June 30, 2010 / 3:36 PM / 10 years ago

Q&A-What next in the Airbus dispute?

June 30 (Reuters) - A World Trade Organization panel issued a damning report on Wednesday in the dispute between the United States and European Union over EU subsidies for Airbus EAD.PA civil aircraft.

What happens next?

* Does Airbus have to repay the subsidies?

The WTO does not usually require subsidies that have already been handed out to be repaid.

But it does require an immediate end to prohibited export subsidies and the withdrawal of other subsidies or their adverse effects on the United States.

* Does it mean the export subsidies have to stop immediately?

The WTO panel defined immediately as “within 90 days”. But that is within 90 days of its report being “adopted” — approved by the entire WTO membership, which could be some months away.

Cases involving prohibited export subsidies enjoy an accelerated process at the WTO.

A report is adopted within 30 days of being circulated — unless it is appealed. (In other cases the deadline is 60 days.) The appeal can be at the last minute. The EU is likely to appeal as it has nothing to lose and will gain time.

The WTO’s appellate body then has 60 days to rule (against 90 days in cases not involving prohibited subsidies).

The appellate body’s report must be adopted within 20 days (against 30 days in other cases).

If the case is complex the appellate body — the WTO’s top court — may take longer. The original panel was supposed to produce its report within 90 days and took nearly five years.

* How does Airbus end the prohibited subsidies and withdraw the other ones?

The WTO did not make any specific recommendations on this.

In practice Airbus would probably have to put outstanding loans and other funding onto a commercial footing, for instance renegotiating the interest it pays.

* Can Airbus subsidise other planes?

The report covers funding for Airbus between 2001 and 2006, so it does not look at funding for its new A350 widebody jet.

Airbus is currently negotiating loans to pay for the A350. [ID:nN02186846]

U.S. and Boeing (BA.N) officials say the ruling will ensure these are not unfair subsidies too.

What is certain is that American lawywers will scrutinise the funding of the A350 and any other Airbus planes, and if they think it is unfair and launch a new challenge, they will be able to cite case law from this dispute.

* How does it affect the U.S. military tanker contest

Airbus parent EADS is bidding against Boeing to win a $50 billion contract to supply tankers to the U.S. Air Force. The EADS bid is based on the A330, which the WTO panel found had been illegally subsidised.

Boeing is making the most of this to argue that the EADS bid is unfair, but it remains to be seen whether this will sway the Pentagon.

* What about other countries?

Boeing officials say this case will also lay down a marker for countries like Brazil, Canada, China and Russia that are thinking of entering the large civil aircraft market.

* So is this the end of the road for Airbus?

The confidential interim report in the EU’s countersuit against the United States over subsidies for Boeing is now expected on July 16. The final report could be published later this year or early next.

That is likely to find the U.S. guilty of illegal practices too — although Boeing officials insist the EU subsidies are much more serious than what is at stake with Boeing.

At that point the two parties may decide to negotiate a settlement to their differences over the funding of large civil aircraft, although the WTO rulings will still be available to other countries that want to challenge them. (For more on Airbus dispute click on [ID:nLDE65O1RU] ) (Compiled by Jonathan Lynn; Editing by Stephanie Nebehay)

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