EUROPEAN COMMUNITIES – EXPORT SUBSIDIES ON SUGAR
Document: Understanding between Brazil and the European Communities
Date: 9 June 2006
Document codes: WT/DS266/36; WT/DS266/35; WT/DS266/35/Add.1
Complainant: Brazil
Respondent: EU
Third parties: Australia, Barbados, Belize, Canada, China, Colombia, Cuba, Fiji, Guyana, India, Jamaica, Kenya, Madagascar, Malawi, Mauritius, New Zealand, Paraguay, Saint Kitts and Nevis, Eswatini, Tanzania, Thailand, Trinidad and Tobago, U.S., Côte d’Ivoire
Dispute stage: Appellate Body
Agreements cited: Art. 3.3, 8, 9.1, 10.1  AgricultureArt. 1.1, 3.1, 3.2  Subsidies and Countervailing Measures (SCM)

EUROPEAN COMMUNITIES – EXPORT SUBSIDIES ON SUGAR

Understanding between Brazil and the European Communities

 The following communication, dated 8 June 2006, from the delegation of Brazil and the
delegation of the European Communities to the Chairman of the Dispute Settlement Body, is
circulated at the request of those delegations.

 Noting the Status Reports by the European Communities ( and
) and the statements of the pa rties to the Dispute Settlement Body (DSB)
relating to this dispute,

 Having regard to the fact that the Europ ean Communities considers that by adopting and
applying the measures referred to in the aforementi oned status reports it has fully complied with the
DSB recommendations and rulings in this dispute with in the reasonable period of time granted to it
under Article 21.3(c) of the Understanding on Rules and Procedu res Governing the Settlement of
Disputes (DSU),

 Mindful that Brazil has made known to the Eur opean Communities that it is not satisfied that
the EC has complied with the DSB recommendations a nd rulings in this dispute within the reasonable
period of time,

 Given the disagreement between Brazil and th e European Communities ("the parties to the
dispute"), within the meaning of Article 21.5 of th e DSU, as to the existence or consistency with a
covered agreement of measures taken by the European Communities to comply with the
recommendations and rulings of the DSB in this di spute within the reasonable period of time, the
parties to the dispute have reached the following understanding with regard to the dispute:

1. Brazil is entitled at any time to request the est ablishment of a panel pursuant to Article 21.5 of
the DSU.

2. At the first DSB meeting at which Brazil’s request for the establishment of an Article 21.5
panel appears on the agenda, the European Communities shall accept the establishment of that
panel.

3. The parties to the dispute shall cooperate to en able the Article 21.5 panel to circulate its report
within 90 days of the panel's establishment, excluding such time during which the panel's
work may be suspended pursuant to Article 12.12 of the DSU.

4. Either party to the dispute may request the DS B to adopt the report of the Article 21.5 panel at
a DSB meeting held at least 20 days after the circulation of the report to the Members unless

either party appeals the report. If a party to th e dispute has notified its decision to appeal, the
report by the Article 21.5 panel shall not be considered for adoption by the DSB until after
completion of the appeal.

5. In the event of an appeal against the Article 21.5 panel report, the parties to the dispute shall
cooperate to enable the Appellate Body to circ ulate its report to the Members within no more
than 60 days from the date of notification of the appeal to the DSB.

6. In the event of an appeal, either party to th e dispute may request the DSB to adopt the reports
of the Appellate Body and the Article 21.5 pane l (as modified by the Appellate Body report)
at a DSB meeting held within 30 days of the ci rculation of the Appellate Body report to the
Members.

7. Brazil shall not request authorization to suspend concessions or other obligations under
Article 22 of the DSU until the adoption by th e DSB of the Article 21.5 panel report and,
where relevant, the Appellate Body report.

8. If the DSB adopts recommendations and rulin gs that measures taken by the European
Communities to comply with the prior recommendations and rulings of the DSB do not exist
or are inconsistent with a covered agreement, Brazil has the right under Article 22.2 of the
DSU to request negotiations with the Europ ean Communities with a view to developing
mutually acceptable compensation, and to re quest authorization from the DSB to suspend
concessions or other obligations pursuant to Articles 22.2 and 22.6 of the DSU.

9. Subject to paragraphs 7 and 8, Brazil has th e right to request the DSB authorization referred
to therein at any future date. The Europ ean Communities shall not assert that Brazil is
precluded from obtaining the DSB authorization because the request was made outside the
30-day time-period specified in Article 22.6 of the DSU .

10. The European Communities retains the right to object to the level of suspension proposed, or
to claim that the principles and procedures set forth in Article 22.3 of the DSU have not been
followed, and to have the matter referred to arbitration under Article 22.6 of the DSU.

11. The parties to the dispute will cooperate to en able the arbitrator under Article 22.6 of the DSU
to circulate its decision within 60 days of the referral to arbitration.

12. The parties to the dispute will cooperate to fac ilitate the participation of the original panelists
in the Article 21.5 compliance panel and the Article 22.6 arbitration.

13. If any of the original panelists is not availa ble for either the Article 21.5 compliance panel or
the Article 22.6 arbitration (or both), the parties to the dispute will immediately request the
Director-General of the WTO to appoint, within five days of being so requested, a
replacement for the proceeding or proceedings in which a replacement is required. If an
original panelist is unavailable to serve in eith er of the proceedings, the parties to the dispute
will further request that, in making this appoint ment, the Director-General seek a person who
will be available to act in both proceedings.

14. The parties to this dispute will continue to cooperate in all matters related to this
Understanding and not to raise any procedural objection to any of the steps set out herein. If,
during the application of these procedures, the parties to the dispute consider that a procedural
aspect has not been properly addressed in this Understanding, they will endeavour to find a
solution within the shortest time possible that will not affect the other aspects and steps
agreed herein.

15. In order to fully safeguard their respective rights under the DSU, the parties to the dispute
agree to request jointly the adoption by the DSB of the draft decision attached to this
understanding at its meeting on 19 June 2006.

Signed:

H.E. Mr Clodoaldo Hugueney-Filho H.E. Mr Carlo Trojan
Ambassador Ambassador
Permanent Representative of Brazil Permanent Representative
 for the European Communities

Draft Decision of the DSB

 The DSB takes note of the Understanding reached between Brazil and the European
Communities and agrees that, in the event that the DSB adopts recommendations and rulings that
measures taken by the European Co mmunities to comply with the prior recommendations and rulings
of the DSB do not exist or are inconsistent with a covered agreement, the DSB shall grant Brazil upon
its request authorization to suspend concessions or other obligations pursuant to Article 22 of the DSU
unless (i) the DSB decides by consensus not to do so , or (ii) the European Communities objects to the
level of suspension proposed or claims that the pr inciples and procedures set forth in Article 22.3 of
the DSU have not been followed, in which case th e matter shall be referred to arbitration under
Article 22.6 of the DSU.