I. Introduction

1.1 On 10 March 1997, Brazil requested consultations with the Government of Canada pursuant to Article 4 of the Agreement on Subsidies and Countervailing Measures ("SCM Agreement") regarding certain alleged subsidies granted by the Government of Canada or its provinces that support the export of civilian aircraft from Canada.

1.2 Brazil and Canada held consultations on 30 April 1997, but failed to reach a mutually satisfactory solution.

1.3 On 10 July 1998, pursuant to Article 4.4 of the SCM Agreement and Article 6 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"), Brazil requested the immediate establishment of a panel with standard terms of reference.

1.4 At its meeting on 23 July 1998, the DSB established a panel pursuant to the request by Brazil (WT/DS70/2).

1.5 At that DSB meeting, parties agreed that the Panel should have standard terms of reference. The terms of reference of the Panel are the following:

1.6 On 16 October 1998, Brazil requested the Director-General to determine the composition of the Panel, pursuant to paragraph 7 of Article 8 of the DSU. This paragraph provides:

1.7 On 22 October 1998, the Director-General accordingly composed the panel as follows:

1.8 The European Communities and the United States reserved their rights to participate in the Panel proceedings as third parties.

1.9 The Panel met with the parties on 26 and 27 November 1998 and 12 and 13 December 1998. It met with the third parties on 27 November 1998.

1.10 The Panel submitted its interim report to the parties on 17 February 1999. Although on 25 February 1999 both parties requested the Panel to review precise aspects of the interim report, neither party requested an additional meeting with the Panel. The Panel submitted its final report to the parties on 12 March 1999.

II. Factual Aspects

2.1 This dispute concerns various Canadian measures which Brazil alleges are subsidies inconsistent with Canada's obligations under Articles 3.1(a) and 3.2 of the SCM Agreement in that they are contingent in law or in fact, whether solely or as one of several other conditions, upon export performance.

2.2 The measures as identified in Brazil's request for a panel are financing and loan guarantees provided by the Export Development Corporation including equity infusions into corporations established to facilitate the export of civil aircraft; support provided to the civil aircraft industry by the Canada Account; funds provided to the civil aircraft industry by Technology Partnerships Canada and predecessor programmes; the sale by the Ontario Aerospace Corporation, an agency or instrumentality of the Government of the Province of Ontario, of a 49 per cent interest in a civil aircraft manufacturer to another civil aircraft manufacturer on other than commercial terms; benefits provided under the Canada-Québec Subsidiary Agreement on Industrial Development; and benefits provided by the Government of Québec under the Société de Développement Industriel du Québec.

III. Findings and Recommendations Requested by the Parties

3.1 Brazil requests the Panel to find that the following are subsidies contingent in law or in fact upon export performance and, therefore, are inconsistent with the requirements of Article 3 of the SCM Agreement:

3.2 Brazil requests that the panel recommend that "the Dispute Settlement Body request Canada to withdraw all of these subsidies without delay and bring its federal and provincial programmes with regard to support for the civilian aircraft industry into conformity with its obligations under the Agreement on Subsidies and Countervailing Measures".

3.3 Canada requests that the Panel make preliminary findings prior to the deadline for Brazil's first written submission that:

Therefore, Brazil's claims pertaining to these measures fall outside the jurisdiction of the Panel."

3.4 Canada additionally requests that the Panel rule that:

3.5 Canada also requests that the Panel dismiss Brazil's claims.

IV. Requests for Preliminary Rulings²

A. Canada's Request Regarding the Panel's Jurisdiction

1. General issues

(a) Arguments of Canada

4.1 Canada requested preliminary rulings with respect to two issues regarding the Panel's jurisdiction. The first issue is whether certain measures identified in Brazil's request for a panel had been the subject of a request for consultations, and thus could be the subject of a panel request under SCM Article 4.4. The second issue is whether certain of the measures identified in Brazil's request for a panel were sufficiently specific as required by Article 6.2 of the DSU. Canada asked the Panel to issue the requested rulings prior to the deadline for the parties' first submissions.

(i) The Panel's responsibility to decide the scope of its jurisdiction

4.2 Canada states that a Panel's terms of reference establish the jurisdiction of the panel by defining the precise claims at issue in the dispute,³ and notes that in the present case, the terms of reference are set out in the complainant's request for the establishment of the panel. Canada argues that the Panel must examine Brazil's request to ensure that it complies with the DSU Article 6.2, since it determines the scope of the Panel's jurisdiction, and quotes the Appellate Body:

4.3 Canada submits that this reasoning applies equally to compliance with Article 4 of the SCM Agreement, as Article 4 also limits the jurisdiction of the Panel in this dispute. For Canada, the Panel may not look to the submissions of the complainant to cure uncertainties in the panel request,⁵ nor may the Panel adopt a claim pursuant to its own ruling:⁶ a Panel may not assume jurisdiction that it does not have. Canada states that in accordance with the views of the Appellate Body, recent panels have examined their jurisdiction and ruled that certain claims did not fall within it.⁷

(ii) Request that the Panel should rule before the first submissions of the Parties are due

