WT/DS316/RW2  
 
2 December 2019 
(19-8221) Page: 1/138 
   
 
  
EUROPEAN COMMUNITIES  AND CERTAIN MEMBER STATES – MEASURES  
AFFECTING TRADE IN L ARGE CIVIL AIRCRAFT  
 
RECOURSE TO ARTICLE 21.5 OF THE DSU BY T HE EUROPEAN UNION  
AND CERTAIN MEMBER S TATES   
REPORT OF THE PANEL  
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 WT/DS31 6/RW2  
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  TABLE OF CONTENTS  
1   INTRODUCTION  ................................ ................................ ................................ ....... 13 
1.1   Prior proceedings in DS316  ................................ ................................ ........................  13 
1.2   Complaint by the European Union  ................................ ................................ ...............  13 
 Request for consultations  ................................ ................................ ........................  13 
 Panel establishment and composition  ................................ ................................ ....... 14 
1.3   Panel proceedings  ................................ ................................ ................................ ..... 14 
 General  ................................ ................................ ................................ ................  14 
 Protection of Business Confidential Information and Highly  
Sensitive Busine ss Information  ................................ ................................ ..........................  15 
 Canada's request to participate in the proceeding as a third party  ................................  15 
 Preliminary ruling on the Panel's terms of reference  ................................ ...................  15 
 Request to file an additional submission regarding the future of  
the A380 LCA programme  ................................ ................................ ................................ . 16 
 Request relating to the United States' comments  ................................ .......................  16 
2   FACTUAL ASPECTS ................................ ................................ ................................ .... 17 
2.1   Product at issue  ................................ ................................ ................................ ....... 17 
2.2   Measures at issue  ................................ ................................ ................................ ..... 17 
3   PARTIES' REQUEST S FOR FINDINGS AND R ECOMMENDATIONS  ...............................  17 
4   ARGUMENTS OF THE  PARTIES  ................................ ................................ ..................  18 
5   ARGUMENTS OF THE  THIRD PARTIES  ................................ ................................ ....... 18 
6   INTERIM REVIEW  ................................ ................................ ................................ ..... 18 
7   FINDINGS  ................................ ................................ ................................ ................  18 
7.1   Introduction  ................................ ................................ ................................ .............  18 
 Proced ural background  ................................ ................................ ...........................  18 
7.1.1.1    Original proceeding  ................................ ................................ .............................  18 
 First compliance proceeding  ................................ ................................ .................  19 
 Second compliance proceeding  ................................ ................................ .............  20 
 The Panel's task in this compliance proceeding  ................................ ..........................  20 
7.2   The European Union's 17 May 2018 compliance communication to the DSB  .....................  22 
 Introduction  ................................ ................................ ................................ ..........  22 
 Measures alleged to achieve withdrawal of the A380 LA/MSF and A350XWB LA/MSF 
subsidies and to contribute to the removal of their adverse effects within the meaning of  
Article 7.8 of the SCM Agreement  ................................ ................................ ......................  22 
 The [***] amendments to the French, German, Spanish and UK A380 LA/MSF 
agreements (measures 1 –4) ................................ ................................ .............................  22 
 The [***] amendment to the German A350XWB LA/MSF agreement (measure  5) ....... 23 
 Repayment of outstanding UK A350XWB LA/MSF in 2018 (measure 6)  ......................  24 
 Withdrawal, through amortisation of the "benefit" conferred by the A380 and  
A350XWB LA/MSF agreements (measures 7 and 8)  ................................ ..............................  24 
 Measures alleged to constitute appropriate steps to remove the adverse effects of the 
A380 LA/MSF and A350XWB LA/MSF subsidies within the meaning of Article 7.8 of the  
SCM Agreement  ................................ ................................ ................................ ...............  25 WT/DS316/RW2  
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 Amortisation of the "benefit" conferred by the A380 LA/MSF agreements  
and A350XWB LA/MSF agreements (measures 9 and 14)  ................................ ......................  25 
 Non-subsidised investments in A380 and A350XWB family aircraft  
(measures 10 and 15)  ................................ ................................ ................................ ...... 25 
 Reduced draw down of principal under the French A380 LA/MSF agreement and the 
French and UK A350XWB LA/MSF agreements (measures 11 and 16)  ................................ ..... 26 
 Attenuation of the causal link between A380 LA/MSF and A350XWB LA/MSF and the 
launches of the A380 and the A350XWB due to the passage of time (measures 13 and 17)  ....... 26 
 Cancellation or completion of A380 deliveries and pending deliveries, and the  
completion or conversion of A350XWB deliveries in certain country markets  
(measures 12 and 18)  ................................ ................................ ................................ ...... 26 
 Observations regarding the European Union's measures or steps taken to achieve 
compliance  ................................ ................................ ................................ ......................  27 
7.3   The European Union's request for a preliminary ruling that the United States' claims  
against certain research and technological development measures are outside the  
Panel's terms of reference  ................................ ................................ ................................ . 27 
 Procedural bac kground  ................................ ................................ ...........................  27 
 The R&TD measures the United States challenges in this proceeding and  
relevant findings from previous stages of t his dispute  ................................ ...........................  28 
 Whether the United States' claims against the R&TD measures are outside the  
Panel's terms of reference  ................................ ................................ ................................ . 30 
 Introduction  ................................ ................................ ................................ ....... 30 
 Are the R&TD measu res identified in the European Union's panel request?  .................  30 
 Do the challenged R&TD measures fall within the Panel's terms of reference,  
even though they are not specifically identified in the European Union's panel request?  ............  32 
 The United States' claims against R&TD measures that were subject to findings in the 
original proceedings or were in existence at the time of the first compliance proceeding  ...........  36 
 The United States' claims against the Eighth Framework  Programme  ...........................  41 
7.3.5.1    Timing  ................................ ................................ ................................ ...............  43 
 Nature  ................................ ................................ ................................ ...............  43 
 Effect s ................................ ................................ ................................ ...............  45 
7.3.6    Conclusions  ................................ ................................ ................................ ...........  46 
7.4   Whether the A350XWB and A380 LA/MSF subsidies have been withdrawn for the  
purpose of Article 7.8 of the SCM Agreement  ................................ ................................ ....... 47 
 Introduction  ................................ ................................ ................................ ..........  47 
 Guidance from the first compliance proceeding regarding the obligation to  
"withdraw" the subsidy contained in Article 7.8 of the SCM Agreement  ................................ ... 47 
 The [***] amendment to the German A350XWB LA/MSF agreement  ............................  49 
 Main arguments of the parties  ................................ ................................ ..............  49 
 Evaluation by the Panel  ................................ ................................ .......................  51 
 Features of the amended German A350XWB LA/MSF loan agreement  .....................  51 
 The relevant analytical framework  ................................ ................................ ...... 52 
 Whether the [***] amendment has aligned the terms of the  
German A350XWB LA/MSF agreement with a market benchmark  ................................ ...........  58 
 Repayment of the UK A350XWB LA/MSF loan on subsidized terms  ...............................  60 
 Main arguments of the parties  ................................ ................................ ..............  60 WT/DS31 6/RW2  
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 Evaluation by the Panel  ................................ ................................ .......................  61 
 Has the UK A350XWB LA/MSF loan been fully repaid?  ................................ ...........  61 
 Whether the full repayment of outstanding principal and interest under the 
UK A350XWB LA/MSF agreement on subsidized terms has achieved the withdrawal  
of the subsidy  ................................ ................................ ................................ ..................  62 
 The European Union's claim that the French, German, Spanish and UK A380 LA/MSF 
subsidies have been withdrawn  ................................ ................................ ..........................  70 
7.4.5.1    The [***] amendments to the French, German, Spanish and UK A380 LA/MSF loan 
agreements  ................................ ................................ ................................ .....................  70 
 Main arguments of the parties  ................................ ................................ ...........  70 
 Evaluation by the Panel  ................................ ................................ .....................  72 
7.4.5.1.2.1    Features of the amended A380 LA/MSF loan agreement s ................................ .... 72 
7.4.5.1.2.2    The relevant analytical framework  ................................ ................................ ... 73 
7.4.5.1.2.3    Have the [***] amendments aligned the terms of the  
A380 LA/MSF agreements with a market benchmark?  ................................ ...........................  74 
 Withdrawal of the Spanish A380 LA/MSF subsidy by means of the  
amortization of benefit through the passage of time  ................................ .............................  78 
 Main arguments of the parties  ................................ ................................ ...........  78 
 Evaluation by the Panel  ................................ ................................ .....................  79 
 Whether Airbus' announcement to "wind down" the A380 programme achieves 
withdrawal of the French, German, Spanish and UK A380 LA/MSF subsidies  ............................  81 
 Main arguments of the parties  ................................ ................................ ...........  81 
 Evaluation by the Panel  ................................ ................................ .....................  82 
7.4.5.3.2.1    The [***] "wind -down" announcement  ................................ ............................  83 
7.4.5.3.2.2    The [***] agreement between [***] and Airbus  ................................ ...............  84 
 Conclusions  ................................ ................................ ................................ ...........  85 
7.5   Whether the European  Union and the relevant member States have complied with  
the requirement to "take appropriate steps to remove the adverse effects" under the  
terms of Article 7.8 of the SCM  Agreement  ................................ ................................ ..........  86 
 Introduction  ................................ ................................ ................................ ..........  86 
 The appropriate counterfactual  ................................ ................................ ................  87 
 The appropriate reference period  ................................ ................................ .............  88 
 Effects of the A380 and A350XWB LA/MSF subsidies through 2013  ..............................  89 
7.5.4.1    Appellate Body findings concerning the market presence of the A380 through 2013  .... 90 
7.5.4.1.1    Effects of the A380 LA/MSF subsidies on the A380 ................................ ................  90 
 Causation of lost sales in the VLA product market  ................................ ................  92 
 Causation of impedance in the VLA product market  ................................ ..............  93 
 Appellate Body findings concerning the market presence of the A350XWB  
through 2013  ................................ ................................ ................................ ..................  95 
 Effects of A380 and A350XWB LA/MSF subsidies on the A350XWB  ..........................  95 
 Causation of lost sales in the twin -aisle product market  ................................ ........  96 
 Conclusion – effects of the A380 and A350XWB LA/MSF subsidies through 2013  .........  97 
 Effects of A380 and A350XWB LA/MSF subsidies a fter 2013 and to the present day  ....... 97 
7.5.5.1    Aggregation of the effects of A380 and A350XWB LA/MSF subsidies  ..........................  98 WT/DS316/RW2  
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 Conditions of competition and product markets ................................ .......................  99 
 Market presence of the A380, A350XWB and A330neo after 2013 in the  
absence of the A380 and A350XWB LA/MSF subsidies  ................................ .........................  100 
7.5.5.3.1    Airbus' counterfactual competitive position after 2013  ................................ ........  101 
 Airbus' counterfactual financial condition after 2013  ................................ ...........  105 
7.5.5.3.2.1    Relevant findings of the first compliance panel  ................................ ................  105 
7.5.5.3.2.2    The Wessels Report  ................................ ................................ .....................  106 
7.5.5.3.2.3    The Airbus Counterfactual Launch Statement  ................................ ..................  107 
7.5.5.3.2.4    Savings from the absence of A380 and A350XWB development costs  .................  108 
7.5.5.3.2.5    Conclusion — Airbus' counterfactual fina ncial condition post -2013 .....................  109 
 Airbus' counterfactual technological and production capabilities after 2013  ............  109 
 Counterfactual demand  ................................ ................................ ...................  111 
7.5.5.3.4.1    A380................................ ................................ ................................ ..........  111 
7.5.5.3.4.2    A350XWB  ................................ ................................ ................................ ... 112 
7.5.5.3.4.3    A330neo  ................................ ................................ ................................ .... 113 
 Conclusions – counterfactual market presence of the A380,  
A350XWB and A330neo after 2013 ................................ ................................ ...................  113 
7.5.5.3.5.1    A380................................ ................................ ................................ ..........  113 
7.5.5.3.5.2    A350XWB  ................................ ................................ ................................ ... 115 
7.5.5.3.5.3    A330neo  ................................ ................................ ................................ .... 116 
 Factors allegedly attenuating the causal link between A380 and A350XWB LA/MSF 
subsidies and any present adverse effects  ................................ ................................ .........  118 
7.5.5.4. 1   "Timing out" of the effects of the A380 and A350XWB LA/MSF subsidies  ...............  118 
 "Amortization" of the benefit of the A380 and A350XWB LA/MSF subsidies  ............  119 
 "Less than full drawdown" of certain LA/MSF subsidies  ................................ ........  120 
 "Non-subsidized investments" in the A380 and A350XWB  ................................ .... 121 
 "Wind -down" of the A380 programme  ................................ ................................ . 124 
 The impact of the "product" effects of A380 and A350XWB LA/MSF subsidies in the 
relevant product markets  ................................ ................................ ................................  126 
7.5.6.1    Impedance and/or displacement  ................................ ................................ .........  127 
7.5.6.1.1    VLA product market  ................................ ................................ ........................  128 
 Twin-aisle product market  ................................ ................................ ...............  130 
 Significant lost sales  ................................ ................................ ..........................  132 
7.5.6.2.1    VLA product market  ................................ ................................ ........................  132 
 Twin-aisle product market  ................................ ................................ ...............  135 
 Conclusions  ................................ ................................ ................................ .........  136 
8   CONCLUSIONS AND RECOMMENDATIONS  ................................ ..............................  136  
 WT/DS31 6/RW2  
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  LIST OF ANNEXES  
ANNEX  A 
PANEL DOCUMENTS  
Contents  Page  
Annex  A-1 Working Procedures of the Panel  4 
Annex  A-2 Additional Working Procedures on open panel meetings  11 
Annex  A-3 Additional Working Procedures for the protection of business confidential 
information and highly sensitive business information  13 
Annex  A-4 Interim Review  27 
ANNEX B  
ARGUMENTS OF THE PAR TIES 
Contents  Page  
Annex  B-1 Integrated executive summary of the arguments of the European Union  30 
Annex  B-2 Integrated executive summary of the arguments of the United States  46 
ANNEX C  
ARGUMENTS OF THE THIRD PARTIES  
Contents  Page  
Annex  C-1 Integrated executive summary of the arguments of  Brazil  55 
Annex  C-2 Integrated executive summary of the arguments of Canada  59 
Annex  C-3 Integrated executive summary of the arguments o f Japan  62 
ANNEX D 
RULING OF THE PANEL ON THE EUROPEAN UNIO N'S REQUEST OF 12 JU LY 2019  
Contents  Page  
Annex  D-1 Ruling of the Panel on the European Union's Request of 12 July 2019 concerning:  
(i) the alleged untimely filing of certain new arguments and evidence; and  
(ii) allegations of additional due process concerns  65 WT/DS316/RW2  
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  CASES CITED IN THIS REPORT  
Short Title  Full Case Title and Citation  
Canada – Aircraft 
(Article  21.5 – Brazil)  Appellate Body Report, Canada – Measures Affecting the Export of Civilian 
Aircraft – Recourse by Brazil to Article 21.5 of the DSU , WT/DS70/AB/RW , 
adopted 4 August 2000, DSR 2000:IX, p. 4299  
Canada – Contin ued 
Suspension  Appellate Body Report, Canada – Continued Suspension of Obligations in the 
EC – Hormones Dispute , WT/DS321/AB/R , adopted 14 November 2008, 
DSR 2008:XIV, p. 5373  
Canada – Continued 
Suspension  Panel Report, Canada – Continued Suspension of Obligations in the EC – 
Hormones Dispute , WT/DS321/R  and Add.1 to Add.7, adopted 14 November 
2008, as modified by Appel late Body Report WT/DS321/AB/R , DSR 2008:XV, 
p. 5757 
Chile – Price Band System 
(Article 21.5 – Argentina)  Appellate Body Report, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products – Recourse to Article 21.5 of the DSU 
by Argentina , WT/DS207/AB/RW , adopted 22 May 2007, DSR 2007:II, p. 513  
Colombia – Textiles 
(Article  21.5 – Colombia ) / 
Colombia – Textiles 
(Article  21.5 – Panama)  Panel Report, Colombia – Measures Relating to the Importation of Textiles, 
Apparel and Footwear – Recourse to Article 21.5 of the DSU by Colombia  / 
Colombia – Measures Relating to the Importation of Textiles, Apparel and 
Footwear – Recourse to Article 21.5 of the DSU by Panama , WT/D S461/RW  and 
Add.1, circulated to WTO Members 5 October 2018  (Currently under appeal)  
EC – Bananas III  Appellate Body Report, European Communities – Regime for the Importation, 
Sale and Distribution of Bananas , WT/DS27/AB/R , adopted 25 September 1997, 
DSR 1997:II, p. 591  
EC – Bed Linen  (Article 21.5 
– India)  Appellate Body Report, European Communities – Anti-Dumping Duties on 
Imports of Cotton -Type Bed Linen from India – Recourse to Article 21.5 of the 
DSU by India , WT/DS141/AB/RW , adopted 24 April 2003, DSR 2003:III, p. 965  
EC – Hormones  Appellate Body Report, European Communities – Measures Concerning Meat and 
Meat Products (Hormones) , WT/DS26/AB/R , WT/DS48/AB/R , adopted 
13 February 1998, DSR 1998:I, p. 135  
EC and certain member 
States  – Large Civil Aircraft  Panel Report, European Communities and Certain Member States – Measures 
Affecting Trade in Large Civil Aircraft , WT/DS316/R , adopted 1 June 2011, as 
modified by Appellate Body Report WT/DS316/AB/R , DSR 2011:II, p. 685  
EC and certain member 
States – Large Civil Ai rcraft Appellate Body Report, European Communities and Certain Member States – 
Measures Affecting Trade in Large Civil Aircraft , WT/DS316/AB/R , adopted 
1 June 2011, DSR 2011:I, p. 7  
EC and certain member 
States – Large Civil Aircraft 
(Article 21.5 – US) Appellate Body Report, 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 , WT/DS316/AB/RW  and Add.1, adopted 28 May 2018  
EC and certain member 
States – Large Civil Aircraft 
(Article 21.5 – US) Panel Report, European Communities and Certain Member States – Measures 
Affecting Trade in Large Civi l Aircraft  – Recourse to Article 21.5 of the DSU by 
the United States , WT/DS316/RW  and Add.1, adopted 28 May 2018, as modified 
by Appellate Body Report WT/DS316/AB/RW  
EC and certain member 
States – Large Civil Aircraft 
(Article 22.6 – EU) Decision by the Arbitrator, European Communities and Certain Member States – 
Measures Affecting Trade in Large Civil Aircraft  – Recourse to  Article 22.6 of the 
DSU by the European Union , WT/DS316/ARB  and Add.1 , 2 October 2019   
Japan – DRAMs (Korea)  Appellate Body Report, Japan – Countervailing Duties on Dynamic Random 
Access Memories from Korea , WT/DS336/AB/R  and Corr.1, adopted 
17 December 2007, DSR 2007:VII, p. 2703  
Japan – DRAMs (Korea)  Panel Report, Japan – Countervailing Duties on Dynamic Random Access 
Memories from Korea , WT/DS336/R , adopted 17 December 2007, as modified 
by Appellate Body Report WT/DS336/AB/R , DSR 2007:VII, p. 2805  
US – Continued Suspension  Appellate B ody Report, United States – Continued Suspension of Obligations in 
the EC – Hormones Dispute , WT/DS320/AB/R , adopted 14 November 2008, 
DSR 2008:X, p. 3507  
US – Continued Suspension  Panel Report, United States – Continued Suspension of Obligations in the EC – 
Hormones Dispute , WT/DS320/R  and Add.1 to Add.7, adopted 14 November 
2008, as modified by Appellate Body Report WT/DS320/AB/R , DSR 2008:XI, 
p. 3891 
US – Countervailing 
Measures on Certain EC 
Products  Appellate Body Report, United States – Countervailing Measures Concerning 
Certain Products from the European Communities , WT/DS212/AB/R , adopted 
8 January 2003, DSR 2003:I, p. 5  
US – Countervailing 
Measures on Certain EC 
Products (Article 21.5 – EC) Panel Report, United States – Countervailing Measures Concerning Certain 
Products from the European Communities – Recourse to Article 21.5 of the DSU 
by the European Communities , WT/DS212/RW , adopted 27 September 2005, 
DSR 2005:XVIII, p. 8950  WT/DS31 6/RW2  
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  Short Title  Full Case Title and Citation  
US – FSC 
(Article 21.5 – EC II)  Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" – Second Recourse to Article 21.5 of the DSU by the European 
Communities , WT/DS108/AB/RW2 , adopted 14 Mar ch 2006, DSR 2006:XI, 
p. 4721 
US – Large Civil Aircraft 
(2nd complaint)  Appellate Body Report, United States – Measures Affecting Trade in Large Civil 
Aircraft (Second Complaint) , WT/DS353/AB/R , adopted 23 March 2012, 
DSR 2012:I, p. 7  
US – Large Civil A ircraft 
(2nd complaint)  Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft 
(Second Complaint) , WT/DS353/R , adopted 23 March 2012, as modified by 
Appellate Body Report WT/DS353/AB/R , DSR 2012:II, p. 649  
US – Large Civil Aircraft 
(2nd complaint)  
(Article 21.5 – EU) Appellate Body Report , United States – Measures Affecting Trade in Large Civil 
Aircraft (Second Complaint) – Recourse to Article 21.5 of the DSU by the 
European Union , WT/DS353/AB/RW  and Add.1, adopted 11 April 2019  
US – Lead and Bismuth II  Appellate Body Report, United States – Imposition of Countervailing Duties on 
Certain Hot -Rolled Lead and Bismuth Carbon Steel Products Originating in the 
United Kingdom , WT/DS138/AB/R , adopted 7 June 2000, DSR 2000:V, p. 2595  
US – Shrimp  
(Article 21.5 – Malaysia)  Appellate Body Report, United States – Import Prohibition of Certain Shrimp and 
Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia , 
WT/DS58/AB/RW , adopted 21 November 2001, DSR 2001:XIII, p. 6481  
US – Softwood Lumber IV 
(Article 21.5 – Canada)  Appellate Body Report, United States – Final Countervailing Duty Determination 
with Respect to Certain Softwood Lumber from Canada – Recourse by Canada to 
Article 21.5 of the DSU , WT/DS257/AB/RW , adopted 20 December 2005, 
DSR 2005:XXIII, p. 11357  
US – Tuna II (Mexico) 
(Article 21.5 – Mexico)  Appellate Body Report, United States – Measures Concerning the Importation, 
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the 
DSU by Mexico , WT/DS381/AB/RW  and Add.1, adopted 3 December 2015, 
DSR 2015:X, p. 5133  
US – Tuna II (Mexico) 
(Article  21.5 – US) /  
US – Tuna II (Mexico) 
(Article  21.5 – Mexico II)  Panel Reports, United States – Measures Concerning the Importation, Marketing 
and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the DSU by 
the United States , WT/DS381/RW/USA  and Add.1 / United States – Measures 
Concerning the Impo rtation, Marketing and Sale of Tuna and Tuna Products – 
Second Recourse to Article 21.5 of the DSU by Mexico , WT/DS381/RW2  and 
Add.1, adopted 11 January  2019, as upheld  by Appellate Body Report 
WT/DS381/AB/RW/USA  / WT/DS381/AB/RW2  
US – Tuna II (Mexico) 
(Article  21.5 – US) /  
US – Tuna II (Mexico)  
(Article  21.5 – Mexico II)  Appellate Body Report, United States – Measures Concerning the Importation, 
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the 
DSU by the United States , WT/DS381/AB/RW/USA  and Add.1 / United States – 
Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna 
Products – Second Recourse to Article 21.5 of the DSU by Mexico , 
WT/DS381/AB/RW2  and Add.1, adopted 11 January 2019  
US – Upland Cotton  Appellate Body Report, United States – Subsidies on Upland Cotton , 
WT/DS267/AB/R , adopted 21 March 2005, DSR 2005:I, p. 3  
US – Upland Cotton 
(Article  21.5 – Brazil)  Panel Report, United States – Subsidies on Upland Cotton – Recourse to 
Article  21.5 of t he DSU by Brazil , WT/DS267/RW  and Corr.1, adopted 
20 June 2008, as modifie d by Appellate Body Report WT/DS267/AB/RW , 
DSR 2008:III, p. 997  
US – Upland Cotton 
(Article  21.5 – Brazil)  Appellate Body Report, United States – Subsidies on Upland Cotton – Recourse 
to Article 21.5 of the DSU by Brazil , WT/DS267/AB/RW , adopted 20 June 2008, 
DSR 2008:III, p. 809  
US – Zeroing (EC) 
(Article  21.5 – EC) Appellate Body Report, United States – Laws, Regulations and Methodology for 
Calculating Dumping Margins ("Zeroing") – Recourse to Article 21.5 of the DSU 
by the European Communities , WT/DS294/AB/RW  and Corr.1, adopted 
11 June 2009, DSR 2009:VII, p. 2911  
US – Zeroing (Japan) 
(Article 21.5 – Japan)  Appellate Body Report, United States – Measures Relating to Zeroing and Sunset 
Reviews – Recourse to Article 21.5 of the DSU by Japan , WT/DS322/AB/RW , 
adopted 3 1 August 2009, DSR 2009:VIII, p. 3441  
 
 WT/DS316/RW2  
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  EXHIBITS REFERRED TO  IN THIS REPORT  
Exhibit No.  Short Title  Title 
EU-7 (BCI)  BEIS Letter to Airbus, [***] Department of Business, Energy & Industrial 
Strategy letter to Airbus, [***] 
EU-8 (BCI)  BEIS Invoice to Airbus, [***] Department of Business, Energy & Industrial 
Strategy invoice to Airbus, [***] 
EU-9 (BCI) 
(English 
translation)  German A350XWB [***] amen dment  [***] Addendum to the Loan Agreement dated 
[***] between KfW and Airbus Operations GmbH, 
[***] 
EU-10 
(HSBI/BCI) 
(English 
translation)  German A350XWB LA/MSF Agreement  German Loan Agreement between KfW and Airbus 
Operations GmbH and Airbus S.A.S, Toulouse, 
[***] 
EU-11 
(HSBI/BCI)  TradeRx A350XWB LA/MSF Report  Professor Klasen Report, "Market Consistency of 
the [***] Amendment to German MSF 
Agreement ", 8 October 2018  
EU-12 (BCI)  French A380 LA/MSF Agreement  Protocole d'Accord entre l'Etat et Airbus France, 
[***] 
EU-13 (BCI)  - Convention no [***]8103500227754 5, [***] 
EU-14 (BCI) 
(English 
translation)  German A380 LA/MSF Agreement  MSF Agreement for the A380, Germany, [***] 
(English translation)  
EU-15 (BCI)  Spanish A380 LA/MSF Agreement  Convenio de colaboración entre el Ministerio de 
Ciencia y Tecnología  y la empresa EADS Airbus 
S.L., relativ o a la financiación  de la participación  
de dicha empresa en el desarrollo del programa de 
la familia de aviones Airbus A -380, [***] 
EU-16 (BCI)  UK A380 LA/MSF Agreement  Agreement between the Secretary of State for 
Trade and Industry, BAE Systems (Operations) 
Limited and British Ae rospace public limited 
company for the provision of launch investment of 
the A380, [***] 
EU-17 
(HSBI/BCI)  PwC A380 LA/MSF Report  PwC Report, "Review of Negotiated Restructurings 
of A380 MSF Loan Agreements", 8 October 2018  
EU-18 (HSBI)  - Minutes of a mee ting of the board of directors of 
Airbus SE, [***] 
EU-19 (BCI)  - Declaration by  [***], 4 October  2018 
EU-20 
(HSBI/BCI) 
(English 
translation)  [***] German A380 LA/MSF 
Amendment  German  [***] Addendum to the Loan Agreement 
of [***] (English translation)  
EU-21 (BCI)  [***] French A380 LA/MSF Amendment  Avenant [***] au protocole d'accord entre l'Etat 
et Airbus Operations S.A.S. relatif au programme 
Airbus A380 (Annexe 2 à la convention Airbus 
A380 no [***] 81 035, notifiée le [***]), [***] 
EU-22 (BCI)  [***] UK A380 Amendment  Deed of amendment in relation to the agreement 
for launch investment in Airbus A380, [***] 
EU-23 (BCI)  [***] Spanish A380 LA/MSF 
Amendment  [***] addenda al convenio de colaboraci ón entre 
el extinto Ministerio de Ciencia y Tecnología  y la 
empresa EADS Airbus S.L. relativ o a la 
financiación  de la participación  de dicha empresa 
en el desarrollo de la familia de aviones 
Airbus  A380, [***] 
EU-24 
(HSBI/BCI)  TradeRx Report on Expected Life of 
LA/MSF  Professor Klasen, "Expected Life of MSF Subsidies 
for the A380 and A350XWB Programmes ", 
8 October 2018  
EU-28 (BCI)  [***] UK A350XWB LA/MSF Agreement  Repayable investment agreement between the 
Secretary for Business, Innovation and Skills and 
Airbus Operations Limited [***] in relation to the 
Airbus A350XWB, [***] 
EU-30 (HSBI)  - Annual Continuing Support and Continuing 
Development for the A350XWB (2013 -2018), 
Proprietary Information Extracted from Airbus' 
Accounts  
EU-40, USA -47 Wessels Report  Professor David Wessels "Assessing Airbus' 
Capacity to Fund Large Scale Projects Without 
LA/MSF ", (Oct. 17, 2012); submitted in the 
first compliance proceeding as USA -364 WT/DS31 6/RW2  
BCI deleted, as indicated [***]  
- 10 - 
 
  Exhibit No.  Short Title  Title 
EU-43 - "One Journey: One Team – Interview with Tom 
Enders", Airbus Annual Review 2014  
EU-45 - EADS, "Financial Statements and Corporate 
Governance ", 2006  
EU-53 (HSBI)  - Annual Continuing Support and Continuing 
Development for the A380 (2013 -2018), 
Proprietary Information Extracted from Airbus' 
Accounts  
EU-78 (HSBI)  - A380 Business Case  
EU-81 (BCI)  Excerpts from Airbus accounting system 
in relation to the A350XWB UK loan   Excerpts from Airbus' accounting system  in 
relation to the A350XWB MSF loan  
EU-86 (BCI)  PwC Response Report  PwC, "Response on U.S. Submission from 
December 19, 2018 regarding i.e. PwC's 'Review  
of Negotiated Restructuring of A380 MSF Loan 
Agreements' ", 25 January 2019  
EU-89 (HSBI)  Letter from [***] Letter from [***] 
EU-90 - Reuters, "Airbus may cut A380 production to 
six planes a year: sources", 11 December 2017  
EU-92 
(HSBI/BCI)  Airbus Counterfactual Launch Statement  Statement by [***], 4 November 2018  
EU-94 (BCI)  - Airbus, "Status of A380 orders and deliveries " 
EU-99 (BCI)  - Airbus, "Timing of remaining Emirates A380 
deliveries " 
EU-101 (BCI)  - [***] 
EU-102 (BCI)  - Letter from [***] 
EU-105 (BCI)  KPMG Assessment of [***] KPMG Report, Assessment of [***], 28 May 2019  
EU-106 (BCI) 
(English 
translation)  - Email from [***], 20 March 2015  
EU-113 (BCI)  [***] [***] 
EU-114 (BCI)  - [***] 
EU-115 (BCI)  - Email from  [***] to Airbus, 8  August  2019 
USA-1 Airbus SE Special Earnings Call January 
2018 Fair Disclosure Wire , "Full Year 2017 Airbus SE 
Commercial Aircraft Orders and Deliveries Call – 
Final", (15 January 2018)  
USA-3 Airbus SE Special Earnings Call February 
2018 Fair Disclosure Wire , "Full Year 2017 Airbus SE 
Earnings Call ", (15 February  2018)  
USA-5 - Emirates  press release, " Emirates welcomes 100th 
A380 to its fleet ", (2 November 2017)  
USA-8 
(HSBI/BCI)  NERA A380 LA/MSF Report  Effects of the [***] Amendment of German 
LA/MSF for the A350 XWB on Pre -Existing LA/MSF,  
NERA ( 19 December  2018)  
USA-9 Airbus Annual Report, 2017  Annual Report 2017, Connecting the skies, Airbus  
USA-16 - FlightGlobal , "Airbus assures on A380 break -even 
this year , David Kaminski -Morrow ", 
(27 February  2015)  
USA-26 
(HSBI/BCI)  NERA German A350XWB LA/MSF Report  NERA A350 XWB Report  
USA-36 - EFFICOMP Project, CORDIS website  
USA-37 - LPA GAM 2018 Project, CORDIS website  
USA-38 - Aerostructures Manufacturer, Graphene Flagship 
website  
USA-49 Airbus Orders & Deliveries Data  Airbus Orders & Deliveries Data (Nov. 2018)  
USA-50 - A330 Family, Airbus website  
USA-51 Airbus A330neo Presentation  The A330neo: Powering into the future, John 
Leahy, Airbus presentation  
USA-53 - Airbus press release, "Airbus launches the 
A330neo ", (14 July  2014)  
USA-54 - Airbus press release,  "AirAsia X orders 34 more 
A330neo ", (19 July 2018)  
USA-55 - Airbus website, "A330 -900" 
USA-78 - Airbus website, "A330 -800" 
USA-119 Clean Sky 2 Joint Undertaking: Work 
Plan 2018 -2019 Clean Sky 2 Joint Undertaking: Work Plan 2018 -
2019 (October 2018)  
USA-126 - Boeing press release, " Boeing Delivers First 
Lufthansa 747 -8 Intercontinental ", (25 April 2012)  
USA-128 - Airbus press release, " Amedeo Firms Up Order for 
20 A380s ", (12 February  2014)  WT/DS316/RW2  
BCI deleted, as indicated [***]  
- 11 - 
 
  Exhibit No.  Short Title  Title 
USA-129 - AIN online, "Singapore Order Tally Grows to 
USD 30 Billion" , (12 February 2014)  
USA-130 - Airbus press release,  "ANA Group Selects the 
A380", (29 January 2018)  
USA-138 Ascend data  Ascend aircraft database  
USA-143 - Airbus press release,  "Virgin Atlantic Selects the 
A350 XWB as its Future Flagship ", (11 July 2016)  
USA-144 - Airways , "First Virgin Atlantic A350 -1000 Spotted 
in Toulouse (+photo) ", (25 October 2018)  
USA-149 Clean Sky 2 Joint Undertaking: Work 
Plan 2014 -2015 Clean Sky 2 Joint Undertaking: Work Plan 2014 -
2015 (July 2014)  
USA-153 Boeing CMO 2015-2034 Boeing Current Market Outlook 2015 -2034 
USA-158 Updated Ascend data  Updated Ascend aircraft database  
USA-173 
(HSBI/BCI)  Third NERA German A350XWB LA/MSF 
Report  Third NERA Report on German A350 XWB LA/MSF  
 WT/DS31 6/RW2  
BCI deleted, as indicated [***]  
- 12 - 
 
  ABBREVIATIONS USED I N THIS REPORT  
Abbreviation  Description  
A320ceo  Airbus A320 "current engine option" aircraft  
A320neo  Airbus A320 "new engine option" aircraft  
A350XWB  Airbus A350 "eXtra widebody" aircraft  
A380  Airbus A380 aircraft  
ANA All Nippon Airways  
BCI business confidential information  
BEIS UK Department of Business, Energy & Industrial Strategy  
CEO Chief Executive Officer  
CORDIS  Community Research and Development Information Service  
CMO current market outlook 
DSB Dispute Settlement Body  
DSU Understanding on Rules and Procedures Governing t he Settlement of Disputes  
EADS  European Aeronautic Defence and Space Company  
EC European Communities  
EFFICOMP  Efficient Composite parts manufacturing  programme  
EUR Euro 
GATT 1994  General Agreement on Tariffs and Trade 1994  
GBP British pound 
GmbH  Gesellschaft mit beschränkter Haftung  
HSBI highly sensitive business information  
IRR internal rate of return  
KfW Kreditanstalt Für Wiederaufbau  
LA/MSF  Launch Aid/Member State Financing  
LCA large civil aircraft  
LPA large passenger aircraft  
LuFo  Luftfahrtforschungsprogramm  (Aviation Research Programme)  
NERA  National Economics Research Associates  
NPV net present value  
PROFIT  Programa de Fomento de la Investigación Técnica (Funding Programme for 
Technological Research)  
PwC PricewaterhouseCoopers  
R&TD  Research and Technological Development  
RSP  risk-sharing partner  
RSS  risk-sharing supplier  
SCM Agreement  Agreement on Subsidies and Countervailing Measures  
TRL Technology readiness level  
UK United Kingdom  
US United States  
USD United States  Dollar  
VLA very large aircraft  
WTO World Trade Organization  
 WT/DS316/RW2  
BCI deleted, as indicated [***]  
- 13 - 
 
  1  INTRODUCTION  
1.1  Prior proceedings in DS316  
This is the second recourse to Article 21.5 of the Understanding on Rules and Procedures 
Governing the Settlement of Disputes (DSU) concerning the alleged failure by the European Union  
to comply with the Dispute Settlement Body's (DSB) recommendations and rulings in the original 
proceeding in  EC and Certain member States – Measures Affecting Trade in Large Civil Aircraft . 
On 1 June 2011, the DSB adopted the Appellate Body report, and the panel report as modified 
by the Appellate Body report, in EC and Certa in member States – Measures Affecting Trade in Large 
Civil Aircraft . The DSB's recommendations called upon the European Union to secure compliance 
with its WTO obligations in respect of "launch aid" or "member State financing" (LA/MSF) for the 
A300, A310, A320, A330, A330 -200, A340, A340 -500/600, and A380 models of large civil aircraft 
(LCA) . The recommendations and rulings also covered certain infrastructure measures, equity 
infusions and regional development grants.  
On 1 December 2011, the European Union informed the DSB of the steps taken to implement 
the DSB's recommendations.1 The United States disagreed with  the European Union regarding the 
sufficiency of the compliance steps communicated by the European Union to the DSB. Following 
consultations, and a t the request of the United States, on 13 April 2012, the DSB referred the parties' 
disagreement to a compliance panel established under Article 21.5 of the DSU . 
On 28 May 2018, the DSB adopted the reports of the panel and the Appellate Body in the 
first compliance proceeding. The compliance panel report, as modified by the Appellate Body report, 
found that the European Union had failed to comply with the DSB recommendations and rulings in 
connection with LA/MSF for the A350XWB2 and the A380 models of LCA . 
Prior to the adoption of the panel and the Appellate Body  reports  in the first compliance 
proceeding, the European Union notified the DSB on 17 May 2018 of the adoption of  a series of 
additional measures , which the European Union considered to have brought  the European Union into 
full substantive compliance  with the DSB's recommendations and rulings. At the meeting of the DSB 
on 28 May 2019, the United States again expressed its disagreement that the European Union ha d 
achieved full substantive compliance  with the  DSB's  recommendations and rulings .3 
1.2  Complaint by the European Union  
Request for consultations  
On 29 May 2018, the European Union4 requested consultations with the United States pursuant 
to Articles 4 and 21.5 of the DSU, Article XXIII:1  of the General Agreement on Tariffs and Trade  1994 
(GATT 1994), and Articles 7.1 and 30 of the Agreement on Subsidies and Countervailing Measures 
(SCM Agreement).5 The European Union indicated that its request was made with respect to a 
"disagreement", un der Article 21.5 of the DSU, "as to the existence or consistency with a covered 
agreement of measures taken to comply with the recommendations and rulings" of the DSB in 
EC and Certain member States – Measures Affecting Trade in Large Civil Aircraft .6 
The European Union and the United States held consultations on 27 June 2018 , but the 
consultations failed to resolve the dispute.  
 
1 Communication from the European Union , WT/DS316/17.  
2 The A350XWB was launched after the initiation of the original panel proceeding.  
3 DSB, Minutes of the meeting held on 28 May 2018, WT/DSB/M/413 . 
4 The European Union replaced and succeeded the European Communities as of 1 December 2009. 
Unless the context otherwise requires, references in this report to the European Union include the "certain 
member States" (France, Germany, Spain and the United Kin gdom of Great Britain and Northern Ireland 
("United Kingdom" or "UK")) against which the United States commenced the original dispute.  
5 Request for consultations by the European Union, WT/DS316/ 36 (European Union's request for 
consultations).  
6 European U nion's request for consultations.  
 WT/DS31 6/RW2  
BCI deleted, as indicated [***]  
- 14 - 
 
  
Panel establishment and composition  
On 31 July 2018 , the European Union requested the establishment of a panel pursuant to 
Article  21.5 of the DSU with standard terms of reference.7 At its meeting on 27 August 2018 , the 
DSB agreed, pursuant to Article 21.5 of the DSU, to refer the dispute to the original panel, if 
possible.8 
The Panel's terms of reference are the following:  
To examin e, in the light of the relevant provisions of the covered agreements cited by 
the parties to the dispute, the matter referred to the DSB by the European Union and 
certain member States in document WT/DS316/39 and to make such findings as will 
assist the DS B in making the recommendations or in giving the rulings provided for in 
those agreements.  
On 17 September 2018, the European Union requested the Director -General to determine the 
composition of the Panel, pursuant to Article 8.7 of the DSU, read together with Article 21.5 of the 
DSU. 
In accordance with these provisions and given the unavailability of two members of the 
original panel, the Panel was composed on 28 September 2018  as follows9: 
Chairman:  Mr Hugo Cayrús  
 
Members:  Mr Christian Etter  
  Mr Thinus Jacobsz  
 
Australia, Brazil, Canada10, China, India,  Japan  and the Russian Federation notified their 
interest in participating in the Panel proceedings as third parties.  
1.3  Panel proceedings  
General  
The Panel held an organizational meeting with the parties on 19 October 2018 .  
After consulting the parties, the Panel  adopted its Working Procedures11 and timetable on 
23 October 2018 . The Panel made various modifications to its timetable throughout the proceeding. 
On 16 September 2019 , the Panel informed the parties of the expected date of the issuance of the 
Interim Rep ort. 
The European Union and the United States  filed their first written submissions on 
26 October  2018 and 19 December 2018, respectively.  Third parties filed their written submissions 
on 11 January 2019.  The second written submissions of the European Unio n and the United States 
were filed on 28 January 2019  and 21 March 2019, respectively.  
The Panel held one substantive meeting with the parties on 7 -8 May 2019. A session with the 
third parties took place on 8 May 2019. At the request of the parties, the P anel's meeting with the 
parties was opened to the public by means of a  delayed video showing. A portion of the Panel's 
meeting with the third parties was also opened to the public by means of a delayed video showing.12  
 
7 EC and certain member States – Large Civil Aircraft , Recourse to Article 21.5 of the DSU by the 
European Union: Request for the establishment of a panel, WT/DS316/39, (European Union's panel request) . 
8 DSB, Minutes of t he meeting held on 27 August 2018, WT/DSB/M/417.  
9 Constitution note of the Panel related to European Union's recourse to Article 21.5 of the DSU , 
WT/DS316/40 and WT/DS316/40/Rev.1.  
10 See section 1. 3.3 below, discussing Canada's request to participate in t he proceeding as a third party.  
11 The Panel's Working Procedures are attached in Annex A -1. 
12 See Additional Working Procedures on Open Panel Meetings  in Annex A -2. Brazil, Canada and Japan 
consented to having their statements videotaped for delayed showin g. China, India and the Russian Federation 
did not make any statement.  WT/DS316/RW2  
BCI deleted, as indicated [***]  
- 15 - 
 
  
The Panel posed questions to the part ies and third parties on 10 May 2019.  
On 10 September 2019 , the Panel issued the descriptive part of its Report to the parties. 
The Panel issued its Interim Report to the parties on 17 October 2019 . The Panel issued its 
Final Report to the parties on 25 November 2019.  
Protection of Business Confidential Information and Highly Sensitive Business 
Information  
Before the organisational meeting, the European Union sent a letter to the Panel asking the 
Panel to adopt additional procedures for the protection of confidential and highly sensitive business 
information. After consulting the parties, the Panel adopted the Additional Procedures to Protect 
Business Confidential Information and Highly Sensitive Business Information (BCI/HSBI Procedures) 
on 23 October 201 8.13 
Canada's request to participate in the proceeding as a third party  
On 30 November 2018, Canada sent a letter to the Chairman of the Panel, the parties and 
the Chair of the DSB, requesting the Panel's authorization to participate in these compliance 
proceedings as a third party.14 In its letter, Canada submitted that it had  omitted to notify the DSB 
of its third -party interest due to internal coordination issues.15 Canada further  submitted that it had 
a "substantial interest" in the present d ispute in light of Canada's participation as the responding 
party in Canada – Measures Concerning Trade in Commercial Aircraft .16 Canada also submitted that 
it would not be unprecedented for the Panel to accept its request, nor would it interfere with the d ue 
process rights of the parties to the proceeding.17 
The Panel asked the parties and third parties to comment on Canada's request, considering 
that Canada made its request more than three months after the Panel was established on 
27 August  2018. The Europe an Union indicated it has no objection to Canada's request.18 
The United  States also agreed with Canada's request.19 Third parties provided no comments on 
Canada's request.  
On 7 December 2018, the Panel informed the parties and third parties that it had deci ded to 
accept Canada's request. In reaching i t decision, the Panel carefully considered the relevant 
provisions of the DSU and the relevant practice concerning third -party notifications made after panel 
composition. The Panel also considered that Canada's incorporation to the proceeding would not 
disturb the development of the proceeding and would not impair the due process rights of the parties, 
who had, in fact, expressed no objections on Canada's request.  
Preliminary ruling on the Panel's terms of refere nce 
On 21 December 2018, following the United States' issuance of its first written submission, 
the European Union requested the Panel to rule that the United States' claims in relation to certain 
European research and technological development (R&TD) meas ures are not within or properly 
within the scope of this compliance proceeding. The European Union asked "the Panel, urgently and 
on a preliminary basis, to find that the United States' claims in relation to the R&TD measures are 
not properly within the sc ope of the Panel's terms of reference".20 
 
13 The BCI/HSBI Procedures were subsequently revised several times. The final version is attached in 
Annex A -3. 
14 Canada's communication ( 30 November 2018 ). 
15 Specifically, Canada submitted that unexpected staff changes at Canada's Permanent Mission to the 
WTO in August 2018, coupled with miscommunications between Canada's Geneva - and capital -based officials, 
resulted in Canada not notifying its third -party interest at the DSB meeting in which the Panel was established 
or during the ten -day notification perio d following that meeting. (Canada's letter dated 30 November 2018 ). 
16 Canada's communication ( 30 November 2018 ). 
17 Canada's communication ( 30 November 2018 ). 
18 European Union's  communication ( 30 November 2018 ). 
19 United States'  communication (4 December 2018 ). 
20 European Union 's request for a preliminary ruling,  para. 1.  
 WT/DS31 6/RW2  
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- 16 - 
 
  
After seeking the views of the United States, the Panel decided  on 11 January 2019 to deny 
the European Union's request for a preliminary ruling , finding that the mere fact that the R&TD 
measures are not specifically identified in the European Union's panel request should not preclude 
the Panel from considering the United States' arguments related to the R&TD measures . The Panel  
indicated that its  decision to deny the European Union's request for a preliminary ruling and consider 
the United States' arguments concerning the R&TD measures was without prejudice to either party's 
right to advance further arguments regarding whether the United States is  otherwise precluded from 
raising claims concerning those measures, or regarding the merits of the United States' claims . 
Accordingly, the Panel invite d the parties to address the matters related to these measures in their 
submissions to the Panel.21  
The P anel's findings and underlying reasoning in relation to the European Union's preliminary 
ruling request are set out in section 7.3 below.  
Request to file an addition al submission regarding the future of the A380 LCA 
programme  
On 25 February 2019, the European Union requested leave to file an additional submission 
addressing the implications of Airbus' announcement on 14 February 2019 to wind down the A380 
programme an d to complete all deliveries by 2021.22 The European Union argued that Airbus' 
announcement has a direct bearing on the object of these compliance proceedings. Specifically, the 
European Union argued that the announcement is a "relevant fact that provides e vidence of 
compliance with the DSB's recommendations and rulings"; "is an event that falls within the terms of 
the European Union's Panel Request"; and "is inextricably linked to, and falls within a continuum of, 
measures that have explicitly been identifi ed in the EU Panel Request as achieving compliance under 
Article 7.8".23 The European Union further argued that it is necessary for the Panel to take this event 
into account as part of its mandate of determining whether the European Union has achieved 
compl iance.24 
After seeking the views of the United States, the Panel decided o n 28 February 2019 to grant 
the European Union's request to file the additional submission regarding Airbus' 14 February 2019 
announcement. Taking into account the timing of the Europ ean Union's request, the Panel also 
decided to extend the United States' deadline to file its second written submission by two weeks to 
ensure that the United States had an adequate opportunity to address the European Union's 
additional submission.25 
Reques t relating to the United States'  comments  
On 12 July 2019, the European Union requested the Panel to issue a ruling reject ing as 
"untimely filed " certain  arguments and evidence contained in the United States' comments on the 
European Union's responses to the Panel's questions following the substantive meeting .26 The 
European Union requested the Panel to either: (i)  reject as "untimely filed " certain new arguments 
and evidence; or alternatively, (ii) afford the European Union an opportunity to  comment on the 
alleged new arguments and evidence, if the Panel were to  decline to reject those arguments and 
evidence as untimely filed .27 The European Union additionally requested the Panel to deny various  
United States  requests  to pose unnecessary addit ional questions to the European Union, and further 
deny what the European Union considers to be an assertion made by the United States that the 
European Union did not engage in good faith in the first compliance proceedings.28 The 
 
21 Panel communication to the parties regarding the European Union's preliminary ruling request 
(11 January 2019 ). 
22 European Union's  communication  (25 February 2019). 
23 European Union's  communication  (25 February 201 9), p. 2.  
24 European Union's  communication  (25 February 201 9), p. 3. The European Union further argued that 
granting the European Union leave to file a submission concerning the A380 programme wind -down does not 
undermine the due process rights of the United States or third part ies. (European Union's  communication  
(25 February 201 9), p. 3 ). 
25 Panel communication to the parties regarding the United States' request to extend filing deadline  
(28 February 2019 ). 
26 European Union's  communication  (12 July 2019 ). 
27 European Union's  communication  (12 July 2019 ), pp. 5 -7. 
28 European Union's  communicati on (12 July 2019 ), pp. 7 -11. 
 WT/DS316/RW2  
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- 17 - 
 
  European  Union argued that  the United States ' belated and untimely filing of new arguments and 
evidence, as well as its invitation to the Panel to pose additional questions to the European Union, 
appear designed to prolong the proceeding,  and raised serious due process concerns.29 
On 5 August 2019, the Panel decline d the European Union's request to reject the 
United  States' arguments and evidence  but decided to provide the European Union an opportunity 
to comment on  certain of the arguments and evidence that the European Union had id entified. The 
Panel additionally declined the European Union's request to deny  any United States requests to pose 
additional questions to the European Union. The Panel did not consider it necessary to address the 
European Union's request concerning whether  the European Union engaged in good faith in the 
first compliance proceeding.  
The Panel's findings and underlying reasoning in relation to the European Union's ruling 
request are set out in Annex D-1 of this Report . 
2  FACTUAL ASPECTS  
2.1  Product at issue  
The product at issue in this dispute is the same as the product that was the subject of the 
original proceeding and the first compliance proceeding, i.e. LCA, as distinguished from smaller 
(regional) aircraft and military aircraft. LCA can generally be described as large (weighing 
over 15,000 kg) "tube and wing" aircraft, with turbofan eng ines carried under low -set wings, 
designed for subsonic flight. LCA are designed for transporting 100 or more passengers and/or a 
proportionate amount of cargo across a range of distances serviced by airlines and air freight 
carriers. LCA are covered by ta riff classification heading 8802.40 of the Harmonized System 
("Airplanes and other aircraft, of an unladen weight exceeding 15,000 kg ").30 
2.2  Measures at issue  
On 17 May 2018 , the European Union filed a communication informing the DSB that the 
European Union h as adopted a series of additional measures to comply that, in the European Union's 
view, constitute " appropriate steps to address the remaining and additional elements of the DSB's 
recommendations and rulings, either through the withdrawal of subsidies or the removal of the 
adverse effects ".31 Those measures are discussed in further detail in section 7.2 below.  
3  PARTIES' REQUESTS FO R FINDINGS AND RECOM MENDATIONS  
 The Eur opean Union requests that the Panel find that the European Union and certain member 
States have achieved full substantive compliance  with the recommendations and rulings of the DSB, 
within the meaning of Article 7.8 of the SCM Agreement. Specifically, the European Union submits 
that it has withdrawn the A380 -related LA/MSF subsidies and the German and UK LA/MSF subsidies 
for the A350XWB. In the event that the Panel finds that these subsidies have not been withdrawn, 
the European Union submits that appropria te steps have been taken to remove their adverse effects. 
Additionally, the European Union submits that it has taken appropriate steps to remove the adverse 
effects of the French and Spanish A350XWB LA/MSF subsides.32 
The United States requests that the Pan el reject the entirety of the European Union's claims 
that the European Union has brought its measures "into full compliance with its WTO obligations".33 
 
29 European Union's  communication  (12 July 2019 ), p. 2.  
30 Panel Report, EC and certain member States – Large Civil Aircraft , para. 2.1 . 
31 Communication by the European  Union, WT/DS316/34  (Compliance communication) , para. 12.  
32 European Union' s first written submission, para. 405; and second written submission, para.  554. 
33 United States'  first written submission, para. 305; and second written submission, para.  360. WT/DS31 6/RW2  
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- 18 - 
 
  4  ARGUMENTS OF THE PAR TIES  
The arguments of the parties are reflected in their executive summaries, provi ded to the Panel 
in accordance with paragraph 22 of the Working Procedures adopted by the Panel (see Annexes B-1 
and B-2). 
5  ARGUMENTS OF THE THI RD PARTIES  
The arguments of Brazil, Canada and Japan are reflected in their executive summaries, 
provided in accordance with paragraph 22 of the Working Procedures adopted by the Panel 
(see Annex es C-1, C-2 and C -3). Australia, China, India and the Russian Federation  did not submit 
written or oral arguments to the Panel.  
6  INTERIM REVIEW  
On 17 October  2019, the Panel issued its Interim Report to the parties. On 31 October  2019, 
the European Union and the United States submitted their written requests for review. 
On 14 November  2019, the parties submitted comments on the other parties' written requests for 
review.  
The parties' requests made at the interim review stage as well as the Panel's discussion and 
disposition of those requests are set out in Annex A-4. 
7  FINDINGS  
7.1  Introduction  
Procedural background  
This proceeding represent s the second occasion on which a Panel has been established under 
Article 21.5 of the DSU to rule on whether the European Union has achieved compliance with the 
DSB's adopted recommendations and r ulings in EC and certain member States – Large Civil Aircraft .  
7.1.1.1   Original  proceeding  
In the original proceeding in this dispute, the United  States claimed that the 
European  Communities and certain of its member  States  had caused, through the use of specific  
subsidies, adverse effects  to the United  States' interests  in the form of serious prejudice  under 
Articles  5(c) and 6.3 of the Agreement on Subsidies and Countervailing Measures  (SCM  Agreement). 
The original panel found that the United States had demonstrated that the European Communities 
and certain member States had caused adverse effects, in the form of certain kinds of serious 
prejudice to the United States' interests, within  the meaning of Articles  5(c), 6.3(a), (b) and (c) of 
the SCM  Agreement, through the use of specific subsidies. These findings pertained to the use of 
LA/MSF for the A300, A310, A320, A330, A330 -200, A340, A340 -500/600, and A380 LCA models; 
the use of cert ain challenged equity infusions and infrastructure measures, and  research  and 
technological development (R&TD) funding provided by the European Communities and certain 
member States.34 The original panel also concluded that the United States had established  that the 
German, Spanish and UK A380 LA/MSF agreements constituted prohibited export subsidies within 
the meaning of Article 3.1(a) and footnote 4 of the SCM Agreement.35 
On appeal, the Appellate Body reversed the original panels' finding that the German, Spanish 
and UK A380 LA/MSF agreements constituted prohibited export subsidies within the meaning of 
Article 3.1(a) and footnote 4 of the SCM Agreement, and was unable to complete the legal analysis  
 
34 Panel Report, EC and certain member States – Large Civil Aircraft , paras. 7.290(a)(i) -(vii), 
7.482 -7.496, and 8.1(a)(i) 7.1245 -7.1249 , 7.1302, 7.1323 -7.1326, 7.1380 -7.1384, 7.1414, and 8.1(c) 
and (d), and  7.1049 -7.1053, 7.1097, 7.1100 -7.1101, 7.1134, 7.1137 -7.1139, 7.1191, 7.1 205-7.1211, 7.1244, 
and 8.1(b)(i) -(iv). 
35 Panel Report, EC and certain member States – Large Civil Aircraft , paras. 7.689 and 8.1(a)(ii).  
 WT/DS316/RW2  
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  with regard  to Article  3.1(a) .36 The Appellate Body, howeve r, upheld  the original panel's conclusion 
that the effects of the challenged LA/MSF measures caused serious prejudice to the 
United  States'  interests within the meaning of Article  6.3(a), (b) and (c) of the SCM Agreement.37 
In addition, the Appellate Body u pheld the original panel's findings that the effects of the challenged 
equity infusions and infrastructure measures "complemented and supplemented" the effects of the 
challenged LA/MSF measures38, while reversing the original panel's finding that the R&TD s ubsidies 
"complemented and supplemented " the effects of the LA/MSF measures.39 
The Appellate Body report and the report of the original panel, as modified by the 
Appellate  Body report, were adopted by the DSB on 1 June 2011.40 The DSB recommended that the 
European Communities  and certain member States comply with the Panel's recommendation 
pursuant to Article 7.8 of the SCM Agreement , that "the Member granting each subsidy found to  have 
resulted in such adverse effects, 'take appropriate steps to remove the a dverse effects or … withdraw 
the subsidy'".41 
First compliance proceeding  
Following the adoption of the original panel report and the Appellate  Body report , on 
1 December 2011, the European Union filed a communication informing the DSB that it had taken 
"appropriate steps to bring its measures fully into conformity with its WTO obligations, and to comply 
with the DSB's recommendations and rulings".42 On 9 December  2011, the United  States requested 
to hold consultations with the European  Union and the  four member States, alleging that the 
European  Union had failed to comply with the recommendations and rulings of the DSB.43 On 
13 April 2012, the DSB referred the parties' disagreement to a  first compliance panel established 
under Article 21.5 of the DSU.44 The first compliance panel circulated its report on 
22 September  2016.  
The panel in the first compliance proceeding concluded that the United States had failed to 
demonstrate that the A380 and A350XWB LA/MSF subsidies are prohibited export and/or prohibi ted 
import substitution subsidies within the meaning of Articles  3.1 and 3.2 of the SCM  Agreement.45 
The first compliance panel, however, rejected the European Union's argument that the expiration of 
the lives of certain subsidies amounted to "withdrawal" o f those subsidies for the purpose of 
Article  7.8.46 The first compliance panel concluded that the effects arising from the LA/MSF subsidies 
provided for the A300, A310, A320, A330, A330 -200, A340, A340 -500/600, A380 and A350XWB, 
caused serious prejudice to the United States' interests within the meaning of Article  6.3(a), (b) and 
 
36 Appellate Body Report, EC and certain member States – Large Civil Aircraft , paras. 1414(j) 
and 1415(b).  
37 Appellate Body Report, EC and certain member States – Large Civil Aircraft , paras. 1414(e)(iv), (l), 
(m), (p), and (q).  
38 Appellate Body Report, EC and certain member States – Large Civil Aircraft , paras. 1414(g) and (r) . 
39 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1414(s).  
40 DSB, Minutes of the meeting held on 1 June 2011, WT/DSB/M/297.  
41 Panel Report, EC and certain member States – Large Civil Aircraft , para. 8.7; Appellate Body Rep ort, 
EC and certain member States – Large Civil A ircraft , para s. 1416 and 1418.  
42 Communication from the European  Union dated 1 December 2011, WT/DS316/17, 5 December 2011, 
para. 1. The European  Union provided "{i}nformation concerning the steps"  it had taken to achieve compliance 
in a list containing 36 numbered paragraphs attached to  its communication. (Communication from the 
European Union  dated 1 December 2011, WT/DS316/17, 5 December 2011, para. 3 ). 
43 Communication by the United States, WT/DS316/19 and Corr.1  (Request for Consultations) . On 
9 December 2011, the United States also r equested the DSB to authorise countermeasures against the 
European Union in accordance with Article 7.9 of the SCM Agreement and Article 22.2 of the DSU 
(WT/DS316/18). At the DSB meeting of 22 December 2 011, the European Union objected to the level of 
countermeasures proposed by the United States and also claimed that the United States had not followed the 
principles and procedures set forth in Article 22.3 of the DSU. As a result, the matter was referred to 
arbitration under Article 22.6 of the DSU (WT/DS3 16/20). On 12 January 2012, the European Union and the 
United States concluded an agreement, pursuant to which the parties agreed to request the arbitrator to 
suspend its work (WT/DS316/21; WT/DS316/22). Following a request from the United States on 13 Jul y 2018, 
the arbitrator agreed to resume its work.  
44 Constitution of the panel, WT/DS316/24.  
45 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 7.1(c)(ii) 
and (iii).  
46 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  7.1(d)(viii) -(ix). 
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  (c) of the SCM Agreement in the single -aisle LCA, twin -aisle LCA and Very Large Aircraft (VLA) 
markets.47 By continuing to be in violation of Articles 5(c) and 6.3(a), (b) and (c) of  the 
SCM Agreement, the first compliance panel concluded that the European Union and certain member 
States had failed to comply with the DSB recommendations and rulings.48  
The report of the compliance panel was appealed by both parties, and the Appellate B ody 
circulated its report on 15 May 2018.  The Appellate Body reverse d the compliance panel's  
interpretation of Article 7.8 of the SCM Agreement, as well as its finding that the European Union's  
compliance obligation s extended to the LA/MSF subsidies provid ed for the  A300, A310, A320, A330, 
A330-200, A340, and A340 -500/600. According to the Appellate Body, no compliance obligation 
existed in relation to these LA/MSF subsidies because, in each case, the "lives" of the subsidies had 
expired before the end of t he European Union's implementation period - 1 December 2011 .49 The 
Appellate Body also reversed the compliance panel's findings under Articles 6.3(a), 6.3(b), 
and 6.3(c) of the SCM Agreement insofar as they related to the single -aisle LCA market.50 However, 
the Appellate Body upheld the compliance panel's conclusions that the European  Union and certain 
member States had failed to comply with the DSB recommendations and rulings insofar as the "lives" 
of the LA/MSF subsidies provided for the A380 and A350XWB ha d not expired, and continued to 
cause adverse effects in the twin -aisle LCA and Very Large Aircraft (VLA) markets in the post -
implementation period.51 The DSB adopted the Appellate Body report and the report of the 
compliance panel, as modified by the Appellate Body report, on 28 May 2018.52 
Second compliance proceeding  
Prior to the DSB's adoption of the reports of the panel and the Appellate Body  in the  
first compliance proceedings, the European Union informed the DSB on 17 May 2018 that it had 
adopted a series of additional measures that, in the European Union's view, constitute " appropriate 
steps to address the remaining and additional elements of the DSB's recommendations and rulings, 
either through the withdrawal of subsidies or the removal of the adverse effects ".53 In a s tatement 
at the DSB meeting o f 28 May 2018 , the United States expressed the view that the European Union 
had not yet fully complied  with the recommendations and rulings of the DSB .54 
On 29 May 2018 , the European Union request ed consultations with the United States with 
respect to their "disagreement", under Article 21.5 of the DSU, "as to the existence or consistency 
with a covered agr eement of measures taken to comply with the recommendations and rulings" of 
the DSB.55 The United States and the European Union held consultations on 27 June 2018 , but the 
consultations failed to resolve the dispute. On 27 August 2018 , the DSB referred the parties' 
disagreement to a  second  compliance panel established under Article 21.5 of the DSU .56 
The Panel's task in this compliance proceeding  
The European Union initiated this compliance proceeding in light of its disagreement with the 
United States as to whether it has achieved full substantive compliance with the recommendations 
 
47 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  7.1(d)(xiv) -(xvi).  
48 Panel Report, EC and certain  member States – Large Civil Aircraft (Art icle 21.5 – US), para. 7.2.  
49 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras. 6.11(a) and 6.12(a).  
50 Appellate Body Report, EC and certain member States – Large  Civil Aircraft (Article 21.5 – US), 
para. 6.27(a).  
51 Appellate Body Report, EC and certain member States – Large Civil Aircra ft (Article 21.5 – US), 
paras.  6.43(a) and (b).  
52 Appellate  Body Report and Panel Report pursuant to Article  21.5 of the DSU, Action by the Dispute 
Settlement Body , WT/DS316/35.  
53 Communication from the European  Union dated 17 May 2018, WT/DS316/34, para. 12.  
54 DSB, Minutes of the meeting held on 28 May 2 018, WT/DSB/M/413 . ("Based on the US review since 
WTO Members had received this communication, the EU document did  not reflect new developments that 
might somehow resolve this long -standing dispute") . 
55 European Union's request for consultations.  
56 DSB, Mi nutes of the meeting held on 27 August 2018, WT/DSB/M/417.  
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  and rulings of the DSB following the adoption of the panel and the Appellate Body  reports in the 
first compliance proceeding.  
As in the first compliance proceeding, our task here  is to decide and resolve the dispute 
between the parties  arising out of their "disagreement as to the existence or consistency with a 
covered agreement of measures taken to comply with the recommendations and rulings".  We must 
evaluate whether the European Union has achieved full, substantive, compliance with the 
requirements of Article 7.8 of the SCM  Agreement, which defines an implementing 
Member's  obligation in compliance disputes involving actionable subsidies57 in the following terms:  
Where a pa nel report or an Appellate Body report is adopted in which it is determined 
that any subsidy has resulted in adverse effects to the interests of another Member 
within the meaning of Article 5, the Member granting or maintaining such subsidy shall 
take appr opriate steps to remove the adverse effects or shall withdraw the subsidy.  
In this proceeding, the European Union asserts  that it has taken steps that achieve full 
substantive compliance  with the DSB's recommendations and rulings. Through these steps, the 
European Union argues that it has demonstrated that there are currently no non -withdrawn subsidies 
that cause present adverse effects, and thus, it can no longer be demonstrated that the 
European  Union is causing nullification or impairment to the United S tates or the US LCA industry 
that would entitle the United States to adopt countermeasures.58 Specifically, the European Union 
argues that it has withdrawn all of the A380  LA/MSF subsidies and the German and UK A350XWB 
LA/MSF subsidies that were found to ca use adverse effects in the preceding stages of this dispute , 
thereby achieving full substantive compliance in respect of those subsidies and their adverse effects. 
In addition, the European Union argues that it ha s also demonstrated that  it has taken steps  to 
remove any adverse effects of those subsidies and the French and Spanish A350XWB LA/MSF 
subsidies. The European Union maintains that it has no compliance obligations with respect to any 
other subsidies . 
Rather than achieving compliance, the United Stat es argues that the actions taken by the 
European Union have exacerbated the European Union's non -compliance. The United States 
contends that the European Union has failed to demonstrate the withdrawal of any of the LA/MSF 
subsidies covered by the DSB's rec ommendations and rulings. The United States argues that a series 
of amendments to the original A380 LA/MSF agreements and the original German A350XWB LA/MSF 
agreement ha ve both increased the amount of the subsidies provided to Airbus and prolonged their 
"lives". The United States further more argues that the repayment of the UK A350XWB LA/MSF simply 
reflects Airbus' fulfilment of the terms of an agreement that was already found to constitute a 
WTO-inconsistent subsidy, and not a step that achieves compliance . In addition, t he United States 
maintains that the European Union has failed to remove the extensive, on -going adverse effects that 
the LA/MSF subsidies were found to cause. Finally, the United States submits that the 
European  Union has maintained and exp anded the use of certain research and technological 
development (R&TD) subsidies , which alone or together with the LA/MSF subsidies at issue in this 
dispute, continue to cause adverse effects to the United States' interests . 
We begin our assessment of the merits of the parties' submissions by reviewing the steps  the 
European Union alleges  have either withdraw n the LA/MSF subsidies or  otherwise  remov ed the 
adverse effects  of any of the LA/MSF subsidies that have not been withdrawn .59 We then turn to 
examine the United States' contention that our assessment of the European Union's compliance 
must take into account the alleged effects of a series of R&TD measures , which the European Union 
maintains are not properly within the  scope of t his proceeding, before addressing the disagreement 
between the parties as to whether the European  Union and certain member States have complied 
with their obligations under Article 7.8 of the SCM  Agreement.  
 
