March 19, 2018

Brexit update: Implications for the aviation sector

On 8 December EU leaders agreed that sufficient progress had been made on the first phase of EU/UK negotiations (principally about the financial settlement) to permit negotiations to move on to the second phase, concerned with the ongoing trading relationship, and talks on this are expected to start in March 2018.

Thus, it is still unclear what the nature of the UK/EU relationship will be in any area, and aviation is no exception. However, there are at least signs that the significance of Brexit for aviation is appreciated and that thought is being given to how to deal with it. The House of Commons Transport Select Committee has been discussing the issue, and in October it reached prominence in the press (for the first time) when the Chancellor of the Exchequer, Philip Hammond, was quoted as saying that it was theoretically conceivable that flights could be grounded if no deal was struck with the EU, and the Transport Secretary, Chris Grayling, responded by saying that such a scenario was inconceivable, as it would be of no benefit to anybody.

The Commission also issued its first written communication on the subject, on 11 December, although it simply briefly stated the legal position - essentially, that UK-licensed airlines will cease to be Community carriers, and hence cease to enjoy free and unlimited access to intra-EU air traffic under EU law, and will also cease to enjoy traffic rights under aviation agreements between the EU and other countries. Later in December, internal preparatory discussions on the future EU-UK aviation relationship commenced within the Council and with the Commission.

On 11 December also, the European Aviation Club held a conference in Brussels on the impact of Brexit on aviation, chaired by Rob Lawson of this firm. At the conference there appeared to be broad consensus that it is in the interests of business and consumers throughout the EU, and not just in the UK, for the current status quo aviation-wise to continue as far as possible, so long as the UK is prepared to accept the obligations involved as well as enjoying the rights. While it is clear that the UK is not prepared to continue to be bound by all EU laws, there ought to be no great problem with its accepting this to a limited sectoral extent, and indeed it could hardly expect to gain access to rights without accepting the accompanying obligations. Moreover, if one considers what such obligations are, they are (in addition to granting access to Community carriers, which is self-evident) largely in the areas of consumer and environmental protection and technical standards. The UK would be unlikely to have any difficulty in continuing to accept these, and indeed would probably wish to do so in any case.

If such an arrangement can be achieved politically (which is of course presently far from certain), then it ought to be relatively feasible from a technical legal point of view, by a combination, and extension, of elements found in the ECAA and Swiss aviation agreements. Two particular issues which will require careful consideration are - future legislation and the jurisdiction of the European Court. Although both raise possible difficulties, they should not be insurmountable:

  • Each of the ECAA and the Swiss aviation agreement contain similar provisions on new legislation (of either party), which essentially provide for a decision on its incorporation to be taken by a Joint Committee made up of representatives of the parties (which normally acts by unanimity or mutual agreement), and the Swiss agreement even provides for the informal seeking of advice from experts of the other party during the proposal stage. Similar arrangements should not be too difficult for the UK to accept.

  • Possibly more difficult, given the rhetoric about it to date (some of which is misguided), is the role that the European Court should play. In this respect the ECAA agreement and the Swiss agreement differ, but can provide guidance as to possible solutions. The ECAA Agreement provides that pre-existing rulings of the Court are binding, whereas the implications of subsequent rulings shall be determined by the Joint Committee, and that references on questions of interpretation may be made to the Court (although an ECAA party may stipulate the extent to which and modalities according to which its courts are to make such references). The Swiss agreement, on the other hand, contains no similar provisions, and in practice Swiss courts have been known not to apply CJEU rulings (such as the Sturgeon ruling re Regulation 261 - with good reason!); all it says about the CJEU is that it shall have exclusive competence on questions concerning the validity of decisions of EU institutions. While the Swiss model is unlikely to find acceptance again from the EU side, the ECAA provisions might be more acceptable to the UK, especially given the qualifying wording about references. Another possibility, which might make good sense in a broader UK/EU context, is the establishment of a new court (or chamber of the CJEU) composed of EU and UK judges (possibly with an independent chairman with casting vote) to adjudicate on any issues arising out of the UK/EU relationship.

    As airlines in the ordinary course start to advertise or sell air services a year in advance (ie, in April 2018 for April 2019), and the two year period pursuant to the notice given under Article 50 of the Lisbon Treaty expires on 29 March 2019, aviation has a more urgent need for certainty as soon as possible than many other sectors, but at present there are no indications that any agreement will have been reached by April 2018. On 26 January the Department for Exiting the EU published an open letter proposing a two year implementation/transitional period, during which existing EU laws would continue to apply, and expressing the hope that this could be agreed by the end of March. If such agreement can be reached, which is currently uncertain given the somewhat obstructive immediate response from the Commission, then the UK would continue to be part of the single EU aviation market at least until the end of March 2021.