Slide1: ARAB AIR TRANSPORT LIBERALISATION AGREEMENT: BRIDGING THE GAPS


Arab Air TransportLiberalisation Agreement:Bridging the Gaps: Arab Air Transport Liberalisation Agreement: Bridging the Gaps Arab aviation scene Existing world models ACAC agreement: Strengths and weaknesses Gaps and how to bridge them


Arab Aviation SceneGrowth & Development: Arab Aviation Scene Growth & Development Impressive economic growth 5.6% Extraordinary traffic growth Jan-Oct 2005 Passenger: 12.6% Cargo: 14.1% Fleet expansion (orders $60 b) Infrastructure development ($30 b) Emerging low cost carriers Better airline profitability Uneven growth/expansion across the region


Arab Aviation SceneLiberalisation Status: Arab Aviation Scene Liberalisation Status Wide spectrum of attitudes towards aviation regulation Liberalisation as growth catalyst: e.g UAE, Lebanon Generally slow pace towards liberalisation Only six states with fully or partially liberalised agreements ACAC agreement: a leap forward, but gaps need to be filled Serious support and political will are needed


Arab Aviation SceneImplications of ACAC Agreement: Arab Aviation Scene Implications of ACAC Agreement Higher traffic growth rates Easier rules on market access and entry Increased competition Changes in regulatory environment to support liberalisation Freer movement of persons and goods Competition laws to create level playing field (airlines operating like any other business) Revision of ownership and control clauses Multinational/cross border ownership Mergers, takeovers?


Existing World Models European Union: Existing World Models European Union Fully deregulated internal market Any EC carrier can fly from anywhere to anywhere Now enlarging scope External dimension EC Clause (horizontal mandate) EU/US deal Soon other mandates? Development of EASA Influence on technical issues European licenses


Existing World Models EU “horizontals” – various models: Existing World Models EU “horizontals” – various models Designation Clauses negotiated by EU Partners Traditional National Ownership and Control Regional O&C + safeguard …[non EU State] may refuse, revoke, suspend or limit the operating authorisation… if by exploiting traffic rights granted under an existing bilateral with a member State, [EC carrier] circumvents limitations imposed under a bilateral with another member State… Principal place of business + regulatory oversight Principal place of business + regulatory oversight + safeguard Mixed (e.g. Morocco)


EU “horizontals”: EU “horizontals”


Existing World Models So-called APEC: Existing World Models So-called APEC Chile, NZ, Brunei, Singapore, USA Traffic rights not completely multilateral Service must have a point in the country designating the airline (Except all cargo) No cabotage National Ownership and Control + Principal Place of Business


Existing World Models Latin America: Going around the restrictions: Existing World Models Latin America: Going around the restrictions No multilateral treaty framework in place But countries unilaterally negotiating “CLAC clause” with EU Chile (soon: Argentina, Uruguay, Nicaragua) “Multi-national” airlines emerging TACA LAN COPA Minority stakes in foreign carriers Doing business under one brand Some still use separate codes for diff’t operators


ACAC Liberalisation Agreement: ACAC Liberalisation Agreement


ACAC Liberalisation AgreementExcellent foundation !: ACAC Liberalisation Agreement Excellent foundation ! Agreement contains all basic elements of a regional block Regional Clause (art 5.2.a) In line with developments in other regions CLAC Clause EC Clause “Traffic Rights” More than the EC Package 2 Stops short of Cabotage but still very generous External dimension in place (Art 32) Could lead to creation of one or several pan-Arab carriers


ACAC Liberalisation Agreement Weaknesses: ACAC Liberalisation Agreement Weaknesses Problems will not emerge from conflict with national laws But from gaps in the Agreement …which can be filled… “regional/multilateral” vs “bilateral” aspects Agreement still contains left-overs of bilateralism Is this balance stable? Probably not


ACAC Liberalisation Agreement Left-overs from bilateralism: ACAC Liberalisation Agreement Left-overs from bilateralism Tariff filing : Why? Capacity and frequency are fully deregulated Internet = increased transparency Embryo of competition rules in place Safety checks With possible multinational carriers emerging, need for common standards ECAC experience with SAFA: common checklists, but not common interpretation Viz. “Blacklist” debate in EU IOSA? Dispute resolution mechanism Dry-Leases only? (art 15) Ability to transfer crews at short notice


Competition Law: Competition Law National? Bilateral? Multilateral? Annex 2: Basic Rules Yet basic rules need to be developed E.g. Arts 81, 82 of EC Treaty Case-Law Guidelines Regulations Recent developments in EC Law Large devolution to national competition authorities BUT: EC may ‘pull’ cases where Unity of doctrine is required Case affects cross-border trade Air Transport, typically E.g. EC / US Draft Open Skies Art 19 “Minimize differences re competition law” “cooperation among competition authorities” Annex 2: Cooperation on Competition Law issues


Competition Law (2): Competition Law (2) Annex 2 Too reliant on national laws / authorities But not all ACAC countries have them And traditions may differ Risk of diverging interpretations Subsidies  Problem area Loose definition No dispute resolution mechanism No remedies E.g. countervailing measures Competition Law No Competition Law In transition


Competition Law (3): Competition Law (3) Dispute Resolution  Problem area Traditional bilateral (consultation, negotiation, arbitration) Strong enough? What about a permanent arbitration panel ? Development of common case-law on aviation Conflict will not be solely between States Airline vs airline State vs Airline Airlines should have recognized roles in dispute resolution mechanism Active Passive


ACAC Liberalisation AgreementGaps & How to Bridge Them : ACAC Liberalisation Agreement Gaps & How to Bridge Them Weak Dispute Resolution Mechanism Power based, not rule based Weak rules on competition & subsidies Need developing A possible solution: Permanent arbitration body Interprets the Treaty Develops Competition Law aspects of the treaty through case law Solves general disputes re implementation of the Treaty


Slide19: THANK YOU