4.4 Canada argues that although there are no explicit panel working procedures that govern preliminary requests for findings,⁸ there is an evolving practice of WTO panels and the Appellate Body concerning preliminary rulings. According to Canada, preliminary issues of an organisational nature have been dealt with before the first substantive hearing of the parties with the panel or the Appellate Body: in European Communities - Bananas, the panel issued a preliminary ruling on the participation of third parties prior to the first substantive meeting;⁹ and more recently, in the case of United States - Import Prohibition of Certain Shrimp and Shrimp Products,¹⁰ the Appellate Body issued a preliminary decision four days after an objection was raised by the appellees in their written submissions concerning the admissibility of amicus curiae briefs. ¹¹

4.5 Canada submits that Indonesia -Automobiles provides the most recent example, where in its first written submission, Indonesia argued as a preliminary matter that a claim made in the first submission of the United States was not within the terms of reference of the panel. Canada recalls that the panel considered and ruled on Indonesia's objection at the first substantive meeting with the parties.¹²

4.6 For Canada, the common theme in these decisions is that many kinds of preliminary issues should be decided at an early stage in the panel proceedings. Canada submits that the issues of jurisdiction identified here are precisely these kinds of issues because an early decision would best fulfil the objectives of due process, quoting the Appellate Body:

4.7 Canada submits that certain claims made by Brazil in its request for the establishment of a Panel are not within the Panel's jurisdiction because they are not identified with sufficient precision or they were not the subject of consultations. Canada argues that it must be given sufficient notice and specificity concerning Brazil's claims to allow Canada an opportunity to respond to Brazil's case, and that it follows that if certain claims are not properly within the Panel's jurisdiction, the Panel should so rule before the Parties' first submissions are due, to give both Canada and Brazil adequate notice of the actual claims in dispute, and to allow them adequate time to prepare their submissions accordingly.

(b) Arguments of Brazil

4.8 Brazil agrees with Canada's statements, consistent with the observations of the Appellate Body in "Brazil - Measures Affecting Desiccated Coconut"¹⁴ and "European Communities - Regime for the Importation, Sale and Distribution of Bananas",¹⁵ that it is for the Panel to ensure compliance with Article 6.2 of the DSU and, by analogy, Article 4 of the SCM Agreement. Brazil also agrees that it is within the Panel's authority to make preliminary rulings on objections raised by the parties. In Brazil's view, however, there is no specific requirement nor any established practice, requiring a panel to rule on preliminary objections concerning the Panel's jurisdiction before the first submissions of the parties. Brazil considers, however, that it may be in the best interests of the parties for the Panel to expedite its ruling on the questions raised by Canada.

To continue with Consistency with Article 4.4 of the SCM Agreement of Brazil's

¹ Paragraph 12 of Article 4 of the SCM Agreement provides:

² Except as otherwise noted, the footnotes and citations, and the emphasis in the text are as contained in the parties' submissions.

³ Brazil - Measures Affecting Desiccated Coconut (Complaint by the Phillippines) (1997), WTO Doc. WT/DS22/AB/R at 21 (Appellate Body Report) (hereinafter Brazil - Desiccated Coconut(.

⁴ European Communities - Regime for the Importation, Sale and Distribution of Bananas (Complaints by Ecuador, Guatemala, Honduras, Mexico and the United States) (1997) WTO Doc. WT/DS27/AB/R at para. 142 (Appellate Body Report) (hereinafter European Communities - Bananas(.

⁵ Id.. at para. 143:

⁶ India - Patent Protection for Pharmaceutical and Agricultural Chemical Products (Complaint by the United States) (1997) WTO Doc. WT/DS50/AB/R at para. 92 (Appellate Body Report) [hereinafter India - Pharmaceuticals]:

⁷ See for example, Japan - Measures Affecting Consumer and Photographic Film and Paper (Complaint by the United States) (1998), WTO Doc. WT/DS44/R at para. 10.21 (Panel Report) (hereinafter Japan - Film(; Indonesia - Certain Measures Affecting the Automobile Industry (Complaints by Japan, European Communities, United States) (1998), WTO Doc. WT/DS54,55,59,64/R at para. 14.3 (Panel Report) (hereinafter Indonesia - Automobiles(.

⁸ In European Communities - Bananas, at para. 144, the Appellate Body noted:

⁹ European Communities - Regime for the Importation, Sale and Distribution of Bananas (Complaints by Ecuador, Guatemala, Honduras, Mexico, United States) (1997) WTO Doc. WT/DS27/ECU at para. 7.6 (Panel Report).

¹⁰ United States - Import Prohibition of Certain Shrimp and Shrimp Products (Complaints by India, Malaysia, Pakistan, Thailand) (1998), WTO Doc. WT/DS58/AB/R (hereinafter United States - Shrimp).

¹¹ Id.. at para. 83.

¹² Indonesia -Automobiles, at para. 14.3.

¹³ Brazil - Desiccated Coconut, at 21.

¹⁴ (1997) WTO Doc. WT/DS22/AB/R.

¹⁵ (1997) WTO Doc. WT/DS27/AB/R.