreign air carriers. The sources of public
international law (reviewed in more detail below) include custom, treaties,
general principles of law,36 and, to a lesser extent, the decisions of interna-
tional adjudicatory bodies.37 These sources are sometimes referred to as
“hard” international law on the assumption that they intrinsically carry

33
See infra Chapter 3.
34
See infra Chapter 5.
35
See generally Michael P. Scharf & Paul R. Williams, Shaping Foreign Policy in
Times of Crisis (2010).
36
See Restatement (Third) of Foreign Relations Law of the United States § 102(1)
(1987) [hereinafter restatement (third)].
37
See id. § 103, cmt. B; see also ICJ Statute, supra note 16.
12 What Is International Aviation Law?

binding force. Hard law is sometimes contrasted with so-called soft law
international instruments, such as the U.N. Universal Declaration of Human
Rights, political statements, and agreements between States, that disclaim legal
effect. Soft law is generally not seen as having legal effect, although some
international jurists have argued that soft law still has normative force and
can be used to track State practice with respect to adducing customary interna-
tional law. Others have argued that the hard/soft distinction is irrelevant with
respect to agreements between States and that the choice of one instrument
over another other is more likely to be informed by the perceived importance of
the proposed agreement, its effect on the internal legal systems of the parties,
and the costs of compliance.38

1.4.2. More on Distinction Between Hard and Soft International

Aviation Law
While we will call attention to the hard law/soft law distinction at relevant
points throughout the book, readers should be aware that the distinction is in
practice sometimes more illusory than real in the realm of international
aviation. For instance, memoranda of understanding (MOUs) and diplomatic
notes, both of which are typically assumed by international jurists to be non-
legal instruments,39 are routinely used by States to update or amend terms in
their aviation trade treaties (commonly referred to as air services agreements
(ASAs)).40 Despite their alleged “sub-legality,” these instruments have proven
to be an expedient and durable means of coordinating the terms of aviation
trade between States, mainly because defection by one party from these terms
would surely induce defection by the other to their mutual detriment. It is
unclear what compliance gains would accrue from “legalizing” such soft law
exchanges, especially because States have recourse in any event to several
mechanisms to modify, suspend, or terminate their hard law commitments.

38
See Jack L. Goldsmith & Eric A. Posner, The Limits of International Law
81–106 (2005).
39
See Anthony Aust, Modern Treaty Law and Practice 20–22 (2000).
40
Article 83 of the Chicago Convention provides that any contracting State can “make arrangements
not inconsistent with the provisions [of the Convention],” that any such “arrangement” should be
registered with the ICAO Council, and that the Council “shall make it public as soon as possible.”
Chicago Convention, supra note 11, art. 83. The vast majority of contracting States “do not consider
[that] the requirement [in Article 83] extends to MOUs.” The Oxford Guide to Treaties 59
(Duncan B. Hollis ed., 2012) (noting also that ICAO’s registration rules include State/airline
arrangements, a few of which have been registered). Nevertheless, ICAO has criticized the practice
of States not filing air transport MOUs. See ICAO Manual, supra note 3, at 2.3–3 (emphasizing
that “[f]ull compliance with the requirement of the Chicago Convention to file all agreements
with ICAO could significantly increase badly needed transparency”).
13 1.4. Public and Private International Aviation Law

1.4.3. Private International Aviation Law

“Private international aviation law” is a handy but mildly misleading descrip-
tor. It is intended to convey the idea that when certain legally significant
transnational events – a catastrophic aircraft accident or the financing of a
Boeing aircraft, for example – are affected by instruments of public interna-
tional law (the Warsaw and Montreal conventions41 for international aircraft
accidents or the Cape Town Convention and Aircraft Protocol42 for certain
cross-border aircraft financing transactions), they are principally enforced or
activated by non-State entities operating within national legal systems. The
term is misleading because public international law instruments like the
Chicago Convention also affect the operating privileges and commercial
choices of non-State entities (where airlines are in private ownership, for
example). The distinction lies in the identity of the parties and the ultimate
forum for enforcement. Public international law instruments provide for
State-to-State cooperation or dispute resolution, sometimes through bilateral
treaties and sometimes at the multilateral level. In contrast, for “private”
international law instruments (a lawsuit against an airline manufacturer for
negligence, a creditor’s action against a debtor or third party based on a
registered security interest), the contracting States delegate enforcement to
those parties directly involved in the underlying event and to those national
courts that can claim jurisdiction under the relevant treaty.

1.4.4. Private International Aviation Law and Airline Liability

Thus, if a passenger on an Air Canada flight originating in Toronto and bound
for Chicago is involved in an onboard accident outside Detroit, the applicable
rules covering standard of liability, jurisdiction, and available defenses are not
found in Michigan law or in U.S. federal rules, but rather have appeared in a
series of international treaties and amending protocols that date as far back as
1929.43 Although domestic courts are ultimately charged with adjudicating

41
See Convention for the Unification of Certain Rules Relating to International Carriage by Air,
opened for signature Oct. 12, 1929, 49 Stat. 3000, 137 L.N.T.S. 11 (entered into force Feb. 13,
1933) [hereinafter Warsaw Convention]; Convention for the Unification of Certain Rules for
International Carriage by Air, opened for signature May 28, 1999, 2242 U.N.T.S. 350 (entered
into force Nov. 4, 2003) [hereinafter Montreal Convention].
42
Convention on International Interests in Mobile Equipment, Nov. 16, 2001, 2307 U.N.T.S. 285;
Protocol to the Convention on International Interests in Mobile Equipment on Matters
Specific to Aircraft Equipment, Nov. 16, 2001, S. Treaty Doc. No. 108–10, http://www.uni-
droit.org/english/conventions/mobile-equipment/aircraftprotocol.pdf.
43
See supra note 41.
14 What Is International Aviation Law?

international air carrier liability claims, they do so under the provisions of

international instruments. But those international agreements are not compre-
hensive. Jurisdiction-specific rules of procedure and evidence, along with can-
ons of interpretation, are present in domestic proceedings as well. So, too, are
jurisdiction-specific interpretations of key concepts that have been incorporated
into international treaties: for example, the meaning of the term “accident” that
appears in both the Warsaw and Montreal conventions.44 Over the course of
eight decades, the result has been contradictory rulings among courts in differ-
ent States and operating within different legal traditions. At times, this quagmire
of inconsistency has challenged fundamental conceptions of justice.

1.4.5. Terminological Confusion

There is considerable confusion about the use and meaning of the term
“private international law.” “Private international law” (generally the pre-
ferred term in civil law jurisdictions) is used interchangeably with “conflict
of laws” or “choice of law” (generally the preferred terms in common law
jurisdictions) to refer to the laws of a domestic legal system that determine
which of two or more applicable State legal systems will apply to a given
dispute between or among private parties where more than one legal system
might apply. The study of transnational commercial relations between private
parties and sometimes between private parties and sovereign States or State
entities (i.e., legal relations other than those between sovereign States) has
complicated the terminology. Some scholars have posited that those arrange-
ments are most appropriately defined as a subset of private international law,
distinguishable from the term’s traditional application to conflict of laws.45
Others have argued that legal instruments governing international transac-
tions between private commercial actors are best described as a diluted or
“privatized” version of “public international law” that in no way alters the
traditional “conflict of laws” meaning traditionally attributed to “private
international law.”46 Recognizing the differing viewpoints, in this book we

44
See infra Chapter 7, Part 7.9.
45
See John A. Spanogle, Jr., The Arrival of International Private Law, 25 Geo. Wash. J. Int’l
L. & Econ. 477 (1992) (using the phrase “international private law” to distinguish the new
subset of “private international law” from the traditional concepts associated with “conflict of
laws”).
46
Ralf Michaels, Public and Private International Law: German Views on Global Issues, 4 J.
Private Int’l L. 121 (2008) (observing that Germany has preserved a more rigorous demar-
cation between “public” and “private” international law than other States, many of which have
allowed the two concepts to merge, despite maintaining the pretense of separation in
Restatements and academia).
15 1.4. Public and Private International Aviation Law

have chosen (when useful) to house this area of law under the much less
contentious heading of “private transnational aviation law.”47

1.4.6. Gray Zones of Public Regulation and Private Effects

Switching between public and private lenses to scrutinize international aviation
law, while conceptually helpful, can also sometimes be distorting. The Warsaw/
Montreal treaty-based liability system, for example, shows how public interna-
tional aviation law and private transnational aviation law emerge from the same
public international law instrument. Were it not for those treaties, classical
“private” international aviation law would otherwise have developed organically
within the legal culture of each State: domestic courts would have taken
jurisdiction under locally based rules that apply to liability claims arising in
both domestic and international air transport. The conflict of laws rules of the
forum State (the lex loci delicti,48 for example) would then apply the law and
jurisprudence of another State, where appropriate.49 But that idea of separate
State liability rules has not shaped international aviation law.50 And, even in
areas where one would expect traditional private-party litigation (and traditional
“private” international law) to predominate, such as in passenger disputes
seeking restitution for cancellations, delays, or denied boarding, the United
States and EU have moved away from private resolution of these disputes to

47
Although private transnational aviation law today enjoys more coherence than at many points
in its history, new proposals for an updated international instrument covering third-party
surface damage arising from international air transport have again raised questions about the
desirability of incursions by international law into private liability cases. See infra Chapter 7,
Part 7.14.
48
Literally, “the law of the place of the harm.”
49
Indeed, as discussed supra in Section 1.4.5, private international law is often considered to be
no more than the application of a State’s conflict of laws (or choice of law) rules, and this
classical system is what applies internally to aircraft liability, for example, in the United States.
See Joseph Story, Commentaries on the Conflicts of the Law 10 (1834). But even
stronger models of “extraterritorialization” of national laws can be imagined. Some authors
have proposed that national courts apply an “amalgam” of domestic and foreign laws: see
generally Graeme B. Dinwoodie, A New Copyright Order: Why National Courts Should Create
Global Norms, 149 U. Pa. L. Rev. 471 (2000). The Court of Justice of the European Union
seems recently to have endorsed the same kind of creativity. See Joined Cases C-509/09 &
C-161/10, eDate Advertising v. X and Olivier Martinez v. MGN Limited (25 Oct. 2011), http://
curia.europa.eu/juris/liste.jsf?language=en&num=C-509/09. Conflict of laws rules play a very
minor part in the Warsaw/Montreal liability system, doing little more than recognizing that the
procedural rules of the adjudicating (forum) court must govern. The system’s substantive legal
rules all come from the conventions.
50
See Goedhuis, supra note 3, at 31 (noting that Warsaw Convention drafters rejected common
rules regulating State conflict of laws because of difficulty of reconciling “different national
legislation[]”).
16 What Is International Aviation Law?

adopting so-called passenger rights regulations.51 Similarly, the EU’s inclusion of

the airline industry in its carbon emissions trading scheme (ETS) extends a
system of public regulation beyond the sovereign borders of the legislator (the
EU) and affects private actors (EU and non-EU airlines and their passengers and
shippers).52 Neither the U.S. nor the EU passenger rights legislation, nor indeed
the EU ETS, would be classified conventionally as an instrument of public
international law. Yet each is an example of a system of public regulation
(whether national or regional) that has predictable effects on the private conduct
of international air transport and on the passengers and shippers who use it.
Here, enforcement is by a public authority rather than by non-State private
entities, but it is ultimately the latter who are affected. This arrangement is not
dissimilar to the public/private arrangement that public international law estab-
lishes (through bilateral treaties) when States negotiate with foreign govern-
ments for market access and other economic privileges for their airlines. If States
allowed airlines to conduct these kinds of negotiations directly with each other
across borders, again we would have some difficulty in describing such a system
as one that is definitively part of public international aviation law or private
transnational aviation law.53

1.5. the sources of international aviation law

1.5.1. Traditional Sources of Public International Law

As we have seen, some international aviation law rules (especially those
affecting passenger and cargo liability and aircraft financing transactions)
are actually the result of interpretive and adjudicative activity within national
jurisdictions, but traditional public international law sources such as custom
and treaties are overwhelmingly dominant in creating what this book regards
as the modern body of international aviation law. Readers already familiar
with the sources of public international law may still wish to examine the
sections below to develop a better understanding of how international aviation
law relies upon those sources. Unlike in other areas of international law,
notably human rights, the role of custom in shaping the modern regulatory
regime for international aviation can be assessed today as mainly historical.

51
Note that the Warsaw and Montreal conventions, supra note 41, do have provisions on delays,
but these are mostly not practicable for the average traveler. See infra Chapter 7, Section 7.12.7.
52
See infra Chapter 6 (discussing the ETS).
53
In the United States, such behavior would run afoul of the Logan Act, which forbids U.S.
citizens from negotiating with foreign governments absent official authorization. See Logan
Act, 1 Stat. 613 (1799) (codified as amended at 18 U.S.C. § 953 (2006)).
17 1.5. The Sources of International Aviation Law

Just as public international law sources dominate over national sources of

international aviation law, therefore, treaties dominate over custom when we
assess the rule-generating capacity of public international law sources in
modern international aviation law.

1.5.2. Custom
“Customary international law results from a general and consistent practice of
[S]tates followed by them from a sense of legal obligation.”54 This belief held
by States that they are acting out of an obligation imposed by international
law, a belief commonly referred to by its Latin term opinio juris,55 is notori-
ously difficult to infer and thus lies at the heart of many disputes over whether
a particular practice has indeed crystallized as customary international law.56
Further problems arise when determining the time horizon by which to
determine State practice. Over a long enough expanse of time, few behaviors
of States (and indeed, the existences of particular States themselves57) are
likely to prove enduring. Changing economic, political, and social circum-
stances all contribute to the decision of States to act one way or another. Even
so, some practices of States have more “stickiness” as custom than others.58 For
instance, the principle of State sovereignty, that is, a State’s exclusive and
independent control over its geographic territory, including over those persons
who abide within that territory, has been recognized (with caveats) among
Western States since at least the Treaty of Westphalia (1648) and by the world
community since the establishment of the United Nations (U.N.) in 1945.
Although modern sovereignty is increasingly defined through the perfectly
rational paradox of its capacity to be given away,59 that it exists in the first place

54
Restatement (Third), supra note 36, § 102(2).
55
Literally, the “sense of legal obligation.”
56
Unlike treaty-based norms, for example, custom is neither formally documented nor officially
reported. Indeed, it is unsettlingly dependent for its articulation on the writings of international
law scholars. What do these scholars (and the international lawyers who rely on them) look at to
make their determinations? The catalog includes official government statements at interna-
tional conferences, diplomatic exchanges, formal instructions to diplomatic agents, national
and international court decisions, legislative measures, and even government press releases.
See Brownlie, supra note 21, at 6.
57
See generally Norman Davies, Vanished Kingdoms: The Rise and Fall of States
and Nations (2012).
58
See Koh, supra note 23, at 2655.
59
See Brian F. Havel, The Constitution in an Era of Supranational Adjudication, 78 N.C.
L. Rev. 257, 327 (2000). An example of this rational paradox is the choice of a State to refrain
from exercising its sovereign right to exclude foreign air carriers from its airspace by granting
market access privileges in exchange for symmetrical rights for its own airlines to serve other
State territories.
18 What Is International Aviation Law?

and is generally respected lends credence to the view that sovereignty is

entrenched as customary international law. Other principles, such as the
limit of territorial sovereignty over coastal waters and the duty of States to
refrain from attacking and capturing another State’s fishing vessels, are more
ambiguous and subject to fluctuating State practices.60

1.5.3. Role of Custom in International Aviation Law

Customary international law has played a modest role in the development of
international aviation law. Presumably, the principle of airspace sovereignty –
captured in the medieval maxim cuis est solum, eius est usque ad caelum et ad
inferos (“for whomever owns the soil, it is theirs up to the sky and down to the
depths”)61 – is part of customary international law in that it represents a logical
extension of the aforementioned principle of State sovereignty. Nevertheless,
its fixed position in multilateral aviation agreements (dating back to the so-
called Paris Convention of 191962) obviates the need to rely on custom to assert
that this doctrine actually exists in international law. Some might argue that
the “nationality” rule in international aviation law, whereby airlines must be
owned and controlled by citizens of their home States, is tantamount to a
principle of custom. Although there are few “persistent objectors,”63 the rule’s
crystallization as custom has been undermined by recent government initia-
tives to destabilize its operation (which include, most notably, its elimination
within the twenty-eight-member EU).64 Finally, piracy is included among a
small list of nonderogable customary international law norms known as jus
cogens (“compelling law”).65 Although piracy would seem to cover injurious
attacks against air transport such as hijacking and sabotage, resistance to
extending the piracy prohibition beyond maritime transport prompted a series
of multilateral aviation crimes treaties beginning in the 1960s.66

60
See Goldsmith & Posner, supra note 38, at 59–78 (tracking changes in State practice in
these areas over time and offering a rational choice explanation of those changes).
61
See Herbert David Klein, Cujus Est Solum Ejus Est . . . Quousque Tandem?, 26 J. Air L. &
Com. 237, 238–43 (1959).
62
See Convention Relating to the Regulation of Aerial Navigation art. 1, opened for signature Oct.
13, 1919, 11 L.N.T.S. 173, reprinted in 30–1 Annals Air & Space L. 5 (2005).
63
If a State had persistently objected to the nationality rule’s status as custom, that State
presumably would not be bound by it.
64
See Brian F. Havel & Gabriel S. Sanchez, The Emerging Lex Aviatica, 42 Geo. J. Int’l L. 639
(2011) (discussing this normative shift). See also infra Chapter 4, Part 4.4 (discussing recent
erosion of the nationality rule).
65
The list is contested, but at the beginning of the 21st century it likely also includes genocide and
slavery, although not inarguably torture. See Brownlie, supra note 21, at 510–11.
66
See infra Chapter 5.
19 1.5. The Sources of International Aviation Law

1.5.4. Treaties
A treaty, as defined by the 1969 Vienna Convention on the Law of Treaties, is
“an international agreement concluded between States in written form and
governed by international law, whether embodied in a single instrument or in
two or more related instruments and whatever its particular designation[.]”67 It
may seem circular that it takes a treaty to define a treaty, but the Vienna
Convention is presumed to express what had become the customary interna-
tional law rules governing the definition and interpretation of treaties. That is
why the Vienna Convention’s canons of treaty construction are generally
taken as valid for all extant international legal agreements even though the
Convention disclaims application to treaties ratified before it entered into
force or to treaties concluded with one or more States that are not party to the
Convention (including the United States68). While treaties share equivalent
status to custom as a source of international law, in practice treaties are
normatively superior in most instances because of linguistic concision and a
capacity to express nuances, caveats, idiosyncrasies, exceptions, and particu-
larities that the invariably general principles derived from custom cannot.
Because the States that become parties to a given treaty likely had some input
into the drafting of its terms, the instrument presumably expresses the interests
of its adherents and therefore may be perceived as more legitimate than
custom by the parties’ internal political cultures. But this does not mean that
treaties are always an ideal means to give fixity to inter-State collaboration.
Broadly speaking, a treaty’s effectiveness vis-à-vis a given end is inversely
related to the number of its State parties. Whereas a bilateral treaty will
often maximize concessions and opportunities between the two parties, multi-
lateral agreements tend to suffer from a lowest common dominator effect that
“waters down” key provisions in order to make the treaty palatable to the
greatest number of potential parties.

1.5.5. Role of Treaties in International Aviation Law

It should come as no surprise, then, that treaties are the largest and most
important source of international aviation law. The pivotal instrument is the
1944 Convention on International Civil Aviation69 (known popularly as the

67
Vienna Convention on the Law of Treaties art. 1(a), opened for signature May 23, 1969, 1155
U.N.T.S. 331.
68
The United States does recognize, however, that the Convention states customary interna-
tional law. See, e.g., Fujitsu Ltd. v. Federal Express Corp., 247 F.3d 423 (2d Cir. 2001).
69
See Chicago Convention, supra note 11.
20 What Is International Aviation Law?

“Chicago Convention”). The Convention has been ratified by more than 190
States and contains universal rules covering airspace sovereignty, aircraft
registration and airworthiness, navigation, and global Standards and
Recommended Practices (SARPs) for technical and safety harmonization.
The Convention also creates a U.N. intergovernmental organ, ICAO, to foster
technical cooperation in the international aviation industry. The Convention,
however, does not organize or authorize the distribution and exchange of air
traffic rights among States; that function is discharged bilaterally by a network
(some have called it a labyrinth) of more than 4,000 ASAs. Nor is the Chicago
Convention the only multilateral treaty that forms part of international avia-
tion law. Multilateral agreements, some negotiated under the auspices of
ICAO, cover areas as diverse as aviation security, aircraft financing, and the
liability of air carriers to their passengers and cargo shippers. What may be
more surprising is that these complex international agreements, which have
almost always engendered significant political differences in their forma-
tion,70 have yielded only a small quantum of inter-State legal disputes over
the past sixty-plus years. From the perspective of rational choice, this relative
legal quiescence may be owed to a perception of aviation’s utility in a
globalized world and a concomitant willingness to engage in political collab-
oration on issues affecting the cross-border movement of air transport.

1.5.6. General Principles of Law

Another recognized (albeit secondary) source of international law are “general
principles common to the major legal systems of the world.”71 Recourse to
general principles “may be important when there has not been practice by
States sufficient to give the particular principle status as customary law and the
principle has not been legislated by general international agreement.”72 It is
not altogether clear, however, what criteria ought to apply in order to ascertain
these principles. International law scholars and commentators generally hold
to the view that conceptions of fairness and justice that are universally present
in most of the world’s legal systems (e.g., good faith, res judicata, audi alteram
partem, impartiality of judges) are general principles, though this may be

70
Matthew Hoffman has described lawmaking through grandiose global agreements like
the Chicago Convention, involving the majority of the world’s nations, as “megamultilateral-
ism.” But he also believes that the era of megamultilateral treaty initiatives has passed. See
generally Matthew J. Hoffmann, Climate Governance at the Crossroads:
Experimenting with a Global Response after Kyoto (2011).
71
Restatement (third), supra note 36, § 102(1)(c). See also ICJ Statute, supra note 16, art. 38(c).
72
Restatement (third), supra note 36, § 102, cmt. l.
21 1.5. The Sources of International Aviation Law

reflective of their liberal, Western democratic biases rather than a metaphys-

ical insight into the nature of law. Often the discussion of general principles of
law is limited to procedural matters within the context of international tribu-
nals, although most international agreements that create such mechanisms
(such as the Dispute Settlement Understanding of the World Trade
Organization (WTO)73) provide a quite sophisticated set of procedural rules
for their adjudicatory bodies to follow. Because formal dispute settlement
plays only a minor role in international aviation law, divining the content of
general principles is not a topic of importance for this field.

1.5.7. Judicial Decisions

The Statute of the International Court of Justice (ICJ) describes judicial
decisions as a “subsidiary means for the determination of rules of [interna-
tional] law.”74 The rapid expansion in transnational adjudicatory bodies since
the close of World War II has led to a massive body of public international law
jurisprudence, although not a great deal of this case law has import beyond the
ruling tribunal. One possible exception might be made for the opinions of the
ICJ itself (which is sometimes dubbed “The World Court”), although some
commentators have perceived a marked decline in the Court’s caseload and
reputation in recent decades that may have impaired the persuasive force of its
judgments.75 In international aviation, a number of cases have been submitted
to the ICJ – especially during the Cold War – but, for reasons discussed in
Chapter 2, the Court has seldom issued a definitive ruling in aviation

73
See generally Dispute Settlement Understanding, Ann. 2 to the WTO Agreement, in Final Act
Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, opened for
signature Apr. 15, 1994, 33 I.L.M. 1226.
74
See ICJ Statute, supra note 16, art. 38(1)(d). Article 38 also lists “the teachings of the most highly
qualified publicists of the various nations” as another subsidiary means. See supra note 16.
Although some have attempted to aggressively expand this principle to mean that the opinions
of the “qualified publicists” (i.e., international law scholars) themselves can serve as an
independent source of international law, they do so in the face of long-held understandings
concerning the limits of scholarly opinion in shaping international legal rules. Cf. Paquete
Habana, 175 U.S. 677, 700 (1900) (“[T]he works of jurists and commentators . . . are resorted to
by judicial tribunals, not for the speculations of their authors concerning what the law ought to
be, but for trustworthy evidence of what the law really is.”).
75
See Eric Posner, The Decline of the International Court of Justice, in International
Conflict Resolution 111, 111 (2006) (analyzing the decline of the Court’s caseload due to
inconsistent application of international law and judicial bias); see also generally Eric Posner,
The International Court of Justice: Voting and Usage Statistics, 99 Am. Soc’y Int’l L. Proc.
130 (2005); Eric Posner & Miguel F. P. de Figueiredo, Is the International Court of Justice
Biased?, 34 J. Legal Stud. 599 (2005).
22 What Is International Aviation Law?

matters.76 Similarly, the WTO’s dispute settlement body – which has juris-
diction over the few discrete aspects of trade in international air services in the
WTO agreements77 – has never adjudicated any dispute relating to that
circumscribed subject matter jurisdiction.

1.5.8. ICAO Council and Dispute Settlement

The closest thing in international aviation law to a widely recognized dispute
settlement body is the ICAO Council created under the Chicago Convention.
Even so, States rarely submit disputes to ICAO, and the Organization never
reached a legally binding decision in those few disputes that have been sub-
mitted. In November 2011, however, seventeen Member States submitted a
complaint to the ICAO Council challenging the EU’s proposed extension of
its emissions trading scheme to non-EU carriers using EU airports.78 The fact
that ICAO is evidently structured as a deliberative body may explain why States
have been more reluctant to initiate ICAO legal challenges than they have been,
for example, in exploiting the consciously adjudicatory WTO dispute settlement
body or the narrower International Tribunal for the Law of the Sea.79

1.5.9. Judicial Enforcement of Private Transnational Aviation Law

As already noted, international aviation law also has a significant “private”
dimension, including the international rules on airline liability and (to a lesser
extent) aircraft finance, that is adjudicated within national court systems.
Accordingly, although these national decisions might not technically be part of
international aviation law properly so-called, they nevertheless remain the only
forum in which public international law treaties that create private transnational
rights and obligations, in particular the Warsaw and Montreal conventions and
the Cape Town Convention and Protocol, are judicially interpreted and applied.
In examining decisions of national courts concerning liability issues, for

76
See infra Chapter 2, Part 2.6. A notable exception is the extradition dispute between Libya and
the United States following the 1988 Lockerbie bombing. See Questions of Interpretation and
Application of the 1971 Montreal Convention Arising from the Aerial Incident at Lockerbie
(Libya v. United States), Provisional Measures, 1992 I.C.J. 114, P 42 (Apr. 14, 1992).
77
See infra Chapter 2.
78
This significant dispute at the intersection of the laws affecting the environment and interna-
tional aviation is considered in more detail infra in Chapter 6.
79
See United Nations Convention on the Law of the Sea, opened for signature Dec. 10, 1982, 21
I.L.M. 1261. The UNCLOS Tribunal is narrower in the sense that it is a purely adjudicative
body dedicated to the settlement of disputes arising under the Convention on the Law of the
Sea, whereas the ICAO Council performs numerous other functions.
23 1.6. The Role of International (and a Few National) Organizations

example, we will note those courts’ willingness (or lack of it) to recognize and
apply decisions by foreign domestic tribunals. This question is particularly
challenging when one realizes that, in resolving conflicts between private per-
sons, courts are looking at the same treaty terms within different legal traditions,
such as Anglo-American common law and French Napoleonic civil law. To the
extent that a local court will look to decisions of foreign courts for interpretive
guidance, it is said to be acting on principles of international comity.80

1.6. the role of international (and a few national)

organizations

1.6.1. IGOs, NGOs, and “Super” National Bodies

International (and a small number of national) organizations feature promi-
nently in the development of both public and private international aviation law.
They include international governmental organizations (IGOs) and interna-
tional nongovernmental organizations (INGOs, though the “I” is typically drop-
ped and we will follow that usage), as well as powerful national governmental
authorities and trade associations (which we will call “super” national organiza-
tions) whose influence stretches well beyond their home country borders. Two
prominent IGOs, the EU and U.N. (the latter through ICAO), have served as the
most prolific and influential originators of modern international aviation law.
NGOs like the International Air Transport Association (IATA), the Association of
European Airlines (AEA), the International Air Carrier Association (IACA), the
African Airlines Association (AFRAA), the Association of Asia Pacific Airlines
(AAPA), the Latin American and Caribbean Air Transport Association (ALTA),
the International Air Cargo Association (IACA), and the Air Transport Action
Group (ATAG) have not only provided technical support for the industry but
have also pioneered new ideas in transnational commercial regulation.81 “Super”
national organizations like the U.S. Federal Aviation Administration (FAA) and
the U.S. airline trade association Airlines for America (A4A)82 have been influ-
encing the shape of law and policy not only within their significant domestic
spheres but throughout the international air transport system.83

80
See Hilton v. Guyot, 159 U.S. 113, 164 (1895).
81
For a more complete listing of aviation-related NGOs, see ICAO Manual, supra note 3, at
3.9–1 to 3.9–3.
82
A4A was known until December 2011 as the “Air Transport Association.”
83
The FAA sets U.S. aviation policy and is therefore naturally influential in the formation of
global aviation policy. A striking example of the agency’s reach was its establishment of the first
national air safety oversight program for foreign airlines in 1991 (the precursor to similar EU
24 What Is International Aviation Law?

1.6.2. IGOs: ICAO and the EU

A critical taxonomic distinction can be drawn between IGOs and NGOs – the
former have explicit power to adopt, through the consent of their members,
binding international legal rules to govern aspects of international air transport.
ICAO, for example, is empowered by its founding instrument, the Chicago
Convention, to propose and negotiate not only amendments to that
Convention, but also additional treaties covering aspects of international air
transport not thematically present in the Convention.84 ICAO also uses its treaty-
based authority regularly to monitor and update the Convention’s annexes
containing SARPs for technical and safety harmonization among the
Member States.85 And although possibly outside its remit, the Organization
has not been shy about convening air services trade conferences in an effort
to expedite aviation liberalization.86 The EU is even more agile in its
lawmaking capacity. As a “supranational” organization,87 its rules (adopted
by EU institutions) are directly binding in the jurisdictions of its twenty-
eight Member States.88 The EU has created within its borders a single
aviation market that is a commercial replica of the federalized airspace of

and ICAO programs): see infra Chapter 5, Part 5.3. The FAA’s safety program expanded
understandings of international aviation law to recognize that such external monitoring of
non-national airlines could be consistent with the principle of airspace sovereignty and with the
Chicago Convention regime.
84
See Chicago Convention, supra note 11, pt. II (providing the rules and organizational structure
of ICAO). Although the power to propose and negotiate treaties is not made explicit in the
Chicago Convention, it can be inferred from a broad reading of Articles 44 (“Objectives” of
ICAO) and 65 (“Arrangements with other international bodies”). See Chicago Convention,
supra note 11, arts. 44 & 65. ICAO has been deeply involved in the creation of multilateral
aviation crimes and air carrier liability treaties such as the Convention on Offences and Certain
Other Acts Committed On Board Aircraft (Tokyo Convention) and the Convention for the
Unification of Certain Rules for International Carriage by Air (Montreal Convention). See
infra Chapters 5 and 7.
85
The legal fog that has enveloped SARPs is discussed infra Chapter 2, Part 2.6.
86
See ICAO, Air Services Negotiation Conference, http://legacy.icao.int/ican2011/. ICAO does
not seem to have set any a priori limits to the topics for which it will provide a negotiating
platform or become a treaty sponsor. For example, ICAO enrolled as the “Supervisory
Authority” for the relatively arcane Cape Town Convention, establishing an international
registry of aircraft security interests, despite the Organization’s initial concern that the treaty
was not a matter for public international aviation law. See infra Chapter 8, Part 8.8.
87
See Wayne Sandholtz & Alec Stone Sweet, European Integration and
Supranational Governance 1 (1998) (portraying the EU as a “supranational polity” that
creates rules fully binding on its Member States within its domains of policy).
88
Note that EU practice insists on capitalizing both “Member” and “State.” See Treaty on the
Functioning of the European Union art. 2, Sept. 5, 2008, 2008 O.J. (C 115) 47, reprinted in
consolidated form at 2010 O.J. (C 83) 47. Croatia signed a Treaty of Accession to the EU on
December 9, 2011, and became the 28th EU Member State on July 1, 2013.
25 1.6. The Role of International (and a Few National) Organizations

the United States.89 Eventually, it is likely that the EU will take autonomous
responsibility for all international aviation relations with non-Members, but
in the meantime it has already acted on behalf of all the Member States to
negotiate a number of far-reaching ASAs with selected partners.90 Additionally,
the CJEU – which is responsible for adjudicating disputes arising under EU
law – has handed down a number of landmark rulings that have dramatically
influenced the direction and content of EU aviation law.91

1.6.3. Other IGOs

Other IGOs play a less direct role in injecting normative content into interna-
tional aviation law, but are nonetheless influential within their respective
spheres. The WTO, through its General Agreement on Trade in Services,
technically has oversight over a handful of small subsectors of aviation-related
services (repair and maintenance, sales, and ground-handling92), but remains
excluded from applying its trade disciplines to “hard” economic areas such as
airline market access and cross-border investment.93 Despite these restraints,
the WTO is nonetheless making a more meaningful contribution to the
development of international aviation law through regular studies of trade in
global air services and an interactive online ASA database guaranteed to
fascinate aviation policy wonks.94 The Organization for Economic Co-
operation and Development (OECD) – an intergovernmental policy forum
dedicated to liberalizing global trade95 – has extensively analyzed the

89
Unlike in the United States, however, air traffic management within the EU is not yet
“federalized.”
90
Although many legal sources still refer to the “European Community” when discussing the
EU’s legal personality, the distinction was rendered obsolete following the Dec. 1, 2009
implementation of the Treaty of Lisbon, 2007 O.J. (C 306) 1, which affirmed the existence of
a single juridico-political entity: the European Union. See generally Consolidated Version of
the Treaty on the Functioning of the European Union, 2008 O.J. (C 115) 47. Throughout the
course of the book, we will rely solely on the term “European Union” (or its EU abbreviation)
and red-flag any substantive or cosmetic changes the Lisbon Treaty made to preexisting
legislation or to CJEU case law.
91
See infra Part 3.5.
92
In reality, these subsectors await further inter-State agreements, and the practical effect of the
WTO’s oversight has been minimal. See infra Chapter 3, Part 3.6.
93
See General Agreement on Trade in Services [GATS], Annex on Air Transport Services,
Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, Legal
Instruments – Results of the Uruguay Round, opened for signature Apr. 15, 1994, 1869 U.N.
T.S. 183, reprinted in 33 I.L.M. 1125, 1167.
94
See WTO, Air Services Agreements Projector, http://www.wto.org/asap/index.html.
95
The OECD is often labeled a “rich States’ club” by virtue of its primarily American and
Western European membership, but ironically it originated as the implementing organ for the
26 What Is International Aviation Law?

regulatory patterns of international aviation, and has been especially vocal in

advocating liberalization of air cargo services.96 In the Asia-Pacific region, the
ten-member Association of Southeast Asian Nations (ASEAN) has been devel-
oping a series of treaties and protocols intended to create a free-trade zone for
intraregional aviation services that is in part modeled on the EU template,
although the project is deliberately incremental and is not expected to be
complete before 2015.97 Similarly, the African Union (AU) has attempted to
foster air services liberalization on the African continent through the so-called
Yamoussoukro Declaration, with mixed success.98

1.6.4. NGOs as Sources of “Law-Generating” Activity

It would be wrong to imagine, however, that only organizations comprised of
governments and their representatives are capable of developing (and enforc-
ing) normative standards for the international aviation industry. If law is
considered in its broadest sense to include alternative or concurrent sites of
law-generating (or at least “quasi” law-generating) activity,99 then such behav-
ior can also be identified among NGOs and even among consortia of private
airlines. Indeed, there is a spirited debate among academics as to the norma-
tive power of these sites, and international aviation offers a number of telling
examples supporting the idea that private actors can choose to self-regulate in
ways that emulate the authority of a State-backed legal system.100 To some
extent, IATA, the global airline industry’s most visible representative

U.S.-funded Marshall Plan to revive Europe’s shattered economies after World War II. See
generally Richard Woodward, The Organization for Economic Co-Operation
and Development (2009). The OECD is self-conscious about its “rich” and geographically
narrow reputation and has latterly added States from outside its dominant hemisphere, such as
Chile. See Press Release, OECD, Chile Signs Up as First OECD Member in South America
(Jan. 11, 2010).
96
See, e.g., OECD, Principles for the Liberalisation of Air Cargo (2000), http://www.
oecd.org/dataoecd/7/9/1806687.pdf.
97
See Alan Khee-Jin Tan, The ASEAN Multilateral Agreement on Air Services: En Route to Open
Skies?, 16 J. Air Transp. Mgmt. 289 (2010).
98
See Charles E. Schlumberger, Open Skies for Africa: Implementing the
Yamoussoukro Decision (2010). For other examples of regional multilateral agreements,
see ICAO Manual, supra note 1, at 3.2–5 to 3.2–6.
99
See Roderick Macdonald, Unitary Law Re-form, Pluralistic Law Re-Substance: Illuminating
Legal Change, 67 La. L. Rev. 1113, 1140 (2007).
100
The legal literature abounds with speculation as to the emergence of a modern lex mercatoria
(“law merchant”) resembling the autonomous system of legal norms and courts evolved by
medieval merchants plying their trade across the European continent. While dissenters argue
that a modern lex mercatoria is simply a fancy reworking of the law of contracts, and therefore
ultimately dependent on the State for its authority, the more impressive point is surely that
private actors use their party autonomy to bind themselves into specific (and mutually
27 1.6. The Role of International (and a Few National) Organizations

organization,101 has at various times in its history provided a normative infra-

structure for the pricing and routing of international air services that had at
least tacit support from governments which saw no alternative to its ratemak-
ing and interlining functions.102 IATA has also straddled the lawmaking divide
between IGOs and NGOs by brokering agreements between its member
airlines and the U.S. Government to waive liability caps once found in
international treaty law.103 With a self-proclaimed tripartite mission to “repre-
sent, lead, and serve the airline industry,” the Association has evidently
developed a unique relationship with world governments that has allowed it
to operate in significant ways as a site for autonomous regulatory activity.104
Sometimes, too, aviation NGOs have tried to occupy a space where they were
clearly not acting normatively but which allowed them to nudge government
officials into fundamentally rethinking how international aviation should be
regulated. The most prominent example of this kind of influence was the
AEA’s policy paper in 1999 calling for a single U.S./EU airspace. The paper set
the early negotiating agenda for what became the game-changing 2007 U.S./
EU Air Transport Agreement.105 Other aviation and nonaviation NGOs that
continue to make important contributions to regulatory policy for interna-
tional aviation include the Airports Council International, the Air Line Pilots
Association, the International Chamber of Commerce, and the Transatlantic
Business Dialogue. We conclude by noting the work of the World Economic
Forum, host organization of the famous Davos conference, which has pro-
moted several important initiatives in international aviation policy (including
a biofuel response to reducing aviation carbon emissions and a so-called smart
visa to encourage tourist-driven air travel) through its Global Agenda Council
on New Models of Travel and Tourism.106

enforceable) commercial relations across entire swathes of private enterprise. The phenomena
of code-sharing (see infra Chapter 4, Part 4.6) and global airline alliances (see infra Chapter 4,
Part 4.5) have been mentioned as representative examples of a modern lex mercatoria. See
Havel & Sanchez, supra note 64, at 659–61.
101
See Brian F. Havel & Gabriel S. Sanchez, International Air Transport Association, in
Handbook of Transnational Economic Governance Regimes 755, 755–64
(Christian Tietje & Alan Brouder eds., 2009).
102
See Brian F. Havel, In Search of Open Skies 120–21 (1997).
103
See infra Chapter 7, Part 7.5.
104
More recently, IATA persuaded a number of governments to initial an IATA-generated docu-
ment that arguably committed them to ignoring their own treaty rules on ownership and
control of foreign airlines with any other State that agreed to do so on a reciprocal basis. See
infra Chapter 4, Section 4.4.8.
105
See AEA, Towards a Transatlantic Common Aviation Area: AEA Policy
Statement (1999).
106
See World Econ. F., Global Agenda Council on New Models of Travel & Tourism 2012, http://
www.weforum.org/content/global-agenda-council-new-models-travel-tourism-2012.
 2

The Foundations of Public International Aviation Law

2.1. introduction to the chicago convention

2.1.1. Background to the Chicago Convention

The cornerstone instrument of public international aviation law is the 1944
Convention on International Civil Aviation, popularly known as the “Chicago
Convention” in honor of its birthplace.1 Even as the Second World War was
reaching its fiery climax in the European and Asian theaters, United States
(U.S.) President Franklin D. Roosevelt – responding to a British initiative –
brought fifty-four Allied and neutral States to Chicago during the winter
months of 1944 with the goal of developing an ordering mechanism for the
world’s airspace and the nascent international air transport industry.2 The
United States hoped that it could steer the negotiations toward affirming a
(relatively) free market in aviation services, one which would give the U.S.
airline industry – at the time the most developed and technologically sophis-
ticated in the world – the opportunity to dominate the global marketplace.
That ambition was not to be realized. Instead, the Convention’s scope was
curtailed to solve technical coordination problems relating to, among other
things, aircraft registry, air traffic management, cross-border recognition of
licensing certificates, and the kinds of taxes and charges that could be imposed
on international air services.

1
Convention on International Civil Aviation, opened for signature Dec. 7, 1944, 61 Stat. 1180, 15
U.N.T.S. 295 (entered into force Apr. 4, 1947) [hereinafter Chicago Convention]. Popularizing
treaties through use of the names of the cities in which they were signed is a common practice
in international aviation law, as we will see in the course of this book. But the name of the city
may not appear in the treaty itself (cf. the Cape Town Convention discussed in Chapter 8).
2
Alone among the Allied Powers, Saudi Arabia and the USSR did not participate in the
Conference. It is also worth noting that 72% of the current Convention signatories were not
present in Chicago in 1944.

28
 2.1. Introduction to the Chicago Convention 29

2.1.2. States, Not Airlines, Define Chicago’s Commercial Environment

Where the Convention does directly implicate economic rights for air carriers,
it is typically in an illiberal key. States, not their airlines, are vested with the
right to define international aviation’s commercial environment. That fact is
not terribly surprising if one recalls the Chicago Convention’s historical
context. Memories of the 1929 worldwide economic collapse were still fresh,
and economic advisors on both sides of the Atlantic were flirting with the
supposed benefits of a Soviet-style command economy.3 Even the United
States, eventually a bastion of neoliberalism and globalization, tempered the
market freedoms of its industrial sectors in the late nineteenth century when
Congress passed the Sherman Antitrust Act4 and established the Interstate
Commerce Commission.5 That regulatory impulse spread to the privately
owned U.S. air transport industry, which since 1938 had been placed under
the economic supervision of a public agency, the now-defunct Civil
Aeronautics Board (CAB).6 European States, on the other hand, opted to
couple regulation of their major airlines with outright public ownership.

2.1.3. Overview of Topics

In this chapter we detail the Chicago Convention’s most salient features,
including its provisions for the establishment and operation of the ICAO.
Throughout, we will also note how the Convention is augmented by
national aviation regimes, particularly those of the United States and
European Union (EU). We will also delve further into how modern public
international aviation law developed in the aftermath of the ideological
clashes at the conference that framed the Chicago Convention. By giving
context to international aviation law’s foundational treaty, we seek to
provide a better understanding of its compromises and limitations. The
same holds true for ICAO. Despite its endurance as one of the longest-
standing international governmental organizations (IGOs), ICAO has
had only limited effect on liberalization of the international air transport
market. But that does not mean that ICAO is a failing or superfluous

3
See generally Daniel Yergin & Joseph Stanislaw, The Commanding Heights: The
Battle for the World Economy (rev. ed. 2002).
4
On the economic, political, and social background to the Sherman Act, see 1 Philip
E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 100–04 (3d ed. 2006).
5
See generally Richard D. Stone, The Interstate Commerce Commission and the
Railroad Industry: A History of Regulatory Policy (1991).
6
See generally Paul Stephen Dempsey, The Rise and Fall of the Civil Aeronautics Board –
Opening Wide the Floodgates of Entry, 11 Transp. L.J. 91 (1979).
30 The Foundations of Public International Aviation Law

institution. It has assiduously developed universal safety and technical

standards for air transport while serving as a forum for the Chicago
Convention’s 191 contracting States to engage each other on international
air transport concerns. We begin, however, by glancing back at what we
might call the prehistory of modern international aviation law.

2.2. the “prehistory” of the chicago convention

2.2.1. From Paul Fauchille to the Paris Convention of 1919

We should not flatter the delegates at the 1944 Chicago conference by intimating
that their Convention, the most ambitious and comprehensive aviation treaty in
history, sprang Athena-like from their heads in December 1944. International
jurists had been at work on the problem of regulating transborder aerial move-
ments since as early as 1900 when the French jurist Paul Fauchille suggested that
a code of air navigation be created by the Institut de Droit International (one of
those rare instances where the legal profession was ahead of technological
innovation).7 That same year, The Hague Peace Conference promulgated the
International Declaration Prohibiting Launching of Projectiles and Explosives
from Balloons8 – demonstrating that States even in aviation’s earliest days were
already sensitive to its national security and sovereignty implications. Fauchille’s
concerns gained new traction in 1903 following the Wright Brothers’ historic
flight in Kitty Hawk, North Carolina. The French Government subsequently
followed up on The Hague Declaration by summoning a conference in 1910
specifically to examine the question of airspace sovereignty. Although the Paris
conference was considerably influenced by Fauchille’s ideas, the delegates
reached no consensus, and indeed the participating jurists felt hamstrung by a
lack of guiding scholarship.9 Ultimately, it took World War I – the first major
conflict to involve aircraft as instruments of aggression – to spur European

7
See Arthur K. Kuhn, The Beginnings of Aerial Law, 4 Am. J. Int’l L. 109, 111 (1910). The Institut
de Droit International was founded in Ghent, Belgium, in 1873.
8
See Declaration Prohibiting Launching of Projectiles and Explosives from Balloons, opened for
signature Jul. 29, 1900, 1 Bevans 270 (entered into force Sept. 4, 1900). The Declaration, which
placed a five-year moratorium on the practice of using balloons as military bombers, was
renewed by the International Declaration Prohibiting the Discharge of Projectiles and
Explosives from Balloons, opened for signature Oct. 18, 1907, 1907 A.T.S. 14 (entered into
force Nov. 27, 1909). For a recent case discussing whether “balloons” still qualify as “aircraft” in
international aviation law, see infra note 12.
9
A quite different context prevailed for international maritime law, where even before the era of
global conventions a settled consensus developed around Grotius’s concept of the mare
liberum, the free access of all nations to navigation of the high seas. See infra note 34.
 2.2. The “Prehistory” of the Chicago Convention 31

powers in 1919 to draft an international treaty on air transport. The indelible

legacy of the Convention Portant Réglementation de la Navigation Aérienne
(“Convention Relating to the Regulation of Aerial Navigation”), dubbed the
Paris Convention, was the codification of airspace sovereignty: “[t]he High
Contracting Parties recognize that every Power has complete and exclusive
sovereignty over the airspace above its territory.”10 Although the United States
declined to ratify the Convention, opting instead for aviation treaties covering its
“near abroad” in Latin America,11 thirty-two States eventually ratified – a
remarkable circle of recognition given the technological and territorial limita-
tions of air transport at that time.

2.2.2. Novel Features of the Paris Convention

Despite its brief life span, the Paris Convention had lasting effects on public
international aviation law, including the Chicago Convention. The
Convention, for example, introduced the concept of global technical uniformity
that would also underpin its Chicago successor, pioneering the use of special
annexes dedicated to standards of airworthiness for airlines and certificates of
competency for pilots. It also established ICAO’s institutional antecedent, the
Commission Internationale de Navigation Aérienne, an independent body
charged with fostering cooperation and harmonization in technical matters,
disseminating information on air navigation, and rendering advice on matters
submitted by the contracting States. The Paris Convention is notable, also, for
containing the first internationally accepted definition of “aircraft,” indicating
that such devices as airships, gliders, free balloons, and helicopters were also
covered by the terms of the treaty. The Chicago Convention later telescoped the
definition, dropping the list of aerial conveyances in favor of a simple affirmation
that an aircraft is “any machine that can derive support in the atmosphere from
the reactions of the air.”12 ICAO – at the behest of its member States – honed this

10
See Convention Relating to the Regulation of Aerial Navigation art. 1, opened for signature Oct.
13, 1919, 11 L.N.T.S. 173, reprinted in 30–1 Annals Air & Space L. 5 (2005) (entered into force
May 31, 1920) [hereinafter Paris Convention].
11
See generally Brower V. York, International Air Law in the Americas, 3 J. Air. L. 411 (1932)
(discussing the history and terms of the 1926 Ibero-American Convention and 1928 Havana
Convention).
12
Chicago Convention, supra note 1, Annex 1. See also Laroche v. Spirit of Adventure (UK) Ltd.,
[2009] EWCA (Civ) 12 (Eng.) (in which Lord Justice Dyson held that the “natural and ordinary
meaning” of the word “aircraft” would include a recreational hot air balloon under U.K.
legislation applying the Warsaw Convention liability system (see infra Chapter 7) to domestic
carriage by air; responding to the objection that hot air balloons could not realistically be used
for international air transport as that form of carriage is understood in the Warsaw Convention,
32 The Foundations of Public International Aviation Law

phrasing even further in 1967 by defining an aircraft as “any machine that can
derive support in the atmosphere from the reactions of the air other than the
reactions of the air against the earth’s surface.”13 In layperson’s terms, therefore, a
hovercraft is not an “aircraft” under international law.14

2.2.3. Regionalism of the Paris Convention

The Paris Convention should not be adjudged a failure despite the manifest
regulatory advances that the Chicago Convention would make slightly more
than two decades later. Two U.S.-backed aviation accords – the 1926 Ibero-
American Convention and the 1928 Havana Convention – transplanted the Paris
Convention’s terms to a pan-American setting,15 and as noted, Chicago’s intent
and broad design were substantially indebted to its French forerunner.16

Lord Justice Dyson observed that “[b]efore the invention of the aeroplane, [balloons] were the
means of transport by air, sometimes across borders”).
13
Id. Annex 13 (emphasis added). See I. H. Ph. Diederiks-Verschoor, An Introduction
to Air Law 6 (8th rev. ed. 2006). For ICAO’s most recent endorsement of this definition, see
International Civil Aviation Organization, Proposal for Annex 19 and Related Consequential
Amendments to Annexes 1, 6, 8, 11, 13, and 14, Letter of the Secretary General of the Air
Navigation Commission and Attachments, Ref. AN 8/3–12/42 (Jun. 29, 2012), at A-13.
14
See Chicago Convention, supra note 1, Annex 7. ICAO has not, however, produced a decisive
answer as to how many angels can dance on the head of a pin. On how to answer this centuries-
old conundrum, see Dorothy L. Sayers, The Lost Tools of Learning (1961), http://
www.gbt.org/text/sayers.html.
15
Unlike the Paris Convention, the Havana Convention had no annexes or continuing super-
visory commission or regulatory body. See Robert M. Kane, Air Transportation 361
(2003). The Ibero-American Convention contemplated an independent commission, but such
an entity never materialized, in part because Spain, along with Argentina and other Latin
American States, gained admission to the Paris Convention’s regulatory body. Unlike the Paris
Convention, the Havana Convention had no annexes or continuing supervisory commission or
regulatory body. See Kane, supra.
16
Although under Article 2 of the Paris Convention all contracting States undertook (in peace-
time) “to accord freedom of innocent passage” above their territories to the aircraft of all other
contracting States, in reality Article 15 of the Convention limited that apparently broad grant by
requiring (as the Chicago Convention would later) that States must “consent” to the establish-
ment of all international airways. See Paris Convention, supra note 10, arts. 2 & 15. Admittedly
both provisions appeared to be confined to “flyover” rights, but the requirement of consent was
still narrower than what otherwise might have been accorded: a right of passage (including
stops) subject only to restrictions a State might consider necessary in the interests of safety. In
any event, the Chicago Convention made the concessionary principle of prior State consent for
all flight operations (including transit over airspace) explicit. For background on the possible
meanings of Articles 2 and 15 of the Paris Convention, see Daniel Goedhuis, Air Law in
the Making 22–27 (1938) (condemning Article 15 as a restraint on the general principle of free
passage and likely to impede “the increasing economic importance of air traffic”). Incidentally,
the Paris Convention (like the Chicago Convention) contained no indication of the legal
mechanism by which States should exchange commercial access to each other’s airspaces.
 2.3. The Cosmopolitanism of the Chicago Convention 33

Although some commentators criticized the United States for weakening the
Paris Convention by withholding ratification and opting instead to support
regional aviation compacts, the technological reality of the 1920s and 1930s
understandably limited the vision of policymakers as they looked at air transport’s
international commercial potential. Cross-border air transport was entirely intra-
regional, and the United States had little interest in compromising its interna-
tional aviation interests to make treaty deals with faraway European States. With
the coming of World War II and heavy investment in substantially improving the
size and range of aircraft (investment that would lead eventually to the jet age),
regionalism could no longer be an effective option. The Paris Convention, along
with its inter-American stablemates, had to yield to a new order.

2.3. the cosmopolitanism of the chicago convention

2.3.1. A Cosmopolitan Tenor

In a tenor that can be described as “cosmopolitan,” the Chicago Convention’s
Preamble announces the treaty’s intents and purposes:
WHEREAS the future development of international civil aviation can greatly
help to create and preserve friendship and understanding among the nations
and peoples of the world, yet its abuse can become a threat to the general
security; and
WHEREAS it is desirable to avoid friction and to promote that co-
operation between nations and peoples upon which the peace of the world
depends;
THEREFORE, the undersigned governments having agreed on certain
principles and arrangements in order that international civil aviation may be
developed in a safe and orderly manner and that international air transport
services may be established on the basis of equality of opportunity and
operated soundly and economically;
Have accordingly concluded this Convention to that end.17

Thus, the Preamble reflects an ascendant faith in international institutions

held by many governments in the West after two global wars. Peace would be
the dividend of strengthened cooperation, especially in trade and economic
Presumably, as in the post-1945 period, bilateral agreements between the contracting States
would be the “default” norm. In fact, few intergovernmental agreements were concluded in the
period between the Paris and Chicago treaties, in part because of the small volume of interna-
tional air transport activities and in part because commercial flights virtually ceased during
World War II. See ICAO, Manual on the Regulation of International Air
Transport 2.0–1, Doc. 9626 (2nd ed. 2004).
17
Chicago Convention, supra note 1, pmbl.
34 The Foundations of Public International Aviation Law

matters. Even the United States, reflexively isolationist since rejecting

Woodrow Wilson’s project for a League of Nations,18 was finally willing to
champion levels of international cooperation unimaginable at any other
point in human history. While the United Nations (U.N.), the Bretton
Woods institutions,19 and the General Agreement on Tariffs and Trade
(GATT) would become the most visible emanations of the new mid-century
internationalism, the Chicago Convention came first. Unlike preceding
public international aviation law treaty instruments, the Convention is
distinguished by its universality. With 191 State parties and its own U.N.-
affiliated organization (ICAO) to steer technical cooperation and (to a
limited extent) to resolve disputes, the Chicago Convention is surely one
of the most effective multilateral agreements in the modern era of interna-
tional law.

2.3.2. A Successful Treaty

The success of the Chicago Convention may appear surprising, given inter-
national aviation’s fraught history of inter-State disagreement (a history that
we will revisit many times in this book). But the vitality of the Convention
becomes easier to understand in light of its substantive scope. Unlike human
rights treaties, for example, the Convention imposes no burden on States to
produce a “public good” for their own citizens;20 there is no legal obligation
under the treaty for countries to provide their citizens with a certain quan-
tum of international air services. In other respects, the Convention reaffirms
behaviors and recognitions already adhered to by its State parties, notably the
principle of airspace sovereignty.21 Where the Convention does impose
positive duties on its parties or requests that they refrain from certain
behaviors, their willingness to do so is perhaps best explained by the rela-
tively low costs of these impositions compared to their manifest benefits.22

18
U.S. involvement in the Second World War was driven more by the attack on Pearl Harbor and
President Franklin D. Roosevelt’s political maneuvering than by any national desire for
military engagement. See generally Andrew Roberts, The Storm of War: A New
History of the Second World War (2009); see also John M. Schleusser, The
Deception Dividend: FDR’s Undeclared War, 34 Int’l Security 133–65 (2010).
19
These institutions include the International Monetary Fund and the five financial and devel-
opment organizations that comprise the World Bank Group.
20
See generally Eric A. Posner, Human Rights, the Laws of War, and Reciprocity (John M. Olin
L. & Econ. Working Paper No. 537 (2d ser.), Sept. 2010).
21
See Chicago Convention, supra note 1, art. 1.
22
The premise of our argument here, as the reader will quickly suspect, is largely that of rational
choice theory. The treaty’s longevity can be explained by the theories of other jurists, of course,
including the so-called global legalists who have been criticized as having “an excessive faith in
 2.3. The Cosmopolitanism of the Chicago Convention 35

A State that adheres to the Convention presumably wants to offer its citizens
(and the citizens of other States) access to international air transport services
that serve its territory. The State will therefore be interested in resolving
baseline coordination problems that may hinder the provision of those
services.23 Thus, for example, to the extent that the inward and outward
operations of foreign States’ air carriers are allowed (and that, again, is a
choice for each State to make), the legal standard in the Convention is
broadly to provide air navigation and airport services to meet ICAO’s com-
mon technical standards, and to do so in accordance with basic principles of
nondiscrimination in the provision of such services24 or in levying takeoff
and landing charges.25

2.3.3. A Logic of Coordination

That logic of coordination (and harmonization) is especially apparent in the
Convention’s treatment of pilot licenses and airworthiness certificates for
airlines.26 If each State were unsure whether its licensing provisions would
be recognized by foreign governments or were forced to customize licensing
criteria to meet the diverse (and perhaps idiosyncratic) standards of other
States, the cost of the licensing regime would inflate precipitously while
yielding few, if any, benefits. By working through ICAO to install a universal
licensing framework, States bypass many of these costs. While the process of
norm-creation in international law can sometimes risk making “universal”
synonymous with “lowest common denominator,” in the context of the
Chicago Convention, those States that hold to the highest standards in matters
such as licensing and safety (e.g., the United States and the EU Member

the efficacy of international law,” believing it to have “value for its own sake” independent of
any instrumental value to States. Eric A. Posner, The Perils of Global Legalism xii
(2009). Among other things, global legalists would invoke the moral necessity of States keeping
their promises to one another, see generally Eric A. Posner, Do States Have a Moral Duty to
Obey International Law?, 55 Stan. L. Rev. 1901 (2003) (arguing against this assumption), or
that adherence to the treaty is part of the “cosmopolitan duty” of its parties, see generally Jack
L. Goldsmith, Liberal Democracy and Cosmopolitan Duty, 55 Stan. L. Rev. 1667 (2003)
(analyzing and critiquing that point of view). Global legalists, in other words, do not shirk from
conflating moral and positivist analysis. They are less likely, however, to be able to add to the
putative moral imperative of obeying treaties a richer secular explanation of why States adhere
when they adhere and defect when they defect.
23
Cf. Jack L. Goldsmith & Eric A. Posner, The Limits of International Law 86–87
(2005) (applying this logic to international communications standards).
24
See Chicago Convention, supra note 1, art. 28.
25
See id. art. 15.
26
See generally id. art. 33.
36 The Foundations of Public International Aviation Law

States) have historically wielded the economic power and influence to align
the treaty’s common standards with their own.27

2.4. the historical impact of the chicago convention

2.4.1. Conflicting Agendas and the Triumph of Managed Trade

The two overarching purposes of the Chicago conference when it convened
on November 1, 1944, were to make arrangements for the establishment of
provisional world air routes and services and to set up an interim council to
collect, record, and study data concerning international aviation. The partic-
ipants arrived at the conference with different agendas. The Americans,
supreme in civil air transport, advocated open competition. The British
proposed an international organization to coordinate air transport, to appor-
tion the world’s air routes, and to decide on frequencies and tariffs.28 Australia
and New Zealand offered the most imaginative solution, which Professor
Michael Levine treated with retrospective alarm as a harbinger of “interna-
tional socialism”: the creation of a single world airline.29 But by the time the
delegates had finished their parleys in Chicago, their Convention would have
very little to say directly on the shape of a new commercial order. As we will
discuss at length in Chapter 3, hard economic rights and privileges (“traffic

27
Sometimes even this is not enough. The EU, for example, has unilaterally developed a
“blacklist” for airlines that fail to meet not only the safety standards established by the
Chicago Convention, but also those established under “relevant [EU] law.” See Commission
Regulation 2111/2005, Establishment of a Community List of Air Carriers Subject to an
Operating Ban within the Community and on Informing Air Transport Passengers of the
Identity of the Operating Air Carrier, and Repealing Article 9 of Directive 2004/36/EC, 2005
O.J. (L 344) 15; see also Commission Regulation 473/2006, Laying Down Implementing Rules
for the Community List of Air Carriers Which Are Subject to an Operating Ban within the
Community Referred to in Chapter II of Regulation (EC) No. 2111/2005 of the European
Parliament and of the Council, 2006 O.J. (L 84) 8. Whether this practice is compatible with EU
Member State commitments under the Chicago Convention is, at best, ambiguous. The U.S.
approach mirrors that of ICAO: instead of blacklisting individual airlines, the Federal Aviation
Administration (FAA), under its International Aviation Safety Assessment (IASA) program,
evaluates the compliance of foreign civil aviation authorities with ICAO standards. States that
receive a Category 2 (noncompliant) rating from the FAA are prohibited from expanding
services to the United States, but existing services are not affected.
28
See Brian F. Havel, Beyond Open Skies: A New Regime for International
Aviation 100 n.5 (2009). Ambitious projects for global or pan-regional airline operating
companies or intergovernmental public bodies were not a new idea in 1944: see, e.g., Robert
Neale Lawson, A Plan for the Organization of a European Air Service (1936).
29
Michael Levine, Scope and Limits of Multilateral Approaches to International Air Transport, in
Organisation for Economic Co-operation and Development, International
Air Transport: The Challenges Ahead 75, 87 n.6 (1993).
 2.4. The Historical Impact of the Chicago Convention 37

rights”) were relegated to two ancillary accords also negotiated at the Chicago
conference, the so-called Two Freedoms and Five Freedoms agreements.30
The latter of these two treaties, which would have opened up a transnational
network of traffic rights allowing air carriers to freely move passengers, cargo,
and mail across the globe, failed to receive more than a handful of ratifica-
tions. As such, international air services became the subject of tightly managed
bilateral trade – a practice that in large measure continues to this day.

2.4.2. Clashing Interests of the United States and Europe

The clash of interests at the Chicago conference was unsurprising. “VE Day”
(Victory in Europe) was still five months away when the delegates convened;
Europe was still enduring the ravages of war. The industrial sectors of the
European Allied Powers were in ruins, and those parts that did function were
geared almost exclusively toward the war effort. The U.S. industrial base, on
the other hand, managed to exit the war largely unscathed. Military aircraft
could easily have been retooled for commercial air services, providing U.S.
airlines with an enduring structural advantage over the Europeans. That
advantage can be framed in the language of economic theory as “absolute,”
and was built on U.S. access to key inputs like aircraft and mechanical
support.31 To catch up, European airlines would need sustained subsidization.
European States feared (perhaps rightly) that their airlines would never match
those of their U.S. competitors, an especially unpalatable outcome at a time
when air carriers were being viewed as embodiments of State prestige rather
than just commercial actors. Larger macroeconomic concerns were also at
work. The world had not yet fully recovered from the impact of the Great
Depression when World War II began and, for Europe in particular, the
magnitude of the conflict exacerbated the effects of a lingering economic

30
See generally International Air Services Transit [Two Freedoms] Agreement, opened for
signature Dec. 7, 1944, 59 Stat. 1693, 84 U.N.T.S. 389; International Air Transport [Five
Freedoms] Agreement, opened for signature Dec. 7, 1944, 59 Stat. 1701, 171 U.N.T.S. 387.
31
The concept of absolute advantage should not be confused with the theory of “comparative
advantage.” The former is a measure of what a particular State is best at from a production
standpoint; the latter concerns where a State can most efficiently direct its productive resources
given the existence of international trade. For instance, the United States may have had an
absolute advantage over every State in the world in providing international air services, but
could possibly have used a certain portion of its productive inputs for air services (e.g.,
technology and labor) in other, more lucrative, sectors. As such, the United States would be
better off reducing its production of international air services and allowing other countries’
airlines to meet the market demand. See generally Concise Encyclopedia of Economics
(David R. Henderson ed., 2007); see also International Encyclopedia of the Social
Sciences 1–2 (William A. Darity ed., 2d ed. 2008).
38 The Foundations of Public International Aviation Law

malaise. Under the sway of economist John Maynard Keynes, Europe was
disposed toward a model of central planning or control over key segments of its
industrial base, the “commanding heights” in Vladimir Lenin’s resonant
phrase.32 Indispensable sectors like coal, steel, and transportation were
thought to be so integral to State prosperity that they simply could not be
left to the “perennial gale of creative destruction” wrought by the free mar-
ket.33 In Europe, that ideological leaning led to direct public ownership over
international airlines. The United States, although insouciant about the idea
of private ownership of its aviation providers, kept custody of their commercial
operations (what routes they could fly, how frequently, and with what
capacity) through the regulatory artifices of the CAB. To the extent that U.S.
air carriers could deliver international services that conformed to the amor-
phous standard of the “public interest,” regulators were willing to tolerate their
functioning as (relatively) independent participants in the market. The chal-
lenge that the United States faced at the Chicago conference was how to
transform commercial potential into actual market dominance.

2.4.3. Deflecting Criticisms of the Chicago Convention’s Outcome

As already noted, strong opposition to the U.S. pro-market position resulted in
a treaty that mostly avoids the hard task of creating a universal structure for the
distribution of economic rights and privileges. Thus, there would be no global
commercial airspace analog to the mare liberum (“freedom of the high
seas”).34 That fact has prompted many analysts over the past six decades to

32
See yergin & stanislaw, supra note 3, at xii.
33
Charles A. Schumpeter, Capitalism, Socialism, and Democracy 84 (1975).
34
Early advocates of a mare liberum regime for airspace would have granted balloons and aircraft
the right to travel freely anywhere, including above sovereign territory, allowing sovereign
control only of airspace proximate to the surface for purposes of self-defense. The difference is
largely contained in the contrasting views of the nature of property rights in airspace. Under
mare liberum, Grotius’s idea is that the sea cannot be occupied, and therefore cannot be
possessed. It is common property to be used by all. Some analogized the concept to airspace,
arguing that it is impossible to occupy and therefore possess an expansive portion of airspace,
even if it is directly above land over which a State does exert territorial control. Stuart Banner’s
book argues that the analogy to the sea fell out of favor because of safety and security concerns,
suggesting that aircraft flying above populated land present certain risks and dangers to those
below the aircraft (including State military installations) that are not present in maritime travel.
Thus, it was concluded that a State’s sovereign authority over land should extend upward to the
airspace above the territory the State controls. See generally Stuart Banner, Who Owns
the Sky?: The Struggle to Control Airspace from the Wright Brothers On 42
(2008) (“[W]as the atmosphere like the ocean, a zone through which anyone could pass,
regardless of nationality? Did the sovereign power of the nation-State extend upward, or was
it confined to the surface of the earth?”).
 2.4. The Historical Impact of the Chicago Convention 39

condemn the Chicago Convention as a failure and, even more critically, as an

enduring hindrance to international air transport liberalization. The first
charge is overstated, as discussed in Part 2.3: the final treaty instrument
negotiated in Chicago resolved (or attempted to resolve) a number of key
coordination problems for air safety and navigation that are fundamental to
the operation of global air services.

2.4.4. The Chicago Convention Did Not Hinder Later Liberalization

The second charge, however, is spurious. Although it is true that the post-
Chicago world saw the rise of a highly restrictive bilateral trade in air services,
that outcome was not foreordained by the Chicago Convention itself. States,
not the Convention, created the bilateral system35 – a point that will receive
more elucidation in Chapter 3. Further, the U.S. decision to compromise with
conference participants and to relegate traffic rights to supplementary treaty
instruments (the aforementioned Two and Five Freedoms agreements) was
not an irrational concession to protectionist trade pressures. Resolving the
coordination challenges addressed in the Convention, along with establishing
ICAO, were goals worth pursuing for their own sake; insisting that trade
concessions be made part of the bargain could have doomed the Chicago
conference to deadlock or yielded a document so freighted with compromises
as to be valueless. From a present-day vantage point, the absence of compre-
hensive economic provisions from the Chicago Convention appears provi-
dential. Given the inherent complications involved in renegotiating or
amending multilateral treaties, had the Convention specified the level of air
services trade concessions States must provide to the other contracting parties
(likely a low threshold given the economic attitudes that prevailed at the time),
it might have been extremely difficult for the United States and EU to pursue
their bilateral international aviation liberalization initiatives in the 1990s and
2000s.36 In other words, the Chicago Convention might have had the effect of
adopting only a particular set of substantive minima37 that would have survived
long after the market skepticism evident at the time of its drafting.

35
Cf. Peter P. C. Haanappel, The External Aviation Relations of the European Economic
Community and of the EEC Members into the Twenty-First Century, Part II, 14 Air L. 122,
141 (1989).
36
See supra Chapter 1, n. 70, commenting on how the Chicago Convention comes from an era of
“megamultilateralism” that has probably ended.
37
The notion of substantive minima has been primarily used in international intellectual
property law, but it occasionally appears in other contexts. See Dinah Shelton, Human
Rights and the Environment: What Specific Environmental Rights Have Been Recognized, 35
40 The Foundations of Public International Aviation Law

2.4.5. The Chicago Convention’s Significant Economic Impact

Nor did the Chicago conference entirely fail in its principal treaty to specify
terms with significant economic implications for the international aviation
industry. Rather, as we will discuss, the delegates agreed on a number of
fundamental propositions related to, for example, airspace sovereignty, the
scope and nature of State regulatory authority, cross-border recognition of
aircraft registration and markings, international safety and technical harmo-
nization, and the formation and functioning of ICAO. All of these compo-
nents of the Chicago Convention continue to bear upon the conduct of
global airline operations. Without universal standards related to air traffic
management procedures, for instance, it would be enormously costly (as
well as dangerous) for airlines to fly across national and regional boundaries.
By articulating a framework for solving flight coordination challenges, the
Chicago Convention facilitates global air services. The Convention does not,
however, provide a comprehensive economic regulatory schema for the
industry.

2.5. the core elements of the chicago convention

2.5.1. Airspace Sovereignty: Articles 1 and 2

Like its antecedent, the 1919 Paris Convention, the Chicago Convention gives
primacy to the principle of airspace sovereignty. That principle, which is a
presumptive extension of the customary international law doctrine of State
sovereignty, has often been expressed through the maxim cujus est solum, ejus
est usque ad caelum et ad inferos (“for whomever owns the soil, it is theirs up to
Heaven and down to Hell”38). Oftentimes misidentified as a part of classical
Roman law, the phrase’s origins are, in fact, medieval.39 It is important not to
take the expression too literally (it does, after all, have absurd consequences if

Denv. J. Int’l L. & Pol’y 129, 164 (2006). Its meaning is constant in all contexts, however: it
refers to a minimum level of substantive rights or protections required by an international
treaty. In the intellectual property setting, the term refers to the minimum protections that a
treaty requires to be inserted into domestic legal systems, whereas here we are using the term
more expansively to refer to a minimum level of concessions that could have been granted
directly by the treaty itself, that is, the Chicago Convention.
38
The quote, minus the et ad inferos (which is often omitted), is probably best cited to Bury v.
Pope, Cro. Eliz. 118, 78 Eng. Rep. 375 (1587). Banner has described how the established
common law concept provided an intellectual basis upon which the State sovereignty regime
was constructed, largely for safety and security reasons. See generally Banner, supra note 34, at
4–41 (2008).
39
See James W. Harris, Property & Justice 76 (1996).
 2.5. The Core Elements of the Chicago Convention 41

one does so40) or assume that it serves as a colorful substitute for what is in the
text of the Convention itself. Article 1 declares only that “every State has
complete and exclusive sovereignty over the airspace above its territory”;
there is no extension “up to Heaven,” which is the province of the 1967
Outer Space Treaty.41 As to where a State’s airspace ends and outer space
begins, although international law has furnished no definitive answer, the
Karman Line – which lies at an altitude of 62 miles above the Earth and
represents the point where the atmosphere becomes too thin for aeronautical
purposes – has been asserted as the upper limit of airspace sovereignty.42 The
actual scope of a State’s territory under the Chicago Convention is defined in
Article 2 as “the land areas and territorial waters adjacent thereto under the
sovereignty, suzerainty, protection or mandate of each State.”43 Further clarity
is provided to that open-ended description by the U.N. Convention on the
Law of the Sea, which limits a State’s territorial waters to twelve nautical miles
off its coast.44 For the airspace “[o]ver the high seas,” where no sovereign
control is exercised, Article 12 of the Chicago Convention notes that the treaty
itself provides the rules in force.45

2.5.2. A Concessionary Principle of Market Access: Article 6

Article 6 of the Chicago Convention perfects the restrictive logic of the
airspace sovereignty principle through a concessionary principle of market

40
See banner, supra note 34, at 89 (quoting Chicago lawyer Carl Zollmann’s observation that,
taken literally, the cujus est solum maxim would make the center of the earth “the most
disputed territory imaginable” because all property rights on the earth’s entire surface would
eventually converge when extended far enough downward; in addition, the maxim would grant
rights to owners of land that extended upward to include distant planets).
41
See Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer
Space, including the Moon and Other Celestial Bodies, opened for signature Jan. 27, 1967, 610
U.N.T.S. 205. The related question of where a landowner’s airspace rights end and the State’s
begin has never been definitively answered, although landowners surely possess air rights. See
Banner, supra note 34, at 252–58 (discussing United States v. Causby, 328 U.S. 256 (1946), in
which the U.S. Supreme Court for the first time imposed a uniform nationwide rule of aerial
trespass).
42
See Dean N. Reinhardt, The Vertical Limit of State Sovereignty, 72 J. Air L. & Com. 65 (2007).
43
Chicago Convention, supra note 1, art. 2.
44
See United Nations Convention on the Law of the Sea (UNCLOS), art. 3, opened for signature
Dec. 10, 1982, 21 I.L.M. 1261. In the 18th and 19th centuries, the territorial waters were defined
more or less by the distance of a cannon shot, the customary line being three nautical miles.
45
Article 12 of the Chicago Convention requires that States establish and enforce rules of flight for
aircraft operating above their territory. It provides further that “[o]ver the high seas, the rules in
force shall be those established under this Convention.” Because flights operating over the high
seas will not be subject to the rules of operation established by any State, rules pertaining to
such operations are set out in Annex 2 of the Convention.
42 The Foundations of Public International Aviation Law

access. Thus, “[n]o scheduled international air service may be operated over
or into the territory of a contracting State, except with the special permission or
authorization of that State, and in accordance with the terms of such permis-
sion and authorization.”46 This is not only an application of noli me tangere
(“touch me not”)47 sovereignty by States to the airlines of the world, however.48
There is also a strong national security component to the Article. Given
aviation’s capacity to penetrate the territorial integrity of a State as no mode
of transportation had heretofore allowed, governments understandably wanted
to limit access to the airspace over their territories to prevent activities such as
unauthorized photographing of military installations. In the intervening dec-
ades, that concern has lost much of its salience. Satellites and high-resolution
photography make aerial photography less important; anyone with an Internet
connection has free access to global satellite imagery on websites such as
Google Earth. Additionally, improvements in air traffic management technol-
ogy have proven sophisticated enough to monitor and keep aircraft away from
sensitive areas.49

2.5.3. Restricted or Prohibited Zones: Article 9

Even so, States still have a compelling interest in maintaining national
security and in protecting their citizens. Hence, Article 9 of the Chicago
Convention allows States – “for reasons of military necessity or public safety” –
to establish restricted or prohibited zones above their territories so long as
these limitations are applied uniformly to the airlines of the Convention’s
contracting parties.50 In exceptional circumstances or where public safety
demands it, Article 9 also permits a State to “temporarily restrict or prohibit
flying over the whole or any part of its territory,” again on the condition that

46
Chicago Convention, supra note 1, art. 6. The use of the term “scheduled” in Article 6 is not
accidental. Article 5 of the Convention provides rights for nonscheduled (i.e., charter) services
“to make flights into or in transit non-stop across” the territory of another contracting State “and
to make stops for non-traffic [i.e., noncommercial] purposes without the necessity of obtaining
prior permission, and subject to the right of the State flown over to require landing.” States may
still, however, place restrictions on where nonscheduled services may fly for reasons of safety.
47
John 20:17 (Vulgate).
48
See generally Mark Mazower, Governing the World: The History of an Idea (2012)
(discussing how traditional “Westphalian” sovereignty is arguably curtailed by a modern
doctrine of intervention by other States when a State abuses its sovereignty by subjecting its
own population to violations of global humanitarian norms).
49
See U.S. Gen. Accounting Office, Airline Competition: Impact of Changing
Foreign Investment and Control Limits on U.S. Airlines, GAO/RCED-93–7, at
14–15 (1992).
50
Chicago Convention, supra note 1, art. 9.
 2.5. The Core Elements of the Chicago Convention 43

the limitation is applied uniformly to all contracting States’ airlines.51 Two of

the most visible deployments of Article 9 authority were the shutdown of U.S.
airspace following the 9/11 terrorist attacks and the closure of large segments of
EU airspace after the “Volcanic Ash Crisis” in April 2010.52

2.5.4. Reasons for a Treaty-Based Airspace Sovereignty

None of the provisions discussed up to now is controversial. Some might argue
that they are superfluous given that the customary international law doctrine of
State sovereignty seems, with only modest tweaking, to provide States with
plenary control over their respective airspaces. Even so, there are still good
reasons for States to use a treaty like the Chicago Convention to crystallize the
doctrine of airspace sovereignty. In a bilateral scenario, for example, State A may
subjectively believe that airspace sovereignty applies only with respect to landing
or taking off from the territory of another State and therefore authorize its airlines
to overfly State B – while State B, taking a more robust construction of the
principle as its guide, may interpret the overflight as an encroachment upon its
sovereignty and use military force to deter any further “intrusions.” By entrench-
ing airspace sovereignty, the Chicago Convention allows States to avoid these
pitfalls of ambiguity, although it must be said that the Convention’s approach to
sovereignty is not (ultimately) absolutist. Article 9, for instance, imposes some
modest restrictions on the scope for discrimination among third States that is
afforded to a State that desires to close part or, in cases of emergency, all of its
airspace. State A cannot close the airspace over a particular area to States B and
C while allowing State D’s airlines to continue flights over the excluded zone.
That curbing of sovereign choice makes sense given that States do not want their
own airlines to be subjected to discriminatory airspace closures by other States.53

2.5.5. Regulatory Scope and Harmonization: Articles 11 and 12

and the Annexes
While providing contours to the concept of sovereignty, the Chicago
Convention also contains provisions that purport to clarify the regulatory
51
Id.
52
Both actions clearly fell under the terms of Article 9 of the Chicago Convention. See
Ruwantissa I. R. Abeyratne, Responsibility and Liability Aspects of the Icelandic Volcanic
Eruption, 35 Air & Space L. 281, 283 (2010) (confirming that the EU volcanic ash shutdown
was an exercise of Article 9 powers).
53
See generally Peter P. C. Haanappel, Law and Policy of Air Space and Outer
Space: A Comparative Approach 45 (2003) (discussing closure of U.S. and Canada
airspaces under Article 9 after the World Trade Center attacks in September 2001).
44 The Foundations of Public International Aviation Law

reach of a State over aircraft registered in its territory and also to establish
territorial and substantive limits on the regulations that may be imposed on
another State’s aircraft operating in its airspace. Article 11 of the Convention
grants each State the authority to devise “laws and regulations” relating to “the
admission to or departure [of aircraft] from its territory” and the “operation
and navigation of such aircraft while within its territory,” subject to the
limitations that such laws and regulations cannot conflict with any provision
of the Convention itself and that they are applied “without distinction as to
nationality.”54 Article 12 requires a State to ensure that all aircraft operating
within its territory – foreign or domestic – obey these aviation laws and
regulations while also ensuring that all aircraft registered in its territory obey
the regulations of any other State over which they are flying. Article 12 further
obligates all contracting States “to keep [their] own [aviation] regulations . . .
uniform, to the greatest possible extent, with those established from time to
time under [the] Convention.”55 The referenced Convention regulations are
the rules, standards, and recommended practices set forth in its eighteen
annexes.56 Additional articles covering the permissible scope of customs
searches, entry and clearance regulations, and preventive measures to limit
the spread of diseases are contained in the Convention as well.57

2.5.6. Tax Treatment of the International Airline Industry: Article 15

There is no controversial issue that divides government tax collectors and the
modern international airline industry more than the industry’s apparently
favorable tax treatment under Articles 15 and 24 of the Chicago Convention.
Article 15, which covers “airports and similar charges,” has moved to the
foreground as States have adopted so-called eco-charges or green taxes to offset
the purportedly harmful environmental effects of aircraft carbon emissions.58
Article 15 permits States to levy nondiscriminatory charges for the use of
airport and air navigation (air traffic management) facilities, subject to a
54
Chicago Convention, supra note 1, art. 11.
55
Chicago Convention, supra note 1, art. 12. For a more detailed account of how Articles 11 and 12
function in relation to the EU’s attempt to regulate global airline emissions, see Chapter 6,
Section 6.4.2.
56
A full list and description of the annexes is available in ICAO, The Convention on
International Civil Aviation: Annexes 1 to 18 (no date given), http://www.icao.int/
icaonet/anx/info/annexes_booklet_en.pdf. Although a detailed treatment of each annex is
beyond the scope of this book, those that are relevant to particular topics will be given further
treatment in the appropriate sections of the work. For discussion of the forthcoming Annex 19,
see infra Chapter 5, Section 5.3.6.
57
See Chicago Convention, supra note 1, ch. II passim.
58
See infra Chapter 6, Section 6.4.2.
 2.5. The Core Elements of the Chicago Convention 45

general exception which provides that “[n]o . . . charges [i.e., other than
charges imposed for the use of airports and air navigation facilities] shall be
imposed by any contracting State in respect solely of the right of transit over or
entry into or exit from its territory of any aircraft of a contracting State or
persons or property thereon.”59 Although not a paragon of clear draftsmanship,
the text of Article 15 has been interpreted by the Convention’s State parties,
acting through ICAO, to permit only the imposition of charges (which may
also be called dues, fees, or taxes) specifically to recover the costs to the
charging State of providing facilities and services to international civil avia-
tion.60 A general charge, such as a “green” tax, that is unrelated to the
provision of services would arguably be a charge imposed in respect “solely”
of the right of transit over or entry into or exit from the State, and thus would be
impermissible under the Convention.61 In Chapter 6 we will return to Article
15, which was scrutinized closely by the Court of Justice of the European
Union (CJEU) in a recent case challenging the legality of the EU emissions
trading scheme.62

2.5.7. Another Rule on Tax Treatment: Article 24

Article 24, which sits among a small group of provisions that deals with common
customs and immigration procedures, provides an excise tax exemption regime
for fuel, lubricating oils, spare parts, regular equipment, and aircraft stores that
arrive in a State on board an international flight and are retained on the aircraft

59
Chicago Convention, supra note 1, art. 15.
60
See ICAO, ICAO Policies on Charges for Airports and Air Navigation Services, para. 1, ICAO
Doc. 9082/7 (7th ed. 2004).
61
Problematically, economically pressed States feel free to designate airline or aircraft charges as
“eco” or “green” taxes but to sweep revenues into the general treasury rather than using them to
offset environmental pollution, which would be a purpose that arguably might satisfy the
“facilities and services” test in Article 15. Even the EU emissions trading scheme has been
accused of being a mere revenue-gatherer for the EU Member States. In a speech before the
Association of Asia Pacific Airlines, Brian Simpson MEP, Chair of the European Parliament’s
Committee on Transport and Tourism, is reported to have said the following: “And yet, within
the EU, governments are keen to press ahead because they desperately need the money. They
won’t say that – oh no – they will claim it’s to help the environment, just as they do with [the
U.K.] Air Passenger Duty [APD]. But let’s be under no illusions here – both [the EU emissions
trading scheme] and APD are being used as revenue streams for hard-up governments and not
for environmental protection measures.” See Karen Walker, EU MP: Europe Will Not Back
Down on ETS, Air Transport World Daily News, Nov. 7, 2011, http://atwonline.com/
operations-maintenance/news/eu-mp-europe-will-not-back-down-ets-1104.
62
Case C-366/10, The Air Transport Ass’n of America, American Airlines, Inc., Continental
Airlines, Inc., United Airlines, Inc. v. the Sec’y of State for Energy and Climate Change, 2010
O.J. C-260/12, referred by U.K. High Court of Justice, Q.B. Div. (Admin. Ct.).
46 The Foundations of Public International Aviation Law

until its departure from the State.63 After many decades of quiescence, Article 24
was also thrust into the spotlight by the recent CJEU judgment. The Court
ruled, in effect, that Article 24 is not infringed by an emissions trading scheme
where airlines surrender a quantum of emissions allowances that is determined
for each flight by the amount of fuel consumed. We will return to Article 24, in
the context of emissions trading schemes, in Chapter 6.

2.5.8. Facilitating Air Navigation: Articles 25–28

Articles 25–28 of the Convention address various coordination problems with
respect to facilitating international air navigation. A State is obligated to
provide air traffic navigation services to any aircraft of another contracting
State it allows to transit to, from, or over its territory and to harmonize such
services “in accordance with the standards and practices recommended or
established from time to time” in the Convention’s annexes.64 Where aircraft
are in distress or an accident occurs, the State that is the situs is obligated to
provide assistance and to institute an accident inquiry.65 To the extent that
these universal standards are properly applied, they not only reduce the need
(and cost) for air crews to master variant air traffic management practices, but
also minimize the risk and expense of accidents. Airlines will feel confidence
in international route development if they can plan for the absence of idiosyn-
cratic air navigation systems and the presence of reasonable emergency sup-
port in each contracting State. Pilot inability to communicate effectively with
air traffic controllers can have disastrous consequences. The 1977 Tenerife
airport disaster involved a runway collision of two Boeing 747s and the deaths
of 583 passengers and crew. The accident was caused, in part, by a breakdown
in communications protocols between local controllers and the pilots.66

63
Chicago Convention, supra note 1, art. 24.
64
See Chicago Convention, supra note 1, art. 28 (emphasis added). Although the “established”
and “recommended” terminology clearly exists in the text of the Article, in practice ICAO has
chosen “standards” and “recommended practices,” collectively known as SARPs, as the
distinguishing terms for ICAO guidelines. Standards are those specifications considered
necessary for the safety or regularity of international air navigation, while recommended
practices are those deemed merely desirable. See infra text accompanying notes 119 & 120.
Contracting States that fail to conform to an existing standard are compelled by Article 38 of the
Convention to report the noncompliance to ICAO. Neither compliance, nor reporting of
noncompliance, is compulsory for recommended practices. For more on ICAO Standards and
Recommended Practices, see infra Part 2.6.
65
See Chicago Convention, supra note 1, arts. 25–26.
66
See Final Report and Comments of the Netherlands Aviation Safety Board on the Investigation
into the Accident with the Collision of KLM Flight 4805, Boeing 747–206B, PH-BUF and Pan
American Flight 1736, Boeing 747–121, N736PA at Tenerife Airport, Spain on 27 March 1977,
 2.5. The Core Elements of the Chicago Convention 47

2.5.9. Uniform Documentation, Technical Specifications,

and Licensing: Articles 29–33
The Chicago Convention, in its fifth chapter, creates uniform rules with
respect to the type of documents aircraft are required to carry when engaged
in international services, establishes technical specifications for aircraft radio
equipment, and provides for the establishment of minimum universal stand-
ards for and mutual recognition of aircraft and personnel (pilot) licensing.67
One of the chief incentives for promulgating these international standards was
to reduce duplication costs. Imagine if a major international air carrier such as
United were compelled to have its aircraft licensed by each country to which,
from which, or over which it flies. Even though United could likely bring itself
into compliance with multiple licensing regimes, the process would still raise
its costs and those of its passengers. Moreover, once the initial congregation of
States that negotiated the Chicago Convention ratified the treaty and agreed to
baseline rules and standards on licensing (rules and standards are adjustable
over time in the relevant annexes to the Convention), little incentive remains
for these founding parties or for States acceding later to the treaty to defect.
Doing so would deny a defecting State’s airlines the cost-saving benefits of the
universal rules and sour the defector’s aeropolitical relations with all other
States that are parties to the Convention.68

2.5.10. Aircraft Registration and Nationality: Articles 17–21

Chapter 8, in the context of aircraft financing, offers a detailed discussion of the
registration and nationality of aircraft. The discussion will also examine the
conceptual misalignment, briefly noted at the end of this section, that attributes
potentially separate “nationalities” to airlines and aircraft.69 For now it is useful
to provide a summary of the Chicago Convention’s relevant provisions on

http://www.project-tenerife.com/nederlands/PDF/finaldutchreport.pdf. See generally Nova:

The Deadliest Plane Crash (PBS (U.S.) television broadcast 2006).
67
See Chicago Convention, supra note 1, ch. V passim. Although ICAO has pursued its charge
under the Chicago Convention to promulgate global standards in these technical and licensing
areas, there has been a number of issues on which individual contracting States (or a regional
organization of States) were the initial movers and ICAO then acted more in a responsive,
harmonizing role. One current example is the recent action by regulators in the United States
and EU to implement new scheduling rules to combat pilot fatigue. See Press Release,
European Aviation Safety Agency, EASA Proposes New Harmonized Rules to Avoid Flight
Crew Fatigue (Oct. 1, 2012); Press Release, Federal Aviation Administration, FAA Issues Final
Rule on Pilot Fatigue (Dec. 21, 2011).
68
Cf. Goldsmith & Posner, supra note 23, at 86–87.
69
Chicago Convention, supra note 1, art. 17.
48 The Foundations of Public International Aviation Law

aircraft registration. The Convention’s core doctrine with respect to aircraft is

contained in Article 17: “Aircraft have the nationality of the State in which they
are registered.”70 Although the Convention does not quite go so far as to say that
an aircraft registered in a particular State’s territory is part of that territory, the
importance of attaching the nationality of an aircraft to a State cannot be
overstated. An aircraft, no matter where it is operating across the globe, remains
under the regulatory control of its home State of registry, subject to the proviso
inserted by Article 11 that once the aircraft enters the sovereign airspace of
another State, it must adhere also to that State’s navigational and operational
rules.71 Although some might see the aircraft nationality rule as a legally
appropriate extension of long-standing maritime “flagging,” whereby ships
must bear the flag of their country of registry, Article 17 is supported also by a
freestanding rationale. Imagine if Article 17 did not exist – or, rather, that the
Convention mandated that an aircraft should absorb the nationality of any State
over which it happens to be flying. That could subject the United fleet (along
with passengers and crew on board), for example, to one body of criminal, civil,
and social law and legislation when a United aircraft is departing Chicago and to
an entirely different set of legal rules when it passes over United Kingdom (U.K.)
airspace on approach to London. And what about flights over the high seas?
Does the airspace above the high seas constitute a “lawless zone”? Subsequent
chapters of this book will discuss other tenets of international aviation law that
sometimes limit or qualify the regulatory principle implicit in Article 17, but the
consequence of embedding that provision in the Convention is that there is
never a moment in the life of an aircraft where it escapes a governing body of
law. At the same time, Article 17 provides a (sometimes contentious) basis for
States to intervene abroad on behalf of aircraft registered in their territory. An
extreme example of such an intervention involved the botched 1985 storming by
an Egyptian special forces team of an Air Egypt flight that had been hijacked to
Malta, resulting in fifty-six civilian and two crew deaths.72

2.5.11. State-Based Aircraft Registration: Articles 18–19

With respect to the rules governing aircraft registration itself (including the
transfer of registrations from State to State), the Convention cedes regulatory
70
Id.
71
See Chicago Convention, supra note 1, art. 11.
72
Clearly, one ostensible legal justification for that Egyptian military action within Maltese
territory was that the plane was registered in Egypt, although presumably the on-board presence
of Egyptian citizens and the fact that the aircraft belonged to the Egyptian government were
also relevant. See U.S. v. Rezaq, 134 F.3d 1121, 1126 (D.C. Cir. 1998) (recounting the tragic
outcome of the raid).
 2.5. The Core Elements of the Chicago Convention 49

authority and latitude to the contracting States.73 As with vessels operating

subject to maritime law, aircraft must “bear [their] appropriate nationality and
registration marks,”74 while States must furnish ICAO or any other contracting
party “information concerning the registration and ownership of any partic-
ular aircraft registered in” their territory, according to the reporting standards
ICAO prescribes.75 And although Article 18 of the Convention states that
“aircraft cannot be validly registered in more than one State,”76 that should
not be taken to mean that airlines, that is, the commercial enterprises that
provide air services through the use of aircraft, must have all of their aircraft
registered in a single State. For example, British Airways (BA), which is
incorporated in the U.K., operates a wholly owned subsidiary established in
France called OpenSkies. The aircraft operated by OpenSkies are registered
in France, whereas BA’s mainline fleet is registered in the U.K.77 Article 18 by
itself, therefore, does not disallow airlines from having a multinational pres-
ence in the global marketplace. Ownership of airlines, however, is a different
matter from registration of aircraft. The absence of multinationally owned
airlines is a consequence of a different rule, the nationality rule, which is not
in the Convention at all: as we will see in Chapter 3, the nationality rule is
included in the restrictive bilateral air services treaties that dominate the
exchange of air traffic rights across the world.

2.5.12. Introduction to Cabotage

As already emphasized, the Chicago Convention is not a comprehensive
economic regulatory charter despite the fact that many of its provisions affect
the commercial operations of airlines. There exists, however, one major
exception to that proposition: the doctrine of cabotage that excludes foreign
airlines from providing domestic point-to-point air services. Although the
doctrine is applied internationally through bilateral air services treaties
(often backed by domestic legislation), its international legal foundation
actually rests in the Chicago Convention. As such, we explicate the doctrine
here and review some of the legal and policy questions that cabotage continues

73
See Chicago Convention, supra note 1, arts. 18–19. Article 19, for example, provides that the
registration or transfer of registration of aircraft in any contracting State “shall be made in
accordance with [that State’s] laws and regulations.”
74
Id. art. 20.
75
Id. arts. 20–21. Information reported under ICAO’s standards will be made available to other
States upon request.
76
Chicago Convention, supra note 1, art. 18.
77
The following is a link to the French Registry listing BA’s three OpenSkies aircraft: http://www.
immat.aviation-civile.gouv.fr/immat/servlet/aeronef_liste.html.
50 The Foundations of Public International Aviation Law

to raise. Cabotage within the framework of trade in international air services

will be discussed further in Chapter 3.

2.5.13. History and Legal Basis of Cabotage

The doctrine of cabotage has a venerable pedigree: it is a phenomenon of the
history of trade, invented with the deliberate mercantilist purpose of protect-
ing domestic commerce from foreign competition. Originally, cabotage was a
creature of maritime law, and described a State reserving to itself the right to
restrict all coastal navigation between two points within its territory for the
exclusive use of its own subjects.78 In the international aviation milieu,
cabotage has been defined neutrally as the carriage of passengers, cargo, and
mail between two points within the territory of the same State for compensa-
tion or hire, but also peremptorily as a sovereign right that has traditionally
been reserved to the exclusive use of that State’s national carriers.79 It is in this
preceptive sense that Article 7 of the Chicago Convention acknowledges the
right of each State “to refuse permission to the aircraft of other contracting
States to take on in its territory passengers, mail, and cargo carried for remu-
neration or hire and destined for another point within its territory.”80

2.5.14. Cabotage and Article 7 of the Chicago Convention

Taken in isolation, the segment of Article 7 quoted in the preceding section
seems superfluous given the Convention’s earlier provisions related to airspace
sovereignty (Article 1) and the acknowledged right of States to allow scheduled
foreign carriers to access their territory on a concessionary basis only (Article 6).
But Article 7 goes on to reinforce the peremptory nature of cabotage by decree-
ing that “[e]ach contracting State undertakes not to enter into any arrangements
which specifically grant [the privilege of cabotage] on an exclusive basis to
any other State or an airline of any other State, and not to obtain any such
exclusive privilege from any other State.”81 Under a strong reading of that
passage, States that are parties to the Chicago Convention are barred from
treating cabotage as a coin of exchange in international air services trade.

78
See generally Pablo M. J. Mendes de Leon, Cabotage in Air Transport Regulation
(1981).
79
See generally Douglas R. Lewis, Air Cabotage: Historical and Modern-Day Perspectives, 45 J.
Air L. & Com. 1059 (1980); W. M. Sheehan, Comment, Air Cabotage and the Chicago
Convention, 63 Harv. L. Rev. 1157 (1950).
80
Chicago Convention, supra note 1, art. 7.
81
Id. art. 7.
 2.5. The Core Elements of the Chicago Convention 51

A weaker reading holds that Article 7 does not bar States from trading cabotage
privileges so long as they are not offered or obtained “on an exclusive basis.”
Chile, for example, has abolished its cabotage restriction and stands ready to
offer domestic market access on a reciprocal basis to airlines representing any
of its bilateral air services partners.82 That liberal approach does not offend
Article 7 so long as none of Chile’s agreements includes a rider prohibiting
Chile from offering the same concession to any other countries. Regardless
of which reading is adopted or is ultimately correct as a matter of law, the
conclusion is the same: Article 7 is not simply a scenario-specific reiteration of
the principle of airspace sovereignty, but rather a restraint on the degree
of sovereignty the Convention’s State parties can trade away. But why would
States have agreed to such a condition? From a strategic trade perspective,
economically powerful States may have feared that other parties to the
Convention with strong airlines could lock down potentially lucrative exclusive
cabotage rights for their airlines in third countries with weak air transport
markets. The second sentence of Article 7 keeps that possibility in check,
regardless of whether a strong or weak reading of the provision is accepted.
Economically weaker States, on the other hand, may enjoy the protection that
Article 7 affords: external pressure from strong States for (exclusive) cabotage
rights can be mitigated by reference to the fact such concessions (may) violate
international law. And all States, whether motivated by national pride or by a
protectionist impulse to repel foreign competitive incursions, can avail them-
selves of Article 7 in its entirety in order to maintain closure of their home
transport markets. The United States is the world’s largest cabotage market,
representing over a quarter of global air traffic movements; and U.S. domestic
airlines, both passenger and cargo, are shielded from foreign competition on

82
The Chilean law permitting cabotage is Ley 2.564 de 1979, art. 1. Reciprocity is contained in
Ley 2.564 de 1979, art. 2 (In fact, the relevant legislation also grants Chile’s Civil Aviation Board
the power to offer cabotage rights on a nonreciprocal basis.). Why has Chile offered to trade
away its cabotage restriction? The reason has something to do with geography and a desire to
attract more air service to a country that is three times the length of California but is isolated at
the end of the South American continent. See David Knibb, Chile Trades Cabotage for
“Precedent Setting” Deal, Airline Bus., Apr. 1, 2003, at 14. Chile also freely grants fifth
(beyond) and seventh (stand-alone) freedom rights for the same reason (although its available
fifth freedom connections have been described as air services for the penguin community,
since its closest geographical neighbors are Antarctica and Easter Island). But Chile’s liberality
is also strategic: the cabotage, fifth, and seventh freedom concessions are also being offered to
mollify critics who point out that its largest carrier, LanChile, is engaged in a continent-wide
airline acquisition spree that at least in some cases may be incompatible with the terms of the
nationality rule. See generally José Ignacio Garcı́a-Arboleda, Transnational Airlines in Latin
America Facing the Fear of Nationality, 37 Air & Space L. 93, 100–112 (2012). For fuller
explanations of the fifth and seventh freedoms, see infra Chapter 3, Part 3.3.
52 The Foundations of Public International Aviation Law

internal U.S. routes by Article 7 of the Chicago Convention and supporting

federal law.83

2.5.15. Current Concerns About Cabotage

With the singular exception of Chile’s unilateral renunciation,84 cabotage
remains heavily embedded in public international aviation law. According to
a recent study by the World Trade Organization’s Council for Trade in
Services, “[t]he granting of cabotage rights is an extremely rare feature” in
international air services trade – so rare that the Council was only able to
identify two agreements worldwide that made cabotage concessions.85 As
noted in the preceding section, the United States stands firm on refusing
cabotage rights despite its record during the past two decades as a bastion of
international air transport liberalization. The closest the world aviation market
has come to a “cabotage-free zone” is the EU, where the establishment of a
common air transport market between and within the twenty-eight EU
Member States necessitated dismantling the doctrine (albeit only for air
carriers licensed under EU law). Australia allows foreign-owned airlines to
provide internal services, and a number in fact do,86 but they must be
incorporated and licensed in accordance with domestic law and cannot

83
See Chicago Convention, supra note 1, art. 7; 49 U.S.C.A. § 41703 (West 2008). Although there
is no U.S. federal statute that expressly forbids cabotage, the Department of Transportation is
only authorized to provide cabotage privileges to foreign air carriers for limited periods of time
in cases of a national air transportation emergency. See 49 U.S.C.A. § 40109(g) (West 2012).
84
See Ley 2.564 de 1979, art. 1.
85
Council for Trade in Services, Quantitative Air Services Agreements Review (QUASAR): Part B:
Preliminary Results, at 43, para. 120, S/C/W/270/Add.1 (Nov. 30, 2006). The two identified
agreements are China-Albania and New Zealand-Brunei Darussalam, which cover very
little traffic: http://www.wto.org/english/tratop_e/serv_e/transport_e/quasar_partb_e.pdf. The
Review goes on to add that “[c]abotage traffic has not been identified as such by the
Secretariat. In view of the low number of agreements involved, given the appropriate data
sets it might be possible to identify whether such rights are used, and it might even be feasible to
estimate the traffic. Further analysis could include at least one additional agreement . . . which
covers significant traffic (i.e., Australia-New Zealand, with between 3.5 and 4 million passen-
gers). Moreover, several plurilateral agreements covering several million passengers contain
cabotage rights implicitly or explicitly (e.g., [the European Economic Area], [the European
Common Aviation Area]).” Subsequent to the conclusion of the Council’s analysis, the United
Kingdom and Singapore finalized an air services agreement (ASA) offering reciprocal cabotage
rights. See Alan Khee Jin Tan, Singapore’s New Air Services Agreements with the E.U. and U.K.:
Implications for Liberalization in Asia, 73 J. Air L. & Com. 351, 362–64 (2008). As noted in the
main text, Chile has also offered reciprocal domestic traffic rights to interested foreign airlines.
86
As well as Virgin Australia, Skywest is owned by a Singapore-based company and Tiger Airways
Australia is a subsidiary of a Singapore company partially owned by Singapore Airlines.
 2.5. The Core Elements of the Chicago Convention 53

serve international destinations as designated Australian carriers.87 Strictly

speaking, that is not cabotage as contemplated under Article 7 of the
Chicago Convention, but rather the provision of a “right of establishment”
to foreign investors to allow them to participate in Australia’s domestic avia-
tion sector.88 Were Australia to allow British Airways to fly domestic routes
despite maintaining its principal place of business and country of incorpora-
tion in the United Kingdom, and without establishing a new Australian
subsidiary for that purpose, then “true” cabotage would be implicated. (We
will explore this distinction further in Chapter 3 when we examine the legal
and policy challenges surrounding foreign investment in airlines.) There are
two final matters to consider. First, the commercial value of cabotage rights
remains a matter of contention among airlines, government officials, and
industry analysts. Even if States with large domestic air transport markets
conceded cabotage privileges to foreign air carriers, a lack of brand presence
or status as an “alien competitor” might make those carriers unappealing to
consumers. More importantly, there is only a small number of domestic
markets in the world that are lucrative enough to entice foreign carriers to

87
That is a privilege currently protected under the terms of Australia’s bilateral ASAs with third
countries. See, e.g., Air Transport Agreement, U.S.-Aus., Mar. 31, 2008, http://www.state.gov/
documents/organization/168386.pdf/. Domestic legislation also applies: cf. Air Navigation
Act, 2002, § 11A (Austl.). As a general matter, if other Australian-based air carriers were to be
permitted to operate internationally, they would need an international license. Eligibility
requirements for the international license are typical of ownership and control requirements –
a minimum of 51% Australian ownership, Australian citizens must make up at least two-thirds
of the board, and an Australian citizen must serve as the Board chairman. See http://www.
infrastructure.gov.au/aviation/international/ial/intro.aspx#1. Creative airlines have found
ways to work around this restriction. A recent increase in the quantum of foreign ownership
of Virgin Australia, which has been operating international flights since 2004, has caused it
to adopt a complicated corporate structure under which its international operations are
placed with a separate holding company with majority Australian ownership and an inde-
pendent board of directors. The international operations holding company has long-term
loan and service agreements with the foreign-owned domestic operations division of
Virgin Australia. See Press Release, Virgin Australia, Virgin Australia Announces Proposed
New Structure (Feb. 23, 2012), http://www.virginaustralia.com/us/en/about-us/media/2012/
VIRGIN-AUSTRALIA-NEW-STRUCTURE/.
88
In the context of aviation, a right of establishment would allow foreign investors not only to take
majority ownership and control of domestic carriers, but also to set up new airlines or
subsidiaries of foreign airlines in a domestic market as well as (if compatible with bilateral
ASAs) to be designated to serve international routes. The right of establishment would also
mandate that the foreign-owned entity must operate as a domestically regulated carrier employ-
ing “localized” workers and abiding by local labor, tax, immigration, registration, safety,
security, and other laws. See generally Brian F. Havel & Gabriel S. Sanchez, The Emerging
Lex Aviatica, Geo. J. Int’l L.639, 668–71 (2011); see also infra Chapter 3, Section 3.3.9.
54 The Foundations of Public International Aviation Law

park their planes abroad in the hope of capturing incremental revenues.89

Second, States – for social, political, and economic reasons – have a compel-
ling interest in regulating the airlines that operate within their territory. In a
situation where BA, using aircraft registered in the U.K., sought to provide
cabotage services between Sydney and Melbourne, the U.K. would arguably
remain the State with primary regulatory jurisdiction over BA in its provision
of that service,90 hardly a palatable prospect for the local Australian civil
aviation regulators. Under Articles 11 and 12 of the Chicago Convention, it is
true, Australia exercises regulatory authority over the operation and navigation
of the flight,91 but Australian labor and environmental laws, for instance,
might not (technically) apply.92 A State that is willing to tolerate a foreign-
owned carrier operating within its domestic sphere would find its regulatory
interests better served by following Australia in providing a right of establish-
ment rather than unadulterated cabotage.93

89
Even within the EU, very few “true” cabotage services have materialized precisely because of a
lack of competitive passenger numbers on even the largest domestic routes. (It is arguable
whether the cabotage services referred to here should even be considered true “cabotage”
services, because the EU is considered a single aviation market and any carriers flying between
points within EU Member States are now “Union” carriers and not foreign carriers.) As a
commercial matter, cabotage rights are much more valuable in large landmass countries such
as Australia, Canada, China, and the United States.
90
See Havel, Beyond Open Skies, supra note 28, at 48 n.92.
91
Under Article 11, foreign aircraft need only comply with “[t]he laws and regulations of a
Contracting State relating to the admission to or departure from its territory of aircraft engaged
in international air navigation, or to the operation and navigation of such aircraft while within
its territory. . . .” Chicago Convention, supra note 1, art. 11. Article 12 requires contracting States
to ensure compliance with local navigational rules by aircraft holding their nationality. See id.
art. 12.
92
Neither the Chicago Convention nor the substance of ASAs speaks to issues such as which
State’s labor law would govern in those circumstances. In most cases, it is likely that the
airline’s employees would operate under the labor law of the State of registration. It is fair to
assert that this question of regulatory jurisdiction remains unsettled. In any event, a State that
felt concerned by the regulatory regime affecting cabotage could endeavor to eliminate or
minimize the apparent split in regulatory responsibility through specific arrangements in its
relevant ASAs. Although some might argue that this form of bilaterally mandated regulatory
specification violates the express terms of the Chicago Convention, it is a generally agreed-
upon principle of international treaty law that two or more States that are party to the same
multilateral agreement may take on or waive rights and obligations supplied by the multi-
lateral so long as they do not affect the rights and privileges of third-party signatories to
the multilateral. See Vienna Convention on the Law of Treaties, art. 58, May 23, 1969, 1155
U.N.T.S. 331.
93
As we will see, infra Chapter 3, cabotage also provides two of the “freedoms of the air” (traffic
rights): the eighth freedom occurs at the end of an existing international service (e.g., passen-
gers or cargo could be picked up in New York on a London/New York flight for onward transit
to Los Angeles), and the ninth freedom (which is “true” cabotage that connects domestic points
without being an extension of an international service). We have been advised of a draft
 2.6. The International Civil Aviation Organization 55

2.6. the international civil aviation organization

2.6.1. The Chicago Convention as a Charter for ICAO

As well as being a repository of solutions to the problems of multilateral coordi-
nation, the Chicago Convention also functions as the charter for ICAO – the
official U.N. intergovernmental agency charged with “develop[ing] the princi-
ples and techniques of international air navigation and foster[ing] the planning
and development of international air transport” so as to:
(a) Insure the safe and orderly growth of international civil aviation
throughout the world;
(b) Encourage the arts of aircraft design and operation for peaceful
purposes;
(c) Encourage the development of airways, airports and air navigation
facilities for international civil aviation navigation;
(d) Meet the needs of the people of the world for safe, regular, efficient and
economical air transport;
(e) Prevent economic waste caused by unreasonable competition;
(f) Insure that the rights of contracting States are fully respected and that
every contracting State has a fair opportunity to operate international
airlines;
(g) Avoid discrimination between contracting States;
(h) Promote safety of flight in international air navigation;
(i) Promote generally the development of all aspects of international civil
aeronautics.94

2.6.2. Tensions Between Some ICAO Goals

These goals amplify the cosmopolitan sentiments expressed in the Preamble
to the Convention quoted earlier in this chapter. The list of ICAO’s goals,
however, includes some that are in obvious tension with one another. Most
glaringly, subparagraph (e) – the handiwork of States that were unwilling to
sacrifice their inefficient air carriers to the vagaries of the free market and

master’s thesis at Leiden University’s International Institute of Air and Space Law that
postulates a tenth freedom (related to cabotage): this freedom would allow a suborbital space
flight – for example, by Sir Richard Branson’s U.K.-owned Virgin Galactica – to depart from
and return to the same launch site in another country (e.g., in the U.S. state of Arizona). (As
told to Professor Brian Havel by distinguished U.K. aviation lawyer Mr. John Balfour, Leiden,
Nov.25, 2011.)
94
Chicago Convention, supra note 1, art. 44.
56 The Foundations of Public International Aviation Law

“unreasonable” competition – sits uneasily beside the economic efficiency

and “economical” availability of international air services mentioned in sub-
paragraph (d). Without dwelling on the Convention’s polemical use of the
term “unreasonable,” if one assumes that competition on routes, quality of
service, and pricing will best accomplish the Convention’s goal of greater
efficiency and economical availability of services, then an operating environ-
ment where firms do not have to compete meaningfully for their customer
base will erode efficiency and reduce availability by tolerating monopolistic or
oligopolistic pricing as well as declining service. It is also difficult to imagine
how “competition” (whether reasonable or unreasonable) can flourish while
States are encouraged by subparagraph (f) to sponsor their own international
airlines under a benign regime of “fair opportunity” for all carriers.95 As we
know from the history of trade in international air services, States have acted to
protect their international airlines by heavy regulation of the degree of foreign
competition they will allow into their markets. And, as we also know, ICAO
has done relatively little over the course of its history to dethrone that system of
managed trade. Only since its first Worldwide Air Transport Conference in
2003 has ICAO shown signs of acknowledging U.S. and EU initiatives to
liberalize the international air transport market by calling on States to give
“as much economic freedom as possible [to airlines] while respecting . . . the
need to ensure high standards for safety, security, and environmental
protection.”96

2.6.3. Assessing ICAO’s Roles in Economic Regulation and Technical

Coordination
The Chicago Convention, having effectively devolved stewardship of market
access to its member States, assigns no determinative role to ICAO in the

95
That is precisely why much of the European aviation marketplace in 2013 remains essentially
uncompetitive: there are too many State-sponsored airlines that have never achieved scale and
scope efficiencies. But some smaller European States may be willing to allow their carriers to
disappear, as demonstrated by toleration of recent bankruptcies of State-dominated airlines –
most notably Hungarian national carrier Malev, which had been the recipient of government
subsidies that were determined to be illegal under EU law. See Nicola Clark & David Jolly,
Hungarian National Airline Halts Flights, N.Y. Times, Feb. 3, 2012. Other European govern-
ments, namely, Ireland and Portugal, have been attempting to sell their stakes in struggling
national carriers Aer Lingus and TAP, respectively. Portugal and Hungary are each smaller
geographically than the U.S. state of Indiana and have smaller populations than the U.S. state
of Ohio. One might well wonder how the competitiveness of the U.S. domestic aviation market
would look if each mid-sized state were to have its own air carrier.
96
See ICAO, Consolidated Conclusions, Model Clauses, Recommendations and Declarations,
at 19, ATConf/5 (Mar. 31, 2003) (revised Jul.10, 2003), http://www.icao.int/icao/en/atb/atconf5/.
 2.6. The International Civil Aviation Organization 57

realm of air services trade regulation.97 Arguably, neither the Organization’s

relatively recent embrace of an agenda of regulatory liberalization nor its
involvement in developing a global regime to limit aircraft carbon emissions
has any sound textual basis in the Convention and should instead be the
concern of regional economic groupings.98 In the traditional areas of its remit,
notably technical cooperation, ICAO has had a much better track record.
Charged under the Convention with developing and updating the treaty’s
annexes containing Standards and Recommended Practices (SARPs) for, inter
alia, air traffic management, aircraft and personnel licensing, airport oper-
ations, and aeronautical information services, ICAO is optimally viewed as the
facilitator of the Chicago Convention’s implicit goal of resolving the coordi-
nation challenges that we have noted throughout this chapter. Because later
chapters will provide more specific detail on ICAO’s engagement in matters of
safety, security, and the environment, and also in discrete areas of economic
regulation such as the registration of international security interests,99 we
confine ourselves here to surveying the Organization’s structure and its pri-
mary responsibility to promulgate SARPs. We also examine ICAO’s tightly
circumscribed role as a dispute settlement body and argue that those limita-
tions, coupled with the fact that States have a rational interest in adhering
to the Convention without the (soft) threat of sanctions, renders ICAO an
uncongenial (and unnecessary) forum in which to resolve disputes occurring
in international aviation.100

97
Through six ICAO Worldwide Air Transport Conferences since 2003, ICAO has injected itself
into economic regulation of the industry. Indeed, ICAO now sponsors annual “speed-dating”
Air Services Negotiation (ICAN) Conferences for States interested over the course of a few days
in making more liberal arrangements to exchange air market access with like-minded States. A
description of those conferences can be found here: http://legacy.icao.int/ICAN2009/docs/
ICAO_Journal_ICAN2008_Vol64Num01_p21.pdf.
98
Nevertheless, as noted in the preceding main text, the aims and objectives of the Organization
include the orderly growth of air transport (Article 44(a)), the provision of efficient and
economical air transport (Article 44(d)), and allowing States a fair opportunity to operate
international airlines (Article 44(f)). Cumulatively, these provisions could offer a broad justi-
fication of ICAO’s involvement in economic regulation.
99
This last engagement has been achieved in the context of the Convention on International
Interests in Mobile Equipment (the Cape Town Convention), which will be covered infra in
Chapter 8.
100
A full analysis of ICAO’s legal and extralegal functions is well beyond the scope of this book.
Readers seeking a detailed introduction to the Organization should see Ludwig Weber,
International Civil Aviation Organization: An Introduction (2007). A prolific
commentator on ICAO is one of its senior officials, Ruwantissa Abeyratne. See, e.g.,
Ruwantissa Abeyratne, The Role of the International Civil Aviation Organization (ICAO) in
the Twenty-First Century, 34 Annals Air & Space L. 529 (2009); Ruwantissa Abeyratne,
Reinventing ICAO’s Role in Economic Regulation – A Compelling Need, 13 Issues Aviation
58 The Foundations of Public International Aviation Law

2.6.4. ICAO’s Structure (1): The Council

Organized as a triptych, ICAO features a Council as its main executive body,
along with a Secretariat and a General Assembly comprised of representatives
from the 191 States parties to the Convention.101 In harmony with the practice of
the U.N. General Assembly, all member States have an equal right to repre-
sentation (i.e., one vote).102 The Council elects a President and appoints a
Secretary General.103 It comprises thirty-six State party representatives who are
elected by the Assembly on a triennial basis. Although the Council elections
are open, Article 50(b) of the Convention stipulates that membership prefer-
ence should be given to “(1) the States of chief importance in air transport;
(2) the States . . . mak[ing] the largest contribution to the provision of facilities
for international air navigation; and (3) the States . . . whose designation will
insure that all major geographic areas of the world are represented[.]”104 Once
its membership is established, the Council’s primary responsibility (discussed
below) is the development and adoption of the SARPs listed in the Chicago
Convention annexes. To that end, the Council receives assistance from a series
of subject-specific bureaucratic support bodies that operate under its direction,
including the Air Navigation Commission (technical harmonization and

L. & Pol’y 9 (2013). For a list of Abeyratne’s ICAO-related publications, see http://www.mcgill.
ca/files/iasl/PUBS_Ruwantissa_Abeyratne.pdf.
101
See Chicago Convention, supra note 1, Ch. VII.
102
See id., art. 48(b). See also Charter of the United Nations art. 18, opened for signature Jun. 26,
1945, 3 Bevans 1153 (entered into force Oct. 24, 1945).
103
The descriptions of both positions are vague, and indeed it is unclear how the processes of
“election” and “appointment” differ with respect to the two positions. While the Chicago
Convention does not vest the Council President with the right to vote, he or she is charged with
convening and overseeing meetings of the Council, the Air Transport Committee, and the Air
Navigation Commission, as well as with serving as the Council’s representative to the rest of
ICAO and carrying out any specific duties that the Council may assign to him or her. See
Chicago Convention, supra note 1, art. 51. The Secretary General, on the other hand, acts to
oversee the Secretariat that provides technical, legal, and administrative support to the Council
and the Assembly, including the Secretariat’s five main divisions: the Air Navigation Bureau,
the Air Transport Bureau, the Technical Co-operation Bureau, the Legal Affairs Bureau, and
the Bureau of Administration and Services. The Chicago Convention does not mention the
Secretariat, but its development is in keeping with the evolution of the modern administrative
State. ICAO, like any governing authority, recognized the need for a professional staff to
evaluate, analyze, research, and report on treaty amendments and SARPs that would eventually
be submitted for approval to the Organization’s member States.
104
See Chicago Convention, supra note 1, art. 50(b). Newly elected Council members for the
2014–2016 term are: Australia, Argentina, Bolivia, Brazil, Burkina Faso, Cameroon, Canada,
Chile, China, Dominican Republic, Egypt, France, Germany, India, Italy, Japan, Kenya,
Libya, Malaysia, Mexico, Nicaragua, Nigeria, Norway, Poland, Portugal, Republic of Korea,
Russian Federation, Saudi Arabia, Singapore, South Africa, Spain, United Arab Emirates,
United Kingdom, United Republic of Tanzania, United States, and Venezuela.
 2.6. The International Civil Aviation Organization 59

safety), the Air Transport Committee (economic regulation), the Legal

Committee (comprising legal experts appointed by the member States), and
the Committee on Unlawful Interference (aviation security).105 Although
Article 54 of the Convention briefly mentions the appointment of an Air
Transport Committee among the mandatory functions of the Council,106
without further guidance on the Committee’s precise scope of duties, its
current focus on economic regulation has evolved entirely at the discretion
of the Council. The Air Navigation Commission, in contrast, has a more
elaborate textual footing in the Convention: Article 56 discusses its appoint-
ment and composition, and Article 57 endows it with specific SARP-generating
responsibilities.107 Finally, the ICAO Council is also vested with limited dis-
pute settlement powers that are considered below.

2.6.5. ICAO’s Structure (2): The Assembly and Secretariat

The Assembly, which convenes every three years at ICAO’s headquarters in
Montreal, Canada,108 acts as a reviewing mechanism for the work of the
Organization as a whole. In addition to electing the Council members, the
Assembly approves ICAO’s budget and passes resolutions addressing pertinent
matters affecting international civil aviation.109 The Assembly’s resolutions are
not a species of binding international legislation, however. ICAO member
States that accept the resolutions are not bound to their terms and, in practice,
the language used in these statements is hortatory. Where the Assembly does
exercise some degree of international legal authority is in evaluating amend-
ments to the Convention proposed by the Council. But even here the
Assembly’s “legislative” powers are subject to the high bar that a minimum
of two-thirds of the Convention States must ratify any approved amendment
before it enters into force (and even then the amendment binds only the
countries that have ratified it).110 The ICAO Secretariat’s role is less exalted

105
The Air Navigation Commission is expressly authorized by Chapter X of the Chicago
Convention. See Chicago Convention, supra note 1, arts. 56, 57. The Council’s authority to
establish other subordinate commissions derives from Article 55. See Chicago Convention,
supra note 1, art. 55(a). The ICAO Legal Committee was established by the ICAO Assembly
in May 1947 as a permanent successor to the Comité International Technique d’Experts
Juridiques Aérien (CITEJA), a group of independent legal experts that (among other achieve-
ments) prepared the draft of the 1929 Warsaw Convention on passenger and cargo liability. See
infra Chapter 7, note 6.
106
See id. art. 54(d).
107
See id. arts. 56, 57.
108
These meetings are referred to as the ICAO Triennial Assembly.
109
See Chicago Convention, supra note 1, art. 49.
110
See id. art. 94.
60 The Foundations of Public International Aviation Law

than that of either the Council or the Assembly.111 Its functions are chiefly
administrative and limited to managing the Organization’s subordinate units
such as the Air Navigation, Air Transport, and Legal Affairs Bureaus. These
bodies discharge useful auxiliary functions. The Legal Affairs Bureau, for
instance, researches private and public international aviation law and has
drafted a number of multilateral agreements related to air carrier liability
and security. The Bureau also acts as the secretariat for the ICAO Legal
Committee and facilitates ICAO’s role as a depositary for a number of
international aviation treaties.

2.6.6. Binding Nature of SARPs

At the core of ICAO’s role and utility is the promulgation of the SARPs listed
in the annexes to the Chicago Convention. Article 54(1), in tandem with
Article 90 of the Chicago Convention, grants the Council the power to
adopt, at its discretion, new or amended annexes by a two-thirds majority
vote of its membership. Once adopted, the new or amended annexes take
effect after three months (or longer if the Council so specifies) unless they
are rejected by a majority of the contracting States.112 All of that is straightfor-
ward enough. Interpretive complications arise, however, with respect to
the legally binding nature of SARPs. Recall that Article 12 of the Chicago
Convention stipulates that a contracting State “undertakes to keep its own
[aviation] regulations . . . uniform, to the greatest possible extent, with those
established from time to time under [the] Convention.”113 Although the
phrasing here is strong, Article 12 falls short of an unambiguous duty on

111
As indicated supra note 103, the Secretariat is not explicitly mentioned in the Chicago
Convention.
112
This is a legislative mechanism sometimes referred to as a “negative consensus.” Once the
initial adopting event has taken place (the two-thirds Council vote in favor of a new annex or
amendment of an existing annex), the new annex or amendment does not require further
affirmative action, such as ratification by a majority of the contracting States. Rather, the
change will inevitably take effect unless a majority of contracting States rejects the new
measure. A comparable procedure exists in the World Trade Organization’s Dispute
Settlement Body (DSB). There, in a context that operates through a stronger sense of unanim-
ity than exists in ICAO, the DSB automatically adopts a dispute settlement decision (ruling)
unless all 159 State parties to the Organization vote to reject it. In practice, that means that even
the victorious party to a dispute settlement proceeding would have to vote against a decision in
its favor for the ruling to be rejected. See generally WTO, The WTO Dispute Settlement
Procedures: A Collection of the Relevant Legal Texts (2012).
113
Chicago Convention, supra note 1, art. 12.
 2.6. The International Civil Aviation Organization 61

States to implement SARPs. Moreover, Article 37 of the Convention, which

has a preliminary listing of eleven SARP subject categories, also appears to
step lightly on State sensibilities, providing only that “[e]ach contracting
State undertakes to collaborate in securing the highest practicable degree of
uniformity” on matters addressed in the SARPs.114 To “undertake” is not the
same thing as to “adhere,” nor is the imperative form “shall” present in the
text. Even if “undertakes” is read strongly, the “undertaking” in question is
only to “collaborate,” and not even (for example) to “follow.” The impres-
sion that SARPs are not obligatory (even if compliance is strongly encour-
aged) is underscored dramatically by the peculiarities of Article 38 of the
Chicago Convention. That provision, ironically, strips Article 37 of any
residual possibility of mandatory effect by imposing an obligation on all
member States to alert ICAO of any intention on their part not to comply
with a Council-approved “standard.”115 Thus, a State that finds it “impracti-
cable” to comply with a new or amended standard (or “deems it necessary” to
adopt separate standards) “shall” notify the Council of any differences
between its national regulations or practices and standards adopted under
the annexes.116 Once notified, the Council must inform the other contract-
ing States, but it possesses no direct powers under Article 38 to punish or
demand compliance from recalcitrant States (nor to sanction States that
simply ignore the requirement to notify).117 But some measure of indirect
enforcement remains possible. Article 84 – to be discussed in more detail in
the following section – provides that “any disagreement between two or more
contracting States relating to the interpretation or application of [the
Chicago] Convention and its Annexes . . . shall . . . be decided by the
Council.”118 Article 84 is so compendiously drafted that it would seem to
allow an ICAO member State that is relying on an Article 38 exception
nevertheless to be summoned before the Council by any other member
State.

114
Id. art. 37.
115
See supra note 64 (explaining that this reporting requirement only relates to standards and not
to recommended practices).
116
Id. art. 38.
117
Id. It is on the basis of ICAO’s notification that other States must determine how to respond.
Article 39 allows an aircraft’s airworthiness certificate to be endorsed (presumably by its State of
registration (cf. Article 31) with an enumeration of details of how that aircraft has “failed in any
respect” to satisfy an international standard of airworthiness or performance. Chicago
Convention, supra note 1, art. 39. It might have been useful to link this procedure to Article
38 by requiring an endorsement on the certificate indicating that the registering State has itself
departed from international standards in a particular respect, but Article 39 does not provide for
such self-policing.
118
Chicago Convention, supra note 1, art. 84.
62 The Foundations of Public International Aviation Law

2.6.7. Differences in Legal Effect Between Standards

and Recommended Practices
A further difficulty that arises with respect to the binding force of SARPs is the
distinction between “standards” and “recommended practices.”119 A standard,
according to the ICAO Air Navigation Bureau, is defined as “any specification
for physical characteristics, configuration, matériel, performance, personnel or
procedure, the uniform application of which is recognized as necessary for the
safety or regularity of international air navigation and to which [c]ontracting
States will conform in accordance with the Convention[.]”120 Despite the
Bureau’s sanguine expectation that States “will conform” to a standard
because of its indispensability to international air navigation, its definition
goes on to recognize both that deviations are possible under Article 38 and also
that (concurrently) standards are always subject to a mandatory notification
requirement.121 A recommended practice, on the other hand, is defined by the
Bureau as only “any specification for physical characteristics, configuration,
matériel, performance, personnel or procedure, the uniform application of
which is recognized as desirable in the interest of safety, regularity or effi-
ciency of international air navigation, and to which contracting States will
endeavor to conform in accordance with the Convention.”122 The Bureau
adds that contracting States are “invited,” but not required, “to inform the
Council of non-compliance” with recommended practices.123 The Bureau’s
119
Frankly, the Convention’s use of these terms is not a model of clarity. Just examine Article 38 to
see a range of labels, including repeated invocation of an “international standard or procedure”
in addition to Article 37’s extended lexicon of “standards and recommended practices and
procedures.” See also supra note 64 (discussing the Convention’s additionally confusing use of
the terms “recommended” and “established” standards and practices).
120
ICAO, Air Navigation Bureau, Making an ICAO Standard, Assembly Res. A1–31, ICAO Doc.
4411 (A1-P/45) (1947), http://legacy.icao.int/icao/en/anb/mais/index.html. For ICAO’s most
recent endorsement of this definition, see International Civil Aviation Organization,
Proposal for Annex 19 and Related Consequential Amendments to Annexes 1, 6, 8, 11, 13, and
14, Letter of the Secretary General of the Air Navigation Commission and Attachments, Ref.
AN 8/3–12/42 (Jun. 29, 2012) [hereinafter ICAO, Proposal for Annex 19].
121
See supra text accompanying note 115.
122
ICAO, Air Navigation Bureau, Making an ICAO Standard, supra note 120. For ICAO’s most
recent endorsement of this definition, see ICAO, Proposal for Annex 19, supra note 120, at A-8.
123
The Bureau’s argument that the Article 38 notification requirement applies only to interna-
tional standards is arguably correct, even though Article 38 regrettably opens with a befuddling
reference to an “international standard or procedure” (emphasis added) before defaulting to the
term “international standard.” See supra note 119. But the notion that States are “invited” to
report deviations from recommended practices is wholly an invention of the Bureau and has no
textual support in the Convention. See also infra Chapter 5, Part 5.3 (noting that ICAO has
recently reiterated its invitation to report deviations from recommended practices in the
context of Annex 19, its new consolidated safety annex). There is no notification requirement
that attaches to ICAO’s copious output of policies and guidance materials.
 2.6. The International Civil Aviation Organization 63

differential treatment of standards and recommended practices under Article

38 places recommended practices beyond whatever zone of normativity has
been established by the Chicago Convention, although they may represent an
instance of soft law. In other words, recommended practices possess some
strong measure of aspirational power, but nothing more. But if recommended
practices are arguably soft law, does that mean that standards are hard (bind-
ing) law? Despite the deconstruction of the texts of Articles 37 and 38 of the
Chicago Convention set forth above, ICAO appears to believe so, although
once again the absence of a strong sanction to punish scofflaws surely militates
against an unambiguous assertion of hard law.124 While that fact may vex
legalists, in practice the absence of a sanction may be inconsequential. States
that fail to adhere to the SARPs promulgated by the Council – whether
standards or recommended practices – are likely to incur losses to reputation,
especially if their defections are habitual or severe. Even if those reputational
losses do not affect the nonadhering States’ international relationships as a
whole,125 they could undermine other States’ confidence in the safety of the
defectors’ airlines, in the suitability of their air traffic management systems, or
in their capacity properly to screen passengers and cargo in order to stop
terrorist threats.126 Countries may issue warnings to their airlines and passen-
gers not to fly to defecting States or to avoid deepening aeropolitical ties with
the defectors until they prove they are capable of adhering, or do adhere, to the
SARPs. Both the United States and EU, for example, have audit programs that
monitor international compliance with SARPs and, in the event of serious
shortfalls, allow their civil aviation authorities to freeze, reduce, or suspend the
traffic rights of airlines originating from defecting States.127 Adherence to

124
A principal reason why standards, unlike recommended practices, might be said to constitute
hard law is the requirement in Article 38 of the Convention that noncompliance with standards
must be reported to ICAO, which then must inform other contracting States of that non-
compliance. Chicago Convention, supra note 1, art. 38; see supra text accompanying note 115.
To assert that ICAO standards have binding force would minimally require that those tasked
with enforcing the standards – the contracting States themselves – be made aware of instances
of noncompliance.
125
See generally George W. Downs & Michael A. Jones, Reputation, Compliance, and
International Law, 31 J. Legal Stud. S95 (2002) (describing how State reputational loss limits
defections from international law); see also Robert O. Keohane, After Hegemony:
Cooperation and Discord in the World Political Economy 97 (1984) (discussing
how participation in international “regimes” raises “the costs of deception and irresponsibility”
for States).
126
All of these matters are covered in one or more of the Chicago Convention Annexes.
127
The U.S. program is known as the International Aviation Safety Assessment (IASA) Program.
Begun in 1992, the program authorizes the FAA to assess the civil aviation authorities of foreign
States (not individual carriers) with respect to their capacity to adhere to ICAO standards and
recommended practices for aircraft operation and maintenance. The United States does not
64 The Foundations of Public International Aviation Law

SARPs is strongly incentivized, therefore, even in the absence of a direct

sanction under the Convention.

2.6.8. ICAO Dispute Settlement: Article 84

In addition to its SARPs-related “legislative” authority, the ICAO Council is
also permitted to settle disputes arising under the Chicago Convention.
According to Article 84 of the Convention:
If any disagreement between two or more contracting States relating to the
interpretation or application of this Convention and its Annexes cannot be
settled by negotiation, it shall, on the application of any State concerned in
the disagreement, be decided by the [ICAO] Council. No member of the
Council shall vote in the consideration by the Council of any dispute to
which it is a party. Any contracting State may . . . appeal from the decision of
the Council to an ad hoc tribunal agreed upon with the other parties to the
dispute or to the [International Court of Justice [ICJ]].128

To help facilitate the dispute settlement process, ICAO devised procedural

rules that, inter alia, govern the nature of submissions to and hearings before the
Council.129 Notably, those rules privilege the settlement of disputes through
negotiation over relying on the Council to sort out and settle the contending
claims of the parties.130 That approach is unsurprising given the internal defects
of Article 84. The Article, for instance, vests the ICAO Council with all of the
Organization’s dispute settlement powers without regard to what (if any)
competence that body has to settle international legal claims. The ICJ, which
is granted only “appellate jurisdiction” for Chicago Convention disputes, and
despite its many perceived flaws,131 has the experience and resources to adjudi-
cate State-to-State legal entanglements.

2.6.9. A Critique of Dispute Settlement Under Article 84

Moreover, Article 84 raises legitimacy concerns by denying Council members
whose States may be party to a dispute the right to vote on the outcome. As a
blacklist States it classifies as noncompliant, but works with them to improve their standards
and practices and will deny expansion of traffic rights until compliance issues have been
addressed. The EU Member States inspect individual carriers and have a common blacklist
banning noncompliant carriers from flying to any EU State. See also supra note 27.
128
As a U.N. body, ICAO is permitted under Article 96(2) of the U.N. Charter to submit legal
questions to the ICJ for an advisory opinion. It has yet to avail itself of this privilege, however.
129
See ICAO, Rules for the Settlement of Differences, ICAO Doc. No. 7782/2 (1975).
130
See id. arts. 6 & 14.
131
See generally Eric A. Posner, The Decline of the International Court of Justice, in
International Conflict Resolution 111 (Stefan Voigt et al. eds., 2006).
 2.6. The International Civil Aviation Organization 65

matter of Realpolitik, we may wonder why any State would leave itself exposed
to a negative finding by the Council if it lacks the right to have a meaningful
say in the decision. This enforced abstention is strange given that the ICJ
grants a State party to a case before it the right to have one of its nationals on
the bench.132 Further, given that any Council decision can be appealed to a
non-ICAO body (the ICJ or an ad hoc arbitral tribunal), which is under no
obligation to respect the Council’s findings, it may be queried what forensic
purpose the Council’s intervention serves. If anything, the Council seems
shoehorned into a political role that lies somewhere between initial accusa-
tions of legal violation and more legitimate and purposive fora for interna-
tional adjudication. It is also likely that States that are assessing particular
disputes (either as complainant or respondent) will in part determine their
view of the value or threat of the Convention’s dispute settlement process by an
assessment of the practical effects of the available sanctions. Should a State
find itself on the losing end of a Council decision and subsequent appeal, it
forfeits voting power in the Council and the Assembly.133 The most important
powers of those organs are, as we have seen, to propose and accept amend-
ments to the Chicago Convention – amendments that must then be ratified by
the member States before they become enforceable and which bind only
ratifying States.134 If amendments to the Convention alone are considered, a
State that has forfeited its voting powers typically need not fear the imposition
of new legal obligations under Convention amendments to which it has not
specifically assented.135 But more problematical is the process of SARP and
annex adoption and amendment, where new rules can take effect for every
member State unless a majority of States rejects them.136

132
See Statute of the International Court of Justice, art. 31, Jun. 26, 1945, 3 Bevans 1153, 33 U.N.
T.S. 993.
133
See Chicago Convention, supra note 1, art. 88.
134
See id. art. 94(a).
135
Note, however, that Article 94(b) does allow the Assembly to designate an amendment such
that nonratification will result in a State’s expulsion from ICAO and make that State no longer
a party to the Convention. See id. art. 94(b). Thus, the inability to vote on Convention
amendments is not always without consequence.
136
See supra note 112 (discussing the “negative consensus” procedure). Thus, if a State with a
Council vote were penalized with loss of voting power under Article 88, that State would also
presumably lose its ability to influence the adoption or amendment of SARPs and annexes.
Whether or not SARPs constitute a binding legal obligation, States may still view that loss of
influence as a serious consequence of forfeiting voting power. Although the exact meaning of
“voting power” has never been defined in ICAO practice, it is unclear that a State stripped of its
vote would still be allowed to participate in the development and consideration of a SARP or an
annex (in the same way that non-Council States are permitted to do under Article 53 of the
Convention). Moreover, while such participation would mitigate the effect of the loss of a vote,
any member State deprived of voting power might find its contributions to the development of
66 The Foundations of Public International Aviation Law

2.6.10. Another Available Remedy: Article 87

A facially potent remedy contemplated under Article 87 of the Convention
involves situations where an airline of a State party, rather than the State itself,
is found to have failed to comply with the outcome of the Convention’s
dispute settlement process. In such instances, all 191 contracting States must
bar that air carrier from flying into, out of, or over their territory.137 But third-
party enforcement of international agreements can be difficult to coordinate
and monitor, particularly because every potential enforcer has an incentive
to “cheat” and to rely on other enforcing States to bear any costs associated
with the punishment. If the potential gains and losses of a dispute are confined
only to a select number of States, other contracting States have little or no
interest in expending resources on enforcement. Enforcing States, after all,
may damage relations with the rogue airline’s home country, compromising
opportunities to strengthen existing ties. Banning a major network carrier like
British Airways or United could have untold aeropolitical fallout, antagoniz-
ing major economic powers while losing the benefits those airlines provide to
the enforcing States’ economies.

