  
  
WT/DS316/ARB  
 
2 October 2019  
(19-6150) Page: 1/156 
  Original: English  
 
  
EUROPEAN COMMUNITIES  AND CERTAIN MEMBER STATES – MEASURES 
AFFECTING TRADE IN L ARGE CIVIL AIRCRAFT  
RECOURSE TO ARTICLE 22.6 OF THE DSU BY T HE EUROPEAN UNION  
DECISION BY THE ARBI TRATOR  
BCI deleted, as indicated [[***]]  
 
 
 
 WT/DS 316/ARB 
 
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  TABLE OF CONTENTS  
 
1   INTRODUCTION  ................................ ................................ ................................ ........  12 
1.1   Original proceedings and compliance proceedings  ................................ ........................... 12 
1.2   Request for arbitration and arbitration proceeding  ................................ .......................... 13 
1.3   Second compliance proceedings  ................................ ................................ ................... 15 
2   PROCEDURAL MATTE RS ................................ ................................ .............................  15 
2.1   Page limits on parties' written submissions  ................................ ................................ ....15 
2.2   Treatment of BCI and HSBI  ................................ ................................ ......................... 16 
2.3   Public presentation of the parties' opening statements  ................................ .................... 16 
2.4   The European  Union's request for a  preliminary ruling  ................................ ..................... 17 
2.4.1    The European  Union's argument concerning Article  22.8 of the DSU  ............................... 18 
2.4.2    The European  Union's argument concerning non -retroactivity of WTO remedies  .............. 20 
2.4.3    Prior arbitration decisions referred to by the European  Union  ................................ ........ 20 
2.4.4    The European  Union's argument concerning the uniqueness of actionable subsidies disputes
 ................................ ................................ ................................ ................................ .......23 
3   MANDATE OF THE A RBITRATOR  ................................ ................................ ................  24 
4   BURDEN OF PROOF AND DUTY TO PRODUCE EVIDENCE  ................................ ............  25 
5   ARTICLE 7.10 OF THE SCM AGREEMENT  ................................ ................................ .... 26 
6   THE EUROPEAN UNI ON'S OBJECTION TO TH E LEVEL OF COUNTERME ASURES  ...........  28 
6.1   Overview of the partie s' approaches and order of analysis  ................................ ............... 28 
6.2   Absence of a reference to impedance in the United  States' request for countermeasures  .....29 
6.2.1    Coverage of the United  States' Article  22.2 request  ................................ ...................... 31 
6.2.2    Specificity of the United  States' Article  22.2 request  ................................ ..................... 33 
6.3   Assessment of the United  States proposed methodology  ................................ ................. 34 
6.3.1    Appropriateness of using the 2011 -2013 Reference Period and accepting Annual Suspension 
of concessions  ................................ ................................ ................................ ................... 34 
6.3.2    The appropriate counterfactual  ................................ ................................ .................. 46 
6.3.3    General European  Union arguments against the United  States methodology  .................... 47 
6.3.3.1    Exclusion of the value of past deliveries from the level of Annual Suspension  ............... 48 
6.3.3.2    Inclusion of both lost sales and impedance in determining the level of Annual Suspension: 
"Over -counting"  ................................ ................................ ................................ ................. 49 
6.3.3.2.1    Temporal assignment of the value of lost sales to the 2011 -2013 Reference Period  ....51 
6.3.3. 2.2   Temporal assignment of the value of impedance to the 2011 -2013 Reference Period  ..56 
6.3.3.2.3    Temporal assignment of the value of both lost sales and impedance to the  2011-2013 
Reference Period  ................................ ................................ ................................ ................ 57 
6.3.3.3    Inclusion of both lost sales and impedance in determining the maximum level of Annual 
Suspension: "Double -counting"  ................................ ................................ ............................ 57 
6.3.3.4    Setting of an end -date for countermeasures based on counterfactual Boeing deliveries 
resulting from the adverse effects determined to exist  ................................ ............................ 58 
6.3.3.5    Exclus ion of the value of Boeing LCA components produced outside the United  States  ...59 
6.3.4    Technical European  Union arguments against t he United  States' methodology  ................. 63 WT/DS 316/ARB 
 
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  6.3.4.1    Summary of the United  States' technical approach to valuing the adverse effects 
determined  to exist  ................................ ................................ ................................ ............ 64 
6.3.4.1.1    The United  States' valuation of lost sales  ................................ .............................. 65 
6.3.4.1.2    The United  States' valuation of impedance  ................................ ............................ 67 
6.3.4.1.3    Annualization of the average values of lost sales and impedance  .............................. 68 
6.3.4.2    Preliminary considerations  ................................ ................................ ..................... 69 
6.3.4.2.1    General evidentiary issues  ................................ ................................ ................... 69 
6.3.4.2.2    Closest competing models  ................................ ................................ ................... 73 
6.3.4.2.3    Product -market -specific countermeasures  ................................ ............................. 74 
6.3.4.2.4    Valuation of services  ................................ ................................ ........................... 76 
6.3.4.3    Issues surrounding the valuation of lost sales  ................................ ........................... 76 
6.3.4.3.1    Representativeness of the 2011 -2013 Reference Period  ................................ .......... 78 
6.3.4.3.2    Use of facts post -dating the lost sales  ................................ ................................ ...79 
6.3.4.3.3    United  States' perspective versus Boeing's perspective  ................................ ........... 81 
6.3.4.3.4    Number and models of aircraft sold and delivered in the counterfactual  .................... 82 
6.3.4.3.4.1    Failure to take actual cancellations into account  ................................ .................. 83 
6.3.4.3.4.2    Failure to take potential future cancellations into account  ................................ .....84 
6.3.4.3.4.3    Valuation of deposits and PDPs for counterfactually cancelled orders ...................... 87 
6.3.4.3.4.4    Failure to take conversions into account  ................................ ............................. 88 
6.3.4.3.5    Timing of Boeing's counterfactual deliveries  ................................ ........................... 91 
6.3.4.3.5.1    Failure to use Boeing delivery schedules  ................................ ............................. 91 
6.3.4.3.5.2    Failure to take deferrals of deliveries into account  ................................ ............... 92 
6.3.4.3.6    Delivery prices of Boeing's counterfactual deliveries  ................................ ............... 94 
6.3.4.3.6.1    Choice of the comparator orders  ................................ ................................ .......96 
6.3.4.3.6.2    Failure to use [[***]] escalation factors  ................................ ...........................  104 
6.3.4.3.6.3    Failure to perform necessary price adjustments  ................................ .................  105 
6.3.4.3.6.4    Discounting of Boeing's counterfactual delivery prices  ................................ ........  107 
6.3.4.3.7    Conclusion  ................................ ................................ ................................ ...... 112 
6.3.4.4    Issues surroundi ng the valuation of impedance  ................................ .......................  112 
6.3.4.4.1    Representativeness of the 2011 -2013 Reference Period  ................................ ........  114 
6.3.4.4.2    Number and models of increased Boeing counterfactual LCA deliveries  ...................  114 
6.3.4.4.2.1    Absence of an economic model  ................................ ................................ ....... 116 
6.3.4.4.2.2    Supply - and demand -side factors  ................................ ................................ .... 117 
6.3.4.4.2.3    Conclusion  ................................ ................................ ................................ .... 139 
6.3.4.4.3    Delivery prices  ................................ ................................ ................................ . 141 
6.3.4.4.4    Conclusion  ................................ ................................ ................................ ...... 143 
6.4   Calculation of countermeasures commensurate with the adverse effects determined to exist
 ................................ ................................ ................................ ................................ ..... 143 
 General approach  ................................ ................................ ................................ .. 143 
6.4.2    Valuation of lost sales  ................................ ................................ ............................  143 
6.4.3    Valuation of impedance  ................................ ................................ ..........................  146 WT/DS 316/ARB 
 
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  6.4.4   Aggregated annualized value of lost sales and impedance  ................................ ...........  147 
6.4.5    Countermeasures commensurate with the annualized value of the adverse effects 
determined to exist  ................................ ................................ ................................ ..........  149 
6.4.5.1    The "commensurate" 2013 Annual Suspension Value  ................................ ...............  150 
6.4.5.2    Adjustment of the annualized value of adverse effects determined to exist for inflation to 
the present day  ................................ ................................ ................................ ...............  150 
6.4.5.3    Adjustment of the annualized value of adverse effects determined to exist for inflation for 
future years in which coun termeasures are applied  ................................ ..............................  151 
6.5   The European Union's argument on the level of countermeasures that the Arbitrator's 
determination may not exceed in this proceeding  ................................ ................................ . 153 
7   THE EUROPEAN UNI ON'S CLAIM CONCERNIN G THE PRINCIPLES AND  PROCEDURES 
SET OUT IN ARTICLE 22.3 OF THE DSU (CROSS -RETALIATI ON) ................................ ... 154  
8   THE EUROPEAN UNI ON'S CLAIM THAT THE PROPOSED COUNTERMEAS URES ARE NOT 
ALLOWED UNDER THE CO VERED AGREEMENTS  ................................ ............................  155  
9   CONCLUSIONS ................................ ................................ ................................ .........  156  
 
 WT/DS 316/ARB 
 
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  LIST OF ANNEXES  
ANNEX A  
WORKING PROCEDURES O F THE ARBITRATOR  
Contents  Page  
Annex  A-1 Working Procedures of the Arbitrator  4 
Annex  A-2 Additional Working Procedures for the Protection of Business Confidential 
Information and Highly Sensitive Business Information  9 
Annex  A-3 Additional Working Procedures for the Substantive Meeting with the Arbitrator  21 
ANNEX B  
ARGUMENTS OF THE PARTIES  
Contents  Page  
Annex  B-1 Integrated executive summary of the arguments of the United  States  23 
Annex  B-2 Executive summary of the arguments of the European  Union  32 
 
ANNEX  C 
DECISION OF THE ARBI TRATOR CONCERNING TH E EUROPEAN UNION'S PRELIMINARY RULING 
REQUEST  
Contents  Page 
Annex  C-1 Communication from the Arbitrator Preliminary Ruling (Conclusion)  49 
 
 
 
 
  WT/DS 316/ARB 
 
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  CASES CITED IN THIS DECISION  
Short Title  Full Case Title and Citation  
Brazil – Aircraft (Article  22.6 – 
Brazil)  Decision by the Arbitrator, Brazil – Export Financing Programme for Aircraft – 
Recourse to Arbitration by Brazil under Article  22.6 of the DSU and Article  4.11 of 
the SCM  Agreement , WT/DS46/ARB , 28 August  2000, DSR 2002:I, p.  19 
Canada – Aircraft Credits  and 
Guarantees (Article  22.6 – 
Canada)  Decision by the Arbitrator, Canada – Export Credits and Loan Guarantees for  
Regional Aircraft – Recourse to Arbitration by Canada under Article  22.6 of the  
DSU and Article  4.11 of the SCM  Agreement , WT/DS222/ARB, 17  February  2003, 
DSR 2003:III, p.  1187 
EC – Bananas III (Article  21.5 
– Ecuador)  Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas – Recourse to Article  21.5 of the DSU by Ecuador , 
WT/DS27/RW/ ECU, adopted 6  May 1999, DSR 1999:II, p.  803 
EC – Bananas III (US)  
(Article  22.6 – EC) Decision by the Arbitrator, European Communities – Regime for the  Importation, 
Sale and Distribution of Bananas – Recourse to Arbitration by the  European 
Communities under Article  22.6 of the DSU , WT/DS27/ARB, 9  April 1999, 
DSR 1999:II, p.  725 
EC – Bananas III (Ecuador) 
(Article  22.6 – EC) Decision by the Arbitrator, European Communities – Regime for the Importation, 
Sale and Distribution of Bananas – Recourse to Arbitration by the European 
Communities under Article  22.6 of the DSU , WT/DS27/ARB/ECU, 24  March  2000, 
DSR 2000:V, p.  2237 
EC – Hormones  Appellate  Body Report, European Communities – Measures Concerning Meat and 
Meat Products (Hormones) , WT/DS 26/AB/R, WT/DS48/AB/R,  adopted 
13 February  1998, DSR 1998:I, p.  135 
EC – Hormones (US)  
(Article  22.6 – EC) Decision by the Arbitrators, European Communities – Measures Concerning  Meat 
and Meat Products (Hormones), Original Complaint by the United  States  – 
Recourse to Arbitration by the European Communities under Article  22.6 of the  
DSU, WT/DS26/ARB, 12  July 1999, DSR 1999:III, p.  1105 
EC and certain member States 
– Large Civil Air craft 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 
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 
(Article  21.5 – US) Appellate  Body Report, European Communities and Certain Member States – 
Measures Affecting Trade in Large Civil Aircraft  – Recourse to Article  21.5 of the 
DSU by the United  States , WT/DS316/AB/RW  and Add.1, adopted 28  May 2018 
EC and certain member States 
– Large Civil Aircraft 
(Article  21.5 – US) Panel Report, European Communities and Certain Member States – Measures 
Affecting Trade in Large Civil Aircraft  – Recourse to Article  21.5 of the DSU by the 
United  States , WT/DS316/RW  and Add.1, adopted 28  May 2018, as modified by 
Appellate  Body Report WT/DS316/AB/RW  
EEC – Apples (Chile I)  GATT Panel Report, EEC Restrictions on Imports of Apples from Chile , L/5047, 
adopted 10  November  1980, BISD 27S/98  
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 
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 
US – 1916 Act (EC) 
(Article  22.6 – US) Decision by the Arbitrator, United  States  – Anti-Dumping Act of 1916, Original  
Complaint by the European Communities – Recourse to Arbitration by the  
United  States  under Article  22.6 of the DSU , WT/DS136/ARB, 24  February  2004, 
DSR 2004:IX, p.  4269 
US – Anti-Dumping and 
Countervailing Duties (China)  Panel Report, United  States  – Definitive Anti -Dumping and Countervailing Duties 
on Certain Products from China , WT/DS379/R , adopted 25  March  2011, as 
modified by Appellate  Body Report WT/DS379/AB/R, DSR 2011:VI, p.  3143 
US – Carbon Steel  Appellate  Body Report, United  States  – Countervailing Duties on Certain Corrosion -
Resistant Carbon Steel Flat Products from Germany , WT/DS213/AB/R  and Corr.1, 
adopted 19  December  2002, DSR 2002:IX, p.  3779 
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 – COOL (Article  22.6 – 
United  States ) Decisions by the Arbitrator, United  States  – Certain Country of Origin Labelling  
(COOL) Requirements – Recourse to Article  22.6 of the DSU the United  States , 
WT/DS384/ARB and Add.1 / WT/DS386/ARB and Add.1, circulated to 
WTO Members 7  Decemb er 2015 WT/DS 316/ARB 
 
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  Short Title  Full Case Title and Citation  
US – FSC (Article  22.6 – US) Decision by the Arbitrator, United  States  – Tax Treatment for "Foreign Sales 
Corporations " – Recourse to Arbitration by the United  States  under Article  22.6 of 
the DSU and Article  4.11 of the SCM  Agreement , WT/DS108/ARB , 30 August  2002, 
DSR 2002:VI, p.  2517 
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 – Gambling (Article  22.6 – 
US) Decision by the Arbitrator, United  States  – Measures Affecting the Cross -Border 
Supply of Gambling and Betting Services – Recourse to Arbitration by the 
United  States  under Article  22.6 of the DSU , WT/DS285/ARB , 21 December  2007, 
DSR 2007:X, p.  4163 
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 – 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) (Article  21.5 – EU) Appellate  Body Report, United  States  – Measures Affecting Trade in Large Civil 
Aircraft (Second Complaint) – Recourse to Article  21.5 of the DSU by the 
European  Union , WT/DS353/AB/RW  and Add.1, adopted 11  April 2019 
US – Large Civil Aircraft (2nd 
complaint) (Article  21.5 – EU) Panel Report, United  States  – Measures Affecting Trade in Large Civil Aircraft 
(Second Complaint) – Recourse to Article  21.5 of the DSU by the European  Union , 
WT/DS353/RW  and Add.1, adopted 11  April 2019, as modified by Appellate  Body 
Report WT/DS353/AB/RW.  
US – Offset Act (Byrd 
Amendment) (EC) 
(Article  22.6 – US) Decision by the Arbitrator, United  States  – Continued Dumping and Subsidy Offset 
Act of 2000, Original Complaint by the European Communities – Recourse to 
Arbitration by the United  States  under Article  22.6 of the DSU , 
WT/DS217/ARB/EEC , 31 August  2004, DSR 2004:IX, p.  4591 
US – Offset Act (Byrd 
Amendment) (Chile) 
(Article  22.6 – US) Decision by the Arbitrator, United  States  – Continued Dumping and Subsidy Offset 
Act of 2000, Original Complaint by Chile – Recourse to Arbitration by the 
United  States  under Article  22.6 of the DSU , WT/DS217/AR B/CHL , 
31 August  2004, DSR 2004:IX, p.  4511 
US – Section 110(5) 
Copyright Act (Article  25) Award of the Arbitrator, United  States  – Section 110(5) of the US Copyright Act – 
Recourse to Arbitration under Article  25 of the DSU , WT/DS160/ARB25/1, 
9 November  2001, DSR 2001:II, p.  667 
US – Tuna II (Mexico) 
(Article  21.5 – Mexico)  Appellate  Body Report, United  States  – Measures Concerning the Importation, 
Marketing and Sale of Tuna and Tuna Products – Recourse to Article  21.5 of the 
DSU by Mexico , WT/DS381/AB/RW  and Add.1, adopted 3  December  2015, 
DSR 2015:X, p.  5133 
US – Tuna II (Mexico) 
(Article  22.6 – US) Decision by the Arbitrator, United  States  – Measures Concerning the Importation, 
Marketing and Sale of Tuna and Tuna Products – Recourse to Article  22.6 of the 
DSU by the United  States , WT/DS381/ARB, 25  April 2017 
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 
(Article  21.5 – Brazil)  Appellate  Body Repor t, 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 – 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  22.6 – US I) Decision by the  Arbitrator, United  States  – Subsidies on Upland Cotton – Recourse 
to Arbitration by the United  States  under Article  22.6 of the DSU and  Article  4.11 
of the SCM  Agreement , WT/DS267/ARB/1, 31  August  2009, DSR  2009:IX, p.  3871 
US – Upland Cotton 
(Article  22.6 – US II)  Decision by the Arbitrator, United  States  – Subsidies on Upland Cotton – Recourse 
to Arbitration by the United  States  under Article  22.6 of the DSU and  Article  7.10 
of the SCM  Agreement , WT/DS267/ARB/2 and Corr.1, 31  August  2009, DSR  
2009:IX, p.  4083 
US – Washing Machines 
(Article  22.6 – US) Decision by the Arbitrator, United  States  – Anti-Dumping and Countervailing 
Measures on Large Residential Washers from Korea – Recourse to Article  22.6 of 
the DSU by the United  States , WT/DS464/ARB  and Add.1, 8  February  2019 
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 
 WT/DS 316/ARB 
 
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  MAIN EXHIBITS REFERR ED TO IN THIS DECISI ON 
Exhibit  Title 
EU-54 Ascend, Flight Fleet Analyzer  
EU-58 Flight Global, "Cathay swaps batch of A350 -1000s to smaller -900", 
13 September  2017 
EU-59 Chicago Business Journal, "United Airlines postponing delivery of much -anticipated 
Airbus -350", 6 September, 2017  
EU-60 Airways Magazine, "United Converts A350 -1000 Order to A350 -900", 6 September 
2017 
EU-68 "Comparing July 2018 delivery prices based on different LCA price inflators: 
(i) Hypothetical escalation rate; (ii) PPI for LCA Manufacturing " 
EU-77 (HSBI) Transaero (2013) comparator campaign: projected versus actual escalation rates  
EU-79 Updated Ascend Database  
EU-81 Boeing cancellation rates  
EU-83 (HSBI)  Transaero Airlines Deposits and Pre -delivery Payments  
EU-86 (HSBI) 2012/2013 Airbus lost sales campaigns: The Emirates [[***]] 
EU-87 (HSBI) 2012/2013 Airbus lost sales campaigns: Cathay Pacific [[***]] 
EU-88 (HSBI) 2012/2013 Airbus lost sales campaigns: Cathay Pacific [[***]] 
EU-89 (HSBI) 2012/2013 Airbus lost sales campaigns: Singapore Airways [[***]] 
EU-90 (HSBI) 2012/2013 Airbus lost sales campaigns: Singapore Airways [[***]] 
EU-91 (HSBI) 2012/2013 Airbus lost sales campaigns: United Airlines [[***]] 
EU-92 (HSBI) 2012/2013 Airbus lost sales campaigns: United Airlines [[***]] 
EU-106 (HSBI) Emirates [[HSBI]] 
EU-116 Boeing 2008 Annual Report  
EU-117 The Seattle Times, "747 -8 delay causes doubts about Boeing", 7  October  2009 
EU-123 (BCI) Airbus, Status of A380 orders and deliveries  
EU-125 (HSBI) Air France Campaign A380, 2001  
EU-126 (HSBI) British Airways Campaign A380, 2007  
EU-127 (HSBI)  China Southern Airlines Campaign A380, 2005  
EU-128 (HSBI)  Emirates Airlines Campaign A380, 2001  
EU-129 (HSBI)  Korean Air Campaign A380, 2008  
EU-130 (HSBI)  Lufthansa Campaign A380, 2001  
EU-131 (HSBI)  Qantas Campaign A380, 2001  
EU-132 (HSBI)  Singapore Airlines Campaign A380, 2006  
EU-135 (HSBI)  United Airlines Campaign A350 -1000 
EU-138 Irwin, Douglas A., Pavcnik, Nina, 2004. "Airbus versus Boeing revisited: international 
competition in the aircraft market", Journal of International Economics, Elsevier, vol. 
64(2): 223 -245 
EU-139 Airbus, "New agreement with United Airlines increases A350 XWB order to 45", 
6 September 2017  
EU-140 (HSBI)  Letter [[ ***]] 
EU-141 Reuters, "Cathay Pacific defers five A350 deliveries, switches six to smaller models", 
13 September  2017 
EU-142 (HSBI)  Email  [[***]] 
EU-143 (HSBI)  Correcting US lost sales valuation  
EU-145 The Emirates Group Annual Report, 2018 -19 
EU-146 Andreas Spaeth, "Emirates to buy Rolls Royce Powered A380S Says Sir Tim Clark", 
Airline Ratings, 2  November  2018 
USA-2 Airbus presentation by John Leahy, COO Customers, Commercial update – Global 
Investor Forum  
USA-3 Emirates to choose between A350 -900 and 787 -10 next year, Murdo Morrison, 
FlightGlobal (Oct. 1, 2015)  
USA-4 Wide Body Battle: Boeing 787 -10 Or Airbus A350 -900?, Dhierin Bechai, Seeking Alpha 
(Dec. 19, 2014)  
USA-5 (BCI)  Boeing Declaration  
USA-6 Cathay Pacific Announces Additional Aircraft Order, Cathay Pacific Press Release 
(Dec.  27, 2013)  
USA-7 Boeing Launches 787 -10 Dreamliner, Boeing Press Release (Jun e 18, 2013)  
USA-8 United Converts 10 787 Orders to 777 -300ER, Edward Russell, FlightGlobal 
(Apr. 23, 2015)  
USA-9 Airbus and Boeing Orders 2013, Aviation Strategy (Feb. 2014)  
USA-12 (HSBI)  Cathay Pacific 777 -300ER Order Information  
USA-13 (HSBI)  Transaero 747 -8I Order Information  
USA-14 (HSBI)  Singapore Airlines 787 -10 Order Information  
USA-15 (HSBI)  United 777 -300ER Order Information  
USA-16 (HSBI)  Emirates [[ ***]] Information  
USA-19 (HSBI)  Calculation of 2011 747 -8I Delivery Prices  WT/DS 316/ARB 
 
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  Exhibit  Title 
USA-20 Producer Price Indexes – Program Overview, U.S. Department of Labor, Bureau of 
Labor Statistics  
USA-22 (HSBI)  Aggregation of Adverse Effects Determined to Exist by Year  
USA-26 (HSBI)  Revised 747 -8I Global Delivery Prices for 2012 and 2013 (revision to Exhibit USA -17 
(HSBI))  
USA-27 (HSBI)  Revised Calculation of 2011 747 -8I Delivery Prices (revision to Exhibit USA -19 (HSBI))  
USA-28 (HSBI) Revised Aggregation of Adverse Effects Determined to Exist by Year (revision to Exhibit 
USA-22 (HS BI)) 
USA-29 (HSBI)  Boeing Contracted Delivery Schedules and Actual Delivery Information for 
"Comparator" Orders  
USA-30 (HSBI)  Boeing E -mail regarding First Set of Arbitrator Questions  
USA-35 (BCI)  Boeing e -mail from [[ ***]] (Dec. 13, 2018)  
USA-36 (BCI)  Boeing e -mail from [[ ***]] (Dec. 13, 2018)  
USA-37 (BCI)  Boeing Escalation Slide  
USA-38 (BCI)  [[***]] 
USA-39 (BCI)  [[***]]  
USA-40 (BCI)  [[***]]  
USA-41 (BCI)  [[***]] 
USA-43 Boeing Historical Deliveries through October 2018, Boeing website  
USA-44 (HSBI)  Boeing Contracted Delivery Schedules, Delivery Schedule Changes, and Actual Delivery 
Information for "Comparator" Orders  
USA-53 Boeing 747 deliveries (2000 – 2013), Excel do wnload from Boeing website  
USA-54 Boeing 747 Family, Boeing website  
USA-56 (BCI)  Boeing e -mail from [Eric Howard] (Dec. 10, 2018)  
USA-57 Boeing, Lufthansa Announce Order for 747 -8 Intercontinental, Boeing Press Release  
USA-58 (BCI)  Letter from Boeing to the U.S. Export -Import Bank (November 1, 2018)  
USA-59 (HSBI)  [[***]] 
USA-60 (BCI)  Boeing E -mail from [[ ***]] (Feb. 10, 2019)  
USA-61 (H SBI) Calculation of Delivery Prices for Comparator Orders  
USA-62 (BCI)  Boeing E -mail regarding Question 112  
USA-63 (BCI)  Boeing E -mail regarding Question 113  
USA-65 (HSBI)  Survival Rate Calculation  
USA-66 (HSBI)  Boeing E -mail regarding Questions 116, 118, 121, 124(c), 125, 128 -129, 132  
USA-68 (HSBI)  Cathay Pacific 2013 777 -300ER Order Documentation  
USA-69 (HSBI)  Cathay Pacific March 2011 777 -300ER Order Documentation  
USA-71 (HSBI)  [[***]] 
USA-73 (HSBI)  Singapore Airlines 2013 787-10 Order Documentation  
USA-74 (HSBI)  United 2015 777 -300ER Order Documentation  
USA-75 (HSBI)  Transaero 2013 747 -8I Order Documentation  
USA-76 (HSBI)  Korean Air 2013 747 -8I Order Documentation  
USA-77 (HSBI)  Air China 2012 747 -8I Order Documentation  
USA-78 (HSBI)  Air China 2013 747 -8I Order Documentation  
USA-79 (HSBI)  Lufthansa 2006 747 -8I Order Documentation  
USA-80 (HSBI)  [[***]] 
USA-81 (HSBI)  [[***]] 
USA-82 (BCI)  Boeing E -mail regarding Question 124  
USA-84 (BCI)  Boeing E-mail regarding Questions 130 -131 
USA-85 (HSBI)  Singapore Airlines Escalation Documentation  
USA-86 Machinists Back Contract With Boeing; 8 -Week Strike Ends, New York Times (Nov. 2, 
2008)  
USA-87 (HSBI)  Lufthansa Escalation Documentation  
USA-89 (HSBI)  Korean Air 2009 747 -8I Order Documentation  
USA-90 (HSBI)  [[***]] 
USA-91 (HSBI)  [[***]] Order Documentation  
USA-92 (HSBI)  [[***]] Order Documentation  
USA-93 (HSBI)  [[***]] Order Documentation  
USA-94 (HSBI)  [[***]] Order Documentation  
USA-95 (HSBI)  [[***]] Order Documentation  
USA-96 (HSBI)  [[***]] Order Documentation  
USA-97 (HSBI)  [[***]] Order Documentation  
USA-98 (BCI)  Boeing E -mail regarding Question 145  
USA-99 (HSBI)  Second Revised Aggregation of Adverse Effects Determined to Exist by Year (revision to 
Exhibit USA -28 (HSBI))  
USA-100 (BCI)  Boeing E -mail from [[ ***]] (Feb. 11, 2019)  
USA-101 (HSBI)  Boeing E -mail regarding Questions 136, 139 -142 
USA-103 (HSBI)  Second Revised 747 -8I Global Delivery Prices fo r 2012 and 2013 (revision to Exhibit 
USA-26(HSBI))  WT/DS 316/ARB 
 
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  Exhibit  Title 
USA-104 (HSBI)  Second Revised Calculation of 2011 747 -8I Delivery Prices (revision to Exhibit 
USA-27(HSBI))  
USA-106 (HSBI)  Net Price Calculations for Questions 153 and 154(d) Alternative Impedance Valuations  
USA-114 Technical specs of 777X, Boeing website  
USA-115 Boeing Website, 747 -400 Deliveries Pre -1990 
USA-116 (BCI)  Boeing E -mail regarding Question 171  
USA-117 GDP Deflator, provided on a quarterly and annual basis  
USA-118 (BCI)  Boeing E -mail regarding Question 173  
USA-119 (HSBI)  Boeing E -mail regarding Question 174  
USA-120 (BCI)  Boeing WACC Data for 2012, 2013  
 
 WT/DS 316/ARB 
 
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  ABBREVIATIONS USED I N THIS DECISION  
Abbreviation  Description  
747-8F Boeing 747 -8 Freighter  
747-8I Boeing 747 -8 Intercontinental  
777-300ER  Boeing 777 -300 aircraft – extended range variant  
A321neo  Airbus A321 new engine option  aircraft  
A350XWB  Airbus A350 "eXtra widebody " aircraft  
A350XWB -900 Airbus A350 "eXtra widebody " aircraft – 900 seat capacity (baseline) variant  
A350XWB -1000 Airbus A350 "eXtra widebody " aircraft – 1000 seat capacity variant  
BCI Business Confidential Information  
BFE buyer -furnished equipment  
CA Civil Aircraft  
CCPs Counter -cyclical Payments  
CMO Collective Management Organizations  
COO Chief Operating Officer  
CPI Consumer Price Index  
DCF Discounted Cash Flow  
DSB Dispute Settlement Body  
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes 
(Dispute Settlement Understanding)  
EC European Communities  
EEC European Economic Community  
EU European  Union  
FDE flight deck equipment  
FOB free on board  
FSC Foreign Sales Corporation  
GATS  General Agreement on Trade in Services  
GATT  General Agreement on Tariffs and Trade  
GDP Gross  Domestic  Product  
HSBI Highly Sensitive Business Information  
LA/MSF  Launch Aid/Member State Financing  
LCA large civil aircraft  
ML Marketing Loans  
MSF Member State Financing  
MTOW  maximum take -off weight  
MY Marketing Year  
NPV net-present -value  
PA Purchase Agreement  
PDP pre-delivery payment  
PPI for CA Manufacturing  United  States  Producer Price Index for Aircraft Manufacturing of Civilian Aircraft  
RfP Request for Proposal  
RPT Reasonable Period of Time  
[[***]]  [[***]]  
SCM Agreement  Agreement on Subsidies and Countervailing Measures  
UAE United Arab Emirates  
UK  United Kingdom  
US United  States  
USA United  States  of America  
USD United  States  dollar  
VLA Very Large Aircraft  
WACC  weighted average cost of capital  
WTO  World Trade Organization  
 WT/DS 316/ARB 
 
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  1  INTRODUCTION  
1.1  Original proceedings and compliance  proceedings  
1.1.  The present arbitration proceeding arise s in the dispute initiated by the United  States  
concerning certain measures by the European  Union1 and certain member States affecting trade in 
large civil aircraft (LCA).  
1.2.  On 1 June 2011, the Dispute Settlement Body (DSB) of the World Trade Organization (WTO) 
adopted the Appellate  Body report in this d ispute, together with the report of the original panel as 
modified by the Appellate  Body.2 The original panel and the Appellate  Body found that certain 
subsidies provided by the European  Union  and certain member States to the European LCA 
manufacturer Airb us3 caused displacement and significant lost sales within the meaning of 
Article  6.3(a) -(c) of the Agreement on Subsidies and Countervailing Measures (SCM  Agreement ) 
which constitutes serious prejudice under Article  5(c).4 
1.3.  According to Articles 7.8 and 7.9  of the SCM  Agreement , the European  Union  and certain 
member States had six months from the date of adoption of the panel report or the Appellate  Body 
report to take appropriate steps to remove the adverse effects of, or withdraw, the relevant 
subsidies. T his six -month period expired on 1  December 2011. On that date, the European  Union  
notified 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 ru lings.5 The United  States  
considered that these steps failed to bring the European  Union  and certain member States into 
compliance with the DSB recommendations and rulings.6 On 12  January  2012, the European  Union  
and the United  States  informed the DSB of t heir Agreed Procedures under Articles 21 and 22 of the 
DSU (the Sequencing Agreement).7 On 13  April 2012, the DSB, at the United  States ' request, 
established the compliance panel under Article  21.5 of the DSU.8 
1.4.  On 22  September  2016, the compliance panel found that the European  Union  and certain 
member States had "failed to comply with the DSB recommendations and rulings and, in particular, 
the obligation under Article  7.8 of the SCM  Agreement  'to take appropriate steps to remove the 
adver se effects or … withdraw the subsidy '".9 The Appellate  Body reached the same conclusion , 
albeit generally on the basis of different reasoning.10 Significantly, the Appellate  Body based its 
reasoning solely on the effects of the following measures: ( a) Launc h Aid/Member State Financing 
(LA/MSF) subsidies for the A380 aircraft in the very large aircraft (VLA) product market; and ( b) 
 
1 This dispute contains the name "European Communities" rather than "European Union". The European 
Union effectively succeeded and replaced the European Communities for purposes of this dispute following the 
entry into force of the Treaty of Lisbon amending  the Treaty on European Union and the  Treaty establishing the 
European Community on 1  December  2009. (See Appellate  Body Report, EC and certain member States – 
Large Civil Aircraft , fn 1). For ease of reference, we refer to the "European Union" whether discussing events 
that occurred before or after the entry into force of the Treaty of Lisbon.  
2 Appellate  Body Report and Panel Report, Action by the Dispute Settlement Body , WT/DS316/16.  
3 For further background on the history and corporate struct ure of Airbus, see Panel Reports EC and 
certain member States – Large Civil Aircraft (Article  21.5 – US), paras.  6.946 -6.957, and EC and certain 
member States – Large Civil Aircraft , pp. 359-363.  
4 See Appellate  Body Report, EC and certain member States – Large Civil Aircraft , paras.  1299-1300 
and 1412; and Panel Report, EC and certain member States – Large Civil Aircraft , paras.  7.2025 and 8.2.  
5 Communication by the European Union, WT/DS316/17 (First Compliance Communication), para.  1.  
6 DSB, Minutes of  the meeting held on 19  December  2011, WT/DSB/M/308, para.  55.  
7 Communication by the parties, WT/DS316/21 (Understanding between the European Union and the 
United  States Regarding Procedures under Articles 21 and 22 of the DSU). The parties agreed, inter alia, to 
request suspension of arbitration under Article  22.6 of the DSU pending completion of the compliance panel 
proceeding under Article  21.5 of the DSU and any appeal thereof. The parties also agreed that in the event that 
the DSB, following a procee ding under Article  21.5 of the DSU, ruled that a measure taken to comply does not 
exist or is inconsistent with a covered agreement, either party may request the Article  22.6 arbitrator to resume 
its work.  
8 DSB, Minutes of the meeting held on 13  April 2012, WT/DSB/M/314, para.  10. 
9 Panel Report, EC and certain member States – Large Civil Aircraft (Article  21.5 – US), para.  7.2. 
10 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article  21.5 – US), 
section 6.  
 WT/DS 316/ARB 
 
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  LA/MSF subsidies  for the A350XWB aircraft in the twin -aisle product  market .11 The compliance panel 
had based its conclusions on a broader set of subsidy measures.12 Based on the effects of those 
measures, the Appellate  Body confirmed certain of the compliance panel 's findings with respect to 
impedance and significant lost sales within the meaning of Article  6.3(a) -(c) of the SCM  Agree ment. 
More specifically, and as explained in more detail in sections 6.3.4.3  and 6.3.4.4  below, the 
Appellate  Body confirmed that A380 and A350XWB LA/MSF caused five lost sales as well as  
impedance in six different geographic markets in the relevant reference period, i.e. the  2011-2013 
reference period (" 2011-2013 Reference Period "). On 28  May 2018, the DSB adopted the 
Appellate  Body report and the report of the compliance panel, as modifi ed by the Appellate  Body 
report.13  
1.2  Request for arbitration and arbitration proceeding  
1.5.  On 9  December  2011, the United  States  requested DSB authorization to "take 
countermeasures with respect to the European Union at an annual level commensurate with the 
degree and nature of the adverse effects caused to the interests of the United  States  by the failure 
of the European Union and certain member States to withdra w subsidies or remove their adverse 
effects in compliance with the recommendations and rulings of the DSB ". In its request, the 
United  States  "estimate[d] this figure to be between $7 and $10 billion per year ".14  
1.6.  The United  States ' request seeks authorizat ion to suspend concessions or other obligations 
under the General Agreement on Tariffs and Trade (GATT) 1994 as well as the General Agreement 
on Trade in Services (GATS). According to the United  States ' request, it is neither practicable nor 
effective for the United  States  to suspend concessions or other obligations only on imports of goods 
from the European  Union  up to a value of approximately USD 10 ,000 million . The United  States ' 
request also states t hat, given the degree and nature of the adverse effects, the circumstances are 
"serious enough " within the meaning of Article  22.3(c) of the Understanding on Rules and Procedures 
Governing the Settlement of Disputes (DSU) to impose countermeasures consisti ng of one or more 
of the following:  
1. suspension of tariff concessions and related obligations (including most -favoured nation 
obligations) under the GATT  1994 on a list of products from the European  Union  and certain 
member States to be drawn from the United States ' Harmonized Tariff Schedule; and  
2. suspension of horizontal or sectoral concessions and obligations contained in the 
United  States ' Schedule of Specific Commitments with regard to all services defined in the 
Services Sectoral Classification List, e xcept for financial services (sector 7).15 
1.7.  At the DSB meeting on 22  December  2011, the European  Union  objected to the United  States ' 
proposed level of countermeasures, and claimed that the United  States  had not followed the 
principles and procedures set for th in Article  22.3 of the DSU. At the same meeting, the DSB agreed 
that the matter raised by the European  Union  in its statement had been referred to arbitration, as 
required by Article  22.6 of the DSU.16 The Arbitrator was constituted on 13  January  201217 and was 
composed of the original panelists:   
 
 
11 See e.g. Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article  21.5 – 
US), para.  5.412 and section 6. See also Panel Reports, EC and certain member States – Large Civil Aircraft 
(Article  21.5 – US), section 6.5.2.3.1 (describing A350XWB LA/MSF measures); and  EC and certain member 
States – Large Civil Aircraft , paras.  7.367 -7.381 and Table 1 (describing A380 LA/MSF measures).  
12 Panel Report, EC and certain member States – Large Civil Aircraft (Article  21.5 – US), section 7.  
13 Appellate  Body Report and Panel Report pursuant to Article  21.5 of the DSU, Action by the Dispute 
Settlement Body , WT/DS316/35.  
14 Recourse to Article  7.9 of the SCM  Agreement and Article  22.2 of the DSU by the United  States, 
WT/DS316/18.  
15 Recourse to Article  7.9 of the SCM  Agreement and Article  22.2 of the DSU by the United  States, 
WT/DS316/18.  
16 DSB, Minutes of the meeting held on  22 December  2011, WT/DSB/M/309, para.  4. 
17 Constitution note of the Arbitrator, WT/DS316/20.  
 WT/DS 316/ARB 
 
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  Chairperson:  Mr Carlos Pérez del Castillo  
Members:   Mr John Adank  
   Mr Thinus Jacobsz  
 
1.8.  In accordance with the terms of the parties ' Sequencing Agreement , and upon a joint request 
from the parties, the Arbitrator suspended arbitration proceedings from 20  January  2012 until either 
party requested the resumption of its work.18 On 13  July 2018 (i.e. just over six weeks following the 
adoption of the Appellate  Body and panel  report s in the compliance proceedin gs on 28  May 2018)  
the United  States  made such a request, and the Arbitrator resumed its work on that day.19 Due to 
the prior resignation of the Chairperson of the Arbitrator, Mr Carlos Pérez del Castillo, on 17  February 
2016, and given the unavailability o f Mr John Adank to serve as a member of the Arbitrator, the 
Director -General appointed a new Chairperson and a new member of the Arbitrator on 9  July 2018, 
pursuant to a request from the United  States  on 28  June 2018.20 Accordingly, the new composition 
of the Arbitrator was as follows:  
Chairperson:  Mr Faizullah Khilji  
Members:   Mr Scott Gallacher  
   Mr Thinus Jacobsz  
 
1.9.  An organizational meeting was held on 14  August  2018 to discuss procedural aspects of the 
arbitration proceeding. After consulting with the parties, the Arbitrator adopted its Working 
Procedures and a timetable on 17  August  2018.21 The Arbitrator adopted Additional Working 
Procedures Concerning Protectio n of Business Confidential Information (BCI) and Highly Sensitive 
Business Information (HSBI) on 31  August  2018. They were amended on 23  October  2018 and on 
27 September 2019  (see section  2.2 below).22 On 6 December  2018, the Arbitrator also adopted 
Additio nal Working Procedures concerning the recording, and delayed public presentation, of the 
opening oral statements of the parties at the substantive meeting , (see section 2.3 below).23 
1.10.   In accordance with the timetable and Working Procedures adopted by the Arb itrator, the 
United  States  on 11  September  2018 submitted a communication explaining its methodology for 
calculating the proposed level of countermeasures ( United  States ' methodology paper). The 
European  Union  filed its written submission, including a  separate request for a preliminary ruling, 
on 15  October  2018. The United  States  filed its written submission , including its response to the 
preliminary ruling  request , on 9 November  2018. The Arbitrator sent questions to the parties for 
written responses on 16  November  2018, to which the parties responded on 30  November  2018. 
The Arbitrator sent additional questions to the parties for written responses on 30  November  2018, 
to which the parties responded on 14  December  2018.  
1.11.   The Arbitrator held it s substantive meeting with the parties on 11 and 12  February  2019. The 
Arbitrator issued its conclusions on the European  Union 's request for a preliminary ruling on 
18 February  2019.24 The conclusion s and the reasons underpinning them are set out in section  2.4 
below.  
1.12.   On 19  February  2019, the Arbitrator sent additional questions to the parties for written 
responses. The parties responded to these questions on 15  March  2019, and provided comments on 
each other 's responses on 8  April 2019. The Arbitrator sent further questions to the pa rties for 
written responses on 28  February  2019. The parties responded to these questions on 22  March  2019 
and provided comments on each other 's responses on 12  April 2019. The Arbitrator sent additional 
questions to the parties  for written responses  on 24 May 2019. The parties responded to these 
questions on 7 June 2019 and provided comments on each other 's responses on 21 June 2019. In 
total, the parties responded to 175 questions, many with sub -parts, from the Arbitrator. The record 
 
18 Communication from the Arbitrator, WT/DS316/22 (Suspension of the Work of the Arbitrator).  
19 Communication from the Arbitrator, WT/DS316/38 (Resumption of the  Work of the Arbitrator).  
20 Replacement of two members of the Arbitrator, WT/DS316/37.  
21 See Working Procedures of the Arbitrator, Annex A -1. 
22 See Additional Working Procedures for the Protection of Business Confidential Information and Highly 
Sensitive Business Information, Annex A -2. 
23 See Additional Working Procedures for the Substantive Meeting with the Arbitrator, Annex A -3. 
24 See Preliminary Ruling by the Arbitrator (Conclusions), Annex B -1. WT/DS 316/ARB 
 
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  of this proceeding th us encompasses hundreds of pages of submissions and thousands of pages of 
exhibits. Much of this information is either BCI or HSBI.  
1.13.    The Arbitrator submitted its Decision for translation on 30 August  2019 and notified the 
parties of this transmission. The Arbitrator on 13 September 2019  issued to the parties a version of 
its Decision containing BCI and a redacted version intended for public circulation. The parties 
returned with requests for additional red actions on 19 September 2019 . The Arbitrator provided its 
HSBI calculations underlying the number in the bottom right corner of Table 21 of this Decision on 
24 September 2019.  The Decision of the Arbitrator was circulated to WTO Members on 2 October 
2019. 
1.3  Second compliance  proceedings  
1.14.   On 17  May 2018, the European  Union  communicated to 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.25 At the DSB meeting o f 28 May 2018, the United  States  noted 
that "based on the [United  States '] review [of the communication from the European  Union  dated 
17 May 2018], the EU document did not reflect new developments that might somehow resolve this 
long-standing dispute ".26 Subsequently, on 27  August  2018, at  the European  Union 's request , the 
DSB established a  second  panel under Article  21.5 of the DSU .27 This second compliance panel had 
not yet issued its report a t the time the Arbitrator issued this Decision.  
2  PROCEDURAL MATTERS  
2.1.  In section  2, the Arbitrator addresses four procedural matters arising in these proceedings. 
First, we briefly  describe procedures related to page limits on the parties ' written submissions.  
Second, we explain our treatment of BCI and HSBI . Third, we address the parties ' request that 
portions of the substantive meeting be recorded for a later presentation  to the public . Finally,  we 
discuss  the European  Union 's request for a preliminary ruling.  
2.1  Page limits on parties ' written submissions  
2.2.  Mindful of the length of the prior proceedings and volume of the parties' submissions in this 
dispute , and the expedited nature of Article  22.6 proceedings, the Arbitrator , ahead of the 
organizational meeting , proposed to introduce pag e limits on the parties ' written submissions to 
facilitate the efficient conduct of this arbitration. The European  Union  commented that while it agree d 
with the need for efficient and speedy proceedings, imposing a page limit on written submissions 
would n ot be conducive either to efficient proceedings or to the protection of the parties ' due process 
rights.28 The United  States  considered that the page limit proposed by the Arbitrator should be 
included in the Working Procedures and noted that the European  Union's objection to this provision 
"hint[ed] at an intent to cause delay ".29 After having considered the views of the parties, the 
Arbitrator decided to increase the previously specified page limit on the parties ' written submissions 
and included it in its Working Procedures. No time limits were imposed on the parties ' oral 
statem ents. 
2.3.  The Arbitrator 's Working Procedures provide that the written submissions of the parties and 
the methodology paper of the United  States  are not to exceed 125 pages (single -spaced, font size 
10) each, excluding any exhibits accompanying such submission s. Moreover, the specified page limit 
was not absolute, as the procedures provide for the possibility to grant an extension upon timely 
request by a party and subject to an explanation by that party of the circumstances that in its view 
warrant exceeding t he page limit .30 Neither request ed an extension of the page limit.  
 
25 Communication by the European Union, WT/DS316/34 (Second  Compliance Communication), para.  1.  
26 DSB, Minutes of the meeting held on 28  May 2018, WT/DSB/M/413, para.  3.3. 
27 DSB, Minutes of the meeting held on 27  August  2018, WT/DSB/M/417, para.  5.5. 
28 European Union's communication (14  August  2018), para.  2. 
29 United States' communication (16  August  2018), para.  10. 
30 For the full text of the adopted procedure on page limits, see Working Procedures of the Arbitrator, 
Annex A -1, para.  3.2. 
 WT/DS 316/ARB 
 
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  2.2  Treatment of  BCI and HSBI  
2.4.  At the organizational meeting, both parties requested  the Arbitrator to adopt additional working 
procedures to protect BCI and HSBI submitted in the course of the p roceeding . As indicated in the 
preceding section , the Arbitrator adopted such additional working procedures on 31 August  2018, 
as amended on 23  October  2018 and 27 September 2019 .31 
2.5.  The Additional Working Procedures , inter alia , (a) define BCI and HSBI for the purposes of 
these proceedings , (b) limit access to, and permissible use of, BCI  and HSBI  submitted during  the 
proceedings to certain pre -designated persons and at certain designated secure locations where 
applicable , (c) provide for the tr eatment and handling of BCI and HSBI in a party 's submissions to 
the Arbitrator , and ( d) provide for the return and destruction of BCI and HSBI after the conclusion 
of the arbitration proceeding . 
2.6.  Additionally, p aragraph s 40 and 51  of the Additional Working  Procedures provi de that t he 
Arbitrator shall not disclose BCI and HSBI  in its D ecision  but may make statements or draw 
conclusions that are based on the information drawn from BCI and HSBI. Importantly, it also 
provides that , prior to circulating the Deci sion of the Arbitrator to the WTO membership,  the parties 
shall be given  an opportunity t o ensure that the D ecision  does not contain any BCI or HSBI . These 
paragraphs  form the "legal basis "32 on which the Arbitrator has redacted words or statements that 
are BCI or HSBI from the public version of this Decision. Accordingly, the text of the version 
circulated to Members is identical to the text of the confidential version issued to the parties, with 
the exception of passages that are redacte d to protect BCI and HSBI. Such passages have been 
replaced by "[[***]]" and "[[HSBI]]". 
2.7.  In the adoption and application of the additional procedures to protect BCI and HSBI, the 
Arbitrator has strived to "ensure that an appropriate balance is struck betwe en the need to guard 
against the risk of harm that could result from the disclosure of particularly sensitive information, 
on the one hand, and the integrity of the adjudication process … and the rights of and systemic 
interests of the WTO membership at la rge, on the other hand ".33 We have also tried to "ensure that 
the public version of [the Decision ] circulated to all Members of the WTO is understandable ".34 Having 
said that, i t is also important to note  that a substantial portion of evidence submitted by the parties 
in this proceeding is protected under the BCI and HSBI procedures and therefore the Arbitrator has 
had to have reference to information classified as BCI  or HSBI  more frequently than may be usual 
in previous arbitration decisions.  
2.8.  In accordanc e with the Additional Working Procedures, the parties on 19 September 2019 
submitted specific requests regarding the redaction of BCI from the public version of this Decision 
and on 23 September 2019 submitted comments on each other's requests. In response  to these 
communications, we made appropriate changes to the public version of our Decision.  
2.3  Public presentation of the parties ' opening statements  
2.9.  At the organizational meeting, both parties agreed that the substantive meeting of the 
Arbitrator with the parties should be made public insofar as it was reasonable to do so, particularly 
given the significant presence of confidential information in the proceeding. In this context, 
recognizing the need to protect the confidentiality of BCI and HSBI that could be referred to at the 
substantive meeting, both parties also agreed that additional working procedures should be adopted 
for the substantive meeting of the parties with the Arbitrator. On 6 December  2018, and pursuant 
to a joint proposal made by the partie s, the Arbitrator adopted Additional Working Procedures for 
the Substantive Meeting with the Arbitrator.35 These procedures addressed issues pertaining to the 
treatment of BCI and HSBI during the meeting, generally, as well as issues more specifically 
perta ining to the parts of the meeting intended to be made available to the public.  
 
31 See Additional Working Procedures for the Protection of Business Confiden tial Information and Highly 
Sensitive Business Information, Annex A -2. 
32 Appellate  Body Report, US – Tuna II (Mexico) (Article  21.5 – Mexico) , para.  5.4. 
33 Appellate  Body Reports, US – Tuna II (Mexico) (Article  21.5 – Mexico) , para.  5.3; and EC and certain  
member States – Large Civil Aircraft , Annex III, Procedural Ruling of 10  August  2010, para.  15.  
34 Appellate  Body Report, Japan – DRAMS (Korea) , para.  279. 
35 See Additional Working Procedures for the Substantive Meeting with the Arbitrator, Annex A -3. WT/DS 316/ARB 
 
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  2.10.   The substantive meeting of the Arbitrator with the parties was held on 11 -12 February  2019, 
during which the parties' opening oral statements were recorded for a later presentat ion to the public 
in accordance with the terms of the Additional Working Procedures. A preview of the recording for 
the parties was held on 8  March  2019, which both the parties attended and at which the parties 
identified utterances of BCI during the openi ng oral statements that were later deleted before the 
public presentation. The public presentation of the redacted recording of the parties ' opening oral 
statements took place on 30  April 2019 at the WTO.  
2.4  The European  Union 's request for a preliminary ruling  
2.11.   As noted at paragraph 1.10 above, when the European  Union  filed its written submission, it 
also filed a separate request that the Arbitrator issue a preliminary ruling at the earliest stage 
possible. The United  States  responded to that r equest in its written submission. Soon after the 
meeting of the Arbitrator with the parties, the Arbitrator issued its conclusions on the preliminary 
ruling request. In this section, the Arbitrator restates its conclusions and provides the reasons 
supporti ng them.  
2.12.   In its preliminary ruling request, the European  Union  requests that the Arbitrator await the 
outcome of the second compliance panel proceeding36 before completing the arbitration proceeding. 
In the European  Union 's view, the Arbitrator and the sec ond compliance panel should find a "logical 
way forward "37 and coordinate their work. The European  Union  submits that there is a unique 
interdependence between the mandates of an Article  22.6 arbitrator and a compliance panel in a 
dispute involving Part III  of the SCM  Agreement  concerning actionable subsidies. According to the 
European  Union , the Arbitrator cannot properly fulfil its task without consideration of whether the 
European  Union  has brought itself into conformity (which the European  Union  has asse rted to be the 
case in its most recent communication on compliance38), and the result of the compliance panel 
proceeding which has a bearing on the arbitration proceeding. The European  Union  considers that 
there is a risk of serious and irreparable harm to the European  Union  if countermeasures were 
imposed despite it having now complied with the DSB 's recommendations and rulings.39 
2.13.   The European  Union  submits that a proper interpretation of Articles 7.9 and 7.10 of the 
SCM Agreement  is that  the DSB can authori ze countermeasures only if no compliance has been 
achieved. The European  Union  recalls in this respect that the question whether the European  Union  
has achieved substantive compliance in this dispute is currently before the second compliance panel. 
In the European  Union 's view, the logical way forward is therefore for the Arbitrator to wait for the 
outcome of "multilateral review " before determining whether the United  States  can receive 
authorization to take countermeasures.40 
2.14.   The United  States  responds that  the preliminary ruling request provides no valid reason, and 
the DSU and SCM  Agreement  do not require, that the Arbitrator halt the proceeding to allow the 
European  Union  to litigate its latest claims of compliance. In the United  States ' view, it is not j ustified 
to halt an arbitrator 's decision in circumstances where the responding party 's initial claim of 
compliance has failed, the DSB has adopted findings of WTO -inconsistency in the post -
implementation period, and the responding party has commenced a se cond compliance proceeding. 
The United  States  notes that the arbitration addresses the level of suspension commensurate with 
adverse effects already identified in the first compliance panel and Appellate  Body reports, whereas 
the second compliance panel will address allegations that a new set of measures have modified the 
European  Union 's subsidies so that they no longer cause adverse effects. The United  States  further 
points out that slowing down the arbitrat ion would be inconsistent with the parties ' joint commitment 
in their bilateral sequencing agreement "'to cooperate to enable the Arbitrator to circulate its decision 
within 60 days '".41 
 
36 See paragraph 1.14 above.  
37 European Union's request for a preliminary ruling, para.  3 (referring to Decision by the Arbitrator, 
EC – Bananas III (US) (Article  22.6 – EC), para.  4.9). 
38 Communication by the European Union, WT/DS316/34 (Second Compliance Communication).  
39 European Union's request for a preliminary ruling, paras.  3-4, 7-9, 23-24, 52, and 74; communication 
to the Arbitrator (22  October  2018), p.  2; and response to Arbitrator question No. 50, paras.  21 and 28.  
40 European Union's request for a  preliminary ruling, paras.  5, 7, 34, and 37.  
41 United  States' written submission, para.  34 (quoting the Sequencing Agreement, para.  7). See also 
United  States' written submission, paras.  21, 31, 34 -35, 60, and 69); and communication to the Arbitrator 
(25 October  2018), p.  2.  WT/DS 316/ARB 
 
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  2.15.   The United  States  argues that according to the European  Union , if the second compliance 
proceeding found against it, the European  Union  would be free to assert new claims of compliance 
that would again halt the arbitration until a third compliance proceeding has been completed. In the 
United  States ' view, such a result would  negate its right to take countermeasures in response to the 
European  Union 's failure to comply. The United  States  further observes that it strongly disagrees 
that the European  Union  has achieved compliance. The United  States  points out in this respect tha t 
the European  Union  and the United  States  disagree on which party should bear the risk of 
uncertainty as to whether the European  Union  is in compliance. The United  States  considers that it 
bore the risk of uncertainty through the end of the first complian ce proceeding. In the United  States ' 
view, now it is the European  Union  that should bear the uncertainty in that it will remain subject to 
countermeasures until claims of compliance have been resolved. The United  States  also observes 
that the European  Union did not argue that the first compliance proceedings should have moved 
quickly because the adverse effects caused by its subsidies were irreparable.42  
2.16.   The Arbitrator, after careful consideration of the parties ' arguments, transmitted to the parties 
its conclusion on the European  Union 's preliminary ruling request and indicated that it would provide 
the supporting reasons in its Decision.43 We concluded that it was neither necessary nor appropriate 
to await the ou tcome of the second compliance proceedings before proceeding to determine the 
maximum level of countermeasures that the United  States  could be authorized to impose. We 
therefore declined the European  Union 's request that we coordinate our work with the sec ond 
compliance panel and decided to proceed with our work.  
2.17.   In this section, we provide the reasons supporting our conclusion. Before doing so, it is useful 
to clarify the nature and practical implications of the European  Union 's request. Regarding the natu re 
of the request, the European  Union  asks that we delay the completion of our work to allow for the 
question of the European  Union 's compliance to be resolved in the second compliance proceeding. 
In other words, the European  Union  does not request that we  resolve the compliance issue ourselves.  
2.18.   Regarding practical implications, the European  Union  states that we should coordinate our 
work with the second compliance panel, and that we should await the outcome of "multilateral 
review "44 of the European  Union 's claim of substantive compliance. As the report of the second 
compliance panel is subject to appeal, the "multilateral review " would not be complete and final until 
after any appeal that either party might initiate. The delay reques ted by the European  Union  would 
thus potentially have been substantial. We note in this connection that in accordance with 
Article  22.6 of the DSU , arbitrations are to be completed on an expedited basis, within 60 days after 
the referral of the matter to a rbitration. If the parties had wished that we not proceed, they could 
have jointly requested a further suspension of this arbitration proceeding.45 The parties clearly did 
not agree, however, that the kind of coordination with the second compliance panel th at the 
European  Union  proposed would be appropriate.46 
2.19.   The European  Union  nevertheless asks, in effect, that irrespective of the fact that the 
United  States  does not agree to delay the arbitration proceeding, we impose timetable coordination 
with the second  compliance panel. The European  Union  presents three main arguments in support 
of its request: (a) an argument concerning Article  22.8 of the DSU , (b) an argument concerning 
non-retroactivity of WTO remedies , and (c) an argument based on prior arbitration decisions. We 
address each in turn below.  
2.4.1   The European  Union 's argument concerning Article  22.8 of the DSU  
2.20.   According to the European  Union , the right to request countermeasures under Article  7.9 of 
the SCM  Agreement  arises in case of non -compliance at the end of the implementation period, but 
 
42 United  States' written submission, paras.  23, 26 -27, 29 -30, and 57; and communication to the 
Arbitrator (25 October 2018), pp.  2-3. 
43 Arbitrator communication to the parties, Annex C -1, (18  February  2019) (containing the Arbitrator' s 
conclusions on the European Union's preliminary ruling request, which form an integral part of the Arbitrator's 
Decision).  
44 European Union's request for a preliminary ruling, para.  37. 
45 As noted at paragraph 1.8 above, at the request of the parties, the present arbitration proceeding 
was suspended from January 2012 to July 2018.  
46 According to the United  States, the "only proper action at this stage is to move forward expeditiously 
with this arbitration". (United  States' written submission, para.  21). 
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  Article  7.9 does not stipulate whether countermeasures may be requested, and authorized, in 
circumstances where the responding Member has asserted compliance after the end of the 
implementation period and a compliance panel has been established to determine whether 
compliance has been achieved. However, in the European  Union 's view, Article  22.8 of the DSU 
means that no countermeasures can be authorized if substantive compliance has been achieved. 
The European  Union  submits that we should therefore await the outcome of a multilateral review of 
the European  Union 's claim of substantive compliance.47  
2.21.   The United  States  notes that the DSB has found that the European  Union  has failed to comply 
with the DSB recommendations and  rulings, and that the DSU provides that the DSB must authorize 
countermeasures at the level determined by the Arbitrator. The United  States  considers that 
Article  22.8 does not preclude the application of countermeasures in the present dispute and that 
any countermeasures authorized by the DSB could properly continue until the DSB adopts a finding 
of compliance (or the parties agree that a solution has been found). According to the United  States , 
what matters under Article  22.8 is not the assertion of comp liance, but a finding of compliance 
adopted by the DSB (which the European  Union  has not obtained).48  
2.22.   The Arbitrator first notes the text of Article  22.8, which states in relevant part that the 
suspension of concessions or other obligations "shall only be applied until such time as the measure 
found to be inconsistent with a covered agreement has been removed ".49 Thus, Article  22.8, by its 
terms, is con cerned with the "application " of the suspension of concessions or other obligations. 
Article  22.7 precedes and is part of the immediate context of Article  22.8. The last sentence of 
Article  22.7 stipulates that the DSB upon request must grant "authorizatio n" to suspend concessions 
or other obligations where the request is consistent with the decision of the Article  22.6 arbitrator 
(and there is no negative consensus in the DSB against granting the request). Accordingly, 
Article  22.7 is concerned with "autho rization ", where Article  22.8 is concerned with "application " of 
a suspension of concessions or other obligations. It is clear to us from these elements that 
Article  22.8 addresses a post -authorization situation – a situation in which the suspension of 
concessions or other obligations has already been authorized by the DSB – and not a pre -
authorization situation.50  
2.23.   We therefore do not agree that Article  22.8 prevents the DSB from "authorizing " 
countermeasures in a pre -authorization scenario such as ours, wh ere the DSB has ruled after 
compliance proceedings that the responding party has not brought itself into conformity by the end 
of the implementation period and the complaining party requests that the DSB grant it authorization 
to take countermeasures on th e basis of the DSB 's prior compliance ruling.51  
2.24.   In fact, the US – Tuna II  (Mexico) dispute is a case in point. The DSB ruled that the 
United  States  had failed to bring itself into conformity by the end of the reasonable period of time. 
Mexico then requeste d authorization to suspend concessions and the matter was referred to an 
Article  22.6 arbitrator. At around the same time, however, a revised United  States ' measure taken 
to comply entered into force , which the United  States  claimed achieved compliance.52 A compliance 
panel was subsequently established following separate requests from the United  States  and Mexico. 
The arbitrator completed its work before the second compliance panel, and the DSB authorized 
Mexico to retaliate. Months later, the second complia nce panel found that the revised United  States ' 
tuna measure brought the United  States  into conformity, and the panel was later upheld by the 
Appellate  Body. Thus, even though the United  States  was claiming to be in compliance when Mexico 
 
47 European Union's request for a preliminary ruling, paras.  38-39; and response to Arbitrator question 
No. 50, paras.  9 and 18.  
48 United  States' written submission, paras.  28, 48, and 50.  
49 Appellate  Body Report, US – Continued Suspension , para.  306 (stating that "the application of the 
suspension of concessions may continue until the removal of the measure found by the DSB to be inconsistent 
results in substantive compliance").  
50 See also Decision by the Arbitrator, US – Upland Cotton (Article  22.6 – US I), para.  3.45. 
51 Article  22.8 would, however, prevent the complaining party from continuing to apply any DSB -
authorized countermeasures if any subsequently completed compliance proceedings established that the 
respond ing party has substantively complied.  
52 The parties in US – Tuna II  (Mexico) (Article  22.6 – US) disagreed about the date on which the 2016 
tuna measure entered into force and the arbitrator did not find it necessary to resolve that issue. (Decision by 
the Arbitrator, US – Tuna II (Mexico) (Article  22.6 – US), paras.  3.64-3.65).   
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- 20 - 
 
  sought DSB authorization to suspend concessions or other obligations, the DSB granted Mexico the 
authorization.  
2.4.2   The European  Union 's argument concerning non -retroactivity of WTO remedies  
2.25.   The European  Union  further argues that if the Arbitrator were to authorize the United States  
to impose countermeasures to respond to a past breach of the SCM  Agreement  instead of any current 
inconsistency with the SCM  Agreement , this would give the United  States  a retroactive remedy. The 
European  Union  submits that this would go again st the principle that countermeasures are 
prospective in nature rather than retroactive.53 
2.26.   In the United  States ' view, if the European  Union 's recent steps achieved compliance (as the 
European  Union  claims ) this would not mean that the United  States  would b e granted a retrospective 
remedy for past adverse effects inflicted by the European  Union , rather than a remedy  for ongoing 
effects. According to the United  States , the European  Union 's argument ignores that the converse 
would also be true. The United  States submits that if the Arbitrator were to stop the proceeding and 
the second compliance proceeding rejects the European  Union 's claims of compliance, the Arbitrator 
would deny the United  States ' right to suspend concessions to restore the balance of rights  and 
obligations upset by the European  Union 's ongoing WTO -inconsistent subsidization.54 
2.27.   The Arbitrator observes that the DSB would authorize the United  States  to take 
countermeasures prospectively (i.e. from the date of the DSB authorization going forward)  to 
respond to a continuing multilaterally determined breach of WTO obligations.55 Moreover, consistent 
with Article  22.8, any such countermeasures could remain in place until there is a new multilateral 
determination by the DSB to the effect that there no longer is a breach (or the parties have reached 
a mutually agreed solution). It is only if countermeasures remained in place even after the DSB has 
determined that there no longer is a breach that such countermeasures could be said to "respond to 
a past br each" (i.e. a breach that has ceased). In contrast, a unilateral declaration of compliance by 
the responding party does not turn multilaterally authorized countermeasures that either begin or 
continue to be implemented after the date of such a declaration into countermeasures that "respond 
to a past breach " from the date of their first implementation (where countermeasures begin to be 
implemented after the declaration) or the date of the declaration (where countermeasures continue 
to be implemented), going forward. Finally, we note that in the US – Tuna II (Mexico)  dispute, the 
DSB granted Mexico the right to suspend concessions or other obligations to respond to a prior 
multilateral DSB determination of non -compliance despite the United  States ' claim that it had in the 
meantime brought itself into compliance.56  
2.28.   In the light of the foregoing considerations, we are unable to accept the European  Union 's 
argument that authorizing the United  States  to take countermeasures before the completion of the 
second compliance panel proceeding would amount to granting a retroactiv e remedy.  
2.4.3   Prior arbitration decisions referred to by the European  Union  
2.29.   The European  Union  submits that three prior arbitration decisions under Article  22.6 support 
its position that there is no basis to authorize countermeasures if compliance has been ach ieved. 
First, the European  Union  points out that the arbitrator in EC – Bananas III (US) (Article  22.6 – EC) 
assessed whether the European  Union  had achieved compliance through the measures it had taken 
after the original proceedings. Second, the European  Union  points to the arbitration decision in US 
– Upland Cotton (Article  22.6 – US I), in which the arbitrator did not include in its valuation a subsidy 
programme that had been found WTO -inconsistent by the original panel, but that the parties agreed 
had b een withdrawn after the end of the implementation period. Third, the European  Union  notes 
 
53 European Union's request for a preliminary ruling, paras.  56-58. 
54 United  States' written submission, paras.  54-55. 
55 In EC and certain member States  – Large Civil Aircraft (Art icle 21.5 – US), the Appellate  Body 
referred to the " prospective  nature  of remedies in WTO dispute settlement" and observed that, under 
Article  7.8 of the SCM  Agreement, a complaining Member can "obtain relief in the form of a prospective 
remedy". (Appella te Body Report, EC and certain member States – Large Civil Aircraft (Article  21.5 – US), 
para. 5.374). (emphasis original)  
56 DSB, Minutes of the meeting held on 22  May 2017, WT/DSB/M/397, para.  7.24; and request for the 
establishment of a panel by the Uni ted States, WT/DS381/32 (12  April 2016).  
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  that the arbitrator in Brazil – Aircraft (Article  22.6 – Brazil)  decided that it would wait for the results 
of the compliance proceeding before the Appellate  Body before reaching a conclusion under 
Article  22.6. The European  Union  notes that only one arbitrator, the arbitrator in US – Tuna II 
(Mexico) (Article  22.6 – US), took a different approach outlined in a preliminary ruling ( US – Tuna 
II Arbitrator 's Preliminary Ruling ). The European  Union  considers that the circumstances of the 
present dispute are different, because this dispute concerns countermeasures in response to DSB 
recommendations concerning actionable subsidies. For the European  Union , the pre mise of an 
arbitrator 's work in this context is the existence of adverse effects. In the European  Union 's view, 
this difference dictates a different approach.57 
2.30.   The United  States  responds that past arbitration decisions do not support halting an 
Article  22.6 arbitration to await the outcome of a second compliance panel proceeding. The 
United  States  submits that the most recent relevant decision, the decision in the US – Tuna II 
(Mexico) (Article  22.6 – US) dispute, is also the most analogous to this proceedi ng and confirms that 
the Arbitrator should not halt its work to await the final results of the second compliance proceeding. 
The United  States  considers that the reasoning developed by that arbitrator applies, with even 
greater force, in a proceeding under  Part III of the SCM  Agreement . According to the United  States , 
in accordance with Article  7.10, the countermeasures must relate to the adverse effects determined 
in the most recent proceeding to be inconsistent with the SCM  Agreement , and not an alleged m ore 
recent version of the relevant measure. Regarding the other arbitration decisions cited by the 
European  Union , the United  States  argues that they do not support the European  Union 's views.58 
2.31.   The Arbitrator notes that the three arbitration decisions on w hich the European  Union  relies 
were all raised and addressed in some detail in the US – Tuna II  Arbitrator 's Preliminary Ruling.59 
We concur with the analysis in that ruling and thus consider that these arbitration decisions do not 
support the European  Union's position. In EC – Bananas III (US) (Article  22.6 – EC), the complaining 
party sought authorization to retaliate without first completing a compliance proceeding. The 
arbitrator determined that the most logical way forward was for it to undertake its own examination 
of the WTO -consistency of the European  Union 's measure taken to comply.60 In the present 
proceeding, there is a prior DSB determination of non -compliance from the first compliance 
proceedings. In US – Upland Cotton (Article  22.6 – US I) , the arbitrator excluded from its valuation 
a previously WTO-inconsistent United  States  measure that the parties agreed had been withdrawn 
prior to the compliance panel and arbitration proceedings , and on which the DSB after the 
compliance procee dings did not make a  determination of non -compliance.61 In the present 
proceeding, there is no multilateral determination that the European  Union  has achieved compliance, 
nor do the parties agree that the European  Union  has achieved compliance, and there th us is no 
reason to "decline[] to authorise countermeasures "62 regarding the WTO -inconsistent adverse 
effects determined to exist in the prior compliance proceedings. Finally, in Brazil – Aircraft 
(Article  22.6 – Brazil) , there was no DSB determination of no n-compliance from prior compliance 
proceedings when the arbitration proceeding commenced. The arbitrator therefore decided to wait 
for the result of the appeal in the compliance proceedings (which were expected to become available 
less than two months afte r the commencement of the arbitration proceeding) to allow the parties to 
take it into account in the context of the arbitration proceeding, since "[t]he decision of the 
Appellate  Body could influence the extent to which Brazil may be considered to have br ought its 
legislation into conformity with its WTO obligations ".63 In the present proceeding, there already is a 
DSB determination of non -compliance from prior compliance proceedings. There consequently is no 
need to await the final results of the second co mpliance proceeding that the European  Union  
subsequently initiated.  
2.32.   As concerns the factual circumstances underlying the US – Tuna II  Arbitrator 's Preliminary 
Ruling, we consider that they are substantially similar to ours. As in the present proceeding, wh en 
that arbitration began, there was a DSB determination of non -compliance from prior compliance 
proceedings. A second round of compliance proceedings was likewise initiated shortly after the 
arbitration proceeding had been initiated. Nevertheless, the arb itrator did not wait for the final 
 
57 European Union's request for a preliminary ruling, paras.  59-61 and 63 -73. 
58 United  States' written submission, paras.  61-69. 
59 Decision by the Arbitrator, US – Tuna II (Mexico) (Article  22.6 – US), paras.  3.29-3.47. 
60 Decision by the Arbitrator, EC – Bananas III (US) (Article  22.6 – EC), para.  4.9. 
61 Decision by the Arbitrator, US – Upland Cotton (Article  22.6 – US I), paras.  3.21 and 3.50.  
62 European Union's request for a preliminary ruling, para.  63. 
63 Decision by the Arbitrator, Brazil – Aircraft (Article  22.6 – Brazil) , para.  2.1. 
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  results of the second compliance proceedings and conducted the arbitration proceeding on the basis 
of the prior DSB determination. According to the arbitrator, this was justified because, in its view, 
the text of Article  22.6 "mandates an arbitrator to assess the level of nullification or impairment 
caused by the WTO -inconsistent original measure (where no compliance measure was subsequently 
taken), or a subsequent WTO -inconsistent compliance measure, that was in existence  at the time of 
expiry of the RPT  [i.e. reasonable period of time] ".64 The arbitrator further observed that this 
measure "may or may not be the most recent version of the relevant measure ".65 We have carefully 
considered the reasoning that the arbitrator provided in support of these statements66 and find it 
persuasive.  
2.33.   Applying this reasoning to the present proceeding, mutatis mutandis , we reach two provisional 
conclusions. First, we consider that it is our mandate to determine the level of countermeasures 
based on the adverse effects determined to exist in the prior compliance proceedings and not by 
reference to the current situation, which the European  Union  claims is one where there no longe r 
exist any adverse effects or the relevant subsidies have been withdrawn. We recall in this connection 
that in our view the reference in Article  7.10 of the SCM  Agreement  to the adverse effects 
"determined to exist " should be construed as a reference to a ny adverse effects determined to exist 
by the panel and Appellate  Body in their reports.67 The most recent of such reports adopted by the 
DSB are those circulated at the end of the first compliance proceedings. We note that fulfilling our 
mandate in this ma nner draws a clear line of separation between the scope of our inquiry and that 
of the second compliance panel. Our inquiry focuses on the facts determined to exist during the  
2011-2013 Reference Period, whereas the second compliance panel focuses on the f acts as they 
existed years later, in 2018, on the date of establishment of the second compliance panel. As there 
thus is no apparent risk that our Decision would contradict or be inconsistent with the second 
compliance report(s), it is not apparent to us t hat we should engage in the kind of "coordination " 
with the second compliance panel that the European  Union  is seeking.  
2.34.   Second, even disregarding our mandate to complete this arbitration proceeding expeditiously, 
we see no reason to wait for the final resu lts of the second compliance proceedings. This arbitration 
proceeding serves to determine the maximum level of countermeasures that the DSB may authorize 
the United  States  to impose in response to the European  Union 's failure to comply by the end of the 
implementation period in 2011. The legal basis for any such authorization is the prior DSB 
determination of non -compliance resulting from the first compliance proceedings. There has been 
no intervening DSB determination since that establishes that the Europe an Union  has achieved 
compliance. Therefore, this arbitration proceeding can and should in our view proceed without delay. 
We observe in this respect that even if the DSB authorizes the United  States  to impose 
countermeasures following the end of this proc eeding, the United  States  is under no obligation to 
implement any such measures immediately or at all.68 Moreover, as was similarly noted in the US – 
Tuna II  Arbitrator 's Preliminary Ruling69, it is conceivable that after any DSB authorization to impose 
countermeasures, the final results to emerge from the second compliance proceedings are that the 
European  Union  has achieved compliance. If so, and if the DSB were to adopt these results, the 
United  States  pursuant to Article  22.8 of the DSU would have to prom ptly terminate any 
countermeasures that it might have imposed after having been granted DSB authorization.70  
 
64 Decision by the Arbitrator, US – Tuna II (Mexico) (Article  22.6 – US), para.  3.24.  
65 Decision by the Arbitrator, US – Tuna II (Mexico) (Article  22.6 – US), para.  3.24. 
66 Decision by the Arbitrator, US – Tuna II (Mexico) (Article  22.6 – US), paras.  3.7-3.23 and 3.49 -3.55. 
67 See paragraph 5.5 below. We agree with the United  States that the text of Article  7.10, when read 
together with Article  7.8 of the SCM  Agreement, is ev en clearer than Article  22.4 of the DSU, read together 
with Article  22.2 of the DSU, on which the US – Tuna II (Mexico)  Arbitrator's Preliminary Ruling relies, in 
linking an arbitration proceeding to the WTO -inconsistent original measure or a subsequent WT O-inconsistent 
compliance measure that was in existence at the time of the expiry of the implementation period. 
(United  States' written submission, para.  66; and Decision by the Arbitrator, US – Tuna II (Mexico) 
(Article  22.6 – US), para.  3.21).  
68 We recal l that in the US – Tuna II (Mexico) dispute, the DSB in May 2017 authorized Mexico to 
suspend concessions or other obligations. To our knowledge, Mexico did not apply any suspension of 
concessions or other obligations and waited instead for the final resul ts of the second compliance panel 
proceedings, which the DSB adopted in January 2019. (Action by the Dispute Settlement Body, 
WT/DS381/49/Rev.1).  
69 Decision by the Arbitrator, US – Tuna II (Mexico) (Article  22.6 – US), para.  3.60. 
70 Appellate  Body Report, US – Continued Suspension , para.  306 (stating that "[i]f, by recourse to a 
multilateral dispute settlement process, the implementing measure is found to bring about substantive 
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  2.35.   Notwithstanding the foregoing, the European  Union  submits that the circumstances in the 
present proceeding dictate a different approach from that a dopted in the US – Tuna II  Arbitrator 's 
Preliminary Ruling. According to the European  Union , this is because in this proceeding the requested 
countermeasures concern actionable subsidies under Part III of the SCM  Agreement . We recall that 
the US – Tuna II  Arbitrator 's Preliminary Ruling addressed a requested suspension of concessions or 
other obligations that concerned a measure in breach of different types of provisions of different 
covered agreements, i.e. the GATT  1994 and the TBT  Agreement . We address the European  Union 's 
argument in the next section.  
2.4.4   The European  Union 's argument concerning the uniqueness of actionable subsidies 
disputes  
2.36.   The European  Union  argues that when actionable subsidies under Part III of the 
SCM Agreement  are at issue, there is a unique interdependence between the mandates of arbitrators 
and the mandates of compliance panels. In the European  Union 's view, their mandates are 
complementary, with the result that the second compliance proceedings hav e a direct bearing on 
the arbitration proceeding. The European  Union  observes that the premise for an arbitrator 's work 
in actionable subsidies cases is the existence of adverse effects and that in the present dispute the 
question whether adverse effects e xist is pending multilateral review before a compliance panel. In 
the European  Union 's view, the arbitrator thus does not have exclusive jurisdiction on the existence 
of adverse effects and the Arbitrator in the present proceeding should therefore coordina te its work 
with the second compliance panel. The European  Union  contends that the US – Tuna II  Arbitrator 's 
Preliminary Ruling concerned a dispute where no such close connection existed between the 
arbitration proceeding and the second compliance proceedi ngs. According to the European  Union , 
this is because the second compliance panel in that dispute did not have to demonstrate the 
existence of harm (nullification or impairment) to determine whether compliance had been 
achieved.71 
2.37.   The United  States  argues t hat Article  7.10 of the SCM  Agreement  explicitly envisages an 
arbitration decision based on adverse effects "determined " to exist in a prior report adopted by the 
DSB. The United  States  infers from this that Article  7.10 instructs an arbitrator to rely on adverse 
effects determined in the past to set the level of countermeasures in the present. To the 
United  States , this indicates that the possibility that the situation evolved after that determination 
does not preclude the arbitrator from completing its wo rk. In the United  States ' view, this holds true 
even if it were assumed that Part III of the SCM  Agreement  differed from other WTO disciplines in 
the ways alleged by the European  Union . The United  States  further contends that the 
European  Union 's premise, under which an evaluation of the negative effects of a measure play no 
role outside of Part III of the SCM  Agreement  is incorrect. The United  States  cites as examples the 
national treatment obligations under the GATT  1994 and the GATS, which require a show ing that 
the challenged measure modify the conditions of competition to the detriment of goods or services 
of another Member.72 
2.38.   The Arbitrator notes that actionable subsidies disputes are indeed different from many other 
WTO disputes in that they involve effects -based disciplines. Under such disciplines, the complaining 
party must demonstrate the existence of adverse effects to sustain a claim of violation. It is therefore 
correct that in this dispute both the Arbitrator and the second compliance p anel are concerned with 
adverse effects: We must quantify the adverse effects previously determined to exist, whereas the 
second compliance panel must determine whether, in the light of the European  Union 's claim of 
compliance, adverse effects still existed (i.e. had not been removed through measures taken to 
comply) when the panel was established.  
 
