WT/DS316/34  
 
18 May 2018  
(18-3050) Page: 1/7 
  Original: English  
 
EUROPEAN COMMUNITIES  AND C ERTAIN MEMBER STATES  – MEASURES  
AFFECTING TRADE IN L ARGE CIVIL AIRCRAFT  
COMMUNICATION FROM THE EUROPEAN UNION  
The following communication, dated 17 May 2018 , was received from the delegation of the 
European Union  with the request  that it be circulated to the Dispute Settlement Body (DSB).  
 
_______________  
 
 
1. The European Union1 refers to the recommendations and rulings of the WTO Dispute 
Settlement Body ( "DSB") with respect to the dispute European Communities and Certain member 
States – Measures Affecting Trade in Large Civil Aircraft  (WT/DS316), as well as the compliance 
panel report (WT/DS316/RW), as modified by the recent Appellate Body report 
(WT/DS316/AB/RW),2 in that same dispute . 
2. The European Union would like to inform the  DSB that it has taken appropriate steps to 
bring its measures fully into conformity with its WTO obligations, and to comply with the DSB 's 
recommendations and rulings. By taking appropriate steps to bring the measures at issue into 
conformity with the Eur opean Union 's WTO obligations, as required by Article 7.8 of the Agreement 
on Subsidies and Countervailing Measures  ("SCM Agreement ") and Article 19.1 of the 
Understanding on Rules and Procedures Governing the Settlement of Disputes  ("DSU"), the 
European U nion has ensured full implementation of the DSB 's recommendations and rulings, and 
has consequently eliminated any nullification or impairment attributable to non -compliance with 
those recommendations and rulings.  
3. In this communication to the DSB, the Euro pean Union uses the term "adverse effects " in 
the same sense as that term is used in Articles 5, 7.8, 7.9 and 7.10 of the SCM Agreement . 
Consistent with those provisions, achieving compliance by withdrawing the subsidy or taking 
appropriate steps to remove  the adverse effects also achieves the elimination of nullification or 
impairment within the meaning of Article 5(b) of the SCM Agreement  and Articles 22.4, 22.7 and 
22.8 of the DSU . 
4. The relationship, in this dispute, between achieving compliance by withdr awing the subsidy 
or taking appropriate steps to remove the adverse effects, on the one hand, and the elimination of 
nullification and impairment, on the other, is also underscored by:  
(1) the specific and unique character of proceedings under Part III of the SCM Agreement ; 
(2) the specific terms of the Recourse to Article 7.9 of the SCM Agreement  and Article 22.2 
of the DSU by the United States,3 and the Recourse to Article 22.6 of the DSU by the 
European Union;4 and, 
                                                
1 Where the context so requires, as a matter of WTO law, references in this document to the European 
Union include the "certain member States " (France, Germany, Spain and the United Kingdom) against which 
the United States commenced this dispute.  
2 Referenc es in this communication to the  compliance  panel report , as modified by the Appellate Body 
Report , also encompass the compliance Appellate Body Report itself.  
3 WT/DS316/18 ( "[T]he United States requests authorization from the Dispute Settlement Body ( 'DSB') 
to take countermeasures with respect to the European Union ( 'EU') at an annual level commensurate with the 
degree and nature of the adverse effects caused to the interests of the United States  by the failure of the EU WT/DS316/34  
 
