EUROPEAN COMMUNITIES AND CERTAIN MEMBER
STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
Recourse to Article 21.5 of the DSU by THE UNITED
sTATES
NOTIFICATION OF AN APPEAL BY the European Union
UNDER ARTICLE 16.4 AND ARTICLE 17 OF THE UNDERSTANDING ON RULES
AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES (DSU),
AND UNDER RULE 20(1) OF THE WORKING PROCEDURES FOR APPELLATE REVIEW
The following communication, dated 13 October
2016, from the delegation of the European Union, is being circulated to
Members.
_______________
Pursuant to Article 16.4 and
Article 17.1 of the DSU, the
European Union hereby notifies to the Dispute Settlement Body its decision to
appeal to the Appellate Body certain issues of law covered in the Panel Report
and certain legal interpretations developed by the Panel in the dispute European Union – Measures
Affecting Trade in Large Civil Aircraft (Recourse to Article 21.5 of the DSU by
the United States) (WT/DS316/RW).
Pursuant to Rule 20(1) of the Working Procedures for Appellate
Review, the European Union simultaneously files this Notice of
Appeal with the Appellate Body Secretariat.
The European Union is restricting its appeal
to those errors that it believes constitute serious errors of law and legal
interpretation that need to be corrected.
Non-appeal of an issue does not signify agreement therewith.
For the reasons to be further elaborated in its submissions to the
Appellate Body, the European Union appeals, and requests the Appellate Body to
reverse, modify or declare moot and of no legal effect, the findings,
conclusions and recommendations of the Panel, with respect to the following
errors of law and legal interpretations contained in the Panel Report[1]:
I.
Whether the
Panel Properly Interpreted Article 7.8 of the SCM Agreement (Sections
6.6.2 and 6.6.3 of the Report)
1.
The Panel erred
in interpreting Article 7.8 of the SCM Agreement to require an implementing Member
to “remove the adverse effects” found from an actionable subsidy in original
proceedings, even if that subsidy has been “withdraw{n}” and is no longer
“maintain{ed}”.[2]
2.
The Panel
additionally erred in its interpretation of Article 7.8 (in
conjunction with Article 1.1(a)) of the SCM Agreement) when finding that bringing about the end of a
financial contribution does not result in
withdrawal of the subsidy.[3] The European Union requests the Appellate
Body to consider this appeal only if the Appellate Body reverses the Panel’s
interpretation of Article 7.8 and attempts to complete the analysis under a
proper interpretation of Article 7.8.
II.
Whether the
Panel erred by refusing to assess whether the European Union achieved
compliance in respect of the Mühlenberger Loch and Bremen airport runway
subsidies (Sections 5.10, 6.2.5 and 6.6.3.4.4 of the Report)
3.
The Panel erred in
interpreting Article 21.5 of the DSU as providing an original respondent with
the right to seek findings of compliance in Article 21.5 compliance proceedings
only in the narrow factual circumstances of the US/Canada –
Continued Suspension dispute.[4]
4.
The Panel erred
in the application of Article 21.5 of the DSU by finding that no disagreement,
within the meaning of Article 21.5 of the DSU, existed between the European
Union and the United States, and consequently by failing to make findings
concerning the European Union’s withdrawal of the Mühlenberger Loch and Bremen
airport runway subsidies.[5]
5.
Separately, by
declining to make findings on a matter that was properly before it, the Panel
failed to make an objective assessment of the matter, under Article 11 of the
DSU.[6]
III.
Whether
LA/MSF for the A350XWB is a subsidy (Section 6.5.2 of the Report)
6.
The Panel erred
when identifying the appropriate point in time from which to draw the corporate borrowing rate component of the market benchmark
to determine whether each A350XWB launch aid/member state financing (“LA/MSF”)
contract confers a “benefit”, and therefore constitutes a subsidy, under
Article 1.1(b) of the SCM Agreement.[7] Specifically, in identifying the corporate
borrowing rate as “the average yields {on the relevant EADS bond} one-month
prior and six-months prior to the conclusion of the contract, in the form of a
range”,[8] the Panel erred in the
application of Articles 1.1(b) and 7.8 of the SCM Agreement.[9]
7.
Separately, by
rejecting the yield on the day of the conclusion of each contract, the Panel
failed to make an objective assessment of the matter, under Article 11 of the
DSU.[10]
8.
Should the
Appellate Body disagree with the European Union and reject the appeals
described in paragraphs 6 and 7, the European Union appeals the Panel’s
inclusion, in its construction of the corporate borrowing rate, of the
six-month average yield on the relevant EADS bond within the Panel’s range of
average yields.[11] Specifically, by including the six-month
average yield within its range, the Panel erred in the application of Articles 1.1(b)
and 7.8 of the SCM Agreement.[12]
9.
