Notwithstanding its bilateral entitlements, and its compliance with all Japanese filing procedures, Northwest stated that on June 28, 1996, at the conclusion of the second round of intergovernmental discussions on this matter, Northwest was notified that it could not operate the service and that a permit would not be granted. Northwest argues that Japan’s action seriously injures Northwest by limiting its ability to serve Asia and by precluding altogether Northwest’s participation in the U.S.-Indonesia market; and that Japan’s clear violation of the bilateral agreement warrants remedial action under the statute. 

In this regard, Northwest requested that the Department immediately require Japan Airlines to cancel its twice weekly service in the Japan-Los Angeles-Brazil market which is operated with local traffic rights between Los Angeles and Sao Paulo, as well as its proposed once weekly flight between Hiroshima and Honolulu whether operated on a scheduled or a charter basis. 

JAL had urged the Department to dismiss Northwest’s complaint. JAL argued that the real issue in this matter is a difference in interpretation between the United States and Japan of the various U.S.-Japan aviation understandings, and in particular, the effect of the 1989 Memorandum of Understanding (1989 MOU). JAL had contended that the Japanese government’s position is that the 1989 MOU made “clear that routes not already available to carriers on the basis of existing home country authority granted prior to the signing of the 1989 [MOU] were no longer available as a matter of right.” 

JAL further stated that it is Japan’s position that this clause includes fifth freedom as well as third- and fourth-freedom services. Since Northwest did not hold U.S. government approval of its Osaka-Jakarta services at the time of the 1989 MOU, JAL contended Northwest was not entitled to Japanese authorization of its Osaka-Jakarta services, and that Japan’s decision not to approve the service does not violate the 1952 Agreement. Although the United States has taken a contrary interpretation of the “non-derogation” provision of the 1989 MOU, JAL contended that such different interpretation did not warrant approval of Northwest’s complaint and that the matter should be resolved through intergovernmental discussions. 

Northwest argued that, contrary to JAL’s assertion, Japan’s denial of its Seattle-Osaka-Jakarta service is not based on the “non-derogation” clause of the 1989 MOU, but rather “Japan’s publicly announced policy, as of January 1995, to disapprove all 1952 carrier applications to add new routes...regardless [of] whether they are protected or derogated by the 1989 non-derogation clause. 

Northwest further argued that the negotiating history of the various understandings between the United States and Japan during the 1980s supports Northwest’s position that the 1952 Agreement entitles it to operate its Seattle-Osaka-Jakarta service with local traffic rights and warrants approval of its complaint. 

United agrees with Northwest that Japan has violated the 1952 aviation agreement. In this regard it contend that the purpose of the 1985 and 1989 “non-derogation” clauses was to ensure that the limitations on the MOU carriers were not mistakenly applied to the 1952 carriers, and, thus, to preserve the rights of the 1952 carriers. It was further argued that JAL’s insistence that the 1985 and 1989 MOUs limit the rights of the 1952 carriers failed to take into consideration the United States Government’s repeated rejection of that position. United maintained that the United States must stand firm in its well-established and supported position against Japan’s efforts to take away U.S. rights granted in the 1952 Agreement, and to require full and unconditional approval of Northwest’s, as well as United’s, Osaka-Jakarta services. 

JAL, argued that neither Northwest nor any other party has made a “colorable argument” in support of the proposition that the Japanese government has violated the 1952 Agreement or that Northwest’s complaint warrants action under the statute. JAL maintained that a difference in interpretation between the United States and Japan cannot lawfully be addressed by means of unilateral sanctions. It, therefore, supports discussions with Japan rather than sanctions. 

Finally, JAL argued that United’s dispute with Japan over its San Francisco-Osaka-Jakarta service is not relevant to the proceeding and should not be considered by the Department.  Northwest argued that, notwithstanding JAL’s arguments to the contrary, Japan’s refusal to authorize Northwest’s Seattle-Osaka-Jakarta service violated the U.S.-Japan Aviation Agreement and warrants approval of its complaint. 

On January 23, 1997, Northwest filed a motion for immediate enforcement of its complaint, requesting that the Department approve its complaint by finding Japan in violation of the U.S.- Japan Aviation Agreement and assessing an appropriate sanction. In this regard, Northwest stated that while it initially requested that the Department require JAL to cease its twice-weekly Japan- U.S.-Brazil service and not approve its Hiroshima-Honolulu service, it believed the appropriate sanction would be denial of JAL’s recent application to add new flights between Tokyo and Kona, Hawaii. 

United, Seattle, the State of Hawaii, and JAL filed answers to Northwest’s motion United opposes Northwest’s motion and states that third- and fourth-freedom rights of either Japanese or U.S. carriers should not be limited due to a dispute over fifth-freedom rights Seattle supports Northwest’s motion and proposed sanction. JAL opposed Northwest’s motion, arguing that its proposed Kona/Atlanta-Tokyo third/fourth freedom services are clearly provided for in the 1985 and 1989 MOUs and that resolution of the issue of Northwest’s proposed fifth-freedom services can be achieved only through discussions between the United States and Japan.  

Hawaii also opposes Northwest’s proposed sanctions against JAL’s Tokyo-Kona services, arguing that the services are consistent with the U.S.-Japan Aviation Agreement and that denial of these services will adversely affect Hawaii which depends on services in the Hawaii-Japan market. After careful consideration of all of the pleadings and issues in this case, it was decided to approve Northwest’s complaint. DOT defer action, at that time, on the issue of sanctions.  

49 U.S.C. section 41310 provides that, upon complaint or on our own initiative, when DOT determines that a foreign government imposes unjustifiable or unreasonable restrictions on the access of a U.S. air carrier to foreign markets, DOT may take such action as deem to be in the public interest. DOT find that Japan’s refusal to authorize Northwest’s proposed Seattle-Osaka- Jakarta service constitutes a violation of the provisions of the 1952 Agreement and related understandings, and has denied Northwest route rights to which it is entitled under the 1952 Agreement. 

Northwest has been designated to serve Japan on Route B(2) of the 1952 Agreement. That Agreement entitles Northwest to operate scheduled services from many U.S. cities, including Seattle, to Tokyo, Osaka and Naha, Japan, and beyond. Thus, Northwest’s proposed Seattle- Osaka-Jakarta services are fully consistent with the provisions of the Agreement, and schedules for these services were properly filed with Japan. The Japanese government’s refusal to approve Northwest’s Seattle-Osaka-Jakarta services, over the objections of the United States, has denied Northwest rights to which it is entitled under the 1952 Agreement.