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A RAB A IR T RANSPORT L IBERALISATION A GREEMENT : B RIDGING T HE G APS

A RAB A IR T RANSPORT L IBERALISATION A GREEMENT : B RIDGING T HE G APS. Arab Air Transport Liberalisation Agreement: Bridging the Gaps. Arab aviation scene Existing world models ACAC agreement: Strengths and weaknesses Gaps and how to bridge them.

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A RAB A IR T RANSPORT L IBERALISATION A GREEMENT : B RIDGING T HE G APS

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  1. ARAB AIR TRANSPORT LIBERALISATION AGREEMENT: BRIDGING THE GAPS ACAC Presentation

  2. Arab Air TransportLiberalisation Agreement:Bridging the Gaps • Arab aviation scene • Existing world models • ACAC agreement: Strengths and weaknesses • Gaps and how to bridge them ACAC Presentation

  3. Arab Aviation SceneGrowth & Development • Impressive economic growth 5.6% • Extraordinary traffic growth • Jan-Oct 2005 • Passenger: 12.6% • Cargo: 14.1% • Fleet expansion (orders $60 b) • Infrastructure development ($30 b) • Emerging low cost carriers • Better airline profitability • Uneven growth/expansion across the region ACAC Presentation

  4. Arab Aviation SceneLiberalisation Status • Wide spectrum of attitudes towards aviation regulation • Liberalisation as growth catalyst: e.g UAE, Lebanon • Generally slow pace towards liberalisation • Only six states with fully or partially liberalised agreements • ACAC agreement: a leap forward, but gaps need to be filled • Serious support and political will are needed ACAC Presentation

  5. Arab Aviation SceneImplications of ACAC Agreement • Higher traffic growth rates • Easier rules on market access and entry • Increased competition • Changes in regulatory environment to support liberalisation • Freer movement of persons and goods • Competition laws to create level playing field (airlines operating like any other business) • Revision of ownership and control clauses • Multinational/cross border ownership • Mergers, takeovers? ACAC Presentation

  6. Existing World Models European Union • Fully deregulated internal market • Any EC carrier can fly from anywhere to anywhere • Now enlarging scope • External dimension • EC Clause (horizontal mandate) • EU/US deal • Soon other mandates? • Development of EASA • Influence on technical issues • European licenses ACAC Presentation

  7. Existing World Models EU “horizontals” – various models • Designation Clauses negotiated by EU Partners • Traditional National Ownership and Control • Regional O&C + safeguard • …[non EU State] may refuse, revoke, suspend or limit the operating authorisation… if by exploiting traffic rights granted under an existing bilateral with a member State, [EC carrier] circumvents limitations imposed under a bilateral with another member State… • Principal place of business + regulatory oversight • Principal place of business + regulatory oversight + safeguard • Mixed (e.g. Morocco) ACAC Presentation

  8. EU ‘HORIZONTALS” National O&C Regional+safeguard Regional- in negotiation Princ.pl.of business+reg.ctrl Princ.pl.of business+reg.ctrl +safeguard EU “horizontals” ACAC Presentation

  9. X Existing World Models So-called APEC • Chile, NZ, Brunei, Singapore, USA • Traffic rights not completely multilateral • Service must have a point in the country designating the airline • (Except all cargo) • No cabotage • National Ownership and Control + Principal Place of Business ACAC Presentation

  10. Existing World ModelsLatin America: Going around the restrictions • No multilateral treaty framework in place • But countries unilaterally negotiating “CLAC clause” with EU • Chile (soon: Argentina, Uruguay, Nicaragua) • “Multi-national” airlines emerging • TACA • LAN • COPA • Minority stakes in foreign carriers • Doing business under one brand • Some still use separate codes for diff’t operators ACAC Presentation

  11. ACAC Liberalisation Agreement ACAC Presentation

  12. ACAC Liberalisation AgreementExcellent foundation ! • Agreement contains all basic elements of a regional block • Regional Clause (art 5.2.a) • In line with developments in other regions • CLAC Clause • EC Clause • “Traffic Rights” • More than the EC Package 2 • Stops short of Cabotage but still very generous • External dimension • in place (Art 32) • Could lead to creation of one or several pan-Arab carriers ACAC Presentation

  13. ACAC Liberalisation Agreement Weaknesses • Problems will not emerge from conflict with national laws • But from gaps in the Agreement • …which can be filled… • “regional/multilateral” vs “bilateral” aspects • Agreement still contains left-overs of bilateralism • Is this balance stable? • Probably not ACAC Presentation

  14. ACAC Liberalisation Agreement Left-overs from bilateralism • Tariff filing : Why? • Capacity and frequency are fully deregulated • Internet = increased transparency • Embryo of competition rules in place • Safety checks • With possible multinational carriers emerging, need for common standards • ECAC experience with SAFA: common checklists, but not common interpretation • Viz. “Blacklist” debate in EU • IOSA? • Dispute resolution mechanism • Dry-Leases only? (art 15) • Ability to transfer crews at short notice ACAC Presentation

  15. Competition Law • National? Bilateral? Multilateral? • Annex 2: Basic Rules • Yet basic rules need to be developed • E.g. Arts 81, 82 of EC Treaty • Case-Law • Guidelines • Regulations • Recent developments in EC Law • Large devolution to national competition authorities • BUT: EC may ‘pull’ cases where • Unity of doctrine is required • Case affects cross-border trade Air Transport, typically • E.g. EC / US Draft Open Skies • Art 19 • “Minimize differences re competition law” • “cooperation among competition authorities” • Annex 2: Cooperation on Competition Law issues ACAC Presentation

  16. Competition Law (2) • Annex 2 • Too reliant on national laws / authorities • But not all ACAC countries have them • And traditions may differ • Risk of diverging interpretations • Subsidies  Problem area • Loose definition • No dispute resolution mechanism • No remedies • E.g. countervailing measures Competition Law No Competition Law In transition ACAC Presentation

  17. Competition Law (3) • Dispute Resolution  Problem area • Traditional bilateral (consultation, negotiation, arbitration) • Strong enough? • What about a permanent arbitration panel ? • Development of common case-law on aviation • Conflict will not be solely between States • Airline vs airline • State vs Airline • Airlines should have recognized roles in dispute resolution mechanism • Active • Passive ACAC Presentation

  18. ACAC Liberalisation AgreementGaps & How to Bridge Them • Weak Dispute Resolution Mechanism • Power based, not rule based • Weak rules on competition & subsidies • Need developing • A possible solution: Permanent arbitration body • Interprets the Treaty • Develops Competition Law aspects of the treaty through case law • Solves general disputes re implementation of the Treaty ACAC Presentation

  19. THANK YOU ACAC Presentation

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