Separately, by
including the six-month average yield within its range, the Panel failed to
make an objective assessment of the matter, under Article 11 of the DSU.[13]
10.
Further, the
Panel erred in identifying the project risk premium
component of the market benchmark to determine whether each A350XWB
LA/MSF contract confers a “benefit”, and therefore constitutes a subsidy, under
Article 1.1(b) of the SCM Agreement.[14]
The Panel selected a single
undifferentiated project risk premium for each A350XWB LA/MSF contract, which
was developed for a different programme (i.e., the A380) in the original
proceedings. In so doing, the Panel committed
three sets of error.
11.
First, the Panel
failed to establish a project-specific risk premium for A350XWB LA/MSF based on
the risks associated with the A350XWB programme. As a result, the Panel erred in the
application of Articles 1.1(b) and 7.8 of the SCM
Agreement.[15]
12.
Separately, by failing
to consider more appropriate benchmarks and by deviating from the approach to
project-specific benchmarks taken in the original proceedings, the Panel failed
to make an objective assessment of the matter, under Article 11 of the DSU.[16]
13.
Second, by failing to establish similarity between the risks involved in
the A350XWB project and the A380 LA/MSF project, as well as between the risks
involved in the A350XWB LA/MSF contracts and the A380 LA/MSF contracts, the
Panel failed to make an objective assessment of the matter, under Article 11 of
the DSU.[17]
14.
Third, and finally, the Panel erroneously adopted a single project risk
premium to benchmark all four A350XWB LA/MSF contracts. As a result, the Panel erred in the
application of Articles 1.1(b) and 7.8 of the SCM
Agreement.[18]
15.
Separately, by
failing to adopt a differentiated project risk premium while adopting a
differentiated corporate borrowing rate, the Panel failed to make an objective
assessment of the matter, under Article 11 of the DSU.[19]
IV.
Whether the
Panel erred in identifying appropriate product markets (Section 6.6.4.4 of the
Report)
16.
The Panel erred
in its interpretation of the term “market” in Article 6.3 of the SCM Agreement, as permitting two products to be placed
in the same product market on the basis of any competition between them, rather
than on the basis of the existence of significant competitive constraints
between them.[20]
17.
Should the
Appellate Body disagree with the European Union and reject the appeal described
in paragraph 16, the Panel erred in the application of Articles 5(c), 6.3 and
Article 7.8 of the SCM Agreement
when it identified the relevant product markets for purposes of assessing the
United States’ adverse effects claims in a manner that is inconsistent with its
own legal standard.[21]
18.
Separately, by
limiting its assessment of the existence of the relevant product markets for
purposes of assessing the United States’ adverse effects claims to competition
between only those products that the United States had placed in the same product
markets, the Panel failed to make an objective assessment of the matter, under
Article 11 of the DSU.[22]
V.
Whether the
Panel erred in reaching its findings relating to the “non-subsidized like
product” provisions of Articles 6.3, 6.4 and 6.5 of the SCM Agreement (Section
6.6.4.3 of the Report)
19.
The Panel erred
in reaching its findings on whether there is a new matter. Specifically, the Panel erred in its
interpretation and application of the term “matter” in Article 11 of the DSU.[23] The Panel also erred in failing to make an
objective assessment of the matter, under Article 11 of the DSU.[24]
20.
In addition, the
Panel erred in reaching its findings on cogent reasons. Specifically, the Panel erred in its
interpretation and application of “security and predictability” within the
meaning of Article 3.2 of the DSU as it relates to the cogent reasons rule;[25]
and, erred in failing to make an objective assessment of the matter, under
Article 11 of the DSU.[26]
21.
Finally, the
Panel erred in its interpretation and application of Articles 6.3(a), 6.3(b),
6.3(c), 6.4 and 6.5 of the SCM Agreement.[27]
VI.
Whether the
Panel erred in finding adverse effects (Section 6.6.4.4 of the Report)
A. Effects of LA/MSF on the launch and market
presence of aircraft
22.
The Panel erred
in the interpretation of Article 5(c) of the SCM
Agreement in adopting a “but for” approach to causation that failed
to consider the passage of time, and events that occurred during that time, and
consequently attributing the current market presence of the A320, A330 and A380
families of aircraft to pre-A350XWB LA/MSF.[28]
23.
Should the
Appellate Body disagree with the European Union and reject the appeal described
in paragraph 22, the
Panel erred in the application of Articles 5(c) and 7.8 of the SCM Agreement in adopting a “but for” approach to causation
that failed to consider the passage of time, and events that occurred during
that time, and consequently attributing the current market presence of the A320
and A330 families of aircraft to pre-A350XWB LA/MSF.[29]
24.
