EUROPEAN COMMUNITIES – MEASURES AFFECTING TRADE IN COMMERCIAL VESSELS
Document: Request for the Establishment of a Panel by Korea
Date: 6 February 2004
Document codes: WT/DS301/3
Complainant: South Korea
Respondent: EU
Third parties: China, Japan, U.S.
Dispute stage: Panel
Agreements cited: Art. I:1, III:4  GATT 1994Art. 23  Dispute Settlement Understanding (DSU)Art. 4, 7, 32  Subsidies and Countervailing Measures (SCM)

EUROPEAN COMMUNITIES – MEASURES AFFECTING TRADE
IN COMMERCIAL VESSELS

Request for the Establishment of a Panel by Korea

 The following communication, dated 5 February 2004, from the delegation of Korea to the
Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.

 On 3 September 2003, the Republic of Korea ("Korea") requested consultations with the
European Communities ("EC") and its Member States pursuant to Article 4 of the Understanding on
Rules and Procedures Governing the Settlement of Disputes (DSU), Article XXIII:1(a) of General
Agreement on Tariffs and Trade 1994 (" GATT 1994 "), Article XXIII:1(b) of GATT 1994 and
Articles 4, 7 and 30 of the SCM Agreement with regard to measures af fecting trade in commercial
vessels, as elaborated below.

 Consultations were held on 9 October and 14 November 2003. The consultations held
between Korea and the EC related to various EC and Member State measures in relation, inter alia, to
the following:

 i. The provisions of EC Regulation 1177/2002 (the "TDM Regulation") and EC
Regulation 1540/98 as such, as well as the EC Member States' implementing
provisions as such. The above provisions provides for granting of subsidies in favour
of commercial vessels, whether directly to the shipbuilders or indirect aid, including
operating aid, restructuring aid, insolvency and closure aid, aid for regional or other
investment, research and development aid and aid for environmental protection;

 ii. The EC and its Member States have in pa rticular instances, through federal, regional
or local authorities and government-own ed or government-controlled financial
institutions, provided subsidies in direct or indirect support of commercial vessels
built in the EC particularly but not exclusively in the form of (a) operating aid granted
on a contractual basis in forms such as grants, export credits, guarantees or tax
breaks, (b) restructuring aid, (c) regional or other investment aid, (d) research and
development aid, (e) environmental protection aid and (f) insolvency and closure aid.

 Unfortunately, these consultations have failed to resolve the dispute between parties as
regards the TDM Regulation (and proposed extens ion) and the EC Member States' implementing
provisions. Korea hereby requests that a panel be established pursuant to Articles 6 of the DSU and
Article XXIII:2 of GATT 1994 with respect to the measures described as below.

 The measures that are subject of this requ est are the EC and its Member States' legal
provisions and decisions providing for the supply of grants to shipbuilders for containerships, product
tankers, chemical tankers and liqui d natural gas carriers ("LNGs") adversely affecting the conditions
of competition and seeking a unilateral redress of a perceived violation of Korea's obligations under

the SCM Agreements. In particular, Korea considers that the following measures are inconsistent with
the EC's obligations under the SCM Agreement:

(i) The provisions of the TDM Regulation as extended to cover LNGs by Notice 2003/C
148/10 published on 25 June 2003 (currently proposed to be extended until 31 March
2005 pursuant to European Commission proposal COM(2004)26 final of 21 January
2004);

(ii) The EC Member State implementing provisions of the TDM Regulation and the
European Commission Decisions approving these implementing provisions,
including:

 – G e r m a n y :

 "Richtlinien des Bundesministerium fü r Wirtschaft und Arbeit zu befristeten
Schutzmassnahmen für den Schiffbau", 24 October 2002;

 Case N 744/2002, Commission Decisi on (2003)788 fin of 19 March 2003.

 – Denmark

 "Lov om midlertidig, kontraktbetinget driftsstotte til bygning af visse
skibstyper, LOV No 305", dated 30 April 2003;

 Case N 141/2003, Commission Deci sion (2003)1765 fin of 24 June 2003.

 – T h e Netherlands

 "Tijdelijke regeling ordersteun sch eepsnieuwbouw, Regeling van de
Staatssecretaris van Economische Zaken, No WJZ3040972", 17 July 2003;

 Case N 780/2002, Commission Decision (2002)2019 fin of 9 July 2003 and
Case N 339/03, Commission Decision (2003)3378 of 18 September 2003.

 – France

commission interministérielle (as referred to by the European Commission in
the publication of the approval of the French aid for LNGs).

 Case N 232/03, Commission Decision (2003)3234 fin of 17 September 2003.

 – S p a i n

 Real Decreto 442/1994 of 11 March 1994 as amended by Real Decreto
1274/2003 of 10 October 2003;

 Case N 812/02, Commission Decision (2003)4079 fin of 11 November 2003.

 Korea considers that the EC and its Member St ate measures referred to above are in breach of
the EC and its Member State obligations under the following provisions:

• Articles I:1 and III:4 of GATT 1994 because the TDM Regulation and Member State
implementing measures involving the bestowal of German, Danish, Dutch, French
and Spanish grants to shipyards on a v essel-specific and product-related basis,
adversely modify conditions of competition between Korean commercial vessels and
the like vessels built in third countries a nd Korean commercial vessels and the like
vessels built in the EC, respectively;

• Article 23(1) and (2) of the DSU, as well as Articles 4 and 7 of the SCM Agreement,
because the TDM Regulation and Member States' implementing measures – which
are aimed at assisting EC or its Member State shipyards in those segments that are
claimed to have suffered from subsidies alle gedly granted to Korean shipyards - have
been effectively designed and implemented as unilateral measures seeking redress of
a perceived violation of Korea's obligations under the SCM Agreement which should
occur exclusively through dispute settlement and not through unilateral action;

• Article 32(1) of the SCM Agreement, as well as Articles 4 and 7 of the SCM
Agreement, because the TDM Regulation and Member State implementing measures
constitute specific actions against perceive d subsidies of another Member not in
accordance with the GATT 1994 as interpreted by the SCM Agreement.

 Korea requests that a panel be immediately estab lished with standard te rms of reference, in
accordance with Articles 6 and 7 of the DSU and Article 30 of the SCM Agreement.

 Korea asks that this request for establishment of a panel be placed on the agenda for the next
meeting of the Dispute Settlement Body, which is scheduled to take place on 17 February 2004.