World Trade

Organization

Australia - Subsidies Provided to Producers and 
Exporters of Automotive Leather

VI. Preliminary Issues and Requests for prleiminary Rulings:  C. "Disclosure" Obligations under Article 14 of the SCM Agreement

6.58 The United States asserts that a review of its consultation request in WT/DS126/1 shows that it included a detailed statement of the available evidence which supports the United States claim that the subsidies in question contravene Article 3 of the SCM Agreement and which meets the requirements of Article 4.2 of the SCM Agreement.  The request for consultations in WT/DS126/1 specifically provided:

"The United States bases this request for consultations on evidence indicating that the A$25 million loan and grants of up to A$30 million are in fact tied to Howe's actual or anticipated exportation or export earnings.  In particular, this evidence indicates that:

- the grants and loan provide benefits to Howe, a company with a troubled financial history that has received GOA export subsidies in the past and that has relied on these subsidies to expand the exportation of its products;

- the grants and loan were provided to compensate Howe for the GOA's decision to excise automotive leather from two de jure export subsidy programme - the Textiles, Clothing and Footwear Import Credit Scheme (TCF) and the Export Facilitation Scheme for Automotive Products (EFS);

- the grants and loan have the same purpose and effect as the TCF and EFS programme - that is, to allow Howe to continue to expand the exportation of its products;the vast majority of Howe Leather's sales are exports, and this fact was well understood by the GOA when it agreed to provide the grants and loan to Howe; 

- the Australian market is unable to absorb Howe's current production of automotive leather and thus cannot absorb a significant increase in that production - leaving exports as the only way Howe can utilize its increased production capacity and meet the aggressive production requirements upon which the grants and/or loan are conditioned; and

- the grants and loan provided to Howe, Australia's only exporter of automotive leather, differ from other subsidies given by the GOA and may well be unique.

This evidence consists of numerous statements and representations made by the GOA, Howe and Howe's affiliated and/or parent companies that have appeared in the media, official GOA publications and GOA communications with the United States Government.  This evidence also consists of financial statements of Howe and its affiliated and/or parent companies;  documents relating to the markets for automotive leather and automobiles in Australia; and other relevant information and materials concerning Howe, GOA export subsidy programs and the Australian market for automotive leather and automobiles, including statements of experts on automotive leather and automobiles, and statements of members of the automotive leather and automobiles industries."

6.59 Referring to Australia's implication that, given the expedited timetable of this dispute, Australia has been put in a disadvantageous position because it did not receive the specific exhibits relied upon by the United States until the time of the United States' first submission, the United States points out that, first, the evidence in this case was extensively described in the consultation request.  This provided ample notice to Australia of the facts and evidence upon which the United States based its belief that the subsidies in question violated Article 3 of the SCM Agreement.  Furthermore, the vast majority, if not all, of the documents submitted with the United States' first submission fall within the description of the evidence provided in the consultation request, and the principal facts relied upon in the first submission parallel the facts stated in the consultation request.  Given the description of the evidence and the statement of the facts included in the consultation request, it seems disingenuous for Australia to claim that it has been somehow blind-sided or surprised by the facts and argument in the United States' first submission.  Indeed, the United States asserts, Australia is more familiar than the United States with the nature and extent of the subsidies in question as well as the specific statements by its own government, the media in Australia and Howe regarding the purpose of the replacement subsidies, the Australian automotive leather industry and the financial condition of Howe in particular.

6.60 The United States points out that Australia would prefer if the United States had been required to present its first submission at the time of the panel request, and that Australia has proposed exactly such a change in the rules in the current review of the DSU.  However, the DSU and the SCM Agreement now provide only the requirements in Article 4.2 of the SCM Agreement and Articles 4.2 and 6.2 of the DSU, which the United States asserts that it has satisfied in this instance.

6.61 Australia reiterates that, under Article 4.2 of the SCM Agreement, the complainant is required to provide a “statement of available evidence”.  This is one of the conditions it must meet if it wants a panel established under the expedited time frames of Article 4 of the SCM Agreement.  Australia asserts that the United States provided as a “statement of available evidence” in WT/DS126/1 a list of unspecified documents.  It did not even provide citations of the documents it was referring to, let alone provide copies of those documents.  Australia asks what use was that listing to Australia in assessing the case brought by the United States?

