EU law update


THE EUROPEAN Commission has published a “reasoned decision” including an order for Ireland to take steps to recover exchequer funds obtained unlawfully by Aer Lingus, Aer Arann and Ryanair. It found the Irish air carriers had received an unlawful selective benefit by virtue of the two-tier structure of the Government’s “air travel tax” from March 2009 to March 2011.

A €10 levy applied to all passenger flights save for those to destinations less than 300km from Dublin Airport, which incurred a €2 levy. The lower tax was found to be an unlawful waiver of tax revenue for domestic airlines, so the exchequer must now recover the €8 difference for each flight.

The two-tier tax structure was found to incorporate unlawful State aid because the €2 levy was seen not to form part of a coherent tax scheme. Ireland’s defence had been that the lower levy was justified by the proportionately lower ticket prices for closer destinations. The commission noted the 300km threshold irrationally related to the distance between Dublin and the destination, rather than the length of the taxable event – the plane journey.

It also found the blunt nature of the distinction between tax levels for domestic and intra-community flights, whereby there was no sliding scale, did not indicate a generally applicable scheme. It also noted ticket prices are not necessarily lower for flights to domestic and UK destinations. Ireland had therefore illegitimately favoured national carriers who compete with other European airlines on other flight routes.

The European Court of Justice was also called upon to rule on a dispute regarding the automatic incorporation of cancellation insurance into flight prices on The court was asked to decide whether air ticket distributors are subject to the 2008 EU law requirement for optional flight extras to be offered on an “opt-in” basis only.

The court rejected the narrow interpretation put forward by ebookers that the rules apply to airlines only and held the customer protection imperative demands all sellers of flight tickets be subject to full transparency requirements.

Meanwhile, the European Council has approved changes to the structure of the European courts to help address a growing backlog of cases. As of July 24th, the European Court of Justice and the General Court may appoint vice-presidents to share the workload, the Grand Chamber need only comprise three presidents of the judge chambers (rather than all five), and temporary judges can be assigned to specialised courts to fill lengthy absences.

A notable exclusion from the reforms is the proposal by the court’s president to increase the number of judges in the General Court from 27 to 39. This change would disrupt the balance of one judge per member state and thus was likely to be seen as too politically contentious to address before October 2012, when 14 judges’ terms expire and Croatia’s July 2013 ascension to the EU will be a more immediate concern.

Kate Leahy and Caroline O’Connor are members of the Irish Society for European Law