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European Integration and Bureaucratic Principles

Aviation lawyer, P Nikolai Ehlers of Ehlers, Ehlers & Partner discusses the bureaucracy surrounding the application on EU law in the aviation sector.

P Nikolai Ehlers

Bureaucrats are very reliable and you can trust that they will adhere to certain principles. Some of these principles are as old as bureaucracy itself. In Germany it is common knowledge that one of these strictly observed principles is the one that says: “We have never done this before.” Or in other words: bureaucracy is like a big ocean liner and it is very difficult to change its course (never mind the iceberg).

When you first hear about the “We have never done this before”principle, for instance in law school, you may mistake it for a jocular cliché, but the best professor is life itself and it teaches that said principle unfortunately is not a joke. Bureaucrats – at least in Germany, but presumably elsewhere as well – seem to be determined to apply this principle with respect to developments of European law: there is a tendency to ignore European law if it means that an authority cannot continue to do things the way it is used to doing them.

Often, ignoring European law appears to be desirable to make life easier for those that are subject to it, for instance, in a case of unsatisfactory draftsmanship of a regulation (yes, these cases exist) or in a case of ambitious over-regulation.However, European law-making is about integrating the entire European Union, about creating a level playing field in the interest of its citizens – and in many instances European legislation goes a long way towards achieving those goals. But it is not enough that the legislative products of the EU serve the goal of European integration if the authorities that have to apply European law are reluctant to do so, as a result of their adherence to the above mentioned bureaucratic principle.

INSURANCE CERTIFICATES

The following case concerning insurance certificates may illustrate the point.

Insurance certificates are required for the registration of an aircraft for the obvious and very valid reason that it is in the interest of the public to make sure that no aircraft can be registered (and consequently operated) without proper insurance. In Germany, the requirement of an insurance certificate for the registration of an aircraft is provided for by the German Aviation Certification Regulation (LuftVZO). The regulation further requires that the insurer providing the coverage must be listed with the German authority supervising the insurance industry (BAFIN) and that the insurer issues the insurance certificate necessary for the registration.

Regulation (EC) No. 785/2004, of course, deals with insurance requirements for air carriers and aircraft operators flying within the territory of EU member states. In line with the provisions of this regulation, the EU Commission has published a very interesting Report on the Operation of Regulation 785/2004 in 2008. This report addresses a number of issues concerning the harmonised application of minimum insurance requirements established by the regulation, including the issue of insurance certificates. The report refers to the common practice of having an aircraft insured by a number of insurers to spread the risk. The report also notes that the insurance market has developed standard insurance certificate formats, namely the ones developed by the London Market Insurance Brokers Committee and by the International Union of Aviation Insurers. The Commission expressly welcomes these efforts by the insurance market to facilitate the operation of Regulation 785/2004 and confirms that the standard insurance certificate formats comply with the requirements of Regulation 785/2004. Therefore one would expect that insurance certificates using those standard formats would also be acceptable to national authorities in charge of applying Regulation 785/2004.

However, the respective German authority (LBA) refuses to accept such certificates if they are issued by an insurance pool or by a broker on behalf of the pool if the certificate refers to more than one pool member. This is odd, considering that pool arrangements are common practice in the aviation industry, as acknowledged by the European Commission in its Report, and furthermore that the Deutsche Luftpool was active in Germany for 80 years since 1924. If pool arrangements are a common practice to cover aviation risks, the insurance certificate clearly must be able to reflect this arrangement and there is no reason to disallow an insurance certificate that identifies who the respective pool members are. The LBA, observing the bureaucratic principle, maintains that the provision of the German Aviation Certification Regulation that deals with the requirement of an insurance certificate uses the term “insurer” in the singular, and that this means an insurance certificate may not refer to more than one pool member. The LBA apparently sees no need to take note of a significant document such as the EU Commission Report on the Operation of Regulation 785/2004, and prefers not to be disturbed by current developments.

FINING COMMUNITY CARRIERS FOR FLIGHTS WITHOUT PERMIT

Another example of the same attitude of the LBA can be seen in the context of non-scheduled commercial flights from outside the EU into Germany by non-German EU carriers. For such flights the LBA requires all foreign carriers to apply for an entry permit irrespective of whether the carrier is a Community air carrier or not. The LBA will review the application and check, among other things, the validity of the AOC, the insurance coverage and whether there are no German operators that can carry out the flight. The carrier applying for an entry permit must prove that no German carriers can carry out the flight by submitting corresponding declarations from German carriers. This procedure is time-consuming and will normally make flights arranged at short notice – which non-scheduled flights often are – impossible. Carriers, including (non-German) Community carriers that have carried out non-scheduled commercial flights from outside the EU to Germany without a permit have been fined by the LBA for violating German law. The LBA argues that Regulation (EC) 1008/2008 only prohibits the requirement of an entry permit for intra-Community air services and that German authorities may impose any restrictions on flights from outside the EU.

At first glance, article 15 of Regulation 1008/2008 seems to support this argument as it provides that “intra-Community air services by a Community air carrier” shall not be subject to a permit or authorisation.

However, the requirement of the non-availability of German carriers for the respective flight is clearly discriminatory and consequently illegal, as there is no justification for the different treatment of German and non-German Community carriers. Also, the application requirement itself is illegal as it subjects the non-German Community carrier to a regulatory review of prerequisites (AOC, insurance coverage, etc) that merely duplicates the review by the authorities of the carrier’s home country. Furthermore, as this review is not required for intra-Community flights, a review for flights by the same Community carrier from outside the EU would be excessive and illegal.

One of the cases in which the LBA has repeatedly fined a non-German Community carrier for carrying out non-scheduled commercial flights into Germany from outside the EU without the respective entry permits is currently pending before a Court of Appeals in Germany. The lower court had upheld the LBA fines, but the Court of Appeals has concluded that this practice is illegal and has submitted the matter to the Court of Justice of the EU for a preliminary ruling.

Again this case shows a tendency for national authorities to ignore the fact that the purpose of European integration is to create a level playing field throughout the EU. The national authorities are responsible for implementing this by saying farewell to the cherished principle of “We have never done this before.” This principle may simplify matters, but it prevents the intended benefits of European integration from becoming a full reality.

This antagonism between the bureaucratic tendency to adhere to established practices and the potential benefits created by EU law needs to be resolved. If this cannot be achieved, Europe will pay a high price, not only because of missed opportunities, but also because of the resulting disputes and litigation that those entitled to the benefits under EU law will commence. Needless to say that life without disputes is utopian, but a more positive approach by those in charge of applying EU law would be a big step in the right direction.

It appears to be time to create a level playing field between bureaucrats and lawyers in private practice by introducing continuing legal education requirements for regulators.

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