Source(s) of the information:

Lawyers, other representatives, expert(s), tribunal’s secretary

Recourse to article 21.5 of the DSU by the United States - Report of the Panel

CASES CITED IN THIS REPORT

Short TitleFull Case Title and Citation
Australia – Automotive Leather II (Article 21.5 –US) Panel Report, Australia – Subsidies Provided to Producers and Exporters of Automotive Leather – Recourse to Article 21.5 of the DSU by the United States, WT/DS126/RW and Corr.1, adopted 11 February 2000, DSR 2000:III, p. 1189
Australia – Salmon (Article 21.5 – Canada) Panel Report, Australia – Measures Affecting Importation of Salmon – Recourse to Article 21.5 of the DSU by Canada, WT/DS18/RW, adopted 20 March 2000, DSR 2000:IV, p. 2031
Brazil – Aircraft (Article 21.5 – Canada) Appellate Body Report, Brazil – Export Financing Programme for Aircraft – Recourse by Canada to Article 21.5 of the DSU, WT/DS46/AB/RW, adopted 4 August 2000, DSR 2000:VIII, p. 4067
Brazil – Aircraft (Article 21.5 – Canada) Panel Report, Brazil – Export Financing Programme for Aircraft – Recourse by Canada to Article 21.5 of the DSU, WT/DS46/RW, adopted 4 August 2000, as modified by Appellate Body Report WT/DS46/AB/RW, DSR 2000:IX, p. 4093
Brazil – Desiccated Coconut Appellate Body Report, Brazil – Measures Affecting Desiccated Coconut, WT/DS22/AB/R, adopted 20 March 1997, DSR 1997:I, p. 167
Brazil – Desiccated Coconut Panel Report, Brazil – Measures Affecting Desiccated Coconut, WT/DS22/R, adopted 20 March 1997, upheld by Appellate Body Report WT/DS22/AB/R, DSR 1997:I, p. 189
Canada – Aircraft Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, p. 1377
Canada – Aircraft Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/R, adopted 20 August 1999, upheld by Appellate Body Report WT/DS70/AB/R, DSR 1999:IV, p. 1443
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, WT/DS70/AB/RW, adopted 4 August 2000, DSR 2000:IX, p. 4299
Canada – Aircraft (Article 21.5 – Brazil) Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft – Recourse by Brazil to Article 21.5 of the DSU, WT/DS70/RW, adopted 4 August 2000, as modified by Appellate Body Report WT/DS70/AB/RW, DSR 2000:IX, p. 4315
Canada – Autos Appellate Body Report, Canada – Certain Measures Affecting the Automotive Industry, WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, DSR 2000:VI, p. 2985
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
China – Rare Earths Panel Reports, China – Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum, WT/DS431/R and Add.1 / WT/DS432/R and Add.1 / WT/DS433/R and Add.1, adopted 29 August 2014, upheld by Appellate Body Reports WT/DS431/AB/R / WT/DS432/AB/R / WT/DS433/AB/R
China – Raw Materials Appellate Body Reports, China – Measures Related to the Exportation of Various Raw Materials, WT/DS394/AB/R / WT/DS395/AB/R / WT/DS398/AB/R, adopted 22 February 2012, DSR 2012:VII, p. 3295
Dominican Republic – Import and Sale of Cigarettes Appellate Body Report, Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes, WT/DS302/AB/R, adopted 19 May 2005, DSR 2005:XV, p. 7367
EC – Approval and Marketing of Biotech Products Panel Reports, European Communities – Measures Affecting the Approval and Marketing of Biotech Products, WT/DS291/R, Add.1 to Add.9 and Corr.1 / WT/DS292/R, Add.1 to Add.9 and Corr.1 / WT/DS293/R, Add.1 to Add.9 and Corr.1, adopted 21 November 2006, DSR 2006:III, p. 847
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 DSUby India, WT/DS141/AB/RW, adopted 24 April 2003, DSR 2003:III, p. 965
EC – Bed Linen (Article 21.5 – India) Panel Report, European Communities – Anti‑Dumping Duties on Imports of Cotton‑Type Bed Linen from India – Recourse to Article 21.5 of the DSUby India, WT/DS141/RW, adopted 24 April 2003, as modified by Appellate Body Report WT/DS141/AB/RW, DSR 2003:IV, p. 1269
EC – Commercial Vessels Panel Report, European Communities – Measures Affecting Trade in Commercial Vessels, WT/DS301/R, adopted 20 June 2005, DSR 2005:XV, p. 7713
EC – Computer Equipment Appellate Body Report, European Communities – Customs Classification of Certain Computer Equipment, WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, adopted 22 June 1998, DSR 1998:V, p. 1851
EC – Fasteners (China) (Article 21.5 – China) Appellate Body Report, European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China – Recourse to Article 21.5 of the DSU by China, WT/DS397/AB/RW and Add.1, adopted 12 February 2016
EC – Hormones Appellate Body Report, EC 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, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, 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, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted 1 June 2011, DSR 2011:I, p. 7
Guatemala – Cement I Appellate Body Report, Guatemala – Anti‑Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/AB/R, adopted 25 November 1998, DSR 1998:IX, p. 3767
India – Autos Panel Report, India – Measures Affecting the Automotive Sector, WT/DS146/R, WT/DS175/R, and Corr.1, adopted 5 April 2002, DSR 2002:V, p. 1827
India – Quantitative Restrictions Appellate Body Report, India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS90/AB/R, adopted 22 September 1999, DSR 1999:IV, p. 1763
Indonesia – Autos Panel Report, Indonesia – Certain Measures Affecting the Automobile Industry, WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R, Corr.1 and Corr.2, adopted 23 July 1998, Corr.3 and Corr.4, DSR 1998:VI, p. 2201
Italy – Agricultural Machinery GATT Panel Report, Italian Discrimination Against Imported Agricultural Machinery, adopted 23 October 1958, BISD 7S/60
Japan – Agricultural Products II Appellate Body Report, Japan – Measures Affecting Agricultural Products, WT/DS76/AB/R, adopted 19 March 1999, DSR 1999:I, p. 277
Japan – Alcoholic Beverages II Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, p. 97
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
Korea – Commercial Vessels Panel Report, Korea – Measures Affecting Trade in Commercial Vessels, WT/DS273/R, adopted 11 April 2005, DSR 2005:VII, p. 2749
Korea – Dairy Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR 2000:I, p. 3
Mexico – Corn Syrup (Article 21.5 – US) Appellate Body Report, Mexico – Anti‑Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSUby the United States, WT/DS132/AB/RW, adopted 21 November 2001, DSR 2001:XIII, p. 6675
Thailand – Cigarettes (Philippines) Appellate Body Report, Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines, WT/DS371/AB/R, adopted 15 July 2011, DSR 2011:IV, p. 2203
Thailand – H‑Beams Appellate Body Report, Thailand – Anti‑Dumping Duties on Angles, Shapes and Sections of Iron or Non‑Alloy Steel and H‑Beams from Poland, WT/DS122/AB/R, adopted 5 April 2001, DSR 2001:VII, p. 2701
US – Certain EC Products Appellate Body Report, United States – Import Measures on Certain Products from the European Communities, WT/DS165/AB/R, adopted 10 January 2001, DSR 2001:I, p. 373
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 Zeroing Appellate Body Report, United States – Continued Existence and Application of Zeroing Methodology, WT/DS350/AB/R, adopted 19 February 2009, DSR 2009:III, p. 1291
US – Countervailing and Anti‑Dumping Measures (China) Panel Report, United States – Countervailing and Anti-Dumping Measures on Certain Products from China, WT/DS449/R and Add.1, adopted 22 July 2014, as modified by Appellate Body Report WT/DS449/AB/R
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
US – FSC Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations", WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, p. 1619
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 March 2006, DSR 2006:XI, p. 4721
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 20 April 2005, DSR 2005:XII, p. 5663 (and Corr.1, DSR 2006:XII, p. 5475)
US – Lamb Panel Report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/R, WT/DS178/R, adopted 16 May 2001, as modified by Appellate Body Report WT/DS177/AB/R, WT/DS178/AB/R, DSR 2001:IX, p. 4107
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) 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 – 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 – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina) Appellate Body Report, United States – Sunset Reviews of Anti‑Dumping Measures on Oil Country Tubular Goods from Argentina – Recourse to Article 21.5 of the DSU by Argentina, WT/DS268/AB/RW, adopted 11 May 2007, DSR 2007:IX, p. 3523
US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina) Panel Report, United States – Sunset Reviews of Anti‑Dumping Measures on Oil Country Tubular Goods from Argentina – Recourse to Article 21.5 of the DSU by Argentina, WT/DS268/RW, adopted 11 May 2007, as modified by Appellate Body Report WT/DS268/AB/RW, DSR 2007:IX, p. 3609
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 – Shrimp (Thailand) / US – Customs Bond Directive Appellate Body Report, United States – Measures Relating to Shrimp from Thailand / United States – Customs Bond Directive for Merchandise Subject to Anti‑Dumping/Countervailing Duties, WT/DS343/AB/R / WT/DS345/AB/R, adopted 1 August 2008, DSR 2008:VII, p. 2385 / DSR 2008:VIII, p. 2773
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 – Softwood Lumber VI (Article 21.5 – Canada) Appellate Body Report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada, WT/DS277/AB/RW, adopted 9 May 2006, and Corr.1, DSR 2006:XI, p. 4865
US – Stainless Steel (Mexico) Appellate Body Report, United States – Final Anti‑Dumping Measures on Stainless Steel from Mexico, WT/DS344/AB/R, adopted 20 May 2008, DSR 2008:II, p. 513
US – Upland Cotton Panel Report, United States – Subsidies on Upland Cotton, WT/DS267/R, Add.1 to Add.3 and Corr.1, adopted 21 March 2005, as modified by Appellate Body Report WT/DS267/AB/R, DSR 2005:II, p. 299
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 the DSU by Brazil, WT/DS267/RW and Corr.1, adopted 20 June 2008, as modified 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 – Wheat Gluten Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R, adopted 19 January 2001, DSR 2001:II, p. 717
US – Wool Shirts and Blouses Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R, adopted 23 May 1997, and Corr.1, DSR 1997:I, p. 323
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

ABBREVIATIONS

AbbreviationDescription
1992 Agreement Agreement between the European Economic Community and the Government of the United States concerning the Application of the GATT Agreement on Trade in Civil Aircraft on Trade in Large Civil Aircraft
2H1E; 2H/1E 2 hydraulic/1 electric
2H2E; 2H/2E 2 hydraulic/2 electric
737MAX redesigned and reengineered Boeing 737
737NG Boeing 737 Next Generation – -600, -700, -800, -900 variants
777-200ER Boeing 777-200 aircraft – extended range variant
777-300ER Boeing 777-300 aircraft – extended range variant
777-200LR Boeing 777-200 aircraft – long range variant
A320neo Airbus A320 "new engine option" aircraft
A320ceo Airbus A320 "current engine option" aircraft
A350XWB Airbus A350 "eXtra widebody" aircraft
A350XWB-800 Airbus A350 "eXtra widebody" aircraft – 800 seat capacity variant
A350XWB-900 Airbus A350 "eXtra widebody" aircraft – 900 seat capacity (baseline) variant
A350XWB-1000 Airbus A350 "eXtra widebody" aircraft – 1000 seat capacity variant
[***][***]
[***][***]
A380 Airbus A380 aircraft
AB Appellate Body
AD Agreement Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-dumping Agreement)
ADIRS Air Data and Inertial Reference System
Aérospatiale Aérospatiale Société Nationale Industrielle
AIC Airbus Integrated Company (Airbus SAS)
ASM Aérospatiale-Matra
BAE Systems British Aerospace Systems
BATNA best alternative to a negotiated agreement
BCI business confidential information
[***][***]
B&O Business and Occupation
B.V.; BV besloten vennootschap (public limited liability company)
CAC 40 Cotation Assistée en Continu
CAR Convention d'avancerécupérable
CASA Construcciones Aeronáuticas S.A.
CEO Chief Executive Officer
CIBBF Corrected Interpolated Bond-Based Figure
CFRP carbon fibre reinforced plastic or polymer
CFO Chief Financial Officer
CMO Current Market Outlook
COMAC Commercial Aircraft Corporation of China, Ltd.
COO Chief Operating Officer
DARE Develop And Ramp-up Excellence
DASA; Dasa Deutsche Aerospace AG (from 1992), Daimler-Benz Aerospace AG (from 1995), DaimlerChrysler Aerospace AG (from 1998)
DCF discounted cash flow
DCLRH DaimlerChrysler Luft- und Raumfahrt Holding AG
DGAC Direction générale d'aviation civile
DM Deutsche Mark
DNA Develop New Aircraft
DSB Dispute Settlement Body
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding)
DTI UK Department of Trade and Industry
EADS European Aeronautic Defence and Space Company N.V.
EBIT earnings before interest and taxes
EC European Communities
EIB European Investment Bank
EMTN Euro medium-term note
EUR euro
Euribor European interbank borrowing rate
FAL final assembly line
FF French franc
FSS flap support structures
FTE full time equivalent
GBP British pound
GDP gross domestic product
GIE groupement d'intérêt économique
GmbH Gesellschaft mit beschränkter Haftung
GMF Global Market Forecast
GRI government-related issuer
GRE government-related entity
GSM 102 General Sales Manager 102
HMT hypothetical monopolist test
HSBI highly sensitive business information
IMA integrated modular avionics
IPO initial public offering
IRR internal rate of return
JRP Jordan Risk Premium
KfW Kreditanstalt für Weideraufbau
LA/MSF Launch Aid/Member State Financing
LCA large civil aircraft
Libor London interbank borrowing rate
Ltd Limited company
MBB Messerschmitt-Bölkow-Blohm GmbH
MBE Member of the Order of the British Empire
MHT Matra HautesTechnologies
MG Maturity Gate / Milestone Gate
MP Member of Parliament
MRL manufacturing readiness level
MSF Member State Financing
MTOW maximum take-off weight
NERA National Economic Research Associates (NERA Economic Consulting)
MTN Medium-term note
MY Marketing Year
NASA National Aeronautics and Space Administration
nm nautical miles
NPV net present value
NRC non-recurring cost
n.v.; N.V.; NV naamloze vennootschap (public limited liability company)
OECD Organisation for Economic Cooperation and Development
Onera; ONERA Office National d'Études et de Recherches Aérospatiales
Original A350 Airbus A350 aircraft design proposed between 2004-2006
Psi; PSI pounds per square inch
PwC PricewaterhouseCoopers
R&D research and development
R&TD research and technological development
RFP Request for Proposal
RLI Repayable Launch Investment / Reimbursable Launch Investment
ROCE return on capital employed
RSP risk-sharing partner
RSS risk-sharing supplier
S&P Standard & Poor's
SAL sub-assembly line
SARS Severe Acute Respiratory Syndrome
SAS société par actions simplifiées
SCM Agreement Agreement on Subsidies and Countervailing Measures
SEPI Sociedad Estatal de Participaciones Industriales
SL; S.L. sociedad limitada
SSNIP Small but Significant Non-Transitory Increase in Prices
SPOF Supplier Pass-On Figure
SOGEPA Société de gestion de participations aéronautiques
SOGEADE Société de gestion de l'aéronautique, de la défense et de l'espace
TDM Temporary Defence Mechanism
TPC Technology Partnerships Canada
TRL technology readiness level
UK United Kingdom
US United States
USD United States dollar
USDOC United States Department of Commerce
VFW Vereinigte Flugtechnische Werke GmbH
VLA very large aircraft
WACC weighted average cost of capital
WRP Whitelaw Risk Premium
WTO World Trade Organization

