(a) Arguments of Canada

4.38 Canada submits that Brazil's request for Panel is inconsistent with Article 6.2 of the DSU in that it does not "identify the specific measures at issue", as required by Article 6.2 of the DSU with respect to the following items:

• financing and loan guarantees provided by the Export Development Corporation ... [emphasis added by Canada]
• funds provided to the civil aircraft industry by Technology Partnerships Canada and predecessor programmes; ...[emphasis added by Canada]
• benefits provided under the Canada-Québec Subsidiary Agreement on Industrial Development; [emphasis added by Canada]
• benefits provided by the Government of Québec under the Société de Développement Industriel du Québec. [emphasis added by Canada]

4.39 For Canada, these items in the request are too vague to provide Canada with sufficient information concerning the claims at issue, prejudicing Canada's due process right to know the case against it. Canada requests, in accordance with Article 6.2 of the DSU and principles of due process, that the Panel make a preliminary finding that Brazil's request is inconsistent with Article 6.2 of the DSU with respect to these items.

(i) Applicable law

4.40 Canada cites language from DSU Article 6.2:

4.42 Canada submits that the reasoning of the Appellate Body is applicable to the case where a defending party is not given specific information as to the factual basis of the claims against it, and that this is so a fortiori in a process subject to an accelerated time-table. The time allotted to a defending Party is simply not adequate from a due process perspective, in Canada's view, for the preparation of a credible defence against a vague accusation, and any clarification that might be provided in Brazil's first submission cannot, therefore, "cure" the fundamental inconsistency of the request for the establishment of a panel with Article 6.2.

(ii) The matters at issue

4.43 Canada states that with respect to the items identified in paragraph 4.38, Brazil's request does not provide any precision, and Canada simply does not know the case against it.

(1) "Financing" provided by the Export Development Corporation

4.44 Canada claims to be at a loss as to the scope of this heading of the request for the establishment of a panel, having noted that this was not a matter on which consultations had been requested. For Canada, nothing in the course of consultations could therefore guide it as to the nature of the case against it.

4.45 Canada notes the less-than-two-week period for it to respond to Brazil's first submission, arguing that given the accelerated procedure of Article 4, it is manifestly contrary to Canada's due process rights to be forced to respond to a legal claim that could potentially cover hundreds of clients, many thousands of financing transactions over several years, and a portfolio of Can$10 billion.

(2) "Civil aircraft industry"

4.46 Canada submits that in the particular circumstances of this case, especially in view of the accelerated time-table under which this panel operates, "civil aircraft industry" does not meet the requirement for specificity under Article 6.2 of the DSU.

4.47 For Canada, the civil aircraft industry is characterised by a complex network of forward and backward relationships between firms in many different industrial sectors that, nevertheless, because of specialisation, may be considered part of the civil aircraft sector.³³ It thus includes firms ranging from machine shops and metal treatment facilities to those involved in advanced instrumentation and communications equipment.³⁴ In Canada, this comprises over 200 enterprises employing 38,000 workers.³⁵

4.48 Canada states that Brazil is not unaware of this complexity, as during the last set of bilateral negotiations to resolve this dispute that immediately preceded the request for the establishment of this panel, Brazil provided Canada with an all-encompassing definition:

4.49 For Canada, this over-broad description puts Canada in an impossible position in preparing a defence to this claim.

4.50 Canada cites the Korea - Liquor Taxes³⁷ dispute, in which Korea argued that the request for the establishment of a panel--which referred to products under HS heading 2208--was not specific enough to satisfy the requirements of Article 6.2, and that each distilled alcoholic beverage had to be specifically identified. The complainants responded that the appropriate imported product was all distilled beverages and simply identifying the HS heading was appropriate.

4.51 According to Canada, the panel, noting the importance of ensuring that the panel request met the criteria set out in Article 6.2, observed that the issue required the weighing of evidence, particularly in view of the previous findings made in Japan - Taxes on Alcoholic Beverages³⁸:

4.52 For Canada, in the present dispute there is no identified tariff heading and no previous decision to guide Canada as to what Brazil might mean by the "civil aircraft industry", and accordingly, in view of the short time-lines of the Article 4 process and in view of the nature of Article 3 as an outright prohibition, Canada submits that it is contrary to its due process rights as protected by the DSU to be forced to respond to cases of which it has been given no specific notice, contrary to the explicit requirements of the DSU.

