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Swiss International Air Lines: Court of Appeal makes a reference to the Court of Justice of the EU in relation to the emissions trading scheme

[2015] EWCA Civ 331

On 1 April 2015 the Court of Appeal (Vos LJ with Burnett and Underhill LJJ agreeing) made a reference to the Court of Justice of the EU (“CJEU”) for a preliminary ruling in relation to the EU’s emissions trading scheme (“ETS”).

Swiss International Air Lines (“Swiss”) challenges the validity of Decision 377/2013/EU (“the Decision”), which makes provisions derogating temporarily from Directive 2003/87/EC. The Directive establishes a scheme for greenhouse gas emission allowance trading within the EU. It was extended so as to include aviation activities in 2008 and then to include EEA states in 2011.

Rather than challenging the Decision directly, Swiss claims that the regulations implementing the Decision in the UK (the Greenhouse Gas Emissions Trading Scheme (Amendment) Regulations 2013) are invalid.

The ETS originally applied to all aircraft operators flying within the EEA or between EEA countries and third countries. Following objections from several “influential” third countries that the ETS amounted to an infringement of their sovereignty, the EU decided for political reasons retrospectively to suspend the operation of the ETS in relation to certain third countries. However, some countries particularly close to the EU were excluded from the suspension, including members of the European Free Trade Association (“EFTA”). In reality, Switzerland was the only country actually excluded as a member of EFTA since the other EFTA members were also EEA members and already excluded as such. Vos LJ summarised the overall effect of the partial suspension of the ETS as “that it [the ETS] applies 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 contends that the Decision is a breach of the EU law principle of equal treatment. The Court of Appeal considered the scope of the “external relations” exception to that principle and concluded (para. 37 of the judgment) that “[i]t 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”; however there was no CJEU decision which directly decided that question and one could “readily see how the CJEU might think it appropriate to construe the exception strictly and to confine it to situations in which the EU is dealing directly with third countries”. The Court of Appeal therefore referred the following questions to the CJEU for a preliminary ruling:

i) Question 1: Does the Decision infringe the general EU principle of equal treatment insofar as it establishes a moratorium on the requirements to surrender emissions allowances imposed by the Directive (as amended) in respect of flights between EEA states and almost all non-EEA states, but does not extend that moratorium to flights between EEA states and Switzerland?

ii) Question 2: If so, what remedy must be provided to a claimant in the position of Swiss, which has surrendered emissions allowances in respect of flights that took place during 2012 between EEA states and Switzerland, to restore that claimant to the position it would have been in, but for the exclusion from the moratorium of flights between EEA states and Switzerland? In particular:–

a) Must the register be rectified to reflect the lesser number of allowances that such a claimant would have been required to surrender if flights to or from Switzerland had been included in the moratorium?

b) If so, what (if any) action must the national competent authority and/or the national court take to procure that the additional allowances surrendered are returned to such a claimant?

c) Does such a claimant have a right to claim damages under Article 340 of the TFEU against the European Parliament and the Council for any loss that it has suffered by reason of having surrendered additional allowances as a result of the Decision?

d) Must the claimant be granted some other form of relief, and if so what relief?