19-May-2011 9:57 AM

WTO hands down final ruling on US case of Airbus subsidies

World Trade Organisation's Appellate Body announced (18-May-2011) the following key finding on the complaint by the US against the EU, as well as France, Germany, Spain and the UK concerning measures affecting trade in large civil aircraft. The body:

  • Upheld the finding that certain subsidies provided by the EU and certain member state governments to Airbus have caused serious prejudice to the interests of the US. The principal subsidies covered by the ruling include financing arrangements - "launch aid" or "Member State financing" - provided by the four nations for the development of the A300, A310, A320, A330/A340, A330-200, A340-500/600 and A380 aircraft;
  • The ruling also upheld the ruling certain equity infusions and certain infrastructure measures provided by the French and German governments to companies that formed part of the Airbus consortium harmed US interests.

The body found that the effect of the subsidies was to displace exports of Boeing aircraft sales from the EU, Chinese and Korean markets and Boeing narrowbody sales from the Australian market. The body confirmed the determination that the subsidies caused Boeing to lose sales of aircraft in the campaigns involving the A320 (Air Asia, Air Berlin, Czech Airlines and easyJet), A340 (Iberia, South African Airways and Thai Airways) and A380 (Emirates, Qantas and Singapore Airlines).

The body excluded certain measures from the scope of the finding of serious prejudice. In particular:

  • 1998 transfer of a 45.76% interest in Dassault Aviation to Aérospatiale;
  • Special purpose facilities at the Mühlenberger Loch industrial site in Hamburg, the Aéroconstellation industrial site and associated facilities in Toulouse and the various research and technology development (R&TD) measures that had been challenged by the US;
  • 1986-1993 R&TD grants by the French government;
  • Grants by the German Federal and Bavarian, Bremen and Hamburg authorities;
  • UK government civil aircraft research and development and aeronautics research programmes.

The body also reversed findings of displacement in Brazil, Mexico, Singapore and Chinese Taipei, and of threat of displacement in India.

The body disagreed with the WTO's panel views on when subsidies can be considered as being de facto contingent upon anticipated export performance. Consequently, it reversed the findings that the financing provided by Germany, Spain and the UK to develop the A380 was contingent upon anticipated exportation and thus a prohibited export subsidy.

The body also rejected the US’ cross-appeal of the finding that it had not been established that certain other Member State financing contracts constituted prohibited export subsidies. As a consequence, the body reversed the WTO recommendation that the EU withdraw prohibited subsidies within 90 days.

The body also found that the US' claims regarding an alleged unwritten launch aid/Member State financing programme were outside its jurisdiction.

The body reversed the WTO panel's findings regarding the rate of return that a market lender would have demanded for launch aid/member State financing loans because they were not based on an objective assessment; but found that a benefit was conferred even on the basis of the EU's calculations.

With respect to the actionable subsidies that have been found to cause adverse effects to the interests of the US, the WTO recommendation that the EU “take appropriate steps to remove the adverse effects or … withdraw the subsidy” stands.

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