compliance, the suspension of concessions may no longer be applied … and cessat ion of the suspension is 
required"). The United  States does not dispute that it would no longer be entitled to apply countermeasures in 
this dispute if the European Union were at some point found by the DSB to be in compliance with its 
obligations. (United  States' written submission, para.  23). 
71 European Union's request for a preliminary ruling, paras.  4, 7-8, 24, 46 -47, 50 -51, 71, and 74; and 
response to Arbitrator question No. 50, para.  28. 
72 United  States' written submission, paras.  39, 44, and 51 -53. 
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  2.39.   However, we do not agree with the European  Union  that the second compliance panel 
proceeding has a "direct be aring" on this arbitration proceeding.73 Rather, as will be evidenced 
throughout our Decision, it is the first compliance proceedings that have a direct bearing on this 
arbitration proceeding, because it is in those proceedings that the adverse effects with  which the 
United  States ' countermeasures must be commensurate were determined to exist. Moreover, we 
focus our inquiry on the adverse effects determined to exist during the 2011 -2013 Reference Period, 
i.e. in the past , whereas the second compliance panel focuses its inquiry on whether there were still 
adverse effects more recently , on the date of establishment of that panel . We thus perceive neither 
a "complementary " relationship nor a relationship of "interdependence " between the mandates of 
these two sep arate WTO adjudicators.  
2.40.   We are thus unable to accept the European  Union 's claim that there is a "unique 
interdependence " between this arbitration proceeding and the second compliance panel proceeding. 
We consequently also disagree with the European  Union  that the circumstances of the present 
proceeding dictate an approach that is different from the approach taken in the US – Tuna II  
Arbitrator 's Preliminary Ruling. The two provisional conclusions that we have reached in the section 
immediately above theref ore stand, as does our overall conclusion on the European  Union 's 
preliminary ruling request.  
3  MANDATE OF THE ARBITRATOR  
3.1.  In having recourse to arbitration under Article  22.6 of the DSU, the European  Union  objected 
to the level of countermeasures contained i n the United  States ' request for authorization to take 
countermeasures under Article  22.2 of the DSU and Article  7.9 of the SCM  Agreement . The 
European  Union  also claimed that the principles and procedures set forth in Article  22.3 of the DSU 
had not been followed, and that the United  States ' proposal was not allowed under the covered 
agreements.74  
3.2.  Article  7.9 of the SCM  Agreement  provides that if certain cond itions are met, "the DSB shall 
grant authorization to the complaining Member to take countermeasures, commensurate with the 
degree and nature of the adverse effects determined to exist, unless the DSB decides by consensus 
to reject the request ". Article  7.10 of the SCM  Agreement  stipulates that "[i]n the event that a party 
to the dispute requests arbitration under paragraph 6 of Article  22 of the DSU, the arbitrator shall 
determine whether the countermeasures are commensurate with the degree and nature of t he 
adverse effects determined to exist ". 
3.3.  Articles 7.9 and 7.10 constitute "special or additional rules and procedures " under Appendix 2 
of the DSU. According to Article  1.2 of the DSU, "[t]o the extent that there is a difference between 
the rules and proce dures of this Understanding and the special or additional rules and procedures 
set forth in Appendix 2, the special or additional rules and procedures in Appendix 2 shall prevail ".  
3.4.  This arbitration is governed by both Article  7.10 and Article  22.6. Articl e 22.7 of the DSU  
defines the mandate for an arbitrator acting exclusively under Article  22.6. That is, the arbitrator 
"shall determine whether the level of suspension is equivalent to the level of nullification or 
impairment ". Article  7.10 of the SCM  Agreement  defines the mandate of an arbitrator somewhat 
differently. It states that in the event that a party to a dispute requests arbitration under Article  22.6, 
the arbitrator "shall determine whether the countermeasures are commensurate with the degre e 
and nature of the adverse effects determined to exist ". In accordance with the status of Article  7.10 
as one of  the "special or additional rules and procedures " listed in Appendix 2 of the DSU, we conduct 
this arbitration with reference to the mandate as  set out  in Article  7.10.75 As indicated in  Article  7.10, 
our mandate in this arbitration proceeding is to determine whether the countermeasures proposed 
 
73 For clarity, we note, however, that the final results of the second compliance proceedings may have a 
direct bearing on the United  States' right under Article  22.8 of the DSU to continue to maintain any DSB -
authorized countermeasures that it may have impo sed before the adoption of the final results of the second 
compliance proceedings.  
74 See section 1.2 above.  
75 Article  4.11 of the SCM  Agreement cross -references Article  22.6 of the DSU in much the same way 
that Article  7.10 does. We thus note that no previ ous arbitrator acting under either Article  4.11 or 7.10 has, in 
addition to determining a level of countermeasures that were consistent with the legal standard contained in 
either of those two provisions, also considered it necessary to ensure that the lev el of countermeasures was 
consistent with the standard referenced above in Article  22.7 of the DSU.  
 WT/DS 316/ARB 
 
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  by the United  States  are "commensurate with the degree and nature of the adverse effects 
determined to exist". However, s hould we find that the level of countermeasures proposed by the 
United  States  is not commensurate, we must go on to make our own determination of the level of 
countermeasures that is commensurate with the degree and nature of the adverse effects 
determined to exist.76 Similarly, should we determine that the methodology proposed by the 
United  States  for calculating the level of countermeasures, or any alternative methodology proposed 
by the European  Union , has shortcomings and is not appropr iate, as presented, we could either 
make appropriate adjustments or develop another, appropriate, methodology ourselves.77  
3.5.  In making these determination s, we will refer to prior arbitration decisions. Although many of 
these arbitration decisions were condu cted exclusively under Article  22.6, it is in our view 
appropriate to refer to these prior decisions in our own Decision, as and where relevant. To the 
extent that our mandate is governed by Article  7.10 of the SCM  Agreement , we note that Article  7.10 
explicitly refers to a request for arbitration under Article  22.6, thereby confirming that arbitrations 
governed by Article  7.10 are, at the same time, governed by Article  22.6. The same is true where 
we refer to arbitration decisions under Article  4.11 of  the SCM  Agreement  concerning prohibited 
rather than actionable subsidies. Article  4.11 likewise confirms that arbitrations under Article  4.11 
are, at the same time, arbitrations under Article  22.6.78 
3.6.  The general provisions of Article  22.7 of the DSU are al so relevant to our mandate. They specify 
that "if the matter referred to arbitration includes a claim that the principles and procedures set 
forth in [Article 22.3 of the DSU] have not been followed, the arbitrator shall examine that claim ". 
They further s tate that the arbitrator "may also determine if the proposed suspension of concessions 
or other obligations is allowed under the covered agreement ". It is, therefore, also within our 
mandate to examine the European  Union 's claim that the United  States  did not follow the principles 
and procedures set forth in Article  22.3 and that the United  States ' proposed countermeasures are 
not allowed under the covered agreements.  
4  BURDEN OF PROOF AND DUTY TO PRODUCE EVIDENCE  
4.1.  As indicated, the European  Union  in having r ecourse to arbitration under Article  22.6 ( a) 
objected to the level of countermeasures proposed by the United  States , (b) claimed that the 
principles and procedures set forth in Article  22.3 of the DSU have not been followed by the 
United  States  in conside ring what countermeasures to take, and ( c) claimed that the United  States ' 
proposal is not allowed under the covered agreements.  
4.2.  It is clear from previous arbitrations under Article  22.6, and the parties do not dispute79, that 
the party challenging the pro posed countermeasures bears the burden of establishing a prima facie 
case that such countermeasures are inconsistent with the relevant requirements of the 
SCM Agreement  and/or the DSU.80 Thereafter, the burden shifts to the party proposing the 
countermeasur es to rebut such prima facie  case.81 According to the arbitrator in US – Upland Cotton 
(Article  22.6 – US II) , this allocation of the burden of proof applies to an objection based on 
 
76 Decisions by the Arbitrators, US – Washing Machines (Article  22.6 – US), para.  1.15 (quoting Decision 
by the Arbitrator , EC – Hormones (US) (Article  22.6 – EC), para.  12 (explaining that "estimat[ing] the level of 
suspension we consider to be equivalent to the impairment suffered … is the essential task and responsibility 
conferred on the arbitrators in order to settle the dispute"); and US – Upland Cotton (Article  22.6 – US II) , 
para. 4.16. 
77 Decision by the Arbitrator, US – Tuna II (Mexico) (Article  22.6 – US), para.  5.152 (noting that "in 
assessing the level of nullification or impairment  … , we are not bound to base our calculation on either 
Mexico's or the United  States' model. We could, in principle, attempt to develop an alternative model that 
would more accurately represent our understanding of the relevant counterfactual").  
78 Article  4.11 begins with an introductory clause that states: "In the event a party to the dispute 
requests arbitration under paragraph 6 of Article  22 of the [DSU]".  
79 European Union's written submission, para.  49; and United  States' written submission, para.  15. 
80 We note that a " prima facie case" has been understood in WTO disp ute settlement practice to mean 
"one which, in the absence of effective refutation by the defending party, requires a panel, as a matter of law, 
to rule in favour of the complaining party presenting the prima facie case". (Appellate  Body Report, 
EC – Hormo nes, para.  104 (referring to Appellate  Body Report, US – Wool Shirts and Blouses, p. 14)). In our 
view, this definition is equally applicable to arbitrations under Article  22.6.   
81 Decisions by the Arbitrators, US – Upland Cotton (Article  22.6 – US I) , para. 4.22; Canada – Aircraft 
Credits and Guarantees (Article  22.6 – Canada) , para.  2.5; US – FSC (Article  22.6 – US), para. 2.8; and 
Brazil  – Aircraft (Article  22.6 – Brazil) , para.  2.8.  
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  Article  7.9 to the proposed level of countermeasures as well as to claims based on Article  22.3.82 We 
consider that the same allocation is appropriate also in the case of a claim that the proposed 
countermeasures are not allowed under the covered agreements.  
4.3.  In the present proceeding, therefore, the European  Union  bears t he burden to submit 
arguments and evidence sufficient to establish a prima facie  case that the countermeasures proposed 
by the United  States  are not "commensurate with the degree and nature of the adverse effects 
determined to exist " and are, consequently,  inconsistent with Article  7.9. To satisfy its burden of 
proof, the European  Union  must engage with the methodology used by the United  States  to arrive 
at the proposed level of countermeasures, and it is "not sufficient merely to assert that another 
method ology is more appropriate ".83 If the European  Union  meets its burden, it is for the 
United  States , thereafter, to submit arguments and evidence sufficient to rebut the prima facie  case 
established by the European  Union . Similarly, the European  Union  bears t he burden to submit 
arguments and evidence sufficient to establish a prima facie  case that the United  States  did not 
follow the principles and procedures contained in Article  22.3 of the DSU in considering what 
countermeasures to take, and that the propose d countermeasures are not allowed under the covered 
agreements. If the European  Union  satisfies this burden, the burden shifts to the United  States  to 
submit arguments and evidence sufficient to rebut the prima facie  case established by the 
European  Union . 
4.4.  Furthermore, each party has the duty to produce evidence in support of its assertions of fact 
and to collaborate with an Article  22.6 arbitrator in presenting evidence.84 Consistent with this duty 
and prior arbitrations, we requested that, as a first step in the proceeding, the United  States  as the 
party seeking authorization to take countermeasures submit a methodology paper substantiating 
how it arrived at the proposed countermeasures.85  
5  ARTICLE 7.10 OF THE SCM AGREEMENT  
5.1.  As noted, our mandate in this proc eeding is to determine the level of "countermeasures … 
commensurate with the degree and nature of the adverse effects determined to exist " within the 
meaning of Article  7.10 of the SCM  Agreement . This standard has three basic elements: (a) 
"countermeasures ", which defines the type of measures that  the United  States  may take , (b) 
"commensurate with ", which defines the relationship that must exist  between the level of 
countermeasures and the degree  and nature of adverse effects determined to exist , and (c) "the 
degree and nature of the adverse effects determined to exist ", which is the metric for determining 
the permissible level of countermeasures. We note that these terms have been previously 
interpreted by other arbitrators, and in particular the arbitrator in US – Upland Cotton (Article  22.6 
– US II) . As we agree with many aspects of these interpretations, we draw on them below and add 
our own observations as appropriate.  
5.2.  According to a prior arb itrator, "'countermeasures ' are, in essence, measures taken to 
'counteract ' something, and specifically, in the context of Article  7.9, measures taken to act against, 
or in response to, a failure to remove the adverse effects of, or withdraw, an actionable  subsidy 
within the required time period ".86 We note that, functionally speaking and in the context of this 
proceeding, which is conducted at the same time under Article  22.6 of the DSU, we understand the 
term "countermeasures " to effectively designate a te mporary "suspension of concessions or other 
 
82 Decision by the Arbitrator, US – Upland Cotton (Article  22.6 – US II) , paras.  4.13 and 5.55.  
83 Decisions by the Arbitrator, US – COOL (Article  22.6 – United  States) , para.  4.14. 
84 Decisions by the Arbitrators, US – COOL (Article  22.6 – United  States) , para.  4.9; US – Gambling 
(Article  22.6 – US), paras . 2.24 and 2.25; US – 1916 Act (EC) (Article  22.6 – US), para.  3.2; US – FSC 
(Article  22.6 – US), para.  2.11; and EC – Hormones (US) (Article  22.6 – EC), para.  11. 
85 Decision by the Arbitrator, EC – Hormones (US) (Article  22.6 – EC), para.  11.  
86 Decision by the Arbitrator, US – Upland Cotton (Article  22.6 – US II) , para. 4.26. 
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  obligations " as that term is used in Article  22.6.87 We further note that a complaining party 's impetus 
to request authorization to take countermeasures or suspend concessions or other obligations is 
triggered by a responding party 's failure to bring its measures into compliance with its relevant WTO 
obligations after being recommended to do so by the DSB.88 Arbitrators have further observed that 
the purpose of authorized countermeasures and suspension of concession s or other obligations is to 
induce a responding party 's compliance.89  
5.3.  Moreover, we note that countermeasures and suspension of concessions or other obligations 
are prospective remedies addressing a responding party 's non -compliance going forward from the 
date on which authorization to take countermeasures or suspend concessions is granted.90  
5.4.  Turning to the next element of Article  7.10 – the term "commensurate with " – this connotes a 
"correspondence " between the "countermeasures " proposed and "the degree and nature of the 
adverse effect determined to exist ". It is a "less precise degree of equivalence than exact numerical 
correspondence ", but it nonetheless indicates a "relationship of correspondence and proportionality 
between the two elements ", which may be "qualitative as well as quantitative ".91 We further observe 
that it is generally recognized that WTO remedies are not intended to be "punitive ".92 Accordingly, 
while the phrase "commensurate with " does not require exact numerical correspondence, t his does 
not imply that countermeasures commensurate with the adverse effects determined to exist may or 
should incorporate any punitive element.  
5.5.  Regarding the last element of Article  7.10 – the term "adverse effects determined to exist " – 
we note that thi s term "sends the treaty interpreter back to the precise findings on adverse effects 
made by the panels and the Appellate  Body as these constitute the 'adverse effects determined to 
exist'".93 That is, it refers "to the specific 'adverse effects ' within the  meaning of Articles 5 and 6 of 
the SCM Agreement  that form the basis of the underlying findings in the case at hand ".94 The term 
"degree " corresponds to a quantitative element whereas the reference to the "nature " of adverse 
effects relates to a qualitative element.95 Thus, Article  7.9 seeks "to closely tailor … the 
countermeasures to the legal basis for the underlying findings ", and therefore potential 
countermeasures are "limited in scope, to the 'degree and natur e' of those effects of the subsid[ies] 
 
87 Recourse to Article  7.9 of the SCM  Agreement and Article  22.2 of the DSU by the United  States, 
WT/DS316/18, fifth paragraph (requesting "suspensions" of "concessions" and "obligations" under the 
GATT  1994 and the GATS). See also Decisions by the Arbitrato rs, US – Upland Cotton (Article  22.6 – US II) , 
para. 4.24 (noting that "it is not argued by either party in these proceedings that the term 'countermeasures' 
would designate, in the SCM Agreement , anything other than a temporary suspension of certain oblig ations, 
and this is what we understand this term to refer to"); and Brazil – Aircraft (Article  22.6 – Brazil) , para.  3.29 
(agreeing with the parties' common position "that the term 'countermeasures', as used in Article  4 of the 
SCM Agreement, may include s uspension of concessions or other obligations"). We make no judgments as to 
whether "countermeasures" under the SCM  Agreement may take forms other than suspensions of concessions 
or other obligations.  
88 Articles 22.2 and 22.6 of the DSU; Article  7.9 of the  SCM Agreement; and Decision by the Arbitrator, 
US – Tuna II (Mexico) (Article  22.6 – US), para.  3.20.  
89 Decisions by the Arbitrators, US – Washing Machines (Article  22.6 – US), para.  1.17; and US – Upland 
Cotton (Article  22.6 – US II) , para.  4.58.  
90 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article  21.5 – US), 
para. 5.374 (referring to the "prospective nature of remedies in WTO dispute settlement").  
91 Decision by the Arbitrator, US – Upland Cotton (Ar ticle 22.6 – US II) , paras.  4.35-4.39. (emphasis 
omitted)  
92 Decisions by the Arbitrators, US – Washing Machines (Article  22.6 – US), para.  1.17 (citing Decisions 
by the Arbitrators, US – Upland Cotton (Article  22.6 – US I), para.  4.109); US – 1916 Act (EC)  (Article  22.6 – 
US), para.  5.8; and US – FSC (Article  22.6 – US), para.  5.62 (noting that even though in prohibited subsidies 
disputes Article  4.10 of the SCM  Agreement authorizes "appropriate" countermeasures that are not 
"disproportionate", there is not hing in that Article  or its context "which suggests an entitlement to manifestly 
punitive [counter]measures").  See also Decision by the Arbitrator, Brazil – Aircraft (Article  22.6 – Brazil) , 
para. 3.55 (explaining that "[a] countermeasure becomes punitive when it is not only intended to ensure that 
the [WTO Member] in breach of its obligations bring its conduct into conformity with its international 
obligations, but contains an additional dimension meant to sanction the action of that [WTO Member]").  
93 Decision by the Arbitrator, US – Upland Cotton (Article  22.6 – US II) , para.  4.49. 
94 Decision by the Arbitrator, US – Upland Cotton (Article  22.6 – US II) , para.  4.50. 
95 Decision by the Arbitrator, US – Upland Cotton (Article  22.6 – US II) , para.  4.41. See als o Decision by 
the Arbitrator, US – Upland Cotton (Article  22.6 – US II) , para.  4.43 (indicating that the "nature" of the 
adverse effects may be understood to refer to the different types of adverse effects that are foreseen in 
Articles 5 and 6 of the SCM  Agreement, thus inviting a consideration of the specific type of adverse effects that 
have been determined to exist).  
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  that are the basis for the successful challenge ".96 We therefore underline that the "adverse effects 
determined to exist " are those that were identified in a previous adopted panel or Appellate  Body 
report.97 We conside r that for purposes of the present arbitration proceeding, the relevant panel and 
Appellate  Body reports are the compliance reports (rather than the original panel and Appellate  Body 
reports). It is the findings from the compliance proceedings, by establis hing that the European  Union  
"has not taken appropriate steps to remove the adverse effects of the subsidy or withdraw the 
subsidy within six months " (Article  7.9 of the SCM  Agreement ), which provide the basis for the DSB 
to grant authorization to the United States  to take countermeasures.  
6  THE EUROPEAN UNION 'S OBJECTION TO THE L EVEL OF COUNTERMEASU RES 
6.1  Overview of the parties' approaches and order of analysis  
6.1.  As already noted further above, this arbitration was triggered by the European  Union 's 
objection to the United  States ' request under Article  22.2 of the DSU and Article  7.9 of the 
SCM Agreement  for authorization to impose countermeasures (hereafter, for simplicity, the 
"Article  22.2 request"). Having addressed introductory, procedural, an d other preliminary matters 
in the above sections of this Decision, we now turn to address the European  Union 's objections to 
the United  States ' proposed level of countermeasures in more detail. In doing so, we find it helpful 
first to provide an overview of the parties' approaches in this respect  and, in the light of those 
approaches, set out the framework that we will use to evaluate the European  Union 's objections.  
6.2.  In this proceeding, the United  States  sets out a proposed methodology for determining a level 
of countermeasures in its methodology paper. In that methodology, the United  States  recalls that, 
in the compliance proceedings, the panel and Appellate  Body found that certain LA/MSF measures 
caused adve rse effects in the forms of lost sales and impedance within the meaning of Article  6.3(a) -
(c) of the SCM  Agreement  in the 2011 -2013 Reference Period. The United  States  proposes that the 
Arbitrator calculate the value of the lost sales and impedance associa ted with those findings, and 
assign those values to the 2011 -2013 Reference Period. The United  States  then sums up these 
individual instances of lost sales and impedance and annualizes the total value. The United  States  
proposes that the United  States  be authorized to take "countermeasures", within the meaning of 
Article  7.9 of the SCM  Agreement , up to that annualized amount every year going forward, adjusted 
for inflation, until the authority to impose countermeasures ends under the terms of Article  22.8 o f 
the DSU.  
6.3.  The Arbitrator  notes at this point that the structure proposed by the United  States  for its 
countermeasures bears similarities to what previous arbitrators have accepted. In particular, 
multiple previous arbitrators have established a single, ma ximum level of countermeasures or 
suspension of concessions or other obligations that the complaining party was then authorized to 
impose annually.98 For ease of reference, we will refer to this structure as "Annual Suspension". In 
addition to proposing Ann ual Suspension, the United  States  requests that the level of Annual 
Suspension be allowed to vary over time to take into account inflation.  
6.4.  In response to the United  States ' proposed methodology, the European  Union  has proceeded 
along two related tracks. F irst, the European  Union  offers numerous criticisms of the United  States ' 
methodology, both procedural and substantive. In offering such criticisms, the European  Union  often 
proposes an alternative, or various alternatives, to specific steps that the United States ' 
methodology contemplates. Second, and based on certain principles that underlie some of the 
criticisms that the European  Union  makes with respect to the United  States ' methodology, the 
 
96 Decision by the Arbitrator, US – Upland Cotton (Article  22.6 – US II) , para.  4.55. In the words of that 
arbitrator, an arbitrator is the refore "entitled to take into account fully the 'degree and nature ' of these adverse 
effects as they present themselves in the case at hand, but [is] not permitted to do more than that". (Decision 
by the Arbitrator, US – Upland Cotton (Article  22.6 – US II) , para.  4.47).  
97 Article  7.8 of the SCM  Agreement forms part of th e immediate context of Article  7.10. It refers to "a 
panel report or an Appellate  Body report" that has been "adopted" and in which "it is determined that any 
subsidy has resulted in adverse effects". Article  7.8 thus makes clear that the adverse effects d etermined to 
exist are adverse effects determined to exist in a prior adopted panel or Appellate  Body report concerning the 
same dispute.  
98 This issue is discussed in more detail in section 6.3.1 below.  
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  European  Union  sketches out an alternative methodology. This description occupies about two pages 
in the European  Union 's written submission, and is summarized as follows:  
[A]ny amount of countermeasures authorised by the Arbitration Panel must respect the 
following principles: (i) [it must be for] a non-recurring  countermeasure; (ii) [it must 
be] calculated based on adverse effects that have not ceased to exist ; (iii) [it must be] 
distributed over time based on deliveries  resulting from, and constituting, the adverse 
effects determined to exist; and (iv) [it must no t be] inflated by the numerous technical 
errors  made by the United  States .99 
6.5.  In the light of the foregoing, section 6 on the European  Union 's objections to the level of 
countermeasures proceeds in four basic parts:  
a. First, we examine a procedural objection b y the European  Union  to the effect that the 
United  States  cannot be authorized to take countermeasures in respect of the DSB -
adopted findings on impedance (section 6.2); 
b. Second , we examine substantive and technical aspects of the United  States ' methodology. 
This part will address: (a) the appropriate reference p eriod, (b) the appropriate 
counterfactual , (c) general European  Union  arguments against the United  States ' 
methodology , and (d) technical European  Union  arguments against the United  States ' 
methodology  (section 6.3); 
c. Third, and based on conclusions reached  in the prior sections, we explain how we calculate 
the actual level of countermeasures that the United  States  may be allowed to impose 
(section 6.4); and  
d. Finally , we examine a procedural objection by the European  Union  regarding the level of 
countermeasu res that, according to the European  Union , the Arbitrator's determination 
may not exceed in view of the United  States ' Article  22.2 request (section 6.5).  
6.6.  We address each in turn below.  
6.2  Absence of a reference to impedance in the United  States ' request for  
countermeasures  
6.7.  The European  Union  submits that the United  States ' request under Article  22.2 of the DSU 
provides no basis for authorizing countermeasures in response to the DSB 's 2018 recommendations 
and rulings concerning adverse effects in the form of impedance. The European  Union  notes that the 
United  States  in its request asked for countermeasures corresponding to adverse effects in the forms 
of lost sales and displacement, but not impedance. According to the European  Union , 
countermeasures cannot be authorized in respect of the DSB -adopted findings on impedance 
because in respect of those findings the United  States  request does not meet the specificity 
requirements contained in Article  22.2.100  
6.8.  The United  States  responds that there is no basis for t he European  Union 's request that the 
Arbitrator exclude from its quantification the DSB -adopted findings on impedance. The United  States  
notes that, as a factual matter, its request is to take countermeasures commensurate with the 
 
99 European Union's written submission, para.  365. (em phasis original) To implement item (iii), the 
European Union has explained that the Arbitrator should:  
[D]etermine … the counterfactual delivery year and number of aircraft delivered, and multiply 
this number by the counterfactual per -unit LCA delivery pr ice. The result would be the annual 
lost revenue for deliveries that would have occurred under the lost sale, and therefore the 
appropriate value of trade effects (and hence countermeasures) for that campaign and that year.  
Summing the annual lost revenue  across the lost sales campaigns would yield the total annual 
lost revenue, and therefore the "commensurate" value of countermeasures for that year.  
(European Union's response to Arbitrator question No. 25, para.  393). The European Union does not 
materiall y expound on the implementation or quantification of its proposed methodology, beyond its 
criticisms of the United  States' methodology.    
100 European Union's opening statement at the meeting of the Arbitrator, para.  18. 
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  adverse effects reflected  in the DSB recommendations and rulings. In the United  States ' view, the 
statement in its request referring to lost sales and displacement explains how the United  States  
valued those adverse effects at the time  that it filed its request. The United  States  submits that this 
statement does not limit the adverse effects to those particular market phenomena or to those that 
had been determined to exist as of that time.101  
6.9.   The United  States  also considers that its request can only be understood to refer to the a dverse 
effects found to exist in the compliance panel and Appellate  Body reports. In support of this 
argument, the United  States  points to the parties ' bilateral Sequencing Agreement. Under that 
Agreement, either party could recommence the present arbitrat ion proceeding, which had been 
suspended in 2012, if the DSB, following compliance proceedings under Article  21.5 of the DSU, 
ruled that a measure taken to comply did not exist or was inconsistent with a covered agreement.102  
6.10.   The United  States  further conte nds that the European  Union  is wrong to claim that, as a 
matter of law, the United  States ' request lacks specificity. According to the United  States , its request 
identifies the level of countermeasures in functional terms, as the annual level of adverse effects 
determined to exist, and the request then goes on to estimate that, as of the time  that it was filed, 
that level was between USD 7 ,000 and 10 ,000 million  per year. Additionally, the United  States  notes 
that its request refers to Article  7.9 of the SCM  Agreement , which authorizes countermeasures 
commensurate with the adverse effects determined to exist. The United  States  observes that both 
parties agree that the relevant determinations appear in the compliance panel and Appellate  Body 
reports . In the United  States ' view, the reference in its request to Article  7.9 thus encompasses the 
findings on impedance contained in those reports.103 
6.11.   The European  Union  counters that the functional description advanced by the United  States  
merely paraphrases t he language of Article  7.9 and does not provide any specificity regard ing the 
level of countermeasures. The European  Union  submits that the functional description provides no 
specificity in terms of the amount requested by the United  States  and the types o f adverse effects. 
The European  Union  argues that under the United  States ' reading of its request, that request does 
not specify a maximum level of countermeasures in numerical terms and could cover any type of 
adverse effects. According to the European  Union, if the overly broad reading suggested by the 
United  States  is the proper construction of the request, it does not support the authorization of any 
countermeasures. The European  Union  notes that the references in the request to the specific types 
of adverse effects (lost sales and displacement) and to the amount of adverse effects are not part 
of the functional description.104 
6.12.   In the European  Union 's view, the factually correct reading of the request is that it defines 
the level of countermeasures by reference to two specific types of adverse effects (lost sales and 
displacement), while excluding a reference to additional types of adverse effects (impedance). The 
European  Union  contends that the findings in the compliance proceedings  cannot bring the 
impedance findings within the terms of reference of this arbitration proceeding. The European  Union  
argues that if the United  States  had wished to request countermeasures in respect of the impedance 
findings, it should have included those  findings in its request under Article  22.2.105 
6.13.   The Arbitrator begins by setting out in full the relevant portions of the opening paragraph of 
the United  States ' request under Article  22.2 and Article  7.9 (hereafter, for simplicity, the 
"Article  22.2 request "). The passage in question consists of the following four sentences:  
Pursuant to Article  22.2 of [the DSU] and Article  7.9 of [the SCM  Agreement ], the 
United  States  requests authorization from the [DSB] to take countermeasures with 
respect to the European  Union  … at an annual level commensurate with the degree and 
nature of the adverse effects caused to the interests of the United  States  by the failure 
 
101 United  States' response to Arbitra tor question No. 133, paras.  143 and 146.  
102 United  States' response to Arbitrator question No. 133, para.  147. 
103 United  States' response to Arbitrator question No. 133, paras.  149-150. 
104 European Union's comments on the United  States' response to Arbitrato r question No. 133, 
paras.  332 and 334 -335. 
105 European Union's comments on the United  States' response to Arbitrator question No. 133, 
paras.  320, 329, 336 -337 (referring to Decision by the Arbitrator, EC – Bananas III (Ecuador) (Article  22.6 – 
EC), para.  24) and 340.  
 WT/DS 316/ARB 
 
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  of the EU and certain member States to withdraw subsidies or remove their adverse 
effects in compliance w ith the recommendations and rulings of the DSB. This amount 
corresponds to the annual value of lost sales, of imports of US large civil aircraft 
displaced from the EU market, and of exports of US large civil aircraft displaced from 
third country markets. T he amount will be updated annually using the most recent 
publicly available data. Based on currently available data in a recent period, the 
United  States  estimates this figure to be between $7 and $10  billion per year.106 
6.14.   Also relevant is the fourth paragrap h of the United  States ' request, which states in its second 
sentence that, "[a]s required by Article  7.9 of the SCM  Agreement , the countermeasures are 
commensurate on an annual basis with the degree and nature of the adverse effects determined to 
exist".107 
6.2.1   Coverage  of the United  States ' Article  22.2 request  
6.15.   The central question presented by the European  Union 's argument s is whether the 
United  States  Article  22.2 request permits the United  States  to include in its proposed level of 
countermeasures adverse effects in the form of impedance that were first determined to exist in the 
compliance reports adopted by the DSB in 2018. In approaching this question, we note at the outset 
that Article  22.2 re quests are comparable  to requests for establishment of a panel under Article  6.2 
of the DSU: both are requests for action from the DSB, and both define the terms of reference in 
any ensuing WTO dispute settlement proceedings.108 We further note that the Appe llate Body has 
stated in respect of panel requests that they must comply with the applicable requirements "on their 
face", that their texts must be examined, "as a whole, and in the light of attendant circumstances " 
and that analyses of panel requests must  be made "on the merits of each case ".109 We find the same 
to be appropriate in the case of Article  22.2 requests.  
6.16.   In the present proceeding, it is useful to look at attendant circumstances before parsing the 
text of the Article  22.2 request, since this als o assists in understanding certain aspects of that text.  
6.17.   The first point to be noted is that the United  States  submitted its Article  22.2 request on 
9 December  2011 after the DSB had adopted the original recommendations and rulings on 
1 June 2011 and the European  Union 's implementation period had expired on 1  December  2011. 
The 2011 DSB recommendations and rulings reflected findings of violation on lost sales and 
displacement, but not impedance.110  
6.18.   The present arbitration proceeding was suspended on 20  January  2012 and recommenced on 
13 July 2018 after the compliance proceedings under Article  21.5 of the DSU had been completed 
and the DSB had adopted the compliance recommendations and rulings on 28  May 2018.111 The 
resumption of the arbitration proceeding was in accordance with the parties ' bilateral Sequencing 
Agreement, pursuant to which either party could recommence the arbitration proceeding "[i]n the 
event that the DSB following a proceeding under Article  21.5 of the DSU rules that a measure taken 
to comply does not exist or is inconsistent with a covered agreement ".112 Both parties thus formally 
agreed that the outcome of any compliance proceedings must be taken into account in determining 
whether to recommence the arbitration proceeding.  
6.19.   In the light o f these attendant circumstances, it was appropriate that the United  States  sought 
countermeasures based on the 2011 DSB recommendations and rulings concerning findings on lost 
 
106 Recourse to Article  7.9 of the SCM  Agreement and Article  22.2 of the DSU by the United  States, 
WT/DS316/18, first paragraph.  
107 Recourse to Article  7.9 of the SCM  Agreement and Article  22.2 of the DSU by the United  States, 
WT/DS316/18, fourt h paragraph.  
108 See Decision by the Arbitrator, EC – Bananas III (Ecuador) (Article  22.6 – EC), para.  20 (stating also 
that both types of requests serve similar due process objectives).  
109 Appellate  Body Report, US – Carbon Steel , para.  127. 
110 See paragraphs 1.2 and 1.5 above.  
111 See paragraphs 1.4 and 1.8 above.  
112 Communication by the parties, WT/DS316/21 (Understanding between the European Union and the 
United  States Regarding Procedures under Articles 21 and 22 of the DSU), para.  6. 
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  sales and displacement.113 Indeed, those were the only recommendations and rulings  that could 
justify countermeasures  at the time that the United  States  submitted its Article  22.2 request. In the 
words of the arbitrator in US – Tuna II (Mexico) (Article  22.6 – US), "arbitration proceedings under 
Article 22.6 can be traced back to a WTO -inconsistent measure that existed when the RPT expired, 
which is either the same original measure that has previously been found to be WTO -inconsistent 
[as in the present proceeding] or a WTO -inconsistent compliance measure taken subsequently (but 
prior to  the expiry of the RPT) ".114 We therefore disagree with the European  Union  that the 
United  States  could properly have included in its 2011 request a proposed level of countermeasures 
that corresponded not just to lost sales and displacement, but also impedan ce. There were no DSB -
adopted findings of violation  with regard to impedance at that time. There thus was no justification 
for the United  States  to include the value of the claimed impedance in its proposed level of 
countermeasures. As the European  Union  correctly notes, the United  States , a few months after 
submitting its Article  22.2 request, filed a request for establishment of an Article  21.5 panel. In that 
request for panel establishment, which the United  States  filed after the European  Union  had 
submitted a notification claiming to have implemented the 2011 DSB recommendations and rulings, 
the United  States  claimed the existence of adverse ef fects in the form of impedance.115 However, 
the United  States  at that time was merely claiming the existence of impedance. The DSB did not 
adopt findings of violation with regard to impedance until 2018.  
6.20.   With these attendant circumstances in mind, we turn to  examine the text of the Article  22.2 
request on its face. We begin with the reference in the first sentence of the opening paragraph to 
the taking of countermeasures in response to "the failure of the EU and certain member States to 
withdraw subsidies or remove their adverse effects in compliance with the recommendations and 
rulings of the DSB ". We consider that this reference points the reader to the most recent available 
DSB recommendations and rulings. It is the most recent DSB recommendations and rulin gs that 
determine whether there still is any failure to comply on the part of the European  Union  that provides 
a legal basis for the United  States  to request authorization to take any countermeasures, and if so, 
whether any such failure is more or less ext ensive than before, which in turn will impact on the level 
of countermeasure that can be authorized. Applying this interpretation at the time of our review of 
the matter, the first sentence thus refers us to the 2018 recommendations and rulings that reflec t 
the adverse findings contained in the compliance reports. In our view, considered on its own and 
applied at the time of our review, the first sentence should therefore be interpreted to set out a 
request by the United  States  for countermeasures at an ann ual level commensurate with the degree 
and nature of the adverse effects determined to exist in the compliance reports adopted by the DSB 
in 2018. Both parties agree that those adverse effects are in the form of lost sales and impedance 
and that those are the relevant adverse effects for purposes of this proceeding.116  
6.21.   We next consider the second sentence of the opening paragraph. That sentence expresses in 
more concrete terms  than the first sentence that the level of countermeasures sought by the 
United  States corresponds to the annual value of lost sales and displaced LCA imports and exports. 
It is uncontested that the second sentence does not refer to adverse effects in the form of 
impedance. As noted, however, in 2011 the United  States  could only describe  the level of 
countermeasures as reflecting the adverse effects that had been determined to exist at that time 
(lost sales and displacement). At the time of our review of the matter, which follows the 2018 DSB 
recommendations and rulings, the United  States , in keeping with the contents of the first sentence, 
is still seeking countermeasures commensurate with the adverse effects determined to exist, only 
now the relevant adverse effects are those determined to exist in the compliance reports adopted 
by the D SB in 2018. The above -quoted second sentence of the fourth paragraph of the Article  22.2 
request also supports this view. We consequently do not consider that the second sentence can 
properly be construed to limit the United  States ' ability to seek counter measures, based on the first 
 
113 Recou rse to Article  7.9 of the SCM  Agreement and Article  22.2 of the DSU by the United  States, 
WT/DS316/18, first paragraph (first and second sentences) and fourth paragraph (second sentence).   
114 Decision by the Arbitrator, US – Tuna II (Mexico) (Article  22.6 – US), para.  3.20. That arbitrator 
further stated that it is "the continued WTO -inconsistency of the original or a compliance measure (where a 
compliance measure was taken within the RPT) at the time the RPT expires that forms the basis for any 
[Article  22.2] request". (Decision by the Arbitrator, US – Tuna II (Mexico) (Article  22.6 – US), para.  3.24).  
115 Recourse to Article  21.5 of the DSU by the United  States, WT/DS316/23, para.  8. 
116 United  States' response to Arbitrator question No. 133, para.  147; and European Union's comments 
on the United  States' response to Arbitrator question No. 133, para.  336. 
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  sentence of the opening paragraph and the fourth paragraph, in response to the 2018 DSB 
recommendations and rulings concerning lost sales and impedance.117  
6.22.   In sum, the first and second sentences of the first paragraph as well as  the second sentence 
of the fourth paragraph,  read together,  and the attendant circumstances, which include the 
compliance reports adopted by the DSB in 2018 and the fact that the United  States  in 2011 could 
not seek countermeasures against adverse effects  in the form of impedance that had not been 
determined to exist, in our view support the conclusion that the annual amount of countermeasures 
that the United  States  can seek in this proceeding can properly correspond to the annual value of 
(a) lost sales, ( b) imports of United  States  LCA impeded from the E uropean  Union  market, and ( c) 
exports of United  States  LCA impeded from third country markets.  
6.23.   The European  Union  argues that the compliance reports adopted by the DSB cannot modify, 
ex post , the t erms of reference of the Arbitrator.118 However, under our interpretation of the 
Article  22.2 request, the compliance reports did not modify our terms of reference. Rather, the terms 
of the Article  22.2 request, when applied at the time of our review, cover countermeasures in respect 
of the impedance findings contained in the compliance reports.  
6.2.2   Specificity of the United  States ' Article  22.2 request  
6.24.   The European  Union  further contends that the United  States ' request is inconsistent with the 
specificity requi rements flowing from Article  22.2. The European  Union  refers in this respect to prior 
arbitrators who found that Article  22.2 contains minimum specificity standards for Article  22.2 
requests, including a requirement that such requests set out the specific level of suspension (i.e. a 
level deemed equivalent to the nullification or impairment caused by the WTO -inconsistent 
measure).119 According to the European  Union , an inconsistency with this specificity requirement 
arises because the level of suspension spec ified in the United  States ' request does not include 
impedance and the request thus is not sufficiently specific in terms of that type of adverse effect. 
The European  Union  also argues that if the Article  22.2 request were not understood to define the 
adverse effects at issue as comprising only lost sales and displacement, the first sentence of the 
opening paragraph of the United  States ' request could cover any form of adverse effects identified 
in Articles 5 and 6.3 of the SCM  Agreement , including for inst ance injury to the domestic industry of 
another Member.  
6.25.   To determin e whether the level of countermeasures specified in the United  States ' Article  22.2 
request meets the minimum specificity requirement identified by prior arbitrators,  the Arbitrator  
deems it once again necessary to consider  the attendant circumstances. As detailed above, it would 
not have been legally appropriate in 2011 for the United  States  to have included in its request a 
reference to adverse effects in the form of  impedance since no such effects had been determined to 
exist in the original reports adopted by the DSB.  
6.26.   Regarding the European  Union 's point concerning the broad reference to "adverse effects " in 
the first sentence of the opening paragraph, we observe t hat that sentence concerns the adverse 
effects caused by the failure of the European  Union  to implement prior DSB recommendations and 
rulings. These DSB recommendations and rulings permit precise identification of the specific adverse 
effects at issue.120 Moreover, the second sentence, by referring to lost sales and displacement (as 
opposed to any other types of adverse effects), confirms the intention of the United  States  to seek 
 
117 This interpretation of the Article  22.2 request also ensures a harmonious approach to, on the one 
hand, the Article  22.2 request and, on the other, the Sequencing Agreement concluded between the parties. As 
mentioned, the Sequencing Agreement contemplates that depending on the outcome of the compliance 
proceedings the suspended arbitration proceeding could be recommenced or not. It would seem to us to be 
incongruous to adopt an approach under which the outcome of compliance proceedings was determinative of 
whether the Arbitrator could be asked to resume its work, but under which that same outcome is deliberately 
disregarded when determining what level of countermeasures the United  States may propose, despite an 
unqualified reference to DSB recommendations an d rulings in the Article  22.2 request.  
118 European Union's comments on the United  States' response to Arbitrator question No. 133, 
para. 336. 
119 Decisions by the Arbitrators, US – Offset Act (Byrd Amendment) (EC) (Article  22.6 – US), para.  2.18; 
and EC – Bananas III (Ecuador) (Article  22.6 – EC), paras.  20 and 21 (quoting EC – Hormones (Canada) 
(Article  22.6 – EC), para.  16). 
120 As noted above, both parties agree, for example, that the 2018 DSB recommendations and rulings 
concern adverse effects in the form of  lost sales and impedance.  WT/DS 316/ARB 
 
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  countermeasures for adverse effects that have been determined to exist in prior  reports adopted by 
the DSB.  
6.27.   Thus, reading the Article  22.2 request as a whole and bearing in mind the 2018 DSB 
recommendations and rulings, it can in our view be reliably inferred that at the time of our review 
the specific proposed amount of countermeas ures that the United  States  is seeking through its 
request corresponds to the annual level of lost sales and impedance from the European  Union  and 
certain third  country markets.  
6.28.   In the light of the foregoing considerations, we conclude that, in the circum stances of the 
present proceeding, the Article  22.2 request provides minimum specificity regarding the inclusion 
by the United  States  in the proposed level of countermeasures of adverse effects in the form of 
impedance that were determined to exist in the compliance reports. We consequently reject the 
European  Union 's contention that the United  States ' request for countermeasures in relation to 
impedance is not consistent with the specificity requirements for an Article  22.2 request.  
6.29.   In summing up, for all the above reasons we disagree with the European  Union 's argument 
that the United  States  cannot be authorized to take countermeasures in respect of the DSB -adopted 
findings on impedance. We will thus proceed to quantify the DSB -adopted findings on impedance  in 
the remainder of section  6 of this Decision .121 
6.3  Assessment of the United  States  proposed methodology  
6.30.   Having rejected the European  Union 's procedural objection that the United  States  cannot be 
authorized to take countermeasures in respect of the DSB -adopted findings on impedance, section  
6.3 turns to assess more  substantive and technical aspects of the United  States ' methodology. This 
section  will therefore address: (a) the appropriat e reference period , (b) the appropriate 
counterfactual , (c) the European  Union 's general arguments against  the United  States ' methodology , 
and (d) the European  Union 's technical arguments against  the United  States ' methodology . 
6.3.1   Appropriat eness of using the  2011 -2013 Reference Period and accepting Annual 
Suspension of concessions  
6.31.   The parties dedicated significant portions of their submissions to debating whether it is 
permissible for the Arbitrator to determine the maximum  level of countermeasures in the for m of 
Annual Suspension122 based on the value of the adverse effects determined to exist in the 2011 -
2013 Reference Period, as the United  States  proposes.123 
6.32.   This appears to be the first time in an Article  22.6 arbitration proceeding that a responding 
party has challenged a complaining party 's request that it be authorized to implement Annual 
Suspension. Previous arbitrators have granted Annual Suspension, including the only other arbitrator 
to have thus far performed an arbitration under Article  7.10 o f the SCM  Agreement , i.e. the arbitrator 
in US – Upland Cotton (Article  22.6 – US II) . However, these arbitrators have not elucidated the 
rationale for doing so. This section accordingly needs to examine in more detail the rationale for 
doing so and resolv e the parties ' disagreement in this context.  
6.33.   As noted in section 6.1, in its methodology paper the United  States  asks the Arbitrator to 
grant the United  States  countermeasures in the form of Annual Suspension. The United  States  
determines the proposed leve l of Annual Suspension by calculating the value of the five lost sales 
and six instances of impedance that were found in the previous compliance proceedings to have 
 
121 We note in passing that disputes about whether the terms of the complaining party's Article  22.2 
request constitute an impediment to the Article  22.6 arbitrator proceeding as the complaining party proposes 
could be prevented if  the parties included in any bilateral sequencing agreement a specific procedure for 
updating the complaining party's Article  22.2 request, and the responding party's Article  22.6 referral, 
following adoption by the DSB of any adverse compliance findings. We note in this context that Article  22.7 of 
the DSU in effect already permits the modification of original Article  22.2 requests.  
122 The term "Annual Suspension" is described in paragraph 6.3 above.  
123 We address the separate issue of the representativenes s of the 2011 -2013 Reference Period in 
sections 6.3.4.3.1  and 6.3.4.4.1  below.  
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  existed during the 2011 -2013 Reference Period, and then annualizing that amount. That annua lized 
amount is the  basis for  the proposed level of the Annual Suspension.124  
6.34.   The European  Union  argues that the adverse effects determined to exist during the 2011 -
2013 Reference Period, i.e. the five lost sales and six instances of impedance, cannot be us ed to 
grant a level of countermeasures in the form of Annual Suspension.125 According to the 
European  Union , the basic rationale for using the effects of a measure in a past reference period to 
determine a level of Annual Suspension is that a measure continu es to have similar effects beyond 
that reference period, a result that generally follows only if a measure is "recurring ". More 
specifically, the European  Union  submits that "to authorise [countermeasures in the form of Annual 
Suspension] … , the [Arbitrat or] must ensure that the adverse effects determined to exist in the 
December 2011 to 2013 reference period provide a reasonable estimation of – i.e., are 
representative of – adverse effects today, and in the future ".126 The European  Union  asserts that the 
United States  has not demonstrated that the 2011 -2013 Reference Period provides this "reasonable 
estimation ", and that , in the European  Union 's view,  the 2011 -2013 Reference Period does not in 
fact provide it.127 
6.35.   The European  Union  further underlines that the compliance panel and Appellate  Body made 
no findings that adverse effects caused by challenged subsidies would continue after 2013, and, in 
fact, f ound that the non -recurring nature of LA/MSF for the A380 and A350XWB programmes would 
result in those subsidies causing fewer, if any, adverse effects after 2013. Further to this latter point, 
the European  Union  argues that no arbitrator has granted Annua l Suspension in an arbitration 
proceeding involving a "non-recurring " measure. The European  Union  submits that such 
considerations distinguish this proceeding from prior arbitrations in which Annual Suspension was 
granted, including US – Upland Cotton (Art icle 22.6 – US II) .128 Thus, according to the 
European  Union , because "[t]he adopted findings [in the present dispute] simply offer no basis for 
the Arbitrat[or] … to authorize [Annual Suspension] ", the Arbitrator can grant the United  States  only 
"an absolut e maximum amount of countermeasures commensurate with the degree and nature of 
the adverse effects actually determined to exist " in the 2011 -2013 Reference Period129, adhering to 
the structure proposed in the European  Union 's written submission, referenced in paragraph  6.4 
above and described in more detail in section 6.3.3.4  below .130 
6.36.   Moreover, the European  Union  suggests that the United  States ' request for Annual Suspension 
is inconsistent with its Article  22.2 request because the request states that the United States  will 
adjust the annual level of countermeasures as determined based on "the most recent publicly 
 
124 The United  States further asks the Arbitrator to adjust that level for inflation that occurred after the 
2011-2013 Reference Period and that will occur in future years when th e United  States may apply 
countermeasures. We discuss that request in sections 6.4.5.2  and 6.4.5.3  below.  
125 We note that the European Union has raised certain other arguments against the United  States' 
methodology that appear to relate to the different iss ue of what adverse effects Annual Suspension may take 
into account. We therefore address those arguments separately in section 6.3.3 below.  
126 European Union's response to Arbitrator question No. 104, para.  134 (fns and quotation marks 
omitted). See also Eu ropean Union's response to Arbitrator question No. 99, paras.  84-85; and comments on 
the United  States' responses to Arbitrator question Nos. 99 and 103.  
127 European Union's written submission, paras.  74-76, 79, 80 -81, 90, 98, 100, 105 -108, 118 -123, 128 -
129, 146, and 160; responses to first set of Arbitrator questions, paras.  18-19, 27 -29, 30 -38, 45, and 50; 
responses to Arbitrator question No. 4, No. 10, para.  218, No. 11, No. 12, No. 14, No. 21, No. 22, No. 56, 
paras.  34-102, No. 57, No. 99, para.  79, No. 101, No. 104, No. 107, No. 108, and No. 147; comments on the 
United  States' responses to Arbitrator question Nos. 99, 101, 103, and 108; and comments on the 
United  States' response to European Union question No. 1. In making these arguments, the European U nion 
emphasizes that, mainly due to the non -recurring nature of A380 and A350XWB LA/MSF, the lives of these 
subsidies are "finite" and thus the adverse effects caused by these subsidies are also "finite" and cannot be 
assumed to continue indefinitely.  
128 The European Union notes that the only arbitrator who addressed a non -recurring subsidy granted a 
one-time lump -sum to the complaining party to be used as countermeasures. (European Union's written 
submission, para.  110 (citing Decision by the Arbitrator, Canada – Aircraft Credits and Guarantees 
(Article  22.6 – Canada) )). 
129 European Union's response to Arbitrator question No. 8, para.  177. 
130 European Union's written submission, paras.  125-127; responses to first set of Arbitrator questions, 
paras.  20-21, 42, and 46 -47; and responses to Arbitrator question No. 10(b), No. 12, para.  262, No. 21, 
No. 25, No. 56, paras.  79-91, and No. 108. In this  context, the European Union emphasizes that sales of A380 
aircraft have decreased over recent years and that, in fact, Airbus is terminating the A380 programme in the 
foreseeable future. (European Union's response to Arbitrator question No. 47, paras.  291-303).  
 WT/DS 316/ARB 
 
- 36 - 
 
  available data ". However, according to the European  Union , doing so would involve adjusting the 
level of countermeasures in the light of data regarding what adverse effects A380 and A350XWB 
LA/MSF have caused after 2013, including at the present day, an exercise that the United  States  
does not perform.131  
6.37.   Finally , the European  Union  argues that Annual Suspension in this dispute is inconsistent with 
the "temporary " nature of countermeasures – which must only apply "pending full compliance " – as 
in this dispute compliance will occur with the passage of time owing to  the non -recurring nature of 
the subsidies in question.132 
6.38.   The United  States  appears to offer two rationales as to why it would be appropriate to 
determine the m aximum  level of countermeasures in the form of Annual Suspension by using  the 
2011-2013 Reference Period  to determine that maximum level : (a) "the United  States  is entitled to 
ongoing countermeasures because the EU remains out of compliance with its WTO obligati ons, as 
confirmed in the compliance reports adopted by the DSB and in the absence of any subsequent 
adopted finding to the contrary "133, i.e. Annual Suspension is appropriate owing to the 
European  Union 's ongoing status of non -compliance , and/or (b) the chal lenged subsidies have 
continued to cause adverse effects beyond the 2011 -2013 Reference Period and the adverse effects 
determined to exist in the 2011 -2013 Reference Period provide a reasonable estimate of those 
ongoing adverse effects, i.e. Annual Suspens ion is appropriate in view of the ongoing effects of the 
measures in question.134 
6.39.   The United  States  asserts that determining a level of Annual Suspension in the manner that 
it proposes is further consistent with the text of the SCM  Agreement  and the DSU beca use the level 
of countermeasures would be determined with reference to "the adverse effects determined to exist " 
in the compliance proceedings, and because Article  22.8 of the DSU requires no pre -determined 
end-date to countermeasures.135 The United  States  further argues that determining a level of Annual 
Suspension by valuing the relevant effects of a measure found to be WTO -inconsistent during a past 
reference period is consistent with how previous arbitrators determined levels of Annual Suspension. 
Moreove r, the United  States  submits that many of the European  Union 's arguments relating to the 
post-2013 adverse effects caused by A380 and A350XWB LA/MSF are compliance -related and thus 
are properly directed to a compliance panel, are unsupported by the previous findings in this dispute, 
and/or are factually unsound. Add itionally, according to the United  States , selecting a reference 
period other than the 2011 -2013 Reference Period to determine a level of Annual Suspension would 
improperly render the compliance proceedings meaningless because it would be tantamount to 
asking the United  States  to re-litigate its compliance case, i.e. demonstrate the presence of adverse 
effects in that new time -period.136  
6.40.   Also, in response to the European  Union 's argument on this subject, the United  States  
contends that its request to "update  [the level of countermeasures] annually using the most recent 
publicly available data "137 does not mean that the United  States  intended to alter the value of 
 
131 European Union's written submission, para.  119. 
132 European Union's written submission, paras.  99 and 131 -136. 
133 United  States' comments on the European Union's response to Arbitrator question No. 101, 
para. 106. 
134 United  States' written submission , paras.  77, 81 -83, 86, 105, 114, 116, 119, and 123 -138; 
responses to Arbitrator question No. 17, No. 19(b), No. 20, No. 22, para.  49, No. 47, and No. 101, para.  22; 
and comments on the European Union's responses to Arbitrator question No. 101, paras.  106-108, and 
No. 104, paras.  128-131. 
135 We note that, at times, the United  States has appeared to characterize "the adverse effects 
determined to exist" as the five specific lost sales and six instances of impedance found within the 2011 -2013 
Reference Period (United  States' methodology paper, para.  29) and at other times appeared to characterize 
them as, or as including, adverse effects that have continued beyond 2013 (United  States' written submission, 
para. 138). As reflected in paragraphs 6.43-6.46 below, t he former appears to be the most appropriate 
formulation for purposes of this arbitration.  
136 United  States' written submission, paras.  77, 89 -98, 100 -106, 108 -113, and 132; responses to 
Arbitrator question No. 17, No. 18, No. 19, paras.  32-33, No. 21, para . 45, No. 22, and No. 59; and comments 
on the European Union's responses to Arbitrator question No. 104, paras.  133-134, and No. 108.  
137 Recourse to Article  7.9 of the SCM  Agreement and Article  22.2 of the DSU by the United  States, 
WT/DS316/18.  
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  countermeasures according to the value of adverse effects occurring after the 2011 -2013 Reference 
Period.138  
6.41.   Finally, the United  States  asserts that Annual Suspension is "temporary " because it will be 
removed once the DSB adopts a decision from a WTO adjudicator finding the European  Union  to be 
in compliance. The United  States  emphasizes, however, that b ecause the time at which compliance 
will be achieved is uncertain, the United  States  should be able to impose Annual Suspension up until 
that point is reached.139 
6.42.   The Arbitrator recalls that the issue is whether it may accept countermeasures in the form of 
Annual Suspension at a level that reflects the level of the adverse effects determined to exist in the 
2011-2013 Reference Period. In assessing this issue, we will initially examine whether we may 
determine the maximum level of countermeasures by reference to a past reference period, i.e. the 
2011-2013 Reference Period. Subsequently, we will examine whether the countermeasures may 
take the form of Annual Suspension. After examining these aspects by reference to our mandate 
and the text and object and purpose  of the DSU140, we will review prior arbitration decisions to see 
whether they shed useful light on the issue before us.  
6.43.   We first address the issue of what determines the level of countermeasures that may be 
granted. Under Article  7.9 of the SCM  Agreement , the DSB may authorize the United  States  to take 
countermeasures commensurate with the degree and nature of the adverse effects determined to 
exist. Our mandate under Article  7.10 is to determine whether the proposed "countermeasures " are 
"commensurate with the degree and nature of the adverse effects determined to exist ". As noted in 
section 5, in the context of the present dispute the phrase "adverse effects determined to exist " 
sends us back to the findings on adverse effects made in the compliance proceed ings that provide 
the basis for the DSB to authorize  the United  States  to take countermeasures.141 More specifically, 
the compliance panel and Appellate  Body found that A380 and A350XWB LA/MSF caused adverse 
effects in the forms of significant lost sales wit hin the meaning of Article  6.3(c) of the 
SCM Agreement  and impedance within the meaning of Article  6.3(a)  and (b) of the SCM  Agreement .  
6.44.   These findings were based on specific LCA order and delivery data contained in the 2011 -
2013 Reference Period, and were identified as adverse effects only after, inter alia , fact -intensive 
analyses pertaining to circumstances existing in the 2011 -2013 Refe rence Period (e.g. product 
markets, conditions of competition, and non -attribution factors). These analyses demonstrated the 
presence of five lost sales and impedance in six geographic markets in the 2011 -2013 Reference 
Period. As these analyses did not co ver the time -period after 2013, no determination was made 
regarding the existence of adverse effects after the 2011 -2013 Reference Period. It is thus consistent 
with the mandate set out in Article  7.10 to determine the maximum  level of countermeasures base d 
on the five lost sales and six instances of impedance that were determined to exist in the 2011 -2013 
Reference Period  and to consider these as "the adverse effects determined to exist " for purposes of 
this proceeding.142 
6.45.   Article  7.10 further clarifies that  we must determine whether the proposed countermeasures 
are "commensurate with " the "degree and nature " of the five lost sales and six instances of 
impedance. It will be recalled that the term "degree " corresponds to a quantitative element whereas 
the refe rence to the "nature " of adverse effects relates to a qualitative element.143 We consider that, 
functionally speaking and in the context of this proceeding, the quantitative element, i.e. "degree ", 
corresponds to the monetary value of the adverse effects det ermined to exist, whereas the 
 
138 United  States' written submission, paras.  124-125; and response to Arbitrator question No. 19(b), 
para. 31. Rather, this updating pertains to usi ng the PPI for CA Manufacturing to adjust the countermeasures 
for inflation, an issue discussed in sections 6.4.5.2  and 6.4.5.3  below. (United  States' written submission, 
para. 124).  
139 United  States' written submission, paras.  111-113. 
140 We recall that th is proceeding is conducted under both the SCM  Agreement and the DSU. (See 
paragraph 3.4 above).  
141 See paragraph 5.5 above.  
142 We note that in this proceeding the United  States has not proposed any formula that would operate 
on a prospective basis and that  would somehow seek to take into account instances of lost sales and/or 
impedance that were not the subject of specific findings in the compliance proceedings.  
143 See paragraph 5.5 above.  WT/DS 316/ARB 
 
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  qualitative elements, i.e. "nature ", corresponds to the type of adverse effects determined to exist – 
in this case significant lost sales and impedance.  
6.46.   In sum, Article  7.10 supports the view that, in this proceeding, we may determine whether 
the proposed countermeasures are commensurate with the value of the lost sales and impedance 
determined to exist in the 2011 -2013 Reference Period. As a corollary, the level of countermeasures 
that the DSB may authorize the United  States  to take under Article  7.9 is a function of adverse 
effects that occurred and were determined to exist in the past during that temporally circumscribed 
reference period. The issue thus becomes whether it would be appropriate to grant Annual 
Suspension based on the value of the adverse effects determined to exist when that value is 
temporally circumscribed to a past time -period.  
6.47.   We further recall the European  Union 's suggestion that the United  States ' request for Annual 
Suspension is inconsistent with its Arti cle 22.2 request. This argument is based on the fact that the 
request states that the United  States  will adjust the annual level of countermeasures as determined 
based on "the most recent publicly available data ", but the United  States  does not do so because it 
does not adjust countermeasures in the light of levels of post -2013 adverse effects.144 We consider 
that the reference to "updat[ing the level of countermeasures] annually using the most recent 
publicly available data " in the United States  Article  22.2 request pertains to the United  States  
proposal to use the US Producer Price Index for Aircraft Manufacturing of Civilian Aircraft  (PPI for 
CA Manufacturing) to adjust the level of countermeasures annually and does not amount to an 
intention to base the countermeasures on calculations of post -2013 adverse effects.145 
6.48.   With this initial result of our analysis in mind, we now examine whether it is permissible to 
authorize temporally indefinite146 countermeasures in the form of Annual Suspensio n at a level that 
reflects the value of adverse effects that were determined to exist in a temporally circumscribed 
past reference period ( in casu , December 2011-2013). We thus shift our attention from the question 
of what determines the maximum permissibl e level of the countermeasures that can be authorized 
to the question of the time -period during which countermeasures may be imposed at that level.  
6.49.   Neither Article  7.9 nor Article  7.10 provides specific answers to this question. We therefore 
look to the DS U for relevant guidance. Under the DSU, a complaining party 's right to request and 
maintain, and the obligation to remove, countermeasures is controlled by the responding party 's 
compliance status.147 This suggests to us that the maximum permissible duration  of 
countermeasures is controlled not by the ongoing effects of a measure that was found to be WTO -
inconsistent, but by the responding party 's compliance status. The Appellate  Body has indicated that 
this aspect of Annual Suspension, i.e. that it may remai n in force pending confirmation of a 
responding party 's substantive compliance, is consistent with the object and purpose of the DSU. In 
US – Continued Suspension , the Appellate  Body addressed, inter alia , the circumstances under which 
Annual Suspension pr eviously authorized should be removed. In doing so, the Appellate  Body 
stressed the importance of a responding party achieving substantive compliance148, noted that the 
suspension of concessions is the "last resort " in securing that substantive compliance, a nd thus 
recognized that "[t]o require the termination of suspension of concessions before substantive 
compliance is achieved would significantly weaken the effectiveness of the WTO dispute settlement 
mechanism ".149 
 
144 European Union's written submission, para.  119. 
145 See section s 6.4.5.2 and 6.4.5.3  below.  
146 According to Article  22.1 of the DSU, the suspension of concessions or other obligations is intended 
as a "temporary" measure. However, pursuant to Article  22.8 of the DSU, the suspension of concessions or 
other obligations may b e applied until the WTO -inconsistent measure has been removed or a mutually agreed 
solution is reached. In that sense, the suspension of concessions or other obligations is a temporally indefinite 
measure.  
147 See Article  22.2, 22.6 and 22.8 of the DSU. Rega rding Article  22.8, see also section 2.4.1 above.  
148 The term "substantive compliance" refers to the fact that a responding party's compliance is 
evaluated not only with respect to the original measures that were found to be WTO -inconsistent, but also with 
respect to any "measures taken to comply" within the meaning of Article  21.5 of the DSU. (Appellate  Body 
Reports, US – Large Civil Aircraft (2nd complaint) (Article  21.5 – EU), para.  5.328; and US – Continued 
Suspension , paras.  305-309).  
149 Appellate  Body Report, US – Continued Suspension , para.  308. 
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  6.50.   In US – Continued Suspension , the Appellate  Body was addressing the issue of when DSB 
authorization to suspend concessions, previously granted, would terminate. In the present dispute, 
no DSB authorization has been granted yet. Nevertheless, it is plain to us that if an arbitrator were 
to structure  countermeasures in such a way that they would effectively "terminat[e] … before 
substantive compliance is achieved[, it] would [similarly and] significantly weaken the effectiveness 
of the WTO dispute settlement mechanism ", and thus be contrary to "the DSU's objective of 
providing security and predictability to the multilateral trading system ".150 The structure of Annual 
Suspension avoids this concern because it may remain in place until a WTO adjudicator finds the 
responding party to have achieved substan tive compliance or a mutually agreed solution has been 
found.151 
6.51.   We make one additional observation about the Appellate  Body's report in US – Continued 
Suspension . The Appellate  Body in that report made clear that the authorization to maintain the 
Annual Sus pension at issue would only lapse following confirmation, through WTO dispute settlement 
proceedings or a mutually agreed solution, of the responding party 's substantive compliance.152 The 
Appellate  Body thus well understood that the Annual Suspension could temporarily remain in force 
even in cases where the responding party in fact has already achieved substantive compliance, but 
this has not yet been multilaterally confirmed. In other words, it is understood that, pending such 
confirmation, the Annual Suspe nsion may continue in place for a certain period of time, even though 
the relevant effects of the latest measures taken to comply would, in fact, be valued at zero given 
that substantive compliance was achieved. This, in our view, further supports that it is the formal 
multilateral compliance status of the responding party that justifies the maintenance of Annual 
Suspension at the previously authorized level, not the notion that the authorized level correctly 
reflects the relevant effects of the responding party's measures over time.  
6.52.   The European  Union  argues that Annual Suspension has so far only been granted in 
arbitrations addressing "recurring " measures.  The European  Union  has not  define d this term.  
Presumably,  the European  Union  was using the term in a broad sense to refer to measures that 
would be expected to produce relevant effects on an ongoing basis. As we see it, however, 
"recurrence " of a measure found to be WTO -inconsistent, however one defines that concept , is not 
a prerequisite to granting Annu al Suspension. Countermeasures serve to induce compliance153 in 
respect of all manner of measures found to be WTO -inconsistent, whether they are "recurring " or 
"non-recurring ".154 Until and unless substantive compliance has been achieved and is multilaterally 
confirmed or a mutually agreed solution has been reached, there remains a valid rationale for 
granting Annual Suspension and maintaining it at the authorized level.155 
6.53.   In this proceeding, the European  Union  also advocates a structure of countermeasures that 
would lead to countermeasures terminating at the time of the final counterfactual delivery of an LCA 
ordered pursuant to the five lost sales in the 2011 -2013 Reference Period had Boeing won the 
sales.156 In short, under the European  Union 's approach, after a certain date, although no 
multilateral confirmation of substantive compliance would exist, the level of countermeasures would 
need to drop to zero. As we have explained above, in our view Annual Suspensi on may remain in 
 
150 Appellate  Body Report, US – Continued Suspension , para.  309. 
151 We note that the level of countermeasures or suspension of concessions or other obligations may, of 
course, vary over time in cas es in which arbitrators use other structures for countermeasures, e.g. formulae 
that apply on prospective bases.  
152 Appellate  Body Report, US – Continued Suspension , section IV.E.  
153 See paragraph 5.2 above.  
154 We note the European Union's assertion that the re was one arbitration decision that relied on the 
non-recurring nature of the relevant subsidy "to reject the higher countermeasures Brazil had proposed to 
deter future subsidisation". (European Union's written submission, para.  110 (citing Decision by th e Arbitrator, 
Canada – Aircraft Credits and Guarantees (Article  22.6 – Canada) , para.  3.111 )). We note that in that decision 
the arbitrator rejected a request by Brazil to upwardly adjust a proposed lump -sum of countermeasures, not a 
request to determine a  level of Annual Suspension. That arbitration decision is, therefore, distinguishable and 
unpersuasive in the context  of the present proceeding.  
155 We note that there is no multilateral finding at this time that specifies the time at which the 
European Unio n will no longer be granting or maintaining A380 or A350XWB LA/MSF, when these measures will 
have been withdrawn, or when these measures' adverse effects will have been removed. (See Article  7.8 of the 
SCM Agreement). There is furthermore no agreement betw een the parties as to when any of these events will 
occur. We thus make no judgments as to whether the presence of any such finding or agreement, if it existed, 
may be taken into account in an arbitration proceeding.  
156 See paragraph 6.4 above and section 6.3.3.4  below.  
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  place at the authorized level until a WTO adjudicator finds the responding party to have achieved 
substantive compliance or the parties have found another solution. We are therefore unable to accept 
the European  Union 's preferred approach,  which, in our view, could significantly dilute the 
effectiveness of countermeasures and undermine the DSU 's objective of providing security and 
predictability to the multilateral trading system.157 
6.54.   Finally, the European  Union  argues that Annual Suspension i s inconsistent with the 
"temporary " nature of countermeasures, which it says must only apply "pending full compliance ". 
We fail to see any inconsistency in this regard. Pursuant to Article  22.8 of the DSU, the Annual 
Suspension must cease once the DSB adop ts a decision by a WTO adjudicator finding that the 
European  Union  has brought itself into substantive compliance with its relevant WTO obligations  (or 
the parties agree that a solution has been found) . 
6.55.   We now turn to examine relevant prior arbitration dec isions to see whether they shed useful 
light on whether in this proceeding it is appropriate to calculate the level of countermeasures by 
reference to a past reference period and to grant countermeasures in the form of Annual 
Suspension.158 We consider four related aspects of prior arbitration practice most relevant to the 
issue at hand. First, most disputes in which arbitrations have occurred resulted in the complaining 
party being granted Annual Suspension.159 These include arbitrations conducted under Articl es 4.11 
and 7.10 of the SCM  Agreement , and Article  22.6 of the DSU. We note, therefore, that Annual 
Suspension has been granted by arbitrators consistently over time and in a variety of legal and 
factual contexts, including under the mandate under which we  operate.  
6.56.   Second, the levels of such Annual Suspension have generally been determined based on the 
trade effects of relevant measures during past time -periods160 by applying counterfactuals to those 
periods. The past time -periods selected were usually short -term periods immediately following or 
 
157 "A Member authorized by the DSB to suspend concessions enjoys the assurance under Article  22.8 
[of the DSU] that, until substantive compliance is achieved or, in case of disagreement, multilaterally -
confirmed, the suspension of concessions  continues to be permitted under the DSU". (Appellate  Body Report, 
US – Continued Suspension , para.  308).  
158 In this section we discuss certain arbitrations conducted exclusively under Article  22.6 of the DSU. 
These are nonetheless relevant in this context for two reasons. First, and as noted previously, arbitrations 
governed by Article  7.10 are, at the same time, governed by Article  22.6. (See paragraph 3.4 above). Second, 
the mandate of an arbitrator acting under Article  22.6 is to "determine whether the l evel of … suspension  is 
equivalent  to the level of the nullification or impairment ". (Article  22.7 of the DSU). (emphasis added) This is 
similar in structure to our mandate, i.e. to determine whether the countermeasures  are commensurate  with 
the degree and  nature of the adverse effects determined to exist . (Decision by the Arbitrator, US – Upland 
Cotton (Article  22.6 – US II) , para.  5.21 (recognizing this structural similarity)). Thus, the circumstances under 
which such arbitrators granted Annual Suspension  under their mandate may be instructive for us.  
159 Decisions by the Arbitrators, US – Washing Machines (Article  22.6 – US), section 3.6 (determining 
further that the level of Annual Suspension could vary over time with inflation); US – Tuna II (Mexico) 
(Article 22.6 – US); US – COOL (Article  22.6 – United  States) ; US – Upland Cotton (Article  22.6 – US II) ; US – 
Gambling (Article  22.6 – US); US – FSC (Article  22.6 – US); Brazil – Aircraft (Article  22.6 – Brazil) ; EC – 
Bananas III (Ecuador) (Article  22.6 – EC); EC – Hormones (Canada) (Article  22.6 – EC); EC – Hormones (US) 
(Article  22.6 – EC); and EC – Bananas III (US) (Article  22.6 – EC). Other arbitrators granted lump -sum 
amounts and/or used formulae of varying complexity. (Decisions by the  Arbitrators, US – Washing Machines 
(Article  22.6 – US), para.  5.2; US – Upland Cotton (Article 22.6 – US I), para. 6.5; US – Offset Act (Byrd 
Amendment) (Brazil) (Article 22.6 – US); US – 1916 Act (EC) (Article 22.6 – US); and Canada – Aircraft 
Credits an d Guarantees (Article 22.6 – Canada) ). None of the latter group of arbitrators, however, refused a 
request by a complaining party for Annual Suspension. We specifically note that the arbitrator in Canada – 
Aircraft Credits and Guarantees (Article  22.6 – Canada) , a proceeding in which "the measure at issue … 
relate[d] to a finite amount of subsidy", granted a lump -sum amount, which was the structure that the 
complaining party requested. (Decision by the Arbitrator, Canada – Aircraft Credits and Guarantees 
(Article 22.6 – Canada) , para.  3.45).  
160 We note that in Brazil – Aircraft (Article  22.6 – Brazil) , the arbitrator authorized Annual Suspension 
under Article  4.11 of the SCM  Agreement based on the projected annualized value of the subsidy between 
2000-2005, a lthough the arbitrator's decision was circulated in August 2000. This approach appeared to flow 
from the unusual facts of the case, and in particular the following elements: (a) Brazil's continued non -
compliance was based on its continued issuance of bonds  in the post -implementation period pursuant to 
commitments Brazil previously undertook, and (b) the bonds were only issued upon delivery of aircraft. 
(Decision by the Arbitrator, Brazil – Aircraft (Article  22.6 – Brazil) , paras.  3.64-3.65).  
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  including the time at which the responding party should have come into compliance.161 Arbitrators 
– including the arbitrator in US – Upland Cotton (Article  22.6 – US II) – have commented on the 
appropriateness of determi ning levels of Annual Suspension by measuring the relevant effects of a 
measure when or shortly after the responding party should have come into compliance, observing 
that the basic purpose of an arbitration proceeding is to determine the harm to the compl aining 
party caused by that precise failure.162 We consider this rationale sound, including in the 
circumstances of this proceeding. We further observe that the suspension of concessions or other 
obligations and countermeasures are intended as temporary rath er than long -term measures by the 
complaining party. The assumption must therefore properly be that the responding party will in good 
faith take appropriate corrective action in the short term to come into compliance promptly after 
suspension of concession s or countermeasures have been authorized. It thus seems appropriate to 
us to assess the short -term effects of a WTO -inconsistent measure rather than its effects in the long 
term when the responding party should be in compliance.  
6.57.   We thus consider that the 2011-2013 Reference Period is appropriate for determining the 
permissible level of Annual Suspension, not just because it is the time -period that was used in the 
compliance proceedings and provides us with the "adverse effects determined to exist " to which  our 
mandate refers us, but because this period occurred immediately after the end of the implementation 
period in this dispute.  
6.58.   Third, uncertainty surrounding the relevant effects of measures occurring beyond the end of 
the reference periods used to dete rmine a level of Annual Suspension has not prevented any 
arbitrator from determining such a level. Indeed, at least two relatively recent arbitrators have 
expressly dismissed the relevance of such uncertainties. The arbitrator in US – Tuna II (Mexico) 
(Article 22.6 – US) dismissed as irrelevant an alleged long -term trend of declining US tuna 
consumption in determining a level of Annual Suspension based on a short -term past reference 
period, i.e. a trend that suggested that a lower level of nullification or impairment existed at the 
time of the arbitration proceeding and moving into the future.163 The arbitrator in US – Upland Cotton 
(Article  22.6 – US II)  expressly stated that "[i]n a situation where a fixed annual amount of 
countermeasures is determined, that  will be applied in the future and for an undetermined period of 
time [i.e. Annual Suspension], there is necessarily an inherent uncertainty as to how closely the said 
amount will represent the actual continued adverse effects of the measure over time ".164 The 
arbitrator nonetheless determined a level of Annual Suspension based on a short -term past reference 
period.  
6.59.   We agree that there is inherent uncertainty about how well levels of Annual Suspension will 
reflect the value of effects of relevant measures ove r time, especially if the Annual Suspension needs 
to remain in place for an extended period of time. Indeed, we consider that, in years following their 
application, it will in fact rarely be the case that levels of Annual Suspension will be exactly equival ent 
to, or in some cases maybe even closely approximate, the value of relevant effects of the measures 
in any such year. This is so not only because of the dynamic nature of markets in which the effects 
of measures occur, but also because private market ac tors will adjust their behaviour over time to 
the continued application of the WTO -inconsistent measures or because responding parties may 
 