1 Introduction

1.1 Complaint by the United States

1.1.
The United States' complaint in this dispute, initiated under Article 21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), concerns the alleged failure on the part of the European Union1 and certain member States to implement the recommendations and rulings adopted by the Dispute Settlement Body (DSB) in the original proceeding EC and certain member States – Large Civil Aircraft.
1.2.
In the original proceeding, the panel found that the United States had demonstrated that the European Communities (EC) 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 Subsidies and Countervailing Measures Agreement (SCM Agreement), through the use of the following specific subsidies:

a. "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)2;

b. French and German government "equity infusions" provided in connection with the corporate restructuring of Aérospatiale and Deutsche Airbus3;

c. certain infrastructure and infrastructure-related measures provided by German and Spanish authorities4; and

d. research and technological development (R&TD) funding provided by the European Communities and certain member States.5

1.3.
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.6
1.4.
In relation to the findings made under Articles 5 and 6.3(a), (b), and (c) of the SCM Agreement, the original panel recommended that:

{U}pon adoption of this report, or of an Appellate Body report in this dispute determining that any subsidy has resulted in adverse effects to the interests of the United States, 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".7

1.5.
As regards the findings made under Article 3.1(a) and footnote 4 of the SCM Agreement, the original panel recommended that:

{T}he subsidizing Member granting each subsidy found to be prohibited withdraw it without delay and specify that this be done within 90 days.8

1.6.
The original panel report was circulated to the Members on 30 June 2010. Both parties appealed certain issues of law and legal interpretations developed by the original panel.9
1.9.
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 2011.15
1.10.
On 1 December 2011, the European Union informed 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".16 The European Union explained that it had "adopted a course of action that addresses all forms of adverse effects, all categories of subsidies, and all models of Airbus aircraft covered by the DSB's recommendations and rulings".17 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.
1.12.
The United States and the European Union held consultations on 13 January 2012, but the consultations failed to resolve the dispute.

1.2 Panel establishment and composition

1.13.
On 30 March 2012, the United States requested the establishment of a panel pursuant to Article 21.5 of the DSU with standard terms of reference.19 At its meeting on 13 April 2012, the DSB agreed, pursuant to Article 21.5 of the DSU, to refer the dispute to the original panel, if possible.20
1.15.
In accordance with Article 21.5 of the DSU, the Panel was composed on 17 April 2012 as follows21:

Chairman: Mr Carlos Pérez del Castillo

Members: Mr John Adank

Mr Thinus Jacobsz

1.16.
Australia, Brazil, Canada, China, Japan, and the Republic of Korea notified their interest in participating in the Panel proceedings as third parties.

1.3 Panel proceedings

1.3.1 General

1.17.
The Panel held an organizational meeting with the parties on 1 May 2012.
1.18.
After consulting the parties, the Panel adopted its Working Procedures22 and timetable on 11 May 2012. The Panel twice suspended its timetable on 10 August 2012 and 28 November 2012 in the light of the United States' and European Union's respective requests for the Panel to exercise its right to seek information under Article 13 of the DSU. The Panel made various other modifications to its timetable throughout the proceeding. On 5 October 2015, the Panel informed the parties of the expected date of the issuance of the Interim Report.
1.19.
The United States and the European Union filed their first written submissions on 25 May 2012 and 6 July 2012, respectively. Third parties filed their written submissions on 27 July 2012. The second written submissions of the United States and the European Union were filed on 19 October 2012 and 15 January 2013, respectively.
1.20.
The Panel held one substantive meeting with the parties on 16-18 April 2013. A session with the third parties took place on 17 April 2013. At the request of the parties, the Panel'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.23
1.21.
The Panel posed questions to the parties and third parties on 23 April 2013, and additional questions to the parties on 23 August 2013 and 31 March 2014.
1.22.
On 5 October 2015, the Panel issued the descriptive part of its Report to the parties. The Panel issued its Interim Report to the parties on 11 December 2015. The Panel issued its Final Report to the parties on 11 March 2016.

1.3.2 Protection of Business Confidential Information and Highly Sensitive Business Information

1.3.3 Preliminary ruling on the Panel's terms of reference

1.24.
In its first written submission, the European Union objected to the inclusion of certain United States claims and challenged measures within the scope of this compliance proceeding. In particular, the European Union objected to the United States' challenge to the LA/MSF agreements entered into between Airbus and France, Germany, Spain and the United Kingdom for the Airbus A350 "eXtra widebody" aircraft (A350XWB), as well as the United States' prohibited subsidy claims against the A380 LA/MSF measures, and the United States' threat of displacement and impedance of imports claims.25 The European Union asked the "Panel to grant the relief requested … through a preliminary ruling, or failing that in its final report".26
1.25.
On 27 March 2013, the Panel issued a preliminary ruling with respect to the European Union's objection to the United States' claims, finding that:

a. the United States' claim that the A380 LA/MSF measures are prohibited export subsidies within the meaning of Article 3.1(a) of the SCM Agreement, and the United States' threat of displacement and impedance of imports claims, are within the scope of this proceeding;

b. the United States' claim that the A380 LA/MSF measures are prohibited import substitution subsidies within the meaning of Article 3.1(b) of the SCM Agreement is outside the scope of this proceeding; and

c. the United States' claims of threat of displacement or impedance of imports pursuant to Article 6.3(a) of the SCM Agreement are within the Panel's terms of reference.

1.26.
In the same communication, the Panel informed the parties that it would issue the reasons underlying its findings in due course.
1.27.
The Panel's findings and underlying reasoning in relation to all of the objections raised by the European Union in its request for a preliminary ruling are set out in Section 6.4.

1.3.4 Information sought by the Panel

1.28.
On 20 July 2012, the United States requested the Panel to exercise its right under Article 13 of the DSU to seek certain information that the United States considered to be necessary for the Panel to carry out its mandate. After considering the views of both parties, the Panel ruled on the United States' request on 4 September 2012, inviting the European Union to provide certain information. The European Union submitted information to the Panel on 5 October 2012.
1.29.
On 23 November 2012, the European Union also requested the Panel to exercise its right to seek information under Article 13 of the DSU. After considering the views of both parties, the Panel informed them on 14 December 2012 that it had decided to deny the European Union's request.
1.30.
The Panel's rulings are reproduced in Annex E of this Report.

1.3.5 Procedural rulings

1.31.
The Panel was asked to make numerous rulings in relation to procedural matters throughout this proceeding. The Panel's main rulings are reproduced in Annex F of this Report.

1.4 Product at issue

2 Parties' requests for findings and recommendations

2.1.
The United States requests that the Panel find that the European Union and certain member States have failed to comply with the recommendations and rulings of the DSB by withdrawing the subsidies or taking appropriate steps to remove the adverse effects and, in particular, that:

a. with the exception of the Bremen Airport runway subsidy, the European Union and relevant member States have not withdrawn the subsidies covered by the DSB recommendations and rulings;

b. French, German, Spanish, and UK LA/MSF for the A350XWB is a specific subsidy within the meaning of Articles 1 and 2 of the SCM Agreement;

c. French, German, Spanish, and UK LA/MSF for the A380 and the A350XWB confers (1) an export subsidy inconsistent with Article 3.1(a) of the SCM Agreement, and (2) an import substitution subsidy inconsistent with Article 3.1(b) of the SCM Agreement;

d. the European Union and relevant member States have not removed the adverse effects covered by the DSB recommendations and rulings;

e. the United States continues to experience serious prejudice in the form of significant lost sales under Article 6.3(c) of the SCM Agreement, including sales where the customer ordered the A350XWB;

f. the United States continues to experience serious prejudice in the form of displacement and impedance, and/or threat thereof, of its LCA imports into the European Union market under Article 6.3(a) of the SCM Agreement;

g. the United States continues to experience serious prejudice in the form of displacement and impedance of its LCA exports to 11 third country markets under Article 6.3(b) of the SCM Agreement; and

h. all subsidies provided to Airbus LCA, including LA/MSF provided to the A350XWB, have a genuine and substantial causal relationship with the effects found.27

2.2.
The European Union requests that the Panel reject the entirety of the United States' claims.28

3 Arguments of the parties

3.1.
The arguments of the parties are reflected in their executive summaries, provided to the Panel in accordance with paragraph 12 of the Working Procedures adopted by the Panel (see Annexes B and C).

4 Arguments of the third parties

4.1.
The arguments of the third parties are reflected in their executive summaries, provided in accordance with paragraph 12 of the Working Procedures adopted by the Panel (see Annex D).

5 Interim review

5.1 Introduction

5.1.
The Panel issued its Interim Report to the parties on 11 December 2015. Both parties submitted written requests for review of precise aspects of the Interim Report on 22 January 2016, and written comments on each other's written requests on 12 February 2016. The parties also provided written comments on the treatment of certain information as BCI and/or HSBI in the Interim Report on 12 February 2016, with comments on each other's comments submitted on 26 February 2016. Neither party requested the Panel to hold an interim review meeting. Below we respond to the issues raised by the parties in the context of the interim review.
5.2.
Due to changes as a result of our review, the numbering of the footnotes in the Final Report has changed from the Interim Report. The text below refers to the footnote numbers in the Interim Report, with the corresponding footnote numbers in the Final Report provided in parentheses for ease of reference. Apart from the specific changes described in the following section, we have also corrected a number of typographical errors and other non-substantive errors throughout the report, including those identified by the parties, which are not referred to specifically below.

5.2 The European Union's Compliance Communication

5.2.1 Paragraph 6.7, and sub-headings 6.2.1, 6.2.2, and 6.2.3 (now sub-headings 6.2.2, 6.2.3, and 6.2.4)

5.3.
The European Union requests the Panel to explain the rationale for, and the implications of, the Panel's decision to discuss the European Union's "measures taken to comply" under the following three separate sub-headings: ("Actions taken after the adoption of the recommendations and rulings by the DSB"); ("Events that occurred before the adoption of the recommendations and rulings by the DSB"); and ("Alleged events that overlapped the adoption of the recommendations and rulings by the DSB"). The United States considers the sub-headings self-explanatory and further considers that the implications of the sub-headings are apparent from the remainder of the Interim Report. The United States, therefore, sees no reason for the Panel to provide the additional requested explanations.
5.4.
The Panel chose to describe the European Union's alleged compliance "actions" under the three relevant sub-headings in order to better understand the nature of the European Union's responses to the United States' allegations of non-compliance, bearing in mind that the timing of the alleged compliance "actions" is pertinent to certain aspects of the European Union's refutation of the United States' claims. For example, the European Union argues that it has no compliance obligation at all in relation to subsidies that ceased to exist prior to the adoption of the recommendations and rulings. Considerations pertaining to the timing of the alleged compliance "actions" are also, more generally, a feature of other European Union arguments, including the submission that certain events that have taken place over the passage of time (including post‑launch investments made in the A320 and A330 both prior to and after the adoption of the recommendations and rulings) have diluted the causal link established in the original proceeding such that the challenged subsidies are no longer a "genuine and substantial" cause of adverse effects. Thus, ultimately, the European Union's alleged compliance "actions" have been described under the relevant sub-headings as a first step in clarifying the arguments underlying the European Union's assertion of compliance, the full contours of which are fully explored and assessed in the remainder of the Report.

5.2.2 Paragraph 6.8

5.5.
The European Union requests that the last sentence of paragraph 6.8 be revised to more accurately reflect the evidence submitted by the European Union and the United States in relation to the termination of certain LA/MSF agreements. The United States argues that one piece of evidence upon which the European Union relies in this context does not provide support for the European Union's requested language, and that another piece of evidence upon which the European Union relies was not supplied by the European Union, but by the United States. The United States asks the Panel to consider these factors when assessing the European Union's request.
5.6.
Paragraph 6.8 has been modified to reflect the parties' positions in relation to the evidence submitted by the European Union regarding the termination of the French LA/MSF Agreements for the A310, A310-300, A330/A340, A330-200, and A340-500/600.29 Consequential adjustments have also been made to paragraphs 6.9-6.12. The United States' evidence, which the European Union asserts demonstrates that the German LA/MSF Agreements for the A300B, A300B3/B4, A300-600, A310, A310-300, A320, and A330/A340 were terminated in 1997 and 1998, is discussed in paragraph 6.26.

