Decisions of the Appellate Body of the World Trade Organization

Brazil-Export Financing Programme for Aircraft Recourse by Canada to Article 21.5 of the DSU

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Joel P. Trachtman

WTO Appellate Body Report: Brazil-Export Financing Programme for Aircraft Recourse by Canada to Article 21.5 of the DSU, AB-2000-3 WT/DS46/AB/RW (00-2990), adopted by Dispute Settlement Body, 4 August 2000. Brazil, Appellant, Canada, Appellee; European Communities and United States, Third Participants. Division: Bacchus, Ehlermann and Lacarte-Mur_. Major Topics Addressed by Appellate Body: Export Subsidies Under Article 3.1(a) of the Agreement on Subsidies and Countervailing Measures; Item (k) of Illustrative List of Export Subsidies; Burden of Proof in Article 21.5 Proceedings.

1. Abstract

Brazil appealed from the determination of the Article 21.5 Panel established to consider measures taken by Brazil to comply with the rulings of the Dispute Settlement Body (DSB) in Brazil-Export Financing Programme for Aircraft.¹ In the original litigation, the Appellate Body upheld the original panel's finding that certain of Brazil's measures constituted prohibited export subsidies, and recommendation that these export subsidies be withdrawn. After Brazil took steps to implement these findings, Canada argued that the Brazilian modifications were inconsistent with Article 3.1(a) of the Agreement on Subsidies and Countervailing Measures (the "SCM Agreement"). In particular, Canada argued that Brazil continued to issue certain bonds to support exports under letters of commitment issued prior to Brazil's modifications. Canada further argued that Brazil's modifications to its financing system did not bring it into compliance with Article 3.1(a). The Article 21.5 Panel agreed. The Appellate body upheld the Article 21.5 Panel's decision. It found that the issuance of bonds to fulfill prior commitments to subsidize interest rates constituted the continuation of Brazil's subsidies after the date at which Brazil was required to comply. It found that Brazil bore the burden of proof as to its affirmative defense that its measures were permitted under item (k) of the Illustrative List, and failed to satisfy its burden because it failed to show that its measures did not provide a material advantage under item (k). It therefore found it unnecessary to examine whether Brazil's a contrario interpretation of item (k) was correct.

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1 WT/DS46/RW, 9 May 2000.

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