Document: WT/DS316/R Page F-1 BCI deleted, as indicated [***] ANNEX F SELECTED RULINGS OF THE PANEL CONCERNING BCI/HSBI PROCEDURES AND THEIR APPLICATION Contents Page Annex F-1 Communication of 13 March 2007 F-2 Annex F-2 Communication of 15 March 2007 F-20
Date: 13 March 2007
Document codes: WT/DS316/R
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

BCI deleted, as indicated [***]

ANNEX F

SELECTED RULINGS OF THE PANEL CONCERNING BCI/HSBI
PROCEDURES AND THEIR APPLICATION

Contents Page
Annex F-1 Communication of 13 March 2007 F-2
Annex F-2 Communication of 15 March 2007 F-20
Annex F-3 Communication of 30 March 2007 F-24
Annex F-4 Communication of 24 April 2007 F-40
Annex F-5 Communication of 30 April 2007 F-41
Annex F-6 Communication of 23 May 2007 F-42

BCI deleted, as indicated [***]

ANNEX F-1

COMMUNICATION OF 13 MARCH 2007

European Communities and Certain Member States – Measures
Affecting Trade in Large Civil Aircraft (DS316)

1. Having considered the United States' comments on the proposed non-BCI version of the
European Communities' first written submission, and the EC's response, the Panel has reached certain
decisions on this issue, and on certain other ma tters concerning the application of the Panel's
BCI/HSBI Procedures in this dispute. Because the Panel recognizes the importance of clarifying
issues relating to these Procedures as soon as possible, it has decided to issue a ruling on the issue of
designation of BCI in the EC's first written submissi on, and certain other matters, at this time. The
Panel is still considering other issues before it, incl uding issues relating to the designation of HSBI in
the EC's first written submission, and will address these issues as soon as possible.

2. Before turning to the resolution of the issue of designation of BCI in the EC's first written
submission, the Panel observes, as a general matter, that the Panel's BCI/HSBI Procedures are
designed to protect specific information, not entire submissions or other documents. It is for this
reason that paragraph 4 of the BCI/HSBI Procedures requires that the specific information designated
as BCI/HSBI be set off within brackets (single or do uble, as appropriate) within any given printed or
electronic document. This general understanding of the meaning of BCI and HSBI has implications
with respect to the manner in which the BCI/HSBI Procedures are to be applied.

(a) First, the Panel would like to clarif y that the Parties are not to present entire
submissions or exhibits categorized as BCI or HSBI, but rather are to specifically
identify, through the use of brackets as provi ded for in paragraph 4, the information
within those submissions or exhibits they cons ider should be so designated. We note,
for example, that the EC did not, in its letter dated 6 March submitted as "BCI
version", specifically identify through the use of brackets any specific information as
BCI. If a Party considers that a s ubmission or exhibit contains BCI it must identify
that information through the use of brackets as envisaged by paragraph 4.

(b) Second, the Panel does not consider that "opinions" or "positions" may be designated
as BCI or HSBI merely because those opi nions or positions we re expressed in
relation to BCI or HSBI.
1 This is clear from the BCI/HSBI Procedures themselves,
which specifically envision that "the Panel may make statements or draw conclusions
that are based on the information drawn from" the BCI or HSBI (paras. 42 and 53),
and further require that a Party provide on request a non-BCI or non-HSBI summary
of BCI or HSBI sufficient to permit a reasonable understanding of the substance of
the information (paras. 38(c)(i) and 52(d)(ii)). Of course, the Parties must exercise
caution to ensure that the "opinions" or "positions" drawn from the BCI or HSBI do
not reveal any specific BCI or HSBI information. This line may be a difficult one to
draw in some cases, but this does not jus tify a blanket approach to designating such
"positions or "opinions" as BCI or HSBI in their entirety.

(c) Third, the BCI/HSBI Procedures clearly st ate that information can be treated as BCI
or HSBI only if it is "not otherwise in th e public domain" (paras. 2 and 9). The fact

1 It should be evident from the foregoing that th e Panel does not accept the view of the EC that
personal opinions may in and of themselves be BCI or HSBI merely because those opinions are not in the public
domain.

BCI deleted, as indicated [***]

that information is also found in "BCI [or HSBI] documents" does not mean that such
information can be treated as BCI or HSBI if it is demonstrably and unambiguously
available in the public domain. The releva nt question for designation of information
as BCI or HSBI is not the source of the information per se. The Panel notes that the
decision whether information is demonstr ably and unambiguously available in the
public domain may be difficult. Thus, th e Panel has erred on the side of caution in
resolving the specific objections at this point, where it has been unable to satisfy itself
on the basis of available information. The Panel may revisit these objections in the
future.

(d) Fourth, the Panel notes the EC's concern for the protection of Boeing documents and
its designation of such documents as BCI or HSBI. The Panel considers, however,
that the standard for determining whether su ch information is BCI or HSBI relates to
the possibility of harm to the "originator" of the information, which in this case is
Boeing, in the event of disclosure. In our view, the originator of a document is
entitled, through its government, to waive BCI or HSBI status where it believes that
disclosure of the information would not cause the requisite harm, or where it is
prepared to accept such harm. The Panel doubts that it would be consistent with
fundamental fairness for it to rely on docu ments originated by a stakeholder where
that stakeholder was unaware that those documents were even before the Panel
because they were designated as BCI or HSBI by the other party.

(e) Fifth, with respect to titles of exhibits, the Panel emphasizes its view that it is not
documents themselves, much less the very existence of such documents, which may
be designated as BCI or HSBI, but information within those documents. In this light,
the Panel does not believe it appropriate, as a general matter, to bracket the titles of
exhibits as BCI and HSBI in their entirety. If, as an exceptional matter, the title itself
contains specific information that a Party considers to be BCI or HSBI, the Panel
requests that the Party identify the document with a non-BCI/HSBI title that permits a
reasonable understanding of the nature of the exhibit in question.

(f) Finally, the Panel notes that the EC has indicated, in numerous instances, its
willingness to re-designate certain information as non-BCI. The Panel has accepted
such re-designations as resolving the US objec tion with respect to the information in
question and appreciates the cooperative spirit shown by the EC in this respect.

The Panel has applied these general principles in r esolving the specific objecti ons raised by the US
regarding designation of BCI in the EC's first writte n submission. The Panel's specific decisions are
set out in the attached annex, which contains BCI. The annex also indicates those instances where the
Panel has accepted the EC's proposed re-designation of information as non-BCI. The Panel directs
the EC to prepare a revised version of its first wr itten submission, reflecting the Panel's decisions and
the re-designations proposed by the EC and accepte d by the Panel, and submit it to the Panel, and
serve the United States, no later than close of business Thursday 15 March 2007.

3. Turning to other issues, the Panel notes the Un ited States' concern regarding the EC's decision
to provide HSBI in the body of its submission rath er than as a separate stand-alone Appendix. The
EC disputes the US understanding that such a stand-alone document is required
2, but indicates its
willingness to provide an Appendix co nsisting of the full text of the paragraphs and footnotes of the

2 The Panel notes, however, that the EC itself stat ed when explaining the proposed language for the
provision that corresponds to the current paragraph 52 "the suggested language clarifies that HSBI must be
provided separately from other parts of the written submis sion which allows the separate treatment of this part
of the written submission as required by the rules pertaining to HSBI ." "Note 14" in EC letter of
29 September 2006. (Emphasis added.)

BCI deleted, as indicated [***]

EC's first written submission in which information designated as HSBI appears. While the Panel does
not consider that such an A ppendix fully satisfies the requirement for a "Full HSBI Version
Appendix" envisaged in paragraph 52(b) of the BCI /HSBI Procedures, it considers the EC's proposal
to be a reasonable effort to address the issue identif ied by the United States with respect to the first
written submission. The Panel therefore requests that the EC prepare such an Appendix in respect of
its first submission by close of business Thursday 15 March 2007 , in order to facilitate the first
meeting of the Panel.3

4. The Panel further requests that the Parti es prepare an appropriate "Full HSBI Version
Appendix" in respect of all future submissions to the Panel that contain HSBI, as envisaged by the
BCI/HSBI Procedures. In the view of the Panel, such an Appendix must be a readable document in
its own, and not simply a compilation of paragraphs containing HSBI.
4

5. With regard to the treatment of the HSBI exhibits that accompanied the EC's first written
submission
5, the Panel realizes that there is certa in ambiguity in the BCI/HSBI Procedures. 6
However, given the fact that the US has provided an electronic copy of its HSBI Exhibit in CD form, 7
the Panel considers it fair to request the EC to subm it the HSBI exhibits in locked CD form, by close
of business on Thursday 15 March 2007 . The Panel draws the attention of the EC to the fact that it
must serve this CD in accordance with paragraph 52(g) of the BCI/HSBI Procedures.

6. The Panel notes the US request that the Pane l "permit the United States to produce one paper
copy of the 'HSBI version' of the EC's written submission for each of its three secure sites".
8 As this
would be a major deviation from the carefully nego tiated provisions of the BCI/HSBI Procedures, the
Panel declines to grant this request.

7. The Panel recognizes that the application of the BCI/HSBI Procedures implies a significant
burden on the Parties (and on the Panel), but the Parti es were well aware that this would be the case
when they sought such procedures. The Pane l considers it essential that these Procedures be
implemented in a manner that protects the legitimate ri ghts of defence of both Parties, and that allows
the Panel to perform its work and to explain its ultimate decision in a comprehensible manner. If
these Procedures prove inadequate as implemented, th e Panel could be forced to re-examine them.
The Panel further notes that the efficiency of th ese Procedures at the panel level may influence the
views of the Appellate Body with respect to how to tr eat information in the event of an appeal. It is
therefore important that the Parties work together in a cooperative spirit to maintain the credibility of
these Procedures.

3 Given that the issue of the designation of HSBI is unlikely to be resolved in advance of the Panel's
first meeting, the Panel requests that the EC prepare an interim version of this Appendix on the basis of existing
designations.
4 Parties have already confirmed this understanding. See letters from the US and from EC dated
17 October 2006.
5 As requested by the US in section C of its 28 February letter.
6 For example, the Panel notes that BCI exhibits are not part of the record to which Third Parties BCI
Approved Persons are granted access.
7 The Panel notes that the EC did not object to such treatment of an HSBI exhibit.
8 Cover letter of the US dated 28 February.

BCI deleted, as indicated [***]

ANNEX

SPECIFIC ISSUES RAISED BY THE US REGARDING DESIGNATION
OF BCI IN THE EC'S FIRST WRITTEN SUBMISSION

No. of
paragraph CONTENT DECISION OF THE
PANEL
120 A summary of the European Communities' perception
on the United States' compliance with Article 5 was
communicated by Sir Leon Brittan, the then
Commissioner for Trade, to his counterpart in 1997:
[***.9 ]
The Panel accepts the EC
re-designation.
121 In her response, Mrs. Barshevsky put forward the
following view:
[***10]
The Panel accepts the EC
re-designation.
321 The amount of the levy [***]. This [***] reflects the
fact that the effect of a manufacturer's learning curve for
an aircraft reduces production costs and, thereby,
increases cash on hand.11
The Panel sustains the US
objection.
322 After MSF debt and interest are repaid in full,
AMs/NatCos may be required to [***] for subsequent
aircraft deliveries. The [***] is calculated either as
[***12] [***] may significantly enhance an MSF
creditor's return on its investment.
With respect to information
in the first and fourth sets of
brackets, the Panel accepts
the EC re-designation.
With respect to information
in the second set of
brackets, the Panel sustains
the US objection.
336 The French government also provided [***] in MSF
loans to support the development of the A340-500/600.13
The Panel is not prepared to
rule on this objection at this
time.
337 Likewise, the Spanish government provided [***] in
loans for the A340-500/600 variant.
The Panel is not prepared to
rule on this objection at this
time.
339 To protect governments from unfavourable changes in
interest rates, repayment obligations for the A380 are
generally tied to variable, as opposed to fixed, rates of
return. The loan amounts were [***]
The Panel is not prepared to
rule on this objection at this
time.
364 - The Panel accepts the EC
re-designation.
365 - The Panel accepts the EC
re-designation.

