   
  
WT/DS316/44  
 
25 August 2020  
(20-5790) Page: 1/3 
  Original: English  
 
EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES  
AFFECTING TRADE IN LARGE CIVIL AIRCRAFT  
COMMUNICATION FROM THE EUROPEAN UNION  
The following communication, dated 21 August 2020 , was received from the delegation of the 
European Union  with the request that it be circulated to the Dispute Settlement Body (DSB).  
 
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Please find enclosed the European Union 's Third Compliance Communication in the above dispute, 
for circ ulation to the Members.  
 
A copy of this communication is being provided directly to the United States.  
 
 
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  WT/DS316/44  
 
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Notification of additional and extraordinary compliance measures that withdraw all 
remaining subsidies and constitute appropriate steps to remove adverse effects, 
substantially in excess of what is required by Article 7.8 of the SCM Agreement  
1. The Europe an Union1 refers to the recommendations and rulings of the WTO Dispute 
Settlement Body ( "DSB") with respect to the dispute European Communities and Certain member 
States – Measures Affecting Trade in Large Civil Aircraft  (WT/DS316), as altered by the first 
compliance panel report (WT/DS316/RW), as modified by the Appellate Body report 
(WT/DS316/AB/RW).2   
2. In the Second Compliance Communication, the European Union informed the DSB that, 
following the first compliance p roceedings and based on the relevant findings, it had taken further 
appropriate steps to bring its measures into conformity with its WTO obligations,3 particularly 
Article 7.8 of the SCM Agreement  and Article 19.1 of the DSU. Accordingly, the European Uni on 
had ensured full implementation of the DSB 's recommendations and rulings, such that there were 
no longer any subsidies causing adverse effects to the interests of the United States.4   
3. The second compliance panel report (WT/DS316/RW2)5 confirmed th at the European Union 
had taken further appropriate steps to withdraw the subsidies and/or remove the adverse effects, 
but concluded that the European Union had not yet achieved compliance.  On 6 December 2019, 
the European Union appealed a number of serio us legal errors in the second compliance panel 
report, arguing that compliance was achieved by: (i) complete repayment of UK A350XWB MSF; 
(ii) alignment of German A350XWB MSF with a contemporaneous market benchmark; (iii) 
amortisation of Spanish A380 MSF; and (iv) termination of the A380 programme.6 Indeed, in 
significant parts of its report, the second compliance panel abandoned established WTO case law 
that was supported by and previously applied to the United States, notably by departing from the 
princi ple that compliance obligations are prospective only, such that there is no obligation to re -
pay benefit that has flowed in the past.  The second compliance panel report represents a serious 
assault on the European Union 's rights and a lack of even -handedn ess relative to the treatment 
afforded the United States in DS353.  
4. Although the Appellate Body issued a Working Schedule, the United States failed to engage 
in the proceedings. Substantively, however, the United States has accepted the second compliance  
panel 's findings, having elected not to file a notice of other appeal and other appellant 's 
submission by the deadline set by the Appellate Body.  Instead, the United States has continued to 
unlawfully obstruct appointments of new Appellate Body members, resulting in suspension of the 
appellate proceedings.  The United States is thereby denying the European Union final resolution of 
the dispute and foreclosing any possibility for the European Union to obtain a multilateral 
confirmation of compliance.  
5. On 2 October 2019, the arbitration panel issued a decision under Article 22.6 of the DSU 
approving US countermeasures of USD 7.5 billion annually. The arbitration panel report also 
contains multiple legal errors that would not withstand appellate review.  No tably, it was wholly 
unreasonable to award countermeasures on an annual basis, for an essentially indefinite period of 
 