(3) "Predecessor programmes"

4.53 Canada submits that "predecessor programmes" does not identify with adequate specificity the programmes that, Brazil alleges, are inconsistent with Article 3. Canada states that it does not know which "predecessor" programmes to Technology Partnerships Canada are being challenged, nor which activities or transactions are being challenged.

(4) Benefits provided under the Canada-Québec Subsidiary Agreement and the Société de Développement Industriel du Québec

4.54 Canada argues that the last two headings of the request are also inconsistent with Article 6.2, in that "benefits provided" does not provide any measure of specificity as required by Article 6.2. For Canada, it is not clear which aspect of these programmes, or which activities or transactions under these programmes, Brazil considers to have conferred a "benefit", and thus the request does not give Canada any clue as to the scope of the challenge against it.

(iii) Brazil's request for the establishment of a panel does not meet the requirements of Article 6.2 of the DSU

4.55 Canada argues that Brazil's request for a Panel is far vaguer than its initial request for consultation.. Canada does not suggest that the initial request for consultations and the request for a Panel must be identical, recalling the observation by the Appellate Body that "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,"⁴⁰ and by the Panel in Korea - Taxes on Alcoholic Beverages that "in our view, the very essence of consultations is to enable the parties to gather correct and relevant information."⁴¹

4.56 According to Canada, consultations thus afford the Parties the opportunity to give more precision to the dispute, not less; additional facts gathered in the consultations phase should give substance to a complaining Party's allegations, not make them less substantial, as Brazil's claims have become.

4.57 For Canada, the integrity of the procedures set out in the DSU and amplified in successive Panel and Appellate Body Reports goes to the root of the Dispute Settlement Body's principal objective of "providing security and predictability to the multilateral trading system."⁴² In Canada's view, due process, fairness, procedural justice: these inexact concepts permeate the DSU -- indeed any legal order -- and though implicit, they give meaning and embellish the explicit procedural guarantees provided for in the DSU, one of the most important of which is Article 6.2, the effective grant of jurisdiction to the panel.

4.58 Canada submits that the importance put on Article 6.2 of the DSU by the Appellate Body arises from the recognition that security and predictability evaporate when a party attempts to conduct its case as "'trial by ambush.'"⁴³

(b) Arguments of Brazil

4.59 Brazil maintains that its request for establishment of a panel is consistent with Article 6.2 of the DSU. Brazil notes, concerning the factual basis of Brazil's claims, its request in a preliminary submission that the Panel ask Canada to reveal the complete details of all operations of EDC, the Canada Account, the Technology Partnerships Canada ("TPC") and its predecessor programmes, the Canada-Québec Subsidiary Agreements on Industrial Development (the "Subsidiary Agreements"), and the Société de Développement Industriel du Québec ("SDI") with regard to the civil aircraft industry. (paras. 4.79 - 4.83 )

4.60 Before addressing Canada's arguments concerning particular problems with the specificity of Brazil's request for the establishment of a panel, Brazil considers it crucial to address Canada's failure to participate meaningfully in the consultation process by offering factual information regarding the programmes at issue. Brazil cites the Appellate Body in India - Patent Protection for Pharmaceutical and Agricultural Chemical Products:

4.61 Brazil argues that due process flows two ways, and that it would violate all notions of basic procedural fairness to blame Brazil for any alleged lack of specificity in stating the factual bases for its claim stemming from Canada's failure to disclose those facts crucial to the process envisioned in the DSU. For Brazil, Canada, in making its own request to the panel regarding procedures for handling confidential information (See paras. 4.152 - 4.161) implicitly admits that it failed to disclose those facts. Brazil accepts that Canada's concern for protecting confidential business information is genuine, and that this genuine concern motivated the refusal to disclose. But for Brazil this refusal, however genuinely motivated, cannot then be turned on Brazil in the form of an accusation of failure to be specific.

