Copyright 2008, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on International Trade & Investment, December 2008
Canada and the 27 member countries of the European Union (EU) announced on December 9, 2008, an open-skies air transport agreement that both claim is an important step towards a greater economic partnership between the parties.
THE LIFTING OF INVESTMENT LIMITS AND RESTRICTIONS ON AIR SERVICES
While the agreement has not been released, apparently it will provide for the opening of the air transport market in four phases:
- "Phase One", effective immediately, allows for direct services (on an airline's own aircraft or that of another carrier) between Canada and the EU without any limitations on the number of flights operated, the number of airlines flying, or the number of services operated by any airline. All cargo airlines will also be permitted to fly onward to a third country.
- "Phase Two" begins when Canada enacts legislation to increase foreign ownership caps in Canada from 25% (the current rate) to 49% of a Canadian carrier's voting equity. Phase Two will grant cargo airlines from either Canada or the EU the right to operate such services to a third country from the other party.
- "Phase Three" commences when both Canada and the EU enable investors to set up and control new airlines in each other's markets. Thereafter, these new passenger airlines will be able to fly to a third country.
- "Phase Four" begins when both Canada and the EU allow existing carriers owned by nationals in their respective jurisdictions to be owned and controlled by nationals of the other party. This phase will grant rights to operate between, within and beyond both markets. It includes the removal of cabotage laws, which would then allow EU carriers to fly between two points in Canada and vice versa for Canadian airlines in European countries.
Given this multiphase approach, the politically controversial issues of allowing foreign-owned airlines to set up and control domestic airlines in each other's markets and the lifting cabotage laws have been deferred to a later date.
CO-OPERATION ON REGULATORY ISSUES
The agreement apparently includes several provisions dealing with air transportation regulatory issues:
- Provisions for the eventual mutual recognition of safety standards and harmonization of approaches to aviation security;
- Provisions that, to the extent possible, will allow for the stationing of airlines representatives, ground handling of aircraft and access to ground and marine modes of transportation associated with air services;
- The establishment of a joint EU-Canada committee that is intended to facilitate co-operation, information-exchange, consultations and the overall implementation of the agreement; and
- Provisions regarding consumer interests, international co-operation, the environment, co-operation in the area of air traffic management, as well as the effective availability of airport and aviation facilities and services.
TIME NEEDED TO ASSESS IMPACT
Government sources in both Canada and the EU are using such words as "historical" and "groundbreaking" to describe the agreement. However, given that few details have been released, further analysis of the agreement must await the passage of time. Any conclusions regarding the impact of the agreement and how it will operate should be reserved until a comprehensive review of its provisions has been conducted.
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