57 Appellate  Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para. 235.  
58 European Union' s first written submission, para. 7.  
59 Communication from the European  Union dated 17 May 2018 , WT/D S316/34, p. 3.  
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  7.2  The European Union's 1 7 May 2018  compliance commu nication to the DSB  
Introduction  
On 17 May 2018 , the European Union informed the DSB that it had adopted a series of 
measures , which according to the European Union "achieve the withdrawal of the subsidies at issue, 
constitute appropriate steps to remove t heir adverse effects, or both"60, thereby bringing the 
European Union into compliance with the DSB's recommendations and rulings.61 
The European  Union identified the measures  or steps  that it allegedly took to achieve 
compliance listing 18 numbered items.62 Certain of the measures  or steps  took place in close 
proximity with the adoption of the recommendations and rulings in the first compliance proceeding; 
while others did not, and either  pre-dated or post -dated the adoption of the recommendations and 
rulings in this dispute, or the European Union's compliance communication of 17 May 2018.  
We briefly describe below our understanding of the European Union's  compliance measures , 
as articulated in the European  Union's 17 May 2018  compliance communication to the DSB and 
further discussed in the parties' submissions in this dispute.  The European Union's asserted 
measures or steps taken to achieve compliance are broadly divided into two main categories: 
(i) measures alleged to achiev e withdrawal of the A380 and A350XWB LA/MSF subsidies and to 
contribute to removal of their adverse effects (section 7.2.2  below); and (ii) measures alleged to 
constitute appropriate steps to remove the adverse effects of any non -withdrawn A380 and 
A350XWB LA/MSF subsidies (section 7.2.3 below).  
Measures alleged to achieve withdrawal of the A380 LA/MSF and A350XWB LA/MSF 
subsidies and to contribute to the removal of their adverse effects within the meaning of 
Article 7.8 of the SCM Agreement  
The [***] amendments to the Fre nch, German, Spanish and UK A380 LA/MSF 
agreements (measures 1 –4) 
The first compliance measures  the European Union lists in its 17 May 2018 notification to the 
DSB are four amendments made to the original A380 LA/MSF agreement s between Airbus and 
France, G ermany, Spain and the United Kingdom. The German A380 LA/MSF amendment was 
concluded on [***], the French A380 LA/MSF amendment on [***], the UK A380 LA/MSF 
amendment on [***], and the Spanish A380 LA/MSF amendment on [***].63 The European  Union 
argues that these amendments "achieve prospective consistency {of the A380 LA/MSF measures} 
with a contemporaneous market benchmark" thereby procuring the "withdrawal of the subsidies 
conferred by each of the A380 MSF loans" .64 
According to the European Union,  Airbus and the four member States concluded the four A380 
LA/MSF loan amendments at a point in time when Airbus faced faltering demand for the A380 and 
needed to make a critical decision as to whether to continue the programme or [***].65 The 
European Union submits that the amendments were advantageous to the member State lenders 
because failing to do so would mean "the member State lenders would have suffered significant 
losses on their MSF investments, given the risk sharing and succ ess-dependent nature of the 
 
60 Communication from the European  Union dated 17 May 2018, WT/DS316/34, para. 13.  
61 Communication from the European  Union dated 17 May 2018, WT/DS316/34, para. 14.  
62 Communication from the European  Union dated 17 May 2018, WT/DS316/34, para.  15. 
The 18 "steps"  identified by the European  Union are described and explained in more detail below.  
63 European Union' s first written submission, para. 144; [***] French A380 LA/MSF Amendment, 
(Exhibit EU -21 (BCI) ); [***] German A380 LA/MSF Amendment, (Exhibit EU -20 (HSBI/BCI) (English 
translation));  [***] Spanish A380 LA/MSF Amendment, (Exhibit EU -23 (BCI) ); and [***] UK A380 LA/MSF 
Amendment, (Exhibit EU -22 (BCI) ). 
64 Communication from the European  Union dated 17 May 2018 , WT/DS316/34, para. 19 . 
65 European Union's first written submission, paras. 128 -129 and 142; PwC A380 LA/MSF Report , 
(Exhibit EU -17 (HSBI/ BCI)), Section C.II ; and Minutes of a meeting of the board of director s of Airbus SE, 
[***], (Exhibit EU -18 (HSBI)) , p. 2.  
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  A380 MSF loans".66 Thus, in the view of the European Union, the amendments would "enable the 
lenders to salvage their investments".67  
The four A380 LA/MSF amendments are discussed in further detail in section 7.4.5.1.2.1  
below. While the terms of the amendments differ,  a core feature of each amendment [***]. In this 
respect, the European Union explains that the amendments are designed to ensure that Airbus wou ld 
receive [***].68 In particular, Emirates Airlines had been the main A380 customer and considered 
ordering additional A380 aircraft [***].69 
The United States submits that the [***] amendments represent nothing more than "Airbus' 
successful attempt to shif t from itself to the funding governments the mounting costs of keeping the 
A380 program{me} alive" following " many years of lower -than-anticipated demand for the A380, 
as well as massive problems pertaining to production and supply chain ".70 Rather than ach ieving the 
withdrawal of the subsidies, the United States argues that  the amendments "increased the projected 
amounts of the subsidies and prolonged their lives"71, and the refore, "{i}n agreeing to these 
amendments, the Airbus governments conformed to their decades -old patter n of propping up Airbus' 
risky LCA ventures with massive subsidies".72 Accordingly, the United States argues that the [***] 
amendment s fail to bring the European Union into compliance with the DSB's recommendations and 
rulings in res pect of the A380 LA/MSF subsidies.  
The [***] amendment to the German A350XWB LA/MSF agreement  (measure  5) 
The European Union identifies a [***] amendment to the German A350XWB LA/MSF 
Agreement as one of the compliance steps . According to the European Union , this amendment 
ensures that the German A350XWB LA/MSF contract is consistent "with a contemporaneous market 
benchmark, such that the subsidy conferred by German A350XWB MSF is withdrawn ".73 
Airbus and Kreditanstalt für Wiederaufbau (KfW) signed the original German A350XWB LAMSF 
agreement  on [***]. Under the loan agreement, Airbus was entitled to draw -down [***] for the 
purpose of funding a portion of the development costs related to the Airbu s A350XWB .74 Airbus drew 
[***]. Airbus drew -down  [***].75 On [***], Airbus and KfW agreed to amend the original loan 
agreement.76 The preamble to the amendment states that Airbus had " asked KfW to [***] the 
arrangements it had entered into in order to [***] on the loan tranches, and to provide {Airbus} 
with new [***] for these [***]".77 The preamble also states that " [***]".78 Overall, the 
European  Union submits that the [***] amendment retains the basic s tructure of the original 
 
66 European Union 's first written submission, para. 140 ; PwC A380 LA/MSF Report, (Exhibit EU -17 
(HSBI/BCI)), Section F.II, Table 15; Minutes of a meeting of the board of directors of Airbus SE, [***], 
(Exhibit EU -18 (HSBI)), p. 4 item (A).  
67 European Union 's first written submission, para. 129; PwC A380 LA/MSF Report, (Exhibit EU -17 
(HSBI/BCI)) , Section F.II, Table 15; Minutes of a meeting of the board of directors of Airbus SE, [***], 
(Exhibit EU -18 (HSBI )), p. 4 item (A).  The European  Union submits that only the [***] would avoid any losses 
from programme termination because, [***]. (See [***]; PwC A380 LA/MSF Report, (Exhibit EU -17 
(HSBI/BCI)), [***]). 
68 European Union 's first written submission, para. 128, PwC A380 LA/MSF Report, (Exhibit EU -17 
(HSBI/BCI)), Section C.II . 
69 European Union 's first written submission, para. 12 9; Minutes of a meeting of the board of directors 
of Airbus SE, [***], (Exhibit EU -18 (HSBI)) ; and PwC A380 LA/MSF Report, (Exhibit EU -17 (HSBI/BCI)), 
para. 39. 
70 United States' first written submission, para. 25.  
71 United States' first written submission, para. 41.  
72 United States' first written submission, para. 2 7. 
73 Communication from the European  Union dated 17 May 2018, WT/DS316/34, para. 21.  
74 German A350XW B LA/MSF  Agreement, (Exhibit EU -10 (HSBI/BCI)  (English translation)) , Clause 3.2; 
and Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.237.  
75 In [***], Airbus and KfW agreed to a [***] to the original agreement , which introduced changes to 
the disbursement schedule, [***]. (Email from [***], 20 March 201 5, (Exhibit EU -106 (BCI) (English 
translation)) ; and  TradeRx A350XWB LA/MSF Report, (Exhibit EU -11 (HSBI/BCI)) , para. 35 ). 
76 German A350XWB  [***] amendment, (Exhibit EU -9 (BCI) (English translation)) . [***]. (See KPMG 
Assessment of [***], (Exhibit EU -105 (BCI)), p. 5 ). 
77 German A350XWB [***] amendment, (Exhibit EU -9 (BCI) (English translation)) , preamble.  
78 German A350XWB [***] amendment, (Exhibit EU -9 (BCI) (English translation)) , preamble.  
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  A350XWB LA/MSF loan by continuing to provide for (a) [***]79; (b) repayments of principal over 
deliveries of A350XWB aircraft80; (c) [***]81, and (d)  [***].82  
The United States submits that , like the [***] A380 LA/MSF amendments, the [***] 
amendment to German LA/MSF for the A350XWB "increased the pre -existing LA/MSF subsidy and 
prolonged its life", which "made Airbus better off financially than it otherwise would have been".83 
Accordingly, the United States argues that the amendment took the European Union further out of 
compliance with the DSB's recommendations and rulings from the first compliance proceeding.  
Repayment of outstanding UK A350XWB LA/MSF in 2018 (measure 6)  
The European Union asserts that  on [***], Airbus repaid the full outstanding principal and 
interest accrued under the UK A350XWB LA/MSF loan contract, such that the subsidy conferred by 
UK A350XWB LA/MSF has been withdrawn.84 Specifically, the European Union refers to a payment 
of [***] made to the UK Department of Business, Energy & Industrial Strategy (BEIS) on [***].85 
The United States does not dispute that Airbus made the specified  payment on [***]. The 
United States dispute s, however, that this payment  amounts to [***].86 Furthermore, the 
United  States argues that repaying a subsidised loan on its own subsided terms does not result in 
withdrawal for purposes of Article 7.8 of the SCM Agreement, in line with findings by the first 
compliance panel.87 Accordingly, the United  States considers that the European Union has failed to 
achieve compliance with the DSB's  recommendations and rulings in respect of UK A350 XWB LA/MSF.  
Withdrawal, through amortisation of the "benefit" conferred by the A380 and 
A350XWB LA/MSF agreements (meas ures 7  and 888) 
The European Union also refers to the amortisation of the "benefit" conferred by the A380 
LA/MSF agreements and A350XWB LA/MSF agreements in its 17 May 2018 compliance notification.89 
In the course of this proceeding, the European Union submitted an analysis conducted by TradeRx  
GmbH of the expected life of the A380 LA/MSF and A350XWB LA/MSF subsidies found to have been 
conferred by the original panel and the first compliance panel. Consistent with the approach taken 
by TradeRx , in its submissions to the Panel, t he European Union  argues that the full amortization of 
the benefit under the Spanish A380 LA/MSF loan will occur by [***], thereby achieving the 
withdrawal for purposes of Articl e 7.8 and bringing the European Union into compliance with respect 
to that subsidy.90 The European Union does not argue that any of the other A380 LA/MSF or 
A350XWB LA/MSF subsidies have been withdrawn through full amortization of benefit.  
The United State s has criticized the European Union's reliance on the TradeRx  report and the 
approach followed in that report.  The United States thus disagrees that  the TradeRx  analysis  can 
provide a basis for finding that any of the LA/MSF loans have been withdrawn for purposes of 
 
79 German A350XWB [***] amendment, (Exhibit EU -9 (BCI) (English translation)) , para. 36. 
80 German A350XWB [***] amendment, (Exhibit EU -9 (BCI) (English translation)), Annex 2; and 
TradeRx A35 0XWB LA/MSF Report, (Exhibit EU -11 (HSBI/BCI)), para. 39.  
81 German A350XWB [***] amendment, (Exhibit EU -9 (BCI) (English translation)), Clause 4; and 
TradeRx A350XWB LA/MSF Report, (Exhibit EU -11 (HSBI/BCI)), para. 40.  
82 German A350XWB [***] amendment, (Ex hibit EU -9 (BCI) (English translation)); and TradeRx 
A350XWB LA/MSF Report, (Exhibit EU -11 (HSBI/BCI)), para. 40. 
83 United States' first written submission, para. 87.  
84 Communication from the European  Union dated 17 May 2018, WT/DS316/34, para. 22 . See also 
European Union's first written submission, paras. 86 -89; and second written submission, paras. 59 -72. 
85 European Union's first written submission, para. 88; BEIS Invoi ce to Airbus, [***], (Exhibit  EU-8 
(BCI)); and BEIS Letter to Airbus, [***], (Exhibit EU -7 (BCI)).  
86 United States' response to Panel question No. 18, para . 47. 
87 United States' first written submission, para. 101.  
88 In the "List of Measures Taken To Comply " in paragraph 15 of the European Union 's compliance 
notification, the European Union refers to the withdrawal, through amortisation or otherwise, of the ' benefit' 
conferred by the French, German, Spanish and UK A38 0 LA/MSF Agreements and A350XWB LA/MSF 
Agreements, both in the context of achieving withdrawal of the subsidies and as constituting an appropriate 
step to remove adverse effects. (See Communication from the European  Union dated 17 May 2018, 
WT/DS316/34, pa ras. 15(A)(vii), 15(A)(viii),  15(B)(ix) and 15(B)(xiv) ). 
89 Communication from the European  Union dated 17 May 2018, WT/DS316/34, paras. 20-23. 
90 European Union's first written submission, paras. 177 -181. 
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  Article  7.8. In addition, the United States considers that the European Union's argument that Spanish 
A380 LA/MSF has been withdrawn fails to take into accoun t that the Spanish government negotiated 
to amend the terms and conditions of A380 LA/MSF in [***], which extended the life of Spanish 
A380 LA/MSF "well past [***]", according to the United States.91 
Measures alleged to constitute appropriate steps to  remov e the adverse effects of 
the A380 LA/MSF and A350XWB LA/MSF subsidies within the meaning of Article 7.8 of 
the SCM Agreement  
Amortisation of the "benefit" conferred by the A380 LA/MSF agreements and 
A350XWB LA/MSF agreements (measures 9 and 14)  
In addition  to addressing the alleged amortization of benefit in connection with its argument 
that the A380 LA/MSF and A350XWB LA/MSF subsidies have been withdrawn for purposes of 
Article  7.8 (see section 7.2.2.4  above) , the European Union submits that the amortisation of t he 
benefit conferred by the French, German, Spanish and UK A380 LA/MSF and A350XWB LA/MSF 
subsidies is also a relevant factor that must be taken into account i n determining whether the A380 
LA/MSF and A350XWB LA/MSF subsidies continue at present to be a genuine and substantial cause 
of present adverse effects, for purposes of assessing whether the European Union has taken steps 
to remove adverse effects of any n on-withdrawn subsidies.92  
As explained in  paragraph 7.28, the United States rejects  the approach taken in the TradeRx  
report to assess  the expected life of each of the loans .93 The United States also submits that the 
European Union has not establishe d that an assessment of the supposed reduction in benefit through 
amortization of LA/MSF is relevant to assessing whether the adverse effects of the subsidies 
continue, considering the "product effects"  causal pathway  that was established  to exist.94 
Non-subsidised investments in A380 and A350XWB family aircraft (measures 10 
and 15)  
As an additional compliance "step" , the European Union submits that  alleged significant post-
launch, non-subsidised investments  that Airbus made  in the A380 and A350XWB families of LCA, 
which, according to the European Union, attenuate the requisite causal link between the subsidy and 
any alleged present adverse effects, such that the A380 or A350XWB LA/MSF can no longer be 
considered a genuine an d substantial cause of sales or deliveries of either aircraft or any associated 
adverse effects.95 For both the A380 and the A350XWB programmes, the European Union alleges 
that Airbus has invested in the continuing  development of the aircraft , including the  development of 
new model variants  and continuing support for the two programmes.96  
The United Sates submits that the European Union's arguments concerning "non -subsidised" 
investments in the A380 and A350XWB are "a recycled version of the EU's failed 'non -subsidized 
investment' arguments  from the first compliance proceeding and should be rejected once again" .97 
In this regard, t he United States submits that the European Union unsuccessfully argued that the 
causal link between LA/MSF and the continued market  presence of the A320 and A330 families was 
attenuated by "'massive' and allegedly non -subsidized investments Airbus made with its own fund s", 
in connection with "{c}ontinuing {d}evelopment", "{c}ontinuing {s}upport", the design and 
manufacture of new vari ants of the A320 and A330 families, and setting up new A330 production 
lines.98 The United States submits that the compliance panel rejected this line of argument  on the 
 
91 United States' first written submission, para. 83.  
92 European Union's first written submission, paras. 204, 300 -308, and 371 -378. 
93 United States' first written submission, para. 83 and fn 140.  
94 United States' first written submission, para. 196.  
95 Communication from the European  Union dated 17 May 2018, WT/DS316/34, paras. 31 and 41.  
96 European Union's first written submission, paras. 315 -323 and 384 -388. 
97 United States' first written submissi on, para. 199.  
98 United States' first written submission, para. 199  (referring to EC and certain member States – Large 
Civil Aircraft (Article 21.5 – US), para. 6.1516 ). 
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  basis that the subsidies had enabled the existence of the aircraft in the first place,  and there would 
have been nothing to improve absent the subsidies .99 
Reduced draw down of principal under the French A380 LA/MSF agreement and 
the French and UK A350XWB LA/MSF agreements (measures 11 and 16)  
The European Union further submits that  the reduced draw -down of the loan amounts under 
the French A380 LA/MSF agreement and the French and UK A350XWB LA/MSF agreements are 
measures  taken to comply .100 The European Union considers  that the r educed draw -down of the full 
amount of the se loans means that  the "monetary consequence s" of the LCA programme risks 
assumed by the lenders are correspondingly reduced, and therefore, the subsidies can no longer be 
considered a genuine and substantial cause of sales or deliveries of A380 aircraft, or any adverse 
effects.101 
The United States argues that the European Union failed to establish that less than full 
drawdown reduces the ex ante  benefit of the subsidy. The United States  also rejects the 
European  Union's argument  that Airbus ' drawing  down of less than the full amount of any of the 
LA/MSF subsidies should have any bearing on the  Panel's  assessment of whether the causal link 
established between the existing subsidies and Airbus' ability to offer and deliver the A380 and 
A350XWB continues in the post-implementation period.102  
Attenuation of the causal link between A380 LA/MSF and A350XWB LA/MSF and 
the launches of the A380 and the A350XWB due to the passage of time (measures 13 
and 17) 
The European Union has also identified as an additional measure taken to comply the alleged 
attenuation of the causal link between A380 LA/MSF and A350XWB LA/MSF and the launches of the 
A380 and A350XWB due to the passage of time. In the case of both aircrafts, the European Union 
argues that A380 and A350XWB LA/MSF had limited accelerating effects on the development of the 
two aircraft, and therefore the subsidies can no longer be considered a cause of the  actual  launch of 
either  aircraft, and of resulting sales or deliveries or any associated adve rse effects.103  
The United States argues that the European Union's counterfactual assessment of the launch 
dates of the A380 and A350XWB  is flawed and based on a misreading of the findings by the original 
panel and compliance panel and therefore should be r ejected.104 In particular, the United States 
argues that the European Union's argument contradicts previously adopted DSB findings from the 
first compliance proceeding that both the A380 LA/MSF and A350XWB LA/MSF subsidies were a 
cause of adverse effects fou nd to have occurred in the 2011 -2013 period.105 
Cancellation or completion of A380 deliveries and pending deliveries, and the 
completion or conversion of A350XWB deliveries in certain country markets (measures 12 
and 18)  
Finally, t he European Union identifie s as further  steps  to remove the adverse effects of 
existing A380 LA/MSF or A350XWB LA/MSF subsidies the cancellation or completion of A380 
 
99 United States' first written submission, para s. 200-206. The United States addition ally argues that the 
alleged "non -subsidised" investments were independent of the R&TD subsidies and hence, the European Union 
has not demonstrated the investments were in fact, not subsidised investments. (United States' first written 
submission, para. 20 3). 
100 Specifically, the European Union  submits that Airbus opted not to draw down [***] or [***] of the 
anticipated principal under the French A380 LA/MSF loan, allegedly because [***]. The European Union 
submits that Airbus opted not to draw down [***] or [***] of the anticipated principal under the French 
A350XWB loan, allegedly due to the [***]. Finally, the European Union submits that Airbus did not draw down 
approximately [***] or [***] under the UK A350XWB LA/MSF loan. (European Union's second written 
submission, para s. 330-332). 
101 Communication from the European  Union dated 17 May 2018, WT/DS31 6/34, paras . 30 and 38 ; and  
European Union' s second written submission, paras. 338 -342. 
102 United States' first written submission, para s. 189-190. 
103 Communication from the European  Union dated 17 May 2018, WT/DS316/34, paras. 33 and 40.  
104 United States' first written submission, paras. 210 -216. 
105 United States' first written submission, para s. 220-235. 
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  deliveries and pending deliveries and completion or conversion of A350XWB deliveries. Specifically, 
the European Uni on has referred to the cancellation or completion of A380 deliveries  corresponding 
to the Transaero 2012 and Emirates 2013 orders, and delivery of any outstanding A380 aircraft to 
certain country markets covered by the finding of impedance in the VLA marke t106; and the 
completion or conversion to other aircraft of A350XWB deliveries corresponding to the Cathay 
Pacific  2012, Singapore Airlines 2013 and United Airlines 2013 orders of the A350XWB.107 The 
European  Union maintains that the cancellation or completion of deliveries, or conversion to other 
aircraft brings to an end the adverse effects arising from those orders.  
The United States addresses the European Union's argument s in the context of addressing 
the European Union's overall claim that it has  taken appropriate steps to remove the adverse effects 
of the A380 and A350XWB LA/MSF subsidies , arguing that the alleged actions fail to bring the 
European Union into compliance with Article 7.8  of the SCM Agreement .108 
Observations regarding the European U nion's measures  or steps  taken to achieve 
compliance  
These measures  or steps  alleged to achieve withdrawal  or to constitute appropriate steps to 
remove adverse effects  encompass : a series of amendments to the A380 and German A350XWB 
LA/MSF agreements ; the alleged full repayment of outstanding principal and accrued interest under 
the UK A350XWB LA/MSF agreement; and the passive amortization of benefit of the Spanish A380 
LA/MSF subsidy . The European Union refers to a broader array of steps  that allegedly att enuate or 
dilute the causal link between the subsidy and alleged present adverse effects established in the 
original proceeding or the first compliance proceeding such that the challenged subsidies are no 
longer a "genuine and substantial" cause of adverse  effects.  We note that the European Union has 
not provided evidence indicating  that the notified measures  and steps  were taken by the relevant 
member States for the specific purpose of achieving compliance with Article 7.8 of the 
SCM Agreement .  
We now examine the merits of the European Union's  compliance claims  based on our 
understanding of the scope and nature of the obligations reflected in  the adopted recommendations 
and rulings as well as prior interpretation of the applicable legal provisions , including Article 7.8.  
7.3  The European Union's request for a preliminary ruling that the United States' claims 
against certain research and technological development measures are outside the Panel's 
terms of reference  
Procedural background  
In its first writ ten submission filed on 19 December 2018, the United States identified a series 
of research and technological development (R&TD) measures  provided to Airbus, which it argues are 
subsidies the Panel is required to take into account in assessing the European  Union's compliance 
with the DSB's recommendations and rulings.109 
On 21 December 2018, the European Union submitted a request for a preliminary ruling that 
the United States' claims in relation to the R&TD measures referred to in the United States' 
first written submission are not properly within the Panel's terms of reference as defined by 
Articles  6.2 and 7.1 of the DSU. The United States submitted written comments on this request, and 
on 11 January 2019  the Panel sent a communication to the parties declin ing the European Union's 
request, indicating that the full reasoning supporting the Panel's decision would be set out in its final 
report.110  
 
106 Communication from the European  Union dated 17 May 2018, WT/DS316/34, para. 32.  
107 Communication from the European  Union dated 17 May 2018, WT/DS316/34, para. 42. See also 
European Union' s first written submission, para. 358.  
108 United States' first written submission, paras. 147 -148; and response to Pan el question No. 73, 
para. 165. 
109 United States' first written submission, paras. 9, 117 -118, 126 -128, and 243.  
110 Panel communication to the parties 11 January 2019.  
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In its communication of 11 January 2019, the Panel explained to the parties that the mere 
fact that the R&TD measures are not specifically identified in the European Union's panel request 
should not preclude the Panel from considering the United States' argu ments related to the R&TD 
measures.111 The Panel's decision was, therefore, without prejudice to any finding on the extent to 
which the United States is entitled to advance substantive claims regarding the consistency of the 
R&TD measures with the European U nion's compliance obligations under Article 7.8 of the 
SCM Agreement. The parties advanced further arguments on this matter in their subsequent written 
submissions and at the Panel's substantive meeting with the parties.  
The R&TD measures the United States  challenges in this proceeding and relevant 
findings from previous stages of this dispute  
In its first written submission, the United States identified the following R&TD measures that 
existed at the time of the original proceeding, each of which were foun d to be specific subsidies:  
a. Grants for LCA -related R&TD projects in which Airbus participated pursuant to the:  
i. Second Framework Programme for Community Activities in the Field of Research 
and Technological Development (1987 -1991) ("Second Framework 
Progra mme");  
ii. Third Framework Programme for Community Activities in the Field of Research 
and Technological Development (1990 -1994) ("Third Framework Programme");  
iii. Fourth Framework Programme of the European Community Activities in the Field 
of Research and Technol ogical Development and Demonstration (1994 -1998) 
("Fourth Framework Programme");  
iv. Fifth Framework Programme of the European Community for Research, 
Technological Development and Demonstration Activities (1998 -2002) 
("Fifth  Framework Programme");  
v. Sixth Frame work Programme of the European Community for Research, 
Technological Development and Demonstration Activities, Contributing to the 
Creation of the European Research Area and to Innovation (2002 -2006) 
("Sixth  Framework Programme");  
b. French government grants for LCA -related R&TD projects in which Airbus participated, 
between 1986 and 2005;  
c. German federal government grants for LCA -related R&TD projects in which Airbus 
participated (LUFO I, LUFO II, and LUFO III);  
d. Grants from three German sub -federal public entities for LCA -related R&TD projects in 
which Airbus participated;  
e. Spanish government loans for LCA -related R&TD projects in which Airbus participated 
under the PTA programme; and  
f. UK government grants for LCA -related R&TD projects in which Airbus participated under 
the CARAD programme.112 
In addition to the R&TD measures  that existed at the time of the original proceeding , the 
United States' claims in this proceeding cover the Seventh Framework Programme for Research and 
Technological Development (2007-2013) (Seventh Framework Programme ) and the Horizon 2020 
 
111 Panel communication to the parties 11 January 2019.  
112 United States' first written submission, para. 118 ; and second written submission, para. 299  and 
fn 396. 
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  Programme (2014 -2020)  (Eighth Framework Programme ).113 These R&TD measures did not exist at 
the time of the original proceeding.  
The original panel found that the majority of the R&TD measures chall enged by the 
United  States constituted specific subsidies to Airbus that caused serious prejudice to the 
United  States' interests under Articles 5(c) and 6.3(a), (b), and (c) of the SCM Agreement.114 
Specifically, the panel found that the R&TD subsidies "ena bled Airbus to develop features and aspects 
of its LCA on a schedule that it would otherwise have been unable to accomplish" and that " {w}hile … 
the impact of pre -competitive R&TD subsidies on Airbus' market presence was perhaps more 
attenuated, compared with the other subsidies at issue or with R&TD subsidies that funded research 
and technology actually used on LCA that were launched, {the panel} believe{d} that combined 
with the others, the RT&D subsidies complemented and supplemented the impact  of LA/MSF" .115  
On appeal, the European Union argued that the original panel failed to establish that any of 
the "features and aspects" of its LCA developed with funding from R&TD subsidies impacted Airbus' 
product launch decisions.116 The European Union furt her argued that the original panel failed to 
provide an evidentiary basis and a reasoned and adequate explanation for its causation finding, in 
violation of Article 11 of the DSU.117 The United States argued, to the contrary, that the original 
panel correctl y found that the R&TD subsidies "complemented and supplemented" the product 
effects of LA/MSF, because they enabled Airbus to "develop features and aspects of its LCA on a 
schedule that it would otherwise have been unable to accomplish".118 
The Appellate Bod y considered that the original panel did not have a sufficient basis to find 
that the R&TD subsidies complemented and supplemented the effects of LA/MSF, finding as follows:  
With respect to the other R&TD subsidies, we agree with the European Union that a 
general finding that they enabled Airbus to develop "features and aspects" of its LCA on 
a schedule that otherwise it would have been unable to accomplish does not provide a 
sufficient basis to determine that R&TD subsidies "complemented and supplemented" 
the "product effect" of LA/MSF in enabling Airbus to launch particular models of LCA. … 
{A} competitive advantage, in our view, must be reflected either in technologies 
incorporated in models of LCA actually launched by Airbus, or in technologies that make  
the production process of those LCA more efficient . Without specific findings  that 
technology or production processes funded by R&TD subsidies contributed to Airbus' 
ability to launch and bring to the market particular models of LCA, the Panel did not 
have a sufficient basis to conclude that those subsidies "complemented and 
supplemented" the "product effect" of LA/MSF .119  
On this basis, the Appellate Body found that the original panel had erred under Articles 5(c) 
and 6.3(a), (b), and (c) of the SCM Agreem ent when it found that the R&TD subsidies 
"complemented and supplemented" the "product effect" of LA/MSF without establishing a genuine 
causal link between those R&TD subsidies and Airbus' ability to launch and bring to market its models 
of LCA. The Appell ate Body, therefore, found that the original panel failed to conduct an objective 
assessment of the matter, including an objective assessment of the facts - as required by Article 11 
of the DSU - and reversed the panel's finding that the effect of R&TD sub sidies was the displacement 
 
113 United States' first written submission, paras. 126 -128. 
114 Panel Report, EC and certain member  States – Large Civil Aircraf t, para. 7.1608. The Panel found, 
however, that the United States failed to establish that the following R&TD measures constituted subsidies: 
(i) grants provided under the UK Technology Programme; and (ii) a portion of th e fund ing committed to Airbus 
under the German government's "LuFo" programmes. (Panel Report, EC and certain member States – Large 
Civil Aircraft , paras. 7.1502  and 7.1591 ). On appeal, the Appellate Body found that the United States' claims 
against the R&TD loans provided pursuant to the Spanish PROFIT programme were outside of the Panel's terms 
of reference. (Appellate Body Report, EC and certain member States – Large Civil  Aircraft , para. 649 ). 
115 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1959.  
116 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1404.  
117 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1404.  
118 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1405  (referring to 
Panel Report, para. 7.1959 ). 
119 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1407.  (emp hasis 
added)  
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  of Boeing LCA from the EC and relevant third country markets, and significant lost sales, within the 
meaning of Article 6.3(a), (b), and (c) of the SCM Agreement.120 
Whether  the United States' claims against the R&TD measures are outside the 
Panel's terms of reference  
Introduction  
The European Union argues that the United States' complaint against the R&TD measures is 
not properly within the Panel's terms of reference because the R&TD measures are not identified in 
the European Uni on's panel request.121 In the absence of any reference to the specific R&TD 
measures in the European Union's panel request, the European Union argues that the proper course 
of action for the United States would have been to follow the guidance of the Appella te Body in US – 
Continued Suspension/Canada – Continued Suspension , and initiate its own Article 21.5 proceeding 
in which the United States could have raised its specific complaint against those measures.122 
According to the European Union, the United States ' failure to do so means that its complaint against 
the R&TD measures cannot now form part of this Panel's terms of reference.123  
The United States argues that the challenged R&TD measures are identified in the 
European  Union's panel request as a matter of fact, because they fall within the scope of the "{n}on -
subsidised investments in the A380 {and A350XWB} family aircraft" referred to on pages 5 and 6 
of the European Union's panel request.124 In any case, the United States argues that the R&TD 
measures fall within the Panel's terms of reference regardless of whether they are referred to in the 
European Union's panel request because they are part of the United States' rebuttal argument 
against the European Union's assertion of full, substantive, compliance.125 In this respect, the 
United  States maintains that the European Union's reliance on certain Appellate Body statements 
made in US – Continued Suspension/Canada – Continued Suspension  is misplaced. On the contrary, 
according to the United States, the US – Continued Suspension/Canada – Continued Suspension 
disputes support its own position because in both proceedings the panels and the Appellate Body 
found that where substantive compliance is alleged by an original respondent, the matter to be 
examined by a pane l is not limited to the measures explicitly listed in the original respondent's panel 
request.126  
The parties' submissions concerning the extent to which the United States' complaint against 
the challenged R&TD measures is within the Panel's terms of refere nce raise two broad questions: 
(i) whether the challenged R&TD measures are referred to in the European Union's panel request as 
a matter of fact ; and (ii) whether the United States' claims against those measures may nevertheless 
fall within the scope of this compliance proceeding even if the measures are not specifically referred 
to in the European Union's panel request. We address each of these questions in turn.  
Are the R&TD measures identified in the European Union's panel request?  
The European Union's  panel request provides a list of measures taken to comply with the 
recommendations and rulings of the DSB. Under the heading "Measures that Constitute Appropriate 
Steps to Remove Adverse Effects, under Articles 7.8, 5 and 6.3 of the SCM Agreement" the 
European  Union lists "{n}on -subsidised investments in A380 family aircraft" and "{n}on -subsidised 
investments in A350XWB family aircraft". In explaining those measures, the European Union's panel 
request provides that:  
 
120 Appellate Body Report, EC and certain member States – Large Civil Aircraft , paras. 1408 and 14 09. 
121 European Union's request for a preliminary ruling , para. 16; and second written submission, 
para. 498. 
122 European Union's second written subm ission, para. 495.  
123 European Union's request for a preliminary ruling , paras. 7 -9; and second written submission, 
paras.  468 and 495-517. 
124 United States' response to the European Union's preliminary ruling request, paras. 9 -14. 
125 United States' response to the European Union's preliminary ruling request, par as. 15 -22. 
126 United States' response to the European Union's preliminary ruling reque st, para . 20 (referring to 
Appellate Body Report , US – Continued Suspension , paras. 327 -332). 
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  Airbus has also undertaken significant n on-subsidised investments in the A380, and in 
A380-related continuous support and development (Measure x, listed above). Currently, 
neither A380 MSF nor any other subsidy at issue is a genuine and substantial cause of 
sales or deliveries of A380 aircraft, or any associated adverse effects.  
… 
Additionally, Airbus has undertaken significant non -subsidised investments in the 
A350XWB, and in A350XWB -related continuous support and development (Measure xv, 
above). Neither A350XWB MSF nor any other subsidy at iss ue is currently a genuine 
and substantial cause of sales or deliveries of the A350XWB or any associated adverse 
effects.127 
The United States submits that the reference in the European Union's panel request to 
"{n}on -subsidised investments in A380 family air craft" and "{n}on -subsidised investments in 
A350XWB family aircraft" identifies investments related to the support and development of the A380 
and the A350XWB, as measures taken to comply. In the United States' view, since the EU panel 
request does not lim it the scope of such investments, either temporally or factually, the R&TD 
measures, which enable Airbus to develop technological improvements that the EU alleges are critical 
to Airbus's current competitiveness, are therefore covered by the EU panel reque st. In addition, the 
United States argues that while the European Union describes the investments as "non -subsidized ", 
this is a rebuttable characterization. In sum, the United States argues that if the EU panel request 
includes investments in development of new technologies, including the development of successor 
aircraft, and the use of financial resources to enable production, it certainly includes the funding 
under the R&TD measures referenced in the United States' first written submission, which go dir ectly 
to those purposes.128  
The European Union argues that the United States' characterisation of the language in its 
panel request is incorrect because, according to the European Union, the relevant language must be 
understood to be limited to non-subsidis ed investments made by Airbus .129 These investments are 
related to the existing  A380 and A350XWB families and programmes, and cover Airbus initiatives 
affecting the "continuing development" of these aircraft130, and the continuing support "to maintain 
and impr ove production facilities".131 The European Union also points out that in its first written 
submission the United States asserts that "{the EU's non -subsidized investment argument here} is 
a recycled version of the EU's failed 'non -subsidized investment' arg uments from the first compliance 
proceeding and should be rejected once again". According to the European Union, this directly 
indicates that the United States understands that the non -subsidized investments do not relate to 
the R&TD measures, as was the c ase in the first compliance proceeding.132 
On its face, the European Union's panel request refers to "non -subsidized" investments by 
Airbus related to "continuous support and development" of the A380 and A350XWB. This general 
language is broad and potentiall y covers any "investments" in the continuous support and 
development of the A350XWB and the A380, which the European Union maintains are not subsidized. 
To this extent, we agree with the United States when it argues that the description of the covered 
investments as "non -subsidized" does not preclude the possibility that the panel request might be 
able to cover the R&TD measures identified by the United States, because the fact that the 
European  Union describes them as "non -subsidized" merely reflects the E uropean Union's own legal 
characterization of the relevant measures. However, the content of the European Union's first written 
submission appears to confirm that the European Union's panel request does not cover the 
R&TD  measures challenged by the United States.  
Although a party's subsequent submissions during panel proceedings cannot be relied upon 
to cure a defect in a panel request, they may be consulted to confirm or clarify the meaning of the 
 
127 European Union's panel request, paras. 31 and 41.  
128 United States' response to the European Union's preliminary ruling request, paras. 9-14. 
129 European Union's second written submission, para. 506.  
130 European Union's first written submission, para. 314.  
131 European Union's first written submission, para. 314; second  written submission, para. 504 . 
132 European Union's second written submission, para. 508  (referring t o United States' first written 
submission, para. 199 ). See also United States' first written submission, para. 187.  
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  words used in the panel request.133 The European Union's fir st written submission does not mention 
R&TD measures in any form, and only refers specifically to targeted investments for the A380 and 
the A350XWB undertaken by Airbus.134 In particular, the European Union refers to " substantial 
investments {by Airbus} … in  continuing development … and continuing support for the A350XWB 
programme {which included} investments into … the development of the ultra -long-range 
A350XWB -900ULR ".135 The European Union argues that these investments sustain and renew the 
aircrafts' compe titiveness and that it is these investments, rather than the historical subsidies at the 
time of launch, that explain the current market presence and competitiveness of the aircraft.136 
Almost identical investments, and arguments, are made regarding the A380 .137 This is consistent 
with the European Union's description of similar Airbus actions in the first compliance proceeding, 
which the European Union argued severed the chain of causation between the LA/MSF subsidies and 
the relevant adverse effects. In parti cular, before the original compliance panel, the European Union 
argued that "the genuine and substantial cause of the ongoing market presence of the A320 and 
A330 families is not the LA/MSF subsidies, but rather the 'massive ', allegedly, non -subsidized 
investments Airbus has made into the two families of LCA since they were launched".138 These 
investments included "(a) 'Continuing Development '; (b) 'Continuing Support '; (c) the design and 
manufacture of three non -subsidized variants (the A321, A319 and A318) between 1988 
and 1999"139, which are the same types of investments as those referenced at this stage of the 
dispute (mutatis mutandis).  
In our view, the content of the European Union's first written submission clarifies that the 
reference in the European Union's panel request to the "non -subsidized investments …" does not 
encompass the R&TD measures challenged by the United States. Indeed, n othing in the 
European  Union's first written submission or any other submission in this dispute suggests that the 
European Union intended to include more than these initiatives in its panel request. Moreover, as 
already noted, reading the European Union's panel request in this way would be consistent with the 
arguments related to non -subsidised investments advanced in the original compliance dispute. 
Furthermore, we note that the United States, in responding to the European Union's "non -subsidized 
investmen ts" arguments, equated those arguments with the European Union's unsuccessful  
"non-subsidized investment" arguments from the first compliance proceeding. The R&TD measures 
did not form part of that proceeding and we can thus infer that the United States, i n equating the 
two sets of arguments, likely understood the allegedly non -subsidised investments to have been 
made by Airbus, and not to refer to the R&TD measures provided by the European Union, as was 
the case in the first compliance proceeding.  
Thus, in  our assessment, there is no  factual  basis to accept the United States' understanding 
of the reference to "non -subsidised investments" in the European Union's panel request as including 
the R&TD measures it seeks to challenge in this proceeding. Accordingl y, we find that the 
European  Union's panel request does not, as a factual matter, include a reference to the R&TD 
measures challenged by the United States.  
Do the challenged R&TD measures fall within the Panel's terms of reference, even 
though they are not  specifically identified in the European Union's panel request?  
The European Union argues that since the R&TD measures are not identified in the 
European  Union's panel request, as a procedural matter, the proper recourse for an original 
complainant that co nsiders the original respondent has excluded particular measures or claims from 
an Article 21.5 proceeding would be to file its own request for the establishment of a panel under 
Article 21.5. Thus, according to the European Union, "if the United States wi shed to challenge the 
WTO-consistency of the R&TD measures, it was required …, as specifically directed  by the 
Appellate  Body" in the US – Continued Suspension/Canada – Continued Suspension  disputes to file 
its own panel request.140 Having not done so, the E uropean Union submits that United States' claims 
 
133 Appellate Body Report, EC and certain member States — Large Civil Aircraft , paras. 786 -787 
and 790. 
134 European Union's first written submi ssion, paras. 313  and 383. 
135 European Union's first written submission, paras. 31 4-323. 
136 European Union's first written submission, paras. 313  and 383. 
137 See European Union's first written submission, paras. 3 83-389. 
138 Panel Report, EC and certain member States — Large Civil Aircraft  (Article 21.5 – US), para. 6.1516.  
139 Panel Report, EC and certain member States — Large Civil Aircraft  (Article 21.5 – US), para. 6.1517.  
140 European Union's second written submission, paras. 473 and 495. (emphasis  added)  
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  against the R&TD measures are outside the Panel's terms of reference and thus cannot be examined 
by the Panel in this dispute.141 
The United States argues that the R&TD measures are part of the Panel's terms o f reference 
regardless of whether they are covered by the European Union's panel request, because they are 
part of the United States' rebuttal to the European Union's assertion of full, substantive, compliance. 
The United States argues that the Panel could  only reach such a finding after considering the full 
scope of the relevant issues bearing on the European Union's allegation of substantive compliance. 
In this respect, the United States argues that the European Union cannot be found to have complied 
with its obligations under Article 7.8 of the SCM Agreement if the R&TD measures at issue (either 
alone or together with the LA/MSF subsidies) cause adverse effects to the US LCA industry.142 Citing 
the panel and Appellate Body reports in US – Continued Suspensi on/Canada – Continued Suspension  
disputes, the United States argues that, where an original respondent asserts substantive 
compliance in an Article 21.5 proceeding, the matter to be examined by the Panel is not limited to 
what is explicitly listed in the o riginal respondent's panel request. Furthermore, the United States 
emphasizes that an implementing Member should not be permitted to seek a finding that it has 
achieved full, substantive, compliance by submitting a panel request that identifies only a subs et of 
the relevant measures taken to comply or otherwise artificially limits the scope of a compliance 
proceeding.143  
We begin by observing that Article 7.1 of the DSU establishes that a panel's terms of reference 
are defined by the "matter" referred to in the request for its establishment; and the requirements 
for identifying the "matter" set out in the request for establishment are prescribed in Article 6.2 of 
the DSU, which in relevant part, provides that:  
The request for the establishment of a panel shal l … identify the specific measures at 
issue and provide a brief summary of the legal basis of the complaint sufficient to 
present the problem clearly.  
Both Articles 6.2 and 7.1 apply to panels established to examine compliance disputes within 
the meaning o f Article 21.5 of the DSU, but their requirements must be adapted for that purpose.144 
Thus, it has been found that a panel request in an Article 21.5 proceeding must refer to the 
recommendations and rulings of the DSB made in the original proceeding, in add ition to identifying 
the specific measures and the legal basis of the complaint.145 
When a dispute is brought under Article 21.5 of the DSU by an original complainant, the 
compliance panel's terms of reference will be defined by the complainant , who will ide ntify in its 
request for establishment, one or more of the respondent's declared or undeclared measures "taken 
to comply" as the focus of its complaint. However, in what are known as "reverse" compliance 
proceedings, it is the respondent  from the original proceeding that requests the establishment of a 
panel to confirm that its alleged compliance actions bring it into conformity with its WTO obligations. 
In such compliance disputes, a strict reading and application of the requirements of Articles 6.2 
and 7.1 of the DSU would mean that the panel's terms of reference would be set entirely by the 
original respondent. In our view, this would make it possible for an original respondent to confine 
the scope of the "reverse" compliance dispute to only those measure s that it considers show 
compliance, leaving measures that the original complainant may consider to show non -compliance, 
outside of the scope of the proceeding. Thus, a strict interpretation of the requirements of 
Articles  6.2 and 7.1, as they apply in a " reverse" Article 21.5 proceeding, would mean that an 
implementing Member could be found to be in compliance simply because of the way it has defined 
the panel's terms of reference when, in fact, other measures (not included in the "reverse" 
compliance pane l's terms of reference) could show non -compliance.  
 
141 European Union's request for a preliminary ruling , para. 13  (citing  US – Continued Suspension , 
para. 354); and second written submissio n, paras. 473, 482 , and 495.  
142 United States' response to the European Union's preliminary ruling request, para s. 16-19. 
143 United States' response to the European Union's preliminary ruling request, para . 20. 
144 Appellate Body Report, US – Zeroing (Japan) ( Article 21.5 – Japan) , para. 109 (quoting 
Appellate  Body Report, US – FSC (Article 21.5 – EC II) , para. 59).  
145 Appellate Body Report, US – FSC (Article 21.5 – EC II) , para. 62 (referring to Appellate Body Report, 
US – Softwood Lumber IV (Article 21.5 – Canada) , para. 67).  
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According to the European Union, the Appellate Body specifically addressed this matter in the 
US – Continued Suspension  / Canada – Continued Suspension  disputes, where it allegedly found 
that the correct course of action for an original complainant to take, when it considers that an original 
respondent has excluded certain measures or claims from its request for the establishment of a 
panel in a "reverse " Article 21.5 proceeding, is to file its own separate request for the establishment 
of a panel under Article 21.5.  The United States disagrees with the European Union's characterization 
of the Appellate Body's findings  in the Continued Suspension  disputes . For the United States, the 
Appellate Body statements the European Union relies upon constitute obiter dictum  as they were 
made by the Appellate Body only after it had resolved the particular issue on appeal.146 Moreover, 
the United States notes that the Ap pellate Body did not find the existence of a requirement  on an 
original complainant to bring its own case, but only advised that an original complaining party "may" 
file its own request if it considers that the implementing measure is inconsistent with pro visions of 
the WTO agreements not covered in the implementing Member's panel request.147  
The Continued Suspension  disputes arose out of a disagreement between the 
European  Communities, on the one hand, and Canada and the United States, on the other, about 
whether the European Communities had complied with the recommendations and rulings of the DSB 
in the EC – Hormones  dispute. In EC – Hormones , a European Communities' import ban on meat 
from cattle treated with certain hormones was found to be inconsistent w ith Article 5.1 of the SPS 
Agreement  because it was not based on a proper risk assessment.148 Following the adoption of the 
EC – Hormones  panel and Appellate Body reports, Canada and the United States suspended 
concessions against imports of EC products as a  result of the European Communities' failure to 
implement the recommendations and rulings within a reasonable period of time. Subsequently, the 
European Communities adopted Directive 2003/74/EC, which repealed and replaced the measure 
found to be WTO -incon sistent, claiming that it had thereby implemented the DSB's recommendations 
and rulings.149 The United States and Canada considered that the new EC measure did not bring the 
European Communities into conformity with its WTO obligations, and continued to susp end 
concessions. The European Communities subsequently initiate d the Continued Suspension original 
panel proceedings (not "reverse" Article 21.5 compliance proceedings), claiming that Canada and 
the United States were acting inconsistently with Article 22. 8 of the DSU by continuing to suspend 
concessions after the measure found to be WTO -inconsistent had been removed.  
Before the panels, the European Communities argued that once it had adopted 
Directive  2003/74/EC, Canada and the United States were not entit led to continue to suspend 
concessions but were required to initiate an Article 21.5 compliance panels to resolve any 
disagreement about whether the newly adopted measure brought the European Communities into 
compliance.150 The panels rejected this argument,  finding nothing in the text of Article 21.5 requiring  
Canada or the United States to bring such a case. The panels were not convinced that Article 21.5 
was the "only avenue available to address a claim of compliance by a Member", noting that other 
possibi lities were available, including resorting to a new original panel (as the European Communities 
had done in those disputes). Furthermore, the panels did not " believe that proceedings under 
Article  21.5 are open only to the original complainant "151, finding that a respondent could also initiate 
an Article 21.5 proceeding to establish that its alleged compliance measures brought it into 
conformity with its obligations.  
Contrary to the panels, the Appellate Body found that the appropriate procedural avenue to 
resolve a disagreement as to whether an inconsistent measure has been removed is an Article 21.5 
compliance panel. For the Appellate Body, the panels recognized this by stating that the task of each 
panel in the underlying dispute was to " perform  functions similar to {those } of an Article 21.5 
panel ".152 Thus, the Appellate Body concluded that:  
… recourse to Article 21.5 panel proceedings is the proper  course of action within the 
procedural structure of the DSU in cases where, as in this dispute, a Member subject to 
 
146 United States' response to the European Union's preliminary ruling request, paras. 30, 32 , and 33.  
147 United States' response to the European Union's preliminary ruling request, paras. 28 -33. 
148 Appellate Body Report, EC – Hormones , para. 208.  
149 Appellate Body Reports, US – Continued Suspension/Canada – Continued Suspension , para. 326.  
150 Panel Reports, US – Continued Suspension/Canada – Continued Suspension , para. 4.104.  
151 Panel Reports, US – Continued Suspension/Canada – Continued Suspe nsion , para. 7.353.  
152 Appellate Body Reports, US – Continued Suspension/Canada – Continued Suspension , para. 341  
(quoting Panel Reports, US – Continued Suspension/Canada – Continued Suspension , para. 8.3 ). 
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  the suspension of concessions has taken an implementing measure and a disagreement 
arises as to whether "the measure found to be inconsistent with a covered agreement 
has been removed" within the meaning of Article 22.8. Therefore, we sha re the 
European Communities' view that Article 21.5 panel proceedings are the procedures to 
be followed where there is disagreement as to whether Directive 2003/74/EC has 
achieved substantive compliance.153 
The Appellate Body then went on to reject the Europ ean Communities' appeal against the 
panels' finding that a respondent is not precluded from initiating Article 21.5 proceedings. The 
Appellate Body agreed with the panels that such a course of action would be open to a respondent 
"to obtain confirmation of  the consistency with the WTO agreements of its implementing measure". 
However, in making this finding, the Appellate Body recognized that where a respondent does 
request an Article 21.5 compliance panel, the panel request may be incomplete, as a responden t 
"cannot be expected to speculate as to the violations that could possibly be raised against its 
measure by other Members".154 It was in this context that the Appellate Body made the statements 
the European Union relies upon in this dispute to argue that th e R&TD measures identified by the 
United States do not fall within the scope of this proceeding. Specifically, the Appellate Body 
observed that where a respondent triggers an Article 21.5 proceeding, and the complainant considers 
the implementing measure d oes not achieve compliance, the complainant:  
… may file its own {panel request} under Article 21.5 identifying those provisions that 
it considers should be examined by the Article 21.5 panel. … The original complainant 
would be expected to do so as soon a s possible after adoption of an implementation 
measure or after the filing of the original respondent's panel request, so that both 
Article  21.5 panel requests may be referred to the original panel wherever possible, 
allowing review of all the issues relat ing to substantive compliance in the same 
Article  21.5 proceedings.155  
In our view, these Appellate Body statements firmly advocate the view that claims and 
measures not included in an original respondent's request for a "reverse" Article 21.5 compliance 
panel should be brought into the scope of the same Article 21.5 proceeding by having the 
complainant identify them in its own, separate, request for establishing an Article 21.5 panel.156 Yet, 
we see nothing in the Appellate Body's statements pointing to the e xistence of any requirement on 
a complainant to take this course of action. The Appellate Body report does not identify any specific 
obligation in the DSU, stating only that a complainant " may" file its own request for establishment, 
adding that it would b e "expected " to do so expeditiously. Moreover, we note that in the same 
disputes, both the panels and the Appellate Body ruled that Canadian and United States' claims 
against the European Communities' alleged compliance measure, that were not identified in  the 
European Communities' request for establishment, could be examined.  
In response to the European Communities' assertion of compliance, Canada and the 
United  States argued that Directive 2003/74/EC was inconsistent with Articles 5.1 and 5.7 of the 
SPS Agreement. Neither of these two provisions was identified in the European Communities' panel 
request. Nevertheless, despite the lack of any reference to these provisions in the panel requests, 
the panels concluded that it was appropriate to consider the co mplainants' claims because 
understanding whether the European Communities was in substantive compliance with its 
obligations under the SPS Agreement was a prerequisite to determining whether the 
European  Communities had made out its own claim under Article  22.8 of the DSU. Accordingly, the 
 
153 Appellate Body Reports, US – Continued Suspensio n/Canada – Continued Suspension , para. 345.  
154 Appellate Body Reports, US – Continued Suspension , para. 329; Canada – Continued Suspension , 
para. 353.  
155 Appellate Body Reports, US – Continued Suspension, para. 329 ; Canada – Continued Suspension , 
para. 354.  
156 Since the Continued Suspension disputes, original complainants in two disputes, US – Tuna II 
(Mexico) (Article  21.5 – US) and Colombia – Textiles (Article 21.5 – Colombia) , have followed this approach 
and submitted their own respective  panel requests fol lowing requests for "reverse" Article 21.5 proceedings by 
the respective respondents. In both cases, the panels addressed the measures and claims raised in both 
parties' panel requests thereby avoiding the terms of reference issues raised in the present proceeding.  
Appellate Body Reports, US – Continued Suspension  / Canada  – Continued Suspension , US – Tuna II (Mexico ) 
(Article  21.5 – US) / US – Tuna II (Mexico) ( Article  21.5 – Mexico II) and Panel Report , Colombia – Textiles 
(Article 21.5 – Colombia) / Colombia – Textiles (Article 21.5 – Panama ). 
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  panels concluded that "nothing in the DSU prevents the Panel from considering the compatibility of 
the EC  implementing measure with the SPS Agreement if this is necessary in order to make the 
findings required by {its} te rms of reference" .157  
The Appellate Body upheld the panels' finding, concluding that it was necessary to evaluate 
whether the European Communities brought itself into conformity with the DSB's recommendations 
and rulings. The Appellate Body explained:  
It is evident from the panel requests that the consistency of the United States' and 
Canada's continued suspension with Article 22.8 was linked to the 
European  Communities' implementation of the DSB's recommendations and rulings in 
EC – Hormones . We fail to se e how the claims explicitly listed in the panel requests by 
the European Communities could be resolved in isolation from the question of whether 
{the relevant measure} has brought the European Communities into compliance with 
these DSB's recommendations an d rulings.158 
Thus, the panels and the Appellate Body in the  Continued Suspension disputes decided that 
it was appropriate to address claims under Articles 5.1 and 5.7 of the SPS Agreement even though 
those legal provisions were not identified in the European Communities' panel request . The panels 
and the Appellate Body concluded that i t was necessary to determine the merits of the 
complainants'  claims in order to assess whether the European Communities had achieved full 
substantive compliance with the DSB's recommendations and rulings, which was in turn relevant to 
address the European Communities' claim that the complaining parties were acting inconsistently 
with Article  22.8 of the DSU by continuing to suspend concessions.  
Having carefully reviewed the reasoning and findings from the panel and Appellate Body 
reports in the Continued S uspension  disputes the parties rely upon, we find they do not provide any 
clear guidance for determining whether the United States is entitled to have the merits of its claims 
against the R&TD measures examined in this "reverse" Article 21.5 dispute. Ultim ately, however, 
we do not consider it is necessary to decide this legal question, because even assuming, arguendo , 
that the absence of any reference to  the challenged R&TD measures  in the European Union's panel 
request could not prevent the United States f rom raising claims,  we believe we would be precluded 
from addressing them on other procedural grounds, which we identify and explain in the sections 
that follow.  
The United States' claims against R&TD measures that were subject to findings in 
the original proceedings or were in existence at the time of the first compliance 
proceeding  
The European Union claims that the United States is precluded in these second compliance 
proceedings from raising claims against the R&TD measures that were subject to findings  in the 
original proceedings. The European Union argues that allowing the United States to challenge these 
measures again would provide the United States with an unfair second chance to make a case that 
it failed to make out in the original proceeding.159 Specifically, the European Union argues that none 
of the R&TD measures were found to be WTO -inconsistent in the original proceeding, permitting the 
United States to raise claims against them now would disturb the finality of the 
DSB's  recommendations and rul ings.160 In any event, the European Union argues that the 
United  States could have challenged those measures in the first compliance proceeding but chose 
not to do so.161 By declining to challenge any of the R&TD measures in the first compliance 
proceeding whe n it had the opportunity to do so, the European Union argues that the United States 
has essentially forfeited its right to make any further claim against these measures.162  
 
157 Panel Reports, US – Continued Suspension  / Canada – Continued Suspension , para. 7.3 67. 
158 Appellate Body Reports, US – Continued Suspension / Canada – Continued Suspension , para. 331.  
159 European Union's second written submission, para. 523 (citing Appellate Body Report, US – Upland 
Cotton  (Article 21.5 – Brazil) , para. 210).  
160 European Union's second written submission, p aras. 519 -527. 
161 European Union's second written submission, para. 530.  
162 European Union's second written submission, para. 532.  
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The European Union also notes that it did not incur, upon the conclusion of the firs t compliance 
proceeding, any compliance obligations with respect to the R&TD measures163 and that the 
United  States' decision not to challenge the Seventh Framework Programme in the first  compliance 
proceedings constitutes a final resolution of the matter.164 
The United States argues that there is no basis to exclude from the Panel's consideration any 
of the R&TD measures that were subject to findings in the original proceeding or the Seventh 
Framework Programme. With respect to the measures raised in the origi nal proceeding, the 
United  States argues that the Appellate Body's findings were confined to the original panel's failure 
to make " specific findings"165 and that the test applied by the original panel "was insufficiently 
demanding to justify its conclusion".166 According to the United States, the Appellate Body did not 
evaluate whether the evidence before the original panel would support specific findings that the 
R&TD subsidies contributed to Airbus's ability to launch and bring to market any LCA model167 and 
thus the matter was not resolved on the merits. Accordingly, the United States contends that it 
would not be getting an unfair second chance to make a case that it failed to make out in the original 
proceeding.168 
The United States also argues that the Europea n Union and member States have continued 
to provide funding to Airbus in the form of grants under the Seventh Framework Programme and 
that funding under this Framework Programme is "of the same nature" as the earlier funding.169 The 
United States therefore a rgues that it should be permitted to challenge this Framework Programme 
on the grounds that it was not part of the original proceeding.170 
Finally, the United States also argues that it should be permitted to raise a claim against the 
R&TD measures on systemic grounds. The United States contends that a finding that the measures 
cannot be challenged in a second compliance proceeding because th ey were not challenged in a first 
compliance proceeding would incentivize complaining parties to pursue claims that were not in 
themselves necessary  to resolve the dispute in the interest of preserving the right to pursue potential 
claims against those mea sures in potential future proceedings. According to the United States, this 
would be inefficient and would be contrary to the objective of the prompt settlement of disputes 
enshrined in Article 3.3 of the DSU.171 Additionally, the United States argues that p reclusion on this 
ground " would impose a burden on the original complainant to identify all measures that are 
inconsistent with the original respondent's compliance obligations, no later than the original 
complainant's first request for the establishment o f a compliance panel ".172 On the United States' 
understanding of the European Union's argument, this would mean that the original complainant's 
right to challenge such measures would be forever waived within the confines of the dispute. 
The United States sug gests that this would infringe on the due process rights of original 
complainants, along with the objective of promoting prompt compliance with the recommendations 
or rulings of the DSB.173 
Article 17.14 of the DSU provides that Appellate Body reports adopte d by the DSB shall be 
"{...} unconditionally accepted by the parties to the dispute". Past panels and Appellate Body have 
interpreted this obligation to mean that adopted Appellate Body reports must be treated by the 
parties as a final resolution  to their dispute.174 Consequently, as explained in US – Upland Cotton 
(Article 21.5 – Brazil) , "allowing a party in an Article 21.5 proceeding to re -argue a claim that has 
been decided in adopted reports would … provide an unfair 'second chance' to that party" .175 In 
 
163 European Union's second written submission, para. 529.  
164 European Union's second written submission, para. 533.  
165 United States' first written submission, para. 248.  
166 United States' second written submission, para. 329.  
167 United States' second written submission, para. 329.  
168 United States' second written submission, para. 330  (referring to European Union's second written 
submission, para. 523 ). 
169 United States' first written submission, para. 126; and second written submission, para. 328.  
170 United States' second written submi ssion, para. 328.  
171 United States' second written submission, para. 336.  
172 United States' second written submission, para. 33 7. (emphasis original)  
173 Article 21.1 of the DSU.  
174 See Appellate Body Reports, Chile – Price Band System (Article 21.5 – Argentina ), para. 236; EC – 
Bed Linen (Article 21.5 – India) , para. 93; US – Shrimp (Article 21.5 – Malaysia) , para. 97; and Panel Report, 
US – Upland Cotton (Article 21.5 – Brazil) , fn 1145.  
175 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para . 210. (fn omitted)  
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  contrast , where claims against a measure have not been decided on the merits in the original 
proceeding "they are not covered by the recommendations and rulings of the DSB" and, therefore, 
"a Member should not be entitled to assume that those aspects of the  measure are consistent with 
the covered agreements."176 Thus, although compliance proceedings cannot be used to "re -open" 
issues that were decided on the merits  in the original proceeding177, claims that are not decided on 
the merits in the original proceedin g can be reasserted in compliance proceedings.178 Accordingly, 
in considering whether the United States is entitled to raise claims against the R&TD measures in 
this second compliance proceeding, a first threshold question we believe must be answered is 
whether the challenged R&TD measures were the subject of adopted findings and recommendations 
in the original proceeding.  
As explained in paragraph  7.46, the original panel found that the majority of the R&TD 
measures challenged by the United States in this proceeding constituted specific subsidies that 
caused serious prejudice to the United States' interests under Articles 5(c) and 6.3(a), (b), and (c) 
of the SCM Agreement.179 The panel found that the R&TD subsidies "enabled Airbus to develop 
features and aspects of its LCA on a schedule that it would otherwise have been unable to 
accomplish".180 As a result, the original panel found that " {w}hile … the impact  of pre -competitive 
R&TD subsidies on Airbus' market presence was perhaps more attenuated, compared with the other 
subsidies at issue, … we believe that combined with the others, the RT&D subsidies complemented 
and supplemented the impact of LA/MSF" .181 
On appeal, the Appellate Body found that the original panel did not have a sufficient basis to 
find that the R&TD subsidies complemented and supplemented the effects of LA/MSF. In particular, 
the Appellate Body observed that a general finding that the subsidie s enabled Airbus to develop 
"features and aspects" of its LCA on a schedule that it otherwise would have been unable to 
accomplish does not provide a sufficient basis to determine that R&TD subsidies "complemented and 
supplemented" the product effect of LA /MSF in enabling Airbus to launch particular models of LCA.182 
In reaching this finding, the Appellate Body held that:  
Without specific findings  that technology or production processes funded by R&TD 
subsidies contributed to Airbus' ability to launch and bri ng to the market particular 
models of LCA, the Panel did not have a sufficient basis to conclude that those subsidies 
"complemented and supplemented" the "product effect" of LA/MSF .  
…  
In failing to provide a sufficient evidentiary basis for its finding  that the effect of 
non-LA/MSF subsidies was the displacement of Boeing LCA from the EC and relevant 
third country markets and significant lost sales … the Panel failed to conduct an objective 
assessment of the matter, including an objective assessment of th e facts, as required 
by Article 11 of the DSU.183  
We understand the Appellate Body to have rejected the original panel's analytical approach , 
finding that the application of the approach actually undertaken lead the panel to fail to conduct an 
objective ass essment of the matter. However, the Appellate Body did not reject the merits of the 
United States' claims.  
While the European Union disagrees with this characterization of the Appellate Body findings 
in the original proceeding, it argues that the United S tates is not entitled to advance any claims 
against the original R&TD measures in this second Article 21.5 compliance proceeding, because the 
United States failed to pursue such claims in the first Article 21.5 compliance proceeding. According 
 