1 Unless the context otherwise requires, as a matter of WTO law, references in this document to the 
European Union include the "certain member States " (France, Germany, Spain and the United Kingdom) 
against which the United States commenced this dispute.  
2 Reference s in this communication to the  compliance  panel report , as modified by the Appellate Body 
Report , also encompass the compliance Appellate Body Report itself.   The first compliance panel and the 
Appellate Body reviewed a first set of compliance mea sures. See: First Compliance Communication, 
WT/DS316/17, 1 December 2011.  
3 WT/DS316/34, 18 May 2018.   
4 This Third Compliance Communication builds upon and should be read together with the Second 
Compliance Communication, the content of which the European Union refers to and incorporates by reference, 
but does not repeat.  
5 2 December 2019.  
6 The European U nion refers to its notice of appeal for a more complete identification of the errors of law 
and legal interpretation committed by the second compliance panel.  See WT/DS316/43, 6 December 2019.  WT/DS316/44  
 
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  time, when compliance proceedings (of which the arbitration panel was fully informed) had already 
established the absence of any signific ant continuing benefit and the termination of the A380 
programme.  The resulting amount of countermeasures is consequently unjustified.  
6. The second compliance panel and the arbitration panel, along with the United States ' 
obstruction of appointments of new Appellate Body members, have thus created a situation where 
the European Union is trapped by the prospect of an essentially indefinite authorisation of 
countermeasures, unilaterally maintained by the United States, coupled with a denial of any legal 
recourse to demonstrate compliance. This represents a complete failure to safeguard the core of 
the WTO 's dispute settlement function, which is to ensure the security and predictability of a rules -
based multilateral trading system.  
7. In these circumstances,  given the extremely unfavourable economic conditions created by 
the Covid -19 crisis, and with a view to achieving a situation in which there are no 
countermeasures on either side, so that both LCA producers and other affected or potentially 
affected econo mic operators are properly able to contribute to a global recovery,  the European 
Union has now procured additional and extraordinary measures with respect to the remaining two 
subsidies.  These additional and extraordinary measures go far beyond anything that is required 
by Article 7.8 of the SCM Agreement .  They fully withdraw the remaining two subsidies even 
though they were no longer causing adverse effects, and they also constitute steps to remove 
adverse effects that no longer exist. This means that, on any view, including that of the United 
States, which has not cross -appealed the second compliance panel report, compliance has now 
been achieved.  These additional and extraordinary measures consist of:  
• the amendment of the French A350XWB MSF loan agreement so as to align the terms of 
the financial instrument on a market benchmark prevailing at the time of the original 
measure, with prospective effect from the date of the amendment; and,  
• the binding agreement to amend the Spanish A350XWB MSF lo an agreement so as to align 
the terms of the financial instrument on a market benchmark prevailing at the time of the 
original measure, with prospective effect from the date of the amendment.  
8. In effect, these measures impose a financial burden on the Eu ropean Union 's participant in 
the large civil aircraft industry that is not required in order to discharge the European Union 's 
compliance obligations, effectively imposing on it a competitive disadvantage vis -à-vis the United 
States ' participant in the in dustry. The amounts involved are substantial. The details of the 
measures have been confidentially communicated to the United States.  
9. The European Union has procured these additional, extraordinary and costly compliance 
measures in an effort to persuade  rational and reasonable stakeholders in the United States, 
including consumers, employers, workers, government officials and entities, airlines and other 
economic operators, that now is the time to draw a line under these disputes.  It is not in the 
interests of anyone that the European Union and the United States now proceed to, or continue, 
mutually assured retaliation, and certainly not in the current economic climate. Instead of 
progressively stepping -up retaliatory measures, we should step them down, coming rapidly to the 
point at which there are no countermeasures applied on either side.  This proposition is consistent 
with the fact that the European Union, like the United States, believes in the mutual benefits of 
open and fair trade. The step that w e have now taken represents our contribution to both parties 
moving in that direction. We believe that the next step should be to achieve the absence of 
countermeasures on both sides. Only in this way will we create an environment that will best allow 
both aircraft manufacturers and their airline customers around the world, and indeed other sectors 
that would otherwise be subject to countermeasures, to weather the current economic crisis and 
contribute to a global recovery.  
 
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