EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
Document: Revision to the Notification of an Appeal by the European Union under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 20(1) of the Working Procedures for Appellate Review Communication from the Appellate Body to the Chairman of the Dispute Settlement Body
Date: 17 August 2010
Document codes: WT/DS316/12/Rev.1
Complainant: U.S.
Respondent: EU, France, Germany, Spain, United Kingdom
Third parties: Australia, Brazil, Canada, China, Japan, South Korea
Dispute stage: Retaliation & Arbitration
Agreements cited: Art. 3.1, 3.2, 5, 6.3  Subsidies and Countervailing Measures (SCM)Art. XVI:1  GATT 1994Art. 1, 2  Subsidies and Countervailing Measures (SCM)Art. III:4  GATT 1994

EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES
AFFECTING TRADE IN LARGE CIVIL AIRCRAFT

Revision to the

Notification of an Appeal by the European Union
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 20(1) of the Working Procedures for Appellate Review

Communication from the Appellate Body
to the Chairman of the Dispute Settlement Body

 The following communication, dated 12 Augus t 2010, from the Chairman of the Appellate
Body addressed to the Chairman of the Dispute Settlement Body, is being circulated to Members.

 I am writing to advise you that, by letter of 5 August 2010, the European Union requested
authorization from the Appellate Body, pursuant to Rule 23 bis of the Working Procedures for
Appellate Review (the " Working Procedures "), to amend its Notice of Appeal dated 21 July 2010.
The Division hearing the appeal provided the United States and all third participants with an
opportunity to comment in writing on the request. No objections to the European Union's request
were received. On 11 August 2010, the Division authorized the European Union to amend its Notice
of Appeal.

 The amended Notice of Appeal is attached.

Pursuant to Article 16.4 and Article 17.1 of the DSU the European Union hereby notifies to
the Dispute Settlement Body its decision to appeal to the Appellate Body certain issues of law
covered in the Panel Report and cer tain legal interpretations devel oped by the Panel in the dispute
European Union – Measures Affecting Trade in Large Civil Aircraft (WT/DS316). Pursuant to Rule
20(1) of the Working Procedures for Appellate Review , the European Union simultaneously files this
Notice of Appeal with the Appellate Body Secretariat.
The European Union is restricting its appeal to those errors that it believes constitute serious
errors of law and legal interpretation that need to be corrected. Non-appeal of an issue does not
signify agreement therewith. The European Union also believes that it may not be necessary for the
Appellate Body to decide all the issues raised in this notice of appeal since some may become moot as
a result of decisions on other issues.

For the reasons to be further elaborated in its submissions to the Appellate Body, the
European Union appeals, and requests the Appellate Bo dy to reverse, modify or declare moot and of
no legal effect the findings, conclusions and reco mmendations of the Panel, with respect to the
following errors of law and legal interpretations contained in the Panel Report
1:
I. Preliminary Issues
A. Legal irrelevance of pre-1995 subsidies (Section VII.C.2 of the Report)
1. The Panel erred in its interpretation and application of Article 5 of the SCM Agreement when
concluding that all alleged actionable subsidies gr anted by the European Union prior to 1 January
1995 were included in the temporal scope of these proceedings.2
B. Identity of recipient, pass through, extincti on, extraction and withdrawal of subsidy
(Section VII E.1 of the Report)
2. The Panel erred in its interpre tation and application of the SCM Agreement , in particular
Articles 1, 4.7, 7.8, 5 and 6.3, by failing to dist inguish the recipients of the alleged subsidies over
time, and by failing to properly account for sales, transfers and changes in ownership of assets and
companies and the extinction, extraction, removal or withdrawal of the alleged subsides.3
3. In this respect the Panel also failed to make an objective assessment of the law and facts
contrary to Article 11 of the DSU in a number of ways. In particular, the Panel failed to offer reasoned
and adequate explanations for its findings that the European Union "did not argue" that the
transactions were at arm's length,4 that certain of the transactions were in fact not at arm's length, 5 that
the SEPI and Daimler extractions did not remove the funds from use for LCA development and
manufacture6 and that cash was not truly "withdrawn" from CASA. 7 The Panel also lacked a
sufficient evidentiary basis for these findings. The Panel's findings concerning the provision and
removal of money to a state-owned entity by it s government shareholder are also internally
inconsistent and incoherent.8
4. The Panel erred in its interpretation and a pplication of Articles 4.7 and 7.8 of the
SCM Agreement in recommending that the European Union "withdraw the subsidy" and "remove the
adverse effects or ... withdraw the subsidy", to the extent that th e European Union had already done
so.9

