EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
Document: RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE EUROPEAN UNION AND CERTAIN MEMBER STATES REPORT OF THE PANEL BCI deleted, as indicated [***]
Date: 2 December 2019
Document codes: WT/DS316/RW2
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 EUROPEAN UNION
AND CERTAIN MEMBER STATES
REPORT OF THE PANEL
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BCI deleted, as indicated [***]

LIST OF ANNEXES
ANNEX A
PANEL DOCUMENTS
Contents Page
Annex A-1 Working Procedures of the Panel 4
Annex A-2 Additional Working Procedures on open panel meetings 11
Annex A-3 Additional Working Procedures for the protection of business confidential
information and highly sensitive business information
13
Annex A-4 Interim Review 27
ANNEX B
ARGUMENTS OF THE PARTIES
Contents Page
Annex B-1 Integrated executive summary of the arguments of the European Union 30
Annex B-2 Integrated executive summary of the arguments of the United States 46
ANNEX C
ARGUMENTS OF THE THIRD PARTIES
Contents Page
Annex C-1 Integrated executive summary of the arguments of Brazil 55
Annex C-2 Integrated executive summary of the arguments of Canada 59
Annex C-3 Integrated executive summary of the arguments of Japan 62
ANNEX D
RULING OF THE PANEL ON THE EUROPEAN UNION'S REQUEST OF 12 JULY 2019
Contents Page
Annex D-1 Ruling of the Panel on the European Union's Request of 12 July 2019 concerning:
(i) the alleged untimely filing of certain new arguments and evidence; and
(ii) allegations of additional due process concerns
65

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CASES CITED IN THIS REPORT
Short Title Full Case Title and Citation
Canada – Aircraft
(Article 21.5 – Brazil)
Appellate Body Report, Canada – Measures Affecting the Export of Civilian
Aircraft – Recourse by Brazil to Article 21.5 of the DSU , ,
adopted 4 August 2000, DSR 2000:IX, p. 4299
Canada – Continued
Suspension
Appellate Body Report, Canada – Continued Suspension of Obligations in the
EC – Hormones Dispute , WT/DS321/AB/R, adopted 14 November 2008,
DSR 2008:XIV, p. 5373
Canada – Continued
Suspension
Panel Report, Canada – Continued Suspension of Obligations in the EC –
Hormones Dispute, WT/DS321/R and Add.1 to Add.7, adopted 14 November
2008, as modified by Appel late Body Report WT/DS321/AB/R, DSR 2008:XV,
p. 5757
Chile – Price Band System
(Article 21.5 – Argentina)
Appellate Body Report, Chile – Price Band System and Safeguard Measures
Relating to Certain Agricultural Products – Recourse to Article 21.5 of the DSU
by Argentina, WT/DS207/AB/RW, adopted 22 May 2007, DSR 2007:II, p. 513
Colombia – Textiles
(Article 21.5 – Colombia) /
Colombia – Textiles
(Article 21.5 – Panama)
Panel Report, Colombia – Measures Relating to the Importation of Textiles,
Apparel and Footwear – Recourse to Article 21.5 of the DSU by Colombia /
Colombia – Measures Relating to the Importation of Textiles, Apparel and
Footwear – Recourse to Article 21.5 of the DSU by Panama, WT/DS461/RW and
Add.1, circulated to WTO Members 5 October 2018 (Currently under appeal)
EC – Bananas III Appellate Body Report, European Communities – Regime for the Importation,
Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997,
DSR 1997:II, p. 591
EC – Bed Linen (Article 21.5
– India)
Appellate Body Report, European Communities – Anti-Dumping Duties on
Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the
DSU by India, WT/DS141/AB/RW, adopted 24 April 2003, DSR 2003:III, p. 965
EC – Hormones Appellate Body Report, European Communities – Measures Concerning Meat and
Meat Products (Hormones) , WT/DS26/AB/R, WT/DS48/AB/R, adopted
13 February 1998, DSR 1998:I, p. 135
EC and certain member
States – Large Civil Aircraft
Panel Report, , WT/DS316/R, adopted 1 June 2011, as
modified by Appellate Body Report WT/DS316/AB/R, DSR 2011:II, p. 685
EC and certain member
States – Large Civil Aircraft
Appellate Body Report, , WT/DS316/AB/R, adopted
1 June 2011, DSR 2011:I, p. 7
EC and certain member
States – Large Civil Aircraft
(Article 21.5 – US)
Appellate Body Report, – Recourse to Article 21.5 of the
DSU by the United States, WT/DS316/AB/RW and Add.1, adopted 28 May 2018
EC and certain member
States – Large Civil Aircraft
(Article 21.5 – US)
Panel Report, European Communities and Certain Member States – Measures
Affecting Trade in Large Civi l Aircraft – Recourse to Article 21.5 of the DSU by
the United States, WT/DS316/RW and Add.1, adopted 28 May 2018, as modified
by Appellate Body Report WT/DS316/AB/RW
EC and certain member
States – Large Civil Aircraft
(Article 22.6 – EU)
Decision by the Arbitrator, – Recourse to Article 22.6 of the
DSU by the European Union, WT/DS316/ARB and Add.1, 2 October 2019
Japan – DRAMs (Korea) Appellate Body Report, Japan – Countervailing Duties on Dynamic Random
Access Memories from Korea , WT/DS336/AB/R and Corr.1, adopted
17 December 2007, DSR 2007:VII, p. 2703
Japan – DRAMs (Korea) Panel Report, Japan – Countervailing Duties on Dynamic Random Access
Memories from Korea, WT/DS336/R, adopted 17 December 2007, as modified
by Appellate Body Report WT/DS336/AB/R, DSR 2007:VII, p. 2805
US – Continued Suspension Appellate Body Report, United States – Continued Suspension of Obligations in
the EC – Hormones Dispute , WT/DS320/AB/R, adopted 14 November 2008,
DSR 2008:X, p. 3507
US – Continued Suspension Panel Report, United States – Continued Suspension of Obligations in the EC –
Hormones Dispute, WT/DS320/R and Add.1 to Add.7, adopted 14 November
2008, as modified by Appellate Body Report WT/DS320/AB/R, DSR 2008:XI,
p. 3891
US – Countervailing
Measures on Certain EC
Products
Appellate Body Report, United States – Countervailing Measures Concerning
Certain Products from the European Communities , WT/DS212/AB/R, adopted
8 January 2003, DSR 2003:I, p. 5
US – Countervailing
Measures on Certain EC
Products (Article 21.5 – EC)
Panel Report, United States – Countervailing Measures Concerning Certain
Products from the European Communities – Recourse to Article 21.5 of the DSU
by the European Communities , WT/DS212/RW, adopted 27 September 2005,
DSR 2005:XVIII, p. 8950

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Short Title Full Case Title and Citation
US – FSC
(Article 21.5 – EC II)
Appellate Body Report, United States – Tax Treatment for "Foreign Sales
Corporations" – Second Recourse to Article 21.5 of the DSU by the European
Communities, WT/DS108/AB/RW2, adopted 14 Mar ch 2006, DSR 2006:XI,
p. 4721
US – Large Civil Aircraft
(2nd complaint)
Appellate Body Report, United States – Measures Affecting Trade in Large Civil
Aircraft (Second Complaint) , WT/DS353/AB/R, adopted 23 March 2012,
DSR 2012:I, p. 7
US – Large Civil Aircraft
(2nd complaint)
Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft
(Second Complaint) , WT/DS353/R, adopted 23 March 2012, as modified by
Appellate Body Report WT/DS353/AB/R, DSR 2012:II, p. 649
US – Large Civil Aircraft
(2nd complaint)
(Article 21.5 – EU)
Appellate Body Report, United States – Measures Affecting Trade in Large Civil
Aircraft (Second Complaint) – Recourse to Article 21.5 of the DSU by the
European Union, WT/DS353/AB/RW and Add.1, adopted 11 April 2019
US – Lead and Bismuth II Appellate Body Report, United States – Imposition of Countervailing Duties on
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the
United Kingdom, WT/DS138/AB/R, adopted 7 June 2000, DSR 2000:V, p. 2595
US – Shrimp
(Article 21.5 – Malaysia)
Appellate Body Report, United States – Import Prohibition of Certain Shrimp and
Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia ,
WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, p. 6481
US – Softwood Lumber IV
(Article 21.5 – Canada)
Appellate Body Report, United States – Final Countervailing Duty Determination
with Respect to Certain Softwood Lumber from Canada – Recourse by Canada to
Article 21.5 of the DSU , WT/DS257/AB/RW, adopted 20 December 2005,
DSR 2005:XXIII, p. 11357
US – Tuna II (Mexico)
(Article 21.5 – Mexico)
Appellate Body Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the
DSU by Mexico , WT/DS381/AB/RW and Add.1, adopted 3 December 2015,
DSR 2015:X, p. 5133
US – Tuna II (Mexico)
(Article 21.5 – US) /
US – Tuna II (Mexico)
(Article 21.5 – Mexico II)
Panel Reports, United States – Measures Concerning the Importation, Marketing
and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the DSU by
the United States , WT/DS381/RW/USA and Add.1 / United States – Measures
Concerning the Importation, Marketing and Sale of Tuna and Tuna Products –
Second Recourse to Article 21.5 of the DSU by Mexico , WT/DS381/RW2 and
Add.1, adopted 11 January 2019, as upheld by Appellate Body Report
WT/DS381/AB/RW/USA / WT/DS381/AB/RW2
US – Tuna II (Mexico)
(Article 21.5 – US) /
US – Tuna II (Mexico)
(Article 21.5 – Mexico II)
Appellate Body Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the
DSU by the United States, WT/DS381/AB/RW/USA and Add.1 / United States –
Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna
Products – Second Recourse to Article 21.5 of the DSU by Mexico ,
WT/DS381/AB/RW2 and Add.1, adopted 11 January 2019
US – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton ,
WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, p. 3
US – Upland Cotton
(Article 21.5 – Brazil)
Panel Report, United States – Subsidies on Upland Cotton – Recourse to
Article 21.5 of t he DSU by Brazil , WT/DS267/RW and Corr.1, adopted
20 June 2008, as modifie d by Appellate Body Report WT/DS267/AB/RW,
DSR 2008:III, p. 997
US – Upland Cotton
(Article 21.5 – Brazil)
Appellate Body Report, United States – Subsidies on Upland Cotton – Recourse
to Article 21.5 of the DSU by Brazil, WT/DS267/AB/RW, adopted 20 June 2008,
DSR 2008:III, p. 809
US – Zeroing (EC)
(Article 21.5 – EC)
Appellate Body Report, United States – Laws, Regulations and Methodology for
Calculating Dumping Margins ("Zeroing") – Recourse to Article 21.5 of the DSU
by the European Communities , WT/DS294/AB/RW and Corr.1, adopted
11 June 2009, DSR 2009:VII, p. 2911
US – Zeroing (Japan)
(Article 21.5 – Japan)
Appellate Body Report, United States – Measures Relating to Zeroing and Sunset
Reviews – Recourse to Article 21.5 of the DSU by Japan , WT/DS322/AB/RW,
adopted 31 August 2009, DSR 2009:VIII, p. 3441

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EXHIBITS REFERRED TO IN THIS REPORT
Exhibit No. Short Title Title
EU-7 (BCI) BEIS Letter to Airbus, [***] Department of Business, Energy & Industrial
Strategy letter to Airbus, [***]
EU-8 (BCI) BEIS Invoice to Airbus, [***] Department of Business, Energy & Industrial
Strategy invoice to Airbus, [***]
EU-9 (BCI)
(English
translation)
German A350XWB [***] amendment [***] Addendum to the Loan Agreement dated
[***] between KfW and Airbus Operations GmbH,

EU-10
(HSBI/BCI)
(English
translation)
German A350XWB LA/MSF Agreement German Loan Agreement between KfW and Airbus
Operations GmbH and Airbus S.A.S, Toulouse,

EU-11
(HSBI/BCI)
TradeRx A350XWB LA/MSF Report Professor Klasen Report, "Market Consistency of
the [***] Amendment to German MSF
Agreement", 8 October 2018
EU-12 (BCI) French A380 LA/MSF Agreement Protocole d'Accord entre l'Etat et Airbus France,

EU-13 (BCI) - Convention no [***]81035002277545, [***]
EU-14 (BCI)
(English
translation)
German A380 LA/MSF Agreement MSF Agreement for the A380, Germany, [***]
(English translation)
Ciencia y Tecnología y la empresa EADS Airbus
la familia de aviones Airbus A-380, [***]
EU-16 (BCI) UK A380 LA/MSF Agreement Agreement between the Secretary of State for
Trade and Industry, BAE Systems (Operations)
Limited and British Aerospace public limited
company for the provision of launch investment of
the A380, [***]
EU-17
(HSBI/BCI)
PwC A380 LA/MSF Report PwC Report, "Review of Negotiated Restructurings
of A380 MSF Loan Agreements", 8 October 2018
EU-18 (HSBI) - Minutes of a meeting of the board of directors of
Airbus SE, [***]
EU-19 (BCI) - Declaration by [***], 4 October 2018
EU-20
(HSBI/BCI)
(English
translation)
[***] German A380 LA/MSF
Amendment
German [***] Addendum to the Loan Agreement
of [***] (English translation)
EU-21 (BCI) [***] French A380 LA/MSF Amendment Avenant [***] au protocole d'accord entre l'Etat
et Airbus Operations S.A.S. relatif au programme
Airbus A380 (Annexe 2 à la convention Airbus
A380 no [***] 81 035, notifiée le [***]), [***]
EU-22 (BCI) [***] UK A380 Amendment Deed of amendment in relation to the agreement
for launch investment in Airbus A380, [***]
Amendment
[***] addenda al convenio de colaboración entre
empresa EADS Airbus S.L. relativo a la
financiación de la participación de dicha empresa
Airbus A380, [***]
EU-24
(HSBI/BCI)
TradeRx Report on Expected Life of
LA/MSF
Professor Klasen, "Expected Life of MSF Subsidies
for the A380 and A350XWB Programmes",
8 October 2018
EU-28 (BCI) [***] UK A350XWB LA/MSF Agreement Repayable investment agreement between the
Secretary for Business, Innovation and Skills and
Airbus Operations Limited [***] in relation to the
Airbus A350XWB, [***]
EU-30 (HSBI) - Annual Continuing Support and Continuing
Development for the A350XWB (2013-2018),
Proprietary Information Extracted from Airbus'
Accounts
EU-40, USA-47 Wessels Report Professor David Wessels "Assessing Airbus'
Capacity to Fund Large Scale Projects Without
LA/MSF", (Oct. 17, 2012); submitted in the
first compliance proceeding as USA-364

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Exhibit No. Short Title Title
EU-43 - "One Journey: One Team – Interview with Tom
Enders", Airbus Annual Review 2014
EU-45 - EADS, "Financial Statements and Corporate
Governance", 2006
EU-53 (HSBI) - Annual Continuing Support and Continuing
Development for the A380 (2013-2018),
Proprietary Information Extracted from Airbus'
Accounts
EU-78 (HSBI) - A380 Business Case
EU-81 (BCI) Excerpts from Airbus accounting system
in relation to the A350XWB UK loan
Excerpts from Airbus' accounting system in
relation to the A350XWB MSF loan
EU-86 (BCI) PwC Response Report PwC, "Response on U.S. Submission from
December 19, 2018 regarding i.e. PwC's 'Review
of Negotiated Restructuring of A380 MSF Loan
Agreements'", 25 January 2019
EU-89 (HSBI) Letter from [***] Letter from [***]
EU-90 - Reuters, "Airbus may cut A380 production to
six planes a year: sources", 11 December 2017
EU-92
(HSBI/BCI)
Airbus Counterfactual Launch Statement Statement by [***], 4 November 2018
EU-94 (BCI) - Airbus, "Status of A380 orders and deliveries"
EU-99 (BCI) - Airbus, "Timing of remaining Emirates A380
deliveries"
EU-101 (BCI) - [***]
EU-102 (BCI) - Letter from [***]
EU-105 (BCI) KPMG Assessment of [***] KPMG Report, Assessment of [***], 28 May 2019
EU-106 (BCI)
(English
translation)
- Email from [***], 20 March 2015
EU-113 (BCI) [***] [***]
EU-114 (BCI) - [***]
EU-115 (BCI) - Email from [***] to Airbus, 8 August 2019
USA-1 Airbus SE Special Earnings Call January
2018
Fair Disclosure Wire, "Full Year 2017 Airbus SE
Commercial Aircraft Orders and Deliveries Call –
Final", (15 January 2018)
USA-3 Airbus SE Special Earnings Call February
2018
Fair Disclosure Wire, "Full Year 2017 Airbus SE
Earnings Call", (15 February 2018)
USA-5 - Emirates press release, "Emirates welcomes 100th
A380 to its fleet", (2 November 2017)
USA-8
(HSBI/BCI)
NERA A380 LA/MSF Report Effects of the [***] Amendment of German
NERA (19 December 2018)
USA-9 Airbus Annual Report, 2017 Annual Report 2017, Connecting the skies, Airbus
USA-16 - FlightGlobal, "Airbus assures on A380 break-even
this year, David Kaminski-Morrow",
(27 February 2015)
USA-26
(HSBI/BCI)
NERA German A350XWB LA/MSF Report NERA A350 XWB Report
USA-36 - EFFICOMP Project, CORDIS website
USA-37 - LPA GAM 2018 Project, CORDIS website
USA-38 - Aerostructures Manufacturer, Graphene Flagship
website
USA-49 Airbus Orders & Deliveries Data Airbus Orders & Deliveries Data (Nov. 2018)
USA-50 - A330 Family, Airbus website
USA-51 Airbus A330neo Presentation The A330neo: Powering into the future, John
Leahy, Airbus presentation
USA-53 - Airbus press release, "Airbus launches the
A330neo", (14 July 2014)
USA-54 - Airbus press release, "AirAsia X orders 34 more
A330neo", (19 July 2018)
USA-55 - Airbus website, "A330-900"
USA-78 - Airbus website, "A330-800"
USA-119 Clean Sky 2 Joint Undertaking: Work
Plan 2018-2019
Clean Sky 2 Joint Undertaking: Work Plan 2018-
2019 (October 2018)
USA-126 - Boeing press release, "Boeing Delivers First
Lufthansa 747-8 Intercontinental", (25 April 2012)
USA-128 - Airbus press release, "Amedeo Firms Up Order for
20 A380s", (12 February 2014)

BCI deleted, as indicated [***]

Exhibit No. Short Title Title
USA-129 - AIN online, "Singapore Order Tally Grows to
USD 30 Billion", (12 February 2014)
USA-130 - Airbus press release, "ANA Group Selects the
A380", (29 January 2018)
USA-138 Ascend data Ascend aircraft database
USA-143 - Airbus press release, "Virgin Atlantic Selects the
A350 XWB as its Future Flagship", (11 July 2016)
USA-144 - Airways, "First Virgin Atlantic A350-1000 Spotted
in Toulouse (+photo)", (25 October 2018)
USA-149 Clean Sky 2 Joint Undertaking: Work
Plan 2014-2015
Clean Sky 2 Joint Undertaking: Work Plan 2014-
2015 (July 2014)
USA-153 Boeing CMO 2015-2034 Boeing Current Market Outlook 2015-2034
USA-158 Updated Ascend data Updated Ascend aircraft database
USA-173
(HSBI/BCI)
Report
Third NERA Report on German A350 XWB LA/MSF

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ABBREVIATIONS USED IN THIS REPORT
Abbreviation Description
A320ceo Airbus A320 "current engine option" aircraft
A320neo Airbus A320 "new engine option" aircraft
A350XWB Airbus A350 "eXtra widebody" aircraft
A380 Airbus A380 aircraft
ANA All Nippon Airways
BCI business confidential information
BEIS UK Department of Business, Energy & Industrial Strategy
CEO Chief Executive Officer
CORDIS Community Research and Development Information Service
CMO current market outlook
DSB Dispute Settlement Body
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes
EADS European Aeronautic Defence and Space Company
EC European Communities
EFFICOMP Efficient Composite parts manufacturing programme
EUR Euro
GATT 1994 General Agreement on Tariffs and Trade 1994
GBP British pound
GmbH Gesellschaft mit beschränkter Haftung
HSBI highly sensitive business information
IRR internal rate of return
KfW Kreditanstalt Für Wiederaufbau
LA/MSF Launch Aid/Member State Financing
LCA large civil aircraft
LPA large passenger aircraft
LuFo Luftfahrtforschungsprogramm (Aviation Research Programme)
NERA National Economics Research Associates
NPV net present value
PROFIT Programa de Fomento de la Investigación Técnica (Funding Programme for
Technological Research)
PwC PricewaterhouseCoopers
R&TD Research and Technological Development
RSP risk-sharing partner
RSS risk-sharing supplier
SCM Agreement Agreement on Subsidies and Countervailing Measures
TRL Technology readiness level
UK United Kingdom
US United States
USD United States Dollar
VLA very large aircraft
WTO World Trade Organization

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1 INTRODUCTION
1.1 Prior proceedings in DS316
This is the second recourse to Article 21.5 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (DSU) concerning the alleged failure by the European Union
to comply with the Dispute Settlement Body's (DSB) recommendations and rulings in the original
proceeding in EC and Certain member States – Measures Affecting Trade in Large Civil Aircraft.
On 1 June 2011, the DSB adopted the Appellate Body report, and the panel report as modified
by the Appellate Body report, in EC and Certain member States – Measures Affecting Trade in Large
Civil Aircraft. The DSB's recommendations called upon the European Union to secure compliance
with its WTO obligations in respect of "launch aid" or "member State financing" (LA/MSF) for the
A300, A310, A320, A330, A330-200, A340, A340-500/600, and A380 models of large civil aircraft
(LCA). The recommendations and rulings also covered certain infrastructure measures, equity
infusions and regional development grants.
On 1 December 2011, the European Union informed the DSB of the steps taken to implement
the DSB's recommendations.1 The United States disagreed with the European Union regarding the
sufficiency of the compliance steps communicated by the European Union to the DSB. Following
consultations, and at the request of the United States, on 13 April 2012, the DSB referred the parties'
disagreement to a compliance panel established under Article 21.5 of the DSU.
On 28 May 2018, the DSB adopted the reports of the panel and the Appellate Body in the
first compliance proceeding. The compliance panel report, as modified by the Appellate Body report,
found that the European Union had failed to comply with the DSB recommendations and rulings in
connection with LA/MSF for the A350XWB2 and the A380 models of LCA.
Prior to the adoption of the panel and the Appellate Body reports in the first compliance
proceeding, the European Union notified the DSB on 17 May 2018 of the adoption of a series of
additional measures, which the European Union considered to have brought the European Union into
full substantive compliance with the DSB's recommendations and rulings. At the meeting of the DSB
on 28 May 2019, the United States again expressed its disagreement that the European Union had
achieved full substantive compliance with the DSB's recommendations and rulings.3
1.2 Complaint by the European Union
Request for consultations
On 29 May 2018, the European Union4 requested consultations with the United States pursuant
to Articles 4 and 21.5 of the DSU, Article XXIII:1 of the General Agreement on Tariffs and Trade 1994
(GATT 1994), and Articles 7.1 and 30 of the Agreement on Subsidies and Countervailing Measures
(SCM Agreement). 5 The European Union indicated that its request was made with respect to a
"disagreement", under Article 21.5 of the DSU, "as to the existence or consistency with a covered
agreement of measures taken to comply with the recommendations and rulings" of the DSB in
EC and Certain member States – Measures Affecting Trade in Large Civil Aircraft.6
The European Union and the United States held consultations on 27 June 2018 , but the
consultations failed to resolve the dispute.

1 Communication from the European Union, WT/DS316/17.
2 The A350XWB was launched after the initiation of the original panel proceeding.
3 DSB, Minutes of the meeting held on 28 May 2018, WT/DSB/M/413.
4 The European Union replaced and succeeded the European Communities as of 1 December 2009.
Unless the context otherwise requires, references in this report to the European Union include the "certain
member States" (France, Germany, Spain and the United Kingdom of Great Britain and Northern Ireland
("United Kingdom" or "UK")) against which the United States commenced the original dispute.
5 Request for consultations by the European Union, WT/DS316/36 (European Union's request for
consultations).
6 European Union's request for consultations.

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Panel establishment and composition
On 31 July 2018 , the European Union requested the establishment of a panel pursuant to
Article 21.5 of the DSU with standard terms of reference. 7 At its meeting on 27 August 2018, the
DSB agreed, pursuant to Article 21.5 of the DSU, to refer the dispute to the original panel, if
possible.8
The Panel's terms of reference are the following:
To examine, in the light of the relevant provisions of the covered agreements cited by
the parties to the dispute, the matter referred to the DSB by the European Union and
certain member States in document WT/DS316/39 and to make such findings as will
assist the DSB in making the recommendations or in giving the rulings provided for in
those agreements.
On 17 September 2018, the European Union requested the Director-General to determine the
composition of the Panel, pursuant to Article 8.7 of the DSU, read together with Article 21.5 of the
DSU.
In accordance with these provisions and given the unavailability of two members of the
original panel, the Panel was composed on 28 September 2018 as follows9:
Chairman: Mr Hugo Cayrús

Members: Mr Christian Etter
 Mr Thinus Jacobsz

Australia, Brazil, Canada 10, China, India, Japan and the Russian Federation notified their
interest in participating in the Panel proceedings as third parties.
1.3 Panel proceedings
General
The Panel held an organizational meeting with the parties on 19 October 2018.
After consulting the parties, the Panel adopted its Working Procedures 11 and timetable on
23 October 2018. The Panel made various modifications to its timetable throughout the proceeding.
On 16 September 2019, the Panel informed the parties of the expected date of the issuance of the
Interim Report.
The European Union and the United States filed their first written submissions on
26 October 2018 and 19 December 2018, respectively. Third parties filed their written submissions
on 11 January 2019. The second written submissions of the European Unio n and the United States
were filed on 28 January 2019 and 21 March 2019, respectively.
The Panel held one substantive meeting with the parties on 7-8 May 2019. A session with the
third parties took place on 8 May 2019. At the request of the parties, the P anel's meeting with the
parties was opened to the public by means of a delayed video showing. A portion of the Panel's
meeting with the third parties was also opened to the public by means of a delayed video showing.12

7 EC and certain member States – Large Civil Aircraft, Recourse to Article 21.5 of the DSU by the
European Union: Request for the establishment of a panel, WT/DS316/39, (European Union's panel request).
8 DSB, Minutes of the meeting held on 27 August 2018, WT/DSB/M/417.
9 Constitution note of the Panel related to European Union's recourse to Article 21.5 of the DSU,
WT/DS316/40 and WT/DS316/40/Rev.1.
10 See section 1.3.3 below, discussing Canada's request to participate in the proceeding as a third party.
11 The Panel's Working Procedures are attached in Annex A-1.
12 See Additional Working Procedures on Open Panel Meetings in Annex A-2. Brazil, Canada and Japan
consented to having their statements videotaped for delayed showing. China, India and the Russian Federation
did not make any statement.

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The Panel posed questions to the parties and third parties on 10 May 2019.
On 10 September 2019 , the Panel issued the descriptive part of its Report to the parties.
The Panel issued its Interim Report to the parties on 17 October 2019 . The Panel issued its
Final Report to the parties on 25 November 2019.
Protection of Business Confidential Information and Highly Sensitive Business
Information
Before the organisational meeting, the European Union sent a letter to the Panel asking the
Panel to adopt additional procedures for the protection of confidential and highly sensitive business
information. After consulting the parties, the Panel adopted the Additional Procedures to Protect
Business Confidential Information and Highly Sensitive Business Information (BCI/HSBI Procedures)
on 23 October 2018.13
Canada's request to participate in the proceeding as a third party
On 30 November 2018, Canada sent a letter to the Chairman of the Panel, the parties and
the Chair of the DSB, requesting the Panel's authorization to participate in these compliance
proceedings as a third party.14 In its letter, Canada submitted that it had omitted to notify the DSB
of its third-party interest due to internal coordination issues.15 Canada further submitted that it had
a "substantial interest" in the present d ispute in light of Canada's participation as the responding
party in Canada – Measures Concerning Trade in Commercial Aircraft.16 Canada also submitted that
it would not be unprecedented for the Panel to accept its request, nor would it interfere with the due
process rights of the parties to the proceeding.17
The Panel asked the parties and third parties to comment on Canada's request, considering
that Canada made its request more than three months after the Panel was established on
27 August 2018. The Europe an Union indicated it has no objection to Canada's request. 18
The United States also agreed with Canada's request. 19 Third parties provided no comments on
Canada's request.
On 7 December 2018, the Panel informed the parties and third parties that it had deci ded to
accept Canada's request. In reaching i t decision, the Panel carefully considered the relevant
provisions of the DSU and the relevant practice concerning third-party notifications made after panel
composition. The Panel also considered that Canada's incorporation to the proceeding would not
disturb the development of the proceeding and would not impair the due process rights of the parties,
who had, in fact, expressed no objections on Canada's request.
Preliminary ruling on the Panel's terms of reference
On 21 December 2018, following the United States' issuance of its first written submission,
the European Union requested the Panel to rule that the United States' claims in relation to certain
European research and technological development (R&TD) meas ures are not within or properly
within the scope of this compliance proceeding. The European Union asked "the Panel, urgently and
on a preliminary basis, to find that the United States' claims in relation to the R&TD measures are
not properly within the scope of the Panel's terms of reference".20

13 The BCI/HSBI Procedures were subsequently revised several times. The final version is attached in
Annex A-3.
14 Canada's communication (30 November 2018).
15 Specifically, Canada submitted that unexpected staff changes at Canada's Permanent Mission to the
WTO in August 2018, coupled with miscommunications between Canada's Geneva- and capital-based officials,
resulted in Canada not notifying its third-party interest at the DSB meeting in which the Panel was established
or during the ten-day notification period following that meeting. (Canada's letter dated 30 November 2018).
16 Canada's communication (30 November 2018).
17 Canada's communication (30 November 2018).
18 European Union's communication (30 November 2018).
19 United States' communication (4 December 2018).
20 European Union's request for a preliminary ruling, para. 1.

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After seeking the views of the United States, the Panel decided on 11 January 2019 to deny
the European Union's request for a preliminary ruling , finding that the mere fact that the R&TD
measures are not specifically identified in the European Union's panel request should not preclude
the Panel from considering the United States' arguments related to the R&TD measures . The Panel
indicated that its decision to deny the European Union's request for a preliminary ruling and consider
the United States' arguments concerning the R&TD measures was without prejudice to either party's
right to advance further arguments regarding whether the United States is otherwise precluded from
raising claims concerning those measures, or regarding the merits of the United States' claims .
Accordingly, the Panel invited the parties to address the matters related to these measures in their
submissions to the Panel.21
The Panel's findings and underlying reasoning in relation to the European Union's preliminary
ruling request are set out in section 7.3 below.
Request to file an addition al submission regarding the future of the A380 LCA
programme
On 25 February 2019, the European Union requested leave to file an additional submission
addressing the implications of Airbus' announcement on 14 February 2019 to wind down the A380
programme an d to complete all deliveries by 2021. 22 The European Union argued that Airbus'
announcement has a direct bearing on the object of these compliance proceedings. Specifically, the
European Union argued that the announcement is a "relevant fact that provides e vidence of
compliance with the DSB's recommendations and rulings"; "is an event that falls within the terms of
the European Union's Panel Request"; and "is inextricably linked to, and falls within a continuum of,
measures that have explicitly been identified in the EU Panel Request as achieving compliance under
Article 7.8".23 The European Union further argued that it is necessary for the Panel to take this event
into account as part of its mandate of determining whether the European Union has achieved
compliance.24
After seeking the views of the United States, the Panel decided on 28 February 2019 to grant
the European Union's request to file the additional submission regarding Airbus' 14 February 2019
announcement. Taking into account the timing of the Europ ean Union's request, the Panel also
decided to extend the United States' deadline to file its second written submission by two weeks to
ensure that the United States had an adequate opportunity to address the European Union's
additional submission.25
Request relating to the United States' comments
On 12 July 2019, the European Union requested the Panel to issue a ruling rejecting as
"untimely filed" certain arguments and evidence contained in the United States' comments on the
European Union's responses to the Panel's questions following the substantive meeting .26 The
European Union requested the Panel to either: (i) reject as "untimely filed" certain new arguments
and evidence; or alternatively, (ii) afford the European Union an opportunity to comment on the
alleged new arguments and evidence, if the Panel were to decline to reject those arguments and
evidence as untimely filed.27 The European Union additionally requested the Panel to deny various
United States requests to pose unnecessary additional questions to the European Union, and further
deny what the European Union considers to be an assertion made by the United States that the
European Union did not engage in good faith in the first compliance proceedings. 28 The

21 Panel communication to the parties regarding the European Union's preliminary ruling request
(11 January 2019).
22 European Union's communication (25 February 2019).
23 European Union's communication (25 February 2019), p. 2.
24 European Union's communication (25 February 2019), p. 3. The European Union further argued that
granting the European Union leave to file a submission concerning the A380 programme wind-down does not
undermine the due process rights of the United States or third parties. (European Union's communication
(25 February 2019), p. 3).
25 Panel communication to the parties regarding the United States' request to extend filing deadline
(28 February 2019).
26 European Union's communication (12 July 2019).
27 European Union's communication (12 July 2019), pp. 5-7.
28 European Union's communication (12 July 2019), pp. 7-11.

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European Union argued that the United States ' belated and untimely filing of new arguments and
evidence, as well as its invitation to the Panel to pose additional questions to the European Union,
appear designed to prolong the proceeding, and raised serious due process concerns.29
On 5 August 2019, the Panel declined the European Union's request to reject the
United States' arguments and evidence but decided to provide the European Union an opportunity
to comment on certain of the arguments and evidence that the European Union had id entified. The
Panel additionally declined the European Union's request to deny any United States requests to pose
additional questions to the European Union. The Panel did not consider it necessary to address the
European Union's request concerning whether the European Union engaged in good faith in the
first compliance proceeding.
The Panel's findings and underlying reasoning in relation to the European Union's ruling
request are set out in Annex D-1 of this Report.
2 FACTUAL ASPECTS
2.1 Product at issue
The product at issue in this dispute is the same as the product that was the subject of the
original proceeding and the first compliance proceeding, i.e. LCA, as distinguished from smaller
(regional) aircraft and military aircraft. LCA can generally be described as large (weighing
over 15,000 kg) "tube and wing" aircraft, with turbofan eng ines carried under low -set wings,
designed for subsonic flight. LCA are designed for transporting 100 or more passengers and/or a
proportionate amount of cargo across a range of distances serviced by airlines and air freight
carriers. LCA are covered by ta riff classification heading 8802.40 of the Harmonized System
("Airplanes and other aircraft, of an unladen weight exceeding 15,000 kg").30
2.2 Measures at issue
On 17 May 2018 , the European Union filed a communication informing the DSB that the
European Union has adopted a series of additional measures to comply that, in the European Union's
view, constitute "appropriate steps to address the remaining and additional elements of the DSB's
recommendations and rulings, either through the withdrawal of subsidies or the removal of the
adverse effects".31 Those measures are discussed in further detail in section 7.2 below.
3 PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
 The European Union requests that the Panel find that the European Union and certain member
States have achieved full substantive compliance with the recommendations and rulings of the DSB,
within the meaning of Article 7.8 of the SCM Agreement. Specifically, the European Union submits
that it has withdrawn the A380-related LA/MSF subsidies and the German and UK LA/MSF subsidies
for the A350XWB. In the event that the Panel finds that these subsidies have not been withdrawn,
the European Union submits that appropriate steps have been taken to remove their adverse effects.
Additionally, the European Union submits that it has taken appropriate steps to remove the adverse
effects of the French and Spanish A350XWB LA/MSF subsides.32
The United States requests that the Pan el reject the entirety of the European Union's claims
that the European Union has brought its measures "into full compliance with its WTO obligations".33

29 European Union's communication (12 July 2019), p. 2.
30 Panel Report, EC and certain member States – Large Civil Aircraft, para. 2.1.
31 Communication by the European Union, WT/DS316/34 (Compliance communication), para. 12.
32 European Union's first written submission, para. 405; and second written submission, para. 554.
33 United States' first written submission, para. 305; and second written submission, para. 360.

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4 ARGUMENTS OF THE PARTIES
The arguments of the parties are reflected in their executive summaries, provided to the Panel
in accordance with paragraph 22 of the Working Procedures adopted by the Panel (see Annexes B-1
and B-2).
5 ARGUMENTS OF THE THIRD PARTIES
The arguments of Brazil, Canada and Japan are reflected in their executive summaries,
provided in accordance with paragraph 22 of the Working Procedures adopted by the Panel
(see Annexes C-1, C-2 and C-3). Australia, China, India and the Russian Federation did not submit
written or oral arguments to the Panel.
6 INTERIM REVIEW
On 17 October 2019, the Panel issued its Interim Report to the parties. On 31 October 2019,
the European Union and the United States submitted their written requests for review.
On 14 November 2019, the parties submitted comments on the other parties' written requests for
review.
The parties' requests made at the interim review stage as well as the Panel's discussion and
disposition of those requests are set out in Annex A-4.
7 FINDINGS
7.1 Introduction
Procedural background
This proceeding represents the second occasion on which a Panel has been established under
Article 21.5 of the DSU to rule on whether the European Union has achieved compliance with the
DSB's adopted recommendations and rulings in EC and certain member States – Large Civil Aircraft.
7.1.1.1 Original proceeding
In the original proceeding in this dispute, the United States claimed that the
European Communities and certain of its member States had caused, through the use of specific
subsidies, adverse effects to the United States' interests in the form of serious prejudice under
Articles 5(c) and 6.3 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement).
The original panel found that the United States had demonstrated that the European Communities
and certain member States had caused adverse effects, in the form of certain kinds of serious
prejudice to the United States' interests, within the meaning of Articles 5(c), 6.3(a), (b) and (c) of
the SCM Agreement, through the use of specific subsidies. These findings pertained to the use of
LA/MSF for the A300, A310, A320, A330, A330 -200, A340, A340-500/600, and A380 LCA models;
the use of cert ain challenged equity infusions and infrastructure measures, and research and
technological development (R&TD) funding provided by the European Communities and certain
member States.34 The original panel also concluded that the United States had established that the
German, Spanish and UK A380 LA/MSF agreements constituted prohibited export subsidies within
the meaning of Article 3.1(a) and footnote 4 of the SCM Agreement.35
On appeal, the Appellate Body reversed the original panels' finding that the German, Spanish
and UK A380 LA/MSF agreements constituted prohibited export subsidies within the meaning of
Article 3.1(a) and footnote 4 of the SCM Agreement, and was unable to complete the legal analysis

34 Panel Report, EC and certain member States – Large Civil Aircraft, paras. 7.290(a)(i)-(vii),
7.482-7.496, and 8.1(a)(i) 7.1245-7.1249, 7.1302, 7.1323-7.1326, 7.1380-7.1384, 7.1414, and 8.1(c)
and (d), and 7.1049-7.1053, 7.1097, 7.1100-7.1101, 7.1134, 7.1137-7.1139, 7.1191, 7.1205-7.1211, 7.1244,
and 8.1(b)(i)-(iv).
35 Panel Report, EC and certain member States – Large Civil Aircraft, paras. 7.689 and 8.1(a)(ii).

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with regard to Article 3.1(a).36 The Appellate Body, however, upheld the original panel's conclusion
that the effects of the challenged LA/MSF measures caused serious prejudice to the
United States' interests within the meaning of Article 6.3(a), (b) and (c) of the SCM Agreement. 37
In addition, the Appellate Body upheld the original panel's findings that the effects of the challenged
equity infusions and infrastructure measures "complemented and supplemented" the effects of the
challenged LA/MSF measures38, while reversing the original panel's finding that the R&TD subsidies
"complemented and supplemented" the effects of the LA/MSF measures.39
The Appellate Body report and the report of the original panel, as modified by the
Appellate Body report, were adopted by the DSB on 1 June 2011.40 The DSB recommended that the
European Communities and certain member States comply with the Panel's recommendation
pursuant to Article 7.8 of the SCM Agreement, that "the Member granting each subsidy found to have
resulted in such adverse effects, 'take appropriate steps to remove the adverse effects or … withdraw
the subsidy'".41
First compliance proceeding
Following the adoption of the original panel report and the Appellate Body report, on
1 December 2011, the European Union filed a communication informing the DSB that it had taken
"appropriate steps to bring its measures fully into conformity with its WTO obligations, and to comply
with the DSB's recommendations and rulings".42 On 9 December 2011, the United States requested
to hold consultations with the European Union and the four member States, alleging that the
European Union had failed to comply with the recommendations and rulings of the DSB. 43 On
13 April 2012, the DSB referred the parties' disagreement to a first compliance panel established
under Article 21.5 of the DSU. 44 The first compliance panel circulated its report on
22 September 2016.
The panel in the first compliance proceeding concluded that the United States had failed to
demonstrate that the A380 and A350XWB LA/MSF subsidies are prohibited export and/or prohibited
import substitution subsidies within the meaning of Articles 3.1 and 3.2 of the SCM Agreement.45
The first compliance panel, however, rejected the European Union's argument that the expiration of
the lives of certain subsidies amounted to "withdrawal" o f those subsidies for the purpose of
Article 7.8.46 The first compliance panel concluded that the effects arising from the LA/MSF subsidies
provided for the A300, A310, A320, A330, A330 -200, A340, A340-500/600, A380 and A350XWB,
caused serious prejudice to the United States' interests within the meaning of Article 6.3(a), (b) and

36 Appellate Body Report, EC and certain member States – Large Civil Aircraft, paras. 1414(j)
and 1415(b).
37 Appellate Body Report, EC and certain member States – Large Civil Aircraft, paras. 1414(e)(iv), (l),
(m), (p), and (q).
38 Appellate Body Report, EC and certain member States – Large Civil Aircraft, paras. 1414(g) and (r).
39 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1414(s).
40 DSB, Minutes of the meeting held on 1 June 2011, WT/DSB/M/297.
41 Panel Report, EC and certain member States – Large Civil Aircraft, para. 8.7; Appellate Body Report,
EC and certain member States – Large Civil Aircraft, paras. 1416 and 1418.
42 Communication from the European Union dated 1 December 2011, WT/DS316/17, 5 December 2011,
para. 1. The European Union provided "{i}nformation concerning the steps" it had taken to achieve compliance
in a list containing 36 numbered paragraphs attached to its communication. (Communication from the
European Union dated 1 December 2011, WT/DS316/17, 5 December 2011, para. 3).
43 Communication by the United States, WT/DS316/19 and Corr.1 (Request for Consultations). On
9 December 2011, the United States also requested the DSB to authorise countermeasures against the
European Union in accordance with Article 7.9 of the SCM Agreement and Article 22.2 of the DSU
(WT/DS316/18). At the DSB meeting of 22 December 2011, the European Union objected to the level of
countermeasures proposed by the United States and also claimed that the United States had not followed the
principles and procedures set forth in Article 22.3 of the DSU. As a result, the matter was referred to
arbitration under Article 22.6 of the DSU (WT/DS316/20). On 12 January 2012, the European Union and the
United States concluded an agreement, pursuant to which the parties agreed to request the arbitrator to
suspend its work (WT/DS316/21; WT/DS316/22). Following a request from the United States on 13 July 2018,
the arbitrator agreed to resume its work.
44 Constitution of the panel, WT/DS316/24.
45 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 7.1(c)(ii)
and (iii).
46 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 7.1(d)(viii)-(ix).

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(c) of the SCM Agreement in the single -aisle LCA, twin -aisle LCA and Very Large Aircraft (VLA)
markets.47 By continuing to be in violation of Articles 5(c) and 6.3(a), (b) and (c) of the
SCM Agreement, the first compliance panel concluded that the European Union and certain member
States had failed to comply with the DSB recommendations and rulings.48
The report of the compliance panel was appealed by both parties, and the Appellate B ody
circulated its report on 15 May 2018. The Appellate Body reversed the compliance panel's
interpretation of Article 7.8 of the SCM Agreement, as well as its finding that the European Union's
compliance obligations extended to the LA/MSF subsidies provided for the A300, A310, A320, A330,
A330-200, A340, and A340 -500/600. According to the Appellate Body, no compliance obligation
existed in relation to these LA/MSF subsidies because, in each case, the "lives" of the subsidies had
expired before the end of t he European Union's implementation period - 1 December 2011.49 The
Appellate Body also reversed the compliance panel's findings under Articles 6.3(a), 6.3(b),
and 6.3(c) of the SCM Agreement insofar as they related to the single-aisle LCA market.50 However,
the Appellate Body upheld the compliance panel's conclusions that the European Union and certain
member States had failed to comply with the DSB recommendations and rulings insofar as the "lives"
of the LA/MSF subsidies provided for the A380 and A350XWB ha d not expired, and continued to
cause adverse effects in the twin -aisle LCA and Very Large Aircraft (VLA) markets in the post -
implementation period. 51 The DSB adopted the Appellate Body report and the report of the
compliance panel, as modified by the Appellate Body report, on 28 May 2018.52
Second compliance proceeding
Prior to the DSB's adoption of the reports of the panel and the Appellate Body in the
first compliance proceedings, the European Union informed the DSB on 17 May 2018 that it had
adopted a series of additional measures that, in the European Union's view, constitute "appropriate
steps to address the remaining and additional elements of the DSB's recommendations and rulings,
either through the withdrawal of subsidies or the removal of the adverse effects ".53 In a statement
at the DSB meeting of 28 May 2018, the United States expressed the view that the European Union
had not yet fully complied with the recommendations and rulings of the DSB.54
On 29 May 2018 , the European Union requested consultations with the United States with
respect to their "disagreement", under Article 21.5 of the DSU, "as to the existence or consistency
with a covered agreement of measures taken to comply with the recommendations and rulings" of
the DSB.55 The United States and the European Union held consultations on 27 June 2018, but the
consultations failed to resolve the dispute. On 27 August 2018 , the DSB referred the parties'
disagreement to a second compliance panel established under Article 21.5 of the DSU.56
The Panel's task in this compliance proceeding
The European Union initiated this compliance proceeding in light of its disagreement with the
United States as to whether it has achieved full substantive compliance with the recommendations

47 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 7.1(d)(xiv)-(xvi).
48 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 7.2.
49 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.11(a) and 6.12(a).
50 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.27(a).
51 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.43(a) and (b).
52 Appellate Body Report and Panel Report pursuant to Article 21.5 of the DSU, Action by the Dispute
Settlement Body, WT/DS316/35.
53 Communication from the European Union dated 17 May 2018, WT/DS316/34, para. 12.
54 DSB, Minutes of the meeting held on 28 May 2018, WT/DSB/M/413. ("Based on the US review since
WTO Members had received this communication, the EU document did not reflect new developments that
might somehow resolve this long-standing dispute").
55 European Union's request for consultations.
56 DSB, Minutes of the meeting held on 27 August 2018, WT/DSB/M/417.

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and rulings of the DSB following the adoption of the panel and the Appellate Body reports in the
first compliance proceeding.
As in the first compliance proceeding, our task here is to decide and resolve the dispute
between the parties arising out of their "disagreement as to the existence or consistency with a
covered agreement of measures taken to comply with the recommendations and rulings". We must
evaluate whether the European Union has achieved full, substantive, compliance with the
requirements of Article 7.8 of the SCM Agreement, which defines an implementing
Member's obligation in compliance disputes involving actionable subsidies57 in the following terms:
Where a panel report or an Appellate Body report is adopted in which it is determined
that any subsidy has resulted in adverse effects to the interests of another Member
within the meaning of Article 5, the Member granting or maintaining such subsidy shall
take appropriate steps to remove the adverse effects or shall withdraw the subsidy.
In this proceeding, the European Union asserts that it has taken steps that achieve full
substantive compliance with the DSB's recommendations and rulings. Through these steps, the
European Union argues that it has demonstrated that there are currently no non-withdrawn subsidies
that cause present adverse effects, and thus, it can no longer be demonstrated that the
European Union is causing nullification or impairment to the United S tates or the US LCA industry
that would entitle the United States to adopt countermeasures. 58 Specifically, the European Union
argues that it has withdrawn all of the A380 LA/MSF subsidies and the German and UK A350XWB
LA/MSF subsidies that were found to cause adverse effects in the preceding stages of this dispute ,
thereby achieving full substantive compliance in respect of those subsidies and their adverse effects.
In addition, the European Union argues that it ha s also demonstrated that it has taken steps to
remove any adverse effects of those subsidies and the French and Spanish A350XWB LA/MSF
subsidies. The European Union maintains that it has no compliance obligations with respect to any
other subsidies.
Rather than achieving compliance, the United Stat es argues that the actions taken by the
European Union have exacerbated the European Union's non -compliance. The United States
contends that the European Union has failed to demonstrate the withdrawal of any of the LA/MSF
subsidies covered by the DSB's recommendations and rulings. The United States argues that a series
of amendments to the original A380 LA/MSF agreements and the original German A350XWB LA/MSF
agreement have both increased the amount of the subsidies provided to Airbus and prolonged their
"lives". The United States furthermore argues that the repayment of the UK A350XWB LA/MSF simply
reflects Airbus' fulfilment of the terms of an agreement that was already found to constitute a
WTO-inconsistent subsidy, and not a step that achieves compliance . In addition, the United States
maintains that the European Union has failed to remove the extensive, on-going adverse effects that
the LA/MSF subsidies were found to cause. Finally, the United States submits that the
European Union has maintained and exp anded the use of certain research and technological
development (R&TD) subsidies, which alone or together with the LA/MSF subsidies at issue in this
dispute, continue to cause adverse effects to the United States' interests.
We begin our assessment of the merits of the parties' submissions by reviewing the steps the
European Union alleges have either withdraw n the LA/MSF subsidies or otherwise removed the
adverse effects of any of the LA/MSF subsidies that have not been withdrawn .59 We then turn to
examine the United States' contention that our assessment of the European Union's compliance
must take into account the alleged effects of a series of R&TD measures, which the European Union
maintains are not properly within the scope of this proceeding, before addressing the disagreement
between the parties as to whether the European Union and certain member States have complied
with their obligations under Article 7.8 of the SCM Agreement.

57 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), para. 235.
58 European Union's first written submission, para. 7.
59 Communication from the European Union dated 17 May 2018, WT/DS316/34, p. 3.

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7.2 The European Union's 17 May 2018 compliance communication to the DSB
Introduction
On 17 May 2018 , the European Union informed the DSB that it had adopted a series of
measures, which according to the European Union "achieve the withdrawal of the subsidies at issue,
constitute appropriate steps to remove t heir adverse effects, or both" 60, thereby bringing the
European Union into compliance with the DSB's recommendations and rulings.61
The European Union identified the measures or steps that it allegedly took to achieve
compliance listing 18 numbered items. 62 Certain of the measures or steps took place in close
proximity with the adoption of the recommendations and rulings in the first compliance proceeding;
while others did not, and either pre-dated or post-dated the adoption of the recommendations and
rulings in this dispute, or the European Union's compliance communication of 17 May 2018.
We briefly describe below our understanding of the European Union's compliance measures,
as articulated in the European Union's 17 May 2018 compliance communication to the DSB and
further discussed in the parties' submissions in this dispute. The European Union's asserted
measures or steps taken to achieve compliance are broadly divided into two main categories:
(i) measures alleged to achiev e withdrawal of the A380 and A350XWB LA/MSF subsidies and to
contribute to removal of their adverse effects (section 7.2.2 below); and (ii) measures alleged to
constitute appropriate steps to remove the adverse effects of any non -withdrawn A380 and
Measures alleged to achieve withdrawal of the A380 LA/MSF and A350XWB LA/MSF
subsidies and to contribute to the removal of their adverse effects within the meaning of
Article 7.8 of the SCM Agreement
The [***] amendments to the Fre nch, German, Spanish and UK A380 LA/MSF
agreements (measures 1–4)
The first compliance measures the European Union lists in its 17 May 2018 notification to the
DSB are four amendments made to the original A380 LA/MSF agreements between Airbus and
France, G ermany, Spain and the United Kingdom. The German A380 LA/MSF amendment was
concluded on [***], the French A380 LA/MSF amendment on [***], the UK A380 LA/MSF
amendment on [***], and the Spanish A380 LA/MSF amendment on [***].63 The European Union
argues that these amendments "achieve prospective consistency {of the A380 LA/MSF measures}
with a contemporaneous market benchmark" thereby procuring the "withdrawal of the subsidies
conferred by each of the A380 MSF loans".64
According to the European Union, Airbus and the four member States concluded the four A380
LA/MSF loan amendments at a point in time when Airbus faced faltering demand for the A380 and
needed to make a critical decision as to whether to continue the programme or [***].65 The
European Union submits that the amendments were advantageous to the member State lenders
because failing to do so would mean "the member State lenders would have suffered significant
losses on their MSF investments, given the risk sharing and succ ess-dependent nature of the

60 Communication from the European Union dated 17 May 2018, WT/DS316/34, para. 13.
61 Communication from the European Union dated 17 May 2018, WT/DS316/34, para. 14.
62 Communication from the European Union dated 17 May 2018, WT/DS316/34, para. 15.
The 18 "steps" identified by the European Union are described and explained in more detail below.
63 European Union's first written submission, para. 144; [***] French A380 LA/MSF Amendment,
(Exhibit EU-21 (BCI)); [***] German A380 LA/MSF Amendment, (Exhibit EU-20 (HSBI/BCI) (English
translation)); [***] Spanish A380 LA/MSF Amendment, (Exhibit EU-23 (BCI)); and [***] UK A380 LA/MSF
Amendment, (Exhibit EU-22 (BCI)).
64 Communication from the European Union dated 17 May 2018, WT/DS316/34, para. 19.
65 European Union's first written submission, paras. 128-129 and 142; PwC A380 LA/MSF Report,
(Exhibit EU-17 (HSBI/BCI)), Section C.II; and Minutes of a meeting of the board of directors of Airbus SE,
[***], (Exhibit EU-18 (HSBI)), p. 2.

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A380 MSF loans".66 Thus, in the view of the European Union, the amendments would "enable the
lenders to salvage their investments".67
The four A380 LA/MSF amendments are discussed in further detail in section 7.4.5.1.2.1
below. While the terms of the amendments differ, a core feature of each amendment [***]. In this
respect, the European Union explains that the amendments are designed to ensure that Airbus would
receive [***].68 In particular, Emirates Airlines had been the main A380 customer and considered
ordering additional A380 aircraft [***].69
The United States submits that the [***] amendments represent nothing more than "Airbus'
successful attempt to shift from itself to the funding governments the mounting costs of keeping the
A380 program{me} alive" following " many years of lower -than-anticipated demand for the A380,
as well as massive problems pertaining to production and supply chain".70 Rather than achieving the
withdrawal of the subsidies, the United States argues that the amendments "increased the projected
amounts of the subsidies and prolonged their lives" 71, and the refore, "{i}n agreeing to these
amendments, the Airbus governments conformed to their decades-old pattern of propping up Airbus'
risky LCA ventures with massive subsidies".72 Accordingly, the United States argues that the [***]
amendments fail to bring the European Union into compliance with the DSB's recommendations and
rulings in respect of the A380 LA/MSF subsidies.
The [***] amendment to the German A350XWB LA/MSF agreement (measure 5)
The European Union identifies a [***] amendment to the German A350XWB LA/MSF
Agreement as one of the compliance steps. According to the European Union , this amendment
ensures that the German A350XWB LA/MSF contract is consistent "with a contemporaneous market
benchmark, such that the subsidy conferred by German A350XWB MSF is withdrawn".73
Airbus and Kreditanstalt für Wiederaufbau (KfW) signed the original German A350XWB LAMSF
agreement on [***]. Under the loan agreement, Airbus was entitled to draw-down [***] for the
purpose of funding a portion of the development costs related to the Airbus A350XWB.74 Airbus drew
[***]. Airbus drew-down [***].75 On [***], Airbus and KfW agreed to amend the original loan
agreement.76 The preamble to the amendment states that Airbus had " asked KfW to [***] the
arrangements it had entered into in order to [***] on the loan tranches, and to provide {Airbus}
with new [***] for these [***]".77 The preamble also states that " [***]".78 Overall, the
European Union submits that the [***] amendment retains the basic s tructure of the original

66 European Union's first written submission, para. 140; PwC A380 LA/MSF Report, (Exhibit EU-17
(HSBI/BCI)), Section F.II, Table 15; Minutes of a meeting of the board of directors of Airbus SE, [***],
(Exhibit EU-18 (HSBI)), p. 4 item (A).
67 European Union's first written submission, para. 129; PwC A380 LA/MSF Report, (Exhibit EU-17
(HSBI/BCI)), Section F.II, Table 15; Minutes of a meeting of the board of directors of Airbus SE, [***],
(Exhibit EU-18 (HSBI)), p. 4 item (A). The European Union submits that only the [***] would avoid any losses
from programme termination because, [***]. (See [***]; PwC A380 LA/MSF Report, (Exhibit EU-17
(HSBI/BCI)), [***]).
68 European Union's first written submission, para. 128, PwC A380 LA/MSF Report, (Exhibit EU-17
(HSBI/BCI)), Section C.II.
69 European Union's first written submission, para. 129; Minutes of a meeting of the board of directors
of Airbus SE, [***], (Exhibit EU-18 (HSBI)); and PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)),
para. 39.
70 United States' first written submission, para. 25.
71 United States' first written submission, para. 41.
72 United States' first written submission, para. 27.
73 Communication from the European Union dated 17 May 2018, WT/DS316/34, para. 21.
74 German A350XWB LA/MSF Agreement, (Exhibit EU-10 (HSBI/BCI) (English translation)), Clause 3.2;
and Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.237.
75 In [***], Airbus and KfW agreed to a [***] to the original agreement, which introduced changes to
the disbursement schedule, [***]. (Email from [***], 20 March 2015, (Exhibit EU-106 (BCI) (English
translation)); and TradeRx A350XWB LA/MSF Report, (Exhibit EU-11 (HSBI/BCI)), para. 35).
76 German A350XWB [***] amendment, (Exhibit EU-9 (BCI) (English translation)). [***]. (See KPMG
Assessment of [***], (Exhibit EU-105 (BCI)), p. 5).
77 German A350XWB [***] amendment, (Exhibit EU-9 (BCI) (English translation)), preamble.
78 German A350XWB [***] amendment, (Exhibit EU-9 (BCI) (English translation)), preamble.

BCI deleted, as indicated [***]

A350XWB LA/MSF loan by continuing to provide for (a) [***]79; (b) repayments of principal over
deliveries of A350XWB aircraft80; (c) [***]81, and (d) [***].82
The United States submits that , like the [***] A380 LA/MSF amendments, the [***]
amendment to German LA/MSF for the A350XWB "increased the pre -existing LA/MSF subsidy and
prolonged its life", which "made Airbus better off financially than it otherwise would have been". 83
Accordingly, the United States argues that the amendment took the European Union further out of
compliance with the DSB's recommendations and rulings from the first compliance proceeding.
Repayment of outstanding UK A350XWB LA/MSF in 2018 (measure 6)
The European Union asserts that on [***], Airbus repaid the full outstanding principal and
interest accrued under the UK A350XWB LA/MSF loan contract, such that the subsidy conferred by
UK A350XWB LA/MSF has been withdrawn. 84 Specifically, the European Union refers to a payment
of [***] made to the UK Department of Business, Energy & Industrial Strategy (BEIS) on [***].85
The United States does not dispute that Airbus made the specified payment on [***]. The
United States dispute s, however, that this payment amounts to [***].86 Furthermore, the
United States argues that repaying a subsidised loan on its own subsided terms does not result in
withdrawal for purposes of Article 7.8 of the SCM Agreement, in line with findings by the first
compliance panel.87 Accordingly, the United States considers that the European Union has failed to
achieve compliance with the DSB's recommendations and rulings in respect of UK A350XWB LA/MSF.
Withdrawal, through amortisation of the "benefit" conferred by the A380 and
The European Union also refers to the amortisation of the "benefit" conferred by the A380
LA/MSF agreements and A350XWB LA/MSF agreements in its 17 May 2018 compliance notification.89
In the course of this proceeding, the European Union submitted an analysis conducted by TradeRx
GmbH of the expected life of the A380 LA/MSF and A350XWB LA/MSF subsidies found to have been
conferred by the original panel and the first compliance panel. Consistent with the approach taken
by TradeRx, in its submissions to the Panel, the European Union argues that the full amortization of
the benefit under the Spanish A380 LA/MSF loan will occur by [***], thereby achieving the
withdrawal for purposes of Article 7.8 and bringing the European Union into compliance with respect
to that subsidy. 90 The European Union does not argue that any of the other A380 LA/MSF or
A350XWB LA/MSF subsidies have been withdrawn through full amortization of benefit.
The United States has criticized the European Union's reliance on the TradeRx report and the
approach followed in that report. The United States thus disagrees that the TradeRx analysis can
provide a basis for finding that any of the LA/MSF loans have been withdrawn for purposes of

79 German A350XWB [***] amendment, (Exhibit EU-9 (BCI) (English translation)), para. 36.
80 German A350XWB [***] amendment, (Exhibit EU-9 (BCI) (English translation)), Annex 2; and
81 German A350XWB [***] amendment, (Exhibit EU-9 (BCI) (English translation)), Clause 4; and
82 German A350XWB [***] amendment, (Exhibit EU-9 (BCI) (English translation)); and TradeRx
83 United States' first written submission, para. 87.
84 Communication from the European Union dated 17 May 2018, WT/DS316/34, para. 22. See also
European Union's first written submission, paras. 86-89; and second written submission, paras. 59-72.
85 European Union's first written submission, para. 88; BEIS Invoice to Airbus, [***], (Exhibit EU-8
(BCI)); and BEIS Letter to Airbus, [***], (Exhibit EU-7 (BCI)).
86 United States' response to Panel question No. 18, para. 47.
87 United States' first written submission, para. 101.
88 In the "List of Measures Taken To Comply" in paragraph 15 of the European Union's compliance
notification, the European Union refers to the withdrawal, through amortisation or otherwise, of the 'benefit'
conferred by the French, German, Spanish and UK A380 LA/MSF Agreements and A350XWB LA/MSF
Agreements, both in the context of achieving withdrawal of the subsidies and as constituting an appropriate
step to remove adverse effects. (See Communication from the European Union dated 17 May 2018,
WT/DS316/34, paras. 15(A)(vii), 15(A)(viii), 15(B)(ix) and 15(B)(xiv)).
89 Communication from the European Union dated 17 May 2018, WT/DS316/34, paras. 20-23.
90 European Union's first written submission, paras. 177-181.

