WT/DS316/AB/RW  
 
15 May 2018  
(18-2882) Page: 1/267 
    
 
EUROPEAN COMMUNIT IES AND CERTAIN MEMB ER STATES –  
MEASURES AFFECTING T RADE IN LARGE CIVIL AIRCRAFT  
RECOURSE TO ARTICLE  21.5 OF THE DSU BY T HE UNITED  STATES  
AB-2016-6 
Report of the Appellate  Body 
 
 
 
BCI redacted, as marked [BCI]  
 
 
 WT/DS316/AB/RW  
 
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  Table of Contents  
 
1   INTRODUCTION  ................................ ................................ ................................ ........  12 
1.1   Original proceedings  ................................ ................................ ................................ ...12 
1.2   Compliance proceedings  ................................ ................................ .............................. 14 
1.2.1    Panel proceedings  ................................ ................................ ................................ ....14 
1.2.2    Appellate proceedings and procedural issues  ................................ ............................... 17 
2   ARGUMENTS OF THE PAR TICIPANTS  ................................ ................................ .........  22 
3   ARGUMENTS OF THE THI RD PARTICIPANTS  ................................ ..............................  22 
4   ISSUES RAISED ON APP EAL ................................ ................................ ......................  22 
5   ANALYSIS OF THE APPE LLATE  BODY  ................................ ................................ .........  24 
5.1   Article  21.5 of the DSU – the Mühlenberger Loch and Bremen Airport measures  ................. 24 
5.1.1    The Panel's findings  ................................ ................................ ................................ .25 
5.1.2    Whether the Panel erred by declining to make a finding as to whether the 
European  Union had "withdrawn" the Mühlenberger Loch and Bremen Airport measures  ............. 27 
5.2   Article  3.1(b) of the SCM  Agreement  ................................ ................................ ............. 31 
5.2.1    The Panel's findings  ................................ ................................ ................................ .31 
5.2.2    Arguments on appeal  ................................ ................................ ............................... 33 
5.2.3    Whether the United  States' appeal is within the scope of appellate  review  ...................... 34 
5.2.4    The legal standard under Article  3.1(b) of the SCM  Agreement  ................................ ......40 
5.2.5    The United  States' claim on appeal  ................................ ................................ ............ 42 
5.2.6    Conclusion  ................................ ................................ ................................ .............. 47 
5.3   Benefit  ................................ ................................ ................................ ...................... 47 
5.3.1    Corpor ate borrowing rate  ................................ ................................ .......................... 47 
5.3.1.1    The Panel's findings  ................................ ................................ ............................... 48 
5.3.1.2    Overview of the relevant jurisprudence regarding the benefit analysis  ......................... 54 
5.3.1.3    Whether the Panel erred in its application of Article  1.1(b) of the 
SCM Agreement by failing to identify properly the "corporate borrowing rate"  ........................... 56 
5.3.1.4    Whether the Panel acted inconsistently with Article  11 of the DSU by rejecting 
the yield of the relevant EADS bond on th e day of conclusion of each A350XWB 
LA/MSF  contract  ................................ ................................ ................................ ................ 64 
5.3.1.5    The European  Union's conditional appeal ................................ ................................ ..68 
5.3.1.5.1    Whether the Panel erred in its application of Article  1.1(b) of the 
SCM Agreement by including the six -month average yield of the EADS bond in its 
determination of the corporate borrowing rate  ................................ ................................ .......68 
5.3.1.5.2    Whether the Panel acted inconsistently with Article  11 of the DSU by including 
the six -month average yield of the EADS bond in its determination of the corporate 
borrowing rate  ................................ ................................ ................................ ................... 71 
5.3.1. 6   Conclusion on the Panel's findings regarding the corporate borrowing rate  ................... 74 
5.3.2    Project -specific risk premium  ................................ ................................ .................... 76 
5.3.2.1    The Panel's findings  ................................ ................................ ............................... 78 WT/DS316/AB/RW  
 
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  5.3.2.2    Whether the Panel committed legal error by failing to establish a project -specific 
risk premium for the four A350XWB LA/MSF contracts based on the risks associated with 
the A350XWB project  ................................ ................................ ................................ ......... 81 
5.3.2.2.1    Whether the Panel erred by failing to undertake a "progressive search" for a 
market benchmark and to adopt the most appropriate benchmark  ................................ ........... 82 
5.3.2.2.2    Whether the Panel erred by failing to make adjustments to the benchmark to 
ensure comparability  ................................ ................................ ................................ .......... 86 
5.3.2.2.3    Whether the Panel acted inconsistently with Article  11 of the DSU  ............................ 89 
5.3.2.3    Whether the Panel acted inconsistently with Article  11 of the DSU in its 
assessment of the risk differences that may affect the project -specific risk premium  .................. 92 
5.3.2.3.1    Programme risk  ................................ ................................ ................................ .93 
5.3.2.3.1.1    Development risk  ................................ ................................ ............................ 93 
5.3.2.3.1.2    Market risk and comparison of development risk and market risk  ........................  101 
5.3.2.3.1.3    Overall conclusion on programme risk  ................................ ..............................  104 
5.3.2.3.2    Contract risk  ................................ ................................ ................................ .... 105 
5.3.2.3.2.1    Whether the Panel failed to compare properly the terms of the A350XWB 
LA/MSF contracts to the terms of the A380 LA/MSF contracts  ................................ ................  105 
5.3.2.3.2.2    Whether the Panel failed to compare the terms of the A350XWB LA/MSF 
contracts to the terms of the A380 risk -sharing supplier c ontracts  ................................ .........  109 
5.3.2.3.3    The price of risk  ................................ ................................ ...............................  110 
5.3.2.3.4    Overall conclusion on the European  Union's claim that the Panel acted 
inconsistently with Article  11 of the DSU in its assessment of the risk differences that 
may affect the project -specific risk premium  ................................ ................................ ....... 113 
5.3.2.4    Whether the Panel erroneously adopted a single, undifferentiated project risk 
premium to benchmark all four of the A350XWB LA/MSF contracts  ................................ .........  113 
5.3.2.4.1    Whether the Panel erred in its application of Article  1.1(b) of the 
SCM Agreement by adopting a single, undifferentiated project risk premium to 
benchmark all four of the A350XWB LA/MSF contracts  ................................ ..........................  114 
5.3.2.4.2    Whether the Panel acted inconsistently with Article  11 of the DSU by adopting 
a single, undifferentiated project risk premium to benchmark all four of the A350XWB 
LA/MSF contracts  ................................ ................................ ................................ .............  116 
5.3.2.5    Conclusion on the Panel's findings regarding the project -specific risk premium  ...........  117 
5.3.3    Overall conclusions on the Panel's findings regarding "benefit" under Article  1.1(b) 
of the SCM  Agreement  ................................ ................................ ................................ ...... 119 
5.4   Article 7.8 of the SCM Agreement  ................................ ................................ ...............  120 
5.4.1    Introduction  ................................ ................................ ................................ ..........  120 
5.4.2    Whether the Panel erred in its interpretation of Article 7.8 of the SCM Agreement  .........  121 
5.4.2.1    Claims and arguments on appeal  ................................ ................................ ..........  121 
5.4.2.2    Interpretation of Article  7.8 of the SCM  Agreement  ................................ .................  123 
5.4.3    Whether the Panel erred in finding that the ex ante  "lives" of certain LA/MSF 
subsidies had expired – conditional appeal by the United States  ................................ ............  130 
5.4.4    Whether the Panel erred in its finding regarding the repayment of financial 
contribution – conditional appeal by the European Union  ................................ .......................  137 
5.5   European Union's consequential appeal under Article 7.8 of the SCM Agreement  ..............  138 
5.6   Articles  5, 6, and 7.8 of the SCM Agreement – adverse effects  ................................ ....... 140 
5.6.1    Non-subsidized like product  ................................ ................................ ....................  142 WT/DS316/AB/RW  
 
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  5.6.1.1    Findings in the original proceedings  ................................ ................................ ....... 143 
5.6.1.2    Arguments before the Panel and Panel findings in the compliance proceedings  ...........  144 
5.6.1.3    Claims and  arguments on appeal  ................................ ................................ ..........  147 
5.6.1.4    Whether the Panel erred in declining to address the arguments raised by the 
European  Union  ................................ ................................ ................................ ...............  148 
5.6.1.4.1    The relationship between Article  6.3(b) and Article  6.4 of the SCM  Agreement  .........  150 
5.6.1.5    Conclusion  ................................ ................................ ................................ .........  152 
5.6.2    The relevant product markets ................................ ................................ ..................  153 
5.6.2.1    Arguments before the Panel and Panel findings  ................................ .......................  153 
5.6.2.2    Claims on appeal  ................................ ................................ ................................  160 
5.6.2.3    Whether the Panel erred in interpreting the term "market" in  Article  6.3 of the 
SCM Agreement  ................................ ................................ ................................ ...............  161 
5.6.2.3.1    Single -aisle LCA marke t ................................ ................................ ....................  165 
5.6.2.3.2    Twin-aisle LCA market  ................................ ................................ ......................  169 
5.6.2.3.3    VLA market  ................................ ................................ ................................ ..... 172 
5.6.2.4   Whether the Panel erred in its application of Article 6.3 of the SCM Agreement  ...........  179 
5.6.2.5    Article 11 of the DSU  ................................ ................................ ...........................  180 
5.6.2.6    Overall conclusion  ................................ ................................ ...............................  183 
5.6.3    "Product effects" of LA/MSF subsidies on Airbus LCA  ................................ ..................  184 
5.6.3.1    Introduction  ................................ ................................ ................................ ....... 184 
5.6.3.2    Summary of Panel findings  ................................ ................................ ...................  186 
5.6.3.2.1    Findings on the "product effects" of pre -A350XWB LA/MSF subsidies on the 
A320, A330, and A380  ................................ ................................ ................................ ...... 186 
5.6.3.2.2    Findings on the "product effects" of the challenged LA/MSF subsidies on 
the A350XWB  ................................ ................................ ................................ ..................  188 
5.6.3.2.2.1    Findings on the "direct effects" of the A350XWB LA/MSF subsidies on 
the A350XWB  ................................ ................................ ................................ ..................  189 
5.6.3.2.2.2    Findings on the "indirect effects" of the pre -A350XWB LA/MSF subsidies on 
the A350XWB  ................................ ................................ ................................ ..................  192 
5.6.3.3    Causation under Articles  5(c) and 6.3 of the SCM  Agreement  ................................ ... 193 
5.6.3.4    Findings in the original proceedings and their relevance for these compliance 
proceedings ................................ ................................ ................................ .....................  195 
5.6.3.5    Whether the Panel erred in  its findings on the "product effects" of the LA/MSF 
subsidies existing in the post -implementation period  ................................ ............................  198 
5.6.3.5.1    "Product  effects" of A380 LA/MSF subsidies on the A380  ................................ ....... 200 
5.6.3.5.2    "Product effects" of LA/MSF subsidies on the A350XWB  ................................ .........  204 
5.6.3.5.2.1    The Panel's assessment of the "direct effects" of the A350XWB LA/MSF 
subsidies  ................................ ................................ ................................ .........................  206 
5.6.3.5.2.2    The Panel's assessment of the "indirect effects" of the A380 LA/MSF 
subsidies  ................................ ................................ ................................ .........................  214 
5.6.3.5.2.3    Conclusion on the "product effects" of existing LA/MSF subsidies on 
the A350XWB  ................................ ................................ ................................ ..................  217 
5.6.3.6    Overall conclusion  ................................ ................................ ...............................  217 
5.6.4    Lost sales, displaceme nt, and impedance  ................................ ................................ .. 219 WT/DS316/AB/RW  
 
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  5.6.4.1    Introduction  ................................ ................................ ................................ ....... 219 
5.6.4.2    Summary of Panel findings  ................................ ................................ ...................  221 
5.6.4.2.1    Findings on significant lost sales  ................................ ................................ ........  221 
5.6.4.2.2    Findings on displacement and impedance  ................................ ............................  223 
5.6.4.3    Claims and arguments on appeal  ................................ ................................ ..........  225 
5.6.4.4    Whether the Panel erred in its interpretation of "displacement" and "impedance"  ........  228 
5.6.4.5   Whether the Panel failed to examine the "closeness of competition"  ..........................  232 
5.6.4.6    Whether the Panel erred in its findings of  significant lost sales and 
"displacement and/or impedance"  ................................ ................................ ......................  233 
5.6.4.6.1    The data set examined by the Panel  ................................ ................................ ... 233 
5.6.4.6.2    The single -aisle LCA market  ................................ ................................ ..............  235 
5.6.4.6.3    The twin -aisle LCA market  ................................ ................................ .................  237 
5.6.4.6.3.1    Significant lost sales  ................................ ................................ ......................  237 
5.6.4.6.3.2    "Displacement and/or impedance"  ................................ ................................ ... 241 
5.6.4.6.4    The VLA market  ................................ ................................ ...............................  243 
5.6.4.6.4.1    Significant lost sales  ................................ ................................ ......................  243 
5.6.4.6.4.2    Displacement and/or impedance ................................ ................................ ...... 246 
5.6.4.7    United  States' request for completing the legal analysis regarding "displacement 
and/or impedance"  ................................ ................................ ................................ ...........  249 
5.6.4.8    Overall conclusion  ................................ ................................ ...............................  251 
5.6.4.8.1    The single -aisle LCA market  ................................ ................................ ..............  252 
5.6.4.8.2    The twin -aisle LCA market  ................................ ................................ .................  253 
5.6.4.8.3    The VLA market  ................................ ................................ ...............................  254 
6   FINDINGS AND CONCLUS IONS  ................................ ................................ ................  256  
6.1   Article  21.5 of the DSU – the Mühlenberger Loch and Bremen Airport measures  ...............  256 
6.2   Article  3.1(b) of the SCM  Agreement  ................................ ................................ ...........  256 
6.3   Benefit  ................................ ................................ ................................ ....................  256 
6.3.1    The calculation of general corporate borrowing rate  ................................ ...................  256 
6.3.2    The calculation of project -specific risk premium  ................................ .........................  258 
6.4   Article  7.8 of the SCM  Agreement  ................................ ................................ ...............  259 
6.5   Conditional appeals under Article  7.8 of the SCM  Agreement  ................................ ..........  259 
6.6   European  Union's consequential appeal under Article  7.8 of the SCM  Agreement  ..............  260 
6.7   Articles 5, 6, and 7.8 of the SCM Agreement – adverse effects  ................................ ....... 260 
6.7.1    Non-subsidized like product  ................................ ................................ ....................  260 
6.7.2    The relevant product markets ................................ ................................ ..................  261 
6.7.3    "Product effects" of LA/MSF subsidies on Airbus LCA  ................................ ..................  261 
6.7.4    Lost sales, displacement, and impedance  ................................ ................................ .. 263 
6.7.4.1    The single -aisle LCA market  ................................ ................................ .................  263 
6.7.4.2    The twin -aisle LCA market  ................................ ................................ ...................  264 
6.7.4.3    The VLA market  ................................ ................................ ................................ .. 265 
 WT/DS316/AB/RW  
 
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  ABBREVIATIONS USED I N THIS REPORT  
Abbreviation  Description  
A350XWB Business 
Case Presentation  "Presentation to the EADS Board", [BCI] and "A350XWB Business 
Case: Assumptions, Sensitivities and Limitations, Presentation to 
EADS BoD – status", 2 November 2006  
A350XWB Chief 
Engineering Rebuttal  Statement by Gordon McConnell, Michel Lacabanne, Chantal Fualdes, 
François Cerbelaud and Burkhard Domke, A350XWB Chief 
Engineering, 13  December  2012 (Panel Exhibit EU -128 (BCI/HSBI))  
A350XWB Chief 
Engineering Statement  Airbus, A350XWB Chief Engineering and Future Projects Office, 
"A350XWB Chief Engineering Statement", 3  July 2012 
(Panel  Exhibit  EU-18 (BCI/HSBI) ) 
A350XWB Production 
Statement  A350XWB Production Statement by Philippe Launay, 14  January  2013 
(Panel Exhibit EU -129 (BCI/HSBI))  
Aérospatiale  French aerospace manufacturer, Aérospatiale Société Nationale 
Industrielle  
BAE Systems  British Aerospace Systems  
Bair Declaration  Declaration of Michael Bair: Products and Competition in the LCA 
Industry (16  August  2012) (Panel Exhibit USA -339 (BCI))  
BCI business confidential information  
Compliance 
Communication  Communication from the European  Union  dated 1  December  2011, 
WT/DS316/17  
DARE  Develop And Ramp -up Excellence  
Deutsche Airbus  German aerospace manufacturer, Deutsche Airbus GmbH  
Dorman Report  Gary J. Dorman, NERA, The Effect of Launch Aid on the Economics of 
Commercial Airline Programs , 6 November 2006 
(Original  Panel Exhibit US -70 (BCI))  
DSB Dispute Settlement Body  
DSU Understanding on Rules and Procedures  Governing the Settlement 
of Disputes  
EADS  European Aeronautic Defence and Space Company N.V.  
EBIT earnings before interest and taxes  
GATT 1994  General Agreement on Tariffs and Trade 1994  
HSBI highly sensitive business information  
IRR internal rate of return  
Jordan Reply  Dr James Jordan, NERA Economic Consulting, "Reply to Professor 
Whitelaw's Response to Jordan Report",  20 May 2013 
(Panel  Exhibit  USA-505 (BCI/HSBI))  
Jordan Report  Dr James Jordan, NERA Economic Consulting, "Comparison of A350 
XWB LA/MSF Interest Rates with Market Benchmarks", 
18 October  2012 (Panel Exhibit USA -475 (BCI/HSBI))  
JRP Jordan Risk Premium  
LA/MSF  "launch aid " or " member  State financing " 
LCA large civil aircraft  
Mourey Statement  Christophe Mourey, Senior Vice President Contracts, Airbus, 
"Statement on Current Competitive Con ditions in the LCA Industry", 
4 July 2012 (Panel Exhibit EU -8 (BCI))  WT/DS316/AB/RW  
 
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  Abbreviation  Description  
MTN medium -term note  
original panel  panel in the original proceedings  
original panel report / 
Original Panel Report  Panel Report, European Communities and Certain Member States – 
Measures Affecting Trade in Large Civil Aircraft , WT/DS316/R  
Panel  The Panel in these Article  21.5 compliance proceedings  
Panel Report  Panel 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/RW  
PwC Amortization Report  PricewaterhouseCoopers, "Analysis of th e expected life of subsidies 
to Airbus conferred by Member State Financing Loans, Capital 
contributions and regional develop ment grants as found in the 
WTO dispute DS316", 29 November 2011 and 2 July 2012 
(Panel  ExhibitEU -5 (BCI/HSBI) ) 
R&D research and development  
R&TD  research and technological development  
ROCE  return on capital employed  
SCM Agreement   Agreement on Subsidies and Countervailing Measures  
Schneider Declaration  Declaration of Larry Schneider, Senior Vice President of Product 
Development, Boeing Commercial Aircraft, "The Relevance of Prior 
Commercial Experience to Exis ting Model Improvements and 
New Aircraft Developments", 17 October 2012 
(Panel  Exhibit  USA-354 (BCI))  
SSNIP  Small but Significant Non -Transitory Increase in Prices  
Supplemental Mourey 
Statement  Christophe Mourey, Senior Vice President, Contracts, Airbus, 
"Supplemental statement on current competitive conditions in the 
LCA industry ", 12 December 2012 (Panel Exhibit EU -124 (BCI/HSBI))  
UK Appraisal  a written assessment by the UK Government of the merits of Airbus' 
request for A350XWB LA/MSF  
United States' compliance 
panel request  Request for the Establishment of a Panel by the United  States 
pursuant to Article 21.5 of the DSU, WT/D S316/23  
USDOC  United  States  Department of Commerce  
VLA very large aircraft  
Whitelaw Response 
to Jordan  Professor Robert Whitelaw, "Response to Dr Jordan's report on the 
benefits of MSF", 13  December 2012 
(Panel  Exhibit  EU-121 (BCI/HSBI))  
Williams Statement  Statement by Tom Williams, Executive Vice President, Programmes, 
Airbus SAS, 17 May 2013 (Panel Exhibit  EU-354 (BCI))  
Working Procedures  Working Procedures for Appellate Review, WT/AB/WP/6 , 
16 August  2010 
WRP Whitelaw Risk Premium  
WTO World Trade Organization  
YTM yield to maturity  
 
 WT/DS316/AB/RW  
 
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  CASES CITED IN THIS REPORT  
Short Title  Full Case Title and Citation  
Australia – Salmon  Appellate  Body Report, Australia – Measures Affecting Importation of Salmon , 
WT/DS18/AB/R , adopted 6  November  1998, DSR 1998:VIII, p. 3327  
Brazil – Retreaded Tyres  Appellate  Body Report, Brazil – Measures Affecting Imports of Retreaded 
Tyres , WT/DS332/AB/R , adopted 17  December  2007, DSR  2007:IV, p. 1527  
Canada – Aircraft  Appellate  Body Report, Canada – Measures  Affecting the Export of Civilian 
Aircraft , WT/DS70/AB/R , adopted  20 August  1999, DSR 1999:III, p. 1377  
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 – Autos  Appellate  Body Report, Canada – Certain Measures Affecting the Automotive 
Industry , WT/DS139/AB/R , WT/DS142/AB/R , adopted 19  June 2000, 
DSR 2000:VI, p. 2985  
Canada – Continued 
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 – Renewable Energy 
/ Canada – Feed-in Tariff 
Program  Appellate  Body Reports, Canada – Certain Measures Affecting the Renewable 
Energy Generation Sector / Canada – Measures Relating to the Feed -in Tariff 
Program , WT/DS412/AB/R  / WT/DS426/AB/R , adopted 24  May 2013, 
DSR 2013:I, p. 7  
Canada – Wheat Exports and 
Grain Imports  Appellate  Body Report, Canada – Measures Relating to Exports of Wheat and 
Treatment of Imported Grain , WT/DS276/AB/R , adopted 27  September  2004, 
DSR 2004:VI, p. 2739  
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  
China – Auto Parts  Appellate  Body Reports, China – Measures Affecting Imports of Automobile 
Parts, WT/DS339/AB/R  / WT/DS340/AB/R  / WT/DS342/AB/R , adopted 
12 January  2009, DSR  2009:I, p. 3  
China – HP-SSST (Japan) / 
China – HP-SSST (EU)  Appellate  Body Reports, China – Measures Imposing Anti -Dumping Duties on 
High-Performance Stai nless Steel Seamless Tubes ("HP -SSST") from Japan / 
China – Measures Imposing Anti -Dumping Duties on High -Performance 
Stainless Steel Seamless Tubes ("HP -SSST") from the European  Union , 
WT/DS454/AB/R  and Add.1 / WT/DS460/AB/R  and Add.1, adopted 
28 October  2015 
China – Publications and 
Audiovisual Products  Appellate  Body Report, China – Measures Affecting Trading Rights and 
Distribution Services for Certain Publications and Audiovisual Entertainment 
Products , WT/DS363/AB/R , adopted 19  January  2010, DSR  2010:I, p. 3  
China – Rare Earths  Appellate  Body Reports, China – Measures Related to the Exportation of Rare 
Earths, Tungsten, and Molybdenum , WT/DS431/AB/R  / WT/DS432/AB/R  / 
WT/DS433/AB/R , adopted 29  August  2014, DSR  2014:III, p. 805  
China – Rare Earths  Panel Reports, China – Measures Related to the Exportation of Rare Earths, 
Tungsten, and Molybdenum , WT/DS431/R  and Add.1 / WT/DS432/R  and Add.1 
/ WT/DS433/R  and Add.1, adopted 29 August 2014, upheld by Appellate Body 
Reports WT /DS431/AB/R / WT/DS432/AB/R / WT/DS433/AB/R, DSR 2014:IV, 
p. 1127  
China – Raw Materials  Appellate Body Reports, China – Measures Related to the Exportation of 
Various Raw Materials , WT/DS394/AB/R  / WT/DS395/AB/R  / WT/DS398/AB/R , 
adopted 22 February 2012, DSR 2012:VII, p. 3295  
Dominican Republic – Import 
and Sale of Cigarettes  Appellate Body Report, Dominican Republic – Measures Affecting the 
Importation and Internal Sale of Cigarettes , WT/DS302/AB/R , adopted 
19 May 2005, DSR 2005:XV, p. 7367  
EC – Asbesto s Appellate  Body Report, European Communities – Measures Affecting Asbestos 
and Asbestos -Containing Products , WT/DS135/AB/R , adopted 5  April 2001, 
DSR 2001:VII, p. 3243  WT/DS316/AB/RW  
 
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  Short Title  Full Case Title and Citation  
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 – Commercial Vessels  Panel Report, European Communities – Measures Affecting Trade in 
Commercial Vessels , WT/DS301/R , adopte d 20 June 2005, DSR 2005:XV, 
p. 7713 
EC – Export Subsidies on 
Sugar  Appellate  Body Report, European Communities – Export Subsidies on Sugar , 
WT/DS265/AB/R , WT/DS266/AB/R , WT/D S283/AB/R , adopted 19  May 2005, 
DSR 2005:XIII, p. 6365  
EC – Fasteners (China)  Appellate  Body Report, Europea n Communities – Definitive Anti -Dumping 
Measures on Certain Iron or Steel Fasteners from China , WT/DS397/AB/R , 
adopted 28  July 2011, DSR  2011:VII, p. 3995 
EC – Hormones  Appellate  Body Report, EC 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 – Poultry  Appellate  Body Report, European Communities – Measures Affecting the 
Importation of Certain Poultry Products , WT/DS69/AB/R , adopted 
23 July 1998, DSR 1998:V, p.  2031 
EC – Sardines  Appellate  Body Report, European Communities – Trade Description of 
Sardines , WT/DS231/AB/R , adopted 23  October  2002, DSR  2002:VIII, p. 3359  
EC – Selected Customs 
Matters  Appellate  Body Report, European Communities – Selected Customs Matters , 
WT/DS315/AB/R , adopted 11  December  2006, DSR  2006:IX, p. 3791  
EC – Tariff Preferences  Appellate  Body Report, European Communities – Conditions for the Granting of 
Tariff Preferences to Developing Countries , WT/DS246/AB/R , 
adopted  20 April 2004, DSR  2004:III, p. 925  
EC – Tube or Pipe Fittings  Appellate  Body Report, European Communities – Anti-Dumping Duties on 
Malleable Cast Iron Tube or Pipe Fittings from Brazil , WT/DS219/AB/R , 
adopted 18  August  2003, DSR  2003:VI, p. 2613  
EC and certain member 
States – Large Civil Aircraft  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  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 Aircraft 
(Article  21.5 – US) Panel 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/RW  and Add.1, circulated to WTO Members 
22 September  2016  
Guatemala – Cement I  Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding 
Portland Cement from Mexico , WT/DS60/AB/R , adopted 25 November 1998, 
DSR 1998:IX, p. 3767  
Indonesia – Autos  Panel Report, Indonesia – Certain Measures Affecting the Automobile Industry , 
WT/DS54/R , WT/DS55/R , WT/DS59/R , WT/DS64/R , Corr.1 and Corr.2, 
adopted 23  July 1998, and Corr.3 and Corr.4, DSR 1998:VI, p. 2201  
Japan – Agricultural 
Products  II Appellate  Body Report, Japan – Measures Affecting Agricultural Products , 
WT/DS76/AB/R , adopted 19  March  1999, DSR 1999:I, p.  277 
Japan – Apples  Appellate  Body Report, Japan – Measures Affecting the Importation of Apples , 
WT/DS245/AB/R , adopted 10  December  2003, DSR  2003:IX, p. 4391  
Korea – Alcoholic Beverages  Appellate  Body Report, Korea – Taxes on Alcoholic Beverages , WT/DS75/AB/R , 
WT/DS84/AB/R , adopted 17  February  1999, DSR  1999:I, p. 3  
Korea – Dairy Appellate  Body Report, Korea – Definitive Safeguard Measure on Imports of 
Certain Dairy Products , WT/DS98/AB/R , adopted 12  January  2000, 
DSR 2000:I, p. 3  WT/DS316/AB/RW  
 
- 10 – 
 
 
  Short Title  Full Case Title and Citation  
Mexico – Corn Syrup 
(Article  21.5 – US) Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose 
Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the 
DSU by the United States , WT/DS132/AB/RW , adopted 21 November 2001, 
DSR 2001:XIII, p. 6675  
Mexico – Taxes on Soft 
Drinks  Appellate  Body Report, Mexico – Tax Measures on Soft Drinks and Other 
Beverages , WT/DS308/AB/R , adopted 24  March  2006, DSR  2006:I, p. 3  
Peru – Agricultural Products  Appellate Body Report, Peru – Additional Duty on Imports of Certain 
Agricultural Products , WT/DS457/AB/R  and Add.1, adopted 31 July 2015  
US – Anti-Dumping and 
Countervailing Duties (China)  Appellate  Body Report, United  States  – Definitive Anti -Dumping and 
Countervailing Duties on Certain Products from China , WT/DS379/AB/R , 
adopted 25  March  2011, DSR  2011:V, p. 2869  
US – Carbon Steel  Appellate  Body Report, United  States  – Countervailing Duties on Certain 
Corrosion -Resistant Carbon Steel Flat Products from Germany , 
WT/DS213/AB/R  and Corr.1, adopted 19  December  2002, DSR  2002:IX, 
p. 3779 
US – Carbon Steel (India)  Appellate  Body Report, United  States  – Countervailing Measures on Certain 
Hot-Rolled Carbon Steel Flat Products from India , WT/DS436/AB/R , adopted 
19 December  2014, DSR  2014:V, p. 1727  
US – Continued Suspension  Appellate  Body 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 Zeroing  Appellate Body Report, United States – Continued Existence and App lication of 
Zeroing Methodology , WT/DS350/AB/R , adopted 19 February 2009, 
DSR 2009:III, p. 1291  
US – COOL 
(Article  21.5 ‒ Canada 
and Mexico)  Appellate  Body Reports, United  States  – Certain Country of Origin Labelling 
(COOL) Requirements – Recourse to Article  21.5 of the DSU by Canada and 
Mexico , WT/DS384/AB/RW  / WT/DS386/AB/RW , adopted 29  May 2015 
US – Cotton Yarn  Panel Report, United States – Transitional Safeguard Measure on Combed 
Cotton Yarn from Pakistan , WT/DS192/R , adopted 5 November 2001, as 
modified by Appellate Body Report WT/DS192/AB/R, DSR 2001:XII, p. 6067  
US – Countervailing and 
Anti-Dumping Measures 
(China)  Appellate  Body Report, United  States  – Countervailing and Anti -Dumping 
Measures on Certain Products from China , WT/DS449/AB/R  and Corr.1, 
adopted 22  July 2014, DSR  2014:VIII, p. 3027  
US – Countervailing and 
Anti-Dumping Measures 
(China)  Panel Report, United States – Countervailing and Anti -Dumping Measures on 
Certain Products from China , WT/DS449/R  and Add.1, adopted 22 July 2014, 
as modified by Appellate Body Report W T/DS449/AB/R, DSR 2014:VIII, 
p. 3175 
US – Countervailing Duty 
Investigation on DRAMS  Appellate Body Report, United States – Countervailing Duty Investigation on 
Dynamic Random Access Memory Semiconductors (DRAMS) from Korea , 
WT/DS296/AB/R , adopted 20 July 2005, DSR 2005:XVI, p. 8131  
US – FSC Appellate  Body Report, United  States  – Tax Treatment for "Foreign Sales 
Corporations" , WT/DS108/AB/R , adopted  20 March  2000, DSR  2000:III, 
p. 1619 
US – FSC 
(Article  21.5 ‒ EC II) Appellate  Body Report, United  States  – Tax Treatment for "Foreign Sales 
Corporations" – Recourse to Article  21.5 of the DSU by the European 
Communities , WT/DS108/AB/RW , adopted 29 January  2002, DSR  2002:I, 
p. 55 
US – Gambling  Appellate  Body Report, United  States  – Measures Affecting the Cross -Border 
Supply of Gambling and Betting Services , WT/DS285/AB/R , 
adopted  20 April 2005, DSR  2005:XII, p. 5663 (and Corr.1, DSR  2006:XII, 
p. 5475)  
US – Hot-Rolled Steel  Appellate  Body Report, United  States  – Anti-Dumping Measures on Certain 
Hot-Rolled Steel Products from Japan , WT/DS184/AB/R , adopted 
23 August  2001, DSR  2001:X, p. 4697  WT/DS316/AB/RW  
 
- 11 – 
 
 
  Short Title  Full Case Title and Citation  
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 Aircraft 
(2nd complaint) 
(Article  21.5 – EU) Panel 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/RW  and Add.1, circulated to WTO Members 
9 June 2017 
US – Offset Act 
(Byrd  Amendment)  Appellate  Body Report, United  States  – Continued Dumping and Subsidy Offset 
Act of  2000, WT/DS217/AB/R , WT/DS234/AB/R , adopted 27  January  2003, 
DSR 2003:I, p. 375  
US – Oil Country Tubular 
Goods Sunset Reviews  Appellate  Body Report, United  States  – Sunset Reviews of Anti -Dumping  
Measures on Oil Country Tubular Goods from Argentina , WT/DS268/AB/R , 
adopted 17  December  2004, DSR  2004:VII, p. 3257  
US – Oil Country Tubular 
Goods Sunset Reviews 
(Article  21.5 – Argentina)  Appellate  Body Report, United  States  – Sunset Reviews of Anti -Dumping 
Measures on Oil Country Tubular Goods from Argentina – Recourse to 
Article  21.5 of the DSU by Argentina , WT/DS268/AB/RW , adopted 
11 May 2007, DSR  2007:IX, p. 3523  
US – Softwood Lumber IV  Appellate  Body Report, United  States  – Final Countervailing Duty 
Determination with Respect to Certain Softwood Lumber from Canada , 
WT/DS257/AB/R , adopted 17  February  2004, DSR  2004:II, p. 571  
US – Softwood Lumber VI 
(Article 21.5 – Canada)  Appellate Body Report, United States – Investigation of the International Trade 
Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of 
the DSU by Canada , WT/DS277/AB/RW , adopted 9 May 2006, and Corr.1, 
DSR 2006:XI, p. 4865  
US – Stainless Steel (Mexico)  Appellate  Body Report, United States  – Final Anti -Dumping Measures on 
Stainless Steel from Mexico , WT/DS344/AB/R , adopted  20 May 2008, 
DSR 2008:II, p. 513  
US – Steel Safeguards  Appellate Body Report, United States – Definitive Safeguard Measures on 
Imports of Certain Steel Products , WT/DS248/AB/R , WT/DS249/AB/R , 
WT/DS251/AB/R , WT/DS252/AB/R , WT/DS253/AB/R , WT/DS254/AB/R , 
WT/DS258/AB/R , WT/DS259/AB/R , adopted 10 December 2003, DSR 
2003:VII, p. 3117  
US – Tax Incentives  Appellate  Body Report, United  States  – Conditional Tax Incentives for Large 
Civil Aircraft , WT/DS487/AB/R  and Add.1, adopted 22  September  2017 
US – Tax Incentives  Panel Report, United  States  – Conditional Tax Incentives for Large Civil 
Aircraft , WT/DS487/R  and Add.1, adopted 22  September  2017, as modified by 
Appellate  Body Report WT/DS487/AB/R  
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  Panel Report, United  States  – Subsidies on Upland Cotton , WT/DS267/R , 
Add.1 to Add.3 and Corr.1, adopted 21  March  2005, as modified by 
Appellate  Body Report WT/DS267/AB/R, DSR  2005:II, p.  299 
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 – Wheat Gluten  Appellate  Body Report, United  States  – Definitive Safeguard Measures on 
Imports of Wheat Gluten fro m the European Communities , WT/DS166/AB/R , 
adopted 19  January  2001, DSR  2001:II, p. 717  
US – Zeroing (EC)  Appellate Body Report, United States – Laws, Regulations and Methodology for 
Calculating Dumping Margins ("Zeroing") , WT/DS294/AB/R , adopted 
9 May 2006, and Corr.1, DSR 2006:II, p. 417  
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 Communit ies, WT/DS294/AB/RW  and Corr.1, adopted 
11 June 2009, DSR 2009:VII, p. 2911  
 WT/DS316/AB/RW  
 
- 12 – 
 
 
  WORLD TRADE ORGANIZATION  
APPELLATE  BODY 
 
 
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  
 
European  Union , Appellant/Appellee  
United  States , Other Appellant/Appellee  
 
Australia, Third Participant  
Brazil, Third Participant  
Canada, Third Participant  
China, Third Participant  
Japan, Third Participant  
Korea, Third Participant  
 AB-2016-6 
 
Appellate  Body Division:  
 
Ramírez -Hernández, Presiding  Member  
Bhatia, Member  
Van den Bossche, Member  
 
 
 
1  INTRODUCTION  
1.1.  The European  Union  and the United  States  each appeals certain  issues of law and legal 
interpretations developed in the Panel 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  States1 (Panel Report).  The Panel was established on 13  April 2012 pursuant to 
Article  21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes  
(DSU) to consider a complaint by the United  States2 regarding the alleged failure on the part of 
the European  Union3 and certain of its member States to implement the recommendations and 
rulings of the Dispute  Settlement Body (DSB) in the original proceedings in EC and certain 
member States  ‒ Large Civil Aircraft .4 
1.1  Original proceedings  
1.2.  In the original proceedings in thi s dispute,  the United  States  claimed that the 
European  Communities and certain of its member  States  – namely, France, Germany, Spain, and 
the United Kingdom  – had caused, through the use of specific subsidies, adverse effects  to the 
United  States ' interest s in the form of serious prejudice  under Articles  5(c) and 6.3 of the 
Agreement on Subsidies and Countervailing Measures  (SCM Agreement ).5 Each of those measures 
related to the design and developme nt by Airbus of large civil aircraft (LCA), which is the product 
at issue throughout this dispute.6 
                                                
1 WT/D S316/RW, 22 September  2016. 
2 Request for the Establishment of a Panel by the United  States pursuant to Article 21.5 of the DSU, 
WT/D S316/23 (United States' compliance panel request) . 
3 The European  Union replaced and succeeded the European Communities as of 1  December  2009. 
Accordingly, we only refer to the European Communities in this Report in relation to events that took pl ace 
during the original panel proceedings . In all other circumstances, we refer to the European  Union.  
4 The recommendations and rulings of the DSB resulted from the adoption on 1  June 2011, by the DSB, 
of the Appellate  Body report, WT/DS316/ AB/R, and the panel report, WT/DS316/ R, in EC and certain member 
States – Large Civil Aircraft . In this Report, we refer to the panel that considered the original complaint 
brought by the United  States  as the "original panel" and to its report as the "original panel rep ort" or 
"Original  Panel Report" . 
5 Original Panel Report, paras.  2.5 and 3.1 -3.3. 
6 The product at issue is the same in both the original and the compliance proceedings. The original 
panel and the Panel have distinguished LCA from smaller (regional) aircra ft or military aircraft , and defined 
LCA as follows:  
{L}arge (weighing over 15,000 kg) "tube and wing" aircraft, with turbofan engines carried under 
low-set wings, designed for subsonic flight. LCA are designed for transporting 100 or more 
 WT/DS316/AB/RW  
 
- 13 – 
 
 
  1.3.  The original panel, established on  20 July 2005, found that the following specific subsidies, 
related  to the production and developme nt of LCA, were inconsistent with Articles  5(c) and 6.3(a), 
(b), and (c) of the SCM Agreement : (i) "launch aid" or "member State financing" (LA/MSF) for the 
A300, A310, A320, A330, A330 -200, A340, A340 -500/600, and A380 models of Airbus LCA7; 
(ii) French and German government "equity infusions" provided in connection with the corporat e 
restructuring of French and German aerospace manufacturer s, Aérospatiale Société 
Nationale  Industrielle (Aérospatiale) and Deutsche  Airbus GmbH  (Deutsche Airbus)8; (iii) certain 
infrastructure and infrastructure -related measures provided by German and  Spanish  authorities to 
Airbus in the form of, inter alia , regional development grants9; and (iv) certain research and 
technological development (R&TD) funding provided to Airbus for LCA -related R&TD projects in 
which Airbus participated.10  
1.4.  In addition, the o riginal panel found that the United  States  had established that the German, 
Spanish, and UK LA/MSF for the A380 constituted prohibited export subsidies within the meaning 
of Article  3.1(a) and footnote 4 thereto of the SCM Agreement .11  
1.5.  On appeal, t he Appel late Body reversed the original panel's finding that the German, 
Spanish, and UK A380 LA/MSF contracts  constituted prohibited export subsidies under 
Article  3.1(a) of the SCM Agreement ; however,  it was unable to complete the legal analysis  with 
regard  to Article 3.1(a) due to insufficient factual findings or undisputed facts on the panel 
record.12 The Appellate  Body also reversed or modified several other aspects of the original panel 
findings13, and completed the legal analysis where it had sufficient factua l findings or undisputed 
facts on the record to do so. With regard to issues of subsidization and adverse effects, the 
Appellate  Body completed the legal analysis and ultimately concluded  that: (i) the use of the 
challenged LA/MSF measures had caused adver se effects to the United  States ' interests ; and 
(ii) the equity infusions and infrastructure measures (but not the R&TD subsidies) that  were found 
by the original panel to constitute  specific subsidies "complemented and supplemented" the effects 
of the LA/MSF measures.14  
1.6.  The Appellate  Body upheld the original panel's recommendation pursuant to Article  7.8 of the 
SCM Agreement , and recommended that the DSB request the European  Union  to bring its 
measures that were found to be inconsistent with the SCM Agreement  into conformity with its 
obligations under that Agreement.15  
1.7.  On 1 June 2011, the DSB adopted the Appellate  Body report and  the original panel  report , 
as modified by the Appellate  Body report.16 
                                                                                                                                                  
passengers and/ or a proportionate amount of cargo across a range of distances serviced by 
airlines and air freight carriers. LCA are covered by tariff classification heading 8802.40 of the 
Harmonized System ("Airplanes and other aircraft, of an unladen weight exceeding 1 5,000 kg").  
(Panel Report, para.  1.32. See also Original Panel Report, para.  2.1) 
7 Panel Report, para.  1.2 (referring to Original Panel Report, paras.  7.290(a)(i) -(vii), 7.482 -7.496, 
and 8.1(a)(i)).  
8 Panel Report, para.  1.2 (referring to Original Panel Report, paras.  7.1245 -7.1249, 7.1302, 
7.1323 -7.1326, 7.1380 -7.1384, 7.1414, and 8.1(c) and (d)).  
9 Panel Report, para.  1.2 (referring to Original Panel Report, paras.  7.1049 -7.1053, 7.1097, 
7.1100 -7.1101, 7.1134, 7.1137 -7.1139, 7.1191, 7.1205 -7.1211, 7.124 4, and 8.1(b)(i) -(iv)). 
10 Panel Report, para.  1.2 (referring to Original Panel Report, paras.  7.1427 -7.1456, 7.1459 -1480, 
7.1608, and 8.1(e)).  
11 Panel Report, para.  1.3 (referring to Original Panel Report, paras.  7.689 and 8.1(a)(ii)).  
12 Panel Report, para . 1.7 (referring to Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft , paras.  1414(j) and 1415(b)).  
13 Panel Report, para.  1.7 (referring to Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft , paras.  1414(a),  (c), (d)(i) -(ii), (e)(ii), (g), (i), (j), (k), and (s), and 1415(b)).  
14 Panel Report, para.  1.7 (referring to Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft , para.  1414(e)(iv), (g), (l), (m), (p), (q), and (r)). See also Appell ate Body Report, EC and certain 
member States – Large Civil Aircraft , para.  1414(s).  
15 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , paras.  1416 and 1418.  
16 Minutes of the DSB Meeting held on 1  June 2011, WT/DSB/M/297.  WT/DS316/AB/RW  
 
- 14 – 
 
 
  1.2  Compliance proceedings  
1.2.1   Panel proceedings  
1.8.  Subsequent to the adoption of the original panel report and the Appellate  Body report, the 
European  Union  informed the DSB  on 1 December  2011 in a Compliance Communication that it 
had "taken appropriate steps" to bring its measure s into conformity with its 
World  Trade  Organization ( WTO) obligations, thereby ensuring "full implementation of the DSB's 
recommendations and rulings ".17 The European  Union  referred  to, inter alia : "(a) the repayment 
and/or termination of LA/MSF; (b)  the imposition of increased fees and lease payments on 
infrastructure support in accordance with market principles; and (c)  ensuring that capital 
contributions and regional aid subsidies  ha{d} …  'come to an end' and {were}  no longer capable 
of causing adverse effects".18 The European  Union  provided further details regarding  the steps it 
had taken and the intervening market events it considered to have enabled it to achieve 
compliance , in a two-page document  comprising 36  numbered paragraphs , attached to its 
Compliance C ommunication.19  
1.9.  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 .20 On 30  March  2012, the United  States  
requested for the establishment of a panel pursuant to Article  21.5 of the DSU with standard terms 
of reference.21 The Panel was established by the DSB on 13  April 2012.22  
1.10.   Before the Panel, the  United  States  argued that the relevant subsidies found to have caused 
adverse effects in the original proceeding s continue  to cause adverse effects and that, by agreeing 
to provide Airbus with LA/MSF  for the A350XWB  family of aircraf t23, the four member States have  
"continued and even expanded" the subsidization of Airbus' LCA activities, thereby causing 
"additional adverse effects" within the meaning of Articles  5(c) and 6.3 of the SCM Agreement .24 
On this basis, the United  States  subm itted that the European  Union  and the four member States 
have failed to "take appropriate steps to remove the adverse effects" or "withdraw the subsidy " 
within the meaning of Article  7.8 of the SCM Agreement . The United  States  also claimed that the 
A350XWB  and A380 LA/MSF measures are prohibited export and/or import substitution subsidies 
within the meaning of Articles 3.1 and 3.2 of the SCM Agreement .  
1.11.   The Panel  circulated its Report to Members of the WTO on 22 September  2016. The factual 
aspects of the Panel proceedings are summarized in detail at para graphs 1.17 through 1.32 of 
the Panel Report.  
1.12.   The Panel made the following findings in its Report : 
a. Only two out of the 36 "alleged compliance 'steps'" notified by the European  Union  in its 
Compliance Commu nication (steps 28 and 29) constitute "actions" concerning the degree 
of ongoing subsidization of Airbus LCA. The 34 remaining "steps" constitute " assertion of 
                                                
17 Commu nication from the European  Union dated 1  December  2011, WT/DS316/17 (Compliance 
Communication), para. 5.  
18 Panel Report, para.  6.6 (quoting Compliance Communication, para. 4). 
19 Panel Report, para.  6.6 (quoting Compliance Communication, para.  4). The 36 "s teps" identified by 
the European  Union are described and explained in more detail at paragraphs 6.8-6.42 of the Panel Report.  
20 WT/DS316/19 and Corr. 1.  
21 WT/D S316/23.  
22 Panel Report, para.  1.13. 
23 For a detailed description of the A350XWB LA/MSF measures,  see Panel Report, paras.  6.225 -6.267. 
The A350XWB LA/MSF measures are  not covered by the DSB's recommendations and rulings. Before the 
original panel, the United  States had challenged the alleged provision of LA/MSF for the original A350 model, 
but the original panel considered that, as at July  2005, the examined evidence s uggested that there were no 
clear commitments from the four member State governments to provide LA/MSF for the A350  on back -loaded, 
success -dependent, and below -market interest rate repayment terms . (Original Panel Report, para. 7.314)  
24 Panel Report, para. 6.3 (quoting United  States ' first written submission to the Panel, para. 1). WT/DS316/AB/RW  
 
- 15 – 
 
 
  facts or the presentation of arguments  for the purpose of supporting the 
European  Union 's theory  of compliance".25 
b. The French, German, Spanish, and UK A350XWB LA/MSF measures, as well as the 
United  States ' prohibited subsidy claims  against t he French, German, Spanish, 
and UK A380 LA/MSF measures under Article  3.1(a) of the SCM Agreement , and the 
United States ' claims of "threat of displacement and impedance" of imports under 
Article  6.3(a) of the SCM Agreement  fall within the scope of these compliance 
proceedings. The United  States ' prohibited subsidy claims against the French, German, 
Spanish, and UK A380 LA/MSF measures under Article  3.1(b) of the SCM Agreement  are 
outside the scope of these compliance proceedings.26 
c. The United  States  demonstrated that the French, German, Spanish, and 
UK A350XWB  LA/MSF measures are specific subsidies within the meaning  of Articles 1 
and 2 of the SCM Agreement .27 
d. The United  States  failed to demonstrate that the French, German, Spanish, 
and UK A350XWB  LA/MSF subsidies are prohibited export and/or import substitution 
subsidies within the meaning of Articles  3.1 and 3.2 of t he SCM Agreement , and that the 
French, German, Spanish, and UK A380 LA/MSF subsidies are prohibited export subsidies 
within the meaning of Articles 3.1(a) and 3.2 of the SCM Agreement .28 
e. With regard to Article  7.8 of the SCM Agreement , the European  Union  demonstrated that 
the ex ante  "lives" of (i) the French, German, and Spanish LA/MSF subsidies for the 
A300B/B2/B4, A300 -600, A310, A320, and A330/A340; (ii) the UK LA/MSF subsidies for 
the A320 and A330/A340; and (iii) the capital contribution subsidies " expired" before 
1 June 2011. The ex ante  "lives" of the French LA/MSF subsidies for the A330 -200 and 
the French and Spanish LA/MSF subsidies for the A340 -500/600 "expired", respectively, 
in [BCI] and [BCI]. The ex ante "lives" of five of the regional devel opment grant 
subsidies will not "expire" until sometime between  2054 and  2058, while the other 
two "expired" around  2014.29 
f. The European  Union  failed to demonstrate that "the alleged partial privatization of 
Aérospatiale in 1999, the transactions leading to  the creation of { European Aeronautic 
Defence and Space Company N.V.  (EADS)} in  2000, and {British Aerospace Systems'  
(BAE Systems) } 2006 sale of its  20% ownership stake in Airbus SAS to EADS, were 
'intervening events' that resulted in the 'extinction' of the benefit of all of the subsidies 
at issue in this proceeding that were granted prior to those transactions".30 
g. The relevant subsidies  identified in subparagraph e above have "expired" because "the 
total period of time over which their 'projected value' w as expected to 'materialize' has 
transpired in the absence of any 'intervening event'".31 
h. With regard to Article  7.8 of the SCM Agreement , the fact that the ex ante  "lives" of 
certain subsidies " passively  'expired'" before the end of the implementation period does 
not amount to "withdrawal" of those subsidies for the purpose of Article  7.8. 
                                                
25 Panel Report, para.  7.1.a.i -ii. (emphasis original)  
26 Panel Report, para.  7.1.b.i -iv. 
27 Panel Report, para. 7.1.c.i.  
28 Panel Report, para.  7.1.c.ii -iii. 
29 The Panel found that  the fact that one or more of the subsidies challenged in these compliance 
proceedings may have ceased to exist prior to 1  June 2011 does not ipso facto mean that the European  Union 
and the four member States do not have a compliance o bligation under the terms of Article  7.8 of the 
SCM Agreement in relation to these subsidies. The Panel further rejected the European  Union's arguments on 
"extraction" of subsidies, which had been rejected by the original panel and the Appellate  Body in th e original 
proceedings. (Panel Report, para.  7.1.d.i -v) 
30 Panel Report, para.  7.1.d.vi.  
31 Panel Report, para.  7.1.d.vii.  WT/DS316/AB/RW  
 
- 16 – 
 
 
  The European  Union  therefore "failed to comply with the obligation to 'withdraw the 
subsidy' for the purpose of Article 7.8".32 
i. The European  Union  failed to establish that the United  States ' claims under Article  6.3(b) 
and (c) of the SCM Agreement  should be rejected on the ground that the United  States ' 
"like" product is not "unsubsidized" within the meaning of Articles 6 .4 and 6.5 of the 
SCM Agreement .33 
j. The United  States  brought its adverse effects claims with respect to "appropriately 
defined product markets for LCA", namely, the global markets for: (i)  single -aisle LCA; 
(ii) twin-aisle LCA; and (iii) very large aircraft  (VLA) .34 
k. The " direct  and indirect  effects of the aggregated pre -A350XWB LA/MSF subsidies 
continue to be a 'genuine and substantial' cause of the current market presence of the 
A320, A330 and A380 … using either the 'plausible' or 'unlikely' counterfactual scenarios 
adopted in the original proceeding in relation to the effects of the same subsidies in 
the 2001 to  2006 period as the starting point of the analysis".35 With the exception of 
the A300 and A310 LA/MSF subsidies, the " direct  and indirect  effects of the aggregated 
LA/MSF subsidies" are a "'genuine and substantial' cause of the current market presence 
of the A350XWB family … using either the 'plausible' or 'unlikely' counterfactual 
scenarios adopted in the original proceeding in relation to the effects  of the 
pre-A350XWB LA/MSF subsidies in the  2001 to  2006 peri od as the starting point of 
the analysis".36 
l. With regard to Articles 6.3 and 5(c) of the SCM Agreement , the "product" effects  of 
LA/MSF subsidies, as identified in subparagraph k above, are a "'ge nuine and substantial' 
cause of displacement and/or impedance" of imports of a "like" product of the 
United  States  into the markets for single -aisle LCA, twin -aisle LCA, and VLA in the 
European  Union , within the meaning of Article  6.3(a), constituting seri ous prejudice 
under Article  5(c). These "product" effects are also a "'genuine and substantial' cause of 
displacement and/or impedance of exports" from the market s for (i) single -aisle LCA in 
Australia, China, and India; (ii)  twin-aisle LCA in China, Korea , and Singapore; and 
(iii) VLA in Australia, China, Korea, Singapore, and the United Arab Emirates, within the 
meaning of Article  6.3(b), constituting serious prejudice under Article  5(c). Further, 
these "product" effects are a "genuine and substantial" cause of significant lost sales in 
the global markets for single -aisle LCA, twin -aisle LCA, and VLA, within the meaning of 
Article  6.3(c), constituting serious prejudice within the meaning of Article  5(c).37 
m. The effects of the aggregated non -LA/MSF subsidie s (i.e. capital contribution subsidies 
and certain regional development grants) "'complement and supplement' the 'product' 
effects of the aggregated LA/MSF subsidies and, therefore, are a 'genuine' cause of 
serious prejudice to the interests of the United  States  within the meaning of 
Article  5(c)". The United  States  failed to demonstrate that the Spanish regional 
development grants used for Airbus' military aircraft activities benefit Airbus' LCA 
activities, and thus failed to establish that these subsidies  "complement and supplement" 
the "product" effects of the LA/MSF subsidies.38 
1.13.   Having found that the challenged subsidies have caused present serious prejudice to the 
United  States ' interests within the meaning of Article  5(c) of the SCM Agreement , the Panel  made 
no findings with respect to the United  States ' conditional claim that the challenged subsidies 
threaten to cause serious prejudice to its interests.39 
                                                
32 Panel Report, para.  7.1.d.viii -ix. (emphasis original)  
33 Panel Report, para.  7.1.d.x.  
34 Panel Report, para.  7.1.d.xi.  
35 Panel Report,  para. 7.1.d.xii. (emphasis original)  
36 Panel Report, para.  7.1.d.xiii. (emphasis original)  
37 Panel Report, para.  7.1.d.xiv -xvi. 
38 Panel Report, para.  7.1.d.xvii -xviii. 
39 Panel Report, para.  7.1.d.xix.  WT/DS316/AB/RW  
 
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  1.2.2   Appellate proceedings and procedural issues  
1.14.   On 13 October  2016, the European  Union  notified the DSB,  pursuant to Articles  16.4 and 17 
of the DSU, of its intention to appeal certain issues of law covered in the Panel Report and certain 
legal interpretations developed by the Panel , and filed a Notice of Appeal40 pursuant to Rule  20 of 
the Working Procedures  for Appellate Review41 (Working Procedures).  
1.15.   Also on 13  October  2016, the Chair of the Appellate  Body received a joint letter from the 
participants, the European  Union  and the United  States , requesting the Division hearing this 
appeal to adopt additional procedures to protect business confidential information (BCI) and highly 
sensitive business information (HSBI) in these appellate pr oceedings. In their letter, 
the European  Union  and the United States  argued, inter alia , that disclosure of certain sensitive 
information on the Panel record would be severely prejudicial to the LCA manufacturers concerned  
and possibly  to their customers and suppliers. The participants suggested that the additiona l 
procedures adopted by the Appellate  Body in the appeal in US – Large Civil Aircraft (2nd complaint)  
(DS353), with certain modifications, form the basis for any procedural  ruling on confidentiality in 
these appellate proceedings.  
1.16.   On the same day, the Chair of the Appellate  Body sent a lette r to the participants and 
third parties indicating that the Division hearing this appeal had decided, pursuant to Rule  16(1) of 
the Working Procedures, to suspend the deadlines for the filing of written submissions and other 
documents in this appeal. T he third parties were invited to comment in writing on the participants' 
joint request by 19  October  2016. Comments were received from Australia, Brazil,  and Canada.  
While none of the third parties o bjected to the adoption of additional procedures for the protection 
of BCI and HSBI, Canada suggested that the additional procedures provide for a designated 
reading room at the embassy and/or other diplomatic mission of the European  Union  and the 
United  States in each of the third participants' capitals .42 On 24  October  2016, Australia, 
the European  Union , and the United  States  each commented on Canada's proposal. Australia 
supported Canada's request. The  European  Union  and the United  States  opposed it, noting that it 
would require a total of 12 designated reading rooms  in the third participants' respective capitals, 
in addition to the designated reading room on the WTO premises, and emphasized that this would 
impose a significant burden on t he participants. The United  States  also considered that there 
would be little benefit to third participants, because the only difference under the proposed 
adjustment would be to shift the burden of reviewing BCI from Geneva -based officials to 
capital -based officials .  
1.17.   Taking into account the arguments made by the participants and the third parties' 
comments,  the Chair of the Appellate  Body, on behalf of the Division hearing this appeal, issued a 
Procedural Ruling on 25  October  201643 adopting additional pro cedures to protect the 
confidentiality of BCI and HSBI in these appellate proceedings.  The Division did not adopt the 
adjustment proposed by Canada, noting the burden it would involve and that the interests of 
third participants mainly concerned the correc t legal interpretation of relevant provisions of the 
covered agreements, rather than factual questions.44 The Division also noted that 
third participants' rights would be taken into account in these appellate proceedings, including in 
setting the Working  Schedule for this appeal.  
1.18.   Pursuant to the Procedural Ruling of 25  October  2016, the participants communicated their 
lists of BCI - and HSBI -Approved Persons on 27  October  2016. On 31  October  2016, the 
United  States  "provisionally " object ed to the inclusion of one of the European  Union 's BCI - and 
HSBI-Approved Persons , and request ed further information on  this individual . On 2  and 
                                                
40 WT/DS316/29 . 
41 WT/AB/WP/6 , 16 August  2010. 
42 Australia and Brazil did not object to the joint request by the participants, but requested that the 
Appellate  Body ensure that the rights of third participants are taken into account in setting the working 
schedule for this appeal.  
43 The Procedural R uling of 25 October  2016 and Additional Procedures to Protect Sensitive Information  
are contained in Annex D -1 of the Addendum to this Report, WT/DS316/AB/RW/Add.1 . The composition of the 
Division was communicated to the participants and third parties on 14  November  2016.  
44 See Appellate  Body Report, EC and certain member States – Large Civil Aircraft , Annex III, Procedural 
Ruling and Additional Procedures to  Protect Sensitive Information, para.  11. WT/DS316/AB/RW  
 
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  18 November  2016 respectively , the European  Union  provided additional information on the 
individual concerned, and confirmed that he had been retained by an outside advisor who is 
subject to an enforceable code of professional ethics and assumes responsibility for compli ance 
with the additional BCI/HSBI procedures adopted by the Appellate  Body in these proceedi ngs. 
The Division issued a Procedural Ruling on 21  November  2016, recalling that , pursuant to the 
Procedural Ruling of 25  October  2016, it would reject a request fo r designation of an outside 
advisor as a BCI- or HSBI -Approved Person only upon a showing of compelling reasons. In the 
circumstances of this case , the Division considered it appropriate for the European  Union  to keep 
the individual concerned on its BCI - and HSBI -Approved Persons list.   
1.19.   On 1  November  2016, the Division provided the participants and third parties with a 
Working Schedule for Appeal, setting out the dates for the filing of the appellant's submission and 
an eventual Notice of Other Appeal and other appellant's submission. On 3  November  2016, 
the European  Union  filed an appellant's submission pursuant to  Rule 21 of the Working Procedures .  
1.20.   On 10 November  2016, the United  States  notified the DSB , pursuant to Articles  16.4 and 17 
of the DSU, of it s intention to appeal certain issues of law covered in the Panel Report and certain 
legal interpretations developed by the Panel , and filed a Notice of Other Appeal and other 
appellant's submission45 pursuant to Rule 23 of the Working  Procedures . The United  States  
requested an extension until Friday, 11  November  2016, and subsequently until Monday, 
14 November  2016, to file the HSBI appendix to its submission, which was being transferred to 
Geneva by means of an expedited international courier service. In ac cepting the United  States ' 
request, the Division noted that the European  Union  did not object to the late filing of the 
appendix, and that the late filing did not adversely affect the Appellate  Body's consideration of this 
appeal. The Division nevertheless  emphasized the importance of adhering to the time -limits for 
filing documents in the interests of fairness and the orderly conduct of the appellate  proceedings.  
1.21.   On 14  November  2016, the Division received a letter from the European  Union  requesting 
that c ertain text in the United  States ' other appellant's submi ssion be designated as BCI. 
The United  States  responded in writing on 16  November  2016, indicating that it did not object to 
the BCI designations proposed by the European  Union  in paragraphs 36, 52, 64, and  69 of its 
other appellant's submission, but objected to the proposed BCI designations in paragraphs 35, 37, 
41, 43, 45, 47, 49, 51, 53, 55, and 60  because the information at issue could already be derived 
from information on the Panel record that w as not designated as BCI or HSBI . The Division 
reviewed the changes proposed, taking into account the risks associated with the disclosure of the 
relevant information  and the rights and duties established in the DSU and the other covered 
agreements. In a P rocedural Ruling dated 21  November  2016, the Division decided to proceed on 
the basis of the BCI designations proposed by the European  Union  and requested the United  States  
to submit revised copies of the BCI and non -BCI versions of its other appellant's s ubmission 
by 23 November  2016.  
1.22.   On 22  November  2016, the Division provided the participants and third parties with a 
revised Working Schedule for Appeal, setting out the dates for the filing of the appellees' and third 
participants' submissions. The Divisi on added that the dates for the oral hearing would be 
communicated to them in due course.  
1.23.   On 5  December  2016, the Appellate  Body received a letter from the European  Union  
referring to this ongoing appeal, and to the then anticipated appeals in US – Large C ivil Aircraft 
(2nd complaint) ( Article  21.5 – EU) (DS353) and US – Tax Incentives  (DS487). Referring to 
Rules  16(1) and  16(2) of the Working Procedures  and Article  9 of the DSU, the European  Union  
requested that the schedules for these three appeals be harmonized to the greatest extent 
possible and that the hearings be sufficiently proximate in time, so that a particular matter would 
not be effectively disposed of in one appeal before the related m atter is heard in one of the other 
appeals. The Chair of the Appellate  Body invited the United  States  and the third parties to submit 
comments on the European  Union 's request by 9 December  2016. The United  States  argued that 
the European  Union 's request wa s not supported by the DSU or the Working  Procedures and would 
result in delays in the proceedings . The United  States  stated that it remained open to proposals to 
set deadlines for written submissions and dates for oral hearings in a way that would allow t he 
                                                
45 WT/DS316/30 . WT/DS316/AB/RW  
 
- 19 – 
 
 
  participants and third participants in each dispute to advocate effectively their positions on appeal 
and for the Appellate  Body to consider fully the issues raised.46 The participants and third  parties 
were invited to submit additional comments by 16  December  2016. The European  Union  reiterated 
its request that any oral hearings in these appeals be sufficiently proximate in time, but noted that 
it was content to leave it to the Appellate  Body to determine what that would mean in practice.47 
By letter date d 22 December  2016, the Appellate  Body indicated that it would bear in mind the 
European  Union 's request, as well as the comments received, during the appellate proceedings in 
these three disputes.48 
1.24.   On 19  December  2016, the United  States  sent a letter referring to the Working  Schedule  
drawn up by the Division informing that it would have significant difficulties participating in the 
oral hearing if it were to be scheduled during the weeks of 6 and 13  March  2017 due to the 
unavailability o f key members of its delegation during those  period s. On the same day, 
the European  Union  sent a letter informing the Division that, for the same reason as that given by 
the United  States , the European  Union  would have difficulties participating in the ora l hearing if it 
were scheduled between 9  and 22  February  2017. Both participants requested the Division to be 
cognizant of this constraint when setting the dates for the oral hearing in these proceedings.  
1.25.   By letter dated 21  December  2016, the Chair of the  Appellate  Body notified the Chair of the 
DSB that the Appellate  Body would not be able to circulate its Report in this appeal within the 
60-day period pursuant to Article  17.5 of the DSU, or within the 90 -day period pursuant to the 
same provision.49 The Ch air indicated that this was due to a number of factors, including the 
number and complexity of the issues raised in these compliance proceedings, the substantial 
workload of the Appellate  Body, the overlap in the composition of the Divisions hearing severa l 
concurrent appeals, and the shortage of staff in the Appellate  Body Secretariat. On 4 May 2018, 
the Chair of the Appellate Body informed the Chair of the DSB that the Appellate Body Report in 
these proceedings would be circulated no later than 15 May  2018.50  
1.26.   On 6 January  2017, the Appellate  Body received a communication from the European  Union  
requesting that the Division modify the deadline for the filing of the appellees' submissions from 
13 January  to 20 January  2017. The Division invited the United States  and the third parties to 
comment on the European  Union 's request by 10  January  2017. Written comments were received 
from the United  States , Australia, and Canada. The United  States  opposed the request for an 
extension. While Australia and Canada d id not object to the extension, they requested that the 
Division also extend the deadline for the filing of the third participants' submissions if it were to 
decide to grant the European  Union 's request. Taking into account the length of the United  States ' 
other appellant's submission and the extended Working Schedule adopted for these appellate 
proceedings, the Division took the view that declining the extension would not result in manifest 
unfairness and thus rejected the European  Union 's request.  
1.27.   On 13  January  2017, the European  Union  and the United  States  each filed an appellee's 
submission.51 On 31  January  2017, Brazil, Canada, China, and Japan each filed a third participant's 
submission.52 On the same day, Australia notified its intention to appear at th e oral hearing as a 
third participant .53 On 26  April 2017, Korea also notified its intention to appear at the oral hearing 
as a third participant .54 
                                                
46 Comments were also received from Canada, Chi na, and Japan.  
47 Comments were also received from the United  States  and Australia.  
48 See also Appellate  Body Report, US – Tax Incentives , para.  1.5. 
49 WT/DS316/31 . 
50 WT/DS316 /32. 
51 Pursuant to Rules 22 and 23(4) of the Working Procedures.  
52 Pursuant to Rule 24(1) of the Working Procedures.  
53 Australia notified in writing that it would not be filing a third participant's submission. For purposes of 
this appeal, we have interpreted Australia 's action to be a notification expressing its intention to attend the oral 
hearing pursuant to Rule 24( 2) of the Working Procedures . 
54 Korea submitted its delegation list for the oral hearing. For purposes of this appeal, we have 
interpreted Korea's action to be a notification expressing its intentio n to attend the oral hearing pursuant to 
Rule 24(4) of the Working Procedures.  WT/DS316/AB/RW  
 
- 20 – 
 
 
  1.28.   By letter dated 26  January  2017, the participants and third participants were informed that 
the first session  of the oral hearing would take place from 2 to 5  May 2017.55 By letter dated 
4 April 2017, the Division invited the participants to indicate by 11  April 2017 whether they wished 
to request the sessions of the oral hearing in this appeal to be open to publi c observation, and if 
so, to propose specific modalities in this respect. The Division also invited the third participants to 
provide comments by 13  April 2017 on any request or proposal made by the participants.  
1.29.   On 11 April 2017, the participants request ed in a joint letter that the oral hearing in this 
appeal be opened to public observation, subject to proposed additional procedures for the 
protection of BCI and HSBI  similar to those in US – Large Civil Aircraft (2nd complaint) . Regarding 
the segments of  the oral hearing  that would be open to public observation, the participants 
suggested that the opening and closing statements of the participan ts and third participants 
(that agreed to public observation) be videotaped, reviewed by the participants for an y inadvertent 
inclusion of BCI/HSBI, and transmitted to the public at a later date.56 On 13  April 2017, Canada 
and China submitted comments on the participants' joint request . Canada supported the joint 
proposal . While recognizing the need for the protectio n of BCI/H SBI in these proceedings, 
China  queried whether a complete exclusion of third participants' non -BCI-Approved Persons from 
segments  of the oral hearing  dedicated to questions and answe rs was required. Instead, 
China  suggested that sessions dedicat ed to legal interpretat ive issues be open to all 
third participants and that they be kept separate from sessions requiring reference to BCI/HSBI.  
1.30.   On 19  April 2017, the Division issued a Procedural  Ruling57 authorizing the participants' 
request to open the sessions dedicated to the delivery of opening and closing statements  to public 
observation, subject to additional procedures for the conduct of all sessions of the oral hearing. 
Regarding China's request, the  Division considere d that it would be difficult to accommodate given 
the amount of BCI/ HSBI involved in this dispute . The Division also recalled  in this regard that third 
partici pants were allowed to designate  up to eight individuals as BCI -Approved Persons , and 
considered this sufficient to allow the third participants to be meani ngfully represented at the 
oral hearing .  
1.31.   By letter dated 16  May 2017, the Division informed the participants and third participants 
that the second session of the hearing would be held from 26 to 29  September  2017. By letter 
dated 22  June 2017, the Division notified to  the participants and third participants that the second 
session of the oral hearing would have to take place one week earl ier than initially planned. 
The Division indicated that this was because no meeting room would be  available at the WTO  due 
to the WTO Public Forum. On the same day, the United  States  objected to this scheduling change 
due to, inter alia , conflict with religious holidays and emphasized that, from its perspective, the 
WTO's organization of a pub lic forum could not supersede the WTO's timely administration of its 
dispute settlement system, a core function of the organization. The United  States  suggested that 
the second session of the oral  hearing take pla ce on the initially scheduled week in an alternative 
venue if no  meeting  room could be made  available  at the WTO . The United  States  stated that, 
alternatively, it could participate in a session scheduled for the week of 2  October  2017, 
if absolutely necessary. By l etter dated 26  June 2017, the European  Union  also stated its 
preference for the second session of the oral hearing to take place on the initially planned dates in 
premises outside the WTO if necessary , due to , inter alia , the professional and personal 
commitments of members of the Europe an Union 's delegation. The European  Union  further 
indicated that it would have a strong preference not to reschedule the second session for the week 
of 2 October  2017, and inst ead suggested moving it to the week of 9  October  2017, should it be 
impossible t o maintain the dates initially planned.  
1.32.   On 7 July 2017, the Division invited the third participants to comment on the arguments 
and proposals of the European  Union  and the United  States . No comments were received from the 
                                                
55 The first session of the oral hearing was held from 2 to 5  May 2017 as scheduled and covered the 
following topics: (i) the Mühlenberger Loch and Bremen Airport measures; (ii) import substitution subsidies; 
(iii) withdrawal of subsidies/removal of adverse effects; (iv) the European  Union's and the United  States' 
conditional appeals regarding the expiry of pre -A350XWB LA/MSF; and (v) benefit.  
56 The participants requested that any  potential disagreement as to whether BCI/HSBI was inadvertently 
included in the oral statements be resolved by the Division.  
57 The Procedural Ruling of 19 April 2017 and Additional Procedures on the Conduct of the Oral Hearing  
are contained in Annex D -2 of the Addendum  to this Report, WT/DS316/AB/RW/Add.1 . WT/DS316/AB/RW  
 
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  third participants.  Following confirmation  by the WTO Administration that there would be no room 
available to the Appellate  Body during the week of the WTO Public Forum, and taking into account 
the participants' preference for the initially planned dates, the Division explored alternat ive venues 
and made arrangements for the second session of the oral hearing to take place on the initially 
planned dates, 26 -29 September  2017, at the World Meteorological Organization.   
1.33.   The participants and third participants did not refer to BCI or HSBI in their opening or 
closing statements in either session of the oral hearing.58 Pursuant to the Procedural Ruling of 
19 April 2017, public observation of the first session of the oral hearing was limited to the opening 
statements  of the participants and the  third participants (with the exception of China). This was 
done by means of a delayed transmission of a video recording of such statements, after the 
participants had been given an  opportunity to review the recording to confirm that no BCI or HSBI 
had bee n inadvertently uttered.59 Due to the fact that the second session of the hearing took place 
outside the WTO premises, public observation took place via delayed audio playback of the 
recording of the opening and closing statements .60  
1.34.   During the two sessions  of the oral hearing, the participants and third participants 
responded to questions posed by Members of the Division hearing the appeal. At the 
second  session, the Division distributed written questions to the participants and third participants 
related t o the United  States ' request for completion of the legal analysis with respect to 
displacement or impedance.61 The Division received written responses during the session and the 
participants were given the opportunity to comment orally on the other particip ant's written 
responses during the final day of the hearing.  
1.35.   On 30  June 2017 and 24  November  2017, respectively, the participants and third 
participants were informed that, in accordance with Rule 15 of the Working Procedures, the Chair 
of the Appellate  Body had notified the Chair of the DSB of the Appellate  Body's decision to 
authorize Appellate  Body Members Mr Ricardo Ramírez -Hernández and Mr Peter Van den Bossche 
to complete the disposition of this appeal, even though their respective second terms of office 
were due to expire before the completion of these appellate proceedings.  
1.36.   On 25 April 2018, pursuant to paragraph 18(xiii) of the Procedural Ruling of 
25 October  2016, the Division provided a confidential advance copy of the Appellate Body Report 
intended for circulation to WTO Members to the participants, invi ting them to indicate, 
by 2 May 2018, whether any BCI or HSBI was inadvertently included in the report, and to request 
removal of such information. The Division also provided the parti cipants with an opportunity to 
respond to each other's comments by 4 May 2018. The United States indicated, on 2 May  2018, 
that it had not found any BCI or HSBI outside of the text encompassed in square brackets in the 
Appellate Body report intended for ci rculation, and the European Union indicated that it had 
identified four instances in which confidential information had be en inadvertently included. 
On 8 May 2018, the Division informed the European Union and the United States that it had 
redacted the info rmation concerned from the Appellate Body report to be circulated to Members.   
                                                
58 There were no closing statements at the first session of the oral hearing. Korea did not make an 
opening statement at either of the sessions, and Australia did not make an opening statement at the 
second  session. In addition, only the European  Union, the United  States, Canada, and Japan made closing 
statements at the end of the second session.  
59 China was not included in the video recording, having objected to opening its statements to public 
observ ation.  
60 China was not included in the audio recording, having objected to opening its statements to public 
observation.  
61 The second session was held from 26 to 29  September  2017 as scheduled and covered the topics not 
covered in the first session, namely : (i) product market; (ii) non -subsidized like product; (iii) causation; 
(iv) displacement/impedance and lost sales; and (v) completion of the legal analysis.  WT/DS316/AB/RW  
 
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  2  ARGUMENTS OF THE PAR TICIPANTS  
2.1.  The claims and arguments of the participants are reflected in the executive summaries of 
their written submissions provided to the Appellate  Body.62 The Notices of Appeal and 
Other  Appeal, and the executive summaries of the participants' claims and arguments, are 
contained in Annexes A and B of the Addendum to this Report, WT/DS316/AB/RW/Add.1.  
3  ARGUMENTS OF THE  THIRD PARTICIPANTS  
3.1.  The arguments of those third participants that filed a written submission are reflected in the 
executive summaries of their written submissions provided to the Appellate  Body63, which are 
contained in Annex C of the Addendum to this Report, WT/DS316/AB/RW/Add.1.   
4  ISSUES RAISED ON APP EAL 
4.1.  The following issues are raised in this appeal64: 
a. whether the Panel erred  by declining to make a finding as to whether the 
European  Union  had "withdrawn"  the Bremen airport and Mühlenberger Loch measures  
within  the meaning of Article  7.8 of the SCM  Agreement ; 
b. whether the Panel erred in finding that the United  States had failed to establish that the 
French, German, Spanish, and UK LA /MSF subsidies for Airbus' A350 XWB constituted 
prohibited import substitution sub sidies, within the meaning of Article  3.1(b) of the 
SCM Agreement  (raised by the United  States);  
c. whether the Panel erred in determining the "corporate borrowing rate " component of the 
market benchmark for the A350XWB LA/MSF measures; and, in particular : 
i. whether the Panel erred in its application of Article  1.1(b) of the SCM Agreement or  
acted inconsistently with Article  11 of the DSU by failing to determine the "corporate 
borrowing rate" component of the market benchmark on the basis of the yield of the 
EADS bond on the day of conclusion  of each A350XWB LA/MSF contract;  and 
ii. in the event the Appellate Body finds that the Panel did not err in the manner 
described above, whether the Panel erred in its application of Article  1.1(b) of the 
SCM Agreement or  acted inconsistently with Article  11 of the DSU by including in its 
calculation of the "corporate borrowing rate" the average yield of the EADS bond 
over the six months prior to the conclusion of the A350XWB LA/MSF contracts ; 
d. whether the Panel erred in using the  risk premium applied to the A380 LA/MSF measures 
in the original proceedings as the project -specific risk premium to determine whether the 
A350XWB LA/MSF measures confer a benefit; and in particular : 
i. whether the Panel erred under Article  1.1(b) of the SCM Agreement  or acted 
inconsistently with Article  11 of the DSU by  allegedly  failing to establish a risk 
premium that best reflects the risks associated with the A350XWB project ; 
ii. whether the Panel acted inconsistently with Article  11 of the DSU in its assessment of 
the differences in the risk profiles of the A380 and the A350XWB projects; and  
                                                
62 Pursuant to the Appellate  Body's communication on "Executive Summaries of Written Submissions i n 
Appellate Proceedings" and "Guidelines in Respect of Executive Summaries of Written Submissions in 
Appellate  Proceedings" (WT/AB/23, 11  March  2015).  
63 Pursuant to the Appellate  Body's communication on "Executive Summaries of Written Submissions in 
Appell ate Proceedings" and "Guidelines in Respect of Executive Summaries of Written Submissions in 
Appellate  Proceedings" (WT/AB/23, 11  March  2015).  
64 Unless indicated otherwise, the following issues are raised by the European  Union.  WT/DS316/AB/RW  
 
- 23 – 
 
 
  iii. whether the Panel erred under Article  1.1(b) of the SCM Agreement  or acted 
inconsistently with Article  11 of the DSU by adopting a single proj ect risk premium 
for each of the French, German, Spanish, and UK A 350XWB LA/MSF measures;  
e. whether the Panel erred in its interpretation of Article  7.8 of the SCM Agreement  in 
finding that this provision requires an implementing Member, found in original 
proceedings to have granted or maintained subsidies that cause adverse effects, to 
"remove the adverse effects" of the subsidies irrespective of whether those subsidies 
continue to exist  in the implementation period;  
f. in the event  the Appellate  Body reverses the Panel's interpretation of Article  7.8 of the 
SCM Agreement:  
i. whether the Panel erred in its interpretation of Article  1.1(b) of the SCM Agreement  
in finding that the ex ante "lives" of the French, German, and Spanish LA/MSF 
subsidies for the A300B/B2/B4 , A300 -600, A310, A320, and A330/ A340, and the 
UK LA/MSF subsidies for the A320 and A330/ A340 expired prior to 1 December 2011  
(raised by the United  States);  and 
ii. if the Appellate Body finds  that the expiry of a subsidy after the end of the 
implementation period  constitute s "withdrawal " within the meaning of Article  7.8 of 
the SCM Agreement , whether the  Panel erred in  finding that the LA/MSF subsidies for 
the A330-200 and the A340-500/600 expired  after 1 December 201 1 (raised by 
the United States);  
g. in the event that the Appellate Body reverses the Panel's interpretation of Article  7.8 of 
the SCM  Agreement and attempts to complete the legal analysis on the basis of a correct 
interpretation, whether the Panel erred in its interpr etation of Article  7.8 (in conjunction 
with Article  1 of the SCM Agreement ) in finding that the European  Union  has not 
demonstrated that the "lives" of the French LA/MSF subsidies for the A310 -300 and 
A330-200, the French and Spanish LA/MSF subsidies for t he A300B/B2/B4 and 
A300-600, and the French, Spanish, and UK LA/MSF subsidies for the A320 and 
A330/A340  came to an end when Airbus completed repaymen t of the financial 
contribution;  
h. whether, as a consequence of the Panel's interpretative error under Artic le 7.8 of the 
SCM Agreement, the Panel's findings regarding the adverse effects caused by the 
challenged subsidies must be reversed;  
i. whether the Panel erred in rejecting the European  Union 's contention that the 
United  States  was required  under  Article  6.4 of the SCM Agreement , to demonstrate that 
its "like product" (Boeing LCA) was "non -subsidized" in order to make out its claims of 
serious prejudice under Article  6.3(b) of the SCM Agreement;  
j. whether the Panel erred in its identification of the relevant pro duct markets ; and in 
particular:  
i. whether the Panel erred in interpreting the term "market" in Article  6.3 of the 
SCM Agreement  by finding that two products fall within the same product market as 
long as there is "some" competitive relationship between the products, and 
consequently failing to perform a "quantitative" analysis of the nature and degree of 
competition between the products to de termine whether it was "significant";  
ii. in the alternative, to the extent that the Appellate  Body finds that the Panel did not 
err in its interpretation of the term "market", whether the Panel erred in its 
application of Articles 5(c), 6.3, and 7.8 of the SCM Agreement  by not finding that all 
Airbus and Boeing LCA products form part of a "single" LCA market based on the 
existence of "some" competition between each model of Airbus and Boeing LCA; and   WT/DS316/AB/RW  
 
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  iii. whether the Panel acted inconsistently with Article  11 of t he DSU by assessing the 
United  States ' adverse effects claims on the basis of the three -way market 
segmentation proposed by the United  States , without also enquiring whether there 
existed "some" competiti on between aircraft that the United  States  had place d in 
separate product markets ; 
k. whether the Panel erred in its interpretation and application of Articles 5(c), 6.3, and 7.8 
of the SCM  Agreement in finding that "product effects" of the pre -A350XWB LA /MSF 
subsidies, that is, the effects of such subsidies on the ability of Airbus to launch and 
bring to market an Airbus LCA as and when it did, continue to be a "genuine and 
substantial " cause of the present -day market presence of the A320, A330 , and A380 
families of Airbus LCA;  
l. whether the Panel found that the LA/MSF subsidies for the A380 resulted in 
"direct  effects" on the launch and market presence of the A380 and , if so, whether the 
Panel acted inconsistently with Article  11 of t he DSU in reaching that finding;  
m. whether the Panel erred in finding that the "product effects " of the aggregated LA/MSF 
subsidies, with the exception of the LA/MSF subsidies for the A300 and A310, are a 
"genuine and substantial " cause of the current market presence of the A350XWB  family 
of Airbus LCA; more specifically:  
i. whether the Panel found that the LA/MSF subsidies for the A350XWB resulted in 
"direct effects " on the launch and market presence of the A350XWB and, if so, 
whether the Panel acted inconsistently with Article  11 of the DSU i n reaching that 
finding; and  
ii. whether the Panel erred in its application of Articles 5(c) and 7.8 of the 
SCM Agreement in finding  that A380 LA/MSF  subsidies had "indirect effects " on 
Airbus' ability to launch the A350XWB ; and  
n. whether the Panel erred in its interpretation and application of Articles 5(c), 6.3(a), 
6.3(b), 6.3(c), and 7.8 of the SCM  Agreement in finding that the United  States 
established that the cha llenged LA/MSF subsidies are a genuine and substantial cause of 
"lost sales " and "displacement and/or impedance " of US LCA in the relevant product and 
geographic markets ; more specifically:  
i. whether the Panel erred in finding a causal link between the challenged subsidies and 
alleged "lost sales " and "displacement and/or impedance " by fai ling to take into 
account: (i)  the "closeness of competition" between various LCA models; 
and (ii) non-attribution factors; and  
ii. whether the Panel erred in finding "displacement and/or impedance " in the relevant 
product and geographic markets at issue by: ( i) failing to distinguish between the 
concepts of "displacement " and "impedance " and making undifferentiated findings of 
"displacement and/or impe dance "; and (ii) failing to engage with the relevant volume 
and market share data and to adopt a large enough number of data points to 
meaningfully investigate  trend s in the chosen reference period . 
5  ANALYSIS OF THE APPELLATE  BODY  
5.1  Article  21.5 of the DSU – the Mühlenberger Loch and Bremen Airport measures  
5.1.  The European  Union  claims that, by declining to make a finding as to  whether the 
European  Union  had achieved compliance with respect to the Mühlenberger Loch aircraft assembly 
site measure and the Bremen Airport runway extension measure, the Panel erred in its WT/DS316/AB/RW  
 
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  interpretation and application of Article  21.5 of the DSU and also acted inconsistently with 
Article  11 of the DSU.65 
5.2.  Specifically, the European  Union  claims that the Panel erred in interpreting Article  21.5 of the 
DSU as limiting the right of an original respondent to have recourse to Article  21.5 to a sc enario 
where the following three conditions are met: (i) the original respondent initiates Article  21.5 
proceedings; (ii) the original complainant refuses to participate in such proceedings; 
and (iii) the original complainant has already suspended concessi ons vis -à-vis the original 
respondent in accordance with Article  22 of the DSU.66 For the European  Union , the Panel thus 
attached, without textual basis, such qualifications to the right of an original respondent to seek 
adjudication of a disagreement conce rning the WTO -consistency of its measure taken to comply.67 
As to the Panel's application of Article  21.5, the European  Union  submits that the Panel erred in 
finding that a "disagreement" within the meaning of this provision did not exist between the 
partie s with respect to the two measures at issue.68 Finally, the European  Union  submits that, 
by refusing to make findings as to whether the European  Union  had achieved withdrawal, within 
the meaning of Article  7.8 of the SCM Agreement , in respect of the Mühlenb erger Loch and 
Bremen Airport measures, the Panel incorrectly declined to exercise validly established jurisdiction, 
thereby acting inconsistently with Article  11 of the DSU.69 Based on these alleged errors in the 
Panel's analysis, the European  Union  reques ts us to reverse the Panel's findings, complete the 
legal analysis , and find  that the European  Union  has withdrawn the subsidies that had been found 
to flow from the two measures at issue.70  
5.3.  Before addressing the European  Union 's claims of error, we briefl y recall the Panel's analysis 
concerning the Mühlenberger Loch and the Bremen Airport measures.  
5.1.1   The Panel's findings  
5.4.  Regarding the Bremen Airport runway extension measure , the Panel noted that 
"{t}he  United  States ' claims of non -compliance d {id} not include" claims with respect to this 
measure.71 In respect of the Mühlenberger Loch aircraft assembly site measure, the Panel noted 
that the measure was initially within the scope of the United  States ' challenge to the 
European  Union 's alleged complian ce. However, having reviewed the European  Union 's explanation 
in its first written submission to the Panel of the methodology it had used to adjust the rental for 
the Mühlenberger Loch site to a market rate, the United  States  subsequently decided not to pu rsue 
its claim with regard to this measure.72 In footnote 1847 to para graph 6.1102 of its Report, 
the Panel stated:  
The extent to which the full or partial repayment of a subsidy or the alignment of its 
terms with a market benchmark may amount to the "withd rawal" of a subsidy for the 
purpose of Article  7.8 of the SCM Agreement  are questions that are not before us and 
we, therefore, make no specific findings as to whether such actions may suffice to 
bring an implementing Member into conformity with its obliga tions under the 
SCM Agreement . We note, however, that the United  States  does not challenge the 
European  Union 's alleged "withdrawal" of the subsidies in relation to the Bremen 
Airport runway extension and the Mühlenberger Loch aircraft assembly site, both of 
which were found to cause adverse effects in the original proceeding. According to the 
European  Union , the terms of these subsidies were aligned to a market benchmark 
before the end of the implementation period.73 
                                                
65 European Union's appellant 's submission, para. 226.  
66 European  Union 's appellant's submission, para. 244. 
67 European  Union 's appellant's submission, para. 244. 
68 European  Union 's appell ant's submission, paras.  258-262. 
69 European  Union 's appellant's submission, paras.  270-271. 
70 European  Union 's appellant's submission, para. 272. 
71 Panel Report, para. 6.20 (referring to United  States ' first written submission to the Panel, paras.  5 
and 35). 
72 Panel Report, paras.  5.75 and  6.22.  
73 See also Panel Report, fn 109 to para. 6.42. WT/DS316/AB/RW  
 
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  5.5.  Similarly, the Panel observed that the United States ' claims of continued adverse effects 
"d{id} not include the subsidy measures relating to the Mühlenberger Loch and the extension of 
the Bremen Airport runway that were found to cause adverse effects in the original proceeding".74 
5.6.  During the interim review stage of the Panel proceedings75, the European  Union  requested 
the Panel to find that the two measures taken to comply in respect of Mühlenberger Loch and 
Bremen Airport achieved "withdrawal" of the respective subsidies within the meaning of Article 7.8 
of the SCM Agreement .76 The European  Union  asserted that the right of an original respondent to 
have a compliance panel under Article  21.5 of the DSU assess the WTO -consistency of a measure 
taken to comply was explicitly recognized by the Appellate  Body in US – Continued Suspension / 
Canada – Continued Suspension .77 In response, the United  States  requested the Panel to reject 
the European  Union 's request and confirmed that, as stated in its second written submission to the 
Panel, it was not pursuing the claims with respect to the Mühlenberger Loch and Bremen Airport 
measures.78  
5.7.  Responding to the European  Union 's request for findings presented during the interim review 
stage, the Panel recalled that its task under Article  21.5 of the DSU was to make an  objective 
assessment as to whether the European  Union  had complied with the recommendations and 
rulings of the DSB  to the extent that there was a " disagreement  as to the existence or 
consistency" of "measures taken to comply".79 In this regard, the Panel n oted that neither party 
contested the "existence" of the European  Union 's measures taken to comply, and found that there 
was no present disagreement between the parties regarding the conformity of the Mühlenberger 
Loch and Bremen Airport measures with the relevant disciplines of the SCM  Agreement  or whether 
those measures  achieved compliance with the recommendations and rulings of the DSB.80 For the 
Panel, in the absence of any such "disagreement", there was no question of WTO -consistency to 
determine in relation to those measures.81  
5.8.  The Panel then addressed the European  Union 's reliance on the Appellate  Body reports in  
US – Continued Suspension / Canada  ‒ Continued Suspension . The Panel noted that, in those 
disputes, the Appellate  Body had discussed the scenario where: (i) the original respondent initiates 
Article  21.5 proceedi ngs; (ii) the original complainant refuses to participate in such proceedings; 
and (iii) the original complainant has already suspended concessions vis -à-vis the original 
respondent in accordance with Article  22 of the DSU.82 The Panel understood the Appell ate Body to 
have considered that , "in such a scenario , the compliance panel would be called upon to 'make its 
determination on the basis of a prima facie case presented by the original respondent that its 
implementing measure has brought it into compliance  with the DSB's recommendations and 
rulings'".83 The Panel considered the situation to be different in the present case , noting that  the 
original complainant – i.e. the United  States  – (rather than the original respondent) had initiated 
these Article  21.5 p roceedings , in which both parties participated, and that the suspension of 
                                                
74 Panel Report, fn  53 to para. 6.3. 
75 The second, and final, round of written submissions to the Panel was concluded on 15  January  2013. 
The Panel meeting with the parties in this dispute took place on 16 -18 April 2013. The Panel issued its Interim 
Report t o the parties on 11  December  2015. The parties submitted their comments on the Interim Report on 
22 January  2016, and responded to each other's  comments on 12  February  2016.  
76 Panel Report, para. 5.74. 
77 Panel Report, para. 5.74 (quoting Appellate  Body Reports, US – Continued Suspension  / 
Canada  ‒ Continued Suspension , para. 358).  
78 Panel Report, para. 5.75. The Panel noted that the United  States  neither sought a finding that the 
European  Union  had failed to comply with the recommendations and rulings of th e DSB with respect to those 
measures, nor argued that those subsidies caused adverse effects after the end of the implementation period . 
(Ibid.)  
79 Panel Report, para. 5.76 ( quoting Article  21.5 of the DSU ( emphasis added by the Panel) ). 
80 Panel Report, para. 5.76. 
81 Panel Report, para. 5.76. 
82 Panel Report, para. 5.77. 
83 Panel Report, para. 5.77 (quoting Appellate  Body Reports, US – Continued Suspension / 
Canada  ‒ Continued Suspension , para. 358). WT/DS316/AB/RW  
 
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  concessions had not been approved or implemented .84 Furthermore, the Panel found no relevant 
"disagreement" or "associated exigency" to exist in these proceedings.85  
5.9.  For all these re asons, and "in the absence of any explicit refutation by the United  States  of 
the European  Union 's measures taken to comply with respect to the Mühlenberger Loch or the 
Bremen Airport runway subsidies", the Panel found that "there {was} no requirement unde r 
Article  21.5 of the DSU for the compliance Panel in this dispute to make any findings on the 
consistency of those measures with the covered agreements ."86 Finally, referring to Article  22.2 of 
the DSU, the Panel noted that, under these circumstances, "the United  States  would not be 
entitled to request the suspension of concessions or other obligations under the covered 
agreements in relation {to} the Mühlenberger Loch and the Bremen Airp ort runway measures ."87 
5.1.2   Whether the Panel erred by declining to  make a finding as to  whether  the 
European  Union  had "withdrawn" the Mühlenberger Loch and Bremen Airport measures  
5.10.   Article  21.5 of the DSU requires that "disputes" arising out of any  "disagreeme nt as to the 
existence or consistency with a covered agreement of measures taken to comply with the 
recommendations and rulings … shall be decided through recourse to these dispute settlement 
procedures, including wherever possible resort to the original p anel." The Appellate  Body has 
emphasized the "compulsory" and "obligatory" nature of Article  21.5 proceeding s for resolving 
disputes concerning the existence or WTO -consistency of measures taken to comply with the 
recommendations and rulings of the DSB.88  
5.11.   In US – Continued Suspension / Canada – Continued Suspension , the Appellate  Body stated 
that a "disagreement" under Article  21.5 as to the consistency with the WTO agreements of a 
measure taken to comply "arises from the existence of conflicting views: the  original complainant 's 
view that such a measure is inconsistent with the WTO agreements or brings about only partial 
compliance, and the original respondent 's view that a mea sure is consistent with the 
WTO agreements and brings about full compliance with the DSB's recommendations and rulings".89 
Article  21.5 does not indicate which party may initiate proceedings under this provision. Rather, 
the language of the provision is neutral on this matter and it is open to either party to refer the 
matter to a compl iance panel to resolve a disagreement as to the existence or consistency with a 
covered agreement of measures taken to comply .90 The text of Article  21.5, therefore, does not 
preclude an original respondent from initiating proceedings under this provision t o obtain 
confirmation of the WTO -consistency of its implementing measures.91  
5.12.   Article  6.2 of the DSU is "generally applicable " to panel requests under Article  21.5.92 
Article  21.5, for its part,  expressly links the measures taken to comply with the recommendations 
and rulings of the DSB.93 In carrying out its adjudicatory function, the task of a  panel under 
Article  21.5 is to decide "disputes" arising out of any "disagreement as to the existence or 
consistency with a covered agreement of measures  taken to comply with the recommendations 
and rulings". By virtue of Article  11 of the DSU, which also governs proceedings under Article  21.5, 
the task of a compliance  panel is to "examine fully" , and in an objective manner , the issues raised 
by the partie s.94 Much like i t is for the Article  21.5 panel – and not for the complainant or the 
                                                
84 Panel Report, para. 5.77. 
85 Panel Report, para. 5.77. 
86 Panel Report, para. 5.78. 
87 Panel Report, para. 5.78. 
88 Appellate  Body Reports, US – Continued Suspension / Canada – Continued Suspension , para.  340. 
See also paras.  336 and 339 . 
89 Appellate  Body Reports, US – Continued Suspension / Canada – Continued Sus pension , para. 347. 
90 Appellate  Body Reports, US – Continued Suspension / Canada – Continued Suspension , para. 347.  
91 Appellate  Body Reports, US – Continued Suspension / Canada – Continued Suspension , para. 347. 
92 Appellate  Body Report, US – FSC ( Article  21.5 – EC II) , para. 59. The Appellate  Body further 
explained that, " given that Article  21.5 deals with compliance proceedings, Article  6.2 needs to be interpreted 
in the light of Article  21.5. In other words, the requirements of Article  6.2, as they apply  to an original panel 
request, need to be adapted to a panel request under Article  21.5". (Ibid.)  
93 Appellate  Body Report, US – FSC ( Article  21.5 – EC II) , paras.  61 and 93 . 
94 Appellate  Body Report, US – Oil Country Tubular Goods Sunset Reviews ( Article  21.5 – Argentina) , 
para. 151. WT/DS316/AB/RW  
 
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  respondent – to determine whether a particular measure is one "taken to comply"95, it is also for 
the Article  21.5 panel, and not for either party, to determine whether an o bjectively identifiable 
"disagreement" exists between the parties. Thus, a panel under Article  21.5 must carry out its 
objective assessment of  the existence and WTO -consistency of measures taken to comply in light 
of the arguments and evidence placed before it by the parties and the relevant recommendations 
and rulings of the DSB .  
5.13.   With these considerations in mind, we begin by examining the European  Union 's claim that 
the Panel erred in its interpretation of Article  21.5 of the DSU by qualifying the right of an original 
respondent to seek adjudication of a disagreement regarding the WTO -consistency of a measure 
taken to comply to scenarios where each of the following three conditions is met: (i) the original 
respondent initiates Article  21.5 proceedings; (i i) the original complainant refuses to participate in 
such proceedings; and (iii) the original complainant has already suspended concessions vis -à-vis 
the original respondent in accordance with Article  22 of the DSU.96  
5.14.   Contrary to what the European  Union  suggests, we do not consider that the Panel dismissed 
the European  Union 's request for findings on the basis of an alleged failure to meet the three 
"conditions" discussed by the Appellate  Body in US – Continued Suspension / Canada – Continued 
Suspension .97 Instead, the Panel declined to rule on the WTO -consistency of the two measures at 
issue because it found that "there {was}  no relevant disagreement between the parties' to 
resolve".98 In doing so, the Panel distinguished between the issues arising in the p resent case and 
those in US ‒ Continued Suspension / Canada – Continued Suspension .99 We do not consider that 
the Panel's reasoning distinguishing the present case from the specific situation addressed by the 
Appellate  Body in those disputes  should be under stood as qualifying the rights of parties to have 
recourse to compliance proceedings by interpreting Article  21.5 in the manner suggested by the 
European  Union . As we have discussed above, under a proper interpretation of Article  21.5, it is 
open to either  party to refer the matter to a compliance panel under this provision  to resolve a 
disagreement as to the existence or consistency with a covered agreement of a measure taken 
to comply .100 
5.15.   The European  Union  further submits that the Panel erred in its applic ation of Article  21.5 of 
the DSU in finding that there was no "disagreement" between the parties, within the meaning of 
this provision, with respect to the Mühlenberger Loch and Bremen Airport measures.101 According 
to the European  Union , a disagreement in r espect of the two measures taken to comply existed, 
and continues to exist, between the parties in the present dispute.102 First, the European  Union  
refers to its Compliance Communication, identifying  the measures it took to comply concerning the 
Mühlenberge r Loch and Bremen Airport measures. Recalling that those measures  were included in 
the United  States ' compliance panel  request103, the European  Union  submits that this is  indicative 
                                                
95 Appellate  Body Report, EC – Bed Linen ( Article  21.5 – India) , para. 78. 
96 European  Union 's appellant's submission, para. 244. 
97 As the Panel rightly observed, the Appellate  Body's discussion of the "hypothetical" scenario wa s 
premised on the existence of a "disagreement" between the parties, namely, whether the ongoing suspension 
of concessions continued to be justified under Article  22.8 of the DSU. (See Panel Report, para.  5.77)  
98 Panel Report, para.  5.75. 
99 In requesting t he Panel to rule on the two measures at issue, the European  Union relied on the 
Appellate  Body's statement in US – Continued Suspension / Canada – Continued Suspension  that, "absent any 
rebuttal by the original complainant, the Article  21.5 panel will make  its determination on the basis of a 
prima  facie case presented by the original respondent that its implementing measure has brought it into 
compliance with the DSB's recommendations and rulings ". (Panel Report, para. 5.74 (quoting Appellate  Body 
Reports, US – Continued Suspension / Canada – Continued Suspension , para. 358)) This statement by the 
Appellate  Body discussed  the specific situation where an original respondent has initiate d Article  21.5 
proceedings against the original complainant, and the origi nal complainant has refuse d to participate in the 
Article  21.5 proceedings initiated by the original respondent. The Appellate  Body explained that , in such 
proceedings initiated by the original respondent, a "defending party {i.e. the original complainant} who refuses 
to participate in dispute settlement proceedings will lose the opportunity to defend its position and will risk a 
finding in favour of t he complaining party {i.e. the original respondent} that has established a prima facie 
case".  (Appellate  Body Reports, US – Continued Suspension / Canada – Continued Suspension , para. 358) See 
also Panel Report, para.  5.77. 
100 Appellate  Body Reports, US – Continued Suspension / Canada – Continued Suspension , para. 347.  
101 European  Union 's appellant's submission, para. 256. 
102 European  Union 's appellant's submission, para. 257. 
103 WT/DS316/23 . WT/DS316/AB/RW  
 
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  of a "disagreement" within the meaning of Article  21.5.104 Second, the Europea n Union  submits 
that the parties' written submissions to the Panel also evidence "conflicting views" as to whether 
the two measures at issue achieved withdrawal of the respective subsidies.105 
5.16.   The United  States  responds that the Bremen Airport measure was not included in its 
compliance panel request  as one of the measures on which  the United  States  requested the Panel 
to rule.106 Even assuming that the Bremen Airport measure was properly included in the 
United  States' compliance panel request , we note that, in its first written submission to the Panel, 
the United  States  made it clear that it was "not challenging t he EU's compliance with the 
DSB recommendations and rulings with regard to {the infrastructure -related subsidy for the 
Bremen Airport runway}"107, nor " the EU's removal of the Bremen Airport runway subsidy."108 
At the oral hearing  in these appellate proceedings , the United  States  confirmed its position that the 
European  Union  had taken action with regard to the  subsidy arising out of the Bremen Airport 
measure in a way that ceased its adverse effects and  that the European  Union  had therefore  
"withdrawn" that subsidy.109 In light of its statements before the Panel , as confirmed by it on 
appeal,  we understand the United States  to have clarified that it is not challenging the 
European  Union 's compliance regarding the Bremen Airport measure and it is not making any 
claim in respect of that measure.  
5.17.   Turning to the Mühlenberger Loch measure, the United  States  does not d ispute that this 
measure was expressly included in its compliance panel request  as one of the measures on which 
it was seeking findings .110 We note that, unlike the Bremen Airport measure, the United  States  
initially pursue d its claim with respect to the Müh lenberger Loch measure in its first written 
submission to the Panel.111 Subsequently, however, the United  States  clarified that it was 
"not pursuing its claim with regard to {that}  measure at {that}  time112 and stated that "the only 
subsidies that the EU ha {d} withdrawn {were}  the discounted fee for the use of the Bremen 
runway and the below -market rental terms for the Mühlenberger Loch site."113  
5.18.   On appeal, in support of its position that the parties' "disagreement" with respect to the 
Mühlenberger Loch measure  continued to exist during the course of the Panel proceedings, the 
European  Union  relies on the heading of a section of the United  States ' second written submission 
to the Panel, which reads as follows: " The modifications to the Mühlenberger Loch lease did  not 
make the terms consistent with the market and, therefore, failed to withdraw the subsidy".114 
While the text of the heading , when considered in isolation, may suggest that the United  States 
continued to take issue with the Mühlenberger Loch measure, we note that in the section following 
that heading  the United  States  clarified that it was " not pursuing its claim with regard to {that}  
measure at {that}  time".115 We understand the United  States  therefore to have abandoned  its 
claim in respect of the Mühlenbe rger Loch measure as of its second written submission to the 
Panel. We also note in this regard that the European  Union  acknowledged before the Panel that 
"{t}he United  States  agree {d} with respect to the measures involving take -off and landing fees at 
Bremen Airport and the lease agreement for the land in the Mühlenberger Loch in Hamburg."116  
5.19.   It was only during the interim review stage of the Panel proceedings that the 
European  Union  requested the Panel to make findings with respect to the Bremen Airport an d 
Mühlenberger Loch measures. Asking the Panel to reject the European  Union 's request made 
                                                
104 European  Union 's appellant's submission, paras.  258-259. At the or al hearing, the European  Union 
asserted that the United  States' compliance panel request incorporated the entire Compliance Communication 
by the European  Union.  
105 European  Union 's appellant's submission, para. 260. 
106 United  States' appellee's submission, p ara. 177. 
107 United  States ' first written submission to the Panel, fn  13 to para. 5. 
108 United  States ' first written submission to the Panel, fn  64 to para. 35. 
109 United  States' response to questioning at the oral hearing.  
110 See United  States ' compliance panel request, para. 5. 
111 United  States ' first written subm ission to the Panel, para.  97.  
112 United  States ' second written submission to the Panel, para. 265. 
113 United  States ' second written subm ission to the Panel, para.  52.  
114 European  Union 's appellant's submission, para. 260 (quoting United  States ' second written 
submission to the Panel, section  IV.C.4 ).  
115 United  States ' second written submission to the Panel, para. 265. 
116 European  Union 's second written submission to the Panel, para. 72. (fn omitted)  WT/DS316/AB/RW  
 
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  during the interim review stage, the United  States  reaffirmed that it was not pursuing the claims 
with respect to those two  measures.117 The United  States  confirmed at  the first session of the oral 
hearing in these appellate proceedings  that it considered the European  Union  to have "withdrawn" 
the subsidy arising out of the Mühlenberger Loch measure in a way that ceased its adverse 
effects.118 
5.20.   As discussed above, a "disagreement" under Article  21.5 as to the consistency with the 
WTO agreements of a measure taken to comply "arises from the exis tence of conflicting views: 
the original complainant 's view that such a measure is inconsistent with the WTO agreements or 
brings about only partial compliance, and the original respondent 's view that a measure is 
consistent with the WTO agreements and brings about full compliance with the 
DSB's recommendations and rulings".119 In accordance with Article  11 of the DSU, it is for th e 
panel to determine whether an objectively identifiable "disagreement" within the meaning of 
Article  21.5 exists between the parties.  
5.21.   By including the Bremen Airport and Mühlenberger  Loch measures in its Compliance 
Communication, the European  Union  took t he view that those  measures are consistent with the 
WTO agreements and brought  the European  Union  into full compliance with the relevant 
recommendations and rulings by the DSB. It is our understanding, based on a collective reading of 
its representations b efore the Panel, that the United  States  did not take issue with or challenge 
this view held by the European  Union .120 Thus, in light of the United  States ' and European  Union 's 
statements before it, the Panel, in our view, rightly found that there was no " disagreement" for it 
to resolve within the meaning of Article  21.5 of the DSU.121 With the United  States  having  clarified 
that it did not take issue with the Bremen Airport and Mühlenberger Loch measures122, the Panel  
was not, under the  circumstances  of the prese nt case,  required  to rule on the merits of the claims 
of WTO -consistency and/or compliance in respect of the those two measures.  
5.22.   Finally, the European  Union  claims that the Panel acted inconsistently with Article  11 of the 
DSU by declining to assess whether the European  Union  had achieved withdrawal, within the 
meaning of Article  7.8 of the SCM Agreement , in respect of the Mühlenberger Loch and Bremen 
Airport measures.123 The European  Union  submits that a panel acts inconsistently with Article  11 of 
the DSU if it declines to exercise validly established jurisdiction on the matter before it.124 
Recalling its position that the "disagreement" between the parties continued to exist throughout 
the Panel proceedings, the European Union  asserts that the "matter" relating to the two measures 
at issue was properly before the Panel and should have been addressed by  it.125  
5.23.   We agree with the European  Union  to the extent  that it suggests that a panel acts 
inconsistently with Article  11 of the DSU if it declines to exercise validly established jurisdiction.126 
It does not , however,  follow from this that , once jurisdiction has been established,  a panel is 
required to rule on the substantive merits of each of the claims before it.127 In the p resent case , 
we have not found fault in the Panel's conclusion that there was no "disagreement" between the 
parties with respect to the Bremen Airport and Mühlenberger Loch measures.  In such 
circumstances,  the Panel was not required to make findings on the  existence and WTO -consistency 
                                                
117 Panel Report, para.  5.75. 
118 United  States' response to questioning at the oral hearing.  
119 European  Union 's appellant's submission, para. 257 (quoting Appellate  Body Reports, US – Continued 
Suspension / Canada – Continued Suspension , para. 347). 
120 Our understanding is confirmed by the United  States' responses to questioning during the 
first session of the oral hearing in this appeal.  
121 Panel Report, para. 5.77.  
122 At the oral hearing in this appeal , the United  States  confirmed  that it would not challenge the 
Bremen Airport and Mühlenberger Loch measures in new proceedings under Article 21.5 of the DSU given its 
view that the subsidies arising out of these measures did not cause adverse effects in the post -implementation 
period.  (United  States' response to questioning at the oral hearing)  
123 European  Union 's appellant's submission, para. 271. 
124 European  Union 's appellant's submission, para. 264 (quoting Appellate  Body Report, Mexico – Taxes 
on Soft Drinks , para. 51). 
125 European  Union's appellant's submission, para. 269. 
126 Appellate  Body Report, Mexico – Taxes on Soft Drinks , paras.  46 and 51. 
127 For example, a panel may validly decline to examine and rule on a particular claim for reasons of 
judicial economy provided it resolves the  dispute at hand.  WT/DS316/AB/RW  
 
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  of those measures,  and we therefore  do not consider that the Panel erred under  Article  11 
of the DSU. 
5.24.   We further note that the Panel did not find that the European  Union had acted in a 
WTO-inconsistent manner or failed to com ply with its obligations under Article  7.8 of the 
SCM Agreement with respect to the Bremen Airport and Mühlenberger Loch measures. In these 
circumstances , we fail to see how the United  States  could request authorization to take 
countermeasures pursuant to Article  7.9 of the SCM Agreement  and Article  22 of the DSU128 with 
respect to  any effects flowing from such measures. In this regard, we agree with the Panel  that 
"the United  States  would not be entitled to request the suspension of concessions or other 
obligations under the covered agreements in relation {to} the M ühlenberger Loch and the 
Bremen  Airport runway measures."129  
5.25.   For these reasons, we find that the Panel did not err by declining to make a finding as to 
whether the European  Union  had achieved compliance with respect to the Mühlenberger Loch 
aircraft assembly site measure and the Bremen Airport runway extension  measure , and see no 
need to make further findings in respect of those measures . 
5.2  Article  3.1(b) of the SCM Agreement  
5.26.   The United States  seeks review of the Panel's finding that it failed to establish that the 
French, German, Spanish, and UK A350XWB LA/MSF contracts  are inconsistent with  Article  3.1(b) 
of the SCM Agreement  because they grant subsidies contingent upon the use of domestic over 
imported goods . Should we  find that the Panel erred in its interpretation of Article  3.1(b) , then the 
United  States  requests that we  reverse  the Panel's finding , complete the legal analysis , and find  
that the French, German, Spanish, and UK A 350XWB LA/MSF  contracts grant  subsidies contingent 
upon the use of domestic over imported goods with in the meaning of  Article  3.1(b).130 
5.27.   We begin by summarizing the Panel's findings and the issues appealed  before turning to 
consider the United  States ' appeal  of the Panel's analysis.  
5.2.1   The Panel's findings  
5.28.   The Panel  began  by setting out the factual background, including the two general types of 
evidence on which the United  States  based its argument under Article  3.1(b)  of the 
SCM Agreement , namely:  (i) the publicly available information  regarding the existence of the 
Workshare Agreements ; and (ii) the terms of each of the French, German, Spanish, and 
UK A350XWB LA/MSF contract s.131 The Panel observed that  subsidy payments in all four contracts 
depend on the recipie nt incurring expenses arising from A350XWB development and production 
activities , and that they require some, if not all, reimbursable expenses to arise from activities 
performed in the territory of the subsidy grantor . The Panel referred to this as  the 
                                                
128 We note that, by virtue of Article  1.2 of the DSU, the DSU (including Article  21.5) applies "subject to 
such special or additional rules and procedures" as listed in Appendix 2 to the DS U. Articles 7.2 through 7.10 of 
the SCM  Agreement  are listed in Appendix 2  to the DS U. Article  7.10 states that, "{i}n the event that a party 
to the dispute requests arbitration under paragraph 6 of Article  22 of the DSU, the arbitrator shall determine 
whether the countermeasures are commensurate with the  degree and nature of the adverse effects determined 
to exist".  
129 Panel Report, para. 5.78. We also note the Panel's observation that "the United  States does not 
challenge the European  Union's alleged 'withdrawal' of the subsidies in relation to the Bremen Airport runway 
extension and the M ühlenberger  Loch aircraft assembly site, both of which w ere found to cause adverse effects 
in the original proceeding." The Panel went on to state the European  Union's position that "the terms of these 
subsidies were aligned to a market benchmark before the end of the implementation period". (Panel Report, 
fn 1847 to para.  6.1102) The Panel's observations make clear that it did not find the measures taken to comply 
at issue in these Article  21.5 proceedings to have WTO -inconsistent effects.  
130 United  States ' other appellant's submission, para. 23.  
131 Panel Report , paras.  6.754 -6.773. Before the Panel, the United  States  argued that the relevant four 
member States  granted A350XWB LA/MSF to Airbus in exchange for commitments to locate certain LCA 
production activities in the member States' territories and then use th e LCA components made in such 
domestic production in downstream LCA production activities. The United  States  characterized this exchange of 
commitments as " Workshare Agreements ". (Ibid., para. 6.780)  WT/DS316/AB/RW  
 
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  "Domestic  A350XWB Development Contingency ".132 The Panel also detected three other types of 
contingencies in the terms of the [BCI] contracts.133 While the Panel observed that  none of the 
contracts  explicitly require d "the use of domestic over imported goods" , it noted that they  could  
nonetheless operate so as to require such use "whether alone or in combination ".134 
5.29.   The Panel understood the United  States  to argue that both the publicly available information  
and the terms of the four A350XWB LA/MSF contracts demon strate  that " the A350XWB LA/MSF 
contracts are contingent {on} the use of domestic over imported goods. "135 However, the Panel 
found the publicly available information insufficient to support the proposition that the 
Workshare  Agreements exist ed in a form dis tinct from the A350XWB LA/MSF contracts.136 
Turning  to the terms of the four A350XWB LA/MSF contracts, t he Panel began by noting that a 
degree of consistency is called for in the interpretation  of Article  III of the General Agreement on 
Tariffs and Trade 1994 ( GATT  1994) and Article  3.1(b)  of the SCM Agreement .137 The Panel 
understood Article  III:8(b) of the GATT  1994 to "suggest{}  that the act of granting subsidies to 
firms so long as they engage in domestic production activities, without more, should not b e 
equated to making those subsidies contingent on the use of domestic over impo rted goods and 
hence prohibited" under Article  3.1(b) of the SCM Agreement .138 The Panel added  that 
"the practice of providing subsidies to firms only so long as they engage in do mestic production 
activity  can and will many times … increase {} consumption of domestic goods" thereby  "limit{ing}  
competitive opportunities for relevant imported goods in certain markets".139 The Panel 
emphasized, however,  that " {s}ignificant problems  arise … if such alterations in the conditions of 
competition … become the focus and determinant of whether a subsidy should be disciplined as 
being contingent on the use of domestic over imported  goods ."140  
5.30.   The Panel understood the United  States  to argue that the A350XWB LA/MSF contracts are 
"contingent on the use of domestic over imported goods " because they  condition "the A350XWB 
LA/MSF subsidies' receipt on the production  of domestic LCA goods".141 The Panel found that the 
discipline of Article  3.1(b)  is "narrow  and specific " and that it is  "activated by a subsidy that 
appropriates an entity's judgment  by conditioning its receipt on that entity discriminating among 
inputs with respect to their domestic or imported nature, whether in law or in fact ".142 The Panel 
further found that "{n} one of the contingencies in the A350XWB LA/MSF contracts … operate in 
this manner with respect to any entity. "143 The Panel thus found that  the United  States ' claim that 
the A350XWB LA/MSF subsidies  are prohibited subsidies under Article s 3.1(b)  and 3.2 
of the SCM Agreement  because they  are de jure and/or de facto contingent upon the use of 
domestic over imported goods is unsupported by sufficient evidence and therefore fails .144 
                                                
132 Panel Report, para. 6.774.  
133 Panel Report, para. 6.774. In this regard, the Panel noted that: (i) the [BCI] contracts appear to 
condition subsidy payments on the recipient [BCI] on the development and/or production phases of the 
A350XWB project in the territory of the grantor (Domestic A350XWB Employment  Contingency); (ii) the [BCI] 
contract appears to condition subsidy payments on the recipient maintaining a  [BCI] (Domestic A350XWB 
Workshare Contingency); and (iii) the [BCI] contract appears to condition subsidy payments on the recipient 
maintaining cert ain [BCI] (Domes tic Non -A350XWB Workshare Contingency). (Ibid.)  
134 Panel Report, para. 6.775. For purposes of its subsequent analysis, the Panel "assume{d} arguendo " 
that all the contingencies it had identified actually exist and, when satisfied, result in the manufacture of 
LCA-related goods in the territories of the respective grantors. (Ibid., para. 6.776)  
135 Panel Report, para. 6.780.  
136 Panel Report, para. 6.781. In particular, the Panel considered that the publicly available information 
was "a vague and ambiguous foundation upon which to establish the existence of any material agreements 
between Airbus and the relevant member States regarding the domestic production and use of LCA 
components beyond what the A350XWB LA/MSF contracts themselves exhibit". (I bid.) 
137 Panel Report, para. 6.783 (referring to Appellate  Body Report, Canada – Autos , para. 140).  
138 Panel Report, para. 6.785. (fn omitted)  
139 Panel Report, para. 6.786.  
140 Panel Report, para. 6.787. In particular, the Panel noted that "disciplining such ef fects under 
Article  3.1(b)  of the SCM Agreement  transforms the provision into an effects -based provision, thereby 
significantly blurring … the line between the disciplines of Part  II of the SCM Agreement  and the effects -based 
disciplines on actionable subs idies contained in Part  III of the SCM Agreement ." (Ibid.)  
141 Panel Report, para. 6.788. ( emphasis  original)  
142 Panel Report, para. 6.788. (fn omitted)  
143 Panel Report, para. 6.788. (fn omitted)  
144 Panel Report, para. 6.790.  WT/DS316/AB/RW  
 
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  5.2.2   Arguments on appeal  
5.31.   The United  States  notes  that, while it a grees with the Panel's reading  of Article  3.1(b)  of the 
SCM Agreement , at the time of these proceedings, a "competing interpretation" was under 
consideration in the US – Tax Incentives  dispute .145 The United  States  maintains  that, if we find  
the "competing interpretation" of Article  3.1(b) developed by the panel in US – Tax Incentives  to 
be correct, "then there is no question that the Panel {in the present case} erred in finding that the 
French, German, Spanish, and UK LA/MSF for the A350 XWB do not constitute import substitution 
subsidies prohibited by Article  3.1(b)."146 The United  States  argues that, following this 
interpretation, "if (i) a subsidy is granted to a domestic producer conditional on the domestic siting 
of production activities to pr oduce a domestic input in an industrial process, and (ii) a substitution 
of imported goods for these inputs would result in the producer's loss of the entitlement to the 
subsidy, then the subsidy is contingent on the use of domestic over imported goods, an d therefore 
is inconsistent with Article  3.1(b)."147 The United  States  submits  that, because "the subsidies at 
issue in this dispute are contingent upon " a number of  intermediate goods "being produced in the 
{European  Union } and then used to manufacture the A350 XWB", "the goods are 'domestic goods' 
and therefore Airbus is required to use domestic over imported goods to receive the subsidy."148 
If we confirm this "competing interpretation", then the United  States  requests that we complete 
the legal analysis bas ed on undisputed facts and Panel findings  in this dispute , which establish that 
the French, German, Spanish, and UK A350XWB LA/MSF contracts are contingent upon the use of 
domestic over imported goods and therefore inconsistent with  Article  3.1(b) of the 
SCM Agreement .149  
5.32.   Referring to "undisputed facts from each of the LA/MSF contracts containing the 
contingencies, as well as other relevant evidence"150, the United  States  argues, for instance,  that 
the French A350XWB Protocole requires [BCI]151, and that these  would be domestic goods for 
purposes of Article  3.1(b).152 The United  States  adds that  "it would be theoretically possible to 
import this good instead of using a domestic version" .153 The United  States  further submits that 
"the LA/MSF agreements address the c omprehensive program undertaken by Airbus to develop 
and produce the A350 XWB, including inputs and tooling developed specifically for that model as 
well as the finished LCA."154 According to the United  States , "in manufacturing finished A350 
XWBs, Airbus mu st use  the [BCI]"155, and "if [BCI], Airbus would [BCI] French A350 XWB 
LA/MSF ."156 The United  States  submits that,  accordingly, under the interpretation of Article  3.1(b)  
developed by the panel in US – Tax Incentives , the French A350XWB LA/MSF subsidy "is 
contingent on the use of domestic over imported [BCI] in breach of Article  3.1(b)" .157 
5.33.   The European  Union  responds  that the "assertions upon which the United  States  seeks the 
Appellate  Body's review of the Panel's findings do not properly constitute an 'a ppeal' within the 
meaning of the DSU", and therefore fall outside the scope of appellate review under Article  17.6 of 
the DSU .158 The European  Union  submits that the United  States  "agrees with the Panel's 
interpretation of Article  3.1(b)"159 and does not alleg e any legal error in the Panel's interpretation 
                                                
145 United  States ' Notice of Other Ap peal, para. 1; other appellant's submission, paras.  20-22. 
146 United  States ' other appellant's submission, para. 23. 
147 United  States ' other appellant's submission, para. 25. In addition, according to the United  States , 
this interpretation "assumes that any good completed in a domestic territory is 'domestic' for purposes of 
Article  3.1(b), without the need to examine the significance of the operations undertaken in the domestic 
territory, the proportion of foreign cont ent contained in the good, rules of origin, or any other considerations." 
(Ibid.)  
148 United  States ' other appellant's submission, para. 26. 
149 United  States ' other appellant's submission, para. 29. 
150 United  States ' other appellant's submission, para. 31. 
151 [BCI] 
152 United  States ' other appellant's submission, para. 34 (referring to French A350XWB  Protocole  
(Panel  Exhibit EU -(Article  13)-03 (BCI)); Panel Report, para. 6.757).  
153 United  States ' other appellant's submission, para. 34.  
154 United  States ' other appe llant's submission, para. 34. (fn omitted)  
155 United  States ' other appellant's submission, para. 34. 
156 United  States ' other appellant's submission, para. 35. 
157 United  States ' other appellant's submission, para. 35. 
158 European  Union 's appellee's submission, para. 86. 
159 European  Union 's appellee's submission, para. 119 (quoting United  States ' Notice of Other Appeal, 
para. 1). WT/DS316/AB/RW  
 
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  or application of this provision, or a failure to make an objective assessment of the matter under 
Article  11 of the DSU.160 Instead, the United  States  "merely asserts that Article  3.1(b) 'can be 
given a differ ent reading '" "without explaining what the legal error is  supposed to be" in the 
present  case.161 The European  Union  requests us to reject the United  States ' appeal as falling 
outside the scope of appellate review under Article  17.6 of the DSU "because it is based on a case 
that is entirely different from the case advanced by the United  States  before the Panel" 
in this dispute.162  
5.34.   Moreover, t he European  Union  argues that, even if we were to consider the United  States ' 
appeal, we should reject it on the merits.163 Accord ing to the European  Union , "the  ordinary 
meaning of the terms used {in Article  3.1(b)} suggests that a subsidy contingent on domestic 
production , without more, does not fall within the prohibition set out in that provi sion."164 
The European  Union  further argues that "the line drawn by the {SCM}  Agreement between 
prohibited … subsidies and actionable production subsidies would be blurred"165 if "a requirement 
of domestic production of goods, coupled with the fact that those goods are used downstream, 
suffices to attract the prohibition" under Article  3.1(b).166  
5.35.   Finally, the European  Union  argues that the United  States ' request for completion  of the 
legal analysis should be rejected because it relies on three categories of factual assertions that 
"were never made by the United  States  before the Panel", and which "{t}he European  Union  never 
had an opportunity to dispute" .167 The European  Union  details  the relevant  assertions for each of 
the four LA/MSF contract s as follows: (i) "' in manufacturing finished A350 XWBs, Airbus must use ' 
the components that the subsidy recipient is allegedly required to produce " in France, Germany, 
Spain, or the UK , in order  to receive LA/MSF for the A350 XWB from the respective country168; 
(ii) for certai n components that the  A350XWB LA/MSF contracts "allegedly require {} the subsidy 
recipient to manufacture, 'it would be theoretically possible to import ' the relevant component"169; 
and (iii) as interpreted by the United  States , certain provisions in the French, German, Spanish , 
and UK A350XWB LA/MSF contracts170 provide that  "the subsidy recipient [BCI] the … LA/MSF 
loan if Airbus SAS used i mported instead of domestically -produced components " in the assembly of 
the A350XWB.171 
5.2.3   Whether the United  States ' appeal is  within the scope of appellate  review  
5.36.   We now turn to t he European  Union 's request that we reject this aspect of the  
United  States ' appeal as falling outside the scope of appellate review  under Article  17.6 of the DSU  
on the basis that the United  States  has not alleged on appeal that the Panel committed  a legal 
error in its analysis of the United  States ' claim under Article  3.1(b) of the SCM Agreement .172 
The European  Union  finds support for its position in the language of Articles  16.4 and 17.13 of the 
DSU, a s well as Rules  20(2)(d)(i), 21(2)(b)(i), and 23(2)(c)(ii)(A) of the Working Procedures.173 
                                                
160 European  Union 's appellee's submission, para. 119. 
161 European  Union 's appellee's submission, para. 120 (quoting United  States ' other appellant’s 
submission, para. 21) and para. 121. 
162 European  Union 's appellee's submission, para. 148. 
163 European  Union 's appellee's submission, para. 185. 
164 European  Union 's appellee's submission, para. 192. (emphasis original)  
165 European  Union 's appellee's submission, para. 194 (quoting Appellate  Body Report, EC and certain 
member States ‒  Large Civil Aircraft , para. 1054) and para. 195. 
166 European  Union 's appellee's submission, para. 196. (emphasis original)  
167 European  Union 's appellee's submiss ion, para. 215. (emphasis omitted)  
168 European  Union 's appellee's submission, para. 217 (quoting United  States ' other appellant's 
submission, paras.  26, 34, 36, 40, 42, 44, 46, 48, 50, 52, and 54 (emphasis added by the  European  Union )) 
and paras.  227, 238, and 248.  
169 European  Union 's appellee's submission, para. 217 (quoting United  States ' other appellant's 
submission, paras.  34 and 36) and paras.  227, 238, and 248.  
170 Namely, Article  9.1 of the French A350XWB Protocole (Panel Exhibit EU -(Article  13)-03 (BCI )), [BCI] 
of the German KfW A350XWB Loan Agreement (Panel Exhibit EU -(Article  13)-14-ENG (BCI)), Clause 11 of the 
Spanish A350XWB Convenio (Panel Exhibit EU -(Article  13)-29 (BCI)), and Section  21.14 of the UK  A350XWB 
Repayable Investment Agreement (Panel E xhibit EU -(Article  13)-30 (BCI)).  
171 European  Union 's appellee's submission, para. 217 (referring to United  States ' other appellant's 
submission, paras.  35, 37, 41, 43, 45, 47, 49, 51, 53, and 55) and paras.  227, 238, and 248.  
172 European  Union 's appellee's  submission, paras.  114-144.  
173 European  Union 's appellee's submission, paras.  116-117. WT/DS316/AB/RW  
 
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  The European  Union  adds that the United  States  has failed to provide arguments in support of any 
"specific allegations of errors "174 and improperly seeks to litigate a new case before the 
Appellate  Body, in that it asserts the existence of  an express requirement to "use"  domestic over 
imported goods on the basis of  the terms of  the French, German, Spanish , and UK A350XWB 
LA/MSF contracts , and in particular by reference  to the [BCI] clauses in  those contracts .175 We 
address each of these claims in turn below.  
5.37.   According to Article  17.6 of the DSU, appellate review centres on " issues of law covered in 
the panel report and legal interpretations developed by  the panel ". In turn, Article  17.12  of the 
DSU calls upon the  Appellate  Body to "address each of the issues raised" on appeal  in accordance 
with Article  17.6. In exercising its mandate, the Appellate  Body may thus be called upon to review 
any aspect of a panel's legal  analysis. Moreover,  according to Article  3.2 of the DSU , the dispute 
settlement system "is a central element in providing security and predictability to the multilateral 
trading system", and  "serves to preserve the rights and obligations of Members under the covered 
agreements " and " to clarify the existing provisions of those agreements in accordance with 
customary rules of interpretation  of public international law ".176 Article  3.7 further states that 
"{t}he aim of the dispute settlement mechanism is  to sec ure a positive solution to a dispute ." 
Therefore , the Appellate  Body's review of issues of law covered in a panel report and legal 
interpretations developed by a panel  should be seen as part  of its duty under Article  17.12 of the 
DSU to "address  each of the issues raised "177, which, as provided for under Article s 3.2 and 3.7, 
may require it to "clarify the existing provisions" of the covered agreements with a view to 
securing  a "positive solution to a dispute" between the parties and ensuring the "security and 
predictability" of the multilateral trading system. The Appellate  Body has noted that s uch 
"{c}larification, as envisaged in Article  3.2 of the DSU, elucidates the scope and meaning of the 
provisions of the covered agreements " and that " the re levance of clarification  contained in adopted 
Appellate  Body report s is not limited to the application of a particular provision in a 
specific  case."178 
5.38.   The European  Union  does not contest  that the Panel's interpretation and applicati on of 
Article  3.1(b) constitute issue s of law that the Appellate  Body must address if properly raised; 
rather , it submits  that the United  States  has failed to "appeal " an issue of law or a legal 
interpretation , because it did not raise a specific allegation of error before the Appellate  Body 
regarding the manner in which the Panel in this dispute interpreted and applied Article  3.1(b). 
In the European  Union 's view, the United  States  "agrees with the interpretation of Article  3.1(b) 
set out in the Panel Report" and, on appeal, "m erely asserts that Article  3.1(b) 'can be given a 
different reading'", without explaining what the Panel's legal error is.179  
5.39.   We begin by considering the nature of the United  States ' appeal. In its Notice of 
Other  Appeal, the United  States  frames its appeal  as follows:  
The United  States  seeks review by the Appellate  Body of the Panel 's finding that the 
United  States  failed to establish that the French, German, Spanish, and UK LA/MSF 
subsidies for Airbus 's A350 XWB constituted prohibited import substitution s ubsidies, 
within the meaning of Article  3.1(b) of the Agreement on Subsidies and Countervailing 
                                                
174 European  Union 's appellee's submission, paras.  145-147. 
175 European  Union 's appellee's submission, paras.  148-183. 
176 Article  3.2 also provides that "{r} ecommendations and rulings of the DSB cannot add to or diminish 
the rights and obligations provided in the covered agreements."  
177 Therefore, while Article  17.13 clarifies that the Appellate  Body "may uphold, modify or reverse the 
legal findings and conclusions of the pan el", Article  17.12 confirms that the Appellate  Body's mandate in 
addressing a panel's "legal findings and conclusions" on appeal is not limited to these actions.  For instance, in 
US – Carbon Steel (India) , India argued that "the  United  States ' request for the Appellate  Body to clarify the 
meaning of Article  1.1(a)(1) of the SCM Agreement  should be rejected because, in seeking such a clarification, 
the United  States  {was} not challenging 'issues of law covered in the panel report and legal interpretations 
developed by the panel'." ( Appellate  Body Report, US – Carbon Steel (India) , para. 4.13) Based on its analysis, 
the Appellate  Body found, however, that the United  States ' "request for clarification" fell within the ambit of 
that appeal, and the Appellate  Body was therefore required to adjudicate it. (Ibid., para. 4.15) See also 
Appellate  Body Reports, China  – HP-SSST (Japan) / China – HP-SSST (EU) , para. 5.310.  
178 Appellate  Body Report, US – Stainless Steel (Mexico) , para. 161. 
179 European  Union 's appellee's submission, para. 120 (quoting United  States ' other appellant's 
submission, para. 21). (emphasis original)  WT/DS316/AB/RW  
 
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  Measures ("SCM Agreement "). While the United  States  agrees with the Panel' s 
interpretation of Article  3.1(b), a competing interpretation is under consideration in 
another dispute, US – Conditional Tax Incentives for Large Civil Aircraft (DS487).  If the 
Appellate  Body were to determine that this competing interpretation of Article  3.1(b) is 
correct, then the Panel here erred in its interpretation and application o f Article  3.1(b) 
and its finding that the French, German, Spanish, and UK LA/MSF for the A350 XWB do 
not constitute import substitution subsidie s prohibited by Article  3.1(b).180 
5.40.   In its other appellant's submission, the United  States  further clarifies the meaning and 
content of its Notice of Other Appeal and the nature of its claims of error. It explains that,  "to the 
extent that  the Appellate  Body considers that {another} interpretation of Article  3.1(b) is correct, 
and the Panel's i nterpretation of that provision is incorrect",  the Panel "erred  in finding that the 
French, German, Spanish, and UK LA/MSF for the A350 XWB do not constitute import substitution 
subsidies prohibited by Article  3.1(b) ".181 In this regard, the United  States  notes that the Panel 
found that "subsidies conditioned on the domestic production of inputs to be used in the 
manufacture of the A350 XWB are not prohibited under Article  3.1(b)" .182 The United  States  
observes, however, that "Article  3.1(b) can be given a diff erent reading" , that it advocated this 
reading before the Panel in the present dispute, and that  the panel in US – Tax Incentives  agreed 
with this other reading of Article  3.1(b) .183 The United  States  underscores  that this other reading 
of Article  3.1(b) may  not be "the best interpretation " of this provision , but emphasizes that it 
"has an interest in ensuring that the same legal approach is applied" in this case and 
in US ‒ Tax Incentives .184  
5.41.   As we see it, the United  States  contends that, depending on  our reading of Article  3.1(b) of 
the SCM Agreement , the Panel erred in its application of Article  3.1(b) to the facts of the present 
case, and in particular in finding that the relevant A350 XWB LA/MSF do not constitute import 
substitution subsidies prohib ited by Article  3.1(b ).185 Specifically, in its other appellant's 
submission, the United  States  describes the approach of the Panel  in the present case186, and sets 
out the elements of what it considers to constitute  a different interpretation, including by re ference 
to its arguments before the Panel .187 Based on our reading of the United  States ' Notice of Other 
Appeal together with its other appellant's submission, and as clarified by the United  States  at the 
oral hearing, we understand the United States'  reques t to be that, if we consider the Panel to have 
erred in its interpretation of Article  3.1(b) , we review  the Panel's application of  this provision , and 
in particular its finding that the United  States  has not established that the French, German, 
Spanish , and UK A350XWB LA/MSF contracts are inconsistent with Article  3.1(b) .188 Therefore, in 
our view, in its appeal, the United  States  has identified "issues of law covered in the panel report 
and legal interpretations developed by the panel", within the meanin g of Article  17.6 of the DSU, 
with regard to the Panel's interpretation and application of Article  3.1(b) of the SCM Agreement . 
5.42.   We also consider that the United  States  has "alleged e rrors" and identified 
"specific  allegations of errors" within the meaning of Rules 21(2)( b)(i), 23(2)(c)(ii)(A),  and 23(3) 
of the Working Procedures with regard to the Panel's interpretation and application of 
                                                
180 United  States ' Notice of Other Appeal, p ara. 1. (fn omitted)  
181 United  States ' other appellant's submission, para. 23. (emphasis added ) 
182 United  States ' other appellant's submission, para. 20 (referring to Panel Report, para. 6.790).  
183 United  States ' other appellant's submission, paras.  20-21.  
184 United  States ' other appellant's submission, para. 22. 
185 United  States ' other appellant's su bmission, para. 23.  
186 United  States ' other appellant's submission, paras.  19-20 and 27.  
187 United  States ' other appellant's submission, paras.  21, 25, and 28.  
188 United  States ' other appellant's submission, paras.  23, 26, and 29. The United  States  further 
requests that we complete the legal analysis and find that the four A350XWB LA/MSF contracts at issue are 
inconsistent with Article  3.1(b).  WT/DS316/AB/RW  
 