1Paragraph numbers provided in footnotes to the follo wing description of the errors of the Panel are
intended to indicate the primary instance of the errors. Of course these errors have consequences throughout the
report and the European Union also appeals all findings and conclusions deriving from or relying on the
appealed errors, and in particular the relevant finding s and conclusions in Sections 8.1 and 8.2 of the Panel
Report, and also in particular all the recommendations of the Panel in Sections 8.6 and 8.7 of the Panel Report.
2Panel Report, para. 7.65 and the findings in paras. 7.44 to 7.64; and para. 7.325 and the findings in
paras. 7.321 to 7.324.
3Panel Report, para. 7.200 and the findings in paras. 7.286 to 7.289 and 7.190 to 7.199 (pass-through);
para. 7.255 and the findings in paras. 7.286 to 7.289 and 7.214 to 7.254 (extinction); paras. 7.286 to 7.289 and
7.266 to 7.285 (extraction and withdrawal); paras. 7.726 to 7.729 (para. 7.729, in particular).
4Panel Report, para. 7.249.
5Panel Report, para. 7.249 and footnote 2175.
6Panel Report, paras. 7.275 to 7.276 and 7.283 to 7.285.
7Panel Report, paras. 7.284 to 7.285.
8Panel Report, paras. 7.1400 to 7.1403, 7.284 to 7.285 and 7.289.
9Panel Report, paras. 8.6 and 8.7.

II. MSF Issues (Section VII E.2 of the Report)
5. The Panel erred in failing to ta ke account of Article 4 of the 1992 Agreement in interpreting
and applying the notion of "benefit" under Article 1.1(b) of the SCM Agreement.10
6. The Panel erred in its interpretation and application of Article 1.1(b) of the SCM Agreement
and under Article 11 of the DSU in making findings regarding project-specific risk premia for various
Airbus LCA programmes that fail to apply the Panel' s own standard and are made without a sufficient
evidentiary basis for these findings and without adequately explaining these findings.11
7. The Panel erred in its interpretation and application of Article 1.1(b) of the SCM Agreement
and under Article 11 of the DSU in finding short-comings of the European Union's risk-sharing
supplier benchmark for LA/MSF without a sufficient evidentiary basis, without assessing the totality
of the evidence, and without adequate explanation.12
8. To the extent that the Panel has made findings with respect to the relevance of the number of
sales over which full repayment is expected to th e appropriateness of the market rate of return, 13 the
Panel made an error under Article 1.1(b) of the SCM Agreement.
III. Export Subsidy Findings (Section VII E.4 of the Report)
9. The Panel erred in its interpretation and appli cation of Article 3.1(a) and footnote 4 of the
SCM Agreement, including but not limited to the terms "subs idies", "contingent/condition", "tied-to",
"actual or anticipated" and "export performance".14
10. In reaching those findings the Panel also erred under Article 7.2 of the DSU in failing to
address the relevant provisions cited by the parties, Article 12.7 of the DSU in failing to set out or to
set out adequately the basic rationale behind its findings and recommendati ons and under Article 11
of the DSU in failing to make an objective assessment of the matter before it, including an objective
assessment of the law and the facts.
IV. EIB Measures (Section VII E.5 of the Report)
11. If the United States appeals the Panel's findings on the lack of specificity of the EIB
measures, then the European Union appeals the Pane l's findings that such measures confer a benefit
and requests the Appellate Body to rule that the Pa nel erred in its interpre tation and application of
Article 1.1(b) of the SCM Agreement and failed to make an objective assessment of the law and the
facts as required by Article 11 of the DSU in its findings that the challenged EIB measures confer a
benefit.15