9 [***].
10 [***].
11 [***].
12 [***].
13 [***].

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
366 - The Panel accepts the EC
re-designation.
369 and
notes
280-284
-

The Panel accepts the EC
re-designation.
370 - The Panel accepts the EC
re-designation.
371 - The Panel accepts the EC
re-designation.
372 - The Panel accepts the EC
re-designation.
note 284 Sondergutachten der Monopolkommission, at p. 71,
Table 11, table entry "davon bis Ende 1988 ausbezahlt"
for the A320 (Exhibit US-30). The US itself notes the
fact that disbursement had reached the level of [***]
already in 1988 (US first written submission, p. 51,
note 194).

The Panel accepts the EC
re-designation.
377 The Spanish commitments for the A330/A340 reached
the level of [***].
The Panel accepts the EC
re-designation.
The Panel understands that
the US is not objecting to
other BCI in this paragraph.
378 - The Panel accepts the EC
re-designation.
note 356 (to para. 483, which reads: By way of background, the
US approach correctly conceives of MSF as a form of
debt financing. The Ellis report repeatedly refers to
MSF as "launch aid debt" and "launch aid loans."
14
Consistent with this concepti on of MSF as debt, the first
two steps of the Ellis model ( i.e., the risk-free rate and
the premium for general cor porate risk) rely entirely on
bond yields.356)

The Panel sustains the US
objection.
The Panel requests that the
EC re-designate all citations
of the "Ellis Report" in all
of the footnotes in its first
submission as non-BCI.
508 Professor Whitelaw explains that Ellis overstates the
cost of equity by employing incorrect assumptions.
Professor Whitelaw [***15] Drawing on recent
scholarship, Professor Whitelaw concludes that the risk
premium would be no more than [***
16. ***17]
The Panel sustains the US
objection.

14 [[***]].
15 [[***]].
16 [[***]].
17 [[***]].

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
509 In sum, the European Communities calculates the
alternative benchmark rates by [***]. The European
Communities notes that the Ellis report applies a fixed
project-specific risk premium for all Airbus aircraft
models.
18 The European Communities adopts the same
approach.
The Panel sustains the US
objection.
515 Second, recent scholarship confirms that the Ibbotson
methodology substantially overstates the equity risk
premium. Professor Whitelaw explains that many
scholars have rejected the Ibbotson approach, which is
based on historical ( ex post ) results that fail to reflect
investor expectations ex ante . Instead, more recent
studies show that the actual equity-based risk premium
is between [***].
19
The Panel sustains the US
objection.
595 The European Communities has provided the Panel with
the measure. The United States alleges that there is an
export contingent subsidy in the provisions of Article 7
of the measure that refer to payments on the [***]
aircraft, and which provide as follows
20:
The repayment instalment per aircraft is defined as
follows on the basis of the overall loan in the
amount of [***]. It is for {...}:
The Panel is not prepared to
rule on this objection at this
time.

878 - The Panel accepts the EC
re-designation.
881 - The Panel accepts the EC
re-designation.
907 - The Panel accepts the EC
re-designation.
912 [***21. *** ]. The development of the ZAC involved
two types of works:
The Panel is not prepared to
rule on this objection at this
time.
917 Furthermore, [***].

The Panel is not prepared to
rule on this objection at this
time.
929 Second, the findings of a commercial appraiser confirm
that the price of the land purchased by Airbus France in
the ZAC Aéroconstellation was consistent with market
terms.22 [***].
The Panel sustains the US
objection.
949 - The Panel accepts the EC
re-designation.

18 [***].
19 [[***]].
20 [***]; US first written submission, paras. 321, 328, 347, 353 second bullet and footnote 415, 354,
357 and footnote 419, and 360.
21 [***].
22 [***].

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
950 - The Panel accepts the EC
re-designation.
951 - The Panel accepts the EC
re-designation.
952 - The Panel accepts the EC
re-designation.
953 - The Panel accepts the EC
re-designation.
955 - The Panel accepts the EC
re-designation.
957 - The Panel accepts the EC
re-designation.
958 - The Panel accepts the EC
re-designation.
959 - The Panel accepts the EC
re-designation.
984 and
985
{Footnotes omitted}
984 The United States alleges that the Welsh Assembly
Government (WAG) provided an ad hoc grant of [***]
to Airbus UK in Broughton and seems to argue that for
this reason the grant is specific. It bases its claim on an
application for a grant that it admits Airbus UK did not
receive. Airbus UK's request for a [***] grant under the
"Regional Selective Assistance" (RSA) programme was
rejected by the WAG in March 2000. The United States
assumes, without any evidence, that the [***] granted in
September 2000 was an ad hoc replacement for the
failed RSA claim.
(Para 984) The Panel
accepts the EC
re-designation.

 985 This claim is without foundation. In fact, the [***]
was neither ad hoc , nor an RSA grant. Rather, it was
made up of two grants of [***], each made under other
generally-available programmes and therefore
non-specific within the meaning of Article 2 of the
SCM Agreement. Indeed, the US allegation of
specificity of the two grants is based entirely on its
assumption that they were a direct substitute for the RSA
grant. Since there was no RSA grant, the United States
has not made a prima facie case of specificity.
However, for the sake of completeness, the European
Communities will demonstrate that the grants are
non-specific.
(Para 985) With respect to
the first set of brackets, the
Panel accepts the EC
re-designation. With respect
to the second set of
brackets, the Panel sustains
the US objection.
986 In 2000, the Welsh Assembly Government, through the
North Wales Training and Enterprise Council
(CELTEC), awarded [***] grant {...}.
The Panel sustains the US
objection.

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
994 Although the United States did not allege the contrary,
the European Communities would like to
(pre-emptively) add, that there was neither a de facto
specificity under Article 2.1(c) of the SCM Agreement.
During the period when the grant of [***] to Airbus UK
was disbursed (FY 2000/2001 – FY 2005/2006), {...}.
The Panel sustains the US
objection.
1036 The European Communities notes, first, that while the
EIB established in 2002 a "credit" or "commitment" in
favour of EADS in the amount of EUR 700 million, only
EUR [***] was ever actually drawn by EADS and this
took place in [***]. The other [***] commitment

23
The Panel accepts the EC
re-designation.
The Panel understands that
the US is not objecting to
other BCI in this paragraph.
1041 - The Panel accepts the EC
re-designation.
1057 The United States ignores completely the fact that none
of the 1988-1993 loans (outstanding or not 24) was
provided to the company that markets and produces
LCA today (Airbus SAS). With regard to the
outstanding loans, the [***] was granted to [***], and
the [***]
25. The United States has not explained how
any benefit allegedly conferred by these loans has
passed through to Airbus SAS in such a manner as to
cause the types of present adverse effects to US LCA-
related interests alleged by the United States in these
proceedings.
The Panel sustains the US
objection with respect to the
phrase " [***]" and denies
the remainder of the US
objection.
1092 EADS [***]. The Panel sustains the US
objection except with
respect to the phrase
"[***]", with respect to
which the Panel denies the
US objection.
1098 [***].26 The Panel sustains the US
objection.
1099 [***.27] The Panel sustains the US
objection, except with
respect to the phrase
"[***]", with respect to
which the Panel denies the
US objection.

23 [***].
24 See also the discussion above where the EC explains that except for the [***], none of the 1988-1993
loans is still outstanding.
25 [***].
26 Daily Treasury Yield Curve Rates from http:/ /www.ustreas.gov/offices/domestic-finance/debt-
management/interest-rate/yield_historical_2004.shtml
27 [***].

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
1103 Finally, the European Communities notes that with
regard to the [***] loan, {...}.
The Panel sustains the US
objection.
1184 These claims consisted of: [***;28 ***]. The Panel is not prepared to
rule on this objection at this
time.
1399 - The Panel accepts the EC
re-designation.
1404 Both Boeing and Airbus, along with market analysts, use
the respective manufacturer's current year order book to
evaluate the competitive position of Airbus and Boeing.
Christian Scherer, Airbus Executive Vice President
Head of Future Programs and former Deputy Head of
Airbus' commercial department, notes that [***
29] Also,
Boeing uses order data to demonstrate the success and
"market share" of, inter alia , its 787, 777 and 747
families. This is reflected in the Boeing marketing slide
below
30:
The Panel sustains the US
objection.

1406 Orders are important for the manufacturer because the
terms and conditions of the purchase are set at the time
of order. Aircraft specification, net price, discounts,
non-price concessions and financing arrangements
involving the manufacturer are all agreed upon when an
airline or leasing company signs a purchase agreement.

31] [***32]. Finally, the order intake determines the
amount of future deliveries.33
The Panel sustains the US
objection.

1416 Airlines and leasing companies often decide to order a
certain aircraft model without considering the
competitor's equivalent product. An airline may choose
not to initiate a bidding process between the
two manufacturers [***.
34 ***:]
[***. ***] 35.
The Panel sustains the US
objection.
1418 There are also situations in which one manufacturer
cannot compete for lack of having a product that can
fulfil the customer's requirements. For example, if a
customer needs a 555-seat aircraft, Airbus can offer its
A380, yet Boeing cannot offer any equivalent product.
Similarly, if a customer needs a 450-seat LCA, Boeing
The Panel sustains the US
objection.

28 See also section X.C.2 of this submission.
29 [***].
30 Randy's Journal: Looking ahead, 23 January 2007 (Exhibit EC-286) (Non-BCI). Mr. Baseler's
comparison of orders for the 747 compared to the Airbus A380 is for comparison purposes only. His numerous
statements regarding competition between the A380 and the Boeing 747 confirm his view that the 747 and the
A380 are in different markets. See Section XII.G.
31 [***].
32 [***].
33 See Expert Statement of Rod Muddle, para. 17 (Exhibit EC-19) (Non-BCI); [***].
34 [***].
35 [***].

