Report 2003 - EFTA Court

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Chapter III. Decisions of the Court: Case E-1/03 EFTA Surveillance Authority v Iceland “analogous provision of services at domestic level” 58 and “comparable domestic services.” 59 80. The Icelandic Government submits that there are significant differences in services between intra-EEA flights and domestic flights in Iceland. The services needed to accommodate international flights in Iceland are much more extensive and costly than those required for domestic flights. The differences in services result from the different facilities, personnel and technological equipment necessary, the different customs rules applicable, and the different requirements for small aircraft compared to jets. 81. The type of aircraft that can be used in domestic flights is limited to propeller driven planes less than 25 tons, and in fact only aircraft below 10 tons operate on routes to the nine airports that only serve domestic traffic. Purely domestic airports can only accommodate small, propeller driven aircraft that require shorter runways with less sophisticated surface and fewer facilities than jet planes. Only jet transport aircraft are used in international flights. The facilities and services available for aircraft operating in the domestic market are very small and simple, based on the requirements of the air carriers and the limited number of passengers using them. The domestic terminals are not built for customs inspections or passport control. 82. The Icelandic Government recalls that as Iceland is a party to the EEA Agreement, it is not part of the customs union of the EU. In Commission v Portugal, 60 Advocate General Alber refers to the fact that no passport control or customs checks are necessary within the Community. His reasoning is that this should support lower tax within the Community, compared to international flights. 61 As Iceland has for the last two years been a party to the Schengen Agreement, passengers on flights originating within the Schengen area do not need to go through passport control. This is, however, not the case regarding intra-EEA flights from the United Kingdom and Ireland, since those EEA Members are not Schengen Members. Full passport control is needed for passengers on those flights, making the required provision of services for part of the EEA exactly the same as for flights for non-EEA destinations. 83. The Government states that in addition, there is always a need for customs checks irrespective of the country in which the flight originates. The EEA Agreement does not establish a customs union but only provides, in Article 21, for co-operation in the field of customs and facilitation of border controls. Therefore the requirements for facilities for customs clearance, technical equipment in that regard, and increased personnel to handle customs clearance 58 Case C-381/93 (n 3 above), at paragraph 5. 59 Case C-70/99 (n 10 above), at paragraph 28. 60 Ibid. 61 Case C-70/99 (n 10 above), at paragraph 50.
Chapter III. Decisions of the Court: Case E-1/03 EFTA Surveillance Authority v Iceland are only needed for international flights. This constitutes a fundamental difference between domestic flights and international flights in Iceland, including EEA flights, which does not exist in EU countries. 84. The extensive services, facilities, and personnel required for accommodating international flights require space. In addition, technological equipment is much more sophisticated for international flights, due to various obligations arising from international police cooperation. The air terminals for international flights are required to have facilities to accommodate all these additional services and personnel. The three alternative airports also need facilities to keep cross-border passengers separate from domestic passengers, due to customs rules and security control. 85. In addition to the differences in services between domestic and international flights outlined above, the Icelandic Government contends that the intra-EEA air services are a distinct and separate market from the domestic Icelandic market. 86. The Icelandic Government submits that the tax rate on international flights, including flights from other EEA countries to Iceland, neither constitutes a barrier to the freedom to provide services nor renders it more difficult to provide intra-EEA air services. The distinctive markets of domestic and international air services in Iceland, with different types of aircraft, very different lengths of air routes and different geographical and meteorological conditions, create a situation that excludes any competition between the two markets. No service provider in the domestic market can effectively compete with the service providers in the international market, because of the distinctive and different requirements and demands of the consumers. 87. In support of its contention that the markets are separate, the Icelandic Government reiterates and develops the factual description of the domestic and international markets. 88. The market for air services within Iceland constitutes approximately 335 thousand passengers per year. On each domestic flight, there are 13-14 passengers on average. Domestic flight services are in direct competition with bus services and the use of private cars, since there are no train services in Iceland, and ferry services to only two scheduled flight destinations, the Westmann Islands and Grimsey Island. The potential consumer market is mostly domestic traffic, which is limited on grounds of the number of inhabitants, 288,000 people, although there is in addition some tourist traffic. 89. The market for international air services to and from Iceland constitutes approximately 1,400,000 passengers per year, with an average of approximately 80 passengers on each flight.
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Report of the EFTA Court 2003
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A collection of the relevant legal
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Chapter I. Administration of the Co
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Chapter II. Judges and Staff II. Ju
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Chapter II. Judges and Staff CURRIC
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III. Decisions of the Court
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Chapter III. Decisions of the Court
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VI Costs Chapter III. Decisions of
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CASES 1994 - 2002 CASE PARTIES TYPE
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15 E-4/96 Fridtjof Frank Gundersen
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30 E-3/98 Herbert Rainford-Towning
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46 E-9/00 EFTA Surveillance Authori
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