The Court of Appeal has referred to the CJEU the question of whether a derogation from the EU Emissions Trading System (EU ETS) for certain non-EEA flights infringes the equal treatment principle.
Swiss International Airlines (“Swiss”) challenged Decision 377/2013/EU (the “Decision”), which temporarily exempted flights to non-EEA countries from the application of the EU ETS. Rather than directly challenging the Decision, Swiss argued for the invalidity of the regulations implementing the Decision in the UK. Since the regulations simply implemented the Decision, Swiss sought a reference to the CJEU (the only court that can declare an EU measure invalid).
Under the EU ETS, aircraft operators in EEA states had to apply for a permit and allowances permitting them to emit certain amounts of carbon dioxide during a specified period. Such allowances had to be surrendered annually according to how much carbon dioxide had been emitted. The EU ETS applied originally to all operators flying within the EEA or between EEA countries and third countries. Several third countries objected to this as an infringement of their sovereignty. For political reasons, the EU decided retrospectively to suspend the operation of the ETS for 2012 in relation to certain third countries. Some countries were excluded from this suspension, including Switzerland. The partial suspension of the EU ETS meant that it applied to flights within the EEA and to flights from the EEA to certain third countries including Switzerland, but not to most other third countries.
Swiss argued that the Decision was a breach of the EU law principle of equal treatment. Swiss brought proceedings in the UK because the UK was Swiss’s “administering Member State” under the EU ETS Directive, as Swiss’s greatest estimated attributed aviation emissions in the relevant period were in relation to UK flights.
The Court of Appeal held as follows:
- “Was the judge right to say that the principle of equal treatment was inapplicable?” In view of the relevant EU case law (some of which had been decided in the 1970s and 1980s, in a very different EU landscape), the extent of the exception to the equal treatment principle remained unclear. This exception was that there existed “no general principle obliging the [EU], in its external relations, to accord to third countries equal treatment in all respects”. “It would be logical to suppose that the qualification relating to the EU’s external relations should apply as much to internal EU legislation affecting external relations as to agreements or treaties made directly with third countries. But there is no decision of the CJEU which directly decides that question”.
- “Was the judge right to hold that the principle of equal treatment would not anyway have been breached in this case?” To show a breach of the equal treatment principle, Swiss would have to show that the EU legislature manifestly exceeded the bounds of its discretion. The Commission and the EU legislature had not yet properly justified Switzerland’s exclusion from the EU ETS suspension. In the absence of a reasoned explanation, it was at least arguable that, if the principle of equal treatment applied here, the EU exceeded the bounds of its discretion by singling out Switzerland for special treatment.
- As regards remedies, in addition to the substantive question of the validity of the Decision being referred to the CJEU, additional questions would be referred. These were: whether the register of emission allowances should be rectified; whether Swiss would have a right to claim damages under article 340 of the TFEU against the European Parliament and the Council for its loss; what (if any) other relief should be granted; and what (if any) action the Environment Agency should take to procure that additional allowances surrendered be restored to Swiss.
Swiss International Airlines AG v Secretary of State for Energy and Climate Change and the Environment Agency [2015] EWCA Civ 331