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  Article  3.1(b).189 In particular, in its Notice of Other Appeal and other appellant's submission, the 
United  States  allege s an error in the Panel's application of Article  3.1(b) , conditional upon the 
existence of an error in the Panel's interpretation of this provision. We are therefore called upon to 
review and clarify the proper meaning of Article  3.1(b), and, if we find th at the Panel erred, to 
examine whether we are in a position to complete the legal analysis and rule on the conformity of 
the measures at issue with this provision.  
5.43.   The European  Union  also argues that the United  States ' appeal is based on  a "hypothetical"  
situation that does not arise in the present dispute.190 According to the European  Union , 
"{c}onsiderations relating to {US – Tax Incentives } cannot serve as a basis for appellate review, 
in these proceedings, of interpretative findings allegedly under consi deration by a different  panel in 
a different  dispute, and cannot serve as a surrogate for a valid allegation of error by the Panel in 
this dispute. "191 However, c ontrary to what the European  Union  argues, the United  States  is not 
simply asking us "to address an interpretive position " because of the asserted relevance of this 
position to the dispute in US – Tax Incentives .192 Instead, while the United  States  refers to  the 
interpretation of Article  3.1(b) developed by the panel in that dispute, it requests that we review 
the interpretation of this provision  developed by the Panel in this dispute . As observed , if we find 
that the Panel erred in its interpretation of Article  3.1(b), then the United  States  considers  that we 
should reverse  the Panel's find ings applying Article  3.1(b)  to the measures at issue and complete 
the legal  analysis .193 We therefore disagree with the European  Union  to the extent that it claims  
that the United  States ' request to review the interpretation and application of Article  3.1(b) 
adopted by the Panel in the present dispute  constitutes a "hypothetical" situation.  
5.44.   Insofar as the United  States  has appealed an issue of law covered in this Panel  Report, or a 
legal interpretation of the Panel in this case, the fact that a similar  interpretative issue may have 
arisen in the context of another dispute is not relevant for the admissibility of the present appeal. 
In fact, there is nothing exceptional about participants referring to legal interpretations developed 
in other panel and Appellate  Body reports in support of their arguments on appeal.  
5.45.   The European  Union  further asserts that the United  States ' other appellant's submission fails 
to provide "legal arguments" in support of the "specific allegations of errors" as required by the 
Working Procedures, insofar as it "offers no explanation of how the (alleged) two interpretations 
(allegedly) 'compete', using the customary rules of interpretation of public international law found 
in the Vienna Convention on the Law of Treaties ".194 In the  European  Union 's view , this is because 
"there are no 'competing interpretations' in the sense alleged by the United  States ."195  
5.46.   We consider that, in its other appellant's submission, the United  States  adequately provides 
legal arguments in support of its r equest for us to review the Panel's interpretation and application 
of Article  3.1(b). While referring to the interpretation and reasoning developed by the panel in 
US – Tax Incentives , the United  States  has included and further developed legal argumentatio n on 
that basis in its submission filed in this appeal. More specifically, the United  States  sets out, albeit 
briefly, a reading of Article  3.1(b) that would arguably lead to a finding of inconsistency under this 
                                                
189 We recall that, pursuant to Rule  23(2)(c)(ii)(A) of the Working Procedures, a Notice of Other Appeal 
shall include "a brief statement of the nature of the other appeal, including … identification of the alleged errors 
in the issues of law covered in the p anel report and legal interpretations developed by the panel". In turn, 
pursuant to Rules 21(2)(b)(i) and 23(3), an other appellant's submission shall set out "a precise statement of 
the grounds for the appeal, including the specific allegations of errors in the issues of law covered in the panel 
report and legal interpretations developed by the panel, and the legal arg uments in support thereof". 
The Working Procedures therefore contemplate that a Notice of Other Appeal will  identify "alleged errors", 
and that an other appellant's submission will set out "specific allegations of errors" with regard to a panel's 
interpretation and/or application of the covered agreements.  
190 European  Union 's appellee's submission, para. 121 (referring to Appellate  Body Reports , US – COOL 
(Article  21.5 – Canada and Mexico) , para. 5.378).  
191 European  Union 's appellee's submission, para. 125. ( emphasis  original)  
192 European  Union 's appellee's submission, para. 130. 
193 United  States ' other appellant's submission, para. 23. 
194 European  Union 's appellee's submission, paras.  145-146 (referring to Rules 21(2)(b)(i) and 23(3) of 
the Working Procedures).  (emphasis original)  
195 European  Union 's appellee's submission, para. 146. WT/DS316/AB/RW  
 
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  provision in the present case.196 The United  States  also contrasts this with the approach taken by 
the Panel197, and concludes:  
This raises a threshold interpretive question that the Appellate  Body has yet to 
consider.  Where a subsidy is contingent not only on the production of a finished good, 
but is also contingent on the production, in th e grantor' s territory, of intermediate 
goods for use as inputs (or goods used to produce other goods, i.e., instrumentalities 
of production) – which are then presumed to be "domestic"  – in manufacturing the 
downstream good, is the subsidy in breach of Article  3.1(b)?198 
5.47.   Notwithstanding the terminology used by the United  States , the question before us is not 
whether the interpretation of  Article  3.1(b) by the Panel in the present dispute is different from the 
interpretation of this provision by the panel  in US – Tax Incentives . Rather, we are called upon to 
examine whether the Panel here erred in its interpretation and application  of Article 3.1(b). 
Consistent with the principle jura novit curia , it was not the responsibility of the United  States  to 
provide us with the "correct" legal interpretation of Article  3.1(b)199, nor does the United  States ' 
appeal of the Panel's interpretation of Article 3.1(b) fall outside the scope of appellate review 
merely  because the United  States  has expressed an opinion as to a "preferred" int erpretation .  
5.48.   We see in the United  States ' request and in its stated "interest in ensuring that the same 
legal approach is applied in this proceeding and in { US – Tax Incentives }"200 a reflection of 
Article  3.2 of the DSU, which provides that the dispute settlement system of the WTO is a central 
element in providing security and predictability to the multilateral trading syst em, and that i t 
serves to preserve the rights and obligations of Members under the covered agreements, as well 
as to clarify the existing provisions of those agreements in accordance with customary rules of 
interpretation of public international law .  
5.49.   Regarding the admissibility of the United  States ' appeal , the European  Union  also submits 
that the United  States  improperly "seeks to litigate a fundamentally different case" on appeal than 
the one it did before the Panel201 by basing  its appeal "on factual asse rtions about the content and 
meaning of specific provisions of the A350XWB LA/MSF contracts never referred to by the 
United  States  when laying out it{s} case to the compliance Panel ".202 The European  Union  
underscores in this regard  that, while the four A350 XWB LA/MSF contracts form part of the Panel 
record, "the meaning in municipal law  that the United  States  accords to " the [BCI] clauses  was 
not argued before the Panel, and that a proper determination as to the meaning  of those  clauses  
would require us "to entertain complex new factual arguments ", including arguments that we 
would need "to solicit, receive and review from the European  Union ".203 
5.50.   In previous disputes, the Appellate  Body has considered that "new arguments are not per se 
excluded from the scope o f appellate review, simply because they are new ."204 At the same time , 
the ability of the Appellate  Body to consider new arguments is circumscribed by its mandate under 
Article  17.6 of the DSU to address " issues of law covered in the panel report and legal 
interpretations developed  by the panel".205 Thus, the Appellate  Body has found that it would not be 
able to consider new arguments if such arguments required it "to solicit, receive and review new 
facts", or if a new argument did "not involve either an 'issue  of law covered in the panel report' or 
                                                
196 United  States ' other appellant's submission, paras.  25-26.  
197 United States ' other appellant's submission, para. 27. 
198 United  States ' other appellant's submission, para. 28.  
199 See Appellate  Body Report, EC – Tariff Preferences , para. 105.  
200 United  States ' other appellant's submission, para. 22. 
201 European  Union 's appellee's submission, para. 168. 
202 European  Union 's appellee's submission, para. 172. ( emphasis  original)  
203 European  Union 's appellee's submission, paras.  181-182. ( emphasis  original) We recall that the 
[BCI] clauses  on which the United  States  relies a re Article  9.1 of the French A350XWB Protocole (Panel  Exhibit 
EU-(Article  13)-03 (BCI)), [BCI] of the KfW A350XWB L oan Agreement (Panel Exhibit EU -(Article  13)-14-ENG 
(BCI)), Clause 11 of the Spanish LA/MSF Convenio (Panel Exhibit EU -(Article  13)-29 (BCI)) , and Article  21.14 
of the UK A350XWB Repayable Investm ent Agreement (Panel Exhibit EU -(Article  13)-30 (BCI)).  
204 See e.g. Appellate  Body Report, Canada – Aircraft , para. 211. 
205 Appellate  Body Reports, Canada – Aircraft , para. 211; US – FSC, paras.  102-103.  WT/DS316/AB/RW  
 
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  'legal interpretations developed by the panel'".206 As we see it, the United  States ' argument on 
appeal is not new in the sense that it involves an issue of law th at was not covered in the 
Panel  Report.207 However, we un derstand the European  Union  to argue that, to the extent that the 
United  States  relies, only on appeal, on certain clauses in the French, German , Spanish , 
and UK A350XWB LA/MSF contracts to establish the existence of  an inconsistency under 
Article  3.1(b), its claim falls outside the scope of appellate review under Article  17.6 of the DSU.  
5.51.   We recall in this regard that we have no authority to solicit, receive , and review new facts 
that were not before the Panel and were not considered by it .208 The Appellate  Body can review a 
Member's municipal law on its face "to determine whether the legal characterization by the panel 
was in error"209, focusing on its text, the context of the provision , and the "overall structure and 
logic"210 of the municipal law.211 Howe ver, in instances where a panel's assessment of municipal 
law goes "beyond the text of an instrument on its face" and "further examination may be required 
{which} may involve factual elements" , the Appellate  Body will not lightly interfere on appeal with 
a panel's finding.212  
5.52.   The [BCI] clauses are part of the French, German , Spanish , and UK A350XWB LA/MSF 
contracts and are therefore part of the Panel record. We note, however, that the meaning of those 
clauses and how they would operate were not examined by t he Panel in any detail. Therefore, to 
the extent  that the proper construction of the [BCI] clauses  and their operation in practice  under 
the municipal laws of the four member States would require us to go beyond the text of those 
clauses and may involve the examination of factual elements, the analysis of those clauses would , 
as we see it,  extend beyond our mandate under Article  17.6 of the DSU and may prejudice the due 
process rights of the European  Union.213 The absence of Panel findings and further exploration by 
the Panel concerning the meaning of the [BCI] clauses may well have a bearing on our ability to 
complete the legal analysis, in the event that we reverse the Panel's findings under Article  3.1(b) 
of the SCM Agreement . However , the absence of such factual findings does not  preclude us from 
examining the United  States ' arguments regarding  the Panel 's articulation of the legal standard 
under Article  3.1(b) , and whether, by reason of this legal stan dard, the Panel  erred in finding that 
the A350 XWB LA/MSF subsidies do not constitute import substitution subsidies prohibited by 
Article  3.1(b ).  
5.53.   In light of the foregoing , we find that the United  States ' appeal  under Article  3.1(b) of the 
SCM Agreement  falls within the scope of appellate  review under Article  17.6 of the DSU, and is 
properly before us. We therefore proceed to  examin e the merits of the United  States ' appeal 
regarding the Panel's interpretation and application of Article  3.1(b) of the SCM Agreement . 
                                                
206 Appellate  Body Report, US – FSC, paras.  102-103. Similarly, in US – COOL ( Article  21.5 ‒ Canada 
and Mexico) , the Appellate  Body observed that it could not  consider a new argument on appeal , if that would 
have required it "to  address legal issue s quite different from those which confronted the {p}anel and which 
may well {have} require{d} proof of new facts". ( Appellate  Body Reports, US – COOL ( Article  21.5 – Canada 
and Mexico) , para. 5.349 (quoting Appellate  Body Report, US – FSC, para. 103))  
207 The United  States  argued before the Panel that "all four A350XWB LA/MSF contracts are conditioned 
on Airbus producing specific Airbus LCA components in the relevant member States' territories", that "{t}hose 
components, therefore, become domestic goods of t he relevant member States, and are then used in 
downstream Airbus LCA production activity" and, "therefore, that the contracts 'effectively require{} Airbus to 
source a large part of its components' from domestic sources." (Panel Report, para. 6.748 (quoti ng 
United  States ' first written submission to the Panel, para. 239; referring to second written submission to the 
Panel, paras.  338-355)) On appeal, the United  States  argues that "there is no question that, in manufacturing 
finished A350 XWBs", Airbus must  use the [BCI]. (United  States ' other appellant's submission, paras.  34, 36, 
40, 42, 44, 46, 48, 50, 52, 54, 59, 63, and 68)  
208 Appellate  Body Report, Canada – Aircraft , para. 211. See also Appellate  Body Report, EC – Export 
Subsidies on Sugar , paras.  240-242.  
209 Appellate  Body Report, US – Countervailing and Anti -Dumping Measures (China) , para. 4.99 (quoting 
Appellate  Body Reports, China – Auto Parts , para. 225). 
210 Appellate  Body Reports, China – Auto Parts , para. 238. 
211 Appellate  Body Reports, China – Auto Parts, paras.  225-245; China – Publications and Audiovisual 
Products , para. 177. 
212 Appellate  Body Reports, US – Countervailing and Anti -Dumping Measures (China) , para. 4.99;  
China  – Auto Parts , para. 225.  
213 Appellate  Body Report, US – Offset Act (Byrd Amendment) , para. 222. See also Appellate  Body 
Report, Chile – Price Band System ( Article  21.5 – Argentina) , paras.  13-15. WT/DS316/AB/RW  
 
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  5.2.4   The legal standard under Article  3.1(b) of the SCM Agreement  
5.54.   Article  3.1(b) of the SCM Agreement  reads:  
Except as provided in the Agreement on Agriculture, the following subsidies, within 
the meaning of Article  1, shall be prohibited:  
… 
(b) subsidies contingent, whether solely or as one of several other conditions, upon 
the use of domestic over imported goods.  
Article  3.2 adds that "{a} Member shall neither grant nor maintain subsidies referred to in 
paragraph  1." 
5.55.   The SCM Agreement  distinguis hes between two categories of subsidies: prohibited subsidies 
(Part II  of the Agreement ); and actionable subsidies (Part  III of the Agreement ). The granting of 
subsidies  is not, in and of itself, prohibited under the SCM Agreement ; nor does the granting of  
subsidies  constitute, without more, an inc onsistency with that Agreement.214 Only subsidies 
contingent upon export performance within the meaning of Article  3.1(a) (commonly referred to as 
export subsidies), or contingent upon the use of domestic over impor ted goods within the meaning 
of Article  3.1(b) (commonly referred to as import substitution subsidies),  are prohibited per se 
under Article  3 of the SCM Agreement .215 In any event, subsidies, if specific, are  disciplined under 
Part III of the SCM Agreement , but a complaining Member must demonstrate the existence of 
adverse effects  under Article  5 of that Agreement . 
5.56.   Article  3.1(b) of the SCM Agreement  prohibits subsidies the granting of which is 
"contingent  … upon the use of domestic over imported goods".  The Appellate  Body has found that 
the legal standard for establishing  the existence of "contingency" under Article  3.1(b) is the same 
as under Article  3.1(a) of the SCM Agreement .216 Since the ordinary meaning  of "contingent" is 
"conditional" or "dependent for its existence on something else", a subsidy would be prohibited 
under Article  3.1(b) if it is "conditional" or "dependent for its existence on"  the use of domestic 
over imported goods.217 Therefore,  a subsi dy would be "contingent" upon the use of domestic over 
imported goods where  the use of those goods is a condition, in the sense of a requirement218, 
for receiving the subsidy .219  
5.57.   The Appellate  Body in US – Tax Incentives  noted that the term "use" in Article  3.1(b) refers 
to the action of using or employing something220 and "may, depending on the particular 
circumstances, refer to consuming a good in the process of manufacturing, but may also refer to, 
for instance, incorporating a component into a separate good,  or serving as a tool in the 
                                                
214 See Appellate  Body Report, Canada – Aircraft ( Article  21.5 – Brazil) , para. 47. 
215 In accordance with Article  2.3 of the SCM Agreement , any subsidy falling under the provisions of 
Article  3 shall be deemed to be "specific". A complaining Member that is able to prove the existence of such a 
prohibited subsidy need not demonstrate that the subsidy also causes adverse effects t o the interests of other 
Members within the meaning of Articles  5 and 6 of the SCM Agreement . 
216 Appellate  Body Report, Canada – Autos , para. 123. 
217 Appellate  Body Report, Canada – Autos , para. 123 (referring to Appellate  Body Report, 
Canada  ‒ Aircraft , para. 166).  
218 For instance, the Appellate  Body observed in Canada – Autos  that the measure at issue in that case 
would be inconsistent with Article  3.1(b) if "the use of domestic goods {was} a necessity and thus {} required 
as a condition for eligibility" und er the measure. ( Appellate  Body Report, Canada – Autos , para. 130 (emphasis 
original))  
219 Appellate  Body Report, Canada – Autos , para.  126. The link between "contingency" and 
"conditionality" is also borne out by the text of Article  3.1(b), which states that import substitution contingency 
can be the sole or "one of several other conditions ". (Appellate  Body Report, Canada – Aircraft , para. 166 
(emphasis added by the Appellate  Body)) As with Article  3.1(a), this "relationship of condi tionality or 
dependence" lies at the "very heart" of the legal standard in Article  3.1(b) of the SCM Agreement . 
(Appellate  Body Reports, Canada – Aircraft , para. 171; Canada – Aircraft ( Article  21.5 – Brazil) , para. 47) 
220 Appellate  Body Report, US – Carbon  Steel (India) , para. 4.374 and fn 1009 thereto (referring to  
Shorter Oxford English Dictionary , 6th edn, A.  Stevenson (ed.) (Oxford University Press,  2007), Vol. 2, 
p. 3484).  WT/DS316/AB/RW  
 
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  production of a good ."221 The Appellate  Body also noted that the term "goods" in Article  3.1(b) is 
qualified by the adjectives "domestic" and "imported", which implies that the "goods" concerned 
should be at least potentially tra dable.222 Finally, t he term "over" expresses a preference between 
two things and, in the context of the phrase "contingent … upon the use of domestic over imported 
goods", refers to the use of domestic goods in preference to, or instead of, imported goods.223 
5.58.   The term "c ontingency" under Article  3.1(b) covers contingency both in law and in fact, but  
the legal standard expressed by the term "contingent" is the same for de jure and de facto 
contingency.224 A subsidy will be de jure contingent upon the use of domestic over imported goods 
"when the existence of that condition can be demonstrated on the basis of the very words of the 
relevant legislation, regulation or other legal instrument consti tuting the measure", or can 
"be derived by necessary implication f rom the words actually used in the  measure".225 
The Appellate  Body has observed that proving de facto contingency "is a much more difficult 
task".226 The existence of de facto contingency "must be inferred  from the total  configuration of 
the facts constituting  and surrounding the granting of the subsidy , none of which on its own is 
likely to be decisive in any given case ".227 Factors that may be relevant in this regard includ e the 
design and structure of the measure granting the subsidy , the modalities of operati on set o ut in 
such a measure, and  the relevant factual circumstances surrounding the granting of the subsidy 
that provide the context for understanding the measure's design, structure, and modalities of 
operation.228 While these factors have been relied upon  in addressing de facto contingency under 
Article  3.1(a), the Appellate  Body considered in US – Tax Incentives  that they are also relevant to 
a de facto  contingency analysis under Article  3.1(b).  
5.59.   Where an analysis of contingency does not yield a finding  of inconsistency under 
Article  3.1(b) on the basis of the words actually used in  the measure, or any necessary implication 
therefrom, the existence of a requirement to use domestic over imported goods  may still be found  
on the basis of  the above -mentioned fa ctors and factual circumstances that form part of  the total 
configuration of the facts constituting and surrounding the granting of the subsidy.229 
The Appellate  Body in US – Tax Incentives  noted that the analysis of de jure and de facto  
contingency under Article  3.1(b) , in light of the above -mentioned factors and circumstances, 
should be understood as a continuum, and a panel should conduct a holistic assessment of all 
relevant elements and evidence on record.230  
5.60.   Accordingly, Article  3.1(b) prohibit s those subsidies that are de jure  or de facto  contingent 
such that they require the use of domestic goods in preference to, or instead of, imported goods 
as a condition for receiving the subsidy. While the distinction between de jure and de facto 
contingency lies  in the "evidence {that} may be employed to prove" that a subsidy is contingent 
upon the use of domestic over imported goods231, in both its de jure and de facto analyses, 
a panel  assess es the consistency of the granting of a subsidy under Article  3.1(b) with the same  
obligation  and against a single legal standard of contingency . In each case, an assessment of 
whether a subsidy is contingent within the meaning of Article  3.1(b) requires a thorough analysis 
                                                
221 Appellate  Body Report, US – Tax Incentives , para. 5.8. 
222 Appellate  Body Report , US – Tax Incentives , para. 5.9. This term may refer to any type of good that 
may be used by the subsidy recipient, including parts or components that are incorporated into another good, 
materials or substances that are consumed in the production process of another good, or tools or instruments 
that are used in the production process. (Ibid.)  
223 Appellate  Body Report, US – Tax Incentives , para. 5.11. 
224 Appellate  Body Reports, Canada – Aircraft , para. 167; Canada – Autos , para. 143. 
225 Appellate  Body Report, Canada – Autos , paras.  100 and 123.  
226 Appellate  Body Report, Canada – Aircraft , para.  167. 
227 Appellate  Body Report, Canada – Aircraft , para. 167. (emphasis original)  
228 Appellate  Body Report, US – Tax Incentives , para. 5.12 (referring to Appellate  Body Report, 
EC and certain member States – Large Civil Aircraft , para. 1046).  
229 Appellate  Body Report, US – Tax Incentives , para. 5.13. In that report, the Appellate  Body 
mentioned that, for instance, factual circumstances potentially relevant to an assessment of whether a subsidy 
is de facto  contingent may include the existence of a multi -stage production process, the level of specialization 
of the subsidized inputs, or t he level of integration of the production chain in the relevant industry. (Ibid., fn 49 
to para. 5.13) 
230 Appellate  Body Report, US – Tax Incentives , para. 5.13. 
231 Appellate  Body Report, Canada – Aircraft ( Article  21.5 – Brazil) , fn 46 to para. 47 (quoting 
Appellate  Body Report, Canada – Aircraft , para. 167).  WT/DS316/AB/RW  
 
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  of whether the conditional relationship between the granting of the subsidy and the use of 
domestic over imported goods  is objectively observable on the basis of a careful and rigorous 
scrutiny of all the relevant evidence. This is especially important when the alleged c ontingency is 
not cle arly expressed in the language used in the relevant legal instrument.232  
5.61.   The Appellate  Body in US – Tax Incentives further observed that, insofar as, b y its terms , 
Article  3.1(b) does not prohibit the subsidization of domestic "producti on" per se, but rather the 
granting of subsidies contingent upon the use of domestic over imported goods, s ubsidies that 
relate to domestic production are not, for that reason alone, prohibited under Article  3 of the 
SCM Agreement .233 In particular, such sub sidies can ordinarily be expected to increase the supply 
of the subsidized domestic goods in the relevant market, thereby increasing the use of these 
goods downstream and adversely affecting imports, without necessarily requiring the use of 
domestic over i mported goods as a condition for granting the subsidy.234  
5.62.   With regard to the relevance of Article  III:8(b) of the GATT 1994, we note that this 
provision exempts from the national treatment obligation in Article  III "the payment of subsidies 
exclusively to d omestic producers" , and  thus makes clear that the provision of subsidies to 
domestic producers only, and not to foreign producers , does not in itself constitute a breach of  
Article  III.235 The Appellate  Body in US – Tax Incentives observed that, while Article  III:8(b) of the 
GATT 1994 comports  with a reading  of Article  3.1(b)  of the SCM Agreement  under which 
something more than  mere subsidization of domestic production  is required for finding an import 
substitution subsidy , a subsidy exempt from the Article III national treatment obligation by virtue 
of it being paid exclusively to domestic producers  within the meaning of Article  III:8(b) of the 
GATT  1994 may still be found to be contingent upon the use by those producers of domestic over 
imported goods under Article  3.1(b) of the SCM Agreement .236 
5.63.   In light of the above, t o the extent that no conditionality requiring the use of domestic over 
imported goods can be determined, but the effect of the subsidy is to displace or impede , 
or otherwise cause adverse effects to imports, those  effects are disciplined under Part III of the 
SCM Agreement . In other words, t he relevant question in determining the existence of contingency 
under Article  3.1(b) is not whether the eligibility requirements under a subsidy may result  in the 
use o f more domestic and fewer imported goods. Rather, the question is whether 
a condition  requiring the use  of domestic over imported goods  can be discerned from the terms of 
the measure itself, or inferred from its design, structure, modali ties of operation , and the relevant 
factual circumstances constituting and surrounding the granting of the subsidy that provid e 
context for understanding the operation of these factors.237 
5.2.5   The United  States ' claim on appeal  
5.64.   In the interpretation section of its Report, the Panel summarized  the jurisprudence of the 
Appellate  Body under Article  3.1(b) of the SCM Agreement .238 In particular, t he Panel noted the 
Appellate  Body's findings that " Article  3.1(b)'s scope covers both de jure and de facto  
contingency"239 and "an evaluation of de facto  contingency under Article  3.1(b) should be 
objectively assessed with respect to the total configuration of facts constituting and surround ing 
the granting of the subsidy ".240 The Panel further developed its understanding of  Article 3.1(b) in 
applying this legal standard to the measures at issue  in this dispute .241 We proceed by reviewing 
the Panel's interpretation in light of our own understanding of the proper interpretation of 
Article  3.1(b) as set out above.  
                                                
232 Appellate  Body Report, US – Tax Incentives , para. 5.14. 
233 Appellate  Body Report, US – Tax Incentives , para. 5.15. (referring to Appellate  Body Report, 
Canada  – Aircraft ( Article  21.5 – Brazil) , para. 47). 
234 Appellate  Body Report, US – Tax Incentives , para. 5.15. 
235 See Appellate  Body Report, US – Tax Incentives , para. 5.16. 
236 Appellate  Body Report, US – Tax Incentives , para. 5.16. 
237 Appellate  Body Report, US – Tax Incentives , para. 5.18. 
238 See Panel Report, paras.  6.777 -6.778.  
239 Panel Report, para. 6.778 (referring to Appellate  Body Report, Canada – Autos , paras.  139-143).  
240 Panel Report, para. 6.778.  
241 Panel Report, paras.  6.782 -6.789.  WT/DS316/AB/RW  
 
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  5.65.   As the Appellate  Body noted in US – Tax Incentives , both import substitution subsidies and 
other subsidies that relate to  domestic production may have detrimental effects in respect of 
imported goods. Subsidies contingent upon import substitution, by their nature, adversely  affect 
competitive conditions of imported goods. Yet, also subsidies  that relate to the production of 
certain goods in a Member's domestic territory can ordinarily be expected to increase the supply of 
the subsidized goods in the relevant market, which wo uld have the consequence of increasing the 
use of subsidized domestic goods downstream and adversely affecting import s. In the specific case 
of subsidies  granted for the production of both an input  and a final good , subsidy recipients would 
likely both "produce" and "use" the subsidized inputs  in the production of the subsidized final good.  
Such subsidies would have consequences for the subsidized producers' input -sourcing decisions to 
the extent that, h aving been required to produce an input domestically , and for reasons of 
production costs and efficiency, they would likely use at least some of these inputs in their 
downstream production activities.  This is even more so in instances where the subsidized input is 
specialized in nature or where vertical int egration between the upstream and downstream stages 
of the production chain exists.  However , while such subsidies may  foster the use of subsidized 
domestic goods and result in displacement in respect of imported goods, such effects do not, 
in and of themse lves, demonstrate the existence of a requirement to use domestic over imported  
goods .242 As observed, t he relevant question in determining the existence of contingency under 
Article  3.1(b) is not whether conditions for eligibility  and access to the subsidy  may result  in the 
use o f more domestic and fewer imported goods, but whether the measure reflects a condition 
requiring the use  of domestic over imported goods.243  
5.66.   At the same time, we recall that whether a subsidy is contingent upon the use of domestic 
over imported goods has to be established on the basis of the total configuration of the facts 
constituting and surrounding the granting of the subsidy.244 In particular, in discerning whether or 
not a de facto  contingency exists, relevant  factual circumstances may form part of the context for 
understanding the measure's design, structure, and modalities of operation in a particular market. 
The Appellate  Body in US – Tax Incentives  noted in this regard that the design and structure of a 
measure granting a subsidy may be adapted to factual circumstances – such as  a multi-stage 
production process  where specialized inputs and final goods are subsidized, or where the 
production chain is  vertically integrated. The modalities of a measure so designed or structured 
may then operate such that conditions for eligibility or access to the subsidy may entail a condition 
requiring the use of domestic over imported goods.245 Ultimately , whether a su bsidy is simply 
conditional upon the domestic production of  certain goods, or upon the use  by the subsidy 
recipient of domestic over imported goods , should be assessed on a case -by-case basis.246 
We consider these observations made in US – Tax Incentives  also useful for our review of the 
Panel's analysis under Article  3.1(b) in this appeal.  
5.67.   In the present case, the Panel began its analysis by addressing the European  Union 's 
assertion that "a proper understanding of Article  3.1(b)'s disciplines should be form ulated in light 
of an examination of Article  III and, more specifically, Article  III:8(b)  of the GATT  1994."247 
The Panel found Article  III:8(b) to confirm  that, "without more, the  mere payment of subsidies to 
firms so long as they engage in domestic product ion activities should not be interpreted as 
imparting to such subsidies a discriminatory element as among domestic and foreign goods in a 
manner that Article  III may discipline ."248 The Panel considered this to suggest that  "the act of 
granting subsidies to firms so long as they engage in domestic production activities, without more, 
should not be equated to making those subsidies contingent on the use of domestic over imported 
goods and hence prohibited ."249  
5.68.   As observed above,  Article  III:8(b) of the GATT  1994 comports with  a reading  of 
Article  3.1(b) of the SCM Agreement  under which something more than mere subsidization of 
domestic production  is required for finding the existence of an import substitution subsidy. That 
                                                
242 Appellate  Body Report, US – Tax Incentives , para. 5.49. 
243 Appellate  Body Report, US – Tax Incentives , para. 5.18. 
244 Appellate  Body Report, Canada – Aircraft , para. 167.  
245 Appellate  Body Report, US – Tax Incentives , para. 5.50. 
246 Appellate  Body Report, US – Tax Incentives , para. 5.50. 
247 Panel Report, para. 6.783.  
248 Panel Report, para. 6.785.  
249 Panel Report, para. 6.785. (fn omitted)  WT/DS316/AB/RW  
 
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  said, a subsidy  exempt  from the Article  III national treatment obligation by virtue of it being paid 
exclusively to domestic producers  within the meaning of Article  III:8(b) of the GATT  1994 may still 
be found to be contingent upon the use by those producers of domestic over imported goods under 
Article  3.1(b) of the SCM Agreement .250 Thus, we do not disagree with the Panel's statement that 
"the act of granting subsidies to firms so long as they engage in domestic production activities, 
without more, should not be equated t o making those subsidies contingent on the use of domestic 
over imported goods and hence prohibited ."251 However, we do not see that this statement 
addresses the specific question of the circumstances under which domestic production subsidies 
may be found to  be contingent upon the use of domestic over imported goods.  
5.69.   The Panel then distinguished subsidies found to be prohibited under Article  3.1(b)  in 
previous cases from those domestic subsidies  requiring the production of certain goods on  
domestic territory .252 In particular , the Panel observed that  prohibited import substitution subsidies 
would be those that "contain{} elements requiring firms to use certain amounts of domestic goods 
as production inputs, i.e. to discriminate  between upstream sources of domest ic and imported  
goods in favour of the former ."253 By contrast , "providing subsidies to firms only so long as they 
engage in domestic production activity can and will many times have an effect occurring 
downstream  from the mandated domestic production activity, i.e.  increased consumption of 
domestic goods due to quantitative and/or qualitative enhancements to the goods produced 
pursuant to the mandated domestic production activities ."254 In the Panel's view, while th ese latter 
subsidies could limit competitive opportunities for relevant imported goods in certain markets, 
Part III, and not Part  II, of the SCM Agreement  is concerned with such event chains.255 
5.70.   We see no error in the Panel's reading of Article  3.1(b)  in thi s context . To begin with, 
the Panel rightly reasoned that a subsid y conditioning eligibility on the production of a certain good  
on domestic territory  is not per se  inconsistent with Article  3.1(b). As we have noted,  while 
subsidies that relate to the prod uction of certain goods in a Member's territory  may foster the use 
of subsidized domestic goods and result in displacement in respect of imported goods, such effects 
do not, in and of themselves, demonstrate the existence of a requirement to use domestic o ver 
imported goods.  The Panel similarly observed that the fact "that  a subsidy in fact  results in the use 
of domestic over imported goods  cannot by itself demonstrate that that subsidy is contingent on 
the use of domestic over imported goods, whether in la w or in fact ."256 We also agree with the 
Panel that basing the legal standard under Article 3.1(b) on the market effects of a subsidy would 
result in  "significantly blurring – and with respect to at least certain subsidies, potentially erasing – 
the line between the disciplines of Part  II of the SCM Agreement  and the effects -based disciplines 
on actionable subsidies contained in Part  III of the SCM Agreement ".257 As we have observed, 
to the extent that no conditionality on the use of domestic over imported goods can be 
established, but the effects of the subsidy are to displace or impede, or otherwise cause adverse 
effects to imports , those effects are di sciplined under Part III of the SCM Agreement .258 
5.71.   With regard to the legal standard under Article  3.1(b), the Panel stated that the phrase 
"contingent … upon the use of domestic over imported goods" refers to those subsidies that 
"contain{} elements requirin g firms to use certain amounts of domestic goods as production 
inputs" and "condition{} the availability of the subsidy on discrimination between upstream 
sources of goods".259 Moreover, the Panel observed that the discipline of Article  3.1(b) is 
"narrow  and specific, activated by a subsidy that appropriates an entity's judgment by conditioning 
{the} receipt {of the subsidy} on that entity discriminating among inputs with respect to their 
domestic or imported nature, whether in law or in fact."260 The Panel als o correctly noted that the 
mere fact that the French, German, Spanish , and UK A350XWB LA/MSF contracts may " affect the 
                                                
250 Appellate  Body Report, US – Tax Incentives , para. 5.16. 
251 Panel Report, para. 6.785.  (fn omitted)  
252 Panel Report, para. 6.786 (referring to Panel Reports, Indonesia – Autos ; US – Upland Cotton ; 
Appellate  Body Report, Canada – Autos , paras.  118-146).  (additional text in fn 1418 thereto omitted)  
253 Panel Report, para. 6.786. (emphasis original ; fn omitted ) 
254 Panel Report, para. 6.786.  
255 Panel Report, paras.  6.786 and 6.788.  
256 Panel Report, fn 1422 to para. 6.788. (emphasis original)  
257 Panel Report, para. 6.787.  
258 See Appellate  Body Report, US – Tax Incentives , para. 5.18. 
259 Panel Report, para. 6.786.  
260 Panel Report, para. 6.788.  (fn omitted)  WT/DS316/AB/RW  
 
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  domestic/import composition of a supply of inputs …, thereby displacing or impeding competitive 
opportunities for relevant substitute imp orted goods ", cannot in itself demonstrate the existence of 
a requirement, whether express or implicit , to use domestic over imported  goods .261 The focus of 
the Panel's legal standard under Article  3.1(b) on the need to establish a condition requiring the 
use of domestic over imported goods accords with our reading of this provision.  
5.72.   With regard to the Panel's references to "discrimination", we observe that the 
Appellate  Body has held that Article  3.1(b) addresses discriminatory conduct.262 Import 
substitution subsidies , by their nature, adversely affect competitive conditions of imported goods 
and thereby  intrinsically distort the preferences of the subsidy recipient by requiring it to  obtain 
goods  from domestic sources, to the detriment of imports .263 We conside r that, in the context of 
the phrase "contingent … upon the use of domestic over imported goods", it is the word "over", 
linking the words "domestic" and "imported", that captures this inherent discriminatory nature of 
import substitution subsidies. Yet, a lso subsidies that relate to the production of certain goods in a 
Member's domestic territory  can ordinarily be expected to increase the supply of the subsidized 
domestic goods in the relevant market, which would have the consequence of increasing the use  of 
these subsidized domestic goods  downstream , and have discriminatory effects in respect of 
imported goods. However, the legal standard under Article  3.1(b) requires establishing the 
existence of "contingency", namely, whether  the measure granting the sub sidy reflects a condition 
requiring  the use  of domestic over imported goods , and not whether the measure may result in 
any discriminatory effects to the detriment of imported goods.  
5.73.    We wish to highlight in this regard the following statement by the Panel:  
{R}ather than conditioning the availability of the subsidy on discrimination between 
upstream  sources of goods, the practice of providing subsidies to firms only so long as 
they engage in domestic production activity can and will many times have an effect 
occurring downstream  from the mandated domestic production activity, i.e. increased 
consumpti on of domestic goods due to quantitative and/or qualitative enhancements 
to the goods produced pursuant to the mandated domestic production activities.264 
5.74.   Since the granting of both subsidies concerning  the production of inputs and final goods  
domestically and subsidies conditional upon the use of domestic over imported goods  may result in 
"discriminat{ion} between upstream sources of domestic and imported goods in favour of the 
former" , we do not consider that  the distinction articulated by the Panel between  a requirement 
under the subsidy relating to upstream sourcing decisions ("conditioning the availability of the 
subsidy on discrimination between upstream sources of goods") and effects occurring downstream 
resulting from the subsidy ("an effect occurring downstream from the mandated domestic 
production activity") is particularly useful in establishing the existence of contingency under 
Article  3.1(b).265 However, we understand the Panel to have made this statement as an example 
illustrating its understanding  of the legal standard under Article  3.1(b), namely, the need to 
establish the existence of a condition that requires the use of d omestic over imported goods, 
as opposed to relying solely on the existence of displacement effects in respect of imported goods. 
Therefore, we do not consider that this statement undermines the Panel's articulation of the legal 
standard under Article  3.1(b).  
5.75.   Referring to the approach tak en by the panel in US – Tax Incentives , the United  States  
argues that the implication of that approach would be that, "if (i) a subsidy is granted to a 
domestic producer conditional on the domestic siting of production activities to produce a domestic 
input in an industrial process, and (ii) a substitution of imported goods for these inputs would 
result in the producer's loss of the entitlement to the subsidy, then the subsidy is contingent on 
the use of domestic over imported goods, and therefore is incons istent with Article  3.1(b)."266 
We recall that the Appellate  Body reversed the relevant findings appealed by the United  States  in 
                                                
261 Panel Report, para. 6.788.  
262 See Appellate  Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program , 
para. 5.5. 
263 See Appellate  Body Report, US – Tax Incentives , para. 5.49. 
264 Panel Report, para. 6.786. ( emphasis  added)  
265 Panel Report, para. 6.786.  (emphasis original; fn omitted)  
266 United  States ' other appellant's submission, para. 25.  WT/DS316/AB/RW  
 
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  US ‒ Tax Incentives. In so doing, the Appellate  Body reasoned that, "{w}hile it is not unusual 
that, in order to receive a subsi dy, the recipient is required to meet certain conditions", it was not 
entirely clear, in the circumstances of that case, "how the Washington Department of Revenue 
would exercise its discretion and whether a loss of the subsidy by the recipient, if these co nditions 
are not met, would demonstrate the existence of a requiremen t to use domestic over 
imported  goods."267 
5.76.   Indeed, as noted above, subsidies granted for the production of both an input  and a final 
good may well have consequences for the subsidized produ cers' input -sourcing decisions to the 
extent that the producer would likely use at least some of the subsidized  inputs in the production 
of the subsidized final good .268 However , even if such subsidies are likely to  affect adversely 
imported inputs, such effects cannot, in and of themselves, establish the existence of a 
requirement to use domestic over imported goods within the meaning of  Article  3.1(b).  
Admittedly, factual circumstances such as the existence of a multi -stage production process, the 
level of specialization of the subsidized inputs, or the level of integration of the production chain in 
the relevant industry may form part of the context for understanding the design, structure, and 
modalities of operation of a measure granting a subsidy in a particular market .269 Ultimately, 
however, whether a subsidy is simply conditional upon the domestic production of  certain goods, 
or upon the use by the subsidy recipient  of domestic over imported goods , should be assessed 
case by case on the basis of the te rms of the measure at issue, t heir necessary implication, 
and other relevant factors and circumstances .270  
5.77.   In light of our analysis above, we uphold  the Panel's interpretation of Article  3.1(b) of 
the SCM Agreement .  
5.78.   We note that the United  States ' appeal o f the Panel's application of Article  3.1(b) and its 
request for us to complete the legal analysis are conditional upon us reversing the Panel's 
interpretation of Article  3.1(b) .271 Having upheld the Panel's interpretation of Article  3.1(b), 
we therefore do n ot need to examine the United  States ' arguments relating to the Panel's 
application of th e legal standard under Article  3.1(b) to the facts of the present case.  Nor do we 
need to address the United  States ' arguments concerning its  request that we complete the legal  
analysis. In any event, we note that the meaning of the [BCI] clauses in the French, German, 
Spanish , and UK A350XWB LA/MSF contracts272 and how they would operate was not discussed 
before and examined by the Panel in any detail. Thus, to the extent  that the proper construction of 
those clauses  and their operation in practice  under  the municipal laws of the four  member States 
would require us to  solicit and review new factual arguments , and in the absence of sufficient 
factual findings by the Panel or undisputed facts on the Panel record , any analysis of those clauses 
would extend beyond our mandate under Article  17.6 of the DSU and may prejudice the 
participants' due process rights .273  
5.79.   The Panel's finding that the United  States' claim u nder Articles 3.1(b) and 3.2 of the 
SCM Agreement  is unsupported by sufficient evidence therefore stands.274 
                                                
267 Appellate  Body Report, US – Tax Incentives , para. 5.73. 
268 Appellate  Body Report, US – Tax Incentives , para. 5.49. 
269 Appellate  Body Report, US – Tax Incentives , paras.  5.48 and 5.50.  
270 Appellate  Body Report, US – Tax Incentives , para. 5.50. 
271 We recall that the United  States  argues that the Panel erred in its application of Article  3.1(b) of the 
SCM Agreement  and requests us to reverse  the Panel's findings that the French, German, Spanish, and UK 
LA/MSF for the A350XWB are not inconsistent with Article  3.1(b) " to the extent that  the Appellate  Body 
considers that … the Panel's interpretation of { Article  3.1(b)} is incorrect". ( United  States' other appellant's 
submission, para. 23 (emphasis added)) Moreover, at the oral hearing, the United  States  confirmed that what 
it is appealing is the interpretation of Article  3.1(b) adopted by the Panel in the present case.  
272 The United  States  raises o n appeal the relevance of the so -called [BCI] clauses in the four A350XWB 
LA/MSF contracts, arguing that, in light of those clauses, if [BCI], Airbus would [BCI] the A350XWB LA/MSF . 
(See e.g. United  States ' other appellant's submission, para. 35) 
273 Appella te Body Report, US – Offset Act (Byrd Amendment) , para. 222. See also Appellate  Body 
Report, Chile – Price Band  System  (Article  21.5 – Argentina) , para. 13. 
274 Panel Report, para. 6.790.  WT/DS316/AB/RW  
 
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  5.2.6   Conclusion  
5.80.   With respect  to the admissibility of the United  States ' appeal under Article  3.1(b) of the 
SCM Agreement  raised by the European  Union , we find that the United  States ' appeal falls within 
the scope of appellate  review under Article  17.6 of the DSU . In particular, we consider that the 
United  States ' appeal adequately identifies "issues of law covered in the panel report and legal 
interpretat ions developed by the panel" pursuant to Article  17.6 of the DSU, as well as 
"specific  allegations of errors" within the meaning of the Working  Procedures, with regard to the 
interpretation and application of Article  3.1(b) of the SCM Agreement . Regarding the merits of the 
United  States ' appeal, we uphold  the Panel's interpretation of Article  3.1(b) . While we have 
expressed concerns with certain aspects of the Panel's reasoning, the focus of the Panel's legal 
standard on the need to establish a condition requiring the use of domestic over imported goods 
comports with our reading of this provision .  
5.81.   Having upheld the Panel's interpretation of Article  3.1(b)  of the SCM Agreement , we are not 
required to make findings regarding  the applic ation of this provision to the facts of the present 
case, or to address the United  States ' arguments concerning comple tion of the legal analysis. 
The Panel's finding that the United  States ' claim under Articles  3.1(b)  and 3.2 of  the 
SCM Agreement  is unsupp orted by sufficient evidence therefore stands.  
5.3  Benefit  
5.82.   We turn now to the European  Union 's appeal of the Panel's findings concerning the 
assessment of whether each of the French, German, Spanish, and UK A350XWB LA/MSF contracts 
confer s a "benefit ", and the refore constitutes a "subsidy",  within the meani ng of Article  1.1(b) of 
the SCM Agreement .275 
5.83.   In determining whether the A350XWB LA/MSF contracts  confer a benefit , the Panel  divided  
its analysis  into two parts. First, the Panel assessed the expected rate of return on the loans 
provided to Airbus through each of the four A350XWB LA/MSF contracts.276 Second, the Panel 
examined  the rate of return that a market lender would have demanded for providing financing on 
the same or similar t erms as LA/MSF for the A350XWB. In evaluating  these two issues, the Panel 
sought to determine whether a benefit had been conferred , by conducting a comparison between 
the expected rates of return of the A350XWB LA/MSF contracts and the market benchmark 
rate of return.  
5.84.   The European  Union 's appeal concerns only the second aspect of the Panel's analysis, 
namely, the identification  of the market benchmark  rate of return . The Panel divided this part of its 
analysis into two main subsections: (i) the calculation of a general corporate borrowing rate  that 
Airbus would have had to pay to a commercial lender to borrow money; and (ii) the calculation of 
a project -specific risk premium  that represents the additional rate of return that a commercial 
lender would have re quired for offering financing to Airbus on the particular terms of the relevant 
A350XWB LA/MSF contracts .277 On appeal, t he European  Union  challenges the Panel's analysis 
regarding both the corporate borrowing rate and the project -specific risk premium . We b egin by 
examining the European  Union 's appeal concerning the Panel's anal ysis of the corporate 
borrowing  rate. 
5.3.1   Corporate borrowing rate  
5.85.   The European  Union  argues  that the Panel erred in identifying the corporate borrowing rate  
that served as a basis for the market benchmark used in the benefit analysis . In particular, 
the European  Union  takes issue with the fact that, in identifying the  time period over which to 
                                                
275 European  Union 's Notice of Appeal, paras.  6-15; appellant's submission, paras.  276 and 328.  
276 In referring to the expected rates of return for each of the four A350XWB LA/MSF contracts , the 
United  States  used the terms "rate of return" and "interest rate" . In turn , the European  Union  referred t o the 
expected rates of return as the "internal rate of return" (IRR) of the A350XWB LA/MSF contracts. The Panel 
decided to use "rates of return" as a generic term, and referred to the European  Union 's proposed rates  for the 
A350XWB LA/MSF contracts  as "inter nal rates of return", or "IRR estimates ". (Panel Report, fn 485 to 
para. 6.306 ) 
277 Panel Report, para. 6.350. WT/DS316/AB/RW  
 
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  observe the corporate borrowing rate, the Panel erroneously relied  on a range of average yields of 
the EADS  bond at issue278, rather than  the yield of such a bond on the day  of conclusion  of each of 
the French, German, Spanish, and UK A350XWB LA/MSF contract s. The European  Union  therefore 
requests us to reverse the Panel's  conclusion that the corporate borrowing rate component of the 
market benchmark in the present case can be based on "the  average yields one -month prior and 
six-month s prior to the conclusion of the contract, in the form of a range"279, and, consequently, 
also the Panel's findings related to the corporate borrowing rate set out in Table 7 
("Corporate  borrowing rate estimates" ) at paragraph 6.430 and Table 10 ("Approximate difference 
between rates of return and market benchmark rate") at paragraph 6.632 of its Report.280 
5.86.   The European  Union  brings two principal  claims of error concerning the manner in which the 
Panel identified the time period over which to observe the corporate borrowing rate component of 
the market benchmark. First, t he European  Union  contends that the Panel erred in its application 
of Article  1.1(b) of the SCM Agreement  by rejecting data pertaining to the yield of the relevant 
EADS bond on the day  of conclusion of each A350X WB LA/MSF contract. Second, 
the European  Union  asserts that th e Panel failed to make an objective  assessment of the matter, 
as required by Article  11 of the DSU, because it s decision to reject  the EADS bond yield on the day 
of conclusion  of each A350XWB LA/MSF contract  lacks an evidentiary basis  and reflects a lack o f 
objectivity and even -handedness . 
5.87.   In the event that we reject the above claims, the European  Union  brings two conditional  
claims – a claim of error in the application of Article  1.1(b) of the SCM Agreement  and a claim of 
inconsistency with Article  11 of t he DSU – challenging the Panel's decision to accept the average 
yield of the EADS bond over the six month s prior to the conclusion of each of the A350XWB 
LA/MSF contract s as part of the range of average yields that was used to determine the corporate 
borro wing rate .281 
5.88.   Before addressing the European  Union 's claims of err or, we begin by summarizing 
the Panel's findings.  
5.3.1.1   The Panel's findings  
5.89.   Having determined the expected rates of return of the four A350XWB LA/MSF contracts, the 
Panel turned to examine the rate  of return that a market lender would have demanded for 
providing financing on the same or similar terms as LA/MSF for the A350XWB (i.e. the market 
benchmark rate of return). Before the Panel , the United  States  proposed constructing such a 
benchmark based on : (i) a general borrowing rate that the recipient (Airbus) would have had to 
pay to a market lender ; plus (ii)  a project -specific risk premium that represents the additional 
return that a lender would have required for offering financing on the particular terms of the 
relevant A350XWB LA/MSF contracts .282 The European  Union  did not object to this approach for 
examining whether the A350XWB LA/MSF contracts confer a benefit.  However, the Panel observe d 
that the pa rties had diverging positions regarding both the general corporate borrowing rate and 
the project -specific risk premium.283 
5.90.   The Panel began by noting that the determination of the market benchmark rate of return 
raised the initial question of whether to use the rates derived from the data and regression models 
                                                
278 As explained in more detail below, the European  Union proposed determining the corporate 
borrowing rate on the basis of bond data of Airbus' pare nt company, EADS. In particular, the European  Union  
proposed using the EADS Finance B.V. 5.5% coupon 03/18 medium -term note (MTN), a bond  issued on 
24 September  2003 and maturing on 25 September  2018. (Panel Report, paras.  6.357 -6.358)  
279 European  Union 's appellant's submission, para. 319 (quoting Panel Report, para. 6.389).  
280 European  Union 's appellant's submission, para. 319. 
281 We note that, in taking issue with the Panel's decision to include the average yield over the 
six month s prior to the conclusion of each of the A350XWB LA/MSF contracts  in the relevant time period over 
which to observe the EADS bond yield, the European  Union does not appear to challenge the use of the 
one-month average yield of the EADS bond . 
282 Panel Report , para. 6.350.  
283 Panel Report, para. 6.351. The Panel observed, in particular, that the parties disagreed  on not only 
what the values of the two components should be, but also what bases these values should be derived  from. 
(Ibid.)  WT/DS316/AB/RW  
 
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  used in the original proceedings, as proposed by the United  States , or from EADS' actual general 
borrowing costs, as proposed by the European  Union .284 The United  States  requested an expert – 
Dr James  Jordan – to prepare a report calculating Airbus' corporate borrowing rate.285 On the basis 
of this report, t he United  States  presented general corporate borrowing rates that were based on 
the same data used to derive the general corporate borrowing rates app lied in the original 
proceeding s, updated to account for the timing of the conclusion of the relevant A350XWB LA/MSF 
contracts.286 The European  Union  rejected the United  States ' approach, maintaining that, unlike in 
the original proceeding s, the borrowing hi story and bond data of Airbus' parent company, EADS, 
were directly observable when  the A350XWB LA/MSF contracts were concluded.287 
The European  Union  also relied on an expert – Professor Robert Whitelaw – to calculate the 
relevant corporate borrowing rate.288 Professor Whitelaw asserted that "it 'is possible to establish 
from market data the company's actual cost of long -term borrowing ', that is, 'EADS' actual, 
long-term borrowing rates at the date of the agreements, expres sed as the yield on its 
longest -term b ond'."289  
5.91.   The Panel agreed with the European  Union  that the in tegration of the Airbus entities and the 
availability of the EADS bond data are relevant factual differences between the original and the 
compliance proceedings .290 Thus, th e Panel considered that using relevant bond data directly 
observable at the time that the A350XWB LA/MSF contracts were concluded – to the extent that 
such data reflect borrowing by the relevant entities – would, in principle, be preferable to  the 
approach  proposed by the United  States .291 However, before reaching its conclusion on the 
appropriate corporate borrowing rate for constructing the market benchmark, the Panel addressed 
a series of criticisms by the United  States  questioning the extent to which the EADS bond data 
may be used to construct the relevant corporate borrowing rates. In particular, the Panel 
examined the following four issue s raised by the United  States : (i) whether the EADS bond reflects 
the identity of the borrower; (ii)  the relevant date s for obser ving the EADS bond yield; 
(iii) whether to adjust the EADS bond yield in terms of maturity and duration; and (iv ) whether to 
add to the corporate borro wing rate an amount for normal fees and charges associated with 
general corp orate borrowing on  the market.292 
5.92.   With respect to the first issue, the United  States  questioned whether a bond representing 
the corporate borrowing rate of EADS – Airbus' parent company – is a good reflection of the 
general corporate bor rowing rate associated with the Airbus entities with which the A350XWB 
LA/MSF  contract s were concluded .293 In the Panel's view, the borrowing rate can be  expected to be 
closest to the parent company's borrowing rate where the parent is explicitly a co -contra ctor 
[BCI]. Noting that the German KfW A350XWB Loan Agreement  and UK A350XWB LA/MSF contract  
implicate EADS directly as a co -contractor [BCI], the Panel agreed with  the European  Union  that 
the reference to EADS' corporate borrowing rate is appropriate for those two contracts.294 By 
contrast, the Panel  indicated that general corporate borrowing rates may be higher than the parent 
                                                
284 Panel Report, para. 6. 352. 
285 See Dr James Jordan, NERA Economic Consulting, "Comparison of A350 XWB LA/MSF Interest Rates 
with Market Benchmarks", 18  October  2012 (Jordan Report) (Panel Exhibit USA -475 (BCI/HSBI)).  
286 Panel Report, para. 6.353. In the original proceedings, the United States  constructed a corporate 
borrowing rate for each of the four member States, using what limited bond data was then available regarding 
the relevant Airbus companies for the time periods in question and regression models and other techniques to 
fill data gaps. The constructed corporate borrowing rate for each of the four member States was the sum of a 
government borrowing rate (said to be a "risk -free" borrowing rate) derived from government bonds and a 
"general corporate risk premium", or credit spread, derived from Aérospatiale and BAE Systems bond data for 
borrowing in France and the United Kingdom (i.e. the spread between French and UK risk -free rates) and the 
performance of similarly rated bonds. The corporate risk premium was applied over the  relevant 
country -specific risk -free rate to arrive at a corporate rate for each contract. (Ibid. (referring to Ellis -Jordan 
Report, 10  November  2006 (Panel Exhibit USA -474/506 ( BCI) (exhibited twice) ), pp. 1 and 7))  
287 Panel Report, para. 6.357.  
288 Professor Robert Whitelaw, "Response to Dr Jordan's report on the benefits of MSF", 
13 December  2012 (Whitelaw Response to Jordan) (Panel Exhibit EU -121 (BCI/HSBI)).  
289 Panel Report, para. 6.357 (quoting Whitelaw Response to Jordan (Panel Exhibit EU -121 (BC I/HSBI) ), 
paras.  8 and 11 -12, and fns 10 and 13  thereto ). 
290 Panel Report, para. 6.360.  
291 Panel Report, para. 6.364.  
292 Panel Report, paras.  6.367 -6.428.  
293 Panel Report, para. 6.367.  
294 Panel Report, para. 6.372.  WT/DS316/AB/RW  
 
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  company rate where the parent [BCI]. The Panel thus considered that the corporate borrowing 
rate for the French Airbus entity, Airbu s SAS (Toulouse), and for the Spanish Airbus entity, Airbus 
Operations  SL, could be higher than the corporate borrowing rate for EADS.295 As a result , for the 
French A350XWB LA/MSF contract and the Spanish A350XWB Convenio , the EADS bond may be an 
understate ment of the general corporate  borrowing  rate. However, the Panel considered that using 
the EADS bond for all four A350XWB LA/MSF  contracts was preferable to the United  States ' 
proposed alternative  on the understanding that the EADS bond may well be an underestimate for 
at least the French A350XWB LA/MSF contract and Spanish A350XWB Convenio .296 
5.93.   Regarding the relevant dates for observing the EADS bond yield, the Panel identified two 
main issues raised by the United  States : (i) whether Professor Whitelaw's approach – which 
average d the yield over a period representing the time during which the A350XWB LA/MSF 
contracts were concluded – was an appropriate way of determini ng the EADS bond rate; 
and (ii) which date is relevant for deriving the yield applicable to  the French A350XWB LA/MSF 
contract.297 
5.94.   With resp ect to Professor Whitelaw's average, the European  Union  indicated that his 
proposed corporate borrowing rate was obtained by averaging the EADS bond's yield to maturity  
(YTM)  over [BCI] months. Therefore, Professor Whitelaw derived the YTM of the EADS 5.5% 
03/18 medium -term note (MTN) bond for the period [BCI]. According to the European  Union , this 
is the period over which all four of the A350XWB LA/MSF contracts were concluded. On this basis, 
Professor Whitelaw calculated a rate of [BCI] for EADS' actual cost of long -term borrowing for the 
French, German,  and Spanis h A350XWB LA/MSF contracts, and  [BCI] for the UK  A350XWB 
LA/MSF contract.298 
5.95.   In response, the United  States ' expert, Dr  Jordan, criticized "the manner in which Professor 
Whitelaw derive{d} the results for EADS' actual cost of long -term debt based on the EADS bond, 
submitting that the [BCI] averaging period used by Professor Whitelaw is an 'inconsistent 
approach to selecting a yield based on the signing dates of the agreements' and  produces a 
downward bias in the selected yield".299 Dr Jordan maintain ed that "Professor  Whitelaw's corporate 
borrowing rates are based on yields that include time periods after the LA/MSF loan agreements 
were finalized. They also do not use consistent periods of time around the loan agreement dates, 
and they are affected by  the downward trends in yields ."300  
5.96.   The Panel compared Professor Whitelaw's average  yields with Dr Jordan's observation of the 
EADS bond yield on various dates (i.e. the average yield over the six month s prior to the 
conclusion of the relevant A350XWB LA/MS F contract, the average yield over the month prior to 
the conclusion of the relevant contract, and the yield on the day of conclusion of the relevant 
contract) .301 The Panel's comparison is reproduced below : 
                                                
295 Panel Report, para. 6.373. 
296 Panel Report, para. 6.374.  
297 Panel Report, para.  6.377.  
298 Panel Report, para. 6.378. Professor Whitelaw revealed that the average YTM on the bond was 
computed for the [BCI] for each of the three euro -denominated A350XWB LA/MSF contracts, with an 
adjustment based on the average EUR to GBP s wap rates being made for the UK  A350XWB LA/MSF contract. 
(Ibid.)  
299 Panel Report, para. 6.379 (quoting Dr James Jordan, NERA Economic Consu lting, "Reply to Professor 
Whitelaw's Response to Jordan Report",  20 May 2013 (Jordan Reply) (Panel Exhibit USA -505 (BCI/HSBI)), 
para. 16 (fn omitted)).  
300 Panel Report, para. 6.379 (quoting Jordan Reply (Panel Exhibit USA -505 (BCI/HSBI )), paras.  24-28).  
301 Panel Report , para.  6.382  (referring to Jordan Reply (Panel Exhibit USA -505 (BCI/HSBI)), Table 6; 
Jordan Materials in Response to Panel Questions Nos. 110, 111, 112, and 114 (Panel Exhibit USA -567 
(BCI/HSBI)), supplement to Table 6).  WT/DS316/AB/RW  
 
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  Table 1: Respective proposals  for EADS bond yield values  
EU member State and 
relevant date of 
conclusion of loan 
agreement  6 month average 
prior to date of 
loan agreement  1 month average 
prior to date of 
loan agreement  Yield on day 
of loan 
agreement  Whitelaw average yield 
over [BCI] starting [ BCI] 
France  
[BCI] 
([BCI])302 
[BCI]  
[BCI] 
([BCI]) 
[BCI]  
[BCI] 
([BCI]) 
[BCI]  
[BCI] 
([BCI]) 
[BCI]  
[BCI] 
Germany  
[BCI]  
[BCI]  
[BCI]  
[BCI]  
[BCI] 
Spain  
[BCI]  
[BCI]  
[BCI]  
[BCI]  
[BCI] 
United Kingdom  
[BCI]  
[BCI]  
[BCI]  
[BCI]  
[BCI] 
Source: Panel Report, Table 6 at paragraph 6.382.  
5.97.   The Panel then noted the Appellate  Body's guidance from the original proceedings:  
Under a "benefit" analysis, a comparison is made between the terms and conditions of 
the financial contribution when it is granted {and} the terms and conditions that 
would have been offered on the market at that time  … a panel's assessment of benefit  
should focus on the relevant market benchmark at the time the financial contribution 
is granted to the recipient. That benchmar k entails a consideration of what a market 
participant would have been able to secure on the market at that time.303 
5.98.   On the basis of this guidance, the Panel indicated that "borrowing costs should be observed 
at the time that each particular contract was con cluded ."304 The Panel explained that "{a}veraging 
the borrowing rate of contracts concluded over a time -period during which there were different 
market borrowing rates may lead to distortions."305 For this reason, the Panel considered that:  
Professor Whitelaw's averaging approach could artificially lower a higher market 
borrowing rate, leading to a misplaced finding that there was no subsidisation . It could 
also artificially increase a lower market borrowing rate, and create a danger that a 
benefit might be found in a case where LA/MSF was really obtained at, or above, 
market rate. In such an instance there could be a misplaced finding of 
subsidisation.306 
5.99.   The Panel observed that "Professor Whitelaw's averaging approach would result in the 
application of corporate borrowing rates derived over time periods that are different  for the 
four LA/MSF contracts."307 By way of example, the Panel noted that " the market rate for the 
UK loan agreement, coming later, would be distorted upwards by higher yields from the time when 
                                                
302 In their submissio ns before the Panel, the parties referred to the date of the conclusion of the 
French  A350XWB Protocole  as [BCI]. The Panel noted that the French A350XWB Protocole  was signed and 
dated [BCI] and that [BCI] is the date of a cover letter enclosing copies of the French A350XWB Protocole  
sent to the Director General of Airbus. Therefore, the Panel considered the correct date for the French 
A350XWB Protocole  to be [BCI]. However, the Panel also decided to include the yields on both dates in the 
table of calculations for the sake of completeness. (Panel Report, fn 585 to Table 6  at para.  6.382)  
303 Panel Report, para.  6.384 (quoting Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft , para.  706 (emphasis original)). The Panel also note d the Appellate  Body's statement that "{t}he 
comparison is to be performed as though the {actual and benchmark} loans were obtained at the same time … 
the assessment focuses on the moment in time when the lender and borrower commit to the transaction". 
(Ibid. (quoting Appellate  Body Report, EC and certain member States – Large Civil Aircraft , paras.  835-836))  
304 Panel Report, para. 6.385 . 
305 Panel Report, para. 6.385.  
306 Panel Report, para. 6.385.  
307 Panel Report, para. 6.386 ( referring to Jordan Reply (Panel E xhibit USA -505 (BCI /HSBI )), para. 27). 
(emphasis added ; additional text in fn 588 thereto omitted ) WT/DS316/AB/RW  
 
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  the French agreement was concluded – some [BCI] earlier ".308 However, "{t} he market rate for 
the French loan agreement  … would not be judged against market rates from [BCI] prior to its 
conclusion, when the bond yields were even higher and would have likewise distorted the rates 
upwards ."309 Thus, the Panel considered that there was no "justification for judging the four 
LA/MSF agreements by different st andards".310 
5.100.   In addition, t he Panel pointed out that "Professor Whitelaw's averaging approach would 
also incorporate data from after the conclusion of three of the four contracts. "311 In the Panel's 
view, " {m}arket rates for debt after the conclusion of a contract do not seem … to be a good 
measure of what the market would have offered at the time  it was concluded."312 The Panel found 
it "difficult to see how what … happens after the conclu sion of an agreement is relevant for the 
purposes  of establishing a market benchmark".313 
5.101.   In light of these considerations, the Panel concluded  that, contrary to the Appellate  Body's 
guidance , "Professor Whitelaw's approach of observing the average daily yield to maturity over a 
[BCI]-month p eriod during w hich the four contracts were signed, d{id}  not provide the yields 'at 
the time' that the terms, and thus rates, of the individual contracts were negotiated and 
agreed ."314 Therefore, the P anel "reject {ed} the averaging approach in favour of the yields from a  
consistent time -period up to the date of the conclusion of the individual contract, as calculated by 
Dr Jordan".315 
5.102.   The Panel  then turned to determine which of the periods provided by Dr Jordan should be 
utilized for constructing the market benchmark : (i) the average yield over the six month s prior to 
the conclusion of the contract; (ii) the average yield over the month prior to the conclusion of the 
contract; or (iii) the yie ld on the day of conclusion of the contract . In this regard, t he Panel 
considered t hat "the yield on the day of the signature of contract may  reflect atypical 
fluctuations."316 First, t he Panel considered that parties agreeing to a complex loan contract may 
rather set the rates in the lead -up to the conclusion of the contract . Therefore, i n the Panel's view , 
"the one -month average would appear to be a reasonable proxy for the parties' expectations ."317 
The Panel added that "{t} he six-month  average may be less likely to reflect expectations during 
the finalisation period, but may also be a hel pful indication of market exp ectations."318 On this 
basis, the Panel decided to carry out the "benchmarking assessment using the average yields 
one-month prior and six-month s prior to the conclusion of the contract, in the form of a range".319 
5.103.   Second, w ith respect to the relevant date of the French A350XWB LA/MSF contract, the 
Panel considered that th is question would be a material issue only if Professor Whitelaw's 
averaging approac h were used. The Panel pointed out that, having rejected that approach, there 
was no material difference in the yields regardless of the chosen dates.320 However, for the sake of 
completeness, the Panel examined the issue and concluded that the date of conclusion of  the 
French A350XWB  Protocole , signed on [BCI], should be used given that it reflected the relevant 
time when the French Government committed to the terms and conditions of LA/MSF, while the 
                                                
308 Panel Report, para. 6.386 . 
309 Panel Report, para. 6.386 . (emphasis omitted)  
310 Panel Report, para.  6.386.  
311 Panel Report, para. 6.387.  (emphasis added)  
312 Panel Report, para. 6.387. (emphasis original)  
313 Panel Report, para. 6.387. In contrast to market rates after the time of conclusion of the relevant 
contract , the Panel noted that  market rates for debt in the lead -up to the conclusion of a contract could provide 
empirical evidence of the "going market rates" and may be indicative of what the market might have been 
willing to offer and accept at the time of conclusion of the relevant contract. (Ibid.)  
314 Panel Report, para. 6.388.  In particular, t he Panel considered that Professor Whitelaw's approach 
was not consistent with the Appellate  Body's guidance that: ( i) the benchmark entails a consideration of what a 
market participant would have been able to secure on the market at that time;  and ( ii) the assessmen t focuses 
on the moment in time when the lender and borrower commit to the transaction.  (Ibid.)  
315 Panel Report, para. 6.388.  
316 Panel Report, para. 6.389.  
317 Panel Report, para. 6.389.  
318 Panel Report, para. 6.389.  
319 Panel Report, para. 6.389.  
320 Panel Report,  para. 6.392.  WT/DS316/AB/RW  
 
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  date of conclusion  of the French A350XWB  Convention  (i.e. [BCI]) related to when the relevant 
funds were attributed .321 
5.104.   Third, the Panel turned to assess  whether it was necessary to adjust the EADS bond yield 
in terms of maturity and duration. The United  States  sought to adjust the EADS bond  yield based 
on similarly  rated bonds with a term of  20 years, on the ground that the LA/ MSF measures at issue  
have a much longer term to maturity than the EADS bond.322 The Pa nel noted that, if an 
adjustment is made to take into account differences in maturity, then account must also be taken 
of differences that may exist in term s of structure.  The Panel therefore considered that it would be 
an "oversimplification to adjust the EADS bond yield solely by adding the term spread, or term 
premium, of simil arly-ranked  20-year corporate bonds, given that the structure of the A350XWB 
LA/MSF contracts m eans the loan principal will not be exposed for the full length of that term".323 
Consequently, the Panel concluded that the United  States ' proposal to adjust the EADS bond was 
not appropriate, and proceeded on the basis of the unadjusted EADS bond yield.324 
5.105.   Finally, the Panel examined the United  States ' propo sal of adding to the corporate 
borrowing rate an amount for normal fees and charges associated with general corporate 
borrowing on the market. The Panel agreed  that fee amounts normally charged as part of  the 
corporate borrowing rate should be considered in the benefit analysis . However, the Panel 
expressed concerns about some of the estimates provided by the United  States .325 The Panel thus 
decided to accept the European  Union 's estimate of the underwriting  fee for the EADS bond itself, 
leading  to an adjustment to the EADS bond yield of approximatel y [BCI] basis points.326 
5.106.   In sum , the Panel decided to use the yield of the EADS bond identified by the 
European  Union  as the basis for the corporate borrowing rate . As regards the dates for observing 
the yield, the Panel determined that "the EADS bond's yields should be observed over consistent 
time periods in the lead up to each of the four individual contracts, in the form of a range of the 
one-month and six-month  average yields prior to the date of the individual contracts".327 However, 
the Panel observed that "the EADS bond yield may be lower than rates that would be required for 
borrowing by its Airbus subsidiaries alone (that is, the EADS bond yield may understat e the 
corporate borrowing rate for the French and Spanish contracts)."328 Similarly, the Panel observed 
that it would use "the unadjusted yields of the EADS bond on the understanding that it is likely to 
be a conservative reflection of the corporate borrowin g rate that should be used to construct the 
relevant market benchmark for the LA/MSF contracts".329 On this basis, in Table 7  at 
paragraph  6.430  of its Report, t he Panel  concluded that the quantitative implications of its findings 
on the corporate borrowing rate are  the following : 
                                                
321 Panel Report, para. 6.399.  
322 Panel Report, para. 6.400.  
323 Panel Report, para.  6.417.  
324 Panel Report, para. 6.421.  
325 The Panel considered it unclear that the United  States ' underwriting fee estimate, derived  from an 
analysis of complex, equity -linked, derivative , and innovative instruments, would match the kind of normal 
fees that Airbus would face if it turned to the market for funding for the A350XWB. (Panel Report, para. 6.428)  
326 Panel Report, para. 6.428 (referring to European  Union 's comments on the United  States ' response 
to Panel question No. 161, para. 16 and fn 41  thereto; Whitelaw Comments  on US  Responses (Panel 
Exhibit  EU-508 (BCI)), para. 16). 
327 Panel Report, para. 6.429. 
328 Panel Report, para. 6.429. 
329 Panel Report, para. 6.429.  WT/DS316/AB/RW  
 
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  Table 2: Corporate  borrowing rate estimates  
EU member State  Corporate borrowing rate as 
reflected by yield on EADS 
bond (range: between 
average yield 1 -month prior, 
and 6 -months prior, to date 
of individual c ontract)  Representative 
sum for normal 
market fees  Total corporate 
borrowing rate 
component of market 
benchmark rate  
France  [BCI] to [BCI] [BCI] [BCI] to [BCI] 
Germany  [BCI] to [BCI] [BCI] [BCI] to [BCI] 
Spain  [BCI] to [BCI] [BCI] [BCI] to [BCI] 
United Kingdom  [BCI] to [BCI] [BCI] [BCI]330 to [BCI] 
Source: Panel Report, Table 7 at paragraph 6.430.  
5.3.1.2   Overview of the relevant jurisprudence regarding the benefit analysis  
5.107.   A financial contribution constitutes a subsidy within the me aning of Article  1.1 of the 
SCM Agreement  if it confers a benefit. With respect to the nature of the benefit analysis , the 
Appellate  Body has explained that the concept of "benefit" under Article  1.1(b) of the 
SCM Agreement  implies conducting a comparison. Th is is because "there can be no 'benefit' to the 
recipient unless the 'financial contribution' makes the recipient 'better off' than it would otherwise 
have been, absent that contribution."331 The Appellate  Body has pointed out that the 
"marketplace" provides an appropriat e basis for comparison in determining whether a benefit has 
been conferred, because the trade -distorting potential of a financial contribution can be identified 
by determining whether the recipient has received such financial contribution on terms more 
favourable than those available to the recipient on the market.332 
5.108.   The Appellate  Body has stated that Article  14 of the SCM Agreement  provides relevant 
context to Article  1.1(b).333 Article  14 sets forth guidelines relating  to equity investments, loans, 
loan guarantees, and the provision of goods or services by a government and the purchase of 
goods by a government.  Under each of the guidelines , a benefit arises if the recipient has received 
a financial contribution on terms  more favourable than those available to it on the market.334 Thus, 
Article  14 confirm s the view  that the "marketplace" should be used as the benchmark for the 
comparison in determining whether a benefit exists.335  
5.109.   With regard to financial contributions provi ded in the form of a loan, Article  14(b) of the 
SCM Agreement  sets out that government loans shall not be considered as conferring a benefit, 
unless there is a difference between the amount that the firm receiving the loan pays on the 
government loan and t he amount the firm would pay on a comparable commercial loan that it 
could actually obtain on the market. Article  14(b)  also specifies that the benefit "shall be the 
difference between these two amounts".  Thus, t here is a benefit  where the amount that the 
recipient pays on the government loan is less than what the recipient would have paid on a 
comparable commercial loan that the recipient could have obtained on the market . 
5.110.   The Appellate  Body has specified that a benchmark loan under Article  14(b) must be a  loan 
that is "comparable" to the investigated government loan. In the Appellate  Body's view, 
"a benchmark loan under Article  14(b) should have as many elements as possible in common with 
                                                
330 As reflected in Table 10 of the Panel Report, the correct figure representing the lower bound of the 
total corporate borrowing rate component of the market benchmark rate for the UK LA/MSF contract is [BCI]. 
This figure ha s been used in reproducing Table 7 of the Panel Report.  
331 Appellate  Body Report, Canada – Aircraft , para. 157. 
332 Appellate  Body Report, Canada – Aircraft , para. 157. 
333 Although Article  14 is in Part V of the SCM Agreement , "it is relevant context to the interpretation of 
Article  1.1(b) for the purpose of Part II of the SCM Agreement"  and "can be used as relevant context to 
determine whether a subsidy exists ". (Appellate  Body Report, Canada – Renewable Energy / Canada – Feed-in 
Tariff Program , para. 5.163  (fn omitted)) See also Appellate  Body Report, US – Large Civil Aircraft  
(2nd complaint) , fn 1293 to para.  616. 
334 Appellate  Body Report, Canada – Aircraft , para. 158. 
335 Appellate  Body Report, Canada – Aircraft , paras.  155 an d 158.  WT/DS316/AB/RW  
 
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  the investigated loan to be comparable."336 In the context of that provision, the Appellate  Body 
has observed that, "ideally, an investigating authority should use as a benchmark a loan to the 
same borrower that has been established around the same time, has the same structure as, and 
similar matur ity to, the government loan, is about the same size, and is denominated in the same 
currency."337  
5.111.   The Appellate  Body has, however, acknowledged  that, "in practice, the existence of such 
an ideal benchmark loan would be extremely rare, and that a comparison should also be possible 
with other loans that present a lesser degree of similarity."338 This means that a certain degree of 
flexibility  applies under Article  14(b) in the selection of benchmarks, so that such selection can 
ensure a meaningful comparison for  the determination of benefit.339 In line with this flexibility, the 
Appellate  Body has indicated that, " {i}n the absence of an actual comparable commercial loan that 
is available on the market, an investigating authority should be allowed to use a proxy for  what 
'would' have been paid on a comparable commercial loan that 'could' have been obtained on the 
market ."340 In this regard, the Appellate  Body has specified that " selecting a benchmark under 
Article  14(b) involves a progressive search for a comparable co mmercial loan ".341 The aim is to 
find " the commercial loan that is closest to the investigated loan (a loan to the same borrower that 
is nearly identical to the investigated loan in terms of timing, structure, maturity, size and 
currency) ".342 The "further awa y an investigating authority moves from the ideal benchmark of the 
identical or nearly identical loan, the more adjustments will be necessary to ensure that the 
benchmark loan approximates the 'comparable commercial loan which the firm could actually 
obtain on the market ' specified in Article  14(b) ".343 
5.112.   The Appellate  Body has mentioned a series of factors that inform whether the benchmark 
loan is "comparable" to the investigated government loan , such as the timing, structure, size, and 
currency of the relevan t loans.344 Regarding the timing  of the relevant transactions , the 
Appellate  Body in the original proceedings in this dispute stated that, pursuant to Article  14(b), the 
comparison of the "amount the firm receiving the loan pays on the government loan" with "the 
amount the firm would pay on a comparable commercial loan " is "to be performed as though the 
loans were obtained at the same time."345 Thus,  "the comparable commercial loan is one that 
would have been available to the recipient firm at the time it recei ved the government loan."346 
The Appellate  Body reasoned that the assessment focuses "on the moment in time when the 
lender and borrower commit to the transaction", and that a panel conducting this assessment must 
therefore consider " how the loan is structur ed and how risk is factored in, rather than looking at 
how the loan actually performs over time ".347 
5.113.   In this regard, the Appellate  Body further explained  in the original proceedings that 
financial transactions should be  analysed on an ex ante  basis. This is  because , in deciding whether 
to commit resources to a particular investment, an investor will consider alternative investment 
opportunities and will make a decision on the basis of information available at that time about 
market conditions and projections.  It is on the basis of this information that a panel should 
determine whether a particular investment was "commercially rational ".348 For this reason, the 
Appellate  Body rejected  the notion that it is relevant to examine  how the investment at issue 
                                                
336 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 476. 
337 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 476. 
338 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 476. 
(fn omitted)  
339 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 489. See also 
Appellate  Body Report, US – Carbon Steel (India) , para. 4.345.  
340 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 487. 
341 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 486. 
342 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 486. 
343 Appellate  Body Report, US – Anti-Dumping and Coun tervailing Duties (China) , para. 488. 
344 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 476. 
345 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 835. 
346 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 835. 
347 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 836. (emphasis 
added ; fn omitted ) 
348 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 836. WT/DS316/AB/RW  
 
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  actually performed.349 Such an ex post  analysis "has nothing useful to say about the basis upon 
which the investment was made".350 In light of these considerations, the Appellate  Body 
emphasized that a benefit analysis "must examine the terms and conditions of a loan at the time it 
is made and compare them to the terms and conditions that would have been offered by the 
market at that time."351 
5.3.1.3   Whether the Panel erred in its application o f Article  1.1(b) of t he 
SCM Agreement  by failing to  identify properly  the "corporate borrowing rate"  
5.114.   The European  Union  submits that the Panel erred in its application of Article  1.1(b) of the 
SCM Agreement  by identifying the corporate borrowing rate compo nent of the market benchmark 
rate of return as "the average yields {on an EADS bond} one -month prior and six-month s prior to 
the conclusion of the { relevant LA/MSF} contract, in the form of a range".352 The European  Union  
submits  that the Panel correctly ide ntified the legal stan dard applicable under Article  1.1(b) when 
it explain ed that "borrowing costs 'should be observed at the time  that each particular contract 
was concluded '".353 However, the European  Union  maintains  that, in applying this standard, the 
Panel should have used the actual data on the bond yield at the time each of the four A350XWB 
LA/MSF contract s was concluded (i.e. the yield on the day of conclusion of each A350XWB LA/MSF 
contract).354 Instead,  the Pane l "replac {ed} this single yield for each contract with a range based 
on the average yields one month and six month s prior to the date on which each contract was 
concluded ".355 
5.115.   According to t he European  Union , the Panel justified its rejection of the data per taining to 
the yield on the day of conclusion of the A350XWB LA/MSF contracts by "speculating" that it 
"may reflect atypical fluctuations".356 However, "the Panel did not find that there were 'atypical 
fluctuations' in the yields of the relevant EADS bond on  the day of conclusion of the LA/MSF 
contracts."357 Rather,  the Panel's own factual findings reveal that "the yield on the day of the 
conclusion of the co ntract was very similar – and sometimes even identical – to the average yield 
over the month prior to the conclusion of the contract."358 In addition, the European  Union  noted 
that the Panel critici zed Professor Whitelaw's  averaging approach , arguing that it could  lead to 
distortions.359 For the European  Union , a similar concern applies to the range of average  yields 
used by the Panel because they "could artificially increase or lower a market borrowing rate, 
leading to a false positive or a false negative subsidy finding".360 
5.116.   For the foregoin g reasons, the European  Union  requests us to reverse the Panel's 
conclu sion that the corporate borrowing rate component of the market benchmark can be based 
on "the average yields one -month prior and six-month s prior to the conclusion of the contract, in 
                                                
349 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 836. Given that 
the assessment focuses "on the moment in time when the lender and borrower commit to the transaction", 
a panel conducting this assessment "must look at how the loan is structured and how risk is factored in, rather 
than looking at how the loan actually performs over time". (Ibid. (fn omitted))  
350 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 836. 
351 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 838. 
352 European  Union 's appellant's submission, para. 278 (quoting Panel Report, para. 6.389 ). See also 
para. 290.  
353 European  Union 's appellant's submission, para. 288 (quoting Panel Report, para. 6.385 (emphasis 
added by the European  Union )). 
354 The European  Union  maintains that, for each A350XWB LA/MSF contract, "the day of conclusion of 
the contract represents 'the moment in time when the lender and borrower committ{ed} to the transaction'" . 
(European  Union 's appellant's submission, para. 289 (quoting Panel Report, para. 6.388))  
355 European  Union 's appellant's submission, para. 290. (emphas is omitted ) 
356 European  Union 's appellant's submission, para. 291 (quoting Panel Report, para. 6.389  (emphas is 
added by the European  Union)).  
357 European  Union 's appellant's submission, para. 291. (emphasis original)  
358 European  Union 's appellant's submission, para. 292. 
359 European  Union 's appellant's submission, para. 293 (quoting Panel Report, para. 6.385).  
360 European  Union 's appellant's submission, para. 294. WT/DS316/AB/RW  
 
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  the form of a range" , and the Panel's findings related to the corporate borrowing rate  set out in 
Tables 7 and 10 of the Panel Report .361 
5.117.   The United  States  disagrees with the European  Union  that Article  1.1(b) o f the 
SCM Agreement  requires the use of a corporate borrowing rate based exclusi vely on data from the 
24-hour period coinciding with  the finalization of the terms and conditions of each A350XWB 
LA/MSF contract. According to the United  States , Article  1.1(b) affords panels "a degree of 
discretion in selecting the appropriate methodology to determine 'benefit'"362, which enc ompasses 
the choice of whether to consult data pre -dating the date of conferral of an alleged subsidy.  The 
United  States  argues that , in evaluating whether a financial contribution confers a benefit within 
the meaning of Article  1.1(b), panels should condu ct an ex ante  analysis, and that "determining 
whether the investment was commercially rational is to be ascertained based on the information 
that was available to the investor at the time the decision to invest was made".363 Therefore, 
"the body of 'informat ion available at the time the decision is made' will necessarily include 
information that pre -dates the decision itself".364 
5.118.   Additionally, the United  States  argues that, "in situations where the relevant 'decision' to  
confer a subsidy is 'made' over an extended period of time, the Appellate  Body's guidance implies 
that the correspond ing commercial benchmark should include information from the same period of 
time (as well as additional information preceding it)".365 In this case, the Panel found that the 
terms and conditions for all four A350XWB LA/MSF contracts were the product of [BCI].366 This 
process had begun by [BCI], and various stages  were completed [BCI].367 In the United  States ' 
view,  these facts further suppor t the Panel's finding that the average corporate borrowing rate in 
the one­month period preceding finalization is a "reasonable proxy" for investor  expectat ions, and 
that the six-month  average is also a "helpful indication" of such e xpectations, though to a 
lesser  extent.368 Consequently, the United  States  argues that the Panel's decisi on to use the one -
month and six-month  average yields as the basis for the corporate borrowing rate is consistent 
with Article  1.1(b)  of the SCM Agreement . 
5.119.   A meaningful benefit analysis pursuant to Article  1.1(b) requires panels to carry out a 
careful and thorough comparison between the financial contribution provided by a government and 
a market benchmark. Regarding  the manner in which the timing of the relevant transactions 
should be factored into the benefit analysis, we reiterate that the benefit comparison  must be 
undertaken on an ex ante  basis, and thus  focuses "on the moment in time when the lender and 
borrower commit to the transaction".369 Information that is closer in time  to the conclusion of the 
terms and conditions of a loan will usually  be more probative than information that derives from 
time periods preceding the final stages of negotiation and conclusion of a transaction. 
Nevertheless , a panel's determination regardi ng the appropriate timing of  when the lender and 
borrower committed to the relevant terms and conditions of  the transaction at issue should be 
made on a case -by-case basis, taking into account the specific nature and features of the financing 
at issue and in light of the arguments and evidence presented by the parties.  
5.120.   Therefore, a panel conducting this assessment must look at how the relevant government 
financial contribution is structured, focusing on the nature and type of financing that is being 
provid ed and whether aspects thereof were agreed upon in the  period leading up to the formal 
signing of the legal instrument providing the financial contribution.  While in some cases parties 
                                                
361 European  Union 's appellant's submission, para. 319 (referring to Panel Report, para.  6.389, Table  7 
at para. 6.430, and Table 10 at para. 6.632).  
362 United  States ' appellee's submission, para. 198 (quoting  Appellate  Body Report, EC and certain 
member States – Large Civil Aircraft , para. 883).  
363 United  States ' appellee's submission, para. 202 (quoting Appellate  Body Report, EC and certain 
member States – Large Civil Aircraft , para. 836).  
364 United  States ' appellee's submission, para. 202. 
365 United  States ' appellee's submission, para. 204 (referring to Appellate  Body Report, EC and certain 
member States – Large Civil Aircraft , para.  836). 
366 United  States ' appellee's submission, para. 204 (quoting Panel Rep ort, para. 6.644, in turn quoting 
Statement by Tom Williams, Executive Vice President, Programmes, Airbus SAS, 17 May 2013 (Williams 
Statement) (Panel Exhibit  EU-354 (BCI)), para. 3).  
367 United  States ' appellee's submission, para. 204 (referring to Panel R eport, paras.  6.55 and 6.645). 
368 United  States' appellee's submission, para.  204. 
369 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 836. WT/DS316/AB/RW  
 
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  may commit to a complex financing instrument only after all the relevan t terms and conditions in 
their overall configuration are known , it is also possible to envisage cases where parties may have 
committed to a transaction – or to key aspects thereof – during a finalization period of the 
negotiations preceding the moment of formal conclusion  of all aspects of that transaction . 
This may be the case, in particular, where the financial contribution at issue consists of complex 
financing instruments , the terms  and conditions  of which have been negotiated and agreed over a 
certain contracting period . In such circumstances , it would be appropriate for a panel to take into 
account in its analysis  information that pre -dates the moment or actual  day on which the legal 
instruments underlying the relevant  transaction were formally signed , bearing in mind that 
information closer in time to the formal conclusion of the financing instrument will be more 
probative than information from earlier stages of the negotiations.  
5.121.   While the Europe an Union  correctly notes that, in condu cting the benefit analysis, 
the comparison focuses "on the moment in time when the lender and borrower commit to the 
transaction"370, we disagree with the European  Union  to the extent that it suggests that the Panel 
was required to limit its analysis to  data from "the day of conclusion" of each A350XWB LA/MSF 
contract regardless of the time period  over which the parties may have committed to the terms 
and conditions of that financing  instrument . Rather, for purposes of c onducting its benefit analysis, 
the Panel was required to take into account the specific  financing instrument at issue, including the 
relevant circumstances surrounding the conclusion of that instrument, to determine the period 
over which the terms and con ditions of the relevant contract were agreed.  
5.122.   With these considerations in mind, in order to determine whether the Panel erred under 
Article  1.1(b), we turn to review its analysis regarding the  specific nature and features of 
A350XWB LA/MSF  financing , incl uding  the time  period over which the parties  negotiated and  
committed to that financing.   
5.123.   Before doing so, however, we note that the Panel relied on the yield of the EADS bond as 
an analytical tool to determine the first component of the market benchmark p roposed by  the 
United  States  – namely, a corporate  borrowing rate that Airbus would have had to pay to a market 
lender . In conducting this examination, the Panel addressed a series of criticisms by the 
United  States  regarding  the extent to which the EADS bond data could  be used to construct the 
relevant corporate borrowing rate. In assessing the relevant dates for observing the EADS bond 
yield, we do not understand the Panel to have sought to determine the "price of the EADS b ond" 
per se . Rather, the Panel examined the time period over which the relevant A350XWB LA/MSF 
contracts  were concluded to draw a conclusion as to the corporate borrowing rate that would have 
been applicable to Airbus during that period using the yield of the EADS bond as a proxy in 
this regard.  
5.124.   With respect to the specific nature and features of LA/MSF financing, the original panel  
held that, despite a number of variations in the terms and conditions  of the legal instruments 
making up the contractual frame work of the challenged LA/MSF measures, numerous similarities in 
the type and form of financing exist ed.371 In these compliance proceedings, the United  States  
argued before the Panel that the four A350XWB LA/MSF contracts contain the same "core" terms 
as the pre-A350XWB LA/MSF measures.372 After examining the similarities and differences 
between the A350XWB LA/MSF contracts and the LA/MSF measures examined in the original 
proceedings, the Panel indicated that "the LA/MSF contracts for the A350XWB resemble the 
contracts at issue in the original proceeding {s}, based on the type of terms, including the 
similarity of disbursement mechanisms, the levy -based repayments of the principal along an 
anticipated schedule of deliveries and the imposition of royalties, the fa ct that no security is 
provided for the debt amount, and the existence of conditional guarantees that are limited only to 
the performance of obligations."373 Thus, the Panel considered that, overall, the repayment of the 
                                                
370 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 836. 
371 Panel Report, para.  6.286 (referring to Original Panel Report, paras.  7.374, 7.410, and 7.525).  
372 Panel Report, para. 6.58 ( referring to United  States' first writte n submission to the Panel, paras.  140, 
143-144, and 147; second written submission to the Panel, paras.  85 and  89-101).  
373 Panel Report, para.  6.286.  WT/DS316/AB/RW  
 
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  A350XWB LA/MSF is back -loaded374, primarily levy -based375, dependent on the sales of aircraft, 
and unsecured.376 To this extent, the Panel concluded that the A350XWB LA/MSF contracts share 
the same core features as the LA/MSF measures considered in the original proceeding s.377 
5.125.   Moreover, the Pane l made relevant findings regarding the time  period over which the 
parties negotiated and committed to the A350XWB LA/MSF contracts. In particular, the Panel 
found  that, "the Airbus governments {i.e. France, Germany, Spain, and the United Kingdom} 
formally entered into negotiations with Airbus for LA/MSF {to support the A350XWB programme} 
in late  2008, individually agreeing on its terms on different dates between [BCI]."378 [BCI]379 As 
will be elaborated  below,  the Panel's reasoning reveals that the terms  and co nditions  of the 
relevant instruments were negotiated and agreed over a contracting period spanning across 
[BCI].  
5.126.   In terms of the reasoning provided by the Panel in support of its conclusion regarding the 
relevant dates for observing the EADS bond yield, w e recall that , in conducting this analysis,  the 
Panel began by rejecting Professor Whitelaw's averaging approach because such approach "would 
result in the application of corporate borrowing rates derived over time periods that are different  
for the four L A/MSF contracts."380 In addition, the Panel indicated that "Professor Whitelaw's 
averaging approach would also incorporate data from after the conclusion of three of the 
four contracts."381 On this basis, the Panel was unable to accept Professor Whitelaw's approach.  
5.127.   Then, the Panel  decided to determine the corporate borrowing ra te using the average 
yields one month prior and six month s prior to the conclusion of the four A350XWB LA/MSF 
contracts, in the form of a range. The Panel provided two reasons in support of its decision. First, 
the Panel considered that "the yield on the day of the signature of contract may reflect atypical 
fluctuations."382 In this regard, we note t he European  Union 's contention that "the Panel did not 
find that  there were 'atypical fluctuations' in the yields of the relevant EADS bond on the day of 
conclusion of the LA/MSF contracts."383 The European  Union  also makes this argument in its 
challenge under Article  11 of the  DSU, where it is further elaborated.384 We will therefore address 
it in more detail in our analysis of that claim. At this juncture, however, we observe that we do not 
understand the Panel to have based its finding on speculation that there might have been  atypical 
fluctuations  in the yield of the EADS bond on the day of signature of the A350XWB LA/MSF 
contracts. Rather, we understand the Panel to have merely observed, as a general matter, 
that choosing the yield on the day of conclusion of the A350XWB LA/MS F contract at issue might 
                                                
374 The Panel stated that, "{i}n some instances, repayment begins only after Airbus has made a 
specified number of aircraft deliveries. Althoug h the amount of the per -aircraft levies varies {among}  the 
different contracts, it appears in nearly all cases to be [BCI]. In this way, the contracts are back-loaded ." 
(Panel Report, para. 6.273  (emphasis original) ) 
375 The Panel explained that reimbursemen t of the loan principal in all f our A350XWB LA/MSF contracts 
is by per -aircraft levies. The levy is charged upon aircraft delivery, and thus levies are expected to be paid 
according to a pre -determined anticipated aircraft delivery schedule. According to t he Panel, repayment of the 
principal may thus be said to be levy-based . (Panel Report, para. 6.270)  
376 The Panel observed that, similar to the situation in the original proceedings where the loans were 
said to be unsecured , in these compliance proceedings " no security or collateral is nominated or provided by 
another entity for repaying {A350XWB} LA/MSF either if Airbus does not fulfil its obligations or in the event 
that delivery targets are not met or if the programme fails or is discontinued". (Panel Repo rt, para. 6.277)  
377 Panel Report, para. 6.286.  
378 Panel Report, para. 6.55 (referring to Williams Statement (Panel Exhibit EU -354 (BCI)), para. 3; 
European  Union 's response to Panel question No. 101).  
379 Panel Report, Table 6 at para. 6.382.  
380 Panel Report, para. 6.386 (referring to Jordan Reply (Panel Exhibit USA -505 (BCI/HSBI)), para. 27). 
(emphasis added ; additional text in fn 588 thereto omitted ) 
381 Panel Report, para. 6.387.  
382 Panel Report, para. 6.389.  
383 European  Union 's appellant's submission, para. 291. (emphasis original)  According to the 
European  Union , "rather than reflecting atypical  fluctuations, the Panel's own factual findings reveal that the 
yield on the day of conclusion of each {A350XWB} LA/MSF contract was typical ." (Ibid., para. 292 (emphasi s 
original) ) 
384 See section 5.3.1.4 of this Report.  WT/DS316/AB/RW  
 
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  raise some methodological concerns for purposes of constructing the market benchmark because, 
on the day of conclusion of a contract, the yield " may reflect atypical fluctuations".385  
5.128.   The Panel's second reason in support of its con clusion regarding the relevant dates for 
observing the EADS bond yield was that " {p}arties agreeing to a complex loan contract may 
rather set the rates in the lead -up to the conclusion of the contract, and prior to the actual day on 
which the contract is s igned ."386 Earlier in its analysis , the Panel had also stated that "market rates 
for debt in the lead -up to the conclusion of a contract could provide empirical evidence of the 
'going market rates' and may be indicative of what the market might have been wil ling to offer 
and accept, and may thus inform what is known and predicted ab out market rates at the time 
of conclusion".387  
5.129.   The Panel applied these general considerations to the facts of the present dispute by 
making  relevant findings with respect to the le ngth of the negotiations between Airbus and the 
four member States , thereby  shedding light on the period of time during which the investment 
decision s were made in the present case. For instance, the Panel observed that, "{a}fter publicly 
signalling their support for the new programme in  July 2006, the Airbus governments {i.e. France, 
Germany, Spain, and the United Kingdom} formally entered into negotiat ions with Airbus 
for LA/MSF {to  support the A350XWB programme} in late  2008, individually agreeing on its terms 
on different dates between [BCI]."388 As noted, [BCI].389 
5.130.   The above considerations served as the basis for the Panel's decision to determine the 
corpora te borrowing rate using the average yields one  month prior and six month s prior to the 
conclusion of the four A350XWB LA/MSF contract s, in the form of a range. In this regard, we  
observe that, although the Panel determined the corporate borrowing rate in the form of a  range  
of average yields, the  Panel rightly gave more  prominence to the one -month average yield on the 
EADS bond  than to the six-month  average yield . Indeed, the Panel found that "the one -month 
average  would appear to be a reasonable proxy for the parties' expectations."390 By contrast, the 
Panel considered that "{t}he six-month  average may be less likely to reflect expectations during 
the finalisation period, but may also be a helpful indication of market expectations."391 
5.131.   As noted, in the present case, the Panel found that "{p}arties agreeing to a complex loan 
contract may rather set the rates in the lead -up to the conclusion of the contract, and prior to the 
actual day on which the contract is signed ."392 In our view, t his understanding is in line with our 
observation that, in some cases, parties may have committed to a transaction – or to key aspects 
thereof – during a finalization period  of the negotiations  preceding the moment of formal 
conclusion of all aspects of th at transaction . This may be the case, in particular, where , as here,  
the financial contribution at issue consists of complex financing instruments, the terms and 
conditions of which have been negotiated and agreed over a certain contracting period. We have 
indicated that, in such circumstances, it would be appropriate for a panel to take into account in its 
analysis  information that pre -dates the moment or actual  day on which the legal instruments 
underlying the relevant  transaction were formally signed.  
5.132.   Specifically, w ith regard to the A350XWB LA/MSF contracts,  the Panel's findings support 
the view that the four A350XWB LA/M SF contracts fall within this category of complex financing , 
the terms  and conditions of which have been  negotiated and agreed over a c ertain period of time. 
Indeed, we recall that the Panel indicated that these contracts share the same core features as the 
LA/MSF measures considered in the original proceeding s in that their repayment is back -loaded, 
                                                
385 Panel Report, para.  6.389.  (emphasis added)  
386 Panel Report, para. 6.389.  
387 Panel Report, para. 6.387.  
388 Panel Report, para. 6.55 (referring to Williams Statement (Panel Exhibit EU -354 (BCI)), para. 3; 
European  Union 's response to Panel question No. 101). According to the  Panel, "Airbus commenced formal  
negotiations with the Airbus governments for A350XWB LA/MSF in [BCI] after the launch of the A350XWB."  
(Ibid. , para. 6.144 (referring to European  Union 's response to Panel question No.  101) (emphasis original; 
additional text in fn 290 thereto omitted))  
389 Panel Report,  Table 6 at  para. 6.382. 
390 Panel Report, para. 6.389. 
391 Panel Report, para. 6.389. 
392 Panel Report, para. 6.389.  WT/DS316/AB/RW  
 
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  primarily levy -based, dependent on the  sales of aircraft, and unsecured.393 As to the manner in 
which the terms and conditions of the A350XWB LA/MSF contracts were negotiated and agreed, 
the Panel found  that "the Airbus governments {i.e. France, Germany, Spain, and the 
United  Kingdom} formally e ntered into negotiations with Airbus for LA/MSF {to support the 
A350XWB programme} in late  2008, individually agreeing on its terms on different dates between 
[BCI]."394 Indeed, [BCI].395 These finding s by the Panel show that Airbus and the four member 
States negotiated and agreed the terms and conditions of the different A350XWB LA/MSF contracts 
over a certain period of time . 
5.133.   Moreover, o ur review of the  manner in which the parties presented their argume nts and 
evidence regarding the relevant dates for observing the yield of the EADS bond reveals that the 
parties did not focus their discussion before the Panel on determining which  of the three time 
periods  proposed by Dr  Jordan would be the correct one fo r determining such yield. Indeed, t he 
market benchmark that the United  States  originally proposed to the Panel did not include a 
reference to the EADS bond.396 In turn, most of the European  Union 's argumentation sought to 
support Professor Whitelaw's averagi ng approach as a basis for determining the relevant dates of 
the EADS bond yield.397 In response , the United  States  criticized Professor Whitelaw 's averaging 
approach398 and presented as Exhibit USA -505 an additional report prepared by Dr  Jordan.399 
In that report, Dr  Jordan provided a table compari ng the averag e yield calculated by 
Professor  Whitelaw with yields for "more relevant dates and periods for each of the 
agreements".400 Through this table, the United  States  submitted to the Panel information 
regarding: (i) the average yield over the six month s prior to the conclusion of the A350XWB 
LA/MSF  contract s; (ii) the average yield over the month prior to the conclusion of the A350XWB 
LA/MSF  contract s; and (iii) the yield on the day of conclusion of the  A350XWB LA/MSF  
contract s.401 
5.134.   Following the report presented by Dr  Jordan as Exhibit USA -505, the discussion between 
the United  States  and the European  Union  focused mostly on the question of whether the EADS 
bond yield to maturity should be adjust ed based on s imilarly rated bonds with a term of  20 years , 
as proposed by the United  States . In its subsequent communications to the Panel , the 
European  Union  did not appear to criticize expressly the relevant da tes for observing the EADS 
bond yield proposed by the United  States . Nor did the European  Union , for instance, in its 
comments to the United  States ' responses to Panel questions,  seem to express a preference for 
                                                
393 Panel Report, para.  6.286.  
394 Panel Report, para. 6.55 and fn 132 thereto (referring to Williams Statement (Panel Exhibit EU -354 
(BCI) ), para. 3; European  Union 's response to Panel que stion No. 101) . (fn 131 omitted)  
395 Panel Report,  Table 6 at  para. 6.382. 
396 The general corporate bo rrowing rates originally proposed by the United  States  were based on the 
same data used to derive the general corporate borrowing rates applied in the original proceeding s, updated to 
account for the timing of the conclusion of the relevant A350XWB LA/MSF contracts . (Panel Report, 
para. 6.353)  
397 We recall that the European  Union  asserted before the Panel that it "is possible to establish from 
market data the company's actual cost of long -term borrowing", that is, "EADS' actual, long -term borrowing 
rates at the date of the agreements, expressed as the yield on its longest -term bond". (Panel Report, 
para. 6.357 (quoting Whitelaw Response to Jordan (Panel Exhibit EU -121 (BCI/HSBI)), paras.  8 and 11 -12, 
and fns 10 and 13 thereto)) In particular, the European  Union  proposed using the EADS Finance B.V. 5.5% 
coupon 03/18 MTN, a bond issued on 24  September  2003 and maturing on 25  September  2018. (Ibid., 
para. 6.358) The European  Union  specified that Professor Whitelaw derived "the average yield to maturit y 
('YTM') of the EADS bond maturing in the last quarter of  2018 for the period when all four member State 
financing agreements were concluded – i.e., [BCI]". (European  Union 's second written submission to the 
Panel, para. 312) 
398 The United  States  took issu e with the fact that Professor Whitelaw calculated an average of the daily 
YTM on the EADS bond over "an arbitrary [BCI] time period that beg{an} [BCI]". (United  States ' comments 
to the European  Union 's responses to Panel question No. 99, para. 275 (fn omi tted)) The United  States  
disagreed with the fact that Professor Whitelaw's approach also relied on debt instrumen ts with a maturity that 
is "far  shorter than the actual term of the A350 XWB LA/MSF loans to Airbus". (Ibi d. (quoting Jordan Reply 
(Panel  Exhib it USA -505 (BCI/HSBI)), fn 3 to para. 3)) 
399 Jordan Reply (Panel  Exhibit USA -505 (BCI/HSBI)).  
400 Jordan Reply (Panel Exhibit USA -505 (BCI/HSBI)), para. 29. 
401 Jordan Reply (Panel  Exhibit USA -505 (BCI/HSBI )), Table 6 at para. 29. WT/DS316/AB/RW  
 
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  observing the EADS bond yield on the day of conclusion of the contracts .402 Thus, there was not 
much  debate between the parties regarding which of the three yields of the EADS bond presented 
by the United  States  should be chosen for purposes of determining the corporate borrowing rate.  
5.135.   In light of these considerations, we see no error in the Panel's obse rvation that "{p}arties 
agreeing to a complex loan contract may rather set the rates in the lead -up to the conclusion of 
the contract, and prior to the actual day on which the contract is signed"403, and its conclusion that 
the four A350XWB LA/MSF contracts are complex financing instruments that were negotiated and 
agreed by Airbus and the four member States over a contracting period spanning across [BCI]. 
5.136.   We note that the European  Union  additionally argues that the range of average yields used  
by the Panel r aises concerns similar to those expressed by the P anel itself regarding 
Professor  Whitelaw's averaging  approach. According to the European  Union , "{b}y using average 
yields – instead of the yield at the time each contract was signed – the Panel' s approach could 
artificially increase or lower a market borrowing rate, leading to a false positive or a false negative 
subsidy finding ."404 We find the European  Union 's position difficult to reconcile with the fact that, 
before the Panel, the European  Union  itself proposed determining the corporate borrowing rate on 
the basis of average yields.405 Moreover, the European  Union  appears to assume that the reason 
why the Panel rejected Professor Whitelaw's approach was the fact that it used average yields. 
We disagree. As we see it, the Panel's conclusion was based on other reasons. For example, the 
Panel observed that "Professor Whitelaw's averaging approach would result in the application of 
corporate borrowing rates derived over time periods  that are different  for the four LA/MSF 
contracts."406 Also, the Panel indicated  that "Professor Whitelaw's averaging approach would also 
incorporate data from after the conclusion of three of the four contracts. "407  
5.137.   Other aspects of the Panel's analysis are also relevant in addr essing the European  Union 's 
argument that the use of  average yields  could lead to a "false" finding of benefit. In particular, we 
recall that, in addition to the question of the relevant dates for observing the EADS bond yield, the 
Panel examined other iss ues in determining the applicable corporate borrowing rate.408 
In assessing these issues, it seems that the Panel preferred to follow an approach whereby the 
calculations would most likely be a conservative  reflection of the corporate borrowing rate .409 
For instance, the Panel po inted out that "the EADS bond yield may be lower than rates that would 
be required for borrowing by its Airbus subsidiaries alone (that is, the EADS bond yield may 
understate the corporate borrowing rate for the French and Spanish contr acts)."410 In addition, the 
Panel stated that, contrary to the United  States ' position, it decided not to adjust the EADS bond 
yield for a  20-year maturity. The Panel considered it preferable to "use the unadjusted yields of 
the EADS bond on the understanding that it is likely to be a conservative reflection of the 
                                                
402 See e.g. European  Union 's comments on the United  States ' respons e to Panel questions Nos. 92 
and 110-112.  
403 Panel Report, para. 6.389.  
404 European  Union's appellant's submission, para.  294. 
405 Panel Report, para. 6.378.  
406 Panel Report, para. 6.386 (referring to Jordan Reply (Panel Exhibit USA -505 (BCI/HSBI)), para. 27). 
(emphasis added ; additional text in fn 588 thereto omitted ) The Panel explained in this regard:  
For example, in the present case, the market rate for the UK loan agreement, com ing later, 
would be distorted upwards by higher yields from the time when the French agreement  was 
concluded – some [BCI] earlier (according to Professor Whitelaw). The market rate for the 
French loan agreement, however, would not be judged against market rates from [BCI] prior to 
its conclusion, when the bond yields were even higher and would have likewise distorted the 
rates upwards.  
(Ibid. (emphasis original))  
407 Panel Report, para. 6.387.  
408 We recall that, in determining the general corporate borrowing rate, the Panel examined the 
following four issue s raised by the United  States : (i) whether the EADS bond reflects the identity of the 
borrower; (ii) the relevant dates for observing the EADS bond yield; (iii) whether to adjust the EADS bond yield 
in terms of maturity and duration; and (iv ) whether to add  to the corporate borro wing rate an amount for 
normal fees and charges associated with general corp orate borrowing on the market . (Panel Repor t, 
paras.  6.367 -6.428 ) 
409 Indeed, the Panel  indicated that it would "use the unadjusted yields of the EADS bond on the 
understanding that it is likely to be a conservative reflection of the corporate borrowing rate that should be 
used to construct the relev ant market benchmark for the LA/MSF contracts".  (Panel Report, para. 6.429 ) 
410 Panel Report, para. 6.429.  WT/DS316/AB/RW  
 
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  corporate borrowing rate  that should be used to construct the relevant market be nchmark for the 
LA/MSF contracts".411 In light of these  considerations , we doubt that the use of average yields 
could , in and of itself,  have led to "a false positive or a false negative subsidy finding"  in the 
present case, as the European  Union  suggests .412 
5.138.   As indicated above, t he European  Union  correctly argues  that, in conducting the benefit 
analysis, the comparison focuses "on the moment in time when the lender and borrower commit to 
the transaction".413 However, we disagree with the European  Union  to the ex tent that it suggests 
that the Panel was required, pursuant to Article  1.1(b) of the SCM Agreement , to limit its analysis 
to data regarding  the yield "on  the day of conclusion" of each A350XWB LA/MSF contract 
regardless  of the time  period over which the parties may have committed to  the terms and 
conditions of  that financing  instrument . Rather, a panel conducting this assessment must look at 
how the relevant government financial contribution is structured , focusing on the nature and type 
of financing that  is being provided and whether aspects thereof were agreed in the lead -up to the 
formal signing of the legal instrument providing the financial contribution.  
5.139.   We recall that the Panel provided two reasons in support of its decision to determine the 
corpora te borrowing rate using the average yields one  month prior and six month s prior to the 
conclusion of the A350XWB LA/MSF contract s, in the form of a range . First, the Panel considered 
that "the yield on the day of the signature of contract may reflect atypi cal fluctuations."414 
As noted above, w e see no error in th is observation  by the  Panel . The Panel's second reason was 
that " {p}arties agreeing to a complex loan contract may rather set the rates in the lead -up to the 
conclusion of the contract, and prior to the actual day on which the contract is signed ."415 We have 
found t his understanding to be in line with our observation that, in some cases, parties may have 
committed to a transaction – or to key aspects thereof – during a finalization period of the 
negotia tions preceding the moment of formal conclusion of all aspects of that transaction . 
This may be the case, for example, where, as here,  the financial contribution at issue consists of 
complex financing the terms  and conditions  of which have been negotiated and agreed over a 
certain contracting period. The Panel's findings, in our view, support the view that the A350XWB 
LA/MSF contracts fall  within this category of complex financing. This is particularly the case, given 
the Panel's findings t hat: (i) the A350XWB LA/MSF contracts share certain unique features 
compared to other forms of financing, namely, that their  repayment terms are back-loaded, 
primarily levy -based, dependent on the sales of aircraft , and unsecured; and (ii) "the Airbus 
governments {i.e. France, Germany, Spain, and the United Kingdom} formally entered into 
negotiations with Airbus for LA/MSF {to support the A350XWB programme} in late  2008, 
individually agreeing on its ter ms on different dates between [BCI]."416  
5.140.   The above consi derations served as the basis for the Panel's determin ation of  the 
corporate borrowing rate. As noted, while the Panel determined the corporate borrowing rate in 
the form of a range of average yields, it  rightly  gave more prominence to the one -month averag e 
yield of the EADS bond  than to the six-month  average yield . Indeed, the Panel found th at 
"the one-month average  would appear to be a reasonable proxy for the parties' expectations."417 
By contrast, the Panel considered that "{t}he six-month  average may be less likely to reflect 
expectations during the finalisation period, but may also be a helpful indication of market 
expectations."418 In these circumstances, we find that the Panel did not err  in its application of 
Article  1.1(b) of the SCM Agreement  in finding that  the corporate borrowing rate component of the 
market benchmark could be based on  the average yields o f the EADS bond "one-month prior and 
                                                
411 Panel Report, para. 6.429. (emphasis added)  In this regard, t he Panel  indicated that  "the increased 
uncertainty with respect to repayments scheduled for a more distant point in time means that the EADS bond 
yield likely gives a conservative estimate of the corporate borrowing rate compo nent of the benchmark rate for 
all four contracts ". (Ibid.  (emphasis original) ) Moreover , the Panel stated that "the higher Macaulay durations 
of the [BCI] contracts, when compared to the Macaulay duration of the EADS bond, further suggests that the 
EADS bond yield would represent a conservative estimate for those three contracts ." (Ibid.  (emphasis original) ) 
412 European Union 's appellant's submission, para. 294. 
413 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 836. 
414 Panel Report, para. 6.389.  
415 Panel Report, para. 6.389.  
416 Panel Report, para. 6.55 (referring  to Williams Statement (Panel Exhibit EU -354 (BCI)), para. 3; 
European  Union 's respon se to Panel question No. 101).  
417 Panel Report, para. 6.389.  
418 Panel Report, para. 6.389.  WT/DS316/AB/RW  
 
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  six-month s prior to the conclusion " of the  French, German, Spanish, and UK  A350XWB LA/MSF 
contract s, "in the form of a range" , attributing more weight to the former average yield s than it did 
to the latter .419 
5.3.1.4   Whether the Panel acted inconsistently with Article  11 of the DSU by rejecting 
the yield of the relev ant EADS bond on the day of conclusion of each A 350XWB 
LA/MSF  contract  
5.141.   The European  Union  presents two main lines of argumentation in support of its claim that 
the Panel acted inconsistently with its obligations under Article  11 of the DSU. First, the 
European  Union  argues that the Panel acted inconsist ently with Article  11 because it "lacked a 
sufficient evidentiary basis"  for rejecting the EADS bond yield on the day of conclusion of each of 
the four A350XWB LA/MSF contract s.420 According to the European  Union , the Panel justified the 
rejection of the EADS bond yield on the day of conclusion of the contract s due to "the possibility 
that that yield 'may reflect atypical fluctuations'".421 The European  Union  asserts  that the Panel did 
not test whether such atypical  fluctuations in fact existed , and argues that the Panel therefore had 
no evidentiary basis to reject the yield on the day of conclusion of the four  contract s. 
5.142.   Second , the European  Union  asserts  that two aspects of the Panel's analysis reflect  a 
"lack of objectivity and even -handedness" .422 The European  Union  argues that , on the one hand,  
the Panel's rejection of the data pertaining to the EADS bond yield on the day of conclusion of each 
contract occurred against the background of a downward trend in such yield, which resulted in an 
"artificial  increase in the market benchmark" used by the Panel .423 On the other hand , the Panel  
provided no plausible explanation for its  "unsupported" decision to set  the corporate borrowing 
rate component of its market benchmark in the form of a range  of average yields .424 
5.143.   The United  States  requests that we reject the European  Union 's claim  that the Panel  acted 
inconsistently with Article  11 of the DSU  in this regard. A ccording to the United  States , the Panel in 
this case provided a thoroughly reasoned explanation, supported by evidence, for each of its 
findings.  In particular, t he United  States  disagrees that the Panel acted  inconsistent ly with 
Article  11 by stating that the EADS bond yield " may reflect atypical fluctuations " without 
"test{ing}  whether such atypical fluctuations in fact existed".425 The United  States  points out that  
the Panel Report contains a graph that displays daily fluctuations in the EADS bond yield, which 
confirms that the Panel's concern about potentially atypical fluctuations in the bond yield was 
"reasonable – not egregiously erroneous ".426 The United  States  also disagre es with the 
European  Union 's assertion that  the Panel provided no "plausible explanation " for its  decision to 
express the corporate borrowing rate in the form of a range  of average yields,  contrary to 
Article  11 of the DSU .427 The United  States  points out th at such a plausible explanation is found in 
paragraph 6.389 of the Panel  Report. Additionally, the United  States  asserts that the inclusion of 
such a range "enhances the robustness" of any findings based on a market  benchmark because it 
allows for a comparison that reflects the variability of the bond yields .428 
                                                
419 Panel Report, para. 6.389.  
420 European  Union 's appellant's submission, para. 296. 
421 European  Union 's appellant's submission, para. 297 (quoting Panel Report, para. 6.389 (emphasis 
added by the European  Union )). 
422 European  Union 's appellant's submi ssion, para.  298. 
423 European  Union 's appellant's submission, para. 298. 
424 European  Union 's appellant's submission, para. 299. The European  Union  submits that eliminating 
the range chosen by the Panel narrows the gap between the benchmark and the  internal rate of return, which 
increases the "stress " on the Panel's overall benefit finding. (Ibid.)  
425 United  States ' appellee's submission, para. 211 (quoting  European  Union 's appellant's submission, 
para. 297).  
426 United  States ' appellee's submission, para. 211 (referring to Panel Report, para. 6.381 and Figure 1 
thereto).  
427 United  States ' appellee's su bmission, para. 210 ( quoting  European  Union 's appellant's submission, 
para. 299).  
428 United  States ' appellee's submission, para. 210. Furthermore, while the United  States  acknowledges 
that there could be cases where the inclusion of such a ra nge calls into question the exis tence of a subsidy, this 
is not the case in the present dispute, "as the terms of LA/MSF for the A350 XWB were better than both ends 
of the Panel's ranges" . (Ibid.)  WT/DS316/AB/RW  
 
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  5.144.   Before addressing the European  Union 's claim that the Panel acted inconsistently with 
Article  11 of the DSU, we begin by recalling key aspects of the Appellate  Body's jurisprudence 
under this provision.  
5.145.   Article  11 of the DSU provides:  
Function of Panels  
The function of panels is to assist the DSB in discharging its responsibilities under this 
Understanding  and the covered agreements. Accordingly, a pane l should make an 
objective assessment of the matter before it, including an objective assessment of the 
facts of the case and the app licability of and conformity with the relevant covered 
agreements, and make such other findings as will assist the DSB in m aking the 
recommendations or in giving the rulings provided for in the covered agreements.  
5.146.   As the Appellate  Body has observed, " Article  11 of the DSU imposes upon panels a 
comprehensive obligation to make an 'objective assessment of the matter', an obligat ion which 
embraces all aspects of a panel's examination of the 'matter', both factual and legal."429 
In disputes concerning actionable subsidies under the SCM Agreement , a panel serves as the initial 
trier of facts. In such cases, panels have the responsibil ity to gather and analyse relevant factual 
data and information.430 The Appellate  Body has explained  that a panel's duty as the trier of facts, 
in such cases, requires it to "consider all the evidence presented to it, assess its credibility, 
determine its weight, and ensure that its factual findings have a proper basis in that evidence".431 
In the context of addressing claims under Part III of the SCM Agreement , the Appellate  Body has 
further specified the conditions that a panel must comply with to remain within the bounds of its 
authority as the initial trier of facts.432 In particular, a panel may not "mak e affirmative findings 
that lack a basis in the evidence contained in the panel record".433 As the initial trier of facts, 
a panel must also provide "reasone d and adequate explanations and coherent reasoning"434 and 
not reveal a lack of "even -handedness" in th e "treatment of the evidence" .435 
5.147.   Within these parameters, how ever, it is generally within the discretion of a panel to decide 
which evidence it chooses to utilize in making its findings436, and to determine how much weight to 
attach to the various items of ev idence placed before it by the parties.437 A panel does not err 
simply because it declines to accord to the evidence the weight that one of the parties  believes 
should be accorded to it.438 Moreover, the mere fact that a panel has not explicitly referred  to each 
and every piece of evidence in its reasoning is insufficient to establish a claim  of violation under 
Article  11.439 Rather, an appellant must explain why such evidence is so material to its case that 
the panel's failure to address it explicitly has a bearing on the objectivity of its factual 
assessment.440 
                                                
429 Appellate  Body Report, US – Hot-Rolled Steel , para. 54. 
430 Appellate  Body Report, US – Upland Cotton , para. 458.  
431 Appellate  Body Report s, US – Large Civil Aircraft (2nd complaint) , para. 992; Brazil – Retreaded 
Tyres , para. 185. See also Appellate  Body Report s, EC – Hormones , paras.  132-133; Australia  – Salmon , 
para. 266; EC – Asbestos , para. 161; EC – Bed Linen (Article  21.5 – India) , paras.  170, 177, and  181; 
EC ‒ Sardines, para. 299; EC ‒ Tube or Pipe Fittings , para. 125; Japan  – Apples , para. 221; 
Japan  ‒ Agricultural Products II , paras.  141-142; Korea  ‒ Alcoholic Beverages , paras.  161-162; Korea – Dairy , 
para. 138; US – Carbon Steel , para.  142; US ‒ Gambling , para.  363; US – Oil Country Tubular Goods Sunset 
Reviews , para.  313; EC ‒ Selected  Customs Matters , para. 258. 
432 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , paras.  881 and 1317.  
433 Appellate  Body Report, US – Carbon Steel , para. 142 (referring to Appellate  Body Report, 
US ‒ Wheat Gluten , paras.  161-162).  
434 Appellate  Body Report, US – Upland Cotton ( Article  21.5 – Brazil) , fn 618  to para. 293.  
435 Appellate  Body Report, US – Upland Cotton ( Article  21.5 – Brazil) , para. 292. 
436 Appellate  Body Report, EC – Hormones , para. 135. 
437 Appellate  Body Report, Korea – Dairy , para. 137. 
438 Appellate  Body Reports, Australia – Salmon , para. 267; Japan – Apples , para. 221; Korea  – Alcoholic 
Beverages , para. 164. 
439 Appellate  Body Reports, EC – Fasteners (China) , paras.  441-442; Brazil – Retreaded Tyres , 
para. 202. 
440 Appellate  Body Report, EC – Fasteners (China) , para. 442. WT/DS316/AB/RW  
 
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  5.148.   The Appellate  Body has also considered it unacceptable for an app ellant simply to recast 
factual arguments that it made before the panel in the guise of an Article  11 claim.441 Instead, an 
appellan t must ide ntify specific errors regarding the objectivity of the panel's assessment442 and 
"explain why the alleged error meets  the standard of review under that provision".443 Indeed, a 
claim  that a panel has f ailed to conduct the "objective  assessment of the matter before it" as 
required by Article  11 of the DSU is "a  very serious allegation"444, and the Appellate  Body will not 
"interfere lightly" with a panel's fact -finding authority.445 Rathe r, for a claim  under Article  11 to 
succeed, the Appel late Body "must be satisfied that the panel has exceeded the bounds of its 
discretion, as the trier of facts".446 According to the Appellate  Body, "not every error allegedly 
committed by a panel amounts to  a violation of Article  11 of the DSU"447, but only tho se that are 
so material that, "taken together or singly"448, they undermine the objectivity of the panel's 
assessment of the matter before it.449 
5.149.   In its first line of argumentation, the European  Union  challenges the lack of a  sufficient  
evidentiary basis  for the Panel's reject ion of  the yield of the EADS bond on the day of conclusion of 
each A350XWB LA/MSF contract because of  "the possibility that that yield 'may reflect atypical 
fluctuations'".450 According to the European  Union , the undisputed data on the record show that 
the yield on the day of conclusion of each A350XWB LA/MSF contract did not reflect atypical 
fluctuations, but was very similar – and sometimes even identical – to the average yield over the 
one-month period prior to the conclusion of each contract.  
5.150.   In our view, in  making this argument, the European  Union  appears to be assuming that 
the Panel intended to base its conclusion on the fact that , in effect,  there were  "atypical 
fluctuations" in the EADS bond yield on the day of conclusion of the four A350XWB LA/MSF 
contracts. However, as noted above, we do not understand the Panel to have based its finding  on 
such an assumption . Rather, the Panel appears to have merely observed, as a general matter , that 
choosing the yield on the day of conclusion  of the contract at issue might raise some 
methodological concerns for purposes of constructing the market benchmark because, on the day 
of conclusion of a contract, the yield " may reflect atypical fluctuations".451 Had the Panel intended 
to make the factual  finding  that the yield of the EADS bond was indeed  affected by atypical 
fluctuations on the day of conclu sion of each of the four contracts, there could well be good 
reasons to criticize the Panel for not having verified whether the data substantiated tha t finding  
and for not having reflected such review of the data in its reasoning . However, this is not how we 
read the Panel's analysis. Moreover, t he Panel provided further reasoning  as to why it would be 
preferable not to choose the yield of the bond on t he day of conclusion of a contract by stating 
that " {p}arties agreeing to a complex loan contract may rather set the rates in the lead -up to the 
conclusion of the contract, and prior to the actual day on which the contract is signed."452 
Therefore, we are not persuaded by the European  Union 's argument in this regard.  
5.151.   In its second line of argumentation  under Article  11 of the DSU, the European  Union  
argues that the Panel's analysis reflects a lack of objectivity and even -handedness . 
The European  Union 's argument is  two-fold. First, the European  Union  contends that the fact that 
the Panel reject ed the EADS bond yield on the da y of conclusion of each A350XWB LA/MSF 
contract against the background of a downward trend in such yield  evidences a  lack of objectivity 
                                                
441 Appellate  Body Report, EC – Fasteners (China) , para. 442. 
442 Appellate  Body Report, EC – Fasteners (China) , para. 442. 
443 Appellate  Body Reports, China – Rare Earths , para. 5.178 (quoting Appellate  Body Report, 
EC ‒ Fasteners (China) , para. 442 (emphasis original)).  
444 Appellate  Body Reports, China – Rare Earths , para. 5.227 (quoting Appellate  Body Report, 
EC ‒ Poultry , para. 133).  
445 Appellate  Body Reports, EC – Sardines , para. 299 (quoting Appellate  Body Report, US ‒ Wheat 
Gluten , para. 151); US – Carbon Steel , para. 142. 
446 Appellate  Body Report, US – Wheat Gluten , para. 151. 
447 Appellate  Body Report, EC – Fasteners (China) , para. 442. 
448 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1318. See also 
Appellate  Body Report, EC – Fasteners (China ), para. 499. 
449 Appellate  Body Reports, China – Rare Earths , para. 5.179.  
450 European  Union 's appellant's submission, para. 297 (quoting Panel Report, para. 6.389 (emphasis 
added by the European  Union )). 
451 Panel Report, para. 6.389.  (emphasis added ) 
452 Panel  Report, para. 6.389.  WT/DS316/AB/RW  
 
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  and even -handedness . According to the European  Union , this resulted in an "artificial increa se in 
the market benchmark" used by the Panel.453  
5.152.   We agree with the European  Union  that, given the risk of false findings of benefit being 
made,  a panel must be particularly vigilant when it engages in a benefit analysis with respect to 
complex financial contributions , the terms and conditions of which have been negotiated and 
agreed over a period of time. In particular,  a panel is required to take into account the time period 
over which the terms and conditions of the financial contribution  were negotiated and agreed, 
so that the benefit comparison focuses "on the moment in time when the lender and borrower 
commit {ted}  to the transaction".454 However, the fact that the Panel relied on averages of data is 
not in itself objectionable, provided that this information is close enough in time to the conclusion 
of the contract terms and conditions to be probative for the benefit c omparison. In any event, the 
fact that there was a downward trend in the yield of the EADS bond  does not per se  establish that 
the Panel failed to conduct a proper benefit analysis when it relied on  a range of average yields, 
let alone that it acted incons istently with Article  11 of the DSU. In fact, we view the 
European  Union 's arguments under Article  11 of the DSU as being largely premised on its view 
that the Panel misapplied Article  1.1(b) of the SCM Agreement . 
5.153.   As noted above, we see no error in the Pan el's analysis of the corporate borrowing rate 
component of the market benchmark under Article  1.1(b) of the SCM Agreement . Indeed, we 
consider that the Panel based its conclusion on the specific nature and features of the  A350XWB 
LA/MSF  financing at issue in light of the arguments and evidence presented by the parties . 
In particular, one of  the reasons provided by the  Panel was that " {p}arties agreeing to a complex 
loan contract may rather set the rates in the lead -up to the conclusion of the contract, and prior to 
the actual day on which the contract is signed ."455 The Panel's findings support the view that the 
French, German, Spanish, and UK A350XWB LA/MSF contracts fall within this category of 
complex  financing.456  
5.154.   As we understand it, these  considerations s erved as the basis for the Panel's decision to 
determine the corporate borrowing rate using the average yields one  month prior and six month s 
prior to the conclusion of each contract, in the form of a range , placing more reliance on the 
one-month average, while considering the six-month  average "helpful" . Since we disagree with the 
European  Union 's arguments in the context of its claim of error under Article  1.1(b) of 
the SCM Agreement , we consequently disagree with this line of argumentation  under Article  11 
of the DSU. 
5.155.   Second , the European  Union  asserts that the Panel's lack of objectivity and 
even-handedness is also revealed by its decision to set the corporate borrowing rate component of 
the market benchmark in the form of a range  of avera ge yields , without supporting its decision 
with any explanation.457 
5.156.   In addressing this challenge under Article  11 of the DSU, we begin by noting that t he Panel 
expressed a clear pref erence for determining the EADS bond yield on the basis of evidence about 
market rates "in the lead -up to the conclusion of a contract".458 We recall that the information  on 
the record regarding the relevant yields  of the EADS bond  included : (i) the average yield over the 
six month s prior to the conclusion of the A350XWB LA/MSF cont racts; and (ii) the average yield 
                                                
453 European  Union 's appellant's submission, para. 298. 
454 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 836. 
455 Panel Report, para. 6.389.  
456 This is particularly the case, given the Panel's findings that: (i) the four A350XWB LA/MSF contracts 
share certain unique features compared to other forms of financing, namely, that their repayment terms are 
back-loaded, primarily levy -based, dependent on  the sales of aircraft, and unsecured; and (ii) "the Airbus 
governments {i.e. France, Germany, Spain, and the United Kingdom} formally entered into negotiations with 
Airbus for LA/MSF {to support the A350XWB programme} in late  2008, individually agreeing o n its terms on 
different dates between [BCI]." (Panel Report, para. 6.55 (referring to Willi ams Statement (Panel 
Exhibit  EU-354 (BCI)), para. 3; European  Union 's response to Panel question No.  101))  
457 European Union's appellant's submission, para. 299.  
458 Panel Report, para. 6.387. For instance, in its concluding sentence addressing Professor Whitelaw's 
averaging approach, the Panel stated that it "reject{ed} the averaging approach in favour of the yields from a 
consistent time -period up to the date of the  conclusion  of the individual contract, as calculated by Dr Jordan".  
(Ibid., para. 6.388 (emphasis added))  WT/DS316/AB/RW  
 
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  over the month prior to the conclusion of the A350XWB LA/MSF contracts. In selecting those 
two periods proposed by Dr Jordan, the Panel reasoned that "{p}arties agreeing to a complex loan 
contract may rather set the rates in the lead -up to the conclusion of the contract , and prior to the 
actual day on which the contract is signed."459 In light of these considerations, the Panel, in our 
view, did provide an explanation for its decision to set the corporate borro wing rate in the form of 
a range  of average yields. In  any event, w e reiterate  our understanding that, even though the 
corporate borrowing rate was determined in the form of a range  of average yields, the Panel  
rightly gave  more prominence to the one -month average yiel d of the EADS bond  than to the 
six-month  average yield.  
5.157.   In addition , we highlight that the European  Union  itself fails to indicate why relying on a 
range of average yields for purposes of identifying the general corporate borrowing rate 
necessarily shows a lack of objectivity. An appellant must identify specific errors regardi ng the 
objectivity of the panel's assessment460, and "it is incumbent on a participant raising a claim under 
Article  11 on appeal to explain why the alleged error meets  the standard of review under that 
provision" .461 It certainly fell well within the bounds of the Panel's discretion under Article  11 of the 
DSU to refer to both averages in the form of a range.  
5.158.    For the foregoing reasons, we disagree with the European  Union 's claim that the Panel 
acted inconsistently with Article  11 of the DSU because it lacked a sufficient evidentiary basis  for 
rejecting the EADS bond yield on the day of conclusion of each A350XWB LA/MSF contract . 
Moreover, we do not believe that the Europe an Union  has established that the Panel's  decision to 
set the corporate borrowing rate in the form of a range  of average yields, or the fact that such 
decision was done against the background of a downward trend in the yield of the EADS bond,  
reflect s a lack of objectivity and even -handedness  contrary to the requirements of Article  11 of the 
DSU. Consequently, we find that the European  Union  has failed to establish that the Panel acted 
inconsistently with its obligations under Article  11 of the DSU.  
5.3.1.5   The European  Union 's conditional appeal  
5.159.   The European  Union  brings two conditional  claims  – one claim of error in the application of 
Article  1.1(b) of the SCM Agreement  and one claim of inconsistency with Article  11 of the DSU – 
challenging the Panel's decision to accept the average yield of the EADS bond over the six month s 
prior to the conclusion of each of the four A350XWB LA/MSF contract s as part of the range that 
was used to determine the corporate borrowing r ate.462 These claims are conditional upon us 
reject ing the European  Union 's principal  claims  on appeal. Given that we have rejected these 
claims of error, we turn to address the European  Union 's conditional claims.  
5.3.1.5.1   Whether the Panel erred in its application of Article  1.1(b) of the 
SCM Agreement  by including the  six-month  average yield of the EADS bond  in its 
determination of the  corporate borrowing rate  
5.160.   The European  Union  argues that the Panel erroneously used, "as part of the range of 
corporate borrowing r ates forming part of its market benchmark, the average yield {of the EADS 
bond} over the six month s prior to the conclusion of each of the {four A350XWB} LA/MSF 
contracts ".463 In the European  Union 's view, " {t}he average yield of the relevant EADS bond over 
those six-month  periods does not reflect the yield 'at the time  that each particular contract was 
concluded ', and does not 'focus{} on the moment in time when the lender and borrower commit to 
the transaction '."464 The European  Union  points out that " {t}he Panel itself found that the 
six-month  average was ' less likely to reflect  expecta tions during the finalisation period' of each 
                                                
459 Panel Report, para. 6.389. (emphasis added)  
460 Appellate  Body Report, EC – Fasteners (China) , para. 442. 
461 Appellate  Body Reports, China – Rare Earths , para. 5.178 (quoting Appellate  Body Report, 
EC ‒ Fasteners (China) , para. 442 (emphasis original)).  
462 European Union's appellant's submission, paras. 300 -301. 
463 European  Union 's appellant's submission, para. 302. 
464 European  Union 's appellant's subm ission, para. 303 (quoting Panel Report, paras.  6.385 and 6.388  
(emphasis added by the European  Union )). WT/DS316/AB/RW  
 
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  LA/MSF contract than the one -month average."465 Thus, in the European  Union 's view, the Panel 
"adopted a market benchmark that the Panel itself recognised does not reflect the yield at the time  
the LA/MSF contracts were concluded".466 
5.161.   Moreover, according to the European  Union , the six-month  average yield used by the Panel 
was "part icularly prone to result in misplaced findings of subsidisation", given that "there was a 
downward trend in yields on the relevant EADS bon d in the months leading -up to the conclusion of 
each contract ."467 Consequently, with regard to each of the four A350XW B LA/MSF contracts, 
"the average yield over the six-month s prior to the conclusion of each contract was substantially 
higher  than the average yield over the one -month period prior to the conclusion of each 
contract".468 Therefore, the European  Union  maintain s that, "by using the six-month  average yield, 
the Panel 'artificially increase{d} a lower market borrowing rate', thereby 'creat{ing} a danger 
that a benefit might be found in a case where LA/MSF w as really obta ined at, or above, 
market  rate'."469 
5.162.   In response , the United  States  asserts that , as in the context of its principal claim of error 
in the application of Article  1.1(b)  of the SCM Agreement , the European  Union  adopts an 
"improperly narrow" reading  of the Appellate  Body's guidance that the commer cial benchmark 
should be based on the time at which  each particular contract was concluded .470 Therefore, for the 
same reasons advanced in the context of the European  Union 's principal claim , the United  States  
disagrees  that the Panel erred in its applicatio n of Article  1.1(b) by including in the calculation of 
the corporate borrowing rate the average yiel d of the EADS bond over the six month s prior to the 
conclusion of the four A350XWB LA/MSF contracts.471 
5.163.   In our analysis above, we indicate that, although the Panel determined the corporate 
borrowing rate in the form of a range  of average yields, it rightly gave more prominence to the 
one-month average yield of the EADS bond  than to the six-month  average yield . Indeed, the Panel 
found that "the one -month average  would appear to be a reasonable proxy for the parties' 
expectations."472 By contrast, the Panel considered that "{t}he six-month  average may be less 
likely to reflect expectations during the finalisation period, but may also be a helpful indication of 
marke t expectations."473 Moreover, we find that Article  1.1(b) of the SCM Agreement  does not 
require the Panel to have conduct ed its benefit analysis by focusing exclusively on the yield of the 
EADS bond "on the day of conclusion" of each A350XWB LA/MSF contract . Indeed, while  in 
conducting the benefit analysis the comparison focuses "on the moment in time when the lender 
and borrower commit to the transaction"474, we disagree with the European  Union  to the extent 
that it suggests that the Panel should have conducte d the benefit comparison exclusively using 
data concerning the yield "on  the day of conclusion" of each A350XWB LA/MSF contract regardless 
of the time period over which the parties may have committed to the terms and conditions of that 
financing instrument .  
5.164.   As we see it, in claiming that the Panel committed legal error under Article  1.1(b) by 
including in its analysis  "the average yield {of the EADS bond} over the six month s prior to the 
conclusion of each of the LA/MSF contracts"475, the European  Union 's claim is similarly challenging 
the Panel's benefit analysis  regardless of the time period over which the parties may have 
committed to the terms and conditions of that financing instrument . Therefore, the same 
considerations provided  in our  analysis of the earlier claim of error also apply in the context of the 
present claim. As noted, we  consider it relevant for  a panel to evaluate the specific financing 
instrument at issue, including the relevant circumstances surrounding the conclusion of that 
                                                