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  (3) the Agreed Procedures under Articl e 21 and 22 of t he DSU and Article 7 of the 
SCM Agreement that the European Union and the United States adopted for the purposes 
of this dispute on 12 January 2012.5 
5. Given that this communication concerns, in part, the withdrawal of subsidies and/or the 
removal of adverse effects, it is relevant for "the original panel " within the meaning of Article 21.5 
of the DSU, in the event that it is called upon, for a second tim e, to adjudicate a "disagreement ", 
within the meaning of Article 21.5.  
6. At the same time, given that this document also concerns the elimination of nullification 
and impairment, it is equally relevant for "the original panel " within the meaning of Article 2 2.6 of 
the DSU, in the event of arb itration panel proceedings.  
I. Background  
7. The European Union recalls that the recommendations and rulings of the DSB, adopted in 
June 2011, cover a number of subsidies in the form of member State financing ( "MSF") from 
France, Germany, Spain and the United Kingdom ( "UK") for the development of various families of 
Airbus large civil aircraft ( "LCA"). In particular, the DSB 's recommendations and rulings called 
upon the European Union to secure compliance with its WTO oblig ations in respect of MSF for the 
A300, A310, A320, A330/340, A330 -200, A340 -500/600 and A380. The recommendations and 
rulings also covered certain infrastructure measures, equity infusions and a number of regional 
development grants.  
8. On 1 December 2011, th e European Union informed the DSB of the steps taken to 
implement the DSB 's recommendations and rulings.6 A disagreement arose between the United 
States and the European Union regarding the sufficiency of the compliance steps communicated by 
the European U nion to the DSB. Following consultations, and at 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.  
9. The compliance panel circulated its report on 2 2 September 2016. The report of the 
compliance panel was appealed by both parties, and the Appellate Body circulated its report on 
15 May 2018.  
10. In the compliance proceedings, the panel report, as modified by the Appellate Body report, 
confirms that the Eur opean Union has achieved substantial compliance with much of the DSB 's 
recommendations and rulings.7 However, the panel report, as modified by the Appellate Body 
report, also found that the European Union had not yet fully complied with all of the DSB 's 
recommendations and rulings in respect of adverse effects arising from A380 MSF, and added 
recommendations and rulings in respect of A350XWB MSF (with respect to which the European 
Union has yet to receive a reasonable period of time in which to comply, w ithin the meaning of 
Article 21.3 of the DSU).  
11. In considering appropriate steps to bring these remaining and additional measures into 
conformity with its WTO obligations, the European Union took note of all elements of the DSB 's 
recommendations and rulings , and the Appellate Body 's guidance on the content and nature of the 
applicable compliance obligation under Article 7.8 of the SCM Agreement . In particular, the 
European Union notes the Appellate Body 's confirmation that a Member found to have acted 
incons istently with Articles 5 and 6.3 of the SCM Agreement  can achieve compliance under 
Article  7.8 by either (i) withdrawing the subsidy, or (ii) taking appropriate steps to remove the 
                                                                                                                                                  
and certain member States to withdraw subsidies or remove their adverse effects  in compliance with the 
recommendations and rulings of the DSB. This amount corresponds to the annual value of lost sales, of imports 
of US large civil aircraft displaced from the EU market, and of exports of US large civil aircraft displaced from 
third country markets. The  amount will be updated annually  using the most  recent publicly available data ".) 
(emphasis added).  
4 WT/DS316/20.  
5 WT/DS316/21.  
6 WT/DS316/17.  
7 Appellate Body Report, EC – Large Civil A ircraft (Article 21.5 – US), paras. 5.1 -5.25, 5.351 -5.383, 
5.384 -5.404, 5.710, 5.716, 5.719 -5.722, 5.731, 5.732 -5.737, 5.742, 6.2, 6.11, 6.12 -6.13, 6.19, 6.26 -6.29, 
6.32-6.35, 6.39 -6.40. WT/DS316/34  
 
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  adverse effects of the subsidy. The European Union also notes the Appellate  Body's findings on the 
meaning of the term "withdraw " in Article 7.8. In relation to the removal of adverse effects, the 
European Union has also given close consideration to the Appellate Body 's guidance on the 
delineation of product markets, the requirem ents of a proper causation assessment, and the 
preconditions for a finding of displacement or of impedance. The European Union has also closely 
monitored and assessed LCA product and market developments in the months and years following 
the period covered by the panel 's review.  
12. Taking all of these factors into account, the European Union has taken appropriate steps to 
address the remaining and additional elements of the DSB 's recommendations and rulings, either 
through the withdrawal of subsidies or the rem oval of the adverse effects.8 
13. In Section II, the European Union lists the measures taken to comply with the DSB 's 
recommendations and rulings. In Section III, the European Union explains that these measures 
achieve the withdrawal of the subsidies at issue, cons titute appropriate steps to remove their 
adverse effects, or both, and achieve the elimination of nullification and impairment . 
14. By taking appropriate steps to bring the measures at issue into conformity with the 
European Union 's WTO obligations, as require d by Article 7.8 of the SCM Agreement  and 
Article  19.1 of the DSU, the European Union has ensured full implementation of the DSB 's 
recommendations and rulings, and has consequently eliminated any nullification or impairment 
attributable to non -compliance w ith those recommendations and rulings . 
II. List of Measures Taken to Comply  
15. The European Union sets out below a list of measures taken to comply with the 
recommendations and rulings of the DSB in the present dispute.  
A. Measures that Achieve Withdrawal of the Subsidies under Articles 7.8, 1 and 2 of 
the SCM Agreement , and Contribute to Removal of their Adverse Effects, under 
Articles 7.8, 5 and 6.3 of the SCM Agreement9 
i. A 2018 amendment to the French A380 MSF Agreement;  
ii. A 2018 amendment to the German A380 MSF Agreement;  
iii. A 2018 amendment to the Spanish A380 MSF Agreement;  
iv. A 2018 amendment to the UK A380 MSF Agreement;  
v. A 2018 amendment to the German A350XWB MSF Agreement;  
vi. Full repayment of the UK A350XWB MSF in 2018;  
vii. Withdrawal through amortisation or otherwise of the "benefit " conferred by the French, 
German, Spanish and UK A380 MSF Agreements; and,  
viii. Withdrawal through amortisation or otherwise of the "benefit " conferred by the French, 
German, Spanish and UK A350XWB MS F Agreements.  
B. Measures that Constitute Appropriate Steps to Remove Adverse Effects, under 
Articles 7.8, 5 and 6.3 of the SCM Agreement  
ix. Withdrawal, through amortisation or otherwise, of the "benefit " conferred by the French, 
German, Spanish and UK A380 MSF Agreements;  
x. Non-subsidised investments in A380 family aircraft;  
                                                
