EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE UNITED STATES NOTIFICATION OF AN APPEAL BY THE EUROPEAN UNION UNDER ARTICLE 16.4 AND ARTICLE 17 OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES (DSU), AND UNDER RULE 20(1) OF THE WORKING PROCEDURES FOR APPELLATE REVIEW
Document: UNDER ARTICLE 16.4 AND ARTICLE 17 OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES (DSU), AND UNDER RULE 20(1) OF THE WORKING PROCEDURES FOR APPELLATE REVIEW
Date: 26 October 2016
Document codes: WT/DS316/29
Complainant: U.S.
Respondent: EU, France, Germany, Spain, United Kingdom
Third parties: Australia, Brazil, Canada, China, Japan, South Korea
Dispute stage: Retaliation & Arbitration
Agreements cited: Art. 3.1, 3.2, 5, 6.3  Subsidies and Countervailing Measures (SCM)Art. XVI:1  GATT 1994Art. 1, 2  Subsidies and Countervailing Measures (SCM)Art. III:4  GATT 1994

EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES AFFECTING
TRADE IN LARGE CIVIL AIRCRAFT
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE UNITED STATES
NOTIFICATION OF AN APPEAL BY THE EUROPEAN UNION
UNDER ARTICLE 16.4 AND ARTICLE 17 OF THE UNDERSTANDING ON RULES
AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES (DSU),
AND UNDER RULE 20(1) OF THE WORKING PROCEDURES FOR APPELLATE REVIEW
The following communication, dated 13 October 2016, from the delegation of the European Union,
is being circulated to Members.

Pursuant to Article 16.4 and Article 17.1 of the DSU, the European Union hereby notifies to the
Dispute Settlement Body its decision to appeal to the Appellate Body certain issues of law covered
in the Panel Report and certain l egal interpretations developed by the Panel in the dispute
European Union – Measures Affecting Trade in Large Civil Aircraft (Recourse to Article 21.5 of the
DSU by the United States) (). Pursuant to Rule 20(1) of the Working Procedures for
Appellate Review , the European Union simultaneously files this Notice of Appeal with the
Appellate Body Secretariat.
The European Union is restricting its appeal to those errors that it believes constitute serious
errors of law and legal interpretation that n eed to be corrected. Non -appeal of an issue does not
signify agreement therewith.
For the reasons to be further elaborated in its submissions to the Appellate Body, the European
Union appeals, and requests the Appellate Body to reverse, modify or declar e moot and of no legal
effect, the findings, conclusions and recommendations of the Panel, with respect to the following
errors of law and legal interpretations contained in the Panel Report1:
I. WHETHER THE PANEL PR OPERLY INTERPRETED A RTICLE 7.8 OF THE
SCM AGREEMENT (SECTIONS 6.6.2 AND 6.6.3 OF THE REPORT)
1. The Panel erred in interpreting Article 7.8 of the SCM Agreement to require an
implementing Member to “remove the adverse effects” found from an actionable subsidy in
original proceedings, even if that subs idy has been “withdraw{n}” and is no longer
“maintain{ed}”.2
2. The Panel additionally erred in its interpretation of Article 7.8 (in conjunction with
Article 1.1(a)) of the SCM Agreement ) when finding that bringing about the end of a

1 Paragraph numbers provided in footnotes to the following description of the errors of the Panel are
intended to indicate the primary instance of the errors. These errors have consequences throughout the report,
and the European Union also appeals all findings and conclusions deriving from or relying on the appealed
errors, and in particular the relevant findings and conclusions in Sections 7.1, 7.2, 7.3 and 7.4 of the Panel
Report.
2 Panel Report, paras. 6.803, 6.813, 6.819, 6.822, 6.838, 6.839-6.841, 6.1078, 6.1089, 6.1094,
6.1100, 6.1101-6.1102, 6.1451-6.1452, 6.1463, 6.1534, 6.1774, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847,
7.1(d)(i), 7.1(d)(viii), 7.1(d)(ix), 7.1(d)(xii)-(xvii) and 7.2.

