1 1Associate Professor, Institute of Air and Space Law, McGill University, Montreal, Quebec, Canada. This research was made possible by a grant from the International Chamber of Commerce. However, the opinions here expressed are those of the author alone. He is grateful to Joseph Wilson for his extensive research assistance; to Timothée Giard and Shy Kurtz for their helpful suggestions respecting research strategies; and to Alan Alexandroff, Julian Arkell, Paul Stephen Dempsey, Morgan Foulkes, Brian Havel, Pierre Latrille, Rod Macdonald, Bob Wolfe and Maureen Irish for their insightful comments. The author may be contacted at: ‹Richard.firstname.lastname@example.org›.
I T.I.A.S. 1507 (1946). See AnnualReviewofCivilAviation, 58 ICAO Journal 6, 2003, at 12.
3 For an analysis of the impact of subsidies on air transportation services, see International Chamber of Conunerce, PolicyStatementonStateAidstoAirlines, Ice Doc. No. 310/430 Rev. 2, available at: . 4 The European Commission's negotiating mandate from the Council, which has not been made public, covers a wide range of issues. Among them are traffic rights, routes, capacity, frequency, slots, fares, application of competition mles and high standards of safety and aviation security; see at: . Recently, however, the EU has acknowledged that it is unlikely to make progress on all issues through this round of negotiations and will have to envisage more than one phase to the negotiations; see Press Release from the Transport Council meeting of 8-9 March 2004 at: . The proposal of the European Commission falls under co-decision. On 11 March 2004, the European Parliament adopted the proposal after the second reading report: A5-0064/2004. 6 49 U.S.C. §41310.
7 Agreement between the European Community and the Swiss Confederation on Air Transport, OJ L 114/73, 30 April 2002. " See WTO, TheResultsof theUruquayRoundofMultilateralTradeNegotiations:TheLegalTexts, United Nations, New York and Geneva, 1994; also available at: www.wto.org/english/docs_e/legal e/24-scm.pdfi. For a masterful, systematic treatment of the subject, see Marc Benitah, TheLaw of SubsidiesundertheCATr lWTOSysterrr, Kluwer, The Hague, 2002. 1 Charles Hunnicutt, former U.S. Assistant Secretary of Transportation for Aviation and International Affairs, has written: "There are no international rules on state aid in aviation. In the General Agreement on Tariffs and Trade (GATT), aviation has been exempted. As a consequence, no state aid rules under the World Trade Organization's regime apply to aviation. It will be important for an EU/US arrangement to come to an understanding on state aid." See USandEU:NewEra,Next,Agreement? Air and Space Lawyer, Fall 2003; available at: .
10 See at: supra, footnote 5, at p. 2. See also the objective identified for the Regulation by the Council in Common Position No. 11/2004 (2004/C 66 E/02). 12 It is notable that Commission Guidelines specifically exclude invoking foreign State aid to a competing carrier as a justification for State aid to an EU carrier; see ApplicationofArticles92and93oftheECTreatyandArticle61of theEEAAgreementtoStateaidsintheaviationsector, OJ C 350/5, 12 December 1994 (94/C 350/07), para. 11; available at: et seq. (hereinafter Aviation State Aids Guidelines).
" Unlike the Scum Agreement, the Regulation does not target government income or price support. On the other hand, the Regulation does target "unfair pricing practices", a term which it adapts from Council Regulation (EEA) No. 4057/86 of 22 December 1986 on unfair pricing practices in maritime transport, OJ L 378/14, 31 December 1986. In essence, this is a loose test for predatory pricing or dumping: "Unfair pricing practices shall be deemed to exist on a particular air service to or from the Community where non-Community air carriers: - benefit from a non-commercial advantage; and - charge air fares which are sufficiently below those offered by competing Community air carriers to cause injury. These practices must be clearly distinguishable from normal competitive pricing practices." The subject of unfair pricing practices is beyond the scope of this article but ought to be addressed through a common approach to competition policy under the Open Aviation Area for reasons analogous to the arguments presented here. �t However, judicial interpretation has narrowed the scope of the provision: see infra, footnote 76 and accompanying discussion. z This is apparently a maladroit adaptation of the language from Article 15.5 of the Scum Agreement: "The authorities shall also examine any known factors other than the subsidized imports which at the same time are injuring the domestic industry, and the injuries caused by these other factors must not be attributed to the subsidized imports." Note, however, that the purpose of the SCM provision is to require a finding of causal connection between the subsidized import and injury to domestic producers. Other known factors are to be considered, and injury caused by them is not to be attributed to the subsidized import.
