Aviation Developments

Beyond Dec. 15 2008

Drs. Disraël G.D. Orphelin
 Introduction
This is a revision of my powerpoint presentation
presented on May 4 2008 at Trupial Inn Hotel on
the occasion of the visit to Curaçao of Prof. Dr.
Pablo J.M. Mendes de Leon, director of the Air
Law Institute, University of Leiden, the
Netherlands, to address the meeting with as
subject “The Future Aviation Policy for Curaçao”.

Disraël Orphelin
 Statement
After the dismantling of the
Netherlands Antilles the aviation
relationships between Curaçao and
the Netherlands (including BSS), and
between St. Martin and the
Netherlands (including BSS), will
greatly be determined by decisions
made in Brussels and not in
The Hague!
After the Netherlands Antilles
Island Political Relation to EU Part of Internal EU
Status Aviation Market
Curaçao Autonomous OCT No, 3rd country
Island
St. Autonomous OCT No, 3rd country
Maarten Island
Aruba Autonomous OCT No, 3rd country
Island
Public entity
Bonaire integrated in UPR Yes
the
Netherlands
Public entity
Saba integrated in UPR Yes
the
Netherlands
Public entity
Statia integrated in UPR Yes
the
Netherlands
Some airlines that could fly AMS – BON
and v.v. if Bonaire becomes a UPR …
 ECJ Ruling Nov. 2002
In November 2002 the European Court of
Justice (ECJ) affirmed that EU Member
States have the ability to enter into
bilateral air services agreements (ASA)
with 3rd countries to the extent that these
agreements do not affect EU Community
rules on air transport.
ECJ Ruling Nov. 2002 cont’d
The ECJ furthermore found that some of
the provisions in these agreements
infringed the EU Community’s exclusive
external competence, as regards air fares
and CRSs. ECJ also found that the clause
regarding ownership and control of airlines
infringed EU Community law of freedom of
establishment.
Result ECJ Ruling Nov. 2002
The ECJ ruling of Nov 2002 (and which
was reconfirmed in the ECJ ruling of April
2007 in which the Netherlands was
condemned by the ECJ for its ASA with
the USA) gave the European Commission
the exclusive competence to develop the
agenda for the EU Community’s external
aviation policy.
 Result ECJ Ruling cont’d
Since the rulings of the European Court
ASA negotiated between EU member
states and third countries must comply
with EC 847/2004 on the negotiation and
implementation of air service agreements
between Member States and third
countries. →
Because of the ECJ ruling EU Member States
now have to adapt their existing agreements
with 3rd countries in order to convert them
into horizontal aviation agreements.
Horizontal aviation agreements bring bilateral
ASAs between EU Member States and third
countries in line with EU community law.
They do not replace bilateral agreements but
remove their discriminatory clauses (such as
article 4 in the MOU signed between the
Netherlands and the Netherlands Antilles in
2000) that do not allow EU airlines to fly to 3rd
countries from a EU Member State other than
their country of origin.
First consequence ECJ ruling for
N.A., CUR, AUA and SXM as OCTs
Any EU air carrier licensed in compliance
with EC Regulation 2407/92 on licensing
of air carriers, with an establishment in the
Netherlands can operate between the
Netherlands and the Netherlands Antilles
and also Aruba.
After the dismantling, between the
Netherlands (including BSS), and
Curaçao, Aruba and St. Martin.
 Right of establishment
• The airline of a EU Member State must be
integrated in the national economy of the
Netherlands;
• The airline of a EU Member State must also
have a permanent presence in the Netherlands;
and
• The airline of a EU Member State must actually
and effectively exercise aviation activities on a
long term base in/ out of the Netherlands.
Right of establishment cont’d
The right of establishment allows EU
nationals or companies from any member
state to buy or set up an airline in any
other member state.
Principle of Right of Establishment
The principle of freedom of establishment
enables an economic operator (whether a
person or a company) to carry on an
economic activity in a stable and
continuous way in one or more Member
States (Article 43 EC Treaty).
Second consequence ECJ ruling for
N.A., CUR, AUA and SXM as OCTs
The ECJ ruling of Nov. 2002 and against
the Netherlands in April 2007 confirms that
the Netherlands Antilles are a 3rd country
since the N.A. is not a member of the EU.
Therefore the EU can grant other 3rd
countries the 5th Freedom rights for
transporting passengers and goods
between points in the EU and points in the
Netherlands Antilles.
 Article 3 paragraph 2
EC Regulation 2408/92
Since April 1 1997 all airlines registered in the
EU plus Norway and Iceland (non EU member
States, but members of the European Economic
Area), whether state or privately owned, are
considered domestic or Community carriers
anywhere within the EU and EEA.
Therefore all Community air carriers licensed in
compliance with EC Regulation 2407/92 on
licensing of air carriers, can operate without any
restrictions between BSS and between BSS and
any other point within the EU and vice versa.
 COMMISSION REPORT ON THE MEASURES TO
IMPLEMENT ARTICLE 299(2)
THE OUTERMOST REGIONS OF THE EUROPEAN UNION