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
can offer its 747-8, yet Airbus cannot offer an equivalent
product. As a result, Airbus will not even submit a
proposal. [***36].
1419 [***.37 ***. 38] Randy Baseler, vice president of
Marketing for BCA, has acknow ledged this as well.
Mr. Baseler stated that "{a}bout 150 of the {A320}
orders {in 2005} were from China, and {Airbus} did it
on the government's decision, not on the airlines' orders.
But China took 150 from each of us."
39
The Panel sustains the US
objection.
1420 An airline may also choose to exercise options or
purchase rights without initiating a bidding process.
Options and purchase rights are secured at the same time
of a purchase contract. [***].
[***40].
The Panel sustains the US
objection.
1421 Although scale efficiencies favour follow-on orders
from the same manufacturer, follow-on orders can also
be the subject of fierce competition. 41 Customers are
sometimes concerned about having a "sole-supplier" of
airframes. [***42] Customers therefore sometimes
decide to diversify their fleet.
The Panel sustains the US
objection.
1426 [*** 43]. The Panel sustains the US
objection, except with
respect to the specific
figures in the fifth and sixth
sentences, i.e., [***], with
respect to which the Panel
denies the US objection.
1432 [***44]. Seemingly small differences in the physical or
economics characteristics of competing Boeing and
Airbus LCA can, thus, be decisive in the purchasing
decision of an airline. EC LCA market expert
Rod Muddle notes that "{f}or a model to win a
competition its manufacturer has to do better on the
criteria to which the airline attaches greatest priority
according to its strategic plans."
45
The Panel sustains the US
objection.

36 [***].
37 [***].
38 [***].
39 "What's Next for Boeing?," US News.com, 19 October 2006,
http://www.usnews.com/usnews/biztech/articles/061019/19boeing.htm) (visited 4 January 2007, Exhibit
EC-278) (Non-BCI).
40 [***].
41 Compare the first written submission of the United States, para 712: "Once an airline orders a
particular LCA type, however, the scale efficiencies favor follow-on orders of the sa me type, as well as orders
of other aircraft from the same manufacturer in order to take advantage of commonalities across an LCA fleet."
42 [***]
43 [***]
44 [***].
45 See Expert Statement of Rod Muddle, para. 101.

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
1433 Differences in seating and cargo capacity are amongst
the most important product-related elements of
competition in LCA sales campaigns. Capacity has a
direct impact on the future costs and revenues an airline
will incur and generate over the life of the LCA.
46
[***47] Furthermore, at times, a particular LCA can be
viewed by an airline as being the more technologically-
advanced aircraft amongst competing Airbus and Boeing
LCA.
48
The Panel sustains the US
objection.
1434 Direct operating costs are crucial in an airline's
evaluation of competing offers, in particular since the
cost of operating a LCA over its life far outweighs its
purchase price.49 [***50]
The Panel sustains the US
objection.
1435 Engine manufacturers can also play a significant role in
determining the outcome of a sales campaign. 51 Engines
are the single most expensive item on an LCA. 52
[***53].
The Panel sustains the US
objection.
1436 The net "fly-away" price a customer pays is the
combination of the airframe price and the engine price.
While Airbus may offer modest discounts, the engine
manufacturer may offer the customer very large
discounts. As a result, the final fly-away price secured
by a customer may be low, even though Airbus secured
a relatively high price. [***
54].
The Panel sustains the US
objection.
1437 An airline may also attach great value to a certain
delivery date of its newly-acquired aircraft. 55 Airlines
might require additional aircraft to expand their route
network. A late delivery schedule by one LCA
manufacturer would thus mean revenue foregone for that
The Panel sustains the US
objection.

46 See first written submission of the United States, para. 712. [***]; and Expert Statement of
Rod Muddle, para. 66 (Exhibit EC-19) (Non-BCI).
47 [***].
48 See Expert Statement of Rod Muddle, para. 35 (Exhibit EC-19) (Non-BCI).
49 Cash Airplane Related Operating Costs (including crew, fuel, maintenance and landing costs)
constitute 60% of a LCA's related operating costs, co mpared to 40% capital costs (including financing,
insurance and depreciation). Karen Willcox, "Cost Analysis," Massachusetts Institute of Technology Aerospace
Computational Design Laboratory, 19 September 2 004, http://ocw.mit.edu/NR/r donlyres/Aeronautics-and-
Astronautics/16-885JFall-2004/9DFE0985-C9C2-486B-BD37-42060E082AB2/0/pres_willcox.pdf, slide 6
(visited on 10 December 2006, Exhibit EC-292) (Non-BCI).
50 [***].
51 [***] See also Expert Statement of Rod Muddle, paras. 27-34 and 63-64 (Exhibit EC-19)
(Non-BCI).
52 See [***]; See also Expert Statement of Rod Muddle, para. 27 (Exhibit EC-19) (Non-BCI).
53 [***] See also Expert Statement of Rod Muddle, para. 27 (Exhibit EC-19) (Non-BCI).
54 [***].
55 See Expert Statement of Rod Muddle, paras. 70-71 (Exhibit EC-19) (Non-BCI).
56 See Expert Statement of Rod Muddle, para. 70 (Exhibit EC-19) (Non-BCI).

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
airline while it awaits delivery of its aircraft. 56
Alternatively, an airline might want to downsize its fleet
to reduce costs in times of an economic downturn.
Again, a late delivery schedule would mean additional
costs incurred by the airline pending delivery of the
smaller aircraft. Under those circumstances, an earlier
delivery slot offered by a manufacturer might be
decisive in an airline's decision to buy Airbus over
Boeing. Alternatively, a manufacturer can facilitate the
"transfer" of a delivery slot from a leasing company or
other customer to the customer involved. [***]

57
1449 Not only did Boeing neglect leasing companies as
potential customers, but Boeing decided to compete with
them by providing LCA financing support to airlines
itself.
58 [***59] It created "Aircraft Financial Services"
("AFS"), a group under Boeing Capital Corporation
("BCC"), a wholly-owned subsidiary of The Boeing
Company. AFS was intended to provide financing for
Boeing commercial aircraft. Instead of transferring the
risks and benefits associated with aircraft financing to
the leasing companies – as Airbus did – Boeing kept, to
a certain extent, the financing of aircraft in-house in an
attempt to make further profits. Thereby, Boeing added
a further risk to its LCA business. In other words, a
crisis like the one caused by 9/11 would hit Boeing
twice – first, its LCA manufacturing business, and at the
same time also its financing business.
The Panel sustains the US
objection.
1451 Airbus's strategy of securing orders with leasing
companies proved to be very valuable following the
events of 9/11, the resulting global economic downturn,
and the Asian SARS crisis. [***.
60 ***. 61 ***. 62
***.63]
The Panel sustains the US
objection.
1536 These slides identify the same "markets" that the
European Communities has identified above: [***64].
The Panel sustains the US
objection.

57 [***].
58 [***].
See further GE Commercial Aviation Services, Loans and Structured Finance,
http://www.gecas.com/financing.asp (visited 20 December 2006, Exhib it EC-303) (Non-BCI). Leasing
companies regularly sell and buy LCA to maintain a sound portfolio of both Airbus and Boeing LCA. Although
leasing companies primarily offer LCA on operating leases to airlines, leasing companies also provide financing
support to airlines "to help [airlines] renew their fleets, increase liquidity, lower debt, and move asset risk off
their books."
59 [***].
60 [***].
61 [***].
62 [***].
63 [***].
64 [***].

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
1539 The table below reflects Airbus' as well as Boeing's
categorization of where their respective aircraft fall
within these various LCA markets65: {Table omitted}
The Panel sustains the US
objection.
note 1579 (refers to para. 1712, which reads: [[***]] T h i s i s
confirmed by the fact that, [[***]]1579)
1579 [[***]]

The Panel cannot rule on
this objection, as it cannot
determine to what
BCI-designation the US is
objecting in paragraph 1579.
1542 The United States alleges that the Boeing 747 family
was in competition with the Airbus A380 family.
However, as discussed in more detail below, [***.66]
Section XII.J below sets forth further detailed evidence
of the separate nature of the markets for the A380 family
and the 747 family.
The Panel sustains the US
objection.
1543 - The Panel accepts the EC
re-designation.
1546 - The Panel accepts the EC
re-designation.
1547 [***] The Panel sustains the US
objection. The Panel
understands that the US is
not objecting to other BCI in
this paragraph.
1548 [***] The Panel sustains the US
objection. The Panel
understands that the US is
not objecting to other BCI in
this paragraph.
1560 Finally, the United States provides a handful of
examples where certain airlines fly Boeing or Airbus
LCA from different LCA fam ilies to or from the same
location to support its finding of a single like product. 67
However, this evidence of "demand substitution" ignores
[***.68 ***].
The Panel sustains the US
objection except with
respect to the sentence
"[***]", with respect to
which the Panel denies the
US objection.

65 [***]
Boeing markets the 787-3 as a 290-3 30 seat aircraft in a 2-class sea ting configuration. As the 787-3
has the same fuselage as the 787-8, the 787-3 is assumed to have the same 3-class seating capacity as the 787-8.
Boeing markets the 787-8 as a 210-250 seat aircraft in a 3-class configuration.
66 See Section XII.J, below.
67 See First Written Submission of the United States, para. 728.
68 [***].

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
1618 The US/Boeing methodology therefore reflects these
established principles. It allocates alleged subsidies
associated with MSF loans tied to a specific LCA
programme over the marketing life of that programme,
beginning in the year of launch.
69 [***.70] B e c a u s e
R&T grants support basic research that is not tied to a
specific aircraft programme, these subsidies are
allocated over [***
71]
The Panel sustains the US
objection except with
respect to the figures
"[***]", with respect to
which the Panel denies the
US objection.
1619 [***]. The European Communities recalls that the "base
case" simulation for the model described in the Dorman
report assumes only a 15-year period of deliveries. 72

The Panel sustains the US
objection except with
respect to the figures
"[***]", with respect to
which the Panel denies the
US objection.
1623 As described above, the amount of the subsidy conferred
by R&T support (which is not tied to a specific
programme) is allocated across all Airbus LCA
programmes.
73 Beginning in the year of grant, it is
allocated across all programmes and [***] A s m o r e
fully explained in Section V, above, the European
Communities reduces these subsidy magnitudes to
account for subsidies that were extinguished or extracted
when new owners acquired portions of the Associated
Manufacturers or Airbus S.A.S.
74
The Panel sustains the US
objection except with
respect to the figure "[***]",
with respect to which the
Panel denies the US
objection.
1629 Third, the amount of subsidy associated with the
four MSF loans is allocated across all orders in the A320
programme [***] This period is based on [***].
Further, beginning in the year of grant, the amount of
subsidy associated with R&T support is allocated across
all programmes (including the A320 programme) [***].
This approach provides a magnitude of the subsidy for
each order in the A320 programme for a given year.
75
The Panel sustains the US
objection except with
respect to the figures " [17",
"four", "16", "three" and
"18]", with respect to which
the Panel denies the US
objection.

1640 [***]. In other words, MSF loans do not inherently
confer a benefit.
The Panel accepts the EC
re-designation.
1650 [***]. Because of these repayment provisions, market
risk has become less relevant and less costly for
creditors to bear over time.
The Panel sustains the US
objection except with
respect to the figure "[***]",
with respect to which the
Panel denies the US
objection.

69 [***].
70 [***].
71 [***].
72 Dr. Gary J. Dorman, "The Effect of Launch Aid on the Economics of Commercial Airplane
Programs," October 2006 (hereinafter "Dorman report"), exhibit US-70, p. 3.
73 [***].
74 See Section V, above; [***].
75 [***].