5.2.3 Paragraphs 6.15, 6.16, 6.859, 6.869, 6.879, 6.895, 6.908, 6.918, and 6.928

5.7.
The European Union requests that the Panel's characterization of the European Union's arguments in paragraphs 6.15, 6.16, 6,859, 6,869, 6,879, 6,895, 6,908, 6,918, and 6,928 be modified to reflect the fact that the European Union's submissions concerning the end of the "lives" of the relevant subsidy measures were focused on the end of the implementation period, not the beginning of the implementation period. The United States offers an alternative revision regarding paragraph 6.15, and argues that it is unnecessary to revise any of the other relevant paragraphs because they already accurately reflect the European Union's factual arguments regarding the time at which the "lives" of the relevant subsidy measures came to an end.
5.8.
The relevant paragraphs have been amended to more accurately reflect the European Union's arguments.

5.2.4 Paragraphs 6.33‑6.35

5.9.
The European Union requests that paragraphs 6.33‑6.35 be moved from sub-heading 6.2.2 (now 6.2.3) to sub-heading 6.2.3 (now 6.2.4), to reflect the fact the relevant post-launch investments occurred both after and before the adoption of the recommendations and rulings by the DSB. The United States did not comment on the European Union's request.
5.10.
The text of paragraphs 6.33‑6.35 now appears under sub-heading 6.2.4 (in paragraphs 6.36‑6.38). A corresponding change has also been made to the title of sub‑heading 6.2.4.

5.2.5 Paragraph 6.39

5.11.
The European Union requests the replacement of the word "their" in paragraph 6.39 with the word "any", arguing that the wording "their present-day adverse effects", when applied to the challenged LA/MSF subsidies, appears to suggest that these subsidies do have present-day adverse effects, a question that the European Union considers the Panel is not pre-judging at this stage of the Interim Report. The European Union additionally requests the Panel to clarify the attribution of a quotation in the same paragraph to the European Union. The United States did not comment on the European Union's request.
5.12.
Paragraph 6.39 has been modified to address the European Union's concerns.

5.3 Scope of the compliance proceeding

5.3.1 Paragraphs 6.53 and 6.80

5.13.
The United States requests that the description in paragraphs 6.53 and 6.80 of the findings made in the original proceeding in relation to the United States' claims against the alleged LA/MSF commitment for the Original A350 be modified to more accurately reflect the conclusions set out in paragraph 8.3 of the original panel report. The European Union objects to the United States' request insofar as it asks for the deletion of existing language in the Report, language that the European Union deems accurate. The European Union does not, however, object to the additional language proposed by the United States if the existing language is retained.
5.14.
For the avoidance of confusion, the relevant passages of paragraphs 6.53 and 6.80 have been clarified.

5.3.2 Paragraphs 6.109 and 6.143

5.15.
The European Union requests that the phrase "for the purpose of financing the development of each and every new model of Airbus LCA that has ever been launched and brought to market" in paragraphs 6,109 and 6,143 be replaced with the phrase "for the purpose of financing the development costs of Airbus LCA" in order to reflect the fact that: (i) no such agreements were entered into "for the purpose of financing the development of" the A321, A319 and A318 LCA; (ii) Germany, Spain and the UK did not enter into LA/MSF loan agreements for the A330-200; and (iii) Germany and the UK did not enter into LA/MSF loan agreements for the A340-500/600.
5.16.
The United States considers that the European Union's objection to the wording of the Interim Report resembles an argument that the European Union made before the original panel. The United States recalls that the original panel, after considering that European Union argument, observed that: "{W}hile we understand that the Airbus governments did not provide LA/MSF for each and every model of LCA developed by Airbus, the evidence we have reviewed does show that whenever Airbus sought LA/MSF it was offered by each of the Airbus governments on the same four 'core terms', and in all but one case, the terms and conditions of that LA/MSF were agreed between the parties."30 The United States has no objection to the Panel making conforming changes to paragraph 6,109 of the Interim Report.
5.17.
Footnote 205 (now footnote 228) to paragraph 6,109 refers to a passage from the adopted panel report which, in our view, accurately reflects the relevant facts pertaining to the extent to which LA/MSF agreements were entered into by Airbus and the Airbus governments for the purpose of financing the development of every new model of Airbus LCA. Accordingly, we decline the European Union's request in relation to paragraph 6,109.

5.3.3 Footnote 224 (now footnote 247)

5.18.
The European Union requests the Panel to insert the words "up to a maximum of" before the figure "33%" that appears in footnote 224 (now footnote 247) to accurately reflect the facts of the agreements at issue. The United States did not object to the European Union's request.
5.19.
Footnote 224 (now footnote 247) has been modified to more accurately reflect the terms of the relevant LA/MSF agreements.

5.4 Whether LA/MSF for the A350XWB is a subsidy

5.4.1 Paragraph 6.229 et seq.

5.20.
The European Union requests that the expression "successful aircraft delivery" that is used in various paragraphs of the Interim Report to denote the trigger of a repayment obligation, be replaced with the expression "aircraft delivery". According to the European Union, modifying the term "aircraft delivery" with the adjective "successful" is confusing because it "inaccurately" suggests that not all aircraft deliveries trigger repayment obligations. The United States did not comment on the European Union's request.
5.21.
Paragraphs 6,229, 6,232, 6,238, 6,251, 6,254, and 6,261 have been modified to address the European Union's concern.

5.4.2 Footnote 377 (now footnote 401) to paragraph 6.231

5.22.
The European Union requests that the words "even now", which appear in the final sentence of footnote 377 (now footnote 401) to paragraph 6,231, be replaced with "as of today" in order to avoid the impression that the Panel considers that a financial instrument with an interest rate that depends in part on the timing of [***], such as the French A350XWB LA/MSF contract, inherently confers a "benefit". The United States considers that the phrase "even now" does not have the connotation that the European Union believes that it has in this context, and that "even now" is synonymous with "as of today", rendering the European Union's request inutile.
5.23.
Footnote 377 (now footnote 401) has been modified to address the European Union's concern.

5.4.3 Paragraphs 6.268-6.288

5.24.
The European Union notes that paragraphs 6,268-6.288 describe how the A350XWB LA/MSF agreements compare with LA/MSF agreements provided for earlier aircraft programmes. The European Union requests that citations be added to the relevant paragraphs of the United States' submissions "from which the arguments reviewed in this comparative assessment were drawn".
5.25.
The United States notes that paragraphs 6,268-6.288 contain detailed factual observations citing to the original panel report or derived by the Panel from evidence submitted by the parties in this proceeding. The United States observes that this passage represents the Panel's effort to organize facts that both parties have submitted as relevant to the evaluation of the matter before the Panel, rather than an attempt to capture the viewpoint of either party. Citation to "relevant paragraphs of the United States' submissions" is therefore, in the view of the United States, unnecessary. The United States also makes a general comment, detailed further below, that as a panel need not adopt the reasoning of one of the parties, and may rely on its own reasoning independent of the arguments put forward by the parties, its conclusions need not cite the arguments of the parties.
5.26.
Paragraphs 6,268-6.288 are part of sub-section 6.5.2.3.1 of the Interim Report, in which the key features of the LA/MSF agreements for the A350XWB are described and factually assessed, first individually and then in comparison with the LA/MSF agreements challenged by the United States in the original proceeding. In performing this factual assessment, the compliance Panel found it useful to compare the A350XWB LA/MSF agreements with the LA/MSF agreements at issue in the original proceeding in order to develop a better understanding of their particular features.
5.27.
We recall that the mandate of a panel is to make an objective assessment of the matter before it, including an objective assessment of the facts, in accordance with Article 11 of the DSU. In so doing, a panel must review the totality of the facts and evidence before it.31 We are not aware of a rule that prevents a panel from setting out its own factual understanding of measures in this context, or that a panel's factual understanding of the measures at issue must necessarily proceed from the arguments made by one or another of the parties. Accordingly, we see no basis for the European Union's request for review and, therefore, make no change to the relevant paragraphs.

5.4.4 Footnote 438 (now footnote 462) to paragraph 6.289

5.28.
The European Union observes that footnote 438 (now footnote 462) to paragraph 6,289 reads:

With regards to the UK contract, the European Union initially stated that [***], as disbursements were scheduled to occur no earlier than [***]. However, the European Union later clarified that disbursements were made as follows: In [***]. Disbursements were scheduled and made by the UK Government in [***].

5.29.
The European Union asserts that the final sentence in this section of the footnote is factually inaccurate, alleging that the [***], and that under the [***], the earliest disbursement was scheduled for [***]. The European Union requests this Panel's relevant finding be reviewed "to ensure factual accuracy". The United States considers that the European Union's request should be rejected because the relevant language in the Interim Report already accurately reflects the facts.
5.30.
The description in the footnote at issue is based on our assessment of: (i) the HSBI revised schedule of disbursements contained at paragraph 2 of the exhibit to which the European Union refers – which replaced the schedule of disbursements also contained at paragraph 2 of the [***]; and (ii) the remaining paragraphs of Exhibit EU‑133/EU‑(Article 13)-33. While paragraph 3 of that exhibit indicates that a disbursement was indeed scheduled to occur on [***] and a further disbursement on [***], the same paragraph indicates those payments – as distinct from the earlier, scheduled disbursements – would be subject to additional conditions. This is further confirmed by the text of paragraph 4 of the exhibit.
5.31.
We recall that the European Union was asked to clarify its submissions in this respect in Panel question Nos 86 and 128. In response to Panel question No. 86, the European Union provided an HSBI schedule of disbursements already made, and those to be made, confirming that payments would be made prior to [***]. In Panel question No. 128, the European Union was asked to reconcile this information with its submission at paragraph 276 of its second written submission that "[***]. Instead, amendments made to the [***]". In its response, the European Union "confirm{ed} that the information included in its response to Question 86 is accurate. The [***] does not, however, affect the overall EU argument". We note that Professor Whitelaw's calculations (for example in Exhibit EU-421 (HSBI)) also utilise figures involving disbursements made prior to [***]. The compliance Panel's understanding of the disbursements made and scheduled to be made is based on these submissions by the European Union.
5.32.
Having reviewed the finding, and found it to be in accordance with the European Union's factual submissions, we accordingly make no change.

5.5 Programme risk for the A350XWB

5.5.1 Footnote 500 to paragraph 6.338

5.33.
The European Union requests that the compliance Panel add a citation to the United States' submissions where the United States makes an argument which the European Union maintains is described in footnote 500. According to the United States, the footnote reflects the Panel's observation regarding the implications of an argument raised by the European Union, and a citation is unnecessary.
5.34.
Footnote 500 of the Interim Report set out an observation made by the Panel about one of the possible implications of the European Union's decision not to provide certain pricing information. Our observation does not constitute an argument made by either of the parties. For the avoidance of confusion, the relevant footnote containing the observation has been deleted.

5.5.2 Paragraph 6.490

5.35.
The European Union notes that the footnote to this paragraph appears to contain an erroneous attribution to the European Union. The European Union requests that the content of the footnote be corrected. The United States did not object to the European Union's request. The citation has been corrected to refer to the relevant part of the United States' submissions.

5.5.3 Paragraphs 6.496-6.500, 6.502, 6.505, 6.513, and 6.526

5.36.
The European Union requests that citations be added to the United States' submissions where the United States asserts the relevance of "the context of the development of the A350XWB" to the question of the mitigation of risks that is referenced in paragraphs 6,496-6.500, and where "the United States makes" certain arguments, which the European Union maintains are set out in paragraphs 6,502, 6,505, 6,513, and 6,526.
5.37.
The United States asks the Panel to reject the European Union's request, arguing that there is no need to include any such citations. The United States notes that the DSU does not require panels to adopt the view of one party or the other. The United States considers that Article 11 of the DSU presupposes that a panel may assess the facts and relevant legal provisions differently from one or both parties with respect to a matter in dispute.32 The United States recalls that a panel may not "make the case" for a complaining party "which has not established a prima facie case of inconsistency based on specific legal claims asserted by it"33, but that within these limitations, a panel has considerable latitude to formulate its conclusions. The United States comments that, as a panel need not adopt the reasoning of one of the parties, and may rely on its own reasoning independent of the arguments put forward by the parties, its conclusions need not cite the arguments of the parties. The United States considers that a panel is free to use such citations to explain its conclusions, either by comparison or contrast with the views expressed by one or both of the parties. However, absent some further additional consideration, a panel has no obligation or even reason to include citations to the arguments of a party even if it reaches conclusions favourable to that party. The United States considers that the European Union has not provided reasons why it is necessary or appropriate to include citations and asks that the Panel reject the European Union's requests in this regard.
5.38.
The United States further observes that paragraphs 6,496-6.500 lay out the Panel's understanding of relevant facts as context for evaluating the European Union's argument that the risks associated with the A350XWB were mitigated. The United States observes that the passage contains numerous citations to documents submitted by both parties, and that the European Union does not dispute the accuracy of the Panel's observations or that the cited documents fully support them. The United States also observes that: in paragraph 6,502 the Panel was addressing an internal inconsistency within the arguments presented by the European Union; in paragraphs 6,503-6.504 the Panel evaluated evidence submitted by the European Union to determine whether it supported an inference that the European Union was seeking to draw; in paragraph 5,505 the Panel concluded that the evidence supported a different inference; paragraph 6,513 contains conclusions reached by the Panel after evaluating the European Union's arguments in light of the evidence submitted by both parties, and that in any event those conclusions agree in part with the European Union; and that paragraph 6,526 addresses matters relevant to evaluating the European Union's arguments. The United States considers that there is, accordingly, no need to include citations to United States arguments.
5.39.
As the European Union appears to acknowledge in its request for review of paragraph 6,502, the paragraphs that are the focus of the European Union's request for review set out the compliance Panel's "respon{se} to the European Union's submissions on the mitigation of the risks associated with the A350XWB". These submissions were made as part of the European Union's rebuttal of the United States' arguments concerning the appropriate project-specific risk premium to use for the purpose of constructing the relevant market interest rate benchmark for the A350XWB LA/MSF measures. The European Union advanced two main arguments in this regard: First, that due to the technological challenges of the A350XWB, Airbus changed its development process, which significantly mitigated risks of the A350XWB compared with those of the A380; and second, that the later point in the development process at which the A350XWB LA/MSF contracts were concluded compared to the point when the A380 contracts were concluded also mitigated the risks associated with the A350XWB programme compared with the A380 programme. In our view, a full exposition of the context of the development of the aircraft was relevant to understanding whether the arguments made by the European Union with respect to risk mitigation were compelling. Thus, after summarising the European Union's submissions in paragraph 6,493, the compliance Panel evaluated their merits in paragraphs 6,494-6.527, exploring and drawing upon evidence submitted by both parties.
5.40.
Accordingly, we see the entire content of paragraphs 6,493-6.527 to be consistent with (and, indeed, required by) our mandate under Article 11 of the DSU, which is to make an objective assessment of the matter, including an objective assessment of the facts. In this respect, we note that it is well established that a panel must examine and consider the totality of the facts and evidence before it, not just evidence submitted by one or another party, and evaluate the relevance and probative force of each piece of evidence.34 It is also equally settled that a panel is entitled to develop its own reasoning, and that evidence before the panel can be used in favour of either party, regardless of which party presented it. Moreover, while panels are inhibited from addressing legal claims outside of their terms of reference, nothing in the DSU limits the faculty of a panel freely to use arguments submitted by any of the parties to support its own findings and conclusions on the matter under its consideration.35 Indeed, a panel might well be unable to carry out an objective assessment of the matter, as mandated by Article 11 of the DSU, if in its reasoning it had to restrict itself solely to arguments presented by the parties to the dispute.36 We have, therefore, left paragraphs 6,496-6.500, 6,502, 6,505, 6,513, and 6,526 unchanged.