6.62 Australia submits that, at the time the complainant makes its request under Article 4.1 of the SCM Agreement, the ball is at its feet.  It has total control over the paper work and over much of the timing of the process.  If it follows the rules, then it can have a very quick outcome.  However, it must follow the rules.  In Australia's view, there is something essentially unfair and biased where the complainant can have expedited proceedings without the disclosure required under Article 4.2 of the SCM Agreement.   If this practice were to be allowed, then a respondent could find itself in the future even making its first submission to the PGE on the basis of a statement that the complainant has evidence without specifying in any detail what it is.

6.63 In response to the statement of the United States on "disclosure" and on the meaning of “statement of available evidence”, Australia states that the issue here is that under expedited procedures of the SCM Agreement, the respondent has to know what the evidence is in order to prepare its case.  This is different from usual DSU requirements.  The quid pro quo of expedited proceedings is that the complainant must show its hand of the time of the request for consultations.  The purpose of expedited proceedings is not to disadvantage the respondent, but rather to obtain a quick outcome.  According to Australia, Article 4.2 of the SCM Agreement is supposed to be a guarantee that information necessary for a respondent to defend itself is provided.

6.64 Australia asserts that, in the alternative, if the Panel does not agree to its requests for an immediate  ruling that the Panel proceedings should be terminated or that the United States has failed to establish its claims, the systemic issue of what evidence a panel (or the PGE) should accept still has to be resolved.If a statement in the request for consultations that amounts to little more in substance than “we have evidence” is regarded as sufficient to meet the disclosure requirements of Article 4 of the SCM Agreement, then that provision would be nullified.  This could lead to legalizing a cat and mouse game between the complainant and the respondent, which would significantly alter the balance of rights under the SCM Agreement and, indeed, affect in a substantial way the balance of rights under the DSU.  In Australia’s view, the purpose of expedited proceedings is not to disadvantage the respondent.  Thus, as a systemic requirement, complainants have to follow clear disclosure requirements.

6.65 In this context, Australia asks the Panel to rule that, as a result of the failure of the United States to fulfil its "disclosure" obligations under Article 4 of the SCM Agreement, evidence submitted by the United States that was not provided in WT/DS126/1 should not be admissible in the proceedings before the Panel.  In the alternative, Australia asks that the Panel rule that at least those facts and arguments not explicitly set out in WT/DS126/1 but which would have been available to the United States at the time it requested the consultations will be disregarded for the purposes of the proceedings of this Panel.  In support of this, Australia notes that Article 4.2 of the SCM Agreement says: “[a] request for consultations under paragraph 1 shall include a statement of available evidence with regard to the existence and nature of the subsidy in question.”

6.66 In addition, Australia alleges that the United States has referred to answers provided in the context of the consultations called for in WT/DS106/1 and urges the Panel to rule that any facts derived by the United States from those consultations, including Exhibit 2, and arguments by the United States based on them, are confidential to that process and not admissible before this Panel.  According to Australia, this raises a different systemic issue.This was part of the consultative process that led to the establishment of a panel by the DSB on 22 January 1998.  That is not the same panel as the current process.  Under Article 4.6 of the DSU, such consultations are confidential to that panel process and so any material provided in that context is required to be treated as being confidential to that panel process.  As a systemic matter, such evidence should not be admitted before this Panel without Australia’s agreement (and there was no consultation on this), since it was provided under a separate, confidential procedure. As a systemic issue, if Members cannot have confidence that the confidentiality provisions of the DSU will be respected, then these procedures will be undermined.

6.67 The United States asserts that it has satisfied the requirements of Article 4.2 of the SCM Agreement, and so the Panel need not consider Australia's arguments.  If the Panel finds it necessary to consider these arguments, the United States submits that it would be inconsistent with the DSU and the SCM Agreement to limit the Panel to consideration of only those facts explicitly set forth in the consultation request.  Article 11 of the DSU directs a panel to "make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements".  The Panel's task of "objective assessment" under Article 11 is fundamentally incompatible with excluding from its examination relevant facts in the dispute before it.  Australia argues that a supposed violation of Article 4.2 should be punished, but such a punishment is irrelevant and exceeds the authority given to the Panel under the DSU.  If the consultation request in WT/DS126/1 has not satisfied the requirements of Article 4.2 of the SCM Agreement, the remedy would be for the complaining party to be required to start its case again.