Separately, to
the extent the Panel found that LA/MSF for the A380 resulted in “direct
effects” on the launch and market presence of the A380, the Panel failed to
make an objective assessment of the matter, under Article 11 of the DSU.[30]
25.
The Panel
additionally erred in the application of Articles 5(c) and 7.8 of the SCM Agreement by attributing the market presence of the
A350XWB to the “indirect effects” of LA/MSF for the A380.[31]
26.
Separately, to
the extent the Panel found that LA/MSF for the A350XWB resulted in “direct
effects” on the launch and market presence of the A350XWB, the Panel failed to
make an objective assessment of the matter, under Article 11 of the DSU.[32]
B. Findings of displacement, impedance and lost
sales
27.
The Panel erred
in the application of Articles 5(c), 6.3 and 7.8 of the SCM
Agreement by failing, in its assessment of lost sales, displacement
and impedance, to account for the differences in closeness of competition
between various aircraft.[33]
28.
The Panel erred in
the application of Articles 5(c), 6.3 and 7.8 of the SCM
Agreement by failing, in its assessment of lost sales, displacement
and impedance, to account for non‑attribution factors.[34]
29.
The Panel erred
in the interpretation of Articles 6.3(a) and 6.3(b) of the SCM
Agreement in finding that non-withdrawn subsidies cause
“displacement and/or impedance”, thereby conflating the two separate forms of
serious prejudice.[35]
30.
The Panel erred
in the interpretation of Articles 6.3(a) and 6.3(b) of the SCM
Agreement as permitting findings of “displacement” without any
assessment of sales volume and market share data.[36]
31.
In addition, the
Panel also erred in the application of Articles 5(c), 6.3(a), 6.3(b) and 7.8 of
the SCM Agreement by finding “displacement”
without any assessment of sales volume and market share data.[37]
32.
The Panel erred
in the interpretation of Articles 6.3(a) and 6.3(b) of the SCM
Agreement as permitting findings of “impedance” without any
assessment of sales volume and market share data.[38]
33.
In addition, the
Panel also erred in the application of Articles 5(c), 6.3(a), 6.3(b) and 7.8 of
the SCM Agreement by finding “impedance”
without any assessment of sales volume and market share data.[39]
__________
[1] Paragraph numbers provided in footnotes to the following
description of the errors of the Panel are intended to indicate the primary
instance of the errors. These errors have consequences throughout the report,
and the European Union also appeals all findings and conclusions deriving from
or relying on the appealed errors, and in particular the relevant findings and
conclusions in Sections 7.1, 7.2, 7.3 and 7.4 of the Panel Report.
[2] Panel Report, paras. 6.803, 6.813, 6.819, 6.822, 6.838,
6.839-6.841, 6.1078, 6.1089, 6.1094, 6.1100, 6.1101-6.1102, 6.1451-6.1452,
6.1463, 6.1534, 6.1774, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(i),
7.1(d)(viii), 7.1(d)(ix), 7.1(d)(xii)-(xvii) and 7.2.
[3] Panel Report, paras. 6.1072-6.1074,
6.1451-6.1452, 6.1463, 6.1534, 6.1774, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847,
7.1(d)(i), 7.1(d)(viii), 7.1(d)(ix), 7.1(d)(xii)-(xvii) and 7.2.
[4] Panel Report, paras. 5.76-5.78, footnote 53 to para. 6.3, footnote
109 to para. 6.42, and footnote 1847 to para. 6.1102.
[5] Panel Report, paras. 5.76-5.78, footnote 53 to para. 6.3, footnote
109 to para. 6.42, and footnote 1847 to para. 6.1102.
[6] Panel Report, paras. 5.76-5.78, footnote 53 to para. 6.3, footnote
109 to para. 6.42, and footnote 1847 to para. 6.1102.
[7] Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).
[8] Panel Report, para. 6.389.
[9] Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).
[10] Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).
[11] Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).
[12] Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).
[13] Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).
[14] Panel Report, paras. 6.435, 6.459, 6.487, 6.492, 6.527,
6.539-6.542, 6.579, 6.595, 6.607, 6.608-6.610, 6.632 (Table 10), 6.633, 6.656, 6.1798, 6.1817,
6.1847, 7.1(c)(i), 7.1(d)(xiii)-7.1(d)(xvii) and 7.2.
[15] Panel Report, paras. 6.435, 6.459, 6.608-6.610, 6.632 (Table 10), 6.633, 6.656, 6.1798,
6.1817, 6.1838, 6.1846, 6.1847,
7.1(c)(i),
7.1(d)(xiii)-7.1(d)(xvii) and 7.2.