1(0 See COM/2002/11O/tlnaI, supra, footnote 5, at p. 1. This is one of the main arguments offered for arming the Commission with new powers. For a comprehensive discussion of the U.S. measures against foreign discriminatory practices in air transportation, see Paul Stephen Dempsey, LawandForeignPolicyinInternationalAviation, Transnational Publishers, Dobbs Ferry, New York, 1987, pp. 121-166. 'N 49 U.S.C. §41310(a). 1'1 see 14 C.F.R., Chapter I, Part 13. The tATFCPA also envisages modalities for ongoing review of discriminatory and unfair competitive practices and for Congressional action where the Secretary's exercise of authority proves inadequate. 21> See Office of the U.S. Secretary of Transportation, Washington, D.C., Docket No. OsT-1998-4030-1, 1 , available through the Usdot Website at: �www.dot.gov�. 21 In the last decade, in matters involving the United States and the EU, similar use of �41310 was made (1) in 1999 by Northwest in the now infamous "hushkit" dispute: see Office of the U.S. Secretary ofTransportation, Washington, D.C., Docket No. Os r-1999-501 1; (2) in 1998 by US Airways as it sought implementation of the right to fly between Gatwick, U.K. and Charlotte, North Carolina: see Office of the U.S. Secretary of Transportation, Washington, D.C., Docket No. OST-1998-3615; and (3) in 1995 by Delta as it sought implementation of the right to handle its own baggage at Frankfurt, Germany: see Office of the U.S. Secretary of Transportation, Washington, D.C., Docket No. OsT-1995-683; all available through the Usmor Website at:
-- See USGAO, InternationalAviation:Dur'sEffortstoPromoteU. S.AirCargoCarriers'Interests, GAO/RCED-97-13, U.S. Government Printing Office, Washington, D.C., at 26-29. See also USGAO, InternationalAviation:DOTNeedsMoreInformationtoAddressU.S.Airlines'ProblemsinDoingBusinessAbroad, Gao/Rced-95-24; available at: .
z3 USGAO, DOTNeedsMoreInformation, ibid. z'r See Paul Stephen Dempsey, FlightsofFancyFyFightsof Fury:ArbitrationandAdjudicationof Commercial&PoliticalDisputesinIntemationalAviation, unpublished manuscript in possession of the author, December 2003. zs See Robert Wolfe, SeeyouinCeneva?I'luralisrnandCentralisminIxgalRepresentationsof theTradingSystem, School of Policy Studies, Queen's University, Kingston, Ontario, Canada, unpublished manuscript, April 2004; available at: www.worldtradelaw.net/articles/wolfcgeneva.pd6.