2.6.11. A Brief Proposal on ICAO Dispute Settlement

More reasonably, the Chicago Convention ought to (but does not) emulate
the later-evolving WTO dispute settlement model by allowing aggrieved
States to take retaliatory measures against nonconforming States (or, in
appropriate cases, their airlines). That way, only those countries with a vested
interest in the dispute (and thus the incentive to enforce the outcome) would
be committed to doing so.138 As it stands, however, the Convention’s enforce-
ment provision against noncompliant airlines is impractical and politically
imprudent.139

norms to be unwelcome within the rest of the ICAO community. Although the hard legal
penalties for noncompliance mentioned in the main text may not appear overly stringent,
therefore, much of ICAO’s work, like most international lawmaking, involves less formal
mechanisms for norm-generation, and States will not want to be shut out of that process.
137
See Chicago Convention, supra note 1, art. 87.
138
See Posner, The Perils of Global Legalism, supra note 22, at 154–56 (discussing the
effectiveness of this dispute settlement enforcement method).
139
For a proposal to reinforce relatively weak intergovernmental bureaucracies like ICAO by
collective member State action that would exclude violators from the benefits of membership,
see Oona Hathaway & Scott J. Shapiro, Outcasting: Enforcement in Domestic and International
Law, 121 Yale L.J. 252 (2011).
 2.6. The International Civil Aviation Organization 67

2.6.12. ICAO’s Continuing Mission

This survey of ICAO and its most legally related functions hardly captures all
of the Organization’s activities. Criticism of ICAO’s role in international
economic regulation or in dispute settlement should not be taken as an
indictment of the institution as a whole. It is important to bear in mind that
the promulgation of SARPs is now only one dimension of ICAO’s mission to
promote technical cooperation and safety harmonization at the international
level. In 1999, the Organization launched its Universal Safety and Oversight
Audit Program (USOAP) with the aim of fostering greater global transparency
with respect to State adherence to the Convention and its annexes. ICAO
circulates the reports produced through these audits to all contracting States.
Although USOAP cannot directly compel States to fall into line with the
Convention, negative audits can inflict reputational losses on States and in
turn lead to breakdowns in aeropolitical relations with, or even sanctions
by, other State parties to the Convention.140 As later chapters will reveal,
ICAO has been active also in securing global cooperation to prevent and
combat aviation crimes, including hijackings and other terrorist challenges
to international civil aviation. More recently, the international community
entrusted ICAO with the responsibility to develop global standards on aviation
carbon emissions. The Organization continues to encourage its members to
collaborate on projects that expand the reach of international air transport,
for example, by channeling assistance to developing countries in moder-
nizing their air transport sectors.141 Another key initiative – the Cooperative
Development of Operational Safety and Continuing Airworthiness
Programmes (COSCAP) – has sought to devolve aviation technical and safety
cooperation to regional groupings, leaving ICAO as a framework organization
tasked with promoting a region-based approach to air transport issues.142

140
ICAO uses the USOAP to help bring noncompliant States up to its global standards, but the
EU, for example, has included USOAP audits in its decision-making process for banning
third-country operators. See European Aviation Safety Agency, Opinion 05/2012, Nov. 22, 2012,
http://easa.europa.eu/agency-measures/docs/opinions/2012/05/EN%20to%20Opinion%2005-
2012%20(TCO).pdf. ICAO maintains a special website for the USOAP, http://www.icao.int/
safety/CMAForum/.
141
ICAO has a variety of programs and mechanisms by which it provides technical expertise as
well as financial support for safety and modernization projects. See generally Jason R. Bonin,
Regionalism in International Civil Aviation: A Reevaluation of the Economic Regulation of
International Air Transport in the Context of Economic Integration, 12 Singapore Y.B. Int’l
L. & Contributions 113 (2008).
142
See ICAO, 2011: State of Global Aviation Safety 24–25 (2011). This process is intended
to go further than just the coordination of ICAO’s regional offices. By itself, regionalism is not a
new development for ICAO: the regional offices were established shortly after ICAO was
created. But in recent years ICAO has begun to reach out to other regional organizations such
68 The Foundations of Public International Aviation Law

Finally, ICAO continues to act as a global advocate for States to achieve

interoperability as they undertake the costly task of modernizing their air
traffic management systems.143

2.6.13. A More Muscular ICAO?

While legalists hold out hope for the eventual emergence of a more “muscu-
lar” ICAO, equipped with unambiguous international legislative powers or
more clout in dispute settlement, the likelihood of that transformation in the
foreseeable future is not promising. This is not a counsel of despair, however.
As the last six decades have shown, the smooth functioning of the Chicago
Convention does not require a strong dispute settlement mechanism. The
treaty’s instrumental value in solving international coordination problems
provides strong incentives for States to adhere to its provisions and to avoid
defections. As for ICAO’s powers, although they may lack formal normativity,
they remain adequate for the Organization’s primary task of developing and
amending the Convention annexes. And it is not clear that any of ICAO’s
other functions, such as promoting safety and security or working as a legal
advisory body, would be significantly enhanced by an upgrade of ICAO’s legal
authority. In fact, as with other international organizations that depend on
maintaining equipoise in its members’ interests, an expanded or more intru-
sive role in international aeropolitical affairs could compromise ICAO’s
legitimacy and capacity to function.

as the EU and hosted a joint EU/ICAO symposium on regional organizations in Montreal in

April 2008. See generally http://legacy.icao.int/icao/en/ro/roresp.htm.
143
See Brian F. Havel, A US Point of View on European ATM Developments, in Achieving the
Single European Sky 107 (Pablo M. J. Mendes de Leon & Daniel Calleja Crespo eds.,
2011); see also Ensuring the Safety and Efficiency of Global Aviation, 66 icao j. 3 (2011).
 3

The International Law Regime for Trade

in Air Services

3.1. introduction to the bilateral system

3.1.1. Parallel Frameworks: The Chicago Convention

and ASAs
As will now be clear, there are parallel frameworks that organize international
air services. One is the product of the Chicago Convention and focuses primar-
ily on setting the terms of international technical cooperation and harmoniza-
tion. The other is a much more specific economic system that is based on
bilateral exchange where two States negotiate an air services agreement (ASA)
that grants each party’s airlines the privilege to carry passengers, cargo, or a
combination of both to points to, from, over, or beyond their respective terri-
tories. These market access privileges (commonly referred to as “traffic rights”)
have historically been subject to a number of protectionist conditions, includ-
ing, inter alia, caps on the number of flights flown over a given time period
(frequencies), predetermined limits on the amount of passengers and/or cargo
carried (capacity), and rate of return (pricing or air fare) regulations.

3.1.2. The Nationality Rule

No restrictive condition has been more conspicuous than the pervasive
requirement, stitched into virtually all ASAs, that an airline must be substan-
tially owned (and often also effectively controlled) by its home State (or by the
citizens of that State) before it is eligible to perform international air services
under that State’s ASAs. Referred to by aviation lawyers as the “nationality
rule,”1 the extraordinary consequence of that restriction is that the world’s

1
In this book, the nationality rule includes both ASA nationality clauses (requiring States to
designate for international service only airlines owned and controlled by the designating State

69
70 The International Law Regime for Trade in Air Services

airlines are effectively barred from fully accessing global equity markets,2 from
establishing foreign subsidiaries, and from consummating cross-border merg-
ers. As a result, there is no such thing as a true global airline, although
Australia and New Zealand had aspirations to build such a Colossus at the
Chicago conference in 1944.3 To borrow a slogan favored by the International
Air Transport Association (IATA), the nationality rule prevents airlines “from
doing business like any other business.”4 In a phrase, the industry that helped
to globalize the world has not itself become globalized.

3.1.3. Recent Liberalization Initiatives

In the last two decades, however, the bilateral system (known as the “Chicago”
system even though it evolved after the Chicago Convention5) has undergone
a paradigm shift from overt protectionism to an increasingly widespread
tolerance, even enthusiasm, for reducing barriers to international trade in air
services. The United States, through its open skies policy,6 has secured liberal
reciprocal market access concessions from more than 100 partner States,
including a landmark agreement in 2007 with all 27 Member States of the
European Union (EU).7 The EU, in turn, has developed an external aviation

or its citizens), and domestic laws that cap foreign ownership and control of home State
airlines).
2
Ironically, airlines’ access to foreign debt markets is usually unrestricted, unless a foreign bank
or investor acquires so much debt in a carrier that the home State or the home State citizens
lose effective control over the airline. For example, in 2011 the Royal Bank of Scotland (RBS)
sold all of its aircraft leasing operations to Sumitomo Mitsui of Japan for $700 million.
Sumitomo is not barred by the nationality rule from financing aircraft leases for U.S. or U.K.
airlines that previously relied on RBS. See infra Chapter 8, Section 8.2.2.
3
See Michael E. Levine, Scope and Limits of Multilateral Approaches to International Air
Transport, in OECD, International Air Transport: The Challenges Ahead 75,
87 n.6 (1993) (describing the proposal as a harbinger of “international socialism”).
4
The slogan has appeared in a number of settings. See, e.g., int’l air transp. assoc., Agenda
for Freedom, http://www.agenda-for-freedom.aero/.
5
See Brian F. Havel, Beyond Open Skies: A New Regime for International
Aviation 9 (2009).
6
Open skies received official imprimatur in a policy statement issued by the U.S. Department of
Transportation in 1992; see generally In the Matter of Defining “Open Skies,” Dkt. No. 48130,
Order 92-8-13, 1992 DOT Av. LEXIS 568 (Dep’t of Transp. Aug 5, 1992). The policy principles
were reaffirmed three years later in the Department of Transportation’s Statement of United
States International Air Transportation Policy, Dkt. No. 49844, 60 Fed. Reg. 21,841 (May 3,
1995). Although the term originated as a piece of U.S. policy nomenclature, it is now broadly
applied to any liberal ASA.
7
See Air Transport Agreement, U.S.-EU, Apr. 30, 2007, 2007 O.J. (L 134) 4, 46 I.L.M. 470
[hereinafter U.S./EU Air Transport Agreement]. The Agreement entered into provisional force
on March 30, 2008, and was subsequently modified by the Protocol to Amend the Air Transport
Agreement, U.S.-EU, Jun. 24, 2010, 2010 O.J. (L 223) 3. For a consolidated version of the 2007
 3.1. Introduction to the Bilateral System 71

policy aimed at exporting its internal model of a single aviation market among
EU Member States to countries in the Union’s geographic neighborhood.
Simultaneously, the EU is pursuing strategic bilateral partnerships (such as
the aforementioned agreement with the United States) to create an Open
Aviation Area (OAA) between the EU and leading aviation powers that is
intended to go even further than the U.S. open skies model in its efforts to
liberalize trade in air services.8 Regional accords, such as the Yamoussoukro
Declaration/Decision among members of the African Union and the aviation
agreements finalized among the member States of the Association of
Southeast Asian Nations (ASEAN), have also pressed air transport liberaliza-
tion forward, although in a piecemeal and incomplete manner. Meanwhile,
despite the fact that the international community has come to embrace trade
in goods and services at the multilateral level under the auspices of the World
Trade Organization (WTO), the “hard” economic elements of air services,
notably the exchange of traffic rights, have been excluded from that regime.

3.1.4. Overview of Topics

In this chapter, we overview the most salient features of the legal regime that
has evolved to regulate international trade in air services. For conceptual
simplicity, we build our analysis around the substantive elements of the U.S.
open skies template,9 but with frequent reference to important distinctions

and 2010 instruments, see Air Transport Agreement as Amended by Protocol to Amend the Air
Transport Agreement Between the United States of America and the European Union and Its
Member States, reprinted in U.S. Dep’t of State, Eighth Meeting of the US-EU Joint
Committee: Record of Meetings, Attachment 2 (Nov. 17, 2010), http://www.state.gov/docu
ments/organization/151670.pdf. Unless otherwise noted, all references to the U.S./EU Air
Transport Agreement are to the amended version of that treaty.
8
The OAA concept is derived conceptually from the Transatlantic Common Aviation Area
(TCAA) initiative proposed by the Association of European Airlines (AEA) in 1999. See Ass’n
of Eur. Airlines, Towards a Transatlantic Common Aviation Area: AEA Policy
Statement (1999). Although it is sometimes compared with the U.S. open skies policy, the OAA
(like the TCAA) embodies a more robust agenda for air transport liberalization – one that includes
unrestricted traffic rights, cross-border investment in airlines, and comprehensive regulatory
harmonization. No third State has yet entered into a full OAA with the EU (the agreement
with Canada includes four progressive steps to full OAA status that depend on uncertain future
Canadian legislative changes: see Agreement on Air Transport Between Canada and the
European [Union] and its Member States, Dec. 17, 2009, 2010 O.J. (L 207) 32). On the future
of the EU’s external aviation policy, including proposals for future agreements, see infra
Section 3.5.4.
9
See generally U.S. Dep’t of State, Air Transport Agreement Between the Government of the
United States of America and the Government of [Country] (Jan. 12, 2012), http://www.state.
gov/documents/organization/114970.pdf [hereinafter Model Open Skies Agreement]. An alter-
native model is the “Full liberalization” Template Air Services Agreement (TASA) of the
72 The International Law Regime for Trade in Air Services

that exist in the bilateral aviation trade relationships of other countries and
regions. With more than 4000 ASAs in existence,10 along with thousands of
additional hard and soft law instruments modifying those agreements,11 it is
impossible for a single chapter (or even a single volume) to capture all of the
nuances, particularities, and exceptions that clutter the landscape of aviation
trade. Even so, once readers are familiar with the system’s principal juristic
elements, the idiosyncrasies of specific agreements can be readily deciphered.
We will conclude with a look at international aviation’s attenuated presence
within the WTO system and discuss how that organization’s trade disciplines
do not align easily with the key substantive rights exchanged under bilateral
ASAs. We begin with a brief retrospective look at the history of trade in air
services, including the emergence of its resolutely bilateral character and its
embrace of certain unique ideas in international commercial regulation.

3.2. aviation trade after the chicago convention

3.2.1. Concessionary Regime of the Chicago Convention

As discussed in Chapter 2, delegates at the 1944 Chicago conference failed to
agree on a single global market system for international aviation. Ideological
differences between the United States, on the one hand, and the Western
European States, on the other, over the degree of market freedom that ought
to be afforded the still fledgling industry drove negotiations about the “proper”
aviation economic environment to stalemate. As we noted, the multilateral
treaty that was finalized at the conference – the Chicago Convention12 – is not
devoid of economic impact. The principle of airspace sovereignty,13 allied with
the affirmation of the rights of States to regulate commercial airspace access on a
concessionary basis14 and to reserve domestic air transport (“cabotage”) to their

ICAO. ICAO also provides both “Traditional” and “Transitional” templates. See ICAO, Air
Transport Bureau, Economic Policy & Infrastructure Management Section, Economic
Regulation Template Air Services Agreement, http://legacy.icao.int/icao/en/atb/epm/Ecp/
Tasa.htm.
10
See WTO, Air Services Agreements Projector (2010), http://www.wto.org/asap/index.html.
11
See Cornelia Woll, The Road to External Representation: The European Commission’s Activism
in International Air Transport, 13 J. Eur. Pub. Pol’y 52, 56 (2006) (stating that if one takes into
account all informal exchanges, additions, and writings, the global number of extant bilateral
ASAs may be as high as 10,000).
12
See Convention on International Civil Aviation, opened for signature Dec. 7, 1944, 61 Stat. 1180,
15 U.N.T.S. 295 (entered into force Apr. 4, 1947) [hereinafter Chicago Convention]. As of
March 2013, 191 States are parties to the Convention. See supra Chapter 1, n. 11.
13
See id. art. 1.
14
See id. art. 6.
 3.2. Aviation Trade After the Chicago Convention 73

own air carriers,15 produced powerful economic implications. An obsessive

focus on sovereignty displaced any notion of creating a commercial airspace
analog to the mare liberum (freedom of the high seas).16 Thus, before an airline
serving international routes is permitted to operate any service that crosses the
sovereign airspace of a foreign State (or to land in, depart from, or enplane or
deplane passengers or cargo within that territory), its home State must negotiate
a concession from the foreign State that allows it do so. The Convention,
however, did not predetermine how negotiations for such concessions might
be conducted. The world’s States (or a group of like-minded States) could, in
theory, have subscribed to a multilateral and generous distribution of uniform
traffic rights. In practice, protectionist impulses ruled.

3.2.2. Failure of Multilateralism: The Two Freedoms

and Five Freedoms Agreements
Nevertheless, even though hard economic provisions were mostly stripped out
of the Chicago Convention, the United States and some other participants still
advocated for side agreements exchanging traffic rights at the multilateral
level. To that end, the Chicago delegates did prepare two ancillary accords,
the International Air Services Transit Agreement (“Two Freedoms
Agreement”)17 and the International Air Transport Agreement (“Five
Freedoms Agreement”).18 Those agreements instituted the “freedoms of the
air,” actually a series of restrictions that sought to confine market access rights
within an ascending scale of relative openness (discussed below). Of the two
instruments, only the Two Freedoms Agreement – with its provisions limited
to flyover and noncommercial landing rights – managed to win wide assent in
a world suspicious of unbridled market forces.19 The Five Freedoms

15
See id. art. 7; see supra Chapter 2, Part 2.5.
16
See generally Hugo Grotius, The Freedom of the Seas (Ralph Van Deman Mogoffin
trans., Oxford Univ. Press 1916) (1608). French scholar Paul Fauchille was the best-known
advocate for an aviation regime modeled on Grotius’s principles. He observed that the air was,
like Grotius had said about the oceans, capable of being occupied but not of being possessed.
See Stuart Banner, Who Owns the Sky?: The Struggle To Control Airspace
from the Wright Brothers On 48–50 (2008); see also supra Chapter 2, n. 34.
17
International Air Services Transit Agreement, opened for signature Dec. 7, 1944, 59 Stat. 1693,
84 U.N.T.S. 389 (entered into force Jan. 30, 1945) (129 State parties as of January 2013)
[hereinafter Two Freedoms Agreement].
18
International Air Transport Agreement, opened for signature Dec. 7, 1944, 59 Stat. 1701, 171
U.N.T.S. 387 (entered into force Jan. 30, 1945) (11 State parties as of January 2013) [hereinafter
Five Freedoms Agreement].
19
The Two Freedoms Agreement has been ratified by 129 States since 1944. When set beside the
mere 11 ratifications received by the Five Freedoms Agreement, it is incommensurably the
74 The International Law Regime for Trade in Air Services

Agreement held the potential to allow airlines to develop deeper transnational

route networks by generally granting an airline of a State party the privilege not
only to carry traffic back and forth between any point in its home State and any
point in a foreign State party to the Agreement,20 but also to move traffic
“beyond” that foreign State to serve points in any third State party.21 But the
Five Freedoms Agreement attracted few adherents and quickly became mor-
ibund. Arguably, at the inception of the Agreement only the U.S. airline
industry was poised to take full advantage of its multilateral liberalizing
provisions. From an economic standpoint, that “first mover” advantage of
U.S. carriers was not necessarily problematic. If they enjoyed the resources,
technology, and initiative to provide international air service at a level superior
to that of foreign competitors, no economic reason disqualified them from
doing so. States with less nimble air transport sectors would, theoretically, have
been better off switching resources into services (or goods) where they held a
comparative advantage while their consumers used U.S. airlines for interna-
tional travel.22 Such a happy destiny for the U.S. airline industry was utopian,
of course, because pure-form Darwinian economic thinking was trumped in
the 1940s and later by a mix of ideological factors that included national pride,
deep-seated suspicion of unregulated economies, and a belief that airlines
were primarily public utilities rather than autonomous actors in the market-
place. Another half-century would pass before the major aviation powers
(especially those of Western Europe) would take economic theory as norma-
tive in framing policy for international air transport.

3.2.3. Rise of Bilateralism and Managed Trade

After the failure of the Five Freedoms Agreement to prompt a multilateral
exchange of even minimally liberal market access privileges, States began
to use bilateral ASAs as the principal diplomatic and political vehicle for

more successful of the two agreements. For more on the early history of these treaties, see
Charles S. Rhyne, International Law and Air Transportation, 47 Mich. L. Rev. 41 (1948).
20
These back-and-forth privileges are called the third and fourth freedoms; see infra text accom-
panying note 36.
21
Under the fifth freedom, see infra text accompanying note 41, an air carrier can bring passengers
(and cargo) back and forth between a foreign State (the bilateral partner State) and a third
State, but the flight must always remain an extension of a sequence that will end in the home
State. There is (as yet) no generally available privilege to move traffic back and forth between a
foreign State and a third State without a home State connection. See infra text accompanying
note 49.
22
On the distinction between comparative and absolute advantage in international trade, see
supra Chapter 2, n. 31.
 3.2. Aviation Trade After the Chicago Convention 75

these trades.23 As an object of purely bilateral exchange, however, market

access privileges were now to be conceded only on the basis of defensive
reciprocity. A State could choose to tighten or loosen any number of operating
restrictions, including constraints on pricing, capacity, frequencies, and traffic
rights, in line with the recalcitrance or generosity of its bilateral partners.
A principal motivation for a managed trade strategy was that a State, by
not “giving away” too much market access to other States, could secure for
its own airlines what it perceived to be an equitable share of any given trans-
national market. Other restrictions, which have long been endemic in this
system, could then be utilized to freeze each partner’s carriers in artificial
commercial parity. For instance, in a two-State scenario where State A’s airline
has a higher cost structure than the airline of State B, State A may insist on
pricing controls for routes between the two countries in order to ensure that
its own airline is able to recover its costs (plus, most likely, any additional
capital necessary to attract equity investments),24 despite the fact that State B’s
more efficient carrier may be able to set lower prices while still recovering
its costs. Similarly, where State A’s airline has more available capacity to
dedicate to routes between the two countries, State B may insist on capacity
limits to ensure that its airline is able to carry a roughly equal share of
the traffic.

3.2.4. Bilateralism Is Not Ordained in the Chicago Convention

Although this system of piecemeal give-and-take, as already noted, is often
labeled the “Chicago system,” bilateralism is in no way ordained by the
Chicago Convention itself. Delegates at the conference did adopt
Resolution VIII, captioned “Standard Form of Agreement for Provisional Air
Routes,” which recommended a model nonexclusive bilateral agreement that
States were free to adopt during a transitional period (the immediate postwar
period) “in order to obtain practical experience for giving effect to more
permanent arrangements at a later date.”25 Divisions among the delegations

23
The idea of bilateralism was actually considered at the Chicago conference and a model
agreement emerged from delegate discussions. See main text infra.
24
In instances where an airline was owned by its home State and thus was not under the same
market pressures as private enterprises to return profits to its investors, pricing controls could
still be used to protect the nationally owned airline (and hence its State owner) from the
embarrassment of ceding large portions of its market share to foreign competitors. This
“national pride” component of aviation policy still exerts a powerful influence in the realm
of trade in air services.
25
See Resolution VIII, in Resolutions for the Final Act of the International Civil Aviation
Conference (Dec. 7, 1944), reprinted in 3 Av. L. Rep. (CCH) ¶ 28,012, at 25,063–66.
76 The International Law Regime for Trade in Air Services

at Chicago ensured that no such “more permanent arrangements” ever mate-

rialized. The result, a massive case-by-case negotiation and exchange of
literally thousands of international air routes, has been colorfully described
by a leading commentator as a “labyrinthine legal grotto.”26

3.3. the freedoms of the air

3.3.1. At the Core of All Aviation Trade Agreements

The substantive content of ASAs, present and projecting into the future, will
shortly occupy our attention for the remainder of this chapter. In this part we
examine one of international aviation’s most visible deposits of jargon and
conceptual confusion: the nine freedoms of the air.27 Entry into the domain of
international aviation law, somewhat ironically, demands fluency in the nine
freedoms despite the fact that almost no ASAs characterize their exchanges of
traffic rights using terminology such as “first freedom,” “second freedom,”
“third freedom,” and so on. Yet the content of these freedoms lies at the core of
all aviation trade agreements and remains a contentious element in air services
negotiations. It is not difficult to see why. An airline’s right to carry interna-
tional traffic (passengers, cargo, or both in combination) over, to, from, within,
or beyond points in a foreign State can seriously affect its economic viability.
When the United States and China initialed a new ASA in 2007 that increased
daily round-trip flight opportunities for U.S. carriers to Beijing, Shanghai, and
Guangzhou over a period of five years from ten to twenty-three,28 every major
U.S. carrier petitioned the U.S. Department of Transportation (DOT) for
authorization to serve one or more of the new routes.29 With China’s sizzling
economy and growing reputation as a tourist destination, market access to
major Chinese cities had become a source of substantial potential revenues for
U.S. airlines. Although technically this improvement in U.S./China aviation
relations did not confer new freedoms of the air per se between the parties, the
26
Bin Cheng, The Law of International Air Transport 491 (1962).
27
A tenth freedom has been posited: the privilege of a foreign-owned enterprise to launch
suborbital space vehicles from inside another State’s territory and to return the vehicle to
earth within the same territory – a trajectory that might otherwise be prohibited by the cabotage
rule. See supra Chapter 2, n. 93.
28
See Ariana Eunjung Cha & Del Quentin Weber, U.S., China Agree to Double Flights, Wash.
Post, May 24, 2007, at D1, http://www.washingtonpost.com/wp-dyn/content/article/2007/05/
23/AR2007052301120.html. On the definition of frequencies, see infra text accompanying
note 134.
29
See U.S. Airlines Fight For New Routes, Shanghai Daily, July 25, 2007, http://www.china.org.
cn/archive/2007-07/25/content_1218468.htm. Under open skies agreements, however, there are
no a priori limitations on route availability.
 3.3. The Freedoms of the Air 77

easing of restrictions on the use of the existing five freedoms was itself
commercially significant.

3.3.2. The “Noncommercial” First and Second Freedoms

The Two Freedoms Agreement, as previously mentioned, received wide ratifi-
cation after the close of the Chicago conference in December 1944. One
explanation for that outcome is that the Agreement does not exchange hard
economic (i.e., traffic) rights, but rather resolves sovereignty issues that impinge
on the ordinary functionality of international air services. Thus, the first freedom
of the air allows foreign airlines to operate services that pass over the granting
State’s territory (hence its description as the “flyover” privilege). The second
freedom permits landings for “non-traffic” (i.e., noncommercial) purposes, such
as technical, maintenance, or refueling stops.30 Neither privilege31 appears to
have much direct economic effect on the grantor’s air transport market, and both
are typically regarded as “transit” privileges. As one observer has noted, “a
commercial enterprise . . . would not get very far if . . . limited to the exercise
of these two privileges.”32 On the other hand, a commercial enterprise would
likely not get very far without these privileges either. Despite its technical nature,
the first freedom in particular can have substantial economic consequences.
Without overflight rights, States such as Canada and Russia, which control large
blocks of the world’s airspace, could impede direct international routes. Russia
has long exploited its jurisdiction over the shortest air routes from Europe to East
Asia (the trans-Siberian corridor) to levy what most observers regard as excessive
overflight fees on EU airlines.33 At the same time, Russia capped the number of
U.S. air carriers that can overfly the corridor, although an agreement reached

30
See Two Freedoms Agreement, supra note 17, art. I.
31
In view of the sovereignty principle in Article 1 of the Chicago Convention, it would be more
accurate to speak of the freedoms as “privileges,” which is the word used in both the Two
Freedoms and Five Freedoms agreements. Nevertheless, the expression “freedoms of the air”
has attained wide currency in the law of international air transport.
32
R. M. Forrest, Is Open Competition Preferable to Regulation?, 6 Air L. 7, 8 (1981).
33
Russia has allegedly used these “rents” to prop up its own national carrier, Aeroflot. Indeed, EU
airline executives report that overflight fees were often paid directly to Aeroflot’s bank account.
For years the EU protested these charges and negotiated with Russia to curtail them. EU
negotiators appeared finally to have succeeded as a condition of Russia’s accession to the WTO,
and in 2011 Russia and the EU signed a set of “Agreed Principles on the Modernization of the
Siberian Overflight System.” See Press Release, Europa, Air Transport: Commission
Welcomes Agreement on Siberian Overflights (Dec. 1, 2011). But the European Commission
is skeptical of Russia’s willingness to honor the terms of that agreement. See European
Comm’n, Communication from the Commission to the European Parliament, The
Council, The European Economic and Social Committee and the Committee of the
Regions, The EU’s External Aviation Policy: Addressing Future Challenges, COM (2012) 556
78 The International Law Regime for Trade in Air Services

with the United States in 2005 aimed to remove these numeric caps and to limit
charges imposed on U.S. air carriers to navigation costs only.34 The second
freedom’s allowance for refueling stops has, admittedly, lost some relevance in
light of technological enhancements to the range of aircraft, but no airline would
want to risk an aircraft being stranded in the air because of a technical emer-
gency until it could return to its home State. In sum, the first and second
freedoms are not anachronisms. Even late-model ASAs, such as the 2007 U.S./
EU Air Transport Agreement, embed these transit rights in the negotiated
package of commercial access privileges.35 Knowing that their airlines’ other
privileges could be vitiated without the first two freedoms, States are unwilling to
rely solely on the original Two Freedoms Agreement.

3.3.3. Traffic Rights (1): The Third and Fourth Freedoms

The Five Freedoms Agreement, considered earlier, includes the two transit
rights in the Two Freedoms Agreement and three additional freedoms called
“traffic rights.” These traffic rights (or, more accurately, traffic “privileges”36)
grant permission to pick up and discharge passengers and cargo (or both) and
accordingly have a much more direct bearing on the commercial choices
airlines make in building their international markets.37 For ease of explan-
ation, we will take as examples the commercial flight activities of two major
international air carriers, United Airlines (United) and British Airways (BA),
airlines designated to provide international air service by their respective
aeropolitically powerful home States, the United States and the United
Kingdom (U.K.).38 The third freedom bestows upon United, as a designated

final (Sept. 27, 2012), at 13, 17 [hereinafter European Comm’n, External Aviation Policy]. There
have been rumblings that the controversy over extension of the EU’s emissions trading scheme
to non-EU airlines (see infra Chapter 6) could once again make Siberian overflights an issue.
See Jens Flottau & Robert Wall, Russia May Block EU Carriers from Siberian Overflight in
Emissions Trading Battle, Aviation Daily, Feb. 23, 2012, at 1, http://www.aviationweek.com/
Article.aspx?id=/article-xml/avd_02_23_2012_p01-01-428477.xml.
34
See Protocol between the Government of the United States of America and the Government of
the Russian Federation to Amend the Jan. 14, 1994 Air Transport Agreement, annex IV, secs. 5–6,
U.S.-Rus., Oct. 5, 2005, reprinted in 3 Av. L. Rep. (CCH) ¶ 26,474d, at 22,977.
35
See, e.g., U.S./EU Air Transport Agreement, supra note 7, art. 3(1)(a) –(b).
36
See supra note 31 (on the distinction between “freedoms” and “privileges”).
37
See Five Freedoms Agreement, supra note 18, art. I.
38
We will also assume that these airlines carry passengers only, although in reality most long-haul
international airlines operate as combination carriers, supplementing passenger traffic by
carrying cargo in their aircraft hulls. All-cargo carriers, such as FedEx and DHL, typically
enjoy not only the same freedoms of the air under their respective States’ bilateral agreements
as combination carriers, but additional privileges as well. See infra text accompanying note 53.
 3.3. The Freedoms of the Air 79

U.S. carrier,39 the privilege to carry passengers from the United States to the
U.K. The mirror image of that right is the fourth freedom, which permits
United to enplane passengers in the U.K. for transit back to the United States.
BA, in turn, carries passengers to the United States using U.K. third freedom
privileges, and flies passengers back to the U.K. employing the fourth free-
dom.40 The commercial value of the third freedom would be eviscerated
without the fourth freedom: for United or BA to fly empty aircraft back across
the Atlantic without enplaning new traffic would be economic madness.

3.3.4. Traffic Rights (2): The Fifth Freedom

The fifth freedom is optimistically known as the “network-building” freedom
despite its scope limitations. This freedom allows United, on arrival in the
U.K. under the third freedom, to enplane passengers or cargo for further transit
to a point in a third State (such as France or Germany) with which the United
States maintains a bilateral air services relationship that also permits this
freedom to be exercised.41 Thus, fifth freedom “beyond” traffic requires the
United States to have the permission of both the U.K. and the third State,

39
“Designation” has come to be used as a term of art in international aviation law. The term refers
to the airline of a given State that is authorized under that State’s internal regulations and the
provisions of its ASAs to perform international air services as a designated airline of that State.
Restrictive bilateral agreements will sometimes carry designation restrictions limiting the
number of airlines the signatory States may authorize to serve points in their respective
territories. For example, under the highly restrictive U.S./U.K. ASA known as Bermuda II
(which replaced an earlier agreement known, in similar eponymous tribute to the place of
negotiation and signature, as Bermuda I), the United States could designate only two air
carriers to serve points between U.S. territory and London’s Heathrow Airport. See generally
Agreement Concerning Air Services, U.S.-U.K., Jun. 22 & Jul. 23, 1977, 28 U.S.T. 5367 [here-
inafter Bermuda II] (superseded by the U.S./EU Air Transport Agreement, supra note 7). For
more on the restrictive nature of this infamous treaty, see Bin Cheng, The Role of Consultation
in Bilateral International Air Services Agreements, as Exemplified by Bermuda I and Bermuda II,
19 Colum. J. Transnat’l L. 183 (1981); Harriet Oswalt Hill, Comment, Bermuda II: The
British Revolution of 1976, 44 J. Air L. & Com. 111 (1978).
40
Because the principle of nationality is so endemic in international aviation law, it is worth
emphasizing that, in the context of picking up passengers either in the home State or in any
other State where an airline exercises traffic “rights,” that airline can carry passengers of any
nationality. Readers may find this obvious, but at the same time might have been incredulous
to learn that under international aviation law airlines themselves can only fly internationally if
they have an ownership profile that ties them to the nationals of a particular State (or to
ownership by that State itself). See infra Part 3.4. Interestingly, and relatedly, many States (and
airlines) hold to the view that airlines have a primary commercial claim on the custom of their
home State nationals. See infra note 136.
41
The situations described here are hypotheticals based on historic aeropolitical relations.
Because of the 2007 U.S./EU Air Transport Agreement, supra note 7, the 28 EU Member
States no longer have separate bilateral agreements with the United States.
80 The International Law Regime for Trade in Air Services

whether France or Germany.42 If United enplanes no additional passengers or

cargo in the U.K., but merely carries U.S.-origin traffic to additional points
outside the U.K., this is treated as so-called blind sector transit and does not
require additional negotiated permission. If the beyond point is a second
destination in the U.K., however, United will need to rely upon a negotiated
“coterminalization right.”43 When United carries traffic from the United
States to the U.K. using an intermediate stop in France or Germany, discharges
some U.S. passengers or cargo, and picks up new passengers or cargo in France
or Germany bound for the U.K., this carriage, known as “intermediate” fifth
freedom traffic, also requires the United States to have the permission of both
the U.K. and the intermediate third State, France or Germany. Again, fifth
freedom privileges exercised by BA replicate those of United: having flown
London Heathrow to New York JFK, for example, as part of that service BA
might pick up passengers or cargo at JFK for onward transit to Canada, or
make an intermediate stop in Toronto en route to New York to discharge
passengers or cargo from the U.K. and to enplane new traffic bound for the
United States. Of course, once again, the exchange of fifth freedom rights on a
strictly bilateral basis “may become entirely valueless if traffic rights are not
also granted by the third country concerned”44 (France, Germany, and
Canada in the foregoing examples). That “network” precondition to the
exercise of fifth freedoms causes most complications in practice, and was
one the major reasons that the Five Freedoms Agreement failed to attract
State adherents. The route-building potential of the bilateral system is circum-
scribed still further by the general rule that the exercise of traffic rights
contained in most ASAs must be tied to specific route patterns between the
home State and any foreign State with which it is contracting bilaterally. In
other words, United and BA are not allowed to create long chains of inter-
mediate connections that have only incidental (or theoretical) origin and
termination points in their home territories. To illustrate, United would not
be able to use a fifth freedom to carry passengers from Chicago to Toronto,
then enplane new passengers in Canada for onward transit to London and

42
As expressed by the former Chairman of the U.S. Civil Aeronautics Board, John Robson,
“[b]eyond [i.e., fifth freedom] rights are essentially prisoner to whatever arrangements can be
made with the second, the beyond point.” Quoted in Havel, Beyond Open Skies, supra
note 5, at 106.
43
Coterminalization rights should be distinguished from cabotage rights. The latter implicates
enplaning new traffic at the first destination in a foreign State’s territory for transit to a second
destination point; the former simply implicates two “drop off” points with no new traffic taken
aboard.
44
Z. Joseph Gertler, Order in the Air and the Problem of Real and False Opinions, 4 Annals
Air & Space L. 93, 119 (1979).
 3.3. The Freedoms of the Air 81

then “link” the service into fifth freedoms conceded under the U.S./U.K. (or,
more accurately, U.S./EU45) ASA by enplaning new traffic in London for
additional beyond transit to, say, Istanbul or Moscow under U.S. ASAs with
Turkey and Russia, respectively. Accordingly, the network potential of the fifth
freedom is typically exhausted after only a single exercise.

3.3.5. Nuances in the System (1): The Sixth Freedom

In counterpoint to the prevailing philosophy of closure in the air services trade
system, State practice has introduced some nuances that increase airline
flexibility (although, historically, they have not usually been a part of the
formal bilateral agenda). It is possible, for example, for air passenger or
cargo traffic to originate from a country other than the United States, to transit
through the United States, and to continue to the U.K., where that traffic is set
down. This complex of access privileges, known as the sixth freedom, conflates
the fourth and third freedoms (in that order). Using our existing U.S./U.K.
model, fourth freedom (inbound) traffic moves from, say, Mexico to the
United States (United’s home State) under the U.S./Mexico ASA. Some of
the U.S./Mexico passengers or cargo continue as third freedom (outbound)
traffic from the United States to the U.K. under the U.S./U.K. (now U.S./EU)
air services bilateral agreement. From BA’s point of view, passengers or cargo
in France flying to New York via London on BA flights would be sixth freedom
traffic, combining two streams of fourth and third freedom traffic (i.e., Paris/
London and London/New York). In practice, sixth freedom traffic can be very
difficult for either the origin or the destination State to control.46 Where sixth
freedom traffic is carried with the knowledge and consent of the origin State
(here, Mexico or France) under its respective ASAs, the term “anterior fifth
freedom” can be substituted for “sixth freedom.”47 In sixth freedom scenarios,
the home State of the carrier performing the service is itself an intermediate or
swivel point between two other origin and destination States: for example,
Dubai is the swivel point for Emirates’ air services from the U.K. and Germany
to points in southeast Asia and Africa. Put another way, the home State’s
carrier exercises fifth freedom rights out of its own territory. U.K. and German
competitors are aware of Emirates’ revenue-enhancing conflation of fourth

45
See supra note 41 (indicating that the examples used here are historical in light of the 2007 U.S./
EU agreement).
46
See Daniel A. Kasper, Deregulation and Globalization: Liberalizing
International Trade in Services 53 (1988).
47
See Pat Hanlon, Global Airlines: Competition in a Transnational Industry 87
(2d ed. 2002).
82 The International Law Regime for Trade in Air Services

and third freedoms, yet there does not appear to be a legal basis for obstructing
it. Although it is conceivable that a State could insist on sixth freedom
limitations in its ASAs, international aviation’s present trade regime has, for
better or worse, made peace with the existence of this “rogue” freedom even if
a select number of air carriers have not.48

3.3.6. Nuances in the System (2): The Seventh Freedom

In recent years, the sixth freedom has been augmented by a seventh free-
dom, namely, sixth freedom traffic as in the above examples, but without a
stop at the transit point in the home State. Thus, United could offer direct
service from Mexico to the U.K. without a U.S. swivel point; or BA could
operate a direct Frankfurt/New York route, without touching U.K. territory.
The latter scenario is now legally feasible under the U.S./EU ASA, which
provides that any airline licensed in accordance with the Union’s common
licensing criteria (and, thus, owned and controlled by any EU Member
State or by nationals of any EU Member State) can be designated to carry
passenger and/or cargo traffic between the geographic territory of the EU
and all points in the United States.49 The grant of seventh freedom (so-
called stand-alone) privileges, particularly for passenger traffic, is a rarity.50
Japan, for example, will not readily jeopardize the market shares of its two
international airlines (Japan Air Lines (JAL) and All Nippon Airways
(ANA)) by allowing United or BA to operate direct seventh freedom (as

48
See infra text accompanying note 108. In fact, sixth freedom privileges are explicitly included in
some agreements. See Model Open Skies Agreement, supra note 9, art. 2. For an interesting
analysis of the origin of the sixth freedom right as “homeland bridge carriage” by States well
situated on a reasonably direct routing between other States that originate or terminate
significant traffic volumes, see International Civil Aviation Organization (ICAO), Manual
on the Regulation of International Air Transport 4.1-12 to 4.1-14, ICAO Doc. 9626
(2d ed. 2004) [hereinafter ICAO Manual] (noting that, for example, airlines based in southern
Africa, southern South America, and Australia have virtually no sixth freedom opportunities
because there is “literally no place for them to find or take traffic behind their homelands”).
49
See U.S./EU Air Transport Agreement, supra note 7, art. 3(1)(c), art. 4. Seventh freedom
privileges for U.S. carriers under the Agreement, however, are limited to all-cargo carriers
and include only access to third State points beyond the Czech Republic, France, Germany,
Luxembourg, Malta, Poland, Portugal, and the Slovak Republic. For example, while FedEx
could carry seventh freedom cargo between Toronto and Paris, it could not do so between
Mexico City and London. No U.S. passenger carrier, not even a combination carrier such as
United, is afforded seventh freedom privileges under the Agreement.
50
See WTO, Council for Trade in Services, Quantitative Air Services Agreements Review
(QUASAR): Part B: Preliminary Results, at 42, para. 118, S/C/W/270/Add.1 (Nov. 30, 2006)
(describing seventh freedom rights as a “marginal feature” of ASAs).
 3.3. The Freedoms of the Air 83

opposed to indirect fifth freedom) services from Tokyo to points in Asia that
JAL and ANA already serve.51 Indeed, looking again at the new U.S./EU
arrangement, rather than an authentic grant of liberty to operate air services
entirely independent of their home territories, the seventh freedoms
enjoyed by all EU airlines under the U.S./EU ASA and other Union-
brokered agreements are best portrayed as the result of a common aviation
market that obliterates national distinctions between EU Member State
airlines in favor of the supranational legal construct of a “Union air
carrier.”52

3.3.7. All-Cargo Services and the Seventh Freedom

Seventh freedom privileges have, however, become increasingly prominent as
part of bilateral exchanges of traffic rights for all-cargo airlines. The U.S. open
skies policy, for instance, has made extension of these privileges an important
(albeit optional) part of U.S. liberal ASAs.53 For express delivery carriers such
as FedEx, UPS, and DHL,54 seventh freedoms are critical to their business
model. By exploiting these privileges in U.S. ASAs with China and the EU,
FedEx is able to fly packages from its hub in Guangzhou directly to its hub in
Frankfurt without a time-consuming and expensive “backhauling” of traffic

51
As we will see, see infra text accompanying note 61, allowing foreign airlines to use hubs as
autonomous commercial staging-posts creates regulatory concerns. If United offers a seventh
freedom service from Tokyo to Hong Kong, it is still operating as a U.S.-regulated enterprise;
incorporation or “establishment” in Japan is not required under international aviation law.
52
Under its common rules governing air transport, the EU has implemented a common licensing
system for airlines that have their “principal place of business” in the territory of any Member
State and that are owned and controlled by any EU Member State or by any EU Member State
nationals. See Common Rules for the Operation of Air Services in the European [Union],
Council Regulation 1008/2008, 2008 O.J. (L 293) 3, art. 3(1) [hereinafter Common Rules]. The
common licensing system is administered in each Member State by national authorities that
apply common EU criteria to determine the financial fitness of airlines seeking an “operating
license.” See id. art. 5. Referred to in the legislation as “Community air carriers,” EU airlines
are afforded full market freedoms within the entire territory of the European Union. Following
the ratification in December 2009 of the Treaty of Lisbon (“Treaty of Lisbon Amending the
Treaty on European Union and the Treaty Establishing the European Communities”), Dec.
13, 2007 O.J. (C 306) 1, which abolished the long-standing distinction between the European
Union and the European Community in favor of the former, it appears more appropriate to
refer to airlines licensed in the EU as “Union air carriers.”
53
See Model Open Skies Agreement, supra note 9, art. 2.
54
See generally Brian F. Havel, Rethinking the General Agreement on Trade in Services as a
Pathway to Global Aviation Liberalization, 44(1) Irish Jurist 95 (2009) (discussing just-in-
time business model of the express logistics industry, and its contingent reliance on air transport
as the speediest means of shipment: if Olympic runners could deliver goods and parcels faster,
the industry model would substitute athletes for airplanes).
84 The International Law Regime for Trade in Air Services

to its U.S. hub in Memphis, Tennessee, for onward routing to Germany. The
willingness of States to afford wider freedoms to foreign all-cargo carriers
than for passenger and combination services is likely tied to the positive
economic effects that emanate from this key subsector of air services. Major
express delivery operators already have large international route networks
available – networks that are difficult (and wasteful) for most States’ air carriers
to duplicate. Countries with businesses that want to integrate into the global
economy can rely on established express carriers, and are ready to set aside
objections to the foreign nationality of the providers.55 Additionally, isolated
regions such as Oceania (primarily Australia and New Zealand) depend
heavily on air cargo operators for imports as well as exports. Easing the terms
of foreign provider access rather than protecting market share for home airlines
takes priority in this area of trade in air services. Governments, it seems, no
longer see cargo carriage, unlike passenger traffic, as politically troublesome.56

3.3.8. Cabotage (Again): The Eighth and Ninth Freedoms

Even more contentious than either the sixth or seventh freedoms are the two
additional freedoms that fall under the rubric of cabotage. The eighth
freedom gives a foreign carrier so-called fill-up rights as it transits between
two or more gateways in a foreign State. BA, on a coterminalized London/
New York/Los Angeles route,57 for example, would be permitted to board
new passengers or cargo in New York for the New York/Los Angeles segment
only. Ninth freedom traffic is cabotage in its pure form, the privilege to pick
up and set down passengers or cargo between two domestic points (New
York and Chicago or London and Glasgow), neither of which is the end-
point of a flight sequence that began in a foreign State. As we noted in
the prior chapter, the cabotage privilege is a rare bird in the realm of air
services trade.58 U.S. open skies agreements, despite their broadly liberal
cast, specifically exclude cabotage.59 A notable outlier is the 2006 U.K./

55
China has even begun to allow foreign express delivery carriers to operate within its domestic
market on a limited basis. See Bob Sechler, FedEx, UPS Get a Toehold in China’s Express
Delivery, Wall St. J., Sept. 11, 2012, at B1.
56
In part this is because, unlike passenger transport, no users (customers) ever personally
“experience” the shipment process for cargo services.
57
See supra note 43.
58
See also Council for Trade in Services, supra note 50, at 43, para. 120 (observing that “[t]he
granting of cabotage rights is an extremely rare feature” in ASAs and identifying only two such
agreements worldwide).
59
See Model Open Skies Agreement, supra note 9, art. 2(4) (“Nothing in this Article [granting
traffic rights] shall be deemed to confer on the airline or airlines of one Party the right to take on
 3.3. The Freedoms of the Air 85

Singapore ASA exchanging reciprocal cabotage access, although the com-

mercial opportunities the rights provide to both parties’ airlines are, admit-
tedly, few.60

3.3.9. Distinction Between Cabotage and the Right of Establishment

Some commentators have (mistakenly) suggested that Australia has awarded
cabotage routes to foreign carriers when, in fact, what Australia offers is a right for
foreign nationals to establish commercial airlines within its territory for the sole
purpose of serving domestic routes (Virgin Australia, for example).61 BA, in
contrast, does not have any authority under the Australia/U.K. ASA to carry
traffic between Melbourne and Sydney. The distinction is not unimportant. By
requiring foreign-owned carriers to have a substantial legal and commercial
presence within its territory, Australia is able to exert the same regulatory control
over the airline’s operations that it does over its “indigenous” air carriers such as
Qantas. If, however, Australia were to concede cabotage access under its ASAs,
its regulatory control over foreign airlines utilizing those privileges might be
compromised (although it is unclear how much) in areas such as application of
local labor and environmental laws.62 In fact, labor concerns have long driven
resistance to opening cabotage routes to foreign competition. Labor unions
contend that a foreign-owned, foreign-based airline providing lucrative cabotage
services would be at liberty to use nondomestic staffing and to skirt or avoid local
social regulations. Home-based rivals, on the other hand, may have to recognize
the right to unionize, and also observe local caps on pilot and crew hours and
contribute to social security programs.63 Other objections, such as the threat that
cabotage access may pose to national security, are also touted in the public arena,

board, in the territory of the other Party, passengers, baggage, cargo, or mail carried for
compensation and destined for another point in the territory of that other Party.”).
60
See Alan Khee-Jin Tan, Singapore’s New Air Services Agreements with the EU and the U.K.:
Implications for Liberalization in Asia, 73 J. Air L. & Com. 351, 362–64 (2008). Otherwise put,
Singapore Airlines can now fly between any two points in the U.K., a somewhat more appealing
concession than reciprocally allowing BA to fly between any two points in Singapore.
61
See Henry Ergas & Christopher Findlay, New Directions in Australian Air Transport, 10
Agenda 27, 35 (2003). The right of (commercial) establishment, which subjects the carrier
to full regulation by the host foreign State, will be considered further infra in Chapter 4, Part
4.3. As previously discussed, Virgin Australia appears to circumvent these limitations by
structuring itself so that Australian citizens own and control its international operations. See
supra Chapter 2, n. 87.
62
See supra Chapter 2, Section 2.5.15 (discussing effects of cabotage on regulatory control by the
cabotage-granting State including its labor laws).
63
See Havel, Beyond Open Skies, supra note 5, at 129 n.140 (noting, however, that a “right of
establishment” would circumvent these alleged drawbacks of cabotage).
86 The International Law Regime for Trade in Air Services

but ultimately it seems that States refuse cabotage privileges primarily because of
a chauvinistic preference to have their own airlines serving domestic routes.

3.3.10. Cabotage in the U.S./EU Negotiations

As discussed in Chapter 2, Article 7 of the Chicago Convention has been
invoked by States as a legal barrier to yielding on cabotage access in their
ASAs.64 Although this is certainly an overly narrow (but politically convenient)
reading of the Convention, the juristic and practical debates surrounding
cabotage are unlikely to subside anytime soon. Recently, during negotiations
for the 2007 U.S./EU ASA, the Member States made a de facto comparison
between fifth freedom privileges that U.S airlines enjoy to serve other EU points
from hub destinations such as London and Frankfurt, and a hypothesized eighth
freedom privilege to allow EU airlines to serve London/New York/Los Angeles,
for example, with new traffic enplaned in New York for onward transit to Los
Angeles. The United States rejected that “mirror image” argument, reminding
its European partners that the federalization of U.S. airspace still contrasts with
multiple separate Member State airspace jurisdictions. U.S. point-to-point serv-
ices, therefore, are domestic while EU fifth freedom flight movements are
international. De jure the two sets of privileges are unrelated.65

3.4. the nationality rule

3.4.1. Restrictive Logic of Bilateralism

One of the most commercially damaging results of the doling-out of piece-
meal and uneven traffic privileges under the bilateral system is that no
single air carrier with its principal place of business in a single State (i.e., its
home State) can develop an autonomous transnational route network.66

64
See supra Chapter 2, Section 2.5.14.
65
See Havel, Beyond Open Skies, supra note 5, at 69. For the U.S. negotiators, the EU was not
a genuine “cabotage” jurisdiction but a network of fifth freedoms connecting sovereign States,
each of which enjoys a separate voice in ICAO. See id. Moreover, in an era of code-sharing and
alliances (see infra Chapter 4), no U.S. carriers have directly provided intra-Union air passenger
services since at least 2002. See Havel, id.
66
We will refer several times to the notion of a “principal place of business” of airline enterprises.
According to ICAO, a principal place of business of an airline is predicated on the following:
the company is established and incorporated in accordance with relevant national laws and
regulations in the territory of the State that designates it under ASAs to provide international
services; it has a substantial amount of its operations and capital investment in physical facilities
in that territory; it pays tax, registers, and bases its aircraft there; and it employs a significant
 3.4. The Nationality Rule 87

The enduring precondition for the award of traffic rights under ASAs (setting
aside narrow grants of seventh freedoms for cargo operations) is the existence
of an origin/destination connection to the home State. Within the logic of that
system, if either United or BA, for example, desired to create a freestanding
network, each would have to pick up traffic rights as designated carriers under
as many ASAs as possible within and between the regions the airline wished to
serve. To do that, United or BA would have to set about acquiring existing
airlines or establishing wholly owned subsidiaries in other States, in each case
parachuting into the bilateral treaty privileges secured by those States for their
designated home carriers. Thus, United and BA could circumvent the bilat-
eral system’s home State-centered distribution of traffic rights and effectively
“string together” a workable network of market access privileges.67 If that
course of action were permissible, it would allow the airlines to handle, not
perfectly but workably, the patchwork of market access privileges required by
bilateralism. Strategic trade planning of that kind is commonplace in a
globalized world. Unfortunately, however, what is conventional practice for
many transnational commercial enterprises is legally prohibited in the excep-
tional context of international aviation. Because of the nationality rule, as a
general matter airlines can neither acquire air carriers nor establish air carrier
subsidiaries in foreign States.

3.4.2. Citizenship Purity and the Absence of Multinational Airlines

The Chicago conference delegates inserted a formulation of the nationality rule
into both the Two and Five Freedoms Agreements that persists with little
variation to the present day. Under the original formulation, a State reserves
the right to revoke, limit, or suspend traffic rights in respect of any foreign airline
designated to operate service under one of its ASAs if that airline is not

number of nationals of that territory in managerial, technical, and operational positions. See
ICAO Manual, supra note 48, at 4.4-5.
67
For example, BA could move passengers from London to New York under the U.S./EU ASA
before transferring them to a BA subsidiary established in the United States for final transit to
points within U.S. territory. Or BA could use a wholly owned U.S. subsidiary to move
passengers to points beyond the United States like São Paulo under the U.S./Brazil treaty.
Likewise, BA could operate a subsidiary in Brazil that would move its passengers onward to
Chile or Peru under the Brazil/Chile or Brazil/Peru ASAs. But in reality, as the main text
clarifies, BA can only assemble these successive networks by “contracting out” many of the
flight segments to airlines based in other States. The means by which airlines cooperate in this
way are explained further when we consider interlining, code-sharing, and alliances infra in
Chapter 4. For an explanation of how these international trade principles work in sectors that
are not constrained by the nationality rule that governs the airline industry, see infra note 90
and accompanying text.
88 The International Law Regime for Trade in Air Services

“substantially owned” and “effectively controlled” by the carrier’s home State

(or by the citizens of that State).68 It is this insistence on what we polemically
call the requirement of “citizenship purity,”69 inserted into thousands of post-
Chicago bilateral air services treaties, that is commonly referred to as the
“nationality rule” (or sometimes as the “nationality clause” as situated within
a bilateral treaty70). Nationality, in other words, has for six decades been the
organizing principle of international air commerce. The very names of the
oldest airlines in the world – Air Canada, Air France, British Airways – conflate a
commercial and national affiliation. There are, it would seem, American car-
riers, British carriers, and Canadian carriers, but not a single authentically
transnational carrier. Because of the nationality rule, there is no international
airline properly so called; the concept of a multinational enterprise remains
unknown in global air transport, even in the twenty-first century.71

3.4.3. Reasons for the Nationality Rule: Security

and Strategic Trade Policy
The nationality rule was motivated originally by the national security concerns
of a world emerging from total war. The fear (genuine or otherwise) was that
enemy or ex-enemy States could attain indirect market access to the airspace
of victorious countries by acquiring airlines in third States upon which traffic
rights had been conferred as part of friendly foreign relations. To be sure,
bilateral partners could have relied on less draconian measures to assuage
security concerns, such as providing a list of “rogue” States whose investments
in a partner’s airlines would trigger the power of revocation. But the “one size

68
See Two Freedoms Agreement, supra note 17, art. I, § 5 (“Each contracting State reserves the
right to withhold or revoke a certificate or permit to an air transport enterprise of another State
in any case where it is not satisfied that substantial ownership and effective control are vested in
nationals of a contracting State”); see also Five Freedoms Agreement, supra note 18, art. 1, § 6.
(The Chicago Convention itself contains no provisions on airline (as opposed to aircraft)
nationality. Even the European Commission has mistakenly assumed otherwise. See European
Comm’n, External Aviation Policy, supra note 33, at 11.)
69
See Brian F. Havel & Gabriel S. Sanchez, Restoring Global Aviation’s “Cosmopolitan
Mentalité”, 29 B.U. Int’l L.J. 1, 16 (2011).
70
As we previously indicated, see supra note 1, in this book we generally use the term “nationality
rule” more broadly to encompass both the nationality clauses in ASAs and the many internal
State laws that are designed to prop up the nationality clauses by limiting inward investment in
national airlines.
71
This precise point was reiterated in a recent European Commission report on the EU’s external
aviation policy. See European Comm’n, External Aviation Policy, supra note 33, at 10 (“[T]here
is not a single truly global airline in the way that other industries have global companies. . . .
[The] three global airline alliances . . . have come to play a role as the nearest proxy to global
airlines.”).
 3.4. The Nationality Rule 89

fits all” expression of the nationality rule remains embedded in over 90% of
extant ASAs.72 Coupled with defense and security considerations was a strate-
gic trade component to the nationality rule: its applicability ensures that the
concessions exchanged between two States cannot be captured by a third State
not a party to the deal. This intended result is not dissimilar to the “rule of
origin” requirements in free trade agreements whereby concessions, such as
zero tariffs on select goods, are contingent on the imports being produced or,
in the language of the WTO, having their “last substantial transformation”73 in
the territory of a free-trade partner.74 If the United States, pursuing market
access privileges for its airlines in East Asia, exchanges liberal reciprocal
concessions with, for example, South Korea, it would not want investors
from a more restrictive State, such as neighboring Japan, to “free ride” on
those privileges by either acquiring or establishing an air carrier in South
Korea. Japan’s incentive to offer new market concessions to U.S. air carriers
would be correspondingly diminished so long as its airlines enjoyed asym-
metrical market access privileges to the United States through the U.S./South
Korea bilateral agreement.

3.4.4. Protectionist Effects of the Nationality Rule

At the same time, however, it is important to bear in mind the broader
protectionist effects of the nationality rule. It effectively reserves the primary
origin/destination air traffic between any two States to the home airlines of
those States irrespective of the economic attraction of third-country air carriers
that may offer lower cost structures, sleeker aircraft, or superior perquisites,
and are therefore better placed to satisfy consumer demand. In other words,
“who can perform transport services most efficiently is secondary; what matters
is whether [that person] is a foreigner or a national.”75 Additionally, and as
noted earlier, the nationality rule chokes off foreign capital flows and disables
routine mergers, acquisitions, or consolidations.76
72
See Council for Trade in Services, supra note 50, at 33, para. 61.
73
See Agreement on Rules of Origin art. 3(b), Apr. 15, 1994, Marrakesh Agreement Establishing
the World Trade Organization, 1867 U.N.T.S. 397 (1994).
74
For further discussion of rules of origin, including their strategic trade and overtly protectionist
elements, see Stefano Inama, Rules of Origin in International Trade (2009).
75
Jürgen Basedow, Verkehrsrecht und Verkehrspolitik als Europäische Aufgabe, in Europäische
Verkehrspolitik 1, 7 (Gerd Aberle ed., 1987) (Brian Havel translation).
76
For further discussion of these shortcomings, and economic arguments for change, see
Daniel Yergin et al., Fettered Flight: Globalization and the Airline
Industry (2000); InterVISTAS-ga, The Economic Impact of Air Service
Liberalization (2006); Roberta Piermartini & Linda Rousová, Liberalization of Air
Transport Services and Passenger Traffic (WTO Staff Working Paper ERSD-2008–06 Dec. 2008).
90 The International Law Regime for Trade in Air Services

3.4.5. Interplay of the Nationality Rule with Domestic Law

The rampancy of the nationality clauses in ASAs is only half of the protection-
ist equation. Domestic law is also highly relevant.77 Even prior to the emer-
gence of international trade in air services, States kept tight regulatory controls
on the ownership complexion of their airlines through either owning all of the
capital or by a numerical ceiling (often statutory) on foreign inward invest-
ment where enterprises were held privately. As early as 1926, the United States
adopted a legislative cap on foreign ownership of its airlines of 49%,78 lowering
the cap to 25% in 1938 (where it remains).79 But the EU, which has chosen a
somewhat softer stance toward foreign airline ownership than the Americans,
has yet to pass legislation allowing unrestricted ownership of its air carriers by
non-Member States or their nationals.80 Other significant aviation powers,
including Australia, Brazil, Canada, China, India, and Japan, impose similar
foreign ownership caps.81 While many of these national laws serve explicitly
protectionist purposes, the sheer ubiquity of the nationality rule locks States
into a kind of prisoner’s dilemma where no State seems willing to cooperate in
its wholesale extinction.

3.4.6. Operation of the Nationality Rule

Under the U.S./Canada ASA, for example, Air Canada is eligible to receive
market access privileges to the United States so long as that airline is not in
transgression of the nationality rule at the time it is designated by the Canadian
Government to provide international services under the treaty.82 If, however, the
German carrier Lufthansa acquires Air Canada after the initial designation, the
United States may (or may not) impose conditions on access to its airspace by
Air Canada-owned-and-controlled-by-Lufthansa, up to and including a full

77
See supra note 1.
78
See Air Commerce Act, ch. 344, §§ 3(a) & 9(a), 44 Stat. 568, 569, & 573 (1926).
79
See 1938 Civil Aeronautics Act, ch. 601, § 1(13), 52 Stat. 973, 978. The current provisions on
airline ownership and control are available in 49 U.S.C.A. §§ 40102(a)(15) & 41101(a) (West
2010).
80
See Common Rules, supra note 52, art. 2(9) (requiring an air carrier to be at least 50.1% owned
by nationals of an EU Member State to be eligible for designation as a Union air carrier under
the common operating license regime).
81
See Chia-Jui Hsu & Yu-Chan Chang, The Influence of Airline Ownership Rules on Aviation
Policies and Carriers’ Strategies, in 5 Proceedings of the Eastern Asia Society for
Transportation Studies 557, 557 tbl.1 (2005).
82
See Air Transport Agreement, U.S.-Can., art. 3(2)(a), Mar. 12, 2007, reprinted in 3 Aviation
L. Rep. (CCH) ¶ 26,246a.
 3.4. The Nationality Rule 91

revocation of traffic rights.83 Under the conventional double-pronged test –

which blends a quantitative test (“substantial ownership”)84 and a qualitative
one (“effective control”)85 – even something less than a majority acquisition of
Air Canada’s voting shares could precipitate a U.S. revocation.86 A mere 25%
stake in Air Canada (the upper limit tolerated under present domestic Canadian
law) could allow the United States to assert, if various indicia of corporate
intervention by Lufthansa in Air Canada’s management and operations are
also present, that Lufthansa had acquired sufficient leverage to exercise “effec-
tive control” of the airline, particularly if the stake makes Lufthansa the single
largest investor. On the one hand, Lufthansa (or any other foreign investor)
would likely not consummate a full merger or acquisition that risks forfeiture by
Air Canada of its traffic rights to serve the largest transborder aviation market in
the world. On the other hand, Lufthansa or any foreign carrier would be leery of
buying a stake that would (in the view of local regulators) grant “effective
control” to the foreign investor. Under either scenario, the domestic airline’s
capital-raising ability has been compromised. And yet it is precisely these
investment barriers erected under national law that hold an airline in conform-
ity with the nationality clauses in bilateral treaties and allow it to maintain its
traffic rights to other countries.

3.4.7. External and Internal Components of the Nationality Rule:

A Double-Bolted Lock
The nationality rule, it must now be clear, has a double-bolted “locking”
mechanism: the external nationality clause in each State’s ASAs that typically
speaks to substantial ownership and effective control, to which we can now add
the internal national investment caps in its domestic laws that ensure compli-
ance with the ownership and control requirements of the nationality clause.
This double locking system also rules out foreign airline subsidiaries – the right

83
See id. art. 4(1)(b).
84
Though specific numeric benchmarks are not set out in the Two Freedoms or Five Freedoms
agreements, nor in any formulation of the nationality rule itself, municipal law limits on
foreign ownership (which vary from 25% to 49.9%) provide strong guidance as to the range of
foreign investment that will be permissible under ASAs.
85
What constitutes “effective control” is ambiguous at best and lends itself to an impressionistic,
case-by-case analysis of an airline’s ownership structure, contractual commitments, branding
and licensing activities, financial arrangements, and management. Cf. DHL Airways, Inc.
(ASTAR), Dkt. No. OST-2002-13089, 2003 DOT Av LEXIS 1086, *72–79 (Dep’t of Transp.
Dec. 19, 2003) (discussing the interpretation of “control” in U.S. administrative law); Common
Rules, supra note 52, art. 2(9) (containing one of the rare instances where “effective control” is
explicitly defined).
86
See infra Chapter 4, Part 4.2, for further discussion of ownership and control issues.
92 The International Law Regime for Trade in Air Services

of establishment that is otherwise uncontroversially exchanged in normal bilat-

eral investment relations.87 If Lufthansa were permitted by Canada to establish
Lufthansa-Canada and were then to seek official designations to serve Montreal/
New York or Toronto/Beijing, the Canadian Government could not award
Canadian designations to a German-owned-and-controlled airline under the
nationality clauses in its Canada/United States or Canada/China bilateral air
transport agreements. At most, the Chicago Convention Article 7 provisions on
cabotage do not seem to preclude Canada from conceding opportunities to
foreign subsidiaries to serve wholly domestic traffic points in Canada.88
Cabotage rights, however, are of limited value to a big carrier like Lufthansa
that is more interested in building robust international route connections.89
The airlines’ enfeebled right of establishment represents another denial of
commercial opportunities that are routinely swapped in ordinary trade diplo-
macy. As noted above, they cannot circumvent market access limitations in the
way that manufacturing or services firms that are not bound by a nationality rule
overcome trade barriers such as tariffs and quotas by establishing subsidiaries (or
acquiring locally based producers) in more favorable locales.90

3.4.8. Destabilizing the Nationality Rule

Despite its ubiquitous place in the history of trade in air services, in recent
times the external bolt of the nationality rule has begun to loosen. While we
will discuss the erosion of the rule in greater detail in Chapter 4, for now it is
useful to signal some of the changes that are occurring. Like many “first-order”

87
See generally Jeswald W. Salacuse, The Law of Investment Treaties 196–204 (2010)
(discussing the various approaches to the right of establishment in international investment
treaties).
88
Countries may still be hesitant, however, to grant cabotage privileges to the subsidiaries’
(foreign) parent carriers because these airlines will remain beyond the comprehensive regu-
latory control of the State. See Havel, Beyond Open Skies, supra note 5, at 47–48 n.91; see
also supra Chapter 2, note 92 and accompanying text.
89
“Limited value” is not synonymous with “valueless.” A right of establishment providing access
to lucrative internal markets in countries such as China, India, and the United States would no
doubt hold some attraction for foreign carriers or foreign investors.
90
This circumvention can be accomplished in one of two ways. The first is for an enterprise
facing export restrictions by a foreign State to set up a subsidiary within that State’s territory in
order to sell its products or services without the added cost of a tariff or quota limits. The second
option is for an enterprise to establish a subsidiary in a host State that enjoys more liberal trade
concessions with third countries than the enterprise’s home State and then to export under the
more favorable regime. Understandably, a foreign-owned enterprise is typically barred from
profiting from the trade concessions of its host State if the subsidiary is a “shell company” or the
enterprise’s home State lacks diplomatic relations with the third countries’ governments. See
Salacuse, supra note 87, at 188–89; see also supra text accompanying note 66.
 3.4. The Nationality Rule 93

structures, the nationality rule is contingent and can be superseded. Although

the United States still insists on embedding nationality clauses in its open skies
bilateral agreements,91 de facto U.S. policy has been to refrain from enforcing
the rule against open skies partner States if their airlines become owned and
controlled by nationals from third countries with which the United States has
also signed open skies agreements.92 Meanwhile, the focal point of the EU’s
massive project for a single aviation market was the removal of the discrim-
inatory apparatus of airline nationality that once governed air transport rela-
tions among its Member States:93 within the twenty-eight-member Union, the
nationality rule is disapplied by the device of a single airline identity, the
“Union air carrier,” which may be owned and controlled by any EU State or
nationals of any EU State and which may (at least under EU positive law) serve
any traffic points inside or outside the EU.94 As such, cross-border investment
within the geopolitical territory of the EU (e.g., British Airways/Iberia, Air
France/KLM, Lufthansa/Austrian Airlines) can theoretically escape the
shadow of the “substantial ownership and effective control” duality.95 The
penumbral effects of the EU assault on the nationality rule have included a
U.S./EU agreement, reached within talks to amend their 2007 ASA, to refrain
from applying the nationality clause against select third countries in which
ownership and/or control of an airline becomes vested in U.S. or EU citi-
zens.96 A more modest, but still influential, reform appears in the EU/Chile
ASA that allows nationals of several Latin American States to own or control

91
See Model Open Skies Agreement, supra note 9, art. 3.
92
See John R. Byerly, Deputy Assistant Sec’y for Transp. Affairs, Dep’t of State, Opening Remarks
at the London AirFinance Journal Conference (May 18, 2009).
93
See supra note 52.
94
See id. Thus, the EU has put in place arrangements that would allow British Airways, for
example, to be designated by France to serve Paris/Tokyo routes under the France/Japan
bilateral agreement. But although these routes are theoretically available to BA, they do depend
on the acquiescence of the third State, Japan. As we will see, EU negotiations are continuing at
both Commission and State level to persuade third countries to accept the so-called Union
designation. Not all third States have agreed to the new EU orthodoxy. See infra Chapter 4,
Section 4.4.3.
95
These intra-Union mergers are dependent on third countries refraining from invoking the
nationality rule. Russia, for example, threatened to retract Austrian Airlines’ access rights
following the carrier’s acquisition by Lufthansa. See Pilita Clark, Russia Threatens to Ban
Austrian Airlines, Fin. Times, Mar. 1, 2010, at 1. See also infra Chapter 4, text accompanying
note 63.
96
See U.S./EU Air Transport Agreement, supra note 7, annex 6. According to the agreement,
before either party will abstain from enforcing the nationality clause with respect to third-
country airlines that are controlled by EU or U.S. citizens, both parties must agree that the third
country “has established a record of cooperation in air services” with them. See id. paras. 3–4.
With respect to ownership alone, however, no such record of cooperation needs to be demon-
strated. See id. para. 1.
94 The International Law Regime for Trade in Air Services

Chilean airlines without jeopardizing those airlines’ market access to EU

Member States.97 It is also possible that the members of ASEAN will even-
tually align their respective ASAs to replicate the EU single market
approach.98 Additionally, in 2010, the United States and EU introduced a
proposal before the ICAO Assembly for a new multilateral agreement that
waives the nationality clauses in the ASAs among its State parties.99 Although
the treaty is still in the early stages of negotiation, its ratification by ICAO’s
membership would be the most momentous step toward global (as opposed to
regional) liberalization of trade in aviation services since the Two Freedoms
Agreement.

3.4.9. Reasons for Destabilization

What accounts for the reframing of State policy toward citizenship purity in
airline ownership? Undoubtedly States perceive the waning strategic value of
aggressive aerodiplomacy based on the nationality rule. Except for a few
notable holdouts such as China and Russia, the United States – and, to a
lesser extent, the EU – have managed to entice most aviation powers, includ-
ing each other, into liberal ASAs.100 Under this new regime of amplified
(albeit incomplete) liberalization, the two aviation powers that together rep-
resent approximately 60% of world air traffic have each built networks of
treaties that offer fundamental market freedoms in respect to pricing, frequen-
cies, capacity, and (with important caveats) traffic rights. Given the number of
liberal ASAs existing today, there is much less discernible need for States to use
the hammerlock of the nationality rule to prevent their partners from allowing
third-country nationals from more restrictive jurisdictions to free-ride on open
market concessions. And States with strong air transport industries now have
much to lose if their actions unleash an aviation trade war. The tilt toward

97
See Agreement on Certain Aspects of Air Services art. 2(4), Chile-EU, Oct. 31, 2006, 2006 O.J.
(L 300) 46. The Latin American States in question are those that are members of the Latin
American Civil Aviation Commission.
98
See Tan, supra note 60, at 368.
99
See infra Chapter 4, Section 4.4.5; for a more detailed discussion of the draft treaty, see Brian
F. Havel & Gabriel S. Sanchez, The Emerging Lex Aviatica, 42 Geo. J. Int’l L. 639, 665–67
(2011).
100
The EU continues to operate on two tracks, Member State and supranational, in negotiating
external ASAs. The EU Commission needs a specific mandate from the EU political body,
the Council of the European Union, to undertake negotiations for a comprehensive liberalized
agreement with specific aeropolitical powers such as the United States. Currently, the EU
has concluded comprehensive agreements, displacing separate Member State ASAs, with
the United States, Canada, and Brazil, and plans for further such agreements have been
announced. See infra Part 3.5.
 3.5. The Core Elements of Air Services Agreements 95

liberality should not be overstated. With some exceptions, the loosening of the
external bolt of the nationality rule has not been accompanied by a disabling
of its internal equivalent. The United States stridently rejects calls from the
EU to open its airlines to foreign investment – a historical irony when set
against the European rebuff of U.S. calls for a free market approach to air
services at the Chicago conference.101 Emerging powerhouses, such as the
BRIC economies (Brazil, Russia, India, and China), have not hastened to
relax caps on foreign investment in their respective aviation sectors. But until
the external bolt of the nationality rule is fully disarmed, States will remain
hesitant to allow substantial foreign capital in-flows that might put their
airlines’ traffic rights in jeopardy.

3.4.10. Returning to the Nationality Rule

We will return to the nationality rule in Chapter 4, where we will revisit some
of the themes presented here (including the destabilization of the rule) and
also consider the right of establishment and the emergence of international
airline alliances. In the next part, we will survey some of the main features of
bilateral ASAs and turn then to explain the narrow space that international
trade in air services occupies in the WTO trading system.

3.5. the core elements of air services

agreements: the open skies model

3.5.1. Content of ASAs

Although the sheer number and variety of ASAs militates against a compre-
hensive account of their provisions, in this part we discuss the principal
components of ASAs using the U.S. open skies model. These components
include provisions that cover routes, capacity, pricing, frequency, safety, and
“doing business” restrictions. ASAs also typically provide rules covering com-
mercial opportunities, competition, security, and allowable charges or fees.
Lastly, ASAs routinely include mechanisms for settling disputes, but do not
award private rights of action (against States) to aggrieved airlines.102

101
See infra Chapter 4, Part 4.10 (describing a new EU initiative to seek liberalization of U.S.
domestic laws on foreign ownership of U.S. airlines).
102
See infra text accompanying note 152.
96 The International Law Regime for Trade in Air Services

3.5.2. Grant of Traffic Rights: The First Five Freedoms

At the core of all ASAs is a grant of traffic rights.103 Although, as we noted, ASAs
rarely use international aviation law’s vernacular of the “freedoms of the air,” they
do rely on its underlying conceptual framework.104 In addition to the “non-
commercial” first and second freedoms, the commercial third, fourth, and fifth
freedoms are swapped without numeric limits on capacity, frequency, or desig-
nations so long as each contracting State’s designated passenger and cargo
airlines remain compliant with the nationality rule.105 It is these liberal
exchanges of unrestricted, reciprocal traffic freedoms that are now synonymous
with open skies and that have been emulated by other States. In current trading of
international air services, the third, fourth, and fifth freedoms are unexceptional,
although their exercise may be restricted by other negotiated provisions.106

3.5.3. Grant of the Sixth and Seventh Freedoms

The sixth and seventh freedoms are not typically exchanged, under the open
skies template or otherwise. The sixth freedom presents conceptual difficulties as
an object of exchange: why would Dubai, for example, seek to add an exchange
of sixth freedom privileges with Germany when that Gulf State’s flag carrier,
Emirates, already enjoys the necessary fourth freedom privilege to fly passengers
from (say) Dusseldorf to Dubai and then to transit them onward, using third
freedoms negotiated with third States such as India or Japan, to an array of other
destinations including Mumbai and Tokyo? Germany may be troubled by
Emirates’ cheaper one-stop air services over Dubai that compete with
Lufthansa’s nonstop services from Dusseldorf to Mumbai or Tokyo, but techni-
cally Emirates’ legal capacity to offer those services already exists under third and
fourth freedoms that are granted separately and independently of any effort to
exchange (or withhold exchange of) a sixth freedom.107 The seventh freedom, in
contrast, cannot exist at all without a specific bilateral exchange because it
breaks entirely with the home State connection that defines the other six free-
doms: in the scenario just considered, Emirates would use a seventh freedom

103
See supra note 31 (commenting that these rights are actually “privileges”).
104
For a more detailed conspectus of how route rights are actually described in ASAs, we
recommend consulting ICAO’s Manual on the Regulation of International Air
Transport, supra note 48, at 4.1-2 to 4.1-5.
105
See Model Open Skies Agreement, supra note 9, arts. 2–3.
106
For example, China’s frequency limitations (see supra text accompanying note 28) or Japan’s
restrictions on airport slots (see infra text accompanying note 191).
107
See supra text accompanying note 46.
 3.5. The Core Elements of Air Services Agreements 97

privilege to fly directly from Dusseldorf to Mumbai or Tokyo108 with no segment

connecting that service to Dubai (and Lufthansa, similarly, could operate a
nonstop direct service to those cities from Dubai without being required to route
its service through Germany109). The “stand-alone” seventh freedom, as already
discussed, is almost never granted for air passenger traffic but is gradually being
conceded to all-cargo (but not combination passenger/cargo) carriers.
Protectionism is easy to detect here: seventh freedom privileges invite additional
foreign competition that may be superior to domestic providers, especially those
carrying passenger traffic, in meeting the demands of local consumers. Finally,
eighth and ninth freedom privileges (cabotage) remain off the negotiating table
in all but the most exceptional cases.110

3.5.4. EU Single Aviation Market: Exchange of All Nine Freedoms

The most panoramic exchange of traffic rights in international aviation history
occurred in building the EU’s single aviation market. All twenty-eight
Member States enjoy all nine freedoms – without restriction – among them-
selves, although the matter becomes more complicated at the external level. A
series of rulings by the Court of Justice of the European Union (CJEU) in 2002
found that the nationality clauses in individual Member State bilateral agree-
ments, which prevented ASA designation by each Member State of airlines
owned and controlled by nationals from any other Member State, violated EU
treaty law that guarantees freedom to provide services (including, in this case,
seventh freedom services operated using any airport in any Member State and
serving any destination outside the EU).111 After much political wrangling, the
European Commission, as the central executive body of the EU, received
authorization from the EU’s political steering body, the Council of the
European Union, to enter so-called horizontal agreements with selected
non-EU States that simultaneously modify all of the nationality clauses in

108
As the reader will by now fully appreciate, exercise of that seventh freedom right will depend on
bilateral consent not only under the Germany/Dubai agreement, but also under Dubai’s
separate agreements with India and with Japan.
109
Such a routing (Dubai/Germany/Mumbai or Dubai/Germany/Tokyo) would, in fact, be sixth
freedom!
110
See, e.g., supra Chapter 2, Part 2.5 (discussing Chile’s abolition of cabotage).
111
The targeted ASAs comprised a series of open skies agreements that seven Member States had
concluded with the United States, but the reasoning of the Court applied to all ASAs between
all Member States and all non-EU States. See Cases C-467/98, C-468/98, C-469/98, C-471/98,
C-472/98, C-475/98, and C-476/98, Comm’n v. Denmark, Sweden, Finland, Belgium,
Luxembourg, Austria, and Germany, 2002 E.C.R. I-090519 et seq. An eighth defendant, the
U.K., was named even though the U.S./U.K. relationship had never produced an open skies
agreement. See Case C-466/98, Comm’n v. U.K., 2002 E.C.R. I-09427.
98 The International Law Regime for Trade in Air Services

all of the different Member State agreements with those States in order to
comply with the CJEU rulings.112 Under the recast nationality clause, non-EU
States accept Member State designations of any “Union air carrier,”113 regard-
less of the specific ownership and control profile of the carrier and provided
only that it is substantially owned and effectively controlled by a Member State
or by nationals of a Member State.114 Under the bargain struck between the
Commission and the Council, Member States may still conduct their own
separate negotiations for new or amended bilateral agreements with non-EU
countries, but the outcome of the negotiations must also respect the CJEU
judgments and must not encumber the freedom of airlines owned and con-
trolled by EU Member States or their nationals to provide stand-alone (sev-
enth freedom) services to or from non-EU points using airports in any
Member State. While the Commission’s horizontal agreements allow, but
do not by themselves assure, additional external traffic rights for EU airlines,115
by “Unionizing” the nationality clause they remove the greatest legal barrier to
the exercise of those rights. Horizontal agreements are narrowly focused on
bringing EU ASAs into compliance with CJEU jurisprudence on free move-
ment of services. Beyond that, the Commission’s surrogacy is carefully
restricted. It cannot act as a super-negotiator to obtain full ASAs with a non-
EU State on behalf of all of the Member States unless the Council of the EU
endows it with a so-called vertical mandate. To date, only a handful of such
mandates has been granted, although the cluster of so-called global partners
with which the Commission has completed treaty arrangements (the United

112
As of 2013, 117 non-EU States (and nearly 1000 ASAs) had recognized the principle of EU
designation, 55 of them through horizontal agreements. See European Comm’n, External
Aviation Policy, supra note 33, at 3. See Havel, Beyond Open Skies, supra note 5, at 485
nn.546 & 547 (describing additional clauses in horizontal agreements that relate to pricing –
including a prohibition on lower fares by non-EU carriers on all intra-EU air routes that was
preserved in the U.S./EU ASA – as well as ground-handling services, taxation of aviation fuel,
safety, and so on).
113
See supra note 52.
114
For the textual content of the clauses, see Comm’n Decision 29/03/2005, Approving the
Standard Clauses for Inclusion in Bilateral Air Service Agreements Between Member States
and Third Countries Jointly Laid down by the Commission and the Member States, 2005 O.J.
(C 943) 1.
115
Each Member State’s designation selection process still has to be undertaken for third
countries outside the EU, and not all foreign partners will accept an open skies-style unlimited
designation of any Union air carrier that wishes to serve a foreign market. Accordingly, EU
Member States can now consider for designation a much larger number of airlines, but the
number of airlines that can be designated remains subject to the relevant ASAs. EU legislation
seeks to ensure nondiscriminatory treatment of any Union carrier (regardless of its ownership/
control profile) that seeks designation in each Member State’s process. See generally Council
Regulation 847/2004, 2004 O.J. (L 157) 7.
 3.5. The Core Elements of Air Services Agreements 99

States, Canada, and Brazil116) is a significant one.117 Otherwise, the EU

Member States continue to tolerate the piecemeal system of bilateral ASAs
in their aeropolitical relations with third countries.118

3.5.5. Regional Exchanges of Traffic Rights

Despite the endurance of bilateralism, however, the EU’s external aviation
policy cannot be branded a failure. Although the global partners initiative
has moved slowly, the Union has adopted a livelier pace in expanding the
single aviation market to a network of some thirty-seven States located in the
EU’s eastern and southern neighborhoods, as well as in parts of the Middle
East and North Africa. In its optimal expression (from the EU’s perspective)
all of these States would fully accept the acquis119 of the single aviation
market through their membership of the EU-sponsored European Common
Aviation Area (ECAA).120 Exchanging traffic rights through regional avia-
tion integration, in fact, has been voguish in the wake of the EU project, but
none of the imitators has replicated the Union’s multi-State exchanges of
traffic rights. Members of the African Union, working under the
Yamoussoukro Decision, have not overturned the stringent traffic restric-
tions that have long governed their aeropolitical relations.121 The ASEAN

116
Negotiations with Australia and New Zealand are ongoing: see infra note 117.
117
Brazil, however, has not yet signed its March 2011 comprehensive agreement with the EU. See
European Comm’n, External Aviation Policy, supra note 33, at 11, 18. In addition, the
Commission has a mandate for talks with Australia and New Zealand, and those talks are
still in progress. See id. at 4, 11, 18. The Commission has indicated its desire for further vertical
mandates for negotiations with China, India, Japan, Russia, and Turkey. See id. at 11.
118
The dual EU/Member State responsibility for external ASAs continues to be a source of
“confusion” among non-EU partners. The Commission has noted that, as a result, the EU
still lacks a “comprehensive common . . . external aviation policy” and that its own work is
hamstrung by “national interests” and also by “ad hoc initiatives based on individual author-
izations to negotiate.” See European Comm’n, External Aviation Policy, supra note 33, at 4.
119
That is, the cumulative corpus of EU treaties, legislation, and judicial and administrative
decisions that relate to the air transport area. See European Comm’n, A Community Aviation
Policy Towards Its Neighbours, COM (2004) 74 final (Feb. 9, 2004), para. 35.
120
The ECAA integrates contracting neighboring States into the legal regime governing the
commercial airspace of the EU Member States with respect to issues such as market access,
competition rules, safety, and air traffic management. See Ruwantissa Abeyratne, The Decision
of the European Court of Justice on Open Skies – How Can We Take Liberalization to the Next
Level?, 68 J. Air L. & Com. 485, 504 (2003). As of September 2012, the European Commission
reported “solid progress” in developing the ECAA, having signed agreements with the Western
Balkans, Morocco, Jordan, Georgia, and Moldova. See European Comm’n, External Aviation
Policy, supra note 33, at 10.
121
The Yamoussoukro Declaration, adopted Oct. 7, 1988, set a goal of airline integration, joint
operation of international routes, and removal of internal traffic restrictions among the
100 The International Law Regime for Trade in Air Services

economies, on the other hand, have agreed a series of “staged” accords that
grant comprehensive traffic rights at the subregional, then regional, levels.122
The absence of a central enabling and enforcement agency (akin to the
European Commission) or of a legally binding adjudicatory body (such as
the CJEU) has impeded ASEAN liberalization. Most countries in the bloc
have yet to commit to waiving nationality restrictions either in their internal
laws or in bilateral treaties.123

3.5.6. Authorization/Designation Requirements

As a general proposition, the paramount requirement that a home State’s
airlines must satisfy before being eligible to provide air services under that
State’s ASAs is the nationality rule, that is, that the airlines are substantially
owned and effectively controlled by the home State or by its nationals. U.S.
ASAs typically frame the citizenship “purity” demands of the nationality rule
as a precondition for authorization of the airlines designated by partner
States.124 For example, when Canada designates Air Canada to provide service
under its ASA with the United States, U.S. authorization symmetrically
requires that Air Canada must be owned and controlled by Canadian nation-
als. If, however, subsequent to that authorization, the Canadian Government
were to permit BA to take a controlling stake in the Canadian carrier, it
becomes incumbent upon the United States, if it so wishes, to notify
Canada under the U.S./Canada bilateral ASA that the United States intends
to “revoke, suspend, limit or impose conditions on the operating authoriza-
tions or technical permissions” granted to Air Canada.125 The extinction of
privileges, in other words, requires an affirmative act by the grantor, the
United States. In addition, late-model U.S. open skies agreements like the

participating States. The Declaration was nonbinding but has been credited with initiating air
transport liberalization in Africa and leading to the 1999 Yamoussoukro Decision granting the
first five freedoms to the contracting parties and contemplating removal of frequency and
capacity restrictions. See Charles e. Schlumberger, Open Skies for Africa:
Implementing the Yamoussoukro Decision 9–12 (2010). Although the Decision entered
into force in 2000, its implementation is not yet complete. See id. 29–31.
122
The ASEAN economies have proposed a fully liberalized ASEAN Single Aviation Market by
2015. Moreover, Singapore has presented itself as a “pathfinder” for the EU to develop deeper
interregional collaboration with the new ASEAN arrangements. See European Comm’n,
External Aviation Policy, supra note 33, at 13.
123
See infra Section 3.6.7.
124
A foreign government’s designation will usually be determinative. On U.S. practice, see
Havel, Beyond Open Skies, supra note 5, at 282–83.
125
See Model Open Skies Agreement, supra note 9, art. 4(1); see also Air Transport Agreement,
U.S.-Can., supra note 82, art. 3(2)(a).
 3.5. The Core Elements of Air Services Agreements 101

U.S./Canada 2007 air services treaty reinforce the nationality connection with
a provision obligating designated carriers to have their principal place of
business in the designating State.126 Even if Air Canada were to remain
owned and controlled by Canadian citizens but, for reasons of economic
expediency, were to relocate its principal place of business to Mexico, the
United States may also (but need not) revoke or limit Air Canada’s traffic
rights. As such, it is possible that Air Canada could undergo a transformation of
its ownership profile from “citizen-owned” to “foreign-owned,” or conduct
business operations from a headquarters city other than its present base,
Montreal, without forfeiting its U.S. traffic rights. Nevertheless, the mere
risk of revocation, not to mention the likelihood of Canadian Government
resistance, would certainly chill potential foreign investments.127

3.5.7. Designation Requirements

Additional criteria making authorization contingent upon a designated air-
line’s compliance with ICAO air navigation, safety, and security regulations
are understandably common as well.128 What has faded out of open skies ASAs,
however, are preset limits on the number of designations each State may make
among its eligible air carriers. Historically, States restricted the number of
designations by its partners in an effort to shield their home carriers from what
they characterized as “excessive” or “ruinous” competition. States with only
one international airline were reluctant to thrust their flagships into open
competition with the phalanx of U.S. international carriers, for example, on
the natural assumption that their national economic interests would suffer.
Under the terms of the now-defunct U.S./U.K. ASA known as “Bermuda II,”
the United Kingdom limited access to London’s principal hub, Heathrow
Airport, to two U.S. airlines (first TWA and Pan Am, and later American
Airlines and United as the respective successors to those airlines’ routes129).
The U.K. Government hoped not only to armor-plate BA’s dominance at “the

126
Compare Model Open Skies Agreement, supra note 9, art. 1(4) (defining “Airline of a Party” as
an airline that is “licensed by and has its principal place of business in the territory of that
Party”), with United States: Model Bilateral Air Transport Agreement (“Open Skies
Agreement”) art. 1, 35 I.L.M. 1479 (1996) (providing no such definition). See infra Chapter 8,
note 72 (mentioning ICAO’s approach to determining the “principal place of business”).
127
See infra Chapter 4, Part 4.2 (offering further analysis of the consequences of these investment
changes).
128
See Model Open Skies Agreement, supra note 9, arts 4–7.
129
See Memorandum of Consultations and Draft Exchange of Notes Concerning Modifications
to the U.S./U.K. Air Services Agreement, reprinted in 3 Av. L. Rep. (CCH) ¶ 26,540j, at 23,923
(Jan. 2007).
102 The International Law Regime for Trade in Air Services

gateway to the world,” but to prevent other U.S. airlines from gaining a
foothold in the highly competitive transatlantic aviation market. In reality,
designation limits merely heighten the advantages of incumbency by freezing
out the disciplining effects of more efficient and more price-competitive new
entrants.

3.5.8. Pricing Freedom

The freedom to set prices (fares and rates130) is critical to the success of any
commercial venture. International airlines are no exception. Despite that,
States long insisted on the right to regulate air fares on routes between their
home territories and the territories of their bilateral partners. One of the
earliest bilateral agreements, the U.S./U.K. ASA known as “Bermuda I,”
created a system of “double approval” pricing whereby all fare modifications
by airlines operating under the terms of the treaty required advance filing
with and approval by the aeronautical authorities in both partner coun-
tries.131 The converse procedure, “double disapproval” pricing, allows a
filed fare to stand unless it is rejected by both parties’ aeronautical author-
ities. That more relaxed standard has itself been further liberalized under
open skies through the abandonment of any bureaucratic requirement to file
fares and reliance solely on consumer demand to influence the pricing
decisions of airlines.132

130
Both international and domestic tariffs are divided into these two categories: a “fare” is a tariff
for the carriage of passengers, and a “rate” is a tariff for the carriage of cargo. See ICAO
Manual, supra note 48, at 4.3-2.
131
See Agreement Between the Government of the United States of America and the Government
of the United Kingdom Relating to Air Services, annex, sec. 2, U.S.-U.K., Feb. 11, 1946, 12
Bevans 726 (no longer in force) [hereinafter Bermuda I].
132
See generally Model Open Skies Agreement, supra note 9, art. 12. States have, however, used
domestic competition law or trade law to raise the specter of foreign airlines “dumping” excess
capacity into their markets through price-cutting, thereby driving prices below the cost-
recovery level for national carriers. Potentially beneficial effects on airline consumers are
noticeably absent from State assessments of each of these perceived threats. The EU, for
example, ensures that all ASAs with non-EU States include a prohibition on “price leadership”
on all intra-Union routes by carriers designated by those States. See supra note 113. In fact,
where both “predation” (a contentious concept: see generally Frank Easterbrook, Predatory
Strategies and Counterstrategies, 48 U. Chi. L. Rev. 48 (1981)) and “dumping” are occurring,
consumers benefit – at least in the short run – from pressure to lower fares. Consumers will only
be harmed in the outside chance of successful post-predation or post-dumping supracompeti-
tive pricing. That, in turn, assumes the unlikely event that that the new pricing structure will
not be competed back down by new or returning market entrants looking to skim some of the
monopoly profits made available by these allegedly countercompetitive acts.
 3.5. The Core Elements of Air Services Agreements 103

3.5.9. Capacity and Frequency

In two other aspects of airline operations, capacity and frequency, ASAs have
historically been restrictive (favoring “managed” trade133). But full liberali-
zation of each aspect has also been a feature of open skies. Capacity refers to
the total number of passengers carried (usually on a daily basis) on an
individual flight segment.134 Under Bermuda I bilateralism, airlines were
at liberty to increase capacity on international routes subject to ex post facto
review by the aeronautical authorities of the two contracting States. For its
time, that was a relatively liberal formula because, like double disapproval
pricing, it assumed some level of bureaucratic inertia. By the time of the
highly illiberal U.S./U.K. Bermuda II agreement three decades later,135
some ASAs had begun to insist on 50/50 capacity splits whereby the desig-
nated airlines of each party were limited (or, some might argue, entitled) to a
more or less equal share of the bilateral marketplace.136 With effects similar
to price controls, capacity restrictions artificially raised fares on interna-
tional routes by holding down supply. Capacity controls stifled competition
by keeping aloft less competitive airlines that failed to invest in new, larger
aircraft or were unable to attract the capital to expand market presence.
Frequency refers to the number of flights per day that an airline will assign to
a particular flight segment.137 In the open skies era frequency caps have
mostly been lifted, but conspicuous exceptions still persist. The current
U.S./China ASA (which is not an open skies agreement) “topped out” in
2012 with twenty-three daily frequencies for U.S. airlines serving the limited
number of point-to-point U.S./China routes specified in the ASA.138
With frequency limitations, as indeed with an ASA where only certain

133
“Managed trade” is the use of protectionist artifices such as preset restrictions on imports by or
from a foreign supplier to favor proportionally the weaker domestic supplier.
134
See generally Peter P. C. Haanappel, Ratemaking in International Air Transport:
A Legal Analysis of International Air Fares and Rates 1 (1978); ICAO Manual,
supra note 48, at 4.2-1.
135
Bermuda II, supra note 39.
136
The notion that an airline has the primary claim on the custom of its own nationals is part of a
“managed trade” mindset in the supply of international air transport services. See supra note 40.
The opposite idea is expressed in the Latin phrase suum quoque, “to each [its] own” – that is, to
each air carrier should belong the trade that it is able to attract and build, rather than the trade
that its sponsor State (whether the airline is in public or private ownership) is able to secure based
on mutating aeropolitical bargains with its fellow States. See Henry A. Wassenbergh,
Public International Air Transportation Law in a New Era 153 (1976).
137
Flight frequencies are effectively another way to indicate capacity. See generally haanappel,
supra note 134, at 1.
138
See supra Section 3.3.1.
104 The International Law Regime for Trade in Air Services

point-to-point routes are available, air carriers typically must “bid” for
authorization to be designated for the available routes and for a share of
the frequencies on those routes. In the United States, administrative pro-
ceedings to obtain routes and frequencies are immensely costly and require
evidence to demonstrate that the award of these privileges to a particular
carrier will satisfy an amorphous “public interest” standard.139 Even if the
criteria for winning a frequency are well drawn, the problem remains that
regulatory authorities are not omniscient. As Ludwig von Mises famously
remarked, “the market is a process”;140 as such, only the market yields the
information necessary to determine which airlines are best positioned to
serve it. Regulatory authorities, charged with selecting airlines and deter-
mining the minutiae of frequency, can make mistakes. Ultimately, it is the
consumer who must pay.

3.5.10. “Doing Business” Assurances

To exploit fully the privileges acquired under bilateral ASA diplomacy, air-
lines also need legally binding assurances that they will be able to conduct
normal business operations in foreign States. That governments give these
kinds of assurances is by no means unique to the international aviation
industry: all kinds of foreign investment activities would be undoable without
them.141 “Doing business” provisions in bilateral ASAs may include a broad
guarantee of national treatment (i.e., that foreign airlines will be treated at
least as well as their domestic competitors by local rules and regulations),142
but more specifically will feature a right to establish business offices and to
conduct commercial operations, a “self-handling” right that allows an airline
to use its own ground-handling crews at foreign airports, and the right to
convert and remit its earnings.143 These basic concessions are complemented
in the open skies model by permission to enter cooperative marketing

139
See 2007, 2008, and 2009 US-China Air Services and Combination Frequency Allocation
Proceeding, DOT-OST-2007-28567.
140
Ludwig von Mises, Human Action: A Treatise on Economics 257–58 (4th ed. 1996).
141
See infra Chapter 4 (discussing bilateral investment treaties).
142
The U.S. Model Open Skies Agreement does not include such an explicit guarantee in its
clauses on “Commercial Opportunities,” although it seeks to ensure that foreign airlines can
inter alia establish offices, sell air transportation, perform their own ground-handling services
(i.e., services for an aircraft’s arrival and departure, but excluding air traffic control), remit
earnings to their home States, and enter commercial arrangements such as code-sharing. See
Model Open Skies Agreement, supra note 9, art. 8. On the unresolved question of whether
foreign air carriers can rely on national treatment provisions in general bilateral investment
treaties, see infra Chapter 4, note 25.
143
See Model Open Skies Agreement, supra note 9, art. 8; see also supra note 142.
 3.5. The Core Elements of Air Services Agreements 105

arrangements with local carriers.144 As we will consider in detail in Chapter 4,

these arrangements have escalated into full-scale international airline alli-
ances as large carriers have sought to circumvent the nationality rule’s
embargo on cross-border investment. Alliances in the international aviation
industry, no matter how sophisticated they have become, are all based on the
rather simple device of the code-share: two or more airlines place their IATA
identifier codes145 on the same flight segment, regardless of which airline is
providing the “metal” for the service.146 Alliances allow airlines that are
established as separate companies and in different States to integrate their
services and, subject to regulatory approval, to cooperate on pricing, routes,
and perquisites. Today, three major alliances – SkyTeam, Star, and oneworld –
have developed interlocking air transport networks using partner airlines
around the globe. As we will see, because alliances exist primarily to slide
past the effects of the nationality rule, they are only imperfect imitations of
true mergers. Moreover, their continued existence is contingent on toleration
by State authorities of what are, after all, the kinds of route, price, and capacity
collaborations among competitors that would normally attract scrutiny under
antitrust and competition laws.147 The current U.S. open skies negotiating
process, in particular, anticipates an award of immunity to shield alliances
among U.S. and foreign international carriers designated under the ASA from
the reach of U.S. antitrust laws.148

144
Under the U.S. Model Open Skies Agreement, cooperative marketing arrangements include
blocked-space, code-sharing, and leasing arrangements. See Model Open Skies Agreement,
supra note 9, art. 8(7). “Blocked space” means that one carrier purchases a number of passenger
seats and/or specified cargo space for carriage of its traffic on an aircraft of a second air carrier.
See ICAO Manual, supra note 48, at 4.1-7. For a fuller explanation of code-sharing, see infra
Chapter 4, Sections 4.6.2, 4.6.3.
145
See id.
146
“Metal” is industry argot that refers to the aircraft that is actually performing the service to
which a code-share is being applied. See infra Chapter 4, Section 4.7.1, for further analysis.
147
The U.S. Department of Transportation’s grant of antitrust immunity to the three big alliances
(see infra Chapter 4, Part 4.6) may also smack of a kind of “industrial policy” to allow U.S.
international carriers like American, Delta, and United to generate enough revenues in global
markets to ensure their viability in the U.S. domestic market against lower-cost carriers like
Southwest. See Havel, Beyond Open Skies, supra note 5, at 206.
148
But a pledge of antitrust immunity is not textually a part of the U.S. Model Open Skies
Agreement. Since its inception, the U.S. open skies policy has been tightly interwound with
U.S. administrative grants of antitrust immunity to international airline alliances. Immunity
has been justified as a means of securing open skies agreements, and the agreements have been
negotiated with an implied promise to other countries that immunity will also be forthcoming
for alliances that include their carriers. See infra Chapter 4, Part 4.6, for more detailed
consideration of U.S. policy on antitrust immunity.
106 The International Law Regime for Trade in Air Services

3.5.11. Customs, Duties, and Charges

As we discussed in the previous chapter, Article 15 of the Chicago Convention
prohibits contracting States from applying discriminatory charges against
foreign air carriers while also mandating that any charges applied should be
imposed only to recover the costs of providing air traffic management and
airport services.149 These progressive charging principles have been reinforced
and expanded upon in bilateral aeropolitical diplomacy. U.S. open skies
agreements, for example, provide detail on the acceptable range of charges
that may be imposed upon U.S. carriers and those of bilateral partners. These
agreements also schedule reciprocal exemptions from taxes, levies, fees, and
other charges that may be applied to ground equipment, spare parts, fuel and
lubricants, and promotional and advertising material introduced into U.S.
territory by a foreign air carrier.150 Moreover, in memorializing the key
principles of Article 15, ASAs (including the open skies model) allow States
to contest discriminatory charges on behalf of their carriers using bilateral
dispute settlement proceedings outside ICAO. This is not an unimportant
option given the amount of time it may take for two States to settle their
differences through ICAO’s vaguely defined and (as discussed in the previous
chapter) inadequate dispute settlement machinery. Aggrieved States can rely
on the dispute resolution provisions set out in ASAs to attempt more expedient
relief of their air carriers from illicit charging schemes.

3.5.12. Dispute Settlement

ASA dispute settlement, including the open skies model, offers an admixture of
consultations and arbitration. U.S. liberal bilaterals usually provide that, where
consultations fail to yield a mutually satisfactory result, either State may request
an arbitration tribunal.151 Each party is entitled to nominate an arbitrator, and
the nominated officials, in turn, select the third arbitrator (who will also chair
the tribunal). Majority decision making prevails, and the parties are expected to
fully implement the tribunal’s findings to the extent consistent with their
national laws.152 Unlike ICAO Council determinations, bilateral arbitral deci-
sions typically are not appealable to an additional ad hoc body or to the
International Court of Justice (ICJ). And, unlike the ICJ and other permanent
adjudicatory bodies, arbitral tribunals constituted under ASAs are not bound a

149
Chicago Convention, supra note 12, art. 15.
150
See Model Open Skies Agreement, supra note 9, art. 9.
151
See id. art. 14.
152
See id. art. 14(7).
 3.5. The Core Elements of Air Services Agreements 107

priori to the standard sources of international law (e.g., custom, treaties, and
general principles).153 Moreover, they are “entitled to decide the extent of [their]
jurisdiction . . . [and] establish [their] own procedural rules.”154 The findings of
the few known bilateral arbitral tribunals are rarely released publicly.155 Even if
they were, they would have little or no precedential effect.156 The paucity of
bilateral arbitral proceedings results not only from States’ strong preference for
aerodiplomacy, but also from dissatisfaction with the dilatoriness of traditional
arbitration. More stringent models are available, including the WTO’s time-
sensitive principle of “automaticity,”157 but aviation arbitration has shown little
innovation even in the era of open skies. A very modest step toward tightening
the format appears in the U.S./EU open skies treaty, which creates a standing
Joint Committee that is charged, among its many substantive responsibilities,
with mediating and ultimately seeking to settle potential disputes before arbi-
tration can be triggered by either party.158 In practice, this may amount to little
more than the usual aerodiplomatic consultations, and indeed critics have
suggested that the Joint Committee merely adds yet another procedural step
that will make eventual arbitration even less efficient.159

153
See supra Chapter 1, Part 1.5.
154
See Model Open Skies Agreement, supra note 9, art. 14(3).
155
Notable bilateral disputes include the arbitration between Belgium and Ireland in 1971 over
Belgium’s allegation that the Brussels/Dublin route suffered from overcapacity, in which the
sole arbitrator agreed that the frequencies of both the Irish and Belgian carriers should be
reduced to ensure the viability of each airline on the route (see Jacques Naveau, Arbitral Award
in the Dispute between the Belgian and Irish Civil Aviation Authorities over Services between
Brussels and Dublin by Sabena and Aer Lingus, given at Dublin July 17, 1981, 8 Air L. 50
(1983)), and the U.S./U.K. arbitration under Bermuda II (see supra note 39) concerning airport
user charges levied at London Heathrow, in which the three-person arbitral tribunal found that
the charges did not reasonably reflect the cost of airport services (see Samuel M. Witten, The
U.S.-U.K. Arbitration Concerning Heathrow Airport User Charges, 89 Am. J. Int’l L. 174
(1995)).
156
See Gilbert Guillaume, The Use of Precedent by International Judges and Arbitrators, 2 J. Int.
Disp. Settlement 5 (2011) (noting that the doctrine of binding precedent does not exist in
international law and that this is even more true in international arbitration, in which tribunals
lack the permanence that is characteristic of a court with formal jurisdiction). Although
arbitrations under ASAs are technically inter-State, in reality they are likely to be commercial
disputes involving aviation enterprises and therefore less likely to be concerned with extensive
citation of or reliance on precedent.
157
The WTO dispute settlement procedure gives governments an automatic right to bring their
legal complaints before a dispute settlement tribunal, makes legal rulings by tribunals auto-
matically binding on the parties, and gives complaining parties an automatic right to impose
retaliatory trade sanctions. See Robert E. Hudec, The New WTO Dispute Settlement Procedure,
8 Minn. J. Global Trade 1, 3 (1999).
158
See Havel, Beyond Open Skies, supra note 5, at 82.
159
See id.
108 The International Law Regime for Trade in Air Services

3.5.13. Strategic Considerations in Dispute Settlement

Like all bilateral agreements, ASAs thrive or fail according to the strategic
interests of their parties: a defection by one side from some (or all) of the
terms of the agreement is likely to ignite a reciprocal defection by the other
party or even an alternative retaliatory measure. Dispute settlement is there-
fore most relevant in bringing both parties face-to-face to discuss what does
or does not count as a defection. The United States, for instance, may
believe that under its open skies agreement with Canada the maintenance
of a telephone answering machine in a rented office in northern
Saskatchewan will not qualify Air Canada as having a principal place of
business in Canadian territory where that airline is simultaneously in full
business occupation of a twenty-floor office building in Mexico City. The
United States may attempt to revoke Air Canada’s traffic rights, triggering a
call for consultations by Canada under the ASA. If consultations fail, an
arbitration tribunal may be constituted to clarify the matter. But, if the stakes
for its carrier are too high, Canada may simply bypass arbitration and
retaliate with its own traffic restrictions, regardless of whether or not they
are legitimate under the terms of the ASA. Canada may incur a reputational
loss internationally (a debatable point). More probably, its actions would
undermine friendly aeropolitical relations with the United States. Canada
would thus have to weigh the benefits and disadvantages of defection. The
United States, too, would have to balance its legal right to revoke Air
Canada’s traffic authorization against potential damage to its other aeropo-
litical interests including the Canadian market access of its own airlines.
None of this means that ASA dispute settlement is superfluous; it suggests
only that tougher and tighter arbitral procedures will not necessarily serve
as exogenous restraints on State behavior. Dispute settlement, even if it
never reaches formal arbitration, provides an additional path to clarification
and, in moments of serious disagreement, may prompt new negotiations
to realign the parties’ expectations. Easily the most famous historical exam-
ple of such behavior can be found in the historically fraught context of
U.S./U.K. aeropolitical relations. When the U.K. Government no longer
believed that its interests (or, rather, the interests of BA) were being served
under Bermuda I, it denounced the treaty and contemplated consultations
that led to the classically restrictive Bermuda II bilateral agreement.160 The
United States ceded much economic ground by its acquiescence to

160
More precisely, the U.K. invoked the termination provision in Article 13 of the Bermuda I
Agreement (see supra note 131), which provided for formal termination one calendar year after
receipt of notice by the other contracting State.
 3.6. Looking Beyond Bilateralism 109

Bermuda II, but a trade war, whether confined to the aviation sector or
waged across other industrial sectors, would not have been to either party’s
advantage.161

3.6. looking beyond bilateralism

3.6.1. Preparing for Multilateralism

The bilateral slant of the trade environment for international aviation is
omnipresent, but it is not invulnerable. Multilateralism as enjoyed by other
globally minded service sectors like telecommunications and finance remains
imaginable, although unlikely to materialize in the foreseeable future.
Greater market freedoms have secured their place in open skies–style bilater-
alism, but States remain hesitant to submit their air services trade even to
modest multilateral arrangements. Muscular regional trade pacts like the
North American Free Trade Agreement (NAFTA) continue to exclude hard
economic air traffic rights from coverage.162 To explain why that is the case,
but also to prepare the reader for future shifts beyond bilateralism, we turn to
the treatment of air services trade within the WTO and briefly consider the
challenges of adapting the WTO’s multilateral legal principles to the anoma-
lies of the Chicago bilateral system. We also examine some other regional
initiatives and how they, too, are constrained by bilateralist thinking.

3.6.2. Air Services and the World Trade Organization (WTO)

Bilateralism marks international air services as an outlier from a trend toward
multilateral trade liberalization. That exceptionalism is confirmed when we
examine how international aviation is treated within the WTO General
Agreement on Trade in Services (GATS).163 Unlike all other service sectors,

161
ICAO has criticized bilateral dispute settlement procedures as “inadequate” and has proposed
mediation by impartial experts working to rapid timetables as an alternative to traditional
arbitration clauses. See generally ICAO, Policy and Guidance Material on the Economic
Regulation of International Air Transport, ICAO Doc. 9587 (3rd ed. 2008).
162
See North American Free Trade Agreement art. 1201(2)(b), U.S.-Can.-Mex., Dec. 17, 1992,
reprinted in 32 I.L.M. 289 (1993) (limiting coverage to “aircraft repair and maintenance services
during which an aircraft is withdrawn from service” and “specialty air services,” e.g., aerial
mapping, surveying photography, advertising, etc.). See also, e.g., Free Trade Agreement, art.
10.1(4)(c), U.S.-Austl., May 18, 2004, 118 Stat. 919 (excluding air services from coverage).
163
See General Agreement on Trade in Services [GATS], Annex on Air Transport Services,
Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, Legal
Instruments – Results of the Uruguay Round, opened for signature Apr. 15, 1994, 1869 U.N.
T.S. 183, 33 I.L.M. 1125, 1167 (1993).
110 The International Law Regime for Trade in Air Services

none of which is a priori blocked from coverage under GATS disciplines, the
Agreement’s Annex on Air Transport Services excludes all but a narrow trio of
ancillary services comprising aircraft repair and maintenance, selling and mar-
keting of air transport services, and computer reservation systems.164 On the
principle inclusio unius est exclusio alterius,165 the Annex therefore denies
GATS coverage to the “hard” currency of ASAs such as traffic rights (the free-
doms of the air), foreign investment opportunities, and other market access
privileges. Moreover, GATS treatment of the few included subsectors has been
further eroded by a passel of exemption mechanisms that are hardwired into the
Agreement.

3.6.3. Challenges of Liberalizing Aviation Under WTO

Trade Rules: “Most Favored Nation”
Understanding the exclusion of hard economic rights requires knowing some-
thing about what the GATS trade disciplines are intended to do. Like its older
analog in the trade of goods, the General Agreement on Tariffs and Trade
(GATT), the GATS regime rests on two core principles: most favored nation
(MFN) and national treatment (NT). MFN, in Article II(1) of the Agreement,
instructs each member State to “accord immediately and unconditionally to
services and service suppliers of any other Member State treatment no less
favorable than it accords to the like services and service suppliers of any other
country.”166 Applied strictly to trade in aviation services, MFN would require a
State to offer its most liberal ASA concessions (e.g., under open skies agree-
ments) to all WTO State parties on a nonreciprocal basis. The United States
would be compelled to grant Air China and other Chinese carriers the same

164
See generally ICAO, Economic Commission, Regulation of International Air Transport
Services, Report by the Council on Trade in Services, at 2, A33-WP/7 (Jun. 6, 2001) (describing
GATS Annex on Air Transport Services). It is not clear how the GATS negotiators, in their zeal
to obtain some coverage of air transport, determined that sales and marketing would be treated
as conceptually distinct from the provision of air services as such. As Tissa Abeyratne has
argued, “[a]ir traffic rights that result from the Chicago Convention’s provisions are the tool
with which the selling or marketing of air transport services can be carried out and the two are
inextricably linked to each other.” Ruwantissa Abeyratne, Trade in Air Transport Services:
Emerging Trends, 35 J. World Trade 1133, 1145 (2001). Resting in part on this premise,
Abeyratne suggests that the explicit exclusion of air traffic rights from the GATS is necessarily
“ambivalent.” Id. In any event, “selling and marketing” does not include pricing, which
remains outside the agreement.
165
“The inclusion of one means the exclusion of the other.”
166
For all relevant WTO texts in a concise presentation, see World Trade Organization, GATS
Training Module, http://www.wto.org/english/tratop_e/serv_e/cbt_course_e/signin_e.htm. No
prior training in the esoterica of international trade law and policy is required for this
interactive tutorial.
 3.6. Looking Beyond Bilateralism 111

generous seventh freedom access to U.S. gateways that it concedes to EU airlines

under the U.S./EU ASA. Although China, as a WTO member, would also be
expected to grant nonreciprocal MFN to the United States, the restrictive
market access provisions that the U.S./China ASA imposes on U.S. airlines
would be preserved to the extent that China does not have more liberal arrange-
ments with other States. In fact, China’s ASAs are considerably less liberal than
open skies-model ASAs; its GATS-induced concessions would fall far short of
those that the MFN principle would allow it to extract from open skies adherents
like the United States, the EU, Australia, and Canada. Nonreciprocal MFN
would have had such a disruptive effect on the aviation trading environment that
States were simply not interested in GATS coverage of the sector. Even though
the GATS allows MFN exemptions to avoid free rider problems,167 few States
were inclined to risk the integrity of the bilateral system by opening up even the
possibility of a fully loaded MFN.

3.6.4. “National Treatment”

Likewise, a preference for strategic (and hence discriminatory) trade practices in
their home markets caused States to shun the NT principle. GATS Article XVII
requires contracting States to deliver NT by “accord[ing] to services and service
suppliers of any other [State party], in respect of all measures affecting the
supply of services, treatment no less favorable than it accords to its own like
services and service suppliers.” Strictly applied, NT would prohibit the most
discriminatory terms of aviation trade, including reservations of cabotage routes
to national airlines as well as the nationality rule. While NT under the GATT is
generally applicable, however, under GATS the principle applies only to those
concessions (and for those services) in respect to which a WTO member State
makes a specific scheduled (i.e., listed) commitment. Even if air services had
been generally submitted to GATS treatment, no State party would have had to
schedule a single NT commitment for the sector. But States were once again
unwilling to risk the disruptive effects that NT could have had in the future on
their managed bilateral approach to international air services.168

167
Arguably the availability of MFN exemptions under GATS is not time-limited despite lan-
guage in the Agreement suggesting a technical 10-year expiration. See Havel, Beyond Open
Skies, supra note 5, at 533.
168
The global aviation industry is governed by a variety of discriminatory rules that violate the
assumptions of the NT principle. Examples include discriminatory rules that are explicitly
nationality based such as restrictions on foreign ownership and control of domestic airlines,
reservation of cabotage routes to nationally owned airlines, insistence on the home nationality
of crew members on internal routes, the Fly America program for U.S. Government employ-
ees, prohibition on inbound wet leasing (aircraft plus crew) from foreign carriers,
112 The International Law Regime for Trade in Air Services

3.6.5. A GATS Counterfactual

The GATS was finalized in 1995, just three years after the United States
officially launched open skies and two years before the EU ended its full
transition to a single aviation market. The world’s major aviation powers
simply may have been unprepared for the implications of applying the new
GATS disciplines to an industry that was just emerging from decades of strict
mercantilism. Although counterfactuals are not always useful, it is worth
thinking about what the Annex on Air Transport Services would look like (or
whether it would exist at all) had the GATS been negotiated today. After
recruiting more than 100 partners to its open skies policy, the United States
has made the idea of international air transport liberalization palatable to a
majority of the world’s countries. Were the United States compelled today to
grant nonreciprocal MFN for air services, its strategic costs would be much
less than in 1995 when the only Western European States it could attract to
open skies were the Netherlands and Germany and when it still had restric-
tive ASAs in place with major aviation trading partners such as the United
Kingdom, Australia, Canada, and Japan. A critical mass of WTO members
may eventually lobby for expansion or excision of the Annex on Air
Transport Services.169 Meanwhile, the Annex mandates the WTO – through
its Council on Trade in Services – to regularly evaluate international air
services trade and to chronicle the results in writing. While providing useful
fodder for academics, the WTO’s reporting duties have confined it to
the role of an information clearinghouse. To many, that is a waste of
resources.170

discriminatory preferences favoring national airlines in the assignment of airport slot privileges,
and so on. Strictly speaking, the GATS does not prohibit any of these features of the bilateral
system. Contracting States can simply list them in the relevant schedule as “conditions and
qualifications.” For example, States could schedule existing foreign ownership restrictions in
the form of a GATS commitment and in that way use the GATS formula as a mechanism to
freeze existing restrictions. Had the United States done so, it would not have been able legally to
impose even more restrictive conditions on foreign control in 2003. See Brian F. Havel, Mixed
Signals on Foreign Ownership: An Assessment, Issues Aviation L. & Pol’y (CCH) ¶ 25,341,
at 13,125 (2005) (discussing amendment of U.S. air carrier ownership statute to include explicit
requirement of actual control of a U.S. airline’s stock by U.S. citizens).
169
The EU, Australia, New Zealand, and Chile all supported expanding the GATS to cover air
transport during the first Review of the GATS Annex on Air Transport Services. See Cecilia
Decurtins, The Air Transport Review at the WTO: Bilateralism versus Multilateralism (Jun. 14,
2007) (unpublished Ph.D. thesis, University of Geneva), http://www.unige.ch/cyberdocu-
ments/theses2007/DecurtinsCG/these.pdf.
170
Hamid Mamdouh, Dir., Trade in Services, World Trade Org., address at Sustainable Aviation
Policies for America and the World: A Leadership Summit (Oct. 19, 2006).
 3.6. Looking Beyond Bilateralism 113

3.6.6. Multilateralizing Liberalization: The MALIAT

Since the inception of the U.S. open skies policy, several efforts have been
undertaken to multilateralize its unlimited commercial freedom to set prices,
capacity, and frequency, as well as its unrestricted granting of third, fourth,
and fifth freedoms for passenger and/or cargo traffic (along with occasional
grants of seventh freedoms for all-cargo carriage). The only ostensibly multi-
lateral ASA finalized by the United States is the 2001 Multilateral Agreement
on the Liberalization of International Air Transportation (MALIAT), in which
the United States joined a group of nine other countries including Brunei
Darussalam, Chile, New Zealand, and Singapore.171 MALIAT makes some
minor but interesting modifications to the open skies template, such as
replacing the traditional ownership and control benchmarks in favor of a
more plastic standard of “effective control” by citizens of the designating
contracting State accompanied by (instead of substantial ownership) incorpo-
ration and principal place of business in that State.172 The revised standard
might allow a foreign investor to take a large equity stake in a MALIAT-party
airline, but otherwise the agreement does little more than regulate the bilat-
eral aviation relations of its signatories. For instance, an authentically multi-
lateral feature, such as collective enforcement of the treaty’s terms against a
scofflaw party, does not exist within the agreement.173 Similarly, MALIAT
does not provide an open investment regime among its members, nor does it
facilitate cross-border regulatory harmonization. In reality, MALIAT amounts
to little more than a “pooled” open skies accord.

3.6.7. Other Multilateral Initiatives

Other groups of States, moreover, have partnered regionally to develop liberal
multilateral ASAs. The EU, as previously noted, has evolved an ambitious
structure – the ECAA – that seeks to export its single aviation market to the
wider Union “neighborhood.”174 Using agreements with targeted aeropolitical
powers beyond its region, the EU is also seeking progressive dismantlement

171
See Multilateral Agreement on the Liberalization of International Air Transportation, opened
for signature May 1, 2001, 2215 U.N.T.S. 33, reprinted in 3 Av. L. Rep. (CCH) ¶26,018, at 21,121
(Nov. 15, 2000) [hereinafter MALIAT]; see also the MALIAT homepage, www.maliat.govt.nz.
172
See MALIAT, supra note 171, art. 3.
173
The idea of collective sanctions against a recalcitrant member of an international organization,
to deter commercial or trade actions rather than in a context of belligerency, has recently
regained currency. See, e.g., Oona Hathaway & Scott J. Shapiro, Outcasting: Enforcement in
Domestic and International Law, 121 Yale L.J. 252 (2011).
174
See supra Sections 3.1.3, 3.5.5.
114 The International Law Regime for Trade in Air Services

of the most pernicious restrictions of bilateralism, including cabotage and the

nationality rule, as evidenced by its aspirational 2009 ASA with Canada175
and its ongoing comprehensive aviation trade talks with Australia and New
Zealand.176 The aforementioned 2007 U.S./EU Agreement has also taken on
a multilateral flavor insofar as the accord is able to function as a plurilateral
treaty whereby additional parties can be added if they agree to accede to all of
its terms.177 In 2009, Iceland and Norway, neither of which is an EU Member
State, joined the Agreement, bringing the total State parties to thirty.178
Whether or not more States will petition to join remains to be seen. Beyond
the European theater, ASEAN continues to pour negotiating resources into
the establishment of an “ASEAN Single Aviation Market” (ASAM) by 2015. The
ASAM platform envisions far-reaching regulatory harmonization in areas such
as competition law, consumer protection, and airport charges while also replac-
ing the traditional nationality rule requirements to allow citizens of any
ASEAN member to own and control an airline established in the territory of
another ASEAN member.179 Currently, however, ASEAN air services relations
are governed by the more conservative 2008 Multilateral Agreement on Air
175
See Agreement on Air Transport Agreement between Canada and the European [Union] and its
Member States, Dec. 17, 2009, 2010 O.J. (L 207) 32, http://ec.europa.eu/transport/air/internatio-
nal_aviation/country_index/doc/canada_final_text_agreement.pdf. The EU/Canada agreement
is best characterized as “aspirational,” given the fact that its most progressive features, namely,
reciprocal full investment rights and the reciprocal elimination of cabotage restrictions, will only
come into effect after both parties take the necessary internal legislative steps to put those
provisions into effect. The agreement establishes no time horizon for such major reforms,
however.
176
Australia and New Zealand began working toward their own single aviation market (the Trans-
Tasman Single Aviation Market) in 1996, and have so far granted each other such advanced
features as unrestricted seventh freedom cargo rights, cabotage privileges, and competition law
convergence. Despite the advanced stages of air transport liberalization between the two States,
they continue to conduct external relations separately. Both States have independently been
negotiating liberalized air transport agreements with the EU since 2008, but completion
appears blocked over differences concerning cross-border investment. See David Stone, New
Zealand May Beat Australia to an Open EU Aviation Agreement, N.Z. Herald, Aug. 24, 2009,
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10592719.
177
See U.S./EU Air Transport Agreement, supra note 7, art. 18(5) (extending the Agreement to
third parties following the development of conditions and procedures and necessary amend-
ments). A “plurilateral agreement” is an agreement that might initially be bilateral but is
capable of being expanded to involve additional parties, although typically the later parties
cannot alter the basic terms of the original treaty. See ICAO Manual, supra note 48, at 2.4-1.
178
The EU itself is also a party. For the text of the U.S./EU (Iceland, Norway) Air Transport
Agreement of June 21, 2011, see http://www.state.gov/e/eb/rls/othr/ata/i/ic/170684.htm.
179
The most expansive of these reforms are targeted for discussion, rather than listed as agreed-upon
principles, in the most recently available ASAM policy document. See Ass’n of S.E. Asian Nations
(ASEAN), Implementation Framework of the ASEAN Single Aviation Market (Dec. 16, 2011),
http://www.asean.org/images/archive/documents/111219-17th%20ATM_Agenda%20Item%208%20
ASAM%20Implementation%20Framework.pdf.
 3.7. Remaining Challenges to Trade in Air Services 115

Services (MAAS) and 2010 Multilateral Agreement on Full Liberalisation of

Passenger Air Services (MAFLPAS), which still contain restrictions on cross-
border airline investment along with limitations on market access privileges.180
For instance, neither agreement allows for seventh freedom rights nor for any
form of cabotage.181 Moreover, despite the ambitious nature of the ASAM
platform, there remains strong reason to doubt that its agenda for strong
liberalization will be in place by 2015. Similarly, the African Union has not
succeeded in liberalizing air transport through its own multilateral, the
Yamoussoukro Declaration and Yamoussoukro Decision.182 Although modeled
on the U.S. open skies template, and therefore far less radical than the proposed
ASAM, few African States have demonstrated the political will to bring its
liberalizing terms into effect. That has prompted some members, such as
Ethiopia and Gabon, to pursue liberalization at the bilateral level.183

3.7. remaining challenges to trade in air services

3.7.1. Overview
In this final part, we highlight three matters that trade in air services has
insufficiently addressed and yet which are regularly identified by industry stake-
holders as major challenges to the ongoing project of air transport liberalization.
None of these matters is yet covered materially in ASAs, although some,
particularly harmonization of competition laws, have begun to make their
way into the conduct of aviation trade relations. The reader, however, should
be attentive to the fact that this small list of challenges by no means covers all of
the pressure points on the international air transport industry. Environmental
regulation has recently come to the forefront of international aeropolitical
relations, and while some ASAs now seek to address cross-border convergence
in this area (albeit at a high level of generality), we reserve further discussion on
this challenge for Chapter 5. Similarly, security concerns are also included in
many ASAs, but are reserved for later treatment in Chapter 6.

180
See ASEAN Multilateral Agreement on Air Services, opened for signature May 20, 2009, http://
www.aviation.go.th/doc/public/MAAirServices-Eng.pdf.; ASEAN Multilateral Agreement on
the Full Liberalisation of Passenger Air Services, opened for signature Nov. 12, 2010, http://cil.
nus.edu.sg/rp/pdf/2010%20ASEAN%20Multilateral%20Agreement%20on%20Full%20Liberali
sation%20of%20Passanger%20Air%20Services-pdf.pdf.
181
See id.
182
See generally Schlumberger, supra note 121.
183
See, e.g., Air Transport Agreement, U.S.-Eth., May 17, 2005, reprinted in 3 Av. L. Rep. (CCH) ¶
26,300a; Air Transport Agreement, U.S.-Gabon, Aug. 23, 2004, reprinted in 3 Av. L. Rep.
(CCH) ¶ 26,310a.
116 The International Law Regime for Trade in Air Services

3.7.2. Capacity Constraints

The biggest public policy issue in U.K. aviation today is not market access
rights, domestic cabotage, or whether foreign investors should have the
ability to own and control British Airways. It is, rather, the related facts
that London Heathrow, the world’s busiest international airport, operates
suboptimally with only two runways and that the U.K. Government will not
countenance construction of any more.184 Airport congestion is an enduring
challenge to the orderly development of a competitive international air
transport market. Finite capacity conflicts with the demand created by rising
liberalization. Moreover, many of the world’s highest-demand airports are in
dense urban areas like west London where geographic conditions, environ-
mental concerns, and the lack of political will make significant expansion
problematic. Even authorized projects take many years before new capacity
comes on-stream: Heathrow’s owners predict a lengthy timescale to con-
struct a new runway even if the government were to reverse itself.185 A
competing plan to move London’s principal aviation hub to an island in
the Thames estuary would take twenty years to complete.186 In response to
the problem of scarce capacity, States (or their municipalities) have devised
two remedial mechanisms: congestion pricing and slots. Both are imperfect
instruments that can be, and have been, used to undermine the promise of
liberalization.

184
The issue of U.K. airport capacity (and, specifically, expansion of Heathrow) continues to be a
treacherous political issue. The current Conservative/Liberal Democrat coalition government
campaigned against a third runway in the 2010 general election, but the business community
has subsequently applied considerable pressure to reconsider that position. See Gwyn Topham,
Transport: There’s Only Room for One Hub, Says Heathrow, The Guardian, Nov. 15, 2012, at
34 (reporting on a new study promoted by Heathrow claiming that capacity limitations could
cost the U.K. £14 billion annually in trade revenues). The government had promised to address
the capacity problem as part of a new aviation policy to be released in 2012, but instead
temporarily punted the issue to a special commission that produced an interim report in
December 2013 but will not render a final decision until 2015 (after the next general election).
See Heathrow: Government to Study Airport Expansion Plans, BBC News, Sept. 5, 2012, http://
www.bbc.co.uk/news/uk-politics-19484126. See also Brian F. Havel & Jeremias Prassl,
Reforming Civil Aviation Regulation in the United Kingdom: The Civil Aviation Bill 2011–12,
11 Issues Aviation L. & Pol’y 321 (2012).
185
Estimates vary, but planning objections could delay construction of a third Heathrow runway
by up to a decade. See http://www.ft.com/cms/s/0/96241ba6-f33e-11e1-9ca6-00144feabdc0.
html#axzz2JDichBVH (estimating 6 to 10 years).
186
A new four-runway airport for London, even if it wins the support of the airport capacity
commission and the next U.K. government (see supra note 184), would probably not be
completed until at least 2028. See id.
 3.7. Remaining Challenges to Trade in Air Services 117

3.7.3. Congestion Pricing and Slots

Under congestion pricing, airports scale their takeoff and landing charges in
accordance with the peaks and valleys of demand. The economic logic is that
the airlines that most value “prime-time” access will pay higher charges; the
remainder will redirect their services to off-peak hours or, in some instances,
forego flying to the congested airfield altogether. Although straightforward,
congestion pricing raises a number of concerns. First, it is often difficult to
price properly in line with demand. If prices are set high, too many airlines
may be dissuaded from using the airport and capacity is wasted. If prices are
set too low, then the problem of congestion continues. Second, and more
importantly, congestion pricing can be used by public authorities to collect
rents from airlines. Unless there are preset rules mandating that revenues
collected from congestion pricing are to be used to expand capacity at the
airport or, at least, invested in airport facilities, airlines may find that their
higher fees are being used to fund nonaviation projects. Worse, in States
where the airlines are still publicly owned, revenues collected from conges-
tion pricing may be used to subsidize those carriers. Finally, the costs of
congestion pricing are often merely passed on to airline consumers in the
form of higher fares.187

3.7.4. Slot Mechanisms

An alternative to congestion pricing – one that has been widely adopted in the
EU – is the creation of airport slots. A “slot” is simply an authority to take off or
land at an airport during a given period of time.188 The slot mechanism, too, is
subject to abuse. Because States have historically reserved slots to their
national carriers, it can be difficult for new (including foreign) entrants to
acquire prime slots at high-demand airports. British Airways, for example, has
accumulated over 40% of the slots at Heathrow, and other large U.S. and EU

187
See generally Michael E. Levine, Airport Congestion: When Theory Meets Reality, 26 Yale J.
on Reg. 37 (2009) (proposing a “blind” slot auction that avoids monopolistic and inefficient
effects of government slot allocation procedures and forces slot owners to consider the value
they place on a slot); Jan K. Brueckner, Price vs. Quantity-Based Approaches to Airport
Congestion Management, 93 J. Pub. Econ. 681 (2009).
188
According to the U.S. Federal Aviation Administration, slots are “an operating privilege”
subject to its absolute control. 14 C.F.R. § 93.223(a) (West 2008). Nevertheless, it is well
known that airlines sometimes carry their slot treasuries on their books as assets and have
used them as security for loans or bond flotations. See infra Chapter 8, n. 20 (describing a recent
aborted bond issue by British Airways using some of its takeoff and landing slots at London
Heathrow as collateral).
118 The International Law Regime for Trade in Air Services

carriers have similarly colonized the majority of slot times at their principal
hubs. For protectionist reasons, States may be hesitant to release new slots
even when an airport can handle the additional capacity. One way to avoid
adjusting a fixed supply of slots is for States to allow a secondary or “gray”
market in the existing stock, so that incumbent holders are able to sell or lease
their slots to airlines that value them more. Unfortunately, a gray market lacks
transparency and makes it difficult for airlines to assess the value of their slots
and the opportunity costs associated with holding on to them. Another
approach, favored in both the United States and EU, is to establish a “use-
or-lose” requirement that requires an airline to utilize a given slot at a given
threshold of frequency (say 80% of available peak-time flights) over a given
period – or forfeit its right to the slot. Once forfeited, the slot is redistributed to
a rival carrier, although the terms of redistribution can also pose problems.
The EU, for instance, has favored awarding forfeitures to new entrants despite
the fact that incumbents may value the slot more and would have an incentive
to exploit it more efficiently.189 An auction system, letting the forfeited slot go
to the highest bidder, could resolve this dilemma: but then the challenge
would once again be presented of what to do with auction revenues. If the
revenues must be earmarked for airport upgrading or capacity expansion,
there is little to fret about. If, however, slot auction revenues are remitted to
the general public treasury, airports (or, more specifically, the States and
municipalities that own and control them) have a perverse incentive to
make an inefficient number of slots available for auction in order to collect
rents from bidding air carriers. As things stand, few ASAs contain direct
provisions covering slots, although the pressure of the congestion issue, as
well as the propensity of governments to use it as a plausible rationale for
denying foreign carriers full exploitation of their market access rights, may
cause this state of affairs to change. The 2009 U.S./Japan ASA, for example,
granted U.S. carriers only a small number of slots at one of Tokyo’s two heavily
trafficked international airports, Haneda.190 Critics, labeling the ASA as “open
skies lite,” were quick to note that the Japanese concessions fell far short of
U.S. carrier demands for access.191 Further, the U.S./Japan ASA did not

189
The most recent proposal for amending slot allocation procedures within the EU would allow
airlines to sell and buy slots and possibly incur penalties for delinquent return of unused slots.
See Press Release, Council of the European Union, Transport, Telecommunications and
Energy: Transport Items, PRES/12/447 (Oct. 29, 2012).
190
For the text of the 2009 U.S./Japan ASA, see http://www.state.gov/e/eb/rls/othr/ata/j/ja/
133510.htm.
191
Defenders of the agreement would likely argue that the progress made toward liberalization
should not be discounted given how protectionist Japanese air transport policy had been until
 3.7. Remaining Challenges to Trade in Air Services 119

incorporate a mechanism for acquiring additional slots, other than the usual
channels of aerodiplomacy.