5.5.4 Paragraphs 6.538, 6.546, 6.563, 6.570, and 6.57937

5.41.
The European Union requests that citations be added "to the relevant paragraphs of the United States' submissions at which the United States makes" the arguments or comparison, which the European Union maintains are set out in paragraphs 6,538, 6,546, 6,563, 6,570, and 6,579.
5.42.
The United States refers to its general comment, detailed above, in respect of the European Union's request to include citations to United States arguments. The United States also observes that: paragraph 6,538 sets out certain Panel conclusions in respect of United States arguments cited in an earlier paragraph; paragraph 6,546 contains analysis undertaken by the Panel to address European Union arguments in light of relevant evidence; in paragraph 5,563 – as well as paragraph 6,561 – the Panel compares A350XWB and A380 orders at the date of the respective LA/MSF contracts in response to an EU argument cited in paragraph 6,559; in paragraph 6,570 the Panel makes a finding in response to a United States argument cited in paragraph 6,545; and that paragraph 6,579 contains the conclusions of the Panel based on arguments from the European Union and United States, which the preceding paragraphs cite. The United States therefore considers that it is not necessary to add citations to the United States' submissions as the European Union requests.
5.43.
The relevant passages identified by the European Union form part of our evaluation of the merits of the submissions of either one or both of the parties in relation to various elements of the project risk associated with the A350XWB as compared to that associated with the A380, in the light of the evidence submitted by both parties, consistent with our task to make an objective assessment of the matter. We can, therefore, see no basis to support the European Union's request and, accordingly, make no change to the relevant paragraphs.

5.5.5 Paragraph 6.563

5.44.
The European Union suggests that the phrase "a part share" that is found in paragraph 6,563 is tautological and requests the deletion of either the word "part" or the word "share". The United States did not specifically comment on this aspect of the European Union's request. The word "part" has been deleted from the relevant paragraph.

5.6 Prohibited subsidy claims

5.45.
The United States requests that the description of certain aspects of the A350XWB LA/MSF contracts in paragraph 6,774 be supplemented to include references to additional examples of "Domestic A350XWB Development Contingency" drawn from the evidence, and that the statements made in paragraph 6,776 concerning the United States' Article 3.1(b) claims be revised to better reflect certain pieces of evidence. The European Union asks the Panel to reject the United States' requests. Regarding paragraph 6,774, the European Union considers that the United States' requested revisions address issues that are sufficiently addressed elsewhere in the Report, and are thus unnecessary and would be inaccurate in this context. Regarding paragraph 6,776, the European Union considers that the United States' requested changes would improperly and unnecessarily create affirmative findings that the Panel currently does not make.
5.46.
The United States' requested modifications to paragraph 6,774 would bolster the existing factual characterization and discussion of the A350XWB LA/MSF contracts; while the United States' requested amendments to paragraph 6,776 would introduce conclusions that the Panel does not currently make but instead assumes arguendo. In our view, the existing characterization and discussion of the relevant features of the A350XWB LA/MSF contracts set out in the Report are sufficient to resolve the United States' Article 3.1(b) claim. Moreover, insofar as the United States' requested modifications create conclusions that the Panel does not currently make but instead explicitly assumes arguendo, such changes are not only unnecessary, but would create confusion. Thus, we decline the United States' requests.

5.7 Expiry through the amortization of benefit

5.7.1 Paragraph 6.869, first bullet point

5.47.
The European Union requests modification of the first bullet point to paragraph 6,869 to more fully reflect the European Union's submissions concerning the end of the "lives" of the relevant subsidy measures by means of amortization of "benefit". Specifically, the European Union requests that the phrase "before the end of the implementation period" be inserted immediately following the phrase "'Marketing life' of each of the financed LCA programmes would come to an end". The United States did not object to the European Union's request.
5.48.
The first bullet point to paragraph 6,869 has been modified in response to the European Union's request.

5.7.2 Footnote 1496 (now footnote 1521) to paragraph 6.869

5.49.
The European Union requests modification of footnote 1496 (now footnote 1521) to paragraph 6,869 to more clearly reflect the European Union's arguments concerning the dates by which the "benefit" of the subsidies mentioned in that footnote would amortize. The United States considers that the current text of the footnote, which the United States finds perhaps less precise than the revised text offered by the European Union, is nonetheless accurate, and therefore no change to the footnote is necessary.
5.50.
We have modified the footnote to address the European Union's concerns.

5.7.3 Footnote 1497 (now footnote 1522) to paragraph 6.869

5.51.
The European Union requests that the text of footnote 1497 (now footnote 1522) be moved to the body of paragraph 6,869 as a separate fourth bullet point to that paragraph in order to more clearly reflect the European Union's arguments. The United States did not comment on the European Union's request.
5.52.
The bullet points to paragraph 6,869 identify the subsidy measures that the European Union maintains are demonstrated in the PwC Amortization Report to expire "prior to the end of the implementation period". The European Union does not argue that the "benefit" of the subsidies discussed in footnote 1497 (now footnote 1522) fully amortized "prior to the end of the implementation period". It would, therefore, be an inaccurate characterization of the European Union's argument to transform the text of footnote 1497 (now footnote 1522) into a fourth bullet point to paragraph 6,869. Accordingly, we decline the European Union's request.

5.7.4 Paragraph 6.894

5.53.
The European Union requests modification of paragraph 6,894 to more clearly reflect the facts concerning the number of regional development grants involving Spanish authorities. The United States did not comment on the European Union's request.
5.54.
We have modified the paragraph to address the European Union's concerns and more clearly reflect the subsidies at issue.

5.7.5 Footnote 1574 (now footnote 1599) to paragraph 6.906, and paragraph 6.1076

5.55.
The European Union requests that, in footnote 1574 (now footnote 1599) to paragraph 6,906, we insert an explicit finding that the European Union has demonstrated that the German subsidies for the Nordenham facility and that Spanish subsidies provided for the Sevilla facilities have fully amortized as of present day. The European Union further requests that conforming changes be made to paragraph 6.1076. The United States did not comment on the European Union's request.
5.56.
Footnote 1574 (now footnote 1599) appears at the end of a passage in which the Panel determines that it is not necessary to express a definitive view on what would be the most appropriate methodology for determining the ex ante lives of the seven regional development grant subsidies because even accepting the European Union's arguments in full, the European Union has not established that the relevant subsidies expired by the end of the implementation period. Thus, no finding is made on the appropriateness of the methodology relied upon by the European Union to establish the dates on which, according to the European Union, the "benefit" of the German and Spanish regional development subsidies were fully amortized. Accordingly, there is no factual basis to grant the precise modification requested by the European Union to either paragraphs 6,906 and 6.1076.

5.7.6 Paragraphs 6.1067‑6.1068

5.57.
The European Union requests that paragraphs 6.1067‑6.1068 be modified to capture what the European Union asserts is the fact that the United States did not contest the fact that full repayment of principal and interest was effected in respect of the relevant subsidies on the dates indicated by the European Union. The United States considers that the European Union misunderstands the relevant United States arguments in the context of these paragraphs. The United States explains that it does not accept the European Union's proposed repayment dates, in part because the European Union improperly defined repayment as occurring once principal and interest payments are complete, but before royalty payments stop (in cases where royalty payments are required). The United States rejects that definition, instead having arguing that true "repayment" cannot occur while royalty payments continue.
5.58.
We consider the requested change unnecessary. In the two paragraphs at issue, the Panel summarizes the United States' response to the European Union's argument that the "lives" of relevant LA/MSF loans came to an end when Airbus fully repaid the principal and interest associated with those measures. The United States contested this argument by asserting that the repayment of LA/MSF on subsidized terms could not bring about the end of the LA/MSF subsidies' lives. The Panel concluded that it is unnecessary to make any definitive findings with respect to the merits of the European Union's arguments because, inter alia, even accepting that the principal and interest of the relevant LA/MSF measures had been repaid when the European Union claimed, it would not avail the European Union. The extent to which the United States did or did not contest the validity of the repayment dates is therefore immaterial. We thus decline to make the requested change.

5.7.7 Paragraphs 6.1074, 6.1076, and 6.1077

5.59.
The European Union requests that footnotes identical or substantially similar to footnote 1522 (now footnote 1547) be added to paragraphs 6.1074, 6.1076 and 6.1077 to more accurately reflect the entirety of the compliance Panel's findings on the expiry of the ex ante "lives" of the subsidies. The United States did not comment on the European Union's request.
5.60.
Paragraphs 6.1074, 6.1076, and 6.1077 make and/or summarize findings on the extent to which the European Union has established that the challenged subsidies were "expired", "extinguished" or "extracted" by the end of the implementation period. On the other hand, footnote 1522 (now footnote 1547) simply confirms that we are satisfied that, on the basis of either of the methodologies advanced by the European Union, the ex ante "lives" of the LA/MSF subsidies for the A330-200 and A340-500/600 did not come to an end before the end of the implementation period, but rather in [***] and [***]. Thus, the finding made in footnote 1522 (now footnote 1547) is out of place in the findings made in paragraphs 6.1074, 6.1076 and 6.1077. It is also irrelevant to the question before the compliance Panel, namely, whether the fact that certain subsidies "expired" before the end of the implementation period means that those subsidies have been "withdrawn", within the meaning of Article 7.8 of the SCM Agreement. Accordingly, we decline to make the requested modifications.

5.8 Extraction of benefit

5.61.
The European Union requests that the compliance Panel review the finding made in paragraph 6,927 where it concluded that it "will not consider the European Union's 'extraction' arguments any further in this dispute". The European Union asserts that "neither before the original panel, nor before the Appellate Body, did the European Union argue that the extraction events resulted in withdrawal of the subsidies, within the meaning of Article 7.8". Moreover, the European Union recalls that the Appellate Body found that "a determination as to whether any action taken to implement the recommendations made has actually resulted in the 'withdrawal' of subsidies and has brought about a Member's compliance with the SCM Agreement, is, if contested, best left to a compliance panel …". Thus, according to the European Union, no adopted findings exist on whether the "extraction" events achieved "withdrawal" of the subsidies, with the consequence that there are no such findings for the European Union to unconditionally accept under the terms of Article 17.14 of the DSU.
5.62.
The United States asks the Panel to reject the European Union's request for two main reasons. First, the United States argues that the European Union's statement that it never argued before the original panel or Appellate Body that the relevant extraction events resulted in withdrawal of the subsidies within the meaning of Article 7.8 is factually incorrect. Rather, according to the United States, the European Union raised this precise argument and the Appellate Body explicitly rejected it. Second, the United States considers that European Union's argument that the relevant DASA and SEPI transactions resulted in "withdrawal" of the subsidies rests on the argument that, as a matter of law, they were "extractions" that affected the value of subsidies previously granted to those companies. As the Panel already notes in the Report, however, the Appellate Body rejected that argument.
5.63.
In the Panel's view, contrary to the European Union's assertions, the European Union did argue in the original proceeding that the relevant "extraction" events constituted "withdrawals" within the meaning of Article 7.8 (and Article 4.7) of the SCM Agreement.38 The original panel considered the European Union's arguments and dismissed them, explicitly finding:

Finally, we reject the European Communities' argument that the retention of cash and cash equivalents of Dasa and CASA, by DaimlerChrysler and SEPI, respectively, constituted a "withdrawal" or "repayment" of subsidies previously provided to those entities within the meaning of Articles 4.7 and 7.8 of the SCM Agreement.39

5.64.
The European Union appealed the original panel's finding.40 The Appellate Body reviewed the European Union's appeal41, concluding as follows:

Accordingly, we uphold the Panel's ultimate finding, in paragraphs 7,283, 7,284, and 7,289 of the Panel Report, that the "cash extractions" did not result in the "withdrawal" of subsidies, within the meaning of Articles 4.7 and 7.8 of the SCM Agreement.42

5.9 Extinction of benefit

5.9.1 Paragraph 6.994

5.66.
The European Union requests that the finding made in paragraph 6,994 on the "fair-market" value of the ASM transaction be reviewed in the light of what the European Union asserts is "evidence clearly indicating that the value of Lagardère's commitment to the French State formed part of the information assessed by the relevant investment banks in determining the relative value of MHT to the combined company". The United States did not comment on the European Union's request.
5.67.
We understand the evidence the European Union relies upon to be the following description found in the Aérospatiale-Matra Offering Memorandum:

In its role as a preferred strategic partner, Lagardère has made certain undertakings to the French State in respect of the trading price of Aérospatiale Matra's shares on the Paris Bourse as compared to the CAC 40 index for a period of two years. As a general matter, Lagardère has agreed to make a payment to the French State of up to FF 1.15 billion if the trading price of Aérospatiale Matra's shares underperforms the CAC 40 index by 8% or more during this period. If the trading price of Aérospatiale Matra's shares outperforms the CAC 40 index by 10% or more during this period, Lagardère will not be required to make any payment and its obligation will be terminated. If the trading price is between these two points a pro rata amount will be payable.43

5.68.
While this passage describes the undertaking given by Lagardère concerning the share price of ASM following the Aérospatiale-MHT merger, it does not explain whether or the extent to which its value to the French State was taken into account by the relevant investment banks in their valuations. In this regard, we note that because of the conditional nature of Lagardère's undertaking, Lagardère's final liability could range from FF 1.15 billion to zero, depending upon how the ASM shares traded following the merger. Thus, in the absence of any evidence disclosing what the relevant investment bank valuations were, we see no reason to alter the finding made in paragraph 6,994. Nevertheless, in the light of the European Union's request for review, we have sought to clarify the finding made in paragraph 6,994 and made a related change to paragraph 6,995.