10Panel Report, paras. 7.388 to 7.389.
11Panel Report, paras. 7.469, 7.481 and 7.483 to 7.490, including Table 7, and para. 8.1(a).
12Panel Report, paras. 7.480 and 7.481.
13Panel Report, para. 7.397.
14Panel Report, para. 8.1(a)(ii) and the "findings" in light of which such conclusion is reached,
para. 7.683 (A380 United Kingdom), para. 7.678, and the other findings in paras. 7.612 to 7.716 of the Panel
Report.
15Panel Report, para. 7.885 and the other findings in paras. 7.717 to 7.881 of the Panel Report on which
these findings are based or "in light of" which these findings are made.

V. Infrastructure (Section VII E.6 of the Report)
12. The Panel erred in its interpretation and a pplication of Article 1.1(a)(1)(iii) of the
SCM Agreement in finding that the Mühlenbe rger Loch measures, the Bremen runway extension and
the ZAC Aéroconstellation measures constitute financial contributions.
16
13. The Panel erred in its interpretation and application of Article 1.1(b) of the SCM Agreement
in finding that the Mühlenberger Loch measure s, the Bremen runway extension and the ZAC
Aéroconstellation measures confer a benefit on Airbus Deutschland and Airbus France.17
VI. Aerospatiale Equity Contributions (Section VII E.9 of the Report)
14. The Panel erred in finding that a "benefit" w as conferred by virtue of capital contributions
within the meaning of under Article 1.1(b) of the SCM Agreement by the French State to a state-
owned company, Aérospatiale18 and in its interpretation of the term "benefit" in Article 1.1(b).19
15. The Panel erred in its interpretation and application of Article 1.1(b) of the SCM Agreement
and Article 11 of the DSU in making findings without a sufficient evidentiary basis concerning
reasonable market-based rates of return, and in the absence of coherent reasoning in its assessment of
evidence concerning the performance of Aérospatiale's peers.20
16. The Panel erred in finding that a "benefit" w ithin the meaning of Article 1.1(b) of the
SCM Agreement was conferred by virtue of the transfer by the French State to a state-owned
company, Aérospatiale, of the French State's shares in Dassault Aviation and erred under Article 11 of
the DSU in finding such a "benefit", without a sufficient evidentiary basis to support that finding.21
VII. RT&D Issues (Section VII E.10 of the Report)
17. The Panel erred in its interpretation and application of Article 2.1(a) of the SCM Agreement
when concluding that R&TD support granted unde r each of the Framework Programmes constituted
specific subsidies.22
18. The Panel erred in its interpretation a nd application of Article 6.2 of the DSU in concluding
that the Spanish PROFIT programme 23 and French R&TD funding 24 had been properly identified in
the US panel request.
VIII. Adverse Effects (Section VII F of the Report)
19. The Panel erred in its interpretation and applica tion of Articles 5(c), 6.3(a), 6.3(b) and 6.3(c)
of the SCM Agreement in finding that the effect of the subsidies constitutes serious prejudice to the
interests of the United States, including displacement of imports from the European Union,

16Panel Report, paras. 7.1084, 7.1121, 7.1179, and 8.1(b)(i) to (iii).
17Panel Report, paras. 7.1097, 7.1134, 7.1190 and 8.1(b)(i) to (iii).
18Panel Report, paras. 7.1367, 7.1371, 7.1375, 7.1380 and 8.1(d)(i).
19Panel Report, paras. 7.1364, 7.1366, 7.1370, 7.1374 and 8.1(d)(i).
20Panel Report, paras. 7.1360, 7.1367, 7.1371, 7.1375, 7.1380 and 8.1(d)(i).
21Panel Report, paras. 7.1409, 7.1411, 7.1412, 7.1414 and 8.1(d)(ii).
22Panel Report, paras. 7.1566 and paras. 7.1562 to 7.1565; para. 8.1(e).
23Panel Report, paras. 7.1422 and paras. 7.1420 to 7.1421; para. 8.1(e).
24Panel Report, paras. 7.150 and 7.148 to 7.149; para. 8.1(e).