financial contribution d oes not result in withdrawal of the subsidy. 3 The European Union
requests the Appellate Body to consider this appeal only if the Appellate Body reverses the
Panel’s interpretation of Article 7.8 and attempts to complete the analysis under a proper
interpretation of Article 7.8.
II. WHETHER THE PANEL ERRED BY REFUSING TO ASSESS WHETHER THE EUROPEAN
UNION ACHIEVED COMPL IANCE IN RESPECT OF THE MÜHLENBERGER LOC H AND
BREMEN AIRPORT RUNWA Y SUBSIDIES (SECTION S 5.10, 6.2.5 AND 6. 6.3.4.4 OF
THE REPORT)
3. The Panel erred in interpreting Article 21.5 of the DSU as providing an original respondent
with the right to seek findings of compliance in Article 21.5 compliance proceedings only in
the narrow factual circumstances of the US/Canada – Continued Suspension dispute.4
4. The Panel erred in the application of Article 21.5 of the DSU by finding that no
disagreement, within the meaning of Article 21.5 of the DSU, existed between the
European Union and the United States, and consequently by failing to make findings
concerning the European Union’s withdrawal of the Mühlenberger Loch and Bremen airport
runway subsidies.5
5. Separately, by declining to make findings on a matter that was properly before it, the
Panel failed to make an objective assessment of the matter, under Article 11 of the DSU.6
III. WHETHER LA/MSF FOR T HE A350XWB IS A SUBS IDY (SECTION 6.5.2 O F THE
REPORT)
6. The Panel erred when identifying the appropriate point in time from which to draw the
corporate borrowing rate component of the market benchmark to determine whether each
A350XWB launch aid/member state financing (“LA/MSF”) contract confers a “benefit”, and
therefore constitutes a subsidy, under Article 1.1(b) of the SCM Agreement.7 Specifically,
in identifying the corporate borrowing rate as “the average yields {on the relevant EADS
bond} one-month prior and six-months prior to the conclusion of the contract, in the form
of a range”, 8 the Panel erred in the application of Articles 1.1(b) and 7.8 of the
SCM Agreement.9
7. Separately, by rejecting the yield on the day o f the conclusion of each contract, the Panel
failed to make an objective assessment of the matter, under Article 11 of the DSU.10
8. Should the Appellate Body disagree with the European Union and reject the appeals
described in paragraphs 6 and 7, the European Union appeals the Panel’s inclusion, in its
construction of the corporate borrowing rate, of the six -month average yield on the
relevant EADS bond within the Panel’s range of average yields. 11 Specifically, by including
the six -month average yield within its range, the Panel erred in the application of
Articles 1.1(b) and 7.8 of the SCM Agreement.12

3 Panel Report, paras. 6.1072-6.1074, 6.1451-6.1452, 6.1463, 6.1534, 6.1774, 6.1798, 6.1817,
6.1838, 6.1846, 6.1847, 7.1(d)(i), 7.1(d)(viii), 7.1(d)(ix), 7.1(d)(xii)-(xvii) and 7.2.
4 Panel Report, paras. 5.76-5.78, footnote 53 to para. 6.3, footnote 109 to para. 6.42, and footnote
1847 to para. 6.1102.
5 Panel Report, paras. 5.76-5.78, footnote 53 to para. 6.3, footnote 109 to para. 6.42, and footnote
1847 to para. 6.1102.
6 Panel Report, paras. 5.76-5.78, footnote 53 to para. 6.3, footnote 109 to para. 6.42, and footnote
1847 to para. 6.1102.
7 Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).
8 Panel Report, para. 6.389.
9 Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).
10 Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).
11 Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).
12 Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).

9. Separately, by including the six -month average yield within its range, the Panel failed to
make an objective assessment of the matter, under Article 11 of the DSU.13
10. Further, the Panel erred in identifying the project risk premium component of the market
benchmark to determine whether each A350XWB LA/MSF contract confers a “benefit”, and
therefore constitutes a subsidy, under Article 1.1(b) of the SCM Agreement.14 The Panel
selected a single undifferentiated project risk premium for each A350XWB LA/MSF
contract, which was developed for a different programme (i.e., the A380) in the original
proceedings. In so doing, the Panel committed three sets of error.
11. First, t he Panel failed to establish a project -specific risk premium for A350XWB LA/MSF
based on the risks associated with the A350XWB programme. As a result, the Panel erred
in the application of Articles 1.1(b) and 7.8 of the SCM Agreement.15
12. Separately, by failing to consider more appropriate benchmarks and by deviating from the
approach to project-specific benchmarks taken in the original proceedings, the Panel failed
to make an objective assessment of the matter, under Article 11 of the DSU.16
13. Second, by fa iling to establish similarity between the risks involved in the A350XWB
project and the A380 LA/MSF project, as well as between the risks involved in the
A350XWB LA/MSF contracts and the A380 LA/MSF contracts, the Panel failed to make an
objective assessment of the matter, under Article 11 of the DSU.17
14. Third, and finally, the Panel erroneously adopted a single project risk premium to
benchmark all four A350XWB LA/MSF contracts. As a result, the Panel erred in the
application of Articles 1.1(b) and 7.8 of the SCM Agreement.18
15. Separately, by failing to adopt a differentiated project risk premium while adopting a
differentiated corporate borrowing rate, the Panel failed to make an objective assessment
of the matter, under Article 11 of the DSU.19
IV. WHETHER THE PANEL ERRED IN IDENTIFYING APPROPRIATE PRODUCT MARKETS
(SECTION 6.6.4.4 OF THE REPORT)
16. The Panel erred in its interpretation of the term “market” in Article 6.3 of the
SCM Agreement, as permitting two products to be placed in the same product market on
the basis of any competition between them, rather than on the basis of the existence of
significant competitive constraints between them.20
17. Should the Appellate Body disagree with the European Union and reject the appeal
described in paragraph 16 , the Panel erred in the application of Articles 5(c), 6.3 and
Article 7.8 of the SCM Agreement when it identified the relevant product markets for