8 The European Union has done so "immediately " to the extent "practic able". However, with respect to 
the additional elements of the DSB's recommendations and rulings, this is without prejudice to the European 
Union's right to a reasonable period of time, within the meaning of Article 21.3 of the DSU.  
9 As noted at paragraph  16, below, through the withdrawal of subsidies, these measures also contribute 
to the removal of adverse effects.  WT/DS316/34  
 
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  xi. Reduced draw down of the loan amounts under the French A380 MSF Agreement;  
xii. 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 Very Large Aircraft ( "VLA") market;  
xiii. Attenuation, through the passage of time and events that occurred during  that time, of the 
causal link between A380 MSF and the launch of the A380 and the A350XWB, as and when 
they were launched;  
xiv. Withdrawal, through amortisation or otherwise, of the "benefit " conferred by the French, 
German, Spanish and UK A350XWB MSF Agreemen ts; 
xv. Non-subsidised investments in A350XWB family aircraft;  
xvi. Reduced draw down of the loan amounts under the French and UK A350XWB 
MSF Agreements;  
xvii.  Attenuation, through the passage of time and events that occurred during that time, of the 
causal link between A350XWB MSF and the launch of the A350XWB as and when it was 
launched; and,  
xviii.  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.  
III. The Measures Taken to Comply Achieve Full Compliance within the Framework of 
Article 7.8 of the SCM Agreement  
16. As noted above, in its report in the compliance proceedings, the Appellate Body clarified 
that a Member found to have provided subsidies that have resulted in adverse effects, under 
Articles 5 and 6.3 of the SCM Agreement , can come into compliance by either withdrawing the 
subsidy, or by taking appropriate steps to remove the adverse effects of those subsidies.10 In part 
A, below, the European Union explains that measures i-viii listed above achieve the withdrawal of 
the subsidy from A380 MSF and A350XWB MSF. Through the withdrawal of the subsidy, these 
measures also contribute to the removal of adv erse effects, and to the elimination of nullification 
and impairment. For any subsidies that have not been withdrawn, the European Union explains in 
part B, below, that measures ix-xviii listed above constitute appropriate steps to remove their 
adverse effects, which would also contribute to the elimination of nullification and impairment.  
A. Withdrawal of the Subsidies  
17. The Appellate Body clarified that a Member found to have provided subsidies that have 
resulted in adverse effects, under Articles 5 and 6.3 of the SCM Agreement , can achieve full 
compliance by withdrawing the subsidy.11 The European Union notes that measure s achieving the 
full or partial withdrawal of subsidies at issue would also contribute to the removal of adverse 
effects, and to the elimination o f nullification and impairment.  
18. The European Union has procured full withdrawal of the subsidy from French, Ge rman, 
Spanish and UK A380 MSF, and of the subsidy from German and UK A350XWB MSF, and at least 
partial withdrawal of the subsidies from French and Spanish A350XWB MSF.  
19. A380 MSF:  France, Germany, Spain and the UK have agreed amendments with Airbus to 
each of the A380 MSF Agreements (Measures i-iv, listed above). In each case, the parties have 
agreed amendments to achieve prospective consistency with a contemporaneous market 
benchmark. Therefore, the European Union has procured withdra wal of the subsidies conferred by 
each of the A380 MSF loans.  
                                                