“The fact that Community carriers operating on

intra Community routes can freely set fares, as
laid down by Council Regulation (EEC)
No 2409/92 has resulted in an appreciable
reduction in fares between those regions and
the rest of Europe. Those between France and
the French West Indies are currently among the
cheapest intercontinental fares in the world.”

PS. Report published in 2000

Air Carriers operating from Bonaire to …
Air Carrier The Other EU CUR, AUA, Other
Netherlands destinations SXM countries
Air carriers licensed in
the Netherlands Yes Yes Yes Yes

Other EU air carriers

licensed in compliance
with EC Regulation
2407/92 Yes Yes No No
without an
establishment in the
Netherlands

Other EU air carriers

licensed in compliance
with EC Regulation
2407/92 with an Yes Yes Yes Yes
establishment in the
Netherlands

Air carriers from 3rd No Yes Yes Yes

countries
Air Carriers from Open for Yes Yes Yes
AUA, CUR, SXM discussion
Public Service Obligation (PSO)
(Openbare Dienstverplichting)

In May 2008 there were 209 air routes

throughout the EU with a PSO imposed.
Other PSO air routes are Norway (29) and
Iceland (7). Both are also members of the
European Economic Area (EEA).
 What is a PSO?
Article 2 of EC Regulation 2408/92 defines
a PSO as any obligation imposed upon an
(EU) air carrier to take, in respect of any
route which it is licensed to operate by a
Member State, all necessary measures to
ensure the provision of a service satisfying
fixed standards of continuity, regularity,
capacity and pricing, which standards the
air carrier would not assume if it were
solely considering its commercial interest.
 In other words …
EC Regulation 2408/92 in essence allows
EU Member States to impose PSOs on
(=to regulate) any air route connecting
islands, or peripheral and/or less
developed regions, with the rest of the
country or other EU Member States in
order to stimulate economic, social and
cultural development of the island,
peripheral or region.
PSOs are imposed to guarantee …

minimum frequencies;

timetable constraints;

qualitative standards ;

maximum tariffs;

discounted tariffs for special categories of passengers
like students, 60 years and older passengers, people
traveling to go to funeral, people traveling for health
purposes, etc.;

continuity of service;

