A.  Letter from the European Community and its Member States
Sir,
I have the honour to refer to the negotiations between the Commission of the European Community and the Government of the Russian Federation on the modernisation of the system of utilisation of Transsiberian routes. The results of such negotiations are reflected in the attached “Agreed Principles on the Modernisation of the existing system                  of utilisation of the Transsiberian routes” (Annex I) and the Letter of 23 November 2006 by Minister Levitin to Mr Barrot, Vice-President of the Commission (Annex II)
I have the honour to propose that, upon the confirmation of your acceptance, this letter and its annexes together constitute an Agreement in the form of an Exchange of Letters between the European Community and its Member States, of one part, and the Russian Federation, of the other part. The agreement shall be applied provisionally by both parties from 01st September 2007 and shall enter into force 10 days after the later note in an exchange of diplomatic notes between the Parties confirming that all necessary procedures for entry into force of this Agreement have been completed.
I should be obliged if you would confirm that your Government is in agreement with the contents of this letter.
Please accept, Sir, the assurance of my highest consideration.

On behalf of the European Community and its Member States

THE KINGDOM OF BELGIUM,
THE REPUBLIC OF BULGARIA,
THE CZECH REPUBLIC,
THE KINGDOM OF DENMARK,
THE FEDERAL REPUBLIC OF GERMANY,
THE REPUBLIC OF ESTONIA,
THE HELLENIC REPUBLIC,
THE KINGDOM OF SPAIN,
THE FRENCH REPUBLIC,
IRELAND,
THE ITALIAN REPUBLIC,
THE REPUBLIC OF CYPRUS,
THE REPUBLIC OF LATVIA,
THE REPUBLIC OF LITHUANIA,

THE GRAND DUCHY OF LUXEMBOURG,
THE REPUBLIC OF HUNGARY,
MALTA,
THE KINGDOM OF THE NETHERLANDS,
THE REPUBLIC OF AUSTRIA,
THE REPUBLIC OF POLAND,
THE PORTUGUESE REPUBLIC,
ROMANIA,
THE REPUBLIC OF SLOVENIA,
THE SLOVAK REPUBLIC,
THE REPUBLIC OF FINLAND,
THE KINGDOM OF SWEDEN,
THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND,

THE EUROPEAN COMMUNITY,

“B. Letter from the Russian Federation”
Sir,
I have the honour to acknowledge receipt of your letter of … which reads as follows:
I have the honour to refer to the negotiations between the Commission of the European Community and the Government of the Russian Federation on the modernisation of the system of utilisation of Transsiberian routes. The results of such negotiations are reflected in the attached “Agreed Principles on the Modernisation of the existing system                   of utilisation of the Transsiberian routes” (Annex I) and the Letter of 23rd November 2006 by Minister Levitin to Mr Barrot, Vice-President of the Commission (Annex II).
I have the honour to propose that, upon the confirmation of your acceptance, this letter and its annexes together constitute an Agreement in the form of an Exchange of Letters between the European Community and its Member States, of one part, and the Russian Federation, of the other part. The agreement shall be applied provisionally by both parties from 01st September 2007 and shall enter into force 10 days after the later note in an exchange of diplomatic notes between the Parties confirming that all necessary procedures for entry into force of this Agreement have been completed.
I have the honour to confirm that the above is acceptable to my Government and that your letter, including the annexes, and this reply together constitute an Agreement,                   in accordance with your proposal.
ANNEX I
Agreed principles of the Modernisation of the existing system of utilisation of the Transsiberian routes[1]
I. Object and Scope
1. This instrument lays down Agreed Principles with respect to the modernisation                 of the existing system of overflights along specified Transsiberian routes by EC Member States air carriers.
2.  The Agreed Principles rest on the assumption that the Russian Federation has not acceded to the International Air Services Transit Agreement signed in Chicago on               7 December 1944, and is therefore neither bound by the obligations of, nor enjoys                  the rights available under, that Agreement.
II. Modernisation of the system
1.  No later than 1 January 2014, the provisions of the bilateral arrangements of respective Aeronautical Authorities containing the obligation of the EC Member States air carriers to enter into commercial agreements with Russian air carriers on the above routes shall be terminated. As a consequence, EC air carriers shall not make any payments resulting from commercial agreements in respect of overflights, except payments in accordance with paragraph II.2 of these Agreed Principles.
2.  No later than 1 January 2014, any fees and charges applicable for overflying Russian and EU territories by EU and Russian airlines, respectively, shall be cost-related, transparent and not leading to discrimination between foreign airlines. Any such fees and charges shall be paid to the relevant public authorities and be in accordance with the requirements of the Chicago Convention.

