1. Comment of Canada

4.142 In replying to the Panel's questions posed in connection with the second meeting, Canada indicates that its replies are provided in the light of certain concerns. First, Canada states, the Panel has requested the production of evidence in respect of defences Canada has not made. Canada recalls that consistent with the principle of judicial economy, particularly in the context of the expedited proceedings under SCM Article 4, it is neither necessary nor desirable that the respondent make out a defense for both of the two prongs of the test for a prohibited export subsidy in Part II of the SCM Agreement. Canada states that Brazil must prove both that a subsidy exists within the meaning of Article 1, and that the subsidy is export contingent within the meaning of Article 3. In response, it is sufficient for Canada to demonstrate in relation to each impugned measure, the measure is either not a subsidy or not export contingent. Canada asserts that in its letter to the Chairman of the Panel of 13 December 1998, Brazil has agreed with this thesis.

4.143 Second, Canada states, the Panel has requested the production of evidence in respect of matters where in Canada's view Brazil has clearly not made out a prima facie case. Canada notes that the Panel has not ruled on whether Brazil has made out a prima facie case on any of the impugned programmes, activities or transactions. Canada notes that the covering letter to the Panel's questions of 10 December 1998 states that the questions are posed without prejudice to the Panel's eventual findings with respect to any issue raised by either party.

4.144 Third, Canada objects that the Panel has requested the production of evidence in respect of transactions where Brazil has not even made an allegation. Canada does not consider it appropriate to adduce evidence in response to an allegation that has not been made and a case that has not been established.

4.145 Finally, Canada states that it has been placed in a very difficult position because the Panel's questions ask Canada to produce business confidential information, recalling its position (see paras. 4.173- 4.183) that the Procedures Governing Business Confidential Information do not provide the requisite level of protection for such information.

2. Comment of Brazil

4.146 Regarding Canada's comments about the Panel's questions, and Canada's answers thereto, Brazil raises concerns regarding what it views as Canada's failure to uphold its obligation to disclose information peculiarly within its control. Brazil notes its view that the Panel could, consistent with the principle of judicial economy, have decided the issues raised in this case on the basis of the facts before it as of the second meeting, rather than offer Canada yet another chance to present information in its defense (para. 4.126). Brazils states that regardless, the Panel exercised its right, pursuant to Article 13 of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"), to request further information from Canada, and in Brazil's view, this request triggered Canada's obligation, again under the terms of Article 13, to "'respond promptly and fully'" to the Panel's request.

4.147 Brazil asserts that Canada has failed to meet this obligation, noting Canada's repeated invocation in its answers to the Panel's questions of "'the lack of adequate procedures to protect business confidential information'" to justify its failure to provide information specifically requested by the Panel. Brazil argues that where documentary evidence has been provided by Canada, it has been redacted to such an extreme degree that it contributes nothing to the Panel's understanding of the programmes and issues involved. Brazil states that in other instances, Canada has selectively provided particular pages, lines or figures from various documents, claiming that these extracts support its defense.

4.148 Brazil contends that Canada must bear the consequences of its decision to withhold information from the Panel. Where Canada has expressly refused to provide documentary information specifically requested, or where Canada has wholly or selectively redacted documentary information specifically requested, in Brazil's view the Panel should adopt adverse inferences, presuming that the information withheld constitutes inculpatory evidence of Canada's infringement of the SCM Agreement. In Brazil's view, adoption of such adverse inferences is not prohibited by the DSU, and is entirely consistent with the practice of international tribunals such as the Iran-US Claims Tribunal,⁷⁸ the Inter-American Commission on Human Rights,⁷⁹ and the Inter-American Court of Human Rights.⁸⁰ Moreover, Brazil asserts, reliance on adverse inferences in instances where a party fails to produce information specifically requested and within the party's exclusive possession and control provides a Panel with the only practical means at its disposal of upholding the duty of collaboration recognized in Argentina - Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items as central to the WTO dispute settlement process, and of upholding the obligation incumbent on a WTO Member under Article 13 of the DSU to "'respond promptly and fully to any request by a panel'" for information.