26Supra, footnote 5. 27 P.L. 107-42, 22 September 2001. 21 The legislation also provided for a Victim Compensation Fund, the limitation of lawsuits and the reimbursement of insurance cost increases. As of 8 April 2004, the Victim Compensation Fund had made over USS 6 billion in awards; see: www.usdoj.gov/victitiicotiiperisatioii/paynients deceased. li tri 11,. Furthermore, the U.S. government covered many of the costs of strengthened security measures, such as reinforcing cockpit doors, and took over the airport security function from the airlines. See also Raymond L. Mariani. TheSeptemberl1thVictimCompensationFund42001andtheProtectionoftlieAirlilleIlldllsrry:ABill fortheAmericanPeople, 67 J. Air L. & Com. 141, 2002. On the EU approach, see Communication from the Commission to the European Parliament and the Council, Tliereperrussionsol'tlteterroristattacksintheUnitedStatesOiltheairtransportindustry, Com(2001) 574 final, 10 October 2001. See also: State Aid NN 38/2002-Irrland Closure of US Airspace-Compensation Payments C(2003)1474fin, 13 May 2003, in which the Commission allowed just under € 7 million compensation by the Government of Ireland. 2Y Quoted in Pilot'sCap inHand:ExpectingtooMuchoftlicGovernment, The Economist, 27 June 2002; available at: www.ecoiioiiiist.com/PriiiterFriendly.cfiii?Story_ID=1204503,. On the Sabena bankruptcy proceedings, see Sabena:TheEndof anAirline, Airwise News, 7 November 2001; available at: �news.airwise.com/stories/2001/11/ 1005166294.htii-d,. See also Timothee Giard, TlreControlof StateAidtoAirlinesbytheEuropeanCommission, LL.M. Thesis, Institute of Air and Space Law, McGill University, Montreal, Quebec, Canada, September 2002, at 35 and 50. 3" See the USDOT Office of Public Affairs Website, at: .
31 Sec the U.S Department of the Treasury Website at: , posting dated 17 June 2004. The Board subsequently refused United's request for reconsideration; see , posting of 11 February 2003. On 12 March 2004, the terms of the guarantee were modified after US Airways repaid USS 250 million of the underlying US$ 1 billion loan; see at: . 35 Jeffrey Shane, AviationPolicy:Lookingt3arkandLookingFonii7rd, American Bar Association Forum on Air and Space Law, Washington, D.C., 6 November 2003; available at: . 34 See Giard, supra, footnote 29, at 50.
35 Ibid., at 32. 36 See Claus-Dieter Ehlermann, StateAidControlintheEuropeanUnion:SuccessorIailure?, Fordham Int'l L. J., 2005, at pp. 1225-1229. 37 14 C.F.R., Part 1300, Sec. 1300.12; available at: . 38 See Air Transportation Stabilization Board, Application for Air Carrier Loan Guarantee, paras. 4(f) and (h); available at:
39 See Marc Hansen, Anne van Ysendyck and Susanne Zuchlkc, 77ie Comingof Ageof ECStateAidL,aw:AReviewof thcPrinripalDevelopmentsin2002and2003, E.C.L. Rev., April 2004, p. 182, at pp. 183-190. a° 49 U.S.C. §40118. There is a parallel "Buy American" preference in place for the construction of airport infrastructure, notably for steel and manufactured goods; see 49 U.S.C., Chapter 501. " Comptroller General Decisions B-138942, 17 June 1975; and B-184136, 31 March 1981. 1. 42 See at: viww.gsa.gov/Portal/gsa/ep/contentView.do?contentType=GSA-BASIC&contented=9269,. ^3 The Brattle Group, TheEconomicInrpartof allEU-USOpenAviationArea, 2002, at z100; available at: . '^ For contrasting views, see Allan Mendelsohn, MythsofInternationalAviation, 68 J. of Air L. & Com. 519, 2003, at pp. 532-534 (arguing, as did the Brattle Group, that foreign-owned carriers could join the CRAF); versus Angela Edwards, NotesandComments,ForeignInvestmentintheU.S.AirlineIndustry:FriendorFoe? 9 Emory Int'l L. Rev. 595, 1995, at p. 640; and Jacob Warden, 'OpenSkies'ataCrossroads:HowtheUnitedStatesandEuropeanUnionShorddUsetheEcjTransportCasestoReconstructtheTransatlanticAviationRegime, 24 J. of Int'l L. & Bus. 227, 2003, at pp. 249-251 (arguing that dependence upon foreign-owned carriers for the CKAF would pose an unacceptable risk for the United States).