3.   At the date of the revision of the bilateral arrangements in accordance with point IV.1         at the latest, the number of overflight frequencies available to each side[2] shall not be reduced. The number of overflight frequencies available to EC Member States shall include frequencies currently leased by the EC Member States air carriers from Russian air carriers. At the same time, the relevant EC Member State shall increase the number of overflight frequencies available to the Russian side[3] so that it equals the number  of overflight frequencies available to the EC Member State, or maintain the balance    of rights under the bilateral air services agreements with the Russian side through any other means mutually acceptable for both sides.
--------------------------------------------------------------------------------------------------------------
[1] (Council conclusions on Siberia, 2721st Transport, Telecommunications and Energy,   Council (Transport), Brussels, 27 March 2006)
 For the sole purpose of the present Agreed Principles Transsiberian routes shall include
 routes according to the definition in the respective bilateral arrangements for which the Russian Federation currently limits overflights and requires commercial agreements between designated carriers.
[2] For the purpose of this provision « side » shall be understood as the Russian Federation or one of the EC Member States.
[3] Overflight frequencies shall be operated by Russian carriers as provided under                 the existing bilateral arrangements between EU Member States and the Russian Federation.

III. Mechanism of Transition
1. Newly operated overflight frequencies on agreed specified routes shall not require prior conclusion of a commercial agreement between the designated carriers or payments[4] resulting therefrom after the date of signature of the Agreed Principles.
2. From 1st January 2010, the provisions of the bilateral arrangements of respective Aeronautical Authorities shall be modified in order to ensure that
- the right of the EC Member States air carriers to omit stopping in the territory       of the Russian Federation under bilateral arrangement shall not be subject to any special commercial agreement with Russian designated air carries or payment resulting therefrom.
- any code-share operation using Transsiberian routes shall not be subject to any special commercial agreement with Russian designated air carriers or payments resulting therefrom.
From the date of signature of these Agreed principles, the Aeronautical Authorities shall not approve commercial agreements between designated carriers under the existing bilateral arrangements where the payments exceed the amount paid in 2006.
IV. Implementation modalities
1. [No later than 1st of January 2007], the Russian Federation and all EC Member States shall start consultations to be completed within 6 months with a view to ensuring that the bilateral arrangements comply with the provisions of Sections II and III of these Agreed Principles.
2. In consultations on the use of Transsiberian routes, the Russian Federation and EU Member States shall be governed by these Agreed Principles.
V. Consultations

The Parties agree within 15 days of a request to conduct consultations to discuss any issue related to the implementation of these Agreed Principles with the view to seek            a mutually satisfactory solution.

--------------------------------------------------------------------------------------------------------------
 [4] [These payments from commercial agreements include inter alia the payments for code share, non stop services, transfer of services, use of Transpolar routes, technical landings and leased frequencies.]

ANNEX II
Mr. Jacques Barrot
Vice-President of the European Commission
Commissioner for Transport
Brussels
Dear Vice-President,

The Ministry Transport of the Russian Federation welcomes the cooperation with European Commission in the framework of Working Aviation Group of the Russia – EU Transport dialogue. 

It intends to further develop cooperation in the field of aviation between Russia and EU.

The Aeronautical Authority of the Russian Federation intends to continue its current practice of positive consideration of the requests by the EC Member states on the increase of the number of overflight frequencies made in the context of bilateral negotiations between the respective national Aeronautical Authorities. In the framework of the bilateral arrangements that may be reached in the course of such negotiations the Aeronautical Authorities of the Russian Federation will be ready to increase the number of overflight frequencies based on the principle of mutual benefit and equal opportunity taking into account the air navigation capacity of respective routes.
In the course of these negotiations, the Aeronautical Authority of the Russian Federation will take into account inter alia the rights available for EC Member States air carrier for operations to a third country on routes departing from their own territory.          The increase of the number of overflight frequencies shall be made in accordance with the general principles of overall balance of interests of both Sides that capacity shall be related to the requirements of traffic between the countries of origin and destination, of traffic            of the area through which the agreed services pass; and through airline operations.
Duly motivated requests of the EC Member States will continue to be negotiated in good faith and on reasonable grounds.
Sincerely,
Igor LEVITIN