10 Appellate Body Report, EC – Large Civil Aircraft (Article 21.5 – US), para. 5.383.  
11 Appellate Body Report, EC – Large Civil Aircraft (Article 21.5 – US), para. 5.383.  WT/DS316/34  
 
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  20. In any event, the benefit from the French, German, Spanish and UK A380 MSF subsidies 
has been withdrawn through amortisation or otherwise, achieving the withdrawal of these 
subsidies (Measure vii, listed above).  
21. GERMAN A350XWB  MSF:   Germany, through Kreditanstalt für Wiederaufbau ( "KfW"), and 
Airbus have concluded an amendment to the German A350XWB MSF agreement (Measure v, 
above). The amendment achieves consistency with a contempo raneous market benchmark, such 
that the subsidy conferred by German A350XWB MSF is withdrawn. Additionally, the European 
Union also notes that the benefit conferred by the German A350XWB MSF loan has now 
substantially amortised (Measure viii, listed above).  
22. UK A350XWB  MSF:   Airbus has repaid in full amounts outstanding under the UK A350XWB 
MSF Agreement (Measure vi, above), such that the subsidy conferred by UK A350XWB MSF is 
withdrawn. Additionally, the European Union also notes that the benefit conferred by the UK 
A350XWB MSF loan has now subs tantially amortised (Measure viii, listed above).  
23. FRENCH AND SPANISH A350XWB  MSF:  The benefit from the French and Spanish A350XWB 
MSF has now substantially been withdrawn through amortisation or otherwise (Measure viii, listed 
above). 
B. Appropriate steps to remove the adverse effects  
24. The Appellate Body also clarified that a Member found to have conferred subsidies that 
have resulted in adverse effects, under Articles 5 and 6.3 of the SCM Agreement , can come into 
compliance by taking appropriate steps to remove the adverse effects.12 
25. In the present dispute, the United States advanced its adverse effects claim based on an 
allegation that the provision of the subsidies at issue caused the launch of several families of 
Airbus aircraft. The June 2011 recommendations and rulings adopted by the DSB reflected these  
arguments, and were based on the finding that the subsidies at issue were a genuine and 
substantial cause of the sale and delivery of certain Airbus aircraft, and consequently certain 
adverse effects to the United States found to h ave resulted from those sales and deliveries.  
26. In the compliance proceedings in the present dispute, the panel report, as modified by the 
Appellate Body, found that the MSF subsidies were a genuine and substantial cause of certain sales 
and deliveries of A3 80 and A350XWB aircraft that were held to trigger adverse effects. For the 
A380, these adverse effects were attributed to the "direct effects " of A380 MSF alone. For the 
A350XWB, these adverse effects were attributed to the "direct effects " of A350XWB MSF,  and the 
"indirect effects " of A380 MSF.  
27. As the European Union has already discussed above, the European Union has now 
withdrawn the A380 MSF subsidies, the German and UK A350XWB MSF subsidies,13 and has, 
therefore, achieved full compliance in respect of th ese subsidies (Measures i-vii, above). Therefore, 
the question whether these withdrawn subsidies are presently a cause of adverse effects is 
irrelevant as a matter of law . 
28. Nonetheless, the European Union has also taken appropriate steps to remove any adverse 
effects attributable to any or all of the subsidies in respect of which the European Union incurred 
compliance obligations in light of the compliance panel report, as modified by the Appellate Body 
report ( i.e., A380 MSF and A350XWB MSF). Currently, neither A380 MSF nor A350XWB MSF is a 
genuine and substantial cause of any adverse effects.  Below, the European Union explains this 
conclusion with reference to the A380 and the A350XWB.  
29. A380:  As discussed above, the A380 MSF subsidies have now been withdrawn through 
amendments that prospective ly align the A380 MSF loans with the relevant contemporary market 
benchmark (Measures i-iv). Without prejudice to that observation, the European Union considers 
that, in any event, any benefit from A380 MSF has been withdrawn through amortisation or 
                                                
12 Appellate Body Report, EC – Large Civil Aircraft (Article 21.5 – US), para. 5.383.  
13 As discussed above, the Europ ean Union has also achieved at least partial withdrawal of the French 
and Spanish A350XWB MSF subsidies.  WT/DS316/34  
 