3.7.5. Public Subsidies

The problem of State aid (or public subsidies) is endemic across all sectors of
international trade. Within the EU, a supranational code of behavior seeks to
ensure that industrial and services enterprises, including airlines, cannot be
artificially propped up by their home States. Numerous exceptions to this
regime exist and, with respect to the airline industry, some Member States
appear to have openly defied it.192 International events such as the September 11,
2001, terrorist attacks and the Icelandic Volcanic Ash Crisis in 2010 can provoke
(sometimes unheeded) calls for fiscal support to airlines in the name of safe-
guarding national transportation infrastructures. While, at the global level, the
WTO has attempted to construct a protocol that defines and protects legitimate
subsidies,193 for example, those granted to underdeveloped regions, the decision
to partition off most aspects of international air services from WTO coverage
means that States are not generally dissuaded from assigning public funds to
sustain weak carriers. It remains unclear what, if anything, should be done about
this reality. The rise of the Gulf carriers, and suspicions that they benefit in
numerous ways from the largesse of rich patron States, has added to the vexation
of privately owned airlines about government handouts.194 Yet it is indisputable
that certain kinds of public funding can produce positive outcomes for

very recently. See 5Q with Former State Department Official John Byerly, Bus. Travel News,
Nov. 10, 2010, http://www.businesstravelnews.com/Strategic-Sourcing/5Q-With-Former-State-
Department-Official-John-Byerly/?a=trans (describing the U.S.-Japan agreement as “sort of a
miracle agreement”).
192
See Havel, Beyond Open Skies, supra note 5, at 495–502 (describing the EU’s “battle”
against national subsidies for airlines like Olympic, Alitalia, Aer Lingus, and others). More
recently, the European Commission has investigated the growing phenomenon of State aid to
attract airlines to regional airports in several EU Member States. See European Comm’n,
External Aviation Policy, supra note 33, at 8.
193
See Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, Marrakesh
Agreement Establishing the World Trade Organization, Annex 1A, 1869 U.N.T.S. 14.
194
The European Commission has expressed its concern about these matters in a recent study. See
European Comm’n, External Aviation Policy, supra note 33, at 7, 13 (observing that sustainable
competitiveness in the international air transport industry requires elimination of subsidies and
unfair practices, as well as transparency in financial reporting, and proposing new “fair
competition clauses” for ASAs with non-Member States). The Commission has announced
that it will strengthen Council Regulation 868/2004, Protection Against Subsidisation and
Unfair Pricing Practices Causing Injury to Community Air Carriers in the Supply of Air
Services from Countries Not Members of the European Community, 2004 O.J. (L 162) 1,
which was intended to combat subsidization and unfair pricing practices causing injury to EU
air carriers but which, because the tools it uses are more suitable to dealing with goods rather
120 The International Law Regime for Trade in Air Services

consumers, including greater service opportunities and more competitive fares.

Emirates, the Dubai carrier, has entered secondary airports in the United
Kingdom and Germany to offer a plethora of new one-stop connections over
Dubai, at ticket prices that compete strongly with direct flights by British
Airways and Lufthansa, to points in India and East Asia.195 As the Nobel laureate
economist Paul Krugman is said to have quipped, the best policy response to
foreign State subsidies is “to send a thank-you note to the [local] embassy.”196
Perhaps more importantly, there is an ideology of national pride that continues
to swaddle national carriers and also the still-prevalent bias that airlines remain
public utilities and not solely independent market actors (part of an airline
“system” rather than an airline “industry”197). In those circumstances, States are
unwilling to forego absolutely a sovereign right to bail out a national airline if
the need should arise.198 The prevailing bilateral order and the nationality rule
make such attitudes more understandable. Airlines are largely shut out of
international capital investment and cannot entertain genuine cross-border
mergers or acquisitions. Until the nationality rule is banished, it seems almost
perverse to demand total fiscal self-reliance from the air transport industry.

3.7.6. Competition Law Harmonization

If aviation trade liberalization deepens to the point where airlines will be able to
acquire or establish foreign subsidiaries and consummate cross-border mergers,
the question of “globalizing” competition oversight and enforcement for the
international air transport industry will take on refreshed relevance. Whether
any kind of global competition code is desirable or even possible is a subject that
has preoccupied many legal scholars over the past two decades and is beyond

than services, has never been used. See id. A striking example of the acrimony that has existed
between Emirates and the large international airline alliances can be seen in a 2011 Emirates
publication, Aviation at the Crossroads, available at www.emirates.com. The publication
accuses alliance members inter alia of coordinating competitive attacks on Emirates as a viable
“independent alternative.” Interestingly, while still eschewing the multicarrier global alliance
model, in September 2012 Emirates announced that it would seek regulatory approval to pursue
a 10-year “global aviation partnership” with Australia’s Qantas. See http://www.qantas.com.au/
travel/airlines/media-releases/sep-2012/5440/global/en.
195
For a presentation of Emirates’ current route development strategy, see Aviation at the
Crossroads, supra note 194.
196
Quoted in Alan O. Sykes, International Trade: Trade Remedies, in Research Handbook of
International Economic Law 62, 106 (2007).
197
See havel, beyond open skies, supra note 5, at 376–77 (discussing, but rejecting, possible
reregulation of the U.S. airline industry).
198
See Tyler Brûlé, Embassies with Wings, FT.com, Feb. 24, 2012 (advocating that States help
their airlines for reasons of pride and tourism).
 3.7. Remaining Challenges to Trade in Air Services 121

the scope of this book.199 A handful of ASAs, most notably the 2007 U.S./EU Air
Transport Agreement, contain open-ended provisions calling for “cooperation”
on competition issues, although what that means in practice is hazy.200
ASEAN’s vision for regional air transport liberalization, the ASAM, makes
competition law harmonization one of its pillars. But, given the uncertainty
over whether or not the ASAM will come into effect, it is impossible to judge at
this point what positive (or negative) effects that projected level of regulatory
cooperation will have. Industry stakeholders have suggested that a “one-stop
shop” for competition oversight of transnational airline merger activity would
eliminate duplicative costs and offer more legal certainty, but those advantages
would exist for any commercial activity that crosses borders. None of this is to say
that competition law harmonization is impossible. In a limited number of
bilateral circumstances, where both parties already share a similar competition
code and policy, cross-border cooperation is certainly feasible.201 But stake-
holders must be wary of calls for competition harmonization that are in reality
just intended to stymie further investment liberalization. There is no compel-
ling evidence that the absence of unified global competition laws has thwarted
foreign investment in industries ranging from automobiles to pharmaceuticals.
Even if overlapping competition laws add costs to future potential airline
merger transactions, the parties to the deal are fully capable of taking such
costs into account when deciding whether or not to proceed.

199
See, e.g., Eleanor M. Fox, Toward World Antitrust and Market Access, 91 Am. J. Int’l L. 1 (1997);
Frederic M. Scherer, Competition Policies for an Integrated World
Economy (1994); for a more skeptical perspective, see Paul B. Stephan, Global Governance,
Antitrust, and the Limits of International Cooperation, 38 Cornell Int’l L.J. 173 (2005);
Diane Wood, The Impossible Dream: Real International Antitrust, 1992 U. Chi. Legal F. 277
(1992).
200
But some potentially extraordinary conceptual alignments have nonetheless happened. Thus,
Article 20 of the 2007 U.S./EU Air Transport Agreement, see supra note 7, binds both sides to
U.S. judicial precedent (and to a shared philosophy) when it confirms that the parties “apply
their respective competition regimes to protect and enhance overall competition and not
individual competitors.” See also infra Chapter 4, Part 4.8.6 (discussing some evidence of
convergence in U.S./EU treatment of international airline alliances).
201
As a general matter, U.S./EU cooperation on competition and antitrust enforcement long
predates the 2007 U.S./EU Air Transport Agreement. See Agreement between the Government
of the United States of America and the [EU Commission] Regarding Application of Their
Competition Laws, 1995 O.J. (L 95) (Sept. 23, 1991), as corrected by 1995 O.J. (L 134) 1, reprinted
in 4 Trade Reg. Rep. (CCH) ¶ 13,504, at 21,233-9. The Agreement speaks in the language of
diplomacy rather than normative obligation, inviting each party to demonstrate “comity” in its
relations with the other, either positive comity (to act on the request of the other party) or
negative comity (when each party acts, to take into account important interests of the other). See
also infra Chapter 4, Part 4.8 (discussing cooperation in review of international airline
alliances).
122 The International Law Regime for Trade in Air Services

3.8. some concluding comments on trade

in air services

3.8.1. Assessing the Progress of Liberalization

For those committed to the often frustrating project of trade liberalization
generally, the history of trade in international air services offers a mixed
record. Having largely been exempted from WTO trade disciplines, interna-
tional aviation has had to evolve (and liberalize) within the much more
limited framework of bilateralism. Despite this, progress continues to be
made. Even with widespread restrictions on market access, passengers and
cargo now move across borders under increasingly liberal regimes of routes,
capacity, and fares. Code-shares and alliances have dramatically expanded the
availability of seamless travel to thousands of new connecting cities. The U.S./
EU Air Transport Agreement has offered a dramatic “demonstration” model
for regional liberalization and is likely to produce even further new compet-
itive opportunities in the transatlantic marketplace. Similar multilateral
regional projects are likely to follow in the Asia-Pacific, Latin American, and
African regions. These emerging regions are keenly aware of the stakes: in
today’s sophisticated transnational economy, development is tied inextricably
to new aviation market opportunities.

3.8.2. A Continuing (and Vulnerable) Project

Still, there is much more work to be done, especially if the global air transport
sector is to enjoy the efficiencies that accompany open foreign investment and
untrammeled access to global capital markets. At the same time, there is
concern that managed trade could return as emerging aviation powers such
as China seek to win parity with their developed State rivals. International
aviation law has, and will continue to have, much to contribute to shaping
aviation’s trade landscape in the future. As this chapter has shown, however,
law is constantly in thrall to the demands of politics and the unrelenting
pressure of special interests.
 4

The International Law Regime for Airline

Investment and Global Alliances

4.1. introduction

4.1.1. The Nationality Rule Excludes Single-Carrier Networks

As we noted in Chapter 3, the trade environment for international aviation is
bedeviled by the requirement that airlines designated by a State under its bilateral
air services agreements (ASAs) must be “substantially owned” and “effectively
controlled” by that State or by its citizens. Moreover, that requirement has been
tightened in recent years in many ASAs by making explicit what had always been
an implicit assumption in bilateral aviation relations: that the designated airline
must also be legally established and have its principal place of business in the
designating State.1 To reinforce these treaty-based provisions, most States have
enacted domestic laws that prohibit foreign ownership and control of their
national air carriers. All of these restrictions, bundled together as the “nationality
rule,”2 mean that no single air carrier is legally able to generate a freestanding
global route network using any combination of wholly owned subsidiaries in
strategic locales or cross-border mergers or acquisitions involving foreign part-
ners.3 Airlines, in a phrase, do not do business like any other business.4

1
See Air Transport Agreement Between the Government of the United States of America and
the Government of [country] art. 1(4) (Jan. 12, 2012), http://www.state.gov/e/eb/rls/othr/ata/
114866.htm [hereinafter Model Open Skies Agreement] (“‘Airline of a party’ means an airline
that has received its Air Operator’s Certificate (AOC) from and has its principal place of
business in the territory of that Party”).
2
Technically, the nationality rule refers only to the treaty-based restraints on designation (the so-
called nationality clauses), but domestic laws limiting foreign ownership are just as responsible
for circumscribing transnational airline investment. In our view, the “nationality rule” encom-
passes both treaty and domestic law restrictions, and we use the term with that more compre-
hensive meaning. See supra Chapter 3, note 1.
3
See supra Chapter 3, Section 3.4.1.
4
See International Air Transport, Agenda for Freedom, Frequently Asked Questions, http://www.
agenda-for-freedom.aero/Pages/faq.aspx. Anomalously, perhaps, companies that provide

123
124 Regime for Airline Investment and Global Alliances

4.1.2. Rise of Strategic Alliances

As we will see, however, there is some evidence that the high-water mark of the
nationality rule has passed, and that States in some regions are showing
tolerance for transnational airline mergers that do not conform to the rule.
In the meantime, many international carriers have sought to trump the
nationality rule by forming single-identity strategic commercial alliances
with foreign partners. By collaborating on fares, routes, marketing, and con-
sumer perquisite programs, airline alliance partners can replicate, with vary-
ing degrees of intensity, the unified brand identity and service that a
hypothetical “globalized” airline would be able to offer. These collaborations
are not without controversy, however. As a former Qantas Airlines chief
executive observed, airline alliances involve “sitting in a room to plan your
business with your competitors.”5 Strategic alliances among companies that
are normally in full-throated competition with each other are bound to attract
antitrust scrutiny. But, as we will see, a vestigial power of antitrust exemption
inherited by the U.S. Department of Transportation (DOT) from the era of
airline regulation has enabled the three global alliances that include U.S.
airlines to operate mostly outside that kind of scrutiny. The Department’s
approval of the alliances seems to have influenced competition law enforcers
in other regions to take a similarly benign view.

4.1.3. Overview of Topics

In this chapter, we seek to state the contours of international investment and
competition law as they relate to the airline industry. As with international
environmental law (the subject of Chapter 6), the rules that affect transna-
tional competition and investment in international aviation remain far from
unified. Given that the United States and the European Union (EU) have
largely set the regulatory tempo on matters of international airline competi-
tion and investment, and particularly in relation to alliances, our focus in this
chapter will be on the legal arrangements and policy choices that have found
favor in those two jurisdictions. But we will pay attention also to emerging
trends in other regions, especially as they affect relaxation or even abandon-
ment of the nationality rule. We will look at airline investment from three

ancillary services to airlines, such as aircraft leasing companies, airports, ground-handling

companies, catering suppliers, and so forth, are not subject to the nationality rule.
5
Yet in September 2012 Qantas announced a “global aviation partnership” with the Gulf-based
carrier Emirates: see http://www.qantas.com.au/travel/airlines/media-releases/sep-2012/5440/
global/en. See also supra Chapter 3, note 195.
 4.2. The (Airline) Nationality Rule in Action 125

perspectives. First, we will discuss the operation and effects of the nationality
rule in current international aviation law and practice. Second, we will fit our
analysis of airline investment into the wider context of how international law
normally regulates foreign investment. Third, we will examine a perceptible
trend toward destabilization of the nationality rule as evidenced by changes in
State laws and practices and by the effects of private sector advocacy. Finally,
we will explore how the international airline industry has attempted to cir-
cumvent the commercial limitations imposed by the nationality rule, and we
will focus primarily on the emergence of the international airline alliance. We
will review the legal and policy framework that has developed to support the
three global alliances, and we will consider how U.S. and EU antitrust
regulators are dealing with an industry-created system that binds competitors
into potentially risky collaborative behavior. The chapter closes with a brief
reflection on a new EU initiative that seeks to challenge the nationality rule
within a broader context of U.S./EU trade diplomacy.

4.2. the (airline) nationality rule in action

4.2.1. Operation of the Nationality Rule in ASAs

The nationality rule has been part of international aviation law since the
signing in 1944 of the Convention on International Civil Aviation6 (the
“Chicago Convention”) and its subsidiary accords, the Two Freedoms and
Five Freedoms agreements.7 Although the rule’s placement within literally
thousands of ASAs demonstrates slight levels of variance, for the most part it is
articulated as a condition precedent for States that designate one or more of
their air carriers to take advantage of the terms of market access provided in
each ASA. Under the Canada/U.S. ASA currently in force, Air Canada –
Canada’s flag carrier – must be owned and controlled by Canadian citizens
before it is legally authorized under the ASA to serve destinations to, from, or
beyond the United States.8 Should Air Canada’s ownership profile shift, for
example, through a cross-border merger with Germany’s Lufthansa, the

6
See Convention on International Civil Aviation, opened for signature Dec. 7, 1944, 61 Stat. 1180,
15 U.N.T.S. 295 (entered into force Apr. 4, 1947) [hereinafter Chicago Convention].
7
See International Air Services Transit Agreement, opened for signature Dec. 7, 1944, 59 Stat.
1693, 84 U.N.T.S. 389 (entered into force Jan. 30, 1945) (129 State parties as of January 2013)
[hereinafter Two Freedoms Agreement]; International Air Transport Agreement, opened for
signature Dec. 7, 1944, 59 Stat. 1701, 171 U.N.T.S. 387 (entered into force Jan. 30, 1945) (11 State
parties as of January 2013) [hereinafter Five Freedoms Agreement].
8
See Air Transport Agreement, U.S.-Can., art. 2(a), Mar. 12, 2007, 3 Aviation L. Rep. (CCH) ¶
26,246a.
126 Regime for Airline Investment and Global Alliances

United States could, by the terms of the ASA, reduce or suspend Air Canada’s
market access privileges.9 Even so, neither prong of the nationality rule –
“substantially owned” and “effectively controlled” – is accompanied in ASAs
by clarifications or benchmarks; what will satisfy either test seems left to be
sorted out, as a matter of treaty law at least, on an ad hoc basis should a
designated airline from an ASA partner receive a capital injection from a
foreign-owned airline.10 Would taking a mere 25% ownership stake elevate
Lufthansa to “substantial ownership” of Air Canada?11 On its face, probably
not. But if Lufthansa ratchets up its stockholding to more than 50%, its own-
ership would certainly be perceived as legally “substantial.” Yet there is no
language in the U.S./Canada ASA explicitly regulating that possibility.12

4.2.2. Meaning of Effective Control

“Effective control” is an even more ambiguous measurement of foreign
domination. Whereas 25% of an airline’s voting share capital may not by itself
reflect “substantial ownership,” if 25% represents the single largest fraction of
that capital, spreading the remaining 75% among a diluted mass of small
shareholders may not prevent the 25% owner from exercising effective control.
The imprecision of the nationality rule’s two key components gives States
ample latitude to enforce or (in a growing number of cases) not to enforce the
rule against their ASA partners.

4.2.3. Origins and Purpose of the Nationality Rule

Why the nationality rule infiltrated international aviation law is itself an
interesting question, the answer to which sheds light on its slow but percep-
tible retreat over the past decade. Recall that the Chicago Convention and its
accompanying treaties were negotiated and signed before the end of World
War II hostilities. The United States and its allies feared that enemy or
ex-enemy States could gain control of a third State’s airline and thereby
indirectly enter U.S. or other airspace even though those States’ own airlines
might be blocked from doing so for political and military reasons. States
9
See id. art. 4(b); see also supra Chapter 3, Section 3.5.6.
10
See supra Chapter 3, Section 3.4.7.
11
Canadian domestic legislation currently places a 25% cap on foreign investment in the shares of
Canadian airlines. See Transportation Act, S.C. 1996, c.10, §§ 55, 61(a)(1) (Can.), http://laws.
justice.gc.ca/PDFF/Statute/C/C-10.4.pdf. In addition, Canadian airlines must also be “con-
trolled in fact” by Canadian citizens. Id.
12
Nevertheless, as mentioned supra note 11, Canadian domestic law limits foreign ownership of
the voting stock of Canadian airlines to a maximum of 25%.
 4.2. The (Airline) Nationality Rule in Action 127

understandably wanted to ensure that only the States – and their citizens – to
which market access concessions were awarded could take advantage of those
preferential terms. But there was also a strong protectionist coloring to the
nationality rule. By keeping airlines tethered to their home States and to the
citizen-investors of those States, the nationality rule contributed to maintain-
ing a degree of parity in the international marketplace; no single carrier could
hope to take advantage of cross-border capital infusions that might allow it to
build the fleet capacity and resources to overpower specific international
markets. Likewise, the rule thwarted the establishment of foreign subsidiaries
that would allow airlines to assemble global networks. Hence, on the general
premise that national third and fourth freedom traffic (the basic passenger and
cargo traffic between any two States) “belonged” to the flag carrier in the first
instance,13 the system was effectively rigged to give national airlines the
opportunity to capture business from passengers and shippers in their home
States looking to access foreign destinations. Under that framework, for exam-
ple, a passenger flying from Grand Rapids, Michigan, to Warsaw, Poland,
would travel on a U.S. airline to Chicago and likely board the same or a rival
U.S. carrier for transit to Frankfurt. From there, Poland’s LOT airline would
serve the final segment to Warsaw. The journey would include at least two and
possibly three airlines providing successive carriage at high “interline” rates.14
As we will see, the global alliances (while remaining bound by the limitations
of the nationality rule) offer at least the promise of a more rationally integrated
service.

4.2.4. Foreclosing the Techniques of Cross-Border Investment

The push toward airline deregulation within particular economies promised
greater consumer choice and, for the airlines, much improved efficiency. The
nationality rule prevented delivery of those boons at the international level.
Not only were airlines prevented from creating autonomous transnational
networks, but their legal inability to consummate mergers or acquisitions or
to create subsidiaries across national borders disqualified them from exploiting
the basic investment techniques that other industries use to elude high tariffs
and discriminatory regulatory barriers. A manufacturer established in a State
with high labor standards and other costly regulatory requirements may be
unable to price its products competitively for export to a protected overseas

13
See supra Chapter 3, note 136.
14
See infra note 111 (defining interlining as occurring when different segments of a trip are flown
by different airlines and the passenger and his or her luggage are transferred from the aircraft of
the first carrier to that of the second; interlining typically does not involve a code-share.).
128 Regime for Airline Investment and Global Alliances

market. But, if the manufacturer obtains the right to establish a facility in the
foreign market, localized manufacturing avoids inward tariffs, and more
competitive localized pricing will build market share. Reduced transportation
costs might also encourage the manufacturer to export from its new overseas
base to the wider region within which its new facility is located. Finally, the
manufacturer can benefit from any trade concessions negotiated by its new
host State with other States in the region, such as preferential tariff treatment
within a trading bloc.15 A similar logic can be applied to international aviation.
For example, were it not for the nationality rule in the U.S./Japan ASA or
inward investment caps in Japan’s domestic laws, a U.S. carrier such as
United, frustrated by market access restrictions in Japan, might decide to
establish a subsidiary – call it “United-Asia” – in Japan in order to claim a
slice of Japan’s international aviation market (and perhaps of its domestic
market as well). Assuming that Japan has counterpart ASAs (i.e., without the
nationality rule) with other Asian States, United-Asia could use the market
access rights under these ASAs to offer seventh freedom (stand-alone) services
from Tokyo to Beijing, Hong Kong, Seoul, Singapore, Sydney, or Ho Chi
Minh City. In cooperation with its U.S. parent, United-Asia could develop
Tokyo (or any Japanese “aerotropolis”16) as a pan-Asian hub that not only
sidesteps market access restrictions, but also loops together traffic rights on the
way to amassing a transpacific route network attractive to both American and
Asian passengers.

4.2.5. Domestic Enforcement of the Nationality Rule

The nationality rule chokes off these possible market scenarios because
States are fearful that allowing foreign carriers to invest in domestic airlines
risks jeopardizing the latter’s market access rights under ASAs with other
States. Even under the right of establishment strictly so called, where only a
foreign subsidiary is created,17 if the new subsidiary applies for designation
under a State’s ASA, other States will have the right to deny the designation

15
See supra Chapter 3, note 90.
16
“Aerotropolis” is a term coined by Professor John Kasarda to refer to the concept of planning a
city around an airport, with emphasis on maximizing the city’s effectiveness as a business and
shipping hub. See John Kasarda & Greg Lindsay, Aerotropolis: The Way We’ll
Live Next (2011).
17
Under a right of establishment, an airline would have the ability to establish a subsidiary within
a foreign market. The foreign subsidiary concept is referred to as “secondary establishment” in
EU law. See generally Benjamin Angelette, Note, The Revolution That Never Came and the
Revolution Coming – De Lasteyrie Du Salliant, Marks and Spencer, Sevic Systems and the
Changing Corporate Law in Europe, 92 Va. L. Rev. 1189 (2006).
 4.2. The (Airline) Nationality Rule in Action 129

on the ground of foreign ownership and control. States, therefore, frequently

ensure the “purity” of their air carriers’ citizenship (and eligibility for
designation) through domestic laws that regulate the quantum of share
ownership and sometimes also the stringency of foreign managerial control.
The United States, for example, has a federal statute that requires all U.S. air
carriers to remain 75% owned by and under the “actual control” of U.S.
citizens.18 Most other States have equivalent laws, but with different cali-
brations of ownership or control. The EU allows foreign (i.e., non–EU
Member State or non–EU citizen) entities to hold up to 49.9% of the voting
equity of its air carriers – one of the more liberal investment ceilings
currently in existence.19 The EU has also legislated one of the few definitions
of “effective control.”20

4.2.6. Viewpoint of Organized Labor

Special-interest groups, particularly organized labor, have passionately
opposed dismantling restrictions on foreign investment in national airlines –
including the right of establishment, which labor unions fear will lead to the
same “flag of convenience” problem that plagues global shipping.21 According
to U.S. labor, open investment rights would entice U.S. airlines into keeping
only a “shell” identity in the United States while moving their true commer-
cial operations to low-regulation, low-tax, low-wage third countries, converting
those low regulatory hurdles into significantly lower cost structures while
maintaining their market access privileges in the United States. Thus, the
hypothetical United-Asia, instead of serving as a partner to United’s U.S.
parent, could become the sole corporate presence of the entire airline and
still hold intact the original parent’s domestic and international hub-and-
spoke system within the United States. Even more vexing to U.S. labor is the

18
See 49 U.S.C.S. §§ 41101(a)(1), 41102(a), 40102(a)(15) (LexisNexis 2012).
19
See Common Rules for the Operation of Air Services in the European [Union], Council
Regulation 1008/2008, art. 4(f), 2008 O.J. (L 293) 3 [hereinafter Common Rules].
20
Article 2(9) of the (EU) Common Rules, see supra note 19, defines “effective control” in the EU
aviation law context as (in summary) a relationship – formed by rights, contracts, or otherwise –
that confers the possibility of directly or indirectly exercising a “decisive influence” on an air
carrier, in particular by (a) the right to use all or part of the carrier’s assets, and/or (b) rights or
contracts that grant a “decisive influence” on the composition, voting, or decisions of the
governing body of the air carrier or on the running of its business.
21
In the international shipping industry, merchant vessel owners register (or “flag”) their ships in
foreign States with lighter regulatory burdens than the owners’ home States. See generally H.
Edwin Anderson III, The Nationality of Ships and Flags of Convenience: Economics, Politics,
and Alternatives, 21 Tul. Mar. L.J. 139 (1996).
130 Regime for Airline Investment and Global Alliances

contingency that United-Asia would take down its U.S. employee base and
replace it with cheaper foreign workers. These objections from a powerful
stakeholder suggest that a replacement investment regime for States with high
labor standards would retain some prophylactic restrictions on foreign invest-
ment.22 Such a regime would include a requirement that no airline would be
eligible for designation under an ASA unless its principal place of business
remained in the designating State.

4.2.7. Viewpoint of Other Interests

As well as labor, other interests have been uncomfortable with relaxing or
abolishing the airline nationality rule. The national security bureaucracy, for
example, remains a potent constituency. But whatever merit once attached to
the fear that enemy States could poach the market access rights of third States,
concern about the dangers of “peddling” air routes seems anachronistic in the
modern era. States have not only shifted to open investment regimes covering
major infrastructure industries from automobiles to telecommunications, but
they have also put in place review mechanisms to screen proposed inward
investments where a national security objective seems implicated.23 Other
stakeholders, such as consumer groups, may fear that cross-border mergers will
reduce competition, elevate fares, and cut service. The best policy response to
such concerns is vigilant antitrust enforcement, including the premerger
review procedures that now occur in major air transport markets like the
United States and EU. Ironically, it is a measure of how the nationality rule
unsettles normal commercial practice that the instrument invented by the
international airline industry to bypass the rule – the strategic alliance – relies
entirely on the willingness of States to refrain from applying their competition
codes.24

22
For a response that challenges these arguments (and that advocates the importance of requiring
a broad spectrum of strong legal, regulatory, and commercial links to the licensing State), see
Brian F. Havel, Beyond Open Skies: A New Regime for International Aviation
168–71 (2009).
23
Under the U.S. Foreign Investment and National Security Act of 2007 (FINSA), for example,
the President of the United States has broad powers to block or suspend investments in and/or
acquisitions of U.S. companies and assets by foreign entities if the transaction presents a
“credible” threat to national security. See 50 U.S.C.S. § 2170 (LexisNexis 2012). See
Joseph Mamounas, Controlling Foreign Ownership of U.S. Strategic Assets: The Challenge of
Maintaining National Security in a Globalized and Oil Dependent World, 13 Law & Bus.
Rev. Am. 381, 395–96 (2007) (concluding that the aviation industry qualifies under FINSA as a
“symbolic national asset” with serious security implications).
24
See infra Part 4.5.
 4.3. How International Law (Normally) Regulates Foreign Investment 131

4.3. a quick look at how international law

(normally) regulates foreign investment

4.3.1. A Regime to Encourage Foreign Capital

For the moment, the nationality rule holds sway in the international airline
industry. Yet, in the broad context of how States frame policies on inward
investment, there is nothing surprising about a State giving preference to its
own nationals when determining the desired ownership profile of particular
(or all) sectors of its economy. The right to exclude foreign investment, after
all, has always been just as much a principle of sovereignty as the right to
permit it – protectionism and mercantilism have ancient pedigrees.
Nevertheless, the global market turmoil since 2008 has not yet capsized the
policy choice made by virtually all developed and developing States over the
past two decades that access to foreign capital should be encouraged and
economic sovereignty limited accordingly. A body of “foreign investment
law” has developed to allow States to offer an investment-friendly climate
that fosters economic growth through capital importation. Whether legal
stability alone would drive investment is, of course, open to question, but
the existence of a functioning State, functioning institutions, and the rule of
law will certainly be major factors in weighing a State’s competitiveness as a
prospective site for foreign investment.25

4.3.2. Another Bilateral Treaty System

The international airline industry, in any event, has stood aside from this body
of investment law and is covered only incidentally by it.26 Foreign investment
25
“[I]nvestors primarily make their decision to invest dependent on the credibility of [S]tates to
ensure a predictable and stable legal framework, i.e., to effectively implement the rule of law.”
International Investment Law and Comparative Public Law 178 (Stephan
W. Schill ed., 2010) [hereinafter schill] (citing 1997 World Bank report).
26
Thus, it is possible that a foreign airline that takes only a minority shareholder position in a host
State airline (to the extent that such an investment is permitted by the host State’s domestic law)
will benefit from protections accorded under a bilateral investment treaty. The treaty may also
give independent standing to the investing airline, as it will to all minority shareholders, to
pursue a claim before an international arbitral tribunal even though the local airline corpo-
ration cannot strictly be characterized as foreign-owned. There is strong arbitral support for this
proposition. See Rudolf Dolzer & Christoph Schreuer, Principles of
International Investment Law 58 (2008) (citing decisions of various international
tribunals). A more dramatic argument appears in a recent article suggesting that airlines
which conduct traffic operations in a host State could invoke investment treaty protections,
including investor-State arbitration, in situations where the host State has acted unfairly – for
example, where a government imposes steep fees on foreign airlines landing at its airports,
132 Regime for Airline Investment and Global Alliances

law does resemble international aviation law, however, in that it has developed
since the early twentieth century almost entirely through the medium of
bilateral treaties between States. These treaties are designed to protect the
interests of private corporate investors.27 The directory of investment treaties
now exceeds 3000,28 making the field dense enough to not only merit consid-
eration as a separate object of legal study but also to support a number of
overarching principles of fair treatment that could be described as customary
international law.29 In the past two decades, also, foreign investment law has
far surpassed the adjudicatory scope of international aviation law in repeatedly
using autonomous international tribunals to resolve both inter-State and
investor-State disputes. These tribunals have published a body of more than
300 decisions30 that, while not binding beyond the immediate parties to the
dispute, have shown appreciable cross-fertilization in how they interpret the
legal rules and standards that are increasingly common to all bilateral invest-
ment agreements.

without relation to any identifiable costs in receiving those aircraft. Arguably, that fee structure
would be in violation of Article 15 of the Chicago Convention, supra note 6, which permits
recoupment of airport or navigational costs but does not permit “in gross” charges for overflight,
takeoff, or landing per se. See supra Chapter 2, Section 2.5.6. But the argument rests on the as
yet-untested (and undoubtedly controversial) proposition that “doing business” activities (such
as providing flight service into and from a host State) could qualify as an “investment” for
purposes of invoking a bilateral investment treaty between the host State and the airline’s home
State. Moreover, many bilateral investment treaties exclude air transport activities from their
coverage. See generally Andrew B. Steinberg & Charles T. Kotuby, Jr., Bilateral Investment
Treaties and International Air Transportation: A New Tool for Global Airlines to Redress Market
Barriers, 76 J. Air L. & Com. 457 (2011).
27
Government investors not acting in a sovereign capacity but as commercial enterprises are also
covered. To determine the nationality of a corporation, legal systems typically use tests of
“incorporation” or (and sometimes in addition) the siège social (the principal place of busi-
ness). See Dolzer & Schreuer, supra note 26, at 49. The relevant bilateral investment treaty
will likely specify which test or tests will be preferred. Article 1 of the U.S. Model Bilateral
Treaty defines an “enterprise” as “any entity constituted or organized under applicable law . . .
including a corporation, trust, partnership, sole proprietorship, joint venture, association, or
similar organization; and a branch of an enterprise.” See U.S. State Dept., U.S. Model Bilateral
Treaty (2004), art. 1, http://www.state.gov/documents/organization/38710.pdf [hereinafter U.S.
Model BIT]. As noted, see supra Section 4.2.1, in the international aviation industry the tests of
nationality are extremely stringent, because they require not just majority share ownership by a
State’s nationals but also “effective control” by those nationals.
28
See Jeswald W. Salacuse, The Emerging Global Regime for Investment, 51 Harv. Int’l L.J. 427,
436 (2010). It is best not to describe these bilateral treaties on investment as a “network,” since
they are not necessarily connected to one another despite their repeated use of similar
provisions and conditions. Id. at 430.
29
See Dolzer & Schreuer, supra note 26, at 124–28.
30
See Salacuse, supra note 28, at 460.
 4.3. How International Law (Normally) Regulates Foreign Investment 133

4.3.3. Potential Mechanisms for Investment in Foreign Airlines

A “foreign investment,” as we use the term here and as it is generally
understood, means more than a simple one-off trade transaction because it
involves the rights and obligations that flow from a permanent relationship
between the investing enterprise and the foreign State.31 As the world’s
airline executives are keenly aware, that kind of relationship can take one
of two forms: either it is a nonnational investor taking a controlling share in
an existing domestic corporation (e.g., if United were to buy Lufthansa), or,
under the doctrine known as the right of establishment, a nonnational
investor using local laws to set up a subsidiary corporation that must be
compliant with the full sweep of tax, social, labor, environmental, and other
regulatory rules that apply also to domestically owned companies (e.g., if
United were to establish United/Germany).32 Occasionally, especially with
respect to large-scale utility investments such as power generation plants or
oilfield or gas generation infrastructure, a foreign investor may reach a
separate agreement, called an “investment agreement,” with the host
State.33 Because of the role of airline companies as both profit-seeking
commercial enterprises and also critical components of national transpor-
tation infrastructure, it is conceivable that some States would enter special
agreements with investing foreign airlines if the nationality rule were scrap-
ped but those States still felt that certain questions of national policy needed
to be clarified: a good example would be the U.S. Government’s require-
ment that all of its airlines remain available to provide auxiliary airlift
capacity during military engagements.34

31
“Permanency” is a term of art and may mean as little as a couple of years depending on the
circumstances. The important point is that the relationship has a certain measurable duration
and is not simply a one-off transaction. Note that the kind of foreign investment discussed here
is also distinguishable from so-called portfolio investment where the foreign investor simply
invests in corporate stocks but plays no role in the actual management of the corporation. See
Dolzer & Schreuer, supra note 26, at 64.
32
See supra note 17 (noting similar EU concept of “secondary establishment”).
33
Agreements of this kind may include complex formulas to divide revenues between the parties
to the investment agreement. See generally Dolzer & Schruer, supra note 26, at 72–73.
34
Under the Civil Reserve Air Fleet (CRAF) program, U.S. air carriers commit to supply airlift
capacity to the U.S. defense forces in the event of a military emergency. The carriers receive
peacetime U.S. Government business as a quid pro quo for their wartime availability. The
Department of Defense has expressed concern that foreign-owned U.S. carriers could no
longer be relied upon to honor their CRAF commitments and may be less likely to participate
in CRAF. See Havel, supra note 22, at 48.
134 Regime for Airline Investment and Global Alliances

4.3.4. Foreign Investors and National Treatment

Investment, therefore, is a broad and flexible term that is well understood in
international law.35 Also well understood is that a foreign corporate investor, like
its counterparts in the host State of the investment, acts with an expectation of
profit and must likewise bear the risk of business failure. But foreign investors will
not expect or want to endure the collateral political risks that could follow an
inward investment, for example a sudden reversal of government policy or
replacement of a friendly regime by one hostile to alien rights. At that point, the
investor’s bargaining power recedes and “the commitments received [are at risk of]
becoming obsolete in the eyes of the host government.”36 The foreign investment
law found in bilateral treaties uses a number of well-recognized principles to calm
investors’ fears of political interference. In the first place, these treaties assure what
is effectively “national treatment” (that is, treatment identical to that afforded to
domestic enterprises) to prospective nonnational investors.37 The foreign investor
will be guaranteed rights and privileges (including, for example, nondiscrimina-
tory recourse to national courts and freedom to select its own personnel and not
just local managers38) that its host State competitors enjoy.

4.3.5. “Better than National Treatment” (Dispute Settlement)

Sometimes, moreover, a nonnational investor will receive “better than
national treatment,” as may occur where a special tax regime is offered or
recourse to an international arbitration panel is conceded instead of or in
addition to access to host State courts.39 Supranational dispute settlement, in

35
Bilateral treaties typically contain their own definitions of “investment,” some of which can be
quite extensive and include representative lists of categories. See, e.g., art. 1 of the U.S. Model
BIT, supra note 27, which defines an investment (in summary) as every asset owned or
controlled by an investor that involves the commitment of capital and the expectation of profit,
and which may take the form of an enterprise, shares or stock, bonds and other debt, turnkey
contracts, intellectual property rights, licenses, and so on.
36
Salacuse, supra note 28, at 451. Strong dispute settlement, therefore, is intended to deal with
what Salacuse refers to (citing an earlier authority) as the “obsolescing bargain” between the
investor and the host State. Id.
37
“National treatment” is the standard embodied in the U.S. Model BIT, although some States’
treaties do not envisage that existing laws which may discriminate against foreign investors will
necessarily be changed. Bilateral investment agreements also frequently provide for “most favored
nation” (MFN) treatment, ensuring that the State parties treat each other’s investors in a manner
at least as favorable as they treat investors from third States. See also supra Chapter 3, Part 3.6.
38
Article 9 of the U.S. Model BIT, supra note 27, provides that neither State party “may require
that an enterprise of that Party [i.e., an investment that qualifies as an investment under the
treaty] appoint to senior management positions natural persons of any particular nationality.”
39
As early as 1965, a transnational investment dispute settlement system appeared under the
Convention on the Settlement of Investment Disputes Between States and Nationals of Other
States, opened for signature Mar. 18, 1965, 17 U.S.T. 1270, 575 U.N.T.S. 159 [hereinafter ICSID
 4.3. How International Law (Normally) Regulates Foreign Investment 135

fact, is the “hardest” concession that a State can make to a foreign investor.
The radicalism of this shift toward private-party standing can be appreciated
by simple comparison with the much later dispute settlement machinery of
international agreements such as the treaties establishing the World Trade
Organization (WTO): in that venue, just as in the Chicago Convention, all
disputes are State-to-State.40 For nonnationals, the value of State-investor
international arbitration is magnified by the willingness of international
arbitrators to crystallize certain common treaty assurances, such as “fair
and equitable treatment” and “full protection and security,” as customary
international law.41 These standards of required State behavior may appear
vague when applied in domestic contexts, but, in the hands of experienced
tribunals, they can be (and are) textured to provide robust protection for an
aggrieved foreign national.42

Convention]. At present, the Convention has been ratified by 147 States. The Convention
established the International Centre for the Settlement of Investment Disputes (ICSID), which
allows foreign enterprises and individuals to bring an arbitral suit directly against an expropri-
ating State. More and more bilateral treaties refer to ICSID as a forum for dispute settlement,
and the Geneva-based organization is probably now the main forum for this kind of transna-
tional dispute resolution. Features of the system include the fact that international law is
applied, State immunity is restricted, the usual requirement to exhaust local remedies rule is
abrogated, and awards are directly enforceable. See dolzer & schreuer, supra note 26, at 20.
40
For capital-exporting States, investor-State arbitration reduces governmental transaction costs
arising out of investments made by their nationals. See Salacuse, supra note 28, at 462–63 (“[I]n
effect, [investor-State arbitration] allows [governments of capital-exporting States] to say to
their nationals and companies aggrieved by host government acts that ‘you have your own
remedy in the treaty. Use it if you wish. Go away and don’t bother us.’”).
41
See decisions cited in Dolzer & Schreuer, supra note 26, at 124–28. The general standard of
“fair and equitable” treatment in effect provides an overarching commitment of good faith on
the part of the host State that informs the application of more specific treaty clauses. Salacuse
describes “fair and equitable treatment” as the “basic norm” of the international investment
regime. See Salacuse, supra note 28, at 453. Another standard that often appears in investment
treaties alongside fair and equitable treatment is that of “full protection and security.” Id. at 452.
As noted in the main text, these standards are flexible enough to be given substantive content in
specific cases through the work of arbitral tribunals.
42
There is no principle of customary international law that denies States the power to expropriate
the interests of foreign nationals, nor could there be as a matter of State sovereignty. Despite
occasional rogue actions, for example, Argentina’s attempt to refuse compensation after seizure
of a Spanish oil subsidiary in 2012, outright expropriations are rare, and in any event will
normally be accompanied by what is arguably a customary international law standard of
“prompt, adequate, and effective compensation.” See Schill, supra note 25, at 762
(“Notwithstanding some variations in language, the overwhelming majority of [bilateral invest-
ment treaties] provide for prompt, adequate and effective compensation, based on the market
or genuine value of the investment”). This standard is usually also included in bilateral
investment treaties. See, e.g., U.S. Model BIT, supra note 27, arts. 5, 6. The requirement of
“prompt, adequate, and effective” compensation has also been extended (by both treaty law
and tribunal decisions) to the more controversial issue of “effective” or “regulatory” expropria-
tions, whereby State policies deprive foreign investments of their value through heavy-handed
regulatory measures (e.g., environmental, health, safety, or social laws).
136 Regime for Airline Investment and Global Alliances

4.3.6. Bilateral Investment Treaties (BITs)

The current diplomatic and trade practice is to refer to a bilateral investment
treaty as a BIT, pluralized as BITs. The BIT system continues to evolve.43
Many States, including the United States, have adopted “model” bilateral
treaties that they use serially to establish reciprocal investment environ-
ments with partner States. It has been argued that the nationality rule for
airlines could be liberalized using “sectoralized” BITs, thereby respecting
the industry’s habitual preference for exceptional treatment in international
trade matters. The U.S/EU open skies agreement,44 for example, has an
annex on airline ownership that focuses solely on mutual recognition of
investments by airlines of each party in nonparty airlines, but that could
have promoted an open investment regime between the two aeropowers
using the BIT rules and standards discussed earlier.45 More recently, a new
generation of regional free-trade agreements (such as NAFTA) has over-
lapping coverage with BITs, but once again without any easing of the rules
limiting transborder airline investment.46

43
Interestingly, in the last decade BITs between developing States have started to outnumber
those between developed and developing States. See Steinberg & Kotuby, supra note 26, at 462.
44
See Air Transport Agreement, U.S.-EU, Apr. 30, 2007, 2007 O.J. (L 134) 4, 46 I.L.M. 470
[hereinafter U.S./EU Air Transport Agreement]. The Agreement entered into provisional force
on March 30, 2008, and was subsequently modified by an amending Protocol. See Protocol to
Amend the Air Transport Agreement, U.S.-EU, June 24, 2010, 2010 O.J. (L 223) 3, http://www.
state.gov/documents/organization/143930.pdf [hereinafter U.S./EU Protocol].
45
At the least, the Agreement could have presented a road map for future events of liberalization
(including events that would be contingent on eventual changes in U.S. domestic law), as the
EU negotiated in its new open skies treaty with Canada. See Brian F. Havel & Gabriel
S. Sanchez, Restoring Global Aviation’s Cosmopolitan Mentalité, 29 b.u. int’l l.j. 1, 31–35
(analyzing how the 2009 EU/Canada open skies agreement, see infra note 70, has four
successive phases leading, after changes to national legislation, to 100% cross-border ownership
and unlimited traffic rights including cabotage; at each stage, liberalization of restrictive
investment rules is accompanied by wider grants of traffic rights). The reader may have
noted, supra in Chapter 3, that the EU has created an open investment regime for aviation
within its own borders, technically permitting cross-border ownership of airlines within the EU
by EU nationals. These changes were accomplished by EU supranational legislation, not by
BITs. Outside EU territory, however, the nationality rule still prevails and airlines from non-
EU States must still abide by EU laws limiting inward airline investment into EU carriers.
Many EU States have existing BITs with non-EU States that will remain in effect unless
replaced by agreements negotiated by the EU on behalf of the entire Union. Member States
will still be permitted to negotiate BITs with EU supervision. Council Regulation 1219/2012,
Transitional Arrangements for Bilateral Investment Agreements between Member States and
Third Countries, 2012 O.J. (L 351) 40.
46
See North American Free Trade Agreement, U.S.-Can.-Mex., art. 1201(2)(b), Dec. 17, 1992, 32
I.L.M. 289 (1993) (limiting coverage to “aircraft repair and maintenance services during which
an aircraft is withdrawn from service” and “specialty air services such as aerial mapping,
 4.4. An Emerging International Investment Regime for Airlines 137

4.3.7. No Single Global Investment Treaty

What has not occurred, however, is the creation of a single global treaty to
establish international standards (beyond customary international law standards)
of investment protection and a permanent international arbitral tribunal empow-
ered to adjudicate disputes under the treaty and to impose penalties on States
including sanctions.47 The most ambitious project to date, the Multilateral
Agreement on Investment (MAI) drafted by the Organisation for Economic
Co-operation and Development, was toppled by huge political opposition.48
Thus, the foreign investment regime today is characterized by the absence of a
universal treaty and the dominance of bilateral treaties. For some commentators,
however, the bilateral investment treaties themselves constitute, as a group, “an
emerging global regime for investment.”49

4.4. an emerging international investment

regime for airlines

4.4.1. Is There a Regime for Foreign Airline Investment?

It may seem strange to speak of a regime for foreign airline investment,50 even
an emerging one, when the nationality rule remains so ubiquitous. But, as

surveying photography, advertising, etc.”); see also Free Trade Agreement, U.S.-Austl., art. 10.1
(4)(c), May 18, 2004, 118 Stat. 919 (excluding air services from coverage).
47
Developing States within the WTO have strongly opposed the inclusion of foreign investment
in multilateral trade negotiations, obstructing any path toward a multilateral agreement. See
Leon E. Trakman, Foreign Direct Investment: Hazard or Opportunity?, 41 Geo. Wash. Int’l
L. Rev. 1, 14–16 (2009).
48
Why did the MAI fail? Salacuse mentions two reasons: the practical difficulties of a multilateral
approach to accommodating diverse interests, and the political rationale that motivates developed
States to leverage their bargaining power with capital-importing States through one-on-one
negotiations rather having their power diluted through a bloc-based approach. See Salacuse,
supra note 28, at 464. The MAI was also met with fierce resistance from a collection of NGOs that
were able to turn public opinion, and consequently political leaders, against it. Some of the most
active NGOs referred to their anti-MAI education campaign as the “Dracula strategy,” meaning
that they intended to kill the agreement by exposing its details to light. See Katia Tieleman, The
Failure of the Multilateral Agreement on Investment (MAI) and the Absence of a Global Public
Policy Network (2000), http://www.gppi.net/fileadmin/gppi/Tieleman_MAI_GPP_Network.pdf.
49
Salacuse, supra note 28, at 431.
50
“Nations create and join regimes out of a desire to reduce the relative costs of desired transactions.”
Salacuse, supra note 28, at 435. Salacuse proposes the use of “regime theory,” a construct developed
in international relations studies, to reach beyond the static legal analysis of treaty texts in order to
understand the dynamism and fluidity of the “system” that bilateral treaties have created. Id. at 436.
But see supra note 28 (noting that Salacuse still believes that bilateral investment treaties are not yet
a wholly coherent “network” and that their provisions must be individually assessed).
138 Regime for Airline Investment and Global Alliances

already mentioned, the rule is beset by ambiguity and variation, and its
transborder application has been destabilized by an admixture of legal and
nonlegal instruments, policy choices by States, and commercial practices that
have been adopted by the airline industry itself. Some might also object to the
characterization of a regime on the ground that there is no global body of
airline investment law, but our discussion of foreign investment law revealed
that, just as with international aviation law, a “regime” can exist even when it is
the product of consistent language placed in thousands of separate, mostly
bilateral, agreements.51 The nationality rule makes an excellent case in point:
no global treaty or principle of custom governs its existence and yet, according
to a recent WTO survey, the rule exists in some form in over 90% of all extant
ASAs.52 Even the U.S. Model Open Skies Agreement requires ownership and
control of designated airlines by the designating party or its citizens, and the
U.S./EU Air Transport Agreement, to date the most liberalized manifestation
of open skies, does likewise.53 Arguably, a kind of “path dependence” may be
preserving citizenship restrictions as a pro forma provision of ASAs regardless
of whether States have actually assessed their continued usefulness (even as
protectionist devices).54

4.4.2. Destabilizing the Nationality Rule (Continued)

Whatever the reasons for the endurance of the nationality rule, it has remained
a stable component of international trade in air services. As a regime, however,
it is under assault from liberal shifts in aviation trade policy that are now visible
enough to warrant further analysis here. The new mood, if one can call it that,
may ultimately change how government officials and industry stakeholders
think about the international airline investment regime. Although it is too
soon to speak of the demise of the nationality rule in its traditional form, its
replacement by new normative standards that are generally closer to the
standards of foreign investment law can now be anticipated.
51
See supra note 28 (but see supra note 50, noting one commentator’s view that investment
treaties must still be individually assessed).
52
See World Trade Organization, Council for Trade in Services, Quantitative Air Services Review
(QUASAR): Part B: Preliminary Results, at 33, para. 61, S/C/W/270/Add. I (Nov. 30, 2006)
[hereinafter QUASAR].
53
See Model Open Skies Agreement, supra note 1, arts. 3–4; U.S./EU Air Transport Agreement,
supra note 44, arts. 4–5. But the United States developed habits of waiver of the nationality rule
in its bilateral aviation relations, see infra Section 4.4.6.
54
To some extent States may become victims of “path dependence,” a term used in social
science, history, and economics to describe how the set of decisions one faces in any given
circumstance is limited by the decisions made in the past, even though past circumstances may
no longer be relevant.
 4.4. An Emerging International Investment Regime for Airlines 139

4.4.3. EU Common Licensing Regime

Nowhere has the nationality rule come under more sustained legal assault
than within the supranational legal space of the EU. Beginning with the
so-called third package of air transport liberalization in 1997,55 the EU
defied the then-prevalent investment regime by permitting the airlines of
any EU Member State to be owned and controlled by any other Member
State or the citizens of any other EU Member State.56 Under the new
common licensing regime for EU airlines that applies in all Member
States,57 in order to qualify as a “Union air carrier,”58 an airline must be at
least 50.1% owned by a Member State or by the nationals of any Member State
and must also be under the “effective control” of such State or nationals.59
After 2000, a succession of high-profile mergers and acquisitions occurred
within the Union, including the marriage of two long-standing flag carriers,
Air France and the Dutch airline KLM.60 Germany’s flagship airline,

55
All three reforming packages were consolidated into a single Regulation 1008/2008, Common
Rules for the Operation of Air Services in the [EU]. See supra note 19. The new regulation
incorporates a number of revisions and clarifications.
56
Legislatively, this was done by redefining the concept of the “EU [formerly Community] air
carrier” for purposes of the commercial operating licensing of airlines by Member States. (The
safe operation of aircraft is the subject of the Air Operator’s Certificate (AOC), issued also by the
licensing State once the airline has been found financially fit and is granted an operating license.)
Thus, the relevant regulation requires the would-be licensee to have its principal place of
business located in the licensing Member State, but in effect multilateralizes the nationality
rule by requiring that more than 50% of the voting equity as well as effective control of the
undertaking be held by any Member State and/or by any nationals of any Member States. See
Common Rules, supra note 19, art. 4(f). In other words, if Air France/KLM organizes a subsidiary
in the U.K. that is owned and controlled by French citizens, that subsidiary must be given a U.K.
operating license – and may in certain circumstances apply to serve U.K. international routes
under U.K. bilaterals with third countries. See infra note 63. Here a hallmark feature of the
“Chicago system,” the nationality rule, is converted into a general principle of EU law through
the insertion of EU-wide (as opposed to national) restrictions on ownership and control.
57
See supra note 56 (distinguishing operating license from AOC). A major defect of the common
licensing regime is that it lacks a central EU-wide licensing agency. Moreover, the Member States
refused the Commission’s fallback alternative to a central agency, namely, the grant to the
Commission of full review authority and revocation power over licenses actually awarded by
Member State authorities. Common rules, after all, do not guarantee common enforcement of
those rules.
58
Following the ratification of the Treaty of Lisbon, 2007 O.J. (C 306), in December 2009, and
the abolition of the distinction between the European Union and the European Community,
it is now more appropriate to refer to airlines licensed in the EU as “Union air carriers.” See
E-mail from Daniel Calleja, former Director for Air Transport, European Commission, to
author Brian F. Havel (Mar. 18, 2010, 17:49:00 CST) (on file with authors).
59
Common Rules, supra note 19, art. 4(f).
60
A complex legal structure makes this merger more of a merger-in-fact that preserves KLM’s
separate brand identity. A “holding company” holds two publicly traded air carrier subsidiaries,
140 Regime for Airline Investment and Global Alliances

Lufthansa, acquired a number of smaller non-German carriers61 and British

Airways finalized a merger with Spain’s Iberia in 2011.62 In order to safeguard
these new investment opportunities from becoming ensnared by the nation-
ality rule in the ASAs of EU Member States with non-EU States, the Union
has entered into horizontal agreements that add new provisions to those ASAs
recognizing “EU citizen ownership and control.”63 A few States, notably
Russia, have balked at being asked to acknowledge the EU’s novus ordo.64
Despite threatening to invoke the nationality clause in the Russia/Austria
ASA to rescind the traffic rights of Austrian Airlines after its purchase by
Lufthansa in 2009,65 Russia ultimately acquiesced. Other aviation markets
such as Brazil and China that traditionally resisted air transport liberalization
have nevertheless chosen to honor the EU’s internal displacement of the
nationality rule.66

4.4.4. Rolling Back of Domestic Ownership Restrictions

More modestly, some States have rolled back their national law limitations on
inward air carrier investment, paving the way for foreign-owned domestic
airlines. Australia, for example, legislated in 1999 to give foreign carriers a
right of establishment to provide air services on cabotage routes. The new law
enabled the U.K.-based Virgin Group to launch its own wholly owned

Air France and KLM. The resulting organizational model has been described as “one group/
two air carriers/three businesses” (the three businesses are air passenger transport, air cargo
transport, and aircraft maintenance and repair). For a fuller account of the Air France/KLM
merger model, see Havel, supra note 22, at 457.
61
See, e.g., Lufthansa’s acquisition of Swiss International Air Lines in 2005, British Midland
(BMI) in 2009 (subsequently resold to International Airlines Group in 2012), and Austrian
Airlines in 2009.
62
The two carriers merged into a new multinational holding company, International Airlines
Group (IAG), headquartered in London.
63
Horizontal agreements allow the European Commission to act on behalf of all Member States
in negotiations to amend simultaneously all ASAs between the Member States and a specific
third State. But Member States are also free to act bilaterally to amend their ASAs with any
third State so long as the negotiation leads to recognition by the third State of the new EU rules
on ownership and control. See Council Regulation 847/2004, art. 1, 2004 O.J. (L 157) 7.
64
Whenever a non-EU State has limitations in its ASA with a Member State on the number of
airlines the Member State may designate for service to the third State, EU legislation provides
that the Member State must ensure a nondiscriminatory distribution of designations among the
Member State’s own licensed carriers and all other interested carriers that are owned by
citizens of other Member States. See Council Regulation 847/2004, supra note 63, arts. 5 &
6. The U.S./EU Air Transport Agreement, supra note 44, has no such designation limitations.
65
See Pilita Clark, Russia Threatens to Ban Austrian Airlines, Fin. Times, Mar. 1, 2010, at 1.
66
See European Commission, Mobility and Transport, Air, International Aviation: Brazil, http://
ec.europa.eu/transport/modes/air/international_aviation/country_index/brazil_en.htm.
 4.4. An Emerging International Investment Regime for Airlines 141

Australian subsidiary, Virgin Blue (renamed Virgin Australia in 2011).67 Chile

has completely abolished all of its caps on foreign investment in its air
carriers.68 Chile has also joined Argentina and Brazil in allowing cross-border
mergers of international carriers, subject only to the constraints of competition
law.69 More promising still is the blueprint for future liberalization in the 2009
Canada/EU ASA, which for the first time in a bilateral air services treaty sets
out a program for eventual reciprocal rights of full investment, including a
right of establishment.70

4.4.5. Multi-State Initiatives

The 2010 amending protocol to the landmark 2007 U.S./EU Air Transport
Agreement opens the door to both parties’ airlines acquiring or establishing
airlines in an agreed-upon list of third States without compromising the traffic
rights of airlines from any listed State to either the United States or the EU.71

67
But Australia’s legislation deliberately avoided any problematic third-country designation
issues. As applied, the legislation generally permits foreign investors to establish a new air
transport business in Australia, provided that the airline remains incorporated and headquar-
tered in Australia and serves only internal routes. See supra Chapter 3, Section 3.3.9. Following
its decision to launch international services in 2004, Virgin Blue/Australia was forced to comply
with Australia’s foreign ownership cap of 49% by way of a complicated corporate structure
under which its international operations are placed with a separate holding company that has
majority Australian ownership. See Press Release, Virgin Australia, Virgin Australia Announces
Proposed New Structure (Feb. 23, 2012), http://www.virginaustralia.com/us/en/about-us/
media/2012/VIRGIN-AUSTRALIA-NEW-STRUCTURE/. See also supra Chapter 2, n.87
and accompanying text.
68
See IATA, Agenda for Freedom, The Impact of International Air Service Liberalisation on
Chile (2009), http://www.iata.org/SiteCollectionDocuments/ChileReport.pdf. See also
Chapter 2, Section 2.5.14 (discussing Chile’s abolition of cabotage).
69
See Daniel Michaels & Susan Carey, More Airline Mergers Leap Borders, Wall St. J., Jun. 28,
2012, at B10. See also supra Chapter 3, Section 3.4.8.
70
The EU/Canada ASA sets up a series of “staged” concessions giving both sides more traffic
privileges in exchange for loosening their restrictions on ownership and control (e.g., once
Canada raises its ownership cap to 49% vis-à-vis EU air carriers, its carriers will receive intra-
Union fifth freedom rights). Subsequent phases of the agreement envisage reciprocal rights of
establishment and the removal of cabotage restrictions. See generally Agreement on Air
Transport Between Canada and the European [Union] and its Member States, Dec. 17,
2009, 2010 O.J. (L 207) 32 [hereinafter Canada/EU Air Transport Agreement]. See supra n. 45.
71
See U.S./EU Protocol, supra note 44, Annex 6. Note, however, that before either party will
abstain from enforcing the nationality clause with respect to third-country airlines that are
controlled by EU or U.S. citizens, both parties must agree that the third country “has
established a record of cooperation in air services” with them. See id. paras. 3–4. With respect
to ownership alone, however, no such record of cooperation needs to be demonstrated.
See id. para. 1.
142 Regime for Airline Investment and Global Alliances

A British Airways/Qantas linkup, for example, would not oust Qantas from its
designation under the U.S./Australia ASA.72 The United States and the EU
have also laid a proposal before the ICAO for a “Multilateral Convention on
Foreign Investment in Airlines” – a single treaty that, if it came into effect,
would commit signatory States to waiver of the nationality rule in their
ASAs (but in each case on condition of reciprocity).73 While the draft treaty
does not (and cannot) suppress national laws that limit inward investment, it
may encourage States to facilitate foreign takeovers of their domestic carriers
knowing that key foreign aviation markets have renounced enforcement of
nationality restrictions.

4.4.6. Effective Waivers and Waning Enforcement

But even without a multilateral treaty some States have acted bilaterally to
deliver waivers of the nationality rule. Whether those actions should be
characterized as legal or political is an open question. Because they occur
frequently through official passivity rather than reasoned rulings, they can be
plausibly construed either as political decisions or as examples of a kind of
international law estoppel.74 Waivers are highly likely to occur when all of the
States involved in a particular transaction share an open skies ideology. In 2011,
for example, the U.S. Government apparently indicated that it would not
withdraw traffic rights following a merger between the flag carriers of Trinidad

72
But Qantas might well encounter resistance to its continued designation under other bilateral
agreements, for example, the Japan/Australia ASA. In any event, this hypothetical has become
even more far-fetched since Qantas entered a new partnership with Emirates (see supra note 5).
73
The last publicly available draft can be found at http://legacy.icao.int/icao/en/assembl/a37/wp/
wp190_en.pdf. The draft treaty would require signatories to provide a list of partner States
against which they will not enforce the nationality clauses in their ASAs: only signatories to the
treaty could avail themselves of its benefits. For a more detailed analysis of the draft treaty, see
Brian F. Havel & Gabriel S. Sanchez, The Emerging Lex Aviatica, 42 Geo. J. Int’l L. 639,
665–67 (2011).
74
In international law, estoppel is a rule that bars a State from going back on its previous
representations when those representations have induced reliance on the part of other States.
The ambiguous and contestable doctrine of promissory estoppel in international law may be
one basis for indicating that a State is legally bound by such an act of waiver. Although a species
of estoppel might in theory deter a State from treating its waiver statement as merely hortatory
(nonbinding), the prospect that another State would seek to enforce these statements before the
International Court of Justice must be reckoned as weak. Cf. Restatement (Third) of
Foreign Relations Law of the United States § 301 cmt. c. It is unclear to what extent a
State must rely on a unilateral statement before the declaring State can be legally bound to it,
although as one classic study of the doctrine states, “[t]he more pronounced the reliance upon
considerations of good faith the more sympathetic a tribunal may be expected to be in the face
of arguments based on the concept of estoppel.” I. C. MacGibbon, Estoppel in International
Law, 7 Int’l & Comp. L.Q. 468, 507 (1958).
 4.4. An Emerging International Investment Regime for Airlines 143

and Tobago and Jamaica, so long as the former State entered a liberal
(i.e., open skies) ASA with the United States.75 U.S. officials sent a similarly
robust signal to Brazil in 2010 during negotiations for a new ASA that incre-
mentally liberalized U.S./Brazil aeropolitical relations. Subsequently, Brazil’s
Government approved a merger of the country’s primary international carrier
TAM with the Chilean flag carrier LAN.76 In its relations with the EU, U.S.
policy even before the landmark 2007 agreement had been one of acquies-
cence in intra-Union mergers, notably the 2004 Air France/KLM combina-
tion.77 The EU itself has also begun to moderate its insistence on the
nationality rule, and indeed has departed from U.S. practice in actually
memorializing a more nuanced policy in some of its recent aviation trade
accords.78 No doubt an open skies ideology has persuaded each of these States
to stay its hand when confronted with evident breaches of the nationality rule.
The United States, however, had a record of sporadic enforcement of the rule
even before it ramped up its open skies program. During the 1980s, several
Latin American airlines came under foreign ownership and control without
U.S. objection.79 Smaller European carriers, such as Luxembourg’s Cargo
Lion, were awarded full market access to the United States despite question-
able citizenship profiles: Cargo Lion, for example, lacked a single
Luxembourg owner or control by any Luxembourg national.80 When U.S.
officials warned in 2000 that the United States would repeal KLM’s market
access rights if the company consummated a planned takeover by British
Airways, that threat represented a clear and intelligible exception to the

75
Trinidad and Tobago signed an open skies agreement with the United States in May 2010,
reprinted in 3 Av. L. Rep. (CCH) ¶26,522b, at 23,164.
76
To facilitate that arrangement, which technically violates the nationality rule, LAN took inspira-
tion from the Air France/KLM corporate structure (see supra note 60) and created the LATAM
Airlines Group to act as a “multinational” holding company for the two airlines. See Centre for
Aviation, New LAN-TAM Parent Latam Emerges as a Leader Globally and a Powerful Force
Across South America, Jun. 28, 2012, http://centreforaviation.com/analysis/new-lan-tam-parent-
latam-emerges-as-a-leader-globally-and-a-powerful-force-across-south-america-76917.
77
Although, again, U.S. forbearance was based on an open skies trading climate. In 2000, U.S.
officials advised their U.K. counterparts that the United States would consider suspending
KLM’s air traffic rights in the event of a contemplated British Airways takeover – the U.S./U.K.
ASA was still the notoriously illiberal Bermuda II. See 28 U.S.T. 5367 (1977); see Havel, supra
note 22, at 116 (describing how Bermuda II met “none of the open skies criteria” then being
proposed by U.S. international aviation policy (emphasis in original)).
78
See, e.g., the “staged” liberalization contemplated in the Canada/EU Air Transport Agreement,
supra notes 45, 70.
79
See QUASAR, supra note 52, at 34, para. 68 (noting several examples of foreign airlines
retaining their traffic rights despite foreign acquisition).
80
See Translux International Airlines, Notice of Action Taken, Dkt. No. OST-98–4329 (Dep’t of
Transp. Nov. 25, 1998).
144 Regime for Airline Investment and Global Alliances

usual de facto mildness of U.S. policy on foreign ownership and control.81 The
U.K. Government, after all, had long opposed open skies with the United States.
The nationality rule presented itself as a strategic opportunity to reverse U.K.
implacability. In contrast, the equally game-changing Air France/KLM arrange-
ment, set within an open skies framework between the United States and the
home States of each merger partner, drew no U.S. resistance. The (apparent)
U.S. approach of benign tolerance but occasional obstinacy is easily understood
as a cost/benefit calculation. Clearly, U.S. officials had little to lose in using the
nationality rule to oppose the British Airways/KLM merger: having kept
Heathrow underserved by U.S. airlines since the 1970s, the U.K. could not
retaliate without the risk of a further loss of U.S. traffic rights for British
Airways. Invoking the rule against Air France/KLM, on the other hand, would
not only have upset established open skies relationships but could also have
triggered retaliatory denunciations of the U.S./France and U.S./Netherlands
liberal ASAs. Given that those ASAs represented (for the moment) as much as
U.S. carriers wanted from aviation relations with both States, wielding the
nationality rule would have produced no important benefits.

4.4.7. Liberalizing Breezes from Latin America and Asia

In Latin America, too, the region’s strong historical, political, and economic ties
to the United States have softened U.S. reaction to the spreading cross-border
absorption of smaller flag carriers by big regional carriers like Chile’s flag carrier
LAN82 and the Brazilian-owned, El Salvador–based conglomerate TACA.83 But
there is also a large measure of self-interest. Latin American airlines, it should be

81
See supra note 77. Of course, rival carriers may “whistleblow” against such official passivity.
This has happened several times in the United States, most recently when Alaska Airlines made
a complaint to the U.S. DOT accusing Virgin America of being under the control of the
U.K.-based Virgin Group. See Virgin America, Petition of Alaska Airlines for Review of
Citizenship, Dkt. No. OST-2009-0037 (Dep’t of Transp. Feb. 10, 2009).
82
LAN is Chilean-owned and -controlled, but has successfully persuaded the governments of a
number of Latin American States to alter their foreign ownership rules to allow LAN to acquire
larger stakes in air carriers in those States, including some flag carriers. Thus, LAN has
apparently acquired majority control of LAN Argentina after the local law on ownership was
changed (but the airline still operates routes to and from the United States). LAN also owns
significant stakes (again, in some cases possibly majority stakes) in LAN Colombia, LAN
Ecuador, and LAN Peru, and other affiliates. We have previously noted its takeover of the
Brazilian flag carrier, TAM (see supra note 76 and accompanying text).
83
The other large Latin American carrier, TACA, which merged with the Colombian airline
Avianca in 2009, is Brazilian-owned but primarily based in El Salvador. Like LAN, see supra
note 82, both TACA and Avianca have similar complex ownership and control arrangements
with local carriers outside their home States, and again it is possible that majority shareholdings
are involved.
 4.4. An Emerging International Investment Regime for Airlines 145

noted, do not (as yet) represent a potent enough competitive threat to the
interests of U.S. (or EU) carriers in the region. But the continuing realignments
in Latin America could yet disturb existing commercial relationships, especially
if LAN or TACA should affiliate with one of the big Gulf carriers like Emirates.
Although developments in Latin America have attracted recent focus, liberal
breezes can also be detected in the Southeast Asia region. The Association of
Southeast Asian Nations (ASEAN) has crafted a Multilateral Agreement on Air
Services (MAAS) that attempts to transplant the “EU air carrier” concept. The
Agreement provides for designated air carriers to be incorporated and have a
principal place of business in the designating State, but any carrier of an ASEAN
member State can be owned and effectively controlled by any number of
ASEAN States or their nationals in the aggregate.84 While the MAAS has been
beleaguered by problems of implementation,85 the leading players in the region
have found innovative ways to structure and expand their operations. The
pioneering Malaysian low-cost carrier, AirAsia, has established subsidiaries in
Thailand and Indonesia that are technically separate from the parent carrier.
The airlines – Thai AirAsia and Indonesia AirAsia – are majority-owned by local
Thai and Indonesian interests respectively, with the parent holding only a
minority stake. Although scrupulously faithful to the requirement of local own-
ership and control, AirAsia’s affiliated carriers utilize the operating rights avail-
able under Thai and Indonesian ASAs with third countries. Even so,
entrepreneurs in the region have been pushing to cast off the odd ownership
structures that result from compliance with the nationality rule and are seeking a
more “normalized” investment regime. But when other carriers have tried to
replicate the AirAsia franchise model, for example, the efforts by Tiger Airways to
set up related companies in South Korea and the Philippines, local carriers have
blown the whistle and prevented government agencies from blessing the new
arrangements.86

84
See ASEAN Multilateral Agreement on Air Services, opened for signature at Manila, May 20,
2009, art. 3(2)(a)(ii) [hereinafter ASEAN MAAS]. See Philippa Dee, Services Liberalization
Toward the ASEAN Economic Community, in Tracing the Progress Toward the
ASEAN Economic Community 28, 33–46 (Shujiro Urata & Misa Okabe eds., 2010)
(chronicling the aspiration of and challenges to creation of a common ASEAN air transport
market). Unlike in the EU single aviation market, however, under the MAAS air carriers would
still need to be designated by their home States to serve intra-Agreement markets, and that is by
no means an automatic process: any State party to the MAAS must approve any designation of
an air carrier that is owned and controlled by interests outside the designating State. See
ASEAN MAAS, art. 3(2)(a). See also supra Chapter 3, Section 3.6.7.
85
The MAAS has yet to be ratified by all ten ASEAN Member States.
86
See Centre for Aviation, Incheon Tiger Airways Under Attack from Competitors;
License Applications Plans on Hold Indefinitely, Aug. 29, 2008, http://centreforaviation.com/
analysis/incheon-tiger-airways-under-attack-from-competitors-licence-applications-plans-
146 Regime for Airline Investment and Global Alliances

4.4.8. Air Transport Industry Advocacy

The international airline industry itself has also acted through its representative
trade group, the International Air Transport Association (IATA), to unseat the
nationality rule. At successive “summit” conferences in Istanbul in 2008 and in
Montebello, Canada, in 2009, IATA and a small number of motivated govern-
ments87 encouraged States to declare unilaterally that they would no longer
apply the nationality rule in their bilateral aviation relations with any State that
offered a reciprocal undertaking to do likewise.88 The quasi-diplomatic
Montebello summit issued a series of principles, under the brash banner of an
“Agenda for Freedom,” as a political, though probably not a legal, capstone to
the process.89 While some major aviation markets, including (somewhat ironi-
cally) the host State of Canada, declined to sign on to the Montebello
“Statement of Principles,” the two IATA conferences arguably set the tone for
legally binding steps to be taken in the investment area. For example, the
previously mentioned draft multilateral agreement on airline investment was
circulated for discussion at the Montebello summit before being formally
presented to ICAO by the United States and the EU in September 2010.90
Other aviation trade groups have also lobbied against the nationality rule. As
early as 1999, the Association of European Airlines (AEA) issued its landmark
briefing paper, Toward a Transatlantic Common Aviation Area – one of the first
stakeholder documents to propose an open investment regime between the two
transatlantic aeropowers.91 In the United States, the leading industry trade
on-hold-indefinitely-3635; Centre for Aviation, Thai Airways Delays Launch of Thai Tiger
Airways Again; Thai AirAsia Preparing Strategies to Compete, Nov. 25, 2010, http://cen-
treforaviation.com/analysis/thai-airways-delays-launch-of-thai-tiger-airways-again-thai-
airasia-preparing-strategies-to-compete-40478.
87
In Canada, representatives attended from Chile, the EU, Malaysia, Panama, Singapore,
Switzerland, the United Arab Emirates, and the United States. Canada itself, however, was
not represented.
88
The so-called Agenda for Freedom, however, only proposed waiving the “external” treaty-based
component of the nationality rule. Thus, the United States could reciprocally waive the
nationality clauses in all of its ASAs and still maintain its internal rule (part of federal law)
that mandates at least 75% ownership and actual control of its airlines by U.S. citizens. The
treaty waiver is only a first step – albeit a necessary one – toward eliminating the nationality rule
altogether.
89
On the operation of the international law of promissory estoppel, which seems implicated by
the IATA proposal, see supra note 74.
90
For a detailed analysis of how the IATA reciprocal waiver process would operate, see Havel &
Sanchez, supra note 73, at 662–65.
91
The paper called on the governments of the United States and the EU to embrace a “unified
system that on the one hand gives airlines full commercial opportunities on an equal basis and
on the other ensures that their activities will be governed by a common body of aviation rules,
avoiding any unnecessary regulation.” Among these “full commercial opportunities” would be
removal of all airline ownership restrictions and acknowledgment of a right of establishment.
 4.4. An Emerging International Investment Regime for Airlines 147

association, Airlines for America (formerly the Air Transport Association), has
consistently advocated a dual-track approach for U.S. airline investment policy
that would scrap the nationality rule in the U.S. ASAs and also revoke the federal
law limiting foreign ownership and control of U.S. airlines.92 Some air carriers
have acted independently to champion investment reform. Gulf-based Emirates
is only one of several large international carriers seeking to build a global brand
presence without recourse to the multicarrier alliance system.93

4.4.9. A Note on Rational Interests and the Nationality Rule

If, as Jack Goldsmith and Eric Posner contend, international law serves an
instrumental purpose in States’ foreign relations, and lacks freestanding,
exogenous force,94 then the discussion in this chapter so far seems to confirm
that States will adhere to or defect from international law based on their
rational interests. Arguably, the defection of Latin American and Southeast
Asian States from the strict application of the nationality rule provides some
evidence of the Goldsmith/Posner thesis at work. Especially in Latin America,
many States have small air transport markets and a history of unsustainable air
carriers. Smaller markets, therefore, have simply abandoned strict policing of
the ownership profiles of their carriers in favor of the consumer benefits that
larger entities – operating a series of smaller affiliates as “feeders” – can offer. It
no longer makes economic sense (if it ever did) for every Latin American State
to ring-fence its home air transport market and to repel foreign investors.
Brazil’s pursuit of liberalization, also in the vein of rational self-interest, is
heavily influenced also by economic growth and the infrastructural challenges

Assoc. of Eur. Airlines, Towards a Transatlantic Common Aviation Area: AEA

Policy Statement 1, 8–10 (1999). The AEA paper provided the negotiating template for the
2007 U.S./EU Air Services Agreement (see supra Chapter 1, Section 1.6.4). See Havel, supra
note 22, at 40–43.
92
See, e.g., Glen Tilton, Air Transp. Ass’n Chairman, Speech to U.K. Aviation Club (Feb. 11,
2010).
93
Emirates had sponsored a public campaign against the alliance system and antitrust immunity,
ostensibly to enhance global airline competition. In September 2012 Emirates announced
plans for a more limited ten-year “global partnership” with Australia’s Qantas. See supra note 5.
In March 2013, the Australian Competition and Consumer Commission granted conditional
authorization to the partnership, albeit for a modest period of five years. See Australian
Competition and Consumer Commission, Determination: Applications for Authorisation
Lodged by Qantas Airways Limited and Emirates in Respect of a Master Coordination
Agreement (Mar. 27, 2013).
94
Cf. Jack L. Goldsmith & Eric A. Posner, Moral and Legal Rhetoric in International Relations:
A Rational Choice Perspective, 31 J. Legal Stud. 115, 121–33 (2002).
148 Regime for Airline Investment and Global Alliances

of the soccer World Cup in 2014 and the Olympic Games in 2016. Rapid
economic growth, and the need to serve millions of new airline consumers,
may explain as well why Southeast Asian governments continue to respond
flexibly to efforts by entrepreneurs like AirAsia’s Tony Fernandes to dilute the
full strength of the nationality rule.

4.5. circumventing the nationality rule:

global alliances

4.5.1. Antitrust Immunity for “Mergers Without a Transfer

of Ownership Rights”
With a new investment regime still in its earliest stages, the international
airline industry itself has adhered to its own well-established tradition of lex
mercatoria to escape some of the commercial limitations of the existing
order.95 Based initially on simple code-sharing arrangements,96 the interna-
tional airline alliance in its present advanced form can be described as a
merger without a transfer of ownership rights. But any collaboration between
or among competitors will attract scrutiny from antitrust and competition
regulators. Beginning in 1992, several U.S. and EU airlines began to avail
themselves of a little-used power of antitrust immunity that the DOT had
inherited from the Civil Aeronautics Board, the agency that directed the U.S.
airline industry during the era of regulation. The first of these joint ventures,
involving an investment by Dutch flag carrier KLM in the now-defunct U.S.
carrier Northwest Airlines, enabled the two airlines in certain respects to
impersonate a single merged carrier even though an authentic business

95
In its original meaning, the lex mercatoria (“law [of the] merchant”) was a body of pragmatic rules
and principles laid down by medieval merchants to regulate their dealings and that displaced the
various feudal laws and Roman law, which were not sufficiently responsive to the growing
demands of commerce. See Havel & Sanchez, supra note 73, at 658–59; see also supra
Chapter 1, note 100. Here, we use the term lex mercatoria more loosely as a convenient descriptor
for sets of norms, procedures, and institutions (such as code-sharing and alliances or the operation
of computer reservations systems) which, while they may ultimately need State law to ensure
their enforceability, nonetheless evolved from the customs and practices of the international
aviation industry itself. The Montebello “Statement of Principles,” see supra text accompanying
note 89, exemplifies this developing narrative of converging public and private action. See
Havel & Sanchez, supra, at 659. For a recent essay on a modern lex mercatoria, see Leon
E. Trakman, The Twenty-First Century Law Merchant, 48 Am. Bus. L.J. 775 (2011) (detecting
glimmerings of a new law merchant in the work of transnational arbitration tribunals).
96
Code-sharing, as discussed later in this chapter, is the practice of two or more airlines listing
their separate connecting flights in a computer reservations system and on e-tickets under a
single two-letter code identifier as if a single carrier were providing the entire flight. See infra
Sections 4.6.2, 4.6.3.
 4.5. Circumventing the Nationality Rule: Global Alliances 149

merger was precluded by the combined effects of the external and internal
bolts of the nationality rule.97 The DOT, in granting immunity, expressly
acknowledged that the Netherlands had just become the first treaty partner in
the new U.S. open skies program.98 The grant of immunity to Northwest/KLM
changed the face of global air transport.99 To start with, the availability of U.S.
antitrust immunity in exchange for open skies had a honeypot effect on other
European governments and their airlines: sixteen European States concluded
open skies ASAs with the United States between 1992 and 2006.100 By the turn
of the century, open skies with Germany (1996) and France (2001) had
spawned alliance deals led by Lufthansa and United and by Delta Air Lines
and Air France. For more than a decade, however, the U.K.’s unwillingness to
move beyond Bermuda II chilled efforts by British Airways and American
Airlines to win immunity for their rival combination.

4.5.2. Consolidation of Alliances After the 2007 U.S./EU Agreement

The 2007 U.S./EU Air Transport Agreement101 converted all Member State
ASAs with the United States (including the U.K. agreement) into a common
open skies relationship. Since then, the alliance system has consolidated into
three global joint ventures – SkyTeam, Star, and oneworld – each with a core
constellation of major carriers and a tail of smaller carrier satellites. Although
not all of the partner airlines in each alliance enjoy U.S. antitrust immunity,
most of them do – a fact that has dismayed antitrust enforcers in the U.S.

97
See supra Chapter 3, Section 3.4.7 (explaining how these concepts describe, respectively, the
ASA-based requirement that an airline performing international services on behalf of a State
must be owned and controlled by that State or by its nationals, and the domestic laws restricting
ownership and control of national airlines by foreign carriers).
98
See Northwest Airlines, Inc. & KLM Royal Dutch Airlines, Joint Application for Approval and
Antitrust Immunity of an Agreement Pursuant to Sections 412 and 414 of the Federal Aviation Act,
As Amended, Dkt. No. 48342, Order 92–11–27 to Show Cause (Dep’t of Transp. Nov. 16, 1992), at
2 [hereinafter Joint Application of KLM/Northwest] (explicitly finding approval and immunity
to be “consistent with the [open skies] accord” with the Netherlands). U.S. airlines, not pleased
by the new treaty, unkindly (and accurately) pointed out that the U.S./Netherlands open skies
ASA gave KLM the right to fly to all points in the United States in exchange for allowing U.S.
airlines the right to fly to all points in the Netherlands. The economic value to U.S. carriers,
however, lay in beyond rights from Amsterdam (the fifth freedom). For definitions of the
“freedoms” of the air, including the fifth – the network-building – freedom, see supra
Chapter 3, Part 3.3.
99
Immunity allows the alliance members to “live in sin,” according to former KLM executive
Paul V. Mifsud (who is also the founder of the “Mifnet” that electronically links thousands of
aviation professionals in daily discourse on the industry).
100
See Havel, supra note 22, at 33.
101
See supra note 44.
150 Regime for Airline Investment and Global Alliances

Department of Justice as well as some economists. Critics attack the alliances’

deepening coordination of pricing, routes, and other service offerings as an
affront to the ethos of protecting competition, not competitors.102 Similar
concerns have rung out in the EU, where the principal regulator, the
European Commission, enjoys comparable powers of exemption. With the
integration of major Asia-Pacific airlines into the alliances, competition
authorities in Australia and Japan have also asserted jurisdiction over alliance
behavior, but as yet without making negative findings.103 Only Canada’s
enforcers have seemed willing to push back against the alliances, and even
they have permitted Air Canada to participate in a joint venture with United
and Continental subject to conditions.104 It seems unlikely, however, that the
Canadian investigators would wish to add Air Canada to the small list of major
carriers that have taken the hard route of expanding their international market
presence outside the fold of the alliance system.

4.5.3. Why Global Alliances Exist

While no alternative structure has as much upside as a flawlessly executed
merger or acquisition, alliances nevertheless deliver substantial benefits to
participating carriers. They represent, in the first place, a unique opportunity
to bring network economies to a global industry forced by the citizenship
purity rules into a fundamentally regional structure.105 In a system where
market access rights are distributed bilaterally and inefficiently by government
fiat, alliances also help to break barriers to competitive entry that even open
skies agreements leave unaddressed. As summed up by former DOT Under
Secretary for Policy Jeffrey Shane (now general counsel of IATA), the global
alliance system has three advantages in exploiting the bilateral system: first, an

102
Article 20 of the 2007 U.S./EU Air Transport Agreement, supra note 44, in a sense binds both sides
to U.S. judicial precedent (and now to a shared competition “philosophy”) when it confirms that
the parties will “apply their respective competition regimes to protect and enhance overall
competition and not individual competitors.” See also supra Chapter 3, note 200.
103
The Australian Government seems to have taken a relatively positive view of more locally
focused alliances. Its Competition and Consumer Commission (ACCC) has recently author-
ized alliances between Delta/Virgin Blue (2009), Virgin Australia/Singapore Airlines (2011),
Virgin Blue/Etihad (2011), and in March 2013 granted conditional authorization to a Qantas/
Emirates alliance. Conversely, the ACCC in 2009 rejected an agreement between Air New
Zealand and Air Canada.
104
The agreement between the carriers and the Canadian Competition Bureau prohibits Air
Canada and United from coordinating on fourteen specified routes between Canada and the
United States.
105
See Warren L. Dean, Jr. & Jeffrey N. Shane, Alliances, Immunity and the Future of Aviation, 22
Air & Space L. 1, 17–18 (2010).
 4.6. The Legal (and Policy) Framework for Global Alliances 151

alliance allows a carrier to create domestic feeder flights in the home States of
its partner carriers without violating their domestic laws;106 second, an alliance
allows a carrier to offer flights to points beyond the territories of the home
States of its partner carriers, when those points are otherwise restricted in its
own home State’s bilateral treaties; and third, an alliance allows its members
to fill up seats throughout the alliance system with traffic to a variety of
destinations, even where the “last segment” operations take place on other
airlines.107 The alliances balance any potential losses to consumer welfare
against coordination benefits such as global online route networks with thou-
sands of new city-pairs as well as pooled perquisite programs including fre-
quent flyer programs and business lounge access. There is no question that
alliances are adept at providing connections that would otherwise be com-
mercially infeasible. Omaha, Nebraska, for example, could not sustain online
service to Bologna, Italy. The Star Alliance, however, can lace together a series
of connections that links those two small to midsized markets: a passenger can
fly United Express from Omaha to Chicago, transfer to United or Lufthansa to
Frankfurt, and then fly Lufthansa’s wholly owned regional airline Air Dolimiti
for the final segment between Frankfurt and Bologna. Despite having to
mount services of that complexity, alliance members assert that the cost
efficiencies of coordination are passed to consumers in lower fares.108

4.6. the legal (and policy) framework

for global alliances

4.6.1. U.S. and EU Regulatory Approaches

As noted, the legal framework that allows the alliance system to operate is either
national or, in the case of the EU, a blend of national and supranational, but it is
not (as yet) in any sense either transnational or global. As we indicated earlier,
several States apply their own competition codes to alliance behavior; there is no
serious proposal to unify or harmonize those rules. Even so, international aviation
law as expressed in bilateral ASAs undoubtedly shapes the course of alliance
106
See infra Sections 4.6.2, 4.6.3 (discussing code-sharing).
107
See Dean & Shane, supra note 105, at 17–18.
108
A recent joint report on transatlantic alliances by the DOT and European Commission took a
broadly positive view of their competitive effects, while calling for further study. See Eur.
Comm’n & U.S. Dep’t of Transp., Transatlantic Airline Alliances:
Competitive Issues and Regulatory Approaches (2010), http://ec.europa.eu/competi
tion/sectors/transport/reports/joint_alliance_report.pdf [hereinafter “Transatlantic
Airline Alliances Report”]; but, for a strongly contrary view, see Hubert Horan,
“Double Marginalization” and the Counter-Revolution Against Liberal Airline Competition,
37 Transp. L.J. 251 (2010).
152 Regime for Airline Investment and Global Alliances

decision making. We have seen how the DOT in the United States conditions
antitrust immunity for alliances involving U.S. carriers on the existence of an
open skies relationship with the home States of any intended foreign partners.
Memoranda accompanying open skies agreements typically intone that “sympa-
thetic consideration” as well as “fair and expeditious consideration” of immunity
will flow from a successful negotiation.109 Indeed, alliance members applying for
immunity have lately been making the bold representation that open skies
partner States now rank immunization for their airlines’ commercial involve-
ment with U.S. carriers as a deal-breaking condition for acceptance of a liberal-
ized ASA. Japan’s international carriers, All Nippon Airways and Japan Air Lines,
stated as much in their applications for immunity with Star and the Delta-led
SkyTeam alliance, respectively.110 EU officials are more constrained by their
treaty-based antitrust code (which no longer has special provisions for the airline
industry) and have not been able to emulate a more dogmatic U.S. approach that
comes close to trading immunity for open skies. Unlike the DOT, however, the
EU has been willing to withhold exemptions unless the alliance partners surren-
der slots at congested airports to nonalliance members. The EU, which as we will
see now applies ex post scrutiny to potentially anticompetitive agreements, has
imposed serial review as commercial circumstances change rather than adopting
the “evergreen” status that the DOT typically confers after its first inquiry.111

4.6.2. Code-Sharing
We begin with the most basic technical device to connect airlines in an alliance
arrangement, the code-share. Code-sharing is the practice of two or more

109
Both parties to the 1992 U.S./Netherlands open skies agreement signed a Memorandum of
Consultations on September 4, 1992, consenting to give “sympathetic consideration” to commer-
cial cooperation and integration of commercial operations between each other’s airlines and “to
provide fair and expeditious consideration to any such agreements or arrangements filed for
approval and antitrust immunity.” Joint Application of KLM/Northwest, supra note 98, at 3. See
also United Air Lines, Inc. and Asiana Airlines, Inc., Joint Application for Approval and Antitrust
Immunity for an Alliance Expansion Agreement, Order Granting Approval and Antitrust
Immunity, Dkt. No. OST-03–14202, Order 2003–5–18, 2003 DOT Av. LEXIS 357, *3 n.5 (citing
the Memorandum of Consultations to the U.S./Republic of Korea open skies agreement).
110
See, e.g., All Nippon Airways Co., Ltd., Continental Airlines, Inc. & United Airlines, Inc., Joint
Application, Dkt. No. OST-2009–0350 (Dep’t of Transp., Dec. 23, 2009) at 6 n.9 (stating that, in
the recent Japan/U.S. negotiations, “the Japanese delegation unambiguously communicated
that U.S. approval [of the ANA/Continental/United] Joint Application [for antitrust immunity]
on terms acceptable to the Japanese government is a condition precedent to entry into force of
Open Skies”).
111
But U.S. congressional opponents of immunity attempted (unsuccessfully) to sunset alliance
immunity after three years. See Ensure Adequate Airline Competition Between the United
States and Europe Act, H.R. 831, 111th Cong. (2009).
 4.6. The Legal (and Policy) Framework for Global Alliances 153

airlines listing their separate connecting flights in a computer reservation system

and on e-tickets under a single two-letter code identifier as if a single carrier were
providing the entire service. The code identifier is each airline’s IATA designator
code (UA for United, LH for Lufthansa, and so on). Importantly, the participat-
ing airlines are not combining to offer a single service: in reality, each airline
pretends that it is offering an integrated service that is in fact partly operated by
one or more of its partner carriers. Code-sharing allows airlines to connect traffic
to and from foreign cities, to which they do not fly themselves, with their own
flights. In that way, airlines within an alliance system create the commercial
impression (accentuated by service features such as common access to airport
lounges) that they are offering “online” service to destinations that would
otherwise be uneconomical to serve with their own aircraft and crew. Code-
sharing, as noted above, also allows airlines to serve routes that their home States
have not secured in ASA negotiations. Code-sharing has attracted the attention
of regulators, especially with regard to consumer deception, but is typically pre-
cleared in bilateral ASAs.

4.6.3. U.S. DOT Recognizes Two Types of Code-Sharing Authority

In the United States, two types of code-sharing authority are recognized. The
first type is linked exclusively to international services and simply combines
each carrier’s existing international route authority. Consequently, it
involves no access to cabotage routes and is readily conceded in U.S.
ASAs. British Airways (BA), for example, might advertise a London/
Cancún service under its own two-letter airline code (BA), even though
the service requires a connection over Miami that involves changing to a
Miami/Cancún segment operated by BA’s oneworld alliance partner,
American Airlines (AA). This coding device makes use of the fact that U.S.
and U.K. carriers enjoy unlimited “blind sector” rights, that is, rights to fly to
points beyond each other’s territory (normally the “fifth freedom” if new
passengers are enplaned in the other’s territory) but without being permitted
to pick up new passengers.112 BA’s Cancún service combines a preexisting
privilege (to fly from Miami to Cancún without picking up new passengers
in Miami) with a code-share.113 U.S. regulators also recognize a second type

112
Open skies agreements have made these rights less relevant, but in earlier bilaterals, blind
sector rights were expressly granted. See Air Transport Agreement Between the Government of
the United States and the Government of Canada, Feb. 24, 1995, http://www.state.gov/docu-
ments/organization/114328.pdf.
113
Similarly, United can place its code on service from Chicago to Amsterdam and Brussels,
connecting in London with BA’s flights to those cities.
154 Regime for Airline Investment and Global Alliances

of code-share authority that clearly implicates the cabotage doctrine but that
is essential to full integration of routes within a global alliance. That author-
ity allows internal U.S. points to be connected to a foreign carrier’s interna-
tional system and thereby potentially provides feeder traffic to the foreign
carrier for its long-haul services. As with the first type, the foreign carrier
must have the economic authority, independently of the code-share, to serve
the entire code-shared itinerary. Thus, a BA service advertised as London/
Houston may involve a transfer at New York to a New York/Houston service
operated by AA. BA must therefore have independent authority to serve
London/Houston. That is a sensible restriction, because both carriers to a
code-share will be applying their respective codes to the service as if they
were actually performing the service with their own aircraft. The U.S. DOT
readily grants any additional authority that a carrier needs to close the code-
sharing deal.114

4.6.4. DOT’s Antitrust Immunity Power in International Aviation

In the United States, federal antitrust review of collaborations among com-
petitors is the responsibility of the Department of Justice (DOJ) and the
Federal Trade Commission.115 Exceptionally, however, in 1978 Congress
transferred to the DOT the discretionary authority of the Civil Aeronautics
Board (the industry’s enforcement agency under regulation) to exempt certain
inter-airline conduct from the antitrust laws. Domestic airline mergers,
acquisitions, and intercarrier agreements came under the jurisdiction of the
DOJ from January 1, 1989. But the DOT still retains the power to approve and
immunize intercarrier agreements in international aviation.116 The DOT and
DOJ jointly convinced Congress that the anomalous regime for competition
in international aviation – related to and the product of a diplomatic negotiat-
ing process using bilateral air services treaties – made it necessary for the DOT
to continue to wield the immunity power in order to react flexibly to industry
developments and to move U.S. aviation partners coherently toward a market-
based pro-competitive regime.117

114
14 C.F.R. § 212 (2008).
115
The Federal Trade Commission has the task of preapproving mergers under the Clayton Act.
See 15 U.S.C. § 18a. Meanwhile, antitrust authorities at the U.S. state level are preempted from
regulating air carriers. See 49 U.S.C. § 41713(b)(1) (2012).
116
See 49 U.S.C. §§ 41308–41309 (2006). Mergers and acquisitions in international aviation, of
course, were (and continue to be) foreclosed by the nationality rule. See supra Section 4.1.1.
117
See U.S. DOT, Report to Congress: Administration of Aviation Antitrust
Functions 4 (1987).
 4.6. The Legal (and Policy) Framework for Global Alliances 155

4.6.5. DOT’s Ex Ante Evaluation of Alliances: 49 U.S.C.

Sections 41308 and 41309
The DOT evaluates alliances for ex ante approval and immunity under
two sections of the U.S. transportation code, 49 U.S.C. Section 41308 and
49 U.S.C. Section 41309.118 The sections are chronologically inverted:
approval under Section 41309 then triggers immunity review under the
earlier section, 41308. Section 41309 requires a finding that the proposed
“cooperative arrangement” (i.e., alliance) is “not adverse to the public
interest” and is “not in violation of” other parts of the U.S. code on air
commerce and safety (e.g., provisions requiring that the relevant U.S. air
carriers are 75% owned by and in actual control of U.S. citizens and possess
valid aircraft operator certificates).119 If so, the regulator must answer
three questions affirmatively. First, does the alliance “substantially reduce[]
or eliminate[] competition”?120 Because an alliance always makes partners
out of competitors, the answer to this question is almost invariably “yes.”
Second, is the alliance necessary to meet a serious transportation need or
to secure important public benefits, including “international comity and
foreign policy considerations”?121 If the answer to that question is negative,
the approval fails. Otherwise, the regulator proceeds to a third question,
asking whether the benefits of an anticompetitive agreement can be secured
by “reasonably available alternatives that are materially less anticompeti-
tive.”122 Here, if the answer is affirmative, again approval is withheld. If the
answer is “no,” the alliance wins approval. In practice, an alliance that
successfully navigates the tripwires of Section 41309 will likely be given
immunity. Technically, Section 41308 contains its own additional “public
interest” test and a mandate that immunity will be awarded only “to the
extent necessary . . . to proceed with the transaction.”123 Nevertheless, it has
been apparent from DOT rulings that immunity mechanically succeeds
approval and that satisfaction of the public interest test in Section 41309
will carry the applicant alliance through the similarly worded test in
Section 41308.

118
See 49 U.S.C. §§ 41308–41309 (2006).
119
49 U.S.C. § 41309(b).
120
49 U.S.C. § 41309(b)(1).
121
49 U.S.C. § 41309(b)(1)(A).
122
49 U.S.C. § 41309(b)(1)(B).
123
49 U.S.C. § 41308(b).
156 Regime for Airline Investment and Global Alliances

4.6.6. DOT’s Pro-Immunity Record

There is some degree of travel between the DOT’s rhetorical position on the
grant of antitrust immunity and the decisions that the agency actually renders.
In its first opinion in the SkyTeam “show cause order” in 2005,124 the
Department admonished the applicants that the antitrust laws are a “funda-
mental national economic policy” and that immunity must be considered the
exception and not the rule. Accordingly, before immunity is granted, a “strong
showing on the record” would be required to demonstrate that the alliance is
in the public interest and that the parties will not proceed without immun-
ity.125 The SkyTeam submission was extraordinarily brief and facially weak,
lacking empirical evidence and analysis; the applicants seemed to treat
immunity as a regulatory entitlement or a boon. Later, on receipt of hundreds
of pages from the SkyTeam members, the DOT reversed itself and immu-
nized what was essentially the same alliance configuration.126 Even where the
DOJ has made on-the-record submissions exposing what it argues are the
negative antitrust effects of particular combinations, the DOT has approved
all applications by the three global alliances.

4.6.7. European Commission’s Ex Post System of Review

The EU’s competition code on intercarrier agreements appears in Article 101
of the Treaty on the Functioning of the European Union (TFEU).127 Article

124
See Alitalia-Linee Aeree Italiane-S.p.A., Czech Airlines, Delta Air Lines, Inc., KLM Royal
Dutch Airlines, Northwest Airlines, Inc., and Société Air France, Joint Application for Approval
of and Antitrust Immunity for Alliance Agreements under 49 U.S.C. §§ 41308 and 41309, Dkt.
No. OST-2004–19214, Show Cause Order 2005–12–12 (Dec. 12, 2005) [hereinafter SkyTeam
2005 Show Cause Order]. The DOT will often issue an order directing the respondent to show
cause why the agency should not adopt a proposed finding or conclusion. After considering
responses the DOT will then issue its final order. See 14 C.F.R. § 302.703.
125
SkyTeam 2005 Show Cause Order, supra note 124, at 33.
126
See Alitalia-Linee Aeree Italiane-S.p.A., Czech Airlines, Delta Airlines, Inc., KLM Royal
Dutch Airlines, Northwest Airlines, Inc., and Société Air France, Joint Application for
Approval of and Antitrust Immunity for Alliance Agreements under 49 U.S.C. §§ 41308 and
41309, Dkt. No. OST-2007–28644, Show Cause Order 2008–4–17 (Apr. 9, 2008) [hereinafter
SkyTeam 2008 Show Cause Order].
127
Consolidated Version of the Treaty on the Functioning of the European Union, art. 26, 2010
O.J. (C 83) 47 [hereinafter TFEU]. Article 101 was formerly Article 81 of the Treaty Establishing
the European Community and originally appeared as Article 85 of the Treaty of Rome.
Traditionally, EU competition law has had three goals: first, to enhance efficiency in the
sense of maximizing consumer welfare and optimizing the allocation of resources in the Union
(which is also the only goal shared by all adherents of the Chicago School of Economics);
second, to protect consumers and small firms from large aggregations of power (not a goal of the
 4.6. The Legal (and Policy) Framework for Global Alliances 157

101(1) prohibits “agreements between undertakings” as well as “concerted

practices” that have as their “object or effect the prevention, restriction or
distortion of competition within the internal market.” Article 101(2) provides
that arrangements that violate Article 101(1) are “automatically void.”
Cooperative airline alliances that allow competitors jointly to reduce capacity,
fix schedules, or coordinate prices should be illegal under the plain terms of
Article 101(1).128 But Article 101(3) permits an “exemption” for arrangements
that (among other things) improve the distribution of goods and promote
economic progress, while giving consumers a “fair share” of the resulting
benefit.129 Prior to May 1, 2004, the EU had no direct competency to inves-
tigate alliances that included non-EU airline partners.130 Regulation 411/2004
now makes Article 101 “directly applicable” to all air transport that touches the
Union,131 and Regulation 1/2003 gives the Union (through the European
Commission) the right to displace national competition authorities and courts
that otherwise have co-competency to conduct competition investigations.132
The application of EU competition laws to airline alliances (as well as to all
other EU industries) has been dramatically altered by Regulation 1/2003.
Under Article 1, all cooperative arrangements caught by Article 101(1) of the
TFEU that do not satisfy the exemption conditions of Article 101(3) are
prohibited, “no prior decision to that effect being required.”133 On the other
hand, arrangements that violate Article 101(1) but satisfy Article 101(3) are not
prohibited, “no prior decision to that effect being required.”134 What is the
meaning of the italicized language in those two legislative statements? The
meaning is that now the parties (here, the members of the alliance) must
establish for themselves whether their arrangement needs clearance under
Article 101(3). The former DOT-style ex ante notification and clearance
requirements have been abolished. The risk to which alliance partners are

Chicago School); and third, to facilitate the creation of the EU single market (a goal that is
unique to the EU). In recent years the EU has increasingly emphasized consumer welfare as a
predominant goal. See David J. Gerber, Two Forms of Modernization in European Competition
Law, 31 Fordham Int’l L. J. 1235, 1246–52 (2007).
128
All of these practices are obviously included in Article 101(1)’s representative list of violations.
129
The arrangement also must not impose “restrictions which are not indispensable” on the
companies involved or allow them “the possibility of eliminating competition in respect of a
substantial part” of their business.
130
Instead, various articles of the former treaty required the European Commission, the Union’s
executive agency, to work in tandem with Member State competition authorities.
131
See Council Regulation 411/2004, art. 1, 2004 O.J. (L 68) 1. The term “directly applicable”
appears in the recitals to the Regulation.
132
See Council Regulation 1/2003, art. 11, 2003 O.J. (L 1) 1.
133
Id. art. 1 (emphasis added).
134
Id. art. 1(3) (emphasis added).
158 Regime for Airline Investment and Global Alliances

exposed is that failure to notify can lead in any event to a later investigation by
the Commission or by national competition regulators (often as a result of a
complaint by a disgruntled competitor) and consequent large fines if the
alliance is ruled to be in violation of Article 101(1).135

4.6.8. European Commission’s Investigative Practice

In practice, the Commission will open such an investigation (however it is
prompted) by presenting the members of the alliance with a Statement of
Objections that may include concerns about specific routes.136 The Statement
must be in writing and usually allows twelve weeks for a response. The alliance
members can reject the Statement (which is a “reasoned opinion” that can be
litigated before EU tribunals137) or respond with a request for an oral hearing
as well as by submitting a Statement of Commitments.138 (SkyTeam, for
example, pledged in its Statement of Commitments to offer a series of benefits
to new entrant rivals at key EU airports, including slots, interlining privileges,
and participation in its members’ frequent flyer programs. The alliance also
promised to code-share with rail providers and to accept the appointment of a
trustee to oversee its commitments.139) The Commission “market tests” the
commitments, for example, by sounding out potential new entrants on alli-
ance routes. Finally, the commitments will be approved or rejected by a
Commission decision.140

4.6.9. A Quick Comparison of the U.S. and EU Approaches

Since the U.S. and EU ex ante and ex post approaches to antitrust review of
alliances provide distinct regulatory paradigms for a future global approach, it
is worth quickly comparing the two systems. U.S. ex ante review provides

135
The decentralization of the exemption procedure was in part a response to the problem of the
European Commission’s inability to reach exemption decisions quickly.
136
See Council Regulation 1/2003, supra note 132, art. 11(6); Comm’n Regulation 773/2004, art.
2(1), 2004 O.J. (L 123) 18. When the Commission acts under Article 11(6) of Council Regulation
1/2003, its action suspends the co-competency of Member State national competition author-
ities and courts.
137
See TFEU, supra note 127, arts. 258–59.
138
See Comm’n Regulation 773/2004, supra note 136, art. 12; see also Council Regulation 1/2003,
supra note 132, art. 9(1).
139
See Press Release, Europa, Antitrust: Commission Market Tests Commitments From Eight
Members of SkyTeam Concerning Their Alliance Cooperation (Oct. 19, 2007).
140
See Council Regulation 1/2003, supra note 132, art. 9(1). The decision may simply conclude that
there are no grounds for further action without finding an infringement. Violation of commit-
ments can attract fines totaling 10% of worldwide revenues. See id. art. 23(2).
 4.7. “Metal Neutrality” and “Spillover” 159

greater certainty to applicants but is administered by an agency (the DOT)

that does not overly prize economic and market analysis, although to that
extent the DOT’s approach gives more “wiggle room” to the airlines to make
policy arguments that include appealing to international aerodiplomatic con-
siderations.141 EU ex post review risks having an alliance that has been func-
tioning for years suddenly dethroned by a later European Commission order
to divest slots or gates or even to cease operations. Moreover, appeals to vague
maxims of international aviation policy will have less purchase when the
relevant review section within the Commission (known as the Directorate
General for Competition or DGComp) has huge competition law expertise.
Finally, the DOT’s ex ante review imposes relatively light conditions on
approved and immunized alliances including the “evergreen” validity period
noted earlier as well as time-limited route “carve-outs.”142 As the SkyTeam
Schedule of Commitments revealed, the EU favors more intrusive sets of
conditions that may include slot divestitures and independent monitoring.

4.7. ongoing issues of law and policy for alliances:

“metal neutrality” and “spillover”

4.7.1. Meaning of Metal Neutrality

As the alliance system has evolved as a business model, it has brought vexing
questions of both law and policy in its wake. The matter of so-called metal
141
The DOT, in contrast to the DOJ, believes that network competition could not be duplicated
by “atomistic” point-to-point competitors. The DOJ prefers the classic competition model that
examines specific routes and tests whether they are contestable, that is, whether supracompe-
titive fares will attract timely, likely, and sufficient new competitors to discipline the price-setter
(the alliance). See Impact of Consolidation on the Aviation Industry, with a Focus on the
Proposed Merger Between Delta Air Lines and Northwest Airlines: Hearing Before the
Subcomm. on Aviation of the H. Comm. on Transp. & Infrastructure, 110th Cong. 202–12
(2008) (testimony of James J. O’Connell, Deputy Assistant Attorney Gen., Antitrust Dept., U.S.
Dept. of Justice), http://www.justice.gov/atr/public/testimony/233151.htm. Professor Michael
Levine has argued that antitrust enforcers should recognize that pockets of monopoly will exist
within the networks but are counterweighted by increased convenience of use as against stand-
alone alternatives. He contends also that the ideal market profile for international aviation
should be three to four competing global networks and as much non-network price discipline
as the regulators can encourage. See generally Michael E. Levine, Airline Alliances and Systems
Competition: Antitrust Policy Toward Airlines and the Department of Justice Guidelines, 45
Hous. L. Rev. 333, 335–39 (2008).
142
The DOT has gone as far as arguing that carve-outs inhibit efficiencies and hurt consumers in
cases involving metal neutral joint ventures (see infra in main text). See Air Canada et al., Final
Order to Amend Order 2007–2–16 so as to Approve and Confer Antitrust Immunity, Dkt. No.
OST-2008–0234, Order 2009–7–10, at 20–22 (Dep’t of Transp. Jul. 10, 2009) [hereinafter A++
Final Order].
160 Regime for Airline Investment and Global Alliances

neutrality is currently preoccupying officials and stakeholders. The term is

industry argot (although it has crept into DOT opinions143) to describe an
alliance arrangement where the alliance partner best positioned commercially
to serve a particular route is allowed to do so without competing or comple-
mentary services from other members: in effect, the alliance is “neutral” with
respect to which partner performs the carriage.144 The aim of metal neutrality, in
fact, is to align the economic incentives of the alliance partners so that they need
not compete with each other over which carrier’s aircraft flies any particular
segment of a service. Otherwise, there is a perceived risk of “diversion,” which
makes make it more profitable to keep certain segments and behind or beyond
points out of reach of rival members of the alliance.145 Whether or not revenues
from the service are split evenly among the partners, the economic expectation is
that no extra revenue will accrue to a carrier by booking a passenger on its own
aircraft rather than on that of one of its partners. Typically the partner with the
lowest cost base for the service will be the operator and all other alliance
members will exit.146 In metal neutral arrangements, specialized intercarrier
committees of senior executives jointly plan and manage capacity, pricing, and
inter-airline financial settlement in order to develop a common bottom line.147
The U.S. DOT believes that metal neutrality amplifies the pro-consumer
benefits of the alliance by allowing its members to operate services at the most
efficient cost148 as well as to synchronize schedules and optimize the end-to-end
options for the passenger. Here is the DOT’s precise definition of the term:
[Metal neutrality] is an industry term meaning that the partners in an alliance
are indifferent as to which [one] operates the “metal” (aircraft) when they
jointly market services. Without a metal neutral sales environment, the

143
See, e.g., Air Canada et al., Joint Application to Amend Order 2007–2–16, Order 2011–11–16, 2011
DOT Av. LEXIS 492, *9 & *30 (Dep’t of Transp. Nov. 14, 2011).
144
See A++ Final Order, supra note 142, at n.48.
145
For example, British Airways (BA) offers a nonstop service from Seattle to London. American
Airlines (AA) offers a similar service but connecting over Chicago. If AA puts its code on the BA
service, its own customers will likely opt for the nonstop BA service and cause a revenue transfer
from AA to BA. In code-sharing arrangements, unlike in the metal neutral joint venture, each
carrier to the code-share retains an incentive to optimize its own margins rather than to
maximize joint revenues.
146
There is a risk, of course, that if and when an alliance unravels, the exiting carriers will be
seriously disadvantaged economically by their “physical” absence from flying the routes.
Alliances do face occasional defections: Continental Airlines leaving SkyTeam for Star in
2009 was the biggest such defection in alliance history. A plan for US Airways to leave the Star
Alliance in favor of oneworld following regulatory approval for its merger with American
Airlines was announced in February 2013. See infra note 173.
147
See SkyTeam 2008 Show Cause Order, supra note 126, at 3.
148
Lower costs, in other words, should translate into lower fares for the passenger.
 4.7. “Metal Neutrality” and “Spillover” 161

partners have a strong economic incentive to book passengers on their own

aircraft in order to retain a larger share of the revenue for themselves, which
may not be in the best interest of the consumer or the alliance as a whole.
Metal neutrality may be achieved through revenue and/or comprehensive
benefit-sharing arrangements.149

4.7.2. Contrasting U.S. and EU Approaches to Metal Neutrality

Metal neutrality was not a DOT prerequisite for antitrust immunity during the
decade-and-a-half before 2008 (when open skies ASAs and code-sharing suffi-
ciently justified immunity). But the ubiquity of code-sharing and the existence
of more than 100 open skies agreements seem to have persuaded the DOT to
require metal neutrality for deeper consolidation among alliances that already
have complex code-sharing arrangements and where the home States of the
foreign carrier members have stable open skies relationships with the United
States.150 As we will see, in the SkyTeam, Star, and oneworld global alliances,
metal neutrality involves only select carriers within the larger alliance struc-
ture, thereby presenting the appearance of an “alliance within an alliance.”
The European Commission seems to consider the deeper integration of the
metal neutral joint venture to be a more urgent competition concern than
the broader idea of a multicarrier alliance. This is somewhat ironic, given that
the DOT now prefers metal neutral joint ventures as a mechanism to lower
fares. But these seemingly opposed viewpoints are not contradictory if they are
viewed from the vantage point of each agency’s execution of its mission. The
Commission is probing for anticompetitive outcomes rather than granting
formal immunity. It spends much of its analysis of alliances examining specific
route-pairs to determine competition effects. A metal neutral joint venture will
inevitably have greater anticompetitive impact than a less integrated alliance,
making it logical for a competition-focused agency to prioritize scrutiny of
such arrangements. The DOT, in contrast, is not actually scouring for antitrust
violations (that is the job of the DOJ) but deciding whether to grant antitrust
149
American Airlines, Inc., British Airways PLC, Finnair OYJ, Iberia Lineas Aereas De España,
S.A., Royal Jordanian Airlines, Joint Application under 49 U.S.C. §§ 41308–41309 for Approval
of and Antitrust Immunity for Alliance Agreements, Dkt. No. OST-2008–0252, Order 2010–2–8
at n.6 (Dep’t of Transp. Feb. 13, 2010).
150
Although the term “metal neutrality” has only recently appeared in DOT decisions, it has been
argued that the existence of metal neutrality in a heavily integrated alliance agreement now
appears to be an established requirement for antitrust immunity. See generally Gabriel
S. Sanchez, An Institutional Defense of Antitrust Immunity for International Airline
Alliances, 62 Cath. U. L. Rev. 139 (2012). For a more detailed explication of the concept,
see Volodymyr Bilokach & Kai Huscherlatch, Airline Alliances and Antitrust Policy: The Role of
Efficiencies, 21 J. Air Transp. Mgmt. 76, 80–81 (2012).
162 Regime for Airline Investment and Global Alliances

immunity. Although part of the required statutory testing is to determine

whether an alliance or joint venture will have anticompetitive effects (other-
wise there is no need for immunity), the DOT’s investigative emphasis is more
logically placed on the benefits offered by the proposed arrangement that
would justify immunizing the anticompetitive effects. Because metal neutral
joint ventures are more anticompetitive yet also offer more benefits (to the
DOT’s eye), the U.S. agency sees them as more deserving of immunity at the
same time that the European Commission views them as more threatening.

4.7.3. Viewpoint of Organized Labor on Metal Neutrality

U.S. organized labor attacks metal neutrality as an incentive to heavily
indebted “legacy” carriers,151 bolted to unionized contracts, to assign expensive
routes (and hence staffing) to partners with much lower cost structures.152 The
reader may detect the irony that labor has tried to avoid that exact outcome in
its opposition to liberalizing inward investment. Some critics have portrayed
metal neutrality as a device for the big U.S. carriers to shape-shift into “virtual”
airlines, deriving a revenue stream from marketing air services that are actually
provided by their alliance partners.153

4.7.4. Risk of Domestic and International Spillover

A further issue with alliance antitrust immunity, detected especially by U.S.
authorities, is the risk of domestic and international “spillover.” The DOT is
the sole federal agency that can approve and immunize intercarrier agree-
ments affecting international air transport. Moreover, the federal deregulation
statute abolished an earlier parallel power to immunize domestic agreements
between carriers.154 Before United and Continental merged in 2009, regula-
tors were troubled that their membership of the same (technically interna-
tional) alliance, Star, would allow them to share sensitive information about
their domestic services. As has happened before with problematic antitrust
151
The term “legacy carrier” is used in the United States to refer to those carriers with large
interstate route networks that existed prior to the 1978 Airline Deregulation Act.
152
See, e.g., Answer of the Association of Flight Attendants-CWA, U.S.-Japan Alliance Case, Dkt.
No. OST-2010–0059 (Jul. 9, 2010), http://www.airlineinfo.com/Sites/DailyAirline/web-content/
ostpdf78/775.pdf. The flight attendants’ union argued that if United and Continental were
granted antitrust immunity for a proposed metal neutral joint venture with Japan’s All Nippon
Airways, the two U.S. carriers (now merged) would shift operation of the affected routes to All
Nippon, which had lower labor costs.
153
For labor, “the business of an airline is to fly,” not to outsource flying to the lowest bidder or
merely to act as a ticket agent.
154
See Havel, supra note 22, at 262–263.
 4.8. U.S. and EU Antitrust Oversight of the Three Global Alliances 163

issues in the air transport industry, however, the spillover question has been
parked by industry developments, in this case recent U.S. merger activity.155
But internationally the question remains sensitive. Two non-U.S. alliance
members that obtain immunity in an alliance with the same U.S. airline
could pursue cooperative arrangements that do not include that U.S. carrier.
Under the terms of their 2009 immunity application, for example, Star
Alliance core members United and Lufthansa (and several other airlines)
have an immunity to cooperate that does not extend outward to cover Star’s
Asia-Pacific members, particularly Japan’s ANA.156 Immunization for ANA/
United cooperation in the context of Star was granted in a later DOT ruling –
one which, again, did not extend the immunity beyond the circle of the
applicant carriers to, say, Lufthansa.157 Even so, some analysts fear that
through their separate immunized dealings with United, Lufthansa and
ANA could find ways of collaborating with one another that may offend
U.S. antitrust laws, but more likely that will violate EU or Japanese competi-
tion rules. The quick solution has been for non-U.S. alliance members to
secure exemptions from their home States to expand cooperation beyond the
U.S. context. In 2011, for example, the Japanese authorities blessed the
Lufthansa/ANA cooperative agreement.158 Even so, as the alliance system
continues to take on more airlines, international spillover will remain a risk
that lacks a universal remedy.

4.8. a survey of u.s. and eu antitrust oversight

of the three global alliances

4.8.1. Introduction
Finally, we will look briefly at the some of the key rulings of both the U.S. and
EU antitrust review authorities on various applications by the three global
alliances – SkyTeam, Star, and oneworld. We start with SkyTeam, which
suffered a stunning upset in 2005 when its six-carrier request for immunity was
rebuffed by the DOT. Although that decision was reversed in 2008 (motivated
in part by the merger of U.S. airlines Delta and Northwest, which had been

155
Similarly, DOT regulation of computer reservations systems was superseded by events in the
airline ticket distribution industry.
156
See A++ Final Order, supra note 142.
157
See U.S.-Japan Alliance Case, Dkt. No. OST-2010–0059, Final Order 2010–11–10 (Nov.
10, 2010).
158
See Kaveri Niththyananthan, Lufthansa, ANA Get Antitrust Clearance, WSJ.com, Jun. 1, 2011,
http://online.wsj.com/article/SB10001424052702303657404576359620588556408.html.
164 Regime for Airline Investment and Global Alliances

separate carriers at the time of the first application), all of the alliances have
drawn useful forensic lessons from a rare refusal by the DOT to grant approval
and immunity.

4.8.2. SkyTeam Alliance: DOT Review

The SkyTeam alliance was formally created in 2000. Air France, Alitalia, Czech
Airlines, Delta Airlines, and Korean Air received U.S. antitrust immunity in
2002.159 As noted above, the DOT refused in 2005 to grant approval and immun-
ity to a six-way alliance comprising Air France (now including KLM), Alitalia,
Continental Airlines,160 Delta Airlines, Korean Air, and Northwest Airlines. At
that time, SkyTeam embraced two already-immunized alliances that each
included a U.S. carrier (Northwest/KLM and Delta/Air France/Alitalia). With
overlapping route networks between the existing alliances and no new online
service in new markets, the applicants failed to muster a record as to what public
benefits would accompany an even more comprehensive arrangement beyond
those available from arm’s-length code-sharing and what the distinct immunized
alliances were already achieving.161 Moreover, the involvement of the two
separate U.S. carriers, albeit in separate alliances, was a troubling matter of first
impression.162 The DOT arguably did not perceive the building momentum
toward three global alliances and instead was seeking at least temporarily to
apply brakes to the alliance process. Further, the 2005 ruling occurred at the
outset of negotiations toward a U.S./EU open skies agreement and (unlike in the
Star application in 2007163) the DOT did not have a visible and viable diplomatic
process to protect. By 2008, however, the new U.S./EU “open skies plus” treaty164
had entered into provisional effect and included the signatures of each of the
home States of the applicant non-U.S. carriers. In the DOT’s view, fewer but
larger alliance networks would be competing in a competitive space that would
have incommensurably wider boundaries than the traditional country-pair

159
Note that the United States and France signed an open skies ASA in 2001.
160
Continental Airlines was part of the SkyTeam alliance but was non-immunized.
161
The DOT and DOJ were in agreement on this holding, the DOJ finding that the applicants’
“significant burden” had not been met. In past cases, alliances had been constructed from end-
to-end networks. See Sky Team 2005 Show Cause Order, supra note 124, at 3.
162
See supra Section 4.7.4 (discussing possible domestic “spillover” effects of alliances).
163
See infra Section 4.8.4.
164
The 2007 U.S./EU Air Transport Agreement, see supra note 44, is sometimes described as
“open skies plus” because in addition to liberalization of the four major Chicago system
negotiating points – routes, capacity, frequency, and tariffs – the agreement put in place a
framework for collaboration on regulatory matters such as competition, security, and consumer
protection, and addressed prohibitions on cross-border investment that had been complicated
by the creation of the EU common aviation area.
 4.8. U.S. and EU Antitrust Oversight of the Three Global Alliances 165

markets (i.e., U.S./twenty-eight EU Member States as opposed to, for example,

U.S./U.K. or U.S./France).165 With new entry possible from any EU airport, the
transatlantic market would be more open than ever to new business models that
could use strong regional hubs to discipline incumbents. Moreover, Northwest
had now merged into Delta, dissipating concerns about having more than one
U.S. carrier among the applicants for common immunity. With that backdrop,
the Department now felt comfortable, as it had not been in 2005, with an
arrangement to “rationalize” Air France’s distinct commercial relationships
with Northwest (which had been in an alliance with KLM, Air France’s own
merger partner since 2000166) and Delta (Air France’s current SkyTeam partner).
Despite its prior reservations, the DOT agreed that the Air France/KLM merger
had made the original two immunized alliances effectively unsustainable. And
the public benefits it could not find in 2005 were now manifest.167 Accordingly,
immunity was bestowed not only on the original six-way SkyTeam alliance but
also on an intensified four-way metal neutral joint venture among Air France/
KLM, Alitalia, Delta, and Northwest.168

4.8.3. SkyTeam Alliance: EU Review

In June 2006, the European Commission sent a Statement of Objections to
SkyTeam.169 In October of the following year, the Commission “market-tested”
the commitments proposed by the SkyTeam membership.170 These were
rejected (unlike in parallel proceedings for oneworld) and the probe remained
open until January 2012. In that month, the Commission closed its investigation
into the broader SkyTeam alliance and opened a new probe into the metal
neutral joint venture among Air France/KLM, Alitalia, Delta, and Northwest.171

165
See SkyTeam 2008 Show Cause Order, supra note 126, at 13.
166
See supra note 60 (explaining Air France/KLM “merger-in-fact”).
167
Unlike the original SkyTeam immunity proceedings in 2002, the DOT did not condition the
grant of immunity on numerous “carve-outs” (specified routes on which the alliance carriers
could not cooperate).
168
This “alliance within an alliance” was the first of the new generation of metal neutral joint
ventures where the participants pool revenues and are indifferent to which carrier actually
operates a particular service. See supra Section 4.7.1 (analyzing metal neutral alliance
structures).
169
The Statement identified 11 transatlantic route-pairs where SkyTeam members held strong
market positions that would be further strengthened by reduced competition among alliance
members. The effects would be compounded by scarce slots at congested hubs.
170
See supra Section 4.6.8 (discussing market-testing).
171
See Press Release, Europa, Antitrust: Commission Opens a Probe into Transatlantic Joint
Venture between Air France-KLM, Alitalia and Delta and Closes Proceedings against Eight
Members of SkyTeam Airline Alliance (Jan. 1, 2012), http://europa.eu/rapid/press-release_IP-12-
79_en.htm#PR_metaPressRelease_bottom.
166 Regime for Airline Investment and Global Alliances

4.8.4. Star Alliance: DOT Review

The Star Alliance was officially founded in 1997 by Air Canada, United,
Lufthansa, SAS, and Thai Airways and won antitrust immunity in 2007 (by
which time it had been joined by LOT Polish Airlines, TAP Air Portugal, and
Swiss International Airlines).172 US Airways joined Star as a nonimmunized
participant in 2004.173 The DOT’s analysis in Star’s successful immunity
proceeding in 2007 resembled the 2008 SkyTeam decision: the Department
took favorable note of the pending U.S./EU open skies agreement and empha-
sized the general importance of open skies as a predicate for immunity.174 The
2007 decision also commented that, unlike SkyTeam in 2005, the Star mem-
bers were not proposing to fuse already-immunized alliances that also had
overlapping networks.175 Continental Airlines joined Star in 2009 and almost
immediately applied with Air Canada, United, and Lufthansa for DOT
approval and immunization of a metal neutral joint venture that they branded
as “A++,” another “alliance within an alliance.”176 With a new Democratic
presidential administration in office, the DOJ was embarked on tough anti-
trust enforcement and publicly denounced the idea of two U.S. airlines
(United and Continental) collaborating inside such an arrangement.177

172
Note that the United States and Germany signed an open skies ASA in 1996.
173
Following the announcement of a merger between American Airlines and US Airways
in February 2013, US Airways has indicated that, pending all required regulatory
approvals, it would leave the Star Alliance to join oneworld. See Doug Cameron, U.S.
Airline Merger to Affect Alliances, WSJ.com, Feb. 14, 2013, http://online.wsj.com/article/
SB10001424127887324432004578304210189378352.html?mod=googlenews.wsj. The planned
alliance transition was briefly stalled, however, following the DOJ’s antitrust challenge to
the merger. See Press Release, Dep’t of Justice, Justice Department Files Antitrust Lawsuit
Challenging Proposed Merger Between US Airways and American Airlines (Aug. 13, 2013),
http://www.justice.gov/opa/pr/2013/August/13-at-909.html/.
174
A U.S./Canada liberal ASA had also been negotiated. Protocol to the Air Transport Agreement
between the Government of the United States and the Government of Canada, U.S.-Can.,
Mar. 12, 2007, http://www.state.gov/documents/organization/114887.pdf.
175
See The Austrian Group, British Midland Airways Limited, Deutsche Lufthansa AG, Polskie
Linie Lotnicze Lot S.A., Scandinavian Airlines System, Swiss International Air Lines Ltd., TAP
Air Portugal, United Air Lines, Inc., and Air Canada, Joint Application under 49 U.S.C. §§
41308 and 41309 for Approval of and Antitrust Immunity for Commercial Alliance Agreements,
Dkt. Nos. OST-2005–22922 and OST-96–1434, Show Cause Order at 7 (Dep’t of Transp. Dec.
19, 2006) [hereinafter Star 2006 Show Cause Order].
176
See Air Canada, The Austrian Group, British Midland Airways Ltd., Continental Airlines, Inc.,
Deutsche Lufthansa AG, Polskie Linie Lotniecze Lot S.A., Scandinavian Airlines System,
Swiss International Air Lines Ltd., TAP Air Portugal, and United Air Lines, Inc., Joint
Application to Amend Order 2007–2–16 so as to Approve and Confer Antitrust Immunity, Dkt.
No. OST-2008–0234, Show Cause Order 2009–4–5 (Dep’t of Transp. Apr. 7, 2009).
177
“United and Continental will be discussing the most sensitive competitive subjects.”
Comments of the Department of Justice on the Show Cause Order to Amend Order
 4.8. U.S. and EU Antitrust Oversight of the Three Global Alliances 167

Rather than address the DOJ’s warnings about U.S. domestic “spillover,”178
however, the DOT relied instead on international aviation policy and insisted
that the unique burden of the nationality rule fully justified treating immunity
for international airline alliances as something other than a rare exception.179
To the DOJ charge that its fellow agency could not use immunity to push its
liberalizing agenda any further than had already been achieved in the U.S./
EU Air Transport Agreement, the DOT countered that immunity was still
needed to maintain as well as to reach open skies: foreign partners must be
prevented from withdrawing from existing open skies agreements and thereby
impeding negotiations with other States.180 In so stating, the Department
conceded a point that (as noted above) has been widely believed, namely,
that open skies agreements are now negotiated with the implicit promise of
immunity.181 In terms of the applicable statutory tests, the agency took the view
that ownership restrictions preclude authentic “from anywhere to everywhere”
airline mergers and therefore satisfy the requirement in U.S.C. Section 41309
that the requisite transportation needs or public benefits “cannot be achieved
by reasonably available and materially less anticompetitive alternatives.”182
Moreover, sufficient competitive pressure on the “A++” venture would come
from other carriers, in particular city-pairs, and from other alliances with
global network connectivity.183 Finally, the DOT for the first time awarded
“global immunity” to A++, covering transpacific as well as transatlantic and
transborder markets.184 The decision held that different geographic-specific

2007–2–16 so as to Approve and Confer Antitrust Immunity, Dkt. No. OST-2008–0234 at 29

(Dep’t of Justice Jun. 26, 2009) [hereinafter DOJ Comments]. The DOJ also asserted that it was
“aware of no legal challenge to the actions taken by carriers within and in furtherance of a
legitimate airline alliance.” The DOT retorted, however, that the DOJ was unwilling to opine
that the coordinated activities planned under the joint venture might, even absent immunity,
be otherwise compliant with the antitrust laws or that “the DOJ, competitors, or consumers
would not challenge these activities if undertaken without immunity.” See A++ Final Order,
supra note 142, at 12.
178
See Dep’t of Justice Comments, supra note 177, at 28.
179
See A++ Final Order, supra note 142, at 10–11.
180
See id. at 11.
181
See id.
182
A++ Final Order, supra note 142, at 3.
183
See id. at 10. The Department held that coordinated connecting services by integrated alliances
could discipline fares on virtually all significant nonstop routes. See id. To assuage the DOJ, even
though the DOT found no single international nonstop overlap routes between Continental and
United, the final order carved out some 2-to-1 markets (where competitors were reduced from two
to one) with respect to time-sensitive business travelers who were more likely to rely on nonstop
services and feel the effects of reduced competition. Contrarily, however, these passengers would
also gain network benefits from an integrated metal neutral joint venture. See id. at 18. No 4-to-3
or 3-to-2 markets were excluded from immunization. See id.
184
See id. at 22.
168 Regime for Airline Investment and Global Alliances

protocols, each tailored to a different scope of immunity for activities in

different regions, were likely to be unduly complex and burdensome.185 The
DOT/DOJ conflict over Continental’s accession to a United-led Star was
sharp enough to require intervention by President Obama’s economic adviser,
Lawrence Summers. But the agencies’ disagreement was subsequently
mooted (and muted) by the merger of the two airlines in 2010.186

4.8.5. Star Alliance: EU Review

The European Commission probed the DOT-immunized alliance among
United, Lufthansa, and SAS (the predecessor arrangement to Star) between
1996 and 2002. The alliance surrendered slots at Frankfurt’s airport as a
condition of eventual approval. A new investigation began in 2009, presum-
ably because of changes to the EU governing treaty and the additions of Air
Canada and Continental to the Star Alliance.187 Despite opening its newest
probe at the same time that it was targeting oneworld, the Commission did not
issue a formal Statement of Objections in its review of Star. Instead, the
Commission accepted a series of voluntary market commitments made by
the Star Alliance that are intended to enhance competition on the alliance’s
New York/Frankfurt route.188 These commitments, which are intended to last
ten years, are now legally binding on the Star carriers.

4.8.6. Oneworld Alliance: DOT Review

The oneworld189 alliance was launched in 1999 by American Airlines (AA),
British Airways (BA), Cathay Pacific, Canadian Airlines, and Qantas. They
were joined later by Finnair, Iberia, and Royal Jordanian Airlines. The core
AA/BA partnership was unable to secure antitrust immunity from the DOT
until 2010, when five carriers obtained common immunity after the U.K.
finally endorsed open skies as a party to the U.S./EU Air Transport
185
See id.
186
Similarly, the announcement of an American Airlines/US Airways merger in February 2013
will likely allay any concerns about US Airways’ plan, pursuant to the merger, to leave the Star
Alliance in favor of oneworld. See supra note 173.
187
The Treaty of Lisbon entered into force on Dec. 1, 2009.
188
Specifically, Star members United, Air Canada, and Lufthansa agreed to surrender New York
and/or Frankfurt slots to new entrants while also allowing competing carriers improved access
to the alliance members’ connecting traffic. See Press Release, Europa, Antitrust: Commission
Renders Legally Binding Commitments from Star Alliance Members Air Canada, United and
Lufthansa on Transatlantic Air Transport Market (May 23, 2013), http://europa.eu/rapid/press-
release_IP-13-456_en.htm/.
189
Note the usual lower case “o” at the beginning of the name.
 4.8. U.S. and EU Antitrust Oversight of the Three Global Alliances 169

Agreement. As with SkyTeam and Star, the core group (AA, BA, and Iberia,
which had entered a merger with BA190) also secured immunity for an addi-
tional three-way joint venture within oneworld, yet another “alliance within
an alliance.” The oneworld proceeding was the first in which the DOT
explicitly acknowledged (and deferred to) the work of EU competition author-
ities in a published decision: the U.S. agency accepted that the European
Commission’s procedures for slot divestiture would meet its own objectives for
a similar remedy.191

4.8.7. Oneworld Alliance: EU Review

The oneworld alliance is the only one of the three global alliances to complete
the European Commission’s investigation process. In July 2010, the core joint
venture between British Airways, American Airlines, and Iberia received
approval in its current form for ten years.192 The Commission concluded
that the core group’s key “commitment” – to make available a total of
forty-nine return flights a week193 to new competitors at Heathrow and
Gatwick for service to four major U.S. cities – was sufficient to remedy its

190
International Airlines Group (IAG) was formed in 2011 through a merger between BA
and Iberia. The multinational airline holding company is headquartered in London with
its registered office in Madrid. Both BA and Iberia continue to operate under their
distinct brand names. In 2012, IAG expanded with the acquisition of British Midland
International (BMI).
191
See American Airlines, Inc., British Airways PLC, Finnair OYJ, Iberia Lineas Aereas De
España, S.A., and Royal Jordanian Airlines, Joint Application under 49 U.S.C.
§§ 41308–41309 for Approval of and Antitrust Immunity for Alliance Agreements, Dkt. No.
OST-2008–0252, Order 2010–7–8 at 16–20 (Dep’t of Transp. Jul. 20, 2010) [hereinafter
oneworld Final Order]. Slots are essentially departure and landing rights at a specified
airport tied to a specific date and time. See supra Chapter 3, Section 3.7.4. The DOT
has not typically made use of slot remedies, but found them warranted in this case because
of the oneworld carriers’ especially large share of available slots at Heathrow, one of the
industry’s most congested and economically important hubs. The DOT noted that the
implementation of slot remedies, including the four Heathrow slot pairs (i.e., four new
daily round-trip flights) that the DOT itself required, would be governed by procedures
agreed to by the applicants and the Commission. These procedures, the DOT found, were
“sufficient” to achieve the Department’s objectives for a slot remedy. See supra oneworld
Final Order.
192
See Summary of Commission Decision of 14 July 2010 relating to a proceeding under Article 101
of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement
(COMP/39.56 – British Airways/American Airlines/Iberia), 2010 O.J. (C 278) 14, 15 [hereinafter
Summary of Commission Decision].
193
In other words, seven daily round-trips.
170 Regime for Airline Investment and Global Alliances

concerns about diminution of competition on those routes.194 Finally,

the Commission reciprocated the DOT’s earlier salute in noting that it
had been “in close contact” with the U.S. agency throughout the
investigation.195

4.8.8. A Final Appraisal of the U.S. and EU Approaches

Having looked at DOT review of the global alliances, the reader might
empathize with one critic’s view that the agency believes that “market power
cannot exist in any broadly defined market that has three competitors and an
[o]pen [s]kies treaty.”196 The European Commission is more inclined to
circumspection. Its decisions evoke parallels with the DOJ’s metric of the
“contestability” of specific routes and it is less sanguine than the DOT about
the inherent virtues of network competition.197 Nevertheless, is it clear that
both the DOT and the European Commission apply a dose of “industrial
policy” to their scrutiny of alliances. The U.S. agency sees alliances as
enabling the U.S. international carriers to expand their global networks and
maintain a comparative advantage over domestic low-cost carriers.198
Similarly, the Commission views the global alliances as helping to fortify a
small number of Union “champions” to perform in highly competitive world
markets.199

194
Operating as a “single entity” on these routes, the oneworld core group would benefit from high
barriers to entry, especially the lack of peak-time slots at Heathrow, the alliance members’
frequency advantage, and their control of most connecting traffic on the routes. The slot
remedies, along with participation in oneworld’s frequent flyer programs and other conces-
sions, were aimed at lowering barriers to entry. See Summary of Commission Decision, supra
note 192.
195
The Commission referred to the DOT’s “parallel review under U.S. rules.” See Press Release,
Europa, Antitrust: Commission market tests commitments proposed by BA, AA, and Iberia
concerning transatlantic cooperation (Mar. 10, 2010), http://europa.eu/rapid/press-release_IP-
10-256_en.htm.
196
See Horan, supra note 108, at 262.
197
Some commentators argue that the North Atlantic market is not contestable (i.e., liable to
attract new entrants). In this view, the three global alliances enjoy an oligopolistic 92% of
capacity market share that they sustain through implicit coordination to refrain from entering
each other’s city-pairs and hubs. See id. at 268.
198
Following its acquisition of rival low-cost carrier AirTran, Southwest Airlines announced in
2012 that it would start offering international service on AirTran’s former routes to the
Caribbean and Mexico. The move further complicates attempts to define Southwest’s status
as something larger than other U.S. regional or budget carriers but distinct from the legacy
carriers that participate in the alliance system and that are largely dependent upon interna-
tional service for their profits.
199
See Transatlantic Airlins Alliances Report, supra note 108.
 4.9. Beyond the Alliance System 171

4.9. beyond the alliance system

4.9.1. A Contingent System

Despite being welcomed in some quarters as the most important development
in the international air transport industry since the jet aircraft,200 the immu-
nized alliance system faced legislative emasculation in the months before the
2010 U.S. congressional elections. Proposals to limit antitrust immunity for
alliances to three years, and in any event to abolish the “evergreen” grant,201
did not survive the return of a Republican Congress.202 Even if they have (for
the moment) dodged the wrath of Congress, however, alliances arguably will
always be a contingent system that will endure only so long as international
airlines have to await the emergence of a global investment regime.