displacement of exports from certain third country ma rkets or threat thereof and significant lost sales
in the same market.25
20. In reaching those findings the Panel also erred under Article 12.7 of the DSU in failing to set
out or to set out adequately the basic rationa le behind its findings a nd recommendations and under
Article 11 of the DSU in failing to make an objective assessment of the matter before it, including an
objective assessment of the law and the facts.
A. 1992 Agreement
21. The Panel erred in its interpretation and application of Article 5(c) of the SCM Agreement and
Articles 12.7 and 11 of the DSU in failing to take account of the fact that the United States had
expressly consented to all subsidies covered by the 1992 Agreement and could therefore not suffer
serious prejudice as a result of such subsidies.26
B. Subsidized product
22. The Panel erred in its interpretation and applica tion of Articles 5(c), 6.3(a), 6.3(b) and 6.3(c)
of the SCM Agreement and Articles 12.7 and 11 of the DSU when it found that it did not need to
independently and objectively make a determination regarding the subsidized product.27
C. Displacement or threat thereof
23. The Panel erred in its interpretation and applica tion of Articles 5(c), 6.3(a) and 6.3(b) of the
SCM Agreement and Articles 12.7 and 11 of the DSU when it found that there is only one, rather than
several distinct product markets, and by finding that it could therefore assess displacement, significant
price suppression and price depression on the basis of a single product market, thereby exaggerating
the extent of the displacement and price suppression and depression it found.28
24. The Panel erred in its interpretation and app lication of Articles 5(c) and 6.3(b) of the
SCM Agreement and Articles 12.7 and 11 of the DSU when it found that there was displacement in the
markets of Mexico and Brazil, although the United States did not lose market share in those markets.29
25. The Panel erred in its interpre tation and application of Articles 5(c) and 6.3(a) of the
SCM Agreement and Articles 12.7 and 11 of the DSU when it found that the subsidies caused
displacement in the EU market.30
26. The Panel erred in its interpretation and app lication of Articles 5(c) and 6.3(b) of the
SCM Agreement and Articles 12.7 and 11 of the DSU when it found that the subsidies caused
displacement in the third country markets of Austra lia, Brazil, China, Chinese Taipei, Korea, Mexico
and Singapore.31

25Panel Report, paras. 8.2(a), (b), (c) and (d) and the "findings" in light of which such conclusions are
reached, including the findings set out in the following paragraphs of this notice of appeal and the other findings
in paras. 7.1610 to 7.2186 of the Panel Report.
26Panel Report, para. 8.2 and any findings that may be considered to support this conclusion.
27Panel Report, paras. 7.1650, 7.1652, 7.1653, 7.1654, 7.1656, 7.1662 and 8.2.
28Panel Report, paras. 7.1742, 7.1751, 7.1755, 7.1 756, 7.1757, 7.1758, 7.1777, 7.1779, 7.1780, 7.1781,
7.1782, 7.1786, 7.1788 to 89 and 7.1790 to 7.1791 and 8.2( a), 8.2(b) and 8.2(c), as well as any other paragraphs
that rely on such finding.
29Panel Report, paras. 7.1785, 7.1786, 7.1791, 7.1993, 7.2025 and 8.2(b).
30Panel Report, paras. 7.1985, 7.1986, 7.1993, 7.2025 and 8.2(a).
31Panel Report, paras. 7.1985, 7.1986, 7.1993, 7.2025 and 8.2(b).

