It began as a very small dispute. Pan American World Airways planned to introduce a service from San Francisco to Paris with a stop in London, using a Boeing 747 aircraft from San Francisco to London and a smaller Boeing 727 aircraft from London to Paris. The change to a smaller plane would have enabled the most efficient and economic use of Pan Am's fleet. In aviation as in railroad terminology, a change along a route to equipment of a different size is called a "change of gauge."
In accordance with French law, Pan Am filed a schedule on February 20, 1978 with the French aeronautical authorities, showing inauguration of the service with change of gauge effective May l, 1978. The French aeronautical authorities informed Pan Am, however, that, in France's view, the proposed change of gauge at London was not authorized by the United States-France Air Transport Services Agreement (the Agreement). According to the French, the Agreement authorized change of gauge in the territory of the parties subject to conditions specified in the Agreement; but because the Agreement made no mention of change of gauge in third countries, a United States carrier could not undertake such an operation on a route to France unless France gave its consent in the particular case. The French authorities made clear that Pan Am should not expect to obtain such consent unless the United States Government was willing to negotiate with France for an appropriate quid pro quo.
Pan Am, and the United States Government, disagreed with the French interpretation. The Agreement's specific provision on change of equipment in the territory of the parties established the conditions under which such operations could take place in those territories, but there were no comparable provisions on third-country change of gauge. Indeed, the United States had always viewed change of gauge as an operational matter left to the managerial discretion of each carrier, unless specific provisions of a bilateral agreement imposed restrictions on the exercise of this discretion. Allowing each carrier to use the most efficient type and size of aircraft in light of differing traffic demands along the segments of a route would promote the declared policy of the United States and France expressed in the Agreement: "to foster and encourage the widest possible distribution of the benefits of air travel for the general good of mankind at the cheapest rates consistent with sound economic principles." In the view of the United States, the text and context of the Agreement, including it. Negotiating history and a long record of practice under it and similar agreements, led to the conclusion that a third-country change of gauge which did not otherwise violate any conditions imposed by the Agreement was perfectly acceptable. Special consent was not necessary, and accordingly an attempt to prohibit an operation merely because it involved a third-country change of gauge would violate the Agreement.
Dispute Resolution and Arbitration | International Law | Law
Lori F. Damrosch,
Retaliation or Arbitration – Or Both: The 1978 United States-France Aviation Dispute,
Am. J. Int'l L.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/4125