176 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 424. 
177 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico ), para. 5.8 (quoting 
Appellate  Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 427).  
178 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico ), para. 5.8 (quoting 
Appellate  Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 424).  
179 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7. 1608.  
180 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.19 59. 
181 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1959.  
182 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1407.  
183 Appellate Body Report, EC and certain member States – Large Civil Aircraft , paras. 1407 -1408.  
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  to the Europ ean Union, the United States' failure to raise such claims during the first compliance 
proceeding when it had that opportunity means that the United States has essentially forfeited its 
right to raise these claims here. Importantly, in this regard, the Eur opean Union notes that because 
of the United States' decision not to renew its challenge against the Second through Sixth Framework 
Programmes, and other member State R&TD measures , at the time of the first compliance panel, 
the European Union did not incu r any compliance obligations with respect to those measures upon 
the conclusion of the first compliance proceeding. The European Union maintains that the same logic 
applies in respect of the Seventh EU Framework Programme, which existed at the time of the 
first compliance proceeding – the United States' failure to raise claims against that measure at the 
time of the first compliance means that it has forfeited its right to do so in this second compliance 
proceeding.  
In discussing the merits of their respect ive positions on this matter, both parties rely upon 
the Appellate Body's statement in US – Upland Cotton (Article 21.5 – Brazil)  that "{a} complaining 
Member ordinarily  would not be allowed to raise claims in an Article 21.5 proceeding that it could 
have pursued in the original proceedings, but did not" .184 The European Union argues that the 
Appellate Body's statement supports the conclusion that the United States is not entitled to have its 
challenge against the original R&TD measures and the Seventh Framew ork Programme heard in this 
dispute. The United States argues that the specific reference does not support the European Union's 
argument, as that statement signifies only that the United States may not, in this proceeding, raise 
claims that it could have r aised in the first Article 21.5 compliance proceeding  and says nothing 
about the relationship between the first and second successive compliance proceedings, which the 
United States alleges should be treated differently.185  
We note that since US – Upland Co tton (Article 21.5 – Brazil) , the Appellate Body has 
explained that its use of the word "ordinarily" was not intended to mean that such claims could never 
be brought, and that certain situations could exist which would allow an aspect of a previously 
challenged measure to be challenged in compliance proceedings to the extent that aspect was 
incorporated into the measure "taken to comply".186 For example, in US – Zeroing (EC) (Article 21.5 
– EC), the European Communities sought to challenge an arithmetical err or made to the 
determination of dumping challenged in the original dispute, which was subsequently incorporated 
into the United States' measure "taken to comply" (a revised anti -dumping determination). The 
European Communities had not challenged this aspec t of the original determination during the first 
panel stage. Nevertheless, the Appellate Body found that the European Communities was entitled to 
challenge the arithmetical error because it was now an integral part of a new measure – the measure 
"taken to  comply".  
The circumstances surrounding this second compliance proceeding are different to those that 
arose in US - Upland Cotton (Article 21.5 – Brazil) and US – Zeroing (EC) (Article 21.5 – EC). In this 
proceeding, the United States challenges the same measures that were challenged in the original 
proceeding. This compliance proceeding does not involve the question of whether an original 
complainant can challenge in a first compliance  proceeding new aspects  of an original measure that 
did not exist  at the time of the original proceeding, as in US - Upland Cotton (Article 21.5 – Brazil) , 
or an pre-existing feature  of a new measure, as in US – Zeroing (EC) (Article 21.5 – EC). We recall 
that the United States' claims against the R&TD measures were not decided on the merits in the 
original proceeding. Accordingly, in our view, the United States would have been entitled to raise 
claims against the previously -challenged R&TD measu res in the first compliance proceeding. Thus, 
the question that is now before us is whether, by failing to take that "second chance", the 
United  States should be barred from making those claims in this second compliance dispute.  
In considering this questi on, we begin by recalling that in the first compliance proceeding, the 
United States claimed that the A380 LA/MSF measures constituted prohibited import substitution 
subsidies under Article 3.1(b) of the SCM Agreement. The European Union argued that the 
United States' was not entitled to advance those claims because the United States "could have been 
pursued {them} in the original proceeding against the same A380 LA/MSF measures", but it instead 
 
184 European Union's second written submission, para. 530  (citing Appellate Body Report, US – Upland 
Cotton (Article 21.5 – Brazil) , para. 211). See also  Appellate Body Report, US – Continued Suspension , fn 771;  
and United States' second written submission, para. 335. (emphasis added)  
185 United States' second written submission, para. 335.  
186 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), paras. 431 -435. 
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  chose to abandon them.187 The United States argued that it shoul d be permitted to pursue its 
Article  3.1(b) claims against the A380 LA/MSF subsidies in the compliance proceeding because at 
the time of the original proceeding, it was not aware of information (subsequently acquired by the 
time of the compliance proceedin g), allegedly showing that French, German, Spanish and UK LA/MSF 
subsidies for the A380 were contingent on the use of domestic over imported goods.  
The first compliance panel was not convinced that, as a matter of law, the United States was 
entitled to ra ise a claim under Article 3.1(b) against the unchanged A380 LA/MSF measures in that 
compliance proceeding on the basis that it did not have sufficient information at the time of the 
original panel request. The compliance panel found that it was difficult t o see how the acquisition of 
new information alone could justify a complainant pursuing a new claim about an unchanged 
measure in a compliance proceeding.188 In addition, the panel found that the evidence did not 
support the United States' contention that it  was unaware of facts that could potentially be relevant 
to its fresh Article 3.1(b) claim.189 Accordingly, the first compliance panel found that the 
United  States was precluded from raising its Article 3.1(b) claims because it could have raised those 
claims , but didn't, in the original proceeding.  
In this proceeding, the United States' challenges R&TD measures that were the subject of 
unresolved claims at the original stage of this dispute. The United States had the opportunity to 
raise claims against all of  these measures, as well as the Seventh Framework Programme, in the 
first compliance proceeding. The United States did not take this "second chance". Moreover, in 
contrast to the situation in the first compliance proceeding as regards its Article 3.1(b) cl aims against 
the A380 LA/MSF subsidies, the United States has advanced little explanation of why it decided not 
to raise claims against the R&TD measures in the first compliance proceeding.  
The United States argues that its claims should not be precluded simply because they were 
not raised in the first compliance proceeding because this "would impose a burden on the original 
complainant to identify all measures that are inconsistent with the original respondent's compliance 
obligations, no later than the o riginal complainant's first request for the establishment of a 
compliance panel".190 We note, however, that the United States was fully aware of the 
R&TD measures, having previously challenged them in the original proceeding. Thus, the present 
set of facts d o not present a situation where an original complainant became aware of a new set of 
measures only after the first compliance proceeding. Furthermore, the United States' concern arises 
identically in the context of a first compliance proceeding following a n original proceeding, in that 
parties are required to bring all relevant claims against a measure at the original panel stage, and 
cannot raise new claims in the compliance proceeding that could have been pursued in an original 
proceeding.191  
Finally, the United States argues that its claims against the R&TD measures should be 
reviewed in this proceeding because the significance or relevance of the R&TD measures to the 
question of EU compliance has increased over time.192 We note, however, that the R&TD work 
conducted under the majority of the challenged R&TD measures came to an end prior to the 
conclusion of the original proceeding. To the extent that the United States considered this R&TD 
work continued to bear on the question of compliance, it is therefore unclear why the United States 
could not have challenged them in the first compliance proceeding. Again, by not asserting any claim 
against the R&TD measures in the first compliance proceeding, the European Union had no basis to 
assume that it had complianc e obligations in this dispute with respect to the R&TD measures.193 
Thus, for all of the foregoing reasons, we find that the United States is not entitled to raise 
claims in this second compliance proceeding against the R&TD measures that were the subject of  
findings in the original proceeding, as well as the Seventh Framework Programme, which was not 
 
187 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.189.  
188 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.199.  
189 Panel Report,  EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.200.  
190 United States' second written submission, para. 33 7. (emphasis original)  
191 See, in this regard, Panel Report, EC and certain member States – Large Civil Aircraft 
(Article 21.5 – US), para. 6.199 ; Appellate Body Reports, EC and certain member States – Large Civil Aircraft , 
para. 642; and EC – Bananas III , para. 142.  
192 United States' comments on the European Union's response to Panel question No. 81, para. 322.  
193 See Panel Report, US – Countervailing Measures on Certain EC Products (Article 21.5 – EC), 
para. 7.75. 
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  addressed in the original proceeding, but could have been challenged by the United States in the 
first compliance dispute.  
The United States' claims against th e Eighth Framework Programme  
This section addresses whether the United States is entitled to raise claims against the 
Eighth  Framework Programme, an alleged subsidy programme which did not exist at the time of 
establishment of the first compliance proceed ing.194  
The European Union argues that the United States may not raise any claims against the 
Eighth  Framework Programme as it does not constitute a "measure taken to comply" within the 
meaning of Article 21.5 of the DSU.195 The European Union argues that for  a measure to be properly 
before a compliance panel, it must not only be specifically identified in a panel request, but must 
also constitute a "measure taken to comply" within the meaning of Article 21.5 of the DSU.196 
Accordingly, the European Union argues  that by not including it in its panel request, the 
European  Union did not declare the Eighth EU Framework Programme to be a measure taken to 
comply.197 However, the European Union recognizes that the parties' characterization of a measure 
as one taken to co mply is not dispositive and that it is up to the Panel to determine its jurisdiction, 
which may involve examining measures that the implementing Member has not declared to be 
measures taken to comply.198 In this regard, the European Union argues that the Eig hth Framework 
Programme cannot be characterized as an " undeclared  measure taken to comply", because it does 
not have a "particularly close relationship" or a "close nexus" with the adopted DSB 
recommendations and rulings or the declared measures taken to c omply in terms of their timing, 
nature and effect.199 
The United States objects to the European Union's strict reliance on what is known as the 
"close nexus test", arguing that the European Union " does not engage with the first compliance 
panel's warning tha t 'there may be situations where the factual circumstances and legal provisions 
at issue in a particular compliance dispute call for a different approach to be taken '".200 Even so, the 
United States argues that the Eighth Framework Programme bears a sufficiently close nexus to the 
European Union's declared measures taken to comply and the DSB's recommendations and rulings, 
and presents arguments related to each of the requi site elements.  
Both parties accept that Article 21.5 proceedings concern measures "taken to comply" with 
the recommendations and rulings of the DSB.201 Such measures may include measures declared  by 
the implementing Member to bring it into compliance, but a lso include other measures that were not 
expressly declared as a "measure taken to comply" by the original respondent. Such undeclared  
 
194 We note that in its responses to Panel questions, the United States has identified several other R&TD 
measures involving Airbus that did not exist at the time of establishment of the first compliance proceeding. 
These include the German civil aviation research programmes, LuFo V (2015 -2019) and LuFo VI (2018 -2022), 
as well as the UK's " Wing of the Future" programme. However, these measures were not cited by the 
United  States as challenged measures, in direct response to a Panel question to this effect. The United States 
also did not present any arguments that these measures constituted specific subsidies which confer a benefit . 
Considering the late stage in the proceeding in which the United States raised these measures, and given the 
lack of substantive arguments the United States has advanced in their regard,  we do not understand the 
United States to be challenging them. (See United States' first written submission, paras. 118  and 126; 
second  written submission, para. 299 and fn 396; response to Panel question No. 79, paras. 196 -197; and 
European  Union's comme nts on the United States' response to Panel question No. 79, paras. 445  and 449). 
195 The European Union, in the alternative, also argues that the Second through Sixth Framework 
Programmes and the Seventh Framework Programme are not measures taken to comply within the meaning of 
Article 21.5 of the DSU. The preceding section recommends that the Panel find that the United States is 
precluded from challenging all of these programmes.  
196 European Union's second written submission, para. 538.  
197 European Union's second written submission, para. 539.  
198 European Union's second written submission, para. 540.  
199 European Union's second written submission, para. 542.  
200 United States' second written submission, para. 345  (referring to Panel Report, EC and certain  
member States – Large Civil Aircraft (Article 21.5 – US), para. 6.84, fn 190 ). 
201 Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil) , para. 36. The Appellate Body 
reiterated in EC – Bed Linen (Article 21.5 – India)  that " {i}f a claim challenges a measure  which is not a 
'measure taken to comply ', that claim cannot properly be raised in Article 21.5 proceedings" . (Appellate Body 
Report, EC – Bed Linen (Article 21.5 – India), para. 78. (emphasis original) ) 
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  measures taken to comply are measures that may "operate {} to undermine or effectively nullify the 
declared 'measures take n to comply ' or otherwise circumvent that Member's compliance 
obligations".202 As the Eighth Framework Programme is not a declared measure "taken to comply" 
by the European Union, the question arises as to whether it may be brought into the scope of this 
proceeding as an "undeclared" measure taken to comply by application of what is described as the 
"close nexus" test.  
Panels and the Appellate Body have applied the "close nexus" test in order to assess whether 
an undeclared measure "taken to comply" may fall  within a panel's terms of reference in the context 
of standard compliance proceedings.203 Thus far, the "close nexus" test has been applied to allow 
complainants  to initiate compliance proceedings to review measures that have not been specifically 
declared by an implementing member as measures "taken to comply". The test has not yet been 
applied in a "reverse" compliance proceeding to allow an original complainant to challenge an 
undeclared measure which is not identified in the original respondent's  request  for panel 
establishment. Although the United States objects to the European Union' s strict reliance on the 
close nexus test, it fails to set out any reasons for not applying the test, merely relying on the 
possibility  that another approach may be taken.  
In considering whether the "close nexus" test should apply in this "reverse" compliance 
proceeding, we recall that our analysis in this section proceeds on the basis of the premise that an 
original complainant in a "reverse" compliance proceeding is entitled to raise claims against 
measures not specifically identified by the original respondent in its panel request.204 Given this 
premise, we believe it makes sense to apply the "close nexus" test to determine whether a measure 
not identified by an original res pondent in its panel request may fall within a "reverse" compliance 
panel's terms of reference. In our view, such an approach would effectively define the types of 
measures that an original complainant may bring into a "reverse" compliance dispute in the s ame 
way that measures that are not declared by an implementing Member to be "measures taken to 
comply" can be brought within the scope of a normal compliance dispute – namely, when they have 
a particularly close relationship with the measures taken to comp ly and/or the recommendations 
and rulings of the DSB.  
Under the "close nexus" test, any measure with a "particularly close relationship" to the 
declared measure taken to comply, and to the recommendations and rulings of the DSB may be 
susceptible to revie w by a compliance panel.205 As explained by the first compliance panel:  
Determining whether {a measure is susceptible to review} requires panels to "scrutinize 
these relationships" in the context of the "factual and legal background" against which 
a declared  measure taken to comply is adopted, which may, depending on the particular 
facts, call for an examination of the timing , nature  and effects  of the various measures. 
A compliance panel must on this basis determine whether there are "sufficiently close 
links" between the relevant measures and the DSB recommendations and rulings such 
that it would be appropriate to characterize the undeclared measure as a "measure 
taken to comply" and, consequently, to assess its consistency with the covered 
agreements in a p roceeding initiated under Article 21.5 of the DSU.206  
Thus, in order for the United States' claims against the Eighth Framework Programme to fall 
within our terms of reference, we must determine whether a particularly close relationship exists 
between that Programme and the recommendations and rulings of the DSB, and the declared 
measures taken to comply.  
We recall that the DSB's recommendations and rulings from the first compliance proceeding 
concern the A380 and A350XWB LA/MSF measures.207 The declared  measures taken to comply in 
 
202 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.82.  
203 See Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada) , para. 77.  
204 See above para. 7.74. 
205 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.83.  
206 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.83  
(referring to Appellate Body Report, US – Softwood Lumber  IV (Article 21.5 – Canada) , para. 77. (emphasis  
added )). 
207 In the original proceeding, the United States identified the Mühlenberger Loch and Bremen Airport 
measures but did not pursue these in the compliance proceeding. (Panel Report, EC and certain member States 
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  this dispute are the actions which the European Union alleges have withdrawn the LA/MSF subsidies 
and/or the alleged steps taken by the European Union and certain member States to remove their 
adverse effects. Applicati on of the "close nexus" test requires us to assess the proximity of the Eighth 
Framework Programme with these declared measures taken to comply and the recommendations 
and rulings of the DSB in connection with LA/MSF. This involves examining the timing, na ture and 
effects of each of these.  
7.3.5.1   Timing  
The European Union argues that there is a temporal disconnect  between the more recent 
Framework Programmes, including the Eighth Framework Programme, and the development of the 
A380 and A350XWB. In particular, as the A380 and A350XWB were launched in 2000 and 2006 
respectively, the European Union argues that the A380 and A350XWB were launched, developed, 
tested, and certified before the Eighth Framework Programme even began208, and thus this 
Framework Programme canno t be a measure taken to comply.  
The United States does not deny that there is a temporal disconnect between the R&TD 
activities funded through the Eighth Framework Programme and Airbus's original development of 
the A380 and A350XWB but contends that this disconnect is irrelevant.209 However, the United States 
argues that the Eighth Framework Programme's funding overlaps the continuing investment that the 
European Union has cited as a measure taken to comply both in time and in the topic areas covered, 
and th at thus, it complements and supplements the effects of the original LA/MSF for those aircraft 
by maintaining and enhancing the market presence of the aircraft that the older financing enabled.210 
Consequently, according to the United States, there is a close  nexus in terms of timing between the 
Eighth Framework Programme and LA/MSF.  
The European Union is correct that the funding provided under the Eighth Framework 
Programme was disbursed for activities taking place after the launch, development, testing and 
certification of the A380 and A350XWB. We note, however, that the funding provided under the 
Eighth Framework Programme overlaps with the continuing investment in post -launch support 
allegedly undertaken by Airbus in relation to both the A380 and the A350XW B, which the 
European  Union has cited as a measure taken to comply. Accordingly, the R&TD work performed 
under the Eighth Framework Programme coincides with several of the European Union's compliance 
actions. To this extent, it cannot be excluded from the timing  of the Eighth Framework Programme, 
that the R&TD work funded thereunder could undermine the European Union's alleged compliance 
actions, especially if the nature and effect of that work can be linked with the continued development 
and market presenc e of the A380 and the A350XWB.  
Nature  
According to the European Union, unlike the LA/MSF subsidies for the A380 and the 
A350XWB, the funding available under the Eighth Framework Programme does not pertain to the 
financing of the development of a specific a ircraft programme. Instead the European Union argues 
that the funding available under the Eighth Framework Programme is provided for conducting the 
early stages of research into new technologies that may or may not be applied on future aircraft 
development  programmes.211 The European Union's argument is that the general  nature of the 
research funded by the Eighth Framework Programme simply cannot be equated with particular  
instances of LA/MSF that were found to enable the launch of specific types of aircraft "as and when" 
they were launched.212 
The United States argues that the nature of the R&TD projects funded under the Eighth 
Framework Programme is not unlike the work fund ed through the LA/MSF provided for the A380 and 
A350XWB. Key to its arguments are the supposed overlaps between the work performed under the 
LA/MSF measures and the work performed in connection with the R&TD measures.213 In this regard, 
 
208 European Union's second written submission, para. 548.  
209 United States' second written submission, para. 358.  
210 United States' second written submission, para. 358.  
211 European Union's second written submission, para. 543.  
212 European Union 's second written submission, para. 544.  
213 United States' second written submission, para. 348.  
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  the United States ref ers to various projects and programmes linked to the development of the A380 
and A350XWB (as well as the A320neo and A330neo), arguing that these projects and programmes 
directly impacted "several technology areas", though only certain of these arguments r elate 
specifically to the Eighth Framework Programme.214 The United States asserts that the LA/MSF 
contracts "authorized Airbus to use funds to conduct technical feasibility studies and validation work, 
including preliminary design, wind tunnel tests, costs of prototype and trial aircraft, structural tests, 
wing tests, [***]".215 Similarly, the United  States submits that the Large Passenger Aircraft (LPA) 
element of the Clean Sky 2 project funded under the Eighth Framework Programme is aimed at 
developing flight-test vehicles and prototypes, developing manufacturing and assembly concepts, 
and performing flight tests .216 According to the United States, the Clean Sky 2 project is aimed at 
taking technologies developed under the Seventh Framework Programme's Clean Sk y project "to a 
higher level".217 The United  States disagrees with the European Union's assertion that the 
Eighth  Framework Programme was limited to early -stage research, arguing that in fact " some 
activities under the Eighth Framework {are} explicitly aimed  at 'R&TD with near -term 
applications '".218 Moreover, the United States argues that, like LA/MSF, the Eighth Framework 
Programme funds both early - and late -stage R&TD.219 
We recall that the adverse effects that are the subject of the DSB's recommendations and 
rulings were found to have been caused by LA/MSF subsidies related specifically  to the A380 and 
the A350XWB. The factual situation with respect to the R&TD work funded under the 
Eighth  Framework Programme is different, and can be contrasted with the circum stances faced by 
the panel in the first compliance dispute, when it found there was a "close nexus" between the 
A350XWB LA/MSF measures and the other LA/MSF measures at issue in that dispute.220 There, the 
United States had argued that the A350XWB LA/MSF mea sures had essentially the same nature as 
the LA/MSF measures found to cause adverse effects in the original proceeding because both were 
"(a) loans; (b) concluded between the same parties; (c) with the same core success -dependent, 
levy-based, back-loaded and unsecured repayment terms; and (d) for the purpose of developing 
new models of LCA to compete against Boeing".221 This is markedly different from the form of the 
R&TD funding provided under the Eighth Framework Programme, which consists of a large-scale, 
overarching scheme through which cash grants are awarded upon application to fund particular, 
discrete research and development projects aimed at developing various technologies, much of 
which is generic and does not refer to specific aircraft  programmes.222  
We agree with the United States, in principle, that the work done under the R&TD measures 
can overlap with LA/MSF in certain areas because the design and launch of an aircraft will involve 
research and technical development. Thus, where both  are aimed at, for example, developing flight 
test vehicles and prototypes, we understand there to be an overlap in terms of scope. However, the 
essential point is that even to the extent that United States is correct about the overlaps between 
the two typ es of measures, the purpose and objective of each is different. On the one hand the 
projects funded under the Eighth Framework Programme are relatively  early-stage research into 
various technologies and production methods which, while related specifically to aircraft and areas 
such as fuel efficiency and aerodynamics, are not tied to the launch and development of a specific 
type of aircraft or model of Airbus LCA. In other words, on the evidence presented by the 
United  States, the R&TD projects funded under  the Eighth Framework Programme are not product -
specific. On the other hand, the government loans provided to Airbus under the LA/MSF measures 
were intended to finance the specific development and launch of the A380 and A350XWB.223 The 
successful execution o f the contracting parties' obligations under the LA/MSF agreement s would 
 
214 United States' first written submission, paras. 277 -294; and second written submission, para. 349.  
215 United States' second written submission, para. 351  (referring to Panel Report, EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.227, 6.237, 6.250, and 6.258 ). 
216 Clean Sky 2 Joint Undertaking: Work Plan 2018 -2019, (Exhibit USA -119), pp. 18 -19. 
217 United States' second written subm ission, para. 357  (referring to Clean Sky 2 Joint Undertaking: 
Work Plan 2014 -2015, (Exhibit USA -149), p. 66). 
218 United States' second written submission, para. 354.  
219 United States' second written submission, para. 355.  
220 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.150 -6.154.  
221 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para . 6.58.  
222 European Union's second written submission, para. 543.  
223 Likewise, the European Union's alleged non -subsidized investments were not of a general nature, but 
specifically targeted to the A350XWB and the A380.  
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  result in the launch, development and sale of a specific Airbus LCA. In contrast, the successful 
completion of the Airbus projects funded under the Eighth Framework Programme would al low Airbus 
to access a number of prototype technologies which may or may not be further developed and used 
on one or more of its existing or future LCA models.  
Moreover, while it is possible to say that from a general perspective, certain aspects of the 
work funded under the LA/MSF agreements and the Eighth Framework Programme share some 
common features, both sets of measures also fund work that does not overlap. Under the aeronautics 
component of the Eighth Framework Programme, for example, a range of pro jects are funded, and 
only a part of these are related to LCA development in the same way as LA/MSF.224 Furthermore, it 
appears that funding under the Eighth Framework Programme is not expressly earmarked for specific 
aircraft and the United States has not e ffectively demonstrated that the elements of the work that 
do overlap are in fact  related to the development of specific aircraft. Accordingly, on the basis of the 
above considerations, we find that there is no particularly close relationship between the n ature of 
the Eighth Framework Programme, the declared measures taken to comply, and the 
DSB's  recommendations and rulings.  
Effects  
The European Union argues that the Eighth Framework Programme is of the same nature as 
the Second through Seventh Framework P rogrammes, "for which the European Union has, at no 
point during the 15 -year history of this dispute, incurred any compliance obligations" .225 Referring 
to the Second through Sixth Framework Programmes, the European Union refers to the finding of 
the origina l panel, which stated that the " impact of pre -competitive R&TD subsidies on Airbus' 
market presence was perhaps more attenuated, compared with the other subsidies at issue ".226 
According to the European Union, "pre -competitive" research of the type that has been found, in the 
original proceedings, not to complement and supplement the product effect of LA/MSF, is causally 
too far removed from the declared measures taken to comply to undermine their compliance with 
the DSB's recommendations and rulings. Thus, a ccording to the European Union, the effects of the 
Eighth Framework Programme can be distinguished from those of the A380 and A350XWB LA/MSF 
subsidies on the basis of the more attenuated nature of the effects of the former, as well as the 
adopted findings that these subsidies did not complement and supplement the latter.227 
To demonstrate a link between the funding provided under the Eighth Framework 
Programme and Airbus LCA development, the United States refers to three examples of projects 
funded under the Eighth Framework Programme that allegedly directly benefited Airbus: (i) the 
EFFICOMP project, which the United States' maintains has the objective of reducing manufacturing 
costs and lead time of composite structure manufacturing for aerospace application s228; (ii) the 
Clean Sky 2 Large Passenger Aircraft Programme, which the United States considers aims to "further 
mature and validate key technologies such as advanced wings and empennages design, making use 
of hybrid laminar airflow wing developments, as we ll as an all -new next generation fuselage cabin 
and cockpit -navigation"229 and; (iii) the Graphene Flagship project, which the United States asserts 
is aimed at improving "existing and broadly used aeronautic products, especially those where high 
performance  composites of epoxy resins and carbon fibres are implemented in airplane parts and 
fuselages" .230 
On their own, according to the United States, the R&TD under the Eighth Framework 
Programme generally accelerates the market entry of new and derivative Airbus  LCA through the 
additive effects of generating learning that Airbus would not otherwise enjoy.231 The United States 
cites examples in support of these assertions with respect to the A380, A350XWB, A320neo, and 
 
224 See, for example, the CompInnova Pro ject, which aims to develop a " revolutionary  automated 
multipurpose and multifunctional Vortex robot … for inspecting metallic and composite aircraft structures". See 
<http://compinnova.eu/>,  accessed 21 August 2019.  
225 European Union's second written submission, para. 545.  
226 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1959.  
227 European Union's second written submission, para. 546.  
228 EFFICOMP Project, CORDIS website , (Exhibit USA -36). 
229 LPA GAM 2018 Project, CORDIS website , (Exhibit USA -37). 
230 Aerostructures Manufacturer, Graphene Flagship website , (Exhibit USA -38). 
231 United States' first written submission, para. 276.  
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  A330neo.232 The United States argues that the Eur opean Union has thus provided no support for its 
assertion that the impact of Eighth Framework Programme's research on Airbus's technical 
capabilities is more attenuated than LA/MSF. The United States notes that one of the stated goals 
of the Clean Sky 2 p roject, for example, is the development of technology to Technology Readiness 
Level (TRL) 6, which overlaps in part with the types of R&TD funded by LA/MSF.233  
As we have noted above, the Eighth Framework Programme does not involve product -
specific financin g, marking a crucial difference between that programme and LA/MSF for the A380 
and A350XWB. The projects funded under the Eighth Framework Programme raised by the 
United  States do not appear to be associated with the A380 or A350XWB, nor any apparent direc t 
replacement model. Indeed, they do not appear to be specific to any particular model of Airbus LCA. 
It is thus difficult to see how, in practice, the effects of the Eighth Framework Programme would act 
specifically to undermine the European Union's compl iance in this dispute.  
Furthermore, we note that the majority of the work performed under the Eighth Framework 
Programme will only have effects in the future. Thus, even if the United States were correct in 
arguing that the subject matter of the Eighth Fr amework Programme and the LA/MSF measures 
overlaps in scope, it has not, in our view, presented sufficient evidence to demonstrate that the 
research funded under the Eighth Framework Programme could result in " matured technology that 
Airbus used on the A38 0 and the A350XWB either at the time of launch, or after those aircraft were 
launched"234 because as the United States itself notes, flight testing of the technologies under the 
Clean Sky 2 Programme "is planned for late 2019 or early 2020, with production a nd delivery of a 
lower fuselage section in the 2020 -2022 period" .235 Similarly, the EFFICOMP project aims to "develop 
efficient processes and efficient certification tools for the fast -track {of} cost -effective composite 
aircraft of the future ".236 The United States has not explained how a project that aims to begin flight 
tests in 2020 or the development of processes for "aircraft of the future" could be linked to: 
(i) Airbus' ability to launch the A380 and the A350XWB, as and when it did and, (ii) Airbus' completed 
post-launch investments in the A380 and the A350XWB that hav e resulted in technologies and 
production processes already in use.237 
In the light of our review of the limited evidence and arguments presented by the 
United  States with respect to the Eighth Framework Programme, and the distinct design and 
objectives of t he R&TD measures which are not tied to particular aircraft models, we do not see a 
sufficient basis to find that the effects of the Eighth Framework Programme are likely to undermine 
the European Union's compliance with the adopted recommendations and ruli ngs. Unlike LA/MSF  
and the allegedly non -subsidized investments Airbus made into the A350XWB and the A380 , the 
work performed under the Eighth Framework Programme is not particularly closely related to 
enhancing Airbus'  present  competitiveness of the A350X WB and A380 in the marketplace.  
7.3.6   Conclusions  
In the light of the above analysis, we find that the United States' claims against the 
R&TD  measures are outside of the scope of this second  compliance proceeding. We reach this 
conclusion on the basis of the fo llowing considerations:  
a. The R&TD measures that the United States challenges  are not identified , as a matter of 
fact, in the European Union's panel request; and  
b. Even assuming, arguendo , that the absence of any reference to the challenged 
R&TD  measures  in the European Union's panel request does not prevent the United States 
from raising its claims  in this proceeding , the United States is nevertheless precluded from 
raising those claims  because:  
 
232 United States' first written submission, paras. 277 -294. 
233 United States ' second written submission, para. 354.  
234 European Union's response to Panel question No. 84, para. 480.  
235 United States' second written s ubmission, para s. 350 and 357 . 
236 "Objectives" EFFICOMP Website, < https://efficomp.eu/objectives >, accessed 29 July 201 9. 
(emphasis added)  
237 European Union's comment s on the United States' response to Panel question No. 76, para. 402.  WT/DS316/RW2  
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  i. As regards the United States' claims against the R&TD measures that were the subject 
of findings in the original proceeding , as well as the Seventh Framework Programme, 
the United States is precluded from raising those claims because it could have brought 
them in the first compliance proceeding  but failed to do so.  
ii. As regards the United States' claims against the Eighth Framework Programme , the 
United States has failed to establish that the Eighth Framework Programme has 
"sufficiently close links" with the relevant measures taken to comply and the 
DSB's  recommendations and rulings  such that it would be appropriate to characterize 
the Eighth Framework Programme  as a "measure taken to comply ". 
7.4  Whether the A350XWB and A380 LA/MSF subsidies have been withdrawn for the 
purpose of Article 7.8 of the SCM Agreement  
Introduction  
In this section, we address the European Union's claim that it has withdrawn the A350XWB 
and A380 LA/MSF subsidies , within the meaning of Article 7.8 of the SCM Agreement,  thereby 
achieving full substantive compliance  with the DSB recommendations and rulings.238  
The European Union maintains that  a Member achieves compliance through the withdrawal 
of the subsidy , within the meaning of Article 7.8 , when that subsidy ceases to exist. In this regard, 
the European Union submits that Art icle 1.1 of the SCM Agreement identifies a financial contribution 
and a benefit as two distinct constituent elements of a subsidy, and a subsidy will no longer exist 
when either one of the two elements is removed. Under this understanding, a subsidy would no 
longer be "maintained" within the meaning of Article 7.8 when either the financial contribution or 
the benefit no longer exist s.239 The European Union finds support for its position in the ordinary 
meaning of the term "withdraw", as allegedly clarified by  the Appellate Body in the first compliance 
proceeding.240  
The European Union submits that there are different means through which a Member may 
achieve the withdrawal of a subsidy for the purpose of Article 7.8 of the SCM Agreement. In this 
proceeding, the European Union has identified the following three circumstances in which it argues 
the lives of the A350XWB and A380 LA/MSF subsidies have ceased to exist  and, therefore, been 
withdrawn for the purpose of Article 7.8 of the SCM Agreement : (i) the actual repayment of all 
outstanding principal and accrued interest under the UK A350XWB and UK A380 LA/MSF loans ; 
(ii) the replacement of the German A350XWB  LA/MSF  and French, German, Spanish and UK  A380 
LA/MSF agreements , with amended LA/MSF agreements conferred o n terms consistent with the 
relevant market benchmark; (iii) the amortization of the benefit of the Spanish A380 LA/MSF subsidy 
through the passage of time.241 
With this explanation of the European Union's claims, we first address the European Union's 
claims concerning the German and UK A350XWB LA/MSF subsidies before addressing the 
European  Union's various claims concerning the A380 LA/MSF subsidies. Before doing so, we 
consider it helpful to first recall the guidance from the first compliance proceedi ng regarding the 
obligation to withdraw the subsidy contained in Article 7.8 of the SCM Agreement . 
Guidance fr om the first compliance proceeding regarding the obligation to 
"withdraw" the subsidy contained in Article 7.8 of the SCM Agreement  
In the first c ompliance proceeding, the European Union argued before the panel that it had 
no obligation to adopt compliance measures with respect to subsidies that had ceased to exist prior 
 
238 The European Union has not argued that the French and Spanish A350XWB LA/MSF subsidies have 
been withdrawn, instead arguing that it has taken appropriate steps to remove any adverse effects arising 
from those and any other non -withdrawn subsidies. We addr ess the European Union's claim regarding the 
removal of adverse effects of any non -withdrawn subsidies in section 7.5 below.  
239 European Union's first written submissi on, para. 59  (citing Appellate Body Report, EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), para.  5.383 ). 
240 European Union's first written submission, paras. 60 -62. 
241 European Union's first written submission, para. 63.  
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  to the DSB's adoption of the panel and Appellate Body recommendations and rulin gs in the original 
proceedings in EC and certain member States – Large Civil Aircraft  on 1 June 2011.242 The panel 
rejected this argument based on its finding that compliance under Article 7.8 can only be achieved 
if "an implementing Member no longer causes adverse effects through the use of subsidies within 
the meaning of Article 5 of the SCM Agreement".243 The European Union requested the 
Appellate  Body to reverse this finding.244 In doing so , the Appellate Body addressed the 
interpretation of what is required  to achieve compliance within the meaning of  Article 7.8 of the 
SCM Agreement.  
The Appellate Body began its analysis with an assessment of the text of Article 7.8 of the 
SCM Agreement, which provides:  
Where a panel report or an Appellate Body report is ado pted in which it is determined 
that any subsidy has resulted in adverse effects to the interests of another Member 
within the meaning of Article 5, the Member granting or maintaining such subsidy shall 
take appropriate steps to remove the adverse effects o r shall withdraw the subsidy.  
The Appellate Body observed that Article 7.8 consists of two clauses, the first of which refers 
to circumstances where a subsidy is found to have "resulted in adverse effects to the interests of 
another Member", and the second  of which specifies two alternative ways that "the Member granting 
or maintaining such a subsidy" may come into compliance with its obligations under the 
SCM Agreement.245 These options are to: (i) either "take appropriate steps to remove the adverse 
effects "; or (ii) "withdraw the subsidy".246 In terms of the reference in Article 7.8 to "granting or 
maintaining" a subsidy found to have caused adverse effects, the Appellate Body considered "these 
terms indicate that Article 7.8 reflects an obligation to cease a ny conduct amounting to the 'granting 
or maintaining' of subsidies that cause adverse effects".247 Due to its view that Article 7.8 sets out 
an obligation "of a continuous nature, extending beyond subsidies granted in the past"248, the 
Appellate Body found it "difficult to see how a Member could be said to be 'granting or maintaining' 
a subsidy  giving rise to a compliance obligations if that subsidy  has expired and therefore no longer 
exists".249 
In terms of achieving "withdrawal" of a subsidy, the Appellate Body noted that the relevant 
dictionary definitions of the term include: "{d}raw back or remove (a thing) from its place or 
position"; "{t}ake back or away (something bestowed or enjoyed)"; "{c}ease to do, refrain from 
doing".250 The Appellate Body  thus explained that "{t}his suggests that withdrawal of a subsidy, 
under Article 7.8 of the SCM Agreement, concerns the taking away of that subsidy, and thus that a 
Member 'granting or maintaining' a subsidy cease such conduct ".251 In order to withdraw a su bsidy, 
the Appellate Body proceeded to note that " an implementing Member may be able to take action to 
align the terms of the subsidy with a market benchmark or to otherwise modify the terms of the 
subsidy such that it no longer qualifies as a subsidy ".252 In this vein, the Appellate Body additionally 
 
242 Panel Rep ort, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.794.  
243 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para s. 6.822  
and 6.1085.  
244 Appellate Body Report, EC and certain member Stat es – Large Civil Aircraft (Article 21.5 – US), 
para. 5.353.  
245 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.362.  
246 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article  21.5 – US), 
para. 5.362  (referring to Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para. 236 ). 
247 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.364.  
248 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para. 237.  
249 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.364. (emphasis original)  
250 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.366.  
251 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.366.  
252 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.366.  
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  stated that it was "not clear … how an implementing Member could modify the terms and conditions 
of subsidies that no longer exist".253 
The Appellate Body also considered its understanding of withdrawal taking int o account the 
context and object and purpose of Article 7.8. The Appellate Body emphasized that, while the focus 
of Article 5 of the SCM Agreement, as well as Article 7.8, is the causing of adverse effects through 
the use of a subsidy, Article 7.8 contempl ates compliance action only in relation to the subsidy found 
to have caused adverse effects. For this reason, to the extent that the underlying subsidy has ceased 
to exist, the Appellate Body observed that there is no additional requirement under Article 7 .8 to 
remove any lingering effects that may flow from that subsidy.254 The Appellate Body further noted 
that its understanding of the term "withdrawal" was supported in the relevant provisions of the 
SCM Agreement governing prohibited subsidies. In particula r, the Appellate Body noted that the 
remedy discussed in Article 4.7 "withdraw the subsidy without delay" does not require  the removal 
of the effects of such subsidies.255 Thus, the Appellate Body explained that "{i}t would be 
incongruous, in our view, if el imination of the source of the inconsistency were sufficient to comply 
with an implementing Members' obligations in the context of Article 4.7, but not in the context of 
Article  7.8".256 The Appellate Body also noted that Article 19.1 in Part V of the SCM Ag reement, 
addressing the imposition of countervailing duties, stipulates that countervailing duties may be 
imposed on subsidised imports "unless the subsidy or subsidies are withdrawn".257 
Thus, the Appellate Body emphasized that the obligation to "take appro priate steps to 
remove the adverse effects … or withdraw the subsidy" in Article 7.8 pertains to subsidies that 
continue to be ''granted" or "maintained" by the implementing Member after the conclusion of the 
implementation period. In turn, a n implementing  Member is not required to withdraw a subsidy that 
has ceased to exist.258 Accordingly,  based on this understanding,  an implementing Member would 
have no compliance obligation with respect to subsidies that have expired or cease d to exist.  
With this guidance  in mind, we turn to evaluate  the merits of the parties' submissions 
concerning the measures and steps  the European Union maintains have resulted in the withdrawal 
of the A350XWB and A380 LA/MSF subsidies.  
The [ ***] amendment to the German A350XWB LA/MSF agreement  
Main  arguments of the parties  
The European Union maintains that the subsidy provided to Airbu s through the original 
German A350XWB LA/MSF agreement has been "withdrawn", within the meaning of Article 7.8 of 
the SCM Agreement, by means of replacement with a new non-subsidized German A350XWB LA/MSF 
agreement. According to t he European Union,  where a n implementing Member granting a financial 
contribution on subsidized terms varies those terms, such that there is a "substantial " modification 
in what the Member provides the recipient, the Member provides a new financial contribution , the 
benefit of whic h must be determined by comparing the terms of the new instrument to a 
contemporaneous market benchmark.259 
 
253 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.366.  
254 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.371. 
255 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.376.  
256 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.376. 
257 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.378.  
258 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.383  
259 European Union's first written su bmission, paras. 70 -80 and 100 -102. Canada appears to share the 
European Union's view that the amended terms and conditions should be assessed against the terms and 
conditions available on the market at the time when full substantive compliance  is asserted , in the case of 
respondent -initiated compliance proceedings. (Canada's response to Panel question No. 1 to third parties, 
paras. 1 and 5 ). 
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The European Union argues that the [***] amendment to the original German A350XWB 
LA/MSF agreement  brought about a "substantial modification"260 to its terms as a result of the 
changes made to the [***], the [***], the [***], and [***].261 For the European Union,  these 
changes result ed in a new financial contribution, the "benefit" of which must be assessed by 
comparing the newly agreed terms with a benchmark that reflects the relevant market conditions 
and positions of Airbus and the German government in 2018.262  
In assessing whether the newly amend ed German A350XWB LA/ MSF agreement was 
provided on such market terms , the European Union relies on a report produced by its consultant , 
TradeRx , which compares the terms of the amended German A350XWB LA/MSF agreement with a n 
alleged  contemporaneous  market benchmark, follow ing the approach adopted in the first compliance 
proceeding to determine the internal rate of return (IRR) and applicable market benchmark for the 
original German A350XWB LA/MSF loan .263 The European Union points out that, according to the 
calculations  in the TradeRx A350XWB Report , the expected IRR  of the amended German A350XWB 
LA/MSF agreement  exceeds the  relevant contemporaneous  market benchmark.264 The 
European  Union thus concludes that the German A350XWB LA/MSF agreement resulting from th e 
[***] amendment replaces the subsidi zed financial contribution under the original German 
A350XWB LA/MSF agreement with a financial contribution that does not confer a benefit, and is, 
therefore, not subsidized .265  
Finally, the European Union also argue s, in the alternative , that it would be appropriate to 
view the [***] amendment to the German A350XWB LA/MSF loan agreement as an intervening 
event that brings the life of the German A350XWB LA/MSF loan to an end, achieving withdrawal of 
the subsidy for the p urpose of Article 7.8 of the SCM Agreement.266  
The United States maintains that the European Union has chosen the wrong analytical 
framework to assess the question of withdrawal , arguing  that there is no support for the 
European  Union's submission that the [***] amendment achieved compliance with respect to the 
original German A350XWB LA/MSF subsidy. The United States submits that the benchmark analysis 
set out in TradeRx A350XWB R eport m ight be appropriate to determine whether a new loan confers 
a subsidy, but it does not properly address the question of whether an amendment to a pre -existing 
loan provided on subsidized terms  has been withdrawn.  The United States argues that, in order to 
answer that question, it is necessary to assess the effect of the amendment on the pre -existing loan, 
which in the United States' view, TradeRx A350XWB Report  has ignored.267  
According to t he United States,  the [***] amendment to the German A350 XWB LA/MSF 
agreement is correctly viewed as  an "intervening event ", or "an unplanned adjustment to the terms 
of the pre -existing German LA/MSF for the A350XWB", that "increased the benefit conferred by the 
pre-existing German LA/MSF subsidy for the A350XWB" and prolo nged its "life" until at least 
[***].268 To assess the effect of the amendment, the United States submits a report produced by 
its consultant , NERA Economic Consulting, that compar es the IRR of the original unamended German 
A350XWB LA/MSF agreement, as of [***], to the IRR of the amended German A350XWB LA/MSF 
agreement, as of [***].269 The NERA German A350XWB Report concludes that the IRR of the 
original unamended arrangement is higher  than the IRR of the amended loan ag reement, which the 
United States submits means that the  amendment increased the subsidy to Airbus and that the  
German lender, KfW , would have been in a better financial position if it had simply left the terms of 
 
260 European Union's first written submission, para. 101 ; German A350XWB  [***] amendment, 
(Exhibit  EU-9 (BCI) (English  translation)) , Clause 2(d) and Annex 2. See also TradeRx A350XWB LA/MSF 
Report, (Exhibit EU-11 (HSBI/BCI)) , paras. 37 -39. 
261 European Union's first written submission, para. 101.  
262 European Union's first written submission, para. 103. 
263 TradeRx A350XWB LA/MSF Report, (Exhibit EU -11 (HSBI/ BCI)).  
264 European Union's first written submission, paras. 105 -107 (referring to  TradeRx A350XWB LA/MSF 
Report, ( Exhibit EU -11 (HSBI/BCI)).   
265 European Union's first written submission, paras. 115 -116. 
266 European Union's first written submission, fn 142.  
267 United States' first written submission, para. 96.  
268 United States' first written submission, paras. 93 and 100.  
269 NERA German A350XWB LA/MSF Report, (Exhibit USA -26 (HSBI/BCI)).  
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  the original A350XWB LA/MSF unamended.270 Accordingly, the United States concludes that "no 
reasonable commercial lender in the position of the Government of Germany  would have agreed to 
enter into the [***] Amendment" .271 In addition, the United  States argues that the [***] 
amendment "prolonged the li fe of the pre -existing German LA/MSF subsidy for the A350XWB to well 
after [***]", because the amendment was based on an expectation that A350XWB deliveries would 
continue [***].272  
Finally,  the United States argues that even if the Panel were to accept the European Union's 
analytical framework as the correct one, a comparison of the IRR of the [***] amendment to the 
market benchmark used by TradeRx shows that no reasonable commercial lender would have agreed 
to the amendment's terms.  The United States relies upon a second analysis of the [***] amendment 
performed by NERA, in which NERA calculated a r evised IRR for the amended German A350XWB 
LA/MSF loan agreement. NERA based this calculation on a revised delivery schedule that NERA 
constructed after concluding that the delivery schedule used by TradeRx "is at odds with the 
anticipated number of deliver ies in the Ascend data, the statement of Airbus executives, and the 
[***] anticipated in the business case for the A350XWB".273 Based on this assessment NERA 
concluded that, assuming that the market benchmark used by TradeRx was correct, then the IRR is 
actually lower than what a market lender in 2018 would have required for a similar transaction.274 
In connection with NERA's updated analysis, the United States has also argued that TradeRx's 
market benchmark is also "likely too low", because TradeRx "appear{s} to have improperly ignored 
that, even under an early repayment scenario, KfW would have been entitled to [***] provided for 
under the terms of the original German A350 XWB LA/MSF contract".275 For these reasons, the 
United States argues that, even  if the Pan el were to agree that the European Union's analytical 
framework was the correct one, the European Union has failed to demonstrate that the IRR of the 
German A350XWB LA/MSF as modified by the [***] amendment is not lower than the market 
benchmark.276  
Evaluat ion by the Panel  
Features of the amended German A350XWB LA/MSF loan agreement  
As explained in section 7.2.2.2  above,  the original  German A350XWB LA/MSF agreement  
entitled  Airbus  to draw a total of [***] under a scheduled series of disbursement s. Repayments  
were to be  made through per -aircraft levies  based on an estimated delivery forecast  submitted in 
connection with the original loan agreement .277 Full rep ayment of the drawn -down loan principal was 
expected to occur  by [***].278 The original agreement also require d Airbus to [***].279  
 
270 NERA German A350XWB L A/MSF Report, (Exhibit USA -26 (HSBI/BCI)), para s. 7-8; United States' 
first written submission, para. 93 . 
271 United States' first written submission , para. 93.  
272 United States' first written submission, paras. 87 and 100.  
273 Third NERA German A350XWB LA/MSF Report , (Exhibit USA -173 (HSBI/BCI)), para. 18. To construct 
a delivery schedule for the A350XWB, NERA considered it reasonable to rely on actual deliveries through the 
end of 2017 with projected deliveries as reported by Flight Ascend Consultancy for 2018  to 2019. Beginning 
in 2020, NERA then estimated deliveries based on the A350 XWB business case schedule and a maximum 
annual delivery level of 120 aircraft. (Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173 
(HSBI/BCI)) , para. 16 ). 
274 Third NERA German A350XWB LA/MSF Report , (Exhibit USA -173 (HSBI/BCI)), para. 23.  
275 United States' comments on the European Union's response to Panel question No. 7, para s. 44-47; 
and Third NERA German A350XWB LA/MSF Report , (Exhibit USA -173 (HSBI/BCI)), s ection VII.  
276 United States' comments on the European Union's response to Panel question No. 7, paras. 44 -47; 
and Third NERA German A350XWB LA/MSF Report , (Exhibit USA -173 (HSBI/BCI)), section V.  
277 German A350XWB LA/MSF Agreement, (Exhibit EU -10 (BCI) (English translation)) , Clause 3.2; and 
Panel Report, EC and certain member States – Large Civil Aircraft  (Article 21.5 – US), para. 6.237.  
278 German A350XWB LA/MSF Agreement, (Exhibit EU -10 (BCI) (English translation)) , Clause 6; and 
Panel Report, EC and cert ain member States – Large Civil Aircraft  (Article 21.5 – US), para. 6.238.  
279 German A350XWB LA/MSF Agreement, (Exhibit EU -10 (BCI) (English translation)) , Clause 10; and 
Panel Report, EC and certain member States – Large Civil Aircraft  (Article 21.5 – US), para. 6.242.  
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The original loan agreement was [***].280 The agreement was amended [***].281 On the 
latter occasion, the German government lender, KfW, agreed to [***].282 Expected repayments  of 
outstanding principal  were calculated on the basis of [***].283 Under the amended [***], full 
repayment of principal and interest is expected to be achieved by [***]. The [***] amendment 
also modified [***], with [***].284  
Thus, while the [***] amendment modified certain terms of the original German A350XWB 
LA/MSF loan agreement, Airbus continues to be under an obligation to repay the outstanding 
principal and accrued interest under that loan. The German A350XWB LA/MSF agreement therefore 
continues to exist as an outstanding loan, albe it on modified terms. The question that arises is 
whether the amended terms modified the arrangement such that it no longer qualifies as a subsidy , 
within the meaning of the SCM Agreement . 
The relevant analytical framework  
The European Union characterizes the [***] amendment to the German A350XWB LA/MSF 
loan as an act, and alternatively , an "intervening event", that achieves the withdrawal of the German 
A350XWB LA/MSF  subsidy, within the meaning of Article 7.8 of the SCM Agreement. We note, 
however, that n otwithstanding the European Union's alternative characterization, the fundamental 
reason advanced by the European Union to support its assertion of compliance on this basis is the 
same regardless of how the [***] amendment is described.285 Thus, irrespective of whether the 
amendment is properly characterized as an act, or as an "intervening event", the European Union 
maintains that it achieves compliance with its obligation to "withdraw the subsidy" because it has 
replaced the pre -existing subsidized A350XWB L A/MSF agreement with a LA/MSF agreement on 
terms that would have been offered to Airbus by a market lender.  Accordingly, the key question we 
must address in order to determine the merits of the European Union's assertion of compliance is 
whether the [***] amendment to the German A350XWB LA/MSF agreement has resulted in the 
replacement or modification of the subsidized loan that was the subject of the original compliance 
proceeding with a market -based loan instrument.  
In considering their positions, we begi n by recalling the Appellate Body's observations from 
the first compliance proceeding regarding the obligation to "withdraw" the subsidy in accordance 
with Article 7.8 of the SCM Agreement, as discussed in section 7.4.2 above. The Appellate Body 
emphasized that the obligation to either "take appropriate steps to remove the adverse effects … or 
withdraw the subsidy" in Article 7.8 pertains to subsidies that continue to be ''granted" or 
"maintained" by the implementing Member after the conclusion of the implementation period.286 The 
Appellate Body also provided guidance with respect to how an implementing Member may withdraw 
a subsidy that is being "granted" or "maintained" for purposes of Article 7.8, agreeing with the 
compliance pa nel that "withdrawal" may be achieved when an implementing Member takes "action 
to align the terms of the subsidy with a market benchmark , or to otherwise modify the terms of the 
subsidy such that it no longer qualifies as a subsidy".287 As discussed above, there is no question 
 
280 Email from [***], 20 March 2015 , (Exhibit EU -106 (BCI) (English translation )). See also  TradeRx 
A350XWB LA/MSF Report , (Exhibit EU-11 (HSBI/BCI)),  para. 35. 
281 See section 7.2.2.2  above.  
282 German A350XWB  [***] amendment, (Exhibit EU -9 (BCI) (English translation)) , Clause 2(d) and 
Annex 2. See also TradeRx A350XWB LA/MSF Report, (Exhibit EU -11 (HSBI/BC I)), paras. 37-39. [***] The 
[***] amendment does not appear to have [***]. (See [***] German A350XWB LA/MSF Agreement, 
(Exhibit EU -10 (BCI) (English translation)) , Clauses 5.4(d) and Annex  1.4(f); and KPMG Assessment of [***], 
(Exhibit EU -105 (BCI)), pp. 3 -5). 
283 Germ an A350XWB  [***] amendment, (Exhibit EU -9 (BCI) (English translation)) , Clause 2(d) and 
Annex 2. See also TradeRx A350XWB LA/MSF Report, (Exhibit EU -11 (HSBI/BCI)) , paras. 37-39. 
284 German A350XWB  [***] amendment, (Exhibit EU -9 (BCI) (English translation)), Clause 4; and 
TradeRx A350XWB LA/MSF Report, (Exhibit EU -11 (HSBI/BCI)), paras. 39-40. 
285 The European Union's claim that the  [***] amendment to the German UK A350XWB LA/MSF loan 
may be, in the alternat ive, characterized as an "intervening event" that brings the life of the subsidy to an end, 
is presented in a footnote to its first written submission. The European Union does not advance any specific 
arguments to support this claim that are different to t hose advanced in relation to its main, non -alternative, 
claim. (See European Union's first written submission, fn 142 ). 
286 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.383 . 
287 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.366.   
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  that the amended German A350XWB LA/MSF loan agreement is a measure currently being 
maintained  by the German government. Thus, the question that remains to be resolved , in the light 
of the European Union's submissions, is whether the [***] amendment ha s aligned the terms of 
the A350XWB LA/MSF loan agreement with a market benchmark.  In the light of the prospective 
nature of WTO remedies288, we understand that the alignment of an existing subsidized loan with a 
market benchmark need not resu lt in the repayment of past subsidies provided under that loan, but 
rather, it must achieve non -subsidization with respect to the future operation of the loan.  
The European Union argues that the making of "substantial" modifications to the terms of a 
pre-existing subsidised loan necessarily means that the pre -existing loan has been "replaced" by a 
new and different  loan, which must be assessed against a contemporaneous  benchmark in order to 
determine whether the subsidy provided under the original loan has  been withdrawn. In advancing 
this line of argument, the European Union refers to certain statements and findings made by the 
panel in Japan – DRAMs (Korea) . Specifically, the European Union relies on the panel's statement 
that "the modification of an exis ting loan may properly be treated as the transfer of new rights to 
the recipient of the modified loan", in support of its view that an existing financial contribution is 
replaced by a "new" one whenever it is "substantially" modified.289  
In our view, the Eu ropean Union's reliance on Japan  – DRAMS ( Korea ) is misplaced. The 
panel in Japan  – DRAMS ( Korea ) was called upon to inter alia  determine whether 
Japan's  investigating authority (JIA) had acted inconsistently with its WTO obligations when it 
determined that a series of restructuring transactions, which included modifications to the terms of 
pre-existing loan agreements in the form of extensions to loan maturities, reductions of interest 
rates, and the conversion of interest to principal, invol ved "direct transfers of funds" within the 
meaning of Article  1.1(a)(1)(i) of the SCM Agreement. Korea argued that "transactions that merely 
change the terms of existing claims, and do not involve the provision of money to the alleged subsidy 
recipient, ca nnot be characterized as transactions involving a 'direct transfer of funds' within the 
meaning of Article 1.1(a)(1)(i) of the SCM Agreement".290 In rejecting Korea's submission and 
finding that the JIA had not acted inconsistently with its obligations, the panel expressed the 
following views (parts of which the European Union relies upon):  
We do not accept that the relinquishment or modification of claims may not, in certain 
circumstances, be treated as the transfer of new claims, giving rise to new rights a nd 
obligations. For example, once one analyses what actually occurs in the transaction, the 
modification of an existing loan may properly be treated as the transfer of new rights 
to the recipient of the modified loan. The borrower's old rights no longer ex ist. They 
have been replaced by new rights. In this sense, the modified loan may properly be 
treated as a new loan. Thus, the modification of a loan through debt forgiveness involves 
the transfer of new rights to the borrower, who is now liberated of the o bligation to 
repay the debt, and instead has the right to use the money for free. Similarly, the 
modification of a loan through an extension of the loan maturity involves the transfer 
of new rights to the borrower, who is now entitled to borrow the money f or a longer 
period of time. Since the new rights that are transferred in such transactions have 
monetary value, and may be counted in a (legal or natural) person's capital, we consider 
that such transactions may properly be treated as "direct transfers of funds" in the 
meaning of Article 1.1(a)(1)(i) of the SCM Agreement . …291 
We note that the legal question that is the focus of the above analysis is whether a 
modification  to the terms of an existing loan may be characterized as a "direct transfer of funds" f or 
the purpose of Article 1.1(a)(1)(i) of the SCM Agreement. This legal question arose in the context 
of a fact pattern where none of the modified loans at issue had been previously found to constitute 
subsidies.  In contrast, the legal question at the cent re of the European Union's submission in this 
dispute is whether the [***] amendment should be understood to have created a new German 
A350XWB loan contract that must be considered separately and independently  from the pre -existing 
subsidized  A350XWB loan , when it comes to determining whether the subsidy provided under the 
 
288 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , fn 494; and Panel Report, US – 
Large Civil Aircraft ( 2nd complaint) , paras. 6.38 -6.42. 
289 European Union's first written submission, para. 75  (referring to Panel Report, Japan – DRAMs 
(Korea) , para. 7.442 ). 
290 Panel Report, Japan – DRAMs (Korea) , para. 7.426.  
291 Panel Report, Japan – DRAMs (Korea) , para. 7.442.  WT/DS31 6/RW2  
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  pre-existing A350XWB loan contract has been withdrawn for the purpose of Article 7.8 of the 
SCM Agreement . On the basis of th ese legal and factual difference s alone, we do not find the 
panel's statements in Japan  – DRAMS ( Korea ) to be instructive for the resolution of the matter before 
us. In any case, we do not understand those statements to have the same mean ing and implications 
as the European Union . 
We understand the panel in the above passages to have said that a "modified loan may 
properly be treated as a new loan" to the extent that a "borrower's old rights no longer exist" and 
"have been replaced by new rights" . In our view, in advancing this line  of thinking, the panel merely 
meant to explain that when the terms of an existing loan are amended, a "new" loan exists, "in the 
sense that" the rights and obligations under the pre -existing loan have been modified. The panel did 
not say that the pre -existing loan no longer exists, but only that the "borrower's old rights" (those 
that are modified) "no longer exist" and "have been replaced by new rights". This does not mean 
that the pre -existing loan has been terminated and replaced. Rather, it simply mean s that the 
pre-existing loan continues to exist in a modified form. In this regard, we note that Japan had argued 
that "changes to the terms of loans amount to a re-issuance  of the loan  as the terms of the original 
loan are extinguished and replaced with n ew terms".292 However, the panel did not go as far as 
Japan in its finding, concluding only that the transactions involving the modification  of loans at issue 
could be characterized as "direct transfers of funds" within the meaning of Article 1.1(a)(1)(i) 
because they involved the transfer of new rights of monetary value.  
Moreover, to the extent that we should understand the European Union submissions to 
suggest that the panel's finding stands for the proposition that the benefit  of a new financial 
contribut ion, resulting from modifications made to an existing, subsidized , financial contribution, 
must be evaluated at the time of the modifications, we recall that the loans at issue in 
Japan  – DRAMS  (Korea)  had not  been previously found to confer a benefit. In contrast, in this dispute 
the German A350XWB LA/MSF agreement was previously found to constitute a subsidy  within the 
meaning of Article 1.1 of the SCM Agreement . Thus, in our assessment, there is no basis from which 
to draw the implication the European Union appears to rely upon , given the different factual situation  
in this proceeding compared with that in  Japan – DRAMS  (Korea) .  
Thus, for all of the above reasons, we do not consider the panel statements in Japan  – 
DRAMS ( Korea ) the European Un ion relies upon to support its position in this dispute.  
In the light of our understanding of the panel's approach in Japan  – DRAMS  (Korea) , we 
consider that the [***] amendment to the German A350XWB LA/MSF agreement altered the rights 
of the German govern ment and Airbus, but it did not bring into existence a new loan agreement. 
There is no evidence before us, and, indeed, the European Union does not argue, that the original 
A350XWB LA/MSF is legally distinct from the loan agreement resulting from the [***] amendment. 
We note, moreover, that by the time of the [***] amendment, all required disbursements had been 
made and Airbus was continuing to make payments of principal and interest in accordance with the 
terms of the original contract, which was not termi nated. Thus, we find that the original German 
A350XWB LA/MSF agreement continues to exist in a modified form, reflecting the revised repayment 
terms agreed through the [***] amendment. In our view, this implies that, contrary to the 
European Union's conten tion, the appropriate benchmark against which to measure whether the 
[***] amendment aligned the terms of the German A350XWB LA/MSF agreement with the market, 
is not a loan on the same or similar terms issued by a market lender for the first time  at the same 
moment as the amendment . We disagree with the European Union on this point because the 
analytical approach it advances would treat the amended A350XWB LA/MSF agreement in the same 
way as a new loan under which all terms and conditions (disbursements, interest payments, 
repayments)  have been agreed at the time of the amendment293 when in fact, for the reasons we 
have explained, this is not the case.  
We recall that in all previous proceedings of this dispute, the panels and the Appellate Body 
explained that in order to determine whether LA/MSF confers a "benefit" on Airbus, within the 
meaning of Article 1.1(a)(2) of the SCM Agreement, the terms of each LA/MSF loan agree ment must 
 
292 Panel Report, Japan – DRAMs (Kore a), para. 7.437 . (emphasis added)  
293 As explained further below, the European Union's approach treats all outstanding principal under the 
original  [***] German A350XWB LA/MSF Agreement as funding disbursed to Airbus for the first time in [***]. 
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  be compared with the terms of a comparable loan available from the market.294 In the original and 
first compliance proceedings, the challenged LA/MSF agreements were examined to determine 
whether they each conferred a benefit on Airbus by comparing  the cost of the LA/MSF financing to 
Airbus on the agreed terms (calculated as a separate "internal rate of return" for each LA/MSF 
contract) to the cost that Airbus would have incurred (calculated as a "rate of return") to obtain the 
same or similar finan cing from the market at the time Airbus and the relevant Airbus government 
entered into the LA/MSF agreement .295 For the German A350XWB LA/MSF contract, the IRR was 
determined by identifying the interest rate that set the Net Present Value of the cash flows 
anticipated under the terms of the loan agreement to zero.296 The IRR of the German A350XWB 
LA/MSF agreement was compared with a constructed interest rate considered to represent the rate 
of return that a market lender would have achieved on a loan to Airbus  on the same or similar terms, 
and at the same time , as the A350XWB loan agreement.  
Consistent with this approach, we believe that where funding under a subsidized loan 
agreement has already been disbursed and remains outstanding, an amendment to that loan  to 
bring it into alignment with a market benchmark on a prospective basis would need to ensure that , 
all other things being equal,  the revised repayment terms capture the overall cash -flow the market 
lender would have expected to achieve, at the time the recipient originally entered into the 
government loan contract , for the remaining duration of the particular loan.297 In this way, the 
recipient would be placed in the same position it would have been in at the t ime of the amendment, 
had the loan been agreed on market terms from the very beginning.   
Explained by way of example, this line of reasoning  implies that a subsidized loan provided 
for a 10 -year period at an average  cost of 5% interest per annum (instead o f the market rate of 
7%), could be aligned with a market benchmark in year five by increasing the rate of interest to 
apply over the remaining five years to 7%, even if the market rate for a comparable five -year loan 
at the same time was higher or lower than 7%. In our view, it is only by raising the interest rate to 
what the market lender would have originally requested the recipient to pay over the remaining 
five years of the loan contract that it could be concluded that , all other things being equal,  the 
recipient is no longer receiving a subsidized loan.   
Such an  approach to determining whether a subsidized loan has been aligned to a market 
benchmark would  ensure that the "withdrawal" of a subsidy will depend upon a Member's own 
actions and decisions, as  opposed to exogenous factors such as the general cost of finance in an 
economy.298 Thus, where, for example, the general cost of money increased between the time a 
subsidized loan was agreed and the date of an amendment intended to align the terms of that l oan 
with a market benchmark, an approach that requires the amended terms to reflect the 
contemporaneous cost of money  would require the subsidizing government to charge, on a 
prospective basis, more for the loan than a market lender would have originally r equested from the 
recipient  over the same period of the loan . Conversely, where the general cost of money decreased 
between the time a subsidized loan was agreed and the date of an amendment intended to align the 
terms of that loan with a market benchmark,  an approach that requires the amended terms to reflect 
the contemporaneous cost of money  would require the subsidizing government to charge, on a 
prospective basis, less for the loan than a market lender would have originally requested  from the 
recipient.  In both situations , the determining factor for the alignment of the subsidized loan to a 
market benchmark would not be the government's decision to have the recipient pay what a market 
lender would have required at the time the loan was originally agreed,  but rather movements in the 
 