BCI deleted, as indicated [***]

Article 7.8. In addition, the United States considers that the European Union's argument that Spanish
A380 LA/MSF has been withdrawn fails to take into account that the Spanish government negotiated
to amend the terms and conditions of A380 LA/MSF in [***], which extended the life of Spanish
A380 LA/MSF "well past [***]", according to the United States.91
Measures alleged to constitute appropriate steps to remove the adverse effects of
the A380 LA/MSF and A350XWB LA/MSF subsidies within the meaning of Article 7.8 of
the SCM Agreement
Amortisation of the "benefit" conferred by the A380 LA/MSF agreements and
In addition to addressing the alleged amortization of benefit in connection with its argument
that the A380 LA/MSF and A350XWB LA/MSF subsidies have been withdrawn for purposes of
Article 7.8 (see section 7.2.2.4 above), the European Union submits that the amortisation of t he
benefit conferred by the French, German, Spanish and UK A380 LA/MSF and A350XWB LA/MSF
subsidies is also a relevant factor that must be taken into account in determining whether the A380
LA/MSF and A350XWB LA/MSF subsidies continue at present to be a genuine and substantial cause
of present adverse effects, for purposes of assessing whether the European Union has taken steps
to remove adverse effects of any non-withdrawn subsidies.92
As explained in paragraph 7.28, the United States rejects the approach taken in the TradeRx
report to assess the expected life of each of the loans .93 The United States also submits that the
European Union has not established that an assessment of the supposed reduction in benefit through
amortization of LA/MSF is relevant to assessing whether the adverse effects of the subsidies
continue, considering the "product effects" causal pathway that was established to exist.94
Non-subsidised investments in A380 and A350XWB family aircraft (measures 10
and 15)
As an additional compliance "step", the European Union submits that alleged significant post-
launch, non-subsidised investments that Airbus made in the A380 and A350XWB families of LCA,
which, according to the European Union, attenuate the requisite causal link between the subsidy and
any alleged present adverse effects, such that the A380 or A350XWB LA/MSF can no longer be
considered a genuine and substantial cause of sales or deliveries of either aircraft or any associated
adverse effects.95 For both the A380 and the A350XWB programmes, the European Union alleges
that Airbus has invested in the continuing development of the aircraft, including the development of
new model variants and continuing support for the two programmes.96
The United Sates submits that the European Union's arguments concerning "non-subsidised"
investments in the A380 and A350XWB are "a recycled version of the EU's failed 'non -subsidized
investment' arguments from the first compliance proceeding and should be rejected once again" .97
In this regard, t he United States submits that the European Union unsuccessfully argued that the
causal link between LA/MSF and the continued market presence of the A320 and A330 families was
attenuated by "'massive' and allegedly non-subsidized investments Airbus made with its own funds",
in connection with "{c}ontinuing {d}evelopment", "{c}ontinuing {s}upport", the design and
manufacture of new vari ants of the A320 and A330 families, and setting up new A330 production
lines.98 The United States submits that the compliance panel rejected this line of argument on the

91 United States' first written submission, para. 83.
92 European Union's first written submission, paras. 204, 300-308, and 371-378.
93 United States' first written submission, para. 83 and fn 140.
94 United States' first written submission, para. 196.
95 Communication from the European Union dated 17 May 2018, WT/DS316/34, paras. 31 and 41.
96 European Union's first written submission, paras. 315-323 and 384-388.
97 United States' first written submission, para. 199.
98 United States' first written submission, para. 199 (referring to EC and certain member States – Large

BCI deleted, as indicated [***]

basis that the subsidies had enabled the existence of the aircraft in the first place, and there would
have been nothing to improve absent the subsidies.99
Reduced draw down of principal under the French A380 LA/MSF agreement and
the French and UK A350XWB LA/MSF agreements (measures 11 and 16)
The European Union further submits that the reduced draw-down of the loan amounts under
the French A380 LA/MSF agreement and the French and UK A350XWB LA/MSF agreements are
measures taken to comply.100 The European Union considers that the reduced draw-down of the full
amount of the se loans means that the "monetary consequence s" of the LCA programme risks
assumed by the lenders are correspondingly reduced, and therefore, the subsidies can no longer be
considered a genuine and substantial cause of sales or deliveries of A380 aircraft, or any adverse
effects.101
The United States argues that the European Union failed to establish that less than full
drawdown reduces the ex ante benefit of the subsidy. The United States also rejects the
European Union's argument that Airbus' drawing down of less than the full amount of any of the
LA/MSF subsidies should have any bearing on the Panel's assessment of whether the causal link
established between the existing subsidies and Airbus' ability to offer and deliver the A380 and
A350XWB continues in the post-implementation period.102
Attenuation of the causal link between A380 LA/MSF and A350XWB LA/MSF and
the launches of the A380 and the A350XWB due to the passage of time (measures 13
and 17)
The European Union has also identified as an additional measure taken to comply the alleged
attenuation of the causal link between A380 LA/MSF and A350XWB LA/MSF and the launches of the
A380 and A350XWB due to the passage of time. In the case of both aircrafts, the European Union
argues that A380 and A350XWB LA/MSF had limited accelerating effects on the development of the
two aircraft, and therefore the subsidies can no longer be considered a cause of the actual launch of
either aircraft, and of resulting sales or deliveries or any associated adverse effects.103
The United States argues that the European Union's counterfactual assessment of the launch
dates of the A380 and A350XWB is flawed and based on a misreading of the findings by the original
panel and compliance panel and therefore should be r ejected.104 In particular, the United States
argues that the European Union's argument contradicts previously adopted DSB findings from the
first compliance proceeding that both the A380 LA/MSF and A350XWB LA/MSF subsidies were a
cause of adverse effects found to have occurred in the 2011-2013 period.105
Cancellation or completion of A380 deliveries and pending deliveries, and the
completion or conversion of A350XWB deliveries in certain country markets (measures 12
and 18)
Finally, t he European Union identifie s as further steps to remove the adverse effects of
existing A380 LA/MSF or A350XWB LA/MSF subsidies the cancellation or completion of A380

99 United States' first written submission, paras. 200-206. The United States additionally argues that the
alleged "non-subsidised" investments were independent of the R&TD subsidies and hence, the European Union
has not demonstrated the investments were in fact, not subsidised investments. (United States' first written
submission, para. 203).
100 Specifically, the European Union submits that Airbus opted not to draw down [***] or [***] of the
anticipated principal under the French A380 LA/MSF loan, allegedly because [***]. The European Union
submits that Airbus opted not to draw down [***] or [***] of the anticipated principal under the French
A350XWB loan, allegedly due to the [***]. Finally, the European Union submits that Airbus did not draw down
approximately [***] or [***] under the UK A350XWB LA/MSF loan. (European Union's second written
submission, paras. 330-332).
101 Communication from the European Union dated 17 May 2018, WT/DS316/34, paras. 30 and 38; and
European Union's second written submission, paras. 338-342.
102 United States' first written submission, paras. 189-190.
103 Communication from the European Union dated 17 May 2018, WT/DS316/34, paras. 33 and 40.
104 United States' first written submission, paras. 210-216.
105 United States' first written submission, paras. 220-235.

BCI deleted, as indicated [***]

deliveries and pending deliveries and completion or conversion of A350XWB deliveries. Specifically,
the European Union has referred to the cancellation or completion of A380 deliveries corresponding
to the Transaero 2012 and Emirates 2013 orders, and delivery of any outstanding A380 aircraft to
certain country markets covered by the finding of impedance in the VLA marke t106; and the
completion or conversion to other aircraft of A350XWB deliveries corresponding to the Cathay
Pacific 2012, Singapore Airlines 2013 and United Airlines 2013 orders of the A350XWB. 107 The
European Union maintains that the cancellation or completion of deliveries, or conversion to other
aircraft brings to an end the adverse effects arising from those orders.
The United States addresses the European Union's argument s in the context of addressing
the European Union's overall claim that it has taken appropriate steps to remove the adverse effects
of the A380 and A350XWB LA/MSF subsidies , arguing that the alleged actions fail to bring the
European Union into compliance with Article 7.8 of the SCM Agreement.108
Observations regarding the European U nion's measures or steps taken to achieve
compliance
These measures or steps alleged to achieve withdrawal or to constitute appropriate steps to
remove adverse effects encompass: a series of amendments to the A380 and German A350XWB
LA/MSF agreements; the alleged full repayment of outstanding principal and accrued interest under
the UK A350XWB LA/MSF agreement; and the passive amortization of benefit of the Spanish A380
LA/MSF subsidy. The European Union refers to a broader array of steps that allegedly attenuate or
dilute the causal link between the subsidy and alleged present adverse effects established in the
original proceeding or the first compliance proceeding such that the challenged subsidies are no
longer a "genuine and substantial" cause of adverse effects. We note that the European Union has
not provided evidence indicating that the notified measures and steps were taken by the relevant
member States for the specific purpose of achieving compliance with Article 7.8 of the
SCM Agreement.
We now examine the merits of the European Union's compliance claims based on our
understanding of the scope and nature of the obligations reflected in the adopted recommendations
and rulings as well as prior interpretation of the applicable legal provisions, including Article 7.8.
7.3 The European Union's request for a preliminary ruling that the United States' claims
against certain research and technological development measures are outside the Panel's
terms of reference
Procedural background
In its first written submission filed on 19 December 2018, the United States identified a series
of research and technological development (R&TD) measures provided to Airbus, which it argues are
subsidies the Panel is required to take into account in assessing the European Union's compliance
with the DSB's recommendations and rulings.109
On 21 December 2018, the European Union submitted a request for a preliminary ruling that
the United States' claims in relation to the R&TD measures referred to in the United States'
first written submission are not properly within the Panel's terms of reference as defined by
Articles 6.2 and 7.1 of the DSU. The United States submitted written comments on this request, and
on 11 January 2019 the Panel sent a communication to the parties declin ing the European Union's
request, indicating that the full reasoning supporting the Panel's decision would be set out in its final
report.110

106 Communication from the European Union dated 17 May 2018, WT/DS316/34, para. 32.
107 Communication from the European Union dated 17 May 2018, WT/DS316/34, para. 42. See also
European Union's first written submission, para. 358.
108 United States' first written submission, paras. 147-148; and response to Panel question No. 73,
para. 165.
109 United States' first written submission, paras. 9, 117-118, 126-128, and 243.
110 Panel communication to the parties 11 January 2019.

BCI deleted, as indicated [***]

In its communication of 11 January 2019, the Panel explained to the parties that the mere
fact that the R&TD measures are not specifically identified in the European Union's panel request
should not preclude the Panel from considering the United States' argu ments related to the R&TD
measures.111 The Panel's decision was, therefore, without prejudice to any finding on the extent to
which the United States is entitled to advance substantive claims regarding the consistency of the
R&TD measures with the European U nion's compliance obligations under Article 7.8 of the
SCM Agreement. The parties advanced further arguments on this matter in their subsequent written
submissions and at the Panel's substantive meeting with the parties.
The R&TD measures the United States challenges in this proceeding and relevant
findings from previous stages of this dispute
In its first written submission, the United States identified the following R&TD measures that
existed at the time of the original proceeding, each of which were found to be specific subsidies:
a. Grants for LCA-related R&TD projects in which Airbus participated pursuant to the:
i. Second Framework Programme for Community Activities in the Field of Research
and Technological Development (1987 -1991) ("Second Framework
Programme");
ii. Third Framework Programme for Community Activities in the Field of Research
and Technological Development (1990-1994) ("Third Framework Programme");
iii. Fourth Framework Programme of the European Community Activities in the Field
of Research and Technol ogical Development and Demonstration (1994 -1998)
("Fourth Framework Programme");
iv. Fifth Framework Programme of the European Community for Research,
Technological Development and Demonstration Activities (1998 -2002)
("Fifth Framework Programme");
v. Sixth Frame work Programme of the European Community for Research,
Technological Development and Demonstration Activities, Contributing to the
Creation of the European Research Area and to Innovation (2002 -2006)
("Sixth Framework Programme");
b. French government grants for LCA-related R&TD projects in which Airbus participated,
between 1986 and 2005;
c. German federal government grants for LCA -related R&TD projects in which Airbus
participated (LUFO I, LUFO II, and LUFO III);
d. Grants from three German sub-federal public entities for LCA-related R&TD projects in
which Airbus participated;
e. Spanish government loans for LCA -related R&TD projects in which Airbus participated
under the PTA programme; and
f. UK government grants for LCA-related R&TD projects in which Airbus participated under
the CARAD programme.112
In addition to the R&TD measures that existed at the time of the original proceeding , the
United States' claims in this proceeding cover the Seventh Framework Programme for Research and
Technological Development (2007-2013) (Seventh Framework Programme) and the Horizon 2020

111 Panel communication to the parties 11 January 2019.
112 United States' first written submission, para. 118; and second written submission, para. 299 and
fn 396.

BCI deleted, as indicated [***]

Programme (2014-2020) (Eighth Framework Programme).113 These R&TD measures did not exist at
the time of the original proceeding.
The original panel found that the majority of the R&TD measures chall enged by the
United States constituted specific subsidies to Airbus that caused serious prejudice to the
United States' interests under Articles 5(c) and 6.3(a), (b), and (c) of the SCM Agreement. 114
Specifically, the panel found that the R&TD subsidies "enabled Airbus to develop features and aspects
of its LCA on a schedule that it would otherwise have been unable to accomplish" and that "{w}hile …
the impact of pre -competitive R&TD subsidies on Airbus' market presence was perhaps more
attenuated, compared with the other subsidies at issue or with R&TD subsidies that funded research
and technology actually used on LCA that were launched, {the panel} believe{d} that combined
with the others, the RT&D subsidies complemented and supplemented the impact of LA/MSF".115
On appeal, the European Union argued that the original panel failed to establish that any of
the "features and aspects" of its LCA developed with funding from R&TD subsidies impacted Airbus'
product launch decisions. 116 The European Union furt her argued that the original panel failed to
provide an evidentiary basis and a reasoned and adequate explanation for its causation finding, in
violation of Article 11 of the DSU. 117 The United States argued, to the contrary, that the original
panel correctl y found that the R&TD subsidies "complemented and supplemented" the product
effects of LA/MSF, because they enabled Airbus to "develop features and aspects of its LCA on a
schedule that it would otherwise have been unable to accomplish".118
The Appellate Body considered that the original panel did not have a sufficient basis to find
that the R&TD subsidies complemented and supplemented the effects of LA/MSF, finding as follows:
With respect to the other R&TD subsidies, we agree with the European Union that a
general finding that they enabled Airbus to develop "features and aspects" of its LCA on
a schedule that otherwise it would have been unable to accomplish does not provide a
sufficient basis to determine that R&TD subsidies "complemented and supplemented"
the "product effect" of LA/MSF in enabling Airbus to launch particular models of LCA. …
{A} competitive advantage, in our view, must be reflected either in technologies
incorporated in models of LCA actually launched by Airbus, or in technologies that make
the production process of those LCA more efficient . Without specific findings that
technology or production processes funded by R&TD subsidies contributed to Airbus'
ability to launch and bring to the market particular models of LCA, the Panel did not
have a sufficient basis to conclude that those subsidies "complemented and
supplemented" the "product effect" of LA/MSF.119
On this basis, the Appellate Body found that the original panel had erred under Articles 5(c)
and 6.3(a), (b), and (c) of the SCM Agreem ent when it found that the R&TD subsidies
"complemented and supplemented" the "product effect" of LA/MSF without establishing a genuine
causal link between those R&TD subsidies and Airbus' ability to launch and bring to market its models
of LCA. The Appell ate Body, therefore, found that the original panel failed to conduct an objective
assessment of the matter, including an objective assessment of the facts - as required by Article 11
of the DSU - and reversed the panel's finding that the effect of R&TD subsidies was the displacement

113 United States' first written submission, paras. 126-128.
114 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1608. The Panel found,
however, that the United States failed to establish that the following R&TD measures constituted subsidies:
(i) grants provided under the UK Technology Programme; and (ii) a portion of the funding committed to Airbus
under the German government's "LuFo" programmes. (Panel Report, EC and certain member States – Large
Civil Aircraft, paras. 7.1502 and 7.1591). On appeal, the Appellate Body found that the United States' claims
against the R&TD loans provided pursuant to the Spanish PROFIT programme were outside of the Panel's terms
of reference. (Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 649).
115 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1959.
116 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1404.
117 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1404.
118 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1405 (referring to
Panel Report, para. 7.1959).
119 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1407. (emphasis
added)

BCI deleted, as indicated [***]

of Boeing LCA from the EC and relevant third country markets, and significant lost sales, within the
meaning of Article 6.3(a), (b), and (c) of the SCM Agreement.120
Whether the United States' claims against the R&TD measures are outside the
Panel's terms of reference
Introduction
The European Union argues that the United States' complaint against the R&TD measures is
not properly within the Panel's terms of reference because the R&TD measures are not identified in
the European Uni on's panel request. 121 In the absence of any reference to the specific R&TD
measures in the European Union's panel request, the European Union argues that the proper course
of action for the United States would have been to follow the guidance of the Appellate Body in US –
Continued Suspension/Canada – Continued Suspension, and initiate its own Article 21.5 proceeding
in which the United States could have raised its specific complaint against those measures. 122
According to the European Union, the United States' failure to do so means that its complaint against
the R&TD measures cannot now form part of this Panel's terms of reference.123
The United States argues that the challenged R&TD measures are identified in the
European Union's panel request as a matter of fact, because they fall within the scope of the "{n}on-
subsidised investments in the A380 {and A350XWB} family aircraft" referred to on pages 5 and 6
of the European Union's panel request. 124 In any case, the United States argues that the R&TD
measures fall within the Panel's terms of reference regardless of whether they are referred to in the
European Union's panel request because they are part of the United States' rebuttal argument
against the European Union's assertion of full, substantive, compliance. 125 In this respect, the
United States maintains that the European Union's reliance on certain Appellate Body statements
made in US – Continued Suspension/Canada – Continued Suspension is misplaced. On the contrary,
according to the United States, the US – Continued Suspension/Canada – Continued Suspension
disputes support its own position because in both proceedings the panels and the Appellate Body
found that where substantive compliance is alleged by an original respondent, the matter to be
examined by a panel is not limited to the measures explicitly listed in the original respondent's panel
request.126
The parties' submissions concerning the extent to which the United States' complaint against
the challenged R&TD measures is within the Panel's terms of refere nce raise two broad questions:
(i) whether the challenged R&TD measures are referred to in the European Union's panel request as
a matter of fact; and (ii) whether the United States' claims against those measures may nevertheless
fall within the scope of this compliance proceeding even if the measures are not specifically referred
to in the European Union's panel request. We address each of these questions in turn.
Are the R&TD measures identified in the European Union's panel request?
The European Union's panel request provides a list of measures taken to comply with the
recommendations and rulings of the DSB. Under the heading "Measures that Constitute Appropriate
Steps to Remove Adverse Effects, under Articles 7.8, 5 and 6.3 of the SCM Agreement" the
European Union lists "{n}on-subsidised investments in A380 family aircraft" and "{n}on-subsidised
investments in A350XWB family aircraft". In explaining those measures, the European Union's panel
request provides that:

120 Appellate Body Report, EC and certain member States – Large Civil Aircraft, paras. 1408 and 1409.
121 European Union's request for a preliminary ruling, para. 16; and second written submission,
para. 498.
122 European Union's second written submission, para. 495.
123 European Union's request for a preliminary ruling, paras. 7-9; and second written submission,
paras. 468 and 495-517.
124 United States' response to the European Union's preliminary ruling request, paras. 9-14.
125 United States' response to the European Union's preliminary ruling request, paras. 15-22.
126 United States' response to the European Union's preliminary ruling request, para. 20 (referring to
Appellate Body Report, US – Continued Suspension, paras. 327-332).

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Airbus has also undertaken significant non-subsidised investments in the A380, and in
A380-related continuous support and development (Measure x, listed above). Currently,
neither A380 MSF nor any other subsidy at issue is a genuine and substantial cause of
sales or deliveries of A380 aircraft, or any associated adverse effects.
…
Additionally, Airbus has undertaken significant non -subsidised investments in the
A350XWB, and in A350XWB-related continuous support and development (Measure xv,
above). Neither A350XWB MSF nor any other subsidy at iss ue is currently a genuine
and substantial cause of sales or deliveries of the A350XWB or any associated adverse
effects.127
The United States submits that the reference in the European Union's panel request to
"{n}on-subsidised investments in A380 family air craft" and "{n}on -subsidised investments in
A350XWB family aircraft" identifies investments related to the support and development of the A380
and the A350XWB, as measures taken to comply. In the United States' view, since the EU panel
request does not lim it the scope of such investments, either temporally or factually, the R&TD
measures, which enable Airbus to develop technological improvements that the EU alleges are critical
to Airbus's current competitiveness, are therefore covered by the EU panel request. In addition, the
United States argues that while the European Union describes the investments as "non-subsidized",
this is a rebuttable characterization. In sum, the United States argues that if the EU panel request
includes investments in development of new technologies, including the development of successor
aircraft, and the use of financial resources to enable production, it certainly includes the funding
under the R&TD measures referenced in the United States' first written submission, which go directly
to those purposes.128
The European Union argues that the United States' characterisation of the language in its
panel request is incorrect because, according to the European Union, the relevant language must be
understood to be limited to non-subsidised investments made by Airbus.129 These investments are
related to the existing A380 and A350XWB families and programmes, and cover Airbus initiatives
affecting the "continuing development" of these aircraft130, and the continuing support "to maintain
and improve production facilities". 131 The European Union also points out that in its first written
submission the United States asserts that "{the EU's non-subsidized investment argument here} is
a recycled version of the EU's failed 'non-subsidized investment' arguments from the first compliance
proceeding and should be rejected once again". According to the European Union, this directly
indicates that the United States understands that the non -subsidized investments do not relate to
the R&TD measures, as was the case in the first compliance proceeding.132
On its face, the European Union's panel request refers to "non -subsidized" investments by
Airbus related to "continuous support and development" of the A380 and A350XWB. This general
language is broad and potentiall y covers any "investments" in the continuous support and
development of the A350XWB and the A380, which the European Union maintains are not subsidized.
To this extent, we agree with the United States when it argues that the description of the covered
investments as "non-subsidized" does not preclude the possibility that the panel request might be
able to cover the R&TD measures identified by the United States, because the fact that the
European Union describes them as "non-subsidized" merely reflects the European Union's own legal
characterization of the relevant measures. However, the content of the European Union's first written
submission appears to confirm that the European Union's panel request does not cover the
R&TD measures challenged by the United States.
Although a party's subsequent submissions during panel proceedings cannot be relied upon
to cure a defect in a panel request, they may be consulted to confirm or clarify the meaning of the

127 European Union's panel request, paras. 31 and 41.
128 United States' response to the European Union's preliminary ruling request, paras. 9-14.
129 European Union's second written submission, para. 506.
130 European Union's first written submission, para. 314.
131 European Union's first written submission, para. 314; second written submission, para. 504.
132 European Union's second written submission, para. 508 (referring to United States' first written

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words used in the panel request.133 The European Union's first written submission does not mention
R&TD measures in any form, and only refers specifically to targeted investments for the A380 and
the A350XWB undertaken by Airbus. 134 In particular, the European Union refers to " substantial
investments {by Airbus} … in continuing development … and continuing support for the A350XWB
programme {which included} investments into … the development of the ultra -long-range
A350XWB-900ULR".135 The European Union argues that these investments sustain and renew the
aircrafts' competitiveness and that it is these investments, rather than the historical subsidies at the
time of launch, that explain the current market presence and competitiveness of the aircraft. 136
Almost identical investments, and arguments, are made regarding the A380 .137 This is consistent
with the European Union's description of similar Airbus actions in the first compliance proceeding,
which the European Union argued severed the chain of causation between the LA/MSF subsidies and
the relevant adverse effects. In particular, before the original compliance panel, the European Union
argued that "the genuine and substantial cause of the ongoing market presence of the A320 and
A330 families is not the LA/MSF subsidies, but rather the 'massive', allegedly, non -subsidized
investments Airbus has made into the two families of LCA since they were launched". 138 These
investments included "(a) 'Continuing Development'; (b) 'Continuing Support'; (c) the design and
manufacture of three non -subsidized variants (the A321, A319 and A318) between 1988
and 1999"139, which are the same types of investments as those referenced at this stage of the
dispute (mutatis mutandis).
In our view, the content of the European Union's first written submission clarifies that the
reference in the European Union's panel request to the "non -subsidized investments …" does not
encompass the R&TD measures challenged by the United States. Indeed, n othing in the
European Union's first written submission or any other submission in this dispute suggests that the
European Union intended to include more than these initiatives in its panel request. Moreover, as
already noted, reading the European Union's panel request in this way would be consistent with the
arguments related to non -subsidised investments advanced in the original compliance dispute.
Furthermore, we note that the United States, in responding to the European Union's "non-subsidized
investments" arguments, equated those arguments with the European Union's unsuccessful
"non-subsidized investment" arguments from the first compliance proceeding. The R&TD measures
did not form part of that proceeding and we can thus infer that the United States, i n equating the
two sets of arguments, likely understood the allegedly non -subsidised investments to have been
made by Airbus, and not to refer to the R&TD measures provided by the European Union, as was
the case in the first compliance proceeding.
Thus, in our assessment, there is no factual basis to accept the United States' understanding
of the reference to "non-subsidised investments" in the European Union's panel request as including
the R&TD measures it seeks to challenge in this proceeding. Accordingl y, we find that the
European Union's panel request does not, as a factual matter, include a reference to the R&TD
measures challenged by the United States.
Do the challenged R&TD measures fall within the Panel's terms of reference, even
though they are not specifically identified in the European Union's panel request?
The European Union argues that since the R&TD measures are not identified in the
European Union's panel request, as a procedural matter, the proper recourse for an original
complainant that considers the original respondent has excluded particular measures or claims from
an Article 21.5 proceeding would be to file its own request for the establishment of a panel under
Article 21.5. Thus, according to the European Union, "if the United States wi shed to challenge the
WTO-consistency of the R&TD measures, it was required …, as specifically directed by the
Appellate Body" in the US – Continued Suspension/Canada – Continued Suspension disputes to file
its own panel request.140 Having not done so, the European Union submits that United States' claims

133 Appellate Body Report, EC and certain member States — Large Civil Aircraft, paras. 786-787
and 790.
134 European Union's first written submission, paras. 313 and 383.
135 European Union's first written submission, paras. 314-323.
136 European Union's first written submission, paras. 313 and 383.
137 See European Union's first written submission, paras. 383-389.
138 Panel Report, EC and certain member States — Large Civil Aircraft (Article 21.5 – US), para. 6.1516.
139 Panel Report, EC and certain member States — Large Civil Aircraft (Article 21.5 – US), para. 6.1517.
140 European Union's second written submission, paras. 473 and 495. (emphasis added)

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against the R&TD measures are outside the Panel's terms of reference and thus cannot be examined
by the Panel in this dispute.141
The United States argues that the R&TD measures are part of the Panel's terms of reference
regardless of whether they are covered by the European Union's panel request, because they are
part of the United States' rebuttal to the European Union's assertion of full, substantive, compliance.
The United States argues that the Panel could only reach such a finding after considering the full
scope of the relevant issues bearing on the European Union's allegation of substantive compliance.
In this respect, the United States argues that the European Union cannot be found to have complied
with its obligations under Article 7.8 of the SCM Agreement if the R&TD measures at issue (either
alone or together with the LA/MSF subsidies) cause adverse effects to the US LCA industry.142 Citing
the panel and Appellate Body reports in US – Continued Suspension/Canada – Continued Suspension
disputes, the United States argues that, where an original respondent asserts substantive
compliance in an Article 21.5 proceeding, the matter to be examined by the Panel is not limited to
what is explicitly listed in the o riginal respondent's panel request. Furthermore, the United States
emphasizes that an implementing Member should not be permitted to seek a finding that it has
achieved full, substantive, compliance by submitting a panel request that identifies only a subset of
the relevant measures taken to comply or otherwise artificially limits the scope of a compliance
proceeding.143
We begin by observing that Article 7.1 of the DSU establishes that a panel's terms of reference
are defined by the "matter" referred to in the request for its establishment; and the requirements
for identifying the "matter" set out in the request for establishment are prescribed in Article 6.2 of
the DSU, which in relevant part, provides that:
The request for the establishment of a panel shal l … identify the specific measures at
issue and provide a brief summary of the legal basis of the complaint sufficient to
present the problem clearly.
Both Articles 6.2 and 7.1 apply to panels established to examine compliance disputes within
the meaning of Article 21.5 of the DSU, but their requirements must be adapted for that purpose.144
Thus, it has been found that a panel request in an Article 21.5 proceeding must refer to the
recommendations and rulings of the DSB made in the original proceeding, in addition to identifying
the specific measures and the legal basis of the complaint.145
When a dispute is brought under Article 21.5 of the DSU by an original complainant, the
compliance panel's terms of reference will be defined by the complainant, who will ide ntify in its
request for establishment, one or more of the respondent's declared or undeclared measures "taken
to comply" as the focus of its complaint. However, in what are known as "reverse" compliance
proceedings, it is the respondent from the original proceeding that requests the establishment of a
panel to confirm that its alleged compliance actions bring it into conformity with its WTO obligations.
In such compliance disputes, a strict reading and application of the requirements of Articles 6.2
and 7.1 of the DSU would mean that the panel's terms of reference would be set entirely by the
original respondent. In our view, this would make it possible for an original respondent to confine
the scope of the "reverse" compliance dispute to only those measure s that it considers show
compliance, leaving measures that the original complainant may consider to show non-compliance,
outside of the scope of the proceeding. Thus, a strict interpretation of the requirements of
Articles 6.2 and 7.1, as they apply in a " reverse" Article 21.5 proceeding, would mean that an
implementing Member could be found to be in compliance simply because of the way it has defined
the panel's terms of reference when, in fact, other measures (not included in the "reverse"
compliance panel's terms of reference) could show non-compliance.

141 European Union's request for a preliminary ruling, para. 13 (citing US – Continued Suspension,
para. 354); and second written submission, paras. 473, 482, and 495.
142 United States' response to the European Union's preliminary ruling request, paras. 16-19.
143 United States' response to the European Union's preliminary ruling request, para. 20.
144 Appellate Body Report, US – Zeroing (Japan) (Article 21.5 – Japan), para. 109 (quoting
Appellate Body Report, US – FSC (Article 21.5 – EC II), para. 59).
145 Appellate Body Report, US – FSC (Article 21.5 – EC II), para. 62 (referring to Appellate Body Report,
US – Softwood Lumber IV (Article 21.5 – Canada), para. 67).

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According to the European Union, the Appellate Body specifically addressed this matter in the
US – Continued Suspension / Canada – Continued Suspension disputes, where it allegedly found
that the correct course of action for an original complainant to take, when it considers that an original
respondent has excluded certain measures or claims from its request for the establishment of a
panel in a "reverse" Article 21.5 proceeding, is to file its own separate request for the establishment
of a panel under Article 21.5. The United States disagrees with the European Union's characterization
of the Appellate Body's findings in the Continued Suspension disputes. For the United States, the
Appellate Body statements the European Union relies upon constitute obiter dictum as they were
made by the Appellate Body only after it had resolved the particular issue on appeal. 146 Moreover,
the United States notes that the Ap pellate Body did not find the existence of a requirement on an
original complainant to bring its own case, but only advised that an original complaining party "may"
file its own request if it considers that the implementing measure is inconsistent with pro visions of
the WTO agreements not covered in the implementing Member's panel request.147
The Continued Suspension disputes arose out of a disagreement between the
European Communities, on the one hand, and Canada and the United States, on the other, about
whether the European Communities had complied with the recommendations and rulings of the DSB
in the EC – Hormones dispute. In EC – Hormones, a European Communities' import ban on meat
from cattle treated with certain hormones was found to be inconsistent w ith Article 5.1 of the SPS
Agreement because it was not based on a proper risk assessment. 148 Following the adoption of the
EC – Hormones panel and Appellate Body reports, Canada and the United States suspended
concessions against imports of EC products as a result of the European Communities' failure to
implement the recommendations and rulings within a reasonable period of time. Subsequently, the
European Communities adopted Directive 2003/74/EC, which repealed and replaced the measure
found to be WTO-inconsistent, claiming that it had thereby implemented the DSB's recommendations
and rulings.149 The United States and Canada considered that the new EC measure did not bring the
European Communities into conformity with its WTO obligations, and continued to susp end
concessions. The European Communities subsequently initiated the Continued Suspension original
panel proceedings (not "reverse" Article 21.5 compliance proceedings), claiming that Canada and
the United States were acting inconsistently with Article 22. 8 of the DSU by continuing to suspend
concessions after the measure found to be WTO-inconsistent had been removed.
Before the panels, the European Communities argued that once it had adopted
Directive 2003/74/EC, Canada and the United States were not entit led to continue to suspend
concessions but were required to initiate an Article 21.5 compliance panels to resolve any
disagreement about whether the newly adopted measure brought the European Communities into
compliance.150 The panels rejected this argument, finding nothing in the text of Article 21.5 requiring
Canada or the United States to bring such a case. The panels were not convinced that Article 21.5
was the "only avenue available to address a claim of compliance by a Member", noting that other
possibilities were available, including resorting to a new original panel (as the European Communities
had done in those disputes). Furthermore, the panels did not " believe that proceedings under
Article 21.5 are open only to the original complainant"151, finding that a respondent could also initiate
an Article 21.5 proceeding to establish that its alleged compliance measures brought it into
conformity with its obligations.
Contrary to the panels, the Appellate Body found that the appropriate procedural avenue to
resolve a disagreement as to whether an inconsistent measure has been removed is an Article 21.5
compliance panel. For the Appellate Body, the panels recognized this by stating that the task of each
panel in the underlying dispute was to " perform functions similar to {those} of an Article 21.5
panel".152 Thus, the Appellate Body concluded that:
… recourse to Article 21.5 panel proceedings is the proper course of action within the
procedural structure of the DSU in cases where, as in this dispute, a Member subject to

146 United States' response to the European Union's preliminary ruling request, paras. 30, 32, and 33.
147 United States' response to the European Union's preliminary ruling request, paras. 28-33.
148 Appellate Body Report, EC – Hormones, para. 208.
149 Appellate Body Reports, US – Continued Suspension/Canada – Continued Suspension, para. 326.
150 Panel Reports, US – Continued Suspension/Canada – Continued Suspension, para. 4.104.
151 Panel Reports, US – Continued Suspension/Canada – Continued Suspension, para. 7.353.
152 Appellate Body Reports, US – Continued Suspension/Canada – Continued Suspension, para. 341
(quoting Panel Reports, US – Continued Suspension/Canada – Continued Suspension, para. 8.3).

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the suspension of concessions has taken an implementing measure and a disagreement
arises as to whether "the measure found to be inconsistent with a covered agreement
has been removed" within the meaning of Article 22.8. Therefore, we sha re the
European Communities' view that Article 21.5 panel proceedings are the procedures to
be followed where there is disagreement as to whether Directive 2003/74/EC has
achieved substantive compliance.153
The Appellate Body then went on to reject the Europ ean Communities' appeal against the
panels' finding that a respondent is not precluded from initiating Article 21.5 proceedings. The
Appellate Body agreed with the panels that such a course of action would be open to a respondent
"to obtain confirmation of the consistency with the WTO agreements of its implementing measure".
However, in making this finding, the Appellate Body recognized that where a respondent does
request an Article 21.5 compliance panel, the panel request may be incomplete, as a responden t
"cannot be expected to speculate as to the violations that could possibly be raised against its
measure by other Members".154 It was in this context that the Appellate Body made the statements
the European Union relies upon in this dispute to argue that th e R&TD measures identified by the
United States do not fall within the scope of this proceeding. Specifically, the Appellate Body
observed that where a respondent triggers an Article 21.5 proceeding, and the complainant considers
the implementing measure does not achieve compliance, the complainant:
… may file its own {panel request} under Article 21.5 identifying those provisions that
it considers should be examined by the Article 21.5 panel. … The original complainant
would be expected to do so as soon a s possible after adoption of an implementation
measure or after the filing of the original respondent's panel request, so that both
Article 21.5 panel requests may be referred to the original panel wherever possible,
allowing review of all the issues relat ing to substantive compliance in the same
Article 21.5 proceedings.155
In our view, these Appellate Body statements firmly advocate the view that claims and
measures not included in an original respondent's request for a "reverse" Article 21.5 compliance
panel should be brought into the scope of the same Article 21.5 proceeding by having the
complainant identify them in its own, separate, request for establishing an Article 21.5 panel.156 Yet,
we see nothing in the Appellate Body's statements pointing to the e xistence of any requirement on
a complainant to take this course of action. The Appellate Body report does not identify any specific
obligation in the DSU, stating only that a complainant "may" file its own request for establishment,
adding that it would b e "expected" to do so expeditiously. Moreover, we note that in the same
disputes, both the panels and the Appellate Body ruled that Canadian and United States' claims
against the European Communities' alleged compliance measure, that were not identified in the
European Communities' request for establishment, could be examined.
In response to the European Communities' assertion of compliance, Canada and the
United States argued that Directive 2003/74/EC was inconsistent with Articles 5.1 and 5.7 of the
SPS Agreement. Neither of these two provisions was identified in the European Communities' panel
request. Nevertheless, despite the lack of any reference to these provisions in the panel requests,
the panels concluded that it was appropriate to consider the co mplainants' claims because
understanding whether the European Communities was in substantive compliance with its
obligations under the SPS Agreement was a prerequisite to determining whether the
European Communities had made out its own claim under Article 22.8 of the DSU. Accordingly, the

153 Appellate Body Reports, US – Continued Suspension/Canada – Continued Suspension, para. 345.
154 Appellate Body Reports, US – Continued Suspension, para. 329; Canada – Continued Suspension,
para. 353.
155 Appellate Body Reports, US – Continued Suspension, para. 329; Canada – Continued Suspension,
para. 354.
156 Since the Continued Suspension disputes, original complainants in two disputes, US – Tuna II
(Mexico) (Article 21.5 – US) and Colombia – Textiles (Article 21.5 – Colombia), have followed this approach
and submitted their own respective panel requests following requests for "reverse" Article 21.5 proceedings by
the respective respondents. In both cases, the panels addressed the measures and claims raised in both
parties' panel requests thereby avoiding the terms of reference issues raised in the present proceeding.
Appellate Body Reports, US – Continued Suspension / Canada – Continued Suspension, US – Tuna II (Mexico)
(Article 21.5 – US) / US – Tuna II (Mexico) (Article 21.5 – Mexico II) and Panel Report, Colombia – Textiles
(Article 21.5 – Colombia) / Colombia – Textiles (Article 21.5 – Panama).

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panels concluded that "nothing in the DSU prevents the Panel from considering the compatibility of
the EC implementing measure with the SPS Agreement if this is necessary in order to make the
findings required by {its} terms of reference".157
The Appellate Body upheld the panels' finding, concluding that it was necessary to evaluate
whether the European Communities brought itself into conformity with the DSB's recommendations
and rulings. The Appellate Body explained:
It is evident from the panel requests that the consistency of the United States' and
Canada's continued suspension with Article 22.8 was linked to the
European Communities' implementation of the DSB's recommendations and rulings in
EC – Hormones. We fail to see how the claims explicitly listed in the panel requests by
the European Communities could be resolved in isolation from the question of whether
{the relevant measure} has brought the European Communities into compliance with
these DSB's recommendations and rulings.158
Thus, the panels and the Appellate Body in the Continued Suspension disputes decided that
it was appropriate to address claims under Articles 5.1 and 5.7 of the SPS Agreement even though
those legal provisions were not identified in the European Communities' panel request . The panels
and the Appellate Body concluded that i t was necessary to determine the merits of the
complainants' claims in order to assess whether the European Communities had achieved full
substantive compliance with the DSB's recommendations and rulings, which was in turn relevant to
address the European Communities' claim that the complaining parties were acting inconsistently
with Article 22.8 of the DSU by continuing to suspend concessions.
Having carefully reviewed the reasoning and findings from the panel and Appellate Body
reports in the Continued Suspension disputes the parties rely upon, we find they do not provide any
clear guidance for determining whether the United States is entitled to have the merits of its claims
against the R&TD measures examined in this "reverse" Article 21.5 dispute. Ultim ately, however,
we do not consider it is necessary to decide this legal question, because even assuming, arguendo,
that the absence of any reference to the challenged R&TD measures in the European Union's panel
request could not prevent the United States from raising claims, we believe we would be precluded
from addressing them on other procedural grounds, which we identify and explain in the sections
that follow.
The United States' claims against R&TD measures that were subject to findings in
the original proceedings or were in existence at the time of the first compliance
proceeding
The European Union claims that the United States is precluded in these second compliance
proceedings from raising claims against the R&TD measures that were subject to findings in the
original proceedings. The European Union argues that allowing the United States to challenge these
measures again would provide the United States with an unfair second chance to make a case that
it failed to make out in the original proceeding.159 Specifically, the European Union argues that none
of the R&TD measures were found to be WTO-inconsistent in the original proceeding, permitting the
United States to raise claims against them now would disturb the finality of the
DSB's recommendations and rul ings.160 In any event, the European Union argues that the
United States could have challenged those measures in the first compliance proceeding but chose
not to do so. 161 By declining to challenge any of the R&TD measures in the first compliance
proceeding when it had the opportunity to do so, the European Union argues that the United States
has essentially forfeited its right to make any further claim against these measures.162

157 Panel Reports, US – Continued Suspension / Canada – Continued Suspension, para. 7.367.
158 Appellate Body Reports, US – Continued Suspension / Canada – Continued Suspension, para. 331.
159 European Union's second written submission, para. 523 (citing Appellate Body Report, US – Upland
Cotton (Article 21.5 – Brazil), para. 210).
160 European Union's second written submission, paras. 519-527.
161 European Union's second written submission, para. 530.
162 European Union's second written submission, para. 532.

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The European Union also notes that it did not incur, upon the conclusion of the first compliance
proceeding, any compliance obligations with respect to the R&TD measures 163 and that the
United States' decision not to challenge the Seventh Framework Programme in the first compliance
proceedings constitutes a final resolution of the matter.164
The United States argues that there is no basis to exclude from the Panel's consideration any
of the R&TD measures that were subject to findings in the original proceeding or the Seventh
Framework Programme. With respect to the measures raised in the origi nal proceeding, the
United States argues that the Appellate Body's findings were confined to the original panel's failure
to make " specific findings" 165 and that the test applied by the original panel "was insufficiently
demanding to justify its conclusion". 166 According to the United States, the Appellate Body did not
evaluate whether the evidence before the original panel would support specific findings that the
R&TD subsidies contributed to Airbus's ability to launch and bring to market any LCA model 167 and
thus the matter was not resolved on the merits. Accordingly, the United States contends that it
would not be getting an unfair second chance to make a case that it failed to make out in the original
proceeding.168
The United States also argues that the Europea n Union and member States have continued
to provide funding to Airbus in the form of grants under the Seventh Framework Programme and
that funding under this Framework Programme is "of the same nature" as the earlier funding.169 The
United States therefore argues that it should be permitted to challenge this Framework Programme
on the grounds that it was not part of the original proceeding.170
Finally, the United States also argues that it should be permitted to raise a claim against the
R&TD measures on systemic grounds. The United States contends that a finding that the measures
cannot be challenged in a second compliance proceeding because they were not challenged in a first
compliance proceeding would incentivize complaining parties to pursue claims that were not in
themselves necessary to resolve the dispute in the interest of preserving the right to pursue potential
claims against those measures in potential future proceedings. According to the United States, this
would be inefficient and would be contrary to the objective of the prompt settlement of disputes
enshrined in Article 3.3 of the DSU.171 Additionally, the United States argues that preclusion on this
ground " would impose a burden on the original complainant to identify all measures that are
inconsistent with the original respondent's compliance obligations, no later than the original
complainant's first request for the establishment o f a compliance panel ".172 On the United States'
understanding of the European Union's argument, this would mean that the original complainant's
right to challenge such measures would be forever waived within the confines of the dispute.
The United States sug gests that this would infringe on the due process rights of original
complainants, along with the objective of promoting prompt compliance with the recommendations
or rulings of the DSB.173
Article 17.14 of the DSU provides that Appellate Body reports adopted by the DSB shall be
"{...} unconditionally accepted by the parties to the dispute". Past panels and Appellate Body have
interpreted this obligation to mean that adopted Appellate Body reports must be treated by the
parties as a final resolution to their dispute.174 Consequently, as explained in US – Upland Cotton
(Article 21.5 – Brazil), "allowing a party in an Article 21.5 proceeding to re -argue a claim that has
been decided in adopted reports would … provide an unfair 'second chance' to that party" .175 In

163 European Union's second written submission, para. 529.
164 European Union's second written submission, para. 533.
165 United States' first written submission, para. 248.
166 United States' second written submission, para. 329.
167 United States' second written submission, para. 329.
168 United States' second written submission, para. 330 (referring to European Union's second written
submission, para. 523).
169 United States' first written submission, para. 126; and second written submission, para. 328.
170 United States' second written submission, para. 328.
171 United States' second written submission, para. 336.
172 United States' second written submission, para. 337. (emphasis original)
173 Article 21.1 of the DSU.
174 See Appellate Body Reports, Chile – Price Band System (Article 21.5 – Argentina), para. 236; EC –
Bed Linen (Article 21.5 – India), para. 93; US – Shrimp (Article 21.5 – Malaysia), para. 97; and Panel Report,
US – Upland Cotton (Article 21.5 – Brazil), fn 1145.
175 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), para. 210. (fn omitted)

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contrast, where claims against a measure have not been decided on the merits in the original
proceeding "they are not covered by the recommendations and rulings of the DSB" and, therefore,
"a Member should not be entitled to assume that those aspects of the measure are consistent with
the covered agreements."176 Thus, although compliance proceedings cannot be used to "re -open"
issues that were decided on the merits in the original proceeding177, claims that are not decided on
the merits in the original proceedin g can be reasserted in compliance proceedings. 178 Accordingly,
in considering whether the United States is entitled to raise claims against the R&TD measures in
this second compliance proceeding, a first threshold question we believe must be answered is
whether the challenged R&TD measures were the subject of adopted findings and recommendations
in the original proceeding.
As explained in paragraph 7.46, the original panel found that the majority of the R&TD
measures challenged by the United States in this proceeding constituted specific subsidies that
caused serious prejudice to the United States' interests under Articles 5(c) and 6.3(a), (b), and (c)
of the SCM Agreement. 179 The panel found that the R&TD subsidies "enabled Airbus to develop
features and aspects of its LCA on a schedule that it would otherwise have been unable to
accomplish".180 As a result, the original panel found that " {w}hile … the impact of pre-competitive
R&TD subsidies on Airbus' market presence was perhaps more attenuated, compared with the other
subsidies at issue, … we believe that combined with the others, the RT&D subsidies complemented
and supplemented the impact of LA/MSF".181
On appeal, the Appellate Body found that the original panel did not have a sufficient basis to
find that the R&TD subsidies complemented and supplemented the effects of LA/MSF. In particular,
the Appellate Body observed that a general finding that the subsidie s enabled Airbus to develop
"features and aspects" of its LCA on a schedule that it otherwise would have been unable to
accomplish does not provide a sufficient basis to determine that R&TD subsidies "complemented and
supplemented" the product effect of LA/MSF in enabling Airbus to launch particular models of LCA.182
In reaching this finding, the Appellate Body held that:
Without specific findings that technology or production processes funded by R&TD
subsidies contributed to Airbus' ability to launch and bri ng to the market particular
models of LCA, the Panel did not have a sufficient basis to conclude that those subsidies
"complemented and supplemented" the "product effect" of LA/MSF.
…
In failing to provide a sufficient evidentiary basis for its finding that the effect of
non-LA/MSF subsidies was the displacement of Boeing LCA from the EC and relevant
third country markets and significant lost sales … the Panel failed to conduct an objective
assessment of the matter, including an objective assessment of th e facts, as required
by Article 11 of the DSU.183
We understand the Appellate Body to have rejected the original panel's analytical approach,
finding that the application of the approach actually undertaken lead the panel to fail to conduct an
objective assessment of the matter. However, the Appellate Body did not reject the merits of the
United States' claims.
While the European Union disagrees with this characterization of the Appellate Body findings
in the original proceeding, it argues that the United S tates is not entitled to advance any claims
against the original R&TD measures in this second Article 21.5 compliance proceeding, because the
United States failed to pursue such claims in the first Article 21.5 compliance proceeding. According

176 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 424.
177 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico), para. 5.8 (quoting
Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 427).
178 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico), para. 5.8 (quoting
Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 424).
179 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1608.
180 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1959.
181 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1959.
182 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1407.
183 Appellate Body Report, EC and certain member States – Large Civil Aircraft, paras. 1407-1408.
(emphasis added)

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to the Europ ean Union, the United States' failure to raise such claims during the first compliance
proceeding when it had that opportunity means that the United States has essentially forfeited its
right to raise these claims here. Importantly, in this regard, the European Union notes that because
of the United States' decision not to renew its challenge against the Second through Sixth Framework
Programmes, and other member State R&TD measures, at the time of the first compliance panel,
the European Union did not incu r any compliance obligations with respect to those measures upon
the conclusion of the first compliance proceeding. The European Union maintains that the same logic
applies in respect of the Seventh EU Framework Programme, which existed at the time of the
first compliance proceeding – the United States' failure to raise claims against that measure at the
time of the first compliance means that it has forfeited its right to do so in this second compliance
proceeding.
In discussing the merits of their respect ive positions on this matter, both parties rely upon
the Appellate Body's statement in US – Upland Cotton (Article 21.5 – Brazil) that "{a} complaining
Member ordinarily would not be allowed to raise claims in an Article 21.5 proceeding that it could
have pursued in the original proceedings, but did not" .184 The European Union argues that the
Appellate Body's statement supports the conclusion that the United States is not entitled to have its
challenge against the original R&TD measures and the Seventh Framework Programme heard in this
dispute. The United States argues that the specific reference does not support the European Union's
argument, as that statement signifies only that the United States may not, in this proceeding, raise
claims that it could have r aised in the first Article 21.5 compliance proceeding and says nothing
about the relationship between the first and second successive compliance proceedings, which the
United States alleges should be treated differently.185
We note that since US – Upland Co tton (Article 21.5 – Brazil), the Appellate Body has
explained that its use of the word "ordinarily" was not intended to mean that such claims could never
be brought, and that certain situations could exist which would allow an aspect of a previously
challenged measure to be challenged in compliance proceedings to the extent that aspect was
incorporated into the measure "taken to comply".186 For example, in US – Zeroing (EC) (Article 21.5
– EC), the European Communities sought to challenge an arithmetical err or made to the
determination of dumping challenged in the original dispute, which was subsequently incorporated
into the United States' measure "taken to comply" (a revised anti -dumping determination). The
European Communities had not challenged this aspect of the original determination during the first
panel stage. Nevertheless, the Appellate Body found that the European Communities was entitled to
challenge the arithmetical error because it was now an integral part of a new measure – the measure
"taken to comply".
The circumstances surrounding this second compliance proceeding are different to those that
arose in US - Upland Cotton (Article 21.5 – Brazil) and US – Zeroing (EC) (Article 21.5 – EC). In this
proceeding, the United States challenges the same measures that were challenged in the original
proceeding. This compliance proceeding does not involve the question of whether an original
complainant can challenge in a first compliance proceeding new aspects of an original measure that
did not exist at the time of the original proceeding, as in US - Upland Cotton (Article 21.5 – Brazil),
or an pre-existing feature of a new measure, as in US – Zeroing (EC) (Article 21.5 – EC). We recall
that the United States' claims against the R&TD measures were not decided on the merits in the
original proceeding. Accordingly, in our view, the United States would have been entitled to raise
claims against the previously-challenged R&TD measures in the first compliance proceeding. Thus,
the question that is now before us is whether, by failing to take that "second chance", the
United States should be barred from making those claims in this second compliance dispute.
In considering this question, we begin by recalling that in the first compliance proceeding, the
United States claimed that the A380 LA/MSF measures constituted prohibited import substitution
subsidies under Article 3.1(b) of the SCM Agreement. The European Union argued that the
United States' was not entitled to advance those claims because the United States "could have been
pursued {them} in the original proceeding against the same A380 LA/MSF measures", but it instead

184 European Union's second written submission, para. 530 (citing Appellate Body Report, US – Upland
Cotton (Article 21.5 – Brazil), para. 211). See also Appellate Body Report, US – Continued Suspension, fn 771;
and United States' second written submission, para. 335. (emphasis added)
185 United States' second written submission, para. 335.
186 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), paras. 431-435.

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chose to abandon them. 187 The United States argued that it shoul d be permitted to pursue its
Article 3.1(b) claims against the A380 LA/MSF subsidies in the compliance proceeding because at
the time of the original proceeding, it was not aware of information (subsequently acquired by the
time of the compliance proceeding), allegedly showing that French, German, Spanish and UK LA/MSF
subsidies for the A380 were contingent on the use of domestic over imported goods.
The first compliance panel was not convinced that, as a matter of law, the United States was
entitled to raise a claim under Article 3.1(b) against the unchanged A380 LA/MSF measures in that
compliance proceeding on the basis that it did not have sufficient information at the time of the
original panel request. The compliance panel found that it was difficult to see how the acquisition of
new information alone could justify a complainant pursuing a new claim about an unchanged
measure in a compliance proceeding. 188 In addition, the panel found that the evidence did not
support the United States' contention that it was unaware of facts that could potentially be relevant
to its fresh Article 3.1(b) claim. 189 Accordingly, the first compliance panel found that the
United States was precluded from raising its Article 3.1(b) claims because it could have raised those
claims, but didn't, in the original proceeding.
In this proceeding, the United States' challenges R&TD measures that were the subject of
unresolved claims at the original stage of this dispute. The United States had the opportunity to
raise claims against all of these measures, as well as the Seventh Framework Programme, in the
first compliance proceeding. The United States did not take this "second chance". Moreover, in
contrast to the situation in the first compliance proceeding as regards its Article 3.1(b) claims against
the A380 LA/MSF subsidies, the United States has advanced little explanation of why it decided not
to raise claims against the R&TD measures in the first compliance proceeding.
The United States argues that its claims should not be precluded simply because they were
not raised in the first compliance proceeding because this "would impose a burden on the original
complainant to identify all measures that are inconsistent with the original respondent's compliance
obligations, no later than the o riginal complainant's first request for the establishment of a
compliance panel". 190 We note, however, that the United States was fully aware of the
R&TD measures, having previously challenged them in the original proceeding. Thus, the present
set of facts do not present a situation where an original complainant became aware of a new set of
measures only after the first compliance proceeding. Furthermore, the United States' concern arises
identically in the context of a first compliance proceeding following a n original proceeding, in that
parties are required to bring all relevant claims against a measure at the original panel stage, and
cannot raise new claims in the compliance proceeding that could have been pursued in an original
proceeding.191
Finally, the United States argues that its claims against the R&TD measures should be
reviewed in this proceeding because the significance or relevance of the R&TD measures to the
question of EU compliance has increased over time. 192 We note, however, that the R&TD work
conducted under the majority of the challenged R&TD measures came to an end prior to the
conclusion of the original proceeding. To the extent that the United States considered this R&TD
work continued to bear on the question of compliance, it is therefore unclear why the United States
could not have challenged them in the first compliance proceeding. Again, by not asserting any claim
against the R&TD measures in the first compliance proceeding, the European Union had no basis to
assume that it had compliance obligations in this dispute with respect to the R&TD measures.193
Thus, for all of the foregoing reasons, we find that the United States is not entitled to raise
claims in this second compliance proceeding against the R&TD measures that were the subject of
findings in the original proceeding, as well as the Seventh Framework Programme, which was not

187 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.189.
188 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.199.
189 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.200.
190 United States' second written submission, para. 337. (emphasis original)
191 See, in this regard, Panel Report, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), para. 6.199; Appellate Body Reports, EC and certain member States – Large Civil Aircraft,
192 United States' comments on the European Union's response to Panel question No. 81, para. 322.
193 See Panel Report, US – Countervailing Measures on Certain EC Products (Article 21.5 – EC),
para. 7.75.

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addressed in the original proceeding, but could have been challenged by the United States in the
first compliance dispute.
The United States' claims against the Eighth Framework Programme
This section addresses whether the United States is entitled to raise claims against the
Eighth Framework Programme, an alleged subsidy programme which did not exist at the time of
establishment of the first compliance proceeding.194
The European Union argues that the United States may not raise any claims against the
Eighth Framework Programme as it does not constitute a "measure taken to comply" within the
meaning of Article 21.5 of the DSU.195 The European Union argues that for a measure to be properly
before a compliance panel, it must not only be specifically identified in a panel request, but must
also constitute a "measure taken to comply" within the meaning of Article 21.5 of the DSU. 196
Accordingly, the European Union argues that by not including it in its panel request, the
European Union did not declare the Eighth EU Framework Programme to be a measure taken to
comply.197 However, the European Union recognizes that the parties' characterization of a measure
as one taken to comply is not dispositive and that it is up to the Panel to determine its jurisdiction,
which may involve examining measures that the implementing Member has not declared to be
measures taken to comply.198 In this regard, the European Union argues that the Eighth Framework
Programme cannot be characterized as an "undeclared measure taken to comply", because it does
not have a "particularly close relationship" or a "close nexus" with the adopted DSB
recommendations and rulings or the declared measures taken to c omply in terms of their timing,
nature and effect.199
The United States objects to the European Union's strict reliance on what is known as the
"close nexus test", arguing that the European Union " does not engage with the first compliance
panel's warning that 'there may be situations where the factual circumstances and legal provisions
at issue in a particular compliance dispute call for a different approach to be taken'".200 Even so, the
United States argues that the Eighth Framework Programme bears a sufficiently close nexus to the
European Union's declared measures taken to comply and the DSB's recommendations and rulings,
and presents arguments related to each of the requisite elements.
Both parties accept that Article 21.5 proceedings concern measures "taken to comply" with
the recommendations and rulings of the DSB.201 Such measures may include measures declared by
the implementing Member to bring it into compliance, but also include other measures that were not
expressly declared as a "measure taken to comply" by the original respondent. Such undeclared

194 We note that in its responses to Panel questions, the United States has identified several other R&TD
measures involving Airbus that did not exist at the time of establishment of the first compliance proceeding.
These include the German civil aviation research programmes, LuFo V (2015-2019) and LuFo VI (2018-2022),
as well as the UK's "Wing of the Future" programme. However, these measures were not cited by the
United States as challenged measures, in direct response to a Panel question to this effect. The United States
also did not present any arguments that these measures constituted specific subsidies which confer a benefit.
Considering the late stage in the proceeding in which the United States raised these measures, and given the
lack of substantive arguments the United States has advanced in their regard, we do not understand the
United States to be challenging them. (See United States' first written submission, paras. 118 and 126;
second written submission, para. 299 and fn 396; response to Panel question No. 79, paras. 196-197; and
European Union's comments on the United States' response to Panel question No. 79, paras. 445 and 449).
195 The European Union, in the alternative, also argues that the Second through Sixth Framework
Programmes and the Seventh Framework Programme are not measures taken to comply within the meaning of
Article 21.5 of the DSU. The preceding section recommends that the Panel find that the United States is
precluded from challenging all of these programmes.
196 European Union's second written submission, para. 538.
197 European Union's second written submission, para. 539.
198 European Union's second written submission, para. 540.
199 European Union's second written submission, para. 542.
200 United States' second written submission, para. 345 (referring to Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), para. 6.84, fn 190).
201 Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil), para. 36. The Appellate Body
reiterated in EC – Bed Linen (Article 21.5 – India) that "{i}f a claim challenges a measure which is not a
'measure taken to comply', that claim cannot properly be raised in Article 21.5 proceedings". (Appellate Body
Report, EC – Bed Linen (Article 21.5 – India), para. 78. (emphasis original))

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measures taken to comply are measures that may "operate{} to undermine or effectively nullify the
declared 'measures take n to comply ' or otherwise circumvent that Member's compliance
obligations".202 As the Eighth Framework Programme is not a declared measure "taken to comply"
by the European Union, the question arises as to whether it may be brought into the scope of this
proceeding as an "undeclared" measure taken to comply by application of what is described as the
"close nexus" test.
Panels and the Appellate Body have applied the "close nexus" test in order to assess whether
an undeclared measure "taken to comply" may fall within a panel's terms of reference in the context
of standard compliance proceedings. 203 Thus far, the "close nexus" test has been applied to allow
complainants to initiate compliance proceedings to review measures that have not been specifically
declared by an implementing member as measures "taken to comply". The test has not yet been
applied in a "reverse" compliance proceeding to allow an original complainant to challenge an
undeclared measure which is not identified in the original respondent's request for panel
establishment. Although the United States objects to the European Union' s strict reliance on the
close nexus test, it fails to set out any reasons for not applying the test, merely relying on the
possibility that another approach may be taken.
In considering whether the "close nexus" test should apply in this "reverse" compliance
proceeding, we recall that our analysis in this section proceeds on the basis of the premise that an
original complainant in a "reverse" compliance proceeding is entitled to raise claims against
measures not specifically identified by the original respondent in its panel request. 204 Given this
premise, we believe it makes sense to apply the "close nexus" test to determine whether a measure
not identified by an original res pondent in its panel request may fall within a "reverse" compliance
panel's terms of reference. In our view, such an approach would effectively define the types of
measures that an original complainant may bring into a "reverse" compliance dispute in the s ame
way that measures that are not declared by an implementing Member to be "measures taken to
comply" can be brought within the scope of a normal compliance dispute – namely, when they have
a particularly close relationship with the measures taken to comp ly and/or the recommendations
and rulings of the DSB.
Under the "close nexus" test, any measure with a "particularly close relationship" to the
declared measure taken to comply, and to the recommendations and rulings of the DSB may be
susceptible to review by a compliance panel.205 As explained by the first compliance panel:
Determining whether {a measure is susceptible to review} requires panels to "scrutinize
these relationships" in the context of the "factual and legal background" against which
a declared measure taken to comply is adopted, which may, depending on the particular
facts, call for an examination of the timing, nature and effects of the various measures.
A compliance panel must on this basis determine whether there are "sufficiently close
links" between the relevant measures and the DSB recommendations and rulings such
that it would be appropriate to characterize the undeclared measure as a "measure
taken to comply" and, consequently, to assess its consistency with the covered
agreements in a proceeding initiated under Article 21.5 of the DSU.206
Thus, in order for the United States' claims against the Eighth Framework Programme to fall
within our terms of reference, we must determine whether a particularly close relationship exists
between that Programme and the recommendations and rulings of the DSB, and the declared
measures taken to comply.
We recall that the DSB's recommendations and rulings from the first compliance proceeding
concern the A380 and A350XWB LA/MSF measures. 207 The declared measures taken to comply in

202 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.82.
203 See Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 77.
204 See above para. 7.74.
205 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.83.
206 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.83
(referring to Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 77. (emphasis
added)).
207 In the original proceeding, the United States identified the Mühlenberger Loch and Bremen Airport
measures but did not pursue these in the compliance proceeding. (Panel Report, EC and certain member States
– Large Civil Aircraft (Article 21.5 – US), fns 1472 and 3330).