6.68 According to the United States, no provision in the DSU or in the SCM Agreement provides a legal basis for the Panel to exclude facts simply because they were "available" at the time of consultations, but not explicitly stated in the consultation request.  Article 4.2 of the SCM Agreement does not state that "all" available evidence must be included in a consultation request, or even that "the" available evidence must be included, thereby implying that the statement should be exhaustive.  It simply requires that the complainant include "a statement of available evidence".  Moreover, Australia does not suggest how the Panel should determine whether the evidence was "available" at the time of consultations.  Just because a document may have been in existence at the time of consultations or a fact may have been ascertainable at that time, does not mean that the evidence was necessarily "available" to the complainant at that time.  It would unduly prejudice a complainant if it could not continue its investigation and development of the facts after the request for consultations.  

6.69 The United States submits that the Panel should reject the arguments raised by Australia on the issue of use in panel proceedings of material obtained during the consultations in WT/DS106/1. Article 4.6 of the DSU provides:  "Consultations shall be confidential, and without prejudice to the rights of Members in any further proceedings" (emphasis supplied by the United States), without making any distinction whether the proceedings are in the same case or in other cases.  There is no basis for distinguishing between the treatment of facts from consultations in a dispute used in a later phase of the same dispute, and the treatment of facts from consultations in one dispute used in another dispute.Indeed, the reference to "further proceedings" would seem to lead to the conclusion that if a panel excludes any evidence, it must start with evidence from earlier stages of the same dispute.  Yet panels can base their conclusions on material from consultations, and have done so on many occasions.  According to the United States, Article 4.6 cannot be interpreted so as to bar this widespread practice and frustrate the fact-finding ability of panels. Article 4.3 of the SCM Agreement provides that one purpose of consultations is to "clarify the facts". Yet there is no point in clarifying the facts if a complaining party cannot present the clarified facts to a panel. The logical implication of Australia's argument is that a complaining party should be required to present erroneous facts to the panel, even if the truth has been clarified in consultations. 

6.70 The United States maintains that, in India – Patents, the Appellate Body recognized the widespread use in panel proceedings of facts from consultations:

All parties engaged in dispute settlement under the DSU must be fully forthcoming from the very beginning both as to the claims involved in a dispute and as to the facts relating to those claims.  Claims must be stated clearly.  Facts must be disclosed freely.  This must be so in consultations as well as in the more formal setting of panel proceedings. In fact, the demands of due process that are implicit in the DSU make this especially necessary during consultations.For the claims that are made and the facts that are established during consultations do much to shape the substance and the scope of subsequent panel proceedings.[41]

In our view, the wording of Article 4.6 of the DSU makes it clear that offers made in the context of consultations are, in case a mutually agreed solution is not reached, of no legal consequence to the later stages of dispute settlement, as far as the rights of the parties to the dispute are concerned.  Consequently, we will not base our findings on such information.[46]  

The United States argues that Article 4.6 of the DSU does not provide a basis for panels to mete out sanctions and exclude relevant factual evidence.  It simply calls for panels to disregard offers of settlement, and not to treat such offers as admissions of guilt.

6.73 Australia repeats that, pursuant to Article 4.6 of the DSU, the consultations under WT/DS106/1 are supposed to be confidential and without prejudice to the rights of any Member in further proceedings.  As a systemic issue, in Australia's view, the United States has no right to use this information in the context of this Panel without obtaining leave from Australia.  Of course, if the Panel rules in favour of Australia on any of its other requests for preliminary rulings, then this issue becomes redundant.

A. Measures

7.1 According to Australia, a key issue for any panel is what are the matters before it, in terms of claims and measures.  Australia asserts that the United States documentation (WT/DS126/1 and WT/DS126/2) recognizes that there is more than one measure before the Panel. WT/DS126/1 says in its second substantial paragraph that: “these measures appear to violate the obligations of the [government of Australia]”. (emphasis supplied by Australia)  Similarly, WT/DS126/2 says in its second substantial paragraph that: “these measures are inconsistent” (emphasis supplied by Australia). In addition, throughout both documents, the United States consistently refers to “subsidies”. Accordingly, Australia maintains, there are a number of different measures that the Panel will need to examine.  Moreover, the Panel will need to examine these measures separately in respect of their consistency with Article 3.1(a) of the SCM Agreement. 