4.9.2. Rise of Multinational Airlines?

It is widely expected that such a regime would propel the leading members of
the three major global alliances –SkyTeam, Star, and oneworld – to full
consolidation with one another. The rise of a future “Star Airline” or “one-
world Airline” is not entirely certain, however. The present triad has been
formed in part by rational calculation, but in part also by circumstance. After
the establishment of Northwest/KLM and United/Lufthansa, carriers such as
Air France and Delta were forced into a similar marriage in the absence of
other suitors. In an open regime, none of those arrangements will continue to
seem foreordained. The sheer size of the current global alliances also hints at
future reluctance by competition authorities to approve a permanent merger
of their current membership. But it would be wrong to close this discussion on
an entirely negative note. To many commentators, the biggest advantage of
alliances to its members has yet to be realized: their present existence has
allowed commercial relationships to be formalized that are bound to remain
strategically important when the regulatory and political environment even-
tually shifts toward open investment. Very plausibly, then, the core groups of
the three global alliances – the metal neutral joint venturers – will settle down
together to form the nucleus of three future global airlines.

200
See Dean & Shane, supra note 105, at 18.
201
See supra note 111.
202
See Ensure Adequate Airline Competition Between the United States and Europe Act, H.R.
831, 111th Cong. (2009).
172 Regime for Airline Investment and Global Alliances

4.10. conclusion: a new eu initiative

4.10.1. An Emerging Normative Order

As we have seen throughout this chapter, the emerging normative order of
international aviation law has destabilized the nationality rule in bilateral air
services treaties. The replacement paradigm that we have proposed here,
which respects the regulatory role of the State, is the right of establishment.
In the meanwhile, however, the fact that States are actually waiving the
nationality clauses in their ASAs, or simply not enforcing them, continues to
reveal deep dissatisfaction with the burden of a regulatory environment that
cannot sustain the needs of its principal participants. The world’s most eco-
nomically powerful countries are actively seeking ways to repeal not only the
nationality clauses in ASAs, but also the more entrenched domestic rules that
limit foreign inward investment in the airline industry.

4.10.2. A New EU Démarche on the U.S. Foreign Ownership Rule

The European Commission’s transport commissioner, Siim Kallas,
announced in September 2012 that the EU will make a new effort to persuade
the United States to scale back its stringent 25% foreign ownership cap for
airlines. The new initiative is a strategic response to the rise of large, well-
financed rivals from the Gulf States and China: fully merged U.S. and EU
airlines would compete more effectively than is possible within the current
system of alliances.203 What is most interesting about the new EU démarche is
that, for the first time, it forms part of a wider multisector dialogue between the
United States and the EU on facilitation and enhancement of transatlantic
investment.204

203
See Andrew Parker & David Gelles, Brussels Renews Push in U.S. for Airline Mergers, Fin.
Times, Sept. 26, 2012, at 6.
204
See Transatlantic Economic Council (TEC), Statement of the European Union and the
United States on Shared Principles for International Investment (Apr. 12, 2012), http://trade.
ec.europa.eu/doclib/docs/2012/april/tradoc_149331.pdf. Moreover, in his State of the Union
address in February 2013, President Barack Obama endorsed negotiations for a new U.S./EU
Transatlantic Trade and Investment Partnership. Those negotiations may provide a more
dynamic context for Commissioner Kallas’s initiative even if it is unlikely that the agenda for
the Partnership will explicitly include air transport services.
 5

The International Law Regime for Aviation

Safety and Security

5.1. introduction

5.1.1. A Collaborative Process of Ensuring Aviation Safety

Since its inception, aviation has imbued the public mind with feelings
of awe accompanied by outsized fears regarding its associated dangers. In
response to these latter concerns, State and industry actors have made
safety, and, in later years, security, a primary concern of global regulatory
efforts. States have surrendered their sovereign authority over the subject
of safety regulation to an extent far greater than has been done with regard
to any other topic in this book. Although States have remained individu-
ally responsible for certifying the airworthiness of aircraft, for licensing
pilots and other crewmembers, and for implementing the technical pro-
cedures and practices that the ICAO declares necessary to achieve an
acceptable level of safety, for most of the world’s States these activities
have meant adhering to standards originating elsewhere. The institutional
and legal framework for international civil aviation safety regulation, in
fact, is more collaborative and less controversial, more ICAO-driven and
less reliant on State-to-State negotiations and bilateral agreements, than
any topic we have covered thus far. Owing in part to its quiet, steady
development and in part to its highly technical nature, safety regulation
tends to receive less scholarly attention than other areas of aviation law
and policy, and the concise treatment with which we begin this chapter
reflects that reality. But conciseness of treatment should in no way be
considered a reflection on the subject’s importance or on its place within
the spectrum of issues commanding the attention of State and industry
actors.

173
174 The International Law Regime for Aviation Safety and Security

5.1.2. Aviation Security and the Challenges of a Global Solution

Global terrorism constitutes one of the greatest threats to international peace
and security in the twenty-first century and, by extension, the greatest security
threat to international aviation. As the savagery of the 9/11 attacks demonstra-
ted, airlines remain at risk because of their visibility and their nationalistic
intimacy with the States whose flags they bear. Although terrorism at airports
and against airlines is mercifully rare, any assault imposes psychic costs on the
traveling public as well as heavy economic burdens on a beleaguered airline
industry. 9/11 precipitated the bankruptcies of several major U.S. airlines, as
well as government-financed rescue packages in both the United States and
the European Union (EU). Much stricter regimes of passenger and cargo
screening have also ensued, accompanied by losses in efficiency, time, and
privacy. Unlike in the sphere of technical cooperation on aircraft safety, the
international response to the contemporary threat to aviation security has
lacked purposiveness. Despite the adoption of no fewer than fifteen United
Nations (U.N.) subject-specific international conventions or protocols, seven
regional treaties, and a range of U.N. Security Council and General Assembly
resolutions, all related to the prevention and repression of terrorism,1 ambiv-
alence about the aims of terrorists, and sometimes even about their methods,
suggests that the threat is not obviously susceptible to an authentically multi-
lateral solution.2 In fact, none of the multilateral or regional instruments or
U.N. resolutions has produced a universally accepted definition of terrorism.3
Our goal in this chapter, however, is not to weigh political arguments about
responses to terrorism but to examine, dispassionately, what has actually been
achieved (or is still proposed) at the global level to address “aviation terrorism”

1
See the complete list in Terrorism and International Law: Accountability,
Remedies, Reform: A Report of the IBA Task Force on Terrorism (Elizabeth
Stubbins Bates et al. eds., 2011) [hereinafter IBA Report]; this list includes the international
aviation crimes treaties discussed in this chapter. All of the listed instruments have in common
that they proscribe specific acts of terrorism (hijacking, bombing, attacks on diplomats, etc.)
and impose duties on States to criminalize and investigate those acts, and to prosecute or
extradite perpetrators. See id. at 2.
2
See generally, e.g., Michael A. Newton, Exceptional Engagement: Protocol I and a World
United Against Terrorism, 45 Tex. Int’l L.J. 323 (2009); Naomi Norberg, Terrorism and
International Criminal Justice: Dim Prospects for a Future Together, 8 Santa Clara J. Int’l
L. 11 (2010); Alex Schmid, Terrorism – The Definitional Problem, 36 Case W. Res. J. Int’l L.
375 (2004).
3
Thus, negotiations for the United Nations Draft Comprehensive Convention on Terrorism
have stalemated in part because of disagreement on inclusion of State-sponsored or State-aided
terrorism in addition to violence by non-State actors, and on whether to include armed
resistance to an occupying regime. See IBA Report, supra note 1, at 2.
 5.2. The Basic Principles of International Air Safety Regulation 175

or, more generally, what we will call “aviation crimes” or “aviation security
offenses.”

5.2. the basic principles of international

air safety regulation

5.2.1. Defining the Category

Safety is a broad category that encompasses virtually every aspect of aircraft
production, air transport operations, air navigation procedures, and crew
licensing and behavior. ICAO has defined safety contextually as “the state of
freedom from unacceptable risk of injury to persons or damage to aircraft and
property.”4 A full examination of all of the specific technical instructions
issued on these subjects is beyond the scope of this book. Instead, this part
overviews the mix of policy and rules that is intended to deliver that “freedom
from unacceptable risk.”

5.2.2. A Positive Political Attitude to Globalized Safety Standards

Aside from the need to settle fundamental questions of sovereign authority
over territorial airspace as discussed in Chapter 2, safety has been the issue
most responsible for the existence and evolution of an international aviation
law regime. States rightly saw the need during the industry’s early years to
ensure that a transformative new technology would not unduly threaten the
well-being of either the commercial passengers necessary to its development
and sustained viability or an unwitting citizenry newly vulnerable to dangers
from above. Long after the present technological maturity of commercial air
transport was attained, the public has still not adjusted its psychological
perspective on air transport to align with the industry’s excellent safety record
when compared to other forms of travel.5 Airplane incidents and failures
garner a disproportionate share of media attention compared to analogous
events in other industries.6 Perhaps for these reasons, the establishment,
harmonization, and implementation of safety norms in international civil
4
ICAO Working Paper AN-WP/7699, “Determination of a Definition of Aviation Safety,”
Dec. 11, 2001.
5
Following 9/11, 1.4 million people chose alternative forms of transportation to satisfy their 2001
holiday season travel needs despite the much lower risk associated with commercial air trans-
port. The shift in modes of transportation is estimated to have led to an additional 1,000
automotive fatalities. See Maia Szalavitz, 10 Ways We Get the Odds Wrong, Psychol. Today,
Jan. 1, 2008.
6
See id.
176 The International Law Regime for Aviation Safety and Security

aviation have provoked less conflict and enjoyed more continuous and suc-
cessful collaboration than the other topics discussed in this book. Unlike with
the control of aviation carbon emissions or aircraft noise pollution, or with
oversight of aviation security offenses, for example, the importance of a global
consensus on safety standards was politically obvious from the industry’s
beginning. Consequently, the necessary legal and institutional framework to
promulgate those standards was the most robust creation of the 1944 Chicago
Convention.7 Safety, unlike air traffic rights, could not be perceived as a
zero-sum contest, where the adoption of certain rules would provide benefits
to the airlines of some contracting States while posing threats to the carriers
of other States. Surrendering authority over safety regulation and agreeing to
a universally applicable set of benchmarks and practices was easier to do when
all States were perceived to benefit jointly from measures to ensure safe air
travel.8

5.3. ensuring international aviation safety through

icao harmonization and state obligations

5.3.1. Mutual Recognition in the Paris and Chicago Conventions

Given international aviation’s origins in a closed, sovereignty-based regime,
it should come as no surprise that international safety regulation has relied
largely on States assuming responsibility for their airspace, aircraft, and
crew. The most immediate and obvious sources of risk to be managed in the
industry’s early years were the quality of the aircraft and of the crew flying
them. States, therefore, required their air transport partners to provide assur-
ance on both of those subjects before allowing foreign aircraft admittance to
their sovereign skies. The normative effects of that demand for assurance were
seen in Article 11 of the 1919 Paris Convention, which mandated that “every
aircraft engaged in international aviation . . . be provided with a certificate of
airworthiness . . . by the State whose nationality it possesses.”9 That require-
ment was accompanied by Article 12, requiring that pilots and operating
crew be licensed by the State of nationality and by Article 13, which required
the other Convention contracting States to recognize national certificates of

7
See infra note 11.
8
See supra Chapter 1, Section 1.3.4, and infra Chapter 6, Section 6.6.2 (discussing the equitable
effects of the economic principle of international Paretianism).
9
Convention Relating to the Regulation of Aerial Navigation art. 11, opened for signature Oct. 13,
1919, 11 L.N.T.S. 173 (entered into force May 31, 1920) [hereinafter Paris Convention].
 5.3. Ensuring International Aviation Safety Through ICAO 177

airworthiness and nationally issued licenses.10 Those three articles established

a system of State responsibility for two prominent safety concerns, the safety
of the aircraft and the competence of the operators, that would serve as the
framework for ensuring aviation safety during the next ninety years. That
system would later be reincorporated into the Convention on International
Civil Aviation (the Chicago Convention) via Articles 31, 32, and 33.11 Reliance
on the safety certification of partner States was also engineered into the
bilateral system of traffic rights agreements that evolved after World War II.12
In addition, States were charged with regulating the flight and maneuver of
aircraft13 and with providing the necessary air navigation services14 for flights
within their territory.

5.3.2. ICAO Harmonization and Standard Setting

While the Chicago Convention and the system of bilateral air transport
agreements fixed State responsibility for implementing and monitoring meas-
ures to guarantee the safety of their air transport operations, neither delineates
the substantive standards that airlines and States would need to meet in order
to comply with their obligations. Instead, the Chicago Convention expressly
assigned that responsibility to the newly created ICAO.15 This duty has been
referred to as ICAO’s raison d’être.16 The model of collaborative harmoniza-
tion established at Chicago also had its precursor in the Paris Convention,
which cast the International Commission for Air Navigation (ICAN) in the
role of safety standard setter.17 ICAO’s primary method for determining safety
benchmarks has been through the issuance of Standards and Recommended
Practices (SARPs)18 contained in the annexes to the Chicago Convention.
Although almost all of the annexes could be said to implicate safety in some
way, those most directly on point include Annex 1, which provides guidelines
for personnel licensing; Annex 2, which contains guidelines for the rules of the

10
See id. arts. 12, 13.
11
See Convention on International Civil Aviation arts. 31–33, opened for signature Dec. 7, 1944, 61
Stat. 1180, 15 U.N.T.S. 295 (entered into force Apr. 4, 1947) [hereinafter Chicago Convention].
12
See Agreement Relating to Air Services art. 4, U.S.-U.K., Feb. 11, 1946, 12 Bevans 726 (no longer
in force). See supra Chapter 3, Part 3.2.
13
See Chicago Convention, supra note 11, art. 12.
14
See id. art. 28.
15
See id. art. 37.
16
See Huang Jiefang, Aviation Safety, ICAO and Obligations Erga Omnes, 8 No. 1 Chinese J.
of Int’l L. 63, 63 (2009).
17
See Paris Convention, supra note 9, art. 34.
18
For a full explanation of the difference between standards and recommended practices and the
legal effect of each, see discussion supra Chapter 2, Sections 2.6.6, 2.6.7.
178 The International Law Regime for Aviation Safety and Security

air; Annex 6, which sets standards for the operation of aircraft; Annex 8, which
applies to airworthiness of aircraft; and Annex 18, which deals with the safe
transport of dangerous goods by air. Typically, SARPs are drafted by ICAO’s
Air Navigation Commission, based on research and analysis conducted by one
of the Commission’s various committees or subgroups responsible for the issue
in question. Contracting States or international organizations may also submit
proposals for SARPs to be considered by the Commission. The drafted stand-
ard or recommended practice is then submitted to the ICAO Council, and, if
supported by two-thirds of the Council members, added to the appropriate
annex. Some standards are accompanied by Procedures for Air Navigation
Services (PANS), which are highly detailed instructions for particularly tech-
nical SARPs. The promulgation of substantive international norms by ICAO
has been the dominant source of lawmaking in international aviation safety,
and the longevity of ICAO’s dominance makes this body of norms unique
among the topics of international aviation law. By comparison, the substantive
rules concerning aviation security, passenger and cargo liability, corporate
finance, and the distribution of traffic rights have been determined at various
times by a mix of multilateral treaties and bilateral agreements. In addition
to its SARPs, ICAO publishes a variety of other documents in furtherance of
its safety regulation efforts. These include agenda-setting documents, such as
the Global Aviation Safety Plan adopted by the ICAO Assembly in 1998, as
well as detailed manuals and circulars to guide States in their implementation
of ICAO’s rules. ICAO has also sought implementation of safety standards
by helping to create and work with Regional Safety Oversight Organizations
(RSOOs), such as the South Asian Regional Initiative (SARI), the Central
American Agency for Aeronautical Safety (ACSA), the Caribbean Aviation
Safety and Security Oversight System (CASSOS), and the Banju Accord
Group Safety Oversight Organization (BAGASOO).19 These organizations
vary in their functions, but provide States with technical assistance and guid-
ance on interpreting standards and updating domestic legislation and regula-
tions to better meet international requirements.

5.3.3. Ensuring Compliance and Enforcement

As is common in international law, ensuring compliance and enforcement has
proved to be the most difficult component of effective international aviation
safety regulation. As discussed in Chapter 2, ICAO’s SARPs have an uncertain

19
See Ruwantissa Abeyratne, Ensuring Regional Safety in Air Transport, 35 Air & Space L. 249,
255–60 (2010).
 5.3. Ensuring International Aviation Safety Through ICAO 179

level of binding legal effect, and ICAO is constrained in its ability to enforce
them.20 Member States are required to notify ICAO of any inability to comply
with standards, although no explicit penalty or response is provided for in the
Chicago Convention. A failure to comply with recommended practices does
not even require notification.21 For most of the past seventy years, ICAO has
perceived its role as being to provide technical expertise and financial aid
to assist States that struggle to comply, rather than to police and punish States
that choose not to comply. Instead, as discussed previously, the ultimate
responsibility for implementing and monitoring compliance with standards
has largely fallen on the individual Member States. The assignment of regu-
latory and monitoring responsibility to the State of registration has become
problematic in recent decades with the rise of more complicated forms of
aircraft financing. In cases where an aircraft was for financing purposes
registered in one contracting State, but operated out of another, the State of
registry often had little opportunity to effectively ensure that safety standards
were being met. Article 83bis was added to the Chicago Convention in 1997
to correct the gap in enforcement.22 Under that provision, the State of
registration may transfer its regulatory stewardship obligations under Articles
12, 30, 31, and 32 to the State of operation if the latter consents.23

5.3.4. Monitoring Safety through National Programs

The absence of an international body with formal responsibility for sanction-
ing noncompliance with safety standards led the United States in 1992 to adopt
its own International Aviation Safety Assessment (IASA) program.24 Under
IASA, before a foreign air carrier is granted a permit to fly into the United
States, representatives of the Federal Aviation Administration (FAA) visit the
foreign State that proposes to designate the carrier and assess the ability of
the State’s Civil Aviation Authority (CAA) to ensure compliance with ICAO
safety standards, especially with regard to Annexes 1, 6, and 8.25 If States not
currently operating services to the United States are found to be compliance-
deficient, they will not be able to commence services without rectifying the
deficiencies. States already operating U.S.-bound services may be prohibited
20
See supra Chapter 2, Section 2.6.7.
21
See id.
22
See Chicago Convention, supra note 11, art. 83bis.
23
See id. For a fuller analysis of the effects of Article 83bis, see infra Chapter 8, Section 8.5.4.
24
See Information Concerning FAA Procedures for Examining and Monitoring Foreign
Carriers, 57 Fed. Reg. 38342 (Aug. 24, 1992). See also supra Chapter 2, note 127.
25
See Federal Aviation Administration, International Aviation Safety Assessment Program, http://
www.faa.gov/about/initiatives/iasa/more/.
180 The International Law Regime for Aviation Safety and Security

from expanding their operations until they become compliant.26 The EU

followed in 1996 with its own Safety Assessment of Foreign Aircraft (SAFA)
program, which imposes ramp inspections on the aircraft of any foreign State
that is suspected of safety deficiencies.27 Notice that under SAFA, it is the
aircraft, as opposed to the aviation authorities, that receive scrutiny.28

5.3.5. ICAO’s Safety Oversight Program

The U.S. and EU programs served as a catalyst for ICAO to adopt its own
formal safety oversight program, which it finally did in 1999.29 The Universal
Safety Oversight Audit Programme (USOAP), like the U.S. IASA, scrutinizes
contracting States’ capability for monitoring and implementing compliance
with ICAO safety SARPs. ICAO assesses that capability based on performance
in eight areas: primary aviation legislation and civil aviation regulations, civil
aviation organization, personnel licensing and training, aircraft operations,
airworthiness of aircraft, air navigation services, aerodromes, and aircraft
accident and incident investigation.30 Initially, USOAP audits were restricted
to reviewing compliance with Annexes 1, 6, and 8, but by 2005 the scope of
the program was expanded to include all safety-related annexes. Beginning in
2013, ICAO moved from a periodic audit schedule to a continuous monitoring
approach.31 The results of the USOAP audits are made available to all other
Member States.32 Although ICAO lacks power to penalize States for non-
compliance, this information-gathering function effectively motivates com-
pliance by potentially jeopardizing a State’s access to the markets of Member
States receiving the reports. In 2006, the EU created a formal program for
penalizing noncompliance and established a list of carriers banned from

26
See id.
27
Although the SAFA program was originally created in 1996, it was only in 2004 that the EU
imposed a legal obligation on Member States to perform ramp inspections on third-country
aircraft landing at their airports. See Council Directive 2004/36/CE, Safety of Third-Country
Aircraft Using [Union] Airports, 2004 O.J. (L 143) 76.
28
See European Aviation Safety Agency, Assessment of Foreign Aircraft (EC SAFA Programme),
http://www.easa.europa.eu/approvals-and-standardisation/safety-assessment-of-foreign-aircraft-
SAFA.php. See also supra Chapter 2, note 127.
29
See International Civil Aviation Organization, Establishment of an ICAO Universal Safety
Oversight Audit Programme, Assem. Res. A32–11, compiled in Assembly Resolutions in Force,
ICAO Doc. 9790 (2001).
30
See International Civil Aviation Organization, 2011: State of Global Aviation Safety (2011).
31
See International Civil Aviation Organization, USOAP Continuous Monitoring Approach,
http://www.icao.int/safety/CMAForum/Pages/default.aspx.
32
For recent information on USOAP compliance levels, see http://www.skybrary.aero/index.php/
ICAO_USOAP_and_Safety_Performance.
 5.3. Ensuring International Aviation Safety Through ICAO 181

access to EU territorial airspace.33 The list is based on evidence gathered from

its own SAFA program as well as from ICAO’s audits.34

5.3.6. The Coming of Annex 19

In February 2013, ICAO adopted its first new annex to the Chicago Convention
in forty years. Annex 19, which was drafted by the Air Navigation Commission
(ANC), consolidates in one document all of the safety management require-
ments previously scattered across various annexes.35 Most of the SARPs con-
tained in Annex 19 were already applicable because they are existing SARPs
that have been transferred to the new annex.36 The purpose of the consolidation
is to provide States with benchmarks for creating a “State safety program”
that comprises an “integrated set of regulations and activities established by a
State aimed at managing civil aviation safety.”37 In light of our analysis in
Chapter 2 of the differences in legal status between “standards” and “recom-
mended practices,”38 it is also worth noting that in its communication on
Annex 19 the ANC “invites” ICAO’s member States, whenever it is “impor-
tant” for the safety of air navigation, to enhance their obligation to notify
ICAO of any variances from standards (under Article 38 of the Chicago

33
See Commission Regulation 2111/2005 of the European Parliament and of the Council of 14
December 2005 on the establishment of a [Union] list of air carriers subject to an operating ban
within the [Union] and on informing air transport passengers of the identity of the operating air
carrier, and repealing Article 9 of Directive 2004/36/EC, 2005 O.J. (L 344) 15.
34
See id.
35
See Chicago Convention, supra note 11, annex 19. See also International Civil Aviation
Organization, Proposal for Annex 19 and Related Consequential Amendments to Annexes 1,
6, 8, 11, 13, and 14, Letter of the Secretary General of the Air Navigation Commission and
Attachments, Ref. AN 8/3–12/42 (Jun. 29, 2012) [hereinafter ICAO, Proposal for Annex 19].
36
See id. at 2.
37
Id. at A-14. The benchmarks vary in detail and focus, but the overarching theme of Annex 19 is
that States must systematize their approach to managing safety. Thus, Annex 19 requires each
State to “promulgate a comprehensive and effective aviation law” that provides all personnel
performing safety oversight with access to the aircraft and operations of air carriers, and also
to establish “relevant authorities or agencies,” supported by qualified personnel and adequate
financial resources, to discharge the required safety functions. See Chicago Convention,
supra note 11, Annex 19. Annex 19 lays out a multicomponent framework for a “Safety
Management System” in each ICAO member State, including effective reporting of safety
violations and coordination of emergency response planning. See id. Although it is undoubt-
edly useful to develop an integrated and consolidated list of best aviation safety practices, it
remains true that implementation of ICAO’s existing directory of SARPs remains well below
optimal levels: see Skybrary, ICAO USOAP and Safety Performance, http://www.skybrary.
aero/index.php/ICAO_USOAP_and_Safety_Performance (presenting statistical patterns of
widespread nonimplementation of SARPs).
38
See supra Chapter 2, Section 2.6.7.
182 The International Law Regime for Aviation Safety and Security

Convention39) to include also any departures from recommended practices

(as to which no requirement of notification normally exists).40

5.4. the basic principles of international aviation

security regulation

5.4.1. A Conceptual Clarification: Aviation Piracy

As we begin our discussion of aviation security, it is important as a preliminary
matter not only to be clear about which acts constitute an internationally
recognized criminal offense against civil aviation, but also the means of and
motivation for those acts. Both within and beyond the bounds of international
aviation law, there has been a temptation to refer to a number of offenses
against aircraft, particularly hijacking, as forms of “aviation piracy.”41 Although
some may regard “aviation piracy” as synonymous with “aviation crimes” or
“aviation security offences” – or, more accurately, regard “aviation piracy” as
a subset of the latter two concepts – commentators are not always meticulous
in their use of terminology, and conceptual confusion is the outcome.

5.4.2. Evolution of the Universal Crime of Piracy

Since the advent of major exploratory and commercial endeavors by sea in the
sixteenth and seventeenth centuries, the concept of piracy has undergone a
radical transformation. As far back as the times of Homer, the pirate (peirate42)
had the positive character of an adventurer who was free to seek fame and
fortune on the seemingly endless stretch of lawless waters surrounding the
continent of Europe.43 Once the seas became a lucrative medium of transport
and, eventually, the pathway to colonization and empire, the pirate became
hostis humani generis (the “universal enemy of mankind”), and the pirate’s
activities became universally condemned. Even today, when seafaring is less

39
See Chicago Convention, supra note 11, art. 38.
40
See ICAO, Proposal for Annex 19, supra note 35, at A-8.
41
The United Nations Convention on the Law of the Sea defines piracy broadly enough to
include aircraft hijacking. United Nations Convention on the Law of the Sea art. 101, opened
for signature Dec. 10, 1982, 1833 U.N.T.S. 397 (entered into force Nov. 16, 1994) [hereinafter
UNCLOS]. A U.S. government task force created in 1969 to study aircraft hijacking was
dubbed The FAA Task Force on Deterrence of Air Piracy. See Fed. Aviation Admin.,
Task Force on Deterrence of Air Piracy Final Report, FAA-AM-78–35 (1978).
42
The Latin word is not dissimilar: pirata.
43
See Carl Schmitt, The Nomos of the Earth in the International Law of the Jus
Publicum Europaeum 43 (G. L. Ulmen trans., 2003) (1950).
 5.4. The Basic Principles of International Aviation Security Regulation 183

integral to the fortunes of great powers, piracy still constitutes one of the few
jus cogens or universal crimes that any State can or ought to punish, regardless
of whether the piratical acts in question were undertaken by or against the
State’s own citizens.44

5.4.3. From Piracy to Political Terrorism

To speak of “aviation piracy,” then, would be to speak of a set of crimes that is
universally proscribed and therefore, as a legal matter, requires neither a formal
treaty nor, presumably, domestic legal instruments in order to be lawfully
sanctioned. The “aviation pirate,” if that reasoning is applied, would deserve
the same treatment, that is, the same forceful application of State police and
prosecutorial power, that the high-seas pirate of yesteryear (or even of today45)
warrants. Such a conceptual overstretching of the notion of piracy, however,
does not hold in the face of the significant differences that exist between the
pirate and the international criminal (even the international terrorist). As
the German jurist Carl Schmitt explained in his 1937 article, The Concept
of Piracy,46 piracy is only manifested through apolitical and indiscriminate
private-party acts for pecuniary gain (animus furandi47) beyond the sovereign
territory of States.48 Schmitt went on to question whether piracy remained a
viable category in the modern world given the level of financial and techno-
logical resources a twenty-first century pirate would need to capture motorized
vessels.49 That is especially true of aviation, given the difficulty (if not impos-
sibility) of true craft-to-craft midair interception. It is unlikely that a private
group of pirates would have the finances and training to operate aircraft for such

44
See infra Section 5.6.3 (discussing the emerging concept of “universal jurisdiction”).
45
Piracy remains a phenomenon in the modern era. “Modern day pirates carry satellite phones,
global positioning systems and are armed with automatic weapons, antitank missiles and
grenades.” Annemarie Middleburg, Piracy in a Legal Context: Prosecution of
Pirates Operating off the Somali Coast 5 (2011). Middleburg’s book includes detailed
background on how the Gulf of Aden and east coast of Somalia became the most pirate-infested
waters in the world after the failure of the Somali State, and currently account for over 90% of
all reported acts of piracy. See id. at 17.
46
After more than seven decades, the article has finally been translated into English. See
Carl Schmitt, The Concept of Piracy, 2 Human. 27 (2011). For the historical background to the
piece, see Daniel Heller-Roazen, Introduction to “The Concept of Piracy,” 2 Human. 23 (2011).
47
Animus furandi is Latin for “the intention to steal.”
48
See Schmitt, supra note 46, at 27.
49
With respect to intercepting commercial and leisure ships, Schmitt appears to have overstated
the level of resource support necessary to accomplish these tasks. As noted in the main text, and
supra note 45, piracy remains a very real phenomenon off the coasts of Asia and Africa even to
this day. See Middleburg, supra note 45, at 26 (describing how well-equipped Somali pirates
can board and subdue poorly defended cargo ships in only 15 minutes).
184 The International Law Regime for Aviation Safety and Security

purposes, which is undoubtedly why “aviation piracy” is more commonly used

to refer to the possibility of “pirates” boarding an aircraft prior to takeoff and
subsequently assuming control by force. But hijacking is not automatically
piracy. Once it is clear that the act is intended for an overtly political purpose
or it becomes clear that the hijackers are acting at the behest of a State, the
concept of “commercial” piracy fades away and the idea of the terrorist takes
center stage. Moreover, acts that may be dubbed “senselessly violent” or driven
by subjective hostility, such as a passenger attempting to wrest control of an
aircraft because of dissatisfaction with the onboard service, are not acts of piracy
(even if undeniably criminal under national rules and international treaty
law50). As the history of aviation security offenses in the last seventy years
attests, few hostile acts against aircraft, including hijacking, fit the standard
robbery-based definition of piracy under international law.51 Most of those
acts have been undertaken with a self-consciously political motive, and a
number of high-profile incidents have relied directly on the assistance of
States, either as willing landing points for a hijacked aircraft or as a safe
haven for the perpetrators.52

5.4.4. A More Expansive Conception of Piracy?

These observations do not preclude the possibility that a more expansive
conception of piracy could take root in public international law. Since the
1958 Geneva Convention on the High Seas,53 States and international law
commentators have attempted to reconstitute piracy in terms of a select number
of State-sponsored and nonpecuniary acts.54 It would be incorrect, however,
to assume that these marginal efforts have hardened into a new universal

50
See 49 U.S.C. § 46502 (2006); Convention for the Suppression of Unlawful Seizure of Aircraft
art. 1, opened for signature Dec. 16, 1970, 860 U.N.T.S. 105 (entered into force Oct. 14, 1971)
[hereinafter The Hague Convention]; Convention for the Suppression of Unlawful Acts
Against the Safety of Civil Aviation, art. 1, opened for signature Sept. 23, 1971, 974 U.N.T.S.
178 (entered into force Jan. 26, 1973) [hereinafter Montreal Convention].
51
See Middleburg, supra note 45, at 13 (distinguishing piracy from terrorism by noting that the
former is motivated by greed and shuns publicity).
52
A notorious example took place on July 22, 1968, when members of the Popular Front for the
Liberation of Palestine (PFLP) hijacked an El Al Israel Airlines flight from Rome to Tel Aviv
and redirected the aircraft to the Algerian city of Algiers. Algeria had hostile relations with
Israel. Once on the ground, the hijackers released the majority of the passengers but held seven
crew members and five passengers hostage for weeks until the Israeli government agreed to an
exchange of prisoners; the hijackers were not apprehended.
53
Convention on the High Seas, opened for signature Apr. 29, 1958, 450 U.N.T.S 11 (entered into
force Sept. 30, 1962).
54
In 1970, the International Law Association proposed a definition of piracy that lacked any
reference to private pecuniary gain and covered “unlawful seizure or taking control of a vessel
 5.5. The Role of ICAO in International Aviation Security 185

definition of the pirate, unmoored from the early modern conceptualization

that is implicated by the jus cogens condemnation of piracy.55 More impor-
tantly, as we discuss through the remainder of this chapter, the fact that States
have invested negotiating resources and political capital in hammering out a
series of treaties condemning aviation security offenses suggests an emerging
consensus that politically motivated attacks against or on board aircraft, or
against aviation infrastructure such as airports, have emerged as a new category
of international crimes requiring a more tailored response.

5.5. the role of icao in international aviation security

5.5.1. Background to Multilateral Legal Action

As noted in Chapter 1, the emergence of cross-border flight raised immediate
questions of peace and security with which States continue to wrestle today. The
Chicago Convention is clear that civil aviation should be used for peaceful
purposes only,56 although the Convention recognizes that States have broad
discretionary powers to restrict foreign flights into and within their territory in
cases of emergency.57 Surprisingly, only a few States undertook the necessary
steps to proscribe aviation-related crimes in their domestic legislation, but a
series of high-profile incidents in the 1950s and 1960s where perpetrators evaded
punishment due to legal technicalities brought about swift legal reform.58 At the
same time that these public miscarriages of justice were transpiring in domestic

through violence, threats of violence, surprise, fraud, or other means.” See Int’l L. Ass’n,
Piracy: Sea and Air, Report of the Fifty-Fourth Conference 708 (1970). See also
Gal Luft & Anne Korin, Terrorism Goes to Sea, 83 Foreign Aff. 61 (2004) (arguing that pirates
are “sea terrorists” and should be treated that way).
55
The relevance of “private ends” to the definition of jus cogens piracy was confirmed in Article
101 of the 1982 United Nations Convention on the Law of the Sea. See UNCLOS, supra note 41,
art. 101.
56
See Chicago Convention, supra note 11, arts. 3, 4, 89. Not only are civil aircraft to be used solely
for peaceful purposes, but States are expected to treat them accordingly. This was made explicit
in 1984 with the addition of Article 3bis to the Chicago Convention that prohibits States from
using weapons against civil aircraft while in flight. See Protocol Relating to an Amendment to
the Convention on Civil Aviation (May 10, 1984), ICAO Doc. 9436. The Protocol entered into
force in 1998 and currently has 143 State parties.
57
See Chicago Convention, supra note 11, art. 9(b). States must apply their flight restrictions on a
nondiscriminatory basis. Id. This provision can be read as one of the few limitations the
Convention places on a State’s sovereign control over its airspace. Cf. id. art. 1. For further
discussion of Article 9 of the Chicago Convention as it relates to closure of sovereign airspace, see
supra Chapter 2, Sections 2.5.3, 2.5.4.
58
See, e.g., United States v. Cordova, 89 F. Supp. 298 (E.D.N.Y. 1950) (in which the court
was found to lack jurisdiction to prosecute because the assault in question occurred over the
high seas).
186 The International Law Regime for Aviation Safety and Security

courts, international air carriers increasingly became targets for hostilities from
politically motivated actors, more aptly referred to in the current geopolitical
context as terrorists.59 Where these perpetrators could be readily apprehended,
either by the State whose citizens or airlines were harmed or by the State
where the criminals happened to reside, there was little problem. What quickly
became apparent, however, were the disparities in criminal sanctions and
jurisdiction that existed across the globe with respect to aviation criminals.
States whose airlines or citizens had been victimized by terrorism frequently
claimed, as a matter of course, that they possessed the right to punish those
responsible, but that right was only as effective as the ability of those States to
exercise jurisdiction by taking the offenders into custody. If foreign nationals
were able to flee, either to their home States or to a third country willing to
harbor them, the possibility that they would be brought to justice was often
illusory. Moreover, States lacking robust legal mechanisms to deal with aviation
security offenses found that even if they wanted to aid in the capture and
punishment of aviation criminals, loopholes in their legal and judicial systems
neutralized such assistance.

5.5.2. ICAO’s Treaty Initiatives

To seek an end to uncertainty at the international level, the ICAO Legal
Committee drafted a series of treaties intended to clothe signatory States
with jurisdiction over aviation crimes that transpire on board or against
aircraft registered in accordance with their national laws.60 The first of these
instruments, the Convention on Offenses and Certain Other Acts Committed
on Board Aircraft, better known as the 1963 Tokyo Convention,61 was followed
by the Convention for the Suppression of Unlawful Seizure of Aircraft (The
Hague Convention, 1970).62 To these were added the Convention for
the Suppression of Unlawful Acts Against the Safety of Civil Aviation (the
1971 Montreal Convention),63 as well as two ancillary accords addressing
59
See, e.g., Michael Burleigh, Blood and Rage: A Cultural History of Terrorism
153–55 (2009).
60
Under the Chicago Convention, all aircraft must be registered in a single State and in accord-
ance with that State’s national rules. See Chicago Convention, supra note 11, arts. 17–19; see also
infra Chapter 8, Part 8.5.
61
See Convention on Offenses and Certain Other Acts Committed on Board Aircraft, opened for
signature Sept. 14, 1963, 704 U.N.T.S. 219 (entered into force Dec. 4, 1969) [hereinafter Tokyo
Convention].
62
The Hague Convention, supra note 50.
63
Convention for the Suppression of Unlawful Acts Against the Safety of Civil Aviation, opened
for signature Sept. 23, 1971, 974 U.N.T.S. 178 (entered into force Jan. 26, 1973) [hereinafter
Montreal Convention].
 5.5. The Role of ICAO in International Aviation Security 187

airports64 and plastic explosives,65 in 1988 and 1991 respectively. Although

laudable for seeking to close the jurisdictional gap for aviation crimes, these
treaties remain subject to a number of caveats that, in the view of some
critics, have impaired their effectiveness. It is not surprising, then, that
countries which have routinely been shadowed by the threat of terrorism,
particularly the United States, have preferred to rely on an admixture of
highly sophisticated law enforcement resources, their own extraterritorial
statutes, and diplomatic pressure, to ensure the prosecution of aviation
criminals. Moreover, as discussed later in this chapter, the United States
led a coalition of States in resorting to measures outside the normal pro-
cesses of international law to compel countries that prove lax in honoring
their obligations under the aviation security crimes treaties to either prose-
cute or extradite suspected wrongdoers.66

5.5.3. Other ICAO Initiatives: Interfering with Domestic Security Policy?

Aside from brokering the aviation crimes treaties, ICAO has otherwise limited
itself to hortatory declarations against terrorism. In response to the 9/11 attacks,
the Organization amended Annex 17 of the Chicago Convention67 by calling
on its State parties to “ensure that principles governing measures designed to
safeguard against acts of unlawful interference with international civil aviation
are applied to domestic operations to the extent practicable.”68 Not only is

64
Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International
Civil Aviation, opened for signature Feb. 24, 1988, 1589 U.N.T.S. 473 (entered into force Aug. 6,
1989) [hereinafter Montreal Protocol].
65
Convention on the Marking of Plastic Explosives for the Purpose of Detection, opened for
signature Mar. 1, 1991, 2122 U.N.T.S. 359 (entered into force June 21, 1998) [hereinafter Plastic
Explosives Convention].
66
See infra Part 5.10.
67
Annex 17, Safeguarding International Civil Aviation Against Acts of Unlawful Interference,
includes provisions binding contracting States to the Chicago Convention to establish a
governmental institution dedicated to aviation security. See Chicago Convention, supra
note 11, Annex 17. The list of requirements and recommendations for security programs is
deep and includes creation of secure areas within airports, background checks on security
personnel, and so on. Although most of the requirements will seem familiar to international
travelers, Article 17 sets substantive minima, not maxima. (On the meaning in international law
of normative minima, see supra Chapter 2, note 37.) Annexes 6, 9, 13, 14, and 18 also contain
mandatory security measures: Annex 6, for example, requires a lockable cockpit door, while
Annex 14 mandates that airports be fenced in and lit and that security facilities have an
independent power source. See id. Annexes 6, 14. Annex 9, captioned “Facilitation,” seeks to
balance passenger convenience, airline efficiency, and aviation security using the hopeful
exhortation that aircraft clearance for security purposes must be carried out “in a manner that
does not erode the inherent advantage of speed in air transportation.” Id. Annex 9.
68
Chicago Convention, supra note 11, Annex 17, amend. 10.
188 The International Law Regime for Aviation Safety and Security

this statement on its face an unauthorized interference in domestic security

policy, but, for the same reason, its practical effects must be negligible. A
similar reproach probably could be made with respect to the various ICAO
Assembly Resolutions calling on States to adopt the aviation crimes treaties69
and “to hold accountable and punish severely those who misuse civil aircraft
as weapons of destruction[.]”70 These Resolutions are without legal effect,71
even if they do signal the understandably low tolerance ICAO member States
have for countries that shelter aviation terrorists or that fail to apprehend,
prosecute, or extradite offenders found in their territories.72

5.5.4. Limitations of ICAO

It remains possible that ICAO could seek a larger role in the ongoing inter-
national effort to combat terrorism (including aviation crimes). But the
Organization’s present “legislative” effectiveness has been put in doubt by its
inability to deliver a workable multilateral treaty to mitigate the aviation indus-
try’s carbon airprint.73 Moreover, ICAO’s parent institution, the U.N., has
itself been unable to steer its membership toward a consensus on either a
practical or legal definition of terrorism.74 For the time being, what progress
ICAO has made in finalizing the aviation crimes treaties remains its principal
substantive contribution to thwarting aviation security offenses and terrorism.75
We will turn shortly to consider the ICAO aviation crimes treaties mentioned
earlier in this part.76 But to understand the design of the treaties and also their
69
See, e.g., Declaration on Misuse of Civil Aircraft as Weapons of Destruction and Other Terrorist
Acts Involving Civil Aviation, ICAO Ass. Res. A33–1 § 5 (2001).
70
Id. at § 4.
71
This understanding of the legal effect of ICAO Assembly Resolutions is not universally shared.
For a thorough discussion of the differing opinions on the subject, see Jiefang Huang,
Aviation Safety Through the Rule of Law: ICAO’s Mechanisms and Practices
175–87 (2009). See also supra Chapter 2, note 109.
72
States have reduced the number of safe harbor jurisdictions available to criminals through a
web of bilateral extradition treaties. No State has an extradition treaty with all other States,
thereby making safe harbors still available to hijackers.
73
See infra Chapter 6. See also Brian F. Havel & Gabriel S. Sanchez, Toward an International
Aviation Emissions Agreement, 36 Harv. Envt’l. L. Rev. 351, 358–60 (2012) (critically
discussing ICAO’s efforts in this regard).
74
See supra Section 5.1.2.
75
Other defects remain unaddressed in the years since the aviation crimes treaties were adopted.
One significant lacuna is the absence of any State-backed compensation system for victims of
aviation terrorism. Passengers or shippers who suffer damage from hijackings or other aviation
crimes must resort to the private Warsaw/Montreal liability systems discussed infra in Chapter 7.
76
In further validation of the concerns expressed in this section, we will also briefly discuss two
new aviation security instruments that were concluded under ICAO stewardship in 2010, but
which have not yet secured a single member State ratification. See infra Section 5.9.3.
 5.6. Exercising State Criminal Jurisdiction in International Law 189

limitations, it is first necessary to introduce some concepts of international

State jurisdiction that are common to all three instruments.

5.6. exercising state criminal jurisdiction

in international law

5.6.1. State Jurisdiction in Matters of Criminal Law

Jurisdiction relates to the power of a sovereign State under international law
to exercise control over a person, property, or a set of events. Naturally, in
framing multilateral treaties to regulate aviation crimes, the drafters needed
to ensure that the transborder character of air travel made it possible for a
number of contracting States lawfully to assert jurisdiction over those crimes
and the responsible offenders using established international law principles.77
The aviation crimes treaties implicate two of the most fraught aspects of
jurisdiction, exercising State judicial power over defendants (judicial juris-
diction) and doing so in matters of criminal law.

5.6.2. At Least Two States Have Potential Jurisdiction

The State of registration of the aircraft would normally have jurisdiction over
offenses committed on board (or to) the aircraft.78 All of the aviation crimes
treaties endorse that principle, which applies also when offenses are commit-
ted over the high seas or over the territory of any other State. But jurisdiction is
primarily territorial, and the State of registration may not be the territory where
the aircraft departs or lands. The aviation crimes treaties accept, therefore, that
a State in which an aircraft or a suspected offender is physically present will be
the first State that makes a decision as to whether to initiate its own criminal
proceedings or to have the offender transferred to another State that also has
a jurisdictional claim (including the State of registration). International law
would expect that the landing (i.e., custodial) State should have some other
ground upon which to exercise jurisdiction besides mere territoriality: after all,

77
A State could, of course, exercise jurisdiction based on its own domestic rules of jurisdiction,
but there is always the risk that other States would not respect such an assertion of authority.
78
The principle that the flag State has jurisdiction over its aircraft dates back to long-standing
maritime practice and is considered a principle of customary international law that has also
been codified in international treaties. See UNCLOS, supra note 41, art. 92. It also appears in
many States’ domestic statutes. See, e.g., 18 U.S.C. § 7 (2006). In international civil aviation, the
State of registration is the flag state. See Chicago Convention, supra note 11, art. 17; for further
discussion of nationality and registration of aircraft, see infra Chapter 8, Part 8.5.
190 The International Law Regime for Aviation Safety and Security

although it is true that the State holding the offender will have what is called
“enforcement” jurisdiction simply by virtue of its having custody, the circum-
stances of acquiring custody may be wholly fortuitous (e.g., a forced land-
ing).79 It would normally be expected, therefore, that some other principle
of jurisdiction (e.g., nationality or effect on national security) would also be
invoked.80 Yet none of the aviation crimes treaties actually operates on that
presumption. The treaties do provide various well-understood categories of
jurisdiction that States may use to justify criminal proceedings in their
territories, but they manifestly do not require that the landing State rely on
any of these.

5.6.3. Can a Universal Jurisdiction Be Asserted?

What, then, is the nature of this enhanced territorial jurisdiction that the land-
ing or custodial State may assert? Is it, arguably, a kind of “universal” jurisdic-
tion, a category that allows any State to exercise jurisdiction over any individual
accused of especially offensive crimes against the international community as
a whole81 even when that State has no other connection (beyond fortuitous
custody of the offender) with the alleged criminal acts? Piracy was the classical
example of a general jurisdiction recognized by international law as granted
to all States to combat a common scourge.82 But universal jurisdiction has only
recently been theorized as a formal category of judicial power, entirely inde-
pendent of specific treaty provisions, as part of the evolution of international
humanitarian law to include war crimes.83 In its strongest form, an exercise

79
Enforcement jurisdiction is the jurisdiction to “induce or compel compliance or to punish
noncompliance with its laws or regulations, whether through the courts or by use of executive,
administrative, police or other nonjudicial action.” Restatement (Third) of Foreign
Relations Law of the united states § 401(c) (1987). Moreover, a landing State may have
no interest in exercising jurisdiction when the aircraft is registered in another State, the
offender is from another State, and the victim (if any) is from another State. In those circum-
stances, it is possible that the offender may enjoy impunity. See ICAO Working Paper LC/SC-
MOT-WP/1, May 7, 2012, Report of the Rapporteur, Alejandro Piera, Special Sub-Committee
of the Legal Committee for the Modernization of the Tokyo Convention Including the Issue of
Unruly Passengers, at 13 [hereinafter Piera Report].
80
See infra Section 5.6.4.
81
Thus, the “crime” need not be defined within that State’s own penal laws; it is instead part of a
register of truly “international” crimes, however that register is defined or created. See supra
Part 5.4 (discussing piracy as an example of such an international crime).
82
Piracy, discussed supra in Part 5.4, was the “original universal jurisdiction crime.” Middleburg,
supra note 45, at 29 (citation omitted). Pirates, as Middleburg points out, “do not discriminate
among targets based on nationality and thus endanger the trade of all countries.” Id. at 30.
83
Universal jurisdiction is premised on the notion that crimes such as piracy, slavery, genocide,
war crimes, and torture are an affront to humanity and threaten the interests of all States.
 5.6. Exercising State Criminal Jurisdiction in International Law 191

of universal jurisdiction may not even require the territorial presence of an

offender.84 Nevertheless, a species of treaty-based State jurisdiction, resting
solely on a State’s custodial power over an offender, was clearly envisaged by
the aviation crimes treaties discussed in this chapter. In truth, a State’s juris-
diction over physically present offenders that is implied in the aviation crimes
treaties is ultimately State-based rather than “universal,” because it looks for its
exercise to the internal processes of each State’s judicial jurisdiction (and
penal laws85) rather than to some overarching common jurisdiction of States.
For that reason, the full force of the term “universal jurisdiction” has been
withheld from these and similar treaties providing for the suppression of various
hostile acts against the international community;86 the term “quasi-universal
jurisdiction” may be preferred.87 Finally, some elements of the regime of treaty-
based aviation crimes, notably hijacking, have arguably become international

Unfortunately, governments frequently collude in the commission of these crimes, and

colluding governments are unlikely to prosecute. Universal jurisdiction vests all States with
the authority to prosecute such crimes, and ideally also provides a deterrent against their
commission. In 2005, the Belgian authorities used the (now-repealed) Belgian law on universal
jurisdiction to charge Hissène Habré, the former president of Chad, with crimes against
humanity and torture. Habré remains in exile in Senegal, which has refused to extradite him
to Belgium. At the behest of the International Court of Justice (ICJ), Senegal has recently
agreed to form a special court to try Habré.
84
But such a formidable extension of jurisdiction will typically depend on national rather than
international law. Belgium’s law of universal jurisdiction, which was adopted in 1993, permit-
ted victims to file complaints for atrocities committed abroad. However, the law was repealed
in 2003 and is now reconfigured to require territorial presence or national affiliation on the part
of potential defendants. In 2005, the Institut de Droit International rejected any exercise of
universal jurisdiction, apart from acts of investigation and requests for extradition, without the
territorial presence of the offender. See Institute of International Law, Krakow Session – 2005,
Resolution of the Seventeenth Commission, Universal Criminal Jurisdiction with Regard to
the Crime of Genocide, Crimes Against Humanity and War Crimes (Aug. 26, 2005).
85
Under the aviation crimes and similar treaties, States are expected to adopt the specified offenses
into their national criminal directories, or (as in the Tokyo Convention, for example) to accept
the treaty’s recitation of an offense as a “default” provision of their national criminal code.
86
Among these other treaties are the Convention Against Torture and Other Cruel, Inhuman or
Degrading Treatment or Punishment, Dec. 10, 1984, 1465 U.N.T.S. 85 (entered into force
Jun. 26, 1987); the Convention on the Prevention and Punishment of Crimes Against
Internationally Protected Persons, Dec. 14, 1973, 1035 U.N.T.S. 167 (entered into force Feb.
20, 1977); and the International Convention Against the Taking of Hostages, Dec. 17, 1979, 1316
U.N.T.S. 205 (entered into force Jun. 3, 1983).
87
“More correct is the approach that in such circumstances international law recognizes that
domestic legal orders may validly establish and exercise jurisdiction over the alleged offenders.”
Malcolm N. Shaw, International Law 673 (6th ed. 2008). Thus, Shaw describes the
kind of jurisdiction envisaged in codifications like the aviation crimes treaties as “quasi-
universal,” or, in the language of some members of the ICJ, “the jurisdiction to establish
territorial jurisdiction over persons for extraterritorial events.” Id. at 674 (citation omitted).
192 The International Law Regime for Aviation Safety and Security

crimes “of virtually universal jurisdiction in practice.”88 The same may soon
be said with respect to the crime of international terrorism (whether against
aircraft or in other contexts).89

5.6.4. Alternative Jurisdictional Bases

Besides the robustness of quasi-universal jurisdiction based on territorial or
custodial power, the aviation crimes treaties allow States a series of alter-
native jurisdictional bases that will be noted in our discussion.90 Because
aircraft have their own “nationality,” the State of registration of the aircraft,
regardless of the nationality of the offender, has a nonexclusive jurisdictional
claim that is antecedent to (but recognized by) the aviation crimes treaties
and is grounded in Article 17 of the Chicago Convention.91 But individuals,
too, have their own nationality,92 and States whose nationals are accused of
offenses under the aviation crimes treaties have a claim to judicial criminal
jurisdiction over their nationals under international law even if the alleged
offense took place outside the State of the accused’s nationality. States tend to
claim that kind of jurisdiction only over the most serious crimes, otherwise
deferring to the prosecuting authorities of the territorial State. Other prem-
ises for international judicial jurisdiction feature in the aviation crimes
treaties, even though their international acceptance has been less secure.
No doubt the “terrorist” stamp of the treaties eased international concerns
about these more robust claims of jurisdiction. The “passive personality”
principle, for example, allows a State to claim jurisdiction to try a foreign
individual for offenses committed outside its territory that have affected or
will affect that State’s own nationals.93 Relatedly, the “protective” principle
would give a State the right to exercise judicial jurisdiction over aliens

88
Id. at 678.
89
Id.
90
The territorial State, of course, could select one of these alternative jurisdictional bases also if it
is available.
91
See supra text accompanying note 78.
92
International law provides no coherent definition of an individual’s “nationality” and gen-
erally leaves the matter to be decided under the domestic rules of States. See Shaw, supra
note 87, at 660.
93
The passive personality principle has been traditionally opposed by the United States but has
increasingly gained international acceptance, at least with regard to terrorist acts. See Geoffrey
R. Watson, The Passive Personality Principle, 28 Tex. Int’l L.J. 1 (1993); see also infra
Section 5.10.3. Note that, for example, Article 5 of the 1979 International Convention Against
the Taking of Hostages, see supra note 86, includes the State of nationality of the hostages in the
list of States with a valid criminal jurisdictional claim over hostage-takers.
 5.6. Exercising State Criminal Jurisdiction in International Law 193

located abroad who have committed offenses that are deemed to jeopardize
that State’s vital security interests.94

5.6.5. Responsibility of the Landing or Custodial State: To Prosecute

or Extradite?
But if States do have these other valid premises to exercise jurisdiction, how
can they do so if the custodial or landing State maintains power over the
physical being of the offender? As we will see, all of the aviation crimes
treaties reference the principle of “prosecute or extradite” (the equivalent
Latin expression, widely used, is aut dedere aut judicare).95 That principle is
intended to impose a stark choice on a State that has physical power over the
offender. That State must prosecute, that is, exercise jurisdiction by institut-
ing criminal proceedings (if applicable, using the quasi-universal jurisdic-
tion described earlier), or extradite, dispatching the offender to a requesting
State. The State that requests extradition must establish its own jurisdiction
under one or more of the specific categories enumerated in each treaty. All
of the aviation crimes treaties provide for the offenses created under the
treaty (or, where relevant, by national penal laws) to be treated as extraditable
offenses in any bilateral extradition treaties concluded between the State
parties. But a shared weakness of the aviation crimes treaties, as we will discuss,
is that any duty to extradite appears always to be subordinated to contrary
domestic laws.96
94
See infra Section 5.10.3.
95
M. Cherif Bassiouni has argued that aut dedere aut judicare is a principle of customary
international law: “The principle is more than an ordinary norm of international law. It is a
condition for the effective repression of offenses which are universally condemned. In large
part, the rules prohibiting these offenses constitute jus cogens norms: they are rules of para-
mount importance for world public order, and cannot be set aside or modified in a subsequent
treaty.” M. Cherif Bassiouni & Edward M. Wise, Aut Dedere Aut Judicare: The
Duty to Extradite or Prosecute in International Law 24–25 (1995).
96
A novel approach to the problem of aut dedere aut judicare was introduced in the criminal cases
that arose out of the explosion and crash of a Pan Am 747 aircraft over the Scottish village of
Lockerbie in December 1988. Libya claimed that its right to prosecute the two Libyan nationals
accused of planting the bombs responsible for the explosion outweighed its obligation to
extradite the defendants. The United States and the U.K. objected, arguing that because the
Libyan government was suspected of involvement in the bombing, Libya had to extradite the
accused parties to ensure an effective and fair prosecution. A 10-year stalemate ensued before
the United States, the U.K., and Libya reached an agreement to hold a trial of the principal
defendants in the Netherlands (a neutral territory) and in accordance with Scottish law. See
Michael Plachta, The Lockerbie Case: The Role of the Security Council in Enforcing the
Principle Aut Dedere Aut Judicare, 12 Eur. J. Int’l L. 125 (2001) (suggesting that the
Lockerbie case added a third alternative, aut transferere, giving the requested State an option
involving “delivery” of the accused to a third State).
194 The International Law Regime for Aviation Safety and Security

5.7. the tokyo convention (1963)

5.7.1. Summary of the Tokyo Convention

The Tokyo Convention, which finally entered into force at the end of 1969,97
was an important, but ultimately inadequate, vehicle to address aviation secur-
ity offenses. The treaty focuses on penal offenses and other acts that endanger
the safety or good order and discipline on board an aircraft while the aircraft is
“in flight.”98 Adopting a somewhat martial tone, Tokyo bestows upon the pilot,
designated as commander of the aircraft, near-plenary powers to restore order.
Accompanying that “microjurisdiction” of the pilot, the treaty sets forth the
rights and duties of the State parties in exercising jurisdiction over and punish-
ing offenders. To prevent impunity for aviation crimes because of defective
national laws, the Tokyo Convention has also been understood to create a
specific category of internationally recognized strict liability crimes.99 In other
words, even a signatory State lacking domestic criminal code provisions on
crimes on board aircraft engaged in international air service can rely on Tokyo
to fill the gap.100 This is true as well with respect to jurisdiction. In the years
leading up to Tokyo’s ratification, a number of States’ courts had found that
although certain offenses on board aircraft constituted a substantive crime
under their national penal laws, a jurisdictional black hole was opened once
the aircraft on which the crime took place had departed their sovereign
airspace.

5.7.2. Offenses Under and Application of the Tokyo Convention

The Tokyo Convention, as noted, applies to “acts which, whether or not they
are offenses [under a signatory’s penal code], may or do jeopardize the safety

97
As of 2012, 185 States have ratified the Convention.
98
See Tokyo Convention, supra note 61, art.1(2). The Convention also provides for its application
when the aircraft is “on the surface of the high seas or . . . any other area outside the territory of
any State.” Id.
99
The offenses contained in the Tokyo Convention, like those listed in The Hague and Montreal
aviation security treaties, infra, are strict liability offenses; no mens rea requirement is attached.
Thus, it is unnecessary for the prosecuting authorities to inquire into the defendant’s mental
state, intentions, or motivations in committing the prohibited actions; mere commission of the
acts barred by the treaty is sufficient.
100
This statement presupposes that the State in question is not obligated under its constitutional
law to create implementing legislation for the treaty. Moreover, a State that fails to make the
treaty effective under its national criminal law would still be obligated, as a matter of interna-
tional law, to do so. Even so, as discussed infra Section 5.10.1, the Tokyo Convention, along
with the other aviation crimes treaties, lacks a strong compliance mechanism.
 5.7. The Tokyo Convention (1963) 195

of the aircraft or of persons or property therein or which jeopardize good

order and discipline on board.”101 Although some have argued to the con-
trary, this provision of the Convention does not function as a limitation on
the scope of covered offenses on board (or against) aircraft or their passen-
gers. The Convention expressly states that it also applies to “offenses against
penal law,” interpreted to mean the criminal codes of the respective signa-
tories.102 What that means in practice is that a State with a directory of
aviation security offenses already included in its national laws can rely on
those offenses in exercising the jurisdictional powers granted under Tokyo.
Given that the express purpose of the treaty is to prevent and punish aviation
crimes, it would make little sense to read the text as imposing a ceiling, rather
than a baseline, on the range of crimes that States can use in pursuing and
prosecuting offenders. But the Convention is nevertheless not unlimited in
its scope. Its substantive criminal and jurisdictional provisions only apply to
“offenses committed or acts done by a person on board any aircraft registered
in a contracting State, while that aircraft is in flight or on the surface of the
high seas or of any other area outside the territory of any State.”103 Interestingly,
the Convention does not restrict its coverage to international flights. In other
words, it is just as applicable to a Delta Air Lines domestic flight from Atlanta to
Los Angeles as it is to a United transcontinental flight from Chicago to London
so long as its key temporal condition is satisfied, that is, that the aircraft is “in
flight.”104 That compact phrase is unpacked in Article 1(3) of the Convention
to mean the period of time “from the moment when power is applied for the
purpose of takeoff until the moment when the landing run ends.”105 Until and
after that stretch of time, any offenses that take place on board the aircraft

101
Tokyo Convention, supra note 61, art. 1(b). It is unclear how much scope can be attached to the
phrase “acts which . . . jeopardize good order or discipline on board,” but arguably it might
cover certain instances of so-called air rage. See infra note 217.
102
Id. art. 1(a). See Terry Richard Kane, Prosecuting International Terrorists in United States
Courts: Gaining the Jurisdictional Threshold, 12 Yale J. Int’l L. 294, 301 (1987).
103
Tokyo Convention, supra note 61, art. 1(2).
104
The Convention’s drafters considered restricting the Convention’s scope so that it would only
apply in situations in which the aircraft was operating outside the territorial airspace of the
State of registration, but worried that the additional language and qualifications required to
accurately define the Convention’s scope were making the clause confusing and opted for the
simplified “in flight” language. The drafters concluded that the Convention posed little threat
to the domestic sovereignty of contracting States because the text defined offenses according
to the penal laws of the contracting States, the same laws that would be in effect on purely
domestic flights. See Robert P. Boyle & Roy Pulsifer, The Tokyo Convention on Offenses and
Certain Other Acts Committed On Board Aircraft, 30 J. Air L. & Com. 305, 332 (1964).
105
Tokyo Convention, supra note 61, art. 1(3). But note how this definition changed (and
expanded) in later treaties, see infra in main text.
196 The International Law Regime for Aviation Safety and Security

remain subject exclusively to the local laws of the State in which the aircraft
is located.106

5.7.3. Jurisdiction Under the Tokyo Convention

Like its broadly painted definition of substantive offenses, the Tokyo Convention’s
jurisdictional provisions are an adjunct to, rather than a replacement for, State
parties’ domestic jurisdictional rules.107 According to Article 3(1), an aircraft’s
State of registration has primary jurisdiction over any criminal offenses that
take place on board.108 But, under Article 4, any State party to the Convention
is authorized in any of the following situations to intercept an aircraft in
flight in order to exercise jurisdiction over an offense that has taken place
on board:109 when the offense has an “effect” in the territory of that State, or
has been perpetrated by or against a national of that State, or jeopardizes that
State’s security,110 or breaches that State’s air navigation regulations,111 or when
that State’s exercise of its jurisdiction over the offense is necessary to fulfill its
obligations under a separate multilateral treaty.112 Although these five circum-
stances carry the appearance of setting bounds to interference by States other

106
Offenses taking place on an aircraft when the aircraft is not “in flight” are outside the scope of
the Tokyo Convention, and would thus be governed by the same domestic and international
rules governing criminal acts unrelated to aviation. The State of registration is only important
for acts covered by the Convention, that is, those committed “in flight.” Interestingly, the scope
is narrower (and more clearly defined) than that of the application of the Warsaw and Montreal
conventions on airline passenger and cargo liability (see infra Chapter 7), which in some cases
has been interpreted to extend to escalators and other areas of airports that are part of the
boarding or disembarkation process.
107
See id. art. 3(3) (stating that nothing in the Convention “exclude[s] any criminal jurisdiction
exercised in accordance with national law”).
108
See Tokyo Convention, supra note 61, art. 3(1).
109
See id. art. 4.
110
The first three justifications for intervention are part and parcel of the customary international
law right of self-defense. Although a treaty may modify any customary international law rule
except jus cogens norms, States have a powerful interest in maintaining their territorial integrity
and security, an interest that they were unwilling to cede under the Tokyo Convention.
111
This ground of jurisdiction is consistent with Article 12 of the Chicago Convention, which
requires each contracting State “to insure that every aircraft flying over or maneuvering within
its territory . . . shall comply with the rules and regulations . . . there in force.” Additionally,
Article 12 requires each contracting State “to insure the prosecution of all persons violating the
regulations applicable.” Chicago Convention, supra note 11, art. 12.
112
Notably, this justification cannot be triggered in pursuit of obligations under a bilateral treaty.
However, the Tokyo Convention does not expressly define the minimum number of States
required to render a treaty “multilateral.” Could Canada, Mexico, and the United States, for
instance, sign a pact pledging to interfere with any aircraft over any of their territories where a
criminal offense has taken place even if the aircraft were registered in, say, Germany? That
possibility remains open, at least theoretically, under the text of the Tokyo Convention.
 5.7. The Tokyo Convention (1963) 197

than the State of aircraft registration, it is difficult to imagine a scenario where

at least one of the five would not be triggered.113 Even so, the treaty does
mandate that State parties “take all appropriate measures to restore control of
the aircraft to its lawful commander or to preserve [the commander’s] control
of the aircraft.”114 In situations where an aircraft commander is compelled to
land in the territory of a State party other than the one of the aircraft’s State
of registration, the landing State must allow the commander to disembark
“any person who [the commander] has reasonable grounds to believe has
committed, or is about to commit,” an offense on board the aircraft.115 The
aircraft commander is also empowered to take custody of such a person and to
deliver that person to the authorities of the State in which the aircraft lands if
the commander has “reasonable grounds” to believe that the person “has
committed on board the aircraft an act which, in [the commander’s] opinion,
is a serious offense according to the penal law of the State of registration of the
aircraft.”116 The latter requirement appears to establish a sufficient premise
under the Convention for activating certain custodial and notification duties
of the landing State. Even if the act is not an offense under the penal law of
the landing State, that State must still accept custody over the perpetrator and
provide immediate notification of that fact to the State where the aircraft
is registered, along with the home State of the detainee as well as any other
interested State that the landing State believes ought to be apprised of the
situation.117 The landing State must also provide notification to those other
States as to whether it intends to “exercise jurisdiction” over the detainee, in
other words, as to whether it will prosecute the offender under its penal laws118
113
Moreover, the five circumstances are in obvious tension with the right of States to set conditions
on the “first freedom” overflight privilege in accordance with the Two Freedoms Agreement (see
supra Chapter 3, Section 3.2.2). Nevertheless, Article 30 of the Vienna Convention on the Law of
Treaties resolves any incompatibility between an earlier treaty and a later inconsistent treaty in
favor of the latter. See Vienna Convention on the Law of Treaties art. 30(3), opened for signature
May 23, 1969, 1155 U.N.T.S. 331 (entered into force Jan. 27, 1980). Given that most modern ASAs
acknowledge that the parties will act in conformity with Tokyo, this is now more a historical
rather than a current problem.
114
Tokyo Convention, supra note 61, art. 11(1).
115
Id. art. 8(1); see also id. art. 12. The issue of whether the passenger has committed an offense can
become more complicated for passenger disturbances that do not violate the penal law of a
given territory. See William P. Schwab, Air Rage: Screaming for International Uniformity, 14
Transnat’l Law. 401, 414 (2001). The problem of air rage will be discussed briefly later in this
chapter: see infra Section 5.11.5.
116
Id. art. 9(1); see also id. art. 13(1).
117
See id. art. 13(5). Attendant to this provision is the requirement that the landing State must
perform an initial inquiry into the alleged offense and notify the results to the various
referenced States. See id. art. 13(4).
118
This will include, as we have seen, the offenses established directly by the Convention. See
supra Section 5.7.2.
198 The International Law Regime for Aviation Safety and Security

or institute extradition proceedings to remove him or her for trial to the State
of registration of the aircraft or to some other State.119 The landing State
thus becomes a third State of concurrent jurisdiction under the treaty along
with the State of registration and any State empowered to intercept an aircraft
under one or more of the five conditions established in Article 4. Notably,
the ICAO drafting conferences were unable to impose any explicit order of
priority among the States of concurrent jurisdiction. By default, therefore,
the landing State’s physical control, along with its discretion to prosecute or
allow extradition, gives that State effective, if not actual, priority under the
Convention.120

5.7.4. Achilles Heels of the Tokyo Convention: No Mandatory

Extradition and the Freedom Fighter Exception
Unfortunately, the apparent strength of the foregoing sequence of jurisdic-
tional provisions is sapped by other provisions in the treaty. First, although
Article 16(1) treats onboard offenses as having been committed in the State
of registration of the aircraft as well as in the “place in which they have
occurred,”121 Article 16(2) provides that nothing in the treaty should be under-
stood as obliging any State party to extradite an offender.122 In other words,
the Tokyo Convention does not compulsorily apply the public international
law principle of aut dedere aut judicare (“extradite or prosecute”).123 Where
a Canadian national commits a crime on board a United flight that lands
in Mexico City, the Mexican Government is not required under the Tokyo

119
Although the treaty provides no time frame for these actions, it does specify that the landing
State is only to hold an alleged offender for the time necessary to bring formal criminal charges
or institute extradition proceedings. See Tokyo Convention, supra note 61, art. 13(2). Note,
however, that the landing State may refuse entirely to admit the disembarked offender, in
which case it is obligated under Article 14(1) to remit that person to his or her State of nationality
or permanent residence or to the State in which that person began his or her journey. See id.
art. 14(1). If the wrongdoer is a national or permanent resident of the landing State, no such
obligations exist, but it is unclear from the text what the landing State should do in those
circumstances.
120
See Abraham Abramovsky, Multilateral Conventions for the Suppression of Unlawful Seizure
and Interference with Aircraft Part 1: The Hague Convention, 13 Colum. J. Transnat’l. L.
381, 396 (1974). See also supra note 96 (where the Lockerbie case illustrates the same point).
Note that there will be a diplomatic conference in Montreal in March 2014 to consider once
again the jurisdiction of the landing State under the Tokyo Convention. The conference will
also consider the status and functions of in-flight security officers under the Convention.
121
Tokyo Convention, supra note 61, art. 16(1). That might be the landing or custodial State, or
some other third State, or over the high seas.
122
See Tokyo Convention, supra note 61, art. 16(2).
123
See supra Section 5.6.5.
 5.7. The Tokyo Convention (1963) 199

Convention to hand over the perpetrator to U.S. or Canadian authorities, even

if Mexico itself decides to forego prosecution.124 More problematically, the
Tokyo Convention is subverted by a second Achilles heel: no State is required
to prosecute or extradite an offender whose actions were undertaken for a
political purpose.125 The so-called freedom fighter exception emerged during
the Convention’s lengthy gestation in response to the political and social
upheaval in the former colonial territories of many European powers. The
exception gives automatic cover for any State that offers a safe haven to aviation
criminals with whom it finds itself in sympathy. Because the treaty provides
such broad opt-outs, States can still claim to be acting in good faith under its
provisions even if they refrain from any action to apprehend, prosecute, or
extradite those accused of crimes against aviation.

5.7.5. Powers of the Aircraft Commander Under the Tokyo Convention

For all of its shortcomings with respect to jurisdiction and extradition, the
Tokyo Convention does equip the aircraft commander (and any crew or
passengers recruited by the commander) with a strong package of powers for
apprehension of aviation criminals and legal protection for actions taken to
do so. Unlike the substantive and jurisdictional provisions of the Convention,
which as we have seen apply only when an aircraft is powered-up until its
landing run ends,126 the commander’s powers are activated “at any time from
the moment when [the aircraft’s] external doors are closed following embar-
kation until the moment when any such door is opened for disembarkation.”127
This amplified conception of when the aircraft is “in flight” eliminates the
possibility of an anarchic zone in which the aircraft, battened down at its
points of takeoff or landing and sealed-off from police authorities on the
ground, is susceptible to criminal activity or a terrorist attack while the
commander remains incapable (as a matter of law) of deploying his or her
otherwise abundant powers to stop the offenders. Where the commander

124
But there may be a preexisting bilateral extradition treaty that covers such offenses.
125
See Tokyo Convention, supra note 61, art. 2 (“Without prejudice to the provisions of Article 4
and except when the safety of the aircraft or of persons or property on board so requires, no
provision of this Convention shall be interpreted as authorizing or requiring any action in
respect of offenses against penal laws of a political nature or those based on racial or religious
discrimination.”).
126
See id. art. 1(2)–(3).
127
Id. art. 5. The Article further provides that “[i]n case of a forced landing,” the aircraft
commander’s powers and protections “shall continue to apply with respect to offenses and acts
committed on board until competent authorities of a State take over the responsibility for the
aircraft and for the persons and property on board.”
200 The International Law Regime for Aviation Safety and Security

is compelled to remove passengers from the flight, he or she is required to

provide as much advance notice as practicable to the landing State.128 In
addition, the commander “shall furnish the authorities to whom any suspected
offender is delivered . . . with evidence and information which, under the law of
the State of registration of the aircraft, are lawfully in his [or her] possession.”129
Once the aircraft is “in flight” for the purposes of the commander’s powers, the
commander may – as noted above – restrain and disembark any passengers he or
she reasonably believes to have committed or are about to commit an offense
on board.130 The commander may also “require or authorize the assistance of
other crew members and may request or authorize, but not require, the
assistance of passengers to restrain any” offender or potential offender.131
Enormous civil, and even criminal, liability might attach to the exercise of
the commander’s virtually plenary authority to restrain as well as to the
assistance rendered by passengers and crew in that effort. It is unsurprising,
therefore, that the Convention overlays the commander’s authority with an
equally robust grant of legal protection against liability. Neither the aircraft
commander, nor any person recruited by the commander to subdue an aviation
criminal, nor the owner of the aircraft, nor the airline operating the flight, “shall
be held responsible in any proceeding on account of the treatment undergone
by the person against whom the actions were taken.”132 As such, the commander
and his or her chosen auxiliaries are inoculated against any legal sanction so
long as their actions flow from the commander’s “reasonable” belief in an actual

128
See id. art. 9(2). Although not explicitly mentioned in the Convention, the commander
implicitly has some degree of power over the jurisdiction to which a restrained passenger
will be assigned, should the commander deem it necessary to land before reaching the final
destination in order to unload the offender.
129
Id. art. 9(3).
130
See id. art. 6(1).
131
Id. art. 6(1)–(2) (emphasis added). Also note that Article 6(2) invests crew members and
passengers directly with authority to take “preventive measures,” provided that they act with
“reasonable grounds,” and even if they lack authorization from the commander. The broad
language of Article 6(2) grants passengers and crew members almost as much authority as the
commander in a true emergency situation. The primary difference is that the authority of
passengers or crew to act is contingent upon their possessing a reasonable belief that such
action is “immediately necessary,” and they can only act to protect the safety of the aircraft,
persons, or property. The commander, on the other hand, can also take measures to “maintain
good order and discipline” in order to enable delivery of the offender to the competent
authorities.
132
Id. art. 10. This legal protection also applies to passengers and crew acting without the
commander’s authorization under the authority of Article 6(2). See supra note 119 and accom-
panying text. Article 10 also extends legal protection to “the person on whose behalf the flight
was performed,” which presumably would extend coverage to third parties connected to the
flight through wet leases, code-shares, or other common business arrangements.
 5.8. The Hague Convention (1970) 201

or impending threat.133 This blanket impunity may appear overly permissive,

even dangerous, although its justification may be found in the fact that the
sealed aircraft becomes a de facto “state of nature.”134 Given the risk to life
because of criminal or other disorderly activity on board aircraft, normal degrees
of toleration for questionable behavior are understandably lower and the
demand for swift, decisive action necessarily higher.135 The insulating provi-
sions of Tokyo diminish the prospect that a cost-benefit analysis will undermine
the strongest intervention to restrain onboard criminality.

5.8. the hague convention (1970)

5.8.1. Context of The Hague Convention

Less than a year after the Tokyo Convention entered into force, ICAO
gathered its member States in the Dutch capital to sign a new treaty addressing
the proliferation of aircraft hijackings that had been occurring during the
1960s.136 Unlike aviation crimes contemplated under Tokyo, hijacking – when
successfully executed – entails gaining control of the aircraft from the
commander and redirecting the flight’s destination, often to States sympa-
thetic to the hijackers’ purposes.137 Because Tokyo provides both an express
right not to extradite offenders as well as a “freedom fighter” escape clause,

133
Or, in the case of passengers or crew acting on their own, as long as their actions flow from their
own possession of “reasonable grounds to believe” that the actions are “immediately necessary”
to protect the aircraft or its contents. Tokyo Convention, supra note 61, art. 6(2); see also supra
note 131.
134
See Lon L. Fuller, The Case of the Speluncean Explorers, 62 Harv. L. Rev. 616, 621 (1949).
135
The common experience of air passengers, flying together for several hours in a pressurized
aircraft, greatly increases “the purely statistical chances of abnormal behaviour.” J. Richard
Orme Wilberforce, Crime in Aircraft, 67 J. Royal Aeronautical Soc’y 175 (1963).
136
In 1968 alone, there were 30 successful hijackings of commercial airliners, 17 of which had U.S.
registration. In 1969, there were 82 hijackings, more than twice the number between 1947 and
1967. The hijackers most active as The Hague Convention was being negotiated were U.S.
radicals redirecting flights to Havana, Cuba, for political purposes or to escape punishment for
prior criminal acts, and Palestinians using hijacking as a political weapon to publicize their
cause. With improved airport security and new laws and international agreements, as well as
shifts in motivation from criminal/pecuniary to terrorism, hijackings declined substantially
after 1980 but received worldwide attention once again with the 9/11 attacks. But see infra
Chapter 7, note 206 (emphasizing that 9/11 was not an incident governed by international law).
137
The Tokyo Convention does have a brief chapter on “[u]nlawful seizure of aircraft,” but omits
effective countermeasures, specifying only that States “shall take all appropriate measures to
restore control of the aircraft to its lawful commander.” Tokyo Convention, supra note 61,
ch. IV, art. 11. The Hague Convention was intended to provide the legal support for States to
punish hijacking.
202 The International Law Regime for Aviation Safety and Security

ICAO hoped that its new treaty, The Hague Convention,138 could further
close the jurisdictional gap and eliminate safe havens for terrorists. This was
not to be, however.

5.8.2. The Hijacking Offense Under The Hague Convention

Under Article 1 of The Hague Convention, it is an offense for any individual
on board an aircraft, through either threat or use of force or by any other form
of intimidation, to seize or exercise control of an aircraft or to attempt to
do so while it is in flight.139 The Convention also provides for accomplice
liability and requires its signatories to make the offense punishable and to
subject hijacking offenders to “severe penalties” under their national criminal
codes.140 No further guidance appears on what constitutes “severe penalties.”
Given major distinctions among States in their understanding of the purposes
of criminal sanctions, it would have been fruitless for negotiators to insist on a
specific benchmark. States are also required to notify ICAO of any hijackings
that have occurred and any responsive measures taken.141 Notably, The Hague
Convention’s jurisdiction ratione loci142 is somewhat narrower than that of
the Tokyo Convention. Article 3(3) states that the provisions of The Hague
Convention “shall apply only if the place of take-off or the place of actual
landing of the aircraft on board which the offense [of hijacking] is committed
is situated outside the territory of the State of registration of that aircraft; it shall
be immaterial whether the aircraft is engaged in an international or domestic
flight.”143 In other words, where a United Airlines aircraft (registered in the
United States) bound for London from Chicago is hijacked, but ultimately

138
See The Hague Convention, supra note 50. The Hague Convention currently has 185
ratifications.
139
The Hague Convention, supra note 50, art. 1. The Hague Convention dispenses with Tokyo’s
two-tiered definition of “in flight,” opting to use only the broader conceptualization applied for
the purposes of the aircraft commander powers and protections under Article 5 of that treaty.
See supra note 127; see The Hague Convention, supra note 50, art. 3(1).
140
See The Hague Convention, supra note 50, arts. 1(a) & 2. Although The Hague Convention
leaves it to the contracting States to determine the appropriate punishment for hijacking, it
differs from the Tokyo Convention by actually defining the offense. The Tokyo Convention only
applies to acts that violate national penal codes, but suffers from the lack of statutory prohibitions
against hijacking in many contracting States (although, as we observed, supra Section 5.7.2, the
Tokyo Convention is available to serve as a “default” repository of criminal offenses where States
otherwise lack local criminal statutes). Article 1 of The Hague Convention corrects this
deficiency.
141
See id. art. 11.
142
The phrase is Latin for jurisdiction by reason of the place, that is, territorial jurisdiction.
143
The Hague Convention, supra note 50, art. 3(3).
 5.8. The Hague Convention (1970) 203

touches down in Newark, New Jersey, only U.S. law applies.144 But if the same
sequence of events happens to a flight operated by British Airways (registered
in the U.K.), the terms of the Convention would unambiguously be in force as
both the place of takeoff and place of actual landing would be outside the
territory of the State of registration.

5.8.3. Jurisdiction Under The Hague Convention

Like Tokyo, The Hague Convention attempts to shore up any jurisdictional
deficiencies that might exist at the international level. Under Article 4, a State
party is required to establish jurisdiction over a hijacking offense in three
situations: when the offense takes place on board aircraft registered within its
territory; when the aircraft on which the offense occurred lands in its territory
and the offender is still on board; or – more technically – “when the offense
is committed on board an aircraft leased without crew to a lessee who has
his [or her] principal place of business or, if [the] lessee has no such place of
business, his [or her] permanent residence, in that State.”145 The second
paragraph of Article 4 invests a broad jurisdiction ratione personae146 in any
State where the offender “is present in its territory” and it does not extradite
that person pursuant to the Convention to any of the States mentioned in
paragraph 1.147 In other words, a third State that is otherwise not directly
affected by an offense, because it is neither the State of registration of a
hijacked aircraft nor the landing State for the aircraft with the offender still
on board, is obligated still to apprehend hijackers who happen to be found
within its territory. Article 6 furnishes a State in which an offender is present
with discretion to determine whether taking custody is warranted.148 Once the
State takes custody, however, “the custody . . . may only be continued for such
time as is necessary to enable any criminal or extradition proceedings to be
instituted.”149 Read on its own, Article 7 of the Convention appears to embrace
aut dedere aut judicare, because if the offender is not extradited the State is
144
This point is implicitly reaffirmed by Article 4(3), which states that nothing in The Hague
Convention excludes the exercise of criminal jurisdiction in accordance with signatories’
national laws. The Hague Convention, supra note 50, art. 4(3).
145
The Hague Convention, supra note 50, art. 4(1). The type of lease described in Article 4 is
known as a “dry” lease. The Convention adds a jurisdictional basis for the State of the lessee
because in the case of a dry lease, the lessee is the operator of the aircraft and supplies the crew,
making it likely that the lessee’s home State will have a stronger connection to the incident than
the State in which the aircraft is registered.
146
The phrase is Latin for jurisdiction by reason of the person, that is, personal jurisdiction.
147
The Hague Convention, supra note 50, art. 4(2).
148
See id. art. 6(1).
149
Id.
204 The International Law Regime for Aviation Safety and Security

“obliged, without exception whatsoever and whether or not the offense was
committed in its territory, to submit the case to its competent authorities for
the purpose of prosecution.”150 But, as with Tokyo, the apparent muscularity
of The Hague Convention’s jurisdictional regime becomes considerably less
impressive when the question of whether to extradite arises.

5.8.4. Undermining The Hague Convention’s Strong

Extradition Provisions
Article 8 does open with two strongly worded provisions on extradition. It
declares generally that the offense of hijacking is extraditable and should be
included in every extradition treaty between State parties to the Convention.151
It goes on to provide that for a State where a treaty is a condition precedent
for extradition but no such bilateral treaty exists, the Convention itself may
serve as the legal basis for extradition.152 Extradition in both cases, however,
remains subject to either the conditions of the relevant extradition treaty or to
“the other conditions provided by the law of the requested State.”153 Similarly,
a State that does not make extradition conditional on a treaty is obligated to
recognize hijacking as an extraditable offense only “subject to the conditions
provided by” its internal extradition rules.154 In practice, the deference to
national rules shown in these provisions enfeebles the Convention’s seemingly
strong mandate of aut dedere aut judicare. Although there is no “freedom
fighter” exception like the one enshrined in the Tokyo Convention, a State
party could embed such an exception in its domestic laws and use it to block an
extradition request under either The Hague Convention or a bilateral extra-
dition treaty.155 That latitude, while tucked into the corners of the Convention,
is effectively as open-ended as the explicit text of Tokyo. Finally, because State
150
The Hague Convention, supra note 50, art. 7. Further, “[t]hose authorities shall take their
decision in the same manner as in the case of any ordinary offense of a serious nature under the
law of that State.” Id.
151
See id. art. 8.
152
See id. art. 8(2). The Convention thus makes itself the basis for extradition in the absence
of a bilateral treaty between the relevant States. See Christopher C. Joyner, International
Extradition and Global Terrorism: Bringing International Criminals to Justice, 25 Loy. L.A.
Int’l & Comp. L. Rev. 493, 510–12 (2003).
153
The Hague Convention, supra note 50, art. 8(2). Common national law or treaty conditions
that weaken the Convention’s extradition rules include exceptions for crimes considered
to be “political offenses” and bars against the extradition of nationals. See Joyner, supra
note 152, at 511.
154
The Hague Convention, supra note 50, art. 8(3).
155
Thus, there is nothing in the Convention to prevent a State from granting political asylum to
hijackers. See I. H. Ph. Diederiks-Verschoor, An Introduction to Air Law 302 (8th
rev. ed. 2006).
 5.9. The Montreal Convention (1971) 205

parties to The Hague Convention are ultimately responsible for judging for
themselves whether or not to proceed with a prosecution, it is consistent with
the terms of the treaty for a State to apprehend a hijacker and plausibly to
claim that it cannot prosecute the offender in accordance with its national laws.
That State can then invoke an internal rule to excuse itself from an extradition
request, even where a requesting State is ready, willing, and able to carry out
the prosecution of the offender. Like Tokyo, The Hague Convention includes
no potent State-to-State dispute settlement mechanism other than a dilatory
arbitration procedure from which any State is free to opt out. Thus, there is
no functional “court of appeal” to which States may have recourse to reverse
prosecutorial or extradition decisions that may be susceptible to a reasonable
second guess.156 Hijackers can still find sanctuary in sympathetic States, and
the anti–aviation crimes treaties are, in truth, powerless in response.157

5.9. the montreal convention (1971)

5.9.1. Summary of the Montreal Convention and Its Later Protocol

Despite the obvious enforcement defects of the earlier treaties, the 1971 Montreal
Convention158 (and its 1988 amending Protocol, considered below) maintained
the Tokyo/The Hague model of ultimate State discretion with respect to pros-
ecution and extradition.159 Montreal does endeavor to move beyond its prede-
cessors by widening the scope of aviation crimes that State parties commit
to punish with “severe penalties.”160 More specifically, Montreal criminalizes
any act (or attempted act) of violence against a person on board an aircraft “in
flight” if that act is likely to endanger the safety of that aircraft, as well as any
act (or attempted act) that destroys or damages an aircraft while it is “in service,”

156
Under the Tokyo and The Hague conventions, aggrieved States may submit their disputes to
arbitration. If the parties involved are unable to agree on procedures for arbitration within six
months, either may submit the matter to the ICJ. Each State party, however, may enter a
reservation with respect to dispute settlement. See Tokyo Convention, supra note 61, art. 24;
The Hague Convention, supra note 50, art. 12. No disputes have been referred to arbitration
under either Convention.
157
Moreover, although The Hague Convention does not include a freedom fighter exception,
neither does it proscribe States from awarding asylum. Even though the United States and
others argued for a ban on asylum, the drafting debates reveal concern that such a provision
would conflict with rights of asylum in many States’ domestic laws and in Article 14 of the
Universal Declaration of Human Rights. See Abramovsky, supra note 120, at 402–05.
158
Montreal Convention, supra note 63. At present, 188 States have ratified the Montreal
Convention.
159
See Montreal Convention, supra note 63, arts. 7, 8.
160
Id. art. 3.
206 The International Law Regime for Aviation Safety and Security

including, inter alia, placing an explosive device on the aircraft.161 Other new
offenses include endangering an aircraft’s safety through sabotage of on-the-
ground air navigation facilities or providing false information that compromises
the aircraft’s safety.162

5.9.2. Meaning of Aircraft “in Service” Under the Montreal Convention

The notion of an aircraft “being in service” is a further elongation of the
jurisdiction ratione temporis163 used in the Tokyo and The Hague treaties.
Under the Montreal Convention, an aircraft is “in service” “from the begin-
ning of the preflight preparation of the aircraft by ground personnel or by the
crew for a specific flight until 24 hours after any landing,”164 along with the
period when the aircraft is technically “in flight.”165 This means that even
offenses committed against a stationary aircraft during its preflight mainte-
nance drill and for up to a day after it has landed will be covered by the
Convention. Under the Tokyo/The Hague treaties, only the domestic law of
the State in which the aircraft was located prior to departure or the domestic
law of the landing State would be applicable outside the “in flight” sequence.
Finally, Montreal makes no distinction between domestic and international
flights; all that matters for the treaty to apply is that “the place of take-off or
landing, actual or intended, of the aircraft is situated outside the territory of
the State of registration” or that “the offense is committed in the territory of a
State other than the State of registration of the aircraft.”166

5.9.3. Other ICAO Initiatives, Including the Montreal Protocol

In the decade after the signing of the Montreal Convention, no further efforts
were made to tighten the enforcement provisions of any of the aviation security
treaties. At the behest of the United States and several European States, ICAO
passed two resolutions calling on Chicago Convention adherents to cooperate
more closely on legal enforcement against hijacking. Under the second
161
Id. art. 1(1).
162
See id. art. 1(1). The offenses contained in the Montreal Convention, like those listed in Tokyo and
The Hague, are strict liability offenses; again, no mens rea requirement is attached. Additionally,
like The Hague Convention, Montreal also provides for accomplice liability. See Montreal
Convention, supra note 63, art. 1(2). See supra note 99 (defining strict liability offenses).
163
The phrase is Latin for jurisdiction by reason of time, that is, temporal jurisdiction.
164
Montreal Convention, supra note 63, art. 2(b).
165
Montreal’s definition of “in flight,” on the other hand, is identical to that contained in The
Hague Convention. See The Hague Convention, supra note 50, art. 3; Montreal Convention,
supra note 63, art. 2(a).
166
Id. art. 4(2) (emphasis added). With respect to attacks against air navigation facilities, listed in
id. art. 1(1)(d), the Convention only applies to such facilities that are used for international air
transport.
 5.9. The Montreal Convention (1971) 207

resolution, the ICAO Legal Committee was instructed to draft a new agree-
ment (which was never produced) that would insert a uniform clause into all
bilateral agreements and subsequent multilateral agreements requiring all
States to enforce the provisions of the Tokyo and The Hague conventions.167
Discussions continued also on other proposals for additional aviation crime
instruments. Those discussions began to bear fruit in 1988 with the ratification
of the Montreal Protocol,168 which further expanded the list of aviation crimes
to include attacks against airports serving international aviation.169 Three
years later, after the Pan Am Lockerbie bombing,170 a new treaty governing
the marking, identification, and transport of plastic explosives was signed in
Montreal.171 This second security-related Montreal Convention established
a standing International Explosives Technical Commission to keep abreast
of technological developments related to plastic explosives and to propose
amendments to the treaty.172 Once again, in terms of enforcement, the treaty
accomplishes nothing more than its predecessor instruments. Much more
recently, in September 2010, ICAO reentered the realm of security with two
new instruments signed in Beijing, China. Following the 9/11 attacks, ICAO
saw the clear need to reevaluate security policy, including a review of the
existing aviation crimes treaties. A study group was formed in 2005 to examine
how those prior treaties might be improved to address the unanticipated
dangers brought to light by the 9/11 attacks. The new Beijing instruments aim,
on the one hand, to replace the Montreal Convention and its Protocol and,
on the other, to amend The Hague Convention.173 Jointly, the overarching

167
Action of the Council, 71st Sess., ICAO Doc. 8923-C/998, reprinted in 9 1.L.M. 1286 (1970). In
effect, full enforcement in the minds of the proponents of the Resolution meant that States
should neither grant political asylum nor decline extradition. See Paul S. Dempsey, Aerial
Piracy and Terrorism: Unilateral and Multilateral Responses to Aircraft Hijacking, 2 Conn.
J. Int’l L. 427, 440–41 (1987).
168
The Protocol supplements the 1971 Montreal Convention, adding paragraphs to Articles 1 and
5 of the 1971 Convention. The Convention and Protocol are intended to be read and inter-
preted as a single instrument. See Montreal Protocol, supra note 64, art. I.
169
See id. art. II. Included in the definition of offenses are attacks against persons located at airports
serving international aviation and any facilities attached to the airport. The Protocol followed
several bomb attacks on large European airports in the mid-1980s.
170
See supra note 87.
171
See Plastic Explosives Convention, supra note 65. At present, 147 States have ratified the Plastic
Explosives Convention.
172
See id. art. V.
173
See generally Convention on the Suppression of Unlawful Acts Related to International Civil
Aviation, opened for signature Sept. 10, 2010, ICAO Doc. 9960, http://legacy.icao.int/DCAS
2010/restr/docs/beijing_convention_multi.pdf [hereinafter Beijing Convention]; Protocol to
the Convention for the Suppression of Unlawful Seizure of Aircraft, opened for signature
Sept. 10, 2010, ICAO Doc. 9959, https://www.unodc.org/tldb/en/2010_protocol_convention_
unlawful_seizure_aircraft.html [hereinafter Beijing Protocol].
208 The International Law Regime for Aviation Safety and Security

purpose of both treaties is to expand the catalog of aviation-related offenses

to cover, inter alia, using civil aircraft as a weapon to cause death, injury, or
damage; misusing aircraft as delivery systems for weapons of mass destruction;
and using weapons of mass destruction against aircraft or those on board.174 In
that vein, the Beijing Convention adds a new offense for transporting certain
dangerous materials such as explosive or radioactive materials or biological,
chemical, or nuclear weapons. Although the Convention states that none of
its listed crimes should be considered “political offenses,”175 enhanced provi-
sions relating to prosecution and extradition are nevertheless absent. As of
this writing, the two Beijing instruments have received fewer than half of the
twenty-two ratifications they each require in order to enter into force.176

5.10. beyond the icao treaty regime

5.10.1. Inadequacies of the ICAO Treaty System

The inadequacies of the aviation crimes treaties that entered into force during
the latter half of the twentieth century did not go unnoticed by States and
commentators alike.177 None of the treaties, for example, threatens scofflaw
States with expulsion from ICAO or a revocation of the traffic rights they
have secured under their various bilateral air services agreements (ASAs).178

174
See The 2010 Beijing Convention and Protocol: Ushering in a New Legal Era for Aviation, 66
No. 1 ICAO J. 6 (2011).
175
Beijing Convention, supra note 173, art. 13.
176
Each agreement requires 22 ratifications before it will enter into force. Beijing Convention,
supra note 173, art. 22; Beijing Protocol, supra note 173, art. XXIII. Regrettably, only a quarter of
ICAO’s member States have fully implemented ICAO’s aviation security instruments in their
national legislation. See Piera Report, supra note 79, at 10, n.91.
177
See Dempsey, supra note 167, at 429.
178
But ICAO’s Legal Committee did consider proposals in the early 1970s to amend the Chicago
Convention so that States not complying with the Tokyo, The Hague, and Montreal conven-
tions could have their traffic access rights revoked. Initially, the U.S. and Canadian delegations
proposed competing plans that would have enabled the suspension of bilateral agreements as a
sanction against States that refused extradition. Other States made proposals to add the provi-
sions of the Tokyo, The Hague, and Montreal conventions to the Chicago Convention. On the
other hand, it would offend the principle of sovereignty to demand that States must ratify the
aviation crimes treaties as a condition of remaining in ICAO. Interestingly, many States do
include in their bilateral agreements an undertaking by their partner States that they will apply
the provisions of the aviation crimes treaties. See, e.g., Air Transport Agreement, U.S.-EU,
Apr. 30, 2007, 2007 O.J. (L 134) 4, 46 I.L.M. 470, as amended by Protocol to Amend the Air
Transport Agreement, U.S.-EU, Jun. 24, 2010, 2010 O.J. (L 223) 3; Agreement Between the
Government of Australia and the Government of the Argentine Republic Relating to Air
Services, art. XVI (Mar. 11, 1992) (not in force); Agreement between Japan and the Republic
of Uzbekistan for Air Services, art. 13, Dec. 22, 2003, U.N. Reg. No. I-48368.
 5.10. Beyond the ICAO Treaty Regime 209

Governments whose populations sympathize with the means and ends of

certain terrorist organizations may find that their interests are better served
by defecting from the aviation crimes treaties, or at least by availing themselves
of the generous loopholes for refusing either prosecution or extradition.179 In
other cases, such as where two States are ideologically at odds, the prospects
for cooperation under any of the aviation security treaties will be even less
promising. These observations beg the question as to why States would bother
to negotiate and ratify these instruments at all. Why not rely on good faith
bilateral cooperation to apprehend and punish aviation criminals rather than
expending resources to produce agreements that can be so easily emasculated?
One answer is that the aviation security treaties, particularly the Tokyo
Convention, provided a “quick fix” to domestic legal regimes that had inad-
equately defined, for substantive or jurisdictional purposes, the kinds of
aviation crimes that the treaties contemplated. Additionally, by signing these
international agreements, any State could send a “cheap signal” to its partner
States of its willingness to cooperate in principle, even if circumstances might
compel it eventually to defect in fact. Given the prevailing geopolitics, a
State’s self-interest would likely be better served by accepting the uncertain
risk of future noncompliance rather than immediate branding as a haven for
aviation criminals.

5.10.2. The Bonn Declaration on Hijacking

Not surprisingly, States that have been victimized by aviation criminals,
particularly terrorists, have not allowed the inadequacies of the treaty regime
to blunt their pursuit of criminal sanctions. In 1978, the then “G7” States
issued the Bonn Declaration on Hijacking.180 Although not a treaty per se,
this “soft” statement committed its promulgators to cutting off air services to
or from any State that “refuses extradition or prosecution of those who have
hijacked an aircraft and/or do not return such aircraft[.]”181 While this threat
has only been applied in a handful of cases over the years,182 the Declaration’s

179
Libya’s refusal to extradite two suspects in the Lockerbie bombing who were believed to have
ties to the Libyan government is an obvious example. See supra note 96 and accompanying text.
180
Bonn Declaration on International Terrorism, Pub. Papers 1308, Jul. 17, 1978, reprinted in 17
I.L.M. 1285 [hereinafter Bonn Declaration]. At that time, the G7 consisted of the United States,
Canada, the United Kingdom, France, Germany, Italy, and Japan. Those States represented
70% of world aviation traffic at the time.
181
Id.
182
The Bonn Declaration has been invoked on a number of occasions. In 1981 a Pakistan
International Airlines flight was hijacked to Afghanistan, which refused to prosecute or to
extradite the hijackers. The three parties to the Bonn Declaration with ASAs with Afghanistan
210 The International Law Regime for Aviation Safety and Security

adherents have reaffirmed its principles in subsequent summits.183 This “extra-

legal” option has raised the hackles of some observers who point out that the
Bonn Declaration goes beyond even the most stringent requirements in the
Tokyo and The Hague conventions and may violate the terms of the declarant
States’ ASAs.184 It is unclear whether that is correct. While the Tokyo and
The Hague treaties do impose certain (avoidable) obligations with respect to
the apprehension and punishment of aviation criminals, neither instrument
proclaims any exclusive competence over this area of international law. More
critically, none of the aviation crimes treaties dictates the terms by which
States will adhere to their ASAs. Most ASAs contain specific clauses allowing
the parties to denounce (or temporarily suspend) the agreement without further
inquiry into the reasons.185 It may be more appropriate, then, to treat the Bonn
Declaration as a statement of policy rather than an attempt to abrogate existing
international law.186 Simply put, the Declaration announces to any State that
harbors aviation criminals that it may forfeit commercial privileges to and
from the world’s leading air transport markets. The Chicago Convention
creates no “natural” right to market access, and States are well within the
bounds of international law when they close their airspace for reasons of
national security.187

denounced those agreements under the procedures for denunciation prescribed within their
ASAs. Those provisions included a one-year notice requirement, which meant that operations
to and from Afghanistan did not end until the following year. Bonn was invoked again in 1981
when South Africa refused to prosecute 45 mercenaries who sought asylum after hijacking a
flight out of the Seychelles. Unlike Afghanistan, South Africa relented to the diplomatic
pressure brought by the United States and others.
183
The 1986 Tokyo Economic Summit is one example. See Dempsey, supra note 167, at 449.
184
See James J. Busuttil, The Bonn Declaration on International Terrorism: A Non-Binding
International Agreement on Aircraft Hijacking, 31 Int’l & Comp. L.Q. 474, 479–82 (1982).
185
In fact, the Bonn Declaration States shut off air services to recalcitrant States through the
processes contemplated in their respective ASAs with those third States.
186
Indeed, the Declaration may have been an attempt by the adhering States to enunciate to the
international community what they believed to be principles of customary international law
(namely, that hijacking is an international crime and that States have a duty to prosecute or
extradite).
187
Some have argued that cutting off air services under the Bonn Declaration violates Article 9 of
the Chicago Convention, because a State’s refusal to extradite does not rise to the level of
“reasons of military necessity or public safety.” Further, Article 9 also requires that any such
restrictions be applied in a nondiscriminatory fashion, which is obviously incompatible with
the targeted and punitive way in which enforcement is carried out under Bonn. See Busuttil,
supra note 184, at 479–82. These criticisms would be correct if any State were to invoke Bonn to
restrict an offending State’s overflight privileges, but Article 9 does not (technically) apply to
restriction of services to and from a State’s aerodromes. On Article 9 generally, see supra
Chapter 2, Section 2.5.3.
 5.10. Beyond the ICAO Treaty Regime 211

5.10.3. Other State-Based Approaches to Combating Aviation Crimes

In addition to the Bonn Declaration, many States have relied on bilateral
Mutual Legal Assistance treaties and other international law enforcement
accords to apprehend and punish air criminals.188 Some countries have taken
extraordinary measures to capture and prosecute aviation terrorists. The United
States even lured a suspected hijacking perpetrator into international waters
for the purpose of seizing him.189 Again, although such actions have intruded
into the comfort zones of strict legalists, they may not be entirely inconsistent
with international law. Several doctrines, including the passive personality
principle190 and the protective principle,191 allow States to exercise extraterri-
torial jurisdiction over certain classes of offenders (especially terrorists), regard-
less of whether the offender or the offender’s victims are nationals of the
State claiming jurisdiction. And even if invocation of these doctrines
is unpersuasive, the hard truth remains that most States would prefer to see
terrorists punished, even at the margins of the law, rather than allow them to
shelter in the name of upholding abstract and contestable notions of legality.192

188
See, e.g., U.S.-Cuba Memorandum of Understanding on Hijacking of Aircraft and Vessels and
Other Offenses, U.S.-Cuba, Feb. 15, 1973, 24 u.s.t. 737, reprinted in 12 i.l.m. 370 (1973);
Agreement on Mutual Legal Assistance between the European Union and the United States of
America, Jun. 25, 2003, T.I.A.S. 10–201.1, 2003 O.J. (L 181) 34.
189
See U.S. v. Yunis, 924 F.2d 1086 (D.C. Cir. 1991). The U.S. Federal Bureau of Investigation
(FBI), in cooperation with the U.S. Navy, lured a suspected aircraft hijacker, Fawaz Yunis, into
international waters under the pretense of conducting a narcotics transaction; Yunis was
subsequently seized, brought into U.S. territory against his will, and successfully prosecuted
under several federal statutes criminalizing hijacking and hostage taking. The only connection
between the hijacking and the United States was that several U.S. nationals were aboard
the affected Royal Jordanian Airlines flight. The defendant’s appeal, which contested U.S.
jurisdiction over his offenses on the basis of international law, failed. See U.S. v. Yunis, 681
F. Supp. 896 (D.D.C. 1988).
190
“Under the passive personality principle, a State may punish non-nationals for crimes com-
mitted against its nationals outside of its territory, at least where the State has a particularly
strong interest in the crime.” U.S. v. Yunis, 924 F.2d at 1091. See also supra text accompanying
note 93 (noting, however, that the United States, in international law, has contested the passive
personality principle despite its use in U.S. domestic court rulings such as Yunis); arguably,
terrorist cases have changed U.S. attitudes toward the principle. See Watson, supra note 93.
191
“The protective principle recognizes that a sovereign can adopt a statute that criminalizes
conduct that occurs outside of its borders when that conduct affects the sovereign itself,”
including “laws that make it a crime to engage in an act that obstructs the function of government
or threatens its security as a State without regard to where or by whom the act is committed.” U.S.
v. Zehe, 601 F. Supp. 196 (D. Mass 1985). See also discussion supra in Section 5.6.4 (noting that
the principle is directed at aliens whose conduct prejudices the security interests of a State).
192
This is certainly not the opinion of the report by the IBA Task Force on Terrorism, however,
which is threaded through with warnings that States must always respect international human
rights law and international humanitarian law in their counterterrorism efforts. See, e.g., IBA
Report, supra note 1, at 219–21.
212 The International Law Regime for Aviation Safety and Security

5.11. preventing aviation crimes and other hostile

incidents within the limits of law

5.11.1. Reactive and Proactive Approaches to Aviation Crimes

The international legal mechanisms discussed so far in this chapter have
focused on ex post action that States can or ought to take to apprehend and
punish aviation criminals, including terrorists. A recurrent theme among
the instruments we have considered is that they represent reactive rather
than proactive approaches. The Hague Convention, for instance, followed a
series of high-profile aircraft hijackings but lacks any provisions that foster
transnational law enforcement cooperation. ICAO has promulgated SARPs
to promote basic levels of airport and aircraft security, but implementation,
particularly in developing countries, remains poor.193 Most States rely on
domestic intelligence units to ascertain potential terrorists and to apprehend
them before they can execute their plans.194 But these intelligence networks
are far from foolproof and, indeed, have been sharply criticized.195 The
international gathering and sharing of intelligence has noticeably intensified
since the 9/11 terrorist attacks, though it, too, remains imperfect.196 In the
remainder of this part, we use U.S./EU aviation security relations to exemplify
the challenges of international cooperation to prevent aviation crimes and
terrorism. Although these major aeropolitical powers have concluded agree-
ments covering trade in aviation services and the interoperability of their air
traffic management systems, integration of the security cultures of the two
sides remains an unfinished and often controversial project.

5.11.2. Use of Passenger Data

One of the preventive tools in any State’s security arsenal is the use of passenger
data to screen for suspected terrorists. In 2004, the United States and the EU
reached an agreement (pursuant to a U.S. statutory mandate) requiring EU
193
Professor Paul Stephen Dempsey tells the story of his visit to the headquarters of the civil
aviation authority of a central African State where he noticed a roomful of dusty unread
manuals. Upon inquiry, he was told that the room was used to store “stuff that ICAO sends
us.” (As told to Professor Brian F. Havel, in Montreal (Can.) (Apr. 15, 2008).)
194
See The Plot to Bring Down Britain’s Planes (Channel 4 (U.K.) television broadcast Apr. 26, 2012).
195
See, e.g., Richard A. Posner, Preventing Surprise Attacks (2005); Richard
A. Posner, Uncertain Shield: The U.S. Intelligence System in the Throes of
Reform (2006) (arguing that the post-9/11 reforms to U.S. intelligence agencies have made the
agencies too centralized and bureaucratic).
196
See generally Adam D.M. Svendsen, Understanding the Globalization of
Intelligence (2012).
 5.11. Preventing Aviation Crimes and Other Hostile Incidents 213

airlines flying to or from the United States to furnish passenger name records
(PNR) in their reservation and departure control systems within fifteen minutes
of their departure time. The result was an immediate backlash by EU citizens
concerned about how the PNR data would be used and indignant that the
EU had not insisted on stronger measures to protect their privacy.197 Following
a successful challenge to the PNR agreement before the Court of Justice of the
European Union,198 a fresh (albeit provisional) agreement was reached in 2007
which, inter alia, provided the United States with access to data concerning
passengers’ race, ethnicity, and religion, and permitted the United States to
distribute the PNR data among its antiterrorism security agencies. The new
accord also required airlines to send data from their reservations systems to U.S.
authorities at least seventy-two hours before flight departure. The European
Parliament, which strongly opposed the 2004 PNR agreement, never approved
the 2007 version. Instead, negotiations on another new agreement began in
December 2010 as part of a new “global external PNR strategy” adopted by the
European Commission.199 That agreement was completed in December 2011
and finally approved by the European Parliament in April 2012, six months after
approval of a similar PNR agreement with Australia.200 The two sides agreed
that, should the EU in the future develop its own PNR system, the parties would
consult to determine any changes needed to ensure full reciprocity between the
two systems.201 Under the 2012 U.S.-EU PNR Agreement, carriers operating
passenger flights between the EU and the United States must provide the U.S.
Department of Homeland Security (DHS) with the PNR contained in their
reservation systems.202 The data must be transferred by secure electronic
means at least ninety-six hours before the scheduled flight departure (note the
stretching of the time for data transfer over the various iterations of the agree-
ment), and the DHS may also require further data transfers “in real time or for a
fixed number of routine and scheduled transfers.”203 The United States is only

197
See Kristin Archick, Cong. Res. Serv., RS 22030, U.S.-EU Cooperation Against
Terrorism 6 (2011).
198
Joined Cases C-317 & C-318/04, Parliament v. Council, 2006 E.C.R. I-4721. The Court
annulled the accord on the ground that it had not been negotiated on the proper legal basis,
but did not find any violation of EU privacy rights. See Archick, supra note 197, at 9.
199
See id. (noting that, under the new strategy, general requirements for all EU PNR agreements
were established).
200
Press Release, European Parliament, Parliament Gives Green Light to Air Passenger Data Deal
with U.S. (Apr. 19, 2012).
201
See Archick, supra note 197, at 10.
202
See Agreement between the United States of America and the European Union on the Use and
Transfer of Passenger Name Records to the United States Department of Homeland Security,
art. 3, Dec. 8, 2011, 2012 O.J. (L 215) 5.
203
Id. art. 15.
214 The International Law Regime for Aviation Safety and Security

allowed to use the provided information “for the purposes of preventing,

detecting, investigating and prosecuting” terrorist and related offenses as well
as transnational crimes punishable by a sentence of imprisonment of at least
three years.204 The 2012 PNR Agreement does not specifically mention hijack-
ing, a sign perhaps of the degree to which terrorism has superseded hijacking as
international aviation’s primary security concern, but hijacking is undoubtedly
covered by the references to related crimes and transnational crimes. Much of
the PNR Agreement is dedicated to detailing procedures for data security,
access, and retention. Sensitive personal information such as the race, ethnicity,
religious and political beliefs, and health of incoming passengers may only be
accessed and used in exceptional circumstances.205 The Agreement also per-
mits individuals whose personal information has been used in violation of its
terms, and regardless of their nationality or place of residence, to “seek effective
administrative and judicial redress in accordance with U.S. law.”206

5.11.3. Passenger Screening Procedures

Following a failed December 2009 bomb attack against a Delta Air Lines flight
bound for Detroit from Amsterdam, the United States rapidly began to install
full-body scanners in its major airports in an attempt to locate concealed
bombs and other weapons without recourse to more time-intensive and
invasive measures such as pat-downs and strip searches. Even so, the revealing
nature of the body scanners and the aggressive body search tactics of the U.S.
Transportation Security Administration (TSA) yielded cries of “gate rape” in
the United States and intense criticism from international observers.207 In the
EU, several Member States expressed concern that body scanners constitute
an automatic privacy violation and pose serious health risks. Specifically to
address these concerns, the European Commission has added operational
conditions for body scanners to its common rules on civil aviation security.208

204
Id. art. 4.
205
See id. art. 6.
206
Id. art. 13.
207
See, e.g., Press Release, Am. Civ. Liberties Union, TSA Body Scanning Technology Strips
Away Privacy (Oct. 1, 2009), http://www.aclu.org/technology-and-liberty/tsa-body-scanning-
technology-strips-away-privacy. See also Bruce L. Ottley, Airport Full-Body Scanners:
Improved Security or Cause for Concern?, 9 Issues Aviation L. & Pol’y 221 (2009) (noting
view of some security planners that the money used to buy body scanners would be better spent
on intelligence-sharing and on behavioral screening).
208
In 2011, the European Commission included body scanners that do not use X-ray technology
on its list of approved methods for passenger screening. The Commission laid down operating
conditions on the use of security scanners that would respect fundamental rights and offer
passengers the possibility of alternative screening methods. See Commission Regulation
 5.11. Preventing Aviation Crimes and Other Hostile Incidents 215

Although the United States and other countries have an understandable

interest in the EU utilizing the most effective measures to screen passengers
for weapons before they board flights bound to their respective territories, it
is unlikely that an international agreement will do much to resolve the issue.
Like the use of PNR data, airport searches give rise to moral concerns that
cannot be negotiated away easily.

5.11.4. Air Cargo Screening Procedures

Air cargo screening is one area where the United States and EU have found
more common ground.209 In 2010, both sides agreed to reconsider the effec-
tiveness of existing post-9/11 measures when terrorists from Yemen used printer
cartridges to conceal bombs on board United Parcel Service and FedEx all-
cargo flights.210 In June 2012, the two powers signed an agreement for mutual
recognition of their respective air cargo security regimes.211 Under the agree-
ment, neither the United States nor the EU will require additional or different
security measures for air cargo flown into its territory from the other side’s
territory.212 In an attempt to strengthen worldwide standards, as of July 1, 2011,
ICAO adopted Amendment 12 to Annex 17, which adds new air cargo security
SARPs focused on development of secure air cargo supply chains.213

5.11.5. Meaning of “Air Rage”

“Air rage” is a term that has been coined to refer to aggressive conduct that
could fall “anywhere on a behavioral continuum from socially offensive to

1141/2011, Amending Regulation (EC) No. 272/2009 Supplementing the Common Basic
Standards on Civil Aviation Security as Regards the Use of Security Scanners at EU Airports,
2011 O.J. (L 293) 22. Nevertheless, Member States are not required under EU rules to deploy
body scanners, and some are unlikely to do so. See Archick, supra note 197, at 15.
209
Part of the U.S. sense of urgency on this matter is the need to comply with a provision in the
Implementing Recommendations of the 9/11 Commission Act of 2007 (Pub. L. 110–53, 121 Stat.
266) that mandates 100% screening of air cargo transported on U.S. domestic and U.S.-bound
international passenger flights equivalent to the level of security used for checked baggage. The
TSA set December 2012 as the deadline by which all inbound cargo on international passenger
flights would be screened. See Bart Elias, Cong. Res. Serv., R 41515, Screening and
Securing Air Cargo: Background and Issues for Congress (2010).
210
See Jad Mouawad, For Air Cargo, A Screening Conundrum, N.Y. Times, Dec. 21, 2010, at B1.
211
See EU-U.S. Security Agreement Allows Cheaper, Faster Air Cargo Operations,
HomelandSecurityNewswire.com, June 5, 2012, http://www.homelandsecuritynews
wire.com/dr20120605-euu-s-security-agreement-allows-cheaper-faster-air-cargo-operations.
212
The EU has confirmed that compliance with its air cargo security measures will also meet the
U.S. statutory requirement of 100% screening of all incoming air cargo. See supra note 209.
213
See ICAO, Aviation Security Programme, http://www2.icao.int/en/avsec/pages/default.aspx/.
216 The International Law Regime for Aviation Safety and Security

criminal” and that endangers other persons on the aircraft or even threatens
the safety of the aircraft itself.214 The phrase is typically applied to passenger
conduct, although it could also include actions by the crew.215 The most
common examples involve passengers attacking or assaulting flight attendants
or other crew members, but the term has been broadly applied to cover a
variety of acts.216 The concept has only gained significant media and scholarly
attention in the past fifteen years, but the number of reported incidents
has escalated dramatically over that time. The actions encompassed under
“air rage” include intentional wrongs or criminal acts that can be easily be
prosecuted under domestic law when jurisdiction is clear. Problematically,
however, many of these offenses are not typically defined in member States’
national laws, and ICAO appears to believe that an international solution may
be needed to fill that void.217 Some States have indeed attempted to address the
jurisdictional gap by statute. For example, the United States has designated a
“special aircraft jurisdiction”218 to cover wrongful seizure of an aircraft by force
as well as interference with flight crew members.219 The jurisdiction includes
any aircraft registered in the United States or foreign aircraft for which the
United States is the next scheduled destination or last point of departure.
Airlines have also taken autonomous measures to combat the problem by
banning unruly passengers.

214
See Nancy Lee Firak & Kimberly A. Schmaltz, Air Rage: Choice of Law for Intentional Torts
Occurring in Flight Over International Waters, 63 Alb. L. Rev. 1, 7 (1999).
215
See Piera Report, supra note 79 (proposing a new terminology of “unruly/disruptive persons on
board aircraft” to take account of the occasional role of crew members failing to respect the
appropriate rules of in-flight conduct).
216
In one unique and repellent example, an investment banker defecated on a food cart on a flight
from Buenos Aires to New York. See Firak & Schmaltz, supra note 214, at 9 (citing Lisa Miller,
Airlines and Courts Are Cracking Down on Unruly Passengers as Assaults Rise, Wall St. J.,
Dec. 27, 1996, at A2).
217
See Piera Report, supra note 79, at 18–19 (noting that there is a strong case for a systematic
international approach to the problem of air rage (citation omitted)). Arguably, air rage offenses
could be included under Article 1 of the Tokyo Convention, which refers to “acts . . . which
jeopardize good order and discipline on board.” Tokyo Convention, supra note 61, art. 1(b).
ICAO is studying the possibility of amending the Tokyo Convention to better address air rage
and has prepared a draft text of an amending protocol for consideration in March 2014. See
supra note 120. In 2001, incidentally, the ICAO Assembly passed a resolution urging member
States to enact national laws to exercise jurisdiction in appropriate cases to prosecute criminal
acts and offenses involving unruly or disruptive passengers on board aircraft registered in other
States. A model statute was attached to the Resolution. See International Civil Aviation
Organization, Adoption of National Legislation on Certain Offenses Committed on Board
Civil Aircraft (Unruly/Disruptive Passengers), Assem. Res. A33–4 (2001). The U.S. legislation
mentioned in the main text is an example of the kind of national law advocated by ICAO.
218
49 U.S.C. § 46502(a).
219
See 49 U.S.C. § 46504.
 6

The International Law Regime for Aviation

and the Environment

6.1. introduction

6.1.1. ICAO’s Response to a Politically Contentious Issue

The impact of aviation on the global environment1 has become one of the most
politically contentious issues in international aviation law and policy. For that
reason, it remains an inadequately addressed facet of air transport at the interna-
tional level.2 That assertion may strike some as surprising given the resources that
the International Civil Aviation Organization (ICAO) has dedicated to studying
the effects of aviation on the environment, including assessment of the industry’s
responsibility for the phenomenon of climate change or “global warming.”3
1
We do not attempt here to define the term “environment,” although for international aviation the
scope of inquiry is readily understandable. See Lynton Keith Caldwell, International
Environmental Policy and Law 170 (1st ed. 1980) (“‘environment’ is a term that everyone
understands and no one is able to define”).
2
This is not necessarily true within the domestic spheres of many States. The United States, for
instance, has enacted a series of regulations that concern aviation’s environmental impact,
including noise restrictions, emissions levels, and airport operations. See, e.g., 14 C.F.R.
§ 36.103 (2012); 14 C.F.R. § 34.21 (2012); 14 C.F.R. § 153 (2012). And some jurisdictions, like
the European Union (EU), are attempting to use their internal aircraft emissions regulations
(including those on emissions “trading,” see infra Section 6.1.2) to “police” the emissions levels
of foreign air carriers entering or exiting their national territory. In keeping with the interna-
tional focus of this book, we have limited our discussion in this chapter to environmental
regulation at the international level, although some national or regional rules (especially the
EU emissions trading system) will be implicated in the analysis.
3
The Intergovernmental Panel on Climate Change (IPCC) – an international scientific body
established jointly by the United Nations (U.N.) and the World Meteorological Organization –
has provided substantial scientific evidence that global temperatures are on the rise due to rapid
increases in greenhouse gas emissions caused by human activity; see IPCC, Climate
Change 2007: Synthesis Report: Summary for Policymakers (2007) [hereinafter
IPCC, summary for policymakers]; IPCC, Climate Change 2007: Impacts,
Adaptation and Vulnerability (2007) [hereinafter IPCC, impacts, adaptation and
vulnerability].

217
218 The International Law Regime for Aviation and the Environment

ICAO’s Committee on Aviation Environmental Protection (CAEP), which is

comprised of members from ICAO State parties, intergovernmental entities,
and nongovernmental organizations, produces regular updates on aviation’s
environmental impact and determines whether adjustments should be made
to any of ICAO’s Standards and Recommended Practices (SARPs) that concern
the environment.4 In 2007, ICAO established a second environmental task
force, the Group on International Aviation and Climate Change (GIACC), to
find sustainable solutions to aviation’s contribution to climate change. Although
long-term solutions must include technological innovations such as biofuel
replacement of kerosene,5 the Group is actually focused on more immediate
economic concerns, exploring, for example, how States can use so-called
‘market-based measures’ (MBMs), such as eco-taxes and cap-and-trade systems,
to incentivize airlines to reduce emissions without inflicting serious economic
harm on the sector.6 To date, neither of these ICAO entities has produced a
workable road map for the industry’s approach to climate change. Nor has the
Organization itself been able to engineer a global sectoral approach to cutting
aviation emissions despite being charged to do so by both the U.N. multilateral
treaty on global climate change and by its own membership.7

6.1.2. Political Problem of the EU’s Emissions Trading Scheme

The political problem of building a global governance structure for aviation
emissions was intensified by the decision of the EU to include non-EU airlines
in its multisectoral cap-and-trade MBM, the “Emissions Trading Scheme”
(ETS). The gist of the ETS can be quickly stated. As of January 1, 2012, the ETS
regulation proposed to cap emissions from virtually all commercial flights

4
ICAO, Committee on Aviation Environmental Protection (CAEP), http://www.icao.int/environ-
mental-protection/pages/CAEP.aspx.
5
World Economic Forum, Policies and Collaborative Partnership for Sustainable Aviation (2011).
6
By “cap-and-trade” we mean a system where a governmental authority establishes a ceiling on
the amount of carbon a particular industrial sector (or sectors) may release during a specified
period of time. Firms within the capped industry are allocated a set number of discharge
permits or credits that they are then free to trade in a secondary market to other firms seeking to
emit beyond their allotted permits. Such schemes may allow for either “open trading,” whereby
firms across multiple capped industries may engage in cross-sectoral exchanges of allowances,
or “closed trading,” under which firms are limited to intrasectoral exchanges. See generally
Thomas H. Tietenberg, Emissions Trading: Principles and Practice (2006).
7
As of the publication date of this book, ICAO has received the backing of its members to draft a
global aviation emissions accord in time for the Organization’s 39th Assembly session in
autumn 2016. Assuming that the agreement is approved, it would not take effect until at least
2020. The exact terms of this potential accord have yet to be worked out. See Press Release,
ICAO, Dramatic MBM Agreement and Solid Global Plan Endorsements Help Deliver
Landmark ICAO 38th Assembly (Oct. 4, 2013).
 6.1. Introduction 219

landing in or departing from the territory of an EU Member State, regardless

of the national origin of the air carrier providing the service.8 Using a route-
based rather than an airspace-based formula, the regulation was intended to
cover emissions from the entire flight, including over the high seas and non-
EU territory.9 For the first year, the cap was set at 97% of the mean average of
emissions released between 2004 and 2006 by airlines operating to and from
the territory of the EU. Although airlines covered by the ETS would receive
most of their carbon allowances free (at least in the initial stages), 15% of the
allowances would be available by auction only, with the revenues going to the
EU Member States. Any airline that exceeded its initial allotment10 would
have to purchase additional allowances through auction or from other airlines
and industrial sectors covered by the ETS. Given that the total number of
allowances was capped at a level below historic annual emissions for the
industry, there was expected to be high demand for the allowances on the
market. Although the ETS regulation contemplated lowering the emissions
cap to 95% in 2013 with the potential for further downward adjustments,
mounting international pressure compelled the EU to “stop the clock” on
the regulation for twelve months beginning in November 2012. A significant

8
Allowances would be required for flights by fixed-wing aircraft with a maximum takeoff mass of
5700 kg or above. Flights performed under visual flight rules and rescue flights are to be
excluded, as are flights performed in the framework of “public service obligations” (i.e., on
thinly served routes that rely on government subsidies in order to be viable). There is also a de
minimis exclusion for commercial flights below a defined frequency. See Council Directive
2008/101, Annex, 2009 O.J. (L 8) 17. These exemptions are consistent with ICAO policy. See
Consolidated Statement of Continuing ICAO Policies and Practices Related to Environmental
Protection, ICAO Assemb. Res. A37-19, Oct. 8, 2010, at para. 15, http://legacy.icao.int/env/
A37_Res19_en.pdf.
9
For example, on the standard flight path for a U.S. carrier flying from San Francisco and
landing in London, 29% of emissions occur in U.S. airspace, 37% in Canadian airspace, 25%
over the high seas, and only 9% over EU territory. See Oral Submissions on Behalf of the Air
Transp. Ass’n of America (ATA), United Continental Airlines, & American Airlines at para. 12,
Case C-366/10, Air Transp. Ass’n of Am. Inc. v. Sec’y of State for Energy & Climate Change,
2010 O.J. C-260/12 (Jul. 5, 2011).
10
Allowances allocated to each aircraft operator would be determined by a benchmark calculated
in three consecutive steps: first, the share of auctioned allowances is subtracted from the overall
cap. Second, remaining carbon emissions are divided by the sum of verified ton-kilometer data
for monitoring year 2010 as reported by all participating operators. Third, the specific amount of
each operator’s allowances is calculated by multiplying the mission distance (great-circle
distance plus an additional fixed surcharge of 95 km) by the payload transported (cargo,
mail, and passengers). See Council Directive 2008/101, Annex, 2009 O.J. (L 8) 9–11. Each
passenger (including baggage) is assigned a value of 100 kg. See Council Directive 2008/101,
Annex, 2009 O.J. (L 8) 19. Allowances not used in the first chargeable year, 2012, could be
banked to the third trading period of the ETS (2013–2020). See Council Directive 2003/87, art.
13, 2003 O.J. (L 275) 36–37. But see infra note 11 (discussing postponement of effective date for
including air transport in the ETS).
220 The International Law Regime for Aviation and the Environment

consortium of States, backed by ICAO, has opposed the EU’s regulatory

unilateralism. While the EU initially insisted that it would not relieve any
foreign airline of emissions charges until its home State adopted “comparable”
aviation emissions-abatement measures, the European Commission left the
door open to back out of the regulation should ICAO muster the international
political capital to promulgate a global scheme.11 We will return later in this
chapter to the principles of international law that may be violated by applying
an ETS unilaterally to foreign airlines serving domestic airports.12

6.1.3. Noise Pollution and Localized Emissions

Hydrocarbon emissions, while undoubtedly the most politically challenging
characteristic of aviation’s relationship with the environment, is not the only
one. Public concerns over noise pollution, particularly in high-density urban
areas, have prompted ICAO to approve several SARPs and have sparked con-
tinuing aeropolitical tensions between the United States and the EU.13
Environmentalists have also indicted the growth of the air transport industry as

11
The 26 States opposed to the EU scheme, led by China, the United States, Russia, and India,
garnered the moniker “the coalition of the unwilling.” See Slaughter, supra note 7. China,
India, and the United States announced or contemplated measures to prohibit their carriers
from complying with the EU regulation. See Europe Considers Suspending Airline Emissions
Charge, Associated Press, Sept. 12, 2012. As noted in the main text, in November 2012 the
EU Commissioner for Climate Action, Connie Hedegaard, announced a “stopping of the
clock” that would defer for one year the ETS obligation to surrender emissions allowances for
all airlines serving routes between EU and non-EU airports (but not, however, for intra-Union
flights). The EU would not require allowances to be surrendered in April 2013 for emissions
from such flights during the whole of 2012. The monitoring and reporting obligations would
also be deferred for such flights. Commissioner Hedegaard justified the deferral on the basis
that ICAO was expected to adopt new multilateral carbon emissions measures at its 2013
Assembly. More cynical voices suspected that China’s threatened postponement of a $14
billion order for 55 Airbus aircraft may also have played a major part in the decision. See
Press Release, European Commission, Stopping the Clock of ETS and Aviation Measures
Following Last Week’s International Civil Aviation Organization (ICAO) Council (Nov. 12,
2012). As discussed supra in note 7, ICAO has been charged by its member States with drawing
up a global aviation emissions agreement by 2016. Nevertheless, the EU appears determined to
resume application of its ETS rules to foreign carriers, while (for the moment) restricting
charges to emissions occurring within the airspace of EU Member States. See Press Release,
European Commission, Aviation Emissions: Commission Proposes Applying EU ETS to
European Regional Airspace from 1 January 2014 (Oct. 16, 2013).
12
Why did the EU pursue this unilateralist course? Certainly, there is a widespread environ-
mentalist culture in the EU that views aviation with suspicion. Also, the ethos of the EU has
long favored social policies (like welfare and diversity) over trade liberalization. And finally, it
may be that the Union’s long experience with integration has eroded the force of sovereignty
within its borders.
13
See infra Part 6.7.
 6.1. Introduction 221

a source of “secondary causes” of pollution, such as ground-level transportation

congestion to, from, and around airports. The international airline industry, ever
conscious of fuel costs, has in turn blamed outmoded air traffic management
(ATM) systems for being a principal cause of fuel waste, especially during airport
operations.14 Inefficient airport use management, which allows air carriers to
take off and land on a “first come, first served” basis during peak use periods,
exacerbates these problems. Not all of these matters can be easily addressed at
the international level, however. For instance, although States may negotiate
bilaterally for fair and transparent slot allocation rules at their partners’ airports, it
is typically conceded that local airport regulators are better placed to optimize
the distribution and frequency of available slots.15 The huge costs of upgrading
national ATM systems and ensuring interoperability with other systems also
demands a “bottom-up” rather than a “top-down” approach; only after a critical
mass of larger markets has achieved functional interoperability will it be possible
to induce strong global compliance.16

6.1.4. Seeking a Global Response

Due to the fragmentary and uncertain shape of international aviation’s environ-
mental law regime, this chapter is oriented more than other parts of the book
toward the lex ferenda or “law-in-the-making.” As such, we will pay more
attention to the legal and policy hazards of formulating an authentically global
response to issues such as aviation emissions reduction. The Chicago
Convention,17 though silent on environmental issues per se, does affirm certain
principles of sovereignty and regulatory uniformity that must be respected in
any negotiation for a future global aviation emissions agreement or even with
respect to national emissions regulations that implicate international air trans-
port. Discussion of these provisions, along with the role of ICAO in promulgat-
ing environmental SARPs, will be followed by consideration of additional
environmental concerns such as aircraft noise. First, however, we turn to an
overview of the substantive scope of current international environmental law.

14
Fuel reportedly represents approximately 35% of industry operation costs. Hugo Martı́n,
Airlines Cut Routes as Fuel Costs Climb; Ticket Prices Will Stay High and Planes Will Stay
Crowded for the Near Future, FAA Report Says, L.A. Times, Mar. 9, 2012, at B1.
15
But, as discussed supra in Chapter 3, Section 3.7.4, if the slot allocation mechanism can be
used by municipalities to collect rents through, for instance, a slot auction, they will have a
strong incentive to stretch their airport’s capacity beyond an efficient level.
16
See Brian F. Havel, A US Point of View on European ATM Developments, in Achieving the
Single European Sky 107, 117 (Pablo Mendes de Leon & Daniel Calleja Crespo eds., 2011).
17
Convention on International Civil Aviation, opened for signature Dec. 7, 1944, 61 Stat. 1180, 15
U.N.T.S. 295 (entered into force Apr. 4, 1947) [hereinafter Chicago Convention].
222 The International Law Regime for Aviation and the Environment

6.2. an overview of international

environmental law

6.2.1. Introduction
To give context to this discussion, it will be helpful to look briefly at the
broader international environmental law regime. While international avia-
tion’s exceptional status is recognized within that regime, the policy choices
and rule-making processes that have both guided and impeded its develop-
ment are also influencing how laws and policies, especially on climate
change, can be framed for the global air transport industry.

6.2.2. A General Obligation of States but Few Binding

Global Standards
According to the International Court of Justice (ICJ), the evolution of interna-
tional environmental law has given rise to “a general obligation of States to
ensure that activities within their jurisdiction and control respect the environ-
ment of other [S]tates or of areas beyond national control.”18 Nevertheless,
global governance of the environment remains fundamentally incomplete, in
part because of a lack of political will but also because of the complexity of
aligning the interests and concerns of nearly 200 States. Thus, the global
environment is not being managed by a single international supervisory
authority along the lines of the World Trade Organization (WTO). There is
not a single systematic global environmental treaty that matches the sweeping
coverage of the 1982 U.N. Convention on the Law of the Sea or of the WTO
treaty regime for international trade law. Moreover, international environ-
mental law has evolved few global standards that could be framed as “hard”
international law: the phase-out schedule for ozone toxins,19 the health,
safety, and environmental provisions adopted by the International Maritime
Organization (IMO),20 and the greenhouse gas emissions reporting

18
Nuclear Weapons, Advisory Opinion, 1996 I.C.J. 226, 241–42, para. 29 (July 8).
19
See infra note 23. The ozone protection regime is the first U.N. regime ever to achieve universal
ratification. United Nations Blog, Most-ratified International Treaties (Sept. 24, 2012), http://
blogs.un.org/blog/2012/09/24/most-ratified-international-treaties/.
20
For example, the ban on dumping plastic garbage at sea imposed in Annex V of the
International Convention for the Prevention of Pollution from Ships, Nov. 2, 1973, 1340
U.N.T.S. 184, as modified by Protocol, Feb. 17, 1978, 1340 U.N.T.S. 61 [hereinafter the
MARPOL Convention], which covers States representing over 98% of the world’s shipping
tonnage. See Summary of Status of Conventions, International Maritime Organization, http://
www.imo.org/About/Conventions/StatusOfConventions/Pages/Default.aspx.
 6.2. An Overview of International Environmental Law 223

obligations of States under the climate change treaty21 may be the only
principles with a secure universal footing as hard law.22 Outside those areas,
international environmental agreements tend toward a “pledge-and-review”
approach (using aspirational language such as “to the extent possible”) and
vague timelines. Treaty standards for carbon emissions reduction, despite
serial U.N.-sponsored conferences, also fall mostly within this soft law
paradigm.

6.2.3. Subject-Specific Regulatory Regimes of International

Environmental Law
International environmental law, in fact, consists primarily of the content and
scope of subject-specific regulatory regimes that are in various states of legal
and policy development. These regimes have been established by multilateral
treaties such as the 1985 Vienna Convention for the Protection of the Ozone
Layer23 and the 1992 Conventions on Climate Change and Biological
Diversity.24 As these treaty titles suggest, international environmental lawmak-
ing is strongly responsive to changing political moods and priorities. As a
result, and even more than in other fields of international cooperation, each
treaty is the product of unique political bartering within its “environmental”
subject area so that the design of each treaty reflects what was politically
feasible at the time of its adoption. Robust diplomacy, rather than patient
codification by teams of experts, has characterized the making of international
environmental law during the past two decades.

