EC launches procedures against four EU Member States over Russia air agreements

The European Commission has launched infringement procedures against France, Germany, Austria and Finland over their bilateral air service agreements with Russia, which include provisions concerning Siberian overflights.

The EC has concerns over two main issues:

• The agreements in question do not contain a clause recognising that the terms apply equally to all EU carriers, despite the Open Skies case law of the EU’s Court of Justice. This can create serious practical problems, e.g. if an airline is taken over by an airline from another Member State it stands to lose all its traffic route rights.

• The bi-lateral air service agreements between the four Member States and Russia contain specific provisions on the setting of traffic rights as well as on the modalities for fixing the charges that EU-designated carriers must pay to Aeroflot in order to fly over Siberia on their way to Asia. The EC believes that such provisions may be in breach of EU antitrust rules and could lead to competition distortions to the disadvantage of both EU airlines and consumers.

The EC believes that air transport agreements must treat all EU airlines equally and respect antitrust rules, to eliminate the possibility of some EU airlines being treated less favourably than their direct competitors or incurring unreasonable additional charges that can get passed on to consumers in higher air fares.

Freedom of establishment

Bi-lateral air service agreements between an individual Member State and a non-EU country must include an "EU designation clause" recognising that the terms apply equally to all EU airlines, and not just the airlines of that Member State. This is an essential part of the Single European Aviation Market that was created in the early- 1990s, guaranteeing that airlines are entitled to operate under the same conditions anywhere in the EU.

The requirement to have an "EU designation clause" was confirmed in the "Open Skies rulings" of the Court of Justice in 2002, where the Court stated that provisions limiting the benefits of air service agreements to nationals of the Member State concerned are in breach of EU rules on freedom of establishment (now laid down in Article 49 of the Treaty on the Functioning of the EU).

Most agreements with non-EU countries have since been adapted to the Court ruling. Russia is one of the few countries in the world that fails to recognise that all EU carriers must be treated equally, and that the terms of any bi-lateral agreement must include an "EU designation" clause and apply to all.

Siberian overflight charges

Next to specific traffic rights, designated EU airlines are obliged to pay Siberian overflight charges for routes to many Asian destinations. It is estimated that, in 2008 alone, the EU carriers concerned paid around US$420 million in charges – most of it directly to Aeroflot.

The EC is concerned that this is in breach of EU antitrust law whereby airlines should not be forced into concluding a commercial agreement with a direct competitor. The EC is also concerned that this is in breach of international law (Chicago Convention). These bilateral agreements also impose different conditions on EU airlines depending on the country they are based in, which creates an additional distortion of competition. In the end, passengers risk having to pay more for their flights than they would otherwise need to.

Next steps

The EC has sent formal requests for information, in the form of letters of formal notice, under EU infringement procedures, to Austria, Finland, France and Germany regarding their bilateral aviation agreements with Russia.

Furthermore, the EC is actively assessing the compliance with EU law of the bi-lateral air service agreements that all 23 other Member States have with Russia.