4.62 Brazil further notes the Appellate Body's statement in European Communities - Regime for the Importation, Sale and Distribution of Bananas that "Article 6.2 of the DSU requires that the claims, but not the arguments, must all be specified sufficiently in the request for the establishment of a panel . . ." ⁴⁵ According to Brazil, the Appellate Body's decision emphasized that Article 6.2 requires that a panel request be "sufficiently precise" because (1) it serves as the basis for the panel's terms of reference, and (2) "it informs the defending party and the third parties of the legal basis of the complaint."⁴⁶

4.63 For Brazil, Canada's contention that Article 6.2 is infringed by an alleged failure to provide "specific information as to the factual basis of the claims against it" (para. 4.42) is irrelevant; the Appellate Body in European Communities - Regime for the Importation, Sale and Distribution of Bananas required only that "legal basis" of the complaining party's claim be "sufficiently precise."

4.64 Brazil contends that the claims stated in its panel request meet the test of Article 6.2 of the DSU, as applied by the pellate Body in European Communities - Regime for the Importation, Sale and Distribution of Bananas. Brazil notes that its panel request states that "Canada grants or maintains an extensive array of subsidies for the Canadian industry producing civil aircraft which are inconsistent with Canada's obligations under Article 3.1(a) and Article 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,"⁴⁷ and specifies those programmes exemplifying Canada's breach of its obligations under Articles 3.1(a) and 3.2 of the SCM Agreement. Brazil maintains that as such it identified the two components of a claim essential to maintain Canada's due process rights pursuant to Article 6.2: (1) the particular provisions of the SCM Agreement with which Canada is charged with failure to comply; and (2) the particular Canadian measures demonstrating that failure. Brazil contends that it has therefore satisfied the test of identifying its claim with "sufficient precision," as required by Article 6.2 and the Appellate Body's decision in European Communities - Regime for the Importation, Sale and Distribution of Bananas.⁴⁸

To continue with EDC "financing"

³³ Industry Canada, Aerospace and Defence: Part C, online: Industry Canada homepage http://strategis.ic.gc.ca/SSG/ad01475e.html (last modified: 8 December 1995). [TAB G 23 October 1998 preliminary submission of Canada]

³⁴ Id..

³⁵ Industry Canada, Aerospace and Defence: Part B, online: Industry Canada homepage http://strategis.ic.gc.ca/SSG/ad01541e.html (last modified: 16 May 1997). [TAB H 23 October 1998 preliminary submission of Canada]

³⁶ Government of Brazil, Proposed Memorandum of Understanding between the Government of Brazil and the Government of Canada on Exchange of Information on the Aircraft Industry, 26 June 1998. [TAB J 23 October 1998 preliminary submission of Canada]

³⁷ Korea - Liquor Taxes..

³⁸ Japan - Taxes on Alcoholic Beverages (Complaints by European Communities, Canada and the United States) (1996), WTO Doc. WT/DS8,10,11/AB/R (Appellate Body Report).

³⁹ Korea - Liquor Taxes, para. 10.16.

⁴⁰ India - Pharmaceuticals, at para. 94.

⁴¹ Korea - Liquor Taxes, at para. 10.23.

⁴² Article 3.2 of the DSU.

⁴³ Redfern, A. and M. Hunter, Law and Practice of International Commercial Arbitration, 2nd ed. (London: Sweet & Maxwell, 1991) at 320-21. The authors were referring to the withholding of principal arguments in the written submission, only to make them in the oral hearing; in the context of this case, however, and in view of Article 6.2, their observation is apposite. [TAB I 23 October 1998 preliminary submission of Canada]

⁴⁴ (1997) WTO Doc. WT/DS50/AB/R, at para. 94.

⁴⁵ (1997) WTO Doc. WT/DS27/AB/R, at para. 143.

⁴⁶ Id. at para. 142 (emphasis added by Brazil).

⁴⁷ Government of Brazil, Request for the Establishment of a Panel.

⁴⁸ (1997) WTO Doc. WT/DS27/AB/R, at paras. 139-144.