Federation of Tour Operators & Ors, R (on the application of) v HM Revenue & Customs & Ors

A tax on air travel is not prohibited by article 15 of the Chicago Convention where it is payable on take-off irrespective of destination. Such a tax is not imposed solely for the right of transit, entry or exit, and subsequent state practice confirms that construction. The single European sky legislation regulates charges for air-navigation services, not air passenger duty. Under A1P1, a tax measure is compatible with proportionality unless the legislature’s assessment is devoid of reasonable foundation. Retrospective effect is relevant but does not itself establish incompatibility. A non-discriminatory tax affecting domestic and cross-border services alike does not infringe article 49 EC merely because it may make cross-border services less attractive where its inhibiting effect is indirect and uncertain.

The claimants, a trade association and two tour operators, sought judicial review of the imposition and increase of air passenger duty. The duty was imposed by the Finance Act 1994; its rate was doubled with effect from 1 February 2007, affecting tour operators who could not fully recover the increase under the Package Travel, Package Holidays and Package Tours Regulations 1992.

They argued that the duty and its increase contravened article 15 of the Chicago Convention, incorporated through article 14 of the Service Provision Regulation, infringed A1P1, and restricted freedom to provide services under article 49 EC. The Speaker of the House of Commons intervened on parliamentary privilege. The central issues were whether the duty was prohibited or incorporated by European legislation, whether the increase was disproportionate, and whether it restricted cross-border services.

1. Chicago Convention. Article 15 is principally an anti-discrimination provision concerning airport and air-navigation charges. Its final sentence does not prohibit a tax payable on take-off irrespective of destination, because it is not imposed solely for the right of transit, entry or exit. The authentic-language differences were resolved by the ordinary meaning, context and subsequent state practice. The travaux préparatoires supported, rather than displaced, that conclusion. APD was therefore not prohibited by article 15.
2. Single European Sky legislation. Article 14 of the Service Provision Regulation concerns charging schemes for air-navigation services. APD is a tax, not a charge for those services, and was outside the provision’s scope. The related framework and common charging legislation did not incorporate article 15 so as to regulate APD.
3. A1P1. The effective financial burden on tour operators engaged A1P1. The Government had initially failed to consider the Package Travel Regulations, but considered their effect after representations and decided to retain the measure. The increase had practical retrospective effect because it affected flights contracted before announcement, although that did not make it unlawful. Taxation attracts a wide margin of appreciation. The appropriate question was whether the legislature’s assessment was devoid of reasonable foundation. Revenue-raising and environmental objectives supplied substantial reasons, and the burden was an incident of the claimants’ business. Proportionality was satisfied.
4. Parliamentary material. Its admissibility depended on relevance and purpose. Parliamentary opinions on retrospectivity, witness accuracy and parliamentary procedure were irrelevant to legality. Evidence of ministerial statements could in principle be used to establish executive motivation, subject to the circumstances.
5. Article 49 EC. APD was non-discriminatory, its effect on EU service providers was indirect and uncertain, and it affected domestic and cross-border services alike. It therefore did not restrict freedom to provide services. Alternatively, it was justified and proportionate in pursuit of environmental and revenue-raising objectives.
6. The claim for judicial review was dismissed.