13 Panel Report, paras. 6.389, 6.430 (Table 7) and 6.632 (Table 10).
14 Panel Report, paras. 6.435, 6.459, 6.487, 6.492, 6.527, 6.539-6.542, 6.579, 6.595, 6.607, 6.608-
6.610, 6.632 (Table 10), 6.633, 6.656, 6.1798, 6.1817, 6.1847, 7.1(c)(i), 7.1(d)(xiii)-7.1(d)(xvii) and 7.2.
15 Panel Report, paras. 6.435, 6.459, 6.608-6.610, 6.632 (Table 10), 6.633, 6.656, 6.1798, 6.1817,
6.1838, 6.1846, 6.1847, 7.1(c)(i), 7.1(d)(xiii)-7.1(d)(xvii) and 7.2.
16 Panel Report, paras. 6.435, 6.459, 6.608-6.610, 6.632 (Table 10), 6.633, 6.656, 6.1798, 6.1817,
6.1838, 6.1846, 6.1847, 7.1(c)(i), 7.1(d)(xiii)-7.1(d)(xvii) and 7.2.
17 Panel Report, paras. 6.487, 6.492, 6.527, 6.539-6.542, 6.579, 6.595, 6.607, 6.608-6.610, 6.632
(Table 10), 6.633, 6.656, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(c)(i), 7.1(d)(xiii)-7.1(d)(xvii) and 7.2.
18 Panel Report, paras. 6.607, 6.608-6.610, 6.632 (Table 10), 6.633, 6.656, 6.1798, 6.1817, 6.1838,
6.1846, 6.1847, 7.1(c)(i), 7.1(d)(xiii)-7.1(d)(xvii) and 7.2.
19 Panel Report, paras. 6.607, 6.608-6.610, 6.632 (Table 10), 6.633, 6.656, 6.1798, 6.1817, 6.1838,
6.1846, 6.1847, 7.1(c)(i), 7.1(d)(xiii)-7.1(d)(xvii) and 7.2.
20 Panel Report, paras. 6.1210, 6.1211, 6.1236, 6.1280, 6.1289, 6.1292, 6.1305, 6.1320, 6.1348,
6.1382, 6.1362, 6.1409, 6.1416, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(xi), 7.1(d)(xiv)-7.1(d)(xvii)
and 7.2.

purposes of assessing the United States’ adverse effects claims in a manner that is
inconsistent with its own legal standard.21
18. Separately, by limiting its assessment of the existence of the relevant product markets for
purposes of assessing the United States’ adverse effects claims to competition between
only those products that the United States had placed in the same pro duct markets, the
Panel failed to make an objective assessment of the matter, under Article 11 of the DSU.22
V. WHETHER THE PANEL ER RED IN REACHING ITS FINDINGS RELATING TO THE
“NON-SUBSIDIZED LIKE PROD UCT” PROVISIONS OF A RTICLES 6.3, 6.4 AND 6.5
OF THE SCM AGREEMENT (SECTION 6.6.4.3 OF THE REPORT)
19. The Panel erred in reaching its findings on whether there is a new matter. Specifically, the
Panel erred in its interpretation and application of the term “matter” in Article 11 of the
DSU.23 The Panel also erred in failing to make an objective assessment of the matter,
under Article 11 of the DSU.24
20. In addition, the Panel erred in reaching its findings on cogent reasons. Specifically, the
Panel erred in its interpretation and application of “security and predictab ility” within the
meaning of Article 3.2 of the DSU as it relates to the cogent reasons rule; 25 and, erred in
failing to make an objective assessment of the matter, under Article 11 of the DSU.26
21. Finally, the Panel erred in its interpretation and applicatio n of Articles 6.3(a), 6.3(b),
6.3(c), 6.4 and 6.5 of the SCM Agreement.27
VI. WHETHER THE PANEL ER RED IN FINDING ADVER SE EFFECTS (SECTION 6.6.4.4
OF THE REPORT)
A. EFFECTS OF LA/MSF ON THE LAUNCH AND MARKET PRESENCE OF AIRCRAFT
22. The Panel erred in the inte rpretation of Article 5(c) of the SCM Agreement in adopting a
“but for” approach to causation that failed to consider the passage of time, and events that
occurred during that time, and consequently attributing the current market presence of the
A320, A330 and A380 families of aircraft to pre-A350XWB LA/MSF.28
23. Should the Appellate Body disagree with the European Union and reject the appeal
described in paragraph 22, the Panel erred in the application of Articles 5 (c) and 7.8 of the
SCM Agreement in adopting a “but for” approach to causation that failed to consider the
passage of time, and events that occurred during that time, and consequently attributing
the current market presence of the A320 and A330 families of aircraft to pre -A350XWB
LA/MSF.29