7.2 Australia points out that the United States refers throughout WT/DS126/1 repeatedly to “grants” and to “the grants and loan”.  The only measures specifically referred to in WT/DS126/1 are: “a A$25 million loan, which was made on preferential and non-commercial terms, and grants of up to another A$30 million”.[47]   The United States goes on in the next sentence to refer to “these measures appear to violate …” (emphasis supplied by Australia).  In the third substantial paragraph of WT/DS126/1, the United States says that it: “bases this request for consultations on evidence indicating that the A$25 million loan and grants of up to A$30 million … .”  In five of the six tirets to this paragraph, the United States refers to “the grants and loan”.  The fourth substantial paragraph of WT/DS126/1 refers to “[t]his evidence”. Australia argues that, in light of Article 4.2 of the SCM Agreement, since “evidence” is only referred to about “loan and grants” and “the grants and loan”, these are the only measures covered by the claims of the United States.

7.3 Australia maintains that the “loan” is clearly the loan provided under the loan contract, and this leaves to be determined what is meant by "the grants”.  According to Australia, the United States has not proposed that the grant contract is a measure under the dispute.  Instead, it asked for consultations about the actual payments, “the grants”.  There have been three payments made to date.  Two were made in 1997 and one was made in July 1998, i.e. after not just the request for consultations but also after the establishment of the Panel.  Australia contends that the term "grants" can only mean actual payments, since they have been distinguished from the actual grant contract, and that since the United States has referred to these payments severally, each of the grants before the Panel is a separate measure.  This leaves the question of which payments under the grant contract are before the Panel.

7.4 Australia asserts that the second substantial paragraph of WT/DS126/1 says: “the [government of Australia] has provided subsidies to Howe that include … grants of up to another A$30 million.”  The second tiret of the third substantial paragraph of WT/DS126/1 refers to “the grants and loan were provided”.  Similarly, the first substantial paragraph of WT/DS126/2 says: “the Government of Australia has provided subsidies … [that] … include grants …."  These references can only be to payments that had been made already.  The only payments under the grant contract that had been made by the time of these documents, and indeed the date of the establishment of the Panel, were the first two payments in 1997 (of A$5 million and A$12.5 million). Accordingly, the only grants referred to by the United States as measures in its request for consultations, and for the establishment of a Panel, were these first two payments.  Thus, these, together with the loan, are the only measures covered by the Panel’s terms of reference. 

 7.5 Australia states that the United States' claims are that each of the individual payments covered by the terms of reference of the Panel falls under Article 3.1(a) of the SCM Agreement.  The United States' claims deal with each of the payments under the grant contract that are before the Panel as one of the separate measures at issue.  No other explanation is consistent with the text and the normal meaning of the terms “grant” and “grants”.  Australia asserts that, in the alternative, even if the Panel decided to consider payments made subsequent to WT/DS126/1, or even to the establishment of the Panel, it should consider each payment as a separate measure. 

7.6 Again in the alternative, regardless of the view the Panel takes of the issue of what aspects of the grant contract are before it, Australia argues that the United States has correctly recognized that the loan is a quite separate measure from the grant contract or payments under the grant contract.  The documentation consistently talks of “measures” rather than “measure” and the only consistent interpretation of that is that the Panel is to examine each of the measures separately.  The Australian government entered into two separate, independent contracts with the company, the loan contract and the grant contract.  These are legally different, unrelated instruments.  The United States has not made any allegation to the contrary.  Australia contends that the Panel will need to assess the status under Article 3.1(a) of the SCM Agreement of each of the measures before it (i.e. the loan and the first two payments under the grant contract) on its own merits (or if the Panel takes the view that the grant contract is a measure before it, then the loan contract and grant contract as separate measures).  For the sake of argument, even if the Panel finds that one of the measures was not consistent, it could find that the others were consistent with Article 3.1(a) of the SCM Agreement.