21
See infra note 24. In contrast, the more binding emissions reduction targets and time-frames of
the Kyoto Protocol (see infra in the main text) affect States responsible for only 25% of global
greenhouse gas emissions.
22
See discussion in Veerle Heyvaert, Regulatory Competition: Accounting for the Transnational
Dimension of Environmental Regulation (May 16, 2012) (unpublished paper presented to the
Center for Socio-Legal Studies, Oxford).
23
Vienna Convention for the Protection of the Ozone Layer, Mar. 22, 1985, T.I.A.S. No. 11097,
1513 U.N.T.S. 293. The real achievements of ozone protection occurred in the later 1987
Montreal Protocol on Substances that Deplete the Ozone Layer, the first in a series of agree-
ments setting specific targets for reducing and eliminating manufacture and use of a range of
ozone-depleting substances. The success of ozone protection is such that global ozone losses
and the Antarctic ozone hole should recover by 2068. NASA, Goddard Space Flight Center,
NASA Study Finds Clock Ticking Slower on Ozone Hole Recovery, Jun. 29, 2006, http://www.
nasa.gov/centers/goddard/news/topstory/2006/ozone_recovery.html.
24
United Nations Framework Convention on Climate Change, May 9, 1992, 1771 U.N.T.S. 107
(entered into force Mar. 21, 1994) [hereinafter UNFCCC]; Convention on Biological
Diversity, Jun. 5, 1992, 1760 U.N.T.S. 79 (entered into force Dec. 29, 1993).
224 The International Law Regime for Aviation and the Environment

6.2.4. The U.N. Framework Convention on

Climate Change (UNFCCC)
The most comprehensive approach to addressing a single global environ-
mental issue is the 1992 U.N. Framework Convention on Climate Change
(UNFCCC).25 For the first time in the text of an international treaty, the
Convention specifically emphasizes the risk of damage to “ecosystems” in
tandem with the need to protect the planet’s “climate system.”26 The
UNFCCC was actually the product of “package deal” diplomacy that also
led to a soft law instrument, the 1992 Rio Declaration on Environment and
Development of the U.N. Conference on Environment and Development.27
The Rio Declaration and its accompanying treaties28 are regarded by many
commentators as the coming-of-age moment for international environmental
law. As an example, both the Declaration and the Convention use a speci-
alized lexicon, incorporating terms such as “common but differentiated
responsibility,”29 the “precautionary” principle,30 the “polluter pays” princi-
ple,31 and the notion of “sustainable development,”32 that had become well-
established in international environmental law and policy through prior
international collaboration.

25
UNFCCC, supra note 24.
26
Id. art. 1.
27
United Nations Conference on Environment and Development, Rio de Janeiro, Braz., Jun.
3–14, 1992, Rio Declaration on Environment and Development, princ. 1, U.N. Doc. A/
CONF.151/26/Rev.1 (Vol. I), Annex I (Aug. 12, 1992) [hereinafter Rio Declaration].
28
As noted, supra note 24, the Convention on Biodiversity was also signed at Rio in 1992.
29
UNFCCC, supra note 24, art. 3; Rio Declaration, supra note 27, princ. 7. Perhaps the most
controversial concept in the climate change accords, the principle of “common but differ-
entiated responsibility” was intended to recognize that industrialized nations bear a greater
responsibility for the carbon buildup in the atmosphere by virtue of larger historical carbon
emissions than developing countries. Industrialized countries also have greater technological
and economic capacity to reduce climate emissions. As a result, developed countries are held to
more exacting emissions reduction standards than developing nations, which are merely
charged with continuing development in a more sustainable manner.
30
UNFCCC, supra note 24, art. 3; Rio Declaration, supra note 27, princ. 15. The “precautionary”
principle holds that climate change mitigation efforts should not be impeded by concerns
about any perceived or real lack of full scientific certainty regarding the causes and effects of
climate change.
31
Rio Declaration, supra note 27, princ. 16. According to this principle, the polluting party is
made to bear the cost of the pollution, either through taxes on the pollution or regulatory
schemes.
32
UNFCCC, supra note 24, art. 3; Rio Declaration, supra note 27, princ. 7. Sustainable develop-
ment utilizes resources in a way that satisfies a country’s present needs while preserving
resources and the environment for future generations. It is often ensnared with “common
but differentiated responsibilities” as developing countries are asked to pursue “sustainable
development” rather than focus on reducing current pollution levels.
 6.2. An Overview of International Environmental Law 225

6.2.5. Competing Priorities of the Environment and Economic Growth

The international community, however, has never authoritatively resolved the
competing priorities of ecosystem trusteeship and economic growth. The Rio
Declaration did not exalt the environment over economic development,
affirming instead that these goals should be “integrated” but without assigning
a priority between them.33 The political consequences of that ambivalence are
reflected in the making of international environmental law. Precisely because
they need to be flexible in responding to changing political, scientific, and
technological circumstances, environmental treaties tend to be drafted in very
general terms. Rather than settling agreed standards and timetables for action,
they envisage an ongoing consultative process such as a “Committee of the
Parties” to elaborate more detailed rules through later protocols, amendments,
and annexes. In that way, a “regulatory regime” arises to govern specific
aspects of environmental concern. Of course, that incremental process is
well understood by aviation lawyers because it reflects how the principles of
the Chicago Convention and its annexes continue to evolve through ICAO’s
adoption of new and revised SARPs. In the field of international environ-
mental law, the possibility for more detailed bargaining to follow the adoption
of the main text allows a more general treaty to consolidate support and to
build confidence in its principles.

6.2.6. The UNFCCC as an Incremental Model

As its name indicates, the UNFCCC is just such a framework or umbrella
treaty that sets out some important key principles but also reflects the incre-
mental model through a diplomatic process for reaching further and more
detailed agreement on numerical targets for carbon dioxide emissions reduc-
tion. The ultimate objective of the Convention is not to reverse climate
change but to stabilize carcinogenic pollution “at a level that would prevent
dangerous anthropogenic interference with the climate system.”34 The
Convention sets a nonbinding benchmark of a return to 1990 levels of anthro-
pogenic emissions,35 but otherwise appears to tolerate some degree of climate
damage provided that a “time-frame” is created “sufficient to allow ecosystems
to adapt naturally to climate change.”36 Consistent with the Rio Declaration,

33
See United Nations Conference on Environment and Development, Rio de Janeiro, Braz.,
Jun. 3–14, 1992, Agenda 21, U.N. Doc. A/CONF. 151/26 (Aug. 12, 1992).
34
UNFCCC, supra note 24, art.2.
35
See id. art. 4 (although this target is assigned only to “developed” countries).
36
Id. art. 2.
226 The International Law Regime for Aviation and the Environment

the Convention also recognizes that the time-frame must “enable economic
development to proceed in a sustainable manner.”37

6.2.7. The Kyoto Protocol

The 1997 Kyoto Protocol, discussed later in this chapter, was the first milestone
in the serial diplomacy that has characterized the UNFCCC process.38 In
exempting aviation and maritime emissions from its national emissions reduc-
tion targets,39 the Protocol recognized the international nature of these indus-
tries’ emissions (as the EU had also done in initially exempting aviation from
its emissions trading scheme40). But there is some concept slippage in a
document that purports to regulate global emissions multisectorally yet
exempts two key sectors that emit globally.41 The reasons for the exemption
were institutional: deference was paid to the fact that both international
aviation and international shipping have their own intergovernmental speci-
alized agencies (ICAO and the IMO) within the U.N. system.42 Nevertheless,
critics have pointed out that devolving responsibility for emissions reduction
to those agencies carries the risk of regulatory capture of their agenda by the
industries they represent: at least with respect to international aviation, ICAO’s
slow progress toward a multilateral aviation emissions agreement may offer
some support to its critics.43

37
Id.
38
Kyoto Protocol to the United Nations Framework Convention on Climate Change, Dec. 11,
1997, 2303 U.N.T.S. 162 (entered into force Feb. 16, 2005) [hereinafter Kyoto Protocol].
39
See id. art. 2. Aviation, incidentally, was not exempted from the 1987 Montreal Protocol on
substances depleting the ozone layer (see supra note 23). This was not a major issue for the
industry because most of the pollutants regulated by the Protocol were absent from kerosene
emissions.
40
See Brian F. Havel & John Q. Mulligan, The Triumph of Politics: Reflections on the Judgment of
the Court of Justice of the European Union Validating the Inclusion of Non-EU Airlines in the
Emissions Trading Scheme, 37 Air & Space L. 3, 6 (2012) (citing Council Directive 2003/87,
2003 O.J. (L 275)).
41
A sectoral focus, such as nuclear energy, toxic chemicals, and the law of the sea, had been the
dominant approach of international environmental law until the more recent creation of
broader (but still issue-specific) regimes to superintend climate change, protection of the
ozone layer, and biological diversity.
42
In July 2011, the IMO added energy-efficiency requirements to Annex VI of the MARPOL
Convention, supra note 20. The IMO has had ongoing discussions about development of
MBMs for reducing the amount of greenhouse gases produced by the shipping industry.
43
This deficiency has certainly drawn comment with respect to the IMO experience. See
Claybourne Fox Clarke & Thiago Chagas, Aviation and Climate Change Regulation, in
Legal Aspects of Carbon Trading: Kyoto, Copenhagen, and Beyond 606–21
(David Freestone & Charlotte Streck eds.) (2009) (commenting also on close relations between
CAEP and the aviation industry).
 6.2. An Overview of International Environmental Law 227

6.2.8. Future of International Environmental Law

Other than the continued post-Kyoto process, there is little likelihood of major
new treaty initiatives in international environmental law in the coming
years.44 The focus instead will be on consolidating and improving the effec-
tiveness and compliance record of existing regimes. Similarly, calls for a
supranational environmental enforcement agency or judicial tribunal are no
longer likely to be heeded, especially in an era when pallid economic growth
among Western States is forcing them to reassess policy priorities such as
environmental protection. But it is now apparent that international environ-
mental law is no longer just a matter of neighboring States quarrelling over
liability for smokestack contaminants leaking across borders.45 To the extent
that international aviation lawyers should be concerned about the scope of this
relatively new discipline, it is to recognize that international environmental
law now has a global emphasis, and focuses in particular on a preventive and
precautionary approach to management of the ecosystem.

6.2.9. Divergent Paradigms of Airspace Sovereignty

and the Global Atmosphere
Finally, international aviation lawyers watching these developments may be
troubled by one possible legal consequence of the globalization of international
environmental law. The UNFCCC, in its preamble, states the eye-catching
premise that climate change is the “common concern of humankind.”46 The
treaty also attributes climate change to “human activity that alters the compo-
sition of the global atmosphere.”47 Although the treaty makes no express

44
As the Copenhagen (2010), Mexico City (2011), and Durban (2012) summits demonstrated, the
UNFCCC process has been stalled and in some respects defeated by its quest for a binding,
multilateral, multisectoral emissions reduction strategy. Durban produced only an agreement
to pursue a comprehensive climate change treaty to be completed by 2015, but the proposed
accord would not come into effect sooner than 2020. See Establishment of an Ad Hoc Working
Group on the Durban Platform for Enhanced Action, Draft Decision CP.17 (Dec. 2011), http://
unfccc.int/files/meetings/durban_nov_2011/decisions/application/pdf/cop17_durbanplatform.
pdf. A full archive of videos, documents, and other statements released during the 17th
Conference of the Parties to the UNFCCC is available at http://unfccc.int/meetings/dur
ban_nov_2011/meeting/6245.php.
45
An example of a relatively early environmental treaty addressing just such problems is the
Convention on Long-Range Transboundary Air Pollution. Transboundary pollution occurs
when pollution is generated in one State but crosses the border, typically via air or water
pathways, and affects the citizens or environment of another State. See Convention on Long-
Range Transboundary Air Pollution, opened for signature Nov. 13, 1979, 1302 U.N.T.S. 217.
46
UNFCCC, supra note 24, pmbl.
47
Id. art. 1. There are numerous references in the treaty’s text to the “atmosphere.”
228 The International Law Regime for Aviation and the Environment

appropriation of the Earth’s atmosphere to the principle of “common concern”

or common ownership, it is a nice question whether the Chicago Convention’s
doctrine of airspace sovereignty is implicated (if not actually violated) by the
climate change treaty’s ideation of the “atmosphere.”48 Moreover, if the atmos-
phere is to be treated as a “common resource,” as recommended by a prepar-
atory group of legal experts,49 then arguably each member of the community
of States has an identifiable interest under the treaty in how each of its fellow
States manages the atmospheric canopy above its territory. Airspace sovereignty,
in this sense, would be circumscribed by the shared responsibilities of States
in accordance with treaties like the UNFCCC. Here, it seems, international
aviation law and international environmental law reflect strongly divergent
paradigms of global regulation.

6.3. the role of icao in environmental issues

affecting international aviation

6.3.1. ICAO’S Competence for Environmental Issues

International civil aviation, unlike virtually all other major industries, has its
own U.N. specialized agency, ICAO, and a governing treaty, the Chicago
Convention.50 The Convention does not expressly vest ICAO with custody
over aviation emissions reduction (indeed, it hardly mentions environmental
issues at all). But it does provide sufficient authority to the Organization,
through the consent of its 191 State parties, to develop several legal mecha-
nisms that can address this issue with varying degrees of legal bindingness.
What remains in dispute is the exclusivity of ICAO’s competence over interna-
tional aviation emissions and whether the Organization is functionally

48
Thus, the high seas are treated (in the Chicago Convention and elsewhere) as a common area
beyond the reach of any State jurisdiction. See Chicago Convention, supra note 17, art. 12. The
“atmosphere,” on the other hand, is neither a defined term in the UNFCCC nor in general
public international law. As an air mass in constant motion both above and across national
boundaries, it lacks the simple conceptual clarity that the drafters of the Chicago Convention
were able to assume for the term “airspace.”
49
The conception of the atmosphere as a common resource or trust has been put forth at
conferences, in scholarship, and even in judicial opinions. See Meeting Statement from
Protection of the Atmosphere: International Meeting of Legal and Policy Experts, at Ottawa,
Canada (Feb. 20–22, 1989); Mary Christina Wood, Nature’s Trust: A Legal, Political and Moral
Frame for Global Warming, 34 B.C. Envt’l. Aff. L. Rev. 577 (2007); Ramit Plushnick-
Masti, Texas Judge Rules Atmosphere, Air is Public Trust, Associated Press, July 12, 2012.
50
See Chicago Convention, supra note 17. For a detailed discussion of the Convention, see supra
Chapter 2.
 6.3. The Role of ICAO in Environmental Issues 229

capable of facilitating a true international consensus on emissions reduction.

It is worth noting, also, that the U.N. Charter contains no explicit charge to the
world organization itself to act as a policymaker in international environ-
mental matters. The environment was not a legislative issue at the time of
the adoption of the Charter in 1945, nor was it when the Chicago Convention,
ICAO’s founding instrument, was negotiated and signed in 1944. The emer-
gence of a U.N. environmental competency, as with ICAO, was the result of
giving a broad teleological interpretation to the Charter and to the implied
powers of that organization. The specialized agencies, also, were not endowed
with specific powers over the environment but have evolved their own com-
petency through interpretation and practice.51

6.3.2. Path to ICAO Oversight

International aviation’s contribution to global climate change lies at the core
of ICAO’s current policy agenda on the environment. According to the
Intergovernmental Panel on Climate Change (IPCC),52 global temperatures
are on the rise due to rapid increases in greenhouse gas emissions produced by
human activity.53 In response to global warming concerns, as we have seen,
world leaders instructed their ministers and diplomats to forge several interna-
tional agreements to reduce greenhouse gas emissions. As noted earlier, the
Rio Conference in 1992 agreed to the UNFCCC which, inter alia, establishes
a framework for intergovernmental cooperation and information-sharing
related to emissions, national environmental regulations, and best practices;
inaugurates a series of domestic and international strategies for adapting to the
impact of climate change; and classifies State parties according to the level of
obligations they are expected to accept in order to scale back their output of
greenhouse gases.54 Although the treaty framers chose not to address the air

51
Notice that the ICJ has taken a relatively strict view of how generously the powers of the
specialized agencies should be interpreted vis-à-vis the parent organization. See Legality of
the Use by a State of Nuclear Weapons in Armed Conflict, Advisory Opinion, 1996 I.C.J. 66,
78–79, para. 25 (Jul. 8, 1996) (“[International organizations] are invested by the States which
create them with powers, the limits of which are a function of the common interests whose
promotion those States entrust to them”).
52
As indicated supra note 3, the IPCC is an international scientific body jointly established by the
U.N. and the World Meteorological Organization.
53
See generally IPCC, Summary for Policymakers, supra note 3. For a more detailed
discussion of the potential adverse effects of global warming on the environment, see IPCC,
Impacts, Adaptation and Vulnerability, supra note 3. The Panel’s next inclusive report
on global warming is scheduled to be released in 2014.
54
See UNFCCC, supra note 24.
230 The International Law Regime for Aviation and the Environment

transport industry directly, the 1997 Kyoto Protocol to the UNFCCC man-
dates that developed States which have ratified that instrument must “pursue
limitation or reduction of greenhouse gases . . . from aviation [by] working
through [ICAO] [.]”55 The following year, ICAO adopted Resolution A32–8,
an update to the Organization’s Consolidated Statement of Continuing ICAO
Policies and Practices Related to Environmental Protection,56 designating
ICAO’s special committee on the environment, CAEP,57 to study the effects
of aviation emissions on climate change and to develop policies based on its
findings.58 At ICAO’s triennial Assembly meetings in 2007 and 2010, the
Organization’s member States adopted Resolutions (A36-22 and A37-19,
respectively) reaffirming the Organization’s legitimacy as the lead interna-
tional body to execute a global response to aviation’s role in climate change.59
In the 2010 Resolution, however, ICAO seemed implicitly to contemplate
other fora for transnational aviation emissions initiatives, urging States to
respect the annexed Guiding Principles for MBMs (see below) “and to engage
in constructive bilateral and/or multilateral consultation and negotiations
with other States to reach an agreement.”60 With respect to emissions reduc-
tion, the 2010 Resolution also sets a desired but nonbinding target for “global
annual average fuel efficiency improvement” of 2% until 2020, and carbon-

55
Kyoto Protocol, supra note 38, art. 2(2). The Protocol makes a division between Annex I and II
parties, which are committed to reduce greenhouse gas emissions, and non-Annex parties
comprised of developing countries that are not required to make emissions reduction commit-
ments. Ironically, three of the world’s leading greenhouse gas emitters – China, India, and
Brazil – are not Annex I parties. See Larry Parker & John Blodgett, Cong. Research
Serv., RL 32721, Greenhouse Gas Emissions: Perspectives on the Top 20
Emitters and Developed Versus Developing Nations 14 (2008).
56
International Civil Aviation Organization, Consolidated Statement of Continuing ICAO Policies
and Practices Related to Environmental Protection, Assem. Res. A32–8 (2000), compiled in
Assembly Resolutions in Force, ICAO Doc. 9790 (2001). The Consolidated Statement of
Continuing ICAO Policies and Practices Related to Environmental Protection is updated every
three years at the ICAO Assembly session. The most recent update of ICAO resolutions included
a separate consolidated statement on climate change distinct from the statement regarding other
environmental concerns. See ICAO, Assembly Resolutions in Force, ICAO Doc. 9958 (2010).
57
See supra Section 6.1.1.
58
Resolution A32-8 has since been superseded by subsequent resolutions addressing aviation and
environmental protection. See ICAO, Assembly Resolutions in Force, ICAO Doc. 9958 (2010).
59
See ICAO, Consolidated Statement of Continuing ICAO Policies and Practices Related to
Environmental Protection, app. A, Assem. Res. A36-22 (2007), compiled in Assembly
Resolutions in Force, ICAO Doc. 9902 (2007); ICAO, Consolidated Statement of Continuing
ICAO Policies and Practices Related to Environmental Protection – Climate Change, Assem.
Res. A37-19, compiled in Assembly Resolutions in Force, ICAO Doc. 9958 (2010) [hereinafter
ICAO Res. A37-19]. New amendments to these policies, adopted at ICAO’s 38th Assembly in
October 2013, have yet to be officially published as this book goes to press.
60
ICAO Res. A37-19, supra note 59, para. 14.
 6.3. The Role of ICAO in Environmental Issues 231

neutral growth thereafter.61 Curiously, unlike the methodology adopted in the

UNFCCC, the Resolution imposes no binding obligation on member States to
report relevant annual carbon emissions to ICAO.62 All of the ICAO Assembly
Resolutions, however, constitute soft law to the extent that they are not techni-
cally binding on States and lack legal enforceability, as we will discuss later in
this chapter. But they still serve as a signaling device among the State parties that
reveals attitudes toward the relationship between aviation and the phenomenon
of climate change, including the willingness of States to submit their airlines to
potentially costly emissions reduction mandates. As this book goes to press in
late 2013, ICAO has been charged by its members with developing a “hard law”
solution to the aviation emissions problem no later than the Organization’s
autumn 2016 Assembly meetings and with an eye to full implementation in
2020. Given the Organization’s mixed record on emissions abatement as well as
the challenges of trying to corral more than 190 States into endorsing an agree-
ment that will have widely varying effects on their respective aviation econo-
mies, hortatory resolutions may be the most that ICAO will be able to muster.

6.3.3. Role of SARPs: Annex 16

Within the range of its express powers, ICAO can do little directly to regulate
aviation emissions. As a historical matter, given the dearth of knowledge about
climate science in 1944, this is understandable. Even so, as discussed above and
in Chapter 1, ICAO – through the consent of its members – can promulgate
SARPs as annexes to the Chicago Convention in order to encourage harmo-
nization of critical issues in air transport, including safety standards, navigation
protocols, and various technical specifications.63 With respect to the environ-
ment, Annex 16, now divided into two distinct chapters,64 includes standards for
61
Id. paras. 4, 6. Notice the emphasis on fuel-efficiency improvements rather than emissions
targets until 2020. Discussions to date also indicate that domestic aviation will be included in
ICAO’s global emissions reduction efforts. See ICAO Executive Committee Working Paper,
Development of a Global Framework for Addressing Civil Aviation CO2 Emissions, A37-WP/
217 EX/39 (2010). However, no specific recommendation to incorporate domestic aviation
into a future ICAO-brokered emissions agreement has been announced thus far. See gen-
erally ICAO Executive Committee Working Paper, Consolidated Statement of Continuing
ICAO Policies and Practices Related to Environmental Protection – Climate Change, A38-
WP/34 EX/29 (2013).
62
But ICAO member States are “encouraged” to submit action plans and to report emissions. See
ICAO Res. A37–19, supra note 59, para. 9.
63
See supra Chapter 1, Section 1.6.2, and Chapter 2, Sections 2.6.6., 2.6.7.
64
Annex 16 was first developed in 1971 to regulate aircraft noise. The 1972 U.N. Conference on the
Human Environment led to ICAO Assembly Resolutions A18-11 and A18-12 recognizing
aviation’s potential to adversely impact the environment and ICAO’s role in developing
environmental standards. An ICAO study group identified vented fuel, smoke, and gaseous
232 The International Law Regime for Aviation and the Environment

aircraft engine design to prevent liquid fuel expulsions during operation (“fuel
venting”), while also establishing requirements to limit the discharge of smoke,
hydrocarbons, carbon dioxide, and nitrogen oxide. Notably, two of the largest
identified contributors to the so-called greenhouse effect, dihydrogen oxide and
carbon dioxide, are left untouched by the Annex.65 The limited scope of the
SARPs dealing with emissions has prompted calls for an overhaul of Annex 16 to
include more comprehensive coverage of greenhouse gas standards, along with
stricter requirements for airlines to phase out noncompliant engines. Little
action has been taken on either front. CAEP is charged with updating Annex
16, but seems to have settled into serving primarily as a research arm and, to
some degree, as a clearinghouse for aviation emissions data and best practices
with respect to abatement measures.66

6.3.4. Legal Status of SARPs

Relying only on SARPs to achieve emissions reductions is problematic: they
are, at best, legally ambiguous.67 The thirty-six member ICAO Council has
the power to adopt new SARPs by a two-thirds majority vote, but their
adoption can be nullified if a simple majority of the ICAO membership chooses
to reject them.68 Further, depending on whether a potential emissions
abatement requirement is framed as a “standard” or a “recommended practice,”
it is conceivable that some ICAO member States might question its manda-
tory status.69 And even if a supermajority of ICAO’s Council membership had
the political will to enhance Annex 16’s emissions measures, the Convention
emissions as subjects for regulation. In 1977, the ICAO Council added a Committee on Aircraft
Engine Emissions (CAEE), which would be the precursor to the CAEP. After a decade’s worth
of study, standards for engine emissions were adopted in 1981, prompting Annex 16’s renaming
and division into two volumes: Volume I, Aircraft Noise, and Volume II, Aircraft Engine
Emissions. See ICAO, International Standards and Recommended Practices:
Environmental Protection, Annex 16, foreword.
65
This is because the first engine emissions standards were devised to limit the impact of smoke,
fuel venting, and gaseous emissions on the immediate environments through which aircraft
traveled, and not because of any concern to reduce aviation’s contributions to the atmospheric
greenhouse gas buildup driving global climate change.
66
See, e.g., ICAO, Offsetting Emissions from the Aviation Sector, ICAO Doc. 9951 (2011); ICAO,
Scoping Study on the Application of Emissions Trading and Offsets for Local Air Quality in
Aviation, ICAO Doc. 9948 (2011).
67
See supra Chapter 2, Section 2.6.7.
68
See Chicago Convention, supra note 17, art. 90.
69
Although often discussed collectively under the acronym SARPs, standards and recommended
practices are actually distinct in that compliance with standards is deemed necessary and any
contracting State that is unable to comply with a standard is required to notify ICAO.
Recommended practices are considered desirable and it is not mandatory to report noncom-
pliance. See supra Chapter 2, Section 2.6.7.
 6.3. The Role of ICAO in Environmental Issues 233

allows States that are unable (or unwilling) to comply with a newly
promulgated standard to provide ICAO with notice to that effect without incur-
ring penalties.70

6.3.5. Exclusivity of ICAO’s Emissions Reduction Competence

and the Issue of MBMs
The argument that ICAO should attempt directly to regulate emissions
through SARPs is motivated by the possibly mistaken belief that the
Organization now holds exclusive competence over the disposition of the
issue of reducing aviation emissions. We have seen how the Kyoto Protocol
requires States to work through ICAO, although that mandate is restricted to
developed States that are signatories to the UNFCCC (the so-called Annex I
parties).71 The early triennial Assembly Resolutions that reaffirm ICAO’s
leadership72 are unspecific with respect to whether ICAO envisions an inter-
national treaty establishing MBMs (such as emissions trading or eco-taxes) or
simply plans a nonbinding framework on MBMs and nothing more. The
most recent Assembly Resolution, adopted in October 2013, calls upon ICAO
to create a global MBM scheme by 2016. Presumably, such a scheme would
require a fresh treaty instrument.73 The 2010 and 2013 Resolutions do set forth,
however, a series of “Guiding Principles” for MBMs that States can pursue
both bilaterally and multilaterally. Even though ICAO member States are
free (in a technical sense) to disregard these Principles, their value lies in
providing a common road map to emissions reduction. The Principles advo-
cate that MBMs support sustainable development in the international avia-
tion sector; be transparent and administratively simple; be cost-effective;
minimize carbon leakage and market distortions; and ensure the fair treat-
ment of international aviation in relation to other sectors.74 In addition, the

70
See Chicago Convention, supra note 17, art. 38 (a State’s nonconformity with a promulgated
recommended practice, on the other hand, does not carry a requirement of notification to
ICAO). For more on the shortcomings of the Convention’s enforcement mechanisms, see
supra Chapter 2, Part 2.6. ICAO employs the Universal Safety Oversight Audit Program as its
primary enforcement mechanism for SARPs concerning aviation safety. States are audited for
compliance with safety standards and the results of the audits are made public. See supra
Chapter 5, Section 5.3.5. The audit program has not been extended to Annex 16 SARPs,
however, making compliance even more uncertain.
71
See supra note 55 (explaining distinction between Annex I and II parties and non-Annex
parties).
72
See supra note 59 and accompanying text.
73
See, e.g., ICAO Res. A37–19, supra note 59, para. 13. See Press Release, supra note 7.
74
Id. annex. This annex of “Guiding Principles” remains unchanged by the 2013 Resolution.
234 The International Law Regime for Aviation and the Environment

Principles recommend that “where revenues are generated from MBMs . . .

they should be applied in the first instance to mitigating the environmental
impact of aircraft engine emissions, including mitigation and adaptation, as
well as assistance to and support for developing States[.]”75 Finally, the 2010
and 2013 Resolutions imply that States should only apply MBMs to foreign
carriers on the basis of mutual consent.76 Unilateralism, for reasons discussed
shortly, is greatly disfavored.

6.3.6. An Aviation Emissions Reduction Regime Outside ICAO?

The Kyoto Protocol, as noted, calls upon only a select number of its
signatories to “work through” ICAO, without providing further details on
what this process might entail in practice. Presumably, so long as the State
parties to the Protocol do not disregard the Organization’s mandates as
specified in the Chicago Convention and elaborated in Assembly
Resolutions, there is no conflict if States should choose to negotiate a
bilateral or multilateral emissions reduction treaty outside the auspices of
ICAO.77 ICAO’s own pronouncements seem to suggest that it would acqui-
esce in complementary (or even rival) initiatives.78 To date, it has merely
exhorted its membership “to refrain from environmental measures that
would adversely affect the orderly and sustainable development of interna-
tional civil aviation,” as well as “to continue to cooperate closely with
international organizations” on climate change.79 Importantly, however,
the Organization qualifies this arguably permissive language with a warning
that States should not “implement an emissions trading system on other
[Chicago Convention] [c]ontracting States’ aircraft operators except on the
basis of mutual agreement between those States.”80 That caveat was, of
course, motivated by the EU’s recent incorporation of all non-EU carriers
into its ETS, but the Resolution also reflects the general stance of ICAO’s
members against emissions unilateralism.

75
Id. This principle is especially important to note in light of Article 15 of the Chicago
Convention, see infra Section 6.4.2.
76
See, e.g., ICAO Res. A37-19, supra note 59, para. 14 (recommending bilateral or multilateral
negotiations before MBMs are adopted by any State).
77
The Court of Justice of the European Union (CJEU) has affirmed this proposition. See
Havel & Mulligan, supra note 40, at 25–26; see also infra Section 6.4.6.
78
See ICAO Res. A37-19, supra note 59, para. 14.
79
Assem. Res. A36-22, supra note 59, paras. 9–10.
80
Id. para. 1(b)(1).
 6.4. The Chicago Convention and Aviation Emissions Regulation 235

6.4. the chicago convention and aviation

emissions regulation

6.4.1. Key Principles of Multilateralism, Reciprocity,

and Mutual Consent
The issue of unilateralism, then, is central to an understanding of how the
Chicago Convention and ICAO’s mandates seek to reconcile the airspace
sovereignty principle in Article 1 of the Convention with the imperative of
making international air travel functionally possible across national borders.
As we will discuss, the Convention includes prohibitions on discrimination
and places limits on charges (including, it can be argued, environmentally
motivated charges) to foreign carriers. These provisions reflect an understand-
ing that while States retain control over their national airspaces, international
aviation ultimately relies on a sense and pattern of comity between States. The
industry has a rich history (much of it achieved through ICAO) of multilateral
technical cooperation, and ICAO’s rejection of unilateral emissions reduction
initiatives reflects normative deference to the importance of multilateralism,
reciprocity, and mutual consent.

6.4.2. Constraints on Unilateral Action (1): Articles 1, 12,

and 15 of the Chicago Convention
The Chicago Convention, in fact, can be read as placing strong legal con-
straints on unilateral action. For instance, Article 1, which codifies the custom-
ary international law principles of airspace sovereignty, arguably constrains
the regulatory reach of States seeking to control the emissions released by
foreign carriers into the common planetary atmosphere.81 So, too, does Article
12, which indicates (albeit in implicit rather than explicit terms) that only
ICAO has the authority to regulate flights over the high seas.82 These provi-
sions would readily call into question the legality of, for example, an EU-
imposed flight ban on U.S. airlines over the Pacific Ocean or an EU eco-tax on

81
The EU’s Court of Justice did not agree with that proposition. The CJEU insisted that when
non-EU airlines use EU airports during any point in their journeys, they are subject to the
“unlimited jurisdiction of the European Union.” Case C-366/10, The Air Transport Ass’n of
America, American Airlines, Inc., Continental Airlines, Inc., United Airlines, Inc. v. The Sec’y
of State for Energy and Climate Change, 2010 O.J. C-260/12, referred by U.K. High Court of
Justice, Q.B. Div. (Admin. Ct.), para. 125.
82
But note that, under the Chicago Convention, the State of aircraft registration may continue to
regulate the aircraft of its air carriers regardless of where they are flying in the world. Chicago
Convention, supra note 17, art. 12.
236 The International Law Regime for Aviation and the Environment

Canadian carriers for the emissions they discharge over the Yukon. Greater
subtlety and some greater complexity is introduced by a cap-and-trade system
of charges whereby any U.S. or Canadian carrier operating to or from the
territory of the EU is expected to pay for all of the carbon emissions discharged
on its journey as a condition for entering or exiting EU territory.83 Such a
measure would seem to implicate Article 15 of the Convention, which pro-
vides that “[n]o fees, dues, or other charges [other than charges imposed for
the use of airports or air navigation facilities] shall be imposed by any
Contracting State in respect solely of the right of transit over or entry into or
exit from its territory of any aircraft of a Contracting State[.]”84 Article 15 was
designed to ensure that an international air carrier would not be at risk of being
encumbered by multiple species of taxes in any State to or from which it
wished to offer air services. ICAO has glossed Article 15 to mean that the
Convention permits the imposition of charges specifically (and only) to
recover the costs of providing facilities and services to airlines engaged in
international air transport.85 Under ICAO’s reading, MBMs directed at off-
setting emissions, such as cap-and-trade or eco-taxation, but which are unre-
lated to the provision of airport and air navigation services to international
aviation, would constitute a charge “in respect solely of the right of transit over
or entry into or exit” and would be impermissible under the Convention.86 A
possible counterargument holds that Article 15 refers only to “charges” and not
explicitly to a “tax,” and that therefore a tax – even if imposed “solely” on the
right of transit, entry, or exit – is otherwise permissible. Although it is true
that the official English language version of Article 15 does not mention the
word “tax,” the equally valid French, Spanish, and Russian texts do.87 Indeed,
the other authoritative translations offer powerful evidence that the

83
Indeed, this is exactly the effect of the EU’s decision to bring international aviation into its
Emissions Trading Scheme. For more on the EU ETS, see supra Section 6.1.2.
84
Chicago Convention, supra note 17, art. 15.
85
See ICAO, ICAO Policies on Charges for Airports and Air Navigation Services, para. 1, ICAO
Doc. 9082/7 (7th ed. 2004). Admittedly, ICAO’s understanding of the Chicago Convention
carries only persuasive authority. Unlike the WTO, it does not have the power to issue binding
interpretations of its own agreements. Cf. Marrakesh Agreement Establishing the World Trade
Organization art. IX(2), Apr. 15, 1994, 1867 U.N.T.S. 154 [hereinafter WTO Agreement].
86
A more moderate interpretation of Article 15 is that emissions-abatement measures are them-
selves part of the cost of providing airport and air navigation services. But we do not think that a
more moderate interpretation would allow a generalized “environmental” tax, where emissions
are targeted in gross without specific remediation actions.
87
The English text of Article 15 includes a prohibition against “fees, dues or charges.” The
French, Spanish, and Russian translations of the Convention all use their languages’ respective
terms for taxation instead of “dues.” See Chicago Convention, supra note 17, art. 15, multi-
lingual text, http://www.icao.int/publications/Documents/7300_cons.pdf.
 6.4. The Chicago Convention and Aviation Emissions Regulation 237

Convention drafters intended to exclude “taxes,” along with “fees,” “dues,”

and “charges,”88 that are not imposed to recover the costs of air navigation and
the use of airports. This is a sensible reading of the Chicago Convention: to
argue that Article 15 does not deal explicitly with taxes, and that therefore taxes
are unregulated by the Convention, would deprive Article 15 of substantive
force and allow States to levy all kinds of treasury taxes without any need for
cost justification. That is probably why, for example, Article 15 provides in
express terms that no charges shall be imposed solely for the right to exit a
State’s airspace89 – by definition, such activities could occur without necessa-
rily implicating a government-provided service.90

6.4.3. Constraints on Unilateral Action (2): Article 24

of the Chicago Convention
The only other use of the term “charge” in the Convention appears in Article
24, in a separate and subsequent chapter captioned “Measures to Facilitate Air
Navigation.” Article 24 defines an impermissible charge as including “customs
duties, inspection fees, or similar national or local duties or charges.”91 It is
evident from the respective placement of these Articles that Article 24 is merely
a specific example of the general provision on airport and air navigation

88
As indicated, supra note 87, these are the terms used in the English language recitation in
Article 15.
89
Also, the reference in Article 15 to “overflight,” in respect of which no airport charges are
required, suggests that Article 15 is an absolute rule rather than, as some have argued, a
nondiscriminatory rule to protect foreign carriers against their domestic counterparts. The
Chicago Convention is concerned with international air transport. It is unlikely that the parties
intended by the word “solely” to mean that States could impose charges on international air
transport provided that they also did so with respect to domestic air transport. The parties would
not have been interested in what States did with regard to air transport within their own
territories. The Article 15 prohibition, therefore, cannot be vitiated simply by applying the same
tax to domestic carriers.
90
Defenders of unilaterally imposed charges may point to Article 11 of the Convention, which
provides that the “laws and regulations of a contracting State relating to the admission to or
departure from its territory of aircraft engaged in international navigation . . . shall be complied
with by such aircraft upon entering or departing from or while within the territory of that State.”
Chicago Convention, supra note 17, art. 11. Article 11, however, does not offer a passe-partout for
all kinds of taxes to be imposed by contracting States on the basis that it requires compliance with
national laws and regulations (including, presumably, national tax laws and regulations). In light
of the obligations accepted by the contracting States in Article 15 (and in Article 24, discussed
infra in the main text), the Convention is unlikely to support such an interpretation. Otherwise,
once again, there would be virtually no restriction on a State’s ability to impose taxes on
international civil aviation as a condition “solely” for entry into or exit from that State’s territory.
91
See Chicago Convention, supra note 17, arts. 15, 24.
238 The International Law Regime for Aviation and the Environment

charges in Article 15.92 Once again, that interpretation finds support in ICAO’s
own statement that customs duties levied by a taxing authority on fuel,
lubricants, or aircraft stores cannot be imposed except to the extent that they
are based on the actual costs of providing airport or air navigational facilities
and services and used to finance the costs of providing them.93

6.4.4. No Constraints on Curbing National Airline Emissions

Taken together, Articles 15 and 24 most likely limit the regulatory reach of
States in environmental matters while also defining the scope of regulations
that involve taxes and charges. They say nothing, however, concerning the
regulations – including MBMs to offset aviation emissions – that a State may
impose on its own airlines for hydrocarbon discharges that occur within or
beyond its territory. Rather, a State is barred from unilaterally imposing taxes
or charges or other regulations that discriminate against or among foreign
airlines operating within its territory94 or extending such impositions (discrim-
inatory or otherwise) to foreign airlines operating outside its territory. Under
this reading of the Chicago Convention, the United States could apply an
“eco-tax” to Delta Air Lines for emissions released both within and outside
U.S. sovereign airspace. But the U.S. authorities could not extend such a tax to
Lufthansa for its EU-based emissions. Under a strong reading of Article 15, in
fact, no U.S. taxes could be imposed on Lufthansa for any emissions in U.S.
airspace unless the tax were intended in its entirety as a recoupment of the cost
of providing airport or air navigational facilities.95

92
This proposition also follows logically from ICAO’s own (albeit nonbinding) interpretation
that the Convention “did not attempt to deal comprehensively with tax matters.” ICAO,
ICAO’s Policies on Taxation in the Field of Air Transport, intro., para. 2, ICAO Doc. 8632
(1999) [hereinafter Policies on Taxation]. In other words, as noted supra in the main text, the
Convention appears to define a permissible range of cost-related charges in Article 15, and later
provides an illustrative example of impermissible non-cost-related charges (labeled as fees or
duties) in Article 24.
93
See ICAO, Council Resolution on Taxation of International Air Transport, para. 1(b)(e), in
Policies on Taxation, supra note 92. As the Commentary on the Resolution, para. 5, in Policies
on Taxation, id., also makes clear, the name attached to a levy (e.g., tax, charge, emissions
trading) is not dispositive of its effects. In other words, within the Convention system, there is no
such thing as a permissible tax that bears no relationship to a cost incurred for service provided.
Article 24, therefore, appears to be best understood as being defined ultimately by its relation-
ship to Article 15.
94
This is because of an earlier clause in Article 15 which states that “[a]ny charges that may be
imposed . . . by a contracting State for the use of . . . airports and air navigation facilities by the
aircraft of any other contracting State shall not be higher” than the State applies “to its national
aircraft engaged in similar international services.”
95
See supra Section 6.4.2.
 6.4. The Chicago Convention and Aviation Emissions Regulation 239

6.4.5. The Chicago Convention and Non-ICAO Emissions Agreements

The Chicago Convention falls silent, however, on the question of whether two
or more of its State parties could agree among themselves on an emissions
taxing or trading system to be applied only to the airlines of the agreement –
and without regard to the site of the emissions or any connection to the
provision of navigation or other services. ICAO, as discussed above, already
presupposes the legitimacy of such accords, whether reached bilaterally or
multilaterally.96 So long as all parties to the agreement apply the MBMs to their
own carriers and to no other party’s or nonparty’s airlines, there is no conflict
with the Chicago Convention. That view is consistent with Article 58(1)(b) of
the Vienna Convention on the Law of Treaties, which states that “[t]wo or
more parties to a multilateral treaty may conclude an agreement to suspend the
operation of provisions of that treaty” so long as “the suspension in question
is not prohibited by the treaty,” “does not affect the enjoyment by the other
parties of their rights under the treaty,” and “is not incompatible with the object
and purpose of the treaty.”97 A murkier question is whether a party to such an
aviation emissions agreement could cede regulatory control in this area to
another party (or parties). For example, could the United States and EU
develop a uniform emissions taxing scheme that imposed a fixed charge on
both parties’ airlines for all takeoffs or landings anywhere in the world, and
agree further that the scheme would be administered solely by the United
States? Presumably yes, so long as the rights of third parties to the Chicago
Convention were not infringed. As Joost Pauwelyn has argued with respect to
conflicts between WTO law and other international agreements concluded
between WTO member States, so long as the obligations made under WTO
law are reciprocally given, they can be reciprocally waived through the oper-
ation of another treaty. In most such cases, where third-party rights are not
violated, the non-WTO treaty prevails.98 Under Pauwelyn’s interpretation, two
WTO members could agree bilaterally to refrain from importing certain
species of fish from each other for a period of ten years in order to help quell
the effects of overfishing, but they could not agree to restrict imports of the same
species from third-party members.99 The same logic applies in our projected

96
See supra Section 6.3.6.
97
See Vienna Convention on the Law of Treaties, May 23, 1969, 1155 U.N.T.S. 331, art. 58(1)(b).
The Convention adds the caveat that suspensions must be “temporary,” although it fails to
provide a definite timetable.
98
See Joost Pauwelyn, Conflict of Norms in Public International Law: How
WTO Law Relates to Other Rules of International Law 491 (2003).
99
See id.
240 The International Law Regime for Aviation and the Environment

scenario: the EU could agree to cede control over emissions-related taxation

of its airlines to the United States, but could not grant the United States any
rights to tax non-EU air carriers, even with respect to emissions released
within EU territory.100

6.4.6. Absence of Authoritative Rulings

Neither ICAO, in its guise as a limited dispute settlement body,101 nor the ICJ,
serving as a recognized tribunal for Convention-related disputes,102 has ever
issued an authoritative ruling on the issues raised in this part. Although several
local courts, including the Netherlands Supreme Court and the Court of
Justice for the European Union (CJEU), have confronted the application of
the Convention to national (or supranational) emissions abatement regula-
tions, their decisions carry little transnational heft.103 The CJEU was asked to
assess (among other things) whether the Chicago Convention barred the
application of the EU’s ETS to non-EU airlines. The Court’s ruling that the
Convention is in no way binding on the EU (only on its individual Member
States) is not sitting well with the international community.104 Indeed, dissat-
isfaction with the CJEU decision has prompted several major aeropolitical
powers, including China and the United States, to contemplate a formal
challenge to the ETS before ICAO.105 Unless the matter is mediated, a final
decision – assuming one is rendered at all106 – could take years.

100
The reason is simple: the tax would, arguably, still violate Article 15 with respect to all non-EU
airlines.
101
See Chapter 2, Part 2.6 (discussing ICAO’s dispute settlement provisions).
102
See Chicago Convention, supra note 17, art. 86.
103
See Brian F. Havel & Niels van Antwerpen, The Dutch Ticket Tax and Article 15 of the Chicago
Convention, 34 Air & Space L. 141 (2009); Brian F. Havel & Niels van Antwerpen, The Dutch
Ticket Tax and Article 15 of the Chicago Convention (Continued), 34 Air & Space L. 447 (2009).
104
See Case C-366/10, supra note 81. Although it is clear that the EU is not a contracting party to
the Chicago Convention, the logic of the CJEU judgment suggests that EU Member States
could declare themselves unbound by the Convention when acting in concert through their
EU common institutions. Similarly, if it could find willing partners, the EU could negotiate
bilateral or multilateral treaties without reference to the international law principles of the
Convention. See Havel & Mulligan, supra note 40, at 10, 16. That is not a sustainable frame-
work for international aviation law.
105
See Valeri Volcovici, U.S. Airline Industry Urges Obama to Block EU Carbon Scheme,
Reuters (Sept. 18, 2012), http://www.reuters.com/article/2012/09/18/uk-airlines-eu-emissions-
idUSLNE88H00C20120918. China passed legislation that would prohibit its carriers from
complying with the EU scheme, as did the United States, which enacted the European
Union Emissions Trading Scheme Prohibition Act, Pub. L. No. 00, 126 Stat. 1477 (2012). On
the deferral of the implementation of the ETS on flights to and from the EU, see supra note 11.
106
In the case of ICAO, this is not a safe assumption to make. See supra Chapter 2, Part 2.6.
Nevertheless, ICAO has refreshed its commitment to forging an international aviation
 6.5. The Role of Air Services Agreements 241

6.5. the role of air services agreements

in environmental regulation

6.5.1. Environmental Measures in ASAs

Even though States would prefer to establish global rules for aviation emis-
sions, they are reluctant to wait for ICAO to invent a multilateral response.
Some States, therefore, have begun to insert environmental measures into
their air services agreements (ASAs), but primarily to protect the commercial
interests of their airlines. For instance, while Article 15(3) of the 2007 U.S./EU
Air Transport Agreement requires the parties to follow ICAO’s environmental
standards,107 it also requires each party to limit the application of environ-
mental regulations that may adversely affect the market access privileges
granted under the treaty.108 The Agreement also stipulates that both sides are
to consult with one another through a novel collaborative entity, the Joint
Committee,109 in order to assess the impact that any environmental regulation
may have on the terms of the accord.

6.5.2. A Criticism of ASA Safeguard Provisions

Safeguard provisions of this type, which are increasingly a staple of ASAs,
could be criticized by environmentalists for undermining the right of States to
protect the environment. On the other hand, international trade lawyers
would retort that environmental and other social regulations can serve pro-
tectionist goals if the trade climate shifts.110 It is also conceivable, of course,
that environmental provisions in ASAs could be enhanced to include cooper-
ative arrangements on environmental protection. In addition to the reciprocal
imposition of MBMs discussed in the preceding part, joint programs to
research and develop green technologies or to upgrade ATM systems for
interoperability can also suppress the adverse impact of aviation emissions.
States that are politically committed to climate change reversal may use their

emissions agreement, although the particular terms of such a treaty remain undetermined. See
supra note 7.
107
See Air Transport Agreement, U.S.-EU art. 15(3), Apr. 30, 2007, 2007 O.J. (L 134) 4, 46 I.L.M.
470, as amended by Protocol to Amend the Air Transport Agreement, U.S.-EU, Jun. 24, 2010,
2010 O.J. (L 223) 3 [U.S./EU Air Transport Agreement].
108
See id. art. 15(2), 15(3).
109
On the role of the Joint Committee generally, see infra Section 6.6.2.
110
See Jonathan Baert Wiener, On the Political Economy of Global Environmental Regulation, 87
Geo. L.J. 749, 771–88 (1999) (describing the prevalence of attempted rent-seeking in global
environmental regulation).
242 The International Law Regime for Aviation and the Environment

ASAs to “purchase” support for emissions reduction standards, even condi-

tioning wider market access privileges on other States’ compliance with
agreed-upon reduction benchmarks.

6.6. the legal and political prospects

for a multilateral aviation emissions treaty

6.6.1. An Alignment of Political Will

A sectoralized emissions treaty for the international aviation industry is fea-
sible because the principal stakeholders have acted publicly to make it so.
ICAO’s member States have already agreed in principle to develop MBMs to
cut aviation emissions at the global level. The International Air Transport
Association (IATA), the representative trade group for most of the world’s
international airlines, has pledged carbon-neutral growth in the sector from
2020 onward and to halve carbon emissions by 2050 compared to 2005 levels.111
And, as discussed earlier, the EU has begun unilaterally to sweep all flight
operations touching any EU airport into its carbon trading system, the world’s
largest.112 Support for emissions reduction in the aviation sector from govern-
ment and industry stakeholders indicates an opportune alignment of political
will for a sector-specific approach rather than a global multisectoral one. No
comparable alignment of interest appears to exist in any other global industry.
From the perspective of the international air transport industry, although the
policy drivers for an emissions reduction agreement are not entirely altruistic,
they have no need to be. The airline industry has long enjoyed trade “excep-
tionalism,” and has been comfortable with it, since the signing of the Chicago
Convention nearly seventy years ago. Industry stakeholders acknowledge that a
sectoralized agreement can ensure the economic sustainability of interna-
tional aviation, even though the participating States must also seek an optimal
level for emissions reduction. For governments, there is clear political advant-
age to supporting a sectoral response by the world’s most visible services
industry. Emissions reductions pursued by one of the great enablers of global-
ization would have powerful “demonstration” effects for other industries as
well as for States.

111
See IATA, Fact Sheet: Environment, http://www.iata.org/pressroom/facts_figures/fact_sheets/
pages/environment.aspx. IATA’s reduction targets are shared by other industry trade groups as
affirmed in ICAO Resolution A37–19. See ICAO Res. A37–19, supra note 59.
112
See supra Section 6.1.2.
 6.6. The Prospects for a Multilateral Aviation Emissions Treaty 243

6.6.2. A Regional Approach to Aviation Emissions

Reduction: The U.S./EU ASA
Because of the wide disparity of State interests, however, we do not think that a
global sectoralized airline emissions treaty embracing all of the world’s States is
immediately feasible.113 In our view, one of the most promising settings for this
kind of sectoral initiative is the landmark Air Transport Agreement signed by the
United States and European Union in 2007.114 The sharp divide between these
two aviation superpowers on the EU’s ETS did not prevent U.S. and EU
negotiators from concluding a comprehensive “open skies plus”115 treaty that
scrapped decades of calcified restrictions on the exchange of air traffic access
rights between their two jurisdictions. As noted earlier, the Agreement did more
than liberalize air traffic rights. In a radical break with the template for bilateral
air services negotiations, U.S. and EU aviation officials added several chapters to
the 2007 Agreement that contemplate regulatory convergence (and even even-
tual harmonization) in areas such as security, safety, competition, and the
environment. In another remarkable innovation, the Agreement has a standing
body, the Joint Committee, to steer the process of convergence through con-
sensus. On environmental questions, in an amending Protocol to the Agreement
signed in 2010, the U.S. and EU negotiators stated their intention “to work
together to limit or reduce, in an economically reasonable manner, the impact
of international aviation on the environment.”116 The parties also affirmed their
openness to working through the Joint Committee “to develop recommenda-
tions that address issues of possible overlap between and consistency among
[MBMs] regarding aviation emissions implemented by [them] with a view to
avoiding duplication of measures and costs and reducing to the extent possible
the administrative burden on airlines.”117 Finally, the Joint Committee remains
charged with “fostering expert-level exchanges on new legislative or regulatory
initiatives and developments . . . in the field [] of . . . the environment[.]”118 With

113
Also, such a treaty would have to satisfy what Eric Posner and David Weisbach refer to as the
principle of “international Paretianism:” all of the State parties to such a treaty “must believe
themselves better off by their lights as a result of the . . . treaty.” Eric A. Posner &
David Weisbach, Climate Change Justice 6 (2010). For a fuller discussion of how this
economic principle applies to a global airline emissions reduction treaty, see generally Brian
F. Havel & Gabriel S. Sanchez, Toward an International Aviation Emissions Agreement, 36
Harv. Envt’l. L. Rev. 351 (2012).
114
See supra note 107.
115
See supra Chapter 4, note 164 (explaining this concept).
116
U.S./EU Air Transport Agreement, supra note 107, art. 3.
117
Id. art. 15(7).
118
Id. art. 18(4).
244 The International Law Regime for Aviation and the Environment

60% of global air traffic movements occurring within and between these two
aeropowers, the demonstration effects of a bilateral emissions reduction treaty
arranged within the structures of the 2007 Agreement would be powerful. And
these effects need not be static. The trade concessions delivered in the 2007
Agreement are available to third-party States to the extent that the Agreement
functions as a plurilateral, that is, an international agreement that offers non-
parties the opportunity to accede after it has come into effect among its founding
parties, but typically requires latecomers to accept the terms of the agreement in
their entirety.119

6.6.3. Regulatory Features of a U.S./EU Aviation Emissions Agreement

A U.S./EU aviation emissions agreement would be written to comply with the
principles (including international law principles) that we have been consid-
ering in this chapter. Each party would impose the agreement’s selected MBM
(see below) on its own carriers, and the agreement could be engineered so that
either party may cede regulatory control over its airlines’ emissions, including
discharges over the high seas, to the remit of the other party, or to a joint
administrative agency. Any inconsistency between the agreement and various
provisions of the Chicago Convention (e.g., with respect to deployment of
revenues120) would be eliminated by force of the parties’ mutual consent to the
agreement. Which carbon reduction mechanism would a U.S./EU emissions
reduction treaty apply without sacrificing industry competitiveness or distort-
ing the global aviation market? Although such a mechanism should be
effective, it might not be the most effective option available. Quick but
financially damaging “solutions” could include forcibly grounding a large
number of aircraft or restricting air traffic to high-volume routes utilizing
the most fuel-efficient aircraft and mandating that they be at or near capacity
before being cleared to fly. More strident critics of the aviation industry have
even called for the abolition of aviation.121 In this setting, MBMs (eco-taxes
and carbon trading) would be the more flexible and less burdensome alter-
natives. Their use has been, in principle, endorsed by ICAO, its member
States, and the airline industry.122 Practically speaking, however, it may be
difficult for States to know ex ante how to set an emissions tax at a level that will

119
See id. art. 18(5); see Vienna Convention on the Law of Treaties, supra note 97, art. 20(2).
120
See supra Section 6.4.2.
121
See George Monbiot, Heat: How to Stop the Planet from Burning (2007).
122
See ICAO Res. A37–19, supra note 59, para. 13; IATA, A Global Approach to Reducing Aviation
Emissions (Nov. 2009), http://www.iata.org/SiteCollectionDocuments/Documents/Global_
Approach_Reducing_Emissions_251109web.pdf.
 6.6. The Prospects for a Multilateral Aviation Emissions Treaty 245

steer airlines toward the agreed-upon reduction goals. In contrast, emissions

trading (to the extent that it is allowed to function without government
distortion123) allows the market to set the price necessary to induce emissions
reduction. A carbon trading scheme would have the further advantage of
smoother integration into a future global climate change arrangement
where emissions credits could be cross-traded among multiple industrial
sectors.124 In conformity with the wider reading of Article 15 discussed ear-
lier,125 revenues from the trading system could be directed toward projects that
improve air transport efficiency (such as ATM enhancement, capacity exten-
sion at congested airports, or research into “green” technologies) rather than to
fill national coffers.126

6.6.4. Geographic Scope of a U.S./EU Aviation Emissions Agreement

There would still be sizeable gaps in the geographic scope of a U.S./EU
aviation emissions agreement. Major non-Western international air carriers
such as Hong Kong’s Cathay Pacific, Dubai’s Emirates, and Singapore
Airlines would be at liberty to operate beyond the agreement’s reach.127 A
possible enticement to these airlines’ home States to join the agreement would
be simultaneous accession to the liberal air services trade environment created
by the 2007 U.S./EU Agreement and its 2010 Protocol. Although several large
EU carriers would find the prospect unsettling, rising aviation powers – and
growing greenhouse gas emitters – such as China, the United Arab Emirates,
and India would readily see how the 2007 Agreement could generate

123
For example, through manipulation of the amount of auctionable as opposed to free allow-
ances that the scheme will offer.
124
This already happens in the EU ETS, where airlines have joined serial industrial carbon
emitters including power stations, combustion plants, oil refineries, and iron and steel works, as
well as factories making cement, glass, lime, bricks, ceramics, pulp, paper, and board.
125
See supra note 86 and accompanying text.
126
Note that the EU’s ETS legislation does not specify how Member States are to use revenues
captured from the emissions allowance auctions. To date, only Germany has passed legislation
earmarking those revenues for emissions abatement and similar purposes. See Barbara Lewis &
Nina Chestney, EU Airline Carbon Cash Should Help Fill Climate Fund, Reuters (May 16,
2012), http://www.reuters.com/article/2012/05/16/uk-energy-summit-hedegaard-idUSLNE84F0
1220120516. See also Chapter 2, note 61.
127
That assumes, of course, that the Chicago Convention completely bars States from unilaterally
imposing emissions taxes and charges on foreign air carriers. But the Convention (as we have
seen, passim) could be given a more flexible reading to allow such charges to be imposed on
foreign carriers for the period when they are within U.S. or EU airspace. Even so, coverage would
remain marginal, for example, capturing only the limited U.S./EU airspace penetration of a
Cathay Pacific flight from Hong Kong to London or an Emirates flight from Dubai to New York.
246 The International Law Regime for Aviation and the Environment

substantial market access benefits for their airlines. States already pursuing
liberal air services trade relations with the United States and EU, such as
Canada and Australia, might be persuaded to adhere to an emissions reduc-
tion agreement as part of those States’ broader cultures of international
cooperation. And for States willing to commit to emissions reduction but
uninterested in further liberalizing aviation trade relations, provision could
be made to integrate them into the administrative operation of the new
agreement’s MBMs. As the circle of adherents widens, pressure will build on
recalcitrant States. Although major markets like China and Russia might last
some time as outliers, principled obstinacy would be unlikely to trump new
market opportunities indefinitely.

6.6.5. A Work of Governance as Much as of Economics

Finally, if it can fairly be said that global airline carbon emissions reduction
will be as much a work of governance as of economics, then the hard work of
shaping an international aeropolitical governance structure has already been
accomplished by the 2007 U.S./EU Air Transport Agreement. The next
iteration, an aviation emissions reduction agreement generated from within
that structure, can therefore more easily be imagined.

6.7. the international regulation

of noise abatement

6.7.1. ICAO’s Benchmark Standards

Prior to the advent of global warming concerns, States faced the problem of
noise pollution caused by the rapidly growing number of large jet aircraft
taking to their skies. Although States initially chose to regulate aircraft noise
through local rules, ICAO introduced Annex 16 to the Chicago Convention
in 1971 in order to help establish a more uniform approach to noise abate-
ment.128 Like most other SARPs, the methodology of Annex 16 is to bench-
mark a set of minimum standards – in this case, the permissible levels of
noise for various aircraft classifications and types.129 ICAO member States

128
See ICAO, International Standards and Recommended Practices, Aircraft
Noise, Annex 16 to the Convention on International Civil Aviation (1971).
129
ICAO’s latest noise certification standards were promulgated in February 2013. See ICAO News
Release, ICAO Environmental Protection Committee Delivers Progress on New Aircraft . . .
Noise Standards, COM 4/13 (Feb. 14, 2013). The new standards will apply to new-design aircraft
entering into service from 2017.
 6.7. The International Regulation of Noise Abatement 247

are responsible for evaluating and then certifying that aircraft on their
national registers are compliant with the appropriate ICAO standard.130
Aircraft are expected to carry documentation proving their noise certifica-
tion (some States include this information on their airworthiness certifi-
cates), and ICAO member States undertake to recognize these certifications
for foreign aircraft entering their territory regardless of domestic standards
for acceptable noise levels.131 But it would be just as incorrect to view ICAO
as a global regulator for aircraft noise as it would be to view the Organization
as the exclusive authority overseeing aircraft carbon emissions. ICAO sets
baselines for the acceptability of noise levels, and compliance has been
strong. A choice by a State to waive or apply the obligations on a discrim-
inatory basis would spark serious political tensions.

6.7.2. Interaction Between International and State-Based

Noise Regulation
ICAO’s standard-making does not mean that States are prohibited from
ratcheting up noise abatement rules for their own air carriers. The issue
came to a head during the 1990s when States began to phase out aircraft that
failed to meet ICAO noise standards. Several airlines, particularly in the
United States, sought to adopt more economical measures to reduce noise
without sacrificing the utility of their older aircraft. Through the use of
“hushkits,” airlines could continue to rely on aging planes without violating
ICAO standards. That move antagonized environmentally savvy politicians
in the EU, and the Union institutions passed legislation to ban hushkitted
aircraft from EU territory.132 The European Commission insisted that air-
craft upgraded through hushkits were noisier than the newer aircraft built to
ICAO’s current standards.133 The United States, in response, accused EU
officials of protectionism, prompting a U.S. complaint to the ICAO Council

130
See ICAO, International Standards and Recommended Practices,
Environmental Protection, Annex 16 to the Convention on International
Civil Aviation, Vol. I, Aircraft Noise (5th ed. 2008) [hereinafter Annex 16, Volume I].
The noise standards have grown more stringent over time. Generally, aircraft built prior to 1977
were governed by the standards contained in Chapter 2, while aircraft built between 1977 and
2006 had to be compliant with the stricter standards contained in Chapter 3. Aircraft built after
2006 must comply with the Chapter 4 standards. See also supra note 129 (indicating the recent
adoption of the newest set of standards).
131
See Annex 16, Volume I, supra note 130, amend. 8.
132
See Council Regulation 925/1999, 1999 O.J. (L 115) 1.
133
See Press Release, European Commission, Commission Takes Action to Combat Aircraft Noise
(Mar. 13, 1998), http://europa.eu/rapid/press-release_IP-98-251_en.htm?locale=en.
248 The International Law Regime for Aviation and the Environment

under the dispute settlement rules of the Chicago Convention.134 The

Council never issued a binding decision, but the EU withdrew its regula-
tion.135 The issue remains a flashpoint in U.S./EU aeropolitical relations. In
negotiations for an amending protocol to the 2007 U.S./EU Air Transport
Agreement, U.S. officials lobbied their European counterparts to
“Unionize” the autonomy of Member State local and regional authorities
to impose noise regulations in the form of night flight restrictions.136 The

134
See Paul Stephen Dempsey, Flights of Fancy and Fights of Fury: Arbitration and Adjudication
of Commercial and Political Disputes in International Aviation, 32 ga. j. int’l & comp. l. 231,
281–82 (2004). The Article 84 filing named the EU Member States, rather than the EU, because
the EU was not a party to the Chicago Convention. Surprisingly, neither the EU States
themselves nor ICAO addressed whether or not the hushkit rule could be evaluated against
the Chicago Convention, given that the rule was being implemented by the EU, a nonparty to
the Convention. This question would later be examined by the CJEU in the emissions trading
case. See supra note 104. Although EU nonadherence was never raised in the ICAO dispute,
the English High Court of Justice ruled in a separate case that the hushkit regulation could not
be evaluated against the Chicago Convention precisely because the EU was not a party. See
Kriss E. Brown, Comment, The International Civil Aviation Organization is the Appropriate
Jurisdiction to Settle Hushkit Dispute Between the United States and the European Union, 20
Penn St. Int’l L. Rev. 465, 481 (2002) (citing The Queen v. Sec’y of State for the Env’t,
Transp. and the Regions, ex parte Omega Air Ltd., High Court of Justice (England) (Queen’s
Bench Div., Nov. 25, 1999)).
135
The EU Member States did submit preliminary objections, questioning the ICAO Council’s
jurisdiction to adjudicate the dispute and whether the United States had exhausted the
required procedural remedies. The ICAO Council ruled unanimously against the EU
Member States, which declined to appeal the Council’s ruling on the preliminary objections
to the ICJ. Instead, the United States and the EU, with the assistance of the ICAO President
and Legal Counsel, resumed negotiations, ultimately resulting in the EU repealing the
regulation and U.S. withdrawal of its Article 84 complaint. Not all was lost for the EU, however:
the United States permitted development of ICAO Chapter 4 noise standards (see supra
note 130), which it had previously obstructed, to proceed. Although some observers have
flagged this dispute as evidence of ICAO’s robust adjudicatory powers, the fact that the
ICAO Council never acted as more than a mediator during the controversy indicates that
settlement was a product of diplomatic, rather than legal, intervention. For more on ICAO’s
dispute settlement authority, see supra Chapter 2, Part 2.6.
136
Night flight restrictions are one form of noise restrictions that are levied on airports, rather than
directly on air carriers as with the ICAO standards. Obviously, the restrictions impact carriers
who must comply in order to utilize the restricted aerodrome. The restrictions are notable in
that they are based on notions of legal control over land planning or zoning and are thus
perceived as a local policy question despite their impact on the industry more broadly. Night
flight regulations restrict the flights in and out of a given airport during typical sleeping hours
for neighboring residents. These restrictions are most prevalent in the EU Member States. In
2001 ICAO adopted Assembly Resolution A33–7, urging States to use a “balanced approach to
noise management” that would include a cost-benefit analysis and that would prioritize the
reduction of noise through improved land management and operational procedures before
turning to regulation as a last resort. International Civil Aviation Organization, Consolidated
Statement of Continuing ICAO Policies and Practices Related to Environmental Protection,
Assem. Res. A33–7 (2001), compiled in Assembly Resolutions in Force, ICAO Doc. 9790 (2001).
 6.8. Conclusion 249

European Commission demurred on the ground of “subsidiarity,” that is,

the principle (enshrined in EU treaty law) that decisions should be taken, as
far as possible, by officials and authorities closest to the affected
populations.137

6.7.3. A Final Comment on Noise Pollution

Noise pollution, like aircraft emissions, is a problem that will remain on
regulatory agendas in the absence of a radical technological breakthrough.
ICAO will probably continue to broker a degree of international consensus,
but adjustments to Annex 16 are likely to be marginal and calculated
not to jeopardize the economic stability of member States’ air transport
sectors.

6.8. conclusion

6.8.1. An Intensifying Dialogue

It is impossible to predict the eventual stopping-place of the climate change
discourse. Barring a dramatic change in climate change projections, interna-
tional dialogue will intensify as we draw nearer to the “zero hour” of climate
catastrophe.

6.8.2. Two Final Observations

We conclude this rather policy-focused chapter with two statements that we
think summarize the arguments we have raised here. First, a plausible multi-
lateral aviation emissions reduction agreement can ensure that international
aviation “does its part” by reducing the sector’s emissions to a sustainable level
without sacrificing its economic viability. The international backlash against
the EU ETS strongly indicates that there is a low tolerance among aviation

137
See Treaty of Lisbon Amending the Treaty on European Union and the Treaty Establishing the
European Communities, art. 3, Protocol on the Application of the Principles of Subsidiarity
and Proportionality, Dec. 13, 2007, 2007 O.J. (C 306) 149–52. Even so, the amending protocol
does provide a potential incentive for the EU to change its mind, namely, a grant of limited
seventh freedom (“stand-alone”) rights that would allow a select number of EU airlines to serve
points between the United States and third States – without a home State connection to the
EU – in exchange for Member States ceding full regulatory authority over noise abatement at
EU airports to the European Commission. See U.S./EU Air Transport Agreement, supra
note 107, art. 21; on seventh freedom traffic rights, see supra Chapter 3, Section 3.3.6.
250 The International Law Regime for Aviation and the Environment

powers for regulatory unilateralism on the emissions issue. Second, the con-
vergence of stakeholder interests within international aviation will further
ensure that any such agreement can serve as a lead sector for future (and
wider) global collaboration on climate change. Under the canopy of a sectoral
treaty among like-minded States, international aviation can responsibly
reduce its environmental impact while remaining a force for dynamic eco-
nomic growth in the coming decades.
 7

The International Law Regime for Air Carrier

Liability and Surface Damage

7.1. introduction

7.1.1. A Hybridized Structure

In the first four chapters we discussed the principal components of the public
dimension of international aviation law, namely, the Chicago Convention
and the bilateral system of cross-border trade in air services. In the previous two
chapters we considered other significant issues of public law, including safety
and security and evolving regimes to control aircraft carbon emissions and
noise pollution. This chapter turns primarily to the private transnational legal
rules governing air carrier liability for injury or damages to passengers and
cargo on international flights as well as to the fairly rudimentary provisions that
international law provides to compensate passengers and shippers for delay.1
The system of international air carrier liability is an unusual hybrid of public
international law and private transnational law:2 the primary rules are set forth
in international treaties (public international law) and in some agreements
that are not, strictly speaking, treaties. But all disputes that arise under these
various public international law instruments concerning the scope of the rules
and liability for damages are adjudicated in the domestic court systems of the
contracting States rather than by international judicial bodies. As we will see

1
We also discuss international law provisions that impose liability for third-party surface (“on the
ground”) damage caused by aircraft. See infra Section 7.1.7 and Part 7.14. Airlines, of course,
may potentially incur many other types of liability to a variety of third parties, including
handling agents, caterers, and maintenance companies; lenders and lessors (through financing
arrangements); airport authorities (e.g., cleanup expenses); government regulators (under tax
and competition laws); and to their employees under labor or employment laws. But none of
this wide spectrum of liability is covered under an international agreement.
2
See supra Chapter 1, Section 1.4.5, discussing the relevant distinctions that we make in this
book between public international aviation law and private transnational aviation law treaty
instruments.

251
252 The International Law Regime for Air Carrier Liability

in the next and final chapter of the book, in modern international aviation
law, only the Cape Town Convention (as it relates to ownership interests in
aircraft) has a comparable hybridized structure that straddles both the public
and private dimensions of international law.3

7.1.2. The Warsaw Convention (1929)

The applicable series of treaty and nontreaty instruments on passenger and
cargo liability begins more than eighty years ago with the 1929 Convention
for the Unification of Certain Rules Relating to International Carriage by
Air, commonly referred to as the “Warsaw Convention” in honor of its place of
signature.4 The most prominent international aviation treaty after the Chicago
Convention, it has certainly been the most litigated instrument in the field
of international aviation law.5 The terms of the Warsaw Convention, though
3
See infra Chapter 8, Part 8.8.
4
See Convention for the Unification of Certain Rules Relating to International Carriage by Air,
opened for signature Oct. 12, 1929, 137 L.N.T.S. 11, 49 Stat. 3000 (entered into force Feb. 13,
1933) [hereinafter Warsaw Convention]. In some translations from the official original French
text, the word “Carriage” in the title appears as “Transportation.” See, e.g., note following 49
U.S.C. § 40105; O’Grady v. British Airways, 134 F. Supp. 2d 407 (2001); Glenn Pogust, Note,
The Warsaw Convention – Does it Create a Cause of Action?, 47 Fordham L. Rev. 366 (1978).
5
The U.S. Supreme Court has considered issues relating to the Warsaw Convention on eight
separate occasions since 1966: Trans World Airlines, Inc. v. Franklin Mint Corp., 466 U.S. 243
(1984) (upholding the decision of the U.S. Civil Aeronautics Board, after the 1978 repeal of the
U.S. Par Value Modification Act – which had previously set an official price of gold within the
United States – to use a $9.07-per-pound cargo liability limit for Warsaw Convention cases
when converting the treaty’s liability limits from gold francs to U.S. currency); Air Fr. v. Saks,
470 U.S. 392 (1985) (holding the airline not liable under the Warsaw Convention for a
passenger’s deafness caused by the normal operation of the aircraft’s pressurization system,
on the ground that the injury was not caused by an unusual or unexpected event external to the
passenger, and therefore was not an accident under Article 17; see infra Part 7.9); Chan v.
Korean Air Lines, Ltd., 490 U.S. 122 (1989) (holding that the airline did not lose the benefit of
Warsaw’s liability limitation when notice of the limitation was provided to passenger in 8-point
instead of required 10-point type); Eastern Airlines, Inc. v. Floyd, 499 U.S. 530 (1991) (holding
that Article 17 of the Warsaw Convention does not allow recovery for mental or emotional
injuries unaccompanied by physical injury; see infra Section 7.9.8); Zicherman v. Korean Air
Lines Co., 516 U.S. 217 (1996) (holding that Article 17 of the Warsaw Convention only permits
recovery for legally cognizable harm as determined by domestic law, and that loss-of-society
damages are not permitted under the U.S. Death on the High Seas Act); Dooley v. Korean Air
Lines Co., 524 U.S. 116 (1998) (holding U.S. Death on the High Seas Act does not provide a
basis for relatives to recover under the Warsaw Convention for decedents’ pre-death pain and
suffering); El Al Isr. Airlines, Ltd. v. Tseng, 525 U.S. 155 (1999) (holding that a passenger cannot
recover under domestic law for personal injury damages for which the carrier was not liable
under the terms of the Warsaw Convention; see infra Section 7.9.8); and Olympic Airways v.
Husain, 540 U.S. 644 (2004) (holding that flight attendant’s refusal to move an asthmatic
passenger away from cigarette smoke constituted an accident under Article 17, see infra
Section 7.9.3).
 7.1. Introduction 253

admirable for their time in helping to provide a fairly stable liability regime for
airlines in the formative decades of international air transport, were eventually
found to be outmoded as to liability. Infelicitous drafting, coupled with a
tight liability cap for passenger injury and death that many plaintiffs’ attorneys
found unpalatable, led to a series of amending instruments that received
mixed degrees of ratification. The United States, unrivaled in the interna-
tional aviation market, was prepared to reject the Warsaw Convention entirely
by the mid-1960s until the international airline industry’s private trade organ-
ization, the International Air Transport Association (IATA), stepped in on
behalf of its member airlines to broker the first in a series of private, nontreaty
agreements (some involving the U.S. Government) to waive aspects of the
Convention that had drawn U.S. opprobrium.

7.1.3. The Montreal Convention (1999)

It would not be until 1999, seventy years after the Warsaw Convention was
negotiated, that a successor treaty intended to address the shortcomings of
Warsaw and to consolidate the various amending instruments was finalized
in Montreal, Canada. Although the Montreal Convention6 has yet to receive
universal assent, its adoption by 103 States, including the United States and
all twenty-eight EU Member States, has positioned it as the controlling
liability treaty for a majority of the world’s international air carriage activities.
As such, Montreal, not Warsaw and its amending instruments, receives the
greater part of our analytical attention in this chapter.

7.1.4. The Montreal Convention Replaces, Not Augments,

the Warsaw Convention
Our decision to focus principally on the Montreal Convention requires some
further justification. It is not uncommon for secondary sources of private
transnational aviation law to discuss “the Warsaw Convention as amended”
and to speak of the “Warsaw System” as encompassing all of the governmental
and private agreements subsequent to the original treaty, including internal
rules adopted by States intended to modify the coverage of that regime with
respect to their air carriers. Some commentators have gone so far as to conflate
the Warsaw System with the 1999 Montreal Convention, treating the seven-
decade legal and policy history that separates the two instruments as comprising
6
See Convention for the Unification of Certain Rules for International Carriage by Air, opened
for signature May 28, 1999, 2242 U.N.T.S. 350 (entered into force Nov. 4, 2003) [hereinafter
Montreal Convention].
254 The International Law Regime for Air Carrier Liability

a unified whole. That is incorrect. The purpose of the Montreal Convention,

as the language of Article 55 of that treaty makes clear, is to replace, not merely
to augment, the old Warsaw System.7 It is only because of recalcitrance on
the part of certain States that Montreal is still compelled to live in an uneasy
cohabitation with the vestiges of Warsaw. Although there may be no way of
telling how long international aviation’s ancien régime for civil liability will
endure, suffice it to say that the guillotine of history awaits.

7.1.5. Either the Warsaw or the Montreal Conventions May Apply

Later in this chapter we will look briefly at the disposition of cases where,
because of divergent State ratifications, it is possible that either Warsaw or
Montreal may apply to the litigated accident.8 Readers interested in learning
more about the Warsaw System in detail, including the particularities of
its rules governing liability, jurisdiction, and defenses, may consult the sources
listed in the bibliography. For present purposes, we will only discuss the Warsaw
System to elucidate provisions now located in the Montreal Convention or to
explain the history of this area of private transnational aviation law.

7.1.6. Terminology and Scope of the Warsaw System

For ease of exposition, we will refer to the “Warsaw System” when discussing
the Warsaw Convention and all of its related instruments. The term “Warsaw
Convention” will be used when referring to that single treaty, although – unless
7
See id. art. 55, which provides that: “This Convention shall prevail over any rules which apply to
international carriage by air . . . by virtue of those States commonly being Party to . . .” Article 55
goes on to list the Warsaw Convention and its subsequent amending protocols as sources of rules
over which the Montreal Convention “shall prevail.” Some might argue to the contrary by
invoking the Montreal Convention’s Preamble, which states in part that its signatories recognize
“the need to modernize and consolidate the Warsaw Convention and related instruments[.]”
Warsaw Convention, supra note 4, pmbl. Although that assertion is accurate so far as it goes, it is
also true that the Montreal Convention stands autonomously: there is no need for a State to go
behind the new treaty and to adopt any of the Warsaw System’s instruments in order to give
Montreal full legal effect. Additionally, given the Montreal Convention’s “consumer-oriented”
approach of providing full restitution in contrast to Warsaw’s original “airline-oriented”
approach of shielding carriers from anything more than nominal liability, it is problematic to
frame Montreal as a mere extension or modification of its predecessor. But, as discussed infra
Part 7.9 passim, courts that interpret the Montreal Convention do look for guidance to existing
case law under the Warsaw Convention as a matter of prudence and to State-level jurisprudence
developed under the Warsaw Convention because of the similarity of many of the provisions in
the two instruments and also “so as not to result in a complete upheaval of the ‘common law’
surrounding the Warsaw Convention.” Watts v. Am. Airlines, Inc., No. 1:07-cv-0434, 2007 WL
3019344, at *2 (S.D. Ind. Oct. 10, 2007).
8
See infra Sections 7.12.3, 7.12.4.
 7.2. Private and Public Oversight of Air Carrier Liability 255

otherwise noted – always in light of its various amendments prior to the

Montreal Convention. In the interest of economy, we have also limited our
discussion of the Montreal rules relating to ticketing and carriage of cargo.
In the decades between Warsaw and Montreal, detailed rubrics covering
the issuance, format, and medium of airline ticketing have yielded to advances
in technology and the near-universal embrace of “e-ticketing” in the airline
industry. Readers interested in more advanced discussion of the history of
documentation rules for international carriage by air are advised to consult
the bibliography in this book.

7.1.7. Third-Party Surface Liability

Finally, this chapter concludes with an examination of another area of private
liability where efforts have been made to apply international lawmaking: the
rules that govern air carrier liability for third-party surface (“on the ground”)
damage caused by aircraft. The importance of this area of international law-
making, however, has been reduced by the existence of effective national laws
to impose liability for these rare events.

7.2. the choice between private and public

oversight of air carrier liability

7.2.1. Contrasting Public and Private Regulation of Liability

To deepen the reader’s appreciation of the fundamental changes in liability
policy that led to the Montreal Convention, we turn now to a short discussion
of the tensions involved in developing a system of private law to determine
after-the-fact (ex post) liability instead of relying solely on before-the-fact
(ex ante) public regulatory governance of claims arising from the provision
of international air services. Advocates of private liability for air carriers9 have
long argued that the Warsaw System provides a more efficient mechanism to
discipline the safety standards of the international air transport industry than

9
We do not enter the debate here as to whether the kind of liability established in the Warsaw
Convention sounded (or sounds) in contract, tort, or the civil law notion of “delict.” See Hamid
Kazemi, Carrier’s Liability in Air Transport with Particular Reference to Iran (unpublished
Ph.D. thesis, Leiden University 2012) (analyzing how the “exceptional system” of the air carrier
liability treaties required that States with different national liability principles put these aside
“in order to achieve uniformity in the liability principles for air carriage”). See also infra at
Section 7.3.3 (indicating that the Convention finesses the relevance of these distinctions by
creating an automatic international liability regime).
256 The International Law Regime for Air Carrier Liability

public regulation.10 Ex post liability, when strictly applied, is seen to meet

the demands of corrective justice – a concept that dates back to Aristotle.11 Ex
ante public regulation, some critics charge, is too clumsy to meet its ends in a
cost-effective manner. Even if government regulators draw safety standards
to minimize the risk of air travel accidents, they impose compliance costs on
the airlines that are not always aligned with the benchmarks set forth in the
actual regulations.12 The private system of recovery provides the necessary
incentives for air carriers to take prophylactic measures to protect passengers
and cargo. In this view, by scrutinizing past damages awards and the accidents
that triggered them, air carriers are well placed to assess what modifications
they need to make to their operations to avoid those costs.13

7.2.2. Integrating the Private and Public Regulatory Approaches

But it is also true that public regulation continues to play a decisive role
in safety (as well as in security, as we saw in Chapter 5). ICAO’s continual
updating of the relevant technical annexes to the Chicago Convention, as well
as that Organization’s safety audits and similar programs conducted by the
U.S. Federal Aviation Administration (FAA) and the European Union (EU),
all demonstrate a public focus on establishing a “base level” for safety regard-
less of what the airlines may be prompted to do out of fear of litigation. The
air carriers, in turn, insist that the Warsaw System has driven them to exceed
publicly drawn international safety standards precisely because of the perpet-
ual threat of liability. In that sense, ex ante public and ex post private systems
of regulation are seen to be complementary and synergistic. The integration of
those two approaches arguably keeps airlines “honest” on the front end about
their commitment to safety and culpable at the back end in the unfortunate
10
See, e.g., Robert W. Poole Jr., Toward Safer Skies, in Instead of Regulation: Alternatives
to Federal Regulation 207 (Robert W. Poole ed., 1982). On the other hand, there are
practitioners who would argue that considerations of improving safety have never been of any
concern to a pragmatic system of tort-based private regulation.
11
See Aristotle, Ethica Nicomachea 1132a25 (L. Bywater ed., Oxford Univ. Press (1920)).
For the “classic” treatment of strict liability and corrective justice in contemporary legal
scholarship, see Richard A. Epstein, A Theory of Strict Liability: Toward a
Reformation of Tort Law (1980). For Epstein’s latest restatement of his views on strict
liability, see Toward a General Theory of Tort Law: Strict Liability in Context, J. Tort L., Vol.
3, No. 1 (2010).
12
For example, airlines may be compelled to submit to direct inspections from government
officials or to follow reporting procedures that are subsidiary to the practice of keeping aircraft
in good repair or to making sure that pilots, crew, and repair staff are properly trained in the
execution of their duties.
13
See Paul A. Cleveland and Thomas L. Tucker, Privatizing Airline Safety and Security, Ideas
on Liberty, Nov. 2002, at 6–9.
 7.3. The Warsaw System 257

event of a crash or other incident giving rise to damages. Many would view a
shift toward one to the exclusion of the other as either inadequate to maintain
a high level of safety in international air transport or as failing to meet some
other overarching societal value. Moreover, as the authors of this book have
discovered, there are also practitioners who would question an assertion that
the litigation system exists for any grander societal purpose beyond satisfying the
demands of the claimants in a particular dispute.14 In any event, whether
the additional costs imposed by this dualistic system are more than what is
necessary to sustain aviation safety is a debatable point. It is certainly arguable
that an environment of high-octane ex post liability where no air carrier is
permitted to fly unless its risks are fully insured could, in fact, achieve levels of
safety comparable to the present mixed system but without its intrusiveness into
airlines’ commercial operations.15

7.3. the warsaw system

7.3.1. The Warsaw System Created a Unique Concept

in International Law
Instead of imposing obligations directly on States to remedy the consequences
of aviation accidents and delays, the Warsaw Convention established a private
legal regime that directly affects human and corporate persons. The Montreal
Convention later did likewise. Although the Warsaw Convention set the
14
See supra note 10. Within the U.S. tort bar, also, an intense focus on the rights of plaintiffs has
also fostered a sense that the whole Warsaw/Montreal system of strict or absolute liability (see
infra note 76 and accompanying text) deprives plaintiffs of an opportunity, in addition to
obtaining compensation, of exposing the particular culpability and negligence of the defendant
carrier. But this question of identifying “fault” may well exceed what the Warsaw/Montreal
treaties were intended to provide: rather than being instruments of criminal law designed to
assign guilt and to root out bad behavior, their primary goal was always the efficient compen-
sation of the victims. This Warsaw/Montreal “mentalité” has perhaps allowed the airline
industry to develop too impersonal and transactional an approach to customer dissatisfaction,
leaving it vulnerable to a deluge of passenger rights legislation imposed over the last decade.
The industry’s singular focus on defining a monetary liability for passenger injuries, while
bypassing concerns about passenger treatment (especially during long delays), left a void that
savvy politicians across the world were eager to fill with new rules on passenger rights. See infra
Section 7.12.8.
15
Whether insurers actually have safety goals in mind when they set their premiums is also
debatable, however. The airline insurance industry is fundamentally pragmatic: the cost of
coverage is not established in order to encourage higher safety compliance (however that might
be done) but rather is determined by an individual airline’s claims record and the general
geographic, economic, and regulatory environment in which that airline operates. Insurance
companies no doubt assume that appropriate safety standards will be enforced by national and
international regulators.
258 The International Law Regime for Air Carrier Liability

framework governing air carrier liability, it did not establish any independent
or supranational judicial body to adjudicate liability actions against air car-
riers.16 In the absence of such a tribunal, all Warsaw and Montreal liability
actions are under the jurisdiction of the individual contracting States and
depend for their efficacy on the enforcement power of the contracting
States within their own territories. Thus, the separate domestic legal regimes
of the ratifying States – primarily a mixture of civil and common law systems –
have controlled all of the treaty’s interpretation, execution, and, some would
argue, expansion beyond the original intent of its framers. In that sense, the
Warsaw System and its Montreal successor have occupied a unique place in
international aviation law; as we have noted, only the much more recent Cape
Town Convention (as it affects ownership interests in aircraft) now replicates
the Warsaw/Montreal model of a private legal regime established through
a public international law treaty and enforced within the contracting States’
legal systems.17

7.3.2. A Search for a Universal Cap on Liability

At two international conferences held between 1925 and 1929, States debated
the merits of constructing a system of harmonized rules governing liability
for international carriage by air.18 Although cross-border air travel was still in
its infancy, States and their air carriers realized that uniform standards of
liability could not exist in a legal environment where national courts applied
inconsistent conflict of laws (choice of law) rules to select a governing law
in a particular dispute.19 More important, from the airlines’ perspective, was
the need to create a universal cap on their liability for damages arising out
of international air transportation. According to the airlines, their fledgling
status, combined with uncertainty surrounding the causes of many airline
accidents, made them uniquely vulnerable to lawsuits. Unlimited liability
would deter investors and limit the scope of services that air carriers would be
able to provide. Other options besides a universal liability cap were available
16
Even today, we might not encounter much State enthusiasm for some kind of “world civil
aviation liability court.”
17
See Convention on International Interests in Mobile Equipment, Nov. 16, 2001, ICAO Doc.
9793, U.N. Doc. A/AC.105/C.2/2002/CRP.3, U.S. Treaty 108–10 [hereinafter Cape Town
Convention].
18
Although the United States sent observers, it did not participate directly in the proceedings of
the conferences.
19
See King v. Bristow Helicopters & In Re Morris, [2002] UKHL 7, at ¶ 63 (stating that one of the
“primary objectives” of the Warsaw Convention was “to eliminate conflict of laws problems”)
[hereinafter King v. Bristow Helicopters]. See also supra Chapter 1, Section 1.4.5 (further
explaining the equivalent terms “conflict of laws” and “choice of law”).
 7.3. The Warsaw System 259

to narrow the industry’s exposure. Airlines concerned about risky cross-border

transit could have negotiated liability limits or other protections into their
contracts of carriage, perhaps foregoing some profit through reduced fares in
exchange for the consent of passengers or shippers to a fixed level of damages
in the event of an accident.20

7.3.3. Integration of the Warsaw Convention with National

Law and Carrier Contracts of Carriage
It is critical to understand that the Warsaw Convention was not just a traité-
loi21 setting out certain key principles of airline liability that contracting States
were to observe in their relations with one another. Its effectiveness lay in the
fact that contracting States were undertaking to treat the Convention’s provi-
sions as the applicable domestic law in all airline liability cases in all of their
national courts. Were that not the case, the absence of a uniform international
law of contract and of uniform rules of conflict of laws would have meant
that carriers would be required to conform their individual contracts of
carriage to each system of law within which they conducted flight operations.
The Warsaw Convention instead provided international airlines with a kind
of “transnational” contract with respect to the matters it covered. IATA, the
representative body for most commercial airlines operating at the time of the
Convention’s adoption, revised its “standard contract of carriage” in 1929 so
that all of the Convention’s provisions would become part of the contractual
relationship between individual passengers and shippers and their air carriers.
IATA has continued to update its standard contract ever since.22 Because of

20
Indeed, the Warsaw Convention itself envisaged precisely this alternative to a general liability
cap. See Article 22(1), providing for special contracts between passengers and carriers allowing
“a higher limit of liability.” Warsaw Convention, supra note 4, art. 22(1). The alternative of a
private bargain assumed, of course, that such contracts would be honored across national
boundaries. Disparities in the law of contracts, coupled with the 20th century decline in
(common law) courts upholding freedom of contract over ancillary social concerns, may
have curtailed widespread reliance on contract to set liability terms. Even so, nothing pre-
vented States from using the original Warsaw Convention as a means of tilting the scales of
justice more discernibly toward a freedom of contract approach with respect to air carriage.
Doing so would not have seemed unreasonable as a matter of social justice: passengers in 1929
were wealthy and could readily have self-insured.
21
See V. D. Degan, Sources of International Law 489 (1997) (distinguishing the law-
making treaty or “treaty as statute,” the traité-loi, from the treaty as contract, the traité-contrat,
such as a commercial sales agreement between States).
22
Each airline has a contract of carriage with its customers that, while it will include terms
additional to those of the international liability conventions, certainly includes all of those
terms. The contract of carriage is actually mentioned in Article 3(2) of the Warsaw Convention,
which provides that the lack of a ticket does not affect the existence or validity of the contract of
260 The International Law Regime for Air Carrier Liability

Warsaw (and subsequently Montreal), therefore, each national law of contract

is integrated automatically into the international liability system by each air-
line’s contract of carriage with its customers. Notwithstanding the arrival of the
e-ticket, the fundamental principle of a common set of conditions of carriage
(and of liability) remains the same today. Moreover, the automatic application
of the Warsaw and Montreal conventions to any carriage falling within the term
“international carriage” neatly avoids having to categorize the liability system
itself as sounding in contract, tort, or delict.23

7.3.4. Basic Principles of Liability Under the Warsaw Convention

In very broad terms, the Convention sought to create a suite of exclusive
remedies24 applicable to accidents or damage occurring in all international
carriage of persons, baggage, or cargo performed by air transport enterprises
for payment or even without payment.25 Articles 17 and 18 of the Convention
acknowledged the heightened scrutiny that Anglo-American common law
imposed on all “common carriers,”26 making airlines prima facie liable for
damages for death or injury to passengers or loss or damage to baggage and
cargo.27 The contracting States opted, however, to shelter their airlines from
the exigencies of common carrier liability law by capping air carrier exposure
carriage, and that a carrier accepting a passenger without a ticket is not entitled to limit its
liability under the Convention (presumably because the passenger would not have received the
Warsaw notice required in Article 3(1)(e)). See Warsaw Convention, supra note 4, art. 3. In the
era of e-ticketing, the full text of each airline’s contract of carriage (which is considerably longer
than the text historically printed on the back of ticket stock) is now more likely to be available
online.
23
See supra note 9.
24
Warsaw Convention, supra note 4, art. 24.
25
As we will see in our more detailed treatment of the Montreal Convention, even that one
introductory sentence contains a series of terms (“accidents,” “international carriage,” and so
forth) that would become the object of (sometimes varying) court interpretations in the legal
systems of the various contracting States.
26
English judges in the late 16th or early 17th centuries began holding common carriers strictly
liable for lost or damaged goods. A variety of public policy reasons were given, including the
fear that customers would have no defense against or possibility of proving fraud by carriers, a
desire to promote commerce, and the belief that carriers were performing a public service.
Common law courts held common carriers to an only slightly less stringent standard of liability
for injuries to passengers, out of concern for public safety. For a thorough discussion of how
common carrier liability evolved first in England and then in the United States, see Robert
J. Kaczorowski, The Common-Law Background of Nineteenth-Century Tort Law, 51 Ohio St.
L. J. 1127, 1129–69 (1990).
27
See Warsaw Convention, supra note 4, arts. 17–18. Under Article 17, injury to passengers must
have been sustained “on board the aircraft” or in the process of “embarking or disembarking”;
under Article 18, loss or damage to baggage or cargo must occur during the period when the
carrier is in charge of the baggage or cargo. Again, these provisions contain terms of art that
have been subject to extensive judicial interpretation in the courts of contracting States.
 7.3. The Warsaw System 261

for injuries to passengers at 125,000 “Poincaré” gold francs28 (approximately

$8300 at the time that Warsaw took effect in 1933) and damage to cargo at
250 gold francs per kilogram (approximately $17 in 1933).29 Despite the
relatively modest caps, a carrier could escape liability altogether if it could
prove that it had taken “all necessary measures” to avoid the alleged wrong or
could show that it was impossible to do so.30 A plaintiff seeking to break the
liability caps bore the burden of demonstrating that the damage or injuries in
question arose out of the air carrier’s “wilful misconduct.”31 The scope and
meaning of that troublesome phrase would be revisited in later State efforts to
reform Warsaw. Plaintiffs could also circumvent the Warsaw liability limits
altogether if the defendant airline failed to issue a ticket,32 although (in a
departure from Anglo-American common law) plaintiffs that were shown to be
contributorily negligent risked foregoing some or all of their damages.33

7.3.5. Surviving Early U.S. Skepticism

The Faustian exchange of presumptive liability for a near-unbreakable dam-
ages cap proved unstable in the decades after the Warsaw Convention entered

28
The Poincaré gold franc was created by French Prime Minister Raymond Poincaré in 1926
when he returned France to the gold standard. The franc was equal to 65.5 milligrams of gold of
millesimal fineness .900. When the Warsaw Convention was negotiated three years later, the
drafters decided to tie the compensation caps to the franc and, specifically, to the amount of
gold represented by the franc. Some courts converted the Warsaw caps into their domestic
currencies by referring to the market price of gold in that currency. Others used official prices
of gold set by the State. See Kevin Kyser, Tarnished But Still Valuable: A History and Present
State of the Gold Franc, 16 SUM Currents: Int’l Trade L. 82, 84–89 (2007); Allan
I. Mendelsohn, The Value of the Poincaré Gold Franc in Limitation of Liability Conventions,
5 J. Mar. L. & Com. 125, 125–28 (1973).
29
See Warsaw Convention, supra note 4, art. 22. The liability limit for cargo could be increased if
the consignor of the cargo declared a value for the goods in excess of the Warsaw limits and,
where necessary, paid additional fees to the carrier. Failure on the part of either the carrier or
the consignor to abide by the Convention’s esoteric rules on cargo documentation could also
affect the Convention’s standards of liability. See id. arts. 4, 9.
30
See id. art. 20(1). Article 20(2) of Warsaw analogizes the traditional maritime defense of
“nautical fault” to events of cargo and luggage damage: “[T]he carrier is not liable if he proves
that the damage was occasioned by negligent pilotage, or negligence in the handling of the
aircraft or in navigation[.]” On the history of nautical fault in liability law, see Madeleine
Jansson, The Consequences of a Deletion of the Nautical Fault 12–17 (May 2007) (M.A. thesis,
Department of Law, Göteborg University).
31
Warsaw Convention, supra note 4, art. 25(1). The phrase “wilful misconduct” was later replaced
in The Hague Protocol. See infra Section 7.4.1.
32
See Warsaw Convention, supra note 4, art. 3(2).
33
“If the carrier proves that the damage was caused by or contributed to by the negligence of the
injured person the Court may, in accordance with the provisions of its own law, exonerate the
carrier wholly or partly from his liability.” Warsaw Convention, supra note 4, art. 21.
262 The International Law Regime for Air Carrier Liability

into force. The U.S. tort bar was especially vociferous in its complaints that
the treaty undermined the recovery rights of plaintiffs by failing to meet even
the minimum standards of corrective justice. Some U.S. lawyers also alleged
that Warsaw created a moral hazard by incentivizing airlines to take unneces-
sary risks with their safety protocols – airline companies would never have to
internalize the full costs of the damages for which they were responsible.34
But fears of a safety free-for-all did not prove justified. As States began to
intensify their regulatory oversight of airlines,35 and in many cases to take
ownership in their national carriers, ex ante regulations were put in place to
protect against aircraft crashes and maintain consumer confidence in the
industry. Arguably, Warsaw’s liability shield worked (at least financially) by
allowing the industry to leverage technological advances in the 1950s and
1960s to begin offering transcontinental jet transportation. With an enhanced
global profile and improving financial prospects, however, a buoyant inter-
national airline industry faced intensified calls for reform to the original
Warsaw Convention and a realignment of its liability rules to favor the
consumer.

7.4. reforming the warsaw convention (1): the

treaty instruments

7.4.1. The Hague Protocol (1955): A Doubling of the Liability Cap

The first concerted attempt to bring meaningful reform to the Warsaw System
came in September 1955 with the adoption of “The Hague Protocol.”36 Drafted
by the ICAO Legal Committee, the Protocol sought to relieve growing disquiet,
especially among American plaintiffs’ lawyers, about Warsaw’s relatively modest
liability caps.37 After much wrangling, the drafting conference rejected a U.S.
proposal to quadruple the original passenger injury cap, consenting instead to a

34
But see supra note 14 and accompanying text (discussing U.S. tort lawyers’ particularistic view
of the tort system).
35
Regulatory oversight existed in the U.K. from as early as 1919 with the establishment of the
Department of Civil Aviation. The United States passed the Air Commerce Act in 1926, which
included provisions for safety regulation and pilot certification.
36
See Protocol to Amend the Convention for the Unification of Certain Rules Relating to
International Carriage by Air, opened for signature Sept. 28, 1955, 478 U.N.T.S. 371 (entered
into force Aug. 1, 1963) [hereinafter The Hague Protocol].
37
Most U.S. states at the time had limits on recovery in wrongful death actions, so that caps were
not a foreign concept to U.S. tort lawyers. See 2 Stuart M. Speiser et al., Recovery for
Wrongful Death and Injury § 7.1 (3d ed. 1992) (describing U.S. states’ caps on recovery
for wrongful death actions).
 7.4. Reforming the Warsaw Convention 263

doubling of the amount to $16,600.38 In addition, the Protocol rebalanced

Warsaw’s liability rules governing cargo carriage, improving the legal positions
of both shippers and carriers.39

7.4.2. Reforming the Principle of “Wilful Misconduct”

The Hague Protocol also attempted to resolve an interpretive controversy
concerning the phrase “wilful misconduct” in Article 25 of the Warsaw
Convention.40 A finding of “wilful misconduct” would deprive a carrier of
entitlement to rely on any liability caps: civil law jurisdictions (such as France)
interpreted the term as requiring that the air carrier intentionally inflicted
injury,41 whereas common law systems such as the United States did not make
intentionality an issue.42 Naturally that divergence created a problem when
attempting to translate the authentic French text of the Convention43 into an
English equivalent and then seeking to interpret the translated English text as
if the translated concepts were synonymous with those found in Anglo-
American law. Common law courts, in any event, barely troubled themselves
with any misalignment between civil law concepts and common law reality.
As a result, plaintiffs in common law jurisdictions more easily breached
Warsaw’s liability limits than those litigating under civil law regimes.44 The
compromise struck in 1955 was to integrate the two lines of interpretation,
replacing “wilful misconduct” with a standard that triggers unlimited liability

38
See Hague Protocol, supra note 36, arts. XI, XIII. The post-Hague liability cap was set at 250,000
gold francs ($16,600). The United States had lobbied for a much higher cap of $25,000.
39
In particular, the “nautical fault” defense, see supra note 30, was deleted entirely and clearer
standards were promulgated with respect to calculating cargo and baggage damage. See Hague
Protocol, supra note 36, art. XI. Additionally, the Protocol provided air carriers with the right to
defend themselves from cargo liability claims if they could prove that the damage was due to an
inherent defect in the cargo. See id. art. XII.
40
See supra note 31 and accompanying text.
41
The original French text of the Convention used the words “dol” and “faute . . . equivalente au
dol,” both of which suggest an intention to inflict damage on another person or “gross
negligence” (the latter deemed to be equivalent to intention in civil law based on the
Roman maxim culpa lata dolo aequiparatur (“gross negligence is equal to malice”)).
42
See Koninkljke Luchtvaart Maatschappij N.V. KLM v. Tuller, 292 F.2d 775, 778–79 (D.C. Cir.
1960) (discussing recognition by delegates to the Warsaw Convention that “wilful misconduct,”
the chosen English translation of “dol,” included acts where the harm was not intended).
43
At the time of The Hague Protocol, only the French text was recognized as official.
44
See Tuller, supra note 42, 292 F.2d at 779–82 (holding that under the U.S. common law
interpretation of the Warsaw Convention, an airline’s failure to take appropriate safety meas-
ures before and after a crash could constitute wilful misconduct); see also Lawrence
B. Goldhirsch, The Warsaw Convention Annotated: A Legal Handbook 152
(2d ed. 2000) (citing Gallais c. Aéro Maritime, T.G.I. Seine, Apr. 28, 1954, R.F.D.A. 1954, 184
(Fr.), as an example of French courts requiring intentional harm to trigger unlimited liability).
264 The International Law Regime for Air Carrier Liability

if the plaintiff proves that the damage or injury resulted from an act or omission
of the carrier either (a) with the intent to cause damage (the civil law standard) or
(b) done recklessly and with knowledge that such an act or omission would
probably result in damage or injury (the common law approach).45 By incor-
porating the more lenient demands of the common law, The Hague Protocol
also expanded the options available to plaintiffs in civil law jurisdictions.

7.4.3. U.S. Failure to Ratify The Hague Protocol

In a harbinger of things to come, the United States refused to ratify The
Hague Protocol and openly expressed dissatisfaction with the reset liability
cap. Although some commentators noted the irony that the U.S. demurral
continued to subject U.S. plaintiffs to Warsaw’s even less savory liability limits,
courts in America had already shown themselves willing to find “wilful mis-
conduct” on the part of air carriers and thereby to avoid Warsaw’s caps
altogether. Failure to ratify The Hague Protocol did not significantly impede
the efforts of plaintiffs’ lawyers in the United States to score larger recoveries
from the airlines.46 But the uneven ratification of the Protocol marked the
first in a series of incomplete ratifications of amending instruments. A decline
in the coherence of the Warsaw System would be the inevitable result.47

7.4.4. Problem of Successive Carriage

The Hague Protocol tilted the scales further toward plaintiffs, but by no means
addressed all of the problems associated with the original Warsaw System.

45
See Hague Protocol, supra note 36, art. XIII. “Recklessness” is often proven by violation of a
statute or of air safety regulations. See Goldhirsch, supra note 44, at 163.
46
In the opinion of several U.S. federal courts, the United States implicitly ratified The Hague
Protocol when it ratified Montreal Protocol No. 4 of 1975 (which incorporates the terms of the
earlier instrument; see infra Section 7.4.7). See Continental Ins. Co. v. Federal Express Corp.,
454 F.3d 951, 958 (9th Cir. 2006); but see Avero Belgium Ins. v. Am. Airlines, Inc., 423 F.3d 73,
89 (2d Cir. 2005). Explicit ratification came in 2003. See U.S. Dep’t of State, Treaties in
Force 350 (2004). Even without U.S. participation, The Hague Protocol entered into force on
May 1, 1964. As of mid-2005, it had 137 State parties. See ICAO Composite Table (status of
treaties and status of States vis-à-vis treaties), http://www.icao.int/Secretariat/Legal/Pages/
TreatyCollection.aspx.
47
The Hague Protocol, incidentally, produced a complete amended Convention by providing
that its own provisions and those of the unamended Warsaw Convention form a single instru-
ment. See Hague Protocol, supra note 36, art. XIX. Reversing the common legislative techni-
que of reading amendments into the original legal instrument, Warsaw’s unamended
provisions are, instead, read into The Hague Protocol to produce a complete regime. See
Richard Gardiner, Revising the Law of Carriage by Air: Mechanisms in Treaties and Contract,
47 I.C.L.Q. 278, 281 (1998).
 7.4. Reforming the Warsaw Convention 265

One of the most disconcerting technical shortcomings concerned cases

involving lease, charter, or interchange of aircraft and airlines as well as the
practice of freight forwarding. In those situations, a passenger or shipper may
conclude a contract of carriage with one enterprise, while the actual carriage
is performed by a different enterprise. Code-sharing, where an airline places
its IATA designator code on a service that is actually operated by another
carrier, is a more recent example of such intercarrier arrangements.48 An
austere reading of Article 1(3) of the Warsaw Convention49 indicates that the
treaty’s terms (including its liability limits) apply between the passenger or
shipper and the airline with which either has contracted for carriage, but not
(unless a further specific contractual provision is made) to any additional
carrier or carriers that may perform all or part of the service.50 For example,
United could avail itself of the Warsaw Convention on a ticket that it sells for
a Washington, D.C./Madrid flight operated by Irish carrier Aer Lingus,51 but
Aer Lingus as the actual carrier would be exposed to unlimited liability in the
event of an accident affecting the purchaser of the ticket.

7.4.5. Successive Carriage Under the Guadalajara

Supplementary Convention (1961)
Although not all jurisdictions took such a stern view of Article 1(3) of the Warsaw
Convention, a separate treaty instrument – the Guadalajara Supplementary
Convention of 196152 – clarified that all carriers providing a single service under
the ticket’s contract of carriage were protected by Warsaw for those segments of
48
“Code-sharing is a marketing arrangement in which an airline places its designator code on a
flight operated by another airline and sells and issues tickets for that flight(s).” Office of
Sec’y, Dep’t of Transp. & Fed. Aviation Admin., Code-share Safety Program
Guidelines 4 (2006). Readers will probably have noticed that airlines do not actually share
codes, but rather aircraft. Airport information screens continue to list “code-shared” flights
under the separate code of each partner airline. Nevertheless, the term “code-sharing” has
become accepted usage: for fuller discussion of the concept, see supra Sections 4.6.2, 4.6.3.
49
“A carriage to be performed by several successive air carriers is deemed . . . to be one undivided
carriage, if it has been regarded by the parties as a single operation, whether it had been agreed
upon under the form of a single contract or of a series of contracts.” Warsaw Convention, supra
note 4, art. 1(3).
50
A broad reading of Article 1(3), supra note 49, in contrast, posits that the Convention already
contemplates that multiple and successive carriers may be involved in passenger transport and
cargo shipments.
51
This was an actual service (now discontinued) that was made legally possible by the offer of
seventh (“stand-alone”) freedoms to EU carriers serving the United States under the terms of
the 2007 U.S./EU Air Transport Agreement. See supra Chapter 3, Part 3.3.
52
Convention, Supplementary to the Warsaw Convention, for the Unification of Certain Rules
Relating to International Carriage by Air Performed by a Person Other Than the Contracting
Carrier, ICAO Doc. No. 8181 (entered into force May 1, 1964). The ICAO Legal Committee
266 The International Law Regime for Air Carrier Liability

the journey where they performed the actual carriage.53 That would remain
true even if a particular carrier’s portion of an international journey were wholly
domestic.54

7.4.6. The Guatemala City Protocol (1971): A Failure

to Set an Absolute Liability Cap
Although the Guadalajara Convention eventually attracted eighty-four ratify-
ing States, the United States was never among them. As we will shortly see,
U.S. resistance to the whole Warsaw System would spill over into a threatened
formal denunciation of the Warsaw Convention in 1965 and a parallel “private”
arrangement between the U.S. Government and IATA’s member airlines. But
ICAO still sought to salvage Warsaw, and in 1971 its Legal Committee launched
the Guatemala City Protocol, an update to The Hague Protocol and thus
in legal effect a “protocol to a protocol.” In its most notorious provision,
Guatemala City sought to minimize litigation and expedite compensation by
establishing an absolute liability ceiling of $100,000 that could not be broken
even in instances of “wilful misconduct.”55 That proposal held little appeal for
most of the Warsaw Convention’s signatories. The Protocol never received
enough ratifications to enter into force and remains merely a drafting relic of
the Warsaw era.56

dealt with the issue of successive carriers using a new treaty rather than another amending
instrument. Ostensibly the Committee’s decision reflected a concern that an amending
conference would be used by some States to revisit the issue of liability caps. The true
underlying reason, however, was to prevent Poland – using its status as the depositary State
for the Warsaw Convention – to deny ratification to States (such as South Korea) that the Polish
Communist government did not recognize.
53
The Guadalajara Convention corrected the Warsaw Convention’s apparent omission of the
actual carrier (which is otherwise covered by Warsaw) from being deemed a party to the contract
of carriage by operation of the Convention. See Gardiner, supra note 47, at 295. The acts of the
actual carrier are deemed to be those of the contracting carrier (and vice versa). See id.
54
See Warsaw Convention, art. 1(3). For example, on a Los Angeles/New York/London flight
offered under a code-sharing agreement by American Airlines (Los Angeles/New York) and
British Airways (New York/London), American Airlines would still be protected under Warsaw
even if the accident occurred within the territory of the United States.
55
See Protocol to Amend the Convention for the Unification of Certain Rules Relating to
International Carriage by Air, as Amended by the Hague Protocol, opened for signature Mar.
8, 1971, ICAO Doc. 8392 (1971). A detailed analysis of the ill-fated instrument is available in
Rene H. Mankiewicz, The 1971 Protocol of Guatemala City to Further Amend the 1929 Warsaw
Convention, 38 J. Air L. & Com. 519 (1972). Given that the requirement of an “accident” had
proven so problematic under Warsaw (see infra Part 7.9), the Protocol also made the reasonable
proposal to replace the Article 17 term “accident” by the term “event.” See id. at 525.
56
The Protocol had the cumbersome requirement that it could not come into force unless the 30
ratifying States included five States whose airlines carried 40% of international scheduled air
 7.4. Reforming the Warsaw Convention 267

7.4.7. The Montreal Protocols (1975): A Basket of Changes

Undaunted by the chilly reception for its Guatemala City Protocol, or by U.S.
unilateralism, ICAO pushed the rest of the international community to
continued modernization of the Warsaw System. Four new legal instruments,
known as the Montreal Protocols, were agreed upon in 1975.57 The most
sweeping change implemented by the Protocols was to replace the Warsaw
Convention’s “gold clause” monetary standard by use of the International
Monetary Fund’s Special Drawing Rights (SDRs).58 Additionally, Montreal
Protocol No. 3 set a new liability cap of 100,000 SDRs,59 while Protocol No. 4
terminated Warsaw’s archaic rules on cargo documentation in favor of mod-
ernized methods that rely on standard forms (the “air waybill”60) and elec-
tronic transactions.61 Protocol No. 4 also raised the liability cap for cargo to 17
SDRs ($25) per kilogram.62 Finally, Protocols Nos. 2–4 also incorporated
The Hague Protocol by reference, intending thereby to allow countries such
as the United States that failed to ratify that instrument to take advantage of its
clarifications to the Warsaw System.63

traffic in 1970. See Guatemala Protocol, art. XX. That percentage would have required U.S.
ratification, which never happened.
57
See Protocols to Amend the Convention for the Unification of Certain Rules Relating to
International Carriage by Air, opened for signature Sept. 25, 1975, reprinted in 22 I.L.M. 13.
58
Montreal Protocols Nos. 1–3 all amended Article 22 of the Warsaw Convention to replace the
Poincaré gold franc with the SDR. SDRs were created by the International Monetary Fund in
1969 to support the now-defunct Bretton Woods fixed exchange rate system. That change was
prompted by the “demonetization” of gold, which subjected gold to the ordinary laws of supply
and demand and ended its “transcendent” or “universal” value. Despite the collapse of Bretton
Woods, SDRs are still used as a means of valuation in some international instruments such as
the Warsaw and Montreal conventions. The value of SDRs is based on a basket of four
currencies – currently the euro, the Japanese yen, the pound sterling, and the U.S. dollar.
See International Monetary Fund, Factsheet, Special Drawing Rights (Aug. 24, 2012), http://
www.imf.org/external/np/exr/facts/sdr.htm.
59
Article VII of Montreal Protocol No. 3 stated that ratification would have the effect of accession
to the Guatemala City Protocol for any State not already a party. Incidentally, Montreal
Protocol No. 3 was the only one of the four Montreal instruments to have failed to receive
sufficient ratifications to enter into force. See supra note 57.
60
Air waybills are used in air cargo transport as contracts of carriage and evidence of receipt of
goods. IATA is primarily responsible for the development and standardization of the air
waybill, which was incorporated by Montreal Protocol No. 4 into the Warsaw System.
61
IATA is pushing an e-Air Waybill initiative to increase the use of electronic as opposed to paper
air waybills. Both the shipping and receiving States must have ratified either the Montreal
Convention or Montreal Protocol No. 4 in order to allow airlines to use electronic air waybills.
See http://www.iata.org/whatwedo/cargo/Pages/eawb.aspx.
62
This was an increase from the previous 250 gold franc limit (approximately $17 per kilogram).
See supra Section 7.3.4.
63
See Montreal Protocol No. 2, art. IV; Montreal Protocol No. 3, art. V; Montreal Protocol No. 4,
art. V.
268 The International Law Regime for Air Carrier Liability

7.4.8. Aftermath of the Montreal Protocols

The Montreal Protocols marked the last efforts by public international law
treaty-making to modify the Warsaw System. But they did not obviate any need
for further change. The Warsaw System was now plagued by inconsistent and
uneven ratifications of its various instruments. The United States, as noted,
had rejected all of the agreements that followed Warsaw (and had even
threatened to reject Warsaw itself). Moreover, other than in the technical
sense of consolidating prior agreements, the Protocols largely avoided the
fraught question of moving (or removing) Warsaw’s liability caps.64 Despite
enthusiastic U.S. support for the Montreal Protocols at the time of drafting,
once again U.S. ratification was not forthcoming. And, as we will see, other
States revealed displeasure with the Warsaw System by adopting less airline-
friendly variances of the prevailing international rules for international air
carrier liability.

7.5. reforming the warsaw convention (2): government

and non-government initiatives

7.5.1. Continued U.S. Dissatisfaction with Warsaw

In truth, the United States had little stake in further multilateral negotiations
to modify the Warsaw System. Preservation of the concept of liability limits,
however many times the caps were elevated, ran counter to its interests
(or, rather, to the vocal interests of the U.S. plaintiffs’ tort bar). Critics accused
the United States of undermining the Warsaw System through unilateralism,
but those attacks were overstated. From the beginning, after all, the Warsaw
Convention presented no textual objection to waiving its ground rules for
liability and defenses. As noted earlier, Article 22 allowed air carriers, “by
special contract,” to “agree to a higher limit of liability” than that codified
in the treaty.65 Added to that, Article 33 of the Convention provided that
“[n]othing in [the] Convention shall prevent [a carrier] . . . from making
regulations which do not conflict with the provisions of the Convention.”66
Besides, few would have denied that the Warsaw System had failed to keep

64
But see supra note 59 and accompanying text.
65
Warsaw Convention, art. 22. See also supra note 20. On the question of special jurisdictional
contracts under the Montreal Convention, see infra note 266 and accompanying text.
66
Warsaw Convention, art. 33. At the same time, however, Article 23 stated that an airline cannot
lower its liability or use the contract of carriage to create new defenses from liability. “Any
provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid
down in this Convention shall be null and void . . .” Warsaw Convention, supra note 4, art. 23.
 7.5. Reforming the Warsaw Convention 269

pace with the huge expansion of international air services during the second
half of the twentieth century. The economic justifications for inoculating the
airlines against high liability that were so convincing in 1929 had lost much of
their directive force by the 1970s. Finally, U.S. domestic air transport had not
perished as a result of decades-long exposure to the rigors of uncapped liability
under common law. To U.S. critics of the Warsaw System, it was absurd that
an accident befalling a passenger on a flight between Chicago and Toronto
could be subject to severe liability caps while a similar event on the much
longer Los Angeles/New York route would be controlled by the common law
rules on common carrier liability.

7.5.2. The U.S./IATA Montreal Agreement (1966)

ICAO perceived a threatened U.S. denunciation of the Warsaw Convention
(delivered on November 15, 1965) as potentially lethal to the Warsaw System.67
But, although the Organization continued to advocate modernization, it was
outflanked by the forces of (especially U.S.) unilateralism. The U.S./IATA
“Montreal Agreement” signed in 1966,68 extraordinary as it appeared to be,
would not be the only public/private initiative that a State would pursue to
alter the terms of international air carrier liability. Throughout 1965, IATA
itself had convened a series of meetings to discuss possible reforms to the
Warsaw System, including supersession of Warsaw by the local liability laws of
the domicile of injured passengers. A related proposal sought to expand the
jurisdictional options under Warsaw to allow more suits to be brought into
U.S. courts.69 Under the terms of the Montreal Agreement, IATA’s member
airlines70 consented to an increased liability limit of $75,000 ($58,000 after
deduction of legal fees and costs) for all international flights for which a point

67
In fact, the United States never followed through on its Notice of Denunciation. The with-
drawal of the Notice consisted of the announcement of the deal outlined in the main text.
68
Order of Civil Aeronautics Board Approving Increases in Liability Limitations of Warsaw
Convention and Hague Protocol, May 13, 1966 (approving Agreement CAB 18900), 31 Fed.
Reg. 7302 (1966), reprinted in 49 U.S.C. app. § 1502 (1988) [hereinafter Montreal Agreement].
In fact, the IATA agreement was with the then–U.S. aviation regulatory agency, the Civil
Aeronautics Board. The Agreement was named after the location city of IATA’s headquarters.
That usage naturally causes confusion with similarly styled public international aviation law
treaties.
69
Under Article 28(1) of the Warsaw Convention, jurisdiction may be exercised (at the option of
the plaintiff) by the court of: the domicile of the air carrier; the air carrier’s principal place of
business; the place where the contract of carriage was made; or the place of destination. See
infra Part 7.11.1.
70
Non-IATA member airlines were not covered, although in 1966 there were few such carriers
that operated international services.
270 The International Law Regime for Air Carrier Liability

in the United States was an agreed-upon stopping-place, point of departure,

or destination under the contract of carriage.71 Passengers would have to be
notified in writing of the possible applicability of the new provisions.72 The
airlines also agreed to waive their right to the “all necessary measures” defense
in Article 20 of the Warsaw Convention.73 The IATA-brokered compromise
did not, it should be noted, affect the “wilful misconduct” provision in Article
25 of the Warsaw Convention. U.S. courts continued to apply that standard in
its common law (i.e., “nonintentional”) meaning in cases where a plaintiff
sought to shatter the Warsaw (or IATA) liability cap altogether.74

7.5.3. The IATA Intercarrier Agreement (1995)

IATA’s nongovernmental interventions in the Warsaw System did not stop
with the Montreal Agreement. The Association reentered the liability fray in
the 1990s when it became clear (especially after the “Japanese Initiative”
discussed below) that Warsaw was not going to hold. Acting under a grant of
antitrust immunity from the U.S. Department of Transportation, sixty-seven
IATA member airlines convened in Washington, D.C., to discuss the Warsaw
limits. While they expressed support for preserving the Warsaw System, they
acknowledged that “the existing passenger liability limits for international
carriage by air [were] grossly inadequate in many jurisdictions and should
be revised as a matter of urgency.”75 Hoping to break the governmental dead-
lock on fixing the Warsaw Convention, the member airlines confirmed the
dramatic reach of their proposed reform at the IATA annual general meeting
in Kuala Lumpur in October 1995.76 Under the so-called ‘IATA Intercarrier
Agreement,’ they agreed to take steps to waive the Warsaw Convention/Hague
Protocol Article 22(1) limitation for passenger injury or death arising out of an
71
See Montreal Agreement, supra note 68, ¶ 1(1). The agreement was limited, however, to cases
involving passenger death or injury; it did not extend to loss or damage to baggage or cargo.
72
In legal effect, the Montreal Agreement could be regarded as a “special contract” between air
carriers and passengers under the Warsaw Convention. See Chubb & Son, Inc. v. Asiana
Airlines, 214 F.3d 301, 307 n.4 (2d Cir. 2000). See infra note 266 and accompanying text.
73
See Montreal Agreement, supra note 68, ¶ 1(2); see also supra Section 7.3.4.
74
See, e.g., In re Korean Air Lines Disaster of Sept. 1, 1983, 932 F.2d 1475, 1485 (D.C. Cir. 1991). It
has been speculated that the United States could have “strong-armed” the airlines into accept-
ing no liability cap at all, although the Article 20 (“all necessary measures”) defense would have
remained. It was probably in the interest of the U.S. tort bar, however, to get rid of the Article 20
defense in exchange for the raised liability cap. Moreover, as noted in the main text, U.S. courts
were quite willing to break the cap altogether in instances of “wilful misconduct.”
75
Ruwantissa Abeyratne, Regulatory Management of the Warsaw System of Air Carrier Liability, 3
J. Air Transport Mgmt. 37–45 (1997).
76
Although only 12 airlines signed the agreement initially, all U.S. carriers signed on a week later,
which effectively cleared the way for a new liability regime.
 7.5. Reforming the Warsaw Convention 271

Article 17 accident.77 The 1995 Agreement introduced a universal approach to

liability caps, excluding any a priori limits on damages for passenger injury or
death and waiving defenses (including the “all necessary measures” defense)
for those portions of claims below 100,000 SDRs. Where a plaintiff’s “no proof
of fault” (strict liability78) entitlement to damages no longer applied automati-
cally, that is, for those portions of claims that exceeded 100,000 SDRs, the
airlines would carry the burden of proof. Two further points should be noted.
First, for those portions of claims exceeding 100,000 SDRs, the “all necessary
measures” defense would continue to apply.79 Second, the Article 25 provision
on “wilful misconduct” became irrelevant because, in principle, the concept
of a liability cap was no longer in play.80

7.5.4. Effect of the IATA Intercarrier Agreement on the Warsaw System

The IATA Intercarrier Agreement worked to bring the Warsaw System (albeit
unofficially) closer in line with the long-standing common law presumption
that common carriers (such as railroads and airlines) should bear the risks
associated with their services because they are better placed than their pas-
sengers to guard against them.81 Although that presumption originated in an
era when people (and the courts) were much more circumspect about the
safety of new modes of travel, it still appears intuitively correct given the fact
that airline passengers (and, indeed, shippers82) are, for good reason, afforded
no control over the operation of the aircraft in which they or their cargo will
travel.83 Even though neither the Montreal Agreement nor the Intercarrier
77
International Air Transport Association, Intercarrier Agreement on Passenger Liability, Oct. 31,
1995, reprinted in 3 Av. L. Rep. (CCH) ¶ 27,951 [hereinafter IATA Intercarrier Agreement]. In
April 1996, IATA drafted the “IATA Measures of Implementation Agreement” to give effect to
the measures agreed upon in the Intercarrier Agreement. See International Air Transport
Association, Agreement on the Measures to Implement the IATA Intercarrier Agreement,
reprinted in 3 Av. L. Rep. (CCH) ¶ 27,952 [hereinafter IATA Implementation Agreement].
78
A plaintiff still had to prove that the Article 17 accident caused the plaintiff’s damages,
distinguishing the Warsaw regime from an absolute liability system where proof of causation
would be unnecessary.
79
That defense had been suspended under the Montreal Agreement. See supra note 73.
80
Unlike the 1966 Montreal Agreement, the IATA Intercarrier Agreement was not restricted to
routes connected to the United States, although the Agreement still provided some flexibility.
For instance, select routes were bracketed off and therefore remained subject to the Warsaw
System.
81
See supra note 26 and accompanying text.
82
Although, in fact, the IATA Intercarrier Agreement did not apply to air cargo transport.
83
Some might argue that in an era of pervasive ex ante safety regulation and international
standards set by ICAO, governments have assumed responsibility for safety and should accept
at least some of the blame if accidents occur. See supra Part 7.2. A more contrarian line of
thought is to suggest that, in the modern age, consumers know better the risks associated with
272 The International Law Regime for Air Carrier Liability

Agreement constituted a formal treaty instrument,84 the two IATA agreements

effectively established the rules for international air carrier liability in the
United States for more than thirty years. Those who take a more favorable view
of these initiatives see them as remarkable examples of a private trade group
having a discernible impact on the development of international law.85 The
willingness of IATA’s member airlines to accept the new liability regime – no
doubt fearing an even more deeply fractured and unworkable Warsaw System
if States emulated the United States with threatened or actual defections – also
pointed toward the possibility of further reforms. Their solidarity revealed,
too, that their plea of certain economic ruin if liability caps were lifted no
longer had force after the 1960s. Finally, as we will see, IATA’s acceptance of a
new, “post-Warsaw” model of presumptive liability would become the corner-
stone of the 1999 Montreal Convention.

7.5.5. The Japanese Initiative on Liability (1992)

Across the Pacific, Japan had also grown dissatisfied with the liability regime
established by Warsaw. The absence of a universal consensus on liability,
coupled with the undeniable fact that airlines engaged in international car-
riage enjoyed a level of protection not afforded to carriers providing wholly
domestic air services,86 led ten Japanese airlines in 1992 to invoke Article 22 of
the Warsaw Convention and to add language to their conditions of carriage
altering their liability under the Warsaw System.87 Under the new liability
regime for Japanese carriers, known as the “Japanese Initiative” and which was
a precursor to the IATA Intercarrier Agreement, the airlines waived their right

air travel and can judge for themselves whether they want to bear them. Why should the airlines
“automatically” carry the burden of responsibility? Should they not have the option to negotiate
narrower liability terms in their contracts of carriage? Whatever the merits of these alternatives,
IATA was never ready to advocate such unprecedented flexibility.
84
They are actually contractual agreements between carriers, at least some of which were private
(i.e., non-State-owned) entities. Treaty law as set down in the Vienna Convention on the Law
of Treaties only applies to agreements between States. See Vienna Convention on the Law of
Treaties, art. 3, 1155 U.N.T.S. 331 (1969), 8 I.L.M. 679 (1969).
85
This is hardly an uncommon occurrence, widely discussed in international law scholarship by
reference to the medieval lex mercatoria. See Brian F. Havel & Gabriel S. Sanchez, The
Emerging Lex Aviatica, 42 Geo J. Int’l L. 639, 658–59 (2011). See also supra Chapter 4,
Section 4.5.1 (mentioning IATA’s more recent initiative to encourage States to waive the
operation of the nationality rule in their bilateral air transport agreements).
86
Thus, a trigger for the Japanese Government’s action was the 1985 domestic crash of a JAL 747
in which 520 people lost their lives. The average recovery in that case was $800,000, well above
the Warsaw System limits. See Naneen K. Baden, The Japanese Initiative on the Warsaw
Convention, 61 J. Air L. & Com. 437, 453–55 (1996).
87
See id.
 7.5. Reforming the Warsaw Convention 273

to the Warsaw Convention’s “all necessary measures” defense for claims up

to 100,000 SDRs (i.e., allowing strict liability) in exchange for keeping the
defense available for any amount in excess of 100,000 SDRs88 (i.e., fault-based
liability). There would, however, be no cap on recovery. Commentators
noted, incidentally, that the Japanese Initiative may have been an emanation
of a deeper sense of “moral commitment” that Japanese businesses feel toward
the wider citizenry.89

7.5.6. Response of the European Union (EU)

Discontent with the Warsaw System reigned in Europe as well. With an eye
to raising air carrier liability to a socially acceptable level, the EU adopted
Regulation 2027/97.90 The EU legislation, which only applied to air carriers
licensed under the Union’s single aviation market rules,91 essentially dupli-
cated the liability terms set out in the IATA Intercarrier Agreement: EU airlines
would be subject to unlimited liability, but the strict/fault-based dichotomy
would be retained by allowing recourse to the “all necessary measures” defense
for the portion of claims that exceeded 100,000 SDRs. Regulation 2027/97 also
allowed EU carriers to avail themselves of a defense of contributory negli-
gence.92 The EU legislation was not the first time that European States had
tried to fix the Warsaw System. In 1974, several European States signed on to
an informal accord known as the Malta Agreement to encourage their carriers
to increase their liability caps.93 A decade or so later, the Italian Constitutional
Court exposed Italian carriers (especially Alitalia) to unlimited liability when
it ruled in 1985 that the domestic law implementing the Warsaw Convention
was unconstitutional insofar as it discriminated against air travelers vis-à-vis
surface travelers and its liability limits constituted an offense to human life
and dignity.94 In response, the Italian Government passed Law No. 274 of 1988,

88
See Abeyratne, supra note 75, at 39. Following the Japanese Initiative, Australia enacted new
legislation in 1995 to unilaterally raise the liability cap to 260,000 SDRs. See id.
89
Compounding that sense of obligation was the long-standing official Japanese perception of the
airline industry as a public utility rather than a purely private enterprise.
90
See EC Regulation 2027/97, Air Carrier Liability in the Event of Accidents, 1997 O.J. (L 285) 1.
91
For further discussion of these rules, see supra Chapter 4, Section 4.4.3.
92
For further discussion of the Regulation’s other provisions, see E. Schmid and R. Giemulla,
Council Regulation (EC) No. 2027/97 on Air Carrier Liability in the Event of Accidents and its
Implications for Air Carriers, 23 Air & Space L. 98 (1998).
93
See I. H. Ph. Diederiks-Verschoor, An Introduction to Air Law 163–64 (8th ed.
2006). The Malta Agreement related to carriage outside the United States; U.S.-related carriage
would already have been covered by the Montreal Agreement. See supra note 68.
94
See Coccia v. Turkish Airlines, 108 Foro It. 1 1586 (Corte Cost. 1985).
274 The International Law Regime for Air Carrier Liability

which imposed strict liability up to 100,000 SDRs and mandated compulsory

insurance.95

7.6. the warsaw convention: conclusion

7.6.1. A Sustained Onslaught on the Warsaw Convention

Although all of these reform efforts were limited in scope, they nevertheless
represented a sustained onslaught on the Warsaw Convention’s fundamental
conceptual premise (the product of applying Articles 17 and 22) of admitting
fault but capping liability. The sequence of public and public/private instru-
ments, beginning with The Hague Protocol and culminating in the second
IATA agreement, sent a powerful signal that the Warsaw System was failing
to achieve its principal intended purpose, namely, to create uniform rules
for air carrier liability in international transport. Moreover, the integrity and
cohesion of the Warsaw System had been progressively eroded by some of the
world’s largest aviation markets.

7.6.2. Need for a New Treaty

The apparent willingness of the international airline industry to tolerate these
new, sometimes conflicting rules sent its own message as well: the old protec-
tions that the Warsaw Convention bestowed were no longer necessary. The
international airline industry had finally evolved to the point where it could be
expected to take, and expected itself to take, full responsibility for its actions
and to accept potentially unlimited liability for accidents resulting in injuries
or loss of life.96 What was needed was a fresh treaty to restore uniformity
without sacrificing the new ethos. To that end, ICAO stepped forward to
develop the 1999 Montreal Convention.

95
See Law 274 of July 7, 1988. The law applied to all Italian carriers flying anywhere in the world
and to any air carrier flying to or from Italy. Although some have seen the Italian legislation as
novel, in truth it did little more than implement the Guatemala Protocol and Montreal Protocol
No. 3. So long as the new Italian regime was consistent with the Warsaw Convention, it would
not be invalidated “by this being at the behest of [a government].” Gardiner, supra note 47, at
299. The problem, as Gardiner notes, is that it does not appear that the special contract provisions
of the Warsaw Convention (see supra note 20) were intended as a means of increasing limits of
liability for all carriers affecting a particular State. But that State’s imposition of liability limits on
carriers of its own nationality would be within its legitimate sphere of regulation. See Gardiner,
supra, id.
96
The reader may have noted that most of these reforms in the Warsaw System ignored liability
for baggage and cargo.
 7.7. The Montreal Convention (1): Introduction 275

7.7. the montreal convention (1): introduction

7.7.1. Preserving a System of Uniform Liability

The tolerance of the international community for the Warsaw Convention’s
regime of liability limits declined steadily over the course of the twentieth
century. The arrival of the jet age and the vitality of the aviation industry
compared with its precarious health in 1929 swept away any remaining justi-
fication for the Warsaw limits. What remained, however, was a desire to hold
onto the other stated aim of the Warsaw System, namely, to create universally
applicable rules governing liability. After all, in the realm of public interna-
tional aviation law, the Chicago Convention had successfully anchored a
stable regime for facilitating international air services (albeit one that left
most economic rights to be distributed through an idiosyncratic patchwork
of bilateral treaties).97 But seven decades of amendments, criticisms, threats of
denunciation, private side agreements, State-level initiatives, and a plethora
of secondary studies, had made only limited progress toward modifying the
Warsaw System to boost liability caps and to provide plaintiffs with more
options to recover damages beyond those caps. Most of the international
community kept faithful to Warsaw, relying still on the original Convention
and its various amending protocols (which themselves had not been univer-
sally adopted). But the United States, the perennial voice of reform, had a
sporadic record of actually accepting the amendments.98

7.7.2. Role of ICAO in Creating the Montreal Convention

The alacrity of many IATA carriers in adopting the Intercarrier Agreement
put enormous pressure on ICAO to respond at the intergovernmental level
and to forge a long-elusive consensus on the issue of liability limits. ICAO, in
fact, defied expectations to recapture the leadership on this issue from IATA.
In May 1999, the Organization convened a Diplomatic Conference of 118
States in Montreal to discuss a draft convention that would “modernize and

97
See supra Chapters 2, 3.
98
Eventually the United States did ratify Montreal Protocol No. 4 while also ratifying the 1999
Montreal Convention. See ICAO, Status of the United States with Regard to International
Law Instruments, http://www.icao.int/secretariat/legal/Status%20of%20individual%20States/
united_states_en.pdf. The reason for adopting the Protocol was to ensure that its liability
terms, even though imperfect, still applied in situations where the international air carriage
in issue involved an airline of a State that had not adopted the Montreal Convention as well,
but only the Protocol. For further discussion of the applicability of different instruments
depending on the circumstances of individual cases, see infra Section 7.12.3.
276 The International Law Regime for Air Carrier Liability

consolidate” the Warsaw System.99 The successor instrument would integrate

not only the treaty-based advances made over the decades within the Warsaw
System, but also the progress achieved through the various State and public/
private initiatives already noted.100

7.7.3. Issues of Restitution and Corrective Justice

One of the clearest indicators that the Montreal Convention inaugurated
“regime change” can be found in the treaty’s Preamble, which recognizes
“the importance of ensuring protection of the interest of consumers in interna-
tional carriage by air and the need for equitable compensation based on the
principle of restitution.”101 That one line, hortatory though it may be,102 is a far
cry from the manifest intent of the Warsaw Convention (expressed through
its apparatus of liability caps) to shield airlines from the risk of an “excessive”
liability. The Preamble also accords with the principle of corrective justice:
according to that idea, airlines should, as a matter of right, restore those they
injure as near to the condition they were in prior to the accident as circum-
stances will allow.103

7.7.4. Basic Principles of Liability and Jurisdiction

To that end, the Montreal Convention aligns with the IATA Intercarrier
Agreement and the Japanese Initiative to abolish all arbitrary limits on recovery
for passenger death or injury. Like those instruments, it adopts a scheme of
strict liability for proven damages up to 100,000 SDRs and unlimited liability
beyond that amount, subject to a narrow range of defenses. Montreal sets no
upper limit on the amount of damages an airline may have to pay out; the
determination of damages rests with the local courts applying the Convention’s
rules. In certain circumstances, too, Montreal expands the bases of jurisdiction
for claims relating to passenger death or injury to permit suits in the passenger’s
home State if certain conditions are met.104 Additionally, Montreal updates
the liability limits for baggage and cargo, setting a 1000 SDR per passenger

99
Montreal Convention, supra note 6, pmbl.
100
See Assad Kotaite, President, ICAO, Opening Address at the International Conference on Air
Law on the Modernization of the Warsaw System (May 10, 1999), http://legacy.icao.int/icao/en/
conf/warsaw_pres.htm.
101
Montreal Convention, supra note 6, pmbl.
102
And, indeed, the concept of “restitution” appears nowhere in the main text of the Montreal
Convention.
103
But see supra Part 7.2, also canvassing a more contrarian view.
104
See infra Section 7.11.12.
 7.8. The Montreal Convention (2): The Basic Principles 277

liability cap for checked baggage105 and a 17 SDR per kilogram cap for loss,
damage, or delay of cargo.106 Finally, Montreal preserves all of the documentary
efficiencies secured for the cargo industry by the Warsaw-era Montreal Protocol
No. 4.107 In the next parts, we will examine the most important principles of the
Montreal liability system in more detail.