5.9.2 Paragraph 6.1008

5.69.
The United States requests that the last sentence of paragraph 6.1008 be modified to provide greater clarity in the Panel's findings concerning the implications of ASMs corporate governance structure on the "economic reality" of the ASM transaction. The European Union asks the Panel to reject the United States' request. In the European Union's view, the existing language in this paragraph is accurate and succinct. Further, according to the European Union, the Panel has elsewhere discussed the relevant issues discussed in this paragraph, making the modification unnecessary.
5.70.
For the avoidance of confusion, the final sentence of paragraph 6.1008 has been reworded along the lines suggested by the United States.

5.9.3 Paragraphs 6.1009 and 6.1010

5.71.
The United States requests that the first sentence of paragraph 6.1010 and the accompanying footnote be deleted, because according to the United States, the European Union did not deny the accuracy of the statements contained in the BusinessWeek reportquoted at the end of paragraph 6.1009, but only the United States' assertions in paragraph 20 of the United States' response to Panel question No. 8. The United States argues that the United States' assertions in paragraph 20 were distinct from the underlying evidence. The European Union asks the Panel to reject the United States' request. According to the European Union, the Panel properly understood the European Union's statement referred to in the United States' comment as a denial of the entirety of the assertions, including a denial that the materials cited by the United States (e.g. the statements contained in the BusinessWeek report) in support of the United States assertions.
5.72.
In paragraph 20 of its response to Panel question No. 8, the United States made a number of assertions including that the "French government set for itself the political goal to 'create a national champion' in the aerospace and defense industry, which would be better positioned to negotiate with its British and German counterparts". In the footnote to this sentence, the United States made the following additional assertions:

Press reports also confirmed that the ASM merger plan was adopted in reaction to a prospective merger between Dasa and BAE, which would have resulted in the French industry being "clearly outgunned" and "threatened" its "traditional dominance of the Airbus partnership". … For this reason, "Prime Minister Jospin secretly endorsed a bold plan to privatize Aérospatiale and merge it with Matra, a large defense contractor controlled by Lagardère. Jospin reasoned that since the government would retain a large stake, it could still pretty much call the shots. 'We had to be as industrially strong as possible to stay in the game', remembers Frederic Lavenir, a key high-ranking Finance Ministry official who helped structure the merger."44

5.73.
We do not read the contents of this footnote, which accompanied the second sentence of paragraph 20 of the United States' response to Panel question No. 8, to be merely a citation of evidence in support of the assertion made in that paragraph. In our view, the United States reference to Prime Minister Jospin's alleged views concerning the strategic importance and continued national control of ASM formed part of its assertion that the French government wanted to create a "national champion" for the purpose of the merger between Dasa and BAE. Thus, in denying the accuracy of the assertions set out in paragraph 20 of the United States' response to Panel question No. 8, we understand the European Union to deny them in their entirety, including those set out in the United States' footnote quoting from the BusinessWeek report. Such a reading of the European Union's position would be consistent with the European Union's general line of argument concerning the "qualitative change in control" that resulted from the ASM merger, which according to the European Union, left Lagardère (not the French State) with "effective control" over the company's key decisions. Accordingly, we find the characterization of the European Union's position concerning the assertions made in paragraph 20 of the United States' response to Panel question No. 8 to be accurate. We, therefore, decline the United States' request to delete the first sentence of paragraph 6.1010 and the accompanying footnote.

5.10 Requests for findings of the existence, and consistency with the covered agreements, of measures taken to comply regarding the Bremen Airport runway extension and the Mühlenberger Loch aircraft assembly site subsidies

5.74.
The European Union requests that the Panel find that the two declared measures taken to comply concerning the Mühlenberger Loch aircraft assembly site and the Bremen Airport runway extension achieved "withdrawal" of the respective subsidies, within the meaning of Article 7.8 of the SCM Agreement. The European Union asserts that the right of an original respondent to have a compliance panel assess the WTO consistency of a measure taken to comply was explicitly recognised by the Appellate Body in US – Continued Suspension and Canada – Continued Suspension, where it found that: "absent any rebuttal by the original complainant, the Article 21.5 panel will make its determination on the basis of a prima facie case presented by the original respondent that its implementing measure has brought it into compliance with the DSB's recommendations and rulings".45
5.75.
The United States asks the Panel to reject the European Union's request. In doing so, the United States affirms that, as stated in its second written submission, it is not pursuing the claims included in its panel request with respect to the Mühlenberger Loch and Bremen runway measures. The United States neither seeks a finding that the European Union failed to comply with the recommendations and rulings of the DSB with respect to those measures, nor argues that those subsidies caused adverse effects after the end of the implementation period. Thus, there is no relevant disagreement between the parties for the Panel to resolve. The United States further argues that Appellate Body reports in US – Continued Suspension and Canada – Continued Suspension do not provide material support the European Union's request, and that the European Union's request is untimely.
5.76.
We recall that the purpose of a panel established under Article 21.5 of the DSU is to make an objective assessment of whether a Member has complied with the rulings and recommendations adopted by the DSB in an original proceeding when there is a "disagreement as to the existence or consistency with a covered agreement of measures taken to comply". As described in paragraph 2.1(a), and footnotes 33 (now footnote 53), 87 (now footnote 109), and 1820 (now footnote 1847), neither party presently disputes the existence of the European Union's notified measures taken to comply with respect to the Mühlenberger Loch or the Bremen Airport runway subsidies, and there is, furthermore, no present disagreement between the parties regarding whether such measures taken to comply are consistent with the SCM Agreement's relevant disciplines or whether they achieve compliance with the recommendations and rulings of the DSB. The explicit terms of Article 21.5 of the DSU imply that in the absence of any such "disagreement", there is no question of WTO-consistency to determine in relation to the measures taken to comply.
5.77.
The Appellate Body reports in US – Continued Suspension and Canada – Continued Suspension do not compel a different resolution. The European Union quotes a passage from these two reports that appears in sections in which the Appellate Body described what a hypothetical Article 21.5 panel would be expected to do in the following specific procedural scenario: (a) an original respondent initiates an Article 21.5 proceeding; (b) the original complainant refuses to participate in that Article 21.5 proceeding; and (c) the original complainant had already suspended concessions vis-à-vis the original respondent in accordance with applicable provisions of Article 22 of the DSU. The Appellate Body stressed, however, that in this hypothetical scenario there would be a "disagreement" between the parties for the compliance panel to resolve, i.e. whether the ongoing suspension of concessions continued to be justified under Article 22.8 of the DSU. Thus, in such a scenario, the compliance panel would be called upon to "make its determination on the basis of a prima facie case presented by the original respondent that its implementing measure has brought it into compliance with the DSB's recommendations and rulings"46 in order to address the "abnormal state of affairs"47 of ongoing suspension of concessions, a situation that "must be brought back to normality as soon as possible".48 No such disagreement or associated exigency exists in this proceeding. Suspension of concessions has not been approved or implemented, and, moreover, the original complainant, the United States, initiated the present Article 21.5 proceeding, in which both parties participated.
5.78.
Thus, in the absence of any explicit refutation by the United States of the European Union's measures taken to comply with respect to the Mühlenberger Loch or the Bremen Airport runway subsidies, we find that there is no requirement under Article 21.5 of the DSU for the compliance Panel in this dispute to make any findings on the consistency of those measures with the covered agreements. Thus, it follows from the express terms of Article 22.2 of the DSU that the United States would not be entitled to request the suspension of concessions or other obligations under the covered agreements in relation the Mühlenberger Loch and the Bremen Airport runway measures. Accordingly, for all of the above reasons, we decline the European Union's request.

5.11 Adverse effects

5.11.1 Paragraph 6.1155 and footnote 1908 (now footnote 1935)

5.79.
The United States requests that the last sentence of footnote 1908 (now footnote 1935) to paragraph 6.1155 be modified to more accurately reflect the United States' arguments and data submitted in relation to freighter aircraft. The European Union asks the Panel to reject the United States' request. In the European Union's view, the requested modification would reflect a claim regarding freighters that the United States did not substantiate during the course of the dispute.
5.80.
We have modified footnote 1908 (now footnote 1935) to more accurately capture the scope of the United States' arguments.

5.11.2 Paragraph 6.1672

5.81.
The European Union requests that the finding made in paragraph 6.1672 regarding the relevance of EADS' gross cash as a source of financing for part of the development costs of the A350XWB be modified, and for the Panel to consequently find that the gross cash figures further strengthen the finding in paragraph 6.1690 that "EADS had significant cash that it could have diverted to the A350XWB programme". The European Union argues that gross cash is relevant in this context "because, even though it would be reduced when a financial liability falls due, it can simultaneously be replenished thorough {sic} borrowing, such that EADS' overall cash and borrowing position does not change." As described in paragraph 6.1672, the European Union made the same argument in a footnote to its second written submission. The United States asks the Panel to reject the European Union's request. The United States considers that even if EADS could have issued debt to "replenish" its gross cash as financial liabilities fell due, this is a question of EADS' counterfactual ability to raise debt. Because the Panel already addresses that counterfactual ability elsewhere in the Report, there is no need to address that issue in the context of discussing gross cash.
5.82.
We decline the European Union's request. As explained in the Report, the portion of any of EADS' gross cash positions (actual or projected) that must cover financial liabilities would be unavailable to divert to the A350XWB programme. Deducting that portion of the gross cash positions yields EADS' associated net cash positions. We therefore considered net cash to be a more reliable indicator of how much cash EADS had to divert to the A350XWB programme. This relationship between gross and net cash positions endures no matter how much debt EADS could raise or when EADS raised it. Insofar as EADS could have raised cash with which to help fund the A350XWB programme by selling debt, that is addressed – consistent with how the parties structured their arguments and presented their evidence – under our EADS-debt-capacity analysis. In other words, we have analysed the ability of EADS to fund the development costs of the A350XWB programme through debt, as a debt-capacity issue, rather than under the rubric of gross cash.

5.11.3 Paragraph 6.1788

5.83.
The European Union requests that citations be added to the relevant paragraphs of the United States' submissions "at which the United States makes" the argument stated in the last two sentences of paragraph 6.1788.
5.84.
The United States refers to its general comment, detailed above, in respect of the European Union's request to include citations to US arguments. The United States also observes that the paragraph contains the Panel's conclusions and is based on the Panel's preceding discussion of the parties' arguments and the evidence, including the parties' agreement as to the observed failure of the several new entrants to play a significant role in LCA competition and the likelihood that this situation would continue in the immediate future. The United States considers that citations to the United States' submissions are, accordingly, unnecessary.
5.85.
The two sentences that are the subject of the European Union's request for review are found in a passage of the Interim Report where the merits of the parties' positions in respect of the conditions of competition that would exist after the end of the implementation period, in the light of the two "plausible" counterfactual scenarios, are evaluated. The two sentences form part of our objective assessment of the conditions of competition that we believe would exist in the "plausible" counterfactual scenario in which Boeing would have been a monopoly producer of LCA. Accordingly, we see no basis for the European Union's request for review and, therefore, make no change to the relevant paragraph.

5.12 Designation of certain information as BCI

5.86.
The United States requests that certain specific information appearing in seven paragraphs of the Interim Report be designated as BCI in order to prevent the disclosure of non-public information in the Final Report that could cause harm to the originators of the information. The European Union did not object to the United States' requests.
5.87.
The United States' requests have been granted, and the relevant information bracketed in the Final Report.
5.88.
The European Union requests that certain specific information appearing in 59 paragraphs and 25 footnotes of the Interim Report be designated as BCI in order to prevent the disclosure of non-public information in the Final Report that could cause harm to the originators of the information. In its comments to the European Union's requests, the United States observes that two of the European Union's requests (concerning paragraph 6,561, and paragraphs 6,728 and 6,729) related to information appearing unbracketed in the European Union's first and second written submissions. The United States also notes that the information the European Union proposed should be bracketed in paragraphs 6,682 and 6,272 appeared unbracketed in paragraph 177 of the United States' first written submission and is based on publicly available information.
5.89.
The information that is the focus of the European Union's request for BCI treatment in paragraphs 6,561, 6,728 and 6,729 is the date on which the first A350XWB LA/MSF contract was concluded. The European Union designated this date as BCI when it provided the LA/MSF contracts in response to the Panel's request for information pursuant to Article 13 of the DSU, after filing its first written submission. As the United States notes, however, the same date can be found explicitly identified in two paragraphs of the European Union's first and second written submissions in which it is not given a BCI designation. Apart from these few instances of disclosure, the European Union has generally sought to bracket the dates of the conclusion of all of the LA/MSF contracts for the A350XWB. We note, moreover, that neither party argues that the relevant information is within the public domain. In our view, these facts suggest that the European Union's disclosure of the relevant information in the paragraphs cited by the United States was unintentional. In this light, and given the voluminous submissions and extensive pieces of evidence that have been presented in this proceeding, we have decided to grant the European Union's request, bearing in mind that to do so would not prejudice the United States' due process rights in the resolution of this dispute.
5.90.
Turning to the United States' observations concerning the European Union's requests in relation to paragraphs 6,682 and 6,272, we are unable to find any reference to the information that is the focus of the European Union's request in connection with paragraph 6,272 in paragraph 177 of the United States' first written submission. Moreover, on the basis of the information in paragraph 177 of the United States' first written submission, we understand the United States' second observation to be focused on paragraph 6,681 of the Interim Report, not paragraph 6,682. We have modified the text of paragraph 6,681 with a view to responding to both parties' comments on the confidentiality of the relevant information.
5.91.
With respect to all other European Union requests for the treatment of certain information as BCI, we have either bracketed the specific text or otherwise modified the relevant passages to secure the level of protection requested by the European Union.

