G/SCM/Q2/CAN/67  
 
4 October  2016 
(16-5284) Page: 1/3 
Committee on Subsidies and Countervailing Measures  Original: English  
 
 SUBSIDIES  
QUESTIONS POSED BY BRAZIL  TO CANADA  
PURSUANT TO ARTICLE 25.8 OF THE SCM AGREEMENT  
The following communication, dated 3 October 2016 , is being ci rculated at the request of the 
Delegation of Brazil.   
 
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Question 1  
 
The Canadian Fe deral Government provided Bombardier with CAN$ 350 million in launch aid for 
the development of the C -Series from 2008 to 2015 (see, e.g., WT/TPR/M/246/Add.1 at 212; 
G/SCM/Q2/CAN/66). The Government of Quebec provided Bom bardier with an additional 
CAN$  118 million in launch aid (see G/SCM/Q2/CAN/62 at 3; G/SCM/Q2/CAN/52 at 7 -8). 
Bombardier obtained the launch aid from the Canadian Federal Government and the Government 
of Quebec rather than from the commercial market. Did the Canadian Federal Government and the 
Government of Quebec provide taxpayer -funded aid to a private company because the same 
amount of aid on the same terms was not available from commercial sources? Why did Bombardier 
select the use of public funds rather than a commercial source of finan cing? 
 
Question 2  
 
The Canadian Federal Government and the Government of Quebec (including Investissement 
Quebec) have made minor adjustments to the terms of the launch aid agreements with 
Bombardier since they were originally signed. What is the nature of  these minor adjustments and 
do such adjustments change the repayment terms or conditions or otherwise affect the overall 
value of the launch aid?  
 
Question 3  
 
The Canadian Federal Government provides funding through the Strategic Aerospace and Defense 
Initiative ("SADI") and Technology Partnerships Canada ("TPC"). Did SADI or the TPC provide 
funding or other support to Bombardier or any of its suppliers for the C -Series? If so, when was 
this funding provided and in what amounts?  
 
Question 4  
 
In February 2 016, Bombardier received $1.5 billion from the Quebec's Caisse de Dépôt et 
Placement du Québec ("CDPQ") in exchange for an interest in Bombardier's transportation assets, 
which were placed in a new company – Bombardier Transportation (Investment) UK Ltd (" BT 
Holdco"). Under the applicable law (An Act Respecting the Caisse de Dépôt et Placement du 
Québec), CDPQ is a mandatary of the Quebec government, whose property belongs to the Quebec 
government and whose mission includes "contributing to Quebec's economi c development" . 
CDPQ's funds will not be used by BT Holdco, which is the entity in which CDPQ acquired an 
ownership interest. Rather, according to its press release, Bombardier intends to use the CDPQ 
funds for "general corporate purposes". Given that (a) applicable law provides that CDPQ is an 
instrumentality of the Quebec government, (b) all property of CDPQ, including investment 
interests, belongs to the Quebec government, and (c) none of the $1.5 billion was directed to G/SCM/Q2/CAN/67  
 
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  support BT Holdco, the company in  which CDPQ actually invested and from which it is presumably 
seeking a return, please confirm whether the Canadian Federal government or the Quebec 
government know how Bombardier is using the $1.5 billion in funds, including whether such funds 
were made a vailable to support, directly or indirectly, Bombardier's C -Series program.  
 
Question 5  
 
In its press release announcing the Bombardier's agreement with CDPQ, Bombardier reported:  
 
"After a thorough review process, including an initial public offering and a competitive international 
auction process for the private placement of a minority stake, the Board of Directors of Bombardier 
determined the transaction announced today, contemplating the sale of 30% of Bombardier 
Transportation to CDPQ, is the most attr active option."  
 
Bombardier engaged in "a competitive international auction process" to identify funding available 
in the commercial market. Instead of obtaining funding from the commercial market through this 
auction process, Bombardier agreed to an inves tment on more favorable terms offered by CDPQ as 
"the most attractive option" . Why did CDPQ provide this investment on terms more favorable than 
available in the commercial market?  
 
Question 6  
 
In October 2015, Bombardier entered a memorandum of understand ing with the Government of 
Quebec for the provision of a $1.0 billion equity investment, with the proceeds "used entirely for 
cash flow purposes of the C Series aircraft program." Bombardier and the Government of Quebec 
entered a definitive agreement for t he equity investment on 23 June 2016. The Government of 
Quebec made a payment of $500 million on 30 June 2016 an d is scheduled to make a 
second  payment of $500 million on 1 September 2016. Why is the Government of Quebec 
providing the investment rather tha n commercial investors?  
 
Question 7  
 
Bombardier's agreement with the Government of Quebec includes the issuance of warrants 
exercisable by the Government of Quebec to acquire up to 100 million shares of Bombardier at an 
exercise price of $1.72 (CAN$ 2.21).  When exercised, the Government of Quebec will provide up 
to $172 million in additional funds to Bombardier. Is the Government of Quebec required to 
exercise these warrants at the exercise price? Is it possible for the Government of Quebec to 
exercise the warrants at a share price below the trigger price?  
 
Question 8  
 
Why has Canada not notified the CAN$ 468 million in launch aid subsidies, the $2.5 billion in 
Quebec subsidies, and other support to Bombardier for the C -Series to the WTO Committee on 
Subsidi es under Article 25 of the SCM Agreement?  
 
Question 9  
 
The Canadian federal government is considering making an additional equity infusion in the C -
Series program of $1 billion. What is the status of this additional support?  
 
Question 10  
 
Bombardier has n ow succeeded in making sales to, for example, Air Canada in the Canadian 
market and Delta in the U.S. market. Bombardier has also conceded that the pricing of these 
sales, together with sales to Air Baltic, will require it to record a $500 million "onerous  contract" 
charge in its financial statements. Bombardier claims that this loss is normal for the early sales of 
a new aircraft. Did Bombardier take similar charges in any of its previous aircraft programs? Why 
was a similar charge not required in relation  to all of the prior sales of the C -Series, including its 
sales to Lufthansa, the launch customer?  
 G/SCM/Q2/CAN/67  
 
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  Question 11  
 
The Parliament of Canada has recently amended the Air Canada Public Participation Act to allow Air 
Canada greater flexibility as to where maint enance work is done. During testimony to the Senate 
Committee, Air Canada threatened to walk away from the C -Series purchase if the legislation was 
not passed. Press reports indicate that Air Canada's purchase of the C -Series was contingent on 
the Parliame nt changing the legislation and on the Government of Quebec dropping a related 
lawsuit. Can you provide information on what agreement or d iscussions occurred between 
Air Canada and the Government of Canada leading up to the introductions of the legislative  
amendments? Can you provide information on what agreement or discussions occurred between 
Air Canada and the Government of Quebec in relation to termination of the lawsuit? Did the 
Canadian Federal Government or the Government of Quebec provide any other commitments or 
provide any other incentives, including export financing, to Bombardier's customers?  
 
Question 12  
 
On 25 April 2016, the Premier of Quebec stated that the Delta sale happened because of the 
investment in Bombardier by the Government of Quebe c, stating that "[i]f you ask Bombardier … 
they will acknowledge that it's because we (the government) were there that this transaction 
happened" . Is this statement a public recognition that subsidies provided by the Government of 
Canada have distorted int ernational competition in the aviation sector, in particular for the sales to 
Air Canada, Air Baltic and Delta? Did the Government of Quebec provide any formal or informal 
guarantees or other commitments to Delta or any other Bombardier customers regarding  its 
investment in Bombardier?  
 
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