7.8. the montreal convention (2): the basic

principles

7.8.1. Scope of Application of the Montreal Convention

Article 1 of the Montreal Convention, which defines the treaty’s scope
of application, replicates Article 1(1) of Warsaw in holding that the treaty
“applies to all international carriage of persons, baggage or cargo performed
by aircraft for reward,” and applies equally to gratuitous carriage.108 As in
Warsaw, Article 1(2) also makes clear that the Convention governs all interna-
tional carriage where the places of departure and destination are in two States
that have ratified the Montreal Convention or are within a single ratifying
State, provided in the latter case that there is an agreed-upon stopping-place
in another State, whether or not it has ratified the Convention.109 Thus, the
Convention’s applicability is a combination of treaty relations between States

105
See Montreal Convention, supra note 6, art. 22(2).
106
See id. art. 22(3). This matches the cargo liability cap contained in Montreal Protocol No. 4,
supra note 57.
107
See supra Section 7.4.7.
108
Montreal Convention, supra note 6, art. 1. The extension of coverage to “gratuitous carriage,”
that is, carriage offered free of charge as a courtesy, is limited in application. Courts have read it
to include airline employees who are “deadheading” (traveling free in unsold seats without
working), and it would seemingly apply also to passengers who have earned a free ticket through a
frequent flyer plan. The Convention, however, does not cover on-duty airline employees, nor,
presumably, would it apply to stowaways. See Goldhirsch, supra note 44, at 12.
109
See Montreal Convention, supra note 6, art. 1(2). Although this language seems convoluted, it
works out to be fairly straightforward in practice. Take State A, a Montreal-ratifying State,
and State B, a nonratifying State that still adheres to the Warsaw System (including The
Hague Protocol). A one-way trip from State A to State B will not be covered by the Montreal
Convention (it will continue to be covered by Warsaw, assuming that State A still adheres also
to that treaty). But if the ticket is for a State A/State B/State A round-trip journey, the Montreal
Convention governs because the places of departure and destination are both in State A and the
agreed-upon stopping-place is State B (even though it is not a Convention party). The reader
may wonder why State A is the “destination” State rather than State B, a point that is not
obvious. To determine the “destination” State, in fact, courts have focused on the objective
manifestations of the parties’ intent expressed by the ticket. See In re Alleged Food Poisoning
Incident, Mar. 1984, 770 F.2d 3, 4–5 (2d Cir. 1985). But see infra Section 7.12.4 (adding a further
complication to the fact pattern considered here).
278 The International Law Regime for Air Carrier Liability

coupled with “facts of a geographical nature”:110 it will apply when relevant

States are party to it, the link between those States being provided by geo-
graphical information in the contract of carriage as to the origin and destination
of the flight.111 Cabotage (purely intra-State) services are excluded from cover-
age even if the flight route crosses non-national airspace.112 Article 1(3), again
borrowed virtually intact from Warsaw, addresses the oft-litigated question of
when a domestic journey performed by one carrier is connected to an interna-
tional journey performed by a different, “successive” carrier for purposes of
securing coverage for the first carrier under the Convention. That problem of
successive carriage was more significant when airlines routinely orchestrated
passenger and baggage connections on flights performed by other airlines using
an IATA-sponsored collaborative process called “interlining.”113 Today most
airlines operate through code-sharing arrangements with partner carriers,114
reducing the number of disputes over whether successive carriers formed a
“single, undivided operation.”115

110
Gardiner, supra note 47, at 282.
111
See id. As Gardiner points out, “[t]o the extent of selection of places of departure, destination
and agreed stopping places (and to that extent only), what is agreed between the airline and the
passenger or consignor of cargo has a bearing on whether the carriage is within the . . .
Convention. Beyond those choices, however, the parties to the contract have no option
whether or not the . . . Convention is to apply. It applies by force of law. The obligation on
each State to apply the Convention’s provisions to each such instance of carriage by air arises
from the treaty relations between States parties to the Convention.” But see infra note 269
(indicating that treaty relations may sometimes be completely absent and the case cannot
proceed under any international agreement).
112
For example, a United flight from Chicago to Seattle may enter Canadian airspace at various
points in the journey. On cabotage generally, see supra Chapter 2, Part 2.5.
113
Interlining occurs when different legs of a trip are flown by different airlines and the passenger
and his or her luggage are transferred from the aircraft of the first carrier to that of the second.
Although the two carriers cooperate on getting the passenger to his or her ultimate destination,
they do not necessarily place their codes on the cooperating carrier’s aircraft, nor does the
passenger receive frequent flyer miles for the portion of the trip flown by the other carrier. This
is distinct from code-sharing, where regardless of the aircraft or crew used to fly a given route,
the flight will be listed and sold under the flight number of multiple partner airlines whose
customers are often eligible to receive all of the miles, priority boarding, and other perks
associated with flights operated by any of the airlines code-sharing on that flight. Article 36 of
the Montreal Convention covers liability for interline operations. On code-sharing generally,
see supra note 48.
114
In 2011, approximately 80% of capacity flown across the Atlantic and Pacific oceans and
between Asia and Europe was provided by the three major code-share alliances. See IATA
Economics Briefing, The Economic Benefits Generated by Alliances and
Joint Ventures (2012), http://www.iata.org/whatwedo/Documents/economics/Economics
%20of%20JVs_Jan2012L.pdf.
115
See, e.g., Feeney v. America W. Airlines, 948 P.2d 110 (Colo. App. 1997) (determining that
baggage lost by the carrier flying the Phoenix-Denver leg of a Mexico-Denver flight was covered
under the Warsaw Convention because the flight was an undivided operation).
 7.8. The Montreal Convention (2): The Basic Principles 279

7.8.2. Successive Carriage Through Interlining

Nevertheless, where mere interlining, as opposed to code-sharing, is still
employed, the legal consequences remain significant. Article 39 of the
Montreal Convention excludes mere successive carriers, whose liability is
governed by Article 36, from the provisions of Chapter V that extend the
performing carrier’s liability to contracting carriers in code-sharing arrange-
ments.116 Article 36 instead specifies that when there are successive carriers,
such as in an interline relationship, a claim can only be brought “against the
carrier which performed the carriage during which the accident or delay
occurred” unless the first carrier expressly assumes liability for the entire
trip.117 The distinction between the liability of interlining carriers and code-
sharing carriers was cogently described by the court in Best v. BWIA West
Indies Airways (BWIA).118 Karen Best purchased a round-trip ticket from
BWIA to fly from New York to Grenada. The trip included a stopover at
Port of Spain, Trinidad, and the Port of Spain–Grenada leg was to be flown by
a separate carrier, LIAT. Although the ticket Best purchased from BWIA
covered both legs of the flight, there was no code-share arrangement between
BWIA and LIAT, making this a simple interline arrangement. Best arrived in
Port of Spain without incident, but suffered injuries after boarding the LIAT
aircraft for the onward portion of the flight. While the plaintiff argued that
BWIA should be liable under Article 39 of the Montreal Convention, the New
York federal district court granted BWIA’s motion for summary judgment,
finding that the successive carrier relationship between BWIA and LIAT was
not enough on its own to impose liability on BWIA.119

116
See Montreal Convention, supra note 6, art. 39. Thus, in a code-share arrangement, the
plaintiff has the option of bringing a claim against either the actual carrier or the contracting
carrier. In one recent case, a French court ruled that a passenger who used accumulated Air
France frequent flyer miles to purchase a one-way ticket on Kenya Airways (a partner with Air
France in the SkyTeam alliance) to fly from Cameroon to China could bring a claim against
Air France as the contracting carrier because of the code-sharing agreement between Air
France and Kenya Airways. See Cour d’appel [CA] [regional court of appeal] Paris, 2001
(Kuate v. Air Fr., Kenya Airways and others).
117
Montreal Convention, supra note 6, art. 36.
118
581 F. Supp. 2d 359 (E.D.N.Y. 2008).
119
See id. at 364. “Although Article 39 provides a basis for liability for a ticket seller that did not
exist under the Warsaw Convention, by its plain language this Article does not apply to the
contract of carriage in this case since, as noted, it excludes from coverage successive carriage
arrangements. The relationships typically covered by Article 39 include ‘code share operations
and operations where one carrier offers service using an aircraft and crew leased from another
carrier.’” Id. For discussion of successive carriage under the Warsaw Convention, see supra
Sections 7.4.4, 7.4.5.
280 The International Law Regime for Air Carrier Liability

7.8.3. Code-Sharing
Code-sharing, in fact, is more relevantly and reliably treated under the new
Article 1(4) of the Montreal Convention, the first example of how the new
treaty consolidates pieces of the Warsaw System. Consistent with the clarifi-
cation of Warsaw by the Guadalajara Supplementary Convention, Article 1(4)
now explicitly extends the treaty’s coverage (via the ten Articles of a newly
minted Chapter V120) to carriage performed by air transport “undertakings”121
other than the contracting carrier, such as code-share partners.122 The looped
provisions of Article 1 and Chapter V serve a modern international aviation
commercial environment dominated by large alliance groups such as
SkyTeam, Star, and oneworld.123 Without Montreal’s extended coverage, an
alliance partner might be hesitant to perform portions of international carriage
for which it is not the “contracting carrier,” that is, the airline that sells the
ticket to the passenger.124 The Convention also applies to carriage performed
by State-run entities, although it generally excludes postal carriage.125

7.8.4. Cargo Carriage

Like Warsaw, the Montreal Convention also contains a number of provisions
(in Articles 4 through 16) that relate to cargo carriage and which are distinct
from the rules that apply to air passenger carriage. Unlike its predecessor,
however, the Montreal Convention’s cargo regime resists strict oversight of
documentary procedures, leaving most of the technical details to be worked
out between consignor and consignee.126 Article 5, for instance, reflects a
philosophy of ticket simplification (applicable also to the air passenger ticket,
120
The text is not identical, but Guadalajara was cited as the precedent. See Letter of President
William Jefferson Clinton Approving the Montreal Convention (Sept. 6, 2000), 106th Cong.,
2d Sess., Treaty Doc. 106–45 (2000).
121
As in the Warsaw Convention, this term is undefined.
122
See Montreal Convention, supra note 6, Chapter V. For discussion of international airline
alliances, see supra Chapter 4; on code-sharing generally, see supra Chapter 4, Sections 4.6.2,
4.6.3.
123
See In re Air Crash at Taipei on Oct. 31, 2000, 219 F. Supp. 2d 1069 (C.D. Cal. 2002) (finding
that the Star Alliance itself is not a carrier under Article 17 of the Warsaw Convention).
124
See Montreal Convention, supra note 6, arts. 39, 40. Article 39 of the Convention distinguishes
the “contracting carrier” from the “actual carrier” that performs the whole or part of the
carriage “by virtue of authority from the contracting carrier.”
125
See Montreal Convention, supra note 6, art. 2.
126
See generally id. art. 5. Some of the old Warsaw rules are retained, however. For example,
Article 10 of Montreal retains the Warsaw mandate that the cargo shipper is responsible for the
accuracy of the details related to the shipment that appear on the air waybill. Articles 12–14,
which enumerate the rights of the consignor and the consignee vis-à-vis the air carrier, have also
been retained from Warsaw. According to Article 14, the consignor and consignee can both
 7.8. The Montreal Convention (2): The Basic Principles 281

as considered below) that requires the general document of carriage, the “air
waybill,” to contain only one cargo-specific detail, the weight of the consign-
ment.127 The air waybill must also indicate the places of departure and
destination and at least one foreign stopping-place if the places of departure
and destination are within the same State.128 New ground is struck for cargo in
Article 18, which appears in the Montreal Convention’s chapter on liability.
Under that provision, a carrier can escape liability for damage to or loss of
cargo if it can prove one or more of the following causal events: “(a) inherent
defect, quality or vice . . .; (b) defective packaging of that cargo performed by
a person other than the carrier . . .; (c) an act of war or armed conflict; and (d)
an act of public authority carried out in connection with the entry, exit or
transit of the cargo.”129 Only the first event, “inherent defect, quality or vice,”
was a traditional (common law) liability defense,130 but Article 18 offers further
sturdy excuses permitting the cargo carrier to escape liability – and might be
viewed as sitting uneasily alongside the apparent consumer-friendly ethos of
the new Convention. One justification for giving carriers new opportunities to
avoid cargo-related liability is the fact that shippers, particularly shippers of
high-volume, high-value air freight, are likely to have enough commercial
sophistication to know the risks associated with using air transport to move
their products.131 Shifting too much of the liability burden to the air carriers
may also force them to become self-insurers of cargo damage risks and to spike
their tariffs accordingly. Also, a strict liability cargo regime, akin to the rules
that now govern liability to passengers, potentially opens the door for shippers
to be less careful in packing. Unlike the extreme dependency that affects
enforce all rights granted to them by Articles 12 and 13 (on the disposition and delivery of cargo),
each in their own name and whether they are acting in their own interests or in the interests of
another person, provided that they carry out their contractual obligations. Finally, Article 15
duplicates the same-numbered provision in Warsaw in stating that Articles 12–14 do not affect
the relations of consignor and consignee with each other or the relations of third parties whose
rights are derived from the consignor or consignee. See id. arts. 12–15.
127
The weight of the cargo is essential because weight is the basis for the Convention’s liability cap
for damaged cargo.
128
See supra note 109 for an explanation of the importance of indicating the foreign stopping-place
if the Convention is to apply.
129
Montreal Convention, supra note 6, art. 18(2).
130
But see Missouri Pac. R.R. v. Elmore & Stahl, 377 U.S. 134, 137 (1964) (listing as the common
law defenses for carriers, “(a) the act of God; (b) [the act of a] public enemy; (c) the act of the
shipper himself; (d) [the act of a] public authority; or (e) the inherent vice or nature of the
goods”).
131
While to some extent, therefore, the duty of insurance remains with the shipper, Article 18 of
the Montreal Convention still imposes liability on the carrier for destruction, loss, or damage
that occurs “during the carriage by air.” Montreal Convention, supra note 6, art. 18(1). The
carrier will be responsible for damage in transit caused by improper loading, storage, air
turbulence, and so on. See id.
282 The International Law Regime for Air Carrier Liability

passengers, cargo shippers can themselves take better precautions to assure the
intact arrival of their consignments.132

7.8.5. Air Passenger Ticketing

Finally, another marker of Montreal’s break with the old Warsaw System
appears in the provisions of Article 3 of the Montreal Convention relating to
air passenger ticketing. Article 3(1) requires “an individual or collective docu-
ment of carriage,” that is, a ticket that indicates the places of departure and
destination and must also include one stopping-place in a foreign State if
the places of departure and destination are within the same State.133 Thus, the
arcane Warsaw rules relating to the nature and content of a physical ticket are
discarded in favor of much simpler provisions, and indeed Article 3(2) plainly
contemplates eventual full conversion to e-ticketing.134 Also, while an airline is
still required to provide passengers with written notice that the Montreal
Convention’s liability rules apply for international carriage,135 failure to pro-
vide such notice no longer automatically vitiates the applicability of the
Convention.136 Having scrapped Warsaw’s cumbersome requirements for a
“luggage ticket,”137 however, Montreal does require that an air carrier supply
a separate “baggage identification tag” for each piece of checked baggage.138
Although the new Montreal rule is both simpler (there are no required
formalities) and slightly more complex (the requirement for multiple tags),
the whole matter has become trivial. In an age when few air passengers ever
132
It is interesting to note that under the revised cargo liability regime introduced in Montreal
Protocol No. 4, supra note 57, the defenses were available only if the damage to cargo resulted
“solely from one or more” of the listed causes [emphasis added]. Id. art. IV. By dropping the
word “solely,” the Montreal Convention allows a carrier to escape liability even if it can prove
only that one or more of the enumerated events led partly to the damage or loss. Thus, in that
sense, the Convention furnishes an even thicker set of protections for air cargo carriers.
133
Montreal Convention, supra note 6, art. 3(1)(a), (b). See supra note 109 for an explanation of the
importance of indicating the foreign stopping-place if the Convention is to apply.
134
“Any other means which preserves [the information about departure and destination] may be
substituted for the delivery of [the ticket].” Montreal Convention, supra note 6, art. 3(2). It can
be seen that the text of Article 3(2) is capacious enough to absorb even futuristic technologies
that would allow the information to be “mind-melded” into passengers’ brains. Note that
Article 4(2) of the Convention includes an almost identical provision for air cargo.
135
See Montreal Convention, supra note 6, art. 3(4).
136
See id. art. 3(5). The contrasting Warsaw Convention provision appeared in Article 3(2) of that
instrument. See Warsaw Convention, supra note 4, art. 3(2). On the other hand, of course, the
later Convention no longer has any caps on liability for passenger injury or death.
137
Warsaw Convention, supra note 4, art. 4. The luggage ticket even required a declaration of
value to comply with the luggage liability cap (and the available cap-breaking declaration of
higher value) in Article 22 of the Warsaw Convention. See supra Section 7.17.7.
138
Montreal Convention, supra note 6, art. 3(3).
 7.9. The Montreal Convention (3): Activating the Liability Regime 283

receive a physical ticket, multiple computerized baggage tags are now the only
reliable means of tracking your belongings on their journey from Des Moines
to Frankfurt after you have already arrived safely at your final destination in
Sydney.

7.9. the montreal convention (3): activating

the liability regime (accidents, death, injury)

7.9.1. An “Accident” Causing Death or Injury

Unlimited liability is the cornerstone principle of the Montreal Convention,
and we will return to that topic later in the chapter. But the conditions that
determine air carrier liability for death or bodily injury of a passenger are
the same as those articulated in the Warsaw Convention. Under Article 17(1) of
Montreal, which appears in Chapter III on liability of the carrier, an exclusive
cause of action arises under the Convention139 if the “accident” that caused
the death or injury takes place “on board the aircraft” or “in the course of
any of the operations of embarking or disembarking.”140 Although seemingly
straightforward, this is actually a polyvalent sentence that requires some
unpacking.141 Moreover, it is common ground among domestic court systems
139
See El Al Isr. Airlines, Ltd. v. Tseng, 525 U.S. 155, 161 (1999) (“We therefore hold that recovery
for a personal injury suffered ‘on board [an] aircraft or in the course of any of the operations of
embarking or disembarking,’ art. 17, 49 Stat. 3018, if not allowed under the Convention, is not
available at all”). See infra Section 7.10.10.
140
Montreal Convention, supra note 6, art. 17(1). Article 17(2) of the Montreal Convention lays
down related terms for carrier liability for lost or damaged checked baggage – although the
embarkation/disembarkation dyad is replaced by “any period within which the checked
baggage was in the charge of the carrier.” Montreal Convention, supra note 6, art. 17(2). The
airline can, however, absolve itself of liability if the loss or damage was due to an inherent
defect, quality, or vice of the baggage. See id. For unchecked baggage, the carrier is liable if the
damage resulted from “its fault or the fault of its servants or agents.” Id. A carrier has 21 days to
locate lost baggage before an enforceable claim arises. See Montreal Convention, supra note 6,
art. 17(3). Carrier liability for baggage is capped at 1000 SDRs per passenger. See id. art. 22(2).
141
Article 35 of the Montreal Convention (which is virtually the same as Article 29 of Warsaw)
prescribes a two-year statute of limitations within which plaintiffs must commence any action
for damages (whether related to passenger or cargo transportation) under the Convention. See
Montreal Convention, supra note 6, art. 35; see Kahn v. Trans World Airlines, Inc., 82 A.D.2d
696, 709 (N.Y. App. Div. 1981). There remain unsettled questions regarding the application of
the statute of limitations to actions for indemnification and contribution. See Motorola, Inc. v.
MSAS Cargo Int’l, Inc., 42 F. Supp. 2d 952, 956 (N.D. Cal. 1998) (holding that the two-year
statute of limitations applies to indemnification suits brought by one carrier against another);
but see Chubb Ins. Co. of Eur. S.A. v. Menlo Worldwide Forwarding Inc., 634 F.3d 1023 (9th
Cir. 2011); Connaught Laboratories Ltd. v. Air Canada (1978), 23 O.R. 2d 176 (Can. Ont. Sup.
Ct. J.) (holding that the Warsaw and Montreal Conventions, and thus the statute of limitations,
were only intended to apply to passenger and not carrier claims).
284 The International Law Regime for Air Carrier Liability

that the basic concepts used in the liability Conventions are “autonomous
concepts,” the meaning of which should be determined by examining the
words of the Convention itself rather than by scrutinizing what they signify
under individual national legal systems.142

7.9.2. A Subjective Approach to Defining “Accident”

The meaning of the term “accident” in Article 17 of the Warsaw and Montreal
Conventions is ambiguous and the scope of the term has been the subject of
numerous judicial interpretations.143 The lay observer might well expect that
an event labeled an “accident” must be literally and entirely outside the
control of any of the parties involved, but that would leave only acts of God
to be covered by the Convention. Another approach, which seems to have won
favor with the U.S. Supreme Court in its famous Warsaw Convention decision
in Air France v. Saks,144 is to accept a priori that a wide spectrum of unexpected
events may occur in air transport (as in any common carriage), but to use the
reaction of the individual passenger as the benchmark for whether the term
“accident” should apply to any specific event. Thus, the Supreme Court ruled
in Saks that a Warsaw Convention “accident” occurs only where the injury
suffered is produced by “an unexpected or unusual event or happening that
is external to the passenger.”145 That definition, in turn, excludes any instance
where an injury “indisputably” results from a passenger’s “own internal reac-
tion to the usual, normal and expected operation of the aircraft.”146 One
cannot pretend that Saks is easy to apply. U.S. courts have struggled with
numerous fact situations to which they have had to apply the Supreme Court’s
quasi-psychological analysis of external/internal passenger responses. Generally
speaking, where an alleged accident flows from a passenger’s consumption of
alcoholic beverages on the flight, the courts have labeled such occurrences as
arising from an internal response to the intoxication.147 On the other hand,
where a passenger’s intoxication led to the harm of another passenger and the
142
King v. Bristow Helicopters, supra note 19, at ¶ 16.
143
As previously noted, Warsaw Convention precedent is regularly used to interpret the same or
similar provisions in the Montreal Convention. See, e.g., Baah v. Virgin Atl. Airways Ltd., 473
F. Supp. 2d 591, 596 (S.D.N.Y. 2007).
144
470 U.S. 392 (1985).
145
Id. at 405.
146
Id. at 406.
147
See Padilla v. Olympic Airways, 765 F. Supp. 835 (S.D.N.Y. 1991) (passenger falling over from
intoxication is not an accident). But see Scala v. Am. Airlines, 249 F. Supp. 2d 176, 179–81
(D. Conn. 2003) (flight attendant serving alcoholic beverage to passenger who ordered non-
alcoholic beverage is an accident and passenger can recover for damage resulting from
aggravation of existing heart condition).
 7.9. The Montreal Convention (3): Activating the Liability Regime 285

airline personnel failed to provide assistance to that passenger, an “accident”

within the scope of Warsaw occurred.148 But, where an airline’s personnel failed
to provide medical assistance to a passenger, including failing to have the
proper medical equipment on board, that set of circumstances was held not
to be an “accident.”149

7.9.3. The “Characteristic of Air Travel” Approach

to Defining “Accident”
Another, less subjective interpretive approach used by U.S. courts has been
to find that an Article 17 “accident” must arise from a risk “derived from” or
“characteristic of ” air travel.150 Thus, an assault on another passenger would
not be covered if the airline (through its employees) is not part of the causa-
tion.151 But using the metric of what is “characteristic” of air travel has produced
some startling reasoning, driven no doubt by a desire to allow passenger recovery
in upsetting circumstances. In Wallace v. Korean Air,152 plaintiff Brandi Wallace
fell asleep aboard a nonstop flight from Seoul, South Korea, to Los Angeles,
California, seated in economy class next to two men she did not know. She
awoke to find one of the men sexually assaulting her. The court held this to be
an accident under the characteristic risk of air travel standard, stretching the
notion to encompass situations such as the plaintiff’s where “the characteristics
of air travel increased [the plaintiff’s] vulnerability to [her fellow passenger’s]
assault.”153 The court cited the confined space in economy seating, the plain-
tiff’s proximity to strangers, the dimmed lighting to allow passengers to sleep,
and especially the inattentiveness of the flight attendants, as characteristics
contributing to the assault.154 Similarly, recent cases dealing with failure to
render adequate medical assistance have added what might be considered
unexpected burdens to the duties of air carriers and their employees. For
148
Langadinos v. Am. Airlines, Inc., 199 F.3d 68, 71 (1st Cir. 2000).
149
See Hipolito v. Nw. Airlines, Inc., 2001 WL 861984 (4th Cir. Jul. 31, 2001). But see Watts v. Am.
Airlines, Inc., No. 1:07-cv-0434, 2007 WL 3019344 (S.D. Ind. Oct. 10, 2007) (airline’s failure to
recognize and respond to passenger’s heart attack can count as accident).
150
See Stone v. Cont’l Airlines, Inc., 905 F. Supp. 823, 827 (D. Haw. 1995) (“The fundamental
premise in authorizing carrier liability under the Warsaw Convention ‘is to include such risks
that are characteristic of air travel’”) (citing Price v. British Airways, No. 91 Civ. 4947, 1992 WL
170679, at *3 (S.D.N.Y. Jul. 7, 1992)). The Court in Stone dismissed plaintiff’s claim, arising out
of an assault by a fellow passenger, as “not an accident derived from air travel.” Id.
151
See id.; see also Price, supra note 150, (holding that a fistfight between passengers was not an
accident); Langadinos, supra note 148 (airline only liable for assault by intoxicated passenger if
crew’s over-serving of passenger caused tort).
152
214 F.3d 293 (2nd Cir. 2000).
153
Id. at 299.
154
Id.
286 The International Law Regime for Air Carrier Liability

instance, in Olympic Airways v. Husain,155 a passenger with an asthmatic con-

dition was seated too close to the smoking section. The flight attendant refused
to move the passenger, despite repeated requests from the passenger’s wife,
and the passenger ultimately died from an asthma attack. The U.S. Supreme
Court held that the flight attendant’s failure to act could constitute an “accident”
under the Warsaw Convention.156 A number of other cases resulted in liability
for carriers where the response to an onboard medical emergency was deemed
inadequate or insufficient under industry standards to the point of constituting
an “accident.”157

7.9.4. DVT Cases

There has been a spate of recent cases involving claims for damages related to
deep vein thrombosis (DVT), an ailment some passengers develop on long
international flights. In this series of cases, the quasi-psychological component
of events external to the passenger is missing. Either the passenger has a medical
predisposition, or he or she does not. Courts have primarily concluded that
claims based on the development of DVT do not fall under the definition of
an Article 17 accident, because the development of DVT is internal to the
passenger and not caused by an unusual or unexpected event or happening.158
A more interesting question was posed by recent litigated claims arguing that
an airline’s failure to warn passengers about the risk of DVT rises to the level of
an external, causal action by the carrier that would constitute an Article 17
accident. Thus far, courts remain unpersuaded.159

7.9.5. How Does the Montreal Convention Affect the Definition

of “Accident”?
It is unclear what, if any, changes ought to be made to the Saks exposition of
“accident” now that the Montreal Convention is in force.160 If the treaty is read
155
540 U.S. 644 (2004).
156
See id. at 645, 647–48.
157
See, e.g., Yahya v. Yemenia-Yemen Airways, No. 08–14789, 2009 WL 3424192 (E.D. Mich. Oct.
20, 2009); Watts v. Am. Airlines, Inc., supra note 149; Fulop v. Malev Hungarian Airlines, 175
F. Supp. 2d 651 (S.D.N.Y. 2001).
158
See, e.g., Rodriguez v. Ansett Austl. Ltd., 383 F.3d 914, 917 (9th Cir. 2004); Blansett v. Cont’l
Airlines, Inc., 379 F.3d 177, 180 (5th Cir. 2004); Povey v. Qantas Airways Ltd., [2005] 223 C.L.R.
189 (Australia); Deep Vein Thrombosis and Air Travel Group Litigation, [2005] UKHL 72,
[2005] 1 A.C. 495 (U.K.).
159
See Twardowski v. Am. Airlines, Inc., 535 F.3d 952 (9th Cir. 2008).
160
Saks was cited with approval in the U.K. Court of Appeal in Chaudhari v. British Airways,
[1997] EWCA Civ. 1413.
 7.9. The Montreal Convention (3): Activating the Liability Regime 287

teleologically in light of its Preamble’s emphasis on protecting passengers,

then a broad construction of the term is indicated. An overly broad reading,
however, could overburden the airlines and make them responsible for the
internal reactions of extraordinarily sensitive passengers.161 Air travel, after all,
is no longer novel. Air travelers do or ought to realize that even behemoths like
the A380 cannot always furnish a smooth ride; mental duress or an adverse
physiological reaction may occur in response to events that are “extraordinary”
in the sense that they deviate from any carrier’s desire to provide a pleasant
cabin experience but are not so far beyond the norm as to be wholly unex-
pected. The Saks judgment shifts some responsibility to the passenger for his
or her reaction to the events of flight.

7.9.6. Distinction Between “Bodily” and “Psychic” Injury

Can a passenger who is frightened by air turbulence recover for the psycho-
logical trauma he or she felt and may even continue to feel after the flight?162 At
this point in the history of Warsaw/Montreal jurisprudence, the answer appears
to be “no.” Even though an “accident” is found to occur under Article 17 of
the Montreal Convention, liability will not attach unless that accident has
caused “death or bodily injury.”163 This formulation carries over from the
Warsaw Convention, and once again Warsaw precedent is arguably applica-
ble. Few phrases in either Convention have generated as much interpretive

161
Such a possibility raises the specter of the “eggshell skull” common law tort rule, exemplified by
Vosburg v. Putney, 80 Wis. 523, 50 N.W. 403 (Wis. 1891). Perhaps the most alarming recent
example of an unexpected event that disrupted the passenger experience occurred in March
2012, when a JetBlue pilot went temporarily insane and was locked out of the cockpit by his
copilot. The pilot could be observed by the passengers pounding on the cockpit door and
yelling about the 9/11 attacks, and was ultimately subdued by some of the passengers while the
copilot made an emergency landing. See Corrie MacLaggan, U.S. Charges JetBlue Pilot for
Midair Meltdown, Reuters, Mar. 29, 2012, http://www.reuters.com/article/2012/03/29/us-usa-
crime-jetblue-pilot-idUSBRE82R1GF20120329. JetBlue settled a lawsuit brought by some of
the passengers. See Passengers, JetBlue Settle Suit Over Pilot Rampage, Associated Press, Jun.
13, 2013, http://www.usatoday.com/story/todayinthesky/2013/06/13/passengers-jetblue-settle-suit-
over-pilot-rampage/2418437/. Note that the case serves only as a hypothetical when discussing
the Montreal Convention, because the incident occurred on a domestic flight.
162
Obviously allowing recovery for psychic reactions to the many untoward events of air travel
could open an “avalanche” of intangible and expensive claims against carriers both large and
small. King v. Bristow Helicopters, supra note 19, at ¶ 17. An IATA position paper at the
Montreal Conference in 1999 listed 17 possible such events: in addition to turbulence, the
paper mentioned missed approaches, near misses, lightning strikes, accidental emergency
announcements, aircraft decompression, emergency landings, aborted takeoffs, diversions to
alternative airports, delayed gate departures due to announced mechanical problems with
aircraft or engine, and unruly passenger behavior. Cited id.
163
Montreal Convention, supra note 6, art. 17(1).
288 The International Law Regime for Air Carrier Liability

dissonance among national courts as “bodily injury.” With respect to “injury,”

U.S. judges made careful efforts to develop a coherent jurisprudence under
the Warsaw System that opened up the term to include both physical and
some expressions of psychic injury (the latter is known alternatively as “mental
distress”164). The approach adopted in 1974 by the New York Court of Appeals
in Rosman v. Trans World Airlines165 was to find TWA liable for “plaintiff’s
palpable, objective bodily injuries, including those caused by the psychic
trauma of [a] hijacking, and for the damages flowing from those bodily injuries,
but not for the trauma as such or for the nonbodily or behavioral manifestations
of that trauma.”166 In other words, if the psychic harm caused bodily injury,
such as (in the plaintiff’s case) mental anguish giving rise to backaches, swollen
feet, and leg and back discoloration, damages were recoverable under the
Warsaw Convention.167 Some courts went further. In 1975, in Husserl v.
Swiss Air Transp. Co.,168 the Southern District of New York found damages
for “severe mental pain and anguish,” including “various mental and psycho-
somatic injuries, at least some of which involve[d] demonstrable, physiological
manifestations,” to be recoverable.169 The Husserl court justified its strong
reading by observing that “[t]o effect the treaty’s avowed purpose [of covering
air carrier liability], the types of injuries enumerated should be construed
expansively to encompass as many types of injuries as are colorably within
the ambit of the enumerated types.”170

7.9.7. Approach of Non-U.S. Courts to Psychic Injury

Some courts in other jurisdictions accepted psychic harm without the tangled
formulas resorted to in the United States. The Israeli Supreme Court, in the

164
See, e.g., Ruwantissa I.R. Abeyratne, Mental Distress in Aviation Claims – Emergent Trends, 65
J. Air L. & Com. 225 (2000).
165
314 N.E.2d 848 (N.Y. 1974). The case arose out of the September 1970 hijacking of a TWA flight
from Tel Aviv to New York.
166
Id. at 857. The definition of “accident” was not at issue in Rosman. Hijacking is clearly an
accident under Article 17, and the airline defendant did not contest that point.
167
Id. at 856–57 (finding also that the plaintiff’s children could be compensated for developing
boils and substantial weight loss as a result of the trauma of the hijacking).
168
388 F. Supp. 1238 (S.D.N.Y. 1975).
169
Husserl involved a Zurich–New York flight that was hijacked to a desert area near Amman,
Jordan. See id. at 1242–43. See also generally Borham v. Pan Am. World Airways, Inc., No. 85
Civ. 6922, 1986 WL 2974 (S.D.N.Y. Mar. 5, 1986) (finding that passenger’s cause of action for
emotional trauma without physical injury, caused by an explosion on a Pan Am flight from
Hong Kong to Honolulu, was within the scope of Article 17).
170
Husserl, 388 F. Supp. 1238, 1250.
 7.9. The Montreal Convention (3): Activating the Liability Regime 289

1984 case of Air France v. Teichner,171 read Article 17 of the Warsaw Convention
broadly enough to allow recovery for purely psychic injuries unaccompanied
by bodily injury or physical manifestation. Interestingly, the high court, which
enjoys a reputation as a liberal reformist tribunal, was less focused on the text of
Article 17 than on the evolution of the general law of liability to include recovery
for psychic injury. In the court’s view, “desirable jurisprudential policy”
demanded that Warsaw’s heads of recovery should be enlarged accordingly.172

7.9.8. U.S. Supreme Court’s Decisions in Floyd and Tseng

Although welcomed by plaintiffs’ attorneys, it is questionable whether the
reasoning in Husserl – or, for that matter, in Teichner – was companionable
with Warsaw’s aim to put boundaries around airline liability.173 Certainly, the
U.S. Supreme Court in Eastern Airlines v. Floyd174 thought not, although it
still managed to leave the matter somewhat ambiguous. In Floyd, the plaintiff
sued Eastern Airlines for intentional infliction of emotional distress as a result
of engine failure and subsequent preparations for ditching the airplane.175
The Court, after inquiry into the meaning (in French law and at the Warsaw
negotiating conference) of the term lésion corporelle (“bodily injury”) in
the authentic French text of Article 17, held that “an air carrier cannot be
held liable [under the Warsaw Convention] when an accident has not caused
a passenger to suffer death, physical injury, or physical manifestation of
injury.”176 But a unanimous Court also disclaimed, in dictum, any view “as
to whether passengers can recover for mental injuries that are accompanied by
171
Cie Air Fr. v. Teichner, 39 Revue Francaise de Droit Aérien 232, 242, 23 Eur.Tr.L. 87, 101 (Isr.
1984). Teichner arose from the 1976 hijacking of an Air France flight to Entebbe, Uganda.
Passengers sought compensation for psychic injuries caused by that ordeal.
172
Id. at 243, 23 Eur.Tr.L., at 102. The Court took a similar view in another of the cases referred to
as the “Entebbe” cases, Daddon v. Air Fr., 1 S & B Av. R. VII/141 (Isr. 1984), relying on changes
in the aviation industry since 1929 and the current domestic Israeli view of mental and
psychological injury: but see supra text accompanying note 142 (indicating general view that
Convention concepts should be interpreted as “autonomous”).
173
The Teichner court’s interpretation, for instance, may have severely overstretched the treaty,
which after all was intended to shield the airline industry from unlimited liability and was never
designed with the general “public interest” in mind. See Eastern Airlines, Inc. v. Floyd, 499
U.S. 530, 546 (1991) (“In 1929 the parties were more concerned with protecting air carriers and
fostering a new industry than providing full recovery to injured passengers”).
174
499 U.S. 530 (1991).
175
The pilot had informed the passengers after successive engine failures and altitude loss that the
plane would be ditched in the Atlantic Ocean. The plane landed safely after an engine restart. See
id. at 533. Eastern Airlines conceded that the events constituted an “accident” under Article 17 of
the Warsaw Convention. Id.
176
Id. at 552. Justice Thurgood Marshall appeared to express sympathy for the Israeli Supreme
Court’s policy-based reasoning that allowed recovery in Teichner, see supra note 171.
290 The International Law Regime for Air Carrier Liability

physical injuries.”177 Eight years later, in El Al Israel Airlines v. Tseng,178 the

Supreme Court offered up a “restatement” (in a footnote, and again in dictum)
of Floyd when it declared that “[t]he [Warsaw] Convention provides for
compensation under Article 17 only when the passenger suffers ‘death, phys-
ical injury, or physical manifestation of injury.’”179 Thus, the Tseng footnote
tightens Floyd by inserting “only” before the Floyd list of recoverable events
and by eliminating any reference to mental injuries accompanied by physical
injuries.180 Some commentators nevertheless view Floyd as accepting a sole
instance of recovery for psychic harm, namely, when that harm results in
physical injury.181 The two dicta remain facially inconsistent and one cannot
assume that Tseng intended to overrule or modify the Floyd holding.182 In the

Nevertheless, Marshall held that, because the purpose of Warsaw was uniformly to limit
liability for the international airline industry, and in the absence of “convincing evidence”
that the signatories intended recovery for psychic injury, Article 17 should be construed
narrowly. Id. at 551.
177
Id. at 552. That issue was not presented in Floyd, because the plaintiff passengers did not allege
physical injury or physical manifestation of injury. Id.
178
525 U.S. 155 (1999).
179
Id. at 166 n.9 (emphasis added). Floyd had left such confusion in its wake that lower courts
issued a number of inconsistent opinions concerning psychic injury, holding in some instances
that a plaintiff may recover for such harms when accompanied by physical injuries, and in
others insisting that psychic injury must be linked inextricably to the physical harms suffered.
For a good collection of disparate case law on this point, see John F. Easton, Jennifer Trock, &
Kent Radford, Post-Traumatic “Lésion Corporelle”: A Continuum of Bodily Injury Under the
Warsaw Convention, 68 J. Air L. & Com. 665, 673–90 (2003). It seems, however, that psychic
injury alone is not recoverable under the Warsaw Convention. The only known case to allow
compensation for stand-alone psychic injury is the 1984 Israeli Supreme Court decision in
Daddon v. Air Fr., supra note 172.
180
In fact, later in the opinion the Court reminded the plaintiff, who had sued El Al for assault and
false imprisonment arising out of a rigorous security search, that she had not sustained “bodily
injury” under Article 17 of Warsaw and “could not gain compensation . . . for her solely psychic
or psychosomatic injuries.” 525 U.S. at 172.
181
See, e.g., Dr. Christian Andrews & Dr. Vernon Nase, Psychiatric Injury in Aviation Accidents
Under the Warsaw and Montreal Conventions: The Interface Between Medicine and Law, 76
J. Air L. & Com. 3, 33 (2011).
182
Arguably, the Tseng footnote was an inartful summary of the holding in Floyd and was not
intended to be a new rule to guide the lower courts. In Weaver v. Delta Airlines, 56 F. Supp. 2d
1190 (1999), a lower U.S. court seemed to “outflank” Floyd by accepting an argument that
psychiatric injury or illness can in some circumstances be shown to involve physical changes to
the brain and therefore can constitute a recoverable head of damages as “bodily injury” under
Article 17 of the Warsaw Convention. . The use of the word “outflank” comes from the opinion
of Lord MacKay in the U.K. House of Lords decision in King v. Bristow Helicopters, supra
note 19, at ¶ 19. In King, while all five judges were satisfied that Floyd represents the correct
analysis, three members of the panel also accepted the possibility, not present in the cases
before them, that demonstrable brain damage flowing (as in Weaver) from a mental or psychic
injury might also be compensable. Lord Nicholls held that “[i]njury to a passenger’s brain is an
injury to a passenger’s body just as much as injury to any other part of his body.” Id. at ¶ 4.
 7.9. The Montreal Convention (3): Activating the Liability Regime 291

absence of a clear ruling, the point remains in dispute. A number of scholarly

articles look hopefully to a future U.S. Supreme Court returning to Article 17,
but this time under the Montreal Convention, and finally resolving the
uncertainty.183

7.9.9. Issue of Psychic Injury Under the Montreal Convention

All of the foregoing jurisprudence, selected primarily from U.S. case law,
evolved under the Warsaw System. How relevant is this corpus of precedent to
cases arising under the Montreal Convention? Early rulings under Montreal
suggest that Floyd-as-narrowed-by-Tseng remains the applied standard.184 But
if Montreal is tilted toward passenger welfare, is a broader reading of “injury”
now warranted? During the drafting sessions for the Montreal Convention,
delegates specifically discussed extending liability to “mental injury.”185 A
consensus never formed, however, in part because some delegates appeared
to believe that “injury” is a sufficiently pliable term to include both bodily and
mental harms.186 France, for instance, confirmed at the drafting conference
that the term lésion corporelle (“bodily injury”), which appears in the official
French text of the Warsaw Convention, is a legal term of art to which French
courts had attached both physical and mental injury.187 Therefore, the expres-
sion “bodily injury” in the Montreal Convention must be freighted with the
Although the point might appear reasonable, Lord Steyn did not think that the Weaver opinion
contained any such limiting principle. He criticized his fellow judges for embracing a “too
controversial” position that would sweep “mental injury and illnesses” into the Convention
system and would escalate claims beyond what the drafters intended. Id. at ¶ 27.
183
See, e.g., Andrews & Nase, supra note 181, at 38, 73–75.
184
See, e.g., Schaefer-Condulmari v. U.S. Airways Group, LLC, No. 09–1146, 2012 WL 2920375
(E.D. Pa. Jul. 18, 2012) (passenger can recover for post-traumatic stress disorder if caused by
physical injuries from accident).
185
See Ehrlich v. Am. Airlines, Inc., 360 F.3d 366, 390–400 (2003) (discussing drafting history of
“bodily injury” under the Montreal Convention). The United States delegation pushed the
inclusion of psychic injury at the drafting conference. See id. at 399–400. See also King v.
Bristow Helicopters, supra note 19, at ¶ 31, indicating that the U.K. Government reported
insufficient support at the Montreal drafting conference for a “separate head of claim for
mental injury.”
186
See Ehrlich, supra note 185, at 390–400. One has to treat the failure of the Montreal Convention
to add mental harm recovery as at least surprising. The delegates were aware that liability law had
been gradually evolving toward recognition of psychic damage unaccompanied by physical harm
not only in the United States but also in other jurisdictions, including France, Germany, and
Israel. See id.
187
See McKay Cunningham, The Montreal Convention: Can Passengers Finally Recover for
Mental Injuries?, 41 Vand. J. Transnat’l L. 1043, 1073 (2008) (citing 1 International Civil
Aviation Organization, International Conference on Air Law (Convention for the Unification
of Certain Rules for International Carriage by Air), Montreal (May 10–28, 1999), Minutes, Doc.
9775-DC/2, at 68 (2001)).
292 The International Law Regime for Air Carrier Liability

same meaning. It remains unclear, however, whether the drafting history of

the Montreal Convention and the interpretive acquis of civil law jurispru-
dence will (or should) push courts in all contracting States to shape an
expansive understanding of “bodily injury.” As others have noted, even though
Article 17 of Montreal repeats its predecessor virtually verbatim, that does
not mean that the newer language was also intended to ratify the court-crafted
jurisprudence of the old Article 17.188 As a purely textual matter, after all,
courts in the Montreal era might be expected to acknowledge that the drafters
of the Montreal Convention rejected readings of Article 17 that included
mental harm.189

7.9.10. Embarking and Disembarking

Warsaw Convention cases again supply useful precedent in defining the final
element of Article 17, namely, that the “bodily injury” caused by the “accident”
must occur “on board the aircraft or in the course of any of the operations
of embarking or disembarking.”190 The determination of whether a passenger
is “on board” an aircraft has proven unproblematic. But courts in different
jurisdictions have felt a need to give greater precision to the embarkation/
disembarkation requirement. All of their various approaches are predicated
on where the passenger was physically located when the injury took place, on
the activity in which the passenger was engaged, but also on whose control or
direction the passenger was under at the time of the accident.191 Again, the

188
See Cunningham, supra note 187, at 1076–81.
189
On the other hand, the Supreme Court’s reasoning in Floyd was centered on protection of the
fledgling airline industry, a theory that has lost purchase under the “individual restitution”
philosophy of Montreal. But no lower U.S. court has yet rejected the old jurisprudence in favor
of a “fresh start” under Montreal. Also, it will be recalled that Montreal is not by its terms a
“reset” of Warsaw, but was intended to “modernize and consolidate” that Convention and its
related instruments. See Montreal Convention, supra note 6, pmbl; see also supra Section 7.1.4.
190
Montreal Convention, supra note 6, art. 17(1).
191
See Day v. Trans World Airlines, Inc., 528 F.2d 31, 33–34 (1975). The court in Day first
articulated the “tripartite test” by which embarking or disembarking became based on location,
activity, and control. That test has been updated by recent courts, a more current formulation
being: “(1) the activity of the passenger at the time of the accident; (2) the restrictions, if any, on
the passenger’s movement; (3) the imminence of actual boarding; and (4) the physical
proximity of the passenger to the gate.” Ramos v. Am. Airlines, Inc., No. 3:11cv207, 2011 WL
5075674 (W.D.N.C. Oct. 25, 2011). The Day test has been subject to some criticism by courts
and commentators supporting a narrower interpretation of “embarking,” but that criticism has
primarily been confined to dicta in cases where courts have ruled that plaintiffs would not
recover even under the Day test. See Maugnie v. Compagnie Nationale Air Fr., 549 F.2d 1256,
1262 (9th Cir. 1977) (Wallace, J., concurring); Sweis v. Trans World Airlines, Inc., 681
F. Supp. 501, 504 (N.D. Ill. 1988).
 7.10. The Montreal Convention (4): The New Liability Regime 293

common law rule on “common carriers” requires a high standard of care on the
part of a carrier when passengers are entering into or alighting from a vehicle
operated by the carrier.192 Aligned with Article 17, the common law rule creates
an expectation that a passenger waiting in line during the boarding period,
but who has not yet boarded the aircraft, will be covered by the Montreal
Convention. On the other hand, a passenger who is still en route to the terminal,
or who wanders away from the boarding area to fetch a soft drink and succumbs
to an injury while doing so, is probably beyond the scope of the Convention.193
Disembarkation is measured using similar benchmarks: it appears that
Montreal will cease to apply once the passenger has moved beyond the gate
and is proceeding toward the airport terminal.194 Regardless of what the articu-
lated test may be in a given case, the courts have generally taken a flexible view
of the changing circumstances of international air travel. Control is probably
the most critical component in each analysis; combined with the passenger’s
degree of proximity to the aircraft (both physical and temporal), the control
test usually yields a sensible outcome. Control is also at the core of the “zone of
aviation risk” test that has evolved in some civil law jurisdictions.195

7.10. the montreal convention (4): the new

liability regime

7.10.1. A Mandatory System of Liability

The mandatory and exclusive character of the Montreal system of liability is
established in Article 49 of the Montreal Convention. That provision vitiates
any clause in a contract for international air carriage that purports to change

192
See generally Woodard v. Saginaw City Lines, Inc., 112 N.W.2d 512 (Mich. 1961).
193
These are not actual examples from case law, but rather hypotheticals that almost certainly
would not satisfy the Day court’s three-part test doctrine (see supra note 191) as it has developed.
However, for a more expansive view of “embarking,” see Matveychuk v. Deutsche Lufthansa
AG, No. 08-CV-3108, 2010 WL 3540921 (E.D.N.Y. Sept. 7, 2010) (passenger who was denied
boarding due to tardiness and suffered injury in restroom on way to rebooking desk found to be
in process of embarking).
194
See generally MacDonald v. Air Can., 439 F.2d 1402 (1st Cir. 1971); Martinez Hernandez v. Air
Fr., 545 F.2d 279 (1st Cir. 1976). Courts have applied the Day test (see supra note 191) to
disembarking and have generally come to the conclusion that passengers can be considered to
be in the process of disembarking while still in the gate area and before reaching customs or the
main terminal. For example, passengers injured on an escalator that is part of the gate area
maintained by the defendant airline have repeatedly been found to be disembarking. See, e.g.,
Ugaz v. Am. Airlines, Inc., 576 F. Supp. 2d 1354 (S.D. Fla. 2008).
195
See Hailegabriel G. Feyissa, Ethiopian Law of International Carriage by Air: An Overview, 5
Mizan L. Rev. No. 2, 215, 234, n.114 (2011).
294 The International Law Regime for Air Carrier Liability

the law to be applied or the rules of jurisdiction.196 Reinforcing Article 49,

the Convention annuls any provision that purports to relieve the carrier of
liability or fix a lower limit of liability than that laid down in the Convention197
and stipulates that carriers may by special contract accept only higher limits
of liability than those in the Convention (or no limits whatsoever).198

7.10.2. Strict Liability Under the Montreal Convention

The most salient feature of the new liability regime is its imposition in Article 21
of the Montreal Convention, consistent with later Warsaw Convention reforms,
of strict liability on air carriers up to 100,000 SDRs and potential unlimited
liability above that amount.199 This regime codifies the liability reforms to
which the airline industry acquiesced in the Convention’s immediate historical
precursors, the IATA Intercarrier Agreement and the Japanese Initiative.200
But Article 21 is not, as some commentators have implied, synonymous with
absolute liability.201 Under a hypothetical system of absolute liability (which,
truth be told, has probably never existed202), an airline would automatically
have to disgorge 100,000 SDRs regardless of the nature of the injury incurred
and would be unable to avail itself of any defenses. Under the system of strict
liability in Article 21 of the Montreal Convention, a plaintiff must still prove
damages up to 100,000 SDRs. Once proof is made, however, the airline’s only
backstop is to plead a defense of contributory fault by the plaintiff.203 If a
plaintiff is seeking more than 100,000 SDRs, the presumption remains that
the air carrier is responsible (the same presumption that Warsaw made204), but
Article 21(2) dismantles Warsaw’s “all necessary measures” defense and substi-
tutes a modernized negligence formula: the carrier will not be liable for
damages that exceed 100,000 SDRs if it proves that “the damage was not due
to the negligence or other wrongful act or omission of the carrier” or that “such

196
See Montreal Convention, supra note 6, art. 49. A similar provision appeared in Article 32 of the
Warsaw Convention.
197
See Montreal Convention, supra note 6, art. 26; see also supra note 66.
198
See Montreal Convention, supra note 6, art. 25. As to the use of special contracts, see supra
note 20.
199
See Montreal Convention, supra note 6, art. 21.
200
See supra Part 7.5.
201
See Senai W. Andemariam, Does the Montreal Convention of 1999 Require that a Notice be
Given to Passengers? What is the Validity of Notice of a Choice of Forum Clause Under
Montreal 1999?, 71 J. Air L. & Com. 251, 270 (2006).
202
See generally Richard A. Epstein, Tort Law (1999).
203
Montreal Convention, supra note 6, art. 20; see also infra note 209.
204
See Warsaw Convention, supra note 4, arts. 20, 21.
 7.10. The Montreal Convention (4): The New Liability Regime 295

damage was solely due to the negligence or other wrongful act or omission of
a third party.”205

7.10.3. Disproving Negligence

The first negligence defense for claims above 100,000 SDRs – that of non-
negligence by the carrier itself – is, admittedly, extremely hard to prove. The
second defense, of third-party negligence, is arguably an extension of the
first.206 Third-party responsibility could arise, for example, where a terrorist
detonates a device aboard an aircraft207 or an airport fails to properly maintain
its runways or landing apron. For both defenses, the problems of proof are
likely to be less onerous than those of the “all necessary measures” proviso in
the IATA Intercarrier Agreement and the Japanese Initiative.208 Moreover,
as noted above, the Montreal Convention still affords an air carrier the
opportunity to avoid all or part of its liability by proving a plaintiff’s contrib-
utory fault.209 Finally, the Convention stipulates that all claims are subject to a
two-year statute of limitations.210

205
Montreal Convention, supra note 6, art. 21(2), (a), (b). This new system obviates any need for
passengers to allege “wilful misconduct” on the part of the carrier: passengers are now free to
recover unlimited amounts, and the burden falls on the carrier to argue its negligence defense
to avoid damages greater than 100,000 SDRs.
206
This is because it is difficult to conceive how a carrier could show that no negligence was
involved in an accident without some other party being responsible. Where mixed respon-
sibility is found, however, the airline is still liable to pay any damages proven in excess of
100,000 SDRs.
207
But remember that the terrorist attack would have to be the sole cause of the airplane’s
debilitation. If the air carrier failed to properly screen its baggage or to undertake normal
security precautions, it is likely that the carrier would be responsible for all of the damages
arising out of the attack.
208
Although the drafters thought that a negligence defense would be more favorable to
carriers, in fact courts never applied the “all necessary measures” defense literally: if
such measures had indeed been taken, the injury would not have occurred. The clause
has been construed, rather, to mean “all reasonable measures.” See Manufacturers Hanover
Trust Co. v. Alitalia Airlines, 429 F. Supp. 964, 967 (S.D.N.Y. 1977), aff ’d, 573 F.2d 1292 (2d
Cir. 1977).
209
See Montreal Convention, supra note 6, art. 20. There is a strong public policy motivation for
including this defense in the Convention. No State would wish to incentivize passengers to
engage in risky behavior on board aircraft in order to create the conditions where a damages
recovery would redound to that passenger’s benefit. At the same time, no government would
want to deal with the public outcry if the family of a terrorist were to seek damages after the
destruction of an aircraft. (The 9/11 terrorists, incidentally, were all aboard domestic U.S. flights
and no Warsaw/Montreal issues were presented.)
210
See id. art. 35(1). However, “[t]he method of calculating that period shall be determined by the
law of the court seised of the case.” Id. art. 35(2). See also supra note 141.
296 The International Law Regime for Air Carrier Liability

7.10.4. Forensic Reality of the Montreal Convention Liability Regime

Critics of the Montreal Convention have pointed out – probably rightly – that
the treaty’s liability defenses will rarely, if ever, come into play. Given the
universality of insurance coverage, an inability to plead a liability defense
may not be of great moment with respect to individual claims for events such
as onboard coffee spillage or the like. But for large accident claims, it is
undoubtedly true, as a practical matter, that the exact nature of what caused
an accident remains difficult to prove and expose (even with advances in
accident investigation techniques and reporting). The threshold demonstra-
tion that an accident was absolutely not due to a carrier’s negligence or wrongful
act or omission (terms that bear no relationship to “intentionality”211) is, in
reality, too high a forensic bar. The choice for airlines facing litigation under
the Convention may be reduced to an expeditious settlement or a dissipation
of resources quarrelling over the quantum of damages.212 But is this a bad
thing? Airlines will certainly not welcome such unpalatable choices. But
the Montreal Convention does more than mete out a kind of rough justice
between carriers and their clients. As well as compensating passengers who
suffer death or bodily harm, the Convention can arguably be presented also
as a scheme for ex post regulation that demands (albeit retrospectively) robust
safety compliance by the international air transport industry.213 From the
perspective of social utility, therefore, the treaty’s exacting standards of strict
liability and its narrow framing of defenses may be considerably less unpalat-
able. Operating in Montreal’s shadow, airlines are on notice of their liability
and will be rationally motivated toward best practices in maintenance, inspec-
tions, and crew training. Insurers, too, should be sufficiently risk-aware not
to allow their insured carriers to degrade safety oversight. Air carriers that do so

211
Again, one needs to distinguish Warsaw’s treatment of the idea of “wilful misconduct;” here the
intent of the carrier is not at issue.
212
Harold Caplan, dean of the aviation liability bar in the U.K., confirms this impression. In any
situation where the Montreal Convention might apply to a major event, according to Caplan,
defending counsel will immediately review any possibilities for asserting Convention-based
defenses. Usually counsel will conclude that the prospect of asserting a non-negligence defense
seems unlikely and will instead recommend settlement of all claims while reserving the
contingency of later suing the manufacturer or air traffic control provider or other third party
if the air incident investigation reveals noncarrier culpability. Rapid settlement of some claims
occurred in the 2009 Atlantic Ocean loss of Air France flight 447, for example, even though it
could take many years to identify the technical causes of the crash. Insurers, too, are likely to
support early claim settlement and to reserve for later resolution (perhaps through arbitration)
any cross-liability issues for the various insured parties (airlines, manufacturers, etc.) that may
result from the crash investigation.
213
Again, we note that practitioners would not universally endorse that view of the Convention’s
purpose. See supra Section 7.2.2.
 7.10. The Montreal Convention (4): The New Liability Regime 297

may well be forced to exit the marketplace, widening the space for those with
the capital, resources, and entrepreneurship to provide an appropriate level
of safe air service. And although such a self-correcting regime will not give rise
to a “flawless” environment where accidents never occur, it will go a long way
toward keeping unfit actors out of the marketplace.214

7.10.5. The “Escalator” Clause

A major enhancement to the Warsaw Convention’s terms of liability is the
review of the applicable liability limits that is provided for in Article 24 of
the Montreal Convention. Under the “escalator clause,”215 ICAO is permitted
to review the Convention’s SDR limits every five years if the accumulated rate
of inflation among the States whose currencies comprise the SDR exceeds
10%.216 In such instances, ICAO may revise the liability limits upward, with
the changes coming into effect six months later unless disapproval is registered
by a majority of the State parties to the treaty. If that happens, ICAO must
convene a special meeting to consider revising the liability limits or keeping
them in place. The new power of adjustment was wielded for the first time in
2009, when ICAO recalibrated Article 21 strict liability up to 113,100 SDRs.
Montreal’s escalator clause is significant for two reasons. First and foremost,
it effectively guarantees that the treaty’s liability terms will not go out of date
and that passengers who suffer injury in 1999, 2009, and 2029 will all have
materially equivalent opportunities to recover within the Convention’s strict
liability regime. And second, except in circumstances of collective discontent
with upward movements of the strict liability cap, States will not have to
bother with reconvening to negotiate a new treaty instrument every time
the cap appears inadequate to achieve the Convention’s purposes. Given the
historic failure of the Warsaw System not only to adjust the old caps in a timely
manner, but also to attain a consensus for any proposed adjustments, the
“automaticity” of the new Montreal clause is remarkably efficient.

7.10.6. Other Provisions for Calculating Liability

In addition to the escalator clause, the Convention provides additional
details with respect to calculating liability. Article 23, for example, establishes

214
See id. (discussing the coexistence and utility of separate systems of ex ante and ex post
regulation of air safety).
215
The term “escalator clause” does not appear in the Convention text.
216
See Montreal Convention, supra note 6, art. 24(1).
298 The International Law Regime for Air Carrier Liability

methodologies for converting SDRs into local currency.217 Article 25 recapitu-

lates Warsaw’s “special contract” exceptions by providing that, as noted above,
“[a] carrier may stipulate that the contract of carriage shall be subject to higher
limits of liability than those provided for in [the] Convention or to no limits
of liability whatsoever.”218 Given the presumptive unlimited liability to which air
carriers covered by Montreal are already exposed, however, the second (itali-
cized) clause of this provision of the treaty rings strange.219 At most, it reinforces
the treaty’s disavowal of the liability-capping philosophy of Warsaw.

7.10.7. Advance Compensation

The consumer-friendly ethos of the Montreal Convention is reflected also in
Article 28’s strict requirement that “[i]n the case of aircraft accidents resulting
in death or injury of passengers,” the airline must make, if its national law
so requires, “advance payments without delay to . . . persons who are entitled
to claim compensation in order to meet the immediate economic needs of
such persons.”220 As with Article 17, “accident” is not a defined term in the
Convention’s advance payment requirement. Several questions are therefore
presented, once again, about the scope of that critical term. If it is contestable
as a matter of law whether an “accident” has occurred, is an advance payment
still required? Can an airline seek to resist the payment on the ground that a
Montreal “accident” has not occurred? Does the social desirability of advance
payments give rise to a more flexible definition of the term “accident” in
217
See Montreal Convention, supra note 6, art. 23.
218
Montreal Convention, supra note 6, art. 25 [emphasis added]; see also supra notes 20, 65.
219
The first clause (“higher limits of liability than those provided for in [the] Convention”) simply
allows carriers to increase their strict liability exposure above the Article 21 ceiling (as
amended). In that context, airlines would also have the freedom to use potential waiver of
their strict liability as a bargaining chip in their contractual arrangements. This possibility finds
some support in Article 27’s disclaimer that “[n]othing contained in [the] Convention shall
prevent the carrier from . . . waiving any defenses available under the Convention, or from
laying down conditions [in its contract of carriage] which do not conflict with the provisions of
[the] Convention.” In other words, carriers retain the freedom to contract terms of carriage so
long as they do not run up against the purposes of the treaty itself. Cf. Montreal Convention,
supra note 6, art. 26.
220
Montreal Convention, supra note 6, art. 28. Article 28 also provides, however, that advance
payments are not “a recognition of liability” and may be offset against any amounts subsequently
paid as damages. EU Regulation 889/2002 requires Union carriers to make advance payments of
not less than 16,000 SDRs. Comm’n Regulation 889/2002, amending Regulation 2027/97, 2002
O.J. (L 140) 2–5. U.S. law does not require such payments, but many carriers voluntarily make
them. The largest U.S. airline trade association, formerly known as the Air Transport Association,
in its 2005 Intercarrier Implementing Provisions Agreement sought to obligate its carriers to
make the same minimum 16,000 SDR advance payments as required under the EU Regulation.
See DOT Order 2006–10–14, Docket OST-2005–22617 (Oct. 26, 2006).
 7.10. The Montreal Convention (4): The New Liability Regime 299

Article 28 than in Article 17, or should the two terms be considered inter-
changeable? It has also been suggested that the use of “aircraft accidents” as
opposed to simply “accidents” could signify a stricter interpretation of “acci-
dents” than in Article 17.221 Nevertheless, EC Regulation 2027/97, the original
EU legislation requiring advance payments for accidents, uses a definition of
“accident” that corresponds fairly closely to prevailing interpretations of the
Article 17 usage of the term.222 Practically speaking, airlines will rarely cavil at
paying out advance compensation in accordance with Article 28, even if they
are ultimately exonerated (an outcome that, as we have seen, may be difficult
to achieve under Montreal).

7.10.8. Punitive Damages

One provision added in the Montreal Convention that potentially moderates
the liability exposure of airlines is the prohibition in Article 29 of “punitive,
exemplary or any other non-compensatory damages.”223 Although none of those
terms is actually defined in the treaty itself, carriers may artfully resort to them
as a means of barring claims or parts of claims that appear to extend beyond
the compensatory damages that are axiomatic in the Montreal Convention.224

7.10.9. Exclusivity of Actions Under the Montreal Convention

Article 29 is otherwise a reworking of the “exclusivity clause” in Article 24 of the
Warsaw Convention, providing that “any action for damages, however founded,
whether under [the] Convention or in contract or in tort or otherwise[,]” must
be brought under the conditions and liability limits as set out in the Montreal

221
See Wolf Müller-Rostin, The Montreal Convention of 1999: Uncertainties and Inconsistencies,
The Aviation Q. 218, 223 (2000).
222
See Pablo Mendes De Leon & Werner Eyskens, The Montreal Convention: Analysis of Some
Aspects of the Attempted Modernization and Consolidation of the Warsaw System, 66 J. Air.
L. & Com. 1155, 1178–79 (2001).
223
Montreal Convention, supra note 6, art. 29.
224
For example, Article 29 has been cited as a basis for denying claims for emotional distress from
lost baggage. See Nastych v. British Airways PLC, No. 09 Civ. 9082, 2010 WL 363400 (S.D.N.Y.
Feb. 2, 2010). Note that, with respect to the determination of what compensatory damages will
be awarded (in other words, what “harm” will be remedied), the Convention simply provides a
“pass-through” to the applicable domestic law to determine the types of recoverable compen-
satory damages as well as the eligible claimants. See Litigating the Aviation Tort Case:
From Pre-Trial to Closing Argument 31 (Andrew J. Harakas ed., 3rd ed. 2008). Thus,
the Convention itself does not exclude recovery for psychic injury; as we have seen, whether
that head of recovery will be permitted is dependent on the interpretations of the courts of the
various contracting States. See supra Section 7.9.6.
300 The International Law Regime for Air Carrier Liability

Convention.225 Although the thinking behind Montreal’s liability scheme is

consumer-oriented, as we have noted, Article 29 is a sharp reminder of the
historical purpose of protecting international air carriers from the vagaries of
local laws. Even so, it could certainly be a concern that mere contemplation of
any action other than a claim set forth under the treaty itself could provide
plaintiffs (and local courts) with a back door out of the treaty’s terms entirely.
Alternative bases of claim would seem to be in conflict with a uniform system
of international air carrier liability across national boundaries. If some States
were to allow liability actions to be premised on national laws rather than on
the Montreal rules, not only would the purposes of the treaty be compromised,
but other States might be tempted to defect from the regime entirely in favor of
establishing their own schemes of liability.

7.10.10. Exclusivity and the U.S. Supreme Court’s Decision in Tseng

U.S. courts divided over the controversial question of whether the Warsaw
Convention (a federal treaty) displaced alternative causes of action under the
separate laws of the fifty U.S. states.226 Strangely, the exclusivity debate was
not resolved until the Supreme Court’s relatively recent opinion in El Al v.
Tseng in 1999.227 The question before the Tseng Court was whether, given
both parties’ submissions that Mrs. Tseng’s aggressive body search by El Al
security officials228 was not an “accident” within the meaning of Article 17 of
the Warsaw Convention, and because the Convention did not permit recovery
for emotional or psychic damages,229 she could still maintain an action for
those damages under another source of law – in this case, the tort law of the
state of New York. The larger legal question controlling that specific determi-
nation was whether Article 24 made the Convention the exclusive source
of remedy only for claims that fall within its legal parameters (i.e., meeting

225
Montreal Convention, supra note 6, art. 29. Note that the exclusivity language in Article 29 of
the Montreal Convention does not derive directly from the original text of Article 24 of Warsaw,
but rather from the Warsaw provision as amended and expanded by Montreal Protocol No. 4.
Nonetheless, it is obvious that the Protocol language merely clarified, and did not alter, the
original rule of exclusivity. See El Al Isr. Airlines, Ltd. v. Tseng, 525 U.S. 155, 161 (1999).
226
See Tseng, 525 U.S. at 161 n.3. As to whether the Warsaw Convention itself created a cause of
action under federal law, see Benjamins v. British European Airways, 572 F.2d 913 (2d Cir. 1978).
227
525 U.S. 155 (1999). The tribunal below, the Second Circuit Court of Appeals, had ruled that
the Warsaw Convention’s cause of action was not exclusive.
228
Before boarding, passenger Tsi Yuan Tseng was taken to a secure room by El Al Israel personnel
and subjected to what she considered to be an invasive search of her person. She was then
allowed to continue on her flight to Tel Aviv. She later sued the airline for the emotional and
psychological harm that she claimed to have suffered as a result of the search.
229
On this question, see supra Section 7.9.6.
 7.10. The Montreal Convention (4): The New Liability Regime 301

the Article 17 definition of accident, involving bodily injury, etc.) or for all
personal injury claims based on events that take place between a passenger’s
embarking and disembarking from an aircraft. The U.S. Supreme Court
adopted the latter interpretation, emphasizing that the provision of uniformity
and predictability in air carrier liability was central to the Convention’s
purpose.230 Given the Court’s ruling, considered earlier in this chapter, that
damages for purely psychic injury were not available under the Convention,
disqualification from state relief would leave Mrs. Tseng without any remedy.
In the Court’s view, however, the Convention’s uniform regulation of interna-
tional air carrier liability foreclosed Tseng and similarly placed plaintiffs from
venturing into alternative forums.231 Courts in other signatory States of the
Warsaw Convention have also endorsed the treaty’s exclusivity vis-à-vis domes-
tic remedies.232

7.10.11. Some Further Implications of the Tseng Ruling

The Court in Tseng exposed some anomalous consequences of allowing
claims under local law. First, airlines would face unlimited liability under
diverse legal regimes but would be prevented, under the treaty, from contract-
ing out of such liability.233 Second, passengers injured physically in an
emergency landing might be subject to the liability caps of the Montreal
Convention, while those merely traumatized in the same mishap would be
free to sue outside the Convention for potentially unlimited damages.234 At the
very least, plaintiffs like Tseng could engage in “artful pleading” in order to opt

230
See Tseng, 525 U.S. at 169.
231
As in Saks, see supra note 144, the Supreme Court grounded its ruling on an inquiry into the
textual meaning of Article 17 of the Warsaw Convention, including its negotiating and drafting
history. See Tseng, 525 U.S. at 167–70, 172–76.
232
Justice Ginsburg’s Tseng opinion, in a footnote, cited the following non-U.S. cases in support:
Gal v. Northern Mountain Helicopters Inc., Dkt. No. 3491834918, 1998 B.C.T.C. LEXIS 1351,
*15–*16 (Jul. 22, 1998); Naval-Torres v. Nw. Airlines, Inc., 159 D.L.R. (4th) 67, 73, 77 (1998);
Emery Air Freight Corp. v. Nerine Nurseries Ltd., [1997] 3 N.Z.L.R. 723, 735–36, 737;
and Seagate Technology Int’l v. Changi Int’l Airport Servs. Pte Ltd., [1997] 3 S.L.R. 1, 9.
Exceptions are confined primarily to circumstances deemed to be outside the scope of the
Warsaw/Montreal conventions, such as the example of a breach of contract claim brought by
passengers whose “bumping” from a flight was found to be not covered by Article 19. See Weiss
v. El Al Israel Airlines, 433 F. Supp. 2d 361 (S.D.N.Y. 2006).
233
Under the Montreal Convention, of course, carriers now face unlimited liability under the
international treaty regime as well. But Montreal, like its predecessor, still prevents any carrier
from contracting out of such liability. See Montreal Convention, supra note 6, art. 26; see also
supra Section 7.10.1.
234
See Tseng, 525 U.S. at 171.
302 The International Law Regime for Air Carrier Liability

out of the Convention’s liability scheme, for example, by pleading a psychic

injury cause of action that could only be litigated under local law.235 Another
hypothetical in the case imagined a passenger injured by a malfunctioning
escalator in the airline’s terminal: if the exclusivity of the Convention were
confirmed, would that passenger have any recourse against the airline even
if the airline recklessly disregarded its duty to keep the escalator in proper
repair?236 As discussed earlier, however, the Warsaw Convention “addresses
and concerns, only and exclusively,” the airline’s liability for passenger inju-
ries occurring “on board the aircraft or in the course of any of the operations of
embarking or disembarking.”237 Finally, federal preemption law in the United
States is well established and indeed much litigated under the various iter-
ations of the Federal Aviation Act.238 It is fair to say that federal preemption of
the laws of the fifty states is disfavored, particularly in matters of health and
safety. Tseng argued as much in trying to persuade the Supreme Court to
allow her to pursue relief in New York state court.239 But the Court distin-
guished the Warsaw Convention, addressed to nation States, from ordinary
federal legislation that speaks to the “subdivisions” of a single State, here the
fifty states of the Union: “Our home-centered preemption analysis, therefore,
should not be applied, mechanically, in construing our international
obligations.”240

235
See id.
236
This scenario was postulated by the Second Circuit Court of Appeals in Tseng. See El Al Isr.
Airlines v. Tseng, 122 F.3d 99, 107 (2d Cir. 1997).
237
See supra Section 7.9.10. “[T]he Convention’s presumptive effect on local law extends no
further than the Convention’s own substantive scope.” Tseng, 525 U.S. at 172. The Court’s clear
implication was that the escalator hypothetical would not be pre-empted by the Warsaw
Convention because it would fall outside the Convention’s scope. Many courts, however,
have found escalator accidents to be covered under Warsaw’s “embarking and disembarking”
language: see supra note 194. The point remains, nevertheless, that the Montreal Convention
(as interpreted through Warsaw) only preempts claims for which it provides a remedy (or
denies recovery, as in the case of emotional distress), and therefore passengers will not find
themselves in a no-man’s land with claims that are preempted by but not addressed in the
Convention.
238
Courts have swung back and forth on the question of whether the U.S. Federal Aviation Act
(FAA) preempts state tort and product liability law with regard to all aviation safety matters. The
most prominent case has been Abdullah v. American Airlines, Inc.,181 F.3d 363 (3d Cir. 1999),
which produced an expansive ruling that the FAA preempts the entire field of aviation safety. A
recent Supreme Court case on implied federal preemption has, however, called the holding in
Abdullah into doubt. See Wyeth v. Levine, 555 U.S. 555 (2009).
239
See Tseng, 525 U.S. at 175.
240
Id. See also Sidhu v. British Airways plc [1997] AC 430, in which Lord Hope observed on behalf of
a unanimous U.K. House of Lords that “[t]he idea that an action for damages may be brought by a
passenger against the carrier outside the [Warsaw] Convention in the cases covered by [A]rticle
17 . . . seems to be entirely contrary to the system which [Article 17] was designed to create.”
 7.11. The Montreal Convention (5): Expanding the Bases for Jurisdiction 303

7.11. the montreal convention (5): expanding

the bases for jurisdiction

7.11.1. Five Jurisdictional Choices

The original Warsaw Convention identified four carrier-related forums, any of
which would have to be in the territory of a contracting State, where a plaintiff
would have the option to bring an action for any form of damages (including
cargo-related claims) under the Convention. These treaty-based jurisdictions
were the State of domicile of the carrier (i.e., “where the carrier is ordinarily
resident”241); the State of the carrier’s principal place of business; the State in
which the carrier has an “establishment” that made the contract of carriage;242
and the State of final destination of the aircraft.243 All four of these potential
lawsuit venues are retained under the Montreal Convention.244 Moreover,
after intensive and prolonged discussions at the drafting conference, the
Warsaw heads of jurisdiction were amplified to include a new so-called fifth
jurisdiction for death and injury claims only: the State in which the passenger
(not the carrier) has either his or her “principal and permanent residence”
when the accident occurred.245 The residence affiliation in addition requires
that the qualifying State of residence must also be a place “to and from which
the carrier operates services for the carriage of passengers by air, either on its
own aircraft or on another carrier’s aircraft pursuant to a commercial

241
U.S. courts interpret “domicile” to mean the State in which the carrier is incorporated, but the
term carries a slightly different meaning in other languages. For example, French courts have
interpreted “domicile” as the location of the carrier’s headquarters. See In re Air Disaster Near
Cove Neck, N.Y., 774 F. Supp. 725, 728–30 (E.D.N.Y. 1991). It is unclear how this interpretation
materially differs from the “principal place of business” forum. The redundancy is probably an
accidental by-product of the drafters’ intent that the “domicile” forums apply to private individ-
uals providing air transport services and not to incorporated carriers. See id. at 731 n.7.
242
This refers to the entity from which the ticket was purchased.
243
See Warsaw Convention, supra note 4, art. 28(1).
244
See Montreal Convention, supra note 6, art. 33(1). With the widespread use of arbitration to settle
international public/private or wholly private disputes, see supra Chapter 4, Part 4.3, it is not
surprising that Article 34 of the Montreal Convention provides an option for arbitration: this
alternative forum, which must nevertheless be one of the jurisdictions mentioned in Article 33, is
only available for “the parties to [a] contract of cargo.” Montreal Convention, supra note 6, art.
34(1), (2). The Convention offers no arbitration option in relation to cases of passenger injury or
death. To have done so might have been offensive to public policy in many States as well as
contrary to various national constitutions that will not assign their citizens’ litigation rights to an
international arbitrator. Commercial arrangements involving sophisticated shippers are less
likely to engage issues of fairness and “adhesion.”
245
“Principal and permanent residence” is defined in the Montreal Convention as “the one fixed
and permanent abode of the passenger at the time of the accident.” Montreal Convention,
supra note 6, art. 33(3)(b). Nationality is not the determining factor. See id.
304 The International Law Regime for Air Carrier Liability

agreement, and in which the carrier conducts its business of carriage of

passengers by air from premises leased or owned by the carrier itself or by
another carrier with which it has a commercial agreement.”246

7.11.2. More on the Fifth Jurisdiction

The United States had lobbied for a more expansive jurisdictional basis that
would permit travelers to bring suit in their State of residence even if the
contract of carriage has no other connection with the State.247 Nevertheless,
when set beside the proposal in the stillborn Guatemala City Protocol of a
fifth jurisdiction comprising the State of permanent residence or principal
business of the passenger so long as the defendant carrier has an establishment
there,248 Montreal’s formulation is cumbersome and confusing. The Montreal
Convention, in fact, sought to cabin the more generous Guatemala City
approach by ensuring some rational connection between the passenger’s
home State and the air transport services provided by the defendant carrier.
The defendant, accordingly, must operate to and from the qualifying State and
must have a commercial presence in that State. Because the nationality rule
typically prevents airlines from setting up wholly owned subsidiaries outside
their home States,249 it is unlikely that the Montreal delegates intended the
strong form of commercial activity that such enterprises represent. In an era of
big-carrier alliances, however, there are other forms of “doing business” that
might trigger the fifth jurisdiction. If a U.S. citizen who lives and works in
Chicago purchases a ticket in Germany for a Lufthansa flight from Frankfurt
to Tokyo, any ensuing death or injury befalling that person might be litigable
in a U.S. court on the premise that the passenger is a resident of the United
States and the carrier has some appreciable “minimum contacts” with the
United States that would engage the fifth jurisdiction: Lufthansa, for example,
not only leases ticket counters at several U.S. airports but also has a highly
integrated alliance agreement with United that includes but far exceeds a
simple code-share arrangement.250

246
Montreal Convention, supra note 6, art. 33(2).
247
See Hornsby v. Lufthansa German Airlines, 593 F. Supp. 2d 1132, 1138–39 (C.D. Cal. 2009)
(explaining that developing countries without operations in the United States resisted an
unqualified passenger residence jurisdictional basis to protect their carriers from facing suit
in U.S. courts).
248
See Guatemala City Protocol, supra note 55, art. XII.
249
On the nationality rule, see supra Chapter 3, Section 3.1.2. An exception would be the EU
single aviation market, within which EU designated carriers are allowed to establish and own
subsidiaries in any contracting State. See supra Chapter 4, Section 4.4.3.
250
See supra Chapter 4, Parts 4.5, 4.8.
 7.11. The Montreal Convention (5): Expanding the Bases for Jurisdiction 305

7.11.3. More on the First Four Jurisdictional Choices

The quartet of choices retained from Warsaw, in contrast, is each fairly straight-
forward. As cases across several jurisdictions have shown, a carrier’s domicile is
typically viewed as the State where it is incorporated, while its principal place of
business is the State where it is headquartered.251 In an era where code-sharing
is the dominant form of intercarrier cooperation, Article 46 of the Montreal
Convention adds the actual (in addition to the contracting) carrier’s domicile
and place of business to the available forum choices.252 As for the State where
the “contract” (i.e., the ticket253) was made, courts have generally defined that
expression to signify the place where the ticket was purchased rather than
where it was physically issued.254 Notice also that the State of destination has
been denominated by courts to be the destination point contracted for, not
the actual destination reached.255 Additionally, passengers are not permitted
subjectively to alter their “final destination.” For example, on a fifth freedom
flight operated by British Airways (BA) from London to Toronto and onward to
Chicago, an injured passenger who seeks to disembark at the intermediate
point of Toronto, despite the fact her ticket will take her through to Chicago,
cannot subject BA to Canadian jurisdiction under the Montreal Convention.256

7.11.4. Procedural Questions Under the Montreal Convention

Finally, the Montreal Convention’s provisions on jurisdiction also state, as
the Warsaw Convention previously provided, that “[q]uestions of procedure
shall be governed by the law of the court seised of the case.”257 That apparent
deference to national courts has, unsurprisingly, yielded different interpreta-
tions. Within the U.S. Federal Circuits, there has been a split over whether the
doctrine of forum non conveniens – a procedure that may allow a defendant to
transfer a case to a non-U.S. jurisdiction if evidence and witnesses can be more
251
See supra note 241 and accompanying text. See also Eck v. United Arab Airlines, Inc., 360 F.2d
804, 809 (2d Cir. 1966).
252
See Montreal Convention, supra note 6, art. 46. Article 46 flows conceptually from the terms of
Article 45, which allows actions for damages, at the plaintiff’s option, against either the actual or
the contracting carrier, or against both together and separately. If only one of the carriers is
sued, the other has the right to implead the former into the lawsuit. See id.
253
See, e.g., Chan v. Korean Air Lines, Ltd., 490 U.S. 122, 127–29 (1989).
254
See Polanski v. KLM Royal Dutch Airlines, 378 F. Supp. 2d 1222, 1229–31 (S.D. Cal. 2005).
255
For instance, for a one-way ticket from Chicago to London, the latter is the final destination even if
the aircraft is forced, for technical or safety reasons, to make an emergency landing in New York.
For round-trip transportation, the final destination has been defined as the “ultimate destination,”
that is, the point from which the journey originated. See Goldhirsch, supra note 44, at 185–86.
256
See id. at 186–87.
257
Warsaw Convention, supra note 4, art. 28(2); Montreal Convention, supra note 6, art. 33(4).
306 The International Law Regime for Air Carrier Liability

readily accessed in the foreign State – applies to cases brought under the
Warsaw Convention.258 But U.S. courts have thus far looked more benignly
on the use of forum non conveniens under Montreal.259 There is obvious
tension when a plaintiff’s right to pick the forum is frustrated by local rules
of procedure such as forum non conveniens. A teleological reading of the
Montreal Convention, not available under its predecessor, may help to slice
through that Gordian knot. Using that perspective, Montreal emphasizes the
rights of the plaintiff/consumer over the convenience of air carriers. Even local
rules of procedure should therefore be subordinated to the goal of providing
aggrieved passengers with their best available chance to prevail.

7.12. the montreal convention (6): a final

miscellany of provisions

7.12.1. A Right of Recourse

Article 37 of the Montreal Convention states, in sum, that “[n]othing in this
Convention shall prejudice the question whether a person liable for damage

258
See generally Allan I. Mendelsohn & Renee Lieux, The Warsaw Convention Article 28, the
Doctrine of Forum Non Conveniens, and the Foreign Plaintiff, 68 J. Air L. & Com. 75 (2003).
In Hosaka v. United Airlines, Inc., 305 F.3d 989 (9th Cir. 2002), the Ninth Circuit Court of
Appeals ruled that airlines cannot plead forum non conveniens, causing a split with the Fifth
Circuit Court of Appeals that found forum non conveniens compatible with the Warsaw
Convention. See In re Air Crash Disaster Near New Orleans, La. on July 9, 1982, 821 F.2d 1147,
1162 (5th Cir. 1987) (en banc). The doctrine is not accepted in civil law jurisdictions, incidentally.
See Christian G. Lang & Prager Dreifuss, Forum Non Conveniens in Continental Europe
(unpublished paper, Aug. 2, 2009, http://www.prager-dreifuss.com/system/document_des/78/orig
inal/Forum_Non_Conveniens_Cont_Europe_.pdf?1289378662) (noting that bias toward cer-
tainty and predictability in civil law systems discourages resort to discretionary doctrines like
forum non conveniens).
259
See Allan I. Mendelsohn, Recent Developments in the Forum Non Conveniens Doctrine, 52
Fed. Law. 45, 46 (2005) (“[T]he dearth of legislative history . . . is corrected by copious
legislative history [for the Montreal Convention] . . . showing that forum non conveniens is
available and will be employed by U.S. courts under Article 33(4) [of Montreal]”). See also In re
W. Caribbean Airways, S.A., 619 F. Supp. 2d 1299, 1310–28 (S.D. Fla. 2007). But is U.S.
adherence to forum non conveniens in aviation liability cases correct as a matter of international
treaty law? Arguably, the lex generalis in Article 28 of the Montreal Convention that assigns
questions of procedure to local law should always be subject to the lex specialis in Article 33
that grants the plaintiff noncontingent access to five potential jurisdictional fora. On the
relationship between lex specialis and lex generalis, see Fragmentation of International Law:
Difficulties Arising from Diversification and Expansion of International Law – Report of the
Study Group of the International Law Commission, U.N.G.A. Doc. A/CN.4/L682 (Apr. 13,
2006) (noting that the principle that special law derogates from general law is a widely accepted
maxim of legal interpretation). In any event, the U.S. delegation to the Montreal preparatory
conference stated explicitly that U.S. courts would continue to apply the doctrine.
 7.12. The Montreal Convention (6): A Final Miscellany 307

in accordance with its provisions has a right of recourse against any other
person.”260 Thus, for example, an airline that has been exposed to liability and
damages under the Montreal Convention may seek recovery from an aircraft
manufacturer using theories of product liability. Moreover, nothing prevents
the injured passengers themselves from also seeking recovery directly from
third parties including the aircraft manufacturer, avoiding any limitations on
recovery imposed by the Montreal and Warsaw conventions (which affect only
carrier liability). Finally, Article 37 could be said to provide an independent
basis for an airline to claim indemnification from a negligent third party for
the 100,000 SDRs per injured party that the carrier is required to pay out even
where the airline is not found to be negligent. This is not an inconsequential
right given that a major international airline accident could result in hundreds
of liability claims totaling tens of millions of SDRs. Without Article 37’s
right of recourse, Montreal would shift a potentially unpalatable burden
onto non-negligent international airlines while providing a safe haven to
other parties that may be responsible for passenger injuries and deaths.

7.12.2. The Question of Insurance

For the Montreal Convention’s scheme of ex post liability to be effective,
airlines must carry enough insurance to meet their potential exposure.
According to Article 50, “State Parties shall require their carriers to maintain
adequate insurance covering their liability under this Convention.”261 By the
same provision, a State party is allowed to demand documentation evidencing
insurance. This is not a minor matter. If airlines are not required to carry
insurance in line with Montreal’s liability regime, an important, market-based
oversight measure – the insurance companies themselves – is removed from
the equation.262 At the same time, Article 50 does pose a conundrum: how
much insurance is “adequate”? If a Warsaw-type scheme were in effect, with
100,000 SDRs as a global cap rather than serving merely as a ceiling for
strict liability, air carriers could reasonably calculate a per-flight estimate of
required insurance cover.263 But because the Montreal Convention contains
a rebuttable presumption of unlimited liability above 100,000 SDRs, must
an air carrier contemplate an “unlimited” insurance policy? Realistically, no

260
See Montreal Convention, supra note 6, art. 37.
261
See Montreal Convention, supra note 6, art. 50.
262
But see supra note 15 (observing that insurance companies probably do not see themselves as
performing a societal function as safety overseers).
263
For instance, on a 100-passenger international flight from New York to London, an airline
might insure for up to 100,000,000 SDRs.
308 The International Law Regime for Air Carrier Liability

insurer would write such a policy, and passenger liability policies usually
contain a limit of indemnity for each accident or “occurrence.” There may
also be a “combined single limit” intended to cover the combination of all
claims potentially arising from one event. In fact, the risks of operating com-
mercial aircraft are so potentially huge that the coverage must be spread among
several insurance underwriters.264 Aviation insurers may further limit their own
exposure through placement of risk with so-called reinsurers (i.e., underwriters
that insure insurers).265

7.12.3. Legal Effect of the Montreal Convention

In accordance with Article 53, the Montreal Convention entered into force on
November 4, 2003, sixty days after the deposit of its thirtieth ratification.266
Article 55 ordains, in an omnibus catalog of the prior international law instru-
ments of the Warsaw System, that Montreal prevails over any rules in any
of those instruments where two States are common parties to any of them as
well as being parties to Montreal.267 Nevertheless, all of the instruments of
the Warsaw System remain in effect for those States that have yet to become a
party to the successor treaty.268 As discussed earlier, the applicable treaty
is determined by the origin and destination points specified on the ticket.269
Thus, while a flight from the United States to France would be covered under
the Montreal Convention, as both States are contracting parties to that
Convention, a flight from the United States to Russia would fall under the
Warsaw System as amended by The Hague Protocol: Russia has yet to ratify
the Montreal Convention, but both the United States and Russia have ratified

264
There is a specialty market in aviation insurance. For more detailed information on the operation
of this market, the reader should consult additional sources mentioned in the bibliography.
265
See I. H. Ph. Diederiks-Verschoor, An Introduction to Air Law 342–43 (Pablo
Mendes de Leon, ed., 9th rev. ed. 2012).
266
Montreal Convention, supra note 6, art. 53(6); treaty status available at http://www.icao.int/
secretariat/legal/List%20of%20Parties/Mtl99_EN.pdf. ICAO was designated as the depositary.
267
See Montreal Convention, supra note 6, art. 55.
268
As the reader can glean from this and the following section, the continued existence of the
Warsaw System (not just of the Warsaw Convention!) adds considerable complexity and
confusion to selection of the applicable treaty regime. The Montreal Convention does not
include a required denunciation of Warsaw, and therefore allows conflicting obligations to
States that are not parties to Montreal. What can now be done to reduce or remove that
uncertainty? If Warsaw were no longer applicable in Montreal States, carriers from States that
did not ratify Montreal would still find themselves caught by Montreal’s extended liabilities
whenever they performed carriage with the requisite connections. See Gardiner, supra note 47,
at 289. In such situations, they would have to devise special contracts with passengers or risk a
loss of international traffic and soaring insurance premiums.
269
See supra note 111 and accompanying text.
 7.12. The Montreal Convention (6): A Final Miscellany 309

Warsaw and its Hague Protocol. A flight from the United States to South
Sudan would not be covered under any of the treaties discussed, as South
Sudan (a recently recognized sovereign State) has not ratified any of the
agreements going back to Warsaw. But a United States/South Sudan/France
ticket, and even a United States/South Sudan/United States ticket, would both
be governed by the Montreal Convention because the origin and destination
points are both within a State that has ratified the Convention, with a stopover
in another State.270

7.12.4. An Anomalous Effect That May Flow from a Plaintiff’s

Jurisdictional Choices
But the jurisdictional choices available to a plaintiff can upset this relatively
straightforward treaty selection process and may result in different treaty
regimes being applied in different jurisdictions to carriage involving the same
points. To take one possible scenario: a plaintiff who purchases a ticket from
Air France in Moscow for a Paris/New York flight does have the option under
Article 28 of the Warsaw Convention to use Russia as a qualifying jurisdiction
for the lawsuit (if, for example, Air France has an “establishment” in Moscow
that sold the ticket).271 If the dispute were litigated in Paris or New York, a court
in either of those States would apply the Montreal Convention. A Russian
court, in contrast, would likely apply the Warsaw/Hague rules to the same
lawsuit.272 Thus, although the origin and destination States actually trigger
the application of the Montreal Convention for the Paris/New York flight, the
jurisdiction provisions in the Montreal Convention do not assure that the action
will be brought in either the State of departure or the State of destination or that
the Montreal Convention itself will ultimately apply.273
270
See Byrd v. Comair, Inc. (In re Air Crash at Lexington, Ky., Aug. 27, 2006), 501 F. Supp. 2d 902
(E.D. Ky. 2007) (ruling that the Montreal Convention governed an action on behalf of a
passenger who was killed in a crash during a round-trip flight between the United States and St.
Lucia, a nation that had ratified neither the Montreal Convention nor any of the Warsaw
instruments; in reaching its decision, the court determined that St. Lucia was an agreed-upon
stop on the flight, which had originated, and was to have ended, in the United States).
271
Warsaw Convention, supra note 4, art. 28(1); see also supra Section 7.11.1.
272
A case brought in Russia concerning a Paris/New York flight would be governed by the only
common treaty, the Warsaw Convention, to which all three involved States (Russia, France,
and the United States) remain parties. Again, we have to watch the interaction between
jurisdictional provisions and the nature of the relevant treaty relations (see supra note 111 and
accompanying text). The treaty relations that follow from a plaintiff’s choice of jurisdiction will
determine which treaty (or version of a treaty) is applicable. See id.
273
It can happen that no common treaty relations exist between the States of departure and
destination and that the case cannot therefore proceed under any international agreement,
leaving the dispute (presumably) to be dealt with under the applicable local law of the forum.
310 The International Law Regime for Air Carrier Liability

7.12.5. State Reservations to and Withdrawal

from the Montreal Convention
A State that ratifies the Montreal Convention is required to accept all of its
provisions and can only enter reservations (exceptions) with respect to either
or both of two matters: “international carriage by air performed and operated
directly by [that State] for non-commercial purposes in respect to its functions
and duties as a sovereign State”; or “the carriage of persons, cargo and baggage
for its military authorities on aircraft registered in or leased by [that State],
the whole capacity of which has been reserved by or on behalf of such
authorities.”274 States wishing to withdraw from the Montreal Convention
may do so by written notification to ICAO, but the denunciation does not take
effect until 180 days following such notification.275

7.12.6. Absence of a Dispute Settlement Mechanism

As noted at the start of this chapter, the Montreal Convention (like its prede-
cessor) does not contain any formal dispute settlement mechanism or available
sanctions against violators. If the United States, for example, were to enact
federal legislation in contravention of the treaty that limited the liability of
U.S. international carriers for any claims brought in U.S. courts, no other
party to the Convention under the Convention could initiate procedures to
deter or punish that unilateral action.276 That apparent impunity is not a
cause for alarm, however. Like most international agreements, the Montreal
Convention survives on the self-interested adherence of its signatories. If

See Chubb & Son, Inc. v. Asiana Airlines, 214 F.3d 301 (2d Cir. 2000), cert. denied, 533 U.S. 928,
121 S. Ct. 2549 (2001) (holding that the U.S. District Judge erred in seeking to extrapolate a
“hybrid” or “truncated” treaty between the United States and South Korea based on common
elements drawn from the original Warsaw Convention, to which the United States adhered,
and The Hague Protocol, amending the Warsaw Convention, to which South Korea adhered;
accordingly, South Korea was not in a treaty relationship with the United States under the
original Warsaw Convention and the federal court did not have subject matter jurisdiction over
the dispute).
274
Montreal Convention, supra note 6, art. 57. Many States have entered either or both of the two
available reservations. See ICAO, Treaty Status, http://www.icao.int/secretariat/legal/List%20of
%20Parties/Mtl99_EN.pdf.
275
See Montreal Convention, supra note 6, art. 54. Article 54 of the Montreal Convention
preserves each contracting State’s right to denounce by written notification to the depositary
180 days prior to the effective date of denunciation.
276
Presumably, however, the disputant States could agree to invoke the optional jurisdiction of the
International Court of Justice (ICJ) to hear the dispute. See Statute of the International Court
of Justice, art. 36(2), http://www.icj-cij.org/documents/ (allowing States to declare their accept-
ance of the jurisdiction of the Court in relation to any other State making the same declaration,
and without any special agreement, on all legal disputes such as interpretation of a treaty).
 7.12. The Montreal Convention (6): A Final Miscellany 311

changed world economic conditions were to return the international air trans-
port industry, or parts of it, to something like the structural fragility of its
early decades, it is possible that airlines in affected regions would pressure
their governments to defect from the treaty before formally denouncing it.
Conversely, if a State were disenchanted with the capacity of Montreal’s strict
liability regime to compensate travelers or to discipline airline safety practices,
it could follow Warsaw System precedent by building coalitions with the airline
industry or with like-minded States to enlarge even the Montreal Convention’s
relatively pro-consumer terms of liability.

7.12.7. Liability Regime for “Delays” Under the Montreal Convention

The private liability scheme in both the Montreal and Warsaw conventions
includes coverage of the ubiquitous phenomenon of delays in air travel.
Article 19 of the Montreal Convention echoes Warsaw’s terse declaration of
liability for “damage occasioned by delay” in the carriage by air of passengers,
baggage, or cargo.277 Neither Convention further defines the term “delay.”278
Under Article 22(1) of the Montreal Convention, recoveries for delays to
passengers are capped at 4150 SDRs, while Article 22(2) limits baggage delay
claims to 1130 SDRs and Article 22(3) sets 17 SDRs per kilogram as the
maximum recovery for delay in the delivery of cargo.279 As in Warsaw, Article
19 of the Montreal Convention exonerates carriers if they have taken “all
measures that could reasonably be required to avoid the [delay]” or can show
that “it was impossible . . . to take such measures.”280 Arguably, such a capacious
defense eviscerates carrier liability by making it too easy to justify delays. On
the other hand, under Article 22(5) air carriers can still be confronted by the
elimination of all liability caps if the plaintiff can prove that the delay resulted
from “an act or omission of the carrier . . . done with intent to cause [delay] or

277
Montreal Convention, supra note 6, art. 19.
278
Naturally, the courts must step into this vacuum and create content for the term. Rather than a
priori definitions, they generally explore whether the delay in question is “reasonable,” that is,
due to weather conditions or the demands of air traffic control. See Goldhirsch, supra
note 44, at 101–04.
279
See Montreal Convention, supra note 6, art. 22(1)–(3). Although, as we have seen, see supra
note 233 and accompanying text, carriers cannot contractually exclude themselves from the
liability terms of the Warsaw or Montreal conventions (unless by offering more generous
terms), Article 10 of the IATA standard “General Conditions of Carriage (Passenger and
Baggage)” nevertheless includes “best efforts” language that appears designed to mitigate the
liability of international airlines in instances of delay or cancellation. That phrase does not
appear, however, in IATA’s Conditions of Carriage for Cargo.
280
Montreal Convention, supra note 6, art. 19. Montreal substitutes “reasonable” for “necessary”
measures, a more realistic (and carrier-friendly) standard.
312 The International Law Regime for Air Carrier Liability

recklessly and with knowledge that [delay] would probably result.”281 Although
it may stretch credulity to imagine an airline intentionally precipitating a delay,
given the potential harm to its commercial reputation, the availability of this
means to suppress the liability caps is again characteristic of Montreal’s iden-
tification with consumer interests.

7.12.8. Alternatives to the Montreal Convention’s Delay Provisions

Potential litigation has been discouraged by the cost and time involved in
suing under the delay provisions of Warsaw and Montreal. Large cargo
shippers affected by delay usually rely on insurance but also on the compen-
satory terms of specialized arm’s-length contracts negotiated with their car-
riers. Passengers who are delayed or whose baggage is delayed typically rely
on whatever “pastoral” arrangements their carriers are willing to make.282
Government disquiet about airline treatment of passengers who experience
delays and related inconveniences has produced a raft of consumer legislation
aimed at regulating how carriers respond. Relatively fast administrative pro-
cedures may be available in lieu of scaling the Warsaw/Montreal edifice.283
In a recent judgment, the Court of Justice of the European Union (CJEU)
ruled that the remedies for delays that are available under the Montreal

281
Montreal Convention, supra note 6, art. 22(5).
282
That care may include a willingness to offer the prescribed Warsaw/Montreal compensation
without further proceedings. We are aware that some readers may find our use of the term
“pastoral” to be ironic.
283
EU legislation, for example, covers cancellations, long delays, and denied boarding. See
Regulation 261/2004, of the European Parliament and of the Council of 11 February 2004
Establishing Common Rules on Compensation and Assistance to Passengers in the Event of
Denied Boarding and of Cancellation or Long Delay of Flights, and Repealing Regulation
295/91/EEC, 2004 O.J. (L 46) arts. 4–6 (EC). On March 13, 2013, the European Commission
put forward a proposal for a new Regulation to amend and extend its existing regime. See
Commission Proposal for a Regulation Amending Regulation 261/2004, COM(2013) 130
(seeking to resolve airline compliance problems with and consequent airline challenges to
the existing regime by clarifying key terms, adding legislative support for financial compensa-
tion for delays, introducing passenger rerouting privileges after very lengthy delays, refining
the definition of the much-litigated “exceptional circumstances” exemption for airlines
from the compensation regime, and creating certain new passenger rights including free
amendment of misspelt names, nondenial of boarding for passengers attempting to use only
the return portion of their tickets, and a no-charge increase in the Montreal baggage loss or
delay liability caps for equipment needed by passengers with limited mobility). The U.S.
Department of Transportation has also introduced some regulations to cover delays in which
passengers are stranded on the tarmac for more than four hours, although the rules do not apply
to cancellations or delays in which the passengers are not kept waiting on the aircraft. See
Enhancing Airline Passenger Protections, Dkt. No. OST-2010–0140, Final Rule (Dep’t of
Transp. Apr. 20, 2011).
 7.13. Conclusion 313

Convention are not self-contained and exclusive. The individually activated

liability system of the Convention, the Court held, can coexist with the new
generalized EU scheme of public regulation of compensation for air carrier
delays and other inconveniences.284 With its ruling, the CJEU has challenged
the prevailing orthodoxy of a treaty regime that displaces local systems of
compensation within its sphere of operation.285

7.13. conclusion

7.13.1. An Unfinished Regime

As important as the Montreal Convention has been to overcoming problems
encountered in the Warsaw System, it is not a terminal point in the evolution
of this area of law. The treaty is only a decade old and has not yet won
“universal” ratification. Although its circle of adhering States is expanding
(103 States had ratified as of 2013286), the total number is just over half that
of the Chicago Convention. Thus, it is premature to declare the Montreal
Convention an unqualified success or to extol it as the private law comple-
ment to the Chicago Convention. Many commentators have suggested that
further work on the Convention needs to be done and that issues ranging from
the amount of strict liability to more specific provisions on psychic injury
will require future amendments to the treaty. Like Warsaw, Montreal fails
to define several key terms including “carrier,” “accident,” “embarkation”
and “disembarkation,” and “delay.” Nor does the treaty elucidate fully the
role of insurance, establish uniform conflict of laws (choice of law) rules, or
give detailed guidance on recoverable compensatory damages. There is con-
cern, however, that meddling with the Montreal Convention through

284
See Case C-344/04, International Air Transp. Ass’n v. Department for Transp., 2006 E.C.R.
I-00403. Although the Court recognized that the Montreal Convention governed the condi-
tions when, after a flight delay, passengers “may bring actions for damages by way of redress on
an individual basis,” it found nothing inherent in the Convention itself preempting the EU
from adopting regulations mandating “standardized and immediate compensatory meas-
ures. . . . The [EU] system operates at an earlier stage than the system which results from the
Montreal Convention.” Id. ¶¶ 44, 46. See also Jeremias Prassl, The European Union and the
Montreal Convention: A New Analytical Framework, 12 Issues Aviation L. & Pol’y 381,
402–06 (2013) (further explaining the distinction drawn by the Court between delay-related
damage that is identical for every passenger and for which redress may take the form of
standardized and immediate assistance, and individual damage, inherent in the reason for
traveling, that requires a case-by-case assessment).
285
On the exclusivity of the damages remedies provided under the Montreal Convention, see
supra Sections 7.10.9, 7.10.10.
286
See ICAO, Treaty Status, supra note 266.
314 The International Law Regime for Air Carrier Liability

amendments before wider ratification is achieved will not only slow the
accession of new States, but also duplicate Warsaw’s history by developing
another fractured, piecemeal system that squanders global uniformity and
coherence. Some States, for example, might ratify the Montreal Convention
but not an amending instrument. Montreal, it is argued, was designed to
unclutter the confusion of Warsaw, not to compound it.

7.13.2. Effect of Divergent Judicial Interpretation

It is still not entirely clear how much of the Warsaw System’s thick body of
jurisprudence will endure under its successor. Just as in the development of
Warsaw, if national courts again divide in their rulings, it may well be necessary
for States to return to the negotiating table to bolt together an amending
instrument. But continued divergence of judicial interpretation could also
have a more dramatic consequence for the international liability system. As
we explained early in this chapter, governments are not unwilling to consider
alternative forms of regulation to govern air carrier liability. There remains
support for the radical view that the Montreal Convention should be discarded
in favor of a “true” system of liability developed within the legal cultures
of individual States. Competing claims of jurisdiction, where plaintiffs and
defendants representing several nationalities are potentially involved, could
be buffered through application of national conflict of laws rules and the
precepts of judicial comity. Montreal’s international regime would be super-
seded by domestic courts applying doctrines that may be (or are seen to be)
better adapted to the needs of local citizens and to public sentiment on liability
and safety. Indeed, a process of informal collaboration on issues of foreign law
among courts from different jurisdictions also holds the potential, over time, of
itself producing international convergence on applicable rules and norms of
liability.287

287
See Graeme B. Dinwoodie, A New Copyright Order: Why National Courts Should Create
Global Norms, 149 U. Penn. L.R. 469 (2000) (explaining how this process could occur, for
example, among a specialized community of judges in each State that deals with issues of
international intellectual property law, if such judges are continuously confronted with the
application of foreign law). See also Prassl, supra note 284 (discussing how, following EU
accession to the Montreal Convention, the CJEU is promoting interpretive convergence
among the 28 EU Member States by ruling on Convention-related legal questions that are
referred to it by EU national courts; the article analyzes Case C-410/11, Pedro Sanchez v. Iberia,
2012 E.C.R. 1–0000, in which the Court ruled that if several passengers bundle their belongings
into a single suitcase that is lost by the airline, they can each claim for their loss up to the
relevant liability cap on the basis that while the loss triggered the carrier’s liability, the entitle-
ment to compensation under the Convention accrues to each individual passenger).
 7.14. The International Law Regime for Surface Damage Liability 315

7.14. the international law regime

for surface damage liability

7.14.1. A “Doomed” System?

The second, but radically less effective, facet of private transnational aviation
law that governs airline liability is comprised of a series of ratified and unratified
treaties on air carrier responsibility for third-party surface damage. Beginning
with the failed Rome Convention of 1933288 and its 1938 protocol governing
insurance,289 States sought to establish a uniform set of rules governing surface
damage caused by air carriers outside the territory of their home States.290
Unlike the Warsaw System, which had time to ferment before it would become
an object of scorn by academics and the U.S. tort bar, the so-called Rome
System seemed doomed from the start. Almost as soon as the first instrument
was assembled, States had already bypassed its terms with their own laws
governing surface liability, while also mandating that carriers operating within
their airspace carry the requisite insurance coverage to compensate damage
claimants. None of this deterred ICAO from forging ahead, first with an over-
hauled Rome Convention in 1952,291 followed by an amending protocol in
1978,292 and, more recently, with a dual set of thus-far unratified treaties that
contemplate radically reforming the global surface damage liability regime.

7.14.2. Policy Challenges to a Uniform System of Surface Damage Liability

It is instructive to evaluate not only the terms of these treaties but also the
policy challenges that continue to be posed to a uniform system for surface

288
See International Convention for the Unification of Certain Rules Relating to Damage Caused
by Aircraft to Third Parties on the Surface, opened for signature May 29, 1933, 192 L.N.T.S. 291
(entered into force Feb. 13, 1942). Only five States – Belgium, Brazil, Guatemala, Romania, and
Spain – ever ratified the treaty.
289
Protocol Supplementary to the Convention for the Unification of Certain Rules Relating to
Damage Caused by Foreign Aircraft to Third Parties on the Surface, opened for signature Sept.
29, 1938, ICAO Doc. 107-CD.
290
Surface damage is any damage to person or property on land or on water caused by an aircraft in
flight or by a person or object falling from an aircraft in flight.
291
See Convention on Damage Caused by Foreign Aircraft to Third Parties on the Surface,
opened for signature Oct. 7, 1952, 310 U.N.T.S. 182 (entered into force Feb. 4, 1958) [hereinafter
Rome Convention].
292
Protocol to Amend the Convention on Damage Caused by Foreign Aircraft to Third Parties on
the Surface Signed at Rome on 7 Oct., 1952, Sept. 23, 1978, ICAO Doc. 9257 (entered into force
Jul.25, 2002) [hereinafter 1978 Montreal Protocol]. The 1978 Montreal Protocol significantly
increased the Convention’s per person and per accident liability caps, but did not enter into
force for 24 years and has only garnered 12 ratifications.
316 The International Law Regime for Air Carrier Liability

liability. Indeed, the policy concerns that lay behind the treaties are almost
identical to those that prompted creation of the Warsaw Convention system:
limiting carrier liability in order not to impede industry development, while at
the same time guaranteeing compensation to third parties who suffer damages.
The failure of surface damage treaties (in comparison with Warsaw) suggests
that they were less artfully crafted, that the international airline industry
attributed much less importance to surface liability exposure than it had to
limiting passenger liability, and that States were more reluctant as a matter of
public policy to limit recovery for damages endured by unaware third parties
as opposed to those suffered by passengers who have voluntarily assumed
the risks of flying. Certainly, States may feel that they have an obligation to
protect citizens living within their sovereign borders from the unassumed
risks of air transport and that, moreover, they should be allowed to select the
most appropriate liability regime for doing so. Unlike public regulatory sys-
tems governing, for example, commercial access rights or foreign investment,
liability systems are typically imbued with a strong moral content. That moral
dimension consists of a first-order duty not to injure and, where that duty is
breached, a second-order duty to repair (the idea of “corrective justice”293).
Other theories, ranging from civil court recourse to purely economic evalua-
tions (what is the most efficient allocation of risk? which party is in the better
position to bear the cost of any foreseeable harm?), have also intruded,
resulting in a mixed schema of tort liability within and across borders. Some
U.S. courts, influenced in part by statutory law, opted for a negligence-based
system where liability for aircraft surface damage was determined by the
defendant’s degree of fault.294 Other common law jurisdictions, such as
Australia and the U.K., preferred strict liability where the defendant could
escape responsibility only through an affirmative defense that attributed
blame to the plaintiff.295 But these are not the only liability frameworks that
are available. In a fault-based system, a third-party victim of surface damage
would carry the burden of proving that the airline was at fault: at the opposite
extreme, a system of absolute liability would impose automatic responsibility
293
See supra Part 7.2.
294
Judicial interpretations of U.S. common law have shown both strict liability and negligence-
based approaches. See, e.g., Restatement of (Second) Torts § 520A (1977); Margosian v.
U.S. Airlines, Inc., 127 F. Supp. 464 (E.D.N.Y. 1955) (unnecessary for owner of property
damaged by aircraft crash to prove negligence to recover damages for trespass under New
York law). But see, e.g., Boyd v. White, 276 P.2d 92, 128 Cal. App. 2d 641 (1954) (aviation no
longer considered an ultrahazardous activity, so negligence, rather than strict liability, standard
applies).
295
See Civil Aviation Act, 1949, 12 & 13 Geo. 6, c. 67, § 40 (Eng.); Damage by Aircraft Act, 1952
No. 46, § 2 (N.S.W.). Australia’s current surface damage liability statute does not even include
the contributory negligence affirmative defense. See Damage by Aircraft Act, 1999 § 10 (Austl.).
 7.14. The International Law Regime for Surface Damage Liability 317

on an air carrier without recourse to any defense whatsoever. The moral and
metaphysical, not to say economic, merits and demerits of these competing
approaches to tort liability are the subject of a voluminous literature that we
will not delve into here. Nevertheless, an initial awareness of the alternatives
should be enough to alert any putative designer of uniform global rules for
third-party surface liability that the task will not be easy. That proposition is as
true today as it was when the Rome Convention of 1952 was being prepared.
In any event, once the early attempts at a surface damage treaty proved less
than fully successful and States established their own domestic liability regimes,
the initial policy drivers behind a uniform treaty became even less persuasive.
By the 1950s, the international aviation industry probably no longer needed
this kind of protection. Moreover, unlike with the Warsaw Convention, States
were not already bound to an international system that they would feel com-
pelled to modify. Surface damage liability reemerged as a public policy issue
in the aftermath of the 9/11 attacks, which prompted the creation of the most
recent draft treaties.296 Even so, as we will discuss, serious shortcomings in
the treaties from 1952 onward have continued to block the emergence of an
authentic global regime.

7.14.3. The Rome Convention (1952)

The 1952 Rome Convention was designed with the express purpose of reha-
bilitating the possibility of a uniform system for third-party surface liability
that had met defeat through scant ratification of the original 1933 treaty. From
the outset, however, “Rome Redux” faced serious obstacles, not the least being
(as the previous section revealed) the divergence in liability regimes for surface
damage already put in place under their national laws by potential signatories.
Like its predecessor, the Rome Convention focuses on air carrier liability for
damage that is external to the aircraft and inflicted on persons or property on
the ground and that is caused by the aircraft itself or by any objects (including
passengers) falling from the aircraft.297 It is obviously distinct, therefore,
from the instruments of the Warsaw System, which are principally concerned
with damage inflicted on passengers or cargo on board the aircraft. For the
Convention to apply, the damage must have occurred while the aircraft is
“in flight,” that is, from “the moment when power is applied for the purpose of
actual take-off until the moment when the landing run ends.”298 Additionally,

296
See infra Section 7.14.7.
297
See Rome Convention, supra note 291, art. 1(1).
298
Id. art. 1(2). See supra Chapter 5, Parts 5.7, 5.8, 5.9 (discussing equivalent definitions under the
ICAO-backed aviation crimes treaties).
318 The International Law Regime for Air Carrier Liability

the Convention is limited in scope to damage caused in the territory of a

contracting State by the aircraft of another contracting State.299 Because of
the cabotage rule, the Convention is effectively excluded from covering any
domestic flights, although it is theoretically applicable to the domestic seg-
ment of a foreign-operated international flight that uses coterminalization
rights.300 Finally, the courts of the contracting State where the damage occurred
are afforded exclusive jurisdiction, while claims are subject to a two-year statute
of limitations.301

7.14.4. The Rome Convention’s Terms of Liability

Where damage occurs while the aircraft is in flight, the operator of the
aircraft is liable.302 As to the amount of liability, the Rome Convention mimics
the Warsaw Convention of 1929 in imposing a liability cap that insulates
carriers from exorbitant liability risks that could compromise their ability to
buy insurance and, in the event of a lawsuit, swiftly destroy their economic
viability. Unlike Warsaw’s “one size for all” caps, however, Rome inscribes a
series of caps based on the weight of the aircraft. Following the 1978 Protocol
to the Convention, the operator’s liability is capped at 2.5 million Special
Drawing Rights (SDRs), plus an additional 65 SDRs per kilogram if the
aircraft weighs more than 30,000 kilograms.303 Even so, death and personal
injury recoveries have a relatively low 125,000 SDRs per person ceiling304 –
well below typical damages awards under most national liability regimes. The
Rome Convention does allow these limits to be broken, however, in instances
where the damage was caused by a deliberate act or omission by the aircraft’s

299
See Rome Convention, supra note 291, art. 23(1).
300
In coterminalization, a foreign airline can serve further domestic airports after termination of
an inbound international flight at the first domestic landing point, but (because of the cabotage
rule) cannot pick up new passengers at that first landing point for flights to any additional
domestic airports. See supra Chapter 3, note 43 and accompanying text.
301
See Rome Convention, supra note 291, arts. 20–21.
302
See Rome Convention, supra note 291, art. 2. The registered owner (e.g., the lessor) of the
aircraft is presumed to be the operator unless it can “prove that some other person was the
operator and, in so far as the legal proceedings permit, take appropriate measures to make that
other person a party in the proceedings.” Id. art. 2(3). Additionally, nothing in the Convention
prevents an operator from having recourse against another party that may also be liable for
damages. See id. art. 10. On the relevant legal and practical distinctions between owners and
operators of aircraft, see infra Chapter 8, Part 8.5.
303
See 1978 Montreal Protocol, supra note 292, art. 3(1)(d). For an explanation of SDRs, see supra
note 58.
304
See 1978 Montreal Protocol, supra note 292, art. 3(2).
 7.14. The International Law Regime for Surface Damage Liability 319

operator or with an intent to cause damage.305 Airlines accused of committing

surface damage can, under Rome, avail themselves of several defenses to
avoid some or all liability. In instances of armed conflict, public disturbance,
or public appropriation of the aircraft, the air carrier can be exonerated from
all liability.306 Even aside from these extreme events, an airline can still be
fully exonerated if it proves that the victim was solely at fault.307 And even
where the victim is only partially to blame, the liability exposure can still be
scaled back under the doctrine of contributory negligence.308

7.14.5. Rejection of the Rome Convention

As we noted earlier, the prevalence of national liability regimes cast instant
doubt on the capacity of a single treaty to synthesize these regimes and to
organize a common system that would appeal to the majority of States. Of
the 191 States that are party to the Chicago Convention, only 49 have sub-
scribed to Rome.309 More critically, some of the world’s largest air transport
markets, including the United States, the U.K., France, Germany, and India,
either did not sign or did not ratify the treaty.310 Others, including Australia
and Nigeria, eventually denounced their ratifications.311 At the time that
the final Rome text was released for signatures, the major recalcitrant States
probably believed that their domestic systems were fully able to address surface
liability claims. Moreover, for many of these States it was probably unaccept-
able from a political and social welfare perspective that foreign airlines should
be subject to a different liability regime. The differentiation imposed disparate
financial burdens on domestic airlines (including those engaged in interna-
tional services) vis-à-vis their foreign counterparts, which risked undermining
the competitiveness of the domestic carriers in the international market-
place.312 Further, limited liability for foreign carriers could prompt a lower
level of care in other States’ airspace than in States’ own domestic territories.

305
See Rome Convention, supra note 291, art. 12. The text of Article 12 makes clear that an
intentional injurious act is necessary to avoid the liability caps in the Rome Convention.
This clarity is in contrast to the debate over the meaning of the Warsaw Convention’s “wilful
misconduct” clause, which, until modified by The Hague Protocol, produced competing
interpretations as to whether an intentional act or mere recklessness was necessary to lift
Warsaw’s liability caps. See supra Section 7.4.2.
306
See Rome Convention, supra note 291, art. 5.
307
See id. art. 6(1).
308
See id. art. 6.
309
See ICAO, Treaty Status, supra note 266.
310
See id.
311
See id.
312
Strictly speaking, of course, that is also true of the Warsaw/Montreal liability system.
320 The International Law Regime for Air Carrier Liability

Finally, governments were no doubt fearful of the massive political backlash

from a major surface event where a foreign carrier dodged the perceived full
scope of its liability.

7.14.6. The Montreal Protocol (1978)

The 1978 Montreal Protocol went some way toward alleviating these concerns,
primarily by raising the extremely low liability caps established in the original
treaty.313 But the revised scheme still trailed well behind the levels adopted by
major airlines in order to secure insurance. Given that the Rome Convention
was never widely ratified, it remains unclear what States hoped to accomplish
by the amending Protocol. Arguably, States that were displeased by Rome’s
liability regime should have denounced the treaty and reset their domestic
rules on exposure at a more politically appropriate level. The 1978 augmenta-
tion of liability caps certainly did not induce high-liability countries like the
United States to join the Rome circle. Because of its disappointing history,
therefore, ICAO has continued to revisit the status of the Rome System. In
the aftermath of the September 11, 2001, terrorist attacks, the Organization
asked its Legal Committee to accelerate plans to reengineer the entire regime
in order finally to achieve that long-elusive international consensus.

7.14.7. A New Rome Regime?

A Special Group of the ICAO Legal Committee has spent the past decade in
pursuit of a new surface liability treaty.314 From the beginning, however, the
Committee was forced to work around a set of directive principles that appeared
more contradictory than cohesive. For example, the Special Group attempted
to hold to a mandate of victim protection while ensuring also that the airline
industry would not face undue burdens under a successor regime. As the history
of Warsaw/Montreal seems to have demonstrated, only one of those goals
could prevail at any one time. Now well past its infancy, the airline industry
received little sympathy from the States that negotiated and ratified the
Montreal Convention on passenger and cargo liability. It was apparently this
attitude that also inspired the work product of the Special Group: but two
new surface liability treaties introduced in 2009 – the Unlawful Interference
Convention and the General Risks Convention – have received neither signa-
ture nor ratification from any significant air transport market.
313
On the disappointing ratification history of the Protocol, see supra note 292.
314
See Sean Gates & George LeLoudas, From Rome to Montreal in 57 Years: Worth the Wait?, 22
No. 3 Air & Space Law. 1 (2009).
 7.14. The International Law Regime for Surface Damage Liability 321

7.14.8. The Unlawful Interference Convention

The first of the two new instruments, the Unlawful Interference Convention
(UIC),315 applies to damages to a third party in the territory of a contracting
State caused by an aircraft in the course of an international flight that becomes
the object of an unlawful interference by another party.316 Like the Rome
Convention, the UIC relies on a weight-based system and provides that aircraft
weighing more than 500,000 kilograms can be liable for up to 700,000,000
SDRs ($1.29 billion).317 That cap can be broken, however, if the damage
caused is attributable to serious misconduct by the aircraft operator – such
as engaging in intentional or reckless behavior with the knowledge that
damage would probably result.318 In order to relieve air carriers of some of
the risks implicated by the new liability scheme, the treaty contemplates
the establishment of an International Civil Aviation Compensation Fund
collected from charges levied on passengers and cargo by signatory States.319
The UIC also contemplates serving as the exclusive remedy for victims of the
narrow type of liability claim that the treaty covers and excludes entities such
as aircraft manufacturers, lessors, security personnel, and airport operators
from all liability.320 For the UIC to enter into effect, however, it must receive
35 ratifications from States representing at least 750 million departing passen-
gers per annum.321 Unsurprisingly, the UIC has received a chilly reception.
Critics, including airlines, have been quick to note that “unlawful interfer-
ence” with air carriers is typically the action of terrorists targeting either the
home State of the aircraft or the country in which it is operating. As such, it
is argued, States rather than airlines should compensate third parties harmed
by terrorism. Moreover, the airlines argue that the UIC unduly burdens them
financially by forcing them to carry additional insurance to protect against
liability from a terrorist attack. Although the UIC does allow airlines to seek
recourse from persons who committed, organized, or financed the unlawful
interference that gave rise to liability,322 it is virtually unimaginable that
terrorist perpetrators would have the financial resources to indemnify damages

315
The Convention on Compensation for Damage to Third Parties Resulting from Acts of
Unlawful Interference Involving Aircraft, opened for signature May 2, 2009, ICAO Doc. 9920
[hereinafter UIC].
316
The Convention does allow States to extend its scope of applicability to cover domestic flights
also. See id. art. 2(2).
317
See UIC, supra note 315, art. 4(1)(j).
318
See id. art. 23(2).
319
See id. art. 8.
320
See id. arts. 27, 29.
321
As of 2012, the UIC had only nine signatories. See ICAO, Treaty Status, supra note 266.
322
See UIC, supra note 315, art. 24.
322 The International Law Regime for Air Carrier Liability

suffered by an airline. Even if they did, it would be improbable that the

airlines, or even their home States, could enforce any civil judgment.

7.14.9. State Resistance to the Unlawful Interference Convention

Despite these defects, the promoters of the UIC continue to argue that it does
more to protect airlines than States that impose strict liability for third-party
surface damage.323 They contend also that the treaty ensures that victims on
the ground will receive adequate compensation even in the event of a terrorist
act. Although these arguments might be attractive, it is not difficult to see why
many States would prefer not to address them using an international treaty.
Some States may believe that the material consequences of a terrorist attack
must be borne by its populace like any adverse military strike: neither the State
nor private commercial entities that are also victimized should bear responsi-
bility for what is ultimately the act of a foreign (albeit perhaps “Stateless”)
aggressor. Other States may take the view that national sentiment coupled
with financial realities at the time of the attack will better determine the course
of compensatory action than an inflexible ex ante liability system. Finally,
although airlines have indeed moved well past their “infancy,” their financial
position remains precarious. Fuel prices and substantial regulatory burdens
have already placed the industry at continuing risk of ruin: adding further
financial exposure to the mix can only worsen the problem. Given the position
of airlines as critical elements of national infrastructure and economic sys-
tems, most countries are more inclined than not to shield their airlines from
total destruction. In such contexts, a major terrorist catastrophe is more likely
to induce a bailout rather than a day in court for air carriers.324

7.14.10. The General Risks Convention

The second treaty proposed by the Special Group of the ICAO Legal Committee,
the General Risks Convention (GRC),325 is intended to cover third-party surface
damage liability claims that do not involve unlawful interference. In other words,

323
See Gates & Leloudas, supra note 314, at 6–7.
324
This is essentially how the United States responded to the 9/11 terrorist attacks. Within two
weeks of the tragedy, Congress passed the Air Transportation Safety and System Stabilization
Act compensating airlines for the losses the industry had suffered as a result of the attacks,
reimbursing carriers for the resulting insurance increases, creating a government fund to
compensate victims, and capping carriers’ liability at their amount of liability coverage. See
Air Transportation Safety and System Stabilization Act, Pub. L. No. 107–42, 115 Stat. 230 (2001).
325
The Convention on Compensation for Damage Caused by Aircraft to Third Parties, ICAO
Doc. 9919, opened for signature May 2, 2009 [hereinafter GRC].
 7.14. The International Law Regime for Surface Damage Liability 323

it serves as the effective replacement for the original Rome Convention. Sharing
many of the features of the 1999 Montreal Convention addressing passenger and
cargo liability, the GRC also establishes a weight-based system of strict liability
for third-party surface damage.326 The plaintiff is free, however, to plead damages
above the weight-based strict liability measure, subject only to an airline’s
defenses that the damage was not due to its negligence or wrongful acts or
omissions or that the damage was due solely to the negligence or other wrongful
act of another party.327 Like the UIC, the GRC also requires thirty-five ratifica-
tions before it enters into force, although it does not specify that the thirty-five
ratifiers must represent any preset numeric share of the international air transport
market.328 Few States have been persuaded by the GRC’s willingness to blend
the governing principles of the passenger/cargo liability regime with that of
the surface liability system. Most major aviation markets, as we have seen, have
already developed a strong suite of domestic legal remedies for surface liability
and therefore remain unpersuaded that a new treaty is desirable or necessary.
Still, nothing prevents those States that find virtue in the terms of the treaty from
seeking to rally thirty-four like-minded partners, or even unilaterally incorporating
its provisions into their domestic legal systems. Indeed, it is unclear why multi-
lateral acceptance is critical to this project. The best argument offered thus far is
that a uniform system of liability will put airlines in a better position to predict
the appropriate insurance cover. Even so, where public pressure is sufficiently
strong, even ratifying States may be compelled to denounce the agreement or
demand revisions to the treaty’s terms of liability. The result could well be
piecemeal ratification accompanied by international acrimony.

7.14.11. Outlook for Ratification of the New Surface Damage

Liability Conventions
Despite the recent completion of the UIC and GRC, the outlook for an interna-
tional surface damage treaty remains uncertain. The GRC only has eleven
326
The operator’s total liability is capped depending on the weight of the aircraft. Ten different
weight classes are specified, ranging from a cap of 750,000 SDRs for aircraft 500,000 kilograms
or less to a cap of 700 million SDRs for aircraft weighing more than 500,000 kilograms. See id.
art. 4. As with the Warsaw/Montreal system, the operator is strictly liable for damages where
causation is proven. Unlike Warsaw/Montreal, however, the GRC provides greater textual
clarity regarding the types of damages compensable, including bodily injury as well as mental
injury that is “caused by a recognizable psychiatric illness resulting either from bodily injury or
from direct exposure to the likelihood of imminent death or bodily injury.” Damage to property
and environmental damage are also compensable, but punitive or noncompensatory damages
are not available. See id. art. 3.
327
See id. art. 4(3).
328
See id. art. 23.
324 The International Law Regime for Air Carrier Liability

signatories out of the required thirty-five contracting parties, and major aviation
markets, such as the EU Member States, do not appear interested.329 The GRC
has proven most appealing to developing States that lack adequate domestic
liability regimes, and continued development of the aviation industry in those
markets is probably necessary for the GRC to succeed where the two Rome
Conventions failed. The UIC’s prospects for meeting the ratification require-
ments are more interesting, although also more challenging. In the wake of
the 9/11 attacks, major aviation States called for a solution to the necessity for
publicly funded enhancement of insurance coverage that resulted from those
attacks. The process initiated at that moment led to the creation of both treaties,
with the UIC specifically intended to cover damage caused by terrorist acts.
Because the UIC most directly responds to the events that motivated this law-
making process, it would follow that the treaty would stand a strong chance of
entering into force (and that the GRC’s prospects would correspondingly suffer
because the primary concerns of major aviation powers are addressed by
the other treaty). As more time has passed, however, the shared urgency that
followed the 9/11 attacks has eroded, and States appear less inclined to overlook
areas of the treaty with which they disagree. Moreover, the compensation fund
and other measures contemplated in the UIC may not prove sufficient to address
another event of similar magnitude to 9/11, and the very ability of the UIC to
serve its basic purpose has been called into question. Additionally, the require-
ment that the ratifying parties represent a minimum number of passengers
makes it virtually impossible for the UIC to take effect without ratification by
at least one State representing a major aviation market. As noted earlier, none
of the major aviation powers has signed the treaty. Thus, as of now, it appears
that unification of the private transnational law governing surface damage from
aircraft is little closer to being a reality than it has been for the past eighty years.

329
See Gates & Leloudas, supra note 314, at 6.
 8

The International Law Regime for Aircraft Financing

and Aircraft Nationality

8.1. introduction

8.1.1. Distinction Between Equity and Debt

Chapter 4 on investment and alliances considered the airline business
model from the perspective of equity: how airlines attract and hold risk
capital in their voting stock.1 Equity, however, is not typically a secured or
preferred investment as against an airline’s creditors.2 It is junior to the debt
that an airline takes on from banks, financiers, and other investors. This
chapter moves to the debt side of the business equation, examining the
principles of public international law and private transnational law that
affect how airlines typically pay for their most glamorous but also their
most expensive capital asset, the large commercial passenger or cargo

1
“Risk capital” is a more specific term here than, say, “investment capital,” which certainly
includes equity but which will also include debt. What does equity cost an airline? Unlike debt,
equity typically only costs the payment of a dividend to the shareholders, and even that is at the
discretion of the management. Dividends, it must be said, are rarely paid in the airline industry,
and shareholders in airlines look more to stock price increases than dividends. A doubling of
the stock price makes a mere 4–5% dividend interest irrelevant. On the other hand, raising
funds through equity issues (i.e., more stock) may dilute the ownership of the company as held
by the existing stockholders, who must therefore be offered a discount to the current share price
in order to convince them to put in new money. If an airline is in good shape, the discount need
not be large, but a troubled carrier may have to slash 40–50% off its share price in that situation.
If equity financing is unavailable, then airlines must borrow from capital markets or other
sources. Borrowing, of course, means paying interest.
2
Once the creditors are paid, the shareholders (as owners of the residual value of the
corporation) will share any remaining assets, which may produce a profit or loss for them
depending on the circumstances. Applicable local law (Delaware law, EU law, etc.) will
determine whether “preferred” shareholders have a relationship with a corporation that is
akin to that of a creditor, while still ranking behind the “senior” secured debt as discussed in
this chapter.

325
326 The International Law Regime for Aircraft Financing

aircraft.3 Today, asset-based financing, where a financier lends money

based on the security of the aircraft as collateral,4 and lease-based aircraft
financing5 constitute international businesses: transactions are inherently
complex and cross national boundaries and legal systems.

8.1.2. Private Aircraft Financing and International Aviation Law

In this chapter, therefore, we explore what international aviation law has to say
about these quintessentially private law issues of ownership of and security
interests in aircraft. Certainly, the private rights of contracting parties, but
especially of contracting parties who are negotiating across borders, have long
been of concern to the policymakers who develop international aviation law.6

3
This chapter does not specifically address the financing of private corporate aircraft (which may
include large jets, even the Airbus A380), although the same or similar financial instruments
usually apply.
4
“The essence of secured financing is that the risk of loss to the creditor in the event of default by
its debtor is reduced by access to the value of collateral.” Roy Goode, Herbert Kronke,
Ewan McKendrick, & Jeffrey Wool, Transnational Commercial Law:
International Instruments and Commentary 468 (2d ed. 2012) [hereinafter Goode
et al., Transnational Commercial Law]. Secured transactions, to the extent that they
protect the creditor against rights asserted by third parties, “permit the granting of credit to
borrowers unable or unwilling to finance solely on terms reflecting their commercial capacity
to repay.” Id. Any home mortgage borrower would recognize that principle.
5
Again, we should not be too rigid in our classifications: in a sense all transactions, including
leases, that have an aircraft at the root of the financing transaction are asset based. Indeed, the
lessor in a lease transaction will probably have arranged its own acquisition of the leased aircraft
(from a financier such as a bank) using some form of asset-backed financing. Also, as we will
see, the finance (or “capital”) lease can be characterized as just as much an asset-based loan as a
mortgage.
6
See generally Roy Goode, Official Commentary on the Convention on
International Interests in Mobile Equipment and Protocol Thereto on
Matters Specific to Aircraft Equipment 180 (Unidroit rev. ed. 2008) [hereinafter
Goode, Commentary]. Almost from its foundation in 1926, an international expert drafting
group called the Comité International d’Experts Juridiques Aérien (CITEJA) was at work on two
international property law conventions, one concerning mortgages and other rights in aircraft
and the other primarily on the recording and registration of those rights in title registries. See
Editorial, Convention on International Recognition of Rights in Aircraft: Early Ratification
Desirable, 16 J. Air L. & Com. 61 (1949). The Chicago Conference in 1944 (see supra
Chapter 2, Part 2.1) recommended early adoption of a treaty dealing with the transfer of title
to aircraft, and the Preamble to the Geneva Convention of 1948 (see infra note 87), which deals
with international recognition of rights in aircraft, refers explicitly to that precedent. The 1948
Convention, which is dealt with later in this chapter (see infra Part 8.7), was spurred by the U.S.
aviation industry in which private finance was already a principal feature. That Convention, as
will be discussed, was primarily only a “choice of law” treaty – in part because the dominant
paradigm outside the United States remained that of State financing of aircraft for publicly
owned flag carriers.
 8.1. Introduction 327

Nevertheless, the treaties on which we have focused in the preceding chapters

have little if anything to say on that subject. The Chicago Convention is a
public law instrument that primarily promotes safe and orderly flight oper-
ations,7 liability treaties like the Warsaw and Montreal conventions are con-
cerned with the rights of third parties (passengers and shippers), and bilateral
air services treaties give no formal legal standing to the airlines that derive
traffic and other rights from them.8 Recent treaty making has corrected some
of the deficit in coverage, but there is still no comprehensive system of trans-
national substantive property law that governs the full spectrum of purchasing
and financing of aircraft. On the other hand, several important rules and
principles have emerged in international treaties that shape how aircraft
investments are facilitated, and particularly how secured investments are
accorded priority, and also how States meet their responsibility to ensure the
constant presence of a State of registration to monitor safety compliance by
aircraft operators. Those are the rules and principles that we will examine in
this chapter.

8.1.3. Government Aid for Aircraft Manufacturing and Financing

The final part of the chapter switches back to public law and policy issues,
examining how governments use subsidization to support both aircraft man-
ufacturing (e.g., through tax relief) and financing (e.g., through the export
credit system). We will explore various international mechanisms that have
been created to restrain subsidy levels in each of those sectors, and reflect on
the critical role that public aid continues to play in the production and sale of
hugely expensive large civil aircraft.