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
1668 Finally, to the extent that the US arguments can be
construed to assert that Airbus' A380 programme [***],
the European Communities dem onstrates that this is not
the case.
The Panel sustains the US
objection.
Title
before
1728
- The Panel accepts the EC
re-designation.
1734 Like Boeing, [***]76 In developing the A380, Airbus
"deliberately planned the capacity of the A380 away
from the A340-600 and 747."77
The Panel sustains the US
objection.
1735 ... [***]78 EC LCA market expert Rod Muddle confirms
Mr. Scherer's assessment.79
The Panel sustains the US
objection.
1738 - The Panel accepts the EC
re-designation.
1739 - The Panel accepts the EC
re-designation.
1742 ...[***]80 As a result, large airlines decided to "park the
big airplanes" 81 – a development that had dramatic
effects on Boeing 747-400 market values.
The Panel sustains the US
objection.
1759 Finally, as part of its "general" causation arguments, the
United States suggests that Airbus would not have
launched the A380 programme but for MSF loans. 82
This argument has no merit, because Airbus' decision to
invest in the A380 programme was based on a sound
assessment of the business case for the programme.

The Panel sustains the US
objection.
1767 [***]83 The Panel sustains the US
objection.
1809 [***.84 ***].85 With respect to the first
sentence, the Panel accepts
the EC re-designation. With
respect to the second
sentence, the Panel sustains
the US objection.

76 [***].
77 "On a Roll," Airline Business, April 2005, p. 45 (Exhibit EC-351).
78 [***].
79 See Expert Statement of Rod Muddle, paras. 38 and 44 (Exhibit EC-19).
80 [***].
81 "Is This Old Bird About to Get its Wings Clipped?," USA Today, 12 August 2004 (Exhibit EC-401).
82 See First Written Submission of the United States, para. 813.
83 [***].
84 Airclaims CASE database, data query as of 19 January 2007 (Exhibit EC-21).
85 Airclaims CASE database, data query as of 19 January 2007 (Exhibit EC-21).

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
1810 [***.86 ***.87 ***]. With respect to the second
and third sentences, the
Panel accepts the EC
re-designation. With respect
to the first and fourth
sentences, the Panel sustains
the US objection.
1814 - The Panel accepts the EC
re-designation.
1829/1830 Third, the causal link between any effects of de minimis
alleged A320 subsidies and lower Airbus pricing is
broken if there are other important non-price-related
reasons why the company won the particular sale. The
airlines in the challenged sal es campaigns noted that the
following reasons were amongs t the determining factors
for choosing the A320 family LCA over the
Boeing 737NG:
• advantages in a variety of A320 attributes,
including wider aisles 1725 and cockpit
technology1726;
• advantages in the economics of the A320
family, including savings in maintenance cost
and lower fuel burn
1727;
• higher passenger capacity of the A320 family
LCA1728;
• savings resulting from commonality with the
airline's existing Airbus fleet1729,
• [***]1730
The Panel sustains the US
objection.
1880

The easyJet sales campaign took place in 2002, when the
airline industry was "in the midst of the most serious
short-term downturn in modern aviation history." 88
LCA demand collapsed during the 2001-2003 period,
due to the collapse of the "dot.com" economy, the events
of 9/11 and the global economic recession that
resulted.
89 Furthermore, many LCA that were
previously ordered but not ye t delivered were cancelled
or deferred. [***]
The Panel sustains the US
objection.
1959

Causal Link: Most important in assessing the causal
link is the fact that [***.90 ***.91 ***.92 ***]. Boeing
has acknowledged this fact publicly.93
The Panel denies the US
objection.

86 Ryanair ordered 100 737-800 from Boeing on 24 January 2002. See Airclaims CASE database, data
query as of 19 January 2007 (Exhibit EC-21).
87 EasyJet ordered 120 A319 s on 31 December 2002. See Airclaims CASE database, data query as of
19 January 2007 (Exhibit EC-21).
88 Boeing 2003 Current Market Outlook, p. 4 (Exhibit EC-295).
89 Boeing 2003 Current Market Outlook, p. 6 (Exhibit EC-295).
90 [***].

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
Title
before
2011
- The Panel accepts the EC
re-designation.
2012 - The Panel accepts the EC
re-designation.
2015 The [***] between the A330 a nd 767 families during
2004-2006, and the [***] between 2001-2003 are key
facts for the Panel's assessment of the US serious
prejudice claims with respect to alleged subsidies
benefiting Airbus A330 family LCA. Effects of such
subsidies will generally only be experienced where there
is actual competition. The lack of competition is
consistent with the absence of a genuine and substantial
relationship of cause and effect between any A330
subsidies and lower 767 prices.
The Panel sustains the US
objection.
2033 Causal Link: The small number of orders and deliveries
in every one of the eight th ird country markets makes it
impossible to discern any clear trends in the
development of orders or deliv eries. Further, the small
amounts of alleged subsidies for Airbus A330 LCA have
not been shown by the United States to cause any
displaced or impeded US market share in 200-300 seat
product markets in any of these seven countries. As
discussed in Section XII.L.1.(b) above, there was [***]
The Panel sustains the US
objection.
2048 Second, as discussed in Section XII.L.1.(b) above, the
Airbus [***].
The Panel sustains the US
objection.
2071 As the Airbus A340 and the Boeing 777 are the only
LCA in the 300-400 seat market currently in production,
they compete directly in certain sales campaigns.
[***].94
The Panel accepts the EC
re-designation. The Panel
understands that the US is
not objecting to BCI in the
remainder of this paragraph.
91 [***].
92 [***].
93 For example, Randy Baseler, vice president of Marketing for Boeing Commercial Airplanes, noted in
a recent interview that
{o}]rders for the A320 aren't as robust as they have been, but of course they put on a
surge late last year {2005} to beat us. About 150 of the orders were from China, and
they did it on government's decision, not on the airlines' orders. But China took 150
from each of us.
Interview with Randy Baseler, What's Next for Boeing? (Exhibit EC-278) (underlining added).
94 [***].

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE
PANEL
2074 The European Communities has discussed in detail, in
Section XII.I above, the natu re of the MSF and other
measures challenged by the United States. A significant
aspect of the nature of these alleged subsidies that are
tied or allocated to A340 LCA is their age. MSF loans
for the A340 were granted [***.
95] Likewise, Member
States entered into MSF loans for the A340-500/600

96 Thus, the age of these subsidies strongly
militates against the existence of present adverse effects.
The Panel sustains the US
objection.
2097 Having chosen the Airbus A340 over the 777 based on
performance considerations, Iberia also requested price
discounts from Airbus. This was because the A340s
being offered by Airbus were "white-tail" aircraft
rendered homeless by the bankruptcy of Swissair.
97
[***.98 ***].99
With respect to the first
bracketed sentence, the
Panel sustains the US
objection. With respect to
the second bracketed
sentence, the Panel accepts
the EC re-designation.

95 [***].
96 [***].
97 "The long hello," Flight International , 3 May 2005,
http://www.flightglobal.com/articles/2005/05/03/197483/the-long-hello.html, p. 36 (Exhibit EC-496).
98 [***]
99 See Expert Statement of Rod Muddle, paras. 58-60. (Exhibit EC-19).

BCI deleted, as indicated [***]

ANNEX F-2

COMMUNICATION OF 15 MARCH 2007

European Communities and Certain Member States – Measures
Affecting Trade in Large Civil Aircraft (DS316)

1. The Panel is in receipt of the EC's revised version of its First Writ ten Submission, submitted
in response to the Panel's ruling of 13 March 2007 on the United States' objections to certain of the
designations in the proposed non-BCI version of the European Communities' first written submission.

2. At the outset, the Panel notes that it is surpri sed and disappointed that the EC chose to make
this submission only in the form of an HSBI s ubmission. Given that the revised version does not
change anything with respect to HSBI information, and that it is important that the parties and the
Panel have a clear understanding of wh ich information is to be treated as BCI in preparing for next
week's meeting, it would have been far preferable for the EC to simply revise the BCI version of its
First Written Submission in order to implement the Panel's ruling. Indeed, while we did not so
specify, this is what we had anticipated would occur.

3. Under the circumstances, given the limited time remaining to prepare for next week's
meeting, the EC is directed to prepare a revised BCI version of its First Written Submission, reflecting
the Panel's ruling of 13 March, as modified below, and submit it to the Panel and the United States at
the earliest possible moment, and in any event no later than 17.30 on Friday 16 March 2007.

4. The Panel notes that, should the EC conclude, in light of this decision that it would have to
consider withdrawing any information, the Pane l would expect it to withdraw only the minimum
specific information necessary to satis fy itself. Any withdrawal of information should be notified to
the Panel and the United States at the earliest possi ble moment, and in any event no later than 17.30
on Friday 16 March 2007.

No. of
paragraph CONTENT DECISION OF THE PANEL
1036 The European Communities notes, first, that
while the EIB established in 2002 a "credit"
or "commitment" in favour of EADS in the
amount of EUR 700 million, only EUR
[***] was ever actually drawn by EADS and
this took place in [***]. The other [***]
commitment [***].
1
The Panel accepts the EC re-designation
of 15 March 2007.
1092 EADS [***]

The Panel accepts the EC re-designation
of 15 March 2007.
1098 [***]2 The Panel accepts the EC re-designation
of 15 March 2007.
1099 [***.3]

The Panel accepts the EC re-designation
of 15 March 2007.

1 [***].
2 Daily Treasury Yield Curve Rates from http://www.ustreas.gov/offices/domestic-finance/debt-
management/interest-rate/yield_historical_2004.shtml
3 [***].

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE PANEL
1419 [***.4 *** 5] Randy Baseler, vice president
of Marketing for BCA, has acknowledged
this as well. Mr. Baseler stated that
"{a}bout 150 of the {A320} orders {in
2005} were from China, and {Airbus} did it
on the government's decision, not on the
airlines' orders. But China took 150 from
each of us."
6
The Panel confirms and maintains its
original decision. The Panel notes its
views, expressed in its communication
of 13 March, that it does not consider
that "opinions" or "positions" may be
designated as BCI or HSBI merely
because those opinions or positions were
expressed in relation to BCI or HSBI.
1451 Airbus's strategy of securing orders with
leasing companies proved to be very
valuable following the events of 9/11, the
resulting global economic downturn, and the
Asian SARS crisis. [***.
7 ***. 8 * * * .9
***.10]
The Panel confirms and maintains its
original decision.
1759 Finally, as part of its "general" causation
arguments, the United States suggests that
Airbus would not ha ve launched the A380
programme but for MSF loans. 11 T h i s
argument has no merit, because Airbus'
decision to invest in the A380 programme
was based on a sound assessment of the
business case for the programme. [***.]
The Panel confirms and maintains its
original decision. The Panel notes that
there is nothing in the bracketed text that
suggests that this is a statement of
information, as opposed to a statement
of opinion or position, which as noted, it
does not consider may be designated as
BCI or HSBI merely because such
opinion or position is expressed in
relation to BCI or HSBI.
1810 [***.12 ***.13 ***.]

The Panel accepts the EC re-designation
of 15 March 2007.
1829/1830 Third, the causal link between any effects of
de minimis alleged A320 subsidies and
lower Airbus pricing is broken if there are
other important non-pr ice-related reasons
why the company won the particular sale.
The airlines in the challenged sales
campaigns noted that the following reasons
were amongst the determining factors for
choosing the A320 family LCA over the
Boeing 737NG:
The Panel accepts the EC re-designation
of 15 March 2007.