a� For a discussion, see Mark C. Mathiesen, Commerrt:Raukruptcyof Airlines:Causes,Complaints,andChanges, 61 J. Air L. & Com. 1017, 1996. 4<, See 11 U.S.C. b1110. See also Sandor Schick, WlmiAirlinesCrash:Section1110Hel'isited, 48 Bus. Law. 277, 1992. - 47 49 U.S.C. Chapter 417. ;8 See the USIJOT Website at: ostpxweb.dot.gov/aviatioii/niral/UsO3-04.pdf, and . 411 USGAO, EssentialAirService:ChangesinSubsidyLevels,AirCarrierCosts,andPassengerTraffic, GAO/PCED-00-34; available at: . See also USGAO, CommerdalAviation:FinancialConditionawlIndustryResponsesAffectCompetition, GAo-03-171T, at p. 12; available at: 'frwebgate.access.gpo.gov/cgi-bin/useftp.cgi?IPaddress=l 188.8.131.52 &filename=d03t 71 t.pdf&directory=/diskb/ wais/data/gao>. This latter USGAO Report also describes the Small Community Air Service Development Pilot Program, begun in 2002, which can be used by eligible communities to provide financial incentives to carriers to provide new or expanded service. Uses 75 million was authorized over three years. See also the Uwc>r's description of the programme at: supra, footnote 12, at paras. 15-23. See also European Court of Justice Case No. C-280/00 (�h/Hart;), Judgment of 24 July 2003; available at:
49 U.S.C. Chapters 481 and 482. See USGAO. AirportFinance:UsingAirportGrantFunds forSecurityProjectsHasAffectedSomeDevelopmentProject, GAO-03-27; available at ; see also the U.S. Federal Aviation Authority Website at: . 52 For an overview of slot allocation and of the application of market principles, see Richard Janda, AuctioningAirportSlotsanddates:AirlineOli,qopnly,Hnbsand SyokesandTraitCongestion, 18 Annals of Air & Space Law, 1993, pp. 153-200. 53 See The United States Mission to the European Union, Byerly:LLS.Aims forComprehensiveAccordillAirServicesTalkswithEU, 29 September 2003; available at: . It is interesting to note that Robert Crandall, former Chairman and CEO of American Airlines, has stated, in his usual trenchant style, that an Open Aviation Area with the EU is "severely premature" as long as everyone ignores "the elephants in the room". Airport monopolies were first on his list: "It is sufficient to say that any airline seeking to fly to any major airport in Europe will find it essentially impossible to do so on an optimal schedule, while any European or Asian airline seeking to serve JFK [New Yorkj. Chicago, Dallas, Atlanta, LAX [Los Angeles], SFO [San Francisco], or anywhere else, will be accommodated whenever it wants to fly. Until this imbalance is addressed, any discussion of "open competition" is an oxymoron, and any movement in that direction by the U.S. government will further diminish the international opportunities available to U.S. carriers." Remarks made at the Competitive Enterprise Institute Forum, "Open Aviation for a Global Economy: Removing the Last Barriers to Airline Competition", Washington, D.C., 14 August 2003; available at: Study toAssetstheEffectsof DifferentSlotAllocatioriSchemes:AFinalReport fortheEuropeanCommission, January 2004, at p. 233; available at: europa.cu.int/comm/trailsport/ air/rules/doc/2004_01_24_nera_slot_study.pdf'.
