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See also: One-page summary of key findings of this dispute
Complaint by Brazil.
On 10 March 1997, Brazil requested consultations with Canada in respect of certain subsidies granted by the Government of Canada or its provinces intended to support the export of civilian aircraft. The request was made pursuant to Article 4 of the SCM Agreement. Brazil contended that these measures are inconsistent with Article 3 of the SCM Agreement.
Panel and Appellate Body proceedings
On 10 July 1998, Brazil requested the establishment of a panel. At its meeting on 23 July 1998, the DSB established a panel. The European Communities and the United States reserved their third party rights. On 16 October 1998, Brazil requested the Director-General to determine the composition of the Panel. On 22 October 1998, the Panel was composed. On 14 April 1999, the panel report was circulated to Members. The panel found that certain of Canada’s measures were inconsistent with Articles 3.1(a) and 3.2 of the SCM Agreement, but rejected Brazil’s claim that EDC assistance to the Canadian regional aircraft industry constitutes export subsidies.
On 3 May 1999, Canada notified the DSB of its decision to appeal certain issues of law and legal interpretations developed by the panel. On 2 August 1999, he Appellate Body report was circulated to Members. The Appellate Body upheld the findings of the panel.
At its meeting on 20 August 1999, the DSB adopted the Appellate Body report and panel report, as upheld by the Appellate Body report.
At the DSB meeting on 19 November 1999, Canada announced that it had withdrawn the measures at issue within 90 days and thus had implemented the recommendations and rulings of the DSB.
On 23 November 1999, Brazil requested the establishment of a panel under Article 21.5 because it believed that Canada had not taken measures to comply fully with the rulings and recommendations of the DSB. Brazil and Canada also notified the DSB of an agreement concerning procedures under Articles 21 and 22 of the DSU and Article 4 of the SCM Agreement. At its meeting on 9 December 1999, the DSB agreed to refer to the original panel the matter raised by Brazil. Australia, the European Communities and the United States reserved their third-party rights. On 17 December 1999, the compliance panel was composed.
On 9 May 2000, the compliance panel report was circulated to Members. The compliance panel found:
- that Canada had implemented the recommendation of the DSB by withdrawing the Technology Partnership Canada (TPC) assistance to the Canadian regional aircraft industry within 90 days,
- but that Canada had failed to implement the recommendation to withdraw the Canada Account assistance to the Canadian regional aircraft industry within 90 days.
With regard to the latter finding, the compliance panel considered that the measures taken by Canada were not sufficient to ensure that future Canada Account transactions in the Canadian regional aircraft sector would be in conformity with the interest rate provisions of the OECD Arrangement and would thereby qualify for the safe haven in item (k) of Annex I of the Subsidies Agreement. The compliance panel therefore concluded that Canada’s measures did not ensure that such Canada Account transactions would not be prohibited export subsidies.
On 22 May 2000, Brazil notified the DSB of its decision to appeal certain issues of law and legal interpretations developed by the compliance panel.
On 21 July 2000, the Appellate Body report was circulated to Members. The Appellate Body found that the compliance panel erred by declining to examine Brazil’s argument that the revised TPC programme was inconsistent with Article 3.1(a) of the SCM Agreement. However, the Appellate Body found that Brazil had failed to establish that the revised TPC programme was inconsistent with Article 3.1(a) of the SCM Agreement and, accordingly, that Brazil had failed to establish that Canada has not implemented the recommendations and rulings of the DSB.
At its meeting on 4 August 2000, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report.
Implementation of adopted reports
At the DSB meeting on 4 August 2000, Canada stated its intention to implement the recommendations of the DSB in respect of the Canada Account Programme.