4 [***].
5 [***].
6"What's Next for Boeing?," US News.com, 19 October 2006,
http://www.usnews.com/usnews/biztech/articles/061019/19boeing.htm) (visited 4 January 2007, Exhibit
EC-278) (Non-BCI).
7 [***].
8 [***].
9 [***].
10 [***].
11 See first written submission of the United States, para. 813.
12 Ryanair ordered 100 737-800 from Boeing on 24 January 2002. See Airclaims CASE database, data
query as of 19 January 2007 (Exhibit EC-21).
13 easyJet ordered 120 A319s on 31 December 2002. See Airclaims CASE database, data query as of
19 January 2007 (Exhibit EC-21).

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE PANEL
• advantages in a variety of A320
attributes, including wider aisles 1725
and cockpit technology1726;
• advantages in the economics of the
A320 family, including savings in
maintenance cost and lower fuel
burn1727;
• higher passenger capacity of the
A320 family LCA1728;
• savings resulting from commonality
with the airline's existing Airbus
fleet1729,
• [***]1730
2015 The [***] between the A330 and 767
families during 2004-2006, and the [***]
between 2001-2003 are key facts for the
Panel's assessment of the US serious
prejudice claims with respect to alleged
subsidies benefiting Airbus A330 family
LCA. Effects of such subsidies will
generally only be experienced where there is
actual competition. The lack of competition
is consistent with the absence of a genuine
and substantial relationship of cause and
effect between any A330 subsidies and
lower 767 prices.
The Panel accepts the text as modified
by the EC on 15 March 2007.
2033 Causal Link: The small number of orders
and deliveries in every one of the eight third
country markets makes it impossible to
discern any clear trends in the development
of orders or deliveries. Further, the small
amounts of alleged subsidies for Airbus
A330 LCA have not been shown by the
United States to cause any displaced or
impeded US market share in 200-300 seat
product markets in any of these
seven countries. As discussed in
Section XII.L.1.(b) above, there was [***].
The Panel accepts the text as modified
by the EC on 15 March 2007.
2048 Second, as discussed in Section XII.L.1.(b)
above, the Airbus [***].
The Panel accepts the text as modified
by the EC on 15 March 2007.

BCI deleted, as indicated [***]

No. of
paragraph CONTENT DECISION OF THE PANEL
2097 Having chosen the Airbus A340 over
the 777 based on performance
considerations, Iberia also requested price
discounts from Airbus. This was because
the A340s being offered by Airbus were
"white-tail" aircraft rendered homeless by
the bankruptcy of Swissair.
14 [***.15
***.]16
The Panel accepts the EC re-designation
of 15 March 2007.

14 "The long hello," Flight International , 3 May 2005,
http://www.flightglobal.com/articles/2005/05/03/197483/the-long-hello.html, p. 36 (Exhibit EC-496).
15 [***].
16 See Expert Statement of Rod Muddle, paras. 58-60. (Exhibit EC-19).

BCI deleted, as indicated [***]

ANNEX F-3

COMMUNICATION OF 30 MARCH 2007

European Communities and Certain Member States – Measures
Affecting Trade in Large Civil Aircraft (DS316)

1. The Panel has considered a number of outstanding issues concerning designation of
information as BCI or HSBI in this dispute, incl uding issues raised in the United States' objections
dated 28 February 2007 to the EC's designation of certain information in its first written submission as
"highly sensitive business information", the United States' letter of 27 March 2007 commenting on
whether the version of the EC first written s ubmission submitted on 16 March 2007 may be
considered the basis of a version redacting any BCI, the United States letter of 8 February 2007, and
the United States' answers, dated 12 February 2007, to certain questions posed by the Panel.

2. Before turning to the resolution of the specifi c issues raised by the United States, the Panel
wishes to remind the Parties of the general pr inciples set forth in our 13 March 2007 decision
concerning the designation of "business confidential info rmation" in the EC's first written submission.
As the Panel indicated at that time, those same general principles apply with equal force in the context
of the designation of "highly sensitive business information" in this dispute.

3. As we noted in our 13 March 2007 decision, the Panel's BCI/HSBI Procedures are designed
to protect specific information, not entire submissions or other documents. It is for this reason that
paragraphs 4 and 5 of the BCI/HSBI Procedures requ ires that the specific information designated as
BCI/HSBI be set off within brackets (single or do uble, as appropriate) within any given printed or
electronic document. We set out in our previous decision a number of implications of this principle
for the manner in which the BCI/HSBI Procedures are to be applied in this dispute, including our
view that the Parties are not to present entire submissions or exhibits categorized as BCI or HSBI, but
rather are to specifically identify, through the use of brackets as pr ovided for in paragraphs 4 and 5,
the information within those submissions or exhibits they consider should be so designated.

4. The Panel has applied the general princi ples set out in our 13 March 2007 decision in
resolving pending issues concerning the designation of BCI and HSBI. The Panel's specific decisions
regarding the designation of HSBI in the EC's fi rst written submission are set out in the attached
annex, which contains BCI. The annex also i ndicates those instances where the Panel has accepted
the EC's proposed re-designation of certain information as BCI, or non-BCI, as the case may be.

5. The Panel also notes the continuing designation of titles of exhibits as BCI in the version of
the EC's first written submission submitted on 16 Ma rch 2007. As the Panel instructed in its
13 March 2007 decision, it "does not believe it approp riate, as a general matter, to bracket the titles of
exhibits as BCI and HSBI in their entirety. If, as an exceptional matter, the title itself contains
specific information that a Party considers to be BCI or HSBI, the Panel requests that the Party
identify the document with a non-BCI/HSBI title th at permits a reasonabl e understanding of the
nature of the exhibit in question".

6. The EC is directed to prepare a revised version of its first written submission, fully
implementing the Panel's decisions of 13 March 2007 and today, and the re-designations proposed by
the EC and accepted by the Panel, and submit it to the Panel, and serve the United States, no later than
close of business Thursday 5 April 2007 . The EC shall, at the sa me time, serve a draft non-BCI
version on the third parties. The Panel notes that it has made no decisions, in the abstract, as to

BCI deleted, as indicated [***]

whether information which it is ruling is not pr operly designated as HSBI may be re-designated
as BCI.1

7. In addition, we direct that the EC specify precisely the information which it considers to be
BCI or HSBI in the following documents, by encl osing it within brackets (single or double, as
appropriate), as provided for in paragraphs 4( a) and 5(a) of the BCI/HSBI procedures, and
resubmitting the relevant documents:

• statements of Messrs Scherer and Gordon (Exhibits EC-14 (BCI) and EC-16 (BCI))

• document DS316-EC-HSBI-0001143 (the French project appraisal for
the A340-500/600)

• document DS316-EC-HSBI-0001174 (the French project appraisal for the A380)

• document DS316-EC-HSBI-0001199 (the French project appraisal for the A330-200)

• document DS316-EC-HSBI-0001211 (the UK project appraisal for the A380)

• document DS316-EC-BCI-0006130 (Exhibit US-49)

• document DS316-EC-BCI-0000532 (Exhibit US-125)

• document DS316-EC-HSBI-000088 (Further Calculations of Present Value of
Outstanding Airbus Debt to German Government (1999))

• document DS316-EC-HSBI-000146 (Calculati ons of Present Value of Outstanding
Airbus Debt to German Government (1998))

• document DS316-EC-HSBI-000199 (Comments to Present Value Calculations of
Outstanding Airbus Debt to German Government of 23 June 1997 (Present
Value 1998))

• document DS316-EC-HSBI-000205 (C&L German Auditing Agency's Letter to the
German Ministry of Economics of 26 July 1999)

8. While the Panel recognizes the point raised by the United States in its request that the EC
resubmit all of its BCI exhibits with proper bracketing, the Panel considers that it would be unrealistic
to expect that this could be accomplished at this late stage without causing unacceptable delays in the
proceedings. Nonetheless, the Panel considers it impe rative, in order for this dispute to go forward
based on a clear understanding of the status of inform ation submitted to the Panel, that BCI and HSBI
submitted to the Panel be clearly identified. Theref ore, the Panel considers that additional steps are
necessary to properly identify such information in exhibits already submitted.

9. Therefore, with respect to exhibits alread y submitted to the Panel in connection with the
parties' first submissions and the meeting with the Pa nel, the Panel directs each party to designate, by
close of business Tuesday, 3 April 2007 specific exhibits which it considers contain information
originating with the other party, which require br acketing in order to enable a party to defend its
interests. Such designation is without prejudice to either party making further requests with respect to

1 The Panel recognizes the possibility that the non-BCI version served on third parties on 5 April 2007
may require further revision in light of subsequent events. However, the Panel considers it important to avoid
additional delays in providing the third parties with a non-BCI version of the EC's first written submission from
which they can begin to prepare their own submissions.

BCI deleted, as indicated [***]

designation of information in previously submitted exhibits at a later date, should this become
necessary.2 The Panel expects that the parties will coopera te in this task by limiting, to the maximum
extent possible, their requests to re-bracket previous ly submitted exhibits. The parties will then have
until Monday, 16 April 2007 to resubmit the designated exhibits with bracketing of information
considered by the originating party to be BCI or HSBI . The parties should be guided in this regard by
the general principles enunciated in our decision of 13 March 2007, as well as be informed by the
specific rulings we have made with respect to contested designations to date.

10. The Panel expects that any exhibits to be submitted in the future will comply with
paragraphs 4 and 5 of the BCI/HSBI Procedures. To be clear, parties shall set off, within brackets
(single or double, as appropriate), the specific in formation designated as BCI/HSBI in all submissions
to the Panel, including all exhibits.

11. As we noted in our 13 March 2007 decision, we "recognize{} that the application of the
BCI/HSBI Procedures implies a significant burden on the Parties (and on the Panel), but the Parties
were well aware that this would be the case when they sought such procedures. The Panel considers it
essential that these Procedures be implemented in a manner that protects the legitimate rights of
defence of both Parties, and that allows the Pane l to perform its work and to explain its ultimate
decision in a comprehensible manner. If these Pr ocedures prove inadequate as implemented, the
Panel could be forced to re-examine them. The Panel further notes that the efficiency of these
Procedures at the panel level may influence the view s of the Appellate Body with respect to how to
treat information in the event of an appeal. It is th erefore important that the Parties work together in a
cooperative spirit to maintain the credibility of these Procedures."

2 This is also without prejudice to a party requesting that the party that originally submitted the
information indicate with precision the portions of a document containing BCI and HSBI, as provided for in
paragraphs 38(c)(i) and 52(d)(i) of the BCI/HSBI Procedures. We note that we have decided not to amend
those procedures as we had proposed in our communication dated 20 February 2007.

BCI deleted, as indicated [***]

ANNEX

SPECIFIC ISSUES RAISED BY THE US REGARDING DESIGNATION
OF HSBI IN THE EC'S FIRST WRITTEN SUBMISSION

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
footnote 153 footnote to paragraph 230 [[***]] The Panel sustains the US
objection.
233 Both Lagardère and the French State, as is
standard practice for large merger transactions,
commissioned highly respected investment
banks to determine the market value of their
respective contributions to the new company,
ASM. The French State retained [[***]], and
Lagardère retained [[***]] These firms valued
MHT, Aérospatiale, and the combined firm,
ASM. The experts applied a combination of a
discounted cash flow ("DCF") method and the
comparables method to determine the absolute
and relative values of Aérospatiale and MHT.
3
The Panel sustains the US
objection.
234 and
footnote 156
Based on MHT's pre-merger business plans,
[[***]] found the relative value of MHT to the
combined company to be [[***]] percent. It
derived this ratio by calculating a high and
low estimated value for each entity. Based on
these values, it found the relative value of
MHT to the combined company to be in the
range of [[***]] percent to [[***]] percent,
with an average ratio of [[***]] percent.
4
Footnote blanked: [[***]]
The Panel sustains the US
objection.