'� For a comprehensive account of the EU slot allocation regime, see Paul Stephen Dempsey, CompetitionintheAir:EuropeanUnionRegulationofCommercialAviation, 66 J. of Air L. & Com. 979, 2001, at pp. 1063-1069. See also Dario Maffco, SlotTradillXintheReformof theCouncilRegulationEEANo.95193:AComparativeAnalysiswiththeUnitedStates, 66 J. ofAir L. & Com. 1569, 2001. The saga of the European Commission's 2001 reform proposal, COM(2001)0335, can be traced at the Websitc of the Legislative Observatory of the European Parliament: supra, footnote 54, at p. 281. 5� Article 1(v) Council Regulation (EC) No. 659/1999, 22 March 1999. 58 The language of Article B.1 (a)(3) in the proposed draft text presented in the Annex to this article is meant to address this issue by including the grant of "tradable rights" within the definition of subsidy. 5" Note the claim that United Parcel Service has made against Canada for its allegedly unfair practices involving Canada Post and its courier products, currently in a NAFTA. Chapter 11 proceeding; see UPSAmendedStatementofClaim, 30 November 2001, available at: and at: (www.naftaclaims.com>.
(,0 Commission Decision 2002/753 of 19 June 2002, OJ L 247/27 of 14 September 2002. In 1989, the former German PTT monopoly was split into three successor entities that ultimately became Deutsche Post, Deutsche Telekom and Deutsche Postbank. By 1999, the Gennan government had divested itself of 31 percent of the shares and has since announced that it will divest itself of its majority interest in the company-now called Deutsche Post World Net-when market conditions allow; see at: (Jis Europe,S.A.v.Commissionof theEnropennCommunities, T-179/99, 20 March 2002, which also summarizes the proceedings before the Commission. 63 Case IV/M.1168, DnLlDeutsthePost, OJ 1998 C 307, p. 3. Note that in January 2003 the German Regulatory Authority for Telecommunications and Post imposed a 7.5 percent reduction of postal tariffs on Deutsche Post; see at: .
64 Office of the U.S. Secretary of Transportation, Washington, D.C., Docket No. OST-2001-8372. See related proceedings in Office of the U.S. Secretary of Transportation, Washington, D.C., Docket No. OsT-2000- 6937. See also Office of the U.S. Secretary of Transportation, Washington, D.C., Docket No. C)sr-2002-13089, in which Ups petitioned to institute a public inquiry into the citizenship and foreign control of DHL Airways, Inc. Administrative Law Judge Kolko found that DHL (now Asrna) was indeed a U.S. citizen: Office of the U.S. Secretary of Transportation, Washington, D.C., Docket No. Osr-2002-13089-593, 19 December 2003. The Secretary of Transportation's decision is pending. Deutsche Post's acquisition of Airborne, which was cleared by U.S. antitrust authorities in August 2003, will presumably raise foreign-ownership issues as well. 65 See Office of the U.S. Secretary of Transportation, Washington, D.C., Docket No. OST-2001-8372-22, 11 May 2001; available at: .
bs Aviation State Aids Guidelines, supra, footnote 12, at para. 5. Note, however, that the Commission has taken a dim view of efforts to invoke exceptional reasons for continuing State aid. See, for example, OpinionoftheEconomicandSocialCommitteeonthe'CommunicationfromtheCommissiontotheCouncil,theEuropeanParliament,theEconomicandSocialCommitteeandtheCommitteeof rheRegions-TheEuropeanAirlineIndustry: fromSingleMarkettoWorldwideChallenges', OJ C 75, 15 March 2000, p. 4, at para 1.5: "The Commission authorised state aid as a one-off measure to help national carriers to restructure during the transition to the liberalised single market. This transition is now over, however." For an overview of recent developments, see Konstantinos Adamantopolous, StateAidandPublicUndertakingwithSpecificReferenceto theAirlineSector, in Andrea Biondi. Piet Eeckhout and James Flynn (eds.), TheLawof StateAidintheEuropeanUnion, Oxford University Press, Oxford, U.K., 2004, at p. 219. Case C-261/89, Italyv.Commission(Comsal), (1991) Ecu, p. 4437, grounds 20 to 21, cited in the Aviation State Aids Guidelines, ibid., at footnote 5. See Olympic Airways:Initiationof aninvestigationprocedureconcerning,StateaidbyGreece, IP/04/348, 16 March 2004. 69 Aviation State Aids Guidelines, supra, footnote 12, at para. 27. 70 See TheCommission,decisiononCharleroiairportpromotestheactivitiesaf low-costairlinesandregionaldevelopment, IP/04/157, 3 February 2004. 71 Aviation State Aids Guidelines, supra, footnote 12, at para. 16. See Council Regulation (EEc) No 2408/92 of 23 July 1992 on access for Community air carriers to intra-Community air routes, Article 4. 72 Ibid., at para. 24.