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  otherwise (Measure vii, above). These demonstrate that the subsidies can no longer be considered 
a genuine and substantial cause of sales or deliveries of A380 aircraft, or any associated adve rse 
effects.  
30. The European Union also notes that Airbus did not draw down the full amount of the 
French A380 MSF loan (Measure xi, above). This shows, once again, that the subsidy can no longer 
be considered a genuine and substantial cause of sales or deliveries of A380 aircraft, or any 
associated adverse effects.  
31. Airbus has also undertaken significant non -subsidised investments in the A380, and i n 
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.  
32. The Transaero 2012 order for A380 aircraft, which formed the basis of lost sales findings 
confirmed by the Appellate Body, has been cancelled; many of the de liveries corresponding to the 
2013 order by Emirates have already been made (Measure xii, listed above). These measures 
again constitute appropriate  steps for the removal of adverse effects in the form of lost sales.  
33. The passage of time has also attenuated the causal link between the A380 MSF subsidies 
and the launch of the A380 as and when it was launched, such that A380 MSF is no longer a cause 
of sales or deliveries of A380 aircraft or any associated adverse effects (Measure xiii, listed above).  
34. A350XWB:  As the European Union discussed above , A380 MSF, which the compliance 
panel report, as modified by the Appellate Body, considered to be a cause of the launch of the 
A350XWB as and when it was launched, and of resulting sales or deliveries of the A350XWB 
aircraft and associated adverse effects , has now been withdrawn, either through the prospective 
alignment of the A350XWB MSF loans with the relevant contemporary market benchmark, or 
otherwise (including by amortisation) (Measures i-iv and vii, above) . 
35. As the European Union discussed above, German and UK MSF subsidies for the A350XWB 
have now also been withdrawn (Measures v and vi, listed above).  As such, they can no longer be 
considered a cause of the launch of the A350XWB as and when it was launched, and of resulting 
sales or deliveries of A350XWB aircraft or any associated adverse effects.  
36. As discussed above, the European Union has also achieved at least partial withdrawal of 
the French and Spanish A350XWB MSF subsidies (Measure viii, listed above).  
37. While appropriate steps for the removal of the adverse effects are not necessary in respect 
of subsidies which have been withdrawn, the Eur opean Union has, in any event, taken such steps 
in relation to all of the A350XWB MSF subsidies.  
38. The European Union notes that Airbus did not draw down the full amount under the French 
and UK A350XWB MSF Agreements (Measure xvi, above). This demonstrates that there is very 
little, if any, benefit remaining from the A350XWB MSF subsidies, such that the A350XWB 
MSF subsidies can no longer be considered a cause of the launch of the A350XWB as and when it 
was launched, and of resulting sales or deliveries of A350XWB aircraft or any associated adverse 
effects.  
39. Additionally, any benefit from the A350XWB MSF subsidies has now substantially 
amortised (Measure xiv, above). Once again, this demonstrates that the A350XWB MSF subsidies 
can no longer be considered a cause of th e launch of the A350XWB as and when it was launched, 
and of resulting sales or deliveries of A350XWB aircraft or any associated adverse effects.  
40. The passage of time has also attenuated the causal link between the A380 and A350XWB 
MSF subsidies and the launch of the A350XWB as and when it was launched, such that A380 MSF 
and A350XWB MSF can no longer be considered a cause of the launch of the A350XW B as and 
when it was launched, and of resulting sales or deliveries of A350XWB aircraft or any associated 
adverse effects (Measures xiii and xvii, listed above).  WT/DS316/34  
 
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  41. 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 issue is currently a genuine and substantial cause 
of sales or de liveries of the A350XWB or any associated adverse effects.  
42. Moreover, the Cathay Pacific 2012, Singapore Airlines 2013 and United Airlines 2013 
orders, which formed the basis of lost sales findings confirmed by the Appellate Body, have been 
delivered or con verted to other aircraft (Measure xviii, above). These measures again constitute 
appropriate steps for the removal of adverse effects in the form of lost sales.  
IV. Conclusion  
43. In light of the above, and in light of the "Agreed Procedures under Article 21 and 22 of the 
DSU and Article 7 of the SCM Agreement " adopted by the European Union and the United States 
on 12 January 2012 for purposes of this dispu te, the European Union notifies the DSB that it has 
achieved full compliance with the recommendations and rulings in the present dispute.14 
 
__________  
                                                
14 As noted above, this notification is without prejudice to the European Union's right to a reasonable 
period of time, within the meaning of Article 21 .3 of the DSU.