27. The Panel erred in its interpretation and app lication of Articles 5(c) and 6.3(b) of the
SCM Agreement and Articles 12.7 and 11 of the DSU when it found, that the subsidies caused a threat
of displacement in the third country market of India.
32
D. Lost sales
28. The Panel erred in its interpretation and a pplication of Articles 5 and 6.3(c) of the
SCM Agreement and Articles 12.7 and 11 of the DSU, when it found that the A380 Emirates Airlines
order constituted a significant lost sale.33
29. The Panel erred in its interpretation and a pplication of Articles 5 and 6.3(c) of the
SCM Agreement and Articles 12.7 and 11 of the DSU when it found that the subsidies caused
significant lost sales in the easyJet, Air Berlin, Czech Airlines, Air Asia, Singapore Airlines, Emirates
and Qantas sales campaigns.34
E. Serious prejudice
30. The Panel erred in its interpretation and application of Articles 5 and 6.3 of the
SCM Agreement when it found that it need not make a further finding that the displacement, threat of
displacement and lost sales it found were caused by the subsidies each amount to serious prejudice to
the interests of the United States.35
F. Price suppression/depression
31. The Panel erred in its interpretation and a pplication of Articles 5 and 6.3(c) of the
SCM Agreement and Articles 12.7 and 11 of the DSU in finding that it need not assess price
suppression on the basis of the individual product markets.36
32. The Panel erred in its interpretation and a pplication of Articles 5 and 6.3(c) of the
SCM Agreement and Articles 12.7 and 11 of the DSU in finding that there exists price suppression and
price depression for the 777.37
G. Causation with respect to subsidies other than MSF
33. The Panel erred in its interpretation and applica tion of Articles 5 and 6.3(a), 6.3(b) and 6.3(c)
of the SCM Agreement and Articles 12.7 and 11 of the DSU in failing to distinguish the effects of
non-MSF alleged subsidy measures from MSF measures in assessing adverse effects and in failing to
provide a reasoned and adequate explanation as to how the following measures could cause or
contribute to causing adverse effects:
• the Mühlenberger Loch measures; the Bremen airport runway extension; the ZAC
Aéroconstellation measures; the grants provided by Germany and Spain for construction
of facilities in Nordenham, Germany, and Sev illa, La Rinconada, Toledo, Puerto de Santa
Maria and Puerto Real, Spain; and the grants provided by the governments of Andalusia
and Castilla-La Mancha in Puerto Real, Sevilla, and Illescas (Toledo);
38

32Panel Report, paras. 7.1985, 7.1986, 7.1993, 7.2025 and 8.2(c).
33Panel Report, para. 7.1832, and 8.2(d).
34Panel Report, paras. 7.1985, 7.1986, 7.1993, 7.2025 and 8.2(d).
35Panel Report, paras. 7.1736 and 8.2.
36Panel Report, paras. 7.1854 to 7.1855 and 7.1860 to 7.1861.
37Panel Report, paras. 7.1854 to 7.1855 and 7.1860 to 7.1861.
38Panel Report, paras. 7.1958, 8.1(b), and 8.2.

• the capital contributions by the French State and Crédit Lyonnais to Aérospatiale and the
transfer by the French State of its shares in Dassault Aviation to Aérospatiale;39
• the acquisition by Kreditanstalt für Wideraufbau (KfW) of a 20 percent equity interest in
Deutsche Airbus in 1989, and the 1992 transfer by KfW of its 20 percent equity interest
in Deutsche Airbus to Messerschmitt-Bölkow-Blohm GmbH (MBB);40 and
• the provision of R&TD funding pursuant to: th e Second, Third, Fourth, Fifth, and Sixth
EC Framework Programmes; the French government grants between 1994-2005; the
German Federal government grants under the LuFo I, II and III programmes; the German
sub-Federal government grants from the Bavarian authorities under the OZB and
Bayerisches Luftfahrtforschungsprogramm, from the Bremen authorities under the AMST
programmes, and from the Hamburg author ities under the Luftfahrtforschungsprogramm;
Spanish government loans from the PROFIT and PTA programmes; and UK government
grants under the CARAD and ARP programmes.
41

39Panel Report, paras. 7.1957, 8.1(d), and 8.2.
40Panel Report, paras. 7.1957, 8.1(c), and 8.2.
41Panel Report, paras. 7.1959, 8.1(e), and 8.2.