�3 North American Free Trade Agreement, 17 December 1992, 32 I.L.M. 289. �4 For a discussion of the origins of and rationale for NAFTA Chapter 19, see Jordan Goldstein, Note:DisputeResolutionUnderChapter19of theUnitedStates-CanadaFree-TradeAgreement:DidthePartiesC:etWhatTheyBargainedFor? 31 Stan. J. Int'l L. 275, 1995. Homer E. Moyer, Jr., Symposium:TheOiitlookforChapter19Panels:WhattheEarlyHistorySuggests, 3 Sw. J. of L. & Trade Am. 423, 1996, documents the extension of Chapter 19 to Mexico. See also Chi Charmody, ContinentalConversations:Remandc?fbi�iatioiialPanelDecisionsunderNAF'1,4Chapter19, unpublished manuscript from the "First Decade of NnFrn" Conference held 16-17 October 2003 at Michigan State University, East Lansing, Michigan, discussing the development of a body of Chapter 19 case-law. �� See Multilateral Agreement on the Liberalization of International Air Transportation, with Annex and Appendix, 2001 U.S.T. LExis 69, 1 May 2001; available at . The current U.S. Model Open Skies Agreement is available at: .
7(1 For a helpful comparison of the EU and WTO regimes, see Luca Rubini, TheInternationalContentnf ECStateAidLawandPolicy,IlieRegulationof Subsidies intheWTo, in Biondi etal.,supra, footnote 66, at p. 149. For a very interesting, principled assessment of various types of subsidies disciplines, see Organisation for Economic Co-operation and Development, CompetitionPolicyinSubsidesandStateAid, DAFFF./Ci.i,(2001)24, 12 November 2001; available at: . There is also the model of the WTO Agreement on Agriculture which, given the widespread practice of agriculture susidization, largely takes the form of standstill and reduction commitments. This is not really applicable to an Open Aviation Area, where the purpose is to create a common market, not progressive liberalization.
77 See Case C-379/98, PreussenElektraAGv.SchleswagAG,  Ecn 1-2099, para. 58. �8 See WTO Panel Report, UnitedStates-MeasuresTreatingExportRestraintsasSubsidies, WT/DS194/R, adopted on 23 August 2003; available at: . �y See W ro Appellate Body Report, Canada-MeasuresAffectingtheExportofCivilianAircraft, WT/DS70/AB/R, adopted 20 August 1999, para. 161; available at: www.wto.org>. 80 See Christian Ahlborn and Claudia Berg, CanStateAidAnalysisLearn fromAntitrust?TheNeed foraGreaterRole forCompetitionAnalysisundertheStateAidRules, in Biondi etal.,supra, footnote 66, at p. 41. R� See John H. Jackson, TheWorldTradingSystem:LawandPolicyinInternationalEconomicRelations, 2nd edition, MIT Press, Cambridge, Massachusetts, 1997, Chapter 9.
"2 See International Chamber of Commerce, supra, footnote 3. 13 These sorts of State aids include: (a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment; (b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State; and (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest. 84 However, Havel has envisaged precisely this sort ofEU-U.S. institutional arrangement to address State aids; see Brian Havel, InSearchofOpenSkies:LawandPolicyforaNewErainInternationalAviation, Kluwer, The Hague, 1997, at p. 433. x5 See supra, footnote 7. xb See, for example, Proposal for a Council Decision on a Community Position regarding Decision No. 3/2003 of the Community/Switzerland Air Transport Committee established under the Agreement between the European Community and the Swiss Confederation on Air Transport, amending the Annex to the Agreement, Cona/2003/0769 final, 11 December 2003; available at: (europa.eu.int/eur-Iex/en/com/pdf/2003/ com2003_0769en01 .pdf>. The Annex to the Agreement contains a long list of EU measures to which Switzerland conforms.
