WORLD TRADE  
ORGANIZATION  WT/DS266/36 
9 June 2006 
 
 (06-2800) 
 Original:   English 
  
 
EUROPEAN COMMUNITIES – EX PORT SUBSIDIES ON SUGAR 
 
Understanding between Brazil and the European Communities
 
  
 The following communication, dated 8 June 2006, from the delegation of Brazil and the 
delegation of the European Communities to the Chairman of the Dispute Settlement Body, is 
circulated at the request of those delegations.  
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  Noting the Status Reports by the European Communities (WT/DS266/35 and WT/DS266/35/Add.1) and the statements of the pa rties to the Dispute Settlement Body (DSB) 
relating to this dispute,  
 Having regard to the fact that the Europ ean Communities considers that by adopting and 
applying the measures referred to in the aforementi oned status reports it has fully complied with the 
DSB recommendations and rulings in this dispute with in the reasonable period of time granted to it 
under Article 21.3(c) of the Understanding on Rules and Procedu res Governing the Settlement of 
Disputes  (DSU),  
 
 Mindful that Brazil has made known to the Eur opean Communities that it is not satisfied that 
the EC has complied with the DSB recommendations a nd rulings in this dispute within the reasonable 
period of time,    Given the disagreement between Brazil and th e European Communities ("the parties to the 
dispute"), within the meaning of Article 21.5 of th e DSU, as to the existence or consistency with a 
covered agreement of measures taken by the European Communities to comply with the 
recommendations and rulings of the DSB in this di spute within the reasonable period of time, the 
parties to the dispute have reached the followi ng understanding with regard to the dispute: 
 
1. Brazil is entitled at any time to request the est ablishment of a panel pursuant to Article 21.5 of 
the DSU. 
 2. At the first DSB meeting at which Brazil’s request for the establishment of an Article 21.5 
panel appears on the agenda, the European Comm unities shall accept the establishment of that 
panel. 
 3. The parties to the dispute shall cooperate to en able the Article 21.5 panel to circulate its report 
within 90 days of the panel's establishment, excluding such time during which the panel's 
work may be suspended pursuant to Article 12.12 of the DSU. 
 
4. Either party to the dispute may request the DS B to adopt the report of the Article 21.5 panel at 
a DSB meeting held at least 20 days after the circulation of the report to the Members unless WT/DS266/36 
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  either party appeals the report. If a party to th e dispute has notified its decision to appeal, the 
report by the Article 21.5 panel shall not be considered for adoption by the DSB until after 
completion of the appeal.  
 5. In the event of an appeal against the Article 21.5 panel report, the parties to the dispute shall 
cooperate to enable the Appellate Body to circ ulate its report to the Members within no more 
than 60 days from the date of notification of the appeal to the DSB. 
 6. In the event of an appeal, either party to th e dispute may request the DSB to adopt the reports 
of the Appellate Body and the Article 21.5 pane l (as modified by the Appellate Body report) 
at a DSB meeting held within 30 days of the ci rculation of the Appellate Body report to the 
Members. 
 7. Brazil shall not request authorization to suspend concessions or other obligations under 
Article 22 of the DSU until the adoption by th e DSB of the Article 21.5 panel report and, 
where relevant, the Appellate Body report.   
 8. If the DSB adopts recommendations and rulin gs that measures taken by the European 
Communities to comply with the prior recommendations and rulings of the DSB do not exist or are inconsistent with a covered agreement,  Brazil has the right under Article 22.2 of the 
DSU to request negotiations with the Europ ean Communities with a view to developing 
mutually acceptable compensation, and to re quest authorization from the DSB to suspend 
concessions or other obligations pursuant to  Articles 22.2 and 22.6 of the DSU.   
 9. Subject to paragraphs 7 and 8, Brazil has th e right to request the DSB authorization referred 
to therein at any future date. The Europ ean Communities shall not assert that Brazil is 
precluded from obtaining the DSB authorization because the request was made outside the 
30-day time-period specified in Article 22.6 of the DSU .  
 10. The European Communities retains the right to  object to the level of suspension proposed, or 
to claim that the principles and procedures set forth in Article 22.3 of the DSU have not been followed, and to have the matter referred to arbitration under Article 22.6 of the DSU. 
 
11. The parties to the dispute will cooperate to en able the arbitrator under Article 22.6 of the DSU 
to circulate its decision within 60 days of the referral to arbitration.  
 12. The parties to the dispute will cooperate to fac ilitate the participation of  the original panelists 
in the Article 21.5 compliance panel and the Article 22.6 arbitration.  
 13. If any of the original panelists is not availa ble for either the Article 21.5 compliance panel or 
the Article 22.6 arbitration (or both), the parties to the dispute  will immediately request the 
Director-General of the WTO to appoint, within five days of being so requested, a replacement for the proceeding or proceedings in which a replacement is required.  If an 
original panelist is unavailable to serve in eith er of the proceedings, the parties to the dispute 
will further request that, in making this appoint ment, the Director-General seek a person who 
will be available to act in both proceedings.  
 14. The parties to this dispute  will continue to cooperate in all matters related to this 
Understanding  and not to raise any procedural objection to  any of the steps set out herein.  If, 
during the application of these procedures, the par ties to the dispute consider that a procedural 
aspect has not been properly addressed in this Understanding, they will endeavour to find a 
solution within the shortest time possible that will not affect the other aspects and steps agreed herein.   WT/DS266/36 
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15. In order to fully safeguard their respective rights under the DSU, the parties to the dispute 
agree to request jointly the adoption by the DSB of the draft decision attached to this 
understanding at its meeting on 19 June 2006. 
 
 
Signed:    
 
H.E. Mr Clodoaldo Hugueney-Filho H.E. Mr Carlo Trojan  
Ambassador Ambassador  
Permanent Representative of Brazil Permanent Representative    for the European Communities WT/DS266/36 
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  Draft Decision of the DSB
 
   The DSB takes note of the Understanding reached between Brazil and the European 
Communities and agrees that, in the event that the DSB adopts recommendations and rulings that 
measures taken by the European Co mmunities to comply with the prior  recommendations and rulings 
of the DSB do not exist or are inconsistent with a covered agreement, the DSB shall grant Brazil upon 
its request authorization to suspend concessions or other obligations pursuant to Article 22 of the DSU 
unless (i) the DSB decides by consensus not to do so , or (ii) the European Communities objects to the 
level of suspension proposed or claims that the pr inciples and procedures set forth in Article 22.3 of 
the DSU have not been followed, in which case th e matter shall be referred to arbitration under 
Article 22.6 of the DSU.   
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