4.149 Brazil argues that Canada's claims concerning the "'inadequacy'" of the Panel's confidentiality procedures, if permitted, would make a sham of WTO dispute settlement proceedings concerning activities alleged to violate the SCM Agreement. Brazil submits that in requesting that private parties waive their confidentiality rights, Canada apparently represented that "'the Brazilian government (including Embraer)'" would receive copies of confidential business information.⁸¹ Brazil states that this is simply untrue, and that it calls into question the sincerity of Canada's effort to secure the agreement of private parties to the release of particular information.⁸²

4.150 More importantly according to Brazil, activities reviewable under the SCM Agreement will nearly always involve contributions to a private party, and will therefore depend upon information which can be characterized by a private party as sensitive or business confidential. If dispute settlement proceedings under the SCM Agreement are to be at all meaningful, Brazil maintains, WTO Members must not be permitted to appeal to domestic confidentiality concerns as a way to impede a Panel's right, under Article 13 of the DSU, to seek information, or its obligation, under Article 11 of the DSU, to undertake "'an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements . . .'" Brazil states that it is for these reasons, and to ensure consistency with the obligation, under Article 3(10) of the DSU, of WTO Members to engage in dispute settlement in good faith, that Brazil has been responsive to questions requiring the submission of confidential business information to a separate Panel reviewing the consistency of Brazil's PROEX programme with the terms of the SCM Agreement.

4.151 Moreover, Brazil states, in some instances, Canada's decision to withhold documentation from the Panel is based not upon the refusal of private parties to waive their confidentiality rights, but instead upon the Canadian government's own refusal to release documents prepared for itself by itself. In particular, Brazil directs the Panel's attention to Canada's refusal to provide Canadian government documents constituting TPC "'project assessments and funding decisions.'"(para. 6.260.) Brazil submits that the decision to withhold these documents, which are exclusively within the possession and control of the Canadian government, must carry adverse consequences for Canada, or the good faith obligation contained in Article 3(10) of the DSU will become meaningless. Brazil argues that he Panel should presume that these documents contain information prejudicial to Canada's position.

G. Procedures for Protection of Business Confidential Information

1. Procedure Proposed By Canada

4.152 Canada requests that the Panel adopt as part of its working procedures, pursuant to DSU Article 12.1, a procedure for the protection of confidential proprietary information that may be submitted to the Panel. Canada requests that the proposed procedures be adopted prior to the deadline for Brazil's first submission. Canada notes that such a procedure is necessary as, in making its defence, it may have to submit evidence to the Panel that contains confidential proprietary business information.

4.153 Canada acknowledges that some provisions of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) address the need for confidentiality. Article 18.2 of the DSU provides:

4.156 Canada maintains that there is scant WTO practice with respect to the protection of such information in the context of a dispute, but that this problem has arisen in a previous dispute under the SCM Agreement (Indonesia - Certain Measures Affecting the Automobile Industry)⁸³ in which the United States indicated in its first submission that it possessed proprietary business information relevant to its serious prejudice claims. Canada notes that the United States was reluctant to provide such information to the Panel unless the Panel first established adequate procedures to protect that information,⁸⁴ and Indonesia requested the Panel to require the United States to submit this information before the first substantive meeting of the Panel with the parties.⁸⁵

4.157 Canada recalls that the Indonesia Panel did not require the United States to submit the requested information, noting that there was no obligation on parties to present all factual information in its first submission, but nonetheless found:

4.158 Canada notes that the United States did not propose or request the Panel to adopt any such procedure, and that the Panel found that while complainants could not be required to submit confidential business information, neither could they "...invoke confidentiality as a basis for their failure to submit the positive evidence required, in the present case, to demonstrate serious prejudice under the SCM Agreement."⁸⁷ The Panel concluded that the United States had not demonstrated serious prejudice by positive evidence.⁸⁸

4.159 Canada submits that as complainant in the Indonesia - Automobiles case, the United States had a choice as to whether it would submit evidence necessary to meet its evidentiary burden. Canada argues that in this case, if Brazil meets its prima facie burden, Canada cannot afford the luxury of not adducing the evidence necessary to defend its impugned programmes, and may have to rely upon confidential proprietary business information.