8� U.S. Deputy Assistant Secretary of State for Transportation Affairs, John Byerly, has expressed scepticism about elaborate institutional arrangements for an Open Aviation Area, noting that "not infrequent calls for more robust dispute resolution and rapid fire arbitration sets offsome alarm bells in the United States" and "the wolves of regulation should not be allowed to creep back into the marketplace by donning the sheepskin of barrister wits and arbitrator's robes"; see Competitive Enterprise Institute Conference of 14 August 2003, transcript; available at:
18 See supra, footnote 61 and accompanying discussion. 89 See supra, footnote 7, Articles 22, 29 and 31.
911 Under the terms of Article xv of the General Agreement on Trade in Services, the Working Party on GATS Rules of the Council for Trade in Services has received a mandate to develop multilateral disciplines to avoid the trade-distortive effects of subsidies for services. It continues to study the matter. See, for example, Background Note by the Secretariat, SubsidiesforServicesSectors:InformationContainedinWTOTradePolicyRevieivs, S/WNCiz/W/25/Add.4, 12 February 2004. For an analysis of how subsidies disciplines might be incorporated into the GATS, see Marc Benitah, Subsidies,ServicesandSustainableDevelopment, International Centre for Trade and Sustainable Development, Issue Paper No. 1, July 2004, available at: www.ictsd.org/pubs/ictsd series/services/ IP-services-Ol.pdf,.
91 Suyra, footnote 24.
This somewhat novel concept is designed to ensure that State-owned service providers are treated in the same way as private service providers and that the Agreement extends beyond air carriers to service providers operating airports, baggage handling services, catering services, maintenance services, leasing services and other ancillary air transportation services. 2 The concept of "tradable rights" is meant to encompass a government-granted marketable economic benefit, such as an airport slot, which is conveyed in a manner that causes adverse effects to the air transportation service providers of another Party.
I The addition of a test for distortion of competition, drawn from Article 87 of the EC Treaty, is meant to render explicit what was arguably implicit in the Scum Agreement, namely that for a subsidy to be actionable it must have an impact on competition in the relevant market.
* The concept of air transportation service providers of the complaining Party draws implicitly on some factor linking air transportation service providers to a home jurisdiction. It may be that the Open Aviation Area, drawing on the results of the 2003 International Civil Aviation Organization's Worldwide Aviation Conference, will substitute "principal place of business and regulatory control" for "ownership and effective control", in which case the factor linking the air transportation service provider to the home jurisdiction would adjust accordingly.
5 This draft assumes the existence of a Joint Committee on the model of the EU-Switzerland bilateral agreement. Another approach might be to have notification given to a designated Depositary for the Agreement. For example, New Zealand has been designated as Depositary of the Multilateral Agreement on Liberalization of International Air Transport under the terms of Article 19. 6 Official language requirements are a matter of concern in Canada, for example. 7 Sub-paragraph (k) reflects existing EU Aviation State Aids Guidelines as well as the U.S. loan guarantee programme under the Air Transportation Safety and System Stabilization Act. However, it might be argued that an Open Aviation Area Treaty should phase out such direct State financing. 8 This provision specifically addresses the problem of cross-subsidization.
This article, and the subsequent, one on Dispute Settlement, both of which are drawn from the Multilateral Agreement on the Liberalization of Air Transportation, would, of course, serve a general function in the Open Aviation Area Treaty and not simply be restricted to subsidies disputes. However, they are included here to show their interaction with the remainder of the proposed text.