5.13 Designation of certain information as HSBI

5.92.
The European Union requests that the Panel bracket various words and passages of text from the Interim Report as HSBI in order to avoid the disclosure of non-public information in the Final Report that could cause exceptional harm to the originators of the information. The United States does not object to the European Union's requests.
5.93.
We have granted the European Union's requests for HSBI protection by either eliminating the relevant text or by modifying it in a way that does not reveal HSBI or make it possible to infer HSBI from the context in which it appears. In this respect, we recall that while, pursuant to paragraph 59 of the BCI and HSBI Procedures, HSBI is not to be disclosed in the Panel report, we are nevertheless entitled to "make statements or draw conclusions that are based on the information drawn from the HSBI". We have decided not to bracket the relevant words and passages that are the focus of the European Union's request, as we do not consider it would be necessary to create an HSBI version of the Final Report in order to fully respond to the European Union's requests for HSBI protection.

6 Findings

6.1 Introduction

6.1.
It is well established that the task of a panel established under Article 21.5 of the DSU is to make an objective assessment of whether a Member has complied with the recommendations and rulings adopted by the DSB directing it to bring one or more measures found to be WTO‑inconsistent in an original proceeding into conformity with its obligations under the covered agreements. To this end, Article 21.5 contemplates that a panel may be required to examine two main compliance questions: (a) the "existence" of "measures taken to comply" with the rulings and recommendations; and (b) the "consistency with a covered agreement" of any such measures.49 In compliance disputes involving actionable subsidies, such as the present, a panel's evaluation of these questions will be informed by Article 7.8 of the SCM Agreement.50
6.2.
Article 7.8 of the SCM Agreement is one of the "special or additional rules and procedures on dispute settlement contained in the covered agreements"51, which prevail over the general DSU rules and procedures to the extent that there is a conflict between them.52 Article 7.8 specifies what an implementing Member must do following the adoption of a panel and/or Appellate Body report in which it is determined that any subsidy has caused adverse effects within the meaning of Article 5 of the SCM Agreement. In particular, Article 7.8 prescribes that any "Member granting or maintaining such subsidy shall take appropriate steps to remove the adverse effects or shall withdraw the subsidy". It follows that in order to determine whether an implementing Member has complied with the recommendations and rulings adopted by the DSB in cases involving actionable subsidies, one of the questions that an Article 21.5 panel will have to evaluate is whether the Member concerned has acted in conformity with the requirement to "take appropriate steps to remove the adverse effects" or"withdraw the subsidy".
6.4.
The European Union rejects the entirety of the United States' claims, arguing that the European Union and certain member States have fully implemented the recommendations and rulings adopted by the DSB. In particular, the European Union submits that the subsidies found to cause adverse effects in the original proceeding have either been "withdrawn" or no longer cause "adverse effects", thereby bringing the European Union and certain member States into conformity with their obligations under Article 7.8 of the SCM Agreement. Moreover, the European Union maintains that the United States' claims against the A350XWB LA/MSF measures and the prohibited subsidy claims the United States raises against the A380 LA/MSF subsidies are outside of the scope of this compliance proceeding or, in any case, are without merit.
6.5.
The parties' positions raise essentially three broad sets of issues pertaining to: (a) the scope of the claims and measures that can be challenged in this proceeding; (b) the extent to which the A350XWB and A380 LA/MSF measures are prohibited subsidies, within the meaning of Articles 3.1 and 3.2 of the SCM Agreement; and (c) whether the European Union and certain member States have complied with their obligations under Article 7.8 of the SCM Agreement. Our Report evaluates the merits of the parties' submissions in relation to each of these matters in turn. However, before proceeding to this analysis, we first review the European Union's stated compliance "actions" and address the European Union's conviction that the United States has failed to make a prima facie case of non-compliance in this dispute56 and, therefore, that the European Union and certain member States have "no case to answer".57

6.2 The European Union's Compliance Communication of 1 December 2011

6.2.1 Introduction

6.6.
On 1 December 2011, the European Union informed the DSB that it had "taken appropriate steps" to bring its measures "fully into conformity with its WTO obligations", thereby ensuring "full implementation of the DSB's recommendations and rulings".58 In its communication, the European Union declared that it had adopted "a course of action that addresses all forms of adverse effects, all categories of subsidies, and all models of Airbus aircraft covered by the DSB's recommendations and rulings".59 The European Union described this "course of action" to include: (a) the repayment and/or termination of LA/MSF; (b) the imposition of increased fees and lease payments on infrastructure support in accordance with market principles; and (c) ensuring that capital contributions and regional aid subsidies have, "in the Appellate Body's words, 'come to an end' and are no longer capable of causing adverse effects".60 The European Union provided "information concerning" the "steps that have been taken" and "other intervening market events" it considered to have enabled it to achieve compliance in a two-page document comprising 36 numbered paragraphs attached to its communication.61
6.7.
When considered in the light of the explanations provided by the European Union during the course of this proceeding, it is apparent that the "course of action" the European Union relies upon to claim that it has fully implemented the recommendations and rulings of the DSB refers to not only "actions" taken after the adoption of the recommendations and rulings, but also "events" that occurred before the recommendations and rulings were adopted by the DSB (sometimes even before the United States' request for consultations in the original dispute), as well as "events" that allegedly occurred over a period of time that overlapped the date on which the recommendations and rulings were adopted by the DSB. In this part of our Report we describe our understanding of all three categories of European Union compliance "actions", as articulated in the European Union's Compliance Communication of 1 December 2011 and further explained and explored in the parties' submissions in this dispute.

6.2.2 Actions taken after the adoption of the recommendations and rulings by the DSB

6.2.2.1 Termination of French and Spanish LA/MSF agreements ("steps" 1-3, 7-11, 14‑16, 18-19, and 21-24)

6.8.
Two-thirds of the European Union's declared compliance "actions" took the form of the termination of LA/MSF agreements, the majority of which were terminated after the adoption of the recommendations and rulings by the DSB.62 In its first written submission, the European Union presented evidence showing that the French LA/MSF agreements for the A300B, A300B2/B4, A300-600, A310, A310-300, A320, A330/A340 basic, A330-200, and A340-500/600 programmes and the Spanish LA/MSF agreements for the A300B, A300B2/B4, A300-600, A320, and A330/A340 basic had been terminated between September and November 2011.63
6.9.
We note that in a number of instances, the formal termination of the French and Spanish LA/MSF agreements between September and November 2011 occurred many years after the European Union maintains the loaned principal had been "fully repaid" in accordance with the subsidized terms of the relevant agreements.64 In three cases involving the French State, the LA/MSF agreements were terminated after a settlement was reached on Airbus' "outstanding payment obligations" as of November 2011, in accordance with the subsidized terms of the relevant LA/MSF agreements.65 We also note that the formal termination of the relevant A300 and A310 LA/MSF contracts occurred four years after the end of the respective aircraft programmes66, with the termination of French LA/MSF for the A330/A340 basic and A340-500/600 coinciding with the termination of the A340 programme.
6.10.
Thus, in essence, the French and Spanish LA/MSF termination "steps" the European Union relies upon and has provided evidence of involve instances where either a LA/MSF agreement has already run its course, in accordance with its subsidized terms and conditions, or in the case of French LA/MSF for the A330/A340 basic, A340-500/600 and A330-200, the remaining outstanding repayment obligations have been settled in accordance with their subsidized terms and conditions.
6.13.
Ultimately, therefore, we do not understand the European Union to argue that the formal termination of LA/MSF agreements already repaid or settled on their subsidized terms before the end of the implementation period brings it into compliance with the adopted recommendations and rulings of the DSB. Rather, the European Union relies upon the formal termination of such LA/MSF instruments as part of the configuration of facts, which it maintains demonstrates its full implementation of the adopted recommendations and rulings of the DSB.

6.2.2.2 Ensuring that subsidies have "come to an end" ("step" 26)

6.14.
One of the 36 "steps" identified in the European Union's Compliance Communication is the "bringing 'to an end'" of all of the subsidies found to cause adverse effects in the original proceeding with the exception of the French, German, Spanish and UK A380 LA/MSF measures. The United States characterizes this "step" as "a legal argument" "based on contentions that the passage of time" has "resulted in the subsidies or their adverse effects fading to insignificance". Recalling that the Appellate Body has explained that "when faced with a finding covered by Article 7.8 of the SCM Agreement, 'a Member would normally not be able to abstain from taking any action on the assumption that the subsidy will expire or that the adverse effects of the subsidy will dissipate on their own'", the United States argues that the European Union is not entitled to claim that it has achieved compliance in the absence of taking any "action" because, according to the United States, the European Union has "no basis to believe that the situation here deviates from what the Appellate Body has found would normally be the case". Accordingly, the United States submits that "the purported 'bringing to an end'" of subsidies does not achieve compliance with Article 7.8.74
6.15.
The European Union clarified in its first written submission that what it meant when it referred to "bringing 'to an end'" the relevant subsidies was simply undertaking an exercise to determine whether, in the light of its own interpretation of certain findings made by the Appellate Body in the original proceeding, the ex ante "lives" of those subsidies came to an end before the end of the implementation period. The European Union engaged PricewaterhouseCoopers (PwC) to perform this assessment. Thus, in the light of the European Union's understanding of certain findings made by the Appellate Body in the original proceeding, PwC was asked to determine the period of time over which it was anticipated that certain subsidies would benefit Airbus at the time they were provided, and whether, on the basis of that time period, they were fully amortized as of 1 December 2011, using the following methodologies: (a) the anticipated repayment period under each of the LA/MSF agreements; (b) the anticipated marketing life of the subsidized model of LCA; and/or (c) the useful life of the tangible and intangible assets allegedly purchased with the relevant funding.75
6.16.
According to the European Union, the conclusions reached by PwC demonstrate that the benefit conferred through all of the challenged subsidies with the exception of the French and Spanish A340-500/600 LA/MSF measures, the French, German, Spanish, and UK A380 LA/MSF measures, and a number of the Spanish Government regional development grants, was fully amortized prior to the end of the implementation period.76 For the European Union, this result is significant because, as already noted, the European Union argues that the obligation in Article 7.8 of the SCM Agreement to "take appropriate steps to remove the adverse effects" or "withdraw the subsidy" applies only in relation to subsidies found to cause adverse effects in an original proceeding that continue to exist after the adoption of recommendations and rulings by the DSB. Therefore, to the extent that the results produced by PwC show that the relevant subsidies did not exist at the time that the recommendations and rulings in this dispute were adopted on 1 June 2011, the European Union submits that they prove that the European Union and certain member States have no compliance obligations at all with respect to those subsidies77 or that the European Union has "withdrawn" those subsidies for the purpose of Article 7.8 of the SCM Agreement. Furthermore, and in any case, the European Union maintains that the fact that a particular subsidy may have expired and, therefore, no longer exists by the end of the implementation period, means that the European Union has procured its withdrawal, also bringing it into compliance with its obligations under Article 7.8 of the SCM Agreement.
6.17.
Thus, ultimately, the European Union's reference to "bringing 'to an end'" certain subsidies, is not a reference to any specific action undertaken with respect to subsidies or the adverse effects found to have been caused by subsidies in the original proceeding. Rather, we understand the European Union to be referring to the analysis performed by PwC on the alleged amortization of the benefit of the relevant subsidies, and the assertion, on the basis of that analysis, that the ex ante "lives" of those subsidies have "come to an end".

6.2.2.3 Isolation of certain Spanish regional development grants from use in LCA activities ("step" 27)

6.18.
In the light of the explanations provided by the European Union in its first written submission, we understand this "step" to have involved engaging PwC to undertake an assessment of the extent to which certain subsidized facilities owned by European Aeronautic Defence and Space Company N.V. (EADS)/Construcciones Aeronáuticas S.A. (CASA) in San Pablo, Spain, are used for the purpose of the production of Airbus civil or military aircraft.78 The PwC report concludes that "there is no indication that the San Pablo site has been used or will be used for manufacturing, assembling or transforming civil aircraft".79 Thus, we do not understand the European Union's reference to the "isolation of certain Spanish regional development grants" to describe any specific action undertaken after the adoption of the recommendations and rulings with respect to those subsidies. Rather, we understand the European Union to be simply referring to the analysis performed by PwC on the extent to which the San Pablo South site is used for the purpose of civil or military aircraft, with a view to substantiating its assertion that the subsidized facilities in question are not (and, indeed, have never been) used for civil aircraft purposes and, for this reason, cannot be the subject of the United States' "adverse effects" claims.

6.2.2.4 Imposition of additional fees for use of Bremen Airport runway extensions ("step" 28)

6.19.
The European Union explained in its first written submission that the fee schedule for Airbus' right to use the Bremen Airport runway was revised to include the extensions with respect to which Airbus did not previously pay a fee. The European Union states that the revision took effect on 1 December 2011 and that the amount of the additional fee is proportionate to the length of the runway extension, compared to the length of the general runway.80
6.20.
The United States' claims of non-compliance do not include the Bremen Airport runway extension measure.81

6.2.2.5 Revision of the terms of the Mühlenberger Loch lease agreement ("step" 29)

6.21.
The European Union asserted in its first written submission that the Mühlenberger Loch lease agreement was amended on 30 November 2011 to include a premium of EUR [***] per square metre per year (paid monthly in the amount of EUR [***] per square metre).82 According to the European Union, this change aligned the terms of the lease with the market so that it no longer conferred a "benefit" upon Airbus, within the meaning of Article 1.1(b) of the SCM Agreement, thereby procuring the withdrawal of the subsidy for compliance purposes.83

6.2.2.6 Termination of the A340 programme ("step" 33)

6.24.
We observe that the reason given for the termination of the A340 programme in the decision of the Airbus Shareholder Committee formally bringing the programme to an end on 19 October 2011 related to the fact that "[***]".87 In particular, the decision of the Airbus Shareholder Committee explains that "[***]", with the members of the Shareholder Committee furthermore noting that "[***]".88 Moreover, the European Union has explained in this proceeding that the A340 programme "fail{ed} because of its fuel-burn penalty compared to the 777."89 Thus, it is apparent that the decision to terminate the A340 programme in October 2011 was not taken in response to the recommendations and rulings adopted by the DSB, but rather simply because of its commercial "failure".