161 See, e.g. Dec isions by the Arbitrators, US – Washing Machines (Article  22.6 – US), section 3.2 
(determining Annual Suspension by applying counterfactual to the year in which the RPT expired); US – Tuna 
II (Mexico) (Article  22.6 – US), section 4 (determining Annual Susp ension by applying counterfactual to first 
full year following expiry of RPT); US – COOL (Article  22.6 – United  States) , section 3.2 and para.  6.32 
(determining Annual Suspension by applying counterfactual to "the baseline year" following the end of the 
RPT); and US – Upland Cotton (Article  22.6 – US II) , paras.  4.115 -4.119 (determining Annual Suspension by 
applying counterfactual to the year straddling the expiry of the implementation period). See also Decision by 
the Arbitrator, US – FSC (Article  22.6 – US), para.  2.15 (acting under Article  4.11 of the SCM  Agreement and 
determining Annual Suspension by calculating the amount of the subsidy for the year in which the 
implementation period expired).  
162 Decisions by the Arbitrators, US – Tuna II (Mexico) (Article  22.6 – US), para.  4.14;  US – Upland 
Cotton (Article  22.6 – US II) , para.  4.118; US – Gambling (Article  22.6 – US), para.  3.143; and US – FSC 
(Article  22.6 – US), paras.  2.14(a) and 2.15. See als o Award of the Arbitrator, US – Section 110(5) Copyright 
Act (Article  25), para.  4.19 (explaining that "[u]nlike Article  22.6, which closely relates to compliance (or 
absence thereof) at the end of the reasonable period of time , Article  25 is silent as to the date on which a 
matter referred to arbitration should be assessed "). (emphasis added)  
163 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para.  4.18. 
164 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II) , para. 4.117.  
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  adopt new "measures taken to comply " that can themselves significantly change the relevant effects 
of measures at issue even assuming static market conditions.165  
6.60.   If such uncertainties could make Annual Suspension not "equivalent to the level of nullification 
or impairment " or not "commensura te with the degree and nature of the adverse effects determined 
to exist " under Article  22.6 of the DSU or Article  7.10 of the SCM  Agreement , Annual Suspension 
might need to be continually adjusted after its authorization by the DSB (either downward or upw ard 
to the authorized maximum level following a downward adjustment). It is our understanding that 
this has not been the practice of complaining parties that were granted a fixed amount for Annual 
Suspension. This is consistent with our view that under the  SCM Agreement  and the DSU the 
maximum level of countermeasures or suspension of concessions that may be granted is a function 
of the effects of relevant measures during a past reference period, while the maintenance  of a 
suspension of concessions at that level is predicated not on the magnitude of ongoing effects of 
relevant measures, but on continued non -compliance of the responding party with its WTO 
obligations.166 
6.61.   Fourth and finally, we note that one arbitrator has cautioned against basing levels of Annu al 
Suspension on forecast effects of measures. In US – Gambling (Article  22.6 – US), the arbitrator 
rejected the use of forecasts of future market behaviour as a basis upon which to determine a level 
of Annual Suspension. That arbitrator explained that "different time horizons [of such forecasts] 
would result in different levels of nullification or impairment that bear no relation to questions of 
actual compliance ".167 We agree that determining a level of Annual Suspension with respect to 
essentially a future  reference period of debatable duration might lead to varying results, not just 
because of the uncertainty of future market developments and the lack of actual data, but also the 
chosen length of the reference period. This further supports using the effect s of measures in short -
term past reference periods occurring at or shortly after the time by when the responding party 
should have come into compliance as a basis on which to determine the maximum level of Annual 
Suspension. 168  
6.62.   Bearing in mind the discussi on thus far, we recall the European  Union 's position that "to 
authorise [countermeasures in the form of Annual Suspension] under Article  7.10 of the 
SCM Agreement , the [Arbitrator] must ensure that the adverse effects determined to exist in the 
December 20 11 to 2013 reference period provide a reasonable estimation of – i.e., are 
representative of – adverse effects today, and in the future ".169 The European  Union  refers to this 
 
165 This, of course, assumes that considering the effects of "measures taken to comply" that were not 
the subject of findings in compliance proceedings underlying an arbitration proceeding to set a level of 
countermeasures or suspension of conce ssions would even be legally appropriate. The validity of this 
assumption is in doubt. (See Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), section 3 
(refusing to consider, in setting a level of Annual Suspension, the effects of a re cent amended version of the 
measure found to be WTO non -compliant in the underlying compliance proceeding because the amended 
measure had not been considered in the compliance proceeding)). Insofar as it would be inappropriate, this 
would provide more reas on to decline to discern the effects of any measures taken to comply that were not 
subject to prior findings in a compliance proceeding.  
166 See Decision by the Arbitrator, US – Offset Act (Byrd Amendment) (Brazil) (Article 22.6 – US), 
para. 3.150 (noting th at a coefficient to be used in a formula governing the future levels of suspension of 
concessions was calculated based on data from a past time -period and would likely prove inaccurate in the 
future. The arbitrator considered that " this approach is consist ent with past arbitrations where representative 
periods where used to determine volumes and prices of exports in order to calculate levels of nullification or 
impairment and levels of suspension fixed once and for all"). (fn  omitted)  
167 Decision by the Arbi trator, US – Gambling (Article 22.6 – US), para.  3.144. See also Award of the 
Arbitrator, US – Section 110(5) Copyright Act (Article 25) , para.  4.20 (expressing reservations about 
calculating the level of nullification or impairment with reference to a dat e in the future, which was itself not 
yet known for sure , because such an approach would " add uncertainty to the [arbitrator's] estimate by 
[requiring] additional assumptions").  
168 We note that the arbitrator in EC – Hormones (US) (Article 22.6 – EC) likewi se assessed the effects 
of the relevant measures in a short -term reference period occurring at or shortly after the time by when the 
responding party should have come into compliance. We note, however, that the circumstances of that 
proceeding appeared to require the arbitrator to conduct, in part, a prospective analysis. (Decision by the 
Arbitrator, EC – Hormones (US) (Article 22.6 – EC), para.  41). The circumstances of our proceeding do not 
require any prospective analysis as we are dealing with a short -term past reference period occurring 
immediately following the expiry of the implementation period.  
169 European Union's response to Arbitrator question No. 104, para.  134. (fns and quotation marks 
omitted)  
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  as the applicable "legal standard ", derived from the arbitration decision in US – Upland Cotton 
(Article  22.6 – US II) . This legal standard would have us determine the maximum level of Annual 
Suspension that is "representative " of the value of adverse effects caused by relevant subsidies at 
present and in the future. To apply this legal standard, we would, of course, have to know or 
determine those  until-now unidentified adverse effect s. 
6.63.   Drawing on our considerations above, we find ourselves unable to accept the 
European  Union 's proposed legal standard.170 As noted above, our mandate does not require us to 
determi ne the level of countermeasures vis-à-vis until-now unidentified adverse effects . As we have 
explained, in this proceeding, it is appropriate to consider that the relevant effects are the specific 
lost sales and in stances of impedance arising in the 2011 -2013 Reference Period.  
6.64.   Moreover, as far as future adverse effects are concerned, it is unclear to us what our time-
frame would be , and in particular how far into the future we should attempt to identify relevant 
adverse effects. This would invite contestable results. Additionally, any such predictions about the 
future occurrence of adverse effects would be speculative owing to the lack of actual data.171 We 
discern no way in which we could confidently predict the futur e evolution of complex and dynamic 
LCA markets, the effects of relevant measures within those markets, and the future compliance 
steps of the European  Union , all of which must be considered to determine the future occurrence of 
relevant adverse effects.172  
6.65.   Furthermore, even if we therefore were to determine only  present  adverse effects, this would 
conflate our role with that of a compliance panel established under Article  21.5 of the DSU. Indeed, 
one of the main European  Union  claims before the second compli ance panel is that the 
European  Union  has "remove[d] the adverse effects " within the meaning of Article  7.8 of the 
SCM Agreement .173 To address that claim, the compliance panel will most likely have to similarly 
analyse the existence of adverse effects. More over, no adverse effects have been multilaterally 
"determined to exist " post-2013. Determining the existence of relevant present adverse effects 
would effectively require the United  States  to re-litigate at least a significant part of the first 
compliance proceedings.174 We recall in this connection that the results of the first compliance 
proceedings provide the basis for this arbitration, which was recommenced after several years of 
suspens ion. There would also be a risk of creating conflicting findings between this proceeding and 
the second compliance panel proceeding currently under way that is considering the 
European  Union 's present compliance status.175 Additionally, as we have noted176, an inquiry into 
the existence of adverse effects requires fact -intensive analyses. Engaging in such analyses would 
therefore substantially lengthen the duration of this expedited proceeding.  
6.66.   Finally, we turn to the arbitrator 's decision in US – Upland Cotto n (Article  22.6 – US II) , from 
which the European  Union  derives the legal standard that it advocates. That arbitrator accepted the 
complaining party 's proposed reference period (marketing year (MY) 2005) and rejected the 
responding party 's preferred refere nce period (MY  2005-2007) as the basis to determine a level of 
 
170 See paragraph 6.75 below . 
171 See also Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – 
US), fn 1625 (noting that " [t]he original panel observed that the parties had described the development of LCA 
as an endeavour … in the face of a business environment that is sha ped by factors whose very foreseeability is 
impossible by definition").  
172 We note that the European Union itself argues that the Arbitrator would have to consider the 
European Union's compliance steps when assessing what adverse effects are being caused to day and in the 
future. (See section 2.4 above).  
173 Communication by the European Union, WT/DS316/34 (Second Compliance Communication), 
para. 13. Previous arbitrators have advised against conflating their mandates with those of compliance panels 
and refused  to make findings with respect to compliance -related issues. (Decisions by the Arbitrators, 
US – Washing Machines (Article 22.6 – US), para. 3.29; US – Tuna II (Mexico) (Article 22.6 – US), 
paras.  3.52-3.53; and US – Upland Cotton (Article 22.6 – US II) , paras. 3.14 -3.17). (See also section 2.4 
above, discussing this topic.)  
174 See Appellate  Body Report, US – Continued Suspension , para.  317 (observing that "authorization to 
suspend concessions is … granted following a long process of multilateral dispute settlement in which relevant 
adjudicative bodies, as well as the DSB, render multilateral decisions at key stages of the process").  
175 Communication by the European Union, WT/DS316/34 (Second Compliance Communication), 
para. 43 ("[T]he European Union notif ies the DSB that it has achieved  full compliance with the 
recommendations and rulings in the present dispute"). (emphasis added)  
176 See paragraph 6.44 above.  
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  Annual Suspension. It thus determined a level of Annual Suspension that was based on the adverse 
effects of the United  States ' subsidies in MY 2005. The arbitrator circulated its decision in Au gust 
2009, three years after the end of MY 2005.  
6.67.   The arbitrator in US – Upland Cotton (Article  22.6 – US II)  did not make specific findings 
regarding whether the United  States ' measures caused then -present -day adverse effects or then -
future adverse effects. Moreover, the arbitrator also stated that uncertainty about the future effects 
of the subsidies at issue should not prevent it from determining the maximum level of Annual 
Suspension based on the effects of the subsidies in a past reference period177, even when that 
uncertainty was significant.178 
6.68.   We further note that the arbitrator made the following statement:  
We recognize that price fluctuations on the world upland cotton market may affect the 
calculation of the adverse effects of the ML and CCP sub sidies at issue over time. Indeed, 
there may be a number of economic or other factors that would affect the evolution 
over time of the impact of the subsidies at issue, and we do not exclude that there may 
have been different permissible approaches to the choice of period of reference for the 
purposes of such calculations. In a situation where a fixed annual amount of 
countermeasures is determined, that will be applied in the future and for an 
undetermined period of time, there is necessarily an inherent un certainty as to how 
closely the said amount will represent the actual continued adverse effects of the 
measure over time. What we must ensure, however, is that there is a legitimate basis 
for assuming that the chosen period of reference may lead to a reaso nable estimation 
of these effects.179 
6.69.   The arbitrator did not explain why, in its view, an arbitrator "must" ensure that there is a 
legitimate basis for assuming that the chosen period of reference "may" lead to a reasonable 
estimation of "these effects ". It looks as though by "these effects ", the arbitrator meant "the actual 
continued adverse effects of the measure over time " that are referred to earlier in the quoted 
paragraph.  
6.70.   We recall our own view, which is based on our mandate as set out in Article  7.10, that in the 
circumstances of our proceeding we should quantify the adverse effects determined to exist in the 
compliance panel and Appellate  Body reports, and not any "actual continued adverse effects ". The 
compliance reports in this dispute contain determinations concerning the 2011 -2013 Reference 
Period. That period occur red at the same time as the period immediately following the end of the 
implementation period. It is noteworthy that the arbitrator in US – Upland Cotton (Article  22.6 – US 
II) similarly justified its choice of MY 2005 as the appropriate reference period on the basis that it 
"represent[ed] the first moment at which the United  States  should have come into compliance with 
the recommendations and rulings at issue ".180 Thus, it wou ld in our view have been relevant and 
correct if the arbitrator in US – Upland Cotton (Article  22.6 – US II)  had said that the chosen period 
of reference should lead to a reasonable estimation of the adverse effects in the short term, i.e. the 
 
177 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II) , fn 44 (explaining that "[t ]he 
fact that the actual level of future payments under the [subsidy] program [which cause the adverse effects] 
may be uncertain to date cannot in itself be an obstacle to calculating a level of countermeasures to be 
applied "). (emphasis added) This footno te accompanied the following body text: "Nor can any uncertainty 
about what might happen in the future dissuade this Arbitrator from assessing the adverse effects determined 
to exist in relation to a measure which did exist and which, on the facts, continu es to exist". (Decision by the 
Arbitrator, US – Upland Cotton (Article 22.6 – US II) , para.  3.28). We note that there is no DSB -adopted 
finding in this dispute that the A380 or A350XWB LA/MSF measures have ceased to exist.  
178 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II) , paras.  4.117 -4.118 (noting 
that "price fluctuations on the world upland cotton market may affect the calculation of the adverse effects of 
the … subsidies at issue over time", that cotton prices "vary considerably fr om year to year" and that "there 
may be a number of economic or other factors that would affect the evolution over time of the impact of the 
subsidies at issue").  
179 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II) , para.  4.117.  
180 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II) , para.  4.118.  
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  adverse effe cts occurring at or shortly after the date by which  the responding party should have 
come into compliance.181 
6.71.   The arbitrator in US – Upland Cotton (Article  22.6 – US II)  also examined but rejected the 
United  States ' claim that MY 2005 was an "unrepresentativ e" reference period, finding that the 
average price of cotton during MY 2005 was closer to the historic nine -year average of cotton prices 
(beginning with MY 1999) than was the average price of cotton during the United  States ' proposed 
reference period of MY 2005 -2007. The arbitrator further found that recent increases in cotton prices 
were not indicative of a change in medium - to long -term price trends.182 
6.72.   As the arbitrator ultimately made no finding that MY 2005 did not provide a reasonable 
estimation of th e actual continued adverse effects of the measure over time, it remains unclear what 
the arbitrator would have done if it had so found.183 The arbitrator did say in the excerpt above that 
using different cotton prices would likely affect the calculation of t he adverse effects of the subsidies 
at issue. Also, it seems that the arbitrator was able to reach a conclusion on the issue of the 
appropriate reference period after having considered only the evolution of cotton prices in reviewing 
the issue of the appro priate reference period, although it had said that there were "a number of 
economic or other factors "184 that affected the extent of any adverse effects of the subsidies at issue. 
It is thus unclear whether the arbitrator would have proceeded to examine also  any factors other 
than price that affected the situation in any post -MY 2005 time -period if it had accepted to choose 
a different reference period based on the evolution of cotton prices.  
6.73.   In this proceeding, there is no equivalent to a straightforward com parison of average prices 
for alternative reference periods that would allow us to reach conclusions regarding the 2011 -2013 
Reference Period. Indeed, we cannot simply assume that a certain percentage of all LCA orders that 
Boeing lost to Airbus in a given  year after the 2011 -2013 Reference Period were lost sales, for 
example. As mentioned above, it took the prior compliance panel extensive evidence -based analyses 
to reach its conclusions regarding the existence of adverse effects in the 2011 -2013 Reference  
Period. We are aware of no shortcut in this regard for determining the existence of adverse effects 
in the post -2013 time -period. Also, the volumes of LCA sales during the 2011 -2013 Reference Period 
will rarely coincide with such volumes in any other peri od of time. However, this is the basic nature 
of the LCA industry.185 Finally, we discern no other evidence on the record pointing to any particular 
aspect or event that makes the 2011 -2013 Reference Period unsuitable for purposes of this 
proceeding.186 
6.74.   For th ese various reasons, we are not persuaded that the  arbitrator's  stated approach in  US 
– Upland Cotton (Article  22.6 – US II)  is appropriate in this proceeding. In particular, we see no 
 
181 Indeed, the arbitrator in US – Upland Cotton (Article 22.6 – US II)  itself said that once a 
countermeasure is in place, it may or may not reflect closely the actual continued  adverse effects of the 
measure over time.  
182 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II) , para.  4.118.  
183 For instance, we do not know whether the arbitrator would have accepted MY 2005 -2007 or opted for 
some other alternative refe rence period.  
184 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II) , para.  4.117.  
185 Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.1719 (observing that LCA 
"orders tend to be very large and sporadic").  
186 The pa rties have suggested that it may be possible for an arbitrator to adjust certain data in a 
chosen reference period if the data covered by the reference period were somehow "unrepresentative". 
However, the United  States proposes no such changes and the Euro pean Union casts the "representativeness" 
issue as one pertaining to whether the adverse effects  during the 2011 -2013 Reference Period are 
"representative" of present and future adverse effects. (United  States' responses to Arbitrator question Nos. 
103 and  119; and European Union's comments on the United  States' response to Arbitrator question No. 103 
and to the United  States' response to the European Union's question No. 1, para.  467). We will revert to the 
issue of whether we should base our calculation o n data pertaining to the entire 2011 -2013 Reference Period 
or data pertaining to a subperiod of that Reference Period in sections 6.3.4.3.1  and 6.3.4.4.1  below.  
 WT/DS 316/ARB 
 
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  need to  ensure that our "chosen period of reference ", i.e. the 2011-2013 Reference Period , "may 
lead to a reasonable estimation " of any present and future adverse effects.187  
6.75.   We accordingly also confirm that we cannot accept the European  Union 's proposed legal 
standard. Our mandate  does not require it  and adopting it w ould raise various systemic concerns as 
we have identified above.  
6.76.   Based on all of the foregoing elements, we consider it appropriate to determine the maximum 
level of Annual Suspension based on the value of the adverse effects determined to exist during th e 
2011-2013 Reference Period and to grant countermeasures in the form of Annual Suspension.188 
This approach is harmonious with our mandate as set out in Article  7.10, the text and object and 
purpose of the DSU, the adverse effects determined to exist and th e reference period used in the 
prior compliance proceedings, the task of the second compliance panel proceeding currently under 
way, and, insofar as Annual Suspension with no specified end -date is concerned, with the approach 
followed in prior arbitration decisions.  
6.3.2   The appropriate counterfactual  
6.77.   Previous arbitrators have noted that "in past arbitration proceedings, arbitrators have found 
it necessary to base their decisions on a so -called 'counterfactual ' … [which ] refers to a hypothetical 
scenario that d escribes what would have happened in terms of trade flows had the responding party 
implemented the DSB recommendations and rulings ".189 According to one previous arbitrator, "the 
legal standard that a scenario must meet for it to constitute an appropriate co unterfactual for 
purposes of Article  22.6 proceedings is that of plausibility and reasonability ".190 We note that the 
compliance panel and Appellate  Body in the present dispute already used a counterfactual to identify 
the very adverse effects in the 2011 -2013 Reference Period that we value here, i.e. one in which 
the European  Union 's relevant member States never granted A380 LA/MSF and A350XWB L A/MSF 
to Airbus.191 Thus, this counterfactual appears to suggest itself as the counterfactual under which 
we should value these adverse effects. The parties also predicate their arguments throughout this 
arbitration proceeding on that counterfactual.192 We agree that in  this proceeding it is reasonable to 
 
187 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II) , para.  4.117. We note t hat the 
level of adverse effects caused by LA/MSF going forward could be either above or below that of adverse effects 
caused in the 2011 -2013 Reference Period. Regarding the latter possibility, we note that even if we accepted 
the European Union's argumen t that the A380 programme is winding down, deliveries would likely still occur 
going forward at least for a time. (European Union's response to Arbitrator question No. 147, para.  288 and 
Table 7). Ongoing sales of A350XWB aircraft may significantly increas e and even replace sales of A380 aircraft. 
The "indirect effects" of A380 and A350XWB LA/MSF might affect future Airbus LCA programmes in ways that 
cause additional adverse effects. Moreover, the European Union might take "measures taken to comply" that 
increase the severity and/or duration of relevant adverse effects. (Decision by the Arbitrator, US – Tuna II 
(Mexico) (Article 22.6 – US), fn 92 ("Article 21.5 proceedings could result in a finding that a new compliance 
measure causes more nullification or i mpairment")). We note that in the compliance proceedings A350XWB 
LA/MSF was found to be a "measure[] taken to comply" within the meaning of Article 21.5 of the DSU, and, 
together with A380 LA/MSF, caused lost sales in the twin -aisle LCA market that we valu e in this very 
proceeding.   
188 We recognize that there may be other permissible ways to structure countermeasures. We make no 
judgments as to the permissibility of other structures, whether in this dispute or others.  
189 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para.  4.4. 
190 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para.  4.5. (emphasis omitted) 
See also Decision by the Arbitrator, US – Washing Machines (Article 22.6 – US), para.  3.10.  
191 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.558 (describing counterfactual used by compliance panel) and section 6.7.4 (using counterfactual 
assuming the "absence" of A380 and A350XWB LA/MSF). It  may be further noted that " a counterfactual does 
not necessarily need to reflect the most likely compliance scenario". ( Decision by the Arbitrator, US – Tuna II 
(Mexico) (Article 22.6 – US), para.  4.5). 
192 See, e.g. European Union's response to Arbitrator question No. 3, para.  79 (explaining that "there 
simply is no issue of the Arbitrat[or] using a 'new' counterfactual that deviates from the counterfactual adopted 
by the Appellate  Body in the first compliance proceedings" if all the Arbitrator does is valu e the five lost sales 
and six instances of impedance found in the 2011 -2013 Reference Period). (fn  omitted) The United  States 
never suggests that we use any counterfactual other than the counterfactual used in the compliance 
proceedings.  
 WT/DS 316/ARB 
 
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  use the same counterfactual to value the adverse effects that was used in the prior compliance 
proceedings. We consequently adopt this particular counterfactual as the relevant counterfactual.193 
6.78.   At this stage , we describ e one specific element of the counterfactual adopted in the above 
paragraph, i.e. what United  States  LCA manufacturer (s) would have been present in the twin -aisle 
LCA and VLA product markets (the LCA product markets in which the adverse effects that we val ue 
in this proceeding occurred) in the years leading up to and during the 2011 -2013 Reference 
Period.194 Establishing this element will help frame our subsequent analyses. In this context, the 
European  Union  asserts that "the counterfactual that informed the  adverse effects determination by 
the … compliance panel and the Appellate Body is one in which, in the absence of A380 [LA/]MSF 
and A350XWB [LA/]MSF, Airbus and Boeing would compete in a duopoly ".195 The United  States  
asserts that, in the absence of A380 an d A350XWB LA/MSF, "the Appellate  Body did not foreclose 
the possibility that … there would have been another U.S. industry participant, [but] the findings of 
continuing adverse effects are focused on the impact the subsidies had on Boeing, which is 
underst andable since Boeing was the only extant U.S. LCA producer during the period reviewed ".196 
We further note that neither party 's arguments in this proceeding  appear to assume the presence 
of any non -Boeing United  States  LCA manufacturer in the LCA marketplace  at any relevant point in 
time, including during the 2011 -2013 Reference Period.  
6.79.   Consistent with the parties ' positions in this context, we consider it reasonable to use a 
counterfactual in which Boeing was the sole United  States  LCA manufacturer in the ye ars leading up 
to and during the 2011 -2013 Reference Period. No LCA manufacturers in the United  States  other 
than Boeing in fact existed since 1997 , when McDonnell Douglas merged with Boeing.197 In our view, 
the structure of the counterfactual that the Appellate  Body adopted (i.e. the absence of A380 and 
A350XWB LA/MSF), when considered in conjunction with other evidence  on the record , indicates 
that it would have been unlikely for another United  States  LCA manufacturer to have entered the 
twin-aisle or VLA product markets after 1997 but before year -end 2013.198 Furthermore, we note 
that t he product markets used by the compliance panel and Appellate  Body vis-à-vis the 2011 -2013 
Reference Period were  defined with reference to Airbus and Boeing LCA only . Additionally, the 
Appellate  Body made no mention of a non -Boeing LCA United  States  manufacturer present in the 
LCA market at any relevant time in the counterfactual. Thus, we consider that, in the rele vant 
counterfactual, Boeing would have been the only United  States  LCA manufacturer in the years 
leading up to and during the 2011 -2013 Reference Period , and consequently , in the counterfactual, 
it is Boeing that would have won the lost sales identified in  the compliance proceedings and Boeing 
that would have increased its deliveries  had the impedance identified in the compliance proceedings 
not occurred.  
6.3.3   General European  Union  arguments against the United  States  methodology  
6.80.   In section 6.3.1  above, we concl uded that we may determine the maximum permissible level 
of Annual Suspension using the value of the adverse effects determined to exist in the 2011 -2013 
 
193 More specific as pects of this counterfactual will be discussed in later sections of this Decision as 
appropriate.  
194 The Appellate  Body did not appear to explicitly specify this issue in its report in the compliance 
proceeding.  
195 European Union's response to Arbitrator que stion No. 7, para.  156. 
196 United  States' response to Arbitrator question No. 7(a), para.  9. 
197 Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.1620.  
198 The Appellate  Body found that only the effects of A380 and A350XWB LA/MSF (the two most recent 
sets of LA/MSF measures) could be considered when assessing the European Union's compliance under 
Article  7.8 of the SCM  Agreement. (Appellate  Body Report,  EC and certain member States – Large Civil Aircraft 
(Article 21.5 – US), paras.  5.553-5.555). The earliest grant of any such measure was in 2000. (Panel Reports, 
EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras.  6.560, 6.1630, and fn  452; and 
EC and certain member States – Large Civil Aircraft , para.  7.290(vi i)). It follows that the counterfactual world 
departs from actual historic events starting in 2000, during which the LCA industry was characterized by an 
Airbus -Boeing duopoly. (Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.368  (noting 
that the Airbus -Boeing "effective duopoly has existed since 1997 when Boeing merged with McDonnell 
Douglas")). We discern nothing on the record indicating that any non -Boeing United  States LCA manufacturer 
would have entered the twin -aisle or VLA product markets since 2000 in the face of competition from Airbus 
and Boeing but in the absence of A380 and A350XWB LA/MSF. Indeed, the findings on the record stress how 
difficult it would have been for any new LCA manufacturer to enter the LCA market in t hese conditions. (See, 
e.g. Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras.  6.1215, 
6.1534, and 6.1787 -6.1788).  WT/DS 316/ARB 
 
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  Reference Period, i.e. the five lost sales and six instances of impedance. In connection with this iss ue 
the European  Union  raises several arguments concerning what adverse effects found to exist within 
the 2011 -2013 Reference Period we may or may not include in our determination of the maximum 
level of Annual Suspension.  
6.81.   The European  Union  raises five such arguments. First, the European  Union  argues that the 
Arbitrator must exclude from the maximum level of Annual Suspension the value of adverse effects 
associated with the counterfactual sale of Boeing LCA that would have already been delivered in the 
counterfactual at the time of the conduct of this arbitration proceeding. We will refer to this as the 
argument concerning "past deliveries " for ease of reference. Second, the European  Union  argues 
that the Arbitrator can include in the maximum level of Ann ual Suspension either the value of 
impedance or lost sales, but not both, because it is inappropriate to temporally assign the value of 
both types of adverse effects to the 2011 -2013 Reference Period. We will refer to this as the 
argument concerning "over-counting " for ease of reference. Third, the European  Union  argues that 
the Arbitrator can include in the maximum level of Annual Suspension either the value of impedance 
or lost sales, but not both, because doing so would lead to the Arbitrator counting th e value of the 
same adverse effects twice. We will refer to this as the argument concerning "double -counting " for 
ease of reference. Fourth , and based on the validity of, inter alia , the previous three arguments, the 
European  Union  argues that countermeasu res must end on a date that corresponds to the date of 
the final delivery related to the adverse effects determined to exist in the 2011 -2013 Reference 
Period. Finally, the European  Union  argues that the Arbitrator must exclude the value of Boeing LCA 
comp onents produced outside the United  States . We address each of these arguments in turn.  
6.3.3.1   Exclusion of the value of past deliveries from the level of Annual Suspension  
6.82.   The European  Union  argues that, in determining the maximum level of countermeasures, the 
Arbitrator cannot consider the value of the five lost sales and six instances of impedance insofar as 
these adverse effects involve Boeing LCA that would have already been delivered by the present day 
in the counterfactual. According to the European  Union , the counterfactual deliveries of Boeing LCA 
associated with those adverse effects mean that those adverse effects have ceased to exist or come 
to an end (insofar as they involve previously delivered LCA in the counterfactual).199 The 
European  Union  infers fro m this that associated countermeasures vis-à-vis those adverse effects, 
insofar as they involve previously delivered LCA in the counterfactual, must also come to an end. 
The European  Union  asserts that this approach is consistent with the prospective natur e of WTO 
remedies. The European  Union  also submits  that certain passages in the panel report in US – Large 
Civil Aircraft  (2nd complaint)  support its position in this context.200 
6.83.   The United  States  argues that the European  Union 's approach is (a) unacceptable  because it 
would leave no remedy for impedance, which is based on past deliveries , (b) inapposite because it 
ignores that the countermeasures applied in any future year pertain to the adverse effects caused 
by LA/MSF in that year rather than those that occurred during the 2011 -2013 Reference Period201, 
and (c) unsupported by the text and purpose of the DSU and SCM  Agreement . Also, the 
United  States  submits that the passages from the panel report in US – Large Civil Aircraft  
(2nd complaint)  that the European  Union  cites in this context do not support the European  Union 's 
position.202 
6.84.   The Arbi trator notes t he European  Union 's view that the Arbitrator  should not determine the 
maximum level of Annual Suspension, in whole or in part, based on the value of adverse effects that 
already "ended " in the counterfactual, and that counterfactual deliverie s of Boeing LCA related to 
those adverse effects bring about that "end". This would result in disregarding the six instances of 
impedance found in the 2011 -2013 Reference Period (as they were based on counterfactual Boeing 
 
199 The European Union also makes this argument with reference to "lost sales" that involve cancelle d 
orders. As explained in section 6.3.4.3.4.1  below, we exclude the value of cancelled orders from the level of 
countermeasures. Thus, we do not address that aspect of the European Union's argument here.  
200 European Union's written submission, paras.  149-164 (citing Panel Report, US – Large Civil Aircraft  
(2nd complaint) , paras.  7.1685 -7.1686).  
201 We note that this particular argument appears to assume that granting countermeasures in the form 
of Annual Suspension is predicated on the existence of ongoing adv erse effects of the same magnitude as 
those found to exist in the 2011 -2013 Reference Period. (See paragraph 6.38 above). We have rejected this 
rationale as the basis upon which we determine the maximum level of Annual Suspension above in 
section  6.3.1 . 
202 United  States' written submission, paras.  122 and 126 -128. WT/DS 316/ARB 
 
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  LCA deliveries that would by now have already occurred) and the value of any Boeing LCA that would 
have been delivered by the present day pursuant to the five lost sales had Boeing won them.  
6.85.   Our mandate is to determine whether the proposed level of countermeasures is 
commensurate with "the degree and nature of the adverse effects determined to exist ", i.e. the five 
lost sales and six instances of impedance in the 2011 -2013 Reference Period. We therefore must 
establish the economic value of adverse effects that were determined to have exis ted in the 2011 -
2013 Reference Period. The parties do not agree on whether any of the adverse effects determined 
to exist have ceased to exist prior to this arbitration proceeding. Beyond this, we fail to see the 
materiality in considering when such advers e effects "ended " in the sense that the European  Union  
uses this word. The five lost sales and six instances of impedance were "determined to exist " in the 
2011-2013 Reference Period. Whether such adverse effect continued to exist in some subsequent 
time-period is an extraneous consideration in this arbitration proceeding. The question of the 
continued existence of adverse effects raises a compliance issue that in contentious cases should be 
addressed by a compliance panel under Article  21.5 of the DSU. We further note, as explained above, 
that many arbitrators, including the arbitrator in US – Upland Cotton (Article  22.6 – US II) , have 
determined maxi mum levels of Annual Suspension based on the effects of measures in past 
reference periods.203 
6.86.   Finally, the passages in the panel report in US – Large Civil Aircraft  (2nd complaint)  that the 
European  Union  cites in support of its argument are in our view una vailing and do not lead us to 
exclude the value of past deliveries. Those passages address, inter alia , the issues of when, 
conceptually, "lost sales " and "impedance ", within the meaning of Article  6.3(a) -(c) of the 
SCM Agreement , can be said to exist and what data should properly evidence that existence. As 
explained in the paragraph immediately above, in the dispute before us, these issues have been 
resolved insofar as is relevant for present purposes, that is to say, the relevant adverse effects were 
found to exist in the 2011 -2013 Reference Period based on evidence deemed appropriate for that 
purpose in the compliance proceedings.204  
6.87.   For all these reasons, we reject the European  Union 's argument regarding past deliveries.  
6.3.3.2   Inclusion of both lost sales and impedance in determining the level of Annual 
Suspension: "Over-counting " 
6.88.   The European  Union  argues that the United  States ' methodology results in impermissible 
"over-counting ", i.e. valuing economic harm to the United  State s on the basis of both orders 
(evidencing lost sales ) and deliveries (evidencing impedance ) in the 2011 -2013 Reference Period. 
According to the European  Union , doing so creates a "temporal mismatch in the allocation of harm ", 
resulting in overstated damage amounts in the 2011 -2013 Reference Period. The European  Union  
asserts  that private companies would assign the value of a goods sale to the time of the order or 
resulting delivery, but not both.205 
6.89.   The European  Union  asserts that because mix ing an order -centric metric and delivery -centric 
metric is "inconsistent " and "nonsensical "206, the Arbitrator must choose either one or the other if it 
uses the 2011 -2013 Reference Period to determine the level of Annual Suspension. However, in the 
European  Union 's view, under the circumstances of the present proceeding207, the Arbitrator "must 
opt for US impedance claims ( i.e., based on deliveries) " and "disregard in their entirety US lost sales 
 
203 See section 6.3.1 above. We further recall that a maximum level of Annual Suspension determined 
based on a past reference period is still a prospective remedy. (See paragraphs 2.27 and 5.3 above).  
204 Insofar as these passages raise issues that may bear upon the proper temp oral allocation of the 
value of these adverse effects, we discuss that issue in the following section.  
205 European Union's written submission, sections VIII.C and IX.A.1 and fn  185; responses to first set of 
Arbitrator questions, paras.  54-57 and fn  59; an d responses to Arbitrator question No. 23, paras.  370-377, 
No. 62, paras.  191-192, and fn  256, and No. 107, paras.  182-198 and fn  208. 
206 European Union's response to Arbitrator question No. 23, para.  368. 
207 European Union's response to Arbitrator question No. 23, paras.  360-367 (identifying these 
circumstances as " inter alia the considerable time lag between order and delivery; the significant probability of 
order cancellations, rescheduling, and conversions; and, the particularly large -scale, infrequent na ture of LCA 
sales").  
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  claims ".208 According to the European  Union  this is so because the  Arbitrator should value the "trade 
effects " of LA/MSF, which in the case of orders arise only upon the deliveries of the ordered LCA. 
The European  Union  submits that because of the time lag between LCA orders and deliveries, if 
Boeing had won the five los t sales, counterfactual deliveries would have occurred only after 2013. 
Thus, the European  Union  contends  that temporally assigning the value of lost sales to the times of 
the orders in the 2011 -2013 Reference Period improperly includes therein adverse eff ects that arose 
after the Reference Period. The European  Union  emphasizes in this context that although lost sales 
may have been found to exist with reference to order data in the compliance proceedings, that does 
not necessarily mean that the Arbitrator s hould quantify  the effects of the lost sales with specific 
reference to those orders.209  
6.90.   The European  Union  argues that prior arbitrators confirmed the primacy of the "trade effects 
metric " to determine levels of countermeasures and suspensions of concessio ns, and that arbitrators 
use other metrics only if trade effects are difficult to quantify or where measurable trade effects 
have not yet occurred. The European  Union  further states that using only impedance claims to 
determine the level of countermeasures  is not inconsistent with the findings in the compliance 
proceedings because although panels and the Appellate  Body may find the existence of lost sales 
with respect to order data, an arbitrator can and should quantify  the adverse effects determined to 
exist using a delivery -centric metric. The European  Union  also asserts that both "lost sales " and 
"impedance " are focused on "volume effects " and "market shares ", which correspond to using a 
delivery -centric metric.210 
6.91.   Finally, the European  Union  argues that basing the value of orders representing lost sales on 
future counterfactual deliveries is overly speculative because LCA deliveries do not always occur as 
envisioned under the relevant preceding order, and may be cancelled, converted, or postp oned. 
Thus, according to the European  Union , the Arbitrator "must use the actual deliveries in the relevant 
years as the basis for quantifying trade effects from lost sales ".211 
6.92.   The United  States  argues that no impermissible "over-counting ", as the European  Union  uses 
that term, arises if the Arbitrator values both the five lost sales and six instances of impedance in 
the 2011 -2013 Reference Period and determines the maximum level of Annual Suspension based on 
that combined, annualized amount. The United  States argues that this approach simply implements 
the Arbitrator's mandate, i.e. valuing the "adverse effects determined to exist ". According to the 
United  States , "lost sales " under Article  6.3(c) of the SCM  Agreement  (identified based on LCA 
orders) and "impedance " under Article  6.3(a) and (b) of the SCM  Agreement  (identified based on 
LCA deliveries) are two distinct kinds of adverse effects. The United  States  further submits that both 
kinds of adverse effects were found to exist during the 2011 -2013 Referen ce Period and thus the 
value of both can be temporally assigned thereto. Further, the United  States  asserts that no order 
representing a "lost sale " resulted in deliveries that underlie the impedance findings, and thus no 
LCA is being valued twice as a res ult of valuing both lost sales and impedance found to exist in the 
Reference Period.212  
6.93.   The United  States  submits in addition that insofar as the European  Union  argues that the 
Arbitrator must apply a "trade effects metric " and that metric compels the Arbit rator to disregard 
 
208 European Union's written submission, fn  185. See also European Union's responses to first set of 
Arbitrator questions, paras.  54-57; and response to Arbitrator question No. 107, para.  184. 
209 European Union's written submission, para.  190; and responses to Arbitrator question Nos. 23 and 
26. According to the European Union, "[t]he word 'trade' in 'trade effects' is to be interpreted in the broad 
sense as 'transaction', or 'transfer of goods and services', not in the narrow sense as 'cr oss-border transaction' 
(imports/exports)". (European Union's response to Arbitrator question No. 54, fn  20).  
210 European Union's responses to Arbitrator question No. 23, paras.  354-358, 364 -367, and 383 
(asserting that "these arbitrat[ors] … based their f indings on direct exports of goods and services that were 
affected by the WTO -inconsistent measures at issue"), No. 24, para.  387, No. 26, No. 54, and No. 62, fn 260.  
211 European Union's written submission, paras.  178, 184 -187, 188, and fns  179 and 181 -183 (inter alia  
citing Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.1724 (noting such 
uncertainties)).  
212 United  States' written submission, paras.  129, 131, 146 -149, 156 -157, and 160 -161; and response 
to Arbitrator question No. 54 . 
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  lost sales claims, there is no textual basis for such an approach in the DSU or SCM  Agreement , and 
that there has been no rigid "trade effects metric " used in prior arbitrations.213  
6.94.   Finally, the United  States  rejects the European  Union 's argument that assigning the value of 
future counterfactual deliveries that would have followed from Boeing winning the five lost sales to 
the time of the lost sale (i.e. order) involves undue speculation, stating that the Arbi trator must 
assume that all Boeing LCA that would have been ordered pursuant to the lost sales would also have 
been delivered (i.e. there is no basis for considering the possibility of post -order developments such 
as cancellations, conversions, or delivery  delays); and that the European  Union 's advocated 
methodology for valuing lost sales involves the same kinds of uncertainties as does the 
United  States '.214  
6.95.   The Arbitrator begins by noting that the European  Union 's overall argument in this context is 
that it is improper to temporally assign both the value of impedance and lost sales to the 2011 -2013 
Reference Period, as proposed by the United  States . The European  Union  mainly believes this to be 
so because it is improper, in its view, to temporally assign th e value of lost sales, specifically, to the 
2011-2013 Reference Period. Thus, our analysis proceeds in three steps. First, we examine whether 
it is reasonable to temporally assign the value of lost sales, specifically and in isolation from the 
temporal ass ignment of the value of impedance, to the 2011 -2013 Reference Period. Second, we 
examine whether it is reasonable to temporally assign the value of impedance, specifically and in 
isolation from the temporal assignment of the value of lost sales, to the 201 1-2013 Reference Period. 
If we answer both questions in the affirmative, we then address the European  Union 's remaining 
arguments as to whether it would be improper to temporally assign the value of both impedance 
and lost sales, when considered together, to the 2011 -2013 Reference Period.  
6.3.3.2.1   Temporal assignment of the value of lost sales to the 2011 -2013 Reference 
Period  
6.96.   In the compliance proceedings, the five lost sales were represented by orders for Airbus LCA 
placed in the 2011 -2013 Reference Period.215 Each order was for multiple Airbus aircraft. We agree 
with the European  Union  that, if Boeing had won the lost sales, the resulting counterfactual deliveries 
would all have occurred after the end of the 2011 -2013 Reference Period.216 The main issue is thus 
wheth er, under these circumstances, it is reasonable to temporally assign the value of the Boeing 
LCA that would have been sold pursuant to each counterfactual Boeing LCA order to the time of that 
counterfactual order (i.e. within the 2011 -2013 Reference Period  as the United  States  requests) 
rather than assign the value of each individual ordered Boeing LCA to the time of its counterfactual 
delivery (i.e. outside the 2011 -2013 Reference Period, as the European  Union  requests).217 
6.97.   In addressing this issue, we once again recall our mandate, which is to determine whether 
the proposed level of countermeasures is commensurate with "the degree and nature of the adverse 
effects determined to exist ". We begin by examining the nature of lost sales. Lost sales are described 
in Article  6.3(c), which provides:  
[T]he effect of the subsidy is a significant price undercutting by the subsidized product 
as compared with the price of a like product of another Member in the same market or 
significant price suppression, price depressio n or lost sales in the same market[.]  
6.98.   Regarding the term "lost sales ", the word "sale" is defined as "[t]he action or an act of giving 
or agreeing to give something to a person in exchange for money ".218 This indicates that the event 
that defines a "lost sal e", in the context of a sale of goods, may either occur at the time when an 
 
213 United  States' written submission, paras.  133-136 and 148; and response to Arbitrator question No. 
100, paras.  12-13 (citing Decision by the Arbitrator, US – FSC (Article 22.6 – US), para.  6.40).  
214 United  States' written submission, paras.  149, 158, an d 163; response to Arbitrator question No. 58; 
and response to European Union's question No. 1, para.  242. 
215 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  5.716 and 5.731.  
216 See section 6.3.4.3.5  below.  
217 Under the United  States' methodology, we recall that the United  States considers that the value of a 
lost sale is the present value of the Boeing LCA that were expected to be delivered pursuant to the order.  
218 Shorter Oxford English Dict ionary , 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), 
Vol. 2, p. 2652.  
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  agreement to exchange goods for money is concluded or when the physical "act" of exchanging 
goods for money occurs. We consider it a reasonable proposition, therefore, that the eco nomic value 
of such an agreement would be the value of the goods sold pursuant thereto. Put another way, the 
value of a "lost sale ", when evidenced by an agreement constituting an order for subsequent delivery 
of the purchased goods  and assessed at the tim e of that agreement , would be the expected value 
of the good s that would have been traded if the supplier that lost the sale had won the sale. In the 
light of that observation, we discern no reason to think that that monetary value could not be 
temporally assigned to the time of the agreement.219  
6.99.   We also contrast the language of Article  6.3(c) with that of Article  6.3(a) and (b), which 
describe, inter alia , impedance and are part of the context of Article  6.3(c). The text of these 
provisions reads  as follows:  
(a)  the effect of the subsidy is to displace or impede the imports of a like product of 
another Member into the market of the subsidizing Member;  
(b)  the effect of the subsidy is to displace or impede the exports of a like product of 
anoth er Member from a third country market[.]  
6.100.   These provisions reference "imports " and "exports ", respectively, suggesting that impedance 
is focused on physical movements of goods and arises at the time that "imports " or "exports " of the 
complaining party 's goo ds are physically "impeded " from a relevant geographic market.220 Unlike 
Article  6.3(a) and (b), Article  6.3(c) nowhere mentions "imports " or "exports ". The immediate 
context of Article  6.3(c) therefore indicates to us that the time at which lost sales can o ccur and 
temporally valued need not be the time of the resulting physical transfer of goods from the seller to 
the purchaser. Instead, the value of a lost sale can be determined at the time at which an agreement 
to transfer goods in exchange for money is r eached. Thus, the economic value of that agreement 
can be reasonably characterized as the expected economic value of the goods that would have been 
traded if the supplier who lost the sale had won the sale.  
6.101.   The above observations are consistent with the ma nner in which lost sales were analytically 
determined to exist in prior proceedings in this dispute. In both the original and compliance 
proceedings, lost sales were determined to exist solely based on LCA order data, i.e. data pertaining 
to the time at wh ich the agreements governing the eventual physical transfer of LCA were 
concluded.221 In contrast, impedance was determined to exist solely based on LCA delivery  data, i.e. 
data pertaining to the time of the physical transfer of LCA. The choice to identify t hese adverse 
effects in this manner was in large part based on the references in Article  6.3(a) and (b) to imports 
and exports.222 It is thus clear that the five lost sales in this proceeding were found to have arisen 
within the 2011 -2013 Reference Period. T his suggests to us that the economic value of those orders, 
i.e. the expected value of the Boeing LCA that would have been traded had Boeing won the sale 
instead, could also be temporally assigned to the 2011 -2013 Reference Period.  
6.102.   We further note that los t sales must also be "significant " under Article  6.3(c).223 The original 
panel identified certain factors that make lost sales significant, i.e. strategic importance, learning -
 
219 See Appellate  Body Report, US – Large Civil Aircraft  (2nd complaint) (Article 21.5 – EU), para.  5.331 
(stating that "[i]n EC and certain member States – Large Civil Aircraft , the Appellate  Body explained that 'lost 
sales' are sales that suppliers of the complaining Member 'failed to obtain' and that instead were won by 
suppliers of the respondent Member") (citing Appellate  Body Report, EC and certain member Stat es – Large 
Civil Aircraft , para.  1220). (fn  omitted)  
220 See Panel Report, US – Large Civil Aircraft  (2nd complaint) , para.  7.1685 (explaining that impedance 
"can … only arise at the point at which LCA deliveries take place").  
221 Appellate  Body Report, EC and  certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  5.716 and 5.731 (stating that the five relevant orders for Airbus LCA in the 2011 -2013 Reference Period 
"represent" the lost sales). See also Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) 
(Article  21.5 – EU), para.  5.338 (explaining that the existence of lost sales may be identified using "order data 
alone").  
222 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 1217 (noting that 
order  data underlie the findings on lost sales); and Panel Report, EC and certain member States – Large Civil 
Aircraft , paras.  7.1747 -7.1751, 7.1774, and 7.1777.  
223 The Appellate  Body has explained that "'significant' means 'important, notable or consequential',  and 
that such a term, depending on the circumstances, could have both quantitative and qualitative aspects". 
(Appellate  Body Report, US – Large Civil Aircraft  (2nd complaint) (Article 21.5 – EU), para.  5.332).  
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  curve effects, incumbency, the number of LCA involved in a sale, and the "dollar a mounts involved 
in those sales ".224 The compliance panel considered that "this description regarding the significance 
of losing LCA sales to a rival LCA producer … remains, on the whole, an accurate depiction of the 
significance of losing LCA sales to a riva l LCA producer ".225 On the basis of the same considerations 
enumerated by the original panel, the compliance panel confirmed that the five lost sales at issue in 
this proceeding were "significant ".226 We thus note that the five significant lost sales at issue in this 
proceeding were determined to exist in the 2011 -2013 Reference Period because, inter alia , the 
orders themselves involved large monetary amounts.227 This further suggests to us that the valu e 
of the five lost sales can reasonably be described as the expected value of the Boeing LCA that would 
have been traded had Boeing won the sales instead. It would therefore also appear reasonable to 
temporally assign that value to the time of the lost sal e, i.e. the 2011 -2013 Reference Period.  
6.103.   This interpretation finds further support in the original panel 's descriptions regarding the 
relationship between LCA orders and resulting LCA deliveries, the validity of which have remained 
undisturbed during subseq uent stages of this dispute. In these descriptions, the original panel 
emphasized that "[a]t the moment an order is placed, the terms and conditions of the delivery of 
aircraft pursuant to that order will in large part be set. Aircraft specification, net p rice, discounts, 
non-price concessions and financing arrangements will be determined at the time of order ", including 
the delivery schedules.228 Thus, the original panel observed that "orders are to some extent a proxy 
for future deliveries ", i.e. a proxy fo r expected resulting LCA trade flows.229 Moreover, the original 
panel indicated that rational economic actors would take such expectations arising from orders into 
account in making valuation decisions: "Boeing and Airbus undoubtedly make future plans taking  
into account their current order book, and … market actors will take the future flows from those 
orders into account in evaluating each company ".230  
6.104.   The for egoing discussion indicates that, in the particular context of our proceeding, the value 
of LCA to b e traded pursuant to an LCA order could reasonably be assigned to the time of the 
order.231 As described above, the lost sales in the present dispute were identified purely based on 
LCA order data, and any value ultimately realized from LCA deliveries is dir ectly traceable and 
attributable to their associated order and the terms that were set therein. LCA orders further specify 
the amount of money that is to be exchanged in return for the ordered LCA, and a value can thus 
be placed upon the orders.232 In other words, an LCA order contract is reasonably characterized as 
having an expected economic value such that when the order is lost, the supplier who would have 
won the sale in the relevant counterfactual (in this case, Boeing) can be said to have lost that 
expected value at the time of the lost sale.  
 
224 Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.1845.  
225 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  6.1798.  
226 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  6.1798.  
227 We note that this finding was made with the understanding that relatively [[***]] is actually 
transferred to the LCA manufacturer upon order, and instead "[i]t is at t he time of delivery that a manufacturer 
receives the majority of proceeds from the sale of an aircraft". (Panel Report, EC and certain member States – 
Large Civil Aircraft , para.  7.1749).  
228 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1750. See also 
Appellate  Body Report, US – Large Civil Aircraft  (2nd complaint) (Article 21.5 – EU), paras.  5.335 -5.336 
(making similar observations); and  Panel Report, EC and certain member States – Large Civil Aircraft , 
para. 7.1719 (same).  
229 Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.1750.  
230 Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.1749.  
231 We note that our valuation of the lost sales involves considerably more calculation than si mply 
summing the value of deliveries resulting from the lost sales, however. (See section 6.4.2 below). We further 
note that the valuation involves discounting the delivery prices of Boeing LCA ordered in the counterfactual. 
According to the European Union , "the arbitration panel in US – Gambling explicitly rejected the requesting 
Member's request to include discounted future revenues in its award". (European Union's written submission, 
para. 188 (citing Decision by the Arbitrator, US – Gambling (Article 22 .6 – US), para.  3.144)). However, the 
passage that the European Union cites in that arbitration decision does not impugn the propriety of discounting 
as an economic tool that may be used in arbitration proceedings or suggest a different approach in this 
proceeding.  
232 We recognize, of course, that in this context we are actually valuing orders that do not exist, i.e. 
counterfactual Boeing orders. We note, however, that counterfactual Boeing orders would be structured so as 
to specify the amount of money to b e exchanged for the LCA to be delivered pursuant to these orders. (See 
section 6.3.4.3.6  below).  
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  6.105.   Post-order developments may affect the ultimate value that an LCA manufacturer realizes 
from an LCA order.233 These include cancellations, delivery delays, or even re -negotiations of the 
terms of the sale.234 Such fact ors can be taken into account when assessing what ultimate value 
Boeing would have realized had it won the lost sales. As further discussed in section 6.3.4.3.2  below, 
the manner in which the five relevant Airbus sales have in fact evolved after 2013 can b e taken into 
account in assessing how the counterfactual Boeing sales would have likely evolved had Boeing won 
the lost sales instead. It would further be possible to adjust the value of the lost sales in the light of 
the probability that certain other mat erial changes would arise, such as the chance that future 
counterfactual deliveries would be cancelled.235 We briefly note in this context that, particularly in 
the light of the availability of such adjustments, we see no reason to think that the United  States' 
methodology involves unacceptable speculation.236 
6.106.   Moreover, we do not consider that prior dispute settlement practice provides a persuasive 
reason to temporally assign the value of lost sales to the times of resulting deliveries rather than to 
the time of order. The European  Union  stresses that most previous arbitrators have used a "trade 
effects metric " in determining levels of countermeasures or suspension, a metric that the 
European  Union  argues we should adopt here and that favours temporally as signing the value of lost 
sales to the time of counterfactual deliveries rather than to the time of counterfactual order.237 The 
term "trade effects "238 appears neither in the SCM  Agreement  nor the DSU.  
6.107.   To clarify the relevance of a trade effects metric, ther efore, we make two observations 
regarding the arbitration decisions that the European  Union  maintains  used this metric and that 
support its argument. First, these arbitration decisions generally determined levels of 
countermeasures or suspension of concess ions based on the increased value of counterfactual trade 
that the complaining party would have realized vis-à-vis a relevant good or service had the 
responding party achieved compliance. We note that the method of valuing lost sales described 
above is con sistent with this in that it leads to an economic valuation of the additional Boeing LCA 
that would have been traded had Boeing won the lost sales. In this sense, we consider that by 
temporally assigning the value of counterfactual Boeing LCA deliveries to  the time of the lost sale, 
we would be using a trade effects metric.239 Second, previous arbitrators appeared to temporally 
assign the increased value of counterfactual trade to the time -period in which that counterfactual 
 
233 Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.1724 (explaining that 
there are "many factors that can intervene between order an d actual delivery" that affect the ultimate value 
realized from an order).  
234 Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.2178.  
235 See section 6.3.4.3.4.2  below.  
236 Indeed, we note that under either the United  States' or the Eur opean Union's approach, we would 
have to estimate the probability and timing of essentially the same counterfactual Boeing deliveries.  
237 The European Union argues that the arbitrators in the following disputes used the "trade effects" 
metric: Decisions by the Arbitrators, US – Tuna II (Mexico)  (Article 22.6 – US); US – COOL (Article 22.6 – 
United  States) ; US – Upland Cotton (Article 22.6 – US I); US – Upland Cotton (Article 22.6 – US II) ; 
US – Gambling (Article 22.6 – US); US – Offset Act (Byrd Amendment) (Brazil) (Article 22.6 – US); EC – 
Bananas III (Ecuador) (Article 22.6 – EC); EC – Hormones (US) (Article 22.6 – EC); EC – Hormones (Canada) 
(Article 22.6 – EC); and EC – Bananas III (US) (Article  22.6 – EC). (European Union's responses to Arbit rator 
question No. 23, para.  364, and No. 26, para.  406). We note that the recent decision by the arbitrator in the 
US – Washing Machines  dispute also adopted a "trade effects" approach, i.e. measuring levels of nullification or 
impairment with respect to counterfactual imports of Korean products into the United  States. (Decision by the 
Arbitrator, US – Washing Machines (Article 22.6 – US), paras.  3.7, 3.112 -3.118 , 4.57, 4.117, and 5.1 -5.3). 
238 The European Union cites certain arbitration decisions and panel  reports using, inter alia , the terms 
"trade effects", "trade -distorting impact", and "volumes and prices and flows of such trade" when discussing 
the effects of subsidies and/or the character of adverse effects. (European Union's written submission, 
paras . 63 and 157; and response to Arbitrator question No. 26, paras.  399-402 and fn  433). No cited passage, 
however, specifically delineates the precise content of these phrases as used, and none addresses the kind of 
issue surrounding the temporal assignment of counterfactual trade flows that we address here. Thus, we 
consider that these terms and the passages in which they appear add little insight to our discussion here.  
239 We note, however, that the term "trade effects" should not be understood to refer to o nly 
international trade. Such a narrow understanding would be neither legally appropriate nor workable in this 
proceeding where we must quantify certain identified "adverse effects" within the meaning of Article 5 of the 
SCM Agreement. Indeed, one "lost sa le" finding at issue in this proceeding involved United Airlines, a 
United  States airline customer. In the counterfactual, therefore, a United  States supplier (Boeing) would have 
supplied LCA to a United  States airline customer (United Airlines). This woul d have represented domestic, not 
international, trade. (See also footnote 35 of the SCM  Agreement (envisioning countermeasures implemented 
under Part III of the SCM  Agreement being applied vis-à-vis "the effects of a particular subsidy in the domestic 
market of the [implementing] Member")).  
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  trade would have occurred (i.e. the time when the imports or exports of relevant goods or services 
occur red). We thus note that under the United  States ' approach – at least with respect to valuing 
lost sales – we would, somewhat differently, temporally assign the value of increased counterfactual 
trade in United  States  LCA to the time of the counterfactual o rder that would have given rise to, and 
specified the value of, the physical counterfactual trade (i.e. subsequent deliveries).  
6.108.   Regarding this limited difference between the United  States ' advocated approach and the 
approach of the arbitrators that the Eur opean  Union  cites, however, we make the following related 
observations.  
6.109.   To begin with , the European  Union  cites no prior arbitration decision that indicate s that it 
would be improper to temporally assign the value of goods sales to a time other than the t ime of 
physical transfer of the goods, and we are aware of none that did so.  
6.110.   Moreover, the United  States ' approach appears consistent with what we consider to be the 
fundamental purpose of arbitrations conducted under Article  22.6 of the DSU. We note that the 
arbitrator in US – Section 110(5) Copyright Act (Article  25)240 stated that "for purposes of these 
arbitration proceedings, the relevant [lost] benefits [to be valued] are those which are economic in 
nature . This is consistent with previous decisions of arbitrators acting under Article  22.6 of the 
DSU".241 A subsequent arbitrator acting under Article  22.6 cited this passage while discussing the 
valuation methods used by previous arbitrators, during which the arbitrator noted that such previous 
arbitrators d id not exclusively use a trade effects approach to valuing the relevant economic impact 
of the measures in question.242 We, too, agree with these general observations, i.e. that, 
fundamentally , arbitrators acting under Article  22.6 value economic effects of measures. Indeed, 
with the exception of certain arbitrations conducted under Article  4.11 of the SCM  Agreement243, 
arbitrators acting under Article  22.6 of the DSU and Article  7.10 of the SCM  Agreement  have valued 
the economic impact of the measures at issue . This is so whether arbitrators employed a "trade 
effects " metric, as the European  Union  uses that term, or valued the relevant economic impact of 
the measures at issue in other ways.244 Therefore , we consider that , in keeping with our mandate , 
our task is to place an economic value on "the adverse effects determined to exist " in the Reference 
Period, i.e. the five lost sales and six instances of impedance to the United  States .  
6.111.   Finally, we note that this proceeding involves novel legal and factual circumstances. No prior 
arbitrator has valued "lost sales " within the meaning of Article  6.3(c), l et alone lost sales involving 
goods the sales of which display multi -year lag times between their order and delivery as LCA sales 
do. We further recall  that the SCM  Agreement  directs us to value lost sales the existence of which 
was determined by assessing  the facts at  the time of the relevant sale rather than at the time of 
any deliver ies. Thus, it  seems to  us only natural that certain differences in our valuation method and 
those of prior arbitrators might arise.  
 
240 Although this arbitration was not conducted under Article 22.6 of the DSU, the arbitrator considered 
its task essentially was to quantify the level of "nullification or impairment" of the measure in question. ( Award 
of the Arbitrator, US – Section 110(5) Copyright Act (Article 25) , para. 2.7). 
241 Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25) , para. 3.18 (citing Decisions 
by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC); EC – Hormones (Canada) (Article 22.6 – 
EC); EC – Hormones (US) (Article 22.6 – EC); and EC – Bananas III (US) (Article  22.6 – EC)). (emphasis 
added) The arbitrator reasoned that this was so in view of "the object of the present proceedings, which is to 
quantify t he economic harm  suffered by the European Communities as a consequence of the continued 
application of [the measure at issue]". ( Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25) , 
fn 38). (emphasis added)  
242 Decision by the Arbitrator, US – Offset Act (Byrd Amendment) (Brazil) (Article 22.6 – US), 
paras.  3.38-3.40. That arbitrator emphasized that because "nullification or impairment is [not] limited in all 
instances to the direct trade loss resulting from the  violation", "the 'trade effect' approach … regularly applied 
in other Article 22.6 arbitrations … seems to be generally accepted by Members as a [but not the only]  correct 
application of Article 22 of the DSU". (Decision by the Arbitrator, US – Offset Act  (Byrd Amendment) (Brazil) 
(Article 22.6 – US), paras.  3.69 and 3.71). (emphasis original)  
243 The arbitrators in  Canada – Aircraft Credits and Guarantees (Article 22.6 – Canada) , US – FSC 
(Article 22.6 – US), and Brazil – Aircraft (Article 22.6 – Brazil)  used the value of the export subsidy to calculate 
their countermeasures.  
244 The arbitrator in US – 1916 Act (Article 22.6 – US) based the maximum levels of suspension on the 
sum of  future final monetary judgments awarded against EC companies under t he 1916 Act and  future 
settlement awards entered into by EC companies under the 1916 Act. (See also Award of the Arbitrator , 
US – Section 110(5) Copyright Act (Article 25)  (royalty income lost by EC copyright holders)).  WT/DS 316/ARB 
 
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  6.112.   In sum, we thus do not consider that tempo rally assigning the value of lost sales to the time 
of the relevant orders is inconsistent with persuasive content of prior arbitrator decisions.  
6.113.   It emerges from the totality of the foregoing considerations that the operative question for 
us is whether the  United  States ' approach reasonably captures the economic impact that A380 and 
A350XWB LA/MSF caused to the interests of the United  States  during the 2011 -2013 Reference 
Period. In the case of lost sales, our legal and analytical task is to place an econom ic value on the 
five lost sales . We thus must determine in an economically appropriate manner the value of the 
associated lost orders during the Reference Period. As explained above, and consistent with 
statements by prior WTO adjudicators in this dispute,  it is in our view an economically reasonable 
proposition that the economic value of the five lost sales, which occurred in the 2011 -2013 Reference 
Period, is the expected value of the additional Boeing LCA that would have subsequently been traded 
had Boei ng won those lost sales. Thus, we find it appropriate to temporally assign that value to the 
2011-2013 Reference Period.  
6.114.   For all the foregoing reasons, we consider that in the circumstances of this proceeding we 
should  place a value upon the orders that r epresent the lost sales, i.e. the value of the LCA expected 
to be delivered pursuant thereto, and assign that value to the time of the order, i.e. within the 2011 -
2013 Reference Period. Doing so is consistent with , and follows from,  our legal mandate and p roper 
economic valuation of LCA lost sales. Prior arbitration decisions provide no material reason to adopt 
a different approach. Any differences that arise between our valuation methodology and 
methodologies adopted in prior decisions are a function of the circumstances present in  this 
proceeding, including with regard to  what the underlying legal provisions require us to value in the 
context of the facts of this dispute.  
6.3.3.2.2   Temporal assignment of the value of impedance to the 2011 -2013 Reference 
Period  
6.115.   Turning to the issue of whether it is reasonable to temporally assign the  value of impedance 
to the 2011 -2013 Reference Period, we note as an initial matter that neither party argues that it is 
improper to temporally assign the value of the six instances of impedance to the 2011 -2013 
Reference Period (if impedance is considered  in its own right and separately from the temporal 
allocation of the five lost sales). The six instances of impedance were found to exist in the 2011 -2013 
Reference Period based on LCA deliveries that occurred in that time -frame. This method of 
identifying  impedance accords with the nature of impedance as described in Article  6.3(a) and (b). 
As already discussed above, these provisions refer to imports and exports, thus indicating that they 
are focused on the time at which physical transfers of goods occur.   
6.116.   All of the A380 deliveries upon which the impedance findings were based245 are the 
consequence of orders by the airlines concerned that were placed at an earlier point in time, which 
precedes the 2011 -2013 Reference Period.246 These orders were not determine d to constitute lost 
sales within the meaning of Article  6.3(c) in the prior compliance proceedings, however. There is 
therefore no legal basis on which we could properly determine the value of those orders in this 
proceeding. What we must value instead ar e the six instances of impedance that occurred during 
the 2011 -2013 Reference Period. Those six instances of impedance caused identifiable economic 
harm to the United  States  between 2011 and 2013. As far as the quantification of that harm is 
concerned, it in our view corresponds to the value of the additional Boeing LCA that would have 
been delivered to the six geographic markets in question, during the 2011 -2013 Reference Period, 
had no impedance occurred.  
6.117.   For these reasons, we agree with the parties and t emporally assign the economic value of 
the six instances of impedance, and more concretely the value of the corresponding counterfactual 
Boeing LCA deliveries to the relevant geographic markets, to the 2011 -2013 Reference Period, 
during which the deliverie s would have occurred.  
 
245 These deliveries are contained in Table  12 below.  
246 This information regarding the times of the orders underlying the deliveries upon which the 
impedance findings were based is derived from Exhibits EU -79 and EU -125 (HSBI) -132 (HSBI).  WT/DS 316/ARB 
 
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  6.3.3.2.3   Temporal assignment of the value of both lost sales and impedance to 
the 2011 -2013 Reference Period  
6.118.   We recall that the European  Union 's overall argument is that the Arbitrator cannot temporally 
assign both the value of lost sales and  impedance to the 2011 -2013 Reference Period. Having 
determined above that it is reasonable to temporally assign the value of the five lost sales and the 
six instances of impedance to the 2011 -2013 Reference Period, when considering each in isolation 
from the other, we thus proceed to consider whether it is permissible to assign the value of both the 
lost sales and impedance to the 2011 -2013 Reference Period when considering them together.  
6.119.   At the outset, we note that Articles 5 and 6 of the SCM  Agreement  describe multiple kinds 
of adverse effects. Article  7.10 therefore clearly envisions that an arbitrator may assess multiple 
kinds of different adverse effects, the "degree and nature " of which may differ. While the 
Appellate  Body has noted that there is pote ntial overlap between the concepts of lost sales and 
impedance, "in that both phenomena relate to a firm 's sales ", it has "stressed the distinct features 
of market displacement and impedance claims, compared with significant lost sales, rejecting the 
notion of a 'dependent relationship ' between them ".247 
6.120.   We further note that there is no actual overlap between the five lost sales and six instances 
of impedances determined to exist in the 2011 -2013 Reference Period. That is, the Arbitrator counts 
the value of n o counterfactual Boeing LCA twice in determining the maximum level of Annual 
Suspension. This is so because none of Airbus LCA deliveries that occurred as a result of the five 
lost sales underlie any of the six instances of impedance. Moreover, we note tha t, following from 
this, none of the counterfactual Boeing LCA deliveries that would have occurred as a result of the 
five lost sales (had Boeing won them) are valued as counterfactual Boeing LCA deliveries that were 
impeded in the six relevant geographic m arkets.  
6.121.   We also consider the European  Union 's analogy to accounting practices in the private sector 
to be inapposite. It may be the case, as the European  Union  asserts, that companies  in the private 
sector  would assign the value of goods that they sell to the time of the order or the resulting  
deliveries , but not both. However, we operate under a legal framework that is different from the one 
applicable to such companies. Our mandate is to value the adverse effects determined to exist, 
which in this proceed ing encompass both lost sales and impedance.  
6.122.   We thus see no reason to find that temporally assigning the value based on the time of order 
in the case of lost sales and based on the time of delivery in the case of impedance, is "inconsistent ", 
as the Europ ean Union  argues . Insofar as the temporal assignment of the value of these two types 
of adverse effects differs, this reflects their different nature. Consequently, the underlying findings 
that provide the basis for the United  States  Article  22.2 request and this arbitrat ion proceeding lead 
us to value the five lost sales by reference to the time of order and the six instances of impedance 
by reference to the time of delivery. On that basis, we find that it is proper to assign both the value 
of lost sales (based on counter factual Boeing orders) and impedance (based on counterfactual 
Boeing deliveries) to the 2011 -2013 Reference Period.  
6.3.3.3   Inclusion of both lost sales and impedance in determining the maximum level of 
Annual Suspension: "Double -counting " 
6.123.   The European  Union  argue s that if the Arbitrator determines a level of Annual Suspension 
based on the value of both the lost sales and impedance determined to exist during the 2011 -2013 
Reference Period, this would result in impermissible "double -counting ". That term, according t o the 
European  Union , refers to "the risk of counting the same lost sales transaction twice – once as a lost 
sale (in the form of orders), and once as an instance of impedance (in the form of deliveries) ".248 
 
247 Panel Report, EC and certain member States – Large Ci vil Aircraft (Article 21.5 – US), para.  6.1808 
(quoting Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1240). (fn  omitted) See also 
Panel Reports, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras.  6.1807-6.1809 
(rejecting European Union's argument that impedance and displacement must be predicated on findings of lost 
sales and quoting Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1241 in support of its 
reasoning); and EC and ce rtain member States – Large Civil Aircraft , para.  7.1751 (rejecting European Union's 
argument that displacement and impedance must be demonstrated "on a sale by sale basis").  
248 European Union's response to Arbitrator question No. 56, fn  38. 
 WT/DS 316/ARB 
 
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  The European  Union  asserts that this risk arises because "a given order in one year will turn into a 
delivery a few years later ".249 Thus, the European  Union  asserts that Annual Suspension based on 
both lost sales and impedance would capture the value of a "lost sale " in the form of LCA orders in 
the year in which the order occurred, and then capture the value of the same transaction again when 
the deliveries resulting from the lost order occur as instances of impedance in the years in which the 
deliveries occur (usually a few years after the order). The Eu ropean  Union  agrees with the 
United  States , however, that there is no double -counting within the 2011 -2013 Reference Period, 
i.e. none of the five lost sales resulted in any of the deliveries that occurred in the 2011 -2013 
Reference Period upon which the i mpedance findings were based.250  
6.124.   The United  States  argues that no impermissible double -counting, as the European  Union  
uses that term, arises if the Arbitrator values both the five lost sales and six instances of impedance 
in the 2011 -2013 Reference Period and determines a level of Annual Suspension based on that 
amount. In the United  States ' view, this is so because (a) none of the orders associated with the 
lost sales in the 2011 -2013 Reference Period resulted in any of the deliveries evidencing impedance 
in the 2011 -2013 Reference Period , (b) lost sales and impedance are distinct forms of adverse effects 
under Article  6 of the SCM  Agreement , and (c) there is no textual basis in the SCM  Agreement  for 
offsetting one form of adverse effect against another in the manner the European  Union  advocates. 
The United  States  further notes that its methodology makes no assumptions about the geographic 
markets in which lost sales and impedance would occur in years after 2013, and thus there is no 
basis upon which to find  that double -counting will arise even if the Arbitrator were to consider post -
2013 adverse effects in determining the maximum level of countermeasures.251 
6.125.   The Arbitrator notes that double -counting, as the European  Union  uses that term, could only 
arise if the Arbitrator 's determination of the maximum level of Annual Suspension were to include 
both the value of an LCA order at issue that represents a lost sale and the value of an LCA delivery 
representing impedance and fl owing from that same previous lost sale.252 No such situation arises 
in this proceeding.  
6.126.   As explained above in section  6.3.1 , we determine the maximum level of Annual Suspension 
with sole reference to the five lost sales and six instances of impedance determ ined to exist in the 
2011-2013 Reference Period. Further, none of the orders associated with the five lost sales in the 
2011-2013 Reference Period resulted in any of the deliveries evidencing the six instances of 
impedance in the 2011 -2013 Reference Period .253 Thus, we do not determine the maximum level of 
Annual Suspension with respect to any LCA orders and deliveries with respect to which double -
counting may arise. We accordingly reject the European  Union 's argument concerning the risk of 
double -counting.  
6.3.3.4   Setting of an end -date for countermeasures based on counterfactual Boeing 
deliveries resulting from the adverse effects determined to exist  
6.127.   The European  Union  argues that countermeasures must have a pre -determined end -date 
that corresponds to the date of th e final counterfactual Boeing LCA delivery related to the adverse 
effects determined to exist in the 2011 -2013 Reference Period. Specifically, the European  Union  
 
249 European Unio n's written submission, paras.  191-195. See also European Union's responses to 
Arbitrator question No. 13, paras.  299-300, and No. 62, para.  188 (asserting that the United  States' request 
for Annual Suspension is based on the notion that lost sales and imp edance caused by subsidies continue after 
2013).  
250 European Union's responses to first set of Arbitrator questions, para.  53 and fn  58; and responses to 
Arbitrator question No. 13, No. 23, para.  380, No. 24, paras.  385 and 389, No. 57, paras.  123-132, and 
No. 107, paras.  190-192. 
251 United  States' written submission, paras.  129-131 and 159 -162; response to Arbitrator question 
No. 19, para.  29; and comments on the European Union's response to Arbitrator question No. 107, paras.  168-
174. 
252 We note that "double -counting" is thus distinct from "over -counting". The former issue arises in this 
context only if the Arbitrator grants countermeasures in the form of Annual Suspension  based on the value of 
both lost sales and impedance in the 2011 -2013 Reference Period. The latter arises under any structure of 
countermeasures  that is granted based on the value of both lost sales and impedance in the 2011 -2013 
Reference Period.  
253 United  States' written submission, para.  162; and European Union's respon se to Arbitrator question 
No. 24, para.  385. Our analysis of the data on the record provides no basis upon which to question the parties' 
shared position in this context.  
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  notes that "final delivery of an aircraft related to the specific adverse effects determined t o exist is 
expected for 2026. According to the European Union, this means that any authorization to impose 
countermeasures must also end no later than 2026 ".254  
6.128.   The United  States  argues that the European  Union 's argument fails because it "is based on 
the er roneous premise that the countermeasures in present and future years are meant to capture 
deliveries in those years of aircraft ordered in the specific 2012 and 2013 sales campaigns that 
provided the basis for the significant lost sales findings ".255 
6.129.   The Arb itrator notes that the European  Union 's argument would have us set a firm end -date 
for countermeasures based on expected final counterfactual delivery dates. This argument rests on 
the validity of other European  Union  arguments that concern the appropriate ness of granting 
countermeasures in the form of Annual Suspension and that we rejected in preceding sections . We 
also recall that we do not in this proceeding  ultimately  value the counterfactual  deliveries of aircraft 
originating in lost sales found to exi st in the 2011 -2013 Reference Period at the time of their delivery. 
The date of the last counterfactual delivery of a relevant Boeing LCA that the European  Union  expects 
to take place therefore does not provide, under our valuation methodology, a relevant end-date. As 
explained, the specific end -date for any countermeasures that the United  States  imposes  in the form 
of Annual Suspension will be determined by such possible developments as new DSB -adopted 
findings confirming that the European  Union  has brough t itself into conformity or a mutually agreed 
solution reached by the parties. We accordingly reject the European  Union 's argument.  
6.3.3.5   Exclusion of  the value of Boeing LCA components produced outside the 
United  States   
6.130.   As noted in section 6.1, the United  States  requests countermeasures in the form of Annual 
Suspension, the level of which is based on the value of the additional Boeing LCA that would h ave 
been (a) sold had Boeing won the lost sales and (b) delivered had Boeing not suffered impedance.  
6.131.   The European  Union  argues that the Arbitrator cannot consider the total value of such Boeing 
LCA in determining the maximum level of countermeasures. Rathe r, according to the 
European  Union , the Arbitrator should exclude, from the value of any Boeing LCA that the Arbitrator 
includes in its calculation of the level of countermeasures, the value of components incorporated 
into those Boeing LCA provided by "suppliers from other Members ".256 In support of this position, 
the European  Union  notes that the language contained in Article  5(c) of the SCM  Agreement  
indicates that adverse effects in the form of "serious prejudice " are by definition tied to the manner 
in wh ich they specifically "affect the interests of 'another Member ', rather than all Members ".257 
Therefore, taking into consideration this language, the European  Union  asserts that the Arbitrator 
should exclude from the level of countermeasures the value of adv erse effects to the interests of 
Members other than the United  States , i.e. the value of components incorporated into those Boeing 
LCA added by "suppliers from other Members ". According to the European  Union , this is so even 
though the adverse effects find ings in the prior compliance proceedings pertain to LCA, rather than 
components of LCA, because Members other than the United  States  suffered economic harm as a 
result of lost sales or impedance of Boeing aircraft.258  
6.132.   The European  Union  claims that the deci sion of the arbitrator in US – Upland Cotton 
(Article  22.6 – US II)  supports its position. The European  Union  asserts that, in that dispute, the 
compliance panel and the Appellate  Body determined that "the effect of the subsidies at issue was 
significant price suppression within the meaning of Article  6.3(c) of the SCM  Agreement  in the world 
 
254 European Union's written submission, para.  148. (fn  omitted) See also European Unio n's written 
submission, paras.  143-148 and 370 -372. 
255 United  States' written submission, para.  139. 
256 The European Union suggests that these are suppliers whose "locus of production activity and actual 
value creation" is outside the United  States. (Europea n Union's response to Arbitrator question No. 95, 
para. 18). Further, the European Union argues that neither the ownership structure of the firm producing the 
input nor the "origin" of the input as determined by a Member based on its own rules of origin ca n be used as 
metrics for determining whether the inputs are non -US inputs. (European Union's response to Arbitrator 
question No. 95, paras.  16-18). 
257 European Union's written submission, para.  356 (citing Decision by the Arbitrator, US – Upland 
Cotton (Art icle 22.6 – US II) , para.  4.75). (emphasis original)  
258 European Union's response to Arbitrator question No. 49, para.  487.  
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  market for upland cotton constituting 'present ' serious prejudice to the interests of Brazil within the 
meaning of Article  5(c) of the SCM  Agreement ". The arbitrator, according to the European  Union , in 
determining the level of countermeasures for Brazil, "limited the level of countermeasures to reflect 
only the extent to which Brazil was actually affected … [and] determined that it would not consider 
advers e effects by worldwide cotton producers as a result of the [ United  States  subsidies at 
issue] ".259 The European  Union  submits that this Arbitrator should apply the same standard, i.e. limit 
the level of countermeasures to the adverse effects sustained by the  United  States  and exclude from 
its calculation adverse effects sustained by other WTO Members.260 
6.133.   Additionally, the European  Union  argues that if the level of countermeasures that the 
United  States  will be authorized to take is not limited to the adverse ef fects sustained by the 
United  States , this could result in double remedies against the European  Union . The European  Union  
asserts, for example, that Japan – a major supplier of fuselage and wing components for Boeing LCA 
– could bring a dispute against the  European  Union  that it sustained adverse effects resulting from 
lost sales or impedance of Boeing aircraft, which would have incorporated those Japanese 
components. The European  Union  submits that if Japan succeeded in such a claim, it could potentially 
receive authorization to take countermeasures against the European  Union  vis-à-vis the value of 
those Japanese components, even though the United  States  had already received authorization to 
take countermeasures in an amount that included the value of those  same components as 
incorporated into Boeing LCA as a result of this proceeding.261 
6.134.   The United  States  rejects the European  Union 's request for exclusion of the value of non -
United  States  (US) inputs from the value of Boeing LCA for the purpose of calculating  the level of 
countermeasures. The United  States  advances three main arguments in support of its position. First, 
the United  States  argues that the adopted findings in this dispute pertain to LCA, not components 
of LCA. The United  States  therefore submits that the European  Union 's approach cannot be squared 
with the findings adopted by the DSB.262  
6.135.   Second, the United  States  argues that the premise of the European  Union 's argument on 
double remedies, as the European  Union  uses that term, was rejected by the arbitrator in 
EC – Bananas III (US) (Article  22.6 – EC). The United  States  submits that that arbitrator explained 
that "the theoretical issue of double counting raised by the European  Union  is avoided because 
Members ca nnot receive rights to impose countermeasures for these types of 'indirect ' upstream 
effects ".263 
6.136.   Finally, the United  States  notes that when it applies countermeasures to imports of goods 
from the European  Union , it will base its application of tariffs on th e entire value of the imported 
goods, without respect to the extent to which they incorporate non -European -Union inputs. The 
United  States  thus submits that, to ensure an "apples -to-apples comparison ", the level of 
countermeasures must be stated as a value  of the adverse effects with respect to the entire value 
of relevant Boeing LCA as a product. According to the United  States , this should be done without 
regard to whether such Boeing LCA incorporate non -US inputs.264 
6.137.   Regarding this latter United  States ' argument, the European  Union  responds that any 
consideration related to how the United  States  intends to implement countermeasures is outside the 
mandate of this Arbitrator because it pertains to "the nature of the concessions or other obligations 
to be suspe nded", which Article  22.7 of the DSU bars the Arbitrator from considering.265  
6.138.   The Arbitrator notes that the question presented in this context is whether the value of 
components produced by "suppliers from [non -US] Members " and incorporated into Boeing LCA 
 