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this dispute are the actions which the European Union alleges have withdrawn the LA/MSF subsidies
and/or the alleged steps taken by the European Union and certain member States to remove their
adverse effects. Application of the "close nexus" test requires us to assess the proximity of the Eighth
Framework Programme with these declared measures taken to comply and the recommendations
and rulings of the DSB in connection with LA/MSF. This involves examining the timing, na ture and
effects of each of these.
7.3.5.1 Timing
The European Union argues that there is a temporal disconnect between the more recent
Framework Programmes, including the Eighth Framework Programme, and the development of the
A380 and A350XWB. In particular, as the A380 and A350XWB were launched in 2000 and 2006
respectively, the European Union argues that the A380 and A350XWB were launched, developed,
tested, and certified before the Eighth Framework Programme even began 208, and thus this
Framework Programme cannot be a measure taken to comply.
The United States does not deny that there is a temporal disconnect between the R&TD
activities funded through the Eighth Framework Programme and Airbus's original development of
the A380 and A350XWB but contends that this disconnect is irrelevant.209 However, the United States
argues that the Eighth Framework Programme's funding overlaps the continuing investment that the
European Union has cited as a measure taken to comply both in time and in the topic areas covered,
and that thus, it complements and supplements the effects of the original LA/MSF for those aircraft
by maintaining and enhancing the market presence of the aircraft that the older financing enabled.210
Consequently, according to the United States, there is a close nexus in terms of timing between the
Eighth Framework Programme and LA/MSF.
The European Union is correct that the funding provided under the Eighth Framework
Programme was disbursed for activities taking place after the launch, development, testing and
certification of the A380 and A350XWB. We note, however, that the funding provided under the
Eighth Framework Programme overlaps with the continuing investment in post -launch support
allegedly undertaken by Airbus in relation to both the A380 and the A350XW B, which the
European Union has cited as a measure taken to comply. Accordingly, the R&TD work performed
under the Eighth Framework Programme coincides with several of the European Union's compliance
actions. To this extent, it cannot be excluded from the timing of the Eighth Framework Programme,
that the R&TD work funded thereunder could undermine the European Union's alleged compliance
actions, especially if the nature and effect of that work can be linked with the continued development
and market presence of the A380 and the A350XWB.
Nature
According to the European Union, unlike the LA/MSF subsidies for the A380 and the
A350XWB, the funding available under the Eighth Framework Programme does not pertain to the
financing of the development of a specific a ircraft programme. Instead the European Union argues
that the funding available under the Eighth Framework Programme is provided for conducting the
early stages of research into new technologies that may or may not be applied on future aircraft
development programmes.211 The European Union's argument is that the general nature of the
research funded by the Eighth Framework Programme simply cannot be equated with particular
instances of LA/MSF that were found to enable the launch of specific types of aircraft "as and when"
they were launched.212
The United States argues that the nature of the R&TD projects funded under the Eighth
Framework Programme is not unlike the work funded through the LA/MSF provided for the A380 and
A350XWB. Key to its arguments are the supposed overlaps between the work performed under the
LA/MSF measures and the work performed in connection with the R&TD measures.213 In this regard,

208 European Union's second written submission, para. 548.
209 United States' second written submission, para. 358.
210 United States' second written submission, para. 358.
211 European Union's second written submission, para. 543.
212 European Union's second written submission, para. 544.
213 United States' second written submission, para. 348.

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the United States refers to various projects and programmes linked to the development of the A380
and A350XWB (as well as the A320neo and A330neo), arguing that these projects and programmes
directly impacted "several technology areas", though only certain of these arguments r elate
specifically to the Eighth Framework Programme. 214 The United States asserts that the LA/MSF
contracts "authorized Airbus to use funds to conduct technical feasibility studies and validation work,
including preliminary design, wind tunnel tests, costs of prototype and trial aircraft, structural tests,
wing tests, [***]".215 Similarly, the United States submits that the Large Passenger Aircraft (LPA)
element of the Clean Sky 2 project funded under the Eighth Framework Programme is aimed at
developing flight-test vehicles and prototypes, developing manufacturing and assembly concepts,
and performing flight tests.216 According to the United States, the Clean Sky 2 project is aimed at
taking technologies developed under the Seventh Framework Programme's Clean Sk y project "to a
higher level". 217 The United States disagrees with the European Union's assertion that the
Eighth Framework Programme was limited to early -stage research, arguing that in fact " some
activities under the Eighth Framework {are} explicitly aimed at 'R&TD with near -term
applications'".218 Moreover, the United States argues that, like LA/MSF, the Eighth Framework
Programme funds both early- and late-stage R&TD.219
We recall that the adverse effects that are the subject of the DSB's recommendations and
rulings were found to have been caused by LA/MSF subsidies related specifically to the A380 and
the A350XWB. The factual situation with respect to the R&TD work funded under the
Eighth Framework Programme is different, and can be contrasted with the circum stances faced by
the panel in the first compliance dispute, when it found there was a "close nexus" between the
A350XWB LA/MSF measures and the other LA/MSF measures at issue in that dispute.220 There, the
United States had argued that the A350XWB LA/MSF mea sures had essentially the same nature as
the LA/MSF measures found to cause adverse effects in the original proceeding because both were
"(a) loans; (b) concluded between the same parties; (c) with the same core success -dependent,
levy-based, back-loaded and unsecured repayment terms; and (d) for the purpose of developing
new models of LCA to compete against Boeing". 221 This is markedly different from the form of the
R&TD funding provided under the Eighth Framework Programme, which consists of a large-scale,
overarching scheme through which cash grants are awarded upon application to fund particular,
discrete research and development projects aimed at developing various technologies, much of
which is generic and does not refer to specific aircraft programmes.222
We agree with the United States, in principle, that the work done under the R&TD measures
can overlap with LA/MSF in certain areas because the design and launch of an aircraft will involve
research and technical development. Thus, where both are aimed at, for example, developing flight
test vehicles and prototypes, we understand there to be an overlap in terms of scope. However, the
essential point is that even to the extent that United States is correct about the overlaps between
the two typ es of measures, the purpose and objective of each is different. On the one hand the
projects funded under the Eighth Framework Programme are relatively early-stage research into
various technologies and production methods which, while related specifically to aircraft and areas
such as fuel efficiency and aerodynamics, are not tied to the launch and development of a specific
type of aircraft or model of Airbus LCA. In other words, on the evidence presented by the
United States, the R&TD projects funded under the Eighth Framework Programme are not product-
specific. On the other hand, the government loans provided to Airbus under the LA/MSF measures
were intended to finance the specific development and launch of the A380 and A350XWB. 223 The
successful execution of the contracting parties' obligations under the LA/MSF agreements would

214 United States' first written submission, paras. 277-294; and second written submission, para. 349.
215 United States' second written submission, para. 351 (referring to Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.227, 6.237, 6.250, and 6.258).
216 Clean Sky 2 Joint Undertaking: Work Plan 2018-2019, (Exhibit USA-119), pp. 18-19.
217 United States' second written submission, para. 357 (referring to Clean Sky 2 Joint Undertaking:
Work Plan 2014-2015, (Exhibit USA-149), p. 66).
218 United States' second written submission, para. 354.
219 United States' second written submission, para. 355.
220 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.150-6.154.
221 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.58.
222 European Union's second written submission, para. 543.
223 Likewise, the European Union's alleged non-subsidized investments were not of a general nature, but
specifically targeted to the A350XWB and the A380.

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result in the launch, development and sale of a specific Airbus LCA. In contrast, the successful
completion of the Airbus projects funded under the Eighth Framework Programme would allow Airbus
to access a number of prototype technologies which may or may not be further developed and used
on one or more of its existing or future LCA models.
Moreover, while it is possible to say that from a general perspective, certain aspects of the
work funded under the LA/MSF agreements and the Eighth Framework Programme share some
common features, both sets of measures also fund work that does not overlap. Under the aeronautics
component of the Eighth Framework Programme, for example, a range of pro jects are funded, and
only a part of these are related to LCA development in the same way as LA/MSF.224 Furthermore, it
appears that funding under the Eighth Framework Programme is not expressly earmarked for specific
aircraft and the United States has not e ffectively demonstrated that the elements of the work that
do overlap are in fact related to the development of specific aircraft. Accordingly, on the basis of the
above considerations, we find that there is no particularly close relationship between the n ature of
the Eighth Framework Programme, the declared measures taken to comply, and the
DSB's recommendations and rulings.
Effects
The European Union argues that the Eighth Framework Programme is of the same nature as
the Second through Seventh Framework P rogrammes, "for which the European Union has, at no
point during the 15-year history of this dispute, incurred any compliance obligations" .225 Referring
to the Second through Sixth Framework Programmes, the European Union refers to the finding of
the origina l panel, which stated that the " impact of pre -competitive R&TD subsidies on Airbus'
market presence was perhaps more attenuated, compared with the other subsidies at issue ".226
According to the European Union, "pre-competitive" research of the type that has been found, in the
original proceedings, not to complement and supplement the product effect of LA/MSF, is causally
too far removed from the declared measures taken to comply to undermine their compliance with
the DSB's recommendations and rulings. Thus, according to the European Union, the effects of the
Eighth Framework Programme can be distinguished from those of the A380 and A350XWB LA/MSF
subsidies on the basis of the more attenuated nature of the effects of the former, as well as the
adopted findings that these subsidies did not complement and supplement the latter.227
To demonstrate a link between the funding provided under the Eighth Framework
Programme and Airbus LCA development, the United States refers to three examples of projects
funded under the Eighth Framework Programme that allegedly directly benefited Airbus: (i) the
EFFICOMP project, which the United States' maintains has the objective of reducing manufacturing
costs and lead time of composite structure manufacturing for aerospace application s228; (ii) the
Clean Sky 2 Large Passenger Aircraft Programme, which the United States considers aims to "further
mature and validate key technologies such as advanced wings and empennages design, making use
of hybrid laminar airflow wing developments, as we ll as an all-new next generation fuselage cabin
and cockpit-navigation"229 and; (iii) the Graphene Flagship project, which the United States asserts
is aimed at improving "existing and broadly used aeronautic products, especially those where high
performance composites of epoxy resins and carbon fibres are implemented in airplane parts and
fuselages".230
On their own, according to the United States, the R&TD under the Eighth Framework
Programme generally accelerates the market entry of new and derivative Airbus LCA through the
additive effects of generating learning that Airbus would not otherwise enjoy. 231 The United States
cites examples in support of these assertions with respect to the A380, A350XWB, A320neo, and

224 See, for example, the CompInnova Project, which aims to develop a "revolutionary automated
multipurpose and multifunctional Vortex robot … for inspecting metallic and composite aircraft structures". See
<http://compinnova.eu/>, accessed 21 August 2019.
225 European Union's second written submission, para. 545.
226 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1959.
227 European Union's second written submission, para. 546.
228 EFFICOMP Project, CORDIS website, (Exhibit USA-36).
229 LPA GAM 2018 Project, CORDIS website, (Exhibit USA-37).
230 Aerostructures Manufacturer, Graphene Flagship website, (Exhibit USA-38).
231 United States' first written submission, para. 276.

BCI deleted, as indicated [***]

A330neo.232 The United States argues that the European Union has thus provided no support for its
assertion that the impact of Eighth Framework Programme's research on Airbus's technical
capabilities is more attenuated than LA/MSF. The United States notes that one of the stated goals
of the Clean Sky 2 project, for example, is the development of technology to Technology Readiness
Level (TRL) 6, which overlaps in part with the types of R&TD funded by LA/MSF.233
As we have noted above, the Eighth Framework Programme does not involve product -
specific financing, marking a crucial difference between that programme and LA/MSF for the A380
and A350XWB. The projects funded under the Eighth Framework Programme raised by the
United States do not appear to be associated with the A380 or A350XWB, nor any apparent direc t
replacement model. Indeed, they do not appear to be specific to any particular model of Airbus LCA.
It is thus difficult to see how, in practice, the effects of the Eighth Framework Programme would act
specifically to undermine the European Union's compliance in this dispute.
Furthermore, we note that the majority of the work performed under the Eighth Framework
Programme will only have effects in the future. Thus, even if the United States were correct in
arguing that the subject matter of the Eighth Fr amework Programme and the LA/MSF measures
overlaps in scope, it has not, in our view, presented sufficient evidence to demonstrate that the
research funded under the Eighth Framework Programme could result in " matured technology that
Airbus used on the A380 and the A350XWB either at the time of launch, or after those aircraft were
launched"234 because as the United States itself notes, flight testing of the technologies under the
Clean Sky 2 Programme "is planned for late 2019 or early 2020, with production a nd delivery of a
lower fuselage section in the 2020-2022 period".235 Similarly, the EFFICOMP project aims to "develop
efficient processes and efficient certification tools for the fast -track {of} cost -effective composite
aircraft of the future".236 The United States has not explained how a project that aims to begin flight
tests in 2020 or the development of processes for "aircraft of the future" could be linked to:
(i) Airbus' ability to launch the A380 and the A350XWB, as and when it did and, (ii) Airbus' completed
post-launch investments in the A380 and the A350XWB that hav e resulted in technologies and
production processes already in use.237
In the light of our review of the limited evidence and arguments presented by the
United States with respect to the Eighth Framework Programme, and the distinct design and
objectives of the R&TD measures which are not tied to particular aircraft models, we do not see a
sufficient basis to find that the effects of the Eighth Framework Programme are likely to undermine
the European Union's compliance with the adopted recommendations and ruli ngs. Unlike LA/MSF
and the allegedly non -subsidized investments Airbus made into the A350XWB and the A380 , the
work performed under the Eighth Framework Programme is not particularly closely related to
enhancing Airbus' present competitiveness of the A350XWB and A380 in the marketplace.
7.3.6 Conclusions
In the light of the above analysis, we find that the United States' claims against the
R&TD measures are outside of the scope of this second compliance proceeding. We reach this
conclusion on the basis of the following considerations:
a. The R&TD measures that the United States challenges are not identified, as a matter of
fact, in the European Union's panel request; and
b. Even assuming, arguendo, that the absence of any reference to the challenged
R&TD measures in the European Union's panel request does not prevent the United States
from raising its claims in this proceeding, the United States is nevertheless precluded from
raising those claims because:

232 United States' first written submission, paras. 277-294.
233 United States' second written submission, para. 354.
234 European Union's response to Panel question No. 84, para. 480.
235 United States' second written submission, paras. 350 and 357.
236 "Objectives" EFFICOMP Website, <https://efficomp.eu/objectives>, accessed 29 July 2019.
(emphasis added)
237 European Union's comments on the United States' response to Panel question No. 76, para. 402.

BCI deleted, as indicated [***]

i. As regards the United States' claims against the R&TD measures that were the subject
of findings in the original proceeding, as well as the Seventh Framework Programme,
the United States is precluded from raising those claims because it could have brought
them in the first compliance proceeding but failed to do so.
ii. As regards the United States' claims against the Eighth Framework Programme , the
United States has failed to establish that the Eighth Framework Programme has
"sufficiently close links" with the relevant measures taken to comply and the
DSB's recommendations and rulings such that it would be appropriate to characterize
the Eighth Framework Programme as a "measure taken to comply".
7.4 Whether the A350XWB and A380 LA/MSF subsidies have been withdrawn for the
purpose of Article 7.8 of the SCM Agreement
Introduction
In this section, we address the European Union's claim that it has withdrawn the A350XWB
and A380 LA/MSF subsidies , within the meaning of Article 7.8 of the SCM Agreement, thereby
achieving full substantive compliance with the DSB recommendations and rulings.238
The European Union maintains that a Member achieves compliance through the withdrawal
of the subsidy, within the meaning of Article 7.8, when that subsidy ceases to exist. In this regard,
the European Union submits that Article 1.1 of the SCM Agreement identifies a financial contribution
and a benefit as two distinct constituent elements of a subsidy, and a subsidy will no longer exist
when either one of the two elements is removed. Under this understanding, a subsidy would no
longer be "maintained" within the meaning of Article 7.8 when either the financial contribution or
the benefit no longer exist s.239 The European Union finds support for its position in the ordinary
meaning of the term "withdraw", as allegedly clarified by the Appellate Body in the first compliance
proceeding.240
The European Union submits that there are different means through which a Member may
achieve the withdrawal of a subsidy for the purpose of Article 7.8 of the SCM Agreement. In this
proceeding, the European Union has identified the following three circumstances in which it argues
the lives of the A350XWB and A380 LA/MSF subsidies have ceased to exist and, therefore, been
withdrawn for the purpose of Article 7.8 of the SCM Agreement : (i) the actual repayment of all
outstanding principal and accrued interest under the UK A350XWB and UK A380 LA/MSF loans ;
(ii) the replacement of the German A350XWB LA/MSF and French, German, Spanish and UK A380
LA/MSF agreements , with amended LA/MSF agreements conferred on terms consistent with the
relevant market benchmark; (iii) the amortization of the benefit of the Spanish A380 LA/MSF subsidy
through the passage of time.241
With this explanation of the European Union's claims, we first address the European Union's
claims concerning the German and UK A350XWB LA/MSF subsidies before addressing the
European Union's various claims concerning the A380 LA/MSF subsidies. Before doing so, we
consider it helpful to first recall the guidance from the first compliance proceedi ng regarding the
obligation to withdraw the subsidy contained in Article 7.8 of the SCM Agreement.
Guidance fr om the first compliance proceeding regarding the obligation to
"withdraw" the subsidy contained in Article 7.8 of the SCM Agreement
In the first compliance proceeding, the European Union argued before the panel that it had
no obligation to adopt compliance measures with respect to subsidies that had ceased to exist prior

238 The European Union has not argued that the French and Spanish A350XWB LA/MSF subsidies have
been withdrawn, instead arguing that it has taken appropriate steps to remove any adverse effects arising
from those and any other non-withdrawn subsidies. We address the European Union's claim regarding the
removal of adverse effects of any non-withdrawn subsidies in section 7.5 below.
239 European Union's first written submission, para. 59 (citing Appellate Body Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), para. 5.383).
240 European Union's first written submission, paras. 60-62.
241 European Union's first written submission, para. 63.

BCI deleted, as indicated [***]

to the DSB's adoption of the panel and Appellate Body recommendations and rulings in the original
proceedings in EC and certain member States – Large Civil Aircraft on 1 June 2011. 242 The panel
rejected this argument based on its finding that compliance under Article 7.8 can only be achieved
if "an implementing Member no longer causes adverse effects through the use of subsidies within
the meaning of Article 5 of the SCM Agreement". 243 The European Union requested the
Appellate Body to reverse this finding. 244 In doing so , the Appellate Body addressed the
interpretation of what is required to achieve compliance within the meaning of Article 7.8 of the
SCM Agreement.
The Appellate Body began its analysis with an assessment of the text of Article 7.8 of the
SCM Agreement, which provides:
Where a panel report or an Appellate Body report is ado pted in which it is determined
that any subsidy has resulted in adverse effects to the interests of another Member
within the meaning of Article 5, the Member granting or maintaining such subsidy shall
take appropriate steps to remove the adverse effects or shall withdraw the subsidy.
The Appellate Body observed that Article 7.8 consists of two clauses, the first of which refers
to circumstances where a subsidy is found to have "resulted in adverse effects to the interests of
another Member", and the second of which specifies two alternative ways that "the Member granting
or maintaining such a subsidy" may come into compliance with its obligations under the
SCM Agreement.245 These options are to: (i) either "take appropriate steps to remove the adverse
effects"; or (ii) "withdraw the subsidy". 246 In terms of the reference in Article 7.8 to "granting or
maintaining" a subsidy found to have caused adverse effects, the Appellate Body considered "these
terms indicate that Article 7.8 reflects an obligation to cease any conduct amounting to the 'granting
or maintaining' of subsidies that cause adverse effects". 247 Due to its view that Article 7.8 sets out
an obligation "of a continuous nature, extending beyond subsidies granted in the past" 248, the
Appellate Body found it "difficult to see how a Member could be said to be 'granting or maintaining'
a subsidy giving rise to a compliance obligations if that subsidy has expired and therefore no longer
exists".249
In terms of achieving "withdrawal" of a subsidy, the Appellate Body noted that the relevant
dictionary definitions of the term include: "{d}raw back or remove (a thing) from its place or
position"; "{t}ake back or away (something bestowed or enjoyed)"; "{c}ease to do, refrain from
doing".250 The Appellate Body thus explained that "{t}his suggests that withdrawal of a subsidy,
under Article 7.8 of the SCM Agreement, concerns the taking away of that subsidy, and thus that a
Member 'granting or maintaining' a subsidy cease such conduct".251 In order to withdraw a subsidy,
the Appellate Body proceeded to note that "an implementing Member may be able to take action to
align the terms of the subsidy with a market benchmark or to otherwise modify the terms of the
subsidy such that it no longer qualifies as a subsidy".252 In this vein, the Appellate Body additionally

242 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.794.
243 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.822
and 6.1085.
244 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.353.
245 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.362.
246 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.362 (referring to Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), para. 236).
247 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.364.
248 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), para. 237.
249 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.364. (emphasis original)
250 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.366.
251 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.366.
252 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.366.

BCI deleted, as indicated [***]

stated that it was "not clear … how an implementing Member could modify the terms and conditions
of subsidies that no longer exist".253
The Appellate Body also considered its understanding of withdrawal taking into account the
context and object and purpose of Article 7.8. The Appellate Body emphasized that, while the focus
of Article 5 of the SCM Agreement, as well as Article 7.8, is the causing of adverse effects through
the use of a subsidy, Article 7.8 contemplates compliance action only in relation to the subsidy found
to have caused adverse effects. For this reason, to the extent that the underlying subsidy has ceased
to exist, the Appellate Body observed that there is no additional requirement under Article 7 .8 to
remove any lingering effects that may flow from that subsidy. 254 The Appellate Body further noted
that its understanding of the term "withdrawal" was supported in the relevant provisions of the
SCM Agreement governing prohibited subsidies. In particula r, the Appellate Body noted that the
remedy discussed in Article 4.7 "withdraw the subsidy without delay" does not require the removal
of the effects of such subsidies. 255 Thus, the Appellate Body explained that "{i}t would be
incongruous, in our view, if elimination of the source of the inconsistency were sufficient to comply
with an implementing Members' obligations in the context of Article 4.7, but not in the context of
Article 7.8".256 The Appellate Body also noted that Article 19.1 in Part V of the SCM Ag reement,
addressing the imposition of countervailing duties, stipulates that countervailing duties may be
imposed on subsidised imports "unless the subsidy or subsidies are withdrawn".257
Thus, the Appellate Body emphasized that the obligation to "take appro priate steps to
remove the adverse effects … or withdraw the subsidy" in Article 7.8 pertains to subsidies that
continue to be ''granted" or "maintained" by the implementing Member after the conclusion of the
implementation period. In turn, an implementing Member is not required to withdraw a subsidy that
has ceased to exist. 258 Accordingly, based on this understanding, an implementing Member would
have no compliance obligation with respect to subsidies that have expired or ceased to exist.
With this guidance in mind, we turn to evaluate the merits of the parties' submissions
concerning the measures and steps the European Union maintains have resulted in the withdrawal
of the A350XWB and A380 LA/MSF subsidies.
The [***] amendment to the German A350XWB LA/MSF agreement
Main arguments of the parties
The European Union maintains that the subsidy provided to Airbu s through the original
German A350XWB LA/MSF agreement has been "withdrawn", within the meaning of Article 7.8 of
the SCM Agreement, by means of replacement with a new non-subsidized German A350XWB LA/MSF
agreement. According to the European Union, where an implementing Member granting a financial
contribution on subsidized terms varies those terms, such that there is a "substantial" modification
in what the Member provides the recipient, the Member provides a new financial contribution, the
benefit of whic h must be determined by comparing the terms of the new instrument to a
contemporaneous market benchmark.259

253 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.366.
254 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.371.
255 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.376.
256 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.376.
257 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.378.
258 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.383
259 European Union's first written submission, paras. 70-80 and 100-102. Canada appears to share the
European Union's view that the amended terms and conditions should be assessed against the terms and
conditions available on the market at the time when full substantive compliance is asserted, in the case of
respondent-initiated compliance proceedings. (Canada's response to Panel question No. 1 to third parties,
paras. 1 and 5).

BCI deleted, as indicated [***]

The European Union argues that the [***] amendment to the original German A350XWB
LA/MSF agreement brought about a "substantial modification" 260 to its terms as a result of the
changes made to the [***], the [***], the [***], and [***].261 For the European Union, these
changes result ed in a new financial contribution, the "benefit" of which must be assessed by
comparing the newly agreed terms with a benchmark that reflects the relevant market conditions
and positions of Airbus and the German government in 2018.262
In assessing whether the newly amended German A350XWB LA/ MSF agreement was
provided on such market terms, the European Union relies on a report produced by its consultant,
TradeRx, which compares the terms of the amended German A350XWB LA/MSF agreement with an
alleged contemporaneous market benchmark, following the approach adopted in the first compliance
proceeding to determine the internal rate of return (IRR) and applicable market benchmark for the
original German A350XWB LA/MSF loan .263 The European Union points out that, according to the
calculations in the TradeRx A350XWB Report, the expected IRR of the amended German A350XWB
LA/MSF agreement exceeds the relevant contemporaneous market benchmark. 264 The
European Union thus concludes that the German A350XWB LA/MSF agreement resulting from th e
[***] amendment replaces the subsidi zed financial contribution under the original German
A350XWB LA/MSF agreement with a financial contribution that does not confer a benefit, and is,
therefore, not subsidized.265
Finally, the European Union also argue s, in the alternative, that it would be appropriate to
view the [***] amendment to the German A350XWB LA/MSF loan agreement as an intervening
event that brings the life of the German A350XWB LA/MSF loan to an end, achieving withdrawal of
the subsidy for the purpose of Article 7.8 of the SCM Agreement.266
The United States maintains that the European Union has chosen the wrong analytical
framework to assess the question of withdrawal , arguing that there is no support for the
European Union's submission that the [***] amendment achieved compliance with respect to the
original German A350XWB LA/MSF subsidy. The United States submits that the benchmark analysis
set out in TradeRx A350XWB Report might be appropriate to determine whether a new loan confers
a subsidy, but it does not properly address the question of whether an amendment to a pre-existing
loan provided on subsidized terms has been withdrawn. The United States argues that, in order to
answer that question, it is necessary to assess the effect of the amendment on the pre-existing loan,
which in the United States' view, TradeRx A350XWB Report has ignored.267
According to the United States, the [***] amendment to the German A350 XWB LA/MSF
agreement is correctly viewed as an "intervening event", or "an unplanned adjustment to the terms
of the pre-existing German LA/MSF for the A350XWB", that "increased the benefit conferred by the
pre-existing German LA/MSF subsidy for the A350XWB" and prolo nged its "life" until at least
[***].268 To assess the effect of the amendment, the United States submits a report produced by
its consultant, NERA Economic Consulting, that compares the IRR of the original unamended German
A350XWB LA/MSF agreement, as of [***], to the IRR of the amended German A350XWB LA/MSF
agreement, as of [***].269 The NERA German A350XWB Report concludes that the IRR of the
original unamended arrangement is higher than the IRR of the amended loan agreement, which the
United States submits means that the amendment increased the subsidy to Airbus and that the
German lender, KfW, would have been in a better financial position if it had simply left the terms of

260 European Union's first written submission, para. 101; German A350XWB [***] amendment,
(Exhibit EU-9 (BCI) (English translation)), Clause 2(d) and Annex 2. See also TradeRx A350XWB LA/MSF
Report, (Exhibit EU-11 (HSBI/BCI)), paras. 37-39.
261 European Union's first written submission, para. 101.
262 European Union's first written submission, para. 103.
263 TradeRx A350XWB LA/MSF Report, (Exhibit EU-11 (HSBI/BCI)).
264 European Union's first written submission, paras. 105-107 (referring to TradeRx A350XWB LA/MSF
Report, (Exhibit EU-11 (HSBI/BCI)).
265 European Union's first written submission, paras. 115-116.
266 European Union's first written submission, fn 142.
267 United States' first written submission, para. 96.
268 United States' first written submission, paras. 93 and 100.
269 NERA German A350XWB LA/MSF Report, (Exhibit USA-26 (HSBI/BCI)).

BCI deleted, as indicated [***]

the original A350XWB LA/MSF unamended. 270 Accordingly, the United States concludes that "no
reasonable commercial lender in the position of the Government of Germany would have agreed to
enter into the [***] Amendment".271 In addition, the United States argues that the [***]
amendment "prolonged the life of the pre-existing German LA/MSF subsidy for the A350XWB to well
after [***]", because the amendment was based on an expectation that A350XWB deliveries would
continue [***].272
Finally, the United States argues that even if the Panel were to accept the European Union's
analytical framework as the correct one, a comparison of the IRR of the [***] amendment to the
market benchmark used by TradeRx shows that no reasonable commercial lender would have agreed
to the amendment's terms. The United States relies upon a second analysis of the [***] amendment
performed by NERA, in which NERA calculated a r evised IRR for the amended German A350XWB
LA/MSF loan agreement. NERA based this calculation on a revised delivery schedule that NERA
constructed after concluding that the delivery schedule used by TradeRx "is at odds with the
anticipated number of deliver ies in the Ascend data, the statement of Airbus executives, and the
[***] anticipated in the business case for the A350XWB". 273 Based on this assessment NERA
concluded that, assuming that the market benchmark used by TradeRx was correct, then the IRR is
actually lower than what a market lender in 2018 would have required for a similar transaction. 274
In connection with NERA's updated analysis, the United States has also argued that TradeRx's
market benchmark is also "likely too low", because TradeRx "appear{s} to have improperly ignored
that, even under an early repayment scenario, KfW would have been entitled to [***] provided for
under the terms of the original German A350 XWB LA/MSF contract". 275 For these reasons, the
United States argues that, even if the Pan el were to agree that the European Union's analytical
framework was the correct one, the European Union has failed to demonstrate that the IRR of the
German A350XWB LA/MSF as modified by the [***] amendment is not lower than the market
benchmark.276
Evaluation by the Panel
Features of the amended German A350XWB LA/MSF loan agreement
As explained in section 7.2.2.2 above, the original German A350XWB LA/MSF agreement
entitled Airbus to draw a total of [***] under a scheduled series of disbursements. Repayments
were to be made through per-aircraft levies based on an estimated delivery forecast submitted in
connection with the original loan agreement.277 Full repayment of the drawn-down loan principal was
expected to occur by [***].278 The original agreement also required Airbus to [***].279

270 NERA German A350XWB LA/MSF Report, (Exhibit USA-26 (HSBI/BCI)), paras. 7-8; United States'
first written submission, para. 93.
271 United States' first written submission, para. 93.
272 United States' first written submission, paras. 87 and 100.
273 Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173 (HSBI/BCI)), para. 18. To construct
a delivery schedule for the A350XWB, NERA considered it reasonable to rely on actual deliveries through the
end of 2017 with projected deliveries as reported by Flight Ascend Consultancy for 2018 to 2019. Beginning
in 2020, NERA then estimated deliveries based on the A350 XWB business case schedule and a maximum
annual delivery level of 120 aircraft. (Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173
(HSBI/BCI)), para. 16).
274 Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173 (HSBI/BCI)), para. 23.
275 United States' comments on the European Union's response to Panel question No. 7, paras. 44-47;
and Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173 (HSBI/BCI)), section VII.
276 United States' comments on the European Union's response to Panel question No. 7, paras. 44-47;
and Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173 (HSBI/BCI)), section V.
277 German A350XWB LA/MSF Agreement, (Exhibit EU-10 (BCI) (English translation)), Clause 3.2; and
Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.237.
278 German A350XWB LA/MSF Agreement, (Exhibit EU-10 (BCI) (English translation)), Clause 6; and
Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.238.
279 German A350XWB LA/MSF Agreement, (Exhibit EU-10 (BCI) (English translation)), Clause 10; and
Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.242.

BCI deleted, as indicated [***]

The original loan agreement was [***].280 The agreement was amended [***].281 On the
latter occasion, the German government lender, KfW, agreed to [***].282 Expected repayments of
outstanding principal were calculated on the basis of [***].283 Under the amended [***], full
repayment of principal and interest is expected to be achieved by [***]. The [***] amendment
also modified [***], with [***].284
Thus, while the [***] amendment modified certain terms of the original German A350XWB
LA/MSF loan agreement, Airbus continues to be under an obligation to repay the outstanding
principal and accrued interest under that loan. The German A350XWB LA/MSF agreement therefore
continues to exist as an outstanding loan, albe it on modified terms. The question that arises is
whether the amended terms modified the arrangement such that it no longer qualifies as a subsidy,
within the meaning of the SCM Agreement.
The relevant analytical framework
The European Union characterizes the [***] amendment to the German A350XWB LA/MSF
loan as an act, and alternatively, an "intervening event", that achieves the withdrawal of the German
A350XWB LA/MSF subsidy, within the meaning of Article 7.8 of the SCM Agreement. We note,
however, that notwithstanding the European Union's alternative characterization, the fundamental
reason advanced by the European Union to support its assertion of compliance on this basis is the
same regardless of how the [***] amendment is described. 285 Thus, irrespective of whether the
amendment is properly characterized as an act, or as an "intervening event", the European Union
maintains that it achieves compliance with its obligation to "withdraw the subsidy" because it has
replaced the pre -existing subsidized A350XWB LA/MSF agreement with a LA/MSF agreement on
terms that would have been offered to Airbus by a market lender. Accordingly, the key question we
must address in order to determine the merits of the European Union's assertion of compliance is
whether the [***] amendment to the German A350XWB LA/MSF agreement has resulted in the
replacement or modification of the subsidized loan that was the subject of the original compliance
proceeding with a market-based loan instrument.
In considering their positions, we begin by recalling the Appellate Body's observations from
the first compliance proceeding regarding the obligation to "withdraw" the subsidy in accordance
with Article 7.8 of the SCM Agreement, as discussed in section 7.4.2 above. The Appellate Body
emphasized that the obligation to either "take appropriate steps to remove the adverse effects … or
withdraw the subsidy" in Article 7.8 pertains to subsidies that continue to be ''granted" or
"maintained" by the implementing Member after the conclusion of the implementation period.286 The
Appellate Body also provided guidance with respect to how an implementing Member may withdraw
a subsidy that is being "granted" or "maintained" for purposes of Article 7.8, agreeing with the
compliance panel that "withdrawal" may be achieved when an implementing Member takes "action
to align the terms of the subsidy with a market benchmark, or to otherwise modify the terms of the
subsidy such that it no longer qualifies as a subsidy". 287 As discussed above, there is no question

280 Email from [***], 20 March 2015, (Exhibit EU-106 (BCI) (English translation)). See also TradeRx
281 See section 7.2.2.2 above.
282 German A350XWB [***] amendment, (Exhibit EU-9 (BCI) (English translation)), Clause 2(d) and
Annex 2. See also TradeRx A350XWB LA/MSF Report, (Exhibit EU-11 (HSBI/BCI)), paras. 37-39. [***] The
[***] amendment does not appear to have [***]. (See [***] German A350XWB LA/MSF Agreement,
(Exhibit EU-10 (BCI) (English translation)), Clauses 5.4(d) and Annex 1.4(f); and KPMG Assessment of [***],
(Exhibit EU-105 (BCI)), pp. 3-5).
283 German A350XWB [***] amendment, (Exhibit EU-9 (BCI) (English translation)), Clause 2(d) and
Annex 2. See also TradeRx A350XWB LA/MSF Report, (Exhibit EU-11 (HSBI/BCI)), paras. 37-39.
284 German A350XWB [***] amendment, (Exhibit EU-9 (BCI) (English translation)), Clause 4; and
TradeRx A350XWB LA/MSF Report, (Exhibit EU-11 (HSBI/BCI)), paras. 39-40.
285 The European Union's claim that the [***] amendment to the German UK A350XWB LA/MSF loan
may be, in the alternative, characterized as an "intervening event" that brings the life of the subsidy to an end,
is presented in a footnote to its first written submission. The European Union does not advance any specific
arguments to support this claim that are different to those advanced in relation to its main, non-alternative,
claim. (See European Union's first written submission, fn 142).
286 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.383.
287 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.366.

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that the amended German A350XWB LA/MSF loan agreement is a measure currently being
maintained by the German government. Thus, the question that remains to be resolved, in the light
of the European Union's submissions, is whether the [***] amendment has aligned the terms of
the A350XWB LA/MSF loan agreement with a market benchmark. In the light of the prospective
nature of WTO remedies288, we understand that the alignment of an existing subsidized loan with a
market benchmark need not result in the repayment of past subsidies provided under that loan, but
rather, it must achieve non-subsidization with respect to the future operation of the loan.
The European Union argues that the making of "substantial" modifications to the terms of a
pre-existing subsidised loan necessarily means that the pre -existing loan has been "replaced" by a
new and different loan, which must be assessed against a contemporaneous benchmark in order to
determine whether the subsidy provided under the original loan has been withdrawn. In advancing
this line of argument, the European Union refers to certain statements and findings made by the
panel in Japan – DRAMs (Korea). Specifically, the European Union relies on the panel's statement
that "the modification of an exis ting loan may properly be treated as the transfer of new rights to
the recipient of the modified loan", in support of its view that an existing financial contribution is
replaced by a "new" one whenever it is "substantially" modified.289
In our view, the Eu ropean Union's reliance on Japan – DRAMS (Korea) is misplaced. The
panel in Japan – DRAMS ( Korea) was called upon to inter alia determine whether
Japan's investigating authority (JIA) had acted inconsistently with its WTO obligations when it
determined that a series of restructuring transactions, which included modifications to the terms of
pre-existing loan agreements in the form of extensions to loan maturities, reductions of interest
rates, and the conversion of interest to principal, invol ved "direct transfers of funds" within the
meaning of Article 1.1(a)(1)(i) of the SCM Agreement. Korea argued that "transactions that merely
change the terms of existing claims, and do not involve the provision of money to the alleged subsidy
recipient, cannot be characterized as transactions involving a 'direct transfer of funds' within the
meaning of Article 1.1(a)(1)(i) of the SCM Agreement". 290 In rejecting Korea's submission and
finding that the JIA had not acted inconsistently with its obligations, the panel expressed the
following views (parts of which the European Union relies upon):
We do not accept that the relinquishment or modification of claims may not, in certain
circumstances, be treated as the transfer of new claims, giving rise to new rights a nd
obligations. For example, once one analyses what actually occurs in the transaction, the
modification of an existing loan may properly be treated as the transfer of new rights
to the recipient of the modified loan. The borrower's old rights no longer ex ist. They
have been replaced by new rights. In this sense, the modified loan may properly be
treated as a new loan. Thus, the modification of a loan through debt forgiveness involves
the transfer of new rights to the borrower, who is now liberated of the o bligation to
repay the debt, and instead has the right to use the money for free. Similarly, the
modification of a loan through an extension of the loan maturity involves the transfer
of new rights to the borrower, who is now entitled to borrow the money f or a longer
period of time. Since the new rights that are transferred in such transactions have
monetary value, and may be counted in a (legal or natural) person's capital, we consider
that such transactions may properly be treated as "direct transfers of funds" in the
meaning of Article 1.1(a)(1)(i) of the SCM Agreement. …291
We note that the legal question that is the focus of the above analysis is whether a
modification to the terms of an existing loan may be characterized as a "direct transfer of funds" for
the purpose of Article 1.1(a)(1)(i) of the SCM Agreement. This legal question arose in the context
of a fact pattern where none of the modified loans at issue had been previously found to constitute
subsidies. In contrast, the legal question at the centre of the European Union's submission in this
dispute is whether the [***] amendment should be understood to have created a new German
A350XWB loan contract that must be considered separately and independently from the pre-existing
subsidized A350XWB loan, when it comes to determining whether the subsidy provided under the

288 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), fn 494; and Panel Report, US –
Large Civil Aircraft (2nd complaint), paras. 6.38-6.42.
289 European Union's first written submission, para. 75 (referring to Panel Report, Japan – DRAMs
(Korea), para. 7.442).
290 Panel Report, Japan – DRAMs (Korea), para. 7.426.
291 Panel Report, Japan – DRAMs (Korea), para. 7.442.

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pre-existing A350XWB loan contract has been withdrawn for the purpose of Article 7.8 of the
SCM Agreement. On the basis of th ese legal and factual differences alone, we do not find the
panel's statements in Japan – DRAMS (Korea) to be instructive for the resolution of the matter before
us. In any case, we do not understand those statements to have the same meaning and implications
as the European Union.
We understand the panel in the above passages to have said that a "modified loan may
properly be treated as a new loan" to the extent that a "borrower's old rights no longer exist" and
"have been replaced by new rights". In our view, in advancing this line of thinking, the panel merely
meant to explain that when the terms of an existing loan are amended, a "new" loan exists, "in the
sense that" the rights and obligations under the pre-existing loan have been modified. The panel did
not say that the pre-existing loan no longer exists, but only that the "borrower's old rights" (those
that are modified) "no longer exist" and "have been replaced by new rights". This does not mean
that the pre -existing loan has been terminated and replaced. Rather, it simply mean s that the
pre-existing loan continues to exist in a modified form. In this regard, we note that Japan had argued
that "changes to the terms of loans amount to a re-issuance of the loan as the terms of the original
loan are extinguished and replaced with n ew terms".292 However, the panel did not go as far as
Japan in its finding, concluding only that the transactions involving the modification of loans at issue
could be characterized as "direct transfers of funds" within the meaning of Article 1.1(a)(1)(i)
because they involved the transfer of new rights of monetary value.
Moreover, to the extent that we should understand the European Union submissions to
suggest that the panel's finding stands for the proposition that the benefit of a new financial
contribution, resulting from modifications made to an existing, subsidized, financial contribution,
must be evaluated at the time of the modifications, we recall that the loans at issue in
Japan – DRAMS (Korea) had not been previously found to confer a benefit. In contrast, in this dispute
the German A350XWB LA/MSF agreement was previously found to constitute a subsidy within the
meaning of Article 1.1 of the SCM Agreement. Thus, in our assessment, there is no basis from which
to draw the implication the European Union appears to rely upon, given the different factual situation
in this proceeding compared with that in Japan – DRAMS (Korea).
Thus, for all of the above reasons, we do not consider the panel statements in Japan –
DRAMS (Korea) the European Union relies upon to support its position in this dispute.
In the light of our understanding of the panel's approach in Japan – DRAMS (Korea), we
consider that the [***] amendment to the German A350XWB LA/MSF agreement altered the rights
of the German govern ment and Airbus, but it did not bring into existence a new loan agreement.
There is no evidence before us, and, indeed, the European Union does not argue, that the original
A350XWB LA/MSF is legally distinct from the loan agreement resulting from the [***] amendment.
We note, moreover, that by the time of the [***] amendment, all required disbursements had been
made and Airbus was continuing to make payments of principal and interest in accordance with the
terms of the original contract, which was not termi nated. Thus, we find that the original German
A350XWB LA/MSF agreement continues to exist in a modified form, reflecting the revised repayment
terms agreed through the [***] amendment. In our view, this implies that, contrary to the
European Union's conten tion, the appropriate benchmark against which to measure whether the
[***] amendment aligned the terms of the German A350XWB LA/MSF agreement with the market,
is not a loan on the same or similar terms issued by a market lender for the first time at the same
moment as the amendment . We disagree with the European Union on this point because the
analytical approach it advances would treat the amended A350XWB LA/MSF agreement in the same
way as a new loan under which all terms and conditions (disbursements, interest payments,
repayments) have been agreed at the time of the amendment 293 when in fact, for the reasons we
have explained, this is not the case.
We recall that in all previous proceedings of this dispute, the panels and the Appellate Body
explained that in order to determine whether LA/MSF confers a "benefit" on Airbus, within the
meaning of Article 1.1(a)(2) of the SCM Agreement, the terms of each LA/MSF loan agreement must

292 Panel Report, Japan – DRAMs (Korea), para. 7.437. (emphasis added)
293 As explained further below, the European Union's approach treats all outstanding principal under the
original [***] German A350XWB LA/MSF Agreement as funding disbursed to Airbus for the first time in [***].

BCI deleted, as indicated [***]

be compared with the terms of a comparable loan available from the market. 294 In the original and
first compliance proceedings, the challenged LA/MSF agreements were examined to determine
whether they each conferred a benefit on Airbus by comparing the cost of the LA/MSF financing to
Airbus on the agreed terms (calculated as a separate "internal rate of return" for each LA/MSF
contract) to the cost that Airbus would have incurred (calculated as a "rate of return") to obtain the
same or similar finan cing from the market at the time Airbus and the relevant Airbus government
entered into the LA/MSF agreement .295 For the German A350XWB LA/MSF contract, the IRR was
determined by identifying the interest rate that set the Net Present Value of the cash flows
anticipated under the terms of the loan agreement to zero. 296 The IRR of the German A350XWB
LA/MSF agreement was compared with a constructed interest rate considered to represent the rate
of return that a market lender would have achieved on a loan to Airbus on the same or similar terms,
and at the same time, as the A350XWB loan agreement.
Consistent with this approach, we believe that where funding under a subsidized loan
agreement has already been disbursed and remains outstanding, an amendment to that loan to
bring it into alignment with a market benchmark on a prospective basis would need to ensure that,
all other things being equal, the revised repayment terms capture the overall cash-flow the market
lender would have expected to achieve, at the time the recipient originally entered into the
government loan contract, for the remaining duration of the particular loan.297 In this way, the
recipient would be placed in the same position it would have been in at the time of the amendment,
had the loan been agreed on market terms from the very beginning.
Explained by way of example, this line of reasoning implies that a subsidized loan provided
for a 10 -year period at an average cost of 5% interest per annum (instead o f the market rate of
7%), could be aligned with a market benchmark in year five by increasing the rate of interest to
apply over the remaining five years to 7%, even if the market rate for a comparable five -year loan
at the same time was higher or lower than 7%. In our view, it is only by raising the interest rate to
what the market lender would have originally requested the recipient to pay over the remaining
five years of the loan contract that it could be concluded that , all other things being equal, the
recipient is no longer receiving a subsidized loan.
Such an approach to determining whether a subsidized loan has been aligned to a market
benchmark would ensure that the "withdrawal" of a subsidy will depend upon a Member's own
actions and decisions, as opposed to exogenous factors such as the general cost of finance in an
economy.298 Thus, where, for example, the general cost of money increased between the time a
subsidized loan was agreed and the date of an amendment intended to align the terms of that loan
with a market benchmark, an approach that requires the amended terms to reflect the
contemporaneous cost of money would require the subsidizing government to charge, on a
prospective basis, more for the loan than a market lender would have originally requested from the
recipient over the same period of the loan. Conversely, where the general cost of money decreased
between the time a subsidized loan was agreed and the date of an amendment intended to align the
terms of that loan with a market benchmark, an approach that requires the amended terms to reflect
the contemporaneous cost of money would require the subsidizing government to charge, on a
prospective basis, less for the loan than a market lender would have originally requested from the
recipient. In both situations, the determining factor for the alignment of the subsidized loan to a
market benchmark would not be the government's decision to have the recipient pay what a market
lender would have required at the time the loan was originally agreed, but rather movements in the

294 Panel Reports, EC and certain member States – Large Civil Aircraft, para. 7.382; EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), para. 6.293; Appellate Body Reports, EC and certain
member States – Large Civil Aircraft, para. 706; and EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), paras. 5.109-5.112.
295 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.401.
296 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.306-6.348.
297 Depending upon the terms of the loan contract, this analysis may need to account for any penalties
paid by the borrower to the market lender for renegotiating the terms of the loan.
298 Third parties Brazil and Japan share the view that changes in exogenous commercial condition
cannot on their own be the determining factor in analysing whether a subsidy has been withdrawn.
(Brazil's response to Panel question No. 1 to third parties, para. 3; Japan' response to Panel question No. 1 to
third parties). Canada submits that exogenous commercial circumstances are "highly relevant" to an
assessment of withdrawal. (Canada's response to Panel question No. 1 to third parties, para. 1).

BCI deleted, as indicated [***]

cost of money. Given the characteristics of LA/MSF, other exogenous factors we believe could have
the same or similar impact include the credit worthiness of Airbus and the development status of
the funded LCA.
The European Union maintains that comparing the IRR of the amended German A350XWB
LA/MSF agreement with a contemporaneous market benchmark for a new loan to Airbus issued on
the same or similar terms as the amend ed agreement is an appropriate way to test wheth er the
German A350XWB LA/MSF agreement has been aligned with a market benchmark. The
European Union justifies this approach by arguing that the German government lender, KfW, did not
have the option to leave the German A350XWB LA/MSF agreement unamended because, under
[***] of the unamended agreement, Airbus was entitled to force KfW to accept early repayment.
The European Union maintains that such a clause is a standard term in comparable loan
agreements299, which in the case of Airbus, left it with an incentive to repay the loan in [***]
because market interest rates had decreased substantially since the time Airbus and KfW agreed on
the original terms of the German A350XWB LA/MSF agreement, making it possible for Airbus to
refinance at lower interest rates.300
We understand the logic of the European Union's argument to be as follows: If Airbus chose
to prepay the loan in accordance with [***], KfW (or a market lender in its place) would not have
been in a position to realize the expected future cash -flows and IRR under the original agreement.
The European Union submits that where a loan agreement entitles the borrower to prepay the loan,
the borrower's choice to exercise that right makes the originally -anticipated IRR impossible for the
lender to attain. In those circumstances, the European Union argues that it would be erroneous to
consider that, in agreeing to amend the loan to reflect current market circumstances, the lender
exchanged its allegedly " superior" IRR under the original terms of the subsidy for an allegedly
"inferior" one under the amended terms. Thus, the European Union submits that the only way to
determine whether the [***] amendment is on market terms is to compare the IRR of the amended
German A350XWB LA/MSF agreement with a loan on the same or similar terms that could have been
offered by a market lender to Airbus at the same time.301
We agree with the European Union that, in the face of having to accept the full repayment
of the outstanding principal disbursed under an existing loan concluded at a time of relatively high
interest rates, a market lender would not expect to achieve the same returns anticipated under the
original loan contract from an amendment that avoids full repayment and continues the loan
arrangement on different terms at a time of relatively low interest rates. This situation is different
from the one described in our above example, which underlies the starting point of our analytical
framework, because the situation discussed in the example comes about in a context where the
commercial lender is left with a choice between the continuation of an existing loan or the acceptance
of revised terms. In other words, the situation described in the above example is not one where,
apart from the desire of the contractual parties to amend the loan arrangement to align its terms
with a market benchmark, all oth er things have remained the same. In contrast, in the situation
posited by the European Union, the market lender is faced with a choice between accepting the early
repayment of outstanding principal and accrued interest under an existing arrangement or the new
repayment terms negotiated under revised terms.
The United States argues that the European Union has provided no evidence to support its
assertion that had Airbus and KfW not agreed to enter into the [***] amendment, Airbus would
have opted to prepay the outstanding LA/MSF and other accrued charges. 302 In other words, the
United States argues that there is no factual basis to support the premise underlying the analytical
framework applied by the European Union to determine whether the German A350XWB LA/M SF
subsidies have been withdrawn.
We agree with the United States that the European Union has provided no evidence showing
that Airbus actually invoked, or even attempted to trigger, [***] of the German A350XWB LA/MSF
agreement. Although the European Union argues that in the "negotiations leading up to the
amendment, both Airbus and KfW knew that Airbus' Best Alternative to a Negotiated Agreement, or

299 European Union's second written submission, para. 108.
300 European Union's second written submission, para. 109.
301 European Union's second written submission, para. 105.
302 United States' second written submission, paras. 106-111.

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'BATNA', was to effect prepayment" 303, the European Union has presented no evidence of the
discussions between the German government and Airbus about the potential early repayment of the
outstanding principal under the terms of [***]. Neither is there any evidence before us showing
that Airbus con sidered alternative market -based finance options around the time of those
negotiations. Moreover, in explaining the background and motivations of the [***] amendment, its
preamble makes no reference to any possible early repayment, mentioning only that KfW was asked
to enter into the amendment "in order to [***] on the loan tranches, and to provide the Borrower
with new [***] for these [***]".304 In the absence of any evidence showing that Airbus was, in
fact, seriously considering exercising its rights under [***] in order to refinance the German
A350XWB LA/MSF using market -based instruments (which the European Union maintains was a
credible possibility),305 there is no sufficient basis to accept the premi se underlying the
European Union's submi ssions. In this light, we believe that the European Union's assertion of
compliance with respect to the German A350XWB LA/MSF subsidies cannot be sustained.
Consistent with the starting point of the analytical framework we have set out above , in
considering whether to enter into the [***] amendment, we believe that a market lender that did
not face the potential repayment of the outstanding principal and accrued interest as a credible
possibility would have compare d the returns available under the unamended market-based
arrangement with those available under the proposed amendment. Although the parties have not
undertaken this analysis, the United States' expert, NERA Consulting, conducted an assessment the
expected IRR of the unamended loan contract and compared that to the expected IRR under the
[***] amendments, taking into account the revised 2018 forecast delivery schedule used in the
TradeRx Report.306 The European Union has not disputed the accuracy of the NERA calculation,
arguing only that it addresses the wrong question. 307 For present purposes, we note that NERA
concludes that the IRR for the unamended German A350XWB LA/MSF agreement (which, we recall
was provided on subsidized terms) is greater than the IRR of the amended agreement. 308 This
confirms that a market lender that did not face the potential repayment of outstanding principal and
accrued interest as a credible possibility would have preferred its own market-based A350XWB
LA/MSF agreement (offering grea ter returns than the unamended German A350XWB LA/MSF
agreement) to the [***] amended version of the German A350XWB LA/MSF agreement.
Finally, even if we were to accept that there was a credible possibility that Airbus could have
invoked [***] to repay and refinance the German A350XWB LA/MSF, we are not convinced that the
test for determining whether that amendment was market -based should be focused , as the
European Union argues, on comparing the IRR of the amended contract with the IRR that a market
lender would expect to achieve (and, therefore, request Airbus to pay) for the same or similar loan
entered into at the time of the amendment. As already discussed309, such an approach would
erroneously treat the [***] amended German A350XWB LA/MSF agreement in the same way as a
new loan issued for the first time at the time of the amendment. In order to determine whether the
terms of the amended German A350XWB LA/MSF agreement are market-based, the question that
we believe must be answered is whether a market lender (not KfW) would have preferred to receive
the returns associated with the amended German A350XWB LA/MSF agreement over the returns it
could have expected to achieve as a result of a decision on the part of A irbus to invoke its right
under [***] of the LA/MSF agreement to repay the outstanding principal and accrued interest. In
this way, we believe it would be possible to determine whether the [***] amendment to the German
A350XWB LA/MSF agreement left Airbus in the same position it would have been in at the t ime of
the amendment, had the German A350XWB LA/MSF agreement been agreed with a commercial
lender on market terms from the very beginning. We now turn to apply this standard to the facts

303 European Union's opening statement at the meeting of the panel, para. 65.
304 German A350XWB [***] amendment, preamble. (Exhibit EU-9 (BCI) (English translation)).
305 The European Union has not argued that Airbus would have made the repayment on the basis of its
own funds, without using any form of market financing.
306 NERA German A350XWB LA/MSF Report, (Exhibit USA-26 (HSBI/BCI)), para. 4 and Appendices 1
and 2.
307 European Union's second written submission, para. 102.
308 NERA German A350XWB LA/MSF Report, (Exhibit USA-26 (HSBI/BCI)), paras. 2, 8, and 10-15.
NERA calculated two different IRRs for the original German A350XWB LA/MSF agreement based on different
assumptions concerning the interest charged on the [***]. NERA determined that the IRR under the
unamended arrangement is either [***] or [***]. NERA then compared these IRR calculations to the
expected IRR of [***] that TradeRx calculated for the amended original German A350XWB LA/MSF
agreement. (See NERA German A350XWB LA/MSF Report, (Exhibit USA-26 (HSBI/BCI)), para. 4 and
Appendices 1 and 2).
309 See paragraphs 7.144–7.147 above.