[16] Panel Report, paras. 6.435, 6.459, 6.608-6.610, 6.632 (Table 10), 6.633, 6.656, 6.1798,
6.1817, 6.1838, 6.1846, 6.1847,
7.1(c)(i),
7.1(d)(xiii)-7.1(d)(xvii) and 7.2.
[17] Panel Report, paras. 6.487, 6.492, 6.527, 6.539-6.542, 6.579,
6.595, 6.607, 6.608-6.610, 6.632
(Table 10), 6.633, 6.656, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(c)(i), 7.1(d)(xiii)-7.1(d)(xvii) and 7.2.
[18] Panel Report, paras. 6.607, 6.608-6.610, 6.632 (Table 10), 6.633, 6.656, 6.1798,
6.1817, 6.1838, 6.1846, 6.1847,
7.1(c)(i), 7.1(d)(xiii)-7.1(d)(xvii)
and 7.2.
[19] Panel Report, paras. 6.607, 6.608-6.610, 6.632 (Table 10), 6.633, 6.656, 6.1798,
6.1817, 6.1838, 6.1846, 6.1847,
7.1(c)(i), 7.1(d)(xiii)-7.1(d)(xvii)
and 7.2.
[20] Panel Report, paras. 6.1210, 6.1211, 6.1236, 6.1280, 6.1289,
6.1292, 6.1305, 6.1320, 6.1348, 6.1382, 6.1362, 6.1409, 6.1416, 6.1798, 6.1817,
6.1838, 6.1846, 6.1847,
7.1(d)(xi), 7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
[21] Panel Report, paras. 6.1292, 6.1305, 6.1320, 6.1348, 6.1382,
6.1362, 6.1409, 6.1416, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(xi),
7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
[22] Panel Report, paras. 6.1292, 6.1305, 6.1320, 6.1348, 6.1382,
6.1362, 6.1409, 6.1416, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(xi),
7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
[23] Panel Report, paras. 6.1125-6.1138, 6.1154, 6.1798, 6.1817, 6.1838,
6.1846, 6.1847,
7.1(d)(x), 7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
[24] Panel Report, paras. 6.1125-6.1138, 6.1154, 6.1798, 6.1817, 6.1838,
6.1846, 6.1847, 7.1(d)(x), 7.1(d)(xiv)-7.1(d)(xvii)
and 7.2.
[25] Panel Report, paras. 6.1125-6.1153, 6.1154, 6.1798, 6.1817, 6.1838,
6.1846, 6.1847, 7.1(d)(x), 7.1(d)(xiv)-7.1(d)(xvii)
and 7.2.
[26] Panel Report, paras. 6.1125-6.1153, 6.1154, 6.1798, 6.1817, 6.1838,
6.1846, 6.1847, 7.1(d)(x), 7.1(d)(xiv)-7.1(d)(xvii)
and 7.2.
[27] Panel Report, paras. 6.1125-6.1154, 6.1798, 6.1817, 6.1847, 7.1(d)(x),
7.1(d)(xiv)-7.1(d)(xvii)
and 7.2.
[28] Panel Report, paras. 6.1515, 6.1527, 6.1534, 6.1774, 6.1798,
6.1817, 6.1838, 6.1846, 6.1847,
7.1(d)(xii)-7.1(d)(xvii) and 7.2.
[29] Panel Report, paras. 6.1527, 6.1534, 6.1774, 6.1798, 6.1817,
6.1838, 6.1846, 6.1847,
7.1(d)(xii)-7.1(d)(xvii) and 7.2.
[30] Panel Report, paras. 6.1507, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(xii)-7.1(d)(xvii)
and 7.2.
[31] Panel Report, paras. 6.1747, 6.1771, 6.1773, 6.1774, 6.1798,
6.1817, 6.1838, 6.1846, 6.1847,
7.1(d)(xiii)-7.1(d)(xvii) and 7.2.
[32] Panel Report, paras. 6.1717, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(xiii)-7.1(d)(xvii)
and 7.2.
[33] Panel
Report, paras. 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(xiv)-7.1(d)(xvii)
and 7.2.
[34] Panel
Report, paras. 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(xiv)-7.1(d)(xvii)
and 7.2.
[35] Panel Report, paras. 6.1817, 6.1838, 6.1846, 6.1847,
7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
[36] Panel Report, paras. 6.1817, 6.1838, 6.1846, 6.1847,
7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
[37] Panel Report, paras. 6.1817, 6.1838, 6.1846, 6.1847,
7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
[38] Panel Report, paras. 6.1817, 6.1838, 6.1846, 6.1847,
7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
[39] Panel Report, paras. 6.1817, 6.1838, 6.1846, 6.1847,
7.1(d)(xiv)-7.1(d)(xvii) and 7.2.