259 European Union's written submission, para.  358.  
260 European Union's written submission, paras.  358 and 361. The European Union ha s alternatively 
characterized the effect felt by Members other than the United  States from lost sales and impedance to Boeing 
aircraft as "adverse effects", "economic harm", "trade effects" and "lost revenues".  
261 European Union's response to Arbitrator qu estion No. 95, paras.  2-4. 
262 United  States' written submission, para.  262.  
263 United States' comments on the European Union's response to question No. 95, para. 5 (citing 
Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), paras. 6.6 -6.18). 
264 United  States' written submission, paras.  264-265. 
265 European Union's response to Arbitrator question No. 49, para.  493 (citing Decision by the Arbitrator, 
EC – Hormones (US) (Article 22.6 – US), para.  19). 
 WT/DS 316/ARB 
 
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  should be excluded from the value of Boeing LCA in determining the level of countermeasures that 
the DSB can authorize the United  States  to take.  
6.139.   Our mandate is to determine the level of "countermeasures … commensurate with the degree 
and nature of the adverse effects determined to exist ". In this dispute, the compliance panel and 
the Appellate  Body found that the European  Union  and certain of its member States had failed to 
comply with the DSB recommendations and rulings and, in particular, the obligati on under Article  7.8 
of the SCM  Agreement  "to take appropriate steps to remove the adverse effects or … withdraw the 
subsidy by continuing to be in violation of Articles 5(c) and 6.3(a) -(c) of the SCM  Agreement ".266 
The specific type of adverse effect that w as determined to exist was "serious prejudice " within the 
meaning of Article  5(c) in the forms of lost sales and impedance within the meaning of 
Article  6.3(a) -(c). 
6.140.   Article  5(c) provides that "[n]o Member should cause, through the use of any subsidy … 
adverse effects to the interests of other Members ", including "serious prejudice to the interests of 
another Member ". The adopted findings in this dispute indicate that the European  Union  "cause[d] " 
"serious prejudice " to the United  States ' "interests ". Those findings mention no other Members ' 
interests in this respect.267 Therefore, considering that the findings of the compliance proceedings 
provide the basis for this arbitration proceeding, we focus on the United  States ' interests in this 
proceeding.  
6.141.   We further  note that Article  6.3(a) -(c) provides that the specific types of serious prejudice 
contained therein arise with respect to a "like product of another Member ".268 The adopted findings 
on the specific types of serious prejudice in this dispute, i.e. lost sale s and impedance, pertain to 
LCA – which is the product at issue in this dispute.269 We further note that during the 2011 -2013 
Reference Period LCA were only produced by two Members, i.e. the European  Union  (Airbus) and 
the United  States  (Boeing).270 Therefore, the adverse effects determined to exist in this proceeding 
relate to one specific product, i.e. Boeing LCA.  
6.142.   In sum, the adverse effects determined to exist in this proceeding are those suffered by one 
Member, the United  States , and with referen ce to one product, Boeing LCA. We thus reject the 
European  Union 's position that the adverse effects in this proceeding can be considered to have been 
suffered by the United  States  and additional Members,  or with reference to any product other than 
Boeing LCA. We see no legal basis for considering any adverse effects possibly  suffered by other 
Members or determining the maximum level of countermeasures with reference thereto.271 
6.143.   Contrary to the European  Union 's suggestion, we consider the result reached in US – Upland 
Cotton (Article  22.6 – US II)  consistent with our interpretation of our mandate. In that dispute, the 
findings in the underlying compliance proceedings were based on a determination that the subsidies 
at issue caused significant price suppression  within the meaning of Article  6.3(c) in the world market 
for upland cotton, constituting serious prejudice to the interests of Brazil within the meaning of 
 
266 Appellate  Body Report, EC and certain mem ber States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.43; and Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 7.2. 
267 The compliance panel and the Appellate  Body found that the LA/MSF subsidies at issue are a genuine 
and substantial cause of significant lost sales and impedance "constituting serious prejudice to the interests of 
the United  States within the meaning of Article 5(c) of the SCM  Agreement". (Appellate  Body Report, EC and 
certain member States  – Large Civil Aircraft (Article 21.5 – US), paras.  5.716, 5.731, 5.742, 6.31, 6.37, 6.42, 
and 6.43; and Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  7.1.d.xiv , 7.1.d.xv , and 7.1.d.xvi ). 
268 See Article 6.3 of the SCM  Agreement.  
269 Panel Reports, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 1.32; 
and EC and certain member States – Large Civil Aircraft , para.  2.1. We note that in the compliance 
proceedings, the  panel and Appellate  Body found that there were three relevant LCA product markets, i.e. 
single -aisle, twin -aisle, and VLA. This does not change the fact, however, that the overall product at issue is 
LCA. 
270 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  6.1215 
(noting that "as it was during the original proceeding, the LCA industry continues to be characterized by what 
is effectively an Airbus -Boeing duopoly"). We note that thi s Airbus -Boeing duopoly would also be the situation 
in the relevant counterfactual. (See paragraph 6.79 above).  
271 We also note that it is not within our mandate to determine whether lost sales or impedance of 
Boeing LCA resulted in "economic harm" to Membe rs other than the United  States.  
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  Article  5(c) of the SCM  Agreement .272 Thus, the adverse effects determined to exist in that 
proceedin g were those suffered by one Member, Brazil, and with reference to one product, upland 
cotton , which was the like product within the meaning of Article  6.3(c).273 On that basis, the 
arbitrator determined the level of countermeasures with reference to the eco nomic impact of the 
price suppression on upland cotton from Brazil274, and excluded from the level of countermeasures 
the economic impact of the price suppression for upland cotton on Members other than Brazil. The 
arbitrator conducted no inquiry into the va lue of any non -Brazilian cotton inputs (e.g. foreign 
fertilizers used to grow Brazilian upland cotton) and did not exclude the value of such inputs from 
the level of countermeasures.  
6.144.   Furthermore, we are aware of no previous arbitrator that has excluded th e value of inputs 
not produced in the territory of the complaining party from the value of the product(s) at issue in 
determining the level of countermeasures or the level of suspension of concessions or other 
obligations. Indeed, one arbitrator suggested that it would be improper to do so. In  EC – Bananas 
III (US) (Article  22.6 – EC)275, the United  States  submitted that the arbitrator should take into 
account the value of US inputs used in Latin American banana production (e.g. United  States  
fertilizer, pest icides and machinery shipped to Latin America and United  States  capital or 
management services used in banana cultivation there) in determining the level of nullification or 
impairment sustained by the United  States . The arbitrator, however, declined to at tribute the value 
of intermediate inputs to the Member (the United  States ) that was producing or exporting such 
inputs in its calculation of the level of suspension, basing its reasoning on considerations relating to 
rules of origin.276 The arbitrator reasoned that it was evident from  applicable  rules of origin that the 
place of origin of the end product, bananas, is the country where the bananas were grown.277 More 
pertinent to the circumstances of that proceeding, the arbitrator noted th at the right to seek redress 
under the DSU for nullification or impairment caused with respect to the final product at issue lies 
with the Members that were  the countries of origin of that final product, and not with any other 
Member supplying certain inpu ts for such products. Consequently, it found that "there is no right 
and no need under the DSU for one WTO Member to claim compensation or request authorization to 
suspend concessions for the nullification or impairment suffered by another WTO Member with 
respect to goods bearing the latter 's origin or service suppliers owned or controlled by it ".278 In 
short, once the final product was determined to "originate " in a certain Member, the entire value of 
that product was assigned to that Member for the purpose of calculating the level of nullification or 
impairment. We thus note that a previous arbitrator, when confronted with a position similar to the 
European  Union 's argument here, rejected that position.  
6.145.   Fundamentally , the European  Union 's argument hinges on  the notion that it is improper to 
include in the assessment of the maximum level of countermeasures the value of a Boeing LCA that 
is not attributable to US inputs. Taken to its logical end, this argument would have the United  States  
trace the value of Bo eing LCA back through the supply chain to the level of raw materials and 
ascertain the source of each of the hundreds of components, as we could apportion countermeasures 
 
272 Appellate  Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para.  448(c); and Panel Report, 
US – Upland Cotton (Article 21.5 – Brazil) , para.  10.256.  
273 Panel Reports, US – Upland Cotton (Article 21.5 – Brazil) , para. 10.42; and US – Upland Cotton , 
fn 258. 
274 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II) , paras.  4.88 and 4.89 (noting 
that the findings in the compliance proceedings involve "'serious prejudice' to the interests of Brazil 
specific ally").  
275 We note that this was an arbitration that was conducted exclusively under Article 22.6 of the DSU. 
However, as noted in para graph  3.4 above, to the extent that we are governed by Article 22.6 as well, we find 
the decision by the arbitrator in EC– Bananas III (US) (Article 22.6 – EC) relevant to our determination.  
276 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), paras.  6.12–6.13. 
277 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para.  6.13. It is worth  quoting 
in full the reasoning of the arbitrator:  
WTO Members typically determine the origin of agricultural products based on the place of 
production. In principle, every banana has the origin of the country where it was grown. For 
purposes of WTO rules it is irrelevant whether goods or services (e.g. fertilizer, machinery, 
pesticides, capital and management services) used as intermediate inputs in the cultivation of 
bananas and their delivery up to the f.o.b. stage are of US origin even if US content sho uld 
amount to a significant part of the end -product's value. Also, under US rules of origin bananas 
grown in Puerto Rico or Hawaii are US products regardless of the percentage of foreign input 
incorporated in them or used for their cultivation.  
278 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para.  6.14. 
 WT/DS 316/ARB 
 
- 63 - 
 
  to the United  States  only insofar as it was the source of such inputs.279 This would ma ke the exercise 
of calculating the level of countermeasures "time consuming and exceedingly complicated ", as the 
European  Union  itself notes.280 We have difficulty squaring this argument with the expeditious nature 
of Article  22.6 arbitration proceedings, es pecially in the light of the fact that LCA production is not 
unique in relying on complex and dynamically optimized international supply chains.  
6.146.   Additionally, we observe that were we to exclude the value of  non-US LCA components from 
the maximum level of c ountermeasures, we would weaken the effectiveness of the WTO dispute 
settlement mechanism and diminish the compliance -inducement function of countermeasures. 
Indeed,  the more internationalized the production of an export good is, the more difficult it woul d 
be, in practice, for the Member exporting the final good to induce compliance through 
countermeasures.281 In our view, this would undermine the  security and predictability of the 
multilateral trading system.  
6.147.   Finally, we note the European  Union 's concern about double remedies, arising from  other 
Members whose producers supply inputs to Boeing for incorporation into Boeing LCA bringing claims 
against  it. In the present dispute, no other Member has come forward to challenge the subsidies at 
issue since the United States  filed its request for consultations in 2004. Moreover, the risk of input -
producing Members bringing their own disputes against the same responding party (i.e. the party 
that maintains a WTO -inconsistent measure against the final product that i ncorporates the inputs) 
existed in other disputes in which arbitrations under Article  22.6 were conducted , and we are not 
aware of any specific adjustments made by those arbitrators in view of that risk . Finally, w e recall 
that one previous arbitrator expl ained that producers of intermediate inputs cannot "claim 
compensation or request authorization to suspend concessions for the nullification or impairment 
suffered by another WTO Member with respect to goods bearing the latter 's origin or service 
suppliers  owned or controlled by it ".282  
6.148.   In the light of the above considerations, we decline to exclude the value of LCA components 
produced by suppliers from outside the United  States  and incorporated into Boeing LCA from the 
total value of Boeing LCA in determini ng the level of countermeasures that the DSB can authorize 
the United  States  to take.  
6.3.4   Technical European  Union  arguments against  the United  States ' methodology  
6.149.   Section  6.3.4 examines more technical arguments that the European  Union  has raised 
regarding the  United  States ' methodology. It proceeds in four parts. First, it summarizes the 
United  States ' technical approach to valuing the adverse effects determined to exist. Second,  it 
addresses certain preliminary considerations before turning to, third and fina lly, the United  States ' 
valuation of lost sales and impedance.   
 
279 We note that in the present proceeding, we would, in at least some cases, need to base our 
determination on information about the inputs used in the manufacture of Boeing  LCA and their sourcing 
outside the United  States from several years ago, i.e. the 2011 -2013 Reference Period or even beforehand.  
280 European Union's response to Arbitrator question No. 95, para.  23. Foreshadowing this difficulty, the 
European Union submits  that the Arbitrator should, therefore, limit itself to the locus of production activity of 
the "first tier suppliers" to Boeing LCA, i.e. components manufacturers whose goods and services are directly 
used by Boeing in the final assembly of its LCA, in de termining the nationality of the inputs. (European Union's 
response to Arbitrator question No. 95, para.  22). (emphasis omitted) However, we find such a demarcation at 
the level of first tier suppliers to be arbitrary. Intermediate inputs to a Boeing LCA t hat are manufactured by a 
Member other than the United  States could be processed from raw materials that are supplied by the 
United  States. In such a scenario, based on the European Union's approach, the entire value added would be 
treated as coming from n on-US inputs although it contains raw materials from the United  States.  
281 Under the European Union's suggested approach, only well -coordinated WTO dispute settlement 
proceedings by various input -supplying Members along with the United  States as the produce r of the final good 
could result in countermeasures at the level that the United  States is seeking in the present proceeding (i.e. a 
level that is based on the total value of the additional Boeing LCA that would have been sold or delivered).  
282 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para.  6.14. That arbitrator 
further noted that such overlapping claims would give rise to the issue of double counting and should therefore 
not be allowed.  
 WT/DS 316/ARB 
 
- 64 - 
 
  6.3.4.1   Summary of the United  States ' technical approach to valuing the adverse effects 
determined to exist  
6.150.   By way of background, section 6.3.4.1  describes the United  States ' technical approach to 
valuing the adverse effects determined to exist during the 2011 -2013 Reference Period. The 
Arbitrator in a subsequent section examines the reasonableness of the United  States ' technical 
valuation.   
6.151.   The United  States ' technical appro ach consists of three steps.283 The first and second steps, 
respectively, compute the value of the two forms of adverse effects that were determined to exist 
in the compliance proceedings, i.e. lost sales and impedance.284 The last step annualizes the sum of 
the values of lost sales and impedance expressed in US dollar  terms of a given year in the Reference 
Period, namely 2013.285  
6.152.   The average annual level of adverse effects determined to exist ( 𝐴𝐸𝐷𝑇𝐸 ) for a given 
Reference Period expressed in US dollar  terms of a given year 𝑇 proposed by the United  States  can 
be summarized as follows286: 
𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐴𝐸𝐷𝑇𝐸𝑅𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒  𝑃𝑒𝑟𝑖𝑜𝑑𝑖𝑛 𝑦𝑒𝑎𝑟 𝑇 𝑈𝑆𝐷=(∑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷
𝑜𝑟𝑑𝑒𝑟
𝑦𝑒𝑎𝑟 𝑡×𝑃𝑃𝐼𝑦𝑒𝑎𝑟 𝑇
𝑃𝑃𝐼𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 
+∑𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦
𝑦𝑒𝑎𝑟 𝑠×𝑃𝑃𝐼𝑦𝑒𝑎𝑟 𝑇
𝑃𝑃𝐼𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠
)  
×12
𝑀𝑜𝑛𝑡ℎ𝑠 𝑖𝑛 𝑅𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑃𝑒𝑟𝑖𝑜𝑑 
 (1)  
 
where  𝐴𝐸𝐷𝑇𝐸 : average annual level of adverse effects determined to exist  
 𝑇: base/reference year  
 𝑡:  order month/year in the Reference Period (i.e. December 2011, year 2012 or year 2013)  
 𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷: lost sales value in order year 𝑡 expressed in US dollar  terms of 
order month/year 𝑡 
 𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷: imped ance value in delivery month/year 𝑠 expressed in US 
dollar  terms of delivery month/year 𝑠 
 𝑃𝑃𝐼𝑡: PPI for CA Manufacturing in order month/year 𝑡 
 𝑀𝑜𝑛𝑡ℎ𝑠 𝑖𝑛 𝑅𝑃: number of months in the Reference Period (i.e. 25 months).  
 
6.153.   As shown in Equation (1), the United  States  proposes to first calculate the value of lost sales 
and then the value of impedance for the 2011 -2013 Reference Period.287 In other words, the 
United  States  proposes to calculate the value of lost sales and impedan ce separately for 
December  2011 (expressed in US dollar  terms of December 2011), the year 2012 (expressed in 
2012 US dollar  terms) and the year 2013 (expressed in 2013 US dollar  terms). Each of these three 
lost sales and impedance values represents, respec tively, the value of the additional LCA that Boeing 
would have sold (in the case of lost sales) or delivered (in the case of impedance) in the 
counterfactual in December 2011, the year 2012 or the year 2013:  
𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷=∑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷
𝑖 (2)  
 
283 Unless specified otherwise, this sectio n describes the main methodology proposed by the 
United  States to calculate lost sales and impedance. Alternative approaches proposed by the United  States in 
response to the European Union's arguments are discussed in sections 6.3.4.3  and 6.3.4.4  below.  
284 United  States' methodology paper, paras.  32-53 and 82 -89. 
285 United  States' methodology paper, paras.  90-100. 
286 The symbol  in Equation (1) corresponds to the sum operator for each month/year  𝑡 in the reference 
period: ∑𝑥𝑡=𝑥2012+𝑥20132013
𝑡=2012 . 
287 United States' methodology paper, para.  30. WT/DS 316/ARB 
 
- 65 - 
 
  𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷=∑𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒𝑀𝑎𝑟𝑘𝑒𝑡 𝑘,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
𝑘 (3)  
 
where  𝑖: airline 𝑖 whose order was lost to Airbus in the month/year 𝑡 
 𝑘: geographic market 𝑘 in which Airbus aircraft were delivered in the month/year 𝑠. 
 
6.154.   The United  States  proposes to apply countermeasures on an annualized basis, and for this 
reason computes the average annual level of adverse effects  determined to exist. However, before 
computing this annual average, the United  States  expresses the sum of lost sales and impedance 
values in US dollar  terms of a same year by applying the ratio of the PPI  for CA  Manufacturing  in the 
common base year 𝑇 and the PPI for CA Manufacturing in the order month/year 𝑡 or in the delivery  
month/year 𝑠. The United  States  express es the level of adverse effects determined to exist in US 
dollar  terms of the last year in the Reference Period, namely 2013 ( 𝑇=2013).  
6.155.   For each step of the U nited States'  approach, the European  Union  formulates several 
criticisms. These criticisms are reviewed below  in section s 6.3.4.2 , 6.3.4.3 , and 6.3.4.4 . 
6.3.4.1.1   The United  States ' valuation of lost sales  
6.156.   According to the United  States , the scope of the valuation of lost sales in this proceeding is 
determined by the findings regarding lost sales from the compliance proceedings. Five lost sales 
were identified in the compliance proceedings, involving three Airbus LCA models within the 
A350XWB and A380 model "families", namely the A350XWB -900 (Singapore Airways lost sale), the 
A350XWB -1000 (Cathay Pacific Airways and United Airlines lost sales), and the A380 (Emirates and 
Transaero Airlines lost sales).288 
6.157.   To value the lost sale s in the counterfactual, the United  States  first identifies the Boeing 
models that compete most closely with the three Airbus LCA models involved in the lost sales. The 
United  States  identifies the closest competing Boeing models in the lost sales context as indicated 
in Table 1.289 
Table 1: Airbus and closest competing Boeing models according to the United  States290 
Airbus model  Closest competing Boeing model  
A350XWB -900 787-10 
A350XWB -1000 777-300ER  
A380 747-8I 
 
6.158.   The United  States  proceeds with specifying the number of orders that Boeing would have 
secured for the closest competing Boeing models in the counterfactual. In the context of the lost 
sales, the United  States  assumes that, absent the LA/MSF subsidies at issue , Boeing would have 
sold and delivered  the same number of LCA as Airbus actually sold. Table  2 reproduces the 
counterfactual orders of Boeing LCA on which the United  States  bases its valuation. According to the 
United  States , its proposed order numbers are  consistent with the Appellate  Body's findings on lost 
sales in the compliance proceedings.291  
 
288 United  States' methodology paper, paras.  26-27. 
289 United  States' methodology paper, paras.  32-33. 
290 United  States' methodology paper, para.  33 (citing Panel Report, EC and certain member States – 
Large Civil Aircr aft (Article 21.5 – US), paras.  6.1308, 6.1359 -6.1360, 6.1370, 6.1792, and 6.1410; and Airbus 
Presentation by John Leahy, COO Customers, Commercial update – Global Investor Forum,  (Exhibit USA -2)). 
291 United  States' methodology paper, para.  32. WT/DS 316/ARB 
 
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  Table 2: Counterfactual Boeing twin -aisle and VLA orders proposed by the United  States  
Product 
market  Lost sales 
campaign  Airbus  
model  Closest Boeing 
model  Order 
year Number of 
counterfactually 
ordered aircraft  
Twin-Aisle Cathay Pacific 
Airways  A350XWB -1000 777-300ER  2012 10 
Very La rge 
Aircraft  Transaero Airlines  A380 747-8I 2012 4 
Twin-Aisle Singapore Airways  A350XWB -900 787-10 2013 30 
Twin-Aisle United Airlines  A350XWB -1000 777-300ER  2013 10 
Very La rge 
Aircraft  Emirates  A380 747-8I 2013 50 
 
6.159.   The United  States  proposes to value each lost sale in the year in which the corresponding 
order was lost, using only such information as would have been available to Boeing at the time that 
the order would have been won by Boeing. The United  States  defines the value of eac h lost sale as 
the discounted value, at the time that the order was lost, of the expected net delivery price of the 
counterfactual Boeing aircraft at a scheduled future delivery date.292 
6.160.   To determine the counterfactual pricing terms for each lost sale at iss ue, the United  States  
uses the contractual pricing terms contained in a firm order for the closest competing Boeing model 
that the same airline actually placed, [[***]], within one or two years of the sale lost to Airbus. 
According to the United  States , such Boeing comparator orders, [[***]], provide the best available 
indication of the net delivery prices that the customers involved in the lost sales would have paid for 
the closest competing Boeing model in the counterfactual. Each of these comparator orde rs, [[***]], 
specifies the aircraft's gross price as well as the price concessions and the escalation formula. The 
gross price is expressed in base -year US dollar  terms. However, the base year cannot be a later 
year than the order year. The aircraft net pr ice, also expressed in base -year US dollar  terms, is the 
difference between the gross price and the price concessions (expressed in base -year US dollar  
terms).293 
6.161.   Since many years can pass between the time of order and the time of the deliveries, aircraft 
purchase contracts contain a [[***]] escalation formula. That formula determines the monthly 
escalation factor that adjusts, for a given (future) delivery date, the base -year prices for increases 
in labour and material costs resulting from inflation and othe r economic changes that are expected 
to have occurred by that delivery date. The [[***]] escalation formula agreed upon between Boeing 
and the respective airline is based on [[***]]. For each lost sales campaign at issue, the 
United  States  applies the esca lation factors to transform the net delivery prices (expressed in base -
year US dollar  terms) into net delivery prices expressed in delivery -year US dollar  terms. The 
United  States  proposes to use [[***]] escalation factor s [[***]] reported in the comparator order 
[[***]] and the contractually agreed delivery schedule contained in Airbus' respective contract.294 
6.162.   According to the United  States , the net delivery prices in delivery -year US dollar  terms reflect 
the expected value of the a ircraft that Boeing would have sold, but do not reflect the value of the 
delivered aircraft at the time that the sale was lost. Observing that "economic activity tomorrow is 
not as valuable as economic activity today", the United  States  proposes to apply a  discount rate to 
determine the discounted value of the Boeing LCA at the time of the relevant lost sale had Boeing 
won the orders.  The United  States  proposes the interest rate on United  States  ten-year treasury 
bonds (T-Bond rate) as the appropriate disco unt rate because it represents the interest rate on US 
sovereign debt and thus reveals the "price the United  States  has had to pay to transfer economic 
activity from the future to the present". Dividing the projected aircraft net delivery prices (expressed  
in delivery -year US dollar  terms) by the discount factor provides the discounted value (sometimes 
 
292 United  States' methodology paper, paras.  52-53. 
293 United  States' methodology paper, para.  46; and Boeing Declaration , (Exhibit USA -5 (BCI)).  
294 United  States' methodology paper, paras.  42-43; response to Arbitrator question No. 135, para. 158; 
Boeing Declaration,  (Exhibit USA -5 (BCI)); Cathay Pacific 777 -300ER Order Information,  (Exhibit USA -12 
(HSBI)); Transaero 747 -8I Order Information (Exhibit USA -13 (HSBI)); Singapore Airlines 787 -10 Order 
Information , (Exhibit USA -14 (HSBI)); United 777 -300ER Order Informatio n, (Exhibit USA -15 (HSBI)); and 
Emirates [[***]] Information, (Exhibit USA -16 (HSBI)).  
 WT/DS 316/ARB 
 
- 67 - 
 
  referred to as the "present value") of scheduled future aircraft deliveries expressed in US dollar 
terms  of the corresponding order year.295 
6.3.4.1.2   The United  States ' valuation of impedance  
6.163.   Turning to the valuation of impedance, the United  States  contends that in this proceeding 
the scope of its valuation of impedance is determined by the impedance findings from the compliance 
proceedings, which involve Airbus A380 del iveries to six geographic markets (Australia, China, the 
European  Union , Korea, Singapore and the United Arab Emirates).296 
6.164.   Having identified the Boeing 747 -8I model as competing most closely with the Airbus A380 
model, the United  States  specifies the number  of additional 747 -8I aircraft that would have been 
delivered to the six geographic markets in the counterfactual during the 2011 -2013 Reference 
Period. The United  States  assumes that absent the LA/MSF subsidies at issue, Boeing would have 
delivered the sa me number of additional 747 -8I aircraft to the six geographic markets during the 
2011-2013 Reference Period as the number of A380 aircraft that Airbus actually delivered to the six 
geographic markets during the same time -period. The United  States  further a ssumes that these 
additional counterfactual deliveries would have occurred in the same month or year as each of those 
A380 aircraft deliveries. Table  3 reproduces the additional counterfactual deliveries of Boeing VLA 
on which the United  States  bases its v aluation. According to the United  States , its proposed 
counterfactual delivery numbers are consistent with the Appellate  Body's findings on impedance in 
the compliance proceedings.297  
Table 3: Counterfactual additional Boeing 747-8I deliveries proposed by 
the United  States  
Geographic market with  
impedance  
(Airlines involved)  Delivery date  Number of additional 
counterfactual Boeing 747 -8I 
deliveries  
Australia  
(Qantas Airways)  December 2011  1 
China  
(China Southern Airlines)  December 2011  
2012 
2013 1 
2 
1 
European  Union  
(Air France; British Airways; Lufthansa)  2012 
2013 4 
4 
Korea  
(Korean Air)  2012 
2013 1 
2 
Singapore  
(Singapore Airlines)  2012 5 
United Arab Emirates  
(Emirates)  December 2011  
2012 
2013 2 
11 
13 
 
 
6.165.   The United  States  computes the value of impedance for a given geographic market in a given 
month/year in the Reference Period by multiplying the global (worldwide) average per -aircraft net 
delivery price of 747 -8I aircraft for the relevant month/year by th e number of counterfactual 
deliveries of 747 -8I aircraft in the corresponding month/year. According to the United  States , these 
global average per -aircraft net delivery prices provide the best available indication of the net delivery 
 
295 The discount factor for a given order - and delivery -year combination is equal to the term 
(1+𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑅𝑎𝑡𝑒 ) raised to the power of the number of years between  the time of order and time of delivery. 
(United  States' methodology paper, paras.  49 and 51).  
296 United  States' methodology paper, para.  28. 
297 United  States' methodology paper, para.  82. 
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  prices that the custom ers that would have received additional 747 -8I aircraft in the counterfactual 
would have paid.298 
6.166.   The United  States  computes the global average per -aircraft net delivery price of 747 -8I 
aircraft for 2012 and 2013 by dividing the sum of all net delivery price s of actual worldwide deliveries 
of 747 -8I aircraft that occurred in that year by the number of 747 -8I aircraft delivered worldwide in 
that year. The United  States  takes the relevant information on these net delivery prices of 747 -8I 
aircraft from [[***]]. In response to an argument by the European  Union  that the United  States ' 
calculated 2012 global average net delivery price per aircraft is artificially inflated by the inclusion 
of [[***]], the United  States  excluded prices of 747 -8I deliveries to [[***]] that had been included 
in the United  States ' initial calculation.299  
6.167.   As concerns the 2011 delivery price, it must be noted that no 747 -8I aircraft were in fact 
delivered in 2011, and therefore no actual 2011 per aircraft delivery prices of 747 -8I aircraf t exist. 
The United  States  therefore proposes to extrapolate a 747 -8I per aircraft delivery price for 2011 by 
multiplying the average 2012 -2013 ratio between the global average 747 -8I per aircraft delivery 
price and the global average 747 -8I per aircraft o rder price by the 2011 global average 747 -8I per 
aircraft order  price.300 
6.3.4.1.3   Annualization of the average values of lost sales and impedance  
6.168.   The United  States  proposes to annualize the sum of the total values of lost sales and 
impedance calculated over the 25 -month 2011 -2013 Reference Period. Having separately computed 
the values of lost sales and impedance for December 2011 (expressed in December 2011 US dollar  
terms), the year 2012 (in 2012 US dollar  terms) and the year 2013 (in 2013 US dollar  terms), the 
United States  proposes to express the values of lost sales and impedance that occurred in December 
2011 and the year 2012 in 2013 US dollar  terms. The United  States  proposes this to express the 
values of adverse effects found within the 25 -month 2011 -2013 Refe rence Period on a common 
monetary basis. The United  States  further proposes to apply the PPI for CA Manufacturing  to the 
2011 and 2012 values of lost sales and impedance to adjust them and obtain their 2013 adjusted 
values. The United  States  deems this PPI  index to be the proper index to perform this adjustment 
because the PPI for CA Manufacturing measures the overall price movement at the aircraft producer 
level (i.e. Boeing). More specifically, the United  States  performs this adjustment by multiplying, 
respectively, the December 2011 and 2012 levels of adverse effects determined to exist by the 
2013-to-December 2011 or the 2013 -to-2012 PPI  for CA Manufacturing  ratio, as summarized in 
Table  4 below.301 
Table 4: Overview of the United  States ' annualization of lost sales and impedance  
Reference 
period  Adverse effects 
determined to 
exist (in order -
/delivery -year 
US dollar terms)  PPI for CA 
Manu -
facturing 
ratio  Adverse effects 
determined to 
exist (𝑨𝑬𝑫𝑻𝑬 ) 
(in 2013 US 
dollar terms)  Annualization  Average annual 
adverse effects 
determined to 
exist (𝑨𝑬𝑫𝑻𝑬 ) 
(in 2013 US 
dollar terms)  
December 
2011 (𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠
+𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒 ) ×𝑃𝑃𝐼2013
𝑃𝑃𝐼𝐷𝑒𝑐 2011 =     𝐴𝐸𝐷𝑇𝐸𝑖𝑛 𝐷𝑒𝑐 2011   
2012 (𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠
+𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒 ) ×𝑃𝑃𝐼2013
𝑃𝑃𝐼2012 =     𝐴𝐸𝐷𝑇𝐸𝑖𝑛 2012   
2013 (𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠
+𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒 ) ×1 =     𝐴𝐸𝐷𝑇𝐸𝑖𝑛 2013   
Total               𝑇𝑜𝑡𝑎𝑙𝐴𝐸𝐷𝑇𝐸  ×12
25 =     𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐴𝐸𝐷𝑇𝐸  
 
 
298 United  States' methodology paper, para.  46. 
299 United  States' written Submission, paras.  244-254; response to Arbitrator question No. 61, para.  42; 
Boeing Declaration, (Exhibit USA -5 (BCI)); and Second Revised 747 -8I Global Delivery Prices for 2012 and 
2013 (revision to Exhibit USA -26 (HSBI)),  (Exhibit USA -103 (HSBI)).  
300 United  States' methodology paper, para.  88. 
301 United  States' methodology paper, paras.  90 and 94 -96. 
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  6.169.   By placing all the estimated values of lost sales and impedance on a common 2013 -US-dollar 
basis, these values can then directly be aggregated and annualized to obtain an average annual 
level of adverse effects for the 2011 -2013 Reference Period expressed in 2013 US dollar  terms that 
does not require BCI or HSBI protection.302  
6.170.   Finally, the Arbitrator notes that, using its three -step approach, the United  States  calculates 
the total annualized value of the adverse effects determined to exist, stated in 2013 US dollar  terms, 
as approximately USD 10 ,130 million.303  
6.3.4.2    Preliminary considerations  
6.171.   Section  6.3.4.2  addresses certain preliminary issues applicable to our ensuing valuation of 
both lost sales and impedance. First , it addresses certain general evidentiary issues. Second, it 
discusses the "closest competing Boeing models " that the United  States  identifies in its submissions. 
Third, it examines a request by the European  Union  that the Arbitrator determine product -market-
specific countermeasures.  Finally, it evaluates the European  Union 's request that the values of 
certain services be deducted from the prices of relevant Boeing LCA.  
6.3.4.2.1   General evidentiary issues  
6.172.   In the ensuing parts of this Decision, and consistent with its mandate, the Arbitrator 
determines the values of the LCA orders that Boeing would have secured in the counterfactual had 
it won the lost sales and the LCA deliveries that Boeing would have made in the counterfactual had 
it not suffered impedance. As di scussed in more detail in the following sections, these valuations 
involve a number of different determinations regarding the values of the Boeing LCA that would have 
been ordered and delivered in the case of lost sales and impedance, respectively. As such  
counterfactual orders and deliveries, of course, did not actually occur, we must estimate the values 
of these counterfactual orders and deliveries based on an appropriate methodology and the 
information submitted to us by the parties. Thus, at this point,  we briefly describe the general 
principles that guide how we approach the parties' proposed methodologies and the information 
submitted by the parties.  
6.173.   Regarding the legal standard that governs our assessment of the assumptions underlying 
the parties' pro posed methodologies, we refer to, and agree with, the arbitrator's remarks in US – 
Tuna II (Mexico) (Article  22.6 – US) that any such "'assumptions should be reasonable, taking into 
account the circumstances of the dispute'. We also find relevant the findi ng made in several 
arbitration proceedings that assumptions should be based on 'credible, factual, and verifiable 
information'".304 Furthermore, in keeping with our adjudicative role, we will conduct our assessment 
of the parties' arguments and the evidence on the record in an objective manner.  
 
302 The annualization is calculated by dividing the sum of lost sales and impedance by the  total number 
of months in the reference period (i.e. 25 months) and multiplying it by the total number of months in a year 
(i.e. 12 months).  
303 The United  States in the course of this proceeding revised the proposed total annualized value of the 
adverse ef fects determined to exist on two occasions. Initially, the United  States calculated an annualized 
value of adverse effects of approximately USD 10,560 million in 2013 US dollar terms, which reflected the use 
of Airbus delivery schedules estimated by Boeing  and the inclusion of the so -called [[***]] in the calculation of 
the 2012 global average price for impedance. (United  States' methodology paper, para.  97; and Aggregation of 
Adverse Effects Determined to Exist by Year,  (Exhibit USA -22 (HSBI))). To minimiz e areas of disagreement 
with the European Union, the United  States later recalculated the value of impedance by excluding the 
so-called [[***]] from its calculation of the 2012 global average price for impedance. The corresponding 
annualized value of the a dverse effects determined to exist amounts to approximately USD 10,180 million in 
2013 US dollar terms. ( Revised Aggregation of Adverse Effects Determined to Exist by Year (revision to 
Exhibit  USA-22 (HSBI)),  (Exhibit USA -28 (HSBI))). Finally, the United  States recalculated the value of lost 
sales by replacing the estimated Airbus delivery schedules with Airbus actual contracted delivery schedules 
submitted by the European Union. The corresponding annualized value of the adverse effects determined to 
exist amounts to approximately USD 10,130 million, which is the figure we reflect above. ( Second Revised 
Aggregation of Adverse Effects Determined to Exist by Year. (revision to Exhibit USA -28 (HSBI)), 
(Exhibit  USA-99 (HSBI))).  
304 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para.  5.16 (fns omitted) 
(quoting Decisions by the Arbitrators, US – COOL (Article 22.6 – United  States) , para.  4.5; US – Gambling 
(Article 22.6 – US), para.  3.3; and US – 1916 Act (EC) (Article 22.6 – US), para.  5.54). See also Decision by 
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  6.174.   We also note that, in general, negotiations on the sale of LCA are driven by a complex 
interplay of factors, including customer -specific and some unquantifiable ones.305 In the context of 
the present proceeding, we are therefore not just dealing with complex economic interactions 
betwee n airline customers  and LCA manufacturers . Our task is further complicated by the fact that 
we must estimate the value of counterfactual B oeing sales and deliveries, including the associated 
sales terms (number of aircraft, price, delivery schedule) that would have been  specific to each  
negotiated  contract . In the absence of direct, actual evidence, any such exercise by its very nature 
is beset by a degree of uncertainty and will thus result in a degree of approximation.306 
6.175.   In the light of the foregoing, we must seek to ensure that not just our methodological 
approach, but also our concrete quantitative estimation, is supported, wherever possible, by credible 
and verifiable information. To that end, we have undertaken  all rea sonably feasible efforts  to request 
additional information from the parties to complete the record. Where we nevertheless ultimately 
did not have access to certain desired information (e.g. because it is not readily available), we drew 
appropriate inferenc es from the best available information on the record, provided that the best 
information that we had was itself credible and verifiable.307  
6.176.   In connection with the issue of available information, we note that the European  Union  raised 
certain due process con cerns. In its comments on the response to an Arbitrator question by the 
United  States  posed after the meeting with the parties, the European  Union  asserted that the 
United  States ' failure to submit primary  source evidence demonstrating the reliability of c ertain 
information used in the United  States ' valuation methodology violated the European  Union 's due 
process rights.308 In the next round of questions to the parties requiring written responses, the 
Arbitrator and the European  Union  both asked the United  States to produce, inter alia , such primary  
source documentation. The United  States  provided the requested documents in its responses to the 
third round of questions to the parties submitted on 15  March  2019. As of that filing, therefore, the 
European  Union  was in possession of such primary  source documents.309 
6.177.   The European  Union  submitted comments on the United  States ' submission of 
15 March  2019 on 8  April 2019. In those comments, the European  Union  raised a new due process 
 
the Arbitrator, US – Washing Machines (Article 22.6 – US), para.  3.127 (indicating that "'it is necessary to rely 
only on credible, verifiable information, and not on speculation' in calculating the level of nullification or 
impairm ent") (quoting Decision by the Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), para.  5.63).  
305 See e.g. Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras. 6.1185 -6.1189, 6.1216 -6.1223, and 6.1412; European Union's responses to Arbitrator question No. 60, 
para. 134, and No. 61, paras.  150-157 and 187; United  States' written submission, paras.  195-196; responses 
to Arbitrator question No. 60, para.  23, No. 61, para.  32; and  Boeing e -mail from [[ ***]] (13 Dec. 2018), 
(Exhibit USA -35 (BCI)) . 
306 The panel in US – Anti-Dumping and Countervailing Duties (China)  took a similar view when it had to 
apply Article 14(b) of the SCM Agreement, and in particular the guideline that the investigating authority in 
calculating the benefit to a firm of an alleged subsidy should take into account "the amount the firm would pay 
on a comparable commercial loan which the firm could actually obtain on the market". It is worth setting out 
the relevant statement by the panel in full: 
We note, first, the phrase "the amount the firm would pay on a comparable commercial loan 
which the firm could actually obtain on the market". In our view, the use of the conditional mode 
here, in conjunction with the reference to the individual borr ower's situation, is an indication that 
where loans are concerned, the very individualized nature of borrowing … often will limit an 
investigating authority's ability to identify a fully comparable existing commercial loan held by 
the investigated borrower  to use as a benchmark for the investigated government loan, meaning 
that some degree of approximation will be inevitable.  
(Panel Report, US – Anti-Dumping and Countervailing Duties (China), para.  10.177).  
307 See also Award of the Arbitrator, US – Section 1 10(5) Copyright Act (Article 25) , para.  4.28 (stating 
that "in the absence of figures grounded on facts, the Arbitrators tried to use estimates which … seemed 
reasonable on the basis of the information available"); and Decisions by the Arbitrator, US – COOL 
(Article  22.6 – United  States) , para.  5.101 (stating that "if and where a Member has submitted the best 
available information, it might be appropriate for an arbitrator to decide to accept that information in that 
particular proceeding").  
308 European Unio n's response to Arbitrator question No. 96, para.  37. 
309 The European Union continues to argue that the United  States' information is "incomplete, 
inconsistent, and non -verifiable" in important aspects. However, the European Union does not raise any due 
process objections in raising those specific arguments. (European Union's comments on the United  States' 
responses to Arbitrator question No. 135, section B, paras.  356-367). (See paragraphs 6.312 -6.318  below) 
(discussing these alleged deficiencies).  
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  objection, i.e. that  "the European  Union 's due process right to a meaningful opportunity to answer 
the case put to it by the United  States " was compromised by the United  States ' filing of 
15 March  2019.310 The European  Union  offers the following points in support of this argume nt: (a) 
the submitted evidence was voluminous and complex , (b) the United  States  had "withheld" evidence 
that it could and should have submitted earlier in the proceeding, which would have afforded the 
European  Union  "multiple opportunities" to respond to it rather than just one opportunity , (c) the 
United  States ' belated submission of evidence and the European  Union 's limited opportunities to 
engage with it undermines the value of the debate between the parties and, relatedly, renders it 
impossible for the  Arbitrator to make an "objective assessment" of the matter before it , and (d) the 
impact of the United  States ' belated submission was exacerbated by the fact that the 
European  Union  had to work on its submissions related to the fourth set of questions from the 
Arbitrator at the same time as it was working on its comments on the United  States ' evidentiary 
submissions in question.311  
6.178.   The Appellate  Body has explained that "[a]s a  general  rule, due process requires that each 
party be afforded a meaningful opportunity to comment on the arguments and evidence adduced by 
the other party".312 Such an opportunity must be "meaningful in terms of that party's ability to 
defend itself adequately".313 Thus, an inquiry into whether due process has been respected in a 
particular instance depends on a consideration of general and case -specific factors, which can include 
the conduct of the parties, the issue to which the relevant evidence relates and the ci rcumstances 
surrounding its submission, and the discretion of the Arbitrator.314 
6.179.   In assessing the European  Union 's due process objection, it is important to identify the 
evidence, the submission of which the European  Union  claims violated its due process rig hts. The 
European  Union  raises its due process concerns in the context of commenting on the United  States ' 
responses to four discrete questions, i.e. question  Nos. 93, 115, 135, and 136.315 We thus limit our 
analysis to the content of the United  States ' resp onses to question  Nos. 93, 115, 135 and 136. For 
ease of reference, we refer to that content (both the content of the submission and the exhibits 
provided therewith) as the Challenged Information.  
 
310 The Eu ropean Union raised such objections in its comments on the United  States' responses to four 
different Arbitrator questions. (European Union's comments on the United  States' responses to Arbitrator 
question Nos. 93, 115, 135, and 136).  
311 The Arbitrator sent  the fourth set of questions to the parties on 28  February  2019, with responses 
due 22  March  2019 and comments on the other parties' responses due 12  April 2019. (Communication to the 
parties of 1  March  2019).  
312 Appellate  Body Report, Thailand – Cigarettes  (Philippines) , para.  150. 
313 Appellate  Body Report, US – Gambling , para.  270. According to the Appellate  Body, due process is 
also intrinsically connected to notions of fairness, impartiality and the rights of parties to be heard and to be 
afforded an adeq uate opportunity to pursue their claims, make out their defences, and establish the facts in 
the context of proceedings conducted in a balanced and orderly manner, according to established rules. 
(Appellate Body Report, Thailand –Cigarettes (Philippines) , para. 147).  
314 Appellate  Body Report, Thailand – Cigarettes (Philippines) , para.  155. 
315 In one instance, the scope of the European Union's objection appears limited to the content of the 
United  States' response to that question. (European Union's comments o n the United  States' response to 
Arbitrator question No. 136, paras.  403-406). In the other three, although the objections initially appear to 
pertain to the content of the United  States' responses to those questions, they also either contain or cross -
reference language that refers to the contents of the United  States' submission as a whole. (European Union's 
comments on the United  States' responses to Arbitrator question No. 93, paras.  2-3 ("More generally, t he 
United  States' entire approach  to providing e vidence has compromised, in an unacceptable manner, the 
European Union’s due process right") (emphasis added)  and fn  3 (referring to the European Union's comments 
on the United  States' response to Arbitrator question No. 135, section A), No. 115, fn  257 (referring to the 
European Union's comments on the United  States' response to Arbitrator question No. 135, sect ion A), and 
No. 135, section A (referencing the entire volume of the United  States' 15  March  2019 submission)).  
We consider, however, that a close reading of this latter language indicates that it is simply context for 
understanding the European Union's m ore pointed objections to the specific content of the United  States' 
response to these four questions. (European Union's comments on the United  States' response to Arbitrator 
question No. 135, section A, paras.  351-355 (specifying that the European Union's  due process objection 
concerns the "bulk" of the United  States' evidentiary submissions, i.e. " order and [[ ***]] data", which would 
appear to encompass all exhibits submit ted pursuant to Arbitrator question Nos. 93, 115, 135, and 136, less 
Survival Rate C alculation,  (Exhibit USA -65 (HSBI)); and Boeing E -mail regarding Questions 136, 139 -142, 
(Exhibit USA -101 (HSBI)), which we also include in our analysis)).  
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  6.180.   We next consider the conduct of the parties. The United  States provided the Challenged 
Information in response to direct questions posed by the Arbitrator and the European  Union . The 
United  States ' submission of 15  March  2019 was therefore consistent with the Working Procedures, 
and the European  Union  does not cla im otherwise.316 Further, we do not consider that the 
United  States  necessarily had to provide the Challenged Information earlier in the arbitration 
proceeding. This is so because the purpose of the four questions pursuant to which the Challenged 
Information  was submitted was (a) to present an alternative cancellation rate that could be used to 
estimate the probability that certain orders made pursuant to the "lost sales" would be cancelled317, 
(b) to obtain primary  source documentation regarding a [[***]] to a customer that the 
European  Union , but not the United  States , had advocated using as a comparator order in the lost -
sales context318, (c) to obtain primary  source documentation to confirm the accuracy of previously 
submitted non -primary  source informati on by the United  States  regarding potential comparator 
orders in the lost  sales and impedance contexts , (d) to obtain additional primary  source 
documentation regarding the potential comparator orders mentioned in part (c) above that was 
requested by the Eu ropean  Union  and/or Arbitrator, but that the United  States  had not used in its 
methodology previously319, and (e) to obtain examples of how escalation factors were calculated 
using escalation formulae in certain potential comparator orders that the United  States had 
previously offered in the lost -sales and impedance contexts.320  
6.181.   We also note that all numerical data that the United  States  used in its methodology had, 
before the receipt of the Challenged Information, been supported in the United  States ' methodol ogy 
paper with evidentiary submissions of some kind and the United  States  did not rely on Challenged 
Information to raise new substantive technical issues before the Arbitrator.  
6.182.   We further note that the European  Union  had 24 days to comment on the Challeng ed 
Information. The European  Union  submitted 93 pages of written comments accompanied by one 
HSBI exhibit. In those comments, the European  Union  responds to each of the United  States ' 
responses to question  Nos. 93, 115, 135, and 136. The European  Union  engaged with the Challenged 
Information and in doing so also propose d valuation "corrections". The European  Union  submitted 
no request for any extension of the deadline for commenting on the Challenged Information.321 We 
 
316 The Working Procedures provide that "evidence necessary for purposes of rebuttal, or evidence 
necessary for answers to questions or comments on answers provided by the other party" can be submitted 
after the substantive meeting, which occurred in February 2019. (Working Procedures of the Arbitrator, Annex 
A-1, para.  5.1). We note that the United  States  filed its HSBI Version Appendix and HSBI exhibits associated 
with the 15  March  2019 submission on 18  March  2019, three days following the filing deadline. This is allowed 
under the BCI/HSBI Procedures, and the European Union did not object to it. We also note that "WTO dispute 
settlement proceedings do not involve any particular temporal sequence of proof. Both parties will adduce 
evidence in support of their own arguments or to rebut the arguments made by the other at various stages of 
a dispute, sometime s simultaneously, throughout the entirety of a proceeding". (Panel Report, EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), para.  6.50). We are mindful that adherence to 
Working Procedures is not necessarily dispositive of whether d ue process has been respected. (Appellate  Body 
Report, Thailand – Cigarettes (Philippines) , para.  155).  
317 United  States' response to Arbitrator question No. 115. The European Union argues that the 
United  States should have provided this alternative in its response to Arbitrator question No. 73, which 
appeared in the second set of questions sent to the parties. (European Union's comments on the United  States' 
response to Arbitrator question No. 115, para. 187). We note, however, that that question did not as k the 
United  States to present an alternative methodology in this context, but to respond to the European Union's 
basic assertion that a discount rate should include a component to reflect the risk of cancellation. The 
United  States did so, arguing that su ch a cancellation rate should not be used at all, but further asserted that 
certain flaws existed in the European Union's proposed methodology in this context. (United  States' response 
to Arbitrator question No. 73).  
318 European Union's written submission, paras.  209-218; responses to Arbitrator question No. 28, 
para. 418, and No. 67, para.  233; and United  States' response to Arbitrator question No. 93.  
319 United  States' response to Arbitrator question No. 135; and responses to European Union's question 
Nos. 2-6. 
320 United  States' response to Arbitrator question No. 136.  We note that this specific information was 
requested to clarify how a particular escalation factor was constructed that was used by the United  States to 
compute a price for LCA involved in a particular lost sale.  
321 The Arbitrator extended other deadlines for questions and comments in response to parties' 
requests. (See United  States' communication (28 Feb. 2019) (requesting extension of deadline for responses to 
questions from the Arbitrator); European Union's communication (28 Feb. 2019) (requesting exten sion of 
deadlines for responses to questions from the Arbitrator and for comments on responses); and Arbitrator's 
communication to the parties regarding parties' request for extension of deadline, (1  March  2019) (extending 
deadlines for responses to questi ons from the Arbitrator and for comments on responses)).  
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  further note that the European  Union  itself requested much of the Challenged Information taking 
the form of primary  source documentation322, and we find it reasonable to believe that the 
European  Union  was aware of the kind of information that it would receive.323 
6.183.   We next address the evidence at issue and the circumstances surrounding its submission. 
The Challenged Information consists of the United  States ' answers to question  Nos. 93, 115, 135, 
and 136, which, by and large, discusse d information contained in the 27 exhibits accompanying 
these answers.324 The bulk of the exhibits consists of primary  source information related to Boeing 
[[***]], orders, [[***]] or [[***]] that were discussed as possible compa rator orders in the lost 
sales and impedance context. The 27 exhibits' volume was significant, totalling 1,875 pages, all of 
which was HSBI.325 As already noted, the primary source documentation regarding the [[***]], 
orders, [[***]] or [[***]] were offered to support previously submitted information, or was 
submitted in response to the European  Union 's and/or Arbitrator's request.326  
6.184.   In the light of the entirety of the foregoing considerations, we are unable to accept the 
European  Union 's claim that it was de prived of a meaningful opportunity to respond to the 
Challenged Information, or any information in the United  States ' submission of 15  March  2019, for 
that matter. In particular, we recall that the Challenged Information was submitted in accordance 
with th e Working Procedures; was submitted in response to requests from the Arbitrator and the 
European  Union  in the form of written questions; the European  Union  had over three weeks to 
respond to the Challenged Information; and the European  Union  did not seek a ny extension of the 
deadline for responding to the Challenged Information.  
6.3.4.2.2   Closest competing model s 
6.185.   As noted above, the United  States  quantifies the value of "the adverse effects determined 
to exist" by calculating the value of the LCA that Boeing would h ave sold if Boeing had won the lost 
sales and had not suffered impedance.327 To carry out that calculation, the United  States  identifies 
the Boeing LCA models that in its view compete most closely with the Airbus LCA models that were 
at issue in the compliance findings concerning lost sales (i.e. the A350XWB -900 and -1000 models) 
and impedance (i.e. the A380 model). Table  5 below indicates the closest competing Boeing models 
identified by the United  States .  
Table 5: Closest competitors of Airbus models as identified by the United  States328 
Airbus model  Closest competing Boeing model  
A350XWB -900 787-10 
A350XWB -1000 777-300ER  
A380 747-8I 
 
 
322 European Union's questions to the United  States Nos. 1 -7. 
323 We note that the European Union itself has submitted primary source Airbus order documentation 
that is of similar complexity to the Boein g primary source order documentation that forms the bulk of the 
Challenged Information.  
324 Question 93: Exhibit USA -59 (HSBI). Question 115: Exhibit USA -65 (HSBI). Question 135: Exhibits 
USA-68 (HSBI) through USA -71 (HSBI), Exhibits USA -73 (HSBI) through US A-81 (HSBI), Exhibit USA -87 
(HSBI) and Exhibits USA -89 (HSBI) through USA -97 (HSBI). Question 136: Exhibit USA -85 (HSBI) and Exhibit 
USA-101 (HSBI).  
325 This represented the majority of the total volume of exhibits that the United  States submitted with 
its 15 March  2019 submission, i.e. 46 exhibits running over 2000 pages total, most of which was HSBI.  
326 European Union's response to Arbitrator question No. 96, paras.  37-40; opening statement at the 
meeting of the Arbitrator, paras.  102-111; United  States' res ponses to Arbitrator question Nos. 93, 115, 135, 
and 136; and responses to European Union's question Nos. 1 -7. We note that there was significant overlap 
between the primary source information requested by the Arbitrator and that desired by the European Un ion. 
Indeed, as already noted, one of the main reasons why the Arbitrator requested such information were the 
earlier complaints by the European Union that such primary source documentation should be on the record. 
(Compare Arbitrator's third set of questi ons to the parties, section 4 ("Evidentiary Requests") (19 Feb. 2019) 
and European Union's questions to the United  States Nos. 1 -7). 
327 United  States' methodology paper, para.  31. 
328 United  States' methodology paper, para.  33. 
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  6.186.   The European  Union  does not dispute these pairings offered by the United  States .  
6.187.   The Arbitrator notes that the United  States  submitted a presentation by John Leahy, COO 
Customers of Airbus comparing the Airbus A350XWB -900 and A350XWB -1000 models to the Boeing 
787-10 and 777 -300ER models, respectively, to highlight the operational and technical advantages 
that these Airbus model s have over their corresponding Boeing counterparts.329 Additionally, the 
United  States  refers to articles in the media juxtaposing the capabilities of the Airbus A350XWB -900 
model with that of Boeing's 787 -10 model.330 We also note that the compliance panel a nd the 
Appellate  Body found that, generally, the Airbus A350XWB family of aircraft (i.e. twin -aisle aircraft) 
and the Boeing 787 and 777 families of aircraft (i.e. twin -aisle aircraft) compete in the same twin -
aisle product market, and that the Airbus A380  and Boeing 747 -8I models compete in the VLA 
product market.331 In the light of such evidence and findings, and the absence of disagreement 
between the parties in this respect, we see no basis to disagree with the United  States ' identification 
of the closest  competing Boeing models above and adopt it for purposes of our own calculation.332  
6.3.4.2.3   Product -market -specific countermeasures  
6.188.   The European  Union  submits that the Arbitrator "must calibrate and quantify a level of 
countermeasures that is commensurate with the adverse effects determined to exist in each product 
market at issue ".333 According to the European  Union , the text of Article  7.10 of the SCM  Agreement  
supports its position because that provision requires the countermeasures to be "commensurate 
with the deg ree and nature of the adverse effects determined to exist". The European  Union  recalls 
in this respect that the compliance panel and Appellate  Body found that adverse effects occurred in 
two distinct product markets, i.e. the twin -aisle LCA and VLA product  markets, and thus in order for 
countermeasures to be "commensurate with the degree and nature" of those adverse effects, the 
Arbitrator in the European  Union 's view "should make separate findings for each product market".334 
The European  Union  also argues t hat doing so would be consistent with the approach taken in 
previous arbitration decisions, and in particular the arbitrator's decision in US – Washing Machines 
(Article  22.6 – US). Finally, the European  Union  states that the fact that it "has taken different steps 
to ensure compliance in each product market"335 supports its request in this context because, if the 
second compliance panel finds that the European  Union  has achieved compliance in one of the two 
relevant product markets, the amount of countermeasures "must be reduced accordingly to 
'maintain [correspondence]' and ensure that countermeasures are 'temporary'".336  
 
329 Airbus presentation by John L eahy, COO Customers, Commercial update – Global Investor Forum, 
slides 43 -44 (12  Dec. 2013) (entitled, "A350 -900 capability versus 787 -10"), (Exhibit USA -2). 
330 Emirates to choose between A350 -900 and 787 -10 next year, Murdo Morrison, FlightGlobal (Oct. 1, 
2015), (Exhibit USA -3); and Wide Body Battle: Boeing 787 -10 Or Airbus A350 -900? Dhierin Bechai, Seeking 
Alpha (Dec. 19, 2014), (Exhibit USA -4). 
331 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.513 (c iting Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.1370); and Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.1308, 6.1359 -6.1360, 6.1370 (twin -aisle product market) and 6.1410 (VLA product market).  
332 We recognize that the pairings identified above are meant to identify the closest  competing models, 
but not the only competing models. In this context, we recall first that a given model of LCA will not only 
compete with all other aircraft in its product market to some degree (e.g. the Boeing 777 -300ER model might 
compete at times with the Airbus A330 model), but at tim es will compete against LCA in other product 
markets. (Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  6.1416 
(explaining that "important competitive relationships may also exist between pairings or combinations  of 
aircraft across two, or even all three, of the product markets") (emphasis original))  
333 European Union's opening statement at the meeting of the Arbitrator, para.  80. (emphasis original) 
We note that the European Union, in other portions of its submiss ions, appears to indicate that the Arbitrator 
need not  but may, in its discretion , provide separate amounts of countermeasures vis-à-vis each product 
market. (European Union's comments on the United  States' response to Arbitrator question No. 102, para.  74 
(arguing that "[t] he principal disagreement between the Parties concerns the question whether, in the 
circumstances of the present case, the Arbitration Panel should exercise its discretion  and award separate 
amounts for each of the respective product mar kets") ). (emphasis added)  
334 European Union's opening statement at the meeting of the Arbitrator, para.  82. 
335 European Union's comments on the United  States' response to Arbitrator question No. 102, para.  81. 
336 European Union's comments on the United  States ' response to Arbitrator question No. 102, para.  82 
(quoting Decision by the Arbitrator, US – Washing Machines (Article 22.6 – US), para.  3.5). (alteration original) 
See also European Union's opening statement at the meeting of the Arbitrator, section IV; comments on the 
United  States' response to Arbitrator question No. 102 (citing Decisions by the Arbitrators, US – COOL 
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  6.189.   The United  States  argues that the Arbitrator "is not required to determine, separately for 
each product market, a level of countermeasures corresponding to the adverse effects determined 
to exist".337 The United  States  asserts that there is nothing in either the text or context of relevant 
portions of the SCM  Agreement  that contains such a requirem ent, and no previous arbitrator has 
found there to be such a requirement therein. However, the United  States  notes that, in any event, 
the United  States  "methodology makes it easy to discern what portion of the countermeasures 
corresponds to the adverse ef fects in each of the respective product markets".338  
6.190.   The Arbitrator notes that neither the SCM  Agreement  nor the DSU contains an express 
requirement to determine countermeasures or suspension of concessions vis-à-vis individual product 
markets in the manner  that the European  Union  advocates. Our mandate in this proceeding is to 
determine a level of countermeasures that is "commensurate with the degree and nature of the 
adverse effects determined to exist". In our view, therefore, providing a single maximum l evel of 
Annual Suspension based on the "degree and nature of the adverse effects determined to exist" is 
consistent with our mandate. The fact that the compliance panel and Appellate  Body found adverse 
effects to exist vis-à-vis two different product marke ts does not compel a different conclusion. 
Indeed, it is not clear to us why under the European  Union 's approach an arbitrator would necessarily 
have to determine individual levels of countermeasures for different product markets at issue rather 
than deter mine individual levels of countermeasures vis-à-vis, for instance,  individual "lost sales".  
6.191.    We note the European  Union 's argument that prior dispute settlement practice supports its 
request in this context. Two of the four arbitration decisions that the E uropean  Union  cites 
determined the level of Annual Suspension in a single amount, rather than provide different levels 
of Annual Suspension in respect of different product markets.339 Another arbitration decision 
articulated a formula that would prospectivel y control the maximum level of suspension of 
concessions. It also made no distinction among different product markets.340 In the final arbitration 
decision, i.e. US – Washing Machines (Article  22.6 – US), the arbitrator determined separate 
amounts of suspens ion vis-à-vis different measures at issue, not specifically vis-à-vis different 
product markets.341 We further find no persuasive content in other arbitration decisions that supports 
the European  Union 's position. We therefore consider that prior dispute set tlement practice does not 
materially support the European  Union 's position.  
6.192.   Finally, we turn to the European  Union 's assertion that the Arbitrator should determine levels 
of countermeasures for different product markets because the second compliance panel may find 
that the European  Union  has achieved compliance in at least one of the two relevant product 
markets. According to the European  Union , in such a scenario the amount of countermeasures "must 
be reduced accordingly to 'maintain [correspondence]' and ensure that countermeasures are 
'temporary'".342 In our view, it suffices to note in this respect that our descriptions regarding how 
 
(Article  22.6 – United  States) , paras.  6.78-6.79; US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US), 
para. 3.121; and EC – Hormon es (US) (Article 22.6 – EC), paras.  65 and 78).  
337 United  States' response to Arbitrator question No. 102, para.  23. 
338 United  States' response to Arbitrator question No. 102, para.  25. See also United  States' response to 
Arbitrator question No. 102, para.  24. 
339 Decisions by the Arbitrators, US – COOL (Article 22.6 – United  States) , pp. 81-82; and EC – 
Hormones (US) (Article 22.6 – EC), para.  83. 
340 Decision by the Arbitrator,  US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US), section V.  
341 Decision by the Arbitrator, US – Washing Machines (Article 22.6 – US), para.  3.5. The arbitrator in 
that decision issued its "overall award" in three parts: (a) one amount concerning an anti -dumping measure on 
large residential washers (LRWs) from Korea, (b) another a mount concerning a countervailing duty measure on 
LRWs from Korea, and (c) then -unknown United  States anti -dumping measures that may be placed on Korean 
imports (other than LRWs) in the future. (Decision by the Arbitrator, US – Washing Machines (Article 22 .6 – 
US), section 5).  The latter component was governed by a single formula that applied to all relevant Korean 
imports, irrespective of product -market distinctions. Indeed, the arbitrator's decision never mentions the term 
"product market". As concerns st ructuring countermeasures around individual measures at issue, we note that 
this would be impractical in this proceeding for two reasons. First, it is unclear what proportion of the value of 
the adverse effects determined to exist in the twin -aisle LCA pro duct market is attributable to the "indirect 
effects" of A380 LA/MSF, rather than the "direct effects" of A350XWB LA/MSF. Second, there were multiple 
A380 LA/MSF measures, and multiple A350XWB LA/MSF measures, the individual impacts of which on either 
relevant product market are unclear as in the compliance proceeding causation was determined based on these 
measures' aggregated  effects.  
342 European Union's comments on the United  States' response to Arbitrator question No. 102, para.  82 
(quoting Decision by the Arbitrator, US – Washing Machines (Article 22.6 – US), para.  3.5). (alteration original)  
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  we calculated the maximum level of Annual Suspension should provide the parties with sufficient 
guidance as to how that leve l was determined with respect to, inter alia , the product markets 
involved.  
6.193.   Consequently, even if it generally lay within our discretion to determine levels of 
countermeasures for different product markets, we do not find it appropriate to do so in the 
circumstances of this arbitration proceeding.  
6.194.   In conclusion, in this decision we will provide a single maximum level of Annual Suspension 
rather than determine a separate maximum level of Annual Suspension for each of the two product 
markets at issue.  
6.3.4.2.4   Valuation of services  
6.195.   The European  Union  argues that service -related components of LCA prices, such as prices 
that are paid by the LCA customers for post -delivery services, should be excluded from the 
calculation of the value of the LCA that Boeing would h ave sold or delivered in the counterfactual. 
According to the European  Union , this is because the adverse effects findings in these proceedings 
concerned solely the sale and delivery of LCA, i.e. goods, and did not concern any revenue that 
Boeing would hav e earned from providing services. The European  Union  therefore asserts that the 
prices for such post -delivery services, to the extent that they would be included in the value for LCA 
counterfactually sold or delivered by Boeing, should be excluded from the  Arbitrator's valuation.343 
6.196.   The United  States  argues that it would not be appropriate to reduce any relevant 
counterfactual Boeing LCA prices to account for prices paid by the LCA customers for post -delivery 
services. First, the United  States  asserts that Bo eing's post -delivery services [[***]]. Second, the 
United  States  asserts that, to the limited extent that Boeing has obligations under an [[***]].344 
6.197.   The Arbitrator notes that the record indicates that the provision of post -delivery services 
[[***]]. Very fe w sales contracts that the parties have submitted  to assist us in  valuing lost sales 
and impedance [[***]].345 We further note that when these services [[***]].346 Indeed, the 
European  Union  directs us to no examples of any sales contracts on the record in whi ch prices for 
such services are explicitly identified in a meaningful manner, and, relatedly, the European  Union  
has not provided any methodology describing how the value of any post -delivery services could be  
deducted from relevant aircraft prices. In the  light of this, we perceive no convincing conceptual 
rationale for treating them as separate from the sale of the LCA.  
6.198.   For all these reasons, we do not consider it appropriate to deduct the value of any services 
from the value of the counterfactually orde red and delivered Boeing LCA.  
6.3.4.3   Issues surrounding the valuation of lost sales  
6.199.   In section  6.3.4.3 , we assess the approach proposed by the United  States  for determining 
the value of adverse effects in the form of lost sales. We also address the technical criticisms raised 
by the European  Union  against specific steps contained in the United  States ' approach to quantifying 
lost sales, and any alternatives t o those specific steps that were proposed by the European  Union . 
We recall that in the compliance proceedings the Appellate  Body confirmed the panel's findings that 
the orders secured by Airbus in five specific sales campaigns in the twin -aisle and VLA mar kets that 
occurred in the post -implementation period (identified in Table 19 of the compliance p anel report) 
 
343 European Union's response to Arbitrator q uestion No. 41, para.  456. 
344 United  States' responses to Arbitrator question No. 41, para.  93, and No. 120, para.  80 (citing 
United  States' response to Arbitrator question No. 135 which contains excerpts from the pricing information in 
the comparator order s to show that Boeing's service -related obligations, where Boeing had [[***]]).  
345 See [[***]], (Exhibit USA -38 (BCI)); [[***]], (Exhibit USA-39 (BCI)); [ [***]], (Exhibit USA-40 
(BCI)); [[***]], (Exhibit USA-41 (BCI)); Cathay Pacific March 2011 777 -300ER Or der Documentation, (Exhibit 
USA-69 (HSBI)); Singapore Airlines 2013 787 -10 Order Documentation, (Exhibit USA -73 (HSBI)); United 2015 
777-300ER Order Documentation, (Exhibit USA -74 (HSBI)); Lufthansa 2006 747 -8I Order Documentation, 
(Exhibit USA -79 (HSBI));  and Lufthansa Escalation Documentation, (Exhibit USA -87 (HSBI)).  
346 Cathay Pacific 2013 777 -300ER Order Documentation, (Exhibit USA -68 (HSBI)), pp.  70 and 73.  
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  "represent 'significant lost sales' to the US LCA industry … within the meaning of Article  6.3(c) of 
the SCM  Agreement ".347 We reproduce Table 19 of the compliance p anel report below as Table  6:  
Table 6: United  States ' "lost sales" claims in the post -implementation period348 
Product Market / Customer  LCA model  Number of 
orders  
2012  Number of 
orders  
2013  
Twin-Aisle LCA  
Cathay Pacific Airways  A350XWB -1000 10  
Singapore Airways  A350XWB -900  30 
United Airlines  A350XWB -1000  10 
Very Large Aircraft  
Emirates  A380  50 
Transaero Airlines  A380 4  
 
6.200.   For the purpose of determining the value of lost sales, the United  States  calculates the 
counterfactual value of the lost sales identified in Table 19 of the compliance p anel report , i.e. the 
value of the orders that Boeing would have won in the counterfac tual. As discussed above, the 
United  States  defines the value of each lost sale at issue as the discounted value of scheduled 
deliveries of the closest competing Boeing model in the counterfactual. In particular, the 
United  States  calculates, for each lost  sale 𝑖, the discounted value, at the time that the order was 
lost (i.e. order  year 𝑡), of the net delivery price of each Boeing aircraft counterfactually delivered to 
airline 𝑖 at a scheduled post -order date 𝑠.349 
 
𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷=∑𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
(1+𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑅𝑎𝑡𝑒 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡)𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 − 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑦
𝑦𝑒𝑎𝑟 𝑠 
 ×𝑁𝑢𝑚𝑏𝑒𝑟 𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡 𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 
 (4)  
 
where   𝑠: scheduled delivery date(s) of airline 𝑖's order for the closest competing Boeing model350 
 𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷: net delivery price of airline 𝑖's order for the closest 
competing Boeing model delivered in year 𝑠 and expressed 
in US dollar  terms of delivery year 𝑠 
 𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡 𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠: number of counterfactual Boeing aircraft scheduled to 
be delivered to airline  𝑖 in year 𝑠. 
 