6.2.3 Events that occurred before the adoption of the recommendations and rulings by the DSB

6.2.3.1 Payment by Airbus of outstanding LA/MSF obligations of EUR 1.7 billion ("step" 25)

6.25.
The European Union's Compliance Communication describes one of its 36 alleged compliance "steps" as "{p}ayment by Airbus, other than on deliveries under previously existing contractual terms, with respect to outstanding MSF obligations in the amount of approximately EUR 1,704,775,000".90 The United States asserts that this "step" refers to the payment made by DaimlerChrysler Aerospace AG (DASA91) to the German Federal Government pursuant to a debt settlement in 1997 and 1998. According to the United States, the same debt settlement was considered by the panel in the original proceeding.92

6.2.3.2 Share transactions and cash extractions involving subsidy recipients ("step" 30)

6.28.
In the original proceeding, the European Communities argued that the same events had "extinguished" and "extracted" all of the challenged subsidies. In this compliance dispute, the European Union makes the same submission, arguing in the light of its own interpretation of what it means to comply with the terms of Article 7.8 of the SCM Agreement, that the alleged "extinction" and "extraction" of the relevant subsidies means that they have been "withdrawn" or are no longer causing present "adverse effects".

6.2.3.3 Termination of A300 and A310 programmes ("steps" 31 and 32)

6.30.
The A300 and A310 programmes were terminated on 31 July 2007.96 The European Union relies upon the termination of these programmes to support its submission that there can no longer be any present adverse effects related to the A300 and A310.97 We note, however, that the United States makes no claims of "serious prejudice" in relation to any market displacement or impedance, or lost sales, involving the A300 and A310. Nevertheless, the United States asserts that the termination of the A300 and A310 programmes "had nothing to do with compliance", but rather reflected the fact that the "terminated models were no longer competitive and had been replaced by newer, LA/MSF-funded Airbus LCA", in particular, the A330, A350XWB-800 and "sometimes" the A350XWB-900.98
6.32.
In our view, this statement makes clear that, as with the termination of the A340 programme, the decision to terminate the A300 and A310 programmes was solely motivated by Airbus' commercial interests and, therefore, unrelated to the WTO dispute concerning the alleged subsidization of Airbus that was ongoing at the time between the United States and the European Union and certain member States.

6.2.4 Events and alleged events that overlapped the adoption of the recommendations and rulings by the DSB

6.2.4.1 Completed deliveries and performance of sales contracts ("step" 34)

6.34.
The European Union explained in its written submissions that what it meant when it referred to the completion of performance of a sales contract, was the delivery of an LCA to a customer in accordance with the terms of the order found to constitute a "lost sale" causing serious prejudice to the United States' interests in the original proceeding. The European Union maintains that by delivering the LCA to its customer in this way, "the {lost} sales are … completed and cease to exist in the present".100 For the European Union, this implies that the "United States has failed to demonstrate that significant lost sales …, as found in the original proceedings, have not been removed"101 and, therefore, that the European Union and certain member States have not achieved compliance with respect to those specific transactions. In other words, the European Union submits that the delivery of an LCA under a sales contract that was the subject of a finding of "lost sales" in the original proceeding brings that "lost sale" to an end and, therefore, also ends the "serious prejudice" to the United States' interests.

6.2.4.2 Post-launch investments in Airbus A320 and A330 programmes ("step" 35)

6.2.4.3 "Attenuation" of "any causal link" through "further intervening events" ("step" 36)

6.2.5 Conclusion

6.3 Whether the United States has presented a prima facie case

6.44.
The European Union maintains that the United States has failed to satisfy its burden of presenting a prima facie case of non-compliance and, therefore, that the entirety of the United States' complaint must be rejected.110
6.45.
The European Union submits that in order to make a prima facie case of non-compliance in this dispute, the United States was required to "make a claim, assert fact, adduce evidence and develop argument"111 in respect of each of its claims of WTO-inconsistency in its first written submission. However, according to the European Union, the United States' first written submission is "so deficient and so bereft of substance" that it falls short of this standard.112 In particular, the European Union argues that the United States' first written submission not only neglected to address the need to establish the existence of subsidies after the end of the implementation period, taking into account the Appellate Body's guidance on inter alia the extent to which the "life" of a subsidy will come to an end113, but it also failed to speak to the need to show that any existing subsidies are a "genuine and substantial" cause of present adverse effects, taking into account inter alia the properly determined "lives" of subsidies, an appropriate reference period and correctly defined product markets.114 The European Union maintains that the United States' failure to address these matters in its first written submission is "fatal" to the United States' complaint, "a matter {that} cannot be rectified without infringing {the European Union's} due process rights".115 Consequently, the European Union submits that, as a matter of law, the Panel must dismiss the entirety of the United States' claims of non-compliance.116
6.46.
The United States rejects the European Union's contentions117, arguing that the European Union's characterization of what is required to discharge its prima facie burden of proof seeks to force the United States into bearing the burdens of both establishing the European Union's non-compliance and addressing in advance the arguments that the European Union raised in its first written submission to attempt to establish compliance.118 According to the United States, the burden that falls upon a complaining Member in an Article 21.5 compliance dispute requires it to advance a prima facie case that measures taken to comply do not exist or, if they do exist, that such measures are inconsistent with the covered agreements. In the specific context of Article 7.8 of the SCM Agreement, the United States argues that the burden of demonstrating that any declared measures taken to comply do not exist will have been satisfied if the complaining Member shows that those measures do not withdraw the subsidy or remove its adverse effects. Similarly, the United States submits that the burden of establishing that declared measures taken to comply are inconsistent with the covered agreements will have been met by a complaining Member if it demonstrates that those measures are insufficient to bring the implementing Member fully into conformity with its obligations under Article 7.8.119
6.47.
As regards the "lengthy list" of matters the European Union argues the United States was required to address in its first written submission, the United States maintains that the issues the European Union identifies "might provide defenses to a claim under Article 5 of the SCM Agreement, in circumstances not present in this dispute", or "represent novellegal theories … that find no support in the SCM Agreement or WTO jurisprudence", or even be "potentially, but not necessarily, relevant to a finding under Article 5".120 However, according to the United States, they have "little to do" with what is required to make out a prima facie case of non-compliance with Article 7.8 of the SCM Agreement.
6.48.
We do not understand there to be any disagreement between the parties that it is for the United States to establish the European Union's non-compliance in this dispute, and that it is for the European Union to rebut any prima facie case advanced by the United States, including by raising and substantiating its own affirmative defences. Not surprisingly, however, when it comes to understanding exactly what the United States must demonstrate in order to discharge its prima facie burden of proof, the parties have presented diverging positions, in large part, due to the different views expressed about the scope of this compliance dispute, how the notion of compliance should be given effect under the terms of Article 7.8 of the SCM Agreement and the substance and implications of the legal and factual findings made by the panel and the Appellate Body in the original proceeding. For instance, one of the main reasons the European Union advances to support its contentions about the United States' failure to make a prima facie case is that the United States made no attempt in its first written submission to establish that subsidies exist in the post-implementation period. Yet, in order to accept that the United States' submissions were deficient in this regard, we must first of all be satisfied that the United States was legally required to make such a demonstration. According to the United States, it was under no such obligation. Similarly, the European Union maintains that the United States' causation arguments should have taken into account inter alia the "present amounts of alleged subsidies". Again, however, the extent to which the United States was required to do so in order to establish a prima facie case is a matter in dispute between the parties.
6.49.
Ultimately, therefore, the merits of the European Union's submission that it has "no case to answer" in this proceeding rests in large part upon the correctness of its own legal theory of compliance and understanding of the scope of this dispute, its own interpretation of the findings made in the original proceeding and its own views about the meaning and probative value of the facts and evidence the parties have, or allegedly should have, submitted. It follows that in order to address the European Union's allegations concerning the United States' failure to make a prima facie case, we must assess the merits of the parties' arguments with respect to all of these matters.
6.52.
We now turn to review the substance of the United States' complaint of non-compliance, starting by first of all addressing the parties' arguments concerning the scope of this compliance proceeding.

6.4 The scope of this compliance proceeding

6.4.1 The A350XWB LA/MSF measures

6.4.1.1 Introduction

6.54.
Airbus abandoned the Original A350 programme less than two years after its launch, with key Airbus clients and industry analysts questioning its ability to compete effectively with the lighter, more fuel-efficient, Boeing 787.128 Airbus publicly unveiled a "concept" for a substantially redesigned version of the Original A350 – the A350XWB – at the Farnborough Air Show in July 2006129, formally launching it on 1 December 2006.130
6.55.
As they did with respect to prior models of Airbus LCA, the governments of France, Germany, Spain, and the United Kingdom supported the A350XWB programme with LA/MSF. After publicly signalling their support for the new programme in July 2006131, the Airbus governments formally entered into negotiations with Airbus for LA/MSF in late 2008, individually agreeing on its terms on different dates between [***].132
6.56.
The United States claims that the new A350XWB LA/MSF measures are subsidies, which either alone or in conjunction with the pre-A350XWB LA/MSF subsidies found to cause adverse effects in the original proceeding, continue to cause adverse effects today, thereby evidencing the relevant European Union member States' failure to comply with the recommendations and rulings adopted by the DSB. Accordingly, and despite not being identified as a "measure taken to comply" in the European Union's Compliance Communication, the United States maintains that the A350XWB LA/MSF measures fall within the scope of our terms of reference in this compliance dispute. We examine the merits of the United States' position in the following analysis.

6.4.1.2 Arguments of the United States

6.57.
The United States argues that the alleged A350XWB LA/MSF subsidies fall within the scope of this compliance proceeding on the basis of three related grounds. The first, and we believe principal, line of argument advanced by the United States draws from the case law developed by panels and the Appellate Body concerning the question whether a measure that is not a declared "measure taken to comply" (i.e. an "undeclared" measure) may fall within a compliance panel's terms of reference. The United States submits that the relevant case law in this area establishes that an "undeclared" measure may properly fall within the scope of a compliance panel's terms of reference when it has a particularly close relationship (i.e. a "close nexus") to the original measures subject to DSB recommendations and rulings and the declared "measures taken to comply", based on a consideration of the nature, effects and timing of those measures and the factual and legal background against which any compliance measures are adopted.133 The United States maintains that an examination of all of these factors confirms that, in the present instance, a "close nexus" exists between the alleged A350XWB LA/MSF subsidies, the LA/MSF subsidies found to cause adverse effects in the original proceeding and the European Union's alleged compliance measures, implying that the A350XWB LA/MSF measures must fall within the scope of this compliance proceeding.
6.59.
The United States recalls that the Appellate Body has examined the effects of an undeclared measure in the context of a close nexus analysis by considering whether it "undermine{s}"135 or "potentially negate{s}"136 a valid compliance measure137, and whether it "may have an effect on … whether the original measure, which was found to be inconsistent … has been brought into conformity".138 The United States submits that applying this standard to the alleged A350XWB LA/MSF subsidies leads to the conclusion that their effects are such that they should be brought into the scope of this compliance proceeding. In particular, the United States argues that the alleged A350XWB LA/MSF subsidies have similar, or even identical, effects to the LA/MSF subsidies found to cause adverse effects in the original proceeding. The United States asserts in this regard that A350XWB LA/MSF enabled Airbus to launch the A350XWB as a new model of LCA intended to "fill the holes in the product line created by the A340's inability to compete with the 777 and the aging of A330 technology".139 In other words, according to the United States, A350XWB LA/MSF was provided for the purpose of bringing one Airbus LCA product into existence with a view to replacing another subsidized Airbus LCA product in the same twin-aisle segment in which the United States was found to have suffered adverse effects in the original proceeding.140 Thus, while denying that the measures declared in the European Union's Compliance Communication moved the European Union and relevant member States closer to achieving compliance, the United States considers that these effects of A350XWB LA/MSF would "directly negate" any valid compliance measures.141
6.60.
The United States submits that a consideration of the timing of the relevant measures and the adopted recommendations and rulings "cements the conclusion" that a close nexus exists between them and, therefore, that the A350XWB LA/MSF measures fall within the scope of this compliance proceeding.142 In particular, drawing from the case law in this area, the United States recalls that it has been previously held that measures pre-dating the DSB's adoption of recommendations and rulings, such as the A350XWB LA/MSF measures, may properly fall within the scope of a compliance proceeding.143 The United States notes in this regard that the Appellate Body affirmed in US – Zeroing (EC) (Article 21.5 – EC) that a close nexus existed even when the "undeclared" measure was enacted one to two years before the DSB's recommendations and rulings.144 The United States asserts that the timing of the negotiation, grant and disbursement of the A350XWB LA/MSF measures overlaps with the issuance of the original panel and Appellate Body reports, their adoption by the DSB and the European Union's declared compliance measures.145 Thus, the United States argues that the "evolution of LA/MSF for the A350XWB has moved in tandem with this dispute" as well as the European Union's efforts to comply with the DSB recommendations and rulings, revealing the existence of a close relationship between the "most recent LA/MSF measures and the subsidized LA/MSF" measures found to cause adverse effects in the original proceeding.146
6.61.
Finally, the United States argues that the close relationship existing between the alleged A350XWB LA/MSF subsidies, the LA/MSF subsidies found to cause adverse effects in the original proceeding and the European Union's alleged compliance measures is also apparent when the factual and legal background to the A350XWB LA/MSF measures is considered. In this regard, the United States points to, for example, "the more than 40 years of history of EU member State funding for all Airbus civil aircraft models" in the form of LA/MSF, the fact that EADS' financial statements account for A350XWB LA/MSF in the same way as all prior LA/MSF, and a statement in the preamble to the Spanish A350XWB LA/MSF contract noting the existence of a "system of refundable advances" that has been used to fund all previous Airbus LCA programmes.147
6.62.
The second line of argument the United States advances to support its contention that the alleged A350XWB LA/MSF subsidies fall within the scope of this proceeding is that they replace the subsidies found to cause adverse effects in the original proceeding in respect of the same twin‑aisle segment of the market for LCA. The United States recalls in this regard that the Appellate Body has found that "a Member would not comply with the obligation in Article 7.8 to withdraw the subsidy if it leaves an actionable subsidy in place, either entirely or partially, or replaces that subsidy with another actionable subsidy".148 To this extent, the United States argues that the A350XWB LA/MSF measures would allow the European Union to "evade its obligations by replacing one WTO-inconsistent measure with another".149
6.63.
Lastly, the United States maintains that the A350XWB LA/MSF measures should be considered in this compliance proceeding because excluding them would allow the European Union to circumvent its obligation to comply with the DSB recommendations and rulings with respect to LA/MSF for the A300, A310, A330 and A340. The United States argues that a measure that would allow a Member to circumvent the recommendations and rulings of the DSB may also fall within the scope of a compliance proceeding regardless of its nature and/or timing. Thus, according to the United States, LA/MSF for the A350XWB needs to be evaluated within the terms of reference of this dispute to properly determine if the European Union and relevant member States have complied. Otherwise, the distinction between the A350XWB and other models of subsidized Airbus twin-aisle LCA would provide the European Union with a mechanism to circumvent compliance with respect to the DSB recommendations and rulings concerning the A330 and A340 and their derivatives.150