reserved slots at big airports; and

special services in case of extraordinary events, etc. .
 PSO and subsidy
If no airline is prepared to provide a service under the
conditions imposed, the government may restrict access
to the route to a single carrier and award financial
compensation (=subsidy) to the carrier in return for
compliance with the PSO. These are known as restricted
access routes, while the others, which may attract a
number of carriers, are open routes.
A PSO can be imposed by a Member State for a route
between its territory and that of another Member State,
although all but a very small proportion of PSOs have
been in respect of domestic services.
PSO is bottom up regulation
While it is national governments who
impose PSOs, the initiative for imposing
PSOs has come mainly from regional
authorities and local chambers of
commerce who are of the view that
regular, convenient and affordable air
service links to economic centers are a
social and economic imperative for their
island, peripheral or region.
 Article 4 paragraph 1bii
EC Regulation 2408/92
In the context of stimulating sustainable
economic, social and cultural growth for their
residents BSS can request the government in
the Hague to impose a public service obligation
(PSO) on air routes between BSS and mainland
the Netherlands, and amongst BSS based on
article 4 paragraph 1bii of the EC Regulation
2408/92 on access for Community air carriers to
intra-Community air routes.
 PSOs in the Caribbean
France already has imposed PSOs on the
scheduled air services between mainland
France and Martinique, Guadeloupe and
French Guyana, but also for points within
French Guyana, and between Guadeloupe
and St. Barths, Saint Martin, La Desirade,
Les Saintes and Marie-Galante.
Similar Programs Elsewhere
The USA has a program similar to the PSO,
called Essential Air Services (EAS). The air
routes Mayaguez – San Juan and Ponce - San
Juan in Puerto Rico (PR) are operated as EAS
service.
Besides PR there are ± 140 EAS services in the
US (including Alaska and Hawaii).
Australia has its Remote Air Services (RAS) that
serves ± 250 remote communities.
 The Netherlands and PSO
The government of The Netherlands is not
in favor of imposing PSOs on any air
route, however they do have PSOs for
land and water public transports such as:
National rail routes Regional
served by Bus services
Nederlandse throughout
Spoorwegen the
Netherlands
Ferry services
connecting e.g.
the Wadden Islands
and the mainland of
the Netherlands
Point of view Dutch Government
concerning PSO
“Nederland is in principe voorstander van versimpeling
van de regels met betrekking tot Openbare
dienstverplichting zoals bepaald in artikel 4
(EU Verordening 2408/92). Het opzetten van een
soortgelijk systeem voor luchtdiensten naar derde
landen is niettemin ongewenst, daar het aanleiding kan
geven tot verschillende interpretaties van Openbare
dienst-verplichting en daarmee kan het de vrije
markttoegang belemmeren. Een uitbreiding van de
Openbare dienstverplichting naar derde landen kan de
levens-vatbaarheid van commercieel haalbare directe of
indirecte luchtdiensten tussen EU lidstaten en derde
landen ondergraven.”
 Observation
As a model that regulates bottom up instead of
top down, the PSO model can be an ideal model
for regulating air travel within the Kingdom of the
Netherlands. Also because the PSO model can
coexist with the free market model of supply and
demand that is applied by commercial airlines.
In its 2006 report titled Caribbean Air Transport,
the World Bank recommends Caribbean States
to apply the PSO model to stimulate intra
Caribbean air travel.
What is wrong with this picture?
 Answer
It doesn’t contain an air carrier designated
by the Netherlands Antilles on the Mid
Atlantic route, only Dutch air carriers.
The picture confirms the argument of the
CARICOM that negotiating ASAs on a
level playing field with big states such as
the Netherlands or Great Britain doesn’t
benefit the small island states. The
argument being →
Developing nations are at the least likely
to be in a position to make the extensive
and sustained capital investments,
whether through domestic public or private
sources, which are required in order to
ensure the operation of efficient and
dynamic air carriers. At the same time
these carriers are restricted from pursuing
foreign capital by existing rules regarding
substantial ownership and effective control
of a designated airline.
Principle of Community of Interest
That principle was embodied in a Resolution A24-12
adopted by the Twenty Fourth Session of the General
Assembly of ICAO in 1983 that allowed, essentially, a
developing country belonging to an economic grouping
such as CARICOM to seek, as an alternative to the
traditional criterion, to designate a carrier of another
developing country belonging to the same economic
grouping, to exercise its route rights under an air
services agreement with a third country. Route rights
have an economic value and that Resolution recognized
that the strict application of the traditional criterion could
deny many developing countries a fair and equal
opportunity to operate international air services, as
contemplated in the Chicago Convention, and to
optimize the benefits to be derived from such
operation.→
Community of Interest cont’d
It is on the basis of ICAO Resolution A36-15
that CARICOM countries that do not have
their own airlines are able to designate Air
Jamaica, Caribbean Airlines (formerly BWIA)
or LIAT, for example, to exercise their route
and traffic rights under an air services
agreement. Those countries would otherwise
have to depend solely on foreign carriers
designated by the other Party for vital air
services.
 ICAO Resolution A36-15
The ICAO Assembly Urges Contracting States to
recognize the concept of community of interest
within regional or sub regional economic
groupings as a valid basis for the designation by
one developing State or States of an airline of
another developing State or States within the
same regional economic grouping where such
airline is substantially owned and effectively
controlled by such other developing State or
States or its or their nationals
Objective of Community of Interest

To first of all achieve fairness,

and not necessarily equality, in
the air services agreements for
small states when designating air
carriers on routes between these
small states and bigger states
with more economic resources.
 Recommendation
An autonomous Curaçao and St. Martin ought to
seriously consider including the principle of
community of interest in air services agreements
that they will negotiate with bigger parties such
as the Netherlands. Article 36 of the Statuut,
article 182 of the EC Treaty, and article 73 of the
UN Charter should offer Curaçao and St. Martin
enough compelling arguments to persuade the
Netherlands to include the principle of
community of interest on their behalf in any ASA
negotiated between the Netherlands and
Curaçao and St. Martin.
 Article 36 of the Statuut