7.7 According to Australia, the United States recognized that the grant contract was provided only to cover the period through to 2000.  Indeed, it is a major theme to the United States' argument that the grant contract was a “replacement” for automotive leather being excised from the ICS and the EFS.  The loan, on the other hand, was provided for 15 years regardless of the duration of the previous or any future domestic support arrangements that might be subsequently introduced covering automotive leather.

7.8 Australia submits that the terms of the loan contract and grant contract are different.  The United States recognizes in its first submission in particular that there is no conditionality placed upon the loan other than the natural due diligence ones to ensure that the government gets its money back.  Moreover, Australia points out, the two contracts are independent.  Even if the company had received only the first payment under the grant contract, the loan would have continued.  Thus, regardless of what happens to production, the loan will continue, so long as the company meets the interest and repayment conditions.

7.9 According to Australia, Articles 3.1(a) and 4 of the SCM Agreement are clear that Article 3.1(a) of the SCM Agreement is about individual subsidies, not about an aggregation of subsidies. When examining whether a subsidy falls under Article 3.1(a) of the SCM Agreement, it is necessary to look at each subsidy separately, measure by measure.  There is no issue of aggregation such as can arise under Article 6.1(a) of the SCM Agreement.  Australia points out that:

(a) the chapeau of Article 3.1 of the SCM Agreement refers to: “the following subsidies”;

(b) 4 of the SCM Agreement refers to “the granting of a subsidy” and “[t]he mere fact that a subsidy is granted”;

(c) footnote 5 of the SCM Agreement refers to: “[m]easures referred to”; and

(d) Article 4 of the SCM Agreement continually refers to individual subsidy programmes, e.g.: “a prohibited subsidy” in paragraphs 1, 5 and 7; “the subsidy” in paragraphs 2, 3, and 7; and “the measure in question” in paragraph 5.

7.10 Accordingly, Australia argues, the Panel needs to consider the status of each measure quite separately under Article 3.1(a) and footnote 4 of the SCM Agreement.  The fact that an enterprise receives more than one subsidy does not mean that the status of one measure under Article 3.1(a) of the SCM Agreement has any implication for other measures.  Again, there are other provisions under the SCM Agreement where a Member can seek remedy if it considers that there is adverse effect from the aggregation of a number of subsidies, i.e. under Parts III and V of the SCM Agreement.  However, this case is limited to Article 3.1(a) of Part II of the SCM Agreement.  There is nothing in the text that suggests, and the United States has made no argument, that the existence of a measure in breach of a WTO obligation automatically determines the status under the WTO of any other measure benefiting the same enterprise.  In particular, regardless of what finding the Panel makes about payments under the grant contract (or the grant contract itself), the United States has made no allegation that the loan is in any way contingent upon performance, let alone export performance.

7.11 The United States submits that, in its request for the establishment of the Panel (WT/DS126/2), the United States identified the specific measures at issue in this case:  "a A$25 million preferential loan and grants of up to A$30 million."  There are two contracts between the Australian government and Howe:  a loan contract and a grant contract.  The term "grants" includes any and all possible disbursements under the latter contract. That is why the measure is phrased in terms of "grants up to A$30 million."   According to the United States, the measures that have been targeted in this case are therefore explicitly described in the panel request and Australia cannot claim that it did not have adequate notice in this case of the claims.

7.12 The United States argues that, contrary to Australia's assumption, the term "grants" does not serve to distinguish between actual payments and the grant contract.  Rather, the term "grants" includes all possible disbursements, whether past or future, and otherwise serves to distinguish whether the funds were bestowed upon Howe pursuant to the loan contract or the grant contract. Nowhere in the request for consultations or the panel request is the term "grants" limited to actual payments.  In the view of the United States, it is nonsensical to assume that the United States would pursue a dispute settlement complaint on only past payments made under a single contract and ignore any future payments that could be made under the same contract.

