LegiStorm

Summary:

Much of the law regarding civil aviation has been developed through a combination of domestic laws and international agreements between the United States and other nations. In 1992, the United States Department of Transportation (DOT) introduced the "Open Skies" initiative and began negotiating and entering into modern civil aviation agreements with foreign countries, as well as individual members of the European Union (EU). As a result of a 2002 European Court of Justice ruling that several portions of these "Open Skies" Agreements violated EU law, the United States and the EU have been negotiating a new Open Skies Agreement. A tentative agreement appears to exist between the parties that if enacted would, among other things, allow every EU and U.S. airline to fly between every city in the European Union and every city in the United States and would permit U.S. and EU airlines to determine the number of flights, their routes, and fares according to market demand. Despite this development, there appears to remain several areas of international civil aviation law that the tentative agreement does not address. Among them are the issues of foreign ownership and control, participation in the Civil Reserve Air Fleet Program, and cabotage. Presently, U.S. law requires that to operate as an air carrier in the United States, an entity must be a citizen of the United States. To be considered a citizen for civil aviation purposes, an entity must be owned either by an individual U.S. citizen, a partnership of persons who are each U.S. citizens, or a corporation (1) whose president and at least two-thirds of the board of directors and other managing officers are U.S. citizens, (2) that is under the actual control of U.S. citizens, and (3) has at least 75 percent of its stock owned or controlled by U.S. citizens. Recently, however, the DOT released a Notice of Proposed Rulemaking (NPRM) that would change its interpretation of what constitutes "actual control." If adopted, this new interpretation could have major implications for U.S. and international civil aviation. Several issues relating to this NPRM are currently being debated, including the consistency with the operative statutes and the viability of the Civil Reserve Air Fleet Program (CRAF), should more extensive foreign ownership be permitted. In addition, Members of Congress have taken a significant interest in this DOT rulemaking, both through direct participation in the rulemaking process and by introducing legislation (H.R. 4542 and S. 2135) that would prohibit the adoption of a final rule for one year and require the DOT to submit reports and analysis on the impact of the new interpretation on the domestic industry and national security concerns. Furthermore, both the House and Senate have adopted amendments to the proposed Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia and Independent Agencies Appropriations Act of 2007 (H.R. 5576) that would effectively forestall the DOT from adopting a final rule. U.S. law also contains a general restriction on cabotage, defined as the transportation of passengers or cargo by foreign air carriers from one point in the United States to another. This report provides background on U.S. civil aviation agreements, updates the current status of U.S. "Open Skies" negotiations with the EU, and addresses the legal debate concerning both the foreign ownership and control rules and the cabotage laws. It will be updated as events warrant.