 
 
347 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.31(a) (noting that "the orders identified in Table 19 of the Panel Report in the twin -aisle LCA market 
represent 'significant lost sales' to the US LCA industry") and 6.37(a) (noting that "the orders identified in 
Table 19 of the Panel Report in the VLA market represent 'significant lost sales' to the US LCA industry").  
348 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), Table 19.  We 
note that this Table refers to "Singapore Airways". The parties have used the names "Singapore Airlines" and 
"Singapore Airways" while referring to the same airline customer in this proceeding. We use the names 
"Singapore Airlines" and "Singapore Airwa ys" interchangeably in this Decision.   
349 More technically, the United  States calculates, for each lost sale  𝑖, the sum of Boeing's net delivery 
prices of the aircraft counterfactually delivered to airline 𝑖 at scheduled post -order dates (expressed in th eir 
respective delivery -year US dollar terms) divided by the term one plus the discount rate for order  year 𝑡 raised 
to the power of the number of years between the order  year 𝑡 and their respective delivery  year 𝑠. 
350 For simplicity, the United  States a ssumes that, had Boeing won the lost sales, the counterfactual 
Boeing orders would all have occurred in July of a given year in the reference period (i.e. 2012 or 2013). 
Similarly, the United  States assumes that any counterfactual delivery would have occur red, or would occur, in 
July in the expected delivery years (e.g. July 2020).  WT/DS 316/ARB 
 
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  6.201.   As shown in Equation (4), the calculation of lost sales pr oposed by the United  States  requires 
identifying the closest competing Boeing model (an aspect which we have already addressed in 
section 6.3.4.2.2  above); determining the counterfactual Boeing delivery schedules; selecting the 
relevant comparator orders t o retrieve information on Boeing's counterfactual delivery prices; and 
choosing a discount rate. The United  States  proposes to apply a discount rate to express the value 
of Boeing aircraft, initially expressed in delivery -year US dollar  terms, in terms of US dollar  terms of 
the order month/year 𝑡 in the reference period.  
6.202.   The parties contest six main areas in this context : (a) whether the Arbitrator should use 
facts post -dating the lost sales when valuing the lost sales, (b) whether to value the lost sales from 
the United  States ' or Boeing's perspective, (c) the additional number of what models of LCA Boeing 
would ultimately have sold and delivered in the counterfactual had Boeing won the lost sales, (d) 
the timing of Boeing's counterfactual deliveries, (e) the prices of Boeing's additional LCA sales, and 
(f) whether and how to perform a discounting exercise.  This section addresses each in turn, after a 
brief discussion of  the representativeness of the 2011 -2013 Reference Period for purposes of valuing 
lost s ales. 
6.3.4.3.1   Representativeness of the 2011 -2013 Reference Period  
6.203.   The Arbitrator  notes that prior arbitrators have indicated that a reference period, in order to 
provide an appropriate basis on which to calculate a maximum level of countermeasures or 
suspension of concessions or other obligations, should be "representative".351 We likewise co nsider 
an inquiry into the representativeness of the 2011 -2013 Reference Period appropriate in the context 
of our task to place values on the lost sales and impedance that are "commensurate with the adverse 
effects determined to exist" and not punitive in nature. We observe at the outset that the 
representativeness issue that we are concerned with here is whether the 2011 -2013 Reference 
Period can be considered representative of the short -term adverse effects (in the form of impedance 
and lost sales) result ing from the European  Union 's failure to comply by the end of the 
implementation period.352 
6.204.   Regarding the length of our Reference Period, we note that it is 25 months. Most arbitrators 
have used shorter reference periods.353 However, in other contexts, for ins tance in the area of quota 
administration under Article  XIII:2(d) of the GATT  1994, a longer "previous representative period" 
has been applied.354 The DSU does not prescribe any fixed time -period that Article  22.6 arbitrators 
must use, nor are we aware of any time -period that will necessarily be appropriate in all 
circumstances. The main reason for using the 2011 -2013 time -period as our Reference Pe riod is that 
it was used during the compliance panel and appellate review proceedings and that in our 
assessment we rely on the adverse effects that these prior adjudicators determined to exist during 
the 2011 -2013 Reference Period. Consistency therefore s uggests that we not depart unnecessarily 
from the approach taken at the compliance proceeding stage in this dispute. As a general matter, 
though, we consider that we could in principle elect to use a subperiod of the 2011 -2013 time -period 
on representative ness grounds, if we deemed it appropriate to do so.355  
6.205.   With these introductory observations in mind, we turn now to consider the 
representativeness of the 2011 -2013 Reference Period for purposes of our quantification of adverse 
 
351 See Decisions by the Arbitrators, US – Tuna II (Mexico) (Article 22.6 – US), paras.  4.18-4.19; US – 
Upland Cotton (Article 22.6 – US II) , paras.  4.115 -4.119; and US – Offset Ac t (Byrd Amendment) (Brazil) 
(Article 22.6 – US), para.  3.150.  
352 For greater clarity, we note that this inquiry is different from the kind of inquiry that the European 
Union suggested we should undertake. To recall, it is the European Union's argument that the adverse effects 
determined to exist in the 2011 -2013 Reference Period should be "representative" of adverse effects occurring 
at present and in the future. As further discussed in section 6.3.1 above, we are unable to accept this 
argument.  
353 See footno te 161 above.  
354 See, for instance, Panel Report, EC – Bananas III (Article 21.5 – Ecuador) , para.  6.39 (referring to 
GATT Panel Report, EEC – Apples (Chile I) , L/5047 , para. 4.8, which noted that "in keeping with normal GATT 
practice, the Panel considered it appropriate to use as a 'representative period' a three -year period previous to 
1979, the year in which the EC measures were in effect"). See also Award of the Arbitrator, US – Section 
110(5) Copyright Act (Article 25) , para.  4.45. 
355 The United  States indicated, along similar lines, that certain kinds of data could be adjusted in a 
reference period if they were found to be particularly anomalous. (See United  States' responses to  Arbitrator 
question Nos. 103 and 119).  
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  effects in the form of lost s ales. We note in this respect that the 2013 Emirates order for 50 A380 
aircraft was, historically speaking, unusually large for an A380 order. However, as explained  below 
in section 6.3.4.3.4.1 , we decide to adjust the order numbers down by [[***]] to acco unt for 
cancellations.356 Consequently, the remainder of the 2013 Emirates order amounts to [[***]] A380 
aircraft. In our view, this is not significantly out of line with the volume of orders for A380 aircraft 
in other years.357 Similarly, we note that the 201 3 order from Singapore Airlines for 30 A350XWB -
900 aircraft was substantial. However  , the data  on record  indicates that A350XWB -900 orders of 
that magnitude are unexceptional.358 We also recall that substantial order size variation over time 
is not uncommon  in the LCA industry.359 We thus discern nothing about the orders that represent 
the lost sales, or about any data  on record  relating to those orders and market conditions in the 
2011-2013 Reference Period, that could be objectively characterized as so anoma lous as to render 
the 2011 -2013 Reference Period unrepresentative of the short -term adverse effects (in the form of 
lost sales) resulting from the European  Union 's failure to comply by the end of the implementation 
period.  
6.206.   We therefore perceive no basis u pon which to conclude that the 2011 -2013 Reference Period 
is unrepresentative in the context of valuing lost sales and that we should therefore use only a 
temporal subset of the 2011 -2013 Reference Period rather than the entire 25 -month Reference 
Period.  
6.3.4.3.2   Use of facts post -dating the lost sales  
6.207.   The European  Union  argues that, in valuing the five lost sales in question, it is legally 
permissible and proper for the Arbitrator to take into account facts that arose after the orders 
representing the lost sales we re placed, including facts that arose after the 2011 -2013 Reference 
Period, insofar as such facts bear on what monetary value Boeing would have ultimately realized 
from the lost sales had Boeing won them in the counterfactual. In the European  Union 's view,  this 
includes facts concerning cancellations, conversions, or deferment of deliveries of the Airbus LCA 
ordered pursuant to the five lost sales, and the use of [[***]] versus [[***]] escalation rates in 
converting base -year prices to delivery -year prices.360 
6.208.   The United  States  argues that the Arbitrator, in valuing the five lost sales in question, may 
only take into account facts that were known to the parties (i.e. Boeing and the relevant LCA 
customers) at the time of the orders that would have been placed had Boeing won the l ost sales in 
the counterfactual. According to the United  States , this is so because the lost sales were identified 
on the basis of orders occurring in the 2011 -2013 Reference Period, and any facts arising after the 
relevant orders would have been placed we re not on the record before the compliance panel or 
Appellate  Body in the compliance proceedings and formed no part of the findings related to lost 
sales. In the United  States ' view, if the Arbitrator were to consider such facts, it would be improperly 
altering what "the adverse effects determined to exist" are.361 
 
356 See paragraphs 6.227  and 6.229  below.  
357 Updated Ascend Database , (Exhibit EU -79) (indicating, for example, orders for A380 aircraft in the 
volumes of 78 in 2001, 34 in 2003, and 32 in both 2007 and 2010).  
358 Updated  Ascend Database , (Exhibit EU -79) (indicating, for example, orders for A350XWB -900 aircraft 
in the volumes of 139 in 2007, 80 in 2008, 85 in 2010, and 57 in 2014). Our review of the evidence on record 
further indicates nothing exceptional about the orders in 2012 and 2013 by Cathay Pacific and United Airlines, 
respectively, of ten A350XWB -1000 aircraft each. Although in certain years on either temporal side of the 
2011-2013 Reference Period there were no orders for A350XWB -1000 aircraft, in years in which t here were 
orders (between 2007 and 2018) the volume of orders was generally in excess of ten aircraft per year.  
359 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1719 (explaining that LCA 
"orders tend to be very large and sporadi c"). 
360 European Union's written submission, paras.  163-164, 182 -195, 227, and 255 -260; responses to 
Arbitrator question No. 16, para.  323, No. 28, para.  421, No. 40, para.  450, No. 60(c), paras.  146-148, No. 
80, para.  285, No. 109, paras.  206-211, No. 110,  paras.  212-224, No. 147, paras.  304-308, and No. 167, 
paras.  1-25; comments on the United  States' response to Arbitrator question No. 135, para.  380-383; and 
opening statement at the meeting of the Arbitrator, paras.  86-91. For more detailed explanations of why and 
how such facts may be taken into account, see sections 6.3.4.3.4.1 , 6.3.4.3.4.2 , 6.3.4.3.4.4 , 6.3.4.3.5.2  and 
6.3.4.3.6.2  below.  
361 United  States' written submission, paras.  138-149, 158, 185, and 189; and responses to Arbitrator 
question No. 40,  para. 85, No. 43, paras.  95-100, and No. 58, paras.  14-16. 
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  6.209.   The Arbitrator begins its analysis with the United  States ' broad contention that it would be 
improper to value the lost sales using facts that were not on the record of the compliance 
proceedings. We discern no categorical legal bar to considering facts that were not on the record in 
a previously conducted proceeding in this dispute. The SCM  Agreement  and DSU are silent in this 
regard. Further, we note that because arbitrations generally involve val uation exercises that were 
not the focus of previous original or compliance proceedings, the factual information put before 
arbitrators not infrequently differ s significantly from the factual information that forms part of the 
records of previous original or compliance proceedings.  
6.210.   The thrust of the United  States ' argument appears to be narrower, however. That is, in the 
United  States ' view, if we used certain facts (assumed to have arisen in the counterfactual) that 
would only have arisen in the counterfa ctual after the orders representing the lost sales occurred 
(which, in large part occurred after the end of the 2011 -2013 Reference Period), we would be 
revising the findings of the compliance panel and Appellate  Body. In other words, the United  States  
considers the value  of the orders representing the lost sales to have been set, for purposes of this 
proceeding, at the time that the lost sales were determined to exist in the compliance proceedings. 
We agree that we must place a value on "the adverse effect s determined to exist" in the 2011 -2013 
Reference Period, rather than alter what "the adverse effects determined to exist" are.362 We thus 
briefly review how the five relevant lost sales found to exist  during the 2011 -2013 Reference Period 
were determined to  be "significant … lost sales" within the meaning of Article  6.3(c) of the 
SCM Agreement  to ensure that any approach that we take does not invalidate those findings.  
6.211.   As already discussed in section 6.3.3.2.1  above, and in accordance with the relevant 
language of Article  6.3(c), the five relevant lost sales were determined to be such based on LCA 
order data, and were determined to be "lost" because in the absence of relevant LA/MSF subsidies, 
the United  States  LCA industry would have won the orders.363 These lost sales were deemed 
"significant" in view of a combination of the following factors: (a) strategic importance , 
(b) learning -curve effects (i.e. the beneficial learning effects that would accrue from producing the 
ordered LCA) , (c) incumbency (i.e. gaini ng or retaining the particular customer) , and (d) the number 
of aircraft and monetary amounts involved in the sales.364  
6.212.   The adopted findings that the five lost sales were "significant" were made on the basis of 
facts on the record before the compliance pane l, i.e. based on conditions present in the 2011 -2013 
Reference Period. However, at least the latter three of these factors upon which the findings of 
"significance" were based, identified in the preceding paragraph365, appear dependent, at least in 
significa nt part, on expectations  regarding the future  benefits expected to accrue to the LCA producer 
who won the orders. Indeed, relevant learning effects will mainly arise during the production of LCA, 
i.e. an activity occurring generally years after a relevant order.366 Incumbency benefits would only 
appear relevant if the customer itself remains solvent and present in the marketplace after the order 
is placed (e.g. the customer does not go bankrupt and cease business). Further, regarding monetary 
amounts, because  only [[***]] payment is made by a customer upon order in the form of a deposit, 
with [[***]] made upon delivery367, [[***]] the money realized from an LCA order will depend on 
the order resulting in a delivery (i.e. that the order is not cancelled). We further note that the original 
 
362 It will be recalled that, earlier in this Decision, we decided to use an order -centric approach to 
valuing lost sales. (See section 6.3.3.2.1  above).  
363 See paragraph 6.100  above.  
364 Panel Report,  EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  6.1798 
(citing Panel Report, EC and certain member States – Large Civil Aircraft,  para. 7.1845).  
365 We understand the point regarding "strategic importance" as mainly pertaining to instances when a 
major LCA customer orders its LCA from a particular producer, and/or when a customer switches from buying 
LCA from one producer to the other. (Panel Report, EC and certain member States – Large Civil Aircraft 
(Article  21.5 – US), para.  6.1781; Appellate  Body Report, EC and certain member States – Large Civil Aircraft , 
para. 1212; Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.1845; and European 
Union's response to Arbitrator question No. 61).  
366 Panel Reports, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras.  6.1214 
(explaining that "[l]earning effects … result primarily from a more experienced workforce,  and imply that per 
unit production costs fall as output accumulates over time") and 6.1806 (explaining that "deliveries of new LCA 
will lag their order date by typically at least  three years, and usually many more years in respect of newly 
launched  aircra ft") (emphasis original); and EC and certain member States – Large Civil Aircraft , paras.  7.1717 
and 7.1726 -7.172 7 (describing learning effects and also "economies of scale" resulting from obtaining LCA 
orders).  
367 See paragraph 6.236  below.  
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  panel described how the occurrence of post -order developments could easily influence the degree  of 
benefits – monetary or otherwise – that an LCA producer would ultimately realize from a given 
order.368 Thus, we consider that the findings that the five lost sales were "significant" were, in large 
part, based on expectations regarding the benefits that  would arise for Boeing had Boeing won them 
in the counterfactual, and not the notion that such benefits would accrue immediately upon order.  
6.213.   In the light of these elements, we adopt an approach that is in conformity with the findings 
of the compliance pan el that (a) Boeing would have won the orders representing the lost sales in 
the counterfactual, and (b) at the time of those counterfactual orders, "significant" benefits for 
Boeing would have arisen immediately upon order and/or that Boeing would have rea sonably 
expected "significant" benefits to arise from such orders in the future. Our assessment accordingly 
takes careful account of these points.  
6.214.   We further recall that it is our mandate under Article  7.10 of the SCM  Agreement  to 
determine countermeasure s that are "commensurate with the adverse effects determined to exist", 
i.e. the value of the identified lost sales and instances of impedance. Especially in the context of 
assessing the value of lost sales, the value ultimately realized from the counterfa ctual orders would 
depend in large part on how the terms of the orders would have played out after they were placed 
(e.g. due to cancellation, conversion, delivery delays, and/or how  [[***]] in fact play out over time). 
Thus, if in the context of this proc eeding there now is evidence on the record indicating that a 
particular order that Boeing would have secured in the counterfactual would have been cancelled 
after the 2011 -2013 Reference Period in the counterfactual, whereas such evidence was not yet 
available in the 2011 -2013 Reference Period, we consider it appropriate to take such evidence into 
consideration and adjust the value of that order downwards. In our view, this would not invalidate 
the findings in the compliance proceeding involving points (a) and (b) described in the paragraph 
immediately above . Indeed, if we did not do so, we would be granting the United  States  
countermeasures including a monetary value that Boeing would not have realized in the 
counterfactual. In our view, an approach that wo uld result in the United  States  being granted 
countermeasures in response to (some quantum of) determined adverse effects that it would not 
have suffered in the counterfactual would not be in keeping with Article  7.10.369 Also, as we have 
observed above370, although the United  States  may be authorized to take countermeasures 
"commensurate with the adverse effects determined to exist", the legal standard of 
"commensurateness" does not permit countermeasures that are punitive.  
6.215.   Finally, we emphasize that, insofar  as we take into account in our assessment any particular 
evidence that was not available during the 2011 -2013 Reference Period, we do so in order to place 
as accurate a value as reasonably possible on the orders that represent the lost sales that occurred  
in the 2011 -2013 Reference Period, and not to alter adverse effects already established in the 
compliance proceedings or to establish any additional adverse effects. Instead, in our assessment 
we take into account evidence, including post -Reference  Period  evidence, only insofar as it sheds 
light on how we should quantify the adverse effects determined to exist in the 2011 -2013 Reference 
Period.  
6.3.4.3.3   United  States ' perspective versus Boeing's perspective  
6.216.   The United  States  argues that the discounting exercise  that the United  States  uses in its 
valuation of lost sales  is premised on the time value of money for the United  States , i.e. the value 
of lost sales for the United  States  if that value had accrued to the United  States  in the year of order 
instead of the yea r of delivery. The United  States  argues that this is the appropriate way to 
conceptualize the discounting exercise (i.e. from the perspective of the United  States  government) 
because Article  5 of the SCM  Agreement  describes adverse effects as occurring vis-à-vis the 
"interests of another Member", not vis-à-vis a private company like Boeing. Therefore, for the 
 
368 Panel Report,  EC and certain member States – Large Civil Aircraft , paras.  7.1724 and 7.2178.  
369 See Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25) , para.  3.34 (indicating 
that "[i]t would be quite inappropriate for the Arbitrators to award the E uropean Communities benefits which it 
is not actually losing  as a result of the continued" non -compliance of the United  States). (emphasis added)  
370 See section 5 above (noting that countermeasures should not be "punitive").  
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  purpose of valuing the level of countermeasures that the United  States  may be authorized to take, 
the disco unting exercise must be performed from the perspective of the United  States .371  
6.217.   The European  Union  argues that the discounting exercise is premised on the time value of 
money for Boeing, i.e. the value of lost sales for Boeing if that value had accrued to B oeing in the 
year of order instead of the year of delivery. In the European  Union 's view, this is so because the 
value of these private LCA sales contracts is what is at issue. According to the European  Union , they 
were concluded by Boeing, and Boeing make s investments and takes risks pursuant to these 
contracts. The European  Union  indicates that the purpose of a discount rate is to capture the risks 
borne by the contracting party making the investment, not some third party who is neither a party 
to such a contract nor making investments or taking risks vis-à-vis the relevant sales transactions .372 
6.218.   The Arbitrator notes at the outset that although the parties' disagreement  arises more 
specifically in the context of the discounting exercise that forms just one s tep of the United  States ' 
lost sales valuation methodology, the parties' disagreement  in this context appears to have 
potentially broader implications  regarding how we conduct our valuation of lost sales , and we 
therefore discuss this issue here.  
6.219.   The United States  predicates its argument in this context  on the fact that, in the language 
of the chapeau of Article  5 of the SCM  Agreement , the "[European Union] cause[d] … adverse effects 
to the interests of [the United  States ]" rather than to Boeing. This is t rue. Yet, Boeing is a 
United  States  LCA manufacturer. Thus, viewing the situation through the lens of WTO rules, it is 
clear to us that when Boeing suffers harm, so does the United  States .373 Any benefit that the 
United  States  as a WTO Member would have realized in the absence of adverse effects caused by 
the European Union would have accrued to it via the enhanced sales that Boeing would have 
realized.374 Thus, we see no force in the United  States ' argument based on Article  5 that "the degree 
and nature of the adverse effects determined to exist" should be determined from the perspective 
of the United  States  government, rather than Boeing.  
6.220.   Accordingly, we consider that the European  Union  in this dispute caused adverse effects to  
the interests of the United  States  through the economic impact of relevant LA/MSF subsidies on 
Boeing's LCA orders and deliveries. In this proceeding, for discounting and other quantification 
purposes, we therefore value the adverse effects determined to exist from Boeing's perspective.  As 
explained, by proceeding in this way , we reliably assess the adverse effects susta ined by the 
United  States .  
6.3.4.3.4   Number and models  of aircraft sold and delivered  in the counterfactual  
6.221.   As discussed in section 6.3.4.1.1 , the United  States  assumes that, absent A380 and 
A350XWB LA/MSF, and with respect to each of the five lost sales at issue,  each of the five relevant 
customers would have ordered from  Boeing  a number of  the closest competing Boeing  model  that 
is equal to the num ber of Airbus LCA that each airline actually ordered.375 According to the 
United  States , this assumption is consistent with the adopted findings in the compliance proceedings. 
The European  Union  did not specifically address the United  States ' assumption .376 We agree with 
this assumption, because the compliance panel and Appellate  Body both found that the lost orders 
 
371 United  States' methodology pap er, paras.  49-51; written submission, paras.  229-230; and responses 
to Arbitrator question No. 37, No. 69, para.  46, No. 73 and No. 175, para.  16. 
372 European Union's written submission, paras.  265, 269 and 275; responses to Arbitrator question 
No. 78(c), p aras. 266-270, No. 111, para.  231; and comments on the United  States' responses to Arbitrator 
question No. 111, paras.  141-146, No. 175, para.  26. 
373 See Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25) , para.  3.19 (noting that 
"there  can be no question that the benefits which are denied to the European Communities include the benefits 
which are denied to EC right holders").  
374 See Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25) , para.  3.48 (noting that 
"the bene fits which the European Communities  could expect to realize are the payments which US CMOs would 
make to EC right holders "). (emphasis added)  
375 United  States' methodology paper, para.  32. 
376 However, the European Union does contest certain aspects of the counterfactual that would have 
arisen after the initial orders were placed.  
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  themselves  (i.e. the number of LCA that Airbus sold as part of each of the five lost sales)  
"represented" lost sales to the United  States' LCA industry.377 
6.222.   The United  States  also assumes that, in the counterfactual, Boeing would have delivered all 
the LCA that the five relevant customers would have ordered. The European  Union  contests certain 
aspects of this assumption. These aspects relate to ( a) actual cancellations of some lost sales , (b) 
the risk of future cancellation s of counterfactually ordered aircraft , and ( c) actual conversion s of 
some lost sales to a different Airbus model.  We address  each in turn below.  
6.3.4.3.4.1   Failure to take actual cancellations into account  
6.223.   The European  Union  argues that the Arbitrator should not include in the calculation of the 
maximum level of countermeasures the full value of Boeing LCA orders that Boeing would have 
secured had Boeing won the lost sales b ecause, according to the European  Union , some of those 
orders would have been subsequently cancelled in the counterfactual. In the European  Union 's view, 
this is so because Transaero cancelled all four of the A380 aircraft that it ordered in the 2012 lost 
sale, and Emirates cancelled [[***]] of the A380 aircraft that it ordered in the 2013 lost sale. In the 
European  Union 's view, if Boeing had won these lost sales, the customers would have cancelled 
these orders in the counterfactual as well. Thus, according to the European  Union , in determining a 
level of countermeasures, the Arbitrator can consider, at most, the value of the deposits and pre -
delivery payments (PDPs) that Boeing would have received in connection with those cancelled 
deliveries.378 
6.224.   The United  States , as already noted in section  6.3.4.3.2 , contends that the Arbitrator cannot 
consider facts, including the cancellations of orders for Airb us LCA that represented lost sales to 
Boeing, that occurred after the orders representing the lost sales were placed, as such consideration 
would be inconsistent with the findings of the panel and Appellate  Body in the compliance 
proceedings. Thus, in the United  States ' view, the Arbitrator should assume that all orders that 
Boeing would have secured had it won the lost sales would have been delivered in the 
counterfactual.379  
6.225.   The Arbitrator considers that , in the counterfactual,  the relevance of actual canc ellations of 
Airbus orders depends on whether an actual cancellation of an Airbus order was solely the result of 
the airline's decision and independent of Airbus ' will and the characteristics of its aircraft  (such that 
any cancellation  of Airbus orders  would also have led the same airline to cancel orders for Boeing 
LCA in the counterfactual ). If so, such cancellation s are, in our view, exogenous event s to any aircraft 
manufacturer that would have occurred in any counterfactual, including the one proposed b y the 
United  States . The United  States  failed to provide a valid rationale as to why Boeing would still have 
made certain counterfactual deliveries where no actual deliveries occurred in reality because of 
specific airlines' decisions and actions. We note that information on such actual cancellations by 
definition only becomes available after the airline has placed its order.  
 
377 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.31(a) (noting that "the orders identified in Table 19 of the Panel Report in the twin -aisle LCA market 
represent 'significant lost sales' to the US LCA industry") and 6.37(a) (noting that "the orders identified in 
Table 19 of the Panel Report in  the VLA market represent 'significant lost sales' to the US LCA industry"); and 
Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras.  6.1798 (noting 
that all of the orders identified in Table 19 of that report  repre sent "significant" "lost sales" to the United  States 
LCA industry and, therefore, that the challenged LA/MSF subsidies continue to be a "genuine and substantial" 
cause of serious prejudice to the United  States within the meaning of Article 6.3(c) of the SC M Agreement). We 
note that the relevant part of Table 19 of the compliance panel report are reproduced as Table 6 further above 
(containing the "Number of orders" columns). Moreover, bearing in mind the substitutability of the closest 
competing Boeing and Airbus models, and the demonstrated customer demand for the specified number of 
aircraft involved in the lost sales, we discern no argumentation or evidence on the record indicating that the 
number of Boeing LCA that would have been ordered in the counterf actual would have differed from the 
number of orders involved in the lost sales in reality.  
378 European Union's written submission, paras.  163, 226 -228; responses to Arbitrator question No. 43, 
No. 54, para.  17, and No. 147, paras.  287 and 306; and opening statement at the meeting of the Arbitrator, 
paras.  67 and 86 -91. 
379 United  States' written submission, para.  138; response to European Union's question No. 1, 
paras.  241-242; and comments on the European Union's response to Arbitrator question No. 147, para . 245. 
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  6.226.   Accordingly , given our decision to take into account  up-to-date information insofar as it 
sheds light on how we should quantify the adverse effects determined to exist in the 2011 -2013 
Reference Period, we remove the deliveries to Transaero Airlines from any counterfactual delivery 
schedule used to quantify  adverse effects. The evidence on the record indicates that in 2015 
Transaero Airlines went bankrupt. This is an airline -specific event not attributable to Airbus that 
would likewise have occurred, along with the order cancellation, with Boeing in the coun terfactual.  
6.227.   Similarly, the evidence on the record suggests that the decision by Emirates in 2019 to 
cancel [[***]] outstanding A380 aircraft stemmed from Emirates' business strategy regarding the 
VLA market generally and was not specific to Airbus VLA. Mor e specifically, we note that Emirates 
was faced with external pressures, such as an increase in fuel prices; seasonality of demand in air 
travel; and ongoing macroeconomic pressures, including global geopolitical tensions and volatile 
currency markets. In combination, these pressures would reduce the profitability of, and the 
business case for owning, a four -engine VLA that is relatively less fuel  efficient and less versatile in 
comparison to a two -engine twin -aisle LCA.380 Furthermore, the Emirates Group's A nnual Report 
2018-19 refers to the high quality of the A380 programme, which suggests to us that Emirates' 
decision to cancel some of the A380 orders does not stem from Emirates' dissatisfaction with the 
A380 aircraft, but was rooted in the external pressu res highlighted above.381  
6.228.   The evidence on the record also shows that Boeing currently has [[***]] orders outstanding 
for airline or leasing company customers [[***]] orders outstanding for [[***]].382 The 
United  States  does not explain why, particularly in th e light of the weak general demand for 747 -8I 
aircraft, Emirates would have made a different decision in the counterfactual regarding the partial 
cancellation of its VLA order had it ordered Boeing VLA. Nor does the United  States  address how 
Boeing would h ave prevented such a cancellation.  
6.229.   Based on the above, we are of the view that Emirates' decision to cancel a portion of its 
orders for A380 aircraft was part of a broader trend in certain airlines' business strateg ies involving 
a move away from VLA towar ds twin -aisle LCA, as demonstrated by the weak observed airline 
demand for VLA (except for freighters) that has resulted in a very limited number of orders for A380 
and 747 -8I aircraft.383 We therefore find that Emirates' decision to partially cancel its VLA  order was 
independent of Airbus ' will and not specific to Airbus VLA. We therefore remove the cancelled 
[[***]] outstanding deliveries of A380 aircraft to Emirates from any counterfactual delivery schedule 
that we use to value the relevant lost sale.  
6.3.4.3.4.2   Failure to take potential future cancellations into account  
6.230.   The European  Union  argues that the risk that a specific LCA order may ultimately not result 
in an actual delivery due to a cancellation of the order should also be factored into the calculation of 
the value of lost sales. The European  Union  contends that as soon as an LCA order is concluded, 
Boeing faces a positive risk of future contractual default by its customer (as the episode of Transaero 
Airlines' bankruptcy illustrates) and will want to be compe nsated for such potential revenue losses 
in the future. According to the European  Union , and as discussed in section 6.3.4.3.6.4 , this inherent 
default risk in connection with future deliveries of LCA is one of the three components that has to 
be reflected  in the discount rate. In the absence of information on Boeing's comparator order - or 
customer -specific default risks, the European  Union  proposes to use Boeing's average cancellation 
rate based on historical cancellation rates (measured as the difference between gross orders and 
 
380 The Emirates Group Annual Report, 2018 -19, (Exhibit EU -145); and Andreas Spaeth, "Emirates to 
buy Rolls Royce Powered A380s Says Sir Tim Clark", Airline Ratings, 2  November  2018, (Exhibit EU -146). The 
European Union asserts that these features (re latively less fuel efficiency and less versatility) of Airbus' VLA, 
which make it commercially less attractive for Emirates to own and operate VLA when faced with these 
external pressures, apply equally to Boeing's VLA. In other words, the European Union a rgues that the 747 -8I 
aircraft is also relatively less fuel efficient than a twin -aisle LCA and similarly unsuited for short -haul and 
regional point -to-point air travel as the A380 aircraft. (European Union's response to Arbitrator question No. 
167, para.  22). The United  States has neither refuted this argument, nor is there any evidence on the record to 
show that the features of Airbus' VLA that now make it unattractive to Emirates are unique to Airbus' VLA and 
not shared by Boeing's VLA.  
381 2019 Emirates A nnual Report, (Exhibit EU -145), p. 19; and Arabian Travel Market interview, 
(Exhibit  EU-152).  
382 United  States' response to Arbitrator question No. 171, para.  5. 
383 Updated Ascend Database, (Exhibit EU -79). 
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  net orders, divided by gross orders) across all LCA sales made by Boeing for the period 2008 to 
2017 as a proxy for Boeing's risk of cancellation.384 
6.231.   In response, the United  States  contends that adjusting the value of the lost sales downwards 
to account for any risk of potential cancellation of the orders that Boeing would have secured had 
Boeing won the lost sales would be contrary to the findings of the panel and Appellate  Body in the 
compliance proceedings. According to the United States , this is so because the chance that such 
orders might be cancelled in the counterfactual played no role in the findings on lost sales in the 
compliance proceedings.385  
6.232.   The United  States  nevertheless argues that if the Arbitrator were to account  for the 
probability that an order might be cancelled before its scheduled delivery in the counterfactual, it 
should, for each counterfactual aircraft delivery, multiply its discounted net present delivery value 
by an annual "survival rate" in order to obt ain a sort of "expected value"386: 
 
𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷=∑𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
(1+𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑅𝑎𝑡𝑒 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡)𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 − 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑦
𝑦𝑒𝑎𝑟 𝑠 
×𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡 𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 
×𝑆𝑢𝑟𝑣𝑖𝑣𝑎𝑙𝑅𝑎𝑡𝑒 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 
 (5)  
 
6.233.   According to the United  States , the survival rate corresponds to the inverse of the  probability 
that an expected delivery in Boeing's backlog would be cancelled in any given year. The 
United  States  defines the inverse of the probability that an aircraft ordered in a given year is 
cancelled the following year as one minus the annual cancel lation rate  in that following year. For 
each combination of order - and delivery -year, the United  States  calculates the survival rate of an 
aircraft ordered in year  𝑡 and expected to be delivered in year  𝑠 as the product of each annual 
probability that an  aircraft was not cancelled between the order year  𝑡 and the year preceding the 
delivery year 𝑠 (i.e. 𝑠−1):387 
 
𝑆𝑢𝑟𝑣𝑖𝑣𝑎𝑙𝑅𝑎𝑡𝑒𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠=∏𝑃𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦𝑁𝑜𝑡𝐵𝑒𝑖𝑛𝑔𝐶𝑎𝑛𝑐𝑒𝑙𝑙𝑒𝑑𝑟𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑦
𝑦𝑒𝑎𝑟 𝑠−1
𝑟=𝑂𝑟𝑑𝑒𝑟
𝑦𝑒𝑎𝑟 𝑡 (6)  
 
6.234.   The United  States  proposes to use Boeing's historical annual cancellation rate  for all its LCA 
sales, which it defines as the ratio between the number of cancellations in a given year and the sum 
of backlog at the beginning of the year and gross orders in that year minus conversions and 
deliveries . For any counterfactual deliveries scheduled after 2018, the United  States  proposes to 
calculate Boeing's annual cancellation rate for the year 2018 and onwards as Boeing's average 
annual cancellation rate for all its LCA sales between 2008 and 2017.  
6.235.   According to the European  Union , notwithstanding certain disa greements specific to the 
calculation methodology that the United  States  presented, the United  States ' approach  to calculating  
the cancellation rates can easily be reconciled with that of the European  Union . In the 
European  Union 's view, the Arbitrator may either consider contractual default risk rates as part of 
 
384 European Union's written submission, para.  277; a nd response to Arbitrator question No. 29, 
paras.  429-432. 
385 United  States' response to Arbitrator question No. 126, paras.  118-120. 
386 United  States' response to Arbitrator question No. 115, paras.  49-50; and Survival Rate Calculation,  
(Exhibit USA -65 (HSB I)). The United  States notes that this approach "would not account for PDPs paid prior to 
cancellation". (United  States' response to Arbitrator question No. 115, para.  50). However, as noted in 
section  6.3.4.3.4.3 , [[***]]  in the light of the evidence on t he record.  
387 The symbol  in Equation (6) corresponds to the product operator for each year between the order 
year 𝑡 and the year preceding the delivery year 𝑠: ∏𝑥𝑡=2015
𝑡=2012 𝑥2012×𝑥2013×𝑥2014×𝑥2015. 
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  the discount rate, or adjust the discounted net present delivery va lue downwards by applying the 
survival rate to account for the risk of cancellation of the relevant order.388 
6.236.   The Arbitrator recalls that Boeing typically receives only [[***]] payment immediately upon 
order. As delivery nears, the customer typically must be gin making [[***]] payments, referred to 
as PDPs. At delivery, the customer must then pay whatever balance remains from the delivery price. 
Because most money is paid on delivery, if cancellations occur, Boeing may ultimately retain only 
any deposits and/o r PDPs previously received in connection with the cancelled LCA orders.389 
6.237.   With this background, we note that the United  States ' proposed methodology to quantify 
lost sales is based on a risk -free setting where the risk of cancellation is assumed to be zero.  Yet, 
we note, as acknowledged by both parties, that the risk of cancellation does exist, as shown by 
Boeing's historical cancellation rates.  
6.238.   We further recall that we previously rejected the United  States ' conceptual argument that 
actual cancellations sh ould not be taken into account  because  doing so would be inconsistent with 
the findings from the compliance proceedings  (see section  6.3.4.3.4.1 ). This is the only argument 
that the United  States  offered as to why the Arbitrator should also not consider th e risk of 
cancellation in determining the value of the lost sales in the counterfactual. We therefore agree with 
the European  Union  that the risk that specific Boeing LCA deliveries may not materialize in the future 
due to cancellation of the orders should  be taken into account in the valuation of lost sales.  
6.239.   Turning to the calculation of this cancellation risk, we note that the European  Union  initially 
proposed a definition of the cancellation rate that was different from the one proposed by the 
United  States. However, the European  Union  later used Boeing's cancellation rates as computed 
according to the United  States ' definition. We therefore adopt the approach used by both parties and 
define the annual cancellation rate as the ratio between the number of  cancellations in a given year 
and the sum of backlog at the beginning of that year and gross orders minus conversions and 
deliveries  that have occurred in that year.  
6.240.   We recall  that although both parties use the same Boeing average cancellation rate based 
on Boeing's historical cancellations for the 2008 -2017 time -period, the parties propose to apply it 
differently. The European  Union 's proposed approach consists of including Bo eing's average 
cancellation rate in Boeing's discount rate, while the United  States ' approach involves adjusting the 
discounted net present delivery value by applying the survival rate, which is based on Boeing's 
annual probability that an aircraft is not cancelled, which itself is based on Boeing's cancellation 
rates. However, the European  Union  is of the view that the Arbitrator may either consider the 
approach proposed by the European  Union  with the discount rate or the approach favoured by the 
United  States with the survival rate. In the light of the agreement between the parties on this 
particular issue, we choose to take into account the risk of future cancellations by applying the 
survival rate proposed by the United  States . 
6.241.   Although we agree with the  general approach proposed by the United  States  to calculate 
Boeing's average cancellation rate, we question the validity of calculating it as the United  States  
proposes, i.e. based on cancellation data from the 2008 -2017 period. This is so because doing s o 
implicitly assumes that Boeing's additional counterfactual aircraft orders and deliveries, including 
Transaero's cancellation390, would not have had any impact on Boeing's cancellation rate. Yet, we 
note that neither the United  States  nor the European  Union provided any rationale as to why this 
assumption would hold in the counterfactual. The United  States  also does not explain why it included 
the pre -2012 cancellation rates even though it claims that the pre -2012 cancellation rates are not 
indicative of th e likelihood that an aircraft ordered in 2012 or 2013 would be cancelled prior to its 
delivery date. We therefore choose to calculate Boeing's average cancellation rate for the 2008 -2011 
period on the grounds that the cancellation rates during this period are not affected by the additional 
counterfactual orders placed in the Reference Period and the deliveries made between 2012 and 
 
388 European Union's response to Arbitrator questi on No. 79, para.  277; and comments on the 
United  States' response to Arbitrator question No. 115, para.  191. 
389 United  States' methodology paper, para.  42. 
390 According to the counterfactual delivery schedule (i.e. Airbus' contractually agreed delivery schedule) 
the four  747-8I aircraft would have been delivered to Transaero in [[***]].  
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  2017.391 We also reject the United  States ' suggestion that we apply the survival rate to the delivery 
price for any delivery occu rring after 2013. In our view, the survival rate should only be applied to 
any delivery occurring after 2018.392 This is so because, with the exception of the cancelled 
Transaero orders and the partial ly cancelled Emirates order, we discern no evidence on th e record 
indicating that any of the relevant Boeing counterfactual deliveries arising out of the lost sales and 
scheduled to take place  before the present  day would have been cancelled  by the relevant airline . 
We thus assume them to have been delivered and  to carry a zero risk of cancellation.  
6.3.4.3.4.3   Valuation of deposits and PDPs for counterfactually cancelled orders  
6.242.   At this point, the Arbitrator notes that, in section 6.3.4.3.4.1  above, we determined that, in 
the counterfactual, the 2012 Transaero lost sale (i.e . all four counterfactual orders for 747 -8I 
aircraft) and a portion of the 2013 Emirates lost sale (i.e. [[***]] of the 50 counterfactual orders 
for 747 -8I aircraft) would have been cancelled. Thus, these Boeing LCA would never have been 
delivered and Boeing would not have received the full delivery price for them. We recall, however, 
that, upon an LCA order, the cu stomer will generally pay a [[***]] deposit to the manufacturer, 
and, as the delivery date approaches, the customer will pay additional PDPs to the manufacturer 
before paying the outstanding balance upon delivery.393 The question thus arises of whether, in t he 
counterfactual, Boeing would have received deposits and/or PDPs in connection with the cancelled 
Transaero and/or Emirates orders, and if so, whether it would be appropriate for us to include those 
in the valuation of the adverse effects.  
6.243.   The United  States argues that the PDPs that Boeing would have received in connection with 
the cancelled orders should be included in the valuation of these cancelled orders.394 Regarding the 
Transaero lost sale, the United  States  submitted HSBI evidence indicating that [[HSBI]].395 More 
broadly, the United  States  explains that whether Boeing [[***]], depends on the circumstances of 
the cancellation. The United  States  does not, however, specifically indicate what the specific outcome 
would have been in the circumstances surr ounding the Transaero and Emirates orders in the 
counterfactual, had those orders (or some of those orders) been cancelled.396  
6.244.   The European  Union  argues that in a situation where an order that forms part of the lost 
sales would have been cancelled in the co unterfactual, the Arbitrator could take into account deposits 
and PDPs that Boeing would have received even in the absence of any LCA delivery in determining 
the value of those lost sales. According to the European  Union , such deposits and PDPs are usually  
paid to cover some of the direct production costs of the LCA that were ordered . However, the 
European  Union  has offered no arguments on how these deposits and PDPs should be treated if the 
 
391 We note that the 2008 -2011 period includes years in and following the 200 8 financial crisis. The 
United  States did not explain how the financial crisis has affected Boeing's cancellation rate. In any case, the 
financial crisis is by definition an exogenous event that would have also occurred in the counterfactual. We 
further no te that the annual cancellation rate [[***]]. ( Survival Rate Calculation,  (Exhibit USA -65 (HSBI))).  
392 We note that the European Union follows the same approach by setting, for any counterfactual 
delivery prior to 2019, the cancellation risk at zero in its formula of the discount rate.  
393 United  States' methodology paper, para.  42; response to Arbitrator question No. 33, paras.  51-53; 
Boeing Declaration, (Exhibit USA -5 (BCI)); and European Union's response to Arbitrator's question No. 42, 
para. 459.   
394 We no te that the United  States' foremost position is that the Transaero and Emirates lost sales 
should be valued in the same manner as any other lost sale, as the compliance panel and the Appellate  Body 
had found these sales to be instances of significant lost sales within the meaning of Article 6.3(c) of the 
SCM Agreement . Failure to value them would, in the United  States' view, constitute a collateral attack on the 
DSB's adopted findings, and factual developments post -dating the Reference Period should not aff ect the 
valuation of adverse effects. We have already discussed this argument in the sections 6.3.4.3.2  and 
6.3.4.3.4.1 . 
395 Boeing e -mail from [[***]] (Dec. 13, 2018), (Exhibit USA -30 (HSBI)) (second word to the end of 
sentence of second line under [[***]] on first page). Similarly, for the Transaero order for four A380 aircraft 
that formed part of the lost sales findings, the European Union submitted evidence to show that Transaero 
Airlines had made deposits and pre -delivery payments to Airbus by [[***]]. ( European Union's response to 
Arbitrator question No. 30; and Transaero Airlines Deposits and Pre -delivery Payments,  (Exhibit EU -83 
(HSBI)) ). 
396 United  States' responses to Arbitrator question No. 94, paras.  2-5, and No. 32, para.  50; Boeing 
E-mail regarding  First Set of Arbitrator Questions,  (Exhibit USA -30 (HSBI)); and Boeing E -mail from [[ ***]] 
(Feb. 10, 2019),  (Exhibit USA -60 (BCI)).  
 WT/DS 316/ARB 
 
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  LCA manufacturer were required to return the amount received as de posits and PDPs by virtue of 
cancellation of the orders.397 
6.245.   In the Arbitrator's view, it would appear to be reasonable to include deposits and PDPs in 
the calculation of the maximum level of countermeasures only if Boeing would have both received 
and retaine d such monetary amounts in the counterfactual in the event of a partial or complete 
cancellation of an order. We therefore address whether Boeing would have received and retained 
such payments with respect to the Transaero and Emirates cancelled orders in the counterfactual.  
6.246.   Regarding the 2012 Transaero order for A380 aircraft, we note that Transaero also placed 
an order for [[***]] 747-8I aircraft in [[***]].398 When Transaero declared bankruptcy, [[***]] 
these orders were cancelled along with the orders fo r Airbus A380 aircraft which were the subject of 
the 2012 lost sale.399 The United  States  explained that Boeing [[HSBI]].400 This HSBI evidence 
indicates that Boeing [[***]]. In the light of this, it would in our view  not be appropriate to 
characterize [[***]] for the cancelled Transaero LCA. We consider this HSBI evidence as the best 
evidence that we have indicating what Boeing would have done with additional deposits and PDPs 
that Boeing would have received for the additi onal four 747 -8I aircraft that it would have sold to 
Transaero had Boeing won the 2012 lost sale. In the absence of contrary evidence, we therefore 
assume that Boeing would have [[***]] with those additional amounts. Thus, on balance, we 
consider it unreas onable to include in our valuation any deposits and/or PDPs that Boeing would 
have received in the counterfactual in connection with the Transaero lost sale.  
6.247.   Regarding the 2013 Emirates lost sale, we recognize that it would appear reasonable to 
assume that , in the counterfactual, Boeing would have received certain deposits and/or PDPs in 
connection with the cancelled [[***]] 747-8I aircraft orders. However, even if this would have been 
so, we would still consider it unreasonable to include any such amounts in our valuation. The 
United  States  has explained that it is [[***]]  in situations involving cancellation. Indeed, according 
to the United  States , in situations like the Emirates cancellation, it would appear that the issue would 
have been settled [[***]].401 The United  States  has directed us to nothing on the record indicating 
what [[***]] the Emirates order in the counterfactual in the event of cancellation and would support 
the view that Boeing would have [[***]] any relevant counterfactual deposits and/or PDPs received 
from Emirates, [[***]] of any relevant deposits or PDPs.402 We also have no evidence before us 
regarding what [[***]] on this front in these circumstances in the event of such [[***]]. Thus, the 
[[***]] any counterfactually received depo sits and/or PDPs is [[***]] . In the light of the foregoing, 
we consider it unreasonable to include in our valuation any deposits and/or PDPs that Boeing would 
have received in the counterfactual in connection with the Emirates lost sale.  
6.3.4.3.4.4   Failure to take co nversions into account  
6.248.   The European  Union  argues that insofar as the orders that Airbus secured from the lost sales 
have been converted403 by customers for reasons that would have led them to convert orders of 
Boeing LCA as well (had Boeing won the lost sale s instead), then the Arbitrator should make 
appropriate adjustments to the value of the lost sales. According to the European  Union , two of the 
five lost sales (United Airlines and Cathay Pacific Airways) have involved conversions of certain 
Airbus LCA as of May  2019. The European  Union  asserts that the circumstances surrounding such 
 
397 European Union's responses to Arbitrator question No. 25, fn  420, No. 28, fn  455, No. 43, 
paras.  465-466, No. 54, para.  17, and No. 166, fn  56; and comments on the United  States' response to the 
Arbitrator question No. 94, para.  20. 
398 United  States' methodology paper, para.  62; and Transaero 747 -8I Order Information , (Exhibit 
USA-13 (HSBI)).  
399 United  States' response to Arbi trator question No. 75, para.  92; and Boeing Contracted Delivery 
Schedules and Actual Delivery Information for "Comparator" Orders , (Exhibit USA -29 (HSBI)).  
400 Boeing E -mail regarding First Set of Arbitrator Questions,  (Exhibit USA -30 (HSBI)) (second word t o 
the end of sentence of the second line from [[***]] on page 1).  
401 United  States' response to Arbitrator question No. 94, para.  5. 
402 We consider that certain [[***]] (which we choose as the comparator order for the Emirates lost 
sale) support our conclusi on in this context. (See  Lufthansa 2006 747 -8I Order Documentation,  (Exhibit 
USA-79 (HSBI)), p.  18; and paragraph 6.309  below).  
403 By conversions, we mean the process of changing an order for an LCA of one model (e.g. an 
A350XWB -1000 aircraft) to an order f or a different LCA model (e.g. an A350XWB -900 aircraft).  
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  conversions indicate that had Boeing won these lost sales in the counterfactual, similar conversions 
would have occurred vis-à-vis Boeing's orders.404 
6.249.   The United  States  submits that the European  Union 's conversion -related arguments are both 
conceptually and factually flawed. In the view of the United  States , if the Arbitrator were to reflect 
in the counterfactual a conversion from the model found to be assoc iated with particular lost sales 
to a different model, it would be altering the adopted findings based on a new factual record. 
Moreover, the European  Union  wrongly presumes that because certain Airbus orders were in fact 
converted, then the counterfactual  Boeing order would likewise have been subject to a similar 
conversion.405 
6.250.   The Arbitrator notes that the value that Airbus or Boeing would expect to ultimately realize 
from a given order depends in part on the model of LCA that is ultimately delivered to the  customer 
pursuant to that order. Thus, we consider that counterfactual conversions of Boeing LCA that would 
have been ordered had Boeing won the lost sales are, in principle, a relevant consideration. However, 
we first have to satisfy ourselves that it is  reasonable to conclude that such counterfactual 
conversions would have occurred. We recall that the main disagreement between the parties in this 
context is whether the fact that certain relevant Airbus  LCA orders were converted means that 
corresponding c ounterfactual Boeing LCA orders would also have been converted. We thus turn to 
examine the record evidence that the parties have supplied.  
6.251.   Regarding the United Airlines conversion, the European  Union  provided evidence in the form 
of specialized press art icles suggesting that the reason behind United Airlines' conversion of all its 
orders for A350XWB -1000 aircraft back to orders for A350XWB -900 aircraft in September 2017406 
is found in United Airlines' long -term fleet strategy and, relatedly, its evolving fl eet requirements.407 
We note that this evidence suggests that low fuel prices and the imminent delivery of Boeing 777 -
300ER aircraft ordered at end of line prices in 2015 allowed United Airlines to retire its 747 -400 
aircraft earlier than anticipated and tha t in the light of this change in fleet composition United Airlines 
reassessed its prior purchase of A350XWB -1000 aircraft, which had been ordered in 2013 to replace 
the 747 -400 aircraft. The European  Union  also submitted to the Arbitrator a letter to Airbu s dated 
January 2017, in which [[***]] acknowledged that conversion of the A350XWB -1000 order occurred 
solely at the request of United Airlines.408 
6.252.   The United  States  essentially agrees with what appears to be the main factual thrust of the 
European  Union 's evidence in this context, i.e. that United Airlines' imminent receipt of 777 -300ER 
aircraft in 2017 essentially led to the conversion of the Airbus order. The United States  contends, 
however, that the European  Union  ignores that United Airlines ordered those 777 -300ER aircraft in 
2015 and that, in the counterfactual, United Airlines would have ordered 777 -300ER aircraft in 2013 
(i.e. at the time of the lost sale, and  before the airline's initial 777 -300ER orders in 2015).409 The 
United  States  thus infers that, to the extent that the "imminent delivery" of 777 -300ER aircraft would 
 
404 European Union's response to Arbitrator question No. 110, para.  214. As discussed in section 
6.3.4.3.6.1  on delivery prices, the European Union argues that the Arbitrator should take the United Air lines 
and Cathay Pacific Airways conversions into consideration by selecting an alternative comparator order, or by 
downward -adjusting prices contained in an existing comparator order that is considered the most 
representative, reliable, and robust availab le (European Union's response to Arbitrator question No. 110, 
para. 218).  
405 United  States' written submission, paras.  185-194; responses to Arbitrator question No. 117, 
para. 61, and No. 110, para.  35; and comments on the European Union's responses to Arbitrator question 
No. 98, paras.  76-79 and No. 161, para.  18. 
406 The European Union explains that, in 2013, with a view to replacing its ageing fleet of Boeing 777 
aircraft, United Airlines had converted an order for 25 A350XWB -900 aircraft into an order for the larger 
A350XWB -1000 aircraft variant and at the same time  ordered an additional 10 A350XWB -1000 aircraft (those 
which constitute the "lost sale" at issue). (European Union's response to Arbitrator question No. 98, para. 66).  
407 See Chicago Business Journal, "United Airlines postponing delivery of much -anticipated  Airbus -350", 
6 September 2017, (Exhibit EU -59); Airways Magazine, "United Converts A350 -1000 Order to A350 -900", 
6 September 2017,  (Exhibit EU-60); Airbus, "New agreement with United Airlines increases A350 XWB order 
to 45", 6  September 2017, (Exhibit EU-139); and European Union's response s to Arbitrator question No. 98, 
para. 67, and No. 162, para.  26. 
408 See Letter [[ ***]], (Exhibit EU -140 (HSBI)); and European Union's response to Arbitrator question 
No. 162, para.  28. 
409 See Table  1 above (indicating that  the closest competing Boeing model to the Airbus A350XWB -1000 
aircraft is the 777 -300ER aircraft).  
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  have caused United Airlines to consider order conversions, it would be the imminent deliver y of 
counterfactual 777 -300ER aircraft ordered at the time of the lost sale in 2013. Accordingly, the 
United  States  submits that there is no basis to assume that a counterfactual 777 -300ER order in 
2013 would have been converted to a smaller Boeing model i n 2017.410 
6.253.   Based on the evidence before us, we accept the European  Union 's argument that the 2017 
United Airlines conversion of Airbus A350XWB aircraft was triggered by United Airlines, mainly in 
the light of its changing fleet composition and, in particular , the imminent arrival of previously 
ordered 777 -300ER aircraft in 2015. In the counterfactual, however, United Airlines would have 
already ordered 777 -300ER aircraft in 2013 as a result of Boeing winning the United Airlines lost 
sale. These 777 -300ER airc raft would presumably  have been ordered and/or retained  to replace the 
747-400 aircraft. In the absence of the A350XWB -1000 aircraft, United Airlines would have needed 
the 777 -300ER aircraft ordered in 2013 to replace the 747 -400 aircraft. It would have ha d no reason 
to convert them to smaller aircraft. Indeed, as indicated by the evidence provided by the 
European  Union , United Airlines continued to order 777 -300ER aircraft between 2015 and 2018.411 
In short, the event that appeared to be the driving force be hind the Airbus conversion, i.e. the arrival 
of 777 -300ER aircraft, would have happened substantially earlier in the counterfactual than it did in 
reality and there would have been no corresponding event leading to the conversion of these 
particular  777-300ER aircraft in the counterfactual. This gives us serious doubts as to whether it is 
reasonable to assume that United Airlines' conversion decisions would have been the same in the 
counterfactual as in reality and, consequently, we do not find it reasonabl e to assume that in the 
counterfactual this conversion would likewise have occurred vis-à-vis the 2013 Boeing order  for 777 -
300ER aircraft .  
6.254.   Regarding the Cathay Pacific Airways conversion, the European  Union  presented evidence 
suggesting that Cathay Pacif ic Airways' September 2017 decisions to convert two A350XWB -1000 
aircraft to A350XWB -900 aircraft and to defer five A350XWB -1000 aircraft from 2020 to 2021 were 
taken at the request of Cathay Pacific Airways  in the context of [[***]], and were part of a la rger 
conversion and deferral effort towards smaller A350XWB -900 LCA.412 The European  Union  also 
submitted an E -mail by [[***]], explaining that the decision by Cathay Pacific Airways to request 
the conversion was driven by the perception that the A350XWB -900 model  was better suited for the 
new routes and frequencies foreseen by Cathay Pacific Airways' expansion plan and would enable it 
to cut costs to revive earnings.413 In that E -mail, [[***]]. The European  Union  thus contends that 
Cathay Pacific Airways' deci sion to convert part of its order would have also occurred in the 
counterfactual.414 
6.255.   The United  States  argues that there is no basis to assume that, in the counterfactual, Cathay 
Pacific Airways would have anticipated similar cost savings from the conversion of orders for the 
777-300ER aircraft to orders for the smaller 787 -10 aircraft, particularly since the airline would have 
already had a large, installed fleet of 777 -300ER aircraft, which would have made it relatively easy 
for the airline to incorporate additional 777 -300ER aircraft into its fleet. The United  States  is of the 
view that a "down -conversio n" to a 787 -10, for example, would have required Cathay Pacific Airways 
to introduce an entirely new Boeing model into its fleet. Moreover, given that the actual conversion 
allegedly arose in the context of [[***]], there is no basis to assume that a simil ar circumstance 
would have arisen in the counterfactual.415 
 
410 United  States' comments on the European Union's response to Arbitrator question No. 161, 
paras.  19-23. 
411 See Airways Magazine, "United Converts A350 -1000 Order to A350 -900", 6  September 2017, 
(Exhibit EU -60). 
412 See Flight Global, "Cathay swaps batch of A350 -1000s to smaller -900", 13  September  2017, 
(Exhibit EU -58). More specifically, in the context of Cathay Pacific Airways' evaluation of its request for 
proposal ("RfP") for the A321neo aircraft, Cathay Pacific Airways requested a down -conversion of a total of six 
A350XWB -1000 aircraft into A350XWB -900 aircraft, and a deferral of eight LCA in total. (See E-mail [[ ***]], 
(Exhibit EU -142 (HSBI)); and Cathay P acific Campaign A350 -1000, 2013  (Exhibit EU -133 (HSBI))).  
413 See E -mail [[***]], (Exhibit EU -142 (HSBI)); and Cathay Pacific Campaign A350 -1000, 2013,  
(Exhibit EU-133 (HSBI)).  
414 See European Union's response to Arbitrator question No. 162, paras.  29-30. 
415 United States' comments on the European Union's response to Arbitrator question No. 161, 
paras.  19-23. 
 WT/DS 316/ARB 
 
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  6.256.   The United  States  also responds to the European  Union 's suggestion that, if certain Boeing 
contractual provisions provide for conversions, the appropriate "down -conversion" might be from 
777-300ER a ircraft to the 777 -8 aircraft416, a long -range variant of the 777X program me launched 
in 2013. The United  States  notes that the 777 -8 aircraft has standard two-class seating of 350 -375 
passengers and a maximum range of 8,690 nautical miles.417 According to the  compliance panel 
report, the 777 -300ER aircraft has standard seating for 360 or 386 passengers (according to Airbus 
and Boeing, respectively) and a maximum range of 7,650 or 7,825 nautical miles.418 The 
United  States  argues that it is difficult to see how s witching from a 777 -300ER aircraft to the 777 -8 
aircraft, a longer -range variant with comparable seating capacity, would constitute a "down -
conversion", and still more difficult to see how such a switch would be consistent with Cathay Pacific 
Airlines' rea sons for converting two orders for A350XWB -1000 aircraft to A350XWB -900 aircraft.419 
6.257.   Based on the evidence before us, we accept the European  Union 's argument that Cathay 
Pacific Airways converted two orders for A350XWB -1000 aircraft to orders for A350XWB -900 aircraft 
in order to save costs. We note that it made this decision  in the context of [[***]]. Based on the 
evidence before us, we also accept the United  States ' argument that a "down -conversion" in the 
counterfactual would have required Cathay Pacific Ai rways to introduce an entirely new Boeing model 
into its fleet. This suggests to us that the cost savings from a down -conversion in the counterfactual 
may have been significantly smaller than those expected from the conversion of two A350XWB -1000 
aircraft  into A350XWB -900 aircraft. The European  Union  did not explain why such conversion would 
still have taken place in the counterfactual in circumstances that would likely have differed in 
significant ways from those of the Airbus conversion.  We therefore cons ider that it is not reasonable 
to assume that in the counterfactual this conversion would have occurred vis-à-vis Boeing's orders.  
6.3.4.3.5   Timing of Boeing's counterfactual deliveries  
6.258.   The parties also disagree as to the timing of Boeing's counterfactual deliveries. This timing 
is relevant to the United  States ' methodology because, as discussed in section 6.3.4.1.1 , the 
United  States  establishes the value of a lost sale by summing the discount ed value s of all post-order 
deliveries of the closest competing Boeing model.  In order to determine the date from which that 
delivery price should be discounted, the United  States  proposes to use Airbus' contractually agreed 
delivery schedules of the  lost sales at issue as Boeing's counterfactual delivery schedules.420 This 
section addresses (a) whether this proposal by the United  States  is reasonable , and (b) whether to 
adjust those schedules to take into account post -order delivery deferrals. We addre ss each in turn.  
6.3.4.3.5.1   Failure to use Boeing delivery schedules  
6.259.   The European  Union  argues that using delivery schedules agreed by Airbus with the 
customers in connection with the lost sales in order to estimate counterfactual delivery dates of 
corresponding Boe ing deliveries, as proposed by the United  States , is inappropriate. According to 
the European  Union , this is so because, as the United  States  itself notes, the contracted schedule 
between Airbus and the customer "reflects circumstances specific to Airbus' aircraft, operations, and 
relationships ".421 In the European  Union 's view, the use of Airbus delivery schedules fails to capture 
Boeing's supply -side constraints in the counterfactual world, such as production bottlenecks, delays 
in the development of the ai rcraft, or problems with suppliers – all of which may affect the timeline 
of Boeing's counterfactual deliveries, and none of which are captured by examining Airbus' delivery 
schedules.422 
6.260.   The European  Union , instead, proposes to use the latest updated versio ns of delivery 
schedules contained in selected Boeing comparator orders, i.e. LCA orders that Boeing concluded 
 
416 European Union's response to Arbitrator question No. 161, para.  22. 
417 Technical specs of 777X, Boeing website, (Exhibit USA -114).  
418 Panel Report, EC and  certain member States – Large Civil Aircraft (Article 21.5 – US), para.  6.1295 
and Table 17.  
419 United  States' comments on the European Union's response to Arbitrator question No. 161, para.  24. 
420 United  States' responses to Arbitrator question No. 40, par a. 83, and No. 135, paras.  157, 164, 178 
and 185.  
421 European Union's written submission, paras.  223-225; response to Arbitrator question No. 80, 
paras.  284-287; and comments on the United  States' response to Arbitrator question No. 135, paras.  372-373. 
422 European Union's comments on the United  States' responses to Arbitrator question No. 114, 
para. 184, No. 130, paras.  298-305, and No. 135, para.  372. 
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  with customers in reality and involving the Boeing LCA model that would have been ordered had 
Boeing won the lost sale in question. The European  Union  considers that these comparator orders 
contain contractual terms, including delivery schedules, reasonably similar to what Boeing and the 
relevant airline would have agreed in the counterfactual if Boeing had won the lost sales.423 The 
European  Union  also notes that the counterfactual delivery schedules to which Boeing would have 
agreed would also have been influenced by Boeing's other commitments to deliver LCA to other 
customers during the relevant time -periods because Boeing only has the capacity to deliver so many 
LCA in a given period of time.424  
6.261.   The United  States  responds that the counterfactual contractually agreed delivery schedule 
between Boeing and each of the customers involved in the lost sales would have complemented, 
rather than duplicated, any delivery schedule that appeared in any other Boeing order conc luded 
with any other customer in the counterfactual. The United  States  therefore rejects the 
European  Union 's proposal that the Arbitrator rely on the delivery schedules of Boeing's comparator 
orders .425 
6.262.   The Arbitrator notes that the delivery schedule for an y LCA order is the result of a negotiation 
between the seller and the customer.426 Customers will seek delivery positions that suit their 
strategies and plans, while LCA producers will try to accommodate the customers' requests subject 
to the supply -side con straints that they face. It can be noted in this regard that LCA manufacturers 
do not produce for inventory but on demand.427  
6.263.   That being said, in the absence of direct evidence of the counterfactual negotiating results, 
we consider it less problematic to us e Airbus' contractual delivery schedules concluded in connection 
with the lost sales than using the delivery schedules of Boeings in comparator orders. In our view, 
although these Airbus delivery schedules reflect circumstances and supply -side constraints specific 
to Airbus, we consider that they can be reasonably assumed to reflect the actual pressures from the 
demand side because they have been accepted by the customers involved in the lost sales at issue. 
Moreover, we do not consider that the use of a de livery schedule contained in a Boeing comparator 
order would reasonably reflect Boeing's supply -side constraints in negotiations with the relevant 
customers involved in the lost sales. Indeed, we consider it unlikely that Boeing, which has limited 
producti on capacity in a given period of time, would conclude contracts containing identical delivery 
schedules with multiple customers, rather than trying to sequence overall deliveries in a more even 
fashion over time. In addition, although Airbus' contractually  agreed delivery schedules may not 
reflect exactly what the customers would have wanted from or been able to negotiate with Boeing 
in the counterfactual, they at least represent a compromise that was acceptable to the negotiating 
parties at the time of ord er. We further discern no other option for constructing Boeing's relevant 
counterfactual delivery schedules that, in our minds, would yield a more reliable result than using 
Airbus' contractually agreed delivery schedules.  
6.264.   In the light of the above, we con sider it reasonable to use, as Boeing's counterfactual delivery 
schedules, the delivery schedules found in the contracts concluded by Airbus and the relevant 
customers in connection with the lost sales.  
6.3.4.3.5.2   Failure to take deferrals of deliveries into account  
6.265.   The European  Union  notes that certain  LCA deliveries arising from the orders that Airbus 
secured in connection with the lost sales have been deferred428 by customers . According to the 
European  Union , where these deferrals occurred for reasons that would have  led those  same  
 
423 The issue of the choice of comparator order or [[***]]  is discussed in section 6.3.4.3.6.1 . 
424 European Union's comments on the United  States' response to Arbitrator question No. 135, 
para. 389; Boeing Contracted Delivery Schedules and Actual Delivery Information for "Comparator" Orders , 
(Exhibit USA -29 (HSBI)); and Boeing Contracted Delivery Sched ules, Delivery Schedule Changes, and Actual 
Delivery Information for "Comparator" Orders  (Exhibit USA -44 (HSBI)).  
425 United  States' response to Arbitrator question No. 135, para.  158. The United  States further argues 
that the delivery schedule of the [[***] ] the Cathay Pacific Airways lost sale would be a reasonable estimate to 
use if there were no better data, although the delivery schedule [[***]] is less reliable because it reflects 
[[***]], rather than [[***]]. (United  States' response to Arbitrator ques tion No. 40, para.  87). 
426 Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.1750.  
427 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 5196. 
428 By deferral, we mean the delay of LCA deliveries beyond the contractually agreed time.  
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  customers to defer deliveries of Boeing LCA as well (had Boeing won the lost sales instead), the 
Arbitrator should assume that similar deferrals would have occurred to the LCA ordered from Boeing , 
and make appropriate adjustments to the val ue of the lost sales. In particular, the European  Union  
raises the issue of deferrals in the context of the lost sales concerning orders by United Airlines 
(involving an up to three -year delayed delivery from 2022 -2024 to 2025 -2026) and Cathay Pacific 
(involving a one -year delayed delivery from 2020 to 2021 for some aircraft).429 
6.266.   The United  States  contends that the European  Union 's arguments related to deferrals are 
both factually and conceptually flawed. The United  States  argues that the European  Union  overs tates 
the frequency of deferrals. According to the United  States , [[***]] of firm orders for the 747 -8I, 
777-300ER, and 787 -10 models have occurred as originally scheduled. In addition, delivery delays, 
including in response to customer requests, have typi cally been of [[***]] delays, on average.430 
More generally, the United  States  is of the view that there are many possible reasons for deferrals, 
some of which could be specific to an Airbus aircraft in the real world and would not have applied to 
the closes t competing Boeing model ordered in the counterfactual. In addition, the United  States  
asserts that there could be differences between the Airbus contracts under which the deferrals 
occurred and the contracts that Boeing would have concluded with the relev ant customers, which 
could have altered the frequency and/or duration of relevant deferrals in the counterfactual.431  
6.267.   The Arbitrator notes that the value that Airbus or Boeing would expect to ultimately realize 
from a given LCA order depends in part on when  the LCA ordered are delivered . This is because  the 
net delivery price on a given date is determined by the escalatio n factor associated with that delivery 
date. Thus, we consider that counterfactual deferrals of Boeing LCA are, in principle, relevant 
considerations for purposes of our valuation of lost sales. However, we first have to satisfy ourselves 
that such counter factual deferrals would have occurred.  
6.268.   We note that some deliveries of Airbus LCA associated with lost sales have been deferred 
after the initial order.432 However, the European  Union  does not propose to take into account all 
deferrals that arose in connecti on with Airbus' actual and future deliveries arising out of the lost 
sales at issue, but only the deferrals requested by the airlines. In fact, the parties, have materially 
discussed only two instances of deferrals, namely, deferrals associated with the Un ited Airlines and 
Cathay Pacific Airways lost sales, which, according to the European  Union , have been requested by 
both airlines in the context of conversion.433 As explained in section 6.3.4.3.4.4 , we do not take 
these conversions into account in the valua tion of lost sales. We further note that there is no 
evidence on the record to suggest that both airlines requested the deferrals independently of the 
conversions. In the light of the foregoing, we consider that it is not reasonable to assume that these 
deferrals would have been requested had Boeing won the lost sales involving United Airlines and 
Cathay Pacific Airways.  
6.269.   With respect to the deferrals associated with the United Airlines lost sale, the European  Union  
additionally contends that the United  States' assertion that in the counterfactual Boeing would have 
delivered its LCA according to the expected delivery schedule contained in Airbus' 2013 United 
Airlines order contract is not legitimate. According to the European  Union , this is because the actual  
 
429 European Union's response to Arbitrator question No. 98, paras.  73-77. 
430 United  States' response to Arbitrator question No. 124, para.  110 (stating that "for the 747 -8, more 
than [[***]] percent of the deliveries occ urred as originally scheduled, and just under [[***]] percent were 
delayed by, on average, [[***]]. For the 777 -300ER, about [[***]] percent of the deliveries were on time, and 
about [[***]] percent of the deliveries were delayed by, on average, [[***]]. A nd for the 787 -10, there was 
[[***]]"); and comments on the European Union's response to Arbitrator question No. 98.  
431 United  States' written submission, paras.  185-194; responses to Arbitrator question No. 117, 
para. 61, and No. 110, para.  35; and comment s on the European Union's responses to Arbitrator question 
No. 98, paras.  76-79, and No. 161, para.  18. 
432 The length of such deferrals (compared to the delivery schedules contractually agreed) range, for 
example, anywhere from [[***]] months to [[***]] yea rs (in the case of Emirates)  for "delivery dates re -
scheduled earlier than the original delivery dates", while other deliveries have been delayed from [[***]] 
months to [[***]] years (in the case of United  Airlines). However, we note that [[***]] the Airbu s deliveries 
pertaining to the lost sales at issue have, on average, been delayed [[HSBI]]. (Analysis based on Exhibit EU -
86 (HSBI), Exhibit EU -87 (HSBI), Exhibit EU -88 (HSBI), Exhibit EU -89 (HSBI), Exhibit EU -90 (HSBI), Exhibit 
EU-91 (HSBI), Exhibit EU -92 (HSBI), Exhibit EU -106 (HSBI), and Exhibit EU -123 (HSBI)).  
433 European Union's response to Arbitrator question No. 110, paras.  213-214. 
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- 94 - 
 
  deferral, which resulted in more distant delivery slots ( [[***]]), was purely driven by United Airlines' 
business considerations and had nothing to do with any actions taken by Airbus.434  
6.270.   The United  States  counters that, as the European  Union 's own evidenc e shows, United 
Airlines, in September 2017, continued to take deliveries of Boeing 777 -300ER aircraft (pursuant to 
orders placed in 2015, after the 2013 lost sale) and did not plan to defer the entry into service of 
the 787 -10 aircraft that it had ordered , even as it significantly deferred its A350XWB aircraft 
orders.435 According to the United  States , it would therefore be an unnecessary and inappropriately 
speculative exercise to posit a counterfactual in which United Airlines would have initially ordered 
the 777 -300ER aircraft in 2013, converted those orders to 787 -10 orders in 2017, and then deferred 
the 787 -10 orders by several years.436 
6.271.   We agree with the United  States . In our view, it is implausible that United Airlines would 
have converted its order for 777-300ER aircraft placed in 2013 to 787 -10 aircraft orders in 2017 and 
then deferred the 787 -10 aircraft orders by several years, given that it also placed an order for 
777-300ER aircraft in 2015 that was not deferred.  
6.272.   Similarly, in the case of Cathay Pacific Airways, we are not convinced by the explanation 
provided by the European  Union  that in the counterfactual Cathay Pacific Airways would have 
converted its order for 777 -300ER  aircraft  to an order for 787 -10 aircraft  which it would subsequently 
have deferred.  
6.273.   In the light of the above, we are unable to accept the European  Union 's proposal to adjust 
the counterfactual Boeing delivery schedules by taking into account counterfactual deferrals of 
deliveries.  
6.3.4.3.6   Delivery pri ces of Boeing's counterfactual deliveries  
6.274.   As discussed in section 6.3.4.1.1 , to determine the value of the counterfactual Boeing's 
deliveries, the United  States  first calculates for each lost sale the net delivery price, expressed in 
delivery -year US dolla r terms, of the closest competing Boeing model that would have been ordered 
and then delivered in the counterfactual. For each order at issue, the valuation proposed by the 
United  States  starts with the selection of a Boeing comparator order [[***]] that c ontains the 
contractual prices of the closest competing Boeing model to which the United  States  assumes Boeing 
and the airline would have agreed in the counterfactual.437 The pricing information included in the 
chosen comparator order [[***]] can then be use d to compute the net delivery price for the closest 
competing Boeing model delivered in year 𝑠 and expressed in US dollar  terms of the delivery year  𝑠 
as follows438: 
 
434 European Union's response to Arbitrator question No. 98, para.  75. 
435 United  States' comments on the European Union's response to Arbitrator question No. 98, para.  78 
and fn  91 (citing Chicago Business Journal, "United Airlines postponing delivery of much -anticipated 
Airbus -350", 6  September 2017 ( Exhibit EU -59 (HSBI))).  
436 United  States' comments on the European Union's response to Arbitrator question No. 98, 
paras.  78-79. 
437 United  States' methodology paper, paras.  56, 61, 67, 72, and 78.  
438 United  States' methodology paper, para.  45. 
 WT/DS 316/ARB 
 
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  𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑑𝑎𝑡𝑒 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷=(𝐵𝑜𝑒𝑖𝑛𝑔𝐺𝑟𝑜𝑠𝑠𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷−𝐶𝑜𝑛𝑐𝑒𝑠𝑠𝑖𝑜𝑛𝑠 𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷) 
  ×𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡𝑜𝑟𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠−𝑂𝑡ℎ𝑒𝑟𝐶𝑜𝑛𝑐𝑒𝑠𝑠𝑖𝑜𝑛𝑠𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷 (7)  
 
 
where  𝐵𝑜𝑒𝑖𝑛𝑔𝐺𝑟𝑜𝑠𝑠𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷: gross order price of closest competing Boeing model 
ordered by airline  𝑖 in year 𝑡 and expressed in US dollar  
terms of the base year439 
 𝐶𝑜𝑛𝑐𝑒𝑠𝑠𝑖𝑜𝑛𝑠𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷: price concessions contained in airline  𝑖's order cont ract for the 
closest competing Boeing model expressed in US dollar  terms of 
the base year, and [[***]]  
 𝑂𝑡ℎ𝑒𝑟𝐶𝑜𝑛𝑐𝑒𝑠𝑠𝑖𝑜𝑛𝑠𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷: price concessions contained in airline  𝑖's order contract for 
the closest competing Boeing model expressed in US dollar  
terms of the base year, but [[***]]  
 𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡𝑜𝑟𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠: escalation factor for the delivery date 𝑠 calculated from the  
escalation formula contained in airline 𝑖's order contract for the 
closest competing Boeing model.440  
 
6.275.   As shown in Equation (7), the net delivery price expressed in delivery -year US dollar  terms 
corresponds to the difference between the gross delivery pri ce and price concessions, both expressed 
in base -year US dollar  terms, multiplied by the escalation factor associated with the delivery date 
minus additional price concessions [[***]]  and also expressed in base -year US dollar terms . The 
escalation factor i s determined by an escalation formula that is [[***]]. In particular, the escalation 
formula determines the escalation factor for each month of each year between the base year and 
the scheduled delivery year. According to the United  States , the use of an e scalation formula is "an 
industry -accepted practice to offset the increase in labor and material costs over time resulting from 
inflation and other economic changes".441  
6.276.   Relevant data on the gross price, price concessions and escalation factors, which is ne cessary 
to calculate the net delivery price, are available in Boeing comparator order contracts [[***]] as 
well as in Boeing's internal records, including in particular its electronic revenue management 
system. As summarized in Table  7, for four of the fiv e lost sales at issue, the United  States  proposes 
to use, as comparator orders, firm orders placed by the same customer for the closest competing 
Boeing model within one or two years of the Airbus orders representing the lost sales. According to 
the United  States , the pricing terms contained in these comparator Boeing orders are the best 
available indication of the prices that these same customers would have paid for the closest 
competing Boeing model in the counterfactual .442 
 
439 The base year does not necessarily corr espond to [[***]].  
440 As explained above, escalation factors are specified for the relevant month in the expected delivery 
years by using the escalation formula contained in the comparator order. However, for simplicity, the 
United  States assumes that any d elivery would occur in July in the expected delivery years.  
441 United  States' methodology paper, paras.  42-45. 
442 United  States' methodology paper, paras.  46-47, 56, 61, 67, and 72; and response to Arbitrator 
question No. 135, paras.  158, 165, 172, 179, and 186. 
 WT/DS 316/ARB 
 
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  Table 7: Comparator orders and t he [[***]] proposed by the United  States443 
Lost sales in  
the Reference Period  Comparators proposed by  
the United  States  
Year Airline  Model  Order 
size Year Airline  Model  Order 
size 
2012 Cathay Pacific 
Airways  A350XWB 
1000 10 2013 Cathay Pacific 
Airways order  777-300ER  [[***]]444 
2012 Transaero 
Airlines  A380 4 2012 Transaero Airlines  
order  747-8I 4 
2013 Singapore 
Airlines  A350XWB 900  30 2013 Singapore Airlines  
order  787-10 30 
2013 United Airlines  A350XWB 
1000 10 2015 United Airlines  
order  777-300ER  10 
2013 Emirates  A380 50 [[***]] Emirates  
[[***]] 747-8I [[HSBI]] 
 
6.277.   The United  States  explains that with respect to the Emirates lost sale, there was no 
contemporaneous Boeing 747 -8I aircraft sale to Emirates that it could rely on as a comparator order. 
The United  States  thus proposes to use [[***]] of an HSBI number (i.e. a number that is on the 
record but protected by our HSBI procedures)  of [[***]]. Alternatively, the United  States  asserts 
that the Arbitrator could use the 2013 Korean Air order for five Boeing 747 -8I aircraft as comparator 
order.445 
6.278.   The European  Union  raises a numbe r of concerns regarding delivery prices that relate to 
(a) the choice of the comparator orders , (b) the choice of the point in time from which we begin 
using  [[***]] escalation factors  (i.e. the time of order or the present day) , and (c)  the application 
of price adjustments to the delivery prices contained in the comparator orders.  We address each in 
turn. 
6.3.4.3.6.1   Choice of the comparator orders  
6.279.   The European  Union  argues that the comparator orders selected by the United  States  are 
neither representative nor reliabl e, nor robust. Although the European  Union  is of the view that it is 
the United  States ' responsibility to demonstrate that its selected comparators are representative, 
reliable, and robust approximations of the counterfactual lost sales, it identifies a nu mber of criteria 
intended to guide the Arbitrator's assessment of the representativeness, reliability, and robustness 
of potential comparator orders. According to the European  Union , buyer -furnished equipment (BFE), 
flight deck equipment (FDE, i.e. avionics and communication instruments); the engine supplier, type, 
and performance; as well as the maximum take -off weight (MTOW) all have important implications 
for LCA prices, along with other criteria, such as the "comparator LCA type", order size, del ivery 
schedule, order year, and competitiveness of the campaign.446 
6.280.   The European  Union  also rejects the delivery prices in the comparator orders chosen by the 
United  States  because in the European  Union 's view they are exaggerated and fail to properly 
approx imate the counterfactual delivery prices, resulting in artificially inflated estimates of adverse 
effects from lost sales. Further, the European  Union  rejects some of the United  States ' proposed 
comparator orders because of their unrepresentativeness and u nreliability. The comparator orders 
proposed by the European  Union  are summarized in Table  8.447 
 
443 This table only shows the comparators that the United  States proposes and considers as "first -best".  
444 The order size of [[***]] aircraft is taken from the Ascend database (Updated Ascend Database, 
(Exhibit EU -79)). However, we note that the order s ize of the [[***]].  
445 United  States' methodology paper, para.  48; response to Arbitrator question No. 121, para.  94; 
comments on the European Union's response to Arbitrator question No. 106, para.  155; and Boeing 
Declaration, (Exhibit USA -5 (BCI)), para.  4. 
446 European Union's response to Arbitrator question No. 106, paras.  152-154. 
447 European Union's written submission para.  230. WT/DS 316/ARB 
 
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  Table 8: Comparators proposed by the European  Union448 
Lost sales in  
the Reference Period  Comparators proposed by  
the European  Union  
Year Airline  Model  Order 
size Year Airline  Model  Order 
size 
2012 Cathay Pacific 
Airways  A350XWB 
1000 10 [[***]]  Cathay Pacific 
Airways [[***]] 777-300ER  [[HSBI]] 
2012 Transaero 
Airlines  A380 4 - - - - 
2013 Singapore 
Airlines  A350XWB 900  30 2013 Singapore Airlines 
order*  787-10 30 
2013 United Airlines  A350XWB 
1000 10 2015 United Airlines 
order*  777-300ER  10 
2013 Emirates  A380 50 2006 Lufthansa  
order  747-8I 20 
Note: * Same comparator order as the one proposed by the United  States . 
 