4.160 Canada submits that the protection of confidential proprietary business information is a new and significant challenge to the WTO dispute settlement process, in which the Panel must balance two competing interests, both deeply rooted in fairness and due process, neither in itself having a claim to better protection than the other: first, that reasonable access to such information, when introduced into evidence, must be provided to the Panel and the other disputing parties; second, that additional procedural safeguards are necessary to provide private business interests with adequate protection for their proprietary business information when a disputing party deems it necessary to present such evidence in support of its case. Canada believes that its proposed procedure strikes the necessary balance.

4.161 The procedure proposed by Canada would allow access to business confidential information only to persons having signed a declaration of non-disclosure and who were either panelists, assistants to panelists, WTO Secretariat staff, PGE members, or "representatives" of parties, the latter defined as employees of or agents for parties, excluding employees, officers or agents of private companies engaged in aircraft manufacturing. The procedures as proposed would require business confidential information to remain on the premises of the WTO Secretariat, which would be the only place where it could be consulted. The information would need to be kept in a locked receptacle at the WTO Secretariat and the Secretariat staff would control and monitor access to and use of the information. Approved persons could take summary notes on the information but would not be permitted to copy or distribute it, or remove it from WTO premises. Only approved persons would be permitted to be present in panel meetings at which business confidential information was discussed and tapes of such meetings would be subject to the same procedures as the written material submitted. At the conclusion of the panel process, the BCI would be returned to the submitter and all tapes and transcripts would be destroyed.

2. Arguments of Brazil

4.162 Brazil, while receptive to Canada's proposal, outlined a number of concerns, in light of which it proposed a modified procedure.

(a) Advisors of a Party should be considered an approved person

4.163 Brazil notes that Canada's definition of "representative" includes reference to employees, agents and legal counsel but omits reference to other types of representatives or advisors. Brazil states that the complexity of the aircraft financing market is such that much of the information that Brazil would want to present to the Panel in support of its position would of necessity rely upon the analysis of experts and others knowledgeable about the industry. For Brazil it is crucial to be able to share confidential business information with its advisors to rebut arguments presented by Canada. Brazil agrees with Canada that in no circumstances should the definition of an advisor or other representative include an employee, officer or agent of a private company engaged in aircraft manufacturing.

(b) Review of Confidential Business Information should be permitted outside the WTO premises

4.164 Brazil notes that Canada's proposal omits reference to copies submitted to any party, and that DSU Article 18.2 provides that "[w]ritten submissions . . . shall be made available to the parties to the dispute." Brazil submits that Article 18.2 requires Canada to provide a complete copy of its submissions, and that forcing a party, a third party, a panel member or a PGE member to travel to the WTO to review submissions places enormous administrative burdens on approved parties. Especially given the short time-frames in this dispute, Brazil submits that an approved person - whether a party, a panel member or a PGE member - must have unrestricted access to the information. Brazil argues that a copy of such information therefore should be permitted to be kept in secure locations outside the premises of the WTO.

4.165 In Brazil's view, by limiting the access to such information to the premises of the WTO, Canada would prohibit effective review of confidential business information, information that may be crucial to the case, and in so doing, would effectively bar any approved party from analyzing portions of submissions containing confidential business information. For Brazil, this would significantly hamper any substantive rebuttal of Canada's submissions.

4.166 Brazil argues that providing a party copies of the confidential business information presents no risk to Canada, as each party is bound to ensure that its representatives comply with the non-disclosure obligation. Brazil notes that DSU Article 18.2 provides that "Members shall treat as confidential information submitted by another Member . . . which that Member has designated as confidential."

4.167 Brazil also notes the Vienna Convention on the Law of Treaties, which states in Article 31 that "a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."⁸⁹ In Brazil's view, Canada's original proposal is too restrictive in its limits regarding access to confidential business information; as written, it would prevent Canada's submissions from being made effectively "available" to Brazil or to any other "approved person", including a panel member, in direct contradiction to the spirit of the DSU and to the provisions of DSU Article 18.2.