465 European  Union 's appellant's submission, para. 304 (quoting Panel Report, para. 6.389  (emphasis 
added by the European  Union )). 
466 European  Union 's app ellant's submission, para. 304. (emphasis original)  
467 European  Union 's appellant's submission, para. 306 (referring to Panel Report, para. 6.381).  
468 European  Union 's appellant's submission, para. 306. (emphasis original)  
469 European  Union 's appellant's submission, para. 307 (quoting Panel Report, para. 6.385).  
470 United States' appellee's submission, para. 213.  
471 United  States ' appellee's submission, para. 213. 
472 Panel Report, para. 6.389. 
473 Panel Report, para. 6.389. 
474 Appellate  Body Repor t, EC and certain member States – Large Civil Aircraft , para. 836. 
475 European  Union 's appellant's submission, para. 302. WT/DS316/AB/RW  
 
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  instrument, to determine the period over which the terms and conditions of those contracts were 
agreed . This is because it is possible to envisage cases where , as here, the  parties may have 
committed to a transaction – or to key aspects thereof – during a finalization period of the 
negotiations preceding the moment of formal conclusion of all aspects of that transaction . In such 
circumstances , it would be appropriate for a panel to take into account in its analysis  information 
that pre -dates the  moment  or actual  day on which the legal instruments underlying the relevant  
transaction were formally signed.  
5.165.    As indicated above, the Panel's findings in the present case  support the view that the 
four A350XWB LA/MSF contracts fall within this category of comp lex financing. This is particularly 
the case, given the Panel's findings that: (i) the A350XWB LA/MSF contracts share certain unique 
features compared to other forms of financing, namely, that their  repayment terms are 
back-loaded, primarily levy -based, de pendent on the sales of aircraft , and unsecu red; 
and (ii) "the Airbus governments {i.e. France, Germany, Spain, and the United Kingdom} formally 
entered into negotiations with Airbus for LA/MSF {to su pport the A350XWB programme} 
in late 2008, individually agreeing on its ter ms on different dates between [BCI]."476 These 
considerations served as the basis for the Panel's decision to determine the corporate borrowing 
rate using the average yields one month prior and six month s prior to the conclusion of each of the 
four contract s, in the form of a range.  
5.166.   Moreover, o ur review of the arguments and evidence presented by the parties regarding 
the relevant  dates for observing the yield of the EADS bond reveals that the parties did not focus 
their discussion on  determining which  of the three time periods proposed by Dr  Jordan would be 
the correct one for determining such yield.  Rather, much of the European  Union 's argumentation 
supported the relevant dates of the EADS bond yield on the basis of Professor  Whitela w's 
averaging approach. In turn, the United  States  criticized Professor Whitelaw 's averaging approach 
and submitted a report by Dr Jordan that included  a table compari ng the average yield calculated 
by Professor Whitelaw with yields for "more relevant date s and periods for each of the 
agreements "477, which contained data on the three periods from which the Panel ultimately chose 
the corporate borrowing rate. As noted, since the six - and one -month average yields  were not 
contested by the parties before the Pan el, it does not seem unreasonable for the Panel to have 
relied on this evidence, especially given the Panel's observation that "{p}arties agreeing to a 
complex loan contract may rather set the rates in the lead -up to the conclusion of the contract, 
and prior to the actual day on which the contract is signed"478, and its conclusion that the 
four A350XWB LA/MSF contracts are complex financing instruments , the terms and conditions of 
which were negotiated and agreed by Airbus and the four member States over  a contracting period 
spanning across [BCI]. 
5.167.   The European  Union  argues that " {t}he six-month  average yield used by the Panel was 
particularly prone to result in misplaced findings of subsidisation " because " there was a downward 
trend in yields on the relevan t EADS bond in the months leading  up to the conclusion of each 
contract ."479 We agree with the European  Union  that, given the risk of false findings of the 
existence of benefit being made, a panel must be particularly vigilant where it engages in a benefit 
analysis with respect to complex financial contributions , the terms and conditions of which are 
negotiated and agreed over a certain finalization period before the time of formal conclusion. 
In particular, a panel has to scrutinize the time period over whic h the terms and conditions of the 
financial contribution were negotiated and agreed, so as to ensure that the benefit comparison 
focuses "on the moment in time when the lender and borrower commit {ted}  to the transaction".480 
As noted, the fact that there was a downward trend in the yield of the EADS bond  does not per se  
establish that the Panel failed to conduct a proper benefit analysis when it relied on the average 
yields of the EADS bond. In our analysis above, we reject  the European  Union 's claims that the 
Panel committed legal error under Article  1.1(b) of the SCM Agreement  in its analysis of the 
corporate borrowing rate component of the market benchmark. Instead, we find that the Panel 
                                                
476 Panel Report, para. 6.55 (referring to Williams Statement (Panel Exhibit EU -354 (BCI)), para. 3; 
European  Union 's respon se to Panel q uestion No. 101).  
477 Jordan Reply (Panel  Exhibit USA -505 (BCI/HSBI)), Table 6 at para. 29. 
478 Panel Report, para. 6.389.  
479 European  Union 's appellant's submission, para. 306 (referring to Panel Report, para. 6.381).  
480 Appellate  Body Report, EC and certain member States – Large Civil  Aircraft , para. 836. WT/DS316/AB/RW  
 
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  based its conclusion on the specifi c A350XWB LA/MSF  financing at issue  and the relevant time 
period over which its terms and conditions were concluded.  
5.168.   For the foregoing reasons, we do not consider that it was inappropriate for the Panel to  
have include d in its analysis information regardin g the average yield of the EADS bond over the 
six month s prior to the conclusion of each of the four A350XWB LA/MSF contracts. In any event, 
we recall that, although the corporate borrowing rate was determined in the form of a range  of 
average yields, the Panel rightly gave more  prominence to the one -month average yield of the 
EADS bond  than to the six-month  average yield, which was considered to be only a 
"helpful  indication of market expectations".481 Consequently, we find that the European  Union  has 
not es tablished that  the Panel erred under Article  1.1(b) of the SCM Agreement  "by accepting, 
as part of the range for the corporate borrowing rate, the average yield on the relevant EADS bond 
over the six month s prior to conclusion of each LA/MSF contract ".482 
5.3.1.5.2   Whether the Panel acted inconsistently with Article  11 of the DSU by including 
the six-month  average yield of the EADS bond in its determination of the corporate 
borrowing rate  
5.169.   We now turn to the European  Union 's conditional appeal that the Panel acted inc onsistently 
with Article  11 of the DSU by inclu ding in the calculation of the corporate borrowing rate the 
average yield of the EADS bond over the six month s prior to the conclusion of each of the 
four A350XWB LA/MSF contracts.  The European  Union 's challen ge under Article  11 of the DSU  is 
based on two grounds.  
5.170.   First, the European  Union  contends that the Panel failed to provide a reasoned and 
adequate explanation for including, as part of the range,  the average yield over the six-month  
period prior to the co nclusion of each A350XWB LA/MSF contract. The European  Union  points out 
that, even though the Panel had noted that "the six-month  average was 'less likely to reflect  
expectations during the finalisation period ' of each contract than the one -month average"483, 
the Panel "chose to adopt a range  of values that included the six-month  average".484 The other 
part of the range (i.e. the one -month average yield) consisted of a more appropriate proxy. 
According to the European  Union , the inclusion of what the Panel itse lf considered to be an inferior 
benchmark required, at a minimum, an explanation from the Panel.  Nonetheless,  according to the 
European  Union , the Panel failed to provide such explanation, let alone a reasoned and adequate 
one, in contravention of Article  11 of the DSU.485 
5.171.   In response, t he United  States  rejects the European  Union 's conditional claim  under 
Article  11 of the DSU by reiterating that the European  Union  erroneously asserts that the Panel 
"failed to provide any explanation for the inclusion of the six-month  average yield".486  
                                                
481 Panel Report, para. 6.389.  
482 European  Union 's appellant's submission, para. 308. 
483 European  Union 's appellant's submission, para. 310 (quoting Panel Report, para. 6.389 (emphasis 
added by the European  Union)). 
484 European  Union 's appellant's submission, para. 311. (emphasis original)  
485 European Union's appellant's submission, para. 311.  
486 United  States ' appellee's submission, para. 213 (quoting European  Union's appellant's submission, 
para. 311). WT/DS316/AB/RW  
 
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  5.172.   We begin by closely examining the Panel's analysis. I n the relevant passage of the 
Panel  Report referred to by the European  Union487, the Panel indicated that it would need to 
choose yields from among  the periods of time provided by D r Jordan – i.e. the average yield over 
the six month s prior to the conclusion  of the relevant contract; the average yield over the month 
prior to the  conclusion of the relevant  contract; and the yield on the day of conclus ion of the 
relevant contract.  The Panel pointed out that the yield on the day of conclusion of the relevant 
contract  "may reflect atypical fluctuations".488 The Panel added that "{p}arties agreeing to a 
complex loan contract may rather set the rates in the l ead-up to the conclusion of the contract, 
and prior to the actual day on which the contract is signed."489 Then, the Panel made a few 
observations about yields from the other two  time periods. With regard to the one -month average 
yield, the Panel stated that  it "would appear to be a reasonable proxy for the parties' 
expectations". In turn, regarding the six-month  average yield, the Panel indicated that such 
average "may be less likely to reflect expectations during the finalisation period, but may also be a 
helpful indication of market expectations".490 Finally, having made all of the above remarks, the 
Panel reached the conclusion that it would "therefore carry out {its} benchmarking assessme nt 
using the average yields one -month prior and six-month s prior to th e conclusion of the contract, 
in the form of a range".491  
5.173.   Moreover, w ith respect to the six-month  average yield proposed by Dr Jordan, the 
European  Union  correctly notes that the Panel indicated that " {t}he six-month  average may be 
less likely to reflect expectations during the finalisation period".492 However, the European  Union  
omits that, in the same  sentence , the Panel added that such a six-month  average "may also be a 
helpful indication of market expectations".493 To us, the se stateme nts are consistent with the 
Panel's earlier reasoning that "{p}arties agreeing to a complex loan contract may rather set the 
rates in the lead -up to the conclusion of the contract, and prior to the actual day on which the 
contract is sign ed."494 This understanding is in line with our observation that, in some cases, 
parties may have committed to a transaction – or to key aspects thereof – during a finalization 
period of the negotiations preceding the moment of formal conclusion of all aspect s of that 
transaction . We are thus of the view that the Panel did not exceed its margin of appreciation of the 
evidence when it included the six-month  average yield in the range for determining the corporate 
borrowing rate component of the market benchmark . We also agree with the Panel when it found 
that the one -month average prior to the conclusion of the transaction "would appear to be a 
reasonable proxy for the parties' expectations" and thus gave it more prominence than the 
six-month  average, which was considered to be only a "helpful indication of market 
expectations".495 
5.174.   In light of these considerations, we do not see grounds for a finding of inconsistency with 
Article  11 of the DSU due to the alleged failure by the Panel to provide a  reasoned and adequate 
explanation.  We recall that, although the Panel determined the corporate borrowing rate in the 
form of a  range  of average yields, the  Panel rightly gave more  prominence to the one -month 
average yield of the EADS bond  than to the six-month  average yield . While further analysis and 
explanation may have provided a more robust basis  for the Panel's decision  to conduct the 
benchmarking analysis usin g a range of average yields , we disagree with the European  Union 's 
claim that the Panel's  analysis lacks objectivity. Consequently, we find that the European  Union  
has not established that the Panel ac ted inconsistently with Article  11 of the DSU by failing to 
provide a reasoned and adequate explanation for including, as part of its range, the average yield 
over the six-month  period prior to the conclusion of each of the four A350XWB LA/MSF 
contract s.496 
                                                
487 See Panel Report, para. 6.389.  
488 Panel Report, para. 6.389.  
489 Panel Report, para. 6.389.  
490 Panel Report, para. 6.389.  
491 Panel Report, para. 6.389.  
492 Panel Report, para. 6.389.  
493 Panel Report, para. 6.389.  
494 Panel Report, para. 6.389.  
495 Panel Report, para. 6.389.  
496 European  Union 's appellant's submission, para. 310.  WT/DS316/AB/RW  
 
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  5.175.   In its second line of argumentation, the European  Union  considers that the Panel's 
acceptance of the six-month  average yield is based on inconsistent and incoherent reasoning .497 
The European  Union  puts forward two reasons to substantiate its challenge.  
5.176.   First, the European  Union  highlights that, while the Panel c riticized Professor Whitelaw's 
use of an average yield over [BCI], due to the possibility that such an approach could result in an 
"artificially" lower (or higher) market borrowing rate, the Panel also included  the six-month  
average yield in the market  benchmark. This is despite the fact that the six-month  average 
demonstrably resulted in an "artificial" increase of the market borrowing rate, which could result in 
"misplaced" findings of subsidization. Consequently, the European  Union  considers that the Pan el's 
reasoning is "internally inconsistent".498  
5.177.   The United  States  rejects the European  Union 's claim that the Panel acted inconsistently 
with Article  11 of the DSU in this regard and points out that the European  Union  does not state 
what is inconsistent or incoherent about the Panel's finding.499 According to the United  States , the 
European  Union  fails to appreciate the actual reason why the Panel rejected Professor Whitelaw's 
[BCI] average. This rejection was not based on a concern that [BCI] is "too wide a window" from 
which to draw the relevant data.500 Rather,  the Panel criticized Professor  Whitelaw's [BCI] 
average because it applied a uniform commercial bond yield fro m the time period of [BCI] for 
each of the four A350XWB LA/MSF contracts, despite the fact that they were finalized on different 
dates. Given that  the Panel did not criticize Professor Whitelaw's approach because it is based on 
data from a [BCI] time period, the United  States  maintains that there is nothing inconsistent or 
incoherent about rejec ting Professor Whitelaw's [BCI] average while using the one -month and 
six-month  averages specific to the date of finalization of each A350XWB LA/MSF contract.501 
5.178.   The European  Union 's arguments appear to neglect important aspects of the reasoning 
provided by the Panel for reject ing the averaging approach proposed by Prof essor Whit elaw. 
In particular, the European  Union  seems to suggest that the sole reason why the Panel rejected 
Professor Whitelaw's approach is th at such approach " could  result  in an 'artificially' lower 
(or higher) market borrowing rate, therefore resulting in a 'misplaced ' finding of subsidisation 
(or of no subsidisation)".502 In so doing, the European  Union  overlooks the specific  problems that 
the Panel identified regarding the averaging approach proposed by Professor Whitelaw.  As noted 
above, the Panel's conclusion was based on two main reasons. First, the Panel observed that 
"Professor Whitelaw's averaging approach would result in the application of corporate borrowing 
rates derived over time periods that are different  for the four LA/MSF contracts. "503 Second, 
the Panel indicated  that "Professor Whitelaw's averaging approach would also incorporate data 
from after the conclusion of three of the four contracts. "504 
5.179.   These considerations, in our view, confirm that the Panel di d not take issue with 
Professor  Whitelaw's averaging approach for the mere reason that it was an average . 
We acknowledge t hat, had that indeed been the case, the European  Union  may have some 
legitimate grounds to question the consistency and objectivity of the Panel's decision to include the 
six-month  average in the market benchmark . Instead, the Panel's misgivings in relation to 
Professor Whitelaw's averaging approach stem med from the above -mentioned issues  that the 
Panel identified. Therefore , we do not consider that the Panel's reasoning was inconsistent or 
incoherent for, on the one hand, rejecting Professor Whitelaw's averaging approach and, on the 
other hand, including  the six-month  average as part of the range  of average yields it used in 
determining the corporate borrowing rate . Consequently, the European  Union  has not properly 
substantiated this challenge unde r Article  11 of the DSU.  
                                                
497 European Union's appellant's submission, para. 312.  
498 European  Union 's appellant's submission, para. 313. 
499 United States' appellee's submission, para. 214.  
500 United  States ' appellee's submiss ion, para. 215. 
501 United  States ' appellee's submission, para. 215. 
502 European  Union 's appellant's submission, para. 312 (referring to Panel Report, para.  6.385) . 
(emphasis original ; additional text in fn 278 thereto omitted ) 
503 Panel Report, para. 6.386 (referring to Jordan Reply (Panel Exhibit USA -505 (BCI/HSBI)), para. 27). 
(emphasis added ; additional text in fn 588 thereto omitted ) 
504 Panel Report, para. 6.387.  WT/DS316/AB/RW  
 
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  5.180.   Moreover, t he European  Union  considers that the Panel's reasoning is internally 
inconsistent for one additional reason. According to the European  Union , on the one hand, 
the Panel rejected the EADS bond yield on the day of conclusion of the A3 50XWB LA/MSF contracts 
based on the mere possibility that it "may" be "distorted", even though the evidence on the record 
demonstrated that no such distortion existed. On the other hand, the Panel accep ted the 
six-month  average yield for the EADS bond as a basis for determining the corporate borr owing 
rate, even though that average bore the same risk of being "distorted", and the evidence on the 
record demonstrated that this average was, indeed, distorted.  Therefore, according to t he 
European  Union , the Pan el's decision to accept the six-month  average yield wa s based on 
incoherent and inconsistent reasoning .505 
5.181.   In our view, this challenge under Article  11 of the DSU does not represent  a full and  
accurate characterization of the Panel's analysis. The European  Union  contends that the evidence 
on the re cord demonstrated that there was no distortion in the yield of the EADS bond on the day 
of conclusion of the A350XWB LA/MSF contracts,  and that the six-month  average was , in fact,  
distorted. We see no support for the European  Union 's assertions in the Panel's findings or the 
evidence on the record. In particular, we recall that we do not understand the Panel to have based 
its finding on speculation that there might have been  atypical fluctuations  in the yield of the EADS 
bond on the  day of signature of the A350XWB LA/MSF contracts. Rather, the Panel merely 
observed, as a general matter, that choosing the yield on the day of conclusion of the A350XWB 
LA/MSF contract at issue might raise some methodological concerns for purposes of con structing 
the market benchmark because, on the day of conclusion of a contract, the yield " may reflect 
atypical fluctuations".506 In any event, we observe that the Panel's analysis did not hinge on 
whether or not there were any actual distortions on the yiel d of the EADS bond. Instead, the Panel 
properly focused on the specific nature and features of the  A350XWB LA/MSF  financing at issue  
and whether aspects thereof were agreed in the lead -up to the formal signing of the legal 
instrument providing the financia l contribution . 
5.182.   In addition, the European  Union  contends that the six-month  average yield "bore the sa me 
risk of being 'distorted'"507 as the yield on the day of conclusion of the A350XWB LA/MSF 
contracts. However, the European  Union  has not  substantiate d why that would be the case. 
It appears to us that there is a clear diff erence in the way "atypical  fluctuations" could affect, 
on the one hand, a bond's yield observed only on one day  and, on the other hand, a six-month  
average of that same yield. We do not discount that a six-month  average yield can also be 
affected by "dis tortions" or "atypical fluctuations". However, without an explanation  by the 
European  Union  as to why the six-month  average yield bore the sam e risks  of being "distorted" 
as the yield on the day of conclusion, we consider that the European  Union  has failed to 
substantiate this challenge under Article  11 of the DSU .508 
5.183.   In light of the above considerations, we find that the European  Union  has failed to 
establish  that the Panel erred under Article  11 of the DSU by deciding to observe the EADS bond 
yield on the basis of the average yields one  month prior and six month s prior to the conclusion of 
each of the French, German, Spanish, and UK A350XWB LA/MSF contracts, in the form of a range.  
5.3.1.6   Conclusion on the Panel's findings regarding the corporate borrowing rate  
5.184.   In our analysis above, we disagree with t he European  Union 's principal  claims of error 
concerning the manner in which the Panel identified the relevant time period  from which to draw 
the corporate borrowing rate component of the market benchmark. In particular, while we agree 
that, in conducting the benefit analysis, the comparison focuses on the moment in time when the 
lender and borrower commit to the t ransaction , we disagree with the European  Union  to the extent 
that it suggests that the Panel was required to limit its analysis to data from "the day of 
conclusion" of each A350XWB LA/MSF contract regardless of the time period over which the parties 
may h ave committed to the terms and conditions of that financing instrument. Rather, the Panel 
                                                
505 European  Union 's appellant's submission, paras.  314-316. 
506 Panel Report, para. 6.389.  (emphasis added ) 
507 European  Union 's appellant's submission, para. 315. 
508 As stated by the Appellate  Body in EC – Fasteners (China) , "{i} t is incumbent on a participant raising 
a claim under Article  11 on appeal to explain why the alleged error meets the s tandard of review under that 
provision ." (Appellate  Body Report, EC – Fasteners (China) , para.  442 (emphasis omitted))  WT/DS316/AB/RW  
 
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  was required to take into account the specific financing instrument at issue, including the relevant 
circumstances surrounding the conclusion of that instrument, to d etermine the period over which 
the terms and conditions of the relevant contract were agreed.  The Panel provided two reasons in 
support of its decision to determine the corporate borrowing rate using the average yields 
one month prior and six  months prior to the conclusion of the A350XWB LA/MSF contract s, in the 
form of a range . First, the Panel considered that "the yield on the day of the signature of contract 
may reflect atypical fluctuations."509 The Panel's second reason was that " {p}arties a greeing to a 
complex loan contract may rather set the rates in the lead -up to the conclusion of the contract, 
and prior to the actual day on which the contract is signed ."510 We have found t his understanding 
to be in line with our observation that, in some c ases, parties may have committed to a 
transaction – or to key aspects thereof – during a finalization period of the negotiations preceding 
the moment of formal conclusion of all aspects of that transaction . In the present case, the 
financial contribution a t issue consists of complex financing the terms  and conditions  of which have 
been negotiated and agreed over a certain contracting period.  In these circumstances, we find that 
the Panel did not err in its application of Article  1.1(b) of the SCM  Agreement in finding that the 
corporate borrowing rate component of the market benchmark could be based on  the average 
yields o f the EADS bond "one-month prior and six -months prior to the conclusion " of the  French, 
German, Spanish, and UK  A350XWB LA/MSF contract s, "in the form of a range" , attributing more 
weight to the former average yield s than it did to the latter .511 
5.185.   Moreover, we reject  the European  Union 's claim  that the Panel acted inconsistently with 
Article  11 of the DSU because it lacked a sufficient evidentia ry basis  for rejecting the EADS bond 
yield on the day of conclusion of each A350XWB LA/MSF contract . In addition, the European Union 
has not established that the Panel's  decision to set the corporate borrowing rate in the form of a 
range  of average yields,  or the fact that such decision was done against the background of a 
downward trend in the yield of the EADS bond,  reflect s a lack of objectivity and even -handedness  
contrary to the requirements of Article  11 of the DSU . Consequently, we find that the 
European Union has failed to establish that the Panel acted inconsistently with its obligations under 
Article 11 of the DSU.  
5.186.   We also reject  the European  Union's alternative claims that the Panel erred in its 
application of Article  1.1(b) of the SCM Agreement and acted inconsistently with Article 11 of the 
DSU by accept ing the average yield of the EADS bond over the six months  prior to the conclusion 
of the French, German, Spanish, and UK  A350XWB LA/MSF contract s as part of the range of 
average yields that was used to determine the corporate borrowing rate . Although the corporate 
borrowing rate was determined in the form of a range  of average yields, the Panel rightly gave 
more prominence to the one -month average yield of the EADS bond  than to the six -month aver age 
yield, which was considered to be only a "helpful indication of market expectations".512 In these 
circumstances, we find that the European Union has failed to establish that the Panel erred in its 
application of Article  1.1(b) of the SCM  Agreement or act ed inconsistently with Article  11 of the 
DSU by deciding to observe the EADS bond yield on the basis of the average yields one  month 
prior and six months prior to the conclusion of each of the four A350XWB LA/MSF contracts, in the 
form of a range , attribut ing more weight to the former average yield s than it did to the latter . 
5.187.   Accordingly, we uphold  the Panel's finding, in paragraph 6.389 of the Panel Report, that 
the corporate borrowing rate component of the market benchmark be based on "the average 
yields one-month prior and six-month s prior to the conclusion of the {French, German, Spanish, 
and UK A350XWB LA/MSF contracts}, in the form of a range".  Consequently, we also uphold  the 
Panel's findings related to the corporate borrowing rate in Table  7 at paragraph 6 .430 and 
in Table  10 at paragraph 6.632 of the Panel Report. Below, we  reproduce Table 7 of the 
Panel  Report, which sets out the quantitative implications of the Panel's  findings on the corporate 
borrowing rate:  
                                                
509 Panel Report, para.  6.389.  
510 Panel Report, para.  6.389.  
511 Panel Report, para.  6.389.  
512 Panel Report, para.  6.389.  WT/DS316/AB/RW  
 
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  Table 3: Corporate  borrowing rate estimates  
EU member State  Corporate borrowing rate as 
reflected by yield on EADS 
bond (range: between 
average yield 1 -month prior, 
and 6 -months prior, to date 
of individual contract)513 Representative 
sum for normal 
market fees  Total corporate 
borrowing rate 
component of market 
benchmark rate  
France  [BCI] to [BCI] [BCI] [BCI] to [BCI] 
Germany  [BCI] to [BCI] [BCI] [BCI] to [BCI] 
Spain  [BCI]514 to [BCI] [BCI] [BCI] to [BCI] 
United Kingdom  [BCI] to [BCI] [BCI] [BCI]515 to [BCI] 
Source: Panel Report, Table 7 at paragraph 6.430.  
5.3.2   Project -specific risk premium  
5.188.   The European  Union  argues that the Panel  erred in its  identification of the "project -specific 
risk premium" component  of the market benchmark that was used to determine whether the 
French, German, Spanish, and UK A350XWB LA/MSF contracts  confer a "benefit"  within the 
meani ng of Article  1.1(b) of the SCM Agreement . The European  Union  challenges many aspects of 
the Panel's analysis by bringing  three  sets of claims of error allegedly committed by the Panel in 
identif ying the project -specific risk premium . The overarching critique by the  European  Union  is 
that th e Panel erred in using the project -specific risk premium that was developed in the original 
proceedings for the A380 project  as the risk premium for the A350XWB project,  "launched at a 
different moment in time , and implicating different risks ".516 According to the European  Union , 
the single, undifferentiated project risk premium selec ted by the Panel does not precisely and 
accurately reflect the risks involved in the A350XWB project , and does not reflect the differing 
terms of each of the four indi vidual A350XWB LA/MSF contracts.517 We describe below the essence 
of the three  sets of claims of  error brought by the European  Union . 
5.189.   In its f irst set of claims , the European  Union  argues that the Panel erred in its application 
of Article  1.1(b) of the SCM Agreement  and acted inconsistently with Article  11 of the DSU. With 
respect to Article  1.1(b), the European  Union  submits that " {t}he Panel failed to undertake a 
'progressive  search' for and to adopt the benchmark that shared 'as many elements as possible i n 
common with' the A350XWB LA/MSF loans".518 In addition, the European  Union  asserts that, 
having failed to adopt  the benchmark most closely tailored to the risks associated with the 
A350XWB project , the Panel  failed to make any adjustments  to account for ac knowledged 
                                                
513 We recall that, while the Panel determined the corporate borrowing rate in the form of a range  of 
average yields , it rightly  gave more prominence to the one -month average yield of the EADS bond in its 
determination of the  corporate borrowing rate . (See para. 5.140 above )  
514 The European  Union  identifies a clerical error made by the Panel in Tables 7 and 10 of the 
Panel  Report in relation to the one -month average yield prior to the Spanish A350XWB Convenio . In particular, 
the European  Union  points out tha t "Table 6 of the Panel Report shows, for Spain, the one -month average yield 
prior to the date of the contract was [BCI], and not [BCI] as inscribed in Table 10 (and Table  7)". 
(European  Union 's appellant's submission, fn 286 to Table 2 at para. 322 (refer ring to Panel Report, Table 7 at 
para. 6.430 and Table 10 at para. 6.632) (emphasis original)) The European  Union  is correct in pointing out 
that the correct figure in relation to the one -month average yield prior to the Spanish A350XWB Convenio  is 
[BCI], found in T able 6 of the Panel Report, rather than [BCI], which is the clerical error found in Tables  7 
and 10 of the Panel Report. In response to questioning at the oral hearing, the United  States  agreed that the 
figure [BCI] is a clerical error. Consequen tly, for purposes of the present Report, we proceed on the basis of 
the correct figure mentioned by the Panel in Table 6: [BCI].  
515 See supra , fn 330.  
516 European  Union 's appellant's submission, para. 333. (emphasis original)  
517 European  Union 's appellant's submission,  para. 334. The European  Union  contends that, consistent 
with the guidance provided in the original proceedings, the Panel "should have required the United  States  to 
identify a project risk premium based on the risks associated with the A350XWB project itself , and in light of 
the terms of each specific LA/MSF contract ". (Ibid. para.  336 (emphasis original) ) 
518 European  Union 's appellant's submission, para. 380 (quoting Appellate Body Report, 
US ‒ Anti-Dumping and Countervailing Duties (China) , paras. 476 and 486; referring to Appellate Body Report, 
US – Carbon Steel (India) , para. 4.345).  WT/DS316/AB/RW  
 
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  differences between the selected benchmark and the A350XWB LA/MSF contracts.519 As a result, 
the Panel erred in its application  of Article  1.1(b) by failing "to ensure that the benchmark it 
selected {was} properly tailored to the specific risks associated with the A350XWB project, and 
each of the four LA/MSF contracts for that project".520 With regard to  Article  11 of the DSU, the 
European  Union  claims that  the Panel  acted inconsistently with  this provision, first, by failing  to 
consider alternativ e, and more appropriate , benchmarks than those  proposed by the 
United  States .521 Second, the European  Union  contends that,  in adopting a constant, 
undifferentiated project risk premium not tailored to the risks associated with LA/MSF for the 
A350XWB, the Pan el inappropriately deviated from the findings of the original panel, which called 
for establishing a risk premium that takes into account the risks involved in each specific  
LCA project.522 
5.190.   In its s econd  set of claims , the European  Union  submits that the Pan el acted inconsistently 
with Article  11 of the DSU  by finding  that the project risk premium developed for the A380 project 
was a suitable benchmark for the A350XWB project on the basis that the risks associated with 
these two projects were similar.523 In par ticular, the European  Union  challenges the findings 
regarding the three main categories of risk assessed by the Panel: (i) the risk that the A380 or 
A350XWB project would fail or not be as successful as anticipated  because of a failure to develop 
or sell t he aircra ft as expected (programme risk) ; (ii) the extent t o which market lenders were, 
as a general matter, willing to accept risk at the time of the provision of A380 and A350XWB 
LA/MSF (the price of risk); and ( iii) the risk associated with the different terms of the A380 LA/MSF 
contracts vis-à-vis the four A350XWB LA/MSF contracts, as well as the risks associated with the 
different terms of the four individual A350XWB LA/MSF contracts (contract risk).524 
5.191.   In its third  set of claims , the European  Union  asserts  that the Panel erred in finding that 
the same  risk premium could be applied as a benchmark for each of the four individual  A350XWB  
LA/MSF contracts. The European  Union  argues that , in making this finding,  the Pane l erred in its 
application of Article  1.1(b) of the SCM Agreement  by failing to make adjustments to account for 
differences that exist among the four A350XWB LA/MSF contracts . Moreover, according to the 
European  Union , the Panel also acted inconsistently w ith Article  11 of the DSU  because  its 
conclusion s were based on "internally inconsistent " reasoning.525 
5.192.   On these bases, the European  Union  requests us to reverse the Panel's findings, 
in paragraphs 6.632 (including Table 10) and 6.633  of the Panel Report , that the French, German, 
Spanish, and UK A350XWB LA/MSF contracts confer a "benefit" within the meaning of 
Article  1.1(b) of the SCM Agreement , and consequently to r everse the Panel's findings, 
in paragraphs 6.656 and 7.1 .c.i of the Panel  Report, that the French, German, Spanish, 
and UK A350XWB  LA/MSF contracts each constitute a "subsidy" within the meaning of Article  1 of 
the SCM Agreement .526 
5.193.   Before addressing the European  Union 's claims of error, we  summarize the Panel's 
findings  below.  
                                                
519 European  Union 's appellant's submission, para. 396. 
520 European  Union 's appellant's submission, para. 339. 
521 European  Union 's appellant's submission, para. 408. 
522 European  Union 's appellant's submission, para. 409. 
523 European  Union 's appellant's submission, para. 340 (referring to Panel  Report, paras.  6.487, 6.492, 
6.527, 6.539 -6.542, 6.579, 6.595, 6.607 -6.610, 6.632 (Table 10), and 6.633).  
524 Panel  Report, para. 6.460. 
525 European  Union 's appellant's submission, para. 341. 
526 European Union's appellant's submission, para. 531.  WT/DS316/AB/RW  
 
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  5.3.2.1   The Panel's finding s 
5.194.   Before the Panel, the parties agreed that , in addition to the corporate borrowing rate,  the 
market benchmark should include  a project -specific risk premium reflecting the risk associated 
with providing financing on the same or similar terms as LA/MSF for  the A350XWB project.527  
5.195.   The United  States  proposed two options for a project -specific risk premium. The first 
option, preferred by the United  States , was the Jordan Risk Premium (JRP), a figure calculated by 
its expert, Dr  Jordan. The second option was the  risk premium proposed by Professor Whitelaw in 
the original proceedings for the A380 project, and was referred to as the Whitelaw Risk 
Premium  (WRP).528 
5.196.   The Panel noted that the European  Union  did not propose a project -specific risk premium 
of its own for t he A350XWB project, and rejected both  of the risk premia advanced by the 
United  States . The European  Union  asserted , first,  that the JRP was not used as a project -specific 
risk prem ium in the original proceedings  and, second, that the United  States  had not shown that 
the WRP was an appropriate risk premium for the A350XWB.529 
5.197.   With respect to the first project -specific risk premium submitted by the United  States , 
the Panel  began by noting that the JRP is a figure calculated by Dr Jordan by using "the  average of 
two very similar risk premia" introduced during the original proceedings in relation to the risk 
associated with the A380 project.530 The Panel observed  that neither of the JRP inputs were 
accepted or even argued to be an  appropriate risk premium for the A380 in the original 
proceeding s.531 Therefore, the Panel considered that, in these  compliance proceeding s, 
the United  States  was required to present additional argumentation and evidence to support their 
use as a basis for a risk premium for the A350XWB.532 The Panel was not persuaded by the 
reasons provided by the United  States  to justify its reliance on the JRP.533 As a result, the Panel 
was unable to accept the JRP as a project -specific risk premium.534 
5.198.   The Panel then turned to the United  States ' second option for a project -specific risk 
premium: the WRP . In this context, the Panel considered the main question to be whether the 
United  States  had demonstrated that the project -specific risks of the A350XWB project were 
"sufficiently similar " to those of the A380 p roject, such that it would be reasonable to conclude 
that the WRP could be used as the project -specific risk premium for the A350XWB.535 The Panel 
considered that the parties' arguments concerning the relative project -specific risks associated 
with the A380 and A350XWB projects focused on the following issues: (i) programme risk; 
(ii) the price of risk; and (iii) contract risk.  
                                                
527 Panel  Report, para. 6.431.  The Panel indicated that the second component of the market benchmark 
reflects the fact that, rather than being r epaid from the firm's general assets, the LA/MSF loans " are 
model -specific, that is, they are provided to fund the development of specific aircraft models and are to be 
repaid from the cash flows associated with the same specific model and so a commercial lending rate would 
reflect not only the riskiness of the borrow but also the riskiness of the individual projects". (Ibid. para. 6.432 
(quoting Ellis -Jordan Report (Original Panel Exhibit USA -80; Panel Exhibit USA -474/506 (BCI) (exhibited 
twice)), p. 4))  
528 Panel  Report, para. 6.433 (referring to Jordan Report (Panel  Exhibit USA -475 (BCI/HSBI)), para. 15; 
Jordan Reply (Panel  Exhibit USA -505 (BCI/HSBI)), para. 5). Both the JRP and the WRP use figures that the 
United  States  argued were advanced as project -specific risk premia in the original proceedings. (Ibid.)  
529 Panel  Report, para. 6.434 (referring to European  Union 's first written submission to the Panel, 
paras.  313-315; second written submission to the Panel, para. 321).  
530 Panel  Report, para. 6.437 (quo ting Jordan Report (Panel  Exhibit USA -475 (BCI/HSBI)), para. 14). 
531 Panel  Report, paras.  6.443 and 6.446 -6.447.  
532 Panel  Report, paras.  6.443 and 6.446.  
533 In particular, the Panel was not convinced that the following arguments by the United  States  justified  
relying on the JRP in the present compliance proceedings: (i) the JRP uses the method advanced by the 
European  Union  and Professor Whitelaw in the original proceedings; (ii) the JRP responded to specific criticisms 
of the WRP made by the panel and Appella te Body in the original proceedings; (iii) the two figures on which the 
JRP is based are "higher" than the WRP; and (iv) the two figures on which the JRP is based are "similar" to one 
another. (Panel Report, para. 6.455)  
534 Panel  Report, para. 6.455.  
535 Panel Report, para. 6.459.  WT/DS316/AB/RW  
 
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  5.199.   In the context of the first issue, programme risk , the Panel indicated that the parties 
submitted arguments and evidence with regard to two broad categories: "development" risk and 
"market" risk.536 Regarding development risk , the Panel understood the parties to consider that 
development risk relates to the likelihood that Airbus would not be able to deliver the aircraft as 
and when promi sed, cover ing the entire development of the project  from conceptualization to 
certification.537 The United  States  considered that, as a result of the A350XWB project  using 
"risky  new technologies", it entailed "unique and significant technology risks" that made the 
A350XWB "at least as risky, if not more risky, than the A380".538 The European  Union  disagreed 
with this contention and submitted that actions pursued by Airbus mitigated the 
technology -related risk for the A350XWB and, in addition, that risks were already lower and 
certain maturity levels were reached by the time the A350XWB LA/MSF contracts were 
concluded.539 In light of these arguments, the Panel considered that the main factual questions 
related to: (i)  technical or technology -related risks; and (i i) risk -mitigating or -attenuating 
factors.540 The Panel also examined whether there were any risks associated with the A350XWB 
arising from problems with the A380  project.  
5.200.   The Panel concluded  that the evidence on the record indicated that the A350XWB was 
particularly technologically innovative.541 The Panel was of the view that, even though the A380 
involved its own technological challenges, the A350XWB's technological risk was at least as high  as 
or higher than that of  the A380.542 The Panel  also considered tha t certain aspects of the A350XWB 
development programme  seem to have further increased development risks as compared to the 
A380.543 With regard to the risk -mitigating factors  identified by the European  Union , the Panel 
concluded that these factors would not have fully offset the increased risks associated with the 
new "Develop And Ramp -Up Excellence" (DARE) programme and its high level of outsourcing, and 
also would not have fully offset the technology risks associated with new materials and their lower 
matur ity levels at the start of development.544 Therefore, taking those factors into consideration, 
the Panel concluded that "the development risks associated with the A350XWB were at least as 
high as, or sufficiently similar to , those associated with the A380".545 
5.201.   With respect to market risk , both parties agreed that market risk refers to "the risk that 
the new aircraft will not sell as well as anticipated".546 In comparing the market risk associated 
with the A380 project against that associated with the A350XWB proj ect, the Panel noted that the 
parties' arguments concerned risks regarding: (i) predictions about the size of the respective 
markets for the two aircraft models (market forecasts ); and (ii)  conditions of competition within 
the respective market s.547 As to th e risk related to market forecasts, t he Panel observed  that the 
market demand predictions for the A350XWB were likely to be subject to a negative economic 
environment that would affect Airbus' clients, which was known at the time the A350XWB LA/MSF 
contrac ts were concluded.548 The Panel noted that, while the economic environment appears to 
have been taken into account in  predictions with regard to the  A380549, it was not considered in 
                                                
536 Panel  Report, para. 6.461.  
537 Panel  Report, para. 6.462.  
538 Panel  Report, para. 6.464 and fns 656 -657 thereto.  
539 Panel  Report, para. 6.465 (referring to European  Union 's second written submission to the Panel, 
para. 332, in turn refe rring to Airbus, A350XWB Chief Engineering and Future Projects Office, "A350XWB Chief 
Engineering Statement", 3  July 2012 (A350XWB Chief Engineering Statement)  (Panel  Exhibit EU -18 
(BCI/HSBI) ), paras.  13-17 and 33 -59; first written submission to the Panel, paras.  1110-1129).  
540 Panel  Report, para. 6.466. 
541 Panel  Report, para. 6.539.  
542 Panel  Report, para. 6.539.  
543 Panel  Report, para. 6.540.  The Panel noted that, "{u}nder the ambitious DARE programme, the 
larger number of risk sharing suppliers meant that: (a) Airbus decreased control over the development of the 
aircraft; and (b) the ramped -up development  schedule meant any problems would be 'disastrous'." (Ibid. 
(quoting A350XWB Chief Engineering Statement (Panel Exhibit EU -18 (BCI/HSBI)), para. 37 (lines 7 -12))) 
544 Panel  Report, para. 6.542.  
545 Panel  Report, para. 6.542. (emphasis original)  
546 Panel  Report, para. 6.543 (quoting European  Union 's second  written submission to the Panel, 
para. 322).  (additional text in fn 897 thereto omitted)  
547 Panel  Report, para. 6.544.  
548 Panel  Report, para. 6.570.  
549 Panel  Report, para. 6.568.  WT/DS316/AB/RW  
 
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  the predictions of market demand for the A350XWB. The Panel considered  that a  market lender 
would have taken these factors into account in determining their market lending  rate.550  
5.202.   With regard to the r isk related to conditions of competition within market segment s, 
the Panel was not persuaded by the European  Union 's argument that the conditions of competition 
between Airbus and Boeing were more favourable to Airbus in the context of the A350XWB project 
than in that of the A380 project.551 The Panel was of the view that the A380 and A350XWB 
experienced market risks that were different i n nature.  While  the A380's market success or failure 
rested in large part on the correct identification of the existence and size of the market segment , 
the A350XWB's success or failure would depend upon how it would be received by customers in a 
market segment that was already relatively well known and served by existing aircraft.552 
Moreover, the A350XWB would need to be competitive not only in terms of i nnovation but, 
crucially, in terms of timing . On this basis, the Panel concluded that, while the A380 and A350XWB 
experienced market risks that were different in nature, these risks  were nevertheless overall 
comparable in importance.553 
5.203.   Turning to the second  issue, the price of risk , the Panel began by noting that the price of 
risk refers to "risk acceptable to the finance  industry at different moments of its own market 
cycle".554 The Panel considered that the main question in this regard was whether the financ ial 
environment – in particular the global financial and economic crisis – meant that a market lender 
would have demanded a higher return at the time financing was being sought for the A350XWB  
than at the time it would have been sought for the A380, even i f the aircraft development and 
marketing risks were similar.555 Before the Panel, the United  States  submitted that LA/MSF for the 
A350XWB "was  finalised at a point in time when lending conditions were historically tight" due to 
the lingering effects of the  2008 global financial and economic crisis,  with the implication that 
"the true A350XWB risk premium should likely be higher than the A380 risk premium" .556 
Given  that the United  States  did not provide  certain  yield spreads to the Panel, the Panel was 
unable t o accept the United  States ' argument that a market lender would have demanded a 
higher  return  at the time financing was being sought for the A350XWB than at the time it would 
have been sought  for the A380.557 
5.204.   In the context of the third issue, contract risk , the Panel examined two factors. First, the 
Panel addressed the European  Union 's argument that "differences in the terms of the LA/MSF 
agreements for the A380 and the A350XWB reduce{d} the risk for the A350XWB and, hence, the 
benchmark."558 The Panel noted that, as the European  Union  had submitted, "under the [BCI] 
LA/MSF contracts for the A350XWB, [BCI] in the event that deliveries are not made (unless 
[BCI]); thus some returns may accrue to those member State governments even in the event of 
delays to the programme."559 However, the Panel pointed out that, in the original proceeding s, 
"[BCI], which would likewise constitute 'risk -reducing' terms, existed with respect to [BCI] 
LA/MSF at issue in that proceeding", and that at least one of the [BCI] LA/MSF contracts 
considered in the original proceedings contained a mechanism that similarly  "protected" returns.560 
In those proceedings, the WRP was nevertheless applied taking into account that it was a 
minimum risk premium and would be understated for th at contract.561 Therefore, the Panel 
                                                
550 Panel Report, para. 6.570.  
551 Panel  Report, paras.  6.571 -6.572 . 
552 Panel  Report, para. 6.579.  
553 Panel  Report, para. 6.579.  
554 Panel  Report, para. 6.580  (quoting Jordan Report (Panel Exhibit USA -475 (BCI/HSBI)), para. 22; 
referring to European Union's second written submission to the Panel, para. 344; Whitelaw Response to Jordan  
(Panel Exhibit EU -121 (BCI/HSBI)), para. 23 ). 
555 Panel  Report, para. 6.580.  
556 Panel  Report, para. 6.581 (quoting Jordan Report (Panel  Exhibit USA -475 (BCI/HSBI)), para. 22.) 
557 Panel  Report, para. 6.588.  
558 Panel  Report, para. 6.590 (referring to European  Union's second written submission to the Panel, 
paras.  339-340; response to Panel question No. 100, paras.  404-405).  
559 Panel  Report, para. 6.594. (fn omitted)  
560 Panel  Report, para. 6.595.  
561 Panel  Report, para. 6.595 (referring to Original Panel  Report , para. 7.481 ; Appellate  Body Report, 
EC and certain member States – Large Civil Aircraft , para. 923).  WT/DS316/AB/RW  
 
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  considered that such features argued by the European  Union  should not, in  and of themselves, 
render the WRP inapplicable.562 
5.205.   Second, the Panel assessed t he European  Union 's contention  that "differences {among}  
the terms of the four A350XWB LA/MSF agreements 'could justify th e application of, at least, 
two different risk premiums for those agreements'" .563 The Panel recognized  that there were some 
differences among  the risk profiles of the four individual A350XWB LA/MSF contracts, but noted 
that this was also the case with respect to the contracts in the original proceedings – including 
among  the four A380 LA/MSF contracts – for which the same WRP was applied as a minimum 
premium for all contracts.564 Consequ ently, the Panel was not "persuaded that certain terms 
render the agreements significantly different so as to require the application of two or more 
different project -specific risk premia in this proceeding."565 
5.206.   Overall, having reviewed the risk differences that may affect the project -specific risk 
premium, the Panel considered that the risks for the A380 and A350XWB projects were sufficiently 
similar to allow a valid risk premium applied to the A380 project in the original proceedings to be 
applied to the A3 50XWB project.566 Therefore, the Panel concluded that "Professor Whitelaw's risk 
premium (the WRP) from the original proceeding could be applied to benchmark LA/MSF for 
the A350XWB."567 
5.3.2.2   Whether the Panel committed legal error by  failing to establish a 
project -specific risk premium for the four A350XWB LA/MSF contracts based on the 
risks associated with the A350XWB project  
5.207.   In its first set of claims, the European  Union 's overarching critique is  that, by focusing on 
determining  whether the risk premium developed to assess the A380 LA/MSF measures  (i.e. the 
WRP) could be applied to assess the French, German, Spanish, and UK A350XWB LA/MSF 
contracts, the Panel failed to establish a risk premium to benchmark the four A350XWB LA/MSF 
contracts based on the specific ris ks associated  with the A350XWB project.568 According to the 
European  Union , in conducting its examination, the  Panel erred in its application of Article  1.1(b) of 
the SCM Agreement , and failed to make an objective assessment of the matter as required by 
Article 11 of the DSU.  
5.208.   The European  Union  submits that the Panel erred in its application of Article  1.1(b) of the 
SCM Agreement , first, by failing to undertake a progressive search for a market benchmark and to 
adopt the most appropriate benchmark .569 Second, the European  Union  asserts that, to the extent  
that an insufficiently tailored benchmark was used , the Panel failed  to make adjustments to the 
benchmark to ensure comparability.570 The European  Union  argues that, "{s}eparately and 
collectively"571, these failure s by the Panel  constitute error in the application of  Article  1.1(b).  
5.209.   In the context of its  claim under  Article  11 of the DSU , the European  Union  argues, first, 
that the Panel acted inconsistently with this provision by failing to consider alte rnative , 
and more appropriate , benchmarks than those  proposed by the United  States .572 Second, 
the European  Union  contends that,  in adopting a constant, undifferentiated project risk premium 
not tailored to the risks associated with LA/MSF for the A350XWB, t he Panel inappropriately 
                                                
562 Panel  Report, para. 6.595.  
563 Panel  Report, para. 6.596 (quoting European  Union 's response to Panel question No. 100, 
para. 406).  
564 Panel  Report, para. 6.604.  
565 Panel  Report, para. 6.607.  
566 Panel  Report, para. 6.608. 
567 Panel  Report, para. 6.610. 
568 European  Union's appellant's submission, section V.D.1 . 
569 European  Union's appellant's submission, section V.D.1.a.ii.  
570 European  Union 's appellant's submission, section V.D.1.a.iii.  
571 European  Union 's appellant's submission, para. 406. 
572 European  Union 's appellant's submission, para. 408. WT/DS316/AB/RW  
 
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  deviated from the findings of the original panel, which called for establishing a risk premium that 
takes into account the risks involved in each specific LCA project.573 
5.210.   We begin by addressing the European  Union 's claim that the Pan el erred in its application 
of Article  1.1(b) of the SCM Agreement . 
5.3.2.2.1   Whether the Panel erred by failing to undertake a "progressive search" for a 
market  benchmark and to adopt the most appropriate benchmark  
5.211.   The European  Union  argues that the Panel focused i ts assessment on whether the same 
project risk premium developed to assess the LA/MSF measures  for the A380 project in the 
original proceedings could be applied to assess the LA/MSF measures  for the A350XWB project , 
instead of asking " whether a benchmark comprising, inter alia , a project risk premium tailored to 
the risks of financing the A350XWB project itself , was available and could be used" to assess 
whether the four A350XWB LA/MSF contracts  confer a benefit.574 Therefore, according to  the 
European Union , the Panel erred in its application of Article  1.1(b) of the SCM Agreement  by failing 
to establish a project -specific  risk premium that properly reflect ed the risks associated with the 
A350XWB project itself.575 
5.212.   The European  Union  observes that " Article 14(b) of the SCM Agreement  provides that the 
market benchmark for a government loan must be 'a comparable  commercial loan which the firm 
could actually obtain on the market'."576 The Appellate  Body has explained that, to be 
"comparable", "a commercial  loan 'should have as many elements as possible in common  with the 
investigated loan'."577 The European  Union  considers that "a benchmark loan must be identified 
through 'a progressive search ', which must begin  by assessing the commercial loan that exhibits 
as many similarities as possible to the investigated loan, before  progressing to less similar 
commercial loans."578 In the European  Union 's view, "error results if another commercial loan that 
shares more elements in common with the investigated loan than th e loan ultimately selected as 
the benchmark is not assessed in the course of the panel's 'progressive' consideration".579 In light 
of these considerations, the European  Union  contends that "{t}he Panel failed to undertake a 
'progressive search' for and to adopt the benchmark that shared 'as many elements as possible in 
common with' the A350XWB LA/MSF loans, and that was, therefore, most closely tailored to the 
risks associated  with the A350XWB programme."580  
5.213.   The European  Union  points out that the Panel did not, for example, inquire  whether 
"risk-sharing supplier financing" for the A350XWB project would have been a more appropriate 
benchmark. The European  Union  states that risk -sharing supplier financing for the A350XWB is by 
definition more closely  tailored to the risks associated with the A350XWB than risk -sharing supplier 
financing for the A380 , and reflects market -based pricing at a time considerably more proximate 
to the conc lusion of the A350XWB LA/MSF contracts. The European  Union  contends that, despite 
being aware that Airbus had secured risk -sharing supplier financing for the A350XWB project581, 
neither the United  States  nor the Panel explored whether the terms of risk -sharing supplier 
financing arrangements for the A350XWB had more elements in common with A350XWB LA/MSF 
                                                
573 European  Union 's appellant's submission, para. 409. 
574 European  Union 's appellant's submission, para. 369. (emphasis  original)  
575 European  Union 's appellant's submission, paras.  368-369. 
576 European  Union 's appellant's submission, para. 372 (quoting Article  14(b) of the SCM Agreement  
(emphasis added by the European  Union )). (additional text in fn 333 thereto omitted)  
577 European  Union's appellant's submission, para. 372 (quoting Appellate  Body Report, 
US ‒ Anti-Dumping and Countervailing Duties (China) , para. 476 (emphasis added by the European  Union); 
referring to Appellate  Body Report, US – Carbon Steel (India) , para.  4.345 ). 
578 European  Union 's appellant's submission, para. 374. (emphasis original; fn omitted)  
579 European  Union 's appellant's submission, para. 374. The European  Union  adds that, "{i}f  a 
properly -executed progressive search for a benchmark nonetheless results in an impe rfect match, with the 
selection of a commercial loan that reflects differences  with the investigated loan, adjustments  must be made 
to ensure comparability with the investigated loan." ( Ibid., para. 377 (referring to Appellate  Body Report, 
US ‒ Anti-Dumping and Countervailing Duties (China) , para. 486) (emphasis original))  
580 European  Union 's appellant's submission, para. 380 ( quoting  Appellate  Body Report, 
US ‒ Anti-Dumping and Countervailing Duties (China) , paras.  476 and 486 ; referring to Appel late Body Report, 
US – Carbon Steel (India) , para.  4.345 ). 
581 European  Union 's appellant's submission, para. 384. WT/DS316/AB/RW  
 
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  than did risk -sharing supplier financing arrangements for the A380 project. For the above reasons, 
the European  Union  concludes that the Panel erred in its application of Article  1.1(b) of 
the SCM Agreement .582 
5.214.   The United  States  disagrees . In the United  States ' view, consistent with Article  1 of the 
SCM Agreement , the Panel found that , if the project -specific risks of the A350XWB project were 
sufficiently  simila r to those of the A380 project, then it could also use the A380 project­specific 
risk premium for the A350XWB project.583 To determine if  this was the case, the Panel engaged in 
a detailed, fact -intensive assessment of the relative risks of the two projects .584 Moreover, 
the United  States  points out that the reason the Panel did not consider risk -sharing supplier 
contracts for the A350XWB project  is that the European  Union  never submitted those  contracts 
and never argued that the Panel should use them to establish the  project -specific risk premium.585 
Nor did the European  Union  propose a project -specific risk premium that could serve as an 
alternative to those proposed by the United  States .586 The United States  notes that , in the 
"absence  of argumentation … a panel can not intervene to raise argument s on a party's behalf".587 
5.215.   The United  States  additionally argues that, contrary to the European  Union 's argument, 
Article  1.1(b) does not require the Panel to have engaged in a "progressive search". According to 
the United  States , the requirement to conduct a "progressive search" applies to domestic 
investigating authorities in selecting a benchmark under Article  14(b) of the SCM Agreement , and 
the European  Union incorrectly assumes that the same standard applies to WTO panels.588 
Given  that the European  Union  never proposed any alternative project -specific risk premium, 
including the A350XWB risk -sharing supplier contracts, the Panel had no obligation to engage  in a 
"progressive search".589 On the  contrary , such a "progressive search" would have  
"been  tantamount to making the case for the {European  Union }, and thus would itself have been 
inconsistent" with Article  11 of the DSU.590 The United  States  argues that, eve n on the assumption 
that Article  1.1(b) does require the Panel to have conduct ed a "progressive search", 
the European  Union  has failed to establish that the Panel's findings are inconsistent with such a 
requirement.591 In the United  States ' view , "by using the A380 {project­specific risk premium},  
the Panel constructed a commercial  benchmark that was 'closest to' {the} LA/MSF for the 
A350XWB – 'a loan to the same borrower that is nearly identical to the investigated loan in terms 
of timing, structure, maturi ty, size and currency.'"592 
5.216.   We begin by recalling that a  meaningful benefit analysis pursua nt to Article  1.1(b) of the 
SCM Agreement  requires WTO panels to carry out a careful and thorough comparison between the 
financial contribution provided by a governmen t and a market benchmark . Pursuant to 
Article  14(b) of the SCM Agreement , government loans shall not be considered as conferring a 
benefit unless there is a difference between the amount that the firm receiving the loan pays on 
the government loan and the amount the firm would pay on a comparable commercial loan which 
the firm could actually obtain on the market . In order to reach an appropriate conclusion as to 
whether or not a financial contribution in the form of a loan confers a benefit, it is necessary  to 
compare the government loan with a market benchmark.  In the absence of an actual comparable 
commercial loan that is available on the market, a proxy may be used. We reiterate that, in 
                                                
582 European  Union 's appellant's submission, paras.  393-395. 
583 United  States ' appellee's submission, para. 221 (quoting Panel  Report, para. 6.459 ). 
584 United  States ' appellee's submission, para. 222. 
585 United  States ' appellee's submission, para. 228. 
586 United  States ' appellee's submission, para. 228 (referring to Panel  Report, para. 6.434).  
587 United  States ' appellee's submission, para. 229 (quoting Appellate  Body Report, EC ‒ Fasteners 
(China) , para. 566 (emphasis original)).  
588 United  States ' appellee's submission, paras.  231-232. In support of this argument, the United  States  
refers to the "affirmative obligation" of domestic authorities in terms of  Article  11.1 of the SCM Agreement , of 
which a "progressive search" would be one aspect. (Ibid. , para. 232) 
589 United  States ' appellee's submission, para. 233. 
590 United  States ' appellee's submission, para. 233. 
591 United  States ' appellee's submission, para. 234. 
592 United  States ' appellee's submission, para. 234 (quoting Appellate  Body Report, US ‒ Anti-Dumping 
and Countervailing Duties (China) , para. 486).  While the United  States  accepts that "there is a gap  in time  
between the conferral of the two sets of fi nancing", it emphasizes that, "in all other  relevant respects, LA/MSF 
for the A380 and the A350  XWB were either identical or very close – and certainly closer than was the case for 
any other commercial financing."  (Ibid.)  WT/DS316/AB/RW  
 
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  selecti ng the comparator – i.e. the benchmark loan – it must be ensured that the government loan 
and the benchmark loan are "comparable" because they have "as many elements as possible in 
common".  In some cases, this may require a WTO panel to make adjustments to  the benchmark 
loan to reflect differences with the  investiga ted loan  in relation to various aspects , such as date of 
origination, size, maturity, currency, structure, or borrower's credit risk .593 
5.217.   The European  Union  seeks to support its claim  by referring to the Appellate  Body's findings 
in US – Anti-Dumping and Countervailing Duties (China) , and particularly to the statement that 
"selecting a benchmark under Article  14(b) involves a progressive search  for a comparable  
commercial loan".594 We observe that t his guidance from th e Appellate  Body was provided in 
respons e to a specific set of circumstances  that arose in that dispute. In particular, the 
Appellate  Body addressed a claim about the rejection  of interest rates in China as benchmarks in a 
series of countervailing duties investigations conducted by the United  States Department of 
Commerce (USDOC), and the use of an external proxy benchmark  (i.e. an out -of-country 
benchmark) to determine whether Chinese government loans conferred a benefit.595 Thus, 
the specific context in which the Appellate  Body stated that the se lection of a benchmark under 
Article  14(b) involves  a "progressive search " for a comparable commercial loan  related to a 
domestic authority's recourse to out -of-country benchmarks in conducting  the benefit analysis .596 
As in the case of Article  14(b), Article 14(a) and Article  14(d) both indicate  that the search for a 
benefit benchmark begins in the country where the financial transaction takes place.597 However, 
if there are no similar or comparable transactions (including priv ate and governmental prices) 
in that country or territory that are undistorted or cannot be properly adjusted to serve as benefit 
benchmarks, it is permissible to search for an appropriate benefit benchmark out -of-country or to 
construct a proxy.   
5.218.   The European  Union  argues that "a benchm ark loan must be identified through 
'a progressive search ', which must begin  by assessing the commercial loan that exhibits as many 
similarities as possible to the investigated loan, before  progressing to less similar commercial 
loans ."598 Given the specific  context of the Appellate  Body's statements in US – Anti-Dumping and 
Countervailing Duties (China) , to the extent that the European  Union  is arguing that a panel 
necessarily  errs under Article  1.1(b)  of the SCM Agreement  if it fails to follow a particular,  
predefined sequence or " progressive search" for a market benchmark, we disagree. Instead of 
hinging on whether the Panel in the present case failed to follow a particular, predefined sequence 
or "progressive search" for a market benchmark, our assessm ent should focus on whether, 
in identifying the project -specific risk premium, the Panel fulfilled the substantive  requirement of 
ensuring that the market benchmark is "comparable" to the A350XWB LA/MSF contracts because it 
has "as many elements as possible in  common with the investigated loan{s}".599 
5.219.   The European  Union  further argues that, as a consequence of this requirement to conduct 
a "progressive search" for a benchmark, the Panel should have considered whether the A350XWB 
risk-sharing supplier contracts we re a better basis for the project -specific risk premium than 
the WRP. According to the European  Union , instead of exploring whether the terms of risk -sharing 
                                                
593 Appellate  Body Report, US ‒ Anti-Dumping and Countervailing Duties (China) , para.  485. 
594 European  Union 's appellant's submission, para. 373 (quoting Appellate  Body Report, 
US ‒ Anti-Dumping and Countervailing Duties (China) , para. 486).  (additional text in fn 336 thereto omitted)  
595 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 465. 
596 The Appellate  Body has also provided similar guidance regarding the provision of equity capital, 
pursuant to Article  14(a), and the provision of goods or services or p urchase of goods by a government under 
Article  14(d) of the SCM  Agreement. For instance, in US ‒ Softwood Lumber IV , the Appellate  Body first 
alluded to this possibility in the context of Article  14(d) by stating that " an investigating authority may use a 
benchmark other than private prices in the country of provision, when it has been established that private 
prices of the goods in question in that country are distorted, because of the predominant role of the 
government in the market as a provider of the s ame or similar goods ." (Appellate  Body Report, US – Softwood 
Lumber IV , para. 119) 
597 We do not mean to suggest that such a "progressive search" for comparable commercial loans is 
irrelevant in contexts other than those described in Appellate Body Report, US – Anti-Dumping and 
Countervailing Duties (China) . 
598 European  Union 's appellant's submission, para. 374. (emphasis original; fn omitted)  
599 European  Union 's appellant's submission, para. 372 (quoting Appellate  Body Report, 
US ‒ Anti-Dumping and Countervail ing Duties (China) , para. 476 (emphasis added by the European  Union ); 
referring to Appellate Body Report, US – Carbon Steel (India) , para. 4.345 ). WT/DS316/AB/RW  
 
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  supplier contracts for the A350XWB were a better project -specific risk premium than the WRP, 
"the Panel followed the United  States ' proposal , and proceeded immediately  to an examination of 
the suitability of a single, undifferentiated project risk premium derived from commercial financing  
from risk -sharing suppliers for another  LCA project (i.e., the A380)".600  
5.220.   This argument , in our view, mischaracterizes t he Panel's actual analysis. 
The European  Union  appears to suggest that the Panel simply accepted, without scrutiny or 
analysis, the United  States ' proposed project -specific ris k premium for the A350XWB project . 
A review of the Panel's findings  reveals the opposite . We recall that the United  States  presented to 
the Panel two options for a project -specific risk premium: the JRP and, alternatively, the WRP. 
After examining the part ies' arguments and evidence, the Panel rejected  the JRP, which was the 
United  States ' preferred premium. Only then did the Panel turn to consider the United  States ' 
alternative premium, the WRP. We highlight that  the Panel did not simply assume that the WR P 
would serve as an appropriate project -specific risk premium for the A350XWB. Instead, the Panel 
decided to conduct an assessment of the relative project -specific risks associated with the A380 
and A350XWB projects, focusing  on three categories  of risk: ( i) programme risk; (ii) the price of 
risk; and (iii) contract risk. The purpose of this comparative analysis was, in the Panel's view, 
to determine  "whether the United  States  ha{d} demonstrated that the project -specific risks of the 
A350XWB programme {were } sufficiently similar to those of the A380 programme such that it 
would be reasonable to conclude that the WRP could be used as the project -specific risk premium  
for the A350XWB".601 Thus, contrary to the European  Union 's assertion, the Panel did not  simply  
follow the United  States ' preferred approach . Rather, the Panel sought to engage carefully with  the 
arguments and evidence presented by the parties regarding the possible risk premia that should 
be used  in constructing  the market benchmark.  
5.221.   We also note t hat, before the Panel, the European  Union  did not propose a project -specific 
risk premium of its own for the A350XWB project, and rejected  both of the risk premia advanced 
by the United  States .602 Thus, the European  Union  did not claim  before the Pa nel that the 
project -specific risk premium should be determined on the basis of the A350XWB risk -sharing 
supplier contracts, as it now claims on appeal.603 We note that a p anel is the first trier of facts in a 
serious prejudice case under Part III of the SCM Agreemen t and has a duty to conduct an objective 
assessment  of the matter pursuant to Article  11 of the DSU on the basis  of the parties' 
submissions  and evidence.604 In particular, in  conducting a  benefit analysis , a panel should  begin 
by examining the arguments and  evidence presented by the complainant to support its proposed 
benchmark. A panel should  then turn to assess the responde nt's arguments and evidence. 
In assessing the parties' submissions, a panel may need to request further information and make 
adjustment s to the  components of the proposed  benchmark . While Article  13 of the DSU allows a 
panel to request further information to enable it to make an objective assessment , a panel may 
not make the case for either of the parties.605 
5.222.   We reiterate that the European  Union  did not request  the Panel to explore "whether the 
terms of risk -sharing supplier financing arrangements for the A350XWB shared more elements in 
common with A350XWB LA/MSF "606 than with the WRP.  We do not consider  that the 
European  Union  has established its claim of error under Article  1.1(b) of the SCM Agreement  given 
that the Panel properly assessed the arguments and evidence that were put before it by the 
parties . If the European  Union  consider s that an examination of  the terms of risk -sharing supplier 
financing arrangements  was required  to ensure a proper deter mination of the A350XWB 
project -specific risk premium , it should have pursue d this line of argumentation before the Panel, 
including by providing the A350XWB risk -sharing supplie r contracts  and other relevant evidence.  
                                                
600 European  Union 's appellant's submission, para. 395. (emphasis  original)  
601 Panel  Report, para. 6.459.  
602 Panel  Report, para. 6.434. In particular, the European  Union  asserted that the JRP was not used as a 
project -specific risk premium in the original proceeding s, and that the United  States  had not shown that the 
WRP was an appropriate risk premium for the A 350XWB . (Ibid.)  
603 European  Union's appellant's submission, para.  383. 
604 A panel may seek to exercise its powers under Article  13 of the DSU. We also note the special 
process under Annex V to the SCM Agreement  on "Procedures for Developing Information Conce rning Serious 
Prejudice".  
605 Appellate  Body Report, EC – Fasteners (China) , para. 566. 
606 European  Union 's appellant's submission, para. 394. WT/DS316/AB/RW  
 
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  In any event, and as noted by the United  States , the Appellate  Body's findings from the original 
proceedings indicate that LA/MSF depresse s the rates of return demanded by risk -sharing 
suppliers because it transfers  programme risk from Airbus to the lending governments .607 
As the Appellate  Body explained in the original proceedings, " risk-sharing suppliers would be 
expected to demand a lower rate of return on their participation in an LCA project than they would 
have d emanded in the absence of LA/MSF " and, thus, "deriving the project risk from the rate of 
return of the risk -sharing suppliers will underestimate the project risk premium that woul d be 
demanded by a market lender in the absence of LA/MSF."608 
5.223.   For the foregoin g reasons, we disagree with the European  Union  that "the Panel failed to 
adopt the most appropriate benchmark, tailored to the risks associated with the A350XWB, based 
on a 'progressive search ' for the benchmark that shared 'as many elements as possible in  common 
with' the A350XWB LA/MSF loans ."609 Consequently, we find that the European  Union  has not 
established that the Panel erred in its application of Article  1.1(b) of the SCM Agreement . 
5.3.2.2.2   Whether the Panel erred by failing to make adjustments to the benchm ark to 
ensure comparability  
5.224.   As we see it, in its second argument that the Panel erred under Article  1.1(b) of the 
SCM Agreement , the European  Union  does not appear to take issue with the Panel's decision to 
use the WRP as a basis for the project -specific risk premium . Instead, the European  Union  
contends that, to the extent  that an insufficiently tailored benchmark in the form of the WRP was 
used, the Panel failed to make adjustments  to the benchmark to ensure comparability.  According 
to the European  Union , the Panel applied a single,  undifferentiated project risk premium derived 
from LA/MSF  financing for the A380 project to  LA/MSF  financing for the A350XWB project without 
making adjustments  to account for the differ ences between the two projects in terms o f market 
risk, development risk, and contract risk.610  
5.225.   The European  Union  asserts that the Panel found that the two projects posed different 
market risks . According to the European  Union , the Panel acknowledged that the market risk for 
the A350XWB project w as lower than the market risk for the A380 project.611 Moreover, the Panel 
found that the two  projects posed different development risks  by stating that "the development 
risks associated with the A350XWB 'were approximately similar  to, if not slightly higher  than, 
{those of} the A380'."612 In addition, the Panel found that the A350XWB project offered "some" 
risk mitigation that partially offset the development risk, while such risk mitigation was not present 
for the A380 project. Finally, with respect to contra ct risk , the European  Union  contends that the 
Panel's findings reveal differences between the terms of the A350XWB LA/MSF contracts and the 
A380 LA/MSF contracts.613 The European  Union  points out that the Panel failed to make any 
adjustments to the risk prem ium to account for these differences in market risk, development risk , 
and contract risk.614 Consequently, in the European  Union 's view, the Panel's failure to account for 
these acknowledged differences  amounts to an error in the application of Article  1.1(b)  of 
the SCM Agreement .615 
                                                
607 United  States' appellee's submission, para.  235 (referring to Appellate  Body Report, EC and certain 
member States  – Large Civil Aircraft , para.  921).  
608 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  921. 
609 European  Union 's appellant's submission, para. 405 (quoting Appellate  Body Report, 
US ‒ Anti-Dump ing and Countervailing Duties (China) , paras.  476 and 486; referring to Appellate Body Report, 
US – Carbon Steel (India) , para. 4.345 ). 
610 European  Union 's appellant's submission, para. 396. 
611 European  Union 's appellant's submission, para. 397 (referring to Panel  Report, para. 6.608).  
612 European  Union 's appellant's submission, para. 398 (quoting Panel  Report, para. 6.608 (emphasis 
added by the European  Union )). 
613 The European  Union  observes that, for example,  risk-reducing terms in the [BCI] A350XWB LA/MSF 
contract were more extensive th an in any of the A380 LA/MSF contracts.  (European  Union 's appellant's 
submission, para. 400) 
614 European  Union 's appellant's submission, paras.  397-400. 
615 European  Union 's appellant's submission, para. 403. WT/DS316/AB/RW  
 
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  5.226.   We begin by noting that t he passage in the Appellate  Body report  in US – Anti-Dumping 
and Countervailing Duties (China)  that the European  Union  relies upon in support of this line of 
argumentation reads :  
{S}electing a benchma rk under Article  14(b) involves a progressive search for a 
comparable commercial loan, starting with the commercial loan that is closest to the 
investigated loan (a loan to the same borrower that is nearly identical to the 
investigated loan in terms of tim ing, structure, maturity, size and currency) and 
moving to less similar commercial loans while adjusting  them to ensure comparability 
with the investigated loan.616 
5.227.   As noted in the previous section  of this Report617, the Appellate  Body made this statement 
in address ing a claim concerning  the rejection  of interest rates within China as benchmarks in a 
series of countervailing duty investigations  conducted by the USDOC . In that context , 
the Appellate  Body provided guidance on the conditions  and sequence  that domestic investigating 
authorities should follow before  resorting to out -of-country benchmarks and  constructed  proxies 
for purposes of determining the appropriate market benchmark to conduct the benefit analysis .  
5.228.   Given the specific context of the Appellate  Body's guidance, we recall that, in the present 
case, the focus of our assessment should be on whether, in identifying the project -specific risk 
premium, the Panel fulfilled  the substantive  requirement of ensuring that the market benchmark is 
"comp arable " because it has  "as many elements as possible  in common with the investigated 
loan".618 In this sense, we agree with the European  Union  that, "{i}f a properly -executed 
progressive search for a benchmark nonetheless results in an imperfect match, with the selection 
of a commercial loan that reflects differences  with the investigated loan, adjustments  must be 
made to ensure comparability with the investigated loan."619 Indeed, adjustments may be required 
in situations where the differences  between the gove rnment loan and the benchmark loan are such 
that the benchmark loan is no longer "comparable" to the government loan (e.g. in terms of 
timing, structure, maturity, size , or currency ).620 
5.229.   While we agree that relevant differences between a government loan and the benchmark 
loan may require adjustments, the European  Union  seems to assume  that the fact that the Panel 
found certain  differences in the risks at issue necessarily means  that adjustments were required . 
As explained below, we do not consider this to be correct in the present case. As a starting point, 
in assessing  the risk differences  between the A350XWB and A380 projects , the Panel explained 
why, despite certain differences in the categories of risk examined, it did not necessarily follow 
that adjustments to the WRP were justified. We recall that, i n assessing the United  States ' 
alternative project -specific risk premium (i.e. the WRP), the Panel set out to examine the  
risk differences that "may affect the project -specific risk premium". In light  of the parties' 
arguments, the Panel focused its analysis on three main issues, or categories of risk: 
(i) programme risk; (ii) the price of risk; and (iii) contract risk. The nature of this analysis shows 
that the Panel was not assessing whether the risk s associated with the A350XWB and A380 
projects  were similar in the abstract . Rather, the Panel sought  to make an overall  assessment of 
the relative risk categories and risk profiles between the A350XWB and A380 projects  with one 
specific  objective: to determin e whether the overall  project -specific risks between the two projects  
were sufficiently similar, "such that it would be reasonable to conclude that the WRP could be used 
as the project -specific risk premium  for the  A350XWB".621 Had the Panel intended to  carry out 
such an analysis without the mentioned specific objective, then the existence of differences among 
the categories of risk may well have merited adjustments. However, as noted, the Panel was 
scrutinizing whether the  project -specific risks of the A350XWB project  were sufficiently similar to 
                                                
616 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 486. (emphasis 
added)  
617 See section 5.3.2.2.1 of this  Report.  
618 European  Union 's appellant's submission, para. 372 (quoting Appellate  Body Report, 
US ‒ Anti-Dumping and Countervailing Duties (China) , para. 476 (emphasis  added by the European  Union ); 
referring to Appellate Body Report, US – Carbon Steel (India) , para. 4.345 ). 
619 European  Union 's appellant's submission , para. 377 (referring to Appellate  Body Report, 
US ‒ Anti-Dumping and Countervailing Duties (China) , para. 486). (emphasis original)  
620 Appellate  Body Report, US ‒ Anti-Dumping and Countervailing Duties (China) , para. 485. 
621 Panel  Report, para. 6.459.  WT/DS316/AB/RW  
 
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  those of the A380 project such as to warrant use of the WRP to measure the risks associated with 
the former project while ensuring that it did not make a "false" finding that a benefit existed, 
where there was n one. 
5.230.   Having said that, we observe that, in the present case, it is not possible to determine 
in the abstract  whether the Panel ought to have made adjustments to the WRP to ensure that it 
had as many elements as possible in common with the A350XWB LA/MSF co ntracts . Instead, 
this determination requires examining whether the Panel found specific  differences  in the risk 
profiles of  the A350XWB and A380 projects that would affect the comparability  of the WRP as the 
project -specific risk premium.  We will undertake this assessment when we address the 
European  Union 's criticism of the extensive analysis conducted by the Panel in comparing the risks 
associated with the A350XWB project with those of the A380 project.  Indeed, the European  Union  
challen ges under Article  11 of the DSU the Panel's findings regarding the three main categories of 
risk assessed by the Panel: (i) programme risk; (ii) contract risk; and (iii)  the price of risk.622 
Our analysis of the Panel's comparative assessment of the risk dif ferences between the A350XWB 
and A380 projects is found in section 5.3.2.3  below . 
5.231.   The European  Union  also asserts that "the Panel failed to make any adjustments to 
account for the{} differences {in terms of market risk, development risk, and contract risk} , 
leading to the potential for distortion, imprecision and inaccuracies  that risk false positive 'benefit' 
findings."623 We recognize that difficulties may arise in situations where  a panel looks at different 
aspects of risks and combines them all into a cum ulative  or overall  finding of "sufficient  similarity ". 
In these circumstances, a panel has the obligation to engage in a rigorous and critical analysis of 
all relevant evidence and arguments. Moreover, in conducting the benefit analysis, a panel must 
fulfil the substantive  requirement of ensuring that the market benchmark is "comparable " because 
it has  "as many elements as possible in common with the investigated loan" .624 While we agree 
with the European  Union  that the Panel was required to avoid imprecision in its selection of the 
project -specific risk premium , it is important to bear in mind that the Panel itself also recognized 
that the European  Union 's internal rates of return ( IRRs) – which were used as a basis for the 
Panel's benefit analysis  – may overstate  the expected rates of return.625 In any event, we highlight 
that the f ocus of our assessment is whether the Panel met the substantive requirement of 
conducting a benefit analysis on the basis of comparable  government and benchmark loans  
or proxies.  
5.232.   Furthermore, to the extent that the European  Union  argues  that applying a 
"single,  undifferentiated project risk premium"626 to several families of Airbus aircraft constitutes 
per se legal error under Article  1.1(b) , we disagree.  In the original proc eedings, Professor 
Whitelaw derived the WRP  from the risk -sharing supplier contracts  for the A380, and applied this 
project risk premium also to the A320, A3 30/A340, A330 -200, and A340 -500/600 projects  without  
making  any adjustments.627 The original panel took issue with the notion of applying a "constant 
risk premium to all LCA projects"628, but did not  a priori  see a problem with the application of the 
same risk premium to groups of aircraft. Indeed, the original panel divided the LCA pr ojects into 
                                                
622 European  Union 's appellant's submission, para. 340 (referring to Panel  Report, paras.  6.487, 6.492, 
6.527, 6. 539-6.542, 6.579, 6.595, 6.607 -6.610, 6.632 (Table 10), and 6.633).  
623 European  Union 's appellant's submission, para. 396. (emphasis original)  
624 European  Union 's appellant's submission, para. 372 (quoting Appellate  Body Report, 
US ‒ Anti-Dumping and Countervailing Duties (China) , para. 476 (emphasis added by the European  Union ); 
referring to Appellate Body Report, US – Carbon Steel (India) , para. 4.345).  
625 In assessing other aspects of the benefit analysis, such as the expected rates of return (i.e. t he 
IRRs) , the Panel held that it could not "be certain that those expected IRRs {were} correct and {were} not 
overstated".  (Panel  Report, para.  6.345) Importantly, however, the Panel considered it preferable to proceed 
on the basis of the European  Union 's unvalidated IRRs rather than to use the rates of return advanced by the 
United  States . (Ibid., para.  6.347)  
626 European  Union 's appellant's submission, para. 396. We note that the European  Union argues that:  
the Panel applied the single, undifferentiated p roject risk premium derived from financing for the 
A380 project to financing for the A350XWB project, without making adjustments in light of 
differences between the two projects .  
(Ibid. (emphasis original))  
627 Original Panel Report, para. 7.470.  
628 Appellat e Body Report, EC and certain member States – Large Civil Aircraft , para. 870. (emphasis 
added)  WT/DS316/AB/RW  
 
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  three groups: (i) the A300 and A310; (ii) the A320, A330/A340, A330 -200, and A340 -500/600; 
and (iii) the A380. The Appellate  Body did not fault the original p anel for doing so. In fact, the 
Appellate  Body indicated that it was not "inappropriat e per se  for the {original  panel} to have 
arranged the LCA projects into groups and to have det ermined a range for the project -specific risk 
premium applicable to the LCA projects within each group".629 Moreover, provided that the 
government loan a nd the ben chmark loan or proxy have "as  many elements as possible in 
common"630, it is possible to design a project -specific risk premium for a project in one group of 
aircraft (e.g. twin -aisle LCA such as the A350XWB ) on the basis of information related to another  
group of aircraft (e.g. VLA such as the A380), when it is established that the risk profiles of both 
projects are either sufficiently similar or appropriate adjustments are made.  Therefore, applying a  
single, undifferentiated project risk premium derived fro m the A3 80 project to financing for 
the A350XWB project  does not constitute per se  legal error under Article  1.1(b).  
5.233.   In sum, we find that the European  Union  has not established that the Panel erred in its 
application of Article  1.1(b) of the SCM Agreement  merely because it applied  a single, 
undifferentiated project risk premium derived from the A380 project to the A350XWB project . 
Whether such a risk premium could be used  "without making adjustments in light of differences 
between the two projects "631 depend ed on whether the risk profile of the A380 project was 
sufficiently similar to the risk profile of the A350XWB project so as to be "comparable". We return 
to this question in section  5.3.2.3 below , which addresses the European  Union 's claim that the 
Panel acted inconsistently with  Article  11 of the DSU  by finding  that the project risk premium 
developed for the A380 project is a suitable benchmark for the A350XWB project on the basis that 
the risks posed by the A380 and A350XWB projects  are similar.632 
5.3.2.2.3   Whether  the Panel acted inconsistently with Article  11 of the DSU  
5.234.   The European  Union  also claims that the Panel acted inconsistently with Article  11 of the 
DSU by failing to establish a project risk premium for A350XWB LA/MSF based on the risks 
associated with th e A350XWB project. The  European  Union  advances two lines of argumentation in 
support of its claim . First, the Panel failed to consider alternative, and more appropriate , 
benchmarks than those  proposed by the United  States . Second, the Panel inappropriately  deviated 
from the original panel's findings when it adopted a constant, undifferentiated project risk 
premium not tailored to the risks associated with LA/MSF for the A350XWB.633 We examine each of 
these two lines of argumentation below.  
5.235.   In its first line o f argumentation, t he European  Union  alleges that, when accepting the 
A380 project risk premium  as a benchmark for the four A350XWB LA/MSF contracts , the Panel 
failed to consider alternative , and more appropriate , benchmarks than those  proposed by the 
Unite d States . The European  Union  maintains that this is inconsistent with the Appellate  Body's 
guidance that a panel's mandate is not limited to assessing the benchmarks proposed by the 
parties and, instead, includes an obligation to consider alternatives, so as to identify and adopt the 
most appropriate benchmark.634 
5.236.   In response, the United  States  disagrees with the European  Union  that, in accepting the 
WRP as a benchmark for the four A350XWB LA/MSF contracts , the Panel acted inconsistently with 
Article  11 of th e DSU by failing to consider alternative , and more appropriate , benchmarks. 
The United  States  notes that, in  support of its argument, the European  Union  cites the 
                                                
629 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 883. 
630 Appellate  Body Report, US ‒ Anti-Dumping and Countervailing Duties (China) , para. 476. 
631 European  Union 's appellant's submission, para. 396. (emphasis original)  
632 European  Union 's appellant's submission, para. 340 (referring to Panel  Report, paras.  6.487, 6.492, 
6.527, 6.539 -6.542, 6.579, 6.595, 6.607 -6.610, 6.632 (Table 10), and 6.633).  
633 European  Union 's appellant's submission, para. 423. 
634 European  Union 's appellant's submission, para. 410 (referring to Appellate  Body Report, EC and 
certain member States – Large Civil Aircraft , para. 883).  The European  Union  argues that  the Panel's failure to 
engage in a search for the most appropriate benchmark is particularly surprising because the Panel was fully 
aware that Airbus had secured large amounts of risk -sharing supplier financing for the A350XWB that, in the 
case of the A38 0, served as the basis for the project risk premium for A380 LA/MSF. Moreover, the 
European  Union  highlights that the Panel failed to seek information about the terms of risk -sharing supplier 
financing for the A350XWB, despite having exercised its discreti on, under Article  13 of the DSU, to seek from 
the European  Union  documents memoriali zing the terms of the A350XWB  LA/MSF contracts. ( Ibid., para. 414) WT/DS316/AB/RW  
 
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  Appellate  Body's statement in the original proceedings that the original panel had a "duty to  
assess, based on the evidence on record, whether the application of a constant project risk 
premium was the most appropriate approach and, to the extent that it was not, to consider 
alternative approaches".635 According to the United  States , the European  Union overlooks the fact 
that the Appellate  Body's statement indicates that the appropriate benchmark must be "based on 
the evidence on record".636 For the United  States , this means that, in determining the appropriate 
project -specific risk premium, the Panel had "a duty to consider the range of approaches that were 
possible based on the evidence before it. However, it did not have a duty to consider approaches 
that were not possible given the evidence before it, or to add to the record by  conducting its own 
information -gathering exercise".637 According to the United  States , given that the European  Union  
did not  submit the risk­sharing supplier contracts for the  A350XWB project, the Panel "bore  no 
obligation to explore" , using these contracts , in constructing the project -specific risk premium.638 
5.237.   We begin our analysis by noting that the European  Union 's first line of argumentation 
under Article  11 of the DSU seems  to be largely based on the same ground as its first claim of 
error in the application of Article  1.1(b) of the SCM Agreement , namely,  that the Panel erred by 
failing to undertake a "progressive search" for a market benchmark.  The European  Union  itself 
appears to recognize that there is a degree of overlap between its claim of error under 
Article 1.1(b) and its claim under Article  11 of the DSU.639 The European  Union  nevertheless  
"maintains both grounds of appeal to explain why the Panel's failure to consider alternative 
approaches amounts to inconsistencies with both Article  1.1(b) of the SCM Agreement , 
and Article  11 of the  DSU".640 
5.238.   It is well established that , in most cases, an issue "will either  be one of application of the 
law to the facts or an issue of the objective assessment of facts, and not both ".641 In US – Large 
Civil Aircraft (2nd complaint) , the Appellate  Body found that, while "{a} party is free to frame its 
claim on appeal as it sees fit", "important consequences flow from that choice, including the 
standard of review that will apply in adjudicating that claim".642 In that dispute,  the Appellate  Body 
further reasoned that , "{w}here there is ambiguity, it will fall on the Appellate  Body to determine 
whether a finding  – and a related challenge to it on appeal  – is properly characterized as legal or 
factual, in the circumstances of a s pecific  case".643 
                                                
635 United  States ' appellee's submission, paras.  237 (quoting European  Union 's appellant's submission, 
para. 410, in turn quoting Appellate  Body Report, EC and certain member States – Large Civil Aircraft , 
para. 883).  
636 United  States ' appellee's submission, paras.  238-239 (quoting Appellate  Body Report, EC and certain 
member States – Large Civil Aircraft , para. 883).  
637 United  States ' appellee's submission, para. 238. 
638 United  States ' appellee's submission, para. 239. The United  States  further questions the significance 
of the contrast drawn by the European  Union  between the Panel's decision to exercise it s discretion under  
Article  13 of the DSU to request the European  Union  to submit the LA/MSF contracts for the A350XWB project , 
and the Panel's failure to request the European  Union  to submit the relevant risk -sharing supplier contracts. In 
the former case, t he United  States  specifically requested the Panel to ask the European  Union  to submit the 
LA/MSF contracts, and the Panel partially did so having heard arguments on the matter from both sides. In the 
latter case, neither party requested the Panel to exerci se its discretion  under Article 13 . In any event, the 
European  Union  "had ample opportunity" to submit the releva nt contracts. (Ibid.,  paras.  240-241) 
639 See European  Union 's appellant's submission, fn 366 to  para. 408. 
640 European  Union 's appellant's submis sion, fn 366 to para. 408. (emphasis added)  
641 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 872. (emphasis 
original)  
642 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 956. See also Appellate  Body 
Reports, Canada – Wheat Exports and Grain Imports , para. 177; Japan – Apples , para. 136. 
643 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 958. WT/DS316/AB/RW  
 
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  5.239.   As we see it, the basis  for the European  Union 's claim under Article  1.1(b) of the 
SCM Agreement  and its claim under Article  11 of the DSU are, by and large, the same.644 
Thus,  the question arises whether the European  Union 's challenge  to the Panel's findings should be 
analysed either as a claim of error in the application of Article  1.1(b) or as a claim of inconsistency 
with Article  11 of the DSU.  In our view, the European  Union 's critique of the Panel's failure to 
undertake its benefit inqui ry in a particular manner and following a particular sequence of analysis 
is more appropriately addressed  as a matter of application of  the legal standard established by 
Article  1.1(b) of the SCM Agreement . Since we have already addressed above th e 
Europea n Union 's claim that the Panel erred under Article  1.1(b)645, we do not consider it 
necessary to address further the European  Union 's claim that the Panel acted inconsistently with 
Article  11 of the DSU by failing to conside r alternative, and more appropriate,  benchmarks than 
those  proposed by the United  States . 
5.240.    We now turn to the European  Union 's second line of argumentation  under Article  11 of the 
DSU. The European  Union  argues that, in adopting a constant, undifferentiated project risk 
premium, the Panel "inappropriately deviated" from the findings of the original panel, which called 
for establishing a risk premium that takes into account the risks involved in " each specific  LCA 
project".646 Despite the original panel's findings , the Panel applied the risk premium established for 
the A380 LA/MSF contract in the original proceedings to the four A350XWB LA/MSF contracts , 
without making any adjustments. Thus, in the European  Union 's view, without any explanation, 
the Panel adopted the very approach tha t the original panel rejected. Consequently, the 
European  Union  submits that the Panel's deviation from the original panel's approach constitutes a 
failure to make an objective assessment of the matter, as required by Article  11 of the DSU.647 
5.241.   In response, t he United  States  disagrees with the European  Union  that the Panel, in 
adopting a constant, undifferentiated project -specific risk premium, inappropriately  deviated from 
the findings of the original panel. In the United  States ' view, "{n}o such deviation oc curred".648 
The original panel found that it was appropriate – and the Appellate  Body upheld its approach on 
appeal – to use a constant project -specific risk premium for three separate groups of LA/MSF.649 
The United  States  argues that "the Panel followed the same approach, in effect, grouping the A380 
and the A350  XWB into the same category for purposes of the {project -specific risk premium} 
based on a detailed and lengthy analysis of the relevant facts ."650 Consequently, the United  States  
disagrees with  the European  Union 's claim that the Panel acted inconsistently with Article  11 
of the DSU. 
5.242.   According to  the European  Union , the findings of the original panel called for establishing a 
risk premium that takes into account the risks involved in " each specific  LCA project".651 We do not 
agree with the European  Union 's reading of the original panel's findings  and their endorsement by 
the Appellate  Body. While the original panel took issue with the application  of "a constant risk 
premium to all LCA projects", inclu ding all pre-A350 LA/MSF projects652, and " expressed a 
                                                
644 In the context of its claim of error in the application of Article  1.1(b), the Europe an Union asserts 
that, by focusing on whether the project -specific risk premium developed for the A380 project could be applied 
to assess the LA/MSF loans for the A350XWB project, the Panel failed to undertake a "progressive search" for a 
benchmark that ha d "as many elements as possible in common with" the A350XWB LA/MSF loans, and that 
was, therefore, most closely tailored to the risks associated with the A350XWB project . In turn, under 
Article  11 of the DSU , the European  Union  contends that the Panel acte d inconsistently with this provision by 
limiting its analysis to a review of whether the use of either of the two benchmarks proposed by the 
United  States  (the JRP and the  WRP) would be reasonable, rather than posing questions to the parties and 
constructi ng a risk premium that best reflected the risks associated with the A350XWB project on an 
independent basis. ( European  Union 's appellant's submission, paras.  380 and 411)  
645 See section 5.3.2.2.1 of this Report.  
646 European  Union's appellant's submission, para.  416. (emphasis original)  
647 European  Union's appellant's submission, para.  422. 
648 United  States' appellee's submission,  para. 243. 
649 United  States ' appellee's submission, para. 243. The first group consisted of two projects (the A300 
and A310 projects), the second four projects (the A320, A330/A340, A330 -200, and A340-500/600 projects), 
and the final group of the A380 project alone. (Ibid.  (referring to Appellate  Body Report, EC and certain 
member States – Large Civil Aircraft , para. 882)) 
650 United  States ' appellee's submission, para. 244. 
651 European  Union 's appellant's submission, para. 416. (emphasis original)  
652 Appellate  Body Report, EC and certain member States – Large Civil A ircraft , para. 870. (emphasis 
added)  WT/DS316/AB/RW  
 
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  preference for a variable risk premium that took into account the particularities of the specific LCA 
projects"653, we do not understand it to have suggested that it was necessary to establish  a risk 
premi um that takes into account the risks involved in " each specific  LCA project".654 In our view , 
the approach that the original panel followed is quite different from the European  Union 's 
understanding of the original panel  report. Indeed, as noted, the origina l panel divided the LCA 
projects into three groups : (i) the A300 and A310; (ii) the  A320, A330/A340, A330 -200, 
and A340-500/600; and (iii) the A380655, and determined ranges for the risk premium applicable 
to each group of LCA projects. In turn, the Appellat e Body endorsed this general approach by 
indicating that "it  was {not} inappropriate per se  for the {original p anel} to have arranged the 
LCA projects into groups and to have determined a range for the project -specific risk premi um 
applicable to the LCA pr ojects within each group".656 Thus, as we see it, in the original 
proceedings, the original panel  and the Appellate  Body did not find that  it was necessary to 
identify a specific  risk premium with respect to  each of the Airbus LCA projects at issue . 
5.243.   In addition, we note that, in the context of this claim under Article  11, the European  Union  
also takes issue with the fact that the Panel applied the risk premium established for the A380 in 
the original proceedings to the four A350XWB LA/MSF contracts , "without making any 
adjustments".657 This argument is  essentially the same  as the European  Union 's earlier claim of 
error in the application of Article  1.1(b) of the SCM Agreement  that we have examined above.658 
We fail to see any reason why the outcome of this  analysis would be different in the context of the 
present claim under Article  11 of the DSU . 
5.244.   In light of the above considerations, we disagree with the European  Union  that the Panel 
"deviated" from the approach taken by the original panel regarding the id entification of the 
project -specific risk premium , in a manner inconsistent with Article  11 of the DSU.  
5.245.   To conclude, t he European  Union  advance d two lines of argumentation in support of its 
claim of inconsistency with Article  11 of the DSU. With regard to the first, given that  we have 
already addressed and rejected the European  Union 's claim tha t the Panel erred under 
Article  1.1(b) of the SCM Agreement  by failing to undertake a "progressive search" for a market 
benchmark659, we consider it unnecessary to add ress further the European  Union 's claim that the 
Panel acted inconsistently with Article  11 of the DSU by failing to consider alternative, and more 
appropriate, benchmarks than those  proposed by the United  States . Regarding the second line of 
argumentation , we disagre e with the European  Union 's claim that the Panel acted inconsistently 
with Article  11 because it allegedly deviated from the original panel's findings by adopt ing a 
"constant, undifferentiated project risk premium " for the A350XWB.660 Consequentl y, we find that 
the European  Union  has failed to establish that the Panel acted inconsistently with Article  11 of 
the DSU. 
5.3.2.3   Whether the Panel acted inconsistently with Article  11 of the DSU in its 
assessment of the risk differences that may affect the project -specific risk premium  
5.246.   Having addressed the European  Union 's claims that the Panel erred in its application of 
Article  1.1(b) of the SCM Agreement  and acted inconsistently with Article  11 of the DSU by failing 
to establish a project -specific risk pr emium for the four A350XWB LA/MSF contracts  based on the 
risks associated with the A350XWB project , we turn next to address the European  Union 's second  
set of claims challenging  the Panel's findings.  Specifically, t he European  Union  argues that the 
Panel a cted inconsistently with Article  11 of the DSU in its assessment of the three  categories  of 
                                                
653 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 870.  
654 European  Union 's appellant's submission, para. 416. (emphasis original)  
655 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 882 (referring to 
Original Panel Report, paras.  7.469, 7.481, and 7.485 -7.487).  
656 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 883. 
657 European  Union's appellant's submission, para.  421. 
658 We recall that, in section 5.3.2.2.2 of this Report, we reject the European  Union's claim that the 
Panel erred under Article  1.1(b) by applying a single, undifferentiated project risk premium derived from the 
A380 project to the A350XWB project, without making adjustments  in light of differences between the two 
projects. (European  Union's appellant's submission, para.  396) 
659 See section 5.3.2.2.1 of this  Report.  
660 European  Union 's appellant's submission , para. 423. WT/DS316/AB/RW  
 
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  risk examined in relation to the risk profiles of the A380 and A350XWB projects : (i) programme 
risk; (i i) contract risk ; and (iii)  the price of risk .661 The European  Union  challenges the Panel's 
analysis regarding these  three categories  of risk  on the basis of  multiple  claims of inconsistency 
with Article  11 of the DSU . These claims are all, in one way or another, related to the question of 
whether the risk pr ofiles of the A350XWB  and A380 projects were o verall sufficiently similar, 
or whether any adjustments would have been required to use the WRP as the A350XWB  
project -specific risk premium.  
5.247.   In addressing this set of claims under Article  11 of the DSU , we beg in our analysis with the 
European  Union 's challenge against the Panel's findings in relation to programme risk . This will be 
followed by the European  Union 's claims regarding  the Panel's findings on  contract risk . Finally, 
we conclude by examining the chal lenges against the Panel's analysis of the price of risk . 
5.3.2.3.1   Programme risk  
5.248.   The European  Union  argues that the Panel acted inconsistently with its obligations under 
Article  11 of the DSU in comparing the programme risks involved in the A350XWB and A380 
projec ts. The European  Union  observes  that programme risk encompasses  two different types of 
risk: "development" risk662; and "market" risk.663 In the European  Union 's view, the Panel failed to 
make an objective assessment of the matter , as required by  Article  11 of the DSU , in the context 
of the analysis of development risk; the analysis of market risk; and the comparison of the 
development and market risks posed by the A350XWB and A380 projects.  We begin by addressing 
the European  Union 's claim regarding developmen t risk. We then examine together the claims 
concerning market risk and the comparison of the development and market risks . 
5.3.2.3.1.1   Development risk  
5.249.   The European  Union  submits that  the Panel committed three  distinct errors under 
Article  11 of the DSU in finding tha t "the A350XWB project involved development risks that were 
'at least as high or  higher ' than the development risks related to the A380 project ."664 
5.250.   First, t he European  Union  notes that "{t}he  Panel found that the A380 and A350XWB 
projects gave rise to disti nct development risks, as they 'involved different  technological 
challenges'."665 In particular , the A380 was "an aircraft of unprecedented size", whereas the 
A350XWB made extensive use of "new materials".666 However, despite assessing the different 
technologi cal challenges involved in the A380 and A350XWB projects, the Panel failed to reduce 
these different development risks to common terms susceptible to comparison, that is, in terms of 
the price that would be demanded by a commercial lender as a risk premium  to bear each of the 
distinct development risks – the unprecedented size of the A380 and the use of new materials in 
the A350XWB.  Therefore , the European  Union  maintains that there is no evidence , and 
no reasoned or adequate explanation , to support the Pan el's conclusion that the development risks 
faced by both projects, albeit different in nature, would nonetheless be similarly priced from a 
commercial lender's perspective.667 The European  Union  asserts that, as a result of this "missing 
link" in the Panel's analysis, the record provides no basis for the Panel's finding that the A350XWB 
project involved development risks that were " at least as high or higher " than the development 
                                                
661 European  Union 's appellant's submissio n, paras.  355 and 424.  
662 According to the European  Union , development risk relates to the "likelihood that Airbus will not be 
able to deliver the aircraft as and when promised", including due to technological risks. ( European  Union 's 
appellant's submission , para. 440 (quoting Panel  Report, para. 6.462))  
663 Market risk is the "risk that the new aircraft will not sell as well as anticipated". ( European  Union 's 
appellant's submission, para. 440 (quoting Panel  Report, para. 6.543))  
664 European  Union 's appellant's  submission, para. 442 (quoting Panel Report, paras.  6.485, 6.487, 
and 6.539 (emphasis original)).  
665 European  Union 's appellant's submission, para. 447 (quoting Panel  Report, para. 6.487  
(emphasis added by the European  Union )). 
666 European  Union 's appellan t's submission, para. 447 (quoting Panel  Report, paras.  6.466 and 6.482 ). 
(emphasis omitted)  
667 European Union's appellant's submission, para. 444.  WT/DS316/AB/RW  
 
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  risks related to  the A380  project.668 Consequently, the European  Union  argues that, by making this 
finding regarding the development risks, the Panel acted inconsistently with Article  11 of the DSU.  
5.251.   The United  States  maintains that the Panel's findings were based primarily on qualitative 
rather than quantitative elements.669 However, " Article  11 requires that the Panel make an 
objective assessment of the facts – not that it express its intermediate findings quantitatively ."670 
Therefore, the  United  States  asserts that the Panel' s objectivity cannot be called into question 
simply because most of the evidence examined by the Panel was  qualitative in nature.671 
5.252.   We begin by analysing the thrust of the European  Union 's claim . As we see it, 
the European  Union 's claim is that the Panel should have  analysed the A380's development risk 
(resulting from its unprecedented size) and the A350XWB's development risk (resulting from the 
use of new materials) from the perspective of the price that a commercial lender would have 
charged to assume each  of the se distinct risks. The Panel's failure to carry out this specific 
assessment resulted, in the European  Union 's view, in a breach of Article  11. 
5.253.   The European  Union 's argument appears to be premised on the assumption that the legal 
standard under Article 1.1(b) of  the SCM Agreement  and Article  11 of the DSU  require the Panel to 
have examine d, for both the A380 and the A350XWB project,  the specific issue of the development  
risks in terms of the price that a commercial lender would have charged  to assume the specific 
risks at issue . While we agree that the main issue before the Panel was whether a commercial 
lender would have imposed similar terms for assuming the risk  associated with each project  
(i.e. the A350XWB and the A380) , we do not consi der that the Panel was required to  reach a 
"similarity finding" on the basis of "what a commercial lender  would have  charged"  with respect to 
each of the individual categories of risk  that the parties had presented.  Rather, the Panel was 
required to provid e a reasoned and adequate explanation as to  why the risk profiles of the 
A350XWB and A380 projects were overall  sufficiently similar such that the WRP could be used – 
without making adjustments – as a project -specific risk premium for the A350XWB project.   
5.254.   To the extent that it would have been possible to quantify in the present case what a 
commercial lender would have charged as a risk premium to assume each of the individual 
categories of risk e xamined by the Panel, this type of analysis would have provid ed a more robust 
basis for the Panel's ultimate finding regarding the project -specific risk premium to be used for the 
A350XWB. Nonetheless, and even accepting that the Panel could have explained more clearly how 
it came to its conclusion , the Panel's eval uation of the various aspects of risk associated with the 
A350XWB and A380 projects provided a sufficient basis for it to find that " the overall 
project -specific risks {were}  sufficiently similar to allow the risk premium applied for A380 LA/MSF 
in the ori ginal proceeding to be applied to A350XWB LA/MSF ."672 In particular,  as examined below,  
the Panel 's analysis demonstrates that it took into account each of the various aspects  of risk in its 
overall analysis and that it did not find any differences that requ ired adjustments to be made to 
the WRP, either downwards – as argued by the European  Union  – or upwards, as argued by 
the United  States . 
5.255.   The Panel likewise  did not consider that it was required to examine what a commercial 
lender would have charged with re spect to each of the individual categories of risk  that the parties 
had presented. Rather, the Panel was  making  an overall  assessment and comparison of the 
relative risk  profile s of the A350XWB and A380 projects. Therefore, instead of seeking to base and 
quantify its conclusions on any one type of risk alone , the Panel decided to undertake a holistic 
                                                
668 European Union's appellant's submission, para. 450 (quoting Panel Report, paras. 6.485 and 6.487 
(emphasis original)). According to the European  Union , the missing link  in the Panel's analysis is particularly 
troubling given that the Panel's benefit findin gs are highly dependent on accuracy and precision in the 
benchmarking exercise. Even a small change in the project risk premium could potentially change the results 
for one or more of the A350XWB LA/MSF loans, from a finding of subsidi zation to a finding o f no subsidi zation. 
(Ibid., para. 451) 
669 United  States ' appellee's submission, para. 253. 
670 United  States ' appellee's submission, para. 250. The United  States  points out  that, in any event , the 
Panel did take account of certain quantitative elements, such as the research and development ( R&D) costs 
associated with the two projects. (Ibid. , paras.  251 and 253)  
671 United  States ' appellee's submission, para. 253. 
672 Panel Report, para.  6.608.  WT/DS316/AB/RW  
 
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  assessment of the risk differences  between the A350XWB and A380 projects  with the spe cific 
objective in mind of determining whether  the risk profiles were sufficiently similar such that  it 
would be "reasonable" for the Panel to use the WRP as the project -specific risk premium for the 
A350XWB.  In conducting this assessment, the Panel examin ed the arguments and evidence 
regarding the categories of risk put forward by the parties – which included programme risk 
(development and market risks), contract risk, and the price of risk – and came to the conclusion 
that "the overall project -specific r isks {were} sufficiently similar to allow the risk premium applied 
for A380 LA/MSF in the original proceeding to be applied to A350XWB LA/MSF."673  
5.256.   Moreover, we observe that, before the Panel, the European  Union  does not appear to have 
argued that the Panel was required to undertake an assessment of the specific risks at issue in 
terms of "the price that a commercial lender would have charged" to assume each of the specific  
risks at issue. Rather, the European  Union 's argumentation more broadly addressed the 
differences in the various risks at issue (development risk, market risk, the price of risk, and 
differences in the terms of the contracts) to support its position  that the United  States  had failed 
to show that the risks of the A350XWB project  were "likely " to be higher than those of the A380 
project.674 Therefore, it appears that the parties' arguments and evidence before the Panel  gave 
rise to an analysis focusing on  an overall  comparison of the risk  profiles  associated with the 
A350XWB and A380 projects .  
5.257.   In any event, in the specific context of development risk, the Panel provided a detailed 
examination of the parties' arguments and evidence regarding whether the A350XWB project was 
at least as risky, if not more risky, than the A380 project. The Panel beg an this assessment by 
noting that the evidence provided by both parties indicated that there were a number of 
technological leaps involved with the A350XWB that were primarily associated with the use of new 
materials and structural concepts employed to mak e a lighter and more efficient aircraft.675 
In terms of the volume and extensive use of new materials, the Panel observed that the 
United  States  had submitted evidence showing that the use of carbon fibre reinforced plastics and 
other new composites technolo gy in the A350XWB was new and unprecedented.676 In the Panel's 
view, this novelty and its challenges were known at the time of the aircraft's launch, and thus 
would have informed the assessment of risk at the time of the conclusion of the A350XWB LA/MSF 
contracts.677 The Panel examined further evidence assessing the impact of new materials and 
structural concepts to the development risk associated with the A350XWB project. For instance, 
the Panel observed that, "{d}ue to the use of new materials with the A350XW B, other innovations 
were made in regards to new adaptations and integration"678, and that "the choice of composites 
                                                
673 Panel Report, para.  6.608.  
674 For instance, with respect to development risk, the European  Union  argued that the "relevant 
question is whether the development risk of the A350XWB programme relative to the development risk of the 
A380 programme warrants applicat ion to the A350XWB of a project -specific risk premium associated with the 
A380" . (European  Union 's comments on the United  States ' response to Panel  question No. 90, para. 709) With 
regard to market risk, the European  Union  faulted the United  States  for failing to provide forecasts for the 
A350XWB and A380 projects  and to undertake a comparison of those forecasts, which would have allowed the 
Panel to assess comparative market risks as between the two projects . (Ibid., para. 685) Finally, with regard  to 
the price of risk, the European  Union  argued that the United  States  had failed to provide any basis to support 
the conclusion that the price of risk is at least  the same as or more expensive t han it was at the time the 
A380 LA/MSF contracts were conclu ded. (Ibid., para. 716) 
675 Panel Report, para. 6.468 (referring to A350XWB Chief Engineering Statement  (Panel Exhibit EU -18 
(BCI/HSBI)); Statement by Gordon McConnell, Michel Lacabanne, Chantal Fualdes, François Cerbelaud and 
Burkhard Domke, A350XWB Chief E ngineering, 13  December  2012 (A350XWB Chief Engineering Rebuttal) 
(Panel Exhibit EU -128 (BCI/HSBI)); A350XWB Production Statement (Panel Exhibit EU -129 (BCI/HSBI)); 
Declaration of Larry Schneider, Senior Vice President of Product Development, Boeing Commer cial Aircraft, 
"The Relevance of Prior Commercial Experience to Existing Model Improvements and New Aircraft 
Developments", 17 October 2012 (Schneider Declaration)  (Panel Exhibit USA -354 (BCI)) ; Declaration of 
Michael Bair: Products and Competition in the ICA Industry (16  August  2012) (Bair Declaration)  (Panel Exhibit 
USA-339 (BCI))).  
676 Panel Report, para. 6.470. The Panel pointed out that the new composites technology in the 
A350XWB related to over half of the fuselage and wings, passenger doors, and flap support structures. (Ibid. 
(referring to "A350XWB – Technology", Airbus website, accessed 3  October  2012 (Panel Exhibit USA -427); 
European Commission, State aid N 414/2010 – Belgium – Aid to SABCA 'Flap Support Structures' project, 
(5 October  2011) (Panel Exhibit USA -441), para. 52)) 
677 Panel Report, para. 6.470.  
678 Panel Report, para. 6.473.  WT/DS316/AB/RW  
 
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  also had a knock -on effect on the choice (and integration) of systems in the composite 
fuselage" .679 The Panel also pointed to statements by Ai rbus indicating that "there were skills and 
resource challenges associated with the A350XWB's use of new materials and concepts."680 
The Panel additionally observed that "{t}he use of new materials necessitated new testing and 
gathering of data"681, and that " the move from aluminium to composite materials … also 
necessitated many changes and adaptations to production facilities, at the level of component 
production, sub -assembly and final assembly" .682 
5.258.   The Panel then turned to compare the technological challenges  associated with the 
A350XWB project to those associated with the A380 project. The Panel found  that "the A380 
aircraft also represented a break with previous aircraft", but noted that "this was mainly in terms 
of its unprecedented size."683 However, the Pan el pointed out that, while novel in size and design, 
the A380 was mainly made of traditional metal and fibreglass, which would not have involved the 
same unknowns, or necessitated enhanced testing, as the new materials extensively used for the 
A350XWB.684 For instance, the Panel observed that "Airbus' engineers specifically contrast{ed} the 
new composites and how little is known about them, to 'aluminium structures, where more than 
six decades of experience  have resulted in highly -optimized structures with li ttle margin for 
improvement'."685 Moreover, the Panel added that, while several variants were envisaged under 
the A380 project, the evidence on the Panel record suggested that the parallel development of 
multiple variants in the A350XWB project was more ambi tious.686 The Panel also pointed out that 
"the A350XWB was expected to have a higher relative programme cost than the A380, due to 
higher research and development (R&D) costs."687  
5.259.   Having conducted this comparative assessment of the development risks associate d with 
the A350XWB and A380 projects, the Panel found that:  
higher R&D costs, combined with the evidence of the extent to which the new design 
and use of new materials would necessitate the development of specialised 
equipment, expertise and testing, is co nsistent with a view that, from a lender's 
perspective, the A350XWB involved significant novelty, greater cost, greater 
investment, and therefore technology -related development risks that were at least as 
high or higher  than the risk involved with the tech nology involved in the development 
of the A380.688 
5.260.   In light of the above considerations, including the nature of the arguments and evidence 
that were before the Panel, we disagree with t he European  Union 's arguments  that there is a 
                                                
679 Panel Report, para. 6.473 (quoting A350XWB Chief Engineering Statement  (Panel Exhibit EU -18 
(BCI/HSBI)), para. 26).  
680 Panel Report, para. 6.474. By way of example, the Panel notes that:  
a design engineer specialized in a very specific aspect of systems installation for  aluminium 
fuselage structures … has to learn new requirements and design principles to perform design 
tasks on a CFRP composite fuselage. According to Airbus, such a fuselage "requires a completely 
different set of skills and know -how to be applied, inclu ding, for example, the design solutions for 
lightning strike protection and systems that are not required on aluminium structures."  
(Ibid. (quoting A350XWB Chief Engineering Statement (Panel Exhibit EU -18 (BCI/HSBI)), para. 26)) 
681 Panel Report, para. 6.475. 
682 Panel Report, para. 6.476 (quoting A350XWB Production Statement (Panel Exhibit EU -129 
(BCI/HSBI) ), para. 11). 
683 Panel Report, para.  6.480 ( referring to European  Union 's comments on the United  States ' response 
to Panel question No. 104, para. 810). (em phasis original) The Panel observed that the unprecedented size of 
the A380 posed various technological  challenges, particularly, in terms of aerodynamics, structure, noise and 
emission limits, and airport infrastructure constraints. (Ibid.)  
684 Panel Report , para. 6.482.  
685 Panel Report, para. 6.482 (quoting A350XWB Chief Engineering Rebuttal (Panel Exhibit EU -128 
(BCI/HSBI)), para. 13 (emphasis original)).  
686 Panel Report, para. 6.483 (referring  to, inter alia , Max Kingsley -Jones, "Paris Air Show: A350  XWB 
Ready to Rock", FlightGlobal News , 5 June 2009 (Panel Exhibit USA -428)).  
687 Panel Report, para. 6.484.  (emphasis original)  
688 Panel Report, para. 6.485. (emphasis original ; fn omitted ) The Panel further stated th at, while the 
A380 and the A350XWB projects involved "different technological challenges", it was satisfied that "the 
technological  risk associated with the A350XWB was at least as high or higher  than the technological risk 
associated with development of t he A380". (Ibid., para. 6.487 (emphasis original) ) WT/DS316/AB/RW  
 
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  "missing link" in the Panel's analysis and that the record provides no basis for the Panel's finding 
that the A350XWB project involved development risks that were " at least as high or higher " than 
the development risks related to the A380 project.689 Consequ ently, we reject  the 
European  Union 's first argument with regard to its claim that the Panel acted inconsistently with 
Article  11 of the DSU.  
5.261.   In its second line of argumentation, the European  Union  contends that, in finding that the  
development risks posed  by the A380 and A350XWB projects were sufficiently similar, the Panel 
acted inconsistently with Article  11 of the DSU because this finding  was based on internally 
inconsistent reasoning.690 According to the European  Union , this is because the Panel 
found : (i) that the development risks involved in the two projects were similar691; (ii) that the 
development risks posed by the A350XWB project were mitigated to some extent at the time the 
A350XWB LA/MSF contracts were concluded, while the development risks posed by the A380 
project were not692; and (iii) despite having made these findings, that the development risks 
assumed by the LA/MSF lenders to the two projects were sufficiently similar.693  
5.262.   In order to determine whether the European  Union  is correct in asserting that the Panel's 
analysis was based on internally inconsistent reasoning, we turn to review the Panel's findings. 
Before the Panel, the European  Union  disagreed  that the development risk was higher fo r the 
A350XWB project than for the A380 project. For the  European  Union , this was because actions 
pursued by Airbus mitigated  technology -related risk for the A350XWB.694 Thus, in addition to 
examining the parties' arguments comparing the technology -related risks of the A350XWB and 
A380 projects, the Panel also examined the European  Union 's arguments regarding 
two risk-mitigating factors.695 
5.263.   We recall that, with respect to  the technology -related risks of the A350XWB and A380 
projects, the Panel began by noting that the evidence provided by both parties indicated that there 
were a number of technological leaps involved with the A350XWB that were primarily associated 
with the u se of new materials and structural concepts employed  to make a lighter and more 
efficient aircraft.696 As noted above697, the Panel conducted a comparative assessment of the 
development risks associated with the A350XWB and A380 projects, which included  examin ing the 
use of new materials and the extent to which such use would have an impact on the development 
of each aircraft, and R&D costs.  The Panel noted, in particular, that the A350XWB would involve 
higher R&D costs, and that the new design and use of new m aterials would necessitate the 
development of specialized equipment, expertise, and testing.698 On the basis of this examination , 
the Panel found that "the A350XWB involved  significant novelty, greater cost, greater investment, 
and therefore technology -related development risks that were at least as high or higher  than the 
risk involved with the technology involved in the development of the A380 ."699  
5.264.   Having made this finding, the Panel turned to assess the two main factors that, in the 
European  Union 's view, m itigated the A350XWB risks as compared to the A380 risks.  According to 
the European  Union , the first risk mitigation factor  was that actions pursued by Airbus , such as 
those taken under the DARE  programme , reduced the A350XWB development risks in compariso n 
to the A380 project .700 The Panel indicated that the DARE development process aimed " to reduce 
                                                
689 European  Union 's appellant's submission, para. 450 ( quoting  Panel  Report, paras.  6.485 and 6.487  
(emphasis original) ). 
690 European  Union 's appellant's submission, para. 453. 
691 European  Union 's appellant's  submission, para. 462 (referring to  Panel  Report, paras.  6.485 
and 6.487).  
692 European  Union 's appellant's submission, para. 462 (referring to Panel  Report, para. 6.527).  
693 European  Union 's appellant's submission, para. 462 (quoting Panel  Report, para. 6.608).  
694 Panel  Report, para. 6.465.  
695 Panel  Report, para. 6.466. 
696 Panel Report, para. 6.468 (referring to A350XWB Chief Engineering Statement  (Panel Exhibit EU -18 
(BCI/HSBI)); A350XWB Chief Engineering Rebuttal (Panel Exhibit EU -128 (BCI/HSBI)); A350XWB Production 
Statement (Panel Exhibit EU -129 (BCI/HSBI)); Schneider Declaration  (Panel Exhibit USA -354 (BCI)) ; 
Bair Declaration  (Panel Exhibit USA -339 (BCI))).  
697 See para.  5.257  above.   
698 Panel  Report , para. 6.485.  
699 Panel  Report, para. 6.485. ( empha sis original; fn omitted)  
700 Panel  Report, para. 6.466.  WT/DS316/AB/RW  
 
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  the time taken to design and build new aircraft from seven and a half years to less than six".701 
This rapid pace of development would be achieved, in part, by outsourcing a large amount of the 
plane's development to suppliers from quite early on in the process .702 The Panel also observed 
that the DARE  programme also involved a high number  of risk -sharing suppliers to whom key 
components were outsourced, who were g eographically widely distributed.703 The Panel considered 
that, while certain financial risks of delay or failure to develop aspects of the A350XWB project 
might have been shifted to suppliers, this would not mitigate the likelihood of failure or delay.704 
In the Panel's view, the existence of a high number of suppliers working on a large share of the 
project created  a development risk for Airbus.705 Therefore, the Panel considered that "the DARE 
process involved a very strong element of outsourcing, fragmentatio n of the supply -chain, and 
significant pressure to develop quickly, with potentially disastrous consequences for time schedules 
if one part of the supply chain were to experience problems."706 The Panel pointed out that these 
aspects would have contributed t o development risks associated with the A350XWB project and 
that this degree of risk did not exist with the A380 given that there were fewer suppliers and more 
of the work was completed by Airbus.707 For the foregoing reasons, t he Panel rejected the 
European  Union 's argument by finding that "the attempts to improve supply -chain integration do 
not appear to have cancelled out the enhanced risks from complexity and technological novelty 
involved with the A350XWB ."708 
5.265.   Regarding the second risk mitigation factor, t he European  Union  asserted that "much of 
the technology -related development risk had already been mitigated by the time that the 
A350XWB LA/MSF contracts were concluded more than [BCI] years into the development process 
of the A350XWB."709 The European  Union  contrasted this with the A380 project: " At the time the  
A380 financing agreements were concluded, Airbus was [BCI] the development process for the 
programme, with many technological challenges yet to be identified and addressed ."710 The Panel 
considered that the question of whether technology risk had been mitigated because the A350XWB 
LA/MSF contracts were signed relatively later, compared to the A380 LA/MSF contracts, had to be 
examined in light of the materials novelty and the fac t that multiple variants were in parallel 
development.711 In this regard, the Panel observed that, "as the A350XWB LA/MSF contracts were 
                                                
701 Panel  Report, para.  6.499 ( quoting UK House of Commons Trade and Industry Committee, "Recent 
Developments with Airbus", Ninth Report of Session  2006-07, Vol. I: Report and formal minutes,  19 June 2007 
(Panel Exhibit USA -562), p. 10).  
702 Panel  Report, para. 6.500 (referring to A350XWB Chief Engineering Statement (Panel Exhibit EU -18 
(BCI/HSBI)), para. 40 (lines 4 -5)). 
703 Panel Report, para. 6.500.  
704 Panel Report, para. 6.501.  
705 Panel Report, para. 6.502 . 
706 Panel Report, para. 6.505.  
707 Panel Report, para. 6.505.  
708 Panel  Report, para. 6.513. In this regard, the Panel stated:  
{I}t is apparent that the DARE process involved a very strong element of outsourcing, 
fragmentation of the supply -chain, and signific ant pressure to develop quickly, with potentially 
disastrous consequences for time schedules if one part of the supply chain were to experience 
problems. These aspects would have contributed to development risks associated with the 
A350XWB programme. This degree of risk did not exist with the A380 where there were fewer 
suppliers and more work was completed by Airbus.  
(Ibid., para.  6.505)  
709 Panel  Report, para.  6.514 (quoting European  Union 's second written submission to the Panel, 
para. 332, in turn referr ing to A350XWB Chief Engineering Statement (Panel  Exhibit EU -18 (BCI /HSBI)), 
paras.  13-17 and 33 -59). 
710 Panel  Report, para. 6.514 (quoting European  Union 's second written submission to the Panel, 
para. 332, in turn referring to A350XWB Chief Engineering Statement (Panel  Exhibit EU -18 (BCI/HSBI)), 
paras.  13-17 and 33 -59; first written submission to the Panel, paras.  1110-1129).  
711 Panel Report, para. 6.522.  WT/DS316/AB/RW  
 
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  being negotiated, significant development challenges remained."712 The Panel found  that, "when 
the {A350XWB} LA/MSF contrac ts were being negotiated, it appears that significant development 
tasks were not only still yet to be resolved, but were also ambitious and time -critical."713 For the 
Panel, this meant that "the picture {was}  more complicated than the European  Union 's submis sion 
that A350XWB development risk was mitigated, as compared to the A380, by the comparatively 
later point after launch at which A350XWB LA/MSF was concluded ."714 On this basis, the Panel 
found  that, "at least with respect to materials novelty, the fact tha t the A350XWB LA/MSF 
contracts were signed after the project's launch does not necessarily imply reduced development 
risk compared to the A380 ."715 
5.266.   In light of these considerations, t he Panel concluded  that "{ t}he fact that the A350XWB 
LA/MSF contracts were concluded at a relatively later point during the development programme 
would have had some risk -mitigating effect when compared against the A380 ".716 However, the 
Panel emphasized that " this must be viewed in the light of the extensive use of new materials u sed 
on the A350XWB  and the initial lower maturity of those materials compared to more traditional 
materials, and the increased outsourcing and faster development programme ."717 Therefore, in the 
Panel's view, "the mitigation factors identified by the Europea n Union  (i) would not have fully 
offset the increased and better understood risks associated with the ramped -up DARE  
development  programme  and high level of outsourcing, and (ii) would not have fully offset the 
technology risks associated with new materials and their lower maturity levels at the start 
of development."718 
5.267.   Based on our review of the Panel's analysis, we do not consider that the Panel can be 
faulted for internally inconsistent reasoning, as the European  Union 's suggests. We recall that the 
Panel conducted a comparative assessment of the development risks asso ciated with the A350XWB 
and A380 projects, which included examining the use of new materials and the extent to which 
such use would have an impact on the development of each aircraft, and R&D costs.719 The Panel 
noted, in particular, that the A350XWB would i nvolve higher R&D costs, and that the new design 
and use of new materials would necessitate the development of specialized equipment, expertise, 
and testing.720 On the basis of this examination , the Panel found that "the A350XWB involved  
significant novelty,  greater cost, greater investment, and therefore technology -related 
development risks that were at least as high or higher  than the risk involved with the technology 
involved in the development of the A380 ."721 The Panel then addressed the European  Union 's 
argument that certain factors mitigated  the A350XWB risks as compared to the A380 risks . 
As noted, the Panel disagreed  that the mitigation factors identified by the European  Union  would 
have fully offset the increased and better understood risks associated with the DARE programme  
and high level of outsourcing, and the technology risks associated with new materials and their 
lower maturity leve ls at the start of development.722  
5.268.   In light of the Panel's analysis of the nature and extent of the risk -mitigating fa ctors 
identified by the European  Union , we see no incoherence in the Panel's initial assessment of the 
                                                
712 Panel Report, para. 6.524. The Panel specified that, "{i}n  June 2009, commentators noted that 
Airbu s was to 'undertake an intense development programme of the A350  XWB over the next 24 months, 
the likes of which it ha{d} not seen for decades. Between {then} and mid -2011, when final assembly 
beg{an}, the A350 engineering teams {had to} complete the detai led design lead variant, the -900, and prove 
the carbonfibre production plan for construction to begin, while firming up the bas eline specification for the 
two derivatives.'" (Ibid. (quoting Max Kingsley -Jones, "Paris Air Show: A350  XWB ready to rock", 
FlightGlobal  News , 5 June 2009 (Panel Exhibit USA -428))) The Panel added that "{t}he same commentators 
noted that a similar development process had not been undertaken with respect to the A380: 'Not since it 
introduced the A330/A340 family of twin and quadjet s in 1993 ha{d} the airframer undertaken such ambitious 
multi-variant parallel development'." (Ibid. (quoting Max Kingsley -Jones, "Paris Air Show: A350  XWB ready to 
rock", FlightGlobal News , 5 June 2009 (Panel Exhibit USA -428)))  
713 Panel  Report, para. 6.525 . 
714 Panel  Report, para. 6.525.  
715 Panel  Report, para. 6.527. (emphasis added)  
716 Panel  Report, para. 6.541.  
717 Panel  Report, para. 6.541.  
718 Panel  Report, para. 6.542.  (emphasis added)  
719 See para. 5.257 above . 
720 Panel  Report, para. 6.485.  
721 Panel  Report, para. 6.485. ( emphasis original; fn omitted)  
722 Panel  Report, para. 6.542.  WT/DS316/AB/RW  
 
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  development risks associated with the two projects, its subsequent analysis of risk mitigation 
factors, and its final conclusion that "the development ri sks associated with the A350XWB were 
at least as high as, or sufficiently similar to , those associated with the A380."723 Thus, we fail to 
see any  internal  inconsistency in the Panel's assessment of development risks , let alone one that 
would call the Panel's objectivity into question . 
5.269.   Finally, in its third line of argumentation, the European  Union  argues that, in the Panel's 
assessment of development risks, there is an inconsistency between its benefit findings and its 
subsequent adverse effects findin gs. The European  Union  explains that, in support of its  finding 
that A350XWB LA/MSF constitutes a subsidy, the Panel emphasi zed in the context of benefit how 
different  the A350XWB technologies were from those applied on the A380.724 However, in its 
assessmen t of adverse effects, the Panel stressed  the extent to which the A350XWB technologies 
were derived from  the A380, such that A380 and earlier LA/MSF  measures  were a substantial 
cause of the market presence of the A350XWB.725 Thus, in the European  Union 's view , in the 
"benefit" section  of its Report , the Panel highlighted  the novelty  of the A350XWB project, whereas, 
in the " adverse effects" section, the Panel emphasi zed the continuity  of the A350XWB project in 
light of previous LCA projects, and especially the A380 project.726 In the European  Union 's view, 
these inconsistent findings reveal a lack of even -handedness on the part of the Panel.727 
Consequently, the European  Union  contends that the Panel's treatment of the evidence was not 
objective and is thus inconsis tent with Article  11 of the DSU.728 
5.270.   We begin by noting that, before the Panel, the European  Union  put forward a very similar 
argument to the one now raised on appeal. Indeed, the European  Union  maintained before the 
Panel that it was difficult to reconcile t he United  States ' arguments concerning the adverse effects 
of LA/MSF – e.g. the indirect effects  of the A380 LA/MSF measures  on Airbus' ability to launch and 
develop the A350XWB – with the United  States ' contention, in the context of the proposed benefit 
benchmark for the A350XWB, that the A350XWB involved a greater technological risk compared 
with the A380 and other Airbus LCA. The European  Union  submitted that "{a} neutral, 
even-handed review {could not} reconcile these two arguments ."729 In response, 
the United  States  asserted that "'the fact that the A350XWB incorporates new applications of 
composites material' does not eliminate the 'valuable lessons learned' or 'critical technologies, 
processes and knowledge that Airbus applied' from its prior programme ."730 
5.271.   In the Panel's view, the United  States  was not arguing that "the challenges involved with 
extensive use of composites mean that there were no significant learning effects from the A380, 
and indeed all earlier Airbus aircraft ."731 The Panel specified that  the United  States  identified both 
general learning effects in aircraft manufacturing, and also carry -over of specific components that 
likely benefitted from Airbus' prior LCA experience.732 On this basis, the Panel did not see any 
logical reason why there could not  be incremental improvements from one aircraft to t he next 
(e.g. building on experience of the use of composites in various ways and in particular areas) , 
and also a technology jump (such as the use of composites for more than half the materials in  the 
                                                
723 Panel  Report, para. 6.542.  (emphasis original ) 
724 According to the European  Union , the A350XWB was thus considered  by the Panel  to be "technically 
very different" from the A380, inv olving particular technological challenges not previously faced by Airbus, and 
worthy of a project risk premium at least as sizable as the project risk premium due for A380 LA/MSF . 
(European  Union 's appellant's submission, para. 465 (quoting Panel Report, para. 6.487) ) 
725 European  Union 's appellant's submission, para. 466. The European  Union  recalls that, in the section 
of its Report dealing with  the "effects of the subsidies", "the Panel concluded that the A350XWB project 
'significantly benefitted from Lear ning Effects ', in particular from the A380 project."  (Ibid. , para. 471 (quoting 
Panel  Report, para. 6.1747 (emphasi s added by the European  Union))) In the European  Union 's view, 
"{a}ssuming these findings are correct, these significant learning effects mus t have a bearing on – and 
decrease – the development risks involved in the A350XWB project and, accordingly, the project risk premium 
a market lender would demand as compensation for bearing those risks."  (Ibid., para.  471) 
726 European  Union 's appellant's submission, para. 468. 
727 European  Union 's appellant's submission, para. 464. 
728 European  Union 's appellant's submission, para. 473. 
729 Panel  Report, para. 6.489 (quoting European  Union 's comments on the United  States ' response to 
Panel questio ns Nos. 91 -107, para. 713).   
730 Panel  Report, para. 6.490 (quoting United  States ' second written submission to the Panel , para. 565; 
in turn referring to European Union's first written submission to the Panel, para. 1160 ). 
731 Panel  Report, para. 6.491.  
732 Panel Report, para. 6.491.  WT/DS316/AB/RW  
 
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  fuselage and wings ), with the enhanced risks s uch novelty presents. For instance, the Panel noted 
that Airbus stated that "it 'evolved' its 'step by step gain of composite experience' in previous 
aircraft and declare{d} … that the degree to which comp osites were used on the A350XWB aircraft 
involved very significant novelty ."733 Therefore, the Panel did not consider that the 
United  States ' arguments were necessarily contradictory.734 The Panel thus accepted that there 
were incremental  improvements from one  aircraft to the next but found at the same time that the 
launch of the A350XWB involved novelty . In light of these considerations, we see no lack of 
even-handedness in this approach, or basis to fault the Panel under Article  11 of the DSU . 
5.272.   Furthermore, w e observe  that the Panel's analysis in the "benefit" and "adverse effects" 
sections of its Report actually appears to reflect a combination of both continuity  with previous 
Airbus models (reflecting incremental improvements) and novelty (representing "technological 
jump"). In other words, contrary to the European  Union 's assertion, we do not consider that, on 
the one hand, the benefit analysis refers only to novelty and, on the other hand, the adverse 
effects analysis mentions only contin uity. For instance, in the context of its benefit analysis, the 
Panel found that, while the A350XWB and A380 were technically very different to what had come 
before, both types of aircraft built on "certain expertise in aircraft construction and incorporat ing 
individual components that had been developed in relation to previous aircraft".735 Similarly, in its 
adverse effects analysis, the Panel noted that , "{c}ompared to the Original A350, the A350XWB 
was expected to have a wider and composite fuselage, large r composite wings, higher cruise 
speed, and more powerful engines"736, and that "{p}ress reports characterized the A350XWB as a 
'major' and 'dramatic' redesign of the Original A350 that would prin cipally compete with the 
Boeing  777 and the 787".737 Therefore, in our view, the Panel's reasoning in the "adverse effects" 
section of its Report accounts for, and is in consonance with, its reasoning in the "benefit" section 
of its Report.  
5.273.   Consequently, we are not persuaded by the European  Union 's third line of argume ntation 
with regard to its claim that the Panel acted inconsistently with Article  11 of the DSU.  
5.274.   For the foregoing reasons, the European  Union  has not established  that the Panel acted 
inconsistent ly with Article  11 of the  DSU in its assessment of developme nt risk . 
5.3.2.3.1.2   Market risk and comparison of development risk and market risk  
5.275.   The European  Union  brings claims of inconsistency with Article  11 of the DSU in relation to 
the Panel's analysis of market risk and the Panel's comparison of development risk and marke t 
risk. These claims are based on the same premise, namely, that the Panel should have focused its 
assessment on the price that would be charged by a commercial lender for assuming the specific 
risks at issue. Given the interrelated nature of these claims,  we address them together below.  
5.276.   With regard to market risk738, the European  Union  argues that the Panel's findings suffer 
from flaws similar to those identified with respect to  the Panel's analysis of  development risk. 
The European  Union  maintains that the  Panel again failed to state the differences regarding market 
risks associated with  the A380 and the A350XWB projects in terms that are both relevant under 
Article  1.1(b) of the SCM Agreement  and susceptible to comparison (i.e. in terms of the impact 
that the particular market risks posed by each project would have on the project risk premium that 
                                                
733 Panel  Report, para. 6.492. (fns omitted)  
734 Panel  Report, para. 6.492.  
735 Panel  Report, para. 6.487.  
736 Panel  Report, para. 6.1546 (referring to Guy Norris, "Airline criticism of Airbus A350 forces airframer 
to make radical changes t o fuselage, wing and engines", Flight International , 8 May 2006 (Panel Exhibit 
USA-26)). 
737 Panel Report, para. 6.1546 (quoting and referring to, respectively, Goldman Sachs Investment 
Analysis, A350: Not an option but essential for Airbus' future , in our view, 21 November  2006 (Pa nel 
Exhibit  USA-30), pp.  20-22; Guy Norris, "Airline criticism of Airbus A350 forces airframer to make radical 
changes to fuselage, wing and engines", Flight International , 8 May 2006 (Panel Exhibit USA -26); Scott 
Hamilton, "A350 Redesign Threatens Boeing 777; Boeing prepares 787 for Challenge", Leeham.net , 
6 June 2006 (Panel Exhibit  USA-27)). 
738 The European  Union  observes that "market risk" refers to the "risk that the new  aircraft will not sell 
as well as anticipated ". (European  Union 's appellant's submission, para. 476 (referring to Panel  Report, 
para. 6.543))  WT/DS316/AB/RW  
 
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  would be charged by a commercial lender for assuming that risk).739 In the European  Union 's view, 
given that the Panel identified no evidence showing that a commercial lender would price similarly 
the particular market risks fa ced by each of the two projects, the Panel identified no basis on the 
record for its finding that, while the market risks experienced by the projects were different in 
nature , they were overall "comparable in importance".740  
5.277.   Similarly, with respect to the Panel's overall comparison of development and market risk s, 
the European  Union  takes issue with  the following Panel finding regarding each component of 
programme risk: 
With respect to development risks  (the risk that Airbus will not be able to deliver the 
planned aircraft as and when anticipated), we consider that the risks associated with 
the A350XWB were approximately similar to, if not slightly higher than , the A380. 
With respect to market risk  (the risk that the aircraft will not sell as well as 
anticipated), we consider that the A350XWB  marketing risks would not have been 
much lower than A380 marketing  risks.741 
5.278.   In the European  Union 's view, this finding served a s the basis for the Panel's conclusion 
that the project  risks were sufficiently similar to apply the WRP used in the A380 LA/MSF contracts 
to the A350XWB LA/MSF contracts . As in the case of market risks, the European  Union  emphasizes 
that, to reach this fi nding, the Panel should have assessed whether the development risks and 
market risks, while different for the A350XWB and A380  projects , would nonetheless lead a market 
lender to demand the same project risk premium for bearing those different risks.742 
5.279.   We b egin by highlighting that the Panel had the obligation to engage in a rigorous and 
critical analysis of all relevant evidence and arguments to determine whether the four A350XWB 
LA/MSF contracts confer a benefit. In particular, the Panel was required to av oid imprecision in its 
selection of the project -specific risk premium  and to ensure that it did not make a false finding of 
benefit when there was none. Moreover,  in the present case, the market benchmark chosen for 
purposes of the benefit comparison was required to be "comparable " to the A350XWB LA/MSF 
financing at issue.743 
5.280.   As noted above, the European  Union 's challenge s to the Panel's analysis  on market risks , 
and the comparison of development and market risks, share the same premise as its earlier claim 
against  the Panel's  findings concerning development risk.744 The common thread in all these claims 
is the European  Union 's contention that the Panel should have  analysed the risk at issue 
(development or market) associated with the A350XWB and A380 projects  from the perspective of 
the price that a commercial lender would have charged to assume each of these risks . In light of 
the similar nature of these claims of inconsistency with Article  11, we consider that our earlier 
reasoning is  also applicable in this context.  
5.281.   As indicated above, the main issue before the Panel was whether a commercial lender 
would have imposed similar terms for assuming the risk  associated with each project  
(i.e. the A350XWB and the A380). To the extent that it would have been possibl e to quantify in the 
present case what a commercial lender would have charged as a risk premium to assume each of 
the individual categories of risk e xamined by the Panel, this type of analysis would have provided a 
more robust basis  for the Panel's conclusions . However, the Panel was not required to determine 
what a commercial lender would have charged with respect to each of the individual categories of 
risk that it examined as long as the risk profiles of the A350XWB and A380 projects were overall 
sufficiently similar .  
                                                