6.4.1.3 Arguments of the European Union

6.64.
The European Union submits that "implicit" in every Appellate Body report that has considered whether an undeclared measure may be properly determined to fall within the scope of a compliance proceeding is an "understanding" that any such measures "should be limited" to instances of the application of the same "overarching measure" at issue in the original proceeding and before the compliance panel.151 The European Union notes that the United States failed to allege the existence of an "overarching measure" in its request for the establishment of the compliance panel, and submits that, for this reason alone, the A350XWB LA/MSF measures must be found to fall outside of the scope of this proceeding.152 In any case, the European Union argues that the A350XWB LA/MSF measures and the pre-A350XWB LA/MSF measures at issue in the original proceeding did not result from the application of an "overarching measure". In this respect, the European Union maintains that the United States' arguments purporting to demonstrate the existence of a close nexus between these measures rest on the same submissions concerning the alleged existence of the LA/MSF Programme that were rejected by the panel in the original proceeding.153 The European Union argues that, although the Appellate Body declared the original panel's findings with respect to the existence of the alleged LA/MSF Programme to be moot and of no legal effect, the reasoning underlying the panel's factual determinations is nevertheless instructive.154 Accordingly, the European Union asks the Panel to "remain consistent with the findings of fact that it made sitting as the original panel in the original proceedings"155 and conclude that the A350XWB LA/MSF measures are outside of the scope of this compliance dispute because no "overarching measure" was found to exist with respect to the pre-A350XWB LA/MSF measures in the original proceeding.156
6.65.
The European Union argues that an examination of the relevant measures' nature, effects and timing, within the context of the application of the close nexus test, "serves to confirm" this conclusion.157
6.66.
As to the nature of the relevant measures, the European Union argues that LA/MSF for the A350XWB targets a different product to the LA/MSF measures at issue in the original proceeding.158 Moreover, even leaving aside the question whether the A350XWB is a similar product to prior Airbus twin-aisle LCA, the European Union argues that similar product coverage and country coverage, alone, are not enough to establish the requisite close nexus.159 The European Union furthermore submits that the nature of A350XWB LA/MSF is significantly different from the nature of previous LA/MSF because it was provided more than two years after the first order was received for the A350XWB; whereas LA/MSF provided for other Airbus aircraft was "generally" entered into much closer to the launch of the relevant LCA.160 Similarly, the European Union notes that, unlike the LA/MSF provided for certain older models of Airbus LCA, LA/MSF for the A350XWB was not provided pursuant to any intergovernmental agreement related to the development of the A350XWB.161 The European Union also argues that the United States' reliance on the alleged similarity between the core terms of LA/MSF for the purpose of showing that the nature of the relevant measures is alike is misplaced. According to the European Union, the alleged similarity simply reflects the terms of long-term project financing, which is "ubiquitous in many Members".162
6.67.
As to the effects of the various measures, the European Union argues that the United States has not put forward an adequate analysis of the relationship of the measures' effects, as it has not demonstrated that any of the A350XWB LA/MSF measures: (a) is a subsidy or (b) causes adverse effects.163 For example, the European Union submits that the United States has not explained how financing that was provided several years after the launch of the A350XWB can be said to have the effect of enabling its launch.164 In any case, the European Union submits that the questions that are the focus of the United States' arguments concerning the effects of the relevant measures go to the substantive issues that are before the Panel in this compliance dispute. The European Union maintains that such matters cannot properly be part of a jurisdictional analysis.165
6.68.
As to the timing of the respective measures, the European Union submits that the terms and conditions of A350XWB LA/MSF were agreed to approximately [***]prior to the DSB's adoption of the recommendations and rulings in the original proceeding, and were not adopted "on or around" the time of adoption of the declared "measures taken to comply.166
6.69.
The European Union also submits that neither of the two additional grounds the United States advances to support its contention that the A350XWB LA/MSF measures fall within the scope of this proceeding are independent or stand-alone bases for making such a determination. Rather, according to the European Union, both additional United States arguments are simply potentially relevant considerations for an application of the close nexus test.167
6.70.
Finally, the European Union argues that the United States' position with respect to the A350XWB LA/MSF measures must be dismissed because it is ultimately premised on a view of the types of measures that may affect a Member's compliance with DSB recommendations and rulings that suggests that once a Member is found to have granted an actionable subsidy in a particular sector, any future alleged subsidy in the same sector may be a matter for a compliance proceeding. According to the European Union, this would represent an "extremely expansive notion" of the scope of a compliance proceeding, which would have significant implications for other areas of WTO law.168

6.4.1.4 Arguments of the third parties

6.4.1.4.1 Australia

6.71.
Australia considers that LA/MSF for the A350XWB is within the scope of the compliance proceeding.169 Australia considers that a Member that has successfully argued that its interests are adversely affected by payment of a subsidy should not be required to bring a fresh action with respect to financial contributions made on the same legal basis as those found to be WTO‑inconsistent. In Australia's view, to find otherwise would oblige the complaining Member to become embroiled in a litigation loop of periodic challenges under the SCM Agreement and would deny that Member a remedy under Article 7.8 of that Agreement, a result contrary to the object and purpose of the WTO dispute settlement system, including DSU Articles 3 and 21.170
6.72.
For Australia, a finding that only the original LA/MSF measures are within the scope of this Article 21.5 proceeding would lead to the compliance proceeding being restricted to the re‑examination of the same measures at issue in the original proceeding, rather than the existence or consistency of measures taken to comply. Australia considers that such an unduly restrictive interpretation has previously been rejected by the Appellate Body, and ignores the fact that Article 21.5 proceedings often concern the consistency of a new measure taken to comply with the recommendations and rulings in the dispute.171

6.4.1.4.2 Brazil

6.73.
According to Brazil, the principles of protecting the effectiveness of the WTO dispute settlement system and ensuring prompt compliance and an effective resolution of disputes suggest that LA/MSF for the A350XWB is within the scope of the compliance proceeding. Brazil considers that the Panel should not adopt an overly formalistic approach to its terms of reference, and rather approach the issue in terms of the context in which the measures taken to comply are being applied.172 Brazil notes that, while it does not consider that just any measure that shares features with the original measure or the measure taken to comply could be challenged in an Article 21.5 proceeding, an overly narrow approach to a compliance panel's terms of reference would undermine the effectiveness of the dispute settlement process. In Brazil's view, a very similar type of subsidy, in support of a very similar product, produced by the same recipient company around that time that closely related subsidy measures were found to be WTO-inconsistent, is a measure that can and must be included in an examination of "measures taken to comply".173
6.74.
In terms of the nature of the measures, Brazil considers that the subject matter of LA/MSF for the A350XWB – LA/MSF to support Airbus twin-aisle large civil aircraft – is sufficiently similar to the subsidies to Airbus twin-aisle large civil aircraft analysed in the original proceeding to warrant its inclusion in the scope of this compliance proceeding. Moreover, Brazil considers that, given the competitive overlap between the A350XWB and similar Airbus twin-aisle aircraft covered by the recommendations and rulings of the DSB, LA/MSF support for the A350XWB could affect implementation. Brazil considers that whether this is ultimately the case is a substantive issue to be demonstrated by the United States; however, the similarity in possible effects of LA/MSF for the A350XWB further reinforces the close nexus between the original LA/MSF measures addressed in the original panel and Appellate Body reports, the alleged measures taken to comply, and the LA/MSF measures for the A350XWB. Finally, Brazil refers to Appellate Body statements that measures that predate the adoption of the original panel and Appellate Body reports can be included in the context of an Article 21.5 proceeding as "measures taken to comply" so long as there is a sufficiently close nexus in terms of the nature and effects of the measures.174

6.4.1.4.3 China

6.75.
China submits that, in order for a measure to be subject to review by a compliance panel, it must be either: (a) a declared "measure taken to comply", (b) a measure otherwise constituting a "measure taken to comply" because of its "express link" with the recommendations and rulings of the DSB in the original proceeding, (c) a measure not in itself a "measure taken to comply" but having a "particularly close relationship" to the declared "measure taken to comply" and to the DSB's recommendations and rulings, or (d) in a subsidy case, a replacement subsidy which replaces the one found to be WTO-inconsistent in the original proceeding.175 China considers that LA/MSF for the A350XWB does not fall within any of these four categories, and is therefore not within the panel's terms of reference.
6.76.
China argues that there is no "declared" measure taken to comply with respect to the A350XWB, nor is there a measure that could be considered a "measure taken to comply" on the basis of an "express link" with the recommendations and rulings of the DSB. China notes that the panel in the original proceeding dismissed the United States' claim that an alleged commitment to provide LA/MSF for the Original A350 constituted a specific subsidy. Neither party appealed this finding, and the conclusion adopted by the DSB should be treated as a final resolution of that claim.176 As there were no recommendations or rulings concerning the A350, the European Union bears no obligation to take any measure to bring about compliance in this respect. China considers that it is therefore not possible for any measure to have an "express link" to the non-existing DSB's recommendations and rulings concerning the A350. Because LA/MSF for each Airbus LCA model was considered to be separate and distinct, and because no LA/MSF Programme covering all Airbus LCA was found to exist, there is no basis for the United States to assert that LA/MSF for the A350XWB has a particularly close relationship to either LA/MSF for the A350 or other LA/MSF for twin-aisle LCA.177
6.77.
China considers erroneous the United States' argument that A350XWB is a replacement subsidy for earlier LA/MSF measures that the European Union claims to have withdrawn. According to China, in US – Upland Cotton (Article 21.5 – Brazil), the Appellate Body's conclusion that the marketing loan payments and counter-cyclical payments were properly within the scope of the compliance proceeding was made in the context where the payments were annual, recurring payments made under unchanged regulatory provisions.178 China distinguishes this from the present proceeding, in which there are no findings on the existence of a LA/MSF Programme. Additionally, the disbursements of funds under each of the challenged LA/MSF measures are not recurrent. China considers there is no factual basis to establish that A350XWB LA/MSF is a "replacement subsidy" in relation to "any earlier WTO-inconsistent LA/MSF measures" which are actually all separate from and parallel to each other. Finally, China submits that there is no distinct ground for including a measure within the scope of a compliance proceeding according to whether its exclusion would permit circumvention of the DSB's recommendations and rulings. Rather, this is a factor to be considered as part of the integrated analysis of whether there is a "particularly close relationship" between the "undeclared" measure, the "declared" measures taken to comply and the recommendations and rulings of the DSB.179

6.4.1.4.4 Japan

6.78.
Japan considers that the "close nexus" test should be applied in this and any compliance proceeding, to determine whether a measure is properly before the compliance panel.180 In Japan's view, overly narrow terms of reference for an Article 21.5 panel would undermine the effectiveness of the dispute settlement process. Japan notes that the Appellate Body has found that a relatively wide range of measures not covered by the original proceeding were within the scope of Article 21.5 proceedings.181 Japan considers that the concern expressed by the Appellate Body in US – Upland Cotton (Article 21.5 – Brazil)182 is sufficiently addressed by the criteria of the "close nexus" test. When properly applied, the requirements contained in the close nexus test, such as the timing, nature and effects of the contested measures, ensure the effectiveness of the disciplines of the SCM Agreement.
6.79.
Japan has concerns with the European Union's "overarching measure" approach.183 Japan does not deny that the presence of a common overarching measure may be a relevant factor in determining whether the undeclared measure at issue has a sufficiently "close nexus" with the declared measure taken to comply, and the recommendations and rulings of the DSB.184 However, Japan submits that the existence of a common overarching measure may be one of several factors to be considered in the assessment of whether there are sufficiently close links, in terms of timing, nature, and effects, between the undeclared measure at issue and the declared measure taken to comply and the recommendations and rulings of the DSB, and is neither a prerequisite nor a decisive factor as the European Union appears to posit.

6.4.1.5 Evaluation by the Panel

6.4.1.5.1 Introduction

6.4.1.5.2 The relevance and relationship of the existence of an "overarching measure" to the close nexus test

6.4.1.5.3 Application of the close nexus test

6.4.1.5.3.1 Nature

6.4.1.5.3.2 Effects

6.4.1.5.3.3 Timing