294 Panel Repo rts, EC and certain member States – Large Civil Aircraft , para. 7.382; EC and certain 
member States – Large Civil Aircraft  (Article 21.5 – US), para. 6.293; Appellate Body Reports , EC and certain 
member States – Large Civil Aircraft , para. 706;  and EC and certain member States – Large Civil Aircraft  
(Article 21.5 – US), paras. 5.109 -5.112.  
295 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.401.  
296 Panel Report,  EC and certain member States – Large Civil Aircraft  (Article 21.5 – US), 
paras.  6.306 -6.348.  
297 Depending upon the terms of the loan contract, this analysis may need to account for any penalties 
paid by the borrower to the market lender for renegotiating the terms of the loan.  
298 Third parties Brazil and Jap an share the view that changes in exogenous commercial condition 
cannot on their own be the determining factor in analysing whether a subsidy has been withdrawn. 
(Brazil's  response to Panel question No. 1 to third parties, para. 3; Japan' response to Panel  question No. 1 to 
third parties ). Canada submits that exogenous commercial circumstances are "highly relevant" to an 
assessm ent of withdrawal. (Canada's response to Panel question No. 1 to third parties, para. 1 ). 
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  cost of money. Given the characteristics of LA/MSF, other exogenous factors we believe could have 
the same or similar impact include the credit worthiness of Airbus and the development status of 
the funded LCA.  
The European Union maintains that comparing the IRR of the amended German A350XWB 
LA/MSF agreement with a contemporaneous market benchmark for a new loan to Airbus issued on 
the same or similar terms as the amend ed agreement  is an appropriate way to test wheth er the 
German A350XWB LA/MSF agreement has been aligned with a market benchmark. The 
European  Union justifies this approach by arguing that the German government lender, KfW, did not 
have the option to leave the German A350XWB LA/MSF agreement unamended  because, under 
[***] of the unamended agreement, Airbus was entitled to force KfW to accept early repayment. 
The European Union maintains that such a clause is a standard term in comparable loan 
agreements299, which in the case of Airbus , left it  with an incen tive to repay the loan in [***] 
because market interest rates had decreased substantially since the time Airbus and KfW agreed on 
the original terms of the German A350XWB LA/MSF agreement, making it possible for Airbus to 
refinance at lower interest rates.300  
We understand the logic of the European Union's argument to be as follows : If Airbus chose 
to prepay the loan  in accordance with [***], KfW (or a market lender in its place) would not have 
been in a position to realize the expected future cash -flows and IRR under the original agreement. 
The European Union submits that where a loan agreement entitles the borrower to prepay the loan, 
the borrower's choice to exercise that right makes the originally -anticipated IRR impossible for the 
lender to attain. In those circumstances, the European Union argues that it would be erroneous to 
consider that, in agreeing to amend the loan to reflect current market circumstances, the lender 
exchanged its allegedly " superior" IRR under the original terms of the subsidy for an allegedly 
"inferior" one under the amended terms. Thus, the European Union submits that the only way to 
determine whether the [***] amendment is on market terms is to compare the IRR of the amend ed 
German A350XWB LA/MSF agreement with a loan on the same or similar terms that could have been 
offered by a market lender to Airbus  at the same time .301 
We agree with the European Union that, in the face of having to accept the full repayment 
of the outstanding principal disbursed under an existing loan concluded at a time of relatively high 
interest rates , a market lender would not expect to ac hieve the same returns anticipated under the 
original loan contract  from an amendment that avoids full repayment and continues the loan 
arrangement on different terms at a time of relatively low interest rates. This situation is different 
from the one described in our above example, which underlies the starting point of our analytical 
framework, because the situation discussed in the example comes about  in a context where the 
commercial lender is left with a choice between the continuation of an exi sting loan or the acceptance 
of revised terms . In other words, the situation described in the above example is not one where, 
apart from the desire of the contractual parties to amend the loan arrangement to align its terms 
with a market benchmark, all oth er things have remained the same. In contrast , in the situation 
posited by the European Union, the market lender is faced with a choice between accepting the early 
repayment  of outstanding principal and accrued interest under an existing arrangement or the new 
repayment terms negotiated under revised terms . 
The United States argues that the European Union has provided no evidence to support its 
assertion that had Airbus and KfW not agreed to enter into the [***] amendment, Airbus would 
have opted to prepay the outstanding LA/MSF and other accrued charges.302 In other words, the 
United States argues that there is no factual basis to support the premise underlying the analytical 
framework applied by the European Union to determine whether the German A350XWB LA/M SF 
subsidies have been withdrawn.   
We agree with the United States that the European Union has provided no evidence showing 
that Airbus actually invoked, or even attempted to trigger, [***] of the German A350XWB LA/MSF 
agreement. Although the European Union argues that in the "negotiations leading up to the 
amendment, both Airbus and KfW knew that Airbus ' Best Alternative to a Negotiated Agreement, or 
 
299 European Union's second written submiss ion, para. 108.  
300 European Union's second written submission, para. 109.  
301 European Union's second written submission, para. 105.  
302 United States' second written submission, paras. 106 -111. 
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  'BATNA', was to effect prepayment"303, the European Union has presented no evidence of the 
discussions between the German government and Airbu s about the potential early repayment of the 
outstanding principal under the terms of [***]. Neither is there any evidence before us showing 
that Airbus con sidered alternative market -based finance options around the time of those 
negotiations. Moreover, in explaining the background and motivations of the [***] amendment, its 
preamble makes no reference to any possible early repayment, mentioning only that KfW  was asked 
to enter into the amendment "in order to [***] on the loan tranches, and to provide the Borrower 
with new [***] for these [***]".304 In the absence of any evidence showing that Airbus was, in 
fact, seriously considering exerci sing its rights under [***] in order to refinance the German 
A350XWB LA/MSF using market -based  instrument s (which the European Union maintains was a 
credible possibility) ,305 there is no sufficient basis to accept the premi se underlying the 
European  Union's submi ssions. In this light, we believe that the European Union's assertion of 
compliance with respect to the German A350XWB LA/MSF subsidies cannot be sustained.  
Consistent with the starting point of the analytical framework we have set out above , in 
consideri ng whether to enter into the [***] amendment, we believe that a market lender that did 
not face the potential repayment of the outstanding principal and accrued interest as a credible 
possibility  would have compare d the returns available under the unamended market -based  
arrangement with those available under the proposed amendment. Although the parties have not 
undertaken this analysis, the United States' expert, NERA Consulting, conducted an assessment the 
expected  IRR of the unamended  loan contract and compare d that to the expected IRR under the 
[***] amendments, taking into account the revised 2018 forecast delivery schedule used in the 
TradeRx  Report .306 The European Union has not disputed the accuracy of the NERA calculation, 
arguing only that it addresses the wrong question.307 For present purposes, we note that NERA 
concludes that the IRR for the unamended German A350XWB LA/MSF agreement (which, we recall 
was provided on subsidized terms) is greater than the IRR of  the amended agreement.308 This 
confirms that a market lender that did not face the potential repayment of outstanding principal and 
accrued interest as a credible possibility  would have preferred its own market -based  A350XWB 
LA/MSF agreement (offering grea ter returns than the unamended German A350XWB LA/MSF 
agreement ) to the [***] amend ed version of the German A350XWB LA/MSF agreement .  
Finally, even if we were to accept that there was a credible possibility that Airbus  could have 
invoked [***] to repay and  refinance the German A350XWB LA/MSF, we are not convinced that the 
test for determining whether that amendment was market -based should  be focused , as the 
European  Union argues,  on comparing the IRR of the amended contract with the IRR that a market 
lender  would expect to achieve (and, therefore, request Airbus to pay) for the same or similar loan 
entered into at the time of the amendment. As already discussed309, such an approach would 
erroneously treat the [***] amended German A350XWB LA/MSF agreement in the same way as a 
new loan issued for the first time at the time of the amendment. In order to determine whether the 
terms of the amended German A350XWB LA/MSF agreement are market -based, the question that 
we bel ieve must be answered is whether a market lender  (not KfW) would have preferred  to receive  
the returns associated with the amended German A350XWB LA/MSF agreement over the returns it 
could have expected to achieve as a result of a decision on the part of A irbus to invoke its right 
under [***] of the LA/MSF agreement  to repay the outstanding principal and accrued interest. In 
this way, we believe it would be possible to determine whether the [***] amendment to the German 
A350XWB LA/MSF agreement left Airbus in the same position it would have been in at the t ime of 
the amendment, had the German A350XWB LA/MSF agreement  been agreed with a commercial 
lender on market terms from the very beginning.  We now turn to apply this standard  to the facts 
 
303 European Union's opening statement at the meeting of the panel, para. 65.  
304 German A350XWB  [***] amendment , preamble . (Exhibit EU -9 (BCI) (English translation)) .  
305 The European Union has not argued that Airbus would have made the repayment on the basis of its 
own funds, without using any form of market financing.  
306 NERA German A350XWB LA/MSF Report, (Exhibit USA-26 (HSBI/BCI)), para. 4 and Appendices 1 
and 2. 
307 European Union's second written submission, para. 102.  
308 NERA German A350XWB LA/MSF Report, (Exhibit USA-26 (HSBI/BCI)), paras. 2, 8 , and 10 -15. 
NERA  calculated two different IRRs for the original German A350XWB LA/MSF agreement based on different 
assumptions concerning the interest charged on the [***]. NERA determined that the IRR under the 
unamended arrangement is either [***] or [***]. NERA then compared these IRR calculations to the 
expected IRR of [***] that TradeRx calculated for the amended original Ger man A350XWB LA/MSF 
agreement. (See NERA German A350XWB LA/MSF Report, (Exhibit USA-26 (HSBI/BCI)), para. 4 and 
Appendices 1 and 2 ).  
309 See para graphs  7.144 –7.147  above . WT/DS31 6/RW2  
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  surrounding the [***] amendment to the German A350XWB LA/MSF contract , as a means to make 
alternative findings , having already concluded that the European Union has failed to establish the 
factual basis underpinning its claims of compliance wi th respect to the German  A350XWB LA/MSF 
subsidies.  
Whether the [ ***] amendment has aligned the terms of the German A350XWB 
LA/MSF agreement with a market benchmark  
The European Union argues that the returns that would have been available to KfW had it 
decided to invest the outstanding principal and accrued interest that Airbus would have been 
required to repay in the event that Airbus trigger ed [***] of the German A350XWB LA/MSF 
agreement  can be represented by the IRR that a market lender would have reques ted Airbus to pay 
for a loan on the same or similar terms as the [***] amendment. According to the European Union, 
that "return is also what KfW could have expected to receive if it accepted the prepayment and 
re-invested it in a venture of similar risk profile".310 Thus, r elying upon the calculations in the 
TradeRx  A350XWB LA/MSF Report, the European Union argues that the IRR of KfW's re-investment 
of the funds repaid by Airbus would have been less  than the IRR of the [***] amendment.311 In our 
view, ho wever, it is not entirely clear whether the IRR calculated in the TradeRx  Report for the 
alleged market benchmark represents the return that a market lender  would have expected to 
receive from re -investing the significant  amount of outstanding principal an d accrued interest that 
Airbus would have repaid. The IRR determined by TradeRx  is based on an estimate of the risk profile 
of the amended A350XWB LA/MSF contract, which captures Airbus ' credit worthiness and the risk 
profile of the A350XWB project. Opport unities to invest in projects having different risk profiles  with 
potentially overall greater returns  would have no doubt been available to a market lender, 
particularly given  what the significant  value of the early repayment  would have been . 
The United St ates argues that the European Union is wrong when it argues that KfW would 
have preferred the [***] amendment over the receipt of early repayment under the unamended 
German A350XWB LA/MSF agreement. According to the United States, the European Union's 
submission is flawed because if Airbus effected [***], Airbus would have retain ed the obligation to 
make [***] under the original agreement.312 Thus, th e United States argues that the choice that 
KfW faced with was whether to: (i) receive [***] and also [***] as dictated by the original 
agreement; or (ii) agree to the [***] amendment.313 Given these choices, the United States' expert, 
NERA Consulting, calculated an IRR of investing the [***] at the alleged market -based IRR  
determined in the TradeR x Report and receipt of the [***], and compares that to the IRR of the 
amended German A350XWB LA/MSF agreement. The NERA Report concludes that the expected IRR 
of re-investing the early repayment and receiving [***] ([***]) is greater than the expected IRR 
of the amended German A350XWB LA/MSF loan agreements ( [***]).314 On this basis, the United 
States concludes that a market lender in the German government's position as of [***] would not 
have agreed to enter into the [***] amendment  because it would have been more beneficial to 
accept and re -invest the early repayment and accept the future royalty payments .315 
The European Union does not dispute the United States' assertion that [***] would be 
available  under a n early  repayment scenario, nor does the European Union specifically dispute the 
accuracy of NERA's IRR calculations. Nevertheless, the European Union maintains that the 
United  States and NERA err in arguing that the European Union's submissions "ignore 
KfW's  entitlement to [***] in the case of early repayment". After confirming that [***] would have 
been available under both the early repayment and amendment scenarios, the Europe an Union 
points out that the [***] available under the amended LA/MSF agreement provided for marginally 
 
310 European Union's response to Panel question No. 11, paras. 113 -114. 
311 European Union's response to Panel question No. 7, para. 62.  
312 United States' comments on the European Union's re sponse to Panel question No. 7, para. 47.  
313 United States' comments on the European Union's response to Panel question No. 7, para. 47; 
Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173 (HSBI/BCI)), para. 28.  
314 United States' comments on the Europe an Union's response to Panel question No. 7, para. 47 ; 
Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173 (HSBI/BCI)), paras. 27 -29. NERA submits 
that the TradeRx IRR calculation of [***] for the amended German A350XWB LA/MSF agreement is [***] of 
[***]", and that the annual IRR can be alternatively calculated as [***] which is the compounded annual 
return of [***] quarterly growth. (Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173 
(HSBI/BCI)), fn 5 ). 
315 United States' comments on the European Union's response to Panel question No. 7.  
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  better returns than those prescribed under the unamended A350XWB arrangement. The 
European  Union concludes that this means that "with respect to [***], the 2018 amendment 
enhances KfW's position".316 Likewise, the European Union argues that the [***] terms brought 
about by the [***] amendment had a [***], concluding that the financial terms of the amended 
agreement did not alter KfW's financial position.317  
We find the European Union's response to the United States' arguments to be misplaced 
because it does not address the comparison between the returns available to a market lender under 
the [***] amendment and the returns that would have resulted if a marke t lender decided to 
re-invest the repaid principal and receiv e the planned  [***] under the unamended A350XWB 
LA/MSF agreement.  Although the European Union explains that its response provides a "comparison 
of the expected returns under the early repayment a nd the 2018 amendment scenarios", in 
substance, the European Union compares the terms of the [***] amendment with the terms of the 
unamended agreement. To this extent, t he European Union's submissions  answer the wrong 
question because they proceed on the basis that the early repayment would not have occurred , 
leaving the market lender with a choice between the unamended or amended A350XWB LA/MSF 
agreements.  
As already explained, in order to determine w hether the terms of the amended German 
A350XWB LA/MSF agreement are market -based, the question that must be answered is whether a 
market lender  (not KfW) would have preferred the returns associated with the amended German 
A350XWB LA/MSF agreement over the returns it could have expected to achieve as a result of 
Airbus'  decision to invoke its right under [***] of the LA/MSF agreement to repay the outstanding 
principal and accrued interest. The analysis the United States presents in the NERA Report attempts 
to perform this comparison. However, we are not convinced that NERA's calculation is entirely 
accurate. First, the IRR calculated in the repayment scenario relies upon the market benchmark IRR 
determined by TradeRx , which , as already noted, we believe may n ot necessarily  reflect the 
alternative investment options available to a market lender.318 Second, in the absence of any further 
explanation, we are not convinced that the way the NERA R eport has relied upon th e TradeRx  IRR 
in its calculation is appropriate,  as it seems to have been used to generate the re -invested cash 
flows as a compound interest rate instead of in the form of an IRR. Finally, we note that in accounting 
for the cash flows expected from future [***] payments, the NERA Report uses the values 
prescribed in the unamended German A350XWB LA/MSF agreement. We recall, however, that the 
returns available under the unamended German A350XWB LA/MSF agreement are subsidized and, 
therefore, by definition less tha n what a market lender would have requested Airbus to pay for the 
same or a similar loan. In our view, this suggests that the [***] payments envisaged under the 
unamended German A350XWB LA/MSF agreement were less than what a market lender would have 
accept ed. To this extent , NERA's calculation of the returns achieved from future [***] may well 
under -estimate the returns available to a market lender.  
Thus, in the light of the above considerations, we find that the European Union has failed to 
demonstrate tha t the [***] amendment to the German A350XWB LA/MSF agreement resulted in 
the "withdrawal" of the subsidy, by aligning its terms with a market benchmark. We are not 
convinced by the European Union 's submissions under this alternative analysis, because they fail to 
properly address and establish that a market lender  would have preferred to receive  the returns 
anticipated under the [***] amendment over the returns that would have been available from re-
investing Airbus' early repayment  of the significant amoun t of outstanding principal and accrued 
interest , taking into account the value of future [***] under the unamended A350XWB LA/MSF 
contract . The European Union has, therefore, failed to show that the [***] amendment left Airbus 
 
316 European Union's comments on certain arguments and evidence that the United States filed with its 
25 June 2019 Comments on EU Reponses to Panel questions, paras. 20 and 22 . 
317 European Union's comments on certain arguments and evidence that the United States filed with its 
25 June 2019 Comments on EU Reponses to Panel questions, para. 23.  
318 We note that the United States has questioned the European Union's calculation of the  [***] under 
the German A350XWB LA/MSF agreement, suggesting inter alia  that the European Union's analysis may have 
undervalued it as a potential return to the German government. The United States maintains that it was unable 
to verify the calculation perf ormed by the European Union's expert, KPMG, because it alleges that various 
specific pieces of information needed to understand it was not provided with the analysis. (United States' 
comments on the European Union's response to Panel question No. 4, paras.  29-30). In the light of our 
findings concerning the European Union's claim , we do not believe it is necessary to explore this issue further 
with the parties.  
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  in the same position it would have been in at the t ime of the amendment, had the German A350XWB 
LA/MSF agreement  been originally agreed with a commercial lender that would have been faced with 
a real possibility that Airbus could have forced it to accept early [***] in [***].  
Repayment of the UK A350XWB LA/MSF loan on subsidized terms  
Main arguments of the parties  
The European Union argues that, on [***], Airbus fully repaid the UK A350XWB LA/MSF 
loan by making a payment of [***] to the UK Department of Business, Energy & Industr ial Strategy 
(BEIS). The European Union argues that this sum reflects the  total amount of outstanding  principal 
drawn -down by Airbus as of [***], plus interest accrued since [***], less [***].319 
According to the European Union,  the full repayment of a loan on its subsidized terms 
achieves the withdrawal of that subsidy , for the purpose of Article 7.8 of the SCM Agreement, 
because the repayment of the financial contribution removes one of the constituent elements of a 
subsidy, resulting in the life of that subsidy coming to end. The European Union submits that this is 
precisely what was achieved when Airbus fully repaid the UK A350XWB LA/MSF loan on [***], 
thereby bringing the European Union into compliance under Article 7.8 in respect of the UK A350XWB 
LA/MSF subsidy .320 Alternatively, the European Union argues that it would be appropriate to view 
the repayment of the UK A350X WB LA/MSF loan as an "intervening event" that brings the life of the 
UK A350XWB LA/MSF loan to an end, thereby achieving the withdrawal of the subsidy.321  
The United States acknowledges that Airbus made a payment of [***] to the 
UK Government on [***].322 However, according to t he United  States,  this fact alone does not 
establish that Airbus repaid "the full amount of outstanding principal" or that Airbus will not draw 
down the principal again.323 In any case, t he United States argues that the European Union has  
failed to withdraw the UK A350XWB LA/MSF subsidy because repaying a loan on its subsidized terms 
does not result in the withdrawal of the subsidy for purposes of Article 7.8 of the SCM  Agreement.324 
The United States submits that the first compliance panel agreed with this assessment when it 
criticiz ed the same theory advanced by the European Union in that proceeding .325  
Moreover, the United States rejects the European Union's argument that the repayment of 
the UK A350XWB LA/MSF loan may be viewed as an intervening event  that brings the life of the loan 
to an end. The United States argues that the full repayment to which the European Union refers, 
and the possibility that early repayment would occur, is "part of the spectrum of facts that informed 
the parties'  ex ante  expectation as to the life of the subsidy, and it was also an element of the 
contract that the first compliance panel had before it when it found that the contract transmitted a 
subsidy" .326 The United States argues that the fact that the contract operated as it was originally 
envisioned cannot logically serve as an intervening event that changes the life of the benefit of the 
subsidy.327 
 
319 European Union's first written submission, para. 88.  
320 European Union's first written submissio n, paras. 64 -69 and 89.  
321 European Union's first written submission, fn 139.  
322 United States' first written submission, para. 105 . 
323 United States' first written submission, paras. 101  and 110-114. 
324 United States' first written submission, paras. 101  and 106-109; and second written submission, 
paras. 41 -45. 
325 United States' first written submission, paras. 106 -107 (referring to Panel Report, EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1070 -6.1073 ); and second written 
submission, para. 44.  
326 United States' first written submission, para. 109.  
327 United States' first written submission, para. 109;  and response to Panel question No. 22, para. 61.  
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Evaluation by the Panel  
Has the UK A350XWB LA/MSF loan b een fully repaid?  
The European Union asserts  that Airbus repaid all outstanding principal and interest accrued 
less [***] totalling [***] under the UK A350XWB LA/MSF contract  on [***] as part of a [***].328 
In particular, on [***], Airbus informed the United  Kingdom of its intention to effect [***].329 On 
[***], BEIS confirmed to Airbus that the payment had been received, and that the sum reflected 
"the Principal amount drawn down", "plus Interest accrued from [***]", "less [***]".330 
BEIS confirmed that "{t}his means that the Repayable Investment has been repaid in full".331 
In explaining the amount repaid by Airbus, the European Union submits that during the 
[***], Airbus drew  down only  [***], which is less than the [***] maximum amount of funding 
availabl e under the UK  A350XWB  LA/MSF loan a greement.332 As evidence of the amounts of receipts 
and repayments made, the European Union submitted Airbus accounting entries in Exhibit EU -81.333 
Those entries reveal a difference of [***], which t he European Union explai ns as the difference 
between: (i)  interest accrued between [***] and [***]; and (ii) [***].334 Finally, the 
European  Union explained how Airbus determined the final levy payments that were due on [***] 
eligible A350XWB deliveries that were made during the first quarter of 2018.335 
Our review of Airbus' accounting entries in Exhibit EU -81 and the European Union's 
explanations confirms that Airbus' [***] payment reflects the full amount of outstanding principal 
due under the UK A350XWB LA/MSF agreement, plus interest accrued since the  date of the last 
periodic interest payment on 26 March 2018, less [***]. 
We note that the European Union has further indicated that, under the terms of the UK 
A350XWB LA/MSF Agreement, Airbus is not permitted to re -draw funds under the loan [***].336 
Specif ically, Clause  4.4 of the agreement provides that [***].337 Clause  1 defines the [***].338 The 
 
328 European Union's first written submission, paras. 86 -89; and second written submission, 
paras.  59-72. See  also [***] UK A350XWB LA/MSF Agreement, (Exhibit EU -28 (BCI)), Clause 6.6.  
329 BEIS Letter to Airbus, [***], (Exhibit EU -7 (BCI)) . 
330 BEIS Letter to Airbus, [***], (Exhibit EU -7 (BCI)) . 
331 BEIS Letter to Airbus, [***], (Exhibit EU -7 (BCI)) . 
332 European Union's second written submission, fns 93  and 104. 
333 Excerpts from Airbus' accounting system in relation to the A350XWB LA/MSF loan, (Exhibit EU -81 
(BCI)). The European Union points out that, in scrutinizing Airbus' accounting excerpts, the United States 
erroneously identified cash flows of [***] as repayme nts instead of disbursements of loan principal, and that 
the United States further erroneously transposed the disbursement amount on [***] as an amount that was 
[***] short of the actual disbursement. We have confirmed the accuracy of the amounts of receip ts and 
repayments reflected in Exhibit EU -81 (BCI), consistent with the European Union's observations. 
(European  Union's comments on the United States' response to Panel question No . 18, paras. 67 -70. See also 
United States' response to Panel question No . 18, paras. 46 -47). 
334 The European Union submits that a principal balance of [***]. The European Union also explained 
that Clauses 1.1 and 7.1 of the UK A350XWB LA/MSF loan agreement [***]. (European Union's comments on 
the United States' response to Panel question No . 18, para. 71 and fns  111 and 11 3; [***] UK A350XWB 
LA/MSF Agreement, (Exhibit EU -28 (BCI)), Clauses 1.1 and 7.1 ).  
335 The European Union explains that, in reviewing Airbus' levy payments in the first quarter of 2018, 
the United States incorrect ly determined that Airbus should have made levy payments on [***] A350XWB 
deliveries made by 30 April 2018. The European Union explains that, under the UK A350XWB LA/MSF loan 
agreement, Airbus is required to pay [***]. Of the [***], the European Union explains that [***] were free 
of levies because [***]. (European Union's comments on the United States' response to Panel question 
No. 18, paras. 72 -73 (referring to  [***] UK A350XWB LA/MSF Agreement, (Exhibit EU -28 (BCI)), Clauses 1.1 , 
5.3 and 5.4 ); and Airbus Orders & Deliveries Data, (Exhibit USA -49). See  also United States' response to Panel 
question No . 18, para. 48 ). 
336 European Union's second written submission, para. 75. 
337 [***] UK A350XWB LA/MSF Agreement, (Exhibit EU -28 (BCI)),  Clause 4.4.  
338 [***] UK A350XWB LA/MSF Agreement, (Exhibit EU -28 (BCI)), Clause 1.1.  
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  United States asserts that it is not clear that Airbus will not draw down the principal again339, recalling 
that Airbus and the UK Government previously [***].340  
Although it is true that [***], there has been no further amendment to suggest that this 
will happen again. Moreover, and significantly, it is clear from [***] of the loan agreement that 
Airbus [***] prior to the date on which Airbus made its final payment  of outstanding principal and 
interest . These facts suggest that Airbus is not seeking, and indeed, is not entitled to seek, further 
funding from the UK Government under the UK A350XWB LA/MSF contract. Similarly, we do not see 
a factual basis to conclude t hat Airbus is even considering the possibility of asking the 
UK government to amend the A350XWB LA/MSF agreement to allow it to draw down additional 
funds. The mere possibility  that this may happen is, in our view, insufficient to support a finding that 
the full amount of funding originally contemplated under the UK A350XWB LA/MSF loan continues 
to be available.  
Accordingly , we agree with the European Union that the full amount of [***] was not drawn 
down, and that the full amount of funds available to Airb us under the UK A350XWB LA/MSF contract 
was not outstanding  at the time of the final payment .341 We also agree with the European Union that 
Airbus has repaid the entirety of the principal that it actually drew down and received . In our view, 
this follows fro m the contractual terms of the UK A350XWB LA/MSF agreement, which establishes a 
repayment obligation with respect to the [***]342 and defines the [***].343 
We therefore find that Airbus repaid all outstanding principal and interest accrued under the 
UK A350XWB LA/MSF contract  on [***] with a final payment totalling [***]. This represents 
repayment of the full amount of principal that Airbus actually drew down and received , which we 
consider is the amount relevant to our assessment.  
Whether the full repayment of  outstanding principal and interest under the 
UK A350XWB LA/MSF agreement on subsidized terms has achieved the withdrawal of the 
subsidy  
As it did with respect to the amendment of the German A350XWB LA/MSF agreement, t he 
European Union characteriz es Airbus' repayment of the UK A350XWB LA/MSF loan as an act, and 
alternatively , an "intervening event", that achieves the withdrawal of the UK A350XWB LA/MSF  
subsidy, within the meaning of Article 7.8 of the SCM Agreement. We note, however, that 
notwithst anding the European Union's alternative characterization, the fundamental reason 
advanced by the European Union to support its assertion of compliance on this basis is the same 
regardless of how the repayment is described.344 Thus, irrespective of whether th e repayment is 
properly characterized as an act, or as an "intervening event", the European Union maintains that it 
achieves compliance with its obligation to "withdraw the subsidy" because, by "removing" the 
financial contribution, it has brought the life  of the UK A350XWB LA/MSF subsidy to an end. 
Accordingly, the key question we must address in order to determine the merits of the 
European  Union's assertion of compliance is whether the repayment of the UK A350XWB LA/MSF 
loan on subsidized terms brings th e life of the UK A350XWB LA/MSF subsidy to an end.  
The European Union relied upon essentially the same line of argument in the first compliance 
proceeding , when it argued that  the lives of most of the pre -A380 LA/MSF subsidies had come to an 
 
339 United States' first written submission, paras. 101 and 110-114. 
340 United States' first written submission, para s. 103 and 113  (referring to Panel Report, EC and certain  
member States – Large Civil Aircraft (Article 21.5 – US), para. 6.258 and fn 462 ). The relevant information 
contained in para. 6.258 and fn 462 are BCI.  
341 European Union's first written submission, paras. 87 -89; and second written submission, 
paras.  63-64. See also Excerpts from Airbus accounting system in relation to the A350XWB UK  loan, 
(Exhibit  EU-81 (BCI)).  
342 [***] UK A350XWB LA/MSF Agreement, (Exhibit EU-28 (BCI)), Clause 5.1. 
343 [***] UK A350XWB LA/MSF Agreement, (Exhibit EU -28 (BCI)), Clause 1.1 . 
344 The European Union's claim that the repayment of the UK A350XWB LA/MSF loan may be, in the 
alternative , characterized as an "intervening event" that brings the life of the subsidy to an end, is presented in 
a footnote to its first written submission. The European Union does not advance any specific arguments to 
support this claim that are different to those advanced in relation to its main, non -alternative, c laim. 
(See European Union's first written submission, fn 139 ). 
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  end because they had already been fully repaid.345 In this compliance proceeding, the 
European  Union reiterates that position, arguing that it "is supported by, and fully consistent with 
the Appellate Body's finding, in the original proceedings, that 'the remova l of the financial 
contribution', as one of the constituent elements of a subsidy, results in the 'life' of a subsidy coming 
'to an end' ".346  
In the first compliance proceeding, the panel expressed concerns about  the European Union's  
understanding of the Ap pellate Body's statement, explaining as follows:  
The European Union finds support for its submission that the repayment of the LA/MSF 
agreements has brought the subsidy to an end in the following statement made by the 
Appellate Body in the original proceed ing: 
We understand the participants to agree with the basic proposition that a 
subsidy has a life, which may come to an end, either through the removal 
of the financial contribution and/or the expiration of benefit .{} (emphasis 
added)  
For the European Unio n, the full repayment of the LA/MSF agreements implies that the 
financial contributions provided to Airbus have been "returned "{} and, therefore, 
consistent with the Appellate Body 's statement, no subsidies continue to exist. 
In our view, the European Unio n has misunderstood the totality of the 
Appellate  Body's guidance on this point . 
First, we note that the Appellate Body statement relied upon by the European Union 
refers to the "removal " of a financial contribution. However, it is less than clear to us 
that the repayment of a loan on its subsidized terms amounts to the same thing. Rather, 
it could be argued that the full repayment of a subsidized loan implies that a subsidized 
financial c ontribution has been provided to the recipient in its entirety, not removed or 
"returned", as the European Union argues.  
Second, while it is true that the repayment of a loan on its subsidized terms would bring 
about the end of the financial contribution, in the sense that there would be no longer 
any financial contribution in existence, the Appellate Body explicitly recognized in the 
original proceeding that this, alone, will not necessarily mean that the relevant subsidy 
has ceased to exist.  Specifically,  in the paragraph immediately preceding the statement 
the European Union relies upon, the Appellate Body explained that:  
{T}he fact that a subsidy is "deemed to exist" under Article 1.1 once there 
is a financial contribution that confers a benefit does no t mean that a 
subsidy does not continue to exist after the act of granting the financial 
contribution .{} (emphasis added).347 
 After raising these doubts about the European Union's understanding of the 
Appellate  Body's  statement, the compliance panel ultimat ely refrained from making specific findings 
on whether the repayment of a loan on subsidized terms achieve s the withdrawal of the subsidy  for 
the purpose of Article 7.8 of the SCM Agreement, having already found that the "lives" of the relevant 
subsidies h ad expired before the end of the implementation period on other grounds .348 The 
 
345 Specifically, the European  Union argued that the lives of the French LA/MSF for the A310 -300, the 
French and Spanish LA/MSF for the A300B/B2/B4 and A300 -600, and the French, Spanish, and UK L A/MSF for 
the A320 and A330/A340, came to an end. (Panel Report, EC and certain member States – Large Civil Aircraft 
(Article 21.5 – US), para. 6.109 and Table 13 ).  
346 European Union's second written submission, para. 20  (referring to Appellate Body Report, EC and 
certain member States – Large Civil Aircraft , para. 709 ).  
347 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.1070-6.1073  (citing Appellate Body Report, EC and certain member States – Large Civil Aircraft , 
paras. 708 -709). (fns omitted ) 
348 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1074 
("{W}e believe it is unneces sary to make any definitive findings in relation to the merits of the 
European  Union's submissions concerning the extent to which the actual repayment of the relevant LA/MSF 
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  European Union appealed this aspect of the first compliance panel 's findings . However, the 
Appellate  Body found it unnecessary to address that appeal,  having upheld the Panel's s eparate 
findings that the pre -A380 LA/MSF subsidies expired before the beginning of the implementation 
period, leaving the European  Union with no further compliance obligation under Article 7.8 with 
respect to those subsidies.349 
Fundamentally, the European Union's reliance on the same line of argument in this dispute 
is based on the view that the compliance panel was wrong to suggest that the repayment of a loan 
on subsidized terms may not amount to the "removal" of a financial contribution. The 
European  Union advances several lines of argument in support of its submission.  
First, t he European Union argues that its position "is consistent with, and flows from, the 
very definition of a subsidy"350, which the European Union submits requires the co -existence of two 
elements – a financial contribution  and a benefit conferred on the recipient. Thus, according to the 
European Union, "{ i}t follows that, when one of the two constituent elements is removed,  a subsidy 
canno t be held to exist ".351 For the European Union, this understanding is confirmed by the term 
"thereby" in Article 1.1(b) of the SCM Agreement, which the European  Union argues indicates that  
a benefit can only be conferred, and can only exist, based on a financial contribution that a recipient 
"continues to enjoy".352 
Second, the European Union maintains that the compliance panel's analysis should be 
disregarded because it was based on a misreading of what the Appellate Body had in mind when it 
said that the " fact that a subsidy is 'deemed to exist' under Article 1.1 once there is a financial 
contribution that confers a benefit does not mean that a subsidy does not continue to exist after the 
act of granting the financial contribution ".353 According to the European Union, the compliance panel 
was wrong to interpret this statement to mean that the Appellate Body explicitly recognized that the 
repayment of a loan on its subsidized terms does not, alone, bring the life of a subsidy to an end.354 
For the Eu ropean Union, the Appellate Body's statement "does not speak to the (non -)existence of 
a subsidy after the act of removing the financial contribution in full ", which is the question before 
the panel in this proceeding. Rather, it is focused on the "life of  the subsidy continuing after the act 
of granting the financial contribution ".355 
Third, the European Union submits that the compliance panel's observations about the 
repayment of a loan on subsidized terms were driven by its interpretation of the phrase " withdraw 
the subsidy ", which was overturned by the Appellat e Body. In this light, the European Union argues 
 
measures on subsidized terms has brought about the end of the "lives" of the chall enged subsidies") . See also 
Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 1847.  
349 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.406 ("We see no reason, in  order to resolve this dispute, to make additional findings on whether the 
French LA/MSF for the A310 -300, the French and Spanish LA/MSF for the A300B/B2/B4 and A300 -600, and the 
French, Spanish, and UK LA/MSF for the A320 and A330/A340 also came to an end  due to the actual 
repayment of the loans with interests") . 
350 European Union's second written submission, para. 21.  
351 European Union's second written submission, paras. 21, 28 -35 and 83 -85. Canada in its third -party 
submission expressed a similar view to t hat of the European Union that "actions or events affecting the 
financial contribution or the benefit elements of a subsidy can result in withdrawal", including by repayment of 
the principal amount of the loan. For Canada, "{a}s the recipient of a subsidiz ed loan benefits from having 
access to the principal amount of the loan on better -than-market terms, once the principal is repaid it no 
longer enjoys such benefit" . (Canada's third -party submission, paras. 10 and 12 ). Brazil and Japan share the 
view that withdrawal can only be achieved through addressing the benefit provided by the subsidy. Brazil 
submits, for instance, that, repayment of a loan "does not affect in any way the manner in which a subsidy 
'was projected to materialize over a certain period at the time of the grant'" . (Brazil's response to Panel 
question No. 1 , para. 17). Japan submits that a finding that the life of a subsidy has expired "would always 
require the benefit to no longer exist". (Japan's thir d-party submission, para. 6. See also Japan's third -party 
submission, paras. 4 and 5 (citing Appellate Body Report, EC and certain member States – Large Civil Aircraft 
(Article 21.5 – US), paras. 5.387, 5.391, and 6.12)).  
352 European Union's second written submission, para. 22.  
353 European Union's second written submission, paras. 28 -29; and response to Panel question No. 19, 
para. 22.  
354 European Union's response to Panel question No. 19.  
355 European Union's response to Panel question No. 19, para. 2 5. (emphas is original)  
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  that the compliance panel's views on what might or might not be argued regarding the effectiveness 
of the repayment of a loan on subsidized terms in a chieving "withdrawal" are not instructive.356 
The United States argues that the European Union's argument s are at odds with the correct 
understanding of Article 7.8 of the SCM Agreement as well as Article 1 of the SCM Agreement357, 
and are not supported by the Appellate Body 's findings in the first compliance proceeding  concerning 
the "life" of a subsidy .358 While noting that the text of Article 7.8 permits Members to comply by 
withdrawing the subsidy, the United States submits that, based on its ordinary meaning, the text of 
Article 7.8 refers to the withdrawal of the subsidy itself, and not an element or component of the 
subsidy.359 The United States submits that Article 1 of the SCM Agreement defines the existence of 
a subsidy in terms of a financ ial contribution by which a benefit is conferred. According to the 
United  States, " {t}he Appellate Body found that the evaluation of benefit requires a collective 
analysis of the financial contribution, the terms under which the Member conferred it, and th e terms 
available in the market" .360 Thus, the United States submits that a conclusion as to the withdrawal 
of a subsidy requires consideration of all of these factors.361  
The United States further contends that the Appellate Body's statement "that a subsidy has 
a life, which may come to an end, either through the removal of the financial contribution and/or 
the expiration of the benefit", was made in the context of an analysis of Articles 5 and 6 of the 
SCM Agreement. The United States argues that considerati ons relevant for Article 5 are different 
from those relevant to Article 7.8 , in that Article 5 "concerns the use of subsidies in a way that 
causes adverse effects - not the continued existence of such subsidies".362 In addition, the 
United  States argues that  the use of "and/or" in the Appellate Body's statement the European Union 
relies upon merely "signals an understanding that the parties agreed that the two options are not 
necessarily disjunctive".363 For the United States, this language leaves open the poss ibility that 
removal of a financial contribution would only bring the life of a subsidy to an end if it also entails 
termination of the benefit. The United States argues that the E uropean Union now "seeks to distort 
the appellate report's 'and/or' into an either/or theory that would artificially cut short the lives of 
subsidies while the ex ante  benefit remains untouched" .364 
The United States submits that  there may be occasions when the repayment  -and removal -
of the financial contribution may achieve withdra wal of a subsidy but  considers  that this will depend 
on the particular circumstances. In the case of a subsidised loan, the United States submits that the 
withdrawal would necessitate prospective annual interest rates that brought the loan into conformity 
with the loan the recipient co uld have obtained in the market at the time it received the subsidy.365 
Finally, the United States argues that there is no support for the European Union's argument 
that the compliance panel's views on whether the repayment of a loan on subsidized terms may 
withdraw a subsidy are somehow invalid because the compliance panel's interpretation of the phrase 
"withdraw the subsidy" was overturned by the Appellate Body. The United States submits that the 
 
356 European Union's second written submission, para. 27 ; and response to Panel question No. 19, 
paras. 20 -21. 
357 United States' second written submission, paras. 42 -45. 
358 United States' second written submission, para. 45 . 
359 United States' second written submission, para. 42.  
360 United States' second written submission, para. 42.  
361 United States' second written submission, para. 42. The United States argues that, "just as the 
governments' payment of principal to Airbus under the LA/MS F contracts was not enough for past panel and 
appellate reports to conclude that it conferred a subsidy, the alleged disgorgement of the principal by Airbus is 
not enough by itself to conclude that the subsidy no longer exists" . (United States' second writ ten submission, 
para. 43 ). 
362 United States' second written submission, para. 45  (referring to Appellate Body Report, EC and 
certain member States – Large Civil Aircraft (Article 21.5 – US), para. 5.373 ) ("Article 5 is concerned with the 
causing of adverse effects through the 'use' of subsidies. … In contrast, Article 7.8 is concerned with the 
continued existence of 'such subsid{ies}'.")  
363 United States' second written submission, para. 45.  
364 United States' second written submission, para. 45. See also Unite d States' comments on the 
European Union's response to Panel question No. 19, para. 73.  
365 United States' comments on the European Union's response to Panel question No. 21, para. 84. 
Alternatively, the United States submits that the subsidizing government would need to extract an amount 
equal to the difference between the original benchmark and the loan. (United States' comm ents on the 
European Union's response to Panel question No. 20, para. 76 ). 
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  compliance panel's analysis of whether repayment could withdr aw a subsidy was not founded on its 
separate analysis of whether a subsidy properly found to have ended was withdrawn for purposes 
of Article 7.8.366 
We do not see a contradiction between the compliance panel's suggestion that the 
repayment of a loan on subs idized terms may not constitute the "removal" of a financial contribution 
and the definition of a subsidy contained in Article 1.1 of the SCM Agreement. The compliance panel's 
statement was focused on whether the repayment of a loan on subsidized terms  amounts to the 
"removal" of a financial contribution, not whether the "removal" of a financial contribution brings the 
life of a subsidy to an end. Thus, the compliance panel's statement is not directed at understanding 
whether the removal of one of the const ituent elements of a subsidy (the financial contribution) 
means that the subsidy no longer exists. It is instead focused on whether the repayment of  a loan 
on subsidized terms means that a financial contribution has been "removed". On this particular point , 
the compliance panel suggests that the repayment of a loan on subsidized terms might not amount 
to the "removal" of the financial contribution, but rather, the full provision of a subsidized financial 
contribution.  
Likewise, although we agree with the E uropean Union that the second Appellate Body 
statement quoted in the above passage was not directed at understanding whether the "removal" 
of a financial contribution automatically brings the life of a subsidy to an end, the compliance panel 
did not rely u pon it to make that point. As already noted, the compliance panel's suggestion that the 
repayment of a loan on subsidized terms may not constitute the "removal" of a financial contribution 
does not address this question. The second Appellate Body statement  quoted by the compliance 
panel envisages that a subsidy may "continue to exist after the act of granting the financial 
contribution". When considered in the light of the compliance panel's view that the full repayment 
of a loan on subsidized terms arguabl y "implies that a subsidized financial contribution has been 
provided to the recipient in its entirety ", the compliance panel's reliance on the second 
Appellate  Body statement suggests that it believed that the repayment of a loan on subsidized terms 
could  be characterized as the completion of the "act of granting of a financial contribution". Thus, 
correctly understood, the compliance panel's position is consistent with the Appellate Body's view 
that a subsidy may "continue to exist after the act of granti ng the financial contribution".  
Turning to the third reason the European Union has advanced to support its position that 
the above passage from the compliance panel report should be disregarded, we note that there is 
no mention of, or reference to, the compliance panel's interpretation o f the phrase "withdraw the 
subsidy". Moreover, there is no suggestion that the compliance panel's views were based on its 
previously articulated position that the "withdrawal" of a subsidy for the purpose of Article 7.8 of the 
SCM Agreement must bring an i mplementing Member into conformity with its obligations under 
Article 5 of the SCM Agreement. Indeed, the fact that this consideration was not mentioned at all 
(when it was the most obvious way of dismissing the European Union's submission concerning the 
repayment of the LA/MSF loans) suggests that the compliance panel's interpretation of what it means 
to "withdraw the subsidy" for the purpose of Article 7.8 did not form part of its reasoning in this part 
of its report. Accordingly, we find no basis to agre e with the European Union's contention that the 
compliance panel's statements were driven by its interpretation of the phrase "withdraw the 
subsidy", which was overturned by the Appellate Body.  
We note that in arguing that the repayment of a loan on subsi dized terms constitutes the 
"withdrawal" of a subsidy, the European Union elaborat es a theoretical example involving the 
provision of a one-off cash grant of EUR 10 million that was first advanced by the United States 
during the substantive meeting with th e Panel. The European Union compares the repayment of a  
one-off cash  grant of EUR 10 million that is used to purchase a ssets of the same value with a useful 
life of 10 years, with the repayment of a 10-year subsidized loan of EUR 10 million used for the sa me 
purpose.367 We understand  the European Union to rely upon its presentation of the outcomes of the 
two examples to support the logic of its submissions.   
The European Union begins its discussion of the one -off cash grant by explaining that both 
the financi al contribution and the benefit amount to EUR 10 million. The European Union asserts that 
one way to determine the life of the subsidy would be to amortise the benefit of the EUR 10 million 
over the anticipated useful life of the purchased assets (10 years ). According to the European Union, 
 
366 United States' comments on the European Union's response to Panel question No. 19, para. 70.  
367 European Union's responses to Panel question Nos. 19 and 21.  WT/DS316/RW2  
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  the subsidy would be considered "withdrawn" for the purpose of Article 7.8 of the SCM Agreement 
at the end of the 10 -year period by virtue of the expiry of its benefit. To this extent, the 
European  Union agree s with the notion that the life of a subsidy may continue even after a financial 
contribution has been fully provided – or, in the words of the Appellate Body, that "the fact that a 
subsidy is 'deemed to exist' under Article 1.1 once there is a financial contribution  that confers a 
benefit does not mean that a subsidy does not continue to exist after the act of granting the financial 
contribution".368 
The European Union then goes on to consider how the subsidy could be withdrawn after five 
years, positing two possibilities. The first option would involve removing the benefit  on a prospective 
basis, which the European Union maintains would be achieved if  the recipient repaid the unamortised 
benefit of the one -off cash grant amounting to EUR 5 million. With this payment, the European Union 
submits that the original one -off cash grant could no longer be found to confer a benefit on a 
prospective basis, and the subsidy would be withdrawn. The second option posited by the 
European  Union would involve the removal of the financial contribution , which the European Union 
submits would be achieved if the recipient repaid the entirety of the one -off cash grant of 
EUR 10 million. The European Union argues that, once that payment is made, there would be no 
longer any financial contribution, and the subsidy would thereby be withdrawn.  
Turning to the subsidized loan of EUR 10 million, the European Union first explains th at in 
the light of the 10 -year repayment period and the 10 -year useful life of the assets purchased with 
that loan, the subsidy would come to an end after 10 years. For the European Union , the subsidy 
would no longer exist after 10 years because by then th e financial contribution would have been 
repaid in full and the benefit fully amortized. As with the one -off cash grant, the European Union 
goes on to explain how the subsidy could be withdrawn after five years, identifying two possible 
scenarios. Under th e first scenario, the benefit  would be removed on a prospective basis, which the 
European Union maintains would be achieved by aligning the prospective annual interest payments 
with a market benchmark. The second scenario would see the recipient repay the entirety of the 
loan principal – i.e. the EUR 10 million. With this payment, the European Union argues that there 
would be no longer any financial contribution , and the subsidy would thereby be withdrawn.  
In our view, the European Union's  presentation of t he above two examples overlook s 
important differences in th e characteri stics of the two types of subsidies, which when properly 
considered, suggest that the repayment of a loan on subsidized terms should not be understood  on 
its own  to necessarily bring th e life o f a subsidy to an end.  
As the European Union notes, a financial contribution in  the form of a one -off cash grant 
involves the transfer of funds to a recipient, with those funds also immediately represent ing the 
benefit  to the recipient . In contras t, the benefit  of a subsidized loan accrues from the savings 
achieved by the recipient as a result of the below -market interest rates charged by the government. 
The total value of those savings (i.e. the full benefit ) is not transferred immediately  as in the case 
of a one -off cash grant. It is achieved gradually over the course of the repayment period, which will 
generally define the duration of the loan. Thus, the full benefit  of a subsidized loan will be conferred 
only when the loan is repaid in full . To this extent, and contrary to the European Union's submissions, 
the full repayment of the principal  disbursed under a subsidized loan can be  best equated with the 
provision  of a financial contribution  in the form of a one-off cash grant ( equivalent to the total 
savings resulting from below -market interest rates), not the "removal" of a subsidy . In our view, to 
argue otherwise would mean that Members would have different compliance obligations under 
Article  7.8 of the SCM  Agreement in relat ion to the withdrawal of subsidies affording recipients the 
same amount of benefit , simply because of the form of the financial contribution chosen to confer 
that benefit. This, we believe, can be seen from the examples posited by the European Union.  
The E uropean Union argues that the repayment after five years of the one -off cash grant of 
EUR 10 million and the principal of EUR 10 million disbursed under the subsidized loan, would bring 
the lives of the two subsidies to an end because, according to the Eur opean Union, in both cases the 
financial contributions would have been fully repaid, making it impossible to conclude there is 
ongoing subsidization.369 We note, however, that under this line of reasoning, none of the value of 
 
368 Appellate Body Report , EC and certain member States – Large Civil Aircraft , para. 708 . 
369 The United States considers that the "benefit" conferred by a grant is equivalent to the face value of 
the grant plus the interest that the recipient avoided paying because of the grant. H ence, a grant may be seen 
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  the benefit  afforded to the rec ipient under the subsidized loan would have been returned to the 
government, whereas the entirety of the benefit  conferred via the cash grant would have been 
repaid. The recipient of the subsidized loan would be free to keep the savings that helped or enab led 
it to finance the purchase of assets, while the recipient of the one -off cash grant would not be entitled 
to keep the government funding assistance. In the example presented by the European Union, it is 
not possible to determine the amount of the benef it of the subsidized loan because the interest rate 
savings were not specified. Assuming that the subsidized loan provided its recipient with exactly the 
same total value of savings as the cash grant – i.e. EUR 10 million370 – it is apparent that the Member 
having provided the one -off cash grant would be in a different compliance position  than the Member 
that provided exactly the same amount of benefit  to the recipient by means of a subsidized loan. 
We do not see any legal ba sis to conclude that a Member's decision to provide a recipient with a 
specific amount of funding assistance , by using either  a loan or a grant, should determine the extent 
to which the recipient is required to repay the totality of that funding assistance  in order to bring 
the subsidizing Member into compliance with its obligation to withdraw the subsidy under the terms 
of Article 7.8 of the SCM Agreement. In our view, these considerations suggest that the repayment 
of a loan on subsidized terms should not be understood to bring the life of a subsidy to an end.  
We note, furthermore, that the European Union recognizes that the repayment of principal 
and interest is a defining feature of a financial contribution in the form of a loan.371 Indeed, the 
requirement  to repay principal and interest under a subsidized loan is an essential  term of the 
agreement between the subsidizing government and loan recipient pursuant to  which that form of 
financial contribution is transferred . In contrast, the repayment of a one -off cash grant is not an 
inherent feature of this type of financial contribution. The repayment of a one -off cash grant is 
extraneous to a subsidizing government's direct transfer of funds to a recipient. By overlooking this 
important difference, the parall el the European Union draws between the repayment of the two types 
of financial contributions used in its examples is misplaced. In order to agree with the 
European  Union, we would need to accept that the performance of the very terms through which a 
subsidized loan is provided (i.e. the repayment of principal at below -market interest rates) would 
be, alone, enough to " remove " or "take away " the subsidy that is defined by the very existence of 
those terms . While we accept that the life of any subsidy will come to an end with the passage of 
time, we do not believe that a subsidy can be withdrawn for the purpose of Article 7.8 of the 
SCM Agreement simply through the execution of a condition whose performance is the very means 
by which the same subsidy is  bestowed. In other words, we do not see how the same act – the 
performance of a requirement to make subsidized repayments under a government loan – can define 
both the provision  and the withdrawal of a subsidy.  
Both parties find support for their differen t positions in the terms of Articles 1 and 7.8 of the 
SCM Agreement. According to the European Union, the very defin ition of a subsidy under Article 1 
requires the co -existence of a "financial contribution" and a corresponding "benefit". Thus, relying 
upon the Appellate Body's statement that the life of a subsidy may come to an end " either through 
the removal of the financial contribution and/or the expiration of benefit ", the European Union argues 
that the full repayment  of a loan  on its subsidized terms b rings the life of that subsidy to an end . 
The United States , however, argues that it follows from Article 7.8 that a subsidy in its entirety  must 
be withdrawn in order to achieve compliance, not just one of its elements. In this regard, the 
United  States  maintains that the Appellate Body 's use of the words "and/or" in the  statement the 
European Union relies upon means that the Appellate Body recognized that the two options identified 
were not necessarily disjunctive, confirming that the removal of a financial cont ribution may bring 
the life of a subsidy to an end only if it also entail s the termination of the benefit.  
As noted by the first compliance panel, the statement the European Union relies upon was 
not made in isolation but  preceded by the Appe llate Body's explanation of how the terms of Article  1 
of the SCM Agreement operate to define the existence of a subsidy. After recalling, as the 
 
as functionally equivalent to an interest -free loan for which the recipient need not pay the principal, according 
to the United States. (United States' response to Panel question No. 21, para. 59; and comments on the 
European Unio n's response to Panel question No. 21, para. 79 ). 
370 This could be possible, for example, if the government loan was interest free, and a similar loan from 
the market lender would have required the recipient to pay 10% interest per annum on the full amount of loan 
principal.  
371 European Union's response to Panel question No.  21, para. 11.  
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  European  Union does in this proceeding, that Article 1 stipulates that a subsidy shall be deemed to 
exist if t here is a financial contribution that confers a benefit, the Appellate Body stated:  
… the fact that a subsidy is "deemed to exist" under Article 1.1 once there is a financial 
contribution  that confers a benefit does not mean that a subsidy does not continu e to 
exist after the act of granting the financial contribution. This is confirmed, for example, 
by the text of Articles 4.7 and 7.8 of the SCM Agreement. The reference in those 
provisions to "withdrawing" the subsidy would be rendered meaningless if a sub sidy did 
not continue to exist after its conferral on a recipient.372 
In a footnote attached to the last sentence of this statement the Appellate Body explained 
its thinking further , recalling  that it ha d previously found in the context of Part V of the 
SCM Agreement, that the benefit of a n "untied, non -recurring , 'financial contribution'" may continue 
to flow after it has been provided.373 The statement the European Union relies upon – that the life 
of a subsidy may come to an end " either through the removal of the financial contribution and/or 
the expiration of benefit " – was made by the Appellate Body at the beginning of the very next 
paragraph.  In our view, the European Union's understanding of that statement is mistaken because 
it fails to account for the specific context in which it was made.  
Having twice explained that a subsidy may continue to exist after the act of granting a 
financial contribution is complete, we believe  that it would  be incongruous  to understand the 
Appellate Body to have accepted in the very next sentence that the repayment of a loan on its 
subsidized terms can bring the life of a subsidy to an end.  This is because, for the reasons already 
explained, the repayment of a loan on subsidized t erms merely confirms that a subsidy has been 
fully provided  (in the same way that the transfer of a one -off cash grant confirms the recipient has 
received the full subsidy). Thus, when considered in its proper context, we do not understand the 
Appellate Bo dy statement the European Union relies upon to support its position. On the contrary, 
in the light of the Appellate Body's explanation of how the terms of Article 1 of the SCM Agreement 
operate to define the existence of a subsidy  in the preceding paragrap h of its report , the 
Appellate  Body statement the European Union relies upon is best understood to express the view 
that the life of a subsid ized loan  may come to an end in either of two situations: when the financial 
contribution and the benefit have been  removed; or when only the benefit is removed.  This reflects 
our view that the repayment of a loan on its subsidized terms does not , alone,  bring the life of the 
subsidy to an end.   
Finally,  we do not see an y inconsistency between the view that the repayment of a loan on 
subsidized terms does not, alone, bring the life of a subsidy to an end, and the Appellate Body's 
interpretation of a Member's compliance obligations under Article 7.8 of the SCM Agreement. We  
recall that in the first compliance dispute, the Appellate Body found that a Member has no compliance 
obligation under Article 7.8 with respect to expired subsidies. However, for the reasons explained 
above, we do not consider that the repayment of a loan  on subsidized terms necessarily means that 
the subsidy  has expired. The repayment of a loan on subsidized terms does not "remove", "return" 
or "withdraw" the subsidized loan . Rather, it merely confirms that the subsidized financial 
contribution has been f ully provided, in the same way that the act of transferring the funding 
associated with a one -off cash grant confirms that the cash grant has been fully provided. Thus, just 
as the provision of a financial contribution in the form of a one -off cash grant does not  bring the life 
of a subsidy to an end immediat ely after that grant is made, so too may the life of a subsidized loan 
continue to exist after it has been fully repaid on subsidized terms. In both situations, the life of the 
subsidy will depend upon the extent to which the recipient is continuing to use the subsidy for its 
originally intended purposes (in the European Union's example, the useful life of the purchased 
 
372 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 708 . (fn omitted)  
373 The full text of the relevant footnote provides: " {w}e also note that , in a Part V context, the 
Appellate  Body has found that an investigating authority may presume, for purposes of an administrative 
review under Article 21.2 of the SCM Agreement, "that a 'benefit' continues to flow from an untied, non -
recurring 'financial contribution'", although this presumption is rebuttable. (Appellate Body Report s, EC and 
certain member States – Large Civil Aircraft , fn 1643 (citing Appellate Body Report, US – Lead and Bismuth II , 
para. 62 ); and US – Countervailing Measures on Certain EC Products , para. 84 ). 
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  assets) without having repaid at least the remaining value  of the benefit  associated with th e original  
financial contribution on a prospective basis.374 
With the above considerations in mind, we now turn to review whether the repayment of 
UK A350XWB LA/MSF brought the life of the subsidy provided under that loan to an end. We have 
found375 that Airbus made a final payment to the UK government in [***] totalling [***], which 
represents repayment of the full amount of outstanding principal that Airbus actually drew down and 
received , plus accrued interest under the subsidized  UK A350XWB LA/MS F agreement . Accordingly, 
and in the light of our conclusions with respect to the implications of the full repayment of a 
subsidized loan on its subsidized terms  for the expiry of a subsidy, we find that the European Union 
has failed to establish that Airbus' repayment of the sums outstanding under the subsidized UK 
A350XWB LA/MSF  agreement withdrew the subsidy provided under that arrangement for the 
purpose of Article 7.8 of the SCM Agreement.  
The European Union's claim that the French, German, Spanish and  UK A380 LA/MSF 
subsidies have been withdrawn  
In this section, we address the European Union's claim that the French, German, Spanish 
and UK A380 LA/MSF subsidies have been withdrawn, thereby achieving compliance for purposes of 
Article 7.8 with respect to  these subsidies. In section 7.4.5.1 , we address the European Union's 
contention that it has achieved the withdrawal of all the A380 LA/MSF subsidies through a series of 
[***] amendments to the French, German, Spanish and UK A380 LA/MSF loan agreements. 
In section  7.4.5.2, we address the European Union's separate claim that the Spanish A380 LA/MSF 
subsidy has been withdrawn by means of the full amortization of the ex ante  benefit over time. 
Finally, in section 7.4.5.3 , we address the European Union's submission that an announcement made 
by Airbus during the course of this proceeding to "wind down" and terminate the A380 programme 
provides "further confirmation" and "an independent basis" to find that the European Union has 
withdrawn the French, German, Spanish and UK A380 LA/MSF subsidies .  
7.4.5.1   The [***] amendments to the French, German, Spanish and UK A380 LA/MSF loan 
agreements  
Main arguments of the parties  
The European Union argues, on similar terms to its claim concerning the [***] amendment 
to German A350XWB LA/MSF, that the [***] amendments to the French, German, Spanish and UK 
A380 LA/MSF loan agreements have achi eved the withdrawal of the subsidies conferred under those 
arrangements. The European Union argues that all four member States concluded amendments to 
their respective A380 LA/MSF agreements with Airbus, such that the previous financial contributions, 
which were found to have been provided on subsidised terms, have now been replaced by new 
financial contributions that are consistent with a market benchmark, thereby bringing the member  
State lenders into compliance with their obligations under Article 7.8 of  the SCM Agreement.376 
Relying upon the panel and Appellate Body reports in Japan – DRAMS (Korea) , the 
European  Union argues that the substantial modification of an existing loan, including the extension 
of the repayment period of a government loan, may be properly treated as the transfer of new rights  
to the recipient of the modified loan and thus, give rise to a new financial contribution .377 The 
European  Union argues that the modifications made to the terms of the four amended A380 LA/MSF 
agreements can be characterized as such because they [***], and [***], allowing Airbus [***].378 
Accordingly, the European Union ma intains that the amended A380 LA/MSF contracts constitute new 
 
374 In this regard, we recall that the "nature, amount, and projected use of the challenged subsidy may 
be relevant factors to consider in an assessment of the period over which the benefit from a financial 
contribution might be expected  to flow. A panel may consider, for example, as part of its ex ante  analysis of 
benefit, whether the subsidy is allocated to purchase inputs or fixed assets; the useful life of these inputs or 
assets; whether the subsidy is large or small; and t he period of time over which the subsidy is expected to be 
used for future production". (Appellate Body Report, EC and certain member States – Large Civil Aircraft , 
para. 707).  
375 See section 7.4.4.2.1  above.  
376 European Union's first written submission, paras. 70 -80 and 100 -102, 150, 158 -159, and 160-170. 
377 European Union's first written submission, para. 152  (referring to Panel Report, Japan – DRAMs 
(Korea) , para. 7.442  and Appellate Body Report, Japan – DRAMs (Korea) , para. 251 ). 
378 European Union's first written submission, paras. 155-156. WT/DS316/RW2  
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  financial contributions which must be assessed against the terms of a contemporaneous market 
benchmark in order to determine whether they confer a benefit within the meaning of 
Article  1.1(a)(2)  of the SCM Agreement.  
The European Union argues that the terms of the amended A380 LA/MSF agreements are 
consistent with those that a commercial lender, facing the possibility of the termination of the A380 
programme, would have offered Airbus at the rele vant time . In support of this argument, the 
European Union relies upon a report prepared by its consultant PwC, which analyses the transactions 
at issue and concludes that the behaviour of the member State governments in agreeing to the 
amendments was cons istent with the behaviour of a market -based lender facing the possibility of 
the termination of the A380 programme. In particular, PwC considered the various aspects of the 
four restructured arrangements to assess the "net effect" of the amendments on each  government 
lender's future returns. PwC concluded that the amendments had "net advantages" due to their 
impact on expected repayments which thus put the lenders in a better position than they would have 
been in under a programme termination scenario.379 The European Union contends that the member 
State lenders thus acted as rational commercial actors by agreeing to a restructuring that entailed 
a [***] in the face of the certainty of such losses.380  
The United States argues that there is no support for the Eu ropean Union's argument that 
the amendments "replaced" the pre -existing A380 LA/MSF subsidies. Rather than terminate the 
original A380 LA/MSF contracts, the United States argues that the amendments kept the A380 
LA/MSF contracts in place, under terms that were modified specifically to [***]. The United States 
argues that this does not conform with the requirement in Article 7.8 to "withdraw" or "take away" 
a pre-existing subsidy found to have caused adverse effects.381 
The United States argues that the [***] amendments are properly understood to be  
"intervening events" – an "unplanned adjustment to the terms of a pre -existing subsidy" – that 
increased  the amount of the pre -existing A380 LA/MSF subsidies to Airbus and pro longed their 
lives.382 To assess the effect of the amendment, the United States has submitted a report by NERA 
Consulting,  which compares the IRR of the original A380 LA/MSF loan agreements, considering only 
cash flows from 2018 onward, to the IRR of the ame nded A380 LA/MSF agreements, from 2018 
onward. The NERA analysis finds that the IRRs of the original German, Spanish, and UK A380 LA/MSF 
are higher than the corresponding IRRs of the LA/MSF as amended, concluding that the amendments 
made Airbus better off – and the governments of Germany, Spain, and the UK worse off – than they 
would have been, absent the amendments.383 For French A380 LA/MSF, NERA concludes that the 
IRR of the original French A380 LA/MSF is slightly lower than the IRR of French A380 LA/MSF as 
amended, but finds that the results are highly sensitive to the credibility of [***].384 In this respect, 
the Unit ed States submits that if Airbus opts to terminate the A380 programme somewhat earlier 
than forecasted under the revised delivery schedule, then the IRR of the original French A380 LA/MSF 
contract would be higher than the IRR of French A380 LA/MSF as amend ed.385 NERA also assessed 
the IRR of the original A380 LA/MSF packages considered together, and the IRR of the amended 
LA/MSF packages considered together, concluding that the IRR of the original package is higher than 
the amended arrangements. The United St ates submits that this provides additional confirmation 
that the amendments increased the pre -existing A380 LA/MSF subsidies to Airbus.386 
In any case, even on the basis of the European Union's own argument, the United States 
submits that the European Union is incorrect in arguing that the [***] amendments aligned the 
A380 LA/MSF subsidies with a contemporaneous market benchmark. According to the United States, 
the European Union and the PwC report improperly assume that, absent the [***] amendments, 
Airbus w ould have terminated the A380 programme by [***], thus preventing the Airbus 
governments from recovering the outstanding A380 LA/MSF principal, making any alternative 
 
379 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)).  
380 European Union's second written submission, para. 137.  
381 United States'  first written submission, paras. 52  and 55-56 
382 United States' first written submission, paras. 37 -41. 
383 United States' first written submission, para. 45  (referring to NERA A380 LA/MSF Report 
(Exhibit  USA-8 (HSBI/BCI)), para. 17 ). 
384 NERA A380 LA/MSF Report, (Exhibit USA-8 (HSBI/BCI)), para. 19.  
385 United States' first written submission, para. 46.  
386 United States' first written submission, para. 47  (referring to NERA A380 LA/MSF Report, 
(Exhibit  USA-8 (HSBI/BCI)), paras. 17  and 20). 
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  allowing for the potential recovery of principal attractive.387 The United States considers  the 
European Union's argument to be flawed because it fails to recognize that a private creditor "would 
have had good reasons to believe that Airbus … would have sought to capture the 2018 Emirates 
order or a similar volume of orders from another airline customer, even in the absence of the [***] 
amendments".388 The United States additionally argues that the European Union and PwC analysis 
incorrectly ignored the risk that forecast customer demand for the A380 would not materialize, 
[***] which "{led} PwC to  overstate the 'net advantages,' rendering its financial analysis 
unreliable".389 Finally, the United States argues that the European Union's argument and the 
conclusions in the PwC report are flawed because there is no evidence that the Airbus governments 
performed an adequate level of due diligence in considering whether to enter into the [***] 
amendments to the A380 LA/MSF agreements, which is inconsistent with the behaviour of a 
commercial lender.390 On the whole, the United States argues that a reasonable commercial lender 
could have sought better terms, such as repayment on a fixed schedule, rather than through future 
A380 deliveries, which "would have drastically reduced the risk of the amendments to the 
lenders".391  
Evaluation by the Panel  
7.4.5.1.2.1   Features of the  amended A380 LA/MSF loan agreement s 
The [***] amendments modify the terms of each of the original LA/MSF agreements that 
were concluded by France, Germany, Spain and the United Kingdom with Airbus between [***] and 
[***].392 The European Union asserts that Airbus and the four member States concluded the four 
amendments to ensure that Airbus would receive [***] at a point in time when Airbus faced faltering 
demand for the A380 and needed to make a critical decision as to whether to continue the 
programme or [***].393 The German A380 LA/MSF amendment was concluded on [***], the 
French A380 LA/MSF amendment on [***], the UK A380 LA/MSF amendment on [***], and the 
Spanish A380 LA/MSF amendment on [***].394  
While the specific amendments differ in certain respects, the four amendments share 
common features. As a core modification, each of the amendments [***]. The French amendment 
[***].395 The German amendment [***].396 The Spanish amendment [***].397 The [***] 
UK amendment [***].398 In addition, the LA/MSF contracts contained the following country -specific 
modifications:  
a. In the case of the French amendment, [***]399 Airbus also agreed [***].400 The French 
amendment also extends the expiration date of the original French A380 LA/MSF 
agreement from [***].401 
 