3 In market transactions, such as sa les, spin-offs, mergers, or share offerings, it is standard practice to
involve professional investment bankers to prepare valuations of the company or production subject to the
transaction. The valuation methods used by investment bankers are widely recognized and, although methods
may vary, they all aim at valuing a company's net present value at the time of the transaction. One of the most
commonly applied methods is "Discounted Cash Flow", which determines the value based on the projected
future cash flows while taking into consideration a disc ount rate that reflects the probability that the cash flow
will be realized (the risk factor).
4 [[***]].

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
235 and notes 157
and 158
[[***]] using a DCF method, found that MHT
had a value relative to ASM falling between
[[***]] percent and [[***]] percent, the
mid-range of which is [[***5]]. Thus, [[***]]
found the synergies of the companies were
such that MHT had more value relative to the
new company than simply the sum of its parts.
[[***]] used the comparables valuation
method and obtained a relative value for MHT
of [[***]] percent.
6
Blanked Footnotes 157 and 158: [[***]]
The Panel sustains the US
objection.
248 The parties to the EADS transaction retained
reputed investment banks to assess the
proposed deal and establish the relative values
of each of the merging entities. To perform
this due diligence, Chrysler engaged [[***]];
Lagardère engaged [[***]]; ASM engaged
[[***]]; the Spanish State engaged [[***]],
and the French State engaged [[***]]. These
six investment banks were supported by an
army of accountants and lawyers. Each
investment bank conducted extensive
assessments of the value of the assets of its
client, the value of assets of potential partners,
and the value of the proposed combined entity.
The Panel sustains the US
objection.
252 and footnotes
166 and 167
For example, [[***]], on behalf of ASM,
employed two income approaches to business
valuations – segment DCF and EBITDA.
Applying these methods, Lazard obtained
valuation ratios of [[***]] percent to [[***]]
percent for ASM; [[***]] percent to [[***]]
percent for DASA; and [[***]] percent to
[[***]] percent for CASA.
7 Similarly, [[***]],
on behalf of the Spanish State, applied the
DCF method, including a sensitivity analysis
for valuating ASM, DASA and CASA, and
arrived at a valuation of CASA that fell within
the exchange ratios finally agreed upon.
8
Blanked Footnotes 166 and 167: [[***]]
The Panel accepts the EC
re-designation with respect to
paragraph 252 and note 167.
The Panel sustains the US
objection with respect to
note 166.

Paragraph 310
and footnote 214
The Associated Manufacturers and NatCos
also enter into industrial agreements with
Airbus GIE or Airbus SAS. By signing these
agreements, the AMs and NatCos commit
The Panel sustains the US
objection.

5 [[***]] (HSBI Annex V, EC-HSBI-0000903).
6 [[***]].
7 [[***]].
8 [[***]] is described in the report of the Consej o Consultivo de Priva tizaciones, Informe de
Actividades – 2000, at pp. 49-53 (Exhibit EC-58) (Non-BCI).

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
themselves to the terms of the framework
agreements.
9 In addition, the AMs and
NatCos agree to abide by the provisions of the
[[***]] which distributes work share among
the AMs and NatCos, and the [[***]], which
identifies the development costs that each
entity will incur based on its work share.10
Blanked Footnote 214: [[***]]
419 The United States finally alleges 11 that France
"based its repayment schedule on Airbus's
own optimistic sales forecasts". This
statement is misleading. The Airbus forecast
for the A380, which was in no sense
"optimistic", was [[***]] sales in the first
[[***]]. In compliance with Article 4.1 of the
1992 Agreement , France carried out its own
project appraisal for the A380
12 and
conservatively sought accelerated repayment
of the MSF in [***] after disbursement over
the much lower number of [***].
The Panel accepts the EC
re-designation with respect to
the sales projections.
The Panel understands that
the US is not objecting to
designation of other
information as HSBI.
425 With regard to Article 4.1 of the
1992 Agreement, the European Communities
addresses the misleading statement by the
United States mistakenly states13 that Germany
"joined France in basing its repayment
schedule on Airbus's own optimistic
forecasts". The Airbus forecast for the A380
was [[***]] sales in the first [[***]]. Germany
conservatively sought accelerated repayment
on [***], the same as that used by France and
the UK on the basis of their own project
appraisals.
The Panel accepts the EC
re-designation with respect to
the sales projections.
The Panel understands that
the US is not objecting to
designation of other
information as HSBI.
431 Finally, with regard to Article 4.1 of the
1992 Agreement, the United States
misleadingly states that the Spanish
Government's return is based on "Airbus's own
optimistic sales forecasts".
14 Like other
Member States, Spain conservatively required
accelerated repayment on a lower number of
sales, in its case [***] as compared with the
Airbus forecast of [[***]]
The Panel accepts the EC
re-designation with respect to
the sales projections.
The Panel understands that
the US is not objecting to
designation of other
information as HSBI.

9 [***].
10 [***]; [[***]].
12 [[***]].

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
475 The Member States also structured MSF
contracts for the A380 on the basis of
conservative forecasts and methodologies.
The "base case" estimate for the A380
business case predicted that Airbus SAS
would deliver a total of [[***]]
15 Indeed, the
longer term forecasts foresaw a demand of up
to [[***]]16
The Panel accepts the EC
re-designation with respect to
the sales projections.
The Panel understands that
the US is not objecting to
designation of other
information as HSBI.
501 Professor Whitelaw calculates the average
expected returns for [[***]]17 These returns
provide an ideal benchmark for evaluating the
market-consistency of MSF loans. Financing
through risk-sharing suppl iers is an important
funding source for the development of Airbus
and Boeing aircraft. Indeed, risk-sharing
suppliers financed an estimated 60% of the
development costs for the Boeing 787.
18
The Panel sustains the US
objection.
504 Professor Whitelaw demonstrates that the
average anticipated return for [[***]].
Subtracting the applicable risk-free rate and
premium for general corporate risk, the
project-specific risk premium derived from
this data is [[***]].
19 [***]. Thus, in
calculating a market benchmark, the European
Communities applies a fixed project-specific
risk premium of [[***]].
The Panel sustains the US
objection.
511 The methodologies offered by the
United States to supposedly "cross-check" its
results do not support the US benchmark. The
United States invokes four disparate sources:
i) A study of equity market risk
conducted by Ibbotson Associates;
ii) [[***]]
iii) An appraisal of the A380 conducted
by UK analysts; and
iv) A European Commission decision
on the legal status of a loan to a
regional aircraft manufacturer.
The Panel sustains the US
objection.
516 heading (b) [[***]] The Panel sustains the US
objection.

15 [[***]].
16 [[***]].
17 [[***]].
18 [***].
19 [[***]].

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
516 The second "cross-check" proposed by the
United States fares no better. The Ellis report
relies on the negotiating posture adopted (and
later abandoned) [[***
20]] The Ellis report
latches onto an inflated discount rate proposed
by [[***]] to reduce the net present value of,
inter alia , [[***21]] Contrary to the US
suggestion, this so-called [[***]] is
inappropriate as the basis of a benchmark for
MSF loans and, in any event, does not support
the benchmark rates adopted in the
Ellis report.
The Panel sustains the US
objection.
517 First, [[***]]. As the Ellis report concedes,
[[***]]"22 In his report, Professor Whitelaw
explains that an equity measure is not
appropriate for MSF loans and overstates the
risk premium required by market investors.23
The Panel sustains the US
objection.
518 Second, even if an equity measure were
appropriate, [[***24]] T h i s i s n o t s u r p r i s i n g .
[[***25]] As discussed, scholars have rejected
the Ibbotson data, which substantially
overstates the equity risk premium.
Accordingly, the [[***]] – cannot support the
risk premium derived in the Ellis report.
The Panel sustains the US
objection.
519 Third, the context in which [[***]] proposed
its discount rate confirms that this measure is
inflated. [[***]]
The Panel sustains the US
objection.
520 [[***]] The Panel sustains the US
objection.
521 Significantly, [[***]], which was engaged as
the outside auditor for this transaction, [[***]],
concluding that it was excessive given the
risks involved. 26 M o r e o v e r , [[***]]. Not
surprisingly, the Ellis report neglects to
mention these facts.
The Panel sustains the US
objection.

20 [[***]].
21 [[***]].
22 [[***]].
23 [[***]].
24 [[***]].
25 [[***]].
26 For details see Section X. B.

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
522 In sum, it is inappropriate for the United States
to rely on a discount rate based on a flawed
equity measure. And it is particularly
inappropriate for the United States to rely on a
rate [[***]]. For the reasons set out above, as
an equity measure, this methodology does not
call into question the validity of the
benchmark rates calculated by the
European Communities.
The Panel sustains the US
objection.
528 Fourth, governments based the repayment
schedule for MSF loans on the Airbus GIE
A380 business case – not on predictions
suggesting a [[***]]. The United States, itself,
notes that the UK government ultimately
"disregarded" EID's advice regarding how to
structure the repayment schedule.
27 The
Airbus GIE "baseline" business case for the
A380 predicts [[***]].
28 Echoing these
projections, the UK A380 contract calls for
per-aircraft levies [***]. As previously
discussed, levies paid on deliveries [***];
other Member States adopted [***.
29] The UK
return would then be enhanced through levies
paid on deliveries [***].
30 Likewise, private
commercial actors [[***31]]
The Panel accepts the EC
re-designation with respect to
the sales projections. The
Panel understands that the US
is not objecting to designation
of other information as HSBI.
540 The UK A380 contract provides further
evidence of the linkage between the
company's business case and the repayment
terms for MSF loans. This contract is
structured to ensure an overall return that is
well in excess of the minimum return required
by the 1992 Agreement . Repayment is
structured in two phases. As previously
discussed, the first phase calls for per-aircraft
levies [***.
32] When the contract levy is
applied to the [[***]], principal and interest
will be repaid within 17 years of the first
receipt of MSF – as required by the
1992 Agreement.
The Panel sustains the US
objection.

27 [[***]].
28 [[***]] The delivery forecasts contained in the business case were presented to MSF lenders such as
the UK government before the execution of MSF agreements. See [***].
29 [***].
30 [***].
31 [[***]].
32 [***].

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
762 ProFi and Airbus Germany also concluded
four lease agreements for six special-purpose
facilities, including one for the Northern
runway extension
33. The term for each of
these agreements is 20 years. The amount of
rent is set to provide the City of Hamburg with
a market return of [[***]] on its investment in
each of the facilities, including a return on
capital for the portion of each facility's
economic life depleted during the 20 year
lease term.
34
The Panel sustains the US
objection.
765 and
footnote 637
In two separate opinions issued on
23 October 200335, the Experts Committee
concluded that the terms of all of the leases
were consistent with the terms Airbus
Germany could have secured from a private,
non-governmental lessor. Before discussing
the Experts Committee's findings in detail, the
European Communities first addresses the
Committee's function as an independent
appraiser.
Blanked Footnote 637: [[***]]
The Panel sustains the US
objection.
801 [[***36]] The Panel sustains the US
objection.
804 [[***37]] The Panel sustains the US
objection.
806 The European Communities notes that the US
expert comes to the same conclusion with
regard to the value of the land. Also drawing
from the Bodenrichtwert, he concludes that the
land value is between €51.13/m² and
€61.36/m².
38 [[***]]
The Panel sustains the US
objection.