(c) Third Parties should be granted access to Confidential Business Information

4.168 Brazil notes that Canada's definition of "approved persons" omits reference to third parties, although DSU Article 10.3 provides that "Third parties shall receive the submissions of the parties to the dispute to the first meeting of the panel," and paragraph 6 of the Working Procedures (DSU Appendix 3) provides that "All third parties . . . shall be invited . . . to present their views during a session of the first substantive meeting of the panel . . . All such third parties may be present during the entirety of this session." (emphasis added by Brazil). For Brazil, since third parties are entitled to receive written submissions to the first panel meeting and are entitled to be present during the entire first panel meeting, they should also be granted access to confidential business information disclosed by a party in its first submission or at the first panel meeting.

4.169 Brazil believes that the proposed provisions requiring that only approved persons be present at panel meetings where business confidential information is discussed are redundant. By adding third parties to the definition of approved parties, as required by DSU Article 10.3 and paragraph 6 of the Working Procedures (DSU Appendix 3), Brazil submits, no persons other than approved persons may be present at a panel meeting. Brazil notes Canada's acknowledgement of paragraph 3 of the Working Procedures (DSU Appendix 3): "The deliberations of the panel . . . shall be kept confidential." Brazil also does not object to the requirement that parties and third parties provide a non-confidential summary of the information contained in written submissions that could be disclosed to the public at the same time that they provide their submission to the panel.

(d) A complete administrative record should be maintained for the Appellate Body

4.170 Brazil notes that Canada's proposal omits reference to the Appellate Body, and recalls that in accordance with the provisions of DSU Article 17, the Appellate Body may hear appeals from panel cases and may uphold, modify or reverse the legal findings and conclusions of the panel. To do so, Brazil submits, the Appellate Body must have unrestricted access to a complete administrative record. Destroying confidential business information at the end of the panel process might seriously limit the Appellate Body's ability to obtain a true understanding of the factual arguments made by the parties.

To continue with Action by the Panel

⁷⁸ INA Corporation v. The Government of the Islamic Republic of Iran, Award No. 184-161-1 (13 August 1985), reprinted in 8 Iran-US CTR, 373-384, at Westlaw pg. 8 (extracted in Exh. BRA-100); William J. Levitt v. Islamic Republic of Iran, Ministry of Agriculture and Natural Resources of Iran, et al., Award No. 520-210-3 (29 August 1991), reprinted in 27 Iran-US CTR, 145-187, at paras. 56-66 (extracted in Exh. BRA-101).

⁷⁹ Tom Farer, "Finding the Facts: The Procedures of the Inter-American Commission on Human Rights of the Organization of American States," in Fact-Finding by International Tribunals (R. Lillich, Ed., 1991), pgs. 275-287, at 281 (extracted in Exh. BRA-102).

⁸⁰ Thomas Buergenthal, "Judicial Fact-Finding: Inter-American Human Rights Court," in Fact-Finding by International Tribunals (R. Lillich, Ed., 1991), pgs. 261-274, at 266 (extracted in Exh. BRA-103).

⁸¹ Exh. CDN-106 (letter to Blair Hankey, Associate General Counsel, Trade Law Division, Department of Foreign Affairs and International Trade, from Peter Keyser, Manager, Business Development Programmes, Allied Signal, at pg. 2).

⁸² The Panel notes that Canada, in its 29 January 1999 cover letter transmitting Canada's comments on the draft descriptive part of this report, denies as unfounded and untrue this allegation by Brazil.

⁸³ Indonesia - Certain Measures Affecting the Automobile Industry (Complaints by Japan, European Communities, United States) (1998), WTO Doc. WT/DS54,55,59,64/R (Panel Report) [hereinafter Indonesia - Automobiles].

⁸⁴ Id.. at para 4.56.

⁸⁵ Id.. at para. 4.51.

⁸⁶ Id.. at para. 14.7.

⁸⁷ Id.. at para. 14.235.

⁸⁸ Id.. at para. 14.236.

⁸⁹ Vienna Convention on the Law of Treaties, Art. 31; see also, United States - Standards for Reformulated and Conventional Gasoline, WTO Doc. WT/DS2/R at para. 6.7.