387 United States' first written submission, para. 60.  
388 United States' first written submission, para. 62.  
389 United States' first written submission, para. 74. 
390 United States' first written submission, paras. 77 -78. 
391 United States' first written submissio n, para. 79.  
392 Panel Report, EC and certain member States – Large Civil Aircraft , fn 1933, para. 7.326; 
French  A380 LA/MSF Agreement, (Exhibit EU -12 (BCI)); Convention No. [***]81035002277545, [***], 
(Exhibit EU -13 (BCI)); German A380 LA/MSF Agreement , (Exhibit EU -14 (BCI ) (English Translation) ); and 
Spanish  A380 LA/MSF Agreement , (Exhibit EU -15 (BCI)); UK A380 LA/MSF Agreement, (Exhibit EU -16 (BCI)).  
393 European Union's first written submission, paras. 140-145; PwC A380 LA/MSF Report, (Exhibit EU -17 
(HSBI) ), paras. 39-42; and Minutes of a meeting of the board of directors of Airbus SE, [***], (Exhibit EU -18 
(HSBI)) , pp. 2 -4. 
394 European Union's first written submission, para. 144.  
395 [***] French A380 LA/MSF Amendment, (Exhibit EU -21 (BCI) ), Art. 3.  
396 [***] German A380 LA/MSF Amendment, (Exhibit EU -20 (HSBI/ BCI) ( English Translation )), 
Section  3.1(a).  
397 [***] Spanish A380 LA/MSF Amendment , (Exhibit EU -23 (B CI)), p. 3.  
398 [***] UK A380 LA/MSF Amendment, (Exhibit EU -22 (BCI) ), Art. 4.1.  
399 Specifically, under the amendment, [***]. ([***] French A380 LA/MSF Amendment , (Exhibit EU -21 
(BCI)), Art. 2 ). 
400 [***] French A380 LA/MSF Amendment , (Exhibit EU -21 (BCI)), Art. 5.  
401 [***] French A380 LA/MSF Amendment , (Exhibit EU -21 (BCI)), Art. 1; and PwC A380 LA/MSF 
Report, (Exhibit EU-17 (HSBI/BCI)), para. 163.  
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  b. In the case of the German amendment, [***].402 Airbus was also required to [***].403 
The German amendment also [***].404 
c. In the case of the Spanish amendment, [***].405 The amendment also creates a new 
obligation for Airbus to [***].406 
d. In the case of the UK amendment, Airbus also agreed to make [***].407 
Finally, in the event of the A380 programme termination, the [***] A380 LA/MSF 
amendment affirmed the obligation containe d in the original [***] A380 LA/MSF agreement for 
Airbus to [***].408 [***] in the event of A380 programme termination.409 
7.4.5.1.2.2   The relevant analytical framework  
The analytical framework the European Union relies upon to support its submission that the 
[***] amendm ents to the French, German, Spanish and UK A380 LA/MSF agreements achieved the 
withdrawal of the subsidies conferred under those arrangements is similar to the analytical approach 
the European Union presented in relation to the [***] amendment to the Germa n A350XWB LA/MSF 
agreement discussed in section 7.4.3.2.2 . As with the [***] amendment to the German A350XWB 
LA/MSF contract, the European Union maintains that the [***] A380 LA/MSF amendments created 
four new financial contributions, the terms of wh ich should be compared with a contemporaneous 
market benchmark in order to determine whether they confer a benefit and, therefore, continue to 
subsidize Airbus.410 However, unlike the approach adopted by the European  Union with respect to 
the German A350XWB amendment, the European Union has not attempted to substantiate its 
assertion of compliance by presenting a calculation of the IRRs of the amended A380 LA/MSF 
contracts and comparing these to the rate of return that a market -based lender would have wanted 
to achieve on a loan to Airbus on simila r terms to the amended A380 LA/MSF contracts at the time 
they were concluded. Rather, for the amended A380 LA/MSF contracts, the European Union argues 
that the appropriate benchmark against which to measure whether t he revised terms are market -
based is the behaviour of a commercial lender faced with the likelihood of the early termination of 
the A380 programme by [***].411 Thus, in order to determine whether the [***] amendments to 
the A380 LA/MSF agreements achieve com pliance, the key question that must be answered following 
the European Union's  suggested analytical framework is whether a commercial lender, faced with 
the likely termination of the A380 programme, would have entered into the A380 LA/MSF 
amendments on the  terms agreed between Airbus and the Airbus governments.412 
In essence, we understand the European Union's submissions to be based on the following 
two premises: first, that the [***] amendments created new loans that replaced  the original A380 
LA/MSF agreem ents; and second, that the appropriate way to determine whether the amended A380 
LA/MSF agreements continue to confer a subsidy on Airbus is to determine whether a commercial 
 
402 Specifically, [***]. ([***] German A380 LA/MSF Amendment , (Exhibit EU -20 (HSBI/BCI) (English 
translation)) , sec. 3.1(b) ). 
403 [***] German A380 LA/MSF Amendment , (Exhibit EU -20 (HSBI/BCI) (English translation)) , sec. 2.1. 
404 [***] German A380 LA/MSF Amendment , (Exhibit EU -20 (HSBI/BCI) (English translation)) , sec. 3.2. 
405 Under the original Spanish A380 LA/MSF agreement, Airbus agreed to pay a per -aircraft levy of 
[***]. These per -aircraft levies were [***]. ([***] Spanish A380 LA/MSF Amendment, (Exhibit EU -23 
(BCI)) , p. 4 ). 
406 [***] Spanish A380 LA/MSF Amendment, (Exhibit EU -23 (BCI)) , p. 5. 
407 [***] UK A380 LA/MSF Amendment, (Exhibit EU -22 (BCI)), Art. 4.2.  
408 [***] [***] A380 LA/MSF Amendment, [***]; Clause 2.4 and schedule 3, Clause 4.2. See also 
PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), paras. 123-124. 
409 The [***] amendment uniquely provides that Airbus should [***], specifying that the legal 
consequences prov ided for in Section 9 of the 2002 Loan  Agreement shall not take effect if Airbus breaches 
this obligation. We understand that this means that Airbus is not precluded from terminating the programme 
prior to 2028.  ([***] A380 LA/MSF Amendment, [***], sec.  4; and PwC A380 LA/MSF Report, (Exhibit EU -17 
(HSBI/BCI)), paras. 84-85). 
410 European Union's first written submission, paras. 70 -80 and 152 -176. 
411 European Union's first written submission, paras. 124 -141; Minutes of a m eeting of the board of 
directors of Airbus SE, [***] (Exhibit EU -18 (HSBI)), p. 2; and PwC A380 LA/MSF Report , (Exhibit EU -17 
(HSBI/BCI)) , Section C.  
412 European Union's first written submission, paras. 160 -175. WT/DS31 6/RW2  
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  lender  would have agreed to the A380 LA/MSF amendments, given the likely terminat ion of the A380 
programme.  
We recall that in our analysis of the [***] amendment to the German A350XWB LA/MSF 
agreement, we dismissed the European Union's reliance on the panel and Appellate Body reports in 
Japan – DRAMS (Korea)  as a basis to support its view that a "substantial modification" to an existing 
loan necessarily creates a new loan (financial contribution) for the purpose of performing a benefit 
analysis. We found that the European Union's reliance on Japan – DRAMS (Korea)  was misplaced 
because that dispute addressed a different legal question arising from a different set of facts 
compared with the legal and factual issues arising in relation to the [***] amendment to the 
German A350XWB LA/MSF agreement. In our view, the sam e conclusion can be reached mutatis 
mutandis  in relation to the European Union's reliance on Japan – DRAMS (Korea)  to support its 
submissions concerning the [***] amendments to the A380 LA/MSF agreements.  
As with the [***] amendment to the German A350XWB LA/MSF agreement, there is nothing 
in the evidence before us to suggest that the [***] A380 LA/MSF amendments brought into 
existence a new financial contribution . Although the amendments altered the contracting parties' 
rights, they did not establish new a nd separate loan arrangements. The [***] amendments did not 
terminate the original A380 LA/MSF agreements . All required disbursements under the loan 
agreements had been made before the [***] amendments, no new disbursements were made as 
a result of those a mendments, and the outstanding principal and interest had not yet been fully 
repaid. Thus, in our view, the original A380 LA/MSF  agreements continue to exist but in a 
restructured form, reflecting the revised repayment terms agreed between Airbus and the A irbus 
governments.   
For the reasons already explained in the context of our analysis of the [***] amendment 
to the German A350XWB LA/MSF contract, we consider that where funding under a subsidized loan 
agreement has been fully disbursed and remains outstan ding, an amendment to that loan to bring 
it into alignment with a market benchmark on a prospective basis would need to ensure that the 
recipient is placed in the same position it would have been in at the t ime of the amendment, had 
the loan been agreed on market terms from the beginning.413 Thus, in our view, the correct approach 
for determining whether the revised terms of the A380 LA/MSF agreements align those contracts 
with a market benchmark, requires us to determine whether they leave Airbus in the same position 
it would have been in at the time of the amendment s, had the loan contract been agreed on market 
terms from the beginning . We now turn to apply this standard to the facts surrounding the [***] 
amendments to the A380 LA/MSF agreements.  
7.4.5.1.2.3   Have th e [***] amendments aligned the terms of the A380 LA/MSF 
agreements with a market benchmark ? 
We begin by noting that the amount of outstanding principal under the A380 LA/MSF 
agreements at the time of the [***] amendments was significant.414 As already noted,  the [***] 
amendments release Airbus of the obligation to make levy payments on certain deliveries made 
during the [***] period with a view to inter alia  facilitating Airbus' planned sales to an important 
customer that, it appears, would not otherwise have  been made. However, at the same time, all 
 
413 See section 7.4.3.2.2  above.  
414 Under the original A380 LA/MSF agreements, France committed to provide up to [***] in LA/MSF; 
Germany committed to provide up to [***] in LA/MSF; Spain committed to provide up to [***] in LA/MSF; 
and the United Kingdom committed to provide up to [***] in LA/MSF. (French A380 LA/MSF Agreement , 
(Exhibit EU -12 (BCI)), Arts. 3.1 and 6.2; Ge rman A380 LA/MSF Agreement , (Exhibit EU -14 (BCI)), Clause 4; 
Spanish A380 LA/MSF Agreement , (Exhibit EU -15 (BCI)), Art . 2; and UK A380 LA/MSF Agreement , (Exhibit EU -
16 (BCI)), Clause 5 ). The United States submits that, at the end of 2017, only the outstand ing [***] were 
[***] for France; [***] for Germany, [***] for Spain and [***] for the United  Kingdom. (United  States' 
second written submission, para. 63  (referring to NERA A380 LA/MSF Report , (Exhibit USA -8 (HSBI/BCI)), 
Appendices 1 -8)). We additionally note that the European Union has estimated that losses for the member 
States would have been [***], if the programme had terminated in [***]. The European Union submits that 
[***] because Airbu s is obliged to [***]. (European Union's first written submission, para. 127; PwC A380 
LA/MSF Report, (Exhibit EU -17 (HSBI/BCI)), paras. 150-158 and [***]; and [***] A380 LA/MSF Agreement  
(Exhibit [***]), Schedule 3, Clauses 4.3, 4.8  and 4.9). 
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  four amendments [***].415 The French and German amendments also require Airbus to [***]416, 
and additional [***] on future deliveries are provided for in the case of the Spanish amendment.417 
Thus, in broad terms, it ca n be said that the four amendments restructure the repayment terms of 
the outstanding principal and future interest payable under the pre -existing LA/MSF agreements, in 
a way that decreases the financial burden on Airbus in the short - to medium -term, while  increasing 
that burden in the long -term, when Airbus and the members State governments apparently expected 
the market for the A380 to improve.  
The PwC report the European Union relies upon defines its objective as the assessment of 
"whether the negotiate d restructurings of the respective A380 MSF loan agreements between Airbus 
(or its affiliates) and {the French, German, Spanish and UK governments} are consistent with what 
private creditors in a similar position would have demanded for comparable transact ions at the same 
time, i.e. whether each restructuring measure is provided on terms consistent with the relevant and 
contemporaneous market benchmark" .418 The PwC report undertakes this assessment in essentially 
four steps.  
In the first two steps, the PwC report reviews the likelihood of programme termination and 
the prospects of a successful turnaround at the time of the [***] amendments. After explaining  
that "a precondition for private creditors to support a … project restructuring" is the "likelihood of a 
successful turnaround" in the prospects of the financed project419, the PwC report examines the risk 
of A380 programme termination, finding that "there was a high risk of programme termination and 
therefore a high probability for the member states to lose a substantial portion of their MSF 
investment".420 The PwC report then goes on to explore the "turnaround prospects" of the A380 
programme in the light of  available demand forecasts for LCA sold into the market for Very Large 
LCA over the next 20 years, and the modifications Airbus anticipated would be made to the A380 to 
improve its competitiveness. PwC concludes that this information "suggest{s} the exist ence of 
prospects for a successful turnaround for the A380 programme".421  
In the final two steps of its analysis, PwC determines the potential losses to the Airbus 
governments in the event of A380 programme termination . PwC  next assesses the advantages and 
disadvantages of the amendments from the perspective of each government lender. PwC explains 
that where this assessment results in a "net -advantage", the  member State lenders improve their  
position s relative to the programme termination scenario. However, where the assessment  of the 
amendment shows a "net -disadvantage ", the degree of the disadvantage resulting from the 
restructured terms would need to be compared to the expected losses of the programme termination 
scenario because "a smaller net -negative ef fect in the restructuring scenario … would still lead to 
the conclusion that supporting the restructuring process would be the preferred behaviour of a 
private lender".422 This is because, according to PwC, the "main goal for a private creditor when 
faced wi th restructuring is to avoid (partly or entirely) potential losses".423 In other words, a creditor 
may decide to proceed with the restructuring of a loan even if the full amount of outstanding principal 
and future interest payments expected under the pre -existing loan could not be recovered.  
PwC concludes that the effect of the [***] amendments is a net -advantage for [***] of 
[***]424 and a net -advantage for [***] of [***].425 In the case of [***], PwC determines that 
the net effect of the [***] amendment is "neutral", with a possibility to [***] and concludes that 
a private creditor would have behaved in the same manner as the Spanish government.426 Finally, 
 
415 [***] French A380 LA/MSF Amendment , (Exhibit EU -21 (BCI)), Art. 2;  [***] German A380 LA/MSF 
Amendment , (Exhibit EU -20 (HSBI/BCI) (English translation)) , sec. 3.1(b);  [***] Spanish A380 LA/MSF 
Amendment, (Exhibit EU -23 (BCI)) , p. 4; and [***] UK A380 LA/MSF Amendment , (Exhibit  EU-22 (BCI)), 
Art. 4.2. 
416 [***] French A380 LA/MSF Amendment , (Exhibit EU -21 (BCI)), Art. 5;  and [***] German A380 
LA/MSF Amendment , (Exhibit EU -20 (HSBI/BCI) (English translation)) , sec. 2.1.  
417 [***] Spanish A380 LA/MSF Amendment, (Exh ibit EU -23 (BCI)), p. 5.  
418 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), paras. 3 and 20.  
419 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. 8.  
420 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. 33.  
421 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. 59.  
422 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. 13.  
423 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. 9.  
424 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. 168.  
425 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. [***]. 
426 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. [***]. 
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  in the case of the [***], PwC concludes t hat the [***] amendment [***] even in the event of 
programme termination. Nevertheless, PwC ultimately assesses that the [***] amendment is 
market -based, because a private investor would have accepted the amendment.427 
In our view, PwC's analysis cannot be r elied upon to show that the [***] amendments have 
brought the terms of the A380 LA/MSF agreements into line with a market benchmark.  
The PwC report finds that the market prospects were positive in 2018 for a new and allegedly 
more competitive version of t he A380 that Airbus intended to develop. PwC arrived at this conclusion 
after reviewing: (i) the Airbus 2017 Global Market Forecast (predicting 1,410 new deliveries in the 
"Very Large Aircraft" segment between 2017 and 2037); (ii) Boeing's 2017 Current Mar ket Outlook 
(predicting 3,160 deliveries in the "Medium/Large Passenger Widebody" segment over the same 
period); (iii) the Flight Global Fleet Forecast (predicting 405 deliveries in the "Large aircraft" segment 
from 2016 to 2036, and specifically 394 for t he A380); (iv) two Airbus PowerPoint slides describing 
various planned "improvements" to the A380; and (v) certain Airbus HSBI concerning then current 
and future sales campaigns.428  
We note, however, that as explained by PwC, the recent history of the A380 revealed a 
different story, suggesting that its short to medium -term prospects were not good. As of 
February  2018, Airbus had not received any new A380 orders for nearly four years.429 On the 
contrary, several airlines had cancelled or reduced existing contr actual arrangements, resulting in 
an order volume of 311 aircraft by the end of 2017. With 226 A380s delivered through May 2018, 
only 85 deliveries remained outstanding, and a substantial portion of these were apparently at risk 
of cancellation.430 In our vi ew, the very fact that Airbus was close to terminating the programme 
suggests that a market lender would have closely scrutinized Airbus' future business plans for the 
A380, including the delivery forecasts for a new improved "A380plus".431 In this regard, w e recall 
that in considering the reliability of Airbus' business case delivery forecasts, the original panel made 
the following statement:  
In our view, the further in time the events that are the subject of a forecast are 
anticipated to take place, the more likely it is that one or more intervening events  may 
impede  their fulfilment. In the specific context of the LCA industry, where, as the  
European Communities notes, the business environment is shaped by factors "whose 
very foreseeablity is impossible by definition ",{} the element of uncertainty that is 
attached to aircraft delivery forecasts that sometimes projected events over multiple 
decades{} cannot be ignored.432 
Moreover, in the light of the fact that the repayment terms of the amended A380 LA/MSF 
contracts continue to be substantially levy -based and success -dependent, we believe that the 
following considerations, identified by the panel in the original proceeding, would have also informed 
a market lender's assessment of Airbus' business forecast fo r the A380:  
Because of the graduated levy -based and success -dependent nature of LA/MSF 
repayments, Airbus has an economic incentive to be optimistic in its forecasts of, 
inter alia, the number of aircraft likely to be sold and the pace of those sales {…} The 
greater the number of sales over which principal repayments and royalties must be 
 
427 PwC submits that "a private investor would be interested in supporting [***]. (PwC A380 LA/MSF 
Report, (Exhibit EU -17 (HS BI/BCI)), para. [***]). 
428 PwC A380 LA/MSF Report, (Exhibit EU -17 (HSBI/BCI)), para. 59.  
429 PwC A380 LA/MSF Report, (Exhibit EU -17 (HSBI/BCI)), para. 31 (noting that, "{a}lthough Airbus 
officially announced an A380 order for three aircraft from Japanese carrier All Nippon Airways (ANA) in 
January  2016, these orders were in fact previously considered as 'undisclosed' customers within Airbus' official 
order book".)  
430 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. 31.  
431 The United States and NERA submit that a private creditor would have had access to information 
characterizing Airbus' A380 demand forecasts as optimistic, and therefore would be unlikely to accept Airbus' 
demand forecasts uncritically. (United States' second written submiss ion, paras. 67 -79; and NERA A380 
LA/MSF Report, (Exhibit USA-8 (HSBI/BCI)), paras. 3, 23 -25, and 33-36). 
432 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.414 . (fns omitted)  
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  paid, the less likely it is that Airbus will have to make those payments if the business 
plan estimates prove too optimistic.433 
In our assessment, the above factors su ggest that a market lender would have taken a 
conservative approach to determining whether the business prospects of the A380 were enough to 
justify amending the loans, instead of accepting the losses that would have resulted from programme 
termination. We  are not convinced that a market lender faced with the possibility of termination of 
the A380 programme would have concluded that the "precondition"434 for supporting the 
restructuring of the A380 LA/MSF loans (i.e. the "likelihood of a successful turnaround " of the 
A380)435 was as easily satisfied as PwC found to be the case. Thus, in our view, PwC's analysis is an 
insufficient basis to conclude that a market lender would have found "the existence of prospects for 
a successful turnaround for the A380 programme ".436 
The United States appears to argue that the PwC analysis cannot be relied upon to show 
that the A380 LA/MSF amendments were market -based, because the European Union has failed to 
demonstrate the fundamental premise upon which it is based – namely, that  a market lender would 
have believed that the 2018 amendments were necessary in order to continue the A380 programme. 
The United States discusses evidence which it considers demonstrates that a private creditor would 
have doubted that Airbus would have ter minated the A380 programme by [***] absent the 
amendments. This evidence includes a statement by Emirates CEO that Emirates "remain{ed} 
committed to the {A380} programme".437 The United States submits that Airbus was also confident 
about market demand for th e A380 and expected it to revive in the mid -2020s, that Airbus already 
had enough non -at-risk orders to sustain the A380 programme until [***]438, and that Airbus also 
had identified [***] when pitching the amendments to member State lenders.439 The United Sta tes 
furthermore maintains that a reasonable creditor would also have known that Airbus had the ability 
to continue operating the A380 programme at a loss if necessary, as it had done in the past, in order 
to capture future anticipated demand.440 In the light  of our assessment of what a market lender's 
likely outlook would have been regarding future prospects for the A380 programme —and even NERA 
and the United States' own assessment of Airbus' A380 delivery forecasts441—we are not persuaded 
by the United States'  assertions concerning the likely expectations surrounding the risk of A380 
programme termination.  
In addition, we note that the United States points to the lack of evidence in this proceeding 
showing that the Airbus governments performed any due diligenc e in respect of the 
A380 amendments to support its submission that the PwC report fails to demonstrate that the [***] 
amendments are market -based.442 The United States contrasts this situation with the circumstances 
surrounding the original A380 LA/MSF agree ments, where specific project appraisals were performed 
and the Airbus business case, which included an analysis of multiple scenarios, was reviewed.443 The 
European Union argues that the presence or absence of due diligence is not determinative of whether 
 
433 Panel Report, EC and certain member States – Large Ci vil Aircraft , para. 7.1926 . (fns omitted)  
434 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. 8.  
435 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. 8.  
436 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. 59.  
437 Emirates  press release , "Emirates welcomes 100th A380 to its fleet ", (2 November 2017) , 
(Exhibit  USA-5). 
438 United States' second written submission, para. 67  (referring to Airbus SE Special Earnings Call 
February 2018, (Exhibit USA -3)). See also United States' second written submission, paras. 71 -72. 
439 United States' second written submission, para. 67  (referring to  [***] German A380 LA/MSF 
Amendment , (Exhibit EU -20 (HSBI/BCI )), Attachment 3 ). 
440 United States' first written submission, paras. 64-65. 
441 NERA A380 LA/MSF Report , (Exhibit USA -8 (HSBI/BCI)), para. 16 (referring to Airbus SE Special 
Earnings Call January 2018, (Exhibit USA -1)) ("It is important to be clear, however, that {the expected 
delivery schedule for the A380} is optimistic and inaccurate. The forecasts for [***] are much higher than 
Airbus had already told investors it would meet. Moreover, the delivery schedule assumes that Airbus would 
succeed in capturing {} orders beyond the 2018 Emirates order.")  
442 United States' second written submission, para. 76  (referring to P anel Report, EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), para. 6.651 ); NERA A380 LA/MSF Report, 
(Exhibit  USA-8 (HSBI/BCI)), paras. 37-39. The United States additionally argues that evidence on record 
confirms that the member State lenders decided to enter the  [***] amendments on the basis of non -
commercial considerations related to [***]. (United States' seco nd written submission, paras. 62 and 64  
(citing Letter from [***], (Exhibit EU -89 (HSBI )), "{T}he [***]"). 
443 NERA A380 LA/MSF Report , (Exhibit USA -8 (HSBI/BCI)), para. 39. 
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  the amendments aligned the A380 LA/MSF contracts to a market benchmark, and in any event, the 
member States did in fact negotiate the terms of the agreement and perform due diligence, as is 
evident from the fact that the four amendments differ from each oth er, demonstrating that member 
States sought to optimise the outcomes.444 In our view, a market lender faced with the possible 
termination of the A380 programme and the recognized uncertainty in LCA delivery forecasts 
(particularly, given the recent history, as regards the A380) would have undertaken its own due 
diligence on the prospects of the A380. We recall in this regard that the first compliance panel found 
that: 
… a commercial investor would be normally expected to perform a certain degree of due 
dilige nce in relation to the current and future "economic conditions " of a particular 
project before agreeing to enter into a loan contract .445 
The evidence of discussions between Airbus and the Airbus governments the European Union 
relies upon does not reveal the  extent to which France, Germany, Spain and the UK relied upon their 
own independent appraisals of the prospects for the A380 in agreeing to the amendments. The 
European Union's evidence confirms only that negotiations were held over a period of months to 
discuss the terms of the amendments.446 There is, therefore, no evidence before us showing that 
the Airbus governments performed any independent assessment of Airbus' business plan for the 
A380, including its marketing prospects, or the economic value of the  terms of the amendments. 
While we do not think that the absence of such appraisals can alone demonstrate that the 
amendments fail to align the terms of the original A380 LA/MSF agreements to a market benchmark, 
a commercial market lender would have likely  undertaken due diligence in the process of deciding 
whether to enter into the A380 LA/MSF amendments.  
Finally , we agree with the United States that PwC's "net -advantage/net -negative" analysis 
does not accurately determine the Airbus governments' "net" fi nancial positions at the time of the 
[***] amendment because the comparisons applied are based on nominal  future cash flows, instead 
of the net present value  of those cash flows. By way of example, the United States recalls that the 
PwC report concludes that the Spanish amendment offered a [***]. The United States notes, 
however, that this was despite the fact that under the original Spanish A380 LA/MSF agreement and 
the Airbus/PwC  expected delivery schedule, Airbus would pay an additional [***] in cash flows from 
2020 to 2028, beyond what the [***] amendment requires in those years [***]. The United States 
goes on to note that u nder the Spanish amendment, Airbus eventually pays thi s [***] in cash flows 
[***]. Thus, the United States argues that PwC incorrectly treats [***] as being equivalent to 
[***].447 In our view, PwC's reply to these United States' criticisms does not address the point made 
by the United States448, which we conside r to be valid, and it fails to convince us that the time -value 
of money should not have been taken into account in PwC's calculations.  
Thus, for all of the above  reasons, we find that the European Union has failed to demonstrate 
that the [***] amendments to the A380 LA/MSF agreements bring the subsidized terms of the 
loans into line with market financing instruments. Accordingly, we conclude that the European Union 
has failed to demonstrate that the [***] amendments to the A380 LA/MSF agreements has brough t 
it into compliance with the obligation to "withdraw the subsidy" under Article 7.8 of the 
SCM Agreement.  
Withdrawal of the Spanish A380 LA/MSF subsidy by means of the amortization of 
benefit  through the passage of time  
Main arguments of the parties  
7.235.   The European Union maintains that the life of a subsidized loan may be determined on the 
basis of the ex ante  expectations held by the contracting parties with respect to its full repayment 
 
444 European Union's second written submission, paras. 200 -201. 
445 Panel Report, EC and  certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.651.  
446 Declaration by  [***], 4 October 2018, (Exhibit EU -19 (BCI)) . 
447 NERA A380 LA/ MSF Report , (Exhibit USA -8 (HSBI/BCI)), paras. 40-42. 
448 PwC Response Report, (Exhibit EU -86 (BCI) ), para. 39.  
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  on subsidized terms.449 Accordingly, the European Union clai ms that the benefit of the Spanish A380 
LA/MSF fully amortized [***], when it was anticipated, on the basis of the expectations held by 
Airbus and the Spanish government at the time loan was agreed in [***], that the principal and 
interest accruing to the Spanish government would have been fully repaid. In support of this 
submission, the European Union relies upon a  report prepared by  its consultant, TradeRx , which 
reviews the terms of the Spanish A380 LA/MSF, maps out the expected disbursements and 
repayme nt terms, and concludes that the benefit of the Spanish A380 LA/MSF contract would  be 
fully amortized by [***].450 
The United States argues that the European Union's assessment is flawed because TradeRx 's 
assessment of the life of the subsidy improperly reli es exclusively on the "loan life" without taking 
into account the anticipated "marketing life" of the A380, and because the European Union ignores 
that amendments to the Spanish loan agreement prolonged the ex ante  life of the Spanish A380 
LA/MSF subsidy. The United States submits that the Appellate Body and first compliance panel both 
recognized that analysing a subsidy in relation to its "marketing life" is a valid way to measure the 
life of the LA/MSF subsidies, and by ignoring this, the United States ar gues that TradeRx 's analysis 
of the ex ante  life of Spanish LA/MSF for the A380 "is incomplete and thus unreliable".451 In addition, 
the United States argues that neither the [***] and [***] amendments to the Spanish A380 
LA/MSF was anticipated at the time t hat the original Spanish A380 LA/MSF agreement was 
concluded, and therefore these two amendments may be understood to have extended the ex ante  
life of the Spanish A380 LA/MSF to a point in time well beyond 2018.452 
Evaluation by the Panel  
7.237.   The European Union 's consultant, TradeRx , seeks to determine whether the benefit conferred 
by the Spanish A380 LA/MSF loan agreement has fully amortized [***] by allocating the alleged 
benefit of the Spanish A380 LA/MSF loan over the period during which full repayment of principal 
and interest, along with foreseen royalties, was expected to occur. The rationale for this approach 
is that the alleged benefit conferred through the financial  contribution (i.e. the subsidized loan) 
would be enjoyed during the expected repayment period, which the European Union refers to as the 
expected "loan life".453  
7.238.   We see a number of reasons why the European Union's approach is not an appropriate  basis 
to establish that the Spanish A380 LA/MSF subsidy has been withdrawn for purposes of Article 7.8 
of the SCM Agreement.  
7.239.   First, and fundamentally, the European Union relies upon expectations about the period of 
time it was anticipated for Airbus to repay the loan  on its own subsidized terms . For reasons already 
explained elsewhere in this report, we do not agree with the European Union that the repayment of 
the outstanding principal and accrued interest under  a loan on its subsidized terms  means that the 
subsidy h as been withdrawn for the purpose of Article 7.8 of the SCM Agreement. Rather, in our 
view, the repayment of a loan on its subsidi zed terms merely confirms that the subsidized financial 
contribution has been fully provided, in the same way , for instance,  that the act of transferring the 
funding associated with a one -off cash grant confirms that the cash grant has been fully provided.  
Therefore, the life of a subsidized loan will not necessarily  come to an end after it has been fully 
 
449 The European Union argues that the compliance panel or the Appellate Body did not express a 
preference between measuring the life of LA/MSF subsidies based on ex ante  expectations with respect to its  
full repayment on subsidized terms, or based on amortizing the benefit of a subsidized LA/MSF loan over the 
course of the anticipated marketing life of a funded aircraft. (European Union's first written submission, 
para. 124).  
450 Specifically, Trade Rx con cludes that "{t}he ex ante  amount for (re)payment … adds up to [***] by 
the end of 2017 with [***]. (TradeRx Report on Expected Life of LA/MSF , (Exhibit EU -24 (HSBI/BCI)), 
para. 51). 
451 United States' first written submission, para. 84.  
452 United States' sec ond written submission, para. 93.  
453 We recall that PwC followed the same approach in the first compliance proceeding in analysing 
whether the benefit conferred by the pre -A380 LA/MSF subsidies had fully amortized, which the Panel referred 
to as the "Loan L ife" approach. In the first compliance proceeding, PwC additionally evaluated the pre -A380 
LA/MSF subsidies by allocating the benefit over the expected marketing life of the funded A300, A310, A320 
and A330/A340 LCA programmes, referred to as the "Marketin g Life" approach. (Panel Report, EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.869 -6.879 ). 
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  repaid on its subsidized  terms. In both the one -off grant and subsidized loan situations, the life of 
the subsidy will depend upon the extent to which the recipient is continuing to use the financial 
contribution for its originally intended purpose without having repaid at least the remaining value of 
the benefit on a prospective basis.  
7.240.   Second, we note that the European Union  argues that the life of the Spanish A380 LA/MSF 
subsidy should be determined on the basis of the anticipated repayment period because, in its view, 
A380 LA/M SF was not found to be "critical " to the ability of Airbus to bring the A380 (and A350XWB ) 
aircraft to market.454 In support of this line of argument , the European Union refers to the findings 
of the first compliance panel and the Appellate Body that the A380 and A350XWB LA/MSF loans 
enabled Airbus to launch these aircraft "as and when it did"455, which the European Union 
understands to mean that the subsidies had a limited accelerating effect on the launch of these 
aircraft.456 In our view, the European Union  has mischaracterized the  panel's findings.   
7.241.   We recall that the original panel concluded that it would  not have been possible for Airbus 
to have launched the A380  as originally designed and at the time it did without LA/MSF. However, 
the panel went further , observing that:  
… while the A380 business case suggests, but by no means demonstrates , that as a 
stand -alone proposition the project might have been economically viable even without 
LA/MSF, in our view, that conclusion rests in part  on the assumption tha t at the time of 
the launch, Airbus would have been in a position to not only design and manufacture 
the A380, i.e., had the necessary development and production technologies available to 
it, but also would have been able to obtain all the necessary financ ing on market 
terms.457  
7.242.   Moreover, as we discuss in further detail below, after having excluded from the scope of the 
compliance proceedings all "indirect effects" on the A380 and A350XWB arising from pre -A380 
LA/MSF, the Appellate Body went on to confirm th e first compliance panel's findings that Airbus ' 
sales and deliveries of the A380 during the 2011 -2013 period were a genuine and substantial cause 
of serious prejudice in the VLA market in the form of significant lost sales and market displacement. 
In our view, it logically follows from these findings that the market presence of the A380 in the 
2011-2013 period was attributable to only the direct effects of A380 LA/MSF , implying that Airbus 
could not have launched and subsequently developed the A380 by the end of the 2011 -2013 period 
in the absence of A380 LA/MSF. In this respect, we note that elsewhere in its submissions, the 
European Union has accepted that the adverse effects caused by the market presence of the A380 
in the 2011 -2013 period were "attribut ed to the 'direct effects' of A380 LA/MSF alone".458 Thus, the 
original panel and Appellate Body compliance stage findings do not support the European Union's 
contention that A380 LA/MSF was not "critical" to the market presence of the A380.  
7.243.   We note that th e Spanish A380 LA/MSF agreement has been amended twice since it entered 
into force. The European Union has not addressed the United States' arguments that these 
amendments are "intervening events" extend ing the life of the Spanish A380 LA/MSF subsidy, othe r 
than to argue that that the United States "offers no explanation as to why, or how, any such alleged 
intervening events prolonged the ex ante  anticipated Loan Life for the Spanish A380 MSF subsidy."459 
 
454 European Union's first written submission, fn 303; and second written submission, paras. 125 -126. 
455 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1723 
and 6.1760; and Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – 
US), para. 5.646.  
456 European Union's second written submission, paras.  125-127. The European Union estimates the 
A380 LA/MSF and A350XWB LA/MSF accelerated the respective launches of the A380 and the A350XWB by 
two years or less. The European Union argues that, if the "life" of the A380 LA/MSF subsidies were to be 
estimated based on considering the effect of the subsidies on the marketing life of the A380, then the subsidy 
should be amortized over the duration of the accelerating effect of the subsidies. Instead, TradeRx allocated 
the benefit over the period during which full  repayment of principal and interest, along with foreseen royalties, 
was expected to occur,  which TradeRx concludes was [***]. (See TradeRx Report on Expected Life of LA/MSF , 
(Exhibit EU -24 (BCI)), Table 1 ). 
457 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1948 . (emphasis added)  
458 European Union's submission regarding  the wind -down of the A380 programme, para. 3.  
459 European Union's second written submission, para. 128.  
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  We note , however, that the European Union has itself argued that the [***] A380 LA/MSF 
amendments could be characterized as "intervening events".460  
7.244.   In our view, the [***] A380 LA/MSF amendments are properly considered to  be "intervening 
events" because they were unexpected at the time the original A380 LA/MSF agreements were 
concluded.461 In our view, the modifications made under the amendments change the expectations 
regarding the anticipated repayment period. In the case of Spanish A380 LA/MSF, the [***] 
amendment [***] Airbus' obligation to make per -aircraft repayments on [***] that were 
anticipated to occur between [***]. The amendment [***] per-aircraft levies on other deliveries 
beyond those subject to [***], and additionally creates a new obligation for Airbus to [***]462 
Thus, the [***] amendment modified the ex ante expectations regarding the repayment period for 
Spanish A380 LA/MSF, extending that period (notably through the obligation to pay royalties) 
beyond what was anticipated previously.463 In other words, even by the  European Union's own "loan 
life" standard, the life of the Spanish A380 LA/MSF subsidy has not come to an end because the 
[***] amendment extended the repayment terms beyond the contracting parties' ex ante  
expectations.464  
For the foregoing reasons, we fi nd that the European Union has failed to demonstrate that 
the Spanish A380 LA/MSF subsidy has been withdrawn for the purpose of Article 7.8 as a result of 
the alleged amortization of benefit by [***]. 
Whether  Airbus' announcement to "wind down"  the A380 programme achieves 
withdrawal of the French, German, Spanish and UK A380 LA/MSF subsidies  
Main arguments of the parties  
7.246.   The European Union claims  that Airbus' announcement to "wind down" the A380 programme  
provides "further confirmation" and "an independent basis" to find that the European Union has 
withdrawn the French, German, Spanish and UK A380 LA/MSF subsidies .465 The European Union 
characterizes  Airbus' announcement as a relevant, post -establishment "fact"466 that serves as 
evidence of compliance with the DSB's recommendations and rulings. The European Union submits 
that Airbus' announcement i s "an event that falls within the terms of the European Union's Panel 
Request ", and " is, in the context of an evolving f actual and market situation, inextricably linked with 
measures that have explicitly  been identified in the {European Union's } panel request as achieving 
compliance under Article 7.8. "467  
7.247.   The European Union maintains the Airbus' "wind down" announcement supp orts its claim of 
withdrawal of the A380 LA/MSF subsidies for two principal reasons. First, the European Union asserts 
that Airbus' announcement of the "wind down"  of the A380 programme  has triggered a requirement 
for Airbus to [***] the outstanding princi pal and interest under the [***] A380 LA/MSF agreement , 
scheduled to take place through [***].468 The European Union argues that this requirement 
 
460 European Union's response to Panel question No. 29, paras. 161-163. 
461 We recall an examination of the ex ante "life" of a subsidy, based on the expectation at the time the 
subsidy was granted, should be complemented by an evaluation of subsequent "intervening events"  that were 
alleged to have occurred after the gr ant of the subsidy so as to determine whether the subsidy materialized  as 
expected. (Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.646  (quoting Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 709 )). 
462 [***] Spanish A380 LA/MSF Amendment, (Exhibit EU -23 (BCI)) , p. 5. 
463 We consider that this understanding is compatible with the Appellate Body's discussion of the ex ante  
life of a subsidy in the original procee ding, which focused on the projected uses to which a subsidy has been 
put, not on the expected duration of a financial contribution. (See Appellate Body Report, EC and certain 
member States – Large Civil Aircraft , para. 707 ). 
464 The European Union argues, f or instance, that that the ex ante  expected life of the subsidy will end 
when either the terms of the loan agreement foresee no further repayments, or when the expected delivery 
forecast ends. (European Union's second written submission, paras. 122 -123). 
465 European Union's submission regarding the wind -down of the A380 programme , para. 5.  
466 European Union's submission regarding the wind -down of the A380 programme , paras. 4 and 8.  
467 European  Union's submission regarding the wind -down of the A380 programme , paras. 12 -14, 
and 17-25. 
468 European Union's comments on arguments and evidence that the United States filed with its 
25 June 2019 Comments on EU responses to the Panel's questions, para. 2 (referring to [***], 
(Exhibit  EU-113 (BCI)) ).  
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  "confirms {the} previous demonstration that the [***] A380 MSF subsidy is withdrawn as of 
[***]".469 In the alternative, t he European Union argues that the [***] A380 LA/MSF subsidy will 
be withdrawn on [***], when  final payment is made .470 Second, the European Union argues that 
Airbus' announcement constitutes an "intervening event " that "drastically changes 'how {the} 
subsid{ies} will 'materialize{} over time' relative to the expectations held at the time it wa s 
granted'', " provides certainty with respect to the repayment of the loan, and thus brings about an 
earlier end to the lives of the subsidies than was anticipated ex ante ", thus confirming that  all four 
A380 LA/MSF subsidies  have been withdrawn .471  
7.248.   The Uni ted States argues that Airbus' announcement regarding the future of the A380 
programme is not  a "measure taken to comply" by the European Union, and neither the 
announcement nor the situation it describes can be part of the Panel's terms of reference to  support 
the European Union's  argument that it has withdrawn the A380 LA/MSF subsid ies.472 The 
United  States submits that the European  Union  has not itself asserted that the announcement was 
a "measure taken to comply", and that it has instead chosen to characterize the announcement as 
a "fact" that is somehow relevant to the Panel's assessment. Moreover, the United States argues 
that any Airb us action with respect to the programme would appear to be a private business decision 
without government endorsement or involvement.473 While the United States appears to accept that 
exhibits contained in the European Union's submission in connection with t he announcement can 
serve as relevant evidence  in this dispute, the United States disputes the relevance  of this evidence, 
describing the details contained in Airbus' 14 February 2019 press release not as "facts" but instead, 
as "statements of Airbus' inte nt or expectations".474  
7.249.   In any case , the United States argues that Airbus' announcement does not involve any 
removal of the subsidy previously granted to Airbus and thus does not support the European Union's 
arguments that the A380 LA/MSF subsidies have bee n withdrawn. The United States argues that the 
European Union's arguments concerning repayment of [***] A380 LA/MSF are incorrect, as the 
repayment of a financial contribution on subsidized terms does not achieve the withdrawal of the 
subsidy. Finally, the  United States argues that the announcement of the intent to terminate the 
A380 programme in the future does not constitute an "intervening event" that brings an end to the 
life of the subsidies. In this respect, the United States recalls that the A380 pro gramme remains 
operational. In addition, the United States recalls that the first compliance panel previously rejected 
an argument regarding the termination of the A340 programme, considering  the fact that the A340 
could terminate before full repayment was  achieved to be an inherent feature of the LA/MSF 
agreements.  The United States argues that the same reasoning should apply to the A380 programme 
as well, and "all the more so, given that Airbus has not yet terminated the A380 programme."475  
Evaluation by t he Panel  
7.250.   On 14 February 2019 , Airbus issued a press release announcing its full -year results. In this 
press release, Airbus announced that Emirates Airlines had cancelled 39 A380 orders and that, as a 
consequence, Airbus would cease deliveries of the A380 in 2021 due a lack of order backlog from 
other customers. The press release revealed that Airbus received 12 A380 orders in 2018 and that 
 
469 European Union's comments on arguments and evidence that the United States filed with its 
25 June 2019 Comments on EU responses to the Panel's questions, para. 2.  
470 European Union's comments on arguments and evidence that the United States filed with its 
25 June 2019 Comments on EU responses to the Panel's questions, para. 3.  
471 European Union's submission regarding the wind -down of the A380 programme , para s. 33-38. 
472 United States' second written submission, paras. 19 -20 and 86; opening  statement  at the me eting of 
the Panel , para. 62.  
473 United States' second written submission, para. 19. 
474 United States' second written submission, paras. 15 -18. 
475 United States' second written submission, paras. 88 -91. 
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  Airbus would deliver 14 additional A380 to Emirates before terminating the programme in 2021.476 
The European Union has confirmed that [***] will be made to [***], with the [***].477 
7.251.   On 14 August 2019, the European Union informed the Panel of an agreement reached on 
[***] between the [***] and Airbus, confirming that Airbus would, as a result of Airbus' 
termination announcement, [***] under the [***] A380 LA/MSF agreement, in accordance with 
the specific terms of that contract. The European Union set out its argument with respect to this 
agreement in two paragraphs of its comments to the United States' comments on the European 
Union's response to the Panel's  questions following the substantive meeting.478 
7.252.   We accept that the European Union is entitled to have us consider its contention that Air bus' 
termination announcement was an "intervening event" that brought the life of the A380 LA/MSF 
subsidies to an end. In this respect, we agree with the first compliance panel that, once a 
complainant in a dispute under Article 21.5 DSU has properly ident ified the subsidies and legal 
provisions that are part of its claims, it need not also exhaustively explain how the implementing 
Member may have failed to withdraw those subsidies and/or bring their adverse effects to an end. 
As the first compliance panel explained:  
Once the complainant clearly identifies the relevant subsidies and the legal bases 
supporting its claims with sufficient clarity and detail, the implementing Member will 
know what the dispute is about, and it will then be up to the complainant  to justify  its 
claims on the basis of arguments and evidence presented during the panel process . In 
our view, part of this justification may, where relevant and necessary, need to include 
an explanation of the extent to which the subsidies clearly identifie d {in the panel 
request} continue to exist … as a result of an "intervening event".479 
7.253.   We have doubts, however, about whether the [***] agreement between the [***] and 
Airbus, and the accompanying evidence submitted by the European Union, fall within the sco pe of 
our terms of reference. Although related to the alleged "intervening event" discussed above, the 
facts and arguments the European Union has asked us to consider go beyond the alleged "intervening 
event" itself, and concern the alleged implications fo r compliance of a new measure (the [***] 
agreement), which entered into force well after the establishment of this compliance Panel. 
Notwithstanding these reservations, we do not find it necessary to express a definitive view on this 
matter for the purpose  of this dispute, because as explained in section  7.4.5.3.2.2 , we disagree with 
the European Union's submission that the [***] agreement confirms that the [***] A380 LA/MSF 
subsidy has been withdrawn. Thus, even assuming arguendo  that the [***] agreement is properly 
without our terms of reference, it would not demonstrate that compliance has been achieved with 
respect to the [***] A380 LA/MSF subsidy.   
7.4.5.3.2.1   The [ ***] "wind -down"  announcement  
7.254.   The European Union argues that the wind-down  announcement c onstitutes an "intervening 
event" that brings the life of the A380 LA/MSF subsidies to an end because it confirms that the end 
 
476 Airbus SE, Unaudited Condensed IFRS Consolidated Finan cial Information for the year ended 
31 December 2018, https://www.airbus.com/content/dam/corporate -topics/financial -and-company -
information/FY2018 -Airbus -FINANCIAL -STATEMENTS.pdf , p. 17; Airbus Press Release, "Airbus reports strong 
full-year 2018 results, delivers on guidance", 14 February 2019, 
https://www.airbus.com/content/dam/corporate -topics/financial -and-company -information/FY2018 -Airbus -
PRESS -RELEASE.pdf ; and Airbus, "FY Results 2018" (Presentation), 
https://www.airbus.com/content/dam/corporate -topics/financial -and-company -information/FY2018 -Airbus -
PRESENTATION.pdf , pp. 4  and 11. 
477 European Union's opening statement  at the meeting of the Panel , para. 22;  and Airbus, "Timing of 
remaining Emirates A380 deliveries " (Exhibit EU -99 (BCI)).  
478 European Union's comments on arguments and evidence that the United States filed with its 
25 June 2019 Comments on EU responses to the Panel's questions, para. 2;  [***], (Exhibit EU -113 (BCI)); 
[***], (Exhibit EU -114 (BCI)); and Email from [***] to Airbus, 8 August 2019 (Exhibit EU -115 (BCI)). The 
European Union initially submitted that Airbus would execute full repayment of outstanding principal and 
accrued interested [***], later submitting that the [***]. (European Union's submi ssion regarding the wind -
down of the A380 programme , para. 32 ; and response to Panel question No.  31, para.  175). 
479 Panel Report,  EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.915 . 
(emphasis original)  
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  date for final repayments under the French, German , Spanish and UK A380 LA/MSF contracts will 
be made in [***].480  
7.255.   At present, Air bus continues to produce the A380 and termination will only take place once 
outstanding deliveries are completed in  July 2021. In light of this, we do not see how 
Airbus'  announcement can be said to have brought the "life" of the A380 LA/MSF subsidies to a n end 
at present . We therefore disagree with the European Union's submission that Airbus' announcement 
to wind -down the A380 programme  establishes , on its own,  that the European Union has achieved 
the withdrawal of  the French, German, Spanish and UK A380 LA/MSF subsidies  for the purpose of 
Article  7.8 of the SCM Agreement.  
7.4.5.3.2.2   The [ ***] agreement between [ ***] and Airbus  
7.256.   We last turn to the European Union's argument that the announcement of the "wind -down" 
of the A380  LA/MSF programme has resulted in the withdrawal of the [***] A380 LA/MSF subsidy 
by triggering an obligation for Airbus to repay the principal and interest accrued under the [***] 
A380 LA/MSF contract. Under the terms of the [***] agreement, Airbus is req uired to [***].481 
[***].482 
7.257.   The European Union asks us to find that the repayment under the [***] agreement achieves 
withdrawal of the [***] A380 LA/MSF subsidy in one of two ways. First, the European Union argues 
that the [***] agreement has had the effect o f converting Airbus' repayment obligations into [***], 
as the European Union submits that repayment is no longer dependent on deliveries. The 
European  Union further submits that the applicable interest rate (which the European Union 
estimates was [***]) under the agreement is above what Airbus would have to pay to obtain the 
same amount of funding on the market483, and thus the [***] A380 LA/MSF subsidy has been 
withdrawn as of [***] when the first repayment instalment took place under the agreement. 
Alternat ively, the European  Union submits that the [***] A380 LA/MSF will be withdrawn on [***] 
when Airbus makes its final repayment of outstanding principal and accrued interest.484 
7.258.   As we understand it, the [***] agreement sets out how the contracting parties agreed to 
give effect to the [***] provisions of the [***] amendment to the original [***] A380 LA/MSF 
agreement. Specifically, under the [***] amendment, Airbus agreed to effectuate [***] were 
Airbus to announce that the A380 programme would cease in the future.485 The [***] agreement 
provides  how Airbus must perform this obligation.486 We note, ho wever, that this feature of the 
[***] amendment did not change the [***] government's position vis-à-vis the original A380 
LA/MSF agreement. As explained by the European Union, Airbus was already required to ensure 
[***] in the event the A380 programme wer e terminated [***] under the original [***] A380 
LA/MSF contract .487 In other words, the possibility of [***] was already a feature of the subsidized  
[***] A380 LA/MSF agreement. We note, moreover, that the interest rates applied on the amounts 
of outstanding principal and accrued interest are derived through the application of the same [***] 
formula set out in the original LA/MSF agreement.488 Thus, in practi ce, the [***] agreement appears 
to have done nothing more than simply give effect to the terms of the original [***] A380 LA/MSF 
 
480 The European Union  also argues that the announcement to "wind -down" the A380 programme is an 
"intervening event" that achieves the removal of all adverse effects related to the market presence of 
the A380. We address this argument in section 7.5.5.5  below.  
481 European Union's comments on arguments and evidence that the United States filed with its 
25 June 2019 Comments on EU responses to the Panel's questi ons, para. 2;  and [***], (Exhibit EU -113 
(BCI)), Clause 2.3.  
482 Interest accrues at the rate of the previous year's [***]. (European Union's comments on 
arguments and evidence that the United States filed with its 25  June 2019 Comments on EU responses to t he 
Panel's questions, para. 2;  [***]; [***]; and [***].) 
483 The European Union argues that Airbus enjoys an A+ credit rating and Airbus' corporate borrowing 
rate for [***]. (European Union's comments on arguments and evidence that the United States filed with its 
25 June 2019 Comments on EU responses to the Panel's  questions, para. 2; Airbus , "Hedging & Debt 
Information", https://www.airbus.com/investors/hedging -and-debt-information.html ; and Email from [***] to 
Airbus, 8 August 2019 (Exhibit EU -115 (BCI)) ). 
484 European Union's comments on arguments and evidence that the United States filed with its 
25 June 2019 Comments on EU responses to the Panel's questions, para. 3 and fn 6.  
485 [***]. 
486 [***]. 
487 European Union's first written submission, paras. 123  and 171.  
488 Compare [***] with [***], and [***], all in essentially the same terms.  WT/DS316/RW2  
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  agreement prescribing Airbus' repayment obligations in the event of programme termination. We do 
not understand the [***] agree ment to have imposed on Airbus an obligation that did not already 
exist under the original, subsidized, arrangement. To this extent, we do not agree with the European 
Union when it argues that the [***] agreement replaced the original [***] A380 LA/MSF 
agreement with a new loan agreement on market terms. The [***] agreement has not converted 
Airbus' obligations under the [***] A380 LA/MSF agreement into a [***], as the European Union 
maintains. Rather, it simply prescribes how Airbus and the [***] governmen t have agreed that 
Airbus will perform its obligation to [***] under the existing, subsidized, A380 LA/MSF 
arrangements. Accordingly, we find that the [***] agreement has not withdrawn the [***] A380 
LA/MSF subsidy.  
Conclusion s 
In the light of the reasoni ng and findings set out above, we conclude that the German and 
UK A350XWB LA/MSF subsidies, and the French, German, Spanish and UK A380 LA/MSF subsidies, 
have not been withdrawn for the purpose of Article 7.8 of the SCM Agreement. We reach this 
conclusion based on the following considerations:  
a. As regards the German A350XWB LA/MSF  agreement:  
i. there is no  sufficient  factual basis to accept the premise underlying the 
European  Union's withdrawal claim, namely, that Airbus was seriously considering 
exerci sing its rights under [***] of the original German A350XWB LA/MSF loan 
agreement  in order to refinance the German A350XWB LA/MSF using market -based 
instruments  around the time of the [***] amendment; and  
ii. even if we were to accept that there was a credible possibility that Airbus could have 
invoked [***] to repay and refinance the German A350XWB LA/MSF, we are not 
convinced that the test for determining whether the amended terms of the German 
A350XWB LA/MSF agreement were market -based should be focused, as t he 
European  Union argues, on comparing the expected  IRR of the amended contract with 
the expected IRR that a market lender would expect to achieve for the same or similar 
loan entered into at the time of the amendment. Rather, the question that must be 
answered is whether a market lender would have preferred the expected returns 
associated with the amended German A350XWB LA/MSF agreement over the returns 
it could have expected to achieve as a result of a decision on the part of Airbus to 
invoke its right un der [***] to repay the outstanding principal and accrued interest. 
The European Union has failed to make this demonstration .  
b. As regards the UK A350XWB LA/MS F agreement:  
i. Airbus repaid all outstanding principal and interest accrued under the UK A350XWB 
LA/MSF loan agreement on [***] with a final payment totalling [***], which  
represents the repayment of the full amount of principal that Airbus actually drew 
down and received , and accrued interest ; however,  
ii. the European Union's claim that the repayment of the UK A350XWB LA/MSF agreement  
on its subsidized terms achieves the withdrawal of the subsidy  cannot be sustained 
because we have found that t he full repayment of a loan on subsidized terms does not 
alone  "remove" the subsidy or otherwise bring the life of a subsidy to an end , but 
rather confirms that a subsidy has been fully provided . 
c. As regards the French, German, Spanish and UK A380 LA/MSF agreements : 
i. the European Union's claim that the [***] amendments to the A380 LA/MSF 
agreements achieve the withdrawal of the subsid y cannot be sustained because the 
European Union has failed to show that a commercial lender, faced with the likely 
termination of the A380 programme, would have entered into the A380 LA/MSF 
amendments on the terms agreed between Airbus and the Airbus governments.  WT/DS31 6/RW2  
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  ii. the European Union's claim that the Spanish A380 LA/MSF subsid y has been withdrawn 
as a result of the alleged amortization of  benefit, in the light of the ex ante  expectations 
concerning the anticipated full repayment  of principal and interest on subsidized terms , 
cannot be sustained because we have found that the full repayment of a loan on its 
subsidized terms does not alone  bring the life of the subsidy conferred to an end. Even 
by the European Union's own standard of amortization, we have found that the life of 
the Spanish A380 LA/MSF subsidy has not come to an end because the [***] 
amendment to the Spanish A380 LA/MSF extend ed the repayment terms beyond the 
contracting parties' original ex ante  expectations . 
iii. the European Union's claim that Airbus' announcement to wind -down the 
A380 programme  achieves the withdrawal of  the French, German, Spanish and 
UK A380 LA/MSF subsidies  cannot be sustained because  Airbus continues to produce 
the A380 and termination will only take place once outstanding deliveries are 
completed in July  2021, which fails to bring the life of the A38 0 LA/MSF subsidies to 
an end at present. We also reject the European Union's argument that Airbus' [***] 
agreement  with [***] to repay the principal and interest accrued under the [***] 
A380 LA/MSF contract results in the replacement of the original [***] A380 LA/MSF 
agreement with a new loan agreement on market terms, or otherwise achieves 
withdrawal for purposes of Article 7.8.  
7.5  Whether the European  Union and the relevant member States have complied with the 
requirement to "take appropriate steps to remove  the adverse effects" under the terms 
of Article 7.8 of the SCM  Agreement  
Introduction  
In the preceding section , we concluded that the European Union has failed to establish that 
it has " withdraw {n}" any of the A380 or A350XWB LA/MSF subsidies for the purp ose of Article 7.8 
of the SCM Agreement. In this section, we examine the merits of the European Union's  submission 
that it  has "remove {d} the adverse effects " of these subsidies,  within the meaning of Article 7.8 , 
because none of the subsidies "individually or collectively, constitutes a genuine and substantial  
cause of any present adverse effect s".489 The United States disagrees with the European Union on 
this point, arguing that the A380 and A350 XWB LA/MSF subsidies continu e to be a genuine and 
substantial cause of present adverse effects in the VLA product market (in relation to sales and 
market share won by the A380) and twin -aisle LCA product market (in relation to sales and market 
share won by the A350XWB and the A330neo ).  
As an initial matter, we underline that, in the light of our conclusion that none of the 
eight A380 or A350XWB LA/MSF subsidies have been withdrawn, we must consider whether these 
eight subsidy measures are a genuine and substantial cause of adverse ef fects at present . We recall 
in this regard that in the first compliance proceeding, the panel and, specifically, the Appellate Body, 
made certain findings regarding the effects of these same subsidies in the relevant time -period from 
1 December 2011 throug h year -end 2013 (the "First Compliance Reference Period"). Although our 
task is to determine whether these same subsidies cause present  adverse effects, we consider the 
findings in the first compliance proceeding regarding the effects of the same subsidies  in the 
First Compliance Reference Period  to be relevant to this analysis .  
Our analysis proceeds in six parts. We begin by exploring and identifying the appropriate 
counterfactual for determining the effects of the A380 and A350XWB LA/MSF subsidies, befor e 
addressing the appropriate reference period. We then review the adopted findings in this dispute 
concerning the effects of the A380 and A350XWB LA/MSF subsidies in the reference period used in 
the first compliance proceeding. Using those findings as a st arting point, we then determine the 
extent to which the A380 and A350XWB LA/MSF subsidies continue to have "product" effects after 
the end of the reference period used in the first compliance dispute. Finally, we examine the present 
impact of those effects  in the relevant  product markets.   
 
489 European Union's first written submission, para. 244.  WT/DS316/RW2  
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The appropriate counterfactual  
The European Union argues that the counterfactual that must be applied in this dispute to 
determine whether any non -withdrawn LA/MSF subsidies continue to cause adverse effects  "entails 
comparing the actual market  situation … with the market situation that would have existed if the 
challenged subsidies had been  withdrawn at the end of the implementation period ", i.e. at 
1 December 2011 .490 The European Union maintains that the use o f such a counterfactual would be 
consistent with the requirements of Article 7.8, and appropriate to use in this proceeding, because 
"'if the … counterfactual market situation where the subsidies are withdrawn is equivalent to the 
actual market situation w here those subsidies remain ', then … 'the remaining subsidies are not 
causing any adverse effects that may exist in the market '".491 In light of this line of argument, the 
European Union asserts that the withdrawal of the A380 and A350XWB LA/MSF subsidies by  the end 
of the implementation period through any of the means examined in the previous section of this 
report492, would have left entirely unaffected the launches of the A380 in December 2000 and the 
A350XWB in 2006. Accordingly, the European Union argues t hat, under the appropriate 
counterfactual, there is no basis to find present adverse effects in respect of the A380 and A350XWB 
because both models of LCA would be present on the market today.493 
The United States argues that the appropriate counterfactual i s one in which the challenged 
subsidies were never granted to Airbus. According to the United States, this approach is consistent 
with the text of Article 7.8, which treats the two relevant compliance options (withdrawal or removal 
of adverse effects) as d istinct, and is the counterfactual used in the first compliance proceeding from 
which the European Union offers no reason to depart. The United States also asserts that the 
European Union's counterfactual : (i) would lead to arbitrary results because a pane l may have to 
choose between one of many potential withdrawal options, which may have different impacts on 
relevant market conditions in the counterfactual; (ii) it would needlessly increase the complexity of 
compliance proceedings as it requires a panel's  evaluation of hypothetical withdrawal scenarios; 
(iii) it improperly assumes that the withdrawal o f a subsidy leads to the termination of its effects ; 
and (iv) can only feasibly detect whether the European Union 's failure to withdraw the subsidy (which 
is not the relevant issue) causes present adverse effects.494  
We are not persuaded by the European Union's submissions concerning the appropriate 
counterfactual. We find the European Union's proposed approach to be problematic because it is 
based on the view that, in order to determine whether an implementing Member has taken 
"appropriate steps to remove the adverse effects" of a non -withdrawn subsidy, a comparison must 
be made between the market situation with and without the withdrawal  of that subsidy, as op posed 
to the market situation with and without the provision  of the non -withdrawn subsidy. By focusing on 
the market effects of the withdrawal of a subsidy as of the end of the implementation period, the 
European Union's proposed counterfactual ignores all  prior effects of the non -withdrawn subsidy, 
which may well be important to understanding its present -day effects. We see no reason why such 
effects of a non -withdrawn subsidy must be excluded, as a matter of law, from an assessment of 
the extent to which the same non -withdrawn subsidy continues to cause adverse effects in the post -
implementation period. In our view, the European Union's proposed approach would not answer the 
question that is asked by the compliance requirement in Article 7.8 because it fai ls to identify 
whether the provision  of a non -withdrawn subsidy that continues to exist  in the post -implementation 
period has present day effects.  
 