739 European  Union 's appellant's submission, para. 478. 
740 European  Union 's appellant's submission, para. 479 (quoting Panel  Report, para. 6.579).  
741 European  Union 's appellant 's submission, para. 484 (quoting Panel  Report, para. 6.610 ( emphases  
added by the European  Union )). 
742 European  Union 's appellant's submission, para. 485. 
743 European  Union 's appellant's submission, para. 372 (quoting Appellate  Body Report, 
US ‒ Anti-Dumping and Countervailing Duties (China) , para. 476).  
744 The European  Union  argues that the Panel's findings regarding the second type of programme  risk 
(i.e. market risk) "suffer from flaws similar to those identified … with respect to development risk". 
(European  Union 's appellant's submission, para.  475) WT/DS316/AB/RW  
 
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  5.282.   As in the conte xt of development risks, we highlight that, before the Panel, the 
European  Union  does not appear to have argued that the Panel was required to undertake an 
assessment of market  risks in terms of "the price that a comme rcial lender would have charged" to 
assume this specific  type of risk.745 Nor does the European  Union  appear to have argue d that the 
Panel was required to undertake the  comparison  of the  specific risks at issue in terms of "the price 
that a commercial lender  would have charged ".746 Rather, the European  Union 's argumentation 
more broadly addressed the differences in the various risks at issue, including  development and  
market risks, to demonstrate  that the United  States  had failed to show that the risks of the 
A350XWB project  were "likely" to be higher than those of the A380 project.  
5.283.   In any event, we note that, in assessing programme risk, the Panel provided a detailed 
examination of the parties' arguments and evidence regarding development  risk and market risk. 
As noted above747, the Panel conducted a comparative assessment of the development risks  
associated with the A350XWB and A380 projects, which included examining the use of new 
materials and the extent to which such use would have an impact on the development  of each 
aircraft, and R&D costs. The Panel noted, in particular, that the A350XWB would involve higher 
R&D costs, and that the new design and use of new materials would necessitate the development 
of specialized equipment, expertise, and testing.748 On the basis of this examination , the Panel 
found that "the A350XWB involved  significant novelty, greate r cost, greater investment, 
and therefore technology -related development risks that were at least as high or higher  than the 
risk involved with the technology involved in the development of the A380 ."749  
5.284.   With regard to market risk, the Panel also conducted a comparative assessment of the 
market risk associated with the A350XWB and A380 projects. The Panel began its analysis with the 
risk related to market forecas ts. In this context, the European  Union  argued before the Panel that 
the aerospace industry has considerably more experience in forecasting demand for the middle to 
large wide -body aircraft market segment than for the VLA market.750 In light of this argument , the 
Panel decided to compare the market predictions for the A380 and the A350XWB at the time of the 
respective LA/MSF contracts. After examining considerable evidence, the Panel noted that, at the 
time of the A350XWB LA/MSF contracts, there were signific ant predictions that client airlines, and 
therefore the market, would be affected by a negative financial and economic environment.751 
The Panel additionally found that downward trends in demand were also evident when 
the A380 LA/MSF contracts were being con cluded.752 In comparing the two projects, the Panel 
observed that "the economic environment appears to have been taken into account in predictions 
of market demand at the time the A380 LA/MSF contracts were concluded."753 By contrast, the 
Panel found that, whi le the A350XWB market demand predictions were likely to be subject to a 
negative economic environment that would affect Airbus' clients, that negative economic 
environment was not taken into account in the market demand predictions on which the A350XWB 
LA/MSF contracts appear to have been based.754 The Panel specified that demand predictions used 
in the A350XWB Business Case appear to be those prepared for the industrial launch of the 
A350XWB in  2006 – i.e. predictions that predate the  2007-2009 financial and  economic crisis.755 
The Panel considered that a market lender would have taken this into account in establishing a 
market lending rate.  
5.285.   The Panel then turned to examine the risk related to conditions of competition within the 
relevant market segment. In thi s context, the European  Union  argued that conditions of 
                                                
745 European Union's appellant's submission, para. 448. (emphasis omitted)  
746 European  Union's appellant's submission, para.  448. (emphasis original)  
747 See paras.  5.257 -5.259  above.  
748 Panel  Report, para. 6.485.  
749 Panel  Report, para. 6.485. (emphasis original; fn omitted)  
750 Panel  Report, para. 6.545 (quoting European  Union's second written submission to the Panel, 
paras.  323-326). 
751 Panel  Report, para. 6.565. 
752 Panel  Report, para. 6.567. 
753 Panel  Report, para. 6.568. 
754 Panel  Report, para. 6.570. 
755 Panel  Report, para. 6.569 (referring to "Presentation to the EADS Board", [BCI] (slides  1-45) and 
"A350XWB Business Case: Assumptions, Sensitivities and Limitations, Presentation to EADS BoD – status", 
2 November  2006 (slides 46 -68) (A350XWB Business Case presentation)  (Panel Exhibit EU -130 (HSBI)) , slides 
50-51). WT/DS316/AB/RW  
 
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  competition between Airbus and Boeing were more favourable to Airbus for the A350XWB project 
than for the A380 project.756 The Panel was not persuaded by the European  Union 's argument. 
On the one hand, the Panel observed that "{t}he A380 was far larger than any existing aircraft, 
and its clearest competitor was the Boeing 747, a model near the end of its programme life which 
would likely need to be redesigned in order to improve its competitiveness."757 On the other hand, 
the Panel pointed out that the A350XWB family was launched to compete directly in a market 
segment that already comprised several modern, successful competitor models: the already 
successful Boeing 777 and the new 787, as well as Airbus' o wn existing twin -aisle aircraft, the 
A330 and A340.758 Therefore, the Panel was of the view that "the existence of several modern, 
already successful competitor aircraft in the A350XWB's market segment would mean that, even if 
market demand forecasts were ac curate, Airbus would have more difficulty achieving its hoped -for 
market share in the case of the A350XWB than … in the case of the A380."759 Moreover, the Panel 
added that "any A350XWB development  risks would have had serious consequences in relation to 
market demand in view of the competition in the segment."760 Therefore, for the Panel, "at the 
time of the conclusion of the respective LA/MSF contracts, this competition was a factor that would 
have increased the market risks for the A350XWB relative to the A3 80's market risks."761 
5.286.   On this basis, the Panel reached the following conclusion:  
{T}he A380 and A350XWB experienced market risks that were of a different nature. 
At the relevant points in time, the A380's market success or failure rested in large 
part on th e correct identification of the existence and size of the market segment, 
whereas the A350XWB's success or failure would depend upon how it would be 
received by customers in a market segment that was already relatively well known 
and served by existing air craft, including the 787. Moreover, the A350XWB would 
need to be competitive not only in terms of innovation but, crucially, in terms of 
timing. Competition within the sector would mean that the consequences of any 
delays could be very detrimental to marke t success. For these reasons, we consider 
that while the "market" or "marketing" risks experienced by the A380 and A350XWB 
were different in nature, they were overall comparable in importance.762 
5.287.   In light of the above, we consider that the Panel had a suffic ient basis for its finding that 
the A350XWB project involved market risks  that, while different in nature  from those of the A380 
project , were "overall comparable in importance".763 Thus, the European  Union  has not established 
that the Panel acted inconsiste ntly with Article  11 of the DSU because there is  allegedly  
"no evidence to support its finding that a commercial lender would price similarly the differences in 
development risks and market risks posed by each project".764 Consequently, we disagree with the 
European  Union  that the Panel acted inconsistently with Article  11 of the DSU  in its assessment of 
market risk or in its comparison of development and market risks . 
5.3.2.3.1.3   Overall conclusion on programme risk  
5.288.   The European  Union  has raised several lines of argumen tation under Article  11 of the DSU 
challenging the Panel's analysis of programme risk.  In particular, the European  Union  has criticized 
the analysis of development risk , the analysis of market risk , and the comparison of the 
development and market risks posed by the A350XWB and A380 projects .  
                                                
756 Panel  Report, para. 6.571. (fn omitted)  
757 Panel  Report, para. 6.572 (referring to Amro Aerospace & Defence Sector Research, "EADS: Results 
Analysed – A3XX Project Review – Recommendation Upgrade", 13  December  2000 (Panel Exhibit USA -490), 
pp. 9-10). 
758 Panel  Report, para. 6.573 (referring to Scott Hamilton, "A350 Redesign Threatens Boeing 777; 
Boeing prepares 787 for Challenge", Leeham.net , 6 June 2006 (Original Panel Exhibit US -141; Panel Exhibit 
USA-27); Guy Norris, "Airline criticism of Airbus A350 forces airframer to make radical changes to fuselage, 
wing and engines", Flight International , 8 May 2006 (Panel Exhibit USA -26); Dominic Gates, "Airplane Kingpins 
tell Airbus: Overhaul A350", The Seattle Times , 29 March  2006 (Panel Exhibit USA -24)). 
759 Panel  Report, para. 6.576.  
760 Panel  Report, para. 6.578. (emphasis added)  
761 Panel  Report, para. 6.578. 
762 Panel  Report, para. 6.579.  
763 Panel  Report, para. 6.579 . 
764 European  Union 's appellant's submission, para. 488. WT/DS316/AB/RW  
 
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  5.289.   The overarching criticism raised by the European  Union  relates to the Panel's  alleged  
failure to conduct the examination of development risk, market risk, and the comparison of 
development and market risks in terms of the price that would have been demanded by a 
commercial lender as a risk premium to assume  each of the se types of  risks. While we agree that 
the main issue before the Panel was whether a commercial  lender would have imposed similar 
terms for assuming the risk  associated with each project  (i.e. the A350XWB and the A380) , we do 
not consider that the Panel was required to  reach a "simil arity finding" on the basis of what 
"a commercial lender  would have  charged"  with respect to each of the individual categories of risk  
that the parties had presented  as long as the risk profiles of the A350XWB and A380 projects were 
overall sufficiently similar . Therefore , we do not consider that the Panel was required to  conduct 
the kind of analysis suggested by the European  Union . 
5.290.   The European  Union  has raised two additional lines of argumentation in relation to the 
Panel's analysis of development risk. First, the European  Union  maintains that , in finding that the 
develo pment risks posed by the A380 and A350XWB projects were sufficiently similar, the Panel 
acted inconsistently with Article  11 of the DSU because this finding  was based on internally 
inconsistent reasoning.  Given that the Panel disagreed with the natu re and extent of the 
risk-mitigating factors identified by the European  Union , we see no incoherency  in the Panel's 
initial assessment of the development risks associated with the two projects, its subsequent 
analysis of risk mitigation factors and its final conc lusion that "the development risks associated 
with the A350XWB were at least as high as, or sufficiently similar to , those associated with the 
A380."765 In addition, the European  Union  has argued that the Panel's  benefit findings and its 
subsequent adverse e ffects findings  reveal a lack of even -handedness on the part of the Panel  
contrary to Article  11 of the DSU. In particular, t he European  Union  asserts  that, in the "benefit" 
section  of its Report , the Panel highlighted  the novelty  of the A350XWB project, w hereas, in the 
"adverse effects" section  of its Report , the Panel emphasi zed the continuity  of the A350XWB 
project in light of previous LCA projects, and especially the A380 project.766 We are not persuaded 
that the Panel 's finding  that there were incrementa l improvements from one aircraft to the next , 
while also finding that the launch of the A350XWB involved novelty , reflected a lack  of 
even-handedness  contrary to Article  11 of the DSU . 
5.291.   For the foregoing reasons, we find that the European  Union  has failed to establish that the 
Panel acted inconsistently with its obligations under Article  11 of the DSU in its analysis of 
programme risk , in particular, in its analysis of development risk, market risk, and in its 
comparison of the development and market risks.  
5.3.2.3.2   Contract risk  
5.292.   The European  Union  argues that, in rejecting its argument that there are differences  
arising from the terms of certain  of the A350XWB LA/MSF contracts compared to the A380 LA/MSF 
contracts, the Panel committed two distinct error s under Article  11 of the DSU. First, the 
European  Union  contends that  the Panel failed to compare properly the risk -reducing terms of the 
A350XWB LA/MSF contracts to the risk -reducing terms of the A380 LA/MSF contracts . 
Second,  according to the European  Union, the Panel failed to compare the terms of the A350XWB 
LA/MSF contracts to the terms of the A380 risk -sharing supplier contracts , which were used in the 
original proceedings to derive the risk premium for the A380  LA/MSF contract s (i.e. the WRP) .767 
We address each of these claims below.  
5.3.2.3.2.1   Whether t he Panel failed to compare properly the terms of the A350XWB 
LA/MSF contracts to the terms of the A380 LA/MSF contracts  
5.293.   The European  Union  contends that the Panel's comparison of the four A350XWB LA/MSF 
contracts  with the  A380 LA/MSF contracts does not comply with the requirements of Article  11 of 
the DSU because such comparison lacks a sufficient evidentiary basis.  In particular, 
the European  Union  requests us "to reverse the Panel's findings, at paragraphs 6.595  and 6.609  
of its Report , that 'the A350XWB LA/MSF contracts containing such 'risk-reducing ' terms are 
                                                
765 Panel  Report, para. 6.542.  (emphasis original ) 
766 European  Union 's appellant's submission, para. 468. 
767 European  Union 's appellant's submission, para. 492. WT/DS316/AB/RW  
 
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  no less risky  than at least [BCI] for A380 LA/MSF that also contained similar terms in the original 
proceeding', such that there was ' no reason  why the same risk premium {could not}  also apply to 
the A350XWB LA/MSF measures' ".768 The European  Union  provides three  main arguments in 
support of its claim.  
5.294.   First, according to the European  Union , "the evidence shows that no A380 contract 
contained risk -reducing terms as extensive as those included in the [BCI] A350XWB contract."769 
The European  Union  elaborates:  
Under the [BCI] A350XWB LA/MSF contract, [BCI]. No such mechanism was present 
in any of the A380 LA/MSF contracts. The [BCI] A380 contract include d a mechanism 
that [BCI].770 
5.295.   The European  Union  contends that the evidence shows that, as a result of more extensive 
risk-reducing terms, [BCI] of the A350XWB LA/MSF contracts "[BCI] than any of the 
A380 LA/MSF contracts ", including the [BCI] A380 LA/MSF contract.771 Therefore, in the 
European  Union 's view, the Panel lacked a sufficient evidentiary ba sis to find that "similar" 
risk-reducing terms were present in certain A350XWB LA/MSF contracts, compared to the [BCI] 
A380 LA/MSF contract.772 
5.296.   In or der to assess the European  Union 's claim, we  describe below key aspects of the 
Panel's analysis . Before the Panel, the European  Union  argued that "differences in the terms of the 
LA/MSF agreements for the A380 and the A350XWB reduce the risk for the A350XW B and, hence, 
the benchmark ."773 The European  Union  focused its argumentation on a comparison between the 
[BCI] and the [BCI] by arguing that, "{f}or  example, the [BCI], whereas the [BCI]".774 
In response, the United  States  asserted that " [BCI]."775 The United  States  added that "there is  no 
basis for the European  Union  to conclude that the existence of [BCI] 'may justify a significantly 
lower risk premium for the A350XWB financing agreements , as a whole, than for the 
A380 financing agr eements, as a whole' ".776 Consequently, in the United  States ' view, "in respect 
of '[BCI]', the A380 LA/MSF contracts and the A350XWB LA/MSF contracts are, as a whole, 
[BCI]."777 
5.297.   In light of these arguments, the Panel acknowledged that, "under the [BCI] LA/MSF 
contracts for the A 350XWB, [BCI] in the event that deliveries are not made (unless [BCI])".778 
At the same time, the Panel pointed out that, in the original proceedings, " [BCI], which would 
likewise constitute 'risk -reducing' terms, existed with respect to [BCI] LA/MSF at issu e in that 
proceeding".779 We highlight that, on this basis, the Panel held that "{a}t  least [BCI] of the A380 
contracts considered in the original proceeding – [BCI] – contained a mechanism that similarly 
'protected' returns ."780  
                                                
768 European  Union 's appellant's submission, para. 505 (quoting Panel Report, paras.  6.595 and 6.609 
(emphasis added by the European  Union )). 
769 European  Union 's appellant's submission, para. 496 (referring to Pa nel Report, para.  6.594 and 
fn 1065 thereto, paras.  6.602 and 6.606). (emphasis original)  
770 European  Union 's appellant's submission, para. 497 (referring to Panel Report, paras.  6.602 
and 6.606). ( emphases original; additional text in fn 453 thereto omitted ) 
771 European  Union 's appellant's submission, para. 496. (emphasis original)  
772 European  Union's appellant's submission, para. 498. 
773 Panel Report, para. 6.590 (referring to European  Union 's second written submission to the Panel, 
paras.  339-340; response to Panel question No. 100, paras. 404 -405). 
774 Panel Report, para. 6.591 (quoting European  Union's second written submission to the Panel, 
para. 340; referring to European  Union's response to Panel question No.  100, para.  405). 
775 Panel Report, para. 6.592 (referring to United  States ' comments on the European  Union 's response 
to Panel question No.  100, paras.  276-280).  
776 Panel Report, para. 6.592 (quoting European  Union 's response to Panel question No. 100, 
para. 405).  
777 Panel Report, para. 6.592 (quoting United  States ' comments on the European  Union 's response to 
Panel question No. 100, para. 280).  
778 Panel Report, para. 6.594.  (fn omitted)  
779 Panel Report, para. 6.595.  
780 Panel Report, para. 6.595. (emphasis added)  WT/DS316/AB/RW  
 
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  5.298.   At this point, we point out  that the Panel used broad language when comparing the 
[BCI] A350XWB and [BCI] A380 LA/MSF contracts. Contrary to the European  Union 's 
characterization of the Panel's findings, the Panel did not find that the [BCI] "contained risk -
reducing terms as extensi ve as  those included in the [BCI] A350XWB contract".781 Rather, the 
Panel made the broader finding that "the [BCI] A380 contract – contained a mechanism that 
similarly 'protected' returns ."782 Having made this comparative assessment, the Panel noted that 
"Professor Whitelaw's risk premium was nevertheless applied in that proceeding and, moreover, on 
the understanding that it was a minimum risk premium and would be understated for that 
contract."783 On this basis, the Panel did not "consider that such features in this proceeding should 
in and of {themselves} render the WRP inapplicable".784 
5.299.   Having examined key aspects of the Panel's analysis, we highlight  that the European  Union  
fails to point to any specific error regarding the objectivity of the Panel's assessment,  a 
requirement that an appellant must fulfil to make out a claim successfully under Article  11 of the 
DSU.785 The European  Union  simply states that "the Panel lacked a sufficient evidentiary basis to 
find that 'similar' risk -reducing terms were present in ce rtain A350XWB {LA/MSF} contracts, 
compared to the [BCI] A380 {LA/MSF} contract ."786 However, a determination as to whether the 
Panel had enough evidence on the record to support its finding s depends on how one understands 
the finding that risk-reducing terms present in certain A350XWB LA/MSF contracts and the [BCI] 
A380 LA/MSF contract similarly "protected" returns.787 On appeal, the European  Union  attributes a 
very specific meaning to the notion of  "similar  risk reducing terms ", namely, one in which  both 
contracts establish that  "[BCI]."788 In contrast, in comparing the contracts at issue, the Panel did 
not focus on  contract terms as specific as the ones referred to by the European  Union . Rather, 
given the existence of a clause concerning  "[BCI]", which in the Panel's view would likewise 
constitute "risk -reducing" terms , the Panel concluded that "the  [BCI] A380 {LA/MSF} contract – 
contained a mechanism that similarly 'protected' returns ."789 As will be elaborated below, 
the Panel's approach to comparing the risk -reducing terms in the relevant LA/MSF  contracts may 
well be a reflection of the arguments advanced by the parties during the Panel proceedings.  
5.300.   On appeal, the European  Union  attaches significant weight to the fact tha t: 
{u}nder the [BCI] A350XWB LA/MSF contract, [BCI]. No such mechanism  was 
present in any of the A380 LA/MSF contracts. The [BCI] A380 contract included a 
mechanism that [BCI].790 
5.301.   While, in principle, this may seem like a valid distinction, we highlight that  these subtle 
nuances regarding the terms of the contracts on which the European  Union  is currently basing its 
claim of inconsistency under Article  11 do not seem to have been sufficiently developed before the 
Panel. For instance, whereas  the European  Union did argue that the [BCI] A350XWB LA/MSF 
contract's clause on [BCI] should be taken into account when assessing the differences between  
the A350XWB LA/MSF contracts and the A380 LA/MSF contracts791, the European  Union  did not 
compare the [BCI] A350XWB LA/MSF contract with the [BCI] A380 LA/MSF contract , which 
contrasts with its position on appeal . Rather, before the Panel, the European  Union  made a 
comparison between [BCI].792 Moreover , it appears that, before the Panel, the European  Union  did 
                                                
781 European  Union 's appellant's submission, para. 496. (emphasis added ; fn omitted ) 
782 Panel Report, para. 6.595. (emphasis added)  
783 Panel Report, para. 6.595 (referring to Original Panel Rep ort, para.  7.481; Appellate  Body Report, 
EC and certain member States – Large Civil Aircraft , para. 923).  
784 Panel Report, para. 6.595.  
785 Appellate  Body Report, EC – Fasteners (China) , para. 442. 
786 European  Union 's appellant's submission, para. 498. 
787 Panel Report, para.  6.595.  
788 European  Union 's appellant's submission, para. 497. (emphasis original)  
789 Panel Report, para. 6.595. (emphasis added)  
790 European  Union 's appellant's submission, para. 497 (referring to Panel Report, paras.  6.602 
and 6.606). ( emphases original; additional text in fn 453 thereto omitted ) 
791 European  Union 's second written submission to the Panel, paras.  339-342; response to Panel 
question No. 100, paras.  401-407. 
792 Europea n Union 's second written submission to the Panel, para. 340; response to Panel question 
No. 100, para. 405. WT/DS316/AB/RW  
 
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  not make the distinction between [BCI] and [BCI], as it now do es on appeal.793 The 
European  Union 's arguments were more general in nature. For instance, the European  Union  
maintained that a "rigorous assessment of the provisions of the financing agreements ove rall" may 
"justify a significantly lower risk premium for the A350XWB financing agreements, as a whole, 
than for the A380 financing agreements, as  a whole ".794 
5.302.   A claim that a panel has failed to conduct an objective assessment of the matter before it 
is "a v ery serious allegation"795, and the Appellate  Body will not "interfere lightly" with a panel's 
fact-finding authority.796 We do not consider that the European  Union  has successfully established 
that the Panel's assessment lacks objectivity. To establish that t he Panel acted inconsistently with  
Article  11, the European  Union  must demonstrate that the Panel exceeded the bounds of its 
discretion as the trier of facts, including in its treatment of the evidence.797 We consider that  the 
European  Union  has not done so in the present case , particularly given that the Panel examined in 
detail the limited argumentation and evidence put forward by the parties, as discussed above . 
5.303.   For the foregoing reasons, we do not consider that the European  Union  has made out its 
Article  11 claim by arguing that "the Panel lacked a sufficient evidentiary basis to find that 'similar' 
risk-reducing terms were present in certain A350XWB {LA/MSF} contracts, compared to the [BCI] 
A380 {LA/MSF} contract ."798 
5.304.   In its second line of argumentation, th e European  Union  contends that the Panel's 
reasoning ignores the undisputed fact that a higher number of A350XWB LA/MSF contracts contain 
certain risk -reducing terms than do the A380 LA/MSF contracts. According to the European  Union , 
it is undisputed that [BCI] A350XWB LA/MSF contracts contain certain risk -reducing  terms (the 
[BCI] contracts).799 Together, these  contracts account for approximately [BCI]% of all LA/MSF 
for the A350XWB project.800 In contrast, under the A380 project, it is undisputed that only [BCI] 
of the LA/MSF [BCI] contained certain risk -reducing terms (the [BCI]), which accounted for 
approximately [BCI]% of all LA/MSF for the A380.801 In the European  Union 's view, the fact that 
significantly more LA/MSF for the A350XWB project is provided thro ugh contracts containing risk -
reducing terms implies  that, relative to the A380 project, it has become more important to take 
into account risk -reducing terms when establishing the risk premium for the A350XWB.802 The 
European  Union  contends that the Panel a cted inconsistently with Article  11 because it failed to 
take this objec tive factor into  account.  
5.305.   Having reviewed the Panel record, we observe that the European  Union  does not appear to 
have argued before the Panel that the fact that significantly more A35 0XWB LA/MSF is provided 
through contracts containing risk -reducing terms implies that, relative to the A380 project, it is 
more important to take into account risk -reducing terms when establishing the risk premium for 
the A350XWB, as the European  Union  now contends on appeal. It may possibly be correct that, 
relative to the A380, more LA/MSF for the A350XWB project is provided through contracts 
containing risk -reducing terms . However, w e do not consider  that the European  Union  has 
established its claim of i nconsistency with Article  11, given that the Panel properly assessed the 
arguments and evidence that the parties had presented . In any event, even assuming that more 
A350XWB LA/MSF may have been provided through contracts containing risk -reducing terms tha n 
was the case in the context of the A380 project, we understand the Panel to have taken this into 
account in its overall consideration of whether the overall  project -specific risks between the 
                                                
793 European  Union 's appellant's submission, para. 497. 
794 European  Union 's response to Panel question No. 100, para. 405. 
795 Appellate  Body Reports, China – Rare Earths , para. 5.227 (quoting Appellate  Body Report, 
EC ‒ Poultry , para. 133).  
796 Appellate  Body Reports, EC – Sardines , para. 299 (quoting Appellate  Body Report, US ‒ Wheat 
Gluten , para. 151); US – Carbon Steel , para. 142. 
797 Appellate  Body Report, US – Wheat Gluten , para. 151. 
798 European  Union 's appellant's submission, para. 498. 
799 European  Union 's appellant's submission, para. 500 (referring to Panel  Report, para. 6.598).  
800 The European  Union  adds that [BCI] A350XWB LA/MSF contract did not  contain risk -reducing terms. 
(European  Union 's appellant's submission, para. 500) 
801 European  Union 's appellant's submission, para. 501. The European  Union  notes that the  [BCI] other 
LA/MSF [BCI] (the [BCI]), which accounted for approximately [BCI]% of all  LA/MSF, did not contain risk -
reducing terms. (Ibid.)  
802 European  Union 's appellant's submission, para. 502. WT/DS316/AB/RW  
 
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  two projects were sufficiently similar, "such that  it would be reasonable to conclude that the WRP 
could be used as the project -specific risk premium  for the  A350XWB ."803 
5.306.   In its third line of argumentation, the European  Union  argues that, in its comparison of the 
risk-reducing terms in the LA/MSF contracts for the A350XWB and A380 projects, the Panel 
ignored the relative  importance of these risk -reducing terms in light of the particular risks to which 
each project was considered to be exposed . According to the European  Union , the Panel failed to 
consider tha t, in comparison with the A380 LA/MSF contracts, the lenders' (slightly) higher 
exposure to "development risk" under the A350XWB LA/MSF contracts is reduced precisely as a 
result of the risk -reducing terms in those A350XWB LA/MSF contracts. Thus, for the 
European  Union , the risk -reducing terms in the A350XWB LA/MSF contracts are more 
consequential than the risk-reducing terms in the A380 LA/MSF contracts.804 
5.307.   Again, we note that the European  Union  did not argue before the Panel that the 
risk-reducing terms in the A350XWB LA/MSF contracts are more consequential than those in the 
A380 LA/MSF contracts because the lenders' (slightly) higher exposure to "development risk" 
under the A350XWB LA/MSF contracts is reduced precisely as a result of the risk -reducing terms . 
We do not consider  that the European  Union  has established its claim of inconsistency with  
Article  11 given that the Panel properly assessed the arguments and evidence that were put before 
it by the parties .805  
5.308.   For the foregoing reasons,  we find that the European  Union  has failed to establish that the 
Panel's comparison of  the A350XWB LA/MSF contracts with the A380 LA/MSF contracts  lacks a 
sufficient evidentiary basis  in a manner inconsistent with the requirements of  Article  11 
of the DSU. 
5.3.2.3.2.2   Whether the Pane l failed to compare the terms of the A350XWB LA/MSF 
contracts to the terms of the A380 risk -sharing supplier contracts  
5.309.   The European  Union  submits that the Panel also acted inconsistently with  Article  11 of the 
DSU by failing to compare the terms of the A35 0XWB LA/MSF contracts to the terms of the A380 
risk-sharing supplier contracts, which were used in the original proceedings to derive the project 
risk premium for the A380 LA/MSF contracts  (i.e. the WRP) . According to the European  Union , the 
problem with t he Panel's approach is that, without a proper examination of the terms of the A380 
risk-sharing supplier contracts, the Panel could not have know n whether  they were " dissimilar " to 
the terms of the A350XWB LA/MSF contracts.806 The European  Union  highlights t hat, since 
the A380 risk -sharing supplier contracts do not form part of the record, the Panel evidently failed 
to compare the terms of the A350XWB LA/MSF contracts to those of the A380 risk -sharing supplier 
contracts.807  
5.310.   The United  States  disagrees with the  European  Union 's claim that the Panel acted 
inconsistently with Article  11 of the DSU.808 According to the United  States , the Panel assessed 
whether the relevant risks for the A350 XWB project were comparable to those for the A380  
project . In doing so, it was unnecessary for the Panel to re -examine the  basis for the  A380 risk 
premium from the original panel proceedings.809 
                                                
803 Panel  Report, para. 6.459.  
804 European  Union 's appellant's submission, paras.  503-504. 
805 Appellate  Body Report, US – Wheat Gluten , para. 151. 
806 European  Union 's appellant's submission, para. 514. In the European  Union's view, t he Panel appears 
implicitly to have assumed that the similarity between the A350XWB LA/MSF contracts and the A380 
risk-sharing supplier contracts could be inferred from the  fact that the A350XWB LA/MSF contracts were 
sufficiently similar to the terms of the A380 LA/MSF contracts and the fact that the A380 LA/MSF contracts 
were sufficiently similar to the terms of the A380 risk-sharing supplier contracts.  (Ibid., para.  511) 
807 European  Union 's appellant's submission, paras.  508 and 511.  
808 United  States ' appellee's submission, para. 259. The United  States  asserts that "{i}t is unclear why 
the {European  Union } believes this outcome suggests some lack of objectivity on  the Panel's part." Indeed, 
the United  States  further notes, the European  Union  itself "struggles to identify the supposed error". (Ibid.  
(fn omitted) ) 
809 United  States ' appellee's submission, para. 260. WT/DS316/AB/RW  
 
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  5.311.   Based on o ur review of the Panel record , it appears  that, before the Panel, the 
European  Union  did not request the Panel to compare the A350XWB LA/MSF contracts with the 
A380 risk-sharing supplier contracts. Moreover, as acknowledged by  the European  Union  itself, 
"the A380 {risk-sharing supplier } contracts do not form part of the record ."810 The European  Union 
did not provide these A380 risk-sharing supplier contracts to the Panel. It appears that, even 
though in the original proceedings Professor Whitelaw derived the WRP from the A380 risk-sharing 
supplier contracts811, the European  Union  had only submitted one of these contracts to the original 
panel.812 Had the European  Union  considered that this inquiry was required  to ensure the proper 
determination of the A350XWB project -specific risk premium , it should have pursue d this line of 
argumentation before the Pane l, including by providing the necessary evidence.  
The European  Union  did not do so.  In light of this fact, we do not consider that the Panel's analysis 
would reflect a lack of objectivity contrary to Article  11. 
5.312.   For the foregoing reasons, we find that the European  Union  has failed to establish that the 
Panel acted inconsistently with  Article  11 of the DSU by failing to compare the terms of the 
A350XWB LA/MSF contracts to the terms of the A380 risk -sharing supplier contracts . 
5.3.2.3.3   The price of risk  
5.313.   The European  Union  argues that, given its analysis of the price of risk813, the Panel  acted 
inconsistently with Article  11 of the DSU in  finding that "the overall project -specific risks {were}  
sufficiently similar to allow the risk premium applied for A380 LA/MS F in the original proceeding to 
be applied to A350XWB LA/MSF ."814 First, the European  Union  submits that the Panel's finding that 
the risks associated with the A350XWB and A380 projects were overall sufficient ly similar was 
based on incoherent reasoning . This is because,  with respect to the price of risk , the Panel found 
that the United  States  "did not discharge its evidentiary burden"815, such that the United  States  
had not established that the price of risk in the context of the A380 project was sufficiently similar 
to the price of risk in the context of the A350XWB project. According to  the European  Union , 
"{t}his finding simply does not support, and is left by the Panel unreconciled with, the Panel's 
finding, in the very next sentence of its Report, that the  {overall}  risks posed by the two projects 
'{were}  sufficiently similar'."816 Second, the European  Union  asserts that the Panel's overall  finding 
of "sufficient similarity"  in relation to the A350XWB and A380 projects  does not have an 
evidentiary basis .817 The European  Union  considers that , given the Panel's own factual finding that 
the United  States  had failed to demonstrate the similarity of the price of risk at the time of the 
provision of A380 and A350XWB LA/MSF, "there was no basis for the Panel to find that the A380 
and A350XWB risks {were}  'sufficiently similar ' for the A380 -based project risk premium to apply 
to the A350XWB ."818 
5.314.   In response, the United  States  maintains that the European  Union  "mischaracterizes" the 
Panel's findings by stating that the Pa nel found that the United  States  had not demonstrate d the 
similarity of the price of risk  between the two LCA projects . Rather, according to the United  States , 
                                                
810 European  Union 's appellant's submission, para. 508. 
811 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 100. 
812 Indeed, the original panel stated that "the one contract that the European Communities has 
submitted shows that there is at least one major difference between the r epayment terms under this contract 
and LA/MSF which we believe reduces its relative level of risk". ( Appellate  Body Report, EC and certain member 
States – Large Civil Aircraft , para. 100 ( quoting  Original Panel Report, para. 7.480)) This contract is found in 
Original Panel Exhibit EC -117 and is HSBI.  
813 The Panel defines "price of risk" by reference to " the extent to which market lenders were, as a 
general matter, willing to accept risk at the time of the provision of A380 and A350XWB LA/MSF". 
(Panel  Report,  para. 6.460)  
814 European  Union 's appellant's submission, para. 434 (quoting Panel  Report, para. 6.608  
(emphasis  added by the European  Union omitted)).  
815 European  Union 's appellant's submission, para. 436 (quoting Panel  Report, para. 6.608).  
816 European  Union 's appellant's submission, para. 436 (quoting Panel  Report, para. 6.608).  
817 European Union's appellant's submission, para. 437.  
818 European  Union 's appellant's submission, para. 437 (quoting Panel  Report, paras.  6.608 and 6.610 
(emphasis added  by the European  Union )). WT/DS316/AB/RW  
 
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  the Panel found that the risks for the A380 and A350XWB projects  were overall sufficiently simil ar 
on the basis of types of risk other than price risk.819 
5.315.   As we see it, both lines of argumentation brought by the European  Union  are based on 
very similar grounds. In essence, the European  Union  is challenging under Article  11 the Panel's 
ultimate finding that the risks associated with the A350XWB and A380 projects were overall 
sufficient ly similar  given that the Panel did not make a finding that th e individual category of 
"price  of risk" was "similar" at the time of the provision of LA/MSF to the A350XWB a nd A380 
projects, respectively. In its first line of argumentation, the European  Union  takes issue with the 
Panel's ultimate finding of "sufficient similarity" by contending that such finding was  based on 
incoherent reasoning . In the European  Union 's view,  this is eviden ced in that the Panel found, 
on the one hand, that the United  States  "did not discharge its evidentiary burden"820 with respect 
to the price of risk and, on the other hand, "that the risks posed by the two projects ' {were} 
sufficiently similar '."821 In its second line of argumentation , the European  Union  contends that the 
Panel 's ultimate finding of "sufficient similarity" does not have an evidentiary basis.  In particular, 
the European  Union  assert s that, given the Panel's own factual finding that the United  States  
"had failed to demonstrate the similarity of the price of risk" at the time of the provision of A380 
and A350XWB LA/MSF, "there was no basis for the Panel to find that the A380 and A350XW B risks 
{were}  'sufficiently similar ' for the A380 -based project risk premium to apply to the A350XWB ."822 
Since both lines of argumentation are based on essentially the same grounds, we address them 
together below.  
5.316.   We recall that, in this part of its benefi t analysis, t he Panel understood the main question 
before it  to be "whether the United  States  ha{d} demonstrated that the project -specific risks of 
the A350XWB programme {were}  sufficiently similar to those of the A380 programme such that it 
would be reaso nable to conclude that the WRP could be used as the project -specific risk premium 
for the A350XWB ."823 The parties' arguments  before the Panel  concerning the  differences in the  
risk profiles of the A380 and A350XWB projects  focused on the following issues: ( i) programme 
risk; (ii) contra ct risk ; and ( iii) the price of risk .824  
5.317.   Turning to examine the Panel's findings regarding the price  of risk , we begin by noting that  
the Panel did not make a finding that the category of "price of risk" was similar in relation  to the 
A350XWB and A380 projects. In this regard, t he European  Union  correct ly indicates that the 
Panel 's actual finding was  that, "{w}ith respect to the price of risk … {it was} unable to accept the 
United  States ' arguments because it did not discharge its evidentiary burden ."825 
However,  the European  Union  fails to mention  other  important aspects of the Panel's analysis 
related to this conclusion. In particular, the European  Union  overlooks the legal question that the 
Panel set  out to examine, namely, "wh ether  the financial environment – in particular the global 
financial and economic crisis prevailing at the time – meant that a market lender would have 
demanded a higher return at the time financing was being sought for the A350XWB than  at the 
time it woul d have been sought for the A380, even if the aircraft development and marketing risks 
were similar ."826 The Panel examined this issue in addressing  the United  States ' argument that 
"LA/M SF for the A350XWB 'was finalised at a point in time when lending condit ions were 
historically tight' with the implication that 'the true A350XWB risk premium should likely be higher  
than the A380 risk premium'."827 In particular, the United  States  argued be fore the Panel that, 
"at the time of the A350XWB {LA/MSF} contracts, the  effects of the  2008 global financial and 
                                                
819 United  States ' appellee's submission, para. 249 (referring to Panel  Report, para. 6.608). 
The United  States  also points out that, in reaching this conclusion, the Panel considered and rejected 
arguments made by the United  States  and the European  Union  "that the financial environment at the time of 
the conclusion of the A350  XWB {project} would have altered the project -specific risk". (Ibid. (referring to 
Panel  Report, paras.  6.580 and 6.583­6.584))  
820 European  Union 's appellant's submission, para. 436 (quoting Panel  Report, para. 6.608).  
821 European  Union 's appellant's submission, para. 436 (quoting Panel  Report, para. 6.608).  
822 European  Union 's appellant's submission, para. 437 (quoting Panel  Report, paras.  6.608 and 6.610 
(emphasi s added by the European  Union )). 
823 Panel  Report, para. 6.459.  
824 Panel  Report, para. 6.460. 
825 Panel  Report, para. 6.608.  
826 Panel  Report, para. 6.580.  
827 Panel  Report, para. 6.581 (quoting Jordan Report (Panel  Exhibit USA -475 (BCI/HSBI)), para. 22 
(emphasis added)).  WT/DS316/AB/RW  
 
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  economic crisis continued to linger and constrain the availability of credit, which would have 
affected lending conditions for the A350XWB project."828  
5.318.   In addressing this argument by the United  States , the Panel agr eed with the 
European  Union  that "the high yield spread between investment -grade and below -investment 
grade  debt in [BCI] when the A350XWB LA/MSF agreements were finalised, relative to levels 
in 2006/2007, does not show the price of risk was 'at least' as expensive, or 'more' expensive than 
it was at the time the A380 LA/MSF agreements were finalised in [BCI]."829 The Panel then 
elaborated that "{t}he peak in the spread at the time of the A350XWB LA/MSF contracts provides 
information about how risk was priced at that point, but d{id} not enable {it} to judge whether 
the spread was more marked than that existing at the time of the A380 LA/MSF contracts."830 On 
the basis of the above considerations, the Panel concluded that, "{g}iven the United  States  ha{d} 
not provided the yield spreads that would allow {it} to make a full evaluation of the merits of its 
submission, {i t was} unable to accept its argument that a market lender would have demanded a 
higher return at the time financing was being sought for the A350XWB than at the time it would 
have been sought for the A380 ."831 
5.319.   On appeal, t he European  Union  contends  that the Panel found that "the United  States  had 
not established that the price of risk in the context of the A380 project was sufficiently similar to 
the price of risk in the context of the A350XWB project ."832 However, the Panel did not find that, 
with respect to t he price of risk, the United  States  had failed to establish "sufficient similarity " 
between the A350XWB and A380 projects. Rather, the Panel addressed and dismissed  the 
United  States ' argument that, due to the financial environment existing at the time of the 
conclusion of the A350XWB LA/MSF, the price of risk was higher  because "a market lender would 
have demanded a higher return at the time financing was being sought for the A350XWB than at 
the time it would have been sought for the A380 ."833 In other words , the Panel's analysis was 
mainly devoted to rejecting the United  States ' contention that the project -specific risk premium 
applicable to the A350XWB LA/MSF should be higher .  
5.320.   On the basis of the actual findings made by the Panel , we fail to see any incoherence 
between, on the one hand, the Panel's rejection of the United  States ' argument that the 
project -specific risk premium applicable to the A350XWB LA/MSF should be higher  because LA/MSF 
for the A350XWB was finali zed at a time when lending conditions were historically tight and, 
on the other hand, the Panel's ultimate conclusion that "the overall project -specific risks {were}  
sufficiently similar to allow the risk premium applied for A380 LA/MSF in the original proceeding to 
be applied to A350XWB LA/MSF ."834 In other words, the fact that the Panel rejected the 
United  States ' argument that project -specific risk premium applicable to the A350XWB LA/MSF 
should be higher  in the context of its analysis of price of risk does not undermin e the Panel's 
ultimate conclusion that the overall project -specific risks were sufficiently similar . 
This understanding contradicts the European  Union 's assertion that the Panel's findings regarding 
the price of risk do not support the Panel's ultimate con clusion th at the risks of the A350XWB 
                                                
828 Panel  Report, para. 6.581 (referring to United  States ' comments on the European  Union 's response 
to Panel question No. 100, para. 277). The United  States  substantiated its position in the following manner:  
The United  States  submit{ted} evidence presented by Dr Jordan concerning the yield spread 
between investment -grade and below -investment grade debt, showing  the additional yield that 
investors demand to invest in the lower -rated debt. According to Dr Jordan, "because the risks 
related to providi ng project -specific financing for the A350XWB are undoubtedly much higher 
than {those} related to investment -grade debt, non -investment grade debt provides a better 
assessment of the effect of credit conditions on potential financing for the A350XWB". The 
United  States point{ed} to Dr Jordan's statements that this yield spread remained high in [BCI] 
when the LA/MSF agreements were finalised, relative to pre -2007 ("pre -crisis") levels. 
Specifically, the United  States note{d} Dr Jordan's evidence that the yie ld spread between 
investment -grade industrial companies and below -investment grade industrial companies ranged 
from 1% to 2% in a pre -crisis period (2006 -2007), peaked at almost 7% during the financial 
crisis (late  2008-early 2009), and then remained eleva ted at 3.5% to 5% in the [BCI].  
(Ibid. (fns omitted))  
829 Panel  Report, para. 6.585. 
830 Panel  Report, para. 6.585. 
831 Panel  Report, para. 6.588.  
832 European  Union 's appellant's submission, para. 436. (emphasis original)  
833 Panel  Report, para. 6.588. 
834 Panel  Report, para. 6.608 . WT/DS316/AB/RW  
 
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  and A380 projects  were sufficiently similar. We therefore see no incoherenc e in the Panel's 
reasoning, let alone one that rises to the level of an inconsistency with Article  11 of the DSU .  
5.321.   Similarly, the above misgivi ngs regarding the European  Union 's understanding of the 
Panel's analysis  are also relevant in relation to the European  Union 's second line of argumentation 
that the Panel's ultimate finding of "sufficient similarity" does not enjoy an evidentiary basis. 
As noted, contrary to the European  Union 's assertion, the Panel never found that the United  States  
"had failed to demonstrate the similarity of the price of risk".835 Rather, the Panel's analysis 
focused on dismissing the United  States ' argument that, due to t he financial environment existing 
at the time of the conclusion of the A350XWB LA/MSF, the "price of risk" was higher  because 
"a market lender would have demanded a higher return at the time financing was being sought for 
the A350XWB than at the time it wo uld have been sought for the A380" .836 Moreover, we recall 
that, the Panel did not actually seek to make individual  findings of "similarity" between the 
A350XWB and A380 projects with respect to each of the three risk categories it examined. Rather, 
the Panel sought to make an overall  assessment of the relative risks between the A350XWB and 
A380 projects to determin e whether "the project -specific risks of the A350XWB programme 
{were} sufficiently similar  to those of the A380 progr amme such that it would be reasonable to 
conclude that the WRP could be used as the project -specific risk premium for the A350XWB ."837 
Given the focus of the Panel's analysis in relation to the price of risk  and the nature of the Panel's 
overall assessment , we disagree that, as a result of the Panel's findings in that context, there is no 
evidentiary basis for the Panel's ultimate conclusion that "the  overall project -specific risks {were} 
sufficiently similar to allow the risk premium applied for A380 LA/MSF in the original proceeding to 
be applied to A350XWB LA/MSF ."838 
5.322.   For the foregoing reasons, we find that the European  Union  has failed to establish that 
the Panel acted inconsistently with Article  11 of the DSU in its analysis of the price  of risk .  
5.3.2.3.4   Overall c onclusion on the European  Union 's claim that the  Panel acted 
inconsistently with Article  11 of the DSU in its assessment of the risk differences that 
may affect the project -specific risk premium  
5.323.   The European  Union  has brought multiple claims of inconsisten cy with Article  11 of 
the DSU, challenging the Panel's assessment of three  aspects of risk related to the risk profiles of 
the A380 and A350XWB projects : (i) programme risk; (i i) contract risk ; and (iii)  the price of risk .  
5.324.   In the context of programme risk , we find that the European Union has failed to establish  
that the Panel acted inconsistently with its obligations under Article  11 of the DSU  in its analysis of 
development risk , market risk , or in  its comparison of the development and market risks . 
With regard to contract risk, we find that the European  Union  has failed to establish that the 
Panel's comparison of  the A350XWB and A380 LA/MSF contracts  lacks a sufficient evidentiary basis  
in a manner inconsistent with the requirements of  Article  11 of the D SU. We also find that the 
European  Union  has failed to establish that the Panel acted inconsistently with  Article  11 of the 
DSU by failing to compare the terms of the A350XWB LA/MSF contracts to the terms of the A380 
risk-sharing supplier contracts . Finally, we find that the European Union has failed to establish  that 
the Panel acted inconsistently with Article  11 of the DSU in its analysis of the price  of risk . 
5.3.2.4   Whether the Panel erroneously adopted a single, undifferentiated project risk 
premium to  benchmark all four of the A350XWB LA/MSF contracts  
5.325.   In this section, we address the third and final set of claims brought by the European  Union  
against the Panel's findings related to the project -specific risk premium. In this context, the 
European  Union  argues that the Panel erroneously adopted a single, undifferentiated project risk 
premium (i.e. the WRP) as a benchmark for all four of the A350XWB LA/MSF contracts . According 
to the  European  Union , the terms of the four A350XWB LA/MSF contracts are similar  in some 
ways, but also differ in other ways. Thus, the European  Union  asserts that, in adopting a single, 
                                                
835 European Union's appellant's submission, para. 437.  
836 Panel  Report, para. 6.588. 
837 Panel  Report, para. 6.459. (emphasis added)  
838 Panel  Report, para. 6.608. WT/DS316/AB/RW  
 
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  undifferentiated project -specific risk premium that did not account for the differing allocation of 
risk flowing from the differing contract terms, t he Panel erred in its application of  Article  1.1(b) of 
the SCM Agreement , and also failed to make an objective assessment of the matter as required by 
Article  11 of the DSU.839 We address each of these claims in  turn. 
5.3.2.4.1   Whether the Panel erred in its applicati on of Article  1.1(b)  of the 
SCM Agreement  by adopting a single, undifferentiated project  risk premium to 
benchmark all four of the A350XWB LA/MSF contracts  
5.326.   The European  Union  observes  that Article  1.1(b) of the SCM Agreement  requires the 
selection of a benchmark loan that has as many elements as possible in common with the 
investigated loan, with adjustments made in every instance to account for any differences.840 
In light of this legal standard, the European  Union  points out t hat the Panel's own factual findings 
reveal that there are important differences in the terms of the government loans at issue that 
affect the risk profile – and hence the market price – of each loan.841 For the European  Union , the 
four A350XWB LA/MSF contra cts themselves are not similar in terms of their risk profile s. 
Consequently, a market benchmark that matches the risk profile of one A350XWB LA/MSF contract  
might not match the risk profile of another, at least without adjustments to account for differenc es 
that impact  the market price of each A350XWB  LA/MSF contract .842 
5.327.   According to the European  Union , the Panel acknowledged that differences in risk profiles 
among  the four A350XWB LA/MSF contracts exist, and that these differences could affect the risk 
premium demanded by a market lender. However, the Panel decided that these differences could 
be ignored because  the original panel had allegedly ignored differences in the risk profiles of the 
A380 LA/MSF contracts at issue  in the original proceedings . In the European  Union 's view, 
in applying a single, undifferentiated project risk premium, the Pan el failed even to consider, 
let alone adjust for, differences among  the risk profiles of the four A350XWB LA/MSF contracts that 
could affect the ir market price, whic h amounts to an erroneous application of  Article  1.1(b).843 
5.328.   The United  States  rejects the European  Union 's claim  that the Panel err ed under 
Article  1.1(b) by adopt ing a single project -specific risk premium as a benchmark for all four of the 
A350XWB LA/MSF contracts . According to the United  States , the European  Union 's claim is 
premised on an incorrect understanding of the legal standard. Article  14(b) of the SCM Agreement  
requires that the benchmark be "comparable ", rather than "identical " or "as close as possible" , 
to the government loan at issu e. For the United  States , given that the European  Union  has not 
substantiated  that the benchmark adopted by the Panel is not "comparable " to any of the 
four instances of LA/MSF for the A350XWB, this claim of error m ust fail.844 
5.329.   The European  Union 's claim of error appears to be based on the assumption  that the mere 
fact that the Panel applied the "single, undifferentiated project risk premium" without making 
adjustments  necessarily constitutes error in the application o f Article  1.1(b) .845 We recall that the 
fact that the Panel did not make any such adjustments does not, in and of itself, constitute legal 
error under Article  1.1(b ).846 Indeed, c ontrary to the European  Union 's suggestion, it is not 
possible to determine in the abstract  whether the Panel ought to have made adjustments  to the 
WRP to ensure that it ha d as many elements as possible in common with each of the 
four A350XWB LA/MSF contracts . 
                                                
839 European  Union 's appellant's submission, paras.  517-518. 
840 European  Union's appellant's submission, para. 522. 
841 By way of example, the European  Union  observes that "[BCI] A350XWB  LA/MSF [BCI] protected 
the government against  [BCI] (i.e., the [BCI] LA/MSF contract ), whereas other A350XWB LA/MSF contracts 
provided no such protection ( i.e., the [BCI] LA/MSF contract) ." (European  Union 's appellant's submission, 
para. 519 (referring to Panel  Report, paras.  6.594 and 6.598) )  
842 European  Union 's appellant's submission, para. 519. 
843 European  Union 's appellant's submission, paras.  521-522. 
844 United  States ' appellee's submission, para. 262. The United  States  also notes that the original panel 
used a uniform  project -specific risk premium for all four instances of LA/MSF for the A380, even though they 
exhibited v ariations similar to t hose at issue for the A350XWB. (Ibid.)  
845 European  Union 's appellant's submission, para. 522. 
846 See para.  5.229 above .  WT/DS316/AB/RW  
 
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  5.330.   As we see it, the key premise underlying the European  Union 's claim  is that  the Panel 
acknowledged that "differences in risk profiles {among}  the A350XWB LA/MSF contracts exist" and 
that "these differences could affect the risk premium ".847 In or der to examine this premise, 
we analyse  below  relevant  aspects of the Panel Report.  
5.331.   In response to  arguments by  the European  Union , the Panel actually examined whether 
the four A350XWB LA/MSF contracts should have different risk premia. In particular, the 
European  Union  argued before the Panel that "the four individual A350XWB  {LA/MSF}  contracts 
involve different amounts of risk because the [BCI] contracts protect against risks related to 
[BCI], whereas the [BCI] contract does not."848  
5.332.   As noted  by the European  Union , the Panel did "recognise that there are some differences 
{among}  the risk pro files of the four A350XWB {LA/MSF} contracts".849 However, the Panel went 
on to examine and  to explain why, despite some differences among  the risk profiles of the 
four A350XWB LA/MSF contracts, it would not be necessary  to apply two or more project -specific  
risk premia. The Panel noted, for example,  that in the original proceedings there were also 
differences among  the four A380 LA/MSF contracts for which the same premium was used  (i.e. the 
WRP).  In particular, t he Panel explained  that, although in the original proceedings [BCI], which 
would constitute "risk-reducing " terms, existed in at least [BCI] for A380 LA/MSF , 
Professor  Whitelaw's risk premium was nevertheless applied in those proceedings as a minimum  
premium for all contrac ts.850 
5.333.   Moreover, t he Panel provided additional  reasons why the  differences among  the terms of 
the four A350XWB LA/MSF contracts at issue would not, in this case, "justify the application of, 
at least, two different ris k premiums for those agreements".851 In pa rticular, the Panel noted that, 
"for the [BCI] contract, the contractual terms that the European  Union  has identified as 
'risk reducing' apply  in circumstances involving [BCI]. That is, if foreseen development risks, such 
as technology risks, were to eventuate, it appears that the 'risk reducing' terms may not apply."852 
Furthermore, the Panel found it difficult to accept the European  Union 's argument that 
"the [BCI]."853 In the Panel's view, " [BCI]."854 Based on its analysis, the Panel was not persuaded 
that "certain terms render the agreements significantly different so as to require the application of  
two or more different project -specific risk premia in this proceeding ."855  
5.334.   Moreover, we observe that, w hile the European  Union  argue d before the Panel that there 
were differences among  the risk profiles of the A350XWB LA/MSF contracts, it appears that the 
European  Union  did not elaborate on the adjustments  that it considered would be required  to 
account for such differences.  
5.335.   Pursuant t o the legal standard  under Article  1.1(b) of the SCM Agreement , a panel is 
required to determine  whether, in light of the differences that are found to exist in a given case 
between the government loan and the benchmark loan, adjustments are needed to ensu re that the 
loans at issue are "comparable".856 Given the Panel's analysis and the arguments that were put 
before it, we find that the European  Union  has not established that the Panel erred under 
Article  1.1(b) of the SCM Agreement  by applying a "single, undifferentiated project risk premium" 
                                                
847 European  Union 's appellant's submission, para. 521. (emphasis added; fn omitted)  
848 Panel Report, para. 6.598.  
849 Panel Report, para. 6.604.  
850 Panel Report, para. 6.604.  
851 Panel Report, para. 6.596.  (fn omitted)  
852 Panel Report, para. 6.602.  
853 Panel Report, para. 6.603. (fn omitted)  
854 Panel Report, para. 6.603.  
855 Panel Report, para. 6.607.  (emphasis added)  
856 In this regard, we observe tha t, in US – Anti-Dumping and Countervailing Duties (China) , the 
Appellate  Body held:  
{A} certain degree of flexibility also applies under Article  14(b) in the selection of benchmarks, 
so that such selection can ensure a meaningful comparison for the determination of benefit. At 
the same time, when an investigating authority resorts to a benchmark loan in another currency 
or to a proxy, it must ensure that such benchmark is adjusted so that it approximates the 
"comparable commercial loan".   
(Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para.  489) WT/DS316/AB/RW  
 
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  without making adjustments for differences among  the risk profiles of the A350XWB LA/MSF 
contracts.857 
5.3.2.4.2   Whether the Panel acted inconsistently with Article  11 of the DSU by adopting 
a single, undifferentiated  project  risk premium to benchmark all four of the A350XWB 
LA/MSF contracts  
5.336.   The European  Union  argues that the Panel acted inconsistently with Article  11 of the DSU 
by applying a "single, undifferentiated project risk premium" to all four of the A350XWB LA /MSF 
contracts. In particular, the European  Union  maintains that there is an inconsistency between , 
on the one hand,  the Panel's approach to the identification of the first component of the market 
benchmark for the A350XWB (i.e. the corporate borrowing rat e), for which the Panel adopted a 
differentiated  rate for the four A350XWB LA/MSF contracts and , on the other hand,  the Panel's 
subsequent  identification of the second component of the market benchmark (i.e. the risk 
premium), for which the Panel adopted a n undifferentiated  rate for the four A350XWB LA/MSF 
contracts.858 The European  Union  observes that, although the Panel found relevant differences 
among the four A350XWB LA/MSF contracts with regard to both components of the market 
benchmark, the Panel's appr oach to addressing these differences was  inconsistent, contrary to 
Article  11 of the  DSU.859 
5.337.   The United  States  rejects the European  Union 's claim that the Panel  acted inconsistent ly 
with Article  11 of the DSU. The United  States  maintains that the Panel had good reason to use a n 
undifferentiated  project -specific risk premium f or the four A350XWB LA/MSF contracts:  the original 
panel had also used a single project­specific risk premium for t he A380 LA/MSF contracts, 
"even  though [BCI] A380 LA/MSF contract contain ed similar terms as the so -called 'risk -reducing' 
terms in the [BCI] A350XWB LA/MSF contracts".860 Moreover, the  United  States  argues that the 
Panel was justified in its adoption of a contract -specific approach to the corporat e borrowing rate 
because such approach ensured that the benchmarking exercise was based on information pre -
dating the finalization of the term s and conditions of each of the  LA/MSF contracts.861 
5.338.   We begin by examining the reasons provided by the Panel for its  approach to examining 
the two components of the market benchmark. W ith regard to the use of an undifferentiated 
project -specific risk premium for the four A350XWB LA/MSF contracts, the Pa nel reasoned why, 
despite some  differences among  the risk profiles o f the four A350XWB LA/MSF contracts, it would 
not be appropriate to apply two or more project -specific risk premia. In particular, the Panel 
rejected the European  Union 's contention that different risk premia should apply on the basis of 
guidance from the original proceedings and the limited extent of some of the "risk -reducing" terms 
referred to by the European  Union . The Panel therefore disagreed  with the view that "certain terms 
render the agreements significantly different so as to require the applicati on of  two or more 
different project -specific risk premia in this proceeding ."862 As note d above, we do not consider 
the Panel to have erred  in reaching this conclusion.  
5.339.   As to the adoption of a "contract -specific approach " in determining  the corporate borrowing 
rate, we recall that the Panel decided not to follow Professor Whitelaw's averaging approach 
proposed  by the European  Union .863 The Panel took issue with the fact that "Professor Whitelaw's 
averaging approach would result in the appl ication of corporate borrowing rates derived over time 
                                                
857 European  Union 's appellant's submission, para. 522. 
858 European  Union 's appellant's submission, para. 525. 
859 European  Union 's appellant's submission, para. 529. 
860 United  States ' appellee's submission, para. 263 (referring to Panel  Report, para. 6.609).  
861 United  States ' appellee's submission, para. 263. 
862 Panel Report, para. 6.607.  (emphasis added)  
863 Professor Whitelaw's average (i.e.  his proposed corporate borrowing rate) was ob tained by averaging 
the EADS bond's yield to maturity over [BCI] months. He took as his starting point [BCI] (the date of the 
French A350XWB Convention ), and his end point was [BCI], the date of the UK A350XWB LA/MSF contract 
[BCI]. (Panel Report, para. 6.378) Professor Whitelaw indicated that the average YTM on the bond was 
computed for the [BCI] for each of the three euro denominated LA/MSF contracts, with an adjustment based 
on the average EUR to GBP swap rates being made for the UK A350XWB LA/MSF contra ct. (Ibid. (referring to 
Whitelaw Response to Jordan (Panel Exhibit EU -121 (BCI/HSBI) ), fn 12 to para. 12)) WT/DS316/AB/RW  
 
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  periods that are different  for the four {A350XWB} LA/MSF contracts"864, and would incorporate 
data from after the conclusion of three of the four contracts.865 In reject ing Professor Whitelaw's 
averaging a pproach , the Panel observed that such approach would go against the Appellate  Body's 
guidance of comparing the LA/MSF measures and the benchmark loan on an ex ante basis. 
Indeed,  the Appellate  Body has indicated that, instead of conducting an ex post  analy sis, a panel is 
required to determine whether a benefit has been conferred on the basis of an ex ante  
examination of "how  the loan is structured and how risk is factored in" .866 
5.340.   We further note that, after rejecting Professor Whitelaw's averaging approach, t he Panel 
opted for relying on "the yields from a consistent time -period up to the date of the conclusion of 
the individual contract, as calculated by Dr Jordan".867 As noted by the Panel, the individual 
contracts were [BCI]868 [BCI].869 As we see it, since the Panel sought to rely on " the yields from 
a consistent time -period up to the date of the conclusion of the individual contract"870 
in conduct ing an ex ante examination, there is a clear explanation to support the Panel's  decision 
of using a different  corporate borrowing rate for each of the four LA/MSF contracts.  
5.341.   Based on our analysis of the Panel Report and the Panel record, we see no error in the 
Panel's decision to adopt , on the one hand, a n undifferentiated  project -specific risk pr emium for 
the four A350XWB LA/MSF contracts and, on the other hand, a contract -specific approach to the 
corporate borrowing rate. In particular , we fail to see any inconsistency in the Panel's reasoning in 
this regard, let alone one that would call the Pan el's objectivity into question.  
5.342.   For the foregoing reasons, we find that the European  Union  has failed to establish that, 
by applying a single, undifferentiated project risk premium to all four of the A350XWB LA/MSF 
contracts , the Panel acted inconsistently  with Article  11 of the DSU . 
5.3.2.5   Conclusion on the Panel's findings regarding the project -specific risk premium  
5.343.    The European  Union  argues that the Panel  erred in the identification of the project -specific 
risk premium  component of the market benchmark u tilized to determine whether the French, 
German, Spanish, and UK A350XWB LA/MSF contracts  conferred a benefit  within the meaning of 
Article  1.1(b) of the SCM Agreement . In particular, the European  Union  contend s that the Panel 
erred in using the project -specifi c risk premium developed in the or iginal proceedings for the 
A380 project  as the risk premium to benchmark  the four A350XWB LA/MSF  contracts . 
The European  Union  has brought multiple challenges under Article  1.1(b) of the SCM Agreement  
and Article  11 of the  DSU against various aspects of the Panel's analysis.  
5.344.   We disagree with the three  sets of claims of error raised by the European  Union  in relation 
to the Panel's analysis of the project -specific risk premium .  
5.345.   First, we disagree  that the Panel erred in its application of Article  1.1(b) by failing to 
assess "whether a benchmark comprising, inter alia , a project risk premium tailored to the risks of 
financing the A350XWB project itself , was available and could be used to assess whether the 
A350XWB LA/MSF loans  conferred 'benefits' ."871 We also disagree  that the Panel erred in its 
application of Article  1.1(b) of the SCM Agreement  by applying  a single, undifferentiated project 
                                                
864 Panel Report, para. 6.386 (referring to Jordan Reply (Panel Exhibit USA -505 (BCI/HSBI)), para. 27). 
(emphasis added) By way of example, the Panel explained that:  
the market rate for the UK loan agreement, coming later, would be distorted upwards by higher 
yields from the time when the French agreement was concluded – some [BCI] earlier (according 
to Professor Whitelaw). The market rate for the French loan agreement, however, would not be 
judged against market  rates from [BCI] prior to its conclusion, when the bond yields were even 
higher and would have likewise distorted the rates upwards.  
(Ibid.  (emphasis original) ) 
865 Panel Report, para. 6.387.  
866 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 836.  
867 Panel Report, para. 6.388.  
868 [BCI] 
869 Panel Report, Table 6 at para.  6.382.  
870 Panel Report, para. 6.388.  
871 European  Union 's appellant's submission, para. 369. (emphasis original)  WT/DS316/AB/RW  
 
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  risk premium derived from the A380 project to the A350XWB project  without making adjustments. 
Moreover, since we have already addressed and rejected the European  Union 's claim that the 
Panel erred under Article  1.1(b) by failing to undertake a "progressive search" for a market 
benchmark872, we consider it unnecessary to a ddress further the European  Union 's claim that the 
Panel acted inconsistently with Article  11 of the DSU by failing to consider alternative, and more 
appropriate, benchmarks than those  proposed by the United  States . In addition, we disagree with 
the Europe an Union 's claim that the Panel acted inconsisten tly with Article  11 of the DSU because 
it allegedly  deviated from the original panel's findings when it adopted a constant, undifferentiated 
project risk premium not tailored to the risks associated with LA/ MSF for the A350XWB.873  
5.346.   Second, we disagree with the  European Union's  claim that the Panel acted inconsistently 
with Article 11 of the DSU in its examination of the risk profiles of the A380 and A350XWB 
projects, including in its assessment of : (i) programm e risk; (i i) contract risk ; and (iii)  the price of 
risk. Contrary to the European Union's view, the Panel did not simply assume that the WRP would 
serve as an appropriate project -specific risk premium for the A350XWB . Instead, the Panel 
assess ed the relative project -specific risks associated with the  A380 and A350XWB projects. 
The purpose of this comparative analysis was, in the Panel's view, to determine "whether the 
United  States  ha{d} demonstrated that the project -specific risks of the A350XWB  programme 
{were} sufficiently similar to those of the A380 programme such that it would be reasonable to 
conclude that the WRP could be used as the project -specific risk premium for the A350XWB".874 
Thus, the Panel sought to engage carefully with the argume nts and evidence presented by the 
parties regarding the possible risk premia that should be used in constructing the market 
benchmark.  Regarding the Panel's analysis of programme risk, we find that the European  Union 
has failed to establish  that the Panel acted inconsistently with its obligations under Article 11 of 
the DSU  in its analysis of development risk , market risk , or in its comparison of the development 
and market risks . With regard to contract risk, we find that the European Union has failed to 
establish that the Panel's comparison of  the A350XWB and A380 LA/MSF contracts  lacks a 
sufficient evidentiary basis  in a manner inconsistent with the requirements of  Article  11 of the 
DSU. We also find that the  European Union has failed to establish that the Panel acted 
inconsistently with  Article  11 of the DSU by failing to compare the terms of the A350XWB LA/MSF 
contracts to the terms of the A380 risk -sharing supplier contracts . Finally, we find that the 
European Union has failed to establish that  the Panel  acted inconsistently with Article  11 of the 
DSU in its analysis of the price  of risk . 
5.347.   Finally, we disagree with the third set of claims against the Panel's findings  related to the 
project -specific risk premium. In particular, we reject the European  Union 's claims that , in 
adopting a single, undifferentiated project -specific risk premium for each of the four A350XWB 
LA/MSF contracts , the Panel erred in its application of  Article  1.1(b) of the SCM Agreement , and 
also failed to make an objective assessment o f the matter as required by Article  11 of the DSU.875 
The Panel recogni zed that there were some differences amon g the risk profiles of the 
four A350XWB LA/MSF contracts.876 However, b ased on its analysis, the Panel was not persuaded 
that the terms of those con tracts render ed them  significantly different so as to require the 
application of  two or more different project -specific risk premia in this proceeding . Given the 
Panel's analysis and the arguments that were put before it,  we find that the European  Union  has 
not establish ed that the Panel erred under Article  1.1(b) of the SCM Agreement  by applying a 
"single,  undifferentiated project risk premium" without making adjustments for differences among 
the risk profiles of the A350XWB LA/MSF contracts.877 Moreover, contrary to the European Union's 
claim under Article 11 of the DSU, we see no error in the Panel's decision to adopt , on the one 
hand, a n undifferentiated  project -specific risk premium for the four A350XWB LA/MSF contracts 
and, on the other hand , a contract -specific approach to the corporate borrowing rate.  
Thus,  we find that the European Union has failed to establish that, by applying a single, 
undifferentiated project risk premium to all four of the A350XWB LA/MSF contracts , the Panel 
acted inc onsistently with Article  11 of the DSU.  
                                                
872 See section 5.3.2.2.1 of this Report.  
873 European  Union's appellant's  submission, para. 423. 
874 Panel  Report, para.  6.459.  
875 European  Union 's appellant's submission, paras.  517-518. 
876 Panel Report, para.  6.604.  
877 European  Union 's appellant's submission, para.  522. WT/DS316/AB/RW  
 
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  5.348.   For the foregoing reasons, we uphold  the Panel's  finding, in paragraphs 6.487 and 6.542 of 
its Report, that the development risks associated with the A350XWB were at least as high as, or 
sufficiently similar to , thos e associated with the A380; the Panel's  findings, in paragraphs 6.579 
and 6.608 of its Report, that the market risks experienced by the A380 and A350XWB were overall 
comparable in importance and that the A350XWB market risks would not have been much lower 
than the A380 market risks; the Panel's  finding, in paragraphs 6.595 and  6.609 of its Report, that 
the A350XWB LA/MSF contracts containing such "risk -reducing" terms are no less risky than at 
least [BCI] for A380 LA/MSF that also contained similar terms in  the original proceeding s; the 
Panel's  findings, in paragraphs 6.607 and 6.609 of its Report, that it was not persuaded that the 
differences in certain terms affecting the risk profiles  of the individual A350XWB  LA/MSF  contracts  
would require the application of two or more different pro ject-specific risk premia; 
and, consequently, the Panel's finding, in paragraphs 6.608 and 6.610 of its Report, that the 
overall project -specific risks of the A380 and A350XWB projects were sufficiently similar to al low 
the risk premium applied to the  A380 LA/MSF in the original proceedin gs to be applied to 
the A350XWB  LA/MSF.  
5.3.3   Overall conclusions on the Panel's findings regarding "benefit" under 
Article  1.1(b) of the SCM Agreement  
5.349.   The European  Union  has appeal ed the P anel's findings concerning the assessment of 
whether the French, German, Spanish, and UK A350XWB LA/MSF contracts  confer a benefit within 
the meani ng of Article  1.1(b) of the SCM Agreement . In particular, the European  Union  has 
claimed that the Panel erred  under Article  1.1(b) of the SCM Agreement  and Article  11 of the DSU 
in its analysis of the two components of the market benchmark  rate of return: (i) the calculation of 
a corporate borrowing rate that Airbus would have had to pay to a commercial lender to  borrow 
money; and (ii) the calculation of a project -specific risk premium that represents the additional 
rate of return that a commercial lender would have required for offering financing to Airbus on the 
particular terms of the relevant A350XWB LA/MSF co ntracts .878  
5.350.   We have rejected the European  Union 's claims against the Panel's benefit analysis. For this 
reason, we uphold  the Panel's findings, in paragraphs 6.632 (including Table  10) and 6.633 of 
its Report, that Airbus paid a lower interest rate for the A350XWB  LA/MSF  than would have been 
available to it on the market and  that, consequently, a benefit has thereby been conferred within 
the meaning of  Article  1.1(b) of the SCM Agreement . Consequently, we also uphold  the Panel's 
findings, in paragraphs 6.656 and 7.1.c.i. of its Report, that the French, German, Spanish, and 
UK A350XWB LA/MSF contracts  each constitute a subsidy within the meaning of Article  1.1 of the 
SCM Agreement  and, thus, that the United  States  has demonstrated that the French, German, 
Spanish, and UK A350XWB LA/MSF contracts are specific subsidies within the meaning of Articles  1 
and 2 of the SCM Agreement . Finally, the quantitative implications of the Panel's findings that we 
have just upheld  above  are the following, as set out in Table 10 at paragraph 6.6 32 of 
the Panel  Report:  
                                                
878 Panel Report, para. 6.350. WT/DS316/AB/RW  
 
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  Table 4: Approximate difference between rates of return and market benchmark rate  
EU member 
State  Expected 
Internal Rate 
of Return 
(IRR) of 
LA/MSF 
contracts  Corporate borrowing 
rate as reflected by 
yield on EADS bond879 Normal 
market 
fees WRP  Amount by which 
benchmark 
exceeds IRR  
 A B C D (B+C+D) -A 
France  [BCI] [BCI] to [BCI] [BCI] WRP ([BCI]+WRP) -
[BCI] to  
([BCI]+WRP) -
[BCI]  
Germany  [BCI] [BCI] to [BCI] [BCI] WRP ([BCI]+WRP) -
[BCI] to  
([BCI]+WRP) -
[BCI]  
Spain  [BCI] [BCI] to [BCI]880 [BCI] WRP ([BCI]+WRP) -
[BCI] to  
([BCI]+WRP) -
[BCI]  
United Kingdom  [BCI] [BCI] to [BCI] [BCI] WRP ([BCI]+WRP) -
[BCI] to 
([BCI]+WRP) -
[BCI]  
5.4  Article 7.8 of the SCM Agreement  
5.4.1   Introduction  
5.351.   Before the Panel, the European Union argued that it had no obligation to adopt compliance 
measures with respect to subsidies that had ceased to exist prior to  the DSB's adoption of the 
panel and Appellate  Body recommendations and ru lings in the original proceedings in EC and 
certain member States – Large Civil Aircraft  on 1 June 2011 .881 The Panel rejected the 
European  Union's argument, finding that:   
it follows from the effects -based  nature of the disciplines in Article  5 and the role  that 
Article  7.8 is intended to play in bringing an implementing Member into conformity 
with its obligations under the SCM Agreement , that there may well be particular 
factual circumstances when the obligation to "take appropriate steps to remove the 
adverse effects" or "withdraw the subsidy"  will apply to subsidies found to have 
caused adverse effects in  an original proceeding, irrespective of whether those 
subsidies continue to exist in the implementation period.882 
                                                
879 We recall that, while the Panel determined the corporate borrowing rate in the form of a range of 
average yields, it  rightly  gave more prominence to the one -month average yield of the EADS bond  in its 
determination of the corporate borrowing rate. See para.  5.140 above.  
880 As noted, the European  Union identifies a clerical error made by the Panel in Tables 7 and 10 of its 
Report in r elation to the one -month average yield prior to the Spanish A350XWB Convenio . In particular, the 
European  Union points that " Table 6 of the Panel Report shows , for Spain, the one -month average yield prior to 
the date of the contract was [BCI], and not [BCI] as inscribed in Table 10 (and Table  7)." (European  Union 's 
appellant's submission, fn 286 to Table 2 at para. 322 (referring to Panel Report, Table 7 at para. 6.430  and 
Table 10 at para. 6.632) (emphasis original)) The European  Union  is correct in pointi ng out that the correct 
figure in relation to the one -month average yield prior to the Spanish A350XWB Convenio  is [BCI] found in 
Table 6 of the Panel Report, rather than [BCI], which is the clerical error  found  in Tables  7 and 10 of the Panel 
Report.  In response to questioning at the oral hearing, the United  States agreed that [BCI] is a clerical error . 
Consequently, f or purposes of the present Report, we proceed on the basis of the correct figure mentioned by 
the Panel in Table 6: [BCI]. 
881 Panel Report, para. 6.794.  
882 Panel Report, para. 6.822. (emphasis original)  WT/DS316/AB/RW  
 
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  5.352.   The Panel therefore considered that compliance under Article 7.8 of the SCM  Agreement 
can be achieved  only if "an implementing Member no longer causes adverse effects through the 
use of subsidies, within the meaning of Article 5 of the SCM  Agreement. "883 According to the Panel, 
"the passive  'expiry' events the European  Union relie{d}  upon as the sole basis  to demonstrate 
that it ha {d} 'withdrawn ' the relevant subsidies for the purpose of Article  7.8 {could not}  be 
characterized as such, because the very same subsidies were found in the original  proceeding to 
cause adverse effects over a period of time that followed the full or partial 'expiry' of  almost all of 
those subsidies."884 Based on its analysis, while the Panel agreed with the European Union that 
most of the pre-A380 LA/MSF subsidies885 had expired  before the adoption of the 
recommendations and rulings of the DSB in the original proceedings, it found that the 
European  Union nonetheless remained under an obligation to withdraw such expired subsidies by 
removing their adverse effects .886  
5.353.   The European Union requests us to reverse the Panel's findings on the ground that the 
Panel erred in its interpretation of Article 7.8 by requir ing that an implementing Member 
"remove  the adverse effects" of past subsidies irrespective  of whether such subs idies continued to 
exist in the implementation period.887 In the event that we reverse the Panel's interpretation of 
Article 7.8 and seek to complete the legal analysis, the United  States argues that the Panel erred 
in finding  that the French, German, and Sp anish LA/MSF subs idies for the A300B/B2/B4, 
A300-600, A310, A320, and A330/ A340, and the UK  LA/MSF subs idies for the A320 and 
A330/A340888 had "expired" prior to the beginning of the implementation period in this dispute.889 
For its part, the European  Union co nditionally appeals the Panel's rejection of its argument that t he 
French and Spanish LA/MSF subsidies for the A300B/B2 /B4, A300 -600, A310, A320, 
and A330/A340, and the UK LA/MSF subsidies for the A320 and A330/ A340 came to an end when 
Airbus completed rep ayment of the relevant financial contribution s.890 We will address 
the participants' claims on  appeal in turn below, beginning with the European Union's challenge to 
the Panel's interpretation of Article 7.8 of the SCM Agreement.  
5.4.2   Whether the Panel erred in i ts interpretation of Article 7.8 of the SCM Agreement  
5.4.2.1   Claims and arguments on appeal  
5.354.   The European  Union  claims  that the Panel erred in interpreting Article  7.8 of the 
SCM Agreement  to require  an implementing Member to "remove the adverse effects" of past 
subsidies irrespective  of whether such subsidies continue d to exist in the implementation period .891 
The European  Union  submits  that Article  7.8 provide s an implementing Member with the option 
either to "remove the adverse effects " or to "withdraw the subsi dy", and that withdrawal of a 
WTO-inconsistent measure, through expiry of that measure or otherwise, constitutes 
compliance.892 The European  Union contends that the Panel's interpretati on of Article  7.8 was 
driven not by the customary rules of interpretation  in Article  31 of the Vienna Convention on the 
                                                
883 Panel Report, para. 6.1085. 
884 Panel Report, para.  6.1102. (emphasis original)  
885 The Panel found that all pre -A380 LA/MSF subsidies had expired prior to the implementation period , 
save the LA/MSF subsidies for the A330 -200 and A340 -500/600. (Panel Report, para.  6.879 and fn 1547 
thereto) As discussed in below, we note that the Panel did not make findings specifically relating to the effects 
of these two subsidies. (See fn 2030 and  para. 5.719 of this Report)  
886 Panel Report, paras.  6.1078 -6.1103. The Panel found that the lives of most pre -380 LA/MSF 
subsidies expired prior to 1 June 2011, but considered that this "cannot alone  support a finding that the 
European  Union and certain me mber States have 'withdrawn' the relevant subsidies for the purpose of 
restoring conformity with their obligations under Article 5 of the SCM  Agreement." (Ibid., para. 6.1102 
(emphasis original)) On this basis, the Panel found that "the European  Union ha{d } failed to demonstrate that 
any of the subsidies challenged by the United  States in this compliance dispute have been 'withdrawn' for the 
purpose of Article 7.8 of the SCM Agreement." (Ibid., fn 1848 to para. 6.1104 (emphasis original))  
887 See European  Union's appellant's submission, para.  11 (quoting Panel Report, para.  6.822).  
888 Panel Report, paras.  6.872 -6.879.  
889 United States' appellee's submission, para. 8. For the condition underlying the appeal, see 
section  5.4.3 below.  
890 European Union's appellant 's submission, para. 191. For the condition underlying the appeal, see 
section 5.4.4 below.  
891 See European  Union's appellant's submission, para.  11 (quoting Panel Report, para.  6.822).  
892 European  Union 's appellant's submission, para. 30. WT/DS316/AB/RW  
 
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  Law of Treaties893, but instead "by its desire to avoid a particular outcome that it considered would 
make its findings in the original proceedings 'purely declaratory' in nature".894 The European  Union 
argues, ho wever, that the Panel's concern was not warranted, because it is not uncommon for 
temporarily lingering market effects of a WTO -inconsistent measure to persist following withdrawal 
of the measure.895 The European  Union highlights that, under the Panel's inte rpretation, 
temporarily lingering effects of a subsidy found to cause adverse effects must be removed even if 
the subsidy itself had been withdrawn, whereas for all other policy instruments withdrawal would 
suffice to achieve compliance  regardless of any l ingering effects in the market place.896 In the 
European  Union's view, this would raise significant systemic concerns, because actionable 
subsidies would face a "uniquely exacting compliance obligation" not present with regard to any 
other measure, including  prohibited subsidies.897 The European  Union  further contends that the 
Panel committed the following specific errors. First, the Panel's interpretation is not rooted in the 
terms of Article  7.8, nor supported by its context. Moreover, the Panel's interpretat ion collapses 
the substantive obligations under Article  5 of the SCM Agreement and the implementation 
obligations under Article  7.8, thereby depriving the terms of Article  7.8 of independent meaning.898 
The European  Union  adds that the Panel's interpretation is inconsistent with the design and 
structure of the SCM Agreement , and frustrates its object and purpose.899  
5.355.   By contrast, the  United  States  maintains  that the Panel correctly interpreted Article  7.8 in 
finding that a n implementing  Member has an ongoing compliance obligation under this provision  
with respect to adverse effects caused through the use of subsidies that have ceased to exist.900 
The United  States  further submits that the Panel rightly  recognized that the effec ts-based nature 
of the obligation imposed by Article  5 of the SCM Agreement  was critical to an understanding of 
the remedy contained in Article  7.8 of this Agreement.901 According to the United  States , 
the European  Union 's reading of Article 7.8  would allow Members to structure subsidies so that 
they cause adverse effects well beyond the end of the life of the subsidy, and then claim that they 
were in compliance with Article  7.8 after the relevant subsidy has come to an end . In the 
United  States' view, t his w ould allow a Member to use subsidies in the specific circumstances in 
which Article  5 seeks to prevent their use, contrary to the object and purpose of 
the SCM Agreement.902  
5.356.   In its third participant's submission,  Brazil supports the Panel's finding  that Article  7.8 of 
the SCM  Agreement should be interpreted to require an implementing Member  to come into 
conformity with its obligations under  Article  5 of the SCM Agreement .903 Referring to  the reasoning 
of the Appellate Body and the panel  in the original proceeding s904, Brazil  submits that an 
implementing Member may "withdraw " a subsidy found to have caused adverse effects "by taking 
affirmative action to modify the subsidy " or by allowing it "to expire, provided such modified or 
expired subsidies are no longer a genuine and substantial cause of adverse effects during the 
implementation period".905 
5.357.   Canada, in contrast,  maintains that the Panel's interpretation of Article  7.8 is 
"deeply  flawed".906 For Canada, the plain language of  Article  7.8 indicates that the existence of a 
subsidy is a prerequisite for a compliance obligation to exist under  this provision , and that 
compliance can be achieved by removing the relevant subsidy . According to  Canada, the context 
provided by Articles  4.7, 5, and 7.9 of the SCM Agreement , the restrictions on the application of 
countervailing duties under Part V of the SCM Agreement , and the general rules under the DSU , 
                                                
893 Done at Vienna, 23 May 1969, UN  Treaty Series, Vol. 1155, p.  331. 
894 European  Union 's appellant's submission, para. 109 (quoting Panel Report, paras.  6.840 
and 6.1094).   
895 European Union's appellant's submission, para. 113.  
896 European Union's appellant's submission, para.  123.  
897 European  Union 's appellant's submission, para. 122. 
898 European Union's appellant's submission, paras. 126 -181. 
899 European Union's appellant's submission, paras. 175 -186. 
900 United States' appellee's submission, para. 37.  
901 United States' appellee' s submission, para. 106.  
902 United States' appellee's submission, para. 139.  
903 Brazil's third participant's submission, para. 7. 
904 Brazil's third participant's submission, para. 10. 
905 Brazil's third participant's submission, para. 14. (fn omitted)  
906 Canada's third participant's submission, para. 22. WT/DS316/AB/RW  
 
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  all confirm that only a subsidy in existence during the implementation period is subject to a 
compliance obl igation under Article  7.8. In Canada's view,  the Panel erred in its interpretation of 
Article 7.8 by disregarding the express language of this provision , and by improperly relying on 
Article  5 of the SCM Agreement  and various provisions of the DSU to suppo rt its reading of 
Article  7.8. In so doing , the Panel  created significant uncertainty as to the obligations  that an 
implementing  Member has with respect of  subsidies that no longer exist.907 
5.358.   Along the same lines, China emphasizes  that the Panel's interpretation of Article  7.8 fails 
to give effective meaning to the treaty language in its relevant context and in light of the object 
and purpose of this Agreement , and is not supported by WTO case law. In China's view, 
by requiring tha t the implementing Member achieve compliance with Article  5 by removing adverse 
effects regardless of whether a subsidy continues to exist , the Panel effectively eliminate d the 
option to withdraw the subsidy in Article  7.8.908 China contends that none of the  provisions of the 
DSU referred to by the Panel support the view that a Member that has withdrawn a 
WTO-inconsistent measure is subject to an additional obligation to remove any lingering effects of 
that measure. Finally, China argues that the WTO disputes  cited by the Panel do not lend support 
to its interpretation  of Article  7.8 because they do not provide the answer to the core issue in this 
dispute, namely, whether the implementing Member has an obligation to remove adverse effects 
with respect to subsi dies that are no longer granted or maintained.909 
5.359.   For its part, Japan contends that the withdrawal of a subsidy would require that the benefit 
be extinguished. According to Japan, the existence of a benefit to the recipient of a subsidy is 
crucial for the su bsidy to cause adverse effects. Thus, for Japan, the adverse effects of a subsidy 
cease once the benefit has been removed and the recipient is no longer able to lower the price of 
products through the use of the subsidy .910  
5.360.   Having recalled the arguments of the participants and third participants, we turn to 
examine the interpretative issue raised by the European Union in this appeal, namely, whether an 
implementing Member has a compliance obligation under Article 7.8 of the SCM Agreement  with 
respect to subs idies that had ceased to exist prior to the beginning of the implementation period.  
5.4.2.2   Interpretation of Article  7.8 of the SCM Agreement  
5.361.   Our analysis commences with the text of Article 7.8 of the SCM Agreement, construed 
within its context and in light of th e object and purpose of the SCM Agreement. Article  7.8 states : 
Where a panel 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 appropriate steps to remove the adverse effects or shall withdraw the 
subsidy .911 
5.362.   Article 7.8 consists of two clauses. The introductory  clause refers to  circumstances where a 
subsidy is fo und, in an adopted panel or Appellate  Body report , to have "resulted in adverse effects  
to the interests of another Member ". The second clause then specifies  that, in such a situation , 
"the Member granting or maintaining such subsidy " may come into complia nce with its obligations 
under the SCM Agreement in one of two alternative ways: (i) it may either "take appropriate steps 
to remove the adverse effects"; or (ii) it may "withdraw the subsidy".912 The use of the word "or" 
in the context of the second clause of Article  7.8 suggests that the Member concerned may 
implement the recommendations and rulings of the DSB under Part  III of the SCM  Agreement by 
choosing either of these alternative pathways to achieving compliance.  
                                                
907 Canada's third participant's submission, para.  74. 
908 China's third participant's submission, para. 20.  
909 China's third participant's submission, paras.  11-55. 
910 Japan's third participant's submission, paras.  11 and 14.  
911 Emphasis added.  
912 See Appellate  Body Report, US – Upland Cotton  (Article  21.5 – Brazil) , para. 236. WT/DS316/AB/RW  
 
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  5.363.   Regarding the reference in Article 7.8 to "granting or maintaining" a subsidy, we note the  
European Union's position that these words should be understood in the present continuous tense. 
According to the European Union, this language in Article  7.8 suggests that "an implementing 
Member has exh austed its compliance obligations under Article  7.8 with regard to any subsidy that 
is no longer being granted or maintained, for example because that subsidy has expired ."913 The 
United States, by contrast, argues that the words  "granting or maintaining" in Article 7.8 can also 
be understood as present  participles that relate to the act of "granting or maintaining" a subsidy 
found  to have occurred  in the original proceedings, rather than as meaning  that such action must 
be shown to continue into the implem entation period.914 
5.364.   As noted, Article 7.8 of the SCM  Agreement expressly refers  to the "granting or 
maintaining" of a subsidy found to have  caused  adverse effects to the interests of anoth er 
Member. As we see it , these terms  indicate that Article 7.8 reflect s an obligation to cease  any 
conduct amounting to the "granting  or maintaining" of subsidies that cause adverse effects.915 
This is true regardless of whether the words "granting or maintaining" in Article 7.8 are understood 
in the present continuous tense, or as present  participles qualifying the term "Member". 
Indeed , Article  7.8 sets out an obligation "of a continuous nature, ext ending beyond subsidies 
granted in the past".916 Moreover , the object  of the action of "granting or maintaining" is the 
"subsidy" that causes adverse effects. In the light of this language in Article 7.8 , we find it difficult 
to see how a Member could be sai d to be "granting or maintaining " a subsidy  giving rise to a 
compliance obligation if that subsidy has expired and therefore n o longer exists . 
5.365.   The Panel appears to have acknowledged as much when it stated that "a  Member cannot 
be said to be 'granting  or ma intaining' a subsidy that no longer exists" .917 The Panel added that 
"the text of Article  7.8 may arguably be viewed to suggest that a Member found to have caused 
adverse effects through the use of a subsidy would have no obligation to 'take appropriate step s to 
remove the adverse effects' or 'withdraw the subsidy' if the subsidy at issue no longer exist{ed}  at 
the time of the DSB's adoption of the adverse effects findings."918 However, without further 
analysi s of Article  7.8, the Panel expressed the view that compliance under this provision can be 
achieved only if the "implementing Member no longer causes adverse effects through the use of 
subsidies"919 – regardless  of whether those subsidies had expired due to the passage of time.  
The Panel added that "the  mere 'removal' or 'taking away' of the relevant measure, in the sense of 
its termination, may not bring an end to the undesired trade  effects" and may therefore 
"be insufficient to establish that the 'withdrawal' … has been achieved".920 On this basis , the Panel 
interpreted the option to "withdraw the subsidy" in Article 7.8 "to refer to any conduct on the part 
of an implementing Member in relation to the subsidy  found to cause adverse effects, which brings 
that Member into conformity with its obligations under Ar ticle 5 of the SCM Agreement".921 
The Panel thus understood "withdraw al" to require, in each case , that the implementing Member 
"remove the adverse effects" of any past subsidies, regardless of whether such subsidies had 
expired. As detailed below, we have s everal concerns with the interpretative analysis carried out 
by the Panel.  
5.366.   Regarding  the ordinary meaning of the word "withdraw", we note that the relevant 
dictionary definitions of this 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".922 This suggests  that withdrawal of a subsidy, under Article  7.8 of the SCM Agreement , 
                                                
913 European Union's appellant's submission, para. 38.  
914 United States' appellee's submission, para. 55.  
915 We note in this regard the Appe llate Body's statement that " Article  5 reflects the notion that it is the 
causing, through the use of any subsidy, of adverse effects, rather than the granting of the subsidy that is the 
situation that is addressed by that provision."  The Appellate Body ad ded that  "Part III {of the SCM Agreement} 
generally is concerned with a situation that continues over time, rather than with specific acts. " 
(Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 681 (fn  omitted) ) 
916 Appellate Bo dy Report, US – Upland Cotton (Article 21.5 – Brazil) , para. 237.  
917 Panel Report, para. 6.802.  
918 Panel Report, para. 6.802. (emphasis original)  
919 Panel Report, para. 6.1085. 
920 Panel Report, para. 6.1088.  
921 Panel Report, para. 6.1098.  (emphasis original)  
922 Shorter Oxford English Dictionary , 6th edn, A.  Stevenson (ed.) (Oxford University Press, 2007), 
Vol. 2, p. 3652.  WT/DS316/AB/RW  
 
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  concerns the taking away  of that subsidy , and thus that a Mem ber "granting or maintaining" 
a subsidy cease such conduct . In order to withdraw a subsidy, 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 i t no longer qualifies as a subsidy . The Panel reasoned in 
this regard that it should be possible to find t hat an implementing Member has "withdrawn" – 
i.e. "taken away"  – "a subsidy found to cause adverse effects when the terms or conditions of that 
subsid y have been modified  in a way that ensures it no longer causes adverse effects. "923 
However, it is not clear to us how an implementing Member could modify the terms and conditions 
of subsidies that no longer exist. Moreover, while the pathway identified by t he Panel – 
i.e. modification of the terms or conditions of a subsidy in a way that ensures it no longer causes 
adverse effects  – may provide one way for an implementing Member to come into compliance with 
its obligations under Article 7.8, we do not see ho w it would effectively differ from the other 
compliance option provided for under this provision: the option of taking "appropriate steps to 
remove the adverse effects" . 
5.367.   This second option for compliance under Article 7.8 refers to an approach where an 
implementing Member may come into conformity with its obligations under this provision 
"without  taking any specific action in relation to the subsidy  found to cause adverse effects".924 
As noted by the Panel, an implementing  Member might choose, for example, t o adopt 
"WTO -consistent regulatory, policy or other initiatives that would alter the effects of a subsidy in 
the marketplace".925 It is also conceivable that  such "steps"  could encompass  actions in relation to 
the subsidy itself , such as those described above . 
5.368.   That said, the compliance options under Article 7.8 carry distinct meaning, as is made 
clear by the use of word "or" in Article 7.8. Indeed, the Appellate Body has emphasized that a  
panel must "assess whether the Member concerned has taken one of the actions foreseen in 
Article  7.8".926 A Member is not required to "take appropriate steps to remove the adverse effects" 
of a subsidy and to "withdraw" the same subsidy . Rather, either of these actions can achieve 
compliance. We therefore find it trou bling that the Panel's reading of Article 7.8 appears to reduce 
and collapse these two implementation options into a single option that is concerned with the 
removal of any adverse effects caused by any subsidies.   
5.369.   In order to justify its reading of Articl e 7.8 of the SCM Agreement , the Panel referred to 
"the context and object and purpose of Article  7.8".927 In this regard, we note that t he title of 
Article 7  of the SCM  Agreement is  "Remedies", which situates Article 7.8  within a broader range  of 
provisions applicable to disputes regarding actionable subsidies that have been found to be 
inconsistent with Articles 5 and 6 of this Agreement . Moreover, Article  7.8 refers  expressly to 
"adverse effects … within the meaning of Article  5", which states  that "{n}o Me mber should cause, 
through the use of any subsidy  referred to in paragraphs  1 and  2 of Article  1, adverse effects  to 
the interests of other Members".928  
5.370.   As we see it, Article  5 and Article  7.8 of the SCM  Agreement concern two related but 
distinct inquir ies: while the former seeks to establish the existence of adverse effects and the 
causal link between any subsidy and the adverse effects found to exist, the latter specifies the 
compliance actions to be taken  by a Member granting or maintaining a subsidy found to have 
caused or to cause adverse effects. The Panel's analysis of Article  5 appears to blur the distinction 
between these two provisions and, as the European  Union suggests, to "collapse{} the substantive 
obligations under Article  5 and the implemen tation obligations under Article  7.8".929 We note in 
particular that , in its analysis of the compliance obligations that an implementing Member has 
under Article 7.8, the Panel relied heavily on what it characterized as the "effects -based nature" of 
                                                
923 Panel Report, para. 6.1098. (italics original; underlining added)  
924 Panel Report, para. 6.1099.  (emphasis original)  
925 Panel Report, para. 6.1099.  
926 Appellate  Body Report, US – Upland Cotton  (Article  21.5 – Brazil) , para. 235. (emphasis added)  
927 Panel Report, para. 6.803.  
928 Emphasis added.  
929 European  Union 's appellant's submission, para. 164. WT/DS316/AB/RW  
 
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  Article 5 of the SCM Agreement.930 The Panel referred in particular to the  following passage of the 
Appellate Body report in  EC and certain member States  – Large Civil Aircraft : 
Article  5 of the SCM  Agreement  imposes an obligation on Members not to cause 
adverse eff ects to the interests of other Members through the use of any subsidy as 
defined in Article  1. We disagree with the proposition that this obligation does not 
arise in respect of subsidies that have come to an end by the time of the reference 
period. In fac t, we do not exclude that, under certain circumstances, a past subsidy 
that no longer exists may be found to cause or have caused adverse effects that 
continue to be present during the reference period .931 
5.371.   This passage r ecognize s that a subsidy and its effec ts need not be contemporaneous.932 
Contrary to what the Panel appears to have assumed, it does not follow from this that the effects 
of a subsidy can be detached from the subsidy itself such that these effects  could be subject to a 
separate compliance obligation under Article  7.8. When a subsidy has expired such that it is no 
longer in existence,  we cannot see how a compliance obligation could still apply to lingering effects 
of such a past subsidy. Rather, wha t is relevant for Article  5, as well as for Article 7.8,  is the 
causing of adverse effects through the use of the  subsidy. While  a past subsidy that no longer 
exists may "be found to cause or have caused adverse effects that continue to be present during 
the reference period"933, the source  of the inconsistency under Article 5 is nonetheless the subsidy  
that causes adverse effects.  The option to "withdraw the subsidy" under Article 7.8 contemplates 
action  in relation to the subsidy found to have caused advers e effects . To the extent that the 
underlying subsidy has ceased to exist, there is no additional req uirement, under Article 7.8, 
to remove any lingering effects that may flow from that subsidy.  We therefore disagree with the 
Panel that it follows from the so-called "effects -based nature" of the discipline of Article  5 that an 
implementing Member would have a compliance obligation under Article  7.8 regardless of whether 
the subsidy continues to exist .934 
5.372.   The United  States  contends that Article  7.8 is "a means  by which to achieve the  objective 
of full compliance with Article  5"935, and that the Panel was correct in recognizing that Article  5 
provides critical context for interpreting Article  7.8. According to the United  States , 
the European  Union 's interpretation  of Article  7.8 "divorce {s}" this provision from Article  5936, 
and would mean that a Member that is causing adverse effects th rough the use of a subsidy 
"has different substantive obligations at different stages of a proceeding".937 Specifically, in original 
proceeding s, Article  5 would require a Member not to cause adverse effects through the use of any 
subsidies, including expired subsidies, but , in compliance proceeding s, Article  7.8 would apply in 
isolation, and a Member that causes adverse effects through the use of expired subsidies would 
have no WTO  obligation.  
5.373.   As discussed, Article  5 is concerned with the causing of adverse effects through the "use" 
of subsidies. An analysis under Article  5 seeks to determine whether a Member has caused adverse 
effects t o the interests of another Member through the use of such subsidies. For purposes of such 
a finding, the Appellate  Body has made clear that a finding of "present" subsidization is not 
necessary to establish that a subsidy has caused such adverse effects.938 In contrast, Article  7.8 is 
                                                
930 Panel Report, para. 6.820.  
931 Panel Report, para. 6.820 (quoting Appellate  Body Report, EC and certain member States  – Large 
Civil Aircraft , para. 712 ( original italics omitted; emphasis added by the Panel)).  
932 Although there may be a time lag between the provision of a subsidy and its effects, the 
Appellate  Body emphasized that the "effects of a subsidy will ordinarily dissipate over time and will end at 
some point after the subsidy has expired. Indeed, as with a subsidy that has a finite life and materializes over 
time, so too do the effects of a s ubsidy accrue and diminish over time." (Appellate  Body Report, EC and certain 
member States  – Large Civil Aircraft , para.  713) 
933 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 712. 
934 Panel Report, para. 6.822.  (emphasis o mitted)  
935 United  States ' appellee's submission, para. 114. (emphasis original)  
936 United  States ' appellee's submission, para. 112. 
937 United  States ' appellee's submission, para. 115. 
938 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 712. The 
Appellate  Body found  that "the requirement {under Articles 5 and 6 of the SCM Agreement } that the effects of 
subsidies be felt in the reference period, does not mean that the subsidies, and in particular the benefit 
conferred, must  also be present during that period" . (Ibid.)  WT/DS316/AB/RW  
 
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  concerned with the continued existence of "such subsid {ies}". This difference between Article  5 
and Article  7.8 does not mean that a Member "has different substantive obligations at different 
stages of a proceeding".939 Rather, a Member is always under the obligation to ensure that it does 
not grant or maintain subsidies that cause adverse effects, within the meaning of Article  5 of the 
SCM Agreement. However , a finding of inconsistency under Article  5 need not always trigger the 
obligation to "take appropriate steps to remove the adverse effects or  … withdraw the subsidy" as 
stipulated in Article  7.8. This is because, by its terms , Article  7.8 is concerned only with subsidies  
that the Member is  "granting or maintaining"  in the implementation period . In assessing 
conformity under this provision , a panel's analysis should focus on the subsidies that continue to 
exist in the post -implementation period . Depending on the particularities of a given case, it may be 
relevant for  the panel to consider the effects of past subsidies  under Articles 5 and 6 ; however, 
not in order to determine whether they cause "adverse effects"  in the post -implementation period , 
but rather as part of a matrix of analysis that seeks to identify the ef fects of subsidies that have 
not been withdrawn, and in respect of which the implementing Member continues to have a 
compliance obligation under Article 7.8.  
5.374.   Referring to  the Appellate  Body report  in US – Upland Cotton  (Article  21.5 – Brazil) , 
the Panel em phasized that "the scope of Article  7.8 should not be interpreted in a way that would 
render adverse effects findings made in original proceedings merely 'declaratory in nature', as this 
would preclude a complaining Member from obtaining relief from the ad verse effects caused by a 
Member's use of subsidies in violation of its substantive obligations."940 The Panel's reliance on this 
statement by the Appellate Body is misplaced. The Appellate Body was not suggesting that an 
implementing Member has a compliance  obligation with respect to  a subsidy or subsidies that no 
longer exist.  Rather, the Appellate Body noted that  the obligation under  Article  7.8 would extend  
to recurring annual payments  "maintained " by the respondent beyond the original reference 
period .941 The Appellate  Body's reasoning in that dispute highlight s the prospective nature  of 
remedies in WTO dispute settlement, as well as the fact that , ultimately , the source of 
inconsistency is the "granting or maintaining" of subsidies that cause adverse effe cts. It is in 
respect of such "granting or maintaining"  that the findings made by an original panel require 
cessation . Under our reading of Article  7.8, a complaining Member therefore can obtain relief in the 
form of a prospective remedy.  
5.375.   Referring to a st atement by the Appellate Body in China – Raw Materials , the Panel 
expressed the view that a panel could be expected to make  recommendations with respect to 
expired measures "whenever necessary to ensure that an effective remedy is made available to a 
compl aining Member seeking to put an end to ongoing infringements  of the covered 
agreements."942 The Panel also referred to the panel's recommendation in EC – Commercial 
Vessels  that the European  Union  bring a measure that had formally expired into conformity wit h its 
obligations under the DSU to the extent that the measure was still operational.943 We see nothing 
objectionable per se  in these statements by the Panel. Indeed, in  China – Raw Materials , the 
Appellate Body noted that a  recommendation by a panel "is prospective in nature in the sense that 
it has an effect on, or consequences for, a WTO Member's implementation obligations that arise 
after the adoption of a panel and/or Appellate Body report by the DSB."944 As noted , Article  7.8 of 
the SCM Agreement  requires the cessation of ongoing conduct consisting of the "granting or 
maintaining" of subsidies that  are causing adverse effects. It does not follow from the fact that the 
findings and recommendations by a panel seek to put an end to " ongoing  infringements"945, 
that withdrawal of a subsidy under the SCM Agreement  can be found to have occurred only to the 
extent that the subsidy no longer causes adverse effects.   
                                                
939 United  States ' appellee's submission, para. 115. 
940 Panel Report, para. 6.819.  
941 Appellate  Body Report, US – Upland Cotton ( Article  21.5 – Brazil) , para. 237. The Appellate Body 
highlighted that effective comp liance under Article 7.8 would not permit a situation in which "the adverse 
effects of subsequent payments would simply replace the adverse effects that the implementing Member was 
under an obligation to remove." (Ibid. See also paras. 238, 241, and 245)  
942 Panel Report, para. 6.833. (emphasis original)  See also para. 6.831 (referring to Appellate  Body 
Reports, China – Raw Materials , paras. 263 -265).  
943 Panel Report, para. 6.835.  
944 Appellate  Body Reports, China – Raw Materials , para. 260. 
945 Panel Report, para. 6.833. (emphasis original)  WT/DS316/AB/RW  
 
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  5.376.   Our reading of Article  7.8 also finds support in the relevant provisi ons under Part II of the 
SCM Agreement, entitled "Prohibited Subsidies", comprising Article s 3 and 4. Article  3.1 provides 
that subsidies contingent upon export performance (Article  3.1(a)) or upon the use of domestic 
over imported goods (Article  3.1(b)) " shall be prohibited". Article  3.2 further provides that 
"{a} Member shall neither grant nor maintain subsidies referred to" in Article  3.1. Article  4, 
like Article  7 of the SCM  Agreement, is entitled "Remedies", and sets out the rules for dispute 
settlemen t involving prohibited subsidies referred to in Article  3. Article  4.7 provides that, "{i}f the 
measure in question is found to be a prohibited subsidy, the panel shall recommend that the 
subsidizing Member withdraw the subsidy without delay". Article  4.7 does not require removal of 
the effects of such subsidies . Rather, withdrawal under Article  4.7 seeks to  eliminate the so urce of 
the inconsistency, namely, the condition that is prohibited under Article 3.1(a) or 3.1(b) . Similarly,  
Article  7.8 addresses th e source of the infringement found to exist , and requires cessation of 
conduct consisting of the granting or maintaining of subsidies that cause adverse effects . It would 
be incongruous, in our view, if elimination of the source of the inconsistency were s ufficient to 
comply with an implementing Member's obligations in the context of Article 4.7, but not in the 
context of Article 7.8.  
5.377.   It is also useful in this regard to consider the rules that apply to the imposition of 
countervailing duties under Part V of  the SCM Agreement . While serious prejudice can only be 
addressed through countermeasures imposed under Part III, subsidies that cause injury to the 
domestic industry can be addressed either  through countermeasures imposed under Part III or 
through countervailing duties under Part V.  
5.378.   With regard to the imposition of countervailing duties, Article 19.1 of the SCM Agreement 
stipulates that countervailing duties may be imposed on subsidized imports "unless the subsidy or 
subsidies are withdrawn ." Hence , under Part V of the SCM Agreement, remedial action is 
contemplated with respect to subsidies that cause injury to the domestic industry . As we see it, 
the same is true in the context of Part III of the SCM Agreement, where the inconsistency to be 
remedie d relates to subsidies  that constitute a genuine and substantial cause of adverse effects 
during the implementation period.946 Thus, the inconsistency does not  relate to only the effects, 
as the Panel seems to have suggested, but rather to the action of usin g subsidies  in a way that 
causes adverse effects.  
5.379.   Looking beyond the SCM Agreement to context provided by other covered agreements , we 
note that Article  7.8 of the SCM Agreement is one of the " special or additional rules and 
procedures on dispute settlemen t contained in the covered agreements " that are identified in 
Article  1.2 and Appendix 2 of the DSU, which prevail over the general DSU rules and procedures to 
the extent that they " cannot  be read as complementing  each other" .947 In this regard, we are 
conce rned with the Panel 's decision to resort to context provided by various  provisions of the DSU 
without considering properly  the context ual relevance of provisions in other parts of the 
SCM Agreement. This is especially so because, as a "special or additional rule {}" on dispute 
settlement in the SCM  Agreement, Article  7.8 must be properly understood in the particular 
context of disputes involving subsidies.  
5.380.   We recall that  "the first objective of the dispute settlement mechanism is usually to secure 
the withdrawal of the measures concerned if these are found to be inconsistent with the provisions 
of any of the covered agreements".948 This suggests that, in WTO dispute settlement, the source of 
an infringement of an obligation under  the covered agreements  is the measure itself. Moreover, 
where a measure is found to be inconsistent with a covered agreement, the first sentence of 
Article  19.1 of the DSU provides that a panel or the Appellate  Body shall recommend that the 
Member concerned "bring the measure i nto conformity with that agreement".949 These provisions, 
read together, suggest  that it is the measure  that lies at the heart  of WTO dispute settlement, 
and that conformity with the covered agreements may be achieved through "the withdrawal of the 
                                                
946 See Canada's third participant's submission, para. 60; China's third participant's submission, 
paras.  32-36. 
947 Appellate  Body Report, Guatemala – Cement I , para. 65. (emphasis original)  
948 Article 3.7 of the DSU.  
949 Footnot e omitted.  WT/DS316/AB/RW  
 
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  measures concerned". Indeed, referring to Articles 19.1 and 21.1 of the DSU, the Panel recognized 
that the source of the infringement is the WTO -inconsistent measure itself.950  
5.381.   In the specific context of the SCM Agreement , Article 7.8 provide s special or additional 
rules on how conformity with this Agreement may be achieved. As noted , withdrawal of the 
measure need not be the only way to comply, as the subsidizing Member could also come into 
compliance by taking appropriate steps to "remove the adverse ef fects" while maintaining the 
subsidy. At the same time, withdrawal of the subsidy itself remains a remedy against the 
infringement, as it leads to fulfilment of the first objective of the dispute settlement mechanism 
set out in Article  3.7 of the DSU  – i.e. withdrawal of the measure concerned. This further supports 
our understanding that, where  the relevant measure – the subsidy found to have caused adverse 
effects – has ceased to exist , a Member is no longer obligated under Article  7.8 of the 
SCM Agreem ent to take further steps to remove the adverse effects caused by the subsidy. In this 
respect, w e share Canada's view that "{a}  requirement to remove the adverse effects of an 
actionable subsidy that no longer exists would transform this flexibility in ac hieving compliance 
into an additional, affirmative obligation not seen elsewhere in the covered agreements."951 
5.382.   The Appellate  Body has stated that the object and purpose of the SCM Agreement  is to 
"strengthen and improve GATT  disciplines relating to the use of both subsidies and countervailing 
measures"952, and that the SCM Agreement  "reflects a delicate balance between the Members that 
sought to impose more disciplines on the use of subsidies  and those that sought to impose more 
disciplines on the application of countervailing measures ".953 As discussed above, the Panel's 
reading of Article 7.8 would effectively mean that countermeasures could be imposed under 
Part III of the SCM Agreement to counteract "injury to the domestic industry", within the meaning 
of Art icle 5(a) of the SCM Agreement, regardless  of whether the subsidy at issue has been 
withdrawn. At the same time, countervailing duties cannot be imposed, in the context of Part V of 
the SCM Agreement, to the extent that the underlying subsidy has been with drawn.954 
Moreover,  as discussed, the Panel considered that  the removal of the subsidy at issue would 
constitute compliance in the context of subsidies prohibited under Part II, but not in the context of 
Part III of the SCM Agreement,  where removal of the ef fect of the subsidy would in each case be 
required regardless of whether the Member concerned would still be granting it. In our view, s uch 
an approach to different disciplines that apply under the SCM Agreement lacks coherence, and is, 
in this sense, inco mpatible with its object and purpose. Moreover , the Panel's reading of Article 7.8 
would appear to  result in considerable uncertainty as to the responsibility of Members with respect 
to subsidies that no longer exist . Indeed, the effects of subsidies may w ell persist  even after the 
subsidies themselves have ceased to exist . For example, they may "result in the protection, 
creation, or growth of industries that woul d otherwise be less competitive ".955 Yet, Article  7.8 does 
not speak to such effects in isolation; rather , it requires cessation of any ongoing conduct 
consisting of the "granting or maintaining" of subsidies found to cause adverse effects.956 
Thus,  while expired subsidies can give rise to adverse effects, there is no requirement under 
Article 7.8 to remove the se effects .  
5.383.   In light of the foregoing, we find that the obligation to "take appropriate steps to remove 
the adverse effects or … withdraw the subsidy" concerns the subsidies that continue to be 
"grant {ed} or maintain {ed}" by the implement ing Member at the end of the implementation 
period. An implementing Member cannot  be required to withdraw a subsidy that has ceased to 
exist. Nor do we see a basis, under Article  7.8 of the SCM Agreement , to require that an 
implementing Member "take approp riate steps to remove the adverse effects" of subsidies that no 
longer exist. Accordingly, we reverse  the Panel's interpretation of Article  7.8 of the 
SCM Agreement whereby an implementing Member would be  required to "withdraw" or 
                                                
950 Panel Report, para. 6.807.  
951 Canada's third participant's submission, para. 70. 
952 Appellate  Body Report, US – Softwood Lumber IV , para. 64.  
953 Appellate  Body Report, US – Countervailing Duty Investigation on DRAMS , para. 115. (emphasis 
added)  
954 Article 19.1 of the SCM Agreement specifies that countervailing duties may be imposed, under 
certain conditions, "unless the subsidy or subsidies are withdrawn".  
955 European  Union's response to Panel question No. 46(a), para. 122.  
956 See Appellate Body Reports, US – Upland Cotton (Article 21.5 – Brazil) , fn 494 to para. 243; 
US ‒ Zeroing (EC) (Article 21.5 – EC), para. 299.  WT/DS316/AB/RW  
 
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  "remove  the adverse effec ts" of past subsidies irrespective  of whether such subsidies have expired 
prior to the end of the relevant implementation period.957 It follows from our finding that, in the 
present dispute, the European  Union has no compliance obligation with respect to subsidies that 
expired before 1  December  2011.   
5.4.3   Whether the Panel erred in finding that the ex ante  "lives" of certain LA/MSF 
subsidies had expired – conditional appeal by the United States  
5.384.   This brings us to the  United States' conditional appeal of the Pa nel's finding that the 
ex ante "lives" of several challenged LA/MSF subsidies had expired by 1 December 2011  and that 
they had therefore ceased to exist.958 In particular, the United States requests us to reverse the 
Panel's finding that the ex ante "lives" of the following pre -A380 LA/MSF  subsidies had expired 
before  1 December 2011: the French, German, and Spanish LA/MSF subsidies for the 
A300B/B2/B4, A300 -600, A310, A320, and A330/ A340, and the UK  LA/MSF subsidies for the A320 
and A330/ A340.959 In the event that we reverse these findings, the United States further requests 
that we determine that  the French, German, Spanish, and UK LA/MSF subsidies for the A320 and 
A330/ A340 had not expired before the end of the impl ementation period on 1  December  2011.960 
Moreo ver, in the event that  we find  that the expiry of a subsidy after the end of the 
implementation period  constitute s withdrawal within the meaning of Article  7.8 of the 
SCM Agreement , the United  States  also appeals the Panel's finding that the LA/MSF for the  
A330-200 and A340-500/600 expired in , respectively,  [BCI] and [BCI].961  
5.385.   In addressing the issues raised by the United States in its conditional appeal, we recall 
briefly the Appellate Body's findings regarding the  concept of the "life" of a subsidy. In the  original 
proceedings, the European  Union  claimed that Articles 1, 5, and 6 of the SCM Agreement  require a 
demonstration of a "continuing" or "present" benefit during the reference period chosen for a 
serious prejudice analysis. The Appellate  Body noted th at this cl aim concerned the issue of 
"how an assessment of the benefit conferred under Article  1.1(b) of the SCM  Agreement relates to 
the adverse effects analysis that must be conducted by a panel pursuant to Articles 5 and 6".962 
Upon examining the text of Article 1.1 of the SCM Agreemen t and its relevant context, 
the Appellate  Body stated:  
The ordinary meaning of Article  1.1, read in the light of Article  14 of the 
SCM Agreement, confirms … that a benefit analysis under Article  1.1(b) is 
forward -looking and focuses on future  projections . 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 expe cted 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 
                                                
957 Panel Report, para.  6.822.   
958 United  States ' other appellant's submission, para. 8. 
959 United States' other appe llant's submission, para. 8 (referring to Panel Report, paras.  6.794 
and 7.1.d.ii-iii).  
960 United  States ' other appellant's submission, paras.  8, 17, and 18.  
961 United States' other appellant's submission, fn 15 to para. 8, and fn 35 to para. 17. The 
United  States submits that, "if the Appellate Body were to find that the passive 'expiry' of LA/MSF for the 
A340-500/600 {after 1 December 2011} constitutes 'withdrawal' for purposes of Article  7.8 of the 
SCM Agreement, the United States conditionally appe als the Panel's finding that that tranche of LA/MSF 
expired in [BCI]". (Ibid., fn 15 to para. 8 (referring to Panel  Report, Table 11  and para. 7.1.d.iii)) In  footnote 
1547 to paragraph 6.879, and in paragraph 7.1.d.iii of its Report, however, the Panel found that the ex ante  
"lives" of the LA/MSF subsidies for both the A330 -200 and the A340 -500/600 had expired after the end of the 
implementation period. In light of this Panel finding, and the United  States' clarification at the oral hearing, we 
understand that the United States' appeal of the Panel's finding on the ex ante "life" of the A330 -200 LA/MSF, 
like its appeal relating to the A 340-500/600 LA/MSF, is also subject to the additional condition that we find that 
expiry after the end of the implementation period constitutes withdrawal for purposes of Article 7.8 of the 
SCM Agreement.  
962 Appellate  Body Report, EC and certain member Sta tes – Large Civil Aircraft , para. 701. (emphasis 
omitted)  WT/DS316/AB/RW  
 
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  these inputs or assets; whether the subsidy is large or small; and the peri od of time 
over which the subsidy is expected to be used for future production .963  
5.386.   The Appellate Body further considered 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."964 
The Appellate Body added that  the ex ante  "life" of a subsidy, as projected at the time of its grant, 
may be affected by subsequent "intervening even ts". As the Appellate  Body explained : 
At the time of the grant of a subsidy, the subsidy will necessarily be projected to have 
a finite life  and to be utilized over that finite period . In order properly to assess a 
complaint under Article  5 that a subsidy causes adverse effects, a panel must take 
into account that a subsidy provided accrues and diminishes over time, and will have 
a finite life. The adverse effects analysis under Article  5 is distinct from the "benefit" 
analysis under Article  1.1(b) of the SCM Agreement and there is consequently no need 
to re -evaluate under Article  5 the amount of the benefit conferred pursuant to 
Article  1.1(b). Rather, an adverse effects analysis under Article  5 must consider the 
trajectory of the subsidy as it was projected  to materialize over a certain period at the 
time of the grant. Separately, where it is so argued, a panel must assess whether 
there are "intervening events" that occurred after the grant of the subsidy that may 
affect the projected value of the s ubsidy as determined under the ex ante analysis. 
Such 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.965 
5.387.   Thus, the Appellate Body considered that a panel's analysis of the adverse effects must 
take into account "how the subsidy has materialized over time ".966 These  findings of the 
Appellate  Body set out the conceptual framework for understanding  the "life" of a subsidy. 
Under  this framework, it is relevant "to examine the trajectory of the life  of a subsidy" from both 
an ex ante perspective and from the perspective  of intervening events .967 The ex ante  analysis 
concerns "how the subsidy is affected  … by the depreciation of the subsid y that was projected" 
at the time it was granted , and the analysis of intervening events  involves the evaluation of events 
that occurred  after the grant of the subsidy that may affect the projected value  of the subsidy as 
determined under the ex ante analy sis.968 Furthermore, i n its examination of the claims of serious 
prejudice under Article  5 of the SCM Agreement , the Appellate  Body identified certain  factors that 
may be relevant to assessing t he "trajectory of the life of a  subsidy":  
{I}n order properly to assess a claim under Article  5 of the SCM  Agreement, a panel  
must take into account in its ex ante analysis how a subsidy is expected to materialize 
over time. A panel is also required to consider whether the life of a subsidy has en ded, 
for example, by reason of the amortization of the subsidy over the relevant period or 
because the subsidy was removed from the recipient. …  
Although we neither endorse nor reject the specific amortization methodology 
proposed by the European  Union  in this case, we see no reason to disagree with the 
notion that allocation of a subsidy over the anticipated marketing life of an aircraft 
programme may be one way to assess the duration of a subsidy over time.969 
                                                
963 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 707. 
(italics  original and omitted; underlining added; fn omitted ) 
964 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 708. 
965 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 709. ( original 
emphasis omitted; emphasis added)  
966 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 710. (emphasis 
added)  
967 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 714. (emphasis 
added)  
968 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 710. 
969 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , paras.  1236 and 1241, 
respectively.  (italics and fn omitted)  WT/DS316/AB/RW  
 
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  5.388.   The Appellate  Body thus  noted that  the allocati on of a subsidy over the anticipated 
marketing life of an aircraft project  may constitute  one way of assessing the expected duration  of 
a subsidy, and that subsequent events , such as "removal" of the subsidy , may also be relevant  for 
assessing whether the "life" of a subsidy has ended .  
5.389.   In these compliance proceedings, the Panel began its review of the United States' claim 
that the European Union had failed to withdraw the LA/MSF subsidies at issue by considering the 
European Union's argument that the ex an te "lives" of several challenged subsidies had expired 
due to the amortization of benefit. Referring to the Amortization Report970 issued by 
PricewaterhouseCoopers (PwC Amortization Report), the European Union had advanced before the 
Panel two ways of determ ining the "lives" of the challenged LA/MSF subsidies: (i) by amortizing 
them over the period it was anticipated Airbus would take to repay fully the loaned principal plus 
interest (Loan Life  approach ); or (ii) by looking at the expected marketing life of e ach of the 
financed LCA projects (Marketing Life  approach ). The Panel observed that both approaches 
proposed were based on the actual terms of the LA/MSF contracts, read  alone or in conjunction 
with the expected delivery schedules.971 The Panel added that, a lthough  the United  States 
"appear{ed} to accept that the ex ante lives of the LA/MSF subsidies {would} be dictated by the 
extent to which the contracting parties expected Airbus to continue to have outstanding repayment  
obligations "972, the United  States nonetheless maintained that such expectations should be 
determined on the basis of the repayment obligations that a hypothetical commercial provider of 
financing such as LA/MSF would have demanded Airbus to assume. To the Panel, therefo re, the 
United  States' approach did not concern the expectations of the subsidizing governments at the 
time they agreed to the terms of the LA/MSF, and it thus rejected the United States' approach.  
5.390.   The Panel went on to examine the two approaches proposed by the European Union. 
The Panel recalled that the Appellate  Body's discussion of the ex ante  "life" of a subsidy in the 
original proceedings tended to focus on the projected uses  to which a subsidy has been put, rather 
than the expected duration of a fina ncial contribution. The Panel thus expressed doubts as to 
whether the Loan Life approach "would be the most appropriate methodology for determining the 
'projected value' of the subsidies provided under the LA/MSF agreements", given this approach's 
apparent  focus on the expectations surrounding the mere duration  of the existence of a 
"financial  contribution".973 In the Panel's view,  "it would be at least equally appropriate to equate 
the ex ante  lives of the relevant LA/MSF subsidies with the anticipated marke ting lives of the 
relevant LCA" .974 Nonetheless, the Panel found it unnecessary to "e xpress any definitive views" 
on which of the two methodologies relied upon by the European  Union  to determine the ex ante 
"lives" of the LA/MSF subsidies should be accepted.975 This is because, for the Panel, it was 
"apparent {from the PwC Amortization Report} that under either methodology, the ex ante  "lives" 
of most of the identified LA/MSF subsidies will have come to an end before the end of the 
implementation period".976 The Panel therefore found, in paragraph 6.879 of its Report, that:  
the European  Union  ha{d} demonstrated that the ex ante  lives of the following 
LA/MSF subsidies " expired " before 1 June 2011 as a result of the amortization of 
benefit : the French, German and Spanish government LA/MSF for the A300B/B2/B4, 
A300-600, A310, A320, A330/A340; and the UK government LA/MSF for the A320 and 
A330/A340.977  
                                                
970 PricewaterhouseCoopers, "Analysis of the expected life of subsidies to Airbus conferred by Member 
State Financing Loans, Capital contributions and regional development grants as found in the WTO dispute 
DS316", 29 November 2011 and 2 July 2012 (Panel Exhibit  EU-5 (BCI/HSBI) ). 
971 Panel Report, para.  6.874.  
972 Panel Report, para.  6.874.  
973 Panel Report, para. 6.878.  
974 Panel Report, para. 6.878.  
975 Panel Re port, para. 6.879.  
976 Panel Report, para. 6.879.  
977 Italics original; underlining added ; fn omitted .  WT/DS316/AB/RW  
 
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  The Panel also noted in a footnote that the European  Union  had established that the ex ante  "lives" 
of the French LA/ MSF for the A330 -200 and the French and Spanish LA/MSF for the A340 -500/600 
expired  in, respectively, [BCI] and [BCI].978 
5.391.   After reaching its findings on the ex ante  expiry of the subsidies, the Panel proceeded  to 
examine the arguments concerning alleged "int ervening events" that affected the ex ante  "lives" of 
certain LA/MSF subsidies. In the Panel's view, an intervening event is "one that takes place after 
the grant of a subsidy and alters its ex ante  'life' – that is, an event that changes how a subsidy 
has 'materialized over time' relative to the expectations held at the time it was granted ."979 
The Panel rejected the European  Union 's argument that the alleged "extraction" of subsidies, and 
alleged "extinction" of benefit through partial privatization and sales of shares and ownership, 
were, in the circumstances of this case,  "intervening events" that b rought the lives of certain 
pre-A350XWB subsidies to an end.980 The Panel also rejected the United  States ' claim that the 
ex ante "lives" of the LA/MSF subsidi es for the A300 and A 310 increased because of the launch of 
the A330/ A340981, and that the ex ante  "life" of the LA/MSF for the A340 ended due to the  
termination of the A340 -500/600  project  in 2011.982 Finally, the Panel reviewed and rejected the 
European  Union's argument that the actual repayment of the LA/MSF loans with interest brought 
these loans to an end.983 Based on its analysis , the Panel concluded , in paragraph 6.1076 of 
its Report : 
{W}e have determined that the "lives" of these subsidies have come to an  end 
because the total period of time over which their "projected value" was expected to 
"materialize" has passively  transpired in the absence of any "intervening event" . 
In other words, we have found that the ex ante  "lives" of the relevant subsidies have 
"expired" simply because they have been fully provided to Airbus as originally planned 
and expected.984 
5.392.   The Panel's findings in paragraphs 6.879 and 6.1076 , quoted above,  suggest that the 
Panel examined the issue of "e xpiry" from two angles – both from an ex ante  perspective and in 
light of alleged intervening events that occurred after the grant of the subsidy . 
In paragraph  6.879 , the Panel used the word "expired" to refer to the passage of the time  period  
over which t he subsidies were projected  to be amortized, without regard to any alleged 
"intervening events " or actual repayment. In other w ords, the "expiry" refers to the fact that the 
expected duration of the subsidies – projected  at the time they were  granted – had lapsed. 
The use of the word "expired" in paragraph 6.879 therefore does not speak to the question of 
whether the "life" of the subsidies actually  ended. Subsequently, in paragraph 6.1076, the Panel 
again used the word "expired" aft er having examined the a lleged intervening events and alleged 
repayment of loans, that is, after reviewing relevant arguments and evidence concerning what 
actually happened once the subsidies were granted. We understand the Panel to have found, 
therefore, that the relevant subsidies came to an end by reason of the amortization  of benefit , 
in the absence of any intervening event that would  have changed how th ose subsid ies materialized 
over time relative to the expectations held at the time they were  granted . 
                                                
978 Panel Report, fn 1547 to para. 6.879 . The Panel reached this finding on the basis of the Loan Life 
approach. (See Panel Report, Table 11: PwC ex ante  "Lives" analysis to LA/MSF) We note that, under the 
Marketing Life approach, the LA/MSF subsidy for the A330 -200 would have expired by [BCI] – that is, before 
the end of the implementation period – and the LA/MSF subsidy for the A340 -500/600 would have expire d by 
[BCI]. (Ibid.)  
979 Panel Report, para. 6.911.  (emphasis added)  
980 Panel Report, paras.  6.918 -6.1055.  
981 Panel Report, paras.  6.1056 -6.1059. The United States argued before the Panel that, because Airbus 
envisioned the A330 and A340 as derivatives of the A300, the "lives" of the A300 and A310 LA/MSF subsidies 
continue with the A330 and A340. The Panel disagr eed, finding that there was "simply no evidence before {it} 
to suggest that the 'projected value' of the A300 and A310 LA/MSF subsidies was affected by the launch of the 
A330/A340", and that "the United States conflate{d} the 'lives' of those subsidies wit h their 'indirect effects'". 
(Ibid., para. 6.1059) The United States has not appealed these findings of the Panel. With respect to the 
Panel's analysis of the "indirect effects" of LA/MSF subsidies, see section 5.6.3 of this Report.  
982 Panel Report, paras.  6.1060 -6.1064. The Panel's findings regarding the termination of the 
A340-500/600 are further discussed in paragraphs 5.398 -5.399 below.  
983 Panel Report, paras.  6.1069 -6.1074.  
984 Panel Report, para.  6.1076. (italics original; underlining  added)  WT/DS316/AB/RW  
 
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  5.393.   The United States  has appealed the Panel's finding in pa ragraph 6.879 of its Report, 
as well as the Panel's final conclusion regarding the expiry of the LA/MS F subsidies at issue in 
section  7 of its Report.985 The United States, however, has not specifically challenged the P anel's 
examination of the alleged intervening events. Rather, its  appeal focuse s on the Panel's ex ante 
analysis , that is, the periods of time over which the benefit of the pre -A380 LA/MSF subsidies were 
projected  to materialize . The United States maintain s that, in finding that the ex ante  "lives" of the 
relevant pre -A380 LA/MSF  passively expired before 1  December 2011, the Panel erroneously 
viewed the ex ante "lives" of the LA/MSF subsidies at issue as extending  over a fixed number  of 
years. However, the United States argues, "{n}either the SCM Agreement nor reasoning of the 
Appellate Body suggests that the ex ante  life of a subsidy must always be a fixed number."986 
5.394.   We recognize that, depending on the circumstances of a case, it may not always be 
feasible t o determine, ex ante , a fixed number  of years over which the benefit of a subsidy is 
expected to flow. For example, it  is conceivable that the circumstances of a case may allow for 
only an estimate of the range of years  in which the benefit is expected to last.  Nonetheless, as the 
Appellate  Body emphasized in the original proceedings, "{a}t  the time of the grant of a subsidy, 
the subsidy will necessarily be projected to have a finite life  and to be utilized over that finite 
period ."987 Furthermore, the Appellate  Body stated that it had "no reason to disagree with the 
notion that allocation of a subsidy over the anticipated marketing life of an aircraft programme 
may be one way to assess the d uration of a subsidy over time".988 We do not share the 
United  States' view that the Panel , by relying on the anticipated marketing lives of the relevant 
LCA, erroneously viewed the ex ante  "lives" of the LA/MSF subsid ies at issue as extending over a 
fixed number of years.989 Rather, t he Pan el's approach is appropriate in light of the 
Appellate  Body's guidance that a subsidy has a finite "life", as well as the evidence before the 
Panel regarding how the ex ante  "lives" of the  LA/MSF subsidies at issue should be ascertained, 
including  the PwC Amortization Report . Contrary to the United States' argument, such an approach 
is not a "speculative" exercise that "the parties themselves did not undertake".990  
5.395.   Moreover , while the United  States  maintains that the ex ante  "lives" of the subsidies need 
not be a fixed number991, its argument does not offer  a proper basis on which such "lives" may be  
determined. The United  States  contends that the use of the LA/MSF loans "suggests that the 
parties expected the benefit of LA/MSF to last  throughout the life of the subsidized aircraft 
programs ".992 In other words,  according to the United States, the "lives" of the subsidies should 
last as long as  the commercial life of the  funded aircraft project .993 In our view, the duration of the 
funded air craft project depends on the success of the project, and such success, while it might be 
pertinent for assessing the effects  of the subsidy, does not bear upon the question of how the 
subsidy is anticipated to materialize. To us, t he United States' argumen t conflates  the effects  of 
the subsidy – i.e. its "product " effects994 – with the benefit  of the subsidy.995  
                                                
985 United  States' other appellant's submission , para. 17 (referring to Panel Report, paras. 6.879 and 
7.1.d.ii-iii). 
986 United States' other appellant's submission, para. 10.  
987 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 709. (emphasis 
added)  
988 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  1241. (fn omitted)  
989 United States' other appellant's submission, para. 10.   
990 United  States ' other appellant's submission, para. 13. 
991 United  States ' other appellant's submission, para. 10. 
992 United  States ' other appellant's submission, para. 15. (emphasis added)  
993 This argument of the United  States  on appeal echoes  its view before the Panel that "the life of a 
subsidy creating a new product must be measured by the life of the product it creates ". (United  States ' second 
written submission to the Panel, para.  161 (emphasis added))  
994 As further discussed in section 5.6.3 of this Report, the Panel referred to the "product effects" of the 
LA/MSF subsidies  as the effects of the LA/MSF subsidies in bringing about either: (i) the existence and market 
presence of Airbus; or (ii) the ability of Airbus to offer a full range of comp etitive LCA products. 
(See e.g. Panel  Report, para. 6.1480) The Panel explained th at such "product" effects may be further 
categorized as "direct effects" and "indirect effects", depending on whether the effects relate to the LCA 
specifically funded by an LA/MSF subsidy (direct) or subsequent LCA (indirect). (Ibid., para. 6.1492) The 
United States argued that the "direct effects" of an LA/MSF subsidy will decline sign ificantly with the 
termination of the specifically -funded LCA project, and the "indirect effects" of an LA/MSF subsidy will persist 
as long as the subsequent, benefitting LC A remain in p roduction. (Ibid., para. 6.1493 ) 
995 See Panel Report, para.  6.875.  WT/DS316/AB/RW  
 
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  5.396.   The United States further argues that the Panel failed to engage with "the central legal 
point" of the United  States ' argument, namely, "for contingen t financing, the grantor and recipient 
would expect the benefit to continue as long as payments were due, or for the life of any 
forgiveness if the program failed prior to full repayment."996 By "contingent financing", 
the United  States  refers to the fact th at "the grantor expects the benefit to flow over a period 
whose length is defined to be contingent on some other variable event , such as a large civil 
aircraft program selling a particular number of aircraft, that triggers an obligation to repay the 
principal and accrued interest".997 The United States adds that, if, at the tim e of the grant, 
the benefit "is expected to convert to loan forgiveness upon the satisfaction of a particular 
condition (e.g., the premature failure of an aircraft program), then the life of the subsidy should be 
measured accordingly."998 
5.397.   As the Appellate  Body made clear in the original proceedings, "a benefit analysis under 
Article  1.1(b) is forward -looking and focuses on future projections."999 The Appellate  Body also 
stated that "{t }he 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 ."1000 Thus, the evaluation of how long the benefi t under 
Article 1.1(b) of the SCM Agreement  might be " expected " to flow is based on projections made at 
the time of the granting of the subsidy . We do not see the existence of a "variable event" in a loan 
agreement as permitting departure from this  ex ante  approach for determining the expected "life" 
of a subsidy pursuant to Article  1.1(b) of the SCM Agreement .1001 
5.398.   By arguing that the anticipated "life" of a subsidy depends on certain "variable event {s}", 
such as the timing of delivery and payment, or potentia l failure of the project before full 
repayment, the United States' approach does not comport with an ex ante  analysis of the 
projected duration of benefit. Rather, its argument concerns how the actual performance  of a 
subsidy affects the "life" of that subsidy and, as such, is more pertinent to an examination of any 
alleged intervening events that may have affected the anticipated  "life" of the subsid y. Indeed, 
before the Panel, the United  States referred to debt forgiveness as a result of the t ermination of a 
project as an "intervening event" that extended the anticipated  "life" of the LA/MSF subsidy for the 
A340-500/600. Specifically, the United  States argued  that, had the LA/MSF for the A340 -500/600 
not been terminated in 2011, the subsidy wou ld have continued t o be provided through the 
below -market repayments outstanding at the time.  The termination of the A340 -500/600 project, 
according to the United  States, turned that subsidy into "a  grant to Airbus equivalent to the 
amount of outstanding d ebt" on the loans under the French and Spanish LA/MSF contracts for the 
A340-500/600.1002 The United  States further argued that, as a result of the debt  forgiveness, 
the life of the LA/MSF was extended by the average life of a generic a ircraft project, that i s, 
until approximately 2028 .1003 
5.399.   The Panel rejected the view that the termination of the A340 -500/600 project was an 
intervening event that extended the "life" of the LA/MSF subsidy.1004 In so doing , the Panel 
explained that the termination of the A340 project  was "not an event that can be said to have 
                                                