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surrounding the [***] amendment to the German A350XWB LA/MSF contract, as a means to make
alternative findings, having already concluded that the European Union has failed to establish the
factual basis underpinning its claims of compliance wi th respect to the German A350XWB LA/MSF
subsidies.
Whether the [***] amendment has aligned the terms of the German A350XWB
LA/MSF agreement with a market benchmark
The European Union argues that the returns that would have been available to KfW had it
decided to invest the outstanding principal and accrued interest that Airbus would have been
required to repay in the event that Airbus triggered [***] of the German A350XWB LA/MSF
agreement can be represented by the IRR that a market lender would have requested Airbus to pay
for a loan on the same or similar terms as the [***] amendment. According to the European Union,
that "return is also what KfW could have expected to receive if it accepted the prepayment and
re-invested it in a venture of similar risk profile". 310 Thus, r elying upon the calculations in the
TradeRx A350XWB LA/MSF Report, the European Union argues that the IRR of KfW's re-investment
of the funds repaid by Airbus would have been less than the IRR of the [***] amendment.311 In our
view, however, it is not entirely clear whether the IRR calculated in the TradeRx Report for the
alleged market benchmark represents the return that a market lender would have expected to
receive from re-investing the significant amount of outstanding principal an d accrued interest that
Airbus would have repaid. The IRR determined by TradeRx is based on an estimate of the risk profile
of the amended A350XWB LA/MSF contract, which captures Airbus ' credit worthiness and the risk
profile of the A350XWB project. Opportunities to invest in projects having different risk profiles with
potentially overall greater returns would have no doubt been available to a market lender,
particularly given what the significant value of the early repayment would have been.
The United States argues that the European Union is wrong when it argues that KfW would
have preferred the [***] amendment over the receipt of early repayment under the unamended
German A350XWB LA/MSF agreement. According to the United States, the European Union's
submission is flawed because if Airbus effected [***], Airbus would have retained the obligation to
make [***] under the original agreement. 312 Thus, the United States argues that the choice that
KfW faced with was whether to: (i) receive [***] and also [***] as dictated by the original
agreement; or (ii) agree to the [***] amendment.313 Given these choices, the United States' expert,
NERA Consulting, calculated an IRR of investing the [***] at the alleged market-based IRR
determined in the TradeR x Report and receipt of the [***], and compares that to the IRR of the
amended German A350XWB LA/MSF agreement. The NERA Report concludes that the expected IRR
of re-investing the early repayment and receiving [***] ([***]) is greater than the expected IRR
of the amended German A350XWB LA/MSF loan agreements ( [***]).314 On this basis, the United
States concludes that a market lender in the German government's position as of [***] would not
have agreed to enter into the [***] amendment because it would have been more beneficial to
accept and re-invest the early repayment and accept the future royalty payments.315
The European Union does not dispute the United States' assertion that [***] would be
available under an early repayment scenario, nor does the European Union specifically dispute the
accuracy of NERA's IRR calculations. Nevertheless, the European Union maintains that the
United States and NERA err in arguing that the European Union's submissions "ignore
KfW's entitlement to [***] in the case of early repayment". After confirming that [***] would have
been available under both the early repayment and amendment scenarios, the Europe an Union
points out that the [***] available under the amended LA/MSF agreement provided for marginally

310 European Union's response to Panel question No. 11, paras. 113-114.
311 European Union's response to Panel question No. 7, para. 62.
312 United States' comments on the European Union's response to Panel question No. 7, para. 47.
313 United States' comments on the European Union's response to Panel question No. 7, para. 47;
Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173 (HSBI/BCI)), para. 28.
314 United States' comments on the European Union's response to Panel question No. 7, para. 47;
Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173 (HSBI/BCI)), paras. 27-29. NERA submits
that the TradeRx IRR calculation of [***] for the amended German A350XWB LA/MSF agreement is [***] of
[***]", and that the annual IRR can be alternatively calculated as [***] which is the compounded annual
return of [***] quarterly growth. (Third NERA German A350XWB LA/MSF Report, (Exhibit USA-173
(HSBI/BCI)), fn 5).
315 United States' comments on the European Union's response to Panel question No. 7.

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better returns than those prescribed under the unamended A350XWB arrangement. The
European Union concludes that this means that "with respect to [***], the 2018 amendment
enhances KfW's position". 316 Likewise, the European Union argues that the [***] terms brought
about by the [***] amendment had a [***], concluding that the financial terms of the amended
agreement did not alter KfW's financial position.317
We find the European Union's response to the United States' arguments to be misplaced
because it does not address the comparison between the returns available to a market lender under
the [***] amendment and the returns that would have resulted if a marke t lender decided to
re-invest the repaid principal and receiv e the planned [***] under the unamended A350XWB
LA/MSF agreement. Although the European Union explains that its response provides a "comparison
of the expected returns under the early repayment a nd the 2018 amendment scenarios", in
substance, the European Union compares the terms of the [***] amendment with the terms of the
unamended agreement. To this extent, t he European Union's submissions answer the wrong
question because they proceed on the basis that the early repayment would not have occurred ,
leaving the market lender with a choice between the unamended or amended A350XWB LA/MSF
agreements.
As already explained, in order to determine w hether the terms of the amended German
A350XWB LA/MSF agreement are market-based, the question that must be answered is whether a
market lender (not KfW) would have preferred the returns associated with the amended German
A350XWB LA/MSF agreement over the returns it could have expected to achieve as a result of
Airbus' decision to invoke its right under [***] of the LA/MSF agreement to repay the outstanding
principal and accrued interest. The analysis the United States presents in the NERA Report attempts
to perform this comparison. However, we are not convinced that NERA's calculation is entirely
accurate. First, the IRR calculated in the repayment scenario relies upon the market benchmark IRR
determined by TradeRx, which , as already noted, we believe may n ot necessarily reflect the
alternative investment options available to a market lender.318 Second, in the absence of any further
explanation, we are not convinced that the way the NERA Report has relied upon th e TradeRx IRR
in its calculation is appropriate, as it seems to have been used to generate the re -invested cash
flows as a compound interest rate instead of in the form of an IRR. Finally, we note that in accounting
for the cash flows expected from future [***] payments, the NERA Report uses the values
prescribed in the unamended German A350XWB LA/MSF agreement. We recall, however, that the
returns available under the unamended German A350XWB LA/MSF agreement are subsidized and,
therefore, by definition less than what a market lender would have requested Airbus to pay for the
same or a similar loan. In our view, this suggests that the [***] payments envisaged under the
unamended German A350XWB LA/MSF agreement were less than what a market lender would have
accepted. To this extent , NERA's calculation of the returns achieved from future [***] may well
under-estimate the returns available to a market lender.
Thus, in the light of the above considerations, we find that the European Union has failed to
demonstrate that the [***] amendment to the German A350XWB LA/MSF agreement resulted in
the "withdrawal" of the subsidy, by aligning its terms with a market benchmark. We are not
convinced by the European Union's submissions under this alternative analysis, because they fail to
properly address and establish that a market lender would have preferred to receive the returns
anticipated under the [***] amendment over the returns that would have been available from re-
investing Airbus' early repayment of the significant amoun t of outstanding principal and accrued
interest, taking into account the value of future [***] under the unamended A350XWB LA/MSF
contract. The European Union has, therefore, failed to show that the [***] amendment left Airbus

316 European Union's comments on certain arguments and evidence that the United States filed with its
25 June 2019 Comments on EU Reponses to Panel questions, paras. 20 and 22.
317 European Union's comments on certain arguments and evidence that the United States filed with its
25 June 2019 Comments on EU Reponses to Panel questions, para. 23.
318 We note that the United States has questioned the European Union's calculation of the [***] under
the German A350XWB LA/MSF agreement, suggesting inter alia that the European Union's analysis may have
undervalued it as a potential return to the German government. The United States maintains that it was unable
to verify the calculation performed by the European Union's expert, KPMG, because it alleges that various
specific pieces of information needed to understand it was not provided with the analysis. (United States'
comments on the European Union's response to Panel question No. 4, paras. 29-30). In the light of our
findings concerning the European Union's claim, we do not believe it is necessary to explore this issue further
with the parties.

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in the same position it would have been in at the time of the amendment, had the German A350XWB
LA/MSF agreement been originally agreed with a commercial lender that would have been faced with
a real possibility that Airbus could have forced it to accept early [***] in [***].
Repayment of the UK A350XWB LA/MSF loan on subsidized terms
Main arguments of the parties
The European Union argues that, on [***], Airbus fully repaid the UK A350XWB LA/MSF
loan by making a payment of [***] to the UK Department of Business, Energy & Industrial Strategy
(BEIS). The European Union argues that this sum reflects the total amount of outstanding principal
drawn-down by Airbus as of [***], plus interest accrued since [***], less [***].319
According to the European Union, the full repayment of a loan on its subsidized terms
achieves the withdrawal of that subsidy, for the purpose of Article 7.8 of the SCM Agreement,
because the repayment of the financial contribution removes one of the constituent elements of a
subsidy, resulting in the life of that subsidy coming to end. The European Union submits that this is
precisely what was achieved when Airbus fully repaid the UK A350XWB LA/MSF loan on [***],
thereby bringing the European Union into compliance under Article 7.8 in respect of the UK A350XWB
LA/MSF subsidy.320 Alternatively, the European Union argues that it would be appropriate to view
the repayment of the UK A350XWB LA/MSF loan as an "intervening event" that brings the life of the
UK A350XWB LA/MSF loan to an end, thereby achieving the withdrawal of the subsidy.321
The United States acknowledges that Airbus made a payment of [***] to the
UK Government on [***].322 However, according to t he United States, this fact alone does not
establish that Airbus repaid "the full amount of outstanding principal" or that Airbus will not draw
down the principal again. 323 In any case, t he United States argues that the European Union has
failed to withdraw the UK A350XWB LA/MSF subsidy because repaying a loan on its subsidized terms
does not result in the withdrawal of the subsidy for purposes of Article 7.8 of the SCM Agreement.324
The United States submits that the first compliance panel agreed with this assessment when it
criticized the same theory advanced by the European Union in that proceeding.325
Moreover, the United States rejects the European Union's argument that the repayment of
the UK A350XWB LA/MSF loan may be viewed as an intervening event that brings the life of the loan
to an end. The United States argues that the full repayment to which the European Union refers,
and the possibility that early repayment would occur, is "part of the spectrum of facts that informed
the parties' ex ante expectation as to the life of the subsidy, and it was also an element of the
contract that the first compliance panel had before it when it found that the contract transmitted a
subsidy".326 The United States argues that the fact that the contract operated as it was originally
envisioned cannot logically serve as an intervening event that changes the life of the benefit of the
subsidy.327

319 European Union's first written submission, para. 88.
320 European Union's first written submission, paras. 64-69 and 89.
321 European Union's first written submission, fn 139.
322 United States' first written submission, para. 105.
323 United States' first written submission, paras. 101 and 110-114.
324 United States' first written submission, paras. 101 and 106-109; and second written submission,
paras. 41-45.
325 United States' first written submission, paras. 106-107 (referring to Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1070-6.1073); and second written
submission, para. 44.
326 United States' first written submission, para. 109.
327 United States' first written submission, para. 109; and response to Panel question No. 22, para. 61.

BCI deleted, as indicated [***]

Evaluation by the Panel
Has the UK A350XWB LA/MSF loan been fully repaid?
The European Union asserts that Airbus repaid all outstanding principal and interest accrued
less [***] totalling [***] under the UK A350XWB LA/MSF contract on [***] as part of a [***].328
In particular, on [***], Airbus informed the United Kingdom of its intention to effect [***].329 On
[***], BEIS confirmed to Airbus that the payment had been received, and that the sum reflected
"the Principal amount drawn down", "plus Interest accrued from [***]", "less [***]".330
BEIS confirmed that "{t}his means that the Repayable Investment has been repaid in full".331
In explaining the amount repaid by Airbus, the European Union submits that during the
[***], Airbus drew down only [***], which is less than the [***] maximum amount of funding
available under the UK A350XWB LA/MSF loan agreement.332 As evidence of the amounts of receipts
and repayments made, the European Union submitted Airbus accounting entries in Exhibit EU-81.333
Those entries reveal a difference of [***], which t he European Union explai ns as the difference
between: (i) interest accrued between [***] and [***]; and (ii) [***].334 Finally, the
European Union explained how Airbus determined the final levy payments that were due on [***]
eligible A350XWB deliveries that were made during the first quarter of 2018.335
Our review of Airbus' accounting entries in Exhibit EU -81 and the European Union's
explanations confirms that Airbus' [***] payment reflects the full amount of outstanding principal
due under the UK A350XWB LA/MSF agreement, plus interest accrued since the date of the last
periodic interest payment on 26 March 2018, less [***].
We note that the European Union has further indicated that, under the terms of the UK
A350XWB LA/MSF Agreement, Airbus is not permitted to re -draw funds under the loan [***].336
Specifically, Clause 4.4 of the agreement provides that [***].337 Clause 1 defines the [***].338 The

328 European Union's first written submission, paras. 86-89; and second written submission,
paras. 59-72. See also [***] UK A350XWB LA/MSF Agreement, (Exhibit EU-28 (BCI)), Clause 6.6.
329 BEIS Letter to Airbus, [***], (Exhibit EU-7 (BCI)).
330 BEIS Letter to Airbus, [***], (Exhibit EU-7 (BCI)).
331 BEIS Letter to Airbus, [***], (Exhibit EU-7 (BCI)).
332 European Union's second written submission, fns 93 and 104.
333 Excerpts from Airbus' accounting system in relation to the A350XWB LA/MSF loan, (Exhibit EU-81
(BCI)). The European Union points out that, in scrutinizing Airbus' accounting excerpts, the United States
erroneously identified cash flows of [***] as repayments instead of disbursements of loan principal, and that
the United States further erroneously transposed the disbursement amount on [***] as an amount that was
[***] short of the actual disbursement. We have confirmed the accuracy of the amounts of receipts and
repayments reflected in Exhibit EU-81 (BCI), consistent with the European Union's observations.
(European Union's comments on the United States' response to Panel question No. 18, paras. 67-70. See also
United States' response to Panel question No. 18, paras. 46-47).
334 The European Union submits that a principal balance of [***]. The European Union also explained
that Clauses 1.1 and 7.1 of the UK A350XWB LA/MSF loan agreement [***]. (European Union's comments on
the United States' response to Panel question No. 18, para. 71 and fns 111 and 113; [***] UK A350XWB
LA/MSF Agreement, (Exhibit EU-28 (BCI)), Clauses 1.1 and 7.1).
335 The European Union explains that, in reviewing Airbus' levy payments in the first quarter of 2018,
the United States incorrectly determined that Airbus should have made levy payments on [***] A350XWB
deliveries made by 30 April 2018. The European Union explains that, under the UK A350XWB LA/MSF loan
agreement, Airbus is required to pay [***]. Of the [***], the European Union explains that [***] were free
of levies because [***]. (European Union's comments on the United States' response to Panel question
No. 18, paras. 72-73 (referring to [***] UK A350XWB LA/MSF Agreement, (Exhibit EU-28 (BCI)), Clauses 1.1,
5.3 and 5.4); and Airbus Orders & Deliveries Data, (Exhibit USA-49). See also United States' response to Panel
question No. 18, para. 48).
336 European Union's second written submission, para. 75.
337 [***] UK A350XWB LA/MSF Agreement, (Exhibit EU-28 (BCI)), Clause 4.4.
338 [***] UK A350XWB LA/MSF Agreement, (Exhibit EU-28 (BCI)), Clause 1.1.

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United States asserts that it is not clear that Airbus will not draw down the principal again339, recalling
that Airbus and the UK Government previously [***].340
Although it is true that [***], there has been no further amendment to suggest that this
will happen again. Moreover, and significantly, it is clear from [***] of the loan agreement that
Airbus [***] prior to the date on which Airbus made its final payment of outstanding principal and
interest. These facts suggest that Airbus is not seeking, and indeed, is not entitled to seek, further
funding from the UK Government under the UK A350XWB LA/MSF contract. Similarly, we do not see
a factual basis to conclude t hat Airbus is even considering the possibility of asking the
UK government to amend the A350XWB LA/MSF agreement to allow it to draw down additional
funds. The mere possibility that this may happen is, in our view, insufficient to support a finding that
the full amount of funding originally contemplated under the UK A350XWB LA/MSF loan continues
to be available.
Accordingly, we agree with the European Union that the full amount of [***] was not drawn
down, and that the full amount of funds available to Airbus under the UK A350XWB LA/MSF contract
was not outstanding at the time of the final payment.341 We also agree with the European Union that
Airbus has repaid the entirety of the principal that it actually drew down and received. In our view,
this follows from the contractual terms of the UK A350XWB LA/MSF agreement, which establishes a
repayment obligation with respect to the [***]342 and defines the [***].343
We therefore find that Airbus repaid all outstanding principal and interest accrued under the
UK A350XWB LA/MSF contract on [***] with a final payment totalling [***]. This represents
repayment of the full amount of principal that Airbus actually drew down and received , which we
consider is the amount relevant to our assessment.
Whether the full repayment of outstanding principal and interest under the
UK A350XWB LA/MSF agreement on subsidized terms has achieved the withdrawal of the
subsidy
As it did with respect to the amendment of the German A350XWB LA/MSF agreement, t he
European Union characterizes Airbus' repayment of the UK A350XWB LA/MSF loan as an act, and
alternatively, an "intervening event", that achieves the withdrawal of the UK A350XWB LA/MSF
subsidy, within the meaning of Article 7.8 of the SCM Agreement. We note, however, that
notwithstanding the European Union's alternative characterization, the fundamental reason
advanced by the European Union to support its assertion of compliance on this basis is the same
regardless of how the repayment is described. 344 Thus, irrespective of whether th e repayment is
properly characterized as an act, or as an "intervening event", the European Union maintains that it
achieves compliance with its obligation to "withdraw the subsidy" because, by "removing" the
financial contribution, it has brought the life of the UK A350XWB LA/MSF subsidy to an end.
Accordingly, the key question we must address in order to determine the merits of the
European Union's assertion of compliance is whether the repayment of the UK A350XWB LA/MSF
loan on subsidized terms brings the life of the UK A350XWB LA/MSF subsidy to an end.
The European Union relied upon essentially the same line of argument in the first compliance
proceeding, when it argued that the lives of most of the pre-A380 LA/MSF subsidies had come to an

339 United States' first written submission, paras. 101 and 110-114.
340 United States' first written submission, paras. 103 and 113 (referring to Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), para. 6.258 and fn 462). The relevant information
contained in para. 6.258 and fn 462 are BCI.
341 European Union's first written submission, paras. 87-89; and second written submission,
paras. 63-64. See also Excerpts from Airbus accounting system in relation to the A350XWB UK loan,
(Exhibit EU-81 (BCI)).
342 [***] UK A350XWB LA/MSF Agreement, (Exhibit EU-28 (BCI)), Clause 5.1.
343 [***] UK A350XWB LA/MSF Agreement, (Exhibit EU-28 (BCI)), Clause 1.1.
344 The European Union's claim that the repayment of the UK A350XWB LA/MSF loan may be, in the
alternative, characterized as an "intervening event" that brings the life of the subsidy to an end, is presented in
a footnote to its first written submission. The European Union does not advance any specific arguments to
support this claim that are different to those advanced in relation to its main, non-alternative, claim.
(See European Union's first written submission, fn 139).

BCI deleted, as indicated [***]

end because they had already been fully repaid. 345 In this compliance proceeding, the
European Union reiterates that position, arguing that it "is supported by, and fully consistent with
the Appellate Body's finding, in the original proceedings, that 'the remova l of the financial
contribution', as one of the constituent elements of a subsidy, results in the 'life' of a subsidy coming
'to an end'".346
In the first compliance proceeding, the panel expressed concerns about the European Union's
understanding of the Appellate Body's statement, explaining as follows:
The European Union finds support for its submission that the repayment of the LA/MSF
agreements has brought the subsidy to an end in the following statement made by the
Appellate Body in the original proceeding:
We understand the participants to agree with the basic proposition that a
subsidy has a life, which may come to an end, either through the removal
of the financial contribution and/or the expiration of benefit .{} (emphasis
added)
For the European Union, the full repayment of the LA/MSF agreements implies that the
financial contributions provided to Airbus have been "returned"{} and, therefore,
consistent with the Appellate Body 's statement, no subsidies continue to exist.
In our view, the European Unio n has misunderstood the totality of the
Appellate Body's guidance on this point.
First, we note that the Appellate Body statement relied upon by the European Union
refers to the "removal" of a financial contribution. However, it is less than clear to us
that the repayment of a loan on its subsidized terms amounts to the same thing. Rather,
it could be argued that the full repayment of a subsidized loan implies that a subsidized
financial contribution has been provided to the recipient in its entirety, not removed or
"returned", as the European Union argues.
Second, while it is true that the repayment of a loan on its subsidized terms would bring
about the end of the financial contribution, in the sense that there would be no longer
any financial contribution in existence, the Appellate Body explicitly recognized in the
original proceeding that this, alone, will not necessarily mean that the relevant subsidy
has ceased to exist. Specifically, in the paragraph immediately preceding the statement
the European Union relies upon, the Appellate Body explained that:
{T}he fact that a subsidy is "deemed to exist" under Article 1.1 once there
is a financial contribution that confers a benefit does no t mean that a
subsidy does not continue to exist after the act of granting the financial
contribution.{} (emphasis added).347
 After raising these doubts about the European Union's understanding of the
Appellate Body's statement, the compliance panel ultimately refrained from making specific findings
on whether the repayment of a loan on subsidized terms achieves the withdrawal of the subsidy for
the purpose of Article 7.8 of the SCM Agreement, having already found that the "lives" of the relevant
subsidies h ad expired before the end of the implementation period on other grounds .348 The

345 Specifically, the European Union argued that the lives of the French LA/MSF for the A310-300, the
French and Spanish LA/MSF for the A300B/B2/B4 and A300-600, and the French, Spanish, and UK LA/MSF for
the A320 and A330/A340, came to an end. (Panel Report, EC and certain member States – Large Civil Aircraft
346 European Union's second written submission, para. 20 (referring to Appellate Body Report, EC and
certain member States – Large Civil Aircraft, para. 709).
347 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.1070-6.1073 (citing Appellate Body Report, EC and certain member States – Large Civil Aircraft,
paras. 708-709). (fns omitted)
348 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1074
("{W}e believe it is unnecessary to make any definitive findings in relation to the merits of the
European Union's submissions concerning the extent to which the actual repayment of the relevant LA/MSF

BCI deleted, as indicated [***]

European Union appealed this aspect of the first compliance panel 's findings . However, the
Appellate Body found it unnecessary to address that appeal, having upheld the Panel's s eparate
findings that the pre -A380 LA/MSF subsidies expired before the beginning of the implementation
period, leaving the European Union with no further compliance obligation under Article 7.8 with
respect to those subsidies.349
Fundamentally, the European Union's reliance on the same line of argument in this dispute
is based on the view that the compliance panel was wrong to suggest that the repayment of a loan
on subsidized terms may not amount to the "removal" of a financial contribution. The
European Union advances several lines of argument in support of its submission.
First, the European Union argues that its position "is consistent with, and flows from, the
very definition of a subsidy"350, which the European Union submits requires the co-existence of two
elements – a financial contribution and a benefit conferred on the recipient. Thus, according to the
European Union, "{i}t follows that, when one of the two constituent elements is removed, a subsidy
cannot be held to exist ".351 For the European Union, this understanding is confirmed by the term
"thereby" in Article 1.1(b) of the SCM Agreement, which the European Union argues indicates that
a benefit can only be conferred, and can only exist, based on a financial contribution that a recipient
"continues to enjoy".352
Second, the European Union maintains that the compliance panel's analysis should be
disregarded because it was based on a misreading of what the Appellate Body had in mind when it
said that the " fact that a subsidy is 'deemed to exist' under Article 1.1 once there is a financial
contribution that confers a benefit does not mean that a subsidy does not continue to exist after the
act of granting the financial contribution".353 According to the European Union, the compliance panel
was wrong to interpret this statement to mean that the Appellate Body explicitly recognized that the
repayment of a loan on its subsidized terms does not, alone, bring the life of a subsidy to an end.354
For the European Union, the Appellate Body's statement "does not speak to the (non -)existence of
a subsidy after the act of removing the financial contribution in full ", which is the question before
the panel in this proceeding. Rather, it is focused on the "life of the subsidy continuing after the act
of granting the financial contribution".355
Third, the European Union submits that the compliance panel's observations about the
repayment of a loan on subsidized terms were driven by its interpretation of the phrase " withdraw
the subsidy", which was overturned by the Appellate Body. In this light, the European Union argues

measures on subsidized terms has brought about the end of the "lives" of the challenged subsidies"). See also
Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 1847.
349 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.406 ("We see no reason, in order to resolve this dispute, to make additional findings on whether the
French LA/MSF for the A310-300, the French and Spanish LA/MSF for the A300B/B2/B4 and A300-600, and the
French, Spanish, and UK LA/MSF for the A320 and A330/A340 also came to an end due to the actual
repayment of the loans with interests").
350 European Union's second written submission, para. 21.
351 European Union's second written submission, paras. 21, 28-35 and 83-85. Canada in its third-party
submission expressed a similar view to that of the European Union that "actions or events affecting the
financial contribution or the benefit elements of a subsidy can result in withdrawal", including by repayment of
the principal amount of the loan. For Canada, "{a}s the recipient of a subsidized loan benefits from having
access to the principal amount of the loan on better-than-market terms, once the principal is repaid it no
longer enjoys such benefit". (Canada's third-party submission, paras. 10 and 12). Brazil and Japan share the
view that withdrawal can only be achieved through addressing the benefit provided by the subsidy. Brazil
submits, for instance, that, repayment of a loan "does not affect in any way the manner in which a subsidy
'was projected to materialize over a certain period at the time of the grant'". (Brazil's response to Panel
question No. 1, para. 17). Japan submits that a finding that the life of a subsidy has expired "would always
require the benefit to no longer exist". (Japan's third-party submission, para. 6. See also Japan's third-party
submission, paras. 4 and 5 (citing Appellate Body Report, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), paras. 5.387, 5.391, and 6.12)).
352 European Union's second written submission, para. 22.
353 European Union's second written submission, paras. 28-29; and response to Panel question No. 19,
para. 22.
354 European Union's response to Panel question No. 19.
355 European Union's response to Panel question No. 19, para. 25. (emphasis original)

BCI deleted, as indicated [***]

that the compliance panel's views on what might or might not be argued regarding the effectiveness
of the repayment of a loan on subsidized terms in achieving "withdrawal" are not instructive.356
The United States argues that the European Union's arguments are at odds with the correct
understanding of Article 7.8 of the SCM Agreement as well as Article 1 of the SCM Agreement 357,
and are not supported by the Appellate Body's findings in the first compliance proceeding concerning
the "life" of a subsidy .358 While noting that the text of Article 7.8 permits Members to comply by
withdrawing the subsidy, the United States submits that, based on its ordinary meaning, the text of
Article 7.8 refers to the withdrawal of the subsidy itself, and not an element or component of the
subsidy.359 The United States submits that Article 1 of the SCM Agreement defines the existence of
a subsidy in terms of a financ ial contribution by which a benefit is conferred. According to the
United States, " {t}he Appellate Body found that the evaluation of benefit requires a collective
analysis of the financial contribution, the terms under which the Member conferred it, and the terms
available in the market".360 Thus, the United States submits that a conclusion as to the withdrawal
of a subsidy requires consideration of all of these factors.361
The United States further contends that the Appellate Body's statement "that a subsidy has
a life, which may come to an end, either through the removal of the financial contribution and/or
the expiration of the benefit", was made in the context of an analysis of Articles 5 and 6 of the
SCM Agreement. The United States argues that considerati ons relevant for Article 5 are different
from those relevant to Article 7.8 , in that Article 5 "concerns the use of subsidies in a way that
causes adverse effects - not the continued existence of such subsidies".362 In addition, the
United States argues that the use of "and/or" in the Appellate Body's statement the European Union
relies upon merely "signals an understanding that the parties agreed that the two options are not
necessarily disjunctive". 363 For the United States, this language leaves open the poss ibility that
removal of a financial contribution would only bring the life of a subsidy to an end if it also entails
termination of the benefit. The United States argues that the European Union now "seeks to distort
the appellate report's 'and/or' into an either/or theory that would artificially cut short the lives of
subsidies while the ex ante benefit remains untouched".364
The United States submits that there may be occasions when the repayment -and removal-
of the financial contribution may achieve withdrawal of a subsidy but considers that this will depend
on the particular circumstances. In the case of a subsidised loan, the United States submits that the
withdrawal would necessitate prospective annual interest rates that brought the loan into conformity
with the loan the recipient could have obtained in the market at the time it received the subsidy.365
Finally, the United States argues that there is no support for the European Union's argument
that the compliance panel's views on whether the repayment of a loan on subsidized terms may
withdraw a subsidy are somehow invalid because the compliance panel's interpretation of the phrase
"withdraw the subsidy" was overturned by the Appellate Body. The United States submits that the

356 European Union's second written submission, para. 27; and response to Panel question No. 19,
paras. 20-21.
357 United States' second written submission, paras. 42-45.
358 United States' second written submission, para. 45.
359 United States' second written submission, para. 42.
360 United States' second written submission, para. 42.
361 United States' second written submission, para. 42. The United States argues that, "just as the
governments' payment of principal to Airbus under the LA/MSF contracts was not enough for past panel and
appellate reports to conclude that it conferred a subsidy, the alleged disgorgement of the principal by Airbus is
not enough by itself to conclude that the subsidy no longer exists". (United States' second written submission,
para. 43).
362 United States' second written submission, para. 45 (referring to Appellate Body Report, EC and
certain member States – Large Civil Aircraft (Article 21.5 – US), para. 5.373) ("Article 5 is concerned with the
causing of adverse effects through the 'use' of subsidies. … In contrast, Article 7.8 is concerned with the
continued existence of 'such subsid{ies}'.")
363 United States' second written submission, para. 45.
364 United States' second written submission, para. 45. See also United States' comments on the
European Union's response to Panel question No. 19, para. 73.
365 United States' comments on the European Union's response to Panel question No. 21, para. 84.
Alternatively, the United States submits that the subsidizing government would need to extract an amount
equal to the difference between the original benchmark and the loan. (United States' comments on the
European Union's response to Panel question No. 20, para. 76).

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compliance panel's analysis of whether repayment could withdraw a subsidy was not founded on its
separate analysis of whether a subsidy properly found to have ended was withdrawn for purposes
of Article 7.8.366
We do not see a contradiction between the compliance panel's suggestion that the
repayment of a loan on subsidized terms may not constitute the "removal" of a financial contribution
and the definition of a subsidy contained in Article 1.1 of the SCM Agreement. The compliance panel's
statement was focused on whether the repayment of a loan on subsidized terms amounts to the
"removal" of a financial contribution, not whether the "removal" of a financial contribution brings the
life of a subsidy to an end. Thus, the compliance panel's statement is not directed at understanding
whether the removal of one of the const ituent elements of a subsidy (the financial contribution)
means that the subsidy no longer exists. It is instead focused on whether the repayment of a loan
on subsidized terms means that a financial contribution has been "removed". On this particular point,
the compliance panel suggests that the repayment of a loan on subsidized terms might not amount
to the "removal" of the financial contribution, but rather, the full provision of a subsidized financial
contribution.
Likewise, although we agree with the E uropean Union that the second Appellate Body
statement quoted in the above passage was not directed at understanding whether the "removal"
of a financial contribution automatically brings the life of a subsidy to an end, the compliance panel
did not rely upon it to make that point. As already noted, the compliance panel's suggestion that the
repayment of a loan on subsidized terms may not constitute the "removal" of a financial contribution
does not address this question. The second Appellate Body statement quoted by the compliance
panel envisages that a subsidy may "continue to exist after the act of granting the financial
contribution". When considered in the light of the compliance panel's view that the full repayment
of a loan on subsidized terms arguabl y "implies that a subsidized financial contribution has been
provided to the recipient in its entirety ", the compliance panel's reliance on the second
Appellate Body statement suggests that it believed that the repayment of a loan on subsidized terms
could be characterized as the completion of the "act of granting of a financial contribution". Thus,
correctly understood, the compliance panel's position is consistent with the Appellate Body's view
that a subsidy may "continue to exist after the act of granting the financial contribution".
Turning to the third reason the European Union has advanced to support its position that
the above passage from the compliance panel report should be disregarded, we note that there is
no mention of, or reference to, the compliance panel's interpretation o f the phrase "withdraw the
subsidy". Moreover, there is no suggestion that the compliance panel's views were based on its
previously articulated position that the "withdrawal" of a subsidy for the purpose of Article 7.8 of the
SCM Agreement must bring an i mplementing Member into conformity with its obligations under
Article 5 of the SCM Agreement. Indeed, the fact that this consideration was not mentioned at all
(when it was the most obvious way of dismissing the European Union's submission concerning the
repayment of the LA/MSF loans) suggests that the compliance panel's interpretation of what it means
to "withdraw the subsidy" for the purpose of Article 7.8 did not form part of its reasoning in this part
of its report. Accordingly, we find no basis to agre e with the European Union's contention that the
compliance panel's statements were driven by its interpretation of the phrase "withdraw the
subsidy", which was overturned by the Appellate Body.
We note that in arguing that the repayment of a loan on subsi dized terms constitutes the
"withdrawal" of a subsidy, the European Union elaborat es a theoretical example involving the
provision of a one-off cash grant of EUR 10 million that was first advanced by the United States
during the substantive meeting with th e Panel. The European Union compares the repayment of a
one-off cash grant of EUR 10 million that is used to purchase assets of the same value with a useful
life of 10 years, with the repayment of a 10-year subsidized loan of EUR 10 million used for the same
purpose.367 We understand the European Union to rely upon its presentation of the outcomes of the
two examples to support the logic of its submissions.
The European Union begins its discussion of the one -off cash grant by explaining that both
the financial contribution and the benefit amount to EUR 10 million. The European Union asserts that
one way to determine the life of the subsidy would be to amortise the benefit of the EUR 10 million
over the anticipated useful life of the purchased assets (10 years). According to the European Union,

366 United States' comments on the European Union's response to Panel question No. 19, para. 70.
367 European Union's responses to Panel question Nos. 19 and 21.

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the subsidy would be considered "withdrawn" for the purpose of Article 7.8 of the SCM Agreement
at the end of the 10 -year period by virtue of the expiry of its benefit. To this extent, the
European Union agrees with the notion that the life of a subsidy may continue even after a financial
contribution has been fully provided – or, in the words of the Appellate Body, that "the fact that a
subsidy is 'deemed to exist' under Article 1.1 once there is a financial contribution that confers a
benefit does not mean that a subsidy does not continue to exist after the act of granting the financial
contribution".368
The European Union then goes on to consider how the subsidy could be withdrawn after five
years, positing two possibilities. The first option would involve removing the benefit on a prospective
basis, which the European Union maintains would be achieved if the recipient repaid the unamortised
benefit of the one-off cash grant amounting to EUR 5 million. With this payment, the European Union
submits that the original one -off cash grant could no longer be found to confer a benefit on a
prospective basis, and the subsidy would be withdrawn. The second option posited by the
European Union would involve the removal of the financial contribution, which the European Union
submits would be achieved if the recipient repaid the entirety of the one -off cash grant of
EUR 10 million. The European Union argues that, once that payment is made, there would be no
longer any financial contribution, and the subsidy would thereby be withdrawn.
Turning to the subsidized loan of EUR 10 million, the European Union first explains th at in
the light of the 10-year repayment period and the 10 -year useful life of the assets purchased with
that loan, the subsidy would come to an end after 10 years. For the European Union, the subsidy
would no longer exist after 10 years because by then th e financial contribution would have been
repaid in full and the benefit fully amortized. As with the one -off cash grant, the European Union
goes on to explain how the subsidy could be withdrawn after five years, identifying two possible
scenarios. Under the first scenario, the benefit would be removed on a prospective basis, which the
European Union maintains would be achieved by aligning the prospective annual interest payments
with a market benchmark. The second scenario would see the recipient repay the entirety of the
loan principal – i.e. the EUR 10 million. With this payment, the European Union argues that there
would be no longer any financial contribution, and the subsidy would thereby be withdrawn.
In our view, the European Union's presentation of t he above two examples overlooks
important differences in th e characteri stics of the two types of subsidies, which when properly
considered, suggest that the repayment of a loan on subsidized terms should not be understood on
its own to necessarily bring the life of a subsidy to an end.
As the European Union notes, a financial contribution in the form of a one -off cash grant
involves the transfer of funds to a recipient, with those funds also immediately representing the
benefit to the recipient. In contras t, the benefit of a subsidized loan accrues from the savings
achieved by the recipient as a result of the below-market interest rates charged by the government.
The total value of those savings (i.e. the full benefit) is not transferred immediately as in the case
of a one-off cash grant. It is achieved gradually over the course of the repayment period, which will
generally define the duration of the loan. Thus, the full benefit of a subsidized loan will be conferred
only when the loan is repaid in full. To this extent, and contrary to the European Union's submissions,
the full repayment of the principal disbursed under a subsidized loan can be best equated with the
provision of a financial contribution in the form of a one-off cash grant ( equivalent to the total
savings resulting from below-market interest rates), not the "removal" of a subsidy. In our view, to
argue otherwise would mean that Members would have different compliance obligations under
Article 7.8 of the SCM Agreement in relation to the withdrawal of subsidies affording recipients the
same amount of benefit, simply because of the form of the financial contribution chosen to confer
that benefit. This, we believe, can be seen from the examples posited by the European Union.
The European Union argues that the repayment after five years of the one-off cash grant of
EUR 10 million and the principal of EUR 10 million disbursed under the subsidized loan, would bring
the lives of the two subsidies to an end because, according to the European Union, in both cases the
financial contributions would have been fully repaid, making it impossible to conclude there is
ongoing subsidization.369 We note, however, that under this line of reasoning, none of the value of

368 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 708.
369 The United States considers that the "benefit" conferred by a grant is equivalent to the face value of
the grant plus the interest that the recipient avoided paying because of the grant. Hence, a grant may be seen

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the benefit afforded to the rec ipient under the subsidized loan would have been returned to the
government, whereas the entirety of the benefit conferred via the cash grant would have been
repaid. The recipient of the subsidized loan would be free to keep the savings that helped or enabled
it to finance the purchase of assets, while the recipient of the one-off cash grant would not be entitled
to keep the government funding assistance. In the example presented by the European Union, it is
not possible to determine the amount of the benefit of the subsidized loan because the interest rate
savings were not specified. Assuming that the subsidized loan provided its recipient with exactly the
same total value of savings as the cash grant – i.e. EUR 10 million370 – it is apparent that the Member
having provided the one-off cash grant would be in a different compliance position than the Member
that provided exactly the same amount of benefit to the recipient by means of a subsidized loan.
We do not see any legal ba sis to conclude that a Member's decision to provide a recipient with a
specific amount of funding assistance, by using either a loan or a grant, should determine the extent
to which the recipient is required to repay the totality of that funding assistance in order to bring
the subsidizing Member into compliance with its obligation to withdraw the subsidy under the terms
of Article 7.8 of the SCM Agreement. In our view, these considerations suggest that the repayment
of a loan on subsidized terms should not be understood to bring the life of a subsidy to an end.
We note, furthermore, that the European Union recognizes that the repayment of principal
and interest is a defining feature of a financial contribution in the form of a loan. 371 Indeed, the
requirement to repay principal and interest under a subsidized loan is an essential term of the
agreement between the subsidizing government and loan recipient pursuant to which that form of
financial contribution is transferred. In contrast, the repayment of a one -off cash grant is not an
inherent feature of this type of financial contribution. The repayment of a one -off cash grant is
extraneous to a subsidizing government's direct transfer of funds to a recipient. By overlooking this
important difference, the parallel the European Union draws between the repayment of the two types
of financial contributions used in its examples is misplaced. In order to agree with the
European Union, we would need to accept that the performance of the very terms through which a
subsidized loan is provided (i.e. the repayment of principal at below -market interest rates) would
be, alone, enough to "remove" or "take away" the subsidy that is defined by the very existence of
those terms. While we accept that the life of any subsidy will come to an end with the passage of
time, we do not believe that a subsidy can be withdrawn for the purpose of Article 7.8 of the
SCM Agreement simply through the execution of a condition whose performance is the very means
by which the same subsidy is bestowed. In other words, we do not see how the same act – the
performance of a requirement to make subsidized repayments under a government loan – can define
both the provision and the withdrawal of a subsidy.
Both parties find support for their different positions in the terms of Articles 1 and 7.8 of the
SCM Agreement. According to the European Union, the very definition of a subsidy under Article 1
requires the co-existence of a "financial contribution" and a corresponding "benefit". Thus, relying
upon the Appellate Body's statement that the life of a subsidy may come to an end " either through
the removal of the financial contribution and/or the expiration of benefit", the European Union argues
that the full repayment of a loan on its subsidized terms b rings the life of that subsidy to an end .
The United States, however, argues that it follows from Article 7.8 that a subsidy in its entirety must
be withdrawn in order to achieve compliance, not just one of its elements. In this regard, the
United States maintains that the Appellate Body's use of the words "and/or" in the statement the
European Union relies upon means that the Appellate Body recognized that the two options identified
were not necessarily disjunctive, confirming that the removal of a financial contribution may bring
the life of a subsidy to an end only if it also entails the termination of the benefit.
As noted by the first compliance panel, the statement the European Union relies upon was
not made in isolation but preceded by the Appellate Body's explanation of how the terms of Article 1
of the SCM Agreement operate to define the existence of a subsidy. After recalling, as the

as functionally equivalent to an interest-free loan for which the recipient need not pay the principal, according
to the United States. (United States' response to Panel question No. 21, para. 59; and comments on the
European Union's response to Panel question No. 21, para. 79).
370 This could be possible, for example, if the government loan was interest free, and a similar loan from
the market lender would have required the recipient to pay 10% interest per annum on the full amount of loan
principal.
371 European Union's response to Panel question No. 21, para. 11.

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European Union does in this proceeding, that Article 1 stipulates that a subsidy shall be deemed to
exist if there is a financial contribution that confers a benefit, the Appellate Body stated:
… the fact that a subsidy is "deemed to exist" under Article 1.1 once there is a financial
contribution that confers a benefit does not mean that a subsidy does not continu e to
exist after the act of granting the financial contribution. This is confirmed, for example,
by the text of Articles 4.7 and 7.8 of the SCM Agreement. The reference in those
provisions to "withdrawing" the subsidy would be rendered meaningless if a subsidy did
not continue to exist after its conferral on a recipient.372
In a footnote attached to the last sentence of this statement the Appellate Body explained
its thinking further , recalling that it ha d previously found in the context of Part V of the
SCM Agreement, that the benefit of an "untied, non-recurring, 'financial contribution'" may continue
to flow after it has been provided. 373 The statement the European Union relies upon – that the life
of a subsidy may come to an end " either through the removal of the financial contribution and/or
the expiration of benefit " – was made by the Appellate Body at the beginning of the very next
paragraph. In our view, the European Union's understanding of that statement is mistaken because
it fails to account for the specific context in which it was made.
Having twice explained that a subsidy may continue to exist after the act of granting a
financial contribution is complete, we believe that it would be incongruous to understand the
Appellate Body to have accepted in the very next sentence that the repayment of a loan on its
subsidized terms can bring the life of a subsidy to an end. This is because, for the reasons already
explained, the repayment of a loan on subsidized t erms merely confirms that a subsidy has been
fully provided (in the same way that the transfer of a one-off cash grant confirms the recipient has
received the full subsidy). Thus, when considered in its proper context, we do not understand the
Appellate Body statement the European Union relies upon to support its position. On the contrary,
in the light of the Appellate Body's explanation of how the terms of Article 1 of the SCM Agreement
operate to define the existence of a subsidy in the preceding paragraph of its report , the
Appellate Body statement the European Union relies upon is best understood to express the view
that the life of a subsidized loan may come to an end in either of two situations: when the financial
contribution and the benefit have been removed; or when only the benefit is removed. This reflects
our view that the repayment of a loan on its subsidized terms does not , alone, bring the life of the
subsidy to an end.
Finally, we do not see any inconsistency between the view that the repayment of a loan on
subsidized terms does not, alone, bring the life of a subsidy to an end, and the Appellate Body's
interpretation of a Member's compliance obligations under Article 7.8 of the SCM Agreement. We
recall that in the first compliance dispute, the Appellate Body found that a Member has no compliance
obligation under Article 7.8 with respect to expired subsidies. However, for the reasons explained
above, we do not consider that the repayment of a loan on subsidized terms necessarily means that
the subsidy has expired. The repayment of a loan on subsidized terms does not "remove", "return"
or "withdraw" the subsidized loan . Rather, it merely confirms that the subsidized financial
contribution has been f ully provided, in the same way that the act of transferring the funding
associated with a one-off cash grant confirms that the cash grant has been fully provided. Thus, just
as the provision of a financial contribution in the form of a one-off cash grant does not bring the life
of a subsidy to an end immediately after that grant is made, so too may the life of a subsidized loan
continue to exist after it has been fully repaid on subsidized terms. In both situations, the life of the
subsidy will depend upon the extent to which the recipient is continuing to use the subsidy for its
originally intended purposes (in the European Union's example, the useful life of the purchased

372 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 708. (fn omitted)
373 The full text of the relevant footnote provides: "{w}e also note that, in a Part V context, the
Appellate Body has found that an investigating authority may presume, for purposes of an administrative
review under Article 21.2 of the SCM Agreement, "that a 'benefit' continues to flow from an untied, non-
recurring 'financial contribution'", although this presumption is rebuttable. (Appellate Body Reports, EC and
certain member States – Large Civil Aircraft, fn 1643 (citing Appellate Body Report, US – Lead and Bismuth II,

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assets) without having repaid at least the remaining value of the benefit associated with the original
financial contribution on a prospective basis.374
With the above considerations in mind, we now turn to review whether the repayment of
UK A350XWB LA/MSF brought the life of the subsidy provided under that loan to an end. We have
found375 that Airbus made a final payment to the UK government in [***] totalling [***], which
represents repayment of the full amount of outstanding principal that Airbus actually drew down and
received, plus accrued interest under the subsidized UK A350XWB LA/MSF agreement. Accordingly,
and in the light of our conclusions with respect to the implications of the full repayment of a
subsidized loan on its subsidized terms for the expiry of a subsidy, we find that the European Union
has failed to establish that Airbus' repayment of the sums outstanding under the subsidized UK
A350XWB LA/MSF agreement withdrew the subsidy provided under that arrangement for the
purpose of Article 7.8 of the SCM Agreement.
The European Union's claim that the French, German, Spanish and UK A380 LA/MSF
subsidies have been withdrawn
In this section, we address the European Union's claim that the French, German, Spanish
and UK A380 LA/MSF subsidies have been withdrawn, thereby achieving compliance for purposes of
Article 7.8 with respect to these subsidies. In section 7.4.5.1, we address the European Union's
contention that it has achieved the withdrawal of all the A380 LA/MSF subsidies through a series of
[***] amendments to the French, German, Spanish and UK A380 LA/MSF loan agreements.
In section 7.4.5.2, we address the European Union's separate claim that the Spanish A380 LA/MSF
subsidy has been withdrawn by means of the full amortization of the ex ante benefit over time.
Finally, in section 7.4.5.3, we address the European Union's submission that an announcement made
by Airbus during the course of this proceeding to "wind down" and terminate the A380 programme
provides "further confirmation" and "an independent basis" to find that the European Union has
withdrawn the French, German, Spanish and UK A380 LA/MSF subsidies.
7.4.5.1 The [***] amendments to the French, German, Spanish and UK A380 LA/MSF loan
agreements
Main arguments of the parties
The European Union argues, on similar terms to its claim concerning the [***] amendment
to German A350XWB LA/MSF, that the [***] amendments to the French, German, Spanish and UK
A380 LA/MSF loan agreements have achieved the withdrawal of the subsidies conferred under those
arrangements. The European Union argues that all four member States concluded amendments to
their respective A380 LA/MSF agreements with Airbus, such that the previous financial contributions,
which were found to have been provided on subsidised terms, have now been replaced by new
financial contributions that are consistent with a market benchmark, thereby bringing the member
State lenders into compliance with their obligations under Article 7.8 of the SCM Agreement.376
Relying upon the panel and Appellate Body reports in Japan – DRAMS (Korea) , the
European Union argues that the substantial modification of an existing loan, including the extension
of the repayment period of a government loan, may be properly treated as the transfer of new rights
to the recipient of the modified loan and thus, give rise to a new financial contribution .377 The
European Union argues that the modifications made to the terms of the four amended A380 LA/MSF
agreements can be characterized as such because they [***], and [***], allowing Airbus [***].378
Accordingly, the European Union maintains that the amended A380 LA/MSF contracts constitute new

374 In this regard, we recall that the "nature, amount, and projected use of the challenged subsidy may
be relevant factors to consider in an assessment of the period over which the benefit from a financial
contribution might be expected to flow. A panel may consider, for example, as part of its ex ante analysis of
benefit, whether the subsidy is allocated to purchase inputs or fixed assets; the useful life of these inputs or
assets; whether the subsidy is large or small; and the period of time over which the subsidy is expected to be
used for future production". (Appellate Body Report, EC and certain member States – Large Civil Aircraft,
para. 707).
375 See section 7.4.4.2.1 above.
376 European Union's first written submission, paras. 70-80 and 100-102, 150, 158-159, and 160-170.
377 European Union's first written submission, para. 152 (referring to Panel Report, Japan – DRAMs
378 European Union's first written submission, paras. 155-156.

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financial contributions which must be assessed against the terms of a contemporaneous market
benchmark in order to determine whether they confer a benefit within the meaning of
Article 1.1(a)(2) of the SCM Agreement.
The European Union argues that the terms of the amended A380 LA/MSF agreements are
consistent with those that a commercial lender, facing the possibility of the termination of the A380
programme, would have offered Airbus at the rele vant time . In support of this argument, the
European Union relies upon a report prepared by its consultant PwC, which analyses the transactions
at issue and concludes that the behaviour of the member State governments in agreeing to the
amendments was consistent with the behaviour of a market -based lender facing the possibility of
the termination of the A380 programme. In particular, PwC considered the various aspects of the
four restructured arrangements to assess the "net effect" of the amendments on each government
lender's future returns. PwC concluded that the amendments had "net advantages" due to their
impact on expected repayments which thus put the lenders in a better position than they would have
been in under a programme termination scenario.379 The European Union contends that the member
State lenders thus acted as rational commercial actors by agreeing to a restructuring that entailed
a [***] in the face of the certainty of such losses.380
The United States argues that there is no support for the Eu ropean Union's argument that
the amendments "replaced" the pre -existing A380 LA/MSF subsidies. Rather than terminate the
original A380 LA/MSF contracts, the United States argues that the amendments kept the A380
LA/MSF contracts in place, under terms that were modified specifically to [***]. The United States
argues that this does not conform with the requirement in Article 7.8 to "withdraw" or "take away"
a pre-existing subsidy found to have caused adverse effects.381
The United States argues that the [***] amendments are properly understood to be
"intervening events" – an "unplanned adjustment to the terms of a pre -existing subsidy" – that
increased the amount of the pre -existing A380 LA/MSF subsidies to Airbus and pro longed their
lives.382 To assess the effect of the amendment, the United States has submitted a report by NERA
Consulting, which compares the IRR of the original A380 LA/MSF loan agreements, considering only
cash flows from 2018 onward, to the IRR of the ame nded A380 LA/MSF agreements, from 2018
onward. The NERA analysis finds that the IRRs of the original German, Spanish, and UK A380 LA/MSF
are higher than the corresponding IRRs of the LA/MSF as amended, concluding that the amendments
made Airbus better off – and the governments of Germany, Spain, and the UK worse off – than they
would have been, absent the amendments. 383 For French A380 LA/MSF, NERA concludes that the
IRR of the original French A380 LA/MSF is slightly lower than the IRR of French A380 LA/MSF as
amended, but finds that the results are highly sensitive to the credibility of [***].384 In this respect,
the United States submits that if Airbus opts to terminate the A380 programme somewhat earlier
than forecasted under the revised delivery schedule, then the IRR of the original French A380 LA/MSF
contract would be higher than the IRR of French A380 LA/MSF as amend ed.385 NERA also assessed
the IRR of the original A380 LA/MSF packages considered together, and the IRR of the amended
LA/MSF packages considered together, concluding that the IRR of the original package is higher than
the amended arrangements. The United St ates submits that this provides additional confirmation
that the amendments increased the pre-existing A380 LA/MSF subsidies to Airbus.386
In any case, even on the basis of the European Union's own argument, the United States
submits that the European Union is incorrect in arguing that the [***] amendments aligned the
A380 LA/MSF subsidies with a contemporaneous market benchmark. According to the United States,
the European Union and the PwC report improperly assume that, absent the [***] amendments,
Airbus w ould have terminated the A380 programme by [***], thus preventing the Airbus
governments from recovering the outstanding A380 LA/MSF principal, making any alternative

379 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)).
380 European Union's second written submission, para. 137.
381 United States' first written submission, paras. 52 and 55-56
382 United States' first written submission, paras. 37-41.
383 United States' first written submission, para. 45 (referring to NERA A380 LA/MSF Report
385 United States' first written submission, para. 46.
386 United States' first written submission, para. 47 (referring to NERA A380 LA/MSF Report,
(Exhibit USA-8 (HSBI/BCI)), paras. 17 and 20).

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allowing for the potential recovery of principal attractive. 387 The United States considers the
European Union's argument to be flawed because it fails to recognize that a private creditor "would
have had good reasons to believe that Airbus … would have sought to capture the 2018 Emirates
order or a similar volume of orders from another airline customer, even in the absence of the [***]
amendments".388 The United States additionally argues that the European Union and PwC analysis
incorrectly ignored the risk that forecast customer demand for the A380 would not materialize,
[***] which "{led} PwC to overstate the 'net advantages,' rendering its financial analysis
unreliable".389 Finally, the United States argues that the European Union's argument and the
conclusions in the PwC report are flawed because there is no evidence that the Airbus governments
performed an adequate level of due diligence in considering whether to enter into the [***]
amendments to the A380 LA/MSF agreements, which is inconsistent with the behaviour of a
commercial lender.390 On the whole, the United States argues that a reasonable commercial lender
could have sought better terms, such as repayment on a fixed schedule, rather than through future
A380 deliveries, which "would have drastically reduced the risk of the amendments to the
lenders".391
Evaluation by the Panel
7.4.5.1.2.1 Features of the amended A380 LA/MSF loan agreements
The [***] amendments modify the terms of each of the original LA/MSF agreements that
were concluded by France, Germany, Spain and the United Kingdom with Airbus between [***] and
[***].392 The European Union asserts that Airbus and the four member States concluded the four
amendments to ensure that Airbus would receive [***] at a point in time when Airbus faced faltering
demand for the A380 and needed to make a critical decision as to whether to continue the
programme or [***].393 The German A380 LA/MSF amendment was concluded on [***], the
French A380 LA/MSF amendment on [***], the UK A380 LA/MSF amendment on [***], and the
While the specific amendments differ in certain respects, the four amendments share
common features. As a core modification, each of the amendments [***]. The French amendment
[***].395 The German amendment [***].396 The Spanish amendment [***].397 The [***]
UK amendment [***].398 In addition, the LA/MSF contracts contained the following country-specific
modifications:
a. In the case of the French amendment, [***]399 Airbus also agreed [***].400 The French
amendment also extends the expiration date of the original French A380 LA/MSF
agreement from [***].401

387 United States' first written submission, para. 60.
388 United States' first written submission, para. 62.
389 United States' first written submission, para. 74.
390 United States' first written submission, paras. 77-78.
391 United States' first written submission, para. 79.
392 Panel Report, EC and certain member States – Large Civil Aircraft, fn 1933, para. 7.326;
French A380 LA/MSF Agreement, (Exhibit EU-12 (BCI)); Convention No. [***]81035002277545, [***],
(Exhibit EU-13 (BCI)); German A380 LA/MSF Agreement, (Exhibit EU-14 (BCI) (English Translation)); and
Spanish A380 LA/MSF Agreement, (Exhibit EU-15 (BCI)); UK A380 LA/MSF Agreement, (Exhibit EU-16 (BCI)).
393 European Union's first written submission, paras. 140-145; PwC A380 LA/MSF Report, (Exhibit EU-17
(HSBI)), paras. 39-42; and Minutes of a meeting of the board of directors of Airbus SE, [***], (Exhibit EU-18
(HSBI)), pp. 2-4.
394 European Union's first written submission, para. 144.
395 [***] French A380 LA/MSF Amendment, (Exhibit EU-21 (BCI)), Art. 3.
396 [***] German A380 LA/MSF Amendment, (Exhibit EU-20 (HSBI/BCI) (English Translation)),
Section 3.1(a).
397 [***] Spanish A380 LA/MSF Amendment, (Exhibit EU-23 (BCI)), p. 3.
398 [***] UK A380 LA/MSF Amendment, (Exhibit EU-22 (BCI)), Art. 4.1.
399 Specifically, under the amendment, [***]. ([***] French A380 LA/MSF Amendment, (Exhibit EU-21
(BCI)), Art. 2).
400 [***] French A380 LA/MSF Amendment, (Exhibit EU-21 (BCI)), Art. 5.
401 [***] French A380 LA/MSF Amendment, (Exhibit EU-21 (BCI)), Art. 1; and PwC A380 LA/MSF
Report, (Exhibit EU-17 (HSBI/BCI)), para. 163.

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b. In the case of the German amendment, [***].402 Airbus was also required to [***].403
The German amendment also [***].404
c. In the case of the Spanish amendment, [***].405 The amendment also creates a new
obligation for Airbus to [***].406
d. In the case of the UK amendment, Airbus also agreed to make [***].407
Finally, in the event of the A380 programme termination, the [***] A380 LA/MSF
amendment affirmed the obligation containe d in the original [***] A380 LA/MSF agreement for
Airbus to [***].408 [***] in the event of A380 programme termination.409
7.4.5.1.2.2 The relevant analytical framework
The analytical framework the European Union relies upon to support its submission that the
[***] amendments to the French, German, Spanish and UK A380 LA/MSF agreements achieved the
withdrawal of the subsidies conferred under those arrangements is similar to the analytical approach
the European Union presented in relation to the [***] amendment to the German A350XWB LA/MSF
agreement discussed in section 7.4.3.2.2. As with the [***] amendment to the German A350XWB
LA/MSF contract, the European Union maintains that the [***] A380 LA/MSF amendments created
four new financial contributions, the terms of wh ich should be compared with a contemporaneous
market benchmark in order to determine whether they confer a benefit and, therefore, continue to
subsidize Airbus.410 However, unlike the approach adopted by the European Union with respect to
the German A350XWB amendment, the European Union has not attempted to substantiate its
assertion of compliance by presenting a calculation of the IRRs of the amended A380 LA/MSF
contracts and comparing these to the rate of return that a market-based lender would have wanted
to achieve on a loan to Airbus on similar terms to the amended A380 LA/MSF contracts at the time
they were concluded. Rather, for the amended A380 LA/MSF contracts, the European Union argues
that the appropriate benchmark against which to measure whether t he revised terms are market -
based is the behaviour of a commercial lender faced with the likelihood of the early termination of
the A380 programme by [***].411 Thus, in order to determine whether the [***] amendments to
the A380 LA/MSF agreements achieve compliance, the key question that must be answered following
the European Union's suggested analytical framework is whether a commercial lender, faced with
the likely termination of the A380 programme, would have entered into the A380 LA/MSF
amendments on the terms agreed between Airbus and the Airbus governments.412
In essence, we understand the European Union's submissions to be based on the following
two premises: first, that the [***] amendments created new loans that replaced the original A380
LA/MSF agreements; and second, that the appropriate way to determine whether the amended A380
LA/MSF agreements continue to confer a subsidy on Airbus is to determine whether a commercial

402 Specifically, [***]. ([***] German A380 LA/MSF Amendment, (Exhibit EU-20 (HSBI/BCI) (English
translation)), sec. 3.1(b)).
403 [***] German A380 LA/MSF Amendment, (Exhibit EU-20 (HSBI/BCI) (English translation)), sec. 2.1.
404 [***] German A380 LA/MSF Amendment, (Exhibit EU-20 (HSBI/BCI) (English translation)), sec. 3.2.
405 Under the original Spanish A380 LA/MSF agreement, Airbus agreed to pay a per-aircraft levy of
[***]. These per-aircraft levies were [***]. ([***] Spanish A380 LA/MSF Amendment, (Exhibit EU-23
(BCI)), p. 4).
406 [***] Spanish A380 LA/MSF Amendment, (Exhibit EU-23 (BCI)), p. 5.
407 [***] UK A380 LA/MSF Amendment, (Exhibit EU-22 (BCI)), Art. 4.2.
408 [***] [***] A380 LA/MSF Amendment, [***]; Clause 2.4 and schedule 3, Clause 4.2. See also
PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), paras. 123-124.
409 The [***] amendment uniquely provides that Airbus should [***], specifying that the legal
consequences provided for in Section 9 of the 2002 Loan Agreement shall not take effect if Airbus breaches
this obligation. We understand that this means that Airbus is not precluded from terminating the programme
prior to 2028. ([***] A380 LA/MSF Amendment, [***], sec. 4; and PwC A380 LA/MSF Report, (Exhibit EU-17
(HSBI/BCI)), paras. 84-85).
410 European Union's first written submission, paras. 70-80 and 152-176.
411 European Union's first written submission, paras. 124-141; Minutes of a meeting of the board of
directors of Airbus SE, [***] (Exhibit EU-18 (HSBI)), p. 2; and PwC A380 LA/MSF Report, (Exhibit EU-17
(HSBI/BCI)), Section C.
412 European Union's first written submission, paras. 160-175.