7.13 The United States contends that the Panel should reject Australia's argument that the only measures before the Panel are the A$25 million preferential loan and two payments made pursuant to the grant contract. In the view of the United States, Australia’s arguments are not supported by any reasonable interpretation of the panel request.  The measures at issue include the loan contract and the grant contract.  Under Article 7.1 of the DSU, the terms of reference of this Panel are to examine “the matter refered to the DSB in WT/DS126/2.”  Pursuant to Article 6.2 of the DSU, in the request for the establishment of a panel in this case (WT/DS126/2), the United States identified the “specific measures at issue” as follows: “these subsidies include the provision by the Government of Australia to Howe of grants worth as much as A$30 million and a A$25 million loan on preferential and non‑commercial terms.”  The United States underlines that the request states that the measures include (1) the provision by the government of grants worth as much as A$30 million; and (2) a loan.  The ordinary meaning of the term “provision” is “the act or the instance of providing.[48]The act or instance of providing the grants in this case was the single grant contract. Thus, the  measures at issue in this case, as explicitly described in the panel request, include the loan contract and the grant contract.  The United States emphasizes that the grant contract includes the government's commitments to make payments and captures any and all possible disbursements under that contract.

7.14 Regarding the grant contract, Australia asserts that it has a right under the DSU to be informed by the complainant about the precise measure on which it is being challenged and the legal reason for it being considered to be a subsidy.  Australia maintains that it would appear from the questioning to the United States by the Panel, that the Panel also is not clear about the issue.  It is inappropriate that the United States should only be making the issue unequivocal at a late stage of the Panel proceedings. 

7.15 According to Australia, this issue is relatively unimportant under Parts III and V of the SCM Agreement, since the issue there is one of whether there is subsidization or not, and if so, how to calculate it.  Under Part II of the SCM Agreement, the issue can be more fundamental to the process.  In this case, Australia states, the complainant is required to prove that the granting of the particular subsidy in question is in fact contingent upon export performance.  The elements of proof can be different depending on the measure that is at issue.  For example, the facts and argument required to demonstrate such proof regarding the grant contract would be different from the facts and argument regarding the first A$5 million payment.

7.16 With respect to the United States' assertion that “it is nonsensical to assume that the United States would pursue a dispute settlement complaint on only past payments”, Australia states that this is not the issue.  The issue is, rather, what were the measure or measures that the United States actually identified in its documentation.  In this regard, Australia asserts that it is worth noting that the claims and measures are the same for the panels in both WT/DS106 and WT/DS126.  However, the United States admitted that the request for consultations in WT/DS106/1 was inadequate in respect of Article 4.2 of the SCM Agreement.  According to Australia, since that error in the United States' view was sufficient for it to force through the current Panel process, it would not be unreasonable to assume that there could well be other flaws in the documentation, (i.e. apart from the issue of disclosure under Article 4.2 of the SCM Agreement), including at least that the United States may not have requested what it wanted.

7.17 Australia disagrees with the reference by the United States to the request for the establishment of the Panel in WT/DS126/2.  While the request for a panel may limit the scope of the Panel, it is not correct to argue that the request for the establishment of a panel can widen the scope.  The original request for consultations (in this case WT/DS126/1) limits the scope.  A panel cannot be established with a scope wider than that envisaged under the original request for consultations.   In any case, in asking for “the establishment of a panel to examine the matter”, paragraph 4 of WT/DS126/2 is referring to the matter covered by the consultations requested in WT/DS126/1 as set out in paragraph 3 of WT/DS126/2.  Australia states that the act or instance of providing the grants is the provision of the tranches under the grant contract.

7.18 The United States argues, in the alternative, that if the Panel finds that one of the measures, i.e., the grant contract or the third payment thereunder, is not explicitly described in the panel request, the question becomes whether that measure is subsidiary, or so closely related, to a measure that is specifically identified, that the responding party can reasonably be found to have received adequate notice of the scope of the claims asserted by the complaining party.  The United States refers to the following statement of the panel in Japan - Measures Affecting Consumer Photographic Film and Paper ("Japan – Film"):

To fall within the terms of Article 6.2, it seems clear that a ‘measure’ not explicitly described in a panel request must have a clear relationship to a ‘measure’ that is specifically described therein, so that it can be said to be “included” in the specified ‘measure.’[49]

7.19 According to the United States, in the instant case, there can be no question that the grant contract itself and all payments made pursuant to the grant contract are subsidiary or so closely related to the measure described in the panel request that Australia received adequate notice that the United States was challenging the grant contract, including any and all possible payments under that contract.  It is self-evident that the grant contract and the payments actually disbursed pursuant to the contract, whether past or future at the time of the panel request, are subsidiary or closely related to the measure described as “the provision by the Government of Australia to Howe of grants worth as much as A$30 million.”  Thus, even if the Panel does not agree that the panel request explicitly describes the measures as the loan contract and the grant contract, it is clear that the measures as described can be said to have “included” the grant contract itself and all payments made thereunder.