6.281.   In particular, the European  Union  rejects the 2013 Cathay Pacific Airways order for Boeing 
777-300ER aircraft proposed by the United  States  as a comparator for the 2012 Cathay Pacific  
Airways lost sale on the grounds that it was not a competitive campaign because Airbus did not 
submit any offer in that campaign.449 The European  Union  further submits that the 2013 Cathay 
Pacific Airways order for [[***]] 777-300ER aircraft is not of the s ame order size as the Cathay 
Pacific Airways lost sale for ten aircraft. As an alternative comparator order for the Cathay Pacific 
Airways lost sale, the European  Union  proposes the [[***]] Cathay Pacific Airways [[***]], or 
alternatively the 2011 Cathay P acific Airways order for ten 777 -300ER aircraft. According to the 
European  Union , the [[***]] Cathay Pacific Airways [[***]] would obviate the need to identify a 
comparator order, while the 2011 Cathay Pacific Airways order for ten 777 -300ER  aircraft  has an 
order size identical to the original 2012 Cathay Pacific Airways lost sale involving ten A350XWB -
1000 aircraft.450 
6.282.   The United  States  argues that the European  Union  bears the burden of proof with respect to 
its arguments that the United  State s' comparator orders are unreasonable. According to the 
United  States , the focus of the European  Union 's criteria on the physical or performance 
characteristics of a Boeing aircraft sold pursuant to a comparator order is conceptually misguided 
because thes e characteristics should not affect the selection of the comparator orders. The 
United  States  argues that this is so because the European  Union  never established that, in the 
counterfactual, the customer would have configured the Boeing model to approximat e, as closely as 
possible, the characteristics of the Airbus aircraft that it ordered in reality as a general matter, or 
with respect to BFE, FDE, MTOW, or engine supplier/type/performance in particular.451 The 
United  States  further submits  that the European  Union 's focus on BFE is irrelevant because Boeing 
[[***]]. The United  States  also notes that the European  Union  failed to include the [[***]] in its list 
of criteria, though the European  Union  has frequently recognized the importance of this factor in 
ensuring an appropriate selection of comparator orders. Overall, the United  States  argues that the 
task before the Arbitrator is to value each lost sale by reference to the Boeing LCA that the customer 
 
448 This table only shows the comparator orders that the European Union considers as "first -best" 
(European Union's responses to Ar bitrator question No. 28, paras.  421 and 424, No. 68, para.  236, No. 96, 
para. 35, and No. 106, para. 163; Correcting US lost sales valuation , (Exhibit EU -143 (HSBI))). It does not 
show the comparator orders proposed by the European Union to account for the conversion of the Cathay 
Pacific Airways and United Airlines lost sales.  
449 As discussed in section 6.3.4.3.4.4 , the European Union also rejects the comparator order for the 
Cathay Pacific Airways lost sale proposed by the United  States on the grounds t hat the proposed comparator 
order does not take into account the conversion of two A350XWB -1000 aircraft to a smaller A350XWB -900 
variant. The European Union makes a similar argument for the conversion of the United Airlines order of 
A350XWB -1000 aircraft to A350XWB -900 aircraft. We recall that we have decided not to assume that if Boeing 
had won the lost sales its orders would have been converted in a manner similar to how Airbus' actual orders 
were converted following the placement of the orders. We thus do not further consider the European Union's 
arguments regarding conversions.  
450 European Union's responses to Arbitrator question No. 96, fn  23, No. 105, para.  147, and No. 161, 
para. 17. According to the Ascend database, Cathay Pacific Airways ordered ten  777-300ER aircraft in March 
2011 and another four 777 -300ER aircraft in August of the same year. (Updated Ascend Database (Exhibit EU -
79)). However, the European Union does not consider this [[***]] to be a representative comparator order.  
451 United  States ' comments on the European Union's response to Arbitrator question 106.  
 WT/DS 316/ARB 
 
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  would have ordered in the counterfactual, bearing in mind  that the particular characteristics of that 
Boeing LCA would have differed to some degree from the Airbus model.452 
6.283.   Regarding the United  States ' comparator order for the Cathay Pacific Airways lost sale, the 
United  States  submits that a situation in which A irbus did not submit an offer for a competitor model 
in a sales campaign that resulted in a Boeing comparator order actually replicates more closely the 
relevant counterfactual, where the relevant Airbus aircraft (i.e. the A380 aircraft or the relevant 
A350XWB model) would not have been represented in the campaign . This is  because these Airbus 
LCA would not have been available for order in the counterfactual at any relevant time. According 
to the United  States , insisting on pricing from "competitive campaig ns" that reflect vigorous 
competition from Airbus would entail a significant risk of artificially understating the real level of 
adverse effects. The United  States  also prefers a customer -specific comparator order over a 
customer -specific "final and bindin g offer" because comparator orders contain aircraft price 
information to which the customer, by definition, agreed. The United  States  further claims that  
despite the European  Union 's assertion of [[***]].453  
6.284.   The Arbitrator now turn s to another comparator order that the European  Union  rejects – the 
comparator order for the Emirates lost sale chosen by the United  States . According to the 
European  Union , the Emirates [[***]] does not constitute a reasonable and realistic [[***]] 747-8I 
aircraft to Emirates because [[***]]. The European  Union  further contends that the Emirates 
[[***]].454 
6.285.   As an alternative comparator order for the 2013 Emirates lost sale, the European  Union  
proposes the 2006 Lufthansa order for 20 747 -8I aircraft. According  to the European  Union , the 
Lufthansa order is the only order of a similar, albeit smaller, magnitude in terms of number of aircraft 
sold as compared to the counterfactual order from Emirates that would have involved 50 747 -8I 
aircraft.455 The European  Union  further argues that the Lufthansa order is the most accurate 
comparator order because Lufthansa, like Emirates, is one of the world's premier flagship carriers, 
with a similarly robust network and focus on traveller comfort.456  
6.286.   In addition, to obtain a rel evant per -aircraft price from the 2006 Lufthansa comparator order, 
the European  Union proposes to use the actual average 2013 per -aircraft net delivery price of 747 -
8I aircraft deliveries arising from the 2006 Lufthansa order, expressed in 2013 -year US dollar terms  
and as reported in Boeing's revenue management system, as the base -year net price to which the 
Arbitrator would then apply the escalation formula contained in the [[***]] Emirates.457 
6.287.   The United  States  argues that the European  Union 's criticisms re garding the Emirates 
[[***]] have no merit. The United  States  observes that it provided evidence concerning the 
circumstances surrounding the formulation of the [[***]] and the 747 -8I prices for the [[***]], 
including [[***]]. The United  States  argues that Emirates is a customer whom Boeing knows very 
well from its 777 aircraft sales to the airline and that the 747 -8I prices for [[***]].458 
6.288.   Moreover, the United  States  rejects the 2006 Lufthansa order of 20 747 -8I aircraft that the 
European  Union  proposed as an alternative comparator order for the 2013 Emirates lost sal e 
 
452 United  States' comments on the European Union's response to Arbitrator question No. 106, 
paras.  148-161 and fn 204.  
453 United  States' comments on the European Union's responses to Arb itrator question No. 96, para.  21, 
No. 97, para.  63, and No. 105, paras.  140 and 143; [[***]]  (Exhibit [[ ***]]);  and [[***]]  (Exhibit [[***]]) . 
454 European Union's responses to Arbitrator question No. 52, para.  3, and No. 97, para.  52; and 
comments on the U nited States' response to Arbitrator question No. 121, paras.  235-249. 
455 The 747 -8I is the closest competing Boeing model relative to the A380, which was the Airbus model 
actually sold in the Emirates lost sale.  
456 European Union's response to Arbitrator qu estion No. 68, para.  236. 
457 The European Union proposes to use this approach instead of using the per -aircraft net price 
expressed in base -year US dollar terms reported in the 2006 Lufthansa order subject to the associated 
escalation formula. (European Uni on's written submission para.  246; response to Arbitrator question Nos. 28, 
52, 97, para.  53; and Correcting US lost sales valuation , (Exhibit EU -143 (HSBI)) ). 
458 United  States' responses to Arbitrator question No. 121, paras.  87-90, and No. 122, paras.  95-100; 
Boeing Declaration, (Exhibit USA -5 (BCI)); Boeing E -mail regarding Questions 116, 118, 121, 124(c), 125, 
128-129, 132, (Exhibit USA -66 (HSBI)); Emirates [[***]] Information, (Exhibit USA -16 (HSBI) ); and [[***]], 
(Exhibit USA -71 (HSBI)).  
 WT/DS 316/ARB 
 
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  because, in the United  States ' view, the European  Union  ignores the importance of the [[***]] and 
timing for determining aircraft prices. More specifically, according to the United  States , the Lufthansa 
747-8I delivery prices are [[***]], and were set in  2006, just after the 747 -8I program me had been 
launched, and more than six years prior to the Emirates lost sale. The United  States  further argues 
that the [[***]].459 
6.289.   The United  States  proposes that if the Arbitrator were nevertheless not to use the Emirat es 
[[***]], it could use the 2013 Korean Air order of five Boeing 747 -8I aircraft as an alternative 
comparator order for the Emirates lost sales.  According to the United  States , the 2013 Korean Air 
order is preferable to the 2006 Lufthansa order, because Korean Air is a major airline in Asia that 
has ordered and taken delivery of both A380 aircraft and 747 -8I aircraft, and its 2013 order for 747 -
8I aircraft occurred in the same year as the Emirates A380 lost sale.460 
6.290.   The European  Union  responds that the 2013 Korean Air order is not a representative, 
reliable, and robust comparator order for the 2012 Emirates lost sale. According to the 
European  Union , the fact that Emirates and Korean Air are both based in Asia is irrelevant because 
pricing for long -range aircraft is driven by airline characteristics, not by the location of their hub.461 
6.291.   The European  Union  further argues that the United  States  ignores the importance of order 
size by choosing an alternative comparator order from Korean Air for five aircraft representing a 
tenth of the order size of the Emirates lost sale of 50 aircraft. The European  Union  contends that the 
Korean Air comparator order fails to account for the signalling effect that Boeing could have hoped 
to reap from the large order of 50 747 -8I aircraft by Emirates and the price concessions and/or 
volume discounts Emirates would therefore most likely have received. Similarly, th e European  Union  
is of the view that the United  States  appears to have overlooked that, unlike Lufthansa, Korean Air's 
revenue, number of passengers carried, hours flown, passenger -kilometres flown, seats offered, and 
number of employees, differ consistent ly from Emirates. According to the European  Union , the 
similarity in airline -relevant characteristics between Emirates and Lufthansa suggests that the type 
and extent of price concessions that Emirates would have received from Boeing are more accurately 
captured by the 2006 Lufthansa order than by the 2013 Korean Air order. The European  Union  
further contends that the fact that the 2006 Lufthansa order was placed seven years prior to the 
Emirates lost sale does not matter significantly given that delivery p rices are escalated year -on-
year.462 
6.292.   The Arbitrator notes that both parties offer comparator orders that reasonably approximate 
what the delivery prices of the Boeing models sold in the counterfactual would have been.  We thus 
examine these comparator orders to determine whether they can be used to estimate the prices of 
the counterfactual Boeing orders.  
6.293.   The European  Union  has listed a number of criteria intended to guide the Arbitrator in its 
assessment of the representativeness, reliability, and robustness of the comparator orders (actually 
won by Boeing). This list includes criteria that relate to the pricing terms of the relevant contracts, 
such as the comparator LCA type, order size, delivery schedule, order year, and competitiveness of 
the sales campaign . Other criteria listed by the European  Union  refer to the aircraft's physical and 
performance characteristics, such as BFE, FDE, engine supplier, engine type, and engine 
performance, as well as MTOW. We recognize that all these elements may impact on an a ircraft's 
price in a given sales contract.463 
6.294.   At the same time, we consider that focusing on some of these items, in particular those 
related to the aircraft's characteristics, might be conceptually misguided because Boeing and Airbus 
offerings frequently fe ature different physical or performance characteristics. It seems likely that 
where the customer in a given lost sale ordered a certain Airbus model with particular characteristics, 
it would have ordered the closest competing Boeing model with characterist ics that would inevitably 
 
459 United  State s' response to Arbitrator question No. 61, para.  31, and No. 122, para.  99; and 
comments on the European Union's response to Arbitrator question No. 106, para.  155. 
460 United  States' response to Arbitrator question No. 121, para.  94; and No. 122, para.  100; and 
Korean Air 2013 747 -8I Order Documentation, (Exhibit USA -76 (HSBI)), pp.  17, and 22 -25. 
461 European Union's comments on the United  States' response to Arbitrator question No. 121, 
paras.  254-265. 
462 European Union's comments on the United  States' respon se to Arbitrator question No. 121, 
paras.  254-265. 
463 European Union's response to Arbitrator question No. 106, paras.  153-154. WT/DS 316/ARB 
 
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  have differed to some degree in the counterfactual. We therefore decline to let such physical 
characteristics (other than the use of the closest competing Boeing model) materially guide our 
decision as to the proper comparator ord ers to use in this context.  
6.295.   One of the European  Union 's general arguments regarding the comparators selected by the 
United  States  is that [[***]] to Airbus should be preferred to comparator firm orders. We do not 
agree . To the contrary, we consider that  comparator  firm orders are preferable because they 
represent what the same (or similar) customer (i.e. airline) actually agreed to after negotiations 
occurred, and not something hypothetical (i.e. [[***]] by Boeing).  
6.296.   Another point of disagreement between the parties is the use of [[***]] as comparators. We 
agree with the European  Union  that prices in [[***]] that have [[***]] have not been accepted by 
the customer. It is likely that customers would try to improve prici ng conditions in [[***]] 
negotiations. Specifically with regard to the Emirates [[***]], we further consider that the 
information that it contains is less reliable than order information, because it was [[***]] to the 
customer. Absent proof of [[***]]. 
6.297.   To sum up, we have decided to reject the use of [[***]] as well as the use of [[***]]. This 
means that we need to choose comparators from among the proposed comparator firm orders for 
the closest Boeing model.  
6.298.   Generally, our choice of the relevant comparator firm orders is based on one main criterion, 
namely the customer's identity, i.e. the airline, as applying this criterion would likely provide us with 
pricing terms to which the airline would have agreed, all things being equal, had Boeing won the lost 
sale. In the absence of a proposed comparator order from the same airline, we opt for a comparator 
order involving a different airline that shares relatively similar characteristics to the airline that would 
have placed the order. Finally, where we have differ ent proposed comparator orders from the same 
airline, but for a different order size, we select the comparator with the order size closest to that of 
the lost sale.  
6.299.   In the light of the above, we review the comparators that the parties propose for the five 
lost sales at issue. We start with the 2012 Cathay Pacific Airways lost sale.  
6.300.   Table  9 summarizes the main characteristics of the comparator orders that the parties 
propose, either as first -best or second -best option, for the 2012 Cathay Pacific Airways los t sale464: 
Table 9: Comparators for Cathay Pacific Airways lost sale proposed by the parties  
Cathay Pacific Airways  
lost sales  Comparators proposed by the parties  
Year Model  Order 
size Year Airline  Type of 
comparator  Model  Order 
size 
2012 A350XWB -
1000 10 2012 Cathay Pacific 
Airways  firm order  777-300ER  [[***]] 
[[***]] Cathay Pacific 
Airways  [[***]] 777-300ER  [[HSBI]] 
 
2011 Cathay Pacific 
Airways  firm order  777-300ER  10 
 
 
6.301.   We consider that the best comparator for the 2012 Cathay Pacific Airways lost sale is the 
2011 Cathay Pacific Airways order of ten  777-300ER aircraft. This is so because it is a firm order 
that was made by the same airline for Boeing's closest competing model and it involves the same 
number of aircraft. W e therefore find this comparator order provides a reasonable estimate of the 
prices of the LCA that Boeing would have sold to Cathay Pacific Airways in the counterfactual.  
6.302.   Second, regarding the 2012 Transaero Airlines lost sale, as we explained in section 
6.3.4.3.4.1 , we have concluded that there would have been no counterfactual 747 -8I deliveries to 
Transaero Airlines owing to the  subsequent  bankruptcy of Transaero Airlines, which we consider 
 
464 This table does not show the alternative comparator order proposed by the European Union to 
account for the partial conversion of the Cathay Pacific Airways lost sales, because, as we explained in 
section  6.3.4.3.4.4 , accounting for conversions would be s peculative in our view.  WT/DS 316/ARB 
 
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  should be assumed to have occurred also in the counterfactual. W e thus need not select any 
comparator order for the Transaero Airlines lost sale.  
6.303.   Third, regarding the 2013 Singapore Airlines lost sale, we note that both parties propose to 
use the same comparator order, namely the 2013 Singapore Airlines order for 30 Bo eing 777 -300ER 
aircraft. We agree with the parties and consider that this is the best comparator for the Singapore 
Airlines lost sale, because the firm order was placed by the same airline for Boeing's closest 
competing model and for the same order size. W e therefore find this comparator provides a 
reasonable estimate of the prices of the LCA that Boeing would have sold to Singapore Airlines in 
the counterfactual.  
6.304.   Fourth, regarding the 2013 United Airlines lost sale, we first recall that we have decided not 
to take conversions into account. We further note that both parties propose the same comparator 
order, namely the 2015 United Airlines order of ten 777 -300ER.465 We, too, consider that this is the 
best comparator for the United  Airlines lost sale , because the firm order was placed by the same 
airline, for Boeing's closest competing model, and involved the same number of aircraft. We 
therefore find that this comparator provides a reasonable estimate of the prices of the LCA that 
Boeing would have s old to United Airlines in the counterfactual.  
6.305.   Fifth, regarding the 2013 Emirates lost sale, Table  10 summarizes the main characteristics 
of the comparators proposed by the parties. The Emirates lost sale is the only lost sale at issue for 
which there is no firm order placed by the airline associated with the lost sale ( in casu , Emirates) 
for Boeing's clo sest competing model. As we explained above, we nevertheless reject the use of 
[[***]], which [[***]]  Emirates and which is favoured by the United  States . We do so because in 
our view pricing information contained in a [[***]] is likely to be less reliable  than that contained in 
a firm order.  
Table 10: Comparators for Emirates lost sale proposed by the parties  
Emirates  
lost sales  Comparators proposed by the parties  
Year Model  Order 
size Year Airline  Type of 
comparator  Model  Order 
size 
2013 A380 50 [[***]] Emirates  [[***]] 747-8I [[***]] 
2013 Korean Air  firm order  747-8I 5 
2006 Lufthansa  firm order  747-8I 20 
 
6.306.   Turning to the choice between the 2006 Lufthansa firm order and the 2013 Korean firm 
order, we offer the following considerations. First , the record reflects that , as an LCA customer, 
Lufthansa has more relevant characteristics (such as r evenue, number of passengers carried, hours 
flown, passenger -kilometres flown, seats offered, and number of employees) in common with  
Emirates than does Korean Air.466 These similarities in LCA customer characteristics between 
Lufthansa and Emirates suggest to us that the pricing terms, including the type and extent of price 
concessions, that Emirates would have been able to negotiate wit h Boeing would be more accurately 
captured by the 2006 Lufthansa order than by the 2013 Korean Air order. It is also plausible that 
while negotiating pricing terms with Emirates, Boeing would have been conscious of factors other 
than price, such as signall ing to its potential customer base that the 747 -8I enjoyed the confidence 
of a strategically significant LCA customer like Emirates. Based on the aforementioned similarities 
between Emirates and Lufthansa, it appears to us that Boeing would likely  also have been conscious 
of signalling effects when negotiating pricing terms with Lufthansa. [[***]]  LCA pricing.467  
 
465 As explained above, we note that the European Union initially proposed the 2015 United Airlines 
order for ten Boeing 777 -300ER aircraft, but later proposed the 2013 United Airlines order for ten 787 -10 
aircraft to account for the conversion of the United Airlines lost sale.  
466 European Union's comments on the United  States' response to Arbitrator question No. 121(c), 
Table  2. 
467 United  States' response to Arbitrator question No. 61 (noting that "[s]trategically significant 
customers [[***]]. Customers vary in terms of their strategic significance to Boeing. Some customers are 
 WT/DS 316/ARB 
 
- 102 - 
 
  6.307.   Our second consideration relates to order size. T he size of the 2013 Korean Air order (five 
747-8I aircraft) is ten times smaller than the size  of the Emirates lost sale. In contrast, the size of 
the 2006 Lufthansa order (20 747 -8I aircraft) is significantly closer to the Emirates lost sale. 
[[***]] .468  
6.308.   We recognize that there is a gap of seven years in relation to the order year between the 
Lufthansa comparator order and the Emirates lost sale. However, pursuant to LCA sales contracts, 
the value of counterfactually delivered aircraft is determined by applying the escalation formula 
contained in the Lufthansa comparator order . This takes into accou nt the changes in labour and 
material costs in the production of the 747 -8I model, to the gross price and price concessions 
expressed in 2013 US dollar terms . We consider that by applying the escalation formula we can 
minimize any impact that the gap betwe en the year of order of the Lufthansa sale and the Emirates 
sale would have on our determination of counterfactual Boeing prices.469  
6.309.   On the basis of the above considerations, we therefore find that the 2006 Lufthansa order 
for 20 747 -8I aircraft constitutes  a better comparator order for the 2013 Emirates lost sale than the 
2013 Korean Air order for five 747 -8I aircraft.  
6.310.   As concerns the pricing terms that we obtain from the 2006 Lufthansa order, we reject the 
European  Union 's suggestion to use the actual average Lufthansa 2013 per -aircraft net delivery price 
and to apply the escalation formula contained in the Emirates [[***]]. The European  Union  did not 
provide any economic rationale to justify combining the gross price and  price concessions contained 
in one contract and the escalation formula contained in another contract. We therefore prefer to 
take the same approach as for the other comparator orders. That is to say, we use the per -aircraft 
gross price  and price concessio ns expressed in base -year US dollar terms , and  the associated 
escalation formula contained in the order contract, which allows us to express the net delivery price 
in delivery -year US dollar terms . We also take into account any [[***]].  
6.311.   To sum up our decisions above, Table  11 compiles the relevant comparator orders that we 
have selected to value the five lost sales.  
 
recognized market leaders, and sales to such a customer can be expected to boost the appeal of the model to 
other customers"); and European Union's response to A rbitrator question No. 61 (noting that "a manufacturer's 
views on the strategic importance of a sales campaign [[***]]. A manufacturer may consider a campaign to be 
of particular strategic importance for many reasons, including … the status of the airline in terms of its 
perception by other airlines as a market leader").   
468 United  States' responses to Arbitrator question No. 61, para.  36 (noting that "[[***]]" ), and No. 
125, para.  117 (noting that "[[***]]"); and European Union's comments on the United  States' response to 
Arbitrator question No. 125.  
469 We note that the United  States has argued that, to the extent that the Arbitrator does not use 
[[***]], it  should use the 2013 Korean Air order as the appropriate comparator order for the 2013 Emirates 
lost s ale because the "[Korean Air] order for 747 -8Is occurred in the same year as the Emirates A380 lost sale" 
(United  States' response to Arbitrator question No. 121(f), para.  94). However, the United  States has not 
offered any rationale for its assertion that  the comparator order necessarily needs to be contemporaneous with 
the lost sale, considering that, as we have noted above, the value of the aircraft is determined by applying the 
escalation formula (which takes into account the changes in labour and mater ial costs in the production) to the 
gross price and price concessions.  
 WT/DS 316/ARB 
 
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  Table 11: Comparator orders selected by the Arbitrator  
Lost sales in  
the Reference Period  Selected comparator order  
Year Airline  Model  Order 
size Year Airline  Model  Order 
size 
2012 Cathay Pacific 
Airways  A350XWB 1000  10 2011 Cathay Pacific 
Airways order  777-300ER  10 
2012 Transaero 
Airlines  A380 4 2012 - - - 
2013 Singapore 
Airlines  A350XWB 900  30 2013 Singapore Airlines  
order  787-10 30 
2013 United Airlines  A350XWB 1000  10 2015 United Airlines  
order  777-300ER  30 
2013 Emirates  A380 50 2006 Lufthansa  
order  747-8I 20 
 
 
6.312.   As we noted above, the European  Union  asserts that the Challenged Information that the 
United  States  submitted in its responses to the third round of questions is incomplete, inconsistent 
and non -verifiable in important aspects.470 We recall that the Challenged Information primarily 
relates to evidence that the European Union had requested the Arbitrator to seek from the 
United  States  on the basis that evidence previously submitted by the United  States  did not 
sufficiently demonstrate the reliability of certain information used in the United  States' valuation 
methodology. The European Union's  object ion regarding  incompleteness, inconsistency , and non -
verifiability concerns  the United  States ' newly submitted evidence.  
6.313.   The European Union argues that, following the Arbitrator's evidentiary request,  the 
United  States  has modified its method of quantifying the value of lost sales by relying on pricing 
terms such as gross price and price concessions from the time of the order as contained in the 
Purchase Agreements  (PA) or [[***]] and excluding all pos t-order developments on pricing terms, 
[[***]]. According to the European Union, this modified approach is inconsistent with the 
United  States ' original method of quantifying the value of lost sales using pricing terms retrieved 
from [[***]] aircraft that have already been delivered.471  
6.314.   Furthermore, the European Union contends that the Singapore Airlines 2013 787 -10 Order 
Documentation provided b y the United  States  contains information only on the [[***]] between 
Boeing and Singapore Airlines [[***]]. According to European Union, there is therefore no objective 
basis upon which to accept the accuracy of the pricing information reported in the [[***]].472 
6.315.   The Arbitrator notes that the evidence on the record indicates that a PA is an LCA sales 
contract, which specifies, inter alia , the gross price, price concessions, escalation formula, order 
size, delivery schedule, size and timing of PDPs, penalties for late deliveries and performance 
guarantees, options, purchase rights, and conversion rights at the time of order. The evidence 
further indicates that [[***]] . However, the final delivery price [[***]].473 
6.316.   We further note that the United  States ' initial valuation of lost sales relied on the pricing 
information contained in the [[***]], with the exception of the valuation of [[***]], which was based 
on pricing information contained in [[***]].474 These [[***]] reflect any post -order developments 
and affected the contractual price to be paid for the LCA in question, including [[***]].475 We note, 
however, that following our request that the United  States  provide, among other things, portions of 
relevant sales contracts (including amendments), [[***]], the United  States  replaced previously 
 
470 See footnote 309 above.  
471 European Union's comments on the United  States' response to Arbitrator question No. 135, 
paras.  360-366. 
472 European Union's response to Arbitrator question No. 135, para.  363; and Singapore Airlines 2013 
787-10 Order Documentation , (Exhibit USA -73 (HSBI)) . 
473 United  States' response to Arbitrator question No. 135, para.  156. Based on our review of the record, 
we see no reason to doubt the United  States' explanation in this context.  
474 Cathay Pacific 777 -300ER Order Information, (Exhibit USA -12 (HSBI)); Trans aero 747 -8I Order 
Information, (Exhibit USA -13 (HSBI)); Singapore Airlines 787 -10 Order Information, (Exhibit USA -14 (HSBI)); 
and United 777 -300ER Order Information, (Exhibit USA -15 (HSBI)).  
475 This understanding is based on comparisons of original contract s and delivery invoices on the record.  
 WT/DS 316/ARB 
 
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  provided data on gross price and price concessions with the pricing information contained in the PAs 
or [[***]] to val ue lost sales, with the exception of the [[***]].476 Unlike [[***]], the pricing 
information contained in the P As [[***]] reflects the pricing terms [[***]]. As explained in section 
6.3.4.3.2 , in the light of our decision to take into account up -to-date info rmation that sheds light on 
how we should quantify the adverse effects determined to exist in the 2011 -2013 Reference Period, 
we value lost sales using the gross price and price concessions contained in the PAs or [[***]], but 
add any relevant post -order d evelopments that have an impact on pricing terms [[***]].477  
6.317.   Specifically regarding the 2013 Singapore Airlines comparator order, we note that the 
[[***]] makes several cross -references to the [[***]] between Boeing and Singapore Airlines. 
However, we rejec t the European Union's contention that in the absence of the [[***]], there is no 
objective basis to accept the accuracy of the delivery prices reported in the [[***]]. The European 
Union has failed to explain why [[***]]. In short, we see no reason to bel ieve that the relevant 
pricing information contained in the [[***]] would, unless specified therein, conflict with relevant 
information in the original PA in such a way as to make the information contained in the [[***]] 
inaccurate. Therefore, we see no merit in the European Union's view that the Arbitrator should not 
accept the accuracy of the pricing information contained in the [[***]] for the 2013 Singa pore 
Airlines comparator order.  
6.318.   Based on the for egoing, we do not accept the European Union's arguments that the 
Challenged Information is incomplete, inconsistent and non -verifiable in any material respect such 
that the Arbitrator could not reasonably rel y upon it in its valuation analyses, where relevant . 
6.3.4.3.6.2   Failure to use [[***]] escalation factors  
6.319.   The European Union rejects the United  States ' use of [[***]] escalation factors478 [[***]], 
as proposed by the United  States , on the ground that [[***]] escalation  factors artificially inflate 
the counterfactual delivery price.479 The European Union proposes to apply the  [[***]] escalation 
factors instead of [[***]] factors for the counterfactual deliveries occurring before [[***]] and the  
[[***]] escalation factors o nly [[***]] for counterfactual deliveries occurring after [[***]].480 
6.320.   The United  States  argues that the use of the escalation factors that were [[***]] at the time 
that Boeing would have made the relevant counterfactual sale is proper and consistent with its 
overall valuation approach, which does not take into account counterfactual post -order factual 
developments .481 The United  States  further contends tha t the use of [[***]] escalation factors is 
unnecessarily complicated because the difference between the [[***]] and the [[***]] escalation 
factors is likely to be small and the [[***]] escalation factors would only apply to some 
counterfactual deliveries g iven that [[***]] of the relevant counterfactual deliveries are scheduled 
for 2018 or subsequent years.482 
6.321.   The Arbitrator notes that the delivery price paid by the airline is based on the [[***]] 
escalation factors [[***]]. We further note that the differenc e between the [[***]] escalation factors 
and the [[***]] escalation factors is due to [[***]] associated with [[***]] the escalation factor 
 
476 Cathay Pacific 2013 777 -300ER Order Documentation, (Exhibit USA -68 (HSBI)); Singapore Airlines 
2013 787 -10 Order Documentation, (Exhibit USA -73 (HSBI)); and Transaero 2013 747 -8I Order 
Documentation, (Exhibit USA -75 (HSBI)).  
477 We note that the European Union, in arguing that the Challenged Information is "inconsistent" with 
previously submitted information, makes no claim that such inconsistency has any detrimental impact on the 
European Union's due process rights in  this proceeding. Rather, this argument appears to be a critique of the 
general coherence of the United  States' evidentiary submissions and valuation methodology. As explained 
above, however, we ultimately agree with the European Union that we should take into account relevant 
post-order developments in valuing the lost sales.  
478 As explained above, the escalation factor is determined by an escalation formula that [[***]] 
reflecting the evolution of labour and material costs in the LCA production and used to  calculate the net 
delivery prices in delivery -year US dollar terms.  
479 European Union's written submission, para.  255. 
480 Correcting US lost sales valuation, (Exhibit EU -143 (HSBI)).  
481 See sections 6.3.4.1.1  and 6.3.4.3.2  above.  
482 United  States' written sub mission, para.  223; and response to Arbitrator question No. 58, 
paras.  18-19. 
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  [[***]].483 The United  States  did not provide any economic rationale as to why such [[***]] could 
be ignored.  
6.322.   To minimize [[***]], we follow the approach proposed by the European Union. That is to 
say, we apply the [[***]] escalation factors for any counterfactual deliveries scheduled before 
[[***]] and the [[***]] escalation factors [[***]] for counterfactual del iveries scheduled after 
[[***]]. 
6.3.4.3.6.3   Failure to perform necessary price adjustments  
6.323.   The European Union argues that if the United  States  fails to demonstrate the comparability 
between lost sales counterfactually won by Boeing and comparator orders that Boeing actually 
secured, the Arbitrator should either select alternative comparator orders, or, at a minimum, make 
price adjustments to the comparator orders to account for differences between the counterfactual 
Boeing order and the comparator order, including wit h respect to order size, delivery schedule and 
aircraft configuration.484 For example, the European Union submits that, contrary to what the 
United  States  asserts, the evidence on the record demonstrates that Boeing generally grants volume 
discounts, which the Arbitrator would need to take into account.485 Although the European Union 
contends that it is difficult to propose methodologies to perform these price adjustments based on 
the quality and reliability of the information provided by the United  States , it suggests different ways 
of applying such price adjustments.486  
6.324.   Specifically, the European Union proposes to draw reasonable inferences from a detailed 
comparison of price information contained in (a)  the [[***]] submitted by Boeing in the [[***]] lost 
sales campaign , and (b)  the [[***]] comparator order, proposed by the United  States . According to 
the European Union, the relevant differences between the [[***]], including order size and delivery 
schedules, should be reflected in different pricing terms. The European Union refers to these 
differences in pricing terms to adjust the prices of the [[***]] comparator orders, and the 2006 
Lufthansa comparator order for the Emirates lost sale to account for their differences in order size 
and delivery schedule with respect to their original Airbus orders.487 The European Union also 
explains, how, if the information pertaining to the [[***]] were deemed unreliable, a structured 
comparison between (a)  the [[***]] aircraft , and (b)  the [[***]] aircraft would enable the Arbitrator 
 
483 We note in this respect that the [[***]] escalation factors are, on average, [[***]] higher than the 
[[***]] escalation factors. For most comparator orders, the difference betw een the [[***]] and the [[***]] 
escalation factors tend to increase over time, while for others, the difference initially increases but then 
decreases. Similarly, the [[***]] escalation factors [[***]] are larger than the [[***]] escalation factors 
[[***]] . Overall, we observe that the use of [[***]] escalation factors [[***]] yields larger delivery prices than 
with [[***]] escalation factors.  
484 European Union's response to Arbitrator question No. 106, para.  166, and No. 166, para.  53. 
485 European Union's co mments on the United  States' response to Arbitrator question No. 125, 
paras.  276-278. 
486 The European Union also proposes different methodologies to determine the degree of price 
adjustments that it considers necessary to control for such criteria as differ ences in the type of comparator 
LCA, competitiveness of the campaigns, BFE, FDE, jet engines, engine supplier, engine type, and engine 
performance, and MTOW. (European Union's response to Arbitrator question No. 106, paras.  168-172).  
The United  States arg ues that while certain of the European Union's criteria of representativeness 
support the use of the comparators proposed by the United  States, the use of the above -mentioned remaining 
criteria would be inappropriate. (United  States' comments on the Europe an Union's responses to Arbitrator 
question No. 96, paras.  19-30, Nos. 105, 106, and 165).  
As we explained in section 6.3.4.3.4 , we consider that in the counterfactual the customer associated 
with a given lost sale would have ordered the closest competing  Boeing model with physical or performance 
characteristics that would likely have differed to some degree from the Airbus model actually ordered. In our 
view, adjusting for different physical or performance characteristics would not be appropriate. Moreove r, even 
if it were appropriate, in principle, to control for any such characteristics, undertaking such an adjustment on 
the basis of the information before us would entail speculation on our part. Indeed, we note that one of the 
methodologies suggested by  the European Union would have required contract information on itemized prices 
for certain aircraft specifications, [[***]] , that are not reported in the order  contracts to which we were given 
access. Similarly, another methodology suggested by the Europe an Union would have required [[***]].  
However, we note that the European Union did not explain concretely how these methodologies could be 
applied to the comparator orders for the various lost sales.  
487 European Union's responses to Arbitrator question No. 28, paras.  422-424, No. 68, paras.  238-242, 
No. 97, para.  63, No. 106, para.  168, and No. 164, para.  37. 
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  to downward -adjust the prices contained in the [[***]] comparator orders to better approximate 
the values of the lost sales if the orders had been won by Boeing in the counterfactual.488  
6.325.   Similarly, the European Union pr oposes to quantify volume discounts by comparing the price 
and order information contained in the 2006 Lufthansa order and 2009 Korean Air order if the 
structured comparison between the [[***]] and the [[***]] is "not possible".489  
6.326.   The United  States  argues that the downward adjustments to the per -aircraft prices that the 
European Union proposes are spurious because the evidence on the record does not support the 
premise that orders involving larger numbers of aircraft and more distant delivery positions 
consistently or predictably have lower per -airplane prices than orders involving smaller numbers of 
aircraft.490 More generally, the United  States  points out that Boeing [[***]].491 In addition, the 
United  States  contends that there is no basis to make the Europea n Union's proposed price 
adjustments because there is no relevant difference between the [[***]] Cathay Pacific Airways, the 
2013 United Airlines and the 2015 Singapore Airlines comparator orders and their corresponding lost 
sales.492 
6.327.   The Arbitrator consider s that, in principle, it may be desirable to perform certain price 
adjustments to reflect potential structural differences between the comparator orders and the 
counterfactual lost sales. For instance, we note that the share of [[***]].493 We further note th at for 
these exceptions, where the comparator order presents [[***]]. We also acknowledge that other 
factors, such as aircraft configuration and timing of delivery might impact the extent of price 
concessions ultimately agreed by the parties.  
6.328.   Nonetheless, we are of the view that the methodologies that the European Union  proposes  
to account for differences in order sizes and delivery schedules would entail speculation on our part. 
More specifically, we note that a comparison between the [[***]] aircraft and the [[***]] would not 
reasonably enable us to determine the extent to which any differences in order size or in delivery 
schedules resulted in any differences in prices among the relevant contracts  . In addition, and more 
importantly, the Eur opean Union does not explain concretely how the result of the comparison of 
[[***]] comparators could be applied to the comparator orders for the other lost sales, and we 
discern no straightforward way to do so. The European Union also failed to explain wh y differences, 
if any, revealed by the comparison of the [[***]] comparators would be relevant vis-à-vis other lost 
sales not involving [[***]] and in some instances involving different Boeing aircraft models, namely 
the [[***]]  model in the case of [[***] ] and the [[***]]  model  in the case of [[***]] .  
6.329.   We further note that the European Union only provided a concrete example regarding volume 
discounts. The European Union infers a volume discount rate by comparing the share of price 
concessions (with respect  to the gross price) reported in the 2006 Lufthansa order and the 2009 
Korean Air order. While this approach is easy to implement, it suffers, in our view, from the 
shortcoming that it assumes a simple linear relationship between the order size and the vol ume 
discount. Indeed, the methodology that the European Union  proposes  could lead to an implausible 
situation where the net price would become negative because the volume discount would exceed 
100% for a sufficiently large order. Another shortcoming of thi s proposed methodology – similar to 
a weakness with the comparison approach proposed by the European Union discussed above – is 
that it would not reasonably enable us to determine the extent to which any differences in order size 
or in delivery schedules r esulted in any differences in prices displayed between the relevant 
contracts . For these reasons, we reject the methodology  that the European Union proposes to infer 
a volume discount.  
 
488 European Union's response to Arbitrator question No. 164, paras.  36-37. 
489 European Union's response to Arbitrator question No. 97, para.  63. 
490 United  States' response to Arbitrator question No. 125, paras.  114 and 116.  
491 United  States' response to Arbitrator question No. 125, para.  117. 
492 United  States' comments on the European Union's response to Arbitrator question No. 164, para.  32. 
493 Analysis based on comparator orders reported in Calculation of Delivery Prices for Comparator 
Orders, (Exhibit USA -61 (HSBI)); and Net Price Calculations for Questions 153 and 154(d) Alternative 
Impedance Valuations, (Exhibit USA -106 (HSBI)).  WT/DS 316/ARB 
 
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  6.3.4.3.6.4   Discounting of Boeing's counterfactual delivery prices  
6.330.   As discussed in section 6.3.4.1.1  and as shown in Equation (4) above, the final step of the 
valuation of lost sales proposed by the United  States  involves computing the value of the net 
delivery -year prices (i.e. in delivery -year US dollar  terms) of scheduled deliveries e xpressed in US 
dollar  terms of the year in which the order was lost (i.e. order -year US dollar  terms) by discounting 
the value of delivery -year US dollar prices with a discount rate.  
6.331.   Generally, the United  States  argues that the discounting exercise should be done from the 
perspective of the United  States ' government and that the discount rate therefore is "the rate that 
the United  States  government is willing to pay to transfer the relevant economic activity, ref lected 
in trade, from the delivery year to the order year". According to the United  States , this rate 
corresponds to the interest rate on US sovereign debt. The United  States  thus proposes to use the 
interest rate on United  States  ten-year T -Bond rate as t he discount rate to be applied.494 
6.332.   The European Union raises two main arguments on the United  States ' proposed discounting 
exercise: (a)  the Arbitrator need not find the order -year values of the lost sales and can instead 
simply find the present -day (i.e. 20 19) value of the lost sales; and (b)  the discount rate suggested 
by the United  States  is artificially low, resulting in artificially inflated present values (i.e. order -year 
values) of lost sales. This section addresses each issue in turn.  
Appropriateness  of determining the present -day value of lost sales without 
determining  order -year values  
6.333.   The European Union contends that even if the Arbitrator were to conduct a discounting 
exercise – in the light of the United  States ' apparent ultimate goal of expressi ng the value of the 
adverse effects determined to exist in present -day value terms – the Arbitrator should only do so 
for certain counterfactual payments. More specifically, the European Union argues that the Arbitrator 
should discount future  counterfactua l payments, made in connection with the counterfactually sold 
Boeing LCA, expected to occur after 2019. The European Union proposes to apply an appropriate 
escalation formula to "de -escalate" the amount of such payments to  the present day with a 
downward -adjustment accounting for the risk of cancellation of the relevant order. Regarding any 
relevant counterfactual payments that would have already occurred before  the present day (i.e. 
before 2019), the European Union asserts that it would be more appropriate  to apply an appropriate 
escalation formula to those payments to bring their values directly up to the present day from the 
date on which a given payment would have been made in the counterfactual. According to the 
European Union, this approach avoids the unnecessary and excessive rounds of inflating ( taking  
forward) and discounting (bringing backward) of the net delivery price of the aircraft.495 
6.334.   The United  States  argues that an order -centric approach to lost sales is an integral part of 
the findings concern ing lost sales in the reports of the original panel, compliance panel and 
Appellate  Body in the original and compliance proceedings. The United  States  asserts that such an 
order -centric approach invites discounting the delivery -year prices back to the orde r year, if only as 
an intermediary step of ultimately determining the present -day value of the lost sales.496 The 
United  States  further contends that contrary to what the European Union appears to assume in 
advocating how to determine a present -year value of  the lost sales, (a)  escalating a base -year price 
to a delivery -year price, (b)  discounting the delivery -year price back to the order year to determine 
the order -year value of the delivery -year price, and, finally, (c)  adjusting the order -year value for 
 
494 United  States' methodology paper, paras.  49-51. 
495 European Union's written submission, paras.  336-344; and response to Arbitrator question No. 79, 
paras.  274-278. The European Union also submits that the United  States' approach to determining the order -
year value of  LCA delivery -year prices (deliveries of LCA generally occur years after their order) using a 
discount rate is unwarranted because if the Arbitrator were to follow the overall methodology proposed by the 
European Union and measure trade effects as and when  they arise (i.e. at the time of delivery), the 
discounting step in the United  States' methodology would become moot. (European Union's written submission, 
paras.  261-262). We recall that we have rejected this overall methodology proposed by the European U nion 
earlier in our Decision. (See section 6.3.3.1  above). We thus do not consider this proposal further in this 
context.  
496 As discussed in section 6.3.4.1.3  above, the United  States asks the Arbitrator to determine the 
present -day value of the adverse eff ects determined to exist by applying an inflation index to the value of the 
adverse effects expressed in reference -period dollar values.  
 WT/DS 316/ARB 
 
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  inflation to a present -day US dollar value are distinct steps that serve different purposes. In 
particular, the United  States  argues that the application of the escalation factor is meant to value 
the price of the aircraft in the year in which it is schedule d for delivery, the discounting exercise is 
meant to account for the fact that "economic activity today is more valuable than economic activity 
tomorrow" , and the inflation adjustment is designed to make sure that the countermeasures remain 
commensurate wi th the adverse effects determined to exist when applied in subsequent years.497 
6.335.   The Arbitrator recalls that, in this proceeding, it must determine the economic value of 
adverse effects that were determined to exist in the 2011 -2013 Reference Period.498 We have used 
an order -based approach to valuing lost sales, under which we temporally assign the value of lost 
sales to the 2011 -2013 Reference Period.499 Consistent with these earlier findings, we consider that 
it is appropriate to determine the value of the lost sales at the time that they occurred in the 2011 -
2013 Reference Period and thus look to determine the order -year values of the lost sales.500 We 
therefore reject the European Union's proposal to determine the present -day value  of the lost sales 
because it cannot be used to determine the order -year values  of the lost sales. We thus turn to 
examine the reasonableness of the United  States ' proposed disc ount rate that the United  States  uses 
to determine the order -year value of the lost sales.  
Choice of the discount rate  
6.336.   The European Union argues that the ten -year T -Bond rate that the United  States  proposed 
as a discount rate must be rejected because it is  a United -States -government -centric rather than 
Boeing -centric discount rate (i.e. it does not capture Boeing's relevant risks and circumstances, 
which the European Union considers an appropriate discount rate must do). The European Union 
further contends that the United  States  government is not  a party to any of the LCA sales contracts 
from which the values of the lost sales are derived, nor is the United  States  government making 
investments and taking risks regarding th ose sales transactions. According to  the European Union, 
the ten -year T -Bond rate thus underestimates the applicable discount rate, inter alia , because it fails 
to account for any risks of contractual default by an LCA customer, which, as the United  States  itself 
agrees, reduces the present value of an LCA contract, as measured at the time of order. The 
European Union argues that this leads to the particularly nonsensical situation where, because the 
Boeing -centric escalation factors (used to determine delivery -year prices) are higher than th e 
proposed United -States -government -centric discount rate (used to convert the delivery -year prices 
to order -year value), waiting for uncertain LCA sales revenues in the future would be more  valuable 
to Boeing than realizing the same sales revenue with cer tainty today.501  
6.337.   The European Union asserts that the contractual escalation factor is a more appropriate 
indicator of the time value of money than the ten -year T -Bond interest rate, although this approach 
would still overstate the value of the lost sale at the time of the order because, for example, the risk 
of future cancellation at the time of order would still need to be factored in. The European Union 
thus proposes to replace the ten -year T -Bond rate with a comparator -order -specific discount rate 
that captures three com ponents: (a)  the real interest rate; (b)  the expected LCA price inflation, 
which may be approximated by the contractually agreed escalation factor; and (c)  Boeing's inherent 
default risk in connection with future deliveries of LCA. According to the Europea n Union, in the 
absence of information on comparator -order or customer -specific default risks, Boeing's default risk 
 
497 United  States' written submission, paras.  228 (citing Appellate  Body Report, EC and certain member 
States – Large Civ il Aircraft (Article 21.5 – US), paras.  6.31 and 6.37; Panel Report, EC and certain member 
States – Large Civil Aircraft (Article 21.5 – US), paras.  6.1780 -6.1781, 6.1798; Appellate  Body Report, EC and 
certain member States – Large Civil Aircraft , paras.  1217, 1220, 1414(l)(o) -(p); and Panel Report, EC and 
certain member States – Large Civil Aircraft , paras.  7.1750, 7.1828, 7.1845, 8.2(d)), and 256 -259. 
498 See section 6.3.1 above.  
499 See section 6.3.3.2.1  above.  
500 This is so whether or not our ultimate goal w ill be to determine a present -day value of the adverse 
effects determined to exist.  
501 European Union's written submission, paras.  263, 265 -268, 271, 275, and 283 -290; responses to 
Arbitrator question No. 29, paras.  425-434, and No. 78, paras.  254, 263 -264, and 266 -270; and comments on 
the United  States' response to Arbitrator question No. 111, paras.  143-146 (citing United  States' responses to 
Arbitrator question No. 73, para.  90, No. 115, para.  55, and No. 126, para.  119).  
 WT/DS 316/ARB 
 
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  concerning future deliveries could be proxied by the historical cancellation rates across all LCA sales 
made by Boeing for the 2006 to 2017  time-period.502  
6.338.   Although the European Union argues that its suggested three -component discount rate best 
captures the economic circumstances surrounding the individual lost sales at issue, it also mentions 
the possibility of using Boeing's weighted average  cost of capital (WACC) at the time of the lost sales 
as a reasonable approximation of Boeing's discount rate.503  
6.339.   In response to an Arbitrator question, the European Union rejects the use of Boeing's cost 
of debt, which is one of the WACC components, as Boe ing's discount rate because it fails to meet 
two of the three requirements that the European Union considers a proper discount rate should 
meet. More specifically, according to the European Union, the cost of debt does not reflect price and 
cost inflation that is either specific to the production of Boeing LCA models involved in the 
counterfactual orders or to the LCA industry generally. Nor does the European Union consider that 
the cost of debt reflects the probability that the respective LCA customer canc els the order.504 
6.340.   The United  States  responds that all of the European Union's criticisms regarding the use of 
the ten -year T -Bond rate as the discount rate are inapposite, because they do not address the 
relevant issue under Article  7.10 of the SCM  Agreement , namely that adverse effects are being 
caused to the interests of the United  States  government (as a WTO member), not Boeing. The 
United  States  is therefore of the view that the valuation exercise is properly conducted from the 
perspective of the United  States, not Boeing. The United  States  further argues that the ten -year T -
Bond rate is conservative because ten years is longer than the time between the counterfactual 
orders and nearly all of the estimated counterfactual deliveries at issue here, while the  interest rate 
on shorter bonds would be lower, resulting in higher order -year values of delivery -year prices.505 
6.341.   The United  States  also argues that if the Arbitrator nevertheless wished to determine the 
order -year values of the lost sales from Boeing's perspective, then the Arbitrator could simply use 
the price of the aircraft in order -year US dollar  terms specified in the counterfac tual Boeing sales 
contracts without escalating that price to the time of delivery and then discounting the delivery price 
back to the order year. However, in response to an Arbitrator question, the United  States  also states 
that Boeing, in the normal cours e of business, values its [[***]]. The United  States  further observes 
that Boeing sometimes uses its WACC to discount anticipated future cash flows to determine their 
present value. However, the United  States  maintains that this relates to a different cont ext from the 
valuation of the level of countermeasures. The United  States  does not address what discount rate 
should be used in a discounting exercise undertaken from Boeing's perspective if the WACC were 
found to be an inappropriate discount rate in the c ontext of this proceeding.506 
6.342.   Finally, the United  States  is also of the view that the European Union's assertion that a 
discount rate must include a risk of order cancellation "is both unsupported and needlessly introduces 
technical deficiencies".507 
6.343.   The Arbit rator notes that the parties disagree on whether , if discounting were to be 
performed,  the discount rate should reflect Boeing's or the United  States  government 's perspective . 
As explained in section  6.3.4.3.3 , we consider that the valuation of lost sales must be carried out 
from Boeing's perspective. It follows that the discounting exercise must also be conducted from 
Boeing's perspective, and that any selected discount rate must reflect Boeing's perspective.  
6.344.   The question  now arises as to the appropriate discount rate to use from Boeing's perspective. 
As a first step, we briefly describe the purpose of discounting in the present context. Concluding an 
 
502 European Union's written submis sion, paras.  267-268 and 290; and response to Arbitrator question 
No. 29, paras.  425-434. 
503 European Union's response to Arbitrator question No. 29, paras.  435-436. A company's capital can 
consist of debt and equity. The WACC measures the company's cost of  debt and equity weighted by the value 
of the respective share of debt and equity in the company's total capital.  
504 European Union's response to Arbitrator question No. 111, paras.  225-239; and comments on the 
United  States' response to Arbitrator question  No. 111, paras.  141-151. 
505 United  States' methodology paper, para.  51; written submission, paras.  227-230; and responses to 
Arbitrator question No. 69, para.  46, and No. 72, para.  66. 
506 United  States' responses to Arbitrator question No. 78, paras.  98-99 and 102, No. 111, para.  36-37, 
and No. 175, para. 20; and Boeing WACC Data for 2012, 2013 (Exhibit USA -120 (BCI)).  
507 United  States' response to Arbitrator question No. 73, paras.  88-90. WT/DS 316/ARB 
 
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  LCA sales contract represents an investment for Boeing, i.e. Boeing must mobilize  (a large amount  
of) capit al and invest that capital in the production of the ordered LCA. In return for that investment, 
Boeing contracts for the receipt of future revenues linked to the future delivery of the ordered LCA. 
However, collecting future revenues entails risks. Whether  it is worth taking those risks in the light 
of the initial investment amount controls, in theory, Boeing's decision whether to conclude the 
contract in the first place. Indeed, if a company  could, for instance, take an initial investment amount 
and simply  invest it in risk -free bonds and in doing so realize a greater return over time than it could 
with an alternative investment contract for future revenues, this would argue against concluding the 
contract. Thus, the discounted present value of future reven ues arising from an investment can be 
expected to be a key component of a company's investment decisions. This also illustrates why a 
discount rate applied to anticipated future revenue streams should take into account a company's 
relevant costs and risks of waiting for those streams in order to compare that discounted present 
value to the initial investment value. This is the essence of a net -present -value (NPV) analysis. The 
key issue thus becomes how Boeing's costs and risks, associated with realizing fu ture revenue 
streams in an LCA sales contract scenario , can be captured with a view to determining their NPV at 
the time of order.  
6.345.   We consider that Boeing's risks and costs come in different forms. In particular, inflation 
may erode the value of Boeing's f uture revenue flows relative to the order date. Boeing also incurs 
the opportunity cost of allocating funds to the production of the ordered LCA rather than putting 
those funds to alternative potential uses. Therefore, in our view, the discount rate that w e look for 
here should capture the risks posed by inflation and the opportunity cost  of waiting to receive the 
payment for the production and delivery of an aircraft . Another risk that Boeing faces is that the 
order may also be cancelled, and thus the futu re revenue streams may never be realized. We have 
already decided in section 6.3.4.3.4.2  above to make appropriate adjustments for this risk by using 
the survival rate. We therefore consider that we need not capture this risk again in a discount rate.  
6.346.   The United  States  submits that if the value of the lost sales were considered from Boeing's 
perspective, there would be no reason to use a discount rate to express the delivery -year prices in 
order -year values because the Arbitrator could simply use the or der-year prices of the 
counterfactually ordered Boeing aircraft specified in the relevant counterfactual sales contract 
instead.508 In support of this argument, the United  States  asserts that "Boeing in the normal course 
[[***]]".509 While a review of Boeing's  financial statements does indicate that Boeing values its LCA 
order backlog, i.e. its estimated future revenues , using escalated prices510, this does not answer the 
question of how Boeing would express those estimated future revenues  to determine their order-
year value (i.e. the discounted value of post -order scheduled deliveries of aircraft in order -year 
dollar terms). Hence, using order -year contractual prices is an appropriate alternative to determining 
the order -year value of delivery -year prices (expres sed in delivery -year US dollar  terms).511  
6.347.   In addressing this argument, we recall that, in this proceeding, the value of lost sales is 
essentially controlled by the revenues that Boeing would most likely have realized from the lost sales 
had Boeing won them.  As discussed, it is undisputed that in the counterfactual Boeing would have 
realized these revenues, for the most part, years after the relevant counterfactual order dates. 
Indeed, Boeing specifically bargained for these post -order revenue streams , as illustrated by the 
delivery and payment schedules in the counterfactual sales contracts. As further discussed in the 
paragraphs above , waiting for future revenues entails risks for which Boeing would account when 
determining their order -year NPV. However, the re is nothing on the record that indicates to us that 
the order -year price of any LCA is necessarily equivalent to the order -year value of counterfactual 
delivery -year prices to be received by Boeing years following the order. The order -year price is 
simpl y a price that the customer would pay on the order date if the delivery could also occur on that 
date (which it will not be , pursuant to the contractual delivery schedule). We therefore reject  the 
United  States ' suggestion to use order -year prices.  
 
508 United  States' response to Arbitrator question No. 78, paras.  98-99 and 102.  
509 United  States' response to Arbitrator question No. 175, para.  20. 
510 Boeing Annual Report 2017 (excerpt), (Exhibit USA -34); and Boeing 2013 Annual Report 
(Exhibit  USA-102).  
511 In fact, the United  States itself recognizes that the value of a delive red aircraft expressed in 
delivery -year US dollars reflects the expected value of the aircraft that the United  States industry would have 
sold, but arguably does not reflect the value at the time of sale (i.e. the time that the sale was lost). 
(United  States' methodology paper, para.  49). 
 WT/DS 316/ARB 
 
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  6.348.   Taking  into account the above observations, we therefore agree with the European Union 
that if the discount rate is to reflect Boeing's perspective, it would be desirable to use a project -
specific discount rate that takes into account Boeing's opportunity cost o f waiting to receive the 
payment for the production and delivery of an aircraft, and also expected inflation. However, we 
question the validity of the comparator order -specific discount rate that the European Union 
proposes and that is composed of  the (a)  real interest rate, (b)  expected LCA price inflation, and 
(c) Boeing's risk of order cancellation. We note that the first two components together correspond 
to a nominal interest rate, since, according to the Fisher Equation, the real interest rate is equa l to 
the nominal interest rate minus expected inflation.512 In our view, it would be unusual to construct 
a discount rate by adding a measure of expected inflation to a real interest rate, rather than 
discounting expected future cash flows expressed in nomin al terms using directly a nominal interest 
rate, or discounting expected future cash flows expressed in real terms using a real discount rate.513 
We also note that the three -component discount rate proposed by the European Union is only 
project -specific beca use of the inclusion of the escalation factor as a proxy for the expected LCA 
price inflation. Yet, according to the European Union, the discount rate should be project -specific to 
account for the default risk of the airline, not because different [[***]] are used for different [[***]]. 
In other words, the European Union did not provide a project -specific discount rate that accounts 
for the specific default risk of the airline. In the absence of such project -specific discount rates, we 
consider that a Boeing -specific discount rate is the best available alternative.  
6.349.   We thus turn to address Boeing's WACC, which the European Union proposed as an 
alternative to a comparator order -specific discount rate . To recall, the United  States  explained that 
"Boeing sometimes  [but not always] uses its WACC to discount anticipated future cash flows in order 
to determine their present value" , but observed that "[t]hat is a different context from the level -of-
countermeasures valuation exercise at issue here".514 However, the  evidence on the record is 
insufficient for us to establish  what Boeing's customary approach – if it has one – to discounting 
these future revenue streams would be. We further observe that the WACC is a constructed rate. 
Its value differs depending on how certain WACC  components, in particular the cost of equity, are 
calculated and on the data sources that are used to make those calculations. Both parties provided 
values of Boeing's WACC that differ substantially, with the differences ranging from [[***]]  to 
[[***]]  percentage points. Some  of these differences likely reflect the fact that the parties have 
provided Boeing's WACC with reference to different points in time (i.e. July 2012 and July 2013 
(United  States ) versus December 2012 and December 2013 ( European Union )). But some  of these 
differences could also be the result of different approaches and data sources that the parties might 
have used to calculate the WACC. For these various reasons, we are not persuaded that the WACC 
would be an appropriate dis count rate for the valuation of lost sales in this proceeding.  
6.350.   We also note that both parties have mentioned the possibility of using the escalation factors 
found in Boeing's counterfactual sales contracts that would have governed the lost sales had Boein g 
won them as the discount rate applicable to each lost sale. We nevertheless note that, according to 
the European Union, such an approach would not account for the risk of cancellations. As explained 
by the European Union, applying the escalation factor a s a discount rate to the projected net 
delivery -year prices to determine their discounted values at the time of order, is tantamount to 
calculating the net delivery prices in order -year US dollar  terms using the corresponding escalation 
factor (i.e. order -year prices). Yet we note, and this is acknowledged by both parties, that escalation 
is conceptually distinct from discounting. Escalating serves to determine the amount of US dollar 
revenue that Boeing would ultimately receive upon aircraft delivery in connection with an LCA order 
in the counterfactual. In contrast, discounting is a means by which we can express the value of those 
post-order revenues in order -year values. In fact, we note that using the escalation factor as a 
discount rate implicitly would  assume that Boeing would have a zero -opportunity cost of time and 
would place less value on immediate benefits than on future benefits, because the escalation factor 
only accounts for expected changes in labour and material costs (i.e. inflation). We find  such an 
assumption unreasonable. Consistent with our previous decision to reject the use of order -year 
prices, we reject the use of escalation factors as the discount rate.  
 
512 European Union's written submission, fn 295.  
513 Moreover, as explained in section 6.3.4.3.4.2 , we agree with the European Union that the risk of 
future cancellations should be taken into account in the valuation of lost s ales, but we question the validity of 
the approach proposed by the European Union, which consists of combining rates based on different metrics, 
namely the nominal discount rate relating to the monetary value of time preferences and the cancellation rate 
relating to risk -taking in terms of cancelled aircraft deliveries.  
514 United  States' response to Arbitrator question No. 175, para.  20. (emphasis added)  WT/DS 316/ARB 
 
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  6.351.   As the parties' suggested discount rates appear to us inappropriate in the circums tances of 
this proceeding and given the lack of common ground between the parties on this particular issue, 
we proceed to select an alternative discount rate to discount Boeing's counterfactual anticipated 
post-order cash flows.  
6.352.   As explained above, an app ropriate  discount rate should in our view (a) reflect Boeing's 
opportunity cost of waiting to receive the payment for the production and delivery of an aircraft, and 
(b) account for inflation. With that in mind, we proposed to the parties the cost of debt as a discount 
rate. The cost of debt measures the effective interest rate that Boeing pays on its current debt. It is 
calculated as the sum of a T -Bond rate and Boeing's spread.515 The spread, defined as the difference 
between the yield of a T -Bond and Boein g's bond, is a measure of Boeing's risk of default.  
6.353.   The United  States  opposes using the cost of debt as a discount rate, but it did not provide 
any direct explanation as to why it could not be used.516 We also note the European Union's assertion 
that the co st of debt does not capture price and cost inflation.517 We disagree, since one of the 
components of the cost of debt is the ten -year T -Bond rate, which is a nominal interest rate. We 
also note that the ten -year T -Bond rate accounts for the opportunity cost of waiting in a risk -free 
setting.518 As indicated above, a ccording to the Fisher Equation, a nominal interest rate captures 
expected inflation.519 We are aware that the inflation reflected in the T -Bond rate refers to the US 
consumer price index (CPI) and not [[***]]. However, we note that the 2012 -2018 correlation 
between [[***]] is very high.520  
6.354.   In the light of all of the above, we find that Boeing's cost of debt with a ten -year maturity521 
which is av ailable from the record, is a suitable discount rate to use in the circumstances of this 
proceeding.522 
6.3.4.3.7   Conclusion  
6.355.   This concludes our assessment of technical aspects of the United  States ' methodology for 
valuing lost sales. As noted in section 6.1 above, we will apply these findings further below in 
section  6.4.2 when we calculate the actual value of the lost sales.  
6.3.4.4   Issues surrounding the valuation of impedance  
6.356.   In section  6.3.4.4 , we assess the approach proposed by the United  States  for determining  
the valu e of adverse effects in the form of impedance . We also address the technical criticisms that 
the European Union raised against specific steps contained in the United  States ' approach to 
quantifying impedance, and any alternatives to those specific steps that the European Union  
proposed .  
6.357.   The Appellate  Body has explained that "the phenomenon of impedance 'refers to situations 
where the exports or imports of the like product of the complaining Member would have expanded 
 
515 Boeing 2013 Annual Report, (Exhibit USA -120 (BCI)).  
516 United  States' response to Arbitrator question No . 111.  
517 As explained above in section 6.3.4.3.4.2 , we rejected the European Union's approach to include the 
average risk of cancellation in the discount rate. Instead, we account for the risk of future cancellations by 
applying the survival rate.  
518 As poi nted out by the European Union, the opportunity cost of waiting is often assumed to be 
constant across individuals and situations. (European Union's response to the Arbitrator question No. 78, 
para. 253).  
519 European Union's written submission, fn 295.  
520 The 2012 -2018 correlation between [[***]] is equal to 0.987, which is very close to the 2012 -2018 
correlation of 0.969 [[***]] and the 2012 -2018 correlation of 0.98 [[***]]. (See Boeing e -mail from [[ ***]] 
(Dec. 13, 2018), ( Exhibit USA -36 (BCI)); Boeing Escalation Slide, (Exhibit  USA-37 (BCI)); [[***]], (Exhibit  
USA-40 (BCI)); [[***]], (Exhibit USA-41 (BCI)); and Transaero (2013) comparator campaign: projected 
versus actual escalation rates, (Exhibit  EU-77 (HSBI)) ). 
521 We chos e a ten -year maturity because there is, on average, a [[***]] gap between the order year 
and the counterfactual delivery year. The [[***]] figure was computed as the weighted average of the number 
of years between order and counterfactual delivery, where t he weights are the share of aircraft to be delivered 
on a given date. As discussed in section 6.3.4.3.5.1 , the counterfactual delivery schedules are based on Airbus' 
contractually agreed delivery schedules.  
522 Boeing WACC Data for 2012, 2013, (Exhibit USA -120 (BCI)).  
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  had they not been "obstructed " or "hindered " by the subsidized product'".523 In the compliance 
proceedings, the panel found that challenged subsidies caused impedance in the VLA product 
market524 in six geographic markets based on LCA delivery data reflected in Table  12 below. The 
table ref lects deliveries of Airbus A380 aircraft and Boeing 747 -8I aircraft525 in these six geographic 
markets in the 2011 -2013 Reference Period. These two aircraft models were the only LCA in the VLA 
product market in the 2011 -2013 Reference Period.  
Table  12: Marke t for very large LCA526 
 European  Union  Australia  China  
Delivery Data  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  
Boeing Volume (Units)  0 5 5 0 0 0 0 0 0 
Boeing Market Share  - 55.6%  55.6%  0.0%  - - 0.0%  0.0%  0.0%  
Airbus Volume (Units)  0 4 4 1 0 0 1 2 1 
Airbus Market Share  - 44.4%  44.4%  100%  - - 100%  100%  100%  
 Korea  Singapore  United Arab Emirates  
Delivery Data  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  Dec. 
2011  2012  2013  
Boeing Volume (Units)  0 0 0 0 0 0 0 0 0 
Boeing Market Share  - 0.0%  0.0%  - 0.0%  - 0.0%  0.0%  0.0%  
Airbus Volume (Units)  0 1 2 0 5 0 2 11 13 
Airbus Market Share  - 100%  100%  - 100%  - 100%  100%  100%  
 
6.358.   The Appellate  Body modified the compliance panel's reasoning in this regard, but ultimately 
found that "the 'product effects' of the LA/MSF subsidies existing in the post -implementation period 
are a genuine and substantial cause of impedance of US LCA in the VLA markets in the 
European  Union [under Article  6.3(a) of the SCM  Agreement ], [and] Australia, China, Korea, 
Singapore, and the United Arab Emirates" under Article  6.3(b) of the SCM  Agreement .527 Thus, both 
the compliance panel and the Appellate  Body found that the United  States ' LCA industry's LCA 
deliveries into these six geographic markets would have been "higher" during the 2011 -2013 
Reference Period in the counterfactual.528 Importantly, however, neither the compliance panel nor 
the Appellate  Body specified how much hig her those deliveries would have been in any particular 
geographic market.529  
 
523 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.738 (quoting Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  1161).  
524 The compliance panel had found that  challenged subsidies caused displacement and/or impedance in 
all three product markets (i.e. single -aisle, twin -aisle, and VLA), but these findings were reversed on appeal 
vis-à-vis the single -aisle and twin -aisle product markets, as were the compliance p anel's displacement findings 
vis-à-vis the VLA product market.  
525 There are two versions of the Boeing 747 -8, the 747 -8F (freighter) and the 747 -8I (passenger). 
(Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 2323) . We note, 
however, that the product markets in the compliance proceedings included only passenger aircraft, and thus no 
findings were requested or made regarding impedance of deliveries of 747 -8F aircraft.  
526 The table is a reproduction of Table 22 in the compliance panel report and Table 13 in the 
Appellate  Body report.  
527 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.42(a).  
528 Appellate  Body Report, EC and certain member States – Large Civil Aircraft  (Article 21.5 – US), 
para. 6.41. We thus note that an increase in absolute numbers of Boeing's deliveries to the six geographic 
markets is how Boeing's relevant "exports or imports … would have expanded".  
529 European Union's written submission, para.  198 ( making this point); and United  States' written 
submission, para.  165 (noting that "[t]he United  States and the EU agree that the compliance appellate report 
found that the US LCA industry would have achieved a higher volume of deliveries and market share t han its 
actual level in the post -implementation period. However, the parties disagree as to the implications of this 
finding"). (fn  and quotation marks omitted)  
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  6.359.   We note that the United  States , in its methodology, takes the position that the actual 
deliveries of Airbus A380 aircraft that occurred in the six geographic markets during the 201 1-2013 
Reference Period (which, for ease of reference, we will refer to as the A380 Impedance Deliveries) 
would have been replaced, on a one -to-one basis, with counterfactual deliveries of Boeing 747 -8I 
aircraft (i.e. the closest competing Boeing model to the A380 aircraft) in the 2011 -2013 Reference 
Period.530 The United  States  thus computes the value of impedance in a given geographic market  𝑘 
in a given month or year 𝑠 in the Reference Period, as the average net delivery price of Boeing 747 -
8I aircraft i n that month or year multiplied by the number of 747 -8I aircraft that would have been 
delivered to that geographic market  𝑘 in year 𝑠 in the counterfactual531:  
𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒𝑀𝑎𝑟𝑘𝑒𝑡 𝑘,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷=𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷 
 ×𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡 𝑀𝑎𝑟𝑘𝑒𝑡 𝑘,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 
 (8)  
where  𝑠: delivery month/year in the Reference period  
 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷: average net delivery price of the 747 -8I model 
delivered in year 𝑠 and expressed in US dollar terms  
of delivery year 𝑠 
 𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡 𝑀𝑎𝑟𝑘𝑒𝑡 𝑘,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠: number of 747 -8I aircraft delivered to airline(s) in 
country market  𝑘 in year  𝑠. 
 
6.360.   The parties contest  two main subjects in this context, (a) how much higher Boeing's 
counterfactual deliveries would have been and what Boeing LCA models would have been delivered, 
and (b) the prices of Boeing's additional counte rfactual deliveries. This section addresses each in 
turn, after a brief word on the representativeness of the 2011 -2013 Reference Period for purposes 
of valuing impedance.  
6.3.4.4.1   Representativeness of the 2011 -2013 Reference Period  
6.361.   The Arbitrator  recall s that in  paragraph 6.203 , we indicated that we would conduct an inquiry 
into the representativeness of the 2011 -2013 Reference Period, including for purposes of our 
quantification of adverse effects in the form of impedance. We note in this respect that the VLA 
delivery volumes for notably one of the six relevant geographic markets were high for both 2012 
and 2013. It is unlikely that the exact same number of VLA deliveries or the same customers would 
have been observed in different years. However, this situation i s not inconsistent with the nature of 
the LCA industry.532 We thus discern nothing about the number of A380 Impedance Deliveries, or 
about any record data relating to the A380 Impedance Deliveries and market conditions in the 2011 -
2013 Reference Period, that  could be objectively characterized as so anomalous as to render the 
2011-2013 Reference Period unrepresentative of the short -term adverse effects (in the form of 
impedance) resulting from the European Union's failure to comply by the end of the implementa tion 
period.  
6.362.   In conclusion, we find no basis upon which to conclude that the 2011 -2013 Reference Period 
is unrepresentative in the context of valuing impedance and that we should therefore use only a 
temporal subset of the 2011 -2013 Reference Period rathe r than the entire 25 -month Reference 
Period.  
6.3.4.4.2   Number and models of increased Boeing counterfactual LCA deliveries  
6.363.   As already mentioned above, the United  States  takes the position that the actual deliveries 
of Airbus A380 aircraft that occurred in the six geographic markets during the 2011 -2013 Reference 
 
530 United  States' methodology paper, para.  82. 
531 With the exception of the European Union market , the impedance findings regarding each of the 
remaining five geographic markets at issue concern a single airline. For instance, the impedance findings 
regarding the 2012 deliveries of A380 aircraft to Singapore refers to Singapore Airlines. Conversely, t he 
impedance findings regarding the 2013 deliveries of A380 aircraft to the European Union refer to deliveries to 
Air France and British Airways.  
532 Panel Report, EC and certain member States – Large Civil Aircraft , para. 7.1719 (explaining that LCA 
"orders  tend to be very large and sporadic", thus naturally resulting in non -uniform delivery volumes of 
particular LCA to particular customers over time).  
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  Period (which, for ease of reference, we will refer to as the A380 Impedance Deliveries) would have 
been repla ced, on a one -to-one basis, with counterfactual deliveries of Boeing 747 -8I aircraft (i.e. 
the closest competing Boeing model to the A380 aircraft) in the 2011 -2013 Reference Period.533  
6.364.   The European Union contests that position534, arguing that an economic mo del is needed to 
determine how much higher Boeing's counterfactual LCA deliveries to the six geographic markets 
would have been during the 2011 -2013 Reference Period, taking into account supply - and demand -
side factors. According to the European Union, the se counterfactual deliveries would not necessarily 
have been Boeing 747 -8I aircraft but could have taken the form of other aircraft models, such as 
other Boeing twin -aisle aircraft like the 777 -300ER. The European Union asserts that because the 
United  States has not provided any economic model, the United  States  fails to properly substantiate 
its arguments with proper evidence.535  
6.365.   The United  States  responds that the European Union's arguments are inconsistent with the 
findings of the compliance panel and App ellate  Body, thus amounting to an attempt to re -litigate the 
compliance proceedings with respect to impedance, and are unsupported by proper evidence. The 
United  States , however, leaves open the possibility that Boeing may have replaced certain of the 
A380 Impedance Deliveries with LCA models other than the 747 -8I model, such as the Boeing 777 -
300ER model.536  
6.366.   The Arbitrator notes at the outset that neither the compliance panel report nor the 
Appellate  Body report in the compliance proceedings explicitly spec ified how much "higher" Boeing's 
LCA deliveries into each of the six relevant geographic product markets would have been in the 
counterfactual. Thus, in principle, we consider it appropriate to examine the European Union's 
arguments to determine how much " higher" Boeing's deliveries would have been. At the same time, 
we appreciate the United  States ' concern that, particularly given the low number of A380 deliveries 
into certain of the six geographic markets above (e.g. Australia with one A380 delivery), any thing 
less than a counterfactual one -to-one replacement of Airbus deliveries by Boeing deliveries in such 
markets may either invalidate at least certain of the impedance findings, or may appear contrary to 
apparent assumptions underlying the relevant analy ses in the compliance proceedings. Furthermore, 
it would in our view be implausible and inconsistent, in the absence of supporting findings or 
evidence, to assume that, in the relevant geographic markets in which many A380 Impedance 
Deliveries occurred, Bo eing would have made fewer additional counterfactual LCA deliveries than 
Airbus in fact made, whereas in a relevant geographic market in which only one delivery was made 
(e.g. Australia), Boeing would have counterfactually delivered the same (or a greater)  number of 
aircraft than Airbus did.537  
6.367.   In this case, what is clear to us is that whatever approach we adopt, we must not invalidate 
the Appellate  Body's findings that impedance occurred in the VLA product market in each of the six 
geographic markets, individually538, during the 2011 -2013 Reference Period.539 We consider, 
however, that an examination of the European Union's arguments in this instance is not incompatible 
with that imperative. We therefore examine the European Union's arguments in or der to come to a 
view about how much "higher" Boeing's LCA deliveries would have been into each of the six 
 
533 United  States' methodology paper, para. 82.  
534 We recall that the European Union presents its arguments in  this section in the alternative to its 
preferred approach that the Arbitrator ignore impedance entirely in making its valuation. That approach was 
determined to be improper earlier in this Decision. (See sections 6.3.1 and 6.3.3 above).  
535 European Union's written submission, paras.  197-203. 
536 United  States' written submission, para.  234; responses to Arbitrator question No. 46, para.  114, 
No. 87, para.  122, and No. 88, para.  128; and comments on the European Union's responses to Arbitrator  
question No. 113, para.  217, and No. 151, para.  263. 
537 We note in this context the United  States' correct observation that neither the compliance panel nor 
the Appellate  Body engaged in any geographic -market -specific reasoning in the impedance context. 
(United States' comments on the European Union's response to Arbitrator question No. 113, paras.  221-222).  
538 See Articles 6.3(a) and (b) of the SCM  Agreement (referring to " the market of the subsidizing 
Member" and " a third country market", respectively). (e mphasis added)  
539 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  5.740 and 5.742 (agreeing with findings by the compliance panel that "the volume of deliveries and 
market shares that would have been ac hieved by the United  States' LCA industry between 1  December  2011 
and the end of 2013  would have been higher" in the absence of LA/MSF). (emphasis added)  
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  geographic markets at issue during the 2011 -2013 Reference Period540, and what models of Boeing 
LCA those additional deliveries would have been.  
6.368.   This s ection first  addresses the European Union's basic argument that an economic model is 
needed to assess the relevant counterfactual situation. It then examines the supply - and demand -
side factors that the parties identify  as material in this context.  
6.3.4.4.2.1   Absenc e of an economic model  
6.369.   The European Union argues that the Arbitrator must use an economic model to determine 
how much higher Boeing's market share and deliveries would have been in each of the six geographic 
markets at issue within the 2011 -2013 Reference Period. The European Union asserts that, without 
such a model, the Arbitrator lacks an objective basis to test the United  States ' counterfactual 
assumption that Boeing would have replaced the A380 Impedance Deliveries with an equal number 
of 747 -8I deliver ies within the 2011 -2013 Reference Period. The European Union argues  that such 
a model would, at a minimum, need to address certain supply - and demand -side factors. In the 
European Union's view, in the absence of such a model, the United  States ' position t hat the A380 
Impedance Deliveries would have been replaced, on a one -to-one basis, with deliveries of Boeing 
747-8I aircraft in the counterfactual remains "an extreme and unsupported assumption"541, not 
based on a "credible or evidence -based approach" for ca lculating the value of impedance 
deliveries.542 The European Union thus asserts that the United  States  fails to demonstrate that its 
quantification exercise yields a level of countermeasures vis-à-vis impedance that satisfies the 
"commensurate" standard in A rticles 7.9 and 7.10 of the SCM  Agreement .543 
6.370.   The United  States  argues that its assumption that, in the counterfactual, Boeing would have 
replaced all the A380 Impedance Deliveries with an equal number of 747 -8I aircraft deliveries within 
the 2011 -2013 Refer ence Period is reasonable based on the adopted findings in this dispute and the 
evidence on the record. The United  States  recalls that the A380 and 747 -8I models were found to 
be sufficiently substitutable, were the only two VLA available for delivery in the 2011 -2013 Reference 
Period, and that customer demand for LCA is inelastic. Based on these considerations, in the 
Unite d States ' view, customers would most likely demand deliveries of the same number of 
counterfactual 747 -8I aircraft as they actually did A380 aircraft. The United  States  further asserts 
that the European Union has failed to present evidence demonstrating ot herwise. Thus, the 
United  States  argues that the use of an economic model in this context is unnecessary. Moreover, 
in the United  States ' view the use of such a model would entail speculation about "endless 
variables".544 The United  States ' position is that "[t]o engage in such speculation would only provide 
a misleading appearance of exactitude. In truth, it would make the calculation dependent on highly 
speculative inputs and the interplay between them".545 Thus, the United  States ' asserts that there 
is no re ason to believe that a model would yield more reliable results than the United  States ' 
approach. The United  States  further notes that the compliance panel rejected the notion that 
quantitative econometric analyses were instrumental for determining product markets, and instead 
relied on qualitative evidence.546 
6.371.   The Arbitrator notes that its mandate is to quantify the degree and nature of the adverse 
effects determined to exist with a view to determining whether the proposed level of 
countermeasures is commensu rate with these adverse effects. Article  7.10 of the SCM  Agreement  
 
540 We agree with the European Union that, in the impedance context, we should not include, in setting 
a maximum amount of Annual Suspension, any Boeing counterfactual deliveries that would have occurred 
outside the 2011 -2013 Reference Period. (European Union's comments on the United  States' response to 
Arbitrator question No. 144, paras.  445-451).  
541 Europea n Union's response to Arbitrator question No. 3, para.  92. 
542 European Union's written submission, para.  202. 
543 See, e.g. European Union's written submission, paras.  197-203; and responses to Arbitrator question 
No. 3, paras.  91-95, No. 5, No. 6, No. 46, an d No. 84.  
544 United  States' written submission, para.  194. 
545 United  States' written submission, para.  194. The United  States raises this argument with respect to 
determining when deliveries would have occurred as a result of the lost sales, but we consider these 
arguments would also apply with respect to a more complex inquiry regarding what LCA customers would have 
ordered and when deliveries of such LCA would have occurred in the impedance context.  
546 United  States' written submission, paras.  164, 171, 173,  177, 191 -194, 231, and 236; and 
comments on the European Union's response to Arbitrator question No. 151, para.  265. 
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  is silent on the methodology that arbitrators  should use to  fulfil this mandate, thus leaving a degree 
of discretion to an arbitrator in selecting an appropriate methodology. In making this  selection, the 
starting point is the methodology offered by the complaining party, in this instance the United  States , 
in its methodology paper.  
6.372.   In its methodology paper, the United  States  asks the Arbitrator to assume that, in the 
counterfactual, all A3 80 Impedance Deliveries would have been replaced by an equal number of 
747-8I deliveries occurring within the same relevant time -period, i.e. the 2011 -2013 Reference 
Period. The European Union bears the burden to submit arguments and evidence sufficient to  
establish that this approach leads to a level of countermeasures not commensurate with the six 
instances of impedance found to exist in the compliance proceedings, and is, consequently, 
inconsistent with Article  7.10. To do so, the European Union must eng age with the methodology 
presented by the United  States ; it is "not sufficient merely to assert that another methodology is 
more appropriate".547 While the European Union has engaged with the United  States ' methodology 
and has asserted that an economic model  would be more appropriate, it has not produced any such 
model supporting its arguments.  
6.373.   Thus, to form a view on whether an approach involving economic modelling would be more 
appropriate than the United  States ' approach, we now assess whether, in the lig ht of the evidence  
on the record , the assumption underlying the United  States ' approach, i.e. that Boeing would have 
replaced all A380 Impedance Deliveries with an equal number of deliveries of 747 -8I aircraft within 
the 2011 -2013 Reference Period, is reas onable. If that is the case, economic modelling would in our 
view not constitute an inherently more appropriate methodology. We find it convenient and effective 
to organize our assessment around the supply - and demand -side factors identified by the parties . 
We examine these factors below.  
6.3.4.4.2.2   Supply - and demand -side factors  
6.374.   The parties' submissions, have identified the following supply - and demand -side factors that 
the parties argue the Arbitrator must consider in its analysis of how much "higher" Boeing's 
counterfactual LCA deliveries would have been into each of the six geographic markets during the 
2011-2013 Reference Period: (a) inelasticity of LCA demand , (b) demonstrated customer demand 
for A380 deliveries during the 2011 -2013 Reference Period , (c) the sub stitutability of the 747 -8I and 
the A380 models , (d) Boeing's 747 -8I production capacity , (e) market presence of the A380 aircraft , 
(f) competition from twin -aisle LCA, leasing companies, and the LCA second -hand market , (g) 
aggressive bidding by Airbus in certain sales campaigns , (h) Airbus' and Boeing's costs, prices and 
deliveries , (i) foregone learning -by-doing efficiencies , (j) cu stomers deferring purchases , and (k) 
different customer preferences in the counterfactual . We address each in turn.  
6.375.   In doing so, we recall that the volume of adopted findings in this dispute from the original 
and compliance proceedings run into hundreds of  pages, and that the relevant findings for purposes 
of this arbitration proceeding concern claims made under Part III of the SCM  Agreement , which 
required the identification of adverse effects within the meaning Articles 5 and 6. That being the 
case, we no te that a significant portion of the voluminous adopted findings in this dispute describe 
the conditions of competition in the LCA industry during relevant time periods, the causal mechanism 
through which A380 and A350XWB LA/MSF caused adverse effects gene rally, and the circumstances 
surrounding the occurrence of the lost sales and impedance in question specifically. We are bound 
by such findings and we thus operate within those bounds. In assessing the validity of the European 
Union's arguments in this con text, we therefore note that we conduct this assessment not only in 
the light of the evidence on the record of this arbitration proceeding, but also in the light of the 
significant volume of adopted findings in this dispute bearing on the market conditions  in which the 
relevant instances of impedance arose.548 
 
547 Decisions by the Arbitrator, US – COOL (Article 22.6 – United  States) , para.  4.14. 
548 See Appellate  Body Reports, EC and certain member States – Large Civil Aircraft (Article 21.5 – US); 
EC and certain member States – Large Civil Aircraft ; Panel Reports, EC and certain member States – Large 
Civil Aircraft (Article 21.5 – US); and EC and ce rtain member States – Large Civil Aircraft . We note that in 
many arbitrations conducted under other provisions (e.g. Article 4 of the SCM  Agreement and/or Article 22.6 of 
the DSU), such findings may not be available, as relevant underlying violations may b e related to structural 
aspects of measures rather than their market effects.  
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  Inelasticity for LCA demand  
6.376.   The parties agree that, as a general matter, demand for LCA is inelastic.549 We consider that 
this supports the view that, if the customers to whom the A380 Impedance Deliverie s were made 
could not have had A380 aircraft delivered to them during the 2011 -2013 Reference Period in the 
counterfactual, they would likely have demanded LCA deliveries of some kind to have been delivered 
to them in this same time -period instead, and par ticularly if a model of LCA were available for 
delivery at that time that was sufficiently substitutable with the A380 aircraft.  
Demonstrated VLA customer demand  
6.377.   We further note that, in reality, the customers to whom the A380 Impedance Deliveries were 
made wanted to have A380 aircraft delivered to them in the relevant quantities within the 2011 -
2013 Reference Period. In the absence of evidence that these customers would have for some reason 
changed this revealed preference, we consider it reasonable to ass ume that in the counterfactual 
these same customers would have wanted to have the same number of sufficiently substitutable  
LCA delivered to them within the 2011 -2013 Reference Period.  
Substitutability of the 747 -8I and A380 models  
6.378.   The United  States  notes  that in the compliance proceedings, the A380 and 747 -8I models 
were the only two LCA in the VLA product market in the 2011 -2013 Reference Period, and were the 
only two VLA available for delivery during that period of time.550 The three product markets (singl e-
aisle, twin -aisle, VLA) identified during the compliance proceedings were found to "represent the 
three segments within which most competitive interactions between the relevant aircraft will 
commonly take place".551 Moreover, in the compliance proceedings the substitutability between the 
747-8I and the A380 models was a key consideration in the  impedance findings .552 We thus consider 
that the substitutability between the 747 -8I and the A380 models strongly support s the notion that, 
if the customers t hat recei ved the A380 Impedance Deliveries could not have had A380 aircraft 
during the 2011 -2013 Reference Period in the counterfactual, they would likely have wanted 747-8I 
aircraft instead.  
Boeing 747 production capacity  
6.379.   The European Union argues that, in the cou nterfactual, Boeing would have had insufficient 
production capacity to replace all A380 Impedance Deliveries with 747 -8I deliveries within the 2011 -
2013 Reference Period. The European Union asserts in this regard that Boeing would not have 
delivered its fi rst counterfactual 747 -8I aircraft to a commercial customer before April 2012 (i.e. the 
month in which the actual first delivery of a 747 -8I aircraft to a commercial customer – i.e. Lufthansa 
in the European Union market – occurred), and thus Boeing could not have replaced pre -April-2012 
A380 Impedance Deliveries with counterfactual 747 -8I deliveries. The European Union further 
argues that the remaining 21 months in the 2011 -2013 Reference Period would have been 
insufficient for Boeing to replace the A380 I mpedance Deliveries with an equal number of 747 -8I 
deliveries. In the European Union's view, increasing Boeing's VLA production capacity to the required 
extent may have presented Boeing with an unmanageable production workload, may not have been 
economical ly worthwhile, and/or may have required sacrificing resources vis-à-vis other LCA 
operations to an unacceptable degree. Additionally, the European Union asserts that Boeing could 
not have effectively transferred production capacity from the 747 -8F programm e to the 747 -8I 
programme and that Boeing's decision to [[***]] meant that Boeing would have had insufficient 
resources to commit to the 747 -8I programme in the counterfactual to speed up the 747 -8I 
programme's development and production. The European Unio n, however, leaves open the 
 
549 United  States' written submission, paras.  173, 177, and 186; and European Union's response to 
Arbitrator question No. 5, para.  132. 
550 See paragraph 6.370  above; Appellate  Body Report, EC and certain member States – Large Civil 
Aircraft (Article 21.5 – US), para.  5.548; and Panel Report, EC and certain member States – Large Civil Aircraft 
(Article 21.5 – US), Table 18. We further note that the identification of these product mark ets was the result of 
complex and extensive analyses.  
551 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  6.1416.  
552 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras. 5.734, 5.740, and 6.41.  
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  possibility that Boeing may have been able to replace some A380 Impedance Deliveries with Boeing 
777 aircraft deliveries. The European Union generally submits that only an economic model could 
show how many relevant additional B oeing LCA deliveries would have occurred in the counterfactual 
and what Boeing LCA models would have comprised those additional deliveries . According to the 
European Union, any United  States ' arguments to the contrary are speculative and based on 
insufficient evidence.553 
6.380.   The United  States  first raises a procedural objection to the European Union's arguments in 
this context. According to the United  States , the impedance findings in the complianc e proceedings 
were predicated on the assumption that Boeing could have increased counterfactual 747 -8I 
production capacity, and the European Union's arguments that Boeing could not have done so were 
considered and rejected in both the original and complian ce proceedings. Thus, in the United  States ' 
view, the European Union's arguments amount to a "collateral attack" on adopted findings in that 
they seek to re -litigate settled issues.554 
6.381.   Regarding the substance of the European Union's arguments, the United  States asserts that 
it is reasonable to conclude that Boeing could and would have increased counterfactual 747 -8I 
production so as to allow Boeing to replace all the A380 Impedance Deliveries with 747 -8I deliveries 
within the 2011 -2013 Reference Period. The United States  argues that, if faced with significantly 
more counterfactual 747 -8I orders in the years leading up to the 2011 -2013 Reference Period, 
Boeing would have faced strong incentives to allocate more resources to the 747 -8I programme 
such that Boeing  could have both made its first 747 -8I deliveries to commercial customers before 
April 2012, and increased 747 -8I production capacity overall. The United  States  indicates that 
production capacity is generally driven by demand levels, and that Boeing's abil ity to deliver 747 -8F 
aircraft before 2012 demonstrates that Boeing would have had the capacity to  deliver 747 -8I aircraft 
by December 2011. The United  States  further argues that Boeing could have traded off production 
capacity from the 747 -8F programme in  favour of the 747 -8I programme. In any event, in the 
United  States ' view, if Boeing had faced any production capacity constraints that would have 
prevented Boeing from delivering 747 -8I aircraft at the same times as any of the earlier A380 
Impedance Deliv eries occurred, Boeing simply would have made the 747 -8I deliveries a few months 
later, or delivered 777 -300ER aircraft, or perhaps another model of 747 aircraft, to the relevant 
customers instead.555 
6.382.   The United  States  argues that empirical evidence regardin g Boeing's historical production 
capacity levels concerning a previous version of the Boeing 747 model – the Boeing 747 -400 – 
strongly indicates that Boeing would have had the ability to produce 747 -8I aircraft in the necessary 
quantities so as to replace all A380 Impedance Deliveries with 747 -8I deliveries during the 2011 -
2013 Reference Period. The United  States  submits that the European Union fails to adequately 
explain why the Arbitrator should not rely on these historical 747 production data, and that t he 
remainder of the European Union's arguments are speculative and unsupported by sufficient 
evidence.556 
6.383.   Finally, the United  States  asserts that the Arbitrator may find that Boeing's ability to make 
counterfactual 747 -8I deliveries in the 2011 -2013 Referenc e Period is immaterial because the 
purpose of the Arbitrator's exercise is to calculate the future  adverse effects caused by relevant 
subsidies, and Boeing can deliver ample 747 -8I aircraft going forward.557 
6.384.   In response to the United  States  argument that the  European Union's production -capacity 
arguments amount to a "collateral attack" on adopted findings in this dispute, the European Union 
 
553 European Union's written submission, paras.  197-200 and 300 -305; responses to Arbitrator question 
No. 6, para.  147, No. 85, and No. 88; and comments on the United  States' responses to Arbitrator question 
No. 116, paras.  196-198, and No. 130.  
554 United  States' responses to Arbitrator question No. 7 and No. 46, para.  110; and comments on the 
European Union's response to Arbitrator question No. 98, para.  80. 
555 United  States' written submission, paras.  178, 193, and 240 -243; respo nses to Arbitrator question 
No. 7, para.  10, No. 46, para.  114, No. 71, No. 87, No. 88, No. 127, and No. 130; and comments on the 
European Union's responses to Arbitrator question No. 112, paras.  212-213, No. 113, para.  219, and No. 146.  
556 United  States' w ritten submission, para.  242; response to Arbitrator question No. 71; and comments 
on the European Union's response to Arbitrator question No. 146.  
557 United  States' written submission, para.  239. 
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  asserts that its arguments are aimed at the inquiry regarding the degree  of impedance rather than 
the existence  of imped ance in the six geographic markets.558 
6.385.   Replying  to the United  States ' position that Boeing's historical 747 -400 production rates can 
evidence Boeing's production capacity of 747 -8I aircraft during the 2011 -2013 Reference Period, the 
European Union argues tha t comparing historical production rates of the 747 programme with the 
counterfactual production capacity for the 747 -8I model is  inappropriate . This is  because the 747 -
400 model was made during a time when the market and production circumstances facing Boe ing 
were different, and because the 747 -400 and 747 -8I models are very different aircraft. In the 
European Union's view, historical production rates of the 777 -300ER and A380 aircraft are more 
probative in this context because they are long -range LCA being  developed at roughly the same time 
as the 747 -8I aircraft was being developed. The European Union also stresses that in order to be 
meaningful, the Arbitrator should use historical production rates of an LCA programme during its 
initial ramp -up phase rath er than production rates when the programme is "mature".559 
6.386.   Finally, in response to the United  States ' argument that Boeing can deliver ample 747 -8I 
aircraft going forward, the European Union asserts that this argument is "entirely extraneous" to 
quantifying  the adverse effects determined to exist during the 2011 -2013 Reference Period.560 
6.387.   The Arbitrator at the outset rejects the United  States ' argument concerning Boeing's 
prospective  747-8I production capacity. As explained in section 6.3.1  above, we value the lost sales 
and impedance found to exist during the 2011 -2013 Reference Period  in order to determine a 
maximum level of Annual Suspension. Thus, we must determine how much higher Boeing's LCA 
deliveries would have been in that time -period.  
6.388.   Next, we note the United  States ' procedural objection to the European Union's production -
capacity arguments. We indicated above in paragraph 6.366  that the United  States  makes this 
objection more generally vis-à-vis the European Union's arguments in the im pedance context. We 
see no reason to depart in this specific context from our general conclusions reached in that 
paragraph. The original proceedings did not establish how much higher Boeing's deliveries would 
have been in any relevant geographic market du ring the 2011 -2013 Reference Period. In the 
compliance proceedings, although the compliance panel and Appellate  Body rejected an argument 
by the European Union that production delays in the 747 -8I programme prevented  findings of 
impedance in the VLA produc t market, neither the compliance panel nor the Appellate  Body stated 
that this factor could not alter the degree  of impedance in any relevant geographic market. In 
particular, the findings left open the question of how Boeing's 747 -8I production delays wou ld have 
affected the extent to which Boeing would have replaced A380 Impedance Deliveries with 747 -8I 
aircraft and/or 777 aircraft – an important issue for our valuation purposes, as these aircraft display 
[[***]] delivery prices.561  
6.389.   We turn, then, to the p arties' substantive arguments. As a first step, we examine whether, 
in the counterfactual, Boeing would have been able to deliver 747 -8I aircraft to commercial 
customers before April 2012, i.e. the month in which Boeing actually delivered its first 747 -8I aircraft 
to a commercial customer. This issue matters because certain A380 Impedance Deliveries occurred 
before that month in the 2011 -2013 Reference Period. Thus, if Boeing could not have made those 
pre-April-2012 counterfactual deliveries with 747 -8I air craft, this would impact the counterfactual 
speed with which Boeing would have had to ramp up 747 -8I production.  This would mean that 
Boeing would have had to ramp up the production of 747 -8I aircraft more quickly to produce the 
number of 747 -8I aircraft r equired to replace all A380 Impedance Deliveries in the 2011 -2013 
Reference Period.  
 