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lender would have agreed to the A380 LA/MSF amendments, given the likely termination of the A380
programme.
We recall that in our analysis of the [***] amendment to the German A350XWB LA/MSF
agreement, we dismissed the European Union's reliance on the panel and Appellate Body reports in
Japan – DRAMS (Korea) as a basis to support its view that a "substantial modification" to an existing
loan necessarily creates a new loan (financial contribution) for the purpose of performing a benefit
analysis. We found that the European Union's reliance on Japan – DRAMS (Korea) was misplaced
because that dispute addressed a different legal question arising from a different set of facts
compared with the legal and factual issues arising in relation to the [***] amendment to the
German A350XWB LA/MSF agreement. In our view, the sam e conclusion can be reached mutatis
mutandis in relation to the European Union's reliance on Japan – DRAMS (Korea) to support its
submissions concerning the [***] amendments to the A380 LA/MSF agreements.
As with the [***] amendment to the German A350XWB LA/MSF agreement, there is nothing
in the evidence before us to suggest that the [***] A380 LA/MSF amendments brought into
existence a new financial contribution. Although the amendments altered the contracting parties'
rights, they did not establish new and separate loan arrangements. The [***] amendments did not
terminate the original A380 LA/MSF agreements . All required disbursements under the loan
agreements had been made before the [***] amendments, no new disbursements were made as
a result of those a mendments, and the outstanding principal and interest had not yet been fully
repaid. Thus, in our view, the original A380 LA/MSF agreements continue to exist but in a
restructured form, reflecting the revised repayment terms agreed between Airbus and the A irbus
governments.
For the reasons already explained in the context of our analysis of the [***] amendment
to the German A350XWB LA/MSF contract, we consider that where funding under a subsidized loan
agreement has been fully disbursed and remains outstanding, an amendment to that loan to bring
it into alignment with a market benchmark on a prospective basis would need to ensure that the
recipient is placed in the same position it would have been in at the t ime of the amendment, had
the loan been agreed on market terms from the beginning.413 Thus, in our view, the correct approach
for determining whether the revised terms of the A380 LA/MSF agreements align those contracts
with a market benchmark, requires us to determine whether they leave Airbus in the same position
it would have been in at the time of the amendments, had the loan contract been agreed on market
terms from the beginning. We now turn to apply this standard to the facts surrounding the [***]
amendments to the A380 LA/MSF agreements.
7.4.5.1.2.3 Have th e [ ***] amendments aligned the terms of the A380 LA/MSF
agreements with a market benchmark?
We begin by noting that the amount of outstanding principal under the A380 LA/MSF
agreements at the time of the [***] amendments was significant.414 As already noted, the [***]
amendments release Airbus of the obligation to make levy payments on certain deliveries made
during the [***] period with a view to inter alia facilitating Airbus' planned sales to an important
customer that, it appears, would not otherwise have been made. However, at the same time, all

413 See section 7.4.3.2.2 above.
414 Under the original A380 LA/MSF agreements, France committed to provide up to [***] in LA/MSF;
Germany committed to provide up to [***] in LA/MSF; Spain committed to provide up to [***] in LA/MSF;
and the United Kingdom committed to provide up to [***] in LA/MSF. (French A380 LA/MSF Agreement,
(Exhibit EU-12 (BCI)), Arts. 3.1 and 6.2; German A380 LA/MSF Agreement, (Exhibit EU-14 (BCI)), Clause 4;
Spanish A380 LA/MSF Agreement, (Exhibit EU-15 (BCI)), Art. 2; and UK A380 LA/MSF Agreement, (Exhibit EU-
16 (BCI)), Clause 5). The United States submits that, at the end of 2017, only the outstanding [***] were
[***] for France; [***] for Germany, [***] for Spain and [***] for the United Kingdom. (United States'
second written submission, para. 63 (referring to NERA A380 LA/MSF Report, (Exhibit USA-8 (HSBI/BCI)),
Appendices 1-8)). We additionally note that the European Union has estimated that losses for the member
States would have been [***], if the programme had terminated in [***]. The European Union submits that
[***] because Airbus is obliged to [***]. (European Union's first written submission, para. 127; PwC A380
LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), paras. 150-158 and [***]; and [***] A380 LA/MSF Agreement
(Exhibit [***]), Schedule 3, Clauses 4.3, 4.8 and 4.9).

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four amendments [***].415 The French and German amendments also require Airbus to [***]416,
and additional [***] on future deliveries are provided for in the case of the Spanish amendment.417
Thus, in broad terms, it can be said that the four amendments restructure the repayment terms of
the outstanding principal and future interest payable under the pre-existing LA/MSF agreements, in
a way that decreases the financial burden on Airbus in the short- to medium-term, while increasing
that burden in the long-term, when Airbus and the members State governments apparently expected
the market for the A380 to improve.
The PwC report the European Union relies upon defines its objective as the assessment of
"whether the negotiated restructurings of the respective A380 MSF loan agreements between Airbus
(or its affiliates) and {the French, German, Spanish and UK governments} are consistent with what
private creditors in a similar position would have demanded for comparable transactions at the same
time, i.e. whether each restructuring measure is provided on terms consistent with the relevant and
contemporaneous market benchmark".418 The PwC report undertakes this assessment in essentially
four steps.
In the first two steps, the PwC report reviews the likelihood of programme termination and
the prospects of a successful turnaround at the time of the [***] amendments. After explaining
that "a precondition for private creditors to support a … project restructuring" is the "likelihood of a
successful turnaround" in the prospects of the financed project419, the PwC report examines the risk
of A380 programme termination, finding that "there was a high risk of programme termination and
therefore a high probability for the member states to lose a substantial portion of their MSF
investment".420 The PwC report then goes on to explore the "turnaround prospects" of the A380
programme in the light of available demand forecasts for LCA sold into the market for Very Large
LCA over the next 20 years, and the modifications Airbus anticipated would be made to the A380 to
improve its competitiveness. PwC concludes that this information "suggest{s} the exist ence of
prospects for a successful turnaround for the A380 programme".421
In the final two steps of its analysis, PwC determines the potential losses to the Airbus
governments in the event of A380 programme termination. PwC next assesses the advantages and
disadvantages of the amendments from the perspective of each government lender. PwC explains
that where this assessment results in a "net -advantage", the member State lenders improve their
positions relative to the programme termination scenario. However, where the assessment of the
amendment shows a "net -disadvantage", the degree of the disadvantage resulting from the
restructured terms would need to be compared to the expected losses of the programme termination
scenario because "a smaller net -negative effect in the restructuring scenario … would still lead to
the conclusion that supporting the restructuring process would be the preferred behaviour of a
private lender".422 This is because, according to PwC, the "main goal for a private creditor when
faced with restructuring is to avoid (partly or entirely) potential losses".423 In other words, a creditor
may decide to proceed with the restructuring of a loan even if the full amount of outstanding principal
and future interest payments expected under the pre-existing loan could not be recovered.
PwC concludes that the effect of the [***] amendments is a net -advantage for [***] of
[***]424 and a net-advantage for [***] of [***].425 In the case of [***], PwC determines that
the net effect of the [***] amendment is "neutral", with a possibility to [***] and concludes that
a private creditor would have behaved in the same manner as the Spanish government. 426 Finally,

415 [***] French A380 LA/MSF Amendment, (Exhibit EU-21 (BCI)), Art. 2; [***] German A380 LA/MSF
Amendment, (Exhibit EU-20 (HSBI/BCI) (English translation)), sec. 3.1(b); [***] Spanish A380 LA/MSF
Amendment, (Exhibit EU-23 (BCI)), p. 4; and [***] UK A380 LA/MSF Amendment, (Exhibit EU-22 (BCI)),
Art. 4.2.
416 [***] French A380 LA/MSF Amendment, (Exhibit EU-21 (BCI)), Art. 5; and [***] German A380
LA/MSF Amendment, (Exhibit EU-20 (HSBI/BCI) (English translation)), sec. 2.1.
417 [***] Spanish A380 LA/MSF Amendment, (Exhibit EU-23 (BCI)), p. 5.
418 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), paras. 3 and 20.

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in the case of the [***], PwC concludes t hat the [***] amendment [***] even in the event of
programme termination. Nevertheless, PwC ultimately assesses that the [***] amendment is
market-based, because a private investor would have accepted the amendment.427
In our view, PwC's analysis cannot be relied upon to show that the [***] amendments have
brought the terms of the A380 LA/MSF agreements into line with a market benchmark.
The PwC report finds that the market prospects were positive in 2018 for a new and allegedly
more competitive version of the A380 that Airbus intended to develop. PwC arrived at this conclusion
after reviewing: (i) the Airbus 2017 Global Market Forecast (predicting 1,410 new deliveries in the
"Very Large Aircraft" segment between 2017 and 2037); (ii) Boeing's 2017 Current Market Outlook
(predicting 3,160 deliveries in the "Medium/Large Passenger Widebody" segment over the same
period); (iii) the Flight Global Fleet Forecast (predicting 405 deliveries in the "Large aircraft" segment
from 2016 to 2036, and specifically 394 for the A380); (iv) two Airbus PowerPoint slides describing
various planned "improvements" to the A380; and (v) certain Airbus HSBI concerning then current
and future sales campaigns.428
We note, however, that as explained by PwC, the recent history of the A380 revealed a
different story, suggesting that its short to medium -term prospects were not good. As of
February 2018, Airbus had not received any new A380 orders for nearly four years. 429 On the
contrary, several airlines had cancelled or reduced existing contr actual arrangements, resulting in
an order volume of 311 aircraft by the end of 2017. With 226 A380s delivered through May 2018,
only 85 deliveries remained outstanding, and a substantial portion of these were apparently at risk
of cancellation.430 In our vi ew, the very fact that Airbus was close to terminating the programme
suggests that a market lender would have closely scrutinized Airbus' future business plans for the
A380, including the delivery forecasts for a new improved "A380plus". 431 In this regard, w e recall
that in considering the reliability of Airbus' business case delivery forecasts, the original panel made
the following statement:
In our view, the further in time the events that are the subject of a forecast are
anticipated to take place, the more likely it is that one or more intervening events may
impede their fulfilment. In the specific context of the LCA industry, where, as the
European Communities notes, the business environment is shaped by factors "whose
very foreseeablity is impossible by definition ",{} the element of uncertainty that is
attached to aircraft delivery forecasts that sometimes projected events over multiple
decades{} cannot be ignored.432
Moreover, in the light of the fact that the repayment terms of the amended A380 LA/MSF
contracts continue to be substantially levy -based and success -dependent, we believe that the
following considerations, identified by the panel in the original proceeding, would have also informed
a market lender's assessment of Airbus' business forecast for the A380:
Because of the graduated levy -based and success -dependent nature of LA/MSF
repayments, Airbus has an economic incentive to be optimistic in its forecasts of,
inter alia, the number of aircraft likely to be sold and the pace of those sales {…} The
greater the number of sales over which principal repayments and royalties must be

427 PwC submits that "a private investor would be interested in supporting [***]. (PwC A380 LA/MSF
Report, (Exhibit EU-17 (HSBI/BCI)), para. [***]).
429 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), para. 31 (noting that, "{a}lthough Airbus
officially announced an A380 order for three aircraft from Japanese carrier All Nippon Airways (ANA) in
January 2016, these orders were in fact previously considered as 'undisclosed' customers within Airbus' official
order book".)
431 The United States and NERA submit that a private creditor would have had access to information
characterizing Airbus' A380 demand forecasts as optimistic, and therefore would be unlikely to accept Airbus'
demand forecasts uncritically. (United States' second written submission, paras. 67-79; and NERA A380
LA/MSF Report, (Exhibit USA-8 (HSBI/BCI)), paras. 3, 23-25, and 33-36).
432 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.414. (fns omitted)

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paid, the less likely it is that Airbus will have to make those payments if the business
plan estimates prove too optimistic.433
In our assessment, the above factors su ggest that a market lender would have taken a
conservative approach to determining whether the business prospects of the A380 were enough to
justify amending the loans, instead of accepting the losses that would have resulted from programme
termination. We are not convinced that a market lender faced with the possibility of termination of
the A380 programme would have concluded that the "precondition" 434 for supporting the
restructuring of the A380 LA/MSF loans (i.e. the "likelihood of a successful turnaround " of the
A380)435 was as easily satisfied as PwC found to be the case. Thus, in our view, PwC's analysis is an
insufficient basis to conclude that a market lender would have found "the existence of prospects for
a successful turnaround for the A380 programme".436
The United States appears to argue that the PwC analysis cannot be relied upon to show
that the A380 LA/MSF amendments were market -based, because the European Union has failed to
demonstrate the fundamental premise upon which it is based – namely, that a market lender would
have believed that the 2018 amendments were necessary in order to continue the A380 programme.
The United States discusses evidence which it considers demonstrates that a private creditor would
have doubted that Airbus would have ter minated the A380 programme by [***] absent the
amendments. This evidence includes a statement by Emirates CEO that Emirates "remain{ed}
committed to the {A380} programme".437 The United States submits that Airbus was also confident
about market demand for the A380 and expected it to revive in the mid-2020s, that Airbus already
had enough non-at-risk orders to sustain the A380 programme until [***]438, and that Airbus also
had identified [***] when pitching the amendments to member State lenders.439 The United States
furthermore maintains that a reasonable creditor would also have known that Airbus had the ability
to continue operating the A380 programme at a loss if necessary, as it had done in the past, in order
to capture future anticipated demand. 440 In the light of our assessment of what a market lender's
likely outlook would have been regarding future prospects for the A380 programme—and even NERA
and the United States' own assessment of Airbus' A380 delivery forecasts441—we are not persuaded
by the United States' assertions concerning the likely expectations surrounding the risk of A380
programme termination.
In addition, we note that the United States points to the lack of evidence in this proceeding
showing that the Airbus governments performed any due diligenc e in respect of the
A380 amendments to support its submission that the PwC report fails to demonstrate that the [***]
amendments are market-based.442 The United States contrasts this situation with the circumstances
surrounding the original A380 LA/MSF agreements, where specific project appraisals were performed
and the Airbus business case, which included an analysis of multiple scenarios, was reviewed.443 The
European Union argues that the presence or absence of due diligence is not determinative of whether

433 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1926. (fns omitted)
437 Emirates press release, "Emirates welcomes 100th A380 to its fleet", (2 November 2017),
(Exhibit USA-5).
438 United States' second written submission, para. 67 (referring to Airbus SE Special Earnings Call
February 2018, (Exhibit USA-3)). See also United States' second written submission, paras. 71-72.
439 United States' second written submission, para. 67 (referring to [***] German A380 LA/MSF
Amendment, (Exhibit EU-20 (HSBI/BCI)), Attachment 3).
440 United States' first written submission, paras. 64-65.
441 NERA A380 LA/MSF Report, (Exhibit USA-8 (HSBI/BCI)), para. 16 (referring to Airbus SE Special
Earnings Call January 2018, (Exhibit USA-1)) ("It is important to be clear, however, that {the expected
delivery schedule for the A380} is optimistic and inaccurate. The forecasts for [***] are much higher than
Airbus had already told investors it would meet. Moreover, the delivery schedule assumes that Airbus would
succeed in capturing {} orders beyond the 2018 Emirates order.")
442 United States' second written submission, para. 76 (referring to Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), para. 6.651); NERA A380 LA/MSF Report,
(Exhibit USA-8 (HSBI/BCI)), paras. 37-39. The United States additionally argues that evidence on record
confirms that the member State lenders decided to enter the [***] amendments on the basis of non-
commercial considerations related to [***]. (United States' second written submission, paras. 62 and 64
(citing Letter from [***], (Exhibit EU-89 (HSBI)), "{T}he [***]").

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the amendments aligned the A380 LA/MSF contracts to a market benchmark, and in any event, the
member States did in fact negotiate the terms of the agreement and perform due diligence, as is
evident from the fact that the four amendments differ from each other, demonstrating that member
States sought to optimise the outcomes. 444 In our view, a market lender faced with the possible
termination of the A380 programme and the recognized uncertainty in LCA delivery forecasts
(particularly, given the recent history, as regards the A380) would have undertaken its own due
diligence on the prospects of the A380. We recall in this regard that the first compliance panel found
that:
… a commercial investor would be normally expected to perform a certain degree of due
diligence in relation to the current and future "economic conditions " of a particular
project before agreeing to enter into a loan contract.445
The evidence of discussions between Airbus and the Airbus governments the European Union
relies upon does not reveal the extent to which France, Germany, Spain and the UK relied upon their
own independent appraisals of the prospects for the A380 in agreeing to the amendments. The
European Union's evidence confirms only that negotiations were held over a period of months to
discuss the terms of the amendments. 446 There is, therefore, no evidence before us showing that
the Airbus governments performed any independent assessment of Airbus' business plan for the
A380, including its marketing prospects, or the economic value of the terms of the amendments.
While we do not think that the absence of such appraisals can alone demonstrate that the
amendments fail to align the terms of the original A380 LA/MSF agreements to a market benchmark,
a commercial market lender would have likely undertaken due diligence in the process of deciding
whether to enter into the A380 LA/MSF amendments.
Finally, we agree with the United States that PwC's "net -advantage/net-negative" analysis
does not accurately determine the Airbus governments' "net" fi nancial positions at the time of the
[***] amendment because the comparisons applied are based on nominal future cash flows, instead
of the net present value of those cash flows. By way of example, the United States recalls that the
PwC report concludes that the Spanish amendment offered a [***]. The United States notes,
however, that this was despite the fact that under the original Spanish A380 LA/MSF agreement and
the Airbus/PwC expected delivery schedule, Airbus would pay an additional [***] in cash flows from
2020 to 2028, beyond what the [***] amendment requires in those years [***]. The United States
goes on to note that under the Spanish amendment, Airbus eventually pays this [***] in cash flows
[***]. Thus, the United States argues that PwC incorrectly treats [***] as being equivalent to
[***].447 In our view, PwC's reply to these United States' criticisms does not address the point made
by the United States448, which we consider to be valid, and it fails to convince us that the time-value
of money should not have been taken into account in PwC's calculations.
Thus, for all of the above reasons, we find that the European Union has failed to demonstrate
that the [***] amendments to the A380 LA/MSF agreements bring the subsidized terms of the
loans into line with market financing instruments. Accordingly, we conclude that the European Union
has failed to demonstrate that the [***] amendments to the A380 LA/MSF agreements has brought
it into compliance with the obligation to "withdraw the subsidy" under Article 7.8 of the
SCM Agreement.
Withdrawal of the Spanish A380 LA/MSF subsidy by means of the amortization of
benefit through the passage of time
Main arguments of the parties
7.235. The European Union maintains that the life of a subsidized loan may be determined on the
basis of the ex ante expectations held by the contracting parties with respect to its full repayment

444 European Union's second written submission, paras. 200-201.
445 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.651.
446 Declaration by [***], 4 October 2018, (Exhibit EU-19 (BCI)).
447 NERA A380 LA/MSF Report, (Exhibit USA-8 (HSBI/BCI)), paras. 40-42.
448 PwC Response Report, (Exhibit EU-86 (BCI)), para. 39.

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on subsidized terms.449 Accordingly, the European Union claims that the benefit of the Spanish A380
LA/MSF fully amortized [***], when it was anticipated, on the basis of the expectations held by
Airbus and the Spanish government at the time loan was agreed in [***], that the principal and
interest accruing to the Spanish government would have been fully repaid. In support of this
submission, the European Union relies upon a report prepared by its consultant, TradeRx, which
reviews the terms of the Spanish A380 LA/MSF, maps out the expected disbursements and
repayment terms, and concludes that the benefit of the Spanish A380 LA/MSF contract would be
fully amortized by [***].450
The United States argues that the European Union's assessment is flawed because TradeRx's
assessment of the life of the subsidy improperly reli es exclusively on the "loan life" without taking
into account the anticipated "marketing life" of the A380, and because the European Union ignores
that amendments to the Spanish loan agreement prolonged the ex ante life of the Spanish A380
LA/MSF subsidy. The United States submits that the Appellate Body and first compliance panel both
recognized that analysing a subsidy in relation to its "marketing life" is a valid way to measure the
life of the LA/MSF subsidies, and by ignoring this, the United States ar gues that TradeRx's analysis
of the ex ante life of Spanish LA/MSF for the A380 "is incomplete and thus unreliable".451 In addition,
the United States argues that neither the [***] and [***] amendments to the Spanish A380
LA/MSF was anticipated at the time t hat the original Spanish A380 LA/MSF agreement was
concluded, and therefore these two amendments may be understood to have extended the ex ante
life of the Spanish A380 LA/MSF to a point in time well beyond 2018.452
Evaluation by the Panel
7.237. The European Union's consultant, TradeRx, seeks to determine whether the benefit conferred
by the Spanish A380 LA/MSF loan agreement has fully amortized [***] by allocating the alleged
benefit of the Spanish A380 LA/MSF loan over the period during which full repayment of principal
and interest, along with foreseen royalties, was expected to occur. The rationale for this approach
is that the alleged benefit conferred through the financial contribution (i.e. the subsidized loan)
would be enjoyed during the expected repayment period, which the European Union refers to as the
expected "loan life".453
7.238. We see a number of reasons why the European Union's approach is not an appropriate basis
to establish that the Spanish A380 LA/MSF subsidy has been withdrawn for purposes of Article 7.8
of the SCM Agreement.
7.239. First, and fundamentally, the European Union relies upon expectations about the period of
time it was anticipated for Airbus to repay the loan on its own subsidized terms. For reasons already
explained elsewhere in this report, we do not agree with the European Union that the repayment of
the outstanding principal and accrued interest under a loan on its subsidized terms means that the
subsidy has been withdrawn for the purpose of Article 7.8 of the SCM Agreement. Rather, in our
view, the repayment of a loan on its subsidized terms merely confirms that the subsidized financial
contribution has been fully provided, in the same way, for instance, that the act of transferring the
funding associated with a one -off cash grant confirms that the cash grant has been fully provided.
Therefore, the life of a subsidized loan will not necessarily come to an end after it has been fully

449 The European Union argues that the compliance panel or the Appellate Body did not express a
preference between measuring the life of LA/MSF subsidies based on ex ante expectations with respect to its
full repayment on subsidized terms, or based on amortizing the benefit of a subsidized LA/MSF loan over the
course of the anticipated marketing life of a funded aircraft. (European Union's first written submission,
para. 124).
450 Specifically, Trade Rx concludes that "{t}he ex ante amount for (re)payment … adds up to [***] by
the end of 2017 with [***]. (TradeRx Report on Expected Life of LA/MSF, (Exhibit EU-24 (HSBI/BCI)),
para. 51).
451 United States' first written submission, para. 84.
452 United States' second written submission, para. 93.
453 We recall that PwC followed the same approach in the first compliance proceeding in analysing
whether the benefit conferred by the pre-A380 LA/MSF subsidies had fully amortized, which the Panel referred
to as the "Loan Life" approach. In the first compliance proceeding, PwC additionally evaluated the pre-A380
LA/MSF subsidies by allocating the benefit over the expected marketing life of the funded A300, A310, A320
and A330/A340 LCA programmes, referred to as the "Marketing Life" approach. (Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.869-6.879).

BCI deleted, as indicated [***]

repaid on its subsidized terms. In both the one-off grant and subsidized loan situations, the life of
the subsidy will depend upon the extent to which the recipient is continuing to use the financial
contribution for its originally intended purpose without having repaid at least the remaining value of
the benefit on a prospective basis.
7.240. Second, we note that the European Union argues that the life of the Spanish A380 LA/MSF
subsidy should be determined on the basis of the anticipated repayment period because, in its view,
A380 LA/MSF was not found to be "critical" to the ability of Airbus to bring the A380 (and A350XWB)
aircraft to market.454 In support of this line of argument, the European Union refers to the findings
of the first compliance panel and the Appellate Body that the A380 and A350XWB LA/MSF loans
enabled Airbus to launch these aircraft "as and when it did" 455, which the European Union
understands to mean that the subsidies had a limited accelerating effect on the launch of these
aircraft.456 In our view, the European Union has mischaracterized the panel's findings.
7.241. We recall that the original panel concluded that it would not have been possible for Airbus
to have launched the A380 as originally designed and at the time it did without LA/MSF. However,
the panel went further, observing that:
… while the A380 business case suggests, but by no means demonstrates , that as a
stand-alone proposition the project might have been economically viable even without
LA/MSF, in our view, that conclusion rests in part on the assumption that at the time of
the launch, Airbus would have been in a position to not only design and manufacture
the A380, i.e., had the necessary development and production technologies available to
it, but also would have been able to obtain all the necessary financ ing on market
terms.457
7.242. Moreover, as we discuss in further detail below, after having excluded from the scope of the
compliance proceedings all "indirect effects" on the A380 and A350XWB arising from pre -A380
LA/MSF, the Appellate Body went on to confirm th e first compliance panel's findings that Airbus '
sales and deliveries of the A380 during the 2011-2013 period were a genuine and substantial cause
of serious prejudice in the VLA market in the form of significant lost sales and market displacement.
In our view, it logically follows from these findings that the market presence of the A380 in the
2011-2013 period was attributable to only the direct effects of A380 LA/MSF , implying that Airbus
could not have launched and subsequently developed the A380 by the end of the 2011-2013 period
in the absence of A380 LA/MSF. In this respect, we note that elsewhere in its submissions, the
European Union has accepted that the adverse effects caused by the market presence of the A380
in the 2011-2013 period were "attributed to the 'direct effects' of A380 LA/MSF alone".458 Thus, the
original panel and Appellate Body compliance stage findings do not support the European Union's
contention that A380 LA/MSF was not "critical" to the market presence of the A380.
7.243. We note that the Spanish A380 LA/MSF agreement has been amended twice since it entered
into force. The European Union has not addressed the United States' arguments that these
amendments are "intervening events" extending the life of the Spanish A380 LA/MSF subsidy, other
than to argue that that the United States "offers no explanation as to why, or how, any such alleged
intervening events prolonged the ex ante anticipated Loan Life for the Spanish A380 MSF subsidy."459

454 European Union's first written submission, fn 303; and second written submission, paras. 125-126.
455 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1723
and 6.1760; and Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 –
US), para. 5.646.
456 European Union's second written submission, paras. 125-127. The European Union estimates the
A380 LA/MSF and A350XWB LA/MSF accelerated the respective launches of the A380 and the A350XWB by
two years or less. The European Union argues that, if the "life" of the A380 LA/MSF subsidies were to be
estimated based on considering the effect of the subsidies on the marketing life of the A380, then the subsidy
should be amortized over the duration of the accelerating effect of the subsidies. Instead, TradeRx allocated
the benefit over the period during which full repayment of principal and interest, along with foreseen royalties,
was expected to occur, which TradeRx concludes was [***]. (See TradeRx Report on Expected Life of LA/MSF,
(Exhibit EU-24 (BCI)), Table 1).
457 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1948. (emphasis added)
458 European Union's submission regarding the wind-down of the A380 programme, para. 3.
459 European Union's second written submission, para. 128.

BCI deleted, as indicated [***]

We note , however, that the European Union has itself argued that the [***] A380 LA/MSF
amendments could be characterized as "intervening events".460
7.244. In our view, the [***] A380 LA/MSF amendments are properly considered to be "intervening
events" because they were unexpected at the time the original A380 LA/MSF agreements were
concluded.461 In our view, the modifications made under the amendments change the expectations
regarding the anticipated repayment period. In the case of Spanish A380 LA/MSF, the [***]
amendment [***] Airbus' obligation to make per -aircraft repayments on [***] that were
anticipated to occur between [***]. The amendment [***] per-aircraft levies on other deliveries
beyond those subject to [***], and additionally creates a new obligation for Airbus to [***]462
Thus, the [***] amendment modified the ex ante expectations regarding the repayment period for
Spanish A380 LA/MSF, extending that period (notably through the obligation to pay royalties)
beyond what was anticipated previously.463 In other words, even by the European Union's own "loan
life" standard, the life of the Spanish A380 LA/MSF subsidy has not come to an end because the
[***] amendment extended the repayment terms beyond the contracting parties' ex ante
expectations.464
For the foregoing reasons, we fi nd that the European Union has failed to demonstrate that
the Spanish A380 LA/MSF subsidy has been withdrawn for the purpose of Article 7.8 as a result of
the alleged amortization of benefit by [***].
Whether Airbus' announcement to "wind down" the A380 programme achieves
withdrawal of the French, German, Spanish and UK A380 LA/MSF subsidies
Main arguments of the parties
7.246. The European Union claims that Airbus' announcement to "wind down" the A380 programme
provides "further confirmation" and "an independent basis" to find that the European Union has
withdrawn the French, German, Spanish and UK A380 LA/MSF subsidies .465 The European Union
characterizes Airbus' announcement as a relevant, post -establishment "fact" 466 that serves as
evidence of compliance with the DSB's recommendations and rulings. The European Union submits
that Airbus' announcement i s "an event that falls within the terms of the European Union's Panel
Request", and "is, in the context of an evolving factual and market situation, inextricably linked with
measures that have explicitly been identified in the {European Union's} panel request as achieving
compliance under Article 7.8."467
7.247. The European Union maintains the Airbus' "wind down" announcement supports its claim of
withdrawal of the A380 LA/MSF subsidies for two principal reasons. First, the European Union asserts
that Airbus' announcement of the "wind down" of the A380 programme has triggered a requirement
for Airbus to [***] the outstanding principal and interest under the [***] A380 LA/MSF agreement,
scheduled to take place through [***].468 The European Union argues that this requirement

460 European Union's response to Panel question No. 29, paras. 161-163.
461 We recall an examination of the ex ante "life" of a subsidy, based on the expectation at the time the
subsidy was granted, should be complemented by an evaluation of subsequent "intervening events" that were
alleged to have occurred after the grant of the subsidy so as to determine whether the subsidy materialized as
expected. (Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.646 (quoting Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 709)).
462 [***] Spanish A380 LA/MSF Amendment, (Exhibit EU-23 (BCI)), p. 5.
463 We consider that this understanding is compatible with the Appellate Body's discussion of the ex ante
life of a subsidy in the original proceeding, which focused on the projected uses to which a subsidy has been
put, not on the expected duration of a financial contribution. (See Appellate Body Report, EC and certain
member States – Large Civil Aircraft, para. 707).
464 The European Union argues, for instance, that that the ex ante expected life of the subsidy will end
when either the terms of the loan agreement foresee no further repayments, or when the expected delivery
forecast ends. (European Union's second written submission, paras. 122-123).
465 European Union's submission regarding the wind-down of the A380 programme, para. 5.
466 European Union's submission regarding the wind-down of the A380 programme, paras. 4 and 8.
467 European Union's submission regarding the wind-down of the A380 programme, paras. 12-14,
and 17-25.
468 European Union's comments on arguments and evidence that the United States filed with its
25 June 2019 Comments on EU responses to the Panel's questions, para. 2 (referring to [***],
(Exhibit EU-113 (BCI))).

BCI deleted, as indicated [***]

"confirms {the} previous demonstration that the [***] A380 MSF subsidy is withdrawn as of
[***]".469 In the alternative, the European Union argues that the [***] A380 LA/MSF subsidy will
be withdrawn on [***], when final payment is made .470 Second, the European Union argues that
Airbus' announcement constitutes an "intervening event " that "drastically changes 'how {the}
subsid{ies} will 'materialize{} over time' relative to the expectations held at the time it wa s
granted'', "provides certainty with respect to the repayment of the loan, and thus brings about an
earlier end to the lives of the subsidies than was anticipated ex ante", thus confirming that all four
A380 LA/MSF subsidies have been withdrawn.471
7.248. The Uni ted States argues that Airbus' announcement regarding the future of the A380
programme is not a "measure taken to comply" by the European Union, and neither the
announcement nor the situation it describes can be part of the Panel's terms of reference to support
the European Union's argument that it has withdrawn the A380 LA/MSF subsidies.472 The
United States submits that the European Union has not itself asserted that the announcement was
a "measure taken to comply", and that it has instead chosen to characterize the announcement as
a "fact" that is somehow relevant to the Panel's assessment. Moreover, the United States argues
that any Airbus action with respect to the programme would appear to be a private business decision
without government endorsement or involvement.473 While the United States appears to accept that
exhibits contained in the European Union's submission in connection with t he announcement can
serve as relevant evidence in this dispute, the United States disputes the relevance of this evidence,
describing the details contained in Airbus' 14 February 2019 press release not as "facts" but instead,
as "statements of Airbus' intent or expectations".474
7.249. In any case , the United States argues that Airbus' announcement does not involve any
removal of the subsidy previously granted to Airbus and thus does not support the European Union's
arguments that the A380 LA/MSF subsidies have been withdrawn. The United States argues that the
European Union's arguments concerning repayment of [***] A380 LA/MSF are incorrect, as the
repayment of a financial contribution on subsidized terms does not achieve the withdrawal of the
subsidy. Finally, the United States argues that the announcement of the intent to terminate the
A380 programme in the future does not constitute an "intervening event" that brings an end to the
life of the subsidies. In this respect, the United States recalls that the A380 pro gramme remains
operational. In addition, the United States recalls that the first compliance panel previously rejected
an argument regarding the termination of the A340 programme, considering the fact that the A340
could terminate before full repayment was achieved to be an inherent feature of the LA/MSF
agreements. The United States argues that the same reasoning should apply to the A380 programme
as well, and "all the more so, given that Airbus has not yet terminated the A380 programme."475
Evaluation by the Panel
7.250. On 14 February 2019, Airbus issued a press release announcing its full-year results. In this
press release, Airbus announced that Emirates Airlines had cancelled 39 A380 orders and that, as a
consequence, Airbus would cease deliveries of the A380 in 2021 due a lack of order backlog from
other customers. The press release revealed that Airbus received 12 A380 orders in 2018 and that

469 European Union's comments on arguments and evidence that the United States filed with its
25 June 2019 Comments on EU responses to the Panel's questions, para. 2.
470 European Union's comments on arguments and evidence that the United States filed with its
25 June 2019 Comments on EU responses to the Panel's questions, para. 3.
471 European Union's submission regarding the wind-down of the A380 programme, paras. 33-38.
472 United States' second written submission, paras. 19-20 and 86; opening statement at the meeting of
the Panel, para. 62.
473 United States' second written submission, para. 19.
474 United States' second written submission, paras. 15-18.
475 United States' second written submission, paras. 88-91.

BCI deleted, as indicated [***]

Airbus would deliver 14 additional A380 to Emirates before terminating the programme in 2021. 476
The European Union has confirmed that [***] will be made to [***], with the [***].477
7.251. On 14 August 2019, the European Union informed the Panel of an agreement reached on
[***] between the [***] and Airbus, confirming that Airbus would, as a result of Airbus'
termination announcement, [***] under the [***] A380 LA/MSF agreement, in accordance with
the specific terms of that contract. The European Union set out its argument with respect to this
agreement in two paragraphs of its comments to the United States' comments on the European
Union's response to the Panel's questions following the substantive meeting.478
7.252. We accept that the European Union is entitled to have us consider its contention that Airbus'
termination announcement was an "intervening event" that brought the life of the A380 LA/MSF
subsidies to an end. In this respect, we agree with the first compliance panel that, once a
complainant in a dispute under Article 21.5 DSU has properly ident ified the subsidies and legal
provisions that are part of its claims, it need not also exhaustively explain how the implementing
Member may have failed to withdraw those subsidies and/or bring their adverse effects to an end.
As the first compliance panel explained:
Once the complainant clearly identifies the relevant subsidies and the legal bases
supporting its claims with sufficient clarity and detail, the implementing Member will
know what the dispute is about, and it will then be up to the complainant to justify its
claims on the basis of arguments and evidence presented during the panel process. In
our view, part of this justification may, where relevant and necessary, need to include
an explanation of the extent to which the subsidies clearly identifie d {in the panel
request} continue to exist … as a result of an "intervening event".479
7.253. We have doubts, however, about whether the [***] agreement between the [***] and
Airbus, and the accompanying evidence submitted by the European Union, fall within the sco pe of
our terms of reference. Although related to the alleged "intervening event" discussed above, the
facts and arguments the European Union has asked us to consider go beyond the alleged "intervening
event" itself, and concern the alleged implications fo r compliance of a new measure (the [***]
agreement), which entered into force well after the establishment of this compliance Panel.
Notwithstanding these reservations, we do not find it necessary to express a definitive view on this
matter for the purpose of this dispute, because as explained in section 7.4.5.3.2.2, we disagree with
the European Union's submission that the [***] agreement confirms that the [***] A380 LA/MSF
subsidy has been withdrawn. Thus, even assuming arguendo that the [***] agreement is properly
without our terms of reference, it would not demonstrate that compliance has been achieved with
respect to the [***] A380 LA/MSF subsidy.
7.4.5.3.2.1 The [***] "wind-down" announcement
7.254. The European Union argues that the wind-down announcement constitutes an "intervening
event" that brings the life of the A380 LA/MSF subsidies to an end because it confirms that the end

476 Airbus SE, Unaudited Condensed IFRS Consolidated Financial Information for the year ended
31 December 2018, https://www.airbus.com/content/dam/corporate-topics/financial-and-company-
information/FY2018-Airbus-FINANCIAL-STATEMENTS.pdf, p. 17; Airbus Press Release, "Airbus reports strong
full-year 2018 results, delivers on guidance", 14 February 2019,
https://www.airbus.com/content/dam/corporate-topics/financial-and-company-information/FY2018-Airbus-
PRESS-RELEASE.pdf; and Airbus, "FY Results 2018" (Presentation),
https://www.airbus.com/content/dam/corporate-topics/financial-and-company-information/FY2018-Airbus-
PRESENTATION.pdf, pp. 4 and 11.
477 European Union's opening statement at the meeting of the Panel, para. 22; and Airbus, "Timing of
remaining Emirates A380 deliveries" (Exhibit EU-99 (BCI)).
478 European Union's comments on arguments and evidence that the United States filed with its
25 June 2019 Comments on EU responses to the Panel's questions, para. 2; [***], (Exhibit EU-113 (BCI));
[***], (Exhibit EU-114 (BCI)); and Email from [***] to Airbus, 8 August 2019 (Exhibit EU-115 (BCI)). The
European Union initially submitted that Airbus would execute full repayment of outstanding principal and
accrued interested [***], later submitting that the [***]. (European Union's submission regarding the wind-
down of the A380 programme, para. 32; and response to Panel question No. 31, para. 175).
479 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.915.
(emphasis original)

BCI deleted, as indicated [***]

date for final repayments under the French, German , Spanish and UK A380 LA/MSF contracts will
be made in [***].480
7.255. At present, Airbus continues to produce the A380 and termination will only take place once
outstanding deliveries are completed in July 2021. In light of this, we do not see how
Airbus' announcement can be said to have brought the "life" of the A380 LA/MSF subsidies to an end
at present. We therefore disagree with the European Union's submission that Airbus' announcement
to wind-down the A380 programme establishes, on its own, that the European Union has achieved
the withdrawal of the French, German, Spanish and UK A380 LA/MSF subsidies for the purpose of
Article 7.8 of the SCM Agreement.
7.4.5.3.2.2 The [***] agreement between [***] and Airbus
7.256. We last turn to the European Union's argument that the announcement of the "wind-down"
of the A380 LA/MSF programme has resulted in the withdrawal of the [***] A380 LA/MSF subsidy
by triggering an obligation for Airbus to repay the principal and interest accrued under the [***]
A380 LA/MSF contract. Under the terms of the [***] agreement, Airbus is req uired to [***].481
[***].482
7.257. The European Union asks us to find that the repayment under the [***] agreement achieves
withdrawal of the [***] A380 LA/MSF subsidy in one of two ways. First, the European Union argues
that the [***] agreement has had the effect of converting Airbus' repayment obligations into [***],
as the European Union submits that repayment is no longer dependent on deliveries. The
European Union further submits that the applicable interest rate (which the European Union
estimates was [***]) under the agreement is above what Airbus would have to pay to obtain the
same amount of funding on the market 483, and thus the [***] A380 LA/MSF subsidy has been
withdrawn as of [***] when the first repayment instalment took place under the agreement.
Alternatively, the European Union submits that the [***] A380 LA/MSF will be withdrawn on [***]
when Airbus makes its final repayment of outstanding principal and accrued interest.484
7.258. As we understand it, the [***] agreement sets out how the contracting parties agreed to
give effect to the [***] provisions of the [***] amendment to the original [***] A380 LA/MSF
agreement. Specifically, under the [***] amendment, Airbus agreed to effectuate [***] were
Airbus to announce that the A380 programme would cease in the future. 485 The [***] agreement
provides how Airbus must perform this obligation. 486 We note, ho wever, that this feature of the
[***] amendment did not change the [***] government's position vis-à-vis the original A380
LA/MSF agreement. As explained by the European Union, Airbus was already required to ensure
[***] in the event the A380 programme wer e terminated [***] under the original [***] A380
LA/MSF contract.487 In other words, the possibility of [***] was already a feature of the subsidized
[***] A380 LA/MSF agreement. We note, moreover, that the interest rates applied on the amounts
of outstanding principal and accrued interest are derived through the application of the same [***]
formula set out in the original LA/MSF agreement.488 Thus, in practice, the [***] agreement appears
to have done nothing more than simply give effect to the terms of the original [***] A380 LA/MSF

480 The European Union also argues that the announcement to "wind-down" the A380 programme is an
"intervening event" that achieves the removal of all adverse effects related to the market presence of
the A380. We address this argument in section 7.5.5.5 below.
481 European Union's comments on arguments and evidence that the United States filed with its
25 June 2019 Comments on EU responses to the Panel's questions, para. 2; and [***], (Exhibit EU-113
(BCI)), Clause 2.3.
482 Interest accrues at the rate of the previous year's [***]. (European Union's comments on
arguments and evidence that the United States filed with its 25 June 2019 Comments on EU responses to the
483 The European Union argues that Airbus enjoys an A+ credit rating and Airbus' corporate borrowing
rate for [***]. (European Union's comments on arguments and evidence that the United States filed with its
25 June 2019 Comments on EU responses to the Panel's questions, para. 2; Airbus, "Hedging & Debt
Information", https://www.airbus.com/investors/hedging-and-debt-information.html; and Email from [***] to
Airbus, 8 August 2019 (Exhibit EU-115 (BCI))).
484 European Union's comments on arguments and evidence that the United States filed with its
25 June 2019 Comments on EU responses to the Panel's questions, para. 3 and fn 6.
485 [***].
486 [***].
487 European Union's first written submission, paras. 123 and 171.
488 Compare [***] with [***], and [***], all in essentially the same terms.

BCI deleted, as indicated [***]

agreement prescribing Airbus' repayment obligations in the event of programme termination. We do
not understand the [***] agreement to have imposed on Airbus an obligation that did not already
exist under the original, subsidized, arrangement. To this extent, we do not agree with the European
Union when it argues that the [***] agreement replaced the original [***] A380 LA/MSF
agreement with a new loan agreement on market terms. The [***] agreement has not converted
Airbus' obligations under the [***] A380 LA/MSF agreement into a [***], as the European Union
maintains. Rather, it simply prescribes how Airbus and the [***] government have agreed that
Airbus will perform its obligation to [***] under the existing, subsidized, A380 LA/MSF
arrangements. Accordingly, we find that the [***] agreement has not withdrawn the [***] A380
LA/MSF subsidy.
Conclusions
In the light of the reasoning and findings set out above, we conclude that the German and
UK A350XWB LA/MSF subsidies, and the French, German, Spanish and UK A380 LA/MSF subsidies,
have not been withdrawn for the purpose of Article 7.8 of the SCM Agreement. We reach this
conclusion based on the following considerations:
a. As regards the German A350XWB LA/MSF agreement:
i. there is no sufficient factual basis to accept the premise underlying the
European Union's withdrawal claim, namely, that Airbus was seriously considering
exercising its rights under [***] of the original German A350XWB LA/MSF loan
agreement in order to refinance the German A350XWB LA/MSF using market -based
instruments around the time of the [***] amendment; and
ii. even if we were to accept that there was a credible possibility that Airbus could have
invoked [***] to repay and refinance the German A350XWB LA/MSF, we are not
convinced that the test for determining whether the amended terms of the German
A350XWB LA/MSF agreement were market -based should be focused, as t he
European Union argues, on comparing the expected IRR of the amended contract with
the expected IRR that a market lender would expect to achieve for the same or similar
loan entered into at the time of the amendment. Rather, the question that must be
answered is whether a market lender would have preferred the expected returns
associated with the amended German A350XWB LA/MSF agreement over the returns
it could have expected to achieve as a result of a decision on the part of Airbus to
invoke its right under [***] to repay the outstanding principal and accrued interest.
The European Union has failed to make this demonstration.
b. As regards the UK A350XWB LA/MSF agreement:
i. Airbus repaid all outstanding principal and interest accrued under the UK A350XWB
LA/MSF loan agreement on [***] with a final payment totalling [***], which
represents the repayment of the full amount of principal that Airbus actually drew
down and received, and accrued interest; however,
ii. the European Union's claim that the repayment of the UK A350XWB LA/MSF agreement
on its subsidized terms achieves the withdrawal of the subsidy cannot be sustained
because we have found that the full repayment of a loan on subsidized terms does not
alone "remove" the subsidy or otherwise bring the life of a subsidy to an end , but
rather confirms that a subsidy has been fully provided.
c. As regards the French, German, Spanish and UK A380 LA/MSF agreements:
i. the European Union's claim that the [***] amendments to the A380 LA/MSF
agreements achieve the withdrawal of the subsidy cannot be sustained because the
European Union has failed to show that a commercial lender, faced with the likely
termination of the A380 programme, would have entered into the A380 LA/MSF
amendments on the terms agreed between Airbus and the Airbus governments.

BCI deleted, as indicated [***]

ii. the European Union's claim that the Spanish A380 LA/MSF subsidy has been withdrawn
as a result of the alleged amortization of benefit, in the light of the ex ante expectations
concerning the anticipated full repayment of principal and interest on subsidized terms,
cannot be sustained because we have found that the full repayment of a loan on its
subsidized terms does not alone bring the life of the subsidy conferred to an end. Even
by the European Union's own standard of amortization, we have found that the life of
the Spanish A380 LA/MSF subsidy has not come to an end because the [***]
amendment to the Spanish A380 LA/MSF extended the repayment terms beyond the
contracting parties' original ex ante expectations.
iii. the European Union's claim that Airbus' announcement to wind -down the
A380 programme achieves the withdrawal of the French, German, Spanish and
UK A380 LA/MSF subsidies cannot be sustained because Airbus continues to produce
the A380 and termination will only take place once outstanding deliveries are
completed in July 2021, which fails to bring the life of the A38 0 LA/MSF subsidies to
an end at present. We also reject the European Union's argument that Airbus' [***]
agreement with [***] to repay the principal and interest accrued under the [***]
A380 LA/MSF contract results in the replacement of the original [***] A380 LA/MSF
agreement with a new loan agreement on market terms, or otherwise achieves
withdrawal for purposes of Article 7.8.
7.5 Whether the European Union and the relevant member States have complied with the
requirement to "take appropriate steps to remove the adverse effects" under the terms
of Article 7.8 of the SCM Agreement
Introduction
In the preceding section, we concluded that the European Union has failed to establish that
it has "withdraw{n}" any of the A380 or A350XWB LA/MSF subsidies for the purpose of Article 7.8
of the SCM Agreement. In this section, we examine the merits of the European Union's submission
that it has "remove{d} the adverse effects" of these subsidies, within the meaning of Article 7.8 ,
because none of the subsidies "individually or collectively, constitutes a genuine and substantial
cause of any present adverse effect s".489 The United States disagrees with the European Union on
this point, arguing that the A380 and A350 XWB LA/MSF subsidies continu e to be a genuine and
substantial cause of present adverse effects in the VLA product market (in relation to sales and
market share won by the A380) and twin-aisle LCA product market (in relation to sales and market
share won by the A350XWB and the A330neo).
As an initial matter, we underline that, in the light of our conclusion that none of the
eight A380 or A350XWB LA/MSF subsidies have been withdrawn, we must consider whether these
eight subsidy measures are a genuine and substantial cause of adverse effects at present. We recall
in this regard that in the first compliance proceeding, the panel and, specifically, the Appellate Body,
made certain findings regarding the effects of these same subsidies in the relevant time-period from
1 December 2011 through year-end 2013 (the "First Compliance Reference Period"). Although our
task is to determine whether these same subsidies cause present adverse effects, we consider the
findings in the first compliance proceeding regarding the effects of the same subsidies in the
First Compliance Reference Period to be relevant to this analysis.
Our analysis proceeds in six parts. We begin by exploring and identifying the appropriate
counterfactual for determining the effects of the A380 and A350XWB LA/MSF subsidies, befor e
addressing the appropriate reference period. We then review the adopted findings in this dispute
concerning the effects of the A380 and A350XWB LA/MSF subsidies in the reference period used in
the first compliance proceeding. Using those findings as a st arting point, we then determine the
extent to which the A380 and A350XWB LA/MSF subsidies continue to have "product" effects after
the end of the reference period used in the first compliance dispute. Finally, we examine the present
impact of those effects in the relevant product markets.

489 European Union's first written submission, para. 244.

BCI deleted, as indicated [***]

The appropriate counterfactual
The European Union argues that the counterfactual that must be applied in this dispute to
determine whether any non-withdrawn LA/MSF subsidies continue to cause adverse effects "entails
comparing the actual market situation … with the market situation that would have existed if the
challenged subsidies had been withdrawn at the end of the implementation period ", i.e. at
1 December 2011.490 The European Union maintains that the use of such a counterfactual would be
consistent with the requirements of Article 7.8, and appropriate to use in this proceeding, because
"'if the … counterfactual market situation where the subsidies are withdrawn is equivalent to the
actual market situation w here those subsidies remain ', then … 'the remaining subsidies are not
causing any adverse effects that may exist in the market '".491 In light of this line of argument, the
European Union asserts that the withdrawal of the A380 and A350XWB LA/MSF subsidies by the end
of the implementation period through any of the means examined in the previous section of this
report492, would have left entirely unaffected the launches of the A380 in December 2000 and the
A350XWB in 2006. Accordingly, the European Union argues t hat, under the appropriate
counterfactual, there is no basis to find present adverse effects in respect of the A380 and A350XWB
because both models of LCA would be present on the market today.493
The United States argues that the appropriate counterfactual is one in which the challenged
subsidies were never granted to Airbus. According to the United States, this approach is consistent
with the text of Article 7.8, which treats the two relevant compliance options (withdrawal or removal
of adverse effects) as distinct, and is the counterfactual used in the first compliance proceeding from
which the European Union offers no reason to depart. The United States also asserts that the
European Union's counterfactual : (i) would lead to arbitrary results because a pane l may have to
choose between one of many potential withdrawal options, which may have different impacts on
relevant market conditions in the counterfactual; (ii) it would needlessly increase the complexity of
compliance proceedings as it requires a panel's evaluation of hypothetical withdrawal scenarios;
(iii) it improperly assumes that the withdrawal o f a subsidy leads to the termination of its effects ;
and (iv) can only feasibly detect whether the European Union's failure to withdraw the subsidy (which
is not the relevant issue) causes present adverse effects.494
We are not persuaded by the European Union's submissions concerning the appropriate
counterfactual. We find the European Union's proposed approach to be problematic because it is
based on the view that, in order to determine whether an implementing Member has taken
"appropriate steps to remove the adverse effects" of a non -withdrawn subsidy, a comparison must
be made between the market situation with and without the withdrawal of that subsidy, as opposed
to the market situation with and without the provision of the non-withdrawn subsidy. By focusing on
the market effects of the withdrawal of a subsidy as of the end of the implementation period, the
European Union's proposed counterfactual ignores all prior effects of the non -withdrawn subsidy,
which may well be important to understanding its present -day effects. We see no reason why such
effects of a non -withdrawn subsidy must be excluded, as a matter of law, from an assessment of
the extent to which the same non-withdrawn subsidy continues to cause adverse effects in the post-
implementation period. In our view, the European Union's proposed approach would not answer the
question that is asked by the compliance requirement in Article 7.8 because it fai ls to identify
whether the provision of a non-withdrawn subsidy that continues to exist in the post-implementation
period has present day effects.

490 European Union's first written submission, paras. 215 and 278. (emphasis added)
491 European Union's second written submission, para. 319 (quoting Canada's third-party submission,
para. 34).
492 The four means by which the European Union argues the LA/MSF subsidies would be withdrawn are:
(i) full repayment of the loan on subsidized terms; (ii) replacement of a subsidized financial contribution with a
non-subsidized financial contribution; (iii) the expiry of benefit over time; and (iv) an intervening event that
brings about the end of the benefit of a subsidy. (European Union's first written submission, para. 279).
493 European Union's first written submission, para. 281. We note that "Canada considers that, in these
second compliance proceedings, the correct counterfactual would be one under which the remaining subsidies
associated with the A380 and A350XWB are withdrawn by the date of the European Union's second compliance
communication, i.e. 17 May 2018". (Canada's third-party submission, para. 27).
494 United States' first written submission, paras. 175-185; second written submission, paras. 166-175;
response to Panel question No. 53; and comments on the European Union's responses to Panel question
Nos. 53 and 55.

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We recall, moreover, that of the four hypothetical scenarios the European Union maintains
would withdraw the subsidy, we have already found that one – the repayment of a subsidized loan
on its subsidized terms – cannot, alone, constitute the withdrawal of a subsidy. As regards the other
three possibilities, we note that, apart from asserting that the withdrawal of the A380 and A350XWB
LA/MSF subsidies would have left unaffected the launches of the A380 in December 2000 and the
A350XWB in 2006, the European Union has not advanced any specific explanation of how the way
those subsidies could have been withdrawn would have impacted Airbus' ability to market and deliver
LCA's in the relevant period. The European Union argues that the application of its counterfactual in
this dispute is a straight -forward exercise.495 However, the European Union does not expl ain how
the different modes of potential withdrawal could have impacted Airbus' counterfactual market
situation, which under its proposed approach, ultimately is what must be compared with the actual
market situation. For instance, the European Union does not explain how the adjusted terms of a
LA/MSF contract that was properly aligned to a market benchmark could have affected Airbus' ability
to market and win A350XWB and A380 sales in the relevant period. In our view, the withdrawal of
the LA/MSF subsidies by aligning their terms with a market benchmark might well have increased
the overall cost of repayments to Airbus, thereby increasing the costs of the programmes. Such a
difference would need to be taken into account in comparing the actual market situat ion with the
counterfactual market situation.
Finally, the fact that the hypothetical withdrawal options posited by the European Union
would have had potentially different effects on Airbus' ability to make present day sales and
deliveries of the A380 and A350XWB implies that different, possibly competing, scenarios, could
result from the application of the European Union's proposed counterfactual. Although the
European Union argues that a panel would need to only examine the withdrawal scenarios proposed
by the respondent, it is not clear to us that the universe of hypothetical withdrawal options should
be left to a respondent to decide, as a complainant might well conceive of other possible withdrawal
options that would have a different counterfactual market effect.
For all of the above reasons, we see no reason to depart from the counterfactual used by
the panel and Appellate Body in the first compliance proceeding. Thus, for the purpose of this section,
we will proceed with our analysis of the European U nion's assertion of compliance through the
removal of the adverse effects by applying a counterfactual under which A380 and A350XWB LA/MSF
subsidies were never granted to Airbus (which, for ease of reference, we will refer to as "the absence
of" the LA/MSF subsidies). In doing so, w e bear in mind that, consistent with the
Appellate Body's findings in the first compliance proceeding, the counterfactual under which we must
operate is one where the effects of the pre-A380 LA/MSF subsidies must be disregarded for the
purpose of assessing compliance.496 We understand this to mean that we must assume that Airbus,
in the counterfactual, had launched all of its pre-A380 LCA as and when it did in reality.
The appropriate reference period
The European Union argues that the appropriate reference period in this proceeding would
begin no earlier than the time of adoption of the DSB 's recommendations and rulings in the first
compliance proceeding, i.e. 28 May 2018, and extend at minimum until present day . According to
the European Union this is so because the reference period must enable an assessment of adverse
effects under current factual conditions as influenced by the European Union 's measures taken to
comply, and a relatively recent reference period i s appropriate because data arising further in the
past is less probative of current factual market conditions. Citing the panel report in US – Upland
Cotton (Article 21.5 – Brazil), the European Union further argues that a compliance panel must also
take into account events that post -date the end of the defined reference period, as a compliance
panel must assess compliance at the time it gives its ruling.497
The United States argues that the appropriate reference period in this proceeding would
begin on 1 Jan uary 2014 and extend until present day. According to the United States, this is so

495 European Union's first written submission, para. 281; and second written submission, para. 324.
496 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.361-5.383.
497 European Union's first written submission, para. 226 and fn 354 (citing Panel Report, US – Upland
Cotton (Article 21.5 – Brazil), paras. 9.67-9.71, 10.104, and 10.248); and second written submission,
paras. 307-313.

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because the first compliance proceeding already determined the European Union's compliance up
through its own reference period, i.e. December 2011 through year -end 2013, and thus the
European Union must show that it removed the adverse effects sometime after 2013. The
United States further argues that the European Union's proposed reference period, beginning in May
2018, is inappropriately short in the light of the conditions of competition in the LCA industry, and
is unsupported by any rationale.498
We recall that the SCM Agreement contains no specific guidance on the selection of a
reference period for the purpose of determining whether an implementing Member has achieved
present-day compliance with the obligation to "take appropriate steps to remove the adverse effects"
within the meaning of Article 7.8.499 We note, however, that "the unavailability of immediate data
means that it is impossible to assess the 'present' situation"500 on the basis of contemporaneous
information. As such, "a review of the past is necessary to draw conclusions abou t the present".501
Thus, like the first compliance panel, we "see no need to make any a priori choice of reference
period"502, and consider it "appropriate to examine the entirety of the evidence and arguments put
forward by the {parties} … including the most recent information where relevant and reliable" 503,
with a view to determining whether the A380 and A350XWB LA/MSF subsidies are a genuine and
substantial cause of present adverse effects.
Effects of the A380 and A350XWB LA/MSF subsidies through 2013
The first compliance panel found that the European Union and certain member States had
"failed to comply with the DSB recommendations and rulings and, in particular, the obligation under
Article 7.8 of the SCM Agreement 'to take appropriate steps to remove the adverse effects or …
withdraw the subsidy '".504 The Appellate Body reached the same conclusion but on the basis of
different reasoning.505 In particular, the Appellate Body based its findings solely on the effects of the
French, German, Spanish, and UK A380 LA/MSF subsidies and the French, German, Spanish, and
UK A350XWB LA/MSF subsidies506 (i.e. the same set of measures being examined in this part of our
report), whereas the compliance panel had based its conclusions on a broader set of subsidy
measures.507 Thus, for present purposes , we focus our attention on the findings of the
Appellate Body report in the first compliance proceeding where it addressed the market effects of
the identical set of subsidy measures that are at issue in this proceeding.
The Appellate Body's findings confirmed that A380 and A350XWB LA/MSF subsidies were a
genuine and substantial cause of significant lost s ales and impedance within the meaning of
Article 6.3(a)-(c) of the SCM Agreement in the VLA product market, and significant lost sales within
the meaning of Article 6.3(c) in the twin -aisle product market, in the First Compliance Reference
Period.508 The parties interpret these findings in different ways.
The European Union argues that the Appellate Body findings leave the launch dates of the
A380 and A350XWB, in the absence of the A380 and A350XWB LA/MSF subsidies, entirely open
questions. Accordingly, the European Union bases its assertion of compliance on a counterfactual in

498 United States' first written submission, paras. 170-174; and second written submission,
paras. 160-165.
499 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1444.
500 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1443.
(internal quotation marks and citation omitted)
501 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1443.
(internal quotation marks and citation omitted)
502 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1444.
503 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1444.
504 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 7.2.
505 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
section 6.
506 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.412 and section 6. See also Panel Reports, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), section 6.5.2.3.1 (describing A350XWB LA/MSF measures); and EC and certain member
States – Large Civil Aircraft, paras. 7.367-7.381 and Table 1 (describing A380 LA/MSF measures).
507 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), section 7.
508 Appellate Body Report and Panel Report pursuant to Article 21.5 of the DSU, Action by the Dispute
Settlement Body, WT/DS316/35.