490 European Union's first written submission, paras. 215 and 278 . (emphasis added)  
491 European Union's second written submission, para. 319 (quoting Canada's third -party submission, 
para. 34).  
492 The four means by which the European Union argues the LA/MSF subsidies would be withdrawn are: 
(i) full repayment of the loan on subsidized terms; (ii) replacement of a subsidized financial contribution with a 
non-subsidized financial contribution; (iii) the expiry of benefit over time; and (iv) an intervening event that 
brings about the end of the benefit of a subsidy. (European Union's first written submission, para. 279 ). 
493 European Union's first written submission, para. 281.  We note that " Canada consi ders that, in these 
second compliance proceedings, the correct counterfactual would be one under which the remaining subsidies 
associated with the A380 and A350XWB are withdrawn by the date of the European Union 's second compliance 
communication, i.e. 17 M ay 2018 ". (Canada's third -party submission, para. 27).  
494 United States' first written submission, paras. 175 -185; second written submission, paras. 166 -175; 
response to Panel question No. 53; and comments on the European Union's response s to Panel question 
Nos. 53 and 55.  
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We recall, moreover, that of the four hypothetical scenarios the European Union maintains 
would withdraw the subsidy, we have already found that one – the repayment of a subsidized loan 
on its subsidized terms – cannot, alone, constitute the withdrawal of a subsidy. As regards the other 
three possibilities, we note that, apart from asserting that the  withdrawal of the A380 and A350XWB 
LA/MSF subsidies would have left unaffected the launches of the A380 in December 2000 and the 
A350XWB in 2006, the European Union has not advanced any specific explanation of how the way 
those subsidies could have been w ithdrawn would have impacted Airbus' ability to market and deliver 
LCA's in the relevant period. The European Union argues that the application of its counterfactual in 
this dispute is a straight -forward exercise .495 However, the European Union does not expl ain how 
the different modes of potential withdrawal could have impacted Airbus' counterfactual market 
situation, which under its proposed approach, ultimately is what must be compared with the actual 
market situation. For instance, the European Union does not explain how the adjusted terms of a 
LA/MSF contract that was properly aligned to a market benchmark could have affected Airbus' ability 
to market and win A350XWB and A380 sales in the relevant period. In our view, the withdrawal of 
the LA/MSF subsidies  by aligning their terms with a market benchmark might well have increased 
the overall cost of repayments to Airbus, thereby increasing the costs of the programmes. Such a 
difference would need to be taken into account in comparing the actual market situat ion with the 
counterfactual market situation.  
Finally, the fact that the hypothetical withdrawal options posited by the European Union 
would have had potentially different effects on Airbus' ability to make present day sales and 
deliveries of the A380 and A350XWB implies that different, possibly competing , scenarios, could 
result from the application of the European Union's proposed counterfactual. Although the 
European  Union argues that a panel would need to only examine the withdrawal scenarios proposed 
by the respondent, it is not clear to us that the universe of hypothetical withdrawal options should 
be left to a respondent to decide, as a complainant might well conceive of other possible withdrawal 
options that would have a different counterfactual mark et effect.  
For all of the above reasons, we see no reason to depart from the counterfactual used by 
the panel and Appellate Body in the first compliance proceeding. Thus, for the purpose of this section, 
we will proceed with our analysis of the European U nion's assertion of compliance through the 
removal of the adverse effects by applying a counterfactual under which A380 and A350XWB LA/MSF 
subsidies were never granted to Airbus (which, for ease of reference, we will refer to as "the absence 
of" the LA/MSF  subsidies). In doing so, w e bear in mind that,  consistent with  the 
Appellate  Body's  findings in the first compliance proceeding , the counterfactual under which we must 
operate  is one where  the effects of the pre-A380 LA/MSF subsidies must be  disregarded  for the 
purpose of assessing compliance .496 We understand this to mean that we must assume that Airbus , 
in the counterfactual, had launched all of its pre -A380 LCA as and when it did in reality.   
The appropriate reference period  
The European Union  argues that  the appropriate reference period  in this proceeding would 
begin no earlier than  the time of adoption of the DSB 's recommendations and rulings in the first 
compliance proceeding , i.e. 28 May 2018 , and extend at minimum until present day . According to 
the European Union this is so because the reference period must enable an assessment of adverse  
effects under current factual conditions  as influenced by the European Union 's measures taken to 
comply , and a relatively recent reference period i s appropriate because data arising further in the 
past is less probative of current factual market conditions. Citing the panel report in US – Upland 
Cotton (Article 21.5 – Brazil) , the European Union further argues that a compliance panel must also 
take i nto account events that post -date the end of the defined reference period, as a compliance 
panel must assess compliance at the time it gives it s ruling.497 
The United States  argues  that the appropriate reference period in this proceeding would 
begin on 1 Jan uary 2014 and extend until present day. According to the United States, this is so 
 
495 European Union's first written submis sion, para. 281; and second written submission, para. 324.  
496 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras. 5.361 -5.383.  
497 European Union's first written submission, para. 226 and fn 354 (citing Panel  Report, US – Upland 
Cotton  (Article 21.5 – Brazil) , paras. 9.67 -9.71, 10.104, and 10.248); and second written submission, 
paras.  307-313. 
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  because the first compliance proceeding already determined the European Union's compliance up 
through its own reference period, i.e. December 2011 through year -end 2013, and  thus the 
European Union must show that it removed the adverse effects sometime after 2013. The 
United  States further argues that the European Union's proposed reference period, beginning in May 
2018, is inappropriately short in the light of the conditions  of competition in the LCA industry, and 
is unsupported by any rationale.498 
We recall that the SCM Agreement contain s no specific guidance on the selection of a 
reference period for the purpose of determining whether an implementing Member has achieved 
present -day compliance with the obligation to "take appropriate steps to remove the adverse effects" 
within the meaning  of Article 7.8.499 We note, however, that "the unavailability of immediate data 
means that it is impossible to assess the 'present ' situation"500 on the basis of contemporaneous 
information. As such, "a review of the past is necessary to draw conclusions abou t the present".501 
Thus, like the first compliance panel, we "see no need to make any a priori  choice of reference 
period"502, and consider it "appropriate to examine the entirety of the evidence and arguments put 
forward by the {parties } … including the most recent information where relevant and reliable"503, 
with a view to determining whether the A380 and A350XWB LA/MSF subsidies  are a genuine and 
substantial cause of present  adverse effects.  
Effects of the A380 and A350XWB LA/MSF subsidies through 2013  
The first compliance panel found that the European  Union and certain member States had 
"failed to comply with the DSB recommendat ions and rulings and, in particular, the obligation under 
Article  7.8 of the SCM  Agreement 'to take appropriate steps to remove the adverse effects or … 
withdraw the subsidy '".504 The Appellate  Body reached the same conclusion but on the basis of 
different r easoning.505 In particular, the Appellate  Body based its findings  solely on the effects of the 
French, German, Spanish, and UK A380 LA/MSF subsidies  and the French, German, Spanish, and 
UK A350XWB LA/MSF subsidies506 (i.e. the same set of measures being examin ed in this part of our  
report), whereas the compliance panel had based its conclusions on a broader set of subsidy 
measures.507 Thus, for present purposes , we focus our attention on the findings of the 
Appellate  Body report in the first compliance proceeding  where  it addressed the market effects of 
the identical  set of subsidy measures that are at issue in this proceeding.  
The Appellate Body 's findings  confirmed that A380 and A350XWB LA/MSF subsidies were a 
genuine and substantial cause of significant lost s ales and impedance within the meaning of 
Article  6.3(a) -(c) of the SCM Agreement in the VLA product market, and significant lost sales within 
the meaning of Article 6.3(c) in the twin -aisle product market, in the First Compliance Reference 
Period.508 The par ties interpret these findings in different ways.  
The European Union argues  that the Appellate Body findings leave the launch dates of the 
A380 and A350XWB, in the absence of the A380 and A350XWB LA/MSF subsidies, entirely open 
questions. Accordingly, the European Union bases its assertion of compliance on a counterfactual in 
 
498 United States' first written submission, paras. 170 -174; and second written submission, 
paras.  160-165. 
499 Panel Rep ort, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1444.  
500 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1443 . 
(internal quotation marks and citation omitted)  
501 Panel Repor t, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1443 . 
(internal quotation marks and citation omitted)  
502 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1444.  
503 Panel Report,  EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1444.  
504 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  7.2. 
505 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
section 6.  
506 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.412 and section 6. See also Panel Reports, EC and certain member States – Large Civil Aircraft 
(Article  21.5 – US), section 6.5.2.3.1 (describing A350XWB LA/MSF measures); and EC and certain member 
States – Large Civil Aircraft , paras.  7.367 -7.381 and Table 1 (describing A380 LA/MSF measures).  
507 Panel Report, EC and certain member States – Large Civil Aircr aft (Article 21.5 – US), section 7.  
508 Appellate  Body Report and Panel Report pursuant to Article  21.5 of the DSU, Action by the Dispute 
Settlement Body , WT/DS316/35.  
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  which Airbus launched the A380 and A350XWB in or around 2002 and in 2007/2008, respectively.509 
Thus, the European Union maintains that it follows from the Appellate Bod y's findings that 
non-subsidized versions of the A380 and A350XWB would have been available for order and delivery 
during the First Compliance Reference Period, explaining that the counterfactual orders actually lost 
to Boeing up to and including that peri od resulted from the delayed counterfactual launches of the 
two LCA, which meant that Airbus offered less attractive delivery slots .510  
The United States maintains that the Appellate Body's findings preclude any counterfactual 
launch of either the A380 or t he A350XWB until at least the end of 2013, and that the 
European  Union's attempts to reconcile the Appellate Body's findings of adverse effects with the 
European Union's proposed counterfactual launch dates for the two LCA finds no support in the first 
compliance panel's or Appellate Body's reasoning. Thus, the United States argues that any 
counterfactual that the Panel may use to determin e whether the European Union has removed the 
adverse effects within the meaning of Article 7.8 must be one in which neit her the A380 nor the 
A350XWB would have been launched before 2013.511  
7.5.4.1   Appellate Body findings concerning the m arket presence of the A380  
through  2013   
In this section, we review the Appellate Body's compliance report by focusing on the three 
aspects of its findings and analysis we believe  most materially bear on the issue of the market 
presence of the A380 in the First Compliance Reference Period : (a) the Appellate Body's findings 
and analysis concerning the effects of A380 LA/MSF subsidies on the launch, de velopment and 
bringing to market  of the A380; (b) the Appellate Body's causation analysis and findings in relation 
to lost sales in the VLA product market; and (c) the Appellate Body's causation analysis and findings 
in relation to  impedance  in the VLA pro duct market. We address each of these aspects in turn.  
7.5.4.1.1   Effects of the A380 LA/MSF subsidies on the A380  
We recall that the United  States ha s pursued its claims throughout the various proceedings 
in this dispute relying upon what has been described as the  "product " theory of causation.512 Under 
this theory of causation, "market distortion and adverse effects flow directly from Airbus ' entry at a 
particular time with a particular aircraft , which in the United  States ' view would not have been 
possible but for the subsidies ".513 The first compliance panel found that, in the absence of the 
"product effect " of all pre -A350XWB LA/MSF  subsidies  (arising from the "indirect " effects514 of pre -
 
509 The United States asserts that "{b}oth the United States and the EU have mistakenly refe rred to 
the EU's proposed A380 counterfactual launch date as being 2002. … the confusion likely stems from adding 
the {European Union's } estimate  of the purported delay – two years – to the year of the real world A380 
launch, 2000. However, the European Un ion's actual position appears to be that Airbus would have launched 
the A380 in 2003 {without the A380 LA/MSF subsidies .} … Previous U.S. references to 2002 should be read 
instead as referring to 2003" . (United States' comments on the European Union's resp onse to Panel question 
No. 68(b), fn  427).  
510 European Union's first written submission, paras. 272 -276; second written submission, 
paras.  269-275, 276 -295, 300 -306, 430 -431, and 433 -437; response s to Panel question No. 68, paras. 354  
and 359-360, and No. 7 1, para. 374; comments on the United States' response s to Panel question No. 59, 
para. 272, No. 60, para. 284, No. 70, paras.  326, 369, and No. 75, para. 385; and Airbus Counterfactual 
Launch Statement, ( Exhibit EU -92 (HSBI/BCI) ), paras. 24  and 27. 
511 United States' first written submission, paras. 207 -235; and second written submission, paras. 135 -147 
and 231. See also United States' comments on the European Union's response to Panel question No.  60. 
512 In the original dispute the United  States also off ered a "price" theory of causation, which was 
rejected by the original panel and not pursued on appeal by the United  States. (Panel Report, EC and certain 
member States – Large Civil Aircraft , para. 7.1877 . See also Appellate  Body Report, EC and certain me mber 
States – Large Civil Aircraft (Article 21.5 – US), fn 1618).  
513 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.587. (emphasis original) See also Appellate  Body Report, EC and certain member State s – Large Civil 
Aircraft (Article 21.5 – US), para.  5.416 (describing "product effects" as "the effects of such subsidies on the 
ability of Airbus to launch and bring to market particular Airbus LCA models as and when it did"). (emphasis 
original)  
514 "Indir ect effects" are the "learning", scope and financial effects that any given LA/MSF subsidy 
provided specifically for one model of LCA may have on Airbus' ability to launch and bring to market another, 
subsequent model of LCA. (Appellate  Body Report, EC and  certain member States – Large Civil Aircraft 
(Article  21.5 – US), paras.  5.563 and 5.594).  
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  A380 LA/MSF subsidies and the "direct " effects515 of A380 LA/MSF  subsidies ), the A380 programme  
would not have existed before or during the First Compliance  Reference Period.516 The 
Appellate  Body, however, found that only the effects of A380 LA/MSF subsidies could be considered 
vis-à-vis the A38 0 programme in the counterfactual. Accordingly, in deciding whether the compliance 
panel had erred in reaching its adverse effects findings, t he Appellate  Body examined " whether the 
Panel 's analysis regarding the 'product effects ' of {A380 LA/MSF subsidies  alone } support a finding 
of a genuine and substantial causal relationship between these subsidies … and the market 
phenomena identified in the post -implementation period " in the VLA product market.517 
The Appellate  Body determined  that A380 LA/MSF subsidies  had a "genuine  impact on 
Airbus ' ability to fund the timely launch of the A380 "518, that "these 'direct effects ' of A380 LA/MSF 
continued after the original reference period  {which ended in 2006}", and that "the 
Panel 's understanding of the 'direct effects ' of A380 LA/MSF on Airbus ' ability to launch, bring to 
market, and continue developing the A380 as and when it  did {had} a sufficient evidentiary basis ".519 
The Appellate  Body further  characterized the "product effects " of A380 LA/MSF subsidies as follows: 
(a) they "enabled Airbus … to bring to market and to continue developing the A380 ", an event that 
was "crucial to renew and sustain Airbus ' competitiveness in the post -implementation period "520; 
(b) they " made it possible … to bring to market the A380 "521; (c) they " continued to have effects on 
Airbus ' ability to bring to market and to continue developing the A380 after the original reference 
period "522; and (d) in the absence of A380 LA/MSF subsidies, " Airbus would not have been able to 
offer the A380 at the time it did ".523  
Thus, the Appellate  Body expressly  concluded  that A380 LA/MSF  subsidies impact ed Airbus ' 
ability to undertake a timely launch of the A380 , to bring it to market,  and to continue to develop 
the A380 ai rcraft after 2006.524 In other words, A380 LA/MSF subsidies affected  Airbus ' ability to 
launch and market the A380 programme, and to  actually develop the aircraft post -launch. Relatedly, 
and as noted above, the Appellate  Body directly stated that A380 LA/MSF  "made it possible … to 
bring to market the A380 ". This, in our view, is a direct  statement asserting that the A380 would 
not have been brought to market without  A380 LA/MSF  subsidies . Accordingly, we find that the 
 
515 "Direct effects" are the effects of any given LA/MSF subsidy on Airbus' ability to launch and bring to 
market the particular model of Airbus LCA specifically fund ed by that LA/MSF loan. (Appellate  Body Report, 
EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  5.563).  
516 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 7.1(d)(xii).  
517 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.599.  
518 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.609. 
519 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.609. (emphasis original) The Appellate  Body also considered it "important  … that the A380 programme 
suffered 'extensive' production delays in 2005 and 2006", during which time "Airbus continued to receive 
disbursements" under A380 LA/MSF measures. (Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft (Article 21.5 – US), para.  5.608). See also Appellate  Body Report, EC and certain member States 
– Large Civil Aircraft (Article 2 1.5 – US), para.  5.646 (stating that "A380 LA/MSF had 'direct effects' on Airbus' 
ability to launch, bring to market, and continue developing the A380 as and when it  did, given that the A380 
LA/MSF subsidies had not expired, as well as the fact that Airbus  continued to receive disbursements under the 
French, German, and Spanish LA/MSF contracts at a time when it was experiencing severe financial difficulties 
resulting from the e xtensive production delays in the A380 programme " and concluding that A380 LA/MS F 
"made it possible … to bring to market the A380 "). (emphasis original)  
520 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  5.647 and 6.23.  
521 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.646.  
522 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.635.  
523 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  5.766, 5.769, and 5.773.  
524 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.558.  
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  Appellate  Body's characterizations  of the  "product effects " of A380 LA/MSF strongly suggest that it 
considered the A380 would not have been available for either order or delivery by year-end 2013 .525 
Causation  of lost sales in the VLA product market  
We now turn to examine the Appellate  Body's anal ysis of whether the "product effects " of 
A380 LA/MSF subsidies were a genuine and substantial cause of  lost sales in the VLA product market 
during the First Compliance  Reference Period.526  
We start by noting that  at no point  in its analysis  did the Appellate  Body state that the A380 
would have been available for order at any time leading up to and including the First Compliance  
Reference Period. Indeed, had the Appellate  Body considered that a non -subsidized A380 could have 
been available, it wou ld have needed to explain  how the A380 LA/MSF subsidies  could have been a 
"genuine and substantial " cause of the lost sales in the First Compliance  Reference Period  given the 
market presence of an unsubsidized A380. However, no such explanation can be foun d in the 
Appellate Body's analysis. The absence of such an explanation, and the lack  of any other 
Appellate  Body statements concerning  the causal mechanism through which A380 LA/MSF caused 
lost sales, suggests  that the causal mechanism relied upon by the A ppellate Body was the one  
described in the compliance panel report, namely,  the A380 was unavailable for order during the 
First Compliance  Reference Period.  
In the course of its lost sales analysis , the Appellate  Body explained  that "the Panel's 
findings  … indicate that Airbus' competitiveness in the VLA market, gained through earlier LA/MSF 
subsidies, was renewed and sustained beyond the original reference period and into the 
post-implementation period due to the subsidies it continued to receive after the  original reference 
period and into the post -implementation period ".527 This was so because the A380 LA/MSF  subsidies  
"enabled Airbus to bring the A380 to market and continue its development in the face of extensive 
production delays ".528 The Appellate Body we nt on to clarify that "{i} n other words, in the absence 
of {A380 LA/MSF }, Airbus would not have been able to be 'present  in {both} of the relevant sales 
campaigns as exactly the same competitor selling identical  aircraft ' in the post -implementation 
period ".529 The Appellate  Body again stated that the A380 LA/MSF subsidies  "enabled Airbus to bring 
the A380 aircraft to market and continu e its development ", without suggesting  that Airbus could 
have brought to market and developed the A380 otherwise. Importantly , the Appellate  Body found  
that the Airbus  company operating  in the counterfactual, would have been unable to present an 
aircraft "identical " to the A380 in the sales campaigns leading to the Transaero and Emirates lost 
sales. In our view,  this statement cannot be reconciled with the European Union's interpretation of 
the Appellate  Body's  findings. Rather, it seems to us to confirm that like the compliance panel, the 
Appellate Body was satisfied that Airbus could not have offered an unsubsidized  A380 in the 
First Compliance  Reference Period. The Appellate  Body's statement that A380 LA/MSF subsidies 
"renewed and sustained " Airbus ' "comp etitiveness in the VLA market " in the counterfactual 
post-implementation period is also consistent with the conclusion that, in the absence of the  A380 
LA/MSF  subsidies , the A380 would have been unavailable for order in the First Compliance  Reference 
Period. 
 
525 For clarity, when this section refers to the A380, it refers to the A380 that was in fact ordered and 
delivered in the First Compliance Reference Period. At no time has the European Union ever argued that any 
"inferior" version of the A380 would have been launched. On the contrary, the European Union argues that the 
market would not have accept ed an inferior version. (European Union's response to Panel question No. 59 ; 
comments on the United States' response to Panel question No. 59).  
526 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
section 5.6.4. 6.4.1. The lost sales in the VLA product market were the 2012 Transaero order for four A380 
aircraft and the 2013 Emirates order for 50 A380 aircraft.  
527 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.725. 
528 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.725.  
529 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.726 (quoting Panel Report, EC and  certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.1789) . 
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Finally , we note that in reject ing the European Union 's argument that the compliance panel 
improperly dismissed certain of the European Union 's non -attribution factors , the Appellate Body 
gave the following explanation : 
The European  Union argued before the Panel that Transaero Airlines and Emirates 
Airlines chose the A380 over the 747 -8 in the orders they placed in 2012 and 2013 
because of, inter alia , the  A380's more advanced technologies and greater size 
compared with t he 747 -8, which enabled it to satisfy both customers ' very specific 
requirements. However, similar to our analysis in the context of lost sales in the 
twin-aisle LCA market, we do not view these factors as unrelated to the effects of the 
subsidies . Rather,  our review of findings from the original proceedings and the 
Panel 's findings shows that, absent the LA/MSF subsidies existing in the post -
implementation period, Airbus would not have been able to launch and bring to market 
the A380 at the time it did. Th erefore, like the Panel, we have doubts as to whether 
Airbus ' pre-existing commonality advantages and other product -related advantages 
over Boeing could be characterized as non -attribution factors that could be said to 
"dilute " the causal link between the LA/MSF subsidies existing in the 
post-implementation period and the relevant market phenomena.530 
In stating that the " more advanced technologies and greater size " of the A380s actually 
offered during the First Compliance  Reference Period were not "unrelated  to the effects of 
{A380 LA/MSF } subsidies ", this passage, in our view, further confirms  that the Appellate Body 
considered that the A380 would have been unavailable for offer in the  First Compliance  Reference 
Period in the counterfactual  scenario . 
In sum,  our assessment  of the Appellate  Body's VLA lost  sales analysis  indicates that the 
Appellate Body's findings were based on the conclusion that Airbus would not have been able to offer 
the A380 by the end of the First Compliance  Reference Period  in the abse nce of the A380 LA/MSF 
subsidies. This, of course, implies that Airbus could not have launched the A380 before the end 2013 
without the A380 LA/MSF subsidies.  
Causation of impedance  in the VLA product market  
In examin ing the Appellate  Body's analysis of whether the "product effects " of A380 LA/MSF 
were a genuine and substantial cause of impedance  in six geographic markets, we see nothing  
directly indicating that it was of the view that an unsubsidized A380 would have been  available for 
delivery in the First Compliance  Reference Period. Indeed, had  the Appellate  Body considered that a 
non-subsidized A380 could have been available for delivery, it would have needed to explain  how 
the A380 LA/MSF subsidies could have been a g enuine and substantial cause of impedance , given 
the presence of an unsubsidized A380 in the same geographic markets. However, no such 
explanation can be found  in the Appellate Body's analysis. The absence of such an explanation, and 
the lack of any other Appellate Body statements concerning the causal mechanism through which 
A380 LA/MSF caused lost sales, suggests that the causal mechanism relied upon by the 
Appellate  Body was the one described in the compliance panel report, namely,  the A380 was 
unavailab le for delivery during the First Compliance  Reference Period.  
This, we believe, finds further confirmation in the fact that  the Appellate  Body affirmed that 
even the low number of A380 impedance deliveries present in Australia (a single A380 delivery), 
China (four A380 deliveries), Korea (three A380 deliveries), and  Singapore (five A380 deliveries) 
during the First Compliance  Reference Period could support findings of impedance in each separate  
 
530 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.729 . (fn omitted; emphasis added) We note that other reasons that th e European Union alleged led 
Transaero and Emirates to order the A380 aircraft over the 747 -8I aircraft appeared to be HSBI. (Panel Report, 
EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 3275 (citing HSBI versions of 
submission s and HSBI exhibits when discussing the European Union's arguments in this context)). The 
European Union appears to suggest that in this statement the Appellate Body was addressing "Airbus' choices 
about the initial  product characteristics of the A380". (E uropean Union's comments on the United States' 
response to Panel question No. 63, para. 313 (underline omitted)). The relevance of this argument is 
somewhat unclear to us, but we note that, "initial" or not, the Appellate Body was clearly addressing "produ ct-
related advantages" (e.g. size and technologies) of the A380.  
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  geographic market.531 Again, had the Appellate Body considered t hat an unsubsidized A380 could 
have been delivered during the First Compliance Reference Period, it is difficult to see how it could 
have also found that such small volumes of deliveries would have been captured by Boeing, without 
explaining how an unsubsi dized A380 would have failed to win them. The Appellate Body's findings 
concerning these low volume deliveries suggest that it was of the view that, in the absence of the 
A380 LA/MSF subsidies, Boeing would have captured 100% of deliveries – a view that wo uld be 
consistent with the conclusion that Airbus could not have been present in the relevant markets with 
an unsubsidized A380.  
We also note the Appellate  Body's reject ion of  the European Union 's appeal against the 
first compliance panel 's dismiss al of i ts non-attribution arguments  concerning delays in the 
747-8I programme. The first  compliance panel had expressed the following opinion on the impact 
of those delays on the merits of the United States' claims : 
{W}e do not see the delays in the development and production of … the 747 -8 to mean 
that, in the absence of the "product " effects of the LA/MSF subsidies, Boeing or the 
United  States ' LCA industry would not have won the orders corresponding to the 
deliveries made in the … market { } for … very l arge LCA. The fact that Airbus would 
not have existed in the absence of the LA/MSF subsidies means that customers that 
could not wait for the 787 and 747 -8 to become available would have turned to either 
Boeing 's other twin-aisle LCA, the 767 and the 777.3326 
3326 We recall that … there is evidence that the larger versions of the 777 may also at times 
challenge for sales in the market for very large LCA. (footnote original)532 
The Appellate  Body rejected the European Union 's appeal  against the first compliance 
panel's  findings , stating : 
We recall that the Panel did not see these delays "to mean that, in the absence of the 
'product ' effects of the LA/MSF subsidies, Boeing or the United  States ' LCA industry 
would not have won  the orders  corresponding to the deliveries made in the different 
markets " for VLA. We also note the Panel 's observation that "there is evidence that the 
larger versions of the 777 may also at times challenge for sales in the market for 
{VLA}". Thus, the P anel's reasoning that, in the absence of Airbus ' VLA offerings, 
customers would have turned to other Boeing LCA products – for instance, the larger 
versions of the 777 – appears to us to be reasonable . Consequently, we see no reason 
to disturb the Panel 's finding that this non -attribution factor would n ot be capable of 
diluting the genuine and substantial relationship of cause and effect between LA/MSF 
subsidies and the alleged market phenomena.533 
In our view, the  Appellate  Body's affirm ation of the reasoning of the compliance panel that 
expressly include d an assumption regarding the "absence of Airbus ' VLA offerings " further confirms 
that the A380 would have been absent from the market in the years leading up to the 
First Compliance Reference Period, i.e. when the A380 orders resulting in the A380 deliver ies 
evidencing impedance would have occurred.  Relatedly,  it was left unexplained  why, if the A380 had 
been in the market in the counterfactual such that it could have competed for orders that resulted 
in the relevant A380 deliveries , and if customers would  have substituted  away from the 747 -8I, due 
to production delays, customers would have opted for a twin -aisle LCA that is not a VLA (i.e. the 
777 model) rather than simply purchased Airbus VLA (i.e. the A380) instead. We consider the most 
reasonable explan ation to be that the A380 was unavailable, thus essentially forcing customers to 
accept an LCA that only "at times " competed with VLA for sales, i.e. larger versions of the  777. 
In our assessment, t hese aspects of the Appellate  Body's VLA impedance analysi s confirm 
that the adopted findings were based on the conclusion that the A380 would not have been launched 
 
531 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.739.  
532 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21. 5 – US), para.  6.1816 
and fn 3326.  
533 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.735. ( fns omitted; emphasis added)  WT/DS316/RW2  
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  in the years leading up to the First Compliance Reference Period, i.e. the time -period in which the 
A380 orders resulting in the A380 deliveries evidencing impedance would have occurred.  
Appellate  Body findings concerning the m arket presence of the A350XWB 
through  2013  
Effects  of A380 and A350XWB LA/MSF subsidies on the A350XWB  
In the first compliance proceeding, the panel found that, in the absence  of the "product 
effect " of all of the challenged LA/MSF  subsidies (arising from the "indirect " effects of pre -A350XWB 
LA/MSF subsidies and the "direct " effects of A350XWB LA/MSF  subsidies ), the A350XWB would not 
have existed before or during the First Compliance  Reference Period.534 The Appellate  Body, 
however, found that only the effects of A380 and A350XWB LA/MSF subsidies could be considered 
vis-à-vis the A350XWB programme in the counterf actual . Accordingly, in deciding whether the 
compliance panel had erred in reaching its adverse effects findings, t he Appellate  Body examined 
"whether the Panel 's analysis regarding the 'product effects ' of {A380 and A350XWB LA/MSF 
subsidies alone } support  a finding of a genuine and substantial causal relationship between these 
subsidies … and the market phenomena identified in the post -implementation period " in the twin -
aisle product market.535  
The Appellate  Body confirmed  the compliance panel 's finding tha t the A350XWB LA/MSF 
subsidies had "direct effects " on the A350XWB programme, and in particular that in the absence of 
A350XWB LA/MSF  subsidies, " the Airbus company that actually existed {in 2006-2010} could have 
pursued such a programme only by a narrow m argin, with a high likelihood that it would, to some 
degree, have had to make certain compromises with respect to the pace of the programme and/or 
the features of the aircraft '".536 The Appellate Body also upheld the compliance panel's findings that 
the A380 LA/MSF subsidies had "indirect effects " on the A350XWB programme, such that  the 
"A350XWB significantly benefitted from the 'learning effects ' of the A380 " and the "A380 LA/MSF 
had 'financial effects ' on Airbus ' ability to launch the A350XWB as and when it did ".537 Thus, the  
Appellate  Body concluded that, "without the aggregated 'product effects ' of the existing LA/MSF 
subsidies for the A380 and A350XWB programmes, Airbus would not have been able to launch the 
A350XWB as and when it did ".538 In other words, the Appellate Body confirmed that A380 and 
A350XWB LA/MSF subsidies " enabled Airbus to proceed with the timely launch and development of 
the A350XWB ", an event that was "crucial to renew and sustain Airbus ' competi tiveness in the 
post-implementation period ".539 These Appellate Body statements and findings do not support the 
European Union's position that an unsubsidized A350XWB would have been launched any time before 
the end of the First Compliance Reference Period. On the contrary, insofar as the Appellate Body 
found that the A380 and A350XWB LA/MSF subsidies "enabled Airbus to proceed with the timely 
launch and development  of the A350XWB ", which  was "crucial to renew and sustain Airbus' 
competitiveness in the post -implementation period ", we understand the Appellate Body to have 
found that an unsubsidized A350XWB could not have been launched before the end of 2013.  This is 
because if an unsubsidized A350XWB had been launched prior to that date, and particularly near t he 
 
534 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21. 5 – US), 
para. 7.1(d)(xiii).  
535 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.599.  
536 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.632 (quoti ng Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.1717). (emphases original)  
537 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  5.637 -5.638. See also Appe llate Body Report, EC and certain member States – Large Civil Aircraft 
(Article 21.5 – US), para.  6.1747 (noting that "the A350XWB programme significantly benefitted from Learning 
effects arising from previous, subsidized Airbus LCA programmes, especially (but not only) the A380 
programme").  
538 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.639. These "aggregated" effects  consisted of the "direct" effects of A350XWB LA/MSF and the "indirect" 
effects of A380 LA/MSF. The Appellate  Body also stated elsewhere in its report that in the absence of A380 
and A350XWB LA/MSF, Airbus "would have been unable to launch the A350XWB or an A350XWB -type aircraft 
by the end of 2006". (Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 
– US), para.  5.714).  
539 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.647.  
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  time of actual launch in 2006, it would have been difficult to conclude, without further explanation, 
that Airbus' competitiveness would have suffered without the launch of the A350XWB in 2006 to the 
degree that the Appellate Body's language appears to indicate.  
Causation  of lost sales in the twin -aisle product market  
We now turn to examine the Appellate  Body's analysis of whether the "product effects " of 
A380 LA/MSF subsidies were a genuine and substantial cause of  lost sales in the twin-aisle product 
market during the First Compliance Reference Period.540  
We start by noting that at no stage in its analysis did  the Appellate  Body state that a non -
subsidized  A350XWB would have been launched or available for order by any particular point in time. 
Had the A ppellate Body considered that a non -subsidized A350XWB could have been launched or 
been available for order prior to the First Compliance Reference Period, it would have needed to 
explain how the A380 and A350XWB LA/MSF subsidies could have been a genuine and substantial 
cause of adverse effects, given the market presence of an unsubsidized A350XWB. However, no 
such explanation can be found in the Appellate Body's analysis. The absence of such an explanation, 
and the lack of any other Appellate Body statements concerning the causal mechanism through 
which the A380 and A350XWB LA/MSF subsidies caused lost sales, suggests that the causal 
mechanism relied upon by the Appellate Body was the one described in the compliance panel report, 
namely,  the A3 50XWB was unavailable for order during the First Compliance  Reference Period.  
In the course of its analysis, t he Appellate  Body stated that "in the absence of the {A380 
and A350XWB } LA/MSF subsidies … Airbus would not have been able to offer  the A350XWB at the 
time it did and with the features that the A350XWB contained ".541 Thus, according to the 
Appellate  Body, " in the absence of these subsidies, Airbus would not have been able to be 'present 
in all {three} of the relevant sales campaigns as exactly the same competitor selling identical 
aircraft ' in the post -implementation period ".542 In our view, these statements also confirm that 
without the product effects of the A380 and the A350XWB  LA/MSF subsidies, the A350XWB could 
not have been offered b y Airbus for sale during  the First Compliance  Reference Period.  This, of 
course, implies that Airbus could not have launched an unsubsidized A350XWB prior to or during the 
First Compliance  Reference Period .  
Finally , we note that the Appellate  Body rejecte d the European Union 's appeal against the 
first compliance panel 's dismiss al of its non-attribution arguments . In doing so, t he Appellate  Body 
observed that it shared " the Panel's view that most of the alleged non -attribution factors with regard 
to lost sales in the twin -aisle LCA market … including Airbus' pre -existing commonality advantages  
and other product -related advantages over Boeing, are not factors 'unrelated' to the LA/MSF 
subsidies existing in the post -implementation period ".543 Moreover, th e Appellate Body agreed " with 
the Panel 's assessment of the non -attribution factor concerning Singapore Airlines ' wish to split 
orders between Boeing and Airbus ", finding that "{i} ndeed, the fact that Airbus was in a position to 
offer the A350XWB in a time ly manner was, in itself, largely due to LA/MSF subsidies and their effect 
on the pace of the programme and the features  of the A350XWB ".544 In our view, these statements 
provide further confirmation that the Appellate Body considered the A350XWB would have been 
unavailable for order in the First Compliance Reference Period absent the A380 and A350XWB 
LA/MSF subsidies. Again, had the Appellate Body considered that an unsubsidized A350XWB could 
have been available for consideration in the Singapore Airlines ca mpaign that resulted in split orders 
 
540 Appellate  Body Report, EC and certain member States – Large  Civil Aircraft (Article 21.5 – US), 
section 5.6.4.6.3.1. The lost sales in the twin -aisle product market were the 2012 Cathay Pacific Airways order 
for 10 A350XWB -1000 aircraft, and the 2013 orders by Singapore Airways and United Airlines for 
30 A350XWB -900 aircraft and 10 A350XWB -1000 aircraft, respectively.  
541 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.709. (emphasis added)  
542 Appellate  Body Report, EC and certain member States – Large Civil Airc raft (Article 21.5 – US), 
para. 5.709. (emphasis added)  
543 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.714. (emphasis added) We note that the Appellate  Body did not specify which alleged non -attrib ution 
factors examined by the compliance panel were, in the Appellate  Body's view, unrelated to A380 and A350XWB 
LA/MSF. However, as discussed above, other aspects of the Appellate  Body's analysis appear to clarify that the 
A350XWB aircraft, as it existed,  would not have been available for order in the 2011 -2013 Reference Period.  
544 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.714. (emphasis added)  WT/DS316/RW2  
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  in 2013, it would have needed to explain why it nevertheless found that the Singapore Airlines orders 
of the subsidized A350XWB constituted Boeing lost sales. In our view, the absence of any such 
explanation or discussi on leads us to conclude that the Appellate Body's findings must be logically 
understood to mean that the Appellate Body was of the view that Airbus would not have launched 
an unsubsidized A350XWB by the end of the First Compliance Reference Period.  
Conclu sion – effects of the A380 and A350XWB LA/MSF subsidies through 2013  
Having carefully reviewed the Appellate Body's findings concerning the effects of the A380 
and A350XWB LA/MSF subsidies on the market presence of the A380 and A350XWB in the First 
Complia nce Reference Period, as well as the Appellate Body's findings of significant lost sales and 
impedance caused by those subsidies, we see no basis to accept the European Union's submission 
that Airbus would have launched the A380 and A350XWB in or around 20 02 and in 2007/2008, 
respectively, in the absence of the relevant LA/MSF subsidies. Unlike  the European Union, we do not 
understand the Appellate Body's findings to confirm that the A380 and A350XWB would have been 
available for order and delivery during t he First Compliance Reference Period in the absence of 
LA/MSF subsidies. We do not agree with the European Union that the Appellate Body's findings can 
be reasonably interpreted to mean that the Airbus company , that did not receive LA/MSF and then 
present in the market , would have been losing orders to Boeing up to and including in the 
First Compliance Reference Period because the delayed counterfactual launches of the non -
subsidized A380 and A350XWB meant that Airbus would have offered less attractive deli very slots . 
Rather, as indicated in the above analysis, we consider that there are several parts of the Appellate 
Body's  findings and underlying analysis that can be reasonably understood to leave open only one 
conclusion – namely, that neither the A380 no r the A350XWB would have been launched before the 
end of the First Compliance Reference Period  in the absence of A380 and A350XWB LA/MSF 
subsidies; or, in other words, that both LCA models would not have been available for order  or 
deliver y at least until year -end 2013.545  
Effects  of A380 and A350XWB LA/MSF subsidies after 2013 and to the  present day  
In this section we examine the parties' submissions concerning  the effects of the A380 and 
A350XWB LA/MSF subsidies after 2013 and up to  the present day.  At the outset, we note that the 
European Union has consistently based its arguments regarding the removal of adverse effects on a 
counterfactual in which Airbus launched the A380 in or around 2002 and the A350XWB in 2007/2008. 
However, for the reasons expl ained in the previous section, the Appellate Body's findings from the 
first compliance proceeding preclude the launch of the A380 and the A350XWB before the end 
of 2013. The European Union has not addressed the possibility of this outcome in its submission s, 
having advanced no arguments or evidence to support the view that Airbus would have launched 
the A380 and A350XWB programmes at any time after the end of 2013546, or that Airbus would have 
 
545 We also discern no basis in the Appellate Body's f indings for concluding that Airbus would have 
launched any "inferior" version of either the A380 or A350XWB before year -end 2013. Indeed, there was no 
argumentation to this effect before the first compliance panel, and the Appellate Body never intimated th at 
such inferior versions would have been launched and brought to market. Moreover, when Airbus attempted to 
do precisely this, with the Original A350 (essentially an inferior version of the A350XWB), the market rejected 
the aircraft causing Airbus to aban don the project. (Panel Report, EC and certain member States – Large Civil 
Aircraft (Article 21.5 – US), para. 6.463). In addition, we note that the Appellate Body rejected the 
European  Union's claim that the first compliance panel improperly failed to exa mine "whether an alternative 
aircraft with anything less than the features of the A350XWB, offered on the market later in time than the 
A350XWB, would have been commercially viable or attractive for Airbus to have launched ". (Appellate Body 
Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 5.631).  
546 European Union's comments on the United States' response to Panel question No. 75, para. 388 
(stating that "{t}he European Union has never asserted a counterfactual launch {o f the A350XWB} 
after 2013"). We further note that the European Union consistently asserts that Airbus would have 
launched  both the A380 and the A350XWB in the counterfactual and the gap between their respective 
launches  would have been the same as it was i n reality, i.e. with a launch of the A380 six years before the 
launch of the A350XWB. (European Union's first written submission, paras. 344 -345; second written 
submission, para. 430 ; response to Panel question No. 68, paras. 359 -360; and Airbus Counterfac tual 
Launch  Statement, ( Exhibit EU -92 (HSBI/BCI) ), para. 25 ). 
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  launched, from the year 2000 until present day, any alternative LC A programmes instead of the 
A380 and A350XWB  programmes.547  
As already noted, the United States advocates a counterfactual in which the earliest time 
that the A380 or the A350XWB would have been launched is 2014, and offers some argumentation 
and evidence i n order to illustrate the alleged difficulties Airbus would have had in launching either 
LCA programme even then. The United States, however, offers no specific counterfactual launch 
date of either aircraft, and generally asserts in this context that the E uropean Union has simply not 
carried its burden to show that the A380, A350XWB, or A330neo would be available for order or 
delivery today in the absence of the A380 and A350XWB LA/MSF subsidies.  
The parties' limited submissions concerning the effects of t he A380 and A350XWB LA/MSF 
subsidies in the period after the end of the First Compliance Reference Period means that there is 
little direct evidence before us addressing if and when Airbus would have launched the A380 or the 
A350XWB (or developed the A330n eo variant) after 2013, in the absence of the A380 and A350XWB 
LA/MSF subsidies. Nevertheless, in the sections that follow, we proceed to examine the arguments 
and evidence that have been made with a view to determining the extent to which the " product " 
effects of A380 and A350XWB LA/MSF subsidies found to persist until the end of 2013, continue in 
the post-2013 period  to the present day .  
7.5.5.1   Aggregation  of the effects of A380 and A350XWB LA/MSF subsidies  
The Appellate Body has explained that  "an ex ante decision taken by a panel to undertake a 
single analysis of the effects of multiple subsidies whose structure, design, and operation are similar 
and thereby to assess in an integrated causation analysis the collective effects of such subsidy 
measures " is known as "aggregation".548 This integrated causation analysis is used to " determine 
whether there is a genuine and substantial causal relationship between these multiple subsidies and 
{alleged adverse effects }".549 In both the original and first compliance proceedings, both the panels 
and the Appellate Body followed this approach vis-à-vis LA/MSF subsidies, and we consider this 
approach appropriate going forward as well. Thus, we will analyse the effects of A380 and A350XWB 
LA/MSF subsidies on an aggregated basis.  
We note that the A350XWB was launched six years after the A380, and both parties assume 
in their arguments that the A380 would not have been launched after the A350XWB in any presented 
scenario. Accordingly, consistent with the analytic approaches taken by both the panel and 
Appellate  Body in the first compliance proceedin g550, we will proceed to assess: (a) the "direct" 
effects of A380 LA/MSF subsidies on the A380; and (b) the aggregated "indirect" effects of A380 
LA/MSF subsidies and "direct" effects of A350XWB LA/MSF subsidies on the A350XWB.  
The parties disagree , however, about  whether the Panel may assess: (a) the "indirect" 
effects of A350XWB LA/MSF on the A380; and (b) the "indirect" effects of A380 and A350XWB 
LA/MSF on the A330neo. The United States argues that it would be legally and procedurally 
permissibl e, and factually appropriate, for the Panel to do so. The European Union argues that doing 
so would be factually unsound because "indirect" effects arising from one set of LA/MSF measures 
directed at a particular LCA programme only impact other LCA program mes that were launched after 
the launch of the previously LA/MSF -subsidized LCA programme. The European Union also argues 
that the United States has never argued that "indirect" effects arising from one LA/MSF -subsidized 
 
547 The United States and European Union argue that there is no basis in the record supporting the view 
that Airbus would have launched some inferior version of the A380 at any relevant time. (United States' 
response s to Panel question Nos. 59 and 74;  and comments on the European Union's response to Panel 
question No. 59; European Union's response to Panel question No. 59; and comments on the United States' 
response to Panel question No. 59). We further discern no argumentation by the European Union that Airbu s 
would have launched any twin -aisle LCA programme instead of the A350XWB at any particular time.  
548 Appellate  Body Report, US – Large Civil Aircraft ( 2nd complaint) , para. 1282.  
549 Appellate  Body Report, US – Large Civil Aircraft ( 2nd complaint) , para. 1285 . 
550 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.1448 -6.1451, 6.1480 -6.1515, 6.1528 -6.1534, 6.1535 -6.1540, 6.1713 -6.1723, and 6.1774 -6.1778 . 
See also Appellate Body Report s EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  5.610 -5.632, and 5.633 -5.639; EC and certain member States – Large Civil Aircraft , paras. 1269, 1281, 
1352, 1355, and 1356 ; and Panel Report, EC and certain member States – Large Civil Aircraft , 
paras.  7.1935 -7.1948 .  
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  LCA programme affect the post -launc h development of any other LCA programme, appearing to 
suggest that it would be procedurally unsound for the Panel to undertake such an analysis. The 
European Union also states that the United States' claims regarding the indirect effects of A380 and 
A350X WB LA/MSF subsidies on the A330neo are not in the Panel's terms of reference.551 
As an initial matter, we are not persuaded by the European Union's contention that the 
United States' arguments concerning the alleged "indirect" effects of the A380 and/or A350 XWB 
LA/MSF subsidies on the A330neo are outside our terms of reference. The United States'  submissions 
purpo rt to explain how  measures that are explicitly within  our terms of reference, i.e. A380 and 
A350XWB LA/MSF measures, continue to result in present a dverse effects within the meaning of 
Articles 5 and 6 of the SCM Agreement. The A330neo is simply a vehicle through which such effects 
are alleged to have occurred. To this extent, we understand the United States' arguments to fall 
within the scope of this  proceeding.  
We note, furthermore, that the United States could not have reasonably pursued the same 
line of argument in the first compliance proceeding. According to Airbus documents, the A330neo 
was launched in 2014552, which is after the end of the First  Compliance Reference Period. Thus, we 
see no legal or procedural impediment to considering the United States' submissions concerning the 
alleged "indirect" effects of the A380 and A350XWB LA/MSF subsidies on the A330neo.  
Conditions of competition and pro duct markets  
The European Union asserts that general  conditions of competition in the LCA industry, as 
described by the  original and compliance panels, have not materially changed up to present day, 
and has identified no material changes that would have oc curred in the counterfactual.553 The 
United  States, while not excluding the possibility that such conditions might have changed in some 
ways between the first and second compliance proceedings, identifies no particular changes that 
have occurred or would hav e occurred to the overall conditions of competition in the 
counterfactual.554  
We discern nothing on the record indicating that the following general conditions of 
competition in the LCA industry, which were identified in the original and first compliance 
proceedings, do not continue to be relevant and applicable in the period after 2013 and at present: 
(a) development and production of LCA is "an enormously complex and expensive undertaking"555 
generally requiring the sale of hundreds of a given LCA in order t o make that LCA programme 
profitable; (b) economies of scope and scale reinforce incumbent firms' competitive advantages and 
that make it difficult for an LCA manufacturer to enter just one market segment; (c) important  
"learning", scope, and financial eff ects arising from LCA programmes that enable LCA manufacturers 
to more easily launch subsequent LCA programmes556; (d) incumbent firms' incentive to adopt 
"deterring price strategies"557; (e) customers' preference for fleet commonality; (f) pervasive and 
strong competition between Airbus and Boeing; (g) relatively infrequent but large orders for LCA; 
and (h) an Airbus -Boeing duopoly in the twin -aisle and VLA product markets.558 
 
551 European Union's comments on the United States' response to Panel question No. 60, para. 280 
("If the United States wished to obtain a finding that some subsidy at issue had effects manifesting in the 
market presence of the A330neo, it should p roperly have brought the matter within the Panel's terms of 
reference"). See also United States' first written submission, paras. 236 -238; and response s to Panel question 
No. 60, paras. 146 -147, and No. 67, para. 154. See also European Union's comments on the 
United  States'  response to Panel question No. 67, para. 319.  
552 Airbus A330neo Presentation, (Exhibit USA -51), slide 19. See European Union's comments on the 
United States' response to Panel question No. 67, para. 319 (indicating that the United States did not allege 
that A350XWB LA/MSF had any effects on the A330neo programme in prior proceedings in this dispute).  
553 European Union's comments on the United States' response to Panel question No. 70.  
554 United States' comments on the European Union's response to Panel question No. 81, para. 325.  
555 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1717.  
556 Panel Report, EC and certain member States – Large Civil Aircraft (Article 2 1.5 – US), 
paras.  6.1510 -6.1511.  
557 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1717.  
558 Panel Report s, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.1214 -6.1217; and EC and certain member St ates – Large Civil Aircraft , paras. 7.1716 -7.1728. We 
agree with the analysis of the Arbitrator in this dispute that, in the counterfactual, up through year -end 2013, 
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Although the European Union recalls certain general findings made in the original proc eeding 
regarding the importance of analysing adverse effects vis-à-vis properly defined product markets559, 
neither party calls into question that the three LCA product markets identified in the first compliance 
proceeding (i.e. single -aisle, twin -aisle, and  VLA) continue to be those " within which most 
competitive interactions between the relevant aircraft will commonly take place ".560 Indeed, both 
parties appear to implicitly accept and structure their arguments around these product markets in 
this proceeding.561  
The analysis that follows proceeds on the basis of our understanding that the 
above -described conditions of competition would have prevailed in the counterfactual and would 
have operated in conjunction with the three product markets identifie d in the first compliance 
proceeding (i.e. single -aisle, twin -aisle, and VLA product markets).  
Market presence  of the A380, A350XWB and A330neo after 2013  in the absence 
of the A380 and A350XWB LA/MSF subsidies  
The United States  argues that the European U nion has not established that, in the 
counterfactual, Airbus would have launched either the A380 or the A350XWB at any time after 2013. 
According to the United States, in order to do so, the European Union would have to establish that 
launching either of t hese LCA programmes after 2013 in the counterfactual was economically viable, 
financially feasible, and technological ly practicable for Airbus. In this context, the United States 
asserts that the A380's viability after 2013 is doubtful due to the then -weakening demand for VLA 
and Boeing's counterfactual incumbency advantages in the VLA product market. Further, the United 
States argues that there is no evidence establishing the viability of the A350XWB after 2013, and 
that the aircraft would have been diffic ult to fund had Airbus financed the A380 in the counterfactual 
with financing on market terms rather than with LA/MSF. Moreover, insofar as Airbus would have 
wished to launch the A350XWB having not launched the A380 first, the United States argues that it 
would have been difficult for Airbus to do so without the learning effects gained from 
Airbus'  experiences with the A380 programme. The United States also reiterates its argument from 
the first compliance proceeding that a "weaker" Airbus could not have la unched the A350XWB at 
any relevant time in the counterfactual. Relatedly, in the United States' view, changed circumstances 
as between the times of the actual launches of the A380 (2000) and A350XWB  (2006) and the 
conditions in the counterfactual post -2013 period mean that the A380 and A350XWB "Business 
Cases", authored at the times of the actual launches of the A380 and A350XWB, are of limited value 
in establishing the viability of these two LCA programmes in the counterfactual post -2013 period.562  
The Unit ed States also argues that the European Union has not established that Airbus would 
have or could have launched the A330neo after 2013 in the counterfactual, although the 
United  States' arguments vis-à-vis this particular LCA are limited relative to those advanced by the 
United States' vis-à-vis the A380 and A350XWB.563 
As already noted, t he European Union  presents no arguments or evidence intended to 
support the specific conclusion that either the A380 or A350XWB would have been launched 
after 2013. However,  the European Union does assert that both LCA would have been available for 
orders and deliveries by the present day in the counterfactual, just as they are in reality, in the 
context of arguing that the counterfactual launch times of the A380 and A350XWB would have been 
in or around 2002 and in 2007/2008, respectively. According to the European Union, the evidence 
 
Airbus and Boeing would have competed in a duopoly in the twin -aisle and VLA product mark ets. (Decision by 
the Arbitrator, EC and certain member States – Large Civil Aircraft  (Article 22.6 – EU), paras. 6.78 -6.79).  
559 European Union's first written submission, paras. 218 -223. 
560 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  6.1416.  
561 European Union's submission regarding the wind -down of the A380 programme, para. 27 (arguing 
that with the wind -down of the A380 programme Boeing's "exports will no longer be obstructed or hindered by 
Airbus products in  that product market"); United States' second written submission, section VII.D (structuring 
allegations of specific adverse effects around these three product markets). See also European Union's panel 
request, para. 11 ("In relation to the removal of adve rse effects, the European Union has also given close 
consideration to the Appellate Body's guidance on the delineation of product markets").  
562 United States' first written submission, paras. 229, 233; second written submission, paras. 145 -147, 
157-159, 229 , 237-238, and 243-245; response s to Panel question No. 70, para. 160, No. 75, paras. 173  and 
176-177; and comments on the European Union's response s to Panel question No. 60, para. 198, No. 68, 
paras. 268 -269, No. 69 , and No. 72, paras . 303-305. 
563 United States' first written submission, para. 328; and second written submission, para. 234.  WT/DS316/RW2  
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  it has submitted in this proceeding, when combined with the previously adopted findings in this 
dispute, establish that the A380 and the A350XWB  would have been present on the market place in 
the absence of the A380 and A350XWB LA/MSF subsidies. The European Union stresses that the 
findings in this dispute establish that both the A380 and A350XWB programmes would have been 
launched in the counterf actual, just with a delay. The European Union thus argues that there is no 
need to address the counterfactual viability of either LCA programme or Airbus' counterfactual 
technological ability to launch either LCA programme anew in this proceeding because t hese issues 
were effectively mooted by the adopted findings that Airbus would have launched both LCA in the 
counterfactual. According to the European Union, t his is especially so because, at the time of any 
delayed launches of the A380 and A350XWB, Airbus would have been a more integrated company 
than it was at the times of the actual launches, with a "can do" attitude, and, further, any relevant 
circumstances would not have changed in between the times of actual versus counterfactual 
launches so as to make  any viability or technological -capacity arguments worth examining anew in 
this proceeding. The European Union further criticizes the United States as not offering any specific 
counterfactual launch times for either the A380 or A350XWB, and asserts that th e United States has 
provided insufficient evidence to demonstrate that the A330neo would not have been launched and 
brought to market in the counterfactual as it was in reality.564 
Given the parties' arguments and the record evidence, we consider that in ord er to assess 
the counterfactual market presence of the A380, A350XWB, and A330neo in the post -2013 period, 
we should examine the following issues vis-à-vis that period: (a) Airbus' counterfactual competitive 
position; (b) Airbus' counterfactual financial p osition; (c) Airbus' counterfactual technological and 
production -related capabilities; and (d) counterfactual demand for the A380, A350XWB, and 
A330neo. Such analyses will inform our determination of the extent to which Airbus would have 
found it feasible and commercially viable to launch the A380 and/or the A350XWB in the 
counterfactual post -2013 period. The following sections address each of these matters in turn.565 
7.5.5.3.1   Airbus' counterfactual  competitive position after 2013  
The European  Union has explained that it was in Airbus ' vital interest to be present  and 
competitive  in all LCA product markets  at all relevant times,  given incumbency  advantages that 
would have accrued for Boeing in the absence of competitive Airbus LCA in a given pr oduct market. 
Accordingly, the European Union indicates that the A380  (in the VLA product market)  would have 
been " a necessity for Airbus to launch "566 and recalls that launching the A350XWB  (in the twin -aisle 
 
564 European Union's first written submission, paras. 44, 264, 272, 326, 344, 350, and 421 -422; 
second  written submission, paras. 126, 228, 274, and 446-455; response s to Panel question No. 68(b), 
paras.  356-360, and No. 70, para. 370 ; and comments on  the United States' response s to Panel question 
No. 59, paras. 272  and 284, and No. 70, paras. 324  and 330. See also Panel Report, EC and certain member 
States – Large Civil Aircraft  (Article 21.5 – US), para. 6.1507, fn 2597. See also One Journey: One Team – 
Interview with Tom Enders , Airbus Annual Review 2014, (Exhibit EU -43). 
565 We note the European Union's position that the adopted findings in this dispute confirm tha t Airbus 
would have launched the A380 and the A350XWB, albeit with a delay. (European Union's response to Panel 
question No. 68, para. 358; and comments on  the United States' response to Panel question No. 75, 
para. 378). We disagree. We discern nothing in  the adopted findings stating that, in the counterfactual under 
which we operate, Airbus would have in fact launched either the A380 or A350XWB at any particular time. 
In particular, any findings by the Appellate Body that indicate that, in this counterfac tual, Airbus could not have 
launched the A380 or the A50XWB "as and when" Airbus actually did leaves the question of whether, or when, 
Airbus would actually have launched either LCA open.  
566 European Union's second written submission, para. 454 (citing  Panel Report, EC and certain member 
States – Large Civil Aircraft , paras. 7.1943 ("{T}he A380 business case predicts a positive NPV for the 
programme even assuming no LA/MSF is provided, as well as a positive NPV in circumstances where a Realistic 
Worst Case s cenario is contemplated in situations where the project is supported by LA/MSF "), 7.1665 (" Since 
its inception, Airbus has recognized the importance to its continued success in the LCA market of developing a 
full line  - a family - of different LCA models …  {T}he need to offer separate products whose commonality keep 
operating costs down for customer airlines across the fleet but which can perform the various missions dictated 
by an airline's route structure has historically meant that no manufacturer of a s ingle product or family of 
products, no matter how compelling, has survived in the LCA industry ") (emphases added ), and 7.1957 
(recognizing Airbus' goal of developing a full range of LCA for the market ); Appellate Body Report, EC and 
certain member States – Large Civil Aircraft , para. 1355  (finding that Airbus would be "much weaker" in a 
counterfactual where it does not offer a "full range" of LCA);  Panel Report, EC and certain member States – 
Large Civil Aircraft (Article 21.5 – US), para. 6.1475 (f inding that Airbus would be "much weaker" in a 
counterfactual where it does not offer a "full range" of LCA); Appellate Body Report, EC and certain member 
States – Large Civil Aircraft (Article 21.5 – US), para. 5.558(b)).  
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  product market) was  "'critical for Airbus ' ability to continue to be a mainstream competitor against 
Boeing '".567 The European Union also asserts that launching  the A380 was a "very significant 
intermediate step, in terms of its learning effects, for Airbus' future work with composites", a skill 
that was important so that Airbus could "remain a viable competitor in the {LCA} duopoly".568  
The United States argues that any assessment of Airbus' counterfactual competitive position 
after 2013 would need to take into account Boeing's enhanced incumbency advantag es that would 
have accrued in the 2001 -2013 period in the absence of the A380 and the A350XWB.569  
In our view, the adopted findings in this dispute and the record evidence indicate that 
Airbus'  counterfactual competitive position after 2013 would have been generally compromised 
relative to what its actual competitive condition was at that time. We further consider that this would 
have been so with respect to all three product markets, albeit to different degrees.  
Airbus' counterfactual competitive position would have begun to weaken (relative to what it 
was in reality) in 2000 with the absence of the A380's  launch. In the absence of the A380, Airbus  
would have ceded the VLA product market to Boeing, who thus would have had a monopoly in that 
product market for the next 13 years at least  (i.e. until at least year -end 2013) . In the absence of 
the A380, Boeing would have captured larger numbers of VLA orders with its 747 family of LCA in 
the years following 2000 and up to 2013.570 We consider that Boeing's increas ed sales of VLA in the 
absence of the A380 would also have resulted in increased Boeing sales in the single -aisle and 
twin-aisle LCA product markets due to two main factors. First, on the demand side, capturing 
significant additional VLA orders would have enhanced Boeing's incumbency advantages, causing 
airlines to gravitate toward Boeing single -aisle and twin -aisle LCA in order to realize fleet -
commonality advantages. In this regard, we note that the A380 Business Case itself envisions the 
"[***]" and that these represent "significant potential upsides" of launching  the A380.571 
Second, on the supply side, Boeing would also have benefitted from enhanced economies of 
scope and scale, and additional "learning" effects, arising from its increased VLA, twin-aisle, and 
single -aisle LCA production, thus becoming more efficient and profitable overall. Additionally, as 
Boeing began delivering counterfactually more VLA, twin -aisle, and single -aisle LCA as a 
comparatively more efficient LCA producer572, Boeing w ould have realized greater revenues and 
profits, giving Boeing more flexibility with pricing of single -aisle and twin -aisle LCA.573 We consider 
 
567 European Union's second written  submission, para. 453 (quoting Panel Report, EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1713).  
568 European Union's response to Panel question No. 68, para. 365.  
569 United States' second written submission, paras. 243 -245; Panel Report, EC and certain member 
States – Large Civil Aircraft , paras. 7.1828 -7.1832, 7.1845, and 7.2025; Appellate Body Report, EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US, para. 1414(p); Panel Report, EC and certain membe r 
States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1781, 6.1789 -6.1791, 6.1798, and 6.1806.  
570 According to the Ascend database , the net total number of A380 orders from 2000 -2013 was 296.  
(Updated Ascend Data , (Exhibit USA -158)). Regarding Exhib it USA -158, the European Union argues that the 
Panel, when requesting the United States to submit this exhibit, did not explain the relevance of this exhibit, 
and thus drawing any conclusions from Exhibit USA -158 would be improperly "making a case" for the  
United  States and deprive the European Union of its due process rights because the European Union would not 
know "the case against it". Further, the European Union asserts that the data in Exhibit USA -158 is deficient in 
certain respects. (European Union' s comments on the United States' response to Panel question No. 58). We 
note that: (a) we only use the record evidence to assess the arguments that the parties themselves have 
made; (b) insofar as the European Union has indicated deficiencies in this exhib it, we take them into 
consideration; and (c) the European Union has had an opportunity to comment on this exhibit. We therefore 
consider that using this exhibit does not improperly "make a case" for the United States or deprive the 
European Union of its du e process rights.  
571 A380 Business Case, (Exhibit EU -78 (HSBI)), p. 5.  
572 "Aircraft manufacturers earn the bulk of the revenue on a sale not at the time the aircraft are sold, 
i.e., ordered, but at the time of delivery." (Panel Report, EC and certain member States – Large Civil Aircraft , 
paras.  7.2106  and 7.2178 ). See also Panel Report, EC and certain member States – Large Civil Aircraft 
(Article  21.5 – US), para.  6.1806 (explaining that "we recall that deliveries of new LCA will lag their order date 
by typic ally at least  three years, and usually many more years in respect of newly launched  aircraft" ). 
(emphasis added)  
573 We note that such additional revenue gains could likely have been achieved starting in the 
early 2000s and increasing over time. This is so b ecause Boeing had both twin -aisle and single -aisle LCA 
available for sale and delivery during the entire 2011 -2013 period. We note, however, that there would likely 
have been a time -period from around 2005 -2012 during which Boeing would not have delivered,  and realized 
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  it likely that Boeing would have used this pricing flexibility to put additional competitive pressures 
on Airbus i n the single -aisle and twin -aisle product markets in an attempt to capture additional 
market share from Airbus.574 We further note that the demand - and supply -side issues above appear 
to reinforce one -another, i.e. incumbency advantages lead to increased pro duction, which leads to 
greater efficiencies and price flexibility, which leads to even greater sales and incumbency 
advantages.  
Absence of the A350XWB launch in 2006 would significantly have exacerbated the 
competitive disadvantages that Airbus would alre ady have been experiencing due to the absence of 
the A380. It will be recalled that Airbus viewed the A350XWB as a necessity to remain a mainstream 
competitor to Boeing. This was so because without the A350XWB, going forward from 2006, Airbus 
would have be en forced to compete against Boeing's twin -aisle LCA with the A330 and A340 LCA 
families. As the first compliance panel explained, however:  
Boeing's launch of the 787 in 2004 caused the market share of the A330 to drop at a 
time when A340 sales were alread y falling because the aircraft could not effectively 
compete with the more fuel -efficient 777. Indeed, the evidence indicates that in 2005 
Airbus sold only 15 A340s whereas Boeing sold approximately ten times as many 777s. 
Such developments had significant  implications for Airbus' overall sales performance as 
well; as of July 2006, Boeing had reportedly captured 75% of all new aircraft orders 
thus far that year. According to the European  Union, this situation "clarified that Airbus 
aircraft within the twin -aisle market had lost their competitive edge to the 
Boeing  787"{.}575 
After 2006, considering the conditions of competition in the LCA industry, it appears likely 
that Boeing's competitive advantages would have increased further as Boeing continued its 
monop oly in the VLA market and likely captured the significant majority of twin -aisle LCA sales.576 
This would have occurred through the same demand - and supply -side processes that were described 
above in paragraphs 7.318  and 7.319 .577 As the first compliance panel found, based in large part on 
its analysis  of the A350XWB Business Case, "although the failure to launch the A350XWB would 
likely not present an existential threat to Airbus and EADS, the companies considered the A350XWB 
programme to be essential to Airbus' continued relevance as a healthy competi tor to Boeing in all 
market segments  at least through the foreseeable future".578 
In sum, beginning in 2000, the heightened competitive pressures from Boeing would likely 
have begun to erode Airbus' market shares across the three product markets. This erosio n would 
likely have accelerated to some degree over time as Boeing's advantages on the demand and supply 
 
revenues from additional VLA sales. This is so because the last 747 -400 was delivered in 2005, and its 
predecessor model, the 747 -8I, was not delivered until 2012.  We further note that the 787, launched 2004, 
was first delivered in 2011. (Updated Ascend Data , (Exhibit USA -158)).  
574 See A380 Business Case, (Exhibit EU -78 (HSBI)), p. 6, last sentence of second paragraph under 
"Note".  
575 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1544. 
(fns om itted)  See also Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.1572 ("{I}n November 2006, Goldman Sachs predicted that without the A350XWB, Airbus' overall 
market share could fall to 35%, thus characterizing it as 'essential for Airbus to remain a mainstream 
competitor to Boeing '. Significantly, the Goldman Sachs report also indicates that a failure to launch the 
A350XWB would not only harm Airbus' twin -aisle market presence, but could also result in a lower s ingle-aisle 
market presence 'as many airlines may want commonality, and buy larger and smaller aircraft in packages '") 
(internal citations omitted)  
576 See above paragraph 7.308 . 
577 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1713 
("{T}he A350XWB programme was of significant strategic importance to Airbus and, in the short -term, critical 
for Airbus' abilit y to continue to be a mainstream competitor against Boeing. The evidence shows that around 
the time of launch, Airbus was of the view that it needed to develop a new generation of twin -aisle aircraft in 
the near term in order to compete effectively against  the Boeing 777 and 787, not only to maintain market 
share in the twin -aisle segment, but also to avoid losing ground in other markets with respect to customers 
interested in fleet commonality").  
578 Panel Report, EC and certain member States – Large Civil A ircraft (Article 21.5 – US), para. 6.1572. 
(emphasis added) See also Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – 
US), para. 6.1602 (noting that a UK Government appraisal regarding whether to provide UK A350XWB LA/MSF 
to Airbus indicating that "the A350XWB project is a sound project of great strategic important for Airbus") 
(internal quotation marks and citation omitted)  
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  sides began to reinforce each other. Considering the significant competitive disadvantages that 
Airbus was experiencing in reality in and around 2006 i n the absence of the A350XWB but in the 
presence  of the A380, we consider that it is probable that, by 2014, in the absence of both the A380 
and A350XWB, Airbus' competitive position would have been significantly compromised across all 
three product market s. That the overall damage that such a scenario would have inflicted on Airbus' 
general competitive position would have been significant is confirmed by not only the 
European  Union explanation that the A380 and A350XWB were critical in maintaining Airbus' 
competitiveness overall, but also the compliance panel's finding that "the Business Case outlined 
severe strategic disadvantages and costs to Airbus that were assumed to accrue in the absence of 
the A350XWB programme".579 Our conclusions in this respect are consistent with the explanation in 
the original proceeding regarding how critical competitiveness in all LCA product markets is for an 
LCA manufacturer, i.e. that " no manufacturer of a single product or family of produc ts, no matter 
how compelling, has survived in the LCA industry ".580 
We note that Airbus may have been able to mitigate the competitive damage inflicted by 
Boeing in the counterfactual years before 2013 by making ongoing progress in its pre -existing LCA 
produ cts, and in particular the A330.581 We also consider that Airbus could have, and very likely 
would have had to, lower the prices of its twin -aisle and single -aisle LCA so as to counter Boeing's 
increasing price flexibility in those markets.582 We have doubts, however, as to how successful such 
efforts would have been. The lagging sales of the A330 and A340 in and around 2006 show just how 
far Airbus had fallen behind Boeing in the twin -aisle LCA product market, in particular after the 
launch of the fuel -efficie nt 787. Indeed, we recall that the Original A350583 was essentially envisioned 
"as a long -range, fuel -efficient version of Airbus A330 airliner and a rival to the {Boeing} 7E7' 
(i.e. the Boeing 787)".584 However:  
… by the spring of 2006 major customers and ind ustry analysts had determined that 
the Original A350 could not effectively compete with the Boeing 787, especially in terms 
of fuel efficiency. In fact, some critics judged the Original A350 as so plainly inadequate 
that they called for Airbus to scrap the  programme in favour of a redesigned aircraft. 
The European  Union itself acknowledges that in response to Boeing's launch of the 787 
in 2004, Airbus had initially launched the Original A350. The Original A350 was 
supposed to have a composite wing, but was otherwise based on the aluminium fuselage 
of the A330. Customers rejected the design of the Original A350 as not being able to 
match the weight savings and fuel efficiency promised by the 787.585  
Thus, we consider that even had Airbus been able to improve i ts existing twin -aisle LCA 
offerings in the counterfactual years before 2013, it would have been insufficient to avoid suffering 
significant competitive damage at the hands of Boeing.  
We note that there appears little evidence that the A320 was not genera lly competitive with 
Boeing's single -aisle offerings during all relevant times. Thus, we consider that Airbus' mitigation 
strategies would have been somewhat more successful in the single -aisle market, although Airbus' 
position in that product market wo uld still have been compromised by Boeing leveraging its 
advantages in the other two product markets into the single -aisle market via processes explained 
above.  
We thus conclude that, in the counterfactual and coming into the year 2014, Airbus' 
competitive position vis-à-vis Boeing in all three product markets would have been generally  
compromised  relative to what its actual competitive condition was at that time . More specifically, 
 
579 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1705 . 
(footnote omitted)  
580 Panel Report, EC and certain member States – Large Civil Aircraft , para . 7.1665.  
581 The A340 programme was terminated in 2011.  
582 We recognize, however, that Boeing's market power in any given product market in the 
counterfactual would likely have been limited by the negotiating power of Boeing's sophisticated airline 
customers.  
583 The "original A350" was the "Airbus A350 aircraft de sign proposed between 2004 -2006 (Original 
A350) programme launched in December 2004". (Panel Report, EC and certain member States – Large Civil 
Aircraft (Article 21.5 – US), para. 6.53) . 
584 Panel Report, EC and certain member States – Large Civil Aircraft  (Article 21.5 – US), para. 6.1542.  
585 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1543. 
(footnotes and internal quotation marks omitted)  WT/DS316/RW2  
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  Boeing would have had a monopoly in the VLA market, would have been capturing the large majority 
of sales in the twin -aisle LCA market, and also would have made gains in  market share in  the single -
aisle market.  
Airbus' counterfactual  financial condition after 2013  
Regarding Airbus'  financial condition in the counterfactual post -2013 period, the 
European  Union has indicated that, if Airbus had delayed the launch of the A380 and/or A350XWB 
in the counterfactual, then between the time of ac tual launch and the counterfactual launch of either 
LCA, Airbus would not have had to shoulder the burdens of the development costs of these LCA 
programmes, suggesting that Airbus would have had more financial resources available for other 
activities if Ai rbus had wished to pursue them. The European Union also offers two expert reports  –
the Wessels Report and the Airbus Counterfactual Launch Statement  – which discuss several  aspects 
of Airbus' financial situation  under certain counterfactual scenarios. The European Union furthermore  
notes that Airbus' actual credit rating in 2006 was "A -" which would have allowed Airbus to raise 
debt to fund large projects such as an LCA launch.586  
The United States argues that there are reasons to believe  that Airbus would not have been 
in a sound financial state in the counterfactual post -2013 period. The United States asserts that the 
Wessels Report and the Airbus Counterfactual Launch Statement a re immaterial under the relevant 
counterfactual. Further more, the United States asserts that Airbus ' counterfactual post -2013 
financial position would need to be assessed in the light of Boeing 's increased incumbency in the 
VLA and twin -aisle markets due t o the absence of the A380 and A350XWB. The United States also 
indicates that financing the A380 (or A350XWB) on market terms instead of with LA/MSF would have 
been more expensive for Airbus in the counterfactual, and doing so thus would have negatively 
affected Airbus ' credit rating.587  
In the sections that follow, we examine the merits of the parties' submissions with a view to 
determining what Airbus' financial condition would have been in the counterfactual post-2013 period . 
We begin by recalling the find ings from the first compliance proceeding we consider to be relevant 
to this analysis, before turning to examine the Wessels Report , the Airbus Counterfactual Launch 
Statement, and the implications of the European Union 's assertion that Airbus would have b een 
spared the expenses of developing the A380 and A350XWB for any period during which their 
launches were delayed.  
7.5.5.3.2.1   Relevant findings  of the first compliance panel  
We note that t he first compliance panel examined Airbus' actual  financial condition in the 
periods leading up to and following  the launch of the A350XWB in 2006 in some detail.588 The 
first compliance panel essentially found that, in and around 2006, "the assortment of financial 
resources that Airbus, via EADS, had at its disposal would have been,  collectively, sufficient to 
effectively replace the monies Airbus is entitled to under the actual A350XWB LA/MSF contracts", 
but it would have been difficult and risky for Airbus to do so and thus "the Airbus company that 
actually existed  could have pursu ed such a programme only by a narrow margin, with a high 
likelihood that it would, to some degree, have had to make certain compromises with respect to the 
pace of the programme and/or the features of the aircraft" .589  
In making these findings, the first co mpliance panel identified multiple factors that impacted 
Airbus', and its parent company EADS', financial condition in and around 2006. In our view, some 
of these factors would likely not have significantly changed in the counterfactual applied in this 
proceeding. These factors include the development and production problems associated with the 
A400M military transport plane, which was experiencing significant cost overruns during this time -
 