558 See, e.g. European Union's comments on the United  States' response to Arbitrator question No. 153, 
fn 2 (explaining that "there remains disagreement between the Parties as to the degree  of impedance – i.e., 
the counterfactual market share that Boeing VLA would have been able to capture in the absence of the MSF 
subsidies at issue", and citing previous portions of the European Union's submissions).  
559 European Union's response to Arbitrator question No. 146; and comments on the United  States' 
response to Arbitrator question No. 116, para.  194. 
560 European Union' s response to Arbitrator question No. 85.  
561 Boeing E -mail regarding Questions 116, 118, 121, 124(c), 125, 128 -129, 132, (Exhibit USA -66 
(HSBI)).  
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  6.390.   We note that the first 747 -8I deliveries were initially planned for 2010.562 However, several 
factors led to delays in the programme, such that deliveries to commercial custo mers could be made 
only in April 2012: (a) supply chain issues , (b) late design changes , (c) performance issues found 
during testing , (d) an eight -week labour strike , (e) limited engineering resources , and (f) [[***]] 
only a limited number of 747 -8I orders  materialized following launch.563  
6.391.   In our view, four aspects of these factors are noteworthy. First, the occurrences  of these 
problems appear generally unrelated to the effects of LA/MSF, and thus we consider that these 
problems (with the possible exception  of limited engineering resources, as explained in the following 
paragraph) would likely have occurred in the counterfactual.  
6.392.   Second, while such problems may have occurred  in the counterfactual, it appears reasonable 
to us to assume that Boeing would have addressed  at least certain of these problems more rapidly 
than Boeing did in fact. This was so because Boeing [[***]] at the same time.564 In the face of 
higher order numbers  that would have resulted in the counterfactual, we find it reasonable to assume 
that Boeing would have increased its resource allocation to the counterfactually [[***]] 747-8I 
programme, most likely by increasing its overall resource base.565 
6.393.   Third, these pr oblems appeared to arise during the development and initial production 
phases of the 747 -8 programme, resulting in Boeing's delayed ability to assemble and deliver a final 
747-8I aircraft in April 2012 rather than earlier. However, we note that Boeing did in fact deliver 
additional 747 -8I aircraft following April 2012, thus indicating that Boeing had essentially resolved 
issues encountered during the 747 -8I development and initial production phases.566 
6.394.   Finally, Boeing's ability to deliver 747 -8F aircraft begi nning in October 2011 and Boeing's 
ability to deliver 747 -8I [[***]] aircraft to customers before April 2012567 suggest to us that it should 
in principle have been possible for Boeing to have realized pre -April-2012 deliveries of 747 -8I aircraft 
to commercia l customers in the counterfactual, in particular in the assumed presence of additional 
resources being allocated to the 747 -8I programme in the counterfactual.568  
6.395.   In the light of these various observations, we consider it likely that in the counterfactual 
Boeing would have been able to deliver its first 747 -8I aircraft to commercial customers before April 
2012, although the precise time at which that first delivery would have occurred is uncertain. 
Nevertheless, for present analytical purposes, we assume tha t, in the counterfactual, Boeing would 
not have delivered any 747 -8I aircraft to commercial customers before April 2012. We expressly 
note, however, that we consider this to be a conservative assumption.  
6.396.   We next consider whether Boeing's assumed inability to make pre -April-2012 747 -8I 
deliveries to the A380 Impedance Deliveries customers would likely have prevented such customers 
 
562 Boeing E -mail regarding Questions 130 -131, (Exhibit USA -84 (BCI)).  
563 United  States' responses to Arbitrator q uestion No. 88, para.  126, and No. 131; Boeing 2008 Annual 
Report , (Exhibit EU -116); Boeing e -mail from [[ ***]] (Dec. 10, 2018),  (Exhibit USA -56 (BCI)); Boeing E -mail 
regarding Questions 130 -131, (Exhibit USA -84 (BCI)); and Machinists Back Contract With Bo eing; 8 -Week 
Strike Ends, New York Times (Nov. 2, 2008), (Exhibit USA -86 (BCI)).  
564 Boeing 747 Family, Boeing website, ( Exhibit USA -54) (indicating that in 2009 Boeing was re -
evaluating its commitment to the 747 -8I programme because only one customer, i.e. Lufthansa, had ordered 
the 747 -8I aircraft by that time).  
565 Boeing E -mail regarding Questions 130 -131, ( Exhibit USA -84 (BCI)) (indicating that a counterfactual 
increase in resources allocated to the 747 -8I programme would mean that [[***]]); and The Seattl e Times, 
"747-8 delay causes doubts about Boeing", 7  October  2009, ( Exhibit EU -117) (discussing these problems). We 
note that we assume such a counterfactual increase in 747 -8I orders to be significant, as we generally 
conclude later in this section that i t is reasonable to assume that Boeing would have replaced all of the A380 
Impedance Deliveries on a one -to-one basis with deliveries of 747 -8I aircraft.  
566 The Seattle Times, "747 -8 delay causes doubts about Boeing", 7  October  2009, ( Exhibit EU -117) 
(discus sing such problems in some detail); and Boeing E -mail regarding Questions 130 -131, ( Exhibit USA -84 
(BCI)) (indicating that delays in the 747 -8 programme were primarily the result of " development and initial  
production phases"). (emphasis added)  
567 Boeing 74 7 deliveries (2000 –2013), Excel download from Boeing website, (Exhibit USA -53); and 
Boeing E -mail regarding Questions 130 -131, (Exhibit USA -84 (BCI)).  
568 The 747 -8I and 747 -8F are produced on the same final assembly line and share significant 
commonalities.  (United  States' response to Arbitrator question No. 88; and Boeing E -mail regarding Questions 
130-131, ( Exhibit USA -84 (BCI))).  
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  from ordering 747 -8I aircraft in the first place. We answer this question in the negative. The record 
indicates that, immediately  after the launch of the 747 -8 programme in 2005569, Boeing envisioned 
delivering its first 747 -8I to commercial customers in 2010. It was only after developmental issues 
arose primarily in the subsequent 2008 -2011 time -frame that this date was delayed.570 As the 
counterfactual 747 -8I deliveries that would have replaced the A380 Impedance Deliveries (and 
especially the pre -April 2012 A380 Impedance Deliveries) would have been the first 747 -8I 
deliveries, we consider it reasonable to assume that they would gener ally correspond to the earliest -
in time orders received as well, i.e. orders most likely received before the 2008 -2011 period. Thus, 
we do not consider it reasonable to assume that any relevant customer would not have ordered 747 -
8I aircraft due to the abo ve-discussed developmental problems with the 747 -8 programme.571 
Moreover, both parties agree that, once ordered, customers will generally wait for the delivery of 
their ordered LCA model even in the face of years  of delivery delays.572 We discern nothing on t he 
record to indicate that th ese dynamic s would have been any different with respect to any relevant 
customer in this context in the counterfactual. We therefore consider that it is reasonable to conclude 
that the customers that received  the pre -April-2012 A380 Impedance Deliveries would have wanted 
deliveries of 747 -8I aircraft in April 2012 or as soon as possible thereafter.  
6.397.   At this point, therefore, we note that for Boeing to have been able to replace all the A380 
Impedance Deliveries with an equal numb er of 747 -8I aircraft deliveries within the 2011 -2013 
Reference Period, we assume that Boeing would have had to do so within the 21 -month period from 
the date of the first counterfactual delivery (i.e. April 2012) through December 2013, inclusive. For 
ease of reference, we will refer to this period as the counterfactual 747 -8I Ramp -Up Period.  
6.398.   In assessing whether Boeing could have achieved the necessary production ramp -up, we 
first address the counterfactual demand for 747 aircraft deliveries in the 747 -8I Ramp -Up Period. 
For analytical purposes, and in the light of certain of the parties' arguments on how far 747-8F 
production may have to be taken into account, we sum the actual  deliveries of 747 -8I and 747 -8F 
aircraft during the relevant 21 -month time -period with the A380 Impedance Deliveries occurring 
during the entire 2011 -2013 Reference Period.573 Further, for ease of treatment of the data later on 
in this Decision, we further break out these data by calendar year. We summarize this counterfactual 
demand data in Table  13 below.  
 
569 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1220; 
and Boeing E -mail regard ing Questions 116, 118, 121, 124(c), 125, 128 -129, 132, ( Exhibit USA -66 (HSBI)).  
570 United  States' response to Arbitrator question No. 112, para.  44; and Boeing E -mail regarding 
Question 112, ( Exhibit USA -62 (BCI)). The European Union does not dispute that these problems mainly arose 
in the 2008 -2011 time -frame.  
571 We therefore further note that we do not believe, as the European Union argues, that delays in the 
747-8I would have meant that relevant customers who would otherwise have preferred to take deliver ies of 
747-8I aircraft would instead have ordered and taken deliveries of, for example, Airbus twin -aisle LCA. 
(European Union's response to Arbitrator question No. 64, para.  121). We note that all the orders from which 
the A380 Impedance Deliveries came w ere placed in or before 2008. ( Updated Ascend Database,  (Exhibit 
EU-79)). 
572 United  States' response to Arbitrator question No. 112; and European Union's response to Arbitrator 
question No. 112.  
573 The 747 -8I and 747 -8F were the only 747 models available for  deliveries in the 747 -8I Ramp -Up 
Period.  
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  Table 13: 747 counterfactual demand in 747 -8I Ramp -Up Period  
 April – Dec 2012  
(747 -8I / 747 -8F) 2013  
(747 -8I / 747 -8F) Total  
(747 -8I / 747 -8F) 
Actual A380 
Impedance 
Deliveries574 27575 20 47 
Actual 747 -8 
worldwide 
deliveries576 25 
(11 / 14) 24 
(5 / 1 9) 49 
(16 / 33) 
Total Counterfactual 
747-8 demand577 52 
(38 / 14) 44 
(25 / 1 9) 96 
(63 / 33) 
 
6.399.   As is clear from the above table, the issue presented  is whether it is reasonable to conclude 
that Boeing could have delivered 9 6 747-8 aircraft during the 21 -month 747 -8I Ramp -Up Period 
(i.e. the 4 9 747-8 deliveries actually made plus an additional 47 counterfactual 747 -8I deliveries).  
6.400.   The parties have produced evidence regarding the ability of Airbus and Boeing to deliver 
particular volumes of other LCA models during particular periods of time as a proxy for estimating 
Boeing's counterfactual production capacity. Beyond such delivery dat a, there is little other empirical 
evidence on the record on which to base our analysis. We thus use  this empirical data to assess 
Boeing's ability to produce 9 6 747 aircraft in the 21 -month counterfactual 747 -8I Ramp -Up Period.  
6.401.   We note that the parties  rely on different historical LCA delivery rates in this context. The 
European Union advocates that we rely on historical delivery rates of the A380 and 777 -300ER 
aircraft, whereas the United  States  advocates that we rely on historical delivery rates of the 747-
400. We consider that Boeing's historic delivery rates of the 747, and in particular the 747 -400, 
would best represent Boeing's ability to produce and deliver 747 aircraft in the counterfactual 747 -
8I Ramp -Up Period.578 This is so, first, because both th e 747 -8I and 747 -400 were produced by the 
same company, i.e. Boeing. Also, both are in the 747 family of aircraft. Moreover, the 747 -400 is 
the predecessor passenger version of the 747 -8I.  
6.402.   The 747 -400 model was launched in 1985 and delivered until 2005.579 Under  the 21 -month 
counterfactual 747 -8I Ramp -Up Period, Boeing would have produced two 747 models,  the 747 -8I 
and 747 -8F. We thus believe that it would be meaningful to compare the counterfactual 747 -8I 
Ramp -Up Period to the first 21 months following the first delivery of the 747 -400, during which 
Boeing was also producing other models of the 747, albeit in much more limited numbers than the 
747-400. For ease of reference, we will refer to this period as the 747 -400 Ramp -Up Period. We 
 
574 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
Table  13. 
575 This number is the sum of the A380 Impedance Deliveries made from December 2011 through 
December 2012, u nder the assumption that customers who wanted 747 -8I deliveries before April 2012 but 
could not get those delivery slots would want those deliveries still within calendar -year 2012.  
576 Boeing 747 deliveries (2000 – 2013), Excel download from Boeing website,  (Exhibit USA -53); Boeing 
E-mail regarding Questions 116, 118, 121, 124(c), 125, 128 -129, 132 , (Exhibit USA -66 (HSBI)); and Boeing 
747 Family, Boeing website, (Exhibit USA-54). We note that these numbers include the [[***]] deliveries as 
described in the United  States' response to Arbitrator question No. 116, paras.  56-57, that occurred after April 
2012. We further note that, apparently due to the inconsistent presence of t he [[***]] deliveries in these 
exhibits, the total number of 747 deliveries in this row sometimes vary across the parties' exhibits.   
577 This row sums the numbers in the previous two rows above.  
578 See, e.g. Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25) , paras.  4.7 
(preferring "a starting point grounded on historical, verified facts, even if adjustments may have to be made") 
and 4.15 (noting that "since they considered it more appropr iate to use figures grounded on facts than 
deductions or inferences, the Arbitrators generally gave preference to approaches which relied as much as 
possible on historical figures").  
579 Boeing 747 deliveries (2000 –2013), Excel download from Boeing website, (Exhibit USA -53) 
(indicating the last passenger version of the 747 -400 was delivered in 2005); Boeing 747 Family, Boeing 
website,  (Exhibit USA -54) (indicating the 747 -400 launch date as 1985); Boeing E -mail regarding 
Questions  116, 118, 121, 124(c), 125, 1 28-129, 132, ( Exhibit USA -66 (HSBI)) (same); and Boeing, Lufthansa 
Announce Order for 747 -8 Intercontinental, Boeing Press Release, (Exhibit USA -57) (indicating that the 747 -8 
is the successor of the 747 -400).  
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  consider that assessi ng Boeing's total 747 production capacity during the 747 -400 Ramp -Up Period 
will yield a reasonable estimate of Boeing's total 747 production capacity during the counterfactual 
747-8I Ramp -Up Period.  
6.403.   We recognize the European Union's argument that a compar ison of the counterfactual 747 -
8I Ramp Up Period and the 747 -400 Ramp -Up Period is inappropriate because the circumstances 
and conditions of competition facing Boeing during these two time -periods were different, and 
because the 747 -400 and 747 -8I models a re dissimilar . According to the European Union, this is 
due, i n particular , to the more advanced technologies used in the 747 -8I model as compared to the 
747-400 model. We accept that there are differences as between these two ramp -up periods and 
the aircr aft involved. We discern no convincing reason, however, why the general conditions of 
competition or circumstances of Boeing in the two time -periods invalidates a comparison between 
the two time -periods for our purposes.  
6.404.   We also consider that the fact tha t the 747 -8I aircraft is more technically advanced than its 
747-400 predecessor does not invalidate this comparison.580 This is so because the record of this 
dispute contains extensive discussions about how the accumulation of "learning effects" helps to 
improve an LCA producer's capacity  to produce successively more complex LCA. Simply put, the 
Boeing company in the counterfactual 747 -8I Ramp -Up Period would have been more skilled at 
producing 747 aircraft than the Boeing company that existed in the 747 -400 Ramp -Up Period. Thus, 
we do not consider that it necessarily follows that Boeing could not have produced 747 aircraft as 
efficiently during the counterfactual 747 -8I Ramp -Up Period as it could in the 747 -400 Ramp -Up 
Period simply because the 747 -8I is a mo re complex model than the 747 -400.  
6.405.   Further to the point immediately above, we recall that we have already described the issues 
that Boeing had with the 747 -8I development, some of which were possibly due to the 747 -8I 
aircraft's technological complexity a nd production management. We noted, however, that these 
issues appeared generally to pertain to the initial development phases of the 747 -8I programme, 
rather than ongoing issues with production. We further note that Boeing was able to deliver 89 787 
aircraft in the first 25 months following first delivery.581 As we understand it, the 787 model is also 
a technologically complex aircraft. This, in our view, is indicative of Boeing's ability to significantly 
ramp up production of technologically advanced LCA in  a time -period similar to that of the 20 11-
2013 Reference Period.  
6.406.   We thus set out in the table below Boeing's 747 deliveries in the 747 -400 Ramp -Up Period, 
organized by deliveries made in the first nine months following the first delivery of a 747 -400 airc raft 
and the following 12 months, consistent with how we organized the data related to the counterfactual 
747-8I Ramp -Up Period above in Table  14: 
Table 14: 747 deliveries in the 747 -400 Ramp -Up Period  
LCA programme  Deliveries in first nine 
months582 
(747 -400 / other 747 
models)  Deliveries in next 12 
months583 
(747 -400 / other 747 
models)  Total deliveries in first 
21 months  
(747 -400 / other 747 
model)  
747 deliveries584 32 
(29 / 3)  68 
(63 / 5)  100 
(92 / 8)  
 
580 See e.g. Boeing, Lufthansa Announce Order fo r 747 -8 Intercontinental, Boeing Press Release, 
(Exhibit USA -57) (noting the features in the 747 -8I aircraft that are more technically advanced than its 
counterparts in the 747 -400 aircraft).  
581 Updated Ascend Database, (Exhibit EU -79). 
582 This is the first three quarters of 1989.  
583 This is the fourth quarter of 1989 and the first three quarters of 1990.  
584 Boeing Historical Deliveries through October 2018, Boeing website, (Exhibit USA -43); Boeing E -mail 
regarding Questions 116, 118, 121, 124(c), 125, 128 -129, 132, (Exhibit USA -66 (HSBI)); Boeing Website, 
747-400 Deliveries Pre -1990, (Exhibit USA -115); and Updated Ascend Database (Exhibit EU -79). The number 
of 747 -400 aircraft delivered during these time -periods are derived from Exhibits USA -115 and EU -79. We n ote 
that Boeing delivered four 747 aircraft other than the 747 -400 in 1989. (Boeing Historical Deliveries through 
October 2018, Boeing website, (Exhibit USA -43) (listing the total number of 747 variants delivered in 1989, 
i.e. 45); and Boeing Website, 747 -400 Deliveries Pre -1990, Exhibit USA -115 (listing the number of 747 -400 
 WT/DS 316/ARB 
 
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  6.407.   We therefore note that Boeing was able to deliver 100 747 aircraft to all customers in the  21-
month 747 -400 Ramp -Up Period – 92 of which were 747 -400 aircraft. We recall that, in the 
counterfactual, Boeing would have had to deliver a total of 9 6 747-8 aircraft – 63 of which would 
have been 747 -8I aircraft – in order to replace all A380 Impedance Deliveries within that period in 
addition to making the pre -existing 747 -8 deliveries within that same period.  
6.408.   Furthermore, we take account of the following elements. First, we discern no significant 
evide nce on the record that Boeing's 747 production rate during the 747 -400 Ramp -Up Period had 
reached a hard ceiling.585 Second,  it is important to note that Boeing makes 747 aircraft to order 
and not for inventory, and thus its production capacity is generally controlled by demand levels, 
which means that the production capacity is increased as and when demand levels increase.586 Third, 
we have previously made an expressly conservative assumption that Boeing would have had only 
21 months, rather than up to 25 months, in which to make the necessary additional 47 747 -8 
deliveries. In the light of the above data and elements, we cons ider it reasonable to conclude that 
Boeing would have been able to make the necessary 9 6 747-8 deliveries (which includes both 747 -
8I and 747 -8F deliveries) not only within the 2011 -2013 Reference Period, but most likely within the 
counterfactual 747 -8I Ra mp-Up Period as well.  
6.409.   We note that under our approach Boeing would have faced a counterfactual demand for 3 8 
747-8I deliveries in 2012, i.e. at the beginning of the counterfactual 747 -8I Ramp -Up Period, that 
is higher than the demand for 25 747 -8I deliver ies that it would have faced in 2013. We note that 
this contrasts with observed LCA production ramp -ups during which the delivery numbers tend to 
increase over time. It is instructive in this context to compare  data concerning the number of aircraft 
of spe cified LCA models that Boeing delivered in the first nine months of each programme following 
first delivery with data concerning  the number of the same aircraft Boeing delivered in the following 
12 months. The Boeing LCA models for which we consider such d ata are the 747 -400 model 
(deliveries approximately doubled from the first nine months to the following 12 months); 
777-300ER model (deliveries approximately doubled from the first nine months to the following 
12 months); and the 787 model (deliveries appr oximately quadrupled from the first nine months to 
the following 12 months).587 In the light of this data, we doubt that a delivery structure of 3 8 
deliveries of 747 -8I aircraft in the first nine months of the 747 -8I Ramp -Up Period and the smaller 
number of 25 747 -8I aircraft deliveries in the following 12 months of the 747 -8I Ramp -Up Period 
would be likely. A delivery volume of 3 8 aircraft for the first nine months also significantly exceeds 
the number of 747 -400 aircraft that Boeing was able to deliver in t he first nine months of the 
747-400 Ramp -Up Period (which number was 29). Thus, we consider that a reasonable assumption 
is that Boeing could have delivered 29 747 -8I aircraft in the latter nine months of 2012 (i.e. the 
same number that Boeing was able to deliver for the 747 -400 model  in the first nine months of the 
747-400 Ramp -Up Period ) and delivered the remaining 3 4 747-8I aircraft in 2013.588 Taking into 
 
variants delivered during 1989, i.e. 41)). We cannot definitively determine from these exhibits the months in 
which the four non -747-400 variants of the 747 model were delivered, howev er. Thus, we evenly distribute the 
four deliveries over 1989, i.e. on average one delivery in each quarter of 1989. This yields three deliveries of 
non-747-400 variants of the 747 in the first nine months of 1989 and one in the last quarter of the year, an d 
we allocate these deliveries as such in the table above. We note that Exhibit EU -79 also contains the numbers 
of 747 aircraft deliveries of variants other than the 747 -400 model for the first nine months of 1990. The 
United  States has explained, however,  that this exhibit does not contain two 747 aircraft deliveries that Boeing 
made to the US military in 1990. (United  States' response to Arbitrator question No. 170, para.  4). The 
European Union has not disputed the United  States' assertion. Although we ca nnot tell from these exhibits in 
what months those two deliveries were made, we believe it reasonable to allocate one such delivery to the first 
nine months of 1990. We allocate that delivery as such in the above table.  
585 We note that in the compliance pro ceedings, the European Union submitted evidence indicating 
Airbus' ability to continuously increase A330 and A320 production capacity to keep pace with demand levels. 
With respect to the A320, Airbus increased the number of its final assembly lines in orde r to do so. (Panel 
Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1325 and 6.1520).  
586 Panel Report, EC and certain member States – Large Civil Aircraft,  para. 7.2101 and fn  5196.  
587 Updated Ascend Database, (Exhibi t EU-79). The Boeing 777 -300ER is a long -range aircraft and the 
largest version of the Boeing 777. It was launched in 2000. The Boeing 787 is an advanced twin -aisle aircraft 
launched in 2004. (Panel Report, EC and certain member States – Large Civil Aircra ft (Article 21.5 – US), Table 
17 and para.  6.1220;  Boeing E -mail regarding Questions 116, 118, 121, 124(c), 125, 128 -129, 132, ( Exhibit 
USA-66 (HSBI)) (stating the 777 -300ER launch date)). Accordingly, these two LCA share similarities with the 
747-8I in bo th certain key features and the time of launch, which in our view makes the use of the above data 
reasonable under the circumstances.  
588 Under this assumed temporal delivery structure, deliveries of 747 -8I aircraft would therefore less 
than double as betwee n the first nine months following the first delivery and the following twelve months.  
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  account the numbers of actual 747 -8I aircraft delivered in those two time -periods (i.e. 1 1 and 5, 
respectively), this would yield an additional 1 8 747-8I deliveries in 2012 and an additional 29 747-
8I deliveries in 2013.589 Thus, even assuming that, in the counterfactual, Boeing would have lacked 
the capacity to deliver 747 -8I aircraft as quickly as Airbus delivered A380 aircraft to the six relevant 
geographic markets in reality, we find it reasonable to assume that Boeing could nonetheless have 
replaced all of the A380 Impedance Deliveries with an equal number of deliveries of 747 -8I aircraft 
within the 201 1-2013 Reference Period.590 We summarize these conclusions in the following table:  
Table 15: Counterfactual deliveries of 747 -8I aircraft in the 747-8I Ramp -Up Period  
 Apr. – Dec. 2012  
(actual / additional)  2013  
(actual / additional)  Total  
(actual / additional)  
747-8I counterfactual 
deliveries  29 
(11 / 18) 34 
(5 / 29) 63 
(16 / 47) 
 
6.410.   We note the European Union's arguments that it may be uncertain: (a) whether, in the 
counterfactual, Boeing would have been able to properly manage production of an increased number 
of 747 -8I aircraft , (b) whether upstream suppliers could have satisfied demand for additional 747 -
8I components , (c) whether the impact of increased 747 -8I production would have had negative 
impacts on Boeing's overall production operation s, including with regard to other LCA programmes, 
that Boeing would have found unacceptable , and (d) whether Boeing would simply have opted to 
extend the delivery schedules for 747 -8I aircraft for other reasons.591 However, these considerations 
appear to us as speculative, particularly in the light of the volumes of 747 aircraft that Boeing was 
in fact able to produce in the 747 -400 Ramp -Up Period. Moreover, we recognize that, if more orders 
had materialized from the beginning of the 747 -8I programme – i.e. several years before the 2011 -
2013 Reference Period – Boeing would have had a substantial amount of lead time to increase its 
production resources overall, thus limiting the need to make compromises in other LCA programmes, 
especially [[***]], for the benef it of increasing 747 -8I production.592 
6.411.   In conclusion, based on the foregoing, we thus assume that Boeing's counterfactual 747 -8 
production capacity would have allowed Boeing to replace all of the A380 Impedance Deliveries with 
an equal number of 747 -8I deliv eries in the 2011 -2013 Reference Period. More specifically, we 
conclude that a reasonable estimate is that, in the counterfactual, Boeing would have delivered an 
additional 1 8 747-8I aircraft in 2012 and an additional 29 747-8I aircraft in 2013 to the six 
geographic markets in question taken as a whole.  
Market presence of the A380 aircraft  
6.412.   The European Union argues that, in the counterfactual, Boeing might not be able to replace 
all A380 Impedance Deliveries with 747 -8I deliveries because Airbus could still  have made some of 
these deliveries with A380 aircraft in the counterfactual. The European Union argues that this is a 
reasonable conclusion because the Appellate  Body left the counterfactual launch date of the A380 
model open, and because in the European Union's view  the counterfactual  launch of the A380 model 
would have occurred shortly after its actual launch in 2000.593 The European Union asserts that the 
Appellate  Body's findings of lost sales and impedance in the 2011 -2013 Reference Period are not 
incon sistent with the A380 model being available for order and/or delivery in the 2011 -2013 
 
589 We see little basis upon which to conclude that Boeing would have altered the dates of any 747 -8F 
aircraft deliveries in the counterfactual, an aircraft which Boeing ha d begun to deliver months before the 
747-8I. We recall that under our assumptions Boeing would have had the capacity to deliver the required 
number of 747 -8I and 747 -8F aircraft within the 2011 -2013 Reference Period. We therefore see no reason to 
further e xamine the European Union's argument that the Arbitrator would have to consider the "trade -offs" in 
production capacity between the 747 -8I and 747 -8F aircraft in the counterfactual. (European Union's 
comments on the United  States' response to Arbitrator qu estion No. 130, paras.  306-309).  
590 We consider that such counterfactual delivery dates would have been acceptable to 747 -8I 
customers. (See paragraph 6.396  above).  
591 European Union's written submission, para.  304. 
592 See United  States' response to Arbitrato r question No. 131, para.  140 (making this point).  
593 European Union's response to first set of Arbitrator questions, para.  28; responses to Arbitrator 
question No. 3, paras.  87-88, No. 4, No. 5, paras.  132 and 134, No. 7, paras.  155-158, No. 10, 
paras.  204-205, No. 14, paras.  314-316, and No. 46, paras.  475-476. 
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  Reference Period in the counterfactual because Airbus could have launched the A380 model soon 
after its actual launch date in 2000. According to the European Union, this  delayed launch would 
have meant, "[f]or example, in light of later availability of delivery positions, and/or the [A380 
model's] less well -established market position or maturity, [that] certain customers would not have 
ordered the aircraft", thus resulti ng in the lost sales observed during the 2011 -2013 Reference 
Period.594 
6.413.   The United  States  argues that the Appellate  Body found that the A380 aircraft would not 
have been available for either order or delivery before the end of the 2011 -2013 Reference Period,  
and thus Airbus could not have captured any of the A380 Impedance Deliveries in the counterfactual 
with deliveries of A380 aircraft. The United  States  asserts that, in particular, because the 
Appellate  Body found that the A380 aircraft would not have been  available for order  in the 2011 -
2013 Reference Period, then, a fortiori , Airbus  could not have delivered  the A380 in the 2011 -2013 
Reference Period. The United  States  also rejects the European Union's arguments purportedly 
reconciling the findings of lost sales and impedance caused by A380 LA/MSF in the 2011 -2013 
Reference Period and a counterfactual launch of the A380 model before the 2011 -2013 Reference 
Period. In th e United  States ' view, the European Union's arguments in that context have no support 
in the findings in the compliance proceedings.595 
6.414.   The Arbitrator notes that the key disagreement between the parties in this context is whether 
the Appellate  Body report in  the compliance proceeding resolved the issue of whether the A380 
aircraft would have been available for sale in the counterfactual such that Airbus could still have 
captured some of the A380 Impedance Deliveries with deliveries of A380 aircraft. In assess ing this 
issue, we examine five issues addressed in the Appellate  Body's report in the compliance 
proceedings: (a) the effects of A380 LA/MSF on the A380 programme , (b) whether those effects 
caused lost sales in the VLA product market in the 2011 -2013 Refe rence Period , (c) whether those 
effects caused impedance in the VLA market in the 2011 -2013 Reference Period , (d) the effects of 
A380 and A350XWB LA/MSF on the A350XWB programme , and (e) whether those effects caused 
lost sales in the twin -aisle product mar ket in the 2011 -2013 Reference Period. We address each in 
turn. 
Effects of A380 LA/MSF on the A380 aircraft  
6.415.   We thus examine first the Appellate  Body's findings concerning the effects of A380 LA/MSF 
on the A380 programme. In that context, and by way of back ground, we find it helpful to recall that 
throughout this dispute, the United  States  had relied on a "product" theory of causation.596 The 
Appellate  Body explained that "[u]nder this product theory of causation, market distortion and 
adverse effects flow dir ectly from Airbus' entry at a particular time with a particular aircraft , which 
in the United  States ' view would not have been possible but for the subsidies".597 In the compliance 
 
594 European Union's response to Arbitrator question No. 4, paras.  116-117. See also European Union's 
responses to Arbitrator question No. 5, para.  127, No. 64, para.  210, and No. 101, para.  102 (making similar 
statements); and comments on the United  States' response to Arbitrator question No. 112, fn  226 (same).  
595 United  States' written submission, paras.  165-178; response to Arbitrator question No. 7(b), 
para. 15; and comments on the Europe an Union's responses to Arbitrator question No. 112, paras.  207-209, 
and No. 113, para.  216. 
596 In the original dispute the United  States also offered a "price" theory of causation, which was 
rejected by the original panel and not pursued on appeal by the U nited States. (Appellate  Body Report, EC and 
certain member States – Large Civil Aircraft (Article 21.5 – US), fn 1618).  
597 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.587. ( internal quotation mark s and citation omitted; emphasis original) See also Appellate  Body 
Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  5.416 (describing 
"product effects" as "the effects of such subsidies on the ability of Airbus to laun ch and bring to market 
particular Airbus LCA models as and when it did") (emphasis original) and fn  1496 (explaining that "the Panel 
used the term 'product effects' to refer to the effects of LA/MSF subsidies on the ability of Airbus to launch and 
bring to  market an Airbus LCA as and when it did"). We note that the term "bring to market" vis-à-vis a 
particular LCA is not a technical term, but, rather, has been used as a shorthand to describe an LCA 
manufacturer's general ability to develop and sell a partic ular LCA. (See, e.g. Panel Report, EC and certain 
member States – Large Civil Aircraft , para.  7.367 (explaining that "[c] onsequently, bringing a new LCA model 
to market requires long -term planning and advance assessment of a wide variety of factors, includ ing future 
manufacturing needs, market trends, customer demand and prices. This means that at the time a decision is 
taken to develop a new LCA model and to incur start -up costs, the eventual success of the project remains 
subject to a high degree of uncer tainty") ). The term is often paired with the term "launch" as well (i.e. the 
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  proceeding, the compliance panel found that, in the absence of the "product e ffect" of all pre -
A350XWB LA/MSF  (arising from the "indirect" effects598 of pre -A380 LA/MSF and "direct" effects599 
of A380 LA/MSF), the A380 aircraft would not have existed before or during the 2011 -2013 
Reference Period. The compliance panel's findings of lo st sales and impedance in the VLA product 
market were predicated on that non -existence.600 The Appellate  Body, however, found that only the 
effects of A380 LA/MSF could be considered vis-à-vis the A380 programme in the counterfactual. 
The Appellate  Body thus had to perform a new analysis aimed to "ascertain[] whether the Panel's 
analysis regarding the 'product effects' of [A380 LA/MSF alone] support a finding of a genuine and 
substantial causal relationship between these subsidies … and the market phenomena i dentified in 
the post -implementation period" in the VLA product market.601 
6.416.   The Appellate  Body determined what the "product effects" of A380 LA/MSF were vis-à-vis 
the A380 programme by examining the findings from the original proceedings and those made by 
the compliance panel.602 The Appellate  Body concluded that A380 LA/MSF had a "genuine  impact on 
Airbus' ability to fund the timely launch of the A380"603, that "these 'direct effects' of A380 LA/MSF 
continued after the original reference period", which ended in 2006, and that "the Panel's 
understanding of the 'direct effects' of A380 LA/MSF on Airbus' ability to launch, bring to market, 
and continue develo ping the A380 as and when it  did [had] a sufficient evidentiary basis".604 
Elsewhere in its report, the Appellate  Body also characterized the "product effects" of A380 LA/MSF 
as follows: (a) A380 LA/MSF "enabled Airbus … to bring to market and to continue de veloping the 
A380", an event that was "crucial to renew and sustain Airbus' competitiveness in the 
post-implementation period"605, (b) in the absence of A380 LA/MSF "Airbus would not have been 
able to offer the A380 at the time it did"606, (c) "A380 LA/MSF sub sidies continued to have effects 
on Airbus' ability to bring to market and to continue developing the A380 after the original reference 
period"607, and (d) A380 LA/MSF "made it possible … to bring to market the A380".608  
6.417.    Thus, the Appellate  Body clearly foun d that A380 LA/MSF had an impact not only on Airbus' 
ability to undertake a timely launch of the A380, but to continue to develop the A380 aircraft after 
 
ability of an LCA manufacturer to "launch and bring to market" a particular LCA model), a construction that has 
essentially the same meaning.  
598 "Indirect effects" are the "learnin g", scope and financial effects that any given LA/MSF subsidy 
provided specifically for one model of LCA may have on Airbus' ability to launch and bring to market another, 
subsequent model of LCA. (Appellate  Body Report, EC and certain member States – Large Civil Aircraft 
(Article  21.5 – US), paras.  5.563 and 5.594).  
599 "Direct effects" are the effects of any given LA/MSF subsidy on Airbus' ability to launch and bring to 
market the particular model of Airbus LCA specifically funded by that LA/MSF loan. (Appe llate Body Report, 
EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para.  5.563).  
600 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 7.1(d)(xii).  
601 Appellate  Body Report, EC and certain me mber States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.599.  
602 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
section 5.6.3.5.1.  
603 Appellate  Body Report, EC and certain member States – Large Civil Ai rcraft (Article 21.5 – US), 
para. 5.647.  
604 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.609. (emphasis original) The Appellate  Body also considered it "important … that the A380 programme 
suffered 'extensive' production delays in 2005 and 2006", during which time "Airbus continued to receive 
disbursements" under A380 LA/MSF measures. (Appellate  Body Report, EC and certain member States – Large 
Civil Aircraft (Article 21.5 – US), para.  5.608). See also Appellate  Body Report, EC and certain member States 
– Large Civil Aircraft (Article 21.5 – US), para.  5.646 (stating that "A380 LA/MSF had 'direct effects' on Airbus' 
ability to launch, bring to market, and continue developing the A380 as and when it  did, given that the A380 
LA/MSF subsidies had not expired, as well as the fact that Airbus continued to receive disbursements under the 
French, German, and Spanish LA/MSF contracts at a time when it was experiencing severe financial dif ficulties 
resulting from the extensive production delays in the A380 programme" and concluding that A380 LA/MSF 
"made it possible … to bring to market the A380"). (emphasis original)  
605 Appellate  Body Report, EC and certain member States – Large Civil Aircr aft (Article 21.5 – US), 
paras.  5.647 and 6.23.  
606 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  5.766, 5.769, and 5.773.  
607 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.635.  
608 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.646.  
 WT/DS 316/ARB 
 
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  the original reference period, which ended in 2006.609 This illustrates that A380 LA/MSF had effects 
not only on Airbus' ability to decide to launch the A380 programme at all, but to actually develop 
the aircraft post -launch. Relatedly, and as noted above, the Appellate  Body directly stated that A380 
LA/MSF "made it possible … to bring to market the A380". W e interpret this statement as more 
categorically asserting that the A380 aircraft would not have been brought to market at all in the 
absence of A380 LA/MSF.  
6.418.   In sum, taken in their entirety, the Appellate  Body's descriptions of the "product effects" of 
A380 LA/MSF strongly suggest that the A380 aircraft would not have been available for order or 
delivery by the end of the 2011 -2013 Reference Period.610 
Causation of VLA lost sales  
6.419.   We next turn to examine the Appellate  Body's analysis of whether the "product e ffects" of 
A380 LA/MSF caused lost sales in the VLA product market during the 2011 -2013 Reference Period.611 
This analysis is significant in our view because LCA deliveries result from previous LCA orders. Thus, 
insofar as the Appellate  Body's analysis of lo st sales indicates that Airbus would not have been able 
to offer the A380 aircraft by the end of the 2011 -2013 Reference Period in the counterfactual then, 
a fortiori , Airbus could not have captured any of the A380 Impedance Deliveries  in the counterfactua l 
with deliveries of A380 aircraft, since such deliveries would result from orders placed well before the 
deliveries would have been made.  
6.420.   We note in particular four aspects of the Appellate  Body's VLA lost sales analysis. First,  the 
Appellate  Body never s tated that the A380 aircraft would have been available for order in the 2011 -
2013 Reference Period, or at any time beforehand. Relatedly, the Appellate  Body never explained 
how A380 LA/MSF could have been a "genuine and substantial" cause of lost sales in the 2011 -2013 
Reference Period if the A380 aircraft would have been available for offer in the 2011 -2013 Reference 
Period in the absence of A380 LA/MSF. This is significant in our view because, in the absence of any 
other explanation by the Appellate  Body regarding the causal mechanism through which A380 
LA/MSF caused lost sales, it would appear reasonable to conclude that the causal mechanism was 
that described in the compliance panel report, i.e. the A380 aircraft was absent from the market and 
unavailabl e for order during the 2011 -2013 Reference Period.  Based on the totality of the 
Appellate  Body's report, the only reasonable explanation that we discern for the absence of such 
explanations is that they were unnecessary because in the counterfactual the A3 80 aircraft would 
not have been available for order in the 2011 -2013 Reference Period.  
6.421.   Second, the Appellate  Body stated that "the Panel's findings … indicate that Airbus' 
competitiveness in the VLA market, gained through earlier LA/MSF subsidies, was rene wed and 
sustained beyond the original reference period and into the post -implementation period due to the 
subsidies it continued to receive after the original reference period and into the post -implementation 
period".612 This was so because A380 LA/MSF "enab led Airbus to bring the A380 to market and 
continue its development in the face of extensive production delays".613 The Appellate  Body went on 
to explain that, "[i]n other words, in the absence of [A380 LA/MSF], Airbus would not have been 
able to be 'present  in [both] of the relevant sales campaigns as exactly the same competitor selling 
identical  aircraft' in the post -implementation period".614 We therefore note that the Appellate  Body 
again stated that A380 LA/MSF "enabled Airbus to bring the A380 to market and continu e its 
development", without ever implying that the A380 aircraft could have been brought to market and 
developed otherwise. Most significantly, perhaps, the Appellate  Body plainly stated that Airbus, in 
 
609 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.558.  
610 For clarity, when this section refers to the A380 aircraft, it refers to the A380 aircraft that was in fact 
ordered and delivered in the 2011 -2013 Reference Period.  
611 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Ar ticle 21.5 – US), 
section 5.6.4.6.4.1. The lost sales in the VLA product market were the 2012 Transaero order for four A380 
aircraft and the 2013 Emirates order for 50 A380 aircraft.  
612 Appellate  Body Report, EC and certain member States – Large Civil Aircr aft (Article 21.5 – US), 
para. 5.725.  
613 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.725.  
614 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.726 (quoting Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.1789) (second alteration original).  WT/DS 316/ARB 
 
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  the counterfactual, would not have been able to prese nt, in the sales campaigns leading to the 
Transaero and Emirates lost sales, an aircraft "identical" to the A380 aircraft that was in fact brought 
to market. We take this as a direct statement that Airbus could not have offered the A380 aircraft 
in the 201 1-2013 Reference Period. Moreover, the Appellate  Body's statement that A380 LA/MSF 
"renewed and sustained" Airbus' "competitiveness in the VLA market" in the counterfactual post -
implementation period is consistent with the conclusion that, without A380 LA/ MSF, the A380 aircraft 
would not have been available for order in the 2011 -2013 Reference Period.  
6.422.   Third, we note the manner in which the Appellate  Body rejected the European Union's 
argument that the compliance panel improperly dismissed certain of the Eur opean Union's non -
attribution factors:  
The European  Union argued before the Panel that Transaero Airlines and Emirates 
Airlines chose the A380 over the 747 -8 in the orders they placed in 2012 and 2013 
because of, inter alia , the  A380's more advanced techno logies and greater size 
compared with the 747 -8, which enabled it to satisfy both customers' very specific 
requirements. However, similar to our analysis in the context of lost sales in the twin -
aisle LCA market, we do not view these factors as unrelated t o the effects of the 
subsidies . Rather, our review of findings from the original proceedings and the Panel's 
findings shows that, absent the LA/MSF subsidies existing in the post -implementation 
period, Airbus would not have been able to launch and bring to  market the A380 at the 
time it did. Therefore, like the Panel, we have doubts as to whether Airbus' pre -existing 
commonality advantages and other product -related advantages over Boeing could be 
characterized as non -attribution factors that could be said t o "dilute" the causal link 
between the LA/MSF subsidies existing in the post -implementation period and the 
relevant market phenomena.615 
6.423.   This passage, in our view, further demonstrates that the A380 aircraft would not have been 
available for offer in the 201 1-2013 Reference Period in the counterfactual. Indeed, this appears a  
reasonable conclusion if these features of the A380 aircraft, i.e. "more advanced technologies and 
greater size", that were offered in reality during the 2011 -2013 Reference Period were not "unrelated 
to the effects of [A380 LA/MSF] subsidies".  
6.424.   Finally, we underline that, in its VLA lost sales analysis, the Appellate  Body affirmed the VLA 
lost sales findings of the compliance panel, which were predicated on the market absence of the 
A380 aircraft, and provided no alternative reasoning as to how A380 LA/MSF caused VLA lost sales 
in the 2011 -2013 Reference Period.616 
6.425.   These four aspects of the Appellate  Body's VLA lost sales analysis in the compliance 
proceeding, in our view, support the concl usion  that Airbus would not have been able to offer the 
A380 aircraft by the end of the 2011 -2013 Reference Period, and thus, a fortiori , that Airbus would 
not have been able to capture any of the A380 Impedance Deliveries during the 2011 -2013 
Reference Pe riod with deliveries of A380 aircraft.  
Causation of VLA impedance  
6.426.   We next turn to examine the Appellate  Body's analysis of whether the "product effects" of 
A380 LA/MSF caused impedance in the six geographic markets. In this context, we find nothing in 
the Appellate  Body's analysis indicating that the A380 aircraft would have been available for order 
or delivery in the 2011 -2013 Reference Period in the counterfactual. Indeed, the Appellate  Body 
never stated that the A380 aircraft would have been available f or delivery in the 2011 -2013 
Reference Period, or at any time beforehand. Relatedly, the Appellate  Body never explained how 
A380 LA/MSF could have been a "genuine and substantial" cause of impedance in the 2011 -2013 
 
615 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.729. (f n omitted; emphasis added) We note that other reasons that the European Union alleged led 
Transaero and Emirates to order the A380 aircraft over the 747 -8I aircraft appeared to be HSBI. (Panel Report, 
EC and certain member States – Large Civil Aircraft (Ar ticle 21.5 – US), fn 3275 (citing HSBI versions of 
submissions and HSBI exhibits when discussing the European Union's arguments in this context)).  
616 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.37. 
 WT/DS 316/ARB 
 
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  Reference Period if the A380 aircraft wo uld have been available for delivery during that same time -
period in the absence of A380 LA/MSF. Moreover, the Appellate  Body affirmed that even the low 
number of A380 Impedance Deliveries present in Australia (a single A380 delivery), China (four 
A380 del iveries), Korea (three A380 deliveries), and  Singapore (five A380 deliveries) during the 
2011-2013 Reference Period could support findings of impedance in each such geographic market.617 
6.427.   Additionally, we note the manner in which the Appellate  Body rejected t he European Union's 
argument that the compliance panel improperly dismissed the European Union's alleged non -
attribution factor regarding delays in the 747 -8I programme. Before looking at the Appellate  Body's 
rejection of the European Union's argument, we  need to recall the following statement by the 
compliance panel in the context of assessing the validity of the United  States ' impedance claims in 
the VLA product market:  
[W]e do not see the delays in the development and production of … the 747 -8 to mean 
that, in the absence of the "product" effects of the LA/MSF subsidies, Boeing or the 
United  States ' LCA industry would not have won the orders corresponding to the 
deliveries made in the … market  [ ] for … very large LCA. The fact that Airbus would not 
have existed in the absence of the LA/MSF subsidies means that customers that could 
not wait for the 787 and 747 -8 to become available would have turned to either Boeing's 
other twin -aisle LCA, the 767 and the 777. [3326] 
3326 We recall that … there is evidence that the larger versions of the 777 may also at times 
challenge for sales in the market for very large LCA.  (footnote original)618 
6.428.   On appeal, the European Union argued that the compliance panel wrongly rejected its 
argument. As noted above, the Appellate  Body rejected the European Union's appeal, reasoning as 
follows:  
We recall that the Panel did not see these delays "to mean that, in the absence of the 
'product' effects of the LA/MSF subsidies, Boeing or the United  States ' LCA industry 
would not  have won the orders  corresponding to the deliveries made in the different 
markets" for VLA. We also note the Panel's observation that "there is evidence that the 
larger versions of the 777 may also at times challenge for sales in the market for [VLA]". 
Thus, the Panel's reasoning that, in the absence of Airbus' VLA offerings, customers 
would have turned to other Boeing LCA products – for instance, the larger versions of 
the 777 – appears to us to be reasonable . Consequently, we see no reason to disturb 
the Panel's finding that this non -attribution factor would not be capable of diluting the 
genuine and substantial relationship of cause and effect between LA/MSF subsidies and 
the alleged market phenomena.619 
6.429.   We note, therefore, that the Appellate  Body affirmed  reasoning by the compliance panel that 
expressly included an assumption regarding the "absence of Airbus' VLA offerings". Such an 
affirmation would have been incongruous if that portion of the compliance panel's reasoning were 
false. Indeed, in this passa ge, the Appellate  Body affirmed that "customers that could not wait for 
the … 747 -8 to become available would have turned to …  Boeing's other twin -aisle LCA", and in 
 
617 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.739. See also United  States' comments on the European Union's response to Arbitrator question 
No. 113, paras.  221-222 (noting the single VLA delivery  into the Australian market during the Reference Period 
and stating, correctly, that "[t]here were no other facts or evidence analysis specific to the Australia market. 
And yet, there was a finding of impedance"). (fn  omitted)  
618 Panel Report, EC and certai n member States – Large Civil Aircraft (Article 21.5 – US), para.  6.1816 
and fn  3326.  
619 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.735. (fn  omitted; emphases added)  
 WT/DS 316/ARB 
 
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  particular the 777 -300ER aircraft.620 It was left unexplained, however, why, if the A380 air craft had 
been in the market in the counterfactual such that it could have competed for orders that resulted 
in the A380 Impedance Deliveries, and if customers would have opted away from the 747 -8I, which 
is a VLA, due to production delays, customers would  have opted for a twin -aisle LCA that is not a 
VLA (i.e. the 777 -300ER model) rather than simply purchased Airbus VLA (i.e. the A380 model) 
instead.621 Based on the totality of the Appellate  Body's report, we consider the most reasonable 
explanation to be th at the A380 aircraft was assumed to be unavailable, thus essentially forcing 
customers to accept an LCA that only "at times" competed with VLA for sales, i.e. the twin -aisle 777 -
300ER aircraft.  
6.430.   Finally, we underline that, in its VLA impedance analysis, the  Appellate  Body affirmed the 
VLA impedance findings of the compliance panel, which were predicated on the market absence of 
the A380 aircraft, and provided no alternative reasoning as to how A380 LA/MSF caused VLA 
impedance in the 2011 -2013 Reference Perio d.622 
6.431.   These aspects of the Appellate  Body's VLA impedance analysis in the compliance proceeding 
in our view support the conclusion  that Airbus would not have been able to deliver the A380 aircraft 
by the end of the 2011 -2013 Reference Period, and thus that Airbus would not have been able to 
capture any of the A380 Impedance Deliveries during the 2011 -2013 Reference Period with deliveries 
of A380 aircraft.  
6.432.   At this point, we recall the European Union's argument that the Appellate  Body's report could 
be interpreted to mean that the A380 aircraft would have been available for both offer and delivery 
in the 2011 -2013 Reference Period in the counterfactual, but still lost the Transaero and Emirates 
orders and failed to make at least some of the A380 Impedance Deliveries for other reasons, i.e. 
disadvantages related to delivery schedules or less well -established market position or maturity. In 
the light of the above discussions, we must reject these arguments. As explained above, the 
Appellate  Body's findings in dicate to us with sufficient clarity that Airbus would not have been able 
to offer or deliver the A380 aircraft during the 2011 -2013 Reference Period.623  
Effects of A380 and A350XWB LA/MSF on the A350XWB aircraft  
6.433.   Next, we  examine the Appellate  Body's analys is regarding  the effects of A380 and A350XWB 
LA/MSF on the A350XWB programme and whether those effects caused lost sales in the twin -aisle 
product market in the 2011 -2013 Reference Period. The impedance findings at issue concern 
deliveries of A380 aircraft , not A350XWB aircraft. However, the Appellate  Body's analyses on the 
A350XWB aircraft may be relevant for our purposes here. We recall in this regard that (a) the 
 
620 We consider that the phrase "larger versions of the 777" aircraft in footnote 3326 of the compliance 
panel's report, quoted further above, meant primarily the 777 -300ER model in the light of the fact that the 
777-300ER was the largest 777 model in the twin -aisle product market in the  compliance proceedings, and 
considering footnote 2415 of the compliance panel's report according to which "[i]t is asserted in the Mourey 
Statement that the 747 -8 may sometimes face competition from the smaller, but more 'efficient', 777 -300ER, 
as well as  the A350XWB -1000". (Panel Report, EC and certain member States – Large Civil Aircraft (Article 
21.5 – US), fn 2415).  
621 We recognize that, for example, if customers only became aware of the delays in the 747 -8I 
programme after having ordered the aircraft, they might have seen it as beneficial to convert those orders into 
another Boeing model, e.g. the 777 -300ER model, rather than cancelling the order and purchasing Airbus VLA 
instead. However, such reasoning is absent from the causation findings vis-à-vis the A380 aircraft in the 
compliance proceedings, and thus we cannot conclude that such reasoning played any role in such findings.  
622 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.41 and 6.42.  
623 The European Union also asserts that in the compliance proceeding certain A380 orders and 
deliveries in the 2011 -2013 Reference Period were not found to represent lost sales or impedance. (European 
Union's responses to Arbitrator question No. 57, para.  104 and  fn 158, and No. 113, para.  256). The European 
Union thus appears to argue that this means that the Appellate  Body found that in the counterfactual the A380 
aircraft was in the market in the 2011 -2013 Reference Period. (European Union's responses to Arbitr ator 
question No. 127, para.  290, and No. 257, para.  257). We disagree. To the extent that there were additional 
A380 orders and deliveries during the 2011 -2013 Reference Period not subject to adverse -effects findings in 
the compliance proceeding, we note that the United  States did not challenge such orders and deliveries. They 
are thus subject to no findings at all. Insofar as such additional orders and/or deliveries exist, they are 
therefore not material in establishing the market presence of the A380 air craft in the counterfactual.  
 WT/DS 316/ARB 
 
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  A350XWB aircraft was launched in 2006, whereas the A380 aircraft was launched in 2000624, and 
(b) the A350XWB aircraft incorporated a significant range of technologies that were developed, inter 
alia, as part of Airbus' experience with the A380 aircraft.625 In the light of this, we consider it a 
reasonable assumption that, in the counterfactual, had Airbus launched and brought to market the 
A350XWB aircraft, Airbus would likely have done so after Airbus launched and at least begun post -
launch development of the A380 aircraft.626 Thus, insofar as the Appellate  Body found that, in the 
counterfactual, the A350XWB aircraft would have been launched and available for order627 by the 
end of the 2011 -2013 Reference Period, such a finding could indirectly support the inference that 
the A380 aircraft would have been available for order and/or delivery in the 2011 -2013 Reference 
Period as well, as its development would likely have been further along than the development of the 
A350XWB aircraft at that time. In this way, examining the effects of LA/MSF on the A350XWB aircraft 
in the counterfactual may indirectly inform  our understanding of the effects of LA/MSF on the A380 
aircraft.628 
6.434.   In the compliance proceeding, the panel found that, in the absence of the "product effect" 
of all LA/MSF  (arising from the "indirect" effects of pre -A350XWB LA/MSF and "direct" effects of 
A350XWB LA/MSF), the A350XWB aircraft would not have existed before or during the 2011 -2013 
Reference Period.629 The Appellate  Body, however, found that only the effects of A380 and A350XWB 
LA/MSF could be considered vis-à-vis the A350XWB programme in the cou nterfactual, and thus had 
to perform a new analysis aimed to "ascertain[] whether the Panel's analysis regarding the 'product 
effects' of [A380 and A350XWB LA/MSF alone] support a finding of a genuine and substantial causal 
relationship between these subsi dies … and the market phenomena identified in the post -
implementation period" in the twin -aisle product market.630  
6.435.   The Appellate  Body confirmed  the compliance panel's findings that (a) A350XWB LA/MSF 
had "direct effects" on the A350XWB programme, and in par ticular that "' without  A350XWB LA/MSF, 
the Airbus company that actually existed [in 2006-2010] could have pursued such a programme 
only by a narrow margin, with a high likelihood that it would, to some degree, have had to make 
certain compromises with resp ect to the pace of the programme and/or the features of the 
aircraft'"631, and (b) A380 LA/MSF had "indirect effects" on the A350XWB programme, and in 
particular the "A350XWB significantly benefitted from the 'learning effects' of the A380" and that 
"A380 LA/MSF had 'financial effects' on Airbus' ability to launch the A350XWB as  and when it did".632 
The Appellate  Body concluded that, "without the aggregated 'product effects' of the existing LA/MSF 
subsidies for the A380 and A350XWB programmes, Airbus would not have been able to launch the 
 
624 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
fn 1715.  
625 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.637. See also Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – 
US), para.  6.1747 (noting that "the A350XWB programme significantly benefitted from Learning effects arising 
from previous, subsidized Airbus LCA programmes, especially (but not only) the A380 programme").  
626 The European Union's arguments are consistent with this basic assumption. (European Union's 
response to Arbitrator question No. 101, paras.  96-97 (arguing that both the A380 and A350XWB mode ls 
would have been launched in the counterfactual shortly after their respective actual launch dates)).  
627 The first A350XWB aircraft was not delivered until 2014. (Updated Ascend Database, (Exhibit EU -
79)). Thus, in the counterfactual we focus on whether t he A350XWB aircraft would have been available for 
order, and not delivery, in the 2011 -2013 Reference Period.  
628 We therefore note that in this context, we analyse the Appellate  Body's findings regarding the effects 
of A380 and A350XWB LA/MSF in their own r ight, rather than in the light of the Appellate  Body's findings 
regarding: (a) the effects of A380 LA/MSF on the A380 programme, (b) causation of VLA lost sales, or (c) 
causation of VLA impedance.  
629 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 7.1(d)(xiii).  
630 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.599.  
631 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.632 (quoting Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.1717). (emphases original)  
632 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  5.637 -5.638.  
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  A350XWB as and when it did".633 In other word s, A380 and A350XWB LA/MSF "enabled Airbus to 
proceed with the timely launch and development of the A350XWB" aircraft, an event that was "crucial 
to renew and sustain Airbus' competitiveness in the post -implementation period".634 
6.436.   The Appellate  Body never sta ted when the A350XWB aircraft would have been launched and 
brought to market in the counterfactual. Certain of the Appellate  Body's characterizations of the 
"product effects" of LA/MSF appear to leave open the possibility that the A350XWB aircraft could 
have been launched and brought to market by the 2011 -2013 Reference Period. We therefore recall 
that although the A350XWB programme had been launched in 2006, the first delivery had not yet 
occurred by year -end 2013. Thus, even if Airbus did not have, in the  counterfactual, the ability to 
proceed "with the timely launch and development of the A350XWB" aircraft, this does not mean that 
Airbus could not have had the counterfactual ability to do so at a later point in time, such that orders 
of A350XWB aircraft c ould still have occurred in the 2011 -2013 Reference Period. We thus consider 
that the Appellate  Body's findings regarding the effects of A380 and A350XWB LA/MSF on the 
A350XWB programme do not establish whether the A350XWB aircraft would have been launched  
by, and available for order in, the 2011 -2013 Reference Period.  
Causation of twin -aisle lost sales  
6.437.   We now turn to examine the Appellate  Body's analysis of whether the "product effects" of 
LA/MSF caused lost sales, secured by the A350XWB aircraft, in the t win-aisle product market during 
the 2011 -2013 Reference Period.635 In our view, this analysis will inform our understanding of 
whether the A350XWB aircraft would have been present in the market and available for order in the 
2011-2013 Reference Period.636 We n ote in particular four aspects of this analysis. First, the 
Appellate  Body did not state that the A350XWB aircraft would have been launched or available for 
order by any particular time. Relatedly, the Appellate  Body never explained how LA/MSF could have 
been a "genuine and substantial" cause of lost sales in the twin -aisle market in the 2011 -2013 
Reference Period if the A350XWB aircraft would have been available for offer in the 2011 -2013 
Reference Period in the absence of A380 and A350XWB LA/MSF.637  
6.438.   Second , the Appellate  Body stated that "in the absence of the [A380 and A350XWB] LA/MSF 
subsidies … Airbus would not have been able to offer the A350XWB at the time it did and with the 
features that the A350XWB contained . In other words, in the absence of these subsidies, Airbus 
would not have been able to be 'present in all [three ] of the relevant sales campaigns as exactly the 
same competitor selling identical aircraft ' in the post -implementation period".638 We take these as 
direct statements that Airbus could no t have offered the A350XWB aircraft in the 2011 -2013 
Reference Period.  
 
633 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.639. These "aggregated" effects  consisted of the "direct" effects of A350XWB LA/MSF and the "indirect" 
effects of A380 LA/MSF. The Appellate  Body also stated elsewhere in its report that in the absence of A380 and 
A350XWB LA/MSF, Airbus "would have been unable to launch the A350XWB or an  A350XWB -type aircraft by 
the end of 2006". (Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – 
US), para.  5.714).  
634 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.647.  
635 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
section 5.6.4.6.3.1. The lost sales in the twin -aisle product market were the 2012 Cathay Pacific Airways order 
for ten A350XWB -1000 aircraft, and t he 2013 orders by Singapore Airways and United Airlines for 30 
A350XWB -900 aircraft and ten A350XWB -1000 aircraft, respectively.  
636 See paragraph 6.433  above.  
637 We note, however, that certain of the Appellate  Body's statements suggest that the Appellate  Body 
considered that the timely launch  of the A350XWB aircraft, rather than the market presence  of the A350XWB 
aircraft in the 2011 -2013 Reference Period, was in some way responsible for the competitiveness of the 
A350XWB in the 2011 -2013 Reference Period. (A ppellate  Body Report, EC and certain member States – Large 
Civil Aircraft (Article 21.5 – US), paras.  5.631 (stating that "the Panel considered that an alternative aircraft  
with fewer features and/or offered later in time would not have been as competitive  as a timely launched 
A350XWB") and 5.632 (stating that "we agree that the Panel considered that the features and timing  of the 
A350XWB were crucial for its competitiveness and commercial success")). (emphasis added)  
638 Appellate  Body Report, EC and certain  member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.709. (emphases added)  
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  6.439.   Third, we note the manner in which the Appellate  Body rejected the European Union's 
argument that the compliance panel improperly dismissed certain of the European Union's alleged 
non-attribution factors. The Appellate  Body stated that "we share the Panel's view that most of the 
alleged non -attribution factors with regard to lost sales in the twin -aisle LCA market … including 
Airbus' pre -existing commonality advantages  and other product -related advantages over Boeing, 
are not factors 'unrelated' to the LA/MSF subsidies existing in the post -implementation period"639, 
and "agree  with the Panel's assessment of the non -attribution factor concerning Singapore Airlines' 
wish to split orders betwe en Boeing and Airbus. Indeed, the fact that Airbus was in a position to 
offer the A350XWB in a timely manner was, in itself, largely due to LA/MSF subsidies and their effect 
on the pace of the programme and the features  of the A350XWB".640  
6.440.   Finally, we under line that, in its twin -aisle lost -sales analysis, the Appellate  Body affirmed 
the twin -aisle lost -sales findings of the compliance panel, which were predicated on the market 
absence of the A350XWB aircraft, and the Appellate  Body provided no alternative re asoning as to 
how LA/MSF caused twin -aisle lost sales in the 2011 -2013 Reference Period.641 
6.441.   The Appellate  Body's findings with respect to the effects of LA/MSF on the A350XWB 
programme and whether those effects caused lost sales in the twin -aisle market in the 2011 -2013 
Reference Period do not indicate that the A350XWB aircraft would have been launched or availabl e 
for order by the end of the 2011 -2013 Reference Period. Indeed, the Appellate  Body never stated 
when the A350XWB aircraft would have been launched in the counterfactual, and never clarified 
how, if the A350XWB aircraft had been available for order in the  2011-2013 Reference Period, A380 
and A350XWB LA/MSF could have caused the lost sales in the twin -aisle LCA market. Moreover, 
certain other statements by the Appellate  Body, in our view, establish  that the A350XWB aircraft 
would not have been present in th e market in the 2011 -2013 Reference Period. In particular, we 
note that the Appellate  Body (a) stated that, in the counterfactual, Airbus could not have been able 
to offer an aircraft "identical" to the A350XWB aircraft in the sales campaigns that resulted  in the 
lost sales in the twin -aisle market during the 2011 -2013 Reference Period , (b) found that the 
compliance panel properly rejected alleged "product -related advantages" as non -attribution factors 
because they were in fact attributable to LA/MSF subsid ies, (c) directly implied that one of the 
reasons why Airbus was able to win the split order from Singapore Airlines in 2013 was the fact that 
LA/MSF subsidies put "Airbus … in a position to offer the A350XWB in a timely manner" , and (d) 
stated that "the f act that Airbus was in a position to offer the A350XWB in a timely manner was, in 
itself, largely due to LA/MSF subsidies and their effect on the pace of the programme and the features 
of the A350XWB".642 We consider that these statements would be incongruou s if the A350XWB 
aircraft would have been available for order in the 2011 -2013 Reference Period in the counterfactual.  
6.442.   Thus,  the Appellate  Body's analyses involving the A350XWB aircraft examined above do not 
suggest to us that the A380 aircraft would have been available for either order or delivery in the 
2011-2013 Reference Period.  
Conclusion  
6.443.   In the light of the foregoing, we consider that the Appellate  Body's analyses concerning the 
effects of LA/MSF on the A380 and A350XWB programmes, and whether such ef fects caused relevant 
adverse effects in the 2011 -2013 Reference Period, establish that Airbus would not have been able 
to offer or deliver the A380 aircraft during the 2011 -2013 Reference Period. If this were not the 
case, multiple aspects of the Appellat e Body's reasoning would in our view become incongruous.  
 