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which Airbus launched the A380 and A350XWB in or around 2002 and in 2007/2008, respectively.509
Thus, the European Union maintains that it follows from the Appellate Bod y's findings that
non-subsidized versions of the A380 and A350XWB would have been available for order and delivery
during the First Compliance Reference Period, explaining that the counterfactual orders actually lost
to Boeing up to and including that peri od resulted from the delayed counterfactual launches of the
two LCA, which meant that Airbus offered less attractive delivery slots.510
The United States maintains that the Appellate Body's findings preclude any counterfactual
launch of either the A380 or t he A350XWB until at least the end of 2013, and that the
European Union's attempts to reconcile the Appellate Body's findings of adverse effects with the
European Union's proposed counterfactual launch dates for the two LCA finds no support in the first
compliance panel's or Appellate Body's reasoning. Thus, the United States argues that any
counterfactual that the Panel may use to determin e whether the European Union has removed the
adverse effects within the meaning of Article 7.8 must be one in which neit her the A380 nor the
A350XWB would have been launched before 2013.511
7.5.4.1 Appellate Body findings concerning the m arket presence of the A380
through 2013
In this section, we review the Appellate Body's compliance report by focusing on the three
aspects of its findings and analysis we believe most materially bear on the issue of the market
presence of the A380 in the First Compliance Reference Period : (a) the Appellate Body's findings
and analysis concerning the effects of A380 LA/MSF subsidies on the launch, development and
bringing to market of the A380; (b) the Appellate Body's causation analysis and findings in relation
to lost sales in the VLA product market; and (c) the Appellate Body's causation analysis and findings
in relation to impedance in the VLA product market. We address each of these aspects in turn.
7.5.4.1.1 Effects of the A380 LA/MSF subsidies on the A380
We recall that the United States has pursued its claims throughout the various proceedings
in this dispute relying upon what has been described as the "product" theory of causation.512 Under
this theory of causation, "market distortion and adverse effects flow directly from Airbus' entry at a
particular time with a particular aircraft , which in the United States' view would not have been
possible but for the subsidies ".513 The first compliance panel found that, in the absence of the
"product effect" of all pre-A350XWB LA/MSF subsidies (arising from the "indirect" effects514 of pre-

509 The United States asserts that "{b}oth the United States and the EU have mistakenly referred to
the EU's proposed A380 counterfactual launch date as being 2002. … the confusion likely stems from adding
the {European Union's} estimate of the purported delay – two years – to the year of the real world A380
launch, 2000. However, the European Union's actual position appears to be that Airbus would have launched
the A380 in 2003 {without the A380 LA/MSF subsidies.} … Previous U.S. references to 2002 should be read
instead as referring to 2003". (United States' comments on the European Union's response to Panel question
No. 68(b), fn 427).
510 European Union's first written submission, paras. 272-276; second written submission,
paras. 269-275, 276-295, 300-306, 430-431, and 433-437; responses to Panel question No. 68, paras. 354
and 359-360, and No. 71, para. 374; comments on the United States' responses to Panel question No. 59,
Launch Statement, (Exhibit EU-92 (HSBI/BCI)), paras. 24 and 27.
511 United States' first written submission, paras. 207-235; and second written submission, paras. 135-147
and 231. See also United States' comments on the European Union's response to Panel question No. 60.
512 In the original dispute the United States also offered a "price" theory of causation, which was
rejected by the original panel and not pursued on appeal by the United States. (Panel Report, EC and certain
member States – Large Civil Aircraft, para. 7.1877. See also Appellate Body Report, EC and certain member
States – Large Civil Aircraft (Article 21.5 – US), fn 1618).
513 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.587. (emphasis original) See also Appellate Body Report, EC and certain member States – Large Civil
Aircraft (Article 21.5 – US), para. 5.416 (describing "product effects" as "the effects of such subsidies on the
ability of Airbus to launch and bring to market particular Airbus LCA models as and when it did"). (emphasis
original)
514 "Indirect effects" are the "learning", scope and financial effects that any given LA/MSF subsidy
provided specifically for one model of LCA may have on Airbus' ability to launch and bring to market another,
subsequent model of LCA. (Appellate Body Report, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), paras. 5.563 and 5.594).

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A380 LA/MSF subsidies and the "direct" effects515 of A380 LA/MSF subsidies), the A380 programme
would not have existed before or during the First Compliance Reference Period. 516 The
Appellate Body, however, found that only the effects of A380 LA/MSF subsidies could be considered
vis-à-vis the A380 programme in the counterfactual. Accordingly, in deciding whether the compliance
panel had erred in reaching its adverse effects findings, the Appellate Body examined "whether the
Panel's analysis regarding the 'product effects' of {A380 LA/MSF subsidies alone} support a finding
of a genuine and substantial causal relationship between these subsidies … and the market
phenomena identified in the post-implementation period" in the VLA product market.517
The Appellate Body determined that A380 LA/MSF subsidies had a "genuine impact on
Airbus' ability to fund the timely launch of the A380"518, that "these 'direct effects' of A380 LA/MSF
continued after the original reference period {which ended in 2006}", and that "the
Panel's understanding of the 'direct effects' of A380 LA/MSF on Airbus ' ability to launch, bring to
market, and continue developing the A380 as and when it did {had} a sufficient evidentiary basis".519
The Appellate Body further characterized the "product effects" of A380 LA/MSF subsidies as follows:
(a) they "enabled Airbus … to bring to market and to continue developing the A380 ", an event that
was "crucial to renew and sustain Airbus ' competitiveness in the post -implementation period"520;
(b) they "made it possible … to bring to market the A380"521; (c) they "continued to have effects on
Airbus' ability to bring to market and to continue developing the A380 after the original reference
period"522; and (d) in the absence of A380 LA/MSF subsidies, "Airbus would not have been able to
offer the A380 at the time it did".523
Thus, the Appellate Body expressly concluded that A380 LA/MSF subsidies impacted Airbus'
ability to undertake a timely launch of the A380 , to bring it to market, and to continue to develop
the A380 ai rcraft after 2006. 524 In other words, A380 LA/MSF subsidies affected Airbus' ability to
launch and market the A380 programme, and to actually develop the aircraft post-launch. Relatedly,
and as noted above, the Appellate Body directly stated that A380 LA/MSF "made it possible … to
bring to market the A380 ". This, in our view, is a direct statement asserting that the A380 would
not have been brought to market without A380 LA/MSF subsidies. Accordingly, we find that the

515 "Direct effects" are the effects of any given LA/MSF subsidy on Airbus' ability to launch and bring to
market the particular model of Airbus LCA specifically funded by that LA/MSF loan. (Appellate Body Report,
EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 5.563).
516 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 7.1(d)(xii).
517 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.599.
518 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.609.
519 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.609. (emphasis original) The Appellate Body also considered it "important … that the A380 programme
suffered 'extensive' production delays in 2005 and 2006", during which time "Airbus continued to receive
disbursements" under A380 LA/MSF measures. (Appellate Body Report, EC and certain member States – Large
Civil Aircraft (Article 21.5 – US), para. 5.608). See also Appellate Body Report, EC and certain member States
– Large Civil Aircraft (Article 21.5 – US), para. 5.646 (stating that "A380 LA/MSF had 'direct effects' on Airbus'
ability to launch, bring to market, and continue developing the A380 as and when it did, given that the A380
LA/MSF subsidies had not expired, as well as the fact that Airbus continued to receive disbursements under the
French, German, and Spanish LA/MSF contracts at a time when it was experiencing severe financial difficulties
resulting from the extensive production delays in the A380 programme" and concluding that A380 LA/MSF
"made it possible … to bring to market the A380"). (emphasis original)
520 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.647 and 6.23.
521 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.646.
522 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.635.
523 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.766, 5.769, and 5.773.
524 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.558.

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Appellate Body's characterizations of the "product effects" of A380 LA/MSF strongly suggest that it
considered the A380 would not have been available for either order or delivery by year-end 2013.525
Causation of lost sales in the VLA product market
We now turn to examine the Appellate Body's analysis of whether the "product effects" of
A380 LA/MSF subsidies were a genuine and substantial cause of lost sales in the VLA product market
during the First Compliance Reference Period.526
We start by noting that at no point in its analysis did the Appellate Body state that the A380
would have been available for order at any time leading up to and including the First Compliance
Reference Period. Indeed, had the Appellate Body considered that a non-subsidized A380 could have
been available, it would have needed to explain how the A380 LA/MSF subsidies could have been a
"genuine and substantial" cause of the lost sales in the First Compliance Reference Period given the
market presence of an unsubsidized A380. However, no such explanation can be foun d in the
Appellate Body's analysis. The absence of such an explanation, and the lack of any other
Appellate Body statements concerning the causal mechanism through which A380 LA/MSF caused
lost sales, suggests that the causal mechanism relied upon by the A ppellate Body was the one
described in the compliance panel report, namely, the A380 was unavailable for order during the
First Compliance Reference Period.
In the course of its lost sales analysis , the Appellate Body explained that "the Panel's
findings … indicate that Airbus' competitiveness in the VLA market, gained through earlier LA/MSF
subsidies, was renewed and sustained beyond the original reference period and into the
post-implementation period due to the subsidies it continued to receive after the original reference
period and into the post-implementation period".527 This was so because the A380 LA/MSF subsidies
"enabled Airbus to bring the A380 to market and continue its development in the face of extensive
production delays".528 The Appellate Body went on to clarify that "{i}n other words, in the absence
of {A380 LA/MSF}, Airbus would not have been able to be 'present in {both} of the relevant sales
campaigns as exactly the same competitor selling identical aircraft' in the post -implementation
period".529 The Appellate Body again stated that the A380 LA/MSF subsidies "enabled Airbus to bring
the A380 aircraft to market and continu e its development ", without suggesting that Airbus could
have brought to market and developed the A380 otherwise. Importantly, the Appellate Body found
that the Airbus company operating in the counterfactual, would have been unable to present an
aircraft "identical" to the A380 in the sales campaigns leading to the Transaero and Emirates lost
sales. In our view, this statement cannot be reconciled with the European Union's interpretation of
the Appellate Body's findings. Rather, it seems to us to confirm that like the compliance panel, the
Appellate Body was satisfied that Airbus could not have offered an unsubsidized A380 in the
First Compliance Reference Period. The Appellate Body's statement that A380 LA/MSF subsidies
"renewed and sustained " Airbus' "competitiveness in the VLA market " in the counterfactual
post-implementation period is also consistent with the conclusion that, in the absence of the A380
LA/MSF subsidies, the A380 would have been unavailable for order in the First Compliance Reference
Period.

525 For clarity, when this section refers to the A380, it refers to the A380 that was in fact ordered and
delivered in the First Compliance Reference Period. At no time has the European Union ever argued that any
"inferior" version of the A380 would have been launched. On the contrary, the European Union argues that the
market would not have accepted an inferior version. (European Union's response to Panel question No. 59;
comments on the United States' response to Panel question No. 59).
526 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
section 5.6.4.6.4.1. The lost sales in the VLA product market were the 2012 Transaero order for four A380
aircraft and the 2013 Emirates order for 50 A380 aircraft.
527 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.725.
528 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.725.
529 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.726 (quoting Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.1789).

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Finally, we note that in rejecting the European Union's argument that the compliance panel
improperly dismissed certain of the European Union 's non-attribution factors, the Appellate Body
gave the following explanation:
The European Union argued before the Panel that Transaero Airlines and Emirates
Airlines chose the A380 over the 747 -8 in the orders they placed in 2012 and 2013
because of, inter alia , the A380's more advanced technologies and greater size
compared with t he 747 -8, which enabled it to satisfy both customers ' very specific
requirements. However, similar to our analysis in the context of lost sales in the
twin-aisle LCA market, we do not view these factors as unrelated to the effects of the
subsidies. Rather, our review of findings from the original proceedings and the
Panel's findings shows that, absent the LA/MSF subsidies existing in the post -
implementation period, Airbus would not have been able to launch and bring to market
the A380 at the time it did. Th erefore, like the Panel, we have doubts as to whether
Airbus' pre-existing commonality advantages and other product -related advantages
over Boeing could be characterized as non -attribution factors that could be said to
"dilute" the causal link between the LA/MSF subsidies existing in the
post-implementation period and the relevant market phenomena.530
In stating that the " more advanced technologies and greater size " of the A380s actually
offered during the First Compliance Reference Period were not "unrelated to the effects of
{A380 LA/MSF} subsidies", this passage, in our view, further confirms that the Appellate Body
considered that the A380 would have been unavailable for offer in the First Compliance Reference
Period in the counterfactual scenario.
In sum, our assessment of the Appellate Body's VLA lost sales analysis indicates that the
Appellate Body's findings were based on the conclusion that Airbus would not have been able to offer
the A380 by the end of the First Compliance Reference Period in the absence of the A380 LA/MSF
subsidies. This, of course, implies that Airbus could not have launched the A380 before the end 2013
Causation of impedance in the VLA product market
In examining the Appellate Body's analysis of whether the "product effects" of A380 LA/MSF
were a genuine and substantial cause of impedance in six geographic markets, we see nothing
directly indicating that it was of the view that an unsubsidized A380 would have been available for
delivery in the First Compliance Reference Period. Indeed, had the Appellate Body considered that a
non-subsidized A380 could have been available for delivery, it would have needed to explain how
the A380 LA/MSF subsidies could have been a g enuine and substantial cause of impedance , given
the presence of an unsubsidized A380 in the same geographic markets. However, no such
explanation can be found in the Appellate Body's analysis. The absence of such an explanation, and
the lack of any other Appellate Body statements concerning the causal mechanism through which
A380 LA/MSF caused lost sales, suggests that the causal mechanism relied upon by the
Appellate Body was the one described in the compliance panel report, namely, the A380 was
unavailable for delivery during the First Compliance Reference Period.
This, we believe, finds further confirmation in the fact that the Appellate Body affirmed that
even the low number of A380 impedance deliveries present in Australia (a single A380 delivery),
China (four A380 deliveries), Korea (three A380 deliveries), and Singapore (five A380 deliveries)
during the First Compliance Reference Period could support findings of impedance in each separate

530 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.729. (fn omitted; emphasis added) We note that other reasons that the European Union alleged led
Transaero and Emirates to order the A380 aircraft over the 747-8I aircraft appeared to be HSBI. (Panel Report,
EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 3275 (citing HSBI versions of
submissions and HSBI exhibits when discussing the European Union's arguments in this context)). The
European Union appears to suggest that in this statement the Appellate Body was addressing "Airbus' choices
about the initial product characteristics of the A380". (European Union's comments on the United States'
response to Panel question No. 63, para. 313 (underline omitted)). The relevance of this argument is
somewhat unclear to us, but we note that, "initial" or not, the Appellate Body was clearly addressing "product-
related advantages" (e.g. size and technologies) of the A380.

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geographic market.531 Again, had the Appellate Body considered t hat an unsubsidized A380 could
have been delivered during the First Compliance Reference Period, it is difficult to see how it could
have also found that such small volumes of deliveries would have been captured by Boeing, without
explaining how an unsubsidized A380 would have failed to win them. The Appellate Body's findings
concerning these low volume deliveries suggest that it was of the view that, in the absence of the
A380 LA/MSF subsidies, Boeing would have captured 100% of deliveries – a view that wo uld be
consistent with the conclusion that Airbus could not have been present in the relevant markets with
an unsubsidized A380.
We also note the Appellate Body's rejection of the European Union 's appeal against the
first compliance panel 's dismissal of i ts non-attribution arguments concerning delays in the
747-8I programme. The first compliance panel had expressed the following opinion on the impact
of those delays on the merits of the United States' claims:
{W}e do not see the delays in the development and production of … the 747-8 to mean
that, in the absence of the "product" effects of the LA/MSF subsidies, Boeing or the
United States' LCA industry would not have won the orders corresponding to the
deliveries made in the … market { } for … very l arge LCA. The fact that Airbus would
not have existed in the absence of the LA/MSF subsidies means that customers that
could not wait for the 787 and 747 -8 to become available would have turned to either
Boeing's other twin-aisle LCA, the 767 and the 777.3326
3326 We recall that … there is evidence that the larger versions of the 777 may also at times
challenge for sales in the market for very large LCA. (footnote original)532
The Appellate Body rejected the European Union 's appeal against the first compliance
panel's findings, stating:
We recall that the Panel did not see these delays "to mean that, in the absence of the
'product' effects of the LA/MSF subsidies, Boeing or the United States' LCA industry
would not have won the orders corresponding to the deliveries made in the different
markets" for VLA. We also note the Panel's observation that "there is evidence that the
larger versions of the 777 may also at times challenge for sales in the market for
{VLA}". Thus, the P anel's reasoning that, in the absence of Airbus ' VLA offerings,
customers would have turned to other Boeing LCA products – for instance, the larger
versions of the 777 – appears to us to be reasonable. Consequently, we see no reason
to disturb the Panel 's finding that this non -attribution factor would n ot be capable of
diluting the genuine and substantial relationship of cause and effect between LA/MSF
subsidies and the alleged market phenomena.533
In our view, the Appellate Body's affirmation of the reasoning of the compliance panel that
expressly included an assumption regarding the "absence of Airbus' VLA offerings" further confirms
that the A380 would have been absent from the market in the years leading up to the
First Compliance Reference Period, i.e. when the A380 orders resulting in the A380 deliver ies
evidencing impedance would have occurred. Relatedly, it was left unexplained why, if the A380 had
been in the market in the counterfactual such that it could have competed for orders that resulted
in the relevant A380 deliveries, and if customers would have substituted away from the 747-8I, due
to production delays, customers would have opted for a twin -aisle LCA that is not a VLA (i.e. the
777 model) rather than simply purchased Airbus VLA (i.e. the A380) instead. We consider the most
reasonable explanation to be that the A380 was unavailable, thus essentially forcing customers to
accept an LCA that only "at times" competed with VLA for sales, i.e. larger versions of the 777.
In our assessment, t hese aspects of the Appellate Body's VLA impedance analysi s confirm
that the adopted findings were based on the conclusion that the A380 would not have been launched

531 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.739.
532 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1816
and fn 3326.
533 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),

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in the years leading up to the First Compliance Reference Period, i.e. the time -period in which the
A380 orders resulting in the A380 deliveries evidencing impedance would have occurred.
Appellate Body findings concerning the m arket presence of the A350XWB
through 2013
Effects of A380 and A350XWB LA/MSF subsidies on the A350XWB
In the first compliance proceeding, the panel found that, in the absence of the "product
effect" of all of the challenged LA/MSF subsidies (arising from the "indirect" effects of pre-A350XWB
LA/MSF subsidies and the "direct" effects of A350XWB LA/MSF subsidies), the A350XWB would not
have existed before or during the First Compliance Reference Period. 534 The Appellate Body,
however, found that only the effects of A380 and A350XWB LA/MSF subsidies could be considered
vis-à-vis the A350XWB programme in the counterf actual. Accordingly, in deciding whether the
compliance panel had erred in reaching its adverse effects findings, t he Appellate Body examined
"whether the Panel 's analysis regarding the 'product effects ' of {A380 and A350XWB LA/MSF
subsidies alone} support a finding of a genuine and substantial causal relationship between these
subsidies … and the market phenomena identified in the post -implementation period" in the twin-
aisle product market.535
The Appellate Body confirmed the compliance panel 's finding tha t the A350XWB LA/MSF
subsidies had "direct effects" on the A350XWB programme, and in particular that in the absence of
A350XWB LA/MSF subsidies, "the Airbus company that actually existed {in 2006-2010} could have
pursued such a programme only by a narrow m argin, with a high likelihood that it would, to some
degree, have had to make certain compromises with respect to the pace of the programme and/or
the features of the aircraft'".536 The Appellate Body also upheld the compliance panel's findings that
the A380 LA/MSF subsidies had "indirect effects " on the A350XWB programme, such that the
"A350XWB significantly benefitted from the 'learning effects' of the A380 " and the "A380 LA/MSF
had 'financial effects' on Airbus' ability to launch the A350XWB as and when it did ".537 Thus, the
Appellate Body concluded that, "without the aggregated 'product effects' of the existing LA/MSF
subsidies for the A380 and A350XWB programmes, Airbus would not have been able to launch the
A350XWB as and when it did ".538 In other words, the Appellate Body confirmed that A380 and
A350XWB LA/MSF subsidies "enabled Airbus to proceed with the timely launch and development of
the A350XWB ", an event that was "crucial to renew and sustain Airbus ' competitiveness in the
post-implementation period".539 These Appellate Body statements and findings do not support the
European Union's position that an unsubsidized A350XWB would have been launched any time before
the end of the First Compliance Reference Period. On the contrary, insofar as the Appellate Body
found that the A380 and A350XWB LA/MSF subsidies "enabled Airbus to proceed with the timely
launch and development of the A350XWB ", which was "crucial to renew and sustain Airbus'
competitiveness in the post -implementation period ", we understand the Appellate Body to have
found that an unsubsidized A350XWB could not have been launched before the end of 2013. This is
because if an unsubsidized A350XWB had been launched prior to that date, and particularly near the

534 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 7.1(d)(xiii).
535 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.599.
536 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.632 (quoting Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.1717). (emphases original)
537 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.637-5.638. See also Appellate Body Report, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), para. 6.1747 (noting that "the A350XWB programme significantly benefitted from Learning
effects arising from previous, subsidized Airbus LCA programmes, especially (but not only) the A380
programme").
538 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.639. These "aggregated" effects consisted of the "direct" effects of A350XWB LA/MSF and the "indirect"
effects of A380 LA/MSF. The Appellate Body also stated elsewhere in its report that in the absence of A380
and A350XWB LA/MSF, Airbus "would have been unable to launch the A350XWB or an A350XWB-type aircraft
by the end of 2006". (Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5
– US), para. 5.714).
539 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.647.

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time of actual launch in 2006, it would have been difficult to conclude, without further explanation,
that Airbus' competitiveness would have suffered without the launch of the A350XWB in 2006 to the
degree that the Appellate Body's language appears to indicate.
Causation of lost sales in the twin-aisle product market
We now turn to examine the Appellate Body's analysis of whether the "product effects" of
A380 LA/MSF subsidies were a genuine and substantial cause of lost sales in the twin-aisle product
market during the First Compliance Reference Period.540
We start by noting that at no stage in its analysis did the Appellate Body state that a non-
subsidized A350XWB would have been launched or available for order by any particular point in time.
Had the A ppellate Body considered that a non -subsidized A350XWB could have been launched or
been available for order prior to the First Compliance Reference Period, it would have needed to
explain how the A380 and A350XWB LA/MSF subsidies could have been a genuine and substantial
cause of adverse effects, given the market presence of an unsubsidized A350XWB. However, no
such explanation can be found in the Appellate Body's analysis. The absence of such an explanation,
and the lack of any other Appellate Body statements concerning the causal mechanism through
which the A380 and A350XWB LA/MSF subsidies caused lost sales, suggests that the causal
mechanism relied upon by the Appellate Body was the one described in the compliance panel report,
namely, the A350XWB was unavailable for order during the First Compliance Reference Period.
In the course of its analysis, t he Appellate Body stated that "in the absence of the {A380
and A350XWB} LA/MSF subsidies … Airbus would not have been able to offer the A350XWB at the
time it did and with the features that the A350XWB contained ".541 Thus, according to the
Appellate Body, "in the absence of these subsidies, Airbus would not have been able to be 'present
in all {three} of the relevant sales campaigns as exactly the same competitor selling identical
aircraft' in the post -implementation period ".542 In our view, these statements also confirm that
without the product effects of the A380 and the A350XWB LA/MSF subsidies, the A350XWB could
not have been offered b y Airbus for sale during the First Compliance Reference Period. This, of
course, implies that Airbus could not have launched an unsubsidized A350XWB prior to or during the
First Compliance Reference Period.
Finally, we note that the Appellate Body rejected the European Union 's appeal against the
first compliance panel's dismissal of its non-attribution arguments. In doing so, the Appellate Body
observed that it shared "the Panel's view that most of the alleged non-attribution factors with regard
to lost sales in the twin-aisle LCA market … including Airbus' pre -existing commonality advantages
and other product -related advantages over Boeing, are not factors 'unrelated' to the LA/MSF
subsidies existing in the post-implementation period".543 Moreover, the Appellate Body agreed "with
the Panel 's assessment of the non -attribution factor concerning Singapore Airlines ' wish to split
orders between Boeing and Airbus", finding that "{i}ndeed, the fact that Airbus was in a position to
offer the A350XWB in a timely manner was, in itself, largely due to LA/MSF subsidies and their effect
on the pace of the programme and the features of the A350XWB".544 In our view, these statements
provide further confirmation that the Appellate Body considered the A350XWB would have been
unavailable for order in the First Compliance Reference Period absent the A380 and A350XWB
LA/MSF subsidies. Again, had the Appellate Body considered that an unsubsidized A350XWB could
have been available for consideration in the Singapore Airlines campaign that resulted in split orders

540 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
section 5.6.4.6.3.1. The lost sales in the twin-aisle product market were the 2012 Cathay Pacific Airways order
for 10 A350XWB-1000 aircraft, and the 2013 orders by Singapore Airways and United Airlines for
30 A350XWB-900 aircraft and 10 A350XWB-1000 aircraft, respectively.
541 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.709. (emphasis added)
542 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.709. (emphasis added)
543 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.714. (emphasis added) We note that the Appellate Body did not specify which alleged non-attribution
factors examined by the compliance panel were, in the Appellate Body's view, unrelated to A380 and A350XWB
LA/MSF. However, as discussed above, other aspects of the Appellate Body's analysis appear to clarify that the
A350XWB aircraft, as it existed, would not have been available for order in the 2011-2013 Reference Period.
544 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.714. (emphasis added)

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in 2013, it would have needed to explain why it nevertheless found that the Singapore Airlines orders
of the subsidized A350XWB constituted Boeing lost sales. In our view, the absence of any such
explanation or discussion leads us to conclude that the Appellate Body's findings must be logically
understood to mean that the Appellate Body was of the view that Airbus would not have launched
an unsubsidized A350XWB by the end of the First Compliance Reference Period.
Conclusion – effects of the A380 and A350XWB LA/MSF subsidies through 2013
Having carefully reviewed the Appellate Body's findings concerning the effects of the A380
and A350XWB LA/MSF subsidies on the market presence of the A380 and A350XWB in the First
Compliance Reference Period, as well as the Appellate Body's findings of significant lost sales and
impedance caused by those subsidies, we see no basis to accept the European Union's submission
that Airbus would have launched the A380 and A350XWB in or around 20 02 and in 2007/2008,
respectively, in the absence of the relevant LA/MSF subsidies. Unlike the European Union, we do not
understand the Appellate Body's findings to confirm that the A380 and A350XWB would have been
available for order and delivery during t he First Compliance Reference Period in the absence of
LA/MSF subsidies. We do not agree with the European Union that the Appellate Body's findings can
be reasonably interpreted to mean that the Airbus company, that did not receive LA/MSF and then
present in the market , would have been losing orders to Boeing up to and including in the
First Compliance Reference Period because the delayed counterfactual launches of the non -
subsidized A380 and A350XWB meant that Airbus would have offered less attractive delivery slots.
Rather, as indicated in the above analysis, we consider that there are several parts of the Appellate
Body's findings and underlying analysis that can be reasonably understood to leave open only one
conclusion – namely, that neither the A380 nor the A350XWB would have been launched before the
end of the First Compliance Reference Period in the absence of A380 and A350XWB LA/MSF
subsidies; or, in other words, that both LCA models would not have been available for order or
delivery at least until year-end 2013.545
Effects of A380 and A350XWB LA/MSF subsidies after 2013 and to the present day
In this section we examine the parties' submissions concerning the effects of the A380 and
A350XWB LA/MSF subsidies after 2013 and up to the present day. At the outset, we note that the
European Union has consistently based its arguments regarding the removal of adverse effects on a
counterfactual in which Airbus launched the A380 in or around 2002 and the A350XWB in 2007/2008.
However, for the reasons explained in the previous section, the Appellate Body's findings from the
first compliance proceeding preclude the launch of the A380 and the A350XWB before the end
of 2013. The European Union has not addressed the possibility of this outcome in its submission s,
having advanced no arguments or evidence to support the view that Airbus would have launched
the A380 and A350XWB programmes at any time after the end of 2013546, or that Airbus would have

545 We also discern no basis in the Appellate Body's findings for concluding that Airbus would have
launched any "inferior" version of either the A380 or A350XWB before year-end 2013. Indeed, there was no
argumentation to this effect before the first compliance panel, and the Appellate Body never intimated that
such inferior versions would have been launched and brought to market. Moreover, when Airbus attempted to
do precisely this, with the Original A350 (essentially an inferior version of the A350XWB), the market rejected
the aircraft causing Airbus to abandon the project. (Panel Report, EC and certain member States – Large Civil
Aircraft (Article 21.5 – US), para. 6.463). In addition, we note that the Appellate Body rejected the
European Union's claim that the first compliance panel improperly failed to examine "whether an alternative
aircraft with anything less than the features of the A350XWB, offered on the market later in time than the
A350XWB, would have been commercially viable or attractive for Airbus to have launched". (Appellate Body
Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 5.631).
546 European Union's comments on the United States' response to Panel question No. 75, para. 388
(stating that "{t}he European Union has never asserted a counterfactual launch {of the A350XWB}
after 2013"). We further note that the European Union consistently asserts that Airbus would have
launched both the A380 and the A350XWB in the counterfactual and the gap between their respective
launches would have been the same as it was in reality, i.e. with a launch of the A380 six years before the
launch of the A350XWB. (European Union's first written submission, paras. 344-345; second written
submission, para. 430; response to Panel question No. 68, paras. 359-360; and Airbus Counterfactual
Launch Statement, (Exhibit EU-92 (HSBI/BCI)), para. 25).

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launched, from the year 2000 until present day, any alternative LC A programmes instead of the
A380 and A350XWB programmes.547
As already noted, the United States advocates a counterfactual in which the earliest time
that the A380 or the A350XWB would have been launched is 2014, and offers some argumentation
and evidence in order to illustrate the alleged difficulties Airbus would have had in launching either
LCA programme even then. The United States, however, offers no specific counterfactual launch
date of either aircraft, and generally asserts in this context that the European Union has simply not
carried its burden to show that the A380, A350XWB, or A330neo would be available for order or
delivery today in the absence of the A380 and A350XWB LA/MSF subsidies.
The parties' limited submissions concerning the effects of t he A380 and A350XWB LA/MSF
subsidies in the period after the end of the First Compliance Reference Period means that there is
little direct evidence before us addressing if and when Airbus would have launched the A380 or the
A350XWB (or developed the A330neo variant) after 2013, in the absence of the A380 and A350XWB
LA/MSF subsidies. Nevertheless, in the sections that follow, we proceed to examine the arguments
and evidence that have been made with a view to determining the extent to which the " product"
effects of A380 and A350XWB LA/MSF subsidies found to persist until the end of 2013, continue in
the post-2013 period to the present day.
7.5.5.1 Aggregation of the effects of A380 and A350XWB LA/MSF subsidies
The Appellate Body has explained that "an ex ante decision taken by a panel to undertake a
single analysis of the effects of multiple subsidies whose structure, design, and operation are similar
and thereby to assess in an integrated causation analysis the collective effects of such subsidy
measures" is known as "aggregation".548 This integrated causation analysis is used to " determine
whether there is a genuine and substantial causal relationship between these multiple subsidies and
{alleged adverse effects}".549 In both the original and first compliance proceedings, both the panels
and the Appellate Body followed this approach vis-à-vis LA/MSF subsidies, and we consider this
approach appropriate going forward as well. Thus, we will analyse the effects of A380 and A350XWB
LA/MSF subsidies on an aggregated basis.
We note that the A350XWB was launched six years after the A380, and both parties assume
in their arguments that the A380 would not have been launched after the A350XWB in any presented
scenario. Accordingly, consistent with the analytic approaches taken by both the panel and
Appellate Body in the first compliance proceedin g550, we will proceed to assess: (a) the "direct"
effects of A380 LA/MSF subsidies on the A380; and (b) the aggregated "indirect" effects of A380
LA/MSF subsidies and "direct" effects of A350XWB LA/MSF subsidies on the A350XWB.
The parties disagree, however, about whether the Panel may assess: (a) the "indirect"
effects of A350XWB LA/MSF on the A380; and (b) the "indirect" effects of A380 and A350XWB
LA/MSF on the A330neo. The United States argues that it would be legally and procedurally
permissible, and factually appropriate, for the Panel to do so. The European Union argues that doing
so would be factually unsound because "indirect" effects arising from one set of LA/MSF measures
directed at a particular LCA programme only impact other LCA programmes that were launched after
the launch of the previously LA/MSF -subsidized LCA programme. The European Union also argues
that the United States has never argued that "indirect" effects arising from one LA/MSF -subsidized

547 The United States and European Union argue that there is no basis in the record supporting the view
that Airbus would have launched some inferior version of the A380 at any relevant time. (United States'
responses to Panel question Nos. 59 and 74; and comments on the European Union's response to Panel
question No. 59; European Union's response to Panel question No. 59; and comments on the United States'
response to Panel question No. 59). We further discern no argumentation by the European Union that Airbus
would have launched any twin-aisle LCA programme instead of the A350XWB at any particular time.
548 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1282.
549 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1285.
550 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.1448-6.1451, 6.1480-6.1515, 6.1528-6.1534, 6.1535-6.1540, 6.1713-6.1723, and 6.1774-6.1778.
See also Appellate Body Reports EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.610-5.632, and 5.633-5.639; EC and certain member States – Large Civil Aircraft, paras. 1269, 1281,
1352, 1355, and 1356; and Panel Report, EC and certain member States – Large Civil Aircraft,
paras. 7.1935-7.1948.

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LCA programme affect the post -launch development of any other LCA programme, appearing to
suggest that it would be procedurally unsound for the Panel to undertake such an analysis. The
European Union also states that the United States' claims regarding the indirect effects of A380 and
A350XWB LA/MSF subsidies on the A330neo are not in the Panel's terms of reference.551
As an initial matter, we are not persuaded by the European Union's contention that the
United States' arguments concerning the alleged "indirect" effects of the A380 and/or A350 XWB
LA/MSF subsidies on the A330neo are outside our terms of reference. The United States' submissions
purport to explain how measures that are explicitly within our terms of reference, i.e. A380 and
A350XWB LA/MSF measures, continue to result in present a dverse effects within the meaning of
Articles 5 and 6 of the SCM Agreement. The A330neo is simply a vehicle through which such effects
are alleged to have occurred. To this extent, we understand the United States' arguments to fall
within the scope of this proceeding.
We note, furthermore, that the United States could not have reasonably pursued the same
line of argument in the first compliance proceeding. According to Airbus documents, the A330neo
was launched in 2014552, which is after the end of the First Compliance Reference Period. Thus, we
see no legal or procedural impediment to considering the United States' submissions concerning the
alleged "indirect" effects of the A380 and A350XWB LA/MSF subsidies on the A330neo.
Conditions of competition and product markets
The European Union asserts that general conditions of competition in the LCA industry, as
described by the original and compliance panels, have not materially changed up to present day,
and has identified no material changes that would have oc curred in the counterfactual. 553 The
United States, while not excluding the possibility that such conditions might have changed in some
ways between the first and second compliance proceedings, identifies no particular changes that
have occurred or would hav e occurred to the overall conditions of competition in the
counterfactual.554
We discern nothing on the record indicating that the following general conditions of
competition in the LCA industry, which were identified in the original and first compliance
proceedings, do not continue to be relevant and applicable in the period after 2013 and at present:
(a) development and production of LCA is "an enormously complex and expensive undertaking" 555
generally requiring the sale of hundreds of a given LCA in order t o make that LCA programme
profitable; (b) economies of scope and scale reinforce incumbent firms' competitive advantages and
that make it difficult for an LCA manufacturer to enter just one market segment; (c) important
"learning", scope, and financial effects arising from LCA programmes that enable LCA manufacturers
to more easily launch subsequent LCA programmes 556; (d) incumbent firms' incentive to adopt
"deterring price strategies"557; (e) customers' preference for fleet commonality; (f) pervasive and
strong competition between Airbus and Boeing; (g) relatively infrequent but large orders for LCA;
and (h) an Airbus-Boeing duopoly in the twin-aisle and VLA product markets.558

551 European Union's comments on the United States' response to Panel question No. 60, para. 280
("If the United States wished to obtain a finding that some subsidy at issue had effects manifesting in the
market presence of the A330neo, it should properly have brought the matter within the Panel's terms of
reference"). See also United States' first written submission, paras. 236-238; and responses to Panel question
No. 60, paras. 146-147, and No. 67, para. 154. See also European Union's comments on the
United States' response to Panel question No. 67, para. 319.
552 Airbus A330neo Presentation, (Exhibit USA-51), slide 19. See European Union's comments on the
United States' response to Panel question No. 67, para. 319 (indicating that the United States did not allege
that A350XWB LA/MSF had any effects on the A330neo programme in prior proceedings in this dispute).
553 European Union's comments on the United States' response to Panel question No. 70.
554 United States' comments on the European Union's response to Panel question No. 81, para. 325.
555 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1717.
556 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.1510-6.1511.
557 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1717.
558 Panel Reports, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.1214-6.1217; and EC and certain member States – Large Civil Aircraft, paras. 7.1716-7.1728. We
agree with the analysis of the Arbitrator in this dispute that, in the counterfactual, up through year-end 2013,

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Although the European Union recalls certain general findings made in the original proceeding
regarding the importance of analysing adverse effects vis-à-vis properly defined product markets559,
neither party calls into question that the three LCA product markets identified in the first compliance
proceeding (i.e. single -aisle, twin -aisle, and VLA) continue to be those " within which most
competitive interactions between the relevant aircraft will commonly take place ".560 Indeed, both
parties appear to implicitly accept and structure their arguments around these product markets in
this proceeding.561
The analysis that follows proceeds on the basis of our understanding that the
above-described conditions of competition would have prevailed in the counterfactual and would
have operated in conjunction with the three product markets identifie d in the first compliance
proceeding (i.e. single-aisle, twin-aisle, and VLA product markets).
Market presence of the A380, A350XWB and A330neo after 2013 in the absence
of the A380 and A350XWB LA/MSF subsidies
The United States argues that the European U nion has not established that, in the
counterfactual, Airbus would have launched either the A380 or the A350XWB at any time after 2013.
According to the United States, in order to do so, the European Union would have to establish that
launching either of these LCA programmes after 2013 in the counterfactual was economically viable,
financially feasible, and technological ly practicable for Airbus. In this context, the United States
asserts that the A380's viability after 2013 is doubtful due to the then -weakening demand for VLA
and Boeing's counterfactual incumbency advantages in the VLA product market. Further, the United
States argues that there is no evidence establishing the viability of the A350XWB after 2013, and
that the aircraft would have been difficult to fund had Airbus financed the A380 in the counterfactual
with financing on market terms rather than with LA/MSF. Moreover, insofar as Airbus would have
wished to launch the A350XWB having not launched the A380 first, the United States argues that it
would have been difficult for Airbus to do so without the learning effects gained from
Airbus' experiences with the A380 programme. The United States also reiterates its argument from
the first compliance proceeding that a "weaker" Airbus could not have la unched the A350XWB at
any relevant time in the counterfactual. Relatedly, in the United States' view, changed circumstances
as between the times of the actual launches of the A380 (2000) and A350XWB (2006) and the
conditions in the counterfactual post -2013 period mean that the A380 and A350XWB "Business
Cases", authored at the times of the actual launches of the A380 and A350XWB, are of limited value
in establishing the viability of these two LCA programmes in the counterfactual post-2013 period.562
The United States also argues that the European Union has not established that Airbus would
have or could have launched the A330neo after 2013 in the counterfactual, although the
United States' arguments vis-à-vis this particular LCA are limited relative to those advanced by the
United States' vis-à-vis the A380 and A350XWB.563
As already noted, t he European Union presents no arguments or evidence intended to
support the specific conclusion that either the A380 or A350XWB would have been launched
after 2013. However, the European Union does assert that both LCA would have been available for
orders and deliveries by the present day in the counterfactual, just as they are in reality, in the
context of arguing that the counterfactual launch times of the A380 and A350XWB would have been
in or around 2002 and in 2007/2008, respectively. According to the European Union, the evidence

Airbus and Boeing would have competed in a duopoly in the twin-aisle and VLA product markets. (Decision by
the Arbitrator, EC and certain member States – Large Civil Aircraft (Article 22.6 – EU), paras. 6.78-6.79).
559 European Union's first written submission, paras. 218-223.
560 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1416.
561 European Union's submission regarding the wind-down of the A380 programme, para. 27 (arguing
that with the wind-down of the A380 programme Boeing's "exports will no longer be obstructed or hindered by
Airbus products in that product market"); United States' second written submission, section VII.D (structuring
allegations of specific adverse effects around these three product markets). See also European Union's panel
request, para. 11 ("In relation to the removal of adverse effects, the European Union has also given close
consideration to the Appellate Body's guidance on the delineation of product markets").
562 United States' first written submission, paras. 229, 233; second written submission, paras. 145-147,
157-159, 229, 237-238, and 243-245; responses to Panel question No. 70, para. 160, No. 75, paras. 173 and
176-177; and comments on the European Union's responses to Panel question No. 60, para. 198, No. 68,
paras. 268-269, No. 69, and No. 72, paras. 303-305.
563 United States' first written submission, para. 328; and second written submission, para. 234.

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it has submitted in this proceeding, when combined with the previously adopted findings in this
dispute, establish that the A380 and the A350XWB would have been present on the market place in
the absence of the A380 and A350XWB LA/MSF subsidies. The European Union stresses that the
findings in this dispute establish that both the A380 and A350XWB programmes would have been
launched in the counterfactual, just with a delay. The European Union thus argues that there is no
need to address the counterfactual viability of either LCA programme or Airbus' counterfactual
technological ability to launch either LCA programme anew in this proceeding because t hese issues
were effectively mooted by the adopted findings that Airbus would have launched both LCA in the
counterfactual. According to the European Union, t his is especially so because, at the time of any
delayed launches of the A380 and A350XWB, Airbus would have been a more integrated company
than it was at the times of the actual launches, with a "can do" attitude, and, further, any relevant
circumstances would not have changed in between the times of actual versus counterfactual
launches so as to make any viability or technological-capacity arguments worth examining anew in
this proceeding. The European Union further criticizes the United States as not offering any specific
counterfactual launch times for either the A380 or A350XWB, and asserts that the United States has
provided insufficient evidence to demonstrate that the A330neo would not have been launched and
brought to market in the counterfactual as it was in reality.564
Given the parties' arguments and the record evidence, we consider that in ord er to assess
the counterfactual market presence of the A380, A350XWB, and A330neo in the post -2013 period,
we should examine the following issues vis-à-vis that period: (a) Airbus' counterfactual competitive
position; (b) Airbus' counterfactual financial p osition; (c) Airbus' counterfactual technological and
production-related capabilities; and (d) counterfactual demand for the A380, A350XWB, and
A330neo. Such analyses will inform our determination of the extent to which Airbus would have
found it feasible and commercially viable to launch the A380 and/or the A350XWB in the
counterfactual post-2013 period. The following sections address each of these matters in turn.565
7.5.5.3.1 Airbus' counterfactual competitive position after 2013
The European Union has explained that it was in Airbus' vital interest to be present and
competitive in all LCA product markets at all relevant times, given incumbency advantages that
would have accrued for Boeing in the absence of competitive Airbus LCA in a given product market.
Accordingly, the European Union indicates that the A380 (in the VLA product market) would have
been "a necessity for Airbus to launch"566 and recalls that launching the A350XWB (in the twin-aisle

564 European Union's first written submission, paras. 44, 264, 272, 326, 344, 350, and 421-422;
second written submission, paras. 126, 228, 274, and 446-455; responses to Panel question No. 68(b),
paras. 356-360, and No. 70, para. 370; and comments on the United States' responses to Panel question
No. 59, paras. 272 and 284, and No. 70, paras. 324 and 330. See also Panel Report, EC and certain member
States – Large Civil Aircraft (Article 21.5 – US), para. 6.1507, fn 2597. See also One Journey: One Team –
Interview with Tom Enders, Airbus Annual Review 2014, (Exhibit EU-43).
565 We note the European Union's position that the adopted findings in this dispute confirm that Airbus
would have launched the A380 and the A350XWB, albeit with a delay. (European Union's response to Panel
question No. 68, para. 358; and comments on the United States' response to Panel question No. 75,
para. 378). We disagree. We discern nothing in the adopted findings stating that, in the counterfactual under
which we operate, Airbus would have in fact launched either the A380 or A350XWB at any particular time.
In particular, any findings by the Appellate Body that indicate that, in this counterfactual, Airbus could not have
launched the A380 or the A50XWB "as and when" Airbus actually did leaves the question of whether, or when,
Airbus would actually have launched either LCA open.
566 European Union's second written submission, para. 454 (citing Panel Report, EC and certain member
States – Large Civil Aircraft, paras. 7.1943 ("{T}he A380 business case predicts a positive NPV for the
programme even assuming no LA/MSF is provided, as well as a positive NPV in circumstances where a Realistic
Worst Case scenario is contemplated in situations where the project is supported by LA/MSF"), 7.1665 ("Since
its inception, Airbus has recognized the importance to its continued success in the LCA market of developing a
full line - a family - of different LCA models … {T}he need to offer separate products whose commonality keep
operating costs down for customer airlines across the fleet but which can perform the various missions dictated
by an airline's route structure has historically meant that no manufacturer of a single product or family of
products, no matter how compelling, has survived in the LCA industry") (emphases added), and 7.1957
(recognizing Airbus' goal of developing a full range of LCA for the market); Appellate Body Report, EC and
certain member States – Large Civil Aircraft, para. 1355 (finding that Airbus would be "much weaker" in a
counterfactual where it does not offer a "full range" of LCA); Panel Report, EC and certain member States –
Large Civil Aircraft (Article 21.5 – US), para. 6.1475 (finding that Airbus would be "much weaker" in a
counterfactual where it does not offer a "full range" of LCA); Appellate Body Report, EC and certain member
States – Large Civil Aircraft (Article 21.5 – US), para. 5.558(b)).

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product market) was "'critical for Airbus' ability to continue to be a mainstream competitor against
Boeing'".567 The European Union also asserts that launching the A380 was a "very significant
intermediate step, in terms of its learning effects, for Airbus' future work with composites", a skill
that was important so that Airbus could "remain a viable competitor in the {LCA} duopoly".568
The United States argues that any assessment of Airbus' counterfactual competitive position
after 2013 would need to take into account Boeing's enhanced incumbency advantag es that would
have accrued in the 2001-2013 period in the absence of the A380 and the A350XWB.569
In our view, the adopted findings in this dispute and the record evidence indicate that
Airbus' counterfactual competitive position after 2013 would have been generally compromised
relative to what its actual competitive condition was at that time. We further consider that this would
have been so with respect to all three product markets, albeit to different degrees.
Airbus' counterfactual competitive position would have begun to weaken (relative to what it
was in reality) in 2000 with the absence of the A380's launch. In the absence of the A380, Airbus
would have ceded the VLA product market to Boeing, who thus would have had a monopoly in that
product market for the next 13 years at least (i.e. until at least year-end 2013). In the absence of
the A380, Boeing would have captured larger numbers of VLA orders with its 747 family of LCA in
the years following 2000 and up to 2013.570 We consider that Boeing's increased sales of VLA in the
absence of the A380 would also have resulted in increased Boeing sales in the single -aisle and
twin-aisle LCA product markets due to two main factors. First, on the demand side, capturing
significant additional VLA orders would have enhanced Boeing's incumbency advantages, causing
airlines to gravitate toward Boeing single -aisle and twin -aisle LCA in order to realize fleet -
commonality advantages. In this regard, we note that the A380 Business Case itself envisions the
"[***]" and that these represent "significant potential upsides" of launching the A380.571
Second, on the supply side, Boeing would also have benefitted from enhanced economies of
scope and scale, and additional "learning" effects, arising from its increased VLA, twin-aisle, and
single-aisle LCA production, thus becoming more efficient and profitable overall. Additionally, as
Boeing began delivering counterfactually more VLA, twin -aisle, and single -aisle LCA as a
comparatively more efficient LCA producer 572, Boeing w ould have realized greater revenues and
profits, giving Boeing more flexibility with pricing of single -aisle and twin-aisle LCA.573 We consider

567 European Union's second written submission, para. 453 (quoting Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1713).
568 European Union's response to Panel question No. 68, para. 365.
569 United States' second written submission, paras. 243-245; Panel Report, EC and certain member
States – Large Civil Aircraft, paras. 7.1828-7.1832, 7.1845, and 7.2025; Appellate Body Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US, para. 1414(p); Panel Report, EC and certain member
States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1781, 6.1789-6.1791, 6.1798, and 6.1806.
570 According to the Ascend database, the net total number of A380 orders from 2000-2013 was 296.
(Updated Ascend Data, (Exhibit USA-158)). Regarding Exhibit USA-158, the European Union argues that the
Panel, when requesting the United States to submit this exhibit, did not explain the relevance of this exhibit,
and thus drawing any conclusions from Exhibit USA-158 would be improperly "making a case" for the
United States and deprive the European Union of its due process rights because the European Union would not
know "the case against it". Further, the European Union asserts that the data in Exhibit USA-158 is deficient in
certain respects. (European Union's comments on the United States' response to Panel question No. 58). We
note that: (a) we only use the record evidence to assess the arguments that the parties themselves have
made; (b) insofar as the European Union has indicated deficiencies in this exhibit, we take them into
consideration; and (c) the European Union has had an opportunity to comment on this exhibit. We therefore
consider that using this exhibit does not improperly "make a case" for the United States or deprive the
European Union of its due process rights.
571 A380 Business Case, (Exhibit EU-78 (HSBI)), p. 5.
572 "Aircraft manufacturers earn the bulk of the revenue on a sale not at the time the aircraft are sold,
i.e., ordered, but at the time of delivery." (Panel Report, EC and certain member States – Large Civil Aircraft,
paras. 7.2106 and 7.2178). See also Panel Report, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), para. 6.1806 (explaining that "we recall that deliveries of new LCA will lag their order date
by typically at least three years, and usually many more years in respect of newly launched aircraft").
(emphasis added)
573 We note that such additional revenue gains could likely have been achieved starting in the
early 2000s and increasing over time. This is so because Boeing had both twin-aisle and single-aisle LCA
available for sale and delivery during the entire 2011-2013 period. We note, however, that there would likely
have been a time-period from around 2005-2012 during which Boeing would not have delivered, and realized

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it likely that Boeing would have used this pricing flexibility to put additional competitive pressures
on Airbus i n the single -aisle and twin -aisle product markets in an attempt to capture additional
market share from Airbus.574 We further note that the demand- and supply-side issues above appear
to reinforce one-another, i.e. incumbency advantages lead to increased pro duction, which leads to
greater efficiencies and price flexibility, which leads to even greater sales and incumbency
advantages.
Absence of the A350XWB launch in 2006 would significantly have exacerbated the
competitive disadvantages that Airbus would already have been experiencing due to the absence of
the A380. It will be recalled that Airbus viewed the A350XWB as a necessity to remain a mainstream
competitor to Boeing. This was so because without the A350XWB, going forward from 2006, Airbus
would have be en forced to compete against Boeing's twin -aisle LCA with the A330 and A340 LCA
families. As the first compliance panel explained, however:
Boeing's launch of the 787 in 2004 caused the market share of the A330 to drop at a
time when A340 sales were alread y falling because the aircraft could not effectively
compete with the more fuel -efficient 777. Indeed, the evidence indicates that in 2005
Airbus sold only 15 A340s whereas Boeing sold approximately ten times as many 777s.
Such developments had significant implications for Airbus' overall sales performance as
well; as of July 2006, Boeing had reportedly captured 75% of all new aircraft orders
thus far that year. According to the European Union, this situation "clarified that Airbus
aircraft within the twin -aisle market had lost their competitive edge to the
Boeing 787"{.}575
After 2006, considering the conditions of competition in the LCA industry, it appears likely
that Boeing's competitive advantages would have increased further as Boeing continued its
monopoly in the VLA market and likely captured the significant majority of twin -aisle LCA sales.576
This would have occurred through the same demand- and supply-side processes that were described
above in paragraphs 7.318 and 7.319.577 As the first compliance panel found, based in large part on
its analysis of the A350XWB Business Case, "although the failure to launch the A350XWB would
likely not present an existential threat to Airbus and EADS, the companies considered the A350XWB
programme to be essential to Airbus' continued relevance as a healthy competi tor to Boeing in all
market segments at least through the foreseeable future".578
In sum, beginning in 2000, the heightened competitive pressures from Boeing would likely
have begun to erode Airbus' market shares across the three product markets. This erosio n would
likely have accelerated to some degree over time as Boeing's advantages on the demand and supply

revenues from additional VLA sales. This is so because the last 747-400 was delivered in 2005, and its
predecessor model, the 747-8I, was not delivered until 2012. We further note that the 787, launched 2004,
was first delivered in 2011. (Updated Ascend Data, (Exhibit USA-158)).
574 See A380 Business Case, (Exhibit EU-78 (HSBI)), p. 6, last sentence of second paragraph under
"Note".
575 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1544.
(fns omitted) See also Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.1572 ("{I}n November 2006, Goldman Sachs predicted that without the A350XWB, Airbus' overall
market share could fall to 35%, thus characterizing it as 'essential for Airbus to remain a mainstream
competitor to Boeing'. Significantly, the Goldman Sachs report also indicates that a failure to launch the
A350XWB would not only harm Airbus' twin-aisle market presence, but could also result in a lower single-aisle
market presence 'as many airlines may want commonality, and buy larger and smaller aircraft in packages'")
(internal citations omitted)
576 See above paragraph 7.308.
577 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1713
("{T}he A350XWB programme was of significant strategic importance to Airbus and, in the short-term, critical
for Airbus' ability to continue to be a mainstream competitor against Boeing. The evidence shows that around
the time of launch, Airbus was of the view that it needed to develop a new generation of twin-aisle aircraft in
the near term in order to compete effectively against the Boeing 777 and 787, not only to maintain market
share in the twin-aisle segment, but also to avoid losing ground in other markets with respect to customers
interested in fleet commonality").
578 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1572.
(emphasis added) See also Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 –
US), para. 6.1602 (noting that a UK Government appraisal regarding whether to provide UK A350XWB LA/MSF
to Airbus indicating that "the A350XWB project is a sound project of great strategic important for Airbus")
(internal quotation marks and citation omitted)

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sides began to reinforce each other. Considering the significant competitive disadvantages that
Airbus was experiencing in reality in and around 2006 i n the absence of the A350XWB but in the
presence of the A380, we consider that it is probable that, by 2014, in the absence of both the A380
and A350XWB, Airbus' competitive position would have been significantly compromised across all
three product markets. That the overall damage that such a scenario would have inflicted on Airbus'
general competitive position would have been significant is confirmed by not only the
European Union explanation that the A380 and A350XWB were critical in maintaining Airbus'
competitiveness overall, but also the compliance panel's finding that "the Business Case outlined
severe strategic disadvantages and costs to Airbus that were assumed to accrue in the absence of
the A350XWB programme".579 Our conclusions in this respect are consistent with the explanation in
the original proceeding regarding how critical competitiveness in all LCA product markets is for an
LCA manufacturer, i.e. that " no manufacturer of a single product or family of produc ts, no matter
how compelling, has survived in the LCA industry".580
We note that Airbus may have been able to mitigate the competitive damage inflicted by
Boeing in the counterfactual years before 2013 by making ongoing progress in its pre-existing LCA
products, and in particular the A330. 581 We also consider that Airbus could have, and very likely
would have had to, lower the prices of its twin -aisle and single-aisle LCA so as to counter Boeing's
increasing price flexibility in those markets.582 We have doubts, however, as to how successful such
efforts would have been. The lagging sales of the A330 and A340 in and around 2006 show just how
far Airbus had fallen behind Boeing in the twin -aisle LCA product market, in particular after the
launch of the fuel-efficient 787. Indeed, we recall that the Original A350583 was essentially envisioned
"as a long -range, fuel -efficient version of Airbus A330 airliner and a rival to the {Boeing} 7E7'
(i.e. the Boeing 787)".584 However:
… by the spring of 2006 major customers and ind ustry analysts had determined that
the Original A350 could not effectively compete with the Boeing 787, especially in terms
of fuel efficiency. In fact, some critics judged the Original A350 as so plainly inadequate
that they called for Airbus to scrap the programme in favour of a redesigned aircraft.
The European Union itself acknowledges that in response to Boeing's launch of the 787
in 2004, Airbus had initially launched the Original A350. The Original A350 was
supposed to have a composite wing, but was otherwise based on the aluminium fuselage
of the A330. Customers rejected the design of the Original A350 as not being able to
match the weight savings and fuel efficiency promised by the 787.585
Thus, we consider that even had Airbus been able to improve i ts existing twin -aisle LCA
offerings in the counterfactual years before 2013, it would have been insufficient to avoid suffering
significant competitive damage at the hands of Boeing.
We note that there appears little evidence that the A320 was not generally competitive with
Boeing's single-aisle offerings during all relevant times. Thus, we consider that Airbus' mitigation
strategies would have been somewhat more successful in the single -aisle market, although Airbus'
position in that product market wo uld still have been compromised by Boeing leveraging its
advantages in the other two product markets into the single -aisle market via processes explained
above.
We thus conclude that, in the counterfactual and coming into the year 2014, Airbus'
competitive position vis-à-vis Boeing in all three product markets would have been generally
compromised relative to what its actual competitive condition was at that time . More specifically,

579 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1705.
(footnote omitted)
580 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1665.
581 The A340 programme was terminated in 2011.
582 We recognize, however, that Boeing's market power in any given product market in the
counterfactual would likely have been limited by the negotiating power of Boeing's sophisticated airline
customers.
583 The "original A350" was the "Airbus A350 aircraft design proposed between 2004-2006 (Original
A350) programme launched in December 2004". (Panel Report, EC and certain member States – Large Civil
Aircraft (Article 21.5 – US), para. 6.53).
584 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1542.
585 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1543.
(footnotes and internal quotation marks omitted)

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Boeing would have had a monopoly in the VLA market, would have been capturing the large majority
of sales in the twin-aisle LCA market, and also would have made gains in market share in the single-
aisle market.
Airbus' counterfactual financial condition after 2013
Regarding Airbus' financial condition in the counterfactual post -2013 period, the
European Union has indicated that, if Airbus had delayed the launch of the A380 and/or A350XWB
in the counterfactual, then between the time of actual launch and the counterfactual launch of either
LCA, Airbus would not have had to shoulder the burdens of the development costs of these LCA
programmes, suggesting that Airbus would have had more financial resources available for other
activities if Airbus had wished to pursue them. The European Union also offers two expert reports –
the Wessels Report and the Airbus Counterfactual Launch Statement – which discuss several aspects
of Airbus' financial situation under certain counterfactual scenarios. The European Union furthermore
notes that Airbus' actual credit rating in 2006 was "A -" which would have allowed Airbus to raise
debt to fund large projects such as an LCA launch.586
The United States argues that there are reasons to believe that Airbus would not have been
in a sound financial state in the counterfactual post-2013 period. The United States asserts that the
Wessels Report and the Airbus Counterfactual Launch Statement are immaterial under the relevant
counterfactual. Further more, the United States asserts that Airbus ' counterfactual post -2013
financial position would need to be assessed in the light of Boeing 's increased incumbency in the
VLA and twin-aisle markets due to the absence of the A380 and A350XWB. The United States also
indicates that financing the A380 (or A350XWB) on market terms instead of with LA/MSF would have
been more expensive for Airbus in the counterfactual, and doing so thus would have negatively
affected Airbus' credit rating.587
In the sections that follow, we examine the merits of the parties' submissions with a view to
determining what Airbus' financial condition would have been in the counterfactual post-2013 period.
We begin by recalling the find ings from the first compliance proceeding we consider to be relevant
to this analysis, before turning to examine the Wessels Report , the Airbus Counterfactual Launch
Statement, and the implications of the European Union 's assertion that Airbus would have b een
spared the expenses of developing the A380 and A350XWB for any period during which their
launches were delayed.
7.5.5.3.2.1 Relevant findings of the first compliance panel
We note that t he first compliance panel examined Airbus' actual financial condition in the
periods leading up to and following the launch of the A350XWB in 2006 in some detail. 588 The
first compliance panel essentially found that, in and around 2006, "the assortment of financial
resources that Airbus, via EADS, had at its disposal would have been, collectively, sufficient to
effectively replace the monies Airbus is entitled to under the actual A350XWB LA/MSF contracts",
but it would have been difficult and risky for Airbus to do so and thus "the Airbus company that
actually existed could have pursu ed such a programme only by a narrow margin, with a high
likelihood that it would, to some degree, have had to make certain compromises with respect to the
pace of the programme and/or the features of the aircraft".589
In making these findings, the first compliance panel identified multiple factors that impacted
Airbus', and its parent company EADS', financial condition in and around 2006. In our view, some
of these factors would likely not have significantly changed in the counterfactual applied in this
proceeding. These factors include the development and production problems associated with the
A400M military transport plane, which was experiencing significant cost overruns during this time -

586 European Union's first written submission, paras. 339-343 and 347 (citing EADS, Financial
Statements and Corporate Governance, 2006, (Exhibit EU-45)).
587 United States' first written submission, paras. 221-235; second written submission, paras. 228-245;
and comments on the European Union's response to Panel question No. 68, para. 263.
588 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.1550-6.1566, 6.1580-6.1587, and 6.1640-6.1700.
589 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.1715-6.1717. (emphasis original)

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period and as late as mid -2009590, and a weak US dollar in 2005 and a s late as 2010. 591 Other
important factors in that analysis would have changed under our counterfactual, and notably the
impact of the A380's launch and subsequent development. In this respect, we recall that the A380
was an expensive programme that experienced substantial cost overruns592, spending and overruns
which negatively impacted Airbus' financial position in the short run, but also that the A380
prevented Boeing from having a monopoly in the VLA product market, which was likely beneficial to
Airbus' competitive position overall and thus likely positively impacted its financial position to some
degree.593 Whether certain other events that occurred in this time -frame that materially impacted
Airbus' financial position would have also occurred in the counter factual is less clear to us, and
notably the institution of Airbus' "Power8" cost-cutting programme, implemented in response to the
A380 production problems and the need to fund the A350XWB programme. 594 We also note,
however, that the first compliance panel did not extend its analysis of Airbus' financial condition up
to year-end 2013 or beyond, and at no time projected what Airbus' financial condition would have
been at any time after 2006 in the absence of the A380 and A350XWB programmes. As explained
above, the absence of both the A380 and the A350XWB until at least 2014 would have significantly
impacted Airbus' overall sales in all three product markets.
Due to the significant differences between the circumstances that Airbus would have
encountered in our counterfactual and Airbus' actual circumstances in the period examined by the
first compliance panel, we find it difficult to use the analyses of the first compliance panel as a
baseline from which to extrapolate Airbus' financial conditions under the counterfactual in the post-
2013 period. In general, however, we consider that if the subsidized Airbus company that actually
existed in 2006 would only have had the financial means with which to pursue the A350XWB by a
narrow margin, we have doubts as to whether the financial condition of Airbus in the counterfactual
post-2013 period, considering its generally compromised competitive position , would have
considered itself to have had the financial means with which to launch the very expensive595
A350XWB with confidence.
7.5.5.3.2.2 The Wessels Report
In support of its arguments that Airbus could have launched the A380 in or around 2002 and
the A350XWB in 2007/2008, the European Union offers the Wessels Report. The Wessels Report is
a report authored in 2012 by Professor David Wessels of the Wharton School at the University of
Pennsylvania. The Wessels Report was originally authored for the United States and presented by
the United States as evidence in the first compliance proceeding. The first compliance panel
explained that "{t}he Wessels Report purports to demonstrate that, had Airbus launched its pre -
A380 subsided LCA with financing on market terms, Airbus' resulting debt burden would have been
approximately EUR 24.3 billion. The Wessels Report concludes that this debt burden is so massive
that it would have prohibited Airbus from launching either the A380 or the A350XWB until at
least 2019".596 The first c ompliance panel's analysis of the report consists of one paragraph, and
simply concludes that "the Wessels Report restates what the original panel, as affirmed by the
Appellate Body, already found. That is, even assuming that Airbus had launched all its pre-A380 LCA
with market financing rather than LA/MSF, Airbus' resulting debt burden would have made it
extremely difficult, and perhaps impossible, for Airbus to launch the A380 as and when it did". 597

590 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1581
(explaining that "A June 2009 Financial Times article reported that EADS had recently undergone a
reorganization that came 'in response to the debacle over the development of the A400M military transport
aircraft, which is already running at least three years late with billions of euros of extra costs and with work
almost halted, while EADS and its seven European government customers haggle over the future of the
project.'").
591 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1581
(explaining that "{t}he European Union has further explained that in 2010 EADS' financial performance
suffered, in part, due to a weak US dollar"). A weak US dollar relative to the EUR affects Airbus' profitability
because "although LCA are priced in US dollars, Airbus keeps its financial accounts, incurs much of its costs,
and accounts for its profits, in Euros". (Panel Report, EC and certain member States – Large Civil Aircraft,
para. 4.595).
592 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1675.
593 See paragraph 7.326 above.
594 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1554.
595 See paragraph 7.341 below.
596 Wessels Report, (Exhibits EU-40, USA-47), p. 6.
597 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1769.

