Stephenson Harwood’s aviation and regulatory team has advised AirAsia X (AAX), the new long-haul affiliate of Air Asia, on its obligations under the EU emissions trading system (EU-ETS) for the aviation industry, which applies to all aircraft flying in and out of Europe. The firm successfully secured the UK’s agreement to allow AAX to submit its monitoring and emission plans to the UK, which according to the firm will save AAX millions of dollars a year.
Under the EU-ETS, an airline must submit a monitoring and emission plan to its allocated EU member state in order to gain free allowances of CO2. As AAX only became operational last year, it had not been allocated an EU member state under the EU-ETS and Stephenson Harwood alerted the airline to the fact that it could potentially miss out on its share of free allowances for 2012. If this were the case, AAX would need to buy credits from the carbon markets.
Non-EU airlines are allocated EU member states for EU-ETS regulation on the basis of which country within Europe the bulk of their flights go to, making the UK the regulating body or competent authority for AAX. A significant number of airlines had already been allocated to the UK given the huge number of flights that go through Heathrow airport and resources were already stretched. “It was quite an ordeal to try and get their attention in order to correct the oversight on the list [of allocations],” said Paul Ng, global head of aviation at Stephenson Harwood.
Negotiations were further complicated by the fact that the regulations are new. “There is no precedent or clear process to follow in order to submit an amendment to the list,” said Ng. “We explored both legal avenues and commercial relationship avenues in order to get the attention of the UK Environment Agency.”
The team worked under pressure in order to successfully secure the UK’s agreement before the deadline for submissions. This agreement enables AAX to plan future routes and flight capacity to Europe and avoid huge extra costs by obtaining the free allowances.
The team at Stephenson Harwood played more than just a legal role in the protracted negotiations with the UK on behalf of its client. It also assumed the role of project manager and worked with environmental and engineering company Entec to provide legal and technical expertise. “As legal counsel, we are very clear on our responsibilities but often clients come to us for more than legal advice and we want to facilitate the process with them,” said Ng. “The lawyer-client relationship is one of trust and not uncommonly we are asked to take a project management role with other consultants.”
The regulatory team at Stephenson Harwood is also advising clients and nations, such as China and Indonesia, on the Cape Town Convention, a treaty designed to facilitate asset-based financing and leasing of aviation equipment.
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