7.20 The United States asserts that Australia devotes considerable time to arguing that the measures described in the consultation request limit the United States to challenging only the first two payments under the grant contract.  Putting aside the fact that the language of the consultation request cannot be reasonably construed to impose such a limitation, it is the panel request, not the consultation request, that is relevant for determining the scope of the measures before this Panel[50]  The panel request specifically identifies the measures at issue in this case to include the loan contract and the grant contract.

7.21 Australia disagrees with the interpretation made by the United States of paragraphs 10.8 and 10.9 of Japan – Film. [51]  The issue in this current dispute is not about the inclusion of a subsidiary measure.  Under the DSU, a claim must be specified, the specific measures at issue must be identified, and there must be a brief summary of the legal basis of the complaint sufficient to present the problem clearly.  This has not been done for this dispute.  Ultimately, it is up to the Panel to decide whether the United States' request in WT/DS126/1 was sufficient to provide the basis for a “curing” of its claims in subsequent submissions.

7.22 The United States submits that, in any event, contrary to Australia’s assumption, the term “grants” as used in the consultation request does not serve to distinguish between actual payments and the grant contract.  Indeed, the Concise Oxford Dictionary notes that the term “grant” means the “process of granting or the thing granted."[52]  Thus, the only reasonable interpretation is that the term “grants” includes both the government’s commitment to make payments and the payments themselves, including all possible disbursements, whether past or future.  Nowhere in the consultation request, or the panel request for that matter, is the term “grants” limited to past payments.

7.23 In Australia's view, the “definition” given by the United States of “grant”, i.e. “the process of granting or the thing granted”, contains alternative meanings.  In WT/DS126/1 the United States talks of “grants of up to A$30 million” (and in WT/DS126/2 of “grants worth as much as A$30 million”).  The plural of “the process of granting” is “the processes of granting”.; Thus, on the basis of the first meaning the United States is apparently talking about “the processes of granting [of] up to A$30 million”.  Each of these processes must be in relation to an actual payment, since otherwise why not say “grant of up to A$30 million” if that is the meaning attributed by the United States to “grant”?  This would suggest that the Panel should look at each of the payments separately.  The same conclusion arises from using the second meaning “the thing granted”.“Grants” then becomes “the things granted”.  Accordingly, “grants of up to A$30 million” becomes “the things granted of up to A$30 million.”

7.24 Australia underlines that the identification of what the complainant considers to be the subsidy is critical to the argument of whether the granting of that subsidy meets the “in fact” standard of Footnote 4 of the SCM Agreement.  This goes to the heart of what the measures are before the Panel and the alleged “existence and nature of the subsidy in question”.  Under Article 4.2 of the SCM Agreement, these were supposed to be identified in the complainant’s request for consultations.

7.25  In respect of the grant contract, Australia asserts that it remains unclear whether it is the grant contract that is the subsidy at issue or the individual payments under the grant contract that are the subsidies at issue.  This is central to what the United States must prove.

7.26 According to Australia, if it is the grant contract, then the issue is whether the granting of the grant contract was in fact tied to actual or anticipated exportation or export earnings.  Of course, the two cases do overlap, since the way in which the actual grants are made go to the demonstration of the nature of the grant contract itself.  The bases for the actual payments under the grant contract have necessarily to be looked at to see what was in fact agreed between the Australian government and the company.  The record confirms conclusively that the payments were not tied to actual or anticipated exportation or export earnings.  This, in turn, proves that the granting of the grant contract was not in fact tied to actual or anticipated exportation or export earnings. Australia reasons that, if, on the other hand, it is the individual grants under the grant contract, the granting of each of them must be considered separately.  Trivially, the first tranche was only tied to the execution of the grant contract and to nothing else.  Given the bases for the second and third tranches, there were clearly no ties to export performance.