Indian airline loses EU ETS appeal

OREANDA-NEWS. India's Jet Airways has lost its appeal against the UK government over 150t of CO2 equivalent (CO2e) that it emitted during intra-European flights in 2012, but failed to report or cover under the EU emissions trading scheme (ETS).

The ruling could set a precedent for all those non-EU airlines operating across Europe that have not complied with EU ETS legislation.

The UK environment agency (EA) on 4 June served notice to Jet Airways of the amount of intra-EU emissions for 2012 for which it is liable after the airline failed to meet a 31 March 2013 reporting deadline as required under EU ETS rules.

The EA notice and subsequent court ruling is the first step in a punitive process that could oblige the airline to pay a charge of nearly €16,000 — based on €100/t CO2e fine for noncompliance plus the cost of allowances needed to cover its emissions. The emissions were generated during flights between European Economic Area (EEA) airports in Belgium, Cyprus, the Czech Republic, Iceland and Ireland.

Initially, under EU ETS legislation airlines had to cover their emissions for the full length of any flight into or out of the EEA from 2012 onwards. But staunch opposition and threats of trade sanctions from countries including India, China, the US and Russia forced the EU to curtail the scheme's scope.

So in 2012, the EU temporarily exempted intercontinental flights from the EU ETS and obliged airlines to submit allowances only for intra-EEA flights. Subsequently, in 2014 the EU extended this exemption to 2016, which is the year by when the International Civil Aviation Organisation (ICAO) undertook to agree a global market-based mechanism that is to be implemented in 2020.

Jet Airways contended that its non-compliance with EU ETS rules was legitimate, given certain ICAO resolutions that the EU's inclusion of international flights in the EU ETS was contrary to the global consensus. The airline further argued that it was compelled to adhere to the Indian government's instructions not to comply with EU law. The Indian government had issued various directions to Indian carriers that prohibited them from participating in the EU ETS or disclosing emissions data.

But in his ruling of 27 March, judge David Hart dismissed Jet Airways' appeal and ruled that the environment agency, as the UK authority responsible for administering the scheme, was obliged to determine the airline's emissions given that that it had failed to meet the legal reporting deadline.

Hart also supported the UK's contention that the ICAO resolution was not legally binding in international law and as such did not bind the EU. This correlates with the European Court of Justice's ruling on 21 December 2011 that the inclusion of international flights in the EU ETS did not contravene international law.

Since the EU has competence over its airspace, the EU ETS directive is valid insofar as it applies to flights arriving at or departing from an EEA airport, and that this includes the Jet Airways flights, the UK's legal representation said.

The UK further argued that the Indian government's directions were not legally binding on either the EU or UK, and that national courts do not have the power to declare acts of EU institutions invalid.

Hart also found that he had no jurisdiction to question the validity of the EU ETS directive. Only the European Court of Justice may decide whether an act of an EU institution is invalid, he said.

But despite not having the jurisdiction to rule over the EU ETS directive's validity, there are a number of reasons why Hart would dismiss the Jet Airways' appeal, he said.

Firstly, ICAO resolutions are non-binding on the EU, Hart said, citing the ECJ's ruling that an ICAO resolution is "simply a non-binding political declaration by the contracting states at the ICAO assembly".

Secondly, the Indian government's directions are "plainly political views based upon that government's view as to the state of negotiations between the EU and the rest of the ICAO", Hart said. Nothing suggests that these directions are binding in law on Jet Airways, "even though I quite understand why politically Jet may wish to adhere to them if it can", he said.

"The underlying issue is whether there is a binding international norm that is capable of trumping the EU directive," Hart said. But ultimately, no such overriding global legislation exists, he concluded.

EU member states are required to publish the names of those EU ETS operators in breach of requirements. But because of the political controversy surrounding the scheme, member states have until recently avoided publicly naming non-compliant operators, although a number of fines were issued last year.

Germany fined 60 aircraft operators a total of €5,353,400 (\\$5,659,079) for not complying with EU ETS reporting responsibilities in 2012. The list includes a number of small operators as well as Air Berlin and Condor. The fines are not specified but range from €100 to €203,600.

Apart from Germany, Italy has published a list of 13 operators that failed to comply in 2012.