21 Panel Report, paras. 6.1292, 6.1305, 6.1320, 6.1348, 6.1382, 6.1362, 6.1409, 6.1416, 6.1798,
6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(xi), 7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
22 Panel Report, paras. 6.1292, 6.1305, 6.1320, 6.1348, 6.1382, 6.1362, 6.1409, 6.1416, 6.1798,
6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(xi), 7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
23 Panel Report, paras. 6.1125-6.1138, 6.1154, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(x),
7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
24 Panel Report, paras. 6.1125-6.1138, 6.1154, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(x),
7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
25 Panel Report, paras. 6.1125-6.1153, 6.1154, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(x),
7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
26 Panel Report, paras. 6.1125-6.1153, 6.1154, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(x),
7.1(d)(xiv)-7.1(d)(xvii) and 7.2.
27 Panel Report, paras. 6.1125-6.1154, 6.1798, 6.1817, 6.1847, 7.1(d)(x), 7.1(d)(xiv)-7.1(d)(xvii) and
7.2.
28 Panel Report, paras. 6.1515, 6.1527, 6.1534, 6.1774, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847,
7.1(d)(xii)-7.1(d)(xvii) and 7.2.
29 Panel Report, paras. 6.1527, 6.1534, 6.1774, 6.1798, 6.1817, 6.1838, 6.1846, 6.1847, 7.1(d)(xii)-
7.1(d)(xvii) and 7.2.

24. Separately, to the extent the Panel found that LA/MSF for the A380 resulted in “direct
effects” on the launch and market presence of the A380, the Panel failed to make an
objective assessment of the matter, under Article 11 of the DSU.30
25. The Panel additionally erred in the application of Articles 5(c) and 7.8 of the
SCM Agreement by attributing the market presence of the A350XWB to the “indirect
effects” of LA/MSF for the A380.31
26. Separately, to the extent the Panel found that LA/MSF for the A350XWB resulted in “direct
effects” on the launch and market presence of the A350XWB, the Panel failed to make an
objective assessment of the matter, under Article 11 of the DSU.32
B. FINDINGS OF DISPLACEMENT, IMPEDANCE AND LOST SALES
27. The Panel erred in the application of Articles 5(c), 6.3 and 7.8 of the SCM Agreement by
failing, in its assessment of lost sales, displacement and impedance, to account for the
differences in closeness of competition between various aircraft.33
28. The Panel erred in the application of Articles 5(c), 6.3 and 7.8 of the SCM Agreement by
failing, in its assessment of lost sales, displacement and impedance, to account for
non-attribution factors.34
29. The Panel erred in the interpretation of Articles 6.3(a) and 6.3(b) of t he SCM Agreement in
finding that non -withdrawn subsidies cause “displacement and/or impedance”, thereby
conflating the two separate forms of serious prejudice.35
30. The Panel erred in the interpretation of Articles 6.3(a) and 6.3(b) of the SCM Agreement as
permitting findings of “displacement” without any assessment of sales volume and market
share data.36
31. In addition, the Panel also erred in the application of Articles 5(c), 6.3(a), 6.3(b) and 7.8
of the SCM Agreement by finding “displacement” without any ass essment of sales volume
and market share data.37
32. The Panel erred in the interpretation of Articles 6.3(a) and 6.3(b) of the SCM Agreement as
permitting findings of “impedance” without any assessment of sales volume and market
share data.38
33. In addition, the Panel also erred in the application of Articles 5(c), 6.3(a), 6.3(b) and 7.8
of the SCM Agreement by finding “impedance” without any assessment of sales volume
and market share data.39