996 United  States' other appellant's submission, para.  12.  
997 United  States' other appellant's submission, para . 10. (emphasis added)  
998 United States' other appellant's submissio n, fn 17 to para. 10.  
999 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 707. (fn omitted)  
1000 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 707. (emphasis 
original)  
1001 See European  Union's appellee's submission, para.  50.  
1002 Panel Report, para.  6.1060.  
1003 Panel Report, para. 6.1060.  
1004 In the Panel's view, the possible termination of the A340 project  before full repayment was an 
inherent feature of the LA/MSF contracts  themselves . The Panel stated:  
{I}t is precisely because the full repayment of the LA/MSF agreements could not be guaranteed 
and was dependent upon the fortunes of the A340 -500/600 … that it was appropriate (and 
required) for the relevant European  Union member States to charge a  product -specific risk 
premium on their loans. It follows, therefore, that the possibility of the termination of the A340 
programme before full repayment of the LA/MSF loans was not an unexpected event , and must 
have been contemplated and used to inform th e expectations about how the "projected value" of 
the relevant LA/MSF subsidies would "materialize over time" when they were granted.  
(Panel Report, para. 6.1063)  WT/DS316/AB/RW  
 
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  altered the expectations held at the time of the grant of the relevant LA/MSF subsidies about how 
the 'projected value' of those subsidies would 'materialize over time '."1005 The Panel added that 
"the termination of t he A340 programme only one year ahead of the expected  duration of its 
marketing life did not prevent Airbus from using the relevant LA/MSF subsidies, precisely as 
originally envisaged , to develop and bring to market the A340 -500/600 derivatives."1006 The Panel 
also noted that "the fact that the repayment terms of the relevant LA/MSF agreements were 
unsecured and success -dependent reveal {ed} that the p ossible termination of the 
A340 programme before the full repayment could be achieved was an inherent fe ature of the 
LA/MSF agreements  themselves ."1007 For the Panel , this implied that "the French and Spanish 
governments (and Airbus) must have included in their anticipated scenarios for the use of the 
LA/MSF subsidies, the possibility that the A340 programme ma y not have been as successful as 
planned."1008 The Panel added that it was "precisely because the full repayment of the LA/MSF 
agreements could not be guaranteed and was dependent upon the fortunes of the A340 -500/600 
that both the European  Union and the Unit ed States agreed that it was appropriate (and required) 
for the relevant European  Union member States to charge a product -specific risk premium on their 
loans."1009 For the Panel , it followed from this "that the possibility  of the termination of the 
A340 programme before full repayment … must have been contemplated and used to inform the 
expectations about how the 'projected value ' of the relevant LA/MSF subsidies would 'materialize 
over time ' when they were granted ."1010 The United States has not appealed this r easoning by the 
Panel, and we see no reason why it would not apply equally to the arguments that the 
United  States makes on appeal regarding the "contingent" nature of the LA/MSF financing, 
including the fact that  the four member States may have expect ed the lives of LA/MSF subsidies  to 
depend  on a "variable event , such as a large civil aircraft program selling a particular number of 
aircraft, that triggers an obligation to repay the principal and accrued interest".1011 As we see it, 
such "variable events" are  an inherent feature of the LA/MSF financing, which the four member 
State governments can be expected to have included in their anticipated scenarios for the use of 
the LA/MSF subsidies . Such uncertainties involved in the LA/MSF financing are, as we unders tand 
it, already reflected in the  project -specific risk premium  calculated, by the original panel and by 
the Panel in these compliance proceedings, in the context of the benefit analysis for each of the 
underlying LA/MSF subsidies . We therefore disagree with the United States that the Panel failed to 
engage with the arguments that the United States made in this regard.  
5.400.   Moving on, we recall that an ex ante  analysis regarding the benefit of a subsidy serves as 
the starting point  of the analysis  to determine  whether a subsidy continues to exist at the end o f 
the implementation period . For such a determination , it is also necessary to conduct an analysis 
regarding "whether there are 'intervening events' that occurred after the gran t of the subsidy that 
may affect the projected value of the subsidy as determined under the ex ante analysis."1012 
Thus,  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 grant of the subsidy so as to determine whether the 
subsidy materialized  as expected.  
5.401.   Having made  findings on the projected  expiry of the subsidies, the Panel wen t on to 
examine the arguments concerning the alleged intervening events that affected the actual duration 
of certain LA/MSF subsidies. Based on its analysis, the Panel concluded that "the ' lives' of these 
subsidies have come to an end because the total per iod of time over which their 'projected value ' 
was expected to 'materialize ' has passively  transpired in the absence of any 'intervening 
event' ".1013 In our view, the Panel's ultimate conclusion regarding the actual  duration  of these 
subsidies was based on a proper  analysis  of both the projected duration of the subsidies and  the 
alleged intervening events  after the granting of the subsidies . This is consistent with the 
                                                
1005 Panel Report, para. 6.1062.  
1006 Panel Report, para. 6.1063. (emphasis original)  
1007 Panel Repor t, para. 6.1063.  
1008 Panel Report, para. 6.1063.  
1009 Panel Report, para. 6.1063.  
1010 Panel Report, para. 6.1063.  
1011 United  States ' other appellant's submission, para. 10. (emphasis added)  
1012 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 709. 
1013 Panel Report, para. 6.1076. ( italics original; underlining  added)  WT/DS316/AB/RW  
 
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  Appellate  Body's approach in the original proceedings, whereby the assessment of the "life" of a 
subsidy should encompass both an ex ante  analysis and an evaluation of intervening events .  
5.402.   For these reasons, we uphold  the Panel's finding , in paragraph s 6.879, 6.1076, and  7.1.d.ii 
of its Report,  that the European Union ha s demonstrated that the ex ante "lives" of the French, 
German,  and Spanish LA/MSF subsidies for the A300B/B2/B4, A300 -600, A310, A320, and 
A330/A340, and the UK  LA/MSF subsidies for the A320 and A330/A340, expired before 
1 June 2011.  
5.403.   The United States also appeals the Panel's finding that the European Union had 
demonstrated that the ex ante  "lives" of the French LA/MSF subsidy for the A330 -200 and the 
French and Spanish LA/MSF subsidies for the A340 -500/600 expired in, respectively, [BCI] and 
[BCI].1014 This aspect of the United States' appeal is premised on the condition that we find that 
the passive expiry of these subsidies after 1 December 2011 meets th e requirement to 
"withdraw  the subsidy" within the meaning of Article 7.8 of the SCM  Agreement.1015 We recall that, 
following the adoption of the panel and Appellate Body reports in the original proceedings 
on 1 June 2011, the European Union, pursuant to Article 7. 9 of the SCM Agreement, had 
six months to "take appropriate steps to remove th e adverse effects" or to "withd raw the subsidy". 
On 1 December  2011, the European  Union informed the DSB, in its Compliance Communication, 
that it had taken the appropriate steps to bring its measures "ful ly into conformity with its 
WTO obligations".1016 Subsequently, the Panel was established to examine the United States' claim 
that "the actions and events listed in the {European Union's Complian ce Communication } do not 
withdraw the subsidies or remove their adverse effects for purposes of Article 7.8 of the 
SCM Agreement".1017  
5.404.   In examining whether the European Union complied with its obligation under Article  7.8 of 
the SCM Agreement, the relevant question before the Panel was whether the European  Union  had 
brought itself into compliance by the end of the implem entation period , that is, before 
1 December  2011. For purposes of these compliance proceedings , therefore, the expiry of the 
subsidies subsequent to  1 December 2011 does not bear directly  on the question that the Panel 
was called upon to examine, namely, whether compliance had been achieved by the end of the 
implementation period . In these circumstances, we see no need further to address this  aspect of 
the United States' appeal.  
5.4.4   Whether the Panel erred in its finding regarding  the repayment of financial 
contribution  – conditional appeal by the European Union  
5.405.   The European  Union  conditionally appeals the Panel's finding that  "repayment of a financial 
contribution does not bring the life of a subsidy to an end".1018 The European  Union requests, 
in particular, tha t we find that the "lives" of the following subsidies came to an end due to the 
"repayment " of the underlying LA/MSF loans on their subsidized terms : the French LA/MSF for the 
A310-300 and A330-200, the French and Spanish LA/MSF for the A300B/B2/B4 and A30 0-600, 
and the French, Spanish, and UK LA/MSF for the A320 and A330/A340.1019  
5.406.   We have upheld the Panel's finding that almost all  pre-A380 LA/MSF subsidies, including 
the ones referred to above,  expired before the beginning of the implementation period in thi s 
dispute, that is, before 1 June 2011.1020 We have also found that the European Union has 
                                                
1014 Panel Report, fn 1547 to para. 6.879, and para. 7.1.d.iii.  
1015 United States' other appellant's submission, fn 15 to para. 8, and fn 35 to para. 17.  
1016 Panel Report, p ara. 6.6 (quoting Compliance Communication).  
1017 WT/DS316/19, p. 3.  
1018 European  Union 's appellant's submission, para. 197 (referring to Panel Report, 
paras.  6.1072 -6.1074).  See also para. 190.  
1019 European Union's appellant's submission , paras. 214 -215. 
1020 The Panel found that the LA/MSF subsidies for the A330 -200 and the A340 -500/600 expired  in, 
respectively,  [BCI] and [BCI], that is, after the end of the implementation period. (Panel Report, fn 1547 to 
para. 6.879) The Panel found that the market presence  of the A340 came to an end before the beginning of the 
post-implementation period when Airbus terminated the A340 programme in November 2011. ( Ibid., fn 2188 
to para. 6.1293) As discussed in sections 5.6.3 and 5.6.4 of this Report, we  note that the Panel did not make 
findings specifically relating to the effects of these two subsidies.  WT/DS316/AB/RW  
 
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  no further compliance obligation , under Article 7.8 of the SCM Agreement , with respect to such 
expired  subsidies. 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.1021 
5.5  European Union's consequential appeal under Article 7.8 of the SCM Agreement  
5.407.   The European  Union maintains that, due to the Panel's error in its interpretation of 
Article  7.8 of the SCM  Agreement, the Panel's findings regarding t he adverse effects caused by the 
challenged subsidies must also be reversed. According to the European  Union, this is because the 
Panel failed to recognize that an expired subsidy "could no longer be used to ground a finding of 
non-compliance, including on  the basis that it causes present adverse effects after the end of the 
implementation period".1022 The European  Union also argues that, pursuant to a proper 
interpretation of Article  7.8, an analysis of adverse effects must be based on a "re -constituted 
baske t of subsidies" from which the expired subsidies are excluded1023, and that the Panel failed to 
conduct such an analysis.1024 On this basis, the European  Union requests us to reverse a series of 
intermediate findings made in the context of the Panel's adverse ef fects analysis1025, as well as its 
final conclusion that the challenged LA/MSF subsidies continue to be a "genuine and substantial" 
cause of serious prejudice within the meaning of Articles  5(c), 6.3(a), 6.3(b), and 6.3(c) of the 
SCM Agreement.1026 Furthermore , the European Union requests us to reverse the Panel's 
conclusion that  the non -LA/MSF subsidies at issue (including capital contributions1027 and certain 
regional development grants) are a "genuine" cause of such serious prejudice and can be 
"cumulated" with t he effects of the challenged LA/MSF subsidies.1028 
5.408.   For its part, the United  States contends that the European  Union's consequential appeal 
should be rejected. The United  States highlights that these compliance proceedings involve 
findings that a group of subs idies collectively caused current adverse effects with respect to a 
number of models of aircraft. Even assuming arguendo  that the expiry of some of the subsidies 
within that group satisfied a Member's obligation under Article  7.8 with respect to the expire d 
subsidies , "there would remain a question of how to evaluate the {European Union's } obligation 
under Article  7.8 with respect to the rest of the group of subsidies."1029 In the United  States' view, 
an analysis of the existing subsidies in these compliance p roceedings should account for the 
"aggravating effects of the expired subsidies" and "could not simply pretend that those effects 
were related to WTO -consistent behavior."1030 The United States emphasizes in this regard that, 
                                                
1021 In this regard, we recall the Panel's finding that the French LA/MSF for the A330 -200 expired in 
[BCI]. (Panel Report, fn 1547 to para. 6.879) However, the Panel made no finding regarding whether  Airbus 
had "repaid" that subsidy prior to the end of the implementation period. (Ibid., para. 6.1074) In the absence of 
any factual findings by the Panel, we are unable to rule on whether the French LA/MSF for the A330 -200 came 
to an end through "repayment", as the European Union argues on appeal.  
1022 European  Union's appellant's submission, para.  187. See also paras. 188 -189. 
1023 European  Union's appellant's submission, paras.  1076 and 1088. The European  Union further argues 
that the e ffects of those expired subsidies should be taken into account as non -attribution factors for purposes 
of analysing the effects of the re -constituted basket of subsidies (i.e. the "basket" that contains only the 
existing subsidies). (Ibid., para.  1097)  
1024 European  Union's appellant's submission, para.  187. 
1025 European  Union's appellant's submission, para.  189 (referring to Panel Report, 
paras.  6.1451 -6.1452, 6.1463, 6.1534, 6.1774, and 7.1.d.xii -xiii). 
1026 European  Union's appellant's submission, para.  189 (referring to Panel Report, paras.  6.1798, 
6.1817, and 7.1.d.xiv -xvi). 
1027 The Panel found that the European  Union had demonstrated that the ex ante  "lives" of the capital 
contribution subsidies had "expire d" before 1 December 2011, and therefore, before the end of the 
implementation period. (Panel Report, para.  6.907) This finding of the Panel has not been appealed.  
1028 European  Union's appellant's submission, para.  189 (referring to Panel Report, paras.  6.1838, 
6.1846, 6.1847, and 7.1.d.xvii). Furthermore, recalling  the Panel's finding that the non -LA/MSF subsidies 
"complemented and supplemented" the effects of the LA/MSF subsidies, the European Union contends that the 
basis for this finding "would fall away " following a reversal of the Panel's findings regarding the adverse effects 
of the LA/MSF subsidies. (European Union's appellant's submission, paras.  1060 (quoting Panel Report, 
para. 6.1847) and  1061).  
1029 United  States' appellee's submission, para.  158. 
1030 United  States' appellee's submission, para.  158. The United  States notes that, during proceedings 
before the Panel, the European  Union argued that the WTO -inconsistent effects of expired subsidies became 
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  because "the current adverse effe cts of those expired subsi dies are inconsistent with 
{the European Union's} obligations under Article 5", a compliance panel "would properly aggregate 
any expired subsidies that continued to cause adverse effects".1031 This, in the United States' view, 
would "especially be the case if those expired subsidies put the recipients of the subsidy in a 
position where subsequent subsidies had more pronounced effects".1032 
5.409.   We note that Article  21.5 of the DSU identifies the task of a panel operating pursuant to 
this provision, namely to examine whether the DSB recommendations and rulings from the original 
dispute have been implemented consistently with the covered agreements. Proceedings under 
Article  21.5 do not occur in isolation, but are part of a "continuum of events" .1033 It is for this 
reason that a compliance  panel assessing whether an implementing Member has complied with its 
obligations under Article  7.8 must take due account of the reasoning and findings from the original 
proceedings.1034 
5.410.   Having said that, we recall that Article  7.8 of the SCM  Agreement is concerned with the 
"granting or maintaining" of subsidies that cause adverse effects, and requires cessation of such 
conduct.  To the extent that the underlying subsidy has ceased to exist, there is no additional 
requirement, under this provision , to remove any lingering effects that may flow from that 
subsidy.1035 The pertinent question for purposes of these compliance proceedings  is, therefore, 
whether the United States has established that the subsidies exist ing in the post -implementation 
period (i.e. after 1 December 2011) cause adverse effects. An evaluation of the effects of such 
subsidies may be informed, in part, by findings from the original proceedings concerning the 
effects of the LA/MSF subsidies, including th e expired subsidies, on Airbus' ability to launch LCA 
products at issue in the original proceedings as and when it did.1036 Those findings describe the 
design, structure , and ope ration of the expired subsidies  and how they "impacted Airbus' 
operations until t he end of 2006."1037 Therefore, we do not preclude that the expired subsidies 
may be relevant for our review of the Panel's findings as part of a matrix of analysis that seeks to 
understand the effects of the subsidies existing in the post -implementation peri od. 
5.411.   In light of the foregoing, we disagree with the European  Union that it necessarily  follows 
from the manner in which the Panel characterized the scope of the compliance obligation under 
Article  7.8 of the SCM Agreement that the Panel's findings of adver se effects must be reversed for 
each of the specific country and product markets with respect to which the United  States brought 
its claims.1038 We note that the Panel's adverse effects analysis led to  its final conclusion that 
"the European Union and certain  member States hav e 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 
                                                                                                                                                  
WTO-consistent for purposes of a compliance proceed ing. According to the United States, the European Union 
asserted that in its adverse effects analysis, the Panel would have to separate and distinguish the effects of 
expired subsidies from the effects of existing subsidies, and base its analysis of advers e effects on only the 
existing subsidies. (Ibid., fn  217 to para.  158 (referring to European  Union's first written submission to the 
Panel, para.  1099)) The United  States further contends that, although the European  Union "has not explicitly 
made such an a rgument {on appeal}, it is a logical consequence of the {European  Union's} position, and 
demonstrates the absurdity of that position". (Ibid., fn  217 to para.  158) 
1031 United States' appellee's submission, para.  160. 
1032 United  States' appellee's submission, p ara. 160. We also note the United  States' argument before 
the Panel that the expired LA/MSF subsidies "still ha{ve} current effects  on competition because of the 
enduring effects of LA/MSF and a continuing pattern of subsidizing one Airbus LCA program afte r another, and 
providing Airbus with new LA/MSF". (United  States' first written submission to the Panel, para.  325 (emphasis 
original))  
1033 Appellate  Body Report, US – Softwood Lumber VI (Article  21.5 – Canada) , paras.  102-103; 
Appellate  Body Report, Mexico – Corn Syrup (Article  21.5 – US), para.  121. 
1034 See Appellate  Body Report, Chile – Price Band System (Article  21.5 – Argentina) , para.  136. We 
note, however, that in Article 21.5 proceedings the burden is on the complainant to show a WTO -inconsistency 
at the end of the implementation period in respect of the "measure taken to comply". In this regard, the Panel 
also recognized the importance of not "simply transpos{ing}" findings in the original proceedings to the 
present proceedings. (Panel Report, para.  6.1462) 
1035 See section 5.4.2 of this Report . 
1036 As further explained in section 5.6 of this Report, the Panel referred to such effects as the "product 
effects" of LA/MSF subsidies. (See  Panel Report, paras.  6.1492, 6.1536, and 6.1777)  
1037 Panel Report, para.  6.1461.  
1038 European  Union's appellant's submission, paras.  187-189. WT/DS316/AB/RW  
 
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  subsidy' ."1039 In our view, whet her the Panel had a sufficient basis for this ultimate conclusion is a 
question that can only be answered following a careful review of the Panel's reason ing and 
analysis, in particular  its analysis relating to the adverse effects of the existing  LA/MSF su bsidies 
that are maintained or granted in the post -implementation period. Thus, we do not dismiss the 
totality of the Panel's adverse effects analysis solely on the basis of its interpretation of Article 7.8 
of the SCM Agreement. Rather, we do not preclude  that the pertinent question in thes e compliance 
proceedings – i.e. whether the subsidies exist ing in the post -implementation period cause adverse 
effects – may still be answered on the basis of the Panel's analysis of the existing subsidies. 
A considerati on of expired subsidies is relevant for this purpose insofar as it sheds light on whether 
LA/MSF subsidies granted or maintained by the European  Union in the post -implementation period 
cause adverse effects.  
5.412.   With these considerations in mind, we turn to r eview the Panel's analysis in reaching its 
ultimate conclusion on adverse effects. As further explained below, our review will focus on the 
Panel's findings regarding the effects of the subsidies that the European  Union continued to grant 
or maintain in th e post -implementation period, including, in particular, the LA/MSF subsidies for 
the Airbus A380 and the A350XWB, which have not expired.1040 
5.6  Articles  5, 6, and 7.8 of the SCM Agreement – adverse effects  
5.413.   Having found that the United States had established tha t the European Union ha s failed to 
"withdraw the subsidy" within the meaning of Article 7.8 of the SCM Agreement1041, the Panel went 
on to examine the United States' claim that the European  Union had failed to "take appropriate 
steps to remove the adverse effects" , as required under th is provision. The Panel considered the 
question before it to be "whether … the challenged subsidies continue  to cause serious prejudice to 
the interests of the United States after 1 December 2011, that is, after the end of the  
implementation period".1042 At the outset, having rejected the European Union's claim that it ha s 
withdrawn certain LA/MSF subsidies within the meaning o f Article 7.8 of the SCM  Agreement as a 
result of their expiry1043, the Panel dismissed the European Union's  contention that it should 
exclude from the adverse effects analysis those challenged subsidies that had expired.1044 Thus, 
under the Panel's adverse effects analysis, the reference to the "challenged" LA/MSF subsidies 
covers all of the LA/MSF subsidies grant ed by the European Union to date, including those the 
Panel found to have expired, as well as those exist ing in the post -implementation period.1045  
5.414.   The Panel began by addressing two "threshold" issues.1046 First, the Panel dismissed the 
European  Union's argumen t that, in order for the United  States to make out its claims of 
displacement or imped ance of exports within the meaning of Article  6.3(b) of the SCM  Agreement, 
the United  States must demonstrate that its product allegedly being displaced or impeded is a 
"non-subsidized like product".1047 Second, the Panel disagreed with the European  Union's 
contention that the United  States had failed to establish the existence of the three alleged LCA 
product markets for purposes of its complaint1048, finding instead that the m arkets identified by 
                                                
1039 Panel Report, para.  7.2. 
1040 See paras.  5.554 -5.557 below. We also recall the Panel's finding that the LA/MSF subsidies for the 
A330-200 and A340 -500/600 had expired, r espectively, [BCI], that is, after the end of the implementation 
period. (Panel Report, fn 1547 to para. 6.879, and fn 1600 to para. 6.907) We note that these aircraft were 
derivatives of, respectively, the A330 and A340. (Original Panel Report, para. 7.1622) As further discussed in 
sections 5.6.3 and 5.6.4 of this Report, we note that the Panel did not make findings specifically related to the 
effects of these two subsidies, and we focus our analysis  on the subsidies with respect to which the Panel mad e 
findings, namely, the A380 and A350XWB LA/MSF subsidies.  
1041 Panel Report, para. 6.1102.  
1042 Panel Report, para.  6.1104. (emphasis original)  
1043 Panel Report, para.  6.1107 (referring to section 6.6.2 of the Panel Report). See  also section 5.6.3.1 
of this Repor t. 
1044 Panel Report, paras.  6.1106 -6.1107. See  also paras.  6.1449 -6.1450.  
1045 See e.g. Panel Report, paras.  6.1104 and 6.1440. As further discussed below, our review of the 
Panel's adverse effects analysis is focused on the Panel's findings regarding a subset of these challenged 
subsidies, namely, those existing in the post -implementation period.  
1046 Panel Report, para.  6.1107.  
1047 Panel Report, paras.  6.1114 and 6.1154.  
1048 The three product markets are: the single -aisle LCA market for the Airbus A320neo and A320ceo , 
and the Boeing 737MAX and 737NG LCA families; the twin -aisle LCA market for the Airbus A330 and A350XWB 
 WT/DS316/AB/RW  
 
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  the United  States represented the three segments within which most competitive interactions 
between the relevant aircraft would commonly take place.1049  
5.415.   Turning to the present -day effects of the challenged LA/MSF subsidies in the three r elevant 
product market segments1050, the Panel sought to determine whether the challenged LA/MSF 
subsidies, as an aggregated group1051, are a "genuine and substantial" cause of serious prejudice 
to the United  States' interests within the meaning of Article  6.3(a ), 6.3(b), and 6.3(c) of the 
SCM Agreement. The Panel divided its analysis into three parts.  
5.416.   The first two parts concern the "product effects" of LA/MSF subsidies, that is, 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.1052 First, the Panel examined the "product effects" of the pre -A350XWB LA/MSF 
subsidies on the A320, A330, and A380, and found that the pre -A350XWB LA/MSF subsidies 
continue to be a genuine and substantial c ause of the current market presence of the A320, A330, 
and A380 families of Airbus LCA.1053 Second, having analysed the "product effects" of all of the 
challenged LA/MSF subsidies on the A350XWB, the Panel found that these subsidies, with the 
exception of LA/MSF for the A300 and A310, are a genuine and substantial cause of the current 
market presence of the A350XWB family of Airbus LCA.1054  
5.417.   Third, examining the impact of the "product effects" of the challenged LA/MSF subsidies in 
the relevant product markets,  the Panel found that all of the orders of Airbus LCA identified by the 
United  States in the post -implementation period represented "significant" lost sales to the US  LCA 
industry.1055 Thus, the Panel concluded that the "product effects" of the challenged LA/ MSF 
subsidies are a genuine and substantial cause of:  
significant lost sales in the global markets for single -aisle, twin -aisle and {VLA}, 
within the meaning of Article  6.3(c) of the SCM  Agreement, constituting serious 
prejudice to the interests of the Un ited States within the meaning of Article  5(c) of the 
SCM Agreement … . 1056 
The Panel further found that , in the absence of the LA/MSF subsidies,  the volume of deliveries and 
market shares that would have been achieved in the U S LCA industry would have been higher than 
its actual level in all relevant product markets .1057 Thus, the Pa nel concluded that the 
"product  effects" of the challenged LA/MSF subsidies are a "genuine and substantial" cause of:  
displacement and/or impedance of the imports of a like product  of the United  States 
into the markets for single -aisle, twin -aisle and {VLA} in the European  Union, within 
the meaning of Article  6.3(a) of the SCM  Agreement, constituting serious prejudice to 
                                                                                                                                                  
and the Boeing 767, 777, and 787 LCA families; and the VLA market for the Airbus A380 and the Boeing 747 
families. (Panel Report, para.  6.1411)  
1049 Panel Report, para.  6.1416.  
1050 Panel Report, para.  6.1417. Before examining this issue, the Panel reviewed the preliminary 
question regarding the reference period, and considered that the United  States would succeed in its 
non-compliance claims only if it could  establish the existence of present  serious prejudice under Article  6.3(a), 
(b), and (c) of the SCM Agreement  in the post -implementation period (i.e. after 1  December  2011). (Ibid., 
paras.  6.1441 -6.1444)  
1051 As further discussed in paragraphs 5.563 and 5.593  below, like the original panel, the Panel 
undertook an aggregated assessment of the effects of all LA/MSF subsidies due to their similar "design, 
structure and operation". (Panel Report, para.  6.1448) The Panel further noted that, in aggregating the effec ts 
of the subsidies, the original panel examined "the extent to which alone, and in combination, the direct and 
indirect effects of LA/MSF operated to enable Airbus to launch, develop and bring to market each model of LCA 
that existed in the 2001 -2006 refe rence period". (Ibid. (fn omitted))  
1052 Panel Report, paras.  6.1492, 6.1536, and 6.1777. See  also paras.  6.1448, 6.1464, and 6.1480. As 
further discussed below, the Panel found that "product effects" of LA/MSF consisted of "direct effects" and 
"indirect effe cts", depending on whether the effects concern Airbus' ability to launch the particular model of 
LCA specifically funded by a LA/MSF subsidy (direct), or other models of LCA (indirect). (See  Panel Report, 
para. 6.1492. See also paras. 5.563 and 5.593 -5.594  below)  
1053 Panel Report, para.  6.1534. See  also para.  7.1.d.xii.  
1054 Panel Report, para.  6.1778. See  also para.  7.1.d.xiii.  
1055 Panel Report, para.  6.1798.  
1056 Panel Report, para.  7.1.d.xvi.  
1057 Panel Report, para.  6.1817.  WT/DS316/AB/RW  
 
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  the interests of the United  States within the meaning of Artic le 5(c) of the 
SCM Agreement1058; {and}  
displacement and/or impedance of exports from the market for single -aisle LCA in 
Australia, China and India, the market for twin -aisle LCA in China, Korea and 
Singapore and the market for {VLA} in Australia, China, Korea, 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.1059  
5.418.   The European  Union app eals the Panel's findings with respect to both "threshold" issues, 
alleging that the Panel failed to take into account the existence of subsidization of United States 
LCA products1060, and erred in its identification of the relevant product markets for purpos es of its 
adverse effects analysis .1061 The European Union also alleges that the Panel erred in reaching its 
findings on: (i) the "product effects" of the pre -A350XWB LA/MSF subsidies on the A320, A330, 
and A3801062; (ii) the "product effects" of the LA/MSF subsidies for the A380 and A350XWB on the 
A350XWB1063; and (iii) the causal link between the relevant subsidies , on the one hand,  and lost 
sales and "displacement and/or impedance" in specific country and product markets , on the other 
hand.1064 We address these alle gations of error in turn.  
5.6.1   Non-subsidized like product  
5.419.   We turn next to  examine the European  Union 's appeal regarding  the relevance of the term 
"non-subsidized like product" in Article  6.4 of the SCM  Agreement for purposes of assessing claims 
of serious prejudice brought under Article  6.3(b) of th e SCM  Agreement . According to the 
European  Union,  the Panel erred in finding that: (i) there was no "new matter " before it1065; 
and (ii) there were, in any event, no  "cogent reasons" for the Panel to depart from the findings 
made by the original panel regarding the relationship between  Article  6.3(b) and Article  6.4 of the 
SCM Agreement.1066 Moreover, the European  Union submits that the Panel failed to make an 
objective assessment of the matter before it, contrary to its duty under Article  11 of the DSU.1067 
5.420.   Before the Panel , the European  Union  advanced two main lines of argumentation in this 
regard. First, the European  Union argued that the SCM  Agreement  establishes a remedy under 
Article  6.3(b) only in situations where the complaining Member  has demonstrated  that its  like 
product is non -subsidized. According to the European  Union, the United  States  was therefore 
required to establish  that Boeing LCA (the like product at issue) were  "non-subsidized" in ord er to 
make out its claims of serious prejudice under this provision .1068 The European  Union referred to 
this as its "clean hands" argument.1069 In addition, the European  Union claimed that  subsidizati on 
of the like product had, "in  any event, to be taken into account in the assessment of causation, 
in an appropriately balanced way, guided by the Appellate  Body's intervening clarifications of the 
relationship between Articles  6.3(b) and Article  6.4".1070 The European  Union  referred to th is 
second argument as its "causation " argument1071, explaining on appeal that this was its main 
                                                
1058 Panel Report, para. 7.1.d.xiv.  
1059 Panel  Report, para. 7.1.d.xv. In light of these findings, the Panel made "no determination of the 
United  States' claim of threat  of displacement and impedance in the market for single -aisle LCA in the 
European  Union, given that the United  States requested the P anel to consider this claim only if {it} rejected its 
claims of present  serious prejudice". (Ibid., para.  6.1818 (emphasis original; fn  omitted). See also 
para. 7.1.d.xix)  
1060 European  Union's appellant's submission, paras.  641-750.  
1061 European  Union's appellant's submission, paras.  533-640. 
1062 European  Union's appellant's submission, paras.  832-884.  
1063 European  Union's appellant's submission, paras.  885-913. 
1064 European  Union's appellant's submission, paras.  914-958 and 966 -1056.  
1065 European  Union's appellant's submission, paras. 700 and 717.  
1066 European  Union's appellant's submission, para. 724.  
1067 European Union's appellant's submission, para. 724.  
1068 Panel Report, para. 6.114.  
1069 European  Union 's appellant's submission, para. 645. 
1070 European  Union's appellant's submission, para. 714. ( emphasis  and fn omitted ) See also 
European  Union's second written submission to the Panel, paras. 706 -727.  
1071 European  Union's appellant's submission, para. 645.  WT/DS316/AB/RW  
 
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  argument1072 regarding the relevance of Article  6.4 in this dispute. According to the 
European  Union, the Panel erred in declining to rule on these arguments based on  its view that the 
"matter" had been decided by the original panel and there were no "cogent reasons" to "re -open" 
the matter and decide otherwise.1073 
5.421.    We begin by providing a brief summary of the  relevant findings in the original 
proceedings,  before we turn  to the parties' arguments before the Panel and the Panel's findings  in 
these compliance proceedings.  Thereafter, we set out the arguments  raised  by the participants on 
appeal, beginning by reviewing the approach that the Panel took to the questions raised  by the 
European  Union.  
5.6.1.1   Findings in the original proceedings  
5.422.   Before  the original panel, the European Communities  had claimed that displacement or 
impedance under  "Article  6.3(b) can be demonstrated only if the complaining Member does not 
provide a subsidy within the meaning of Article  1 of the SCM  Agreement  in respect of the like 
product exported" .1074 The original panel considered that the European  Communities' argument 
relied upon the assumption that  Article  6.4 of the SCM  Agreement sets out an  "exclusive 
mechanism for demonstrating displacement or impedance of exports to a third  country market 
under Article  6.3(b) ".1075 It therefore proceeded to examine whether this was the case, 
or whether, to the contrary, displacement and impedance under Article  6.3(b) could  be 
demonstrated without reference to Article  6.4. 
5.423.   Recalling the panel's finding in Indonesia – Autos1076, the original panel found  that 
"Article  6.4 describes a particular situation " where "the like product of the complaining Member is 
not subsid ized" and where  an increase in the market share of the subsidized product would  
"suffice {} to make a prima facie case of displacement or impedance under Article  6.3(b)" .1077 
However, the original panel noted that , while the United  States  had made a claim unde r 
Article  6.3(b)  of the SCM  Agreement , to which Article  6.4 of that  Agreement refers, it  did 
"not purport to rely on the special rule  set out in Article  6.4, but rather, assert{ed} that it ha{d} 
demonstrated that displacement or impedance of its exports {in} third country markets {was}  the 
effect of the subsidies in dispute."1078 The original panel considered that its reading of Article  6.4 
led "to the conclusion that if the circumstances set out in Article  6.4 are satisfied, a further 
assessment of whether the changes in market share {were}  'the effect of the subsidy' {was} not 
necessary."1079 
5.424.   Having made these observations, the original panel found nothing in Article  6.4 to "suggest 
that the analysis set out t herein is the exclusive means of demonstrating displacement or 
impedance of exports for purposes of Article  6.3(b)" .1080 The original panel considered that the use 
of the phrase "shall include" indicated that there may be other circumstances, not set out in 
Article 6.4, in which a Member could demonstrate displacement or impedance for purposes of 
Article  6.3(b). The original panel added that , "{r}ather than limiting the circumstances in which 
                                                
1072 European  Union 's response to questioning  at the oral hearing.  
1073 European  Union's appellant's submission, paras. 686 -698. 
1074 Original Panel Report, para. 7.1762. ( emphasis  omitted)  
1075 Original Panel Report, para. 7.1766.  
1076 The panel in Indonesia – Autos  found:  
If the type of analysis set forth in Article 6.4 is appropriate in this case, then the complainants 
arguably could make a prima facie case of displacement or impedance simply by demonstrating 
that the market share of a subsidized product has increased over an appropriately representative 
period. If, on the other hand, the type of analysis set forth in Article  6.4 is not appropriate in th is 
case, then the complainants must demonstrate that " the effect of the subsidy " is to displace or 
impede imports into  Indonesia, that is, that they have lost export sales to Indonesia that they 
would otherwise have made and that those export sales were lo st as a result of the subsidies 
provided pursuant to the National Car programme.  
(Panel Report, Indonesia – Autos , para.  14.209  (emphasis original)). (See also Original Panel Report, 
para. 7.1767.)  
1077 Original Panel Report, para. 7.1767.  
1078 Original Panel Re port, para. 7.1768.  (emphasis added)  
1079 Original Panel Report, para. 7.1769.  
1080 Original Panel Report, para. 7.1769.  WT/DS316/AB/RW  
 
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  Article  6.3(b) may be satisfied", Article  6.4 simply "set{s} out add itional guidance for the 
application of Article  6.3(b) in certain particular circumstances" .1081  
5.425.   Based on this reasoning, t he original panel rejected the European Communities' view that 
"Article  6.4 {was} the exclusive basis for a finding of displacement or impedance under 
Article  6.3(b)".1082 In so doing, the original panel emphasized that the interpretation suggested by 
the European Communities would mean  that the SCM  Agreement  "establishes a remedy for 
displacement or impedance of exports in third country mar kets only in situations where the 
complaining Member's product is demonstrated to be unsubsidized ".1083 The original panel 
characterized this as  "a sort of 'clean hands' requirement for complaining Members as a 
prerequisite  to a claim under Article  6.3(b)".1084  
5.426.   The original panel found support for  its view in the negotiating  history of Article  6 of the 
SCM Agreement . In particular, it considered that its reading of Article  6.3: 
fit{s} with the  overall architecture of Article  6 as originally negotiated and adopted, 
with different burdens for establishing serious prejudice, ranging from "deemed " 
serious prejudice in the case of certain subsidies under Article  6.1, to a lesser burden 
for complaining Members with "clean hands ", i.e., an unsubsidized competing product, 
to the requirement to prove that the market effects of displacement or impedance are 
the effect of the subsidies.1085 
5.427.   Neither party appealed these findings, and the original panel report as modified by the 
Appellate  Body report in relation to other matters , was adopted by the DSB. Thus, the 
Appellate  Body did not have the occasion to review  the original panel's findings in this respect. 
However, while completing – at least to some extent – the legal analysis of the United  States' 
claims of displacement under Article s 6.3(a) and 6.3(b) of the SCM  Agreement, the Appellate  Body 
made certain statements regarding Article 6.3 and Article 6.4. The Appellate  Body found that, 
while displacement under Article  6.3(a) arises " where im ports of a like product of the complaining 
Member are declining in the market of the subsidizing Member, and are being substitu ted by the 
subsidized product", under Article  6.3(b), displacement occurs " where exports {of} the 
like product of the complaining  Member  are declining in the third country market concerned, and 
are being substituted  by exports of the subsidized product ".1086 With regard to Article  6.4, 
the Appellate  Body noted that, under this provision,  the change in relative market shares shall be 
demonstrated "over an appropriately representative period sufficient to demonstrate clear trends 
in the development of the market for the product concerned".1087  
5.6.1.2   Arguments before the Panel and Panel findings  in the compliance proceedings  
5.428.   Before the Panel, the European  Union  argued that, in order for the United  States  to make 
out its claims of displacement or impedance of exports within the meaning of Article  6.3(b) of the 
SCM Agreement , "the United  States  {had to}  demonstrate, by virtue of Article  6.4, that {it s} 
product being allegedly displaced o r impeded in any relevant third  country market {was}  a 
'non-subsidized like product'."1088 The European  Union  submitted that "the fact that there {was} 
now a multilateral determination {in US – Large Civil Aircraft (2nd complaint) } that the 
United  States ' 'like products' {were} subsidized mean{t} that the relevant factual circumstances 
ha{d} changed" such that "there {was} now a new 'matter' before the compliance Panel that 
{had to} be resolved".1089 Additionally, the Europea n Union argued that given the context of 
                                                
1081 Original Panel Report, para. 7.1769.  
1082 Original Panel Report, para. 7.1770.  
1083 Original Panel Report, para. 7.1770. ( emphasis omitted)  
1084 Original Panel Report, para. 7.1770. ( emphasis added ) 
1085 Original Panel Report, para. 7.1771.  
1086 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1170. 
(emphasis  added)  
1087 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1166. 
(fn omitted)  
1088 Panel Report, para. 6.1114.  
1089 Panel Report, para. 6.1115 (referring to European  Union 's second written submission to the Panel, 
paras.  708-712).  WT/DS316/AB/RW  
 
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  Article  6.4, "the existence of such subsidisation" was something that the Panel had to take into 
account in its assessment of causation and non -attribution.1090 The European  Union  alleged that 
there were, in any event,  "cogent reasons" to review the original panel's interpretation of the 
relationship between Article  6.3(b) and Article  6.4 of the SCM Agreement .1091 
5.429.   In response, the United  States  submitted that "the ' non-subsidized like product' arguments 
… in this complianc e dispute were already addressed and rejected in the unappealed findings from 
the original proceeding that were adopted by the DSB", which "impl{ied} that the European  Union  
{was} not entitled to reopen the matter" .1092 According to the United  States , the European  Union 's 
submission that there was a new "matter" before the Panel "in th e light of the alleged 
'changed  facts' {was} premised on a mischaracterization of the original panel's findings" .1093 
The United  States  submitted that "the original panel's rejec tion of the European Communities' 
arguments regarding the relationship between Articles  6.3(b) and 6.4 was based on a legal 
interpretation, rendering the factual question of the subsidization of the United  States ' like 
products 'irrelevant in this case'."1094 Furthermore, the United  States  disagreed with the 
European  Union 's contention that there were "cogent reasons" for the Panel to review the original 
panel's findings.1095 
5.430.   The Panel began its analysis  by noting that, in the orig inal proceedings, 
"the European  Communities {had} advanced essentially the same line of argument" it now 
advanced in these compliance proceedings to support its proposition that the United  States ' claims 
under Article  6.3(b) should be rejected .1096 The Panel recalled the original  panel's fi nding that 
"the 'non-subsidized like product' language appearing in Article  6.4 … 'may well require that a 
complaining Member demonstrate, in the circumstances of that provis ion, that its like product … 
is not subsidized '."1097 However, the Panel noted that t he original panel had proceeded to examine  
"another question, namely, 'whether Article  6.4 {was} the neces sary or exclusive mechanism 
for demonstrating displacement or impedance of exports … under Article  6.3(b), 
or whether  … displacement and impedance und er Article  6.3(b) {could} be demonstrated without 
reference to Article  6.4'."1098 The Panel considered that the ori ginal panel's finding that 
"the language of Article  6.4 did not prescribe the exclusive means through which a complaining 
Member could demonstra te displacement or impedance for the purpose of Article  6.3(b) was 
sufficient to dispose of the European  Communities' argument."1099 The Panel further noted that 
"{t}he European  Union  did not appeal the original panel's findings on this point; and the {original} 
panel report, as modified by the Appellate  Body in relation to ot her matters, was adopted by 
the DSB."1100  
5.431.   The Panel understood the European  Union  to now request that it "rule on what is 
essentially the same legal question that was resolved in the  original proceeding and/or review and 
modify the original panel's legal findings. "1101 The Panel first considered the European  Union 's 
argument that "new factual circumstances mean{t} that there {was} a new 'matter' before the … 
Panel" and, therefore, that t he Panel was "not precluded from addressing the European  Union 's 
arguments concerning the interpretation of Articles  6.3(b) and 6.4" .1102 The Panel found, however, 
that the original panel's interpretation of the relationship between Article  6.3(b) and Article  6.4 
had "decided the matter "1103, and considered that " the extent to which Boeing LCA were subsidized 
                                                
1090 European  Union's appellant's submission, para. 645. See also  Panel Report, para. 6.1116.  
1091 Panel Report, para. 6.1115.  
1092 Panel Report, para. 6.1121 (referring to United  States ' second written submission to the Panel, 
paras.  404-406, 409 -410, and 412).  
1093 Panel Report, para. 6.112 2. 
1094 Panel Report, para. 6.1122 ( quoting United  States ' second written submission to the Panel, 
paras.  413-415 (emphasis and fn omitted by the Panel) ). 
1095 Panel Report, para. 6.1122.  
1096 Panel Report, para. 6.1126.  
1097 Panel Report, para. 6.1127 (quoting Original Panel Report, para. 7.1765).  
1098 Panel Report, para. 6.1127 (quoting Original Panel Report, para. 7.1766).  
1099 Panel Report, para. 6.1130.  
1100 Panel Report, para. 6.1131.  
1101 Panel Report, para. 6.1131.  
1102 Panel Report, para. 6.1132 (referring to European  Union 's second written submission to the  Panel, 
paras.  709-710).  
1103 Panel Report, para. 6.1135.  WT/DS316/AB/RW  
 
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  played no role at all in the original panel's legal analysis ".1104 For the Panel, the adopted 
recommendations and rulings in US – Large Civil Aircraft (2nd complaint)  in relation to 
"the subsidization of Boeing LCA" therefore did not mean there was "now a new 'matter'" before 
the Panel "as regards the European  Union 's reliance on Article  6.4 to reject the United  States ' 
claims made under Article  6.3(b)".1105 
5.432.   The Pa nel next turned to address the European  Union 's argument that " there {were} 
'cogent reasons' for the … Panel to review the original panel's interpretation of the relationship 
between Articles  6.3(b) and 6.4 " of the SCM  Agreement .1106 The Panel began by noting that 
"the concept of 'cogent reasons' has generally been raised in cases where panels have departed or 
been asked to depart from previous adopted Appellate  Body findings in different disputes. "1107 
The Panel recalled the findings in  US – Countervailing and Anti -Dumping Measures (China)  where 
the panel had indicated the types of considerations that could, in appropriate cases, justify a panel 
adopting a different interpretation.1108 Referring to  the Appellate  Body report  in US – Stainles s 
Steel (Mexico ), the Panel  expressed  the view that "a compliance panel  would be committing a legal 
error" if it were to review and reconsider the merits of a legal interpretation developed by the 
panel serving in the original proceedings  of the same dispu te, when "that legal interpretation was 
left unappealed and ultimately the subject of recommendations and rulings adopted by the 
DSB".1109 Thus, the Panel concluded that it was not convinced that "the European  Union  {was} 
entitled to reopen the original panel 's findings with respect to its arguments concerning the 
relevance of Article  6.4 … to the United  States ' claims under Article  6.3(b)."1110 In any event, the 
Panel found that, " even if it were legally permissible for a compliance panel to review a legal 
interpretation developed by an original panel that was unappealed and adopted by the DSB in the 
same dispute"1111, the explanations provided by the European  Union  did "not amount to 
'cogent  reasons'".1112 On this basis, the Panel dismiss ed the European  Union 's request to reject the 
United  States ' claim under Article  6.3(b) of the SCM  Agreement  in light of the adopted 
recommendations and rulings in US – Large Civil Aircraft (2nd complaint)  regarding the 
subsidization of Boeing LCA.1113 
                                                
1104 Panel Report, para. 6.1136.  
1105 Panel Report, para. 6.1138.  
1106 Panel Report, para. 6.1139 (referring to European  Union 's first written submission to the Panel, 
para. 657; second written submission to th e Panel, paras.  713 and 727).  
1107 Panel Report, para. 6.1140 (referring to Appellate  Body Reports,  US – Stainless Steel (Mexico) , 
paras.  160-162; US – Continued Zeroing , para. 362; Panel Reports, China – Rare Earths , paras.  7.55-7.61; 
US – Countervailing and  Anti-Dumping Measures (China) , paras.  7.315 -7.317). (emphasis original)  
1108 Panel Report, para. 6.1143 (quoting Panel Report, US – Countervailing and Anti -Dumping Measures 
(China) , paras.  7.315 -7.317). In US – Countervailing and Anti -Dumping Measures (China ), the panel noted 
that, although the Appellate  Body has not  defined the concept of "cogent  reasons", its reference to "cogent 
reasons" must be considered in the context of its other statements regarding the hierarchy provided for in the 
DSU between itself  and panels, the objectives that are served through the development of a consistent, 
coherent and predictable body of jurisprudence, and the concerns that it has expressed when panels have 
departed from its prior jurisprudence. (Panel Report, US – Counterv ailing and Anti -Dumping Measures (China) , 
para. 7.316) Accordingly, the panel stated:  
To our minds, "cogent" reasons, i.e. reasons that could in appropriate cases justify a panel in 
adopting a different interpretation, would encompass, inter alia : (i) a mu ltilateral interpretation 
of a provision of the covered agreements under Article  IX:2 of the WTO  Agreement  that departs 
from a prior Appellate  Body interpretation; (ii) a demonstration that a prior Appellate  Body 
interpretation proved to be unworkable in a  particular set of circumstances falling within the 
scope of the relevant obligation at issue; (iii) a demonstration that the Appellate  Body's prior 
interpretation leads to a conflict with another provision of a covered agreement that was not 
raised before  the Appellate  Body; or (iv) a demonstration that the Appellate  Body's interpretation 
was based on a factually incorrect premise.  
(Panel Report, US – Countervailing and Anti -Dumping Measures (China) , para. 7.317)  
1109 Panel Report, para. 6.1142  (referring to Appellate Body Report, US – Stainless Steel (Mexico) , 
fn 309 to para. 158) . (emphasis original)  
1110 Panel Report, para. 6.1143.  
1111 Panel Report, para. 6.1143.  
1112 Panel Report, para. 6.1143.  
1113 Panel Report, para. 6.1154.  WT/DS316/AB/RW  
 
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  5.6.1.3   Claims and arguments on app eal 
5.433.   As noted, t he European  Union  argued before the Panel that in dealing with the 
United  States ' claim under Article  6.3(b) of the SCM  Agreement , the Panel was required to take 
into account the context of Article  6.4, including, particularly, the phrase "non-subsidized like 
product ", when assessing the United  States ' assertions on the issue of causation.1114 On appeal, 
the European  Union  emphasizes that it  had argued not only that "any subsidisation of the like 
product would preclude or defeat a claim under Article 6.3(b) (the original 'clean hands' 
argument)", but also that "the existence of such subsidisation was something that the … Panel had 
to take into account, in any event, in its assessment of causation and non -attribution under 
Article  6.3(b) (the 'cau sation' argument)".1115 The European  Union  added that "there was now, for 
the first time, an express multilateral determination in { US – Large Civil Aircraft (2nd complaint) } 
to the effect that the like products referred to by the United  States  (Boeing LCA) are 
subsidised".1116 For the European  Union , the Panel's finding that "there was no new matter before 
it"1117 is erroneous because "{ a} 'matter' necessarily consists of the treaty terms identified by the 
parties as framing the obligation alleged to  have been breached (duly clarified), as well as the 
particular facts identified by both the complainant and the defendant. "1118 The European  Union  
therefore faults the Panel for disregarding "the fact that, as between the original proceedings and 
the complia nce proceedings, the interpretative propositions advanced … and the facts referenced 
by the European  Union  when referring to Article  6.4 have changed."1119 
5.434.   The European  Union  further submits that the United  States  brought a claim under 
Article  6.3(b) in respo nse to which "the European  Union  referred to Article  6.4, and also made 
certain factual assertions and adduced certain evidence in support of its position ."1120 According to 
the European  Union , "this constituted the matter that the compliance Panel was oblige d to 
objectively assess ."1121 Thus, the European  Union  submits that it was not asking the Panel to 
"reopen" the findings in the original proceedings , but "simply asking" it "to clarify the relevant 
legal provisions, taking into account the intervening guidanc e prov ided by the Appellate  Body, 
and apply them to the arguments and fact pattern arising in these compliance proceedings".1122  
5.435.   Referring to Article  11 of the DSU, t he European  Union  also claims  that the Panel 's 
treatment of the arguments raised by the Euro pean Union reveal s "a lack of even -handedness on 
the part of the Panel".1123 The European  Union  refers to a series of alleged " qualifications, 
omissions and misstatements", and maintains  that the Panel sought to shield from "review an 
interpretation of Articles  6.3(b) and 6.4 {by the original panel} that is clearly incorrect".1124 
In particular , the European  Union  alleges that the Panel denied "the European  Union  its day in 
court on this mat ter"; and wrongly suggested  that the European  Union was "precluded" from 
challenging a prior "adopted" interpretation  "whilst at the same time re -writing that very same 
interpretation by retroactively eliminating key elements of the reasoning" .1125 The Europe an Union  
also identifies several "additional elements" that it claims, "taken together or in any combination ", 
demonstrate a breach of Article  11 of the DSU.1126  
5.436.   For its part, t he United  States  recalls that t he original panel framed the relevant question 
before it as "whether Article  6.4 {was}  the necessary or exclusive mechanism for demonstrating 
displacement or impedance of exports to a third country market under Article  6.3(b), or whether, 
to the contrary, displacement and impedance under Article  6.3(b) {could}  be demonstrated 
without reference to Article  6.4."1127 According to the United  States , this " was a legal question for 
                                                
1114 See European  Union 's appellant's submission, para. 701. 
1115 European  Union 's appellant's submission, para. 645. ( emphasis  omitted)  
1116 European  Union 's appellant's submission, para. 703. 
1117 European  Union 's appellant's submission, para. 705 (referring to Panel Report, para. 6.1138).  
1118 European  Union 's appellant's submission, para. 710. ( emphasis  omitted)  
1119 European  Union 's appellant's submission, para. 712. 
1120 European  Union 's appellant's submission, para. 726. 
1121 European  Union 's appellant's submission, para. 726. 
1122 European  Union 's appellant's submission, para. 746. 
1123 European  Union 's appellant's submission, para. 718. 
1124 European  Union 's appellant's submission, para. 718. 
1125 European  Union 's appellant's submission, para. 718. 
1126 European  Union 's appellant's submission, paras.  718 and 749 . 
1127 United  States ' appellee's submission, para. 371 (quoting Original Panel Report, para. 7.1766).  WT/DS316/AB/RW  
 
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  which the existence (or not) of subsidization  to Boeing large civil aircraft was irre levant "1128, 
and the Panel "was correct in concluding that subsidization of Boeing large civil aircraft did not 
play a role in the original panel's unappealed and DSB -adopted legal interpretation of 
Article  6.4."1129 Referring to the Appellate Body reports in the original proceedings in this dispute  
and in US ‒ Large Civil Aircraft  (2nd complaint) , the United  States  adds that,  while the 
Appellate  Body has found that the phrase in Article  6.4 "over an appropriately rep resentative 
period sufficient to demonstrate clear trends in the development of the market for the product 
concerned" provides relevant context  in interpreting Article  6.3(b)1130, it has not "found that claims 
under Article  6.3(b) must in all cases  also satis fy every provision  in Article  6.4".1131 
The United  States adds that "Article  6.4 does not describe the exclusive basis on which a claim 
under Article  6.3(b) may be demonstrated "1132, and that, " even if  relevant intervening 
Appellate  Body statements in another di spute were to exist, it is not at all clear that such 
statements would allow a compliance panel to deviate from previously adopted DSB findings ."1133  
5.437.   Regarding the European  Union's claims under  Article  11 of the DSU , the United  States  
submits that the Panel "did a careful and thoughtful job reviewing the issues before it" and that 
"it is evident that the { European  Union 's} submission does not challenge a lack of objectivity in 
the Panel's assessment of the facts, but the correctness of  the Panel's legal analysis that it {was} 
precluded from reviewing the original panel's interpretation of Article  6.4."1134 According to the 
United  States , "if the Appellate  Body decides not to entertain the { European  Union 's} submission 
in resp ect of the ori ginal panel's DSB -adopted legal interpretation of Article  6.4, 
the {European  Union 's} Article  11 claims would merit similar treatment. "1135 In any event, 
the United  States  asserts that the European  Union  has not identified any "specific errors that are 
so mat erial that, 'taken together or singly ', they undermine the objectivity of the {P}anel's 
assessment of the matter before it."1136  
5.438.   Having summarized  the original panel's and the Panel's analysis,  as well as the arguments  
on appeal, we turn to address the issue s raised by the European  Union.  
5.6.1.4   Whether the Panel erred in declining to address the arguments raised by the 
European  Union  
5.439.   As noted  above , the European  Union  argued before the Panel that: (i) the SCM  Agreement  
establishes a remedy for displacement or impe dance  of exports in third country markets under 
Article  6.3(b)  only in situations where the complaining Member has demonstrated that its like 
product is non-subsidized; and (ii) subsidization of the like product must, in any event, be taken 
into account in  the assessment of causation. In so doing, the European  Union  expressed concern 
with, in particular: (i) the original panel's description  of Article  6.4 of the SCM  Agreement as a 
"special rule"; (ii) its conclusions, drawn from the "shall include" language  in the first sentence of 
Article  6.4, regarding  the relationship between Article  6.3(b) and Article  6.4; (iii)  its reference to 
preparatory work; and (iv) its view o n how its interpretation fit with the overall architecture of 
Article  6 of the SCM  Agreeme nt.1137  
5.440.   Based on its review of the European  Union's arguments, t he Panel considered the 
European  Union  to have articulated "reasons " as to why it " disagree{d}  with the original panel's 
findings concerning the relationship between the relevant provisions and certain 'other related 
matters referenced' in the {original} panel report" .1138 The Panel added that  "the European  Union 's 
                                                
1128 United  States ' appellee's submission, para. 371. (emphasis original)  
1129 United  States ' appellee's submission, para. 372. 
1130 United  States ' appellee's su bmission, para. 395. 
1131 United  States ' appellee's submission, para. 379. (emphasis original)  
1132 United  States ' appellee's submission, para. 381.  
1133 United  States ' appellee's submission, para. 382. (emphasis original)  
1134 United  States ' appellee's submission, para. 399. 
1135 United  States ' appellee's submission, para. 399. 
1136 United  States ' appellee's submission, para. 400 (quoting Appellate  Body Report, Peru ‒ Agricultural 
Products , para. 5.66, in turn quoting Appellate  Body Report s, EC and certain member States – Large Civil 
Aircraft , para. 1318; US – Anti-Dumping and Countervailing Duties (China) , para. 337 (fns omitted by 
the United States) ). 
1137 Panel Report, para. 6.1152.  
1138 Panel Report, para. 6.1153. (emphasis original)  WT/DS316/AB/RW  
 
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  submissions appear{ed} to be arguments that a party might raise in an appeal of a legal 
interpretation before the Appellate  Body".1139 As detailed above, t he Panel considered, however, 
that the original panel's interpretation of the relationship between Article  6.3(b) and Article  6.4 
had "decided the matter "1140, and it therefore declined to "reopen the original panel's findings with 
respect to  {the European  Union 's} arguments concerning the relevance of Article  6.4 … to the 
United  States ' claims under Article  6.3(b)" .1141 For the Panel , there were no "cogent reasons" 
to do so.1142 
5.441.   We recall that the United  States claimed before the Panel that Boeing continued to 
experience displacement and/or impedance of its exports to cer tain third country markets, 
and adduced evidence in support of its claim  under Article  6.3(b). For its part , the European  Union  
sought to rebut the United  States' claim  by referring  to Article  6.4 and to interpretative guidance 
provided by the Appellate Body i n the original proceedings in this dispute and  in US ‒ Large Civil 
Aircraft (2nd complaint) regarding the meaning of Article  6.3(b) and the contextual relevance of 
Article  6.4.1143 The European  Union also referred to the recommendations and rulings of the DSB in 
US – Large Civil Aircraft (2nd complaint)  establishing that  Boeing LCA were subsidi zed, arguing that 
they should be taken into account in assessing the United  States' claims  under Article  6.3(b).1144  
5.442.   As we see it, the Panel was under a duty, pursuant to Article  11 of the DSU, to adjudicate 
the claims brought by the United  States  in these compliance proceedings in light of the evidence 
and arguments put forward by the European  Union and the relevant WTO jurisprudence . In order 
to do so, the Panel was required to  examine  the meaning of Article  6.3(b) of the SCM  Agreement, 
including the relationship between this provision and Article  6.4, as clarified  by the Appellate Body 
in the o riginal proceedings in this dispute  and in US ‒ Large Civil Aircraft (2nd complaint ). It was 
also appropriate for the Panel to take into account the findings and reasoning by the original panel 
regarding the meaning of Article  6.4. We note, as did the Pane l, that an "unappealed  finding 
included in a panel report that is adopted  by the DSB must be treated as a final resolution  to a 
dispute between the parties in respect of the particular claim  and the specific  component of a 
measure that is the subject of that claim ."1145  
5.443.   That said, we note that the European  Union  put forward new arguments and evidence 
regarding the relevance of alleged subsidization of the like product to rebut new claims brought by 
the United  States under Article  6.3(b) with respect to the post -implementation period , which is 
different from the reference period covered in the original proceedings . In doing s o, 
the European  Union  relied upon the contextual guidance regarding t he relationship betw een 
Article  6.3(b) and Article 6.4 provided by the Appellate Body in the original proceedings  in this 
dispute1146 and in US ‒ Large Civil Aircraft (2nd complaint ). In these circumstances, the Panel  could 
not simply refuse to address the arguments and evidenc e before it in dealing with 
the United  States ' claims under Article  6.3(b) ; rather, the Panel was required to adjudicate the 
United  States ' claims under Article  6.3(b) in light of the arguments raised and evidence submitted 
by both parties to the dispute.1147 By refusing  to give  full consideration  to the specific facts and 
circumstances of the present case and to the legal arguments raised by the parties to the dispute , 
the Panel breached its duties under Article  11 of the DSU. Accordingly, we declare moot and of 
                                                
1139 Panel Report, para. 6.1153.  
1140 Panel Report, para. 6.1135.  
1141 Panel Report, para. 6.1143.  
1142 Panel Report, para. 6.1143.  
1143 European  Union 's appellant's submission, paras.  727-728. 
1144 European  Union 's appellant's submission, paras.  645 and 703. 
1145 Panel Report, para. 6.1140 (quoting Appellate  Body Report, EC – Bed Linen (Article  21.5 – India) , 
para. 93 (emphasis original)).  
1146 We note in this respect that findings contained in the original panel report on the issue of 
"non-subsidized like product" were adopted by the DSB together with the guidance contained in the 
Appellate  Body report in the same original proceedings regarding the relationship between Article 6.3(b) and 
Article 6.4 of the SCM  Agreement.  
1147 We recall that, having noted that Article  11 of the DSU provides that a panel "should make an 
objective assessment of the matter before it, including an objective assessment of the facts of the case and the 
applicability of and conformity with the relevant covered agreements", the Appellate  Body ex plained that 
"{t}he 'matter' is constituted by both the facts of the case (and, in particular, the specific measures at issue) 
as well as the legal claims raised".  (Appellate  Body Report, Dominican Republic – Import and Sale of 
Cigarettes , para. 105 (refer ring to Appellate  Body Report, Guatemala – Cement I , para. 73)) WT/DS316/AB/RW  
 
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  no legal effect the Panel's finding , in paragraph 6.1154 of the Panel Report , concerning the 
European  Union's reliance on Article 6.4 to reject the United States' claims under Article 6.3(b)  of 
the SCM Agreement . Having reached this conclusion, we see n o need to make additional findings 
regarding whether the Panel also erred in finding that there were no " cogent reasons " to depart 
from the original panel's findings, or whether the Panel acted inconsistently with Article  11 of the 
DSU on other grounds, as  claimed by the European  Union. We fail to see how such additional 
findings would assist in securing a "positive solution" to the dispute or a "satisfactory settlement of 
the matter".  
5.444.   We therefore proceed to address the European  Union 's arguments regardin g the 
relationship between Article  6.3(b) and Article  6.4 of the SCM  Agreement .1148 
5.6.1.4.1   The relationship between Article  6.3(b) and Article  6.4 of the SCM  Agreement  
5.445.   As we understand it, the issues raised by the Europea n Union on appeal relate to 
two fundamental questions : (i) what is the role of Article  6.4 of the SCM  Agreement for the 
purposes of serious prejudice claims asserted under Article  6.3(b)  of the SCM  Agreement , 
including whether Article  6.4 can be considered as providing an exclusive pathway for 
demon strating displacement or impedance of exports in a third country market for purposes of 
Article  6.3(b) and (ii) to what extent, if any, should the subsidization of the like product  be taken 
into account in an adverse effects analysis under Article  6.3(b) ? 
5.446.   Starting with the text of the relevant provisions, we note that Article  6.3(b) provides that 
serious prejudice within the meaning of Article  5(c) of the SC M Agreement may arise when 
"the effect of the subsidy is to displace or impede the exports of a like product of another Member 
from a third country market". Article  6.3(b) thus speaks to the question of whether there is a 
"causal relationship" between the challenged subsidy and its effects. Article  6.4, in turn, speaks 
more directly to the relevant market  phenomenon caused by the subsidy, that is, 
"the displacement or impeding of exports". The first sentence of Article  6.4 describes the link 
between Article  6.3(b) and Article  6.4 in the following terms:  
For the purpose of paragraph 3(b), the displacement o r impeding of exports shall 
include  any case in which, subject to the provisions of paragraph  7, it has been 
demonstrated that there has been a change in relative shares of the market to the 
disadvantage of the non-subsidized like product (over an appropri ately representative 
period sufficient to demonstrate clear trends in the development of the market for the 
product concerned, which, in normal circumstances, shall be at least one year).1149 
5.447.   The use of the words "shall include  any case " in Article  6.4 indica tes that there may be 
cases, other than those set out  in Article  6.4, in which a Member could demonstrate the 
"displacement or impeding of exports" for purposes of Article  6.3(b). Article  6.4 therefore does not 
set out an exclusive way to demonstrate displacement or imped ance of exports in a third country 
market.1150 At the same time, Article  6.4 provides guidance as to the meaning of the terms 
"displacement " and "impedance ", indicating that these phenomena can be found to exist  where 
"it has been demonstrated that there has been a change in relative shares of the market to the 
disadvantage of the non-subsidized like product ." The second sentence of Article  6.4 indicates that 
such a " {c}hange in relative shares of t he market" can be found to exist where: (a) "there is an 
increase in the market share of the subsidized product"; (b)  "the market share of the subsidized 
product remains constant in circumstances in which, in the absence of the subsidy, it would have 
declined"; and (c) "the market share of the subsidized product declines, but at a slower rate than 
would have been the case in the absence of the subsidy."  
5.448.   We do not read Article  6.4 as dispensing with the requirement to assess causation – 
i.e. whether any cha nge in relative shares of the market to the disadvantage of the non-subsidized 
like product  is the "effect of the subsidy " in question. Given that Article  6.4 contemplates a finding 
                                                
1148 See European  Union 's appellant's submission, paras.  720-723. 
1149 Emphasis added.  
1150 In contrast, Article  6.7 of the SCM  Agreement describes circumstances in which displacement or 
impedance unde r Article  6.3 of that  Agreement shall not be found to exist.  WT/DS316/AB/RW  
 
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  of "the displacement or impeding of  exports" to be made "{f}or the  purpose  of" Article  6.3(b), 
it would appear that the required nexus between the subsidy and the relevant effects must be 
demonstrated on the basis of an evaluation of whether the former amounts to a genuine and 
substantial cause of the latter. Thus, rather than i ndicating that a complainant would not be 
required to demonstrate a "causal link" between the subsidy  and its effects to the extent that it 
has shown that its like product is not subsidized, as the original panel appears to have 
suggested1151, Article  6.4 provides guidance as to how displacement or impedance of exports can 
be demonstrated to exist in particular cases or situations .  
5.449.   Looking to the context of Article  6.3(b), w e note that there is no corresponding provision 
similar to Article  6.4 that would e lucidate on how displacement and/or impedance can be 
demonstrated with respect to "imports of a like product of another Member into the market of the 
subsidizing Member" within the meaning of Article  6.3(a).  We understand the European  Union to 
argue that, where a complainant raises claims under both Article  6.3(a) and Article  6.3(b), it would 
be required to demonstrate  that its like product is non -subsidized for the purposes of any claim  it 
brings  under Article  6.3(b), but not for purposes of  its claims und er Article  6.3(a). We find it 
difficult to see a basis for  this distinction given that Article  6.3(a) and Article  6.3(b)  both speak to 
displacement and/or impedance, albeit in different g eographic markets . Indeed , as the 
Appellate  Body found in US – Large Civil Aircraft  (2nd complaint) , Article  6.4 "applies to both 
phenomena referred to in Article  6.3(a) and (b) " and requires simply that, "as with displacement, 
a finding of impedance should be supported by evidence of changes in the relative market share in 
favour of the subsidized product, over a sufficiently representative period, to demonstrate 
'clear trends ' in the development of the mar ket concerned ."1152 
5.450.   Moreover, w e note that Article  6.3(c) establishes that serious prejudice within the meaning 
of Article  5(c) of the SCM  Agreement may arise in case s where the effect of the subsidy is 
"a significant price undercutting by the subsidized prod uct as compared with the price of a like 
product of another Member in the same market". In addition, Article  6.5 of the SCM  Agreement 
states:  
For the purpose of paragraph 3(c), price undercutting shall include any case in which 
such price undercutting has been demonstrated through a comparison of prices of the 
subsidized product with prices of a non-subsidized like product supplied to the same 
market . The comparison shall be made at the same level of trade and at comparable 
times, due account being taken of  any other factor affecting price comparability. 
However, if such a direct  comparison is not possible, the existence of price 
undercutting may be demonstrated on the basis of export unit values.1153 
5.451.   Article  6.5 therefore clarifies that price undercutting with in the meaning of Article  6.3(c) 
"shall include" any case in which such price undercutting has been demonstrated through a 
comparison of prices of the subsidized product with prices of a " non-subsidized like product" 
supplied to the same market . We view the relationship between Article  6.3(c) and Article  6.5 as 
similar to that between Article  6.3(b) and Article  6.4, in the sense that Article  6.3(c) speaks 
broadly to the question of whether a "causal relationship" exists between the challenged sub sidy 
and the relevant price effects, while Article  6.5 speaks to one of the relevant market phenomen a 
mentioned in Article  6.3(c) , that is, " significant price undercutting ", and how it can be found to 
exist by comparing certain prices . Rather than indicati ng that a complainant would not be required 
to demonstrate a "causal link" between the subsidy  and the undercutting of prices of a 
"non-subsidized like product", Article  6.5 provides guidance as to which prices to compare to 
determine whether undercutting occurs. We do not find support in Article  6.5 for the proposition 
that a complainant would be required in each case to demonstrate that its like product is 
non-subsidized in the context of claims brought under Article  6.3(c).  
5.452.   The European  Union  submits  that "the language of Article  6.4 must be taken into account 
in any circumstances when Article  6.3(b) is applied ."1154 In the original proceedings , 
                                                
1151 See Original Panel Report, paras.  7.1769 and 7.1771.  
1152 Appellate  Body Report, US – Large Civil Aircraft  (2nd complaint) , para.  1086.  
1153 Emphasis added.  
1154 European  Union 's appellant's submission, para. 644. (emphasis original)  WT/DS316/AB/RW  
 
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  the Appellate  Body noted that Article  6.4 "provides that the change in relative market shares shall 
be demonstrated 'over an appropriately representative period sufficient to demonstrate clear 
trends in the development of the market for the product concerned'."1155 Moreover, referring to its 
findings in the original proceedings in this dispute , the Appellate  Body stated in US – Large Civil 
Aircraft (2nd complaint)  that "the effect of a subsidy must be examined 'over a sufficiently long 
period of time and is not limited to the year in which it was paid' because consideration of 
developments over a longer period 'provides a more robust basis for a serious prejudice 
evaluation'."1156 The Appellate  Body added  that Article  6.4 "applies to both phenomen a referred to 
in Article  6.3(a) and  (b)"1157, and requires , as with displacement, that a finding of impedance 
"be supported  by evidence of changes in the relative market share in favour of the subsidized 
product, over a sufficiently representative period, to demonstrate 'clear trends' in the development 
of the market concerned."1158 While we agree with the European  Union  that Article 6.4 is context 
for a proper interpretation of Article  6.3(b), we do not consider that it  follow s from this that a 
complainant is required  in each case  to demonstrate that its like product is  non-subsidized to 
establish the existence of displacement or  impedance under  Article  6.3(b). Nor do we find support 
for such a proposition in the Appellate  Body reports in the original proceedings in this dispute or  
in US ‒ Large Civil Aircraft (2nd complaint) . As noted earlier, Article  6.4, and in particular its 
reference to "non -subsidized like product", does not set out an exclusive pathway to demonstrate 
displacement or imped ance of exports in a third country market.  
5.453.   The European  Union  also maintains, in the alternative,  that the existence of subsidization 
of the like product  (Boeing LCA)  "was something that the … Panel had to take into account, in any 
event, in its assessment of causa tion and non-attribution under Article  6.3(b)".1159 Depending on 
the arguments and evidence that the parties put before a panel, it  may be relevant for a panel to 
consider, as a part of its causation analysis, whether the like product of the complainant  is 
subsidized. However, we see no reason why a panel would be required to determine whether one 
subsidizing Member is causing a parti cular market phenomenon to the exclusion of another 
subsidizing Member , as the European  Union  seems to suggest.1160  
5.6.1.5   Conclusion  
5.454.   Regarding the European  Union's arguments concerning the relevance of Article  6.4 of the 
SCM Agreement to the United  States' claims under Article  6.3(b) of that Agreement, the Panel was 
required to  examine  the meaning of Article  6.3(b), including the relationship between this 
provision and Article  6.4, as clarified  by the Appellate Body in  the original proceedings in this 
dispute  and in US ‒ Large Civil Aircraft (2nd complaint) . It was also appropriate for the Panel to 
take into account the findings and reasoning by the original panel regarding the meaning of 
Article  6.4. The Panel  could not simply refuse to address the arguments and evidence before it in 
dealing with the United  States ' claims under Article  6.3(b). Rather, the Panel was required to 
adjudicate the United  States ' claims under Article  6.3(b) in  light of the arguments raised and 
evidence submitted by both parties to the di spute , and it erred by declining to do so .  
5.455.   Accordingly, we declare  moot and of no legal effect  the Panel's finding , 
in paragraph  6.1154 of the Panel Report , concerning  the European  Union's reliance on Article  6.4 
to reject the United  States' claims under Article  6.3(b)  of the SCM Agreement . Based on our 
interpretation of Article  6.3(b), read together with Article  6.4, we disagree, however, with the 
European  Union  that a complainant is required to demonstrate, in each case, that its like product 
is non -subsidized  in order to show that the effect of the subsidy is displacement and/or impedance 
of its like product in a third country market.  
                                                
1155 Appellate  Body Report, EC and certain member States — Large Civil Aircraft , para. 1166. 
(fn omitted)  
1156 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1081 (quoting Appella te Body 
Report, EC and certain member States – Large Civil Aircraft , para. 1166, in turn quoting Appellate  Body 
Report, US – Upland Cotton , para. 478).  
1157 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1086.  
1158 Appellate  Body Report,  US – Large Civil Aircraft (2nd complaint) , para. 1086.  
1159 European  Union 's appellant's submission, para. 645. ( emphasis  omitted)  
1160 See European  Union's appellant's submission, para.  672. (fn omitted)  WT/DS316/AB/RW  
 
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  5.6.2   The relevant product market s 
5.456.   We turn next to  examine the European  Union's appeal regarding  the Panel's analysis of the 
relevant product markets , which, as the European  Union notes, formed the basis for the Panel's 
subsequent assessment of the adverse effects of the challenged subsidies.1161 To provide context 
for our analysis , we begin by surveying the relevant findings by th e Panel in some detail, before 
addressing the issues raised by the participants on appeal.  
5.6.2.1   Arguments before the Panel  and Panel findings   
5.457.   Before the Panel, the United  States argued that there are three separate product markets 
relevant to its claims of ser ious prejudice in this dispute, namely: (i) the market for single -aisle 
aircraft ; (ii) the market for twin-aisle aircraft ; and (iii) the market for VLA.1162 More specifically, 
the United  States referred to the following product markets : 
Table 5: Competitive relationships among LCA according to the United States  
Market of competition  Subsidized product  Like product  
Single -aisle aircraft  A318, A319,  
A319neo, A320, A320neo, 
A321,  
A321neo  737-600, 737 -700, 737  MAX 
7, 737 -800, 737  MAX 8, 
737-900ER, 737 MAX 9  
Twin-aisle aircraft  A330-200, A330 -300, A340 -
300, A340 -500, A340 -600, 
A350XWB -800, A350XWB -
900, A350XWB -1000 767-300ER, 787 -8, 787 -9, 
777-200ER, 777 -200LR, 
777-300ER  
Very large aircraft  A380 747-8 
Source: Panel Report, Table 14 at paragraph 6.1155 . 
5.458.   By contrast, the European  Union argued that more than three, and up to six or seven, 
product markets should be considered in the context of an analysis of serious prejudice1163: 
                                                
1161 The European  Union has separately appealed the Panel's  failure properly to take into account, in its 
causation analysis, the differences in the nature and degree of competition between the relevant Airbus and 
Boeing LCA products in the various product and geographic market s in respect of which the United States 
brought its claims of serious prejudice . (European  Union's appellant's submission, fn 521 to para.  559 and 
fn 616 to para.  626 (referring  to section VIII.E.4.a  of its appellant's submission )) 
1162 Panel Report, para.  6.1155.  
1163 Panel Report, para.  6.115 6. WT/DS316/AB/RW  
 
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  Table 6: Competitive relationships among LCA according to the European Union  
Market of competition  Subsidized product  Like product  
Single -aisle aircraft  
Current versions, near -term 
delivery  A318, A319, A320, A321  737-600, 737 -700, 737 -800, 
737-900ER  
New generation, end of 
decade delivery  A319neo, A320neo, A321neo  737 MAX 7, 737 MAX 8, 737 
MAX 9  
Twin-aisle aircraft  
 None 767-300ER  
Smaller, medium -range, 
near-term delivery  A330-200, A330 -300 None 
New generation, deliveries 
further into the future  A350XWB -800, A350XWB -
900, A350XWB -1000 787-8, 787 -9 
Larger, longer -range, near -
term delivery  None 777-200ER, 777 -200LR, 777 -
300ER  
Smaller, very large aircraft  None 747-8 
Larger, new generation, very 
large aircraft  A380 None 
Source: Panel Report, Table 15 at paragraph 6.1156 . 
5.459.   Referring to the original appellate proceedings in this dispute, the Panel noted that  the 
parties had "appeared to accept (or at least did not object to the notion) that competition in the 
LCA industry could be viewed as taking place in three distinct passenger aircraft product markets, 
namely, the single -aisle, twin -aisle and VLA  markets".1164 The Panel recalled, however, that the 
European  Union had argued in the current compliance proceedings that Airbus and Boeing LCA 
compete in up to six or seven distinct product markets, two of which are "temporal" monopoly 
markets where either Airbus  or Boeing is the sole credible supplier.1165 The Panel further noted the 
United  States' contention that the same three product markets  relied upon by the Appellate  Body 
in the original proceedings continue to exist.1166 
5.460.   Before turning to examine the parties' respective positions, the Panel referred to and 
quoted extensively from the Appellate  Body's findings  in the original proceedings  regarding the 
identification of the relevant product markets  and how this can assist a panel in determining 
whether a complainant has properly framed its claims of serious prejudice.1167 The Panel 
recognized , in particular , that, when examining claims brought und er Article  6.3 of the 
SCM Agreement , "a panel must make an objective assessment of the competitive relationship  
between specific products and thereby determine the extent to which a complainant has brought 
its case with respect to the correct product marke ts".1168 The Panel also noted that the 
Appellate  Body referred to the notion of "market" as consisting of "the set of products 
(and geographical areas) that exercise some  competitive constraint on each other ".1169 The Panel 
further recalled that the Appellate  Body explained that "where the evidence shows that the 
competitive relationship is not direct and 'at most, indirect or remote', this must be properly taken 
into account in the analysis"1170, and that "the absence of demand -side substitutability between 
two pro ducts would suggest that they are likely to compete in two distinct markets , rather than in 
a single market."1171 The Panel added that "a consideration of substitutability on the supply -side 
                                                
1164 Panel Report, para.  6.1157 (referring to Appellate  Body Report, EC and certain member States  – 
Large Civil Aircraft , paras.  1177-1178).  
1165 Panel Report, para.  6.1157 . 
1166 Panel Report, para.  6.1157 .  
1167 Panel Report, para s. 6.115 8-6.1172 . 
1168 Panel Report,  para. 6.1160. (emphasis original)  
1169 Panel Report, para.  6.1169 (quoting Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft , fn 2467 to para.  1120 (emphasis added by the Panel )).  
1170 Panel Report, para.  6.1169 (quoting Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft , para.  1136).  
1171 Panel Report, para.  6.1170 (referring to Appellate  Body Report, EC and certain member States – 
Large Civil Aircraft , para.  1134).  WT/DS316/AB/RW  
 
- 155 – 
 
 
  may also be required in order to determine whether two produ cts comp ete in the same 
product  market ."1172  
5.461.   With these considerations in mind, the Panel turned to address the merits of the parties' 
respective positions  in order to determine  whether the United  States ha d properly framed its 
claims of serious prejudice.  In so doi ng, the  Panel noted the European  Union's argument  that the 
United  States was required to present " quantitative analysis  in support of its allegations of 
demand -side substitutability between the relevant LCA products".1173 The Panel found nothing in 
the Appell ate Body report in the original proceedings to suggest that "a complainant bringing a 
serious prejudice complaint must identify the relevant product markets by using evidence that is 
'rooted in' quantitative analyses ."1174 Instead, the Panel understood the Appellate  Body to have 
simply found that , in determining whether two products "form part  of the same product market, 
it will be important to explore and analyse the particular characteristics and features of demand 
and, i n certain situations, supply".1175 For the Panel, the reference by the Appellate  Body to the 
"Small  but Significant Non -Transitory Increase in Prices" (SSNIP)  test was merely a reference to a 
test "that is commonly  used to ascertain whether two products exerc ise competitive constraints on 
each other "1176, and did not suggest that the Appellate  Body had considered that "the SSNIP test, 
or by implication any other quantitative methods of analysis, must be applied in each and every 
serious prejudice dispute to ident ify relevant product markets ."1177 
5.462.   In light of the particular characteristics of the LCA industry, and of the absence of reliable 
pricing information and difficulties associated with identifying the relevant product markets, 
the Panel further emphasized that "the task of performing a reliable econometric analysis of the 
demand for LCA products would face a number of significant methodological and data 
challenges ."1178 The Panel went on to note that it could not see how, in the absence of accurate 
pricing informat ion, "the United  States could have generated meaningful  results from the 
application of any of the … relevant quantitative methods of analysis identified by the 
European  Union".1179 Referring to the practice of competition authorities, the Panel added that th e 
European Commission, for instance, would "only take into account 'available quantitative evidence' 
for the purpose of identifying relevant product markets when it is 'capable of withstanding rigorous  
scrutiny'; a decision that will 'depend{} to a large e xtent on the availability of the necessary data, 
the specificities of the case in question and the respective time constraint of the procedure'."1180 
Thus, the Panel found "no reason to fault the United  States' decision not to use the SSNIP test or 
any other price-based quantitative analysis to substantiate its view that there are three relevant 
product markets in the LCA industry" .1181 Accordingly, the Panel concluded that "the United  States 
was entitled to advance its case using any and all evidence it believe{ d} establishe{d} the 
existence of the three relevant products markets".1182 
5.463.   The Panel next turned to consider the European  Union's argument that "the  United  States 
ha{d} failed to establish the existence of the three alleged passenger LCA product markets 
because it ha{d} not shown that all of the aircraft that allegedly compete in each  of the 
three  distinct product markets exercise ' significant competitive  constraints' on each other."1183 The 
                                                
1172 Panel Report, para.  6.1172. (emphasis original)  
1173 Panel Report, para.  6.1174. (emphasis original)  
1174 Panel Report, para.  6.1178 (referring to Appellate  Body Report, EC and certain member States – 
Large Civil Aircraft , paras.  1120-1121). (emphasis original)  
1175 Panel Report, para.  6.1178.  
1176 Panel Report, p ara. 6.1179 (quoting Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft , fn 2468 to para.  1120 (emphasis added  by the Panel )). 
1177 Panel Report, para.  6.1179. (emphasis original)  
1178 Panel Report, para.  6.1205.  
1179 Panel Report, para.  6.1207. (emphasis original)  
1180 Panel Report, para.  6.1207 (quoting , respectively,  Commission Notice on the Definition of Relevant 
Market, para.  39, published in Official Journal of the European Communities , C Series, No.  372 (1997) 
(Panel  Exhibit USA -551), para. 38; OECD Policy Roundtables , Competition Committee, Background Note on 
Market Definition (2012) (Panel Exhibit USA -549), European Commission submission, p.  336).  
1181 Panel Report, para.  6.1208.  
1182 Panel Report, para.  6.1208.  
1183 Panel Report, para.  6.1209 ( quoting  European  Union's second written submission to the Panel, 
paras.  626-704; response s to Panel question s Nos. 48, 49, 50, 52 -56, 70 -71, 75, and 79, paras.  213, 215, 
 WT/DS316/AB/RW  
 
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  Panel recalled the Appellate  Body's finding that two products are in the same product market when 
they are "sufficiently substitutable so as to create competitive constraints on each other ".1184 The 
Panel noted that the Appellate  Body had not qualified this s tatement by stating "that the required 
competitive constraints must be 'significant'" .1185 For the Panel, "to the extent that the 
Appellate  Body provided any guidance at all on the requisite degree or intensity of competition 
that must exist between two produ cts in order to find that they fall within the same product 
market", it was "apparent" that the Appellate  Body had not articulated a standard that " require{d}  
showing that two products impose 'significant competitive constraints' on each other or that thos e 
products {were} 'closely competitive'".1186 
5.464.   Based on its analysis, the Panel found no basis to interpret the word "market" in Article  6.3 
of the SCM  Agreement "in a way that would mean that 'serious prejudice' could only ever be found 
to exist in the contex t of product markets where there is vigorous ('significant' or 'close')  
competition"1187, as opposed to "markets where competition between products is relatively weak 
or, in certain circumstances, even markets where strong competitive constraints are imposed by 
one product on one or more other products, which themselves impose little, if any, competitive 
constraint on the stronger competitor" .1188 The Panel recalled that "the fundamental purpose of 
identifying relevant product markets in  a serious prejudice dispu te is to determine whether certain 
specific trade effects have been caused by the use of subsidies ."1189 
5.465.   Thereafter and having recalled the general conditions of competition in the LCA 
industry1190, the Panel considered certain marketing materials and presentati ons in its evaluation 
of "the extent to which the parties' arguments demonstrate the existence of the alleged 
single -aisle, twin -aisle and {VLA}  … product markets".1191 The Panel was not convinced that these 
materials presented  "a clear picture of the extent to which Airbus and Boeing consider{ed that} 
competition takes place exclusively  across the three … LCA product markets asserted by the 
United  States" .1192 Nonetheless , the Panel considered that  this evidence suggested  that 
"Airbus  and Boeing {would}, more of ten than not, analyse and present their commercial LCA 
activities on the basis of one single -aisle, one twin -aisle and one VLA segment ."1193 For the Panel , 
therefore, the relevant materials  lent "a degree of support to the continued existence of the three 
LCA … markets … which the United  States relie{d} upon to make its serious prejudice complaint"  
in these compliance proceedings .1194  
5.466.   The Panel next turned to examine the parties' positions with respect to each of the three 
alleged product markets individually. F or each market, the Panel examined the  parties' arguments 
and evidence, including multiple expert statements, addressing: (i)  the physical and performance 
characteristics, end -uses, and customers of the various LCA; (ii) the extent to which different LCA 
exercised pricing constraints on each other; and (iii) Airbus' and Boeing's marketing strategies and 
sales campaigns.  
5.467.   Regarding single -aisle LCA, the United  States argued that each LCA model in Boeing's 737 
family competes with each LCA model in Airbus' A32 0 family.1195 While the European  Union agreed 
that competition existed between Airbus and Boeing single -aisle products, it argued that this 
competition takes place "in two separate product markets : one for airlines seeking near-term 
delivery  of LCA products, where the current versions of the A320 family compete with th e current 
versions of the  737NG  family; and another for airlines that seek delivery by the end of the decade , 
                                                                                                                                                  
221-225, 227, 230, 232, 250, 253, 255, 258, 261, 277, 288 -291, 303, and 327 , respectiv ely (emphasis added 
by the Panel )). 
1184 Panel Report, para.  6.1210 (quoting Appellate  Body Report, EC and certain member States  – Large 
Civil Aircraft , para.  1120).  
1185 Panel Report, para.  6.1210.  
1186 Panel Report, para.  6.1211. (emphasis original)  
1187 Panel Repor t, para.  6.1211.  
1188 Panel Report, para.  6.1211.  
1189 Panel Report, para.  6.1211. (emphasis original)  
1190 Panel Report, paras.  6.1213 -6.1223.  
1191 Panel Report, para.  6.1224.  
1192 Panel Report, para.  6.1236. (emphasis original)  
1193 Panel Report, para.  6.1236.  
1194 Panel Report, para.  6.1236.  
1195 Panel Report, para.  6.1237.  WT/DS316/AB/RW  
 
- 157 – 
 
 
  where effective competition takes place solely between the new generation of Airbus a nd Boeing 
single -aisle products, namely, the A320neo  and its derivatives versus the  737MAX and 
its derivatives".1196  
5.468.   The Panel noted that there was "a high degree of commonality in the physical attributes, 
end-uses and customers of all new generation and cur rent versions of Airbus and Boeing 
single -aisle aircraft"1197, and ultimately found that "the new generation of Airbus and Boeing 
single -aisle aircraft may be viewed as updated, more fuel efficient, versions of their current 
single -aisle offerings, principall y intended to serve the same missions already operated by existing 
single -aisle customers."1198  
5.469.   Regarding the existence of effective competition between the current and new generation 
of single -aisle LCA products, the Panel found that "the superior fuel -efficiency of the new 
generation of Airbus and Boeing single -aisle aircraft {did} not mean they {were} impervious to 
competition from current versions ."1199 The Panel found that , to the extent that the 
European  Union had demonstrated that "the A320ceo cannot over come the fuel -burn advantage of 
the A320neo by price discounting when both aircraft are delivered on the same date "1200, it did 
"not automatically follow that it will never be possible for the A320ceo to be offered at a price that, 
in the light of other poten tially important terms and conditio ns such as delivery dates, 
will overcome the fuel -burn efficiency of the A320neo ."1201 On this basis, the Panel found that the 
current versions of Airbus and Boeing single -aisle aircraft not only compete with new generation 
models, "but also that this competition will inevitably involve reciprocal pric ing constraints, 
the degree of which will depend upon and vary with the particular characteristics of different 
customer requirements and sales campaigns ."1202 
5.470.   The Panel also a ssessed whether the existence of competition between the current and 
new generation s of Airbus and Boeing single -aisle aircraft was supported  by evidence proffered  by 
the United  States concerning  two specific  sales campaigns : the 2011 American Airlines and 
2011-2012 Norwegian Air Shuttle campaigns.1203 The Panel found the A320neo to have been a 
"very strong competitor " in those sales campaigns1204, and concluded that "the United  States 
ha{d} established that all Airbus and Boeing si ngle-aisle LCA offerings exercise a sufficient degree 
of competitive constraint on each other such that they should all be considered to fall within the 
same product market for the purpose of {its} serious prejudice claims" .1205 
5.471.   Regarding twin -aisle LCA, the United  States argue d that the Boeing 767, 777, and  787 
families of LCA compete in the same product market as the Airbus A330 and A350XWB 
families.1206 Conversely, t he European  Union asserted that there were a number of separate 
markets for these five famili es of Airbus and Boeing LCA. In  particular, the European  Union  
                                                
1196 Panel Report, para.  6.1237 (referring to European  Union's first written submission to the Panel, 
paras.  600-606; Christophe Mourey, Senior Vice President , Contracts, Airbus, "Statement on Current 
Compet itive Conditions in the LCA Industry", 4 July 2012 (Mourey Statement)  (Panel Exhibit EU -8 (BCI)), 
paras.  75-84). (emphasis original)  
1197 Panel Report, para.  6.1287.  
1198 Panel Report, para.  6.1287. See also para. 6.1246.  
1199 Panel Report, para.  6.1288.  
1200 Panel Report, para.  6.1288. (emphasis original) The Panel further recalled that the European  Union 
had failed to disclose the information on price concessions that were used in the  Supplemental Statement  by 
Christophe Mourey (Christophe Mourey, Senior Vice Presi dent, Contracts, Airbus, "Supplemental statement on 
current competitive conditions in the LCA industry ", 12 December 2012 (Supplemental Mourey Statement) 
(Panel Exhibit EU -124 (BCI/HSBI)) ) to arrive at its conclusions. ( Ibid., fn  2187 thereto (referring to  
para. 6.1262))  
1201 Panel Report, para.  6.1288.  
1202 Panel Report, para.  6.1288.  
1203 Panel Report, para.  6.1277.  
1204 Panel Report, para.  6.1290.  
1205 Panel Report, para.  6.1292.  
1206 Panel Report, para. 6.1293. The Panel noted that the United  States also argued that the alleged 
market for twin -aisle LCA includes the A340. However, the Panel found that the market presence of this family 
of Airbus LCA came to an end before the beginning of the post -implementation period when Airbus terminated 
the A340 project  in November 20 11. Accordingly, the Panel considered that the A340 family of Airbus LCA was 
no longer available and could not, therefore, fall within the scope of the alleged twin -aisle market for LCA that 
exists currently. ( Ibid., fn 2188 thereto) WT/DS316/AB/RW  
 
- 158 – 
 
 
  submitted that "the A350XWB and the 787 closely compete in the same product market for 
techno logically advanced and fuel -efficient new generation aircraft", and that "the A330 and 777 
are each so ld in their own separate monopoly markets f or smaller , medium -range aircraft 
(in the case of the A330) and larger, longer -range aircraft (in the case of the 777) that are 
available for near -term delivery ."1207 In respect of the 767, the European  Union submitt ed that "its 
allegedly 'outdated' and 'inferior' technology mean{t} that it {did} not compete in the same 
product market as the A330 and that, in any case, it ha{d} been replaced by the 787 ."1208 
5.472.   The Panel found that, "in terms of basic physical charact eristics and end -uses, 
the five families of Airbus and Boeing twin -aisle LCA are, as a whole, able to satisfy a relatively 
broad spectrum of mission requirements starting with the regional routes serviced by the smaller 
767 and A330 families of aircraft and endi ng with the larger capacity, long -haul missions for which 
the bigger versions of the 777 and A350XWB were specifically designed."1209 The Panel added that , 
"within the range of potential customer needs that may be satisfied by the five families of LCA, 
there {we}re notable overlaps, with six versions of four families (the A330 -200, 777 -200ER, 
A350XWB -900, 787 -8, 787 -9 and A350XWB -800) positioned relatively close to each other."1210 
For the Panel, this suggested that, "while the potential customer -base for Airbus and Boeing 
twin-aisle aircraft {was} likely to be more varied than the potential  customer -base for their 
single -aisle aircraft, any individual customer {was} likely to have multiple combinations of 
relatively closely -matched Airbus and Boeing twin -aisle ai rcraft to choose from ."1211 
5.473.   The Panel did "not consider the superior operating performance of the new generation of 
Airbus and Boeing twin -aisle aircraft compared with their current generation models {to} signal{} 
that they {were} sold {in} separate product markets."1212 Rather, the Panel considered that 
"Airbus and Boeing {would} regularly compete with each other on the timing of the availability of 
their aircraft".1213 According to the Panel, this was "because of the important role that delivery 
considerations pl ay in a potential customer's purchase decision".1214 However, the Panel did not 
consider "the relative near -term availability" of the A330 and 777 as an advantage that places 
those aircraft models in "'temporary' product markets of their own".1215 Rather it saw this as 
simply " one of the factors that customers  … {would} take into account in their purchase 
decisions".1216 The Panel noted in this regard that "non -price factors other than delivery terms 
(e.g. fleet commonality) might … serve to diminish the performance advantages of new generation 
aircraft over current generation aircraft" and might create "more room for pri ce discounting to play 
a greater role in a customer's purchase decision".1217 
5.474.   The Panel further found that "the competitive relationships between all five families of 
Airbus and Boeing twin -aisle aircraft have been constantly evolving, reflecting not only cha nging 
demand … but also the pace and nature of aircraft innovation ."1218 However, the Panel cautioned 
that "to say that every time  a newly introduced technologically advanced or more efficient aircraft 
wins sales against existing models means that it faces no  competitive constraints from aircraft that 
were not chosen by those customers" would be "incorrect and an oversimplification of the 
complicated dynamics of competition in the LCA industry".1219 In the Panel's view, "these and other 
considerations suggest{ed}  that the 787 and the A350XWB {did} not merely face competitive 
constraints from each other, but also from other twin -aisle aircraft ."1220 
                                                
1207 Panel Report, para.  6.1293.  
1208 Panel Report, para.  6.1293 (referring to European  Union's first written submission to the Panel, 
paras.  607-619; second written submission to the Panel, paras.  626-628; response to Panel question No.  70). 
1209 Panel Report, para.  6.1363.  
1210 Panel Rep ort, para.  6.1363.  
1211 Panel Report, para.  6.1363.  
1212 Panel Report, para.  6.1364.  
1213 Panel Report, para.  6.1364.  
1214 Panel Report, para.  6.1364.  
1215 Panel Report, para.  6.1364.  
1216 Panel Report, para.  6.1364. (emphasis original)  
1217 Panel Report, para.  6.1365.  
1218 Panel  Report, para.  6.1367.  
1219 Panel Report, para.  6.1367. (emphasis original)  
1220 Panel Report, para.  6.1365.  WT/DS316/AB/RW  
 
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  5.475.   Finally, the Panel turned to consider the United  States' assertion that the existence of the 
alleged competitive relatio nships between (i) "the A330 and the 787 ", and (ii) " the A330, 
A350XWB, and the 777 ", are also substantiated by the HSBI and other evidence before the 
Panel.1221 The Panel found that "it {was} difficult to believe that Airbus or Boeing would go to the 
expense  of participating in a sales campaign if either company did not believe it had a reasonable 
chance of convincing a customer to purchase its own LCA products ahead of those of its rival"1222 
or, "at the very least, imposing some level of competitive constraint  on its rival's offering".1223 
In this regard, the Panel recalled the Appellate  Body's finding in the original proceedings 
dismissing the European  Union's appeal against the original panel's conclusion that "an order for 
A380s made by Emirates Airlines in 200 0 constituted 'lost sales' to the United  States' LCA industry, 
notwithstanding the absence of any formal aircraft offer having been made on the part of 
Boeing ."1224 On this basis, the Panel considered that "evidence that both Airbus and Boeing 
actually did pa rticipate  in the same sales campaign should, a fortiori , be interpreted to strongly 
suggest … that the products in question were in competition with each other for the relevant 
customer's sales ."1225 Accordingly, the Panel concluded that the United  States had  established that 
all five families of Airbus and Boeing twin -aisle LCA "exercise differing but overall sufficient 
degrees of competitive constraints against each other such that they should all be considered to 
fall within the same product market for the purpose of the serious prejudice claims".1226 
5.476.   Finally, with respect to VLA, the Panel recalled the United  States' argument that the A380 
and the 747 -8I compete in the VLA  product  market and , further , that "the A380 and the 747 -8I 
are imperfectly substitutable  with each other as both may be used to cover essentially the same 
long-haul, slot -constrained and high passenger -demand missions ."1227 By contrast, 
the European  Union had asserted that "the  A380 and the 747 -8I are sold in two separate  
monopoly markets" and t hat "the  considerable differences that exist between these two  LCA 
products, particularly as regards seating capacity and technologies, generate an insurmountable 
potential revenue and operating cost advantage in favour of the A380, thereby placing it in a  
different product market to the 747 -8I."1228 
5.477.   The Panel noted that the A380 and the 747-8I are the largest civil aircraft produced by 
Airbus and Boeing, and can both be generally used to cover the same long -haul routes.1229 
The Panel stated that , "{w}hile the A380's larger seating capacity and relatively modern 
technologies mean{t} that it has a per/seat operating cost and revenue advantage  over 
the 747-8I", it  considered that "this advantage {would} decrease the closer the expected seating 
capaci ty of a particular mission is to the maximum seating capacity of the 747 -8I."1230 
Thus,  the Panel considered it "apparent from the conditions of competition in the LCA industry that 
the A380 and the 747 -8I {would} have a potential customer base that {would} i nclude airlines 
with mission requirements that overlap the capabilities of the two aircraft".1231 The Panel did not 
consider that "the A380's operating cost and revenue advantage over the 747 -8I on missions 
where passenger capacity is close to {the A380's}  maximum " would  demonstrate that the former 
was "sold in its own monopoly market".1232 
5.478.   The Panel next considered whether the existence of competition between the A380 and the 
747-8I in the same product market was further evidenced by the pricing pressure that ea ch 
aircraft imposed upon the other. "{G}iven that there {would} be a range of customer demands for 
LCA with a passenger capacity exceeding 400 seats", the Panel found that "one would expect to 
                                                
1221 Panel Report, para.  6.1346.  
1222 Panel Report, para.  6.1348.  
1223 Panel Report, para.  6.1348.  
1224 Panel Report, para.  6.1349 . See also  Appellate  Body Report, EC and certain member States  – Large 
Civil Aircraft , para.  1223. 
1225 Panel Report, para.  6.1349. (emphasis original)  
1226 Panel Report, para.  6.1370.  
1227 Panel Report, para.  6.1371 (referring to United  States' second written submission to the Panel, 
para. 492; re sponse to Panel question No s. 50, 52, and 63, paras.  156, 166, and 247, respectively ). 
1228 Panel Report, para.  6.1371 (referring to European  Union's first written submission to the Panel, 
paras.  620-633).  
1229 Panel Report, para.  6.1407.  
1230 Panel Report, para. 6.1407.  
1231 Panel Report, para.  6.1407 (referring to paras.  6.1379 -6.1383).  
1232 Panel Report, para.  6.1407.  WT/DS316/AB/RW  
 
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  find differing degrees of reciprocal pricing constraints betwee n the A380 and the 747 -8I, 
depending upon how close a particular customer's needs reflect the relative advantage of one 
aircraft over the other."1233 However, the Panel considered that "this {did} not imply the absence 
of competition", but only that "the comp etitive constraints imposed by one LCA on the other 
{would}  be more or less intense depending upon which product more closely satisfie{d} the 
relevant needs of a potential customer".1234 
5.479.   Finally, the Panel addressed the United  States' argument that "the ex istence of 
demand -side substitution and effective competition between the 747 -8I and the A380 is 
substantiated by evidence from the Emirates, Hong Kong Airlines, Asiana Airlines and Skymark 
sales campaigns".1235 The Panel considered it to be "apparent from the U nited States' HSBI 
evidence, that Boeing offered the 747 -8I as an alternative to the A380 to each of the relevant 
airlines".1236 The Panel found that "the United  States' HSBI evidence clearly show{ed} that Boeing 
not only saw an opportunity to sell the 747 -8I to each of the relevant airlines, but also that it 
would have to compete with the A380 to win those sales".1237 The Panel further considered the 
747-8I and the A380 to compete regularly for the same customers, finding "additional support in 
the Qantas and Br itish Airways sales campaigns that resulted in the order of 20 A380s in 2006 and 
2007".1238 Noting that the A380 and the 747 -8I were "not perfect substitutes", the Panel, 
nonetheless, considered that "the fact that one LCA will have a superior economic value to another 
under certain demand conditions, does not render it impervious to competition".1239 Instead, 
the Panel found that "{o}ne aircraft's economic advantage over another might simply reflect that 
it is better placed to win the competition  for sales betwe en two imperfectly substitutable 
products".1240 Accordingly, the Panel found that "the United  States ha{d} established that, for the 
purpose of evaluating its claims of serious prejudice under Article  6.3 … the A380 and 747 -8I 
{could}  be considered to compete  against each other in one single product market for  VLA".1241 
5.480.   For all these reasons, the Panel concluded that it was appropriate to examine the 
United  States' claims of serious prejudice on the basis of the three separate product markets 
identified above.1242 The Panel, however, emphasized that:  
in making this finding, it is not our view that the degree of competition existing within 
each of these markets will be identical between all pairings or combinations of aircraft. 
There will be weaker and stronger competitive relationships within each market 
depending upon the particular circumstances of a sale. Moreover, important 
competitive relationships may also exist between pairings or combinations of aircraft 
across two, or even all three, of the product markets. Thus, while it is apparent that 
the three product markets the United  States has chosen to rely upon to bring its 
complaint of non -compliance do not exhaustively capture how competition takes place 
between aircraft in the LCA sector at all times, we are satisfied that at present 
(as in the original proceeding) they represent the three segments within which most  
competitive interactions between the relevant aircraft will commonly take place.1243 
5.6.2.2   Claims on appeal  
5.481.   In its appellant's submission, the European  Union takes issue with the Panel's findings on 
three grounds. First, the Eur opean  Union claim s that the  Panel erred in interpreting the term 
"market" in Article  6.3 of the SCM  Agreement  to mean that two products fall within the same 
product market as long as there is "some" competitive relatio nship between the products, 
                                                
1233 Panel Report, para.  6.1408.  
1234 Panel Report, para.  6.1408.  
1235 Panel Report, para.  6.1396 (referring to United  States' first written submission to the Panel, 
paras.  483-486 and 493 -503; response to Panel question No. 49).  
1236 Panel Report, para.  6.1400.  
1237 Panel Report, para.  6.1400.  
1238 Panel Report, para.  6.1402.  
1239 Panel Report, para.  6.1405.  
1240 Panel Report, para.  6.1405. (emphasis original)  
1241 Panel Rep ort, para.  6.1410.  
1242 Panel Report, paras.  6.1416 and 7.1.d.xi . 
1243 Panel Report, para.  6.1416 . (emphasis original; fns omitted)  WT/DS316/AB/RW  
 
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  and conseq uently failing to perform a quantitative analysis of the nature and degree of competition 
between the products at issue to determine whether it was "significant".1244 Second, the 
European  Union argue s that, even assuming that the Panel's interpretation was co rrect, the Panel 
erred in its application of Articles  5(c), 6.3, and 7.8 of the SCM  Agreement because it failed to 
make the product market finding necessarily implied by its interpretation – i.e. that there exists a 
single product market "encompassing at l east all LCA"1245 based on the existence of "some" 
competition between each model of Airbus and Boeing LCA. Third, the European  Union submits  
that the Panel failed to make an objective assessment of the matter under Article  11 of the DSU by 
assessing the Unit ed States' adverse effects claims on the basis of the three -way market 
segmentation proposed by the United  States, without assessing the nature and extent of 
competition between the aircraft that the United  States  had placed in separate 
product  markets.1246  
5.482.   We address each of these claims below, beginning with the interpretation of the term 
"market" in Article  6.3 of the SCM  Agreement, and the type of adverse effects analysis that is 
required under th is Agreement . We note that in arguing that the Panel erred in its interpretation of 
the term "market", the European Union refers to various statements made by the Panel which, 
according to the European Union, demonstrate that the Panel erred in its interpretative 
approach.1247 
5.6.2.3   Whether the Panel erred in interpreting the term "market" in  Article  6.3 of the 
SCM Agreement  
5.483.   The European  Union relies upon the Appellate  Body's findings in the original proceedings to 
argue that "'the nature and degree' of competition, and not merely the existence  of competition , 
is decisive f or determining 'the scope of the relevant product market' ."1248 For the European  Union, 
"the mere existence of competition between two products is insufficient  to group them into the 
same product market " for purposes of conducting an adverse effects analysis.1249 Instead, 
the European  Union submits that two products would fall within the same market only where an 
analysis of "the 'nature and degree of competition' between them reveals that they exercise 
'significant competitive constraints ' on one another ."1250 Conversely, they would fall within 
separate product markets where there is no "significant" competition between them.1251 
The European Union argues therefore that  the Panel erred in interpret ing the term "market" to 
mean that two products fall within the same pro duct market as long as there is "some" 
competitive relationship between the products, regardless of the nature or degree of that 
relationship.1252 According to the European Union, the Panel's erroneous interpretation of the term 
"market" in Article 6.3 of the  SCM Agreement is reflected in the Panel's analysis of the product 
market delineations suggested by both parties before the Panel.  
5.484.   The United  States counters that the Panel followed the Appellate  Body's guidance 
concerning the term "market" in Article  6.3 and the importance of making an objective assessment 
of product markets in accordance with that meaning.1253 Contrary to what the European  Union 
suggests , the  Panel did not "find that all products that have some competitive relationship, 
regardless of the nature or degree of that relationship, must always be found to be in the same 
market for the purposes of Article  6.3"1254; nor did the Panel consider  the intensity of competit ion 
between different LCA product  pairings " to be irrelevant ".1255 Instead, in the United  States' view, 
                                                
1244 European  Union's appellant's submission, paras.  597-598 and 606 . 
1245 European  Union's appellant's submission, para.  639. (emphasis  original) See also  para. 540. 
1246 European  Union's appellant's submission, paras.  541-542 and 639.  
1247 European  Union's appellant's submission, para s. 599-601. 
1248 European  Union's appellant's submission, para.  577 ( quoting  Appellate  Body Report, EC and certain  
member States  – Large Civil Aircraft , para.  1123 (emphasis added by the European Union )). 
1249 European Union's appellant's submission, para. 579. (emphasis added)  
1250 European  Union's appellant's submission, para.  579 (quoting Appellate  Body Report, EC and certain 
member States  – Large Civil Aircraft , para.  1123 (emphasis added by  the European  Union) ). 
1251 European  Union's appellant's submission, para.  579. 
1252 European  Union's appellant's submission, paras.  597 and 602.  
1253 United  States' appellee's submission, p ara. 273. 
1254 United  States' appellee's submission, para.  274. 
1255 United  States' appellee's submission, para.  274 (quoting European  Union's appellant's submission, 
para. 599).  WT/DS316/AB/RW  
 
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  the Panel "selected the best possible market definitions – those which captured 'most competitive 
interactions' – in light of the difficulties inherent in 'drawing a line' amidst products that are 
imperfect substitutes subject to demand of a 'complex, constantly evolving and often idiosyncratic' 
nature."1256 The United  States further submits  that the Panel rightly "recognized that the 
Appellate  Body had identif ied quantitative methods of analysis as potentially useful tools without 
imposing a legal requirement that they must be used in every case".1257  
5.485.   Regarding the meaning of the term "market", we note that the Appellate  Body has 
explained that " a market comprise s only those products that exercise competitive constraint on 
each other".1258 It has also considered that "two products would be in the same market if they 
were engaged in actual or potential competition in that market ."1259 In the original proceedings, 
the App ellate  Body further  referred to the notion of "market " as consisting of " the set of products 
(and geographical areas) that exercise some competitive constraint on each other".1260 In so 
doing, the  Appellate  Body referr ed to a range  of considerations  that may assist  in determining 
whether two products compete  in the same market, in the sense that  they " exercise  competitive 
constraints on each other".1261 Specifically , with respect to  demand -side substitutability, 
the Appellate  Body explained that it may be relevan t for a panel to consider, for example, 
"whether customers demand a range of products or whether they are interested in only a 
particular product type".1262 Factors such as "product homogeneity, flight ranges, seating 
capacities, prices, fuel efficiency, and other performance characteristics" may also be relevant.1263 
The Appellate Body noted that, "{o} rdinarily, the subsidized product and the like product will form 
part of a larger product market " but "it may be the case that a complainant chooses to define the 
subsidized and like products so broadly that it is necessary to analyze these products in different 
product markets ".1264 Competition may thus be found to occur  not only between  specific pairings 
of product types1265 but, "{i}n some cases, the entire product ran ge offered by the complainant 
may compete with the range of products of the respondent that is allegedly subsidized ."1266  
5.486.   The Appellate  Body has found  that a panel is " required to make an objective assessment of 
the competitive relationship between specific products in the marketplace and to define the 
relevant product market in order to determine whether particular products can be treated as 
forming part of a single product market or several product markets " for purposes of an analysis of 
a serious prejudice  under Article s 6.3(a) and 6.3(b)  of the SCM Agreement .1267 As we see it, 
a panel is called upon in this respect to carry out a holistic consideration of all relevant evidence 
and arguments before it in order to make an objective determin ation of the relevant product 
                                                
1256 United  States' appellee's submission, para.  288 (quoti ng Panel Report, para.  6.1412).  
1257 United  States' appellee's submission, para.  277. 
1258 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1120. 
(fn omitted)   
1259 Appellate Body Report, US – Upland  Cotton , para.  408. The Appellate Body in that dispute also  
agreed with a definition of  "market" as "the area of economic activity in which buyers and sellers come 
together and the forces of supply and demand affect prices ". (Ibid. (quoting Panel Report, US – Upland  Cotton , 
para. 7.1236, in turn quoting Merriam -Webster Dictionary online )) 
1260 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , fn 2467 to  para. 1120 
(quoting M assimo  Motta, Competition Policy: Theory and Practice (Cambridge University Press, 2005), p. 102).  
1261 Appellate  Body Repo rt, EC and certain member States  – Large Civil Aircraft , para.  1120.  
1262 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1120.  
1263 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1134.  We also 
recall that in US – Upland Cotton , the Appellate Body shared the panel 's view that "the scope of the 'market', 
for determining the area of competition between two products, may depend on several factors such as the 
nature of the product, the homoge neity of the conditions of competition, and transport costs."  (Appellate Body 
Report, US – Upland  Cotton , para.  408 (fn omitted))   
1264 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1119.  The 
Appellate Body emphasized, howe ver, that " it is important to note that whether or not a broad or narrow range 
of products benefit from subsidization says little about whether all these products compete in the same 
market " and that  "products benefiting from subsidies may compete in very different markets ". (Ibid., 
para. 1123)  
1265 We recall the Appellate Body to have found that " an assessment of the conditions of competition 
may reveal the existence of multiple product markets in which particular products of the complaining Member 
compete wi th particular subsid ized products of the respondent". ( Appellate  Body Report, EC and certain 
member States  – Large Civil Aircraft , para.  1123) 
1266 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1123.  
1267 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1123.  WT/DS316/AB/RW  
 
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  market. A  panel should assess whether it is appropriate to examine serious prejudice claims on the 
basis of the particular market segmentation proposed by the complainant  or whether the range of 
products at issue compete in di fferent and distinct markets .1268 In so doing, the panel has to 
examine the respondent's arguments alleging the existence of different market segmentations and 
rebutting the complainant's arguments.1269 An assessment of "whether the alleged subsidized and 
like products compete in the same market or multiple markets"  is, as the Appellate  Body has 
found, "a prerequisite for assessing" claims brought under Article  6.3.1270 However, w hether 
two products "compete in the same market is not determined simply by assessing w hether they 
share particular physical characteristics or have the same general uses; it may also be relevant to 
consider whether customers demand a range of products or whether they are interested in only a 
particular product type ."1271 According to the Appel late Body, " when customers procure a range of 
products to satisfy their needs, this may give an indication that all such products could be 
competing in the same market ."1272 Thus, t wo products are in the same product market when they 
are "sufficiently substit utable so as to create competitive constraints on each other"1273, or if they 
exercise  "meaningful competitive constraints "1274 on each other.1275  
5.487.   As we understand it, the European Union does not argue that the use of quantitative 
methods of analysis is required i n each case. The European Union insists, however, that placing 
two products into the same product market requires a careful consideration of the nature and 
degree of competition between them.1276 The European Union further submits that, in assessing 
the scope  of product markets in a given case, a panel must ensure that products within a product 
market compete more closely with one another than wit h products outside that 
product  market.1277 
5.488.   As noted by the Appellate Body, a consideration of quantitative  tools and evidence may 
assist a panel in defining the relevant product markets1278 and in answering the question of 
                                                
1268 See Appellate Body Report, EC and certain member States  – Large Civil Aircraft , para.  1131. 
1269 In the original proceedings, the Appellate Body found that the original panel was "required to make 
an independent and objective assessment of the serious prejudice claims put forward by the United  States, 
including  whether it was appropriate to examine all Airbus LCA as a single 'subsidized product ' and all Boeing 
LCA as a si ngle 'like product ' for purposes of its adverse effects inquiry ". In so doing, the Appellate Body stated 
that the original panel was also required to assess " the European  Communities' allegation that there {were}, 
in fact, five distinct product markets of Airbus and Boeing LCA ". (Appellate  Body Report, EC and certain 
member States  – Large Civil Aircraft , para.  1131 (emphasis original) ) According to the Appellate Body , the 
original panel should have then reached a conclusion as to whether any of the parties'  or a different "product 
market" definition was appropriate for purposes of its displacement analysis . (Ibid.)  
1270 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1128.  
1271 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para. 1120.  
1272 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para. 1120. The 
Appellate Body noted that "{a} lthough physical characteristics, end -uses, and consumer preferences may 
assist in deciding whe ther two products are in the same market, they should not be treated as the exclusive 
factors to consider in deciding whether those products are sufficiently substitutable so as to create competitive 
constraints on each other. " (Ibid. (emphasis original))  
1273 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1120.  
1274 We note that the compliance panel in US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU) 
found that " the European Union has not demonstrated that existing  technology aircraft and new technology 
aircraft of similar capacity, range, and MTOW no longer exercise meaningful competitive constraints on each 
other such that they presently compete in separate LCA product markets" . (Panel Report, US – Large Civil 
Aircraft (2nd complaint) (Article 21.5 – EU), para. 9.39 ) We further note that, in coming to that conclusion, the 
compliance panel in that dispute noted this Panel's finding that " all Airbus and Boeing single -aisle aircraft 
compete in one and the same LCA pro duct market", and "all five families of Airbus and Boeing twin -aisle LCA 
exercise differing but overall sufficient degrees of competitive constraints against each other such that they 
should all be considered to fall within the same LCA product market for the purpose of the serious prejudice 
claims". (Ibid., fn 2712 to para. 9.39 (referring to Panel Report, paras. 6.1286 and 6.1370 )) 
1275 In its opening statement at the second session of the oral hearing, the European Union recalled that 
the compliance panel in US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU) used the formulation 
"meaningful competitive constraints", rather tha n significant competitive constraints. The European Union 
emphasized that what matters is not the adjective chosen to describe the requirement, provided that a panel's 
analysis properly takes into account the required nature and degree of competition betwe en the products.   
1276 European Union's opening statement at the second session of the oral hearing.  
1277 European Union's opening statement at the second session of the oral hearing.  
1278 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para. 1134 and fn 2492 
thereto.  WT/DS316/AB/RW  
 
- 164 – 
 
 
  whether products exercise meaningful competitive constraints on each other and are sufficiently 
substitutable to fall within the same product market. How ever, like the Panel, we do not see a 
reason to preclude that a careful  scrutiny of qualitative  evidence may also be sufficient provided 
that it permits an informative and meaningful analysis  of the relevant product markets.  Depending 
on the particularitie s of a given case1279, it may be sufficient for a panel to examine qualitative  
evidence regarding demand -side and supply -side substitutability, product characteristics, 
end-uses, and customer preferences  to reach a conclusion as to  the nature and degree of 
competition between two products. Further to the arguments raised in its appellant's submission, 
the European Union clarified at the oral hearing that it was not arguing that complainants must 
use quantitative  analyses to identify relevant product markets in each case . Rather , as the 
European Union had argued before the Panel,  such tools should be used where possible and where 
they assist the task of identifying relevant product markets.1280 As we see it, the Panel rightly 
relied on the Appellate Body report in the original proceedings to reject the proposition that 
"quantitative methods of analysis must, as a legal matter , always be used to inform a 
determination of relevant product markets in a serious prejudice dispute."1281 While the 
European  Union does not argu e that a review of quantitative  evidence is required in each c ase, 
its appellant's submission focuses on specific aspects of the Panel's analysis to argue that the 
Panel considered the intensity of competition between different product pairings to be altog ether 
"irrelevant" .1282 We address these arguments below, in particular when we discuss the Panel's 
analysis of the product market segmentations proposed by the parties.  
5.489.   The Appellate  Body has emphasized that, in cases where a complainant chooses to define 
the subsidized and like products "broadly", it will be "necessary to analyze these products in 
different product markets … so as to analyze further the real competitive interactions that are 
taking place, and thereby determine whether displacement { or impeda nce} is occurring".1283 
While  it may be possible to conduct an analysis of adverse effects and reach meaningful findings of 
serious prejudice in instances where "all  products are not engaged in direct competition for the 
same  sales or orders – or where the co mpetitive relationship between such products is, at most, 
indirect or remote"1284, this must however "be properly accounted for"  in the serious prejudice 
analysis .1285 Thus, to the extent that a complainant has adopted a broad product market definition, 
it may b e more difficult , depending on the facts of a given case, for such complainant  to establish 
the existence of adverse effects. We therefore agree with the European  Union to the extent that it 
suggests that there is a  critical relationship between product ma rket definition and the causation 
analysis , in the sense that the tighter the market definition , the easier it may be to demonstrate 
causation, and conversely, the looser the market definition the more difficult it may be to 
demonstrate causation.1286 
5.490.   As deta iled above , the Panel referred extensively to the Appellate Body report in the 
original proceedings, including  the finding that two products are in the same product market when 
they are "sufficiently substitutable so as to create competitive constraints on  each other ".1287 
In particular, the Panel correctly noted that, " in determining whether two products are sufficiently 
substitutable so as to create competitive constraints on each other, and therefore form part of the 
same product market, it will be importan t to explore and analyse the particular characteristics and 
features of demand and, in certain situations, supply."1288 The Panel also recognized that, 
when  examining claims brought under Article  6.3, "a panel must make an objective assessment of 
                                                
1279 In this regard, we recall the Appellate  Body's guidance that the identification of the relevant product 
market(s) "is likely to vary from case  to case depending upon the particular factual circumstances". 
(Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1123)  
1280 European Union's response to questioning at the oral hearing.  
1281 Panel Report, para.  6.120 4. (emphasis original)  
1282 European  Union's appellant's submission, para.  599 (referring to Pa nel Report, para.  6.1289), 
para. 600 (referring to Panel Report, para.  6.1382), and para. 601 (referring to Panel Report, paras.  6.1280, 
6.1315, 6.1320, and 6.1348).  
1283 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  1119. The 
Appellate Body noted that a similar argument can be made with respect to impedance. (Ibid., fn 2466 thereto)  
1284 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  1136.  
1285 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1136.  
1286 European Union's opening statement at the second session of the oral hearing.  
1287 Panel Report, para.  6.1210 (quoting Appellate  Body Report, EC and certain member States  – Large 
Civil Aircraft , para.  1120).   
1288 Panel Rep ort, para. 6.1178.  WT/DS316/AB/RW  
 
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  the competit ive relationship  between specific products and thereby determine the extent to which 
a complainant has brought its case with respect to the correct product markets ."1289 In doing so, 
the Panel, in our view, properly articulated the standard to be applied in i dentifying the relevant 
product market(s) in this dispute. However, we note that the European Union refers to certain 
statements made by the Panel1290 that, according to the European Union, demonstrate that the 
Panel erred in its interpretative approach. In p articular, the European Union contends that these 
statements made by the Panel reveal that the "the Panel considered the intensity of competition to 
be irrelevant"1291 in coming to its product market delineation . We therefore turn now to consider 
the specific  arguments that the European Union makes in this regard.   
5.491.   We recall that the Panel undertook a qualitative assessment of the intensity of competition 
between products for the purposes of identifying the relevant product markets  in this dispute , 
having rega rd to the Appellate  Body's jurisprudence and the relevant evidence and arguments 
before it. In so doing , the Panel observed  that the partie s' arguments focused little on supply -side 
substitutability1292, and that the debate between them mainly  addressed the e xtent to which  a 
level of demand -side substitution between different Airbus and Boeing aircraft was demonstrated 
by: (i) the physical and performance characteristics, end -uses, and customers of the different 
Airbus and Boeing aircraft; (ii)  the existence a nd nature of any pricing constraints between these 
aircraft; and (iii)  the evidence with respect to sales campaigns.1293 With this background in mind, 
we begin our review with the single -aisle LCA market.   
5.6.2.3.1   Single -aisle LCA market  
5.492.   Beginning with the Panel's analysis of competition in the single -aisle LCA market , 
the European Union points to the Panel's statement  that: 
to accept that the 737NG did not compete with the A320neo in these sales, we would 
have to be convinced that in the absence of the A320neo, the same airlines would 
have preferred to purchase no aircraft at all – in other words, that  at the time of the 
sales, the A320neo had a  temporary  monopoly.1294 
5.493.   The European  Union refers to this statement to support its assertion that the Panel 
considered that two products are "in separate product markets  only where there is an absence of 
competition, such that customers would buy no product at all  if the  subsidised product 
were unavailable".1295  
5.494.   The United States counters that the European Union miscon strues the Panel' s findings 
when it cites this statement as standing for the proposition that the Panel' s test places products 
into the same market unless there is no competition between them.1296 According to the 
United  States, t he Panel  was making the point that "the success of t he A320neo ' over the 737NG ' 
in a given sales campaign does  not demonstrate an absence of competition ."1297 
5.495.   Contrary to what the European Union suggests, w e do not understand the above -quoted 
statement from the  Panel Report to indicate that the Panel  considered the intensity of competition  
between different product types  to be irrelevant  per se. Rather, the Panel  appears to have simply 
expressed the view that, to accept the argument by the E uropean Union that there was  
                                                
1289 Panel Report, para.  6.1160. (emphasis original)  
1290 European  Union's appellant's submission, para.  599 (referring to Panel Report, para.  6.1289), 
para. 600 (referring to Panel Report, para.  6.1382), and para. 601 (referring to Panel Repo rt, paras.  6.1280, 
6.1315, 6.1320, and 6.1348) . 
1291 European  Union's appellant's submission, para.  599. 
1292 Panel Report, paras.  6.1238, 6.1294, and 6.1372.  
1293 Panel Report, paras.  6.1238, 6.1294, and 6.1372.  
1294 European  Union's appellant's submission, para.  599 (quoting Panel Report, para.  6.1289 ). 
(emphasis original)  
1295 European  Union's appellant's submission, para.  597 (referring to Panel Report, paras.  6.1210, 
6.1211, 6.1236, 6.1289, and 6.1382). (emphasis original)  
1296 United States' appellee's submission, para . 330.  
1297 United States' appellee's submission, para. 329 (quoting Panel Report, para. 6.1289). (emphasis 
original)  WT/DS316/AB/RW  
 
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  no competition at all between the 737NG and the A320neo in the sales campaigns at issue, it 
would have had to find that the A320neo had a temporary monopoly at the time of the sales.  It 
does not follow from this that the  Panel would have considered that t wo products could  be found to 
compete in the same , or in different, product  market s regardless of the nature and degree of 
competition  that exists between them. Instead, the Panel recognized that the degree of 
competition existing in each of the relevant p roduct markets will not "be  identical between all 
pairings or combinations of aircraft", that there "will be weaker and stronger competitive 
relationships within each market depending upon the particular circumstances of a sale "1298, and 
that "important compe titive relationships may also exist between pairings or combinations of 
aircraft across two, or even all three, of the product markets".1299 The Panel found, however, that :  
while it {was} apparent that the three product markets the United  States {had} 
chosen  to rely upon to bring its complaint of non -compliance do not exhaustively 
capture how competition takes place between aircraft in the LCA sector at all times, 
{the Panel was} satisfied that at present (as in the original proceeding) they represent 
the thr ee segments within which most competitive interactions between the relevant 
aircraft will commonly take place.1300 
5.496.   Specifically, with respect to competition in the single -aisle LCA market, t he Panel noted  
that "Airbus ha{d} itself emphasized the high degree of commonality between the A320ceo and 
the A320neo in a number of publicly available presentations and documents ."1301 The Panel also 
found that "the new generation of Airbus and Boeing single -aisle aircra ft may be viewed as 
updated, more fuel efficient, versions of their current single -aisle offerings, principally intended to 
serve the same missions already operated by existing single -aisle customers ."1302 In the Panel's 
view, it followed that "a typical cust omer wanting to purchase a single -aisle aircraft {would} have 
a potential  choice between two aircraft from each manufacturer, one from  a current version and 
another from the new generation of products ."1303 Thus, as we see it , in assessing the nature and 
extent of competition between "both producers' range of new generation single -aisle products 
{and}  their current versions"1304, the Panel took into account the Appellate  Body's guidance 
regarding the identification of relevant product markets  by considering the r equisite demand -side 
substitutability factors.1305 Contrary to what the European Union appears to suggest, the Panel 
therefore did not disregard the European Union's argument that competition in the single -aisle LCA 
market takes place in two separate product markets: one for the c urrent versions of the A320 
and 737NG families; and the other for the new generation A320neo and 737MAX families.1306 
Rather, the Panel addressed this argument by the European Union, but disagreed with it.  
5.497.   The Panel consider ed, for examp le, the United States'  argument that "the existence of 
effective  competition between the current and new generation of single -aisle LCA products is 
evidenced by the pricing pressures that the two sets of LCA place on each other ."1307 The Panel 
found in this r egard that, "in setting the price for new generation products, Airbus and Boeing 
{would} not only have to consider each other's pricing on the 737MAX and A320neo, but also 
the 737NG and A320ceo ."1308 According to the Panel, this suggested that "current versions of 
                                                
1298 Panel Report, para.  6.1416.  (emphasis added)  
1299 Panel Report, para.  6.1416. (emphasis original; fn omitted)  
1300 Panel Report, para.  6.1416. ( emphasis added; fn omitted)  
1301 Panel Report, para.  6.1244 . 
1302 Panel Report, para.  6.1287. See also para.  6.1246.  
1303 Panel Report, para.  6.1287. (emphasis original)  
1304 Panel Report, para.  6.1237.  
1305 See Appellate  Body Report, EC and certain member States – Large Civil Aircraft , paras.  1120-1122 
and 1134.  
1306 Panel Report, para.  6.1237 (referring to European  Union's first written submission to the Panel, 
paras.  600-606; Mourey Statement (Panel Exhibit EU -8 (BCI)) , paras.  75-84). 
1307 Panel Report, para.  6.1249 (r eferring to Bair Declaration (Panel Exhibit USA -339 (BCI)) , paras.  27 
and 29 ; United  States' response to Panel question No. 63 ). (emphasis added) We note that Bair uses the 
phrase " significant competitive relationships " to describe the competition between the 737NG, 737MAX, 
A320ceo, and A320neo. (Bair Declaration (Panel Exhibi t USA -339 (BCI)), paras.  27 and  29) 
1308 Panel Report, para.  6.1252.  WT/DS316/AB/RW  
 
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  Airbus and Boeing single -aisle LCA do impose  pricing constraints on their new generation 
models".1309 The Panel found add itional  support from the evidence on record, noting:  
From customer's perspective, the only meaningful difference betwe en the {current 
version and new generation aircraft} is an operating cost difference driven by the 
improved fuel efficiency of the new engines on the neo and the MAX. Neither Airbus 
nor Boeing is able to increase prices for the newer models by the net pres ent value of 
their enhanced fuel efficiency, since that would neutralize their operating cost 
advantage over earlier models and thereby leave customers with little incentive to 
adopt the newer models . Indeed, pricing for the A320neo and 737MAX is generally  
constrained by the market presence of earlier models, as the value of the latter's fuel 
burn disadvantage tend to diminish on a dollar -for-dollar basis as neo and MAX prices 
increase.1310 
Airlines will be able to take the advertised and guaranteed fuel burn advantages of the 
new generation aircraft and apply what they know about fuel prices and their own 
operations to estimate these present values. This will allow them to quantify the 
advantage that operating new generation aircraft offers to the airlines' bo ttom line 
over current generation aircraft. In practice, Boeing and Airbus have had to "share" 
the cost -savings and value advantages from new generation ne o and MAX with 
single -aisle customers.1311 
5.498.   The Panel also considered the  European Union's arguments  that "the current versions of 
Airbus and Boeing single -aisle LCA products {did} not place any significant pricing constraints on 
their respective new generation models"1312 and "the only significant pricing constraints that affect 
the sale of Airbus and Boeing ne w generation aircraft result exclusively from the competitive 
pressures that the 737MAX and the A320neo place on each other ."1313 Based on its analysis of the  
evidence adduced by the European Union, the Panel found  that, "{w}hile operating costs 
(including fu el-efficiency) {would} invariably play a significant role in any customer's purchase 
decision, there {were} other factors that {would} also play an important role", such as 
"price,  fleet commonality, and date of delivery".1314 The Panel further considered tha t 
"the available date of delivery of a particular aircraft {would} weigh heavily in the economic 
assessment that a potential customer {would} undertake of the value of that aircraft to its 
business model and strategic objectives."1315 In each case, the custom er would have  to choose 
between two options:  (i) "buying a relatively higher priced {new generation} aircraft with 
relatively low operating costs that is not available in the near term" ; or (ii) "buying a lower priced 
{current version} aircraft with higher operating costs that is available in the near term ".1316 
On this basis, the Panel agreed with the United  States that "the superiority of the new generation 
aircraft over current versions d elivered on the same date does not establish that the two sets of 
LCA are not substitutable ."1317 The Panel added :  
to the extent that delivery dates may (alone or in combination with other non -price 
factors) play a decisive role in a customer's purchase deci sion, it is apparent that 
airlines wanting to purchase aircraft that can perform single -aisle missions are likely to 
view the current versions and new generation models of Airbus and Boeing single -aisle 
LCA to be potential substitutes .1318 
                                                
1309 Panel Report, para.  6.1252.  
1310 Panel Report, para.  6.1252 (quoting Bair Declaration (Panel Exhibit USA -339 (BCI)) , para. 27 
(emphasis added by the Panel )). 
1311 Panel Report, para.  6.1252 (quoting Supplemental Mourey Statement  (Panel Exhibit EU -124 
(BCI/HSBI)) , para.  23 (emphasis added by the Panel )). (additional fn omitted)  
1312 Panel Report, para.  6.1251 (referring to Euro pean Union's comments on the United  States' response 
to Panel question No. 63, paras.  509-510).  
1313 Panel Report, para.  6.1251.  
1314 Panel Report, para.  6.1260.  (fn omitted)  
1315 Panel Report, para.  6.1264 (referring to para. 6.1217).  
1316 Panel Report, para.  6.1264.  (emphasis original)  
1317 Panel Report, para.  6.1265. (emphasis added)  
1318 Panel Report, para.  6.1265. (emphasis added)  WT/DS316/AB/RW  
 
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  5.499.   Thereafter, the Pan el turned to the arguments and evidence presented by the parties in 
respect of specific sales campaigns. Based on its analysis, the Panel did  not understand 
the 2011 AirAsia, Cebu Pacific Air, GoAir, IndiGo, Lufthansa, Qantas/Jetstar, and TAM sales 
campaig ns "to be examples of situations where customers found new generation and current 
versions of Airbus and Boeing single -aisle aircraft not to compete".1319 Rather, the Panel 
considered that  "the fact that several airlines chose to purchase the A320neo over the  737NG , 
simply suggest{ed}  that each of the relevant customers found the A320neo to be a better fit with 
its business model and strategic objectives, in the light of the economic value offered by 
each aircraft , including the proposed terms and conditions o f sale."1320  
5.500.   Turning to the 2011 American Airlines and 2011 -2012 Norwegian Air Shuttle campaigns, 
the Panel found that these sales campaigns did "not show that the 737NG did not compete 
sufficiently  with the A320neo to conclude that the two aircraft are in  different product markets , 
but only that the A320neo, on the terms and conditions it was offered in that sales campaign, was 
a very strong competitor".1321 The Panel added that, "{r}ather than showing that the 737NG {did}  
not compete with the A320neo", the 2 011 American Airlines sales campaign represented "a clear 
example of one aspect of the very essence of competition  between Airbus and Boeing"1322, namely, 
"the introduction of technologically superior products for the purpose of winning the competition  
for single-aisle aircraft customers ."1323 The Panel further stated that  it did " not believe that the 
acknowledged fuel -burn superiority of the new generation of Airbus and Boeing single -aisle LCA 
necessarily  mean{t} that they  {did} not compete with current versions  of their single -aisle 
offerings ."1324 Instead , the Panel recalled that "both manufacturers' new generation aircraft 
{were} specifically intended to operate missions that {would} largely overlap those already 
serviced by current versions ."1325 It was in this con text that the Panel stated that , "{in}  order to 
accept that the 737NG did not compete with the A320neo in these sales , {it} would have to be 
convinced that in the absence of the A320neo, the same airlines would have preferred to purchase 
no aircraft at all  – in other words, that  at the time of the sales, the  A320neo had a temporary 
monopoly."1326 As we understand it, this statement by the Panel concerns circumstances in which 
the Panel could find that the 737NG and the A320neo did not compete in the context of  a 
particular sales campaign ; it does not suggest that the Panel considered the degree and nature of 
competition between different product types to be altogether irrelevant, as the European  Union 
suggests. Indeed, the Panel observed that the nature and deg ree of competition between product 
types may vary " depending upon the particular circumstances of a sale ".1327 
5.501.   As we see it, the Panel therefore sufficiently scrutinized the nature and extent of actual or 
potential competition between the new generation and the current generation of Boeing and Airbus 
single -aisle LCA , in light of th e arguments and evidence presented by the parties , to conclude 
eventually that " the degree of demand -side substitution that exists between these two lines of 
single -aisle aircraft is sufficient "1328 to confirm the United  States' contention that, "for the purpose 
of the serious prejudice disciplines of the SCM Agreement, all Airbus and Boeing single -aisle 
aircraft compete in one and the same product market ."1329 In reaching this conclusion , the Panel 
analysed the relevant qualitative factors concerning demand -side substitutability in its assessment 
of the nature and extent of actual or potential competition , and also considered that, in the facts of 
this dispute, "producing accurate and reliable quantitative evidence of the degree of demand -side 
substitution between differ ent LCA products would be a formidable task. "1330 In particular, 
the Panel considered that, "to generate accurate and meaningful results" in the use of quantitative 
analysis f or the purposes of identifying relevant product markets, "a  significant volume of historical 
                                                
1319 Panel Report, para.  6.1289.  
1320 Panel Report, para.  6.1289. (emphasis original)  
1321 Panel Report, para.  6.1290. (emphasis added)  
1322 Panel Report , para.  6.1280.  (emphasis added)  
1323 Panel Report, para.  6.1280. (emphasis added) We recall that , while assessing the general conditions 
of competition in the LCA industry, the Panel considered that , as in the original proceedings, technological 
innovation r emained a key element of the competition between Airbus and Boeing. ( Ibid., para.  6.1220)  
1324 Panel Report, para.  6.1280. (emphasis original)  
1325 Panel Report, para.  6.1280.  
1326 Panel Report, para.  6.1289. ( italics  original; underlining added)  
1327 Panel Report, para. 6.1416. (emphasis added)  
1328 Panel Report, para.  6.1286. (emphasis added)  
1329 Panel Report, para.  6.1286.  
1330 Panel Report, para.  6.1205.  WT/DS316/AB/RW  
 