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The Appellate Body mentioned the Wessels Report only in p assing in one paragraph and one
accompanying footnote. 598 In short, neither the first compliance panel nor the Appellate Body
materially relied on the content of the Wessels Report in making their findings.
The European Union offers the Wessels Report in thi s proceeding as purporting to
demonstrate the time at which Airbus would have had the financial means with which to have
launched the A380 and A350XWB in the counterfactual. To that end, the European Union observes
that the Wessels Report concludes that ev en if Airbus were burdened with "massive" debt starting
in 2000, Airbus' credit rating would have been sufficient to allow Airbus to raise enough money with
debt to fund the launch of the A380 and/or A350XWB by 2019. Therefore, according to the
European Union, because in the counterfactual Airbus would not have been burdened with that debt
in 2000, Airbus would have been able to launch the A380 and/or A350XWB years before 2019. 599
The United States argues that, for various reasons, the Wessels Report is immat erial for purposes
of this compliance proceeding.600
We are not convinced by the European Union's reliance on the Wessels Report. First, the
Wessels Report operates under a counterfactual materially different from the counterfactual we
operate under here, i.e. a counterfactual in which Airbus funded its pre-A380 LCA programmes with
market financing, a scenario that the Wessels Report itself recalls was "not possible" under the
findings by the original panel. 601 Under our counterfactual, however, Airbus is presu med to have
received pre-A380 LA/MSF and developed all of its pre-A380 models of LCA as and when it did with
the LA/MSF subsidies.602 Second, the Wessels Report makes assumptions that do not capture key
counterfactual considerations. In particular, the Wessels Report uses "conservative assumptions" to
forecast Airbus' financial performance after 2005, including "forecast{ing Airbus'} revenue growth
using Airbus' own passenger traffic growth projections of 4.9% between 2000 and 2019".603 Further,
"{t}o forecast other income statement line items {the report} use{s} the company's financial ratios
as of 2005" which is "quite conservative, since 2005 matches the company's best operating margins"
as of 2012.604 We consider that these conservative assumptions do not ther efore take into account
that, had Airbus failed to launch the A380 and A350XWB at any time before 2013, starting in 2000
Airbus would have been, as explained above, under considerable increasing competitive pressures
from Boeing in all three product market s that would have significantly and negatively affected its
overall financial condition. In particular, we do not consider that an assumption of steady revenue
growth of almost 5% by Airbus starting in 2005 has been demonstrated to be a reasonable
assumption in the light of that counterfactual competitive picture. We further have doubts as to the
impact of a significantly decreased order book on Airbus' credit rating.605 We thus consider that the
Wessels Report cannot be meaningfully used to illustrate Airbus ' financial condition in the
counterfactual post-2013 period.
7.5.5.3.2.3 The Airbus Counterfactual Launch Statement
In support of its arguments that Airbus could have launched the A380 in or around 2002 and
the A350XWB in 2007/2008, the European Union offers the Airbus Counterfactual Launch Statement.
The Launch Statement adapts the Wessels Report based on a counterfactual in line with that
prescribed by the Appellate Body in the first compliance pr oceeding, i.e. one in which Airbus is
presumed to have received pre -A380 LA/MSF but the effects of such subsidies are disregarded for
the purpose of determining continued adverse effects. The Launch Statement therefore "modifies
one critical assumption {of the Wessels Report} – that Airbus would have accumulated massive debt

598 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.577 and fn 1588.
599 European Union's first written submission, sections V.B.4.d.ii-iii.
600 United States' first written submission, paras. 221-223; and second written submission,
paras. 235-241.
601 Wessels Report, (Exhibits EU-40, USA-47), p. 6.
602 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.361-5.383, and 5.652.
603 Wessels Report, (Exhibits EU-40, USA-47), p. 4.
604 Wessels Report, (Exhibits EU-40, USA-47), pp. 4-5.
605 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1749 ("Boeing and Airbus
undoubtedly make future plans taking into account their current order book, and … market actors will take the
future {revenue} flows from those orders into account in evaluating each company").

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by 2001 as a result of launching Airbus' pre -A380 aircraft programmes".606 The Launch Statement
then proceeds to use an adapted version of the Wessels Report's methodology to conclude tha t
Airbus would have had sufficient debt-raising capacity to fund a launch of the A380 in 2001 and the
launch of the A350XWB in 2006, i.e. essentially the times at which these two LCA were actually
launched.607
The European Union offers the Counterfactual Lau nch Statement as purporting to
demonstrate the time at which Airbus would have had the financial means with which to have
launched the A380 and A350XWB in the counterfactual. The United States generally argues that, for
various reasons including that it co ntradicts the adopted findings from both the original and first
compliance proceeding s, the Launch Statement is immaterial for purposes of this compliance
proceeding.608
In our view, the Launch Statement does not demonstrate that Airbus would have launched
the A380 and A350XWB in or around 2002 and in 2007/2008 respectively for two main and related
reasons. First, the Launch Statement assumes the launch of the A380 in 2003, and from that date
moving forward it assumes, in its financial analysis, the presence of the A380 programme.609 This
materially differs from the counterfactual under which we operate, i.e. that the A380 could not have
been launched until end of 2013 at the earliest. The Launch Statement also fails to capture that the
absence of the A380 durin g the 2000 -2008 period would have placed Airbus under considerable
competitive pressures from Boeing. Second, the Launch Statement ends its counterfactual analysis
of Airbus in 2008 – six years before Airbus could have launched the A350XWB in the counterfactual
we apply and during a period where Airbus would have been suffering from Boeing's competitive
pressures. We thus consider that the Airbus Counterfactual Launch Statement cannot be
meaningfully used to illustrate Airbus' financial condition in the counterfactual post-2013 period.
7.5.5.3.2.4 Savings from the absence of A380 and A350XWB development costs
The European Union asserts that, had Airbus delayed the launches of the A380 and
A350XWB, Airbus would not have had to shoulder the large development costs of thes e
LCA programmes during the delay period, the suggestion being that Airbus would have had that
money available for other ends and/or generally available to stabilize its overall financial position.
The European Union also puts forth evidence indicating tha t the A380 only reached a financial
"break-even" point in 2015610, while the A350XWB had not done so by May 2019611, evidencing that
Airbus continues to bear an overall financial burden from these programmes for many years following
launch.612
The United States counters that the A380 and A350XWB programmes were still
"cash-generating" even before their "break-even" points and thus benefitted Airbus financially.613

606 Airbus Counterfactual Launch Statement, (Exhibit EU-92 (HSBI/BCI)), para. 16.
607 Airbus Counterfactual Launch Statement, (Exhibit EU-92 (HSBI/BCI)), para. 18.
608 United States' second written submission, para. 230; and comments European Union's response to
Panel question No. 70.
609 Airbus Counterfactual Launch Statement, (Exhibit EU-92 (HSBI/BCI)), para. 24.
610 According to the European Union, the A380 programme reached a "break-even point over recurring
costs in 2015". (European Union's second written submission, para. 168. See also United States' first written
submission, para. 65; FlightGlobal, "Airbus assures on A380 break-even this year, David Kaminski-Morrow",
(27 February 2015), (Exhibit USA-16); Airbus Annual Report, 2017, p. 77 (Exhibit USA-9); and Airbus may cut
A380 production to six planes a year: sources, Reuters, 11 December 2017, (Exhibit EU-90)). From these
submissions and exhibits it is apparent that by "break-even" the European Union essentially means that cost of
production per aircraft equals the revenues realized from that aircraft.
611 European Union's comment on the United States' response to Panel question No. 67, para. 322
(citing A350 closes on production-rate target, David Kaminski-Morrow, FlightGlobal (27 April 2015),
<https://www.flightglobal.com/news/articles/a350-closes-on-production-rate-target-448127/>, accessed
15 September 2019).
612 United States' second written submission, para. 221. The United States argues that R&TD subsidies
also meant that Airbus did not use funds exclusively through sales of the A320s and A330s. (United States'
second written submission, para. 222). We recall that the R&TD subsidies are outside the scope of this
compliance proceeding insofar as they relate to the United States' arguments that those measures have
"product effects" that "complement and supplement" the effects of the LA/MSF subsidies.
613 United States' second written submission, para. 220.

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We recall that the development and production of LCA is "an enormously complex and
expensive undertaking" generally requiring the sale of hundreds of a given LCA in order to make
that LCA programme profitable. 614 In the counterfactual we apply, Airbus would have funded the
launches of the A380 and A350XWB on market terms. The non -recurring costs of the A38 0 were
expected to be [***]615 in 2000, and for the A350XWB, they were expected to be EUR 12 billion as
late as 2009 .616 Moreover, Airbus' spending on the A380 and A350XWB programmes would have
been particularly high in the initial phases of each programme before significant numbers of
deliveries were even made. 617 We thus accept that Airbus, had it not launched the A380 and
A350XWB before 2014, would not have had to fund the se programmes, which would have entailed
expenditures of many hundreds of millions of EUR before Airbus saw any appreciable revenues arise
from sales of the A380 or A350XWB.618
7.5.5.3.2.5 Conclusion — Airbus' counterfactual financial condition post-2013
In the light of the above analysis , we discern two general competing considerations when
assessing Airbus' counterfactual financial position after the end of 2013. On the one hand, Airbus'
competitive position would have been generally compromised, resulting in diminished orders across
all three product markets during the counterfactual 2000 -2013 period. On the other hand, Airbus
would not have had to fund the expensive A380 and A350XWB programmes during this time, thus
being able to put financial resources that would have otherwise been directed to those programmes
to other ends. Overall, and on balance, we consider that the negative consequences flowing from
the former consideration would have outweighed advantages arising from the latter, at least by
year-end 2013. This is so because Airbus' revenues would have been diminished through lower sales
of LCA over this time-period. As explained, it would have become increasingly difficult for Airbus to
make sales over time in the 2000-2013 period as Boeing's competitive advantages grew. Moreover,
part of Airbus' available cash would likely have to have been channelled towards competitively pricing
Airbus' remaining LCA models to enable them to compete with Boeing. Further, Airbus' significantly
diminished order book would like ly have made Airbus less attractive from investors' standpoint,
making it harder for Airbus to raise debt and equity. In short, we consider that Airbus' overall
financial condition in the counterfactual post -2013 period would have roughly reflected its ove rall
competitive position, i.e. it would have been generally compromised. We note, however, that the
paucity of evidence that the parties have provided us in this context prevents us from more
meaningfully quantifying Airbus' financial position.619
Airbus' counterfactual technological and production capabilities after 2013
The European Union has indicated that the development and launch of the A380 represented
a significant technological step forward for Airbus, particularly with respect to Airbus' competence s
in using composite materials. The European Union has also indicated that, even if the launches of
the A380 and A350XWB had been delayed in the counterfactual to some extent, during the delay

614 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1717. See A380 Business
Case, (Exhibit EU-78 (HSBI)), p. 6 (giving estimated break-even point for the programme).
615 A380 Business Case, (Exhibit EU-78 (HSBI)), p. 5, 7th bullet. See also Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), fn 2746 (describing the adopted convention of what
the "cost" of an LCA programme is in that report).
616 See Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.485, 6.1602, 6.1578, and 6.1710.
617 The first compliance panel also indicates that, generally speaking, the most spending-intense periods
in the launch of an LCA begins after the initial technologies are proven and production ramp-up begins. In the
case of the A350XWB, this occurred roughly three years following launch. (Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1577-6.1578).
618 We recall that the A380 was launched in 2000 but the first delivery was only made in 2007.
The A350XWB was launched in December 2006.
619 We note that the European Union has, in other contexts, provided certain of Airbus' financial
information in the post-2013 period. (See European Union's submission regarding the wind-down of the A380
Programme, fn 1 (containing links to Airbus financial data from 2018)). None of this information, however,
takes into account the significantly changed competitive position that Airbus would have faced in the
counterfactual 2000-2013 period, and thus cannot be meaningfully used to estimate Airbus' counterfactual
post-2013 financial condition.

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period Airbus would still have made progress in developing its technological capabilities through
processes other than developing and launching a specific LCA programme such as the A380.620
The United States also draws attention to the fact that, because the A380 represented a
significant technological step forward for Airbus in many ways, the failure to launch the A380 at least
until 2014 would have deprived Airbus of significant learning effects that would have hampered
Airbus' ability to launch other advanced LCA models such as the A350XWB.621
In our view, any failure by Airbus to launch the A380 before any launch of the A350XWB
would have deprived Airbus of valuable "learning" effects that arose from the A380 programme. The
importance of "learning effects" to an LCA manufacturer's ability to design, develop, produce, and
market LCA has been emphasized by panels and the Appellate Body throughout this dispute.622
The first compliance panel found that the A350XWB programme had benefitted from
"learning" effects arising from previous Airbus LCA programmes in the following areas:
(a) managerial know-how; (b) pre-existing infrastructure and engineering resources; (c) experience
with composite materials; (d) specific structural features and on -board systems of the A350XWB;
and (e) Airbus' ability to effectively market the A350XWB.623 Although these "learning" effects were
derived from multiple Airbus' pre-A350XWB LCA programmes, generally, the first compliance panel
report documented that many were specifically derived from the A380 programme. For instance, the
first compliance panel noted how the A350XWB programme benefited from the A380 programme in
the following ways: (a) Airbus' experience with using composite materials in the context of the A380
programme624; (b) the A350XWB contained components and features derived f rom the A380 625;
(c) Airbus gained experience with using RSPs in the A380 programme626; and (d) Airbus changed its
design and testing processes to avoid problems that had arisen with the A380 programme. 627 The
Appellate Body agreed with the first compliance panel that the A350XWB derived significant
"learning" effects from the A380 programme. These "learning" effects were especially important for
Airbus in the context of the A350XWB programme, because of it s high risk profile628 given the use
of unprecedented high amounts of composite materials 629, the unprecedented high degree of
outsourcing, and the fact that Airbus was attempting to significantly speed up the development and
production of the A350XWB relative to prior Airbus LCA programmes.630 In short, Airbus needed to
draw on all its experience in order to produce the A350XWB.
However, we accept that even in the absence of the launch of the A380 and/or A350XWB, it
would be unreasonable to expect Airbus' technological and production capabilities to have remained
static. We agree that in the counterfactual, and at least up until year-end 2013, Airbus would likely
have continued to make progress in these areas to some degree. This is so because Airbus would
have continued to glean certain "learning" effects from its other LCA programmes, and in particular
production of the A320 and A330. In this respect, we note that the European Union has presented
evidence demonstrating that Airbus has continued to make investmen ts and improvements in its
A330 LCA family on an ongoing basis. 631 We also accept that Airbus could have made certain

620 European Union's response to Panel question No. 68, paras. 359-367.
621 United States' comments on the European Union's responses to Panel question Nos. 68 and 72.
622 See above, paras. 7.315 and 7.319.
623 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.1754-6.1759.
624 Panel Reports, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.473,
6.469, 6.1735-6.1736, and 6.1745, first bullet, 6.1746, sixth, ninth, tenth, and eleventh bullets, and
para. 6.469. Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.492.
625 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1757
and fn 3222.
626 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 811.
627 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1754.
628 See Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.468-6.487.
629 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.469,
6.492, 6.1547, 6.1620-6.1621, 6.1728-6.1731, and 6.1621.
630 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.499-6.505.
631 "{T}he A330neo benefits from continuous investment of over 150 million euro every year". (A330
Family, Airbus website, (Exhibit USA-50), p. 1). We recognize that the United States generally argues that the

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progress in the area of composite materials, as the record confirms Airbus' ability to perform
research and development with respect to such materials outside the context of a specific
LCA programme like the A380.632
We do not exclude that technological and LCA-production-related advances that Airbus could
have made during the counterfactual 2000-2013 period could have effectively replaced at least some
of the "learning" effects that had actually arisen from the A380 programme. Indeed, we consider
that, to some extent at least, it is reasonable to assume that this would have occurred particularly
in the field of developing understanding of compos ite materials given the strong incentives that
Airbus would have had to enhance its understanding of these materials with a view to future
production of increasingly composite -based LCA. We note, however, that there is no appreciable
evidence on the record indicating that Airbus could have reached the same stage of competence
working with composite materials by year-end 2013 in the absence of the A380 programme. Indeed,
we recall in this regard the European Union's own position that launching the A380 was a "very
significant intermediate step, in terms of its learning effects, for Airbus' future work with
composites", a competence that was important so that Airbus could "remain a viable competitor in
the {LCA} duopoly".633 There is also no evidence to suggest that Airbus could have replaced all
"learning" effects arising from the A380 in the realm of managerial know -how through other
processes and experiences in the counterfactual. 634 On the contrary, to the extent that the A380
raised several new and unexpected challenges which Airbus eventually resolved, it is clear that the
same type of expertise and know-how could not have been developed in its absence.635
In sum, although we recognize that an Airbus company that did not launch the A380 and
A350XWB in the years up to the end of 2013 would have continued to work and improve its
technological and production capabilities, we do not believe those capabilities would have been of
the same nature and quality that enabled the subsidized Airbus company to actually launch and
develop the A350XWB between 2006 and 2013.
Counterfactual demand
7.5.5.3.4.1 A380
The United States argues that post -2013 demand levels for the A380 would have been
materially lower than they were looking forward in time in 2000 for two main reasons. First, the
United States asserts that the market for VLA was , generally, by around 2013, shifting away from
large, four-engine VLA. Second, the United States asserts that the A380 would likely have been able
to capture a proportionately smaller segment of the VLA market after 2013 than it could have going
forward from 2000, as Boeing 's incumbency advantages would have been reinforced during the
previous 13 years, particularly with the introduction of the 747-8I in 2005.636
The European Union appears to agree that the demand levels for the A380 were low going
forward from year-end 2013. The European Union, for instance, agrees with the United States that
the LCA market was moving away from VLA during this time. The European Union also asserts that
the weak demand levels for the A380 ultimately led Airbus to announce the wind-down of the entire
A380 programme in 2019.637

European Union has not demonstrated that such investments are not, at least in part, due to the effects of
subsides. (See section 7.5.5.4.4 below). For present purposes, we consider that whether or not Airbus has, in
fact, funded, in whole or in part, research and development activities outside the specific context of the A380
and A350XWB programmes to be immaterial. At this point, we simply note that Airbus does indeed conduct
such activities in the presence of resources with which to perform them.
632 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.516
and 6.1728.
633 European Union's response to Panel question No. 68, para. 365.
634 See paragraph 7.315 above.
635 For example, Airbus discovered problems with its computer-design software in the context of the
A380 programme, problems that resulted in serious A380 production delays and cost overruns. (Panel Report,
EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.509).
636 United States' second written submission, paras. 243-245; and comments on the
European Union's response to Panel question No. 68, para. 263.
637 European Union's comments on the United States' response to Panel question No. 73, para. 349.

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The evidence before us reveals that the levels of demand for VLA, including the A380, were
low after 2013. As the parties indicate, this was mainly due to the fact that customers were shifting
away from four-engine VLA generally, and toward more fuel-efficient and flexible twin-aisle LCA.638
Boeing's 2015 Current Market Outlook (CMO) indicates that the market for large twin -aisle aircraft
(i.e. VLA) was on the decline. That CMO forecasts global demand for 540 large wide-body aircraft
over the 20 -year period 2015 -2034639, in contrast to the A380 Business Case's projected higher
demand [***] moving forward from 2000.640 We further note that the evidence on record indicates
that the 747-8I (i.e. Boeing's only VLA for sale in the post -2013 period) had secured no orders in
the 2014-2018 period, inclusive.641 Also, as of May 2019, Boeing only had a backlog of four orders
for the 747-8I.642 Moreover, it was Airbus' failure to maintain an acceptable backlog of orders of the
A380 that led Airbus to announce the discontinuation of the A380 programme in 2019.643
In the counterfactual world where Airbus had not launched the A380 and A350XWB, the
incumbency advantages that Boeing would likely have accrued as a monopolist in the VLA product
market would have made it more difficult for Airbus to secure orders for the A380 in the post-2013
period compared with the market it faced when it actually launched A380 in 2000. This would
have been particularly so because, in reality, when the A380 was launched Boeing was marketing
the 747-400. Boeing only launched its successor and improved 747 model, the 747 -8I, in 2005644,
which only became available for delivery in 2012. 645 Thus, in 2013, the A 380 would have had to
compete against a relatively advanced model of the 747 that was already being produced and
available for delivery to customers.
In sum, in the counterfactual post -2013 period, Airbus would not only have faced low
demand for VLA like the A380, generally, but would have likely found it difficult to capture an
appreciable portion of what market demand for VLA did exist with the A380.
7.5.5.3.4.2 A350XWB
We consider that the demand outlook for twin -aisle LCA such as the A350XWB would have
been significantly positive in the counterfactual beginning in 2014. This is so for four reasons. First,
the 2015 Boeing CMO indicates that the twin -aisle market was still extremely valuable, i.e. worth
USD 2.7 trillion over the next 20 years. 646 We further note that a n expert report submitted by the
European Union forecasts "substantial demand for A350XWB aircraft over the next 20 years"
beginning in 2018.647 Second, we recall that one of the reasons that the VLA market was declining
in and around 2014 was that airlines were switching away from four -engine VLA in favour of
comparatively more fuel-efficient twin-aisle VLA such as the A350XWB.648 Third, we note that overall,
orders for the A350XWB in 2014, 2015, 2016, and 2017 stood at 57, 16, 51, and 44 respectively,

638 United States' second written submission, para. 244.
639 Boeing CMO 2015-2034, (Exhibit USA-153), pp. 24 and 27. Further, the European Union indicates
that Airbus, in the post-2013 period, had forecast that although demand for VLA may improve, it would not do
so until the mid-2020s. (European Union's first written submission, paras. 132, 137, 145, and 164;
second written submission, para. 187; and comments on the United States' response to Panel question No. 37,
para. 142. But see the European Union's opening statement at the meeting of the Panel, para. 32 ("Recent
announcements by major customers confirm the view that there is no future interest or strategic fleet fit for
the A380: Amedeo cancelled its orders of 20 aircraft, Qantas cancelled the outstanding 8 deliveries, and Qatar
announced that it will retire its existing fleet of 10 aircraft by 2024, while Lufthansa and Air France announced
that they will half their existing fleets by 2022 (Lufthansa from 14 down to 8 aircraft, and Air France from
12 down to 5)").
640 A380 Business Case, (Exhibit-EU 78 (HSBI)), p. 13. We note that, although the Business Case
apparently includes VLA [***]. (See A380 Business Case, (Exhibit-EU 78 (HSBI)), pp. 13-14).
641 Ascend Data, (Exhibit USA-138).
642 United States' response to Panel question No. 73, para. 165.
643 European Union's submission regarding the wind-down of the A380 programme, para. 1. (Updated
Ascend Data, (Exhibit USA-158)). Some of these may have been cancelled.
644 Boeing Launches New 747-8 Family, Boeing website, <https://boeing.mediaroom.com/2005-11-14-
Boeing-Launches-New-747-8-Family>, accessed 25 September 2019.
645 United States' second written submission, para. 244 (citing Boeing press release, "Boeing Delivers
First Lufthansa 747-8 Intercontinental", (25 April 2012), (Exhibit USA-126)).
646 Boeing CMO 2015-2034, (Exhibit USA-153), p. 27.
648 See paragraph 7.352 above. See also Boeing CMO 2015-2034, (Exhibit USA-153), p. 27 (indicating
decreasing demand for VLA).

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indicating, in our view, steady and significant demand levels.649 Finally, we discern no argumentation
or evidence on the record materially indicating that, beginning in 2014, the demand for twin -aisle
LCA such as the A350XWB would have been anything but positive.
Balanced against this positive overall demand picture, however, is the fact that, in the
counterfactual, by 2014 Boeing would have accumulated significant incumbency positions with many
customers through its superior competitive position in the 2000-2013 period. Thus, we consider that
Airbus would have had a relatively more difficult time selling the A350XWB to customers in and
immediately after 2014 than it did in 2006 when it was actually launched.
7.5.5.3.4.3 A330neo
We consider that the overall demand outlook for the A330neo would have been positive in
the counterfactual beginning in 2014. Indeed, we note that, in reality, the A330neo was launched
in 2014, presumably because demand was sufficient to justify a launch. We further note that overall
demand for modern twin-aisle LCA appeared particularly strong, generally, during this time-period.
Airbus documentation reveals perceived strong demand of the A330neo 650, and we detect no
argumentation or evidence on the record to indicate that this would not be the case. As with the
A350XWB, however, this overall positive demand picture would have to be viewed in the light of
Boeing's significant incumbency advantages in the counterfactual, which would have made it more
difficult for Airbus to sell the A330neo beginning in 2014 in the counterfactual relative to how difficult
it was in 2014 in reality.
Conclusions – counterfactual market presence of the A380, A350XWB and
A330neo after 2013
In the light of the foregoing analysis, we turn to assess in conclusion, whether, in the absence
of the A380 and A350XWB LA/MSF subsidies, the A380, A350XWB, and A330neo programmes would
have been sufficiently attractive (i.e. "viable") for Airbus to pursue in the counterfactual post-2013
time-period.651 We set out our conclusions in respect to each LCA programme in turn , making
reference – as needed and insofar as the limited evidence on the record allows – to the same four
factors that the first compliance panel used in its "viability" analysis concerning the A350XWB in the
absence of A350XWB LA/MSF : (a) Airbus' expected ability to effectively fund the relevant
programme with financing on market terms; (b) the relevant programme's base-case forecast NPV;
(c) the strategic reasons for Airbus to pursue the relevant programme; and (d) the relevant
programme's risks.
7.5.5.3.5.1 A380
With respect to the viability of the A380 programme in the counterfactual post-2013 period,
we begin our analysis by noting t hat the A380 Business Case, which was relied upon by Airbus to
launch the A380, was authored in the year 2000652 – 14 years before the counterfactual post-2013
time-period began. It was thus authored under very different competitive circumstances than those
that would have faced Airbus in the counterfactual post-2013 period. Thus, while the A380 Business
Case indicates a positive expected NPV for the A380 programme at the time of actual launch even
in the absence of A380 LA/MSF653, we do not believe this assessment can be relied upon to conclude
that a launch of the A380 in the post-2013 period would have been expected to generate a positive
NPV. We believe this to be the case mainly because of the lack of demand that would exist for the
A380 in the post-2013 period.
We recall that demand for the A380 was weak in the post -2013 period. Indeed, the
European Union has submitted evidence indicating that, as of December 2017, the most recent order
for A380s had occurred in February 2014 by leasing company Amedeo. Aft er December 2017,

649 Updated Ascend Data, (Exhibit USA-158).
650 See Airbus A330neo Presentation, (Exhibit USA-51), slide 3.
651 See Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.1637 (using the term "viability" in a similar way).
652 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1922.
653 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1943.

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Emirates ordered 20 A380s, [***] the 2014 Amedeo order.654 We further note that as of May 2019,
Boeing only had a backlog of four orders for the 747-8I.655 We see no reason to believe that Airbus
would have secured any additional A380 orders in the counterfactual in this time -frame, and no
particular reason to believe that Airbus would have earlier predicted receiving any in this time-frame.
This contrasts with the situation as it existed in the 2000-2003 period in reality, during which Airbus
received 112 orders for the A380. 656 We recall that " orders are crucial for a newly launched LCA
model to be successful, due to the substantial economies of scale in production as well as the steep
learning curve cost reductions generated thereby".657 We thus discern no convincing reason to think
that Airbus w ould have launched the A380 until Airbus could either secure or expect to secure
immediate and substantial interest from customers.658
Moreover, we consider that the perceived strategic benefits of the A380 programme
beginning in 2014 in the counterfactual would likely have been rather low. With the lagging sales of
747-8I aircraft in this time-period, it appears unlikely to us that Airbus would have viewed competing
with Boeing in the VLA market as such an imperative as it was in the early 2000s when demand for
VLA was much higher. This would have been all the more so given the enormous expenses associated
with the A380 programme and the attendant risks associated with any LCA programme of that
magnitude.659
We note that Airbus received an order for 20 A380s in 2018 from Emirates. This, however,
does not convince us that Airbus would have launched the A380 at that time. This is so for three main
reasons. First, Airbus presumably would have been aware that overall demand for the A380 was
weak due to the low lev el of interest from customers in VLA in the immediately preceding years.
Second, we have doubts as to whether Airbus would have won this 2018 Emirates order in the first
place. This is so because Emirates had been a consistent A380 (rather than 747) customer for many
years, with A380 orders stretching back to 2001.660 In the absence of the A380 we consider it highly
likely that Emirates would have ordered Boeing VLA (and/or perhaps larger 777s 661) instead. Thus,
Boeing would likely have had a significant VLA incumbency advantage with Emirates by 2018 in the
counterfactual. In the light of such considerations, we consider it less than certain that Emirates
would have, in 2018, introduced an entirely new Airbus VLA into its fleet in the counterfactual.
Finally, we note that 2018 was only one year before Airbus' decision, in reality, to discontinue the
entire A380 programme in the light of weak demand.662 We consider it likely, therefore, that Airbus
would have judged VLA demand as being too weak at that time to justify a launch of the A380.
Our conclusions regarding Airbus' competitive and financial condition in the counterfactual
post-2013 period reinforce this view. In this period, Airbus' competitive position would have been
compromised in all three product markets . Airbus' financial situation would most likely have
approximated its competitive position, i.e. it would have been generally compromised. We have
found nothing on the record indicating that Airbus could have, in that set of circumstances, launched
both the A380 and the A350XWB essentially simultaneously. In short, in and immediately around
2014 in the counterfactual, Airbus would have had to choose between launching the A380 or a twin-
aisle aircraft like the A350XWB. We consider it highly unlikely that Airbus would have opted to spend
billions of euros on launching an A380 programme in the face of such weak demand for the A380.

654 See paragraph 7.435 below. See also European Union comments on the United States' response to
Panel question No. 58, Table at para. 268; and Airbus, "Status of A380 orders and deliveries",
(Exhibit EU-94 (BCI)).
655 United States' response to Panel question No. 73, para. 165.
656 Including 78 in 2001 and 34 in 2003. (Updated Ascend Data, (Exhibit USA-158)).
657 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1726.
658 We recall that in Airbus predicted that demand for VLA would pick up again in the mid-2020s.
(European Union's first written submission, paras. 132, 137, 145, and 164; second written submission,
para. 187; and comments on the United States' response to Panel question No. 37, para. 142). This may have
been so in the counterfactual as well, but we discern nothing on the record suggesting that Airbus would have
launched the A380 in the hopes of receiving orders in ten years' time.
659 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1943 (explaining that "the
A380 was a massive project with respect to both the technical aspects of development of the aircraft, and its
associated costs") and 7.1948 (noting the risks associated with LCA programmes such as the A380).
660 Updated Ascend Data, (Exhibit USA-158).
661 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 3326
(explaining that "there is evidence that the larger versions of the 777 may also at times challenge for sales in
the market for {VLA}").
662 See section 7.5.5.5 below.

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Rather, we consider that Airbus would have opted to launch a twin -aisle LCA programme for the
reasons discussed in the next two sections.663
In sum, we conclude that the A380 would not likely have been available for either order or
delivery at any time in the counterfactual post-2013 period. Accordingly, we find that the A380
LA/MSF subsidies continue to be a "genuine and substantial" cause of the market presence of the
A380.
7.5.5.3.5.2 A350XWB
In assessing the viability of the A350XWB in the counterfactual post -2013 period, we first
note that the strategic benefits of launching the A350XWB would likely have been high. After
enduring heightened competitive pressures from Boeing across all three product markets for multiple
years, and with the market for VLA too weak to warrant a launch of the A380, we consider that
Airbus would have sought to launch as strong a competitor to the Boeing 777 and 787 that Airbus
could as quickly as possible. Such a launch would not only be directed to re -establishing Airbus'
competitiveness in the valuable twin -aisle LCA market, but also reduce Boeing's incumbency
advantages and Boeing's ability to cross -subsidize prices across the product markets, thus shoring
up Airbus' competitive position in the single -aisle market as well. Indeed, we recall that such
concerns over Airbus' general competitive position were significant factors for Airbus in determining
to launch the A350XWB in reality. Thus, we consider that Airbus' would have been strongly motivated
to launch the A350XWB in the counterfactual post-2013 period.
We also consider that Airbus would have perceived sufficient general market demand for
twin-aisle LCA like the A350XWB. Indeed, the main reason why Boeing would have been able to
exert heightened competitive pressures on Airbus during the counterfactual 2006-2013 time-period
was that Boeing would have had more advanced and fuel -efficient twin -aisle LCA, wh ich were
achieving high levels of sales, and that lacked a meaningful competitor from Airbus. 664 Balanced
against this overall demand picture, however, is the fact that if Airbus had launched the A350XWB
after 2013 in the counterfactual, then Airbus would ha ve encountered a different competitive
environment than it did in 2006. The key changed aspect of this environment, in our view, is that
Boeing would have accumulated significant incumbency advantages in the twin -aisle LCA product
market over the past eigh t years. This would have limited to some degree the demand for the
A350XWB. On balance, however, we consider that the overall strong demand for twin-aisle LCA like
the A350XWB would have provided a strong demand for the A350XWB.
We have some reservations about whether Airbus' financial condition in the post-2013 period
would have enabled Airbus to launch and fund a programme as expensive and risky as the A350XWB
with financing instruments on market terms, which would not have had the "risk -transferring"
qualities that LA/MSF possessed.665 There is, however, little material evidence before us to address
this point, and, as discussed above, it is difficult to use the existing findings on the record to
meaningfully discern what Airbus' financial resources would have been in the counterfactual post -
2013 period. Therefore, we recall our earlier conclusion that, as a general matter, Airbus' financial
condition in the post -2013 period would have reflected its competitive position, which would have
been generally compromised.666 Overall, in the light of the above considerations, we consider that
it would be reasonable to proceed on the basis of a scenario in which Airbus would have launched
the A350XWB in early 2014. This is so because Airbus would have had significant business and
strategic incentives to launch the A350XWB in order to re-establish Airbus' competitiveness in the
twin-aisle market and thereby boost its overall business position. However, exactly how such a
launch would have proceeded in the years that followed is, in our minds, uncertain.

663 Airbus terminated the A300 and A310 programmes in 2007 and terminated the A340 programme
in 2011. (Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1062
and fn 2596).
664 We note that, in the 2006-2013 period Boeing received 604 net orders for 777s and 731 net orders
for 787s. (See Updated Ascend Data, (Exhibit USA-158)).
665 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1934 (explaining that
"LA/MSF functions as a risk transferring device which significantly alters the economics of a decision to launch
any given LCA programme").
666 See paragraph 7.326 above.

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On the one hand, there are reasons to believe that the counterfactual post-launch period
would have been difficult for Airbus. For instance, Airbus' generally compromised financial position
may have slowed the pace of the programme. Furthermore, given the high risk profile and technical
challenges of the A350XWB, the absence of any experience with the A380 suggests that the
development and production phases of the programme would likely have been comparatively difficult
for Airbus in the counterfactual, leading to cost overruns and delays. On the other hand, we accept
the European Union's proposition that, at least to some degree, during the counterfactual 20 06-
2013 period, Airbus would have continued to evolve into a generally more integrated company and
would have made gains in managerial and technological expertise even in the absence of the A380
programme.667 However, in our assessment, such gains would have been insufficient to entirely
overcome the financial and technological shortcomings in Airbus' position at the time of the
counterfactual launch of the A350XWB in 2014. It is likely, therefore, that Airbus would have faced
post-launch production difficulties – albeit perhaps not rising to the full magnitude of those affecting
the A380 in its development and production phases.668 Such difficulties would likely have resulted in
some cost overruns and production delays, which would have negatively impacted Airbus' ability to
attract customers for the A350XWB in the same numbers that Airbus actually attracted during this
time-period. This is especially so because Boeing would have been already able to offer more
attractive delivery positions for the 777 and 787, bot h of which were already available for delivery
in the post -2013 period, at a time when Boeing had already secured significant incumbency
advantages with customers in prior years. In such a scenario, we accept as reasonable the
European Union's submission that the time-gap between the counterfactual launch of the A350XWB
and the time by when Airbus could have actually delivered the A350XWB would have been at least
eight years (i.e. the same time lag between launch and the first delivery of the A350XWB in
reality).669 Applying the European Union's estimate to a counterfactual launch in 2014 would mean
that the first actual delivery of an A350XWB would take place after the present day.
In conclusion, we find that in the counterfactual scenario described above, Airbus would
have launched the A350XWB in 2014, but that it would not have been able to offer delivery positions
until at least eight years after its counterfactual launch date. We also consider that Airbus could only
have offered the A350XWB on less attractive terms (at least in terms of delivery positions) than
Boeing could offer its competitive twin-aisle LCA in the counterfactual post-2013 period.
7.5.5.3.5.3 A330neo
The United States argues that the A380 and A350XWB LA/MSF subsidies had " indirect"
effects on the A330neo, which was launched in 2014. Specifically, the United States asserts that
aspects of the A380 and A350XWB have been incorporated into the A330neo, and that the A380 and
A350XWB programmes put Airbus in the financial position where it could launch the A330neo.670
The European Union argues that the United States has not established the causal pathway
through which the A380 and A350XWB LA/MSF subsidies have had relevant effects on the A330neo
programme, has not identified the sub sidy that caused the unidentified effect, and generally has
submitted insufficient evidence with which to support its arguments, particularly in the light of the

667 European Union's first written submission, para. 350.
668 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.509-6.510.
669 The European Union argues that the time gap between the 2007/2008 launch of the A350XWB in its
proposed counterfactual, and first delivery would have been as it was in reality, i.e. eight years.
(European Union's comments on the United States' response to Panel question No. 74, paras. 364 and 374-
376. See also European Union's first written submission, para. 348; second written submission, para. 459; and
opening statement at the meeting of the Panel, para. 79).
670 United States' first written submission, paras. 236-238; second written submission, paras. 232-234;
response to Panel question No. 67; and comments on the European Union's response to Panel question No. 67.
According to the United States, the A330neo programme includes two variants, i.e. the A330-800 (intended to
compete against the Boeing 787-8) and the A330-900 (intended to compete against the Boeing 787-9). (Airbus
A330neo Presentation, (Exhibit USA-51), slide 14).

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fact that there are no adopted findings regarding the effects of any subsidies on the A330neo
programme.671
We note that the United States makes two basic arguments in this context: (i) that the
A330neo's launch would not have been financially possible for Airbus in the absence of the A380 and
A350XWB (i.e. the A330neo benefitted from "financial effects" arising from the A380 and A350XWB
programmes672); and (ii) that features of the A380 and A350XWB were incorporated into the
A330neo (i.e. the A330neo benefitted from "learning" effects arising from the A380 and A350XWB
programmes).
With respect to the "financial effects" of the A380 and A350XWB programmes on the
A330neo, we recall our previous conclusion that, in the counterfactual post -2013 period, Airbus'
financial situation would have reflected its overall competitive position, i.e. it would have bee n
generally compromised. This would have been the result of a process that began in 2000 with the
absence of an A380 launch and with Boeing exerting increasing competitive pressures across all
three product markets over time. Thus, we accept that, in the c ounterfactual, after 2000 it would
likely have become increasingly difficult for Airbus to fund large-scale and expensive projects as its
LCA orders and deliveries (and the financial resources derived from such orders and deliveries)
decreased. This suggests that Airbus would have had difficulty launching the A330neo in 2014 and
thus may not have been able to make the A330neo available for order and delivery at present day
in the counterfactual, compared with the position of Airbus in reality.
On balance, however, we consider that such a conclusion is unwarranted on the basis of the
arguments and evidence before us. We note that the United States has presented little evidence
indicating just how expensive the A330neo was to develop and launch. The United States offers one
exhibit indicating that " the A330neo benefits from continuous investment of over 150 million euro
every year – integrating the latest developments from the A350 XWB and A380 Families ".673
However, this was an investment made over time, and we note that the A330 family was launched
in 1987.674 We further do not know how much of that money was actually necessary for Airbus to
develop the technologies to launch and produce the A330neo. The A330neo is a variant developed
from a pre -existing A330 pla tform, and we note other evidence that the United States submits
indicates that its improvements are "incremental". 675 In that context, we recall that, in the
counterfactual period of 2000 -2013, Airbus would have likely been trying to retain what market
share it had in the twin-aisle LCA product market. We consider that, in the absence of the launch of
the A350XWB before 2014, making incremental improvements to Airbus' only remaining line of twin-
aisle LCA following 2011 (i.e. the A330) would have been a clea r and perhaps necessary strategy.
Thus, it seems to us that Airbus would have had strong incentives to pursue an incrementally
improved A330 in the counterfactual. Thus, in the absence of an additional showing that the A330neo
presented a significant finan cial challenge to Airbus, we do not believe the programme would not
have been pursued as and when it actually was for financial reasons in the absence of the A380 and
A350XWB programmes.
We turn to examine the extent to which the A330neo benefitted from "learning" effects that
arose from the A380 and A350XWB programmes. Our review of the exhibits the United States offers
reveals the following specific "learning" effects: (a) the cabin design of the A330neo benefitted from
the cabin that was designed for the A350XWB676; (b) an indication that "Trent 1000-TEN architecture
with Trent XWB technology" (the "Trent 1000" is the A330neo engine) 677; (c) "{i}mproving lift-to-

671 European Union's second written submission, para. 440 (quoting Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1492 and 6.1446 (fn 2470)); and comments
on the United States' responses to Panel question No. 60, paras. 276-280, and No. 67.
672 Financial effects are where "the previous subsidized financing enables launches of subsequent models
by alleviating the capital burdens that would otherwise exist". (Panel Report, EC and certain member States –
Large Civil Aircraft (Article 21.5 – US), paras. 6.1724-6.1725 and 6.1761-6.1771).
673 A330 Family, Airbus website, (Exhibit USA-50), p. 1.
674 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1719.
675 Airbus press release, "Airbus launches the A330neo", (14 July 2014), (Exhibit USA-53), p. 1.
676 Airbus A330neo Presentation, (Exhibit USA-51); Airbus press release, "AirAsia X orders 34 more
A330neo", (19 July 2018), (Exhibit USA-54); Airbus website, "A330-900", (Exhibit USA-55); and Airbus
website, "A330-800", (Exhibit USA-78).
677 Airbus A330neo Presentation, (Exhibit USA-51), slide 6.

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drag ratio using A350 wing philosophy" 678; (d) the "Electrical Bleed Air System" was "{a}lready
successfully in service on A380"679; and (e) the A330neo has "A350 XWB inspired winglets".680
We consider that, without a further showing of how difficult it would have been to develop
such features in th e absence of the A380 and A350XWB, the submitted evidence is insufficient to
demonstrate that the A330neo, in the counterfactual, would not have been available for order or
delivery today. Again, such improvements appear incremental in nature, the A330 had been in the
market for many years and thus allowing for much time to achieve such incremental advances. It is
further unclear to us that such improvements could or would not have been made by an Airbus
company motivated to incrementally improve its A330 l ine of LCA as it fought to sustain its
competitive position in the twin-aisle market in the counterfactual.681
For the foregoing reasons, we find that the United States has failed to demonstrate that
A380 and A350XWB LA/MSF subsidies are a genuine and substa ntial cause of the current market
presence of the A330neo, i.e. that, in the counterfactual, the A330neo would not have been launched
and brought to market as and when it actually was.
Factors allegedly attenuating the causal link between A380 and A350XWB
LA/MSF subsidies and any present adverse effects
The European Union has identified the following factors which it argues attenuate the causal
link between the A380 and A350XWB LA/MSF subsidies and any present adverse effects: (a) the
"timing out" of the direct effects of the A380 LA/MSF subsidies on the continued market presence of
the A380, and of the indirect and direct effects of A380 and A350XWB LA/MSF subsidies,
respectively, on the continued market presence of the A350XWB; (b) the reduction in the benefit of
A380 and A350XWB LA/MSF subsidies as a result of the amortisation of each of the A380 and
A350XWB LA/MSF subsidies over time; (c) the reduction in the benefit of A380 and A350XWB LA/MSF
subsidies as a result of the less than full drawdown of principal available under the French and UK
A350XWB LA/MSF agreements and of the French A380 LA/MSF agreement; and (d) the supplanting
of the "product" effects of A380 and A350XWB LA/MSF subsidies as a result of significant "non-
subsidised investments" in, and related to, the A380 and A350XWB programmes
At times, the European Union appears to describe these four factors as "non-attribution
factors", "the passage of time", and "intervening events". However, regardless of characterization,
the substantive point the European Union raises in relation to each factor is the same – namely, that
these factors, whether individually or collectively, compel the conclusion that A380 and A350XWB
LA/MSF subsidies are no longer a genuine and substantial cause of present adverse effects. We
address each of these factors in turn.
7.5.5.4.1 "Timing out" of the effects of the A380 and A350XWB LA/MSF subsidies
The European Union argues that both the direct and indirect effects of A380 and A350XWB
LA/MSF subsidies have "timed out" and thus can longer be said to cause adverse effects at present.
The European Union predicates this argument on the counterfactual launch dates of the A380 and
A350XWB being in or immediately around 2002 and 2007, respectively . In this counterfactual
scenario, the European Union argues that Airbus would have had many years to begin production of
the A380 and A350XWB such that both the A380 and A350XWB would be available for sale and
delivery in the counterfactual, exactly as they are in reality, thereby severing any causal link between
A380 and/or A350XWB LA/MSF and any alleged present adverse effects.682
The European Union's submission rests entirely on the counterfactual launches of the A380
and A350XWB hav ing occurred in the years preceding the end of 2013. These submissions have
already been rejected in the preceding sections of this Report, where we concluded that the market
presence of the A380 and A350XWB in the absence of the LA/MSF subsidies would have occurred in

678 Airbus A330neo Presentation, (Exhibit USA-51), slide 7.
679 Airbus A330neo Presentation, (Exhibit USA-51), slide 9.
680 Airbus press release, "Airbus launches the A330neo", (14 July 2014), (Exhibit USA-53).
681 We also note that, in our estimation, such evidence falls short of the quantity and quality of evidence
upon which the first compliance panel used to determine that the A350XWB significantly benefitted from
Airbus' prior LCA programmes.
682 European Union's second written submission, paras. 296-299 and 415-459.

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the post-2013 period. Insofar as any specific issues remain regarding the present impact of those
"product effects" that may further be construed as pertaining to this European Union argument, we
consider that our analyses in section 7.5.6 below would effectively cover them. We thus do not
address this issue further here.
"Amortization" of the benefit of the A380 and A350XWB LA/MSF subsidies
The European Union argues that the amortisation of the benefit of the A380 and A350XWB
LA/MSF subsidies must be taken into account in determining whether those subsidies are a genuine
and substantial cause of present adverse effects. In so arguing, the European Union cites to multiple
statements made by the Appellate Body in the original and first compliance proceedings purportedly
standing for the propositions that a panel should consider the issue of amortization in a compliance
proceeding because amortization may affect the link that a complaining party is seeking to establish
between the provision of the subsidy and its alleged effects . The European Union also offers an
expert report by its consultant, TradeRx, which concludes that the benefit from all A380 and
A350XWB LA/MSF subsidies has either fully or partially amortized.683
The United States argues that the European Union's argument conflates two issues, i.e. an
approach for determining the "life" of a subsidy, on the one hand, and the "passage of time" as an
intervening event that may attenuate the causal link between a subsidy and present adverse effects,
on the other hand. According to the United States, the Appellate Body has also neither adopted
amortization as a tool with which to measure the life of a subsidy nor equated the life of a subsidy
with the complete dissipation of its effects . Further, the United States argues that the
European Union offers no explanation as to how th e amortization of benefit in this context impacts
the relevant "product effects" of LA/MSF subsidies, especially considering that those effects stem
from the fact that LA/MSF allowed Airbus to launch the A380 and A350XWB in the first place. Finally,
the United States no tes that in no prior proceedings in this dispute was the amortization of any
LA/MSF subsidy materially linked to that subsidy's ability to cause adverse effects at any particular
time.684
As we understand it, the rationale underlying the approach adopted in the TradeRx report
the European Union relies upon is that the effects of a subsidy may be determined by identifying the
extent to which the subsidy recipient was expected to benefit from that subsidy at the time it was
originally granted. The TradeRx report determines the expected duration and extent of this benefit
for the LA/MSF subsidies by identifying the magnitude of the outstanding repayments under each
A380 and A350XWB LA/MSF contract, on the basis of the expectations held by the contracting parties
at the time the LA/MSF agreements were concluded.
Although we do not exclude the possibility that a methodology focused on the amortization
of the benefit of a subsidy may be one way of determining the duration and extent of the effects of
a particular subsidy, we do not consider that such an approach would be appropriate in the case of
the A380 and A350XWB LA/MSF subsidies. Our fundamental objection to the application of the
European Union's proposed approach in this context is that it would not reflect t he nature of the
"product" effects found to have been caused by the A380 and A350XWB LA/MSF subsidies. The
European Union's approach would imply that the effect of the subsidies could only arise as and when
the below-market repayments are made. However, throughout the different stages of this dispute,
and once again in this proceeding, LA/MSF has been found to have a "product" effect – simply put,
the A380 and A350XWB LA/MSF subsidies have been found to have enabled Airbus to launch,
develop and bring to ma rket the A380 and A350XWB before the post -2013, when they otherwise
could not have been launched by Airbus. Thus, an approach to identifying the effects of the LA/MSF

683 European Union's first written submission, paras. 303-307 and 374-375; second written submission,
paras. 353-368; and comments on the United States' response to Panel question No. 62. In making these
arguments, the European Union cites, inter alia, the Appellate Body Reports in EC and certain member States –
Large Civil Aircraft (Article 21.5 – US), para. 5.386, fn 932 and EC and certain member States – Large Civil
Aircraft, paras. 706-707, 709-710, 713-714, and 1236.
684 United States' first written submission, paras. 192-197; second written submission, paras. 192-197;
and response to Panel question No. 62. The United States also asserts that the [***] amendments to the
A380 LA/MSF and German A350XWB LA/MSF agreements extend the life and increases the amount of the
LA/MSF measures, and thus these subsidies would not have been reduced through amortization in the way that
the European Union describes. (United States' second written submission, para. 197).

BCI deleted, as indicated [***]

subsidies that is focused on the duration and extent of the expected repayments would be
inconsistent with the nature of the effects caused by the LA/MSF subsidies.
The European Union's approach is also problematic because it is focused on the ex ante
expectations concerning the magnitude and duration of repayments, without also taking into account
the unplanned amendments to the LA/MSF agreements that modified disbursement and repayment
schedules.
Accordingly, we find that the European Union's submissions and expert evidence fails to
demonstrate that the effects of the A380 and A350XWB LA/MSF subsidies have been attenuated
simply because the anticipated repayment of the principal provided under the LA/MSF arrangements
has been partially or fully made.
"Less than full drawdown" of certain LA/MSF subsidies
The European Union argues that if Airbus draws down less than the full amount to which
Airbus is entitled under a given LA/MSF measure, this is an intervening event that "affects the
projected value of the subsidy as determined under the ex ante analysis".685 The European Union
asserts that the Appellate Body explained that "'{s}uch {intervening} events may be relevant to an
adverse effects analysis because they may affect the link that a complaining party is seeking to
establish between the subsidy and its alleged effects '".686 Therefore, according to the
European Union, the Panel must account for the fact that the diminished magnitude of the subsidy
"attenuates the present causal link between non-withdrawn A350XWB MSF and any alleged present
adverse effects"687 because "all things being equal, there will be a certain correspondence between
the magnitude of a subsidy, and the degree of adverse effects that it is capable of causing".688 The
European Union submits data indicating that Airbus drew down less than the full amount to which
Airbus was entitled under the French A380 and French and UK A350XWB LA/MSF contracts.689
The United States argues that the European Union has not established that less -than-full
drawdown of a given LA/MSF measure reduces the benefit of th at measure because the benefit of
LA/MSF is determined at the time the measures were granted. Further, the United States asserts
that, even assuming that the benefit and/or magnitude of an LA/MSF measure has been reduced
through some process such as less -than-full drawdown, the European Union offers no explanation
as to how that reduction impacts the relevant effects of LA/MSF subsidies con sidering that those
effects stem from LA/MSF's ability to allow Airbus to launch the A380 and A350XWB in the first place.
Finally, the United States accepts that considerations surrounding the magnitude of a subsidy might
be relevant in some instances, but, given the causal pathway of the "product" effects of LA/MSF and
at the present stage of the Panel's analysis, the present magnitude of any particular LA/MSF measure
is no longer relevant in this proceeding.690
We accept that, as a general matter, the magni tude of a given subsidy (whether the
magnitude of the "benefit" and/or "financial contribution") may affect that subsidy's ability to cause
adverse effects at a given time. We note, however, that in the case of the funds not drawn -down
under the French A380 and A350XWB LA/MSF contracts, the reason given for Airbus not resorting
to that funding is that the development and production of A380 and [***] was not pursued by
Airbus.691 The fact that Airbus did not fully draw-down the funding promised under the French A380
and A350XWB LA/MSF agreements was not the result of any decision on the part of Airbus to use
other funding to launch and develop the [***] envisaged under the LA/MSF contracts. Rather, it
appears that Airbus launched and developed those [***] of A380 and A350XWB using the amount
of funding provided for under the relevant arrangements. In other words, the funding available under
the French A380 and A350XWB LA/MSF agreem ents was used precisely as expected to launch,

685 European Union's first written submission, para. 365. (emphasis original)
686 European Union's first written submission, para. 365 (quoting Appellate Body Report, EC and certain
member States – Large Civil Aircraft, para. 709).
687 European Union's first written submission, para. 299.
688 European Union's second written submission, para. 346.
689 European Union's first written submission, paras. 295-296 and 367; and second written submission,
paras. 329-352.
690 United States' first written submission, paras. 188-191; second written submission, paras. 178-191;
and comments on the European Union's response to Panel question No. 61.
691 European Union's second written submission, paras. 330-331.

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develop and bring to market the A380 and A350XWB. The "product" effects of the French LA/MSF
subsidies were not attenuated by the less -than-full draw-down of the principal available under the
French LA/MSF contracts.
The European Union has not explained why Airbus decided to draw -down less than it was
entitled to under the UK A350XWB LA/MSF agreement. We note, however, that the UK A350XWB
LA/MSF agreement envisaged that Airbus would produce the same [***] identified in the French
A350XWB LA/MSF contract.692 Thus, to the extent that Airbus' decision not to develop and produce
[***] resulted in less work and cost for Airbus UK (the recipient of the principal disbursed under
the UK LA/MSF agreement), our conclusion would be similar to that we have come to in relation to
the less-than-full drawn-down of the principal under the French LA/MSF contracts. We note, in this
regard, that the role of Airbus UK in the A350XWB project was to design and produce its wings –
which may well have been different and required additional work and cost to design and produce for
the A350XWB [***] that Airbus decided not to pursue.693
In any case, in the light of the "product" effects of the LA/MSF subsidies, it is difficult to see
how a dec ision not to draw -down the full amount of principal under the French and UK LA/MSF
agreements years after they were concluded and following the development of the initial versions of
the A350XWB, could have impacted Airbus' decision in 2006 to launch and d evelop those versions
of A350XWB. Airbus' decision to proceed with the A350XWB was based on the assurance that the
full amount of funding provided for under the respective LA/MSF agreements would have been
available. Moreover, Airbus actually developed and brought the A350XWB to market in reliance on
the below-market funding provided under the LA/MSF agreements. Thus, it cannot be deduced from
the mere fact that Airbus drew-down less than the full amount of available funding under the French
and UK LA/MSF c ontracts that Airbus would have developed the same models of LCA at the same
time, or shortly thereafter, in the absence of the provision of the LA/MSF subsidies.
Thus, in the light of the above considerations, we see no basis to conclude that the "product"
effects of the French A380 and A350XWB LA/MSF subsidies and the UK A350XWB LA/MSF subsidies
were attenuated by the less -than-full draw-down of the principal available under the respective
LA/MSF contracts.
"Non-subsidized investments" in the A380 and A350XWB
The European Union asserts that Airbus made significant non-subsidized investments in the
A380 and A350XWB programmes since their respective launches in 2000 and 2006 , totalling a
substantial amount that is HSBI over the [***] period.694 According to the European Union, these
investments, and not LA/MSF, explain the current market presence and competitiveness of the A380
and A350XWB mainly because these investments constitute "intervening event s" that " supplant"
any relevant indirect effects arising from A380 and/or A350XWB LA/MSF, thus attenuating the causal
link between the LA/MSF subsidies and any alleged present adverse effects. The European Union
also argues that: (i) contrary to the United States' assertions, the adopted findings in the first
compliance proceeding regarding non-subsidized investments do not support rejecting the
European Union's arguments regarding alleged non -subsidized investments here; (ii) the United
States has failed to demonstrate that the alleged non-subsidized investments are, rather, "subsided"
investments; and (iii) the United States has not demonstrated any relationship between the timing
of the counterfactual launch of the A380 and A350XWB and Airbus' financial ability to make these
non-subsidized investments. The European Union also rejects the United States' characterization of
these investments as "routine" as irrelevant.695

692 UK A350XWB LA/MSF Agreement, (Exhibit EU-28 (BCI)), Article 1.
693 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.681
and 6.754.
694 European Union's first written submission, paras. 314-316 and 387-389; Annual Continuing Support
and Continuing Development for the A350XWB (2013-2018), Proprietary Information Extracted from Airbus'
Accounts, (Exhibit EU-30 (HSBI)); and Annual Continuing Support and Continuing Development for the A380
(2013-2018), Proprietary Information Extracted from Airbus' Accounts, (Exhibit EU-53 (HSBI)).
695 European Union's first written submission, paras. 308, 310-311, 383-391, and 392-396;
second written submission, paras. 369-414; responses to Panel question Nos. 64, 65, and 66; and comments
on the United States' response to Panel question No. 63. The European Union also asserts that such cash would

BCI deleted, as indicated [***]

The European Union asserts that Airbus has invested in the continuing development of the
A380 programme, including incremental improvements and i nvestments into product and
performance improvements and the cost of overcoming significant delays in the production of the
A380. The European Union maintains that these costs were unforeseen in the A380 business case
and relevant LA/MSF agreements.696 The European Union further alleges that Airbus has invested in
continuing support for the A380 programme to maintain and enhance its production lines, including
investments into technical support; jigs and tools maintenance; and specific, non-recurring activities
related to production improvements and aircraft maintenance697; and the development of the A380
Plus variant.698
The European Union also maintains that Airbus has invested in continuing development of
the A350XWB programme, including : (i) incremental technological improvements to the
A350XWB699; (ii) continuing support for the A350XWB programme to maintain and enhance its
production lines, including investments into technical support; (iii) jigs and tools maintenance; and
(iv) specific, non -recurring activities related to production improvements and developments in
aircraft maintenance.700 The European Union cites [***] for the development of the A350-900ULR
variant701 and the Beluga XL, the latter of which transports the composite wings used in the
production of the A350XWB from the UK to France.702
The United States argues that the European Union has not demonstrated that the relevant
investments are, in fact, "non-subsidized". The United States further asserts that the European
Union's arguments should be rejected because the only reason Airbus could make any such
investments is because A380 and A350XWB LA/MSF allowed Airbus to launch those two aircraft
programmes in the first place. The United States stresses in this context that these investments are
"incremental" and "routine" improvements in LCA design and production that build on the foundation
provided by LA/MSF. This is so according to the United States because "even if a counterfactual non-
subsidized Airbus could – and would – have launched and brought to market the A380 and A350XWB
in the period since 2013, it would not have had the accumulated experience and financial resources
that allowed real-world Airbus to undertake the post -launch investments the EU identifies ".703 The
United States notes that the first compliance panel and the Appellate Body in the first compliance
proceeding rejected similar European Union arguments regarding the relevance of alleged non -
subsidized investments under similar circumstances. Moreover, the United States asserts that even
if the European Union showed that non-subsidized investments are a genuine and substantial cause
of the current market presence of the A380 and A35 0XWB, this does not pre -empt a finding that
LA/MSF is also such a cause. The United States also recalls that in the first compliance proceedings,
it was only the indirect effects arising from the A300 and A310, i.e. the first two Airbus LCA
programmes, that had been found to have been supplanted by later-in-time developments, and thus
it is unconvincing that non-subsidized investments could supplant learning effects arising from the
A380 and A350XWB so quickly in this case.704
At the outset we recall that we have determined that Airbus would not have launched the
A380 at any time in the absence of t he A380 LA/MSF subsidies. This is so because the Appellate
Body's findings establish that the A380 would not have been launched before year -end 2013, and,
after 2013, demand for the A380 would have been insufficient to warrant a launch. We note,
therefore, that any alleged non -subsidized investments that Airbus in fact made in the A380
programme were only possible because of the "product" effects of A380 LA/MSF subsidies, which
enabled Airbus to launch, develop and bring to market the A380 in the years following 2000.

have come from the A320 and A330 sales because the A380 programme was loss-generating for Airbus until
very recently. (European Union's second written submission, para. 407).
696 European Union's first written submission, paras. 384 and 388.
697 European Union's first written submission, para. 387.
698 European Union's first written submission, paras. 385-386.
699 European Union's first written submission, para. 316.
700 European Union's first written submission, para. 315.
701 European Union's first written submission, paras. 316-320.
702 European Union's first written submission, paras. 321-323.
703 United States' second written submission, para. 200.
704 United States' first written submission, paras. 202-206; second written submission, paras. 198-225;
and comments on the European Union's responses to Panel question No. 63, No. 64, No. 65, para. 227, and
No. 66.

