Europe's right to tackle pollution from all airlines using its airports does not breach international law, EU judges ruled today.
They threw out a challenge by a group of American and Canadian-based airlines and airline associations over an emissions trading scheme which includes even non-EU aircraft in rules designed to curb CO2 output.
The verdict will heighten transatlantic tensions in a week when US Secretary of State Hillary Clinton urged EU foreign policy chief Catherine Ashton to help reverse the policy - warning of "appropriate action" by Washington if nothing was done.
But today's ruling from the European Court of Justice described the way the EU's emissions trading scheme is applied to the aviation sector as "valid".
The judges declared: "The uniform application of the scheme to all flights which depart from or arrive at a European airport is consistent with the provisions of the Open Skies Agreement designed to prohibit discriminatory treatment between American and European operators."
The Open Skies Agreement was concluded in April 2007 between America and the EU.
But when the UK implemented the EU emissions measures, the American Air Transport Association, American Airlines, Continental and United Airlines, supported by the International Air Transport Association (IATA) and the National Airlines Council of Canada, launched legal action in the High Court.
The matter was passed to European judges to answer the complaint that by including transatlantic aviation in the scheme, the EU violated principles of "customary international law" including "the freedom to fly over the high seas".
Today's verdict said that the emissions trading rules were "not intended to apply as such to aircraft flying over the high seas or over the territory of the member states of the EU or of third States."
It went on: "It is only if the operators of such aircraft choose to operate a commercial air route arriving at or departing from an airport situated in the EU that they are subject to the emissions trading scheme."
The judges said: "In this context, application of the emissions trading scheme to aircraft operators infringes neither the principle of territoriality nor the sovereignty of third states, since the scheme is applicable to the operators only when their aircraft are physically in the territory of one of the EU member states and are thus subject to the unlimited jurisdiction of the EU.
"Nor can such application of EU law affect the principle of freedom to fly over the high seas since an aircraft flying over the high seas is not subject, insofar as it does so, to the emissions trading scheme."
The ruling rejected the claim that US and Canadian aircraft - or any other non-EU aircraft arriving in the EU - should not be fully subject to the emissions trading scheme.
It said: "The fact that certain matters contributing to the pollution of the air, sea or land territory of the (EU) member states originate in an event which occurs partly outside that territory is not such as to call into question ... the full applicability of EU law in that territory."
Neither did the trading scheme amount to a tax, fee or fuel charge in breach of Open Skies rules which exempt aircraft from such levies.
The verdict was welcomed by German MEP Peter Liese, who said it meant the extension of emissions trading to aviation could now go ahead as planned on January 1 2012.
Mr Liese, who wrote a European Parliament report on the issue, said: "When we drafted the legislation, we took extensive legal advice, also concerning the compatibility with international law."
He said the US and Canadian airlines should now respect the court's ruling.
He said: "We have the law on our side, and we adopted this legislation after years of discussion. How could we justify to our citizens not implementing it just because of the pressure of the USA, China and others?"
He said the EU should now clarify that revenues generated by the emission trading scheme are spent for climate change mitigation and adaptation, and can be used to develop common projects with third countries.
Mr Liese said any rise in air ticket prices should be "marginal, if the airlines play fair".
About 85% of emissions trading certificates were allocated free, and carbon prices were currently low.
"The price increase for a flight from Europe to US east coast should be less than one euro. If an airline increases the price substantially more, they either fool their passengers by including the price of the certificates that they got for free, or they have a very old and dirty fleet," he said.