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  information on  the prices actually  paid by LCA customers"1331 would be required. The Panel 
"raised  doubts about the availability of such actual pricing data"1332, observ ing further that, 
"when  asked to disclose the anticipated A350XW B price information used by Professor Whitelaw to 
derive the internal rates of return", the European  Union "redacted the price data from its 
response".1333 The Panel went on to observe that, "eve n with this information, the task of 
performing a reliable econo metric analysis of the demand for LCA products would face a number of 
significant methodological and data challenges."1334 In addition, the Panel considered the 
"limited  argumentation … advanced in respect of supply -side substitutability "1335 by the parties.1336  
5.502.   In sum, we are satisfied that the Panel's identification of the single -aisle LCA market as 
comprising the new generation and the current generation of Boeing and Airbus single -aisle LCA  
was based on a proper analysis of the competition between these products , which  the Panel found 
to demonstrate sufficient substitutability, in accordance with the standard articulated by the 
Appellate Body in the original proceedings.  We do not agree with the  European  Union that the 
Panel's analysis of competition in the single -aisle LCA market was based on the premise that 
two products would be "in separate product markets  only where … customers would buy 
no product at all  if the  subsidised product were unavai lable" .1337 Nor do we agree with the 
European Union that the Panel disregarded the European Union's arguments regarding the nature 
and degree of competition between the new and current generati ons of Boeing and Airbus 
single -aisle LCA such that they should be  placed into different product markets. Rather, as noted, 
the Panel considered those arguments but decided to reject them. In light of the foregoing 
considerations, we are satisfied that the Panel's analysis identifying the single -aisle LCA market 
reflects  a proper reading of the term "market" in Article 6.3 of the SCM Agreement.  
5.6.2.3.2   Twin -aisle LCA market  
5.503.   The European  Union similarly submits that the Panel considered the intensity of 
competition to be "irrelevant" when it found that "the A330 and the 777 belong  in the same 
product market because {the} 'potential customer base for the A330 {was} likely to at least 
overlap  with the range of customers that {would}  be interested in the 777'"1338 and, further , in 
finding that " the A330 -300 and the  777-200ER belong {ed} in the same product market " based on 
the absence of evidence  indicating that they exercise "competitive constraints on each other".1339  
5.504.   The United States contends that a n overlap  in customer bases is highly relevant to 
assessing demand -side substitutability  and the dynamics of competition , but that " the Panel never 
suggested that it was the only, or even the primary, reason for its product market definitions ".1340 
According to the United States, the statement in the Panel Report that the European Union refers 
to "is simply one observation" from a detailed analysis carried out by the Panel.1341 
5.505.   We recall in this regard that,  in considering the "competitive relationship between the A330 
and the 777"1342, the Panel noted that "a customer's decision to purchase an LCA {wo uld} be 
guided by the overall value of the aircraft package it is offered", in "the light of a number of 
factors, including its particular business model; and one of the key determinants of an airline's 
business model {would} be the types of missions it in tends to operate".1343 The Panel noted that 
"passenger demand is a multi -faceted parameter that for any particular route " would  "vary 'at all 
                                                
1331 Panel Report, para.  6.1205. (emphasis original)  
1332 Panel Report, para.  6.1205.  
1333 Panel Report, para. 6.1181 (referring to European  Union's response to Panel question No.  132; 
United  States' comments on the European  Union's response to Panel question No.  132).  
1334 Panel Report, para.  6.1205.  
1335 Panel Report, para.  6.1294. (emphasis original; fn omitted)  
1336 Panel Report, paras.  6.1238 , 6.1294, and 6.1372 . 
1337 European  Union's appellant's submission, para.  597 (referring to Panel Report, paras.  6.1210, 
6.1211, 6.1236, 6.1289, and 6.1382). (emphasis original)  
1338 European  Union's appellant's submission, para.  601 (quoting Panel Report, para.  6.1315  (emphasis 
added by the European  Union)).  
1339 European Union's appellant's submission, para. 601 (quoting Panel Report, para. 6.1320).  
1340 United States' appellee's submission, para. 333.  
1341 United States' appellee's submis sion, para. 333.  
1342 Panel Report, para.  6.1312.  
1343 Panel Report, para.  6.1313.  WT/DS316/AB/RW  
 
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  times of the day or from one season or year to the next', not only between different airlines but 
also for an individ ual airline".1344 Thus, the Panel considered that "the process of forecasting 
required seating capacity and route structures over the commercial life of any particular aircraft for 
a potential LCA customer {was} likely to be highly complex, bringing with it a  certain measure of 
risk."1345 Based on its analysis, t he Panel found  it "difficult to see how the simple fact that the 
A330 may be better suited than the 777" to "perform the particular range of medium -range 
missions for which it {was}  specifically designed necessarily implie{d} that it {would} face no 
competition from the 777".1346 The Panel went on to state that , "{i}f relative performance 
advantages over optimized  missions were a sufficient basis to identify relevant product markets in 
the LCA sector"1347, it would seem that "most, if not all, of the Airbus and Boeing twin -aisle 
families of LCA would be in separate, narrowly defined, monopoly markets because , in one way or 
another, all Airbus and Boeing twin -aisle LCA are differentiated in terms of their perfor mance 
characteristics."1348 
5.506.   It was in this context that the Panel considered "the potential customer base {s}" for 
the A330 and the 777 as part of its assessment of the competitive relationship between these 
aircraft , noting that  evidence of the existence of "an overlapping potential customer base … may 
be highly relevant to the task of identifying LCA product markets ."1349 In this respect, the 
United  States had pointed to "a number of examples of airlines having chosen to operate a  range 
of different twin -aisle a ircraft on the same routes"1350, arguing that  this "support{ed} the view 
that there {was} a degree of overlap in the use of all twin -aisle aircraft" and, therefore, that 
"one must be wary of narrowly defining bright lines to segment a product space " in light of the 
"complex patterns of customer demand and product uses ".1351 Based on the evidence before it , 
the Panel found , for example,  that the decision by Malaysia Airlines and Singapore Airlines 
to "switch away from the 777 to the A330 provide {d} not only a clear example of demand -side 
substitutability  between two differentiated products"1352, but "also demonstrate {d} the important 
and undisputed role that technological development plays in a customer's choice of aircraft, 
highlighting a key dimension of competition  between Airbus and Boeing".1353 We see no error in 
the Panel's analysis in this regard. Nor do we understand the statements referred to by the 
European Union1354 to indicate that the Panel considered the intensity of competition in the 
twin-aisle LCA market to be irrelevant . Indeed, as noted by the A ppellate  Body in the original 
proceedings, "when customers procure a range of products to satisfy their needs, this may give an 
indication that all such products could be competing in the same market ."1355 
5.507.   Moreover, we note that t he Panel considered the European Union's arguments and came to 
the conclusion that,  for the Panel  "to accept that the differences in {net present values}  of the 
A330 and 777 when performing optimized missions  demonstrate {d} that the two aircraft  {did}  not 
impose competitive constraints on each other"1356 would be akin to finding that "only two types of 
customers {were} presently  interested in considering the two aircraft – either: (a) customers 
looking for an aircraft to move a relatively large numb er of passengers over relatively lo ng routes 
(who would favour the  777); or (b) customers wanting an aircraft to fly a smaller number of 
passengers on medium -haul routes (who  would choose the A330) ."1357 The Panel found the 
European  Union's position "to be ov erly simplistic and at odds with even its own description of the 
                                                
1344 Panel Report, para.  6.1313 (quoting Supplemental Mourey Statement (Panel Exhibit EU -124 
(BCI/HSBI) ), para.  91). 
1345 Panel Report, para.  6.1313.  
1346 Panel Report, para.  6.1314.  
1347 Panel Report, para.  6.1314. (emphasis original)  
1348 Panel Report, para.  6.1314.  
1349 Panel Report, paras.  6.1316 -6.1317.  
1350 Panel Report, para.  6.1318.  
1351 Panel Report, para.  6.1318 (quoting United  States' comments on the European  Union's response to 
Panel questi on No. 75).  
1352 Panel Report, para.  6.1322. (emphasis added)  
1353 Panel Report, para.  6.1322.  
1354 European  Union's appellant's submission, para.  601 ( referring  to Panel Report, para s. 6.1315  
and 6.1320 ).  
1355 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  1120.  
1356 Panel Report, para.  6.1344.  (emphasis original)  
1357 Panel Report, para.  6.1344.  WT/DS316/AB/RW  
 
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  core features of aircraft demand".1358 The Panel thus rejected the European Union's argument that 
"the A330 and 777 are each sold in their own separate monopoly markets f or smaller, 
medium -range  aircraft (in the case of the A330) and larger, longer -range aircraft (in the case of 
the 777) that are available for near -term delivery ."1359  
5.508.   Turning to the A350XWB, the Panel recalled the European Union's contention that 
"the A350XWB and the 787 closely co mpete {d} in the same product market for techno logically 
advanced and fuel -efficient new generation aircraft" .1360 However, the Panel considered that the 
fact that Airbus chose to highlight "the alleged performance advantages of the A350XWB -900 over 
the 787 -9 and the 777 -200ER  at the time of launch " suggest ed that "it must have expected 
potential customers to be interested in learning about the relative performance characteristics of 
all three aircraft ".1361 The Panel further noted that, "since it was launched, Ai rbus … continued to 
market the A350XWB family as an alternative to both the 787 and the 777 ."1362 The Panel 
considered that the fact that the evidence on record  sought  "to highlight the 'competitiveness ' of 
the technologically advanced A350XWB by focusing on its relative performance advantages over 
the 787, 777, and 767 " was consistent with the fact that " the A350XWB was developed for the 
specific purpose of winning sales  from a range of customers that would otherwise be potentially 
interested in the performan ce characteristics of, at least, all three families of Boeing aircraft ."1363  
5.509.   The Panel further found that there was evidence to suggest that " Airbus intended to win 
sales away from the 787 not only using the A350XWB, but also the A330 ."1364 In this regard, 
the Panel considered that it did  "not understand the lack of near -term delivery positions for 
one aircraft compared to another to necessarily mean that they do not impose any competitive 
constraints on each other ".1365 According to the Panel, the evidence  on reco rd recognized that 
"the A330 was … in a competitive relationship with the 787"1366, and in particular , 
"the Mourey  Statement … explain{ed} that 'as a result of Boeing's launch of the 787 {in 2004}, 
for a number of years, the A330 saw its prices, orders and ma rket share drop dramatically, 
with airlines ordering the 787'."1367 In the Panel's view, these con siderations suggested that 
"the 787 and the A350XWB {did} not merely face competitive c onstraints from each other, 
but also from other twin -aisle aircraft."1368  
5.510.   As regards the 767, the Panel found that "the range of missions and operating 
performance offered by the 767" were "somewhat limited compared with the larger versions of the 
787, and the 777 and A350XWB families".1369 The Panel noted that the evidence indicated  that the 
767 and the A330 were roughly the same size offering a "comparable range"1370, and further that, 
with the introduction of the 787, the sales of both "the 767 and the A330 were significantly 
affected".1371 This, in the Panel's view, suggested  the possib ility that customers were choosing 
Boeing's new generation aircraft over both the A330 and the 767.1372 The Panel also found 
evidence that the A330 was marketed "by comparing its sales performance and operating 
characteristics against not only the 777 and 787 , but also the 767 ".1373 Finally, the Panel 
considered that, "{a}s an 'eventual replacement' of an aircraft, which at the time, was considered 
by Airbus to be a better performing rival to the 767", it logically followed that "the A350XWB would 
inevitably appe al to a range of customers including some of those that may have been interested 
in exploring the suitability of the 767 or the A330."1374 To that extent, we find the Panel to have 
                                                
1358 Panel Report, para.  6.1344 (referring to paras . 6.1311-6.1322).  
1359 Panel Report, para.  6.1293.  
1360 Panel Report, para.  6.1293.  
1361 Panel Report, para. 6.1307. (emphasis original)  
1362 Panel Report, para. 6.1308. (emphasis original)  
1363 Panel Report, para. 6.1309. (emphasis original)  
1364 Panel Report, para. 6.1310. (emphasis original)  
1365 Panel Report, para. 6.1311.  
1366 Panel Report, para. 6.1310 . 
1367 Panel Report, para. 6.1310 (quoting Mourey Statement (Panel Exhibit EU -8 (BCI)), para. 88). 
1368 Panel Report, para. 6.1365.  
1369 Panel Report, para. 6.1327.  
1370 Panel Report, para. 6.1327. (fn omitted)  
1371 Panel Report, para. 6.1327. (fn omitted)  
1372 Panel Report, para. 6.1327.  
1373 Panel Report, para. 6.1327. (emphasis and fn omitted)  
1374 Panel Report, para. 6.1327.  WT/DS316/AB/RW  
 
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  addressed and rejected the European Union's argument that the 767 did not comp ete with the 
A330 and that, in any case, it had been replaced by the 787.1375 
5.511.   The Panel observed  that "the competitive relationships between all five families of Airbus 
and Boeing twin -aisle aircraft {ha d} been constantly evolving, reflecting not only changin g 
demand … but also the pace and nature of aircraft innovation ."1376 The Panel further 
explained  that:  
in terms of basic physical characteristics and end -uses, the five families of Airbus and 
Boeing twin -aisle LCA are, as a whole, able to satisfy a relativel y broad spectrum of 
mission requirements starting with the regional routes serviced by the smaller 767 and 
A330 families of aircraft and ending with the larger capacity, long -haul, missions for 
which the bigger versions of the 777 and A350XWB were specific ally designed.1377  
5.512.   However, as noted above, in rejecting the European  Union's contention, the Panel 
cautioned that , "to say that every time  a newly introduced technologically advanced or more 
efficient aircraft wins sales against existing models mean {t} that it face {d} no competitive 
constraints from aircraft that were not chosen by those customers", would be "incorrect and an 
oversimplification of the complicated dynamics of competition in the LCA industry".1378 The Panel 
therefore did "not consider {that} the superior operating performance of the new generation of 
Airbus and Boeing twin -aisle aircraft compared with their current generation models  signal{ ed} 
that they {were} sold {in} separate product markets."1379 
5.513.   As we see it, the Panel's analysis concerning the twin -aisle market took into account the 
competing arguments and evidence put forward by the European Union in support of its position. 
In our view, the Panel's identification of the twin-aisle LCA market as comprising the Boeing 767, 
777, 787 and the Airbus A330 and A350XWB families  was based on a proper  analysis of the 
competition between these products , which  the Panel found to demonstrate sufficient 
substitutability, in accordance with the standard articu lated by the Appellate Body in the original 
proceedings . Before reaching this finding, the Panel discussed the part ies' arguments regarding the 
intensity of competition  between various twin -aisle LCA  offered by Boeing and Airbus. As we 
understand it, the e xistence of meaningful competition was not contested between the parties  in 
relation to certain Airbus and Boeing product pairings (the A350WXB and the 787). However, the  
parties  disagreed on the nature and degree of competition between other A irbus and Bo eing 
twin-aisle LCA  (the 767, 777, and A330). Having evaluated the parties ' arguments regarding the 
varying degrees of competitive relationship between these twin -aisle LCA, we see no reason to 
disagree with the Panel 's conclusion that  "all five families o f Airbus and Boeing twin -aisle LCA 
exercise {d} differing but overall sufficient degrees of competitive constraints against each other 
such that they should all be considered to fall within the same product market for the purpose of 
the serious prejudice cl aims".1380 In light of the foregoing considerations, we are satisfied that the 
Panel's analysis identifying the twin -aisle LCA market reflects a proper reading of the term 
"market" in Article 6.3 of the SCM Agreement.  
5.6.2.3.3   VLA market  
5.514.   With regard to the Panel's ana lysis of the VLA market, the European  Union points to yet 
another statement by the Panel, arguing that it demonstrates that the Panel treated the nature 
and extent of competition as "irrelevant".1381 Specifically, the Euro pean Union takes issue with 
the Panel 's statement that:  
to accept that the A380's relative performance advantage over the 747 -8I places it in 
a monopoly market, we would have to accept that the A380 was developed to 
                                                
1375 Panel Report, paras. 6.1293 and 6.1338.  
1376 Panel Report, para.  6.1367.  
1377 Panel Report, para.  6.1363.  
1378 Panel Report, para.  6.1367. (emphasis origin al) 
1379 Panel Report, para.  6.1364.  
1380 Panel Report, para. 6.1370.  
1381 European Union's appellant's submission, para. 599.  WT/DS316/AB/RW  
 
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  exclusively serve a particular customer space that the 747 (or indeed any other 
aircraft)  could not attract .1382 
5.515.   The United States recalls that the Panel extensively di scussed the reasons why the 
two aircraft compete with one another , including the existence of an overlapping customer base , 
which in turn  was consistent with "the pa ttern of competitive interaction that drives Airbus ' and 
Boeing's supply decisions".1383 The United States further notes the Panel's description of the 
strategy employed by both LCA producers to meet  demand with the fewest possible product lines 
to satisfy a wide array of requirements .1384 Thus, the United States submits that the Panel 's 
statement highlighted by the E uropean Union was intended to explain that "the 
{European  Union's}  theory of the A380 being placed in a monopoly market would require 
accepting that  the A380 was devel oped not to compete with Boeing' s nearest competitor, but 
rather to serve a customer space that the  747 could not attract, which is contrary to the evidence 
regarding how Boeing and Airbus develop their product lines ."1385 
5.516.   We begin by notin g that the statement quoted by the European  Union was made by the 
Panel in the context of analysing the physical and performance characteristics, end -uses, and 
customers for the A380 and the 747 -8I to determine if the A380 and the 747 -8I fell within the 
same product market – i.e. the product market for VLA, as proposed by the United  States. 
However, prior to that , the Panel had considered that, as regards the A380 and the 747-8I, 
"the essential point of divergence between the parties … focused on the conclu sions that {could}  
be drawn about the degree of demand -side substitutability  that exist {ed} between the A380 and 
the 747 -8I as a result of their relative  performance advantages ."1386 Thus, the Panel was aware of 
its task to consider the nature and degree of d emand -side substitutability, a factor that the 
Appellate  Body, in the original proceedings,  considered to be "indispensable " when assessing 
whether two products are in a single market.1387 
5.517.   The Panel began by setting out the following table of data submitted by the parties . 
Table 7: Basic physical and performance characteristics of Airbus and Boeing VLA1388 
Model  Typical 
Seats  
(Airbus / 
Boeing)  
 MTOW (t)  
(Airbus / 
Boeing)  Max Range 
(nm)  
(full capacity)  
(Airbus / 
Boeing)  Length  
(m) Wing Spa n 
(m) 
(Airbus / 
Boeing)  2011 
List 
Price 
(USD M)  
A380 -800 525 / 555  560 / 633.9  8,500 / 7,870  72.72 / 
72.70  79.75 / 79.80  375.3  
747-8I 405 / 467  447.7 / 
493.5  7,600 / 7,760  76.30  68.50  332.9  
Source: Panel Report, Table 18 at paragraph 6.1373 . 
                                                
1382 European  Union's appellant's submission, para.  600 (quoting Panel Report, para.  6.1382 (emphasis 
added by the European  Union)).  
1383 United  States' appellee's submission, para. 332 (quoting Panel Report, para. 6.1382).  
1384 United States' appellee's submission, para. 332.  
1385 United States' appellee's submission, para. 332.  
1386 Panel Report, para.  6.1378. (emphasis added)  
1387 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1121.  
1388 Panel Report, para. 6.1373, Table 18 (referring  to Mourey Statement (Panel Exhibit EU -8 (BCI)) , 
Table 7; Bair Declaration (Panel Exhibit USA -339 (BCI)) , para.  43). WT/DS316/AB/RW  
 
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  5.518.   The Panel considered that , although the European  Union denied the existence of anything 
more than "weak or minimal" competition between the 747 -8I and the A3801389, 
the Mourey  Statement "recognize{d} that the two aircraft ' {were}  the closest to one  another' in 
terms of size"1390 and, "moreover, 'ha {d} similar range capabilities' , meaning that they {could}  
both 'generally be used for the same long -haul routes' ."1391 Accordingly, the Panel noted that the 
parties therefore "seem{ed} to agree that the differe nces between the A380 and the 747 -8I in 
terms of size and flying range {did} not preclude the possibility that, in general, the two aircraft 
{could}  be used to serve the same long -haul routes ."1392 
5.519.   The Panel noted that the A380 and the 747-8I were the largest  civil aircraft produced by 
Airbus and Boeing, and c ould both genera lly be used to cover the same long -haul routes .1393 
The Panel stated that , "{w}hile the A380's larger seating capacity and relatively modern 
technologies mean{t} that it ha{d} a per/seat oper ating cost and revenue advantage over the 
747-8I", the Panel considered that "this advantage {would} decrease the closer the expected 
seating capacity of a particular mission {was} to the maximum seating capacity of the 747 -8I".1394 
For the Panel, "{t}he smal ler the difference, the greater {was} the possibility that the A380's 
advantage might be overcome by a combination of other factors informing a customer's purchase 
decision, including price, fleet commonality and/or delivery date."1395 Thus, the Panel conside red it 
"apparent from the conditions of competition  in the LCA industry that the A380 and the 747 -8I 
{would}  have a potential customer base that {would} include airlines with mission requirements 
that overlap the capabilities of the two aircraft ."1396 The Pan el found that a number of features of 
demand and supply of LCA products1397 suggested that "the potential customer base of the A380 
{was} likely to be broader, encompassing not only airlines projecting consistently high levels of 
passenger demand, but also ai rlines with lower or varying projections of passenger demand 
overlapping the capacities of the A380 and the 747 -8I."1398 The Panel concluded that "{t}hese 
general and A380 -specific features of LCA demand {did} not weigh in favour of the argument that 
the A380 's potential customers {would} only ever seriously consider purchasing it for the purpose 
of missions that  {could not}  also be serviced by the 747 -8I".1399 This, according to the Panel, 
"implie{d} that … there {were} customers that {would} explore the economi cs of both the A380 
and the 747 -8I for the purpose of performing comparable missions".1400 
5.520.   It was in this context that the Panel stated that , "to accept that the A380's relative 
performance advantage over the 747 -8I place {d} it in a monopoly market, {it} would have to 
accept that the A380 was developed to exclusively serve a particular customer space that the 747 
(or indeed any other aircraft) could not attract."1401 As we understand it, the Panel appears, in this 
context, to ha ve simply expressed this view only with respect to the A380's relative performance 
advantage over the 747 -8I. It does not follow from this that the Panel considered that the A380 
and the 747 -8I would compete in the same market regardless of the nature and degree of 
competition  that exist ed between them.  As we recall, the Panel found that the conditions of 
competition revealed that "the A380 and the 747 -8I {would} have a potential customer base that 
{would} include airlines with mission requirements that ove rlap the capabilities of the two 
aircraft ."1402 The Panel's analysis is in consonance with the Appellate  Body's guidance in the 
original proceedings that, in determining "whether two products compete in the same market … it 
may also be relevant to consider wh ether customers demand a range of products or whether they 
                                                
1389 Panel Report, para. 6.1378 ( quoting Supplemental Mourey Statement (Panel Exhibit EU -124 
(BCI/HSBI) ), para.  65; European  Union's second written submission to the Panel, para.  690).  
1390 Panel Report, para.  6.1378 (quoting Supplemental Mourey Statement (Panel Exhibit EU -124 
(BCI/HSBI) ), para.  79). 
1391 Panel Report, para.  6.1378 (quoting Mourey Statement (Panel Exhibit EU -8 (BCI)) , para.  149).  
1392 Panel Report, para.  6.1378.  
1393 Panel Report, para.  6.1407.  
1394 Panel Report, para.  6.1407.  
1395 Panel Report, para.  6.1407 . (fn omitted)  
1396 Panel Report, para.  6.1407. (emphasis added ; fn omitted ) 
1397 Panel Report, para.  6.1380.  
1398 Panel Report, para.  6.1379.  
1399 Panel Report, para.  6.1381. (emphasis original)  
1400 Panel Report, para.  6.1381.  
1401 Panel Report, para.  6.1382.  
1402 Panel Report, para.  6.1407. (fn omitted)  WT/DS316/AB/RW  
 
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  are interested in only a particular product type ."1403 In case  of the former, the Appellate  Body 
considered that , "when customers procure a range of products to satisfy their needs, this may give 
an indication that all such products could be competing in the same market."1404  
5.521.   Moreover, we note that the Panel's analysis did not end there. Instead, after reviewing the 
evidence on record, the Panel noted that , "outside of the context of this proceeding, Air bus ha{d} 
consistently maintained the view that the potential customers of the A380 {would} also be likely 
to seriously consider the 747 -8I in a segment of the LCA market  that {was} covered by no 
other  aircraft ."1405 
5.522.   As it did in the context of  its analysis of competition in  the single -aisle and twin -aisle LCA 
markets , the Panel next turned to consider whether the existence of competition between the 
A380 and the 747 -8I was evidenced by the pricing pressure that  each aircraft imposed upon 
the other.  
5.523.   Before th e Panel, t he United  States had referred to certain HSBI evidence, which, 
according to the United  States, revealed Boeing's net present value  analyses and pricing 
considerations with respect to both aircraft in the 2007 Emirates and 2006 British Airways sal es 
campaigns.1406 The United  States additionally argued that "the existence of reciprocal pricing 
constraints follow{ed} logically from the dynamics of sales negotiations in the LCA industry, where 
'companies bargain over prices based on the best alternative to negotiated agreement … faced by 
each player'."1407 The Panel noted that, while the European  Union accepted that "the A380's 
presence ha {d} caused signific ant pricing pressure on the  747-8I"1408, it denied that "the 747 -8I 
constrain {ed} Airbus' pricing of the A380 in any substantial way"1409, asserting further that , just 
because "the 747 -8I may be the 'closest alternative' to the A380 {did}  not … reveal the degree of 
competition that exist {ed} between the two products, and for this reason, it {was} legally and 
factually insufficient to establish the requisite demand -side substitutability."1410 
5.524.   The Panel agreed that "the mere fact that one aircraft may be an 'alternative' to another 
for the purpose  of flying the same missions {said} little about the degree of competition that 
exist{ed} between those aircraft".1411 The Panel also considered that "the HSBI evidence relied 
upon by the United  States … represent{ed} no more than Boeing's view that at a cert ain point in 
time during the 2007 Emirates and 2006 British Airways sales campaigns, [BCI]".1412 Addressing 
the European  Union's net present value analyses of the A380 and the  747-8I, the Panel found  that 
the net present value  comparison analysis conducted in  the Supplemental Mourey Statement 
"fail{ed} to demonstrate that the two aircraft {did} not compete with one another in the same 
product market".1413 The Panel reasoned that "all  that the {net present value}  analyses ultimately 
demonstrate{d} {was} that, excl uding price, fleet commonality, delivery date and other factors … 
the A380 {would} have a significant operating cost and revenue advantage over the 747 -8I on 
                                                
1403 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  1120. (emphasis 
added)  
1404 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  1120.  
1405 Panel Report, para.  6.1383.  
1406 Panel Report, para. 6.1387 (referring to United  States' response to Panel question s No. 53, 
para. 176 (HSBI) and No. 58; [[HSBI ]] (Panel Exhibit  USA-539 (HSBI) ); [[HSBI ]] (Panel  Exhibit USA -557 
(HSBI)) ). 
1407 Panel Report, para.  6.1387 (quoting United  States' response to P anel question No. 54, para.  177; 
Expert Declaration of Dr Chetan Sanghvi, NERA,  21 May 2013 (Panel Exhibit USA -530), paras.  40-41).  
1408 Panel Report, para.  6.1388 (referring to European  Union's second written submission to the Panel, 
para. 693).  
1409 Panel Rep ort, para.  6.1388 (referring  to European  Union's first written submission to the Panel, 
para. 631; second written submission to the Panel, para.  693; response to Panel question No. 54, para.  258 
and fn 434 to para.  256; comments on the United  States' respo nse to Panel question No. 54, para.  392).  
1410 Panel Report, para.  6.1388 (referring to European  Union's comments on the United  States' response 
to Panel question No. 53, paras.  381-382).  
1411 Panel Report, para.  6.1390.  
1412 Panel Report, para.  6.1391. (emphasis original)  
1413 Panel Report, para.  6.1394.  WT/DS316/AB/RW  
 
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  missions where the latter {could not} satisfy the demand for seating capacity, which demand 
{could } only be met by one aircraft in the LCA industry – the A380."1414 
5.525.   The Panel further noted that , as the A380 and the 747 -8I were the only two aircraft 
capable of flying well over 400 passengers on long -haul routes, the Panel found it "difficult to 
believe tha t airlines interested in purchasing LCA with capabilities such as those of the A380 and 
the 747 -8I would not try to negotiate and obtain price discounts"  from Airbus and Boeing on 
"the basis of the strength of each company's respective sales offer, even wh en the superiority of 
one aircraft over the other may be relatively apparent".1415 The Panel found that "the fact that 
Airbus may {have} face{d} relatively less pricing pressure from the 747 -8I when a potential 
customer {was} looking for an LCA with a seating  capacity that approximate {d} the maximum 
capacity of the A380 {did} not necessarily signal the absence of reciprocal pricing constraints ."1416 
Rather, according to the Panel, "given that there {would} be a range of customer demands for 
LCA with a passenger c apacity exceeding 400 seats", one would "expect to find differing degrees 
of reciprocal pricing constraints between the A380 and the 747 -8I, depending upon how close a 
particular customer's needs reflect {ed} the relative advantage of one aircraft over the other ."1417 
The Panel concluded that , "{a}t either end of this range of customer needs, one aircraft {would} 
impose greater pricing pressure on the other ."1418 However , according to the Panel, this did "not 
imply the absence of competition, but only that  the com petitive constraints imposed by one LCA 
on the other {would}  be more or less intense depending upon which product more closely 
satisfie {d} the relevant needs of a potential customer ".1419 As we understand it, this statement 
suggest s that the Panel considered the nature and degree of competition between these 
two product types to vary depending upon the needs of a customer. In our view, this is in line with 
the Panel's observation that the nature and degree of competition between prod uct types could  
vary " depending upon the particular circumstances of a sale ".1420 We do not find the Panel to have 
considered the nature and degree of competition between these two product types to be 
altogether irrelevant, as the European Union suggests.   
5.526.   Turning to the sales campaigns at issue, the Panel considered that , although it had no 
evidence before it "of actual customer  evaluations of the economics of the A380 and the 747 -8I", 
the United  States' "HSBI evidence of Boeing's analysis of the competitive interaction between the 
two aircraft in the 2007 Emirates and 2006 British Airways sales campaigns"1421 suggested that, 
"according to Boeing, at a certain point in time during those campaigns, [BCI]."1422 The Panel 
found this to be consistent with "not only the evidence showing that Airbus considered competition 
for the British Airways' sales to be 'intense'"1423, but also that, from "the evidence {it had} 
reviewed from four other sales campaigns (Asiana Airlines, Hong Kong Airlines, Skymark and 
Qantas)", it was "ap parent that Boeing presented the 747 -8I as an alternative to the A380 with a 
view to winning sales from the relevant customers ."1424 In particular, the Panel considered that the 
sales campaign for British Airways showed that Airbus appeared "to have explicitl y recognized the 
existence of ' intense ' competitive pressure, with its then -CEO, Tom Enders, describing the British 
Airways sales campaign as having involved 'an intensive year -long competitive evaluation' ."1425 
Moreover, we also recall that , in its analysis of the sales campaigns for Transaero, Korean Air, and 
Lufthansa, the Panel noted that , "{w}hile {it} agree {d} with the European  Union that the 
evidence … suggest{ed} that the three airlines purchased the A380 and the 747 -8I to fill different 
capacity segments of their operations", the Panel did "not believe that this alone implie{d} that 
the two LCA were sold to each customer in the absence of effective competition ."1426  
                                                
1414 Panel Report, para.  6.1394.  
1415 Panel Report, para.  6.1408.  
1416 Panel Report, para.  6.1408.  
1417 Panel Report, para.  6.1408.  
1418 Panel Report, para.  6.1408.  
1419 Panel Report, para.  6.1408. (emphasis added)  
1420 Panel Report, para. 6.1416. (emphasis added)  
1421 Panel Report, para.  6.1409.  (emphasis original)  
1422 Panel Report, para.  6.1409.  (emphasis omitted)  
1423 Panel Report, para.  6.1409.  
1424 Panel Report, para.  6.1409.  
1425 Panel Report, para.  6.1402 (quoting EADS Press Re lease, "British Airways to buy 12  Airbus A380 
aircraft for long haul fleet", 27  September 2007 (Panel Exhibit USA -256)).  (emphasis added)  
1426 Panel Report, para.  6.1405.  WT/DS316/AB/RW  
 
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  5.527.   Based on its analysis , the Panel found that "despite som e appreciable differences", 
the A380 and 747 -8I are "sufficiently similar to be considered by air lines wanting to … operate 
long-haul, slot -constrained missions requiring a maximum se ating capacity in excess 
of 400 passengers".1427 The Panel concluded that the United  States ha d established that, "for the 
purpose of evaluating its claims of serious prejudice under Article  6.3 … the A380 and 747 -8I 
{could}  be considered to compete against each other in one single product market for VLA."1428 
The Panel further considered that its "conclusion reflect{ed} the Appellate  Body's explicit 
confirmation … that 'there {was} competition between the Airbus A380 and the Boeing 747 and 
that Airbus and Boeing competed for the Emirates' Airlines A380 orders in 2000 ."1429  
5.528.   Based on the above, we see no interpretative error in the Panel's reading of the term 
"market", and the standard it sought to apply. Nor do we agree with the European Union that the 
Panel considered the nature and degree of competition in the VLA market to be irrelevant for 
purposes of its analysis. Indeed, as noted, the Panel clarified that "{t}here {would} be weaker and 
stronger competitive relationships within each market depending upon the particular 
circumstances of a sale ."1430 We also disagree with the European Union to the extent  that it 
suggests that the Panel failed to consider whether these product types were sufficiently 
substitutable to be placed i nto the same market, or that the Pane l disregarded the 
European  Union's argument that "the larger passenger capacity and advanced technologies of the 
A380" meant that "the A380 ha{d} an insurmountable per{} seat operating cost advantage and 
generate{d} hig her revenues … placing it in a separate product market."1431 Rather, 
we understand  the Panel to have considered these arguments but rejected them based on its 
review of the parties' arguments and of evidence regarding physical characteristics, end -uses, 
custo mers, pricing constraints, and sales campaigns. In light of t he foregoing considerations, 
we are satisfied that the Panel's analysis identifying the VLA product market reflects a proper 
reading of the term "market"  in Article 6.3 of the SCM  Agreement.  
5.529.   Moreover, we understand that the Panel took into account the European  Union's contention 
that "differing degrees of less -than-vigorous competition exist{ed} between other combinations of 
Airbus and Boeing aircraft"1432, and that, "in some cases, an LCA product of  one manufacturer 
{could}  impose significant competitive constraints on another LCA product without having to face 
any or the same level of competitive constraint from that product itself ."1433 In particular, 
the Panel recalled that, according to the European  Union, there was "'limited' or 'very little' 
competition between the new and current generations of Airbus a nd Boeing single -aisle and 
twin-aisle aircraft"1434; "'little' or 'weak' competition between the A330 an d all three families of 
Boeing twin -aisle LCA"1435; and "'very limited' or 'very weak' competition between the A380 and 
the 747 -8".1436 However, on balance, the Panel considered that , "while it {was} apparent that the 
three product markets the United  States {had } chosen to rely upon to bring its complaint … {did} 
not exhaustively capture how competition takes  place between aircraft in the LCA sector at all 
                                                
1427 Panel Report, para. 6.1386.  
1428 Panel Report, para.  6.1410.  
1429 Panel Report, para.  6.141 0 (quoting  Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft , paras.  1227-1228).  
1430 Panel Report, para.  6.1416.  
1431 Panel Report, para. 6.1377 (referring to European  Union's first written submission to the Panel, 
paras. 626 -629; second written submission to the Panel, para. 691; response to Panel question No. 49, 
para. 222; Mourey Statement (Panel Exhibit EU -8 (BCI)) , paras. 151 -152 and 160; Supplemental Mourey 
Statement  (Panel Exhibit EU -124 (BCI/HSBI)), paras. 67 -69). 
1432 Panel Report, para.  6.1413.  
1433 Panel Report, para.  6.1413.  
1434 Panel Report, para.  6.1413 (referring to European  Union's first written submission to the Panel, 
paras.  491, 602, 604, and 718; second written submission to the Panel, paras.  636, 639, and 677; Mourey 
Statement (Panel Exhibit EU -8 (BCI)) , para.  82; Supplemental Mourey Statement (Panel Exhibit EU -124 
(BCI/HSBI)), paras.  10, 13, 19 , and 22).  
1435 Panel Report, para.  6.1413 (referring to European  Union's first written submission to the Panel, 
para. 860; Supplemental Mourey Statement (Panel Exhibit EU -124 (BCI/HSBI) ), paras.  10, 26, 35, 43, 50 -51, 
and 60).  
1436 Panel Report, para.  6.1413 (referring to Eur opean  Union's first written submission to the Panel, 
para. 629; second written submission to the Panel, para.  690; response to Panel question No. 58; Mourey 
Statement (Panel Exhibit EU -8 (BCI)) , para.  176; Supplemental Mourey Statement (Panel Exhibit EU -124 
(BCI/HSBI) ), para.  65). WT/DS316/AB/RW  
 
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  times", it was satisfied that "they represent{ed} the three segments within which most 
competitive interacti ons between  the relevant aircraft {would} commonly take place ."1437  
5.530.   As we see it, th is discussion by the Panel, including its  emphasis on the three market 
segments as areas where the "most competitive interactions" take place , clearly suggests that the 
Panel  considered the intensity of competition between concerned aircrafts to be relevant, and 
sought to take it into account in its analysis. We therefore do not agree with the European  Union 
that the Panel sought simply to assess whether there were " some " comp etitive constraints or 
interactions among  different LCA models. Instead, we agree with the United  States that, consistent 
with the Appellate  Body's guidance, the Panel was aware of the differences in the degree of 
competition between products1438 and "did not define markets based on the slightest  competitive 
constraints or interactions, as evidenced by its finding that the three -market delineation does not 
'exhaustively capture how competition takes place between aircraft in the LCA sector at all 
times'."1439 Our review above also suggests that the Panel's three -way product market delineation 
was based on a proper  analysis of the competition between relevant LCA  that the  Panel found to 
demonstrate sufficient substitutability, in accordance with the standard articu lated by t he 
Appellate  Body in the original proceedings .  
5.531.   Finally, the European Union contends that the Panel considered the intensity of competition 
to be "irrelevant" when it stated that " Airbus ' and Boeing' s mere participation with a particular 
product offering in a sales campaign {} was 'highly relevant to {the} task of determining the 
existence of relevant product mark ets', because it indicated that the manufacturer had a 
reasonable expectation of 'imposing some level of competitive constraint  on its ri val's 
offering '."1440  
5.532.   For its part, t he United States recalls the Panel's explanation that " it is difficult to believe 
that Airbus or Boeing would go to the expense of participating in a sales campaign if either 
company did not believe it had a reasonable ch ance of convincing a customer to purchase its own 
LCA products ahead of those of its rival or, at the very least, imposing some level of competitive 
constraint on its rival's offering."1441 The United States submits that t he Panel was correct in this 
analysis  and that nothing suggests that the Panel considered the intensity, degree, or level of 
competition to be "irrelevant ".1442  
5.533.   We recall the Panel's finding that "evidence showing that Airbus and Boeing presented or 
formally offered one or more LCA products for  consideration in a particular sales campaign 
{would} be highly relevant to {its} task of determining existence of relevant product markets."1443 
The Panel considered such evidence to "strongly suggest that a customer's ultimate purchase 
decision {would} be i nformed by its consideration of the relative strengths and weaknesses of 
either company's respective offerings."1444 In support, the Panel recalled the Appellate Body's 
finding in the original proceedings dismissing the European  Union's appeal against the ori ginal 
panel's conclusion that "an order for A380s made by Emirates Airlines in 2000 constituted 
'lost sales' to the United  States' LCA industry, notwithstanding the absence of any formal aircraft 
offer having been made on the part of Boeing ."1445 Contrary to what the European Union suggests, 
we do not understand the Panel to have treated participation in a particular sales campaign as 
determinative of two products competing in the same market. Rather, the Panel stated that it was 
                                                
1437 Panel Report, para.  6.1416. (emphasis added) In a footnote, t he Panel also recalled that , during the 
original appellate proceedings, "the parties appeared to accept (or at least did not object to the notion) that 
competition in the LCA industry could be viewed as taking place in three distinct passenger aircraft product 
markets , namely, the single -aisle, twin-aisle and VLA markets ", noting further that the Appellate  Body went on 
to "complete the analysis" on the basis of the same  three product markets . (Ibid., fn 2416 thereto ) 
1438 United  States' appellee's submission, para.  349. 
1439 United  States' appellee's submission, para.  349 (quoting Panel Report, para.  6.1416 ). (emphasis 
original ) 
1440 European Union's appellant's submission, para. 601 (quoting Panel Report, para. 6.1348 (emphasis 
added by the European Union)).  
1441 United States' appellee's submission, para. 333 (quoting Panel Report, para. 6.1348 ). 
1442 United States' appellee's submission , para. 333. 
1443 Panel Report, para. 6.1348.  
1444 Panel Report, para. 6.1399.  
1445 Panel Report, para.  6.1349 . See also  Appellate  Body Report, EC and certain member States  – Large 
Civil Aircraft , para.  1223. WT/DS316/AB/RW  
 
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  difficult to believe that "Air bus or Boeing would go to the expense of participating in a sales 
campaign if either company did not believe it had a reasonable chance of convincing a customer to 
purchase its own LCA products ahead of those of its rival" or, "at the very least, imposing some 
level of competitive constraint on its rival's offering."1446 We see nothing objectionable per se  in 
these statements. Nor do we understand the Panel to have discounted the intensity of competition 
between the relevant LCA in coming to its three -way market delineation. Instead, as considered 
above, the Panel's overall analysis, in our view, shows that  the Panel's assessment and 
identification of the three product markets was based on competition that was "meaningful" 
between the relevant pairings of LCA.  
5.534.   In light of the foregoing  considerations , we do not agree with the European  Union to the 
extent tha t it claims  that the Panel erred in its interpretation of the term "market" in Article  6.3 of 
the SCM  Agreement.1447 Instead, our review above of the Panel's product market analysis, 
including for each of the three LCA markets, shows that the Panel did not er r in its interpretation 
of the term "market" in Article 6.3 of the SCM Agreement.  
5.6.2.4   Whether the Panel erred in its application of Article 6.3 of the SCM Agreement  
5.535.   The European  Union submits  in the alternative  that, even assuming that the Panel properly 
interpreted Article  6.3 of the SCM  Agreement, it nonetheless erred in applying th is provision to the 
facts of this case.1448 In this regard, the European  Union recalls that both parties agreed that, 
under a broad approach to the interpretation of the term "market" , all LCA could be placed in the 
same product market.1449 The European  Union adds that the evidence offered by the parties 
"is consistent with the Panel's findings of the existence of competition between aircraft that the 
United  States placed into separate pr oduct markets"1450, pointing in particular to the competition 
between the 747 -8 (placed in the VLA market) and the 777 -300ER and the A350XWB -1000 
(placed in the twin -aisle LCA market) , as cited by the Panel itself.1451 Therefore, the 
European  Union contends that , "{h}aving recognised that competition existed {among}  all LCA, 
the Panel should have applied its product market standard to find a single product market in which 
all LCA (if not also a range of other means of transport) competed".1452  
5.536.   The United  States cou nters that the European  Union's argument is based on "the  flawed 
premise that the Panel 'replaced the Appellate  Body's 'significant competitive constraints' standard 
with a standard based on the mere existence of competitive constraints'."1453 The United  States 
further submits that n either  party argued for broader product market definitions, and that, "in any 
event, broadening the definitions would have risked including products in the same market that 
placed insufficient competitive constraints on each other ."1454  
5.537.   We understand this aspect of the European Union's appeal to be predicated on its view that 
the Panel considered the existence of any or some  competition to be sufficient to support a finding 
that two products fall within the same product market. We hav e disagreed with that proposition 
above. Instead, we have found that the Panel's three -way product market delineation was based 
on a proper  analysis of the competition among  relevant LCA  that the  Panel found to demonstrate 
sufficient substitutability, in a ccordance with the standard articulated by the Appellate Body in the 
original proceedings . In these circumstances, we see no reason to further engage with the 
arguments advanced by the European Union in this regard.   
                                                
1446 Panel Report, para. 6.1348.  
1447 European  Union's appellant's submission, para.  615. 
1448 European  Union's appellant's submission, para.  616. We note that the European  Union requests us 
to consider this appeal only if we reject the European  Union's appeal concerning the Panel's interpretation of 
the term "ma rket" in Article  6.3, and instead consider that the Panel properly interpreted the term "market". 
(Ibid., para.  540, and fn 576 to para.  595) 
1449 European  Union's appellant's submission, para.  619. 
1450 European  Union's appellant's submission, para.  620. 
1451 European  Union's appellant's submission, para.  621 (referring to Panel Report, fn 2415 to 
para. 6.1416).  
1452 European  Union's appellant's submission, para.  623. 
1453 United  States' appellee's submission, para.  348 (quoting European  Union's appellant's submissio n, 
para. 624).  
1454 United  States' appellee's submission, para.  350. WT/DS316/AB/RW  
 
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  5.6.2.5   Article 11 of the DSU  
5.538.   In a final set of  arguments, the European  Union claims that the Panel acted inconsistently 
with its obligations under Article  11 of the DSU  by viewing its task as consisting solely of carrying 
out an examin ation of "whether there existed intra -market competition between pr oducts that the 
United  States  had placed within each of its three alleged product markets" .1455 According to the 
European Union, this was not sufficient , given that the Panel was also required to assess whether 
"the competitive dynamic between a given pairing  of aircraft, which the United  States asserted to 
be in two separate  product markets, was such that the aircraft should instead be placed in the 
same  product market."1456 The European  Union contends that, "on the sole basis that the 
United  States alleged them  to be in different product markets, the Panel neglected altogether to 
examine whether the A321neo exerts competitive constraints on the 767, or whether the 
777-300ER or the A350XWB -1000 exert competitive constraints on the 747 -8".1457 
The European  Union subm its that this constitutes error under Article  11 of the DSU.1458  
5.539.   For its part, the United  States submits that "the Panel determined that the three product 
markets outlined by the United  States provided a proper basis to analyze allegations of 
displacement, i mpedance, and lost sales"1459, while recogniz ing, based on the voluminous evidence  
adduced by the parties , that "important competitive relationships may also exist between pairings 
or combinations of aircraft across two, or even all three, of the product mark ets."1460 However, the 
Panel determined that, "while it {was}  apparent that the three product markets the United  States 
ha{d} chosen to rely upon to bring its complaint of non -compliance {did}  not exhaustively capture 
how competition takes place  between aircraft in the LCA sector at all times ", it was "satisfied that 
at present (as in the original proceeding) they represent {ed} the three segments within which 
most competitive interactions between the relevant aircraft will commonly take place."1461 
In respect of the European  Union's assertion that the Panel neglected to examine, for example, 
whether the A321neo exert ed competitive constraints on the 767, the United  States submits that , 
"{d}espite submitting thousands of pages of briefing and thousand s of exhibits, neither party 
suggested that the A321neo (which is in the A320  family) and the 767 were in the same 
market ."1462 Accordingly, the United  States maintains  that there was no reason for the Panel to 
"explain in detail why these products were not p laced in the same market ".1463 The United States 
adds that the Panel "conducted an exhaustive review of all of the evidence and argumentation 
submitted by the parties, and gave equal consideration to both parties' proposals"1464, and did not 
act inconsistently w ith Article  11 of the DSU.1465 
5.540.   For purposes of identifying relevant product market(s) in the context of a serious prejudice 
analysis under Articles 6.3(a) and 6.3(b) of the SCM Agreement, the mandate of a panel under 
Article 11 of the DSU is " to make an objec tive assessment of the competitive relationship between 
specific products in the marketplace and to define the relevant product market in order to 
determine whether particular products can be treated as forming part of a single product market 
or several pr oduct markets ".1466 In this regard, a  panel is called upon to carry out a holistic 
consideration of all the relevant evidence and arguments before it in order to make an objective 
determin ation of the relevant product market. A panel should assess whether it is appropriate to 
examine serious prejudice claims on the basis of the particular market segmentation proposed by 
the complainant  or whether the range of products at issue compete in different and distinct 
                                                
1455 European  Union's appellant's submission, para.  629. (emphasis original)  
1456 European  Union's appellant's submission, para.  635. (emphasis original)  In its opening statement at 
the second ses sion of the oral hearing, the European Union argued that, in assessing the scope of product 
markets in a given case, a panel must ensure that products within a product market would compete more 
closely with one another than with products outside that produ ct market.  
1457 European  Union's appellant's submission, para.  630. 
1458 European  Union's appellant's submission, para.  637. 
1459 United States' appellee's submission, para. 354.  
1460 United  States' appellee's submission, para.  355 (quoting Panel Report, para.  6.1416  (emphasis 
original ; fn omitted )).  
1461 United  States' appellee's submission, para.  355 (quoti ng Panel Report, para.  6.1416 (fn omitted)).  
1462 United  States' appellee's submission, para.  356. 
1463 United  States' appellee's submission, para.  356. 
1464 United  States' appellee's submission, para.  357. 
1465 United  States' appellee's submission, para.  358. 
1466 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1123.  WT/DS316/AB/RW  
 
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  markets . In so doing, the panel has to examine the  respondent's arguments alleging the existence 
of different market segmentations and rebutting the complainant's arguments.1467  
5.541.   Depending on the facts of a particular case, there can be multiple ways in which a 
complainant may choose to frame the scope of it s serious prejudice claims. We recall that the 
Appellate  Body in the original proceedings recognized that "there is no inhibition on how a 
complainant may choose to formulate its claim as to the scope of the 'subsidized product'"1468, 
adding that "it can do s o as it thinks best comports with the adverse effects it seeks to 
challenge ."1469 Accordingly, the Appellate  Body agreed with the original panel that "Members of the 
WTO have the sovereign right to structure their complaints as they choose."1470 However, at the 
same time, the Appellate  Body emphasized  "the difference between a WTO Member's freedom to 
formulate its complaint"1471 and the duty of a panel to scruti nize "whether the complaint, 
so formulated, holds true and is a proper account of the phenomenon in question, be it 
displacement, impedance, or any other effect of a subsidy ."1472  
5.542.   The Panel in these compliance proceedings noted the European  Union's argument that LCA 
are currently "bought and sold in up to six or seven distinct product markets, two of which  are 
allegedly 'temporal' monopoly markets where either Airbus or Boeing is … the sole credible 
supplier" .1473 At the same time, the Panel noted the United  States' argument that "the same three 
… LCA product markets relied upon by the Appellate  Body in the or iginal proceeding to 'complete 
the analysis' continue to exist ."1474  
5.543.   As discussed above, in assessing the three -way market segmentation proposed by the 
United  States, we understand the Panel to have conducted its own objective assessment of the 
relevant prod uct markets in light of the competing arguments and evidence presented by the 
parties. As noted, the Panel began its analysis with the three -way market segmentation proposed 
by the complainant but, in conducting its analysis, the Panel also addressed the a rguments by the 
European Union regarding the existence of "up to six or seven distinct product markets".1475 
In particular, the Panel took into account the Appellate  Body's guidance in the original proceedings 
regarding the range  of factors that may assist a panel in determining whether two products are in 
the same market, in the sense that they "create competitive constraints on each other".1476 
The Panel also carefully  assessed whether LCA customers sought to procure a range of products to 
satisfy their needs a nd requirements . Indeed , "when customers procure a range of products to 
satisfy their needs, this may give an indication that all such products could be competing in the 
same market ."1477 The Panel analysed the relevant qualitative  factors concerning demand -side 
substitutability in its assessment of the nature and extent of actual or potential  competition 
between specific products . It also noted that  "producing accurate and reliable quantitative 
evidence of the degree of demand -side substitution between different LCA products would be a 
formidable task ."1478 Based on its analysis of the  arguments and evidence before it, the Panel 
found it "appropriate to examine the United  States' claims of serious prejudice on the basis of the 
three separate product markets {the Panel  had} identified ".1479 
5.544.   In so doing , however, the Panel  cautioned  that it was " not {its} view that the degree of 
competition existing within each of these markets {would} be identical between all pairings or 
combinations of aircraft"1480, and further , that "{t}here {would} be weaker and stronger 
competitive relationships within each market depending upon the particular circumstances of a 
                                                
1467 See Appellate Body Report, EC and certain member States  – Large Civil Aircraft , para. 1131.  
1468 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1131.  
1469 Appellate  Body Report, EC and  certain member States – Large Civil Aircraft , para.  1131.  
1470 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1130.  
1471 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1130.  
1472 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1130.  
1473 Panel Report, para.  6.1157.  
1474 Panel Report, para. 6.1157.  
1475 Panel Report, para. 6.1157.  
1476 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1120.  
1477 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1120.  
1478 Panel Report, para.  6.1205.  
1479 Panel Report, para.  6.1416.  
1480 Panel Report, para.  6.1416. (emphasis original)  WT/DS316/AB/RW  
 
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  sale."1481 In this context , the Panel observed that "important competitive relationships {could}  
also {have} exist{ed} between pairings or combinations of aircraft across two, or even all three, 
of the product markets ."1482 The Panel further stated that, while the three product markets the 
United  States had chosen to rely upon to bring its  complaint did "not exhaustively capt ure how 
competition {took}  place between aircraft in the LCA sector at all times", it was satisfied that 
"they represent{ed} the three segments within which most competitive interactions  between the 
relevant aircraft  {would} commonly take place ."1483 That sai d, we note that the European  Union 
did not  argue before the Panel that the 747 -8I and the 777 -300ER and the A350XWB -1000 should 
have been placed in to the same product market. Nor did it contend that the A321neo and the 767 
compete d in the same market. To t he contrary, we understand the European  Union's position 
before the Panel to have been that the "allegedly 'outdated' and 'inferior' technology {of the 767} 
mean {t} that it {did}  not compete in the same product market as the A330 and that, in any case, 
it ha{d} been replaced by the 787 ."1484 In respect of the 777 -300ER, the European Union argued 
that the 777 family was in a "temporal" monopoly market1485, while the A350XWB -1000 competed 
closely with the 787 family in the market for technologically advanced and fu el-efficient new 
generation aircraft.1486 The European  Union did not place the 747 -8I into this product market but, 
rather, placed it into a product market of its own.1487 We fail to see why the Panel would therefore 
have been required to separately analyse and make findings on whether "the A321neo exert{ed} 
competitive constraints on the 767, or whether the 777 -300ER or the A350XWB -1000 exert{ed} 
competitive constraints on the 747 -8" such that they should have been placed in the same 
market.1488 Rather, as we see i t, the Panel was "required to make an objective assessment of the 
competitive relationship between specific products in the marketplace and to define the relevant 
product market"1489, taking properly into account the European  Union's arguments and evidence 
regarding the existence of up to six or seven distinct product markets .1490 The Panel had no duty, 
in our view, to make additional findings regarding the nature and degree of competition among 
LCA that neither party had argued were in meaningful competition or were sufficiently 
substitutable.  
5.545.   We note that a  panel is required , under Article 11 of the DSU,  "to 'consider all the evidence 
presented to it, assess its credibility, determine its weight, and ensure that its factual findings 
have a proper basis in that evidence '".1491 A panel does not err simply because it declines to 
accord to the evidence or to an argument the weight that one of the parties believes should be 
                                                
1481 Panel Report, para.  6.1416.  
1482 Panel Report, para.  6.1416. (emphasis original; fn omitted)  
1483 Panel Report, para.  6.1416. (emphasis added) In a footnote, t he Panel also recalled that, during the 
original appellate proceedings, "the parties appeared to accept (or at least did not object to the notion) that 
competition in the LCA industry could be viewed as taking place in three distinct passenger aircraft product 
markets , namely, t he single -aisle, twin-aisle and VLA markets ", noting further that the Appellate  Body went on 
to "complete the analysis" on the basis of the same three product markets . (Ibid., fn 2416 there to) 
1484 Panel Report, para.  6.1293 (referring to European  Union's fir st written submission to the Panel, 
paras.  607-619; second written submission to the Panel, paras.  626-628; response to Panel question No.  70). 
The Panel noted that the European  Union "also appear{ed} to argue that there may be no product market at 
all in which the 767 -300ER is currently sold". ( Ibid., para.  6.1157  (fn omitted) ) 
1485 Panel Report, para.  6.1156, Table 15: Competitive relationships between LCA  according to the 
European  Union.  
1486 Panel Report, para. 6.1293.  
1487 Panel Report, para.  6.1156, Table 15: Competitive relationships between LCA  according to the 
European  Union.  
1488 European Union's appellant's submission, para. 630.  
1489 Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1123.  
1490 In the original proceedings, the Appellate Body stated that "{t}he {original panel} was also required 
to assess the European Communities' allegation that there are, in fact, five distinct product markets of Airbus 
and Boeing LCA". ( Appellate  Body Report, EC and certain member States  – Large Civil Aircraft , para.  1131)  
1491 Appellate  Body Report, US – Carbon Steel (India) , para.  4.78 ( quoting  Appellate  Body Reports, 
China – Rare Earths , para.  5.178, in turn referring to Appellate  Body Reports, Brazil  – Retrea ded Tyres , 
para. 185; EC – Hormones , paras.  132 and 133; Australia  ‒ Salmon , para.  266; EC – Asbestos , para.  161; 
EC – Bed Linen (Article  21.5 – India) , paras.  170, 177, a nd 181; EC – Sardines , para. 299; EC – Tube or Pipe 
Fittings , para.  125; Japan  – Apples , para.  221; Japan – Agricultural Products  II, paras.  141-142; 
Korea  ‒ Alcoholic Beverages , paras.  161-162; Korea  – Dairy , para.  138; US – Carbon Steel , para.  142; 
US ‒ Gambling , para.  363; US – Oil Country Tubular Goods Sunset Reviews , para.  313; EC ‒ Selected Customs 
Matters , para.  258).  WT/DS316/AB/RW  
 
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  accorded to it.1492 As we see it, in this case, the Panel properly assessed the United  States' 
three -way market segmentation in light of the arguments and evidence before it, including those  
advanced by the European Union regarding the existence of more segmented market delineations , 
before concluding that it was "appropriate to examine the United  States' claims of serious 
prejudice on the basis of the three separate produc t markets {the Panel had} identified above".1493 
In coming to this conclusion, the Panel did not suggest that the United  States' identification of the 
relevant product markets was the only way to analyse the adverse effects of the challenged 
subsidies.  The fa ct that the Panel did not agree with the six- or seven -way market segmentation 
proposed by the European Union does not mean that the Panel committed legal error amounting to 
a violation of Article  11 of the DSU.  
5.546.   For all these reasons, we see no basis to find that the Panel acted inconsistently with 
Article  11 of the DSU.   
5.6.2.6   Overall conclusion  
5.547.   Regarding the term "market" in Article  6.3 of the SCM  Agreement , for the purposes of 
conducting an adverse effects analysis, two products are in the same market  if they are sufficiently 
substitutable and they exercise " meaningful " competitive constraints on each other.  
A consideration of quantitative  tools and evidence may assist a panel in defining the relevant 
product markets and in answering the question of whether products exercise meaningful 
competitive constraints on each other and are sufficiently substitutable to fall in the same product 
market. However , like the Panel, we do not see a reason to preclude that a careful  scrutiny of 
qualitative  evidence may also be sufficient , provided that it permits an informative and meaningful 
analysis  of the relevant product markets.  Depending on the particularities of a given case, it may 
be sufficient for a panel to examine qualitative  evidence regarding demand -side and supp ly-side 
substitutability, product characteristics, end-uses, and customer preferences  in order to reach a 
conclusion as to the nature and degree of competition between two products.  Having reviewed  the 
Panel's analysis of competition in the single -aisle LCA, twin -aisle LCA, and VLA  product markets, 
we are satisfied that the Panel's identification of the product markets in the present dispute was 
based on a proper analysis of the competition among the relevant products , which  the Panel found 
to demonstrate s ufficient substitutability, in accordance with the standa rd articulated by the 
Appellate  Body in the original proceedings.  We are also satisfied that the Panel's analyse s 
identifying the single -aisle LCA, twin -aisle LCA, and VLA product markets reflect a proper reading 
of the term "market" and we do not agree with the European  Union  to the extent that it argues 
that the Panel erred in its interpretation of the term "market" in Article  6.3 of the SCM Agreement.  
5.548.   Accordingl y, we uphold  the Panel's finding , in paragraph 6.1416 of the Panel Report, that 
the United  States had brought  its adverse effects claims with respect to appropriately defined 
product markets for LCA, namely, the global markets for single -aisle LCA, twin -aisle LCA, and VLA.  
5.549.   That said, we wish to emphasize that the identification of relevant product markets is a 
threshold question, the disposition of which informs the subsequent analysis of whether a 
complainant has established that the effect of a particular  subsidy is serious prejudice.  While it 
may be possible to conduct an analysis of adverse effects and reach meaningful findings of serious 
prejudice in instances where "all  products are not engaged in direct competition for the same  sales 
or orders – or wh ere the competitive relationship between such products is, at most, indirect or 
remote"1494 – this must , however , "be properly accounted for"  in the serious prejudice analysis .1495 
                                                
1492 Appellate Body Reports, Australia – Salmon , para.  267; Japan  – Apples , para.  221; 
Korea  ‒ Alcoholic Beverages , para.  164.  
1493 Panel Report, para.  6.1416.  
1494 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  1136.  
1495 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  1136.  WT/DS316/AB/RW  
 
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  5.6.3   "Product effects" of LA/MSF subsidies on Airbus LCA  
5.6.3.1   Introduction  
5.550.   As discussed ab ove, in examining the causal link between the LA/MSF subsidies and the 
alleged serious prejudice, the Panel began by reviewing the "product effects" of the LA/MSF 
subsidies.1496 The Panel found that the pre -A350XWB LA/MSF subsidies continue to be a genuine 
and substantial cause of the present -day market presence of the A320, A330, and A380  families of 
Airbus LCA.1497 The Panel also found that the aggregated LA/MSF subsidies, with the exception of 
LA/MSF for the A300 and A310, are a genuine and substantial cause o f the market presence  of the 
A350XWB.1498  
5.551.   On appeal, the European Union maintains that the Panel's erroneous interpretation of 
Article  7.8 of the SCM Agreement "led it to assess, erroneously, adverse effects of withdrawn 
subsidies"1499, and made its causation a ssessment "for an overly broad basket of subsidies".1500 
The European Union further contends that the Panel "compounded" its errors by committing a 
number of additional errors in its causation analysis.1501 With respect to the pre -A350XWB LA/ MSF 
subsidies, the European  Union alleges that the Panel erred by relying solely on the original panel's 
finding that Airbus would not have existed with its current range of product offerings during the 
original reference period  (2001 -2006) , because Airbus would not h ave lau nched those products 
"as and when" it did "but for " the pre -A350XWB LA/MSF subsidies.1502 According to the 
European  Union, while such a "but for" approach can identify the "necessary" cause of the current  
market presence of Airbus' product offerings1503, it is incapable of determining a genuine and 
substantial cause in this case, due to its failure to account for the passage of time and relevant 
events during that time, including the expiry of several LA/MSF subsidies and non -subsidized 
investments in Airbus' A32 0 and A330 families of Airbus LCA.1504  
5.552.   As a preliminary matter, we note that the errors alleged above by the European Union 
regarding the Panel's findings on the "product effects" of the pre -A350XWB LA/MSF subsidies on 
the market presence of the A320 and A33 0 families of  Airbus  LCA concern primarily the LA/MSF 
subsidies that had expired before the end of the implementation period , namely, the subsidies for 
the A300, A310, A320, A330,  and A340. In particular, the European Union contends that 
"the basket of sub sidies considered by the Panel included subsidies that were granted more than 
four decades ago, most of which the Panel itself found  have since expired ."1505 In the 
European  Union's view, "{c}onsistent with Article 7.8 of the SCM Agreement, the compliance 
Panel's task was, therefore, to examine if the passage of time, and events that have occurred 
during that time, including the expiry of the subsidies and massive non -subsidised post -launch 
investments, have resulted in 'remov{al} of the adverse effects' found  to exist in the original 
proceedings."1506 
5.553.   In section 5.4.2 of this Report , we have found that the Panel erred in its interpretation of 
Article 7.8 of the SCM Agreement in finding that the European Union has a compliance obligation 
in respect of subsidies th at had expired prior to the adoption of the panel and Appellate  Body 
reports in the original proceedings  – i.e. before the beginning of the implementation period.  
In addressing the European Union's consequential appeal in section 5.5 of this Report , we have 
                                                
1496 As noted above, the Panel used the term "product effects" to refer to the effects of LA/MSF subsidies 
on the ability of Airbus to  launch and bring to market an Airbus LCA as and when it did, and further found that 
"product effects" consisted of "direct effects" and "indirect effects", depending on whether the effects concern 
Airbus' ability to launch the particular model of LCA spec ifically funded by an LA/MSF subsidy (direct), or other 
models of LCA (indirect ). (See supra  fn 1052)  
1497 Panel Report, para.  6.1534.  
1498 Panel Report, paras. 6.1778 and  7.1.d.xiii.  
1499 European Union's appellant's  submission, para. 774. (fn omitted)  
1500 European Union's appellant's submission, para. 776. 
1501 European Union's appellant's submission, para. 776. 
1502 European  Union's appellant's submission, para. 834 (quoting Original Panel Report, paras.  7.1920, 
7.1940, 7.1984,  and 7.2025 ). 
1503 European  Union's appellant's submission, para. 834. 
1504 European  Union's appellant's submission, paras. 777, 854, and 857.  
1505 European Union's appellant's submission, para. 854 (referring to Panel Report, para. 6.907).  
1506 European Union's appellant's submissi on, para. 854. WT/DS316/AB/RW  
 
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  therefore highlighted that the pertinent question for purposes of these compliance proceedings is 
whether the subsidies granted or maintained by the European Union – i.e. the subsidies existing  in 
the post-implementation period  (after 1 December 2011)  – cause adverse effects.  Thus, t o the 
extent that some subsidies have expired, a further examination of the removal of the effects of 
those subsidies would not be necessary. In other words, it is not pertinent to examine whether the 
Panel's findings on the "product effects" of the expired  subsidies can support its ultimate 
conclusion of non -compliance under Article 7.8 of the SCM Agreement.  In line with this view, we 
do not consider it necessary to make separate findings on  the European Union's appeal  insofar as 
it concern s the Panel's  alleged failure to assess properly the passage of time and the events during 
that time in reaching its  findings on the "product effects" of  the expired subsidies.1507  
5.554.   Furthermore, we have noted above that whether the Panel  had a sufficient basis for its 
ultimate conclusions  is a question that can only be answered following a careful review of the 
Panel's reasoning and analysis  as it relates to the LA/MSF subsidies existing  in the 
post-implementation period . Therefore, in addressing the errors alleged by the European Union in 
respect of the Panel's adverse effects analysis1508, we will focus our review on the Panel's analysis 
and findings regarding the effects of subsidies existing in the post -implementation period , and the 
European Union's appeal thereof, to determine whether those findings support the Panel's ultimate 
conclusion regarding serious prejudice.  
5.555.   With respect to the A380 LA/MSF subsidies , which had not expired, t he European  Union 
claims on appeal that, to the exte nt that the Panel found that  the A380 LA/MSF  subsidies  resulted 
in "direct  effects" on the A380, such a finding lacks sufficient evidentiary basis.1509 As to the 
Panel's finding of the "product effects" of LA/MSF subsidies on the A350XWB , the European  Union  
alleges , first, that the Panel's finding that the A350XWB LA/MSF subsidies had " direct  effects" on 
the launch of the A350XWB lacks sufficient evidentiary basis1510, and is contradicted by certain 
other findings made by the Panel.1511 Second, the European  Union cl aims that the Panel erred in 
finding that the A380 LA/MSF had " indirect  effects" on Airbus' ability to launch the A350XWB.1512  
5.556.   In carrying out our analysis of these claims, we bear in mind  the findings from the original 
proceedings concerning the effects of the LA/MSF subsidies on Airbus' ability to launch the LCA 
products at issue in the original proceedings as and when it did.  As noted, the  expired subsidies 
are relevant for our review of the Panel's findings not to determine whether they cause 
"adverse  effects", but only as part of a matrix of analysis that seeks to understand the effects of 
the subsidies existing in the post -implementation period. This is particularly the case given that, 
as further discussed below, the subsidies at issue in these compl iance proceedings operate along 
the same causal pathway as the subsidies that were found to have caused adverse effects in the 
original proceedings .1513  
5.557.   With these considerations in mind, we begin by providing an overview of the Panel's 
findings on the "prod uct effects" of LA/MSF subsidies. Thereafter, we recall briefly the causation 
standard under Articles  5 and 6 of the SCM  Agreement, as explained by the Appellate  Body in past 
disputes. We then describe the relevant  findings from the original proceedings co ncerning the 
"product effects" of the pre -A350XWB LA/MSF, and review the extent to which the findings from 
the original proceedings inform ed the Panel's findings on adverse effects in these compliance 
proceedings. Finally, we proceed to review the European  Union's appeal of the Panel's findings 
concerning the "product effects" of the LA/MSF subsidies exist ing in the post -implementation 
period, namely, its findings regarding the A380 and A350XWB LA/MSF subsidies.   
                                                
1507 As noted above, such events include the expiry of certain LA/MSF subsidies and non -subsidized 
investments in the A320 and A330 families of Airbus LCA.  
1508 European Union's appellant's submission, paras.  776-786. 
1509 European  Union's appellant' s submission, paras. 878-884. 
1510 European  Union's appellant's submission, paras. 888, 899, and 913.  
1511 European  Union's appellant's submission, paras.  901 and 913.  
1512 European  Union's appellant's submission, paras.  890-895. 
1513 See sections 5.6.3.4 and 5.6.3.5 of  this Report.  WT/DS316/AB/RW  
 
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  5.6.3.2   Summary of Panel findings  
5.558.   The Panel explaine d at the outset of its analysis that the effects of the relevant subsidies 
should be determined by conducting a unitary counterfactual analysis, which "entails comparing 
the actual market situation that is before the adjudicator with the market situation t hat would 
have existed in the absence of the challenged subsidies".1514 The Panel agreed with the 
United  States that the starting point  of the counterfactual analysis in th ese compliance 
proceeding s should be the counterfactual that formed the basis of the or iginal panel and 
Appellate  Body findings on the effects of the pre -A350XWB LA/MSF subsidies in the 2001 -2006 
period.1515 Moreover, the counterfactual analysis in this dispute requires consideration of the 
extent to which "the design, structure and operation o f the challenged LA/MSF subsidies" are such 
that the same or similar effects found to exist in the 2001 -2006 reference period continue to be 
present in the post-implementation period  (i.e. after 1 December 2011) .1516 Having recalled the 
relevant findings from  the original proceedings1517, the Panel considered that the effects of the 
pre-A350XWB LA/MSF  subsidies  in the 2001 -2006 period may be characterized as having been 
indispensable to:  
a. the very existence  of Airbus, implying that in the absence of the pre -A350XWB LA/MSF 
subsidies, Airbus would not have been present on the mar ket (the "plausible" 
scenario);  or 
b. the ability of Airbus to offer a full range of competitive LCA , implying that in the absence 
of the pre -A350XWB LA/MSF subsidies, a "much weaker" Airb us "with at best a more 
limited offering of LCA models"1518 would have been present on the market 
(the "unlikely" scenario).1519 
5.559.   Having reviewed the findings from the original proceedings, the Panel explained that it 
would begin its evaluation by first determini ng the effects of the pre-A350XWB LA/MSF  subsidies  in 
the post-implementation period  on the A320, A330, and A380 families  of Airbus LCA , before 
examining the extent to which all of the challenged LA/MSF subsidies (including the pre-A350XWB 
and the A350XWB LA/MSF subsidies) allowed  Airbus to launch and bring to market the A350XWB 
as and when it did . 
5.6.3.2.1   Findings on the "product effects " of pre -A350XWB LA/MSF subsidies on the 
A320, A330, and A380   
5.560.   The Panel considered that in order for the United  States to succee d in its argument that 
the pre -A350XWB LA/MSF subsidies have essentially the same "product effects" today as they did 
at the time of  the original proceedings, the United  States would have to demonstrate that: (i) a 
non-subsidized Airbus would not exist tod ay; or (ii) any non -subsidized Airbus company  coming 
                                                
1514 Panel Report, para. 6.1453 (quoting Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft , para. 1110). The Panel explained that, in contrast to a "unitary approach", a "two -step" ana lysis 
first seeks to identify the market phenomena described in Article  6.3(a) -(d) of the SCM  Agreement and then, 
as a second step, examines whether there is a causal relationship between the phenomena and the challenged 
subsidies. The Panel recalled that,  while the Appellate  Body accepted the validity of this approach in the 
original proceedings, it explicitly stated that a "unitary analysis" would be preferable. (Ibid., fn  2490 thereto 
(referring to Appellate  Body Report, EC and certain member States – Large Civil Aircraft , paras.  1107 
and 1109)).  
1515 Panel Report, paras.  6.1457 and 6.1461. See  also United  States' first written submission to the 
Panel, paras.  335-352; second written submission to the Panel, paras.  367-373. As further discussed in 
para. 5.591  below, the original panel discussed four scenarios "for the LCA industry in the counterfactual world 
that would exist in the  absence of subsidies to Airbus" . (Original Panel Report, para. 7.1984) Scenarios  1 
and 2, which were considered "plausible" by the  original panel, contemplated that a non -subsidized Airbus 
would have had no market presence in the 2001 -2006 period. Scenarios 3 and 4, which the original panel 
considered "unlikely", envisaged that a non -subsidized Airbus would be competing in the 2001 -2006 period as 
a "much  weaker" company "with at best a more limited offering of LCA models". (Ibid., paras. 7.1984 
and 7.1993)  
1516 Panel Report, para. 6.1462.  
1517 See Panel Report, paras.  6.1464 -6.1479.  
1518 Panel Report, para. 6.1475 (quoting Original Panel Repor t, paras.  7.1984 and 7.1993).  
1519 Panel Report, para. 6.1475. (emphasis original)  WT/DS316/AB/RW  
 
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  into existence after the end of 2006 would not have developed and brought to market the A320, 
A330, and A380 (or a comparable range of LCA products), within a period of approximately five to 
nine years t hereafter.1520 Noting the complexities of LCA production and the dynamics and history 
of competition in the LCA industry, the Panel found it difficult to see how any non -subsidized 
Airbus company  coming into existence after the end of 2006 could have develope d a full range of 
the same or comparable LCA within such a short space of time.1521  
5.561.   The Panel noted that the European  Union did not argue that, in the absence of the 
challenged LA/MSF subsidies, Airbus would have come into existence at any moment after 2006 
and developed a full range of LCA by 1  December 2011 (or any tim e thereafter), nor that a 
"much  weaker" non -subsidized Airbus, with "at best a more limited offering of LCA models" during 
the 2001-2006 period, could have developed the same or comparable ran ge of LCA that it offers 
today.1522 Instead, the Panel noted that the European  Union's "core argument" was that any 
"product effects" found to exist up to the end of 2006 have today either: (i)  dissipated over time; 
or (ii) been significantly attenuated by a number of non -subsidized Airbus investments in the A320 
and A330.1523 The Panel then turned to address these arguments.1524 
5.562.   In respect of the first argument, recalling the Appellate  Body's recognition that the "life" of 
a subsidy will not necessarily define the duration of its effects1525, the Panel considered that the 
extent to which the effects of a subsidy will dissipate with the passage of time and eventually 
come to an end will be a fact -specific  matter that may be informed, but not necessarily defined,  by 
how the "life" of that subsidy has evolved over time.1526 The Panel noted that the ex ante "lives" of 
all of  the A300, A310, and A320 LA/MSF subsidies "came to an e nd before the conclusion of 
the 2001-2006 reference period", but the effects of those subsidies, to gether with the effects of all 
of the other challenged subsidies, were found in the original proceedings to be a "genuine and 
substantial" cause of serious prejudice.1527 The Panel saw no reason why the logic underpinning 
those findings should not be equally applicable for the purpose of determining the extent to which 
the effects of the challenged LA/MSF subsidies in these compliance proceedings have dissipated 
and come to an end with the passage of time.1528  
5.563.   The Panel recalled that the causation findings in th e original proceedings were based on 
the existence of two types of "product effects " attributable to the LA/MSF subsidies: 
(i) "direct  effects " – namely, the effects of any given LA/MSF subsidy  on Airbus' ability to launch 
and bring to market the particula r model of Airbus LCA specifically funded by that LA/MSF loan; 
and (ii) "indirect effects " – namely, 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 model of LCA.1529 The Panel considered that the duration of the 
"direct effects " of any particular LA/MSF subsidy should be determined on the basis of the extent 
to which those effects support the market presence of the specifical ly funded aircraft over time. 
Where the facts show that the very existence and ongoing market presence of a particular aircraft 
programme is dependent upon  specifically designated LA/MSF subsidy, then as a matter of logic, 
                                                
1520 Panel Report, para. 6.1480.  
1521 Panel Report, para. 6.1481.  
1522 Panel Report, para. 6.1481 (quoting Original Panel Report, paras.  7.1984 and 7.1993).  
1523 Panel Report, para. 6.1481.  
1524 The Panel further observed that, "{a}dditionally, and in the alternative", the European  Union had 
argued that any lingering present -day effects of the challenged LA/MSF subsidies were not the cause of any 
present adverse effects because the Unite d States' claims of Boeing lost sales and displacement in the various 
LCA product markets could be explained by a number of factors unrelated t o the effects of LA/MSF. 
(Panel  Report, para. 6.1481) The Panel examined the "alternative" argument in the final part of its analysis of 
the United  States ' claims of Boeing lost sales, displacement , and impedance in the various LCA product 
markets. (Ibid., paras.  6.1782 -6.1783, 6.1790 -6.1797, and 6.1810 -6.1816)  
1525 Panel Report, para. 6.1488.  
1526 Panel Report, para. 6.1489.  
1527 Panel Report, para. 6.1490 (referring to paras.  6.879 and 6.1076).  
1528 Panel Report, para. 6.1491.  
1529 Panel Report, para. 6.1492.  According to the Panel, learning, scope, and financial effects refer to the 
extent to which LA/MSF subsidies enable  Airbus to: (i) develop the "knowledge, know -how and experience" to 
launch other LCA models; (ii) share inputs and spread costs between different LCA models; and (iii) lower the 
cost of financing new LCA models and generate revenues that would not otherwise ex ist in the absence of 
LA/MSF.  (Ibid., paras.  6.1510 -6.1511)  WT/DS316/AB/RW  
 
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  the Panel considered it likely th at the "direct effects " of that LA/MSF subsidy would  continue to be 
felt throughout the marketing life of the specifically funded aircraft.1530 As for the "indirect effects " 
of LA/MSF subsidies,  the Panel was of the view that the duration of such "indirect effects " should 
be "determined on the basis of the extent to which the 'learning', scope and financial effects 
associated with any given LA/MSF measure provided for the purpose of one specific model of LCA 
support the market presence of one or more other m odels of LCA over time".1531 In sum, the Panel 
stated that it did "not see how, as a factual matter, the mere passage of time  could have brought 
the relationship of 'genuine and substantial ' cause and effect between the pre -A350XWB LA/MSF 
subsidies and the A3 20, A330 and A380 to an end while those aircraft continue to be sold. "1532  
5.564.   Turning to the alleged non -subsidized investments  in the A320 and A330 families of LCA , 
the Panel had "no doubt" that the post -launch investments described by the European  Union were 
significant and instrumental to Airbus' ability to upgrade the technologies and production 
processes associated with the original A320 and A330 programmes in a way that enabled Airbus to 
sustain their competitiveness.1533 Nonetheless, the Panel recalled that,  pursuant to the two 
"plausible" counterfactual scenarios, the effects of the pre-A350XWB LA/MSF subsidies were found 
to explain "the very existence of Airbus in the 2001 -2006 period ".1534 The Panel reasoned that, 
because  a significant part of Airbus' post-launch investments took place before  the end of 2006, 
"it must logically follow that they too could not have been undertaken in the absence of the effects 
of the challenged LA/MSF subsidies. "1535 In the Panel's view, the same was true with respect to the 
post-launch investments the European  Union identified as having taken place after the end 
of 2006. The Panel considered it difficult to contemplate how a non -subsidized Airbus entering the 
LCA market in 2007 (at the earliest) would have been able to develop the technical know -how and 
have the financial strength to launch and bring to market two aircraft types comparable to those 
with respect to which Airbus decided to make the post -2006 investments.1536 The Panel therefore 
found that the "direct  effects " and "indire ct effects " of the pre -A350XWB LA/MSF subsidies 
continued to be a "genuine and substantial" cause of the market presence of the current versions 
of the A320 and A330 families  of Airbus LCA , although they were  not the only cause.1537  
5.565.   In conclusion, the Panel was not convinced that the relevant arguments and evidence 
before it "demonstrate {d} that the mere passage of time or the few events which the 
European  Union ha {d} identified to have taken place since the beginning of 2007 (or even before 
then), ha {d} materially eroded the causal link that was found to exist in the original proceeding up 
until the end of 2006".1538 In the Panel's view, the European  Union 's arguments and evidence 
concerning the passage of time and post-launch investments were "factually unpersu asive".1539 
Consequently, the Panel found that the "direct  effects " and "indirect effects " of the pre-A350XWB 
LA/MSF subsidies continue to be a genuine and substantial cause of the present -day market 
presence of the A320, A330 , and A380 families of Airbus LCA . In other words,  in the absence of 
the pre-A350XWB LA/MSF subsidies, Airbus would not be selling th ese aircraft today.1540 
5.6.3.2.2   Findings on the "product effects " of the challenged LA/MSF subsidies on 
the A350XWB  
5.566.   With regard to the A350XWB, the Panel sought to det ermine whether Airbus could have 
launched the A350XWB as and when it did  in December  2006 in the absence of the "individual 
                                                
1530 Panel Report, para. 6.1508.  (emphasis omitted) By contrast, the Panel observed that, where the 
very existence and ongoing market presence of an aircraft that was specifically funded with LA/MSF subsidies 
is not dependent on that funding, in the sense that the same aircraft would have been developed and brought 
to market at some point in time without the specifically designated LA/MSF subsidy, then it would be "highly 
unlikely for the direct effects  of that LA/MSF funding to endure throughout the entire marketing life of the 
relevant LCA programme". (Ibid. (emphasis original))  
1531 Panel Report, para. 6.1513.  
1532 Panel Report, para. 6.1515. (emphasis original)  
1533 Panel Report, para. 6.1524.  
1534 Panel Report, para. 6.1525.  
1535 Panel Report, para. 6.1525.  
1536 Panel Report, para. 6.1526.  
1537 Panel Report, para. 6.1527.  
1538 Panel Report, para. 6.1531.  
1539 Panel Report, para. 6.1534.  
1540 Panel Report, para. 6.1534.  WT/DS316/AB/RW  
 
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  and/or combined impact" of: (i) the "direct effects" of A350XWB LA/MSF subsidies; and 
(ii) the "indirect effects" of the pre-A350XWB  LA/MSF subsidies.1541 In its analysis , the Panel used 
the two "unlikely" counterfactual scenarios  from the original proceedings as the starting point1542, 
having concluded that, under the two "plausible" counterfactual scenarios adopted in the original 
proceedi ngs, "there {was} no doubt that the A350XWB could not have been launched and brought 
to market in the absence of LA/MSF ."1543  
5.567.   The parties' arguments before the Panel focused on the extent to which the subsidized  
Airbus that actually existed  in the 2006 -2010 period could have launched the A350XWB  in the 
absence of the individual and/or combined impact of the "direct effects" of the A350XWB LA/MSF 
subsidies and the "indirect effects" of the pre -A350XWB LA/MSF subsidies . The Panel explained 
that this was based o n "a counterfactual that is different to the one that form {ed} the basis of the 
question" that the Panel had posed , and that neither party had advanced any arguments as to the 
ability of the non-subsidized  Airbus company  that would exist in the "unlikely" counterfactual 
scenarios to launch the A350XWB.1544 Nonetheless, the Panel considered that, by examining the 
impact of LA/MSF on the subsidized Airbus company that actually existed from 2006 to 2010, 
"inferences {could}  be drawn about the extent to which the non -subsidized Airbus company that 
would {have} exist{ed} in the 'unlikely' counterfactual scenarios could have done the same", 
because "the  non-subsidized Airbus company operating in the 'unlikely' counterfactuals would  be, 
by definition, a 'much weaker' competitor 'with at best a more limited offering of LCA models' than 
the Airbus company that actually existed."1545 Adopting this analytical framework , the Panel turned 
to examine the merits of the parties' arguments regard ing the ability of Airbus – as it actually 
existed in 2006 – to launch the A350XWB as and when it did, with a view to drawing inferences 
concerning whether the non -subsidized Airbus company that would have existed in the "unlikely" 
counterfactual scenarios  could have launched the A350XWB as and when it did .1546 
5.6.3.2.2.1   Findings on the "direct effects" of the A350XWB LA/MSF subsidies on 
the A350XWB  
5.568.   The Panel began by setting forth the factual background t o the launch of the A350XWB, 
in the form of a "narrative" of the A350XWB programme "running from its origins through to the 
period during which the A350XWB LA/MSF contracts were entered into".1547 The Panel divided its 
narrative into three main parts, beginning with an examination of the "pre -launch period"1548, 
and then turn ing to the "{l}aunch and the A350XWB Business Case"1549, and the "post -launch 
period".1550  
5.569.   Beginning with the "pre -launch period", the Panel identified t hree "material" topics: 
(i) the origins of the A350XWB programme; (ii) the A350XWB programme's developmental  status 
leading up to launch; and (iii) Airbus' and EADS' financial situation leading up to the launch.1551 
Based on its analysis of the evidence pertaining to these topics, the Panel made the following 
findings with respect to the pre -launch period: (i) "ser ious financial difficulties had arisen for 
                                                
1541 Panel Report, para. 6.1535. (emphasis omitted)  
1542 See 5.591 below. See  also supra  fn 1515.  
1543 Panel Report, para.  6.1535. The Panel explained that, under the "plausible" counterfactual 
scenarios, a non -subsidized  Airbus would not have existed in 2006; and that there was, furthermore, no 
evidence before the Panel to suggest (and the European  Union did not argue) that a non -subsidized Airbus 
would have come into being any time thereafter. (Ibid.)  
1544 Panel Report, para. 6.1537.  
1545 Panel Report, para. 6.1537. (fn  omitted)  
1546 Panel Report, para. 6.1538.  
1547 Panel Report, para. 6.1540. The Panel referred to this as the "Contracting Period". See also 
para. 6.1539.  
1548 This is the period consisting of events surrounding the A350X WB programme that occurred before 
the launch of the A350XWB, that is, before 1 December 2006. (Panel Report, para. 6.1541)  
1549 This relates to  the A350XWB Business Case presented to the EADS Board of Directors on [BCI], in 
preparation for the launch of the A 350XWB, and to the official approval by EADS of the launch of the A350XWB 
on the basis of the Business Case, on 1  December 2006. (Panel Report, para. 6.1568; A350XWB Business Case 
Presentation (Panel  Exhibit EU -130 (HSBI)))  
1550 Panel Report, para. 6.1574. Th is period relates to certain events surrounding the A350XWB 
programme occurring after the launch of the A350XWB, and through the Contracting Period. (Ibid.)  
1551 Panel Report, para. 6.1541.  WT/DS316/AB/RW  
 
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  Airbus and EADS that adversely affected their financial condition moving forward"1552; (ii) although 
it was forecast to be a very expensive project , Airbus deemed the A350XWB programme important 
enough to pursue beca use of, inter alia , its considerable strategic importance to Airbus' 
competitiveness; (iii)  Airbus and EADS pursued multiple strategies to put themselves in a position 
in which they could be sufficiently confident of their ability to fund the A350XWB progr amme, one 
of which was by securing commitments from the member States regarding the future provision of 
some sort of financial assistance in connection with the A350XWB programme; and (iv)  these 
strategies allowed Airbus and EADS to overcome their financia l problems, to the point where they 
were prepared to proceed with the A350XWB launch decision.1553 
5.570.   Turning to the A350XWB Business Case Presentation  on [BCI] in preparation for the 
launch of the A350XWB, the Panel took "particular note" of three aspects.1554 First, based on 
different press reports, the Panel was of the view that disagreements among EADS' shareholders 
regarding how the A350XWB would be funded delayed the launch, and such disagreements were 
resolved, at least in part, with a French Government guarantee to provide certain financial support 
for the programme.1555 Second, the Panel found that the assumption that the A350XWB 
programme would be "funded in part with financing that involved member State [BCI] permeated 
the A350XWB Business Case".1556 Finally , the Panel considered that the business case highlighted 
both risks and strategic benefits associated with the A350XWB  programme .1557 
5.571.   The Panel next analysed evidence from the post -launch period relating to the following four 
topics: (i) the developmental st atus of the A350XWB programme; (ii) Airbus' and EADS' financial 
position during this period; (iii) negotiations between Airbus and the member States concerning 
financial assistance fo r the A350XWB programme  generally, and A350XWB LA/MSF specifically; 
and ( iv) certain government documents discussing the importance of member State financial 
assistance in connecti on with the A350XWB programme.  The Panel m ade the following 
findings:  (i) as of the First Contract Date1558, EADS had experienced certain successes with  efforts 
to mitigate its financial problems that had arisen in the pre -launch period, but continued to face 
financial problems moving forward1559; (ii) although Airbus had completed significant work on the 
A350XWB in the absence of A350XWB LA/MSF, the most ca sh-intensive portions of the programme 
began to occur around or shortly after the First Contract Date1560; (iii) statements made by certain 
UK and Airbus officials, the European Commission State Aid Decisions1561, and a written 
assessment by the UK Government of the merits of Airbus' request for A350XWB LA/MSF1562 
(UK Appraisal ), support the proposition that it would have been extremely difficult for Airbus and 
EADS to effectively fund the A350XWB programme in the absence of A350XWB  LA/MSF1563; 
and (iv) Airbus and the member States continued to be in close contact regarding the eventual 
receipt of member State financial assistance in connection with the A350XWB programme, and 
there is no material evidence that Airbus ever questioned the availability of such assistance.1564 
5.572.   Having set out its narrative of the A350XWB programme, the Panel assessed the parties' 
arguments regarding the extent to which the A350XWB LA/MSF subsidies had an impact on the 
ability of the Airbus company that actually existed  in the 2006 -2010 period to  launch  the 
A350XWB  as and when it did . In doing so, the Panel focused its analysis on the impact of the 
A350XWB LA/MSF subsidies on the "viability" of the programme with respect to both the launch 
date and the First Contract Date .1565 The Panel examined four  main aspects of the A350XWB 
programme bearing upon the issue of viability , namely: (i) Airbus' expected ability to effectively 
                                                
1552 Panel Report, para. 6.1567. See also e.g. paras.  6.1544, and 6.1550 -6.1553.  
1553 Panel Report, para. 6.1567.  
1554 Panel Report, para. 6.1573.  
1555 Panel Report, para. 6.1573. See also para. 6.1568.  
1556 Panel Report, para. 6.1573. See also paras.  6.1569 -6.1570.  
1557 Panel Report, para. 6.1573.  See also paras. 6.1571 -6.1572.  
1558 The Panel used the term "First Contract Date" to refer to the date on which the evidence establishes 
that the first LA/MSF contract came into being. (Panel Report, para. 6.1631)  
1559 Panel Report, para. 6.1624. See also paras.  6.1585 -6.1587.  
1560 Panel Report, paras.  6.1584 and 6.1624.  
1561 Panel Report, paras. 6.1613 -1623.  
1562 UK Appraisal (Panel Exhibit EU -(Article 13) -34 (HSBI) ). 
1563 Panel Report, paras.  6.1600 -6.1609, and 6.1624.  
1564 Panel Report, para . 6.1624. See also para. 6.1598.  
1565 Panel Report, para. 6.1639.  WT/DS316/AB/RW  
 
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  fund the programme with financing on market terms; (ii) the progr amme's base -case NPV; 
(iii) the strategic reasons for Airbus to  pursue the programme not already taken into account in 
the base -case NPV; and (iv) the programme's risks.1566  
5.573.   Beginning with Airbus' ability to fund the programme in the absence of A350XWB LA /MSF, 
the Panel examined evidence pertaining to: (i) increased use  of risk -sharing partners (RSPs)1567; 
(ii) increased profitability and cash generation1568; (iii) disposal of non -core assets; (iv)  a reduction 
in shareholder distributions; (v) equity -related financing1569; (vi)  cash reserves1570; 
and (vii) increased debt.1571 In additi on to the extent of the financial resources available to 
effectively fund the A350XWB programme, the Panel considered three other factors bearing upon 
the issue of  viability vis-à-vis the date of launch and the First Contract Date, namely : 
(i) the programm e's base -case NPV ; (ii)  the programme's strategic benefits ; and (iii) the 
programme's  risks.1572  
5.574.   Taking all of these factors into account, the Panel found that, while "the alternative funding 
options available to Airbus coupled with the strong strategic reas ons it had for launching and 
developing a new generation twin -aisle aircraft meant that the A350XWB programme would have 
been sufficiently attractive and, therefore, viable  to Airbus even without A350XWB LA/MSF", the 
evidence demonstrated that pursuing the  programme in the absence of A350XWB LA/MSF would 
have been "a more complicated, more costly and riskier endeavour"1573, such that, in the absence 
of A350XWB  LA/MSF, it would be highly likely that Airbus would, to some degree, have had "to 
make certain compro mises with respect to the pace of the programme and/or the features of the 
aircraft".1574 Consequently , the Panel found that, without A350XWB LA/MSF, "the Airbus company 
that actually  existed  could have pursued 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."1575 
5.575.   Following its findings  on the impact of A350XWB LA/MSF on the subsidized  Airbus 
company 's ability to launch and bring to market the A350XWB , and recalling that, under both 
"unlikely" counterfactual scenarios, a non -subsidized Airbus operating in the  2001-2006 period 
                                                
1566 Panel Report, para. 6.1638.  
1567 The Panel considered that, while it was theoretically possible for Airbus to involve a greater number 
of RSPs in the A350XWB programme by some degree, it was not persuaded that Airbus could have in practice 
relied on RSPs to a level that would have come anywhere close to doubling their involvement compared to the 
actual situation. (Panel Report, para. 6.1656)  
1568 The Panel found it far from clear that EADS was in a position to cut further significant costs from its 
budget at any relevant time, at least without inviting disruptions and other potential problems to its operations. 
(Panel Report, para. 6.1659)  
1569 While  the Panel accepted that disposal of non -core assets by EADS, a reduction in shareholder 
distributions by EADS, and equity -related financing may have been options for EADS, it concluded that the 
extent to which they could be credible sources of funding for  the A350XWB programme in the absence of 
A350XWB LA/MSF, at any relevant time remained speculative. ( See Panel Report, paras.  6.1657, 6.1664, and 
6.1668)  
1570 The Panel considered that, although EADS had significant cash that it could have diverted to the 
A350XWB programme, doing so would have entailed significant risks for EADS given the uncertainties 
surrounding its future cash positions and the competing pressures on its cash reserves. (Panel Report, 
para. 6.1690)  
1571 While the Panel expressed certain reserv ations regarding the probative value of the evidence 
submitted by the European  Union, the Panel detected little evidence that EADS would have had " no appreciable 
debt-raising capacity in the relevant time periods in the absence of A350XWB LA/MSF", and thus  accepted that 
this was likely an option that could have been pursued to at least some material degree. (Ibid., para. 6.1700 
(emphasis original)).  
1572 Panel Report, para. 6.1701. See also paras.  6.1702 -6.1712.  
1573 Panel Report, para. 6.1717. According to the P anel, any single one of the potentially available 
funding options to Airbus, via EADS, would have had its own risks, costs and/or difficulties, and would  have 
been "insufficient on its own to replace either the absolute monetary value  or the relative finan cial security 
provided through the generally back -loaded, unsecured and success -dependent r epayment terms of A350XWB 
LA/MSF". (Ibid., para. 6.1715 (fn  omitted))  
1574 Panel Report, para. 6.1716. Making such compromises would, in the Panel's  view, be a way to 
reduce costs and/or risk associated with the programme. Further, the Panel  noted several pieces of evidence 
on the record indicating how financial troubles may delay an LCA programme.  (Ibid., para. 6.1716 and fn  3074 
thereto (additional text in fn omitted))  
1575 Panel Report, para. 6.1717. (emphasis original)  WT/DS316/AB/RW  
 
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  would have been "a 'much weaker' company 'with at best a more limited offering of LCA models'", 
the Panel found that a non-subsidized  Airbus operating in the "unlikely" counterfactual scenarios 
would have been unable to launch the A350XWB or an A350XWB -type aircraft by the end of 
2006.1576 The Panel explained that a non -subsidized Airbus operating in the "unlikely" 
counterfactual scenarios at the end of the 2006 would "not have had the same range and quality 
of aircraft on the market that the subsidized Airbus did at the  time of the launch of the A350XWB", 
and that "a non -subsidized Airbus operating in the 'unlikely' counterfactual scenarios would have 
had neither the technical or managerial expertise nor the financial resources that were available to 
the Airbus company t hat actually existed at the end of 2006."1577  
5.6.3.2.2.2   Findings on the "indirect effects" of the pre-A350XWB LA/MSF subsidies on 
the A350XWB  
5.576.   Next, the Panel considered the extent to which the "indirect effects" of the pre-A350XWB 
LA/MSF subsidies contributed to the ability of the subsidized Airbus company that actually existed  
over the relevant period to undertake the A350XWB programme "as and when it did".1578 The 
Panel recalled that the indirect effects of LA/MSF take the form of : (i) "learning effects"; (ii) "scope 
and scale effects"; and (iii) "financial effects".1579 Starting with the learning effects , the Panel 
examined "duelling expert reports" presented by both parties1580, as well as "historical record 
evidence in the form of press reports, the A350XWB Business Case, Airbus/EADS presentation s 
and other materials "1581, and found the evidence to show that "the A350XWB programme 
significantly benefitted from Learning Effects arising from previous, subsidized Airbus LCA 
programmes, especially (but not only) the A380 programme ."1582 The Panel  thus found the 
learning effects of the pre-A350XWB LA/MSF subsidies to be "wide -ranging and  significant, and 
their accumulation central and critical to the ability of Airbus to launch and bring the A350XWB to 
market as and when it did".1583 The Panel however considered it "difficult to materially attribute 
the same degree of importance to any Learning Effects from the A300 and A310 LA/MSF 
subsidies".1584  
5.577.   With regard to financial effects, the Panel examined the impact of the 
pre-A350XWB  LA/MSF subsidies on the A350XWB programme in terms of (i) enterprise value1585; 
(ii) return on capital employed (ROCE)1586; (iii) mitigation of A380 and A340 programme 
issues1587; (iv) the report by Professor David Wessels of the Wharton Business School1588; 
                                                
1576 Panel Report, paras.  6.1718 -6.1719 and 6.1722.  
1577 Panel Report, para. 6.1722.  
1578 Panel Report, para. 6.1723.  
1579 Panel Report, paras.  6.1724 -6.1725.  
1580 Panel Report, para. 6.1726. See also paras.  6.1727 -6.1744.  
1581 Panel Report, para. 6.1726. See also paras.  6.1745 -6.1746.  
1582 Panel Report, para. 6.1747.  
1583 Panel Report, para. 6.1760. (fn  omitted)  
1584 Panel Report, fn  3222 to para. 6.1760. The Panel explained in this regard that the specific A350XWB 
components and systems that it found to have benefitted from "learning effects" "generally appear{ed} to be 
derivations of similar components and systems used on more recent Airbus LCA programmes such as the 
A380". (Ibid.)  
1585 Before the Panel, the United  States argued that "pre -A350XWB LA/MSF made EADS more attractive 
to investors by positively impacting EADS' enterprise value". (Panel Report, para. 6.1762)  
1586 ROCE is calculated by dividing a company's earnings by its invested capital. (See Panel Report, 
fn 3230 to para. 6.1764) Before the Panel, the United  States argued that pre -A350XWB LA/MSF allowed EADS 
to "alter its ROCE to make itself appear more attractive to investors". (Ibid., para. 6.1764 (fn  omitted))  
1587 Before the Panel, the United  States argued tha t the back -loaded and delivery -based repayment 
terms of Airbus' outstanding balances of pre -A350XWB LA/MSF "partially insulated Airbus from the financial 
fallout from the problems Airbus experienced with its A380 and A340 programmes, thereby making it easi er for 
Airbus to launch the A350XWB". (Panel Report, para. 6.1767 (referring to United States' first written 
submission to the Panel, para. 372))  
1588 Professor David Wessels, "Assessing Airbus' Capacity to Fund Large Scale Projects W ithout LA/MSF", 
17 Octobe r 2012 (Wessels Report) (Panel Exhibit USA-364). Before the Panel, the United  States relied on the 
Wessels Report to argue that, if Airbus had launched its subsidized LCA programmes using market financing, 
the "resulting debt burden would have been so grea t as to prohibit the launch and development of the 
A350XWB at any relevant time". (Panel Report, para. 6.1768)  WT/DS316/AB/RW  
 
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  and (v) revenues.1589 On balance, the Panel found that "the evidence … demonstrate{d} that the 
A350XWB programme significantly benefitted from two of the five Financial Effects of the 
pre-A350XWB LA/MSF subsidies … namely, the enhanced revenue and debt reduction effects", 
which "enabled Airbus to launch and bring to market all of its existing Airbus LCA 
programmes".1590 The Panel , however , considered it "difficult to materially attribute such Financial 
Effects related to revenues to the A300 and A310 programmes".1591  
5.578.   Finally, in res pect of the scope and scale effects, the Panel noted that the United  States 
relied on the findings in the original proceedings "without referring to any specific evidence".1592 
As a result, while the Panel accepted that the A350XWB "must have benefitted from the scope and 
scale effects of pre -A350XWB LA/MSF arising from the existence of Airbus' pre -existing models of 
LCA", it found that it could give this line of argument only "limited weight".1593  
5.579.   In conclusion, with respect to the indirect effects of pre -A350X WB LA/MSF subsidies, the 
Panel found that "the indirect effects  of pre -A350XWB LA/MSF were fundamental to Airbus' ability 
to launch and develop the A350XWB programme", and had no doubt that it would not have been 
possible to launch the A350XWB if "Airbus { had} not benefitted from these indirect effects  of the 
pre-A350XWB LA/MSF measures".1594 The Panel found it "apparent" that "a non -subsidized Airbus 
would have had neither the technical expertise nor the financial resources that were available to 
the actual A irbus company operating at the end of 2006 as a result of the indirect effects  of 
pre-A350XWB LA/MSF ."1595 Accordingly, the Panel found that its assessment of the 
"indirect  effects " of the pre -A350XWB L A/MSF subsidies on the A350XWB confirmed  its conclusion 
that "a non-subsidized Airbus operating in the 'unlikely' counterfactual scenarios could not have 
launched and brought to market the A350XWB or an A350XWB -type aircraft."1596 
5.580.   On this basis, using all four counterfactual scenarios from the original proceedings 
concerning the effects of the pre -A350XWB LA/MSF subsidies until the end of 2006 as the starting 
point of its analysis, the Panel found it "apparent that the A350XWB could not have been launched 
and brought to market in the absence of LA/MSF"1597, with the ex ception of the LA/MSF subsidies 
provided for the A300 and A310.1598  
5.6.3.3   Causation under Articles  5(c) and 6.3 of the SCM  Agreement  
5.581.   It is well  established that, in disputes involving claims under Part III of the 
SCM Agreement , a complainant must demonstrate not only the existence of the relevant subsidies 
and the adverse effects to its interests, but also that the subsidies have caused such effects.1599 
The Appellate  Body has consistently articulated the causal link required as "a genuine and 
substantial relationshi p of cause and effect".1600 In other words, the subsidies must contribute, in a 
"genuine" and "substantial" way, to producing or bringing about one or more of the effects, or 
market phenomena, enumerated in Article  6.3 of the SCM  Agreement .1601 The Appellate  Body has 
noted that the  "genuine" nature of the causal link requires a complainant to show that the nexus 
                                                
1589 Panel Report, para. 6.1770. The United  States argued that, insofar as Airbus used its own funds to 
finance the A350XWB programme, such funds were attributable to revenues generated from sales of previous 
LCA that most likely would not have existed but for the LA/MSF subsidies . (Ibid., para. 6.1761) The Panel also 
observed, generally, that certain of the financial effects alleged by the United  States go beyond the financial 
effects that the original panel and the Appellate  Body articulated in the original proceedings. (Ibid., f n 3223 to 
para. 6.1761)  
1590 Panel Report, para. 6.1771. (fn  omitted)  
1591 Panel Report, fn  3248 to para. 6.1771.  
1592 Panel Report, para. 6.1773.  
1593 Panel Report, para. 6.1773.  
1594 Panel Report, para. 6.1774. (emphasis original)  
1595 Panel Report, para. 6.1775. (emphasi s original)  
1596 Panel Report, para. 6.1775. (emphasis original)  
1597 Panel Report, para. 6.1778.  
1598 Panel Report, para. 7.1.d.xiii.  
1599 See Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 913. 
1600 Appellate  Body Report s, US – Upland Cotton , para. 438; US – Upland Cotton ( Article  21.5 – Brazil) , 
para. 374; EC and certain member States – Large Civil Aircraft , para. 1232; US – Large Civil Aircraft 
(2nd complaint) , para. 913. 
1601 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 913. WT/DS316/AB/RW  
 
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  between cause and effect is "real" or "true".1602 As for the "substantial" component of the causal 
relationship,  "this concerns the relative i mportance of the causal ag ent (the subsidies at issue) 
in bringing about the adverse effect(s) in question ".1603  
5.582.   The mere presence of other causal factors  that contribute to a particular market effect 
does not, in itself, preclude the su bsidy from being foun d to be a genuine and substantial cause of 
that effect. Indeed,  "a panel need not determine {the subsidy}  to be the sole cause of that effect, 
or even that it is the only substantial cause of that effect ".1604 However, the panel must  "take care 
to ensure that  it does not attribute the effects of those other causal factors to the subsidies at 
issue, and that the other causal factors do not dilute the causal link between those subsidies and 
the alleged adverse effects such that it is not possible to characterize  that link as a genuine and 
substantial relationship of cause and effect. "1605 Ultimately, a final determination as to whether the 
requisite causal link has been established can only be made if, "having given proper consideration 
to all other relevant contrib uting factors and their effects, the panel is satisfied that the 
contribution of the subsidy has been demonstrated to rise to that of a genuine and substantial 
cause."1606 
5.583.   Provided that the panel adheres to the standard for causation described above, "a panel  
has a certain degree of discretion in selecting an appropriate methodology for determining whether 
the 'effect' of a subsidy" is one of the effects set out in Article  6.3.1607 One such methodology is 
the use of counterfactuals , which, in general terms, " entails comparing the actual market situation 
that is before the adjudicator with the market situation that would have existed in the abse nce of 
the challenged subsidies".1608 The Appellate  Body has noted that a "but for" approach could be a 
permissible  way of co nducting a counterfactual analysis1609 if "the subsidy is both a necessary 
cause of the market phenomenon and a substantial cause".1610 
5.584.   Another methodological issue concerns the collective assessment of the effects of multiple 
subsidies. As explained by the Appellate Body in US – Large Civil Aircraft (2nd complaint) , one way 
to conduct such a collective assessment is through aggregation, whereby a panel " group {s} 
together subsidy measures that are sufficiently similar in their design, structure, and operation in 
order to ascertain their aggregated effects in an integrated causation analysis and determine 
whether there is a genuine and substantial causal relationship between these m ultiple subsidies, 
taken together, and the relevant market phenomena identified in Article  6.3 of the 
SCM Agreement".1611 The Appellate  Body cautioned that , in each case, " a panel is subject to the 
                                                
1602 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , fn 1865 to para. 913. The 
Appellate  Body noted that the d ictionary definitions of "genuine" include "{h}aving the character claimed for it: 
real, true, not counterfeit", and "{n}at ural or proper to a person or thing". ( Ibid. (quoting Shorter Oxford 
English Dictionary , 6th edn, A.  Stevenson (ed.) (Oxford University Press, 2007), Vol.  1, p. 1094) ) 
1603 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , fn 1866 to para. 913. The 
Appellate  Body noted that the d ictionary definitions of "substantial" include "{h}aving solid worth or value, of 
real significance; solid; weighty; important, worthwhile" and "{o}f ample or considerable amount or s ize; 
sizeable, fairly large". (Ibid. (quoting Shorter Oxford English Dictionary , 6th edn, A.  Stevenson (ed.) (Oxford 
University Press, 2007), Vol. 2, p.  3088) ) 
1604 Appellate  Body Report,  US – Large Civil Aircraft (2nd complaint) , para. 914. (emphasis original)  
1605 Appellate  Body Report,  US – Large Civil Aircraft (2nd complaint) , para. 914. (fns  omitted)  See also 
Appellate Body Reports, US – Upland Cotton , para. 437; EC and certain member States – Large Civil Aircraft , 
para. 1232.  
1606 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 914. 
1607 Appellate Body Reports, US – Upland Cotton , para. 436; EC and certain member States – Large Civil 
Aircraft , para. 1376.  
1608 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1110.  
1609 Appellate  Body Report, US – Upland Cotton ( Article  21.5 – Brazil) , para. 375. 
1610 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1233. (emphasis 
original)  In particular , in situations where the subsidy at issue is shown to be a necessary cause, but is very  
remote , and other factors or intervening causes contribute to the occurrence of the market phenomenon in 
question, then a "but for" approach may not be sufficient to e stablish the requisite causal link.  (Ibid.)  
1611 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1285. Another approach to 
collective assessment is " cumulation", whereby a  panel may begin by analy sing the effects of a single  subsidy, 
or an aggregated  group of subsidies, to determine whether it constitutes a genuine and substantial cause of 
adverse effects. Having reached that conclusion, a panel may then assess whether other  subsidies  – either 
individually or in aggregated groups  – have a genuine  causal connection to the same effects, and complement 
 WT/DS316/AB/RW  
 
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  constraint that it must employ an approach that will enable i t to take due account of all of the 
subsidies that provide a relevant and identifiable competitive advantage to the recipient and its 
products in the market and that relate to alleged adverse effects phenomena. "1612  
5.585.   Finally, we recall that t he original panel  in the present dispute conducted a two-step 
analysis by first examining the existence of certain market phenomena (displacement and lost 
sales) before analysing whether the subsidies at issue caused serious prejudice in the form of such 
market phenomen a.1613 Although the Appellate  Body proceeded on the same basis in its analysis , 
it nonetheless noted that  it was "difficult to understand the market phenomena described in the 
various  subparagraphs of Article  6.3 in isolation from the challenged subsidies".1614 Thus, the 
Appellate  Body found that panels may undertake an analysis of serious prejudice under either a 
unitary or two-step approach1615, although " a unitary approach that uses a counterfactual will 
generally be the more appropriate approach ".1616 
5.6.3.4   Findings in the original proceedings and their relevance for these compliance 
proceedings  
5.586.   As discussed above, the question of whether the expired  subsidies cause adverse effects  in 
the post -implementation period is not within the scope of these compliance proceedings in light of 
our interpretation of Article 7.8 of the SCM Agreement . Nonetheless, findings from the original 
proceedings in relation to the expired subsidies, in particular those concerning the causal pathway 
linking  those subsidies and the relevant market phen omen a, remain relevant for those proceedings 
insofar as they inform our understanding of the effects of the  subsidies existing in the 
post-implementation period  (after 1 December 2011) . As the Panel noted, findings by the original 
panel and the Appellate B ody "establish no t only what the effects of the pre -A350XWB LA/MSF 
subsidies were in the 2001 -2006 period, but they also describe the design, structure and operation 
of those subsidies, and therefore how LA/MSF impacted Airb us' operations until the end 
of 2006".1617 As such,  they inform our understanding of the causal pathway through which the  
existing subsidies  may ca use adverse effects in the post -implementation period.  With this in mind, 
we turn to recall the relevant findings from the original proceedings,  particularly those concerning 
the causal pathway linking the LA/MSF subsidies and the alleged market phenomen a in the original 
reference period  (2001 -2006) . 
5.587.   In the original proceedings, the United  States advanced a "product" theory of causation,  
arguing t hat "the subsidies had an impact on 'Airbus' ability to launch and bring to the market 
models of LCA that … would not otherwise have been possible  at the time and in the way that it 
did without the support of those subsidies' ."1618 Under this "product" theory  of causation, " market 
distortion and adverse effects flow directly from Airbus' entry at a particular time with a particular 
                                                                                                                                                  
and supplement the effects of the first subsidy (or group of subsidies) that was found, alone, to be a genuine 
and substantial  cause of the alleged market phenomena.  (See ibid., para. 1287)  
1612 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1290. (emphasis added)  
1613 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1106.  
1614 Appellate  Body Report, EC and certain member States – Large Civil Ai rcraft , para. 1109.  
1615 Under a unitary approach, the analysis of the particular market phenomena identified in the 
subparagraphs of Article  6.3 is not conducted separately from the analysis of whether there is a causal 
relationship between those market phen omena and the challenged subsidies. In contrast, under a two -step 
approach, the analysis first seeks to identify the market phenomena and then, as a second step, examines 
whether there is a causal relationship.  (Appellate Body Report, EC and certain member  States – Large Civil 
Aircraft , para. 1107. See also Appellate Body Reports, US – Large Civil Aircraft (2nd complaint) , fn 1855 to 
para. 910; US – Upland Cotton , para. 431; US – Upland Cotton ( Article  21.5 – Brazil) , para. 354) 
1616 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1109.  
1617 Panel Report, para. 6.1461.  
1618 Appellate  Body Report,  EC and certain member States – Large Civil Aircraft , para. 1243 (quoting 
Original Panel Report , para. 7.1877). In the original proceedings,  the United  States  advanced two theories of 
causation, referred to by the original p anel as the  "product" and "pric e" theories of causation.  The principal 
focus of the United States' "price" theory of causation was the argument that the challenged subsidies, and in 
particular LA/MSF, provided Airbus with the financial means to be flexible with its pricing of LCA in competitions 
against Boeing, thereby enabling it to win sales, capture market share, and significantly depress and suppress 
the prices o f LCA between the years 2001 and 2006. (Original Panel Report , para. 7.1997) The original panel 
rejected the United  States ' "pric e" theory of causation. The United  States did not appeal this aspect of the 
original panel's analysis. (See Appellate  Body Repo rt, EC and certain member States – Large Civil Aircraft , 
para. 1243 and fn 2670 thereto)  WT/DS316/AB/RW  
 
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  aircraft , which in the United  States ' view would not have been possible but for the subsidies. "1619 
In analysing causation, the original panel began by examining a report prepared by 
Dr Gary Dorman1620 (Dorman Report) , which simulated the cash  flows that would be generated 
under six hypothetical LCA programmes , in comparison with  a base case scenario in wh ich the NPV 
of the programme was calculated without the LA/MSF subsidies.1621 The original panel found that 
the Dorman Report supported the  proposition that "Airbus product launches would not have 
occurred in the absence of LA/MSF "1622 and demonstrated that "the  provision of LA/MSF is likely to 
change the behaviour of the recipient with respect to a decision to launch a LCA by increasing the 
likelihood of an affirmative decision to go forward with the launch".1623  
5.588.   The original panel went on to analyse the business cases of various Airbus LCA 
programmes  and the public statements relied on by the United  States. For the A300, A310, A320, 
A330, and A340, the original panel found that LA/MSF was necessary for Airbus to have launched 
these LCA as originally designed and a t the time that it did.1624 The original panel noted, 
in particular, the complexities and high risks involved in launching an LCA programme1625, and the 
high percentage of the development costs of these models that the LA/MSF subsidies financed.1626 
Moreover, the o riginal panel emphasized that " static and dynamic ( 'learning curve ') economies of 
scope and scale achieved in the context of one model of LCA are an important part of the 
development and  production of other LCA models" .1627 Thus, the original panel found that , for 
example,  "the launch of the A320 in 1984, as originally designed, was to a very large degree  made 
possible by Airbus' successful launch es of the A300 and A310 over the previous decade with the 
assistance of LA/MSF. "1628 
5.589.   With respect to the A330 -200 and A340 -500/600, the original panel noted that both were 
"derivative aircraft" whose development was dependent upon the prio r production of, respectively, 
the original A330 and A340.1629 The original panel considered that, " while the particular grant of 
LA/MSF specific to the A330 -200 may not  have been necessary to its launch, on the whole, 
… LA/MSF was necessary to the launch of the A330 -200, as without the grant of LA/MSF for the 
development of the original model (and all models  preceding th at model), the A330 -200 could not 
have been launched when it was without significantly higher costs. "1630 The original panel further 
considered that " LA/MSF was also essential to the development of the A340 -500/600 " because it 
was " appropriate no t only to consider the LA/MSF directly  linked to the particular aircraft model 
but also to consider the role that LA/MSF played in the launch of  the aircraft on which it is based , 
as well as all other Airbus LCA launched before it."1631  
5.590.   Finally, with regard to the A380, as further described in section 5.6.3.5  below, the original 
panel considered various arguments and evidence submitted by both parties, including  the Airbus 
                                                
1619 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1243 (quoting 
Original Panel Report , para. 7.1879  (fn omitted) ). (emphasis added)  
1620 Gary J. Dorman, NERA, The Effect of Launch Aid on the Economics of Commercial Airline Programs , 
6 November 2006 (Original Panel Exhibit US -70 (BCI)).  
1621 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , paras. 1244-1245. The 
Europ ean Communities submitted a critique of the Dorman Report  by its own economic expert, Dr  Paul 
Watchel. (Ibid.,  para. 1246 (referring to Paul Watchel, Critique of "The Effect of Launch Aid on the Economics 
of Commercial Airline Programs" by Dr. Gary J. Dorman , 31 January 2007 (Original Panel Exhibit EC -12) and 
clarification, 20 May 2007 (Original Panel Exhibit EC -659)) ) 
1622 Original Panel Report , para. 7.1887.  
1623 Original Panel Report , para. 7.1912.  
1624 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1255 (referring to 
Original Panel Report , paras.  7.1934, 7.1936, and 7.1938 -7.1939).  
1625 The original panel observed that the parties  had described the development of LCA as an endeavour 
that requires huge up -front investments  and a  commitment of tremendous resources  in the face of a business 
environment that is shaped by factors whose very foreseeability is impossible by definition . (Original Panel 
Report, para. 7.1933)  
1626 As the original panel found, LA/MSF subsidies accounted for 9 0% to 100% of the development costs 
for the A300 and A310, up to 90% for the A320, and between 60% and 90% for the A330 and A340. (Original 
Panel Report, paras.  7.1934 -7.1939)  
1627 Original Panel Report, para. 7.1936. (fn omitted)  
1628 Original Panel Report, para. 7.1938.  
1629 Original Panel Report, paras.  7.1940 -7.1941.  
1630 Original Panel Report, para. 7.1940.  
1631 Original Panel Report, para. 7.1941. (emphasis added)  WT/DS316/AB/RW  
 
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  A380 business case , and  found  that, "the A380 business case suggest {ed}, but by no mean s 
demonstrat {ed}, that as a stand -alone proposition the project might have been economically 
viable even without LA/MSF" .1632 However, noting the "technical capabilities" derived from its 
development of earlier aircraft models, and the fact that  "Airbus would  not have been in a position 
to obtain market financing for the A380, had it not financed the development of its earlier model 
LCA in significant part through LA/MSF", the original panel concluded that "either directly  or 
indirectly , LA/MSF was a necessary  precondition for Airbus ' launch in 2000 of  the A380. "1633 
Thus, with regard to the "product  effects " of the above -mentioned LA/MSF subsidies, the original 
panel concluded that "Airbus' ability to launch, develop, and introduce to the market, each of its 
LCA models was dependent on subsidized LA/MSF".1634  
5.591.   The original panel  went on  to discuss four scenario s "for the LCA industry in the 
counterfactual world that would  {have}  exist{ed} in the absence of subsidies to Airbus".1635 
Scenarios  1 and 2, which the original panel considered "plausible", contemplated that a 
non-subsidized Airbus would have had no market p resence in the 2001 -2006 period.1636 
Scenarios  3 and 4 were regarded as "unlikely", which envisaged that a non -subsidized Airbus 
would have been  competing in the 2001 -2006 period, against either Boeing or Boeing and another 
US producer. To the original panel,  under either of the "unlikely " scenarios, Airbus would have 
been a "much weaker" company "with at best a more limited offering of LCA models".1637 
In conclusion, the original panel found that, in the absence of the LA/MSF subsidies, Airbus would 
"not have be en able to launch and develop the LCA models it ha {d} actually succeeded in bringing 
to the market ", and that " Airbus' market presence during the period 2001 -2006, as reflected in its 
share of the EC and certain third country markets and the sales it won a t Boeing's expense, {was}  
clearly an effect of the subsidies " at issue in the original proceedings .1638 
5.592.   The original panel's above analysis regarding the relevant causal pathway  of the LA/MSF 
subsidies remained undisturbed on appeal. On appeal , the Appellate  Body examined , in particular,  
the European  Union's claim that the original panel acted inconsistently with Article  11 of the DSU 
in its causation finding with respect to LA/MSF for the A380.1639 The Appellate  Body dismissed the 
claim, finding that the origina l panel had acted within the bounds of its discretion as initial trier of 
facts.1640 Moreover, the Appellate  Body found that, even in the counterfactual scenario posited by 
the European  Union, in which Airbus would have been able to launch an A320-type LCA in  1987 
and a n A330-type LCA in 1991, "the {original panel's} conclusion that Airbus would not have been 
able to launch the A380 in 2000 … but for LA/MSF provided in relation to earlier models of LCA  
would hold".1641 The Appellate  Body also affirmed its agreeme nt with the original panel's view that 
"Airbus' technical capabilities were derived in large part from its experience in the development of 
earlier models of LCA".1642 Thus, the Appellate  Body upheld the original panel's finding that "either 
directly or indir ectly, LA/MSF was a necessary precondition for the launch of the A380 in 2000 ."1643 
5.593.   In light of the above findings from the original proceedings, the Panel observed that, due 
to the similar design, structure, and operation of the LA/MSF subsidies in the origi nal 
                                                
1632 Original Panel Report, para. 7.1948.  
1633 Original Panel Report, para. 7.1948. (emphasis added)  
1634 Original Panel Report, para. 7.1949.  
1635 Original Panel Report, para. 7.1984.  
1636 Original Panel Report, para. 7.1984. The original panel noted that, under these "plausible" 
counterfactual scenarios, the LCA industry would have been characterized by the existence of either a Boeing 
monopoly, or a duopoly involving Boeing and another US LCA producer (possibly, McDonnell Douglas). (Ibid.)  
1637 Original Panel Report, para. 7.1993.  
1638 Original Panel Report, para. 7.1993. See also para. 7.2025.  
1639 Appellate  Body Re port, EC and certain member States – Large Civil Aircraft , paras. 1312-1356. 
Specifically, the European  Union argued that the original panel erred: (i) in its assessment of the A380 
business case; (ii)  in its evaluation of Airbus' ability to fund the A380 without LA/MSF; and (iii) in its analysis of 
Airbus' technological capabilities without  LA/MSF . (Ibid., para. 1312)  
1640 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1356. Further 
details of the Appellate  Body's findings in the original proceedings on the A380 are discussed in 
section  5.6.3.5.1 below.  
1641 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1352.  
1642 Appellate  Body Report, EC and certain  member States – Large Civil Aircraft , para. 1355.  
1643 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1356 (quoting 
Original Panel Report, para. 7.1948).  WT/DS316/AB/RW  
 
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  proceedings1644, the original panel conducted an aggregated analysis of the effects of th ose 
subsidies  on the basis of two types of "product effects" attributable to the such subsidies: "direct  
effects " and "indirect effects ".1645 Referring to the original p anel's findings, the Panel defined 
"direct effects" as "the effects of any given LA/MSF loan on Airbus' ability to launch and bring to 
market the particular model  of Airbus LCA specifically funded by that LA/MSF loan".1646 The Panel 
defined "indirect effects"  as "the 'learning', scope and financial effects that any given LA/MSF loan 
provided for the specific purpose of one model of LCA may have on the ability of Airbus to launch 
and bring to market another model  of LCA."1647  
5.594.   As for the different types of "indire ct effects", the Panel explained that, according to 
findings of th e original panel: (i)  learning  effects "result from the extent to which LA/MSF enables 
Airbus to launch and bring to market one particular model of LCA, and thereby develop the 
knowledge, kn ow-how and experience to support the launch and development of other models of 
Airbus LCA"1648; (ii) economies of scope arise "when, for example, basic aircraft design and 
components are shared across different models of LCA, making i t possible to share input s 
(and therefore spread costs) between the production processes of different aircraft"1649; 
and (iii) financial effects "result from not only the impact of the 'learning' and scope effects on the 
cost of financing new models of LCA, but also the revenues gene rated from sales and deliveries of 
LCA that would not exist in the absence of LA/MSF, as well as the below -market interest rates 
charged on the repayment of LA/MSF".1650  
5.595.   Our review of the original panel's findings supports the notion that the "product effect s" of 
the LA/MSF subsidies have at least two dimensions: one concerns Airbus' ability to launch the LCA 
model  that an LA/MSF subsidy directly finances, and the other relates to Airbus' ability to launch 
other LCA  models . As the Panel correctly noted, the o riginal panel's causation findings "were 
inextricably linked to the 'learning', scope and financial effects of the LA/MSF subsidies across 
Airbus' different models of LCA ".1651 At the same time, we caution  that this nomenclature serves 
only as an analytical tool and  does not change the substance of the finding s from the original 
proceedings . In particular, we do not see it as creating a rigid dichotomy between  the two kinds of 
"product effects " of LA/MSF fo und in the original proceeding s. As noted, the original panel found 
that "either directly or indirectly, LA/MSF was a necessary precondition" for the launch of certain 
Airbus LCA  models  such as the A380.1652 For purposes of the original panel's conclusion reg arding 
the "product effects ", it was not necessary for the original panel to have mad e a separate finding 
with regard to each of these two dimensions.  
5.6.3.5   Whether the Panel erred in its findings on the "product effects" of the LA/MSF 
subsidies existing in the  post-implementation period  
5.596.   Keeping in mind the above considerations regarding the relevance of the findings from the 
original proceedings  for these compliance proceedings , we turn to review the Panel's findings 
regarding the effects of the subsidies exist ing in the post -implementation period  
(after  1 December  2011), and the European Union's appeal of such findings. We note that, while 
contending that the pre -A380 LA/MSF subsidies "ceased to exist" before the implementation period 
and were therefore not wit hin the scope of its compliance obligation1653, the European  Union does 
not dispute that the A380 LA/MSF subsidies continued to exist during the post -implementation 
period. Indeed, as the Panel found, one of the 36 "steps" identified in the European Union's 
                                                
1644 Panel Report, para. 6.1448.  
1645 Panel Report, para. 6.1446 (referring to Original Panel Report, paras.  7.1935 -7.1948; 
Appellate  Body Report, EC and certain member States – Large Civil Aircraft , paras.  1269, 1281, 1352, 1355, 
and 1356) and para. 6.1492.  
1646 Panel Report, para. 6.1492. (emphasis added)  
1647 Panel Report, para. 6.1492. (emphasis added; fn  omitted)  
1648 Panel Report, para. 6.1510.  
1649 Panel Report, para. 6.1510. (fn  omitted)  
1650 Panel Report, para. 6.1511.  The Panel noted that the original panel did not specifically refer to 
"direct effects" and "indirect effects" in its findings. Nonetheless, the Panel cons idered that "the 'direct' and 
'indirect' effects nomenclature provides a useful way of understanding the {original} panel's evaluation of the 
effects of the LA/MSF subsidies."  (Ibid., fn  2470 to para. 6.1446 ) 
1651 Panel Report, para. 6.1509. (emphasis added)  
1652 Original Panel Report, para. 7.1948.  
1653 Panel Report, para. 6.794. See also paras. 6.869 and 6.1069.  WT/DS316/AB/RW  
 
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  Compliance Communication is the "bringing 'to an end'" of all of the subsidies found to have 
cause d adverse effects in the original proceedings, "with the exception of the French, German, 
Spanish and UK A380 LA/MSF" subsidies.1654  
5.597.   The Panel further found that , subsequent to the original reference period (2001 -2006), the 
European  Union granted new LA/MSF subsidies to Airbus for developing its A350XWB family of 
LCA, and that these subsidies were "closely connected" with the adopted DSB recommendations 
and ruling s from the original proceedings and the European  Union's alleged compliance 
"actions".1655 The Panel found, in particular, that the A350XWB LA/MSF subsidies are similar in 
nature  to the pre -A350XWB LA/MSF subsidies, and that "the effects  of A350XWB LA/MSF could 
undermine the European  Union's compliance."1656 Moreover, in evaluating whether the A350XWB 
LA/MSF constitutes a subsidy under Article 1.1 of the SCM Agreement, the Panel found that, 
"{o}verall, … the LA/MSF contracts for the A350XWB resemble the contracts  at issue in the 
original proceeding, based on the type of terms, including the similarity of disbursement 
mechanisms, the levy -based repayments of the principal along an anticipated schedule of 
deliveries and the imposition of royalties, the fact that no security is provided for the debt amount, 
and the existence of conditional guarantees that are limited only to the performance of 
obligations."1657 Thus, despite "some pertinent differences", the Panel found that "the A350XWB 
LA/MSF contracts share the same c ore features as the LA/MSF measures considered in the original 
proceeding".1658 We note that neither participant  has disputed these factual findings by the Panel.  
5.598.   The Panel considered that the same approach used to assess the "product effects" of the 
LA/MSF subsidies – i.e. through the lenses of their "direct  effects " and "indirect effects " – may be 
equally applicable for its aggregated analysis of the effects of the LA/MSF subsidies in these 
compliance proceedings.1659 As noted above in paragraph 5.413 , the Pan el's aggregat ed analysis 
covered all of the challenged LA/MSF subsidies, that is, including  the expired subsidies. Pursuant 
to our interpretation of Article 7.8 of the SCM Agreement, we disagree with the Panel to the extent 
that it considered the effects o f the expired LA/MSF subsidies to be a part of its aggregated 
assessment. Instead, our review in this section focuses on the Panel's findings relating to a subset 
of those subsidies, namely, the subsidies existing  in the post -implementation period.  We reca ll in 
this regard that a panel may group together subsidy measures that are sufficiently similar in their 
design, structure, and operation in order to ascertain their aggregated effects in an "integrated 
causation analysis" , so as  to determine "whether  there is a genuine and substantial causal 
relationship between these multiple subsidies, taken together, and the relevant market 
phenomena identified in Article  6.3 of the SCM Agreement ."1660 As we understand it, the 
European  Union  does not contest  that the LA/M SF subsidies for the A380 and the A350XWB  are 
similar in their design, structure, and operation .1661 For this reason, we consider it appropriate to 
assess  the aggregated effects of the A380 and A350XWB LA/MSF subsidies  – i.e. the LA/MSF 
                                                
1654 Panel Report, para. 6.14. 
1655 Panel Report, para. 6.150.  
1656 Panel Report, para. 6.149. (emphasis  original)  
1657 Panel Report, para. 6.286.  
1658 Panel Report, para. 6.286.  
1659 Panel Report, para.  6.1451.  
1660 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1285.  
1661 Panel Report, para. 6.152. See also para. 6.1651.  WT/DS316/AB/RW  
 
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  subsidies that the European  Union  continued to "grant or maintain" in the post -implementation 
period  – in an integrated causation analysis.1662  
5.599.   As further discussed below, the European Union alleges specific errors regarding the 
Panel's findings on the "direct" and "indirect" effects of individual LA/MSF subsidies. With respect 
to the A380, the European Union challenges the Panel's assessment of the " direct  effects" of the 
A380 LA/MSF subsidies on Airbus' ability to bring to market the A380. Similarly, the 
European  Union takes issue with the Panel's assessment of the effects of A350XWB LA/MSF 
subsidies ("direct effects") and A380 LA/MSF subsidies ("indirect effects") on Airbus' ability to 
launch the A350XWB as and when it did. While we address these s pecific aspects of the 
Europ ean Union's appeal below, we note that, under the aggregated approach towards the 
assessment of all LA/MSF followed by the Panel, it was  neither required to find that each subsidy 
is, individually , a genuine and substantial cause of the relevant phenomenon , nor to assess the 
relative contribution of each subsidy , considered in isolation,  within the group to the resulting 
effects.1663 Against this background, we turn to the European Union's specific allegations of error 
with a view to ascertaining whether the P anel's analysis regarding the "product effects" of the 
subsidies existing in the post -implementation period support a finding of a genuine and substantial 
causal relationship between these subsidies, taken together, and the market phenomena identified 
in the post -implementation period.  
5.6.3.5.1   "Product effects" of A380 LA/MSF subsidies on the A380  
5.600.   The European  Union claims that, "{t}o the extent" that the Panel found that A380 LA/MSF 
subsidies resulted in "direct effects", the Panel acted inconsistently with Artic le 11 of the DSU 
because any such finding lacks a "sufficient evidentiary basis".1664 According to the 
European  Union , given the Panel's observation that A380 LA/MSF  subsidies  were "not critical to 
{the} very existence" of the A3801665, there is no basis for its finding that A380  LA/MSF  subsidies  
were a "necessary" cause of the market presence of the aircraft, let alone a "genuine and 
substantial" cause.1666 The European  Union also highlights that the "the Panel did not find that, 
absent A380 LA/MSF, Airbus would ha ve delayed the launch of the A380, or that the A380 would 
have been any different in technology."1667 Alleging that "the Panel's findings are limited to its 
affirmation that A380 LA/MSF was 'not critical to {the} very existence' of the A380"1668, 
the European  Union asserts that there "is simply no finding to s upport the conclusion that 
A380 LA/MSF resulted in 'direct effects' on 'Airbus' ability to launch and bring to market' 
the A380."1669 The United  States responds that neither the original panel, nor the Panel, m ade a 
finding that the A380 LA/MSF subsidies were not critical to the existence of the A380.1670 Instead, 
according to the United  States, the findings from the original proceedings establish that the A380 
                                                
1662 As noted in paragraphs 5.389 -5.390 and footnote 978 above, t he European Union submitted 
two approaches for estimating the " ex ante " lives of the LA/MSF subsidies – the "Loan Life" approach and the 
"Marketing Life" approach. The Panel expressed doubt as to whether the Loan Life approach would be the most 
appropriate methodology for d etermining the ex ante  "lives", and noted that "it would be at least equally 
appropriate" to utilize the Marketing Life approach. (Ibid., para.  6.878) The Panel, however, did not find it 
necessary to express a definitive view on which of the two approaches  should be accepted. (Ibid., para.  6.879) 
Ultimately, the Panel found that the LA/MSF subsidies for the A330 -200 and the A340 -500/600 expired, 
respectively, in [BCI] – that is, after the end of the implementation period – on the basis of the Loan Life 
approach for assessing the ex ante  "lives" of subsidies. (Panel Report, fn 1547 to para.  6.879). We note that, 
under the Marketing Life approach, the LA/MSF subsidy for the A330 -200 would have expired by [BCI] – that 
is, before the end of the implementation pe riod – and the LA/MSF subsidy for the A340 -500/600 would have 
expired by [BCI]. (Ibid., Table 11: PwC ex ante  "lives" analysis for LA/MSF) As further discussed in footnote 
2030 and paragraph 5.719 below, we do  not find specific findings and supporting anal ysis from the original 
proceedings or in the Panel Report regarding how the "product effects" of these two subsidies contributed to 
the alleged serious prejudice in the post -implementation period.  
1663 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1285.  
1664 European  Union's appellant's submission, para. 884. 
1665 European  Union's appellant's submission, para. 880 (quoting Panel Report, para. 6.1507 and 
referring to fn  2597 thereto).  
1666 European  Union's appellant's submission, para. 881. 
1667 European  Union's appellant's submission, para. 883. (emphasis original)  
1668 European  Union's appellant's submission, para. 883 (quoting Panel Report, para. 6.1507 and 
referring to fn  2597 thereto).  
1669 European  Union's appellant's submission, para. 883 (quoting Panel Report, para. 6.1492).  
1670 United  States' appellee's submission, para. 479. WT/DS316/AB/RW  
 
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  LA/MSF subsidies resulted in "direct effects"1671 and these findings cannot be challenged as part of 
the present compliance proceedings.  
5.601.   As we see it, the crux of the European Union's appeal is its contention that neither the 
original panel, nor the Panel, found that the A380 LA/MSF subsidies had any effect on the Airbus' 
ability to launch and bring to market the A380 as and when it did.1672 Before the Panel, the 
European  Union made a similar argument with respect to the original proceedings, claiming that 
the original panel's causation findings concerning the A380 were based " not on the impact of 
A380 MSF on the launch decision, but solely  on the impact of all previous MSF".1673 We therefore 
understand that, in  challenging the Panel's alleged finding on the "direct effects" of A380 LA/MSF, 
the European  Union is taking issue with the manner in which the Panel understood the causal 
pathway through which A380 LA/MSF, taken alone, affected Airbus' ability to launch, bring to 
market, and continue developing the A380 as and when it did.  
5.602.   In paragraph 6.1507 of its Re port, the Panel stated that , "where LA/MSF provided for the 
specific purpose of launching and bringing an aircraft to market is not critical to its very existence, 
then the direct effects  of the relevant LA/MSF funding could not normally be said to last fo r the 
entire marketing life of the relevant programme."1674 In a footnote to this statement, the Panel 
recalled that:  
the panel in the original proceeding found that it was likely that "the A330 -200 could 
have been launched even in the absence of the specific  LA/MSF granted in respect of 
that programme" because it was a derivative of the A330 and, therefore, required a 
comparatively small amount of funding to develop. The original panel also found that 
the A380 business case suggested, "but by no means  demonst rates", that as a 
stand -alone proposition, the A380 might have been economically viable even without 
the A380 LA/ MSF. Ultimately, however, in respect of both models of LCA, the panel 
found that they could not have been launched and brought to market in the  absence 
of the indirect effects  of other LA/MSF subsidies.1675  
The European  Union  argues that the Panel's statements in paragraph 6.1507 and the footnote 
thereto of its Report amount to a " finding " that A380 LA/MSF was "not critical to {the} very 
existence"  of the A380  and that, therefore, the LA/MSF for the A380 had no "direct effects ".1676 
Moreover, the European  Union asserts that neith er the original panel, nor the Panel , found that 
A380 LA/MSF had the effect of advancing the launch of the A380.1677  
5.603.   We have so me difficulty in accepting the European  Union's reading of the Panel Report. 
In discussing the dissipation of "direct effects" of an LA/MSF  subsidy , the Panel made it clear that 
an LA/MSF subsidy that was not critical to the very existence of an aircraft  could nonetheless have 
"direct  effects ", although they may not last the entire marketing life of the aircraft.1678 The Panel  
also recalled  the original panel's finding that "the A380 business case suggest ed, 'but by no means 
demonstrates', that as a stand -alone proposition, the A380 might have been economically viable 
even without the A380 LA/MSF ."1679 This finding  by the original panel does not, however, suggest 
that A380 LA/MSF had no effects  on Airbus' ability to launch the A380 as and when it did .  
                                                