33 [***].
34 Bürgerschaft der Freien und Hansestadt Hamburg, Drs. 18/33, pp. 6-7. (Exhibit EC-562) (Non-BCI).
35 [[***]].
36 [[***]].
37 [[***]]. The estimate of [[***]] coincides with the Expert Co mmittee's yearly estimations of
property value in Hamburg. Compare Gutachterausschuss für Grundstückswerte in Hamburg,
Der Grundstücksmarkt in Hamburg 2002, 2003, 2004, 2005 , setting an average return on real estate for the
relevant area at 6,2%. (Exhibit EC-565) (Non-BCI).
38 Expert Opinion No. 27649/06, Benchmarks for Land Values concerning Hamburg Airbus Site,
"Mühlenberger Loch," Kreetslag 10, 21129 Hamburg Finkenwerder, 9 October 2006 ("Keunecke Report"), p. 5
of the English translation (Exhibit US-189).

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
807 Drawing from a median value of €56,25/m 2
and applying a return on real estate of [[***]],
a market rent would amount to €3,70/m 2 per
year, or €0,30/m 2 per month. This is in
accordance with the rent paid by Airbus
Germany.
The Panel sustains the US
objection.
808 The difference between the assumptions of the
Hamburg real estate Experts Committee and
that of the expert commissioned by the
United States lies in the applicable return on
real estate, set at 9 to 12 % in the Keunecke
Report as opposed to [[***]] of the Expert
Committee.
The Panel sustains the US
objection.
816 Assuming, conservatively, that the properties
represented in the report cited by
Dr. Keunecke have an average economic life
of 40 years, a ratio of rent revenue to value of
between 6.0 percent to 8.5 percent represents
an actual return of between 5.2 percent and
8.0 percent, respectively. The median ROI of
rent revenue to value included in the report's
data ( i.e., 7.2 percent) represents an actual
return of 6.2 percent, [[***
39]
The Panel sustains the US
objection.
830 Before discussing the Committee's appraisal,
the European Communities offers a general
note about the Committee's approach. [[***]]
The Panel sustains the US
objection.
831 [[***]] The Panel sustains the US
objection.
833 The Experts Committee assessed the market
consistency of the Agreement separately with
respect to each facility. Each of these
agreements follows the method of the Experts
Committee in determining the market rent.
The actual figures for each agreement are laid
down in a report to the Hamburg Parliament of
January 2007.
40
As a basis for its assessment, [[***]]. The
Experts Committee – and the report to the
Hamburg Parliament referred to directly above
– also expressed the required rent to achieve a
[[***]] actual return on investment (ROI) as a
percentage of the amount invested to
determine the amount of the total annual rent
payment. The annual rent for each facility,
including the actual ROI and the amount of
The Panel sustains the US
objection.

39 Gutachterausschuss für Grundstückswerte in Hamburg, Der Grundstücksmarkt in Hamburg 2002,
2003, 2004, 2005, (Exhibit EC-565) (Non-BCI).
40 Bürgerschaft der Freien und Hansestadt Hamburg, Drs. 18/33 (Exhibit EC-562) (Non-BCI).

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
the investment repaid to compensate the
investor for the consumed value of each
facility (i.e., depreciation), varies from [[***]]
depending on the useful life of the relevant
facility (from 20 to 50 years).
834 [[***41]]42 The Panel sustains the US
objection.
835 [[***]]. The Panel sustains the US
objection.
836 [[***]]43 The Panel sustains the US
objection.
837 [[44]].45 The Panel sustains the US
objection.
838 [[***]] The Panel sustains the US
objection.
839 [[***]]. The City of Hamburg has not,
therefore, conferred a "benefit," or a
"subsidy," on Airbus Germany, within the
meaning of Article 1.1 of the SCM Agreement.
The Panel sustains the US
objection.
850 In contrast, the actual rate of return of [[***]]
expressed by the Experts Committee includes
only the first component, actual return on
investment. The second component, refund of
the investment consumed during the lease, is
separately accounted for by the Experts
Committee in the actual rental payment for the
special-purpose facilities leases.
The Panel sustains the US
objection.
851 When both components of the Hamburg
Special Facilities leases are combined ( i.e.,
actual return on investment and the refund of
the portion of the investment consumed during
the lease), the returns – now stated in the same
manner as Dr. Keunecke (rent/investment
value) – range from a low of [[***]].
The Panel sustains the US
objection.
852 The distinction between real return required of
[[***]] required by the Hamburg Experts
Committee and Dr. Keunecke's ROI expressed
as rent revenue over the value of the property
is comparable to the difference between the
return earned by a bank on a home mortgage
and annual mortgage payment as percent of
the loan. A 20 year home mortgage for
The Panel sustains the US
objection.

41 [[***]].
42 [[***]].
43 [[***]].
44 [[***]].
45 [[***]].

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
€ 100,000 with an interest rate of [[***]]
would required a annual payment of [[***]].
The values [[***]] are therefore equivalent
and simply stated on a different basis. The
Experts Committee specified the former,
actual return, and Dr Keunecke measures the
latter, total payment.
853 Therefore, to make a fair comparison of the
Experts Committee's required [[***]] to
Dr. Keunecke's measure, it is necessary to put
them on the same economic basis. The
European Communities first restates
Dr. Keunecke's measure of return to that of the
Hamburg Experts Committee.
The Panel sustains the US
objection.
1176 and
footnote 948
This is not surprising, as the 1998 settlement
reflected the fair market value of the
repayment claims of the German government
against Deutsche Airbus. The amount of the
settlement was based on [[***
46]] Moreover,
[[***]] The terms of the 1998 settlement
therefore did not confer on Deutsche Airbus
any benefit within the meaning of Article 1.1
of the SCM Agreement.
The Panel sustains the US
objection.
1185 To begin the negotiations, [[***]] To avoid
undervaluing its claims, however, the German
government [[***]]
The Panel accepts the EC
re-designation with respect to
first set of brackets.
With respect to remainder of
the paragraph, the Panel
sustains the US objection.
1186 [[***47***]] The Panel sustains the US
objection.
1187 [[***48]] The Panel sustains the US
objection.
1188 [[***]] The Panel sustains the US
objection.
1189 [[***]] The Panel sustains the US
objection.
1190 [[***]] The Panel sustains the US
objection.
1191 [[***49]] The Panel sustains the US
objection.

46 [[ ]].
47 [[ .]]
48 [[.]]
49 [[***]]

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
1192 [[***]]50 The Panel sustains the US
objection.
1193 Using the [[***]] as a basis, the government
entered into negotiations with
to determine the settlement amount.
Ultimately, the German government secured
from Deutsche Airbus agreement to a
settlement amount higher than the upper
[[***]] the German government and Deutsche
Airbus agreed on a settlement of
DM 1.75 billion – [[***]]
The Panel sustains the US
objection.
1196 On the request of the German government,

The Panel sustains the US
objection.
1197 [[***51]] The European Communities fails to
understand why the United States has not
addressed [[***]] in its first written
submission and thereby disclosed only a
portion of the pertinent facts known to it. The
United States was obliged, under paragraphs 5
and 15 of the Working Procedures, to provide
all its factual evidence with its first written
submission.
The Panel sustains the US
objection.
1199 As explained by the Appellate Body, a
"benefit" under Article 1.1(b) of the
SCM Agreement is conferred if a recipient
secures a financial contribution on terms more
advantageous than those that would have been
available on the market. 52 Like any market
participants operating at arm's length, the
German government and Deutsche Airbus
used [[***]] report as an indication of value
around which to negotiate the terms of
settlement.
The Panel sustains the US
objection.
1201 [[***53]] The Panel sustains the US
objection.

50 [[***]].
51 [[***]].
52 Appellate Body Report, Canada – Aircraft, para. 157.
53 [[***]].

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
1202 Based on additional negotiations, the German
government and Deutsche Airbus agreed on
values above [[***]]. Deutsche Airbus paid
the German government fair value of its
claims, and thus did not receive any advantage
relative to that it would have been accorded by
a market-based creditor. No "benefit" was
conferred on Deutsche Airbus, within the
meaning of Article 1.1(b) of the
SCM Agreement.
The Panel sustains the US
objection.
footnote 963 (footnote to paragraph 1187)

The Panel sustains the US
objection.
1208 Upon the advice of two independent
accounting firms, [[***]], requested jointly by
the German government and DASA/MBB, it
was determined that the value of KfW's
20 percent stake in Deutsche Airbus, as of
1 January 1992, [[***]].
The Panel sustains the US
objection.
1209 [***] Since the valuation fell below
DM 505 million, the German government was
entitled above and beyond the [[***]] value
ascribed by [[***]], to an additional [[***]] in
return for KfW's 20% stake. The German
Government, MBB and Deutsche Airbus
negotiated that a transfer price of [[***]] to be
paid by Deutsche Airbus under the terms of
the debtor warrant, along with the [[***]]
million specified in the 1989 restructuring
agreement. Like all other claims, this claim
was settled in its entirety for fair market value
as a part of the 1998 settlement (see above).
54
Therefore, contrary to the United States'
assertions, the transfer was not free of
charge
55, and did not provide any benefit to
Deutsche Airbus.56
The Panel sustains the US
objection.
Exhibit EC-98 [[***]] The Panel sustains the US
objection.
Exhibit EC-563 [[***]] The Panel sustains the US
objection.
Exhibit EC-564 [[***]] The Panel sustains the US
objection.
Exhibit EC-20 [[***]] The Panel sustains the US
objection.

54 The European Communities notes that the terms of the debtor warrant itself were amended in 1992
(see also above section X.B.2(a)).
56 Cf. US First Written Submission, para. 555.

BCI deleted, as indicated [***]

No. of Paragraph,
Note or Exhibit CONTENT DECISION OF THE
PANEL
Exhibit EC-327 [[***]] The Panel sustains the US
objection.
Exhibit EC-336 [[***]] The Panel sustains the US
objection.
Exhibit EC-478 [[***]] The Panel sustains the US
objection.

BCI deleted, as indicated [***]

ANNEX F-4

COMMUNICATION OF 24 APRIL 2007

European Communities and Certain Member States – Measures
Affecting Trade in Large Civil Aircraft (DS316)

1. The Panel is in receipt of the EC's letter dated 16 April 2007, submitted in response to the
direction contained in paragraph 7 of the Panel's communication of 30 March 2007.

2. The Panel notes that in its letter dated 16 April 2007, the EC indicates that it has complied
with the Panel's direction contained in paragraph 7 of the communication of 30 March 2007 to specify
precisely the BCI and HSBI information contai ned in four documents (DS316-EC-HSBI-000088;
DS316-EC-HSBI-000146; DS316-EC-HSBI-000199; and DS316-EC-HSBI-000205) on the
understanding that, despite the designation of some information in these documents as BCI, the
documents as a whole, and the remainder of th e HSBI documents which contain BCI designations,
"will retain their HSBI status and remain accessi ble only in the Secure Room and only to HSBI
approved persons."