639 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.714. (emphasis added) We note that the Appellate  Body did not  specify which alleged non -attribution 
factors examined by the compliance panel were, in the Appellate  Body's view, unrelated to A380 and A350XWB 
LA/MSF. However, as discussed above, other aspects of the Appellate  Body's analysis appear to clarify that the  
A350XWB aircraft, as it existed, would not have been available for order in the 2011 -2013 Reference Period.  
640 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.714. (emphasis added)  
641 Appellate  Body Re port, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 6.31. 
642 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.714.  
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  Competition from twin -aisle LCA, leasing companies, and the second -hand market  
6.444.   The European Union argues that, in the counterfactual, the LCA customers that received the  
A380 Impedance Deliveries mi ght not have ordered Boeing LCA, such that Boeing would not have 
captured all the A380 Impedance Deliveries with deliveries of new Boeing LCA. Instead, the European 
Union argues that in the counterfactual these customers had a variety of options, including  (a) to 
purchase new Airbus or Boeing twin -aisle LCA, (b) lease LCA from leasing companies, and/or (c) buy 
LCA on the second -hand market.643 
6.445.   The United  States  generally asserts that the European Union's arguments are at odds with 
the findings of the Appellat e Body in the compliance proceedings, in particular with respect to 
findings regarding the market absence of the A380 aircraft in the 2011 -2013 Reference Period and 
the substitutability between the A380 and 747 -8I aircraft, which were the only two LCA avai lable for 
delivery in the VLA product market in the 2011 -2013 Reference Period. The United  States  also 
asserts that even if in the counterfactual VLA customers that received  the A380 Impedance Deliveries 
would have opted for twin -aisle LCA they would have chosen Boeing, not Airbus, twin -aisle LCA.644 
6.446.   The Arbitrator notes that the LCA customers that received  the A380 Impedance Deliveries 
purchased new and technologically advanced VLA, i.e. the A380 aircraft. In the absence of 
compelling evidence to the contrar y, we find it reasonable to assume that, in the counterfactual, the 
same customers would have been interested in purchasing  (rather than leasing) new (rather than 
second -hand)645 and technologically advanced VLA (rather than twin -aisle LCA).646 The only other 
such VLA that was available for delivery in the 2011 -2013 Reference Period was the 747 -8I aircraft. 
We discern nothing in the adopted findings of this dispute, or in the arguments of the parties in this 
proceeding, that indicates that the customers that re ceived  the A380 Impedance Deliveries would 
have opted for anything other than 747 -8I deliveries during the 2011 -2013 Reference Period. 
Indeed,  a contrary conclusion would appear at odds with the findings in the compliance proceeding 
that the 747 -8I and A38 0 aircraft were the only two LCA in the VLA product market in the 2011 -
2013 Reference Period.647 
 
643 European Union's written submission, para.  200; responses to Arbitrator question No. 3, 
paras.  87-88, No. 4, No. 5, paras. 126, 132, and 134, No. 7, paras. 156 and 158, No. 10, paras.  204-205, 
No. 46, paras.  475-476, No. 64, paras.  211-212, No. 84, para.  302, No. 112, para.  249, No. 113, para.  261, 
and No.  151; and comments on the United  States' responses to Arbitrator question No. 114, para.  185, and 
No. 127, para.  291. 
644 United  States' written submission, section V.A.2; and comments on the European Union 's response 
to Arbitrator question No. 151, para. 268.  
645 We note that before the original panel, the European Union argued "that in a significant number of 
sales campaigns, competition is with a potential purchase of used LCA or a lease, rather than with t he other 
manufacturer. [Thus] …, to the extent that Boeing is not involved in these sales, an Airbus 'win' cannot be 
considered a 'loss' to Boeing". (Panel Report, EC and certain member States – Large Civil Aircraft , 
para. 7.1723). The original panel rejec ted this argument, instead finding that "[w]hile it may well be that there 
is not clear head -to-head competition for each and every sale of LCA, it is apparent to us that, with only two 
manufacturers in the market, there is overall competition between Boei ng and Airbus for all sales of LCA". 
(Panel Report, EC and certain member States – Large Civil Aircraft , para.  7.1724. See also Panel Report, 
EC and certain member States – Large Civil Aircraft , para.  7.1722 (elaborating on the pervasive competition 
betwee n Airbus and Boeing for LCA sales)).  
646 We recall that twin -aisle LCA and VLA comprise different product markets. Further, we recall that in 
the compliance proceedings "the European Union did not argue … that the 747 -8I and the 777 -300ER and the 
A350XWB -1000 should have been placed into the same product market". (Appellate  Body Report, EC and 
certain member States – Large Civil Aircraft (Article 21.5 – US), para.  5.544).  
647 The Appellate  Body explained that "while the three product markets the United  States h ad chosen to 
rely upon [(i.e. the single -aisle, twin -aisle, and VLA)] to bring its complaint did 'not exhaustively capture how 
competition [took] place between aircraft in the LCA sector at all times', [the compliance panel] was satisfied 
that 'they repres ent[ed] the three segments within which most competitive interactions  between the relevant 
aircraft [would] commonly take place'". (Appellate  Body Report, EC and certain member States – Large Civil 
Aircraft (Article 21.5 – US), para. 5.544 (quoting Panel R eport, EC and certain member States – Large Civil 
Aircraft (Article 21.5 – US), para. 6.1416) ). (emphasis added by Appellate  Body) We further recall our 
conclusion above that the A350XWB aircraft would not have been available for order or delivery in the 
2011-2013 Reference Period. We further discern nothing in the adopted findings of this dispute or the 
arguments of the parties in this proceeding materially indicating that there would have been any other models 
of VLA in the 2011 -2013 Reference Period in t he counterfactual.  
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  6.447.   The European Union offers an article that in its view supports the position that, absent the 
A380 aircraft, Airbus would have captured some of the A380 Impedance Deliveries with twin -aisle 
LCA such as the A330 aircraft.  We note that this exhibit, in relevant part, purports to demonstrate 
the impact that the introduction of the A380 aircraft would have on demand for other types of LCA 
using data from 1969 -1998.648 The 747 -8I aircraft was not available for either order or delivery 
during the 1969 -1998 time -period and the exhibit does not consider the impact that the market 
presence of the 747 -8I aircraft would have had on the analysis contained in the exhibit. Thus, the 
conditions of competition upon which the exhibit's analysis are based significantly differ from those 
in the years leading up to and during the 2011 -2013 Refer ence Period in the counterfactual. We 
therefore consider that this article cannot properly be used to determine to what extent customers 
would have demanded deliveries of A330 instead of 747 -8I aircraft in the 2011 -2013 Reference 
Period had the A380 aircra ft been absent from the market before and during that time.649 
Aggressive bidding by Airbus in certain sales campaigns  
6.448.   The European Union argues that, in the counterfactual, Airbus may still have captured some 
of the A380 Impedance Deliveries through more ag gressive bidding in certain key sales campaigns. 
In other words, "[t]o incentivise prospective customers and to prevent them from switching over to 
Boeing, Airbus might have been tempted to offer steeper discounts in that counterfactual"650, and 
with such a strategy by Airbus, "in a world in which A380 deliveries were delayed, airlines may well 
have contemplated purchasing two A330s and using them in higher frequencies in order to replace 
a single A380".651 
6.449.   The United  States  generally responds that this European Union argument is among those 
that essentially seek to "negate in part or in full" the findings regarding impedance from the 
compliance proceedings.652 
6.450.   The Arbitrator notes that the record reflects that Boeing and Airbu s are generally in strong 
competition in the global LCA marketplace. Nevertheless, there is no evidence or findings that we 
discern to provide a basis upon which to assume that Airbus would have captured any of the A380 
Impedance Deliveries via aggressive bidding of LCA in the counterfactual. We recall that the A380 
and 747 -8I aircraft were the only LCA available for either order or delivery in the VLA product market 
in the 2011 -2013 Reference Period, and that we have concluded that in the counterfactual th e A380 
aircraft would not have been available for either order or delivery in the 2011 -2013 Reference Period.  
Also, if it were reasonable to assume that Airbus would have bid more aggressively in certain relevant 
sales campaigns, it would appear equally re asonable to assume that Boeing would likewise have 
(had to) bid more aggressively in the same sales campaigns, and could thus still have won the sales. 
As concerns the European Union's assertion that airlines might have purchased A330 aircraft rather 
than A380 aircraft, we refer to our considerations in the immediately preceding section. For all these 
reasons, we  reject the European Union's position on the grounds that it is speculative and 
unsupported by material evidence.  
Airbus' and Boeing's costs, price s, and deliveries  
6.451.   The European Union argues that in order to determine the degree of impedance in the 2011 -
2013 Reference Period, the Arbitrator would need to consider the economic mechanisms through 
which the LA/MSF subsidies at issue affected Airbus' (an d Boeing's) production costs, prices, and 
delivery schedules of VLA and how these same parameters would have been affected in a 
counterfactual involving withdrawal of these subsidies. According to the European Union, for 
example, in the absence of the A380  LA/MSF, if Boeing had made additional sales and deliveries of 
 
648 Irwin, Douglas A., Pavcnik, Nina, 2004. "Airbus versus Boeing revisited: international competition in 
the aircraft market", Journal of International Economics, Elsevier, vol. 64(2): 223 -245, (Exhibit EU -138), 
p. 224. 
649 We further recal l that, in the compliance proceedings, the Appellate  Body confirmed that the A380 
and 747 -8I aircraft are "sufficiently substitutable". There is no such finding on the record regarding the degree 
of substitutability between the A330 and the 747 -8I aircraft . 
650 European Union's response to Arbitrator question No. 84, para.  307. 
651 European Union's response to Arbitrator question No. 84, para.  305. See also European Union's 
written submission, para.  200; responses to Arbitrator question No. 6, para. 148, No, 84, para.  307, and No. 
88, para.  326; and comments on the United  States' response to Arbitrator question No. 130, para.  308. 
652 United  States' written submission, para.  178. 
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  747-8I aircraft in the counterfactual, Boeing would have brought down prices via the accumulation 
of additional "learning -curve effects", i.e. Boeing would have become more efficient and shared  (or 
would have been forced to share) its cost savings at least in part with sophisticated customers 
through lower prices. Also, the European Union argues that if in the counterfactual Boeing had been 
in a monopoly position in the VLA product market, it wo uld have had incentives to raise prices and/or 
restrict supply of 747 -8I aircraft to maximize profits.653  
6.452.   The United  States  responds that the European Union's argument regarding counterfactual 
monopoly pricing by Boeing is a vague and generalized assertion,  unsupported by evidence, and 
does not account for the conditions of competition that would prevail in the VLA product market 
absent the effects of LA/MSF subsidies. In the United  States ' view, the evidence on the record shows 
that, in the counterfactual, Boeing would not have faced incentives to decrease the production of 
747-8I aircraft or raise prices to an extent that customers would have opted out of buying that 
aircraft. Moreover, the United  States  asserts that the historic production rates and prices  of the 747 -
400 aircraft shows that when the 747 aircraft family did not face competition from the A380 aircraft, 
Boeing "priced and produced the 747 to meet customer demand [and] did not choke off demand in 
an attempt to reap unusually high profits on a s maller number of sales".654 The United  States  further 
asserts that the adopted findings in this dispute nowhere suggest that LA/MSF subsidies affected 
Boeing's prices. Finally, the United  States  argues that, even assuming that Boeing would have raised 
prices  in response to its monopoly position in the VLA product market in the counterfactual, the 
European Union would further have to demonstrate that the revenue loss associated with decreased 
sales exceeded the revenue gained by increased prices, which the Eur opean Union has not done.655 
6.453.   The Arbitrator discerns no material quantitative or qualitative evidence on the record that 
can be used to reasonably predict how any changes in Airbus' and/or Boeing's costs or prices would 
have ultimately affected Boeing's or A irbus' LCA deliveries in the counterfactual. Indeed, we recall 
that the LCA marketplace is characterized by complex dynamics of supply and demand. Moreover, 
as noted by the European Union, Boeing would not only have faced incentives to increase 747 -8I 
aircraft prices in the counterfactual (due to theoretical monopolistic behaviour), but there are 
reasons to consider that Boeing would have, at the same time in the counterfactual, faced pressures 
to increase production to satisfy the higher demand, which woul d likely have reduced the costs and 
possibly the prices of 747 -8I aircraft (due to pressures to share the lower costs with sophisticated 
customers that would have been aware of Boeing's lower costs). We note that such lower costs 
would likely have been rea lized because, as described by the European Union, "the more [LCA] units 
that are produced [by Boeing], the lower the recurring costs per unit".656 Even assuming the validity 
of both propositions, we discern nothing on the record indicating how such competing pressures 
would have played out. We thus consider that any conclusions regarding the resulting net effect of 
these incentives and pressures ide ntified by the European Union would be speculative.  
Foregone "learning -by-doing efficiencies"  
6.454.   We note the European Union's statement that any impedance analysis would need to "factor 
in Airbus' actions in the VLA market in the absence of the MSF subsidies at issue, including foregone 
learning -by-doing efficiencies".657 As this argument is raised vis-à-vis "Airbus' actions", we interpret 
the phrase "foregone learning -by-doing efficiencies" as meaning that Airbus would have sold fewer 
 
653 European Union's written submission, paras.  200 and 241 -242; and r esponses to Arbitrator question 
No. 65, paras.  219-223, and No. 113, paras.  262-263. The European Union also argues that the Arbitrator 
would need to consider "Airbus' actions in the VLA market in the absence of the MSF subsidies at issue". 
(European Union 's written submission, para.  200). The European Union does not specify what those actions 
would have been, other than those already discussed in this section. We thus do not consider this argument 
further.  
654 Boeing E -mail regarding Question 113, (Exhibit U SA-63 (BCI)).  
655 See United  States' response to Arbitrator question No. 113, para.  45; comments on the European 
Union's responses to Arbitrator Question No. 113, paras.  214-215, No. 151, para.  272, fn  373 (noting that the 
original panel and Appellate  Body r eports affirmatively found that it could not be concluded that the 
United  States had demonstrated that challenged subsidies caused significant price suppression and price 
depression of United  States LCA (citing Panel Report, EC and certain member States – Large Civil Aircraft , 
para. 7.1996)) and fn  374. 
656 European Union's written submission, para.  241 (citing Panel Report, EC and certain member 
States  – Large Civil Aircraft , para.  7.1936 and fn  5643 (discussing, inter alia , how production of an increased 
number of LCA leads to "economies of scope and scale")).  
657 European Union's written submission, para.  200. 
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  LCA in the counterfactual (as Boeing would have won the lost sales and not suffered impedance), 
with the consequence that Airbus would not have realized the "learning" effects associated with 
producing as many LCA as it did in reality.658 The European Union has not explained how th ese 
dynamic s would have resulted in Boeing realizing fewer deliveries in the six geographic markets in 
the counterfactual. It is not readily apparent to us how this could have been the case. We therefore 
reject the European Union's argument as  unsubstantiate d by argument or evidence.  
Customers deferring LCA purchases  
6.455.   We note the European Union's argument that, in the absence of the A380 aircraft, potential 
VLA customers would have "simply waited for the A380 launch", or, alternatively stated, "deferred 
purcha ses", rather than purchase Boeing LCA.659 We recall our earlier finding that the A380 aircraft 
would not have been launched or available for offer before the end of the 2011 -2013 Reference 
Period. We further recall that any additional counterfactual deliveri es that Boeing would have made 
in the six geographic markets in the counterfactual would have been the result of earlier orders. We 
see no basis upon which to  assume that LCA customers would have had any expectation of an A380 
launch at any time before the  2011-2013 Reference Period. Thus, we discern no basis upon which 
to conclude that customers who were in the market for VLA before 1  December  2011, and who 
demonstrated a desire to have technologically advanced VLA delivered during the 2011 -2013 
Reference Period, would "simply … wait" or defer purchases of VLA in the counterfactual until the 
A380 aircraft was launched. This is particularly so since another VLA, i.e. the 747 -8I aircraft, was 
available for order before the 2011 -2013 Reference Period such that  it would have been available 
for delivery in the 2011 -2013 Reference Period. We therefore reject the European Union's argument 
as speculative and unsupported by material evidence.  
Different customer preferences  
6.456.   The European Union generally asserts that cu stomer preferences for LCA would have been 
different in the counterfactual such that it is unreasonable to assume that Boeing would have 
captured all the A380 Impedance Deliveries with 747 -8I deliveries.660 
6.457.   The Arbitrator notes that the record reflects that customers' demand for particular LCA at a 
given time is very complex and entails considerations that are subjective, idiosyncratic, and 
containing unquantifiable judgments.661 We therefore do not exclude the possibility that customer 
demand preferences would  have been different in some way in the counterfactual. However, there 
are no findings, nor is there evidence on the record, that provides a basis upon which to reasonably 
assume that any customer that received  the A380 Impedance Deliveries would have had different 
preferences in the counterfactual, such that it would not have purchased VLA662 and not had them 
delivered during the 2011 -2013 Reference Period.663 We thus reject the European Union's position 
as speculative and unsupported by material evidence.  
6.3.4.4.2.3   Conclusion  
6.458.   In the light of the foregoing, we consider that the United  States ' assumption that Boeing 
would have replaced all of the A380 Impedance Deliveries with deliveries of an equal number of 
747-8I aircraft within the 2011 -2013 Reference Period is reason able in the light of the adopted 
findings of this dispute, and the evidence and arguments offered by the parties. In particular, we 
note that this conclusion takes into account the fact that (a) the relevant customers desired a 
 
658 Insofar as the European Union uses this phrase with reference to how changes in "learning effects" in 
the counterfactual might have influenced Boeing 's prices, this argument is addressed in paragraph 6.453  and 
footnote 656 above.  
659 European Union's written submission, para.  200; and response to Arbitrator question No. 64, 
para. 212. 
660 European Union's written submission, para.  200; and responses to Arb itrator question No. 3, 
para. 89, and No. 5.  
661 See, e.g. Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
paras.  6.1185 -6.1189 and 6.1216 -6.1223.  
662 We recall that we have found above that the A380 aircraft would not have been available for delivery 
in the 2011 -2013 Reference Period.  
663 Indeed, if it were reasonable to assume that customers' preferences would have been different, it 
would seem just as reasonable to assume that different customers' preferences would have led them to buy 
more Boeing VLA than they would have bought in the counterfactual.  WT/DS 316/ARB 
 
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  confirmed number of A380 air craft during this time -period (evidenced by the A380 Impedance 
Deliveries), (b) Boeing would have had the means with which to replace all such deliveries with 
deliveries of 747 -8I aircraft in the counterfactual, and (c) the 747 -8I and A380 aircraft were th e only 
two VLA available for delivery in the 2011 -2013 Reference Period. As discussed above, the factors 
determining LCA supply and demand are complex, often involving unquantifiable factors. However, 
we discern no reasonable basis upon which to assume tha t the counterfactual number and general 
timing of relevant counterfactual 747 -8I deliveries would have been different from the number and 
general timing of the A380 Impedance Deliveries. In fact, the European Union offers no alternative 
number Boeing LCA t hat would have been counterfactually delivered to the six geographic markets 
at issue during the 2011 -2013 Reference Period.  
6.459.   At this point, we revert to the European Union's argument that we must use an economic 
model to determine how much higher Boeing's LCA deliveries would have been in the counterfactual.  
6.460.   We believe that in the light of the extensive discussions above, which examine a range of 
supply - and demand -side factors, we can conclude that the United  States ' assumption in this context 
is reasonabl e. This conclusion is based on extensive adopted findings regarding the conditions of 
competition in the LCA industry and the effects of LA/MSF, and a significant amount of both 
qualitative and quantitative evidence. We also recall that a significant aspec t of those findings was 
that the A380 aircraft would not have been available for order or delivery in the years leading up to 
and in the 2011 -2013 Reference Period, leaving the 747 -8I aircraft as the only VLA available for 
delivery in that time -period. Any  other particular number of counterfactual Boeing deliveries within 
the 2011 -2013 Reference Period in our view finds no sufficient basis in the record.664  
6.461.   Moreover, the European Union, as the proponent of economic modelling in this proceeding 
could have, bu t did not, propose any specific model and offer sufficient supporting evidence 
(including regarding the assumptions to be made and parameters to be used), and data with which 
to run a model calculation. The European Union chose not to do so, leaving us wit h the information 
on the record upon which to base our decision in this context.  
6.462.   Additionally , in this very dispute, conclusions regarding complex economic issues concerning 
the conditions of competition in the LCA marketplace and the economic effects of c hallenged 
subsidies to LCA manufacturers have been reached in the absence of any economic modelling. The 
compliance panel and Appellate  Body were able to make several critical determinations without the 
assistance of any economic modelling: (a) the precise  number of orders, representing the lost sales 
that the United  States  LCA industry suffered in the counterfactual665, (b) that the United  States  LCA 
industry's deliveries would have been higher in each of the six relevant geographic markets in the 
absence of subsidies , and (c) the relevant product markets, even though the competitive dynamic s 
between different models of LCA is highly complex.  
6.463.   Further to this last point, we take special note that the compliance panel rejected a similar 
argument by the European Union, i.e. that the United  States  had to establish the existence of product 
markets using quantitative economic evidence. In the compliance  panel's view, even if it had had a 
significant volume of historic pricing data with which to work (which it did not):  
[T]he task of performing a reliable econometric analysis of the demand for LCA products 
would face a number of significant methodological  and data challenges. These include 
deciding how to appropriately model demand for LCA products, which is itself highly 
complex and influenced by a multiplicity of factors that are sometimes subjective and 
"unquantifiable". When these and other particular characteristics of LCA demand are 
considered in the light of the recognized difficulties associated with identifying relevant 
product markets made up of differentiated products, it is apparent that producing 
 
664 We note that a one -to-one A380 -to-747-8I replacement ratio may, in fact, be conservative. This is so 
because the 747 -8I aircraft actually has significantly fewer seats than an A380 aircraft on average. ( Panel 
Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), Table 18 (indicating that the 
"typical" number of seats in an A380 -800 aircraft was well over 500 seats whereas the 747 -8I aircraft has well 
under 500 seats)). Thus, it does not seem implausible that a larger number of 747 -8I aircraft could have been 
needed to fulfil the same customer needs as a smaller number of A380 air craft. (See United  States' comments 
on the European Union's response to Arbitrator question No. 113, para.  219 (raising this point)).  
665 See paragraph 6.221  above.  
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  accurate and reliable quantitative evidence of t he degree of demand -side substitution 
between different LCA products would be a formidable task.666 
6.464.   We note that according to the panel, as here, "[t]he European  Union [did] not venture[] any 
suggestions about what such a model might look like. However, one economist who [had] 
endeavoured to undertake such analysis has recognized that 'demand for aircraft is very complex, 
and estimating the demand for aircraft is a formidable research agenda in itself".667 We discern no 
lesser challenge in our proceeding, i.e. modelling both supply and demand considerations to 
determine precise numbers of VLA deliveries in particular geographic product markets in a discrete 
period of time and in a counterfactual scenario.  
6.465.   Finally, we observe that economic models have not been tr eated as a sine qua non  of 
arbitrations of this sort. As far as we know, no arbitrator has suggested that an economic model 
must necessarily be performed. Rather, as we understand the approaches taken by previous 
arbitrators, they have depended on the part icular facts and circumstances of a given record, 
including the adopted findings by the DSB and the methodologies and arguments that the parties 
have put forward in the arbitration proceeding.  
6.3.4.4.3   Delivery prices  
6.466.   In the impedance context, the United  States  defines the value of each additional 
counterfactual Boeing LCA delivery in a given calendar year of the 2011 -2013 Reference Period as 
the average net delivery price of all the 747 -8I aircraft actually delivered in that calendar year 
expressed in delivery -year US dollar terms . As shown in Equation ( 9), according to the United  States , 
the global (worldwide) average per -aircraft delivery price for a given year is calculated by dividing 
the sum of all net prices for 747-8I aircraft delivered in that calendar year  by the number of 747-8I 
aircraft delivered in that year.  
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷=∑𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒 𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑗,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑗 
 (9)  
where  𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷: net delivery price of Boeing 747 -8I model delivered 
to airline 𝑗 in month/year 𝑠 and expressed in US dollar 
terms  of delivery year 𝑠 
 𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠: number of Boeing 747 -8I aircraft delivered in year  𝑠. 
 
6.467.   We recall our finding that no relevant additional Boeing counterfactual deliveries of 747 -8I 
aircraft could have occurred in December 2011, and thus only counterfactual Boeing deliveries in 
the years 2012 and 2013 are relevant to our valuation here.668  
6.468.   With respect to 2012 and 2013, the United  States  computes the respective global average 
per-aircraft delivery price of Boeing 747 -8I aircraft based on [[***]] of all 747 -8I aircraft actually 
delivered in 2012 and 2013, res pectively669; these 2012 and 2013 global average per -aircraft net 
delivery prices are by construction expressed in 2012 and 2013 US dollar terms , respectively.670 The 
United  States  explains that in both 2012 and 2013 Boeing only made deliveries of 747 -8I aircr aft to 
Lufthansa pursuant to a 2006 order for 20 747 -8I aircraft, which means that these 2012 and 2013 
 
666 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1205.  
667 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1186.  
668 In that context, we note that the parties disagree regarding the method for calculating the 2011 
average delivery price. (European Union's re sponse to Arbitrator question No. 83 para.  295; comments on the 
United  States' responses to Arbitrator question No. 139, paras.  424-432, No. 140, para.  433, No. 142, 
para. 435, and No. 143, para.  436; and United  States' written submission, para.  252). Howe ver, given that we 
have found that no additional counterfactual Boeing deliveries would have occurred in 2011, such 
disagreements are moot.  
669 United  States' methodology paper, paras.  86-87. 
670 Second Revised 747 -8I Global Delivery Prices for 2012 and 2013 (revision to Exhibit USA -26 
(HSBI)), (Exhibit USA -103 (HSBI)).  
 WT/DS 316/ARB 
 
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  global average per -aircraft net delivery prices actually represent Lufthansa's average per -aircraft 
net delivery prices of 747 -8I aircraft for those two years.671  
6.469.   The European Union initially argued that the United  States  should have based its impedance 
calculations on customer - and campaign -specific price information, similar to the approach proposed 
by the United  States  to valuing lost sales.672 However, th e European Union subsequently agreed with 
the United  States  that the 2006 Lufthansa order for 20 Boeing 747 -8I aircraft constitutes a 
representative, reliable, and robust basis to obtain counterfactual 2012 and 2013 747 -8I delivery 
prices.673 The European Un ion further observes that there is no need for the Arbitrator to pursue 
any alternative approach.  
6.470.   The Arbitrator notes that both parties agree that the Arbitrator should base its valuation of 
impedance on global average delivery prices calculated on the ba sis of delivery prices for the 2006 
Lufthansa order of 20 747 -8I aircraft. Those prices could then be used to derive counterfactual 2012 
and 2013 747 -8I delivery prices. We further recall that the reason why the European Union initially 
disagreed with the approach based on average delivery prices was that, based on available 
information at that time, the European Union believed that it artificially inflated Boeing's 
counterfactual delivery prices. However, after gaining access to more information in the con text of 
this proceeding and following the United  States ' agreement to exclude delivery prices [[***]]  from 
the 2012 average delivery price, the European Union revised its judgment on this particular point.  
6.471.   Although there is an argument to be made for using  the same (comparator -order) approach 
for the valuation of both lost sales and impedance, we consider that there are sound reasons to 
adopt a different, global -average -price approach in the impedance context. After a careful review of 
the different compara tors proposed by the parties in the impedance context we consider that a 
customer - and campaign -specific approach for the valuation of impedance would not have produced 
a more accurate estimate of impedance. We recall in this respect that the customer's id entity (the 
airline concerned) is our main criterion to select relevant comparator orders. Yet, relatively few 
customers to whom the A380 Impedance Deliveries were made also ordered 747 -8I aircraft, and 
thus there are very few potential comparator orders p laced by the same airline to choose from. In 
those circumstances, using global average prices for actual 747 -8I deliveries in 2012 and 2013 
appears to us a reasonable alternative method to estimate the counterfactual delivery prices of 
additional 747 -8I deliveries in those years.  
6.472.   In the light of the above, we agree to follow the approach supported by both parties and 
thus value impedance using global average delivery prices for the additional counterfactual deliveries 
of 747 -8I aircraft to the relevant six  geographic markets in 2012 and 2013.  
 
671 The European Union initially argued that the United  States significantly inflated the 2012 global 
average per -aircraft net deli very prices of 747 -8I aircraft by including prices for [[***]] aircraft sales. 
(European Union's written submission paras.  322-328). The United  States, to minimize areas of disagreement 
between the parties wherever possible, responded to the European Union 's argument by excluding deliveries of 
[[***]] models from its calculation of the 2012 global average net delivery price for 747 -8I aircraft. 
(United  States' written submission paras.  247-248).  
672 European Union's written submission, para.  312. In response to the European Union's initial 
suggestion to use customer - and campaign -specific price information for the valuation of impedance, the 
United  States identified comparators, including [[***]], and provided the corresponding calculations of the 
value of imp edance, while arguing that such an approach would not be necessary. (United  States' responses to 
Arbitrator question No. 153, paras.  4-9, and No. 154, paras.  10-23; comments on the European Union's 
response to Arbitrator question No. 158, paras.  11-12; Calculation of Delivery Prices for Comparator Orders,  
(Exhibit USA -61 (HSBI)); and Net Price Calculations for Questions 153 and 154(d) Alternative Impedance 
Valuations,  (Exhibit USA -106 (HSBI))).  
The European Union rejected the choice of some of the comparat ors put forward by the United  States 
and proposed alternative comparators. ( European Union's written submission, paras.  243-246 and 318-320; 
and responses to Arbitrator question No. 83, paras.  297-299, and No. 158, paras.  5-10.)  
The European Union also re jected the approach taken by the United  States for calculating the relevant 
delivery prices for impedance. (European Union's responses to Arbitrator question No. 83, paras.  297-299, and 
No. 158, para. 9; and comments on the United  States' response to Arbit rator question No. 153, para. 9).  
673 European Union's responses to Arbitrator question No. 83, para. 295, and No. 158, para. 4; and 
comments on the United  States' response to Arbitrator question No. 153, para. 5.  
 WT/DS 316/ARB 
 
- 143 - 
 
  6.3.4.4.4   Conclusion  
6.473.   This concludes our assessment of technical aspects of the United  States ' methodology for 
valuing impedance. As noted in section 6.1 above, we will apply these findings further below in 
section 6.4.3 when we  calculate the actual value of impedance.  
6.4  Calculation of countermeasures commensurate with the adverse effects determined 
to exist  
In the preceding sections, we have accepted certain aspects of the United  States ' proposed 
methodology but found shortcomings in other aspects requiring adjustments to be made. In section  
6.4, we apply those conclusions to calculate the maximum level of An nual Suspension that is 
"commensurate with the degree and nature of the adverse effects determined to exist".674 In keeping 
with the content of the above sections  and our mandate , this section proceeds in five parts. First, 
we explain our general methodology . Second, we determine values for lost sales in 2012 and 2013 
US dollar terms. Third, we determine values for impedance in 2012 and 2013 US dollar terms. 
Fourth , we determine  the total annualized value of lost sales and impedance  stated in 2013 US dollar 
terms in order to determine the maximum level of Annual Suspension.  Finally, we determine a level 
of countermeasures commensurate with the previously determined annualized value of the adverse 
effects determined to exist.  
General approach  
In section  6.4.1  we describe the approach that we consider best suited to establish the value 
of adverse effects determined to exist. In accordance with our finding s made thus far , we measure 
the value of the adverse effects determined to exist as the sum of the value of lo st sales and the 
value of impedance. We follow a three -step approach to value the adverse effects determined to 
exist, whereby we calculate ( a) lost sales and ( b) impedance separately , and (c) annualize their sum 
over the Reference Period to obtain the ave rage annual value of the adverse effects determined to 
exist expressed in 2013 US dollar terms . In implementing this approach, we in some instances 
modify the United  States ' proposed methodology to  take into  account  some of the arguments that 
the European Union  advanced  and our own concerns regarding the United  States ' methodology.  
One important departure from the United  States ' proposed approach is that we use all the 
relevant information that the parties provided a s of June 2019 to value lost sales and impedance, 
so long as the information pertains to, and sheds light on, the value of the adverse effects 
determined to exist during the Reference Period.  
6.4.2   Valuation of lost sales  
6.477.   As explained in section 6.3.4.3.4 , the A rbitrator assume s that absent A380 and A350XWB 
LA/MSF subsidies,  for each of the five lost sales at issue, Boeing in the counterfactual would have 
initially sold during the same year in the Reference Period the same number of aircraft as Airbus, 
and that B oeing would have sold the closest competing Boeing model vis-à-vis the Airbus LCA model 
actually sold. However, we adjust the counterfactual delivery numbers of these ordered Boeing 
aircraft to take into account actual cancellations (as of June 2019) of some of the aircraft ordered 
from Airbus that would also have occurred in the counterfactual . Specifically, we make such 
adjustments where  these order cancellations were the result of the airline customer's decision, were 
independent of Airbus' will and  happened for reasons not specific to the Airbus  company  or Airbus' 
aircraft .  
6.478.   In the light of those considerations, Table  16 below summarizes Boeing's counterfactual 
orders and deliveries that would have occurred had Boeing won the five lost sales. With respec t to 
the Transaero lost sale, as discussed in section 6.3.4.3.4.1 , we assume that although Boeing would 
 
674 As noted above in section 3, should we det ermine that the methodology proposed by the 
United  States for calculating the level of countermeasures, or any alternative methodology proposed by the 
European Union, has shortcomings and is not appropriate, we could either make appropriate adjustments or 
develop another, appropriate, methodology ourselves. As one previous arbitrator has explained "previous 
arbitrators developed their own appropriate methodologies, based either on elements of methodologies 
proposed by the parties, or on an altogether differ ent approach". (Decision by the Arbitrator, US – Washing 
Machines (Article 22.6 – US), para. 116). (fns omitted)  WT/DS 316/ARB 
 
- 144 - 
 
  have won the order for four 747 -8I aircraft, the entirety of the order would have been cancelled, 
and thus no deliveries would have occurred. Similarly,  as discussed in section 6.3.4.3.4.1 , we have 
removed the counterfactual deliveries of [[***]] 747-8I aircraft to Emirates on the grounds that 
those deliveries would also have been cancelled in the counterfactual.  
Table 16: Boeing's counterfactual twin -aisle and VLA orders and deliveries  
Lost sales 
campaign  Airbus  
model  Closest 
Boeing model  Order 
year Number of 
counterfactual 
ordered 
aircraft  Number of 
counterfactual 
delivered 
aircraft  
Cathay Pacific 
Airways  A350XWB -1000 777-300ER  2012 10 10 
Transaero Airlines  A380 747-8I 2012 4 0 
Singapore Airways  A350XWB -900 787-10 2013 30 30 
United Airlines  A350XWB -1000 777-300ER  2013 10 10 
Emirates  A380 747-8I 2013 50 [[***]] 
 Total  104 [[***]] 
 
 
6.479.   We follow an order -centric approach and value each lost sale in the year in which the 
corresponding order was lost. Additionally, and as explained in section 6.3.4.3.6.4 , we obtain that 
value by calculating the discounted value, at the time that the order was lost, of the net delivery 
price of each Boeing aircraft counterfactually delivered at a scheduled post -order date and by 
adjusting , where appropriate, for the respective risk of future cancellation of the counterfactual 
delivery  (as of 2019)675: 
 
𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷=∑𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
(1+𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑅𝑎𝑡𝑒 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡)𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 − 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑦
𝑦𝑒𝑎𝑟 𝑠 
 ×𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑒𝑑𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡 𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 
 ×𝑆𝑢𝑟𝑣𝑖𝑣𝑎𝑙𝑅𝑎𝑡𝑒 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 
 (10)   
6.480.   For each lost sales campaign at issue, we have selected a comparator firm order for Boeing's 
closest competing model placed by the same airline or a similar airline from which to draw on 
relevant contractual pricing information to estimate the net delivery  price of each counterfactually 
delivered Boeing aircraft. Table  17 summarizes the Boeing comparator orders that we have selected 
to value lost sales. With the exception of the 2013 Emirates lost sale, each selected comparator 
order corresponds to a Boeing  order placed by the same airline. As explained in section 6.3.4.3.6.1 , 
we consider that the 2006 Lufthansa order for 747 -8I aircraft constitutes the best available 
comparator order for the Emirates lost sale, given its large order size and the similaritie s between 
the two airlines.676 
6.481.   Regarding  the relevant counterfactual Boeing delivery schedules, we use the contractually 
agreed delivery schedule contained in Airbus' respective contract s for the lost sales at issue.  
 
675 For simplicity, we assume that any counterfactual order would occur in July of a given year in the 
Reference Period (i.e. 2012 or 2013) and a ny counterfactual delivery would occur in July in the expected 
delivery years (e.g. July 2020).  
676 Cathay Pacific March 2011 777 -300ER Order Documentation, (Exhibit USA -69 (HSBI)); Singapore 
Airlines 2013 787 -10 Order Documentation, (Exhibit USA -73 (HSBI));  United 2015 777 -300ER Order 
Documentation, (Exhibit USA -74 (HSBI)); Lufthansa 2006 747 -8I Order Documentation, (Exhibit USA -79 
(HSBI)); and Lufthansa Escalation Documentation, (Exhibit USA -87 (HSBI)).  WT/DS 316/ARB 
 
- 145 - 
 
  Table 17: Selected comparator orders  
Lost sales in  
the Reference Period  Comparator order  
Year Airline  Model  Order 
size Year Airline  Model  Order 
size 
2012 Cathay Pacific 
Airways  A350XWB -
1000 10 2011 Cathay Pacific 
Airways order  777-300ER  10 
2012 Transaero 
Airlines  A380 4* 2012 - - - 
2013 Singapore 
Airlines  A350XWB -900 30 2013 Singapore Airlines  
order  787-10 30 
2013 United Airlines  A350XWB -
1000 10 2015 United Airlines  
order  777-300ER  30 
2013 Emirates  A380 50+ 2006 Lufthansa  
order  747-8I 20 
Note:  * 4 post -order cancellations  
+ [[***]] post-order cancellations  
 
6.482.   For each lost sale, we use the pricing terms contained in the comparator order , [[***]] to 
calculate the net delivery price of the corresponding counterfactual aircraft delivery expressed in 
delivery -year US dollar terms .677 The net delivery price (expressed in delivery -year US dollar terms ) 
is the difference between the gross delivery price and price concessions (expressed in base -year US 
dollar terms ) multiplied by the escalation factor associa ted with the delivery date minus additional 
price concessions [[***]] .678 
6.483.   To minimize the [[ ***]], and in the light of our decision to consider up -to-date information 
as of June 2019, we apply the [[ ***]] escalation rates for any counterfactual deliveries scheduled 
to take place before [[ ***]] and [[ ***]] escalation rates [[ ***]] for counterfactual deliveries 
scheduled to take place after [[ ***]].679  
6.484.   Unless we have already made a determination that a particular counterfactual Boeing order 
would have been cancelled in the counterfactual680, we assume that all other Boeing deliveries  
counterfactually scheduled for 2018 or earlier would have occurred. For counterfactual Boeing 
deliveries set for after 2018, we account for the probability that such orders might be cancelled 
before those deliveries occur. We do so by adjusting those calc ulated counterfactual Boeing net 
delivery prices by Boeing's order - and delivery -year specific survival rate. As discussed in section 
6.3.4.3.4.2 , Boeing's order - and delivery -year specific survival rates are based on Boeing's historic 
average cancellation  rate for all its LCA sales between 2008 and 2011681, as illustrated below:  
 
𝑆𝑢𝑟𝑣𝑖𝑣𝑎𝑙𝑅𝑎𝑡𝑒𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠={100% if 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠 ≤2018
(1−𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐶𝑎𝑛𝑐𝑒𝑙𝑙𝑎𝑡𝑖𝑜𝑛𝑅𝑎𝑡𝑒2008−2011)𝑠−𝑡if 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦  𝑦𝑒𝑎𝑟 𝑠>2018 (11)   
 
6.485.   Finally, we discount each adjusted counterfactual Boeing net delivery price to obtain the 
present value at the time of the lost sale in order -year US dollar  terms. As discussed in 
section  6.3.4.3.6.4 , in the light of  our decision to conduct this discounting exercise from Boeing's  
perspective, we choose Boeing's cost of debt as the most appropriate discount rate available on the 
record.682 
 
677 The pricing terms include the aircraft's gross price  and price concessions (expressed in base year US 
dollar terms) as well as the escalation formula. Relevant [[***]]  are also found in [[***]] . 
678 For some comparator orders, [[***]].  
679 See [[***]], (Exhibit USA -38 (BCI)); [[***]], (Exhibit USA -39 (BCI)); [[ ***]], (Exhibit USA -40 
(BCI)); [[***]], (Exhibit USA -41 (BCI)); Cathay Pacific March 2011 777 -300ER Order Documentation, 
(Exhibit  USA-69 (HSBI)); Singapore Airlines 2013 787 -10 Order Documentation, (Exhibit USA -73 (HSBI)); 
United 2015 777 -300ER Order Docum entation, (Exhibit USA -74 (HSBI)); Lufthansa 2006 747 -8I Order 
Documentation, (Exhibit USA -79 (HSBI)); and Lufthansa Escalation Documentation, (Exhibit USA -87 (HSBI)).  
680 As discussed above, this would be the case for the Transaero lost sale and a portion o f the Emirates 
lost sales.  
681 Survival Rate Calculation,  (Exhibit USA -65 (HSBI)).  
682 Boeing WACC Data for 2012, 2013, (Exhibit USA -120 (BCI)).  
 WT/DS 316/ARB 
 
- 146 - 
 
  6.486.   For each lost sales campaign at issue, the net present -value delivery prices of all 
counterfactually ordered Boeing aircraft, adjusted, as appropriate, for the risk of future cancellation, 
are summed to obtain the estimated value of the lost sale to Boeing, expressed in order -year US 
dollar terms . Table  18 indicates the results of our valuation of the lost sales at issue.683 
Table 18: Value of lost sales in the Reference Period  
Lost sale  Order 
year Closest 
competing 
Boeing 
model  Number of 
counterfactually 
ordered aircraft  Number of 
counterfactually 
delivered 
aircraft  Lost sale value  
(in order -year 
USD)  
Cathay Pacific 
Airways  2012 777-300ER  10 10 [[HSBI]] 
Transaero Airlines  2012 747-8I 4 0 0 
Singapore 
Airways  2013 787-10 30 30 [[HSBI]] 
United Airlines  2013 777-300ER  10 10 [[HSBI]] 
Emirates  2013 747-8I 50 [[***]] [[HSBI]] 
 
6.4.3   Valuation of impedance  
6.487.   Turning to the valuation of the relevant instances of impedance in the six geographic 
markets, as explained in section 6.3.4.4.2 , the Arbitrator assume s that absent A380 and A350XWB 
LA/MSF subsidies, Boeing would have replaced the A380 Impedance Deliveries  with the same 
number of Boeing 747 -8I aircraft in the 2011 -2013 Reference Period, although the timing of Boeing's 
counterfactual 747 -8I aircraft deliveries would have differed somewhat from the timing of the A380 
Impedance Deliveries. As further explained  in paragraphs  6.409  and 6.411 , Boeing would have 
delivered an additional 1 8 747-8I aircraft in 2012 and an additional 29 747-8I aircraft in 2013 to the 
six geographic markets in question taken as a whole.684 
6.488.   Table  19 reproduces the A380 Impedance Deliveries and Boeing's counterfactual deliveries 
of 747 -8I aircraft that we take into account in our valuation of impedance.  
Table 19: A380 Impedance Deliveries and Boeing's counterfactual 747 -8I deliveries  
Delivery date  Number of Airbus A380 deliveries  
in the six relevant geographic 
markets  Number of counterfactual Boeing 
747-8I deliveries in the six relevant 
geographic  markets  
December 2011  4 0 
2012 23 18 
2013 20 29 
Total  47 47 
 
 
683 Regarding the Transaero Airlines lost sale, we note that our task is governed by the 2018 DSB 
recommendations and  rulings, which include a finding of adverse effects in respect of the Transaero Airlines 
lost sale. We must therefore value that lost sale. On a correct assessment, which takes into account the post -
order cancellation of the entirety of the Transaero Airl ines order, the value of the Transaero Airlines lost sale is 
zero. We note in this context that according to Article 3.8 of the DSU "there is normally a presumption that a 
breach of the rules has an adverse impact on other Members". However, we agree with the statement by 
another arbitrator that "[t]he presumption  of nullification or impairment … as set forth by Article 3.8 … cannot 
in and of itself be taken simultaneously as evidence  proving a particular level of nullification or impairment 
allegedly suffe red by a Member requesting authorization to suspend concessions … at a much later stage of the 
WTO dispute settlement system". We also agree with the same arbitrator's further observation that "[t]he 
review of the level of nullification or impairment … fro m the objective benchmark foreseen by Article 22 of the 
DSU … is independent from the finding of infringements of WTO rules by a panel or the Appellate  Body". 
(Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 6.10 (emphasis orig inal))  
684 See paragraphs 6.408 -6.411  above.  
 WT/DS 316/ARB 
 
- 147 - 
 
  6.489.   In the context of our valuation of impedance, we follow a delivery -centric approach and thus 
value impedance in the year in which the counterfactual deliveries would have been made. We obtain 
this value by multiplying the global (i.e. worldwide) average 747 -8I per -aircraft net delivery price 
for the relevant year of the Reference Period by the number of counterfactual deliveries of 747 -8I 
aircraft in the corresponding year.  
6.490.   The 747 -8I per -aircraft net delivery global average prices for 2012 and 2013 are computed 
by dividing the sum of all the net delivery prices for 747 -8I aircraft delivered in 2012 or 2013 by the 
number of 747 -8I aircraft delivered in 2012 or 2013.685  
6.491.   Table  20 indicates the results of our valuation of the instances of impedance at issue, 
expressed in delivery -year US dollar terms . 
Table 20: Value of impedance in the Reference Period  
Delivery 
date Number of counterfactual 
Boeing 747 -8I deliveries  
in the six rel evant 
geographic  markets  Global average 747 -
8I per -aircraft  
net delivery price  Value of impedance  
in delivery -year USD  
December 
2011 0 - 0 
2012 18 [[HSBI]] [[HSBI]] 
2013 29 [[HSBI]] [[HSBI]] 
Total  47   
 
6.4.4   Aggregated annualized value of lost sales and impedance  
6.492.   In sections 6.4.2 and 6.4.3 above, the Arbitrator determined the monetary values for 
impedance and lost sales during the 25 -month Reference Period of December 2011 -2013. There 
were no lost sales in December 2011, and we have found in the impe dance context that no relevant 
counterfactual Boeing 747 -8I deliveries would have occurred in December 2011. Therefore, at this 
point in our analysis the monetary values pertaining to both lost sales and impedance have been 
expressed in 2012 US dollar valu es and in 2013 US dollar values, as appropriate. Doing so is 
consistent with the United  States ' methodology. The United  States ' methodology proposes to 
annualize these values in 2013 US dollar values to determine an annualized value of adverse effects 
as a preliminary step towards determining the maximum level of Annual Suspension.  
6.493.   The United  States  obtains the annualized 2013 US dollar value by converting the 2012 US 
dollar values into 2013 US dollar values by adjusting these values for inflation using th e PPI for CA 
Manufacturing and adding that amount to the pre -existing 2013 US dollar values to reach a total 
aggregate value of lost sales and impedance expressed in 2013 US dollar terms. The United  States  
then divides that aggregate amount by 25 (i.e. the  25-month reference period) and multiplies it by 
12 (i.e. the 12 months per year). This results in an annualized value of the adverse effects 
determined to exist expressed in 2013 US dollar terms. For ease of reference, we will refer to this 
amount as the "2013 Annualized Value".  
6.494.   According to the United  States , the need for annualization of the value of the adverse effects 
determined to exist arises because the United  States  seeks to apply countermeasures up to the 
authorized maximum level on an annual basis (i.e. a 12 -month period) instead of, for example, a 
25-month period (i.e. the temporal length of the 2011 -2013 Reference Period). In other words, the 
United  States  requests that the Arbitrator determines the maximum amount of countermeasures 
that the  United  States  may take per calendar year so that the United  States  can implement its 
countermeasures accordingly. The United  States  cites administrability and the common practice of 
 
685 Boeing Declaration, (Exhibit USA -5 (BCI)); and Second Revised 747 -8I Global Delivery Prices for 
2012 and 2013 (revision to Exhibit USA -26 (HSBI)), (USA -103 (HSBI)).  
 WT/DS 316/ARB 
 
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  complaining parties under Article  22 of the DSU as reasons for proposing to take countermeasures 
on an annual basis.686  
6.495.   In 6.3.1  above , we determined  that it is legally appropriate to grant countermeasures in the 
form of Annual Suspension as proposed by the United  States  in its methodology.687 As the 
United  States  seeks to be gran ted a maximum level that it can impose annually, we consider that 
annualizing the value of adverse effects determined over the 25 -month Reference Period is 
appropriate. We note that other arbitrators likewise established maximum levels of suspension based 
on the relevant effects of the measures in question over one year.688 Accordingly, like the 
United  States , we calculate an aggregated annualized value of the adverse effects for 2013 (the 
2013 Annualized Value), 2013 being the most recent year of the 2011 -2013 Reference Period.  
6.496.   Having decided that it is appropriate to determine the 2013 Annualized Value, the question 
before us is what is the appropriate inflation rate that we should use to adjust the 2012 value of lost 
sales and impedance with a view to expre ssing it in 2013 US dollar terms. As explained above, the 
United  States  proposes to use the PPI for CA Manufacturing.689 The United  States  provides mostly 
practical justifications for using the PPI for CA Manufacturing. The United  States  suggests that it has 
the advantage that it is a reasonable proxy for the increased dollar value of LCA over time; that it 
is a publicly available and regularly updated index, published by a government institution; and that 
it is unlikely to be subject to manipulation by indus try participants. According to the United  States , 
the PPI for CA Manufacturing is also not specific to airlines, unlike the [[***]]. According to the 
United  States , using the [[***]] in calculating the annual countermeasures would make that 
calculation exc eedingly and unnecessarily complex.690 
6.497.   The Arbitrator considers that there is no valid reason to use the PPI for CA Manufacturing 
besides the practical benefit of using a single non -HSBI index ratio . We note in this connection that 
the 2012 values of lost sa les and impedance that need to be adjusted for inflation are values 
concerning Boeing aircraft. Their  price evolution is in our view best captured by the [[***]] 
escalation formula. B ased on [[***]], the escalation formula determines an escalation factor for 
each month of each year between the base year and the delivery year. This escalation factor reflects 
[[***]] changes in labour and material costs resulting from inflation and other economic chang es. 
Accordingly, for each 2012 lost sale at issue and the 2012 value of impedance we use the 
corresponding 2013 -to-2012 [[***]] escalation factor ratio to restate the 2012 values of lost sales 
and impedance in 2013 US dollar terms.  
6.498.   On this basis , we procee d to determine the aggregated annualized value of the adverse 
effects in 2013 US dollar terms.  
6.499.   First, for lost sales, we multiply the only remaining 2012 lost sale value – the Cathay Pacific 
lost sale value (expressed in 2012 US dollar terms ) – by the [[***]] 2013-to-2012 escalation factor 
ratio associated with its comparator order. Second , for impedance , we apply the [[***]] 2013-to-
2012 escalation factor ratio based on the escalation formula contained in the 2006 Lufthansa 
contract to the 2012 impedance v alue. Once we have expressed all the 2012 lost sales and 
impedance values in 2013 US dollar terms , we add them to the 2013 lost sales and impedance 
 
686 United  States' methodology paper, para. 90.  
687 See paragraph 6.76 above.  
688 Decisions by the Arbitrators,  US – Tuna II (Mexico) (Article 22.6 – US); US – COOL (Article 22.6 – 
United  States) ; US – Upland Cotton (Article 22.6 – US II) ; US – Gambling (Article 22.6 – US); US – FSC 
(Article 22.6 – US); Brazil – Aircraft (Article 22.6 – Brazil) ; EC – Bananas III (Ecuador) (Article 22.6 – EC); 
EC – Hormones (Canada) (Article 22.6 – EC); EC – Hormones (US) (Article 22.6 – EC); and EC – Bananas III 
(US) (Article 22.6 – EC). We note in particular the approach  of the arbitrator in Brazil – Aircraft (Article 22.6 – 
Brazil) . In that proceeding, after determining the present value of the prohibited subsidy granted over a six -
year period (2000 -2005), the arbitrator divided that aggregate amount by six (for the time -period of six years) 
to determine the average annualized present value of the subsidy. (Decision by the Arbitrator, Brazil – Aircraft 
(Article 22.6 – Brazil) , para. 3.93. See also Award of the Arbitrator , US – Section 110(5) Copyright Act 
(Article  25), fn 78 (explaining that "compensations or suspensions of concessions or other obligations have 
been so far calculated on a twelve -month basis")).  
689 Producer Price Indexes – Program Overview, U.S. Department of Labor, Bureau of Labor Statistics, 
(Exhibit USA -20). 
690 United  States' response to Arbitrator question No. 38, paras.  77-79. WT/DS 316/ARB 
 
- 149 - 
 
  values. This sum is then annualized by dividing it by 25 (the number of months in the Reference 
Period) and multiplying it by 12 (months).  
 
𝐴𝐸𝐷𝑇𝐸 𝐷𝑒𝑐.2011−𝐷𝑒𝑐.2013𝑖𝑛 2013 𝑈𝑆𝐷=(𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐶𝑎𝑡ℎ𝑎𝑦𝑃𝑎𝑐𝑖𝑓𝑖𝑐 ,2012𝑖𝑛 2012 𝑈𝑆𝐷×𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡𝑜𝑟𝐶𝑎𝑡ℎ𝑎𝑦𝑃𝑎𝑐𝑖𝑓𝑖𝑐  2013
𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡 𝑜𝑟𝐶𝑎𝑡ℎ𝑎𝑦𝑃𝑎𝑐𝑖𝑓𝑖𝑐  2012 
+𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑆𝑖𝑛𝑔𝑎𝑝𝑜𝑟𝑒𝐴𝑖𝑟𝑤𝑎𝑦𝑠 ,2013𝑖𝑛 2013 𝑈𝑆𝐷 
+𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑈𝑛𝑖𝑡𝑒𝑑𝐴𝑖𝑟𝑙𝑖𝑛𝑒𝑠 ,2013𝑖𝑛 2013 𝑈𝑆𝐷 
+𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐸𝑚𝑖𝑟𝑎𝑡𝑒𝑠 ,2013𝑖𝑛 2013 𝑈𝑆𝐷 
+𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒2012𝑖𝑛 2012 𝑈𝑆𝐷×𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡𝑜𝑟𝐿𝑢𝑓𝑡ℎ𝑎𝑛𝑠𝑎 2013
𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡𝑜𝑟𝐿𝑢𝑓𝑡ℎ𝑎𝑛𝑠𝑎 2012 
+𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒2013𝑖𝑛 2013 𝑈𝑆𝐷)×12
25 (12)   
 
6.500.    As summarized in Table  21 below, the total annualized value of the adverse effects 
determined to exist, expressed in 2013 US dollar terms , amounts to USD  7,496.623 million . 
Table 21: Total annualized value of the adverse effects d etermined to exist  
Reference 
Period 
year Value of adverse effects  
determined to exist  
in order -/delivery -year 
USD Value of adverse effects  
determined to exist  
in 2013 USD  Value of annualized 
adverse effects 
determined to exist over 
the Reference Period  in 
2013 USD  
December 
2011 0 0  
2012 [[HSBI]] [[HSBI]]  
2013 [[HSBI]] [[HSBI]]  
Total:     [[HSBI]]  7,496.623 million  
 
6.4.5   Countermeasures commensurate with the annualized value of the adverse effects 
determined to exist  
6.501.   Consistent with Article  7.10 of the SCM  Agreement , the maximum level of countermeasures 
that the United  States  may be authorized to impose annually (i.e. the maximum level of Annual 
Suspension) must be "commensurate" with the annualized value of adverse effects. We must 
therefore examine  whether the level of countermeasures proposed by the United  States  is 
"commensurate" with the 2013 Annualized Value of adverse effects that we have determined above. 
If it is not, we need to determine what would be the commensurate level of Annual Suspens ion 
expressed in 2013 US dollar terms ( for ease of reference, we will refer to this as the 2013 Annual 
Suspension Value).  
6.502.   The United  States  requests, however, that we not stop there and go on to adjust the 2013 
Annual Suspension Value. Specifically, it req uests that we adjust for inflation from 2013 up to  the 
present day and thus express the level of Annual Suspension in 2019 US dollar terms ( for ease of 
reference, we will refer to this as the 2019 Annual Suspension Value).  
6.503.   Additionally, the United  States  requests that it be authorized to adjust the 2019 Annual 
Suspension Value for inflation arising in future, post -2019, years in which the United  States  would 
apply countermeasures.  
6.504.   The Arbitrator address es these three issues – the "commensurate" 2013 Annua l Suspension 
Value and the adjustment for inflation up to 2019 and beyond – in separate sections below.  WT/DS 316/ARB 
 
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  6.4.5.1   The "commensurate" 2013 Annual Suspension Value  
6.505.   At this point, we recall that the United  States  requests that the countermeasures that it will 
seek auth orization to impose be based on the 2013 Annualized Value of adverse effects. The 
United  States  calculates the 2013 Annualized Value as USD 10 ,560 million . We have calculated it as 
USD 7,496.623 million . These two figures differ materially.  
6.506.   We note that t he United  States  does not specifically propose the value of USD 10 ,560 million  
as the level of countermeasures that it is seeking authorization to impose. It is only after adjusting 
this 2013 Annualized Value for inflation and expressing it in 2019, 2020, etc. terms that the 
United  States  arrives at its proposed level of countermeas ures for the relevant year (i.e. the value 
of Annual Suspension Value for the relevant year). However, for the purpose of determining the 
"commensurate" 2013 Annual Suspension Value, we compare the value of USD 10 ,560 million – that 
value being the annual suspension value that the United  States  would have proposed for 2013 – to 
our calculated 2013 Annualized Value.  
6.507.   The issue that we therefore now examine is whether the United  States ' value of USD 10 ,560 
million that the United  States  has calculated may be c onsidered "commensurate" with the 2013 
Annualized Value of adverse effects that we have calculated.  
6.508.   As we have explained above691, the phrase "commensurate with" as it appears in Article  7.10 
of the SCM  Agreement  connotes a correspondence of a "less precise degree of equivalence than 
exact numerical correspondence" between the "adverse effects determined to exist" and 
"countermeasures" proposed.692 Thus, the "commensurateness" standard may not require exact 
equivale nce between the level of countermeasures that the United  States  could be authorized to 
take, on the one hand, and the value of the adverse effects determined to exist, on the other hand. 
However, the United  States  does not request that it be allowed to tak e countermeasures in the form 
of a maximum level of Annual Suspension in excess of the value of the annualized value of the 
adverse effects determined by us (except for inflation adjustments, which we discuss in more detail 
in the following sections). Nor does the European Union argue that we should establish an Annual 
Suspension Value that is higher than the Annualized Value of adverse effects. We further note that 
our calculated 2013 Annualized Value of adverse effects (i.e. USD 7,496.623 million ) is sign ificantly 
lower than the United  States ' 2013 Annual Suspension Value (i.e. USD 10 ,560 million). Even 
assuming that, as a general matter, the commensurateness standard could permit some limited 
degree of discrepancy between the proposed level of countermeas ures and the value of the adverse 
effects determined to exist, an adjustment from USD 7,496.623 million  to USD 10 ,560 million would 
in our view exceed, by far, any permissible degree of discrepancy. We are accordingly unable to 
accept USD 10 ,560 million as  the "commensurate" 2013 Annual Suspension Value.  
6.509.   For the reasons indicated, we thus perceive neither a need nor a justification, in the particular 
circumstances of this proceeding, for establishing the 2013 Annual Suspension Value at a level that 
is high er than the 2013 Annualized Value of adverse effects that we have established. Accordingly, 
we determine that the "commensurate" 2013 Annual Suspension Value is USD 7,496.623 million . 
6.4.5.2   Adjust ment of  the annualized value of adverse effects determined to exis t for 
inflation to the present day  
6.510.   In furtherance of its request that the Arbitrator adjust the 2013 Annualized Value for inflation 
in order to determine an initial level of Annual Suspension in 2019 US dollar values, the United  States  
notes that it will be authorized to begin taking countermeasures only several years after the period 
during which adverse effects were determined to exist (i.e. the 2011 -2013 Reference Period). 
Therefore, to prevent the intervening inflation from diminish ing the real value of the Annual 
Suspension to be granted and to ensure that the level of countermeasures that will be applied 
prospectively starting from 2019 onwards is commensurate with the value of adverse effects, the 
United  States  proposes that the A rbitrator adjust the value of the countermeasures for inflation at 
least initially as between the 2011 -2013 Reference Period and the present day. As noted further 
above, the United  States  proposes to make this adjustment for inflation by using the PPI for CA 
 
691 See section 5 above.  
692 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II) , paras.  4.35-4.39. (emphasis 
omitted)  
 WT/DS 316/ARB 
 
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  Manufacturing from the year preceding the year in which countermeasures will be applied. This 
means that, for example, the 2013 Annualized Value would be adjusted for inflation using the ratio 
of the PPI  for CA Manufacturing  figure for 2018 and the PPI for CA Manufacturing figure for 2013 to 
determine the maximum level of Annual Suspension for 2019.693  
6.511.   The European Union does not specifically object to the United  States ' request for inflation 
adjustment.694 
6.512.   The Arbitrator notes that in virtually all arbitra tion proceedings in which the maximum level 
of Annual Suspension was determined on the basis of the level of nullification or impairment or the 
value of adverse effects sustained during a past reference period – an approach that we also follow 
in this proc eeding – the maximum level of Annual Suspension was the value of nullification or 
impairment or adverse effects found to exist during the past reference period, with no adjustment 
for inflation up until the year in which the countermeasures or suspension c ould be authorized.695 
This has been the case also in arbitration proceedings where the temporal gap between the reference 
period and the year in which Annual Suspension could be authorized was significant.696  
6.513.   Considerable time has passed in this dispute sinc e the time -period in respect of which 
adverse effects were determined to exist (i.e. the 2011 -2013 Reference Period). However, we are 
not persuaded that in the circumstances of the present proceeding an adjustment for inflation is 
necessary to preserve the  effectiveness of the countermeasures that the United  States  may seek 
authorization to impose.697 
6.514.   Based on the above considerations, we decline the United  States ' request that we adjust the 
Annual Suspension Value expressed in 2013 US dollar terms (i.e. USD 7,496.623 million ) for inflation 
to the present day (2019).  
6.4.5.3   Adjust ment of  the annualized value of adverse effects determined to exist for 
inflation for future years in which countermeasures are applied  
6.515.   As we noted above, the United  States  also requests tha t it be authorized to further adjust 
for inflation the maximum level of Annual Suspension for each year going forward in which the 
United  States  would apply countermeasures. The United  States  thus asks the Arbitrator to adopt a 
 
693 United  States' methodology paper, para. 100.  
694 The European Union does, however, dispute the overall methodology proposed by the United  States 
in calculating the 2019 Annualized Value (i.e. escalating base prices up to delivery -year prices, discounting 
delivery -year prices back to 2012 or 2013 US doll ar values, and then inflating those values up to 2019). The 
European Union proposes a different approach to achieve 2019 values in its written submission. (European 
Union's written submission, paras.  336-344). We have already discussed why, in our view, it  is appropriate to 
perform escalation and discounting exercises  in the lost sales context to determine the value of the lost sales. 
(See sections 6.3.4.3.6.2  and 6.3.4.3.6.4  above). Therefore, we do not address these arguments again here.  
695 See Decisions b y the Arbitrators,  US – Tuna II (Mexico) (Article 22.6 – US); US – COOL (Article 22.6 
– United  States) ; US – Upland Cotton (Article 22.6 – US II) ; US – Gambling (Article 22.6 – US); US – FSC 
(Article 22.6 – US); Brazil – Aircraft (Article 22.6 – Brazil) ; EC – Bananas III (Ecuador) (Article 22.6 – EC); 
EC – Hormones (Canada) (Article 22.6 – EC); EC – Hormones (US) (Article 22.6 – EC); and EC – Bananas III 
(US) (Article  22.6 – EC). We note that the arbitrator in US – Washing Machines (Article 22.6 – US) adjusted 
the level of Annual Suspension for inflation so as to protect the real value of that level. (Decision by the 
Arbitrator, US – Washing Machines (Article 22.6 – US), para. 3.133). Since the approach adopted by that 
arbitrator is relevant to both what we  discuss in this section (inflation adjustment up to the present day) and 
what we address in the next section (section 6.4.5.3 ) (inflation adjustment going forward), we revert to that 
arbitrator's approach in more detail in the next section.  
696 See Decision s by the Arbitrators,  US – Tuna II (Mexico) (Article 22.6 – US); and US – Upland Cotton 
(Article 22.6 – US II) . In both these proceedings, the time period between the date by when the responding 
party should have come into compliance and the date of circul ation of the arbitrator's decision was four years. 
The levels of Annual Suspension were determined by these arbitrators with reference to the short -term time -
period immediately following the date by when the responding party should have come into complianc e. 
697 Additionally, we have difficulty accepting the United  States' argument that the PPI for CA 
Manufacturing would be the appropriate inflation index to use. The PPI for CA Manufacturing, as the 
United  States explains, is a measure of "price change from t he perspective of the seller" and is specific to one 
industry – CA manufacturing. (United  States' methodology paper, para. 94). However, the value that, 
according to the United  States, needs to be protected from being eroded by inflation is the value of th e 
countermeasures,  which may be imposed by the United  States government on a potentially wide range of 
goods and/or services imported from the European Union.  
 WT/DS 316/ARB 
 
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  formula that allows the maxi mum level of Annual Suspension to be applied to a given year to change 
with reference to inflation data from the previous calendar year (e.g. the 2020 level of suspension 
would be based on inflation data from 2019).  
6.516.   The European Union has not specifically  objected to the United  States  request to adjust for 
inflation the maximum level of Annual Suspension each year going forward.  
6.517.   The Arbitrator notes that the United  States ' request for setting an initial level of Annual 
Suspension in present -day dollar valu es (i.e. the 2019 Annualized Value) rather than in 2013 US 
dollar values (see section 6.3.4.1.3  above), and for adjusting future  levels (i.e. 2020, 2021, etc.) of 
Annual Suspension, both seek to protect the real value of countermeasures from being eroded b y 
inflation.698 We also recall that in the preceding section, we have declined to adjust the 2013 Annual 
Suspension Value for inflation until the present day (2019). In our view, the same considerations 
for not performing this initial inflation adjustment ap ply to the requested adjustment of future levels 
of Annual Suspension for inflation.  
6.518.   As noted above, with the exception of US – Washing Machines (Article  22.6 – US), in no 
previous arbitration decision that determined a maximum level of Annual Suspension did the 
arbitrator find it appropriate to adjust the level of Annual Suspension for future years based on 
inflation. Rather, once determined, the maximum level of An nual Suspension was set at a fixed 
monetary level going forward.  
6.519.   As concerns the recent arbitration decision in US – Washing Machines (Article  22.6 – US), it 
seems that the parties in that proceeding agreed that (a) suspension of concessions or other 
obligations could be in the form of Annual Suspension , and (b) that the maximum level of Annual 
Suspension for each year could be adjusted.699 The only disagreement between the parties in that 
context was with respect to how to perform that adjustment. Korea pro posed that future levels of 
suspension should be adjusted for the growth in the United  States  washing machines market to take 
into account that the level of nullification or impairment that Korea would suffer in the future would 
increase in proportion to t he growth in the United  States  washing machines market. The 
United  States , on the other hand, submitted that the economic model that it had proposed for 
calculating the level of nullification or impairment could be re -run each year with updated data for 
determining the level of suspension for a given year. After having found that neither party had 
offered an acceptable adjustment mechanism, the arbitrator determined that the level of suspension 
may be adjusted for inflation on an annual basis.700 In doing so,  the arbitrator noted that inflation 
adjustment constitutes a means to ensure that the "real value of the level of suspension is 
maintained over time".701 
6.520.   We note that the arbitrator in US – Washing Machines (Article  22.6 – US) did not explain 
why the disput e before it warranted an approach that was significantly different from that followed 
by all previous arbitrators that had determined a maximum level of Annual Suspension.702 For the 
reasons articulated above in paragraphs 6.512 -6.513  and bearing in mind the  approach followed by 
all other arbitrators in respect of future inflation, we do not find it appropriate, in the circumstances 
of the present proceeding, to adjust the maximum level of Annual Suspension for each year going 
forward so as to protect the rea l value of Annual Suspension from being eroded by future inflation.  
6.521.   The United  States  has not proffered any additional justification (other than what it offered 
for adjusting the 2013 value for inflation to the present day) as to why in the context of the present 
 
698 See paragraph s 6.502  and 6.503  above.  
699 Decision by the Arbitrator,  US – Washing Machines (Arti cle 22.6 – US), para. 3.123.  
700 Decision by the Arbitrator,  US – Washing Machines (Article 22.6 – US), paras.  3.124 -3.134.  
701 Decision by the Arbitrator,  US – Washing Machines (Article 22.6 – US), para. 3.133.  
702 It is also noteworthy in this context that in US – Section 110(5) Copyright Act (Article 25) , the 
arbitrator had to calculate only the level of nullification or impairment (i.e. it did not have to determine any 
level of suspension of concessions or other obligations). In undertaking this task, the arb itrator decided to 
reflect the evolution of the United  States market. The arbitrator did so by taking into account the annual 
growth rate of the United  States' Gross Domestic Product (GDP) up to the date of referral of the matter to 
arbitration, but not be yond that date. (See Award of the Arbitrator, US – Section 110(5) Copyright Act 
(Article  25), paras.  4.23 and 4.72). That is to say, the arbitrator did not provide for an adjustment of the level 
of nullification or impairment for each year going forward ba sed on the annual rate of growth of the 
United  States' GDP.  
 WT/DS 316/ARB 
 
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  proceeding we should provide for an adjustment of future levels of Annual Suspension. There notably 
is no evidence on the record suggesting a substantial rise in the near -term in prices for imports of 
European Union goods and services. We also note  in this context that, as pointed out above703, 
countermeasures are intended as temporary measures. We should therefore not simply assume that 
the United  States  countermeasures in this dispute will (need to) remain in place for a multi -year 
time-period.704 
6.522.   On the basis of the above considerations, we thus also decline the United  States ' additional 
request that we adjust for inflation the maximum level of Annual Suspension for each year going 
forward.  
6.5  The European Union 's argument on the level of countermeasure s that the Arbitrator 's 
determination may not exceed in this proceeding  
6.523.   The European Union argues that the maximum level of countermeasures that the DSB can 
authorize the United  States  to take per year cannot exceed the maximum level contained in the 
Unite d States  Article  22.2 request. According to the European Union, the arbitrator in EC – Bananas 
III (Ecuador) (Article  22.6 – EC) confirmed that an Article  22.2 request must set out a specific level 
of suspension that constitutes the maximum level of suspension that can be determined by the 
arbitrator. The European Union notes that the maximum specific level of countermeasures contained 
in the United  States  Article 22.2 request is USD 10 ,000 million  per year. As a result, the European 
Union submits that maximum level of countermeasures that the DSB could authorize the 
United  States  to impose is USD 10 ,000 million  per year.705  
6.524.   The European Union also notes that the United  States  submitted its Article  22.2 request 
following the original proceeding in which adverse effects were determined to exist related to the 
A320 family, the A330 family, the A340 family and the A380  aircraft , whereas the findings of the 
complia nce proceedings excluded adverse effects concerning the A320, A330 and A340 LCA families. 
Therefore, for the European Union, it follows that the level of countermeasures commensurate with 
the adverse effects determined to exist by the compliance panel and the Appellate  Body must be 
substantially below the amount identified in the Article  22.2 request.706  
6.525.   The United  States  responds that the level of countermeasures to be determined by the 
Arbitrator can exceed USD 10 ,000 million per year. The United  States  argues that by agreeing in 
their bilateral Sequencing Agreement to suspend the arbitration proceeding until the DSB adopts a 
finding that the European Union failed to comply with the DSB recommendations and rulings in the 
original proceedings, the parties ex pressed their clear intention that the findings of the compliance 
proceedings would inform the work of the Arbitrator. According to the United  States , implicit in this 
agreement is the understanding that the United  States  will update the level of counterme asures 
following the compliance proceedings. The United  States  also submits that the present arbitration 
proceeding is unlike that in EC – Bananas III  (Ecuador) (Article  22.6 – EC), in which Ecuador was 
proposing to go beyond the level of suspension specif ied in its Article  22.2 request based on findings 
and information that were already in existence at the time that Ecuador had submitted its 
Article  22.2 request. The United  States  notes that, in contrast, its Article  22.2 request was followed 
by compliance proceedings that found that the European Union had, in addition to maintaining WTO -
inconsistent measures, adopted new WTO -inconsistent measures.707  
6.526.   Additionally, the United  States  notes that its Article  22.2 request does not identify USD 
10,000 million as the maximum level of countermeasures. Rather, it defines the level of 
countermeasures in "functional terms ", as the annual level of adverse effects determined to exist 
caused to the interests of the United  States  by the European Union 's failure t o comply with the DSB 's 
 
703 See paragraph 6.56 above.  
704 We recall in this connection the European Union's assertion that it has already taken appropriate 
steps to bring its measures fully into conformity with its WTO oblig ations. (Communication by the European 
Union, WT/DS316/34 (Second Compliance Communication), para. 1). We also recall that this issue is under 
examination by the second compliance panel.  
705 European Union's written submission, paras.  83-87. 
706 European Union 's written submission, para. 88.  
707 United  States' written submission, para. 75.  
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  recommendations and rulings. The amount of USD 10 ,000 m illion is explicitly stated as an "estimate " 
of this functional description that is based on "currently available data in a recent period ".708  
6.527.   The European Union responds that th e United  States ' argument, i.e. that its Article  22.2 
request identif ies the level of countermeasures in functional terms as the "annual level of adverse 
effects determined to exist ", would imply that the Article  22.2 request fails to set out a specific le vel 
of suspension and therefore would not support the authorization of any countermeasures 
whatsoever. However, in the European Union 's view, such a reading of the United  States  Article  22.2 
request is  "erroneous ".709 
6.528.   The Arbitrator notes that the European U nion's argument is that the DSB cannot authorize 
the United  States  to take countermeasures at a level that exceeds the maximum level of 
countermeasures specified in numerical terms in its Article  22.2 request. According to the European 
Union, the maximum l evel of countermeasure that is specified in the request is USD 10 ,000 million 
per year.  
6.529.   We note that the text of the United  States ' Article  22.2 request characterizes the USD 10 ,000 
million per year level as an "estimate " of the level of countermeasures based on data that was 
available when the request was made (i.e. December 2011).710 We also note that USD 10 ,000 million 
per year in 2011 US dollar terms is equal to USD 10 ,830 million in 201 3 US dollar terms.  
6.530.   In section 6.4.4 above, we determined  that the maximum level of Annual Suspension that 
the United  States  may implement per year , i.e. the "commensurate" 2013 Annual Suspension Value, 
is USD 7,496.623 million . This level is lower than USD 10 ,000 million per year  (in 2011 US dollar 
terms)  and USD 10,830 million per year, which is the 201 3 US dollar term equivalent of USD 10 ,000 
million in 2011 US dollar terms. Therefore, regardless of whether the figure of USD 10 ,000 million 
contained in the United  States  Article  22.2 request is taken to constitute an "estimate " of a functional 
description of the level of countermeasures (and thus could in principle be exceeded) or the 
maximum permissible level of countermeasures specified in the request in numerical terms, the lev el 
of Annual Suspension that we have determined to be commensurate with the degree and nature of 
adverse effects determined to exist does not exceed USD 10 ,000 million per year (in 2011 US dollar 
terms). As the European Union 's argument is that the United  States  must not be allowed to seek 
authorization for a level of countermeasures that exceeds USD 10 ,000 million per year in 2011 US 
dollar terms, this argument is moot in view of our determination of the level of Annual Suspension. 
We therefore do not exam ine this argument further.  
6.531.   The European Union raises another argument, which is that the level of countermeasure s 
commensurate with the adverse effects determined to exist must be substantially below the USD 
10,000 million identified in the Article  22.2 request in view of the different scope of the findings in 
the original and compliance proceedings. This argument go es to the question of the correct 
determination of the level of Annual Suspension and not to the question of the maximum level of 
countermeasures specified in the Article  22.2 request. We have undertaken our determination of the 
level of Annual Suspension above in section s 6.3 and 6.4 and in quantifying the adverse effects 
determined to exist have taken into account the scope of the findings in the compliance proceedings. 
There is therefore no need to dwell further on this argument.  
7  THE EUROPEAN UNION 'S CLAIM CONCERNING THE  PRINCIPLES AND PROC EDURES SET 
OUT IN ARTICLE 22.3 OF THE DSU (CROSS -RETALIATION)  
7.1.  As noted in section 1.2, the United  States  requested authorization to take countermeasures 
under the GATT  1994 as well as the GATS. In its request, the United States  noted that it is neither 
practicable nor effective for the United  States  to suspend concessions or other obligations only on 
imports of goods from the European Union up to a value of approximately USD 10 ,000 million. The 
United  States ' request also states that, given the degree and nature of the adverse effects, the 
 
708 United  States' written submission, para. 74.  
709 European Union's comments on the United  States' response to Arbitrator question No. 133.  
710 For the relevant portion of the text  of the Article 22.2 request, see paragraph 6.13 above. The 
Article  22.2 request further states that "it is neither practicable nor effective to suspend concessions or other 
obligations on imports of EU goods up to a value of approximately US $10 billion". (Recourse to Article 7.9 of 
the SCM  Agreement and Article 22.2 of the DSU by the United  States, WT/DS316/18, fourth paragraph)  
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  circumstances are "serious enough " within the meaning of Article  22.3(c) of the DSU.711 Therefore, 
the United  States  requested authorization to impose countermeasures consisting of one  or more of 
the following:  
a. suspension of tariff concessions and related obligations (including most -favoured -nation 
obligations) under the GATT  1994 on a list of products of the European Union and certain 
member States to be drawn from the United  States ' Harmonized Tariff Schedule; and  
b. suspension of horizontal or sectoral commitments and obligations contained in the 
United  States ' Schedule of Specific Commitments with regard to all services defined in the 
Services Sectoral Classification List, except for f inancial services (sector 7).712 
7.2.  As also noted, in having recourse to arbitration under Article  22.6, the European Union claimed 
that the United  States  did not follow the principles and procedures set forth in Article  22.3 in 
considering what countermeasures  to take.713  
7.3.  The European Union thus reserved the right to raise a claim before the Arbitrator that the 
United  States  had not followed the principles and procedures set forth in Article  22.3. As explained, 
it is for the European Union to make out a prima facie case that the  United  States  did not follow the  
principles and procedures in Article  22.3.714 
7.4.  However, the European Union did not put forward any claim under Article  22.3 in its written 
submission or oral statement. The only reference to Article  22.3 by  the European Union is contained 
in the "procedural history " section of its written submission where it recalls that it had "claimed that 
the principles and procedures set forth in Article  22.3 of the DSU had not been followed " when it 
had recourse to Arti cle 22.6 at the DSB meeting on 22  December  2011.715 
7.5.  Since the European Union did not pursue its claim before the Arbitrator, we cannot examine 
this issue further in the present Decision. We note that in WTO dispute settlement practice, a 
Member 's measure is treated as WTO -consistent until it has been proven otherwise.716 We consider 
that, likewise, a complaining party 's request under Article  22.3(c) must be treated as DSU -consistent 
until proven otherwise. Consequently, in the circumstances of the present arbit ration, it must be 
presumed that the United  States ' request for cross -retaliation is not inconsistent with Article  22.3(c) 
of the DSU.  
8  THE EUROPEAN UNION 'S CLAIM THAT THE PRO POSED COUNTERMEASURE S ARE NOT 
ALLOWED UNDER THE CO VERED AGREEMENTS  
8.1.  As noted in section 1.2, in having recourse to arbitration under Article  22.6 of the DSU, the 
European Union also claimed that the United  States ' proposal is not allowed under the covered 
agreements.717 We note in this respect that Article  22.5 of the DSU provides that "[t]he DSB shall 
not authorize suspension of concessions or other obligations if a covered agreement prohibits 
suspensions " and recall that in accordance with Article  22.7 of the DSU "[t]he arbitrator may … 
 
711 Article 22.3(c) provides that:  
In considering what concessions or other obligations to suspend, the complaining party  shall 
apply the following principles and procedures:  
… 
(c) if that party considers that it is not practicable or effective to suspend concessions or 
other obligations with respect to other sectors under the same agreement, and that the 
circumstances are s erious enough, it may seek to suspend concessions or other obligations under 
another covered agreement.  
712 Recourse to Article 7.9 of the SCM  Agreement and Article 22.2 of the DSU by the United  States, 
WT/DS316/18.  
713 DSB, Minutes of the meeting held on 22  December  2011, WT/DSB/M/309, para. 4.  
714 Decisions by the Arbitrators, US – Upland Cotton (Article 22.6 – US II), para. 5.55; US – Gambling 
(Article 22.6 – US), para. 2.27; and EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 59.  
715 European Union's written submission, para. 17.  
716 Appellate  Body Report, US – Carbon Steel , para. 157.  
717 DSB, Minutes of the me eting held on 22  December  2011, WT/DSB/M/309, para. 4.  
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  determine if the proposed suspension of concessions  or other obligations is allowed under the 
covered agreement ". 
8.2.  Thus, the European Union reserved the right to raise a claim before the Arbitrator that the 
United  States ' proposal is not allowed under the covered agreements. The onus is on the European 
Union to make a prima facie  case in this regard.  
8.3.  However, the European Union did not put forward any such claim in either its written 
submission or its oral statement. Sinc e the European Union did not pursue its claim before the 
Arbitrator, we do not examine this issue further in the present Decision. As no inconsistency has 
been proven, for purposes of the present proceeding it is to be presumed that the covered 
agreements at issue, i.e. the GATT  1994 and the GATS, do not prohibit the suspension contemplated 
by the United  States ' request for authorization to impose countermeasures (i.e. the suspension of 
United  States ' tariff concessions and related obligations under the GAT T 1994 on a list of products 
of the European Union and certain member States, or the suspension of horizontal or sectoral 
commitments and obligations contained in the United  States ' GATS schedule with regard to all 
services defined in the Services Sectoral  Classification List, except for financial services).718  
9  CONCLUSIONS  
9.1.  For the reasons set out above, the Arbitrator concludes as follows:  
a. with reference to Articles 7.10 of the SCM  Agreement  and 22.6 of the DSU, the level of 
countermeasures "commensurate wit h the degree and nature of the adverse effects 
determined to exist" during the 2011 -2013 Reference Period amounts to USD 7,496.623 
million  per annum;  
b. with reference to Article  22.3 of the DSU, the European Union has not demonstrated that 
the United  States  failed to follow the principles and procedures set forth in Article  22.3 of 
the DSU in determining that it is not practicable or effective to suspend concessions or 
other obligations in trade in goods and that the circumstances are serious enough; and  
c. with reference to Article  22.5 of the DSU, the European Union  has not demonstrated that 
the countermeasures proposed by the United  States  are not allowed under the covered 
agreements at issue, i.e. the GATT  1994 and the GATS.  
9.2.  The United  States  may therefore request authorization from the DSB to take countermeasures 
with respect to the European Union and certain member States, as indicated in document 
WT/DS316/18, at a level not exceeding, in total, USD 7,496.623 million  annually. These 
countermeasures may tak e the form of (a) suspension of tariff concessions and related obligations 
under the GATT  1994, and/or (b) suspension of horizontal or sectoral commitments and obligations 
contained in the United  States ' services schedule with regard to all services defined in the Services 
Sectoral Classification List, except for financial services.  
 
__________  
 
 
718 Recourse to Article 7.9 of the SCM  Agreement and Article 22.2 of the DSU by the United  States, 
WT/DS316/18.  