1671 United States' appellee's submission, para. 477 (referring to Panel Report, para. 6.1528).  
1672 European  Union's response to questioning at the oral hearing.  
1673 European Union's first written submission to the Panel, para. 981. (emphases original)  
1674 Panel Report, para. 6.1507. (emphasis original; fn  omitted)  
1675 Panel Report, fn  2597 to para. 6.1507 (quoting and referring to Original Panel R eport , paras.  7.1940 
and 7.19 48). (emphasis original)  
1676 European  Union's appellant's submission, para. 880 (quoting Panel Report, para. 6.1507 and 
referring to fn  2597 thereto).  
1677 European  Union's appellant's submission, para. 883. See also European Union's first written 
submission to  the Panel, para. 981.  
1678 Panel Report, para. 6.1507.  
1679 Panel Report, fn  2597 to para. 6.1507 (quoting and referring to Original Panel R eport , paras.  7.1940 
and 7.1948).  In fact, although the original panel acknowledged  that th e A380 business case predicted  a 
positive NPV in the absence of LA/MSF,  it was "not persuaded that the A380 business case alone demonstrates 
that Airbus would have launched the A380 even in the absence of LA/MSF".  (Original Panel R eport, 
para. 7.1944 ) WT/DS316/AB/RW  
 
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  5.604.   In this context, we recall that the original panel , having examined the evidence on the 
record,  agreed with the United  States that,  even if Airbus had been confident that the A380 
programme  would have been viable without LA/MSF, it would not have been able to fund the 
programme  relying exclusively on its own resources and "outside financing ".1680 The original panel 
rejected the European  Communities' argument that the creation of EADS increased Airbus' 
financial flexibility. For the original panel, it was not cl ear how or to what degree the corporate 
restructuring of Airbus Industrie GIE, Aérospatiale, CASA, and Deutsche Airbus affected the ability 
of Airbus France (or Airbus  SAS) to raise the very large amounts of capital needed for the A380 
programme .1681 Finally,  the original panel also observed that the European  Communities had 
"submitted no evidence to support the contention that merely because, reportedly, Boeing was 
able to finance a significant portion of the non-recurring costs of development of the 787 thro ugh 
risk-sharing supplier arrangements, Airbus would necessarily have been able to do the same with 
respect to the A380."1682 The Appellate  Body upheld the  original  panel's  overall  conclusion that 
"either directly or indirectly, LA/MSF was a necessary precondition for Airb us' launch in 2000 of the 
A380"1683, noting that it  was based on multiple considerations, including the A380 business case, 
evidence o f Airbus' ability to fund the A380 in the absence of LA/MSF, and the financial and 
technological impact of LA/M SF provided in relation to previous models of Airbus LCA.  
5.605.   We agree with the United  States that these findings from the original proceedings reveal 
that, without A380 LA/MSF, Airbus would have been unable to fund the timely launch of the A380 
programme relying exclusively on its own financial resources and outside  financing.1684 This in turn 
suggests that A380 LA/MSF had "direct effects" on Airbus' ability to launch the A380 . We recall 
that, in these compliance proceedings, the United  States bears the burden of establishing that the 
subsidies granted or maintained by the European Union in the post -implementation period 
continue to cause adverse effects. Before the Panel, the Unit ed States argued that 
"{s}erial  infusions of LA/MSF have enabled Airbus to cover the full spectrum of LCA demand and 
to replace uncompetitive models with state -of-the-art aircraft".1685 As further discussed below1686, 
the findings by the original panel and the Appellate  Body, together with the Panel's findings 
regarding the A350XWB, indicate to us that , following the original reference period,  the LA/ MSF 
subsidies for the A380 allowed Airbus to build on the platform provided by the technical experience 
and financial resources derived from the grant of LA/MSF subsidies for previous LCA models.  
5.606.   We note that, pursuant to the Panel's finding regarding the allocation of benefit and expiry 
of the LA/MSF subsidies, the benefit conferred by the French, German, Spanish, and UK LA/MSF 
subsidies for the A380 had not expired by the end of the implementation period, that is, 
                                                
1680 Original Panel R eport, paras. 7.1945-7.1947 . The original panel's analysis of "outside financing" 
available to Airbus included an assessment of the extent to which Airbus could increase its use of risk -sharing 
supplier arrangements to fund the launch of the A380. (Ibid., paras. 7.1945 -7.1947)  
1681 Original Panel R eport, para. 7.1947.  
1682 Original Panel R eport , para. 7.1947. The original p anel acknowledged that Airbus used risk -sharing 
supplier arrangements, but did not see any indication that it could have increased its use of such arrangement s 
so as to replace the entire amount of financing provided by LA/MSF, which was up to 33% of the development 
costs of the A380. Furthermore, the original panel  did not consider the availability of risk -sharing supplier 
arrangements in respect of the A340 -500/600 to be persuasive in this regard, because those were derivative 
aircraft that entailed much smaller development costs and a much lower level of risk to Airbus' overall 
operations. In the original panel's view, the  willingness of suppliers to take on some of the risk of that much 
smaller programme did not demonstrate that any supplier or suppliers would be prepared to do so in respect of 
up to 33% of the m uch greater costs of the A380. Finally, the original panel  noted that the information in the 
Airbu s A380 business case suggested that the RSPs'  involvement in the A380 programme  may not have been 
on strictly market terms for all participants.  (Ibid.)  
1683 Original Panel Report, para. 7.1948; Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft , para. 1356.  
1684 United  States' appellee's submission, para. 479 (referring to Appellate  Body Report, EC and certain 
member States – Large Civil Aircraft , para. 1256).  
1685 United  States' first written submission to the Panel, para.  354. 
1686 See paras. 5.643 -5.647 below.  WT/DS316/AB/RW  
 
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  1 December 2011.1687 Indeed, the Panel obser ved that one of the 36 "steps" identified in the 
European  Union's Compliance Communication is the "bringing 'to an end'" of all of the subsidies 
found to cause adverse effects in the original proceeding s "with the exception of  the French, 
German, Spanish a nd UK A380 LA/MSF measures".1688 Thus, the European Union acknowledges  
that the A380 LA/MSF  subsidies had not  "expired " by the end of the implementation period . 
5.607.   We further recall that findings from  the original proceedings  establish that the A380 was 
launched  in 2000, and the  amount of the financial contribution  under the French, German, 
Spanish, and UK LA/MSF contracts  was found to be, in millions,  [BCI], respectively .1689 Both the 
original panel and the Appellate  Body found that the A380 LA/MSF  subsidies conferred a benefit on 
Airbus within the meaning of Article  1.1 of the SCM Agreement.1690 The findings from the original 
proceedings also establish that, unlike the pre-A380 LA/MSF  subsidies, which were disbursed 
decades ago, the disbursements of the A380 LA/ MSF subsidies continued well beyond the original 
reference period. The original panel noted that disbursements under the French A380 LA/MSF 
contract would be provided to Airbus [BCI]1691, and that the German and Spanish A380 LA/MSF 
contracts both provided for  [BCI].1692 As the original panel found, in all three cases, the 
outstanding instalments represent ed a part of the total (and maximum) amount of funding that it 
was agreed and planned would be transferred to Airbus for the A380 pro gramme . Thus, the 
original p anel considered it "clear" that "Airbus maintain {ed} a contractual right to receive {the 
specified funding amounts} at a predetermined moment in the future so long as it continue {d} to 
develop the A380 ."1693  
5.608.   We also consider important the Panel's finding tha t the A380 programme suffered 
"extensive" production delays in 2005 and 2006 .1694 The Panel found that these delays resulted in 
increased development costs for the A380.1695 They also led to the  cancellation of orders for 
the A380 and gave rise to significant contractual penalty payments to A380 customers.1696 
                                                
1687 See Panel Report, para.  6.872, Table 11: PwC ex ante  "lives" analysis for LA/MSF. We also note the 
Panel's statement that, "{a}ccording to the European  Union, the conclusions reached by PwC demonstrate that 
the benefit conf erred through  all of the challenged subsidies with the exception of  the French and Spanish 
A340-500/600 LA/MSF measures, the French, German, Spanish, and UK A380 LA/MSF measures, and a 
number of the Spanish Government regional development grants, was fully  amortized prior to the end of the 
implementation period ." (Ibid., para. 6.16 (referring to European  Union's first written submission to the Panel, 
paras.  205-223) (emphasis original))  
1688 Panel Report, para. 6.14. (emphasis added)  
1689 Original Panel Report, para. 7.380, Table 1: Approximate amount of funding provided for under the 
challenged LA/MSF measures.  
1690 Original Panel Report, para. 7.490.  The original panel found that the differences between the 
interest rates under the French, German, Spanish, and UK A380 LA/MSF subsidies and the relevant market 
benchmark ranged from a number that is HSBI to [BCI], respectively. (Original Panel Report, para. 7.488, 
Table 7: LA/MSF Rates of Return Compared with Market Rates of Return ) The Appellate  Body, having found 
several errors in the original panel's analysis and noted that those differences should be lower, nonetheless 
upheld the original panel's final conclusion that those subsidies conferred a benefit. ( See Appellate  Body 
Report, EC and certain member States – Large Civil Aircraft , paras.  923-929) 
1691 Original Panel Report, para. 7.378 (referring to French A380 LA/MSF contract (Original Panel 
Exhibit  US-116 (BCI)), Annexe 3).  
1692 Original Panel Report, para. 7.378 (referring to German A380  LA/MSF  contract  (Original Panel 
Exhibit  US-72 (BCI)  (English translation)) , clause 4.2; BT -Drs. 14/10002 (Original Panel Exhibit US -124 
(English translation )), p. 3; Spanish A3 80 LA/MSF contract (Original Panel Exhibit US-73 (BCI) ), 3rd clause) . 
The original panel found that all of  the funds committed under the UK A380 LA/MSF contract had "already been 
provided to Airbus ". (Original Panel Report, para. 7.377)  
1693 Original Panel Report, para. 7.378. (emphasis added)  
1694 Airbus first announced a six -month delay in the A380 delivery schedu le in 2005. In June 2006 – the 
month before Airbus unveiled the A350XWB at the Farnborough Air Show – Airbus announced a second delay 
in the A380 delivery schedule of a further six months, which was reportedly expected to cost Airbus hundreds 
of millions o f euros. Then, three months after unveiling the A350XWB, in October 2006, Airbus announced a 
third delay in the A380 programme of an additional year. (Panel Report, para. 6.1551) The first A380 was 
delivered on 12 October 2007. (Ascend database, Deliveries  made, data request as of 7 Ap ril 2014 (Panel 
Exhibit EU -512))  
1695 Panel Report, para. 6.1551 (referring to Mario Heinen, Airbus Senior Vice President A380, 
EADS/Airbus presentation "The A380 Program", presented at the Global Investor Forum, 19 -20 October 20 06 
(Panel Exhibit EU -419), slide  18). 
1696 Panel Report, para. 6.1551 (referring to EADS Press Release, "A350 XWB launch: EADS Gives Go 
Ahead for Airbus to Launch the A350 XWB", 1 December 2006 (Panel Exhibit USA -569)). WT/DS316/AB/RW  
 
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  Moreover, because LCA customers generally pay a substantial portion of the sale price upon 
delivery1697, the Panel considered that the delays meant that Airbus would realize certain revenues 
from the A380 later  than expected for the A380s that were ultimately delivered.1698 The Panel 
noted that EADS documents indicated that earnings before interest and taxes (EBIT) at Airbus 
"was also negatively affected by €2.5 billion in 2006"1699, in part due to the A380 difficulti es, and a 
2007 UK Government report indicated that "{p}artly as a result of cost overruns and late delivery 
payments to its customers, Airbus reported a loss of £389 million for 2006."1700 Characterizing 
these A380 problems as "severe", the Panel observed tha t they "precipitated a management crisis " 
that saw the de parture  of two CEOs in less than four months.1701 In our view, these findings by the 
Panel reflect the gravity and severity of the financial implications for Airbus of the extensive 
production delays su ffered by the A380 in 2005 and 2006. During that time , Airbus c ontinued to 
receive disbursements as part of the French, Spanish, and German A380 LA/MSF contracts.1702  
5.609.   In sum, the original panel's findings indicate that, although the A380 may have been 
"econo mically viable" in the absence of A380 LA/MSF, it does not follow from this that A380 
LA/MSF had no "direct effects". Instead, the findings from the original proceedings indicate that 
Airbus could not have launched the A380 as and when it did by relying ex clusively on its own 
financial resources and outside financing. In this sense, A380 LA/MSF had a genuine  impact on 
Airbus' ability to fund the timely launch of the A380. The original panel's findings, together with 
the Panel's analysis, indicate that these  "direct effects" of A380 LA/MSF continued after the original 
reference period, given that the A380 LA/MSF subsidies had not expired, as well as the fact that 
Airbus continued to receive significant sums of money as disbursements under the French, 
German, and Spanish A380 LA/MSF contracts at a time when it was experiencing severe financial 
difficulties resulting from the extensive production delays in the A380 programme. We therefore 
disagree with the European  Union's claim under Article 11 of the DSU 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 lacks a sufficient evidentiary basis.  
5.6.3.5.2   "Product effects" of LA/MSF subsidies on the A350XWB  
5.610.   Having found that "the A350XWB could not have been launched and brought to market in 
the absence of LA/MSF"1703, the Panel reached the conclusion that "the direct  and indirect  effects 
of the aggregated LA/MSF subsidies, with the exception of the LA/MSF subsidi es provided for the 
A300 and A310, are a 'genuine and substantial' cause of the current market presence of the 
A350XWB family of Airbus LCA".1704 The European  Union  challenges the Panel's findings and 
analys is of the "product  effects " of LA/MSF subsidies on the A350XWB  on two grounds. First, 
the European  Union  alleges that the Panel failed to make an objective assessment of the matter, 
as required by Article  11 of the DSU, to the extent  that it found that the A350XWB LA/MSF 
subsidies resulted in "direct effect s" on the launch  of th e A350XWB .1705 Second, the 
European  Union claims that the Panel erred in its application of Articles  5(c) and 7.8 of the 
                                                
1697 Panel Report, para. 6.1551 (referring  to Original Panel Report, para. 7.1719).  
1698 Panel Report, para. 6.1551 (referring to  A380 Business Case (Panel Exhibit EU -20 (HSBI)), p. 19, 
section 6.4; Original Panel Report, para. 7.1719).  
1699 Panel Report, para. 6.1551 (quoting "Risk Factors", EADS Finan cial Statements and Corporate 
Governance , Book 2, 2006, pp. 8 -13 (Panel Exhibit USA -496), p. 12). The Panel further noted that an Airbus 
press release from February 2007 indicates that Airbus reported a negative EBIT for 2006 and, "following the 
A380 delay s, faces significant cash needs and deteriorating profits in the future" (Ibid., fn  2680 to 
para. 6.1551 (quoting Airbus Press Release, "Power8 prepares way for 'new Airbus'", 20  February  2007 (Panel 
Exhibit USA -94))) 
1700 Panel Report, para. 6.1551 (quoting UK House of Commons Trade and Industry Committee, "Recent 
Developments with Airbus", Ninth Report of Session 2006 -2007, Volume I: Report and formal minutes, 
19 June 2007 (Panel Exhibit USA -25), p. 8 ). 
1701 Panel Report, para. 6.1551 (quoting Aude Lagorce, "Ai rbus refuses to rule out state loans on the 
A350XWB", MarketWatch , 4 December  2006 (Panel Exhibit USA -359)).  
1702 See Original Panel Report, para. 7.378. See also para. 5.607 above.  
1703 Panel Report, para. 6.1778.  
1704 Panel Report, para. 7.1.d.xiii. (emphasis ori ginal)  
1705 European  Union's appellant's submission, para. 896 (referring to Panel Report, para. 7.1.d.xiii).  WT/DS316/AB/RW  
 
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  SCM Agreement in finding that the A380 LA/MSF subsidies had "indirect effects" on Airbus' ability 
to launch the A350XWB.1706  
5.611.   With respect to the finding of " direct effects " of A350XWB LA/MSF allegedly made by the 
Panel, the European  Union  recalls the Panel's statement that, "in the absence of A350XWB  
LA/MSF …, the Airbus company that actually existed in the 2006 to 2 010 period would have been 
able to launch and bring to market the A350XWB or an A350XWB -type aircraft ."1707 The 
European  Union asserts that this statement "by definition preclud{es} a finding that A350XWB 
LA/MSF resulted in 'direct effects'".1708 To the extent t hat the Panel nonetheless made a finding of 
"direct effects" of A350XWB LA/MSF, the European  Union argues that the "only basis"1709 for it is 
the Panel's conclusion that there was a "high likelihood" that, without A350XWB LA/MSF, the 
Airbus company that actua lly existed in 2006 -2010 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".1710 The European  Union claims that, in reaching this conclusion, the Panel failed to make 
an objective assessment of the matter as required by Article  11 of the DSU.1711 As for the finding 
of "indirect effects" allegedly made by the Panel , the European  Union  asserts that, having found 
that A380 LA/MSF was "not critical" to the very existence of the A 380, and  therefore did not have 
"direct  effects" on the A380, the Panel erred in its application of Articles  5(c) and 7.8 of the 
SCM Agreement to the extent that it found that A380 LA/MSF resulted in "indirect effects" on 
the A350XWB.1712  
5.612.   As with its appeal of the Panel's analysis of the "direct effects" of A380 LA/MSF, we note 
that the European Union takes issue with the Panel's assessment of the effects  of individual 
LA/MSF subsidies – namely, the A350XWB LA/MSF ("direct effects") and the A380 LA/MSF 
("indi rect effects")  – on Airbus' ability to launch the A350XWB as and when it did. Given the 
Panel's aggregated assessment of the effects of all LA/MSF, the Panel did not make separate 
findings that A350XWB LA/MSF and A380 LA/MSF were, individually, a genuine a nd substantial 
cause of the launch of the A350XWB. Nor was the Panel required to make such findings.1713 
Instead, the Panel first examined the causal mechanism through which individual subsidies, 
including the A350XWB LA/MSF and A380 LA/MSF  subsidies , affecte d Airbus' ability to launch the 
A350XWB as and when it did, before analysing the relationship between the collective effects of all 
LA/MSF  subsidies and the launch of the A350XWB in December 2006.1714 Given that the Panel was 
not required to find that each of  the LA/MSF subsidies was, individually, a genuine and substantial 
cause of the launch of the A350XWB, we understand the European  Union , in challenging the 
Panel's findings of "direct  effects " and " indire ct effects " of the A350XWB LA/MSF and A380 
LA/MSF , respectively, to be taking issue with the manner in which the Panel understood the causal 
mechanism through which the se existing  individual  subsidies  affected Airbus'  ability to launch the 
A350XWB  as and when it did . 
5.613.   In light of these considerations, and having already recalled the main aspects of the 
Panel's analysis and findings on the "product effects" of LA/MSF subsidies on the A350XWB1715, 
we turn to consider w hether the Panel acted inconsistently with Article  11 of the DSU to the extent 
that it found th at the A350XWB  LA/MSF  subsidies resulted in "direct effects" on the launch of the 
A350XWB . We then examine whether the Panel erred in its application of Articles  5(c) and 7.8 of 
                                                
1706 European Union's appellant's submission, para. 895 (referring to Panel Report, para. 6.1507 and 
fn 2597 thereto).  
1707 European  Union's appellant's submission, paras.  888 and 897 (quoting Panel Report, para. 6.1717 
(emphasis original)).  
1708 European  Union's appellant's submission, para. 888. 
1709 European  Union's appellant's submission, para. 898. 
1710 European  Union's appellant' s submission, para. 898 (quoting Panel Report, para. 6.1717).  
1711 European  Union's appellant's submission, paras.  888 and 896.  
1712 European  Union's appellant's submission, para. 895 (quoting Panel Report, para. 6.1507 and 
referring to fn  2597 thereto).  
1713 See para. 5.599 above.  
1714 As we have explained above, pursuant to our interpretation of Article 7.8 of the SCM Agreement, we 
disagree with the Panel to the extent that it considered the effects of the expired LA/MSF subsidies to be a part 
of its aggregated asses sment.  
1715 See section 5.6.3.2.2 of this Report. The A350XWB was launched on 1 December 2006 and was 
therefore not at issue in the original proceedings. Accordingly, there are no findings from the original 
proceedings concerning the "product effects" of LA/M SF subsidies on the A350XWB.  WT/DS316/AB/RW  
 
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  the SCM  Agreement in finding that the A380 LA/MSF subsidies had "indirect effe cts" on 
the A350XWB .1716 
5.6.3.5.2.1   The Panel's assessment of the "direct effects" of the A350XWB LA/MSF  
subsidies  
5.614.   As noted above, the Panel's analysis in relation to the "direct effects" of the A350XWB 
LA/MSF was based, to a large extent, on an examination of the abili ty of the subsidized  Airbus 
company that actually existed  during the 2006 -2010 period to launch the A350XWB as and when it 
did.1717 The European  Union claims that the Panel acted inconsistently with Article  11 of the DSU in 
concluding that, without A350XWB LA /MSF, there was a "high likelihood" that the Airbus company 
that actually existed in 2006 -2010 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".1718 
The European  Union advances three related lines of arguments in support of its Article  11 claim . 
First, the European  Union argues that the Panel did not cite any evidence, or offer any reasoning, 
to support its "probabilistic" conclusion.1719 For the European  Union, the Panel's  conclusion 
therefore "lacks a sufficient evidentiary basis".1720 Second, the European  Union points out that a 
number of the Panel's intermediate findings, and several pieces of evidence, "strongly indicate that 
Airbus would not have found a compromise on tim ing or features of the A350XWB to be 
commercially viable", thereby contradicting the Panel's "speculation" that, absent LA/MSF, 
compromises would have been made on the timing or technology of the A350XWB.1721 
Finally,  the European  Union avers that the Panel d id not examine 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 viable or commercially attractive for Ai rbus, thereby "vitiat{ing}" 
the Panel's "probabilistic " conclusion.1722  
5.615.   The United  States  responds that the Panel made numerous findings and cited extensive 
evidence in support of the conclusion challenged by the European  Union .1723 For the United  States , 
the European  Union 's insistence that the Panel  paid too little attention to the evidence showing 
that timing or feature  compromises would have made the A350XW B unattractive and unviable, 
if correct, only proves that Airbus as it actually existed would not have launched the A350XWB at 
all in the absenc e of A350XWB LA/MSF.1724 
5.616.   We begin with the European  Union's assertion that the Panel did not cite any evidence, or 
offer any reasoning, in support of its conclusion that, without A3 50XWB LA/MSF, there was a 
"high likelihood" that the Airbus company that actua lly existed in 2006 -2010 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".1725 The United  States asserts that the Panel's 
analysis of the "direct effects" of A350XWB LA /MSF includes a numbe r of intermediate findings, 
not challenged on appeal, that support and "inexorably" lead to the Panel's ultimate conclusion 
challenged by the European  Union.1726 We note that, before reaching this conclusion, the Panel 
analysed, in consid erable detail, Airbus' ability to fund effectively the A350XWB programme with 
                                                
1716 We note that the Panel began its analysis by assessing the "direct effects" of A350XWB LA/MSF, 
before turning to the "indirect effects"  of pre -A350XWB LA/MSF. In its appellant's submission, the 
European  Union reverses this order of analysis, challenging first the Panel's finding of "indirect effects" and 
then turning to its "direct effects" finding. This is because, in challenging the Panel's finding of "indirect effects" 
of the A380 LA/MSF subsidies, the European  Union reli es heavily on its arguments concerning the "direct 
effects" of the same subsidies, which are contained in the last section of its claims concerning the Panel's 
analysis of the effects of pre -A350XWB LA/MSF. In our analysis, we follow the Panel's sequence o f analysis 
because it helps in understanding the analytical framework adopted by the Panel for examining the effects of 
A350XWB LA/MSF.  
1717 See para. 5.567 above.  
1718 European  Union's appellant's submission, para.  898 (quoting Panel Report, para.  6.1717).  
1719 European  Union's  appellant's submission, para. 899. 
1720 European  Union's appellant's submission, para. 888. See also paras.  912-913. 
1721 European  Union's appellant's submission, paras.  901 and 907.  
1722 European  Union's appellant's submission, para. 900. 
1723 United  States' appellee's submission, paras.  495-501. 
1724 United  States' appellee's submission, para. 505. 
1725 European  Union's appellant's submission, para. 898 (quoting Panel Report, para. 6.1717).  
1726 United  States' appellee's submission, para. 499 (referrin g to Panel Report, para. 6.1539).  WT/DS316/AB/RW  
 
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  financing on market terms.1727 The Panel recalled that the European  Union did not argue that, in 
the absence of  A350XWB LA/MSF, Airbus could have "effectively funded" the A350XWB 
programme on its own , but only that it could have done so  with the help of its parent company, 
EADS.1728 Having found that EADS would have, in principle, been willing to involve itself in the 
financing of the A350XWB1729, the Panel turned to examine the extent  of the financial resources 
available to Airbus and EADS , and considered evidence pertaining to the following specific sources 
of funding: (i)  increased use of RSPs; (ii) disposal of non -core assets; (iii)  increased profitability 
and cash generation; (iv)  a reduction in shareholder distributions; (v)  equity -related financing; 
(vi) cash reserves; and (vii)  increased debt.1730  
5.617.   Regarding the extent to which Airbus could have involved a greater number of RSPs in the 
A350XWB programme in the absence of LA/MSF, alt hough the Panel acknowledged that this was 
theoretically possible, it was not persuaded that Airbus could have, in practice , relied on RSPs to a 
level that would have come anywhere close to doubling their involvement compared to the actual 
situation, as cl aimed by the European Union.1731 In reaching its conclusion, the Panel identified 
certain risks associated with the enhanced use of RSPs.1732 As to the disposal of non -core assets 
by EADS, while the Panel accepted that this may have been an option for EADS, it c oncluded that 
the extent to which this was a credible source of funding for the A350XWB programme in the 
absence of A350XWB LA/MSF at any relevant time was "speculative".1733 Turning to increased 
profitability and cash generation, the Panel considered it far from clear that EADS was in a position 
to further cut significant costs from its budget at any relevant time, at least without inviting 
disruptions and other potential problems to its operations.1734 With respect to the potential 
reduction in shareholder dist ributions by EADS, the Panel accepted  that this may have been an 
option for EADS, but concluded that the extent to which this was a credible source of funding 
remained "speculative".1735 The Panel reached a similar conclusion as to the possibility of raising 
additional funds via equity -related financing.1736 
5.618.   Regarding EADS' cash reserves, the Panel looked at the actual and projected net cash 
positions and concluded that, moving forward from either the time of launch or the First Contract 
Date, EADS had "significa nt cash" that it could have diverted to the A350XWB programme. 
Given  the uncertainties surrounding EADS'  future cash positions at each of these dates, however, 
and given the competing pressures on EADS'  cash reserves, the Panel considered that doing so 
would have entailed "significant risks" for EADS – risks that unsecured, back -loaded , and 
                                                
1727 The Panel analysed Airbus' ability to fund the programme on market terms in the context of its 
discussion of the "viability" of the A350XWB in the absence of A350XWB LA/MSF. ( See Panel Report, 
paras.  6.1636 -6.1638)  
1728 Panel Report, para. 6.1640.  
1729 Panel Report, paras.  6.1644 -6.1645.  
1730 Panel Report, para. 6.1645. See also paras.  6.1646 -6.1700.  
1731 Panel Report, para. 6.1656.  
1732 The Panel recalled its earlier statements indicating that  Airbus appeared to  enhance  aggressivel y its 
reliance on RSPs  relative  to its previous LCA programmes  (which  entailed significant risks to the programme ), 
that Airbus appeared to employ  RSPs to the maximum extent Airbus  deemed feasible  (i.e. the amount of 
outsourcing  and supplier involvement was at saturation ), and that enhanced use of  RSPs would have been 
problematic from a general administrative standpoint . (Panel Report, para. 6.1650) For the Panel, this 
demonstrated that "materially increasing reliance on RSPs in the absence of A350XWB  LA/MSF,  even if Airbus 
had been willing to do so, would have entailed significant risks for the programme and would have been 
difficult". (Ibid. (referring to para. 6.500 et seq. of its Report)) The Panel also found that, "at least to some 
extent, it would have b een more costly and more difficult for Airbus to secure additional RSP involvement in 
the absence of A350XWB LA/MSF" (Ibid., para. 6.1651), and that " RSPs would have encountered challenges in 
accessing market financing that would have allowed them to incre ase their involvement in the A350XWB 
programme in the absence of A350XWB LA/MSF". (Ibid., para. 6.1653 (fn  omitted))  
1733 Panel Report, para. 6.1657.  
1734 Panel Report, para. 6.1659.  
1735 Panel Report, para. 6.1664. The Panel also saw  "little reason " to doubt the United  States ' evidence 
or argument that such a decision to r educe shareholder distributions  would have been, at least in part, 
interpreted as an indicator of EADS' financial fragility by the market. Thus, the extent  to which EADS would 
have felt comfortab le reducing shareholder distributions such as dividends to help fund the A350XWB 
programme  remained "unclear" to the Panel. (Ibid., para. 6.1663) The Panel also detect ed no evidence of a 
historic practice by EADS of sacrificing shareholder distributions to  help finance specific projects . (Ibid.)  
1736 Panel Report, para. 6.1668. Although the Panel accepted that this may have been an option for 
EADS, it considered that the extent to which this was a credible source of funding remained "somewhat 
speculative". (Ib id.) WT/DS316/AB/RW  
 
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  success -dependent instruments like LA/MSF tend to shift away from EADS.1737 In reaching this 
conclusion, the Panel made a number of intermediate findings. Discussing the re levance of the net 
cash position, it appeared "likely" to the Panel that, at least for the years such figures cover, EADS 
either had or was expected to have sufficient net cash levels that , "on their face" , were capable of 
covering the A350XWB -related expe nses Airbus had accrued up until such times that A350XWB 
LA/MSF had instead covered.1738 However, the Panel cautioned that the face value of these net 
cash positions did not actually represent the amount of cash that EADS could or would have 
directed to the A 350XWB programme. In this regard, the Panel considered the record to reflect 
that EADS was "hesitant to substantially deplete its cash reserves during the relevant times".1739 
Based on the evidence before it, the Panel saw "compelling reasons" as to why EADS would be 
hesitant to deplete its cash reserves to a significant degree.1740 Therefore, the Panel considered 
that not only were the net cash projections themselves subject to uncertainties, but it was also 
uncertain as to what specific cash needs EADS would ha ve in the future. The Panel also  considered 
it "reasonably clear" that at least a portion of EADS' net cash positions would h ave to be held in 
reserve to maintain a proper balance between its ability to raise debt and its maintenance of an 
acceptable credi t rating.1741 Finally, turning to EADS ' debt capacity as a potential source of 
funding, the Panel detected "little evidence" that EADS would have had no appreciable debt-raising 
capacity in the relevant time periods in the absence of A350XWB LA/MSF , and thus accepted that 
this was likely an option that could have been pursued to at least some material degree.1742  
5.619.   Our review of the Panel's assessment of each of the individual sources of funding reveals 
that, in determining the availability and extent of each indi vidual funding source, the Panel 
identified the specific limitations and risks associated with each source. We note that, on appeal, 
the European  Union does not take issue with the above aspects of the Panel's analysis. The Panel 
considered that any single  one of the potentially available funding options would have been 
insufficient, on its own, to replace either the absolute monetary value or the relative financial 
security provided through the generally back -loaded, unsecured , and success -dependent 
repaym ent terms of A350XWB LA/MSF .1743 Having addressed each of the individual source s of 
funding, the Panel found that, "on  balance", the assortment of financial resources that Airbus, via 
                                                
1737 Panel Report, para. 6.1690.  
1738 Panel Report, para. 6.1673. The Panel explained that EADS' net cash position at any point in time is 
"simply the accumulated result of its positive and negative cash flows up until that time, less financial 
liabilities" . (Ibid.) For the Panel, if EADS were to have financed the A350XWB programme in the absence of 
A350XWB LA/MSF with net cash, EADS would have had to have, at any given time, a net cash balance capable 
of covering not only the A350XWB -related expenses that h ad accrued up until that point that had been covered 
by MSF assistance but also all its other relevant cash needs. In this regard, the Panel noted that, at year -end 
2006 and 2009, EADS had net cash balances of approximately EUR  4.2 billion and EUR  9.8 bill ion, respectively, 
which exceeded the total amount of monies to which Airbus was entitled under the A350XWB LA/MSF 
measures. The net cash projections contained in the 2007 and 2009 Operating Plans likewise indicated to the 
Panel expected net cash levels th at appear "in excess of the total sum of monies received by Airbus under the 
A350XWB LA/MSF contracts for almost every year for which they contain net cash projections". (Ibid. (referring 
to CompetitionRx Report (Panel Exhibit EU -127 (BCI/HSBI)), Tables 36  and 39, and Annex G.1 (Table 2)))  
1739 Panel Report, para. 6.1674.  
1740 Panel Report, para. 6.1675. The Panel explained, e.g. that EADS may well have needed the cash to 
cover contingencies arising from not only its non -LCA businesses but also cost overruns and/ or revenue 
shortfalls associated with Airbus' LCA programmes. In this regard, the Panel recalled that unexpected A380 
delays that accumulated in the latter part of 2006 had massive expected impacts on EADS'  cash positions for 
multiple years into the future . The Panel also recalled that the A350XWB programme itself carried significant 
risks, the occurrence of which would put further strain on EADS' financial resources. (Ibid.)  
1741 Panel Report, para. 6.1676 (referring to CompetitionRx Report (Panel Exhibit EU -127 (BCI/HSBI)), 
Annex G.1, para. 14). 
1742 Panel Report, para. 6.1700. The Panel accept ed that th e presence of "undrawn funds" to  the tune of 
EUR 1.5 billion and EUR  500 million under the  Euro Medium -term Note  (EMTN ) programme at approximately 
the time of la unch and the First Contr act Date, respectively, suggested  EADS ' "ability to raise at least some 
additional debt in the relevant time -periods ". (Ibid.,  para. 6.1696)  
1743 Panel Report, para. 6.1715. The Panel considered this to be supported by the European  Union's 
statements regarding how the A350XWB programme would have been funded in the absence of A350XWB 
LA/MSF. (Ibid., fn  3068 thereto (referring to and quoting European  Union's response to  Panel question 
No. 135, para. 118 (arguing that "with the assistance of its financial advisors, EADS would put in place a mix of 
financing  … that meets the financing requirement and maximises the profits of the programme." (emphasis 
added by the Panel))))  The Panel further explained that this was especially the case because none of the 
potentially available funding options would have provided Airbus with the same significant "risk -sharing" 
features as did LA/MSF. ( Ibid., para. 6.1715)  WT/DS316/AB/RW  
 
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  EADS, had at its disposal would have been, "collectively", sufficient to replace effectively the 
monies that Airbus is entitled to under the actual A350XWB LA/MSF contracts.1744 However, the 
Panel did not share the European  Union's "optimism" regarding how easily EADS could have  
martialled th ese resources for the purpose of the A3 50XWB programme.1745 In this regard, the 
Panel stated that  each of the potentially available – and "to  some degree speculative" – funding 
option s would have "carried its own risks, costs and/or difficulties".1746 Besides referring to the 
specific risks associate d with each funding option  discussed above1747, the Panel also recalled its 
analysis of : (i) the LA/MSF negotiations; (ii) the UK Appraisal; and (iii) the European Commission 
State Aid Decisions.1748 With respect to the LA/MSF negotiations, the Panel recalled th at its 
analysis of the record evidence suggested that EADS' desire for LA/MSF measures for the 
A350XWB stemmed from the "lack of other options".1749 Turning to the UK  Appraisal1750, terming it 
as the "most credible source" of analysis in the record regarding EAD S' ability to proceed with the 
A350XWB in the absence of A350XWB LA/MSF1751, the Panel fou nd that the Appraisal 
"strongly  supports the proposition that it would have been very difficult for Airbus and EADS to 
effectively fund the A350XWB programme … in the ab sence of A350XWB LA/MSF".1752 
Finally,  recalling its analysis of the State Aid Decisions discussing the challenges for aerospace 
companies in accessing market financing for projects1753, the Panel found that the Decisions 
"indicate that the A350XWB programme and  certain of its constituent projects entailed significant 
risks, and that securing market financing to fund certain such constituent projects was infeasible 
due, at least in part, to systemic problems faced by companies in the LCA and aerospace 
industries,  in which Airbus and EADS are participants".1754 
5.620.   Furthermore, the Panel stated that it could not assess the availability of each funding 
option in a "vacuum" and considered that the implementation of o ne option would have 
"generally  limited the availability o f others".1755 In this regard, the Panel recalled several findings 
from its examination of Airbus' ability to fund the programme: (i) reducing EADS' cash reserves 
could have put EADS' credit rating at further risk1756; (ii) enhancing RSP involvement could have 
invited production disruptions or at least required additional or a diversion of management 
resources, which could, in turn, have adversely impacted Airbus' other aircraft programmes and/or 
possibly even EADS' expected cash flows1757; and (iii) cutting dividen ds may have shaken investor 
confidence in the company, making it more difficult to raise  debt or equity.1758 Moreover, the Panel 
noted that EADS' financial situation, at the time of launch  and through the  period during which the 
A350XWB LA/MSF contracts were entered into , displayed "considerable problems ".1759 The Panel  
thus concluded that "EADS would have faced significant challenges when assembling and 
implementing a combination of the funding options that were potentially available to it for a 
programme with the risk profile of the A350XWB programme".1760  
                                                
1744 Panel Report, para. 6.1715.  
1745 Panel Report, para. 6.1715.  
1746 Panel Report, para. 6.1715.  (fn omitted)  
1747 Panel Report, fn  3067 to para. 6.1715 (referring to para. 6.1640 et seq. of its Report).  
1748 Panel Report, fn  3067 to para. 6.1715.  
1749 Panel Report, fn  3067 to para. 6.1715 (r eferring to para. 6.1588 et seq. of its Report). See also, 
para. 6.1598.  
1750 Panel Report, fn 3066 to para. 6.1715 (referring to para. 6.1600 et seq. of its Report).  
1751 Panel Report, fn  3066 to para. 6.1715.  
1752 Panel Report, para. 6.1609. (fn  omitted)  
1753 Panel Report, fn  3067 to para. 6.1715 (referring to para. 6.1613 et seq. of its Report).  
1754 Panel Report, para. 6.1623.  
1755 Panel Report, para. 6.1715.  
1756 Panel Report, para.  6.1715 (referring to para.  6.1676  of its Report).  
1757 Panel Report, para.  6.1715 (referring to para.  6.1646  et seq. of its Report). See also para. 5.617 
above.  
1758 Panel Report, para.  6.1715 (referring to para.  6.1660  et seq. of its Report). See also para. 5.617 
above.  
1759 Panel Report, para.  6.1715 and fn  3073 thereto (referring to para.  6.1550  et seq. of its Report 
(Airbus/EADS financial position pre -launch), para . 6.1580  et seq. (Airbus/EADS financial position post -launch), 
para. 6.1600  et seq. (discussing the UK Appraisal that contains certain relevant HSBI assessments of EADS' 
financial position), and para. 6.1689  (discussing significant  limitations of the EADS Operating Plans' financial 
projections that existed during these times)).  
1760 Panel Report, para. 6.1716.  WT/DS316/AB/RW  
 
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  5.621.   Thus, in addition t o determining whether each of the individual funding options available to 
Airbus was, on its own, sufficient to fund the launch of the A350XWB, the Panel also undertook a 
collective assessment of whether an assortment of funding sources would be sufficient  to replace 
the monies that Airbus was entitled to under the A350XWB LA/MSF contracts. In finding that 
"EADS would have faced significant challenges when assembling and implementing a combination 
of the funding options that were potentially available to it  for a programme with the risk pr ofile of 
the A350XWB programme"1761, the Panel acknowledged the interrelationship between the different 
funding sources and considered that the implementation of o ne option would have 
"generally  limited the availability of oth ers".1762 Moreover, in carrying out its collective assessment, 
the Panel recalled the risks identified by it with respect to each funding option, as well as the 
overall risks and complications associated with the A350XWB programme.  
5.622.   In the Panel's view, all th ese reasons suggested that, had EADS pursued the A350XWB 
programme at any relevant time in the absence of either (i) assurances from the member States 
regarding their willingness to help finance the programme , or (ii) the A350XWB LA/MSF measures 
themselves , "EADS would have had to accept that it may have been putting the overall health of 
the company at greater and … considerable, risk".1763 This, in turn, led the Panel to believe that 
"it {was}  highly likely that, in the absence of A350XWB LA/MSF, Airbus woul d, to some degree, 
have had to make certain compromises with respect to the pace of the programme and/or the 
features of the aircraft".1764 In a footnote to this statement, the  Panel explained that 
"{m}aking  such compromises would … be a way to reduce costs a nd/or risk associated with the 
programme".1765 In the same footnote, the Panel "note{d} several pieces of evidence in the record 
indicating how financial troubles may delay an LCA programme".1766 The Panel thus considered 
that pursuing the programme in the absen ce of A350XWB LA/MSF would have been "a more 
complicated, more costly and riskier endeavour".1767 It was "{o}n this basis" that the Panel found 
that, although the Airbus company that actually existed  in the 2006 to 2010 period would, in the 
absence of A350XWB  LA/MSF, "have been able to launch and bring to market the A350XWB or an 
A350XWB -type aircraft", it could have done so only by a " narrow margin" and 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".1768  
5.623.   Our review above renders it clear that, as part of its analysis of the LA/MSF negotiations, 
the UK Appraisal, and the European Commission State Aid Decisions, as well as the ability of 
                                                
1761 Panel Report, para. 6.1716.  
1762 Panel R eport, para. 6.1715.  
1763 Panel Report, para. 6.1716  
1764 Panel Report, para. 6.1716. (fn  omitted)  
1765 Panel Report, fn  3074 to para. 6.1716.  
1766 Panel Report, fn  3074 to para. 6.1716. The full text of the footnote reads:  
Making such compromises would, in our view, be a way to reduce costs and/or risk associated 
with the programme. Further, we note several pieces of evidence in the record indicating how 
financial troubles may delay an LCA programme. ( See e.g. UK Appraisal, 
(Exhibit  EU-(Article  13)-34) (HSBI), para. 16 (lines 2 -4); UK House of Commons Business, 
Innovation and Skills Committee, "Full Speed ahead: maintaining UK excellence in motorsport 
and aerospace", Sixth Report of Session 2009 -10, Report, formal minutes, and oral and written 
evidence, 9 March 2010, ( Exhibit USA -44), para. 18 (explaining that "{e}ach {LA/MSF} applicant 
has to demonstrate … that government investment is essential  for the project to proceed on the 
scale and in the timeframe specified ") (emphasis added); "Competitiveness of the EU Aerospace 
Industry with focus on Aeronautics Industry, within the framework contract of sectoral 
competitiveness studies ENTR/06/054", Ecorys, December 2009, ( Exhibit USA -151), p. 27 
(discussing the possibility of delays in A350XWB programme in light of ec onomic conditions 
brought about by the financial crisis); Pilita Clark and Peggy Hollinger, "Deferrals to take toll on 
EAD's cash pile", Financial Times , December 2009,  (Exhibit USA -153) (reporting that industry 
analysts had doubts regarding EADS' ability to pursue its new LCA programmes); 
Standard  & Poor's Global Credit Portal Ratings Direct, Research Update: S&PCORRECT: EADS 
Rating Cut To 'A -/A-2', L-T Still On Watch Neg, On Further Restructure Delay , 12 October 2006, 
(Exhibit  USA-511), p. 2 (discussing p ossibility of launch delay); and A350XWB Business Case 
Presentation,  (Exhibit EU -130) (HSBI), slide 90 (contemplating a [BCI] even in the presence of 
the assumed receipt of the Launch Financing Instrument, but also outlining costs of such a 
delay)).  
1767 Panel Report, para. 6.1717.  
1768 Panel Report, para. 6.1717.  WT/DS316/AB/RW  
 
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  Airbus to fund the programme, the Panel identified and explained several risks, costs, and 
complications for the A350XWB programme that would arise in the absence of A350XWB 
LA/MSF.1769 It was the Panel's understanding of these "considerable" risks, costs, and 
complications for the launch and development of the A350XWB in the absence of A350XWB 
LA/MSF that led it to conclude that there was a high likelihood that Airbus would, to some degree, 
have had to make certain compromises with respect to the timing and/or fe atures of the aircraft. 
The Panel explained that making such compromises would, in its view, be "a way" to reduce the 
costs and/or risk associated with the programme.1770 In support, the Panel expressly cited several 
pieces of evidence that, in its view, "ind icat{ed} how fina ncial troubles may delay an 
LCA programme ".1771  
5.624.   While the European  Union summarily challenges the Panel's conclusion as lacking a 
sufficient evidentiary basis, it does not identify or allege any specific errors in the Panel's extensive 
assessment of the risks, costs, and complications that would arise for the A350XWB programme in 
the absence of A350XWB LA/MSF.1772 In its appellant's submission, the European  Union also does 
not provide an explanation of why the evidence cited by the Panel, i ndicating how financial 
troubles may delay an LCA programme, does not support its view that making compromises on the 
timing and/or features of the A350XWB would be "a way" to manage or mitigate the costs and/or 
risks associated with the programme. In resp onse to questioning at  the oral hearing, 
the European  Union clarified that the evidence cited by the Panel concerned the LCA industry, 
in general, and did not specifically address the likelihood of compromises with respect to 
the A350XWB.1773  
5.625.   We note that, i n addition to citing several pieces of evidence relating to how financial 
troubles may generally delay an LCA programme, the Panel referred to the UK Appraisal as well as 
a UK Government report from March 2 010, entitled "F ull Speed ahead: maintaining UK  excellence 
in motorsport and aerospace" .1774 Given the apparent rigour of its underlying analysis, timeliness, 
and objective context, the Panel considered the UK Appraisal to be the "most credible source" of 
analysis on the record regarding EADS' ability to pro ceed with the A350XWB in the absence of 
A350XWB LA/MSF.1775 As to the UK Government report, the Panel considered it to 
"stron gly suggest{} that the data on which the UK Appraisal relied in making its recommendation 
to provide A350XWB LA/MSF to Airbus should h ave demonstrated that A350XWB LA/MSF was 
'essential ' for the A350XWB programme 'to proceed on the scale and in the timeframe 
specified '".1776 Conversely, the Panel's understanding of the documents in this manner suggests 
that, without A350XWB LA/MSF, the A350 XWB programme would not be able to proceed on the 
                                                
1769 Panel Report, fn  3067 to para. 6.1715. See  also paras.  6.1588 et seq., 6.1600 et seq., 
6.1613  et seq., and 6.1640 et seq.  
1770 Panel Report, fn  3074 to para. 6.1716.  
1771 Panel Report, fn 3074 to para. 6.1716.  
1772 As noted above, the Panel discussed these aspects as part of its analysis of, inter alia , the LA/MSF 
negotiations, the UK Appraisal, and the State Aid Decisions, as well as the ability of Airbus to fund the 
programme.  
1773 European Union's response to questioning at the oral hearing.  
1774 Panel Report, fn  3074 to para. 6.1716 (referring to, inter alia , UK Appraisal 
(Panel  Exhibit  EU-(Article  13)-34 (HSBI)), para. 16 (lines 2 -4); UK House of Commons Business, In novation 
and Skills Committee, "Full Speed ahead: maintaining UK excellence in motorsport and aerospace", 
Sixth Report of Session 2009 -10, Report, formal minutes, and ora l and written evidence, 9  March  2010 
(Panel  Exhibit USA-44), para. 18). The Panel also referred to the A350XWB Business Case Pres entation 
(Panel  Exhibit EU -130 (HSBI)). (Ibid)  
1775 Panel Report, fn  3066 to para. 6.1715. The Panel also rejected the European  Union's argument that, 
insofar as these documents were prepared by and for UK governmental agencies, they could be seen as being 
limited to a much narrower question, namely, whether the A350XWB programme would go ahead in the 
United Kingdom without a UK MSF loan. Instead, the Panel considered it:  
entirely appropriate that the UK Appraisal would consider the implications for the A350XW B 
programme of all four relevant member States supplying or failing to supply A350XWB LA/MSF to 
Airbus … for the simple reason that, as discussed in the UK Appraisal itself, Airbus' need for 
UK A350XWB LA/MSF and the benefits  to the UK of the UK supplying A350XWB LA/MSF to Airbus 
depend in large part on the extent to which the other member State governments were also 
expected to grant similar financial aid to Airbus.  
(Ibid., para. 6.1605 (referring to UK Appraisal ( Panel Exhibit EU -(Article  13)-34 (HSBI)), paras.  4 and 16) 
(emphasis original))  
1776 Panel Report, para. 6.1609. (emphasis added)  WT/DS316/AB/RW  
 
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  scale and in the timeframe specified, thus supporting a finding of a high likelihood of compromises 
with respect to the features and timing of the A350XWB without LA/MSF. On appeal,  
the European  Union  does not explain why the Panel's understanding of these documents , 
which  focus specifically on Airbus and the A350XWB programme,  and the weight it attached to 
them amounts to an error under Article  11 of the DSU. We therefore disagree with the 
European  Union 's view that the Panel did not cite any evidence, or offer any reasoning, to support 
its "probabili stic" conclusion .1777 
5.626.   We now turn to consider the European  Union's second argument that a number of the 
Panel's factual findings, and several pieces of evidence, " strongly indicate that Airbus would not 
have found a compromise on timing or features of the A350XWB to be commercially viable", 
thereby contradicting the Panel's "subsequent speculation" that , absent LA/MSF,  compromises 
would have been made on the timing or features of the A350XWB.1778 Referring to the Panel's 
statement that "the A350XWB was not born in a vacuum"1779, the European  Union points out that 
the A350XWB was born in a competitive environment in which Boeing had gained a competitive 
edge that required a n "urgent competitive response" from Airbus and any launch delay would have 
undermined the effectiveness of such a response.1780 For the European  Union, these statements 
confirm that the "commercial viability of the A350XWB was inherently tied to the timing of the 
aircraft's launch, and that compromises by Airbus with respect to timing would have undermined 
the viability of the A35 0XWB as a competitive response to the 787".1781 Turning to the features of 
the aircraft, the European  Union notes the Panel's observation that the large number of 
improvements that Airbus offered on the A350XWB, compared to the Original A3501782, were key 
to the  aircraft's ability to compete with the 787 and the 777.1783 "Conversely", the European  Union 
argues, any compromise on the features of the aircraft would have "prejudiced the new aircraft's 
competitive position" and undermined its commercial viability.1784 
5.627.   We a gree with the European  Union that several of the Panel's findings and observations 
underscore the importance of the features and timing of the A350XWB for its competitiveness in 
the twin -aisle LCA market. Discussing the origins of the A350XWB programme, th e Panel observed 
that the Original A350 was rejected by customers "as not being able to match the weight savings 
and fuel efficiency " of the Boeing 787.1785 Compared to the Original A350, the Panel noted that the 
A350XWB was expected to have a wider and compo site fuselage, larger composite wings, higher 
cruise speed, and more powerful engines, in order to compete effectively with the Boeing  777 and 
787.1786 The Panel also considered it apparent that "time was of the essence", given that sales of 
the A330 and A340  were suffering "significant setbacks" due to competition from Boeing and the 
launch of the 787, which would have a "developmental head start" of around two years on any 
Airbus LCA that could replace the Original A350.1787 The importance of the timing of the A350XWB 
is also evident from the Panel's observation that Airbus public ly unveiled the A350XWB in 
July 2006 without having yet achieved sufficient certainty that it had the technical expertise to 
build the A350XWB as envisioned – particularly as regards to  the extensive use of composite 
materials in the new aircraft.1788 To make a formal launch decision, Airbus thus developed a new 
and accelerated "front -loaded design and production process" for the A350XWB that would ensure 
                                                
1777 European Union's appellant's submission, para. 899.  
1778 European  Union's appellant's submission, paras.  901 and 907.  
1779 European  Union's appellant's submission, para. 902 (quoting  Panel Report, para. 6.1542 ). 
1780 European  Union's appellant's submission, para. 902 (referring to Panel Report, 
paras.  6.1362 -6.1544). See also para. 903. 
1781 European  Union's appellant's submission, para. 904. See also para. 906.  
1782 Airbus A350 aircra ft design proposed between 2004 and 2006. (Panel Report, 
paras.  6.1542 -6.1543)  
1783 European  Union's appellant's submission, para. 905 (referring to Panel Report, para. 6.1546).  
1784 European  Union's appellant's submission, para. 905. 
1785 Panel Report, para. 6.1543 (quoting European  Union's first written submission to the Panel, 
para. 1113 (fns omitted)).  
1786 Panel Report, para. 6.1546.  
1787 Panel Report, para. 6.1544. The Panel recalled the European  Union's explanation that Boeing's 
launch of the 787 in 2004 caused th e market share of the A330 to drop at a time when A340 sales were 
already falling because the aircraft could not effectively compete with the more fuel -efficient 777. 
(Ibid.  (referring to European  Union's first written submission to the Panel, para. 1108))  
1788 Panel Report, para. 6.1547 (referring to A350XWB Chief Engineering Statement (Panel 
Exhibit  EU-18 (BCI/HSBI) paras. 14 -15 and 43)).  WT/DS316/AB/RW  
 
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  that the aircraft  was technically f easible and attained "a given level of maturity of the aircraft 
design much earlier than Airbus had achieved in previous aircraft developments".1789 
5.628.   In fact, in our view, the Panel's analysis establishes the importance of the timing and the 
features of the A3 50XWB not only for the competitiveness of that aircraft against the Boeing 777 
and 787 in the twin -aisle LCA market, but also for ensuring "Airbus' continued relevance as a 
healthy competitor to Boeing in all market segments at least through the foreseeabl e future".1790 
We recall in this regard the Panel's discussion of the problems with the production of the A380, 
which it termed as being "particularly serious".1791 The A380 programme suffered 
three  "extensive" production delays around the time when Airbus publi cly unveiled the A350XWB 
in July  2006.1792 As discussed in greater detail above1793, the Panel found that these delays 
resulted in increased development costs for the A380, cancellation of orders for the A380, 
significant contractual penalties for the delays, as  well as the deferred realization of revenues for 
the A380s that were ultimately delivered.1794 Given the significance that the Panel attached to 
these problems, a successful and timely launch of the A350XWB appears to have been important 
to ease the pressure  on Airbus' ability to  bring to market and  sell the A380.  
5.629.   While we agree that the Panel considered that the features and timing of the A350XWB 
were crucial for its competitiveness and commercial success, we fail to see how this aspect of the 
Panel's analysis "contradict{s} the speculation underlying any finding of 'direct effects'", as alleged 
by the European  Union.1795 The extent to which the features and timing of the A350XWB had an 
impact on its competitiveness is distinct from the issue of whether th e A350XWB LA/MSF subsidies 
had an impact on Airbus' ability to launch the A350XWB as and when it did. As we see it, the fact 
that a compromise on the timing or features of the A350XWB would have undermined its 
competitiveness and commercial viability1796 simply illustrates why Airbus would have sought to 
avoid such compromises. Indeed, the Panel identified several considerations that would have 
provided Airbus "with a strong commercial incentive  to go ahead with the A350XWB programme, 
assuming that it could fi nd appropriate financing ".1797 That Airbus would, therefore, ideally wish to 
avoid any such compromises does not answer the question of whether, absent A350XWB LA/MSF, 
Airbus would, in fact , have been able to launch the A350XWB as and when it did. This was th e 
question the Panel set out to address in its analysis of the "direct effects" of A350XWB LA/MSF.1798 
As discussed above, based on its review of alternative sources of f unding available to Airbus, 
the Panel concluded that, without A350XWB LA/MSF, the Airbus company that actually existed 
could have pursued the A350XWB 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".1799  
5.630.   We thus agree with the United  States that1800, rather than suggesting a contradiction in 
the Panel's reasoning, the Panel's view that the competitiveness of the A350XWB was tied closely 
to its features and timing supports its ultimate understand ing of the "direct effects" of A350XWB 
LA/MSF. Indeed, the Panel's analysis suggests that even a slight delay in the launch of the 
A350XWB could have had significant implications for Airbus' competitiveness, particularly in light 
of the developmental head start that the Boeing 787 had over the A350XWB , as well as the serious 
financial difficulties for Airbus and EADS in the pre -launch period. Moreover, the Panel considered 
                                                
1789 Panel Report, para. 6.1548 (quoting A350XWB Chief Engineering Statement (Panel Exhibit EU -18 
(BCI/HSBI)), para. 33). 
1790 Panel Report, para. 6.1572.  
1791 Panel Report, para.  6.1551.  
1792 Panel Report, para.  6.1551.  
1793 See para. 5.608 above.  
1794 Panel Report, para.  6.1551 (referring to Mario Heinen, Airbus Senior Vice President A380, 
EADS/Airbus presentation  "The A380 Program", presented at the Global Investor Forum, 19 -20 October 2006 
(Panel Exhibit EU -419), slide 18; EADS Press Release, "A350 XWB launch: EADS Gives Go Ahead for Airbus to 
Launch the A350 XWB", 1 December 2006, (Panel Exhibit USA -569); A380 B usiness Case, p. 19, section 6.4 
(Panel Exhibit EU -20 (HSBI)); Original Panel Report, para. 7.1719).  
1795 European  Union's appellant's submission, para. 901. 
1796 European  Union's appellant's submission, para. 907. 
1797 Panel Report, para. 6.1713. (emphasis added)  
1798 Panel Report, para. 6.1539.  
1799 Panel Report, para. 6.1717.  
1800 United  States' appellee's submission, paras.  505-506. WT/DS316/AB/RW  
 
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  the A350XWB to be a "very expensive" programme1801, with "high risks and uncertainties".1802 
In such an environment, the Panel's findings indicate that A350XWB LA/MSF provided Airbus with 
increased confidence and certainty to embark successfully on a programme with the risk profile, 
costs, and ambition of the A350XWB, thereby enabling its timely  launch.  
5.631.   Finally, we also have difficulty accepting the European  Union's third and related argument 
that the Panel, in reaching its conclusion, did not examine 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.1803 
As discussed above, the question before the Panel, based on the United States' claim, was 
whether, in the absence of A350XWB LA/MSF,  Airbus had the ability to launch the A350XWB 
as and when it did .1804 In answering this limited question, the Panel sufficiently engaged with the 
arguments and evidence submitted by the parties, and conducted a detailed analysis as outlined 
above. Moreover, t he European  Union refers to several statements by the Panel, discussed 
above1805, that highlight the strategic importance for Airbus to have launched the A350XWB with 
the features and at the time it had planned. As we see it, these statements  by the Panel sup port 
the view that the Panel considered that an alternative aircraft  with fewer features and/or offered 
later in time would not have been as competitive as a timely launched A350XWB.1806  
5.632.   The Appellate  Body has underscored that a claim under Article  11 of the  DSU must not be 
"vague or ambiguous".1807 Instead, a challenge under Article  11 of the DSU "must be clearly 
articulated and substantiated with specific arguments".1808 In these compliance proceedings, the 
European  Union summarily alleges that the Panel's conclu sion lacks a sufficient evidentiary basis. 
The European Union has not engaged with the Panel's detailed reasoning leading up to that 
conclusion, or the evidence cited by the Panel, so as to explain the basis of its allegation. While we 
agree that the Panel  considered that the features and timing of the A350XWB were crucial for its 
competitiveness and commercial success, we fail to see how this aspect of the Panel's analysis 
contradicts its ultimate conclusion, as alleged by the European  Union. We therefore do not 
consider that the European  Union has substantiated its claim under Article  11 of DSU with the 
specificity and precision that is required under th is provision. In light of the foregoing, we find that 
the European  Union has failed to establish that th e Panel  acted inconsistently with Article  11 of the 
DSU in concluding  that, " without  A350XWB LA/MSF, the Airbus company that actually existed  
{in 2006-2010}  could have pursued 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."1809 
5.6.3.5.2.2   The Panel's assessment of the "indirect effects" of the A380 LA/MSF  
subsidies  
5.633.   We now turn to the European  Union 's claim that the Panel erred in its application of 
Articles  5(c) and 7.8 of the SCM Agreement  in finding that the A380 LA/MSF  subsidies  had 
"indirect effects " on Airbus' ability to launch the A350XWB  as and when it did . Recalling its 
argument that the Pan el did not find that the A380 LA/MSF  subsidies  had "direct effects" on the  
A3801810, the European  Union  submits that "where LA/MSF {subsidies}  for an aircraft do not result 
in 'direct effects' with respect to that aircraft, those {subsidies}  are incapable of resulting in 
'indirect effects' on a subsequently -launched aircraft ."1811 According to the European  Union , where 
                                                
1801 Panel Report, para. 6.1567.  
1802 Panel Report, para. 6.1705.  
1803 European Union's appellant's submission, para. 900.  
1804 Panel Report, para. 6.1539. We note that before the Panel, the United  States alleged that A350XWB 
LA/MSF, " enabled" Airbus to launch the A350XWB, "when and as it was". (United  States' first written 
submission to the Panel, para.  395) 
1805 See paras.  5.626 -5.628 above.  
1806 Panel Report, paras.  6.1542 -6.1544.  
1807 Appellate  Body Report, US – Steel Safeguards , para.  498. See  also Appellate  Body Report, 
US ‒ Zeroing (EC) , para.  253. 
1808 Appellate  Body Report, US – Steel Safeguards , para. 498. See also Appellate  Body Report, 
US ‒ Zeroing (EC) , para. 253. 
1809 Panel Report, para. 6.1717. (emphasis original)  
1810 European  Union's appellant's submission, para. 886. 
1811 European  Union's appellant's submission, para. 894. WT/DS316/AB/RW  
 
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  LA/MSF subsidies are found not to have "direct effects", the aircraft funded by those subsidies  
"would, by definition, have existed (in  its presen t form and at the time it was launched) absent the 
{subsidies} ".1812 In these circumstances, the European  Union  submits that any "learning", "scope 
and scale", or "financial effects " flowing from the A380 programme would have existed absent the 
A380 LA/MSF  subsidies , and therefore cannot be attributed to them.1813 The United  States  
responds that the original panel's findings conclusively resolved that  the A380 LA/MSF subsidies 
had "direct effects" on the A380.1814 Moreover, the United  States  considers the European  Union's 
assertion that a finding of no "direct effects" of the A380 LA/MSF subsidies  means, by definition, 
that the aircraft funded by th ose subsidies  would have existed as and when it did without the 
LA/MSF to be a "fallacy" because it ignores the indirect  effects of previous LA/MSF  subsidies .1815 
5.634.   We note that the European Union's appeal does not take issue with the substantive aspects 
of the Panel's "indirect effects" analysis. Instead, the European  Union's claim of error is premised 
entirely on its argument that the Panel found that the A380 LA/MSF had no "direct effects" on the 
A380.1816 According to the European  Union, having found that the A380 LA/MSF subsidies were not 
critical to the very existence of the A380, the Panel erred in finding that those subsidie s resulted in 
"indirect effects" on the A350XWB.1817  
5.635.   As discussed in greater detail above1818, the original panel analysed the manner in which 
the A380 LA/MSF subsidies contributed to Airbus' ability to launch the A380 as and when it did. 
In our view, th e reaso ning and analysis by the original panel establishes that the A380 LA/MSF 
subsidies had "direct effects" on the A380, in the sense that those subsidies contributed in a 
genuine way to Airbus' ability to launch the A380 as and when it did. Given the original  panel's 
findings identifying the "direct effects" of the A380 LA/MSF subsidies on Airbus' ability to launch 
the A380 as and when it did1819, we see no reason why the Panel was precluded from examining 
the "indirect effects" of the A380 LA/MSF subsidies on th e A350XWB. This view is further 
supported by our earlier conclusion that the Panel's findings establish that the A380 LA/MSF 
subsidies continued to have effects on Airbus' ability to bring to market and to continue developing 
the A380 after the original re ference period. We therefore reject the European  Union's argument 
that the Panel erred in finding that the A380 LA/MSF subsidies resulted in "indirect effects" on 
the A350XWB.1820 
5.636.   Having rejected the European Union's argument, and given that our focus is on t he effect s 
of the subsidies existing in the post -implementation period, we consider it useful to recall briefly 
the Panel's "indirect effects" analysis, particularly as it relates to the "indirect effects" of the 
existing A380 LA/MSF subsidies on the A350X WB. T he Panel found that the "indirect effects" of the 
pre-A350XWB LA/MSF subsidies were "fundamental" to Airbus' ability to launch the A350XWB as 
and when it did.1821 In reaching this finding, the Panel examined the evidence and arguments 
                                                
1812 European  Union's appellant's submission, para. 894. 
1813 European  Union's ap pellant's submission, paras.  886 and 893.  
1814 United  States' appellee's submission, para. 483. 
1815 United  States' appellee's submission, para. 484 (referring to Original Panel R eport, para. 7.1940).  
1816 European  Union's appellant's submission, paras. 886 and 890 . 
1817 European  Union's appellant's submission, para.  895 (referring to Panel Report, para.  6.1507 and 
fn 2597 thereto).  
1818 See section 5.6.3.5.1 of this Report.  
1819 We recall that the Appellate Body upheld the original panel's overall conclusion with respect to the 
A380 programme. (See  para. 5.604 above)  
1820 We would, however , disagree with the Panel insofar as its analysis of the "indirect effects" of the 
expired LA/M SF subsidies served as the basis for its ultimate conclusion in respect of Airbus' ability to launch 
the A350XWB as and when it did. As explained  above, the European  Union is not under an obligation to take 
appropriate steps to remove the adverse  effects c aused by the expired subsidies. We acknowledge, however, 
that understanding the mechanism through which expired subsidies caused the effects found in the original 
proceedings provide s useful background for our analysis of  the issue at hand, that is, the ca usal link between 
the subsidies exist ing in the post -implementation period – including the A380 LA/MSF – and the relevant 
market phenomena.  
1821 Panel Report, para. 6.1774.  WT/DS316/AB/RW  
 
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  presented by the pa rties in the context of t wo broad categories of "indirect effects", namely, 
"learning effects"  and "financial effects ".1822 
5.637.   Assessing the extent of the "learning effects " from Airbus' previous  subsidized LCA 
programmes on Airbus' ability to launch the A350XWB , the Panel considered the evidence to 
demonstrate that the "A350XWB programme significantly benefitted from Learning Effects arising 
from previous, subsidized Airbus LCA programmes, especially (but not only) the A380 
programme".1823 In reaching its conclusio n, the Panel identified several specific types of 
"learning  effects " that it considered as "materially benefit{ing}" the A350XWB.1824 First, the Panel 
found that Airbus gained managerial know -how from its previous  subsidized LCA programmes. 
In this regard, th e Panel referred to, inter alia , evidence that "Airbus would change its design and 
testing processes to avoid problems it had encountered on the A380 ."1825 Second, the Panel found 
that the A350XWB "benefitted somewhat" from Airbus' pre-existing infrastructure  and engineering 
resources used for previous  subsidized LCA programmes.1826 Third, the Panel considered that the 
A350XWB benefitted from Airbus' evolutionary experience with composite materials and 
structures.1827 Fourth, the Panel identified several specific st ructural features of the A350XWB that 
benefitted from Airbus' prior LCA experience.1828 In this context, the Panel noted that the 
A350XWB Chief Engineering Statement concedes that the A350XWB wings' "high-lift system bears 
similarities to the A380's ".1829 Similarly, the Panel considered t hat certain of the A350XWB's 
on-board systems benefitted from Airbus' prior  LCA experience.1830 Specifically, the Panel found 
that Airbus ' experience from the A380 benefitted the A350XWB's hydraulic pressure levels and 
flight control architecture, amongst others.1831 Indeed, the Panel explained that the specific 
A350XWB components and systems that it considered to have benefitted from learning effects 
"generally appear to be derivations of similar components and systems used on m ore recent 
Airbus LCA programmes such as the A380".1832 Finally, the Panel had "little doubt" that Airbus 
benefitted from its prior LCA experience in the form of being able to market effectively its LCA  
including the A380 .1833 The above review indicates that, ev en though the Panel considered the 
extent to which Airbus benefitted from the technological platform provided by all of its previous 
subsidized LCA programmes, it was of the view that the A350XWB significantly benefitted from the 
"learning effects" of the A380 in particular.  
5.638.   Turning to the "financial effects", the Panel found the evidence before it to demonstrate 
that the A350XWB programme " significantly benefitted from two of the five Financial Effects of the 
pre-A350XWB LA/MSF subsidies, which enabled Air bus to launch and b ring to market all of its 
existing Airbus LCA programmes – namely, the enhanced revenue and debt reduction effects".1834 
The Panel also recalled  the original panel's finding that the A380 LA/MSF measures were subsidies 
and that replacing th em with market financing would therefore have been more expensive for 
Airbus . The Panel concluded that, if Airbus had financed all its pre -A350XWB LCA with market 
financing, its resulting debt burden would have made it extremely difficult, and most likely 
impossible, to launch  the A350XWB as and when it did.1835 In our view, these findings by the Panel 
indicate that A380 LA/MSF had "financial effects" on Airbus' ability to launch the A350XWB as and 
when it did.   
                                                
1822 Panel Report, para. 6.1725. With respect to the third kind of "indirect effects", namely, "scope and 
scale effects", the Panel gave them "limited weight" given the fact that the United  States did not specifically 
identify such effects in relation to the A350XWB. (Ibid., para. 6.1773)  
1823 Panel Report, para. 6.1747.  
1824 Panel Report, para. 6.1753.  
1825 Panel Report, para. 6.1754. The Panel noted, e.g. that the cracks on the wings of the A380 "alerted 
Airbus to the general risks posed by thermal problems to new wing designs". (Ibid., f n 3201 thereto)  
1826 Panel Report, para. 6.1755.  
1827 Panel Report, para. 6.1756.  
1828 Panel Report, para. 6.1757.  
1829 Panel Report, para. 6.1757 (referring to A350XWB Chief Engineering Statement (Panel 
Exhibit  EU-18 (BCI/HSBI)), para. 107).  
1830 Panel Report, para. 6.1758.  
1831 Panel Report, para. 6.1758 and fns 3218 -3219 thereto.  
1832 Panel Report, fn  3222 to para. 6.1760.  
1833 Panel Report, para. 6.1759.  
1834 Panel Report, para. 6.1771. (fn  omitted)  
1835 Panel Report, para. 6.1769.  WT/DS316/AB/RW  
 
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  5.6.3.5.2.3   Conclusion on the "product effects" of existing LA/MSF subsid ies on 
the A350XWB  
5.639.   In addressing the European Union's appeal of the Panel's analysis of the "direct effects" of 
the A350XWB LA/MSF subsidies  on the A350XWB , we have found above that the European  Union 
has failed to establish that the Panel act ed inconsistently with Article  11 of the concluding  that, 
"without  A350XWB LA/MSF, the Airbus company that actually existed  {in 2006 -2010} could  have 
pursued 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."1836 We have also rejected the Eu ropean Union's claim that the Panel 
erred in finding that the A380 LA/MSF subsidies had "indirect effects" on the A350XWB. In doing 
so, we recalled several findings by the Panel indicating that, in launching the A350XWB, Airbus 
significantly benefitted fro m the "learning  effects " and "financial effects" flowing from the 
subsidized A380 programme. The Panel's findings regarding the "direct effects " of the A350 XWB 
LA/MSF  subsidies , read together with its findings concerning the "indirect effects " of the 
A380 LA/MSF  subsidies , indicate to us 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.  
5.6.3.6   Overall conclusion  
5.640.   Upon examini ng the "product effects" of LA/MSF subsidies , the Panel found that "the direct  
and indirect  effects of the aggregated pre -A350XWB LA/MSF subsidies continue to be a 'genuine 
and substantial' cause of the current market presence of the A320, A330 and A380".1837 The Panel 
further found that "the direct  and indirect  effects of the aggregated LA/MSF subsidies, with the 
exception of the LA/MSF subsidies provided for the A300 and A310 , are a 'genuine and substantial' 
cause of the current market presence of the A350XW B".1838  
5.641.   The errors alleged by the European Union regarding the P anel's findings on the 
"product  effects" of the pre -A350XWB LA/MSF subsidies on the market presence of the A320 and 
A330 families of Airbus LCA concern primarily the LA/MSF subsidies that were f ound by the Panel 
to have expired before the end of the implementation period  – namely, the subsidies for the A300, 
A310, A320, A330,  and A340. We recall that, under our interpretation of Article 7.8 of the 
SCM Agreement, the European  Union does not bear a compliance obligation with respect to the 
subsidies that were found by the Panel to have expired by the end of the implementation period . 
Thus, t o the extent that some subsidies have expired, a further examination of the removal of the 
effects of those subsidies would not be necessary. In other words, it is not pertinent to examine 
whether the Panel's findings on the "product effects" of the expired  subsidies can support its 
ultimate conclusion of non -compliance under Arti cle 7.8 of the SCM Agreement.  In line with this 
view, we do not consider it necessary to make separate findings on  the European Union's claims 
on appeal  insofar as they concern the Panel's  alleged failure to assess properly the passage of time 
and the even ts during that time in reaching its  findings on the "product effects" of  the expired 
subsidies.  In addition, we disagree with the Panel insofar as its reference to the aggregated 
LA/MSF subsidies in the above findings includes  the expired subsidies.1839  
5.642.   Rather, as we have explained above, t he pertinent question for purposes of these 
compliance proceedings is whether the subsidies exist ing in the post-implementation period 
(i.e. after 1 December 2011) cause adverse effects.  The Panel found, and the European Union 
does not disagree, that the French, German, Spanish , and UK A380 LA/MSF subsidies had not 
expired by the end of the implementation period.1840 Furthermore, the Panel found that, 
                                                
1836 Panel Report, para. 6.1717. (emphasis original ) 
1837 Panel Report, para. 7.1.d.xii. (emphasis original) See also para. 6.1534.  
1838 Panel Report, para. 7.1.d.xiii. (emphasis original) See also para. 6.1778.  
1839 Having said that, we recall that the expired subsidies remain relevant as part of a matrix of analy sis 
that seeks to identify the effects of the subsidies existing in the post -implementation period, in respect of 
which the European  Union continues to have a compliance obligation.  Findings from the original proceedings 
concerning the design, structure , and operation of the expired subsidies, as well as how th ose subsidies 
affected Airbus' operations until the end of 2006, can help in understanding the extent to which the  existing 
subsidies  may cause adverse effects in the post -implementation period.  
1840 Panel Report, para. 6.14. WT/DS316/AB/RW  
 
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  subsequent to the original reference per iod (2001 -2006), the European  Union granted new LA/MSF 
subsidies to Airbus for developing its A350XWB family of LCA, and that these subsidies were 
"closely connected" with the adopted recommendations and rulings of the DSB and the 
European  Union's alleged compliance "actions".1841 Given the scope of these compliance 
proceedings, we have therefore focused our review on the Panel's analysis and findings regarding 
the effects of subsidies existing in the post -implementation period  – namely, the A380 LA/MSF and 
the A350XWB LA/MSF subsidies  – and the European Union's appeal thereof,  to determine whether 
those findings support the Panel's ultimate conclusion regarding serious prejudice .  
5.643.   As part of our analysis above, we have disagree d with the European  Union's claim  under 
Article 11 of the DSU  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 
lacks sufficient evidentiary basis.  Furthermore, we have f ound that the European  Union has failed 
to establish that the Panel acted inconsistently with Article  11 of the DSU in reaching its conclusion 
that, " without  A350XWB LA/MSF, the Airbus company that actually existed  {in 2006 -2010} could  
have pursued 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."1842 We have also rejected the European Union's claim that the 
Panel erred in finding that the A380 LA/MSF subsidies had "indirect effects" on the A350XWB .  
5.644.   In these compliance proceedings, the Panel's findings with respect to the A380 and 
A350XWB programmes indicate that Airbus' competitivene ss gained throug h earlier  LA/MSF 
subsidies was renewed and sus tained beyond the original reference period and into  the 
post-implementation period  due in significant part to the subsidies that it continued to receive 
after the original reference period and that still exist ed in the post-implementation period. 
The Panel's findings reveal that the years following the original reference period were a period of 
considerable uncertainty for Airbus. As the Panel noted, Airbus witnessed "particularly serious" 
problems with the A38 0 programme  subsequent to the original reference period, including  three 
"extensive" delays during 2005 and 2006.1843 These delays resulted in cancellation of orders for 
the A380, Airbus having to pay contractual penalties, and a delayed realization of revenues from 
A380 deliveries.1844 For the Panel, these problems had "severe" implications for Airbus.1845 
As noted above, Airbus ultimately delivered its first A380 in October 200 7.1846 
5.645.   The Panel's findings establish that, a round the same  time as Airbus grappled with delays in 
the A380 programme, the Original A350, launched in December 2004 , "had fallen into the 
market's disfavour".1847 The Boeing 787 was outcompeting Airbus aircraft in the twin -aisle LCA 
market and had a " developmental head start" of roughly two years on any Airbus LCA programme 
that might replace the Original A350.1848 The Panel further found that Airbus' decision to terminate 
the Original A350 programme in favour of th e A350XWB – which could effectively co mpete with 
Boeing's 7 87 and 777 – was "too expensive to be taken lightly".1849 The Panel's findings also 
establish that Airbus publicly unveiled the A350XWB concept in July 2006 without having yet 
                                                
1841 Panel Report, para. 6.150. We also note that neither participant disputes the Panel's finding that 
"the A350XWB LA/MSF contracts share the same core features as the LA/MSF measures considered in the 
original proceeding" . (Ibid., para. 6.286)  
1842 Panel Report, para. 6.1717. (emphasis original)  
1843 Panel Report, para.  6.1551.  
1844 See para. 5.608 above.  
1845 Panel Report, para.  6.1551 (referring to Aude Lagorce, "Airbus refuses to rule out state loans on the 
A350XWB", MarketWatch , 4 December  2006 (Panel Exhibit USA -359)).  
1846 Ascend database, Deliveries made, data request as of 7 April 2014 (Panel Exhibit EU -512). See also 
supra  fn 1694.  
1847 Panel Report, para . 6.1543.  
1848 Panel Report, para. 6.1544. We also note the Panel's finding tha t sales of the A330 and A340 were 
suffering "significant setbacks" at this time due to competition from Boeing. (Ibid.) The European  Union 
explained to the Panel that Boeing's launch of the 787 in 2004 caused the market share of the A330 to drop at 
a time when A340 sales were already falling because the aircraft could not effectively compete with the more 
fuel-efficient 777.  (Ibid. (referring to European  Union's first written submission to the Panel, para. 1108)) 
The Panel found that such developments had " significant implications" for Airbus' overall sales performance.  
(Ibid. (referring to  "Time for a new, improved model: Airbus gets to work on its medium -sized aircraft, but 
deeper problems remain", The Economist , 20 July 2006 (Panel Exhibit USA -28))) 
1849 Panel Report, para. 6.1545.  WT/DS316/AB/RW  
 
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  achieved "sufficient certainty" that it had the technical expertise to build the A3 50XWB1850, 
given  that it was a "major" and "dramatic" redesign of the Original A350, and envisioned extensive 
use of composite materials.1851 Thus, Airbus was face d not only with the financial strain of 
replacing the Original A350  with an expensive new aircraft as soon as possible , but also  with the  
technological challenges in launching an aircraft as innovative as the A350XWB. Ultimately, Airbus 
launched the A350XWB on 1 December 2006.1852  
5.646.   The above findings by the  Panel on the issues surrounding the Original A350  and the 
launch of the A350XWB, together with its findings on the severe implications of the extensive 
delays with the A380 programme, establish that Airbus was faced with considerable overall 
uncertainty  in the years following the original reference perio d. As discussed above, the original 
panel's findings, together with the Panel's analysis, indicate 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 extensive produ ction delays in the 
A380 programme. The Panel's findings regarding the "direct effects " of the A350 XWB LA/MSF, read 
together with its findings concerning the "indirect effects " of the A380 LA/MSF,  also indicate  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. In other words, the existing LA/MSF subsidies that Airbus continued to receive made it 
possible to proceed wit h the timely launch of the A350XWB – a high -risk and expensive 
programme of considerable strategic importance to Airbus – and to bring to  market the A380, 
which had suffered extensive delays.  
5.647.   In sum, our discussion of the Panel's findings reveals that the LA/MSF subsidies existing in 
the post -implementation period – i.e. the A380 and A350XWB LA/MSF subsidies – enabled Airbus 
to proceed with the timely launch and development of the A350XWB, and to bring to market and 
to continue developing the A380. Both the se events, as the above analysis shows, were crucial to 
renew and sustain Airbus' competitiveness in the post -implementation period.  
5.6.4   Lost sales , displacement , and impedance  
5.6.4.1   Introduction  
5.648.   Having examined the "product effects" of the LA/MSF subsidies, the Pa nel turned to 
consider "the extent to which the LA/MSF subsidies, through their continued 'product' effects, are a 
'genuine and substantial' cause of the lost sales, and market impedance  and displacement" alleged 
by the United  States.1853 In respect of lost s ales, the Panel concluded that : 
all of the orders identified in Table  19 {of the Panel  Report} represent "significant" 
"lost sales" to the United  States LCA industry and, therefore, that the challenged 
LA/MSF subsidies continue to be a "genuine and substantial" cause of serious 
prejudice to the United  States within the meaning of Article  6.3(c) of the 
SCM Agreement.1854 
                                                
1850 Panel Report, para. 6.1507 (referring to A350XWB Chief Engineering Statement (Panel Exhibit 
EU-18 (BCI/HSBI)), paras. 14 -15 and 43).  
1851 Panel Report, para. 6.1546 (quoting Goldman Sachs Investment Analysis, A350: Not an option but 
essential for Airbus' future, in our view, 21 November 2006 (Panel exhibit USA -30), pp. 20 -22; G. Norris, 
"Airline criticism of Airbus A350 forces airframer to make radical changes to fuselage, wing and engines", 
Flight  International , 8 May 2006  (Panel Exhibit USA -26)). 
1852 Panel Report, para. 6.1568.  
1853 Panel  Report, para. 6.1779.  
1854 Panel  Report, para. 6.1798. As further described below, Table 19 of the Panel  Report lists orders for 
Airbus' A320, A380, and A350XWB families of LCA in 2012 and 2013, which were 150 and 225, respectively. 
(Ibid., para. 6.1781, Table 19: United States' "Lost Sales" Claims in the Post -Implementation Period ) WT/DS316/AB/RW  
 
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  5.649.   With respect to displacement and impedance in the relevant markets, the Panel concluded  
that: 
the United  States has established that th e "product" effects of the challenged LA/MSF 
subsidies are a "genuine and substantial" cause of displacement and/or impedance of 
United  States LCA in the markets for single -aisle LCA in the European  Union, Australia, 
China and India; twin -aisle LCA in the European  Union, China, Korea and Singapore; 
and very large LCA in the European  Union , Australia, China, Korea, Singapore and the 
United Arab Emirates.1855 
5.650.   The European  Union  contends that the Panel erred in its  interpretation and  application of 
Articles  5(c), 6.3, and 7.8  of the SCM  Agreement  in finding causation for lost sales and 
"displacement and/or impedance " in the relevant markets , and raises two main grounds of appeal 
in respect of the Panel's above conclusions. The first concerns the c ausal link betwee n the 
"product  effects " of LA/MSF subsidies and these market phenomena . Specifically, the 
European  Union contends that  the Panel  failed to  account for:  (i) the differences in the degree of 
competition between the relevant LCA at issue in the par ticular instances of lost sales, 
displacement , and impedance alleged  by the United  States ; and (ii)  the market -specific and 
sale-specific non-attribution factors referred to by  the European  Union .1856 The second  ground of 
appeal  relates to  alleged errors  arising from  the Panel's treatment of  displacement and impedance 
as "interchangeable and indistinguishable" concepts1857, and from the Panel's failure  to examine a 
sufficiently large dat a set and to engage  with the sales volume and market share data that were 
before it for purposes of analysing the United  States' claims of displacement  and/or impedance.1858  
5.651.   As noted  in Section 5.6.3.3  above , the Appellate  Body has indicated that generally the 
"more appropriate  approach " to assess the effect of a subsidy under Article  6.3 of the 
SCM Agreement is through a unitary counterfactual analysis , whereby a panel conducts a single, 
integrated analysis of both the existence  of the relevant market phenomena and whether these 
phenomena  have been caused  by the subsidies at is sue.1859 Indeed, as the Appellate  Body noted in 
the original proceedings, "it is difficult to understand the market phenomena described in the 
various  subparagraphs of Article  6.3 in isolation from the challenged subsidies."1860 Although the 
Panel explained that  it would adopt a "unitary" approach to causation1861, we note that its analysis 
progressed in two stages: (i)  first, t he Panel concluded that the "product effects " of LA/MSF 
subsidies were such that the market presence of the A320, A330, A380, and A350XWB  would not 
have been possible without the challenged LA/MSF subsidies1862; and (ii) t he Panel then found that 
such "product effects" led to the serious prejudice  allegedly suffered by  the US LCA industry in the 
form of lost sales and "displacement and/or impedan ce".1863  
5.652.   In the preceding section, we have reviewed the European  Union's appeal of the Panel's 
conclusion on "product effects" insofar as they relate to the LA/MSF subsidies existing in the 
post-implementation period. We have found that the Panel's findings with respect to the A380 and 
A350XWB programmes indicate that Airbus' competitiveness , gained through the pre -A380 LA/MSF 
subsidies , was renewed and sustained beyond the original reference period and into the 
post-implementation period  due to the subsidies  that it continued to receive after the original 
reference period  and that still existed during the post -implementation period . In that context, we 
have emphasized that the European  Union  does not have a compliance obligation with regard to 
those subsidies  that expired before 1 June 2011 . At the same time,  findings  from the original 
proceedings  regarding the design, structure , and operation of the expired subsidies, as well as how 
                                                
1855 Panel  Report, para. 6.1817.  
1856 European  Union's app ellant's submission, paras.  914-916. 
1857 European  Union's appellant's submission, para. 977. 
1858 European  Union's appellant's submission, para s. 968, 1024, and 1026 . 
1859 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1109. See also 
Appellate  Body Report s, US – Upland Cotton , para. 431; US – Upland Cotton ( Article  21.5 – Brazil) , para. 354. 
In contrast, under a two -step approach, the analysis first seeks to identify th e market phenomena and then, 
as a second step, examines whethe r there is a causal relationship.  (Appellate Body Report, EC and certain 
member States – Large Civil Aircraft , para. 1107)  
1860 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1109.  
1861 Panel Report, para. 6.1453.  
1862 Panel Repor t, paras.  6.1534 and 6.1778.  
1863 Panel Report, paras.  6.1779 -6.1818.  WT/DS316/AB/RW  
 
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  those subsidies affect ed Airbus' operations until the end of 2006,  together with the Panel's findings 
in relation to the subsidies provided since then and into the post -implementation period,  inform 
our understanding of whether  the existing subsidies may cause adverse  effects in the 
post-implementation period. In keeping  with the "unitary" approach to causation, and in light of 
the fact that t he Panel's findings on "product  effects " formed the basis for its subsequent findings 
on serious prejudice, our an alysis in the preceding section  remains  pertinent to our review of 
the European  Union's appeal of the  Panel's findings on lost sales  and 
"displacement  and/or  impedance".  
5.653.   We begin with  a brief overview of the Panel's findings on lost sales and "displacement 
and/or impedance", as well as the claims and arguments raised on a ppeal . We then consider the 
European  Union 's appeal of the Panel's interpretation of the concepts of "displacement" and 
"impedance" under Articles  6.3(a) and 6.3(b) of the SCM Agreement . Subsequently , we address 
the European  Union's claim that the Panel fa iled to take into account the "closeness of 
competition" among  relevant LCA in reaching its serious prejudice findings1864, and its allegation 
that the Panel failed to examine a sufficiently large data set in reaching its findings of 
displacement and impedanc e. Thereafter, we examine the Panel's findings of lost sales and 
"displacement and/or impedance"  in each of the three market segments identified by th e Panel – 
single -aisle LCA; twin -aisle LCA ; and VLA markets  – in light of specific errors alleged by the 
European Union, namely, its argument that the Panel failed to analyse properly market -specific 
and sale -specific non -attribution factors referred to by the European Union as well as its argument 
that the Panel failed to engage  with the sales volume and mark et share data  that were before it in 
reaching its findings of "displacement and/or impedance". Finally, we consider the United States'  
request to complete the legal analysis of "displacement and/or impedance" , to the extent that we 
reverse the relevant fin dings by the Panel.1865 
5.6.4.2   Summary of Panel findings  
5.654.   The Panel recalled  its finding that the  "product  effects " of the challenged LA/MSF subsidies 
continued to be a genuine and substantial cause of the current market presence of the A320, 
A330, A380, and A350XWB families of Airbus LCA. The Panel also recalled its conclusion that 
"in the absence of the challenged LA /MSF subsidies", Airbus "would not be selling and/or delivering 
any of its existing  models of aircraft today" .1866 The Panel con sidered  that its task was therefore to 
determine whether  the LA/MSF subsidies, through their continued "product effects ", were a 
genuine and substantial cause of the lost sales, and market impedance and displacement alleged 
by the United  States. T he Panel added that it would  limit its assessment to evaluating the merits of 
the United  States ' claims in  light of the findings it had made  with respect to the "product effects " 
of LA/MSF under  the "plausible " counterfactual scenarios  because, according to the Panel, findings 
under  such scenarios provided a sufficient basis for conduct ing an "objective assessment of the 
matter"  as required un der Article 11 of the DSU .1867 
5.6.4.2.1   Findings on significant lost sales  
5.655.   Before the Panel, the United  States argued that in light of the continued "product effects" 
of the challenged LA/MSF subsidies and the conditions of competition in the LCA industry, orders 
made  by eight airlines for Airbus LCA " after 1 December 2011 constitute 'lost sales' within the 
meaning of Article  6.3(c) of the SCM  Agreement".1868 Furthermore, the United  States argued that 
"because of the allegedly strategic importance of many of these sales t o both Boeing and Airbus 
                                                
1864 European Union's appellant's submission, fn  1041 to  para. 968. 
1865 United  States' appellee's submission, para. 573. 
1866 Panel  Report, para. 6.1779. (emphasis original)  
1867 Panel  Report, para. 6.1779.  
1868 Panel  Report, para. 6.1781 (referring to United  States' first written submission to the Panel, 
para. 413; second written submission to the Panel, paras.  699-709; response to Panel questions No. 67 
and No. 162; Summary Table of US Significant Lost  Sales  (Panel Exhibit USA -164); Ascend database, Boeing 
and Airbus Deliveries in Units 2001 -2013 (Q1), Commercial Operators, data request as of 27 April 2013 
(Panel  Exhibit USA-546)). (emphasis original) Recalling its discussion regarding the reference per iod for its 
adverse effects analysis, the Panel explained that it would  "examine only claims of 'lost sales' occurring in the 
post-implementation period". (Ibid., fn  3258 thereto (referring to para.  6.1444 of its Report). See  also 
fns 3260 and 3261 to Tabl e 19 of the Panel Report)  WT/DS316/AB/RW  
 
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  and their monetary value of billions of USD", the "lost sales" were also "'significant'".1869 The Panel 
identified the United States' lost sales claims occurring in the post -implementation period in 
Table  19 of its Report, which recor ded orders of Airbus LCA by eight airlines in 2012 and 2013, 
including the sales of 271 single -aisle LCA, 50 twin -aisle LCA, and 54 VLA.1870  
5.656.   At the outset of its analysis, the Panel briefly recalled the meaning of the terms 
"significant" "lost sales" in Arti cle 6.3(c) of the SCM Agreement, noting that they refer to 
"important, notable or consequential" sales that suppliers of the complaining Member "failed to 
obtain" and that instead were won by supp liers of the respondent Member.1871 The Panel agreed 
with the European  Union  that, to demonstrate that the "product effects" of the LA/MSF  subsidies  
are a "genuine and substantial" cause of the "lost sales" occurring in the post -implementation 
period, "it must not only be established that Airbus  would not have won th ose sales in the absence 
of the subsidies, but also that Boeing or another United  States  LCA manufacture r (as opposed to a 
non-United  States LCA producer) would have won those sales".1872 Having considered the facts 
surrounding the nature of competition from potential new entrants in the current duopoly involving 
Airbus and Boeing, the Panel found that, in the "plausible" counterfactual scenarios1873, "it would 
have been highly unlikely for a non-United  States  producer to have  entered the LCA market"1874, 
and that, even if there were such a new entrant, such an entity "would have only been able to 
enter the single -aisle segment with aircraft that … could only impose weak competitive constraints 
on Boeing".1875 
5.657.   Given the above considerations, the Panel considered that it  "necessarily follow{ed} that 
the sales won by Airbus in the twin -aisle and {VLA} markets were 'lost sales' to the United  States' 
industry in both 'plausible' counterfactual scenarios" in the post -implementation period.1876 As for 
the "numerous, allegedly 'no n-subsidy'"1877 reasons that the European  Union advanced for 
explaining why Airbus won sales in the twin -aisle LCA and VLA markets1878, the Panel found that 
Airbus would not have had any of those advantages in the campaigns for twin -aisle LCA and VLA in 
the "pla usible" counterfactual scenarios, "because it simply would not have existed".1879 The Panel 
also dismissed the non -attribution factor relating to Singapore Airlines' wish to split its order for 
twin-aisle LCA between Airbus and Boeing, finding instead that th e airline would have had to 
choose from LCA producers in  the US LCA industry as Airbus would not have existed in the 
"plausible" counterfactual scenarios.1880 
5.658.   The Panel next turned to the alleged  "lost sales " in the single -aisle LCA market . The Panel 
noted th at the Airbus aircraft actually purchased  – namely, the A320 and A321  – offered a seating 
capacity that was "in excess of what a new entrant could have reasonably offered " and further that 
"200 of the 271 individual aircraft ordered were new generation air craft – A320neos".1881 
In the Panel's view, it stood to reason that , in the two "plausible" counterfactual scenarios, US LCA 
producers would have had a very strong competitive advantage over any new entrant in all three 
sales campaigns, as they could have offered single -aisle LCA with characteristics that closely 
matched those demanded and ultimately chosen by the relevant customers.  
                                                
1869 Panel  Report, para. 6.1781 (referring to United  States' first written submission to the Panel, 
paras.  413-414; second written submission to the Panel, paras.  699-709).  
1870 Panel Report, para. 6.1781, Table 19: United States' "Lost  Sales" Claims in the Post -Implementation 
Period.  
1871 Panel Report, para. 6.1780 (quoting Appellate Body Reports, US – Large Civil Aircraft  
(2nd complaint) , para. 1052; EC and certain member States – Large Civil Aircraft , para. 1220).  
1872 Panel  Report, para. 6.1784. (emphasis original)  
1873 We recall that, according to the original panel, in the "plausible" counterfactual scenarios, the LCA 
industry would have been characterized by the existence of either a Boeing monopoly, or a duopoly involving 
Boeing and anoth er US LCA producer. (Original Panel Report, para. 7.1984. See also Panel Report, 
para. 6.1466.)  
1874 Panel  Report, para. 6.1787.  
1875 Panel  Report, para. 6.1788.  
1876 Panel  Report, para. 6.1789.  
1877 Panel  Report, para. 6.1789.  
1878 Panel  Report, para. 6.1790.  
1879 Panel  Report, para. 6.1791.  
1880 Panel  Report, para. 6.1792. The European Union argued that one of the reasons for splitting orders 
was to secure a large number of aircraft over a particular period of time. (Ibid.)  
1881 Panel  Report, para. 6.1793.  WT/DS316/AB/RW  
 
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  5.659.   As for the "allegedly 'non -subsidy' reasons"1882, the Pa nel found that, because 
"Airbus  would not have existed in t he post -implementation period in the absence of the effects of 
the LA/MSF subsidies", the European  Union's arguments relating to Airbus' product offering or 
actual experiences in the sales campaigns were "of no relevance ".1883 The Panel also dismissed the 
non-attribution factor regarding Norwegian Air Shuttle's wish to split its order between Airbus and 
Boeing single -aisle offerings.1884 The Panel considered that t he non-US LCA producer that might 
have entered the market would not have been able to compete effect ively with US LCA producers  
in the post -implementation period and, therefore, could not have prevented US LCA producers 
from winning the relevant sales in the absence of Airbus.1885 
5.660.   The Panel further considered that the original panel's description of the sig nificance of 
losing LC A sales to a rival LCA producer – which was not specifically appealed or otherwise 
disturbed by the Appellate  Body – remained, on the whole, an accurate depiction of the 
significance of losing LCA sales to a rival LCA producer in the post-implementation period, and thus 
incorporated it mutatis mutandis .1886 The Panel saw no reason not to characterize the lost sales in 
the post -implementation period as "significant". Accordingly, the Panel concluded by stating:  
we find that all of the orde rs identified in Table  19 represent "significant" "lost sales" 
to the United  States LCA industry and, therefore, that the challenged LA/MSF 
subsidies continue to be a "genuine and substantial" cause of serious prejudice to the 
United  States within the mean ing of Article  6.3(c) of the SCM  Agreement.1887 
5.6.4.2.2   Findings on displacement and impedance  
5.661.   Before the Panel, the United  States  argued that, in light of the "product effects " of the 
challenged LA/MSF subsidies and the conditions of competition in the LCA industry,  the US LCA 
industry  suffer ed "serious prejudice in the form of displacement and/or impedance of its LCA 
products in all three relevant product markets in the European  Union , and in 11 third country 
product markets, within the meaning of Articles  6.3(a) an d 6.3(b) of the SCM Agreement ".1888 In 
support , the United  States  adduced evidence of Airbus' and Boeing 's delivery volumes and market 
shares in all relevant markets for each year from 2001 to 2013.1889 The United  States  argued that , 
"in the absence of the 'product' effects of LA/MSF, the United  States  LCA industry's delivery 
volumes and market shares would have been higher than they actually were in each of the 
relevant markets."1890 
5.662.   The European  Union  responded  that the United  States  had failed to demonstrate 
"any clearly discernible trends  (in the form of clearly declining  delivery volumes and market 
shares) to show that sales of United  States  LCA have been either substituted in the relevant 
markets or obstructed from entering those ma rkets."1891 
                                                
1882 Panel  Repor t, para. 6.1794.  
1883 Panel  Report, para. 6.1795.  
1884 Panel  Report, para. 6.1796. The European Union argued that splitting orders would allow the 
company to "hedge their bets … with regard to new and different technologies". (Ibid., quoting 
European  Union's sec ond written submission to the Panel, para. 1301)  
1885 Panel  Report, paras. 6.1796 -6.1797.  
1886 Panel  Report, para. 6.1798.  
1887 Panel  Report, para. 6.1798.  
1888 Panel  Report, para. 6.1801. The Panel also noted that the United  States made a conditional request 
that, were the Panel to reject its present serious prejudice claims in the European  Union single -aisle LCA 
market, the Panel should find that "the United  States' LCA industry {w as} threatened  with displacement and/or 
impedance in … that market". (Ibid., fn  3288 thereto (referring to United  States' first written submission to the 
Panel, para. 514; second written submission to the Panel, para. 720; response to Panel question No. 16 2) 
(emphasis original))  
1889 Panel  Report, para. 6.1801.  
1890 Panel  Report, para. 6.1801 (referring to United  States' first written submission to the Panel, 
paras.  520-532).  
1891 Panel  Report, para. 6.1802 (referring to European  Union' first written submission to t he Panel, 
paras.  845, 851, 854, 855 -951, 955, 959, 963, 1061, 1063, 1067, 1073, 1077, and 1079; second written 
submission to the Panel, paras.  1562, 1600 -1606, 1612, 1619, 1624, 1628, 1638, 1646, 1647, 1655 -1656, 
 WT/DS316/AB/RW  
 
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  5.663.   The Panel began  by reviewing the guidance the Appellate  Body has provided on how to 
determine whether the effect of a subsidy is to impede or displace the imports or exports of a like 
product into a relevant market within the meaning of Articles  6.3(a) and 6.3(b)  of the 
SCM Agreement .1892 Specifically, the Panel recalled the Appellate  Body's finding that:  
the most appropriate approach to assess the effect of a subsidy under Article  6.3 of 
the SCM Agreement  is through a unitary counterfactual analysis.  In the case of 
displacement and impedance, the counterfactual analysis would involve estimating 
what the sales of the complaining Member would have been in the absence of the 
challenged subsidy. The counterfactual sales of the complaining Member would the n 
be compared to its actual sales. Displacement or impedance would arise where the 
counterfactual analysis shows that the sales of the complaining Member would have 
declined less or would have been higher in the absence of the challenged subsidy.1893 
5.664.   The Pane l considered that an analysis of "the trends  in the evolution of a complainant's 
competitive position in a relevant market over time may reveal", inter alia, that its volume of sales 
and market share have generally: ( i) remained stagnant; ( ii) decreased; ( iii) increased; 
or (iv) fluctuated.1894 The Panel was not persuaded by the European  Union 's contention that 
"the United  States ' displacement and impedance claims may succeed only if the relevant data 
clearly demonstrated the second of these four possibilities ".1895 The Panel reasoned that to accept 
the European  Union 's contention would imply that there could be no displacement or impedance in 
a relevant market in a situation where the effect of a subsidy is to prevent the like product from 
achieving a higher volu me of sales and market share than would otherwise be the case in the 
absence of the subsidy .1896 
5.665.   The Panel recalled the Appellate  Body's observation that the original panel had 
"entertained the United  States' claim of displacement on the basis of an assessment of whether 
there was an observable decline in the sales of Boeing".1897 While recognizing that the 
Appellate  Body had faulted parts of the original panel's displacement  analysis for its "failure to 
identify trends  showing declining  market shares"1898, the Panel noted  that the Appellate  Body 
made these findings only after having: (i) "explained that the identification of declining trends  was 
a necessary element of the first part  of the panel's two-step approach to causation"1899; 
and (ii) "decided to limit  its assessment of the panel's displacement  analysis for this purpose to the 
same question entertained by the panel – namely, 'whether there was an observable decline in the 
sales of Boeing'".1900 The Panel, however, explained that , as it was "undertaking a 
'unitary  analysis ' of the effects of the challenged subsidies for the purpose of claims of both 
displacement  and impedance", the Appellate  Body's statements from the original proceeding s 
"{did} not appear to be entirely relevant to the situation at hand".1901 
5.666.   Turning to the "appropriate{} representative period", the Panel noted that the 
United  States  had submitted data for the period from 2001 to 2013.1902 The Panel considered  that 
the extent to which the United  States  had established its claims of serious prejudi ce would  be 
                                                                                                                                                  
1658, 1661, 1667, 1674, 1678, 1681, 1685, 1 688, and 1691; comments on the United  States' response to 
Panel question No. 162). (emphasis original)  
1892 Panel  Report, para. 6.1799.  
1893 Panel  Report, para. 6.1800 (quoting Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft , para. 1163). 
1894 Panel  Report, para. 6.1803.  (emphasis original)  
1895 Panel  Report, para. 6.1803. (emphasis original)  
1896 Panel  Report, para. 6.1803.  
1897 Panel Report, fn  3293 to para. 6.1804 (quoting Appellate  Body Report, EC and certain member 
States – Large Civil Aircraf t, para. 1179).  
1898 Panel  Report, para. 6.1804 (referring to Appellate  Body Report, EC and certain member States – 
Large Civil Aircraft , paras.  1188-1190 and 1193 -1198). (emphasis original)  
1899 Panel  Report, para. 6.1804 (referring to Appellate  Body Report, EC and certain member States – 
Large Civil Aircraft , paras.  1170 and 1188). (emphasis original)  
1900 Panel  Report, para. 6.1804 (referring to Appellate  Body Report, EC and certain member States – 
Large Civil Aircraft , para. 1179). (emphasis original)  
1901 Panel  Report, para. 6.1804. (emphasis original; fn  omitted)  
1902 Panel  Report, para. 6.1805 (referring to United  States' response to Panel questions No. 40 and 
No. 162; Summary Table of Updated Ascend Aircraft Database (Panel Exhibit USA -578 (BCI))).  WT/DS316/AB/RW  
 
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  "focused on the most recent market data presented by the parties in this dispute from the 
post-implementation period ", as it was only with respect to "the effects found to exist in the period 
after 1 Decembe r 2011" that the European  Union  and the four  member States could  "be found to 
have failed to  comply with {the}  obligation to ' take appropriate step s to remove the adverse 
effects'  by the end  of the implementation period ".1903 
5.667.   The Panel next tabulated "the volume of deliveries and market share" data for each of the 
different country and product markets  at issue .1904 The Panel found that , in light of the 
two "plausible " counterfactual scenarios, it was 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 
achieved by the US LCA industry would have been higher than its actual level.1905 The Panel 
considered that: (i) "in both 'plaus ible' counterfactual scenarios, any new non-US LCA competitor 
would have only entered the market with a single -aisle LCA", implyi ng that "the twin -aisle and 
VLA markets would have been supplied by the United  States ' industry alone"; and (ii) while it was 
possible that "any new non-US LCA producer entering the market after the end of 2006 " might 
well have been able to "win a relatively small number of single -aisle aircraft orders between 
1 December 2011 and the end of 2013 ", it had "strong doubts about wheth er such a new entrant 
could have also made deliveries  over {those} years".1906 The Panel was thus satisfied  that no new 
non-US LCA producer entering the market after the end of 2006  could have delivered  a single -aisle 
LCA between 1  December  2011 and the end o f 2013.  
5.668.   Finally, with regard to the  non-attribution factors asserted by the European  Union , 
the Panel was of the view that these factors were "either entirely or partly premised on the 
existence of Airbus as a competitive LCA producer offering a full range  of LCA in all three LCA 
product markets".1907 Having found that , in the "plausible " counterfactual scenario s, Airbus would 
not have existed at the relevant times, the Panel considered that the LA/MSF subsidies must 
therefore be a "genuine and substantial " cause of the post-implementation period deliveries.1908  
5.669.   For these reasons, the Panel found that, in the absence of the "product 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 between 1 December 2011 and the end of 2013 would 
have been higher than its actual level in all relevant product markets ".1909 Accordingly, the Panel 
concluded that:  
the United  States  has established that the "product" effects of the challenged LA/MSF 
subsidies are a "genuine and substantial" cause of displacement and/or impedance  of 
United  States  LCA in the markets for single -aisle LCA in the European  Union , Australia, 
China and India; twin -aisle LCA in the European  Union , China, Kore a and Singapore; 
and very large LCA in the European  Union , Australia, China, Korea, Singapore and the 
United Arab Emirates.1910 
5.6.4.3   Claims and arguments on appeal  
5.670.   The European  Union  contends that the Panel erred in its application of Articles  5(c), 6.3 , 
and 7.8 of the SCM  Agreement in finding causation for serious prejudice , because the Panel failed 
to account for the differences in the degree of competition between the relevant LCA at issue. 
The European  Union  submits that , given the "extremely broad interpretati on that the Panel 
adopted for the term 'market'" and the "consequent identification of product markets within which 
                                                
1903 Panel  Report, para. 6.1444.  (emphasis original)  
1904 Panel  Report, para. 6.1805, Tables 20 -22. 
1905 Panel  Report, para. 6.1806.  
1906 Panel  Report, para. 6.1806. (emphasis original) The Panel recalled that deliveries of new LCA would 
lag their order date by "typically at least  three years, and usually many more years in respect of newly 
launched  aircraft". (Ibid. (emphasis original))  
1907 Panel  Report, para. 6.1814.  
1908 Panel  Report, paras.  6.1814 -6.1816.  
1909 Panel  Report, para. 6.1817.  
1910 Panel  Report, para. 6.1817. In light of these findings, the Panel refrained from making any findings 
concerning the United  States' conditional claim of " threat  of displacement and impedance in the market for 
single -aisle LCA in the European Union". (Ibid., para. 6.1818 (emphasis original))  WT/DS316/AB/RW  
 
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  there would be 'weaker and stronger  competitive relationships' ", it was important for the Panel, in 
its causation analysis, "to account for these differences in the degree of competition".1911 
The European  Union considers this failure to be "all the more troubling" because the Panel noted 
the " absence  of close competitive relationships between the products it placed into the same 
product market".1912 Therefore, the European  Union argues, the Panel should  have "assessed 'the 
specific circumstances and dynamics of competition occurring in the relevant geographic market 
and the demands of customers in that market' to ensure that it arrive {d} at 'meaningful findings 
of' displacement, impedance or lost sales"1913, but it failed to do so.1914 Instead, the Panel based 
its findings of serious prejudice on its theory that "Airbus would not have been able to offer its 
current range of aircraft in a counte rfactual absent the subsidies"1915, and " ignored the 'genuine 
and substantial' causation standard " in Articles  5(c) and  6.3 of the SCM Agreement.1916 
5.671.   The European  Union further contends that  the Panel failed to take into account the 
market -specific and sale -specific non-attribution factors that the European  Union  demonstrated 
caused (or contributed to causing) the observed market phenomena1917, notwithstanding the 
Panel's recognition that "an LCA customer's decision will be influenced by a host of non-price 
factors ".1918 Rather, the Panel "characterised every Airbus sale as a lost sale to Boeing, and every 
delivery of an Airbus LCA to a market at issue as a basis for its findings of 'displacement and/or 
impedance'".1919 With regard to lost sales, the European  Union submits  that the Panel rejected its 
arguments concerning several non -attribution factors relating to advantages enjoyed by Airbus 
vis-à-vis Boeing, noting instead that "Airbus would not have had any of these advantages … in the 
'plausible' counterfactual scenario s because it simply would not have existed ."1920 Similarly, the 
European  Union argues, the Panel rejected the non -attribution factors raised by the 
European  Union in relation to displacement and impedance on the ground that Airbus would not 
have existed "but for" the LA/MSF subsidies.1921 Referring to the Panel's rejection of the 
European  Union's request to seek information under Article  13 of the DSU for purposes of 
examining non -attribution factors, the European Union contends that the Panel  simply 
"pre-judged"  the relevance of non-attribution factors.1922 
5.672.   Finally, the European  Union alleges errors of interpretation and application of 
Articles  6.3(a) and 6.3(b) of the SCM  Agreement in respect of the Panel's findings of displacement 
and/or impedance. First, the European  Union contends that  the Panel erred in its interpretation of 
Articles  6.3(a) and 6.3(b)  of the SCM  Agreement because it made "undifferentiated findings of 
'displacement and/or  impedance' for the countr y and product markets at issue", thereby 
"conflating the two concepts of 'displacement' and 'impedance' ".1923 The European  Union  also 
contends that the Panel erred in interpreting Articles  6.3(a) and 6.3(b) to permit a finding of 
displacement "without any engagement with the sales vol ume and market share  data", 
and "without a finding of clearly discernible and identifiable declining trends in sales volume or 
market shares for each of the country and product markets at issue".1924 Second, t he 
European  Union  alleges  that the Panel erred in its application of Articles  5(c), 6.3(a), 6.3(b), 
and 7.8 of the SCM  Agreement because : (i) the Panel failed to adopt a large enough number of 
data poin ts to investigate " trends"  in a meaningful manner1925; and (ii)  the Panel erred "by failing 
to engage with the data, and by instead making findings of displacement entirely divorced from 
                                                
1911 European  Union's appellant's submission, para. 939. 
1912 European  Union 's appellant's submission, para. 925. (emphasis original)  
1913 European  Union's appellant's submission, para. 928 (quoting Appellate  Body Report,  
EC and certain member States – Large Civil Aircraft , para. 1136).  
1914 European  Union's appellant's submission, para. 929. 
1915 European  Union's appellant's submission, para. 941. 
1916 European  Union's appellant's submission, para. 942. 
1917 European  Union's appellant's submission, para . 916. 
1918 European  Union's appellant 's submission, para. 946 (quoting Panel  Report, para. 6.1186). 
(emphasis added by the European  Union)  
1919 European  Union's appellant's submission, para. 947. 
1920 European  Union's appellant's submission, para. 950 (quoting Panel  Report, paras.  6.1791 
and 6.1795).  
1921 European Union's appellant's submission, paras. 951 -954. 
1922 European  Union's appellant's submission, para . 956. 
1923 European  Union's appellant's submission, para. 967. 
1924 European  Union's appellant's submission, para. 1014. See also paras.  1017 and 1022.  
1925 European  Union's appellant's submission, para. 1024.  WT/DS316/AB/RW  
 
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  the data ".1926 With respect to the Panel's findings o f impedance, the European  Union submits that 
the Panel repeated "essentially the same errors "1927, that is, "in the Panel 's view, impedance may 
be found without any assessment of sales volume and market share data, and without a finding of 
a trend that is clearly discernible and identifiable ".1928 
5.673.   The United  States  responds  that there is no support in the text  of the SCM  Agreement or 
the Appellate  Body's guidance for the proposition that "the  'closeness of competition' between 
products must, as a general rule, be examined twice: first in the product market inquiry and then 
in the evaluation of whether displacem ent, impedance, or lost sales of the like product in the 
relevant market was the 'effect of the subsidy' to the subsidized product".1929 Thus, the 
United  States  argues that, "by properly taking the nature and degree of competition into account 
in delineating the product markets, the Panel protected against reaching subsequent adverse 
effects findings that were not meaningful".1930 Moreover,  the United  States submits that the Panel 
recognized the "need to properly take into account whether a competitive relationsh ip is 'at most, 
indirect or remote'", and did not, as the European  Union alleges, find that "all products that have 
some competitive relationship, regardless of the nature or degree of that relationship, must be 
placed in the same market for the purposes o f Article  6.3".1931 The United  States also contends 
that the Panel "did … examine 'the existence, nature and degree of competition between the 
relevant a ircraft' … in exhaustive detail  in its analysis of the appropriate product markets".1932 
Furthermore, the Uni ted States asserts that the European  Union has not identified  a specific 
product relationship in this dispute that was not properly captured by the Panel's analysis of 
product markets and that should have  been addressed at the causation stage.1933 According to the 
United  States, where the parties had argued that particular aspects of competition were relevant 
to specific sales campaigns or geographic markets, the Panel examined such issues in the course 
of its analyses of "the {United  States'} lost  sales and displacement/impedance claims".1934 In sum, 
the United  States contends that " there are no product -related causation issues that the Panel left 
unaddressed in its analyses of product markets and causation and, therefore, no errors for the 
Appellate  Body to correct. "1935 
5.674.   The United  States further contends that the Panel's treatment of the European  Union's 
non-attribution arguments is both a logically sound extension of its counterfactual analysis and 
completely consistent with Articles  5(c), 6.3, and 7.8  of the SCM  Agreement .1936 The United  States 
submits that, with respect to lost sales, the Panel explicitly considered each of the 
European  Union's non -attribution factors and reje cted most of them because they were premised 
on the existence and market presen ce of Airbus in the post -implementation period, a scenario the 
Panel found to be "unlikely".1937 In the United  States' view, such factors were not "valid" 
non-attribution factors because Airbus would  not have existed under the "plausible" counterfactual 
and, as the Appellate  Body stated,  it "would be pointless to attempt delineating the features of 
something that would not have existed without the subsidies".1938 The United  States also maintains 
that, contrary to the European  Union's arguments, the Panel assessed  the non -attribution factors 
individually where they were unique to a customer. With regard to "displacement and/or 
impedance", the United  States contends that the Panel 's analysis of the proposed non-attribution 
factors follows logically the line of reaso ning that , under the "plausible " counterfactual, Airbus 
                                                
1926 European  Union's appellant's submission, para. 1026.  
1927 European  Union's appellant's submission, para. 1037.  
1928 European  Union's appellant's submission, para. 1045 (referring to Panel Report,  
paras.  6.1802 -6.1804).  
1929 United  States' appellee's submission, para. 520. (emphasis original)  
1930 United  States ' appellee's submission, para. 511. 
1931 United  States' appellee's submission, para. 515 (referring to European  Union's appellant's 
submission, paras. 550, 559, 602, 614, 618, and 922).  
1932 United  States ' appellee's submission, para. 516 (referring to Panel  Report, paras.  6.1157 -6.1416).  
1933 United  States' appellee's submission, para. 528. 
1934 United  States' appellee's submission, para. 516 (referring to s ection s VIII.E.2.a -b of its submission) . 
1935 United  States' appellee's submission, para. 529. 
1936 United States' appellee's submission, para. 532. 
1937 United  States' appellee's submission, para. 535 (referring to Panel Report, paras. 6.1790 and 
6.1792 -6.1797, an d quoting Panel  Report, para. 6.1478).  
1938 United  States' appellee's submission, para. 535 (quoting Appellate  Body Report,  EC and certain 
member States – Large Civil Aircraft , para. 1264).  WT/DS316/AB/RW  
 
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  would not have existed in the reference period, absent the effects of the LA/MSF subsidies.1939 
Furthermore, according to the United  States, the Panel did not summarily reject any factor, but 
instead ana lysed how each factor would affect the behaviour of market participants in the 
counterfactual, and properly dismissed the European  Union's arguments on that basis.1940 
The United  States submits that the Panel rejected the European  Union's request to seek 
information pursuant to Article  13 of the DSU, because it correctly concluded that "the requested 
information is not necessary for its evaluation of the United  States' allegations of lost sales and 
displacement."1941 
5.675.   As for the specific interpretative errors of A rticles  6.3(a) and 6.3(b) alleged by the 
European  Union, t he United  States  contends  that "{e} very aspect of the Panel's unitary analysis 
demonstrates that it considered displacement and impedance as separate and distinct 
concepts. "1942 The United  States  adds that the fact that the Panel "made findings of displacement 
and impedance linked by the term 'and/or' confirms that it considered these product effects to be 
discrete concepts."1943 The United  States  further recalls  that the Appellate  Body, in interpret ing 
Articles  6.3(a) and 6.3(b), has explained that "panels may discern or identify displacement or 
impedance based on evidence of trends in import or export volumes and market shares".1944 
However, the United  States  also recalls the Appellate  Body's finding t hat, "because 'impedance 
may not be a visible phenomenon, evidence of trends may not be dispositive, or may hold less 
probative value, for a finding of impedance.'"1945 In the United  States' view, a comparison of the 
actual and counterfactual situations demon strated that imports (or exports) and market share of 
US LCA would have been greater in each of the relevant product markets, because "under the 
counterfactual scenarios, Airbus volume of deliveries and market share information would not have 
existed in an y of the relevant product markets ."1946 Thus, the United  States  submits that  the Panel 
correctly interpreted the terms " displacement " and "impedance " in Article  6.3 of the 
SCM Agreement .1947  
5.676.   For these reasons, the United  States requests us to reject  the Europea n Union's challenges 
to the Panel's analysis.1948 However, in the event that we  find that the Panel erred  in its 
assessment of the evidence related to displacement and impedance , or that the Panel should have 
more explicitly addressed trends , the United  States  requests that we complete the legal analysis of 
displacement and/or impedance based on relevant data from the period 2001-2013.1949 
5.6.4.4   Whether the Panel erred in its interpretation of "displacement" and 
"impedance"  
5.677.   We begin our analysis with the t ext of Article  6.3 of the SCM Agreement , which states, in 
relevant part:  
Serious prejudice in the sense of paragraph  (c) of Article  5 may arise in any case 
where one or several of the following apply:  
(a) the effect of the subsidy is to displace or impede  the imports of a like product of 
another Member into the market of the subsidizing Member;  
                                                
1939 United  States' appellee's submission, para. 539 (referring to Panel  Report, paras.  6.1455 -6.1479).  
1940 United  States' appellee's submission, paras.  540-546. 
1941 United  States' appellee's submission, para. 549 (quoting Panel  Report, Annex E -2, para. 2). 
1942 United  States' appellee's submission, para. 563. 
1943 United  States' appell ee's submission, para. 565 (quoting Panel  Report, paras.  6.1817 and 
7.1.d.xiv -xv; referring to Panel  Report, US – Cotton Yarn , fn 277 to para. 7.88).  
1944 United  States' appellee's submission, para. 568 (referring to Appellate  Body Reports, US – Upland 
Cotton , para. 478; EC and certain member States – Large Civil Aircraft , paras.  1166-1167 and 1170; 
US ‒ Large Civil Aircraft (2nd complaint) , para.  1086).  
1945 United  States' appellee's submission, para. 568 (quoting Appellate  Body Report,  
US – Large Civil Aircraf t (2nd complaint) , para. 1086).  
1946 United  States' appellee's submission, para. 571. 
1947 United  States' appellee's submission, para. 572. 
1948 United  States' appellee's submission, paras.  551 and 572.  
1949 United  States' appellee's submission, para. 573 (referring t o United  States' response to Panel 
questions No. 40 and No. 162; Summary Table of Updated Ascend Aircraft Database  (Panel Exhibit USA -578 
(BCI))).  WT/DS316/AB/RW  
 
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  (b) the effect of the subsidy is to displace or impede  the exports of a like product of 
another Mem ber from a third country market;  … 
5.678.   We note that Article  6.3(a) and  Article 6.3(b) of the SCM  Agreement both use the 
conjunction "or" to separate the terms "displace" and "impede". The text of Article  6.3 does not 
elaborate further on these concepts . In the original proceedings, the Appellate Body explained 
that, in order  to come to a finding that the effect of a subsidy  is "to displace or impede", 
"the counterfactual analysis would involve estimating what the sales of the complaining Member 
would have been in the absence of the challenged subsidy" , and thereafter comparing "{t}he 
counterfactual sales of the complaining Member … to its actual sales".1950 The Appellate  Body 
concluded that the effect of a subsidy  is "to displace or impede"  where "the counterfactual analysis 
shows that the sales of the complaining Member would have declined less or would have been 
higher in the absence of the challenged subsidy ."1951 That said, regardless of the methodology 
used to undertake an analysis of serious prejudice under Article 6.3, the market phenomenon 
must be shown to be the effe ct of the challenged subsidy.  
5.679.   Specifically, in relation to displacement, t he Appellate  Body construed th at concept "as 
relating to, and arising out of, competitive engagement between products in a market" .1952 
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"1953 – i.e. "there is a substitution effect 
between the subsidized product and the like product of the complaining Member".1954 
A determination of whethe r 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 evi dence 
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).1955 To that extent, while a  market trend ana lysis – 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.  
5.680.   The term "impede", as the Appellate  Body found, "connotes a broader array of situations 
than the term 'displace'" .1956 The Appellate  Body explained 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".1957 Evidence that sales 
would ha ve increased more or declined less than they did in the absence of the subsidy  would 
                                                
1950 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1163.  
1951 Appellate  Body Re port, EC and certain member States – Large Civil Aircraft , para. 1163.  The 
Appellate  Body added that "{t}he identification of displacement under this approach " (i.e. the two -step 
approach)  should focus on "clearly identifiable" trends in the markets, "looking at both volumes and market 
shares ". (Ibid., para. 1170 (emphasis added) ) We recall that, in the context of the two -step approach to 
causation adopted by the original panel, the Appellate  Body explained that, "w here a complainant puts forward 
a case  based on the existence of displacement as a directly observable phenomenon ", displacement can be 
found to exist where the " imports of a like product of the complaining Member are declining in the market of 
the subsidizing Member, and are being substituted  by the subsidized product ". (Ibid. (emphasis added))  
In contrast, u nder a unitary approach, the analysis of the particular market phenomena identified in the 
subparagraphs of Article  6.3 is not conducted separately from the analysis of whether there is a causal 
relationship between those market phenomena and the challenged subsidies. (Ibid., para. 1107)  
1952 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1119. 
(fn omitted) The Appellate  Body has explained that the following characteristics would  "normally  be necessary" 
before a panel can reach a finding of displacement under Article  6.3(b): "first, that at least a portion of the 
market share of the exports of the like product of the complaining Member must have been taken ove r or 
substituted by the subsidized product"; and "second, it must be possible to discern trends in volume and 
market share".  (Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1082 ( emphasis added; 
fn omitted) ) 
1953 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1119.  
1954 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1160. 
(fn omitted)  
1955 Appellate  Body Report, EC and certain member States – Large Ci vil Aircraft , para. 1162.  
1956 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1161. 
(fn omitted)  
1957 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1161.  WT/DS316/AB/RW  
 
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  indicate the existence of impedance  within the meaning of Articles  6.3(a) and 6.3(b).1958 
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".1959 As in t he case of displacement, a 
determination of whether the effect of a subsidy is to "impede" involves a fact -specific  analysis 
that can be made only on a case -by-case basis and in light of th e particularities of the 
market  concerned.  
5.681.   We recall , in the origi nal proceedings,  that the Appellate  Body acknowledged that 
"{t}here  … could be situations where displacement and impedance overlap"1960 and that "it may be 
difficult to draw a clear demarcation"1961 between these concepts. The Appellate  Body indicated, 
for examp le, how a particular factual situation could give rise to the phenomena of both 
displacement and impedance. Specifically with respect to situations where the imports or exports 
of the like product "are declining " and where they  "are declining by more than they otherwise 
would", the Appellate  Body noted that, "{t}o the extent that there is an observable decline  in the 
imports or exports, it could be considered a situation of displacement ."1962 At the same time, the 
Appellate  Body stated that "there is an aspect  of the decline that is not directly observable  – the 
decline is sharper than it would otherwise have been", in which  case, the "situation could be 
considered one of impedance".1963 
5.682.   With these considerations in mind, we turn to address the issues raised by th e 
European  Union  on appeal, beginning with the European  Union 's claim  that the Panel treated  
"displacement " and "impedance " as interchangeable concepts  and therefore erred . As noted, the 
European  Union asserts that "the Panel made undifferentiated findings of 'displacement and/or  
impedance' with respect to all of the country and product markets at issue".1964 The 
European  Union  contends that "a proper reading" of the Appellate  Body's guidance reveals that the 
Appellate  Body "matche{d} (i) the concept of 'displacement' with a situation where, absent the 
subsidies, 'the sales of the complaining Member would have declined less' , and (ii) the concept of 
'impedance' with a situation where, absent the subsidies, 'the sales of t he complaining Member … 
would have been higher'."1965 The European  Union  further submits th at "the Panel failed to specify 
whether it had found (i) both displacement and impedance in all country a nd pro duct markets, 
or instead (ii) had found one or the other of these two distinct effects in any given market ."1966 
5.683.   The United  States  responds by recall ing that both "displacement and impedance" were 
present in most of the product markets and  the only product and geographical markets in which 
the United  States  did not allege "displacement and/or impedance, or the threat thereof"1967, were 
the EU twin-aisle LCA market; the China VLA market; and the United Arab Emirates VLA market.  
Instead, the United States has claimed  only impedance in these markets.1968 Therefore , according  
to the United States,  "the Panel's simultaneous analysis of both concepts represents a logical 
approach to assessing the { United  States '} claims ."1969 The United  States  submits that 
"{t}he Appellate  Body has clarified that a single factual scenario (namely e vidence of declining 
                                                
1958 Appellate  Body Report, EC and certa in member States – Large Civil Aircraft , para. 1162.  
1959 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1161. 
(fn omitted)  The Appellate  Body further noted that impedance " presupposes the existence of an economic 
mechanism by which a subsidized product hinders, obstructs, or holds back sales of a like product in the 
relevant product market ". (Ibid., fn  2465 to para. 1119)  
1960 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , fn 2548 to para. 1161.  
1961 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1162.  
1962 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , fn 2550 to para. 1162.  
1963 Appellate  Body Report, EC and certain member States – Large Civi l Aircraft , fn 2550 to para. 1162.  
1964 European  Union's appellant's submission, para. 979. (emphasis original)  
1965 European  Union's appellant's submission, para. 998 (quoting Appellate  Body Report, EC and certain 
member States – Large Civil Aircraft , para. 1163).  
1966 European  Union's appellant's submission, para. 979. 
1967 United  States' appellee's submission, fn  1025 to para. 564 (referring to United States' response to 
Panel question No. 162, paras.  14-15, 24, and 32).  
1968 United States' appellee's submission, pa ras. 579, 591, and 603 (referring to United States' response 
to Panel question No. 162, paras. 16, 24, and 32, respectively; Summary Table of Updated Ascend Aircraft 
Database (Panel Exhibit USA -578 (BCI)), pp. 3, 9, and 15, respectively).  
1969 United  States' appellee's submission, para. 564 (referring to Panel  Report, para. 6.1801; 
United  States'  response to Panel question No. 162 , paras.  13-31). WT/DS316/AB/RW  
 
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  sales) could demonstrate the existence of both effects ."1970 Thus, the United  States  asserts that it 
is "inaccurate to suggest  … that the Appellate  Body 'matched' the concepts of displacement and 
impedance with an exhaustive set of specif ic, and mutually exclusive, factual scenarios ."1971 
5.684.   The Panel, as we recall, noted the United  States' contention  that the US LCA industry 
"suffer{ed} serious prejudice in the form of displacement and/or impedance  … in all three relevant 
product markets in the  European  Union , and in 11 third country product markets".1972 The Panel 
reviewed  the guidance provided by the Appellate  Body "on how to determine whether the effect of 
a subsidy is to impede or displace the imports or exports of a like product".1973 The Panel q uoted , 
in particular,  the Appellate  Body's finding that , "{w}hile there may be some overlap between the 
concepts, 'displacement' and 'impedance' are therefore not interchangeable concepts ."1974 
The Panel further recalled the "framework" laid down by the Appellate  Body in order to "evaluate a 
claim of impedance or displacement".1975 
5.685.   The Panel noted that the United  States  had "introduced evidence of Airbus and Boeing 
delivery volumes and market shares in all relevant product mar kets for each year from 2001 
to 2013" to support its claim  that, "in the absence of the 'product' effects of LA/MSF, 
the United States LCA industry's delivery volumes and market shares would have been higher than 
they actually were  in each of the relevant markets."1976 The Panel added that a finding of 
displacement or impedance can be made "where the effect of a subsidy is to prevent the like 
product from achieving a higher volume of sales and market share than would otherwise be the 
case in the absence of the subsidy".1977 
5.686.   As discussed above,  the Appellate  Body has indicated that, generally , the "more 
appropriate approach" to assess the effect of a subsidy under Article 6.3 is through  a "unitary " 
counterfactual analysis.1978 In the case of displacement and impedance, "the counterfactual 
analysis w ould involve estimating what the sales of the complaining Member would have been in 
the absence of the challenged subsidy" , and thereafter its comparison with the "actual sales".1979 
Displacement or impedance would arise  where "the counterfactual analysis sho ws that the sales of 
the complaining Member would have declined less or would have been higher in the absence of the 
challenged subsidy ."1980 We understand the Panel to have sought to apply this framework when it 
turned to assess whether the volume of deliver ies and market shares that "would have been 
achieved by the United  States ' LCA industry between 1 December 2011 and the end of 2013 would 
have been higher than  its actual level  in all relevant product markets"1981 in the absence of the 
"product effects " of the LA/MSF subsidies . 
5.687.   Furthermore, we have noted th at there could be situations of  overlap, in the sense that a 
given situation may give rise to both displacement and impedance, and that the Appellate  Body 
has cautioned against drawing a bright line distin ction between these concepts. It is conceivable 
that, depending on the facts of a given case, for a particular product and geographic market, a 
                                                
1970 United  States' appellee's submission, para. 566 (referring to Appellate  Body Report, EC and certain 
member States  – Large Civil Aircraft , para. 1162).  
1971 United  States' appellee's submission, para. 567.  
1972 Panel  Report, para. 6.1801. The Panel also noted that the United  States made a "conditional claim" , 
in the event that the Panel were to reject its present serious p rejudice claims in the single -aisle LCA  market in 
the European Union , that "the United  States ' LCA industry {was} threatened  with displacement and/or 
impedance in … that market ". (Ibid., fn 3288 thereto (referring to United  States ' first written submission to 
Panel, para. 514; second written submission to the Panel, para.  720; response  to Panel question No. 162)  
(emphasis original))  
1973 Panel  Report, para. 6.1799. (emphasis added)  
1974 Panel  Report, para. 6.1799 (quoting Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , 
para. 1071, in turn referring to Appellate  Body Report, EC and certain member States – Large Civil Aircraft , 
paras.  1119, 1160 -1161, 1165 -1166, and 1170).  
1975 Panel  Report, para. 6.1800. (emphasis added)  
1976 Panel Report, para. 6.1801 (referring to United  States' first written submission to the Panel, 
paras.  520-532).  
1977 Panel Report, para. 6.1803.  
1978 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1109.  
1979 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1163.  
1980 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1163.  
1981 Panel  Report, para. 6.1817. (emphasis added)  WT/DS316/AB/RW  
 
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  panel may find that the effect of a subsidy is: displacement; or impedance; or  displacement and 
impedance. Although it is not entirely clear what the Panel meant when it used the term 
"displacement and/or impedance" , as we see it, the Panel's finding that "the United  States has 
established that the 'product' effects of the challenged LA/MSF subsidies are a 'genuine and 
substantial' cause of displacement and/or impedance  of United  States LCA  in the 
{relevant  geographic} markets for single -aisle LCA … ; twin-aisle LCA … ; and {VLA} "1982 
is informed by  the manner in which the United  States framed its claims.1983 We do not read the 
Panel's use of the term "displacement and/or impedance" , when summing up its serious prejudice 
findings for the relevant  markets at issue, as suggesting that the Panel found the existence of 
these serious prejudice phenomena in an undifferentiated mann er with respect to one and the 
same product and country market.  Therefore,  contrary to what the European Union appears to 
suggest, it does not necessarily follow from the Panel's use of the term "displacement and/or 
impedance" that the Panel treated "displ acement" and "impedance" as interchangeable and 
indistinguishable concepts for purposes of its adverse effects analysis.1984 
5.6.4.5   Whether the Panel failed to examine the "closeness of competition"  
5.688.   As noted above, the European  Union  claims that the Panel erred in its application of 
Articles  5(c), 6.3 , and 7.8 of the SCM  Agreement in finding causation because the Panel failed to 
account for the differences in the degree of competition between LCA in the relevant product and 
country markets at  issue. According to the European  Union , given the broad interpretation that the 
Panel adopted for the term "market", and the Panel's identification of product markets within 
which "there would be 'weaker and stronger competitive relationships ' (or in some  instances, no 
competitive constraint imposed by one product on another within the same product market)"1985, 
it was important for the Panel, in its causation analysis, to account for these differenc es in the 
degree of competition . The European  Union further asserts that, "even where there does exist 
'some' competition between two products, that fact does not conclusively establish whether 
subsidies to one product result in adverse effects for the other".1986 
5.689.   We recall that, in section 5.6.2 above , we have addres sed the European  Union's appeal 
concerning the Panel's product market findings, inclu ding its assertion that the Panel erred in 
failing to assess the nature and degree of competition between products. We have concluded that 
the Panel's assessment of the re levant product markets in these compliance proceedings was 
based on a proper analysis of the nature and degree of competition between products that the 
Panel found to demonstrate sufficient substitutability.1987 Accordingly, we have found no error in 
the Pane l's findings in this regard . 
                                                
1982 Panel  Report, para. 6.1817. (emphasis added)  
1983 For instance, the United States has claimed that  in the single -aisle LCA market in India, the "severe 
decline in market share demonstrates the displacement and/or impedance of Boeing LCA exports".  
(United  States' appellee's submission, para.  593 (referring to U nited States' response to Panel question 
No. 162, para.  25; Summary Table of Updated Ascend Aircraft Database (Panel Exhibit USA -578 (BCI)), p.10)) 
Similarly, in the single -aisle LCA market in Australia, " Boeing LCA are being displaced and/or impeded". (Ib id., 
para. 583 (referring to Summary Table of Updated Ascend Aircraft Database (Panel Exhibit USA -578 (BCI)), 
p.5)) However, in respect of the single -aisle LCA market in China, "the displacement found by the 
Appellate  Body is continuing, and Boeing's 737 e xports are also being impeded". (Ibid., para.  587 (referring to 
United  States' response to Panel question No.  162, para.  21; Summary Table of Updated Ascend Aircraft 
Database (Panel Exhibit USA -578 (BCI)), p.7) ) Similarly, in the VLA market in Korea, "the A380 has displaced 
and impeded the 747 -8I". (Ibid., para.  597 (referring to United  States' response to Panel question No. 162, 
para. 28; Summary Table of Updated Ascend Aircraft Database (Panel Exhibit USA -578 (BCI)), p.  12)) 
Finally,  in respect of the twi n-aisle LCA market in the European Union and the VLA markets in China and the 
United  Arab Emirates, the Unites States claimed the existence of only impedance. (Ibid., paras. 579, 591, and 
603 (referring to United States' response to Panel question No. 162,  paras.  16, 24, and 32, respectively; 
Summary Table of Updated Ascend Aircraft Database (Panel Exhibit USA -578 (BCI)), pp. 3, 9, and 15, 
respectively))  
1984 European  Union's appellant's submission, para.  977. We review the Panel's findings of serious 
prejudic e in the relevant markets at issue in section 5.6.4.6 of this Report.  
1985 European Union's appellant's submission, para. 939. (emphasis  added)  See also Panel Report, 
para. 6.1416 . 
1986 European Union's appellant's submission, para. 93 4. 
1987 See section 5.6.2 of this Report. See also Panel Report, paras. 6.1292, 6.1294, and 6.1372; 
Appellate  Body Report, EC and certain  member States – Large Civil Aircraft , para. 1120.  WT/DS316/AB/RW  
 