586 European Union's first written submission, paras. 339 -343 and 347 (citing EADS, Financial 
Statements and Corporate Governance, 2006, (Exhibit EU -45)). 
587 United States' first written submission, paras. 221 -235; second written submission, paras. 228 -245; 
and comments on the European Union's response to Panel questi on No. 68, para. 263.  
588 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.1550 -6.1566, 6.1580 -6.1587, and 6.1640 -6.1700.  
589 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.1715 -6.1717. (emphasis original)  
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  period and as late as mid -2009590, and a weak US dollar in 2005 and a s late as 2010.591 Other 
important factors in that analysis would have changed under our counterfactual, and notably the 
impact of the A380's launch and subsequent development. In this respect, we recall that the A380 
was an expensive programme that experien ced substantial cost overruns592, spending and overruns 
which negatively impacted Airbus' financial position in the short run, but also that the A380 
prevented Boeing from having a monopoly in the VLA product market, which was likely beneficial to 
Airbus' co mpetitive position overall and thus likely positively impacted its financial position to some 
degree.593 Whether certain other events that occurred in this time -frame that materially impacted 
Airbus' financial position would have also occurred in the counter factual is less clear to us, and 
notably the institution of Airbus' "Power8" cost -cutting programme, implemented in response to the 
A380 production problems and the need to fund the A350XWB programme.594 We also note, 
however, that the first compliance panel  did not extend its analysis of Airbus' financial condition up 
to year -end 2013 or beyond, and at no time projected what Airbus' financial condition would have 
been at any time after 2006 in the absence of the A380 and A350XWB programmes. As explained 
above, the absence of both the A380 and the A350XWB until at least 2014 would have significantly 
impacted Airbus' overall sales in all three product markets.  
Due to the significant differences between the circumstances that Airbus would have 
encountered in our  counterfactual and Airbus' actual circumstances in the period examined by the 
first compliance panel, we find it difficult to use the analyses of the first compliance panel as a 
baseline from which to extrapolate Airbus' financial conditions under the cou nterfactual in the post -
2013 period. In general, however, we consider that if the subsidized Airbus company that actually 
existed in 2006 would only have had the financial means with which to pursue the A350XWB by a 
narrow margin, we have doubts as to whet her the financial condition of Airbus in the counterfactual 
post-2013 period, considering its generally compromised  competitive position , would have 
considered itself to have had the financial means with which to launch the very expensive595 
A350XWB with confidence.  
7.5.5.3.2.2   The Wessels  Report  
In support of its arguments that Airbus could have launched the A380 in  or around  2002 and 
the A350XWB in 2 007/2008,  the European Union offers the Wessels Report. The Wessels Report is 
a report authored in 2012 by Professor David Wessels of the Wharton School at the University of 
Pennsylvania. The Wessels Report was originally authored for the United States and  presented by 
the United States as evidence in the first compliance proceeding. The first compliance panel 
explained that "{t}he Wessels Report purports to demonstrate that, had Airbus launched its pre -
A380 subsided LCA with financing on market terms, Airb us' resulting debt burden would have been 
approximately EUR  24.3 billion. The Wessels Report concludes that this debt burden is so massive 
that it would have prohibited Airbus from launching either the A380 or the A350XWB until at 
least 2019".596 The first c ompliance panel's analysis of the report consists of one paragraph, and 
simply concludes that "the Wessels Report restates what the original panel, as affirmed by the 
Appellate  Body, already found. That is, even assuming that Airbus had launched all its pr e-A380 LCA 
with market financing rather than LA/MSF, Airbus' resulting debt burden would have made it 
extremely difficult, and perhaps impossible, for Airbus to launch the A380 as and when it did".597 
 
590 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1581 
(explaining that "A June 2009 Financial Times  article reported that EADS had recently undergone a 
reorganization  that came 'in response to the debacle over the development of the A400M military transport 
aircraft, which is already running at least three years late with billions of euros of extra costs and with work 
almost halted, while EADS and its seven European go vernment customers haggle over the future of the 
project .'"). 
591 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1581 
(explaining that " {t}he European  Union has further explained that in 2010 EADS' financial pe rformance 
suffered, in part, due to a weak US dollar"). A weak US dollar relative to the EUR affects Airbus' profitability 
because "although LCA are priced in US dollars, Airbus keeps its financial accounts, incurs much of its costs, 
and accounts for its p rofits, in Euros" . (Panel Report, EC and certain member States – Large Civil Aircraft , 
para. 4.595).  
592 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1675.  
593 See paragraph 7.326  above.  
594 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1554.  
595 See paragraph 7.341  below.  
596 Wessels Report, ( Exhibits EU -40, USA -47), p. 6.  
597 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1769.  
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  The Appellate Body mentioned the Wessels Report only in p assing in one paragraph and one 
accompanying footnote.598 In short, neither the first compliance panel nor the Appellate Body 
materially relied on the content of the Wessels Report in making their findings.  
The European Union offers the Wessels Report in thi s proceeding as purporting to 
demonstrate the time at which Airbus would have had the financial means with which to have 
launched the A380 and A350XWB in the counterfactual. To that end, the European Union observes 
that the Wessels Report concludes that ev en if Airbus were burdened with "massive" debt starting 
in 2000, Airbus' credit rating would have been sufficient to allow Airbus to raise enough money with 
debt to fund the launch of the A380 and/or A350XWB by 2019. Therefore, according to the 
European  Union, because in the counterfactual Airbus would not have been burdened with that debt 
in 2000, Airbus would have been able to launch the A380 and/or A350XWB years before 2019.599 
The United States argues that, for various reasons, the Wessels Report is immat erial for purposes 
of this compliance proceeding.600 
We are not convinced by the European Union's reliance on the Wessels Report. First, the 
Wessels Report operates under a counterfactual materially different from the counterfactual we 
operate under here, i. e. a counterfactual in which Airbus funded its pre -A380 LCA programmes with 
market financing, a scenario that the Wessels Report itself recalls was "not possible" under the 
findings by the original panel.601 Under our counterfactual, however, Airbus is presu med to have 
received pre -A380 LA/MSF and developed all of its pre -A380 models of LCA as and when it did with  
the LA/MSF  subsidies.602 Second, the Wessels Report makes assumptions that do not capture key 
counterfactual considerations. In particular, the Wesse ls Report uses "conservative assumptions" to 
forecast Airbus' financial performance after 2005, including "forecast{ing Airbus'} revenue growth 
using Airbus' own passenger traffic growth projections of 4.9% between 2000 and 2019".603 Further, 
"{t}o forecast other income statement line items {the report} use{s} the company's financial ratios 
as of 2005" which is "quite conservative, since 2005 matches the company's best operating margins" 
as of 2012.604 We consider that these conservative assumptions do not ther efore take into account 
that, had Airbus failed to launch the A380 and A350XWB at any time before 2013, starting in 2000 
Airbus would have been, as explained above, under considerable increasing competitive pressures 
from Boeing in all three product market s that would have significantly and negatively affected its 
overall financial condition.  In particular, we do not consider that an assumption of steady revenue 
growth of almost 5% by Airbus starting in 2005 has been demonstrated to be a reasonable 
assumpti on in the light of that counterfactual competitive picture. We further have doubts as to the 
impact of a significantly decreased order book on Airbus' credit rating.605 We thus consider that the 
Wessels Report  cannot be meaningfully used to  illustrate Airbus ' financial condition in the 
counterfactual post -2013 period.  
7.5.5.3.2.3   The Airbus  Counterfactual Launch Statement  
In support of its arguments that Airbus could have launched the A380 in  or around  2002 and 
the A350XWB in 2007/2008, the European  Union offers the Airbus Counterfactual Launch Statement. 
The Launch Statement adapts the Wessels Report based on a counterfactual in line with that 
prescribed by the Appellate Body in the first compliance pr oceeding, i.e. one in which Airbus is 
presumed to have received pre -A380 LA/MSF but the effects of such subsidies are disregarded for 
the purpose of determining continued adverse effects. The Launch Statement therefore "modifies 
one critical assumption {of the Wessels Report } – that Airbus would have accumulated massive debt 
 
598 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.577 and fn 1588.  
599 European Union's first written submission, sections V.B.4.d.ii -iii. 
600 United States' first written submission, paras. 221 -223; and  second written submission, 
paras.  235-241. 
601 Wessels Report, (Exhibits EU -40, USA -47), p. 6.  
602 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras. 5.361 -5.383, and 5.652.  
603 Wessels Report, (Exhibits EU -40, USA-47), p. 4.  
604 Wessels Report, (Exhibits EU -40, USA -47), pp. 4 -5. 
605 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1749 ("Boeing and Airbus 
undoubtedly make future plans taking into account their current order book, and … mark et actors will take the 
future {revenue } flows from those orders into account in evaluating each company").  
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  by 2001 as a result of launching Airbus' pre -A380 aircraft programmes".606 The Launch Statement 
then proceeds to use an adapted version of the Wessels Report's methodology to conclude tha t 
Airbus would have had sufficient debt -raising capacity to fund a launch of the A380 in 2001 and the 
launch of the A350XWB in 2006, i.e. essentially the times at which these two LCA were actually 
launched.607 
The European Union offers the Counterfactual Lau nch Statement as purporting to 
demonstrate the time at which Airbus would have had the financial means with which to have 
launched the A380 and A350XWB in the counterfactual. The United States generally argues that, for 
various reasons  including that it co ntradicts the adopted findings from both the original and first 
compliance proceeding s, the Launch Statement is immaterial for purposes of this compliance 
proceeding.608 
In our view, the Launch Statement does not demonstrate that Airbus would have launched 
the A380 and A350XWB in or around 2002 and in 2007/2008 respectively for two main and related 
reasons. First, the Launch Statement assumes the launch of the A380 in 2003, and from that date 
moving forward it assumes, in its financial analysis, the presence of the A380 programme.609 This 
materially differs from the counterfactual under which we operate, i.e. that the A380 could not have 
been launched until end of 2013 at the earliest. The Launch Statement also fails to capture that the 
absence of the A380 durin g the 2000 -2008 period would have placed Airbus under considerable 
competitive pressures from Boeing. Second, the Launch Statement ends its counterfactual analysis 
of Airbus in 2008 – six years before Airbus could have launched the A350XWB in the counterfa ctual 
we apply and during a period where Airbus would have been suffering from Boeing's competitive 
pressures. We thus consider that the Airbus Counterfactual Launch Statement  cannot be 
meaningfully used to  illustrate Airbus' financial condition in the cou nterfactual post -2013 period.  
7.5.5.3.2.4   Savings from  the absence of A380 and A350XWB development costs  
The European Union asserts that, had Airbus delayed the launches of the A380 and 
A350XWB, Airbus  would not have had to shoulder the large development costs of thes e 
LCA programmes during the delay period, the suggestion being that Airbus would have had that 
money available for other ends and/or generally available to stabilize its overall financial position. 
The European Union also puts forth evidence indicating tha t the A380 only reached a financial 
"break -even" point in 2015610, while the A350XWB had not done so by May 2019611, evidencing that 
Airbus continues to bear an overall financial burden from these programmes for many years following 
launch.612  
The United States  counters that the A380 and A350XWB programmes were still 
"cash -generating" even before their "break -even" points and thus benefitted Airbus financially.613  
 
606 Airbus Counterfactual Launch Statement, ( Exhibit EU -92 (HSBI/BCI) ), para. 16.  
607 Airbus Counterfactual Launch Statement, ( Exhibit EU -92 (HSBI/BCI) ), para. 18.  
608 United States' second written submission, para. 230; and comments European Union's response to 
Panel question No. 70.  
609 Airbus Counterfactual Launch Statement, ( Exhibit EU -92 (HSBI/BCI) ), para. 24.  
610 According to the European Union, the A380 programme reached a " break -even point over recurring 
costs in 2015 ". (European Union's second written submission, para. 168 . See also  United States' first written 
submission, para. 65; FlightGlobal , "Airbus assures on A380 break -even this year , David Kaminski -Morrow ", 
(27 February  2015) , (Exhibit USA -16); Airbus Annual Report, 2017, p. 77 (Exhibit USA -9); and Airbus may cut 
A380 production to six planes a year: sources , Reuters, 11 December 2017, (Exhibit EU -90)). From these 
submissions and exhibits it  is apparent that by "break -even" the European Union essentially means that cost of 
production per aircraft equals the revenues realized from that aircraft.  
611 European Union's comment on the United States' response to Panel question No. 67, para. 322 
(citing A350 closes on production -rate target , David Kaminski -Morrow, FlightGlobal (27 April 2015), 
<https://www.flightglobal.com/news/articles/a350 -closes -on-production -rate-target -448127/ >, accessed 
15 September 2019).  
612 United States' second written submissi on, para. 221. The United States argues that R &TD subsidies 
also meant that Airbus did not use funds exclusively through sales of the A320s and A330s. (United States' 
second written submission, para. 222). We recall that the R &TD subsidies are outside the scope of this 
compliance proceeding insofar as they relate to the United States' arguments that those measures have 
"product effects" that "complement and supplement" the effects of the LA/MSF subsidies.  
613 United States' second written submission, para. 22 0. 
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We recall that the development and production of LCA is "an enormously complex and 
expensive underta king" generally requiring the sale of hundreds of a given LCA in order to make 
that LCA programme profitable.614 In the counterfactual we apply, Airbus would have funded the 
launches of the A380 and A350XWB on market terms. The non -recurring costs of the A38 0 were 
expected to be [***]615 in 2000 , and for the A350XWB, they were expected to be  EUR 12 billion as 
late as 2009 .616 Moreover,  Airbus' spending on the A380 and A350XWB  programmes would have 
been particularly high in the initial phases of each programme before significant numbers of 
deliveries were even made.617 We thus accept that Airbus, had it not launched the A380 and 
A350XWB before 2014, would not have had to fund the se programmes, which would have entailed 
expenditures of many hundreds of millions of EUR before Airbus saw any appreciable revenues arise 
from sales of the A380 or A350XWB.618  
7.5.5.3.2.5   Conclusion  — Airbus' counterfactual financial condition post -2013  
In the light o f the above analysis , we discern two general competing considerations when 
assessing Airbus' counterfactual financial position after the end of 2013. On the one hand, Airbus' 
competitive position would have been generally compromised , resulting in diminish ed orders across 
all three product markets during the counterfactual 2000 -2013 period. On the other hand, Airbus 
would not have had to fund the expensive A380 and A350XWB programmes during this time, thus 
being able to put financial resources that would ha ve otherwise been directed to those programmes 
to other ends. Overall, and on balance, we consider that the negative consequences flowing from 
the former consideration would have outweighed advantages arising from the latter, at least by 
year-end 2013. Thi s is so because Airbus' revenues would have been diminished through lower sales 
of LCA over this time -period. As explained, it would have become increasingly difficult for Airbus to 
make sales over time in the 2000 -2013 period as Boeing's competitive advan tages grew. Moreover, 
part of Airbus' available cash would likely have to have been channelled towards competitively pricing 
Airbus' remaining LCA models to enable them to compete with Boeing. Further, Airbus' significantly 
diminished order book would like ly have made Airbus less attractive from investors' standpoint, 
making it harder for Airbus to raise debt and equity. In short, we consider that Airbus' overall 
financial condition in the counterfactual post -2013 period would have roughly reflected its ove rall 
competitive position, i.e. it would have been generally compromised. We note, however, that the 
paucity of evidence that the parties have provided us in this context prevents us from more 
meaningfully quantifying Airbus' financial position .619 
Airbus' c ounterfactual technological  and production capabilities after 2013  
The European Union has indicated that the development and launch of the A380 represented 
a significant technological  step forward for Airbus, particularly with respect to Airbus' competence s 
in using composite materials. The European Union has also indicated that, even if the launches of 
the A380 and A350XWB had been delayed in the counterfactual to some extent, during the delay 
 
614 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1717. See A380 Business 
Case, (Exhibit EU -78 (HSBI)), p. 6 (giving estimated break -even point for the programme).  
615 A380 Business Case, (Exhibit EU -78 (HSBI)), p. 5, 7th bullet . See also Panel Report, EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), fn 2746 (describing the adopted convention of what 
the "cost" of an LCA programme is in that report).  
616 See Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.485, 6.1602, 6.1578, and 6.1710.  
617 The first compliance panel also indicates that, generally speaking, the most spending -intense periods 
in the launch of an LCA begins after the initial technologies are pr oven and production ramp -up begins. In the 
case of the A350XWB, this occurred roughly three years following launch. (Panel Report, EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1577 -6.1578 ). 
618 We recall that the A380 was  launched in 2000 but the first delivery was only made in 2007. 
The A350XWB was launched in December 2006.  
619 We note that the European Union has, in other contexts, provided certain of Airbus' financial 
information in the post -2013 period. (See European Un ion's submission regarding the wind -down of the A380 
Programme, fn 1 (containing links to Airbus financial data from 2018)). None of this information, however, 
takes into account the significantly changed competitive position that Airbus would have faced i n the 
counterfactual 2000 -2013 period, and thus cannot be meaningfully used to estimate Airbus' counterfactual 
post-2013 financial condition.  
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  period Airbus would still have made progress in developing its technological capabilities through 
processes other than developing and launching a specific LCA programme such as the A380.620  
The United States also draws attention to the fact that, because the A380 represented a 
significant technological step forward for  Airbus in many ways, the failure to launch the A380 at least 
until 2014 would have deprived Airbus of significant learning effects that would have hampered 
Airbus' ability to launch other advanced LCA models such as the A350XWB.621  
In our view, any failure  by Airbus to launch the A380 before any launch of the A350XWB 
would have deprived Airbus of valuable "learning" effects that arose from the A380 programme. The 
importance of "learning effects" to an LCA manufacturer's ability to design, develop, produce, and 
market LCA has been emphasized by panels and the Appellate Body throughout this dispute.622  
The first compliance panel found that the A350XWB programme had benefitted from 
"learning" effects arising from previous Airbus LCA programmes in the following areas: 
(a) managerial know -how; (b) pre -existing infrastructure and engineering resources; (c) experience 
with composite materials; (d) specific structural features and on -board systems of the A350XWB; 
and (e) Airbus' ability to effectively marke t the A350XWB.623 Although these "learning" effects were 
derived from multiple Airbus' pre -A350XWB LCA programmes, generally, the first compliance panel 
report documented that many were specifically derived from the A380 programme. For instance, the 
first co mpliance panel noted how the A350XWB programme benefited from the A380 programme in 
the following ways: (a) Airbus' experience with using composite materials in the context of the A380 
programme624; (b) the A350XWB contained components and features derived f rom the A380625; 
(c) Airbus gained experience with using RSPs in the A380 programme626; and (d) Airbus changed its 
design and testing processes to avoid problems that had arisen with the A380 programme.627 The 
Appellate Body agreed with the first compliance panel that the A350XWB derived significant 
"learning" effects from the A380 programme. These "learning" effects were especially important for 
Airbus in the context of the A350XWB programme, because of it s high risk profile628 given the use 
of unprecedented high amounts of composite materials629, the unprecedented high degree of 
outsourcing, and the fact that Airbus was attempting to significantly speed up the development and 
production of the A350XWB relative  to prior Airbus LCA programmes.630 In short, Airbus needed to 
draw on all its experience in order to produce the A350XWB.  
However, w e accept that even in the absence of the launch of the A380 and/or A350XWB, it 
would be unreasonable to expect Airbus' techno logical and production capabilities to have remained 
static. We agree that in the counterfactual, and at least up until year -end 2013, Airbus would likely 
have continued to make progress in these areas to some degree. This is so because Airbus would 
have c ontinued to glean certain "learning" effects from its other LCA programmes, and in particular 
production of the A320 and A330. In this respect, we note that the European Union has presented 
evidence demonstrating that Airbus has continued to make investmen ts and improvements in its 
A330 LCA family on an ongoing basis.631 We also accept that Airbus could have made certain 
 
620 European Union's response to Panel question No. 68, paras. 359 -367. 
621 United States' comments on the European Un ion's response s to Panel question Nos. 68 and 72.  
622 See above, paras. 7.315  and 7.319 . 
623 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.1754 -6.1759.  
624 Panel Report s, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.473 , 
6.469, 6. 1735-6.1736, and 6.1745, first bullet , 6.1746, sixth, ninth, tenth, and eleventh bullets, and 
para. 6.469. Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.492 . 
625 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1757 
and fn 3222.  
626 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 811.  
627 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1754.  
628 See Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.468 -6.487.  
629 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.469, 
6.492 , 6.1547, 6.1620 -6.1621, 6.1728 -6.1731, and 6.1621.  
630 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras. 6.499 -6.505.  
631 "{T}he A330neo benefits from continuous investment of over 150 million euro every year". (A330 
Family , Airbus website, (Exhibit USA -50), p. 1 ). We recognize that the United States generally argues that the 
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  progress in the area of composite materials, as the record confirms Airbus' ability to perform 
research and development with respect to such  materials outside the context of a specific 
LCA programme like the A380.632 
We do not exclude that technological and LCA -production -related advances that Airbus could 
have made during the counterfactual 2000 -2013 period could have effectively replaced at le ast some 
of the "learning" effects that had actually arisen from the A380 programme. Indeed, we consider 
that, to some extent at least, it is reasonable to assume that this would have occurred particularly 
in the field of developing understanding of compos ite materials given the strong incentives that 
Airbus would have had to enhance its understanding of these materials with a view to future 
production of increasingly composite -based LCA. We note, however, that there is no appreciable 
evidence on the record  indicating that Airbus could have reached the same stage of competence 
working with composite materials by year -end 2013 in the absence of the A380 programme. Indeed, 
we recall in this regard the European Union's own position that launching the A380  was a  "very 
significant intermediate step, in terms of its learning effects, for Airbus' future work with 
composites", a competence that was important so that Airbus could "remain a viable competitor in 
the {LCA} duopoly".633 There is also no evidence to suggest that Airbus could have replaced all 
"learning" effects arising from the A380 in the realm of managerial know -how through other 
processes and experiences in the counterfactual.634 On the contrary, to the extent that the A380 
raised several new and unexpected challenges which Airbus eventually resolved, it is clear that the 
same type of expertise and know -how could not have been developed in its absence.635  
In sum, although we recognize that an Airbus company that did not launch the A380 and 
A350XWB in the years  up to the end of 2013 would have continued to work and improve its 
technological and production capabilities, we do not believe those capabilities would have been of 
the same nature and quality that enabled the subsidized Airbus company to actually launch  and 
develop the A350XWB between 2006 and 2013.  
Counterfactual  demand  
7.5.5.3.4.1   A380  
The United States  argues that post -2013 demand levels for the A380 would have been 
materially lower than they were looking forward in time in 2000 for two main reasons. First, the 
United States asserts that the market for VLA was , generally,  by around 2013 , shifting away from 
large, four -engine VLA. Second, the United States asserts that the A380 would likely have been able 
to capture a proportionately smaller segment of the VLA mar ket after 2013 than it could have going 
forward from 2000, as Boeing 's incumbency advantages would  have been reinforced during the 
previous 13 years, particularly with the introduction of the 747 -8I in 2005.636  
The European Union appears to agree that the demand levels for the A380 were low going 
forward from year -end 2013. The European Union, for instance, agrees with the United States that 
the LCA market was moving away from VLA during this time. The European Union also asserts that 
the weak demand le vels for the A380 ultimately led Airbus to announce the wind -down of the entire 
A380 programme in 2019.637 
 
European Union has not demonstrated that such investments are not, at least in part, due to the effects of 
subsides. (See section 7.5.5.4.4  below). For present purposes, we consider that whether or not Airbus has, in 
fact, funded, in whole or in part, research and development activities outs ide the specific context of the A380 
and A350XWB programmes to be immaterial. At this point, we simply note that Airbus does indeed conduct 
such activities in the presence of resources with which to perform them.  
632 Panel Report, EC and certain member State s – Large Civil Aircraft (Article 21.5 – US), paras. 6.516  
and 6.1728.  
633 European Union's response to Panel question No. 68, para. 365. 
634 See paragraph 7.315  above.  
635 For example, Airbus discovered problems with its computer -design software in the context of the 
A380 programme, problems that resulted in serious A380 production delays and cost overruns. (Panel Report, 
EC and certain member States – Large  Civil Aircraft (Article 21.5 – US), para. 6.509 ). 
636 United States' second written submission, paras. 243 -245; and comments on the 
European  Union's  response to Panel question No. 68, para. 263.  
637 European Union's comments on the United States' response to Panel question No. 73, para. 349.  
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The evidence before us reveals that the levels of demand for VLA, including the A380, were 
low after 2013. As the parties indicate, this was mainly due  to the fact that customers were shifting 
away from four -engine VLA generally, and toward more fuel -efficient and flexible twin -aisle LCA.638 
Boeing's 2015 Current Market Outlook (CMO) indicates that the market for large twin -aisle aircraft 
(i.e. VLA) was on  the decline. That CMO forecasts global demand for 540 large wide -body aircraft 
over the 20 -year period 2015 -2034639, in contrast to the A380 Business Case's projected higher 
demand [***] moving forward from 2000.640 We further note that the evidence  on record  indicates 
that the 747 -8I (i.e. Boeing's only VLA for sale in the post -2013 period) had secured no orders  in 
the 2014 -2018 period, inclusive.641 Also, as of May 2019, Boeing only had a backlog of four orders 
for the 747 -8I.642 Moreover, it was Airbus' failure  to maintain an acceptable backlog of orders of the 
A380 that led Airbus to announce the discontinuation of the A380 programme in 2019.643  
In the counterfactual world where Airbus had not launched the A380 and A350XWB, the 
incumbency advantages that Boeing would likely have accrued as a monopolist in the VLA product 
market would have made it more difficult for Airbus to secure orders for the A380 in the post -2013 
period compared with the market it faced when it actually launched A380 in 2000. This would 
have been particularly so because, in reality, when the A380 was launched Boeing was marketing 
the 747-400. Boeing only launched its successor and improved 747 model, the 747 -8I, in 2005644, 
which only became available for delivery in 2012.645 Thus, in 2013, the A 380 would have had to 
compete against a relatively advanced model of the 747 that was already being produced and 
available for delivery to customers.  
In sum, in the counterfactual post -2013 period, Airbus would not only have faced low 
demand for VLA like the A380, generally, but would have likely found it difficult to capture an 
appreciable portion of what market demand for VLA did exist with the A380.  
7.5.5.3.4.2   A350XWB  
We consider that the demand outlook for twin -aisle LCA such as the A350XWB would have 
been signif icantly positive in the counterfactual beginning in 2014. This is so for four reasons. First, 
the 2015 Boeing CMO indicates that the twin -aisle market was still extremely valuable, i.e. worth 
USD 2.7 trillion over the next 20 years.646 We further note that a n expert report submitted by the 
European Union forecasts "substantial demand for A350XWB aircraft over the next 20 years" 
beginning in 2018.647 Second, we recall that one of the reasons that the VLA market was declining 
in and around 2014 was that airlines were switching away from four -engine VLA in favour of 
comparatively more fuel -efficient twin -aisle VLA such as the A350XWB.648 Third, we note that overall, 
orders for the A350XWB in 2014, 2015, 2016, and 2017 stood at 57, 16, 51, and 44 respectively, 
 
638 United States' second written submission, para. 244.  
639 Boeing CMO 2015-2034, (Exhibit USA -153), pp. 24  and 27. Further, the European Union indicates 
that Airbu s, in the post -2013 period, had forecast that although demand for VLA may improve, it would not do 
so until the mid -2020s. (European Union's first written submission, paras. 132, 137, 145, and 164; 
second  written submission, para. 187; and comments on  the United States' response to Panel question No. 37, 
para. 142. But see the European Union's opening statement at the meeting of the Panel , para. 32 ("Recent 
announcements by major customers confirm the view that there is no future interest or strategic fleet  fit for 
the A380: Amedeo cancelled its orders of 20 aircraft, Qantas cancelled the outstanding 8 deliveries, and Qatar 
announced that it will retire its existing fleet of 10 aircraft by 2024, while Lufthansa and Air France announced 
that they will half th eir existing fleets by 2022 (Lufthansa from 14 down to 8 aircraft, and Air France from 
12 down to 5)").  
640 A380 Business Case, (Exhibit -EU 78 (HSBI)), p. 13. We note that, although the Business Case 
apparently includes VLA [***]. (See A380 Business Case, (E xhibit -EU 78 (HSBI)), p p. 13-14). 
641 Ascend Data, (Exhibit USA -138).  
642 United States' response to Panel question No. 73, para. 165.  
643 European Union's submission regarding the wind -down of the A380 programme, para. 1. (Updated 
Ascend Data, (Exhibit USA -158)). Some of these may have been cancelled.  
644 Boeing Launches New 747 -8 Family , Boeing website, < https://boeing.mediaroom.com/2005 -11-14-
Boeing -Launches -New-747-8-Family >, accessed 25 September 2019.  
645 United States' second written submission, para. 244 (citing Boeing press release, " Boeing Delivers 
First Lufthansa 747 -8 Intercontinental ", (25 April 2012) , (Exhibit USA -126)).  
646 Boeing CMO 2015-2034, (Exhibit USA -153), p. 27.  
647 TradeRx A350XWB LA/MSF Rep ort, para. 3 (Exhibit EU -11 (HSBI/BCI) ). 
648 See paragraph 7.352  above. See also Boeing CMO 2015-2034, (Exhibit USA -153), p. 27 (indicating 
decreasing demand for VLA).  
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  indicat ing, in  our view, steady and significant demand levels.649 Finally, we discern no argumentation 
or evidence on the record materially indicating that, beginning in 2014, the demand for twin -aisle 
LCA such as the A350XWB would have been anything but positive.  
Balanced against this positive overall demand picture, however, is the fact that, in the 
counterfactual, by 2014 Boeing would have accumulated significant incumbency positions with many 
customers through its superior competitive position in the 2000 -2013 period. Thus, we consider that 
Airbus would have had a relatively more difficult time selling the A350XWB to customers in and 
immediately after 2014 than it did in 2006 when it was actually launched.  
7.5.5.3.4.3   A330neo  
We consider that the overall demand outlook for the A330neo would have been positive in 
the counterfactual beginning in 2014. Indeed, we note that, in reality, the A330neo was launched 
in 2014, presumably because demand was sufficient to justify a launch. We further note that overall 
demand for modern t win-aisle LCA appeared particularly strong, generally, during this time -period. 
Airbus documentation reveals perceived strong demand of the A330neo650, and we detect no 
argumentation or evidence on the record to indicate that this would not be the case. As with the 
A350XWB, however, this overall positive demand picture would have to be viewed in the light of 
Boeing's significant incumbency advantages in the counterfactual, which would have made it more 
difficult  for Airbus to sell the A330neo beginning in 2014 in the counterfactual relative to how difficult 
it was in 2014 in reality.  
Conclusions  – counterfactual market presence of the A380, A350XWB and 
A330neo after 2013  
In the light of the foregoing analysis , we turn to assess in conclusion, whether , in the absence 
of the A380 and A350XWB LA/MSF  subsidies , the A380, A350XWB, and A330neo programmes would 
have been sufficiently attractive (i.e. "viable") for Airbus to pursue in the counterfactual post -2013 
time-period.651 We set out our conclusions in respect to each LCA programme in turn , making 
reference – as needed and insofar as the limited evidence on the record allows – to the same four 
factors that the  first compliance panel used in its "viability" analysis concerning the A350XWB  in the 
absence of A350XWB LA/MSF : (a) Airbus' expected ability to effectively fund the relevant 
programme with financing on market terms; (b) the relevant programme 's base -case forecast NPV; 
(c) the strategic reasons for Airbus to pursue the relevant programm e; and (d) the relevant 
programme 's risks.  
7.5.5.3.5.1   A380  
With respect to the viability of the A380 programme in the counterfactual post -2013 period, 
we begin our analysis by noting t hat the A380 Business Case, which was relied upon by Airbus to 
launch the A380, was authored in the year 2000652 – 14 years before the counterfactual post -2013 
time-period began. It was thus authored under very different competitive circumstances than those 
that would have faced Airbus in the counterfactual post -2013 period. Thus, while the A380 Business 
Case indicates a positive expected NPV for the A380 programme at the time of actual launch even 
in the absence of A380 LA/MSF653, we do not believe this assess ment can be relied upon to conclude 
that a launch of the A380 in the post -2013 period would have been expected to generate a positive 
NPV. We believe this to be the case mainly because of the lack of demand that would exist for the 
A380 in the post -2013 pe riod.  
We recall that demand for the A380 was weak in the post -2013 period. Indeed, the 
European  Union has submitted evidence indicating that, as of December 2017, the most recent order 
for A380s had occurred in February 2014 by leasing company Amedeo. Aft er December 2017, 
 
649 Updated Ascend Data, (Exhibit USA -158).  
650 See Airbus A330neo Presentation, (Exhibit USA -51), slide 3.  
651 See Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.1637 (using the term "viability" i n a similar way).  
652 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1922.  
653 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1943.  
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  Emirates ordered 20 A380s, [***] the 2014 Amedeo order.654 We further note that as of May 2019, 
Boeing only had a backlog of four orders for the 747 -8I.655 We see no reason to believe that Airbus 
would have secured any additional A380 orders  in the counterfactual in this time -frame, and no 
particular reason to believe that Airbus would have earlier predicted receiving any in this time -frame. 
This contrasts with the situation as it existed in the 2000 -2003 period in reality, during which Airbus  
received 112 orders for the A380.656 We recall that " orders are crucial for a newly launched LCA 
model to be successful, due to the substantial economies of scale in production as well as the steep 
learning curve cost reductions generated thereby ".657 We thus discern no convincing reason to think 
that Airbus w ould have launched the A380 until Airbus could either secure or expect to secure 
immediate and substantial interest from customers.658  
Moreover, we consider that the perceived strategic benefits of the A380 programme 
beginning in 2014 in the counterfactual would likely have been rather low. With the lagging sales of 
747-8I aircraft in this time -period, it appears unlikely to us that Airbus would have viewed competing 
with Boeing in the VLA market as such an imperative as it was in the early 2000s when demand  for 
VLA was much higher. This would have been all the more so given the enormous expenses associated 
with the A380 programme and the attendant risks associated with any LCA programme of that 
magnitude.659  
We note that Airbus received an order for 20 A380s in 2018  from Emirates. This, however, 
does not convince us that Airbus would have launched the A380 at that time. This is so for three  main 
reasons. First, Airbus presumably would have been aware that overall demand for the A380 was 
weak due to the low lev el of interest from customers in VLA in the immediately preceding years. 
Second, we have doubts as to whether Airbus would have won this 2018 Emirates order in the first 
place. This is so because Emirates had been a  consistent  A380 (rather than 747)  custom er for many 
years, with A380 orders stretching back to 2001.660 In the absence of the A380 we consider it highly 
likely that Emirates would have ordered Boeing VLA (and/or perhaps larger 777s661) instead. Thus, 
Boeing would likely have had a significant VLA in cumbency advantage with Emirates by 2018 in the 
counterfactual. In the light of such considerations, we consider it less than certain that Emirates 
would have, in 2018, introduced an entirely new Airbus VLA into its fleet in the counterfactual. 
Finally, we  note that 2018 was only one year before Airbus' decision, in reality, to discontinue the 
entire A380 programme in the light of weak demand.662 We consider it likely, therefore, that Airbus 
would have judged VLA demand as being too weak at that time to justi fy a launch of the A380.  
Our conclusions regarding Airbus' competitive and financial condition in the counterfactual 
post-2013 period reinforce this view. In this period, Airbus' competitive position would have been 
compromised in all three product markets . Airbus' financial situation would most likely have 
approximated its competitive position, i.e. it would have been generally compromised . We have 
found nothing on the record indicating that Airbus could have, in that set of circumstances, launched 
both the A380 and the A350XWB essentially simultaneously. In short, in and immediately around 
2014 in the counterfactual, Airbus would have had to choose between launching the A380 or a twin -
aisle aircraft like the A350XWB. We consider it highly unlikely that Air bus would have opted to spend 
billions of euros on launching an A380 programme in the face of such weak demand for the A380. 
 
654 See paragraph 7.435  below. See also European Union comments on the United States' response to 
Panel question No. 58, Table at para. 268 ; and Airbus, "Status of A380  orders and deliveries ", 
(Exhibit  EU-94 (BCI)).  
655 United States' response to Panel question No. 73, para. 165.  
656 Including 78 in 2001 and 34 in 2003. (Updated Ascend Data , (Exhibit USA -158)).  
657 Panel Report, EC and certain member States – Large Civil Aircr aft, para. 7.1726.  
658 We recall that in Airbus predicted that demand for VLA would pick up again in the mid -2020s. 
(European Union's first written submission, paras. 132, 137, 145, and 164; second written submission, 
para. 187; and c omments on  the United St ates' response to Panel question No. 37, para. 142) . This may have 
been so in the counterfactual as well, but we discern nothing on the record suggesting that Airbus would have 
launched the A380 in the hopes of receiving orders in ten years' time.  
659 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1943 (explain ing that "the 
A380 was a massive project with respect to both the technical aspects of development of the aircraft, and its 
associated costs") and 7.1948 (noting the risks as sociated with LCA programmes such as the A380).  
660 Updated Ascend Data, (Exhibit USA -158).  
661 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 3326  
(explaining that " there is evidence that the larger versions of the 7 77 may also at times challenge for sales in 
the market for {VLA}").   
662 See section 7.5.5.5  below.  
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  Rather, we consider that Airbus would have opted to launch a twin -aisle LCA programme for the 
reasons discussed in the next two sec tions.663  
In sum, we conclude that the A380 would not likely have been available for either order or 
delivery at any time in the counterfactual  post-2013 period . Accordingly, we find that the A380 
LA/MSF subsidies continue to be a "genuine and substantial" cause of the  market presence of the 
A380.  
7.5.5.3.5.2   A350XWB  
In assessing the viability of the A350XWB in the counterfactual post -2013 period, we first 
note that the strategic benefits of launching the A350XWB would likely have been high. After 
enduring heightened c ompetitive pressures from Boeing across all three product markets for multiple 
years, and with the market for VLA too weak to warrant a launch of the A380, we consider that 
Airbus would have sought to launch as strong a competitor to the Boeing 777 and 787  that Airbus 
could as quickly as possible. Such a launch would not only be directed to re -establishing Airbus' 
competitiveness in the valuable twin -aisle LCA market, but also reduce Boeing's incumbency 
advantages and Boeing's ability to cross -subsidize pri ces across the product markets, thus shoring 
up Airbus' competitive position in the single -aisle market as well. Indeed, we recall that such 
concerns over Airbus' general competitive position were significant factors for Airbus in determining 
to launch the  A350XWB in reality. Thus, we consider that Airbus' would have been strongly motivated 
to launch the A350XWB in the counterfactual post -2013 period.  
We also consider that Airbus would have perceived sufficient general market demand for 
twin-aisle LCA like the A350XWB. Indeed, the main reason why Boeing would have been able to 
exert heightened competitive pressures on Airbus during the counterfactual 2006 -2013 time -period 
was that Boeing would have had more advanced and fuel -efficient twin -aisle LCA, wh ich were 
achieving high levels of sales, and that lacked a meaningful competitor from Airbus.664 Balanced 
against this overall demand picture, however, is the fact that if Airbus had launched the A350XWB 
after 2013 in the counterfactual, then Airbus would ha ve encountered a different competitive 
environment than it did in 2006. The key changed aspect of this environment, in our view, is that 
Boeing would have accumulated significant incumbency advantages in the twin -aisle LCA product 
market over the past eigh t years. This would have limited to some degree the demand for the 
A350XWB. On balance, however, we consider that the overall strong demand for twin -aisle LCA like 
the A350XWB would have provided a strong demand for the A350XWB.  
We have some reservations about whether Airbus' financial condition in the post -2013 period 
would have enabled Airbus to launch and fund a programme as expensive and risky as the A350XWB 
with financing instruments on market terms, which would not have had the "risk -transferring" 
qualities that LA/MSF possessed.665 There is, however, little material evidence before us to address 
this point, and, as discussed above, it is difficult to use the existing findings on the record to 
meaningfully discern what Airbus' financial resources would have been in the counterfactual post -
2013 period. Therefore, w e recall our earlier conclusion that, as a general matter, Airbus' financial 
condition in the post -2013 period would have reflected its competitive position, which would have 
been generally comp romised .666 Overall, in the light of the above considerations, we consider  that 
it would be reasonable to proceed on the basis of a scenario in which  Airbus would have launched 
the A350XWB in  early 2014. This is so because Airbus would have had significant business and 
strategic incentives to launch the A350XWB  in order to re-establish Airbus ' competitiveness  in the 
twin-aisle market and thereby  boost its overall business position . However, exactly how  such a 
launch would ha ve proceeded in the years that followed is, in our minds, uncertain.  
 
663 Airbus terminated the A300 and A310 programmes in 2007 and terminated the A340 programme 
in 2011. (Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1062 
and fn 2596).  
664 We note that, in the 2006 -2013 period Boeing received 604 net orders for 777s and 731 net orders 
for 787s. (See Updated  Ascend Data , (Exhibit USA -158)). 
665 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1934 (explaining that 
"LA/MSF functions as a risk transferring device which significantly alters the economics of a decision to launch 
any given LCA programme").  
666 See paragraph 7.326  above.  
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On the one hand, there are reasons to believe that the counterfactual post-launch period 
would have been difficult for Airbus. For instance, Airbus' generally compromised financial position  
may have slowed the pace of the programme. Furthe rmore , given the high risk profile and technical 
challenges of the A350XWB,  the absence of any experience with the A380  suggests that the 
development and production phases of the programme  would likely have been comparatively difficult 
for Airbus  in the counterfactual,  leading to  cost overruns and delays . On the other hand, we accept 
the European Union's proposition  that, at least to some degree, during the counterfactual 20 06-
2013 period, Airbus would have continued to evolve into a generally more integrated company  and 
would have made gains in managerial and technological  expertise  even in the absence of the A380 
programme .667 However, in our assessment, such gains would have been insufficie nt to entirely 
overcome the financial and technological shortcomings in Airbus' position at the time of the 
counterfactual launch of the A350XWB in 2014. It is likely, therefore, that Airbus would have faced 
post-launch production difficulties  – albeit perhaps not rising to  the full magnitude of  those affecting 
the A380 in its development and production phases.668 Such difficulties  would likely have resulted in 
some cost overruns and production delays, which w ould have negatively impacted Airbus'  ability to 
attract customers for the A350XWB in the same numbers that Airbus actually attracted during this 
time-period. This is especially so because Boeing would have been already able to offer more 
attractive delivery positions for the 777 and 787, bot h of which were already available for delivery 
in the post -2013 period, at a time when Boeing had already secured significant incumbency 
advantages with customers in prior years. In such a scenario, we  accept as reasonable the 
European  Union's submission  that the time -gap between the counterfactual  launch of the A350XWB 
and the time by when Airbus could have actually delivered the A350XWB would have been at least  
eight years  (i.e. the same time lag between launch and the first delivery of the A350XWB in 
reality).669 Applying the European Union's estimate to a counterfactual launch in 2014  would mean 
that the first  actual  delivery of an A350XWB would take place after the present day.  
In conclusion, we find that in the  counterfactual scenario described above, Airbus would 
have launched the A350XWB in 2014, but that it would not have been able to offer delivery positions 
until at least eight years after its counterfactual launch date . We also consider that Airbus could only 
have offered  the A350XWB on  less attractive terms  (at least in terms of delivery positions)  than 
Boeing could offer its competitive twin -aisle LCA in the counterfactual post -2013 period . 
7.5.5.3.5.3   A330neo  
The United States argues that the A380 and A350XWB LA/MSF subsidies had " indirect" 
effects on the A330neo, which  was launched in 2014. Specifically, the United States asserts that 
aspects of the A380 and A350XWB have been incorporated into the A330neo, and that the A380 and 
A350XWB programmes put Airbus in the financial positio n where it could launch the A330neo .670 
The European Union argues that the United States has not established the causal pathway 
through which the A380 and A350XWB LA/MSF subsidies have had relevant effects on the A330neo 
programme, has not identified the sub sidy that caused the unidentified effect, and generally has 
submitted insufficient evidence with which to support its arguments, particularly in the light of the 
 
667 European Union's first written submission, para. 350.  
668 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.509 -6.510.  
669 The European Union argues that  the time gap between the 2007/2008 launch of the A350XWB  in its 
proposed counterfactual, and first delive ry would have been as it was in reality , i.e. eight years . 
(European  Union's comments on the United States' response to Panel question No. 74, paras. 364  and 374-
376. See also European Union's first written submission, para. 348 ; second written submission, para. 459; and 
opening statement at the meeting of the Panel, para. 79).  
670 United States' first written submission, paras. 236 -238; second wri tten submission, para s. 232-234; 
response to Panel question No. 67; and comments on the European Union's response to Panel question No. 67.  
According to the United States, the A330neo programme includes two variants, i.e. the A330 -800 (intended to 
compete against the Boeing 787 -8) and the A330 -900 (intended to compete against the Boeing 787 -9). (Airbus 
A330neo Presentation, (Exhibit USA -51), slide 14). 
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  fact that there are no adopted findings regarding the effects of any subsidies on the A330neo 
programme.671 
We note that the United States makes two basic arguments in this context: (i) that the 
A330neo's launch would not have been financially possible for Airbus in the absence of the A380 and 
A350XWB (i.e. the A330neo benefitted from "financial effe cts" arising from the A380 and A350XWB 
programmes672); and (ii) that features of the A380 and A350XWB were incorporated into the 
A330neo (i.e. the A330neo benefitted from "learning" effects arising from the A380 and A350XWB 
programmes).  
With respect to the "financial effects" of the A380 and A350XWB programmes on the 
A330neo, we recall our previous conclusion that, in the counterfactual post -2013 period, Airbus' 
financial situation would have reflected its overall competitive position, i.e. it would have bee n 
generally compromised . This would have been the result of a process that began in 2000 with the 
absence of an A380 launch and with  Boeing exert ing increasing competitive pressures across all 
three product markets  over time . Thus, we accept that, in the c ounterfactual, after 2000 it would 
likely have become increasingly difficult for Airbus to fund large -scale and expensive projects as its 
LCA orders and deliveries (and the financial resources derived from such orders and deliveries) 
decreased. This sugges ts that Airbus would have had difficulty launching the A330neo in 2014 and 
thus may not have been able to make the A330neo available for order and delivery at present day 
in the counterfactual, compared with the position of Airbus in reality.  
On balance, however, we consider that such a conclusion is unwarranted on the basis of the 
arguments and evidence before us. We note that the United States has presented little evidence 
indicating just how expensive the A330neo was to develop and launch. The United St ates offers one 
exhibit indicating that " the A330neo benefits from continuous investment of over 150 million euro 
every year – integrating the latest developments from the  A350 XWB and A380 Families ".673 
However, this was an investment made over time, and we  note that the A330 family was launched 
in 1987.674 We further do not know how much of that money was actually necessary for Airbus to 
develop the technologies to launch and produce the A330neo. The A330neo is a variant developed 
from a pre -existing A330 pla tform, and we note other evidence that the United States submits 
indicates that its improvements are "incremental".675 In that context, we recall that, in the 
counterfactual period of 2000 -2013, Airbus would have likely been trying to retain what market 
share it had in the twin -aisle LCA product market. We consider that, in the absence of the launch of 
the A350XWB before 2014, making incremental improvements to Airbus' only remaining line of twin -
aisle LCA following 2011 (i.e. the A330) would have been a clea r and perhaps necessary strategy. 
Thus, it seems to us that Airbus would have had strong incentives to pursue an incrementally 
improved A330 in the counterfactual. Thus, in the absence of an additional showing that the A330neo 
presented a significant finan cial challenge to Airbus, we do not believe the programme would not 
have been pursued as and when it actually was for financial reasons in the absence of the A380 and 
A350XWB programmes.  
We turn to examine the extent to which the A330neo benefitted from " learning" effects that 
arose from the A380 and A350XWB programmes. Our review of the exhibits the United States offers 
reveals the following specific "learning" effects: (a) the cabin design of the A330neo benefitted from 
the cabin that was designed for th e A350XWB676; (b) an indication that "Trent 1000 -TEN architecture 
with Trent XWB technology" (the "Trent 1000" is the A330neo engine)677; (c) "{i}mproving lift -to-
 
671 European Union's second written submission, para. 440 (quoting Panel Report, EC and certain 
member State s – Large Civil Aircraft (Article 21.5 – US), paras. 6.1492  and 6.1446 (f n 2470)); and comments 
on the United States' response s to Panel question No. 60, paras . 276-280, and No. 67.  
672 Financial effects are where "the previous subsidized financing enables l aunches of subsequent models 
by alleviating the capital burdens that would otherwise exist". (Panel Report, EC and certain member States – 
Large Civil Aircraft (Article 21.5 – US), paras. 6.1724 -6.1725 and 6.1761 -6.1771 ). 
673 A330 Family , Airbus website, (Ex hibit USA -50), p. 1.  
674 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1719.  
675 Airbus press release, " Airbus launches the A330neo ", (14 July  2014) , (Exhibit USA -53), p. 1.  
676 Airbus A330neo Presentation, (Exhibit USA -51); Airbus press release, "AirAsia X orders 34 more 
A330neo", (19 July 2018) , (Exhibit USA -54); Airbus website, " A330-900", (Exhibit USA -55); and  Airbus 
website, "A330 -800", (Exhibit USA -78). 
677 Airbus A330neo Presentation, (Exhi bit USA -51), slide 6.  
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  drag ratio using A350 wing philosophy"678; (d) the "Electrical Bleed Air System" was "{a}lready 
successfully in service on A380"679; and (e) the A330neo has "A350 XWB inspired winglets".680  
We consider that, without a further showing of how difficult it would have been to develop 
such features in th e absence of the A380 and A350XWB, the submitted evidence  is insufficient  to 
demonstrate that the A330neo, in the counterfactual, would not have been available for order or 
delivery today. Again, such improvements appear incremental in nature, the A330 had  been in the 
market for many years and thus allowing for much time to achieve such incremental advances. It is 
further unclear to us that such improvements could or would not have been made by an Airbus 
company motivated to incrementally improve its A330 l ine of LCA as it fought to sustain its 
competitive position in the twin -aisle market in the counterfactual.681 
For the foregoing reasons, we find that the United States has failed to demonstrate that 
A380 and A350XWB LA/MSF subsidies are a genuine and substa ntial cause of the current market 
presence of the A330neo, i.e. that, in the counterfactual, the A330neo would not have been launched 
and brought to market as and when it actually was.  
Factors allegedly attenuating the causal link between A380 and A350XWB  
LA/MSF subsidies and any present adverse effects  
The European Union has identified the following factors which it argues attenuate  the causal 
link between the A380 and A350XWB LA/MSF subsidies and any present adverse effects: (a) the 
"timing out " of the direct effects of the A380 LA/MSF subsidies on the continued market presence of 
the A380, and of the indirect and direct effects of A380 and A350XWB LA/MSF  subsidies , 
respectively, on the continued market presence of the A350XWB; (b) the reduction in the b enefit of 
A380 and A350XWB LA/MSF subsidies as a result of the amortisation of each of the A380 and 
A350XWB LA/MSF subsidies over time ; (c) the reduction in the benefit of A380 and A350XWB LA/MSF 
subsidies as a result of the less than full drawdown of principal available under the French and UK 
A350XWB LA/MSF agreements and of the French A380 LA/MSF agreement ; and (d) the supplanting 
of the "product " effects of A380 and A350XWB LA/MSF subsidies as a result of significant "non-
subsidised investments " in, and  related to, the A380 and A350XWB  programmes  
At times, the European Union appears to describe these four factors as "non-attribution 
factors" , "the passage of time" , and "intervening events". However, regardless of characterization, 
the substantive point the European Union raises in relation to each factor is the same – namely, that 
these factors, whether individually or collectively, compel the conclusion that A380 and A350XWB 
LA/MSF subsidies  are no longer a genuine and substantial cause of present adverse effects. We 
address each of these factors in turn.  
7.5.5.4.1   "Timing out" of the effects of the A380 and A350XWB LA/MSF  subsidies  
The European Union argues  that both the direct and indirect effects of  A380 and A350XWB 
LA/MSF subsidies have "timed  out" and thus can longer be said to cause adverse effects at present. 
The European Union predicates this argument on the counterfactual launch dates of the A380 and 
A350XWB being in or immediately around 2002 and 2007, respectively . In this counterfactual 
scenario, the European Union argues that Airbus would have had many years to begin production of 
the A380 and A350XWB such that both the A380 and A350XWB would be available for sale and 
delivery in the counter factual, exactly as they are in reality, thereby severing any causal link between 
A380 and/or A350XWB LA/MSF and any alleged present adverse effects.682 
The European Union's submission rests entirely on the counterfactual launches of the A380 
and A350XWB hav ing occurred in the years preceding the end of 2013. These submissions have 
already been rejected in the preceding sections of this Report, where we concluded that the market 
presence of the A380 and A350XWB in the absence of the LA/MSF subsidies would hav e occurred in 
 
678 Airbus A330neo Presentation, (Exhibit USA -51), slide 7.  
679 Airbus A330neo Presentation, (Exhibit USA -51), slide 9.  
680 Airbus press release, "Airbus launches the A330neo" , (14 July 2014) , (Exhibit USA -53). 
681 We also note that, in our e stimation, such evidence falls short of the quantity  and quality of evidence 
upon which the first compliance panel used to determine that the A350XWB significantly benefitted from 
Airbus' prior LCA programmes.  
682 European Union's second written submission, paras. 296 -299 and 415-459. WT/DS316/RW2  
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  the post -2013 period. Insofar as any specific issues remain regarding the present impact of those 
"product effects" that may further be construed as pertaining to this European Union argument, we 
consider that our analyses in section 7.5.6  below would effectively cover them. We thus do not 
address this issue further here.  
"Amortization" of the benefit of the A380 and A350XWB LA/MSF subsidies  
The European  Union argues  that the amortisation  of the benefit of the A380 and A350XWB 
LA/MSF subsidies must be taken into account in determining whether those subsidies are  a genuine 
and substantial cause of present adverse effects.  In so arguing, the European Union cites to multiple 
statements made by the Appellate Body in the original and first compliance proceedings purportedly 
standing for the propositions that a panel should consider the issue of amortization in a compliance 
proceeding because amortization m ay affect the link that a complaining party is seeking to establish 
between the provision of the subsidy and its alleged effects . The European Union also offers an 
expert report by its consultant, TradeRx, which concludes that the benefit from all A380 and 
A350XWB LA/MSF subsidies has either fully or partially amortized.683 
The United States argues  that the European Union 's argument conflates two issues, i.e. an 
approach for determining the "life" of a subsidy, on the one hand, and the "passage of time " as an 
intervening event that may attenuate the causal link between a subsidy and present adverse effects, 
on the other hand. According to the United States,  the Appellate Body has also neither adopt ed 
amortization as a tool with which to measure the life of a subsidy nor equated the life of a subsidy 
with the complete dissipation of its effects . Further, the United States argues that  the 
European  Union offers no explanation as to how th e amortization  of benefit in this context  impacts 
the relevant "product effects " of LA/MSF subsidies, especially considering that those effects stem 
from the fact that LA/MSF allowed Airbus to launch the A380 and A350XWB in the first place. Finally, 
the United States no tes that in no prior proceedings in this dispute was the amortization of any 
LA/MSF subsidy materially linked to that subsidy 's ability to cause adverse effects  at any particular 
time.684 
As we understand it, the rationale underlying the approach adopted in the TradeRx report 
the European Union relies upon is that the effects of a subsidy may be determined by identifying the 
extent to which the subsidy recipient was expected to benefit from that subsidy at the time it was 
originally granted. The TradeRx repor t determines the expected duration and extent of this benefit 
for the LA/MSF subsidies by identifying the magnitude of the outstanding repayments under each 
A380 and A350XWB LA/MSF contract, on the basis of the expectations held by the contracting parties 
at the time the LA/MSF agreements were concluded.  
Although we do not exclude the possibility that a methodology focused on the amortization 
of the benefit of a subsidy may be one way of determining the duration and extent of the effects of 
a particular su bsidy, we do not consider that such an approach would be appropriate in the case of 
the A380 and A350XWB LA/MSF subsidies. Our fundamental objection to the application of the 
European Union's proposed approach in this context is that it would not reflect t he nature of the 
"product" effects found to have been caused by the A380 and A350XWB LA/MSF subsidies. The 
European Union's approach would imply that the effect of the subsidies could only arise as and when 
the below -market repayments are made. However, th roughout the different stages of this dispute, 
and once again in this proceeding, LA/MSF has been found to have a "product" effect – simply put, 
the A380 and A350XWB LA/MSF subsidies have been found to have enabled Airbus to launch, 
develop and bring to ma rket the A380 and A350XWB before the post -2013, when they otherwise 
could not have been launched by Airbus. Thus, an approach to identifying the effects of the LA/MSF 
 
683 European Union's first written submission, paras. 303 -307 and 374 -375; second written submission, 
paras. 353 -368; and comments on the United States' response to Panel question No. 62. In making these 
arguments, the European Union cites, inter alia , the Appellate Body Reports in EC and certain member States – 
Large Civil Aircraft (Article 21.5 – US), para. 5.386, fn 932 a nd EC and certain member States – Large Civil 
Aircraft , paras. 706 -707, 709 -710, 713 -714, and 1236.  
684 United States' first written submission, paras. 192 -197; second written submission, paras . 192-197; 
and response to Panel question No. 62. The United Stat es also asserts that the  [***] amendments to the  
A380 LA/MSF and  German A350XWB LA/MSF agreements  extend the life and increases the amount of the 
LA/MSF measure s, and thus th ese subsid ies would not have been reduced through amortization in the way that 
the European Union describes. (United States' second written submission, para. 197).  WT/DS31 6/RW2  
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  subsidies that is focused on the duration and extent of the expected repayments would be 
inconsistent with the nature of the effects caused by the LA/MSF subsidies.  
The European Union's approach is also problematic because it is focused on the ex ante  
expectations concerning the magnitude and duration of repayments, without  also taking into a ccount 
the unplanned amendments to the LA/MSF agreements that modified disbursement and repayment 
schedules.  
Accordingly, we find that the European Union's submissions and expert evidence fails to 
demonstrate that the effects of the A380 and A350XWB LA/MSF subsidies have been attenuated 
simply because the anticipated repayment of the principal provided under the LA/MSF arrangements 
has been partially or fully made.  
"Less than full drawdown" of certain LA/MSF subsidies  
The European Union argues that if Airbus draws down less than the full amount to which 
Airbus is entitled under a given LA/MSF measure, this is an  intervening event that "affects the 
projected value of the subsidy as determined under the ex ante analysis ".685 The European Union 
asserts that the Appellate Body explained that "' {s}uch {intervening} events may be relevant to an 
adverse effects analysis because they may affect the link that a complaining party is seeking to 
establish between the subsidy and its alleged effects '".686 Therefore, according to the 
European  Union,  the Panel must account for the fact that the diminished magnitude  of the subsidy  
"attenuates the present causal link between non -withdrawn A350XWB MSF and any alleged present 
adverse effects "687 because " all things being equal, there will be a certain correspondence between 
the magnitude of a subsidy, and the degree of adverse ef fects that it is capable of causing ".688 The 
European Union submits data indicating that Airbus drew down less than the full amount to which 
Airbus was entitled under the French A380 and French and UK A350XWB LA/MSF contracts.689 
The United States argues  that the European Union  has not established that less -than-full 
drawdown  of a given LA/MSF measure  reduces the benefit of th at measure because the benefit of 
LA/MSF is determined at the time the measures were granted. Further, the United States asserts 
that, ev en assuming that the benefit and/or magnitude of an LA/MSF measure has been reduced 
through some process such as less -than-full drawdown, the European Union offers no explanation 
as to how that reduction impacts the relevant effects of LA/MSF subsidies con sidering that those 
effects stem from LA/MSF's ability to allow Airbus to launch the A380 and A350XWB in the first place. 
Finally , the United States accepts that considerations surrounding the magnitude of a subsidy might 
be relevant  in some instances, but , given the causal pathway of the "product" effects of LA /MSF and  
at the present stage of the Panel's analysis, the present magnitude of any particular LA/MSF measure 
is no longer relevant in this proceeding.690 
We accept that, as a general matter, the magni tude of a given subsidy (whether the 
magnitude of the "benefit" and/or "financial contribution") may affect that subsidy's ability to cause 
adverse effects at a given time. We note, however, that in the case of the funds not drawn -down 
under the French A38 0 and A350XWB LA/MSF contracts, the reason given for Airbus not resorting 
to that funding is that the development and production of A380 and [***] was not pursued by 
Airbus.691 The fact that Airbus did not fully draw -down the funding promised under the French A380 
and A350XWB LA/MSF agreements was not the result of any decision on the part of Airbus to use 
other funding to launch and develop the [***] envisaged under the LA/MSF contracts. Rather, it 
appears that Airbus launched and developed those [***] of A380 and A350XWB using the amount 
of funding provided for under the relevant arrangements. In other words, the funding available under 
the French A380 and A350XWB LA/MSF agreem ents was used precisely as expected to launch, 
 
685 European Union's first written submission, para. 365. (emphasis original)  
686 European Union's first written submission, para. 365 (quoting  Appellate Body Report, EC and cert ain 
member States – Large Civil Aircraft , para. 709).  
687 European Union's first written submission, para. 299.  
688 European Union's second written submission, para. 346.  
689 European Union's first written submission, paras. 295 -296 and 367 ; and second written s ubmission, 
paras. 329 -352. 
690 United States' first written submission, paras. 188 -191; second written submission, paras. 178 -191; 
and comments on the European Union's response to Panel question No. 61.  
691 European Union's second written submission, paras. 330-331. 
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  develop and bring to market the A380 and A350XWB. The "product" effects of the French LA/MSF 
subsidies were not attenuated by the less -than-full draw -down of the principal available under the 
French LA/MSF con tracts.  
The European Union has not explained why Airbus decided to draw -down less than it was 
entitled to under the UK A350XWB LA/MSF agreement. We note, however, that the UK A350XWB 
LA/MSF agreement envisaged that Airbus would produce the same [***] identified in the French 
A350XWB LA/MSF contract.692 Thus, to the extent that Airbus' decision not to develop and produce 
[***] resulted in less work and cost for Airbus UK (the recipient of the principal disbursed under 
the UK LA/MSF agreement), our conclusion w ould be similar to that we have come to in relation to 
the less -than-full drawn -down of the principal under the French LA/MSF contracts. We note, in this 
regard, that the role of Airbus UK in the A350XWB project was to design and produce its wings – 
which may well have been different and required additional work and cost to design and produce for 
the A350XWB [***] that Airbus decided not to pursue.693  
In any case, in the light of the "product" effects of the LA/MSF subsidies, it is difficult to see 
how a dec ision not to draw -down the full amount of principal under the French and UK LA/MSF 
agreements years after they were concluded and following the development of the initial versions of 
the A350XWB, could have impacted Airbus' decision in 2006 to launch and d evelop those versions 
of A350XWB. Airbus' decision to proceed with the A350XWB was based on the assurance that the 
full amount of funding provided for under the respective LA/MSF agreements would have been 
available. Moreover, Airbus actually developed and  brought the A350XWB to market in reliance on 
the below -market funding provided under the LA/MSF agreements. Thus, it cannot be deduced from 
the mere fact that Airbus drew -down less than the full amount of available funding under the French 
and UK LA/MSF c ontracts that Airbus would have developed the same models of LCA at the same 
time, or shortly thereafter, in the absence of the provision of the LA/MSF subsidies.  
Thus, in the light of the above considerations, we see no basis to conclude that the "product " 
effects of the French A380 and A350XWB LA/MSF subsidies and the UK A350XWB LA/MSF subsidies 
were attenuated by the less -than-full draw -down of the principal available under the respective 
LA/MSF contracts.  
"Non -subsidized  investments" in the A380 and A3 50XWB  
The European Union  asserts  that Airbus made significant non -subsidized investments in the 
A380 and A350XWB programmes since their respective launches in 2000 and 2006 , totalling a 
substantial amount that is HSBI over the [***] period .694 According to the European Union, these 
investments , and not LA/MSF, explain the current market presence and competitiveness of the A380 
and A350XWB mainly because these investments constitute "intervening event s" that " supplant" 
any relevant indirect effects arising  from A380 and/or A350XWB LA/MSF, thus attenuating the causal 
link between the LA/MSF subsidies and any alleged present adverse effects. The European Union 
also argues that: (i) contrary to the United States' assertions, the adopted findings in the first 
compliance proceeding regarding non-subsidized investments  do not support rejecting the 
European  Union's arguments regarding alleged non -subsidized investments  here; (ii) the United 
States has failed to demonstrate that the alleged non -subsidized investment s are, rather, "subsided" 
investments; and (iii) the United States has not demonstrated any relationship between the timing 
of the counterfactual launch of the A380 and A350XWB and Airbus' financial ability to make these 
non-subsidized investments. The Eur opean Union also rejects the United States' characterization of 
these investments as "routine" as irrelevant.695 
 