7
See Convention on International Civil Aviation pmbl., opened for signature Dec. 7, 1944, 61
Stat. 1180, 15 U.N.T.S. 295 (entered into force Apr. 7, 1947) [hereinafter Chicago Convention].
8
There is one other early treaty dealing with aircraft rights that should be briefly mentioned
here. The Convention for the Unification of Certain Rules Relating to the Precautionary
Attachment of Aircraft, opened for signature May 29, 1933, 192 L.N.T.S. 289, is known as the
“Rome Convention.” The Convention attempted to place strong restraints on the (private)
precautionary arrest of aircraft. Arrest is prohibited if the aircraft is used for governmental
purposes or in a regular line of public transport or if the aircraft is ready to start on a journey.
One exception to the applicability of the Convention, however, is the insolvency of the
operator. The Convention was intended to benefit airlines that desired to maintain uninter-
rupted service at a time when a small number of carriers was serving a limited number of
routes. Rome found favor with only a handful of (mainly) civil law countries, and was never
ratified by the United States. Under Article XXIV of the later Aircraft Protocol to the 2001 Cape
Town Convention, see infra Part 8.9, unless a contracting State has declared to the contrary, the
Cape Town Convention supersedes the Rome Convention for all contracting States to the later
instrument.
328 The International Law Regime for Aircraft Financing

8.2. a quick look at international aircraft financing

8.2.1. Introduction
All air carriers must plan for fleet purchases and renewal and that process will
continue. Before looking at the relevant international law instruments, the
reader may find it useful to have a conceptual overview of the sources for and
also some of the animating ideas of financing in the aircraft acquisition
market. Especially germane in this context are the words of Sir Roy Goode,
the common law world’s preeminent exponent of the law of commercial
transactions. In Sir Roy’s view, the theoretical framework of a subject and its
fundamental concepts will endure even though its detailed rules, no matter
how sophisticated, may change.9 Our overview is constructed with that obser-
vation in mind.

8.2.2. Aircraft Financing and the (Airline) Nationality Rule

At the outset, it is worth mentioning that the airline nationality rule, which so
pervasively inhibits cross-border equity investments including mergers and
acquisitions, does not apply to aircraft finance transactions. In 2011, for exam-
ple, the Japanese investment banking group Sumitomo Mitsui purchased the
aircraft finance unit of the Royal Bank of Scotland.10 But British Airways (BA)
and other non-Japanese carriers are nonetheless free to borrow capital from
Sumitomo to finance the purchase of new aircraft. If Sumitomo, however,
were to take an equity stake in BA’s ownership – for example, as security for a
loan – U.K. regulators might scrutinize whether Sumitomo was leveraging a
large debt placement to exercise de facto operational control over the British
flag carrier. That consideration aside, however, if Sumitomo is not a share-
holder of BA, then the legal impediments associated with the nationality rule
will not arise.11

8.2.3. Aircraft Financing and the (Aircraft) Nationality Rule

As we will discuss in more detail below, there is another dimension to the issue
of “nationality” in addition to the airline nationality rule and its effect on
transborder airline ownership. The Chicago Convention requires that each
9
Roy Goode, Commercial Law xxvi (2d ed. 1995).
10
See Harry Suhartono & Tim Hepher, Asia Plugs European Aircraft Lending Gap, Reuters,
Feb. 17, 2012, http://www.reuters.com/article/2012/02/17/us-airshow-financing-idUSTRE81G0FU
20120217.
11
For a more complete discussion of the nationality rule, see supra Chapter 3, Section 3.1.2.
 8.2. A Quick Look at International Aircraft Financing 329

aircraft have a single nationality. The intention behind that rule is to ensure
that some State holds responsibility for the safety compliance of every aircraft
on its national register. The two concepts (airline and aircraft nationality) are
not conceptually linked in the Convention (in fact, the Convention itself
makes no reference at all to airline nationality12), and we will consider some of
the implications of that conceptual misalignment.

8.2.4. Macroeconomic Climate for Aircraft Financing

A critical variable in the choice of financing vehicles is investor confidence.
Deals will get done if investors feel confident in an airline’s economic pros-
pects. Airlines are regularly able to obtain financing: even in the most chal-
lenging economic climate, leasing options are available (as discussed further
below). Sometimes the manufacturer itself will participate in financing risks
alongside the airline and the financier.13 According to Boeing, banks and
leasing companies will fund the bulk of an estimated $4 trillion worth of
new aircraft that airlines, financing companies, and leasing companies are
expected to buy over the next twenty years.14 As has been observed, there are no
airplanes parked on the tarmac in Seattle (Boeing) or Toulouse (Airbus) for
want of financing.15

12
The nationality rule on airline ownership makes appearances only in the subsidiary Two
Freedoms and Five Freedoms agreements. See supra Chapter 3, Section 3.4.2.
13
See generally Donald H. Bunker, 1 International Aircraft Financing 344 (2005)
(explaining that manufacturers may become “junior” lenders to an airline, make direct invest-
ments in the shares of an airline, or become involved in leasing aircraft to an airline). As Bunker
points out, however, manufacturers’ support of the financial risk of their purchasers is a market-
driven factor that manufacturers will prefer to avoid but that is currently the result of intense
competition for market share in a challenging environment. See id. Recently, American Airlines,
although in bankruptcy, was able to benefit from approximately $13 billion of committed
financing from The Boeing Corporation through lease transactions that will help maximize
balance sheet flexibility and reduce risk. The financing fully covers the first 230 deliveries.
Source: Andrew Lobbenberg, airline analyst, European Airline Equity Research, HSBC.
14
See Suhartono & Hepher, supra note 10.
15
The global alliance system (see supra Chapter 4) has encouraged airline members to integrate
or collaborate on their aircraft purchasing activities. The Star Alliance sourcing committee, for
example, coordinates on specifications and requirements with respect to different items that
offer an opportunity for joint sourcing (e.g., onboard items, seats, jet fuel), and the Star Alliance
organization executes a framework agreement that captures terms and conditions of general
application and typically incorporates a volume-based principle that incentivizes the aggrega-
tion of purchase with the preferred vendor or supplier. From time to time, an airline member
that enters into an agreement with a vendor or supplier may have the opportunity to include a
“Star clause” that permits other alliance members to benefit from similar terms and conditions.
Source: Star Alliance Services GmbH. See also Bunker, supra note 13, at 130–31.
330 The International Law Regime for Aircraft Financing

8.2.5. Cash-Based Financing of Aircraft

Arguably, the cheapest way to finance an aircraft purchase is by using cash.16
Consistently profitable carriers like Southwest Airlines in the United States or
Ryanair in Europe, or State-owned carriers, can afford to think in terms of all-
cash transactions. Since the 9/11 tragedy, airlines all over the world have
endeavored to hold an appreciable percentage of their assets in cash, 15–20%
being a common benchmark.17 Cash on the balance sheet acts as insurance
against exogenous shocks like 9/11, when bank financing (such as an overdraft
facility) can suddenly become more costly or even unavailable. Nevertheless,
holding large cash deposits may not always be efficient from the point of view
of aircraft financing. Depending on interest rate fluctuations, cash holdings
could be earning a low interest rate while the airline continues to pay a high
interest rate on other borrowings to buy aircraft.18 Another option to generate
cash is to use an equity flotation (i.e., issuing new shares) to raise money from
existing and also from new shareholders. But most airlines simply do not
contemplate cash transactions, no matter how the cash might be generated.
For them, paying all at once for an aircraft would be simply unsustainable.
Obtaining aircraft, therefore, becomes a question of taking on debt and of how
best to structure that debt.19

8.2.6. Sources of Debt Financing

What kinds of debt financing are available? Although answering that question
in detail could occupy a book by itself (and does), the principal sources can be
quickly sketched. A first (but not often exercised) option is for the airline to

16
We say “arguably” because there are very wealthy individuals and companies who do not want
to pay cash for tax-related and other valid legal and practical reasons. Accordingly, they prefer
secured lending using a variety of offshore aviation finance and lease transactions.
17
When an airline drops below 15–20% in cash holdings, that generally indicates that it is
struggling to make money. Airlines do not fail because of a lack of profitability, according to
one senior investment analyst, but because “they lack cash.” Astonishingly, a recent check of
company reports revealed that easyJet carries 43% of its revenues in cash and Ryanair 81%.
Source: Andrew Lobbenberg, airline analyst, European Airline Equity Research, HSBC.
18
It may make sense, therefore, to “burn up” cash if an airline has it available, either to make
larger deposits when buying or leasing aircraft or to amass a war chest that allows the airline
some strategic options – it can pounce, for example, if the assets of a bankrupt or liquidated
competitor come into play.
19
Debt transactions, in any event, can be less expensive than equity flotations (e.g., issuing more
stock) because of the usual tax deductibility of interest and the availability of tax shelters. See
supra note 1 (commenting on the relative advantages of equity and debt). Of course, debt is best
serviced when interest rates are competitive; airlines are especially vulnerable when economic
conditions drive up interest rates.
 8.2. A Quick Look at International Aircraft Financing 331

issue unsecured corporate bonds. A bond is simply a corporate “IOU” to the

purchaser of the bond and also requires the airline to pay interest to the
purchaser over the lifetime of the bond.20 After that, we enter the realm of
“true” aircraft financing, where the debt is secured by the aircraft itself. The
major forms of secured debt financing are bank debt or bond debt.21 The
repayment obligations will be secured by an instrument – a bank loan will
require a mortgage, for example22 – that gives the creditor a reversionary
interest in the aircraft in the event of default. Leases are sometimes regarded

20
Bonds are known in some jurisdictions (e.g., India) as “debentures.” Unsecured bonds are more
likely to be used to raise capital to reduce overall corporate debt (which in turn will include
some aircraft outlays). Some carriers with poor credit ratings are compelled to issue bonds at
high interest rates in order to attract investors. These are high-yield bonds that are considered
below investment grade (“junk” bonds). Air Berlin, the third-largest low-cost carrier in Europe,
refinanced existing debt in 2011 with an interest rate of 11.5% redeemable by investors in
November 2014. The higher the interest rate, the weaker the issuing carrier. As a comparator,
the average interest rate on corporate bonds tends to be in the 5% range. Interestingly, investor
appetite for the Air Berlin bonds was strong: the order volume exceeded the issuing total of $100
million. Source: Andrew Lobbenberg, airline analyst, European Airline Equity Research,
HSBC.
21
Aircraft-backed bond issues are more common in the United States: in 2010, for example,
Delta Air Lines used a purchase of 24 jet aircraft to collateralize a bond issue of $450 million.
But these transactions are more likely to be used elsewhere in the future as banks cut back
lending to conserve capital as required by new global rules. For a recent EU-based issue, for
example, see Arno Schuetze & Andreas Kröner, NordLB Sells First Aircraft Covered Bond in
Germany, Reuters, July 10, 2012, http://in.reuters.com/article/2012/07/10/nordlb-aircraft-
pfandbrief-idINL6E8IA8ZY20120710. Typically the bonds are issued through underwriters
such as Goldman Sachs, which “place” the issue through private capital markets (comprising
large corporate and institutional investors such as pension funds). Secured bonds do not
usually trade on public stock exchanges, but rather on specialty bond exchanges. Bond
collateral need not only consist of aircraft, however, although the proceeds may be used in
part to finance aircraft, and bonds may occasionally be traded on the public stock exchanges.
A recent aborted issuance by British Airways (BA) demonstrates both of these points. In 2012,
International Airlines Group (the holding company for BA and Iberia) pulled plans for an
innovative £250 million bond issue on the London Stock Exchange that would have used
31 takeoff and landing slots at London Heathrow as collateral. See News Release,
International Airlines Group, Issue of Debt (Jul. 9, 2012), http://www.iagshares.com/phoe
nix.zhtml?c=240949&p=irol-rnsArticle_Print&ID=1712478&highlight. The scarcity value of
BA’s Heathrow slots (much greater than those of Lufthansa at Frankfurt or of Air France at
Paris Charles De Gaulle) looked enticing to risk-takers. But almost concurrently with BA’s
announcement there was informed speculation that the U.K. Government might reverse its
ban on a third runway at Heathrow. At a stroke, the future scarcity value of BA’s slots was
compromised and the flotation collapsed. U.S. bonds, on the other hand, have been more
readily secured against slots and even airport gates and route rights.
22
International law does not itself regulate the types of debt instruments that may be used in
aircraft financing; while national laws must be consulted, the “basic” transactions through
which national systems (but not all national systems) allow the creation of secured rights in
aircraft include mortgages, pledges, charges, liens, and conditional sales. Most of these forms of
transaction are covered elsewhere in this chapter.
332 The International Law Regime for Aircraft Financing

as conceptually distinct from secured asset-based financing, but in fact that

separation is only clear in the case of “operating” leases (whereby an airline
“rents” aircraft for a period from a lessor23). In a “finance” or “capital” lease,
where the airline agrees in advance to buy the aircraft at the expiration of the
lease, arguably a secured debt relationship is created not by a mortgage but by
the fact that the lender/lessor retains legal ownership until repayment is
completed. Both types of lease are considered further below.

8.3. the third-party effects of secured

financing of aircraft

8.3.1. Distinction Between Proprietary and Contractual Rights

It is critical to understand that the core concern of secured aircraft financing
law and practice is with rights in rem and erga omnes rather than with con-
tractual (in personam) rights that arise between buyers and sellers of aircraft.
What does that string of Latin tags signify? Simply the following: if the acid test
of a financial transaction is the successful assertion of a secured right against all
third parties (erga omnes24) when the debtor goes bankrupt, it is easy to see that
the creditor or lender needs to have a strong proprietary interest in the thing
itself (the aircraft), that is, an in rem25 claim, rather than just a personal claim (a
claim in personam26) against the bankrupt debtor – a claim that may be
completely useless.27 The distinction between the “contractual effects” of a
transaction and its “property effects” is well known.28 How strong should the in
rem claim be? Because aircraft have the capacity to land in multiple jurisdic-
tions, and because local courts in those jurisdictions may seek to determine
ownership and possessory rights in the aircraft, the creditor needs to be able to
assert a proprietary claim across multiple jurisdictions. In a contest between the

23
As noted earlier, the lessor itself may have obtained the aircraft through secured bank or bond
financing. See supra note 5.
24
Literally, “against all persons.”
25
Literally, “in the thing.”
26
Literally, “in the person.”
27
Most of the discussion in this chapter concerns the rights of secured parties (e.g., banks)
in situations where a debtor, which often is the technical “owner” of an aircraft, defaults on
repayments of its loan. Most legal systems recognize that the debtor is indeed the “owner,” and
that a bank is a mortgagee or pledgee whose rights (e.g., of repossession or resale) are not
triggered until default: in the meantime, the bank is not the owner and cannot sell the aircraft
whenever it wants, or lease it to a third party, or otherwise dispose of it. Mortgages in some legal
systems (e.g., England) do regard the lender bank as the owner even before default.
28
Blue Sky One Ltd. & Or’s v. Mahan Air & Ano’r [2010] EWHC 631 (Comm.), 2010 WL 902909
(Mar. 25, 2010), at 27 [hereinafter Blue Sky].
 8.3. The Third-Party Effects of Secured Financing of Aircraft 333

creditor and the local insolvency administrator and other foreign claimants
against the bankrupt debtor’s estate and assets, can the creditor prevail?
Different national laws recognize different types of proprietary interests
(some States, for example, do not recognize the concept of a mortgage in
aircraft29), adding to the complexity of enforcing rights – and to the risk that a
right might simply not be enforceable. The dangers for creditors are vividly
presented in a case from the English High Court that is discussed in the
following sections.

8.3.2. Blue Sky Case (1): Factual Background

The now notorious decision in Blue Sky v. Mahan Air (Blue Sky)30 illustrates
exactly how challenging the diversity of national laws and the lack of a
comprehensive international system of recognition of rights can be to the
transborder enforceability of security interests in aircraft. The judgment, in
international aviation finance lawyer Patrick Honnebier’s estimation, “affirms
that due to the absence of adequate national and international regimes many
mortgages are ineffective when the aircraft are operated in other [S]tates.”31 In
2010, the English High Court considered the validity of certain mortgages
created under English law in a number of Boeing 747–422 widebodies. The
owners of the aircraft, who were also the lessors of the planes, acquired them
using so-called Special Purpose Vehicles32 established under English law. The
aircraft were leased to an Armenian lessee but chartered and operated by an
Iranian corporation, Mahan Air. The planes held the nationality of several
States: for present purposes, however, the two significant aircraft were, respec-
tively, English and Armenian. On December 21, 2006, the owners mortgaged
the two aircraft to a U.S. financier (PK Airfinance), using mortgages that were
purportedly valid under English law. At the time that the mortgages were
created, one of the planes was allegedly in Iran (although that fact was never
established to the Court’s satisfaction) and the other was parked at Schiphol
Airport in the Netherlands. After the lessee defaulted, PK Airfinance com-
menced proceedings in England to repossess the two aircraft. Mahan Air in

29
See supra note 22.
30
See supra note 28.
31
B. Patrick Honnebier, The English Blue Sky Case – Topical International Aviation Finance
Law Issues, in 2011 IIASL Alumni Book (rectified ed. 2012) (rectification available at www.
airandspacebooks.info, at 2 [hereinafter Honnebier, Blue Sky Case]).
32
A Special Purpose Vehicle (SPV) is used in these circumstances to ensure that the underlying
partners remain “bankruptcy remote” in the event of the SPV’s bankruptcy. If an airline sets up
an SPV to lease or securitize an aircraft and then defaults, the creditor can pursue only the
aircraft rather than the carrier’s other assets.
334 The International Law Regime for Aircraft Financing

turn stated that it was operating the aircraft under a lease, had no knowledge of
any mortgages, and that in any event it disputed the validity of the two
mortgages.

8.3.3. Blue Sky Case (2): Renvoi Doctrine

Looking at the foregoing facts, it is apparent that the Blue Sky case potentially
had significant connections to the laws of four legal systems (England,
Armenia, Iran, and the Netherlands), each of which has different substantive
property laws and different rules for the protection of security interests in
property. The English High Court had to decide, when four different legal
systems might potentially apply, which national law would determine the
validity of the mortgages. To do so, the Court would have to apply English
“choice of law” rules (also known as “conflict of laws” rules) to select the most
appropriate foreign legal system to determine title to movable property (here,
the two aircraft). Those rules sometimes involve an exercise in “judicial
mental gymnastics” known as the renvoi doctrine,33 the idea that picking a
foreign legal system also involves applying that system’s own choice of law
rules. If those rules in turn select another State’s legal system, then that legal
system will govern the dispute (unless the selected legal system once again
includes its choice of law rules, sometimes causing unpredictable consequen-
ces34). In Blue Sky, therefore, determination of the validity of the mortgage
might depend on the substantive domestic property laws of a foreign State; but
if the Court followed the renvoi doctrine to select a foreign State’s choice of
law rules rather than solely that State’s domestic property law, then another
State’s laws could apply, including those of England.

8.3.4. Blue Sky Case (3): Distinction Between Lex Registrii and Lex Situs
The English High Court held that, for the aircraft with English nationality,
either English law as the lex registrii (law of the State of aircraft nationality –
registration – on the date of the mortgage) or Dutch law as the lex situs (law of
the State of location – situs – of the movable property on the date of the
mortgage) could apply. For the aircraft with Armenian nationality, the

33
Blue Sky, supra note 28, at 49 (citation omitted).
34
Thus, a potentially ludicrous consequence of a true renvoi arrangement is that each foreign
legal system that is selected, if its own conflict of laws or choice of law rules are also included in
the selection, may then bounce the selection to yet another foreign legal system and its choice
of law rules, thereby risking a chain of continuous instances of renvoi that conceptually
resembles the back-and-forth of a ping-pong or tennis game.
 8.3. The Third-Party Effects of Secured Financing of Aircraft 335

alternatives were Armenian law as the lex registrii or Iranian law as the lex situs.
Under English and Armenian law, both mortgages were valid and effective
and transferred legal title to the aircraft to PK Airfinance as mortgagee. For
both mortgages, however, the Court chose to apply only the lex situs, the place
of the location of the movable property (the aircraft), and decided not to use
the renvoi doctrine to include in that law the local choice of law rules that
might have directed the Court back to English law or to the law of another
State. The effects of the Court’s preference for this strict view of the lex situs
were remarkably different with respect to each of the two mortgages. For the
aircraft with Armenian nationality, in the absence of proof that the plane was
in Iran (the alleged lex situs) on the date of the execution of the mortgage, and
in the absence of satisfactory proof of any other law, the Court applied English
law to the validity of that mortgage. As to the aircraft with English nationality,
the Court rejected PK Airfinance’s argument that Dutch law (as the lex situs
on the date of the execution of the mortgage) would uphold the validity of the
mortgage because, under Dutch choice of law rules, a Dutch court would
apply English law as the lex registrii. The Court refused to select Dutch choice
of law rules and to trigger a possible renvoi to English law: under Dutch
domestic property law, which the Court considered to be the sole applicable
part of the lex situs, the mortgage was invalid. Astoundingly, the Court’s
interpretation meant that PK Airfinance lost the entire value of the aircraft
under the mortgage ($43.1 million).

8.3.5. Blue Sky Case (4): Court Applied No Special Rule for Aircraft
The reader will note that in neither circumstance (i.e., whether the aircraft
had English or Armenian nationality) did the High Court apply the law of the
State of nationality of the aircraft, also known as the lex registrii, to adjudicate
the “consensual” property rights in each aircraft.35 Counsel for PK Airfinance
argued that a Dutch court, applying its own choice of law rules, might have
selected the lex registrii (English law) rather than simply applying Dutch
law.36 The lex registrii, English law, would have saved the mortgage. The
U.S. financier’s lawyers, evidently stunned by the Court’s intention to select
35
As will be explained later, “consensual rights” in property are those that arise between the
parties to a proprietary transaction such as a mortgage. “Nonconsensual rights” are those that
are imposed by operation of State law (including, for example, tax or repair liens). Arguably, the
lex situs should govern nonconsensual property rights. See Honnebier, Blue Sky Case, supra
note 31, at 6. See infra Section 8.10.5.
36
According to Honnebier, a Dutch law expert, the appropriate rule in the Netherlands is in fact
the lex situs, thereby making choice of law irrelevant. See Honnebier, Blue Sky Case, supra
note 31, at 3.
336 The International Law Regime for Aircraft Financing

only Dutch domestic law, also argued that the lex registrii should in any case
be preferred as the English choice of law rule to the lex situs: “the special
position of aircraft as a means of transport which move regularly from situs to
situs means that the applicable law is the law of the place where the aircraft is
registered: the lex registrii.”37 The Court’s response gave no succor to the
plaintiff: “Even recognizing that . . . the aim of our private international law
[i.e., choice of law rules] is to identify the most appropriate law and appro-
priate principles to meet particular situations, this is a bold submission. It finds
virtually no support in English cases or commentaries.”38

8.3.6. Blue Sky Case (5): Lex Registrii as the Better Rule
Of course, the outcome in Blue Sky is pernicious for creditors. It suggests that
property rights in aircraft that are validly created in one State may be invalid in
another State where the asset is actually being operated. The lex registrii, the
State of nationality of the aircraft, has a legitimate, predictable, and ultimately
persuasive connection with the asset (the aircraft). Accordingly, the lex registrii
should supply the governing law applied by the court. To insist on the lex situs
is to offer scant predictability and security when an aircraft is so inherently,
shall we say, peripatetic.39

8.3.7. Blue Sky Case (6): An International Law Solution

One of the most effective ways to overcome these collisions (and anomalies) of
national choice of law principles would be to internationalize the recognition
and enforcement of security interests.40 That way, no matter where the dispute
arose, the creditor would have an interest – an international uniform

37
Blue Sky, supra note 28, at 48. PK Airfinance had to make this argument because the Court had
earlier indicated that English choice of law with respect to determining title to movable
property does not generally include reference to the choice of law (or “private international
law”) rules of the applicable foreign legal system. See id. at 47.
38
Id. Honnebier cites some persuasive sources that call the Court’s view into question. See
Honnebier, Blue Sky Case, supra note 31, at 4.
39
The English High Court believed that “practical considerations of control over movables”
required regulation and protection by the State in which they are situated (Blue Sky, supra
note 28, at 49); but the facts of Blue Sky itself demonstrate how transient such an affiliation can
be for aircraft.
40
Indeed, the High Court in Blue Sky indicated as much: “If the perceived advantage [of allowing
reference to another State’s choice of law rules in determining disputes as to title to aircraft] is
to endeavo[u]r that like cases be decided alike wherever they are litigated . . . that task is one for
international conventions and [will not be accomplished] by changing common law rules.”
Blue Sky, supra note 28, at 48 [emphasis added].
 8.4. An Overview of International Aircraft Leasing 337

substantive property interest – that each State agreed to prioritize and protect
against competing third-party claims. That is precisely how the problem is
addressed by the Cape Town Convention, which is discussed extensively later
in this chapter.41 Although that Convention has yet to achieve universal
participation, it already includes many States with significant aircraft finance
activity. Had the Convention applied in the Blue Sky case, the rights of the
mortgagee (PK Airfinance) would have been recognized, prioritized, and
secured irrespective of the location of the aircraft or indeed of the identity of
its State of nationality.42

8.4. an overview of international aircraft leasing

8.4.1. Introduction
An argument can be made that leases are not authentically part of the topic of
aircraft financing, especially secured aircraft financing, because there are few
third-party effects of the leasing arrangement and the lease is almost entirely a
matter of the contractual terms negotiated and agreed upon between the lessor
and the lessee. Although it is true that contractual terms predominate, it is also
true that the lessor in both finance and operating leases will probably have
obtained the leased aircraft through some form of secured financing trans-
action, and that, as noted earlier, the lessor’s retention of full ownership in
finance leases can be equated to the mortgagee’s reversionary interest in the
mortgaged aircraft.43 More importantly, however, it would give the reader an
incomplete impression of the current aircraft acquisition market if we were to
exclude leases because they do not fit with the “asset-based” models of typical
debt financing.

41
See Convention on International Interests in Mobile Equipment, opened for signature Nov. 16,
2001, 2307 U.N.T.S. 285 (entered into force Apr. 1, 2004) [hereinafter Cape Town Convention].
The best way to access the full authorized text of the Convention, accompanied by an excellent
set of documentary resources, is via the Unidroit website at http://www.unidroit.org/english/
conventions/mobile-equipment/main.htm.
42
As a result of Blue Sky, according to Patrick Honnebier, many aircraft being operated in and
from other States (e.g., Russia) are flown across England or parked temporarily at English
airports. While they are above or in English territory, the existing English mortgages are
“restructured.” Some English lawyers have suggested, Honnebier reports, that this practice
would establish the “proper” legal situs. Naturally, this solution is costly. See generally
B. Patrick Honnebier, The English ‘Blue Sky’ Case Shows that the Aircraft Finance Practice
Needs Uniform International Substantive Mortgage Laws as the Existing Conflict Rules Fail;
The Cape Town Convention Solves the Existing Problems while the Geneva Convention is
Obsolete, 2011–2 Tijdschrift Vervoer & Recht 70, at § 7.
43
See supra Section 8.2.6.
338 The International Law Regime for Aircraft Financing

8.4.2. Growing Significance of Leases

Airlines increasingly are relying on leases to obtain aircraft, especially as a
hedge against unpredictable economic cycles.44 After all, it is challenging and
potentially very expensive to forecast fleet needs a decade or fifteen years into
the future. Airlines, therefore, may have a core fleet of owned aircraft as
strategic long-term assets, with the balance resting on flexible lease arrange-
ments that they can allow to expire or sometimes extend depending on their
market position. Leases allow a carrier to continue building its fleet even when
access to more traditional financing sources (such as loans) becomes tighter.
The lease offers great flexibility in devising its terms45 and allows the carrier to
accumulate cash reserves to weather economic downturns (including fluctu-
ating fuel costs). Leasing also allows rapid access to new, more fuel-efficient
aircraft. It is estimated that by 2015 the global leasing aircraft portfolio will
swell to almost $280 billion.46

8.4.3. Aircraft Leasing Companies

The financial strength of lessor companies is critical to the success of aircraft
leasing. GE Capital Aviation Services, for example, is an arm of the multina-
tional conglomerate General Electric. In early 2011, Air Lease Corporation, a
recent start-up by veterans of other major leasing companies, raised more than
$900 million in an initial public offering of shares on the New York Stock
Exchange. Strong leasing companies can borrow money more cheaply than
economically challenged airlines like Air Berlin47 and can charge their air
carrier clients a nice premium on lease contracts.

44
Although more than a quarter of the world’s commercial air fleet is leased, aircraft leasing “as a
discrete field of jurisprudence” has only “taken off” on a major scale since the 1980s. See Donal
Patrick Hanley, Aircraft Operating Leasing: A Legal and Practical Analysis
in the Context of Public and Private International Aviation Law 1 (2012).
45
Thus, according to Bunker, lease payments may be varied according to the revenue expect-
ations of lessees (e.g., using “balloon payments” at the front or back end of a lease). See
Bunker, supra note 13, at 251.
46
See Press Release, Global Indus. Analysts, Inc., Global Aircraft Leasing Market to Reach $279
Billion by 2015 (Feb. 19, 2009), http://www.prweb.com/releases/2009/02/prweb2021874.htm.
Bilateral air transport agreements (see supra Chapter 3) may have provisions on leasing.
ICAO’s Air Transport Committee found dozens of agreements with such provisions: three
had clauses dealing with safety aspects requiring the aviation authority of the operator’s State to
be satisfied that airworthiness standards will be maintained. See ICAO, Study on Aircraft
Leasing, Air Transport Committee, 156th Session of the Council, ICAO, 1999, 4.3–4.14. States
may be concerned about leases between airlines, especially to ensure that no additional traffic
rights are granted.
47
See supra note 20 (noting high interest rate on Air Berlin bond issue).
 8.4. An Overview of International Aircraft Leasing 339

8.4.4. Distinction Between Finance (or Capital) Leases

and Operating Leases
The Cape Town Convention,48 which is considered in more detail below,
defines a lease generally as “an agreement by which one person (the lessor)
grants a right to possession or control of an object (with or without an option to
purchase) to another person (the lessee) in return for a rental or other pay-
ment.”49 As implied by the reference to the presence or absence of an “option
to purchase,” aircraft leases can be classified as “finance” (or “capital”) leases
or as “operating” leases. Although finance leases resemble operating leases in
that the lessee is the operator of the aircraft, at the termination of the finance
lease (unlike in the operating lease), there is an option to buy or even
automatic ownership on the part of the lessee.50 As we have noted above, a
finance lease is therefore akin factually to a long-term mortgage loan, where
the lessee as “mortgagor” eventually becomes the legal owner of the aircraft.51
The finance lease contract will usually include a final price for the equipment
that represents the unamortized balance of the initial purchase price rather
than (in cases where operating leases allow the lessee to buy the aircraft
after the lease) the fair market value.52 Unlike in a mortgage, however, in a
finance lease the lessor does retain title to the asset during the lease term and
therefore holds a much stronger security interest than the typical mortgagee.
(But one must always be aware of national law variations: the typical mortgage

48
See supra note 41; see also infra Part 8.8.
49
Cape Town Convention, supra note 41, art. 1(q); see also infra Part 8.9. As Hanley points out,
the lessor is never the operator or maintenance provider. The lessor in an ordinary lease
transaction “buys the aircraft, typically new from the manufacturer, leasing it first to one
airline, then to another, until it sells the aircraft or the aircraft reaches the end of its economic
life.” Hanley, supra note 44, at 47.
50
Hanley points out that operating leases are becoming a widely used vehicle even though in
their origin they were seen as “the preserve of carriers with a lower credit quality.” Hanley,
supra note 44, at 17. The lessor, as owner of the aircraft, may have to place the aircraft with
different lessees at several times in its operating life, and therefore must not only be concerned
about the ongoing physical condition of the aircraft but must also project demand for aircraft at
least on a medium-term (5- to 10-year) basis. Markets in aircraft coming off operating leases
remain good in emerging markets with strong economic growth like China, India, and Latin
America.
51
Indeed, typically the lessor will set the rental under a capital lease as if the transaction were a
straightforward loan. See Hanley, supra note 44, at 15.
52
Thus, Article 2(c) of the Unidroit Convention on International Financial Leasing (available on
the Unidroit website at http://www.unidroit.org/english/conventions/1988leasing/1988leasing-
e.htm), emphasizes that the primary characteristic of a capital lease is that “the rentals payable
under the leasing agreement are calculated so as to take into account in particular the
amortization of the whole or a substantial part of the cost of the equipment.”
340 The International Law Regime for Aircraft Financing

under English law, for example, requires title to be transferred to the lending
bank for security purposes and title only reverts to the airline when the debt is
paid in full.)

8.5. the international law regime for aircraft

nationality

8.5.1. Basic Principles of Aircraft Nationality

As we considered briefly above and also earlier in Chapter 2, an aircraft is
unlike other forms of movable property in that it has a nationality. Article 17 of
the Chicago Convention attributes a nationality to every aircraft, that is, the
nationality of its State of registry.53 The aircraft will be registered in one State,
and only in one State, but may be operated in another State.54 Article 18 allows
for registration to be changed from the register of one State to that of another
State, but aircraft can only be registered in one State at any time.55 Article 19
devolves the form and requirements for registration to local State law.56 Under
Article 31 of the Chicago Convention, every aircraft of a contracting State
engaged in international navigation must have a Certificate of Airworthiness
issued (or rendered valid) by its State of registry.57 Pursuant to Articles 12, 30,
31, and 32(a) of the Chicago Convention, a State has an obligation to ensure
that the aircraft and operators on its registry are operating safely and prepared

53
See Chicago Convention, supra note 7, art. 17.
54
Thus, as can be seen in Annex 6 to the Chicago Convention (on Operation of Aircraft), see infra
note 57, ICAO makes a distinction (which the original Convention itself does not make)
between the State of Registry (or registration) and the State of Operation of the aircraft. But see
infra Part 8.5.4, discussing Article 83bis of the Chicago Convention.
55
See Chicago Convention, supra note 7, art. 18.
56
See id. art. 19. The Paris Convention, which preceded Chicago, made registration of an aircraft
dependent on the owners being nationals of the registry State. See Convention Relating to the
Regulation of Aerial Navigation, art. 7, opened for signature Oct. 13, 1919, 11 L.N.T.S. 173,
reprinted in 30–1 Annals Air & Space L. 5 (2005).
57
Article 29 of the Chicago Convention requires that the Certificate of Airworthiness (along with
the Certificate of Registration) must be carried on board the aircraft. See Chicago Convention,
supra note 7, art. 29. Annex 6 of the Convention provides in addition for an Air Operator’s
Certificate issued by the State of the Operator (although that State should also consider various
approvals and acceptances by the State of registration), certifying professional ability and
competence to ensure safe operations. See Annex 6 to the Convention on International Civil
Aviation, Operation of Aircraft: Part I, International Commercial Air Transport – Aeroplanes
(9th ed. July 2010), http://www.icao.int/safety/ism/ICAO%20Annexes/Annex%206.pdf. (Note
that the air transport license is concerned with the overall economic and financial viability of
the proposed enterprise, while the air operator’s certificate – typically issued by the same
authority – is concerned with safety.)
 8.5. The International Law Regime for Aircraft Nationality 341

to comply with the regulatory standards of all contracting States.58 Each State
has complete flexibility, however, in deciding what requirements it will
impose for registration, including whether it will insist (as the United States
has) that only its own citizens may own aircraft placed on its register59 and
whether (where ownership and operation are separated, as in a lease) the
registering entity should be the owner or the operator or both.

8.5.2. Distinction Between Aircraft Nationality and Airline Nationality

It has to be said, however, that the design of the Chicago Convention fails
conceptually to link aircraft nationality with airline nationality, the latter
being (as discussed earlier) a post-Convention development that requires an
airline to be owned and controlled by the State (or citizens of that State)
which designates it to serve international routes.60 Surprisingly, and in part
because the Convention drafters were never able to clarify their under-
standing of airline nationality, it is not evident from the Convention that
an airline needs to register any of its aircraft on its home registry. Thus, it is
legally acceptable under the Convention for British Airways (BA), for
instance, to own aircraft that operate out of the U.K. but are registered in
Australia or Japan or, conversely, to operate aircraft that are registered in the
U.K. but are owned by Australian or Japanese lessors.61 If the purpose of
registration is to ensure that a State is held responsible for the operational
safety of aircraft on its registry, in other words, that there is a “genuine link”
between the State and its registered aircraft, it would be hard to argue that
such a link would exist between Japan or Australia and the aircraft operated
by the U.K. carrier on routes (for example) to the United States and

58
See Chicago Convention, supra note 7, arts. 12 (“rules of the air”), 30 (“aircraft radio equip-
ment”), 31 (“certificates of airworthiness”), and 32(a) (“licenses of personnel”). See ICAO,
Guidance on the Implementation of Article 83bis of the Convention on International Civil
Aviation, Cir. 295 LE/2 (Feb. 2003), at 4 [hereinafter ICAO, Guidance]. According to ICAO,
these provisions represent the primary functions and duties of the State of registry. See id. at 5.
59
The United States, for example, only allows aircraft to be registered in the United States by U.S.
citizens, but also allows certain trust arrangements that obviate the strictness of that rule. See
generally Dean N. Gerber, Aircraft Financing, ch. 7, in Equipment Leasing – Leveraged
Leasing (Ian Shrank & Arnold G. Gough eds., 5th ed. 2012), at 7–9 et seq. [hereinafter Gerber,
Aircraft Financing]. Determinations of ownership by the Federal Aviation Administration
(FAA) in an application for registration of an aircraft are conclusive for FAA purposes only
and do not prove title in any non-FAA proceedings. See id. at 7–9.
60
Thus, bilateral air services treaties exchange traffic rights on the basis of designated airlines
rather than designated aircraft. On the issue of airline nationality, see supra Chapter 3,
Section 3.1.2.
61
This situation, in fact, is quite common in international leasing transactions.
342 The International Law Regime for Aircraft Financing

Mexico.62 The reason why Japan or Australia will not serve as a “registry of
choice” in that context (after all, an aircraft lessor might prefer how Japanese
or Australian law treats lessor rights63) is that State licensing authorities,
unlike the Chicago Convention, do typically impose a link between their
national airlines and the aircraft they operate. Within the European Union
(EU), for example, the BA “Japan or Australia registry” hypothetical is
impossible because EU Regulation 1008/2008 requires that “aircraft used
by a [Union] air carrier shall be registered, at the option of the Member
State whose competent authority issues the operating license, in its national
register or within the [Union].”64 Indeed, as an ICAO senior legal officer
Jiefang Huang points out, “the practice of ICAO has been not to focus on
foreign ownership of aircraft but, rather, on the safety oversight capabilities
of the States which register foreign-owned aircraft.”65

62
We are assuming, of course, that a “genuine link” to a State of nationality would by itself ensure
safety oversight: but safety enforcement standards vary considerably among States. The fact that
these variations exist highlights the inadequacy of the system of aircraft nationality established
under the Chicago Convention.
63
The choice is made for various legitimate legal, tax, and practical reasons and is not connected
to safety considerations. In fact, the lessor and its financing bank will dictate that the aircraft
must be maintained in accordance with applicable national and international laws and will not
want their expensive asset to deteriorate because of poor maintenance.
64
See Common Rules for the Operation of Air Services in the [Union], Council Regulation
1008/2008, 2008 O.J. (L 293) 3, art. 12(1). The Regulation also instructs all EU civil aviation
authorities to accept on their national registers aircraft owned by nationals of other Member
States and transfers from registers of other Member States. See id. art. 12(2). Hanley mentions
“aircraft registries of convenience” like Aruba, Bermuda, Ireland, and Mauritius, see
Hanley, supra note 44, at 81, but exactly what this means is unclear if States typically
require their national airlines to register their aircraft in the home registry. Certain lessors
would no doubt prefer to have their aircraft registered in States that offer better protection for
their interests, but the extent to which they can do so will be determined by whether the State
of the lessee will allow such “external” registration in a State that is not the State of the
operator. If the nationality rule for aircraft disappeared, of course, then the registration
system would have to be reconceptualized accordingly to prevent “convenience” registers
from springing up.
65
See Jiefang Huang, Aviation Safety and ICAO 37 (Mar. 18, 2009) (unpublished Ph.D. thesis,
Leiden University). These conceptual inadequacies of nationality and national registers are
found elsewhere in international aviation law. For example, under Article 2(3) of the 1952
Rome Convention on Damage Caused by Foreign Aircraft to Third Parties on the Surface,
considered supra Chapter 7, Section 7.14.3, where the operator is liable for damage caused to
persons on the ground from an aircraft in flight, “the registered owner” of the aircraft is
presumed to be the operator, and it is up to the registered owner, if it can, to prove that some
other party was the operator and therefore liable. Not all States register “owners,” however,
because Article 17 of the Chicago Convention refers to registration not of owners, but of aircraft.
Thus, the concept of “registered owner” in the Rome Convention has no direct analog in the
 8.5. The International Law Regime for Aircraft Nationality 343

8.5.3. Aircraft Nationality and Aircraft Financing

Although the concept of aircraft nationality and registration is conceptu-
ally incomplete, it cannot be ignored in aircraft financing transactions. If a
defaulting operator has registered an aircraft in the State of its principal
operations, a financier or legal owner (e.g., a lessor) will want to secure not
only repossession of the vessel but also deregistration if it has no other
connection with that State and wishes to move the aircraft elsewhere and
to register in a new State that requires the operator to maintain a registra-
tion in that State.66 Some lessors and financiers have even required that
the aircraft be registered outside the principal State of operation from the
beginning.67 Given that the State of registration is responsible for the
safe operation of the aircraft, registration in States other than the State of
operation (or of primary operation) is arguably not ideal:68 registration
implies safety oversight, even if the aircraft is not operated in the
registering State,69 and States that take their Convention obligations
seriously do require their registered aircraft to be serviced and maintained
under local supervision and by locally licensed technicians.70 If aircraft
are operating in a foreign State, the State of registration may legitimately
instruct operators to return the vessel to the State of registry for safety and
maintenance procedures or to use approved foreign repair stations as an
alternative.

Chicago Convention. The 2009 Convention on Compensation for Damage to Third Parties
Resulting from Acts of Unlawful Interference Involving Aircraft, see supra Chapter 7,
Section 7.14.8, proposes under its Article 27 to impose liability only on the part of the operator
with no right of recourse against the lessor or secured financier or even manufacturer. Note
international aviation law expert Jeffrey Wool’s comment that this is the first time a major
international aviation law instrument “recognizes and advances the integrated industry prin-
ciple”: prior instruments equated airlines with the industry as a whole, so that the liability of
stakeholders other than airlines was beyond the scope of such treaties and left to applicable
(presumably local) law. Jeffrey Wool, Lessor, Financier, and Manufacturer Perspectives on the
New Third-Party Liability Convention, 22 No. 4 Air & Space Law. 1 (2010). The same
principle of operator liability appears in the related 2009 Convention on Compensation for
Damage Caused by Aircraft to Third Parties (see supra Chapter 7, Section 7.14.10). Neither
Convention is yet in force.
66
Article 19 of the Chicago Convention implies that deregistration, as an aspect of registration,
will occur under the laws and regulations of the State of registration. See Chicago Convention,
supra note 7, art. 19.
67
Thus, as considered above, an aircraft leased by BA would be registered in the lessor’s home
state of Australia or Japan.
68
But, as we noted supra notes 54, 57, ICAO explicitly contemplates that distinction.
69
As ICAO has emphasized in its guidance document on implementing Article 83bis: see ICAO,
Guidance, supra note 58, at 4.
70
But see supra note 62 (mentioning the wide variations in State enforcement practices).
344 The International Law Regime for Aircraft Financing

8.5.4. Article 83bis of the Chicago Convention

Separating the States of registration and operation appears to be neither cost-
efficient nor convenient.71 Moreover, before 1997, the Chicago Convention
did not have provisions governing aircraft registered in one State being
operated in another State, even though situations of that kind were a regular
occurrence under international leasing contracts. Article 83bis of the
Convention,72 which entered into force on June 20, 1997, provides for a
temporary transfer of oversight authority by the State of nationality (registra-
tion) of the aircraft to the State where the aircraft operator (e.g., a lessee73) has
its principal place of business or permanent residence.74 An Article 83bis
transfer will be of particular salience to a lessor where the lessee is based in a
State that registers only the operator but where the lessor eventually wants to
move the aircraft to another State after a default and needs to bypass the
process of deregistration and to avoid issues created by a lessee’s refusal to
deregister.75 Lessors will always prefer Article 83bis because it allows the lessor
to register the aircraft in its own name in a favorable jurisdiction and of course
thereafter to deregister upon a default by the lessee.76 Because Article 83bis is
usually put into effect through advance inter-State agreements that relate to
specific aircraft and responsibilities, it is typically used only in long-term
leasing situations rather than, for example, for short-term “wet leases.”77

71
See supra note 68 and accompanying text.
72
The little word bis, fused with the number of the Article, is a treaty convention that means
“again” or “twice” (it is of Latin origin).
73
Note that Article 83bis does not distinguish between capital and operating leases.
74
Before that, ICAO allowed case-by-case transfers under various annexes. According to ICAO,
the operator’s principal place of business is “a matter of appreciating the facts of each case and
comparing the importance of the various places of business of an operator so that the main one
can be selected.” ICAO, Guidance, supra note 58, at 2.
75
If there is no Article 83bis delegation, the registering State may simply refuse to allow aircraft on
its register to be leased to operators in other States in order to ensure that it is in compliance
with its obligations under the Chicago Convention. See generally ICAO, Guidance, supra
note 58, at 5.
76
Even if deregistration does not procure immediate repossession, Hanley points out that the
ability of the lessor to deregister “means that, at least, it can prevent the lessee from operating
the aircraft while not paying for it under the lease.” Hanley, supra note 44, at 171.
77
A “wet lease” means an aircraft including crew. On the formalities for a transfer of duties and
functions under Article 83bis (including an obligation in certain circumstances to register
transfer agreements with ICAO), see ICAO, Guidelines, supra note 58, at 5. Hanley proposes
improving the use and efficiency of Article 83bis by creating a multilateral agreement that
would allow States which are satisfied with each other’s safety standards to agree in advance that
any aircraft on the register of any contracting State could be the object of a delegation of any or
all of the responsibilities of the State of registration to the contracting State of the operator. See
Hanley, supra note 44, at 171. But note that not all States have regulations that would allow
even bilateral arrangements to occur. Hanley, an experienced international aircraft leasing
 8.6. An Overview of International Aviation Law and Aircraft Financing 345

8.6. an overview of international aviation law

and aircraft financing

8.6.1. Protection of Security Interests

As Sir Roy Goode points out, no binding international legal instrument sets
forth general rules for the creation, perfection, enforcement, and priority of
security interests and other proprietary rights.78 Nevertheless, in aircraft
financing, whether asset based or lease based, it is critical that the security
holder or owner be able to regain physical and legal control over the equip-
ment (e.g., in order to sell or re-lease the secured aircraft). The key achieve-
ment (indeed, arguably the only achievement) of public international aviation
law in the field of aircraft finance has been to recognize that ownership and
operation of an aircraft can be divided between different parties and to
improve the protection of the aircraft as a security for finance. Among other
things, that protection includes ensuring transparency of competing claims
against collateral (priority), ensuring quick enforcement of priority claims
against the collateral in case of default by the debtor, and protection of the
collateral in the event of bankruptcy or liquidation of the debtor.79 The
additional factor of priority among creditors based on recordation of their
interests in national aircraft registries must also be considered.

8.6.2. Problem of Aircraft Mobility

It is obvious that taking a financial risk in a highly mobile asset like an aircraft
is not like financing a fixed building.80 In theory, the best protection for the
creditor would be to register a security interest in every State to which the
aircraft might fly, or indeed in every State that has “a runway long enough to
accept an aircraft of the type subject to the mortgage”81 – regardless of whether
the aircraft might be expected to fly there. Although the latter is not econom-
ically feasible, nevertheless, as international aircraft leasing lawyer Donald

lawyer based in California, argues that the fact that Article 83bis is not widely availed of may be
because the State of the aircraft operator “has no motivation to accept such responsibility” –
even though it could not avoid such responsibility if the parties agree that the aircraft should be
registered in the operator’s State. Id. at 148.
78
See Goode et al., Transnational Commercial Law, supra note 4, at 469, 476.
79
Sir Roy Goode describes insolvency as the “acid test” of secured credit. Id. at 469.
80
See Bunker, supra note 13, at 388. As Bunker points out, the user’s desire for as much
operational freedom as possible is in conflict with the financier’s expectation that the asset is
maintained in the best possible condition and is readily accessible in the event of default or
bankruptcy. See id.
81
Id. at 77.
346 The International Law Regime for Aircraft Financing

Bunker notes, limiting the registered security interest to jurisdictions where

the borrower is based or the destinations on its scheduled routes will diminish
the attractiveness of the security. Even if the creditor could get very broad
registrations of its security interest, there is always the risk that the creditor
might be trumped by higher-priority interests or even by a deliberate attempt
to evade a State where the security is registered with a high priority, for
example, by an emergency landing in a jurisdiction where no registration
has been filed.82 Moreover, the local regulations on registering security inter-
ests, as well as the complexities of local registration, vary so widely that a
consistent pattern of defending the security interest will be virtually impossible
to achieve.83

8.6.3. Problem of Nonuniform Legal Concepts

Further, interests can be differently characterized in different jurisdictions, so
that universalizing terms like mortgages, finance leases, and other title reten-
tion devices may not make sense.84 Moreover, as we will see, some interests
that arise by operation of law, notably so-called nonconsensual interests such
as repair or tax liens, can also defeat secured creditor interests and, as Sir Roy
points out, may even be secret.85 And the effectiveness of “registering” a
security interest is generally (and obviously) limited to the duration of the
aircraft’s physical sojourn in the State of registration.86 Bunker insists that the
best security is actual ownership of the asset and that leasing, for example,
allows the lender to hold the benefits of ownership while the borrower actually
operates the asset.87 But again, the value of ownership is a value that can only
be expressed in a local court jurisdiction and will depend on how the local
laws view the status of the owner in the context of specific proceedings. In the
U.K., for example, ownership of an aircraft, even if perfected under local

82
See id. at 78.
83
Some States (such as the U.K.) actually have specific registers for security interests in aircraft,
but most do not. The central aircraft registry maintained by the FAA in the United States is
intended primarily to register the U.S. nationality of aircraft, but also allows registration of
some security interests. See Gerber, Aircraft Financing, supra note 59, at 7–7. Since 2010,
certificates of registration (or reregistration) granted by the FAA expire every three years. See 14
C.F.R. § 47.40(b) (2010).
84
Not every State recognizes that a mortgage in an aircraft is even legally possible, for example.
See supra note 22.
85
See Goode et al., Transnational Commercial Law, supra note 4, at 469; on non-
consensual interests, see infra Section 8.10.5.
86
Here we are talking about registration of a security interest, not registration of an aircraft on a
national registry.
87
See Bunker, supra note 13, at 78, 390.
 8.7. The Geneva Convention (1948) 347

security registration rules, will never prevail against an action by the Civil
Aviation Authority to collect airport navigation charges and which may result
in forfeiture of the aircraft.88

8.6.4. Introduction to the Geneva and Cape Town Conventions

As a practical matter, the focus of public international aviation law on instru-
ments to better protect transnational security interests and leases has been
open to debate: some aviation finance lawyers would regard protection of the
security as lower in importance to the potential investor than the strength of an
airline’s management team, its profit history, and the soundness of its business
plan. Nevertheless, cases like Blue Sky throw sharply into relief that protection
of creditor security interests can create serious legal and practical difficulties in
international aircraft financing. Two significant instruments that address those
difficulties (the Geneva Convention of 1948 and the Cape Town Convention
of 2001) therefore must now be considered. Although fifty years apart in their
entry into force, they stand at the intersection of what is typically understood as
the basic template of international law – treaties among sovereign States that
regulate relations between those States – and the domain of transnational
commercial law, which also involves treaties but which touches the private
dealings of private citizens.

8.7. the geneva convention (1948)

8.7.1. Introduction
Before the Cape Town Convention, the only treaty in force that sought to
provide transnational assurance to holders of security interests in aircraft was
the Convention on the International Recognition of Rights in Aircraft, known
as the Geneva Convention, which was signed in Geneva, Switzerland, on June
19, 1948.89 Before Geneva, aircraft finance law was predominantly domestic

88
Thus, the U.K. Civil Aviation Authority (CAA) acts on behalf of Eurocontrol, the European
organization for air traffic management safety, to collect route charges that fund Eurocontrol’s
operations. The CAA has authority under the U.K. Civil Aviation (Navigation Services
Charges) Regulations 2000 to seize an aircraft without court order when the lessor or the
operator is in default on the charges, and (with a court order) to sell the aircraft to recoup the
charges. If the operator is in possession when the aircraft is detained, the aircraft may be sold to
satisfy the entire fleet debt of the operator to Eurocontrol. See Gerber, Aircraft Financing, supra
note 59, at 7–108; see also infra note 167.
89
See Convention on the International Recognition of Rights in Aircraft, Jun. 19, 1948, 4 U.S.T.
1830, 310 U.N.T.S. 151 [hereinafter Geneva Convention].
348 The International Law Regime for Aircraft Financing

law, much of it inadequately developed to meet the needs of a capital-

intensive industry and its financiers. The Convention requires each State
party to recognize only four types of consensual property rights in aircraft
“constituted” and “regularly recorded” in a public record in accordance with
the law of the State of nationality of the aircraft (the lex registrii) when the
rights were made effective.90 If the security interest (or lease) is valid and
recordable under that national law, it will have a claim to be recognized in
other contracting States of the Convention. Thus, rather than creating a
genuine system of enforceable international rights for holders of a security in
aircraft (a project that would only be attempted much later in Cape Town),
the Geneva Convention merely attempted cross-border recognition of other
States’ aircraft mortgages and leases.

8.7.2. The Geneva Convention as a Choice of Law Treaty

The Geneva Convention offers no unified notion of a security right that is
eligible for international protection. Unable to resolve systemic differences in
the recognition, prioritization, and enforcement of security interests between
common law and civil law traditions, Geneva served instead as a choice of law
treaty that aims only to deflect automatic application of the law of the location
of the aircraft (the lex situs91) and imposes a “choice of law” on the court of the
situs. For that reason, the Geneva Convention has been described correctly as
a “conflict of laws treaty that deals with recognition of rights, not a substantive
treaty that creates rights.”92 Geneva’s recognized rights are therefore only those
established by and recognized in the State of nationality of the aircraft. In the
event that an arrest or detention of an aircraft for nonpayment on a financial
security interest or leasing agreement takes place outside of that aircraft’s
State of registry and that non-home jurisdiction is a party to the Geneva
Convention, that jurisdiction must apply the laws of the aircraft’s State of
nationality. This framework was intended to clarify which domestically estab-
lished rights in aircraft would be respected in the event that an aircraft were
seized outside its home State for financial reasons. Only in a limited number

90
Id. art. 1. The list of rights to be recognized is compendiously drafted, including “rights of
property in aircraft,” “rights to acquire aircraft by purchase coupled with possession of the
aircraft,” “rights to the possession of aircraft under leases of six months or more,” and “mort-
gages, liens and similar rights in aircraft that are contractually created as security for payment of
its indebtedness.”
91
Also known as the lex rei sitae (literally, “law of the place of the thing”). See also supra
Section 8.3.4.
92
Hanley, supra note 44, at 93, 144–145 (citing Honnebier); see also on the same point, Goode
et al., Transnational Commercial Law, supra note 4, at 474.
 8.7. The Geneva Convention (1948) 349

of circumstances, such as insolvency, could the arresting jurisdiction dispense

with applying the law of the lex regstrii.93

8.7.3. Two Unsettled Choice of Law Issues

Although the Geneva Convention appears clear on its face, confusion quickly
arose over two issues of selecting the applicable law when a dispute arose
between a creditor and a debtor. First, did the lex registrii rule refer only to the
internal substantive law of the State of registration or to the choice of law rules
of that State also (including the possible application of renvoi)?94 If the latter,
the law of the State of aircraft nationality is not necessarily the substantive
property law of that State. Instead, the lex registrii becomes the law that selects
the governing property law.95 Second, commentators disagreed as to which
State law would apply in financing and leasing transactions when an aircraft’s
State of nationality recognized another kind of “choice of law” – where the
parties to the transaction themselves agree in their contract to apply the law of
a third country. For instance, the parties to an aircraft transaction financed in
Canada by a U.S. entity might choose to adopt New York’s well-developed
commercial rules as the governing law of the transaction.96 Strict construc-
tionists of the Geneva Convention, however, argued that this was an excessive
genuflection to party autonomy and that Geneva was intended to allow only
the law of the lex registrii to follow the aircraft;97 privately selected choice of
law rules that imported the law of a third country – even if that country, too,
were a party to Geneva – were not perceived to be part of the bargain. Because
the Geneva Convention, like the Warsaw and Montreal liability treaties
discussed in Chapter 7, depends on national courts for its construction, it is

93
See infra Section 8.7.4.
94
See supra Section 8.3.3 (explaining renvoi); see also B. Patrick Honnebier, Clarifying the
Alleged Issues Concerning the Financing of Aircraft Engines, 56 Zeitschrift für Luft-
und Weltraumrecht [Z.L.W.] 383 (2007) (arguing that the legislative history of the Geneva
Convention supports an interpretation that the lex registrii includes its choice of law or conflict
of laws rules).
95
And here again a renvoi question could be presented if the lex registrii selects a third State’s law
and that third State would apply its own conflict of law rules to select, once again, the lex
registrii as the applicable law of the transaction – and so forth! See supra note 34.
96
Of course, the parties cannot predetermine how any court would ultimately decide the in rem
issue of the validity of a secured transaction or other asserted proprietary right as against third
parties: to that extent, the “choice of law” might only be for purposes of their own contractual
relations and would have no effect on third parties. The Cape Town Convention, as we will see
below, explicitly confines party choice of law agreements to contractual matters between the
parties. See infra Section 8.13.2.
97
Again, we note the unresolved question of whether that law of the lex registrii would include the
local choice of law rules.
350 The International Law Regime for Aircraft Financing

not surprising that neither of the foregoing questions was susceptible to a

uniform answer or that both remain unsettled.

8.7.4. Problem of Insolvency

In addition to the foregoing procedural ambiguities, the Geneva Convention
suffered from a more problematic shortcoming, namely, its open-ended deter-
mination of which State’s law governs during an insolvency proceeding.
Although Geneva, as noted, requires that the law of the lex registrii is normally
applied, it also states that “the proceedings of a sale of an aircraft in execution
[i.e., seized for sale as part of an insolvency proceeding to pay the aircraft
owner’s debt] shall be determined by the law of the contracting State where
the sale takes place.”98 In other words, the Convention leaves open the
possibility that the law of a State other than the State of aircraft nationality
may be applied in insolvency proceedings, a provision that seems to sabotage
Geneva’s ostensible purpose of serving as a straightforward choice of law treaty
instrument. What happens if the rights of the interest holders in the seized
aircraft are subject to a different insolvency framework from that of the air-
craft’s State of nationality? Neither the text nor the drafting history of the
Geneva Convention provides substantive clarity on that point.

8.7.5. An Ill-Suited Instrument

The Geneva Convention has a patchy record of enforcement, but in any event
its lack of rules for speedy enforcement of remedies99 or for dealing with
insolvency makes it ill-suited to handle the demands of modern asset-based
and lease-based financing. And, even if one wishes to make the measured
argument that all private transnational law instruments succumb to incon-
sistent application within the borders of national legal cultures, that does not
obviate the fact that the Geneva Convention appears to be a poorly drafted
instrument. Too much leeway has been left for inconsistent interpretation and
application, thereby injecting instability into the conduct of international
aircraft financing. It was with these drawbacks firmly in mind that a consor-
tium of States turned not to revising the Geneva Convention, but to scrapping
it altogether in favor of a less ambiguous (albeit customizable) treaty

98
Geneva Convention, supra note 89, art. VII(1).
99
The only enforcement remedy in the Geneva Convention is judicially mandated sale. See
Geneva Convention, supra note 89, arts. VI–VIII. Sir Roy Goode finds the mandatory presale
notice periods in the Convention to be incompatible with the mobility of aircraft. See Goode
et al., Transnational Commercial Law, supra note 4, at 475.
 8.8. The Cape Town Convention (2001) (1): Background and Overview 351

framework. It is largely superseded by the Cape Town Convention for Geneva

signatories where the latter applies.100

8.8. the cape town convention (2001)

(1): background and overview

8.8.1. Context of the Cape Town Convention

As should be apparent from the preceding content of this chapter, the tremen-
dous expense of acquiring aircraft frames and engines has left airlines almost
entirely dependent upon borrowing, financing, and leasing to procure those
assets. Unfortunately, airlines also have a notorious reputation as unstable
investments, with high incidences of bankruptcy and widespread borrowing
from multiple creditors, all of whom may have competing claims to an airline’s
assets should it be unable to pay its debts. As we noted at the outset, further
contributing to the problem is the mobility of an airline’s primary assets, the very
aircraft in which the airline granted security interests or with respect to which it
took on debt as the means to obtaining them. Any creditor that lends to an
airline in exchange for a security interest in aircraft is confronted with the reality
that the creditor has virtually no control over where its collateral may be located
should it need to execute upon its security interest. If the debtor airline defaults
on its obligations to a creditor while the aircraft in question is in a foreign State,
the creditor must hope that the State’s domestic laws and courts will permit it to
exercise its priority in a timely fashion. All of the foregoing contingencies serve
to raise borrowing costs. Creditors are cautious in lending, and when they do
lend, they seek to extract high interest rates and the most robustly framed
security interests in exchange for financing.

8.8.2. Unidroit, the Aviation Working Group, and the

Convention/Protocol Solution
In the late 1980s, the need to facilitate greater financing for high-value mobile
equipment such as aircraft led Unidroit101 to begin working on standardizing
100
See Protocol to the Convention on International Interests in Mobile Equipment on Matters
Specific to Aircraft Equipment, art. XXIII [hereinafter Aircraft Protocol]. As with the
Convention itself, the ideal means to access the full authorized text of the Protocol, as well
as excellent related documentary resources, is the Unidroit website at http://www.unidroit.org/
english/conventions/mobile-equipment/main.htm.
101
Unidroit is an independent, intergovernmental organization of State representatives, itself
established by multilateral agreement, that is dedicated to the unification of international
“private” (commercial) law. See http://www.unidroit.org/.
352 The International Law Regime for Aircraft Financing

the differing national regulatory approaches to security interests in such

equipment.102 Unidroit formed the Aviation Working Group (AWG) in 1994
to assist in that effort.103 Putting together an agreement that adequately
covered aircraft, railway rolling stock, space objects, ships, and offshore oil
rigs proved exceedingly difficult. In 1996, Boeing, frustrated by Unidroit’s
lack of progress, asked ICAO and the International Air Transport
Association (IATA) to work with Unidroit to prioritize finding a solution for
aircraft equipment alone.104 That initiative led in turn to the idea of the
“Convention plus Protocols” approach that became the signature feature of
the Cape Town Convention. Under that approach, a broader agreement, The
Convention on International Interests in Mobile Equipment (the Cape Town
Convention),105 would serve as an “umbrella” treaty providing a framework
of international rules for protecting secured interests in a variety of mobile
equipment. A separate protocol would be specific to each of the different
categories of mobile equipment.106

8.8.3. The Aircraft Protocol

During the next four years, Unidroit focused on the Convention and appointed
a new Aircraft Protocol Group (APG) to draft the protocol specific to aircraft.107
The APG was assisted by the AWG, IATA, and ICAO. The Protocol to the
Convention on International Interests in Mobile Equipment on Matters Specific
to Aircraft Equipment (the Aircraft Protocol)108 was the first to be completed
and the only protocol that was ready when the Convention was signed on
November 16, 2001. The Convention and protocols were uniquely structured
so that the Convention did not go into force until at least one of the protocols
had entered into force. The Aircraft Protocol required ratification by eight States

102
See John Atwood, The Status of the Mobile Equipment (Cape Town) Convention – Arrival of an
International Registration System, 39 UCC L.J. 637 (2006).
103
See Mark J. Sundahl, The “Cape Town Approach”: A New Method of Making International
Law, 44 Colum. J. Transnat’l L. 339, 350–54 (2006).
104
See Angie Boliver, Square Pegs in a Round Hole? The Effects of the 2006 Cape Town Treaty
Implementation and its Impact on Fractional Jet Ownership, 72 J. Air L. & Com. 529, 530
(2007).
105
See supra note 41.
106
The Unidroit website, see supra note 101, includes numerous memoranda and studies prepared
by various committees (including groups examining the interaction between the Cape Town
Convention and public international law, insolvency, and jurisdiction, and the reports of the
Drafting Committee), as well as contributions from Airbus and Boeing, that preceded the
eventual draft treaty.
107
See Sundahl, supra note 103.
108
See supra note 100.
 8.8. The Cape Town Convention (2001) (1): Background and Overview 353

to come into force. The Aircraft Protocol and Convention took effect on March
1, 2006, when the required eight nations (Ethiopia, Ireland, Malaysia, Nigeria,
Oman, Panama, Pakistan, and the United States) ratified the Protocol.109

8.8.4. A Single Instrument, but the Protocol Prevails over the Convention
Although the protocols on railway rolling stock and space objects have now been
completed and incorporated into the Cape Town oeuvre,110 this book naturally
restricts its discussion to the two documents implicating aviation, the Cape
Town Convention and the Aircraft Protocol, which are intended to be read for
legal purposes as a single instrument.111 Unusually in public international law,
however, the Protocol prevails over the Convention in the event of any incon-
sistency between the two documents.112 While there is a combined text of the
two instruments, it is not authoritative for use in formal legal documentation.
Accordingly, in this chapter we cite separately to the Convention (which uses
Arabic numbering) and the Protocol (which uses Roman numbering).

8.8.5. Use of Declarations

In addition to the unique two-instrument structure, the Cape Town
Convention fits into a modern trend in international commercial treaties in
expressly allowing States to make “declarations.” This is particularly important
because these treaties usually have significant overlaps with existing domestic
law. Unless a State allows treaties to have automatic priority over local law,113

109
See Cape Town Convention, supra note 41, art 49(1); Aircraft Protocol, supra note 100, art.
XXVIII. The Convention itself only required three ratifications to enter into force, but even
then its effectiveness was contingent (with reference to aircraft objects) on the coming into
force of the Aircraft Protocol. The 1948 Geneva Convention only needed two States to ratify
before coming into force. See Geneva Convention, supra note 89, art. XX(1). An updated count
of ratifying States for the Cape Town Convention and Aircraft Protocol can be found at the
Unidroit website mentioned supra in notes 41 and 100.
110
They have not, however, yet entered into force.
111
See Cape Town Convention, supra note 41, art. 6(1); see also Aircraft Protocol, supra note 100,
art. II.
112
See Cape Town Convention, supra note 41, art. 6(2). Although it is fairly typical for treaties to
have amending protocols – examples include the U.N. Convention on the Rights of the Child,
Sept. 2, 1990, 1577 U.N.T.S. 3, and the Convention on International Trade in Endangered
Species of Wild Flora and Fauna, Mar. 3, 1973, 993 U.N.T.S. 243 – the Cape Town treaty is
unique in that its protocols are controlling.
113
For example, “monist” jurisdictions like the Netherlands and Belgium. See The Oxford
Guide to Treaties 368 (Duncan B. Hollis ed., 2012) (explaining how the terms “monism”
and “dualism” describe contrasting theoretical perspectives on the relationship between
international and domestic law). See also infra Section 8.8.8.
354 The International Law Regime for Aircraft Financing

the international texts may need to be incorporated into the national legal
order and commercial culture.114 Declarations can be framed to allow a State
to “opt into” (i.e., apply115) or “opt out of” (i.e., disapply116) specific treaty
provisions.117 States may also use declarations to make what Sir Roy Goode
calls “legally operative statements,” for example, which domestic courts have
jurisdiction or to which territorial unit a treaty applies.118 The Cape Town
Convention’s use of declarations is quite aggressive. The Convention includes
numerous provisions where contracting States are permitted or, in some cases,
required to make a declaration as to whether to adopt a certain rule, or to
provide added clarification regarding the effect of the rule within that con-
tracting State’s legal system.119 This “tailored” approach remains unusual in
the general law of treaties and, combined with the two-instrument approach,
gives the Convention an uncommonly flexible, customizable structure. The
purported purpose was to be able to attract as many countries as possible

114
This statement generally describes the concept of “dualism.” See id.
115
The opt-in declarations mean that those provisions will not have effect unless a contracting
State affirmatively declares that they will. See, e.g., Article 39 of the Convention, considered
infra in Section 8.10.5, which allows a State to designate certain types of liens (such as for
unpaid taxes) that will be prioritized within that State as a matter of public policy. See Cape
Town Convention, supra note 41, art. 39(1).
116
The opt-out declarations mean that those provisions will have effect unless a contracting State
declares otherwise. See, e.g., Article 54(1), under which a State can declare that the default rule
in that provision, allowing creditors to re-lease an aircraft that is in default, will not apply in that
State. As a matter of public policy, some States are opposed to re-leasing. Out of respect for that
policy concern, Article 54(1) allows those States not to make the re-leasing remedy available.
See Cape Town Convention, supra note 41, art. 54.
117
Declarations are generally characterized as unilateral statements by a contracting State clarifying
the meaning or scope of a treaty provision in its application within that State. Reservations are
described as unilateral statements excluding or modifying certain provisions from even having
effect within the State making the reservation. See Vienna Convention on the Law of Treaties,
arts. 19–23, 1155 U.N.T.S. 331 (1969), 8 I.L.M. 679 (1969). The Cape Town Convention refers to
all unilateral determinations under the treaty using the rubric of “declarations,” although there
are some that work in much the same way as reservations by essentially precluding a treaty
provision from having force in the declaring State. Nevertheless, they are “declarations” by virtue
of the fact that the choice of opting out of the provisions is granted to the State within the text of
the very provisions affected. In essence, the State, even if it decides that the provision does not
apply, is only clarifying the meaning of that provision because the provision specifies that a State
must determine whether it applies. Additionally, and importantly for the “stickiness” (compliance
profile) of international law, see Chapter 1, note 58 and accompanying text, Article 56 of the
Convention prohibits States from making any reservations or declarations outside the specified
provisions. See Cape Town Convention, supra note 41, art. 56. The extensive opt-in, opt-out
declaration system was designed to accommodate State public policy differences while limiting
the universe of exceptions to the new uniform rules, thereby granting private actors the predict-
ability and certainty that are the treaty’s primary purpose.
118
Goode et al., Transnational Commercial Law, supra note 4, at 3.
119
See supra notes 115, 116.
 8.8. The Cape Town Convention (2001) (1): Background and Overview 355

without falling back on the kind of vague, meaning-deprived verbiage that is

often necessary to get every State to agree. The impact of these many decla-
rations will become apparent in our discussion of the Convention’s provisions.

8.8.6. Effect of Declarations on Party Autonomy

and the Availability of Financing
The declaration system, in combination with choice of law provisions that defer
to party autonomy on selection of the applicable jurisdiction that will govern
their contractual relations,120 also affords private contracting parties greater
control over which set of rules will ultimately apply to their contract. Thus,
the parties can choose to have the contract governed by the jurisdiction where
they see the declarations as most preferable.121 A final important note relates to
the level of State autonomy that declarations can actually provide given the
exogenous economic context of the Convention. One of the most significant
benefits of ratifying Cape Town is eligibility for discounted financing fees from
export credit agencies such as the U.S. Export-Import Bank. Under the 2011
Sector Understanding for Export Credits on Civil Aircraft (2011 Understanding)
of the Organization for Economic Cooperation and Development (OECD),122
eligibility for discounts is made contingent upon a State adopting a specified set
of declarations under the Convention. Thus, many “borrowing” States will only
enjoy the full benefits of the treaty (or only be able to assure those benefits to
their airlines) if they accept limits to their autonomy by adhering to a preferred
list of declarations. Those States’ adherence is secured by the lure of lower rates.
Additionally, when the OECD revises the 2011 Understanding with changes to
the preferred declarations, as it has done a number of times, it indirectly alters
the law of secured interests in many States.

8.8.7. Role of the Cape Town Convention in Aircraft Financing

As with any worthwhile addition to the world’s canon of international laws, the
Cape Town Convention emerged as a solution to an identified problem: the
prohibitively high cost of borrowing and financing for aircraft equipment,
especially for operators from developing countries. Creditors were reluctant
to lend the vast sums necessary to finance aircraft equipment, given the

120
See Cape Town Convention, supra note 41, art. 42(1); see also infra Part 8.13.
121
See id. Of course, this statement is made in the abstract: the parties may not have equal
bargaining power, and hence equal control over selection of a governing law, in a particular
transaction.
122
See infra Part 8.15.
356 The International Law Regime for Aircraft Financing

frequency of airline bankruptcies and the uncertain prospects of recovery for

highly mobile collateral that could be located in any number of legal juris-
dictions at the time of default.123 The Convention’s purpose with regard to
aviation is fourfold: (1) to create an internationally recognized security interest
in aircraft in all contracting States; (2) to offer the creditor various basic default
remedies and possibilities for expedited relief in the event of default; (3) to
create an electronic, international registry so that interests can be filed to notify
potential subsequent creditors, and which is searchable by potential creditors;
and (4) through all of the foregoing means to increase the availability and
decrease the costs of financing for aircraft equipment by diminishing the risks
to creditors. The Convention accomplishes these purposes by establishing a
legal regime for secured interests that is modeled in part on the U.S. system of
recordations in Article 9 of the Uniform Commercial Code, as well as an
international registry where applicable interests can be recorded.

8.8.8. Implementation of the Cape Town Convention in Domestic Law

The Cape Town Convention rests on the idea that a treaty among sovereign
States can also govern the conduct of individuals in their daily commerce.
From an enforcement perspective, however, there is an inherent tension in
that idea. The main objective of the Convention is to ensure that the interna-
tional security interest derives solely from the Convention and in no way depends
on national law. Nevertheless, although that is true in the most general sense,
it is also the case that the contracting States have effectively agreed with
one another that they will see to it that the international interest will itself
become part of a ratifying State’s domestic law, and will be effective in
ordinary legal and insolvency proceedings provided for by that law.
Accordingly, each ratifying State must make specific decisions about what
means it will use to implant this new norm of international law into its domestic
law of security interests. Domestic legal systems take a variety of approaches to
integrating international law. Those approaches are usually classified along a
scale ranging from pure monism (where a ratified treaty automatically is part of
domestic law, as in the Netherlands) to strict dualism (where, as is usually the
123
These industry attitudes were concisely expressed by participants in the 1999 First Joint Session
of the relevant ICAO Sub-Committee and the Unidroit Committee of Governmental Experts
to consider a draft of the new treaty. A banking representative explained that the aviation
industry had evolved from a traditionally government-owned and heavily regulated industry to
a privatized and deregulated industry, increasingly governed by an open skies policy. That
trend had increased airline defaults, giving rise to the need for new legal regimes to protect
creditors. For more details on the First Joint Session, see http://www.unidroit.org/english/
documents/1999/contents.htm.
 8.8. The Cape Town Convention (2001) (1): Background and Overview 357

case in the U.K., a ratified treaty must be further incorporated into domestic
legislation).124 Many States fall between the two poles, with subtle distinctions in
approach too numerous to include in this general overview. Each State will
need to take the required steps for implementation, if any, before individuals
will be able to enforce their rights under the Convention in national courts. The
Convention could be passed in its entirety as domestic legislation, making its
provisions superior to domestic securities law in the event of conflict, or could be
textually and substantively integrated into domestic securities statutes. The
former option places added transactional burdens on domestic actors to under-
stand both legal systems and their interactive implications, but the latter places
in jeopardy the benefits, primarily reduced borrowing costs, that national air-
lines may derive from the export credit agencies.

8.8.9. Importance of Remedies

With a substantive law treaty such as Cape Town, therefore, enforcement is
not merely a question of ensuring compliance from contracting States; the
more pressing and common problem is how an individual creditor (or debtor)
enforces its substantive rights under the treaty. That is why some of the
Convention’s most important and complicated provisions are those concern-
ing remedies. Remedies for rights created through international agreement
have not always been strong or certain enough to protect the rights in question.
That has been a common and regrettable failing of many human rights
accords. Some agreements have provided access to international courts as a
means of asserting those rights. Arbitration is also commonly used as an
enforcement mechanism. For example, many bilateral investment treaties
allow investors to bring claims against States in an independent arbitral
forum.125 The Cape Town Convention, however, departs from these prece-
dents. Once implementation takes place within a State, the treaty offers
instead an extensive commandeering of domestic legal systems to enforce its
provisions. Thus, it not only establishes legal rules to be applied in domestic
courts, but also sets forth explicit procedural rules and deadlines for courts to
follow in the administration of judicially provided remedies. Additionally, the
Convention’s provision of self-help remedies stands apart, even though it can
be vitiated by a State declaration, and is arguably the broadest grant of
autonomy in the enforcement of individual or business rights in all of interna-
tional law. The directives to State registration authorities in Article 15 are also

124
See supra notes 113 and 114 and accompanying text.
125
See supra Chapter 4, Part 4.3.
358 The International Law Regime for Aircraft Financing

notable, demonstrating that domestic administrative agencies can also be

commandeered in the service of the Convention.126

8.8.10. Jurisprudential Significance of the Cape Town Convention

Public international law and private transnational commercial law therefore
emerge from the same public international law instrument, the Cape Town
Convention. What does that mean for classifying the Convention as an instru-
ment of public international law? Unlike traditional public international law
instruments, the purpose of most international commercial law treaties is
not to constrain State behavior but to facilitate private transactions through
the harmonization of rules governing those transactions. As Professor John
F. Coyle has observed, Cape Town is one of only two widely ratified treaties
that can be classified as truly “substantive” commercial law treaties.127 By
this he means that the Convention creates its own body of legal rules to be
followed in the conduct of a specified set of transactions. Arguably, indeed,
treaties like Cape Town are helping to shape a modern lex mercatoria.128 In
particular, the Convention creates an enforceable international legal interest
as well as an entirely new international institution, a registry of international
security interests. Are these initiatives in the domain of public or private law?
The Cape Town Convention (like the Warsaw and Montreal conventions
before it) is shifting perceptions of the “ontology” of international law.

8.9. the cape town convention (2): application

and scope

8.9.1. A One-Sentence Summary

As with any legal regime, the first step to understanding its effects is to identify
those situations to which it applies. The Cape Town Convention and, in
particular, the Aircraft Protocol confer certain benefits, including registration,

126
See infra Part 8.11.
127
John F. Coyle, Rethinking the Commercial Law Treaty, 45 Ga. L. Rev. 343, 360 n.53 (2011).
128
Latin for “law [of the] merchant,” lex mercatoria originally referred to the body of norms that
guided medieval merchants in their dealings with one another as they moved among feudal
territories. But it has a modern application to international business norms, practices, and
behaviors, some of which are clearly grounded in international commercial law treaties like the
Cape Town Convention, that are followed by participants in globalized industries and services.
See Brian F. Havel & Gabriel S. Sanchez, The Emerging Lex Aviatica, 42 Geo J. Int’l L. 639,
659 n.92 (2011). For discussion of the lex mercatoria in the context of developments in the
international aviation industry, see supra Chapter 4, Section 4.5.1.
 8.9. The Cape Town Convention (2): Application and Scope 359

reliance on the Convention’s priority rules, and access to specific remedies in

the event of default, to “international interests” in “aircraft objects.”129

8.9.2. Three Broad Types of Covered Agreement

Article 1(i) of the Convention defines a creditor as being variously “a chargee
under a security agreement, a conditional seller under a title reservation agree-
ment and a lessor under a leasing agreement.”130 Article 2(1) of the Convention
creates an independent, registrable “international interest” that will have
“priority over any other interest subsequently registered and over an unreg-
istered interest.”131 In conformity with Article 1(i), an “international interest”
can be created by any one of three intentionally broad categories: a security
agreement,132 a title reservation agreement,133 or a leasing agreement.134 Those
three types of agreements capture most forms of security and leasehold interest

129
See Cape Town Convention, supra note 41, art. 2 (defining an “international interest”); Aircraft
Protocol, supra note 100, art. I(c) (defining “aircraft objects”).
130
Cape Town Convention, supra note 41, art. 1(i). See Hanley, supra note 44, at 17. Thus, a lender
who chooses either to lend under a finance lease or through the security of a mortgage over the
aircraft will be protected in either instance – either as a lessor or as the holder of a charge.
131
Cape Town Convention, supra note 40, arts. 2(1), 29(1).
132
A “security agreement” is defined in the Convention as “an agreement by which a chargor
grants or agrees to grant to a chargee an interest (including an ownership interest) in or over an
[aircraft] object to secure the performance of any existing or future obligation of the chargor or
a third person.” Id. art. 1(ii). According to the leading lawyer’s guide to the Convention, “[i]t is
often tempting for practitioners to include a reference to ‘international interest’ in the granting
clause of a security agreement, normally as part of the grant of security.” The guide points out
that “[t]his practice is unnecessary and without effect. . . . The eligibility of a security agreement
to qualify as an international interest requires only that the specific requirements of the
Convention be satisfied.” The Legal Advisory Panel of the Aviation Working
Group, Practitioner’s Guide to The Cape Town Convention and The
Aircraft Protocol (rev. ed. Nov. 2012), at 12 [hereinafter AWG Practitioner’s
Guide]. We were reminded here of the New Yorker cartoon showing an unsmiling law firm
partner returning a draft brief to the quivering junior attorney with the stern words, “[p]ut in
more references to international law.”
133
A “title reservation agreement” (also often called a “conditional sale agreement”) is defined by
the Cape Town Convention as “an agreement for the sale of an [aircraft] object on terms that
ownership does not pass until fulfillment of the condition or conditions stated in the agree-
ment.” Cape Town Convention, supra note 41, art. 1(ll).
134
A “leasing agreement,” as previously noted (see supra note 49 and accompanying text), is
defined by the Cape Town Convention as “an agreement by which one person (the lessor)
grants a right to possession or control of an [aircraft] object (without or without an option to
purchase) to another person (the lessee) in return for a rental or other payment.” Cape Town
Convention, supra note 41, art. 1(q). The Convention makes no distinction between operating
and capital leases, especially with regard to remedies. Hanley does not find this surprising,
because one of the main purposes of Cape Town is to establish “clear rules to govern” asset-
based financing and leasing alike. Hanley, supra note 44, at 17.
360 The International Law Regime for Aircraft Financing

and are as defined by the Convention and not by national law.135 Certain benefits
are also extended to contracts of sale.136 An “unregistered interest” is defined in
Article 1 to include nonconsensual rights or interests such as liens (as discussed
below137), and the effectiveness of the priority held by a registered international
interest can be reduced by a national opt-out in favor of such liens.138

8.9.3. Creating an International Interest in Aircraft Objects

The initial characterization of whether an interest constitutes an “international
interest” is prescribed by the Cape Town Convention itself.139 For the under-
lying agreement to be recognized as constituting such an interest, it must be in
writing; the person creating the international interest must have the “power to
dispose” of the aircraft object in which the interest is created; the agreement
must enable the object to be identified; and, for security agreements, the agree-
ment must enable the secured obligations to be identified.140 “Aircraft objects”
are defined as airframes, aircraft engines, and helicopters meeting certain mini-
mum size thresholds.141 Aircraft engines, which are often financed separately
from aircraft frames,142 are treated as distinct by the Convention regardless of

135
Goode, Commentary, supra note 6, at ¶ 2.36. The interest of a chargor under a security
agreement derives entirely from that agreement. But the interest of a conditional seller or lessor
typically precedes and is independent of the conditional sale or leasing agreement – because
the seller or lessor is an owner. What the Convention protects in those cases, therefore, is not the
acquisition of ownership but its retention under the terms of the agreement. It is only when the
agreement is made that the international interest arises in favor of the seller or lessor and is
capable of being registered. For that reason, Article 3(1) of the Convention refers to an agree-
ment “creating or providing for” the international interest – “creating” in the case of a security
agreement, and “providing for” in the case of a title reservation agreement (conditional sale) or
leasing agreement. Cape Town Convention, supra note 41, art. 3(1); see also Roy Goode, The
International Interest as an Autonomous Property Interest, Eur. Rev. Private L., 1–2004, at
18–25 (2004) [hereinafter Goode, International Interest].
136
Article 1(g) of the Cape Town Convention defines a “contract of sale” as “a contract for the sale
of an [aircraft] object by a seller to a buyer [but which is not one of the three agreements
referred to earlier otherwise constituting an international interest].” Cape Town Convention,
supra note 40, art. 1(g). The Protocol extends the provisions of the Convention, to the extent
they apply, to “outright sales,” enabling buyers to avail themselves of the registration facilities
and priority provisions. See Gerber, Aircraft Financing, supra note 57, at 7–18. Including
contracts of sale adds a searchable listing that highlights the various title transfers of the relevant
aircraft object over its useable life. Id. at 7–20.
137
See infra Section 8.10.5.
138
See id.
139
See AWG Practitioner’s Guide, supra note 132, at 13.
140
See Cape Town Convention, supra note 41, art. 7.
141
See Aircraft Protocol, supra note 100, art. I(2).
142
The interchangeability of aircraft component parts, especially engines, “heightens the sensi-
tivities of financiers to attendant legal and collateral risks.” Gerber, Aircraft Financing, supra
note 59, at 7–4.
 8.9. The Cape Town Convention (2): Application and Scope 361

whether an engine is attached to or removed from a frame.143 In that way, the

Cape Town Convention creates an important uniform standard to rectify the
uncertainty caused by the varying standards under which some jurisdictions treat
engines as part of the airframes on which the engines are installed.144

8.9.4. Location of the Debtor Determines Applicability

of the Cape Town Convention
Because a treaty can only govern those States that have acceded to it, the
Convention covers solely those agreements involving debtors situated in a con-
tracting State at the time of the agreement.145 Critically, therefore, at the time
when the international interest is created, the debtor must be located in a
contracting State. The location of the creditor is irrelevant.146 A debtor is
“situated” in a contracting State if the debtor’s (1) place of incorporation, or (2)
registered office, or (3) center of administration, or (4) principal place of business,
is located in a contracting State.147

8.9.5. Autonomy of the International Interest

The international interest may, but need not, be recognized as a protectable
interest under any particular body of national law.148 Once the conditions of
the Convention have been satisfied, a fully constituted international interest
comes into existence regardless of the applicable local law or even of whether
143
The Protocol specifically provides that ownership of, or an interest in, any aircraft engine shall
not be affected by its installation on or removal from an airframe. See Aircraft Protocol, supra
note 100, art. XIV(3). See generally AWG Practitioner’s Guide, supra note 132, at 9.
144
See B. Patrick Honnebier, New Protocols and the Financing of Aircraft Engines, 21 No. 1 Air &
Space Law. 15 (2006).
145
See Cape Town Convention, supra note 41, art. 3(1). The Convention also applies if an airframe is
registered on the aircraft register of a contracting State, that is, where an international interest is
created in respect to an airframe (by virtue of registration) but not in respect to its engines (to which
the Convention can apply only if the debtor is situated in a contracting State). See Aircraft Protocol,
supra note 100, art. IV (1); see also Gerber, Aircraft Financing, supra note 59, at 7–22, 7–23.
146
The creditor may be located, for example, in a noncontracting State. See Cape Town
Convention, supra note 41, art. 3(2).
147
See Cape Town Convention, supra note 41, art. 4(1). That wide range of factors gives “max-
imum scope” to the application of the Convention. Gerber, Aircraft Financing, supra note 59,
at 7–22. The first two factors are objective and typically easy to ascertain (one need only look to
the local authorities or corporate documents), but the latter two are subjective and can lead to
difficulties, especially with large multinational entities. See AWG Practitioner’s Guide,
supra note 132, at 33.
148
Sir Roy Goode defines an international interest as a creature of the Cape Town Convention
that “in principle is not dependent on national law.” Goode, International Interest, supra
note 135, at 24.
362 The International Law Regime for Aircraft Financing

the local law recognizes nonpossessory security interests.149 Local law, accord-
ing to Sir Roy Goode, will still determine whether an agreement exists
between the parties at all.150 Local law will also determine how a particular
interest is to be characterized for purposes of certain provisions of the
Convention, for example, the types of available remedies.151 In most cases, of
course, international interests and locally created interests will be coterminous
(e.g., interests arising under a lease agreement), but in Sir Roy’s view the
international interest will be more legally powerful than a purely domestic
interest because it overrides even unregistrable unregistered interests whereas
the latter may not.152

8.9.6. Internal Transactions Are Also Covered

Despite the use of the term “international,” the Cape Town Convention does
not apply only to agreements between parties from different States. Article 50
of the Convention provides that unless a contracting State specifies otherwise
through one of the treaty’s many possible declarations (about which we will say

149
The general rule under the Convention is that an “assignment” of a secured or leased interest
also transfers to the assignee the related international interest and all interests and priorities of
the assignor. See Cape Town Convention, supra note 41, art. 31(1). The formal requirements for
an effective assignment mirror those applicable to creation of an international interest. See id.
art. 32. See Gerber, Aircraft Financing, supra note 59, at 7–27.
150
See Goode, International Interest, supra note 135, at 24. For example, local law will determine
whether an agreement exists between the parties at all, and thus such questions as capacity to
contract and the existence of a consensus ad idem. See id.
151
See Cape Town Convention, supra note 41, art. 2(4); see also AWG Practitioner’s Guide,
supra note 132, at 38. For example, an agreement that meets the Convention’s definition of a
“leasing agreement” may be characterized under the applicable law of the forum State as
creating a security interest. The agreement will therefore carry the rights and remedies
applicable to a “security agreement” under the Convention. The applicable law, by the way,
will be the domestic rules of the law applicable by virtue of the choice of law (conflict of laws)
rules of the forum State (also called the lex fori). See id. Why did the Convention not
definitively fix the characterization of all three types of agreements for all of its contracting
States? The AWG Practitioner’s Guide provides the answer. Most legal systems outside North
America distinguish sharply between security agreements and title-retention and leasing agree-
ments, treating a conditional seller or lessor as the full owner. The United States, Canada, and
now New Zealand, adopt a functional and economic approach, treating title reservation
agreements and certain leases as forms of security and the title of the conditional seller or
lessor as limited to a security interest. Given these disparate approaches, the drafters recognized
that it would not be possible to agree on a uniform Cape Town characterization. The solution
adopted was to leave these matters to be dealt with under the applicable domestic law as
determined by the conflict of laws rules of the forum State. See AWG Practitioner’s
Guide, supra note 132, at 38.
152
See Goode, International Interest, supra note 135, at 24.
 8.10. The Cape Town Convention (3): The Registration and Priority System 363

more later), the Convention’s protections and priority rules will be applicable
to internal transactions that satisfy the aforementioned definitional criteria.153

8.10. the cape town convention (3): the registration

and priority system

8.10.1. A One-Sentence Summary

One of the primary purposes of the Cape Town Convention and of the
benefits conferred upon international interests within its regime is the estab-
lishment of a clear, global priority system for competing interests in aircraft
objects, as well as an international registry to record and establish priority for
those interests and to provide notice of existing interests to prospective
creditors.

8.10.2. Setup of the Cape Town Convention Registry

The governance structures for the international registry are set out in the
Convention, while the specific features of the registry are in the Protocol.
This allows the subsequent protocols to provide for their own registries with
distinct characteristics.154 When creating the International Registry of Mobile
Assets,155 the airlines, manufacturers, and financiers all sought to create a
system that was simple, efficient, and inexpensive. ICAO initially wanted to
serve as registrar and use the registry to produce revenue, but the ultimate
decision was to make the registry not-for-profit.156 Twenty States were desig-
nated to comprise a Preparatory Commission for the establishment of the
registry, and ICAO was appointed as Supervisory Authority for oversight and
regulation of the registry.157 Ireland was chosen as the location, and Aviareto, a
joint venture between the Irish Government and the private company SITA
SC, was selected to establish the registry and to act as registrar.158

153
See Cape Town Convention, supra note 41, art. 1(n) (defining “internal transactions”); art. 50(1)
(permitting States to opt out of coverage of internal transactions under the Convention).
154
Ronald C.C. Cuming, Considerations in the Design of an International Registry for Interests in
Mobile Equipment, 4 Unif. L. Rev. n.s. 275, 276 (1999).
155
See Cape Town Convention, supra note 41, art. 1(p).
156
See Gerber, Aircraft Financing, supra note 59, at 7–17.
157
See B. Patrick Honnebier, The Fully Computerized International Registry for Security Interests
in Aircraft and Aircraft Protocol that will Become Effective Toward the Beginning of 2006, 70
J. Air L. & Com. 63 (2005).
158
See id.; see also Gerber, Aircraft Financing, supra note 59, at 7–17.
364 The International Law Regime for Aircraft Financing

8.10.3. Using the Registry

The Cape Town registry is completely electronic and online, allowing
approved users to log in and register assets and any member of the general
public to search the registry. It is accessible twenty-four hours per day, seven
days per week. A number of States have designated an “exclusive entry point”
for accessing the international registry in order to harmonize systems for
national registration of secured interests with the international registry. As an
example, in the United States a party must first register an aircraft object with
the Federal Aviation Administration (FAA) and receive a Cape Town trans-
action code that the party can then use to register the aircraft object with the
international registry.159 It is the responsibility of the parties to an international
interest to register that interest. To do so, both parties to the agreement must
have an account with the registry. Only one of the parties needs to submit the
necessary information, but both parties will need to consent to the registration.
Within moments of the parties submitting the necessary information and
consents, the system will automatically assign the interest a file number, at
which point the interest will be searchable on the registry and will be consid-
ered perfected. Registration is now complete.160

8.10.4. Obtaining Priority Under the Registry

The benefit of registering is that once an interest is registered,161 the holder of
that interest has priority over all subsequent registered and unregistered
interests.162 This is a departure from the priority rule in the United States,
which gives the interest first registered in the FAA Registry priority over all

159
See Frank L. Polk, Cape Town and Aircraft Transactions in the United States, 20 Air & Space
Law. 4, 6 (Winter 2006).
160
The framework principles for the operation of the Registry appear in the Convention. See Cape
Town Convention, supra note 41, arts. 18–21.
161
The reader may by now have appreciated that the International Registry provides for the
registration of interests as against particular uniquely identifiable aircraft objects rather than
against parties to a transaction. See Cape Town Convention, supra note 41, art. 2(1) (“an
international interest . . . is an interest in a uniquely identifiable [aircraft] object”); see also
AWG Practitioner’s Guide, supra note 132, at 53. Thus, users can perform searches with
respect to aircraft objects but not with respect to transaction participants. See id.
162
Consider the following scenario, for example: Debtor grants a charge (security interest) over an
aircraft to Creditor 1 (C1) on February 1 and thereafter grants a charge over the same aircraft
to Creditor 2 (C2) on March 1. The international interest in favor of C2 is registered with
the International Registry before the international interest in favor of C1 is registered. Under
the Cape Town Convention, C2 has priority over C1, even if C2 knew of the prior charge in
favor of C1.
 8.10. The Cape Town Convention (3): The Registration and Priority System 365

competing claims unless the registering party has actual notice of another
claim at the time of registration.163 Under the Convention’s much simpler
priority rule notice is irrelevant, avoiding some of the messy factual disputes
over notice that occurred under the U.S. system.164 Thus, the international
interest gives a creditor stronger rights than a purely domestic interest
because registration in the International Registry will override unregistered
interests even if those are “of a kind not capable of registration under the
Convention.”165 In contrast, the priority of an interest created under national
law may depend on the law determined by the choice of law (conflict of laws)
rules of the forum State.166

8.10.5. Priority of Nonconsensual Rights

The major exception to Cape Town’s otherwise straightforward priority system
can be found in Article 39(1) of the Convention, which permits contracting
States to file an “opt-in” declaration specifying certain categories of noncon-
sensual rights or interests that, despite not being registered, will be given
priority over international interests.167 There are various types of priority
interests that may take priority over the rights of a creditor, even a registered
or secured creditor, as a matter of public policy under national law. Liens, for
example, are charges or encumbrances on property that the law imposes in
order to guarantee payment to the lienholder for some service rendered to the
property. Mechanic’s and workmen’s liens, as well as repairmen’s liens, fall
into this category.168 Depending on local law, a lien can be amplified into an
in rem right to seize the aircraft and to sell it in satisfaction of the lien amount.
Governments may impose tax liens: a strong example of such a lien would be
statutory provisions that allow public authorities to seize and even sell aircraft

163
See 49 U.S.C. § 44108(a)(3); see also Polk, supra note 159, at 6.
164
See id. Some contracting States had argued for a “good faith” requirement with respect to
knowledge of prior interests, but ICAO and Unidroit negotiators felt that the general principle
of good faith in many jurisdictions was not justified in the special circumstances addressed by
the Convention, which involves very sophisticated transactions and parties. In their view, a first-
to-file priority rule was the cornerstone of the Convention and was needed to establish a degree
of predictability sufficient to enable airlines greater access to financing alternatives and lower
financing costs. Any exception to first-to-file would open up the prospect of costly litigation.
165
Goode, International Interest, supra note 135, at 24.
166
See id.
167
See Cape Town Convention, supra note 41, art. 39(1).
168
Airlines either perform maintenance in-house or contract the work out to qualified
Maintenance, Repair and Overhaul (MRO) organizations. Many will do both. An MRO
typically need not release the aircraft until it has been paid for its services.
366 The International Law Regime for Aircraft Financing

where airport or navigation charges have not been paid.169 States can only use
Article 39(1) to prioritize those nonconsensual interests that are similarly
prioritized under the contracting State’s national law.170 States also have the
option of declaring pursuant to Article 40 that certain nonconsensual rights or
interests are registrable and thus subject to the Convention’s standard first-to-
file priority rule.171 If a contracting State fails to make a declaration under
Article 39 or Article 40, then the nonconsensual rights and interests under the
national law of that State will not have priority over registered international
interests.172

8.11. the cape town convention (4): remedies

in default

8.11.1. Certainty for Creditors and Nonexclusivity of Remedies

Outside the registration and priority system, provisions establishing and clar-
ifying creditors’ access to remedies in the event of default or insolvency are the
main mechanisms by which the Cape Town Convention provides the cer-
tainty and stability needed to reduce financing costs for aircraft. The
Convention’s main purpose in that context is to provide greater certainty for
creditors and to strengthen their ability to assert their rights when a debtor has
either defaulted on an agreement or has become insolvent. The remedies
provided under the Convention are not exclusive, and parties are still free
(under Article 12) to avail themselves of additional legal procedures and
169
The U.K. Civil Aviation Authority, for example, has a draconian power under U.K. legislation
to seize and sell aircraft to satisfy delinquent route charges that it collects on behalf of the
intergovernmental organization Eurocontrol. See supra note 88. Moreover, Article 39(2) of the
Cape Town Convention ordains that nothing in the Convention shall affect the right of an
intergovernmental organization or other private provider of public services to exercise deten-
tion power. See Cape Town Convention, supra note 41, art. 39(1)(b). The Convention does not
speak to a related power of sale, but the U.K. legislation does provide that authority. Some EU
Member States have proposed a fleet lien for breaches of the Emissions Trading Scheme (ETS)
directive (see supra Chapter 6, Section 6.1.2, for discussion of the ETS legislation). Thus, an
airline that did not pay civil penalties, for example, for failure to report emissions, could have its
entire fleet detained and sold by the appropriate ETS national regulator.
170
See Cape Town Convention, supra note 41, art. 39(1). As an “opt-in” declaration, this provision
only takes effect in States that choose it, and only for those types of liens that the State specifies
in its declaration. It is worth noting, also, that unlike some of the other declarations in the
Convention, a declaration under Article 39 can be made at any time and not just when the
State ratifies the treaty. See id.
171
See id. art. 40. The nonconsensual rights and interests covered by a declaration under Article 39
and the registrable nonconsensual rights and interests covered by a declaration under Article 40
are mutually exclusive. See AWG Practitioner’s Guide, supra note 132, at 91.
172
See Goode, Commentary, supra note 6, at ¶ 4.265.
 8.11. The Cape Town Convention (4): Remedies in Default 367

remedies under local law as long as those procedures and remedies do not
conflict with the Convention.173 Moreover, the Convention’s gearing toward
contractual certainty further allows the parties (under Article 11) “to
agree [on] . . . what constitutes a default” and offers the parties “a certain
contractual freedom to agree [on] remedies in the case of default.”174

8.11.2. Effect of Declarations and of Different Types of Agreement

The subject of remedies is also complicated by the fact that it is the area of the
Cape Town Convention most affected by the use of declarations, which
means that the exact nature of the remedies available will vary depending
on the contracting State in which remedies are pursued. In addition, the
reader should be aware that there is a distinction drawn in the Convention
between the rules governing the remedies available under a security agree-
ment and those available to lessors and conditional sellers under leases and
conditional sale agreements. For ease of exposition, we will focus on the
remedies available to a “creditor” under a security agreement, while noting
a narrower range of Convention-specific remedies available to a lessor or
conditional seller.

8.11.3. Events of Default

The Convention defines “default” very broadly as an event substantially
depriving a creditor of those expectations to which it was entitled under the
agreement,175 although, as noted above, Article 11 allows the parties to con-
tractually define what events of default will trigger the Convention’s default
remedies.176 If a default occurs, a creditor will ideally want repossession of the
aircraft and possibly deregistration of the aircraft from the national register
used by the debtor,177 exporting it from the debtor’s home State as quickly as

173
See Cape Town Convention, supra note 41, art. 12. For example, the use of a remedy such as
prejudgment attachment would fall into this category and be subject to the local substantive
law requirements of the jurisdiction in which the aircraft is located. See AWG
Practitioner’s Guide, supra note 132, at 106.
174
Hanley, supra note 44, at 173 (discussing Article 11 of the Convention, which makes provision
for the debtor and creditor to agree as to the events that constitute a default). See Cape Town
Convention, supra note 41, art. 11(1).
175
See id. art. 11(2).
176
See supra note 174. Article 11(1) does not prescribe any kind of “materiality” standard for a
default where the default is described or defined in an agreement. See AWG Practitioner’s
Guide, supra note 132, at 105.
177
See infra note 188 (explaining how the Convention assists creditors in procuring these
remedies).
368 The International Law Regime for Aircraft Financing

practicable (especially if a threat of bankruptcy or a lien imposition is

looming).178

8.11.4. A Range of Creditor Remedies

The Cape Town Convention recognizes, however, that immediate reposses-
sion may not always be feasible. Instead, it offers the creditor a number of
options that include repossession. In the event of default, therefore, a creditor
can do one or more of the following: (a) take possession or control of the
aircraft object(s) in question; (b) sell or lease the relevant aircraft object(s); or
(c) collect or receive any income or profits arising from the management or
use of the aircraft object(s).179 Alternatively, a creditor may apply for a court
order authorizing any of the foregoing remedies.180 In the case of leases and
conditional sale agreements, the only remedies specifically provided in the
Convention (and indeed the only necessary remedies because the conditional
seller or lessor is the owner of the object181) are the taking of possession and
control of the object or a court order authorizing the foregoing remedies.182
Any of the above remedies must be conducted in a “commercially reasonable
manner.”183 When exercising its right to sell or lease an aircraft object, the
creditor must provide at least ten business days’ notice to the debtor and any

178
The lessor will want “to put the aircraft into revenue service with a new lessee with a minimum
of delay.” Hanley, supra note 44, at 140. To do so, the lessor will need not only the aircraft and
all engines and parts but also all aircraft documents, as well as dealing with all unpaid landing
and parking fees when it tries to export the aircraft (an act that may itself trigger excise taxes and
export duties). See id. See supra Part 8.5 for discussion of the concept of aircraft nationality and
registration. (Note: State registries of aircraft, created in compliance with the Chicago
Convention, must be distinguished from the International Registry under the Cape Town
Convention.)
179
See Cape Town Convention, supra note 41, art. 8(1).
180
See id. art. 8(2).
181
See Goode, Commentary, supra note 6, at ¶ 4.10l; see also Goode, International Interest,
supra note 135, at 23 (“[A]s owner the seller or lessor can do what it likes with its property once
the agreement has been terminated for default.”).
182
See Cape Town Convention, supra note 41, art. 10. But, as noted earlier, other remedies
permitted under applicable local law may be exercised – and this is true also for creditors
under security agreements. See Cape Town Convention, supra note 41, art. 12; see also AWG
Practitioner’s Guide, supra note 132, at 114.
183
Cape Town Convention, supra note 41, art. 8(3). What does the term “commercially reason-
able” as used in Article 8(3) of the Convention actually mean? The Official Commentary looks
to “established commercial practice” and “accepted international practice” as relevant. Such
industry standards and customary wording in international aircraft financing and leasing
contracts should be used to support decisions as to what is commercially reasonable. See
Goode, Commentary, supra note 6, at ¶ 5.46.
 8.11. The Cape Town Convention (4): Remedies in Default 369

competing creditors with subsequent interests in the aircraft object.184 Any

sums a creditor obtains from exercise of its remedies must be used to satisfy the
debtor’s secured obligations, and if the sums exceed those obligations any
surplus should be distributed to satisfy the claims of subsequent creditors and
then the balance returned to the debtor.185

8.11.5. Process of Deregistration and Export

As noted, the process of repossession often involves the “deregistration” of the
aircraft object in question186 and its export and physical transfer from the
territory in which it is situated. Both of those aircraft-specific remedies are
added by Article IX(1) of the Aircraft Protocol to the general remedies in the
Convention itself.187 The prospect of deregistration gives State aircraft regis-
tration authorities the power to significantly obstruct a creditor’s attempts at
repossession. The Cape Town Convention attempts to deal with possible
national administrative roadblocks by requiring local registry authorities to
honor a request for deregistration and export submitted under a recorded
“irrevocable deregistration and export request authorization” (IDERA).188
Article XIII of the Aircraft Protocol permits the creditor to pursue both of
these steps and, in tandem with Article IX, requires the registry authority
within the relevant contracting State to comply with a request for deregistra-
tion if such a request is properly submitted.189

184
See Aircraft Protocol, supra note 100, art. IX(4). The parties may, however, agree to a longer
period of prior notice. See id.
185
See Cape Town Convention, supra note 41, art. 8(5), (6).
186
Because aircraft are mobile, it is easy to see that a repossessing creditor may wish to change the
State of nationality by “deregistering” the aircraft and applying for registration in a different
State. See supra Part 8.5.
187
See Aircraft Protocol, supra note 100, art. IX(1).
188
See id. art. XIII. The authorization, once it is given, cannot be revoked by the debtor without
the consent of the authorized party (the creditor). See id.
189
See id. arts. IX(5), XIII(4). The relevant registration authority is required to enforce the
deregistration and export remedies without the need for court intervention or order. See id.
Note that Article XIII requires a declaration by a contracting State to allow the IDERA
procedure: see id. art. XIII(1). The failure of a contracting State to make a declaration allowing
the IDERA does not mean that deregistration and export remedies are unavailable to creditors,
only that the process for exercising those remedies will be determined by the procedural law of
the State of registry rather than the Convention. See AWG Practitioner’s Guide, supra
note 132, at 101–102. In jurisdictions like the United States, where registration is made in the
name of an owner, an IDERA should be made by the registered owner of the aircraft, whereas
in jurisdictions where registration is in the name of an operator, the IDERA should be issued by
the operator. See generally Gerber, Aircraft Financing, supra note 59, at 7–33. Honoring of the
IDERA is subject to applicable safety laws, and the registry authority may also require proof of
discharge of all registered interests ranking in priority to that of the requesting creditor or that
370 The International Law Regime for Aircraft Financing

8.11.6. Distinction Between Self-Help Remedies and Need

for a Court Order
The manner in which the remedies mentioned above can be legally pursued
hinges on a declaration made by the relevant contracting State. This is the one
mandatory declaration in the treaty: Article 54(2) requires that all contracting
States, upon ratifying the Convention, make a declaration as to whether a
creditor needs to obtain a court order before, for example, repossessing or
selling an aircraft following a debtor’s default.190 Undoubtedly controversial,
this bypassing of national court structures is probably the most creditor-
friendly provision in the entire Convention. In States that permit such non-
judicial remedies, or self-help, creditors are able to bypass the uncertainty and
delay associated with the court process and to act immediately to protect their
interests.191 Any nonjudicial actions must still be performed in a commercially
reasonable manner.192 For interests arising from security agreements, as
opposed to leases or title reservations, the creditor must have the debtor’s
consent before taking nonjudicial action.193

8.11.7. Process of Interim or “Speedy” Relief

To protect creditor rights even further, particularly where a State does not
opt to allow self-help remedies, the Convention permits a creditor to make

those interests have consented to the deregistration and export. See Aircraft Protocol, supra
note 100, art. IX(5). The Wikileaks website revealed that in 2009 the U.S. Government
expressed concern that China’s implementation of Article XIII required creditors to procure
a court order before China’s aircraft registration authority would deregister an aircraft. China’s
decision to require a court order in addition to the IDERA seems contrary to the purpose of the
provision, which is to assure creditors a more certain and expedited deregistration process.
China nevertheless interpreted such a requirement to be consistent with the terms of the
Convention. The available evidence suggests that the only attempt to resolve this dispute was
diplomatic, and that the United States indicated a reluctance to accept China’s interpretation
as a necessary cost of doing business in that country.
190
See Cape Town Convention, supra note 41, 54(2). A contracting State’s ratification will not be
accepted by Unidroit without a declaration on this question – and such a rejection indeed
occurred in the case of Costa Rica. See AWG Practitioner’s Guide, supra note 132, at 111.
191
Seizing a commercial aircraft in most airports without a court order, as a practical matter, will be
challenging. Local administrative obligations, such as a legal requirement for approval by the local
airport authority, must still be observed. A practitioner should proceed with extreme caution and
avoid “breaching the peace.” AWG Practitioner’s Guide, supra note 132, at 112, 113.
192
See Cape Town Convention, supra note 41, art. 8(3); see also supra note 183 and accompanying
text.
193
See Cape Town Convention, supra note 41, art. 10. Remedies that require the debtor’s consent
are usually already agreed to in typical forms of leases, conditional sale agreements, and
security agreements. See AWG Practitioner’s Guide, supra note 132, at 103.
 8.12. The Cape Town Convention (5): Insolvency 371

use of interim or “speedy” relief before its claim against the debtor has been
fully determined on the merits.194 Interim relief involves a creditor provid-
ing a court with evidence that a default has occurred, without having to
fully prove the default, and receiving a court order to prevent the value of
the aircraft object from deteriorating while the debtor waits for a court to
hear its claims. The judicial order may allow the creditor to do one or more
of the following: (a) preserve the value of the aircraft object; (b) take
possession, control, or custody of the object; (c) immobilize the object;
and (d) lease, sell, or manage operation of the object and claim any
resulting income. A creditor can only pursue those remedies by means of
interim relief when the debtor has agreed to such relief as part of the
contract establishing the international interest.195 Again, contracting
States have the ability to determine whether this “speedy relief ” provision
will be available and, if so, precisely how speedy the relief will be (the
number of days between a creditor’s filing for such relief and its receipt of a
court order).196

8.12. the cape town convention (5): insolvency

8.12.1. The Acid Test

According to Sir Roy Goode, author of the official commentary to the
Convention, insolvency (or bankruptcy) is the acid test of the efficacy of
security interests under the Cape Town Convention.197 Because of concerns
about the balance of fairness between creditors and debtors, States are espe-
cially sensitive to inroads into their domestic systems of insolvency. For this
reason, the rules regarding insolvency are among the most controversial and
important provisions of Cape Town.

194
See Cape Town Convention, supra note 41, art. 13; Aircraft Protocol, supra note 100, art.
X. Interim relief may also be available under the laws of the forum, and the Convention does
not preempt use of such local procedures. See Cape Town Convention, supra note 41, art. 13(4);
see also AWG Practitioner’s Guide, supra note 132, at 120.
195
See Cape Town Convention, supra note 41, art. 13; see also supra note 193 (noting that
remedies requiring debtor’s consent usually are included in underlying transaction
agreements).
196
See Cape Town Convention, supra note 41, arts. 13, 55; Aircraft Protocol, supra note 100, art.
X. Ten working days is the most common interim relief time period, and it is typical for States to
select longer time periods under Article X of the Aircraft Protocol before creditors are allowed
to lease or sell the secured aircraft object. See id.
197
Roy Goode, The Protection of Interests in Movables in Transnational Commercial Law, 3 Unif.
L.R. n.s. 453, 456 (1998).
372 The International Law Regime for Aircraft Financing

8.12.2. National Insolvency Laws and the Cape Town

Convention’s Response
Bankruptcy proceedings vary by country, ranging from regimes that allow the
debtor in possession to remain legally immune from creditor claims while it
reorganizes its business (and even thereafter) to much less debtor-friendly
systems like that of Ireland.198 Amendments to the U.S. bankruptcy code provide
holders of security interests in aircraft in certain circumstances with an accel-
erated lifting of the “automatic stay” that protects the bankrupt corporation
against creditor actions (including actions for repossession).199 Moreover, while
it is critical for a creditor to obtain prompt repossession of an aircraft when the
debtor becomes insolvent, repossession is not per se regulated by international
law and is dependent on local court proceedings. To protect creditors fully and
to provide them with the certainty that they need to facilitate aircraft financing,
the Cape Town drafters determined that creditors also need stronger protection
for their rights in the event of debtor insolvency. Although the Convention
virtually ignores the issue,200 the drafters of the Protocol considered insolvency a
matter of particular importance to aircraft financing and included relevant
provisions in the Protocol. Because of the varied national law approaches to
insolvency, reflecting differing perspectives on the proper balance between the
rights of debtors and creditors, insolvency is one of those contentious areas that
inspired the treaty’s customization-through-declarations design.

8.12.3. Application of the Cape Town Insolvency

Rules: Alternatives A and B
The Cape Town Convention’s insolvency provisions will only have effect if
the debtor’s primary insolvency jurisdiction (the State that is “the center of the
debtor’s main interests”201) has made a declaration to adopt Cape Town’s
insolvency rules.202 Contracting States that do so declare have to choose

198
See Pitmans Lawyers News, Shopping for Bankruptcy?, http://www.pitmans.com/news/
shopping-for-bankruptcy (remarking unfavorably on Ireland’s debtor-unfriendly bank-
ruptcy code).
199
See 11 U.S.C. § 1110 (2008); see also Gerber, Aircraft Financing, supra note 59, at 7–62.
200
See Cape Town Convention, supra note 41, art. 30, considered further infra note 202.
201
Aircraft Protocol, supra note 100, art. I(2)(n). The term “center of main interests” is drawn from
EU insolvency law, and the Protocol establishes a rebuttable presumption that the appropriate
State is where the debtor has its registered office (“statutory seat”) or is otherwise incorporated.
See AWG Practitioner’s Guide, supra note 132, at 129.
202
See Aircraft Protocol, supra note 100, art. XI. In addition, the international interest must have
been registered against the debtor prior to the commencement of proceedings. See Cape Town
Convention, supra note 41, art. 30(1).
 8.12. The Cape Town Convention (5): Insolvency 373

between two sets of bankruptcy provisions: Alternative A, the “hard provi-

sions,”203 and Alternative B, otherwise known as the “soft provisions.”204 A
contracting State may elect A in its entirety, B in its entirety, or neither.205
There are macroeconomic consequences to the choice of A or B: if A is
chosen, in effect giving “greater certainty” to enforcement of the security
interest,206 a lower interest rate on export credit financing may be available.207

8.12.4. Insolvency Alternative A

Alternative A is the most generous option for creditors, providing them with
more certainty and more protection. It is designed “to meet the requirements
of advanced structured financing, including international capital market
financing structures.”208 Alternative A resembles and is “similar in ideology”
to the Section 1110 procedure in the U.S. bankruptcy code.209 As prescribed by
the Convention, this first alternative requires the debtor or insolvency admin-
istrator within the time period specified by the contracting State in its insol-
vency declaration210 either to give the creditor possession of the aircraft object
or to cure all defaults under the relevant agreement and agree to perform all
future obligations under that agreement. Should the debtor fail to perform all
future obligations, there will not be a second opportunity to cure defaults and
the aircraft object will have to be transferred right away. The insolvency
administrator or debtor is required to preserve the aircraft object and maintain
its value until the creditor is given the opportunity to take possession.

203
See Aircraft Protocol, supra note 100, art. XI.
204
See id.
205
See id. art. XXX(3).
206
Hanley, supra note 44, at 137.
207
The OECD’s 2011 Understanding, see supra Section 8.8.6, grants eligible States a discount
interest rate on financing from export credit agencies if those States have made a declaration
adopting Alternative A. Alternative A closely resembles the aircraft equipment provision of the
U.S. bankruptcy code, after which it was modeled. See 11 U.S.C. § 1110 (2008); see also supra
note 199 and accompanying text. See infra Section 8.15.9 (discussing export credits).
208
See Gerber, Aircraft Financing, supra note 59, at 7–3.
209
See supra note 199 and accompanying text. As to the point on ideology, see Gerber, Aircraft
Financing, supra note 59, at 7–18. According to Donald Bunker, the availability of Section 1110
benefits may provide “a key” to the implementation of the Cape Town Convention. Bunker,
supra note 13, at 537.
210
Or before the date on which the creditor would otherwise be entitled to possession if that is
earlier than the end of the time period specified by the contracting State. See Aircraft Protocol,
supra note 100, art. XI(2). Most States set the time period at 60 days when they make their
declaration opting for Alternative A. The OECD’s 2011 Understanding, see supra Section 8.8.6,
offers its discount interest rate on financing from export credit agencies if eligible States have
capped the waiting period at no longer than 60 days.
374 The International Law Regime for Aircraft Financing

Additionally, under this Alternative, the creditor is entitled to apply for any of
the previously discussed forms of interim relief as permitted by the relevant
State’s declarations. The creditor is also entitled to deregistration and export
on an expedited basis, and local bankruptcy courts are barred from staying or
interfering with the creditor’s rights or exercise of its remedies as permitted by
the Cape Town Convention and the Aircraft Protocol.211

8.12.5. Insolvency Alternative B

Rather than a definitive sequence of events leading to repossession as in
Alternative A, Alternative B only requires that the debtor or insolvency admin-
istrator either give notice that it will cure all defaults by the beginning of the
insolvency proceedings and perform all future obligations under the agree-
ment, or provide the creditor with the opportunity to repossess. The creditor
also lacks the option of interim or self-help remedies should the debtor fail to
provide such notice. The creditor is thus primarily at the mercy of the local
bankruptcy court, which may allow the creditor to repossess the aircraft “upon
such terms as the court may order.”212 Mexico is the only Contracting State to
have selected Alternative B in its declaration and the results thus far have been
unfavorable.213 That was particularly evident in the August 2010 bankruptcy of
Mexicana when many creditors, wary of the Mexican insolvency process,
terminated their leases and began repossession in advance of the insolvency
filings.214 Had the creditors been more confident that their rights would have
been protected in insolvency, they may have permitted Mexicana to continue
to use the aircraft during an attempted restructuring.215

8.12.6. Priority Differences Under Alternatives A and B

Under Alternative A, registered international interests are guaranteed priority in
insolvency proceedings over all competing interests aside from those noncon-
sensual rights a contracting State has chosen to prioritize via declaration, as

211
See generally Aircraft Protocol, supra note 100, art. XI. It is entirely possible that a State will
already have a more creditor-friendly regime than Alternative A: that may be why the United
States has not made an election under Article XXX of the Aircraft Protocol. See generally
Gerber, Aircraft Financing, supra note 59, at 7–31.
212
See Aircraft Protocol, supra note 100, art. XI (Alternative B(5)).
213
See Donald G. Gray & Auriol Marasco, The Cape Town Convention: Where is Canada?, 24
No. 2 Air & Space Law. 1, 19 (2011).
214
See id.
215
See id.
 8.13. The Cape Town Convention (6): Jurisdiction and Choice of Law 375

discussed earlier.216 Alternative B subjects the international interest to the prior-

ity rules of the local insolvency regime. Finally, for the Convention’s insolvency
provisions to have any effect, the international security interest must be registered
with the International Registry before the insolvency proceedings begin.217

8.13. the cape town convention (6): jurisdiction

and choice of law

8.13.1. Party Autonomy on the Choice of the Forum State

Given the Cape Town Convention’s purpose to clarify legal rights and proce-
dures governing highly mobile equipment and the lack of uniformity pro-
duced by its extensive use of declarations, the Convention had to include rules
for selecting the appropriate forum State in which creditors should seek to
enforce its provisions and by which that State’s declarations will govern the
application of the Convention to a dispute. For most remedies, the parties to
the agreement are free to specify within the agreement which contracting
State they want to have jurisdiction, even if the State has no ties to either party
or even to the transaction itself.218 Accordingly, the courts of the State chosen
by the parties can order the deregistration of an aircraft registered in another
State and the export and physical transfer of an aircraft located in another
State. Appropriate jurisdiction for interim relief varies with the form of relief
sought. An application for preservation, possession, or immobilization of the
aircraft object must be sought in the State where the object is located.219
Creditors seeking to lease, sell, or manage the income from a secured aircraft
object pending final resolution have to file either in a court chosen by the
parties or with a court in the State in which the debtor is located.220

8.13.2. No Choice of Law Rules

Although the parties can choose a jurisdiction, the Cape Town Convention
does not expressly provide for a choice of law (as opposed to a choice of

216
See Aircraft Protocol, supra note 100, art. XI (Alternative A(12)). See supra Section 8.10.5.
217
See supra note 202 (citing Article 30(1) of the Cape Town Convention).
218
See Cape Town Convention, supra note 41, art. 42(1). The parties should recognize, however,
that because the Convention still allows the forum State – applying its choice of law or conflict
of laws rules – to determine the legal system that will characterize their agreement (see infra
next section and also supra Section 8.7.3, which discusses the similar rule under the Geneva
Convention), the selection of a forum could have material consequences for the availability of
rights and remedies. See AWG Practitioner’s Guide, supra note 132, at 39.
219
See Cape Town Convention, supra note 41, art. 43(1).
220
See id. art. 43(2).
376 The International Law Regime for Aircraft Financing

jurisdiction) by the parties for settling those issues that are unaddressed by the
substantive rules of the Convention. That choice typically is made by the
choice of law (conflict of laws) rules of the forum State. The Convention
indicates that reference to the applicable law means “the domestic rules of the
law applicable by virtue of the rules of private international law of the forum
State.”221 Otherwise, however, Cape Town does not emulate Geneva in seek-
ing to provide (however imperfectly) a clear choice of law or conflicts rule. But
the Aircraft Protocol does allow contracting States to make a specific declara-
tion whereby the contracting parties to a financing agreement may choose a
law to govern their “contractual rights and obligations.”222 The law chosen
must be the domestic law of the designated State (rather than its choice of law
rules) and the choice will be respected in any courts of a contracting State.223
The parties cannot, however, predetermine by their selection of a particular
State’s law whether their agreement will constitute a security agreement for
purposes of determining applicable remedies.224 That determination, as in the
Blue Sky case,225 will still be made in accordance with the choice of law
(conflict of laws) rules applied by the forum court. A number of State domestic
laws may therefore be implicated – the law of the situs of the aircraft, the law
where the lessee has its principal place of business, the law of the lex registrii,
the law identified as the governing law in the underlying transaction, possibly
even the law where the lessor is located. The Cape Town Convention’s lack
of a universal choice of law rule regarding the property regime applicable to
aircraft (and aircraft engines) “implies that uncertainty remains; the validity of
a transfer of title or of a security right may be assessed differently depending on
the jurisdiction where the matter is being adjudicated.”226

221
Reference to “private international law” means the choice of law (conflict of laws) rules of
the forum State. See Cape Town Convention, supra note 41, art. 5(3). See also supra Chapter 1,
Part 1.4 (discussing international law terminology).
222
See Aircraft Protocol, supra note 100, art. VIII(2).
223
See id. art. VIII(3); see also AWG Practitioner’s Guide, supra note 132, at 39.
224
See supra note 218; see also AWG Practitioner’s Guide, supra note 132, at 111. To “character-
ize” a document legally, one must look to the domestic law determined by the choice of law
(conflict of laws) rules of the forum State as the applicable law. That law will decide, for example,
whether or not a lease or title reservation agreement is a security agreement. See id.
225
See supra Part 8.3.
226
I. H. Ph. Diederiks-Verschoor, An Introduction to Air Law 350 (9th rev. ed., Pablo
Mendes de Leon ed., 2012) (concluding that “[i]t is regrettable that the Cape Town
Convention fails to provide a clear conflict of law[] rule. . . .”). But can a uniform conflict of
laws rule in aircraft financing even be created? The interests of more than one jurisdiction will
always be in play. The lex situs, after all, will insist on respect for nonconsensual locally created
rights such as tax liens and airport charges. The lex registrii, on the other hand, may represent
the appropriate rule for consensually created rights in light of the possibility of momentary,
fortuitous connections to the situs. It may be unrealistic to propose a single, certain conflict of
 8.14. The Cape Town Convention (7): Impact 377

8.14. the cape town convention (7): the convention’s

impact on aviation financing and on
international law

8.14.1. Ratifications of the Cape Town Convention

and Aircraft Protocol
At the time of publication of this book, the Cape Town Convention had fifty-
eight contracting States (including the United States but not the U.K.), and
the Aircraft Protocol had fifty-two contracting States (again including the
United States but not the U.K.).227 Each has also been acceded to by one
Regional Economic Integration Organization (the EU). Nevertheless, the
EU’s competency regarding the Convention’s various provisions is limited,
and its accession is generally viewed as paving the way for individual Member
States to become parties to the Convention rather than as an act binding the
individual Member States.228

8.14.2. Impact of the Cape Town Convention on Aircraft Financing

The Cape Town Convention is generally seen as having succeeded in facil-
itating financing for operators in developing countries with poor credit rat-
ings.229 Export credit agencies230 have extended lower interest rates, known as
the “Cape Town Discount,” to qualifying States that have ratified the
Convention and made declarations adopting numerous creditor-friendly pro-
visions including, as noted above, Alternative A of the insolvency provisions
with a waiting period of no more than sixty days as well as the IDERA
procedures.231 The Convention’s benefits are less pronounced for States with
more readily available financing and without recourse to export credit agency

laws rule to govern all of the factual situations that can arise in an international aircraft
financing.
227
The U.K. signed both the Convention and the Protocol in 2001 but has not yet ratified either
instrument.
228
See Berend Crans, The Implications of the EU Accession to the Cape Town Convention, 35 No. 1
Air & Space L. 1, 5 (2010). The EU’s accession was necessary in order to ensure consistency
between the Convention’s provisions and substantive areas governed by EU rather than
Member State law.
229
See Vadim Linetsky, Economic Benefits of the Cape Town Treaty (Oct. 18, 2009), http://www.
awg.aero/assets/docs/economicbenefitsofCapeTown.pdf.
230
See infra Part 8.15; see supra notes 207, 210.
231
See supra Sections 8.11.5, 8.12.4; see also AWG Practitioner’s Guide, supra note 132, at 148.
See Dean N. Gerber, The 2011 Aircraft Sector Understanding: Calming the Turbulent Skies, 24
No. 1 Air & Space Law. 1 (2011).
378 The International Law Regime for Aircraft Financing

loans. This in part explains the dearth of EU States that have acceded to the
Convention, some of which have expressed concerns that the Convention’s
creditor-friendly provisions may run contrary to national policy preferences in
favor of debtors.232 There has also been some concern that even though the
appearance of clear, firm protections has reassured aircraft financiers, national
courts may not always faithfully apply the Convention’s provisions.233

8.14.3. Two Models of Transnational Commercial Lawmaking

As we noted when we introduced it earlier in this chapter, the Cape Town
Convention resembles the Warsaw and Montreal conventions relating to
liability in that it is an instrument that regulates private transnational com-
mercial transactions but that has a legal status that is “firmly rooted in [public
international] treaty law.”234 The Convention’s actual influence on the prin-
ciples and practice of transnational commercial lawmaking is interesting to
contemplate. In that context, one should begin by reading Jeffrey Wool’s 1997
article, Rethinking the Notion of Uniformity in the Drafting of International
Commercial Law: A Preliminary Proposal for the Development of a Policy-based
Unification Model.235 According to Wool, international commercial law trea-
ties have long suffered from the tension between the need to establish uniform
normative rules to provide certainty and predictability, and the need to respect
various policy objectives of collaborating nation States. Wool contends that, in
the past, policy differences were often papered over by vague or general textual
provisions that undermined the certainty and predictability that the treaty was
supposed to provide. Wool refers to this as the “undifferentiated unification
model,” where the treaty attempts to harmonize both policy objectives and
legal concepts. Wool proposes what he terms the “policy-based unification
model,” intended to allow the drafters to identify the basic objectives and
associated underlying legal concepts of the treaty, and to draft the legal rules
necessary to achieve those objectives in clear and concrete terms. These rules
would make up the mandatory treaty provisions and be binding on all States.
Next, the drafters would identify related policy determinations reasonably

232
See Crans, supra note 228, at 7.
233
See Gray & Marasco, supra note 213, at 20. But that may not matter. The critical rationale of the
Convention is that there should be no national court involvement: the creditor can apply its
remedies through “self-help” without leave of the court. See supra Section 8.11.6. The absence
of cases, therefore, may signify that the Convention is working as the drafters expected.
234
Goode et al., Transnational Commercial Law, supra note 4, at 1.
235
2 Unif. L. Rev. n.s. 46 (1997). Wool is secretary-general of the Aviation Working Group (see
supra text accompanying note 103).
 8.14. The Cape Town Convention (7): Impact 379

ancillary to the objectives of the treaty and draft appropriate rules – dubbed
“precatory” provisions – that would be binding on only those contracting
States that chose not to enter a reservation to those rules.236 That would assure
greater control for States over the impact of the treaty on policy matters of
national importance.237

8.14.4. The Cape Town Convention as a Policy-Based Model

of Transnational Commercial Lawmaking
The Cape Town Convention and Aircraft Protocol were the first test cases for
Wool’s concept. The policy-based treaty was accomplished through two nota-
ble innovations. The first is the unique two-instrument approach or
“umbrella” structure. As explained earlier, the Convention is the broad
umbrella agreement, and the sector-specific protocols fill in the details. The
fact that the sector-specific protocols are controlling, rather than the
Convention, adds to the uniqueness. The second innovation is the aggressive
use, woven into the fabric of the Convention itself, of a system of declarations
(also discussed previously). The success of Cape Town’s innovative approach
has been debatable. Uniformity (and certainty) is obviously sacrificed to
achieve clearer, more definite treaty language, and to accommodate the
different policy preferences of contracting States. Also, as mentioned earlier,
export credit agencies have prescribed the declarations that developing (but
also developed) States must adopt in order to enjoy the full measure of the
Convention’s intended benefits regarding their access to financing. And States
that have public policy concerns about the Convention’s provisions may
hesitate to accede despite the customization options.238 Still, the creation of

236
These precatory provisions perform the function of reservations, but are not the same as the
kinds of expressly contemplated reservations found in numerous commercial and economic
law conventions. Reservations of that kind have not been used as a vehicle for purposeful
identification within the treaty itself of policy matters and have not afforded States the
opportunity to engage in deliberate decision-making on such matters. Wool’s recast approach
to reservations would arguably preserve greater control for States over the impact of the treaty
on policy matters of national importance.
237
A good example would be the insolvency provisions of the Aircraft Protocol, see supra
Part 8.12.
238
But many jurisdictions with sophisticated aircraft financing activities have acceded: the EU,
Ireland, Luxembourg, the Netherlands, Norway, Switzerland, Russia, Oman, the United Arab
Emirates, Brazil, Singapore, China, India, Canada, Mexico, the United States, and so forth.
Presumably, despite “consumerist” concerns, these jurisdictions are also aware that the huge
economic risk that attaches to aircraft financing may merit a corresponding level of special
legal protection. Higher protection (i.e., legal certainty) for the financier can translate into
more competitive pricing and more available financing.
380 The International Law Regime for Aircraft Financing

substantive private transnational law, embodied in the international security

interest, as well as the establishment of the International Registry, are accom-
plishments that represent a major conceptual advance for international avia-
tion law beyond the 1948 Geneva Convention, which Cape Town has mostly
replaced. The 2001 Cape Town Convention offers a template for future private
transnational commercial law instruments that may emerge in this most
global of industries.

8.15. an overview of the governmental role in

aircraft financing

8.15.1. Relationship Between Subsidization and Financing

Although the Cape Town Convention is a public international law treaty, it is
clear from the preceding discussion that it functions as a private law instru-
ment that supplies information to international market actors about the
prioritization and enforcement of security interests in aircraft. Because Cape
Town was not designed to govern direct commercial relations among its
signatory States, the treaty is wholly silent on the degree of allowable govern-
ment intervention in the aircraft manufacturing and financing markets. That
is not truly an oversight given that the Convention was negotiated for a limited
(although important) purpose; but neither should it obscure the fact that
public subsidies (or “State aid”) to large civil aircraft manufacturers have
become a politically contentious issue in the realm of aircraft financing.
Indeed, one of the most protracted and expensive trade disputes in World
Trade Organization (WTO) history – one that continues at the time of this
writing – concerns the alleged subsidization of industry giants Airbus and
Boeing by the EU and the United States, respectively. Although some observ-
ers might be inclined to segregate aircraft manufacturing subsidization from
aircraft acquisition financing, that, in our view, would not be accurate.
Subsidization, which can take the form of capital infusions, direct loans,
guarantees, tax breaks, and an easing of regulatory strictures, affects the price
of the finished product. An aircraft manufacturer that is spared high research
and development costs because of a government grant, or which enjoys
favorable below-market lending terms from public agencies, can funnel
those savings to its airline customers. Those cost savings will not turn an
aircraft into a “cheap” purchase so that financing is no longer needed, but
certainly will ease an airline’s access to affordable capital. Another way to think
about the matter is to consider how much more expensive large aircraft may be
without subsidization.
 8.15. An Overview of the Governmental Role in Aircraft Financing 381

8.15.2. The OECD and the Control of Export Credits

Coupled with these concerns is the renewed involvement of the OECD – a
loose confederation of top-tier economies without international legal person-
ality – in a distinct, but intertwined, matter of aircraft subsidization that we have
mentioned briefly in prior discussions: export credits. Even prior to the 2008
financial crisis, government (or quasi-government) entities known as export
credit agencies provided assistance, typically in the form of loan guarantees, to
foreign air carriers purchasing (or leasing) aircraft manufactured in the bene-
factor States. Two policy justifications underlie this export assistance. First,
States have an understandable interest in increasing exports, particularly exports
of capital-intensive products such as aircraft. Second, large swathes of the airline
industry have argued, convincingly apparently, that but for the loan guarantees
afforded by export crediting agencies, they would be unable to purchase or lease
a sufficient number of new aircraft. Both justifications pass over the fact that
these loan guarantees (or, in very limited instances, direct loans) are backed by
taxpayer euros and dollars; like all forms of subsidization, the costs involved do
not simply disappear. Rather, they are passed on to less politically savvy (or more
disaggregated) targets.239 Like the criticisms leveled against direct subsidies to
aircraft manufacturers, critics have questioned the argument that the airlines
are in any special need of such assistance.240 A number of stakeholders, includ-
ing private financial institutions and some airlines that are generally excluded
from taking advantage of export credits,241 have pressured States and the OECD
into imposing tighter rules for when export credits may be granted and under
what terms. This form of private lobbying for fresh public rules is not, in itself,
surprising. Even the Airbus/Boeing dispute before the WTO, although brought

239
Thus, industries with a strong organized labor presence are much more capable of leveraging the
combined political influence of owners and workers to procure government assistance during
bleak economic times. Think, for instance, of the controversial bailout of the heavily unionized
U.S. automotive industry in early 2009, achieved (at least initially) at the expense of American
taxpayers. The airline industry itself flexed some lobbying power when it negotiated a federal
“stabilization” package in the wake of the 9/11 attacks. See Brian F. Havel, Beyond Open
Skies: A New Regime for International Aviation 368–74 (2009) (noting, however, that
federal intervention also carried the risk of economic reregulation of the U.S. airline industry).
240
Donald Bunker has been highly critical of national export agencies that, in his view, “place
equipment in the hands of airlines whose finance ratios cannot justify such credit.” Bunker,
supra note 13, at 425. Bunker takes the view that, in a free market, commercial jet aircraft should
(together with an equity contribution from the airline) be enough to provide adequate security
to justify extending long-term credit to creditworthy airlines. Taxpayer-financed aircraft sub-
sidies should not be needed if the private sector is sufficiently innovative. See id.
241
U.S. and certain EU air carriers, resident in the two largest aircraft exporting regions in the
world, are not eligible to take advantage of export credits from their home jurisdictions. See
infra note 268.
382 The International Law Regime for Aircraft Financing

by the manufacturers’ home countries, is the result of advocacy by high-stakes

private interests; the key difference is that the OECD possesses no authority to
create or to adjudicate international law. Yet, as we will discuss, its 2011 Sector
Understanding242 may be as practically effective as any of the international law
instruments we have reviewed in this chapter (and indeed in the whole of this
book).