“Nederland, de Nederlandse Antillen en

Aruba verlenen elkander hulp en bijstand.”
Article 182 of the EC Treaty
“Member States agree to associate with the
Community the non-European countries and
territories which have special relations with
DK, F, NL and UK. The purpose of the
association shall be to promote the economic
and social development of the countries and
territories and to establish close economic
relations between them and the Community
as a whole.”
Article 73 of the UN Charter
“Members of the United Nations which have or
assume responsibilities for the administration of
territories whose peoples have not yet attained a
full measure of self-government recognize the
principle that the interests of the inhabitants of
these territories are paramount, and accept as a
sacred trust the obligation to promote to the
utmost, within the system of international peace
and security established by the present Charter,
the well-being of the inhabitants of these
territories, (…).”
New Trends in ASA Negotiations
Bilateral ASAs remain the primary vehicles for
liberalization of international air transport services for
most States. More and more ASAs are emerging with
the involvement of regional groups including regional
economic integration organizations such as the EU,
Caricom, Andean Pact, Mercosur and ACS (Association
of Caribbean States).
The Open Skies negotiations between the EU and the
US, has set the trend for regional economic blocs to start
negotiating ASAs with each other.
The Netherlands Antilles and Aruba are associate
members of ACS and are both contracting states to the
ACS Air transport Agreement that still has to go into
effect.
 Bloc to bloc ASA
Delegations of the European Commission and
the Commission of the Economic and Monetary
Union of Western Africa (UEMOA, Member
States: Benin, Burkina Faso, Guinea-Bissau,
Ivory Coast, Mali, Niger, Senegal, Togo) initialed
on 7 May 2008 in Brussels an aviation
agreement which will restore legal certainty to
the bilateral air services agreements between
the Member States of UEMOA and EU,
respectively.
 Recommendation
In order to be able to create access to new
markets (especially within the Greater
Caribbean) for their national air carriers or air
carriers of their nationals, it is important for an
autonomous Curaçao and St. Martin to consider
becoming (associate) members of ACS and to
become contracting states to the ACS Air
Transport Agreement (ATA), and also to
becoming (associate) members of Caricom and
contracting states to the Caricom Multilateral Air
Services Agreement.
 Caribotage
Presently Caricom is developing a new concept
called Caribotage. The idea of Caribotage is to
limit commercial air transport of passengers,
goods and freight between Caricom Member
States exclusively to airlines of Caricom Member
States. Therefore if an autonomous Curaçao
doesn’t become a (n) (associate) member of
Caricom, in the future airlines from Curaçao may
not be allowed to transport passengers, goods
and freight between e.g. Port of Spain and
Paramaribo!
Acronym/ Abbreviation Explanation Dutch
BSS Bonaire, Saba, Statia
OCT Overseas Countries and Territories Landen en Gebieden Overzee
UPR Ultra Preipheral Region Ultra Perifere Gebied
ECJ European Court of Justice Europese Hof van Justitie
ASA Air Services Agreement Luchtvaartverdrag
Bilateral ASA Luchtvaartverdrag tusen twee landen
Multilateral ASA Luchtvaartverdrag tusen meerdere landen
EU European Union Europese Unie
CRS Computer Reservation System
MOU Memorandum of Understanding
EEC European Economic Community Europese Gemeenschap
AUA Aruba
CUR Curaçao
SXM Sint Maarten
PSO Public Service Obligation Openbare Dienstverplichting
ICAO International Civil Aviation Organization
EEA European Economic Area
PR Puerto Rico
EAS Essential Air Services
RAS Remote Air Services
Caricom Caribbean Community
ACS Association of Caribbean States
ATA Air transport Agreement Luchtvaartverdrag
DK Denmark
F France
NL Netherlands
UK United Kingdom
Andean Pact Pacto Andino Economische Gemeenschap Andes landen Zuid Amerika
Mercosur Mercado Común del Sur Economische Gemeenschap Zuidelijke Staten Zuid Amerika
UEMOA Economic and Monetary Union of Western Africa
e.g. exampli gratia bijvoorbeeld
For more information
Drs. Disraël Orphelin
dorphelin@gmail.com
Tel: 599-9-5257489
Thank You