3. The Panel notes that the Panel's BCI/HSBI Procedures provide that information designated as
BCI shall be subject to the restrictions set forth in Section V of the Procedures, while information
designated as HSBI shall be subject to the restricti ons set forth in Section VI. The Panel's BCI/HSBI
Procedures do not make provision for information to be designated as BCI yet be subject to the
restrictions applicable to information designated as HSBI. In other words, the Panel's BCI/HSBI
Procedures contemplate only two distinct restricti ons for the protection of information which apply
according to whether information is designated as BCI or as HSBI.

4. The Panel therefore considers that the EC's "understanding" that, despite the designation of
certain information in the afore-mentioned docum ents as BCI, the documents as a whole will retain
their "HSBI status" is not in accordance with th e Panel's BCI/HSBI Procedures or the general
principles set forth in the Panel's communication of 13 March 2007. Neither is it consistent with the
provisions of the BCI/HSBI Procedures concerning the submission of Redacted Version Appendices.

5. Thus, the Panel directs the EC to submit to the Panel, and serve upon the United States, BCI
versions of these documents, with information desi gnated as HSBI redacted from them, no later than
close of business on Tuesday, 1 May 2007. Should the EC be unwilling to comply with this ruling, it
may withdraw these documents from these proceedi ngs. However, the Panel notes that, in cases
where a party fails to provide necessary informati on, a panel may draw appropriate inferences from
this fact. See Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft
("Canada – Aircraft "), WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377,
paras. 197-206.

6. The Panel has taken no view as to the proprie ty of the designations of information in the
afore-mentioned documents as BCI or HSBI.

7. The United States is invited to submit, by close of business on Friday, 27 April 2007 , any
comments it may have on the propriety of the EC's re-designations of information as BCI or HSBI in
response to the Panel's rulings of 30 March and 4 April 2007.

BCI deleted, as indicated [***]

ANNEX F-5

COMMUNICATION OF 30 APRIL 2007

European Communities and Certain Member States – Measures
Affecting Trade in Large Civil Aircraft (DS316)

1. The Panel is in receipt of the EC's lette r dated 25 April 2007. The Panel acknowledges the
EC's undertaking to submit to the Panel and serve upon the United States by 1 May 2007, BCI
versions (from which designated HSBI information has been redacted) of the documents referred to in
the Panel's communication of 24 April 2007.

2. In response to the EC's request for an explanation of the Pane l's understanding of the
BCI/HSBI procedures concerning redacted versions of exhibits, the Panel observes that the issue
addressed in the Panel's communication of 24 Apr il 2007 was not whether the BCI/HSBI Procedures
require a Party to produce red acted versions of exhibits per se . To the extent that the BCI/HSBI
Procedures are understood not to require redacted vers ions of exhibits, the EC's letter has identified a
serious problem with those Procedures. If the EC's view that, under those Procedures, BCI contained
in "HSBI documents" should effectively be treated as HSBI were correct, the right of BCI-Approved
Persons to have access to BCI would be nullified to th e extent that BCI is contained in exhibits also
containing HSBI.

3. A rule requiring the submission of BCI versions of all exhibits with HSBI redacted from them
would appear to be a practical means of ensuri ng that Approved Persons are able to view the
categories of confidential information to which they are entitled to have access.
1 The Panel therefore
proposes to amend the BCI/HSBI Procedures to clarif y that there is such a rule. The alternative
would seem to be, as the EC observes, to allow HSBI-Approved Persons to redact HSBI from exhibits
which also contain BCI, and remove the resulting "r edacted version" from the HSBI secure room and
treat it according to the rules governing BCI. The Pa nel is reluctant to impose the responsibility to
redact the exhibits of the other party on the HSBI-Approved Persons of either party.

4. The Parties are directed to submit any comments on its proposal, or any other suggestions
they may have for ensuring that BCI-Approved Persons have access to BCI in exhibits which also
contain HSBI, by close of business on Friday, 4 May 2007.

1 The Panel notes that BCI versions of exhibits w ith HSBI redacted from them have been submitted by
the United States in connection with its first submission.

BCI deleted, as indicated [***]

ANNEX F-6

COMMUNICATION OF 23 MAY 2007

European Communities and Certain Member States – Measures
Affecting Trade in Large Civil Aircraft (DS316)

1. The Panel is in receipt of the European Communities' letter da ted 18 May 2007, and the
United States' comments thereon dated 22 May 2 007. The Panel acknowledges the EC's undertaking
regarding preparation of a appropriate Full HSBI Version Appendix, in compliance with paragraph 52
of the BCI/HSBI Procedures and with the Pa nel's communications of 13 March 2007 and
14 May 2007, in respect of its answers to questions and second written submission.

2. The Panel has considered the EC's proposed change to the procedure for verifying HSBI-
Redacted Version Exhibits contained in clause (iii) of paragraph 52(k bis) of the revised version of
14 May 2007, to enable such verification to be ca rried out by a representative authorized for this
purpose. In light of paragraph 24 of the BCI/HSB I Procedures, which provides that, unless otherwise
specifically provided otherwise, the BCI/HSBI Procedures do not apply to a Party's or Third Party's
treatment of its own BCI or HSBI, and the lack of any objection, the Panel accepts the EC's proposed
amendment. The relevant amendment to paragraph 52 is incorporated in the attached revised version
of the BCI/HSBI Procedures.

3. With respect to the EC's suggested am endment to paragraph 52(a) of the BCI/HSBI
Procedures, the Panel notes that it has previously stated its view that an HSBI Appendix must be a
readable document on its own, and not simply a co mpilation of paragraphs containing HSBI. The
EC's proposal appears to reflect that view, and therefore, with a slight clarifying modification, the
Panel accepts that change, which is reflected in the attached revised version of the BCI/HSBI
Procedures.

4. With regard to the EC's comments on brack eting of exhibits, the Panel notes that the
amendments to the BCI/HSBI Procedures it transmitt ed to the Parties on 14 May 2007, incorporating
new paragraphs 4(d) and 5(b), are intended to incorporate in the BCI/HSBI Procedures themselves the
requirement, identified by the Panel in various rulings in this dispute, to identify specifically, through
the use of brackets, single or double as appropriate, BCI or HSBI contained in, inter alia, exhibits.
Although this requirement was not explicit in the BCI/HSBI Procedures as originally adopted, the
Panel has concluded that bracketing of BCI contained in exhibits is required by the those Procedures.
In paragraph 2(a) of its communication of 13 March 2007, the Panel clarified that:

"Parties are not to present entire submissions or exhibits
 categorized as BCI or HSBI,
but rather are to specifically identify, through the use of brackets as provided for in
paragraph 4, the information within those submissions or exhibits they consider
should be so designated.... If a Party co nsiders that a submission or exhibit contains
BCI it must identify that information through the use of brackets as envisaged by
paragraph 4." (Underlining added - other emphasis in original )
The Panel reiterated its view in this regard in paragraph 3 of its communication of 30 March 2007,
stating again that "the Parties are not to present en tire submissions or exhibits categorized as BCI or
HSBI, but rather are to specifically identify, through the use of brackets as provided for in
paragraphs 4 and 5, the information within those su bmissions or exhibits they consider should be so
designated." Thus, the addition of paragraphs 4(d) and 5(d) to the BCI/HSBI Procedures does not
represent a new requirement. Rather, these paragra phs incorporate in the text of the BCI/HSBI
Procedures the substance of the Panel's previous rulings. Therefore, the Panel declines to delete them.

BCI deleted, as indicated [***]

5. In order to be clear, the Panel confirms that these amendments take effect as of 14 May 2007.
That is, the Parties (and Third Parties) are required to bracket the specific information designated as
BCI (or HSBI) contained in any exhibit submitte d subsequent to 14 May 2007. Parties are not,
however, required to retroactively re-bracket BCI or HSBI contained in exhibits filed prior to
14 May 2007, except to the extent that the Panel h as already directed them to do so. This does not
preclude the possibility that the Panel may direct a Party to re-bracket BCI or HSBI in an exhibit
submitted prior to that date, on a case-by-case basis.

6. The Panel notes the concern expressed by the EC regarding the production of non-BCI
versions of exhibits. The Panel clarifies that th e BCI/HSBI Procedures, as amended, are not intended
to require Parties to produce and subm it non-BCI versions of exhibits ( i.e. versions of exhibits from
which BCI has been redacted), although such vers ions are, of course, welcome. The Panel has
reflected this view in a clarifying modification to paragraph 38(b).

7. Concerning exhibits EC-167, EC-551 throug h EC-561 and EC-077, the Panel notes the EC's
request that the Panel ask the United States "to speci fy what information it wants to be unbracketed
and to substantiate in what way the alleged over-br acketing is prejudicing its possibility to prepare its
second written submission before the burden is put on the European Communities and the
stakeholders to re-bracket these exhibits." The EC makes this request despite having failed to submit
any responses to the United States' objections to the alleged over-designation of information as BCI in
the aforementioned exhibits by the applicable deadline. The Panel further notes that, in its
communication of 14 May 2007, the Panel sustai ned the United States' objections to the EC's
designation of information as BCI in the aforementi oned exhibits, and directed the EC to re-submit
these exhibits, bracketing only the specific BCI contained therein, by 18 May 2007.

8. The Panel recalls that paragraph 2 of the BCI/HSBI Procedures makes it clear that a Party
submitting information which it seeks to have treated as BCI is obligated to act in good faith and
exercise restraint in designating information as BCI , and endeavour to designate information as BCI
only if its disclosure would cause harm to the originators of the information. Similarly, paragraph 9
of the BCI/HSBI Procedures makes it clear that a Party submitting information which it seeks to have
treated as HSBI is obligated to act in good faith and exercise restraint in designating information as
HSBI, and endeavour to designate information as HSBI only if its disclosure would cause exceptional
harm to the originators of the information, and sets forth categories of information that may, and may
not, be designated as HSBI. It is the Panel's vi ew that the Procedures place the burden on a Party
designating information as BCI or HSBI to demons trate, if challenged, that the information in
question satisfies the criteria for such treatment. The EC's proposed modifications to paragraph 38(d)
and 52(kbis) would shift this burden, imposing obligations on the non-submitting Party, and the Panel.
The Panel considers that a Party receiving inform ation designated as BCI is not required to identify
specific information it seeks to ha ve 'debracketed' and justify its request on the basis that the
designation of such information as BCI is prejudicial to its ability to prepare its submissions to the
Panel. Nor is it the Panel's obligation to identify to a Party the portions of exhibits it may wish to
discuss in its report in order to ascertain whether sp ecific information is considered by the submitting
Party to be BCI.
1

9. The Panel considers that it is incumbent upon th e EC to comply with the Panel's direction of
14 May 2007, and declines to direct the United States to justify its objections as requested by the EC.
The EC having failed to respond to the US objections to the designation of almost the entirety of the
afore-mentioned exhibits as BCI, the Panel is not in a position to rule on the question of whether
specific information in those exhibits may properly be designated as BCI. 2 The Panel notes that,

1 The Panel will, of course, work with the Parties to ensure that any public documents in this dispute do
not contain BCI or HSBI.
2 The Panel notes, however, that based on the principles it has articulated in its rulings on the issue of
designation of information as BCI or HSBI, the Panel ha s difficulty accepting that, for example, portions of the