Are the dues paid by the airlines still related to the cost of the service they get at the airports? A Belgian court has confirmed the principles of the Chicago Convention.
Is the Convention on International Civil Aviation, signed in Chicago on 7 December 1944, outdated? Although the question is sometimes raised, the Convention still proves to have its merits.
As indicated in its preamble, 185 ratifying States agreed to develop international civil aviation “in a safe and orderly manner” so “that international air transport services may be established on the basis of equality of opportunity and operated soundly and economically”.
A framework was created of principles and standards with room however for the States to further regulate.
The International Civil Aviation Organisation, ICAO, was formed with the aim to foster international development and understanding through, amongst others, insuring the balance and the equality between the contracting States for the operation of international airlines. Through the adoption of standards and recommended practices, ICAO exercises a quasi-legislative function.
Chapter II of the Chicago Convention, which deals with “Flight over Territory of Contracting States”, in Article 15 indicates to what extent the States can impose or allow airport and similar charges.
Firstly, the States should not discriminate: airports open to public use by their national aircraft should be open under uniform conditions to the aircraft of the other contracting States (subject to the possibility to designate routes).
Charges are to be communicated to ICAO: ICAO’s Council can review and make recommendations so that equality of opportunity between the States is respected.
Secondly, Article 15 provides that “no fees, dues or other charges shall be imposed by any contracting State in respect solely of the right of transit over or entry into or exit from its territory of any aircraft of a contracting State or persons or property thereon”.
As explained by ICAO: all States can recover the costs of the services they provide to aircraft operators through charges, but a State should not charge solely for granting an authorisation for a flight into, out of or over its territory.
Article 15 needs to be read in the light of the principle of equality between States: the States need to be duly informed of the charges applicable in the other States and this way can exercise a mutual control. Too high charges, not in balance with the services provided to aircraft operators, could put at risk the equal opportunity rule.
This explains why ICAO suggests making use of “charges” in international aviation, and to avoid as much as possible the use of “taxes”.
As ICAO has put it: “A charge is a levy imposed on airlines to recover the cost of operating facilities and services provided by airports and air traffic control entities which are required and used by international civil aviation” whereas “a tax is a levy to raise revenue for national or local treasuries which will be used for general or specific public purposes”.
Certain exemptions from taxes today are being questioned. In particular, why the air transport sector should benefit from a regime that is different from other sectors.
Raising the question is denying the international character of the air transport business, which still functions on the basis of principles of international public law such as the equality of opportunities between States.
The air transport industry today is facing an increase of charges and taxes not related to the cost of the services that are provided.
The Chicago Convention is not always respected by local authorities which sometimes claim that they are entitled to impose taxes even if this infringes the Chicago Convention, of which they say that it would not be directly applicable to their local law.
This was the case in Belgium, where the municipality in which Brussels National Airport is located, imposed on aircraft operators, a tax on the exploitation of aircraft since 1995. The amount of the tax was calculated on the basis of the number of departing passengers: 0,3 euros per passenger.
The municipality considered the Convention as not directly applicable in Belgian law, since the Convention would only aim at obliging the ratifying States to cooperate in order to have sound and economical international air transport and nothing more. It considered that Article 15 does allow taxes on the airlines’ activity to the extent that these are not discriminatory.
Since 1995, the annulment of this tax regulation was requested at the Administrative High Court. A tax however is payable notwithstanding contestation. Since the airlines knew that the procedure with the Administrative High Court would take several years and recovery of the paid taxes would be very difficult even if the tax regulation was annulled, they decided to litigate in order to prevent being obliged to pay the taxes awaiting the Administrative High Court’s judgment. The injunction court in 1996 prohibited the municipality to recover the taxes further to a decision from the Administrative High Court. This court order was confirmed by the Court of Appeal and later by the Belgian Supreme Court.
All courts based their decision on the principles of the Chicago Convention.
Finally the Administrative High Court in May 2005 annulled the tax regulation. It considered that Article 15 of the Chicago Convention in its last paragraph contains a clear prohibition which does not require specific national implementation and which consequently has direct effect in Belgian law. The Court judged that it could directly apply Article 15 to annul the local regulation that violates this Article. It judged that the concerned tax was prohibited under Article 15 since it was imposed on the right of entry or exit from Belgium and not related to the use of the airport or airport facilities.
The Court confirmed that in principle the dues charged to airlines using the State’s airports should be related to the cost of the service that they receive at the airports. It concluded that the Chicago Convention indeed limits the ratifying States and its public entities’ possibility to levy taxes.
The question of the level of airport charges and similar charges is currently highly debated in light of the privatisation of airports.
Despite this, the States that ratified the Chicago Convention still are bound by its principles.
The cost-relatedness between the charge and the service that the airlines receive at the airports remains important to ensure sound and economical development of air transport.
Some of the European Member States are working on local legislation which should impose the cost-relatedness principle also on privatised airports.
The European Commission in 1997, in its proposal for a directive on airport charges, recognised the need to respect this principle. It now announces a new proposal for a directive on airport charges. It is essential for the airline industry that this proposal, in the present times of privatisation, endorses this cost-relatedness principle.
First published in Legal Week, 30 June 2005.