692 UK A350XWB LA/MSF Agreement, (Exhibit EU -28 (BCI)), Article 1.  
693 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.681 
and 6.754.  
694 European Union's first written submission, paras. 314 -316 and 387-389; Annual Continuing Support 
and Continuing Development for the A350XWB (2013 -2018), Proprietary Information Extracted from Airbus' 
Accounts, (Exhibit EU -30 (HSBI));  and Annual Continuing  Support and Continuing Development for the A380 
(2013 -2018), Proprietary Information Extracted from Airbus' Accounts, (Exhibit EU -53 (HSBI)).  
695 European Union's first written submission, paras. 308, 310 -311, 383 -391, and 392-396; 
second  written submission , paras. 369 -414; response s to Panel question Nos. 64, 65 , and 66; and comments 
on the United States' response to Panel question No. 63. The European Union also asserts that such cash would 
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The European Union asserts that Airbus has invested in the continuing  development  of the 
A380 programme, including incremental improvements and i nvestments into product and 
performance improvements and the cost of overcoming significant delays in the production of the 
A380. The European Union maintains that these costs were unforeseen in the A380 business case 
and relevant  LA/MSF agreements .696 The European Union further alleges that Airbus has invested in 
continuing  support  for the A380 programme to maintain and enhance its production lines, includ ing 
investments into technical support; jigs and tools maintenance; and specific, non -recurring activiti es 
related to production improvements and aircraft maintenance697; and t he development of the A380 
Plus variant .698  
The European Union also maintains  that Airbus has invested in continuing development of 
the A350XWB programme, including : (i) incremental technological improvements to the 
A350XWB699; (ii) continuing support for the A350XWB programme to maintain and enhance its 
production lines, including investments into technical support; (iii) jigs and tools maintenance; and 
(iv) specific, non -recurring activities related to production improvements and developments in 
aircraft maintenance.700 The European Union cites [***] for the development of the A350 -900ULR 
variant701 and the Beluga XL, the latter of which  transports the composite wings used in the 
production of the A350XWB from the UK to France .702 
The United States argues  that the European Union has not demonstrated that the  relevant 
investments are, in fact, "non-subsidized ". The United States further asserts that the European 
Union 's arguments should be rejected because the only reason Airbus could make any such 
investments is because A380 and A350XWB LA/MSF allowed Airbus to launch those two aircraft 
programmes in the first place. The United States stresses in this context that these investment s are 
"incremental " and "routine " improvements in LCA design and production that build on the foundation 
provided  by LA/MSF. This is so according to the United States because "even if a counterfactual non -
subsidized Airbus could – and would – have launched  and brought to market the A380 and A350XWB 
in the period since 2013, it would not have had the accumulated experience and financial resources 
that allowed real -world Airbus to undertake the post -launch investments the EU identifies ".703 The 
United States no tes that the first compliance panel and the Appellate Body in the first compliance 
proceeding rejected similar European Union arguments regarding the relevance of alleged non -
subsidized investments  under similar circumstances. Moreover, the United States a sserts that even 
if the European Union showed that non -subsidized investments are a genuine and substantial cause 
of the current market presence of the A380 and A35 0XWB, this does not pre -empt a finding that 
LA/MSF is also such a cause. The United States a lso recalls that in the first compliance proceedings, 
it was only the indirect effects arising from the A300 and A310, i.e. the first two Airbus LCA 
programmes, that had been found to have been supplanted by later -in-time developments, and thus 
it is uncon vincing that non -subsidized investments could supplant learning effects arising from the 
A380 and A350XWB so quickly in this case.704 
At the outset we recall that we have determined that Airbus would not have launched the 
A380 at any time  in the absence of t he A380 LA/MSF subsidies. This is so because the Appellate 
Body's findings establish that the A380 would not have been launched before year -end 2013, and, 
after 2013, demand for the A380 would have been insufficient to warrant a launch. We note, 
therefore,  that any alleged non -subsidized investments  that Airbus in fact made in the A380 
programme were only possible because of the "product" effects of A380 LA/MSF subsidies, which 
enabled Airbus to launch, develop and bring to market the A380 in the years following 2000.  
 
have come from the A320 and A330 sales because the A380 programme was loss -generating for Airbus until 
very recently. (European Union's second written submission, para. 407).  
696 European Union's first written submission, paras. 384 and 388.  
697 European Union's first written submission, para. 387.  
698 European Union's first w ritten submission, paras. 385 -386. 
699 European Union's first written submission, para. 316.  
700 European Union's first written submission, para. 315.  
701 European Union's first written submission, paras. 316 -320. 
702 European Union's first written submission, par as. 321 -323. 
703 United States' second written submission, para. 200.  
704 United States' first written submission, paras. 202 -206; second written submission, paras. 198 -225; 
and comments on the European Union's response s to Panel question No. 63, No. 64, No. 6 5, para. 227, and 
No. 66.  
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Accordingly, we find that the alleged non -subsidized investments  in the A380 programme 
cannot alter the conclusion that A380 LA/MSF subsidies continue to be a "gen uine and substantial" 
cause of the market presence of the A380.   
Turning to the alleged non -subsidized investments  in the A350XWB programme, we first 
note that the A350XWB programme could have been launched only after 2013 in the counterfactual. 
Again, thi s follows from the Appellate Body's findings in the first compliance dispute, and our own 
assessment of the viability of the launch of the A350XWB after 2013. Thus, for analytic purposes, 
we examine the relevance of alleged non -subsidized investments  with respect to two time -periods, 
i.e. before and after 1 January 2014.  
With respect to the time -period before 2014, we recall that the nature of the alleged non -
subsidized investments  in the A350XWB programme, according to the European Union, is related to 
the continued  development and support  of the A350XWB programme.705 These are investments in 
the A350XWB programme that by nature occur post-launch . In the counterfactual, however, the 
A350XWB programme would not have been launched before year -end 2013. Thus, n one of these 
investments would have been made in the counterfactual before year -end 2013. Accordingly, the 
only reason to explain the making of the alleged non -subsidized investments  is the "product" effect 
of the relevant LA/MSF subsidies, which enabled A irbus to launch, develop and bring to market the 
A350XWB in the years between 2006 and 2013.  
With respect to the counterfactual time -period after 2014, we recall our prior findings that 
in the counterfactual post -2013 period Airbus would have launched the  A350XWB but would have  
encountered production difficulties . This would mainly have been so due to the fact that  Airbus would 
have had comparatively less technical and managerial expertise in the absence of the A380 
programme, and that Airbus would have be en in a compromised financial condition. Thus, in order 
to find that the alleged non -subsidized investments  have attenuated the "product" effects of LA/MSF 
in relation to the A350XWB, we would need to be convinced that those investments would have: 
(i) taken place; and (ii) been of a kind that would enable Airbus to overcome the obstacles that a 
non-subsidised Airbus would have faced in the post -2013 period to a degree that would materially  
alter this post -launch scenario . 
We note that the specific alleged non-subsidized investments  the European Union raises in 
this dispute in relation to the A350XWB all took place between [***]. One set of investments 
enhanced Airbus' production processes and tooling for the A350XWB programme, and increase d its 
production capacity.706 Another set of investments focused on making incremental improvements to 
the A350XWB in order to sustain and renew its competitiveness . One example provided by the 
European Union is the development of the ultra -long-range A350XWB -900ULR . According to the 
European Union, the A350XWB -900ULR enjoys a number of advantages over other A350XWB  
models , in terms of range, maximum take -off weight and modified fuel  systems and is attractive to 
potential customers.707 The third specific investm ent the European Union identifies is the 
development and production of the Beluga XL, which supports the production of the A350XWB by 
transporting its components. The European Union explains that Airbus ' investment was necessary 
because the five Beluga air craft in service had proven insufficient to meet Airbus ' increased transport 
capacity requirements, as a result of, inter alia , the A350XWB production ramp -up.708  
We recognize that the specific investments the European Union identifies were significant 
and we have no reason to believe they have not assisted Airbus in the marketing, sale and delivery 
of the A350XWB. However, it is clear from the European Union's explanations that Airbus decided to 
make those investments only after at least seven years' experi ence with the A350XWB that would 
not have been launched and developed prior to end of 2013 without the A380 and A350XWB LA/MSF 
subsidies. In the counterfactual post -launch scenario for the A350XWB  that we have found to be 
most likely , Airbus would not have  needed to make the same types of investments at the same time 
because it would have been in only the early stages of the development and production process. 
Airbus would not have initially found its five in service Belugas to be insufficient because it wo uld 
not have needed to ramp -up production in the same way that it actually did. In the initial years after 
launch, Airbus would not have invested in the A350XWB -900ULR because it would have concentrated 
 
705 European Union's first written submission, paras. 315 -320. 
706 European Union's first written submission, para. 315.  
707 European Union's first written submission, para. 316.  
708 European Union's first written submission, para. 321.  WT/DS31 6/RW2  
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  on the base A350XWB model first. Airbus would not hav e had the more than seven years of 
"learning" with this model that it had when it invested in the A350XWB -900ULR. Finally, it is also 
significant to note that Airbus undertook the relevant investments at a time when it was generating 
revenue from sales of the A350XWB. This, of course, would not be the case in the post -2013 
counterfactual. Thus, we do not believe that an unsubsidized Airbus would have had the financial 
resources in the post -2013 period to make the same investments in the A350XWB. In short, b ecause 
Airbus would have only started to develop and bring an unsubsidized base model of the A350XWB 
to market at the time of the relevant investments, we do not believe that Airbus would have had 
business incentive or the technical and financial resources , to pursue the same investments in the 
post-2013 counterfactual period.  
Accordingly, we find that the alleged non -subsidized investments in the A350XWB  
programme cannot alter the conclusion that A380  and A350XWB  LA/MSF subsidies continue to be a 
"genuine and substantial" cause of the market presence of the A350XWB .  
"Wind -down" of the A380 programme  
The European Union argues that the announcement to "wind down" the A380 programme 
on 14 February 2019 is an "intervening event" that achieves the removal of all adverse effects 
related to the market presence of the A380. We recall that in our assessment of the European Union's 
withdrawal claims above709, we found that the European Union is entitled to have u s consider its 
contention concerning the circumstances surrounding Airbus' termination announcement, although 
we rejected its argument that the announcement , on its own,  resulted in the withdrawal of the A380 
LA/MSF subsidies by bringing their lives to an end.  
The European Union submits  that the "wind-down " announcement  has brought to an end 
the marketing life of the A380, which has brought to an end the "direct effects" of the A380 LA/MSF 
subsidies as well as the "indirect effects" of the A380 LA/MSF subs idies on the A350XWB. Resulting 
from this, the European Union argues that the "wind down" announcement has remov ed the specific 
adverse effects that were found by the first compliance panel to arise during the 2011 -2013 period. 
In this regard, the European  submits that "most of the A380 orders during the December 2011 -2013 
period that formed the basis of the first compliance panel's findings of significant lost sales {in the 
VLA market} have now been delivered or cancelled", leaving only eight to be deliver ed by the end 
of December 2019 and only two by the end of 2020 until the final delivery is made in July 2021.710 
The European Union argues that these "few remaining deliveries" "signal the end of a programme, 
rather than the enhancement of the advantages nor mally accruing  to the manufacturers on the 
delivery of aircraft from a healthy programme with a robust competitive future", which is "not 
'sufficient to establish the {continued } existence of' the significant lost sales and impedance found 
in the first com pliance proceedings" .711 Of the six country markets for which the first compliance 
panel found impedance  in the VLA market , the European Union submits that five will never again 
receive a delivery of the A380, subsidised or otherwise, and that for the UAE ma rket, "a definitive 
course of action has been set in motion that will ensure that the deliveries of the A380 will completely 
cease within the next two years".712  
Finally, the European Union argues that that there is no longer any basis to find that the 
A350XWB LA/MSF subsidies are a genuine and substantial cause of significant lost sales in the twin -
aisle market, "{g}iven the withdrawal of the A380 MSF subsidies and the removal of their indirect 
effects".713 According to  the European Union,  the first complianc e proceedings did not result in a 
finding that the A350XWB LA/MSF subsidies considered alone  were a genuine and substantial cause 
of any of the types of adverse effects enumerated by the compliance panel, but these were only 
considered in an aggregate mann er with the "indirect effects" of the A380 LA/MSF subsidies.  Thus, 
under the European Union's argument, since the "indirect effects" have allegedly come to an end, 
 
709 See paragraph 7.252  above.  
710 European Union's submission regarding the wind -down of the A380 programme, para. 55 ; opening 
statement at the meeting of the Panel, par a. 22; and Airbus, "Status of A380 orders and deliveries " 
(Exhibit  EU-94 (BCI)).  
711 European Union's opening statement at the meeting of the Panel, para. 27  (quoting Appellate Body 
Report, US – Large Civil Aircraft (Article 21.5 – EU), para. 5.341 ). 
712 European Union's opening statement at the meeting of the Panel, para. 28. See also 
European  Union's submission  regarding the wind -down of the A380 programme , paras. 44, 51, and 59-62. 
713 European Union's submission  regarding the wind -down of the A380 programme , para. 65.  
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  there is no longer support for the first compliance panel's finding that aggregated effects of the A380 
LA/MSF subsidies and A350XWB LA/MSF subsidies are a genuine and substantial cause of  adverse 
effects.714  
The United States questions the degree of certainty surrounding whether the A380 
programme will terminate in the future, arguing that there is no assurance that Airbus would not 
choose to continue the programme in the future if Emirates or another customer approached Airbus 
about a large A380 order. In any event, the United States argues that the European Union errs in 
arguing that the "direct  effects" or "indirect effects" of A380 LA/MSF have ended or that Airbus' 
announcement constitutes a "step" that has removed the adverse effects in either the VLA or twin -
aisle LCA markets. Rather than ending their effects, the United States argues that th e wind -down 
demonstrates that the existing LA/MSF continues to cause adverse effects. At most, the 
United  States maintains that the projection of final deliveries could establish that market phenomena 
cause d by the A380 LA/MSF will cease in only 2021. Yet,  the United States contends that the 
European Union cannot succeed in demonstrating compliance today by showing that it expects  to 
achieve compliance at a future point in time. In addition, the United States argues that the 
first compliance panel made clear that indirect effects generated in the past could continue to 
support the present -day market presence of other Airbus models, and scope and learning effects 
are not limited to only pre -launch learning and knowledge.  For example, the United States sub mits 
that the first compliance panel cited "evidence that certain Airbus and Airbus suppliers' facilities 
(e.g. Airbus' Nantes facility and Aerolia's Picardie facility) had become specialized in manufacturing 
certain LCA structures by virtue of their exper ience with prior Airbus programmes, and applied such 
skills in connection with the A350XWB programme" .715 The United States submits that these facilities 
and their specialization in manufacturing structures was not limited to pre -launch activities .716 
The Unit ed States argues that there is no support for the European Union's argument that 
Airbus' announcement constitutes a "step" that has removed the adverse effects in the VLA or 
twin-aisle LCA markets. Regarding the VLA market, the United States considers the fact that 
deliveries remain outstanding provides evidence that impedance is continuing. In addition, the 
United States contends that the European Union has "repeatedly viewed … outstanding deliveries as 
continuing significant lost sales" and , therefore, ou tstanding deliveries further demonstrate that the 
A380 LA/MSF subsidies presently are continuing to cause adverse effects.717 The United States 
argues that the European Union's argument concerning adverse effects in the twin -aisle LCA market 
is based on a fl awed premise that "indirect effects" of the A380 LA/MSF subsidies no longer continue 
in the twin -aisle market.718 
As an initial matter, we do not share the United States' view that prospects remain high for 
Airbus to reverse its decision to terminate the programme, or that it would prove practicable to do 
so. In our assessment of the European Union's withdrawal claims above719, we highlighted the recent 
history of the A380, which suggested that the A380 programme's short to medium -term prospect s 
were not good  at the time of the A380 LA/MSF amendments , further suggesting that there would 
not likely be sufficient demand in the future to justify reviving A380 production after the final 
standing orders are fulfilled. In addition, the United States a ppears to discount the significance of 
the effect of the "wind -down" announcement on the outlook of potential buyers on the future viability 
of operating an A380 fleet going forward. Finally, we note that the European Union has submitted 
evidence concernin g the planned phase down of the A380 programme720 [***].721  
We nevertheless disagree with the European Union's assessment of the implications of the 
termination  announcement  of the A380 programme for our examination of whether the A380 and 
A350XWB LA/MSF subs idies are a genuine and substantial cause of present adverse effects. We do 
 
714 European Union's submission  regarding the wind -down of the A380 programme , para. 65.  
715 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para . 6.1755.  
716 United States' second written submission, para s. 89-91 and  294; and response to Panel question 
No. 37. 
717 United States' second written submission, para. 293, citing First Written Submission of the 
European  Union  in US – Large Civil Aircraft ( Article 21.5 - EU) (Panel) , para. 1339.  
718 United States' second written submission, para. 298.  
719 See paragraphs  7.227 - 7.229 . 
720 European Union's opening statement at the meeting of the Panel, para. 31; [***], slide 18 (p. 10), 
(Exhibit EU -101 (BCI)).  
721 European Union's opening statement at the meeting of the Panel, para. 31; and Letter from [***], 
(Exhibit EU -102 (BCI)).  WT/DS31 6/RW2  
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  not consider that Airbus' 14 February 2019 wind -down announcement achieves , on its own,  the 
removal of the present  adverse effects of the A380 LA/MSF subsidies as they relate to the market 
presence of the A380.  In our view, those effects will persist  while Airbus continues to produce and 
deliver the A380.  It follows, correspondingly , that the wind -down announcement cannot also achieve 
the removal of any present  adverse effects of the A380 and A350XWB LA/MSF subsidies as they 
relate to the market presence of the A350XWB. Accordingly, we find that the wind -down 
announcement does not, alone, demonstrate that the European Union has achieved compliance with 
the obligation in Article 7.8  to "take appropriate steps to remove the adverse effects".  
The impact of the "product" effects of A380 and A350XWB LA/MSF subsidies in the 
relevant product markets  
In the previous section s of our analysis, we found that the  "product"  effects of A380 and 
A350XWB LA/MSF subsidies are a "genuine and substantial" cause of the current  market presence 
of the A380 and A350XWB families of LCA. We determined that in the absence of the A380 and 
A350XWB LA/MSF subsidies, Airbus would not have launched the A380 at all , and that Airbus would 
have launched the A350XWB in 2014 but  would have faced difficulties in the post -launch period.  In 
this section we assess  the extent to which the  A380 and A350XWB  LA/MSF subsidies, through these  
effects, are a "genuine and substantia l" cause of adverse effects in the form of serious prejudice 
within the meaning of Article 5 and 6 of the SCM Agreement.  
The United States claims that the United States  LCA industry presently  suffer s the following 
adverse effects in the VLA and twin-aisle product markets: (a) significant  lost sales  within the 
meaning of Article 6.3(c) of the SCM Agreement; and (b)  impedance and/or displacement within the 
meaning of Article 6.3(a) -(b) of the SCM Agreement .722 For the reasons explained elsewhere in t his 
Report, we will make this determination with particular emphasis on the temporal period following 
2013, but cognizant of the fact that we must do so in order to discern whether such subsides continue 
to cause present  adverse effects.723 
The European Unio n argues that the United States has selected specific "examples" of 
alleged lost sales, impedance, and displacement without explaining on what basis it has selected 
those, and not other, examples. According to the European Union, this "lack of transparency  … 
deprives the European Union from engaging, with argument and evidence, on the appropriateness 
of the factors that the United States relied upon in choosing the examples of alleged lost sales and 
displacement and/or impedance ".724 Further, the European Uni on asserts that the United States' 
approach prevents the European Union from engaging on the subject of "whether those factors are, 
in fact, present in the sales and markets at issue, or whether the market phenomena are, instead, 
driven by other factors, a nd in particular by non -subsidy (non -attribution) factors ".725 
The United States offers the delivery and order data described in the sections below to 
support its position that the European Union has not "take {n} appropriate steps to remove the 
adverse effec ts" of the A380 and A350XWB LA/MSF subsidies. For the reasons explained in our 
review of this data, we believe it is sufficient basis, in the light of our findings on the continued 
"product" effects of the A380 and A350XWB LA/MSF subsidies, to determine th e merits of the 
United  States continued adverse effects claims.  
Finally, before proceeding with our analysis, we consider it important to explain one of the 
implications of our finding that , in the counterfactual,  the A350XWB would plausibly have been 
launched before the present day . In our view, this finding does not automatically preclude the 
possibility that sales and/or deliveries of the subsidized A350XWB could still be the cause of present -
day adverse effects. This is so because  delayed delivery posit ions resulting from the delayed launch 
of the unsubsidised A350XWB would have impacted Airbus' ability to win sales and make deliveries  
in the relevant period . Lost sales could still be occurring, for example, insofar as customers would 
have found counterfactually later -in-time promised delivery dates (resulting from a delayed launch) 
 
722 United States' second written submission, paras. 256 -289. 
723 See section. 7.5.3 above.  
724 European Union's response to Panel question No. 71, para. 377. See also  European Union's response 
to Panel question No. 71, para. 390.  
725 European Union's response to Panel question No. 71, pa ra. 377. See also  European Union's response 
to Panel question No. 71, para. 390 . 
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  so unattractive that the customers would have chosen to order Boeing over Airbus LCA in the 
counterfactual.726  
7.5.6.1   Impedance and/or displacement   
With respect to "displacem ent", the Appellate Body has explained that:  
Displacement, as the Appellate  Body explained, " is a situation where imports or exports 
of a like product are  replace d by the sales of the subsidized product" – i.e. "there is a 
substitution effect between the s ubsidized product and the like product of the 
complaining Member".  A determination of whether the effect of a subsidy is to displace 
involves a fact -specific analysis that can be made only on a case -by-case basis and in 
light of the particularities of the market concerned. To the extent that a complainant 
can demonstrate through arguments and evidence that actual sales or market shares 
of the like product have declined during the reference period, this  may be indicative of 
displacement caused by the subsidy  within the meaning of Articles 6.3(a) and 6.3(b). 
To that extent, while a  market trend analysis – e.g. regarding whether there has been 
a change in relative shares of the market to the disadvantage of the like product – may 
carry relevance , it is not  determinative  of the existence of serious prejudice.727 
With respect to "impedance", the Appellate Body has explained that:  
The term "impede", as the Appellate  Body found, "connotes a broader array of situations 
than the term 'displace'" . The Appellate  Body expl ained that impedance "refers to 
situations where the exports or imports of the like product of the complaining Member 
would have expanded had they not been 'obstructed' or 'hindered' by the subsidized 
product".  Evidence that sales would ha ve increased more  or declined less than they did 
in the absence of the subsidy  would indicate the existence of impedance  within the 
meaning of Articles  6.3(a) and 6.3(b). The  Appellate  Body further explained that 
"impedance" can also refer to a situation where "the exports  or imports of the like 
product of the complaining Member did not materialize at all because production was 
held back by the subsidized product".  As in the case of displacement, a determination 
of whether the effect of a subsidy is to "impede" involves a f act-specific analysis that 
can be made only on a case -by-case basis and in light of the particularities of the 
market  concerned.728 
The United  States claims that, in the light of the "product" effects of the challenged LA/MSF 
subsidies and the conditions of competition in the LCA industry, the United  States LCA industry 
currently suffers serious prejudice in the form of displacement and/or impedance of its LCA products 
 
726 We note that the record of this dispute supports the proposition that customers as a general matter 
find later -in-time delivery positions less attractive than earlier -in-time positions. (European Union's first written 
submission, para s. 323 ("The Beluga XL investment allows Airbus to accelerate production, and thereby to 
sustain increasing overall production of Airbus aircraft, including the A350XWB models, thus maintaining i ts 
ability to ensure timely delivery slots for customers") and 389 (indicating that "timely production enabled by 
these investments allows Airbus to offer attractive delivery positions for its A380 customers, which further 
enhances the competitiveness of t he aircraft"); second written submission, para. 436 ("Such delayed delivery 
positions would then have made Airbus ' offers in sales campaigns in the December 2011 -2013 reference period 
less attractive"); and comments on  the United States' response to Panel question No. 74, para. 367 ("… the 
European Union agrees that counterfactual delivery positions offered to airline or leasing company customers 
are important in their decisions on which aircraft to order") ). See also Panel Report, EC and certain member 
States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1264 and 6.1325 ; Appellate Body Report, US – Large 
Civil Aircraft ( 2nd complaint)  (Article 21.5 – EU), paras. 5.405 and 5.408 (explaining that "in the context of the 
LCA market, determining  whether the forms of ser ious prejudice under Article 6.3 at issue … still exist … 
requires assessing whether any acceleration effects from {relevant } subsidies also had an impact on the timing 
of first delivery" of a relevant LCA).  
727 Appellate  Body Report , EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.679. (fns omitted) See also Appellate  Body Report, US – Large Civil Aircraft ( 2nd complaint) , para. 1071 
(explaining that "{a}n analysis of displacement should assess whethe r this phenomenon is discernible by 
examining trends in data relating to export volumes and  market shares over an appropriately representative 
period").  
728 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.680. (fns omitted)  
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  in the VLA and/or twin -aisle product markets in China, the European  Union, Korea, Singapore , and/or 
the UAE, within the meaning of Articles 6.3(a) and 6.3(b) of the SCM  Agreement. To support its 
claims, the United  States has introduced evidence of Airbus and Boeing delivery volumes and market 
shares in the  VLA and twin -aisle product markets for each year from 2011 to 2018. Relying upon 
these data, the United  States argues that in the absence of the "product" effects of A380 and 
A350XWB LA/MSF  subsidies , the United  States LCA industry's delivery volumes and market shares 
would have been higher tha n they actually were in each of the relevant geographic markets.  
7.5.6.1.1   VLA product market  
With respect to the VLA product market, the United  States claim s the existence of 
displacement and/ or impedance in the VLA markets of the European  Union, Korea, and Singapo re. 
For the VLA market in the United Arab Emirates the United  States claims the existence only of 
impedance. The United States' claims are based on the following delivery and market share data, in 
which all Airbus deliveries are deliveries of A380s and all  Boeing deliveries are deliveries 
of 747-8Is.729 
Table 1 – Market for very large LCA (European Union)730 
Delivery Data  2011 2012 2013 2014 2015 2016 2017 2018 
Boeing Volume 
(Units)  0 4 5 6 4 0 0 0 
Boeing 
Market Share  0.0%  50.0%  55.5%  42.9%  50.0%  0.0%  0.0%  0.0%  
Airbus Volume 
(Units)  6 4 4 8 4 2 0 0 
Airbus 
Market Share  100.0%  50.0%  45.5%  57.1%  50.0%  100.0%  0.0%  0.0%  
Table 2 – Market for very large LCA (Korea)731 
Delivery Data  2011 2012 2013 2014 2015 2016 2017 2018 
Boeing Volume 
(Units)  0 0 0 0 4 3 3 0 
Boeing 
Market Share  0.0%  0.0%  0.0%  0.0%  66.7%  60.0%  100.0%  0.0%  
Airbus Volume 
(Units)  5 1 2 4 2 2 0 0 
Airbus 
Market Share  100.0%  100.0%  100.0%  100.0%  33.3%  40.0%  0.0%  0.0%  
Table 3 – Market for very large LCA (Singapore)732 
Delivery Data  2011 2012 2013 2014 2015 2016 2017 2018 
Boeing Volume 
(Units)  0 0 0 0 0 0 0 0 
Boeing 
Market Share  0.0%  0.0%  0.0%  0.0%  0.0%  0.0%  0.0%  0.0%  
Airbus Volume 
(Units)  3 5 2 0 0 0 2 3 
Airbus Market 
Share  100.0%  100.0%  100.0%  0.0%  0.0%  0.0%  100.0%  100.0%  
 
729 We recall that both the original panel, first compliance panel, and the Appellate Body in the original 
and first compliance proceedings accepted the use of LCA delivery, rather than order, data to evidence the 
phenomena of impedance  and displacement in this dispute. (See Appellate Body Reports,  EC and certain 
member States – Large Civil Aircraft , para. 1153; EC and certain member States – Large Civil Aircraft 
(Article  21.5 – US), para. 6.41 , fn 2054; Panel Reports, EC and certain mem ber States – Large Civil Aircraft , 
para. 7.1748; and EC and certain member States – Large Civil Aircraft (Article 21.5 – US), Tables 20 -22). We 
thus accept the use of delivery data to evidence impedance and/or displacement in this compliance proceeding.  
730 Ascend Data, (Exhibit USA -138).  
731 Ascend Data, (Exhibit USA -138).  
732 Ascend Data, (Exhibit USA -138).  
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  Table 4 – Market for very large LCA (UAE)733 
Delivery Data  2011 2012 2013 2014 2015 2016 2017 2018 
Boeing Volume 
(Units)  0 0 0 0 0 0 0 0 
Boeing Market 
Share  0.0%  0.0%  0.0%  0.0%  0.0%  0.0%  0.0%  0.0%  
Airbus Volume 
(Units)  5 11 13 14 19 23 11 8 
Airbus Market 
Share  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  
 
With respect to impedance in the four geographic markets above, in the light of our earlier 
findings regarding the "product" effects of A380 and A350XW B LA/MSF subsidies, it is apparent that 
in the absence of the effects of the challenged LA/MSF subsidies, the volume of deliveries and market 
shares that would have been achiev ed by the United  States' LCA industry would have been higher  
in each of the four geographic markets  than were their  actual level s in the years 2013 -2018, i.e. the 
years for which the United States has supplied delivery and market -share data. This is so because 
in the counterfactual, from the year 2000 onwards and until present day Boeing would have had a 
monopoly in the VLA product market and the 747 -8I, which is "sufficiently substitutable" with the 
A380734, and would have been the only other VLA available f or delivery . This, in our minds, is a 
sufficient basis for concluding that Boeing would have made the deliveries actually captured by the 
A380.  
The fact that Boeing's deliveries and market shares in each of the four relevant geographic 
markets would have been higher in the 2013 -2018 period  overall , however, does not necessarily 
convince us that there is present  impedance in all of these markets. We note, in particular, that in 
the European Union and Korea, the last A380 deliveries occurred in 2016. This is , in our minds, 
insufficiently recent to demonstrate present  impedance.  Thus, on balance, we consider the pre -2017 
deliveries made to the European Union and Korea to be an insufficient basis upon which to find 
present  impedance.  
The situation is different with respect to Singapore and the UAE, however. Airbus delivered 
A380s to both Singapore and the UAE in both of the two most recently completed calendar years, 
i.e. 2017 and 2018. These deliveries, in our minds, are sufficiently recent to evidence present  
impedance. We underline that, with respect to the UAE, the European Union has indicated that 
deliveries are essentially ongoing, and Airbus plans to make still more A380 deliveries into the UAE 
market in the future. We consider, therefore, that the case for present  impedance in the UAE in the 
VLA market to be particularly strong.735 
In undertaking our assessment of the United States' claims of displacement , we are guided 
by the Appellate Body's statement that "displacement" "is a si tuation where imports or exports of a 
like product are  replace d by the sales of the subsidized product". We agree with this statement and 
understand it to follow from the ordinary meaning of the word "displace", which includes "to remove, 
replace with some thing else, take the place of, supplant".736 Thus, we understand the notion of 
"displacement" for the purpose of Article 6.3(a) and (b) of the SCM Agreement to be premised on 
the existence  of product deliveries  or a market share of some kind which are suppla nted by new or 
increased deliveries, and/or market share,  of a subsidized like product.   
 
733 Ascend Data, (Exhibit USA -138).  
734 Appellate Body Report , EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras. 6.36, 6.38, and 6.41. 
735 We note that the European Union argues that the small number of outstanding deliveries to Emirates 
is insufficient to demonstrate impedance, and that although there is no requirement that impedance be 
"significant", impedan ce must be "discernible". (European Union's opening statement at the meeting of the 
Panel, para. 27; comments on  the United States' response to Panel question No. 70; United States' response to 
Panel question No. 70 (responding to the European Union's argu ment). We establish impedance based on 
actual deliveries rather than potential future deliveries and consider the identified instances of impedance to be 
"discernible".  
736 The New Shorter Oxford English Dictionary, 4th Edn, L.Brown (ed.) (Clarendon Press, 1 993), vol. 1, 
p. 698. 
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Turning to the data , we note that in Singapore, Boeing had a 0% market share in each of 
the years 2014 -2018. In the absence of any market trend indicating that Boeing had any existing 
sales or market share in the VLA segment that was replaced by deliveries of the A380 , we conclude 
that there is an insufficient basis to find present displacement in Singapore . In the European Union, 
Boeing's market share was 42.9%, 50%, 0 %, 0%, and 0% in the years 2014 -2018, respectively. 
Airbus' market shares during the same years were 57.1%, 50%, 100%, 0% and 0%. We consider 
this overall picture to be insufficient to establish a present  trend evidencing a relatively recent  
replacement  of the 747 -8I with the A380.737 We reach the same conclusion with respect to Korea. 
Boeing's market share in Korea during the years 2014 -2018 reveals an upward trend, starting at 
0% in 2014, climbing to 66.7% in 2015, staying roughly level at 60% in 2016, and then climbing 
again to 100% in 2017 before falling to 0% in 2018 – which was also the Airbus' market share 
for 2018.  We consider this overall picture insufficient to establish a present  trend evidencing a 
replacement of the 747 -8I with the A380 .738 
We therefore find that the A380 LA/MSF subsidies are a genuine and substantial cause of 
present imp edance in the VLA product markets in the Singapore and the UAE , but that the evidence 
does not demonstrate present impedance in the European Union or Korea.  Moreover , in the light of 
the absence of any evidence showing that Boeing's market shares and deliveries were recently  
replaced from the VLA markets in the European Union, Korea, and Singapore, we find that the A380 
LA/MSF subsidies are not a genuine and subs tantial cause of present  displacement in those 
geographic markets.  
Twin -aisle product market  
The United States claims impedance of twin -aisle product markets in China, the 
European  Union, Korea, and Singapore. These claims are based on delivery data of Boeing and 
Airbus twin -aisle LCA, found in the tables below.  
Table 5 – Market for twin -aisle LCA (European Union)  
Delivery Data  2011 2012 2013 2014 2015 2016 2017 2018 
Boeing 767  0 0 0 0 0 0 0 0 
Boeing 777  7 6 3 4 5 5 2 0 
Boeing 787  0 2 12 11 18 28 15 30 
Boeing Total  7 8 15 15 23 33 17 30 
Boeing Market Share  46.7%  30.8%  65.2%  75% 76.7%  66% 54.8%  65.2%  
Airbus A330neo  0 0 0 0 0 0 0 3 
AirbusA350 XWB  0 0 0 0 3 7 9 9 
A330neo & A350 XWB 
Market Share  0% 0% 0% 0% 9% 13.2%  29% 26.1%  
Airbus Total  8 18 8 5 7 20 14 16 
Airbus Market Share  53.3%  69.2%  34.8%  25% 23.3%  33% 45.1%  34.8%  
Table 6 – Market for twin -aisle LCA (China)  
Delivery Data  2011 2012 2013 2014 2015 2016 2017 2018 
Boeing 767  0 0 0 0 0 0 0 0 
Boeing 777  4 7 5 13 7 13 7 2 
Boeing 787  0 0 14 6 6 16 18 28 
Boeing Total  4 7 19 19 13 29 25 30 
Boeing Market Share  25% 30.4%  47.5%  44.2%  36.1%  70.7%  43.9%  39.4%  
Airbus A330neo  0 0 0 0 0 0 0 0 
AirbusA350 XWB  0 0 0 0 0 0 0 11 
A330neo & A350 XWB 
Market Share  0% 0% 0% 0% 0% 0% 0% 14.5%  
Airbus Total  12 16 21 24 23 12 32 46 
Airbus Market Share  75% 69.6% 52.5% 55.8% 63.9% 29.3% 56.1% 60.5%  
 
737 We note that our conclusion would not change even if we were to consider the market shares for the 
years 2011 -2013, as in the latter two years Boeing's and Airbus' market shares were roughly equal as well.  
738 We note that our conclus ion would not change even if we were to consider the market shares for the 
years 2011 -2013, as in the latter two years Boeing's market shares were 0%, and thus would not have 
changed the general upward trend that we observe in the above text. We note that our conclusion would also 
not change even if we were to consider the market shares for only the two most recently completed calendar 
years, as we did in the impedance context, i.e. 2017 -2018. Boeing's market shares in these two years in all 
four geographic  markets was 0% with the exception of 2017 on Korea when it was 100%. However, Airbus 
made no deliveries in either 2017 or 2018 in Korea.  WT/DS316/RW2  
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  Table 7 – Market for twin -aisle LCA (Korea)  
Delivery Data  2011 2012 2013 2014 2015 2016 2017 2018 
Boeing 767  0 0 0 0 0 0 0 0 
Boeing 777  3 2 3 0 6 2 0 4 
Boeing 787  0 0 0 0 0 0 0 4 
Boeing Total  3 2 3 0 6 2 5 8 
Boeing Market Share  50.0%  50.0%  50.0%  0.0%  66.7%  100.0%  55.6%  80% 
Airbus A330neo  0 0 0 0 0 0 0 0 
Airbus  A350 XWB  0 0 0 0 0 0 4 2 
A330neo & A350XWB 
Market Share  0% 0% 0% 0% 0% 0% 44.4%  20% 
Airbus Total  3 2 3 4 3 0 4 2 
Airbus Market Share  50.0%  50.0%  50.0%  100.0%  33.3%  0.0%  44.4%  20% 
Table 8 – Market for twin -aisle LCA (Singapore)  
Delivery Data  2011 2012 2013 2014 2015 2016 2017 2018 
Boeing 767  0 0 0 0 0 0 0 0 
Boeing 777  0 0 2 2 4 0 0 0 
Boeing 787  0 0 0 0 10 2 4 10 
Boeing Total  0 0 2 2 14 2 4 10 
Boeing Market Share  0.0%  0.0%  25.0%  33.3%  73.7%  16.7%  28.6%  50.0%  
Airbus A330neo  0 0 0 0 0 0 0 0 
AirbusA350 XWB  0 0 0 0 0 10 10 10 
A330neo & A350 XWB 
Market Share  0% 0% 0% 0% 0% 83.3%  71.4%  50.0%  
Airbus Total  0 0 6 4 5 10 10 10 
Airbus Market Share  0.0%  0.0%  75.0%  66.7%  26.3%  83.3%  71.4%  50.0%  
 
In the light of our earlier findings regarding the "product" effects of A380 and A350XW B 
LA/MSF subsidies, we consider that the record sufficiently demonstrates that in the absence of the 
effects of the challenged LA/MSF subsidies, the volume  of deliveries and market shares that would 
have been achieved by the United  States' LCA industry in the counterfactual post -2013 period in 
each of the geographic markets mentioned above would have been higher than their actual level. 
This is so because, a s explained, the earliest that Airbus could have launched the A350XWB in the  
counterfactual was in 2014, and Airbus could not have made any A350XWB  deliveries at or before 
present day.739 Also, we recall that the 777 and 787 both compete against the A350XWB in the twin -
aisle product market740, that both Boeing LCA were available for order as of the actual launch date 
of the A350XWB (i.e. 2006), both were available for delivery in the post -2013 period, and it was 
these families of LCA against which Airbus' other  twin-aisle LCA programmes, i.e. the A330 and the 
A340, could not effectively compete.741 In the light of these circumstances, we consider  that the 
sales that resulted in the A350XWB deliveries mentioned above would likely have been captured by 
Boeing twin -aisle LCA instead. We further note that Airbus delivered A350XWBs into all the above -
mentioned geographic markets in 2018, i.e. the most recently completed calendar year.  
We therefore find that A380 and A350XWB LA/MSF subsidies are a genuine and substantial  
cause of present impedance in the twin -aisle product market in China742, the European Union, Korea, 
and Singapore.743 
 
739 See paragraph 7.324  above.  
740 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.1307 -6.1309 and 6.1365.  
741 See paragraph 7.323  above.  
742 The United States asks the Panel to find a threat of displacement or impedance in the Chinese twin -
aisle market if the Panel does not find present impedance in the twin -aisle market in China. Because we have 
found such present impedance, we do not address  the United States' threat argument. (United States' 
second  written submission, para. 266 ). 
743 We note that the delivery data above refer to only three A330neo deliveries in the European Union 
market in 2018. We make no findings of impedance or displacement  based on these A330neo deliveries. This is 
so because we found earlier in this Report that it has not been demonstrated that, in the counterfactual, the 
A330neo would not have been launched in 2014 as it was, or that it would not be available for order an d 
delivery today just as it was in the counterfactual. We thus see no material basis on which to conclude that the 
three A330neo deliveries in the European Union market in 2018 would not have occurred as they actually did.  WT/DS31 6/RW2  
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Significant  lost sales  
Regarding the phenomenon of significant lost sales, the Appellate  Body has explained:  
{U}nder Article  6.3(c), "lost sales" are sales that suppliers of the complaining Member 
"failed to obtain " and that instead were won by suppliers of the respondent Member. It 
is a relational concept and its assessment requires consideration of the behaviour of 
both the subsidized firm(s), which must have won the sales, and the competing firm(s), 
which allegedly lost the sales. The assessment can focus on a specific sales campaign 
when such an approach is appropriate given the particular characteristics of the marke t 
or it may look more broadly at aggregate sales in the market. The complainant must 
show that the lost sales are significant to succeed in its claim. … While a two -step 
approach to the assessment of lost sales is permissible, in our view, the most 
appropr iate approach to assess whether lost sales are the effect  of the challenged 
subsidy is through a unitary counterfactual analysis. This would involve a comparison 
of the sales actually made by the competing firm(s) of the complaining Member with a 
counterfa ctual scenario in which the firm(s) of the respondent Member would not have 
received the challenged subsidies. There would be lost sales where the counterfactual 
analysis shows that, in the absence of the challenged subsidy, sales won by the 
subsidized fir m(s) of the respondent Member would have been made instead by the 
competing firm(s) of the complaining Member.744 (emphasis original)  
With respect to the meaning of "significant", the Appellate  Body has noted that this 
term means "important, notable or conse quential", and has both quantitative and 
qualitative dimensions.745 (footnote omitted)  
The United  States argues that, in the light of the "product" effects of the A380 and A350XWB 
LA/MSF subsidies, the US LCA industry continues to suffer significant lost sal es in the VLA and twin -
aisle LCA product markets. We discuss these claims in the following two subsections.  
7.5.6.2.1   VLA product market  
The United States has presented evidence of the following transactions that the United States 
considers to be significant lost sales in the global VLA market within the meaning of Article 6.3(c) of 
the SCM Agreement.746  
Table 9 – Alleged lost sales in the VLA product market  
Customer  Year Number of orders  LCA m odel 
Amedeo  2014 20 A380 
All Nippon Airways  (ANA)  2016 3 A380 
Emirates  2016 2 A380 
2018 36747 A380 
 
We note at the outset that the European Union has asserted that Amedeo cancelled its 2014 
order for 20 A380s748 and that [***].749 If Boeing had won these sales in the counterfactual, most 
 
744 Appellate  Body Report, EC and c ertain member States – Large Civil Aircraft , para. 1220.  
745 Appellate  Body Report, US – Large Civil Aircraft ( 2nd complaint) , para. 1052 (quoting Appellate  Body 
Report, US – Upland Cotton , para.  426; and citing Appellate  Body Report, EC and certain member S tates – 
Large Civil Aircraft , para.  1218).  
746 We recall that both the original panel, first compliance panel, and the Appellate Body in the original 
and first compliance proceedings accepted the use of LCA order, rather than delivery, data to evidence the 
phenomena of lost sales  in this dispute. (See Appellate Body Reports,  EC and certain member States – Large 
Civil Aircraft , para. 1153; EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.41, 
fn 2054; Panel Reports, EC and certai n member States – Large Civil Aircraft , para. 7.1748; EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), Tables 20 -22). We thus accept the use of order data 
to evidence lost sales in this compliance proceeding.  
747 Consisting of 20 firm  orders and 16 options.  
748 European Union's comments on the United States' response s to Panel question No. 37, para. 144, 
and No. 58, Table at para. 268.  
749 European Union's comments on the United States' response to Panel question No. 58, Table at 
para. 268. See also  Airbus, Status of A380 orders and deliveries, (Exhibit EU -94 (BCI)) (indicating that [***]). 
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  likely with 747 -8I LCA750, we consider that, most likely, the counterfactual 747 -8I orders would have 
been cancelled as well. This is so because the evidence on the record indicates to us, and as has  
been explained further above, that during these years the overall demand for VLA, generally, was 
decreasing rather than just demand for the A380, specifically.751 Moreover, the European Union has 
submitted evidence purporting to indicate that [***] business  model has been generally shifting 
away from VLA.752 Additionally, the European Union has indicated that the LCA leasing company 
Amedeo cancelled its order for 20 A380s immediately following Airbus' announcement that it would 
terminate the A380 programme.753 This suggests to us that Amedeo was reacting in turn to Airbus' 
reaction to the weak demand picture for VLA, generally.  
We thus consider that, on this record, we could not find the 2014 Amedeo lost sale, and the 
[***] lost sales, to be "significant" within the meaning of Article 6.3(c). The original panel identified 
certain factors that make lost sales significant, i.e. strategic importance, learning -curve effects, 
incumbency, the number of LCA involved in a sale, and the "dollar amounts involved in those 
sales".754 The compliance panel considered that "this description regarding the significance of losing 
LCA sales to a rival LCA producer … remains, on the whole, an accurate depiction of the significance 
of losing LCA sales to a rival LCA producer".755 We see no  reason to doubt that this description 
remains valid currently. It appears unclear to us whether Boeing would have realized appreciable 
revenues from these cancelled lost sales because the majority of revenues from LCA sales are 
realized upon delivery, and  the United States has put forth no evidence indicating what amounts of 
money Boeing would have received and retained for such cancelled orders. Moreover, because the 
747-8Is sold would never have been produced, we are unconvinced that Boeing would have gl eaned 
significant "learning" effects from their production. Also, no incumbency or commonality advantages 
would have presumably accrued from these sales because the 747 -8Is would never have been 
delivered to the customers. Finally, we discern no particular  reason to conclude that these sales 
were "strategically important" for Boeing.756 We therefore do not consider that the evidence on the 
record supports a finding that such "lost sales" would have been "significant" in the counterfactual. 
Thus, on this recor d, we cannot conclude that "significant" benefits either accrued or would be 
expected to accrue from counterfactual 747 -8I sales at present.757  
With respect to the All Nippon and Emirates sales in 2016, we note certain discrepancies in 
the data on the recor d. The United States has presented certain evidence indicating the occurrence 
of these two sales.758 However, we note that an expert report of the European Union, which generally 
relies on information obtained from the Airbus website, specifically indicates that the All Nippon 
order actually occurred before 2014. The same expert report, in the same portion, indicates that, as 
of December 2017 there had been no new orders for the A380 since February 2014 (i.e. since the 
Amedeo order for 20 A380s).759 In the face  of such conflicting data, we consider that there is no 
reliable basis on this record upon which to conclude that the ANA and Emirates orders are properly 
 
750 We recall that the 747 -8I would have been the on ly other LCA in the VLA product market in the years 
in which the orders were placed and the A380 and 747 -8I are "sufficiently substitutable" . (Appellate Body 
Report, EC and certain member States – Large Civil Aircraft , para. 1120).  
751 See paragraph 7.352  above.  
752 European Union's comments on the United States' response to question No. 73, para. 349, fn 521 
(citing, inter alia , [***]). 
753 European Union's comments on the United States' response to question No. 37, para. 144.  
754 Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.1845.  
755 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  6.1798.  
756 We note that these sales would not ha ve represented launch orders for the 747 -8I, for instance. We 
further lack information indicating that winning these sales would have sent important messages to the 
marketplace about the 747 -8I in some way. We therefore note that although [***] for VLA, [***] would have 
presumably ordered [***], and thus we question the "strategic importance" of winning a further order 
in 2018.  
757 See also Decision by the Arbitrator, EC and certain member States – Large Civil Aircraft (Article 22.6 
– EU), paras. 6.210 -6.213 (explaining that the "significance" of  LCA lost sales depends on the factual record 
before the adjudicator ). 
758 United States' second written submission, paras. 270 -271 (citing Emirates orders two additional 
A380 aircraft , Press Release, Emirates Airlines (13  April 2016) (Exhibit USA -131); and  Airbus press release,  
"ANA Group Selects the A380 ", (29 January 2018), (Exhibit USA -130)).  
759 PwC A380 LA/MSF Report, (Exhibit EU -17 (HSBI/BCI) ), fn 1 to para. 31 (indicating that "{a}lthough 
Airbus officially  announced an A380 order for three aircraft from … All Nippon Airways (ANA) in January 2016, 
these orders were in fact previously considered as 'undisclosed' customers within Airbus' official order book. 
Therefore, 20 firm orders from … Amedeo in February 2014 have to be considered as the latest orders as of 
December 2017").  
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  ascribed to 2016  and thus could represent significant lost sales to the US LCA industry . With respect  
to these two alleged lost sales, therefore, we consider that we lack a reliable evidentiary record upon 
which to conclude that they properly evidence present  lost sales in the VLA product market to the 
US LCA industry.  
We note that the parties have debated and advanced opposing positions with respect to 
whether certain  outstanding A380 deliveries to Emirates, arising from the first compliance panel's 
"significant" "lost sales" findings760, may constitute present significan t "lost sales" for the purpose 
of the current dispute.761  
We recall that the Appellate Body has explained that " the mere existence of outstanding 
deliveries  … relating to {previous}  orders found to have resulted in … significant lost sales … would 
not necessarily, by itself, be dispositive as to the existence of … significant lost sales  in {some later 
period}" .762 As regards what more would need to be shown for a panel to find a continued lost sale 
in the presence of su ch outstanding deliveries, the Appellate Body explained that " it would seem 
that what transpires between LCA orders and their subsequent deliveries would be relevant, 
particularly as it relates to evidence demonstrating the ongoing existence of … lost sale s"763, 
"depending on the nature and scope of the transaction, there may be elements affecting finalization 
of the transaction, or concerning follow -on transactions in the form of options or purchase rights, 
that may be indicative of an ongoing phenomenon of lost sales "764, and " there would need to be 
some indication that subsequent developments following the initial order confirm the ongoing 
existence of such market phenomena ".765 The continued lost sale must also be found to be 
"significant" within the meaning o f Article 6.3(c).766 
In our minds, a key point that emerges from the Appellate Body's guidance in this area is 
that presently outstanding deliveries in the LCA industry stemming from a previous lost sale are, by 
themselves, insufficient to establish that a s ignificant lost sale within the meaning of Article 6.3(c) 
of the SCM Agreement is presently ongoing such that a responding party could have a continued 
compliance obligation to "remove" that particular lost sale within the meaning of Article 7.8 of the 
SCM Agreement. Rather, something more must be shown, relating to the " nature, timing, and scope 
of those underlying transaction "767, further indicating that it would be proper to consider the lost 
sale as presently ongoing. The United States has not, however, d irected us to anything on the record 
indicating that " subsequent developments following the initial {Emirates}  order  confirm the ongoing 
existence " of that lost sale, other than the outstanding deliveries themselves. We thus consider that 
the United States  has not been demonstrated that the 2013 Emirates "lost sale" is "ongoing" such 
that we could find that the European Union has failed to "remove" that particular adverse effect.768 
We therefore find that the A380 LA/MSF subsidies are not a genuine and substa ntial cause 
of present significant lost sales in the VLA product market.  
 
760 Panel Report , EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 7.1(d)(xvi). In particular, the parties focus on a sale of 50 A380s to Emirates in 2013 fo und by the 
compliance panel to constitute "significant" "lost sales".  
761 United States' response to Panel question No. 73; and European Union's comments on the 
United  States' response to Panel question No. 73.  
762 Appellate Body Report, US – Large Civil Aircr aft (2nd complaint)  (Article 21.5 – EU), para. 5.341.  
763 Appellate Body Report, US – Large Civil Aircraft (2nd complaint)  (Article 21.5 – EU), para. 5.340.  
764 Appellate Body Report, US – Large Civil Aircraft (2nd complaint)  (Article 21.5 – EU), para. 5.333.  
765 Appellate Body Report, US – Large Civil Aircraft (2nd complaint)  (Article 21.5 – EU), para. 5.341.  
766 Appellate Body Report, US – Large Civil Aircraft (2nd complaint)  (Article 21.5 – EU), para. 5.340.  
767 Appellate Body Report, US – Large Civil Aircr aft (2nd complaint)  (Article 21.5 – EU), para. 5.333.  
768 We note that the Appellate Body, in the first compliance proceeding, found five lost sales in the VLA 
and twin -aisle markets. We consider that our conclusion above with respect to the 2013 Emirates lo st sale 
would hold with respect to any of the remaining four, as we have been directed to nothing  in the record 
indicating that "subsequent developments following the initial order confirm the ongoing existence of such 
market phenomena".  
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Twin -aisle product market  
The United States has presented evidence of the following orders that the United States 
considers to be significant lost sales, within the meaning of Article  6.3(c) of the SCM Agreement, in 
the global twin -aisle LCA market:  
Table 10 – Alleged lost sales in the twin -aisle product market769 
Customer  Year Number of orders  Model  
Sichuan Airlines  2016 4770 A350XWB -900 
Sichuan Airlines  2018 10 A350XWB -900 
China Eastern Airlines  2016 20 A350XWB -900 
China Southern Airlines  2017 20 A350XWB -900 
Philippine Airlines  2016 6 A350XWB -900 
Virgin Atlantic Airways  2016 12771 A350XWB-1000 
Turkish Airlines  2018 25 A350XWB-900 
StarLux Airlines  2018 12 
5 A350XWB-1000 
A350XWB-900 
Emirates Airlines772 2018 30 A350XWB-900 
 
In considering whether  the order data in Table 10 above demonstrates that the US LCA 
industry is presently experiencing significant lost sales in the global twin -aisle LCA market , we make 
the following observations . First, all the orders in Table 10 above occurred in 2016 or afterwards, 
and thus they are relatively recent. Second , the A350XWB competes directly against the Boeing 777 
and 787, both of which w ere available for order and delivery during this time.773 Third, the record 
indicates that it would have been difficult for the A330  to capture such sales because its inability to 
impose strong competitive pressure on the 777 and 787 was one of the reasons w hy Airbus decided 
to launch the A350XWB in 2006 . Fourth, it would also have been difficult for the A330neo to capture 
these sales, considering that the A330neo is, by design, a qualitatively different LCA than the 
A350XWB  and is essentially an incrementall y improved version of the A330 .774 Fifth, we recall that, 
in the counterfactual post -2013 period, Airbus would have experienced production difficulties  with 
respect to the  A350XWB  (i.e. cost overruns and production delays)  which would have made the 
aircraft more difficult to sell. Sixth, w e consider it likely that the delivery slots that Airbus could have 
offered with respect to the A350XWB in the post -2013 period would have been less attractive than 
those that Boeing would have offered with respect to either  the 777 or 787. This is so because these 
latter two Boeing LCA had been launched and become available for delivery years before 2016. 
Finally, Airbus would have been competing against a Boeing company with incumbency advantages 
in the counterfactual post -2013 period.  
We note , furthermore,  that although it is clear to us that, in the counterfactual, Airbus could 
not plausibly have won all the sales that it actually did with the A350XWB in the period from 2013 
to present day, it is less than clear exactly w hich counterfactual A350XWB sales Boeing would have 
 
769 The European Uni on does not argue that any such orders have been cancelled or changed in any 
material way.  
770 These four A3 50XWBs were for lease.  
771 Eight of these were firm orders, while four were for lease.  
772 The European Union asserts that this order is not, in fact, an order but rather a statement by 
Emirates that it is considering placing an order. (European Union's comments on the United States' response to 
Panel question No. 73, para. 348). We also note that the United States claims a lost sale to Emirates involving 
40 A330neo LCA. In the light of our conclusion that the A380 and A350XWB LA/MSF subsidies are not a 
genuine and substantial cause of the current market presence of the A330neo , we find that the 40 A330neo 
sales to Emirates do not constitute significant lost  sales within the meaning of Article 6.3(c) of the 
SCM Agreement . 
773 See paragraph 7.323  above (indicating that Airbus launched the A350XWB because the  A340 and 
A330 could not effectively compete with the 777 and 787) ; and Panel Report, EC and certain member States – 
Large Civil Aircraft (Article 21.5 – US), para. 6.1544.  
774 Airbus A330neo Presentation, slide 20 (Exhibit USA -51) (indicating that the A330n eo operates in 
"combination with A350XWB").  We note that while there appears to be similarities between certain 
characteristics of the A330neo and A350XWB family of LCA, the two still display differences with respect 
to seating, maximum take -off weight , and range. ( Compare Airbus A330neo Presentation, slide 20 
(Exhibit  USA-51) (containing technical characteristics of the A330neo) and Panel Report,  EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), Table 17 (containing technical characteristics of the 
A350XWB -800, -900, and -1000)). Moreover, we discern no evidence on the record indicating that the 
A330neo uses composite materials to materially the degree to which the A350XWB does so.  
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  won. This is so because  Airbus' new LCA programme would very likely have won appreciable sales  
in the present period . Moreover, we lack evidence relating to the specific circumstances of the sales 
campaig ns reflected in Table 10, which gives us limited insight into the customers' decision -making 
or Boeing's and Airbus' respective positions in those campaigns.  
Notwithstanding these doubts, we take specific note of the  Virgin Atlantic sales campaign. 
In 2016, Virgin Atlantic Airways ordered 12 A350XWB -1000s.775 Three things about this order are 
particularly instructive for our assessment. First, all twelve A350XWB -1000s were ordered together 
in 2016 and according to the A scend database  are scheduled to be delivered in separate years 
before  2022.776 This is significant in our view because we earlier concluded that Airbus could not 
have offered in 2014 the A350XWB for delivery in the counterfactual post -2013 period until 2022 , 
at the earliest. This, of course, implies that any counterfactual A350XWBs ordered in subsequent 
years would likely have been  offered on the basis of delivery positions  after 2022, at the earliest.777 
Thus, all twelve delivery positions to which Virgin Atla ntic agreed would have been unavailable in 
the counterfactual. We have difficulty believing that such a consideration would not have weighed 
on the decision of Virgin Atlantic in this sales campaign.778 This is particularly so as five scheduled 
deliveries we re set to occur in 2019, and thus would have had to be postponed by multiple years in 
the counterfactual if Virgin Atlantic had ordered the A350XWB . Second, Virgin Atlantic ordered 
A350XWB -1000s, which primarily competes against the Boeing 777.779 We note th at the A330neo – 
Airbus' newest and most advanced A330 variant – is not intended to compete against the 777780, 
and thus Airbus would likely have had to compete in this sales campaign against modern Boeing 777 
LCA with older models of its A330 family. Finall y, Virgin Atlantic had previously ordered 787s from 
Boeing (15 787s ordered in 2007, one in 2009, and one in 2014781). Thus, because Virgin Atlantic 
already would have had twin -aisle Boeing LCA in its fleet, Virgin Atlantic could have realized fleet 
commonal ity advantages from purchases of additional Boeing LCA. These considerations, taken 
together, convince us that Airbus would not have won this Virgin Atlantic sale.  
We therefore find that the aggregated "indirect" effects of  A380 LA/MSF  subsidies and 
"direc t" effects of A350XWB LA/MSF subsidies are  a "genuine and substantial" cause of  present lost 
sales to the US LCA industry in the global twin -aisle product market.782  
Conclusion s 
Based on the foregoing  analysis and findings , we conclude  that the European Union has not 
"take {n} appropriate steps to remove the adverse effects" within the meaning of Article 7.8 of the 
SCM Agreement.  More specifically, we conclude that the A380 and A350XWB LA/MSF subsidies are 
a genuine and substantial cause  of present impedance in the VLA product market  and present 
impedance and lost sales in the twin -aisle LCA  product market . 
8  CONCLUSIONS AND RECO MMENDATIONS  
In the light of the reasoning and findings set out in this Report, the Panel reaches the following 
conclusions:  
 
775 Airbus pres s release,  "Virgin Atlantic Selects the A350 XWB as its Future Flagship ", (11 July 201 6), 
(Exhibit USA -143); and Airways, "First Virgin Atlantic A350 -1000 Spotted in Toulouse (+photo )", 
(25 October 2018) , (Exhibit USA -144).  
776 Updated Ascend Data, (Exhibit USA-158).  
777 We note that the rate of deliveries of the subsidized A350XWB have gradually increased over time, 
following delivery of the first subsidized A350XWB eight years after originally ordered. Based on the available  
data, it appears that Airbus achieved  a thus-far peak number of deliveries per calendar year in 2018, 12 years 
after actual launch. Actual deliveries were as follows: 2014 - one delivery; 2015  - 14 deliveries; 2016 – 
49 deliveries; 2017 – 77 deliveries; 2 018 – 93 deliveries . (Updated Ascend data, (Exhibit USA -158)).  
778 We earlier noted the importance of delivery positions to LCA customers. (See fn 726 above).  
779 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1307 -
6.1309, and 6.1365. See also Decision by the Arbitrator,  EC and certain member St ates – Large Civil Aircraft 
(Article 2 2.6 – EU), Table 5 (indicating that the closest competing Boeing model vis-à-vis the A350XWB -1000 
is the 777 -300ER).  
780 Airbus A330neo Presentation, (Exhibit USA -51). 
781 Ascend Data, (Exhibit USA -138).  
782 Insofar as Boei ng would have won any additional sales, we further find that such sales are 
"significant", for the same reasons that the original and first compliance panel found identified lost sales to be 
significant. (Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.1798 (explaining factors underlying the "significance" of lost sales in the LCA industry)).  WT/DS316/RW2  
BCI deleted, as indicated [***]  
- 137 - 
 
  a. In relation to the European Union's request for a preliminary ruling and arguments 
concerning the scope of this compliance proceeding , we find that : 
i. the R&TD measures that the United States challenges are not identified , as a matter 
of fact, in the European Union's panel request; and  
ii. even assuming, arguendo , that the absence of any reference to the challenged R&TD 
measures in the European Union's panel request does not prevent the United States 
from raising claims against those measures in this p roceeding, the United States is 
nevertheless precluded from raising its claims because: (1) a s regards the United 
States' claims against the R&TD measures that were the subject of findings in the 
original proceeding, as well as the Seventh Framework Progra mme, the United States 
is precluded from raising those claims because it could have brought them in the first 
compliance proceeding but failed to do so ; and (2) a s regards the United States' claims 
against the Eighth Framework Programme, the United States has failed to establish 
that the Eighth Framework Programme has "sufficiently close links" with the relevant 
measures taken to comply and the DSB's recommendations and rulings  such that it 
would be appropriate to characterize the Eighth Framework Programme  as a "measure 
taken to comply".  
b. In relation to whether the European Union and certain member States have complied with 
the obligation to "withdraw the subsidy" , we find that the European Union has failed to 
demonstrate  that: 
i. the [***] amendment to the German A350XWB LA/MSF loan agreement ha s 
withdrawn the German A350XWB LA/MSF subsidy ; 
ii. the full repayment of outstanding principal and interest accrued under the UK 
A350XWB LA/MSF agreement has withdrawn  the UK A350XWB LA/MSF subsidy ; 
iii. the [***] amendments to the French, German, Spanish and UK A380 LA/MSF loan 
agreements have withdrawn the French, German, Spanish and UK A380 LA/MSF 
subsidies;  
iv. the alleged amortization of the ex ante  benefit  of the Spanish A380 LA/MSF loan has 
withdrawn the su bsidy;  
v. Airbus' announcement on 14 February 2019 to wind -down the A380 programme 
provides "further confirmation" and "an independent basis" , on its own,  to find that 
the French, German, Spanish and UK A380 LA/MSF subsidies have been withdrawn; 
and 
vi. Airbus' [***] agreement  with [***] to repay the principal and interest accrued under 
the [***] A380 LA/MSF agreement achieves withdrawal of the [***] A380 LA/MSF 
subsidy.  
c. In relation to whether the European Union and certain member States have complied with 
the obl igation to "take appropriate steps to remove the adverse effects" , we find that : 
i. With respect to  the "product" effects of the A380 and A350XWB LA/MSF subsidies : 
(1)  the A380 LA/MSF subsidies continue to be a "genuine and substantial" 
cause of the current market presence of the A380 family of Airbus LCA;  
(2)  the A380 and A350XWB  LA/MSF subsidies continue to be a "genuine and 
substantial" cause of Airbus' ability to deliver  the A350XWB  family  of Airbus 
LCA, and Airbus' ability to offer the A350XWB f amily of LCA on the same 
terms as it actually did  (particularly with respect to delivery positions);  
(3)  the A380 and A350XWB  LA/MSF subsidies are not  a "genuine and 
substantial" cause of  the current market presence of the A330neo;  WT/DS31 6/RW2  
BCI deleted, as indicated [***]  
- 138 - 
 
  ii. Airbus' 14 February 201 9 wind -down announcement does not, on its own, achieve the 
removal of the present  adverse effects of the A380 LA/MSF subsidies as they relate to 
the market presence of the A380.  In our view, those effects will persist  while Airbus 
continues to produce and deliver the A380.  It follows, correspondingly , that the wind -
down announcement cannot also achieve the removal of any present  adverse effects 
of the A380 and A350XWB LA/MSF subsidies as they relate to the market presence of 
the A350XWB;  
iii. With respect to t he impact of the "product" effects of the A380 and A350XWB LA/MSF  
subsidies in the relevant product markets:  
(1)  in the VLA product market, the "product" effects of the LA/MSF subsidies 
identified in subparagraph (c)(i)(1), above,  are a "genuine and substantial" 
cause of the impedance of the exports of a like product of the United States 
from Singapore and the United Arab Emirates within  the meaning of 
Article  6.3(b) of the SCM  Agreement, constituting serious prejudice to the 
interests of the United  States within the meaning of Article  5(c) of the 
SCM Agreement;  
(2) in the twin -aisle product market, the "product " effects of the LA/MSF 
subsidies identified in subparagraph (c)(i)(2), above, are a "genuine and 
substantial" cause of impedance of the imports of a like product of the 
United States into the European Union within the meaning of Article 6.3(a) 
of the SCM Agreement, and are a "genuine and substantial" cause of the 
impedance of the exports of a like product of the United States from China, 
Korea, and Singapore within the meaning of Article 6.3(b) of the 
SCM Agreement , constituting serious prejudice to the in terests of the 
United  States within the meaning of Article  5(c) of the SCM  Agreement ; 
and  
(3) in the twin -aisle product market, the "product" effects of the LA/MSF 
subsidies identified in subparagraph (c)(i)(2), above, are a "genuine and 
substantial" caus e of significant lost sales to the US LCA industry in the 
global market for twin -aisle LCA within the meaning of Article 6.3(c) of the 
SCM Agreement , constituting serious prejudice to the interests of the 
United  States within the meaning of Article  5(c) of  the SCM  Agreement . 
By continuing to be in violation of Articles 5(c) and 6.3(a), (b) and (c) of the SCM Agreement, 
the European Union and certain member States have failed to comply with the 
DSB recommendations and rulings and, in particular, the obligati on under Article 7.8 of the 
SCM Agreement "to take appropriate steps to remove the adverse effects or … withdraw the 
subsidy".  
Under Article 3.8 of the DSU, in cases where there is an infringement of the obligations 
assumed under a covered agreement, the action is considered prima facie  to constitute a case of 
nullification or impairment. We conclude that, to the extent that the measures at issue are 
inconsistent with the SCM Agreement, they have nullified or impaired benefits accruing to the 
United  States  under that Agreement.  
We therefore conclude that the European Union and certain member States have failed to 
implement the recommendations and rulings of the DSB to bring its measures into conformity with 
its obligations under the SCM Agreement. To the ex tent that the European Union and certain member 
States have failed to comply with the recommendations and rulings of the DSB in the original dispute  
and the first compliance proceeding , those recommendations and rulings remain operative.  
__________