8.15.3. Regulating Subsidies in International Trade

In ranking the negative economic impact of trade distortions perpetrated by
government intervention, subsidies fall near the bottom. Overt protectionist
measures such as import quotas, which inflate prices by restricting supply,
have long drawn the ire of trade economists, explaining why they are all but
forbidden under WTO rules. Subsidies, on the other hand, have had a mixed
reaction. Although domestic merchants forced to compete with foreign
exporters enjoying government bounty understandably dislike them, subsidies
are not an unqualified evil for all market participants. Consumers who buy
foreign-produced subsidized goods and services can avail themselves of lower
prices and perhaps even superior quality. Because foreign-produced subsi-
dized goods and services are supported by revenues captured from outside the
consumers’ home country, they are not accompanied by the risk of distortions
and inefficiencies that are supposed to be part of domestic subsidization.243
As a matter of political economy, however, subsidies are often frowned upon as
creating an “unfair” or “imbalanced” competitive environment, particularly at
the international level. That is one reason why the WTO, unlike its prede-
cessor, the 1947 General Agreement on Tariffs and Trade (GATT), has
endeavored to police subsidies through its 1995 Agreement on Subsidies and
Countervailing Measures (“SCM Agreement”).244 Regional trade organiza-
tions, such as the EU, have been even more strident in attempting to discipline
public infusions of money into specific industries and enterprises. Through
its facially rigorous (although unevenly applied) rules governing State aid,
the EU has attempted (among other things) to impose a “first time, last time”
rule on public subsidies in order to maintain a common market where

242
For the text of the Understanding, see www.oecd.org/tad/exportcredits/aircraftsectorunder
standings.htm.
243
See Chapter 3, note 196 (quoting economist Paul Krugman’s wry observation that the best
response to a foreign State’s subsidies is to send a “thank you” note to the local embassy).
244
Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, Marrakesh Agreement
Establishing the World Trade Organization, Annex 1A, 1869 U.N.T.S. 14 (entered into force
Jan. 1, 1995).
 8.15. An Overview of the Governmental Role in Aircraft Financing 383

entrepreneurial savvy, not government largesse, determines market winners

and losers.245 Moreover, most economically developed States seek to offset the
adverse effects of foreign subsidies on domestic producers through “counter-
vailing measures,” an import duty that can be used to raise prices on foreign
subsidized goods. While these trade regulatory actions, like subsidies them-
selves, are policed by the terms of the SCM Agreement, States are given
considerable latitude in determining when to impose countervailing measures
and at what levels. The time and political costs bound up with challenging
a violation of the SCM Agreement before the WTO’s Dispute Settlement
Body (DSB) make it likely that many “illegal” countervailing measures, like
“illegal” subsidies, remain unpoliced.

8.15.4. The GATT/WTO Aircraft Agreement

Although the WTO obviously concerns itself with far more than just the
aircraft manufacturing sector, it is worth noting that the GATT established a
special plurilateral accord, the 1980 Agreement on Trade in Civil Aircraft
(“Aircraft Agreement”).246 The Aircraft Agreement was intended to eliminate
a specific set of aircraft-related tariffs while also encouraging signatory States to
make their civil (not military) aircraft purchasing decisions in accordance with
commercial and technological, rather than nationalistic, interests. In 1995, the
Aircraft Agreement was recast and inserted as Annex 4A to the new WTO
Charter.247 Because the Aircraft Agreement is a plurilateral,248 and hence not
part of the obligatory package for all 159 members of the WTO, its coterie of
signatories is quite limited. Emerging economic powers such as Brazil, China,
India, and Russia – all of which are expected to enhance their presence in
the aircraft manufacturing market in the coming decades – have not signed.
Moreover, from a substantive perspective, the Agreement’s rules for curtail-
ing politically driven government procurement of aircraft are perceived as

245
See generally Conor Quigley, European Union State Aid Law and Policy (2d ed.
2009).
246
See Agreement on Trade in Civil Aircraft, opened for signature Apr. 12, 1979, 1186 U.N.T.S. 170,
reprinted as amended at 1869 U.N.T.S. 508 (entered into force Jan. 1, 1980).
247
See WTO Analytical Index: Agreement on Trade in Civil Aircraft, http://www.wto.org/english/
res_e/booksp_e/analytic_index_e/aircraft_01_e.htm.
248
In the context of the WTO, this means that an agreement such as the Aircraft Agreement is only
binding on a narrower circle of States (although all States are invited to accede). Such agree-
ments contrast sharply with WTO multilateral instruments such as the General Agreement on
Trade in Services (GATS) and Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS), which are automatically binding on the Organization’s entire membership.
On the meaning of “plurilateral” under the general law of treaties, see supra Chapter 3,
note 177.
384 The International Law Regime for Aircraft Financing

weak.249 That is perhaps why not a single WTO dispute, including the ongoing
Airbus/Boeing feud, has invoked the plurilateral. Moreover, as we will
discuss with respect to Airbus/Boeing, it appears likely that a new agreement –
engineered outside the WTO – may be required to govern the permissible
scope of aircraft manufacturing subsidies in the future.

8.15.5. Airbus/Boeing Saga (1): Background

At the commercial level, Airbus and Boeing have been spirited rivals for
decades. Because they operate as a de facto duopoly in the large civil aircraft
sector – a sector that is responsible for massive revenues and hundreds of
thousands of jobs in their home States250 – it is not surprising that their private
interests have become, through the “black box” of trade policy lobbying,251
national interests as well. Indeed, Airbus owes its very existence to the desire of
several powerful EU Member States to create a strategic industrial alternative
to the U.S.-based Boeing, a fact that raised the red flag of public subsidy from
the beginning.252 To forestall a major international row, the United States and
EU began negotiating in the late 1980s for a bilateral agreement on the
permissible scope of State support for the industry. These rules, which were
designed to be more restrictive than the procurement standards sketched out
in the Aircraft Agreement mentioned earlier, entered into force through the
1992 EU/U.S. Agreement on Large Civil Aircraft (“EU/U.S. Agreement”).253
Among other things, the EU/U.S. Agreement capped the amount of direct
support (such as capital infusions) European States could offer to Airbus while

249
See Nils Meier-Kaienberg, The WTO’s “Toughest” Case: An Examination of the Effectiveness of
the WTO Dispute Resolution Procedure in the Airbus-Boeing Dispute Over Aircraft Subsidies, 71
J. Air L. & Com. 191, 198 (2006) (criticizing the Aircraft Agreement as “a general declaration
of principles [rather] than a specific enforceable document”).
250
For a more detailed discussion of the commercial and political history of the Airbus/Boeing
rivalry, see John Newhouse, Boeing Versus Airbus: The Inside Story of the
Greatest International Competition in Business (2008); Mohan R. Pandey,
How Boeing Defied the Airbus Challenge: An Insider’s Account (2010).
251
Brian F. Havel, The Constitution in an Era of Supranational Adjudication, 78 N.C.L.R. 257,
369 (2000) (using “black box” as a metaphor for nontransparency).
252
In fact, the United States originally sought to curtail subsidies to Airbus by bringing a dispute
settlement action under the WTO’s precursor instrument, the GATT. Despite receiving a
favorable ruling from the panel constituted to hear the case, the EU blocked the decision
through a now-extinct rule requiring all GATT parties to consent to a panel decision –
including the loser. See Jennifer A. Manner, How to Avoid Airbus II: A Primer for the
Domestic Industry, 23 Cal. W. Int’l L.J. 139, 148–49 (1992).
253
See generally European Comm’n, Background Fact Sheet: EU/US Large Civil Aircraft (Oct.
11, 2012) [hereinafter Background Fact Sheet]. For the text of the Agreement, see http://tcc.
export.gov/Trade_Agreements/All_Trade_Agreements/exp_002816.asp.
 8.15. An Overview of the Governmental Role in Aircraft Financing 385

also regulating indirect subsidies offered by the United States, such as Boeing-
directed military and National Aeronautics and Space Administration (NASA)
contracts. Because of perceived imbalances in the EU/U.S. Agreement, par-
ticularly with respect to the amount of research and development (R&D) aid
that Airbus was purportedly receiving, the United States unilaterally abrogated
the treaty in 2004 and filed a dispute before the WTO’s DSB alleging more
than 300 subsidy violations, most of which are anchored in the terms of the
SCM Agreement.254 The EU quickly counterclaimed on behalf of Airbus,
although the value of allegedly unlawful subsidies to Boeing identified in the
complaint – $23.7 billion255 – paled beside the more than $200 billion that the
United States claimed as Airbus’s largesse.256

8.15.6. Airbus/Boeing Saga (2): Brief Analysis

Although a complete analysis of the Airbus/Boeing dispute, which thus far
has yielded numerous reports from the DSB (some at nearly 1000 pages
apiece),257 lies beyond the scope of this chapter, the early consensus is that
each party has overstated the subsidization that the other was channeling to its
respective aircraft builder.258 Perhaps more importantly, it does not appear
that either side intends to alter its subsidization behavior. Each side continues
to assert that the other has failed to comply with WTO rules; additional DSB
rulings on the appropriateness of retaliatory measures are expected by the end
of 2013.259
254
See Background Fact Sheet, supra note 253.
255
See First Written Submission by the European Communities, United States – Measures
Affecting Trade in Large Civil Aircraft, ¶ 2, WT/DS353 (July 11, 2007).
256
See Daniel Pruzin, WTO Panel Ruling Slams Illegal Subsidies for Europe’s Airbus in Case
Brought by U.S., 27 Int’l Trade Rep. (BNA) 1029 (July 8, 2010) (noting that the United States
had originally alleged that the EU furnished $205 billion in illegal subsidies to Airbus).
257
See, e.g., Appellate Body Report, European Communities and Certain Member States –
Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R (May 18, 2011); Appellate
Body Report, United States – Measures Affecting Trade in Large Civil Aircraft (Second
Complaint), WT/DS353/AB/R (Mar. 13, 2012).
258
Although the dispute is still ongoing, the DSB found that Boeing had received $5.3 billion in
illegal subsidies – $2.7 billion of which the U.S. was asked to remove. See Daniel Pruzin, WTO
Publishes Final Ruling in Complaint Against Boeing Subsidies: EU, US Claim Win, 28 Int’l
Trade Rep. (BNA) 564 (Apr. 7, 2011). Airbus was found to have received in excess of $18 billion
in illegal subsidies, far less than the $205 billion that the U.S. originally alleged. See Pruzin,
supra note 256, at 1029.
259
For continuing updates on the proceedings, including the most recent rulings from the DSB,
see WTO, European Communities – Measures Affecting Trade in Large Civil Aircraft, http://
www.wto.org/english/tratop_e/dispu_e/cases_e/ds316_e.htm; WTO, United States – Measures
Affecting Trade in Large Civil Aircraft – Second Complaint, http://www.wto.org/english/
tratop_e/dispu_e/cases_e/ds353_e.htm/.
386 The International Law Regime for Aircraft Financing

8.15.7. Airbus/Boeing Saga (3): Ineffectiveness of the WTO

To appreciate why the WTO may not be the most effective instrument to
discipline aircraft subsidies, it is necessary to recall how the DSB works.
Setting aside the WTO’s pretensions to be an authentic multilateral organ-
ization deploying powers of multilateral dispute settlement, we can better
conceive the Organization – for adjudicatory purposes at least – as a bilateral
entity. Aggrieved States file complaints against alleged defectors, and their
only remedy, assuming that a violation is found, is to receive authorization
(after extended hearings and consultations) from the DSB to take reciprocal
retaliatory action against the scofflaw State. The WTO members that are not
party to the dispute do not impose a form of collective punishment such as
simultaneously withholding trade concessions. Even without collective
action, bilateral retaliation is restricted, as noted, by the reciprocity require-
ment: as a result, retaliation resembles not so much a form of punishment as a
“payoff” by a violating party to a contract. Indeed, as lawyer-economists Alan
Sykes and Warren Schwartz have argued,260 WTO dispute settlement is more
akin to the contractual doctrine of “efficient breach,” whereby a party that no
longer believes that the contractual benefits warrant the costs will compensate
the aggrieved party (albeit at a level lower than what the breaching party would
pay had it been forced to complete the terms of the contract).261 In the Airbus/
Boeing dispute, the EU may be willing to “pay compensation” in the form of
enduring retaliatory trade measures from the United States rather than inter-
nalizing the more (politically, although not necessarily economically) costly
alternative of cutting the cord of State aid to Airbus. As past WTO cases have
shown, the economic consequences of retaliatory measures are likely to be
spread across industrial sectors rather than concentrated on the sector receiv-
ing subsidies; that way, while Airbus remains relatively protected, other
branches of the economy may have to pick up the tab.262

260
See Warren F. Schwartz & Alan O. Sykes, The Economic Structure of Renegotiation and
Dispute Settlement in the World Trade Organization, 31 J. Legal Stud. S179 (2002).
261
A simple aviation-related example would be that of an airline that sells the last ticket on a flight
for $500. At the time of departure, a would-be passenger offers the airline $650 for the last seat.
In such a scenario, it would be more efficient for the airline to break its contract of carriage with
the first passenger and reimburse her $600 (which, we assume, is equivalent to the ticket price
($500) plus any damage that she suffers from not being on that particular flight ($100); the end
result is that the airline would take in greater revenue ($550 as opposed to $500) and the
passenger who valued the last seat more would obtain it.
262
See, e.g., European Communities – Measures Concerning Meat and Meat Products
(Hormones), Original Complaint filed by the United States, Recourse to Arbitration by the
European Communities under Article 22.6 of the DSU: Decision by the Arbitrators, WT/
DS26/ARB (July 12, 1999) (providing no objection to the contention of the United States that
 8.15. An Overview of the Governmental Role in Aircraft Financing 387

8.15.8. A New Regime of International Regulation

of Aircraft Subsidies?
Even if the WTO is ill-equipped to compel two large industrial powers to roll
back their aircraft subsidization programs, it is not clear that all subsidies to
this sector ought to be curtailed. As discussed previously in Chapter 6, some
analysts have argued that States should inject public aid into R&D for
“green” aircraft technologies to help offset international aviation’s carbon
footprint. Fuel-efficient aircraft, along with eco-friendly biofuels, are seen by
some (particularly the airline industry) to be a better economic option than
scaling down international air services through taxation or regulatory arti-
fices such as cap-and-trade systems. Critics of even this form of subsidization
argue, however, that airlines have a built-in incentive – spiraling fuel prices –
to demand more efficient aircraft and that the most innovative manufac-
turers already have a waiting market for state-of-the-art, environmentally
efficient aircraft; attracting capital from private investors, therefore, should
not be a problem. Whatever the merits of this debate, another powerful
(though perhaps economically unsound) argument for subsidization is
bound up with the so-called infant industries approach. With emerging
economies such as China, Brazil, and Russia apparently anxious to enter
the large civil aircraft market, it is possible that they will need (and want) to
replicate the Airbus precedent by unleashing billions of dollars in launch
aid. To stabilize what could quickly become a complicated and contentious
environment for aircraft manufacturing, it has been suggested that the
principal subsidy antagonists, the United States and the EU, return to the
negotiating table to hammer out a new aircraft subsidy agreement. Others
have proposed a similar move within the WTO, perhaps by expanding the
current plurilateral Aircraft Agreement or, more ambitiously, by a multi-
lateral agreement that encompasses all WTO members. Another option
would be for the United States and the EU to open their talks to other
interested parties, particularly those emerging powers that are interested in
building a robust aircraft manufacturing base. Neither the United States nor
Europe, for example, will welcome the fact that the assertive plans of their
China-based competitor, the Commercial Aircraft Corporation of China
(COMAC), remain unbounded by any new subsidization rules. And, while
further WTO DSB litigation will remain an available option (at least for the
time being), China, too, may be willing to “pay the price” for breaching the

any country may engage in a “carousel suspension” of concessions against the EU whereby the
United States periodically changes its list of targeted products).
388 The International Law Regime for Aircraft Financing

SCM Agreement rather than rein in further aid to COMAC.263 Although it is

true that the Airbus/Boeing duopoly has not proven detrimental to competi-
tion, and that a third or even a fourth major actor could help spur a new
round of innovation while pushing prices down to a more competitive
level,264 it is not clear that the global aircraft manufacturing market can
sustain more participants. The use of subsidies to promote the survival of
new entrants could be a recipe for waste and excessive production. Again,
however, that is likely to be a matter for resolution at the political and
diplomatic level rather than in the hearing rooms of the WTO.

8.15.9. A Regime for Export Credits

As previously noted, another subsidization issue that affects the aircraft man-
ufacturing sector involves the distribution of credits, such as loan guarantees,
to foreign-based purchasers to improve their terms of trade and in that way to
boost home State exports. These guarantees, usually administered by export
credit agencies,265 shelter financial institutions from the full risk of their loans
to aircraft purchasers while driving down the cost of capital for airlines in the
form of lower interest rates. Because of a domestic restriction usually referred
to as the “home country rule,” not all airlines, regardless of their financial
status, are able to access these credits. U.S. air carriers such as United Airlines
and Delta cannot use export credits offered by their country’s export credit
agency, the Export-Import Bank (or ExIm),266 to purchase Boeing aircraft.
Similarly, European carriers established in France, Germany, the U.K., and

263
“[COMAC] can sink billions into [aircraft] projects without any concern for [the] bottom line.”
Andrew Parker, Aerospace: A Dogfight for the Duopoly, Fin. Times, Aug. 7, 2012, at 7.
Moreover, China’s emergence as a major player in aircraft financing “increases the likelihood
that [its new C919 single-aisle passenger aircraft] will become a credible alternative to the
Airbus A320 and Boeing 737.” Id.
264
This would likely happen as the new competitors seek to gain market footholds. COMAC, for
example, “will probably secure international sales only by initially offering cut-price deals to
airlines.” Id.
265
Direct loans from export credit agencies are rare. See Dean N. Gerber et al., Aircraft Financings
Involving the Export-Import Bank of the United States, in Aircraft Finance Online (2010),
at U.S. Banking-22 [hereinafter Gerber, Export-Import Bank].
266
Originally established in 1934, ExIm Bank is backed by the full faith and credit of the U.S.
Government. By fulfilling its mission, ExIm Bank aims to turn “export opportunities into sales
that create and maintain U.S. jobs and build a stronger economy.” Gerber, Export-Import
Bank, supra note 265, at U.S. Banking-5. During the 2008 fiscal year, ExIm Bank authorized
$14.4 billion in financing to support an estimated $19.6 billion in U.S. exports of goods and
services. Air transport accounts for nearly 50% of ExIm Bank’s exposure. See id. The Bank today
is the largest financier of U.S.-manufactured commercial aircraft in the world, with more than
$30 billion in outstanding exposure. Id.
 8.15. An Overview of the Governmental Role in Aircraft Financing 389

Spain (the States that are home to Airbus267) cannot receive loan guarantees to
purchase Airbus aircraft. This restriction, some charge, confers an unfair
competitive advantage on carriers like Ryanair and Emirates, which are
based in nonmanufacturing States.268 Private financial institutions, too,
claim that export credit agencies are retarding their recovery from the 2008
financial crisis by providing an alternative and more favorably priced financ-
ing product. Moreover, these institutions claim that although airlines may
have had some justification to seek export credits after 2008 when financial
sector liquidity dried up, that problem is no longer acute.269

8.15.10. The OECD 2011 Understanding on Export Credits

To address what was fast becoming an international trade problem, in 2010 the
OECD convened a new working group to set standards on export credits that
would bring their terms of engagement more into line with regular market
rates.270 The 2011 Understanding is a nonbinding document that commits the
Organization’s thirty-four members (along with China and Russia, should
they choose to join271) to a unified set of terms, conditions, and procedures
with respect to official support for large and regional aircraft exports. The
intent of the Understanding is to drop the level of export credit support from
its apparent high of 30% of all aircraft deliveries in 2009 to more modest
levels272 by increasing the minimum premium rate of export credit financing
by at least double.273 Airlines, arguably, would therefore be more apt to seek
financing from commercial banks rather than relying on export credits as a

267
Technically, Airbus is a wholly owned subsidiary of the multinational European Aeronautic
Defence and Space Company (EADS).
268
The “home country” rule is actually an unwritten, informal understanding among the major export
credit agencies supporting the manufacturers of large commercial jet aircraft – including ExIm
Bank, ECGD (U.K.), COFACE (France), and Euler Hermes (Germany) – that they will not
finance competing aircraft that will be principally located in their own or each other’s countries.
See Gerber, Export-Import Bank, supra note 265, at US Banking-12.
269
U.S. and EU carriers, in particular, are critical of the rule as they face limited financing sources
following the global economic crisis. See Gerber, Export-Import Bank, supra note 265, at US
Banking-13.
270
See OECD, Sector Understanding on Export Credits for Civil Aircraft, TAD/ASU(2011) 1
(Aug. 31, 2011) [hereinafter OECD, 2011 Understanding].
271
Thus far Australia, Brazil, Canada, the EU, Japan, Korea, New Zealand, Norway, Switzerland,
and the United States have signed on to the 2011 Understanding, while China and Russia have
opted to remain on the sidelines. See id. pt. I.
272
See Press Release, OECD, Aircraft Sector Understanding: Signing Ceremony (Feb. 25, 2011).
273
See OECD, 2011 Understanding, supra note 270, app. II. The rate calculation and increases are
set to be adjusted periodically based on market conditions and reflect a number of factors,
including the borrower’s risk classification.
390 The International Law Regime for Aircraft Financing

principal funding tool. Moreover, the 2011 Understanding is intended to

correct perceived defects in the previous agreement adopted in 2007. For
instance, the new accord eliminates the 2007 Understanding’s distinction
between regional and large jets, with the former being previously eligible for
broader financing options from government-backed institutions.274 Further,
the 2011 Understanding is intended to reduce the likelihood of participating
States seeking to litigate aircraft export disagreements before the WTO while
also upholding the OECD’s WTO-delegated competence to design and
implement trade-friendly export credit regimes.275

8.15.11. Some Shortcomings of the 2011 Understanding

The OECD’s 2011 Understanding, which has been heavily criticized by a
consortium of carriers using export credits, was unsurprisingly endorsed by
many U.S. and EU carriers and by private financing institutions. As attractive
as the Understanding may appear at first glance, a number of shortcomings
can be identified. First, the document includes a broad “grandfather clause”
that will allow aircraft orders financed before 2013 to be subject to the OECD’s
much more liberal export credit guidelines established in 2007.276 Second, the
2011 Understanding may not be designed to take sufficient account of emerg-
ing regulatory incentives for airlines to purchase new, eco-friendly aircraft; if
airlines feel compelled to rapidly upgrade their existing inputs in a more strict
regulatory environment, there could be a considerable international backlash
against the limitations established under the 2011 Understanding. Finally, as
with any action taken by the OECD, there is the question of legality. Although
nothing in international law prevents States from voluntarily agreeing to
nonbinding accords, international law critics of a legalist bent are ever-wary
of the expansion of so-called soft law. Their concern, perhaps misplaced, is
that the existence of “faux law” like the 2011 Understanding undermines the
legitimacy of “bona fide law” like the Cape Town Convention or the WTO’s
trade rules.

8.15.12. Incentives for Compliance with the 2011 Understanding

States may have other incentives (besides legality) for complying with the 2011
Understanding. It is not unlikely that the OECD will continue to act as a

274
Compare OECD, Sector Understanding on Export Credits for Civil Aircraft, pt. II, ch.1, TAD/
PG(2007) 4/Final (July 27, 2007), with OECD, 2011 Understanding, supra note 270, pt. II, ch. 1.
275
See Press Release, supra note 272.
276
See OECD, 2011 Understanding, supra note 270, pt. VI.
 8.15. An Overview of the Governmental Role in Aircraft Financing 391

coordinating body for other matters of international economic concern: a

State contemplating a defection from the 2011 Understanding may squander
negotiating capital that it might otherwise wish to use at the OECD (or in
another multilateral forum) in the future. Moreover, because the OECD is a
relatively compact organization and the distribution of export credits is easily
monitored, any State defecting from the 2011 Understanding risks sparking a
chain reaction of defections. The EU, for example, may be satisfied that
Emirates, a major international competitor of European airlines, is restricted
by the 2011 Understanding from access to prior levels of export credits to
purchase Boeing aircraft. But the EU could destabilize that development if,
for instance, it were to furnish U.S. carriers with new export credits that
breached the Understanding’s maxima. Finally, it is likely that most (if not
all) of the States that agreed to the 2011 Understanding believe that there is a
domestic upside to doing so: their financial institutions want to restore com-
petitiveness to the aircraft finance market, and their taxpayers will appreciate
that national revenues no longer prop up lucrative transactions that benefit a
small number of stakeholders (most of which, like airlines purchasing aircraft
on credit, are foreign based).

8.15.13. Beyond the 2011 Understanding

However one assesses the position of the 2011 Understanding in international
law, that instrument alone is unlikely to provide a complete solution to the
export credit problem. A new shock to the global financial system could give
the Understanding a short shelf life, and, as noted, changes in the airline
industry’s regulatory environment may lead to fresh lobbying for a relaxation
of export credit rules (or, absent that, to direct government subsidies such as a
“cash for clunkers”–style program to incentivize airlines to purchase “green”
aircraft). Moreover, aircraft manufacturing giants Airbus and Boeing may also
turn against the 2011 Understanding if it begins to impact their bottom line. As
previously noted, more than 30% of these manufacturers’ aircraft orders are
supported by export credits. Still, if forecasts of a global $4.5 trillion demand
for new commercial jet aircraft over the next two decades prove accurate,277
limitations on the availability of export credits may not continue to stir
controversy.

277
See Parker, supra note 263, at 9.
 Afterword

The European Union (EU) created a framework for aviation liberalization

within its single market jurisdiction and has embarked on the task of establish-
ing “horizontal agreements” (and a few comprehensive agreements) with the
rest of the world. The EU is slowly but surely harmonizing more than 3600
bilateral agreements that exist between all the Member States and their
aviation counterparts across the world. We could perhaps debate whether,
particularly in the context of the U.S./EU open skies agreement, the EU used
its leverage effectively. With respect to other third countries, the EU is
frequently challenged to demonstrate the added value it creates vis-à-vis tradi-
tional bilateralism – to which the European Commission consistently replies
that, in a global context, the Member States systemically diluted and frag-
mented Europe’s negotiating clout.
The United States has likewise sought to export its version of open skies.
Although at times criticized for having opened international aviation markets,
but not the equally large continental U.S. market, for international competi-
tion, the United States is the uncontested leader in the liberalization of tradi-
tional closely regulated bilateral aviation markets.
However, dramatic changes are taking place in the global aviation mar-
ketplace, so that we must review past experiences and, if necessary, develop
new concepts and solutions. After twenty years of U.S. open skies and a
decade of the EU model, international aviation is anything but business as
usual.
What has happened? To answer that question, my essay is divided in two
parts. In the first part, I look at the intra-European market and the lessons it
holds for what I call the “commoditization” of airline services – a phenom-
enon we see in regional markets worldwide. In the second part, I look more
broadly at the market shifts that have taken place, and that are accelerating,
in international and intercontinental services. In this second part, I call the

393
394 Afterword

reader’s attention to the need for new global regulatory structures that can
keep pace with these market changes.
As to the intra-European market, it is driven by costs. With more than
140 million passengers flying on low-cost carriers each year, market behavior
and expectation on intra-European flights has changed. Low-cost carriers
now cover approximately 45% of the European market.
Of course, traditional network carriers such as Lufthansa, Air France, KLM,
Iberia, and others have announced, or already have developed, varying models
of lower-cost enterprises that are to function as an additional product platform
within each airline group. The bottom line is that traditional carriers that
depend on intra-European routes must find – without an American-style
Chapter 11 bankruptcy vehicle – ways of reducing legacy costs, because the
short-haul product has been commoditized.
So what is next in the EU internal market? To avoid pure speculation, let
me try to describe some vectors that could drive further developments.
The first vector is the general perception that low-cost carriers are really
“low-cost” and can drive any competitor out of the market, either through an
absolute low-cost system like Ryanair, or by adapting a relative low-cost system
on a route-by-route basis like easyJet. This perception of “low-cost” as being
the ne plus ultra in airline efficiency has given rise to the creation of airlines
such as Germanwings and Iberia Express. They will seek to compete by
unbundling and then rebundling the product elements to fit the brand. The
objective is to minimize the effects of commoditization without jeopardizing
brand loyalty.
This development is not unique to Europe. Carriers in Asia are following
with keen interest whether an established airline, burdened by legacy costs,
can actually develop from within its own structure a modern, low-cost sub-
sidiary that can sustain itself with an “own” brand and an “own” product and
pricing regime without cannibalizing the markets of its mother or sister
companies belonging to the same group – and without simply further reduc-
ing yields. A fundamental question for the likes of ANA, JAL, Cathay Pacific,
Qantas, Qatar, and so on, is: will it will be sufficient in the medium term to
remain competitive by replacing “business class” with “economy plus,” or are
entirely new concepts and new business models required to withstand the
growing competitive pressure?
These questions are of fundamental importance for airline consumers in
the EU and elsewhere as the airline product commoditizes. They are an
expression, too, of a growing realization that aviation is more than an infra-
structure provider; aviation has a basic economic rationale and function. If the
economic returns are insufficient for a given market, low-cost carriers will not
 Afterword 395

operate there, and established airlines increasingly exit these kinds of markets.
This trend has ramifications for an important (and traditional) characteristic
of aviation – that “scheduled” operators are to provide regular and published
services.
A second vector in the internal EU market is consolidation to generate
economies of scale and scope. As was the case with Southwest in the United
States, Europe’s Ryanair is no longer a start-up, but rather a giant with 80 million
passengers annually. Ryanair actually drives the rules of the game and is clearly
seeking to maintain and even to strengthen its grip on the marketplace – in the
future, perhaps, not only by relying on organic growth but also by turning to
acquisitions. It is virtually a certainty that consolidation will have to occur if
other players are going to continue to remain competitive in the internal EU
market.
Moreover, as regional carriers like Ryanair and easyJet look outward to the
international context beyond the EU, the most frequently debated question is
the circumstances under which a new business model would need to be
invented for their international long-haul operations. As they unbundle and
rebundle their product, they will be reevaluating the willingness of passengers
to self-connect. Self-connecting passengers on a large scale can actually gen-
erate totally new dynamics in international markets.
A third vector in Europe is a growing need for an integrated European
transport policy. What is European aviation really about? Airlines seem to have
the worst of both worlds: on the one hand, they are seen as a public service
utility, offering scheduled services, but with inadequate investments into
infrastructure and rising external costs; and on the other hand, they operate
in a market that does not function properly because market entry barriers
are too low and market exit barriers are too high. To complicate matters
even further, EU Member States pursue different policies and with different
priorities. A true single market does not yet exist because Europe consists of
nations with their own separate economic and legislative histories, their own
social legislation, and their own taxation systems. The Third Package in 1992
was an important step, but it was liberalization without harmonization. Now,
particularly in the light of experience with other regions of the world, EU
policymakers must develop an aviation policy that recognizes the role of air
transport by promoting competition as a driver of consolidation, and by invest-
ing in infrastructure as a prerequisite for international competitiveness.
And this question of aviation policy leads me once again to the international
marketplace, the world beyond Europe but which, of course, also includes
Europe. The need for this kind of intensive policy thinking now exists throughout
the global aviation community. Countries that have recognized the economic
396 Afterword

value of aviation and that are investing in infrastructure – such as Turkey, China,
and the Gulf States – have demonstrably shown themselves able to prepare for
the growth of aviation as a sector, and the growth of aviation as a driver of national
economic growth. Evidently, continued expansion will ultimately have to be
balanced against environmental and social concerns; but nations that are avoid-
ing such political discussions fail to appropriately address the stakes in terms of
their economic prospects and stability.
Indeed, while some nations squabble about transport priorities and what it
means to have an aviation industry, the markets continue to evolve interna-
tionally. Arguably, the bilateral strategic alliance grew into a system of multi-
lateral alliances, and even those appear now to be ceding relevance to new
structures. Within the Star Alliance in Europe, for example, a partnership
among equals has been partially replaced by quasi-mergers and acquisitions:
Lufthansa has bought Austrian and Swiss, and a significant share of Brussels
Airlines. Similarly, within Skyteam, transactions have taken place between Air
France, KLM, and Alitalia; and within oneworld, Iberia and British Airways
merged in a holding entity called International Airlines Group. Such strong
structures have served to intensify cooperation with equally strengthened U.S.
partners.
An additional piece of the puzzle has fallen into place with the increased
presence of Gulf carriers within international alliances, as well as their involve-
ment in acquisitions. Again, it is noteworthy that Lufthansa appears not to rely
solely on an alliance relationship with fast-growing Turkish Airlines, but may
also be interested in exploring ways of strengthening that cooperation beyond
an alliance partnership as a strategic answer to the Gulf carriers.
Twenty years after the U.S./Netherlands open skies agreement, globaliza-
tion has driven airlines out of their traditional bilateral paradigm. The key to
success in such a global market is size and connectivity. If an airline has a
sizable home market to feed its international network, it will seek to combine
third and fourth freedom operations with fifth and sixth freedom routes. If
it has a small home market, it will rely solely on its connectivity at its hub. But
in all cases, the players seem now to believe that organic growth will not be
sufficient to maintain a sustainably competitive position in the global market.
That is a paradigm shift in international aviation in a mere twenty years!
International airlines (or, better said, airline groups), in my view, will
strengthen their position in the markets that they dominate and strategically
compete for growth in new markets through cooperation and acquisition.
That will ultimately mean that smaller competitors will exit international
routes, unless they operate in clearly defined niche markets with high barriers
to entry. We will see the emergence of three or four international groups,
 Afterword 397

functioning on the basis of equity swaps, acquisitions, mergers, or intense

cooperation, sharing a large part of the international market – with significant
competition in selected key markets, and competition for growth markets.
In view of these fundamental, dramatic market developments, we need
political leadership! There was a vision underlying the negotiations that led
to a U.S/EU open skies agreement and a (partial) open aviation area between
the two regions. And as much as I acknowledge the need for political realism
in applying agreements, the U.S./EU agreement’s innovative Joint Committee
should be motivated to turn a vision into a reality. The EU + North Atlantic +
U.S. market is the single biggest global traffic market, and the aviation
relationship between the EU and the United States should not be reduced
to managing a treaty. I do fear that we are beginning to get used to managing
the acquis international.
Surely, also, the time has come to review ownership and control provisions.
It is not a dogma but a necessity to question whether these restrictions are
still fit for purpose in light of the ongoing market developments I am describ-
ing. Ultimately we should strive to create one aviation market for the global
economy, so let us start by reinforcing norms that set a framework for one
North Atlantic market.
And this leads me to another phenomenon. Airlines are becoming increas-
ingly upset about the competitive distortions created by differing levels of
external costs. Even if they reduce their internal costs, how are they supposed
to compete against other airlines that do not have to pay an aviation tax or that
are subsidized by their governments? The conditions of competition have
become highly relevant, not only the market access opportunities.
The question is how, in a globalized economic environment, the market
conditions can be harmonized in order to enable fair international competition.
The U.S./EU agreement provided tools to address that question with its Joint
Committee. Does this historic agreement not mark the beginning of a new
approach to cooperation on regulatory issues? Hopefully, we will see encourag-
ing developments with respect to the emissions trading scheme. But the
agreement also has, in its core, a commitment to an element of international
cooperation on standards of competition. Ten years after the first EU-driven
bilateral open skies agreements, we should look at whether broader conditions
of competition on safety, environment, competition policy, state aids, consumer
rights, security, and other regulatory matters should be harmonized – with the
ultimate vision in mind that if they are not harmonized, airlines will not be
able to compete under fair market conditions for the simple reason that there is
not one market.
398 Afterword

Many incremental steps would be necessary to create that one market. But
the time has come to perceive the enormous momentum we now have in
international aviation, and to take stock of the changes required to provide for
a suitable framework for global aviation.
In summary, I will conclude with what I consider to be three crucial points.
First, the EU Court of Justice and the Council of EU Transport Ministers did
actually set the stage in 2002 for a new approach to international aviation by
determining how sovereign Member States of the EU would coordinate their
international aviation negotiations.
Second, the liberalization of the intra-European market, and the develop-
ment of regulatory tools for the international negotiations that followed, acted
as catalysts for dynamic market changes.
Third, the international markets have matured even further to the point that
legal and political answers must be found to guide these dynamic market
changes.
The changes that I have noted and forecasted are not unique to a single
region; they are happening across the world and are in need of regulatory
attention across the world. But global aviation, as yet, has no economic regu-
latory framework with teeth. It is time to move, as the industry itself has done,
from a national and bilateral paradigm and to consider the most appropriate
manner in which global regulatory approaches can address the challenges of a
global airline marketplace.
Ulrich Schulte-Strathaus
Managing Director, Aviation Strategy & Concepts
Brussels, March 2013
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periodical, service, and newspaper articles listed

alphabetically by author
Avila, Frank, 2 Dozen Join NY JetBlue Lawsuit Over Pilot Scare, Associated Press,
Sep. 27, 2012
Brûlé, Tyler, Embassies with Wings, FT.com, Feb. 24, 2012
Cameron, Doug, U.S. Airline Merger to Affect Alliances, WSJ.com, Feb. 14, 2013
Cha, Ariana Eunjung & Del Quentin Weber, U.S., China Agree to Double Flights,
Wash. Post, May 24, 2007, at D1
Clark, Nicola & David Jolly, Hungarian National Airline Halts Flights, N.Y. Times,
Feb. 3, 2012
Clark, Pilita, Russia Threatens to Ban Austrian Airlines, Fin. Times, Mar. 1, 2010, at 1
Cleveland, Paul A. & Thomas L. Tucker, Privatizing Airline Safety and Security, Ideas
on Liberty, Nov. 2002, at 6
Europe Considers Suspending Airline Emissions Charge, Associated Press, Sept. 12,
2012
EU-U.S. Security Agreement Allows Cheaper, Faster Air Cargo Operations,
HomelandSecurityNewswire.com, June 5, 2012
5Q with Former State Department Official John Byerly, Bus. Travel News, Nov. 10,
2010
Flottau, Jens & Robert Wall, Russia May Block EU Carriers from Siberian Overflight
in Emissions Trading Battle, Aviation Week, Feb. 23, 2012
Heathrow: Government to Study Airport Expansion Plans, BBC News, Sept. 5, 2012,
http://www.bbc.co.uk/news/uk-politics-19484126
Knibb, David, Chile Trades Cabotage for ‘Precedent Setting’ Deal, Airline Bus., Apr.
1, 2003, at 14
Lewis, Barbara & Nina Chestney, EU Airline Carbon Cash Should Help Fill Climate
Fund, Reuters, May 16, 2012
MacLaggan, Corrie, U.S. Charges JetBlue Pilot for Midair Meltdown, Reuters,
Mar. 29, 2012
Martı́n, Hugo, Airlines Cut Routes as Fuel Costs Climb; Ticket Prices Will Stay High
and Planes Will Stay Crowded for the Near Future, FAA Report Says, L.A. Times,
Mar. 9, 2012, at B1
Michaels, Daniel & Susan Carey, More Airline Mergers Leap Borders, Wall St. J.,
June 28, 2012, at B10
 Select Bibliography 411

Miller, Lisa, Airlines and Courts Are Cracking Down on Unruly Passengers as Assaults
Rise, Wall St. J., Dec. 27, 1996, at A2
Moores, Victoria, ICAO Sees EU ETS as Regional Issue, Air Transport World
Daily News (Oct. 1, 2012)
Mouawad, Jad, For Air Cargo, A Screening Conundrum, N.Y. Times, Dec. 21, 2010, at B1
Niththyananthan, Kaveri, Lufthansa, ANA Get Antitrust Clearance, WSJ.com, June 1,
2011
Parker, Andrew, Aerospace: A Dogfight for the Duopoly, Fin. Times, Aug. 7, 2012, at 7
Parker, Andrew & David Gelles, Brussels Renews Push in U.S. for Airline Mergers, Fin.
Times, Sept. 26, 2012, at 6
Plushnick-Masti, Ramit, Texas Judge Rules Atmosphere, Air Is Public Trust,
Associated Press, July 12, 2012
Pruzin, Daniel, WTO Panel Ruling Slams Illegal Subsidies for Europe’s Airbus in Case
Brought by U.S., 27 Int’l Trade Rep. (BNA) 1029 (July 8, 2010)
Pruzin, Daniel, WTO Publishes Final Ruling in Complaint Against Boeing Subsidies:
EU, US Claim Win, 28 Int’l Trade Rep. (BNA) 564 (Apr. 7, 2011)
Schuetze, Arno & Andreas Kröner, NordLB Sells First Aircraft Covered Bond in
Germany, Reuters, July 10, 2012
Sechler, Bob, FedEx, UPS Get a Toehold in China’s Express Delivery, Wall St. J.,
Sept. 11, 2012, at B1
Slaughter, Stanley, Analysis: Time Running Out for Deal on Airline Emissions, Air &
Bus. Travel News, Oct. 4, 2012
Stone, David, New Zealand May Beat Australia to an Open EU Aviation Agreement,
N.Z. Herald, Aug. 24, 2009
Suhartono, Harry & Tim Hepher, Asia Plugs European Aircraft Lending Gap,
Reuters, Feb. 17, 2012
Szalavitz, Maia, 10 Ways We Get the Odds Wrong, Psychol. Today, Jan. 1, 2008
Topham, Gwyn, Transport: There’s Only Room for One Hub, Says Heathrow, The
Guardian, Nov. 15, 2012, at 34
U.S. Airlines Fight For New Routes, Shanghai Daily, July 25, 2007
Volcovici, Valeri, U.S. Airline Industry Urges Obama to Block EU Carbon Scheme,
Reuters, Sept. 18, 2012
Walker, Karen, EU MP: Europe Will Not Back Down on ETS, Air Transport
World Daily News, Nov. 7, 2011

television broadcasts
Nova: The Deadliest Plane Crash (PBS (U.S.) television broadcast 2006)
The Plot to Bring Down Britain’s Planes (Channel 4 (U.K.) television broadcast
Apr. 26, 2012)

speeches, presentations, interviews, and briefing

papers listed alphabetically by speaker
Byerly, John R., Deputy Assistant Sec’y for Transp. Affairs, Dep’t of State, Opening
Remarks at the London AirFinance Journal Conference (May 18, 2009)
412 Select Bibliography

Kotaite, Assad, President, ICAO, Opening Address at the International Conference on

Air Law on the Modernization of the Warsaw System (May 10, 1999)
Lobbenberg, Andrew, Airline Analyst, European Airline Equity Research, HSBC,
interview with author
Mamdouh, Hamid, Director, Trade in Services, World Trade Organization, address at
Sustainable Aviation Policies for America and the World: A Leadership Summit
(Oct. 19, 2006)
Tilton, Glen, Chairman, Air Transport Association, Speech to UK Aviation Club
(Feb. 11, 2010)

reports, studies, papers, press releases, and other

documents listed alphabetically
Archick, Kristin, Cong. Res. Serv., RS 22030, U.S.-EU Cooperation Against Terrorism
(2011)
Association of European Airlines, Towards a Transatlantic Common Aviation Area:
AEA Policy Statement (1999)
Association of Southeast Asian Nations (ASEAN), Implementation Framework of the
ASEAN Single Aviation Market (Dec. 16, 2011)
Bonn Declaration on International Terrorism, Pub. Papers 1308, July 17, 1978, reprinted
in 17 I.L.M. 1285
Centre for Aviation, New LAN-TAM Parent Latam Emerges as a Leader Globally and
a Powerful Force Across South America, June 28, 2012, http://centreforaviation.
com/analysis/new-lan-tam-parent-latam-emerges-as-a-leader-globally-and-a-power
ful-force-across-south-america-76917
Council for Trade in Services, Quantitative Air Services Agreements Review
(QUASAR): Part B: Preliminary Results (Nov. 30, 2006)
Elias, Bart, Cong. Res. Serv., R 41515, Screening and Securing Air Cargo: Background
and Issues for Congress (2010)
E-mail from Daniel Calleja, former Director for Air Transport, European Commission,
to Brian F. Havel (Mar. 18, 2010, 17:49:00 CST) (copy on file with authors)
European Aviation Safety Agency, Assessment of Foreign Aircraft (EC SAFA
Programme), http://www.easa.europa.eu/approvals-and-standardisation/safety-assess
ment-of-foreign-aircraft-SAFA.php
European Commission & U.S. Department of Transportation, Transatlantic Airline
Alliances: Competitive Issues and Regulatory Approaches (2010)
Federal Aviation Administration, International Aviation Safety Assessment Program, http://
www.faa.gov/about/initiatives/iasa/more/
Federal Aviation Administration, Task Force on Deterrence of Air Piracy Final Report,
FAA-AM-78–35 (1978)
Institute of International Law, Krakow Session – 2005, Resolution of the Seventeenth
Commission, Universal Criminal Jurisdiction with Regard to the Crime of
Genocide, Crimes Against Humanity and War Crimes (Aug. 26, 2005)
Intergovernmental Panel on Climate Change (IPCC), Climate Change 2007: Impacts,
Adaptation and Vulnerability (2007)
 Select Bibliography 413

Intergovernmental Panel on Climate Change (IPCC), Climate Change 2007:

Synthesis Report: Summary for Policymakers (2007)
International Air Transport Association, Agenda for Freedom, http://www.agenda-for-
freedom.aero
International Air Transport Association, Agreement on the Measures to Implement the
IATA Intercarrier Agreement, reprinted in 3 Av. L. Rep. (CCH) ¶ 27,952 [IATA
Implementation Agreement]
International Air Transport Association, Fact Sheet: Environment, http://www.iata.org/
pressroom/facts_figures/fact_sheets/pages/environment.aspx
International Air Transport Association, A Global Approach to Reducing Aviation
Emissions (Nov. 2009), http://www.iata.org/SiteCollectionDocuments/Documents/
Global_Approach_Reducing_Emissions_251109web.pdf.
International Air Transport Association, IATA Economics Briefing, The Economic
Benefits Generated by Alliances and Joint Ventures (2012), http://www.iata.org/
whatwedo/Documents/economics/Economics%20of%20JVs_Jan2012L.pdf
International Air Transport Association, Intercarrier Agreement on Passenger Liability,
Oct. 31, 1995, reprinted in 3 Av. L. Rep. (CCH) ¶ 27,951 [IATA Intercarrier
Agreement]
International Airlines Group, News Release, Issue of Debt (July 9, 2012)
International Civil Aviation Organization, Action of the Council, 71st Session, ICAO
Doc. 8923-C/998, reprinted in 9 I.L.M. 1286 (1970)
International Civil Aviation Organization, Air Services Negotiation Conference, http://
legacy.icao.int/ican2011/
International Civil Aviation Organization, Air Transport Bureau, Economic Policy &
Infrastructure Management Section, Economic Regulation Template Air
Services Agreement, http://legacy.icao.int/icao/en/atb/epm/Ecp/Tasa.htm.
International Civil Aviation Organization, Assembly Resolutions in Force, ICAO Doc.
9958 (2010)
International Civil Aviation Organization, Committee on Aviation Environmental
Protection (CAEP), http://www.icao.int/environmental-protection/pages/CAEP.aspx
International Civil Aviation Organization, Composite Table (Status of Treaties and
Status of States vis-à-vis Treaties), http://www.icao.int/Secretariat/Legal/Pages/
TreatyCollection.aspx
International Civil Aviation Organization, Consolidated Conclusions, Model Clauses,
Recommendations and Declarations, ATConf/5 (Mar. 31, 2003) (revised July 10,
2003)
International Civil Aviation Organization, Economic Commission, Regulation of
International Air Transport Services, Report by the Council on Trade in
Services, A33-WP/7 (Jun. 6, 2001)
International Civil Aviation Organization, Executive Committee Working Paper,
Development of a Global Framework for Addressing Civil Aviation CO2
Emissions, A37-WP/217 EX/39 (2010)
International Civil Aviation Organization, General Responsibilities of Each Regional
Office, http://legacy.icao.int/icao/en/ro/roresp.htm
International Civil Aviation Organization, Guidance on the Implementation of
Article 83bis of the Convention on International Civil Aviation, Cir. 295 LE/2
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414 Select Bibliography

International Civil Aviation Organization, ICAO Aviation Security Programme, http://

www2.icao.int/en/avsec/pages/default.aspx/
International Civil Aviation Organization, ICAO Policies on Charges for Airports and
Air Navigation Services, ICAO Doc. 9082/7 (7th ed. 2004)
International Civil Aviation Organization, ICAO’s Policies on Taxation in the Field of
Air Transport, ICAO Doc. 8632 (1999)
International Civil Aviation Organization, International Conference on Air Law
(Convention for the Unification of Certain Rules for International Carriage by
Air), Montreal (May 10–28, 1999), Minutes, ICAO Doc. 9775-DC/2 (2001)
International Civil Aviation Organization, Manual on the Regulation of International
Air Transport, ICAO Doc. 9626 (2d ed. 2004)
International Civil Aviation Organization, Offsetting Emissions from the Aviation
Sector, ICAO Doc. 9951 (2011)
International Civil Aviation Organization, Policy and Guidance Material on the
Economic Regulation of International Air Transport, ICAO Doc. 9587 (3rd ed.
2008)
International Civil Aviation Organization, Rules for the Settlement of Differences,
ICAO Doc. 7782/2 (1975)
International Civil Aviation Organization, Scoping Study on the Application of
Emissions Trading and Offsets for Local Air Quality in Aviation, ICAO Doc.
9948 (2011)
International Civil Aviation Organization, Special Subcommittee of the Legal
Committee for the Modernization of the Tokyo Convention Including the Issue
of Unruly Passengers Working Paper, Report of the Rapporteur of the Special Sub-
Committee on the Preparation of an Instrument to Modernize the Convention on
Offenses and Certain Other Acts Committed On Board Aircraft of 1963, LC/SC-
MOT-WP/1 (2012)
International Civil Aviation Organization, Study on Aircraft Leasing, Air Transport
Committee, 156th Session of the Council, 1999
International Civil Aviation Organization, Treaty Status, http://www.icao.int/secretar
iat/legal/List%20of%20Parties/Mtl99_EN.pdf
International Civil Aviation Organization, 2011: State of Global Aviation Safety
(2011)
International Civil Aviation Organization, USOAP Continuous Monitoring Approach
http://www.icao.int/safety/CMAForum/Pages/default.aspx
International Civil Aviation Organization, Worldwide Air Transport Conferences,
http://legacy.icao.int/ICAN2009/docs/ICAO_Journal_ICAN2008_Vol64Num01_
p21.pdf
International Law Association, Piracy: Sea and Air, Report of the Fifty-Fourth
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International Monetary Fund, Factsheet: Special Drawing Rights (Aug. 24, 2012)
InterVISTAS-ga, The Economic Impact of Air Service Liberalization (2006)
Lang, Christian G. & Prager Dreifuss, Forum Non Conveniens in Continental Europe
(unpublished paper, Aug. 2, 2009), http://www.prager-dreifuss.com/system/docu
ment_des/78/original/Forum_Non_Conveniens_Cont_Europe_.pdf?128937866
 Select Bibliography 415

National Aeronautics and Space Administration, Goddard Space Flight Center, NASA
Study Finds Clock Ticking Slower on Ozone Hole Recovery, June 29, 2006, http://
www.nasa.gov/centers/goddard/news/topstory/2006/ozone_recovery.html
Office of Sec’y, Dep’t of Transp. & Fed. Aviation Admin., Code-Share Safety Program
Guidelines (2006)
Organisation for Economic Co-operation and Development, Principles for the
Liberalisation of Air Cargo (2000)
Organisation for Economic Co-operation and Development, Sector Understanding on
Export Credits for Civil Aircraft, TAD/PG (2007) 4/Final (July 27, 2007)
Organisation for Economic Co-operation and Development, Sector Understanding on
Export Credits for Civil Aircraft, TAD/ASU (2011) 1 (Aug. 31, 2011)
Parker, Larry & John Blodgett, Cong. Res. Serv., RL 32721, Greenhouse Gas Emissions:
Perspectives on the Top 20 Emitters and Developed Versus Developing Nations
(2008)
Piermartini, Roberta & Linda Rousová, Liberalization of Air Transport Services and
Passenger Traffic, WTO Staff Working Paper SRSD-2008–06 (Dec. 2008)
Pitmans Lawyers News, Shopping for Bankruptcy?, http://www.pitmans.com/news/
shopping-for-bankruptcy
Press Release, American Civil Liberties Union, TSA Body Scanning Technology Strips
Away Privacy (Oct. 1, 2009)
Press Release, Australian Competition and Consumer Commission, ACCC Grants
Interim Authorisation to Alliance Between Qantas and Emirates (Jan. 17, 2013)
Press Release, Council of the European Union, Transport, Telecommunications and
Energy: Transport Items, PRES/12/447 (Oct. 29, 2012)
Press Release, Europa, Air Transport: Commission Welcomes Agreement on Siberian
Overflights (Dec. 1, 2011)
Press Release, Europa, Antitrust: Commission Market Tests Commitments from Eight
Members of SkyTeam Concerning their Alliance Cooperation (Oct. 19, 2007)
Press Release, Europa, Antitrust: Commission Market Tests Commitments Proposed by
BA, AA and Iberia Concerning Transatlantic Co-operation (Mar. 10, 2010)
Press Release, Europa, Antitrust: Commission Opens a Probe into Transatlantic Joint
Venture between Air France-KLM, Alitalia and Delta and Closes Proceedings
against Eight Members of SkyTeam Airline Alliance (Jan. 1, 2012)
Press Release, Europa, Commission Takes Action to Combat Aircraft Noise (Mar. 13,
1998)
Press Release, Europa, Stopping the Clock of ETS and Aviation Measures Following
Last Week’s International Civil Aviation Organization (ICAO) Council (Nov. 12,
2012)
Press Release, European Aviation Safety Agency, EASA Proposes New Harmonized
Rules to Avoid Flight Crew Fatigue (Oct. 1, 2012)
Press Release, European Parliament, Parliament Gives Green Light to Air Passenger
Data Deal with U.S. (Apr. 19, 2012)
Press Release, Federal Aviation Administration, FAA Issues Final Rule on Pilot Fatigue
(Dec. 21, 2011)
Press Release, Global Industry Analysts, Inc., Global Aircraft Leasing Market to Reach
$279 Billion by 2015 (Feb. 19, 2009)
416 Select Bibliography

Press Release, Organisation for Economic Co-operation and Development, Aircraft

Sector Understanding: Signing Ceremony (Feb. 25, 2011)
Press Release, Organisation for Economic Co-operation and Development, Chile Signs
Up as First OECD Member in South America (Jan. 11, 2010)
Skybrary, ICAO USOAP and Safety Performance, http://www.skybrary.aero/index.
php/ICAO_USOAP_and_Safety_Performance
Tieleman, Katia, The Failure of the Multilateral Agreement on Investment (MAI) and
the Absence of a Global Public Policy Network, Case Study for the UN Vision
Project on Global Public Policy Networks (2000), http://www.gppi.net/fileadmin/
gppi/Tieleman_MAI_GPP_Network.pdf
Transatlantic Economic Council (TEC), Statement of the European Union and the
United States on Shared Principles for International Investment (Apr. 12, 2012)
United Nations Blog, Most-ratified International Treaties (Sept. 24, 2012), http://blogs.
un.org/blog/2012/09/24/most-ratified-international-treaties/
United Nations Conference on Environment and Development, Rio de Janeiro, Braz.,
June 3–14, 1992, Agenda 21, U.N. Doc. A/CONF. 151/26 (Aug. 12, 1992)
United Nations Conference on Environment and Development, Rio de Janeiro, Braz.,
June 3–14, 1992, Rio Declaration on Environment and Development, princ. 1,
U.N. Doc. A/ CONF.151/26/Rev.1 (Aug. 12, 1992)
United Nations Framework Convention on Climate Change, Conference of the
Parties, Durban, Nov. 28- Dec. 14, 2011, Draft Decision 1/CP.17, http://unfccc.
int/files/meetings/durban_nov_2011/decisions/application/pdf/cop17_durbanplat
form.pdf
United Nations General Assembly, Fragmentation of International Law: Difficulties
Arising from Diversification and Expansion of International Law – Report of the
Study Group of the International Law Commission, Doc. A/CN.4/L682 (Apr. 13,
2006)
U.S. General Accounting Office, Airline Competition: Impact of Changing Foreign
Investment and Control Limits on U.S. Airlines, GAO/RCED-93–7 (1992)
World Economic Forum, Policies and Collaborative Partnership for Sustainable
Aviation (2011)
World Trade Organization, Air Services Agreements Projector (2010), http://www.wto.
org/asap/index.html
WTO Analytical Index: Agreement on Trade in Civil Aircraft, http://www.wto.org/
english/res_e/booksp_e/analytic_index_e/aircraft_01_e.htm
World Trade Organization, Council for Trade in Services, Quantitative Air Services
Review (QUASAR): Part B: Preliminary Results, S/C/W/270/Add.1 (Nov. 30, 2006)
World Trade Organization, GATS Training Module, http://www.wto.org/english/tra-
top_e/serv_e/cbt_course_e/signin_e.htm
World Trade Organization, The WTO Dispute Settlement Procedures: A Collection
of the Relevant Legal Texts (2012)
 Table of Authorities

treaties and other international agreements

listed alphabetically
Agreement Between the Government of Australia and the Government of the
Argentine Republic Relating to Air Services (Mar. 11, 1992) (not in force)
Agreement between the Government of the United States of America and the
[EU Commission] Regarding Application of Their Competition Laws,
1995 O.J. (L 95) (Sept. 23, 1991), as corrected by 1995 O.J. (L134) 1, reprinted
in 4 Trade Reg. Rep. (CCH) ¶ 13,504, at 21,233-9
Agreement between Japan and the Republic of Uzbekistan for Air Services,
Dec. 22, 2003, U.N. Reg. No. I-48368
Agreement between the United States of America and the European Union on
the Use and Transfer of Passenger Name Records to the United States
Department of Homeland Security, Dec. 8, 2011, 2012 O.J. (L 215) 5
Agreement Concerning Air Services, U.S.-U.K., June 22 & July 23, 1977, 28
U.S.T. 5367 [Bermuda II] (no longer in force)
Agreement on Air Transport between Canada and the European [Union] and
its Member States, Dec. 17, 2009, 2010 O.J. (L 207) 32
Agreement on Certain Aspects of Air Services, Chile-EU, Oct. 31, 2006, 2006
O.J. (L 300) 46
Agreement on Mutual Legal Assistance between the European Union
and the United States of America, June 25, 2003, T.I.A.S. 10-201.1, 2003
O.J. (L 181) 34
Agreement on Rules of Origin, Apr. 15, 1994, Marrakesh Agreement
Establishing the World Trade Organization, 1868 U.N.T.S. 397 (1994)
Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994,
Marrakesh Agreement Establishing the World Trade Organization, 1869
U.N.T.S. 14 (1994)

417
418 Table of Authorities

Agreement on Trade in Civil Aircraft, opened for signature Apr. 12, 1979, 1186
U.N.T.S. 170, reprinted as amended at 1869 U.NT.S. 508
Agreement Relating to Air Services, U.S.-U.K., Feb. 11, 1946, 12 Bevans 726
[Bermuda I] (no longer in force)
Air Transport Agreement, U.S.-Austl., Mar. 31, 2008, [2008] ATNIF 3 (Austl.)
Air Transport Agreement, U.S.-Can., Mar. 12, 2007, reprinted in 3 Av. L. Rep.
(CCH) ¶ 26,246a
Air Transport Agreement, U.S.-Eth., May 17, 2005, reprinted in 3 Av. L. Rep.
(CCH) ¶ 26,300a
Air Transport Agreement, U.S.-EU, Apr. 30, 2007, 2007 O.J. (L 134) 4, 46 I.L.M.
470, as amended by Protocol to Amend the Air Transport Agreement, U.S.-
EU, Mar. 25, 2010, 2010 O.J. (L 223) 3 [U.S./EU Air Transport Agreement]
Air Transport Agreement, U.S.-Gabon, Aug. 23, 2004, reprinted in 3 Av.
L. Rep. (CCH) ¶ 26,310a
ASEAN Multilateral Agreement on Air Services, opened for signature May 20,
2009 [ASEAN MAAS]
Charter of the United Nations, opened for signature June 26, 1945, 3 Bevans
1153 (entered into force Oct. 24, 1945)
Clinton, William Jefferson, Letter Approving the Montreal Convention (Sept.
6, 2000), 106th Cong., 2d Sess., Treaty Doc. 106-45 (2000)
Convention for the Suppression of Unlawful Acts Against the Safety of Civil
Aviation, opened for signature Sept. 23, 1971, 974 U.N.T.S. 178 (entered into
force Jan. 26, 1973) [Montreal Convention]
Convention for the Suppression of Unlawful Seizure of Aircraft, opened for
signature Dec. 16, 1970, 860 U.N.T.S. 105 (entered into force Oct. 14, 1971)
[The Hague Convention]
Convention for the Unification of Certain Rules for International Carriage by
Air, opened for signature May 28, 1999, 2242 U.N.T.S. 350 (entered into
force Nov. 4, 2003) [Montreal Convention]
Convention for the Unification of Certain Rules Relating to International
Carriage by Air, opened for signature Oct. 12, 1929, 137 L.N.T.S. 11, 49 Stat.
3000 (entered into force Feb. 13, 1933) [Warsaw Convention]
Convention on Biological Diversity, opened for signature June 5, 1992, 1760
U.N.T.S. 79 (entered into force Dec. 29, 1993)
Convention on Compensation for Damage Caused by Aircraft to Third
Parties, ICAO Doc. 9919, opened for signature May 2, 2009 [General
Risks Convention]
Convention on Compensation for Damage to Third Parties, Resulting from
Acts of Unlawful Interference Involving Aircraft, opened for signature May
2, 2009, ICAO Doc. 9920 [Unlawful Interference Convention].
 Table of Authorities 419

Convention on Damage Caused by Foreign Aircraft to Third Parties on the

Surface, opened for signature Oct. 7, 1952, 310 U.N.T.S. 182 (entered into
force Feb. 4, 1958) [Rome Convention]
Convention on the High Seas, opened for signature April 29, 1958, 450 U.N.
T.S. 11 (entered into force Sept. 30, 1962)
Convention on International Civil Aviation, opened for signature Dec. 7, 1944,
61 Stat. 1180, 15 U.N.T.S. 295 (entered into force Apr. 7, 1947) [Chicago
Convention]
Convention on International Interests in Mobile Equipment, opened for
signature Nov. 16, 2001, 2307 U.N.T.S. 285 (entered into force Apr. 1,
2004) [Cape Town Convention]
Convention on the International Recognition of Rights in Aircraft, opened for
signature Jun. 19, 1948, 4 U.S.T. 1830, 310 U.N.T.S. 151 [Geneva Convention]
Convention on Long-Range Transboundary Air Pollution, opened for signa-
ture Nov. 13, 1979, 1302 U.N.T.S. 217
Convention on the Marking of Plastic Explosives for the Purpose of Detection,
opened for signature Mar. 1, 1991, 2122 U.N.T.S. 359 (entered into force June
21, 1998) [Plastic Explosives Convention]
Convention on Offenses and Certain Other Acts Committed on Board
Aircraft, opened for signature Sept. 14, 1963, 704 U.N.T.S. 219 (entered
into force Dec. 4, 1969) [Tokyo Convention]
Convention on the Settlement of Investment Disputes Between States and
Nationals of Other States, opened for signature Mar. 18, 1965, 17 U.S.T. 1270,
575 U.N.T.S. 159 [ICSID Convention]
Convention on the Suppression of Unlawful Acts Related to International
Civil Aviation, opened for signature Sept. 10, 2010, ICAO Doc. 9960
[Beijing Convention]
Convention Relating to the Regulation of Aerial Navigation, opened for
signature Oct. 13, 1919, 11 L.N.T.S. 173 (entered into force May 31, 1920)
[Paris Convention]
Convention, Supplementary to the Warsaw Convention, for the Unification
of Certain Rules Relating to International Carriage by Air Performed by a
Person Other Than the Contracting Carrier, ICAO Doc. No. 8181 (entered
into force May 1, 1964)
Declaration Prohibiting Launching of Projectiles and Explosives from
Balloons, opened for signature July 29, 1900, 1 Bevans 270 (entered into
force Sept. 4, 1900)
Free Trade Agreement, U.S.-Austl., May 18, 2004, 118 Stat. 919
General Agreement on Trade in Services [GATS], Annex on Air Transport
Services, Marrakesh Agreement Establishing the World Trade Organization,
420 Table of Authorities

Annex 1B, Legal Instruments – Results of the Uruguay Round, opened for
signature Apr. 15, 1994, 1869 U.N.T.S. 183, reprinted in 33 I.L.M. 1125 (1993)
Ibero-American Convention, opened for signature Nov. 1, 1926, 45 Stat. 2409
International Air Services Transit Agreement, opened for signature Dec. 7,
1944, 59 Stat. 1693, 84 U.N.T.S. 389 [Two Freedoms Agreement]
International Air Transport Agreement, opened for signature Dec. 7, 1944, 59
Stat. 1701, 171 U.N.T.S. 387 [Five Freedoms Agreement]
International Convention for the Prevention of Marine Pollution from Ships,
Nov. 2, 1973, 1340 U.N.T.S. 184, as modified by Protocol, Feb. 17, 1978, 1340
U.N.T.S. 61
International Convention for the Unification of Certain Rules Relating to
Damage Caused by Aircraft to Third Parties on the Surface, opened for
signature May 29, 1933, 192 L.N.T.S. 291 (entered into force Feb. 13, 1942)
International Declaration Prohibiting the Discharge of Projectiles and
Explosives from Balloons, opened for signature Oct. 18, 1907, 1907 A.T.S.
14 (entered into force Nov. 27, 1909)
Kyoto Protocol to the United Nations Framework Convention on Climate
Change, opened for signature Dec. 11, 1997, 2303 U.N.T.S. 162 (entered into
force Feb. 16, 2005) [Kyoto Protocol]
Marrakesh Agreement Establishing the World Trade Organization, opened for
signature Apr. 15, 1994, 1867 U.N.T.S. 154 [WTO Agreement]
Memorandum of Consultations and Draft Exchange of Notes concerning
Modifications to the U.S./U.K. Air Services Agreement, reprinted in 3 Av.
L. Rep. (CCH) ¶ 26,540j, at 23,923 (Jan. 2007)
Multilateral Agreement on the Liberalization of International Air
Transportation, opened for signature May 1, 2001, 2215 U.N.T.S. 33
[MALIAT]
North American Free Trade Agreement, U.S.-Can.-Mex., Dec. 17, 1992,
reprinted in 32 I.L.M. 289 (1993) (entered into force Jan. 1, 1994)
Pan American Convention on Commercial Aviation, opened for signature
Feb. 20, 1928, 129 L.N.T.S. 223 [Havana Convention]
Protocol between the Government of the United States of America and the
Government of the Russian Federation to Amend the Jan. 14, 1994 Air
Transport Agreement, U.S.-Rus., Oct. 5, 2005
Protocol between the United States of America and the Federal Republic of
Germany to Amend the Air Transport Agreement of July 7, 1995, with
related Route Schedule, signed at Milwaukee, May 23, 1996
Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving
International Civil Aviation, opened for signature Feb. 24, 1988, 1589 U.N.
T.S. 473 (entered into force Aug. 6, 1989) [Montreal Protocol]
 Table of Authorities 421

Protocol Supplementary to the Convention for the Unification of Certain

Rules Relating to Damage Caused by Foreign Aircraft to Third Parties on
the Surface, opened for signature Sept. 29, 1938, ICAO Doc. 107-CD
Protocol to Amend the Air Transport Agreement, U.S.-EU, Apr. 25 & 30, 2010,
2010 O.J. (L 223) 3 [U.S./EU Protocol]
Protocol to Amend the Convention on Damage Caused by Foreign Aircraft to
Third Parties on the Surface Signed at Rome on 7 October 1952, opened for
signature Sept. 23, 1978, ICAO Doc. 9257 (entered into force July 25, 2002)
[1978 Montreal Protocol]
Protocol to Amend the Convention for the Unification of Certain Rules
Relating to International Carriage by Air, opened for signature Sept. 28,
1955, 478 U.N.T.S. 371 (entered into force Aug. 1, 1963) [The Hague Protocol]
Protocol to Amend the Convention for the Unification of Certain Rules Relating
to International Carriage by Air, as Amended by The Hague Protocol, opened
for signature Mar. 8, 1971, ICAO Doc. 8392 (1971) [Guatemala Protocol]
Protocols to Amend the Convention for the Unification of Certain Rules
Relating to International Carriage by Air, opened for signature Sept. 25,
1975, reprinted in 22 I.L.M. 13 [Montreal Protocols 1, 2, 3, & 4]
Protocol to Amend the Jan. 14, 1994 Air Transport Agreement, U.S.-Rus., Oct.
5, 2005, reprinted in 3 Av. L. Rep. (CCH) ¶ 26,474d, at 22,977
Protocol to the Convention on International Interests in Mobile Equipment
on Matters Specific to Aircraft Equipment, opened for signature Nov. 16,
2001, 2367 U.N.T.S. 517 (entered into force Mar. 1, 2006)
Protocol Supplementary to the Convention for the Suppression of Unlawful
Seizure of Aircraft, opened for signature Sept. 10, 2010, ICAO Doc. 9959
[Beijing Protocol]
Resolutions for the Final Act of the International Civil Aviation Conference,
Dec. 7, 1944, reprinted in 3 Av. L. Rep. (CCH) ¶ 28,012
Settlement Understanding, Ann. 2 to the WTO Agreement, in Final Act
Embodying the Results of the Uruguay Round of Multilateral Trade
Negotiations, opened for signature Apr. 15, 1994, 33 I.L.M. 1226
Statute of the International Court of Justice, opened for signature June 26, 1945,
59 Stat. 1031, 3 Bevans 1153, 33 U.N.T.S. 993
Treaty of Lisbon Amending the Treaty on European Union and the Treaty
Establishing the European Communities, Dec. 13, 2007, 2007 O.J. (C 306) 1
Treaty on the Functioning of the European Union, Sept. 5, 2008, 2008 O.J. (C
115) 47, reprinted in consolidated form at 2010 O.J. (C 83) 47 [TFEU]
Treaty on Principles Governing the Activities of States in the Exploration and
Use of Outer Space, including the Moon and Other Celestial Bodies,
opened for signature Jan. 27, 1967, 610 U.N.T.S. 205
422 Table of Authorities

UNIDROIT Convention on International Financial Leasing, opened for

signature May 28, 1988, reprinted in 27 I.L.M. 931
United Nations Convention on the Law of the Sea, opened for signature Dec.
10, 1982, 1833 U.N.T.S. 397 [UNCLOS]
United Nations Framework Convention on Climate Change, May 9, 1992,
1771 U.N.T.S. 107 (entered into force Mar. 21, 1994) [UNFCCC]
U.S.-Cuba Memorandum of Understanding on Hijacking of Aircraft and
Vessels and Other Offenses. Feb. 15, 1973, U.S.-Cuba, 24 U.S.T. 737
U.S. Dep’t. of State, 2012 U.S. Model Bilateral Investment Treaty, http://www.
state.gov/documents/organization/188371.pdf [U.S. Model BIT]
U.S. Dep’t of State, Air Transport Agreement Between the Government of the
United States of America and the Government of [Country], http://www.
state.gov/e/eb/rls/othr/ata/114866.htm (Jan. 12, 2012) [Model Open Skies
Agreement]
U.S. Dep’t of State, United States Model Bilateral Air Transport Agreement
(“Open Skies Agreement”), reprinted at 35 I.L.M. 1479 (1996)
Vienna Convention on the Law of Treaties, opened for signature May 23, 1969,
1155 U.N.T.S. 331
Vienna Convention for the Protection of the Ozone Layer, opened for signa-
ture Mar. 22, 1985, T.I.A.S. No. 11,097, 1513 U.N.T.S. 293

international civil aviation organization assembly

resolutions listed chronologically
International Civil Aviation Organization, Air Navigation Bureau, Making an
ICAO Standard, Assembly Res. A1-31, ICAO Doc. 4411 (A1-P/45) (1947)
International Civil Aviation Organization, Consolidated Statement of
Continuing ICAO Policies and Practices Related to Environmental
Protection, Assem. Res. A32-8 (2000), compiled in Assembly Resolutions in
Force, ICAO Doc. 9790 (2001)
International Civil Aviation Organization, Establishment of an ICAO
Universal Safety Oversight Audit Programme, Assem. Res. A32-11, compiled
in Assembly Resolutions in Force, ICAO Doc. 9790 (2001)
International Civil Aviation Organization, Declaration of Misuse of Civil
Aircraft as Weapons of Destruction and Other Terrorist Acts Involving
Civil Aviation, Assem. Res. A33-1 (2001)
International Civil Aviation Organization, Adoption of National Legislation on
Certain Offenses Committed on Board Civil Aircraft (Unruly/Disruptive
Passengers), Assem. Res. A33-4 (2001)
 Table of Authorities 423

International Civil Aviation Organization, Consolidated Statement of Continuing

ICAO Policies and Practices Related to Environmental Protection, Assem. Res.
A33-7 (2001), compiled in Assembly Resolutions in Force, ICAO Doc. 9790
(2001)
International Civil Aviation Organization, Consolidated Statement of Continuing
ICAO Policies and Practices Related to Environmental Protection, Assem. Res.
A36-22 (2007), compiled in Assembly Resolutions in Force, ICAO Doc. 9902
(2007)
International Civil Aviation Organization, Consolidated Statement of Continuing
ICAO Policies and Practices Related to Environmental Protection – Climate
Change, Assem. Res. A37-19, compiled in Assembly Resolutions in Force, ICAO
Doc. 9958 (2010)

u.s. federal and state court cases listed alphabetically

Abdullah v. American Airlines, Inc., 181 F.3d 363 (3d Cir. 1999)
Air Crash at Taipei on Oct. 31, 2000, In re, 219 F. Supp. 2d 1069 (C.D. Cal.
2002)
Air Crash Disaster Near New Orleans, La. on July 9, 1982, In re, 821 F.2d 1147
(5th Cir. 1987) (en banc)
Air Disaster Near Cove Neck, N.Y., In re, 774 F. Supp. 725 (E.D.N.Y. 1991)
Air Fr. v. Saks, 470 U.S. 392 (1985)
Alleged Food Poisoning Incident, Mar., 1984, In re, 770 F.2d 3 (2d Cir. 1985)
Avero Belgium Ins. v. American Airlines, Inc., 423 F.3d 73 (2d Cir. 2005)
Baah v. Virgin Atl. Airways Ltd., 473 F. Supp. 2d 591 (S.D.N.Y. 2007)
Benjamins v. British European Airways, 572 F.2d 913 (2d Cir. 1978)
Best v. BWIA West Indies Airways, Ltd., 581 F. Supp. 2d 359 (E.D.N.Y. 2008)
Blansett v. Continental Airlines, Inc., 379 F.3d 177 (5th Cir. 2004)
Borham v. Pan Am. World Airways, Inc., No. 85 Civ. 6922, 1986 WL 2974
(S.D.N.Y. Mar. 5, 1986)
Boyd v. White, 276 P.2d 92, 128 Cal. App. 2d 641 (Cal. Dist. Ct. App. 1954)
Byrd v. Comair, Inc. (In re Air Crash at Lexington, Ky., Aug. 27, 2006), 501
F. Supp. 2d 902 (E.D. Ky. 2007)
Chan v. Korean Air Lines, Ltd., 490 U.S. 122 (1989)
Chubb & Son, Inc. v. Asiana Airlines, 214 F.3d 301 (2d Cir. 2000), cert. denied,
533 U.S. 928, 121 S. Ct. 2549 (2001)
Chubbs Ins. Co. of Eur. S.A. v. Menlo Worldwide Forwarding Inc., 634 F.3d
1023 (9th Cir. 2011)
Continental Ins. Co. v. Federal Express Corp., 454 F.3d 951 (9th Cir. 2006)
Day v. Trans World Airlines, Inc., 528 F.2d 31 (2d Cir. 1975)
424 Table of Authorities

Dooley v. Korean Air Lines Co., 524 U.S. 116 (1998)

Eastern Airlines, Inc. v. Floyd, 499 U.S. 530 (1991)
Eck v. United Arab Airlines, Inc., 360 F.2d 804 (2d Cir. 1966)
Ehrlich v. American Airlines, Inc., 360 F.3d 366 (2d Cir. 2004)
El Al Isr. Airlines, Ltd. v. Tseng, 525 U.S. 155 (1999)
Feeney v. America W. Airlines, 948 P.2d 110 (Colo. App. 1997)
Fujitsu Ltd. v. Federal Exp. Corp., 247 F.3d 423 (2d Cir. 2001)
Fulop v. Malev Hungarian Airlines, 175 F. Supp. 2d 651 (S.D.N.Y. 2001)
Hilton v. Guyot, 159 U.S. 113 (1895)
Hipolito v. Northwest Airlines, Inc., 2001 WL 861984 (4th Cir. 2001)
Hornsby v. Lufthansa German Airlines, 593 F. Supp. 2d 1132 (C.D. Cal. 2009)
Hosaka v. United Airlines, Inc., 305 F.3d 989 (9th Cir. 2002)
Husserl v. Swiss Air Transport Co., 388 F. Supp. 1238 (S.D.N.Y. 1975)
Kahn v. Trans World Airlines, Inc., 82 A.D.2d 696 (N.Y. App. Div. 1981)
Koninkljjke Luchtvaart Maatschappij N.V. KLM v. Tuller, 292 F.2d 775 (D.C.
Cir. 1960)
Korean Air Lines Disaster of Sept. 1, 1983, In re, 932 F.2d 1475 (D.C. Cir. 1991)
Langadinos v. American Airlines, Inc., 199 F.3d 68 (1st Cir. 2000)
MacDonald v. Air Can., 439 F.2d 1402 (1st Cir. 1971)
Manufacturers Hanover Trust Co. v. Alitalia Airlines, 429 F. Supp. 964 (S.D.
N.Y. 1977), aff’d, 573 F.2d 1292 (2d Cir. 1977)
Margosian v. U.S. Airlines, Inc., 127 F. Supp. 464 (E.D.N.Y. 1955)
Martinez Hernandez v. Air Fr., 545 F.2d 279 (1st Cir. 1976)
Matveychuk v. Deutsche Lufthansa AG, No. 08-CV-3108, 2010 WL 3540921
(E.D.N.Y. Sept. 7, 2010)
Maugnie v. Compangie Nationale Air Fr., 549 F.2d 1256 (9th Cir. 1977)
Missouri Pac. R.R. v. Elmore & Stahl, 377 U.S. 134 (1964)
Motorola, Inc. v. MSAS Cargo Int’l, Inc., 42 F. Supp. 2d 952 (N.D. Cal. 1998)
Nastych v. British Airways PLC, No. 09 Civ. 9082, 2010 WL 363400 (S.D.N.Y.
Feb. 2, 2010)
O’Grady v. British Airways, 134 F. Supp. 2d 407 (E. D. Pa. 2001)
Olympic Airways v. Husain, 540 U.S. 644 (2004)
Padilla v. Olympic Airways, 765 F. Supp 835 (S.D.N.Y. 1991)
Paquete Habana, 175 U.S. 677 (1900)
Polanski v. KLM Royal Dutch Airlines, 378 F. Supp. 2d 1222 (S.D. Cal. 2005)
Price v. British Airways, No. 91 Civ. 4947, 1992 WL 170679 (S.D.N.Y. July 7,
1992)
Ramos v. American Airlines, Inc., No. 3:11cv207, 2011 WL 5075674 (W.D.N.C.
Oct. 25, 2011)
Rodriguez v. Ansett Austl. Ltd., 383 F.3d 914 (9th Cir. 2004)
 Table of Authorities 425

Rosman v. Trans World Airlines, Inc., 34 N.Y.2d 385 (N.Y. Ct. App. 1974)
Scala v. American Airlines, 249 F. Supp. 2d 176 (D. Conn. 2003)
Schaefer-Condulmari v. U.S. Airways Group, LLC, No. 09-1146, 2012 WL
2920375 (E.D. Pa. July 18, 2012)
Stone v. Continental Airlines, Inc., 905 F. Supp. 823 (D. Haw. 1995)
Sweis v. Trans World Airlines, Inc., 681 F. Supp. 501 (N.D. Ill. 1988)
Trans World Airlines, Inc. v. Franklin Mint Corp., 466 U.S. 243 (1984)
Twardowski v. American Airlines, Inc., 535 F.3d 952 (9th Cir. 2008)
Ugaz v. American Airlines, Inc., 576 F. Supp. 2d 1354 (S.D. Fla. 2008)
U.S. v. Causby, 328 U.S. 256 (1946)
U.S. v. Cordova, 89 F. Supp. 298 (E.D.N.Y. 1950)
U.S. v. Rezaq, 134 F.3d 1121 (D.C. Cir. 1998)
U.S. v. Yunis, 681 F. Supp. 896 (D.D.C. 1988), aff’d, 924 F.2d 1086 (D.C.
Cir. 1991)
U.S. v. Zehe, 601 F. Supp. 196 (D. Mass 1985)
Vosburg v. Putney, 80 Wis. 523, 50 N.W. 403 (Wis. 1891)
Wallace v. Korean Air Lines, 214 F.3d 293 (2d Cir. 2000), cert. denied 531 U.S.
1144 (2001)
Watts v. American Airlines, Inc., No. 1:07-cv-0434, 2007 WL 3019344 (S.D.
Ind. Oct. 10, 2007)
West Caribbean Airways, S.A., In re, 619 F. Supp. 2d 1299 (S.D. Fla. 2007)
Woodard v. Saginaw City Lines, Inc., 112 N.W.2d 512 (Mich. 1961)
Wyeth v. Levine, 555 U.S. 555 (2009)
Yahya v. Yemenia-Yemen Airways, No. 08-14789, 2009 WL 3424192 (E.D.
Mich. Oct. 20, 2009)
Zicherman v. Korean Air Lines Co., 516 U.S. 217 (1996)

u.s. administrative (cab/dot/faa) proceedings listed

alphabetically
Air Canada, The Austrian Group, British Midland Airways Ltd., Continental
Airlines, Inc., Deutsche Lufthansa Ag, Polskie Linie Lotniecze Lot S.A.,
Scandinavian Airlines System, Swiss International Air Lines Ltd., Tap Air
Portugal, and United Air Lines, Inc., Joint Application to Amend Order
2007-2-16 so as to Approve and Confer Antitrust Immunity, Dkt. No. OST-
2008-0234, Show Cause Order 2009-4-5 (Apr. 7, 2009)
Air Canada et al., Final Order to Amend Order 2007-2-16 so as to Approve and
Confer Antitrust Immunity, Dkt. No. OST-2008-0234, Order 2009-7-10 (July
10, 2009)
426 Table of Authorities

Air Canada et al., Joint Application to Amend Order 2007-2-16 so as to Approve

and Confer Antitrust Immunity, Dkt. No. OST-2008-0234, Order 2011-11-16
(Nov. 14, 2011)
Air Transport Association – Order on Reconsideration – International Air
Carrier Liability Limits, Dkt. No. OST-2005-22617, Order 2006-10-14 (Oct.
26, 2006)
Alitalia-Linee Aeree Italiane-S.p.A., Czech Airlines, Delta Air Lines, Inc.,
KLM Royal Dutch Airlines, Northwest Airlines, Inc., and Société Air
France, Joint Application for Approval of and Antitrust Immunity for
Alliance Agreements under 49 U.S.C. §§ 41308 and 41309, Dkt. No. OST-
2004-19214, Show Cause Order 2005-12-12 (Dec. 12, 2005)
Alitalia-Linee Aeree Italiane-S.p.A., Czech Airlines, Delta Airlines, Inc., KLM
Royal Dutch Airlines, Northwest Airlines, Inc., & Société Air France, Joint
Application for Approval of and Antitrust Immunity for Alliance Agreements
Under 49 U.S.C. §§ 41308 and 41309, Dkt. No. OST-2007-28644, Show
Cause Order 2008-4-17 (Apr. 9, 2008)
All Nippon Airways Co., Ltd., Continental Airlines, Inc. and United Airlines,
Inc., Joint Application under 49 U.S.C. §§ 41308–41309 for Approval of and
Antitrust Immunity for Alliance Agreements, Dkt. No. OST-2009-0350 (Dec.
23, 2009)
American Airlines, Inc., British Airways PLC, Finnair OYJ, Iberia Lineas
Aereas De Espana, S.A., Royal Jordanian Airlines, Joint Application
Under 49 U.S.C. §§ 41308-41309 for Approval of and Antitrust Immunity
for Alliance Agreements, Dkt. No. OST-2008-0252, Order 2010-2-8 (Feb. 13,
2010)
American Airlines, Inc., British Airways PLC, Finnair OYJ, Iberia Lineas
Aereas De Espana, S.A., Royal Jordanian Airlines, Joint Application
Under 49 U.S.C. §§ 41308-41309 for Approval of and Antitrust Immunity
for Alliance Agreements, Dkt. No. OST-2008-0252, Order 2010-7-8 (July 20,
2010)
The Austrian Group, British Midland Airways Limited, Deutsche Lufthansa
AG, Polskie Linie Lotnicze S.A., Scandinavian Airlines System, Swiss
International Air Lines Ltd., TAP Air Portugal, and United Air Lines,
Inc., and United Air Lines, Inc. and Air Canada, Joint Application under
49 U.S.C. §§ 41308 and 41309 for Approval of and Antitrust Immunity for
Commercial Alliance Agreements, Dkt. Nos. OST-2005-22922 and OST-96-
1434, Show Cause Order (Dec. 19, 2006)
Comments of the Department of Justice on the Show Cause Order to Amend
Order 2007-2-16 so as to Approve and Confer Antitrust Immunity, Docket
DOT-OST-2008-0234 (June 26, 2009)
 Table of Authorities 427

Computer Reservation Systems (CRS) Regulations, Dkt. No. OST-97-2881,

Final Rule, 14 C.F.R. Part 255, 69 Fed. Reg. 976 (Jan. 7, 2004)
DHL Airways, Inc. (ASTAR), Dkt. No. OST-2002-13089, 2003 DOT Av LEXIS
1086 (Dec. 19, 2003)
Enhancing Airline Passenger Protections, Dkt. No. OST-2010-0140, Final Rule
(Apr. 20, 2011)
In the Matter of Defining “Open Skies,” Dkt. No. 48130, Order 92-8-13, 1992
DOT Av. LEXIS 568 (Dep’t of Transp. Aug 5, 1992)
Northwest Airlines, Inc. and KLM Royal Dutch Airlines, Joint Application for
Approval and Antitrust Immunity of an Agreement Pursuant to Sections
412 and 414 of the Federal Aviation Act, as amended, Dkt. No. 48342,
Order 92-11-27 to Show Cause (Nov. 16, 1992)
Order of Civil Aeronautics Board Approving Increases in Liability Limitations
of Warsaw Convention and Hague Protocol, May 13, 1966 (approving
Agreement CAB 18900), 31 Fed. Reg. 7302 (1966), reprinted in 49 U.S.C.
app. § 1502 (1988)
Statement of United States Air Transportation Policy, Dkt. No. 49844, 60 Fed.
Reg. 21,841 (May 3, 1995)
Translux International Airlines, Notice of Action Taken, Dkt. No. OST-98-
4329 (Nov, 25, 1998)
United Air Lines, Inc. and Asiana Airlines, Inc., Joint Application for Approval
and Antitrust Immunity for an Alliance Expansion Agreement, Dkt.
No. OST-03-14202, Order 2003-5-18 Granting Approval and Antitrust
Immunity (May 14, 2003)
2007, 2008, and 2009 US-China Air Services and Combination Frequency
Allocation Proceeding, OST-2007-28567
U.S.-Japan Alliance Case, Answer of the Association of Flight Attendants-
CWA, Docket DOT-OST-2010-0059 (July 9, 2010)
U.S.-Japan Alliance Case, Dkt. No. OST-2010-0059, Final Order 2010-11-10
(Nov. 10, 2010)
Virgin America, Petition of Alaska Airlines for Review of Citizenship, Dkt. No.
OST-2009-0037 (Feb. 10, 2009)

international court of justice cases listed

alphabetically
Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, 1996
I.C.J. 226 (July 8) [GA Opinion]
Legality of the Use by a State of Nuclear Weapons in Armed Conflict,
Advisory Opinion, 1996 I.C.J. 66 (July 8) [WHO Opinion]
428 Table of Authorities

Questions of Interpretation and Application of the 1971 Montreal Convention

Arising from the Aerial Incident at Lockerbie (Libya v. United States),
Provisional Measures, 1992 I.C.J. 114 (Apr. 14)

court of justice of the european union cases listed

alphabetically
Case C-366/10, The Air Transport Ass’n of America, American Airlines, Inc.,
Continental Airlines, Inc., United Airlines, Inc. v. the Sec’y of State for
Energy and Climate Change, 2010 O.J. C-260/12, referred by UK High
Court of Justice, Q.B. Div. (Admin. Ct.)
Cases C-467/98, C-468/98, C-469/98, C-471/98, C-472/98, C-475/98, and C-476/
98, Comm’n v. Denmark, Sweden, Finland, Belgium, Luxembourg, Austria,
and Germany, 2002 E.C.R. I-090519 et seq.
Case C-466/98, Comm’n v. U.K., 2002 E.C.R. I-09427
Joined Cases C-509/09 & C-161/10, eDate Advertising v. X and Olivier
Martinez v. MGN Ltd. (Oct. 25, 2011)
Summary of Commission Decision of 14 July 2010 relating to a proceeding
under Article 101 of the Treaty of the Functioning of the European Union
and Article 53 of the EEA Agreement (COMP/39.56 – British Airways/
American Airlines/Iberia) 2010 O.J. (C 278) 14

european court of first instance cases listed

alphabetically
Case C-344/04, International Air Transp. Ass’n v. Department for Transp.,
2006 E.C.R. I-00403
Joined Cases C-317 & C-318/04, Parliament v. Council, 2006 E.C.R. I-4721

national court cases listed alphabetically

Blue Sky One Limited & Or’s v. Mahan Air & Ano’r [2010] EWHC 631
(Comm.) (Mar. 25, 2010) (U.K.)
Bury v. Pope, Cro. Eliz. 118, 78 Eng. Rep. 375 (1587) (U.K.)
Celestial Aviation Trading 71 Ltd. v. Paramount Airways Pvt. Ltd., [2010]
EWHC 185 (Comm.) (Feb. 11, 2010) (U.K.)
Chaudhari v. British Airways [1997] EWCA 1413 (U.K.)
Cie Air Fr. v. Teichner, 39 Revue Francaise de Droit Aerien 232, 23 Eur. Tr.
L. 87 (Isr. 1984)
Coccia v. Turkish Airlines, 108 Foro It. 1 1586 (Corte Cost. 1985)
 Table of Authorities 429

Connaught Laboratories Ltd. v. Air Canada, 23 O.R. 2d 176 (Ont. Sup. Ct. J.)
(1978) (Can.)
Daddon v. Air Fr., 1 S. & B. Av. R. 141 (Isr. 1984).
Deep Vein Thrombosis and Air Travel Group Litigation, [2005] UKHL 72,
[2005] 1 A.C. 495 (U.K.)
Emery Air Freight Corp. v. Nerine Nurseries Ltd., [1997] 3 N.Z.L.R. 723
(N.Z.)
Gal v. Northern Mountain Helicopters Inc., Dkt. No. 3491834918, 1998 B.C.T.
C. LEXIS 1351 (B.C.T.C. (Can.), July 22, 1998)
Gallais c. Aéro Maritime, T.G.I. Seine, Apr. 28, 1954, R.F.D.A. 1954, 184 (Fr.)
King v. Bristow Helicopters & In Re Morris, [2002] UKHL 7, 1 Lloyd’s Rep. 745
(U.K.)
Kuate v. Air Fr., Kenya Airways and others, Cour d’appel [CA] [regional court
of appeal] Paris, 2011 (Fr.)
Laroche v. Spirit of Adventure (UK) Ltd., [2009] EWCA (Civ) 12 (Eng.)
Naval-Torres v. Northwest Airlines, Inc., 159 D.L.R. (4th) 67 (Ont. Gen. Div.
(Can.) 1998)
Povey v. Qantas Airways Ltd., [2005] 223 C.L.R. 189 (Austl.)
Seagate Technology Int’l v. Changi Int’l Airport Servs. Pte Ltd., [1997] 3 S.L.R.
1 (Sing.)
Sidhu v. British Airways plc, [1997] 1 All E.R. 193 (U.K. H.L.)
The Queen v. Sec’y of State for the Env’t, Transp. & the Regions, ex parte
Omega Air Ltd., High Court of Justice (Q.B., Nov. 25, 1999) (Eng.)

non-u.s. administrative proceedings listed

alphabetically
European Aviation Safety Agency, Opinion 05/2012, Nov. 22, 2012
European Communities – Measures Concerning Meat and Meat Products
(Hormones), Original Complaint filed by the United States, Recourse to
Arbitration by the European Communities under Article 22.6 of the DSU:
Decision by the Arbitrators, WT/DS26/ARB (July 12, 1999)
Final Report and Comments of the Netherlands Aviation Safety Board on the
Investigation into the Accident with the Collision of KLM Flight 4805,
Boeing 747-206B, PH-BUF and Pan American Flight 1736, Boeing 747-121,
N736PA at Tenerife Airport, Spain on 27 March 1977 (Source: ICAO
Circular 153-AN/56)
World Trade Organization, Appellate Body Report, European Communities
and Certain Member States – Measures Affecting Trade in Large Civil
Aircraft, WT/DS316/AB/R (May 18, 2011)
430 Table of Authorities

World Trade Organization, Appellate Body Report, United States – Measures

Affecting Trade in Large Civil Aircraft (Second Complaint), WT/DS353/AB/
R (Mar. 13, 2012)

u.s. federal legislation by u.s. code sequence

11 U.S.C. § 1110
18 U.S.C. § 7
18 U.S.C. § 953
49 U.S.C. § 40102(a)
49 U.S.C. § 40109(g)
49 U.S.C. § 41101(a)
49 U.S.C. § 41102(a)
49 U.S.C. § 41308(b)
49 U.S.C. § 41309
49 U.S.C. § 41309(b)
49 U.S.C. § 41309(b)(1)
49 U.S.C. § 41309(b)(1)(A)
49 U.S.C. § 41309(b)(1)(B)
49 U.S.C. § 41703
49 U.S.C. § 44108(a)(3)
49 U.S.C. § 46502
49 U.S.C. § 46502(a)
49 U.S.C. § 46504
50 U.S.C. § 2170

u.s. federal legislation by popular name listed

chronologically
1799 Logan Act, 1 Stat. 613
1926 Air Commerce Act, ch. 344, 44 Stat. 568.
1938 Civil Aeronautics Act, ch. 601, 52 Stat. 973
2001 Air Transport Safety and System Stabilization Act, Pub. L. No. 107-42, 115
Stat. 230
2007 Implementing Recommendations of the 9/11 Commission Act of 2007,
Pub. L. No. 110-53, 121 Stat. 266
2009 Ensure Adequate Airline Competition Between the United States and
Europe Act, H.R. 831, 111th Cong.
 Table of Authorities 431

u.s. code of federal regulations listed

by code sequence
14 C.F.R. § 34.21 (2012)
14 C.F.R. § 36.103 (2005)
14 C.F.R. § 153 (2008)
14 C.F.R. § 212 (2008)
14 C.F.R. § 255 (2004)
14 C.F.R. § 257.5 (2005)

u.s. legislative history

Impact of Consolidation on the Aviation Industry, With a Focus on the
Proposed Merger Between Delta Air Lines and Northwest Airlines:
Hearing Before the Subcomm. on Aviation of the H. Comm. on Transp. &
Infrastructure, 110th Cong. 202–12 (2008) (testimony of James J. O’Connell,
Deputy Assistant Attorney Gen., Antitrust Dept. U.S. Dept. of Justice)

european commission regulations listed

chronologically
Regulation 2027/97, Air Carrier Liability in the Event of Accidents, 1997 O.J.
(L 285) 1
Regulation 889/2002, Amending Regulation (EC) No. 2027/97 on Air Carrier
Liability in the Event of Accidents, 2002 O.J. (L 140) 2
Regulation 261/2004, of the European Parliament and of the Council of 11
February 2004 Establishing Common Rules on Compensation and
Assistance to Passengers in the Event of Denied Boarding and of
Cancellation or Long Delay of Flights, and Repealing Regulation 295/91/
EEC, 2004 O.J. (L 46) arts. 4–6
Regulation 773/2004, Relating to the Conduct of Proceedings by the Commission
Pursuant to Articles 81 and 82 of the EC Treaty, 2004 O.J. (L 123) 18
Regulation 2111/2005, Establishment of a Community List of Air Carriers
Subject to an Operating Ban within the Community and on Informing
Air Transport Passengers of the Identity of the Operating Air Carrier, and
Repealing Article 9 of Directive 2004/36/EC, 2005 O.J. (L 344) 15
Regulation 473/2006, Laying Down Implementing Rules for the Community
List of Air Carriers Which Are Subject to an Operating Ban within the
432 Table of Authorities

Community Referred to in Chapter II of Regulation (EC) No. 2111/2005 of

the European Parliament and of the Council, 2006 O.J. (L 84) 8
Regulation No. 1141/2011, Amending Regulation (EC) No. 272/2009
Supplementing the Common Basic Standards on Civil Aviation Security
as Regards the Use of Security Scanners at EU Airports, 2011 O.J. (L 293) 22

other european commission documents listed

alphabetically
Background Fact Sheet on the EU/US Large Civil Aircraft Agreement (Oct.
11, 2012)
Commission Decision 29/03/2005, Approving the Standard Clauses for
Inclusion in Bilateral Air Service Agreements Between Member States and
Third Countries Jointly Laid down by the Commission and the Member
States, 2005 O.J. (C 943) 1
Summary of Commission Decision of 14 July 2010 relating to a proceeding
under Article 101 of the Treaty of the Functioning of the European Union
and Article 53 of the EEA Agreement (COMP/39.56 – British Airways/
American Airlines/Iberia), 2010 O.J. (C 278) 14

eu council regulations listed chronologically

Council Regulation (EC) 925/1999, Registration and Operation within the
Community of Certain Types of Civil Subsonic Jet Aeroplanes which Have
Been Modified and Recertificated as Meeting the Standards of Volume I,
Part II, Chapter 3 of Annex 16 to the Convention on International Civil
Aviation, Third Edition, July 1993, 1999 O.J. (L 115) 1
Council Regulation 1/2003, Implementation of the Rules on Competition
Laid Down in Articles 81 and 82 of the Treaty, 2003 O.J. (L 1) 1
Council Regulation 411/2004, Repealing Regulation (EEC) No 3975/87 and
Amending Regulations (EEC) No 3976/87 and (EC) No 1/2003, in
Connection with Air Transport between the Community and Third
Countries, 2004 O.J. (L 68) 1
Council Regulation 773/2004, relating to the Conduct of Proceedings by the
EC Pursuant to Articles 81 and 82 of the European Community Treaty,
2004 O.J. (L 123) 18
Council Regulation 847/2004, Negotiation and Implementation of Air Service
Agreements between Member States and Third Countries, 2004 O.J. (L
157) 7
 Table of Authorities 433

Council Regulation 868/2004, Protection Against Subsidisation and Unfair

Pricing Practices Causing Injury to Community Air Carriers in the Supply
of Air Services from Countries Not Members of the European Community,
2004 O.J. (L 162) 1
Council Regulation 1008/2008, Common Rules for the Operation of Air
Services in the European [Union], 2008 O.J. (L 293) 3
Council Regulation 1219/2012, Transitional Arrangements for Bilateral
Investment Agreements between Member States and Third Countries,
2012 O.J. (L 351) 40

eu council directives listed chronologically

Council Directive 2003/87, Establishing a Scheme for Greenhouse Gas
Emission Allowance Trading within the Community and Amending
Council Directive 96/61/EC, 2003 O.J. (L 275) 36
Council Directive 2004/36/CE, Safety of Third-Country Aircraft Using
[Union] Airports, 2004 O.J. (L 143) 76
Council Directive 2008/101, Amending Directive 2003/87/EC so as to Include
Aviation Activities in the scheme for Greenhouse Gas Emission Allowance
Trading within the Community, 2009 O.J. (L 8) 9–11, 17, 19

eu legislative proposals and reports listed

chronologically
European Commission, A Community Aviation Policy Towards its Neighbours,
COM (2004) 74 final (Feb. 9, 2004)
European Commission, Communication from the Commission, Developing
the Agenda for the Community’s External Aviation Policy, COM (2005) 79
final (Mar. 11, 2005)
European Commission, Communication from the Commission to the
European Parliament, The Council, The European Economic and
Social Committee and the Committee of the Regions, The EU’s External
Aviation Policy: Addressing Future Challenges, COM (2012) 556 final (Sept.
27, 2012)

other national laws and regulations (listed

alphabetically)
Air Navigation Act, 2002, §11A (Austl.)
Civil Aviation Act, 1949, 12 & 13 Geo. 6, c. 67, § 40 (Eng.)
434 Table of Authorities

Damage by Aircraft Act, 1952 No. 46, § 2 (N.S.W.) (Austl.)

Damage by Aircraft Act, 1999 § 10 (Austl.).
Law No. 274 of July 7, 1988 (It.)
Ley 2.564 de 1979, arts. 1 & 2 (Chile)
Transportation Act, S.C. 1996, c.10, §§ 55, 61(a)(1) (Can.)
 Index

Aer Lingus, 265 challenges to, 115; and security, 210; and
Agreement on Large Civil Aircraft subsidies, 119; and traffic rights, 68, 72, 79,
(U.S./EU), 384 96. See also bilateralism, cabotage, freedoms
Agreement on Subsidies and Countervailing of the air, nationality rule, open skies
Measures (WTO), 382, 385 Air traffic management, 28, 40, 46, 51, 57, 63,
Agreement on Trade in Civil Aircraft 106, 212, 221, 244
(WTO), 383 Air Transport Action Group, 23
African Airlines Association, 23 Air Transport Agreement (U.S./EU), see
African Union, 26, 71, 99, 115 U.S./EU Air Transport Agreement
Air Berlin, 338 Air Transport Committee (ICAO), 59
Air Canada, 13, 88, 90, 108, 126, 150, 166. See AirAsia (Malaysia-based airline), 145; and
also Star related entities, 145
Air Dolimiti, 151 Airbus, 329, 380; subsidization dispute with
Air Egypt, 48 Boeing, 384
Air France, 88, 139, 143, 149, 164, 171, 309, 394 Aircraft, 6, 11, 20, 28, 30, 37, 42, 78, 110, 153, 173,
Air France v. Saks, 284 325, 383; crimes against, 182; definition of, 31;
Air France v. Teichner, 289 leasing of, 337, 339; registration and
Air France/KLM, 93, 139, 143, 164. See also nationality of, 47, 48, 54, 328, 334, 340. See
SkyTeam also Chicago Convention, emissions,
Air Lease Corporation, 338 financing, nationality (aircraft)
Air Line Pilots Association, 27 Aircraft Protocol Group (Unidroit), 352
Air Navigation Commission (ICAO), 58, Airlines for America (A4A), 23, 147
178, 181 Airports, 22, 35, 46, 57, 97, 104, 120, 165, 187, 220,
Air rage, 215 242, 293, 304, 321; and capacity constraints,
Air services agreements, 12, 20, 25, 69, 83, 95, 116, 152, 158, 221, 245; charges for use of, 44,
113, 123, 138, 208, 241; authorization and 114, 236, 347; crimes against, 174, 185, 207,
designation under, 100; capacity and 212; and passenger screening, 214
frequency requirements, 5, 74, 94, 103; and Airports Council International (ACI), 27
Chicago Convention, 69; and competition Airspace sovereignty, 17, 40, 72, 176, 227;
law, 105, 114, 120; customs, duties, and reasons behind treaty basis for, 43;
charges, 106; dispute settlement, 106, 108; relationship with international
doing business assurances, 104; and the environmental law, 228. See also Chicago
environment, 241; liberalization of, 70, 94, Convention
122; multilateralization of, 109, 113; and Airworthiness, 20, 31, 67, 180; Certificate of, 35,
nationality rule, 125; open skies model of, 95; 173, 176, 247, 340
and pricing freedom, 74, 102; remaining Alitalia, 164, 273

435
436 Index

All Nippon Airways, 82, 152; and antitrust Bankruptcy and insolvency, 174, 332, 345, 351,
immunity, 163; cooperative agreement with 368, 371
Lufthansa, 163. See also Star Beijing Convention (security), 207; and related
Alliance, airline, 9, 95, 105, 122, 124, 147, 280, protocol, 208
304, 396; consolidation of, 149; definition of, Bermuda I Agreement (U.S./U.K.), 102, 108
148; future of, 171; history of, 124, 148; Bermuda II Agreement (U.S./U.K.), 101,
industrial policy relating to, 170; reasons for, 108, 149
150. See also antitrust immunity, Best v. BWIA West Indies Airways, 279
code-sharing, metal neutrality, oneworld, Bilateral air services agreement, see air services
SkyTeam, spillover, Star agreements, bilateralism
American Airlines, 149, 153, 168; as successor to Bilateral Investment Treaty, 92, 131, 136, 357
TWA, 101. See also Oneworld Bilateralism, 86, 99, 103, 109, 122, 393; defined
Animus furandi, 183 as the “Chicago system,” 70; and managed
Annex on Air Transport Services (WTO), 110, trade, 37, 74; as not ordained in Chicago
112, 136 Convention, 75
Annexes, Chicago Convention. See Chicago Blind sector transit, see freedoms of the air
Convention Blue Sky v. Mahan Air, 333, 347, 376
Antitrust and competition law, 4, 29, 56, 105, Boeing, 7, 13, 46, 329, 333, 352, 380;
114, 120, 124, 130, 152, 157; global subsidization dispute with Airbus, 384
harmonization of, 120 Bonn Declaration on Hijacking, 209
Antitrust immunity, 105, 148, 154, 171, 270; Brazil, 90, 99, 140, 147
comparison of U.S. and EU approaches Bretton Woods institutions, 34
to, 158, 161, 170; and Department of British Airways, 49, 53, 78, 88, 93, 101, 116, 120,
Transportation (U.S.), 155; and 140, 142, 144, 149, 168, 305, 328, 341, 396. See
domestic spillover, 162; and EU approach also Oneworld
to, 156; and global immunity, 167; Brownlie, Ian (law professor), 8
and metal neutrality, 159. See also alliance, Brunei, 113
code-sharing, oneworld, SkyTeam, Bunker, Donald (lawyer), 345
spillover, Star
Association of Asia-Pacific Airlines, 23 Cabotage, 6, 49, 72, 84, 92, 97, 111, 114, 140, 153,
Association of European Airlines, 23, 146; and 278, 318; Australian approach to, 52, 85;
1999 policy paper, 27, 146 current concerns about, 52; EU cabotage-
Association of Southeast Asian Nations free zone, 52; history and legal basis of, 50;
(ASEAN), 26, 71, 94, 99, 121; single aviation distinguished from right of establishment,
market of, 114, 145 85; labor opposition to, 85; in U.S./EU
Australia, 70, 85, 90, 114, 213, 246; and negotiations, 86. See also freedoms of the air
aviation policy of, 52, 140; and Chicago Canada, 77, 90, 99, 108, 246
Convention, 36 Canada/EU air services agreement, see
Australia/U.K. air services agreement, see EU/Canada air services agreement
U.K./Australia air services agreement Canada/U.S. air services agreement, see
Australia/U.S. air services agreement, see U.S./Canada air services agreement
U.S./Australia air services agreement Canadian Airlines, 168. See also Oneworld.
Austria/Russia air services agreement, see Capacity (airline), 69, 103; and restraints in
Russia/Austria air services agreement international air transport, 116
Austrian Airlines, 93, 140 Cape Town Convention, 252, 347; and aircraft
Aut dedere aut judicare, 193 leases, 339; and aircraft objects, 360;
Aviareto, 363 applicability of, 361; as solution to issue in
Aviation trade, exceptionalism of, 242 Blue Sky case, 336; and choice of law, 375;
Aviation Working Group (Unidroit), 351 covered agreements, 359; and creditor
protection, 366; customizability, 354;
Banju Accord Group Safety Oversight and events of default, 367; economic
Organization, 178 context of, 351; and export credit agency
 Index 437

discounts, 355, 377; history of, 351; China, 90, 140, 245; and response to EU
implementation in domestic law, 356; and ETS, 240
insolvency, 371; international interest, China/U.S. air services agreement, see
autonomy of, 361; international interest, U.S./China air services agreement
creation of, 360; international registry, 363; Choice of law, 14, 258, 313, 334, 348, 355,
international law significance of, 358, 378; 365, 375
and jurisdiction, 375; and priority of Civil Aeronautics Board (U.S.), 9, 29, 148, 154
nonconsensual rights (liens, etc.), 363; Clayton Antitrust Act (U.S.), 4
ratifications of Convention and Protocol, Code-sharing, 105, 122, 148, 152, 158, 161, 164,
377; relationship with Aircraft Protocol, 352; 265, 278, 305; defined, 153; and liability of air
and remedies, including self-help, carriers, 280
deregistration, interim relief, 357, 368, 370; Comity, international, 23
role in financing, 356; summary of, 359; and Commercial Aircraft Corporation
use of declarations, 353, 367 of China, 387
Cargo Lion (Luxembourg airline), 143 Committee on Aviation Environmental
Caribbean Aviation Safety and Security Protection (ICAO), 218, 230
Oversight System, 178 Committee on Unlawful Interference
Cathay Pacific (Hong Kong), 168, 245. See also (ICAO), 59
Oneworld. Competition law, see antitrust and
Central American Agency for Aeronautical competition law
Safety, 178 Conflict of laws, see choice of law
Chicago conference, 29, 30, 36, 70, 72, 77, 87, 95 Congestion pricing, 117; as alternative
Chicago Convention, 6, 11, 13, 19, 22, 24, 28, 34, to slots, 117
125, 135, 229, 234, 239, 242, 251, 275, 305, 313, Continental Airlines, 150, 166; alliance
319, 327; and aircraft licensing, 47; and membership, 166; merger with United
aircraft nationality registration, 328, 340, 344; Airlines, 162
airspace regulation, 43; airspace restrictions, Convention on Biological Diversity, 223
42; and airspace sovereignty, 40, 43, 72, 228; Convention on International Civil Aviation,
annexes to, 24, 31, 43, 57, 60, 64, 177, 215, 225, see Chicago Convention
230, 246, 340; and bilateralism, 75; as charter Convention on International Interests in
for ICAO, 55; concessionary basis of market Mobile Equipment, see Cape Town
access, 41, 72; and conflicting views of, 37, 72, Convention
126; and coordination of State regulations, Convention on the International Recognition
35; cosmopolitanism of, 33; economic of Rights in Aircraft, see Geneva Convention
impact of, 40, 72; and environmental (financing)
regulation, 221, 225, 235, 246; and Convention on Offenses and Certain Other
liberalization, 29, 39, 41, 69, 70, 86, 92, 125, Acts Committed on Board Aircraft, see
210; and navigation, 46; negotiations for, 28, Tokyo Convention
36; and pre-history of, 30; preamble of, 33; Convention Relating to the Regulation of
and registration and nationality of aircraft, Aerial Navigation, see Paris Convention
47, 343; restricted zones, 42; and safety, 176, Convention for the Suppression of Unlawful
181, 256; and security, 42, 185, 187, 192; and Acts Against the Safety of Civil Aviation, see
relationship to State laws and regulations, Montreal Convention (security).
44; success of, 34; and taxation, 44, 106, 236; Convention for the Suppression of Unlawful
and uniformity, 47, 231. See also airspace Seizure of Aircraft, see Hague Convention,
sovereignty, cabotage, International Civil The (security)
Aviation Organization, Standards and Convention for the Unification of Certain
Recommended Practices Rules for International Carriage by Air, see
Chile, aviation policy of, 52, 141; membership Montreal Convention (liability)
of MALIAT, 113 Convention for the Unification of Certain
Chile/EU air services agreement, see Rules Relating to International Carriage by
EU/Chile air services agreement Air, see Warsaw Convention
438 Index

Cooperative Development of Operational Emissions Trading Scheme (EU), 16, 22, 45,
Safety and Continuing Airworthiness 218, 226, 234, 240, 249, 397; and issue of
Programmes (ICAO), 67 unilateralism, 235
Coterminalization, 80 Environmental law, 54, 85
Council of the EU, 97 Environmental law, international, 124, 222; and
Council for Trade in Services (WTO), 52, 112 airspace sovereignty, 227; and economic
Court of Justice of the European Union, 25, 45, growth, 225; future of, 227; overview of, 222;
97, 213, 240, 313 principles of, 224; and subject-specific
Coyle, John F. (law professor), 358 regulatory regimes, 223
Crimes, aviation, 11, 18, 67, 175, 185, 194, 205, Equity (investment), 70, 75, 113, 129, 328, 330;
211; jurisdiction over, 189; and passenger distinguished from debt, 325. See also
data, 212; and piracy, 182; reactive and financing
proactive approaches to, 212. See also Estoppel (in international law), 142
hijacking, jurisdiction, security Ethiopia, 115
Cuis est solum, eius est usque ad caelum et ad European Commission, 97, 100, 150, 165, 172,
inferos, 18 213, 220, 247, 393; and airline alliances, 156;
Customary international law, 12, 17, 20, 40, and emissions trading scheme, 220; and
132, 135; and international aviation law, 18, horizontal and vertical air services
43, 235 agreements, 97. See also European
Czech Airlines, 164 Common Aviation Area
European Common Aviation Area, 99, 113, 146
Debt (financing), 13, 162, 330, 361; European Parliament, 213
distinguished from equity, 325. See also European Union, 3, 7, 24, 29, 124, 156, 243, 342,
financing 393; common airline licensing regime, 98,
Delays, see passenger rights 139; and airline liability, 273; as cabotage-
Delta Air Lines, 149, 152, 163, 171, 195, 214, 234, free zone, 52; external aviation policy of, 99;
238, 388. See also SkyTeam and foreign investment in airlines, 90, 129;
Department of Homeland Security (U.S.), 213 and liberalization, 70; and passenger rights,
Department of Justice (U.S.), 150, 154, 166 312; and safety, 256; and security, 174; single
Department of Transportation (U.S.), 76, 124, aviation market of, 7, 24, 83, 97, 139; and
148, 154, 270 subsidy policy, 119. See also Court of Justice
DHL, 83 of the European Union, emissions trading
Directorate-General for Competition (EU), 159 scheme, European Commission, European
Dispute settlement, 11, 21, 59, 64, 106, 134, 240, Common Aviation Area
248, 310, 383. See also air services EU/Canada air services agreement, 114, 141
agreements, International Civil Aviation EU/Chile air transport agreement, 93
Organization, World Trade Organization EU/U.S. Air Transport Agreement, see
Doctrinalism, 7 U.S./EU Air Transport Agreement
Dubai, see Emirates Airlines Export credits, see subsidies
DVT, air carrier liability for, 286 Export/Import Bank (U.S.), 388
Extradition, 187, 193, 198, 204; as alternative to
Easterbrook, Frank (judge), 4, 6 prosecution, 193
Eastern Airlines v. Floyd, 289
easyJet, 7 Fauchille, Paul (jurist), 30
Economic analysis of law, 4, 9 Federal Aviation Act (U.S.), 302
El Al Israel Airlines v. Tseng, 290, 300 Federal Aviation Administration (U.S.), 7, 23,
Emirates Airlines, 81, 96, 120, 145, 245, 389 179, 256, 364
Emissions, aviation, 5, 10, 16, 22, 27, 44, Federal Trade Commission (U.S.), 154
57, 67, 176, 217, 235, 397; and airspace FedEx, 83, 215
sovereignty, 227; global response to, 221; and Fernandes, Tony (airline entrepreneur), 148
multilateral treaty, 242; regional approach to, Financing, aircraft, 5, 13, 16, 20, 47, 179, 325,
218, 243 343, 355, 377; cash-based, 330; and choice of
 Index 439

law issues, 324; “contractual” and “property” Goode, Sir Roy (law professor), 328, 345, 354,
effects of secured transactions distinguished, 362, 371
332; debt-based, 330; and insolvency, 350; Google Earth, 42
and leases, 337; macroeconomic climate for, Government aid (financing), see subsidies
329; problem of aircraft mobility, 345; Group on International Aviation and Climate
problem of nonuniform legal concepts, 346; Change (ICAO), 218
protection of security interests generally, Guadalajara Supplementary Convention
345; relationship with subsidization, 380; (liability), 265
role of Cape Town Convention in, 356. See Guatemala City Protocol (liability), 266, 304
also Cape Town Convention, leases,
subsidies Hague Convention, The (security), 186, 201,
Finnair, 168. See also Oneworld. 207, 210, 212; and extradition, 204; and
Five Freedoms Agreement, 37, 39, 73, 78, hijacking offenses, 202; jurisdiction under,
87, 125 203; limitations of, 204
Flag of convenience, 129 Hague Peace Conference, The, 30
Forum non conveniens, 305 Hague Protocol, The (liability), 262, 267,
France, 49, 79, 144, 149, 165, 263, 291, 308, 270, 274, 308; and successive carriage, 264;
319, 388 U.S. failure to ratify, 264; and wilful
Freedoms of the air, 73, 76, 96, 99, 110; first misconduct, 263
freedom, 77; second freedom, 77, 96; third Haneda Airport (Japan), 118
freedom, 78, 127; fourth freedom, 78, 127; Hard law, 12, 63, 223, 231. See also soft law
fifth freedom, 79, 86, 96, 113, 153, 305; Havana Convention, 32
anterior fifth freedom, 81; fifth freedom and Heathrow Airport (U.K.), 80, 101, 116, 144, 169;
blind sector transit, 80, 153; intermediate and capacity constraints, 116
fifth freedom, 80; sixth freedom, 81, 96; Henkin, Louis (law professor), 8
seventh freedom, 82, 96, 111, 113, 128; seventh Hijacking, 18, 48, 67, 184, 191, 201, 206, 212, 288;
freedom for all-cargo services, 83; eighth distinguished from piracy, 182. See also Bonn
freedom, 84; ninth freedom, 84; exchange of Declaration on Hijacking, Hague
all nine freedoms in the EU, 97. See also Convention, The (security)
cabotage, European Union Homer (Greek poet), 182
Frequencies, see capacity Honnebier, Patrick (lawyer), 333
Friendly, Henry (judge), 1 Horizontal agreements (EU), 97, 140
Huang, Jiefang (ICAO lawyer), 342
Gabon, 115 Hushkit dispute, 247
Gatwick Airport (U.K.), 169 Husserl v. Swiss Air Transp. Co., 288
GE Capital Aviation Services, 338
General Agreement on Tariffs and Trade Iberia Airlines, 93, 140, 168, 394. See also
(WTO), 34, 110, 382 Oneworld
General Agreement on Trade in Services Ibero-American Convention, 32
(WTO), 25, 110, 109 Iceland, 114
General principles of law, 11, 19, 107 India, 90, 120, 245
General Risks Convention, 320, 322 Indonesia, 145
Geneva Convention (financing), 347, 380; as a Institut de Droit International. 30
choice of law treaty, 348; criticism of, 350; Intercarrier Agreement (IATA) (liability),
enforcement only by domestic courts, 349; 270, 294
and issue of insolvency, 350 Intergovernmental organizations, 23
Geneva Convention on the High Seas, 184 Intergovernmental Panel on Climate
Germany, 79, 84, 96, 112, 120, 133, 139, 149, 304, Change, 229
319, 388 Interlining, 27, 127, 158, 278. See also alliance,
Global warming, 217, 229, 246 code-sharing
Globalization, 2, 29, 227, 242, 396 International Air Cargo Association, 23
Goldsmith, Jack (law professor), 147 International Air Carrier Association, 23
440 Index

International Air Services Transit Agreement, International law, public, 11; compliance, 8, 178;
see Two Freedoms Agreement relationship with domestic law, 3; sources of,
International Air Transport Agreement, see 16. See also customary international law,
Five Freedoms Agreement dispute settlement, general principles of law,
International Air Transport Association, 23, 26, judicial decisions, treaties
70, 352; and “Agenda for Freedom,” 146; and International Maritime Organization, 222, 226
Cape Town Convention, 352; and emissions International Monetary Fund, 267
regulation, 242; and liability agreements, International nongovernmental organizations,
253, 269; and relationship with governments, see nongovernmental organizations
27; and standard contract of carriage, 259 International Registry of Mobile Assets (Cape
International aviation law, 1, 3, 122; as Town Convention), 363
freestanding body of law, 4; relationship with International Tribunal for the Law of the Sea, 22
domestic law, 3, 6; scope and content, 4 Interstate Commerce Commission (U.S.), 29
International Aviation Safety Assessment Investment, crossborder, in airlines, 127,
(FAA), 179 133, 137, 171. See also international
International Chamber of Commerce, 27 investment law
International Civil Aviation Organization, 5, Iran, 333
24, 55, 67, 142, 173; Assembly of, 59; Assembly Ireland, 363, 372
resolutions of, 59; continuing mission of, 67; Irrevocable Deregistration and Export Request
Council of, 22, 58, 64, 106, 176; and dispute Authorization (IDERA), 369, 377
settlement, 22, 64, 106, 135; and economic Israeli Supreme Court, 289
regulation, 56; and the environment, 217, Italian Constitutional Court, 273
228, 233, 246; future development of, 68;
goals of, 55; Legal Affairs Bureau of, 60; Jamaica, 143
Legal Committee of, 186, 262, 320; and new Japan, 90
safety annex, 181; role in Cape Town Japan Air Lines, 82, 152. See also SkyTeam
Convention, 352; role in creating Montreal Japan/U.S. air services agreement, see
liability agreement, 275, 320; and safety audit U.S./Japan air services agreement
program, 67, 180; and safety regulation, 173; Judicial decisions, international, 21
Secretariat of, 60; and security, 185, 206, 208; Jurisdiction, international criminal, 189, 196,
subordinate bodies of, 58; and surface 203; bases of (in aviation crimes treaties), 192;
damage liability treaties, 315, 320; and enforcement jurisdiction, 190;
technical coordination, 56. See also Air extraterritorial jurisdiction, 211; judicial
Navigation Commission, Air Transport jurisdiction, 189; passive personality and
Committee, Committee on Unlawful protective principles, 192, 211; and State of
Interference, Standards and Recommended registration, 189; universal jurisdiction,
Practices 190. See also aut dedere aut judicare, crimes
International Commission for Air (aviation)
Navigation, 177 Jus cogens, 18,183
International Court of Justice, 21, 106, 222, 240;
and role in ICAO dispute settlement, 64 Kallas, Siim (EU transport commissioner), 172
International Declaration Prohibiting Karman Line, 41
Launching of Projectiles and Explosives Keynes, John Maynard (economist), 38
from Balloons, 30 KLM Airlines, 93, 139, 143, 148; and Northwest
International Explosives Technical Airlines investment, 148
Commission, 207 Korean Air, 164
International governmental organizations, 23 Krugman, Paul (economist), 120
International investment law, 131, 137; and Kyoto Protocol, 5, 226, 230, 233
arbitration of investor/State disputes, 135;
bilateral investment treaties, 136; definition LAN (Chilean airline), 143
of foreign investment, 133 Latin America, 31, 93, 122, 143; and
International law, private, 14 liberalization, 144
 Index 441

Latin American and Caribbean Air Transport 280; consumer orientation of, 276; and delay
Association, 23 liability, 311; embarking and disembarking,
League of Nations, 34 292; enforceability by contracting States, 258;
Leases (aircraft), 337; finance and operating entry into effect, 308; “escalator” clause, 297;
leases distinguished, 339; growing exclusivity of, 299; and insurance, 307;
significance of, 338; wet leases, 344. See also future evolution of, 313; judicial
financing interpretation of, 314; jurisdiction under,
Legal Affairs Bureau (ICAO), see International 303, 309; legal effect of, 308; liability
Civil Aviation Organization principles of, 276, 293, 311; and negligence of
Legal Committee (ICAO), see International air carriers, 295; and procedural questions,
Civil Aviation Organization 305; punitive damages under, 299; passenger
Legal theory, 7 right of recourse against non-carriers, 307;
Lenin, Vladimir, 38 relationship to Warsaw Convention, 253,
Levine, Michael (law professor), 9, 36 277, 309; and State reservations, 310; scope
Lex ferenda, 221 of, 277; and successive carriage, 279; and
Lex loci delicti, 15 ticketing, 282. See also International Civil
Lex mercatoria, 148, 358 Aviation Organization, liability
Lex registrii, 334, 348, 376 Montreal Convention (plastic explosives), 207
Lex situs, 334, 348 Montreal Convention (security), 186, 205;
Liability, international air carrier, 251, 258, 276, meaning of “aircraft in service,” 206; offenses
293, 318; caps on, 266; cargo carriage, 280; under, 205; and related protocol, 207
and EU, 273; and Japan, 272, 294; public Montreal Protocol (surface damage
versus private oversight of, 255; standards of, liability), 320
294; and third-party surface damage, 255, 315, Montreal Protocols (liability), 267
321, 317. See also Montreal Convention Most favored nation, 110
(liability), Warsaw Convention, Warsaw Multilateral Agreement on Air Services
System (ASEAN), 114, 145
Lockerbie (Pan Am bombing), 207 Multilateral Agreement on Full Liberalisation
LOT Airlines (Poland), 127. See also Star of Passenger Air Services (ASEAN), 115
Lowenfeld, Andreas (law professor), 1 Multilateral Agreement on Investment, 137
Lufthansa, 90, 96, 120, 125, 133, 140, 149, 163, Multilateral Agreement on the Liberalization
166, 238, 304, 394. See also Star of Air Transportation (MALIAT), 113
Luxembourg, 143 Multilateral Convention on Foreign
Investment in Airlines, 142
Mahan Air, 333 Multilateralism, 109; with respect to aviation
Malta Agreement (liability), 273 carbon emissions regulation, 235
Mare liberum, 38, 73
Market-based measures (environmental National Aeronautics and Space
regulation), 218, 230, 233, 244 Administration (NASA), 385
Mergers, airline, 120, 125, 127 National treatment, 110, 134
Metal neutrality, 159; contrasting U.S. and EU Nationality (aircraft), 328, 340; and aircraft
approaches to, 161; and viewpoint of financing, 343; and Chicago Convention,
organized labor, 162 344; EU rules, 342; ICAO approach to, 342;
Mexico, 374 nationality of aircraft and airlines
Mises, Ludwig von (economist), 104 distinguished, 341; relationship to aircraft
Montreal Agreement (U.S./IATA) (liability), 269 registration and safety oversight, 343
Montreal Convention (liability), 14, 253, 274, Nationality rule, 18, 49, 69, 86, 123, 125, 147, 341;
306, 313, 320; absence of dispute settlement and aircraft financing, 328; defined as
mechanism, 311; accident causing death or citizenship purity, 8, 129; and domestic law,
injury, 283, 286; and advance compensation, 90, 128, 140; elements of, 69, 91, 126;
298; bodily versus psychic injury, 287, 291; organized labor, viewpoint of, 129; origins
and cargo carriage, 280; and code-sharing, and purpose of, 126; protectionist effects of,
442 Index

89, 127; recent application and Private international law, see international law,
destabilization by States, 92, 138, 142; private
relationship with security and strategic trade Private international aviation law, 251;
policy, 88, 130; and right of establishment, definition of, 13; judicial enforcement of, 22
140; trade effects of, 87, 128; and waivers of, Private transnational aviation law, 15; and
142. See also right of establishment judicial enforcement of, 22
Navigation, see Chicago Convention Procedures for Air Navigation Services, 178
Netherlands, The Kingdom of the, 122, 144, 149, Protocol to the Convention on International
240, 334, 396; as monist State, 356 Interests in Mobile Equipment on Matters
Netherlands, The Kingdom of the, Supreme Specific to Aircraft Equipment, see Cape
Court, 240 Town Convention
New Zealand, 70, 114; and Chicago Public international aviation law, definition of,
Convention, 36; membership of MALIAT, 113 11; overlap with private transnational
Night flight restrictions (in U.S./EU aviation law, 15
relations), 248 Public international law, see international law,
Noise pollution, aviation, 220, 246 public
Nongovernmental organizations, 4, 23, 218, 270
North American Free Trade Agreement, 5, Qantas, 85, 124, 142, 168. See also Oneworld.
109, 136
Northwest Airlines, 163. See also KLM Airlines Railway Labor Act (U.S.), 4
Norway, 114 Rational choice theory, 10
Ratione loci, 202
Obama, Barack (U.S. president), 168 Ratione personae, 203
Olympic Airways v. Husain, 286 Ratione temporis, 206
Oneworld (alliance), 105, 149; regulatory Regional Economic Integration Organization
review of, 168 (Cape Town Convention), 377
Open Aviation Area, 7, 71 Regional Safety Oversight Organization
Open skies, 7, 10, 70, 93, 95, 101, 106, 112, 136, (ICAO), 178
142, 144, 243, 393; and airline alliances, 150; Renvoi doctrine, 334
and liberalization, 70, 83, 110 Right of establishment, 53, 85, 91, 128, 140, 172;
Organization for Economic Cooperation and distinguished from cabotage, 85. See also
Development, 25, 355, 389; and air cargo cabotage, investment, nationality rule
transport liberalization, 26; control of export Rio Declaration on Environment and
credits, 381 Development, 224
Outer Space Treaty, 41 Rome Convention (1933 and 1952) (surface
damage liability), 315, 317
Paretianism, international, 10 Rome Protocol (surface damage liability),
Paris Convention, 18, 31, 176; and 315. See also Montreal Protocol (surface
establishment of international aerial damage liability)
navigation commission, 31 Roosevelt, Franklin D. (U.S. president), 28
Passenger data, 212; passenger name records, Rosman v. Trans World Airlines, 288
213; U.S./EU agreements concerning, 213; Royal Bank of Scotland, 328
use for security purposes, 212 Royal Jordanian Airlines, 168. See also
Passenger rights, 312 Oneworld
Pauwelyn, Joost (law professor), 239 Russia, 77, 246; and EU aviation relations, 140;
Philippines, 145 and trans-Siberian overflights, 77
Piracy, aviation, 18, 182; distinguished from Russia/Austria air services agreement, 140
terrorism, 183; as jus cogens crime, 185. See Ryanair, 7, 330, 389
also crimes (aviation)
PK Airfinance (U.S.), 333 Safety, aviation, 175; and Chicago Convention,
Posner, Eric (law professor), 147 176; and Paris Convention, 176. See also
Pricing (airline), 69, 102 International Civil Aviation Organization
 Index 443

Safety Assessment of Foreign Aircraft (EU), 180 Supreme Court (U.S.), 289
SAS Airlines, 166. See also Star Surface damage liability, see liability
Schiphol Airport (Netherlands), 333 Swiss International Airlines, 166. See also Star
Schmitt, Carl (jurist), 183 Sykes, Alan (economist and lawyer), 386
Schwartz, Warren (economist and lawyer), 386
Sector Understanding for Export Credits on TACA (El Salvador-based airline), 144
Civil Aircraft (OECD), 355, 389 TAM (Brazilian airline), 143
Security, aviation, 173, 182; and air cargo, 215; TAP Air Portugal, 166. See also Star
and passenger and cargo screening Terrorism, 188, 212; and aviation, 174;
procedures, 214; State bilateral cooperation, distinguished from piracy, 183; and U.N.
211. See also air rage, crimes, International efforts to define, 184
Civil Aviation Organization, passenger data Thai Airways, 166. See also Star
September 11, 2001 (9/11), 43, 119, 174, 187, Thailand, 145
207, 212 Tiger Airways, 145
Shane, Jeffrey (IATA general counsel), 150 Tokyo Convention, 186, 194; aircraft
Sherman Antitrust Act (U.S.), 29 commander powers, 199; jurisdiction under,
Singapore, membership of MALIAT, 113 196; limitations of, 198; offenses under, 194;
Singapore Airlines, 245 scope of, 195; weaknesses of, 198
SITA (Cape Town registry), 363 Trade, managed, 36, 74. See also air services
SkyTeam (alliance), 105, 149, 156, 161, 171, 180, agreements
396; regulatory review of, 164 Traffic rights, see air services agreements,
Slots, 116, 158, 168, 221; as alternative to freedoms of the air
congestion pricing, 117 Transatlantic Business Dialogue, 27
Soft law, 12, 63, 223, 231, 390. See also hard law Transit rights, see freedoms of the air
South Asian Regional Initiative, 178 Transportation Security Administration
South Korea, 145 (U.S.), 214
Southwest Airlines, 330 Treaties, 3, 11, 16, 19; and dualism, 357; and
Sovereignty, airspace, see airspace sovereignty. monism, 356; role in international aviation
See also Chicago Convention law, 19
Space law, 41 Treaty on the Functioning of the European
Special Drawing Rights, 267 Union, 156
Spillover (of airline alliance immunity), 162, 167 Treaty on Principles Governing the Activities
Standard Form of Agreement for Provisional of States in the Exploration and Use of Outer
Air Routes, 75 Space, see Outer Space Treaty
Standards and Recommended Practices, 20, 24, Trinidad and Tobago, 143
57, 61, 177, 231; differences in legal effect of, Two Freedoms Agreement, 37, 73, 77, 87, 125
62, 232
Star (alliance), 105, 149, 151, 161, 171, 280, 396; Unidroit, 351
regulatory review of, 166 Unilateralism, 234; with respect to airline
State aid, see subsidies carbon emissions regulation, 235
Strict liability (civil), 271, 276, 281, 294, 307, 311, United Airlines, 78, 128, 163, 166; as successor to
316, 322 PanAm, 101; and antitrust immunity, 163
Strict liability (criminal), 194 United Kingdom, and Chicago Convention,
Subsidies, 119, 327, 382; and aircraft 36; as dualist State, 357; and aircraft
manufacturing, 327, 380; and export credits, financing, 377
381, 388; future prospects for, 387. See also U.K./Australia air services agreement, 85
Airbus, Boeing, Sector Understanding for United Arab Emirates, 245
Export Credits on Civil Aircraft (OECD) United Nations, 5, 17, 34; and actions related to
Successive carriage, 264, 279 prevention of terrorism, 174; General
Sumitomo Mitsui, 328 Assembly, 174; Security Council, 174
Summers, Lawrence (U.S. government United Nations Convention on the Law of the
official), 168 Sea, 222
444 Index

United Nations Framework Convention on Vertical agreements (EU), 98

Climate Change, 5, 223, 227. See also Kyoto Vienna Convention on the Law of Treaties, 19,
Protocol 233, 239
United Nations Universal Declaration of Vienna Convention for the Protection of the
Human Rights, 12 Ozone Layer, 223
United Parcel Service (UPS), 83, 215 Virgin Australia (formerly Virgin Blue), 85, 141
United States, 3, 10, 15, 25, 76, 104, 108, 124, 136; Volcanic ash crisis, 43, 119
and approach to airline industry regulation,
29; as cabotage market, 52; and the Chicago Wallace v. Korean Air, 285
Convention, 28, 36, 72; and the Warsaw Convention, 14, 252, 274; bodily
environment, 220, 239; and financing, 341, versus psychic injury, 287; enforceability
353, 364, 377; and foreign investment in by contracting States, 258; exclusivity
airlines, 90, 129; and liability, 253, 263, 268, of, 300; history of, 258; integration with
275, 308; and liberalization, 70, 143; and national law and contracts of carriage, 259;
open skies policy, 70, 83, 93, 144, 149; and jurisdiction under, 303; principles of
response to EU ETS, 240; and review of liability, 260; reform of, 262; relationship
airline alliances, 149; and safety, 63, 179; and to Montreal Convention, 253; U.S.
security, 206, 211 skepticism of, 261, 268; and willful
U.S./Australia air services agreement, 142 misconduct, 263. See also Hague Protocol
U.S./Brazil air services agreement, 143 (The) (liability), Guadalajara
U.S./Canada air services agreement, 90, 100, 125 Supplementary Convention (liability),
U.S./China air services agreement, 76, 103, 111 Guatemala City Protocol (liability), Malta
U.S./EU Air Transport Agreement, 27, 78, 82, Agreement (liability), Montreal Protocols
86, 93, 111, 114, 127, 138, 141, 149, 164, 248, 393, (liability), Montreal Agreement (U.S./IATA)
397; and antitrust and competition law, 121; (liability), Intercarrier Agreement (IATA)
as demonstration model, 122; dispute (liability)
settlement under, 107; and the environment Warsaw System, 253, 257, 271; and liability
241, 243; and modification of nationality caps, 266
rule, 142; and noise regulation, 248; as Westphalia, Treaty of, 17
plurilateral agreement, 114, 244; and Wilson, Woodrow (U.S. president), 34
amending Protocol, 243; role of joint Wool, Jeffrey (law professor and
committee appointed under, 243 lawyer), 378
U.S. Export-Import Bank, 355, 388 World Economic Forum, 27
U.S./France air services agreement, 144 World Trade Organization (WTO), 21, 25, 52,
U.S./Japan air services agreement, 118, 128 222, 380; and air services trade, 25, 52, 71, 89,
U.S./Mexico air services agreement, 81 109; and Airbus/Boeing dispute, 381, 384;
U.S. Model Open Skies Agreement, 138 and aircraft financing, 380; and dispute
U.S./Netherlands air services agreement, 144 settlement, 21, 107, 109, 135, 383. See also
U.S./Singapore air services agreement, 85 General Agreement on Tariffs and Trade,
U.S./South Korea air services agreement, 89 General Agreement on Trade in Services,
Universal Safety Oversight and Audit subsidies
Programme, 180. See also International Civil Wright Brothers, 30
Aviation Organization
Unlawful Interference Convention, 321; State Yamoussoukro Declaration/Decision (African
resistance to, 322 Union), 26, 71, 99, 115