Recent issues on ETS for aviation & Transport sector in Belgium

Belgium is first and for all known for its maritime transport with Antwerp being the second largest port of Europe and the 6^th largest of the world.  Apart from the harbour of Antwerp Belgium has also a major seaport with Zeebrugge which is the largest port of Europe for roll on roll off ships.  Both ports are connected with the rest of the European continent through an efficient network of railroads, canals and highways.  Antwerp has been an important harbour since the thirteenth century.  Nowadays it is one of the most important harbours in bulk and containers.

Zeebrugge is an important harbour for car shipping.  Although no carmaker is established in Belgium, Belgium has a long tradition in quality assembly of cars with the assembly factories of among others Ford, Volkswagen and Volvo.  Recently this industry has been much under pressure after the closure of the Opel assembly factory in Antwerp and before that by the closure of the Renault factory.  This car assembly activity is of course supported by the fact that both the harbour of Antwerp and Zeebrugge are very well equipped for car transport.

Belgium has supported its important transport and distribution industry by specific fiscal advantages. Belgium has created a special tax regime for distribution centres being part of a group by the Circular of 8 August 1989.  Since 2003 no new applications are allowed. But new distribution centres can benefit from the special tax regime by obtaining a special ruling from the tax authorities. Recognised distribution centres can benefit from a nominal margin for tax purposes which is assumed to be at arms lengths under the transfer pricing rules. 

The largest airport in Belgium is Brussels Airport which is the 29^th largest passengers airport in 2010 and in 2008 the 29^th largest cargo airport of the world.  Other cargo airports are the airport of Liège (Bierset) which is the home base of TNT, and the Airport of Oostende.

When Sabena was created on 23 May 1923 it was one of the first airlines in the world.  It was partly funded by the Belgians in the Congo colony and was pioneer in the cargo and passengers transport within Africa and also pioneered the routes from Africa to Belgium.  Its bankruptcy on 7^th of November 2001 was considered a blow to the national pride.  Many critics thought that Belgium did not need its own carrier and that the gap would soon be filled by competitor carriers.  A group of Belgium’s most important companies completely disagreed and considered that Belgium with its tradition of a transport country and hosting the headquarters of NATO, the European Commission, Council and Parliament had to have its own airline.  They created SN Air Holding and acquired form the bankrupt estate the shares in Sabena’s regional carrier Delta Air Transport (now called Brussels Airlines).  Now about 10 years after the bankruptcy of Sabena, Brussels Airlines is again one of the market leaders on air transport to Africa.

Belgium hosts a very important organisation in safety of air navigation, namely Eurocontrol. EUROCONTROL, the European Organisation for the Safety of Air Navigation, is an intergovernmental organisation made up of 39 Member States and the European Community.  Today, together with its partners, EUROCONTROL is committed to building a Single European Sky that will deliver the ATM performance required for the 21st century and beyond.  Founded in 1960, it is a civil-military organisation that has developed into a vital European repository of air traffic management (ATM) excellence, both leading and supporting ATM improvements across Europe. (See website of Eurocontrol: www.eurocontrol.int)

There are three regulatory bodies in Belgium, namely the Civil Aviation Authority of the Federal Public Service of Mobility and Transport (BCAA), Belgocontrol which is responsible for the air traffic control and civil air navigation services for Belgium and Luxembourg and the Belgian Supervising authority for Air Navigation services which was created in the context of the Single European Sky.

The BCAA is however the main authority responsible for safety and control of air navigation in Belgium.  It is part of the Public Service of Mobility and Transport, which is also responsible for the transport over road, water and rail. (http://www.mobilit.fgov.be)

Although the federal Government is the competent authority for transport, the environmental aspects of the transport fall under the competence of the regions.  There are three regions in Belgium, Flemish, Walloon and Brussels Region.  The environmental issues related to transport are however by definition cross border and this has lead to many discussions and court cases. Recently these discussions related to the implementation of the ETS Directives for the aviation sector (Directives 2003/87/CE and 2008/101/CE) in Belgium.  The Emission Trade System (ETS) Directives for Aviation had to be implemented by 2 February 2010 (see Flemish decree of 8 May 2008 modifying the REG decree of 2 April 2004 and the Walloon decree of 6 October 2010 modifying the decree of 10 November 2004 with respect to the emission of CO2).   As there are only airports in Flanders and Wallonia, the Brussels Region would normally not have been concerned.  Brussels Airport, not withstanding its name is located in Zaventem, Flanders.  But of course many of the flights go over Brussels and as such “polluting” Brussels. 

The Brussels region has filed an appeal against the Flemish ETS Decree before the Constitutional Court which rendered its decision on 2 March 2011.   The court confirmed that indeed the Regions are competent for environmental matters but that the green house emissions for aviation are by definition cross border and that the different regions have to conclude a cooperation agreement with respect to such cross border issues.  Following this decision the Federal Government has also filed an appeal against the Walloon ETS Decree before the Constitutional Court.  The Regions have the time until 31 December 2011 to conclude such cooperation agreement. Until that time the effects of the Flemish ETS Decree remain unchanged.  The discussions are of course mainly monetary.  The majority of the air operators depart from Brussels Airport.  Flanders would therefore benefit the most of the ETS rights.  Brussels clearly wants to have a portion of the ETS benefits.  The question is how the Belgian operators will be affected by the new ETS.  The ETS Directive for Aviation uses as historical emissions the arithmetic average of the emission for the years 2004, 2005 and 2006.  All major airlines in Belgium, EAT and TNT for Cargo, Brussels airlines, TUI Airlines Belgium and Thomas Cook Airlines Belgium have undergone or are still undergoing a major fleet renewal replacing older, more polluting aircraft by newer or new aircraft.  It is therefore highly probable that their emissions will be lower then the 95% of the historic emissions and that they will have ETS rights to trade.

Birgitta Van Itterbeek is partner and Dugardyn & Partners. She has extensive experience in (i) aviation law, specifically aircraft finance and leasing, (ii) asset-based financing, with a special focus on leasing, project finance and acquisition finance and (iii) insurance. She regularly advises airlines, charter companies and lessors. She has also counselled Belgian and foreign companies, venture capital funds and banks on matters of acquisition finance and secured lending. Birgitta has also a particular knowledge in insurance matters, including reinsurance and retrocession, and regularly assists reinsurance and insurance companies.

Birgitta publishes regularly on selected topics in the field of aviation law and leasing and is frequently invited to speak at seminars.  She is selected by Who’s Who of Aviation Lawyers and of Business lawyers as a world leading Aviation Lawyer.

She can be contacted at +32 2 737 10 40 or by email Birgitta.vanitterbeek@d-lawfirm.be