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  5.690.   That said, we agree with the European Union to the extent that it argues that a panel's 
assessment and identification of relevant product market(s) on the basis of actual or potential 
competition between products  forms only a p art of a panel's overall analysis of whether a given 
subsidy contribute s in a genuine and substantial way to producing or bringing about one or more 
of the adverse effects enumerated  in Article  6.3 of the SCM Agreement . Indeed, as the 
Appellate  Body has stated, a panel's evaluation of "whether the alleged subsidized and like 
products compete in the sa me market or multiple markets … is a prerequisite  for assessing 
whether displacement {or impedance} within the  meaning of Articles  6.3(a) and  6.3(b) could be 
found to exist".1988 However, an assessment of the nature and degree of competition in the 
relevant product market (s) does not, in and of itself, answer the question of whether the subsidies 
existing in the post -implementation perio d are a genuine and substantial cause of adverse effects 
in the relevant market (s). We will bear these considerations in mind as we continue to review the 
Panel's findings.  
5.6.4.6   Whether the Panel erred in its findings of significant lost sales and 
"displacement  and/or impedance"  
5.6.4.6.1   The data set examined by the Panel  
5.691.   Before reviewing the Panel's findings of serious prejudice, we address a preliminary issue 
raised by the European  Union  concerning the size of the data set examined by the Panel in 
reaching its finding s of "displacement and /or impedance ". The Eu ropean  Union contends that 
"the Panel failed to adopt a large enough number of data points to meaningfully investigate 
'trends'"1989 and, "{b}y virtue of its choices", the Panel was "effectively left with two data p oints – 
annual data for the years 2012 and 2013".1990 According to the European  Union, "{t}he  data for 
the single month, December 2011, would present the problem of 'sales {being} sporadic and 
volumes relatively small, making identification of any trends more  difficult'"1991 and that 
"there  would be no meaningful way to compare data pertaining to a single month to data 
pertaining to full years".1992 
5.692.   The Panel, as we recall, considered that "a panel tasked with reviewing the merits of 
claims " made under Articles  6.3(a), 6.3(b), and 6.3(c) of the SCM Agreement  must "focus its 
efforts on determining the extent to which the challenged subsidies are a 'genuine and substantial' 
cause of serious prejudice in the present "1993, or "' under  current factual conditions '".1994 The P anel 
noted the parties' agree ment that, as far as the findings in these compliance proceedings were 
concerned, it may have been  possible and even appropriate for the Panel to examine data from a 
historical period that predate d the end of the implementation  period . The Panel shared this view 
and considered that its "duty to conduct an objective assessment of the matter pursuant to 
Article  11 of the DSU would be best served" if it were "to examine the entirety of the evidence put 
forward by the United  States , and the full rebuttal evidence advanced by the European  Union , 
including the most recent information where relevant and reliable".1995 However,  while the Panel  
did not see the "need to make any a priori  choice of reference period",  it considered  that the 
United States  would only succeed in its non-compliance claims if it could establish "the existence 
                                                
1988 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1128. (emphasis 
added)  
1989 European  Union's appellant's submission, para. 1024.  
1990 European  Union's appellant's submission, para. 1025.  
1991 European  Union's appellant's submission, fn  1114 to para. 1025 (quoting Appellate  Body Report, 
EC and certain mem ber States – Large Civil Aircraft , para. 1188).  
1992 European  Union's appellant's submission, fn  1114 to para. 1025.  
1993 Panel  Report, para. 6.1443 (referring to Panel  Reports, US – Upland Cotton (Article  21.5 – Brazil) , 
para. 10.18; EC and certain member Stat es – Large Civil Aircraft , paras.  7.1694 and 7.1714). (emphasis 
original)  
1994 Panel  Report, para. 6.1443 (quoting Panel  Report, US – Upland Cotton (Article  21.5 – Brazil) , 
paras.  10.104 and 10.248 (emphasis added)).  
1995 Panel  Report, para. 6.1444.  WT/DS316/AB/RW  
 
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  of present  serious prejudice to its interests … in the post-implementation period , that is, present  
serious prejudice in the period after 1  December  2011".1996 
5.693.   As noted, while evidence pointing to changes in relative market shares may be indicative  
of displacement  or impedance , it does not, without more, establish that the effect of a particular 
subsidy is to displace or impede imports or exports of a like product of another Member within the 
meaning of Articles 6.3(a) and 6.3(b). Article  6.4 of the SCM Agreement  stipulates , in this regard , 
that displacement or impedance "shall include any case in which … it has been demonstrated that 
there has been a change in rela tive shares of the market to the disadvantage of the 
non-subsidized like product ( over an appropriately representative period  sufficient  to demonstrate 
clear trends  in the development of the market for the product concerned, which,  in normal 
circumstances,  shall be at least one year) ".1997 Although  a plain reading of Article  6.4 suggests 
that, under normal circumstances, trends in the market can be established even on the basis of 
data from a one -year reference period, this will depend on the nature of the pro duct and the 
particularities of the market at issue and the number of data points available in the chosen 
reference period. The  Appellate  Body has stated  that "{t}he identification of a trend will be more 
accurate the larger the data set used in the analys is".1998 At the same time, the Appellate  Body 
has explained that "too strict a requirement concerning the size of the data set could preclude a 
Member from timely challenging subsidies that cause adverse effects to its interests".1999 
Moreover, in the context of  compliance proceedings, a panel may  be called upon to adjudicate a 
claim of non-compliance following what may have been a relatively short reasonable period of time 
for implementation.  We also note the particular nature of the LCA industry where instances  of 
sales and volumes of deliveries are generally much lower than in the case of consumer goods.  
5.694.   In our view, these considerations are apt and instructive in the context of these  
compliance proceeding s. We do not understand the Panel to have a priori  excluded from 
consideration relevant evidence and information that had been put before it. In the circumstances 
of the present case, given that it recognized that "the United  States {would} only succeed in its 
non-compliance claims if it {could} establish the existence of present  serious prejudice … in the 
post-implementation period "2000, we see no error in the Panel's decision to focus on the "most 
recent market data presented by the parties in this dispute from the post-implementation 
period ".2001 While we acknowledge that the data on the volume of deliveries and market shares 
from the post-implementation  period in this case appear to have been rather  limited, we see no 
basis to rule out a priori , without further analysis, the possibility that such  data could support a 
finding as to the existence of adverse effects  in the post -implementation period.  
5.695.   We now turn to examine the Panel's findings of alleged lost sales2002 and 
"displacement  and/or impedance " in the post -implementation period, beginning with its 
findings  for the single -aisle LCA market.  
                                                
1996 Panel  Report, para. 6.1444. (emphasis original)  Accordingly, for the purposes of assessing the 
United  States' claims of lost sales, and "displacement and/or impedance", the Panel took into account market 
data for the period December 2011 through December 2013. (Ibid., para. 6.1781, Table 19, and para. 6.1805, 
Tables 20 -22) 
1997 Emphasis added.  
1998 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1167. 
(fn omitted)  
1999 Appellate  Body Report, EC and certain member States – Large Civ il Aircraft , para. 1167.  
2000 Panel Report, para. 6.1444. (emphasis original)  
2001 Panel  Report, para. 6.1444. (emphasis original)  
2002 Before the Panel, the United States submitted evidence of 115 orders for approximately 1300 Airbus 
LCA made between 2001 and 2013 , arguing that all such orders represent ed "lost sales" to the US LCA 
industry within the meaning of Article 6.3(c). The United States further argued that all of these orders should 
have been  considered for the purpose of establishing whether the European Union has complied with the 
recommendations and rulings of the DSB. The Panel , however,  decided to examine only claims of "lost sales" 
occurring in the post -implementation period. (Panel Report, fn 3258 to para. 6.1781) This approach by the 
Panel has not b een appealed by either of the parties to the dispute.  WT/DS316/AB/RW  
 
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  5.6.4.6.2   The single -aisle LCA market  
5.696.   The Panel identified the following "lost sales" alleged by the United  States in the 
single -aisle LCA market in the post -implementation period, all of which concerned the sales of 
Airbus' A320 family of LCA:  
Table 8: United States ' "Lost Sales " Claims in the Post -Implementation Period  
Product Market / Customer  LCA model  No. of Orders  
2012  No. of Orders  
2013  
Single -Aisle 
China Aircraft Leasing Company  A320ceo/A321ceo  28/8  
easyJet  A320ceo/A320neo   35/100  
Norwegian Air Shuttle  A320neo  100  
Source: Panel Report, para. 6.1781, Table 19.  
5.697.   As noted above, the Panel considered that, under either "plausible" counterfactual 
scenario, competition from potential new non-US entrants would have been limited to the 
single -aisle LCA market.2003 However, the Panel found it difficult to see how any new non-US 
entrant could have developed "a credible single -aisle LCA offering" that could compete with Boeing 
(or a duopoly of Boeing with another US LCA producer) in the sales campaigns in question.2004  
5.698.   Furthermore, we recall that the United  States has claimed the existence of displacement 
and/or impedance in the markets for single -aisle LCA in Australia, China, and India.2005 For the 
EU single -aisle LCA market, the United  States has claimed  the existence of  "impedance"2006, and in 
the alternative, threat of displacemen t and impedance.2007 The Panel identified  "the volume of 
deliveries and market share" data for each of the different single -aisle LCA markets in Table 20 of 
its Report  (reproduced in Table 9  below ). All of the deliveries by Airbus reflected in Table 9  
involved  deliveries of the A320 family of LCA .2008 
                                                
2003 Panel  Report, paras.  6.1787 -6.1788.  
2004 Panel  Report, para. 6.1793.  
2005 United  States' appellee's submission, paras.  583, 587, and 593.  
2006 United  States' appellee's submission, para.  575. 
2007 United States' appellee's submission, para. 577 (referring to United States' response to Panel 
question No. 162, para. 14; Summary Table of Updated Ascend Aircraft Database (Panel Exhibit USA -578 
(BCI)), p.2). The Panel however made no determination of the United  States'  claim of threat of displacement 
and/or impedance in this market given that "the United  States requested the Panel to consider this claim only 
if {it} rejected {the United  States'} claims of present  serious prejudice". (Panel Report, para.  6.1818 (referring 
to United  States' first written submission to the Panel, para.  514; second written submission to the Panel, 
para. 720; response to Panel question No. 162)  (emphasis original) ) 
2008 Panel Report, para. 6.1805, Table 20 : Market for single -aisle LCA  (containing data from  Ascend  
database , Deliveries made, data request as of 7 April 2014 (Panel Exhibit EU -512)) See also Ascend database, 
Boeing and Airbus Deliveries in Units (2001 -2013), Commercial Operator s, data request as of 30 March 2014  
(Panel Exhibit USA -577), referred to in Panel Report, fn 2313 to para. 6.1368.  WT/DS316/AB/RW  
 
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  Table 9: Market for single -aisle LCA  
 European  Union  Australia  China  India  
Delivery 
Data  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  
Boeing 
Volume 
(Units)  10 59 29 4 21 14 4 73 123 1 8 17 
Boeing 
Market 
Share  83.3%  49.6%  29.0%  80% 77.8%  51.9%  33.3%  41.7%  55.9%  33.3%  26.7%  43.6%  
Airbus 
Volume 
(Units)  2 60 71 1 6 13 8 102 97 2 22 22 
Airbus 
Market 
Share  16.7%  50.4%  71.0%  20% 22.2%  48.1%  66.7%  58.3%  44.1%  66.7%  73.3%  56.4%  
5.699.   Following this table  in its Report , the Panel stated  that, "{i}n the light of the two 'plausible' 
counterfactual scenarios", it was evident 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 ind ustry would have been higher than its actual level."2009 The Panel also 
expressed "strong doubts" about whether a new non -US LCA producer of single -aisle LCA "could 
have … made deliveries  over these years".2010 Accordingly, the Panel found the United  States to 
have demonstrated the existence of displacement and/or impedance  in the single -aisle LCA 
markets in the European Union, Australia, China, and India.2011  
5.700.   Thus, in reaching its findings of adverse effects in the single -aisle LCA market, the Panel 
relied on the proposition that Airbus would not have been able to sell or deliver its A320 family of 
LCA in the absence of the "product effects" of the challenged LA/MSF subsidies . As explained 
above, the Panel's findings regarding the "product effects" of LA/MSF subsid ies on the A320 
concerned primarily the effects of those subsidies that had expired prior to the end of the 
implementation period.2012 We have found, however, that the European Union has no compliance 
obligation in respect of those expired subsidies. Rather, the pertinent question is whether the 
subsidies existing in the post -implementation period cause adverse effects, such that the 
European  Union has failed to comply with its obligation under Article 7.8 of the SCM Agreement to 
"take  appropriate steps to rem ove the adverse effects".  
5.701.   In this respect, we do not find any analysis made by the Panel as to whether , and to what 
extent, Airbus' competitiveness in the single -aisle LCA market, gained through the pre -A380 
LA/MSF subsidies, was renewed and sustained beyo nd the original reference period as a result of 
the subsidies that the European  Union maintained or granted afte r the original reference 
period  (2001 -2006) and into the post -implementation period . The Panel did acknowledge that the 
A350XWB programme was of  "significant strategic importance" to Airbus in order for it "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".2013 The Panel, however, did not explore  
or elaborate upon how the "product effects" of the subsidies existing in the post -implementation 
period, particularly those for the A350XWB and A380 that we have reviewed above, may have 
contributed to Airbus' competitiveness in respect of its single -aisle LCA offerings in the 
post-implementation period , such that the alleged adverse effects  in the single -aisle LCA market  
                                                
2009 Panel  Report, para. 6.1806.  
2010 Panel Report, para. 6.1806. (emphasis original)  
2011 Panel Report, para. 6.1817.  
2012 We recall that all LA/MSF sub sidies granted for LCA up to and including the A320 were found by the 
Panel to have expired. ( See paras. 5.402 and 5.552 above.  See also Panel Report, para. 6.876 and fn  1567 
thereto.)  
2013 Panel Report, para. 6.1713. (emphasis added)  WT/DS316/AB/RW  
 
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  could be linked in a genuine and substantial way to the LA/MSF subsidies  existing in the 
post-implementation period .2014 
5.702.    On the basis of the above considerations, we are not convinced that, insofar as the 
single -aisle LCA market is concerned , the Panel's analysis provide s a sufficient basis to sustain its 
conclusion that "the orders identified in Table  19 {in the single -aisle LCA market} represent 
'significant' 'lost sales' to the United  States LCA industry and, therefore, that the challenged 
LA/MSF subsidies continue to be a 'genuine and substantial' cause of serious prejudice to the 
United States  within the meaning of Article  6.3(c) of the SCM Agreement" .2015 Similarly, we are not 
convinced that, with regard to the various country markets for single -aisle LCA, the Panel's 
analysis is sufficient to sustain its conclusion that "the challenged LA/MSF subsidies are a 'genuine 
and sub stantial ' cause of displacement and/or impedance  of United  States LCA in the markets for 
single -aisle LCA in the European  Union, Australia, China and India" .2016 We therefore reverse  the 
above findings of the Panel under Articles 6.3(a), 6.3(b), and 6.3(c) of the SCM Agreement insofar 
as they relate to the single -aisle LCA market.  
5.703.   Consequently , we do not consider it necessary to address the European  Union 's arguments 
that: (i) the Pan el failed to take into account the market -specific and sale -specific non -attribution 
factors that allegedly caused (or contributed to causing) the observed market phenomena2017; 
(ii) "whatever number of data points it chose", the Panel made findings of displa cement and 
impedanc e "entirely divorced from the data"2018 in th ose markets; ( iii) the Panel failed to 
determine whether the data revealed a discernible or clear trend of substitution in the case of 
displacement2019; and (i v) the Panel failed t o identify actual trends, construct counterfactual 
trends, or undertake a comparison between the two in the case of impedance.2020  
5.6.4.6.3   The twin -aisle LCA market  
5.6.4.6.3.1   Significant lost sales  
5.704.   We recall  that, at the outset of its analysis o f lost sales, the Panel rec apitulated  the 
meaning of the terms "significant" and "lost sales" in Article 6.3(c) of the SCM Agreement as 
interpreted in past disputes. As the Panel noted, the term "significant" means "important, notable 
or consequential", and has both quantitative and qualitati ve dimensions.2021 The Panel further 
noted the Appellate  Body's finding that "lost sales" "are sales that suppliers of the complaining 
Member 'failed to obtain' and that instead were won by suppliers  of the respondent Member", 
and that the "the most appropria te approach to assess whether lost sales are the effect  of the 
challenged subsidy is through a unitary counterfactual an alysis", which would involve 
"a comparison of the sales actually made by the competing firm(s) of the complaining Member 
with a counterf actual scenario in which the firm(s) of the respondent Member would not have 
received the challenged subsidies".2022 The interpretation of the terms "significant" "lost sale s" 
within the meaning of Article  6.3(c) is not disputed on appeal.  
                                                
2014 We note that the Panel  found that the non -subsidized post -launch investments in Airbus' A320 and 
A330 families of LCA described by the European Union "were significant and instrumental to Airbus' ability to 
upgrade the technologies and production processes associated with the o riginal A320 and A330 programmes in 
a way that enabled Airbus to sustain their competitiveness". (Panel Report, para. 6.1524) The Panel, however, 
did not consider that such investments had diluted the genuine and substantial link between the pre -A350XWB 
LA/MSF subsidies – most of which had expired – and the market presence of the existing A320 and A330 
families of Airbus LCA. (Ibid.) The European Union contends on appeal that the Panel erred in reaching this 
finding. (See para. 5.551 above) For the reasons stated above, we have not examined these arguments by the 
European Union. (See  paras. 5.410 -5.411, and 5.552 -5.553 above.)  
2015 Panel Report, para.  6.1798.  
2016 Panel Report, para.  6.1817.  
2017 European Union's appellant's submission, para.  916. 
2018 European  Union's appellant's  submission, para. 1026.  
2019 European  Union's appellant's submission, para. 1029.  
2020 European  Union's appellant's submission, para. 1053.  
2021 Panel Report, para. 6.1780 (quoting Appellate Body Report, US – Large Civil Aircraft  (2nd complaint) , 
para. 1052).  
2022 Panel report, para. 6.1780 (quoting Appellate Body Report, EC and certain member States – Large 
Civil Aircraft , para. 1220). (emphasis original)  WT/DS316/AB/RW  
 
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  5.705.   In Table 19 of the Panel  Report, the Panel identified the following "lost sales" alleged by 
the United  States in the twin -aisle LCA market, all of which involved sales of Airbus' A350XWB 
family of LCA.   
Table 10: United  States ' "Lost Sales " Claims in the Post -Implementation Period  
Product Market / Customer  LCA model  No. of Orders  
2012  No. of Orders  
2013  
Twin-Aisle 
Cathay Pacific Airways  A350XWB -1000 10  
Singapore Airways  A350XWB -900  30 
United Airlines  A350XWB -1000  10 
Source: Panel Report, para. 6.1781, Table 19.  
5.706.   The Panel recalled its  finding that any market presence of a new entrant operating in the 
post-implementation period would be, if anything, limited to the market for single -aisle LCA. For 
the Panel, "it must ne cessarily follow that the sales {of the A350XWB} won by Airbus in the 
twin-aisle … market {} were 'lost sales' to the United  States' industry in both 'plausible' 
counterfactual scenarios."2023 The Panel also rejected the "non -subsidy" reasons alleged by the 
European  Union to explain why Airbus won the sales in  the twin -aisle LCA market, because , for the 
Panel, it was apparent that  "almost all of those reasons " were, in fact, "based on the effects of the 
LA/MSF subsidies because they {were}  premised on Airbus be ing present in all {three} of the 
relevant sales campaigns {in the twin -aisle LCA market} as exactly the same competitor selling 
identical aircraft to those it markets today".2024 In other words, a key basis for the Panel's finding 
on lost sales in the twin -aisle LCA market was its finding that,  in the absence of the 
"product  effects" of the challenged LA/MSF subsidies, Airbus would not have been in a position to 
launch  the A350XWB as and when it did.  
5.707.   We recall that, at the outset of its analysis of lost sales, displacement, and impedance, the 
Panel explained that it would limit its assessment  to evaluating  the merits of the United  States ' 
claims in light of its findings  with respect to the "product eff ects" of LA/MSF subsidies under  the 
"plausible" counterfactual scenarios , in which a non -subsidized Airbus would not have existed.2025 
Nonetheless, we recall that the Panel's analysis of the "product effects " of LA/MSF subsidies on the 
A350XWB was  not limited  to the "plausible" counterfactual scenarios alone. Rather, as discussed in 
section  5.6.3.5.2 above, the Panel carried out its analysis, in large part , on the basis of the parties' 
arguments regarding the extent to which the Airbus, as it actually existed  during the 2006 -2010 
period, could have launched the A350XWB  as and when it did , so as to evaluate the "direct effects" 
of the A350XWB LA/MSF subsidies.2026 
5.708.   Specifically, the Panel's analysis regarding the "product effects" of LA/MSF subsidies on the 
A350XWB first sought to determine whether Airbus – as it actually existed in December 2006 – 
could have launched the A350XWB as and when it did in the absence of the "direct effects" of 
A350XWB LA/MSF subsidies. In section 5.6.3.  above, we have agreed with the Pan el's findings in 
that context, and in particular its conclusion that, without the A350XWB LA/MSF  subsidies , there 
was a high likelihood that the Airbus company that actually existed in 2006 would , to some 
degree,  have had to make certain compromises with r espect to the pace of the A350XWB 
programme and/or the features of the aircraft.2027 We have also agreed with the Panel's 
assessment as to the "indirect effects" of the A380 LA/MSF subsidies on the A350XWB.2028 
We emphasize that, pursuant to our interpretation of Article 7.8 of the SCM Agreement, we 
disagree with the Panel to the extent that it considered the effects of the expired LA/MSF subsidies 
as part of its aggregated assessment. Instead, our review in section  5.6.3 above focuses on the 
Panel's findings regarding the subsidies existing in the post -implementation period. These Panel 
                                                
2023 Panel Report, para. 6.1789.  
2024 Panel Report, para. 6.1789.  
2025 Panel  Report, para. 6.1779.  
2026 Panel Report, para. 6.1537.  
2027 Panel Report, para. 6.1717.  
2028 See section 5.6.3.5.2 of this Report .  WT/DS316/AB/RW  
 
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  findings highlight the fact that , in the twin -aisle LCA market,  Airbus' competitiveness , gained 
through earlier LA/MSF subsidies , was renewed and sustained beyon d the original reference period  
as a result of the subsidies that the  European  Union maintained or granted after the original 
reference period and into the post -implementation period . 
5.709.   Our review of the Panel's finding s on the product effects of LA/MSF subsidies on the 
A350XWB thus indicates that, in the absence of the LA/MSF subsidies existing  in the 
post-implementation period, Airbus would not have been able to offer the A350XWB at the time it 
did and with the features that th e A350XWB contained. In other words, 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.2029 
5.710.   We next consider whether the Panel's finding that the sales of the A350XWB in the 
post-implementation period constituted  "lost sales" to the US LCA industry within the meaning of 
Article  6.3(c) of the SCM  Agreement is supported by relevant Panel findi ngs regarding the 
competitive dynamics between Boeing's and Airbus' respective product offerings in the twin -aisle 
LCA market. The twin -aisle LCA market, as the Panel found, comprises the Boeing 767, 777, 
and 787, on the one hand, and the Airbus A330 and A 350XWB, on the other hand.2030 The Panel 
found that " all five families of Airbus and Boeing twin -aisle LCA exercise differing but overall 
sufficient degrees of competitive constraints against each other ", such that "they should all be 
considered to fall withi n the same product market ".2031 In reaching  this conclusion, the Panel 
considered that the fact that Airbus chose to highlight "the alleged performance advantages of the 
A350XWB -900 o ver the 787 -9 and the 777 -200ER  at the time of launch " suggest ed that "it mu st 
have expected potential customers to be interested in learning about the relative performance 
characteristics of all three aircraft ".2032 The Panel further noted that , "since it was launched, Airbus 
… continued to market the A350XWB family as an alternative to both the 787 and the 777 ".2033 
The Panel considered that the fact that the evidence before it  "seeks to highlight the 
'competitiveness ' of the technologically advanc ed A350XWB by focusing on its relative 
performance advantages over the 787, 777, and 767 " was consistent with the fact that 
"the A350XWB was developed for the specific purpose of winning sales  from a range of customers 
that would otherwise be potentially i nterested in the performance ch aracteristics of, at least, 
all three families of Boeing aircraft ".2034 
5.711.   Evidence examined by the Panel regarding specific sales campaigns involving the 
A350XWB further supports its view that Airbus' A350XWB product offering was in direct 
competition with Boeing's twin -aisle LCA. With respect to the sales of  the A350XWB to 
Cathay Pacific  Airways , the Panel found that "the HSBI evidence submitted by the United  States 
very clearly and explicitly demonstrate {d} that Cathay Pacific wa s interested in considering 
different combinations of Airbus and Boeing twin -aisle LCA" to meet its delivery preferences.2035 
Furthermore, the Panel stressed, "the fact that one aircraft may have been chosen over one or 
                                                
2029 See Panel Report, para. 6.1789.  
2030 Panel Report, paras. 6.1293 -6.1370. We note that findings in the original proceedings established 
that the A340 -500/600, also an Airbus twin -aisle LCA, was a derivative aircraft of the A340 family of LCA, and 
LA/MSF for the A340 granted to Airbus by the F rench and Spanish governments had been fully disbursed 
before the establishment of the original panel. (Original Panel Report, paras.  7.376 -7.377 and 7.1622) We 
further recall that, in these compliance proceedings, the Panel found that the LA/MSF subsidies  for the 
A340-500/600 had expired, at the latest, in [BCI]. (Panel  Report, fn 1547 to para. 6.879) The Panel also 
found that the market presence of the A340 came to an end before the beginning of the post -implementation 
period when Airbus terminated the A3 40 programme in November 2011. (Ibid. , fn 2188 to para.  6.1293) 
However, there are no specific findings and supporting analysis in the Panel Report regarding how the "product 
effects" of the A340 -500/600 subsidies contributed to the alleged serious prejudi ce in the twin -aisle LCA 
market in the post -implementation period.   
2031 Panel Report, para. 6.1370.  
2032 Panel Report, para. 6.1307. (emphasis original)  
2033 Panel Report, para. 6.1308. (emphasis original)  
2034 Panel Report, para. 6.1309 (referring to Sophie Pendarie s, Head of A350XWB Marketing, Airbus, 
"Statement on the Market Significance of Technological Innovations to the A350XWB Programme", 5 July 2012 
(Panel exhibit EU -17) (BCI)). (emphasis original)  
2035 Panel Report, para. 6.1360.  WT/DS316/AB/RW  
 
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  more others because of its availability  reflect {ed} its competitive advantage" .2036 We recall, in this 
regard, the Panel's analysis of the "direct effects" of the A350XWB LA/MSF, which suggests that 
even a slight delay in the launch of the A350XWB could have had significant implications for 
Airbus ' competitiveness, particularly in light of the developmental head start that the Boeing 787 
had over the A350XWB.  
5.712.   The Panel reviewed a number of non -attribution factors alleged by the European  Union in 
respect of lost sales in the twin -aisle LCA market. T he European  Union argued that Airbus' 
pre-existing commonality advantages and other product -related advantages over Boeing helped to 
explain its sales of the A350XWB -1000 in 2012 and 2013.2037 More specifically, in the competition 
that led Cathay Pacific Airways to order ten A350XWB -1000 aircraft in 2012, the European  Union 
submitted that Airbus had pre -existing commonality advantages and certain other product -related 
advantages over Boeing. In  the campaign that led Singapore A irlines to order 30 A350XWBs 
in 2013, the European  Union argued that Airbus had an advantage over Boeing because: (i) there 
was uncertainty about the specifications, performance, and availability of the Boeing 787 -10 
relative to the A350XWB -900; (ii) the A350XWB had an advantage in terms of "the delivery 
positions themselves"; and (iii) the terms of Airbus' offer provided Singapore Airlines with higher 
benefits of commonality and lower fleet complexity in the long run in ca se "Singapore Airlines 
would opt for the A350XWB -1000".2038 Similarly, the European  Union maintained that Airbus was 
successful in the sales campaign that led United  Airlines to order ten additional A350XWB -1000 
aircraft in 2013 because the A350XWB -1000 was, for various reasons, the only aircraft that could 
satisfy the airline's requirements at the relevant time.  
5.713.   The Panel disagreed that these non -attribution factors undermine the causal nexus 
between the LA/MSF subsidies and lost sales in the twin -aisle LCA market, noting that 
"Airbus  would not have had any of these advantages in the above campaigns" had it not been for 
the "product effects" of LA/MSF subsidies.2039 The Panel noted that one non -attribution factor 
alleged by the European  Union  did not appear to b e directly -linked with Airbus' competitiveness 
gained through its launches of subsidized aircraft , namely, Singapore Airlines'  wish to split orders 
between Airbus and Boeing.2040 The Panel reasoned, however, that , due to Airbus' ability to offer 
the A350XWB, the airline was presented with the option to split its orders  in this manner  – an 
option that would not have been available in the absence of LA/MSF.2041  
5.714.   As noted, the Panel's relevant findings on "product effects" concerning  the A350XWB 
indicate that, in th e absence of the LA/MSF subsidies existing in the post -implementation period, 
Airbus would have been unable to launch the A350XWB or an A350XWB -type aircraft by the end of 
2006. Thus, we share the Panel's view that most of the alleged non-attribution facto rs with regard 
to lost sales in the twin -aisle LCA market described above, 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. Like the Panel, we 
have doubts as to whether Airbus' pre -existing commonality  advantages and other product -related 
advantages over Boeing (to the extent that they resulted from the provision  of LA/MSF  subsidies ) 
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 
effects. Similarly, we agree with the Panel's assessment of the non -attribution factor c oncerning 
Singapore Airlines' wish to split orders between Boeing and Airbus. Indeed, the fact that Airbus 
was in a position to offer the A350XWB in a timely manner was, in itself, largely due to LA/MSF 
subsidies a nd their effect on the pace of the program me and the features of the A350XWB. 
Therefore , insofar as lost sales in the twin -aisle LCA market are concerned, we are not convinced 
by the European  Union's argument that the Panel's failure to take into account market -specific and 
sale-specific non -attribution factors is contrary to the Appellate  Body's guidance that panels 
                                                
2036 Panel Report, para. 6.1360. (e mphasis original)  
2037 Panel  Report, para. 6.1790.  
2038 Panel Report, para. 6.1790. (fn  omitted)  
2039 Panel  Report, para. 6.1791.  
2040 According to the European  Union, Singapore Airlines chose the A350XWB in 2013 because it wanted 
to split its order for twin -aisle LCA between Airbus and Boeing so as "to secure the delivery of a larger number 
of aircraft over a particular period of time".  (Panel  Report, para. 6.1792)  
2041 Panel Report, para. 6.1792.  WT/DS316/AB/RW  
 
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  "must  ensure that the effects of other factors are not improper ly attributed to the 
challenged  subsidies".2042  
5.715.   The Panel's findings reviewed above support the conclusion that  the sales of the A350XWB 
identified in Table 19 of the Panel Report represent "significant lost sales" to the US LCA industry  
within the meaning of Article  6.3(c) of the SCM Agreement and that such lost sales were the effect 
of the  LA/MSF  subsidies existin g in the post -implementation period. This conclusion also finds 
support in the analytical framework adopted by the panel and the Appellate  Body in the original 
proceedings, as well as in a number of the Panel 's findings, including its finding concerning th e 
"product effects" of the LA/MSF subsidies existing in the post -implementation period on  Airbus'  
timely launch of the A350XWB, and the existence of sufficient substitutability between Boeing' s 
and Airbus' twin -aisle product offerings.   
5.716.   In light of our int erpretation of Article 7.8 of the SCM Agreement2043, however, we disagree 
with the Panel's conclusion on "significant lost sales" in the twin -aisle LCA market to the extent 
that its conclusion was based on the effects of the challenged LA/MSF subsidies that t he Panel 
found to have expired. We therefore modify  the Panel's conclusion in paragraph 6.1798 of the 
Panel  Report , and find instead that the orders identified in Table 19 in the twin -aisle LCA market 
represent significant lost sales to the US LCA industry  and, therefore, that the LA/MSF subsidies 
existing in the post -implementation period are a genuine and substantial cause of serious 
prejudice to the United States within the meaning of Article 6.3(c) of the SCM  Agreement.  
5.6.4.6.3.2   "Displacement and/or impedance"  
5.717.   We recall that the United  States  has claimed the existence  of displacement and/or 
impedance in the twin -aisle LCA markets in China, Korea, and Singapore.2044 For the 
European  Union  twin-aisle LCA market, the United  States  has claimed the existence  only of 
impedance.2045 The Panel identified the volume of deliveries and ma rket share  data for each of 
these twin-aisle LCA markets  in Table 21 of its Report  (reproduced in Table 11 below).  All of the 
deliveries by Airbus reflected in Table 11  involved d eliveries of the  A330 family of  LCA.2046 
Table 11: Market for twin -aisle LCA  
 European  Union  China  Korea  Singapore  
Delivery 
Data Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  
Boeing 
Volume 
(Units)  1 8 15 1 7 19 0 2 3 0 0 2 
Boeing 
Market 
Share  100%  30.8%  65.2%  50% 30.4%  47.5%  - 50.0%  50.0%  - - 25.0%  
Airbus 
Volume 
(Units)  0 18 8 1 16 21 0 2 3 0 0 6 
Airbus 
Market 
Share  0.0%  69.2%  34.8%  50% 69.6%  52.5%  - 50.0%  50.0%  - - 75.0%  
                                                
2042 European  Union's appellant's submission, para. 944 (quoting Appellate  Body Report, US – Upland 
Cotton , para. 437).  
2043 See section 5.4.2.2 of this Report.  
2044 United  States' appellee's  submission, paras.  589, 595, and 599.  
2045 United  States' appellee's submission, para. 579.  
2046 Panel Report, para. 6.1805, Table 21: Market for twin -aisle LCA (containing data from Ascend 
database, Deliveries made, data request as of 7 April 2014 (Panel Exhibit EU -512)) . See also Ascend database, 
Boeing and Airbus Deliveries in Units (2001 -2013), Commercial Operators, data request as of 30 March 2014 
(Panel exhibit USA -577), referred to in Panel Report, fn 2313 to para. 6.1368.  WT/DS316/AB/RW  
 
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  5.718.   The Panel  found  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 would have been higher than its actual level."2047 The Panel also recalled tha t "any new 
non-US LCA competitor would have only entered the market with a single -aisle LCA, implying that 
the twin -aisle … market{} would have been supplied by the United  States' industry alone".2048 
5.719.    As noted, the Panel's task was to assess how the LA/MSF s ubsidies existing in the 
post-implementation period, in the aggregate, contributed to Airbus' competitiveness in respect of 
its twin -aisle LCA offerings in the post -implementation period, such that these subsidies had the 
effect of substituting and/or hind ering like Boeing LCA in the markets at issue. We note that, 
according to the Panel, the LA/MSF subsid ies for the A330 -200 expired no later than [BCI]2049, 
i.e. in the post -implementation period. We recall, however, that findings from the original 
proceedings  establish ed that the A330 -200 – a derivative of the A330  – was launched in 1995, and 
that the LA/MSF for this programme granted by the French Government had been fully disbursed 
as of the date of the establishment of the original panel.2050 We also note  the original panel 's 
finding that it was likely that "the A330 -200 could have been launched even in the absence of the 
specific LA/MSF granted in respect of that programme" because it was a derivative of the A330 
and, therefore, required a comparatively s mall amount of funding to develop.2051 Moreover,  unlike 
for the A380 and A350XWB LA/MSF subsidies, there are no specific findings by the Panel relating 
to the issue of  whether and how the  "product effects"  of the A330 -200 LA/MSF  subsidies  continued  
beyond 200 6 and into the post -implementation period . 
5.720.   As we have explained above, our review of the Panel's finding s on the "product effects" of 
LA/MSF subsidies on the A350XWB indicates that, in the absence of the LA/MSF subsidies for the 
A380 and A350XWB existing i n the post -implementation period, Airbus would not have been able 
to offer the A350XWB at the time it did and with the features that the A350XWB contained. As also 
discussed above, the Panel's analysis concerning the relevant product markets establishe d that 
Airbus' A350XWB product offering was in direct  competition with Boeing's twin -aisle LCA. 
The Panel's analysis in that section of its Report focuses, however, on the degree of substitutability 
of various Airbus and Boeing models in the twin -aisle LCA mar ket; it does not, and is not meant 
to, address the role of the LA/MSF subsidies existing in the post -implementation period in causing 
displacement or impedance to the Boeing LCA models at issue. Nevertheless, given Airbus' 
competitiveness in the twin -aisle LCA market brought about by the existing subsidies, and in light 
of the competitive dynamics between Boeing and Airbus models or variants in the twin -aisle LCA 
market, we do not exclude the possibility that  sales of Boeing's twin -aisle LCA may have been 
substituted or hindered by sales of the subsidized A350XWB, i.e. a newer model of twin -aisle LCA 
by Airbus.2052 
5.721.   We note, however, that the United States framed its claim of displacement and /or 
impedance  in the twin -aisle LCA market  on the basis of data concern ing market shares and 
deliveries  of the A330 and relevant Boeing LCA during  the period 2001-2013.2053 There were no 
                                                
2047 Panel  Report, para. 6.1806.  
2048 Panel  Repor t, para. 6.1806. (emphasis original)  
2049 Panel Report, fn 1547 to para. 6.879. As noted in paras. 5.389 -5.390 and fn 978 of this Report, the 
European Union submitted two methodologies for estimating the ex ante  lives of the LA/MSF subsidies – the 
Loan Life a pproach and the Marketing Life approach. The Panel expressed doubt as to whether the Loan Life 
approach would be the most appropriate methodology for determining the " ex ante " lives, and noted that 
"it would be at least equally appropriate" to utilize the Marketing Life approach . (Ibid., para. 6.878) Ultimately, 
the Panel found that the ex ante life of the A330 -200 expired in  [BCI] on the basis of the Loan Life approach, 
even though, under the Marketing Life approach, the ex ante  life of the A330 -200 LA/MSF would have expired 
by [BCI], that is, before  the end of the implementation period. (Ibid., para. 6.872, Table 11: PwC ex ante  
"lives" analysis for LA/MSF, and fn 1547 to para. 6.879)  
2050 Original Panel Report, paras. 7.371 and 7. 376-7.377; Appellate Body Report, EC and certain 
member States – Large Civil Aircraft , paras.  829, 925, and 929. The original panel found that the amount of 
financial contribution was 330 million French francs . (Original Panel Report, para. 7.380, Table 1:  Approximate 
amount of funding provided for under the challenged LA/MSF measures (fn omitted))  
2051 Original Panel Report, para. 7.1940.  
2052 For references to order data, including for the A350XWB described in various sections of the 
Panel  Report, s ee Panel Rep ort para. 6.1781 and fn 3258 thereto. See also paras. 6.561  and 6.681.  
2053 Panel Report, para. 6.1805. The Panel noted that the United States had submitted data over the 
period 2001 -2013. However, the Panel considered that its examination of serious prejudic e should focus on the 
 WT/DS316/AB/RW  
 
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  deliveries of the A350XWB during that period.2054 Thus, for purposes of  the claim of displacement  
and/or  impedance  in the twin -aisle LCA market , the Panel relied on  market shares and delivery 
data relating to the A330, rather than on orders of the A350XWB , in its analysis . The Panel made 
no specific findings based on order data in this connection. We recall, in this regard, that the 
Panel's finding s regarding the "product effects" of LA/MSF subsidies on the A330 concerned 
primarily the effects of subsidies that had expired.2055 We have fo und, however, that the 
European  Union has no compliance obligation in respect of those expired subsidies.  Rather, 
the pertinent question is whether the subsidies existing in the post -implementation period cause 
adverse effects, such that the European Union has failed to comply with its obligation under 
Article  7.8 of the SCM Agreement to "take appropriate steps to remov e the adverse effects". 
However, given the way the claims of displacement and/or impedance were raised before the 
Panel and the P anel's approach to assessing tho se claims, the Panel did not explore, and made no 
findings on, the issue of whether  and, if so, how the A380 and A350XWB LA/MSF subsidies existing 
in the post -implementation period may have contributed to the deliveries of the A330 occurring 
during that period.  
5.722.   In these circumstances , we are not convinced that the Panel's analysis provide s a sufficient 
basis to sustain the conclusion that the effect of the LA/MSF subsidies existing in the 
post-implementation period was to displace or impede US LCA in the twin -aisle LCA market in the 
European Union and relevant third country markets. We ther efore reverse  the Panel's conclusion , 
in paragraph 6.1817 of the Panel Report , that "the United  States ha{d} established that the 
'product' effects of the challenged LA/MSF subsidies are a 'genuine and substantial' cause of 
displacement and/or impedance of  United  States LCA in the markets for … twin -aisle LCA in the 
European  Union, China, Korea and Singapore".  Having done so, we see no  reason to  further 
address the European  Union's additional arguments regarding the Panel's conclusion, as set out in 
paragra ph 5.703  above.  
5.6.4.6.4   The VLA market  
5.6.4.6.4.1   Significant lost sales  
5.723.   In Table 19 of its Report, the Panel identified the following "lost sales" alleged by the 
United  States in the VLA market, all of which involved sales of the Airbus A380.   
Table 12: United States' "Lost Sales " Claims in the Post -Implementation Period  
Product Market / Customer  LCA model  No. of Orders  
2012  No. of Orders  
2013  
Very Large Aircraft  
Emirates  A380  50 
Transaero Airlines  A380 4  
Source: Panel Report, para. 6.1781, Table 19.  
                                                                                                                                                  
alleged market phenomena occurring in the post -implementation period, i.e. from December 2011. (Ibid., 
fn 3258 to para. 6.1781 , and para.  6.1805)  
2054 Before the Panel, the United States argued that an examination of order data is "appropriate for 
assessing claims of significant lost sales and threat of displacement or impedance, while the text s of 
Articles  6.3(a) and 6.3(b) on displacement or impedance require a focus on market shares and volumes 
derived from delivery data ." (Unite d States' first written submission to the Panel, para. 299 (referring to 
Original Panel Report, paras. 7.1748 -7.1750); see also para. 514) However, the United States did not claim 
threat of impedance or displacement with respect to the twin -aisle LCA marke t. We further note that , with 
respect to the single -aisle LCA market in the European Union, the United States request s that we "conduct a 
threat analysis of displacement and impedance based  on order data" to the extent that we find that "there is 
no impeda nce of Boeing single -aisle LCA based on the delivery data". (United States' appellee's submission, 
para. 577 (referring to Panel Report, para. 6.1818)) We address the United States' claim concerning the threat 
of displacement and impedance in the single -aisle LCA market in the European Union in section 5.6.4.7 of this 
Report.  
2055 We recall that all LA/MSF subsidies granted for LCA up to and including the A330 were found by the 
Panel to have expired. (See paras. 5.402 and 5.552 above). With respect to the A33 0-200 LA/MSF subsidies, 
see para.  5.719 above and fns thereto.  WT/DS316/AB/RW  
 
- 244 – 
 
 
  5.724.   Like its finding with regard to lost sales in the twin -aisle LCA market, the Panel first 
recalled its  finding that any market presence of a new entrant operating in the "plausible" 
counterfactual scenarios would be, if anything, limited to the ma rket for single -aisle LCA in the 
post-implementation period. For the Panel, "it must necessarily follow " that the sales of the A380 
won by Airbus in the VLA market "were 'lost sales' to the United  States' industry".2056 As with its 
finding regarding lost sales in the twin -aisle LCA market, the Panel rejected the "non -subsidy" 
reasons alleged by the European  Union to explain why Airbus won the sales in the VLA market, 
because , for the Panel it was apparent that  "almost all of those reasons " were, in fact, "based on 
the effects of the LA/MSF subsidies because they {were}  premised on Airbus being present in 
{both} of the relevant sales campaigns {in the VLA market} as exactly the same competitor 
selling identical aircraft to those it markets today".2057 In other words, a key basis for the Panel's 
finding on lost sales in the VLA market was its finding that, in the absence of the "product effects " 
of LA/MSF subsidies, Airbus would not have been in a position t o offer the A380 as and 
when  it did. 
5.725.   As discussed in section 5.6.3 above, findings from the original proceedings indicate that, in 
launching the A380  – which was financed in part by LA/MSF for the A380  – Airbus was able to 
utilize technical experience and financial advantage gained through past subsidies, and t o acquire 
competitiveness in the VLA market. Moreover, we have found that the Panel's findings with respect 
to the A380 and A350XWB programmes 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. We reiterate that, pursuant 
to our interpretat ion of Article 7.8 of the SCM Agreement, we disagree with the Panel to the extent 
that it considered the effects of the expired LA/MSF subsidies to be a part of its aggregated 
assessment. Instead, our review in section 5.6.3 above focuses on findings from the original 
proceedings and by the Panel in relation to subsidies exist ing in the p ost-implementation period . 
As noted, such subsidies enabled Airbus to bring the A380 to market and continue its development 
in the face of  extensive production delays. We a lso recall, in particular, that  the disbursements of 
the A380 LA/MSF subsidies were anticipated to continue until [BCI] in the case of French LA/MSF 
subsidy and until [BCI] in the case of German and Spanish LA/MSF  subsidies .2058  
5.726.   Our review of the Panel's findings, as well as the relevant findings from the original 
proceedings , indicates that, in the absence of the LA/MSF subsidies existing in the 
post-implementation period, Airbus would not have been able to offer the A380 at the time it did. 
In other words, in the absence of these subsidies, Airbus would no t have been able to be 
"present  in {both} of the relevant sales campaigns as exactly the sa me competitor selling 
identical  aircraft" in the post -implementation period .2059  
5.727.   We now turn to examine whether the Panel's finding that the sales of the A380 in the 
post-implementation period constituted "lost sales" to the US LCA  industry within the meaning of 
Article  6.3(c) of the SCM  Agreement is supported by relevant Panel findings regar ding the 
competitive dynamics between Boeing's and Airbus' respective product offerings in the VLA 
market.  The VLA market, as the Panel found, comprises the Boeing 747 -8 and the Airbus A380. 
The Panel noted in particular that,  as the only two aircraft capa ble of flying well over 400 
passengers on long -haul routes, "it {was} difficult to believe that airlines interested in purchasing 
LCA with capabilities such as those of the A380 and the 747 -8I would not try to negotiate and 
obtain price discounts from Airb us and Boeing on the basis of the strength of each company's 
respective sales offer, even when the superiority of one aircraft over the other may be relatively 
apparent".2060 Indeed, as noted by the Panel,  "Airbus ha{d} consistently maintained the view that 
the potential customers of the A380 {would} also be likel y to seriously consider the 747 -8I in a 
                                                
2056 Panel Report, para. 6.1789.  
2057 Panel Report, para. 6.1789.  
2058 Original Panel Report, para. 7.378 (referring to French A380 contract (Original Panel Exhibit US -116 
(BCI)), Annexe 3; German A380  LA/MSF  contract  (Original Panel E xhibit  US-72 (BCI) (English translation)) , 
clause 4.2; BT -Drs. 14/10002  (Original Panel E xhibit  US-124 (English translation)), p. 3;  Spanish A3 80 LA/MSF 
contract (Original Panel E xhibit US -73 (BCI) ), 3rd clause).  
2059 Panel Report, para. 6.1789.  
2060 Panel Report, para. 6.1408.  WT/DS316/AB/RW  
 
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  segment of the LCA market that {was} covered by no other aircraft ."2061 Moreover , "given that 
there {would} be a range of customer demands for LCA with a passeng er capacity exceeding 400 
seats , one would expect to find differing degrees of reciprocal pricing constraints between the 
A380 and the 747 -8I, depending upon how close a particular customer's needs reflect the relative 
advantage of one aircraft over the othe r."2062  
5.728.   Turning to specific sales campaigns , the Panel considered that the United  States ' 
"HSBI  evidence of Boeing's analysis of the competitive interaction between the two aircraft in the 
2007 Emirates and 2006 British Airways sales campaigns " suggested that "[BCI]".2063 The Panel 
found this to be consistent with "not only the evidence showing that Airbus considered competition 
for the British Airways' sales to be 'intense'", but also the evidence it had reviewed from four other 
sales campaigns (Asiana Airlines , Hong Kong Airlines, Skymark , and Qantas), in which it was 
"apparent that Boeing presented the 747 -8I as an alternative to the A380 with a view to winning 
sales from the relevant customers".2064 Moreover, in its analysis of  the 2011 sales campaigns to 
Transaero  Airlines , the Panel considered that, notwithstanding the  evidence suggest ing that the 
airline  purchased the A380 and the 747 -8I to fill different capacity segments of its operations , this 
alone did not imply the absence of effective competition .2065 The Panel's analysis regarding the 
conditions of competition in the VLA market thus confirms that Airbus' and Boeing' s respective VLA 
products – the A380 and the 747 – are sufficiently substitutable. Such competitive dynamics, in 
our view, provide furthe r support to the proposition that the sales won by Airbus in the VLA 
market were at the expense of the US LCA producer.  
5.729.   As with the Panel's finding of lost  sales in the other market segments, the European  Union 
alleges that the Panel failed to take into ac count several non-attribution factors. 
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 techno logies and greater size compared with the 747 -8, which enabled 
it to satisfy both customers' very specific requirements.2066 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 t o market the A380 at the time it did. 
Therefore, 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.  
5.730.   Thus, the Panel's findings reviewed above support the conclusion that  the sales of the 
A380 identified in Table 19 of the  Panel Report represent "significant" "lost sales" to the US LCA 
industry  within the meaning of Article  6.3(c) of the SCM Agreement, and that such lost sales were 
the effect of the  LA/MSF  subsidies existing in the post -implementation period. This conclusion also 
finds support in the analytical framework adopted by the panel and the Appellate  Body in the 
original proceedings, as well as in a number of the Panel 's findings, including its finding concerning 
the "product eff ects" of the LA/MSF  subsidies existing in the post -implementation period on  Airbus'  
continued offering of the A380 , and the existence of sufficient substitutability between Boeing' s 
and Airbus' VLA product offerings.   
5.731.   In light of our interpretation of Arti cle 7.8 of the SCM Agreement2067, however, we disagree 
with the Pan el's conclusion on "significant  lost sales" in the VLA market to the extent that its 
conclusion was based on the effects of the challenged LA/MSF subsidies that the Panel found to 
have expired . We therefore modify  the Panel's conclusion in paragraph  6.1798 of the Panel  Report, 
                                                
2061 Panel Report, para. 6.1383.  
2062 Panel Report, para. 6.1408.  
2063 Panel Report, para. 6.1409.  
2064 Panel Report, para. 6.1409.  
2065 Panel Report, paras. 6.1404 (referring to European Union's response to Pane l question No. 55, 
fn 440 and para. 263) and 6.1405 . See also European Union's second written submission to the Panel, 
paras.  1551-1552.  
2066 Panel Report, para. 6.1790.  
2067 See section 5.4.2.2 of this Report.  WT/DS316/AB/RW  
 
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  and find instead  that t he orders identified in Table 19  of the Panel Report  in the VLA market 
represent "significant lost sales " to the US LCA industry and, therefore, th at the LA/MSF subsidies 
existing in the pos t-implementation period are a genuine and substantial  cause of serious 
prejudice to the United States within the meaning of Article 6.3(c) of the SCM Agreement.  
5.6.4.6.4.2   Displacement and/or impedance  
5.732.   We recall that the Un ited States has claimed the existence of displacement and/or 
impedance in the VLA markets in the European  Union, Australia, Korea, and Singapore.2068 For the 
VLA markets in China and the United Arab Emirates, the United  States  has claimed the existence 
only of impedance.2069 The Panel identified the volume of deliveries and market share data for 
each of these VLA markets in Table 22 of its Report (reproduced in Table 13 below).  All of the 
deliveries  by Airbus reflected in Table 13 involved deliveries of the A380 family of LCA.2070 
Table 13: Market for very large LCA  
 European  Union  Australia  China  
Delivery Data  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  
Boeing Volume (Units)  0 5 5 0 0 0 0 0 0 
Boeing Market Share  - 55.6%  55.6%  0.0%  - - 0.0%  0.0%  0.0%  
Airbus Volume (Units)  0 4 4 1 0 0 1 2 1 
Airbus Market Share  - 44.4%  44.4%  100%  - - 100%  100%  100%  
 
 Korea  Singapore  United Arab Emirates  
Delivery Data  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  
Boeing Volume (Units)  0 0 0 0 0 0 0 0 0 
Boeing Market Share  - 0.0%  0.0%  - 0.0%  - 0.0%  0.0%  0.0%  
Airbus Volume (Units)  0 1 2 0 5 0 2 11 13 
Airbus Market Share  - 100%  100%  - 100%  - 100%  100%  100%  
5.733.   Having tabulated the volume of deliveries and market share data for each of the se VLA 
markets, the Panel considered it evident that , "in the absence of the effects of the challenged 
LA/MSF subsidies, the volume of deliveries and market shares that would ha ve been achieved by 
the United  States ' LCA industry would have been higher than its actual level."2071 The Panel also 
recalled that "any new non -US LCA competitor would have only entered the market with a 
single -aisle LCA, implying that the … VLA market{} wou ld have been supplied by the 
United  States' industry alone ."2072 
5.734.   As discussed above2073, our review of the Panel's findings, as well as relevant findings from 
the original proceedings, indicates that, in the absence of the LA/MSF subsidies existing in the 
post-implementation period, Airbus would not have been able to offer the A380 at the time it did. 
We also recall that, as the Panel's analysis of the competitive dynamics in the VLA market shows, 
                                                
2068 United  States' appellee's submission, paras.  581, 585, 597, and 601.  
2069 United  States' appellee's submission , paras.  591 and 603.  
2070 Panel Report, para. 6.1805, Table 22: Market for very large LCA (containing data from Ascend 
database, Deliveries made, da ta request as of 7 April 2014 (Panel Exhibit EU -512)). See also Ascend database, 
Boeing and Airbus Deliveries in Units (2001 -2013), commercial operators, data request as of 30 March 2014 
(Panel Exhibit USA -577), referred to in Panel Report, fn 2313 to para . 6.1368.  
2071 Panel  Report, para. 6.1806.  
2072 Panel  Report, para.  6.1806. (emphasis original)  
2073 See paras.  5.725 -5.726 above.  WT/DS316/AB/RW  
 
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  Boeing's and Airbus' respec tive product offerings – the 747 and th e A380 – are sufficiently 
substitutable .2074 
5.735.   The European  Union submits that the Panel wrongly rejected its contention that the 
United  States had failed to "account for the effect of the development and production delays 
affecting … the 747 -8 on the limited n umber of sales achieved by Boeing".2075 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.2076 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} ".2077 Thus, the Panel'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.2078 Consequently, we see no reason to 
disturb the Panel's finding that this non -attribution factor would not be capable of diluting the 
genuine and substantial relationship of cause and effect between LA/MSF subsid ies and the alleged 
market phenomena.  
5.736.   We now turn to examine the Panel's analysis of the volume of deliveries and market sha re 
data for the post -implementation period for each of the VLA markets at issue  to determine 
whether its analysis supports its ultimate finding of serious preju dice in this market segment. 
As noted, the European  Union contends that in reaching  its findings  of "displacement and/or 
impedance", the Panel failed to  engage  properly with the sales volume and market share data that 
was before it.2079 We observe that, i n the EU VLA market, while Boeing made five deliveries in 
each of 2012 and 2013, Airbus made four deliveries for  each said year. Thus, for both 2012 
and 2013,  Boeing maintained a market share of 55.6%. The evidence indicates that there was no 
actual decline in Boeing's volume of deliveries and market share. In finding displacement in this 
market segment,  the Panel's assessment lacks an explanation as to whether there was a 
demonstrated substitution of the 747 -8 by the A380. In respect of the VLA markets in Australia, 
Korea, and Singapore, Boeing did not make any deliveries and consequently had no market s hare 
in the post -implementation period in these markets.  
5.737.   We recall that a trend analysis may be relevant and indicative, although not necessarily 
determinative, for purposes of a finding of displacement. In our view, however, the Panel did not 
examine whe ther there existed any discernible trends in volumes and market shares in the VLA 
markets at issue, including whether or not there existed declining trends that could have 
supported the Panel's findings. In these circumstances, we consider that the Panel s hould have 
engaged with the evidence before it in order to explain sufficiently the basis for its finding that the 
LA/MSF subsidies had the effect of displacing US LCA in these VLA markets in the 
post-implementation period. We therefore disagree to the ext ent that the Panel  found that 
"the United  States  ha{d} established that the 'product' effects of the challenged LA/MSF subsidies 
are a 'genuine and substantial' cause of displacement … of United  States  LCA in the markets for … 
{VLA}  in the European  Union , Australia, … Korea, {and} Singapore".2080  
5.738.   Turning to impedance, we recall that the phenomenon of 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".2081 In the EU VLA market, 
we note from Table 13 above that , while Boeing made five deliveries in each of  2012 and 2013, 
Airbus made four deliveries  for each said year. Thus, for both 2012 and 2013, Boeing had a 
constant market share of 55.6%. In China and Korea, we observe that Boeing made no deliveries 
                                                
2074 See paras. 5.727 -5.728 above. See also  Panel  Report, paras.  6.1371 -6.1410.  
2075 Panel Report, para.  6.1813. (fn omitted) See also European Union's  appellant's submission, 
paras.  951 and 953 -956. 
2076 Panel Report, para.  6.1816.  
2077 Panel Report, fn  3326 to para.  6.1816.  
2078 Panel Report, para. 6.1816.  
2079 European  Union's appellant's  submissi on, para. 968. 
2080 Panel Report, para . 6.1817. We recall that, for the VLA markets in China and the United Arab 
Emirates, the United States claims only impedance. (See supra  fn 1984) We therefore understand that the 
Panel's finding on displacement does not c over these two markets.  
2081 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  1161.  WT/DS316/AB/RW  
 
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  and consequently held no market share during the post -implementation period. Airbus, however, 
made deli veries in both 2012 and 2013 for each of these markets. In the Australian VLA market, 
neither Boeing nor Airbus made any deliveries in the years 2012 and 2013, although the Panel 
noted that  Airbus made a single delivery in December 2011. With respect to  the VLA market in 
Singapore, while Boeing did not make any deliveries in the post -implementation period, Airbus 
made five deliveries in 2012, retaining 100% of the market share that year. Finally , in the 
United  Arab Emirates, we observe that Airbus made 11 d eliveries in December 2012 
and 13 deliveries in 2013. As for Boeing, we note that , while the United  States  claimed before the 
Panel that Boeing made no deliveries in the post-implementation period, the European  Union  
claimed that Boeing made one delivery i n 2012.2082  
5.739.   The European  Union asserts that, for the VLA markets in Australia, China, Korea, 
and Singapore, sales were sporadic and volumes relatively small, which in turn made the 
identification of trends more difficult and thus precluded a finding of imped ance.2083 We are not 
persuaded by the European  Union 's argument. As explained , given the particular nature of the LCA 
industry  – especially for VLA like the 747 -8 and the A380, where instances of sales and volumes of 
deliveries are generally  much lower tha n in the case of consumer goods – we do not consider that 
the volumes of deliveries that the Panel considered could not have supported a finding of  
impedance. In any event, to find impedance, evidence of trends may not always be dispositive . 
5.740.   As explained above, our review of the Panel's findings with respect to the A380 and 
A350XWB programmes, as well as relevant findings from the original proceedings, indicates that, 
in the absence of the LA/MSF subsidies existing in the post -implementation period, Airbus  would 
not have been able to offer the A380 at the time it did.  Furthermore, we recall that, as the Panel's 
analysis of the competitive dynamics in the VLA market shows, Boeing's and Airbus' respective 
product  offerings – the 747 -8 and the A380 – are suffi ciently substitutable. Therefore, the Panel's 
conclusion regarding impedance, insofar as the VLA market is concerned, is supported by its 
findings on the "product effects"  – including  those of the A380  LA/MSF subsidies existing in the 
post-implementation p eriod – and by the data concerning the deliveries of the subsidized Airbus 
LCA – the A380 – that hindered the sales of competing US LCA in the VLA markets concerned. 
Thus, contrary to the situation regarding alleged impedance in  the twin -aisle LCA market, 
the "product effects" of the LA/MSF  subsidies existing in the post -implementation period, including 
the A380 LA/MSF subsidies2084, and the VLA delivery data underlying the United States' claim, 
concern the same aircraft model , and, as explained above, the Pan el made necessary findings on 
both "product effects" and delivery data.2085 On the basis of these considerations, we see no error 
in the Panel's conclusion that , absent the LA/MSF subsidies,  the US LCA industry would have 
achieved a higher volume of deliverie s and market  share in the VLA markets at issue than its 
actual level in the post -implementation period.2086 
5.741.   The Panel's findings reviewed above thus support the conclusion that the effect of the 
LA/MSF subsidies existing in the post -implementation period is i mpedance of US VLA in the 
markets in the European  Union, Australia, China, Korea, Singapore, and the United Arab Emirates. 
This conclusion  also finds support in the analytical framework adopted by the panel and the 
Appellate  Body in the original proceeding s, as well as in a number of the Panel 's findings, including 
its finding concerning the "product effects" of the LA/MSF subsidies existing in the 
post-implementation period on  Airbus'  continued offering of the A380 , and the existence of 
sufficient substitu tability between Boeing' s and Airbus' VLA product offerings.   
                                                
2082 Panel Report, para.  6.1805, fn  3312 to Table 22: Market for very l arge LCA (referring to 
European  Union's comments on the United States' res ponse to Panel question s No. 162, para. 145, and No. 40, 
fn 321 ). 
2083 European  Union's  appellant's submission, para. 1055.  
2084 We recall that,  unlike the pre-A380 subsidies, which were disbursed decades ago, the disbursements 
of the A380 LA/MSF subsidies continued well beyond the original reference period. (See para. 5.607 above)  
2085 We recall that, in claiming displacement and/or impedance in the twin -aisle LCA market, the 
United  States did not rely on orders of the A350XWB, whereas the subsidies existing i n the 
post-implementation period are essentially those under the A380 and A350XWB programmes. Regarding the 
A330-200 and A340 -500/600 LA/MSF subsidies, see fn 2030 and para. 5.719 above.  
2086 Panel Report, para.  6.1806.  WT/DS316/AB/RW  
 
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  5.742.   In light of our interpretation of Article 7.8 of the SCM  Agreement2087, however, we disagree 
with the Panel's conclusion on impedance in the VLA market to the extent that its conclusion wa s 
based on the effects of the challenged LA/MSF subsidies that the Panel found to have expired. We 
therefore modify  the Panel's concl usion , in paragraph 6.1817 of the Panel  Report, and find instead 
that the United  States has established that the "product e ffects" of the LA/MSF subsidies existing 
in the po st-implementation period are a genuine and substantial cause of impedance of US LCA in 
the VLA markets in the European  Union, Australia, China, Korea,  Singapore, and the 
United  Arab Emirates.2088 
5.6.4.7   United  States ' request for completing the legal analysis regarding "displacement 
and/or impedance"  
5.743.   The United  States  requests, in the event  that we find that the Panel erred in its 
assessment of the evidence, or that the Panel should have "more explicitly" addressed market 
trends  in its analysis , that we  complete the legal analysis regarding  "displacement and/or 
impedance" based on the "relevant data from the period of 2001 through 2013".2089 
The United  States  contends that "{t}he volume and market share data sets relied o n by the 
United  States  and the { European  Union } are almost identical and sourced from the same Ascend 
database service."2090 According to the United  States, "{i}n each geographical market in either 
data set", the evidence shows clear trends in Airbus LCA deli veries that, "according to the Panel's 
causation findings, would not have occurred absent the effects of LA/MSF and other  unwithdrawn 
subsidies and would have been replaced by U.S. LCA".2091 
5.744.   The European Union,  on the other hand , contends that , even if we wer e able to complete 
the legal analysis with respect to the causal link between the subsidies and the market presence of 
certain of Airbus' aircraft, we would not be able to complete the analysis with respect to the 
United  States ' claims of  "displacement and/or impedance" .2092 According to the European  Union, 
"the Panel failed to identify, or even look for, clear and discernible trends that are capable of 
evidencing displacement or impedance ."2093 With respect to market data preceding the year  2011, 
the European  Union  asserts that "the Panel made no findings with respect to such data or any 
trends that could be identified from such data ", and there  are no " undisputed facts of record with 
respect to the existence of any trends identifiable in such d ata."2094 
5.745.   We recall that the Appellate  Body has, on occasion, completed the legal analysis with a 
view to facilitating the prompt settlement of the dispute, pursuant to Article  3.3 of the DSU. 
However, the Appellate  Body has "insisted that {it} can do so only  if the factual findings of the 
panel and the undisputed facts in the panel record provide { it} with a sufficient basis for {its} own 
analysis".2095 We note that both the United  States and the European  Union have relied on the 
same Ascend database service wit h respect to the volume of deliveries and market share data  for 
the period 2001 -2013.2096 We further recall that we have found no error in the Panel's approach of 
                                                
2087 See section 5.4.2.2 of this Report.  
2088 Panel Report, para.  6.1817.  
2089 United  States' appellee's  submission, para. 573 (referring to United States' response to Panel 
questions No. 40 and No. 162; Summary Table of Updated Ascend Aircraft Database (Panel Exhibit USA -578 
(BCI))).  
2090 United  States' appellee's submission, para. 574 (referring to United  States' response to Panel 
question No. 162, paras.  10-32; Summary Table of Updated Ascend Aircraft Database (Panel Exhibit USA -578 
(BCI)); European  Union's comments on the United  States' response to Pan el question No. 162, paras.  57-146). 
We note that, for the Appellate  Body's reference, the United  States has reproduced these data in the Data 
Appendix attached to its appellee's submission.  
2091 United  States' appellee's submission, para. 574 (referring to P anel Report, paras.  6.1806, 6.1774, 
6.1778, 6.1797, and 7.1.d.xii -xiii). 
2092 European  Union's appellant's submission, para. 1098.  
2093 European  Union's appellant's submission, para. 1098.  
2094 European  Union's appellant's submission, para. 1098.  
2095 Appellate  Body Report, EC – Asbestos , para. 78. 
2096 See Ascend database, Deliveries made, data request as of 7 April 2014 (Panel Exhibit EU -512); 
Ascend database , Boeing and Airbus Deliveries in Units  (2001 -2013) , Commercial Operators, data request as 
of 30 March 2014  (Panel Exhibit USA -577).  WT/DS316/AB/RW  
 
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  having " focused on the most recent market data presented by the parties … from the 
post-implemen tation period "2097 in order to make findings of displacement and/or impedance.  
5.746.   In light of the reversal of the relevant Panel findings in the preceding section, our task in 
this section is to consider whether we can complete the legal analysis in respect of the 
United  States' request to find: (i) displacement and/or impedance in the single -aisle LCA markets 
in Australia, China, and India; (ii) impedance in the single -aisle LCA market  in the European Union , 
or, in the alternative, threat of displacement and impedance in that market; (iii)  displacement in 
the twin -aisle LCA markets in China, Korea, and Singapore; (iv) impedance in the twin -aisle LCA 
markets in the European Union, China, Korea, and Singapore; and  (v) displacement in the VLA 
markets in the European  Union, Australia, Korea, and Singapore.  
5.747.   In respect of the United  States' claims of displacement and/or impedance in the 
single -aisle LCA markets in Australia, China, and India and its claim of impedance in the 
single -aisle LCA market  in the European Union , we recall that we have reversed the Panel's finding 
due to its reliance on the "product  effects " of the expired LA/MSF subsidies on the market 
presence of the A320 family of Airbus LC A.2098 We do not, howe ver, detect undisputed facts on the 
Panel record that would allow us to draw our own conclusions regarding the effect of the existing 
LA/MSF subsidies – those provided for the A380 and the A350XWB – on Airbus' competiveness in 
respect of its single -aisle L CA offerings. In the absence thereof, we do not see how we could 
determine whether the LA/MSF subsidies existing in the post -implementation period are a genuine 
and substantial cause of the alleged "displacement and/or impedance" in the single -aisle LCA 
markets at issue.2099  
5.748.   In our view, similar considerations apply with regard to the United  States' request that we 
"conduct a threat analysis of displacement and impedance based on order data "2100 for the 
EU single -aisle LCA market. We recall that the Panel made n o determination with regard to  the 
United  States' claim of threat  of displacement and impedance in the single -aisle LCA market in the 
European  Union, given that "the United  States requested the Panel to consider this claim only if 
{it} rejected {the United  States'} claims of present  serious prejudice".2101 We therefore  do not 
consider it appropriate to engage with the United  States' request in respect of its claim of threat of 
displacement and impedance claim, as it would require us to review  and consider evid ence and 
arguments that were not addressed by the Panel or sufficiently ex plored and developed before 
the Panel.  
5.749.   We now turn to the United  States' request that we  complete the analysis in respect of its 
claims of displacement in the twin -aisle LCA markets in China, Korea, and Singapore, and 
impedance in the twin -aisle LCA markets in the European Union, China, Korea, and Singapore. 
We have found in paragraphs 5.719 -5.722  above that the Panel's analysis and findings do not 
provide a sufficient basis to sustain the conclusion that the effect  of the  LA/MSF subsidies existing 
in the post -implementation period was "to displace or impede" US LCA in the twin -aisle LCA 
marke t in the European Union  and relevant third country markets. Nor do we detect undisputed 
facts on the Panel record that would allow us to draw our own conclusions regarding this issue. In 
these circumstances, engaging with the United  States' request for com pletion where  these markets  
are concerned , would require us to review and consider evidence  and arguments that we find were 
not sufficiently addressed by the Panel or sufficiently explored and developed before the Panel.   
                                                
2097 Panel  Report, para. 6.1444. (emphasis original)  
2098 See paras. 5.700 -5.702 above.  
2099 We further recall that in respect of the United  States ' claims of displacement, we engaged the 
participants at the oral hearing with questions regarding the existence or not of discernible trends in the 
relevant geographical and product markets on the basis of the market data for the post-implementation period. 
However, the participants could no t come to an agreement in this regard . It is therefore our view that we 
cannot ourselves step into the shoes of the Panel to examine these issues in light of the insufficient analysis by 
the Panel , coupled with the participants' disagreement on this issue . 
2100 United  States' appellee's submission, para. 577. (fn omitted)  
2101 Panel Report, para. 6.1818 (referring to United  States' first written submission to the Panel, 
para. 514; second written submission to the Panel, para. 720; response to Panel question No. 1 62). (emphasis 
original)  WT/DS316/AB/RW  
 
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  5.750.   Finally, regarding the United  States' claims of displacement in the VLA markets in the 
European Union, Australia, Korea, and Singapore, we recall the market data that was tabulated by 
the Panel for these markets:  
Table 14: Market for very large LCA  
 European  Union  Australia  Korea  Singapore  
Delivery Data  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  
Boeing Volume 
(Units)  0 5 5 0 0 0 0 0 0 0 0 0 
Boeing Market 
Share  - 55.6%  55.6%  0.0%  - - - 0.0%  - - 0.0%  0.0%  
Airbus Volume 
(Units)  0 4 4 1 0 0 0 1 2 0 5 0 
Airbus Market 
Share  - 44.4%  44.4%  100%  - - - 100%  100%  - 100%  - 
Source: Panel Report, para. 6.1805, Table 22.  
5.751.   We recall that we have reversed the Panel's findings of displacement in these markets on 
the ground that the Panel failed to explain the basis for its finding that the LA/MSF subsidies 
existing in the post -implementation period had the effect of displacing the US LCA . That said, w e 
recall that the United  States ' market trend analyses for th e EU2102 and Australian2103 VLA markets 
span the years 2001 -2013. For the Korean VLA market, while the United  States  relies on market 
data for the years 2001 -20132104, it does not present a market  trend analysis. As for the 
VLA market in Singapore, while the United  States relies on market data for the years 2001 -2013, 
its market trend analysis spans the years 2006 -2013.2105 It is our view that, in these 
circumstances, engaging with the United  States' request for completion where  these markets are 
concerned would require us to review and consider evidence  and arguments in respect of the 
aforesaid concerns that we  find were not sufficiently addressed by the Panel or sufficiently 
explored and developed before the Panel.2106 
5.752.   In light of all of the above considerations, we find that we are unable to complete the legal 
analysis of the United  States' claims of  displacement and/or impedance in the single -aisle LCA 
markets in Australia, China, and India,  impedance in the single -aisle LCA market  in th e 
European  Union , or, in the alternative, threat of displacement and impedance in that market, 
displacement in the twin -aisle LCA markets in China, Korea, and Singapore, impedance in the 
twin-aisle LCA markets in the European Union, China, Korea, and Singa pore, and displacement in 
the VLA markets in the European  Union, Australia, Korea, and Singapore.  
5.6.4.8   Overall conclusion  
5.753.   We recall  that "displacement or impedance" would arise wher e the counterfactual analysis 
shows that the sales of the complaining Member wo uld have declined less or would have been 
                                                
2102 United  States ' appellee's submission, para. 581, Figure 5: EU VLA – Volume Trendline Analysis 
(referring to United  States ' response to Panel question No. 162, para. 18; Summary Table of Updated Ascend 
Aircraft Database (Panel Exhibit USA-578 (BCI)), p.  4). 
2103 United  States ' appellee's submission, para. 585, Figure 7: Australia VLA – Volume Trendline Analysis 
(referring to United  States ' response to Panel question No. 1 62, para. 20; Summary Table of Updated Ascend 
Aircraft Database (Panel Exhibit USA-578 (BCI)), p.  6). 
2104 United  States' appellee's submission, para. 597, Table 2: U.S. Data – Korea VLA Market (referring to 
United States' response to Panel question No. 162, para. 28; Summary Table of Updated Ascend Aircraft 
Database (Panel Exhibit USA -578 (BCI)), p.  12). 
2105 United  States' appellee's submission, para.  601, Figure 16: Singapore VLA – Volume Trendline 
Analysis (referring to United  States' response to Panel questi on No. 162, para.  31; Summary Table of Updated 
Ascend Aircraft Database (Panel Exhibit  USA-578 (BCI)), p.  14). 
2106 We also recall that we engaged the participants at the oral hearing with questions regarding the 
existence or not of discernible trends in the relevant VLA markets on the basis of the market data for the 
post-implementation period. However, the participants could not  come to an agreement in this regard.  WT/DS316/AB/RW  
 
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  higher in the ab sence of the challenged subsidy . We understand the Panel to have sought to apply 
this framework when it turned to assess whether the volume of deliveries and market shares that 
"would have been achi eved by the United  States' LCA industry between 1 December 2011 and the 
end of 2013 would have been higher than  its actual level  in all relevant product markets"2107 in the 
absence of the "product effects" of the LA/MSF subsidies. We further consider  that the  Panel's 
finding that "the United  States has established that the 'product' effects of the challenged LA/MSF 
subsidies are a 'genuine and substantial' cause of displacement and/or impedance  of United  States 
LCA"2108 in the relevant geographic markets for sing le-aisle LCA, twin -aisle LCA, and VLA is 
informed by the manner in which the United  States framed its claims. We do not read the Panel's 
use of the term "displacement and/or impedance" when summing up its serious prejudice findings 
regardin g the relevant m arkets at issue  as suggesting that the Panel found the existence of these 
serious prejudice phenomena in an undifferentiated manner with respect to one and the same 
product and country market. Therefore, contrary to what the European  Union appears to sugge st, 
it does not necessarily follow from the Panel's use of the term "displacement and/or impedance" 
that the Panel treated "displacement" and "impedance" as interchangeable and indistinguishable 
concepts for purposes of its adverse effects analysis.  
5.754.   We rec all our finding that the Panel's assessment  of the relevant product markets in these 
compliance proceedings was based on a proper analysis of the nature and degree of competition 
between products that the Panel found to demonstrate sufficient substitutabil ity. However, an 
assessment of the nature and degree of competition in the relevant product market(s) does not, in 
and of itself, answer the question of whether the subsidies existing in the post -implementation 
period are a genuine and substantial cause of  adverse effects in the relevant market (s). 
5.6.4.8.1   The single -aisle LCA market  
5.755.   With regard to the single -aisle LCA market, the Panel's findings regarding the "product 
effects" of LA/MSF subsidies on the market presence of the A320  concerned primarily the effects of 
those subsidies that had expired prior to the end of the implementation period. We have found, 
however, that the European Union has no compliance obligation in respect of those expired 
subsidies. Rather, the pertinent question is whether the s ubsidies e xisting in the 
post-implementation period (i.e. after 1 December 2011) cause adverse effects, such that the 
European  Union has failed to comply with its obligation under Article 7.8 of the SCM Agreement to 
"take appropriate steps to remove the adverse effects". We do not find  any analysis by the Panel 
as to whether, and to what extent, Airbus' competitiveness in the single -aisle LCA market, gained 
through the pre -A380 LA/MSF subsidies, was renewed and sustained beyond the original reference 
period as a result of the subsidies that the European  Union maintained or granted in the 
post-implementation period.  
5.756.   Thus, we are not convinced that, insofar as the single -aisle LCA market is concerned , the 
Panel's analysis provide s a sufficient basis to sustain its c onclusion , in paragraph  6.1798 of the 
Panel Report, that "the orders identified in Table  19 {in the single -aisle LCA market} represent 
'significant' 'lost sales' to the United  States LCA industry and, therefore, that the challenged 
LA/MSF subsidies continu e to be a 'genuine and substantial' cause of serious prejudice to the 
United States  within the meaning of Article 6.3(c) of the SCM Agreement" . Similarly, we are not 
convinced that, with regard to the various country markets for single -aisle LCA, the Panel 's 
analysis is sufficient to sustain its conclusion , in paragraph 6.1817 of the Panel Report,  that 
"the challenged LA/MSF subsidies are a 'genuine and substantial ' cause of displacement and/or 
impedance  of United  States LCA in the markets for single -aisle LCA in the European  Union, 
Australia, China and India" . 
5.757.   We therefore reverse  the above conclusions of the Panel und er Articles 6.3(a), 6.3(b), 
and 6.3(c) of the SCM Agreement insofar as they relate to the single -aisle LCA market. 
Consequently , we do not co nsider it necessary for us to address the European  Union's additional 
arguments described in paragraph 5.703  above .  
                                                
2107 Panel  Report, para.  6.1817. (emphasis added)  
2108 Panel  Report, para.  6.1817. (emphasis added)  WT/DS316/AB/RW  
 
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  5.758.   We further find that we are unable to complete t he legal analysis of the United  States' 
claims of  "displacement and/or impedance" in the si ngle-aisle LCA markets in Australia, China, and 
India, and impedance in the single -aisle LCA market  in the European Union , or, in the alternative, 
threat of displacement and impedance in that market.  
5.6.4.8.2   The twin -aisle LCA market  
5.759.   With regard to lost sales in the twin -aisle LCA market, our review of the Panel's finding on 
the product effects of LA/MSF subsidies on the A350XWB indicates that, in the absence of the 
LA/MSF subsidies existing in the post -implementation period  (i.e. after 1 December 2011) , Airbus 
would not have been able to offer the A350XWB at the time it did and with the features it had . The 
Panel's finding that the sales of the A350XWB in the post -implemen tation period constituted 
"lost sales" to the US LCA industry within the meaning of Article  6.3(c) of the SCM  Agreement is 
also supported by relevant Panel findings regarding the competitive dynamics between Boeing's 
and Airbus' respective product offerings in the twin -aisle LCA market. Furthermore, we are not 
convinced by the European  Union's arg ument that the Panel failed to take into account 
market -specific and sale -specific non -attribution factors.  
5.760.   Therefore, the Panel's findings support the conclusion that the sales of the A350XWB 
identified in Table 19 of the Panel Report represent "significa nt lost sales" to the US LCA industry 
within the meaning of Article  6.3(c) of the SCM  Agreement, and that such lost sales were the 
effect of the LA/MSF subsidies existing in the post -implementation period. This conclusion also 
finds support in the analytic al framework adopted by the panel and the Appellate  Body in the 
original proceedings, as well as in a number of the Panel 's findings, including its finding concerning 
the "product effects" of the LA/MSF subsidies existing in the post -implementation period on Airbus'  
timely launch of the A350XWB, and the existence of sufficient substitutability between Boeing' s 
and Airbus' twin -aisle product offerings.  In light of our interpretation of Article  7.8 of the 
SCM Agreement, however, we disagree with the Pan el's conclusion on "significant  lost sales" in the 
twin-aisle LCA market to the extent that its conclusion wa s based on the effects of the challenged 
LA/MSF subsidies that the Panel found to have expired.  
5.761.   Accordingly, we modify  the Panel's conclusion in paragrap h 6.1798 of the Panel  Report , 
and find instead that the orders identified in Table 19 of the Panel Report in the twin -aisle LCA 
market represent " significant lost sales " to the US LCA industry  and, therefore, that the LA/MSF 
subsidies existing in the post -implementation period are a genuine and substantia l cause of serious 
prejudice to the United States within the meaning of Article 6.3(c) of the SCM Agreement.  
5.762.   With regard to displacement and impedance in the twin -aisle LCA market,  we note that, 
according t o the Panel, the LA/MSF subsidy for the  A330-200 expired no later than [BCI], 
i.e. in the post-implementation period. We note, however, that the original panel found that it was 
likely that the A330 -200 could have been launched even in the absence of the specific LA/MSF 
granted in respect of that programme because it was a derivative of the A330 and, therefore, 
required a comparatively small amount of funding to develop.  Moreover,  unlike for the A380 and 
A350XWB LA/MSF subsidies, there are no specific findings by the Panel relating to the issue of 
whether and how  the "product effects"  of the A330 -200 LA/MSF subsidy continued beyond 2006 
and into the post -implementation period . Our review of the Panel's finding on the "product effects" 
of LA/MSF subsidies on  the A350XWB indicates that, in the absence of the LA/MSF subsidies for 
the A380 and A350XWB existing in the post -implementation period, Airbus would not have been 
able to offer the A350XWB at the time it did and with the features it had . We further recall  the 
Panel's finding that Airbus' A350XWB product offering was in direct competiti on with Boeing's 
twin-aisle LCA.  
5.763.   We note, however, that the United  States  framed its claim of displacement and /or 
impedance in the twin -aisle LCA market  on the basis of data  concerning market shares and 
deliveries  of Airbus and Boeing LCA during  the period  2001-2013. There were no deliveries of the 
A350XWB during that period.  Thus,  for purposes of  the claim of displacement  and/or  impedance  in 
the twin -aisle LCA market , the Pa nel relied on  market shares and delivery data relating to the 
A330, rather than orders of the A350XWB , in making its finding. We recall, in this regard, that the 
Panel's findings regarding the "product effects" of LA/MSF subsidies on the A330 concerned 
primarily the effects of those subsidies that had expired. We have found, however, that the 
European Union has no compliance obligation in respect of those expired subsidies . Rather, the WT/DS316/AB/RW  
 
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  pertinent question is whether the subsidies existing in the post -impleme ntation period cause 
adverse effects, such that the European Union has failed to comply with its obligations under 
Article 7.8 of the SCM Agreement to "take appropriate steps to remove the adverse effects". 
However, given the way the claims of displacement  and/or impedance were raised before the 
Panel and its approach to assessing these claims, the Panel did not explore, and made no findings 
on, the issue of whether and , if so, how the A380 and A350XWB  subsidies existing in the 
post-implementation period ma y have contributed to the deliveries of the A330 occurring during 
that period. In  these circumstances , we are not convinced that the Panel's analysis and findings 
provide a sufficient basis to sustain the conclusion that the effect of the LA/MSF subsidies existing 
in the post-implementation period was to displace or impede  US LCA in the twin -aisle LCA market 
in the European Union  and relevant third country markets.  
5.764.   Accordingly, w e reverse  the Panel's con clusion , in paragraph 6.1817 of the Panel  Report , 
that "the United  States  ha{d} established that the 'product' effects of the challenged LA/MSF 
subsidies a re a 'genuine and substantial' cause of displacement and/or impedance of United  States  
LCA in the markets for … twin -aisle LCA in the European  Union, China, Korea and Singapore". 
Having done so, we see no further reason to address the European  Union's addi tional arguments 
regarding the Panel's conclusion, as set out in paragraph 5.703  above.  
5.765.   We further find that we are unable to complete the legal  analysis of the United  States' 
claims of  displacement in the twin -aisle LCA markets in C hina, Korea, and Singa pore, 
and impedance in the twin -aisle LCA markets in the European  Union, China, Korea, and Singapore.  
5.6.4.8.3   The VLA market  
5.766.   With regard to lost sales in the VLA market,  our review of the Panel's findings, as well as 
the relevant findings from the original procee dings , indicates that, in the absence of the LA/MSF 
subsidies existing in the post -implementation period  (i.e. after 1 December 2011) , Airbus would 
not have been able to offer the A380 at the time it did.  Moreover, the Panel's analysis regarding 
the condit ions of competition in the VLA market confirms that Airbus' and Boeing' s respective 
VLA products – the A380 and 747 – are sufficiently substitutable. Such competitive dynamics, in 
our view, provide further support to the proposition that the sales won by A irbus in the VLA 
market were at the expense of the US LCA producer.  Finally, 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.  
5.767.   Therefore, the Panel's findings support the conclusion that  the sales of the A380 identified 
in Table 19 of the Panel Report represent "significant" "lost sales" to the US LCA industry  within 
the meaning of Article  6.3(c) of the SCM Agreement, and that such lost sales were the effect of the  
LA/MSF  subsidies existing in the post -implementation period. This conclusion also finds support in 
the analytical framework adopted by the panel and the Appellate  Body in the original proceedings, 
as well as in a number of  the Panel 's findings, including its finding concerning the "product eff ects" 
of the LA/MSF subsidies existing in the post -implementation period on  Airbus'  continued offering of 
the A380 , and the existence of sufficient substitutability between Boeing' s and Airbus' VLA product 
offerings.  In light of our interpretation of Artic le 7.8 of the SCM  Agreement, however, we disagree 
with the Pan el's conclusion on "significant  lost sales" in the VLA market to the extent that its 
conclusion was based on the effects of the challenged LA/MSF subsidies that the Panel found to 
have expired.  
5.768.   Accordingly, we modify  the Panel's conclusion  in paragraph 6.1798 of the Panel Report, 
and find instead  that the orders identified in Table 19  of the Panel Report  in the VLA market  
represent " significant lost sales " to the US LCA industry and, therefore, t hat the LA/MSF subsidies 
existing in the post -implementation period continue to be a genuine and substantial  cause of 
serious prejudice to the United  States within the meaning of Article  6.3(c) of the SCM  Agreement.  
5.769.   With regard to displacement and impedanc e in the VLA market,  our review of the Panel's 
findings, as well as the relevant findings from the original proceedings, indicates that, in the 
absence of the LA/MSF subsidies existing in the post -implementation period, Airbus would not 
have been able to o ffer the A380 at the time it did. We also recall that, as the Panel's analysis of WT/DS316/AB/RW  
 
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  the competitive dynamics in the VLA market shows, Boeing's  and Airbus' respective product 
offerings – the 747 and the A380 – are sufficiently substitutable . With respect to t he 
non-attribution factor alleged by the European  Union concerning  the development and production 
delays affecting the 747 -8, we note the Panel's observation that the larger versions of the 777 
may also at times challenge for sales in the VLA market . Therefore, we see no reason to disturb 
the Panel's finding that this non -attribution factor would not be capable of diluting the genuine and 
substantial relationship of cause and effect between the LA/MSF subsidies and the alleged market 
phenomena.  
5.770.   We reca ll that a trend analysis may be relevant and indicative, although not necessarily 
determinative, for purposes of a finding of displacement. In reaching its finding of displacement, 
however, the Panel did not examine whether there existed any discernible tr ends in volumes and 
market shares in the VLA markets at issue, including whether or not there existed declining trends 
that could have supported the Panel's findings. In these circumstances, we consider that the Panel 
should have engaged with the evidence before it in order to explain sufficiently the basis for its 
finding that the LA/MSF subsidies had the effect of displacing US LCA in these VLA markets in the 
post-implementation period.  
5.771.   Accordingly, insofar as displacement in the VLA market is concerned , we disagree with the 
Panel, to the extent that it found , in paragraph 6.1817 of the Panel Report, that "the United  States  
ha{d} established that the 'product' effects of the challenged LA/MSF subsidies are a 'genuine and 
substantial' cause of displacement … of United  States  LCA in the markets for … {VLA}  in the 
European  Union , Australia, … Korea, {and} Singapore".   
5.772.   We further find that we are unable to complete the legal analysis of the United  States' 
claim of  displacement in the VLA markets in the European  Union, Australia, Korea, and Singapore.  
5.773.   As for the finding of impedance, we recall that the phenomenon of 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 . Given the 
particular nature of the LCA industry, especially for VLA like the Boeing 747-8 and the 
Airbus  A380, where instances of sales and volumes of deliveries are generally much lower than in 
the case of consumer goods, we do not consider that the volumes of deliveries that the Panel 
considered could not have supported a finding of  impedance. We further recall that our review of 
the Panel's findings with respect to the A380 and A350XWB programmes, as well as relevant 
findings from the original proceedings, indicates that, in the absence of the LA/MSF subsidies 
existing in the post -implementation period, Airbus would not have been able to offer the A380 at 
the time it did.  Moreover, as the Panel's analysis of the competitive dynamics in the VLA market 
shows, Boeing's and Airbus' respectiv e product  offerings – the 747 -8 and the A380 – are 
sufficiently substitutable. Thus, contrary to the situation regarding alleged impedance in the 
twin-aisle LCA market, the "product effects" of the LA/MSF  subsidies existing in the 
post-implementation period, including the A380 LA/MSF subsidies, and the VLA delivery data 
underlying the United States' claim, concern the same aircraft model , and, as expla ined above, the 
Panel made necessary findings on both "product effects" and delivery data. On the basis of these 
considerations, and in light of the del iveries of the A380 in the post -implementation period,  we see 
no error in the Panel's conclusion that , absent the LA/MSF subsidies,  the US LCA industry would 
have achieved a higher volume of deliveries and market  share than its actual level in the 
post-implementation period.  
5.774.   Therefore , the Panel's findings reviewed above support the conclusion that the effect of the 
LA/MSF subsidies existing in the post -implementation period is impedance of US VLA in the VLA 
markets in the European  Union, Australia, China, Korea, Singapore, and the United Arab Emirates. 
This conclusion  also finds support in the analy tical framework adopted by the panel and the 
Appellate  Body in the original proceedings, as well as in a number of the Panel 's findings, including 
its finding concerning the "product effects" of the LA/MSF subsidies existing in the 
post-implementation peri od on  Airbus'  continued offering of the A380 , and the existence of 
sufficient substitutability  between Boeing' s and Airbus' VLA product offerings.  In light of our 
interpretation of Article  7.8 of the SCM  Agreement, however, we disagree with the Panel's 
conclusion on impedance in the VLA market to the extent that its conclusion wa s based on the 
effects of the challenged LA/MSF subsidies that the Panel found to have expired.  WT/DS316/AB/RW  
 
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  5.775.   Accordingly, we modify  the Panel's conclusion in paragraph 6.1817 of the Panel  Report , 
and find instead  that the United  States ha s established that the "product  effects " of the LA/MSF 
subsidies existing in the post -implementation period are a ge nuine and substantial cause of 
impedance of US LCA in the markets for VLA in the European  Union, Australia, China, Korea, 
Singapore,  and the United Arab Emirates.  
6  FINDINGS AND CONCLUS IONS  
6.1.  For the reasons set out in this Report, the Appellate Body makes the following findings and 
conclusions.  
6.1  Article  21.5 of the DSU – the Mühlen berger Loch and Bremen Airport measures  
6.2.  In its Compliance Communication, the European  Union took the view that the Mühlenberger 
Loch aircraft assembly site measure and the Bremen A irport runway extension measure  are 
consistent with the WTO agreements and i n full compliance with the relevant recommendations 
and rulings of the DSB. Based on our review of the Panel Report and the Panel record, we do not 
understand the United  States to have contested this view. The Panel, therefore, did not err in its 
interpret ation and application of Article  21.5 of the DSU in finding, in paragraph  5.77 of the Panel 
Report, that there was no "disagreement" for it to resolve within the meaning of that provision. 
Based on our review of the Panel's analysis, we further disagree wi th the European  Union to the 
extent  that it argues that the Panel acted inconsistently with its duties under Article  11 of the DSU 
in reaching this conclusion. For these reasons, we find that the Panel did not err by declining to 
make a finding as to wheth er the European  Union had achieved compliance with respect to the 
Mühlenberger Loch aircraft assembly site measure and the Bremen Airport runway extension 
measure , and see no need to make further findings in respect of those measures . 
6.2  Article  3.1(b) of the  SCM Agreement  
6.3.  With respect  to the admissibility of the United  States' appeal under Article  3.1(b) of the 
SCM Agreement , we find that the United  States' appeal falls within the scope of appellate  review. 
As we see it, the United States' appeal  adequately i dentifie s "issues of law covered in the panel 
report and legal interpretations developed by the panel " pursuant to Article 17.6 of the DSU, as 
well as  "specific allegations of errors" within the meaning of the Working Procedures for 
Appellate  Review, with regard to the Panel's interpretation and appli cation of Article  3.1(b) of 
the SCM Agreement.  
a. Regarding the merits of the United  States' appeal, we uphold  the Panel's interpretation 
of Article  3.1(b) of the SCM Agreement and agree with the Panel that  the fact that a 
subsidy results in the use of domestic over imported goods  cannot by itself demonstrate 
that that subsidy is contingent on the use of domestic over imported goods, whether in 
law or in fact . While we have expressed concerns with certain aspects of the Panel's 
reasoning, the focus of the Panel's legal standard on the need to establish a condition 
requiring the use of domestic over imported goods comports with our reading of this 
provision.  
6.4.  Having upheld the Panel's interpretation of Article  3.1(b)  of the SCM Agreement, we are not 
required to make findings regarding the application of this provision to the facts of the present 
case, or to address the United  States' arguments concerning comple tion of the legal analysis. 
The Panel's finding under Arti cles 3.1(b)  and 3.2 of  the SCM Agreement therefore stand s.  
6.3  Benefit  
6.3.1   The calculation of general corporate borrowing rate  
6.5.  We agree with the European  Union that, in conducting the benefit analysis, the comparison 
focuses on the moment in time when the lender  and borrower commit to the tran saction. 
We disagree, however, with the European  Union to the extent that it suggests that the Panel was 
required to limit its analysis to data from "the day of conclusion" of each A350XWB LA/MSF 
contract regardless of the t ime period over which the parties may have committed to the terms WT/DS316/AB/RW  
 
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  and conditions of that financing instrument. Rather, the Panel was required to take into account 
the specific financing instrument at issue, including the relevant circumstances surrounding the 
conclusion of that instrument, to determine the period over which the terms and conditions of the 
relevant contract were agreed. The Panel provided two reasons in support of its decision to 
determine the corporate borrowing rate using the average yield s one month prior and six months 
prior to the conclusion of the A350XWB LA/MSF contracts, in the form of a range . First, the Panel 
considered that "the yield on the day of the signature of contract may reflect atypical 
fluctuations."2109 The Panel's second re ason was that "{p}arties agreeing to a complex loan 
contract may rather set the rates in the lead -up to the conclusion of the contract, and prior to the 
actual day on which the contract is signed."2110 We have found this understanding to be in line 
with our o bservation that, in some cases, parties may have committed to a transaction – or to key 
aspects thereof – during a finalization period of the negotiations preceding the moment of formal 
conclusion of all aspects of that transaction. In the present case, th e financial contribution at issue 
consists of complex financing , the terms and conditions of which have been negotiated and agreed 
over a certain contracting period. In these circumstances, we find that the Panel did not err in its 
application of Article  1.1(b) of the SCM  Agreement in finding that the corporate borrowing rate 
component of the market benchmark could be based on the average yields of the  EADS bond 
"one-month prior and six -months prior to the conclusion " of the  French, German, Spanish, 
and UK A350XWB LA/MSF contracts, "in the form of a range", attributing more weight to the 
former average yield s than it did to the latter.2111 
6.6.  Moreover, we reject the European  Union's claim that the Panel acted inconsistently with 
Article  11 of the DSU because it lacked a sufficient evidentiary basis  for rejecting the EADS bond 
yield on the day of conclusion of each A350XWB LA/MSF contract. In addition, the European Union 
has not established that the Panel's decision to set the corporate borrowing rate in the form of  a 
range of average yields, or the fact that such decision was done against the background of a 
downward trend in the yield of the EADS bond, reflects a lack of objectivity and even -handedness 
contrary to the requirements of Article  11 of the DSU.  Conseque ntly, we find that the 
European  Union has failed to establish that the Panel acted inconsistently with its obligations under 
Article 11 of the DSU.  
6.7.  We also reject the European  Union's alternative claims that the Panel erred in its application 
of Article  1.1(b) of the SCM  Agreement and acted inconsistently with Article 11 of the DSU by 
accepting the average yield of the EADS bond over the six months  prior to the conclusion of the 
French, German, Spanish, and UK  A350XWB LA/MSF contracts as part of the range  of average 
yields  that was used to determine the corporate borrowing rate. Although the corporate borrowing 
rate was determined in the form of a range of average yields, the Panel rightly gave more 
prominence to the one -month average yield of the EADS bond than to the six -month average 
yield, which was considered  only to be a "helpful indication of market expectations".2112 In these 
circumstances, we find that the European Union has failed to establish  that the Panel erred in its 
application of Article  1.1(b) o f the SCM  Agreement or acted inconsistently with Article  11 of the 
DSU by deciding to observe the EADS bond yield on the basis of the average yields one month 
prior and six months prior to the conclusion of each of the four A350XWB LA/MSF contracts, in the  
form of a range, attributing more weight to the former average yield s than it did to the latter.  
a. For these reasons, we uphold  the Panel's finding, in paragraph 6.389 of the 
Panel Report, that the corporate borrowing rate component of the market benchmark be 
based on "the average yields one -month prior and six -months prior to the conclusion of 
the {French, German, Spanish, and UK A350XWB LA/MSF contracts}, in the form of a 
range". We also uphold  the Panel's findings related to the corporate borrowing rate i n 
Table  7 at paragraph 6.430 and in Table  10 at paragraph  6.632 of the Panel Report.2113 
                                                
2109 Panel Report, para.  6.389.  
2110 Panel Report, para.  6.389.  
2111 Panel Report, para.  6.389.  
2112 Panel Report, para.  6.389.  
2113 See supra  fns 330 and 514.  WT/DS316/AB/RW  
 
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  6.3.2   The calculation of project -specific risk premium  
6.8.  We disagree with the European  Union's claim that " the Panel failed to adopt the most 
appropriate benchmark, tailored to t he risks associated with the A350XWB, based on a 
'progressive search ' for the benchmark that shared 'as many elements as possible in common with ' 
the A350XWB LA/MSF loans ."2114 We also disagree that the Panel erred under Article 1.1(b) of the 
SCM Agreement  merely because it applied  a single, undifferentiated project risk premium derived 
from the A380 project to the A350XWB project . Moreover, given that we addressed and rejected 
the European Union's claim that the Panel erred under Article  1.1(b) by failing t o undertake a 
"progressive search" for a market benchmark2115, we consider it unnecessary to address further 
the European  Union's claim that the Panel acted inconsistently with Article  11 of the DSU by failing 
to consider alternative, and more appropriate, be nchmarks than those proposed by the 
United  States. In addition, we disagree with the European  Union's claim that the Panel acted 
inconsistently with Article  11 of the DSU because it allegedly deviated from the original panel's 
findings by  adopt ing a "const ant, undifferentiated project risk premium " for the A350XWB.2116 
Consequently, we find that the European  Union has not established that the Panel erred in its 
application of Article 1.1(b) of the SCM Agreement . We also find that the European  Union has 
failed to establish that the Panel acted inconsistently with Article  11 of the  DSU. 
6.9.  We also disagree with  the European  Union's claim that the Panel acted inconsistently with 
Article  11 of the DSU in its examination of the risk profiles of the A380 and A350XWB pro jects, 
including in its assessment of: (i) programme risk; (ii) contract risk; and (iii)  the price of risk. 
Contrary to the European Union's view, the Panel did not simply assume that the WRP would serve 
as an appropriate project -specific risk premium for the A350XWB. Instead, the Panel assessed the 
relative project -specific risks associated with the A380 and A350XWB projects. The purpose of this 
comparative analysis was, in the Panel's view, to determine "whether the United  States ha{d} 
demonstrated that t he project -specific risks of the A350XWB programme {were} sufficiently 
similar to those of the A380 programme such that it would be reasonable to conclude that the WRP 
could be used as the project -specific risk premium for the A350XWB".2117 Thus, the Panel so ught 
to engage carefully with the arguments and evidence presented by the parties regarding the 
possible risk premia that should be used in constructing the market benchmark. Regarding the 
Panel's analysis of programme risk, we find that the European Union  has failed to establish that 
the Panel acted inconsistently with its obligations under Article 11 of the DSU in its analysis of 
development risk, market risk, or in its comparison of the dev elopment and market risks. 
With regard to contract risk, we find that the European Union has failed to establish that the 
Panel's comparison of the A350XWB and A380 LA/MSF contracts lacks a sufficient evidentiary basis 
in a manner inconsistent with the requirements of Article  11 of the DSU. We also find that the  
European Union has failed to establish that the Panel acted inconsistently with Article  11 of the 
DSU by failing to compare the terms of the A350XWB LA/MSF contracts to the terms of the A380 
risk-sharing supplier contracts. Finally, we find that the Europ ean Union has failed to establish that 
the Panel acted inconsistently with Article  11 of the DSU in its analysis of the price of risk.  
6.10.   We also reject the European  Union's claims that, in adopting a single , undifferentiated  
project -specific risk premium for  each of the four A350XWB LA/MSF contracts, the Panel erred in 
its application of Article  1.1(b) of the SCM  Agreement, and  also failed to make an objective 
assessment of the matter as required by Article  11 of the DSU.2118 The Panel recogni zed that there 
were some differences among the risk profiles of the four A350XWB LA/MSF contracts.2119 
However, based on its analysis, the Panel was not persuaded that the terms of those contracts 
rendered them significantly different so as to require the application of two or more different 
project -specific risk premia in th ese proceeding s. Given the Panel's analysis and the arguments 
that were put before it, we find that the European  Union has not established that the Panel erred 
under Article  1.1(b) of the SCM  Agreement by ap plying a "single, undifferentiated project risk 
                                                
2114 European  Union's appellant's submission, para.  405 (quoting Appellate  Body Report, 
US ‒ Anti-Dumping and Countervailing Duties (China) , paras.  476 and 486; referring to Appellate Body Report, 
US – Carbon Steel (India) , para. 4.345).  
2115 See section 5.3.2.2.1 of this Report.  
2116 European  Union's appellant's  submission , para. 423. 
2117 Panel  Report, para.  6.459.  
2118 European  Union's appellant's submission, paras.  517-518. 
2119 Panel Report, para.  6.604.  WT/DS316/AB/RW  
 
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  premium" without making adjustments for differences among the risk profiles of the A350XWB 
LA/MSF contracts.2120 Moreover, contrary to the European Union's claim under Article 11 of 
the DSU, we see no error in t he Panel's decision to adopt, on the one hand, an undifferentiated 
project -specific risk premium for the four A350XWB LA/MSF contracts and, on the other hand, a 
contract -specific approach to the corporate borrowing rate. Thus, we find that the European Uni on 
has failed to establish that, by applying a single, undifferentiated project risk premium to all four 
of the A350XWB LA/MSF contracts, the Panel acted inconsistently with Article  11 of the DSU.  
a. For these reasons, we uphold  the Panel's finding, in paragr aphs 6.487 and 6.542 of the 
Panel Report, that the development risks associated with the A350XWB were at least as 
high as, or sufficiently similar to , those associated with the A380; the Panel's findings, in 
paragraphs 6.579 and 6.608 of the Panel Report, that the market risks experienced by 
the A380 and A350XWB were overall comparable in importance and that the A350XWB 
market risks would not have been much lower than the A380 market risks; the Panel's 
finding, in paragraphs 6.595 and 6.609 of the Panel Rep ort, that the A350XWB LA/MSF 
contracts containing such "risk -reducing" terms are no less risky than at least [BCI] for 
A380 LA/MSF that also contained similar terms in the original proceedings; the Panel's 
findings, in paragraphs 6.607 and 6.609 of the Pan el Report, that it was not persuaded 
that the differences in certain terms affecting the risk profiles  of the individual A350XWB 
LA/MSF contracts  would require the application of two or more different project -specific 
risk premia; and, conseq uently, the Pa nel's finding, in  paragraphs 6.608 and 6.610 of 
the Panel Report, that the overall project -specific risks of the A380 and A350XWB 
projects were sufficiently similar to allow the risk premium applied to the  A380 LA/MSF 
in the original proceedin gs to be appl ied to the A350XWB  LA/MSF.  
b. Accordingly, we uphold  the Panel's findings, in paragraphs 6.632 (including Table  10)2121 
and 6.633 of the Panel Report, that Airbus paid a lower interest rate for the A350XWB 
LA/MSF than would have been available to it on the marke t and, consequently, a benefit 
has thereby been conferred within the meaning of Article  1.1(b) of the SCM  Agreement. 
Consequently, we also uphold  the Panel's findings, in  paragraphs  6.656 and 7.1.c.i of the 
Panel Report, that the French, German, Spanish, a nd UK A350XWB LA/MSF contracts 
each constitute a subsidy within the meaning of Article  1.1 of the SCM  Agreement and, 
thus, that the United  States has demonstrated that the French, German, Spanish, and 
UK A350XWB LA/MSF contracts are specific subsidies with in the meaning of Articles  1 
and 2 of the SCM  Agreement.  
6.4  Article  7.8 of the SCM  Agreement  
6.11.   We find that the obligation to "take appropriate steps to remove the adverse effects or … 
withdraw the subsidy" concerns the subsidies that are "grant{ed} or maintain{ed}" by the 
implementing Member at the end of the implementation period. An implementin g Member cannot 
be required to withdraw a subsidy that has ceased to exist. Nor do we see a basis, under 
Article  7.8 of the SCM  Agreement, to require that an implementing Member "take appropriate 
steps to remove  the adverse effects" of subsidies that no longer exis t.  
a. Accordingly , we reverse  the Panel's interpretation of Article  7.8 of the SCM  Agreement, 
in paragraph  6.822 of the Panel Report , whereby  an implementing Member would be  
required to " withdraw " or "take appropriate steps to remove the adverse effects" of past 
subsidies irrespective  of whether such subsidies have expired prior to the end of the 
relevant implementation period. It follows from our finding  that, in the present dispute, 
the European  Union has no compliance obligation with respect to subsidies t hat had 
expired before 1  December 2011.  
6.5  Conditional appeals under Article  7.8 of the SCM  Agreement  
6.12.   We find that an ex ante  analysis regarding the benefit of a subsidy serves as the starting 
point of the analysis  to determine whether a subsidy continues to exist at the end of the 
                                                
2120 European  Union's appellant's submission, para.  522. 
2121 See Table 4  at para. 5.350 above . WT/DS316/AB/RW  
 
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  implementation period. For such a determination, it is also necessary to conduct an analysis 
regarding "whether there are 'intervening events' that occurred after the grant of the subsidy  that 
may affect the projected value of the subsidy as determined under the ex ante analysis."2122 
We further find that the Panel's ultimate conclusion regarding the actual  duration of relevant 
pre-A380 LA/MSF subsidies was based on a proper analysis of both the expiry of the ex ante  
"lives" of the subsidies and the alleged intervening events after the granting of the subsidies.  
We consider  this to be consistent with the Appellate  Body's approach in the original proceedings, 
whereby the assessment of the "life " of a subsidy should encompass both an ex ante  analysis and 
an evaluation of intervening events.  
a. For these reasons, we uphold  the Panel's finding, in paragraphs 6.879 , 6.1076 , 
and 7.1.d.ii  of the  Panel Report, that the European  Union had demonstrated tha t the 
ex ante "lives" of the French, German, and Spanish LA/MSF subsidies for the 
A300B/B2/B4, A300 -600, A310, A320, and A330/A340, and the UK LA/MSF subsidies for 
the A320 and A330/A340, "expired" before 1 June 2011.  
6.13.   We see no reason 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 inte rests. We do not consider such findings to be necessary to 
resolve this dispute.  
6.6  European  Union's consequential appeal under Article  7.8 of the SCM  Agreement  
6.14.   We disagree with the European  Union that it necessarily  follows from the manner in which 
the Panel  characterized the scope of the compliance obligation under Article  7.8 of the 
SCM Agreement that the Panel's findings of adverse effects must be reversed for each of the 
specific country and product markets with respect to which the United  States brought its claims. 
We note that the Panel's adverse effects analysis led to its final conc lusion, in paragraph 7.2 of 
the Panel Report, that "the European  Union and certain member States have failed to comply with 
the DSB recommendations and rulings and, in parti cular, the obli gation under Article  7.8 of 
the SCM Agreement 'to take appropriate steps to remove the adverse effects or … withdraw the 
subsidy '." In our view, whether the Panel had a sufficient basis for this ultimate conclusion is a 
question that can onl y be answered following a careful review of the Panel's reasoning and 
analysis, in particular its analysis relating to the adverse effects of the existing  LA/MSF subsidies 
that are maintained or granted in the post -implementation period.  
6.15.   Thus, we do not d ismiss the totality of the Panel's adverse effects analysis solely on the 
basis of its interpretation of Article  7.8 of the SCM  Agreement. Rather, we do not preclude that the 
pertinent question in these compliance proceedings – i.e. whether the subsidies e xisting in the 
post-implementation period cause adverse effects – may still be answered on the basis of the 
Panel's analysis of the existing subsidies. A consideration of expired subsidies is relevant for this 
purpose insofar as it sheds light on whether L A/MSF subsidies granted or maintained by the 
European  Union in the post -implementation period cause adverse effects.   
6.7  Articles 5, 6, and 7.8 of the SCM Agreement – adverse effects  
6.7.1   Non-subsidized like product  
6.16.   Regarding the European  Union's arguments concern ing the relevance of Article  6.4 of the 
SCM Agreement to the United  States' claims under Article  6.3(b) of the SCM  Agreement, the Panel 
was required to examine the meaning of Article  6.3(b), including the relationship between this 
provision and Article  6.4, as clarified by the Appellate Body in the original proceedings in this 
dispute and in US ‒ Large Civil Aircraft (2nd complaint) . It was also appropriate for the Panel to 
take into account the findings and reasoning by the original panel regarding the mea ning of 
Article  6.4. The Panel could not simply refuse to address the arguments and evidence before it in 
dealing with the United  States' claims under Article  6.3(b). Rather, the Panel was required to 
                                                
2122 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 709. WT/DS316/AB/RW  
 
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  adjudicate the United  States' claims under Article  6.3(b) in light of the arguments raised and 
evidence submitted by both parties to the dispute, and it erred by declining to do so.  
a. Accordingly, we declare moot and of no legal effect the Panel's finding , 
in paragra ph 6.1154 of the Panel Report , concerning the  European Union's reliance on 
Article 6.4 to reject the United States' claims under Article 6.3(b)  of the SCM Agreement . 
Based on our interpretation of Article  6.3(b), read together with Article  6.4, we disagree, 
however, with the European  Union that a com plainant  is required to demonstrate, 
in each case, that its like product is non -subsidized in order  to show that the effect of 
the subsidy is displacement and/or impedance of its like product in a 
third country  market.  
6.7.2   The relevant product markets  
6.17.   Regarding the term "market" in Article  6.3 of the SCM  Agreement, for the purposes of 
conducting an adverse effects analysis, two products are in the same market if they are sufficiently 
substitutable and they exercise "meaningful" competiti ve constraints o n each other. 
A consideration of quantitative  tools and evidence may assist a panel in defining the relevant 
product markets and in answering the question of whether products exercise meaningful 
competitive constraints on each other and are sufficiently su bstitutable to fall in the same product 
market. However, like the Panel, we do not see a reason to preclude that a careful scrutiny of 
qualitative  evidence may also be sufficient provided that it permits an informative and meaningful 
analysis of the releva nt product markets. Depending on the particul arities of a given case, 
it may be sufficient for a panel to examine qualitative  evidence r egarding demand -side and 
supply -side substitutability, product characteristics, end -uses, and customer preferences in or der 
to reach a conclusion as to the nature and degree of competition between two products.  
6.18.   Having reviewed the Panel's analysis of competition in the single -aisle LCA, twin -aisle LCA, 
and VLA product markets, we are satisfied that the Panel's identificati on of the product markets in 
the present dispute was based on a proper analysis of the competition among the relevant 
products, which the Panel found to demonstrate sufficient substitutability, in accordance with the 
standard articulated by the Appellate B ody in the original proceedings. We are also satisfied that 
the Panel's analyses identifying the single -aisle LCA, twin -aisle LCA, and VLA product markets 
reflect a proper reading of the term "market" and we do not agree with the European  Union to the 
extent that it argues that the Panel erred in its interpretation of the term "market" in Article  6.3 of 
the SCM  Agreement.  
a. Accordingly, we uphold  the Panel's finding , in paragraph 6.1416 of the Panel Report, that 
the United  States had brought its adverse effec ts claims with respect to appropriately 
defined product markets for LCA, namely, the global mar kets for single -aisle LCA, 
twin-aisle LCA, and VLA.  
6.7.3   "Product effects" of LA/MSF subsidies  on Airbus LCA  
6.19.   The errors alleged by the European  Union regarding the P anel's findings on the 
"product  effects" of the pre -A350XWB LA/MSF subsidies on the market presence of the A320 and 
A330 families of Airbus LCA concern primarily the LA/MSF subsidies that were found by the Panel 
to have expired before the end of the impleme ntation period  – namely, the subsidies for the A300, 
A310, A320, A330, and A340. We recall that, under our interpret ation of Article 7.8 of 
the SCM Agreement, the European  Union does not bear a compliance obligation with respect to the 
subsidies that were found by the Panel to have expired by the end of the implementation period. 
Thus, t o the extent that some subsidies have expired, a further examination of the removal of the 
effects of those subsidies would not be necessary. In other words, it is not perti nent to examine 
whether the Panel's findings on the "product effects" of the expired  subsidies can support its 
ultimate conclusion of non -compliance under Article  7.8 of the SCM  Agreement. In line with this 
view, we do not consider it necessary to make sep arate findings on the European  Union's claims 
on appeal insofar as they concern the Panel's alleged failure to assess properly the passage of time 
and the events during that time in reaching its findings on the "product effects" of the expired WT/DS316/AB/RW  
 
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  subsidies.  In addition, we disagree with the Panel insofar as its reference to the aggregated 
LA/MSF subsidies in the above findings includes the expired subsidies.2123 
6.20.   Rather, as we have explained above, the pertinent question for purposes of these 
compliance proceeding s is whether the subsidies exist ing in the post -implementation period 
(i.e. after 1 December 2011) cause adverse effects. The Panel found, and the European Union 
does not disagree, that the French, German, Spanish , and UK A380 LA/MSF subsidies had not 
expired by the end of the implementation period. Furthermore, the Panel found that, subsequent 
to the original reference period (2001 -2006), the European  Union granted new LA/MSF subsidies 
to Airbus for developing its A350XWB family of LCA, and tha t these subsidies were 
"closely  connected" with the adopted recommendations and rulings of the DSB and the 
European  Union's alleged compliance "actions". Given the scope of these compliance proceedings, 
we have therefore focused our review on the Panel's analysis and findings regarding the effects of 
subsidies existing in the post -implementation period  – namely, the A380 LA/MSF and the 
A350XWB LA/MSF subsidies – and the European  Union's appeal thereof, to determine whether 
those findings support the Panel's ultimat e conclusion regarding serious prejudice.  
6.21.   As part of our analysis above, we have disagreed with the European  Union's claim under 
Article 11 of the DSU that the Panel's understanding of the "direct effects" of A380 LA/MSF on 
Airbus' ability to launch, brin g to market, and continue developing the A380 as and when it  did 
lacks sufficient evidentiary basis. Furthermore, we have found that the European  Union has failed 
to establish that the Panel acted inconsistently with Article  11 of the DSU in reaching its c onclusion 
that, " without  A350XWB LA/MSF, the Airbus company that actually existed  {in 2006 -2010} could 
have pursued such a programme only by a narrow margin, with a hi gh likelihood that it would, 
to some degree, have had to make certain compromises with re spect to the pace of the 
programme and/or the features of the aircraft."2124 We have also rejected the European Union's 
claim that the Panel erred in finding that the A380 LA/MSF subsidies had "indirect effects" on 
the A350XWB .  
6.22.   The findings by the Panel on t he issues surrounding the Original A350 and the launch of the 
A350XWB, together with its findings on the severe implications of the extensive delays with the 
A380 programme, establish that Airbus was faced with considerable overall uncertainty in the 
years  following the original reference period. Moreover, the original panel's findings, together with 
the Panel's analysis, indicate that A380 LA/MSF had "direct effects" on Airbus' ability to launch, 
bring to market, and continue developing the A380 as and whe n 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 resul ting from the extensiv e production delays in the 
A380 programme. The Panel's findings regarding the "direct effects" of the A350XWB LA/MSF, read 
together with its findings concerning the "indirect effects" of the A380 LA/MSF, also indicate that, 
without th e 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. In other words , the existing LA/MSF subsidies that Airbus continued to receive ma de it 
possible to proceed with the timely launch of the A350XWB – a high -risk and expensive 
programme of considerable strategic importance to Airbus – and to  bring to market the A380, 
which had suffered extensive delays.  
6.23.   In sum, our discussion of  the Panel 's findings reveals  that the LA/MSF subsidies existing in 
the post -implementation period – i.e. the A380 and the A350XWB LA/MSF subsidies – enabled 
Airbus to proceed with the timely launch and development of the A350XWB, and to bring to 
market and to conti nue developing the A380. Both these events were crucial to renew and sustain 
Airbus' competitiveness in the post -implementation period.  
                                                
2123 Having said that, we recall that the expired subsidies remain relevant as part of a matrix of analysis 
that seeks to identify the effects of the subsidies existing in the post -implementation period, in respect of 
which the European  Union conti nues to have a compliance obligation.  Findings from the original proceedings 
concerning the design, structure , and operation of the expired subsidies, as well as how th ose subsidies 
affected Airbus' operations until the end of 2006, can help in understandi ng the extent to which the  existing 
subsidies  may cause adverse effects in the post -implementation period.  
2124 Panel Report, para.  6.1717. (emphasis original)  WT/DS316/AB/RW  
 
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  6.7.4   Lost sales, displacement, and impedance  
6.24.   We recall  that "displacement or impedance" would arise where the counterfactual analysis 
shows that the sales of the complaining Member would have declined less or would have been 
higher in the absence of the challenged subsidy. We understand the Panel to have sought to apply 
this framework when it turned to assess whether the volume of deliveries and market shares that 
"would have been achieved by the United  States' LCA industry between 1 December 2011 and the 
end of 2013 would have been higher than  its actual level  in all relevant product markets"2125 in the 
absence of the "product effe cts" of the LA/MSF subsidies. We further consider  that the Panel's 
finding that "the United  States has established that the 'product' effects of the challenged LA/MSF 
subsidies are a 'genuine and substantial' cause of displacement and/or impedance  of Unite d States 
LCA"2126 in the relevant geographic markets for single -aisle LCA, twin -aisle LCA, and VLA is 
informed by the manner in which the United  States framed its claims. We do not read the Panel's 
use of the term "displacement and/or impedance" when summing up its serious prejudice findings 
regarding the relevant markets at issue as suggesting that the Panel found the existence of these 
serious prejudice phenomena in an undifferentiated manner with respect to one and the same 
product and country market. There fore, contrary to what the European  Union appears to suggest, 
it does not necessarily follow from the Panel's use of the term "displacement and/or impedance" 
that the Panel treated "displacement" and "impedance" as interchangeable and indistinguishable 
concepts for purposes of its adverse effects analysis.   
6.25.   We recall our finding that the Panel's assessment of the relevant product markets in these 
compliance proceedings was based on a proper analysis of the nature and degree of competition 
between products t hat the Panel found to demonstrate sufficien t substitutability. However, 
an assessment of the nature and degree of competition in the relevant product market(s) does 
not, in and of itself, answer the question of whether the  subsidies existing in the 
post-implementation period are a genuine and substantial cause of adverse effects in the 
relevant  market (s). 
6.7.4.1   The single -aisle LCA market  
6.26.   With regard to the single -aisle LCA market, the Panel's findings regarding the 
"product  effects" of LA/MSF subsidies on the market presence of the A320  concerned primarily the 
effects of those subsidies that had expired prior to the end of the implementation period. We have 
found, however, that the European Union has no compliance obligation in respect of those expired 
subsidies. Rather, the pertinent question is whether the  subsidies existing in the 
post-implementation period (i.e. after 1 December 2011) cause adverse effects, such that the 
European Union has failed to comply with its obligat ion under Article 7.8 of the SCM Agreement to 
"take appropriate steps to remove the adverse effects". We do not find any analysis by the Panel 
as to whether, and to what extent, Airbus' competitiveness in the single -aisle LCA market, gained 
through the pre -A380 LA/MSF subsidies, was renewed and sustained beyond the original reference 
period as a result of the subsidies that the European  Union maintained or granted in the 
post-implementation period.  
6.27.   Thus, we are not convinced that, insofar as the single -aisle LCA market is concerned, the 
Panel's analysis provides a sufficient basis to sustain its conclusion, in paragraph  6.1798 of the 
Panel Report, that "the orders identified in Table  19 {in the single -aisle LCA market} represent 
'significant' 'los t sales' to the United  States LCA industry and, therefore, that the challenged 
LA/MSF subsidies continue to be a 'genuine and substantial' cause of serious prejudice to the 
United States within the meaning of Article 6.3(c) of the SCM Agreement". Similarly , we are not 
convinced that, with regard to the various country markets for single -aisle LCA, the Panel's 
analysis is sufficient to sustain its conclusion, in paragraph 6.1817 of the Panel Report, that "the 
challenged LA/MSF subsidies are a 'genuine and su bstantial' cause of displacement and/or 
impedance of United  States LCA in the markets for single -aisle LCA in the European  Union, 
Australia, China and India".  
                                                
2125 Panel  Report, para.  6.1817. (emphasis added)  
2126 Panel  Report, para.  6.1817. (emphasis added)  WT/DS316/AB/RW  
 
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  a. We therefore reverse  the above conclusions of the Panel under Articles 6.3(a), 6.3(b), 
and 6.3(c)  of the SCM Agreement insofar as they relate to the single -aisle LCA market.  
6.28.   Having so found, we do not consider it necessary for us to address the European  Union's 
additional arguments described in paragraph 5.703  of this Report .  
6.29.   We further find that we are unable to complete the legal analysis of the United  States' 
claims of  "displacement and/or impedance" in the single -aisle LCA markets in Australia, China, 
and India, and impedance in the single -aisle LCA market  in the European Union , or, in the 
alterna tive, threat of displacement and impedance in that market.  
6.7.4.2   The twin -aisle LCA market  
6.30.   With regard to lost sales in the twin -aisle LCA market, our review of the Panel's finding on 
the product effects of LA/MSF subsidies on the A350XWB indicates that, in the  absence of the 
LA/MSF subsidies existing in the post -implementation period  (i.e. after 1 December 2011) , Airbus 
would not have been able to offer the A350XWB at the time it did and with the features it had . 
The Panel's finding that the sales of the A350XW B in the post -implementation period constituted 
"lost sales" to the US LCA industry within the meaning of Article  6.3(c) of the SCM  Agreement is 
also supported by relevant Panel findings regarding the competitive dynamics between Boeing's 
and Airbus' respe ctive product offerings in the twin -aisle LCA market. Furthermore, we are not 
convinced by the European  Union's argument that the Panel failed to take into account 
market -specific and sale -specific non -attribution factors.  
6.31.   Therefore, the Panel's findings s upport the conclusion that the sales of the A350XWB 
identified in Table 19 of the Panel Report represent "significant lost sales" to the US LCA industry 
within the meaning of Article  6.3(c) of the SCM  Agreement, and that such lost sales were the 
effect of the LA/MSF subsidies existing in the post -implementation period. This conclusion also 
finds support in the analytical framework adopted by the panel and the Appellate  Body in the 
original proceedings, as well as in a number of the Panel 's findings, includi ng its finding concerning 
the "product effects" of the LA/MSF subsidies existing in the post -implementation period on Airbus' 
timely launch of the A350XWB, and the existence of sufficient substitutability between Boeing' s 
and Airbus' twin -aisle product off erings. In light of our interpretation of Article  7.8 of the 
SCM Agreement, however, we disagree with the Panel's conclusion on "significant lost sales" in the 
twin-aisle LCA market to the extent that its conclusion was based on the effects of the challeng ed 
LA/MSF subsidies that the Panel found to have expired.  
a. Accordingly, we modify  the Panel's conclusion in paragraph 6.1798 of the Panel  Report , 
and find instead that the orders identified in Table 19  of the Panel Report  in the 
twin-aisle LCA market repres ent " significant lost sales " to the US LCA industry and, 
therefore, that the LA/MSF subsidies existing in the post -implementation period are a 
genuine and substantial cause of serious prejudice to the United States within the 
meaning of Article 6.3(c) of t he SCM Agreement.  
6.32.   With regard to displacement and impedance in the twin -aisle LCA market, we note that, 
according to the Panel, the LA/MSF subsidy for the A330 -200 expired no later than [BCI], 
i.e. in the post -implementation period.  We note, however, that the original panel found that it was 
likely that the A330 -200 could have been launched even in the absence of the specific LA/MSF 
granted in respect of that programme because it was a derivative of the A330 and, therefore, 
required a comparatively small am ount of funding to develop. Moreover, unlike for the A380 and 
A350XWB LA/MSF subsidies, there are no specific findings by the Panel relating to the issue of 
whether and how the "product effects" of the A330 -200 LA/MSF subsidy continued beyond 2006 
and into  the post -implementation period. Our review of the Panel's finding on the "product effects" 
of LA/MSF subsidies on the A350XWB indicates that, in the absence of the LA/MSF subsidies for 
the A380 and A350XWB existing in the post -implementation period, Airbu s would not have been 
able to offer the A350XWB at the time it did and with the features it had . We further recall the 
Panel's finding that Airbus' A350XWB product offering was in direct competiti on with Boeing's 
twin-aisle LCA .  
6.33.   We note, however, that the  United  States framed its claim of displacement and/or 
impedance in the twin -aisle LCA market on the basis of data concerning market shares and WT/DS316/AB/RW  
 
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  deliveries  of Airbus and Boeing LCA during  the period 2001 -2013. There were no deliveries of the 
A350XWB during that period. Thus, for purposes of the claim of displacement and/or impedance in 
the twin -aisle LCA market, the Panel relied on market shares and delivery data relating to the 
A330, rather than orders of the  A350XWB, in making its finding. We recall, in this regard, that the 
Panel's findings regarding the "product effects" of LA/MSF subsidies on the A330 concerned 
primarily the effects of those subsidies that had expired. We have found, however, that the 
European Union has no compliance obligation in respect of those  expired subsidies. Rather, 
the pertinent question is whether the subsidies existing in the post -implementation period cause 
adverse effects, such that the European Union has failed to comply with its obligations under 
Article 7.8 of the SCM Agreement to "take appropriate steps to remove the adverse effects". 
However, given the way the claims of displacement and/or impedance were raised before the 
Panel and its approach to assessing these claims, th e Panel did not explore, and made no findings 
on, the issue of whether and , if so, how the A380 and A350XWB subsidies existing in the post -
implementation period may have contributed to the deliveries of the A330 occurring during that 
period. In these circu mstances, we are not convinced that the Panel's analysis and findings provide 
a sufficient basis to sustain the conclusion that the effect of the LA/MSF subsidies existing in the 
post-implementation period was to displace or impede US LCA in the twin -aisle LCA market in the 
European Union and relevant third country markets.  
a. Accordingly, we reverse  the Panel's conc lusion , in paragraph 6.1817 of the Panel  Report , 
that "the United  States ha{d} established that the 'product' effects of the challenged 
LA/MSF sub sidies are a 'genuine and substantial' cause of displacement and/or 
impedance of United  States LCA in the markets for … twin -aisle LCA in the 
European  Union, China, Korea and Singapore".  
6.34.   Having done so, we see no further reason to address the European  Union's additional 
arguments regarding the Panel's conclusion, as set out in paragraph 5.703  of this Report .  
6.35.   We further find that we are unable to complete the legal analysis of the United  States' 
claims of  displacement in the twin -aisle LCA markets in C hina, Korea, and Singapore, 
and impedance in the twin -aisle LCA markets in the European  Union, China, Korea, and Singapore.  
6.7.4.3   The VLA market  
6.36.   With regard to lost sales in the VLA market, our review of the Panel's findings, as well as the 
relevant findings from th e original proceedings , indicates that, in the absence of the LA/MSF 
subsidies existing in the post -implementation period  (i.e. after 1 December 2011) , Airbus would 
not have been able to offer the A380 at the time it did. Moreover, the Panel's analysis reg arding 
the conditions of competition in the VLA market confirms that Airbus' and Boeing' s respective VLA 
products – the A380 and 747 – are sufficiently substitutable with each other. Such competitive 
dynamics, in our view, provide further support to the pr oposition that the sales won by Airbus in 
the VLA market were at the expense of the US LCA producer. Finally, 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.  
6.37.   Therefore, the Panel's findings support the conclusion that the sales of the A380 identified in 
Table 19 of the Panel Report represent "significant lost sales" to the US LCA industry within the 
meaning of Article  6.3(c) of the SCM  Agreement, and that such lost sales were the effect of the 
LA/MSF subsidies existing in the post -implementation period. This conclusion also finds support in 
the analytical framework adopted by the panel and the Appellate  Body in the original proceedings, 
as well as in a number of the Panel 's findings, including its finding concerning the "product effects" 
of the LA/MSF subsidies existing in the post -implementation period on Airbus' continued offering of 
the A380, and the existence of sufficient substitutability between Boeing' s and Airbus' VLA product 
offerings. In light of our interpretat ion of Article  7.8 of the SCM  Agreement, however, we disagree 
with the Panel's conclusion on "significant  lost sales" in the VLA market to the extent that its 
conclusion was based on effects of challenged LA/MSF subsidi es that the Panel found to 
have expired. WT/DS316/AB/RW  
 
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  a. Accordingly, we modify  the Panel's conclusion  in paragraph 6.1798 of the Panel Report, 
and find instead that the orders identified in Table 19  of the Panel Report  in the VLA 
market represent "significant lost sales " to the US LCA industry and, therefor e, that the 
LA/MSF subsidies existing in the post -implementation period continue to be a genuine 
and substantial cause of serious prejudice to the United  States within the meaning of 
Article  6.3(c) of the SCM  Agreement.  
6.38.   With regard to displacement and impe dance in the VLA market, our review of the Panel's 
findings, as well as the relevant findings from the original proceedings, indicates that, in the 
absence of the LA/MSF subsidies existing in the post -implementation period, Airbus would not 
have been able to offer the A380 at the time it did. We also recall that, as the Panel's analysis of 
the competitive dynamics in the VLA market shows, Boeing's  and Airbus' respective product 
offerings – the 747 and the A380 – are sufficiently substit utable. With respect to the 
non-attribution factor alleged by the European  Union concerning the development and production 
delays affecting the 747 -8, we note the Panel's observation that the larger versions of 
the 777 may also at times challenge for sales in the VLA market. T herefore, we see no reason to 
disturb the Panel's finding that this non -attribution factor would not be capable of diluting the 
genuine and substantial relationship of cause and effect between the LA/MSF subsidies and the 
alleged market phenomena.  
6.39.   We recal l that a trend analysis may be relevant and indicative, although not necessarily 
determinative, for purposes of a finding of displacement. In reaching its finding of displacement, 
however, the Panel did not examine whether there existed any discernible tre nds in volumes and 
market shares in the VLA markets at issue, including whether or not there existed declining trends 
that could have supported the Panel's findings. In these circumstances, we consider that the Panel 
should have engaged with the evidence b efore it in order to explain sufficiently the basis for its 
finding that the LA/MSF subsidies had the effect of displacing US LCA in these VLA markets in the 
post-implementation period.  
a. Accordingly, insofar as displacement in the VLA market is concerned , we disagree with 
the Panel to the extent that it found , in paragraph 6.1817  of the Panel Report, that 
"the United  States ha{d} established that the 'product' effects of the challenged LA/MSF 
subsidies are a 'genuine and substantial' cause of displacement …  of United  States LCA in 
the markets for … {VLA} in the European  Union, Australia, … Korea, {and} Singapore".  
6.40.   We further find that we are unable to complete the legal analysis of the United  States' claim 
of displacement in the VLA markets in the European  Union, Australia, Korea, and Singapore.  
6.41.   As for the finding of impedance, we recall that the phenomenon of 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. Given the 
particular nature of the LCA industry, especially for VLA like the Boeing 747-8 and the 
Airbus  A380, where instances of sales and volumes of deliveries are generally much lower than in 
the case of c onsumer goods, we do not consider that the volumes of deliveries that the Panel 
considered could not have supported a finding of impedance. We further recall that our review of 
the Panel's findings with respect to the A380 and A350XWB programmes, as well a s relevant 
findings from the original proceedings, indicates that, in the absence of the LA/MSF subsidies 
existing in the post -implementation period, Airbus would not have been able to offer the A380 at 
the time it did. Moreover, as the Panel's analysis of  the competitive dynamics in the VLA market 
shows, Boeing's and Airbus' respective product  offerings – the 747 -8 and the A380 – are 
sufficiently substitutable. Thus, contrary to the situation regardin g alleged impedance in the 
twin-aisle LCA market, the "p roduct effects" of the LA/MSF subsidies e xisting in the 
post-implementation period, including the A380 LA/MSF subsidies, and the VLA delivery data 
underlying the United States' claim, concern the same aircraft model , and, as explained above, the 
Panel made  necessary findings on both "product effects" and delivery data. On the basis of these 
considerations, and in light of the deliveries of the A380 in the post -implementation period, we see 
no error in the Panel's conclusion that , absent the LA/MSF subsidies , the US LCA industry would 
have achieved a higher volume of deliveries and market share than its actual level in the 
post-implementation period.  WT/DS316/AB/RW 
- 267 –
 
6.42.  Therefore, the Panel's findings reviewed above support the conclusion that the effect of the 
LA/MSF subsidies existing in the post-implementation period is impedance of US VLA in 
the VLA markets in the European Union, Australia, China, Korea, Singapore, and the 
United Arab Emirates. This conclusion also finds support in the analytical framework adopted by 
the panel and the Appellate Body in the original proceedings, as well as in a number of the Panel's 
findings, including its finding concerning the "product effects" of the LA/MSF subsidies existing in the 
post-implementation period on Airbus' continued offering of the A380, and the existence of 
sufficient substitutability between Boeing's and Airbus' VLA product offerings. In light of our 
interpretation of Article 7.8 of the SCM Agreement, however, we disagree with the Panel's 
conclusion on impedance in the VLA market to the extent that its conclusion was based on the 
effects of the challenged LA/MSF subsidies that the Panel found to have expired. 
a.Accordingly, we modify t he Panel's conclusion in paragraph 6.1817  of the Panel Report,
and find instead that the United States has es tablished that the "product effects" of the
LA/MSF subsidies existing in the 
post-implementation period are a genuine and
substantial cause of impedance of US LCA in the VLA markets in the European Union,
Australia, China, Korea, Singapore, and the United Arab Emirates.
6.43.    On the basis of the above, in respect of subsidies existing in the post-implementation  
period, we uphold, alb
eit for different reasons, the Panel's conclusions:  
a.in paragraph 7.2 of the Panel Report, that "{b}y continuing to be in violation of
Articles 5(c) and 6.3(a),  (b) and (c) of the SCM Agreement" insofar as the twin-aisle LCA
and VLA markets are concerned, "the European Union and certain member S tates have
failed to comply with the DSB recommendations 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'"; and
b.in paragraph 7.4 of the Panel Report, 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" and that,
"{t}o the extent that the European Union and certain member States ha ve failed to
comply with the recommendations and rulings of the DSB in the original dispute, those
recommendations and rulings remain operative."
6.44.  The Appellate Body recommends that  the DSB request the European Union to bring 
its measures found in  this Report, and in the Panel Report as modified by  this Report, to 
be 
inconsistent with the SCM Agreement into conformity with its obligations under that Agreement. 
Signed in the 
original in Geneva this 8th day of May 2018 by: 
_________________________ 
Ricardo Ramírez-Hernández 
Presiding Member  
 _________________________ _________________________ 
 Ujal Singh Bhatia 
Member Peter Van den Bossche  
Member
__________