EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT COMMUNICATION FROM THE EUROPEAN UNION
Document: COMMUNICATION FROM
Date: 25 August 2020
Document codes: WT/DS316/44
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
COMMUNICATION FROM THE EUROPEAN UNION
The following communication, dated 21 August 2020 , was received from the delegation of the
European Union with the request that it be circulated to the Dispute Settlement Body (DSB).

Please find enclosed the European Union 's Third Compliance Communication in the above dispute,
for circulation to the Members.

A copy of this communication is being provided directly to the United States.

Notification of additional and extraordinary compliance measures that withdraw all
remaining subsidies and constitute appropriate steps to remove adverse effects,
substantially in excess of what is required by Article 7.8 of the SCM Agreement
1. The Europe an Union 1 refers to the recommendations and rulings of the WTO Dispute
Settlement Body ("DSB") with respect to the dispute European Communities and Certain member
States – Measures Affecting Trade in Large Civil Aircraft (WT/DS316), as altered by the first
compliance panel report (), as modified by the Appellate Body report
().2
2. In the Second Compliance Communication, the European Union informed the DSB that,
following the first compliance p roceedings and based on the relevant findings, it had taken further
appropriate steps to bring its measures into conformity with its WTO obligations, 3 particularly
Article 7.8 of the SCM Agreement and Article 19.1 of the DSU. Accordingly, the European Uni on
had ensured full implementation of the DSB 's recommendations and rulings, such that there were
no longer any subsidies causing adverse effects to the interests of the United States.4
3. The second compliance panel report ()5 confirmed that the European Union
had taken further appropriate steps to withdraw the subsidies and/or remove the adverse effects,
but concluded that the European Union had not yet achieved compliance. On 6 December 2019,
the European Union appealed a number of serio us legal errors in the second compliance panel
report, arguing that compliance was achieved by: (i) complete repayment of UK A350XWB MSF;
(ii) alignment of German A350XWB MSF with a contemporaneous market benchmark; (iii)
amortisation of Spanish A380 MSF; and (iv) termination of the A380 programme. 6 Indeed, in
significant parts of its report, the second compliance panel abandoned established WTO case law
that was supported by and previously applied to the United States, notably by departing from the
principle that compliance obligations are prospective only, such that there is no obligation to re -
pay benefit that has flowed in the past. The second compliance panel report represents a serious
assault on the European Union 's rights and a lack of even -handedness relative to the treatment
afforded the United States in DS353.
4. Although the Appellate Body issued a Working Schedule, the United States failed to engage
in the proceedings. Substantively, however, the United States has accepted the second compliance
panel's findings, having elected not to file a notice of other appeal and other appellant 's
submission by the deadline set by the Appellate Body. Instead, the United States has continued to
unlawfully obstruct appointments of new Appellate Body members, resulting in suspension of the
appellate proceedings. The United States is thereby denying the European Union final resolution of
the dispute and foreclosing any possibility for the European Union to obtain a multilateral
confirmation of compliance.
5. On 2 October 2019, the arbitration panel issued a decision under Article 22.6 of the DSU
approving US countermeasures of USD 7.5 billion annually. The arbitration panel report also
contains multiple legal errors that would not withstand appellate review. No tably, it was wholly
unreasonable to award countermeasures on an annual basis, for an essentially indefinite period of

1 Unless the context otherwise requires, as a matter of WTO law, references in this document to the
European Union include the "certain member States " (France, Germany, Spain and the United Kingdom)
against which the United States commenced this dispute.
2 References in this communication to the compliance panel report, as modified by the Appellate Body
Report, also encompass the compliance Appellate Body Report itself. The first compliance panel and the
Appellate Body reviewed a first set of compliance mea sures. See: First Compliance Communication,
WT/DS316/17, 1 December 2011.
3 WT/DS316/34, 18 May 2018.
4 This Third Compliance Communication builds upon and should be read together with the Second
Compliance Communication, the content of which the European Union refers to and incorporates by reference,
but does not repeat.
5 2 December 2019.
6 The European Union refers to its notice of appeal for a more complete identification of the errors of law
and legal interpretation committed by the second compliance panel. See WT/DS316/43, 6 December 2019.

time, when compliance proceedings (of which the arbitration panel was fully informed) had already
established the absence of any signific ant continuing benefit and the termination of the A380
programme. The resulting amount of countermeasures is consequently unjustified.
6. The second compliance panel and the arbitration panel, along with the United States '
obstruction of appointments of new Appellate Body members, have thus created a situation where
the European Union is trapped by the prospect of an essentially indefinite authorisation of
countermeasures, unilaterally maintained by the United States, coupled with a denial of any legal
recourse to demonstrate compliance. This represents a complete failure to safeguard the core of
the WTO's dispute settlement function, which is to ensure the security and predictability of a rules-
based multilateral trading system.
7. In these circumstances, given the extremely unfavourable economic conditions created by
the Covid -19 crisis, and with a view to achieving a situation in which there are no
countermeasures on either side, so that both LCA producers and other affected or potentially
affected economic operators are properly able to contribute to a global recovery, the European
Union has now procured additional and extraordinary measures with respect to the remaining two
subsidies. These additional and extraordinary measures go far beyond anything that is required
by Article 7.8 of the SCM Agreement . They fully withdraw the remaining two subsidies even
though they were no longer causing adverse effects, and they also constitute steps to remove
adverse effects that no longer exist. This means that, on any view, including that of the United
States, which has not cross -appealed the second compliance panel report, compliance has now
been achieved. These additional and extraordinary measures consist of:
• the amendment of the French A350XWB MSF loan agreement so as to align the terms of
the financial instrument on a market benchmark prevailing at the time of the original
measure, with prospective effect from the date of the amendment; and,
• the binding agreement to amend the Spanish A350XWB MSF loan agreement so as to align
the terms of the financial instrument on a market benchmark prevailing at the time of the
original measure, with prospective effect from the date of the amendment.
8. In effect, these measures impose a financial burden on the Eu ropean Union's participant in
the large civil aircraft industry that is not required in order to discharge the European Union 's
compliance obligations, effectively imposing on it a competitive disadvantage vis -à-vis the United
States' participant in the in dustry. The amounts involved are substantial. The details of the
measures have been confidentially communicated to the United States.
9. The European Union has procured these additional, extraordinary and costly compliance
measures in an effort to persuade rational and reasonable stakeholders in the United States,
including consumers, employers, workers, government officials and entities, airlines and other
economic operators, that now is the time to draw a line under these disputes. It is not in the
interests of anyone that the European Union and the United States now proceed to, or continue,
mutually assured retaliation, and certainly not in the current economic climate. Instead of
progressively stepping-up retaliatory measures, we should step them down, coming rapidly to the
point at which there are no countermeasures applied on either side. This proposition is consistent
with the fact that the European Union, like the United States, believes in the mutual benefits of
open and fair trade. The step that w e have now taken represents our contribution to both parties
moving in that direction. We believe that the next step should be to achieve the absence of
countermeasures on both sides. Only in this way will we create an environment that will best allow
both aircraft manufacturers and their airline customers around the world, and indeed other sectors
that would otherwise be subject to countermeasures, to weather the current economic crisis and
contribute to a global recovery.