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Accordingly, we find that the alleged non-subsidized investments in the A380 programme
cannot alter the conclusion that A380 LA/MSF subsidies continue to be a "genuine and substantial"
cause of the market presence of the A380.
Turning to the alleged non-subsidized investments in the A350XWB programme, we first
note that the A350XWB programme could have been launched only after 2013 in the counterfactual.
Again, this follows from the Appellate Body's findings in the first compliance dispute, and our own
assessment of the viability of the launch of the A350XWB after 2013. Thus, for analytic purposes,
we examine the relevance of alleged non-subsidized investments with respect to two time-periods,
i.e. before and after 1 January 2014.
With respect to the time -period before 2014, we recall that the nature of the alleged non-
subsidized investments in the A350XWB programme, according to the European Union, is related to
the continued development and support of the A350XWB programme.705 These are investments in
the A350XWB programme that by nature occur post-launch. In the counterfactual, however, the
A350XWB programme would not have been launched before year -end 2013. Thus, n one of these
investments would have been made in the counterfactual before year -end 2013. Accordingly, the
only reason to explain the making of the alleged non-subsidized investments is the "product" effect
of the relevant LA/MSF subsidies, which enabled Airbus to launch, develop and bring to market the
A350XWB in the years between 2006 and 2013.
With respect to the counterfactual time -period after 2014, we recall our prior findings that
in the counterfactual post -2013 period Airbus would have launched the A350XWB but would have
encountered production difficulties. This would mainly have been so due to the fact that Airbus would
have had comparatively less technical and managerial expertise in the absence of the A380
programme, and that Airbus would have be en in a compromised financial condition. Thus, in order
to find that the alleged non-subsidized investments have attenuated the "product" effects of LA/MSF
in relation to the A350XWB, we would need to be convinced that those investments would have:
(i) taken place; and (ii) been of a kind that would enable Airbus to overcome the obstacles that a
non-subsidised Airbus would have faced in the post -2013 period to a degree that would materially
alter this post-launch scenario.
We note that the specific alleged non-subsidized investments the European Union raises in
this dispute in relation to the A350XWB all took place between [***]. One set of investments
enhanced Airbus' production processes and tooling for the A350XWB programme, and increased its
production capacity.706 Another set of investments focused on making incremental improvements to
the A350XWB in order to sustain and renew its competitiveness. One example provided by the
European Union is the development of the ultra -long-range A350XWB-900ULR. According to the
European Union, the A350XWB-900ULR enjoys a number of advantages over other A350XWB
models, in terms of range, maximum take-off weight and modified fuel systems and is attractive to
potential customers. 707 The third specific investm ent the European Union identifies is the
development and production of the Beluga XL, which supports the production of the A350XWB by
transporting its components. The European Union explains that Airbus ' investment was necessary
because the five Beluga aircraft in service had proven insufficient to meet Airbus' increased transport
capacity requirements, as a result of, inter alia, the A350XWB production ramp-up.708
We recognize that the specific investments the European Union identifies were significant
and we have no reason to believe they have not assisted Airbus in the marketing, sale and delivery
of the A350XWB. However, it is clear from the European Union's explanations that Airbus decided to
make those investments only after at least seven years' experi ence with the A350XWB that would
not have been launched and developed prior to end of 2013 without the A380 and A350XWB LA/MSF
subsidies. In the counterfactual post -launch scenario for the A350XWB that we have found to be
most likely, Airbus would not have needed to make the same types of investments at the same time
because it would have been in only the early stages of the development and production process.
Airbus would not have initially found its five in service Belugas to be insufficient because it wo uld
not have needed to ramp-up production in the same way that it actually did. In the initial years after
launch, Airbus would not have invested in the A350XWB-900ULR because it would have concentrated

705 European Union's first written submission, paras. 315-320.
706 European Union's first written submission, para. 315.
707 European Union's first written submission, para. 316.
708 European Union's first written submission, para. 321.

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on the base A350XWB model first. Airbus would not hav e had the more than seven years of
"learning" with this model that it had when it invested in the A350XWB -900ULR. Finally, it is also
significant to note that Airbus undertook the relevant investments at a time when it was generating
revenue from sales of the A350XWB. This, of course, would not be the case in the post -2013
counterfactual. Thus, we do not believe that an unsubsidized Airbus would have had the financial
resources in the post-2013 period to make the same investments in the A350XWB. In short, because
Airbus would have only started to develop and bring an unsubsidized base model of the A350XWB
to market at the time of the relevant investments, we do not believe that Airbus would have had
business incentive or the technical and financial resources , to pursue the same investments in the
post-2013 counterfactual period.
Accordingly, we find that the alleged non -subsidized investments in the A350XWB
programme cannot alter the conclusion that A380 and A350XWB LA/MSF subsidies continue to be a
"genuine and substantial" cause of the market presence of the A350XWB.
"Wind-down" of the A380 programme
The European Union argues that the announcement to "wind down" the A380 programme
on 14 February 2019 is an "intervening event" that achieves the removal of all adverse effects
related to the market presence of the A380. We recall that in our assessment of the European Union's
withdrawal claims above 709, we found that the European Union is entitled to have u s consider its
contention concerning the circumstances surrounding Airbus' termination announcement, although
we rejected its argument that the announcement, on its own, resulted in the withdrawal of the A380
LA/MSF subsidies by bringing their lives to an end.
The European Union submits that the "wind-down" announcement has brought to an end
the marketing life of the A380, which has brought to an end the "direct effects" of the A380 LA/MSF
subsidies as well as the "indirect effects" of the A380 LA/MSF subsidies on the A350XWB. Resulting
from this, the European Union argues that the "wind down" announcement has removed the specific
adverse effects that were found by the first compliance panel to arise during the 2011-2013 period.
In this regard, the European submits that "most of the A380 orders during the December 2011-2013
period that formed the basis of the first compliance panel's findings of significant lost sales {in the
VLA market} have now been delivered or cancelled", leaving only eight to be deliver ed by the end
of December 2019 and only two by the end of 2020 until the final delivery is made in July 2021. 710
The European Union argues that these "few remaining deliveries" "signal the end of a programme,
rather than the enhancement of the advantages nor mally accruing to the manufacturers on the
delivery of aircraft from a healthy programme with a robust competitive future", which is "not
'sufficient to establish the {continued} existence of' the significant lost sales and impedance found
in the first com pliance proceedings".711 Of the six country markets for which the first compliance
panel found impedance in the VLA market , the European Union submits that five will never again
receive a delivery of the A380, subsidised or otherwise, and that for the UAE ma rket, "a definitive
course of action has been set in motion that will ensure that the deliveries of the A380 will completely
cease within the next two years".712
Finally, the European Union argues that that there is no longer any basis to find that the
A350XWB LA/MSF subsidies are a genuine and substantial cause of significant lost sales in the twin-
aisle market, "{g}iven the withdrawal of the A380 MSF subsidies and the removal of their indirect
effects".713 According to the European Union, the first complianc e proceedings did not result in a
finding that the A350XWB LA/MSF subsidies considered alone were a genuine and substantial cause
of any of the types of adverse effects enumerated by the compliance panel, but these were only
considered in an aggregate manner with the "indirect effects" of the A380 LA/MSF subsidies. Thus,
under the European Union's argument, since the "indirect effects" have allegedly come to an end,

709 See paragraph 7.252 above.
710 European Union's submission regarding the wind-down of the A380 programme, para. 55; opening
statement at the meeting of the Panel, para. 22; and Airbus, "Status of A380 orders and deliveries"
(Exhibit EU-94 (BCI)).
711 European Union's opening statement at the meeting of the Panel, para. 27 (quoting Appellate Body
Report, US – Large Civil Aircraft (Article 21.5 – EU), para. 5.341).
712 European Union's opening statement at the meeting of the Panel, para. 28. See also
European Union's submission regarding the wind-down of the A380 programme, paras. 44, 51, and 59-62.
713 European Union's submission regarding the wind-down of the A380 programme, para. 65.

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there is no longer support for the first compliance panel's finding that aggregated effects of the A380
LA/MSF subsidies and A350XWB LA/MSF subsidies are a genuine and substantial cause of adverse
effects.714
The United States questions the degree of certainty surrounding whether the A380
programme will terminate in the future, arguing that there is no assurance that Airbus would not
choose to continue the programme in the future if Emirates or another customer approached Airbus
about a large A380 order. In any event, the United States argues that the European Union errs in
arguing that the "direct effects" or "indirect effects" of A380 LA/MSF have ended or that Airbus'
announcement constitutes a "step" that has removed the adverse effects in either the VLA or twin -
aisle LCA markets. Rather than ending their effects, the United States argues that th e wind-down
demonstrates that the existing LA/MSF continues to cause adverse effects. At most, the
United States maintains that the projection of final deliveries could establish that market phenomena
caused by the A380 LA/MSF will cease in only 2021. Yet, the United States contends that the
European Union cannot succeed in demonstrating compliance today by showing that it expects to
achieve compliance at a future point in time. In addition, the United States argues that the
first compliance panel made clear that indirect effects generated in the past could continue to
support the present -day market presence of other Airbus models, and scope and learning effects
are not limited to only pre-launch learning and knowledge. For example, the United States submits
that the first compliance panel cited "evidence that certain Airbus and Airbus suppliers' facilities
(e.g. Airbus' Nantes facility and Aerolia's Picardie facility) had become specialized in manufacturing
certain LCA structures by virtue of their experience with prior Airbus programmes, and applied such
skills in connection with the A350XWB programme".715 The United States submits that these facilities
and their specialization in manufacturing structures was not limited to pre-launch activities.716
The United States argues that there is no support for the European Union's argument that
Airbus' announcement constitutes a "step" that has removed the adverse effects in the VLA or
twin-aisle LCA markets. Regarding the VLA market, the United States considers the fact that
deliveries remain outstanding provides evidence that impedance is continuing. In addition, the
United States contends that the European Union has "repeatedly viewed … outstanding deliveries as
continuing significant lost sales" and, therefore, outstanding deliveries further demonstrate that the
A380 LA/MSF subsidies presently are continuing to cause adverse effects. 717 The United States
argues that the European Union's argument concerning adverse effects in the twin-aisle LCA market
is based on a flawed premise that "indirect effects" of the A380 LA/MSF subsidies no longer continue
in the twin-aisle market.718
As an initial matter, we do not share the United States' view that prospects remain high for
Airbus to reverse its decision to terminate the programme, or that it would prove practicable to do
so. In our assessment of the European Union's withdrawal claims above719, we highlighted the recent
history of the A380, which suggested that the A380 programme's short to medium -term prospects
were not good at the time of the A380 LA/MSF amendments , further suggesting that there would
not likely be sufficient demand in the future to justify reviving A380 production after the final
standing orders are fulfilled. In addition, the United States a ppears to discount the significance of
the effect of the "wind-down" announcement on the outlook of potential buyers on the future viability
of operating an A380 fleet going forward. Finally, we note that the European Union has submitted
evidence concerning the planned phase down of the A380 programme720 [***].721
We nevertheless disagree with the European Union's assessment of the implications of the
termination announcement of the A380 programme for our examination of whether the A380 and
A350XWB LA/MSF subsidies are a genuine and substantial cause of present adverse effects. We do

714 European Union's submission regarding the wind-down of the A380 programme, para. 65.
715 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1755.
716 United States' second written submission, paras. 89-91 and 294; and response to Panel question
No. 37.
717 United States' second written submission, para. 293, citing First Written Submission of the
European Union in US – Large Civil Aircraft (Article 21.5 - EU) (Panel), para. 1339.
718 United States' second written submission, para. 298.
719 See paragraphs 7.227- 7.229.
720 European Union's opening statement at the meeting of the Panel, para. 31; [***], slide 18 (p. 10),
(Exhibit EU-101 (BCI)).
721 European Union's opening statement at the meeting of the Panel, para. 31; and Letter from [***],
(Exhibit EU-102 (BCI)).

BCI deleted, as indicated [***]

not consider that Airbus' 14 February 2019 wind -down announcement achieves , on its own, the
removal of the present adverse effects of the A380 LA/MSF subsidies as they relate to the market
presence of the A380. In our view, those effects will persist while Airbus continues to produce and
deliver the A380. It follows, correspondingly, that the wind-down announcement cannot also achieve
the removal of any present adverse effects of the A380 and A350XWB LA/MSF subsidies as they
relate to the market presence of the A350XWB. Accordingly, we find that the wind -down
announcement does not, alone, demonstrate that the European Union has achieved compliance with
the obligation in Article 7.8 to "take appropriate steps to remove the adverse effects".
The impact of the "product" effects of A380 and A350XWB LA/MSF subsidies in the
relevant product markets
In the previous sections of our analysis, we found that the "product" effects of A380 and
A350XWB LA/MSF subsidies are a "genuine and substantial" cause of the current market presence
of the A380 and A350XWB families of LCA. We determined that in the absence of the A380 and
A350XWB LA/MSF subsidies, Airbus would not have launched the A380 at all, and that Airbus would
have launched the A350XWB in 2014 but would have faced difficulties in the post-launch period. In
this section we assess the extent to which the A380 and A350XWB LA/MSF subsidies, through these
effects, are a "genuine and substantia l" cause of adverse effects in the form of serious prejudice
within the meaning of Article 5 and 6 of the SCM Agreement.
The United States claims that the United States LCA industry presently suffers the following
adverse effects in the VLA and twin-aisle product markets: (a) significant lost sales within the
meaning of Article 6.3(c) of the SCM Agreement; and (b) impedance and/or displacement within the
meaning of Article 6.3(a)-(b) of the SCM Agreement.722 For the reasons explained elsewhere in this
Report, we will make this determination with particular emphasis on the temporal period following
2013, but cognizant of the fact that we must do so in order to discern whether such subsides continue
to cause present adverse effects.723
The European Unio n argues that the United States has selected specific "examples" of
alleged lost sales, impedance, and displacement without explaining on what basis it has selected
those, and not other, examples. According to the European Union, this "lack of transparency …
deprives the European Union from engaging, with argument and evidence, on the appropriateness
of the factors that the United States relied upon in choosing the examples of alleged lost sales and
displacement and/or impedance ".724 Further, the European Uni on asserts that the United States'
approach prevents the European Union from engaging on the subject of "whether those factors are,
in fact, present in the sales and markets at issue, or whether the market phenomena are, instead,
driven by other factors, and in particular by non-subsidy (non-attribution) factors".725
The United States offers the delivery and order data described in the sections below to
support its position that the European Union has not "take {n} appropriate steps to remove the
adverse effects" of the A380 and A350XWB LA/MSF subsidies. For the reasons explained in our
review of this data, we believe it is sufficient basis, in the light of our findings on the continued
"product" effects of the A380 and A350XWB LA/MSF subsidies, to determine th e merits of the
United States continued adverse effects claims.
Finally, before proceeding with our analysis, we consider it important to explain one of the
implications of our finding that , in the counterfactual, the A350XWB would plausibly have been
launched before the present day . In our view, this finding does not automatically preclude the
possibility that sales and/or deliveries of the subsidized A350XWB could still be the cause of present-
day adverse effects. This is so because delayed delivery positions resulting from the delayed launch
of the unsubsidised A350XWB would have impacted Airbus' ability to win sales and make deliveries
in the relevant period. Lost sales could still be occurring, for example, insofar as customers would
have found counterfactually later-in-time promised delivery dates (resulting from a delayed launch)

722 United States' second written submission, paras. 256-289.
723 See section. 7.5.3 above.
724 European Union's response to Panel question No. 71, para. 377. See also European Union's response
725 European Union's response to Panel question No. 71, para. 377. See also European Union's response

BCI deleted, as indicated [***]

so unattractive that the customers would have chosen to order Boeing over Airbus LCA in the
counterfactual.726
7.5.6.1 Impedance and/or displacement
With respect to "displacement", the Appellate Body has explained that:
Displacement, as the Appellate Body explained, "is a situation where imports or exports
of a like product are replaced by the sales of the subsidized product" – i.e. "there is a
substitution effect between the s ubsidized product and the like product of the
complaining Member". A determination of whether the effect of a subsidy is to displace
involves a fact-specific analysis that can be made only on a case -by-case basis and in
light of the particularities of the market concerned. To the extent that a complainant
can demonstrate through arguments and evidence that actual sales or market shares
of the like product have declined during the reference period, this may be indicative of
displacement caused by the subsidy within the meaning of Articles 6.3(a) and 6.3(b).
To that extent, while a market trend analysis – e.g. regarding whether there has been
a change in relative shares of the market to the disadvantage of the like product – may
carry relevance, it is not determinative of the existence of serious prejudice.727
With respect to "impedance", the Appellate Body has explained that:
The term "impede", as the Appellate Body found, "connotes a broader array of situations
than the term 'displace'" . The Appellate Body expl ained that impedance "refers to
situations where the exports or imports of the like product of the complaining Member
would have expanded had they not been 'obstructed' or 'hindered' by the subsidized
product". Evidence that sales would have increased more or declined less than they did
in the absence of the subsidy would indicate the existence of impedance within the
meaning of Articles 6.3(a) and 6.3(b). The Appellate Body further explained that
"impedance" can also refer to a situation where "the exports or imports of the like
product of the complaining Member did not materialize at all because production was
held back by the subsidized product". As in the case of displacement, a determination
of whether the effect of a subsidy is to "impede" involves a f act-specific analysis that
can be made only on a case -by-case basis and in light of the particularities of the
market concerned.728
The United States claims that, in the light of the "product" effects of the challenged LA/MSF
subsidies and the conditions of competition in the LCA industry, the United States LCA industry
currently suffers serious prejudice in the form of displacement and/or impedance of its LCA products

726 We note that the record of this dispute supports the proposition that customers as a general matter
find later-in-time delivery positions less attractive than earlier-in-time positions. (European Union's first written
submission, paras. 323 ("The Beluga XL investment allows Airbus to accelerate production, and thereby to
sustain increasing overall production of Airbus aircraft, including the A350XWB models, thus maintaining its
ability to ensure timely delivery slots for customers") and 389 (indicating that "timely production enabled by
these investments allows Airbus to offer attractive delivery positions for its A380 customers, which further
enhances the competitiveness of the aircraft"); second written submission, para. 436 ("Such delayed delivery
positions would then have made Airbus' offers in sales campaigns in the December 2011-2013 reference period
less attractive"); and comments on the United States' response to Panel question No. 74, para. 367 ("… the
European Union agrees that counterfactual delivery positions offered to airline or leasing company customers
are important in their decisions on which aircraft to order")). See also Panel Report, EC and certain member
States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1264 and 6.1325; Appellate Body Report, US – Large
Civil Aircraft (2nd complaint) (Article 21.5 – EU), paras. 5.405 and 5.408 (explaining that "in the context of the
LCA market, determining whether the forms of serious prejudice under Article 6.3 at issue … still exist …
requires assessing whether any acceleration effects from {relevant} subsidies also had an impact on the timing
of first delivery" of a relevant LCA).
727 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.679. (fns omitted) See also Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1071
(explaining that "{a}n analysis of displacement should assess whether this phenomenon is discernible by
examining trends in data relating to export volumes and market shares over an appropriately representative
period").
728 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.680. (fns omitted)

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in the VLA and/or twin-aisle product markets in China, the European Union, Korea, Singapore, and/or
the UAE, within the meaning of Articles 6.3(a) and 6.3(b) of the SCM Agreement. To support its
claims, the United States has introduced evidence of Airbus and Boeing delivery volumes and market
shares in the VLA and twin-aisle product markets for each year from 2011 to 2018. Relying upon
these data, the United States argues that in the absence of the "product" effects of A380 and
A350XWB LA/MSF subsidies, the United States LCA industry's delivery volumes and market shares
would have been higher than they actually were in each of the relevant geographic markets.
7.5.6.1.1 VLA product market
With respect to the VLA product market, the United States claim s the existence of
displacement and/or impedance in the VLA markets of the European Union, Korea, and Singapore.
For the VLA market in the United Arab Emirates the United States claims the existence only of
impedance. The United States' claims are based on the following delivery and market share data, in
which all Airbus deliveries are deliveries of A380s and all Boeing deliveries are deliveries
of 747-8Is.729
Table 1 – Market for very large LCA (European Union)730
Delivery Data 2011 2012 2013 2014 2015 2016 2017 2018
Boeing Volume
(Units) 0 4 5 6 4 0 0 0
Boeing
Market Share 0.0% 50.0% 55.5% 42.9% 50.0% 0.0% 0.0% 0.0%
Airbus Volume
(Units) 6 4 4 8 4 2 0 0
Airbus
Market Share 100.0% 50.0% 45.5% 57.1% 50.0% 100.0% 0.0% 0.0%
Table 2 – Market for very large LCA (Korea)731
Delivery Data 2011 2012 2013 2014 2015 2016 2017 2018
Boeing Volume
(Units) 0 0 0 0 4 3 3 0
Boeing
Market Share 0.0% 0.0% 0.0% 0.0% 66.7% 60.0% 100.0% 0.0%
Airbus Volume
(Units) 5 1 2 4 2 2 0 0
Airbus
Market Share 100.0% 100.0% 100.0% 100.0% 33.3% 40.0% 0.0% 0.0%
Table 3 – Market for very large LCA (Singapore)732
Delivery Data 2011 2012 2013 2014 2015 2016 2017 2018
Boeing Volume
(Units) 0 0 0 0 0 0 0 0
Boeing
Market Share 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Airbus Volume
(Units) 3 5 2 0 0 0 2 3
Airbus Market
Share 100.0% 100.0% 100.0% 0.0% 0.0% 0.0% 100.0% 100.0%

729 We recall that both the original panel, first compliance panel, and the Appellate Body in the original
and first compliance proceedings accepted the use of LCA delivery, rather than order, data to evidence the
phenomena of impedance and displacement in this dispute. (See Appellate Body Reports, EC and certain
member States – Large Civil Aircraft, para. 1153; EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), para. 6.41, fn 2054; Panel Reports, EC and certain member States – Large Civil Aircraft,
para. 7.1748; and EC and certain member States – Large Civil Aircraft (Article 21.5 – US), Tables 20-22). We
thus accept the use of delivery data to evidence impedance and/or displacement in this compliance proceeding.
730 Ascend Data, (Exhibit USA-138).
731 Ascend Data, (Exhibit USA-138).
732 Ascend Data, (Exhibit USA-138).

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Table 4 – Market for very large LCA (UAE)733
Delivery Data 2011 2012 2013 2014 2015 2016 2017 2018
Boeing Volume
(Units) 0 0 0 0 0 0 0 0
Boeing Market
Share 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Airbus Volume
(Units) 5 11 13 14 19 23 11 8
Airbus Market
Share 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

With respect to impedance in the four geographic markets above, in the light of our earlier
findings regarding the "product" effects of A380 and A350XWB LA/MSF subsidies, it is apparent that
in the absence of the effects of the challenged LA/MSF subsidies, the volume of deliveries and market
shares that would have been achiev ed by the United States' LCA industry would have been higher
in each of the four geographic markets than were their actual levels in the years 2013-2018, i.e. the
years for which the United States has supplied delivery and market -share data. This is so because
in the counterfactual, from the year 2000 onwards and until present day Boeing would have had a
monopoly in the VLA product market and the 747 -8I, which is "sufficiently substitutable" with the
A380734, and would have been the only other VLA available f or delivery. This, in our minds, is a
sufficient basis for concluding that Boeing would have made the deliveries actually captured by the
A380.
The fact that Boeing's deliveries and market shares in each of the four relevant geographic
markets would have been higher in the 2013 -2018 period overall, however, does not necessarily
convince us that there is present impedance in all of these markets. We note, in particular, that in
the European Union and Korea, the last A380 deliveries occurred in 2016. This is, in our minds,
insufficiently recent to demonstrate present impedance. Thus, on balance, we consider the pre-2017
deliveries made to the European Union and Korea to be an insufficient basis upon which to find
present impedance.
The situation is different with respect to Singapore and the UAE, however. Airbus delivered
A380s to both Singapore and the UAE in both of the two most recently completed calendar years,
i.e. 2017 and 2018. These deliveries, in our minds, are sufficiently recent to evidence present
impedance. We underline that, with respect to the UAE, the European Union has indicated that
deliveries are essentially ongoing, and Airbus plans to make still more A380 deliveries into the UAE
market in the future. We consider, therefore, that the case for present impedance in the UAE in the
VLA market to be particularly strong.735
In undertaking our assessment of the United States' claims of displacement, we are guided
by the Appellate Body's statement that "displacement" "is a situation where imports or exports of a
like product are replaced by the sales of the subsidized product". We agree with this statement and
understand it to follow from the ordinary meaning of the word "displace", which includes "to remove,
replace with some thing else, take the place of, supplant". 736 Thus, we understand the notion of
"displacement" for the purpose of Article 6.3(a) and (b) of the SCM Agreement to be premised on
the existence of product deliveries or a market share of some kind which are supplanted by new or
increased deliveries, and/or market share, of a subsidized like product.

733 Ascend Data, (Exhibit USA-138).
734 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.36, 6.38, and 6.41.
735 We note that the European Union argues that the small number of outstanding deliveries to Emirates
is insufficient to demonstrate impedance, and that although there is no requirement that impedance be
"significant", impedance must be "discernible". (European Union's opening statement at the meeting of the
Panel, para. 27; comments on the United States' response to Panel question No. 70; United States' response to
Panel question No. 70 (responding to the European Union's argument). We establish impedance based on
actual deliveries rather than potential future deliveries and consider the identified instances of impedance to be
"discernible".
736 The New Shorter Oxford English Dictionary, 4th Edn, L.Brown (ed.) (Clarendon Press, 1993), vol. 1,
p. 698.

BCI deleted, as indicated [***]

Turning to the data , we note that in Singapore, Boeing had a 0% market share in each of
the years 2014-2018. In the absence of any market trend indicating that Boeing had any existing
sales or market share in the VLA segment that was replaced by deliveries of the A380, we conclude
that there is an insufficient basis to find present displacement in Singapore. In the European Union,
Boeing's market share was 42.9%, 50%, 0 %, 0%, and 0% in the years 2014 -2018, respectively.
Airbus' market shares during the same years were 57.1%, 50%, 100%, 0% and 0%. We consider
this overall picture to be insufficient to establish a present trend evidencing a relatively recent
replacement of the 747-8I with the A380.737 We reach the same conclusion with respect to Korea.
Boeing's market share in Korea during the years 2014 -2018 reveals an upward trend, starting at
0% in 2014, climbing to 66.7% in 2015, staying roughly level at 60% in 2016, and then climbing
again to 100% in 2017 before falling to 0% in 2018 – which was also the Airbus' market share
for 2018. We consider this overall picture insufficient to establish a present trend evidencing a
replacement of the 747-8I with the A380.738
We therefore find that the A380 LA/MSF subsidies are a genuine and substantial cause of
present impedance in the VLA product markets in the Singapore and the UAE, but that the evidence
does not demonstrate present impedance in the European Union or Korea. Moreover, in the light of
the absence of any evidence showing that Boeing's market shares and deliveries were recently
replaced from the VLA markets in the European Union, Korea, and Singapore, we find that the A380
LA/MSF subsidies are not a genuine and subs tantial cause of present displacement in those
geographic markets.
Twin-aisle product market
The United States claims impedance of twin -aisle product markets in China, the
European Union, Korea, and Singapore. These claims are based on delivery data of Boeing and
Airbus twin-aisle LCA, found in the tables below.
Table 5 – Market for twin-aisle LCA (European Union)
Delivery Data 2011 2012 2013 2014 2015 2016 2017 2018
Boeing 767 0 0 0 0 0 0 0 0
Boeing 777 7 6 3 4 5 5 2 0
Boeing 787 0 2 12 11 18 28 15 30
Boeing Total 7 8 15 15 23 33 17 30
Boeing Market Share 46.7% 30.8% 65.2% 75% 76.7% 66% 54.8% 65.2%
Airbus A330neo 0 0 0 0 0 0 0 3
AirbusA350 XWB 0 0 0 0 3 7 9 9
A330neo & A350 XWB
Market Share 0% 0% 0% 0% 9% 13.2% 29% 26.1%
Airbus Total 8 18 8 5 7 20 14 16
Airbus Market Share 53.3% 69.2% 34.8% 25% 23.3% 33% 45.1% 34.8%
Table 6 – Market for twin-aisle LCA (China)
Delivery Data 2011 2012 2013 2014 2015 2016 2017 2018
Boeing 767 0 0 0 0 0 0 0 0
Boeing 777 4 7 5 13 7 13 7 2
Boeing 787 0 0 14 6 6 16 18 28
Boeing Total 4 7 19 19 13 29 25 30
Boeing Market Share 25% 30.4% 47.5% 44.2% 36.1% 70.7% 43.9% 39.4%
Airbus A330neo 0 0 0 0 0 0 0 0
AirbusA350 XWB 0 0 0 0 0 0 0 11
A330neo & A350 XWB
Market Share
0% 0% 0% 0% 0% 0% 0% 14.5%
Airbus Total 12 16 21 24 23 12 32 46
Airbus Market Share 75% 69.6% 52.5% 55.8% 63.9% 29.3% 56.1% 60.5%

737 We note that our conclusion would not change even if we were to consider the market shares for the
years 2011-2013, as in the latter two years Boeing's and Airbus' market shares were roughly equal as well.
738 We note that our conclusion would not change even if we were to consider the market shares for the
years 2011-2013, as in the latter two years Boeing's market shares were 0%, and thus would not have
changed the general upward trend that we observe in the above text. We note that our conclusion would also
not change even if we were to consider the market shares for only the two most recently completed calendar
years, as we did in the impedance context, i.e. 2017-2018. Boeing's market shares in these two years in all
four geographic markets was 0% with the exception of 2017 on Korea when it was 100%. However, Airbus
made no deliveries in either 2017 or 2018 in Korea.

BCI deleted, as indicated [***]

Table 7 – Market for twin-aisle LCA (Korea)
Delivery Data 2011 2012 2013 2014 2015 2016 2017 2018
Boeing 767 0 0 0 0 0 0 0 0
Boeing 777 3 2 3 0 6 2 0 4
Boeing 787 0 0 0 0 0 0 0 4
Boeing Total 3 2 3 0 6 2 5 8
Boeing Market Share 50.0% 50.0% 50.0% 0.0% 66.7% 100.0% 55.6% 80%
Airbus A330neo 0 0 0 0 0 0 0 0
Airbus A350 XWB 0 0 0 0 0 0 4 2
A330neo & A350XWB
Market Share
0% 0% 0% 0% 0% 0% 44.4% 20%
Airbus Total 3 2 3 4 3 0 4 2
Airbus Market Share 50.0% 50.0% 50.0% 100.0% 33.3% 0.0% 44.4% 20%
Table 8 – Market for twin-aisle LCA (Singapore)
Delivery Data 2011 2012 2013 2014 2015 2016 2017 2018
Boeing 767 0 0 0 0 0 0 0 0
Boeing 777 0 0 2 2 4 0 0 0
Boeing 787 0 0 0 0 10 2 4 10
Boeing Total 0 0 2 2 14 2 4 10
Boeing Market Share 0.0% 0.0% 25.0% 33.3% 73.7% 16.7% 28.6% 50.0%
Airbus A330neo 0 0 0 0 0 0 0 0
AirbusA350 XWB 0 0 0 0 0 10 10 10
A330neo & A350 XWB
Market Share
0% 0% 0% 0% 0% 83.3% 71.4% 50.0%
Airbus Total 0 0 6 4 5 10 10 10
Airbus Market Share 0.0% 0.0% 75.0% 66.7% 26.3% 83.3% 71.4% 50.0%

In the light of our earlier findings regarding the "product" effects of A380 and A350XW B
LA/MSF subsidies, we consider that the record sufficiently demonstrates that in the absence of the
effects of the challenged LA/MSF subsidies, the volume of deliveries and market shares that would
have been achieved by the United States' LCA industry in the counterfactual post -2013 period in
each of the geographic markets mentioned above would have been higher than their actual level.
This is so because, as explained, the earliest that Airbus could have launched the A350XWB in the
counterfactual was in 2014, and Airbus could not have made any A350XWB deliveries at or before
present day.739 Also, we recall that the 777 and 787 both compete against the A350XWB in the twin-
aisle product market740, that both Boeing LCA were available for order as of the actual launch date
of the A350XWB (i.e. 2006), both were available for delivery in the post -2013 period, and it was
these families of LCA against which Airbus' other twin-aisle LCA programmes, i.e. the A330 and the
A340, could not effectively compete. 741 In the light of these circumstances, we consider that the
sales that resulted in the A350XWB deliveries mentioned above would likely have been captured by
Boeing twin-aisle LCA instead. We further note that Airbus delivered A350XWBs into all the above -
mentioned geographic markets in 2018, i.e. the most recently completed calendar year.
We therefore find that A380 and A350XWB LA/MSF subsidies are a genuine and substantial
cause of present impedance in the twin-aisle product market in China742, the European Union, Korea,
and Singapore.743

739 See paragraph 7.324 above.
740 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.1307-6.1309 and 6.1365.
741 See paragraph 7.323 above.
742 The United States asks the Panel to find a threat of displacement or impedance in the Chinese twin-
aisle market if the Panel does not find present impedance in the twin-aisle market in China. Because we have
found such present impedance, we do not address the United States' threat argument. (United States'
second written submission, para. 266).
743 We note that the delivery data above refer to only three A330neo deliveries in the European Union
market in 2018. We make no findings of impedance or displacement based on these A330neo deliveries. This is
so because we found earlier in this Report that it has not been demonstrated that, in the counterfactual, the
A330neo would not have been launched in 2014 as it was, or that it would not be available for order and
delivery today just as it was in the counterfactual. We thus see no material basis on which to conclude that the
three A330neo deliveries in the European Union market in 2018 would not have occurred as they actually did.

BCI deleted, as indicated [***]

Significant lost sales
Regarding the phenomenon of significant lost sales, the Appellate Body has explained:
{U}nder Article 6.3(c), "lost sales" are sales that suppliers of the complaining Member
"failed to obtain" and that instead were won by suppliers of the respondent Member. It
is a relational concept and its assessment requires consideration of the behaviour of
both the subsidized firm(s), which must have won the sales, and the competing firm(s),
which allegedly lost the sales. The assessment can focus on a specific sales campaign
when such an approach is appropriate given the particular characteristics of the market
or it may look more broadly at aggregate sales in the market. The complainant must
show that the lost sales are significant to succeed in its claim. … While a two -step
approach to the assessment of lost sales is permissible, in our view, the most
appropriate approach to assess whether lost sales are the effect of the challenged
subsidy is through a unitary counterfactual analysis. This would involve a comparison
of the sales actually made by the competing firm(s) of the complaining Member with a
counterfactual scenario in which the firm(s) of the respondent Member would not have
received the challenged subsidies. There would be lost sales where the counterfactual
analysis shows that, in the absence of the challenged subsidy, sales won by the
subsidized firm(s) of the respondent Member would have been made instead by the
competing firm(s) of the complaining Member.744 (emphasis original)
With respect to the meaning of "significant", the Appellate Body has noted that this
term means "important, notable or conse quential", and has both quantitative and
qualitative dimensions.745 (footnote omitted)
The United States argues that, in the light of the "product" effects of the A380 and A350XWB
LA/MSF subsidies, the US LCA industry continues to suffer significant lost sales in the VLA and twin-
aisle LCA product markets. We discuss these claims in the following two subsections.
7.5.6.2.1 VLA product market
The United States has presented evidence of the following transactions that the United States
considers to be significant lost sales in the global VLA market within the meaning of Article 6.3(c) of
the SCM Agreement.746
Table 9 – Alleged lost sales in the VLA product market
Customer Year Number of orders LCA model
Amedeo 2014 20 A380
All Nippon Airways (ANA) 2016 3 A380
Emirates 2016 2 A380
2018 36747 A380

We note at the outset that the European Union has asserted that Amedeo cancelled its 2014
order for 20 A380s748 and that [***].749 If Boeing had won these sales in the counterfactual, most

744 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1220.
745 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1052 (quoting Appellate Body
Report, US – Upland Cotton, para. 426; and citing Appellate Body Report, EC and certain member States –
Large Civil Aircraft, para. 1218).
746 We recall that both the original panel, first compliance panel, and the Appellate Body in the original
and first compliance proceedings accepted the use of LCA order, rather than delivery, data to evidence the
phenomena of lost sales in this dispute. (See Appellate Body Reports, EC and certain member States – Large
Civil Aircraft, para. 1153; EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.41,
fn 2054; Panel Reports, EC and certain member States – Large Civil Aircraft, para. 7.1748; EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), Tables 20-22). We thus accept the use of order data
to evidence lost sales in this compliance proceeding.
747 Consisting of 20 firm orders and 16 options.
748 European Union's comments on the United States' responses to Panel question No. 37, para. 144,
749 European Union's comments on the United States' response to Panel question No. 58, Table at
para. 268. See also Airbus, Status of A380 orders and deliveries, (Exhibit EU-94 (BCI)) (indicating that [***]).

BCI deleted, as indicated [***]

likely with 747-8I LCA750, we consider that, most likely, the counterfactual 747-8I orders would have
been cancelled as well. This is so because the evidence on the record indicates to us, and as has
been explained further above, that during these years the overall demand for VLA, generally, was
decreasing rather than just demand for the A380, specifically.751 Moreover, the European Union has
submitted evidence purporting to indicate that [***] business model has been generally shifting
away from VLA. 752 Additionally, the European Union has indicated that the LCA leasing company
Amedeo cancelled its order for 20 A380s immediately following Airbus' announcement that it would
terminate the A380 programme.753 This suggests to us that Amedeo was reacting in turn to Airbus'
reaction to the weak demand picture for VLA, generally.
We thus consider that, on this record, we could not find the 2014 Amedeo lost sale, and the
[***] lost sales, to be "significant" within the meaning of Article 6.3(c). The original panel identified
certain factors that make lost sales significant, i.e. strategic importance, learning -curve effects,
incumbency, the number of LCA involved in a sale, and the "dollar amounts involved in those
sales".754 The compliance panel considered that "this description regarding the significance of losing
LCA sales to a rival LCA producer … remains, on the whole, an accurate depiction of the significance
of losing LCA sales to a rival LCA producer". 755 We see no reason to doubt that this description
remains valid currently. It appears unclear to us whether Boeing would have realized appreciable
revenues from these cancelled lost sales because the majority of revenues from LCA sales are
realized upon delivery, and the United States has put forth no evidence indicating what amounts of
money Boeing would have received and retained for such cancelled orders. Moreover, because the
747-8Is sold would never have been produced, we are unconvinced that Boeing would have gleaned
significant "learning" effects from their production. Also, no incumbency or commonality advantages
would have presumably accrued from these sales because the 747 -8Is would never have been
delivered to the customers. Finally, we discern no particular reason to conclude that these sales
were "strategically important" for Boeing.756 We therefore do not consider that the evidence on the
record supports a finding that such "lost sales" would have been "significant" in the counterfactual.
Thus, on this recor d, we cannot conclude that "significant" benefits either accrued or would be
expected to accrue from counterfactual 747-8I sales at present.757
With respect to the All Nippon and Emirates sales in 2016, we note certain discrepancies in
the data on the record. The United States has presented certain evidence indicating the occurrence
of these two sales.758 However, we note that an expert report of the European Union, which generally
relies on information obtained from the Airbus website, specifically indicates that the All Nippon
order actually occurred before 2014. The same expert report, in the same portion, indicates that, as
of December 2017 there had been no new orders for the A380 since February 2014 (i.e. since the
Amedeo order for 20 A380s). 759 In the face of such conflicting data, we consider that there is no
reliable basis on this record upon which to conclude that the ANA and Emirates orders are properly

750 We recall that the 747-8I would have been the only other LCA in the VLA product market in the years
in which the orders were placed and the A380 and 747-8I are "sufficiently substitutable". (Appellate Body
Report, EC and certain member States – Large Civil Aircraft, para. 1120).
751 See paragraph 7.352 above.
752 European Union's comments on the United States' response to question No. 73, para. 349, fn 521
(citing, inter alia, [***]).
753 European Union's comments on the United States' response to question No. 37, para. 144.
754 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1845.
755 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1798.
756 We note that these sales would not have represented launch orders for the 747-8I, for instance. We
further lack information indicating that winning these sales would have sent important messages to the
marketplace about the 747-8I in some way. We therefore note that although [***] for VLA, [***] would have
presumably ordered [***], and thus we question the "strategic importance" of winning a further order
in 2018.
757 See also Decision by the Arbitrator, EC and certain member States – Large Civil Aircraft (Article 22.6
– EU), paras. 6.210-6.213 (explaining that the "significance" of LCA lost sales depends on the factual record
before the adjudicator).
758 United States' second written submission, paras. 270-271 (citing Emirates orders two additional
A380 aircraft, Press Release, Emirates Airlines (13 April 2016) (Exhibit USA-131); and Airbus press release,
"ANA Group Selects the A380", (29 January 2018), (Exhibit USA-130)).
759 PwC A380 LA/MSF Report, (Exhibit EU-17 (HSBI/BCI)), fn 1 to para. 31 (indicating that "{a}lthough
Airbus officially announced an A380 order for three aircraft from … All Nippon Airways (ANA) in January 2016,
these orders were in fact previously considered as 'undisclosed' customers within Airbus' official order book.
Therefore, 20 firm orders from … Amedeo in February 2014 have to be considered as the latest orders as of
December 2017").

BCI deleted, as indicated [***]

ascribed to 2016 and thus could represent significant lost sales to the US LCA industry. With respect
to these two alleged lost sales, therefore, we consider that we lack a reliable evidentiary record upon
which to conclude that they properly evidence present lost sales in the VLA product market to the
US LCA industry.
We note that the parties have debated and advanced opposing positions with respect to
whether certain outstanding A380 deliveries to Emirates, arising from the first compliance panel's
"significant" "lost sales" findings 760, may constitute present significan t "lost sales" for the purpose
of the current dispute.761
We recall that the Appellate Body has explained that " the mere existence of outstanding
deliveries … relating to {previous} orders found to have resulted in … significant lost sales … would
not necessarily, by itself, be dispositive as to the existence of … significant lost sales in {some later
period}".762 As regards what more would need to be shown for a panel to find a continued lost sale
in the presence of su ch outstanding deliveries, the Appellate Body explained that " it would seem
that what transpires between LCA orders and their subsequent deliveries would be relevant,
particularly as it relates to evidence demonstrating the ongoing existence of … lost sale s"763,
"depending on the nature and scope of the transaction, there may be elements affecting finalization
of the transaction, or concerning follow -on transactions in the form of options or purchase rights,
that may be indicative of an ongoing phenomenon of lost sales"764, and " there would need to be
some indication that subsequent developments following the initial order confirm the ongoing
existence of such market phenomena ".765 The continued lost sale must also be found to be
"significant" within the meaning of Article 6.3(c).766
In our minds, a key point that emerges from the Appellate Body's guidance in this area is
that presently outstanding deliveries in the LCA industry stemming from a previous lost sale are, by
themselves, insufficient to establish that a s ignificant lost sale within the meaning of Article 6.3(c)
of the SCM Agreement is presently ongoing such that a responding party could have a continued
compliance obligation to "remove" that particular lost sale within the meaning of Article 7.8 of the
SCM Agreement. Rather, something more must be shown, relating to the "nature, timing, and scope
of those underlying transaction "767, further indicating that it would be proper to consider the lost
sale as presently ongoing. The United States has not, however, directed us to anything on the record
indicating that "subsequent developments following the initial {Emirates} order confirm the ongoing
existence" of that lost sale, other than the outstanding deliveries themselves. We thus consider that
the United States has not been demonstrated that the 2013 Emirates "lost sale" is "ongoing" such
that we could find that the European Union has failed to "remove" that particular adverse effect.768
We therefore find that the A380 LA/MSF subsidies are not a genuine and substantial cause
of present significant lost sales in the VLA product market.

760 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 7.1(d)(xvi). In particular, the parties focus on a sale of 50 A380s to Emirates in 2013 found by the
compliance panel to constitute "significant" "lost sales".
761 United States' response to Panel question No. 73; and European Union's comments on the
United States' response to Panel question No. 73.
762 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 5.341.
763 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 5.340.
764 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 5.333.
765 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 5.341.
766 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 5.340.
767 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 5.333.
768 We note that the Appellate Body, in the first compliance proceeding, found five lost sales in the VLA
and twin-aisle markets. We consider that our conclusion above with respect to the 2013 Emirates lost sale
would hold with respect to any of the remaining four, as we have been directed to nothing in the record
indicating that "subsequent developments following the initial order confirm the ongoing existence of such
market phenomena".

BCI deleted, as indicated [***]

Twin-aisle product market
The United States has presented evidence of the following orders that the United States
considers to be significant lost sales, within the meaning of Article 6.3(c) of the SCM Agreement, in
the global twin-aisle LCA market:
Table 10 – Alleged lost sales in the twin-aisle product market769
Customer Year Number of orders Model
Sichuan Airlines 2016 4770 A350XWB-900
Sichuan Airlines 2018 10 A350XWB-900
China Eastern Airlines 2016 20 A350XWB-900
China Southern Airlines 2017 20 A350XWB-900
Philippine Airlines 2016 6 A350XWB-900
Virgin Atlantic Airways 2016 12771 A350XWB-1000
Turkish Airlines 2018 25 A350XWB-900
StarLux Airlines 2018 12
5
A350XWB-1000
A350XWB-900
Emirates Airlines772 2018 30 A350XWB-900

In considering whether the order data in Table 10 above demonstrates that the US LCA
industry is presently experiencing significant lost sales in the global twin-aisle LCA market, we make
the following observations. First, all the orders in Table 10 above occurred in 2016 or afterwards,
and thus they are relatively recent. Second, the A350XWB competes directly against the Boeing 777
and 787, both of which w ere available for order and delivery during this time.773 Third, the record
indicates that it would have been difficult for the A330 to capture such sales because its inability to
impose strong competitive pressure on the 777 and 787 was one of the reasons why Airbus decided
to launch the A350XWB in 2006. Fourth, it would also have been difficult for the A330neo to capture
these sales, considering that the A330neo is, by design, a qualitatively different LCA than the
A350XWB and is essentially an incrementally improved version of the A330.774 Fifth, we recall that,
in the counterfactual post -2013 period, Airbus would have experienced production difficulties with
respect to the A350XWB (i.e. cost overruns and production delays) which would have made the
aircraft more difficult to sell. Sixth, we consider it likely that the delivery slots that Airbus could have
offered with respect to the A350XWB in the post-2013 period would have been less attractive than
those that Boeing would have offered with respect to either the 777 or 787. This is so because these
latter two Boeing LCA had been launched and become available for delivery years before 2016.
Finally, Airbus would have been competing against a Boeing company with incumbency advantages
in the counterfactual post-2013 period.
We note, furthermore, that although it is clear to us that, in the counterfactual, Airbus could
not plausibly have won all the sales that it actually did with the A350XWB in the period from 2013
to present day, it is less than clear exactly which counterfactual A350XWB sales Boeing would have

769 The European Union does not argue that any such orders have been cancelled or changed in any
material way.
770 These four A350XWBs were for lease.
771 Eight of these were firm orders, while four were for lease.
772 The European Union asserts that this order is not, in fact, an order but rather a statement by
Emirates that it is considering placing an order. (European Union's comments on the United States' response to
Panel question No. 73, para. 348). We also note that the United States claims a lost sale to Emirates involving
40 A330neo LCA. In the light of our conclusion that the A380 and A350XWB LA/MSF subsidies are not a
genuine and substantial cause of the current market presence of the A330neo, we find that the 40 A330neo
sales to Emirates do not constitute significant lost sales within the meaning of Article 6.3(c) of the
SCM Agreement.
773 See paragraph 7.323 above (indicating that Airbus launched the A350XWB because the A340 and
A330 could not effectively compete with the 777 and 787); and Panel Report, EC and certain member States –
Large Civil Aircraft (Article 21.5 – US), para. 6.1544.
774 Airbus A330neo Presentation, slide 20 (Exhibit USA-51) (indicating that the A330neo operates in
"combination with A350XWB"). We note that while there appears to be similarities between certain
characteristics of the A330neo and A350XWB family of LCA, the two still display differences with respect
to seating, maximum take-off weight, and range. (Compare Airbus A330neo Presentation, slide 20
(Exhibit USA-51) (containing technical characteristics of the A330neo) and Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), Table 17 (containing technical characteristics of the
A350XWB -800, -900, and -1000)). Moreover, we discern no evidence on the record indicating that the
A330neo uses composite materials to materially the degree to which the A350XWB does so.

BCI deleted, as indicated [***]

won. This is so because Airbus' new LCA programme would very likely have won appreciable sales
in the present period. Moreover, we lack evidence relating to the specific circumstances of the sales
campaigns reflected in Table 10, which gives us limited insight into the customers' decision-making
or Boeing's and Airbus' respective positions in those campaigns.
Notwithstanding these doubts, we take specific note of the Virgin Atlantic sales campaign.
In 2016, Virgin Atlantic Airways ordered 12 A350XWB -1000s.775 Three things about this order are
particularly instructive for our assessment. First, all twelve A350XWB-1000s were ordered together
in 2016 and according to the A scend database are scheduled to be delivered in separate years
before 2022.776 This is significant in our view because we earlier concluded that Airbus could not
have offered in 2014 the A350XWB for delivery in the counterfactual post-2013 period until 2022,
at the earliest. This, of course, implies that any counterfactual A350XWBs ordered in subsequent
years would likely have been offered on the basis of delivery positions after 2022, at the earliest.777
Thus, all twelve delivery positions to which Virgin Atla ntic agreed would have been unavailable in
the counterfactual. We have difficulty believing that such a consideration would not have weighed
on the decision of Virgin Atlantic in this sales campaign. 778 This is particularly so as five scheduled
deliveries were set to occur in 2019, and thus would have had to be postponed by multiple years in
the counterfactual if Virgin Atlantic had ordered the A350XWB . Second, Virgin Atlantic ordered
A350XWB-1000s, which primarily competes against the Boeing 777.779 We note that the A330neo –
Airbus' newest and most advanced A330 variant – is not intended to compete against the 777 780,
and thus Airbus would likely have had to compete in this sales campaign against modern Boeing 777
LCA with older models of its A330 family. Finall y, Virgin Atlantic had previously ordered 787s from
Boeing (15 787s ordered in 2007, one in 2009, and one in 2014 781). Thus, because Virgin Atlantic
already would have had twin -aisle Boeing LCA in its fleet, Virgin Atlantic could have realized fleet
commonality advantages from purchases of additional Boeing LCA. These considerations, taken
together, convince us that Airbus would not have won this Virgin Atlantic sale.
We therefore find that the aggregated "indirect" effects of A380 LA/MSF subsidies and
"direct" effects of A350XWB LA/MSF subsidies are a "genuine and substantial" cause of present lost
sales to the US LCA industry in the global twin-aisle product market.782
Conclusions
Based on the foregoing analysis and findings, we conclude that the European Union has not
"take{n} appropriate steps to remove the adverse effects" within the meaning of Article 7.8 of the
SCM Agreement. More specifically, we conclude that the A380 and A350XWB LA/MSF subsidies are
a genuine and substantial cause of present impedance in the VLA product market and present
impedance and lost sales in the twin-aisle LCA product market.
8 CONCLUSIONS AND RECOMMENDATIONS
In the light of the reasoning and findings set out in this Report, the Panel reaches the following
conclusions:

775 Airbus press release, "Virgin Atlantic Selects the A350 XWB as its Future Flagship", (11 July 2016),
(Exhibit USA-143); and Airways, "First Virgin Atlantic A350-1000 Spotted in Toulouse (+photo)",
(25 October 2018), (Exhibit USA-144).
776 Updated Ascend Data, (Exhibit USA-158).
777 We note that the rate of deliveries of the subsidized A350XWB have gradually increased over time,
following delivery of the first subsidized A350XWB eight years after originally ordered. Based on the available
data, it appears that Airbus achieved a thus-far peak number of deliveries per calendar year in 2018, 12 years
after actual launch. Actual deliveries were as follows: 2014 - one delivery; 2015 - 14 deliveries; 2016 –
49 deliveries; 2017 – 77 deliveries; 2018 – 93 deliveries. (Updated Ascend data, (Exhibit USA-158)).
778 We earlier noted the importance of delivery positions to LCA customers. (See fn 726 above).
779 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1307-
6.1309, and 6.1365. See also Decision by the Arbitrator, EC and certain member States – Large Civil Aircraft
(Article 22.6 – EU), Table 5 (indicating that the closest competing Boeing model vis-à-vis the A350XWB-1000
is the 777-300ER).
780 Airbus A330neo Presentation, (Exhibit USA-51).
781 Ascend Data, (Exhibit USA-138).
782 Insofar as Boeing would have won any additional sales, we further find that such sales are
"significant", for the same reasons that the original and first compliance panel found identified lost sales to be
significant. (Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.1798 (explaining factors underlying the "significance" of lost sales in the LCA industry)).

BCI deleted, as indicated [***]

a. In relation to the European Union's request for a preliminary ruling and arguments
concerning the scope of this compliance proceeding, we find that:
i. the R&TD measures that the United States challenges are not identified, as a matter
of fact, in the European Union's panel request; and
ii. even assuming, arguendo, that the absence of any reference to the challenged R&TD
measures in the European Union's panel request does not prevent the United States
from raising claims against those measures in this p roceeding, the United States is
nevertheless precluded from raising its claims because: (1) a s regards the United
States' claims against the R&TD measures that were the subject of findings in the
original proceeding, as well as the Seventh Framework Programme, the United States
is precluded from raising those claims because it could have brought them in the first
compliance proceeding but failed to do so; and (2) as regards the United States' claims
against the Eighth Framework Programme, the United States has failed to establish
that the Eighth Framework Programme has "sufficiently close links" with the relevant
measures taken to comply and the DSB's recommendations and rulings such that it
would be appropriate to characterize the Eighth Framework Programme as a "measure
taken to comply".
b. In relation to whether the European Union and certain member States have complied with
the obligation to "withdraw the subsidy" , we find that the European Union has failed to
demonstrate that:
i. the [***] amendment to the German A350XWB LA/MSF loan agreement ha s
withdrawn the German A350XWB LA/MSF subsidy;
ii. the full repayment of outstanding principal and interest accrued under the UK
iii. the [***] amendments to the French, German, Spanish and UK A380 LA/MSF loan
agreements have withdrawn the French, German, Spanish and UK A380 LA/MSF
subsidies;
iv. the alleged amortization of the ex ante benefit of the Spanish A380 LA/MSF loan has
withdrawn the subsidy;
v. Airbus' announcement on 14 February 2019 to wind -down the A380 programme
provides "further confirmation" and "an independent basis" , on its own, to find that
the French, German, Spanish and UK A380 LA/MSF subsidies have been withdrawn;
and
vi. Airbus' [***] agreement with [***] to repay the principal and interest accrued under
subsidy.
c. In relation to whether the European Union and certain member States have complied with
the obligation to "take appropriate steps to remove the adverse effects", we find that:
i. With respect to the "product" effects of the A380 and A350XWB LA/MSF subsidies:
(1) the A380 LA/MSF subsidies continue to be a "genuine and substantial"
cause of the current market presence of the A380 family of Airbus LCA;
(2) the A380 and A350XWB LA/MSF subsidies continue to be a "genuine and
substantial" cause of Airbus' ability to deliver the A350XWB family of Airbus
LCA, and Airbus' ability to offer the A350XWB f amily of LCA on the same
terms as it actually did (particularly with respect to delivery positions);
(3) the A380 and A350XWB LA/MSF subsidies are not a "genuine and
substantial" cause of the current market presence of the A330neo;

BCI deleted, as indicated [***]

ii. Airbus' 14 February 2019 wind-down announcement does not, on its own, achieve the
removal of the present adverse effects of the A380 LA/MSF subsidies as they relate to
the market presence of the A380. In our view, those effects will persist while Airbus
continues to produce and deliver the A380. It follows, correspondingly, that the wind-
down announcement cannot also achieve the removal of any present adverse effects
of the A380 and A350XWB LA/MSF subsidies as they relate to the market presence of
the A350XWB;
iii. With respect to the impact of the "product" effects of the A380 and A350XWB LA/MSF
subsidies in the relevant product markets:
(1) in the VLA product market, the "product" effects of the LA/MSF subsidies
identified in subparagraph (c)(i)(1), above, are a "genuine and substantial"
cause of the impedance of the exports of a like product of the United States
from Singapore and the United Arab Emirates within the meaning of
Article 6.3(b) of the SCM Agreement, constituting serious prejudice to the
interests of the United States within the meaning of Article 5(c) of the
SCM Agreement;
(2) in the twin -aisle product market, the "product " effects of the LA/MSF
subsidies identified in subparagraph (c)(i)(2), above, are a "genuine and
substantial" cause of impedance of the imports of a like product of the
United States into the European Union within the meaning of Article 6.3(a)
of the SCM Agreement, and are a "genuine and substantial" cause of the
impedance of the exports of a like product of the United States from China,
Korea, and Singapore within the meaning of Article 6.3(b) of the
SCM Agreement, constituting serious prejudice to the in terests of the
United States within the meaning of Article 5(c) of the SCM Agreement;
and
(3) in the twin -aisle product market, the "product" effects of the LA/MSF
subsidies identified in subparagraph (c)(i)(2), above, are a "genuine and
substantial" cause of significant lost sales to the US LCA industry in the
global market for twin-aisle LCA within the meaning of Article 6.3(c) of the
SCM Agreement , constituting serious prejudice to the interests of the
United States within the meaning of Article 5(c) of the SCM Agreement.
By continuing to be in violation of Articles 5(c) and 6.3(a), (b) and (c) of the SCM Agreement,
the European Union and certain member States have failed to comply with the
DSB recommendations and rulings and, in particular, the obligati on under Article 7.8 of the
SCM Agreement "to take appropriate steps to remove the adverse effects or … withdraw the
subsidy".
Under Article 3.8 of the DSU, in cases where there is an infringement of the obligations
assumed under a covered agreement, the action is considered prima facie to constitute a case of
nullification or impairment. We conclude that, to the extent that the measures at issue are
inconsistent with the SCM Agreement, they have nullified or impaired benefits accruing to the
United States under that Agreement.
We therefore conclude that the European Union and certain member States have failed to
implement the recommendations and rulings of the DSB to bring its measures into conformity with
its obligations under the SCM Agreement. To the extent that the European Union and certain member
States have failed to comply with the recommendations and rulings of the DSB in the original dispute
and the first compliance proceeding, those recommendations and rulings remain operative.